Mapletree Commercial Trust - CGS-CIMB Research 2019-01-23: Good Performance From VivoCity And Office


Mapletree Commercial Trust - Good Performance From VivoCity And Office

  • Mapletree Commercial Trust's 9MFY19 DPU of 6.83 Scts is in line at 75.4% of our full-year forecast.
  • VivoCity continued to grow, with 4% rental reversion and full occupancy while the office segment delivered strong rental reversion of +10.3%.
  • Maintain ADD with a higher DDM-based Target Price of S$1.79 as we roll forward to FY20.

9MFY19 results highlights

  • MAPLETREE COMMERCIAL TRUST (SGX:N2IU) reported 9MFY3/19 gross revenue of S$331m, up 2% y-o-y on the back of higher contributions from VivoCity, Merrill Lynch HarbourFront (MLHF), PSA Building and Mapletree Business City Phase 1 (MBC I), partially offset by lower contributions from Mapletree Anson (MA). PBT, however, grew slower at 0.4% on higher finance expenses, manager’s fees and unrealised forex loss.
  • Mapletree Commercial Trust's 9MFY19 DPU increased 0.9% y-o-y to 6.83 Scts, in line at 75.4% of our full-year forecast.

VivoCity continued to deliver revenue growth

  • VivoCity achieved stronger revenue growth of 4.6% y-o-y in 3QFY19 versus 1.4% in 1HFY19, translating to 9MFY19 growth of 2.4% y-o-y. The stronger growth in 3QFY19 was driven by higher occupancy (99.9% as of 3QFY19 versus 94.7% as of 2QFY19) and the effects of step-up rents in existing leases. YTD, it achieved an encouraging +4% rental reversion.
  • YTD shopper traffic improved 1.8% while tenant sales declined 1.2%, temporarily affected by AEI and rigorous management of the tenant mix. Momentum should pick up again once the changes are completed. The library at Level 3 started operations in Jan 2019 and this marked the completion of a major AEI at the mall. This AEI is expected to deliver ROI of > 10% on a stabilised basis.

Office segment posted strong 10.3% rental reversion

  • YTD, Merrill Lynch HarbourFront (MLHF)'s revenue rose 8.6% y-o-y to S$14.8m amidst full occupancy while the rental from PSA Building (+0.6% to S$36.9m) and Mapletree Business City Phase 1 (MBC1, +1.3% to S$95.3m) was driven by compensation sums received and higher rental income, respectively.
  • Mapletree Anson’s rental declined 0.4% y-o-y due to lower occupancy, which offset the effects of step-up rents in its existing leases and compensation received. The office segment reported a strong +10.3% rental reversion.
  • Including the effect of rent review of a key tenant at MBC1 for 195k sf of office space, rental reversion was +8.7%. All offices (ex-MBC1) reported higher occupancy q-o-q and committed leases remained high at 96-100%.

Maintain ADD

  • We keep our DPU forecasts but raise our DDM-based Target Price to S$1.79 as we roll forward to FY20.
  • We expect Mapletree Commercial Trust to deliver steady earnings growth, underpinned by higher committed occupancy for its offices and continuous AEI at VivoCity which is positioned as a destination mall. Gearing remained healthy at 34.8%.
  • Potential re-rating catalysts are further asset acquisitions, while downside risks are worse-than-expected retail and office rents.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-01-23
SGX Stock Analyst Report ADD MAINTAIN ADD 1.79 UP 1.670