Mapletree GCCT

Mapletree GCCT: (S$0.98) 1QFY16 in line; solid rental growth from both assets
Synopsis MGCCT's 1QFY16 DPU of 1.696¢ (+8.7%) was within expectations was in line, along with the 10.1% rise in distributable income to $46.3m.

Revenue and NPI climbed 19.1% and 18.7% respectively to $75.9m and $62.4m, largely driven by rental reversions at Festival Walk (+16%) and Gateway Plaza (+29%).

Occupancy edged up 0.2ppt q/q to 99% with weighted average lease expiry of 2.4 years. 65% of portfolio leases due for renewal in FY16 have been renewed/re-let.

Aggregate leverage jumped 5ppt q/q to 41.2%, from additional debt to fund the Sandhill Plaza acquisition, which was completed on 17 Jun. All-in cost of debt was 2.64% with average debt tenor of 2.7 years.

At Festival Walk, tenant sales and footfall grew 6.5% and 5.9% respectively, despite the tepid retail environment in Hong Kong. This is due to the strategic location of the retail mall in the strong catchment area at Kowloon Tong, and its focus on mid-tier/mass market brands.

Meanwhile, Beijing continues to have the lowest office vacancy rates in China, boding well for Gateway Plaza. Going forward, Sandhill Plaza, playing on the Shanghai office decentralisation theme, will also bring growth to the fold.

MGCCT is trading at 6.9% annualized 1QFY16 yield and 0.86x P/B and is a constituent on Market Insight’s yield portfolio.

The street has 6 Buy, 2 Hold and 1 Sell rating on the commercial REIT with a mean TP of $1.14.