MIT 3rd Largest Tenant Cyxtera gone Bankrupt!

As mentioned in my previous post on Headwinds for Mapletree Industrial Trust (MIT):

Headwinds for MIT (Hint: Cyxtera Technologies)

This news has now been announced with MIT's 3rd Largest Tenant Cyxtera Technologies entering the Chapter 11 Bankrupcy process

https://www.straitstimes.com/business/mapletree-industrial-trust-s-3rd-largest-tenant-enters-us-court-supervised-chapter-11-bankruptcy-process

Cyxtera has contributed 3.2% of gross rental income for MIT as at 31 March 2023. While blue chip MIT boasts of a well-diversified tenant base, this negative news would inadvertently be a drag to its share price

With prices closing in to short-term Oct22 lows of $2.13 and long-term Covid Mar20 lows of $2.10, hopefully these price supports would hold the sellers at bay.

Bearish trend continues with the purple weekly MA50 sloping downwards and even acting as a resistance point in Apr23.

Other affected reits included Digital Core and Keppel DC, all putting up brave fronts to soothe shareholder sentiments.

It only goes to show that with new seemingly lucrative Data Centre businesses, risks do abound with every new investments that are outside of traditional property strengths of Reits.

Also with rising and persistant high interest rates, MIT and Reits being highly leveraged companies, will continue to face strong headwinds in the months ahead.

What are some of your thoughts of MIT moving forward? Let me know in the comments section below

Disclosure: I am currently vested in MIT  😅

Headwinds for MIT? (Hint: Cyxtera Technologies)

 

Mapletree Industrial Trust can be considered as one of the blue-chip Reits of Singapore. Part of the reasons include a strong govt linked sponsor, well established history, diversified portfolio of properties in Singapore and USA (which includes lucrative Data Centres).

It recently announced a slightly disappointing Q4 & FY22 results, which saw a slight dip to 3.33c in DPU. As seen from the chart below, MIT had a previous solid history of increasing DPU since FY10, with the exception of FY20 due understandably to Covid pandemic, though it has since recovered strongly to increasing payouts again. However in recent years of FY21/22, we are seeing a plateau and even worrying decreasing trend of falling DPU. Are the best years of MIT over?!

Of course with the previous 9 interest rate hikes since Mar 2022 till now, Reits being a leveraged business is not spared from the increase interest rate expanses to its loans. Though 75% of its debt is in Fixed rates, the impact on DPU can still be seen with the increase in base interest rates. To be fair, no one would have honestly thought in early 2022, that the USA Fed would increase the interest rates so quickly and so frequently.

Another area of concern could be with MIT's 3rd largest tenant (3.2% rental income) rumoured to be Cyxtera Technologies. Even MIT CEO commented on the 2023 outlook to be "a challenging year with increased risk to global financial stability due to the banking crisis and geo-economic fragmentation."

Conerns of Cyxtera Technologies:

1. Posted US$355M loss for 2022 and cancelled earnings call amid ongoing efforts to extend maturing debt

https://www.datacenterdynamics.com/en/news/colo-q4-2022-results-cyxtera-posts-a-355m-net-loss-for-2022-cancels-earnings-call/

2) Moody's downgraded Cyxtera from B3 to Caa2, rated as speculative grade investment of  poor quality and very high credit risk

https://www.theedgesingapore.com/news/reits/cyxteras-long-term-debt-us853-million-matures-2024

3) Price of Cyxtera plunged from $15 to just $0.325! (Nasdaq: CYXT)

Looking at this scary price chart below, it seems the company is heading towards Chapter 11 bankrupcy filings

Do u have any thoughts or insights to Cyxtera or MIT? Let me know in the comments section below 😅

Disclosure: I am currently vested in MIT  

Partial sale of MIT reit

Sold off half my stake in Mapletree Industrial Reit, as immediate resistance of 1.16 is reached. Will prob sell off more at 1.2 if it moves higher further, but global markets are way too choppy and unpredictable. Will purchase more at support level of 1.1, as company (government linked) is stable and pays good dividend of about 8% per year