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The term “social distancing” has become the norm for people everywhere as the spread of coronavirus globally picks up. Stock markets have crashed and investors are panicking but as Warren Buffett once said:
“Be fearful when others are greedy and greedy when others are fearful.”
Now is arguably an ideal time to start picking up shares of great companies. The business victims of the coronavirus are obvious; airlines, travel companies, consumer-facing goods firms. But how about the ones that could see increased usage?
I believe Mapletree Industrial Trust (SGX: ME8U), which owns data centres in both Singapore and North America, could be a beneficiary of the “stay-at-home” trend.
The REIT is trading at an attractive dividend yield right now and its revenues could hold up (and even grow). Here’s why.
Data centre exposure
Mapletree Industrial Trust, also known as MIT, is primarily an industrial REIT that has over 104 properties in Singapore and North America.
In late 2017, it expanded its geographic footprint by purchasing 14 data centres in the US via a joint venture (JV), taking a 40% stake. The other 60% stake of the JV was with its sponsor; Mapletree Investments Pte Ltd.
After further data centre acquisitions – with another one in late 2019 – it has actually grown its share of data centre exposure (see below). Furthermore, all these asset purchases have been distribution per unit (DPU) accretive for shareholders.
Meanwhile, in Singapore it has sought to expand into the build-to-suit (BTS) space in data centres. Effectively, the REIT has constructed and leased out space to international data centre providers such as Equinix.
What’s unique about MIT is that it’s one of the few Asia-based REITs offering investors exposure to the data centre space. One other is Singapore-listed Keppel DC REIT (SGX: AJBU).
Portfolio breakdown for MIT pre- and post-latest data centre acquisition
Source: Mapletree Industrial Trust presentation slides
Increased usage of data
The rise of cloud computing and the upcoming 5G and AI revolution mean data centre demand is likely to pick up. This is even in the face of coronavirus isolation.
In fact, with people staying at home and living their lives online – whether that’s working, streaming shows or playing online games – data usage should see an uptick.
For the US specifically, data centre supply and demand are both expected to grow at a compound annual growth rate (CAGR) of 4.6% and 7.6%, respectively, between 2017-2023.
Looking further out
Mapletree Industrial Trust has a stellar track record of increasing its DPU over time, ever since it first listed in 2010.
There’s no doubt that the coronavirus will impact businesses. However, the extent to which MIT has been sold off suggests there may be an opportunity for long-term investors to accumulate a rock-solid REIT.
At the time of writing, MIT units are trading at S$2.13, offering investors a 5.9% forward dividend yield.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Tim Phillips owns shares of Mapletree Industrial Trust.