Stock Review: If I were to pick an Industrial Trust

I divested my shares in Mapletree Industrial Trust in 2013 at $1.40 after buying it at an IPO price of $1.15 in 2010. Reasons why I bought it were high yield (6%) and strong sponsor, Mapletree. One of the reasons why I sold the share was because I could pocket a "guaranteed advance dividend payout" for the next 3 years by means of realising a capital gain of 20%. On the back of vacancy uptrend and increased supply entering the market in the next 5 years (up till 2018), I thought that I could hold cash and wait for opportunities.

My friend asked which Industrial Trust I will pick if I were to pick an Industrial Trust in the current market. My initial response was that I am still bearish on the industrial market and I will probably still not buy into Industrial Trusts. However, I will force myself to read and choose one, even if I am not buying any.

The first thing I look out for is the demand and supply trends. For that, in Singapore, we have Jurong Town Corporation (JTC) that publishes these statistics quarterly.

Vacancy rates - extracted from JTC

Based on vacancy trends, I will pick warehouses and single-user factory. Logistics companies sometimes have their distribution centres classified as warehouse or single-user factory.

The second thing I look out for is rental prices. JTC also has statistics for rental index.

Rental index - extracted from JTC

Based on the rental index, I will pick single-user factory as it is reporting an uptrend.

The third thing I did was to comb through the financial reports -- Fundamental Analysis. Without knowledge of the industry, I will need to read these reports to make a relative comparison to identify which share to choose in the current market.

Side-by-side comparison of key numbers I look for - 
extracted from individual companies' financial statements and presentations

If there were any transcription errors, it was unintentional. I went through the reports over a few days and I re-read some numbers which looks strange. I couldn't find some of the numbers I was looking for in Ascendas, hence I left it blank -- and it didn't matter too. For each number, I marked out in green the most preferred number (e.g. highest yield), and in red the least preferred (lowest yield).

Just based on the first preference of choosing warehouse and single-user factory, my preferences will be bias towards Cache Logistics. However, we need to keep in mind that Cache Log pays out 100% of its earnings in dividends, hence growth is limited. There are some numbers to like, such as high profit margin, high occupancy, and low trade receivables, which are healthy signs of a single-user factory -- fewer tenants to manage and tenants also pay promptly.

If I have to choose a second preference, I will choose AIMS AMP Capital for the same reasons as Cache Log. The higher weighted land lease expiry is 10 years higher than Cache Log because they have freehold land in Australia (by virtue of a 49% stake in Optus Centre), which they used 99 years as part of the calculation.

Ascendas is my least-liked share. One thing I didn't like in the report was how they perceived lower than market average occupancy as potential revenue. Their profit margin is the lowest among the five companies compared here, and significantly lower than the other four companies. Hence, I am made to believe that there are probably operational inefficiencies within the company. However, some people may like that fact that Temasek Holdings (government-linked) and JTC (government) are reputable sponsors to Ascendas. Having an Ascendas' CEO who was an ex-JTC CEO and ex-EDB deputy managing director, could probably hint that some government-style management is present.

Ascendas CEO - extracted from Ascendas website

Ascendas ownership - extracted from Ascendas website

The writer does not own any shares in the companies mentioned.