After Mapletree Logistics Trust (you can find my summary of its Q3 and 9M FY2020/21 business updates here) and Mapletree Commercial Trust (you can find my summary of its Q3 and 9M FY2020/21 business updates here), Mapletree North Asia Commercial Trust (SGX:RW0U) is the third Mapletree REIT to release its Q3 and 9M FY2020/21 business updates yesterday evening (28 January 2021.)

The REIT have provided some key financial figures, along with an update on its portfolio occupancy and debt profile, which you’ll find in this post, along with my personal thoughts about its latest updates to share…

Financial Performance (Q3 FY2019/20 vs. Q3 FY2020/21, and 9M FY2019/20 vs. 9M FY2020/21)

Q3 FY2019/20 vs. Q3 FY2020/21:

Q3 FY2019/20Q3 FY2020/21% Variance
Gross Revenue
(S$’mil)
$67.3m$100.7m+49.7%
Property Operating
Expenses (S$’mil)
$16.5m$25.1m+51.8%
Net Property
Income (S$’mil)
$50.8m$75.7m+49.0%

The huge quarter-on-quarter (q-o-q) bump in the REIT’s gross revenue and net property income was due to contributions from its newly acquired properties (in MBP and Omori) in 28 February 2020.

Also, for the same time period last year (i.e. Q3 FY2019/20), there was no collection of rent from the tenants of Festival Walk mall due to its temporary closure from 13 November 2019 to 15 January 2020, as well as from Festival Walk office tower, which was also temporarily closed between 13 and 25 November 2019.

9M FY2019/20 vs. 9M FY2020/21:

9M FY2019/209M FY2020/21% Variance
Gross Revenue
(S$’mil)
$277.7m$290.8m+4.7%
Property Operating
Expenses (S$’mil)
$57.1m$75.4m+32.1%
Net Property
Income (S$’mil)
$220.6m$215.4m-2.3%

On a year-on-year (y-o-y) basis, it was a mixed set of results – with its gross revenue inching up by 4.7% (due to a full 9-month contribution from the newly acquired MBP and Omori), and its net property income dipping by 2.3% (due to rental reliefs granted to tenants at Festival Walk retail mall.)

My Thoughts: On the whole, I am satisfied with the REIT’s latest set of results both on a q-o-q, as well as on a y-o-y basis.

Moving forward, as Festival Walk retail mall contributes more than 40+% towards the REIT’s overall revenue, the REIT’s revenue recovery will largely depend on when Hong Kong can once again successfully bring the ongoing Covid-19 pandemic under control and social distancing measures gradually lifted so that shopper traffic and tenant sales can once again go back to pre-pandemic levels.

Portfolio Occupancy Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Now, let us take a look at the REIT’s portfolio occupancy profile for the current quarter under review (i.e. Q3 FY2020/21 ended 31 December 2020), where I will be comparing against the quarter 3 months ago (i.e. Q2 FY2020/21 ended 30 September 2020) to find out if it has improved or deteriorated:

Q2 FY2020/21Q3 FY2020/21
Festival Walk (Retail):
Occupancy Rate
Rental Reversion

99.0%
-12.0%

98.9%
-17.0%
Festival Walk (Office):
Occupancy Rate
Rental Reversion

100.0%
N.A.*

100.0%
N.A.*
Gateway Plaza:
Occupancy Rate
Rental Reversion

92.2%
-9.0%

92.9%
-11.0%
Sandhill Plaza:
Occupancy Rate
Rental Reversion

96.9%
+8.0%

97.4%
+7.0%
Japan Properties:
Occupancy Rate
Rental Reversion

97.8%
+5.0%

97.9%
+3.0%
The Pinnacle Gangnam:
Occupancy Rate

89.6%

97.5%
* N.A. – no leases up for renewal in FY2020/21

My Thoughts: While it is encouraging to see the occupancy rate of most of the REIT’s properties recording improvements 3 months on, but in terms of lease renewals, most of them were renewed at lower rates (i.e. negative rental reversion), and this will in the quarters ahead.

In the final quarter of FY2020/21, there remains 2.7% of leases in Festival Walk retail, 0.7% of leases of leases in Gateway Plaza, 0.5% of leases in Sandhill Plaza, 1.3% of leases in its Japan properties, and 0.2% of leases in The Pinnacle Gangnam pending renewal.

Debt Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Finally, let us take a look at the REIT’s debt profile for the current quarter under review, compared against the previous quarter 3 months ago to find out whether or not it has improved or deteriorated:

Q2 FY2020/21Q3 FY2020/21
Aggregate Leverage
(%)
40.1%41.3%
Interest Coverage
Ratio (times)
3.0x3.4x
Average Term to
Debt Maturity (years)
3.1 years3.2 years
Average Cost of
Debt (%)
2.1%2.0%

My Thoughts: While the REIT’s average cost of debt have dipped slightly (to 2.0%), but its aggregate leverage have increased by another 1.2 percentage points to 41.3%. Its aggregate leverage is one of the highest among the Singapore-listed REITs, and also one that is relatively close to the regulatory limit of 50.0%, and this will certainly limit the REIT’s capacity to make further acquisitions.

If you have been reading my quarterly reviews of the REIT’s results, you’ll know that its aggregate leverage is one I’m not too comfortable with, and in the quarters ahead, I will continue to closely monitor this particular statistic.

In Conclusion

Contributions from the REIT’s newly acquired MBP and Omori have led to its gross revenue recording improvements both on a q-o-q, as well as on a y-o-y basis. However, with rental reversions for lease renewals in most of its properties sinking deeper into negative percentages, I am of the opinion that its top- and bottom-line results in the quarters ahead will continue to remain weak.

Also, just like in the previous quarters, I am concerned about the REIT’s high aggregate leverage, where it is inching closer towards the 50.0% regulatory limit. This is something I will keep a close watch on in the quarters ahead.

Finally, as the REIT have switched to paying out its unitholders on a semi-annual basis (i.e. once when they report its second quarter results and once when they report its fourth quarter results), there are no distributions declared for the current quarter under review.

With that, I have come to the end of my review on Mapletree North Asia Commercial Trust’s latest business updates. Please note that all the opinions you have read about in this post are solely my own which I’m sharing for educational purposes only. They do not represent any buy or sell calls for the REIT’s units. You’re strongly advised to do your own due diligence before you make any investment decisions.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Mapletree North Asia Commercial Trust.

 

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