Analysts are recommending to “buy” Mapletree North Asia Commercial Trust (MNACT) despite a rather disappointing set of 1HFY2021 results, as a glimmer of hope emerges with the trust’s gradual improvement.
The trust recorded a 26% drop in its latest 1HFY2021 DPU to 2.876 cents from 3.887 cents last year.
This was as revenue fell some 9.6% y-o-y to $190.1 million, mainly due to the rental reliefs granted to tenants at Festival Walk (FW). Property operating expenses rose 24% y-o-y to $50.4 million due to expenses of MBP and Omori which were acquired in February 2020 and the higher average rates. Net property income (NPI) for the period dropped 17.7% y-o-y to $30.1 million.
See: Mapletree North Asia Commercial Trust sees 1H DPU drop 26% to 2.876 cents
CGS-CIMB has its “add” call on the stock with a target price of $1.15.
FW saw its 1HFY2021 tenant sales and shopper traffic decline 36.2% and 45.5% y-o-y, respectively, due to Covid-19. However, taking a closer look, FW’s tenant sales and foot traffic gradually improved m-o-m in August and September, with the easing of restrictive measures, to show a smaller 25.9% and 46.8% decline respectively, in September.
In an Oct 30 report, analyst Lock Mun Yee says, “Going forward, the retail environment in Hong Kong remains challenging and would likely continue to put pressure on reversions and occupancy, in our view.”
Meanwhile, in China, while operating conditions remain challenging amid heightened supply, Gateway Plaza (GW) managed to increase its take-up to 92.2%, with -9% rental reversion in 1HFY2021. Sandhill Plaza (SP) continued to achieve higher average rents due to robust demand for more affordable decentralised office space.
Japan portfolio occupancy improved to 97.8% in 1HFY2021 on 5% positive rental reversion.
In Korea, MNACT completed the purchase of a 50% stake in The Pinnacle Gangnam at end-Oct 20 and the new contributions will likely be felt in 2HFY2021.
CGS-CIMB Research is also keepings its “buy” call on MNACT with a $1.05 target price, as the research house believes that returns are attractive at current levels of 0.6 times P/NAV and forward yield of more than 0.8%.
The REIT is liked for its diversification efforts through strategic acquisitions in Japan, which adds income stability in the longer term, while offsetting the temporary drop in income from the closure of FW, its anchor mall asset.
In a Nov 5 report, lead analyst Derek Tan says, “We have further revised our estimates for FY2021 (-5%) on higher rebates and also priced in the debt-funded acquisition of the Korea office building starting from 4QFY2021 with about 0.5-1.0% accretion to DPUs.”
“With greater income diversity from Japan and Korea, we believe that prospects of inclusion in the EPRA NAREIT Developed World Index will drive share price upside in the medium term,” he adds.
As at 1.05pm, units in MNACT are trading at 0.6 times FY2021 NAV with a distribution yield of 7.2%, according to DBS’ estimates.
