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MNACT - An undervalued gem?

I have been holding MNACT since HK thugs set ablaze the Christmas tree erected within Festival Walk in November 2019. 

Then MNACT was trading at around S$1.20 a piece. Now, it is $1 a share. 

Shortly thereafter, Covid reared its ugly head.  As the Chinese saying goes, Covid is akin to dumping a stone onto a person who has fallen into a well.  Another apt saying might be that when your roof leaks, rain falls every night. 

Considering that it bore the brunt of two severe shocks one after the other, and one of which remains very much in progress, it is probably fair to say, its $1 share price isn't exactly an unmitigated disaster.  Indeed, all things considered, I dare say it is actually pretty decent.  

As many would know, MNACT has the unfortunate distinction of being the only unloved child in the Mapletree family.  Why do I say that? Just look at the price-to-NAV ratios: 

MIT  - 1.7

MCT - 1.27

MLT - 1.68

MNACT - 0.75

Basically, the Market believes in paying a (significant) premium for MIT, MCT, and MLT, and perhaps adding insult to injury, only for anaemic yields of between 3-4%.  

Based on trailing yield, MIT appears to boast the best yield at 4.1% whereas MCT is yielding around 3.5% (yikes).  That is not to say that the valuations are unjustified.  After all, Madam Market knows best.  

However, the contrast simply begs to be examined. The ostracized child of the family, MNACT, has a trailing yield of 6% and is relatively undervalued.  Yet, it seems like no one seems to care for it. 

If you look at MNACT's financial highlights, you will note that its FY2019/20 NPI of 277.5M is coincidentally identical to its FY2015/16 NPI.  In FY15/16, MNACT distributed SGD0.069 per share, whereas SGD 0.061 /share was distributed in FY19/20.  More importantly, its recently completed acquisition in Korea (Pinnacle Gangnam) has yet to provide its maiden contribution to the REIT.  

Accordingly, there is good reason to believe that, barring unforeseen disasters, MNACT's distribution should recover significantly in this FY. 

Hence, I have increased my holdings in MNACT by a little bit. Just a bit.

Of course, many argue that shopping malls are pretty much in the sunset industry and covid has no doubt hastened their demise.  There is probably a kernel of truth in this observation. But as those living near suburban malls would know, malls are far from being dead. Indeed, judging from the daily crowds thronging the heartland malls, one might be forgiven for thinking the entire country has been vaccinated.  Ironically, the covid-spurred WFH trend may have even improved footfall for the shops during weekdays and afternoons.  

To me, it is much too early to call time of death on malls, and by extension, REITs with mall assets. Just my personal opinion. 

As always, do your own due diligence. The above is not intended as advice of any sort. 

Onward to FI my friends!




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