Analysts from CGS-CIMB Research and Citi Research have downgraded their recommendations on Mapletree North Asia Commercial Trust (MNACT) after the REIT’s unit price surpassed the offer price of $1.1949 from Mapletree Commercial Trust (MCT).
Units in MNACT have been trading from $1.22 to $1.23 since the manager of MCT announced that it would give MNACT unitholders another option to receive the consideration of $1.1949 in full cash.
CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei have lowered their call to “hold” from “add” with an unchanged target price of $1.13.
“We believe near-term share price upside could be capped by the consideration price,” the analysts write in their report dated April 20.
While MNACT’s results for the FY2022 ended March stood in line with the analysts’ expectations at 98.9% of their full-year forecast, Lock and Eing are lowering their distribution per unit (DPU) estimates for the FY2023 to FY2024 by 1.45% to 1.5%.
Noting the weaker performance at Gateway Plaza in Beijing, the analysts say they see the weak outlook likely to continue to drag on upcoming lease renewals with ample incoming supply.
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The REIT currently has 5.1% of its portfolio rental income expiring at Gateway Plaza in FY2023.
To them, a faster-than-expected recovery in the performance of Festival Walk is a catalyst to MNACT’s unit price, whereas a slower-than-expected recovery at Festival Walk and Gateway Plaza is a downside risk.
Citi Research analyst Ken Yeung has also downgraded his call on MNACT to “neutral” even though MNACT posted a strong set of figures for the FY2022.
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The REIT’s full-year DPU of 6.819 cents stood 2.7% higher than his estimate of 6.8 cents.
Yeung has upped his target price estimate on the REIT to $1.195 from $1.14 previously.
“We believe MNACT is on a steady recovery trend on a better outlook post the Hong Kong Covid-19 situation coming under control with social distancing measures gradually to be relaxed post April 21,” Yeung writes in his report dated April 20.
“We expect MNACT’s merger is likely to succeed after the cash-only offer, and hence we now set our target price at the offer price of S$1.195 per share,” he adds.
However, he sees limited upside to the counter as MNACT’s unit price has already reached its offer price from MCT.
The research team at OCBC Investment Research has kept its "sell" call on MNACT, saying that it is time to lock in profits on the REIT's recent share growth.
MNACT's DPU for the 2HFY2022 met the team's expectations.
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"However, we note that the bulk of the rental assistance was given in 4QFY2022 (around $10 million) due to the fifth Covid-19 wave in Hong Kong. Although the number of daily infection cases has declined significantly, we believe the situation remains fluid, and future rental reliefs are possible should the caseloads increase again," it adds.
The team has lowered its fair value estimate to $1.05 from $1.06 previously after increasing its risk-free rate assumption to 2.5%. It has also raised its DPU forecast for the FY2023 by 1.3%.
"Given that MNACT’s last closing price of SGD1.23 (as at April 20) is above the implied Trust Scheme offer price of $1.1949 and close to this offer price plus the declared 2HFY22 DPU of 3.393 Singapore cents, we believe unitholders can consider locking in profits. While we cannot rule out an improved offer from Mapletree Commercial Trust or a higher competing bid, we believe both scenarios are unlikely," the team writes.
As at 10.54am, units in MNACT are trading 1 cent lower or 0.81% down at $1.22.
