“Oh no!”
This was my initial reaction when Mapletree Logistics Trust‘s (SGX: M44U), or MLT, announced an 11% decline in its distribution per unit (DPU) to S$0.02003 for 3Q 2025.
However, this result shouldn’t have come as a complete surprise. Reviewing my previous post on the takeaways from last quarter’s earnings call, I realised I had anticipated a weaker performance for the remaining quarters of the year.
This experience highlights how quickly we can forget and underscores the value of documenting my investment journey through blogging. It helps me recall the research and analysis I’ve previously conducted.
Returning to the latest earnings, the lower DPU for the quarter can be attributed to several factors: higher borrowing costs, regional currency depreciation, a lower divestment gain, weakness in the Chinese market, and an enlarged unit base.
Since these factors aren’t entirely new, I won’t delve into the specifics here. You can refer to my previous post for my insights on some of these factors.
Instead, I’d like to focus on the trend data over the past seven quarters.
As illustrated by the data, portfolio-level operational metrics remain strong, with robust occupancy and positive rental reversion.
Even in China, MLT’s occupancy exceeds 93%, significantly outperforming the market’s 80%, albeit at the cost of a negative 10% rental reversion. I am aligned with management’s approach to prioritise occupancy over rental income.
However, rising borrowing costs pose a significant challenge. Refinancing and renewed hedges have increased interest rates, compounded by a recent debt increase.
With the projected average borrowing cost reaching 2.8% this fiscal year and 3% next, DPU will likely face continued pressure.
Despite this, even if DPU declined by another 10% to S$0.072 for FY 2025/26, it still translates to an attractive 5.6% yield at the current price of $1.28.
Based on this assessment, I plan to hold my stake while I await for a more favourable market outlook.
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