Latest Earnings from Mapletree Greater China Commercial Trust: Uncertain Times Ahead

Mapletree Greater China Commercial Trust (SGX: RW0U), or MGCCT for short, released its second-quarter results for its fiscal year ending 31 March 2017 (FY16/17) yesterday evening.

As a quick background, MGCCT is a real estate investment trust with properties in China and Hong Kong. It currently has three properties in its portfolio namely, Festival WalkGateway Plaza, and Sandhill Plaza.

With that, let’s find out how it performed.

Financial highlights

The following’s a quick summary of some of the latest financial figures for the reporting quarter:

  1. Gross revenue for MGCCT came in at S$83.1 million, down 1.9% from the same quarter a year ago. The drop in revenue was due to the depreciation of the Hong Kong dollar and renminbi against the Singapore dollar. These were partially offset by higher rental income from Festival Walk.
  2. Net property income (NPI) followed suit, declining by 3.2% year-on-year to S$67.3 million.
  3. The drop in the top-line flowed through to the bottom-line with the REIT’s distributable income decreasing 1% to S$49.1 million.
  4. This resulted in a 2.4% drop in the distribution per unit (DPU) to 1.77 cents from 1.81 cents a year ago.
  5. MGCCT’s net asset value (NAV) per unit remained unchanged at S$1.19 compared to a year ago.

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

Source: MGCCT’s earnings presentation

From the table above, it can be seen that the REIT’s net gearing has decreased despite a slight increase in total debt.  But, there was an increase in funding costs along with a drop in the interest cover ratio. The percentage of total debt on fixed rates had remained relatively unchanged while the average debt duration was lengthend.

Operational highlights

MGCCT ended the reporting quarter with an overall portfolio occupancy of 95.7%, down from the 98.4% seen the year before. It also reported a weighted average lease term to expiry (WALE) of 2.6 years by gross rental income for the reporting quarter, with approximately 14.9% of leases up for renewals for the rest of FY16/17.

Rental reversions for the quarter came in at 15% for the retail component of Festival Walk; the property’s office component experienced a 7% rental reversion. The other two properties – Gateway Plaza and Sandhill Plaza – are commercial buildings and they enjoyed rental reversions of 8% and 23%, respectively.

A future outlook

In the earnings release, MGCCT commented that its results for FY16/17 will be “affected by additional property tax arising from the change in property tax basis and Value Added Tax imposed by the local authorities at Gateway Plaza.”

The REIT also warned that “business and consumer sentiments will continue to be weighed down by the weak global growth environment.”

MGCCT’s units closed at a price of $1.09 each yesterday. This translates to a price-to-book ratio of 0.91.

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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.