Mapletree Greater China Commercial Trust

Mapletree Greater China Commercial Trust: 3QFY15 in line. DPU rose 11.6% y/y to 1.854¢, while distributable income climbed 13% to $51m.

Revenue expanded 19.8% to $88.2m, while NPI grew 22.3% to $72.5m, post the acquisition of Sandhill Plaza, strong rental uplifts from both Festival Walk and Gateway Plaza and the appreciation of Rmb and HKD against SGD.

Festival Walk retail rental uplift was 42% in the quarter, while Gateway Plaza saw 29% positive rental reversions.

At Festival Walk, tenant sales have fallen 1.5% ytd, despite a 0.5% increase in footfall.

Distributable income rose at a slower clip than NPI due to a 66.1% surge in finance costs to $17.2m, attributable to increased borrowings to fund Sandhill Plaza and higher fixed interest rates.

Portfolio occupancy climbed 0.3ppt q/q to 98.7%, with WALE of 2.2 years. 92% of leases expiring this year (4.5% of portfolio) have been committed. In FY17, 28.5% of portfolio leases will expire (of which Festival Walk comprises 20.3%)

Aggregate leverage stood at 41.4% (+0.4ppt q/q) with all in interest cost of 2.67%.

At Festival Walk, management expects moderated rental growth growing forward, amid headwinds facing the HK retail sector. Nevertheless, management expects domestic consumption to be more resilient than tourist spending.

In Beijing, city-wide vacancy is expected to move from the current 3.7% to about 6-7% due to new office supply. This is expected to moderate rental growth going forward.

Meanwhile, Sandhill Plaza in Shanghai is expected to benefit from the easing of restrictions on foreign visas and residence permits, as well as the decentralisation trend. The trend is due to tenants being incentivised by significant cost savings, favourable tax benefits, and improved accessibility.

MGCCT is currently trading at 8.8% annualized 3QFY16 yield and 0.7x P/B.