Mapletree Greater China Commercial Trust - OCBC Investment 2016-04-28: Ending the year on a firm footing

Mapletree Greater China Commercial Trust - OCBC Investment 2016-04-28: Ending the year on a firm footing MAPLETREE GREATER CHINACOMM TR RW06.SI 

Mapletree Greater China Commercial Trust: Ending the year on a firm footing 

  • 4QFY16 DPU grew 10.4% YoY 
  • Positive rental reversions of 25%- 37% 
  • Bump up our FV and maintain BUY 

4QFY16 results met our expectations 

  • Mapletree Greater China Commercial Trust (MGCCT) reported a robust set of 4QFY16 results which came in within our expectations. 
  • DPU grew 10.4% YoY to 1.923 S cents on the back of a 15.2% jump in gross revenue to S$87.8m. 
  • Growth was underpinned by contribution from Sandhill Plaza (SP), which was acquired on 17 Jun 2015, and solid rental uplifts from both Festival Walk (FW) and Gateway Plaza (GP), but partially offset by higher finance costs and management fees. 
  • It was a similar story for MGCCT’s full-year results, as gross revenue accelerated 19.7% to S$336.6m and formed 103.1% of our forecast, while DPU of 7.248 S cents represented growth of 10.8% and was 0.8% higher than our projection. 

Another round of strong rental reversions 

  • Management achieved solid positive rental reversions of 37% at Festival Walk’s retail segment and 25% for Gateway Plaza’s office segment, as at 31 Mar 2016. 
  • Of its three properties, FW and SP are fully occupied, while GP’s occupancy was high at 96.8%. 
  • Overall portfolio occupancy thus came in at 98.6%, relatively stable from end Dec 2015 (98.7%). However, tenant sales and shopper traffic at FW fell 5.3% and 3.3% to HK$5.3b and 40.4m for FY16, respectively. 
  • Besides industry headwinds, this can also be attributed to ongoing renovation by a new cinema operator at the mall, with operations expected to commence in Jun this year. 
  • Due to a combination of lower total borrowings and higher total assets (registered fair value gains on investment properties) on a sequential basis, MGCCT’s aggregate leverage ratio declined from 41.4% (as at 31 Dec 2015) to 39.5%. 

Maintain BUY 

  • Looking ahead, MGCCT has already hedged more than 70% of its expected distributable income for 1HFY17 (comprising both HKD and RMB), a reflection of management’s prudent approach. 
  • Since we highlighted in our last report dated 2 Feb 2016 that we believed MGCCT’s valuations were compelling, its share price has rebounded 17.2%. 
  • We raise our FY17 DPU forecast by 0.9%, and also roll forward our valuations. This bumps our fair value up from S$1.03 to S$1.09. 
  • Maintain BUY.

Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-04-28
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 1.09 Up 1.03