Mapletree Commercial Trust - CIMB Research 2016-07-27: Driven by organic growth

Mapletree Commercial Trust - CIMB Research 2016-07-27: Driven by organic growth MAPLETREE COMMERCIAL TRUST N2UY.SI 

Mapletree Commercial Trust - Driven by organic growth

  • 1QFY17 DPU of 2.03 Scts is in line with our FY17 forecast at 24.3%.
  • Improvement across the board from Vivocity as well as office assets underpinned performance.
  • Completion of AEI at Vivocity in Jul 16 should continue to drive bottomline while minimal office renewals should provide a stable outlook.
  • Private placement of 364.88m new units and 362.82m preferential offering to raise gross proceeds of S$1,018.8m (US$749m) to part fund MBC P1 acquisition.
  • Maintain Add and target price of S$1.62.

Underpinned by organic growth

  • MCT reported a 5.2% rise in topline to S$73.4m (US$54m), backed by improved performance at Vivocity, PSAB and Mapletree Anson and higher overall portfolio occupancy of 97.8%. Accordingly, NPI rose 3.7% to S$56.3m. 
  • Distributable income of S$43.4m, +2.1% yoy, translates into DPU of 2.03 Scts. This makes up 24.3% of our FY17 forecast, which includes contributions from the proposed MBC P1 acquisition.

Completion of AEI should lift contributions from 2Q onwards

  • Rental reversions at Vivocity rose 12%, with a high retention ratio of 94.3% in 1Q. Tenant sales remained fairly flat at S$219m while shopper traffic dipped 3.6% yoy to 12.5m. Completion of its second AEI at end-Jul 16 should raise contributions. 
  • Increased F&B offerings in B2 are already fully pre-committed and ROI is expected to surpass 20%. It has another 7% and 16.1% of retail income to be renewed in FY17 and FY18, respectively, and positive rental reversions should continue to drive the bottomline.

Minimal office reversions over FY17-18

  • Rental reversions for its office properties averaged +14% in 1Q. Office contributions also expanded as occupancy at PSAB rose 3.7% pts to 96.5% while Mapletree Anson saw its take-up rising to 94.7%. 
  • MCT has minimal office renewals of 1.9% and 3.9% in FY17 and FY18, respectively, and this should translate into a stable income outlook.

Equity fund-raising exercise for MBC acquisition underway

  • MCT has launched an equity fund-raising exercise to part fund the purchase of MBC P1. It plans to offer 364.88m new units at S$1.41-1.45/unit under a private placement and a non-renounceable preferential offering of 362.82m new units at S$1.39-1.43/unit on 17 units for every 100 existing units. This exercise should be complete towards end-Aug 16 and will raise gross proceeds of S$1,018.8m. 
  • The acquisition of MBC P1 is expected to boost DPU by 3.2%.

Maintain Add

  • We tweak MCT’s FY17-19 DPU estimates marginally to update for this set of results and to update on the funding structure for the MBC P1 acquisition. However, our DDM-based target price remains unchanged at S$1.62. 
  • We believe the purchase of MBC1 should strategically enhance its portfolio in terms of size and stability. Downside risks to our call include weaker office market.

LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | http://research.itradecimb.com/ 2016-07-27
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.62 Up 1.62