Mapletree Commercial Trust - CIMB Research 2018-01-25: Stable Quarter

MAPLETREE COMMERCIAL TRUST N2IU.SI

Mapletree Commercial Trust - Stable Quarter

Mapletree Commercial Trust's 3Q/9MFY3/18 DPU of 2.3 Scts/6.77 Scts were within expectations, making up 26.3%/77.5% of our full-year forecast.
High committed portfolio occupancy; robust performance underpinned by VivoCity.
Ongoing AEIs could add new income stream from 3QFY3/19.
Maintain ADD and target price of S$1.75.

Mapletree Commercial Trust (MCT)’s 3QFY3/18 gross revenue rose 0.8% to S$109.7m and NPI rose 1.9% y-o-y to S$85.8m on higher contribution from VivoCity and MBC I, offset by lower earnings from PSAB and Mapletree Anson. Distribution income of S$66.5m, up 1.3% y-o-y, translates into DPU of 2.3 Scts.
For the 9M, DPU of 6.77 Scts was in line with our expectations, accounting for 77.5% of our FY18 forecast.

On a portfolio basis, retail renewals rose 2.3% for 9MFY3/18, with a retention rate of 77%. Office/ business park renewals experienced 9.5% negative reversion. Inclusive of rent from the replacement tenant for a pre-terminated lease, office portfolio rental reversion was +0.7%. Portfolio committed occupancy stood at 98.7% at end-3QFY3/18.
The trust has a marginal 0.8% and 0.4% of retail and office/ business sparks space expiring in 4QFY3/18, respectively, and a further 16.7%/ 5.9% in FY19.

VivoCity’s 3Q gross revenue was 2.2% higher y-o-y due to the effect of stepped-up rents in existing leases as well as additional contributions from the completed AEIs at B2, L1 and L3. Although shopper traffic fell 3.4% y-o-y in 3Q, tenant sales rose 1.3% y-o-y over the same period, indicating the resilience of the property. Hence, we expect upcoming rental renewals to remain positive, albeit modest.

Gearing dipped marginally q-o-q to 36.3% at end-3QFY3/18. The trust has S$264m of loans (11% of total debt) maturing in FY19. All-in debt cost increased slightly to 2.73% and 78% of its loans were on fixed rates.
Mapletree Commercial Trust plans to add a 3,000 sq m public library on L3 of VivoCity, which will free up some bonus GFA that can be used to add over 24,000 sq ft of premium retail space in B1. This AEI is in progress and expected to be completed in phases by 3QFY3/19. This exercise can be funded with the trust’s debt headroom.

We leave our FY18-20 DPU estimates unchanged post results and maintain our DDM-based target price at S$1.75.
We believe Mapletree Commercial Trust’s earnings are likely to remain stable, underpinned by better performance at VivoCity. In the longer term, the lack of new business parks supply should be supportive of rents.
Downside risks are continued drag in office and retail rents.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2018-01-25

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