MAPLETREE NORTH ASIA COMM TR (SGX:RW0U)
Mapletree North Asia Commercial Trust - Operational Challenges But Negatives In The Price
- Mapletree North Asia Commercial Trust's 4QFY20 DPU fell 20.4% y-o-y.
- Expecting weaker performance in FY21 versus FY20.
- FY21F P/B ratio of 0.64x as at 29 Apr close.
MNACT's 4QFY20 results slightly below our expectations
- Mapletree North Asia Commercial Trust (SGX:RW0U)’s 4QFY20 results came in slightly below our expectations. Gross revenue and NPI dipped 26.2% and 32.2% y-o-y to S$76.8m and S$56.9m, respectively. This was primarily attributed to rent reliefs given to tenants of Festival Walk amid the COVID-19 pandemic, closure of Festival Walk from 1 Jan to 15 Jan 2020 and weaker performance from Gateway Plaza.
- DPU fell 20.4% y-o-y to 1.556 S cents as there was a distribution top-up of S$7.1m in relation to Festival Walk’s closure.
- On a full-year basis, Mapletree North Asia Commercial Trust’s NPI fell 15.7% to S$277.5m, while DPU was down 7.4% to 7.124 S cents and this formed 96.5% of our FY20 forecast.
Guiding for lower renewal/re-let rents and weaker overall performance in FY21
- Operationally, Mapletree North Asia Commercial Trust’s portfolio occupancy declined 1.1 ppt q-o-q to 95.2%. Average rental reversions were +8% for Festival Walk’s retail component (was +12% for 9MFY20), +10% for Sandhill Plaza, -4% for Gateway Plaza and -9% for its Japan portfolio.
- On the rental front, management has guided for lower renewal or re-let rental rates at Festival Walk in FY21 versus FY20, which we believe implies negative rental reversions ahead. Current retail passing rent for Festival Walk was HK$158.7 psf/month, which was a 3.1% decline q-o-q. Excluding Festival Walk’s mall closure period, its footfall and tenants’ sales fell 18.7% and 18.1% in FY20.
- In China, the passing rent for Gateway Plaza was RMB347.2 psm/month, which was a marginal decline of 0.2% q-o-q; Sandhill Plaza’s passing rent rose 0.9% q-o-q to RMB5.75 psm/day.
- Mapletree North Asia Commercial Trust highlighted that the continued headwinds and uncertainties are expected to adversely impact its revenue and occupancy levels, and it thus expects performance in FY21 to be lower than in FY20.
Factoring in softer assumptions in our model
- Mapletree North Asia Commercial Trust’s aggregate leverage ratio was 39.3%, as at 31 Mar 2020. The increase in leverage limit to 50% has given Mapletree North Asia Commercial Trust more breathing space. It has debt headroom of S$400m and S$900m before reaching the 42% and 45% gearing levels, respectively.
- Portfolio valuation was also largely stable, with an unchanged cap rate for Festival Walk and Sandhill Plaza, while that of Gateway Plaza compressed by 25 bps. We factor in two months of rental rebates for Festival Walk, and also lower our rental and occupancy assumptions.
- Our FY21F and FY22F DPU forecasts are cut by 10.8% and 5.1%, respectively. We also pare our terminal growth rate from 2% to 1.5% and raise our cost of equity assumption from 7.4% to 7.7%. Consequently, our fair value estimate declines from S$1.37 to S$1.13.
- Despite a challenging outlook, we believe negatives are in the price, with Mapletree North Asia Commercial Trust trading at 0.64x FY21F P/B and 7.6% distribution yield, as at 29 Apr close.
- See Mapletree North Asia Commercial Trust Share Price; Mapletree North Asia Commercial Trust Target Price; Mapletree North Asia Commercial Trust Analyst Reports; Mapletree North Asia Commercial Trust Dividend History; Mapletree North Asia Commercial Trust Announcements; Mapletree North Asia Commercial Trust Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-04-30
SGX Stock
Analyst Report
1.13
DOWN
1.370
