Wednesday, April 17, 2013

Mapletree Greater China Commercial Trust: More than meets the eye

•        A best-in-class portfolio of commercial assets 
•        Resilient cashflow with strong organic growth drivers 
•        Recommend BUY with TP of $1.18 

A portfolio with scarcity value. Mapletree Greater China Commercial Trust (MGCCT) offers investors an attractive opportunity to own iconic, best-of-breed commercial assets - Festival Walk and Gateway Plaza - through a capital efficient platform. It offers investors both attractive yield and total return derived from strong and resilient operating cashflow with inbuilt organic growth drivers which will underpin earnings and NAV expansion. 

Strong and resilient cashflows with multi-layer embedded growth. MGCCT is expected to enjoy strong organic earnings growth from the reversion of a sizeable amount of under-rented leases over the next 3 years. We expect these renewals to be reverted positively amid a robust growth environment and favourable supply/demand dynamics. Upside from planned asset enhancement works will provide a further boost to our existing numbers. In addition, whilst initial gross gearing is about 43.0% (net gearing 40.1%), organic income growth will underpin asset value growth and provide upside to NAV in the medium term. This will reduce MGCCT’s gearing over time. Furthermore, the trust can benefit from its Sponsor Mapletree Investments’ wide and deep industry knowledge and network to tap on acquisition growth in the future. This provides another driver to earnings expansion in the medium term. 

BUY with TP of $1.18.  MGCCT currently trades at 5.1% FY13 annualised and FY14 yield and 1.14x P/bk NAV. Our DCF-backed TP of $1.18 translates to a 17% total return for MGCCT.  We like the trust for its resilient prospects with strong organic growth potential. 

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