Mapletree Greater China Commercial Trust’s Latest Earnings: A Slowdown in China? What Slowdown?

Mapletree Greater China Commercial Trust (SGX: RW0U) is a real estate investment trust listed in Singapore that focuses on properties in both China and Hong Kong. The REIT currently has two commercial properties in its portfolio, Festival Walk in Hong Kong, and Gateway Plaza in Beijing, China.

The trust announced its full-year earnings for the financial year ended 31 March 2015 (FY 14/15) on Thursday evening and here are the highlights.

The numers

For the whole of FY 14/15, Mapletree GCCT saw a 11.3% year over year increase in revenue to S$281.1 million. Due to slower growth in property expenses, its net property income rose at a slightly faster clip of 12.2% to S$229.3 million.

After adjustments, Mapletree GCCT’s available distributable income managed to climb by 11.9% to S$178 million. At the end of the day, the most important factor for investors is the distribution per unit figure and on that front, the REIT did not disappoint. With the double-digit growth in distributable income, Mapletree GCCT’s DPU jumped by 10.4% from a year ago to 6.543 Singapore cents.

The REIT ended 31 March 2015 with a net asset value per unit of S$1.198, up 13.2% from S$1.058 a year ago.

Mapletree Greater China Commercial Trust's balance sheet figures (31 March 2015)

Source: Mapletree GCCT’s earnings release

In terms of balance sheet strength, we can see from the table above that Mapletree GCCT has managed to make some improvements compared to a year ago. Besides lowering the amount of borrowings, the REIT has also reduced its gearing ratio and upped its interest cover ratio.

But there are still some areas of concern. The REIT’s debt-maturity has shortened and its all-in cost of debt (in other words, interest rate) has increased. Changes in the latter, in particular, would be worth watching as higher interest expenses have the potential to ding the REIT’s bottom-line

Mapletree GCCT has a total of HK$8.14 billion in loans coming due in FY 15/16 and FY 16/17; the REIT’s progress in refinancing these borrowings would be well worth watching.

Business highlights and future outlook

Operationally, both of Mapletree GCCT’s properties are seeing strong rental demand given that the REIT has a portfolio occupancy rate of some 98.8% as of 31 March 2015, up slightly from 98.5% seen a year ago. Festival Walk is actually enjoying a 100% occupancy rate at the moment and has done so over the whole of FY 14/15.

Investors in Mapletree GCCT might also be happy to note that Festival Walk and Gateway Plaza had experienced very strong rental reversions of 22% and 30% respectively during the year.

As Festival Walk also has a sizeable retail area, the business-health of the property’s retail tenants should also be watched. On that front, Mapletree GCCT reported in its earnings release that Festival Walk has delivered “positive retail sales growth of 5.8% for FY14/15 over the same period last year.”

Going forward, Mapletree GCT sees brighter days ahead for both its properties. The REIT commented that its portfolio “is expected to continue to benefit from resilient domestic demand in Hong Kong and positive rental reversions in the Beijing office sector.”

Foolish Summary

Mapletree Greater China Commercial Trust ended Friday at S$1.07 per unit. At that price, the trust is carrying a yield of 6.11% and a price to book ratio of 0.89.

The yield is definitely attractive, but investors need to take note that the REIT only has two properties in its portfolio and might thus carry concentration risks.

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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 writer Stanley Lim does not own shares in any companies mentioned above.