08 February 2018
December Quarter Earnings of Four Largest Industrial REITs
  • The four largest Industrial REITs on SGX – Ascendas REIT, Mapletree Logistics Trust, Mapletree Industrial Trust and Frasers Logistics & Industrial Trust – averaged a DPU of 2.64 Singapore cents for the quarter ended 31 December 2017, up an average 1.7% from the year-ago period.
  • On average, these four REITs had an aggregate leverage ratio of 34.4% as of the December quarter, versus an average of 31.5% in the three months ended 30 September 2017.
  • These four largest Industrial REITs have a combined market capitalisation of S$20.6 billion. In the 2018 year-to-date, they have averaged a total return of -0.5%, bringing their one-year and three-year total returns to 15.8% and 3.6% respectively. The five trusts also maintain an average distribution yield of 7.0%.

Last month, SGX’s four largest Industrial REITs – Ascendas Real Estate Investment Trust, Mapletree Logistics Trust, Mapletree Industrial Trust and Frasers Logistics & Industrial Trust – reported their earnings for the three months ended 31 December 2017.

 

The Singapore Exchange (SGX) lists 33 Real Estate Investment Trusts (REITs) and six stapled trusts. The Global Industry Classification Standards (GICS®) classifies eight of these as Industrial REITs.

 

Real Estate Investment Trusts (REITs) raise capital to purchase primarily real estate assets, usually with a view to generating income for unit holders of the fund. It allows individual investors to access real property assets and share the benefits and risks of owning a portfolio of properties, which typically distribute income at regular intervals.

 

Industrial REITs are companies or trusts engaged in the acquisition, development, ownership, leasing, management and operation of industrial assets, which include warehouses and distribution properties.

 

The four largest Industrial REITs on SGX have a combined market capitalisation of S$20.6 billion. In the 2018 year-to-date, they have averaged a total return of -0.5%, bringing their one-year and three-year total returns to 15.8% and 3.6% respectively. The five trusts also maintain an average distribution yield of 7.0%.

 

Earnings Highlights 

 

For the quarter ended 31 December 2017, the four trusts averaged a distribution per unit (DPU) of 2.64 Singapore cents, up an average 1.7% from the year-ago period.

 

Ascendas REIT (A-REIT) reported the highest DPU of 3.97 Singapore cents among the four trusts, which declined 0.6% YoY, while Frasers Logistics & Industrial Trust (FLT) posted the highest YoY growth in DPU – up 3.4% to 1.80 Singapore cents. All the REITs posted YoY increases in DPU except for A-REIT.

 

These trusts averaged a 6.6% YoY increase in net property income to S$86.2 million, while gross revenue rose an average 5.5% YoY to S$112.4 million.

 

On average, the four REITs had an aggregate leverage ratio of 34.4% as of the quarter ended 31 December 2017. This compares with an average of 31.5% in the three months ended 30 September 2017.

 

Mapletree Logistics Trust and A-REIT had the highest aggregate leverage ratios of 37.8% and 35.2% respectively, while Frasers Logistics and Industrial Trust had the lowest gearing of 30.9%.

 

Interest cover for the four trusts averaged 6.6 times in the December quarter, versus 6.8 times in the September quarter. Their weighted average tenure of debt averaged 3.3 years for the December quarter, versus 3.5 years for the previous quarter.

 

Financial results for quarter ended 31 December 2017

 

Name

Distribution per unit (Singapore cents)

YoY % change

Net Property Income (SS$ mln)

YoY % change

Gross Revenue (S$mln)

YoY % change

Ascendas REIT

3.970^

-0.6

157.6

1.7

217.3

4.1

Mapletree Logistics Trust

1.907

2.0

83.0

3.9

98.2

2.8

Mapletree Industrial Trust

2.88~

1.8

70.9

11.7

91.5

8.3

Frasers Logistics Trust

1.800

3.4

33.4

8.9

42.4

6.9

Average

2.639

1.7

86.2

6.6

112.4

5.5

^includes taxable and capital distributions of 3.734 cents and 0.236 cents respectively

~includes advanced distribution of 0.99 cent per unit for period 1 Oct 2017 to 1 Nov 2017, paid on 28 Nov 2017; DPU for enlarged units in issue for 2 Nov 2017 to 31 Dec 2017 was 1.89 cents per unit             

 

Name

Aggregate Leverage Ratio (%) as at 31 Dec 2017

Aggregate Leverage Ratio (%) as at 30 Sept 2017

Interest Coverage Ratio (x) as at 31 Dec 2017

Interest Coverage Ratio (x) as at 30 Sept 2017

Avg Wtd Tenure of Debt (yrs) as at 31 Dec 2017

Avg Wtd Tenure of Debt (yrs) as at 30 Sept 2017

Ascendas REIT

35.2

33.1

5.9

5.9

2.8

3.3

Mapletree Logistics Trust

37.8

33.7

5.5

5.6

4.6

4.7

Mapletree Industrial Trust

33.8

30.0

7.2

7.2

3.0

3.2

Frasers Logistics Trust

30.9

29.3

7.8

8.3

2.7

2.9

Average

34.4

31.5

6.6

6.8

3.3

3.5

 

Mixed Domestic Outlook 

 

Meanwhile, the outlook for industrial real estate in Singapore remains mixed.

 

Mapletree Logistics Trust noted in its results statement dated 22 January 2018 that the Singapore market continues to face pressure from a high supply of warehouse space. However, as a portfolio, the Manager continues to see sustained leasing activities across its diversified markets, supporting stable rental and occupancy rates.

 

The Manager of the trust added that it remains focused on maintaining high occupancy rates by actively managing leases due for renewal, while pursuing opportunities for strategic acquisitions and asset enhancements to boost the quality of the existing portfolio.

 

Mapletree Industrial Trust also pointed out that the continued supply of competing industrial space is expected to exert pressure on both occupancy and rental rates, even though the broader domestic economy and business sentiment of small and medium enterprises continue to strengthen.

 

The Manager said in the trust's results statement dated 23 January that it would continue to focus on tenant retention to maintain stable portfolio occupancy rates.

 

Island-wide, the vacancy rate of industrial properties remained at about 11% as at 31 December 2017, A-REIT noted in its results statement dated 25 January 2018. Reflecting this trend, the trust’s Singapore occupancy rate fell by 1.3% from 90.1% in the previous quarter, due to increasing supply and stronger competition for quality tenants. Nonetheless, the trust expects its performance for FY17/18 to remain stable.

 

In terms of the broader economy, Singapore’s gross domestic product grew by 3.5% YoY in 2017, and is forecast to expand by 1.5% to 3.5% in 2018. Growth is supported by the manufacturing sector and externally oriented sectors such as wholesale trade, transportation and storage, as well as finance and insurance.

 

Firm Demand Down Under

 

For the 12 months ended 31 December 2017, the supply of industrial space in Australia held at its 10-year average, with over 1.6 million square metres of space added to the market, and the three major cities of Melbourne, Sydney and Brisbane accounting for more than 90% of the new development, Frasers Logistics & Industrial Trust said.

 

Occupier demand for existing space remained strong, with 2017 national take-up rates surpassing the 10-year average by 17%, and most of the new supply leased prior to completion, the trust noted in its results statement dated 25 January.

 

National investment volume of A$3.7 billion in 2017 is below the five-year annual average of A$5 billion, which reflects fewer assets being offered to the market, FLT said, citing JLL data.

 

Given limited access to assets and the desire to quickly increase exposure to the Australian industrial market, portfolio sales have been highly sought after by both domestic and offshore investors, JLL data showed.

 

On the broader economy, the consensus forecast for Australia's GDP growth in 2018 is 2.8%, A-REIT noted, citing economists polled by Bloomberg. Non-mining business investments are expected to continue supporting growth as the country transitions away from commodity investment.

 

Name

SGX Code

Market Cap S$M

Last Price

Total Return YTD %

Total Annualised Return 1 Yr %

Total Annualised Return 3 Yrs %

P/B

Div Yield %

Ascendas REIT

A17U

7,652

2.650

-2.57

12.7

8.4

1.3

6.0

Mapletree Logistics Trust

M44U

3,852

1.260

-3.07

27.1

8.4

1.2

6.0

Mapletree Industrial Trust

ME8U

3,770

2.000

-0.60

28.5

16.4

1.4

5.9

Frasers Logistics & Industrial Trust 

BUOU

1,703

1.120

-3.45

23.4

N/A

1.2

6.3

AIMS AMP Capital Industrial Trust 

O5RU

909

1.330

-1.68

7.5

5.3

1.0

7.8

Cache Logistics Trust

K2LU

904

0.845

0.66

18.5

-1.0

1.2

8.0

ESR-REIT

J91U

749

0.570

2.53

9.8

1.4

1.0

6.8

EC World REIT

BWCU

604

0.770

1.32

17.2

N/A

0.8

7.8

Sabana Shar'iah REIT

M1GU

416

0.395

2.05

-2.2

-13.9

0.7

8.4

Average

     

-0.5

15.8

3.6

1.1

7.0

Source: StockFacts, Bloomberg (Data as of 6 February 2018). Dividend Yield calculated based on the past 1 year.

     

 

Did You Know?

 

Real Estate Investment Trusts (REITs) raise capital to purchase primarily real estate assets, usually established with a view to generating income for unit holders of the fund. This allows individual investors to access real property assets, and share the benefits and risks of owning a portfolio of properties, which typically distribute income at regular intervals through dividends.

 

The risks associated with a REIT investment vary, and include factors such as gearing ratios, refinancing costs, alignment of management fees, as well as geographical location and quality of the underlying assets in their portfolios. Other risks associated with stock investing (e.g. price risk, volatility and liquidity risks) also apply.


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