Sunday, 5 August 2018

Hui Xian Reit

Layers August 05, 2018 10 comments Edit

Hui Xian Reit (HXR) 30% owned by ARA Asset Management, is make up of malls, offices, service apartments and hotels. The segments' profits are shown on the pie chart below.

Note:There is an estimate adjustment to mall and office in 2015 & 2016 from Chongqing Metropolitan Oriental Plaza

The Mall's profits has been increasing steadily, the recent drop could be due to the AEI at the malls of Chongqing Metropolitan Oriental Plaza as occupancy drop to 75.8% and also headwinds from eCommerce. The Malls at Beijing Oriental Plaza has direct access from Beijing's subway, another extension to another subway line is on the works, which give the mall footfall with easy accessibility.

Office faces headwind from new office supplies and slow down in china's growth.Office segment is still growing but Chongqing Metropolitan Plaza's office NPI drops.

Service apartments has been stagnant, recent growth is due to converting 107 hotels rooms at Grand Hyatt Beijing to service apartments.

Hotel properties have the worst performance for HXR. Occupancy has not grew above 70% since IPO and was below 40% in 2014. Recently acquired two more hotels (Harbour Plaza Chongqing 66%, Sheraton Chengdu Lido Hotel 73.6%). Not sure what the management is thinking, however hotels only contribute 7% of profits.

The implementation of Value Added Tax in May 2016 greatly affected HXR's growth. NPI remain stagnant for the past 3 years.With the recent devaluation of RMB, base on last year's DPU of RMB0.268, which equals to 8.1% yield base of a price of RMB$3.31.

NAV is dropping, probably due to the increasing gearing affecting the total assets. Gearing at 23%, interest coverage 8.4x, NAV of RMB4.795. At a price of RMB$3.31, PB ratio is at 0.69 with a yield of 8.1%. With low PB and high yield, anyone wants a piece of this Reit?