Mapletree Commercial Trust - CIMB Research 2018-04-25: Mixed Results

MAPLETREE COMMERCIAL TRUST N2IU.SI

Mapletree Commercial Trust - Mixed Results

Mapletree Commercial Trust (MCT)'s FY18 DPU of 9.04 Scts, slightly ahead, making up 103.5% of our FY18F projections.
Robust performance at VivoCity with positive rental reversion.
Office rents should stabilise going forward, in our view.
Maintain ADD with an unchanged Target Price of S$1.75.

Mapletree Commercial Trust (MCT) reported a 4QFY18 gross revenue of S$108.9m, +1.3% y-o-y on higher contributions from VivoCity, Mapletree Business City 1 and Bank of America Merrill Lynch HarbourFront, partly offset by weaker PSA Building and Mapletree Anson.
Distribution income and DPU increased a slight 0.4% y-o-y to S$64.8m nd 2.27 Scts respectively.
For the full year, DPU rose 4.9% y-o-y to 9.04 Scts and exceeded our projections by 3.5%. The trust revalued its portfolio by 5.4%, largely due to VivoCity. As a result, BV rose to S$1.49/unit.

VivoCity continued to perform well with gross rental revenue rising 3% y-o-y to S$206.6m and positive reversion of 1.5% due to step-up rents in existing leases and higher income from completed AEIs, partly offset by downtime from ongoing AEIs to add a public library on L3.
Although shopper traffic fell 1.4% y-o-y, tenant sales rose 0.7% y-o-y, indicating the strong positioning of the mall. Hence, we anticipate continued positive renewals for the upcoming FY19/FY20 retail expiries, accounting for 12.6%/14.2% of rental income.

A further 12.6% of rental income, made up of office/business parks leases, are due to be re-contracted in FY19-20.
Although there was negative rental reversion of 8.7% in FY18, this was largely due to a pre-termination of space in MBC1. Excluding this, office/business parks leases would have achieved a 0.6% positive reversion during the year. Hence, we anticipate upcoming expiries to experience modestly positive uplift when renewed.

Gearing declined to 34.5% due to higher portfolio value. Interest cost inched up to 2.75% as at end 4QFY18, and 78.9% of debt are on fixed rates.
The trust has a remainder S$144m to be refinanced in FY19. We anticipated that overall cost could inch up marginally in FY19F, given the rising interest rate environment.

We tweak our FY19-20F DPU estimates up by 1.7-1.9% post results and introduce our FY21F numbers. We maintain our DDM-based Target Price of S$1.75.
We expect MCT’s earnings to remain stable, underpinned by improved portfolio occupancy, good performance of VivoCity and new earnings from completion of an ongoing AEI at B1 of the mall. Contributions from the office portfolio should improve in the medium term led by the office upcycle.
Downside risk could be a continued drag in office and retail rents.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2018-04-25

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