Giving Each Dollar A Job

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I decided to go to Mapletree Industrial REIT AGM this year as I was considering to keep or divest this counter.

This would be a short one, as I was, very unhappily, disrupted by sales call (which I mistook for something else) from who kept insisting on his service when all I wanted when I registered was to have push notifications of news related to my watchlist on the app. I do know what he is talking about but I don't think he really knows what I am talking about, so I gave up, and just ended the call and blocked him.

Unfortunately, it had to come during the time of Q&A and by the time I shook him off, Q&A ended. So sad.

So let's get started.
  • Management is strongly and mainly focused on the Hi-Tech Building segment which focuses on precision manufacturing and tech, basically shifting assets towards higher value uses (I'm personally quite happy with the move)
    • Hi-Tech Building segment has grown from 14.8% six years ago to 43.3% currently.
    • The segment will be growing via acquisitions, build-to-suit projects (BTS) and asset enhancement initiatives (AEI)
    • The management joked that when they were doing their first acquisition years ago, they were all very nervous but now they feel more confident in it.
    • They are looking to pursue more growth in Singapore and overseas with a focus on high specification industrial facilitites and data centres.
    • Demand for data centre space in US is still going strong with growth in data consumption and increasing adoption of cloud services by both businesses and consumers.
    • Data centre both in SG and US are at 17.5% of the portfolio currently.
  • That being said, the management pointed out that the remaining 60% interest of the US data centres would be low hanging fruits to acquire but they will look elsewhere before considering to take it (I would think it is a good idea though)
  • Due to large supply of industrial space and uneven recovery of the manufacturing sector is affecting the performance of the portfolio
    • Singapore economy is expected to slow in 2019 vs 2018 as well
    • The segments are, Flatted factories, Business Park Buildings and Stack-up/Ramp-up Buildings, which makes up 54.4% of the portfolio.
    • Occupancy is dropping in these segments
    • The management is reducing rents to increase occupancy and aim to retain at least half of the tenants, targeting 85% which is the industrial average which they view is sustainable.
    • The management said that they will keep an opportunitistic outlook whether to divest or keep on a case by case basis based on returns.
  • On the balance sheet, the management has no thoughts on how much gearing they would cap at, and would prefer to based it off opportunities available. The management has clarified that when they were last assessed by Fitch during the time when gearing was capped at 65% for rated REITs, it was based on 40-45% gearing for Fitch assessment.
    • If necessary, they would do a combination of rights, preferential offers, private placements, debt and even Dividend reinvesting programs to raise some cash.
    • The management is hopeful that interest rates stay low considering the economical backdrop.
  • The management would prefer organic acquisitions than acquiring other REITs as you don't just acquire just the good parts of the acquiree, it includes the bad.
  • I was quite surprised by the number of directors (14) considering it is a REIT and not a complex business, so I asked the question regarding it. The management replied that they are in the midst of transitioning directors due to the 9 year rule by SGX, so after September it would be left with 10. That being said, out of 14, 3 are not paid, and the remainder adds to about 700k which is a drop in the ocean for MIT.

That's all for this post.

Still wondering, is the growth of the Hi-Tech segment is sufficient to overcome the drag of the other segments (Light Industrial is rather small).

If you like my tibits from this AGM? Click here to view a complete list of AGMs I have attended.

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