Saturday, 27 June 2015

Analysis of MGCCT (Mapletree Greater China Commercial Trust)

MGCCT had a nice bull run since Feb 2014. The rise was slow and steady: any minor retreat in between were well supported by 50d/100d MA, that is, until recently





1.
Fundamentally, MGCCT has two quality properties in HK and Beijing. The Festival Walk in HK is a well established suburban shopping mall, with strong catchment. The Gateway Plaza in Beijing is a well located office building. Both properties are enjoying high occupancy rate and strong rental increment. The DPU growth has been strong, so far

It recently announced a somewhat unexciting plan to buy a property in Shanghai, which is supposed to diversify its income sources, albeit not very much.(See below) Its main holding is still the HK suburban mall. Investors may be concerned about the concentration risk. But it is easy to hedge, as investors can just diversify themselves to invest in other REITs. 

The point is that the current two assets in HK and Beijing are proven to be of good quality in terms of earning power. However, we know little for sure about the Shanghai property, or any future assets its sponsor may deposit into this REIT ( The sponsor Mapletree, like its Singapore peers, does have many developments in China.) So I am not excited by its new purchase. But not worried also as it is only a small percentage. 


MGCCT was listed on Mar 2013, with IPO price of 0.93. If you had subscribed it at IPO price, factoring the distributions, at current price of 1.02, the total return rate would have been 24% ( capital appreciation 9.7%).


2.
But the stellar DPU performance was not only due to its strong top line, but also its very low level of interest cost. MGCCT was listed in the time when interest rate was at historical low levels. Take a look at its debt profile. 

The all-in-cost is 2.5%. As a comparison, CMT is 3.4% and FCT is 2.8%.


From the debt maturity charts, MGCCT needs to refinance over 70% of its debt in 2017 and 2018. By then, the interest rate should be normalized. I am confident that MGCCT, with its quality assets and strong sponsorship, will face no problem to refinance its debt, but the cost will definitely be higher than now. It will affect the DPU performance, although that does not necessarily mean DPU drop. But the DPU growth probably won't be as strong as saw in last two years.


Currently, at price of 1.02. It has P/B= 0.91 current yield = 6.6%. Price level is not quite overstretched, but definitely not cheap. Given that the interest rising in on the horizon, the counter may experience weakness after 16 months of nice run. How far would the price correction go? Or will it enter bear cycle? Well. We can only know afterwards. Let's take a look at technical charts. Both weekly and monthly charts confirms the price weakness.  

 3.
It worth noting that two of its major shareholders reduced their holdings last week.  

Norge Bank reduced its shareholdings from 5.4% to 4.8%
Schroders reduced its shareholding from 6.0% to 5.9%.

Norge bank chose to do so one day after announcement of Shanghai property purchase plan. Schroders followed suite one day after. Is it because the purchase altering the risk profile, or for other reasons? Well, your guess is as good as mine. 

I can't say MGCCT is over-owned by institutional investors. But as a retail investor, we need to be prepared that a sharp price movement is possible should many institutional investors move simultaneously, often imitate one another.

For myself, MGCCT is 4.5% of my entire portfolio. The break even price is 0.84. I will hold for now, and closely observe the future development, together with other REITs holdings.

1 comment:

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    Ass...saya tidak menyanka kalau saya sudah bisa sesukses ini dan ini semua berkat bantuan MBAH RAWA GUMPALA,saya yang dulunya bukan siapa-siapa bahkan saya juga selalu dihina orang dan alhamdulillah kini sekaran saya sudah punya segalanya,itu semua atas bantuan beliau.Saya sangat berterimakasih banyak kepada MBAH RAWA GUMPALA atas bantuan nomor dan dana ghaibnya,alhamdulillah kini saya sudah bisa membuka usaha kembali yang dulunya pakum karna masalah faktor ekonomi dan kini kami sekeluarga sudah sangat serba berkecukupan dan tidak pernah lagi hutang sana sini,,bagi anda yang punya masalah keuangan jangan sungkan-sungkan untuk menhubungi MBAH RAWA GUMPALA karna insya allah beliau akan membantu semua masalah anda dan baru kali ini juga saya mendaptkan para normal yang sangat hebat dan benar-benar terbukti nyata,ini bukan hanya sekedar cerita tapi inilah kisah nyata yang benar-benar nyata dari saya dan bagi anda yg ingin seperti saya silahkan hubungi saja MBAH RAWA GUMPALA di 085==316==106==111

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