MIT Report 2Q & 1HFY24/25 just came out. It has been with me since Year 2018. My expectation is around flat performance. It is one of the REITs which I just need to do a quick glance through and then go away after in 5 or 10 mins. That's for me, so please DYODD.
MIT is one of the largest REIT positions I have and one of the few I continue to add this year. I blogged that most REITs are in a monitoring or re-balancing situation till next year due to rising loan costs despite rate cuts. This has to do with the lagging contract renewals while higher loan rates are still in the process of catching up relative to previous agreements years ago.
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| Picture 1 :DPU Checks |
One of the most obvious things to check is DPU. YoY (or for MIT's current report presented HOH) and QoQ. Looks well so far. Do note QoQ is lower by -1.7%, which is not in the highlight. So it kind of fits into my expectation.
The second thing to check is the DPU trend. When I invest in REITs, the key is sustainability of DPU and being able to sleep well. This means the REIT's operation is safe or stable, as this forms our cash flow needs. We can see how high rates have affected MIT in recent years; however, overall it is still relatively good. There aren't fundamental changes in their business.
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| Picture 2 : DPU Trend |
The third thing to look at is loan management in Picture 3. This is one of the cores of REIT management. Screw this up, and we can be in a lot of trouble. Stats look good and have stabilized somewhat. We still have to continue to monitor future reports; however, chances are the impact will be small from Picture 4. Do note that even though rate cuts have started, the latest loan cost renewal could be higher than their previous contract.
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| Picture 3 : Loan Management |
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| Picture 4 : Loan Impact |
The fourth aspect is REIT-specific. MIT has large USD exposure, and they have lots of DCs, not just industrial properties. This is something to be aware of when you invest in this REIT. The recent move on Japan acquisition seems good to bring loan costs down.
Lastly, I checked the rental revision. Usually, this is in stages since only a portion of the REIT is up for contract renewal. In this case, the Hi-Tech segment seems to have quite a large drop in rental rates for new leases. Last Q presents quite a different picture between renewal and new leases. It doesn't give the full picture, but it does help to be aware of possible situations to watch in future reporting.
Summary
Overall, the REIT looks well-managed and stable. There are only a few REITs that can do that well in today's environment that fits into the dividend investment concept with reasonable levels of capital protection.
The focus on rental retention could also mean less confidence in the marketplace. So whatever I have now, which I am pleased to ride with this good report, will hold for the long term but not more additions due to portfolio-level views and coming personal allocation.
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2024-10-31
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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.
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