My thoughts on MCT (Ketchup) x MNACT (Chili) = MPACT (Nacho cheese)

I am neither the shareholder of Mapletree Commerical Trust (MCT) nor Mapletree North Asia Commerical Trust (MNACT) at this moment. 

I also did not purchase MCT or MNACT before.

But MCT have been in my watchlist for the last few years.

The reasons why I didn't add MCT into my portfolio is due to premium price (Above 1.0 PB) and low dividend rate (Less than 5%).

So I will provide my thoughts from potential MCT shareholders perspective. 

When I finished reading the announcement of the merger powerpoint slide, my thought is it is not worth paying MNACT at $1.1949.

As per the slide title, Attractive Finance Returns for MNACT Unitholders.

A fair value, in my opinion, for MCT to pay for MNACT is 0.7PB ($0.84), max 0.8PB ($0.96) given it is Mapletree branding.

Reason being:

1) Festival Walk (Hong Kong)

     1.1) Average Rental Reversion is NEGATIVE 30%

MNACT 1H FY21/22 Slide 16

       1.2) 2nd largest contributor to NPI post merger at 22% (Largest is MBC 1 & 2 at 24%)

Merger slide 18

        1.3) 25 more years of lease left

Just on this Festival Walk property alone, will you pay 1.0PB ($1.1949) for MNACT? 

 

2) Gateway Plaza (China)

      2.1) Average Rental Reversion is NEGATIVE 24%

MNACT 1H FY21/22 Slide 22

       2.2) Together with Sandhill Plaza, contributor to NPI post merger at 12%

Merger slide 18

 

3) Seiko (Japan)

Source: https://www.mapletreenorthasiacommercialtrust.com/~/media/MNACT/Newsroom/Announcements/2021/Dec/1_MNACT_ValuationofProperties_31Dec2021.pdf

MNACT 1H FY21/22 Slide 14

I believe majority of people agreed that this is a bad merger for MCT, thus the share price reflected it accordingly.

From $2 on 3 Jan Open till $1.82 on 4 Jan Close (- 9%)

I feel that shareholder for MCT vs MNACT are belong to 2 different groups (Ketchup vs Chili).

MCT shareholder love the quality and stability of MCT properties, thus don't mind to pay premium and its low dividend % (Ketchup).

MNACT shareholder is ok to take a higher risk to get a higher dividend % (Chili).

Suddenly you ask Ketchup lover to add Chili into their dish, it is hard for them to swallow the food.

Mapletree need to turn the chili into sweet chili so that existing MCT shareholder can accept it better.

For new potential MCT shareholders like myself, I hope that MPACT will become the most lovable Nacho cheese in the future if the merger were to go through.

Shall monitor the share price of MCT before deciding to onboard or continue staying sideline.