Analysts from CGS-CIMB Research and OCBC Investment Research (OIR) has kept their “add” and “buy” calls on Mapletree North Asia Commercial Trust (MNACT) albeit with lower target prices of $1.12 and $1.15 from $1.15 and $1.18 respectively.
That said, MNACT’s gross revenue and net property income (NPI) of $103 million and $78.3 million stood broadly in line with expectations from both brokerages.
To CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei, the quarter was a “challenging” one for the REIT as its stable performance from its Japan and Seoul portfolios were dragged by weaker figures from Festival Walk and Gateway Plaza.
“Looking ahead, we anticipate the weak outlook to continue to drag on upcoming lease expiries with 1.9% and 12.6% of portfolio income to be renewed at Gateway Plaza for 9MFY2022 and FY2023,” they write.
Due to the weaker rent reversion assumptions at Gateway Plaza, Lock and Eing have lowered their distribution per unit (DPU) estimates for the FY2022 to FY2024 by 3.8% to 4.9%.
“MNACT is trading at an inexpensive 6.6% FY2022 DPU yield and we believe much of the weak retail outlook at FW has been factored into the current share price,” add the analysts.
To the research team at OCBC, the continued headwinds and adversities have adversely impacted MNACT’s performance in the FY2021, especially after the political unrest in Hong Kong, which resulted in damages done to Festival Walk in 2019.
That said, the team says it expects to see a recovery for the REIT in the FY2022.
To the team, MNACT’s liquidity position and aggregate leverage ratio remains healthy still.
As such, they have left their DPU forecasts unchanged, although they have applied a slight environmental social and governance (ESG) valuation discount in its assumptions.
“MNACT has relatively weak business ethics policies and programmes, coupled with weak corporate governance practices compared to peers. Furthermore, the lack of a majority independent board, an independent chairman and a fully independent audit committee may hinder MNACT board’s oversight of management,” writes the team.
“On a positive note, MNACT has made good efforts to further increase the proportion of green-certified buildings in its portfolio relative to peers, and also has robust compensation practices relative to peers, including substantial non-pay benefits,” it adds.
Units in MNACT closed 1 cent higher or 1.0% up at $1.02 on Aug 2, or 0.8 times P/NAV, according to OCBC’s estimates.
Photo: MNACT
