Mapletree Greater China Commercial Trust - OCBC Investment 2018-04-27: Unitholders Say Konnichiwa Japan

MAPLETREE GREATER CHINACOMM TR RW0U.SI

Mapletree Greater China Commercial Trust - Unitholders Say Konnichiwa Japan

Mapletree Greater China Commercial Trust (MGCCT) reported its 4QFY18 results which came in within our expectations.
Gross revenue and NPI fell 5.5% and 6.0% y-o-y to S$89.6m and S$72.9m, respectively. The decline was attributed to the reversal in 4QFY17 of Value Added Tax (VAT) payable for Gateway Plaza (GP) previously assumed at a higher rate and weaker HKD against the SGD, but partially offset by higher rental rates at Festival Walk (FW) and GP.
DPU correspondingly dipped 2.8% y-o-y to 1.904 S cents.
For FY18, MGCCT’s gross revenue increased 1.3% to S$355.0m and this made up 98.8% of our forecast. DPU of 7.481 S cents represented a growth of 1.9%, and came in 1.4% higher than our projection.

Operationally, MGCCT’s properties remained resilient. Overall portfolio occupancy moved up 1.6 ppt q-o-q to 98.5%, as FW and Sandhill Plaza (SP) achieved 100% occupancy. Rental reversions were positive across all three assets, coming in at 11% for FW (both retail and office components), 8% for GP and 15% for SP.
Another positive came from the robust improvements in FW’s tenant sales (+7.4% to HK$5.2b) and footfall (+3.2% to 41.7m) for FY18. Management sounded more upbeat about the prospects of its rental reversions at FW, and seemed confident of achieving low double-digit rental uplifts in FY19.

MGCCT also announced that it had obtained unitholders approval at an EGM for the acquisition of a portfolio of six freehold commercial properties in Japan. Thereafter, management closed a private placement exercise which will raise gross proceeds of S$330.3m with an issuance of 311.6m new units at a price of S$1.06 per unit.
As a recap, the Japan acquisitions are expected to cost ~S$770.5m, while the initial NPI yield works out to be ~4.8% based on the agreed portfolio value.
Factoring in this acquisition in our model and fine-tuning our other assumptions, we raise our FY19F DPU forecast by 2.5%. Rolling forward our valuations, our DDM-derived fair value increases from S$1.39 to S$1.42.

Wong Teck Ching Andy CFA OCBC Investment | http://www.iocbc.com/ 2018-04-27

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