Chart of the Week: Mapletree North Asia Commercial Trust’s Reliance on Hong Kong
Mapletree North Asia Commercial Trust (SGX: RW0U), or MNACT, has proven to be a winner in terms of creating shareholder value over the long term. However, its unit price has suffered a correction recently and is a timely reminder for investors of the dangers of overexposure to one geography or property within a REIT’s portfolio. This concentration risk has hit MNACT as anti-government protests in Hong Kong negatively impacted its biggest revenue and profit generator.
Although MNACT has six properties in Japan, two in China and one in Hong Kong, its sole Hong Kong property (Festival Walk) contributed a whopping 62% of net property income (NPI) in its latest quarter. Although Festival Walk isn’t located in any of the hotspots of violence, the broader downturn in consumer sentiment and a drop in mainland Chinese tourists have nonetheless hit its unit price hard.
As you can see below, even after the initial protests started on 9 June, MNACT’s unit price managed to climb to an all-time high — closing at S$1.46 on 9 July. However, as the situation became more serious, investors have seen its unit price drop sharply and it reached a low of $1.26 as recently as Wednesday. Bargain hunters and contrarians may see it as a buying opportunity amid the uncertainty, given at that price it was yielding an attractive 6.2%.
Source: CapIQ as of 15 August 2019
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips owns shares in Mapletree North Asia Commercial Trust.