Mapletree Commercial Trust - CIMB Research 2017-04-26: Strong Performer

Mapletree Commercial Trust - CIMB Research 2017-04-26: Strong Performer MAPLETREE COMMERCIAL TRUST N2IU.SI

Mapletree Commercial Trust - Strong Performer

  • MCT’s FY3/17 DPU of 8.62 Scts came in ahead of expectations, making up 103.4% of our forecast.
  • The improved performance was felt across the board as well as from MBC1.
  • We expect rental reversions at VivoCity to remain positive, although more muted going forward.
  • Office rents likely to be underpinned by stable business park contributions.
  • Upgrade to Add with a higher target price of S$1.70.

4Q/FY17 results came in slightly ahead of our expectations 

  • MCT reported 4QFY17 DPU of 2.26 Scts, coming in slightly ahead of our projections, representing 12% yoy growth. The better results were supported by a 47% yoy jump in revenue, thanks to the acquisition of MBC1. 
  • Additionally, all the properties across the portfolio also reported an improvement in contributions. 
  • FY17 DPU of 8.62 Scts exceeded our estimates by 3.4%. 
  • The better asset performance led to a 2.2% valuation uplift, with no change in cap rates, translating to a book NAV of S$1.38.

Vivocity continues to perform well 

  • FY17 gross revenue and NPI from Vivocity rose 5%/3.4% yoy while occupancy remained high at 99%. 
  • Shopper traffic grew by a stronger 4.8% yoy to 55.8m while tenant sales crept up 1.3% yoy to S$952m. Retail rents saw a 13.5% upward revision on renewal. 
  • Going into FY18-19, MCT has 8.2% and 18% of retail leases to recontract. We expect rent renewals to be more muted, but positive, going forward as the retail climate remains challenging.

Office/business parks component offers stability 

  • The office/business parks portfolio enjoyed an 8.5% rental uplift on renewals while occupancy at MBC1 and PSA Building held steady at 99% and 98.3%, respectively.
  • Committed occupancy at MLHF rose to 91.6% as part of the vacated space was released.
  • The trust has 4.5% and 7.8% of office leases to be renewed in FY18-19. A lack of new business parks supply should support business park rents.

Strong balance sheet with no near-term refinancing needs 

  • Its balance sheet remains healthy with gearing dipping slightly to 36.3% with a higher portfolio value. 81.2% of its debt cost has been hedged and there is no refinancing needed until FY19.

Upgrade to Add 

  • We tweak our FY18-19 DPU up by 0.5-1.6% to adjust for the better-than-expected performance and introduce our FY20 estimates. We raise our DDM-based target price to S$1.70 as we roll forward our projections as well as lower our Singapore discount rate. Upgrade to Add from Hold. 
  • We like MCT’s portfolio which has a good blend of resilience (through the more stable business park rents) as well as growth coming from Vivocity.
  • MCT offers total return of c.14%. Risks include slower-than-projected rental uplift.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-04-26
CIMB Research SGX Stock Analyst Report ADD Upgrade HOLD 1.70 Up 1.450