MAPLETREE NORTH ASIA COMM TR (SGX:RW0U)
Mapletree North Asia Commercial Trust - Impacted But More Resilient Than Market As Expected
- Mapletree North Asia Commercial Trust's 2QFY20 DPU rose 0.6% y-o-y.
- Resilient occupancy and rental reversions.
- But tenants’ sales took a hit.
Investment thesis
- A pure-play overseas commercial REIT, MAPLETREE NORTH ASIA COMMERCIAL TRUST (SGX:RW0U)’s (MNACT) portfolio comprises Festival Walk mall in Hong Kong, two properties in China (Beijing and Shanghai) and six commercial properties in Japan.
- Notwithstanding the ongoing political unrest in Hong Kong, we expect Mapletree North Asia Commercial Trust’s portfolio to remain resilient, although it would not be immune to the situation and economic slowdown in Hong Kong. We believe Mapletree North Asia Commercial Trust’s risk-reward is attractive as at the closing price on 25 Oct. See Mapletree North Asia Commercial Trust Share Price.
2QFY20 results within our expectations
- Mapletree North Asia Commercial Trust reported its 2QFY20 results which met our expectations. Gross revenue and NPI grew 0.9% and 1.3% y-o-y to S$105.5m and S$84.7m. DPU rose 0.6% y-o-y to 1.937 S cents. See Mapletree North Asia Commercial Trust Announcements; Mapletree North Asia Commercial Trust Dividend History.
- On a 1HFY20 basis, Mapletree North Asia Commercial Trust’s NPI was up 5.8% to S$169.8m, while DPU of 3.887 S cents represented growth of 2.1% and this constituted 49.9% of our FY20 forecast.
Firm average rental reversions and occupancy, but tenant sales unsurprisingly fell
- The ongoing protests in Hong Kong have undoubtedly cast a pall on both retail and business sentiment. Notwithstanding the challenging environment, Festival Walk, which contributed 61.6% of Mapletree North Asia Commercial Trust’s overall 2QFY20 portfolio NPI, continued to maintain its full occupancy. Average rental reversions came in at +12% for Festival Walk’s retail component in 1HFY20, similar to 1QFY20, which we believe implies that 2QFY20 rental reversions were resilient. 85% of the mall’s leases that are due to expire in FY20 have been renewed/re-let, as at 30 Sep 2019.
- Festival Walk’s office component saw a rental uplift of 6% in 1HFY20, slightly higher than the +5% registered in 1QFY20. Given uncertainties over the situation in Hong Kong, it was understandable that management opted to take a more cautious stance, guiding that double-digit rental reversions at Festival Walk were unlikely to be sustainable, but would remain positive at least for FY20.
- Rental reversions for Gateway Plaza were -4% in 1HFY20, slightly better than 1QFY20 (-5%), while that for Sandhill Plaza came in at +10% (1QFY20: +33%). Japan’s rental reversions were stable at +6%.
- As for Festival Walk’s footfall and tenants’ sales, this unsurprisingly dipped 4.9% and 10.0% y-o-y, respectively, in 2QFY20. That said, we note that overall retail sales in Hong Kong slumped 11.5% and 23.0% y-o-y in Jul and Aug, respectively.
- Sep data is not out yet, but likely to show a severe y-o-y decline as well. Hence, we continue to opine that although Mapletree North Asia Commercial Trust will not be immune to the political instability and economic slowdown in Hong Kong, it would remain more resilient relative to the market. Furthermore, turnover rental income formed only 3.4% of Festival Walk’s gross revenue in FY19.
Keeping our projections for now
- We keep our forecasts and S$1.43 for now, but will continue to monitor the situation in Hong Kong and the economic situation in China. Based on Mapletree North Asia Commercial Trust’s closing price on 25 Oct, it is trading at FY20F distribution yield of 6.2% and P/B of 0.88x. We believe the risk-reward is attractive at current levels. See Mapletree North Asia Commercial Trust Share Price; Mapletree North Asia Commercial Trust Dividend History.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2019-10-29
SGX Stock
Analyst Report
1.430
SAME
1.430
