Mapletree North Asia Commercial Trust Analysis @ 4 November 2020

Basic Profile & Key Statistics

Mapletree North Asia Commercial Trust (MNACT) invests in Office and Retail properties which owns 12 properties across China, Hong Kong, Japan and South Korea. 

Performance Review

Gross revenue decreased by 9.6% YoY while NPI decreased by 17.7% YoY. Distributable income and DPU decreased by 21.8% YoY and 26% YoY respectively. The drop is mainly caused by the drop in revenue from Festival walk as well as rental relief granted.

Retail sales and footfall for Festival Walk reduced by 36.2% YoY and 45.5% YoY respectively. Rental reversion for Festival Walk and Gateway Plaza are -12% (retail) and -9% respectively. Positive rental reversion achieved for Sandhill Plaza at +8% and Japan properties at +5%. Overall, rental reversion is negative. 

As compared to the previous year, although footfall remains low at 53.2% in September, the retail sales have returned to 74.1%. 

MNACT has just completed the acquisition for The Pinnacle Gangnam on 30 October. The initial NPI yield is at 3.2%, this should boost performance in the coming quarters.

Lease Profile

Occupancy remains healthy at 96.6%. 22.7% of income is received in JPY. WALE is short at 2.5 years while the highest lease expiry of 28.1% falls in FY22/23. Weighted average land lease expiry is short ta 39.56 years. 

Debt Profile

Gearing ratio is slightly high at 40.1%. Cost of debt is low at 2.1% with a moderate level of unsecured debt at 77.8%. Fixed rate debt is moderate at 77%. Interest cover ratio is low at 3 times. WADE is slightly long at 3.07 years with the highest debt maturity of 26% falls in 2025. 

Diversification Profile

45.5% of income is from Festival Walk in Hong Kong, which is considered low in terms of top geographical contribution but high in terms of top property contribution for MNACT. Top tenant contribution is low at 7.4% while top 10 tenants contribution is moderate at 35.6%. 

Key Financial Metrics

Property yield and distribution on capital are low at 3.5% and 2.6% respectively. Management fee is competitive in which unitholders receive S$ 9.90 for every dollar paid to the manager. Distribution margin is high at 54.7%.

Trends

Uptrend - NAV per Unit

Flat - Distribution Margin

Downtrend - DPU, Interest Cover Ratio, Property Yield

The DPU, Interest Cover Ratio and Property Yield downtrend since 4Q 2019 are mainly due to protests in Hong Kong and loss of revenue due to property damage (closure of 64 days) at Festival Walk.

Relative Valuation

i) Average Dividend Yield  - Average yield at 6.70%, apply the past 4 quarters DPU of 6.113 cents will get S$ 0.91.

ii) Average Price/NAV - Average value at 0.84, apply the latest NAV of S$ 1.337 will get S$ 1.12.

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Income Received in SGD/Major Currencies
Low Cost of Debt	Short WALE
Well Spread Debt Maturity	Short Weighted Average Land Lease Expiry
Low Top Geographical Contribution	Low Interest Cover Ratio
Low top Tenant Contribution	High Top Property Contribution
Competitive Management Fees	Low Property Yield
High Distribution Margin	Low Distribution on Capital
NAV per Unit Uptrend	DPU Downtrend
	Interest Cover Ratio Downtrend
	Property Yield Downtrend

It is very unfortunate that MNACT performance has been affected first due to the Hong Kong protest starting last year and then followed by the current COVID-19 situation. Management has acquired a number of properties to reduce the income concentration from Festival Walk. As compared to the previous quarter, MNACT performance has seen some improvement in terms of gross revenue, NPI and tenants' sales.

To date, MNACT has received S$ 46 million of interim insurance claim payment while has distributed a total of S$ 32.9 million top-ups to unitholders. Excess from insurance amount after repaying the loan which is used for distribution top-up will be distributed to unitholders. We share wait for MNACT for further updates regarding the excess.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.