MGCCT

MGCCT: 1QFY15 DPU beat; offers one of the best commercial REIT yields Mapletree Greater China Commercial Trust (MGCCT) 1QFY15 DPU jumped 11.9% y/y to 1.56¢, coming in 9.3% above the IPO forecast. Gross revenue grew 8.6% to $63.8m and NPI increased 9.9% to $52.6m, thanks to higher than expected rental rates. Portfolio occupancy remained high at 99.2%, with 82% of the expiring leases in FY15 renewed with robust rental reversions (between 21% and 33%). MGCCT’s portfolio comprises two key assets, Festival Walk and Gateway Plaza. At Festival Walk, one of the top ten retail malls in HK, gross revenue and NPI expanded 6.7% and 6.8% y/y, respectively. The property remained 100% occupied for both the retail and office sectors. Shopper traffic and tenants sales rose slightly by 0.5% and 0.1%, respectively. Of the retail leases expiring in FY15, 90% have been renewed or re-let with rental uplift of 21%, thereby underpinning MGCCT’s y/y growth for the subsequent three quarters. At Gateway Plaza, a premier Grade A office building in Beijing, gross revenue and NPI rose 14.2% and 18.8% respectively. Property occupancy stood at 98.6%. Similar to Festival Walk, 80% of the leases expiring in FY15 have been committed with rental uplift of 33%. Management believes MGCCT’s portfolio is well positioned to benefit from the continued performance in both the HK retail sector and the Beijing office sector. MGCCT had net gearing of 38.6% with a weighted debt maturity of 2.7 years, and average cost of debt of 2%. MGCCT trades at 0.9x P/B and offers 6.9% annualized yield, against its closest Singapore peer Suntec (5.0% yield) and Hong Kong peers Champion REIT (5.8%), Fortune REIT (5.7%) and Link REIT (3.8%).