As Mapletree North Asia Commercial Trust (MNACT) enters into a settlement agreement with its insurers for Festival Walk, CGS-CIMB Research analysts Lock Mun Yee and Eing Kar Mei have kept “add” with a slightly higher target price of $1.13 from $1.12.
On Nov 24, the manager of MNACT announced that it has settled on an amount of HK$334.3 million ($58.3 million), which comprises HK$84.3 million for property damage and HK$250 million for revenue loss due to business interruption.
See: Mapletree North Asia Commercial Trust to receive insurance settlement of $58.3 million and Broker's Digest: CICT, KORE, SPH, MNACT, Japfa, Far East Hospitality Trust
In November 2019, MNACT’s Festival Walk in Hong Kong suffered extensive damage from incidents in the Special Administrative Region (SAR). As a result, the retail mall area was closed from Nov 13, 2019 to Jan 15, 2020. The office tower was closed from Nov 13, 2019 to Nov 25, 2019.
Rental was not collected during these periods, note the analysts.
An interim payment of HK$263 million has been received from the insurers to date.
In its announcement, the REIT indicated that it will distribute the excess insurance settlement amount of $3.5 million to its unitholder as part of its distributions for the 2HFY2022.
To reflect the payment of the insurance claims to unitholders, Lock and Eing have upped their distribution per unit (DPU) estimate for FY2022 by 1.49%.
That said, they have reduced their DPU estimates for FY2023 and FY2024 by 0.01%.
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According to the analysts, the REIT is currently trading at an inexpensive 6.6% FY2022 DPU yield.
“We believe much of the weak retail outlook at Festival Walk has been factored into the current share price,” they write in Nov 24 report.
Units in MNACT closed 1 cent lower or 0.95% down at $1.04 on Nov 25.
Photo: MNACT
