Is Mapletree North Asia Commercial Trust Worth Investing In?

On 25 May 2018, Mapletree Greater China Commercial Trust has announced a change of name to Mapletree North Asia Commercial Trust (MNACT) as a reflection to include Japanese properties into its investment portfolio. On the same day itself, MNACT had also completed its acquisition of 6 properties in Japan and thus, enlarging its portfolio valuation to S$ 7.08 billion.

In this article, I’ll cover MNACT’s past performances and details of its recent investments in Japan. Therefore, here are the 9 things that you need to know about MNACT before you invest.

#1: Stock Symbol

Ticker Symbol: SGX: RW0U
Market Capitalization: S$ 3.55 billion (20 June 2018)

Share Price: S$ 1.13 (20 June 2018)

Industry: Reit

#2: The Greater China Portfolio

MNACT derives income from three main properties in China. They are:

  1. Festival Walk
    It is a 7-storey premier retail mall at Kowloon Tong, Hong Kong SAR worth S$ 4.51 billion as of 31 March 2018. It is fully occupied by main tenants such as the Apple Store, H&M, Marks & Spencer, Uniqlo and TaSTe. This property is also inclusive of a 4-Storey office tower where its key tenants are ARUP and Prudential. In financial year (FY) 2018, Festival Walk had contributed S$ 246.1 million in gross revenue, thus, is the main contributor of sales to MNACT.  
  2. Gateway Plaza
    It is a premier Grade-A office building in Beijing, China valued at S$ 1.26 billion as of 31 March 2018. It enjoys a 96.5% occupancy rate and its key tenants are BMW, Bank of China, Nanyang Commercial Bank and BASF. For FY 2018, Gateway Plaza contributed S$ 85.2 million in gross revenue and thus, is the second largest contributor to MNACT.

  3. Sandhill Plaza
    Acquired on 17 June 2015, it is a business park development that has a 20-storey tower and 8 blocks of 3-storey buildings where 7 of the 8 blocks are owned by MNACT. Located in Shanghai, Sandhill Plaza is valued at S$ 419 million and is also fully occupied with main tenants such as Spreadtrum, Dupont, Axalta, Pixelworks and Analog Devices. For FY 2018, Sandhill Plaza had contributed S$ 24.9 million in gross revenue and thus, is the third largest contributor to MNACT.

#3: The Financials

Overall, MNACT has increased in gross revenue and distributable income for the past 5 years. Gross revenue had grown from S$ 252.5 million in 2014 to as high as S$ 355.0 million in 2018. This, in turn, has resulted to an increment in its distributable income during the period. It increased from S$ 159.2 million in 2014 to S$ 210.9 million in 2018. Its distributions per unit (DPU) increased from 5.954 cents in 2014 to 7.491 cents in 2018.

Source: Annual Reports of MNACT

#4: Balance Sheet Strength

As at 31 March 2018, MNACT has reported borrowings amounting to S$ 2.36 billion. Its gearing ratio is 36.2%, its effective interest rate is 2.72% a year, and has an interest cover ratio of 3.9 times. The average term to maturity for debt owed by MNACT is 3.43 years. On 2 April 2018, MNACT has been given Baa Stable in its corporate rating by Moody’s.

#5: Latest Acquisitions

MNACT has completed its acquisition of six freehold commercial properties in Japan for S$ 770.5 million. They are:

  1. IXINAL Monzen-nakacho Building, Tokyo 
  2. Higashi-nihonbashi 1-chome Building, Tokyo  
  3. TS Ikebukuro Building, Tokyo  
  4. ABAS Shin-Yokohama Building, Yokohama  
  5. SII Makuhari Building, Chiba  
  6. Fujitsu Makuhari Building, Chiba

As such, the inclusion of these properties had:

  1. Increased its Portfolio Occupancy Rate from 96.9% to 98.0%.  
  2. Increased its Weighted Average Lease Expiry (WALE) from 2.7 years to 3.1 years.  
  3. Reduced its lease expiries over the next 2 years from 40.7% to 36.4%.  
  4. Increased Portfolio Valuation from S$ 6.29 billion to S$ 7.08 billion.  
  5. Increased its Tenant base from 358 tenants to 379 tenants.  
  6. Accretion of its DPU by 3-4% to 7.601 cents per annum based on the illustration made by MNACT for the EGM Presentation on 24 April 2018 in relations to the acquisition of its Japanese Properties.

#6: Major Announcement

On 25 April 2018, MNACT announced a change in frequency of payment of its income distribution from semi-annually to quarterly. It will start to make quarterly distributions starting for the period ending on 30 June 2018.

#7: Valuation

As I write, MNACT is trading at S$ 1.13 a unit.

In May 2018, MNACT has completed the issuance of 311.6 million new units as a result of a private placement exercise. Thus, based on its announcement document made:

  1. P/NAV
    MNACT would have net asset value (NAV) of S$ 1.285 a unit. Hence, its P/NAV or P/B ratio is 0.88, slightly higher than its P/NAV range of 0.77 – 0.87 over the last 5 years.

  2. Dividend Yields
    Based on DPU of 7.602 cents (Refer Point #5), gross dividend yield is expected to be 6.73%, which is within its 5-year range of 6.32%-7.62%.

Calculated based on Figures Presented in Annual Reports of MNACT

#8: Investor Relations

For further enquiries or to request for additional investment information on MNACT’s Investors Relation matters, you may contact:

Ms. Elizabeth Loo

Vice President, Investor Relations

Email: enquiries_mnact@mapletree.com.sg

Website: MNACT’s Investor Relations

#9: Major Shareholders

As I write, MNACT’s key shareholders and their interests are stated below:

– Temasek Holdings (Private) Ltd: 33.25% (Indirect)

– Schroders Plc: 5.99%

Conclusion:

MNACT had delivered steady distributions to its unitholders over the last 5 years. As I write, MNACT has just begun its new chapter with six properties added into its portfolio, enhancing stability and growth in its income for the near future. Thus, it remains committed to its mission to deliver sustainable growth in DPU and increase NAV over the long-term.

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Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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