Distributions Better Than Expected at Mapletree Greater China Commercial Trust

Mapletree Greater China Commercial Trust (SGX: RW0U), a real estate investment trust with a total of two properties in Hong Kong and Beijing, released its first-ever financial results last night after its debut on the Mainboard stock exchange on 7 March this year.

The earnings results, which encompasses the period from 7 March 2013 to 30 June 2013, saw the REIT report better-than-expected numbers across the board. Gross revenue came in at S$73.8m, 3.4% better than forecasted.

Meanwhile, MGCCT had pulled in net property income and distributable income of S$59.7m and S$46.1m respectively. Those figures were 7.4% and 8.3% higher than estimated during the IPO.

Finally, distributions per unit (DPU) for MGCCT’s unit-holders stood at 1.73 cents, 8.3% better than what the number-crunchers predicted, leading to an annualised DPU of 5.46 cents.

The REIT had seen a strong performance mainly because of positive rental reversions across both properties that it owns. MGCCT owns the Festival Walk in Hong Kong as well as the Gateway Plaza in Beijing, China and both properties are retail & office developments.

Festival Walk is currently 99.1% occupied and saw 84% of leases due for expiry this financial year being renewed or re-let as of 30 June 2013. Meanwhile, the newly-signed leases had their rental payments increase by an average of 21%.

The property also saw strong shopping activity with an increase in sales of 7.8% for the period from 1 April to 30 June 2013 as compared to the corresponding period last year.

Meanwhile, Gateway Plaza has an occupancy rate of 97.8% and it has obtained a commitment for renewal of 43% of its leases that will expire this financial year. In very good news for unit-holders, the renewal-commitments have signed up for positive rental reversions of 86% – i.e. an increase in rent of eighty-six percent.

MGCCT’s gearing ratio (defined as total debt divided by total assets) stands at 41.5% with an interest cover of 4.2 times. The REIT has a well-staggered debt maturity profile where around HK$4b-to-HK$4.1b is due for repayment annually for three years starting from financial year 2015/2016.

MGCCT has also taken steps to mitigate the risk of rising interest-rates for its debts by hedging two-thirds of its total debt load of HK$12.15b (approximately S$1.95b) for the next two years.

For some future outlook, MGCCT’s Manager sees moderate gross domestic product (GDP) growth in Hong Kong, alongside stable domestic demand and growing tourist arrivals. According to MGCCT, those factors, when put together are “expected to help provide firm support to the retail business in the near term.”

Over in China, the REIT sees “measured growth going forward” and positivity regarding office demand.

Overall, MGCCT’s Manager “believes that [the REIT’s] two properties will continue to benefit from the positive demand dynamics in Greater China, given the resilient domestic demand in Hong Kong and organic rental reversions taking place in Beijing’s office sector.”

Cindy Chow, Chief Executive Officer of the Manager of MGCCT, commented on the REIT’s financial performance: “We are pleased to deliver numbers exceeding Forecast for MGCCT’s first financial results for the period from Listing to 30 June 2013, contributed by healthy rental reversions across the portfolio and efficient cost management.

Leasing activities for both properties, Festival Walk and Gateway Plaza, are progressing well with strong support from both new and existing tenants. We will continue to drive performance of our properties through pro-active asset and cost management, and creating value through asset enhancement initiatives.”

MGCCT opened today’s trading session at S$0.94. At that price, units of the REIT are selling for 1 times its net asset value and carry a forward distribution yield of 5.8% based on the annualised DPU of 5.46 cents.

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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 companies mentioned.