Mapletree Grtr China Commercial Trust
PRICE as of 31 Jul 2013 SGD 0.94
PRICE TARGET SGD 0.94
Strong set of results as retail sales and positive office reversions materialise
Mapletree Greater China Commercial Trust‟s (MAGIC) maiden set of results was in line with our estimate, but beat prospectus forecasts by 8%.
We adjust our DPU estimates to account for a weaker SGD against the HKD and RMB.
Discretionary Hong Kong retail sales grew 31% y/y in 5M13 and we continue to see MAGIC as a good proxy to the sector, with retail sales at Festival Walk growing 8% y/y.
We upgrade the stock to In-Line (from Underperform) on valuations. Our price target remains unchanged at SGD 0.94/unit.
First set of results beats prospectus forecasts by 8%: DPU of S¢ 1.73 for the period of 7 March to 30 June 2013 was in line with our and consensus estimates. NPI of SGD 59.7mn was 7% above prospectus forecasts and in line with our SGD 60.0mn estimate. Festival Walk achieved rental reversions of 21-25% for leases renewed during the quarter, while Gateway Plaza achieved rental reversions of 86%.
Raise our FY13/14-16/17 DPU estimates by 4% on average: YTD, the SGD has depreciated 2% and 4% against the HKD and RMB, respectively. We adjust our DPU estimates to account for our latest exchange rate assumptions. MAGIC‟s RMB earnings are unhedged as management is positive on the currency. Despite our expectations of higher interest rates from 2015, MAGIC offers a 5.5% FY13/14-15/16E DPU CAGR.
Good proxy to Hong Kong retail: Hong Kong discretionary watches & jewellery sales grew 31% in 5M13, driving overall Hong Kong retail sales growth of 15% and improving from the 14% y/y growth in 5M12. Supermarket and fashion sales grew 7-10% y/y. Festival Walk, which contributes c.72% of MAGIC‟s NPI, saw retail sales grow 8% y/y during the quarter, in line with our 8% p.a. growth estimate for 2013-15. We remain positive on retail SREITs and continue to see MAGIC as one of the best proxies to Hong Kong retail property and sales.
Upgrade to In-Line on valuations, PT unchanged: We now use a higher risk-free rate of 3.25% from 2.75% in our DDM-valuation to account for rising interest rate expectations. We adjust our earnings estimate for a stronger HKD and RMB. As a result, our PT remains unchanged at SGD 0.94. We use a 0.65 beta, 6.5% market risk premium and 2.25% terminal growth rate. We upgrade MAGIC to In-Line , as we believe the impact of rising interest rates has now been priced in.
Publish date: 31/07/13