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How Mapletree Greater China Commercial Trust Grew Its Distributions By 11.9%

dividends bag of cash money

Mapletree Greater China Commercial Trust (SGX: RW0U), the newest trust from Mapletree Investments, announced its 1st quarter earnings on Friday evening. Its sponsor Mapletree Investments also counts a few other trusts under its banner and these include Mapletree Logistics Trust (SGX: M44U), Mapletree Industrial Trust (SGX: ME8U) and Mapletree Commercial Trust (SGX: N2IU).

Mapletree Greater China Commercial Trust, or MGCCT, currently has two properties in its portfolio: Festival Walk and Gateway Plaza. The former is a combination of a seven-storey retail mall, a four-storey office tower, and three underground car park levels; the property is situated in the upscale residential area of Kowloon Tong, Hong Kong. As for the latter, it’s made up of two 25-storey office towers connected by a three-storey retail atrium and three underground floors; it is located in Beijing, China.

The basic numbers and operational highlights

The trust’s latest financial report card, which encompasses the period from 1 Apr 2014 to 30 June 2014, saw the REIT churn out higher numbers across the board as compared to the corresponding period last year. Gross revenue was up 8.6% to S$63.79 million while net property income rose 9.9% to S$52.6 million.

Income available for distribution to unit-holders, at S$42.09 million for the quarter, had grown by 13.4% from a year ago. On a per-unit basis, the REIT’s quarterly distribution stands at 1.56 Singapore cents, up a healthy 11.9% year-on-year.

During the quarter, 90% of the retail leases that are going to expire in FY14/15 (financial year ending 31 March 2015) were renewed for Festival Walk with rental uplift of 21%; 100% of the office leases that were going to expire for the property were also renewed with rental uplift of 12%. Gateway Plaza also encountered a similar dynamic with 80% of its office leases expiring in FY14/15 being renewed with rental uplift of 33%. These developments helped MGCCT turn in its growth figures for the quarter.

The REIT ended its quarter with a strong occupancy rate of 98.5% for its properties. Throughout the course of the quarter, MGCCT also managed to bring in many international brands as new tenants. These brands include Zara’s sister brand Oysho, Adidas Women, Petit Bateau, Ralph Lauren Children, and School Food. With a diversified tenant mix, it can be beneficial for the trust as it is not dependent on any one particular sector for its business.

Financial position

As of 30 June 2014, MGCCT has a solid balance sheet with a gearing ratio of 38.6% and an interest coverage ratio of 4.8 times. The REIT’s total borrowings of HK$11,455 million have well-staggered debt maturity dates and a weighted average debt maturity of 2.7 years, with the first tranche expiring at the end of FY15/16.

In lieu of rising interest rates, more than 70% of MGCCT’s total debt has fixed interest rates. In addition, to ensure stability of distributions and mitigate currency risks, MGCCT has hedged 90% of its Hong Kong dollar distributable Income forecasted for FY14/15 and is actively monitoring the market to progressively convert its renminbi-denominated distributable Income into Singapore dollars when the rates are favorable.

Foolish Summary

Ms. Cindy Chow, Chief Executive Officer of the Manager of MGCCT, expects the low unemployment rate and resilient consumption demand in Hong Kong to support the performance of the retail market. Meanwhile, several government initiatives in China are expected to help drive long-term and stable growth in the country. All told, the trust’s management is optimistic on the prospects of its two properties going forward.

MGCCT last changed hands at S$0.905, selling below its NAV per share of S$1.058. Based on its annualized DPU (distribution per unit) of 6.257 Singapore cents, the REIT carries a 6.91% distribution yield.

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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 James Yeo doesn’t own shares in any companies mentioned.