$KEPPEL DC REIT(AJBU.SI)$$MAPLETREE INDUSTRIAL TRUST(ME8U.SI)$ Industrial REITs have been a bastion of stability throughout the pandemic.
Of course, the important attribute that many of them have is strong tenants within their portfolio.
This fact has enabled many industrial REITs to pay out a dependable and consistent flow of dividends through good times and bad.
Within the industrial REIT space, it may be tough to choose between two REITs that seem to be equally good.
Keppel DC and $MAPLETREE INDUSTRIAL TRUST(ME8U.SI)$
Both REITs have strong sponsors and diversified portfolios with long track records.
$KEPPEL DC REIT(AJBU.SI)$ owns 21 data centres across nine countries with assets under management (AUM) of S$3.5 billion.
$MAPLETREE INDUSTRIAL TRUST(ME8U.SI)$ MINT's portfolio consists of 143 properties worth S$8.8 billion spread out over six property segments, of which data centres make up roughly 54% of the asset value.
We decided to place these two REITs side by side to see which looks more attractive as an investment.
MINT has almost seven times the number of properties compared with Keppel DC REIT, at 143 versus 21.
The Mapletree REIT’s AUM is also more than double that of its smaller counterpart.
At the same time, investors should note that Keppel DC REIT owns just one type of specialised industrial asset – data centres.
This fact makes the REIT more vulnerable should any negative news impact the sector.
MINT, on the other hand, owns slightly more than half of its AUM in data centres while the rest is spread out among flatted factories, hi-tech buildings, and light industrial buildings.
This diversification is helpful as it provides investors with exposure to many different industrial property types.
Winner: MINT
Turning to financial performance, MINT’s numbers trump Keppel DC REIT.
Gross revenue jumped by 35.5% year on year for its latest quarter while net property income (NPI) rose 35.3% year on year.
Distribution per unit (DPU), the key metric for income-focused investors, increased by 5.8% year on year.
Keppel DC REIT reported a muted performance with gross revenue and NPI falling by 0.9% and 1.4%, respectively.
DPU did manage to inch up 0.2% year on year but it fell short of what MINT had achieved.
Winner: MINT
When it comes to financial metrics, Keppel DC REIT has the more favourable numbers.
Keppel DC REIT’s gearing level was a tad lower than MINT at 36.1% versus 38.4%.
The Keppel-backed REIT’s cost of debt was also lower at 1.8% compared with MINT’s 2.4%.
The interest coverage ratio was nearly double at 10 times versus 5.7 times, making Keppel DC REIT the clear winner on these metrics.
Winner: Keppel DC REIT
Next, we look at both portfolio occupancy and the weighted average lease expiry (WALE) for both REITs.
Keppel DC REIT has close to full occupancy at 98.7% as of 31 March 2022 while MINT’s portfolio occupancy stood at 94%.
With long leases, the data centre REIT also boasts a significantly longer WALE of 7.7 years compared with MINT’s 4.1 years.
Finally, we look at each REIT’s distribution yield.
MINT has a historical distribution yield of 5.5% while Keppel DC REIT’s forward distribution yield is 4.9%.
Of course, investors also need to factor in potential DPU boosts from acquisitions.
Keppel DC REIT has, on this front, made several yield-accretive acquisitions such as the purchase of a second data centre in London as well as an investment in M1’s bonds and preference shares.
MINT currently has three properties under redevelopment at the Kolam Ayer 2 cluster that will be completed by the first half of 2023.
Winner: MINT
Acquisition pipeline is another consideration
It appears that MINT is the more attractive REIT at the moment as it has a higher distribution yield and has also grown its DPU by a higher quantum.
However, one additional consideration is the property pipeline from each REIT’s sponsor that could potentially be injected as acquisitions.
Keppel DC REIT has more than S$2 billion worth of potential data centre assets for acquisitions from its sponsor $KEPPEL CORPORATION LIMITED(BN4.SI)$
MINT has the right of first refusal for the sale of a 50% stake in Mapletree Rosewood Data Centre Trust from its sponsor Mapletree Investments Pte Ltd.
Comments