Mapletree North Asia Commercial Trust Review @ 2 August 2021

 Basic Profile & Key Statistics

Mapletree North Asia Commercial Trust (MNACT) invests in Office and Retail properties and owns 13 properties across China, Hong Kong, Japan and South Korea. 

Performance Highlight

Overall performance improved YoY due to lower rental relief from Festival Walk, improved income from other properties and contributions from Hewlett-Packard Japan Headquarters. Contribution from the Pinnacle Gangnam is excluded as it would be reflected as MNACT’s share of profit in joint venture.

Rental reversion was bad for this quarter especially for Festival Walk and Gateway Plaza.

The retail sales and footfall for Festival have improved as compared to last year, however, this is mainly due to the low base of last year for comparison. The manager did not provide a comparison against the 2019 same period.

MNACT has completed the acquisition of Hewlett-Packard Japan Headquarters in June. This acquisition is funded by a combination of debts and perpetual securities and is expected to be DPU accretive at 2.4%. 

Related Parties Shareholding

• REIT sponsor's shareholding is high at 38.74%
• REIT manager's shareholding is high at 5.33%
• Directors of REIT manager's shareholding is high at 0.19%

Lease Profile

• Occupancy is slightly high at 97.4%
• Income in SGD/Major Currencies is low at 25.1%.
• WALE is short at 2.5 years
• Highest lease expiry within 5 years is high at 29.3% which falls in FY22/23 
• Weighted Average Land Lease Expiry is short at 46.8 years

Debt Profile

• Gearing ratio is high at 41.8%
• Cost of debt is low at 1.87%
• Fixed rate debt % is slightly high at 82%
• Unsecured debt % is low at 69%
• WADM is slightly long at 3.03 years
• Highest debt maturity within 5 years is low at 23% which falls in FY23/24
• Interest coverage ratio is moderate at 4 times
• Perpetual securities over debts is moderate at 6.5%

Diversification Profile

• Top geographical contribution is low 47.5% 
• Top property contribution is high at 47.5% 
• Top 5 properties contribution is high at 90.5% 
• Top tenant contribution is low at 8.2% 
• Top 10 tenants contribution is moderate at 36.3%

Key Financial Metrics

• Property yield is low at 3.8% 
• Management fees over distribution is low at 10.3% in which unitholders receive S$ 9.71 for every dollar paid 
• Distribution on capital is low at 2.7%
• Distribution margin is slightly high at 53.7%

Trends

• Uptrend - NAV per Unit
• Flat - Distribution Margin
• Downtrend - DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital

Relative Valuation

• P/NAV - Higher than average for 1y; Average for 3y and 5y
• Dividend Yield - Average for 1y and 3y; Lower than average for 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Income in SGD/Major Currencies
High REIT Sponsor's Shareholding	Short WALE
High REIT Manager's Shareholding	Concentrated Lease Expiry
High Directors of REIT Manager's Shareholding	Short Weighted Average Land Lease Expiry
Low Cost of Debt	High Gearing Ratio
Well Spread Debt Maturity	Low Unsecured Debt %
Low Top Geographical Contribution	High Top Property & Top 5 Properties Contributions
Low Top Tenant Contribution	Low Property Yield
Competitive Management Fees	Low Distribution on Capital
NAV per Unit Uptrend	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend

Overall, gross revenue and NPI have improved slightly as compared to the previous quarter. The newly acquired Hewlett-Packard Japan Headquarters would start a full quarter contribution and should improve MNACT performance despite negative rental reversion for Festival Walk and Gateway Plaza.

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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 and 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.