SINGAPORE (Sept 11): Despite investors’ concerns over the impact of geopolitical events such as the US-China trade war and protests in Hong Kong, Mapletree’s suite of four real estate investment trusts seem well placed to turn the uncertainties to their advantage instead.
Market watchers believe all four Mapletree REITs – Mapletree Logistics Trust (MLT), Mapletree Industrial Trust (MINT), Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) – remain well positioned in the near term.
According to DBS Group Research, the Mapletree REITs could deliver DPU growth of 2-3% in FY19-21F, on the back of properties in more resilient asset classes as well as acquisition prospects.
“Mapletree REITs are positioned in sectors that can ride market uncertainties well,” says lead analyst Derek Tan in a Wednesday report.
In particular, MLT is seen as a potential “beneficiary” of the trade war.
The logistics trust derives close to 78% of its income from Asia’s developed markets, including Singapore, Hong Kong, Japan and Australia. As such, there has not been any noticeable slowdown in demand amid the trade war threats.
“We remain excited on MLT’s ability to ride the robust outlook for logistics properties in China and Asean,” Tan says.
At the same time, MNACT, has not seen any disruption at this point at the Festival Walk mall in Hong Kong amid protests that have raged on for more than three months in the city. Festival Walk contributes close to 60% of MNACT’s revenues.
With the conflict escalating quickly, some impact on shopper traffic can be expected in the near term. But analysts say Festival Walk’s regular marketing events and position as a “family-themed mall” will dampen the impact on tourism volatility.
“Unlike its peers with malls that cater largely to tourists, [MNACT’s] positioning is more towards mid-level brands coupled with a more local-focused shopper profile, which underpins its more resilient outlook,” Tan says, adding that worries over its performance due to the Hong Kong protests are “misplaced”.
Meanwhile, MCT has a powerful trump card in VivoCity, which contributes almost half of its portfolio revenues. Already a choice location for both retailers and shoppers, the asset enhancement initiative (AEI) which saw a new library and a change in tenant from Giant to NTUC Fairprice is expected to draw even higher traffic.
MCT saw a “meteoric” 11% rise in share price in the past month, ahead of its recently announced inclusion into the Straits Times Index (STI). And Tan believes there is still upside from the current level.
Potential catalysts include an accretive purchase of Mapletree Business City Phase 2, as well as better-than-projected reversions and tenant sales at VivoCity post operations from a new anchor tenant.
The portfolios of the Mapletree REITs are also a promising factor, especially with recent portfolio reconstitution efforts.
For MINT, the planned redevelopment of Kolam Ayer cluster 2 will allow the manager to tap on the site’s un-utilised plot ratio, which will be a key driver to earnings and net asset value (NAV) uplifts.
The near term earnings downside as the property undergoes redevelopment will be compensated by the completion of the recent development at 7 Tai Seng.
Likewise, MCT’s office and business park portfolios remain stable, with occupancy rates heading towards 100% on the back of higher pre-commitment levels.
In addition, Mapletree Business City Phase 2 looks to be a positive accretion to the REIT with key tenants like Google, and comes with an attractive pipeline of potential assets that could be injected into the REIT.
MNACT’s Gateway Plaza in Beijing and Sandhill Plaza in Shanghai are also expected to deliver stable returns. Furthermore, the recent acquisition of a portfolio of commercial properties in Japan are likely to be value accretive, boosting income stability through lengthening the portfolio weighted average lease expiry (WALE) and diversifying its earning base.
And Tan believes MNACT is likely to grow its portfolio in key markets in the near future.
“MNACT has the first right of refusal (ROFR) over several properties from its sponsor, the Mapletree Group in Asia. The manager is looking at potential acquisition opportunities in cities like Beijing, Shanghai, Guangzhou, and Chongqing, which offer a long term growth runway,” he says.
DBS remains bullish on each of the four Mapletree REITs, and is maintaining its “buy” calls on all four.
The brokerage has target prices of $2.40, $2.50, $1.85 and $1.65 for MCT, MINT, MLT and MNACT, respectively.
As at 4pm, units in MCT, MINT, MLT and MNACT are trading at $2.17, $2.31, $1.57 and $1.34, respectively.
