Maybank Kim Eng Research 2015-07-24: Mapletree Commercial Trust - Cautiously Optimistic. Maintain HOLD.

Cautiously Optimistic 

  • 1Q16 revenue lagged, but should recover as issues are transitory. 
  • DPU in line, thanks to cost management. No change to forecasts. 
  • Maintain HOLD & DDM TP of SGD1.43. Prefer Starhill Global (BUY, TP SGD0.97) for sector exposure. 

1Q Met 

  • 1Q revenue lagged due to transitory issues, but MCT leveraged Vivocity’s scale to negotiate for lower utility tariffs. This helped to raise NPI, bringing DPU in line. 
  • 1Q revenue was SGD69.7m (-1.8% QoQ, +1.6% YoY, 23.4% of FY16F), NPI, SGD54.3m (+2% QoQ, +5% YoY, 24.3% of FY16F) and DPU, 2.01cts (+0.5% QoQ, +3.1% YoY, 25% of FY16F). 
  • Revenue growth was mainly accounted for by Vivocity which still boasted 14.4% reversions (4Q: 17.5%). 
  • The drags came from: 
    1. transitional vacancy at Anson and PSA Building; and
    2. AEI disruptions at Vivocity itself.
  • Anson’s and PSA’s low occupancy of 87.5% (1Q3/15: 98.1%) and 91% (1Q3/15: 99.7%) should bounce back, in our opinion, as the properties have been 100% and 94.6% pre-committed respectively. 
  • Vivocity’s contribution should also strengthen as tenant relocations and B1 renovations are now over. All tenants are back to full operations, occupancy was 99.4%. 

Maintain HOLD 

  • We like MCT’s portfolio as Vivocity’s passing rent of c.SGD14psf implies upside potential, as passing rents are c.SGD17psf for a well-run suburban mall. 
  • PSA also offers some exposure to office decentralisation. 
  • Still, we remain cautious on MCT’s overall outlook as shopper traffic declined 6.7% YoY at Vivocity. This, we believe, reflects weak tourist arrivals. 
  • A soft office-leasing market has also been guided by property consultants. 
  • At current valuations of 5.6-5.9% FY3/16-18 yields, the positives are in the price. 
  • Maintain HOLD and SGD1.43 TP (DDM, CoE 7.7%, LTG 2%). 

(Joshua Tan) 

Source: http://www.maybank-ke.com.sg/