Mapletree Greater China Commercial Trust Turns In A Stellar Report Card For Its Latest Earnings Release

The trust announced its second-quarter earnings for the financial year ended 30 September 2015 (FY 15/16) on Tuesday evening after markets closed.

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. Mapletree Greater China Commercial Trust, or MGCCT for short, currently has three properties in its portfolio: Festival Walk and Gateway Plaza and Sandhill Plaza. Sandhill Plaza, a premium business park located in Shanghai, China, is the latest addition to the portfolio and plays a major role in the exceptional numbers shown below.

You can also learn more about the REIT in here and here.

Financial Highlights

For the second quarter of FY 15/16 (1 July to 30 Sep 2015), Mapletree GCCT saw its revenue jumped 25.4% year over year to S$84.63 million. The increase in net property income was largely in line, rising 26.0% to S$69.5 million as profit margins remain unchanged at 82%. The display of such a good performance was propelled by two main reasons: Better rental reversions from its initial portfolio (Festival Walk & Gateway Plaza) coupled with a full quarter of new contribution from Sandhill Plaza

In contrast, Mapletree GCCT’s distributable income only managed to climb by 14.0% to S$49.55 million, mainly due to a 71.4% spike in finance costs. An excerpt of its S$6.7 million increase in finance costs is shown below:

“Higher interest cost of S$2.1m from issuance of medium term notes, S$3.2m from borrowings for acquisition of SP and S$1.4m from higher fixed interest rates relating to interest rate swaps for hedging floating interest payments.”

Nevertheless,  Mapletree GCCT’s distribution per unit (DPU) is still up a remarkable 12.6% to 1.808 Singapore cents on a year-to-year basis. Based on its closing price of S$0.93, its annualized yield surged 10% from 7% to 7.7%.

Quarter Ended:

30 Sept 2015

Quarter Ended:

31 Mar 2015

Aggregate Leverage Ratio 41.0% 36.2%
Interest Cover Ratio 4.0x 5.0x
Weighted Average Debt to Maturity 2.45 years 2.75 years
Average all-in Cost of Debt 2.64% 2.55%
Total Borrowings HK$13,694 million HK$11,286 m

Source: Mapletree GCCT’s earnings release

In terms of balance sheet strength, we can see from the table above that Mapletree GCCT’s financial position has deteriorated compared to a year ago. With the trust taken on extra debt due to its acquisition of Sandhill Plaza, its leverage ratio has ballooned to 41.0% with a slightly higher cost of debt at 2.64%. Investors should keep an eye on the latter as higher interest expenses have the potential to ding the REIT’s bottom-line

Business highlights and future outlook

Operationally, all three of Mapletree GCCT’s properties are seeing strong rental demand given that the REIT has an overall average portfolio occupancy rate of 98.4% as of 30 September 2015, albeit down from 99.2% seen a year ago.

The slight decrease in occupancy is primarily due to a drop in Gateway Plaza’s occupancy rate from 98.6% to 96.3%, while SandHill Plaza is actually enjoying a 100% occupancy rate at the moment, up from its committed occupancy rate of 96.2% as at 31 Mar 2015 was disclosed in the Acquisition announcement.

Investors in Mapletree GCCT might be exuberant to note that Festival Walk and Gateway Plaza had experienced very strong rental reversions of 20% and 25% respectively during the year. In addition, tenants’ sales at Festival Walk registered an increase of 1.8% and shopper traffic was up 2.9% for the period from 1 April 2015 to 30 September 2015 over the same period last year

Going forward, Ms. Cindy Chow, Chief Executive Officer of the Manager remains upbeat on Mapletree GCCT’s outlook despite a challenging market environment due to lower Chinese tourist arrivals. The REIT commented that its portfolio “is expected to continue to benefit from resilient domestic demand and low unemployment rates in Hong Kong as well as healthy demand for business space in the Beijing office sector.”

Mapletree Greater China Commercial Trust ended Tuesday at S$0.99 per unit. At that price, the trust is trading at a price to book ratio of 0.865.

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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.