Friday, 20 July 2018

Three Takeaways from MNACT AGM



MNACT? What stock is that?

In case you are still unaware, Mapletree Greater China Commercial Trust (MGCCT) recently changed their name to Mapletree North Asia Commercial Trust (MNACT), to reflect expansion of investment mandate to whole of North Asia.

As one of my income stocks, I attended its AGM on 18 Jul to find out more about its past year performance and future growth strategies.

Here are my three takeaways from the AGM.

Choice of Private Placement over Rights Issue for Recent Fund Raising
One unit holder asked the management why was there no rights issue during the recent fund raising that allows retail investors to participate in the growth.

Chairman replied that the key reason is speed of raising funds. Rights issue process is much lengthier and requires way more parties' involvement and approval to proceed. Whereas for private placement, it is much faster to go straight to the institutions and rich investors, where more than $300 million was raised over night. Given a dynamic market with much uncertainty, management wanted to close the opportunistic purchase fast. Hence they went with private placement.

While it is more advantageous to retail investors if there is a rights issue (putting aside the quality of purchase), I would not be overly concerned provided its distribution continues to grow. But, having said that, I would need to observe if future acquisitions would have rights issue as this shows management's shareholder friendliness, which plays a big part in long term value.

Hong Kong Retail Sales is Turning Around
According to Board of Directors, Hong Kong retails sales landscape has improved past one year, after a multi-year slump due to decreasing China tourists inflow. This would continue to support Festival Walk's performance going forward.

It's reassuring to hear this from the management as a growing retails sales figure definitely bodes well for MNACT given that Festival Walk is the major key asset.

But judging from Festival Walk's full occupancy past few years as far as I remember (even during the occupy central movement), with healthy rental reversion, I guess it will be largely business-as-usual.

Capital Management 
One unit holder asked about the rather high gearing. I heard Chairman responded that MNACT is comfortable with the current gearing of 42%. Now I may have heard it wrongly, but am not sure how is this 42% derived. Anyway, based on this gearing, there is still a debt headroom of $400 million for future acquisition.

I would hope MNACT to not expand too aggressively via frequent asset acquisition. I think it is now important to integrate the Japan assets nicely into the trust, and ensure they can truly live up to expectations of yield-accretive assets. Not too late to talk about further expansion thereafter.

Other than the above, I didnt pick up any salient points that are not covered in the annual report. Overall, it was a short and smooth AGM, with not many questions asked. I guess most unit holders are happy with its performance, including myself.

Fancy picking up some practical tips on picking profitable stock investments especially in today's volatile market? Sign up for my next talk on 28 Jul here!

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