Mapletree Commercial Trust - CIMB Research 2017-04-26: Strong Performer

MAPLETREE COMMERCIAL TRUST N2IU.SI

Mapletree Commercial Trust - Strong Performer

MCT’s FY3/17 DPU of 8.62 Scts came in ahead of expectations, making up 103.4% of our forecast.
The improved performance was felt across the board as well as from MBC1.
We expect rental reversions at VivoCity to remain positive, although more muted going forward.

MCT reported 4QFY17 DPU of 2.26 Scts, coming in slightly ahead of our projections, representing 12% yoy growth. The better results were supported by a 47% yoy jump in revenue, thanks to the acquisition of MBC1.
Additionally, all the properties across the portfolio also reported an improvement in contributions.
FY17 DPU of 8.62 Scts exceeded our estimates by 3.4%.
The better asset performance led to a 2.2% valuation uplift, with no change in cap rates, translating to a book NAV of S$1.38.

FY17 gross revenue and NPI from Vivocity rose 5%/3.4% yoy while occupancy remained high at 99%.
Shopper traffic grew by a stronger 4.8% yoy to 55.8m while tenant sales crept up 1.3% yoy to S$952m. Retail rents saw a 13.5% upward revision on renewal.
Going into FY18-19, MCT has 8.2% and 18% of retail leases to recontract. We expect rent renewals to be more muted, but positive, going forward as the retail climate remains challenging.

The office/business parks portfolio enjoyed an 8.5% rental uplift on renewals while occupancy at MBC1 and PSA Building held steady at 99% and 98.3%, respectively.
Committed occupancy at MLHF rose to 91.6% as part of the vacated space was released.
The trust has 4.5% and 7.8% of office leases to be renewed in FY18-19. A lack of new business parks supply should support business park rents.

Its balance sheet remains healthy with gearing dipping slightly to 36.3% with a higher portfolio value. 81.2% of its debt cost has been hedged and there is no refinancing needed until FY19.

We tweak our FY18-19 DPU up by 0.5-1.6% to adjust for the better-than-expected performance and introduce our FY20 estimates. We raise our DDM-based target price to S$1.70 as we roll forward our projections as well as lower our Singapore discount rate. Upgrade to Add from Hold.
We like MCT’s portfolio which has a good blend of resilience (through the more stable business park rents) as well as growth coming from Vivocity.
MCT offers total return of c.14%. Risks include slower-than-projected rental uplift.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-04-26

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