Looking at Mapletree North Asia Commercial Trust

I had looked at Mapletree North Asia Commercial Trust (MNACT) when I started investing in late 2015. However a few reasons make me reluctant to invest in it then.

High Gearing 
At almost 40% which may result in rights issues.Over the years I have learnt that rights may not be bad and give a good chance to buy more at a cheap price like the recent Frasers Logistic & Industrial Trust Rights issue.Most Mapletree Reits has high gearing. So it is unavoidable. Over the years since 2015, gearing still as high near 40%. Most of time, they issue placements rather than rights.

Young Reit
listed less than 6 years ( 3yrs in late 2015)

Only 2 Properties in 2015
It had since grow to 9 properties 

• Festival Walk (Retail + Office, Hong Kong)
• Gateway Plaza (Grade A Office, China )
• Sandhill Plaza (Business Park, China)
• 6 Japanese Office Properties (Chiba, Tokyo, Yokohama) 

MNACT to me is like a mirror of Mapletree Commercial Trust (MCT) but in oversea properties with Festival Walk as its core just like Vivocity with MCT.


Festival Walk

Festival Walk is located next to City University of Hong Kong, with ample nearby estates as well as international schools (Need to Zoom in Google maps to have more displayed). I believe these schools will attract properties demand and hence more people staying nearby Festival Walk and more footfall. The Kowloon Tong MTR is located nearby with a walkway link to Festival Walk. Festival Walk contribute 63% of MNACT Net Property Income.

DPU Growth

The manager did a good job growing the DPU which  has been increasing with a CAGR of 4.65% for the past 5 years. 

Occupancy and Rental Performance

The occupancy rate at Festival Walk is amazing, keeping at 100% whereas the rest is pretty good too. Positive rental reversion for the last 4 quarters is also show a very good results. Expects room for further yield improvements for the Japan properties as some of the leases are currently under-rented (Source). Lease expiry for the next 2 years mainly come from Festival Walk but I think it won't haven any issue getting 100% occupancy rate.

Gearing
Gearing is at 39%, however analyst expects this ratio to fall when its existing portfolio of assets are revalued at the end of FY18, particularly given the sharp rise in asset values in Hong Kong. (Source)

Conclusion
I like how MNACT have performed and grew over the years, DPU has been growing nicely. 1H2018/2019 Dividend is 3.807cents, 2H usually give a slightly higher dividends. Estimating a full year dividend to be 7.707cents, at a price of $1.10 gives a yield of 7%. PB ratio of 0.83.

Risk for this Reit will be of the weakening of foreign currency against SGD as well as the economy of that region. And Festival Walk contributed 63% of Net Property Income which is a concentration risk as well.

Vested @ 1.09