Mapletree’s three Singapore REITs – Mapletree Logistics Trust, Mapletree Industrial Trust and Mapletree Pan-Asia Commercial Trust – have been a hot favourite amongst Singapore investors.
Over the past month, shares of these Singapore landlords have quietly climbed higher with expected rate cuts this year.
With these Singapore industrial REITs trading ~6% yield, readers have often asked: Which Mapletree Singapore REITs would you buy?
Well, let’s dive in.
1. Mapletree Logistics Trust at 6.3% Dividend Yield
Mapletree Logistics Trust started in 2005 with just 15 warehouses in Singapore. Today, it owns logistics properties across nine countries.
This includes Australia, India and Vietnam. It also has more than half of its assets in Singapore, China and Hong Kong.
At S$6.4 billion market cap, Mapletree Logistics Trust trades at ~S$1.23 per unit, with a P/B ratio of ~0.97x. It manages ~S$13 billion worth of property assets with a 6.3% dividend yield. This makes it a well-diversified, logistics landlord.
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Let’s look at Mapletree Logistics Trust financial numbers:
- Gross revenue fell by 2.4% y/y to S$177 million
- Net property income fell by 4.1% y/y to S$153 million
- Distributable income fell by 12.4% y/y to S$0.0182 per unit
- Its Weighted Average Lease Expiry (WALE) stood at ~2.7 years
- Quarterly rent prices increased by 2.1%
What happened?
The big drag came from its currency weakness and property divestments. This is because Mapletree Logistics Trust is exposed across different countries, it got hit by weaker regional currencies against the Singapore dollar.
If currencies were constant, the Singapore REIT’s portfolio’s operational performance would look steady.
Having said that, weaker financial results have hit its distribution per unit (DPU), which for now will affect its dividend payout.
Despite a slightly higher leverage ratio, I’d say Mapletree Logistics Trust’s debt is stable.
Its foreign currency debt looks messy, but a large portion of its total debt accounts for cheaper, Japanese yen loans. This helps to lower borrowing costs and makes Mapletree Logistics Trust’s loans manageable.
Having said that, Mapletree Logistics Trust’s operations are stable with overall occupancy rates staying above 90%.
2. Mapletree Industrial Trust at 6.1% Dividend Yield
In terms of P/B and dividend yield, Mapletree Industrial Trust looks more expensive than Mapletree Logistics Trust. Today, shares of Mapletree Industrial Trust trades at ~S$2.09 per unit, with a 1.29x P/B ratio and 6.1% dividend yield.
It manages around S$9 billion worth of industrial properties. This includes data centres – that’s why Mapletree Industrial Trust trades at a pricer valuation.
Over the years, Mapletree Industrial Trust has been acquiring new data centre assets. Today, its portfolio consists of more than 50% of its assets in data centres, with the remaining industrial buildings, and hi-tech buildings and business spaces.
In fact, data centres have been getting increasingly popular, which I wrote previously here.
What I like about Mapletree Industrial is its focus in one particular geography. Think about this. It makes managing assets more efficient, as compared to Mapletree Logistics Trust.
Let’s look at Mapletree Industrial Trust financial numbers:
- Gross revenue grew 0.3% y/y to S$175 million
- Net property income grew 0.8% y/y to S$133 million
- Distributions fell by 4.7% to S$0.0327 per unit
- Its Weighted Average Lease Expiry (WALE) stood at ~4.5 years
- Rental reversions stood at 8.2%
Despite better rental reversions, Mapletree Industrial Trust’s distribution per unit (DPU) fell because of higher borrowing costs.
Note over the last couple of years, Singapore REITs have been hit by higher interest rates. As a result, this has hit Mapletree Industrial Trust’s dividend payout.
So far, Mapletree Industrial Trust’s debt profile is solid. Despite a higher leverage ratio of 40%, its borrowing costs are well-controlled – having an interest coverage ratio of ~3.9 times.
This is much higher than MAS’s ICR regulatory limit of 1.5x.
Now, the interest coverage ratio is simply taking EBITDA (or earnings before interest, tax, depreciation and amortization) divided by the REIT’s interest expenses. MAS required all REITS to be able to produce at least $1.50 in earnings for every dollar of interest the REITs pay.
The thing is, Mapletree Industrial Trust’s occupancy rate looks low at ~89.7%, versus global occupancy rate levels. Especially global vacancy rates are under 5%.
However, this also means there’s a lot more room for Mapletree Industrial Trust to grow its data centre’s rental income.
I’m not surprised that the hi-tech buildings and business space segment has lower vacancy rates. These spaces are usually meant for research and development, and with the current economic situation, businesses are actually cutting R&D.
This should pick up eventually as the economy expands.
3. Mapletree Pan-Asia Commercial Trust at 6% Dividend Yield
Mapletree Pan Asia Commercial Trust is interesting. I frequent Festival Walk, which is one of its properties in Hong Kong.
A quick note on Festival Walk:
What I like about this asset is it will have a steady stream of customers frequenting this mall for the foreseeable future. Why? Well, right next to Festival Walk, is City University Hong Kong.
The thing is, City University is actually a top five university in Hong Kong, and for me particularly I have friends and colleagues who attended that university.
This contributes to the defensiveness of the Mapletree Pan Asia Commercial Trust’s portfolio because students will always need a place to go for shopping, dates, hangouts, miscellaneous tasks, etc.
In my opinion, while the mall won’t be as luxurious or fancy as some of the malls on Hong Kong Island, Festival Walk is very well maintained. It’s also connected to an MTR station, which makes it extremely accessible and convenient for customers to come visit the mall.
At S$7.4 billion market cap, Mapletree Pan-Asia Commercial Trust consists of retail and office properties.
Its shares currently trade ~S$1.39 per unit, and trades at the “cheapest” valuations amongst all three Mapletree Singapore REITs with its P/B ratio at 0.8x. It currently pays a ~6% dividend yield.
Let’s look at Mapletree Pan-Asia Commercial Trust financial numbers:
- Gross revenue fell by 7.6% y/y to S$218 million
- Net property income fell by 7.5% y/y to S$165 million
- Distributions fell by 3.8% to S$0.0201 per unit
- Its Weighted Average Lease Expiry (WALE) stood at ~ 2.3 years
- Rental reversions stood at 1.4%
Mapletree Pan-Asia Commercial Trust’s weak performance was largely due to lower contributions from its previous property divestments.
Plus it also suffered losses due to weaker currency exposures. Having said that, its decline in distribution per unit (DPU) is more controlled as it has better debt management. Which brings me to my next point…
Like its other two peers, Mapletree Pan-Asia Commercial Trust has a healthy debt profile.
And MPACT’s debt situation is pretty good as well. Aggregate leverage sits at a lower 37.9%, with an interest coverage ratio of 2.9 times.
My final thoughts
Mapletree Investments is a quiet sponsor for all its three Singapore industrial REITs – Mapletree Logistics Trust, Mapletree Industrial Trust and Mapletree Pan-Asia Commercial Trust.
One thing in common is despite higher interest rates over the past couple years, these Singapore REITs are able to control their debt management well.
Now, if you ask me which of these three Singapore REITs are a better buy, I’d prefer the one with a stronger tailwind in technology – Mapletree Industrial Trust. I know, I’ve a soft spot for data centres.
And I like the fact that Mapletree Industrial Trust has more than 50% of its portfolio in data centres.
What’s more, a quick observation also tells me Mapletree Industrial Trust has a more resilient dividend profile. Amongst all three Singapore REITs, Mapletree Industrial Trust’s DPU fell the least. And it has the lowest gearing ratio.
How about the other two Singapore REITs? Mapletree Logistics Trust is a great pick if you believe the Asian growth story riding on e-commerce trends.
In the longer term, Mapletree Logistics Trust’s warehouses and modern facilities should bode well for this growth trend.
On the other hand, I’d say Mapletree Pan-Asia Trust isn’t the best performer today, but has the “cheapest” P/B valuations right now.
This is perfect if you like to handpick unloved gems, polish them up a bit and wait for a clean recovery.
