Mapletree Greater China Commercial Trust (MGCCT) reported its 4QFY18 results which came in within our expectations. Gross revenue and NPI fell 5.5% and 6.0% YoY to S$89.6m and S$72.9m, respectively.

The decline was attributed to the reversal in 4QFY17 of Value Added Tax (VAT) payable for Gateway Plaza (GP) previously assumed at a higher rate and weaker HKD against the SGD, but partially offset by higher rental rates at Festival Walk (FW) and GP. DPU correspondingly dipped 2.8% YoY to 1.904 S cents.

For FY18, MGCCT’s gross revenue increased 1.3% to S$355.0m and this made up 98.8% of our forecast. DPU of 7.481 S cents represented a growth of 1.9%, and came in 1.4% higher than our projection.

Operationally, MGCCT’s properties remained resilient. Overall portfolio occupancy moved up 1.6 ppt QoQ to 98.5%, as FW and Sandhill Plaza achieved 100% occupancy.

Rental reversions were positive across all three assets, coming in at 11% for Festival Walk (both retail and office components), 8% for GP and 15% for Sandhill Plaza (SP). Another positive came from the robust improvements in FW’s tenant sales (+7.4% to HK$5.2b) and footfall (+3.2% to 41.7m) in FY18.

Separately, MGCCT announced that it had obtained unitholders approval at an EGM for the acquisition of a portfolio of six freehold offices in Japan. It will also be changing its distribution policy from a semi-annual basis to a quarterly basis starting from 1QFY19’s distributions.

We will provide more details after the analyst briefing.

Maintain BUY and S$1.39 fair value.

Source: OCBC Research - 26 Apr 2018