REIT with solid track records of dividends growth over 8 year

By ShareInvestor – 18 September 2019

Article highlights:

  • High Distribution Yield of 6.2%
  • 90.8% Portfolio Occupancy Rate
  • Temasek Holdings owns a huge 31.72% interest
  • Steady Growth of Distributions per unit (DPU) for 8 years
  • Analysts’ average target price at S$2.23

REITs investing has become quite a norm for Singaporean investors due to their inherent stability and recurring income in the form of dividends.

Furthermore, given the hectic schedule of working adults in Singapore, buying REITs require relatively lesser time and effort to monitor compared to trading or growth investing.

As such, we did a quick screening of REITs based on our pre-set metrics available in ShareInvestor Webpro:

While there are 7 companies that match the above, we will cherry pick one to analyse in this article and the company is MapleTree Industrial Trust (SGX: ME8U).

Company Background

Sourced from Singapore Business Review

Mapletree Industrial Trust (SGX: ME8U), or MIT, is one of the biggest industrial real estate investment trusts (REITs) listed in Singapore.

Based on its latest 1QFY19/20 results, it has 101 industrial properties across 5 business segments as at 30 June 2019. The portfolio is valued at S$4.8 billion and split into 90.9% for Singapore and 9.1% for United States (mainly data centres).

Its overall portfolio occupancy rate stands at 90.8% with a huge tenant base of over 2,200 tenants.

MIT’s Distribution Yields

Here, we talk about the part which most REIT investors love first – Distribution Yield.

As of 12Sep2019 | Sourced from ShareInvestor Webpro

From the picture above, we can see that MIT has delivered pretty decent yields north of 6% ever since FY2012. However, the yields have been sliding from 7.5% in FY2012 to 6.185% in FY2019.

While you might think that the REIT’s distributions have dropped, but in fact it’s the opposite. Looking at the below table, the distributions per unit (DPU) have been growing steadily for every quarter.

As of 12Sep2019 | Sourced from ShareInvestor Webpro

Hence, the only reason is that the share price of the REIT has accelerated faster than the growth in DPU. This is further confirmed when you look at the share price chart below.

As of 12Sep2019 | Sourced from ShareInvestor Webpro

MIT’s Ownership

As of 12Sep2019 | Sourced from ShareInvestor Webpro

Looking at the above ownership chart, we can see that the number 1 top shareholder is Temasek Holdings with a sizable 31.72% interest.

For ShareInvestor Webpro’s ownership feature, we can look at the top 20 shareholders of a particular company. In this case, other than Temasek Holdings, the other substantial shareholders belong to other asset management firms.

MIT’s Consensus Estimates

As of 12Sep2019 | Sourced from ShareInvestor Webpro

Taking a page from the ShareInvestor’s Analyst Consensus Estimates, MIT is well-covered by analysts with 15 ratings. The average recommendation comes up to a with a target price of S$2.23, around 2.1% downside from its current share price of S$2.28.

As of 12Sep2019 | Sourced from ShareInvestor Webpro

When we look at the 2-year consensus estimates chart (stretching from Sep 2017 to Sep 2019), the “Underweight” and “Sell” ratings have been on the increase.

This is probably due to the jump in MIT’s share price over the years to a recent record high.

Conclusion

Singapore’s operating environment is becoming even more challenging amid the global uncertainty and the government’s lowering of the GDP’s growth forecast from its previous estimate for 1.5% to 2.5% to between 0% and 1%.

A slowdown in Singapore’s economy will inevitably results in lower demand for industrial rental space. That said, MIT is not staying on the sidelines.

It recently completed an upgrading of 7 Tai Seng Drive into a data centre for Equnix Singapore with the lease commencing on 20 July 2019. It is 100% committed by Equinix Singapore for an initial term of 25 years3 with annual rental escalations.

In addition, MIT is also embarking on a redevelopment of its Kolam Ayer 2 Flatted Factory Cluster into a new high-tech industrial precinct at a total project cost of S$263 million. The commencement will likely start in 2H2020 and complete by 2H2022.

Keen to analyse other stocks using the above features? Check out our ShareInvestor WebPro’s Free Trial here!

 

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