Thursday, 15 November 2018

Recent Transactions & Dividends Update

Dividends Update

Dividends received to date: $5,602.80

Coming dividends: $466.28

From: MNACT, Suntec REIT and Netlink Trust

Total for the year: $6,069.08.

Target hit.

Recent Transactions
Purchased my maiden lots of Mapletree NAC Trust @ $1.11 during the recent bearish trends in the market.

Ever since they made the foray into Japan, I began to take a deeper look into MNACT because I like the geographical diversification taken by the management.

Have been monitoring MNACT for awhile since and when it hit my TP I pressed the trigger.

This is my second purchase of the Mapletree family. The first being Mapletree Logistics Trust.

Why MNACT?

Financials:

Gross revenue, NPI, distributable income and DPU all increased for the first half of this FY.

Gearing is a tad too high for my liking at 39% though it's still below the 45% regulatory limit.

Other Metrics:

Like the fact that 78% of the debt is tied to fixed interest cost. Assuring in the rising interest rates environment.

Also like the reduced forex risk with 80% of FY18/19 distributable income hedged into SGD. Prudent management.

Valuation:

My purchased price is well below the NAV of $1.325.

One of MNACT directors recently bought 200,000 of its shares at $1.12. Since I'm buying at a cheaper price I would like to think this is a price with enough safety margin.

Outlook:

With the exception of Gateway Plaza (98.7%), all other properties in the portfolio enjoy 100% occupancy. Average portfolio WALE of 3 years ensures continuity for the near future.

And with Festival Walk, Gateway Plaza and Sandhill Plaza all contributed higher average rental rates for the first half of the year, it seems that there is no lack of suitors for MNACT's mix of retail and office spaces.

I especially like the fact that GP and SP are located in the tier 1 cities of Beijing and Shanghai.

Finally, contribution from the newly acquired Japanese properties should provide the impetus for the trend of increasing incomes and DPU to continue.

A well-managed REIT with prudent management and >6% yield. Great.



Added Netlink Trust @ $0.77 to my existing IPO holdings. Waited for its XD before buying as I reckoned it should fall further below NAV levels.

My holding price averaged to $0.79 with this tranche. Close to its NAV of $0.792 as of 30 Sept 2018.

Reasons for buying Netlink Trust have been covered in previous post and those reasons have not changed.

I like this counter for its stable and recurring income.

Financials:

Revenue, EBITDA and profit after tax are higher than projection for H1 FY19.

Can't find the gearing in the financial statements so I did a quick calculation using their loans and net assets. The gearing stands at 20.5%.

Annualised DPU of $0.0488 is higher than the $0.0464 projection and yields 6.18% against my cost.

Valuation:

Purchased price is a slight discount to book.

Outlook:

Netlink Trust maintains a strong economic moat as the dominant player in the field of fibre cable laying and associated installation.

In the short to mid term, Starhub's cessation of its cable network and transition of its broadband customers to fibre network by July 2019 provides likely upside.

In the mid to long term, the increasing residential units will continue to spearhead Netlink Trust as the residential connection segment contributes ~60% of its topline.

The low gearing puts the company in good stead if they wish to expand their business beyond the core offerings, though that will require shareholders approval.

If there is one worry it will be a reduction in the regulated returns during the next review period after Dec 2022.

Lower installation revenues highlighted in the financial report ought to be noted for next half (2H FY19) monitoring as well.

Meanwhile let's collect the >6% yield per annum first.

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