SGX Stocks and Warrants

Author: kimeng   |   Latest post: Mon, 19 Aug 2019, 10:59 AM


Mapletree North Asia Commercial Trust: Steady as She Goes

Author:   |    Publish date:

  • 3QFY19 DPU +3.2% YoY
  • Positive rental reversions of 6%-32%
  • Occupancy near-full at 99.7%

3QFY19 Results Met Our Expectations

Mapletree North Asia Commercial Trust (MNACT) reported a firm set of 3QFY19 results which came in within our expectations. Gross revenue and NPI jumped 19.4% and 18.5% YoY to S$105.6m and S$84.6m, respectively. This increase was underpinned by organic growth from higher rental from its three assets in China and Hong Kong, coupled with contribution from the acquisition of its Japan portfolio on 25 May 2018. DPU grew 3.2% YoY to 1.927 S cents as the growth in NPI was partially offset by higher finance costs, management fees and an enlarged unit base.

On a 9MFY19 basis, MNACT’s gross revenue and NPI improved 14.8% and 14.3% to S$304.6m and S$245.0m, respectively, with the latter forming 75.2% of our FY19 forecast. DPU of 5.734 S cents represented growth of 2.7% and this constituted 74.9% of our full-year forecast.

Firm Occupancy and Rental Reversions; But Softness in Tenants’ Sales

Operationally, MNACT’s portfolio continued to remain resilient. Occupancy was near-full at 99.7%, while rental reversions for 9MFY19 came in at +32% for Festival Walk’s (FW) retail component (due to the lease renewal of one of the anchor tenants in 2QFY19 with a low base) and +15% for the office component; +8% for Gateway Plaza; +14% for Sandhill Plaza and +6% for the Japan properties.

Excluding the anchor tenant renewal, FW’s retail component saw rental reversions of +12%-13%. There was a 3.4% and 1.0% YoY dip in FW’s shopper traffic and tenants’ sales in 3QFY19, respectively, due to market uncertainties and a softer residential property market. However, occupancy cost for FW remains healthy at 19.4%, stable from the previous quarter (19.5%).

Still Trading at Healthy Yield

In terms of financial position, MNACT’s gearing ratio remained stable at 39.0%. MNACT has hedged 85% of its debt (+7 ppt QoQ), while ~82% of its estimated FY19 distributable income has been hedged into SGD. Our fair value increases slightly from S$1.34 to S$1.35 after minor adjustments. MNACT is currently trading at FY19F and FY20F distribution yield of 6.1% (as at 28 Jan close).

Source: OCBC Research - 29 Jan 2019

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