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wengkitcheong

Despite a significant fall in the REIT’s stock price after the incident, OCBC Research Team analysts remain sanguine on the REIT at large, citing sufficient insurance coverage to mitigate the damages caused.

In particular, they have identified two types of coverages the mall has under its belt – a policy on physical damage with an adequate sum covered, as well as business interruption insurance which covers the loss of rental income.

“MNACT has initiated the process for claims and a site inspection has already been carried out by the insurers,” says the team in a report on Thursday.

jerrie

Damage control. I say sell better. It will take months to repair dmg at Festival Walk and also HK is now rioting with no ending at sight. MNACT will have to fork out money to repair its asset, of which their debt alr amount to 80% (total debt is 3B)

Good news = time to sell usually. The best time to buy is when it's calm and nobody notice. lol

ohscene

Reply to @jerrie : Yes. This part i agree.

I was just refering to you saying that MNACT has to fork out money to repair which is untrue and i hate fake news.

Everyone knows that their revenue will decline no matter how much is being repaired. The HK economy already explained itself.

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How deep is your moat? 


$Mapletree NAC Tr(RW0U.SI)

 



Some of you might know I am vested in MNACT and ESR Reit…MNACT had been a performer and was a leader in my small basket of REIT counters for 2 years. MNACT is being managed by ‘premium’ Reit manager Mapletree so it is not a surprise that the share price is doing well.



It was clocking almost 25% (unrealized gains + dividends) at its peak in Jul 2019.  ESR Reit being the most modest performer in
my REIT portfolio, does not come even close to 20% (unrealized gains +
dividends).

Something happened last week. MNACT share price fell to a low of $1.14 and on 19 Nov 2019, the unrealized gains + dividends were under 10%.  A drop of 15%!!!  Immediately ESR Reit (which was not meant to perform yet…akan datang) overtook MNACT with its range bound of 12 – 15% (unrealized gains + dividends). 


Yes, it is not an overnight drop but a gradual decline with escalating with some of facilities in Festival Walk being damaged by rioters.

Moody’s then make me slightly moody when it downgraded this counter to Baa1
rating (pun intended).

I am still not overly concerned but I was slightly amused that it turned out this way.

Because of this manifestation, some thoughts floated into my mind:

 

     
How deep/wide is your moat?



In a stock market crash, the value of your portfolio or individual counters can
dropped from anything from 20% – 40%, if you bought at a high price for a counter, the drop in value could be even more. 
While some were predicting a stock/REIT crash/correction, we haven’t
seen this manifest yet, but the fall in value and gains for this counter
actually made me reflect on the moat.



Is a 20%, 25% or 30% moat sufficient for my counter as this is something I am planning to hold long term.  I think I will hold and sit this out. Some of the factors that guided me were:

 

-       
Risk Appetite -  Fairly ok with risk, I can afford to go low as -10% fall in value to wait for turnaround.

-       
Can hold this long term Y/N :  Yes, this was intended for mid to long term investment.  Not for trading.

-       
Price /NAV :  Close to 0.8. 
My avg price is 1.13 so I think it is still a decent price.

 

 

     
Is Diversification good?

 

If I can draw on your memory, Mapletree
North Asia Commercial Trust was formerly known as Mapletree Greater China Commercial Trust.  MGCCT has mainly had properties
in China, Hong Kong only.  When they renamed to MNACT and take on some properties in Japan, I became vested.

 

You can read my on the ground report a year (Nov 2018) ago.   Below is the excerpt of
my writings in quotes at https://www.investingnote.com/posts/1128234



“I started to took notice and then shortly thereafter took up a position.  With the trade war with U.S and China at the forefront,
I reckon that a more diversified portfolio would be beneficial so

properties in Japan would be a good
balance.

It would be better if they can get some South Korean commercial properties

but I think it is good to keep within 2- 3
countries as exchange rates maybe a

double edged sword.”

 

I believe some diversification reduces risk.  I said some not over-diversification.

Why?  Simply, If there is some natural, geopolitical
risk, change of policy in the country, you have other properties in other
countries to mitigate the negative impact of the affected one.



Some scenarios:



1.   What happened if there is a big earthquake
that hit Chiba, Japan and affect the buildings? 
The properties there will then get impacted.

2.     
What happened if the Gateway Plaza in Beijing  collapsed due to shoddy infrastructure

3.     
What happened if Festival Walk in Hong Kong were
damaged by rioters?

 

The last scenario came true recently.

It is of some concern as Festival Walk contribute to over 60% of the revenue
earnings.



What I like to see for MNACT is to explore to have properties in Seoul and to
possibly convert Baypoint in Chiba into MNACT. 
Rent prices in Japan had been growing steadily the last decade or more
and with the angle of Olympics next year, it could further fuel growth. Hope after
the Olympics, the growth won’t fizzle off.

 

Assessing management

 

It is easy to make money in a growing
economy or in a relatively stable environment.

But as Hong Kong is in recession and seems turbulent now, it is time to see how CEO Ms. Cindy Chow will be able to turn this around.  Tough times don’t last, tough
people do, let’s anticipate good strategy and execution plans from the management team to see this through.

 



 

Do I need to review the hold long term policy on
REIT?  



Different people, different strokes and I appreciate the sharing from the
fellow IN friends.  @minx99 jie jie had shared
that she had divested her holdings as it is always good to take profits citing uncertainty.  @Sporeshare had made 7 rounds of kopi money
trading in and out of this counter.  @NinjaStars
had indicated he made some initiation recently, maybe he see that in fear is
where (big) money is made.



The differing views does help in my assessment and reflection and at this moment,
I will still hold on and keep on monitoring.



Thank you for reading.

 

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