Mapletree Greater China Commercial Trust - OCBC Investment 2017-04-28: Positive VAT Outcome at Gateway Plaza

Mapletree Greater China Commercial Trust - OCBC Investment 2017-04-28: Positive VAT Outcome at Gateway Plaza MAPLETREE GREATER CHINACOMM TR RW0U.SI

Mapletree Greater China Commercial Trust - Positive VAT Outcome at Gateway Plaza

  • 4QFY17 DPU rose 1.9% YoY.
  • Higher portfolio valuation.
  • Positive rental reversions of 7%-16%.

4QFY17 results slightly above our expectations 

  • Mapletree Greater China Commercial Trust (MGCCT) reported its 4QFY17 results which came in slightly above our expectations. 
  • Gross revenue jumped 7.9% YoY to S$94.8m. This was driven by higher rental income across its three properties, coupled with the reversal of Value Added Tax (VAT) payable for Gateway Plaza (GP) previously assumed at a higher rate of 11%, following the clarification obtained from the local tax authorities on the applicable VAT rate and implementation process at GP in Mar 2017.
  • Going forward, MGCCT will apply a VAT rate of 5% on GP’s gross revenue. 
  • NPI grew 6.1% to S$77.5m, implying a margin of 81.7%, which was lower by 1.4 ppt YoY largely due to additional property tax of S$2.1m incurred by GP.
  • DPU for the quarter came in at 1.959 S cents, up 1.9% YoY. 
  • For the full-year, MGCCT’s gross revenue increased 4.2% to S$350.6m and formed 102.1% of our FY17 forecast. DPU of 7.32 S cents represented growth of 1.0%, and was 2.5% above our projection.

Largely robust operational performance 

  • In terms of portfolio valuation, MGCCT’s assets were valued at S$6,226.3m, as at end-FY17, resulting in a fair valuation gain of S$218.9m compared to the same period last year. The cap rates adopted by the valuer were unchanged.
  • Operationally, management secured positive rental uplifts of 12% and 7% at Festival Walk’s (FW) retail and office segments, respectively, while rental reversions of 10% were achieved for GP and 16% for Sandhill Plaza, as at 31 Mar 2017. 
  • Overall portfolio occupancy stood at 98.6%, as at 31 Mar 2017, similar to end- 3QFY17. 
  • Although FW registered an approximate 4.7% YoY dip in tenant sales in 4QFY17, the decline came in at a smaller magnitude as compared to the preceding five quarters. 
  • Footfall jumped ~11.0% YoY in 4QFY17. In terms of financial position, MGCCT’s gearing ratio declined 1.3 ppt QoQ to 39.2%, with 71% of its debt fixed/hedged.

Maintain BUY 

  • Taking into account MGCCT’s full-year results, we raise our FY18 and FY19 DPU forecasts by 2.6% and 1.2%, respectively. As we also roll forward our valuations, we derive a higher fair value estimate of S$1.13 (previously S$1.08).
  • Maintain BUY, supported by FY18F distribution yield of 7.0%. 

Andy Wong Teck Ching CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-04-28
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.13 Up 1.080