Mapletree Commercial Trust - Maybank Kim Eng 2015-10-21: Helped by haze and holidays

Mapletree Commercial Trust - Maybank Kim Eng 2015-10-21: Helped by haze and holidays MAPLETREE COMMERCIAL TRUST N2UY.SI 

Mapletree Commercial Trust - Helped by haze and holidays 

  • 2Q results in-line. Revenue subdued, cost savings drive NPI. 
  • Improved operating metrics largely due to haze and holidays. 
  • Maintain SELL with unchanged TP. Continue to least prefer retail SREITs due to over supply and demand headwinds. 

What’s New 

  • MCT’s 2Q3/16 headline results produced no surprises. Revenue was SGD71.3m (+1.9% YoY, +2.2% QoQ,), and NPI was SGD54.8m (+5.1% YoY, +1% QoQ,), while DPU was 2.02 Scts (+2.5% YoY, +0.5% QoQ). 
  • Of our full year DPU expectations, 50.2% have been met. 
  • As with 1Q, NPI growth was faster due to cost savings from utility service contracts. 
  • Underlying retail sentiment remains weak, as rent reversions slowed yet again to 13.2% (1Q: 14.4%). This quarter’s operating metrics actually improved, with shopper traffic up 3.1% and tenant sales up 5.5%, reversing four and three straight quarters of decline, respectively. 
  • Management believes that the volume improvement is due to more public holidays than usual (SG50, elections) and the haze driving traffic indoors. 
  • As for the office assets (32% NPI), occupancies for PSAB and Anson improved to 93.4% (1Q: 91%) and 91.8% (1Q: 87.5%), in line with the committed occupancies of 94.7% and 99.1%. 
  • As the lease expiry profile for the office assets are low at 0.5%/1%/10.5% (FY3/16-18), MCT will largely skirt the 2H16 deluge of office supply. 

What’s Our View 

  • In line with our 9th October report, we reiterate our concerns about the retail SREIT sector: strong supply until 2017, ecommerce, labour restrictions, a “tired” product, and weak demand from low employment and income growth. 
  • Our flat and largely unchanged DPU forecasts reflect this. 
  • We maintain SELL with unchanged TP (S$1.11) based on applying our yield target of 7.25% to FY3/17 DPU.

Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-21
Maybank Kim Eng SGX Stock Analyst Report SELL Maintain SELL 1.11 Same 1.11