Mapletree Commercial Trust - CIMB Research 2015-10-21: Better operating performance

Mapletree Commercial Trust - CIMB Research 2015-10-21: Better operating performance MAPLETREE COMMERCIAL TRUST N2UY.SI 

Mapletree Commercial Trust - Better operating performance 

  • 2QFY16 performance lifted by higher revenue and lower operating expenses. 
  • Portfolio occupancy rose in 2Q, and could to pick up further in 2H on higher committed take-up. 
  • Recovery of shopper traffic and tenant sales growth in Vivocity. 
  • Outlook remains stable, with 25.9% of leases to be renewed in 2HFY16-FY17. 
  • Maintain Hold with a lower DDM-based target price of S$1.44. 

2QFY16 results in line 

  • MCT’s 2QFY3/16 DPU of 2.02 Scts, +2.5% yoy, was in line, at 25.1% of our FY16 forecast. The improvement came from increased revenue from Vivocity and higher rents from MLHF post its rent review in Dec 14. 
  • Better cost control across its portfolio, largely due to savings from utilities consumption and tariff rates, also boosted NPI margin from 74.5% in 2QFY15 to 77% in 2QFY16. These more than offset higher interest expenses from slightly higher borrowing costs after refinancing of longer tenor debt. 

Portfolio occupancy to improve with higher committed take-up 

  • Portfolio occupancy inched up to 96.6% with greater occupancy at Vivocity and Mapletree Anson. We expect occupancy to improve with higher committed occupancy at the properties. 
  • Retail rental reversion was healthy at +13.2% over preceding levels while office renewals were 10.6% higher over previous rates. 

Higher shopper traffic and tenant sales at Vivocity 

  • Vivocity remained the largest revenue contributor, at S$47.3m in 2Q and accounting for 66.4% of MCT’s topline. The improved performance came on the back of a 13.2% positive rental reversion over preceding levels, plus positive impact from the completed AEI at Basement 1, as well as higher tenant sales (+5.5% yoy) and better shopper footfalls (+3.1% yoy). 
  • More events as well as additional holidays helped increase shopper visits at this property, reversing the decline experienced in 1Q. 

Outlook remains stable 

  • Looking ahead, the trust would continue to drive DPU growth by improving operational efficiency as well as optimising tenant mix. With the remaining 4.5% of retail and 25.1% of portfolio leases to be renewed in 2HFY16 and FY17, we anticipate earnings to remain relatively stable. 
  • Balance sheet remains healthy with 36.4% gearing. 

Maintain Hold 

  • We maintain our Hold rating with a revised DDM-based target price of S$1.44 (higher cost of equity assumption: 8%). MCT is trading at 6.1% FY16 DPU yield and at 1.06x P/BV, in line with its peers.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-10-21
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.44 Down 1.54