Mapletree Commercial Trust - Maybank Kim Eng 2018-10-26: More In Store?


Mapletree Commercial Trust - More In Store?

In line; Maintain HOLD

  • We fine-tune forecasts following Mapletree Commercial Trust's 2Q19 results. We raise DPU by 2% as we see a stronger rental outlook for VivoCity, given its sound destination-mall positioning.
  • Meanwhile, an asset-swap opportunity has materialised for its diversified commercial portfolio. Narrowing office cap rates could imply a SGD125m revaluation gain from Mapletree Anson, while a potential MBC II acquisition could also boost DPU by 9-10%.
  • Our new DDM-based Target Price is SGD1.60 (COE: 7.5%, LTG: 2%).
  • Upside risks could stem from these arising DPU growth levers.

Retail reversions were +41%

  • Mapletree Commercial Trust's 2Q19 DPU rose 1.3% y-o-y on the back of 50% of our FY19E forecast.
  • Occupancy dipped from vacancies at MBC I (from 8.6% to 7.8%) and PSA Building (5.4% to 3.5%) as commitments stayed at VivoCity jumped to +41% from +21% in 1Q19 as shopper traffic increased 58% y-o-y and tenant sales, 28% y-o-y. Management attributed this to Disney at its Sky.

Updating VivoCity estimates; leasing well-supported

  • We raise rental assumptions for VivoCity. VivoMart will vacate 115k sf of space by 1QCY19, with the space to be replaced by Fairprice. We expect high-single-digit reversion.
  • We expect destination malls to continue to draw shopper traffic, backed by strong tourism growth. The latter was up 7.5% y-o-y in 8M18 vs +6.2% y-o-y in 2017.
  • Meanwhile, strong leasing at Changi’s Project Jewel, which is 90% pre-committed to its opening in Mar 2019 should reduce overall market vacancy risk.

Acquisition lever: MBC II deal could add 10% to DPU

  • Gearing of 34.8% suggests SGD600m in debt headroom to a 40% limit for potential deals, with MBC II as front-runner. We estimate DPU accretion of 9-10%, assuming 55:45 equity-debt funding.
  • Meanwhile, Mapletree Anson was valued at a 3.7% cap rate or SGD2,123 psf as at end-Mar 2018. This remains conservative relative to recent market deals.
  • CapitaLand Commercial Trust’s Singapore assets rose 1.3% in its half-yearly review, in line with narrowing office-cap rates. CapitaLand Commercial Trust also divested Twenty Anson in July at a 2.7% NPI yield, for SGD516m or SGD2,503 psf. We believe a potential divestment of Mapletree Anson at similar capital values could result in a SGD125m gain, while a closely-timed divestment of this lower-yielding asset could increase debt headroom for further DPU accretion.

Swing Factors


  • Earlier-than-expected pick-up in leasing demand for retail, office and business park space driving improvement in occupancy.
  • Better-than-anticipated rental reversions.
  • Accretive acquisitions or redevelopment projects.


  • Prolonged slowdown in economic activity could reduce demand for retail, office, and business park space resulting in lower occupancy and rental rates.
  • Termination of long-term leases contributing to weaker portfolio tenant retention rate.
  • Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2018-10-26
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.60 UP 1.500