Mapletree Greater China Commercial Trust (IPO)

Mapletree Greater China Commercial Trust: IPO Public Offer closes tomorrow. Some key selling pts of the IPO are as follows: 1) Positive industry outlook, with Urbis projecting HK retail sales to grow 8.7% CAGR from 2011-17, due to stronger domestic demand and increased China tourist arrivals. In the office segment, Savills expects HK Grade A office rent rates to increase by 10% p.a. from 2013-14, while in Beijing, Colliers projects office rental rates of 7.3% CAGR from 2011-17. 2) Exposure in both HK and China could see investors assign a premium on MGCCT, granting them access to best-in-class commercial properties in HK and Beijing. HK’s Festival Walk is expected to deliver stable and sustainable growth, while Beijing’’s Gateway Plaza will catalyze significant rental growth. 3) Ability to tap on strong parentage by leveraging on the Temasek-backed networks and relationships to identify and acquire accretive assets, supported by a right of first refusal. The sponsor has to date, not sold units in its sponsored REITs, and has been supportive of capital raisings when required. 4) Small portfolio base of 2 buildings, but possible injections by sponsor, could mitigate this concentration risk. MGCCT’s high portfolio occupancy rate of 99%, suggest strong earnings visibility for the foreseeable future, coupled with positive industry dynamics. 5) IPO is attractively priced at 6.1% FY14/15 DPU Yield and 1.0x P/B, vs. peer’s average of 5.5% FY14/15 yield and 1.1x P/B. MGCCT’s investment mandate to pursue future growth in HK, first tier cities and key second tier cities in China, could grant investors further exposure in the greater china region.