Mapletree North Asia Commercial Trust - OCBC Investment 2018-10-29: Another Robust Performance


Mapletree North Asia Commercial Trust - Another Robust Performance

  • MNACT's 2QFY19 DPU +3.1% y-o-y.
  • Positive rental reversions of 6%-40%.
  • Occupancy remains solid at 99.6%.

2QFY19 results met our expectations

  • Mapletree North Asia Commercial Trust (MNACT) reported its 2QFY19 results which came in within our expectations.
  • Gross revenue and NPI jumped 18.7% and 18.0% y-o-y to S$104.6m and S$83.6m, respectively. This was driven by a full quarter contribution from its Japan portfolio acquisition and organic growth from its three other properties. Festival Walk (FW), Gateway Plaza (GP), Sandhill Plaza (SP) and its Japan portfolio contributed 61%, 21%, 6% and 12% of its portfolio revenue, respectively.
  • DPU rose 3.1% y-o-y to 1.926 S cents.
  • For 1HFY19, MNACT’s NPI accelerated 12.3% to S$160.4m and this made up 49.2% of our FY19 forecast. DPU of 3.807 S cents represented growth of 2.5% and this accounted for 49.8% of our full-year projection.

Portfolio metrics continue to exhibit resilience

  • Operationally, MNACT’s overall portfolio occupancy remained high at 99.6%, unchanged q-o-q. The slight dip at Gateway Plaza (-0.9 ppt) was offset by a 1.9 ppt increase at Sandhill Plaza. Festival Walk and its Japan portfolio continued to be 100% occupied.
  • Rental reversions (as at 30 Sep 2018) came in at +40% for Festival Walk’s retail component and +15% for the office component. For the former, the higher-than-average reversion was driven by the lease renewal of one of the anchor tenants with a low base. Rental reversions for Gateway Plaza, Sandhill Plaza and Japan were +8%, +15 and 6%, respectively. Festival Walk’s footfall saw a slight decline of 1.9% y-o-y in 2QFY19 to 10.2m, but 1HFY19 figures still pointed to positive growth of 2.7% to 19.9m.
  • As for tenants’ sales, this came in at a 7% growth in 2QFY19 to HK$1,298m (1HFY19: +8.9% to HK$2,586m).

Attractive FY19F distribution yield of 6.8% as at 26 Oct close

  • In terms of risk management, MNACT has hedged 78% of its debt, while ~80% of its estimated FY19 distributable income has been hedged into SGD.
  • We retain our forecasts given this set of in-line results. However, given the ongoing macroeconomic uncertainties, we conservatively raise our cost of equity assumption from 7.3% to 7.6%. Correspondingly, our fair value estimate is lowered from S$1.42 to S$1.34.
  • Mapletree North Asia Commercial Trust (MNACT) is currently trading at an attractive FY19F distribution yield of 6.8%, based on the closing price of S$1.13 on 26 Oct. 

Andy Wong Teck Ching CFA OCBC Investment Research | https://www.iocbc.com/ 2018-10-29
SGX Stock Analyst Report BUY MAINTAIN BUY 1.34 DOWN 1.420