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  • Writer's pictureDaniel Lee

Is Mapletree Industrial Trust A Good Buy? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Mapletree Industrial Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To June 24

Business Description

Mapletree Industrial Trust is an industrial REIT that was listed in 2011 and owns 140 properties with an increasing focus on data centres.

What I Like About MIT:

  • Very stable operating performances and distribution (Figure 8)

  • Management had exhibited proficiency in managing the REIT’s strategic direction (Figure 9) and capital management (Figure 5) to adhere to the changing times.

  • High number of tenant base that are well diversified across industries and a well spread-out lease expiry profile. All of which points to a low tenancy concentration risk. (Figure 12)

What I Do Not Like About MIT

  • 14% of the portfolio has a remaining land lease of < 30 years (Figure 10)

  • Future yield growth might not materialize in a high interest-rate environment. This may cause excessive downward volatility especially given that a good share of investors treat MIT as a “growth” stock

Updates From Recent Performance (FY 2023/4)

General Comments:

  • DPU fell by 1% year on year due to an enlarged unit base (+3.46%) to partially fund the acquisition of the Osaka Data Centre

  • About 77% of the FY23/24 foreign currency-denominated net income stream had been hedged into SGD to mitigate the impact of FX.

  • Portfolio valuation grew by 0.9% due to the acquisition of the Osaka Data Centre and an improvement in Singapore’s portfolio. This was partially offset by a decline in valuation in North America due to higher capitalization rate requirements

Positive Headwinds:

  • Acquisition of a data centre located in Osaka Japan is completed and expected to contribute to the top and bottom line beyond May 2025 once the remaining two phases of fit-out works are completed.

  • Global demand for data centres is expected to remain strong at the back of a higher cloud adoption rate and the growth in the artificial intelligence and machine learning space.

Negative Headwinds:

  • Slowing global economic growth and activity may pose a headwind in the occupancy rate for non-data centre industrial buildings

  • The cost of borrowing is expected to increase slightly in FY25/26 given that 19.9% of their debt is due for refinancing in the year when interest rates are just starting to taper down.

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Work In Progress

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore


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