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Sunday, 17 February 2013

Mapletree Greater China Commercial Trust ("MGCCT")

MGCCT is established as a REIT with the investment objective of investing in income-producing real estatae in Greater China. The real estate will be used predominantly for retail and office purposes. The draft prospectus is here.

MGCCT is offering 776.636m units for the public offer, subject to over-allotment option. The indicative price range will be between 88c to 93c. The placement tranche is 511.279m units and the balance 265.357m units for the public. The float is huge and will suck up quite a bit of liquidity in the market. There should be enough to 'satisfy' demand, so don't expect too much fireworks on the IPO debut. Up to 79.851m may be "overalloted" if the demand is overwhelming and for price stablization purpose. The market cap at IPO price will be $4.41 billion.

The tentative dates are as follows:
28 Feb 9am - Launch of Public Offer
5 March 12pm - Public Offer closes.
6 March - Balloting
7 March 2pm - Commence trading.

The initial portfolio will consist of Festival Walk in Hong Kong and Gateway Plaza in Beijing.


Accordingly to the prospectus, Festival Walk is a premier retail mall in Hong Kong, is a retail and lifestyle destination of choice, has a attractive and large trade area and growing China tourist patronage. You may want to confirm that with your friends in Hong Kong. Readers who have been to this mall may want to drop a note to confirm if you agree with the prospectus.

Similarly, the prospectus mentioned that Gateway Plaza is strategically located premier Grade A office building and there is a scarcity of comparable properties. Gateway currently enjoys 98% occupancy and counts a number of MNCs as its tenants.

The portfolio has a diversified and high quality tenant base and the breakdown is below.


Cornerstone Investors


Nothing unusual about the cornerstone investors but probably they can help determine the final price at which the units are being offered. I hope it will lean towards 88c to leave some meat on the table and for "goodwill" since this is post Chinese New Year's first Snake IPO and we need to get off to a good start! ^_^  

Yield


At 93c per unit, the Manager projects a yield of between 5.6% for FY2013/14 and 6.1% for FY2014/15. At 88c per unit, the yield will improve to 6.0% and 6.5% respectively.

The first distribution will be for income received from listing date till 30 Sep 2013 and will be paid before 31 Dec 2013. The distribution will be paid semi-annually.

Unaudited Proforma Balance Sheet and financial forecast

Based on the pro-forma balance sheet and based on the final offer price of 93 c per unit, the price to book ratio is around be around 1.02x. The projected earnings and distribution is below for your reference.


Based on the projected figures above, the EPS is approximately 4c FY2013/14 and 4.2c for FY2014/15. The PE based on that will be around 23x based on the IPO price of 93c for FY2013/14. The implied yield will be 5.6% and 6.2% respectively. From a PE perspective, the IPO is expensive but from a price to book perspective, it is transacted at "fair value".  

What I like about the REIT
  • Prime properties in Hong Kong and Beijing.
  • Good track record of Mapletree. It's two other REITs, Mapletree Commerical and Mapletree Industrial have performed very well since their IPO debut. The links is to my IPO write ups last time.
Possible Concerns
  • Depreciation of HKD against SGD since it is pegged to the USD.
  • Buying over the assets at a high.
Fair Value

I think the closest competitor listed here should be Capital Retail China. (Perennial Retail China Trust is not so appropriate because it is more developmental in nature). At a listed price of $1.85, CapitaRetailChina is trading at a implied yield of 5.16%, PE of 9.44x and a price to book of around 1.42x. Using this metrics, lets try to project the possible trading range of Mapletree Greater China Commercial Trust.

PE ratio may not be a right metric as this is primarily a yield play. In this regard, i will probably use the implied yield of 5.16% as the primary benchmark and price to book of 1.42x as the secondary benchmark.

If it trades towards the implied yield of 5% to 6% --> the fair value of MGCCT will be between $0.88 to $1.05
If it trades towards a price to book of between 1.2x to 1.4x --> the fair value of MGCCT will be between $1.09 to $1.28.

Given the positive sentiments, the "decent" yield of 5.6%, i will give it a 2 Chillis Rating. This is a longer term yield play, not mean for short term punt as the float is big and i believe all interested investors will be allocated some shares. Perhaps some allocation to the SRS portfolio may be suitable. 

My wish list will be for the IPO to be priced at 88c instead of 93c.

11 comments:

Mr.DutyFree said...

Mr DutyFree

Hi I am back. Just to let you know I cashed out already. I cashed out at 52 week high and day high yesterday at 0.48. Now 0.455 --> less than 1 month to big announcement about land deal though.

decided to sell cause I am already happy with gains, want to lock in profit. 0.28 to 0.48 more than enough for me.

anw, I recommended to buy around 0.40-0.405 in fact there was a softening where one could have bought at 0.38-0.385: and sell at 0.48 to earn 0.10. I might be buying back at 0.44 if it drops back but seeing that dow jones up so much, monday might break my 0.48 sell price.

anw Mr IPO, I wanna ask you more about this MGCCT IPO since you are the IPO guru. I personally don't like the stock for two reasons: (1) Large IPO (think Hutchinson Port, Ascendas HT): All opening day tank or never go up --> so short term first day stag little chance, (2) Crazy amount of Public Share --> If i go press ATM 100 lots they give me 50 lots i die? (Think HuAn Cable). But Im itching for some IPO kopi action, can share more of what you think?

Mr. IPO said...

Congrats!

You are right la. Probably only a few cents to stag. More for long term play, not really for short term stag. But the good thing is you will be able to gauge the demand once the institutional offering is over.

Anonymous said...

How do I check the demand for the institutional offering?

Mr. IPO said...

Probably u will know next week from the papers.

Anonymous said...

Mr IPO, u buying and how many lots?

Im thinking of pressing 50 lots.

Mr. IPO said...

I will let you know later :)

Mr Dutyfree said...

Breaking News: IPO priced at top end of the range 0.93, huge institutional demand. Any thoughts?

Link is here:
http://online.wsj.com/article/SB10001424127887323384604578327321822464846.html

Anonymous said...

IPO Guru, how? share to buy or not?

Mr. IPO said...

Thought my posting quite clear already :P. long term buy.

James said...

You got any from placement tranche?

Mr. IPO said...

10 lots nia.

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