Mapletree Commercial Trust - UOB Kay Hian 2022-03-23: Flexibility From New Cash-only Option For MNACT Unitholders


Mapletree Commercial Trust - Flexibility From New Cash-only Option For MNACT Unitholders

  • The new cash-only consideration of S$1.1949 provides flexibility to Mapletree North Asia Commercial Trust unitholders should they decide to cash out. The pro forma financial impact remains unchanged, and sponsor Mapletree Investments has provided a backstop for the preferential offering.
  • The reopening of the Hong Kong economy is a welcome relief.
  • The merger, if completed, is accretive to pro forma 1HFY22 DPU by 7.5% (scrip-only) to 8.9% (scrip-and-cash and cash-only).

Mapletree North Asia Commercial Trust (MNACT)'s unitholders have flexibility to choose one out of three options.

  • Besides the existing scrip-only consideration and cash-and-scrip consideration, Mapletree Commercial Trust (SGX:N2IU) has added a new cash-only consideration. The scheme consideration remains unchanged at S$1.1949 for all three options, which is equivalent to Mapletree North Asia Commercial Trust (SGX:RW0U)’s NAV per unit.
  • Preferential offering fully backed by sponsor. Additional cash required for the cash-only consideration of up to S$2.2b will be funded by a preferential offering at an issue price of S$2.0039 per Mapletree Commercial Trust unit. Sponsor Mapletree Investments has demonstrated commitment and support for the merger. It has provided an undertaking to subscribe for the preferential offering up to the maximum of S$2.2b and has agreed to a voluntary six-month lock-up of its unitholding.
  • Mapletree Investments’ stake in the merged entity, Mapletree Pan Asia Commercial Trust (MPACT) will range from 34.8% to 57.1% depending on:
    1. the mix of scheme consideration chosen by Mapletree North Asia Commercial Trust unitholders, and
    2. Mapletree Commercial Trust unitholders’ pro rata participation in Mapletree Commercial Trust’s preferential offering.
  • Same pro forma financial impact. The pro forma financial effects of the new cash-only consideration are the same as the cash-and-scrip consideration. To recap, the merger is accretive to Mapletree Commercial Trust's 1HFY22 DPU and NAV per unit by 8.9% and 6.5% respectively. Pro forma aggregate leverage as of Sep 21 is estimated at 39.2%.

Growing through the 4R strategy.

  • The merged entity Mapletree Pan Asia Commercial Trust (MPACT) will adopt a 4R fee at 25% of y-o-y change in DPU. The new management fee structure will better align MPACT to unitholders’ interest. The proposed new fee structure costs 0.39% of total assets, which is less expensive compared to 0.41% based on the current fee structure.

Hong Kong has relaxed social distancing measures.

  • Gyms, beauty salons, massage parlours, religious places, libraries and sport venues will reopen with groups capped at four people starting 21 Apr 22. Face-to-face classes at kindergartens, primary schools and international schools will resume on 19 Apr 22. Operating hours for restaurants to offer dine-in service will be extended from 6pm to 10pm.
  • The current onerous 14-day quarantine would be lowered to seven days conditional upon negative rapid test results on both the 6th and 7th days of hotel quarantine. The authorities plan to designate more hotels as quarantine facilities to cope with the anticipated increase in volume of travellers.
  • The ban on flights from nine countries, namely Australia, Canada, France, India, Nepal, Pakistan, the Philippines, UK and the US, will be lifted from 1 Apr 22.

Maintain BUY.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-03-23
SGX Stock Analyst Report BUY MAINTAIN BUY 2.480 SAME 2.480