MGCCT

MGCCT: MGCCT’s 2QFY16 results were in line. DPU expanded 12.6% y/y to 1.808¢, while distributable income grew 14% to $49.5m.

Revenue increased 25.4% to $84.6m, while NPI rose 26% to $69.5m, from strong rental reversions from Festival Walk (+20%) and Gateway Plaza (+25%) for leases renewed, as well as full quarter contribution from Sandhill Plaza.

Festival Walk, which contributes 71% of top line, saw tenant sales expand 1.7%, amid a 2.9% increase in footfall.

Finance costs surged 70.3% to $16.8m, from the refinancing of loans, higher fixed interest rates from swaps to hedge floating interest payments, and loans to fund the acquisition of Sandhill Plaza.

Occupancy dipped 0.6ppt q/q to 98.4%, from the dilution from Sandhill Plaza. WALE stood at 2.3 years. 84% of expired and/or expiring leases in FY16 have been committed.

Aggregate leverage increased to 41% at Sep, from 36.2% in Mar ’15, largely from increased debt to fund the acquisition of Sandhill Plaza.

Despite headwinds, Festival Walk in Kowloon Tong, which has solid shopper traffic should remain resilient. The mall focuses on mid-tier and mass market brands, and have withstood across economic cycles.

Meanwhile, rental growth at Gateway Plaza has slowed due to an increasingly higher base achieved over time.

MGCCT’s valuations are inexpensive, currently trading at 0.8x P/B and 7.3% annualized yield. MGCCT is a constituent of the Market Insight yield portfolio.