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Mapletree North Asia Commercial Trust’s Earnings: Impressive Revenue Growth

Mapletree North Asia Commercial Trust (SGX: RW0U) or “MNACT” for short, is a Singapore-listed real estate investment trust (REIT) with properties in China, Hong Kong, and Japan. It currently has nine properties in its portfolio; Festival WalkGateway Plaza and Sandhill Plaza, and six properties in Japan. The portfolio has a total book value of S$7.6 billion as of 31 March 2019.

MNACT released full-year results for FY2018/19 last night. Let’s dive into it to find out how it performed.

Financial highlights

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

  1. Gross revenue for the year came in at S$408.7 million, up 15.1% year-on-year. Net property income (NPI) followed suit, increasing by 14.6% to S$329.0 million. The robust growth in revenue and net income was on the back of rental contribution from the Japan properties and higher income from the three properties in China and Hong Kong.
  2. The uptick in the top line flowed through to the bottom line with the REIT’s distributable income rising 14.1% to S$240.7 million for the reporting year.
  3. Similarly, there was a 2.8% increase in distribution per unit (DPU) to 7.69 cents from 7.48 cents for the same period the previous year.
  4. Net asset value (NAV) per unit rose by 5% year-on-year to S$1.445.

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

31 March 2019 31 March 2018
Gearing Ratio 36.6% 36.2%
Interest Cover Ratio 4.2 times 3.9 times
Average Debt Duration 3.7 years 3.43 years
Hedge/Fixed Rate Borrowing 86% 78%
Weighted Average All in Funding Cost 2.47% 2.72%

Source: Mapletree North Asia Commercial Trust Earnings Presentation

From the table above, the REIT’s gearing ratio increased slightly but it is still well below the 45% regulatory limit. The rest of the metrics all improved on year-on-year, indicating prudent management.

To mitigate foreign currency risks, as all the of REIT’s income is derived in foreign currency, the REIT manager has hedged 75% of MNACT’s expected distributable income for the first half of FY19/20.

Operational highlights

MNACT ended the reporting year with an overall portfolio occupancy of 99.6%, which is an improvement from 98.5% recorded the year before. It had a weighted average lease expiry (WALE) of 2.8 years by gross rental income with approximately 19.3% of leases up for renewals for FY 19/20. Rental reversions for the quarter came in at 15-28% for Festival Walk, 2% for Gateway Plaza, 15% for Sandhill Plaza and 6% for the Japan properties.

The Road Ahead

Ms. Cindy Chow, Chief Executive Officer of the Manager, commented:

“The Manager’s proactive asset and capital management of the portfolio, together with the addition of the Japan Properties, have contributed to a steady year-on-year DPU growth for FY18/19. We are mindful of potential uncertainties in the year ahead, with the ongoing trade tensions and a slowing global economy. Nevertheless, we remain committed to doing our best to weather these conditions and deliver sustainable value for the Unitholders.”

Foolish summary

MNACT last traded at $1.34 per share, translating to a price-to-book ratio of 0.93 and a dividend yield of 5.7%.

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Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own shares in MNACT.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips doesn’t own shares in any companies mentioned.