Mapletree Industrial Trust posts 16.7% higher DPU for 1Q21/22 from contributions from North American data centres

Mapletree Industrial Trust (SGX: ME8U)

With 84 Singapore properties under its portfolio, MIT (SGX: ME8U) listed back in 2010. Having  recently acquired 29 US data centres  through a joint venture with Mapletree Industrial, MIT is no longer just a Singapore focused REIT.

Previously focusing on managing Singapore industrial facilities, MIT has since diversified to US-based data centres. MIT would continue to shift its focus on database centres with aims to be one of the largest Asia Pacific data centres REIT.

The last in rank for 1H21, MIT has a negative return of -1.75%. For investors, the dividend pay-outs are given quarterly.

With a total market capitalisation of $7.60 billion, MIT closed the week at $2.86 with a dividend yield of 3.85%.

In 2019, the Singapore government imposed a moratorium on new data centres. Being a land scarce country, there is a lack of land to accommodate the rapidly growing demands for data centres. In addition, data centres consume huge amount of energy and require energy-efficient cooling systems. For these reasons, data centre players like Keppel DC REIT and Mapletree Industrial Trust look to overseas for data centre acquisitions.
 

Between the two S-REITs, it seems to me that MIT&rsquo s management decided to go on shopping spree. In September 2020, MIT completed the acquisition of the remaining  60.0% interest in 14 data centres  located in the United States for about $293 million. And in March 2021, MIT completed the acquisition of a  data centre in Virginia, United States  for about $283 million. Then in May 2021, MIT announced the  acquisition of 29 data centres in United States. The slew of acquisitions led to several round of equity fundraising, thereby weighing on the MIT share price for the past one year.

Notwithstanding the above, MIT share price had been pretty stable year-to-date, declining by a mere 2.43%. Question now is whether the recent mega acquisition of 29 data centres located in the United States will change the game for MIT share price. Given the massive total acquisition cost of $1.82 billion, it had better be. To fund the acquisition, the S-REIT launched yet another equity fund raising to raise proceeds of no less than $800 million.

Initially, I had concerns whether the huge equity fund raising would trash MIT share price. But my fears proved to be unfound as MIT share price remained resilient after the issuance of the new units.

 

Mapletree Industrial Trust Converting Into a Data Centre Focused REIT-

Mapletree Industrial Trust (" MIT" ) wastes no time in the the execution of its heavily strategic vision of having two-third of its property portfolio in data centres. Coming off the heel of the last US data centers acquisition exercise in 2020, MIT recently announces another  US$1.32 billion  acquisition of 29 data centres from Florida based Sila Realty Trust. 
 

New engine of growth

Data centres remain resilient with attractive growth opportunities, which are underpinned by the acceleration of digitalisation, cloud adoption and e-commerce during the pandemic. The completion of the significant acquisition of the 29 data centres will mean that MIT now has 53.6% of the REIT' s entire portfolio vested in this key property segment relative to 41.2% pre-acquisition. MIT total assets under management thus will increase from $$6.8 billion to S$8.6 billion.  

MIT expects the proposed acquisition to be distribution per unit (DPU) and net asset value per unit (NAV) accretive to unitholders. Based on pro forma estimates, assuming the proposed acquisition was completed on 31 March 2021, it would boost DPU by 3.3 per cent to 12.97 Singapore cents. NAV would rise to S$1.76 per unit from S$1.66 per unit.

For long term investors who do not mind waiting patiently, MIT is the typical " slow and steady" REIT which grows its distribution yield and net asset value gradually overtime backed by a solid Singapore government affiliated Temasek Holdings. 
 

 

Good occupancy for industrial, data centre S-Reits