Mapletree Greater China Commercial Trust (MGCCT) reported their FY14/15 results last Friday morning. These are the key takeaways from the analyst briefing in the afternoon.

Frequent promotions and activities organised in malls boosted footfall and tenant sales - Tenant sales up 5.8% year on year, outperforming the general retail sales index.

Negligible impact from recent Chinese government decision to limit Hong Kong visits by mainland Chinese in Shenzhen – Management has iterated that Festival Walk is not heavily reliant on PRC tourists for tenant sales. Instead, it caters mostly to locals and has an excellent transport infrastructure around it. Hence, there is negligible impact from the fall in mainland Chinese tourist numbers to Hong Kong lately.

Occupancy costs stable and at low end of general average occupancy costs of similar malls in HK – Management has guided that occupancy costs (amount of rent a tenant pays out of sales revenue) stood at ~16.5% in the last quarter, and have been stable at around that level for the past few years. Generally, average occupancy cost for similar malls in HK is around 15% to high teens.

Continue to focus to on key Tier 1 cities for acquisition opportunities – Management has guided that they will continue to focus on key Tier 1 cities like Beijing and Shanghai for potential acquisition opportunities.

Extremely healthy leasing enquiries – Enquiries from new tenants to take up leases have been very encouraging. Generally, most tenants are doing well in reported sales figures. Management will continue to adopt a pro-active approach and switch out of the “underperforming” tenants amongst them.

Investment Action

No stock rating or price target provided, as we do not have coverage on MGCCT.

Source: Phillip Securities Research - 27 Apr 2015