Mapletree North Asia Commercial Trust - OCBC Investment 2019-05-02: Taking A Breather For Now


Mapletree North Asia Commercial Trust - Taking A Breather For Now

MNACT's4QFY19 results met our expectations

  • MAPLETREE NORTH ASIA COMMERCIAL TRUST (SGX:RW0U) reported a robust set of 4QFY19 results which came in within our expectations.
  • Gross revenue and NPI jumped 16.2% and 15.3% y-o-y to S$104.0m and S$84.0m, respectively, while DPU grew 2.7% y-o-y to 1.956 S cents. For FY19, Mapletree North Asia Commercial Trust’s gross revenue and NPI improved 15.1% and 14.6% to S$408.7m and S$329.0m, respectively.
  • DPU of 7.69 S cents represented growth of 2.8% and this constituted 100.4% of our projection.

Rental reversions positive, but softened for Gateway Plaza

  • Operationally, Mapletree North Asia Commercial Trust’s occupancy was near-full at 99.6% (-0.1 ppt q-o-q), while rental reversions for FY19 came in at +28% for Festival Walk’s (FW) retail component (driven by an anchor tenant lease with a low base; excluding which rental uplifts were +13%-14%) and +15% for the office component; +2% for Gateway Plaza (GP); +15% for Sandhill Plaza (SP) and +6% for the Japan properties.
  • We believe there was a more significant moderation in rental reversions at Gateway Plaza in 4QFY19.
  • Looking ahead, management sounded cautious on the rental and occupancy outlook for the property. For Festival Walk, there was a 4.7% and 5.8% y-o-y dip in shopper traffic and tenants’ sales in 4QFY19, respectively, in-line with the soft retail market. However, there was an improvement in tenants’ sales in Mar as compared to Jan and Feb.
  • Occupancy costs at Festival Walk increased slightly from 19.4% to 19.8%, but still a healthy level, in our view.

Total returns of 21.2% YTD, as at 30 Apr close

  • Portfolio valuations-wise, Mapletree North Asia Commercial Trust recorded a fair value gain of S$465.2m in FY19, driven largely by cap rates compression of 50 bps for both Gateway Plaza and Sandhill Plaza and 10 bps for Festival Walk. Its aggregate leverage ratio stood at 36.6%, leaving sufficient debt headroom of S$720m before reaching the 42% mark.
  • We believe office and business park properties in the tier 1-2 cities of China will be the mostly likely destination for Mapletree North Asia Commercial Trust’s next acquisition, with a focus on growth potential of the asset(s).
  • Mapletree North Asia Commercial Trust has delivered total returns of 21.2% YTD, outperforming the FTSE ST REIT Index’s 13.2% total returns during the same period. After adjustments, our fair value increases from S$1.35 to S$1.40.
  • We see limited upside potential versus its last closing price of S$1.36 on 30 Apr. Downgrade to HOLD.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2019-05-02
SGX Stock Analyst Report HOLD DOWNGRADE BUY 1.40 UP 1.350