Mapletree Industrial Trust (MIT) (SGX: ME8U) as its name suggests is a real estate investment trust (REIT) which invests in industrial real estate. Currently, it has 85 properties across five property types namely Flatted Factories, Hi-Tech Buildings, Business Parks, Stack –up/Ramp up buildings and Light industrial buildings. MLT’s portfolio is collectively valued at around S$3.7 billion (as of 31 March 2017). Mapletree Industrial Trust is a REIT currently listed on the Singapore Stock Exchange.

With that, here are 7 things you need to know about Mapletree Industrial Trust.

Stock Information

1

TICKER SYMBOL: SGX: ME8U

MARKET CAP: SGD 3.33 Billion

INDUSTRY: Real Estate Investment Trust

The Business

In the slide below, it gives a quick overview of MIT:


Source: Mapletree Industrial Trust’s investor presentation (May 2017)

The REIT’s sponsor, Mapletree Investments Pte Ltd is a major owner with a stake of 34.2%. Mapletree Investments is a state-owned company and one of the largest real estate investors in Asia. MIT manages a total of 86 properties and these properties are spread out across Singapore. With so many properties under management, it should come as no surprise that not all the properties are of the same type, the next diagram sheds some light on their property mix.

There are several different types of industrial real estate within MIT’s portfolio.


Source: Mapletree Industrial Trust’s investor presentation

Flatted factories make up the largest piece of the REIT’s portfolio in terms of value (a 41.4% piece of the pie). These are high-rise, multi-tenanted buildings with basic facilities which are targeted for light manufacturing activities.

Next up, hi-tech buildings constitute almost a quarter of the value of MIT’s portfolio. These buildings are tenanted to companies in the technology and knowledge-intensive sectors that have a higher office-component to them.

The third biggest property type is business park buildings which make up 15.1% of the portfolio’s value. These buildings can serve as regional headquarters for multinational firms or for research and development.

Moving on, stack-up/ramp up buildings accounts for 12.6% of the portfolio’s value. These properties are mostly tenanted to firms in the manufacturing or assembly sector.

Lastly, light industrial buildings contribute the smallest piece of MIT’s portfolio at just 2.7% of property value. These buildings are multi-storey developments that are usually occupied by an anchor tenant involved with light manufacturing.

Performance

Looking at rental rates, MIT has seen its gross rental rates increase from S$1.90 to S$1.94 per sqft from fourth quarter of FY 15/16 to FY 16/17. This was on the back of growth seen across three of the five property types mentioned above, namely, High Tech Buildings, Light Industrials buildings and flatted factories. Occupancy at the end of the fourth quarter 16/17 stood at 93.1%.

Lastly, let’s look at MIT’s net asset value (NAV). NAV for MIT has risen from S$1.37 to S$1.41 per unit over the past year. At its current unit price of S$1.85, this would result in a price to book value of 1.31. What this means is that investors are paying S$1.31 for S$1 worth of book value that the REIT holds.

Key Opportunities

Large and Diversified Tenant Base


Source: Mapletree Industrial Trust’s investor presentation

MIT’s tenant base is very diversified. This helps to ensure that MIT doesn’t suffer from tenant concentration risk, whereby one tenant is contributing to the majority of its revenue. This reduces the risk for Mapletree Industrial Trust. If one tenant defaults on its payments, MIT would still have a stable revenue stream from its other tenants.

Looking at the diagram above, the largest tenant makes up only 5.3% of its gross rental income. Also, the top 10 tenants together contribute only 21.1% of MIT’s rental income in recent quarter.

The diagram below further drives this point on diversification.


Source: Mapletree Industrial Trust’s investor presentation

As seen in the diagram, no single sector makes up more than 19% of the portfolio’s gross rental income. This is indeed a source of strength for MIT.

Tenant Retention

Apart from the diversified tenant base that MIT has built, the REIT manager also takes care of its tenants’ needs. I can infer this because of the long duration that tenants stay at its properties. The diagram below explains more.


Source: Mapletree Industrial Trust’s investor presentation

As seen from the diagram above, close to 65% of MIT’s tenants have been at their properties for more than 4 years. In fact, 21% have been there for more than 10 years. This goes to show that MIT does something “right” as a landlord to keep its tenants happy. This is important as the longer a tenant stays a trust a built between the tenant and landlord. Also as the tenants business grows it will expand into more of MIT’s space which is a win-win for both parties.

Key Risks

Excess space inventory


Source: Mapletree Industrial Trust’s investor presentation

The diagram above shows data from URA/JTC. Looking at the graphs over the past few years, there has been more supply coming on board compared to the demand for industrial spaces. This is a negative for Mapletree Industrial Trust as it means there could be rental rate pressures on the REIT. This might explain the dip in rental rates mentioned above.

On the business park front, the situation looks slightly better but hopefully, it stays that way.

Economic Slowdown

Industrial space is heavily dependent on how the economy is doing. With the lackluster growth in the economy over the past few years, industrial REITs have been under pressure. The uncertain business environment and global trade are affecting the sector. Also, the rising interest rates will put further pressure on companies as they faced ever higher. All these factors could potentially be a negative for MIT as it needs to serve very price sensitive customers.

Valuation

MIT currently trades at a Price to book (P/B) ratio of 1.31 and spots a 6.1 % distribution yield for its investors, which is slightly higher than its average valuation over the past five years.

Investor Relations

Investor Relation Material:

Ms Melissa Tan
E: ir_industrial@mapletree.com.sg

Top Shareholders (31st September 2016)

  1. Mapletree Dextra Pte. Ltd. 33.75%
  2. Citibank Nominees Singapore Pte Ltd 17.86%
  3. DBS Nominees (Private) Limited 12.33%

Financials

Income Statement

Balance Sheet

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ketz’s personal capacity. It does not in any way represent those of his employer and other related entities. Ketz does not own any companies mentioned.

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