Mapletree North Asia Commercial Trust

Mapletree NAC Trust 1QFY22/23 Updates

MNACT Portfolio Contribution 1QFY22 23

On 21st July 2022, Mapletree North Asia Commercial Trust (MNACT) released their 1QFY22/23 business updates. The focus of the update was on the higher Net Property Income (NPI) that MNACT has achieved.

In 1QFY22/23, Mapletree North Asia Commercial Trust (MNACT) achieved a Net Property Income (NPI) higher by 4.1% as compared to 1Q FY21/22. This is because of the full-quarter contribution from the acquisition of Hewlett-Packard Japan Headquarters Building (“HPB”) in Japan in June 2021.

Another reason for the increase because of the lower quantum of rental relief granted at Festival Walk (1Q FY22/23: S$0.2 million) as compared to the same period last year (1Q FY21/22: S$4.0 million).

The increase was partially offset by lower average rental rates at Festival Walk mall and Gateway Plaza, as well as the newly levied property tax at Sandhill Plaza.

Mapletree NAC Trust 1QFY22/23 Updates

The manager of MNACT shared that the below Gross Revenue and NPI do not include the contribution from The Pinnacle Gangnam, acquired on 30 October 2020. MNACT will share profit after tax of The Pinnacle Gangnam based on its 50% interest.

1QFY22/23
(S$’000)
1QFY21/22
(S$’000)
Change
Gross Revenue 104,682 103,028 1.6%
Net Property Income 81,499 78,283 4.1%

Occupancy

As at 30th June 2022, portfolio occupancy remained high at 97.2%. They have a total of 13 properties in their portfolio.

Lease Expiry

Weighted Average Lease Expiry (“WALE”) stood at 2.2 years. As you can see from the chart below, the lease expiry under Festival Walk is the highest among other properties in FY22/23 at 7.5%.

Debt

As of 31st March 2022, gearing ratio stood at 41.5%. In my opinion, this is on the high side.

Average Term to Maturity stood at 2.42 years with 12% of the total debt maturity by the end of this FY.

The manager shared that they are in healthy liquidity position, comprising of committed and uncommitted undrawn credit facilities of S$593.2 million, and cash and bank balances of S$178.3 million as at 30 June 2022.

74% of the borrowings are hedged to mitigate against Forex fluctuations.

Summary of Mapletree NAC Trust 1QFY22/23 Updates

In summary,

  • Net Property Income (NPI) higher by 4.1% as compared to 1Q FY21/22.
  • Portfolio occupancy remained high at 97.2%.
  • Lease expiry under Festival Walk is the highest among other properties in FY22/23 at 7.5%.
  • Gearing ratio is on the high side at 41.5%.

You should have read about the merger with Mapletree Commercial Trust. Mapletree North Asia Commercial Trust will delist on 3rd August 2022.

In my opinion, even though MNACT achieved higher Gross Revenue and NPI, there are a few things I did not like about MNACT.

  • Festival Walk contributes the highest revenue. Thus any incidents to Festival Walk can impact the revenue. More can be done to proactively renew leases.
  • Gateway and Sandhill Plaza are underperforming and a drag to the portfolio.
  • MNACT only has a 50% stake in The Pinnacle Gangnam. The manager should look for ways to fully acquire The Pinnacle Gangnam.

As an existing investor of Mapletree Commercial Trust, I still think MNACT is a drag after the merger.

However if you are confident the properties under MNACT will benefit Mapletree Commercial Trust, you can consider buying or increasing your stake in Mapletree Commercial Trust because it is trading at S$1.84 which is a steal as compared to the preferential offering price.

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