MAPLETREE COMMERCIAL TRUST
N2UY.SI
Mapletree Commercial Trust (MCT SP) - Vivo growth offset by office risks; D/G to SELL
Rising risk in the office portfolio; D/G to SELL
- MCT’s full-year results were in line, but sequential weakness in the final quarter threw up warnings signs for the office sector.
- We cut office occupancy assumptions by 2.2ppts in each forecast year, shaving DPU 2.4%-3.2%.
- Applying our 6.1% yield target to blended FY3/17-19 DPU lowers our TP to SGD1.35 (-1.5%).
- D/G to SELL.
- MCT is currently trading at tight valuations: 1SD from the mean at every measure, our yield peg is at the mid-point between the -1SD and the mean to reflect our cautious view of the retail and office environment.
4Q results dragged by weak office
- MCT’s full-year results were decent enough with revenue/DPU growing 1.9%/1.6% YoY, forming 100.3%/98.6% of our estimates.
- 4Q revenue/DPU showed 2.8%/1% YoY growth, but their sequential declines are worth noting: revenue/DPU fell 1.1%/2.9%. This was due to surprise vacancy in the office portfolio, despite high commitments.
- Both PSA and Anson registered drops in occupancy, 92.8% (3Q: 94.3%) and 91% (3Q: 99.3%).
Cut occupancy expectations for office
- Occupancy over the year has been especially volatile at Anson, starting from 87.5% to 99.3%, then crashing back down again.
- At PSA it has been ranging in the low-90s. Tenants have downsized, some have exited Singapore altogether.
- To add to the uncertainty, Harbourfront’s only tenant is set to give back 20% of its space by Dec 2016 in exchange for signing a longer lease on the remainder.
- As the upcoming deluge of office supply has not even hit the market yet, office occupancy for MCT may become an issue.
- Accordingly, we cut our office occupancies 2.2ppts/yr.
Vivocity still has room to grow
- While the retail scene is challenging, Vivocity still posted 12% rent reversions and full occupancy. This is extraordinary considering a quality peer (CT SP) reported 1.4% reversions.
- To recap, Vivocity is:
- Singapore’s largest mall,
- gateway to Sentosa,
- has no competition in its local catchment area, and
- has low passing rent of SGD14 psfpm, lower than less prime malls in the high teens (see inside).
- Unfortunately, growth from Vivo could be dragged by the office segment.
Joshua Tan
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-04-28
Maybank Kim Eng
SGX Stock
Analyst Report
1.35
Down
1.37
