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:
- transitional vacancy at Anson and PSA Building; and
- 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/
