Latest Earnings from Mapletree Greater China Commercial Trust: Strong Growth Seen

Last Friday, Mapletree Greater China Commercial Trust (SGX: RW0U) released its first-quarter earnings for its fiscal year ending 31 March 2017 (FY16/17). The reporting period is for 1 April 2016 to 30 June 2016.

As a brief background, Mapletree Greater China Commercial Trust, or MGCCT for short, is a real estate investment trust with retail and commercial properties in China and Hong Kong. It currently has three properties in its portfolio, namely, Festival Walk, Gateway Plaza, and Sandhill Plaza.

With that, let’s dig into the REIT’s latest results to see how it fared.

Financial highlights

The following’s a quick summary of some of MGCCT’s latest financial figures:

  • Gross revenue for the quarter came in at S$85.0 million, up 11.9% from the same quarter a year ago. The increase in revenue is attributed to higher revenue from Festival Walk and the acquisition of Sandhill Plaza in June 2015.
  • Net property income (NPI) followed suit, rising 11.2% to S$69.4 million from S$62.4 million a year ago.
  • The increase in the top-line flowed through to the bottom line with the REIT’s amount available for distribution increasing by 10.6% from S$46.1 million in the first-quarter of FY15/16 to S$51.2 million in the reporting quarter.
  • This resulted in a 9.1% year-on-year increase in the REIT’s distribution per unit (DPU) to 1.85 cents.
  • The REIT’s net asset value (NAV) per unit had increased from S$1.145 in the first-quarter of FY15/16 to S$1.183.

Let’s now move on to look at the REIT’s debt profile:

MGCCT debt profile
Source: Mapletree Greater China Commercial Trust’s earnings presentation

From the table above, it can be seen that the REIT’s balance sheet had weakened over the past year. Although the gearing had declined, MGCCT’s debt had increased. Moreover, the interest cover ratio had fallen, the weighted average cost of debt had increased, and the percentage of debt with fixed rates had stepped down.

Operational highlights

MGCCT ended the reporting quarter with an overall portfolio occupancy of 97.8%, lower than the 99% seen the year before. The REIT also currently has a weighted average lease term to expiry (WALE) of 2.6 years by gross rental income with approximately 24.6% of leases up for renewal in the rest of FY16/17.

During the quarter, the REIT experienced strong positive rental reversions of 13% at Festival Walk, 6% at Gateway Plaza, and 28% at Sandhill Plaza. Also, 45% of the expired/expiring leases for FY16/17 have been renewed or re-let.

The road ahead

In its earnings release, MGCCT had given some commentary on its outlook. The REIT said:

“Demand for MGCCT Group’s three high-quality and well-located properties is expected to remain resilient, bringing stability to the portfolio’s rental income. About 29.4% of MGCCT’s leases (by portfolio gross rental income) will be expiring in FY16/17, of which 45% has already been committed as of 30 June 2016. Net property income margin is expected to remain stable.

The Manager will stay focused on proactive lease and asset management as well as pursue accretive acquisitions, while maintaining a prudent capital management approach.”

Cindy Chow, the chief executive of MGCCT’s manager, also mentioned that “MGCCT’s exposure to HKD and RMB volatility is reduced, with more than 60% of the expected distributable income for FY16/17 hedged into SGD.”

 MGCCT’s units closed at a price of $1.08 last Friday. This translates to a price-to-book ratio of 0.91 and an annualized distribution yield of 6.9%.

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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 Esjay does not own shares in any companies mentioned.