Mapletree Greater China Commercial Trust (MGCCT): MGCCT proposed acquisition of business park, Sandhill Plaza, in Shanghai for S$412.2m (CNY188.1m), which translates into an initial NPI yield of 3.85%. Sandhill Plaza is a premium quality business park with a total GFA of 83,801.48 sqm and is situated within the mature northern zone of the Zhangjiang Hi-Tech Park, which is part of the Free Trade Zone in Shanghai. Management intends to fund this acquisition with existing banking facilities. Thereafter, MGCCT’s gearing ratio is expected to increase from 36.2% to 40.6%.
On a pro forma basis, DPU for the 12 months ended 31 Mar 2015 would remain relatively flat (from 6.543 cents to 6.55 cents) after this acquisition. Management clarified that the pro forma figures are not reflective of the potential of the asset, as operationally, the property had not yet stabilised during that period, with an average occupancy of just 73%. As at 31 Mar 2015, Sandhill Plaza’s occupancy rate had improved to 96.2%. Major tenants include Broadcom, Disney and Borouge. Sandhill Plaza is 10% below the average rental of its comparable basket (premier grade A, higher quality specs buildings). Management is targeting to grow the NPI yield of this asset to >5%.
OCBC upgrades its rating from HOLD to BUY with TP lifted from $1.07 to $1.11 as the house sees the company as value emerging, after MGCCT’s recent share price correction. The stock also offers a prospective FY16F distribution yield of 7.1%.
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