Mapletree North Asia Commercial Trust

[greengiraffe]

Hi Shanrui,

I totally agree with your analysis and would like to add the following:

- The main selling point here is the liquidity tap that is chasing names with good sponsor. Reminds me of CRCT when it was listed before the 2007 bull run. Due to success of CMT and Capland's REIT model, investors threw caution to the wind and chased the billion population China story. The rest is history but certainly a precious lesson.
- The HK Festive Mall is a matured asset with little asset enhancement potential. It was acquired from Swire. In order to entice Swire to sell, the price must be ultimate and that is probably it.
- China is another potential mindfield. I wasn't aware of pending litigation. If indeed, it is the case then there are many books that the local judiciary can fall back on - so many that it can turn into a long term nightmares. In addition, there are plenty of fantastic China commercial and retail properties that are available at steep discount to book values let alone the much touted ghost buildings lurking around China.
- Want an established way to play China - Metro could well be a better bet even though earnings record is volatile or even Yanlord.
- I made kopi money and I am very happy even though I sold at the day's low.

Even using the 5.69 cents dpu in the second year, it is only 5.5% yield. This is not even a pure retail asset, it has an office asset in China that account for 25% of its value and is undergoing some litigation appeal. The assets are on 50 years lease and not on 99 years lease like most retail malls in Singapore. And their gearing ratio is so high especially compared to all other foreign reits listed in Singapore. I remember reading from BT that the sponsor has 5 properties in the pipeline in China. Seemed like the excellent HK retail asset is used to justify dumping weaker properties in the future.

[CityFarmer]

I did not subscribe to it, and knew not much on the IPO, but i assume one of the attraction is the management fee structure. A fee tied to DPU and DPU growth, instead of AUM

None seems touching on this point, probably it is not as important as other factors which already highlighted.

[BeDisciplined]

Reit without a strong sponsors struggles. Reit with a strong sponsor is suspected of being dumped lousy assets. Isn't this capital recycling? Capital appreciation has tapered off, yield is stable, you want stable yield, I sell to you.
Reit at 1X P/B is expensive, Reits at 1.3X P/B is cheap?
PRC property is 70 years or less, got 99 years? Definitely no freehold. New property, yield not stable, how to off load to a reit and guarantee yield?
CRCT initial few years were tough and finally its malls have stabilized and its yield has improved. Now CRCT is so much higher than its its IPO price.
Yanlord share price went through a wild swing. Yes its share price has recovered and the recent PRC property cooling measure would start another gyration, wouldn't it?
Metro record in PRC good?

[Musicwhiz]

When there is enthusiasm and optimism it would be impossible to justify not investing in a company or REIT, as everyone wants a piece of the pie, and fundamentals will take a back seat.

I still remember the heady days of 2006. When Synear Foods was trading at 30x PER, there were analysts there justifying it and saying it was worth that valuation. Target price was about $2.00-$2.50 range. Well, we all know what happened after that.

But for people to learn, they have to repeat the lessons over and over again.

And even then, there is always a new batch of people who have to re-learn the same old lessons the very first time.

[mrEngineer]

I still remember the heady days of 2006. When Synear Foods was trading at 30x PER, there were analysts there justifying it and saying it was worth that valuation. Target price was about $2.00-$2.50 range. Well, we all know what happened after that.

Silverlake is on the way to such valuations. Currently PE at 19.8

[BeDisciplined]

Sorry, Synear is not a good example, it is not Reit. Synear makes dumpling....dumplings you know. There are many other counters that make ice cream, nylon, fruit juice, etc one can name it all. We all know what had happened to them.

Even Singapore Reit assets aren't freehold.

If I recall correctly, Far East Hospitality Trust Hotel is left with not that many years ...but it will definitely outlast many of us.
I mean, if one buys a condo to rent out, why buy freehold which costs more? Buy a cheaper 99 leasehold in the same area, that would give you a better yield? Do you want a Reit with many freehold properties? The acquisition cost would be expensive and yield % would prove challenging? Moreover, which Singapore retail Reit has many freehold properties? As long as it is not 5 years more to expiry, should one be really bother? I am not going to hold it for the next 40 years!!!

Appreciate any comments on sponsorship? Isn't that how Riets have grown in portfolio in the last decade and hence their share prices? Is it ok as long as it is yield accretive? I mean seller has a reason to sell (capital recycle), buyer has a reason to buy (stable yield?)...so what its the suspicion of dumping lousy property?

Isn't it like growth stock vs dividend stock?

For my learning....

---

If there is one thing that really matter...it would be interest rate (hence bond and yield) and credit availability (high gearing at times of another financial crisis) and of course the oveall economy.

A quick check on Singapore listed reits will reveal gearing of mid to high 30%....

[hongonn]

Sorry, Synear is not a good example, it is not Reit. Synear makes dumpling....dumplings you know. 

Even Singapore Reit assets aren't freehold.

A quick check on Singapore listed reits will reveal gearing of mid to high 30%....

If you compare this REIT with other Mapletree REITs, i will say the current price $1.03 is quite reasonable in term of P/B, yield, gearing etc. But then if you judge it from purely valuation point of views, it is priced a bit on the high side.

It is like during the dot com era, i claimed buying yahoo at only PE 80x, is good price, because other stocks like Cisco is trading at PE 100x. But then dot com is not REIT so cannot compare :p

But then compared to how people paying millions for small box in the air like condo without a blink of the eye, then this $1.03 is nothing at all.

Alas, at last i also stag on the REIT because my wife is given the employee allocation, despite just a small amount. I am betting on the willingness of singaporeans paying for properties.

[Musicwhiz]

The Straits Times
www.straitstimes.com
Published on Mar 08, 2013
Mapletree Reit surges 12% on popular IPO

By Melissa Tan

THE largest real estate investment trust (Reit) to be launched here surged as much as 12 per cent on trading debut after a hugely popular IPO.

Mapletree Greater China Commercial Trust (MGCCT), which priced its initial public offering (IPO) at 93 cents, opened at $1.02 on the Singapore Exchange yesterday afternoon.

The heavily traded counter hit an intra-day high of $1.04 shortly after 3pm. It then eased to close at $1.03, nearly 11 per cent higher than the IPO price. About 238.5 million units changed hands, making it the third most actively traded counter yesterday even though trading only started at 2pm.

The Reit owns commercial properties in Hong Kong and mainland China.

MGCCT's IPO closed on Tuesday and the 726.3 million units available for subscription were 29.5 times subscribed in total. The retail tranche of around 215.1 million units, nearly 30 per cent of the available units, was 8.9 times subscribed.

Institutional investors heavily subscribed to the placement tranche of around 511.3 million units, which was 38.1 times subscribed. Separately, 11 cornerstone investors also took up 953.5 million units altogether and subsidiaries of Mapletree Investments subscribed to 931.6 million units.

MGCCT is the fourth Reit to be listed by Mapletree Investments, a unit of Temasek Holdings. Its gain of 11 per cent yesterday outshines the first-day performance of Mapletree's third Reit, Mapletree Commercial Trust. MCT priced its IPO at 88 cents, opened at 89 cents in April 2011 and closed at 88 cents on its first day, with some 140 million units traded.

But MGCCT's performance was not as impressive as the first-day showing of Mapletree Industrial Trust, which opened at $1.15 against an IPO price of 93 cents in October 2010. Mapletree Industrial Trust surged as much as 29 per cent above its IPO price to $1.20 on its first day, then closed at $1.16.

MCT closed at $1.33 yesterday, about 51 per cent higher than its IPO price. As for Mapletreee Industrial Trust, it was 50 per cent above its IPO price yesterday at $1.395.

melissat@sph.com.sg

[specuvestor]

Sorry, Synear is not a good example, it is not Reit. Synear makes dumpling....dumplings you know. There are many other counters that make ice cream, nylon, fruit juice, etc one can name it all. We all know what had happened to them.

Even Singapore Reit assets aren't freehold.

If I recall correctly, Far East Hospitality Trust Hotel is left with not that many years ...but it will definitely outlast many of us.
I mean, if one buys a condo to rent out, why buy freehold which costs more? Buy a cheaper 99 leasehold in the same area, that would give you a better yield? Do you want a Reit with many freehold properties? The acquisition cost would be expensive and yield % would prove challenging? Moreover, which Singapore retail Reit has many freehold properties? As long as it is not 5 years more to expiry, should one be really bother? I am not going to hold it for the next 40 years!!!

Appreciate any comments on sponsorship? Isn't that how Riets have grown in portfolio in the last decade and hence their share prices? Is it ok as long as it is yield accretive? I mean seller has a reason to sell (capital recycle), buyer has a reason to buy (stable yield?)...so what its the suspicion of dumping lousy property?

Isn't it like growth stock vs dividend stock?

For my learning....

---

If there is one thing that really matter...it would be interest rate (hence bond and yield) and credit availability (high gearing at times of another financial crisis) and of course the oveall economy.

A quick check on Singapore listed reits will reveal gearing of mid to high 30%....

This is an interesting post because there are so many facets to the discussion

1) Synear business is doing very well. Problem is management screwed the shareholders, focusing on their own self interest. Ditto for Metro but to lesser extent. A lesson for value investors to look beyond numbers.

2) Freehold preserve value (not yield) better than LH99. In the first 20 years or so people might not feel the difference. But extend it to 50 years and the impact is immense. Ask your elders who bought HDB in the 70s vs their peers who bought private. Those who got rich by holding properties know this. This is different model from developers.

3) OTOH REITS was created for yield seeker, so BeDisciplined is right in that sense. There is clear market segmentation effect. People buying REITS are not value guys. Hence holding FH in REITS may not make sense because yield is the key determinant.

4) Which brings us to yield accretive acquisitions which is of course dependent on interest rates for the capital structure to work. Hence when interest rate rises substantially it is double whammy on the capital structure and hence the yield accretiveness of the new acquisition, as well as opportunity cost for investors into REITS increases. Hence REITS should THEORETICALLY be very averse to interest rate hikes.

5) that said, yield is being financial engineered through leverage so the best gauge for fundy guys should still be the unleveraged ROA as per the CIMB report. And despite the limits on leverage for Singapore REITS, we should not forget that Temasek had to do few rounds of rights issue for various TLC to survive the 2009 crisis.

6) Speaking of Temasek and hence Mapletree, the market value sponsorship primarily because of track record, reputation and portfolio of unlisted assets to be injected. Certainly the seller thinks it is right time to sell (be it lousy or not but fact that most REITS are packaged with good and bad eggs give you a hint) but it is win-win for investors as well due to the market segmentation or disintermediation effect. Nonetheless that is for that particular point of time only... management enhancement ability, capital structure, availability of good assets and macro interest rate trends will determine who are right in the preferred time frame.

[Drizzt]

i dunno but i checked back my article on the ipo http://www.investmentmoats.com/money-man...ogood-buy/

it seems the unlevered yield is 3.1%. somewhat similar to that of k-green's IRR. FCOT unlevered is around 4%. somewhat similar to renting out local properties