Nibbled Mapletree Industrial Trust but sold it off after results announcement

In my Mar 2020 Portfolio Update, I shared about my shopping list in the SGX stock market.

If Mapletree Industrial Trust hits < 1.70, Mapletree Logistics Trust hits < 1.20 or Parkway Life Reit hits < 2.30

None of the target prices materialize. It is either they are unrealistic or too low.

On 24 Apr 2020 last Friday, I decided to nibble Mapletree Industrial Trust (SGX: ME8U) at 2.39 knowing that this Mon they will announce their Q4 2020 results.

My original intention was to start building up MIT in the portfolio though the entry price was far from ideal. Anyway it is only a small position so even if it declines further, I can always average down. I was also expecting at least a 3.0 cents dividends as sweetener

Then came MIT's Q4 results. They were solid and resilient but not super impressive.

DPU decreased 7.5% Q-o-Q to 2.85 cents. 0.3 cents were kept as contingency funds to help tenants affected by Covid virus. After sustaining increasing DPU over the years, this decline is a rare blemish in its ever growing DPU graph.

Though the DPU inched up to 12.24 cents for the entire FY, Gross Revenue, NPI and amount for distribution actually dipped in relative to previous quarter. This comes after the recent acquisition of 13 Data Centers in North America.

It is important to note that locally in Singapore, about 55% of the local tenants are SMEs that may well be affected by the virus situation and highly possible will seek relief from MIT. Up to 30% of MIT's tenants are providing non-essential services and their operations are stopped till 4 Jun 2020 as part of the extended circuit breaker measures. Hence, there is a possibility that subsequent DPU will stay in the range of 2.6 to 2.9 cents due to reduction in amount for distribution as some are set aside for the $13.7m relief package by MIT. This relief package does not come from the government but from shareholders' DIVIDENDS! It is with good intention to help the tenants get out of the crisis so that they can continue to pay rental, rather then let them go bust and default on future rental payments.

Today I decided to flip it off for some Kopi money. Not because the results are poor or MIT has no potential but because my entry price does not warrant sufficient margin of safety and current yield is not very attractive (~4.8% at price of 2.52) compared to smaller counterparts such as AIMS APAC Reit (Yield >10%) and Frasers L&I Trust (Yield >7%). Furthermore, I believe it will take a few more quarters for the DPU to recover back to pre-Covid level above 3 cents per quarter. With the looming recession and uncertainty in the economy, some SMEs and non-essential tenants may face cashflow difficulties and require extended relief to defer rental payments. Furthermore, it may take a few pullbacks before the share price of MIT reach its pre-Covid high of 3.04. Anyway, MIT is a solid and resilient industrial Reit to be in every income portfolio. Hence, I hope to buy MIT some time again this year.

Thanks for reading!

With Love & Peace,

Qiongster