Mapletree Greater China Commercial Trust

Citi Research, July 31

MAPLETREE Greater China Commercial Trust (MGCCT) reported its first quarterly results post-listing, covering the period from March 7 (the listing date) to June 30.

Such a nearly four-month period has generated a distribution per unit (DPU) of 1.73 Singapore cents, beating the company's forecast of 1.60 cents by 8.3 per cent and our estimate of 1.66 cents by 4.2 per cent.

Its strong performance is in line with Mapletree's historical track record of delivering better-than-expected results on Mapletree sponsored Reits.

We have maintained our full- year FY2014 forecast DPU of 5.49 Singapore cents on MGCCT, representing a dividend yield of 5.8 per cent based on the closing price of S$0.945. We believe its current valuation is attractive given its low-risk profile. Reiterate "buy" (target price: S$1.17).

Festival Walk shopping mall has seen a robust 21 per cent rental reversion over the expiring leases, which is better than Fortune Reit's latest 18.2 per cent rental reversion and heading close to Link Reit's 24.6 per cent reversion.

Eighty-four per cent of expiring leases in FY2014 have already been pre-committed, indicating a high assurance on both occupancy and rental rate for Festival Walk mall in the current financial year.

The mall retail sales delivered a sound 7.8 per cent y-o-y growth in Q1 FY2014 to HK$1.207 billion (S$198 million), with footfalls increasing 1.5 per cent y-o-y in the first quarter to 9.2 million.

Festival Walk office portion also sees a decent 25 per cent positive rental reversion, with 90 per cent of expiring leases in FY2014 already precommitted.

Office demand for Gateway Plaza in Beijing remains strong. Gateway Plaza's occupancy rate is stable at 97.8 per cent. As of June 30, 43 per cent of the leases expiring in FY2014 had been committed.

These committed leases registered positive rental reversions of about 86 per cent and represent tenants from diverse trade sectors such as machinery/equipment/ manufacturing, natural resources and professional services.

Among MGCCT's total debt of HK$12.15 billion, two-thirds have been hedged for the next two years. The trust has a well staggered debt profile with average maturity of four years, with no refinancing risk in the next two years. Its gearing ratio, measured by total debt to total assets, was 41.5 per cent as of June 2013, also better than the pro-forma 43 per cent as of the listing date.

We see that MGCCT is in a strong financial position to tackle different interest rate environments.

BUY