MAPLETREE GREATER CHINACOMM TR
RW06.SI
Mapletree Greater China Commercial Trust - CONSISTENT PERFORMER
Allaying market Allaying market fears.
- We maintain our BUY call with a revised TP of S$1.11.
- While acknowledging the concerns over the slowdown in the HK retail market, we believe this is overplayed near term, given the delivery of a 12.6% y-o-y increase in 2Q16 DPU to 1.808Scts, which was in line with expectations.
- Moreover, this risk is accounted for by the 17% discount to MAGIC’s NAV per share of S$1.192.
Currency tailwinds.
- With 70% and 30% of its assets by valuation located in HK and China respectively, MAGIC is a beneficiary of the strengthening HKD and CNY versus SGD. We have conservatively assumed SGD/HKD and SGD/CNY exchange rate (including impact of hedges) of 5.8 and 4.8 respectively in FY16F, and 5.6 and 4.6 in the long term. This compares to the current SGD/HKD and SGD/CNY spot FX rates of 5.55 and 4.55 respectively.
Full contribution from Sandhill Plaza yet to be realised.
- With the S$412m acquisition of Sandhill Plaza in Shanghai only completed in June15, MAGIC’s earnings should receive a boost over the coming year, which should offset any potential slowdown in HK.
- Combined with growth in its existing portfolio, this should translate to a 6% three year DPU CAGR.
Valuation:
- To account for the deceleration in the Hong Kong retail scene, we trimmed our FY17F DPU by 2% and reduced our DCF-based TP to S$1.11 from S$1.12.
- Notwithstanding, with 12% capital upside and 7.3% yield, we reiterate our BUY call.
Key Risks to Our View:
- The key risk to our view is a significant downturn in the HK and Chinese economy, causing a decline in rents at Festival Walk, Gateway Plaza and Sandhill Plaza.
Mervin Song
DBS Vickers
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Derek Tan
DBS Vickers
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http://www.dbsvickers.com/
2015-10-28
DBS Vickers
SGX Stock
Analyst Report
1.11
Down
1.12
