SINGAPORE (Sept 6): OCBC Investment Research is keeping its “buy” call on Mapletree Greater China Commercial Trust (MGCCT) with a fair value estimate of $1.18.

This is based on the assumptions that the trust remains undervalued relative to its Hong Kong-listed peers, and that it will enjoy recovery from Festival Walk in the near term.

In a Tuesday report, lead analyst Andy Wong says he believes units of the trust still offers value “on a relative basis” at its current price level. This comes despite an increase in the unit price of MGCCT 14.4% after news on June 23 of the UK’s vote to exit the EU, which he thinks is in line with its Hong Kong-listed REIT peers.

“Based on our forecast, MGCCT is currently trading at a forward distribution yield of 6.6%, versus its peers’ Bloomberg consensus average forward yield of 4.7%, which implies a yield spread of 190 bps,” Wong elaborates.

While the REIT’s total retail sales in Hong Kong fell 7.7% in value y-o-y for the month of July this year, MGCCT’s shopping centre in Kowloon Tong, Festival Walk, experienced a dip in tenant sales by 12.7% y-o-y in 1QFY17.

The analyst thinks this figure is largely skewed by renovation works that were carried out by its new cinema operator tenant, MCL Cinemas.

As the works were completed in June this year, Wong anticipates a recovery at Festival Walk especially as the reopening of the cinema is expected to “draw back crowds and boost footfall and sales” to the mall.

“Moreover, we believe Festival Walk is able to differentiate itself from its competitors via its strategic location and accessibility which gives it access to the local catchment at Kowloon Tong, coupled with the strength of its brands,” he adds.

As at 1:24pm, units of MGCCT are trading 1.35% higher at $1.13.