Mapletree Industrial Trust posts 3.2% decline in DPU for Q2 2022

MAPLETREE Industrial Trust posted a 3.2 per cent loss in distribution per unit (DPU) to 3.36 Singapore cents in the second quarter of its financial year (FY) ended on Sep 30, from 3.47 cents a year ago, said its manager via a bourse filing on Wednesday (Oct 26).

On a quarter-on-quarter basis, the DPU also fell from 3.49 cents in the previous quarter.

The total DPU of 6.85 cents for the first half of its FY, however, is a slight 0.4 per cent increase from the 6.82 cents over the same period last year.

Net property income rose 8.3 per cent to S$130.3 million in Q2, from S$120.3 million a year ago.

Gross revenue grew 12.8 per cent to S$175.5 million from S$155.6 million over the same period.

The amount available for distribution to unitholders for the quarter increased by 0.7 per cent year-on-year to S$89 million.

Contribution from the acquisition of 29 data centres in the United States, partially offset by higher property operating expenses and borrowing costs., drove this quarter's performance.

Tham Kuo Wei, chief executive officer of Mapletree's manager, said that its financial performance has been affected by headwinds from higher property operating expenses and borrowing costs.

"Such cost pressures arising from rising energy prices and interest rates amid a deteriorating macroeconomic environment are expected to continue for the coming quarters... Our focus remains on prudent cost management while exploring opportunities to improve the portfolio quality and operating performance," he added.

The release of the S$6.6 million of tax-exempt income, which were withheld in the fourth quarter of FY2019/2020, will be released from next quarter to mitigate rising operating and borrowing costs.  This amount came out of distributions declared by joint ventures.

The occupancy of the overall portfolio increased to 95.6 per cent from 95.3 per cent in the previous quarter. Total assets under management is at S$8.9 billion, split almost evenly between Singapore (48.7 per cent) and North America (51.3 per cent).

As at Sep 30, the weighted average lease expiry across the entire portfolio is 4 years.

Mapletree reported positive rental revisions across key property segments in Singapore, including hi-tech buildings, business park buildings, as well as flatted factories.

With a total outstanding debt of close to S$3 billion, that works out to an aggregate leverage ratio of 37.8 per cent, a decrease from 38.4 per cent from the previous quarter.

This was a result of the redemption of S$45 million worth of 10-year medium term notes, which have a fixed interest rate of 3.65% per annum, with cash that matured on Sept 7 this year.

More than 74 per cent of the Group's gross borrowings had been hedged through interest rate swaps and fixed rate borrowings, which will reduce the impact of interest rate fluctuations on distributions. 

Mapletree's manager also raised proceeds of S$40.2 million from the distribution reinvestment plan for the previous quarter, which represented a take-up rate of 42.9 per cent.

The plan will continue to be applied for this quarter's distribution to finance progressive funding needs of the redevelopment project at Kallang Way.

Mapletree also said in its filing that the global economy is experiencing challenges across multiple fronts that weigh heavily on the outlook. This includes higher inflation, tighter financial conditions, Russia's invasion of Ukraine, as well as the lingering effects of the Covid-19 pandemic.

Global growth is expected to slow, and numerous risks, such as geopolitical fragmentation, inflation, and debt distress induced by tighter financial conditions, could cause growth forecast to decline even further.

"Against the backdrop of an uncertain global outlook, the increasing concern of an oncoming recession has dampened business confidence. At the same time, increasing property operating expenses and borrowing costs continue to exert pressure on distributions. The manager will adopt cost-mitigating measures while focusing on tenant retention to maintain a stable portfolio occupancy," read the filing.

Units of Mapletree Industrial Trust went up 4.6 per cent, or S$0.10, to finish at S$2.26 on Wednesday.

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