Mapletree North Asia Commercial Trust DPU Fell 13.3%

Mapletree North Asia Commercial Trust has announced their 3QFY19/20 financial results on 17th January 2020. As expected, gross revenue fell 36.3% to S$67.3m as compared to S$105.6m in 3QFY18/19. Net Property Income also fell 40% to S$50.8m. Distribution fell 13.3% to 1.671 cents. The DPU already included the distribution top up due to Festival Walk closure. Without the top up, the DPU can be worst.

Due to the damages from the riots, Festival Walk has been closed since 13 November 2019. With the mall closure, rental was not collected from the retail tenants. The mall has re-opened and collection of rental resume on 16th January 2020.

3QFY19/20 Financial Results

3QFY19/20
(S$’000)
3QFY18/19
(S$’000)
Change
Gross Revenue 67,277 105,626 (36.3)%
Net Property Income 50,776 84,592 (40.0)%
Distributable Income 53,379 61,006 (12.5)%
Distribution Per Unit (“DPU”) (cents) 1.671 1.927 (13.3)%

Occupancy Rates

As of 31st December 2019, overall portfolio occupancy stood at 96.3%. What surprises me was that occupancy for Festival Walk stood at 100% even though the mall was damaged by the riots.

Debt

Aggregate leverage stood at 37.1%.

Distribution Per Unit

It is extremely hard to forecast the distribution yield due to the distruption of DPU in 3QFY19/20. Based on the closing price of S$1.24 on 21st January 2020 and an estimated FY19/20 annualized DPU of 7.229 cents (1.95+1.937+1.671+1.671), this translate to a dividend yield of 5.83%.

Summary

At the current price of S$1.24, my opinion is that it is too risky to enter given my estimated dividend yield of 5.83%. Nobody knows but things can get worst or better. If you have not noticed, given the weak occupancy at Gateway Plaza, Sandhill Plaza and its recently acquired Japan properties, I do not think its advisable to jump onto the wagon right now just because news of Hong Kong riots have pushed the share price down.

I currently do not own any shares of Mapletree North Asia Commercial Trust. However, my preferred entry price will be S$1.16 and below for an estimated dividend yield of at least 6.20%.

Frasers Logistics and Industrial Trust and Frasers Commercial Trust Announce Proposed Merger

Investors have already felt something fishy last Friday when both Frasers Commercial Trust and Frasers Logistics and Industrial Trust requested for a trading halt. Today, Frasers Logistics and Industrial Trust and Frasers Commercial Trust announced a proposed merger by way of trust scheme.

In conjuction with the merger, Frasers Logistics and Industrial Trust also proposed the acquisition of 50% interest in Farnborough Business Park from a wholly-owned subsidiary of Frasers Property Limited. The remaining 50% is currently held by Frasers Commercial Trust (Read more: My Personal Analysis Of Frasers Commercial Trust) After the merger, Frasers Logistics and Industrial Trust will hold 100% of Farnborough Business Park.

With the merger, the total assets will be worth approximately S$5.7 billion and the enlarged REIT will be one of the top 10 S-REIT by market capitalisation with index representation.

Frasers Commercial Trust unitholders will receive

  • S$0.151 in cash for each unit; and 
  • 1.233 new Frasers Logistics and Industrial Trust units at an issue price of S$1.240 per unit.

I shall not dive into other rationale that the manager gave for the proposed merger. As a dividend investor, I am only keen in the dividend yield after the merger. The merger is expected to be DPU accretive on a pro forma basis for both Frasers Logistics and Industrial Trust unitholders and Frasers Commercial Trust unitholders by 2.2% and 4.2% respectively.

After the news of the merger broke out, share price of Frasers Commercial Trust has also gone up by 2.40%.

SPH REIT Acquires 50.0% Interest in Westfield Marion Shopping Centre, Adelaide, South Australia

When SPH REIT announced its FY19 full year results, I mentioned that the debt gearing currently stood at 27.5% which I felt is low for a retail REIT and there is definitely further room for more acquisitions.

On 7th November 2019, SPH REIT announced the acquisition of 50% in Westfield Marion Shopping Centre, Adelaide, South Australia. The other 50% stake is managed by Scentre Group Limited (“Scentre Group”), the largest Australian Retail REIT.

Westfield Marion Shopping Centre houses 327 tenants and have a high occupancy of 99.3% by Gross Lettable Area (“GLA”). The Weighted Average Lease Expiry (“WALE”) is 6.7 years by GLA and 4.2 years by income.

A picture speaks a thousand words. Post acquisition, you can see that Westfield Marion will make up 15% of SPH REIT’s portfolio valued at S$4.2 billion. The acquisition will be funded via the combination of proceeds from the S$300.0m of perpetual securities issued on 30 August 2019, debt and/or equity fund raising.

Rationale for Acquisition

I shall not touch into the details for the rationale for acquisition as you can find the details from the presentation slides. The important to me is the post acquisition DPU on whether it is accretive or not.

  • Deepens strategic presence in Australia with entry into attractive and stable Adelaide market.
  • Dominant, destination lifestyle mall in South Australia.
  • Complementary acquisition, adding to resilience, diversity and quality of SPH REIT’s portfolio.
  • DPU and NAV per unit accretive transaction.

Pro forma FY2019 DPU

Below is the illustrated Pro forma based on FY2019 DPU. We are expected to get 0.09 cents more post acquisition. Oh well, not much difference in terms of dividends to be collected.