SINGAPORE (Oct 30): OCBC Investment Research believes Mapletree North Asia Commercial Trust (MNACT) will remain resilient, amid the ongoing political unrest in Hong Kong.
Rental income from Festival Walk property in Hong Kong accounted for 61.6% of MNACT’s portfolio net property income in the 2Q19/20 ended September.
Notably, the shopping centre in Kowloon Tong, Hong Kong, recorded committed occupancy at 100%.
Spurred by Festival Walk, MNACT saw its 2Q19/20 gross revenue edge up by 0.9% higher year-on-year to $105.5 million, as net property income rose 1.3% to $84.7 million.
The REIT on Oct 25 reported distribution per unit (DPU) of 1.937 cents for 2Q19/20, marginally higher than DPU of 1.926 cents, as distributable income for the quarter grew 1.5% to $61.7 million.
See: Mapletree North Asia Commercial Trust sees 2Q DPU edge up by 0.6% to 1.937 cents
“Notwithstanding the ongoing political unrest in Hong Kong, we expect MNACT’s portfolio to remain resilient, although it would not be immune to the situation and economic slowdown in Hong Kong,” says OCBC’s research team in a Tuesday report. “We believe [MNACT’s] risk-reward is attractive at current levels.”
OCBC notes that average rental reversions came in at +12% for Festival Walk’s retail component in 1H20, similar to 1Q20. “We believe [this] implies that 2Q20 rental reversions were resilient,” the research house says.
The management has guided that double-digit rental reversions at Festival Walk are unlike to be sustainable, but adds that it would remain positive at least for FY20.
The way OCBC sees it, this more cautious stance is “understandable” given the uncertainties over the situation in Hong Kong.
OCBC is keeping its “buy” call on MNACT with a fair value estimate at $1.43 – representing an upside of close to 12.6%.
“We keep our forecasts and [fair value] of $1.43 for now, but will continue to monitor the situation in Hong Kong and the economic situation in China,” OCBC says.
As at 4.49pm on Wednesday, units in Mapletree North Asia Commercial Trust are trading flat at $1.27, implying an FY20F distribution yield of 6.2% and price-to-book (P/B) ratio of 0.88 times.
