Here Are 2 REITs That Delivered Growth In Their Latest Quarterly Earnings Updates
A new earnings season is underway.
As is common with every earnings season, there will be some real estate investment trusts (REITs) posting growth, some REITs posting mixed numbers, and some REITs experiencing declines. So, which are the REITs that have recently reported growth? Let’s look at two of them:
1. In late January, Mapletree Logistics Trust (SGX: M44U) released its third quarter earnings update for its fiscal year ending 31 March 2018 (FY17/18).
As a quick introduction, Mapletree Logistics Trust is a REIT with 124 logistics properties in many countries in the Asia Pacific region. These countries include Singapore, Hong Kong, Japan, Australia, China, Malaysia, South Korea and Vietnam.
During the reporting quarter, the REIT experienced a 2.8% year-on-year increase in gross revenue to S$98.22 million. Consequently, its net property income improved by 3.9% to S$83.02 million. The top-line growth flowed to the bottom-line, as the REIT’s distribution per unit (DPU) climbed by 2.0% to 1.907 cents. Mapletree Logistics Trust attributed its growth to a stable performance from its existing properties, and new contributions from acquisitions.
In its earnings release, Mapletree Logistics Trust’s Manager said that it “continues to see sustained leasing activities across its diversified markets supporting stable rental and occupancy rates.” But, it also warned that Singapore’s market “continues to face pressure from a high supply of warehouse space.” The REIT’s focus remains on “maintaining high occupancy rates by actively managing leases due for renewal.” As of 31 December 2017, Mapletree Logistics Trust has a portfolio occupancy rate of 96.2%.
Based on Mapletree Logistics Trust’s annualised DPU of 7.575 Singapore cents (from its DPU of 5.681 cents in the first nine months of FY17/18) and closing unit price of S$1.25 as of 6 February 2018, the REIT has a distribution yield of 6.1%.
2. Next up we have Keppel DC REIT (SGX: AJBU), which released its 2017 fourth quarter and full year earnings update in late January.
In the reporting quarter, Keppel DC REIT saw its net property income jump by 30.9% year-on-year to S$32.65 million, driven by a 37.2% increase in gross revenue to S$36.83 million. New acquisitions and favourable currency movements more than offset lower income from certain properties. Keppel DC REIT currently has 13 data centres in its portfolio across Asia and Europe.
The REIT’s adjusted distribution per unit (DPU) increased by 4.8% from 1.31 cents in 2016’s fourth quarter to 1.75 cents. The adjustments were for a preferential offering conducted in November 2016, and a one-off net property tax refund recorded in 2016. Without the adjustments, Keppel DC REIT’s DPU in the reporting quarter would still be 1.75 cents, but it would have been 33.6% higher than a year ago.
In its earnings release, Keppel DC REIT gave some insightful comments on the state of its market and business:
“According to the World Bank’s Global Economic Prospects report released on 9 January 2018, global economic growth is projected to be 3.1% in 2018, following a stronger than expected recovery in 2017. While growth in the investment, manufacturing and trade sectors is expected to be sustained in the near-term, the World Bank cautioned about possible downside pressure from financial stress, increased protectionism, and rising geopolitical tensions.
Data from 451 Research indicates that the data centre demand drivers remain positive in many key data centre hubs, including cities such as Singapore, Sydney, and Amsterdam where Keppel DC REIT is invested in. Demand for data centre capacity is underpinned by the sustained growth of cloud service providers, as well as increased data storage and processing requirements due to end user adoption of new technologies, and data sovereignty regulations.
Keppel DC REIT remains well-positioned to benefit from the growth of the data centre industry, with its global client base and the Manager’s established track record. The Manager will continue to seek opportunities to capture value and strengthen its presence across key data centre hubs.”
Based on Keppel DC REIT’s DPU of 6.97 Singapore cents for 2017 (excluding a capital distribution of 0.15 cents per unit seen during the year), and its closing unit price of S$1.36 on 6 February 2018, the REIT has a trailing distribution yield of 5.1%.