Mapletree Commercial Trust - Maybank Kim Eng 2016-01-28: Flat quarter reflecting a slow retail environment

Mapletree Commercial Trust - Maybank Kim Eng 2016-01-28: Flat quarter reflecting a slow retail environment 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 | http://www.maybank-ke.com.sg/ 2016-01-28
Maybank Kim Eng SGX Stock Analyst Report SELL Maintain SELL 1.18 Up 1.11