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We Take a Look at Mapletree Greater China Commercial Trust

Mapletree Investments Pte Ltd launched a public offer for Mapletree Greater China Commercial Trust (MGCCT) on 28 Feb 2013. The REIT will use the proceeds to help buy two buildings – the Festival Walk retail and office development in Hong Kong and the Gateway Plaza office building with a retail atrium in Beijing. The offer will close on 5 March 2013, and the REIT will commence trading on 7 March. Mapletree Investments is also the sponsor for Mapletree Logistics Trust (SGX: M44U), Mapletree Industrial Trust (SGX: ME8U) and Mapletree Commercial Trust (SGX: N2IU).

The IPO of MGCCT, the largest REIT IPO for Singapore in 2 years, has generated a fair bit of excitement among local investors who wants to get a piece of the action in the lucrative China and Hong-Kong property market.

Before you jump onto the bandwagon and join the excitement, it’s always good to know what you are getting yourself into. Here are some quick facts to help you.

Some Quick Facts

IPO Price per unit: S$0.93

Amount that MGCCT hopes to raise from the IPO: S$1.68b

Number of Units offered to the public: 776.6m

Number of Units offered to Institutional Investors: 511.3m out of the 776.6m

Number of Units offered to general public (retail investors like you and me): 215.1m out of the 776.6m

Number of Units offered to the directors, managers, employees and business associates of Mapletree Investments: 50.3m out of the 776.6m

Number of Units that Cornerstone investors have collectively agreed to subscribe for: 953.5m

Number of Units held by Sponsor: 931.6m

Total Number of Units in issue after the IPO: 2.662b

Projected Distribution yield in 13/14 and 14/15: 5.6% and 6.1% respectively at the offering price of S$0.93 per unit.

What Are You Paying For?

A summary of how the unaudited Balance Sheet of MGCCT will look like at the listing date (aka a Pro Forma statement) is given below under the assumption that 2.662b units have been issued at S$0.93 per unit. :

Non-Current Assets S$4.31b
Current Assets S$136.1m
Total Assets S$4.45b
Non-Current Liabilities S$1.97b
Current Liabilities S$44.9m
Total Liabilities S$2.02b
Net Assets S$2.43b
Number of Units in Issue 2.662b
Net Asset Value per unit S$0.91

The unaudited Pro Forma Income statement of MGCCT for the 13 months prior to 30 Sep 2012 is also summarised below:

Gross Revenue S$234.6m
Net Property Income S$186.1m
Pre-tax Total Return S$127.2m
Total Return S$104.2m

 The average Total Return per month for those 13 months would be S$8.02m thus bringing the twelve months Total Return to S$96.2m.

At a 12 month Total Return of S$96.2m, the Total Return per share would be $0.036. Assuming a 100% distribution to Unitholders, that would be a distribution yield of 3.87% based on the offering price of S$0.93 per unit. In actuality, there are also distribution adjustments that need to be made to the Total Return of S$96.2m which would bump up the distribution yield somewhat higher.

In summary, at the offering price of S$0.93 per unit, investors in MGCCT would be paying a Price-to-Net Asset Value (PNAV) of 1.02 and would be getting a distribution yield higher than 3.87%. These are estimates based upon the latest available financial statements that MGCCT has provided in its IPO prospectus.

Final Foolish Thought

An IPO is an exciting event for most investors hoping that they can hit upon the next Microsoft or Google. However, nothing is guaranteed and investors should always know the story and the numbers behind the IPO they are subscribing to see if it makes sense for their overall investment objectives.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any REITS mentioned.