Mapletree Commercial Trust - CIMB Research 2015-12-09: Stable earnings outlook

Mapletree Commercial Trust - CIMB Research 2015-12-09: Stable earnings outlook MAPLETREE COMMERCIAL TRUST N2UY.SI 

Mapletree Commercial Trust - Stable earnings outlook 

  • 1HFY03/16 earnings performance lifted by Vivocity and higher rents from MLHF. 
  • Portfolio occupancy rose in 2Q and could pick up in 2H due to higher committed take-up. 
  • Recovery in shopper traffic and tenant sales growth in Vivocity in 2Q. 
  • Outlook remains stable, with 25.9% of leases due to be renewed in 2HFY16-FY17. 
  • With the stable outlook, we maintain Hold with unchanged DDM-based target price. 

■ NPI improvement from Vivocity and higher rents from MLHF 

  • NPI for 1HFY16 improved 5.1% yoy. The improvement came from increased revenue from Vivocity and higher rents from Merrill Lynch Harbour Front (MLHF) post-rent review in Dec 2014. 
  • 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 the higher interest expenses from slightly-higher borrowing costs after the refinancing of longer-tenor debt. 

■ Portfolio occupancy to improve with higher committed take-up 

  • Portfolio occupancy inched up to 96.6% in Sep, with greater occupancy at Vivocity and Mapletree Anson. 
  • We expect occupancy to improve moving forward, with higher committed occupancy at the properties. 
  • Retail rental reversion was healthy at +13.2% over preceding levels in 1HFY16, while office renewals were 10.6% higher than previous rates. 

■ Higher shopper traffic and tenant sales at Vivocity 

  • Vivocity remained the largest revenue contributor, accounting for 66% of MCT’s topline. 
  • Vivocity’s rental revenue rose 4% yoy in 1HFY16 on the back of a 13.2% positive rental reversion over preceding levels, positive impact from the completed AEI at Basement 1, higher tenant sales (+5.5% yoy) and better shopper footfall (+3.1% yoy). More events and additional holidays caused an increase in shopper visits to this property, reversing the decline experienced in 1Q. 

■ Earnings outlook remains stable 

  • Looking ahead, the trust intends to continue to drive DPU growth by improving operational efficiency and optimising tenant mix. 
  • With the 4.5% of retail and 25.1% of portfolio leases due to be renewed in 2HFY16-FY17, we anticipate earnings to be relatively stable in FY16-17. 
  • Balance sheet remains healthy, with 36.4% net gearing at end-Sep. 

■ Hold maintained 

  • Although MCT’s earnings outlook remains stable, we keep our Hold recommendation due to the moderation in rental reversions (Vivocity’s passing rents track closer to market levels) and office headwinds. 
  • Our DDM-based target price of S$1.44 is unchanged.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-12-09
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.44 Same 1.44