CRCT-MNACT REIT Maybe?

I was thinking last night that with the flurry of M&A among REITs recently, would we see a merger between CapitaLand Retail China Trust (CRCT) and Mapletree North Asia Commercial Trust (MNACT)?

Afterall CapitaLand bought over Ascendas-Singbridge not too long ago.

The portfolio of CRCT and MNACT are similar in nature to an extent. They are synergistic geographically and in the type of properties - retail. 

Some basic metrics of both counters

CRCT

Market Cap (based on $1.53 share price) : $1.84 B

No. of Properties: 13 (China) 

Property Value: $3.8 B

MNACT 

Market Cap (based on $1.16 share price): $3.7 B

No. of Properties: 9 (China, HK, Japan) 

Property Value: $7.6 B

I couldn't find any information on market capitalisation from CRCT's report but a quick calculation got me $1.84 B. 

So if a merger does occur, we are looking at a REIT with about $5.54 B market capitalisation and 22 properties in North East Asia worth $11.4 B thereabout.

I also did a quick comparison against some of the REITs among my portfolio for curiosity sake. 

MLT Market Cap: $6.15 B

CCT Market Cap: $7.9 B

Suntec Market Cap: $5.2 B

Anyway the above is just a wild thought on a boring night. Just read and forget.

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On a side note, I drove my bro to a certain bubble tea shop just now.

Despite being a Tuesday afternoon, I saw streams of youngsters going into the shop.

That got me curious. After that I found out this shop is actually a franchise by a local mini celebrity. And a really famous singer once said this is his favourite tea shop in Taiwan*. 

(Not going to name names as I don't want to advertise for them and more importantly, I seriously find the tea so so only. Haha.. But some of you might recognise from this bottle.)

The busybody me did a quick back-of-the-envelope calculations. 

Their tea costs between $4 - $7. And they already sold nearly 500 cups by 2 pm. 

Basing on $5 a cup and a sales of 1,000 cups per day, their annual revenue is easily $1.8 M. 

With a 50% margin (easily for a F&B product like bubble tea), they are earning close to a million every year. 

Cool.

Lessons learnt: 

1) Power of networking

Especially if you know famous people. 

2) Power of celebrity endorsement

Just a simple one sentence remark by that famous singer can make this shop people mountain people sea.

Really power.

* Edited some information. 

How Do I See the Possible Merger of ESR-Reit and Viva Industrial Trust

Although the combined entity will be the 4th largest industrial REIT by asset value and 5th largest by market cap in Singapore, I hope the deal doesn't materialise.

The figures above sure look impressive.

However in my opinion the future outlook, portfolio quality and the performance of the REIT management are equally, if not more important.

Take a look at the following table.

 

Gross revenue, NPI and DPU have been decreasing Y-o-Y for ESR whereas that of Viva Industrial Trust (VIT) have grown Y-o-Y. This is a testament of the REIT's manager strength.

Apart from the WALE and occupancy rate which are higher, ESR is going to be a drag on VIT.

Numbers don't lie. Though in some cases they do tell a different story. For example, the REIT's rental reversion depends on what type of leases they take into account. But this is topic for another day.

Since we are at rental reversion, let's look at the negative rental reversion of ESR and think about how this will impact the REIT price performance and dividend payout.

In the most direct manner, the DPU will be negatively affected going forward. The overall value of the REIT portfolio will also be negatively impacted since the collective value of the assets will go down.

Comparing to ESR, I would say VIT performed much more admirably. Whether it's the distribution yield, revenue, NPI or rental reversion.

I also prefer the portfolio of VIT more than that of ESR. Except for 7000 AMK, the rest of the latter's portfolio doesn't conjure any excitement in me when I glanced through.

On the contrary I prefer the outlook for the two crown jewels of VIT: Viva Business Park and UE BizHub East.

Having said that, I do see something interesting for ESR with the Tuas mega port coming up in 2040.

ESR has a number of properties in Tuas among which one of them was acquired last year with 36 years remaining land lease.

If they can position themselves to make use of the mega port development, it should change the dynamics for them.

In summary unless there's something very positive that I missed out in ESR, I hope the deal doesn't goes through.