Mapletree Commercial Trust - CIMB Research 2017-01-26: Improvement across the board

MAPLETREE COMMERCIAL TRUST N2IU.SI

Mapletree Commercial Trust - Improvement across the board

3QFY17 DPU in line, 9MFY17 DPU of 6.36 Scts accounts for 76% of FY17 forecast.
Vivocity continues to trade well with higher tenant sales and shopper traffic.
Office portfolio bucking the trend with positive rental reversions.
Healthy balance sheet with leverage of 37%.

MCT reported a 47%/49% jump in 3QFY3/17 revenue and NPI to S$108.7m/S$84.4m, thanks to a full quarter’s contributions from MBC1 and better performance from existing assets.
DPU grew 9.6% yoy to 2.28 Scts, after taking into account its equity fund raising exercise to partly fund the MBC1 acquisition.
9MFY17 DPU of 6.36 Scts is in line, making up 76% of our FY17 forecast.

9MFY17 gross revenue and NPI at Vivocity rose 5%/3.4% yoy with rental reversions 13.5% higher over the preceding period while occupancy improved slightly to 99.9%.
Underlying operating conditions remain robust with tenant sales rising 2% yoy and shopper traffic increasing 6.7% yoy over the same period.
MCT has a small 0.1% and 10.7% of retail leases expiring for the remainder of FY17 and FY18, respectively. We expect reversions to remain positive given the strong underlying operating metrics.

The office/business parks portfolio enjoyed an 8.5% upward lift in rents on renewal while occupancy remained relatively stable at 96.2-100%. As a result, rental revenue from MLHF, PSAB and Mapletree Anson saw a 6.4% hike over a year ago while MBC1 added a further S$43.5m to the topline.
MCT has another 0.5% and 5.4% of offices expiring over 4QFY17-FY18. A lack of new business parks supply post 2017 would support business parks rents.

Post the recent issuance of S$85m fixed rate notes due 2023, MCT has no debt due in FY17 and FY18. The balance sheet is robust with gearing at 37% and 81.2% of its interest cost hedged.

We leave our FY17-19 DPU estimates and DDM-based target price of S$1.45 unchanged.
We maintain a Hold rating on limited near-term upside. Downside risk includes a weaker-than-expected office and retail rental market, which would drag on upward reversion potential.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-01-26

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