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Mapletree North Asia Commercial Trust’s Latest Earnings: DPU Increases 3.1%

Mapletree North Asia Commercial Trust (SGX: RW0U) or MNACT reported an increase in its distribution per unit (DPU) on Friday. The positive result was driven by higher rental rates from its properties and maiden contributions from its newly acquired properties.

The real estate investment trust’s (REIT) latest earnings release was for the second-quarter of fiscal year ending on 31 March 2019 (FY18/19). As a brief background, MNACT is a Singapore-based commercial REIT with nine properties in China, Hong Kong, and Japan with a book value of S$7.2 billion.

Let’s take a quick look at the results for its latest reporting quarter:

  1. Gross revenue increased by 18.7% year-on-year to S$104.6 million while net property income rose by 18% to S$83.64 million. The steep increase in revenue and net property income was due to contributions from newly acquired properties in Japan which started contributing from 25 May 2018. Meanwhile, higher rental rates from the REIT’s other properties aided in this positive result.
  2. Distributable income increased by 15.8% to S$60.8 million over the same period. This resulted in a 3.1% uptick in distribution per unit (DPU) which came in at 1.926 cents.
  3. Next, let’s take a look at MNACT’s debt profile. As of 30 September 2018, MNACT’s gearing stood at 39%, an increase from 36.2% recorded at the end of March. The weighted average annualized interest rate stood at 2.48% and the REIT had an average debt duration of 3.96 years. Around 78% of the REIT’s debt were on fixed-rate loans and the REIT hedged 80% of its expected distributable income. This hedge is important as MNACT derives its revenue in multiple currencies, and hedging reduces the risk of currency fluctuations.
  4. Moving on, we look at MNACT’s operational statistics. The REIT’s portfolio had an occupancy rate of 99.6% at the end of the quarter, remaining stable compared to the previous quarter. On the rental reversion front, all the REIT’s properties saw an increase, as seen from the table below.

    Source: MNACT’s presentation slides
  5. The REIT’s weighted average lease expiry (by gross rental income) came in at 3.0 years at the end of the reporting quarter with only 3.7% of the leases scheduled for renewal for FY18/19.
  6. MNACT’s net asset value (NAV) declined by 3.7% compared to the end of March 2018, coming in at S$1.325 at the end of 30 September 2018.

The Road Ahead

MNACT added the commentary below for the rest of the fiscal year:

“For FY18/19, MNACT’s assets are expected to remain resilient and offer sustainable and stable returns. To mitigate the impact of interest rate hikes and foreign exchange volatility, the Manager has hedged interest costs for approximately 78% of MNACT’s debt, and about 80% of MNACT’s expected FY18/19 distributable income has been hedged into SGD as of 30 September 2018.

The Manager remains focused on accretive acquisitions, as well as proactive asset and capital management, so as to deliver sustainable returns to unitholders”.

Units of MNACT closed at S$1.13 on Friday, given its a price-to-book ratio of around 0.85 and a yield of 6.63%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.