Wednesday, February 3, 2016

MIT- Small is beautiful

MIT is the second industrial REIT I owned. It is not small per se, it is a REIT with strong parentage and 84 buildings.

But compared it with A-REIT, it is easier to have visible growth drivers that will add to NPI.

There is a new one after HP BTS. An AEI at kallang

Taken with HP phase 1 and 2, which is fully committed. You have staggered increase till 2018.

Each project will add about 400k sft of space. When HP takes up all the space in 1H2017, it will add about 2.2 mio per quarter. I use an conservative $2 per month per sq ft rent for high tech building in my calculation 

There is no pre-committment for Kallang AEI.

But, I would think these 2 growth drivers will provide some buffer in interest rate hike.

2.2 mio per quarter is 30% of its interest cost, it's interest cost will
Have to go above 3% to wipe it off. It might go above 3%, but I do not see the odds as very high. It's current all-in interest cost is 2.4 percent.

However, DRP will cease. MIT will no longer have this source of "funding" to save on cash for acquisition or AEI.

Beautiful, isn't it?

And the supply surge in industrial space is behind them. If they can survive that phase, they should continue to do well unless Singapore economy stagnant or go into negative territory.

7.5% yield is better than A-REIT. 

Valuation in terms of prenium above NAV,
Will show MIT is more expensive.

But I think the distribution and yield should be more relevant valuation. 

As for capital management etc, I like both A-REIT and MIT spread of refinancing needs. 


  1. Hi SI,
    What are your thoughts on MIT net profits being inflated by its upward portfolio revaluation? I loved the business but that part got to me, as I considered how should the value of the property depreciate especially in light of the current financial environment. Wouldn't this negatively affect the earnings?

    1. Hi aloypro,

      I think that is a good qn which I dun have a straight forward answer. But if I am correct,

      Valuation of properties is done annually and will affect net earning either positively or negatively.

      Looking at the 2015 AR, they have EPs of 21 cents after positive valuation gains. But they gave out less than 3 cents per quarter.

      Depreciation is a non-cash item that will not affect distribution and hence it does not bother me.