Inside The Bedokian’s Portfolio: Mapletree North Asia Commercial Trust

Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.

First up, Mapletree North Asia Commercial Trust (MNACT).

Overview

MNACT was previously known as Mapletree Greater China Commercial Trust (MGCCT), which was listed on the Singapore Exchange in March 2013. Initially consisted of two properties, Festival Walk in Hong Kong and Gateway Plaza in Beijing, it acquired another commercial property, Sandhill Plaza, at Shanghai in 2015. Then in 2018, six Japanese properties were added, and along with it a name change to the present one. 

As of now MNACT has a total of nine properties. 

Why MNACT?

I added (then) MGCCT in August 2014 for retail and office exposure in China and Hong Kong. During then the book value was about 0.9 times, gearing at around 38% and a dividend yield close to 7%, which are within range for my major selection guidelines.

Festival Walk, the crown jewel and one of the largest malls in Hong Kong, sits next to the Kowloon Tong MTR station and located in a dense residential district. Adding in the fact that there are two universities within its vicinity, Festival Walk is almost guaranteed to have a heavy footfall. Putting into our local context, it is like a large suburban mall such as Northpoint City. 

Gateway Plaza is located at the prime Chaoyang business district in Beijing, near hotels, some residential areas and several diplomatic embassies, a conducive area for multinational companies. BMW Brilliance and BASF currently have offices situated there.

Present And Future

Based on the latest financial information (1 Apr 2018 – 31 Mar 2019) and closing price as at 28 Jun 2019, MNACT’s book value is at 1.01 times, with a gearing of 36.6% and dividend yield of about 5.3%, which is still moderately healthy. 86% of its debt is on fixed rate, so there is an assurance of stable interest costs. Though currency risk is a given since it holds overseas properties and collects rental in RMB and Yen, 75% of the distributable income for 1H FY19/20 is hedged to SGD, so the risk is mostly mitigated.

The investment mandate had expanded from the Greater China area to encompass the whole northeast Asia region, a good strategic move in my opinion since there will be more accretive property choices for MNACT to go for. This also brings about diversification of office spaces in different countries and it may prove useful in this trade war climate.

The prime concern for me on MNACT will be the crown jewel itself; Festival Walk make up 66% of its NAV and contributes 62% of net property income. Recently Hong Kong is rocked by demonstrations and this may bring a long-term socio-economic impact.

Despite the rise in REIT prices lately, MNACT can be considered for a new addition to the portfolio or for averaging up.

Disclosure

Bought (then) MGCCT at: 

SGD 0.91, August 2014

Disclaimer

Reference

MNACT site: https://www.mapletreenorthasiacommercialtrust.com