Mapletree North Asia Commercial Trust - CGS-CIMB Research 2019-04-30: Festival Walk At A Brisk Pace


Mapletree North Asia Commercial Trust - Festival Walk At A Brisk Pace

  • Mapletree North Asia Commercial Trust's 4Q/FY19 DPU of 1.956/7.69 Scts at 25.6%/100.6% of our FY19 forecast. 
  • Improvements in asset performance seen across the board. 
  • Maintain ADD with a slightly higher Target Price of S$1.38. 

Mapletree North Asia Commercial Trust's 4QFY3/19 results highlights

  • MAPLETREE NORTH ASIA COMMERCIAL TRUST (SGX:RW0U) reported an 4QFY3/19 DPU of 1.956 Scts, +2.7% y-o-y. This was achieved on the back of 16.2%/15.3% y-o-y increases in gross revenue/NPI, thanks to improved performance across its portfolio and the inclusion of Japan contributions. The portfolio was almost fully occupied at 99.6%.
  • Mapletree North Asia Commercial Trust's FY3/19 DPU of 7.69 Scts was 2.8% higher y-o-y.
  • The trust revised up its portfolio value thanks to a 10-50bps compression in cap rates. This translates to a BV/unit of S$1.445.

Festival Walk continues to shine

  • Festival Walk (FW) continued to deliver a strong performance, with revenue/NPI growing 3.2%/3.3% y-o-y. Festival Walk enjoyed strong rental reversion of 28% for FY19 (mid-teens excl anchor tenant reversion). Although shopper footfall fell 0.9% y-o-y, tenant sales was 2.2% better, with strong performances from the F&B, cosmetics, services, luxury retailer sectors. TaSTe supermarket completed a major AEI and was reopened in Mar 19.
  • An estimated 16.5% and 14.6% of gross rental income is due to be re-contracted at Festival Walk in FY20 and FY21 respectively.
  • Although HK retail sales growth has moderated, we anticipate Festival Walk to continue delivering double-digit reversion growth, backed by robust tenant sales performance.

China properties remain stable

  • In China, Gateway Plaza (GW) reported a 2% positive reversion for FY19, slightly lower than the 8% it achieved for 9MFY3/19. Occupancy remained at a high 99%. Despite the challenging leasing environment, we anticipate Gateway Plaza to deliver a stable showing in FY19, given the low total of 7.4% of income expiring in FY20 and FY21.
  • Sandhill Plaza (SP) chalked a 15% uplift for its renewals in FY19 and we expect the property to continue enjoying a positive boost when its leases are re-contracted over the next 2 years.

Healthy gearing to pursue acquisition growth opportunities

  • Post revaluation, Mapletree North Asia Commercial Trust’s gearing was at 36.6% at end-FY19. Based on an optimal gearing of 42%, the trust has a debt headroom of S$720m to pursue inorganic growth opportunities in China and Japan and potentially selected other North Asian countries.
  • While interest cost has ticked up q-o-q, it has minimal debt due for refinancing in FY20 and FY21. The trust has hedged 75% of its 1HFY20 distributions.

Maintain ADD

  • We tweak our FY20-21F DPU post results and lift our DDM-based Target Price to S$1.38, with the slightly higher projected earnings as well as lower cost of equity assumption of 7.8% (vs. 8.5% previously).
  • We maintain ADD with a c.10% total return.
  • Upside catalysts include accretive acquisitions, while downside risk includes slower rental growth at Festival Walk. 

LOKE Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://research.itradecimb.com/ 2019-04-30
SGX Stock Analyst Report ADD MAINTAIN ADD 1.38 UP 1.320