MAPLETREE COMMERCIAL TRUST
N2UY.SI
Mapletree Commercial Trust (MCT SP) - Flat quarter reflecting a slow retail environment
3Q flat. Still concerned about retail. Maintain SELL
- 3Q3/15 results confirm flattish growth for the year, as rent reversions taper on the back of a poor retail environment.
- On the bright side, office occupancies exceeded expectations, causing us to tweak DPUs higher by 0.8-2%.
- We also tighten our yield target to 7% from 7.25% and bring it closer to our sector benchmark CapitaLand Malls Trust of 6.75%, to reflect the defensive nature of Vivocity (65.6% NPI) as well.
- TP is raised to SGD1.18 from SGD1.11, maintain SELL.
Flattish growth as reversions taper
- 3Q3/16 revenue grew just 1.2% while DPU was flat YoY.
- 9M growth was 1.5%/1.8%, forming 75.7%/76.1% of our forecasts.
- Growth came from positive rent reversions, post asset enhancement contributions from Vivo’s basement 1, and rental step-ups on existing leases.
- Rent reversions are however continuing to taper, with Vivo seeing reversions at 12.6% for nine months, weakening from 17.5% (FY3/15) and 37.6% (FY3/14).
Retail environment still weak
- As the passing rent at Vivo is only c.S$14 psfpm, reversions should be much stronger than that when compared to quality suburban malls in the high teens and city malls in the low 20s.
- Evidently the poor retail environment is holding reversions back. Shopper traffic declined 1.9% and tenant sales marginally budged at 2.5%.
- On the macro front retail sales is contracting even as visitor arrivals stage a mild comeback.
- While reversions may taper, occupancy risk at Vivo is low, as it is not just a tourist mall, but has a near monopoly of its catchment area as well.
Office occupancy performs better
- Office (31.5% NPI) occupancy has outperformed our expectations, commendable given looming supply.
- PSA’s occupancies have steadily gotten higher each quarter (91%/93.4%/94.3%) with commitments at 97.6%, while for Anson it’s 87.5%/91.8%/99.3%.
- Accordingly we raise our DPUs by 0.8-2%.
Joshua Tan
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-01-28
Maybank Kim Eng
SGX Stock
Analyst Report
1.18
Up
1.11
