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MAY 2 CLOSE: $1.38

OCBC Investment Research, May 2

Mapletree North Asia Commercial Trust (MNACT) reported a robust set of Q4 FY19 results which came in within our expectations.

Gross revenue and net property income (NPI) jumped 16.2 per cent and 15.3 per cent year on year (y-o-y) to $104 million and $84 million respectively, while distribution per unit (DPU) grew 2.7 per cent y-o-y to 1.956 cents.

Operationally, MNACT's occupancy was near-full at 99.6 per cent, while rental reversions for FY19 came in at +28 per cent for Festival Walk's (FW) retail component and +15 per cent for the office component; +2 per cent for Gateway Plaza (GP); +15 per cent for Sandhill Plaza (SP) and +6 per cent for the Japan properties.

We believe there was a more significant moderation in rental reversions at GP in Q4 FY19. Looking ahead, management sounded cautious on the rental and occupancy outlook for the property.

Portfolio valuations-wise, MNACT recorded a fair value gain of $465.2 million in FY19, driven largely by cap rates compression of 50 basis points for both GP and SP and 10 basis points for FW.

Its aggregate leverage ratio stood at 36.6 per cent, leaving sufficient debt headroom of $720 million before reaching the 42 per cent mark.

We believe office and business park properties in the tier 1-2 cities of China will be the mostly likely destination for MNACT's next acquisition, with a focus on growth potential of the asset(s).

MAY 2 CLOSE: $1.61


Q1 FY19 DPU of 2.09 Singapore cents (-3.7 per cent y-o-y) formed 21 per cent of our expectations due to a 2.4 per cent y-o-y decline in revenue per available room (RevPAR) to $157.

This was partially offset by inorganic contribution from Hotel Cerretani Florence and better performance of Pullman Hotel Munich.

Overall income available for distribution fell 14.4 per cent y-o-y but this was offset by an increase in capital distribution from the proceeds from the sale of Mercure and Ibis Brisbane.

RevPAR declined 2.4 per cent y-o-y due to room closures in Orchard Hotel in Q1 FY19 for renovation as well as the absence of biennial Singapore Airshow and a series of events for Singapore's Asean chairmanship in 2018.

Management has accordingly reduced its industry RevPAR growth forecasts for 2019 from 3-5 per cent to 1-3 per cent.

We have baked in a 6.6 per cent Singapore RevPAR growth assumption in our forecast taking into account the reopening of the refurbished Orchard Hotel rooms.

We tweak our FY19-21 DPU estimates to account for the updated occupancy and RevPAR figures.

We continue to expect the trust to have a stronger 2H FY19 due to the completion of Orchard Hotel refurbishment and continued robust performance from its overseas hotels.

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