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Mapletree North Asia Commercial Trust’s Latest Earnings: What Investors Should Know

Mapletree North Asia Commercial Trust (SGX: RW0U) recently released its earnings update for the April to June quarter. The trust, which changed its name from Mapletree Greater China Commercial Trust in May due to acquisitions of six properties in Japan, has a portfolio of nine assets in China and Japan. In addition to its recently acquired properties in Japan, the trust has three other assets, namely, Festival Walk (retail mall in Hong Kong), Gateway Plaza (office building in Beijing) and Sandhill Plaza (business park in Shanghai).

Here are 12 highlights from its earnings update:

1. Gross revenue climbed 6.2% year-on-year to S$94.4 million. Net property income, likewise, increased 6.7% to S$76.8 million. NPI margin improved three basis points to 81.3%.

2. Distributable income rose 9.3% to S$56.7 million. Distribution per unit (DPU) grew 1.6% to 1.881 cents. The strong numbers were driven by higher average rental rates at Festival Walk, Gateway Plaza and Sandhill Plaza, as well as contribution from the Japan properties starting from 25 May.

3. Below is a chart of distributable income and DPU since the trust went public in 2013.

Source: Mapletree North Asia Commercial Trust FY18/19 Q1 Earnings Presentation

4. Here’s a look at the revenue breakdown after the recent acquisition of the six properties in Japan. However, the Japan portfolio only contributed to revenue from the 25 May. We can expect to see more contribution next quarter onwards.

Source: Mapletree north Asia Commercial Trust FY18/19 Q1 Earnings Presentation

5. The acquisition of the Japan properties increased the total asset value of the trust by S$777.5 million to S$7,350.4 million. However, borrowings increased by 21% to S$2,857.2 million. This gives it a gearing ratio of 38.8%, up from 36.2% recorded on 31 March 2018.

6. The larger number of outstanding units due to a private placement to raise funds for the acquisition of Japan properties also lowered the net asset value per share to S$1.321 from S$1.376 recorded at the end of March.

7. The trust’s debt had an average term to maturity of 3.93 years and an interest cover ratio of 4.1 times. Around 90% of the debt is on a fixed interest cost.

8. Portfolio occupancy was 99.6% at the end of the reporting quarter, an improvement of 1.1 percentage points from the previous quarter. The newly acquired Japan properties had a 100% occupancy rate.

9. The trust reported healthy rental reversions across all its assets. Retail space in Festival Walk had positive rental reversions of 14%, Gateway Plaza 11%, Sandhill Plaza 18% and Japan properties 6%.

10. As of 30 June, the REIT only has 6.4% of leases due for renewal in FY18/19. The leases are also well staggered, with 25% due in FY19/20, 21% in FY20/21 and the rest beyond that. On average, weighted average lease expiry stood at 3.2 years.

11. Retail sales and footfall at Festival Walk increased by 10.9% and 7.2% year-on-year respectively, on the back of higher domestic consumption in Hong Kong.

12. On the outlook for the rest of the year, management expects gross revenue in Festival Walk to grow moderately due to higher average rental reversions. Likewise, Gateway Plaza and Sandhill Plaza are expected to grow modestly due to higher average rental reversions for leases expiring in FY18/19. The REIT’s Japan properties should provide stable income due to high average occupancy rate and long lease expiry.

At the time of writing, units of Mapletree North Asia Commercial Trust traded at S$1.14 per piece, giving it a price-to-book ratio of 0.86 and an annualised distribution yield of 6.6%.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.