Mapletree Commercial Trust - OCBC Investment 2019-10-16: Vivocity Gaining Traction

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust - Vivocity Gaining Traction

MAPLETREE COMMERCIAL TRUST (SGX:N2IU) reported an in-line set of results, with 2QFY20 gross revenue and NPI increasing by 1.9% and 1.7% y-o-y to S$112.0m and S$87.7m, respectively. All properties contributed positively to NPI growth, with the exception of Mapletree Anson, which saw a 21.9% y-o-y dip due to reduced occupancy. Actual occupancy for the property fell sharply from 92.7% (end-1QFY20) to 75.1%.
Management has managed to bring committed occupancy for the property back up to 99.0%, with three major leases to commence in Nov and Dec this year, and Jan 2020. The new tenants include WeWork, one shipping company and one media company.
DPU for the quarter grew 2.2% y-o-y to 2.32 S cents. For 1HFY20, Mapletree Commercial Trust’s gross revenue grew 2.6% to S$224.2m, while NPI was up 2.2% to S$176.1m. DPU came in at 4.63 S cents, representing growth of 2.9%, and formed 49.9% of our FY20 forecast. See Mapletree Commercial Trust's dividend history.

Operationally, Mapletree Commercial Trust achieved overall portfolio rental reversions of +5.0%. This was driven largely by the retail segment, which registered a rental uplift of 6.8%. Rental reversions for the Office/Business Park segment were +0.7%, due to a drag from one lease at Mapletree Anson which had a large negative rental reversion as the lease was signed 6- 7 years ago at the peak of the office cycle.
Overall portfolio physical occupancy was 96.1% (-0.8 ppt q-o-q), while committed occupancy was higher at 98.8%. With regards to Mapletree Commercial Trust’s exposure to WeWork, management alluded that if it commits to its full lease obligations, this would only form ~2.7% of Mapletree Commercial Trust’s portfolio. Management also has backup plans and is prepared should WeWork decide to give back some space in the future.
Shopper traffic and tenant sales at VivoCity fell 2.8% and 2.0% y-o-y, respectively, in 1HFY20. However, this can be largely attributed to a transitory impact as anchor tenant NTUC FairPrice only contributed a full month from Aug 2019. Sales momentum has been encouraging, and we note that VivoCity’s tenant sales for 2QFY20 only declined marginally by 0.3% y-o-y.

Mapletree Commercial Trust has unsurprisingly obtained approval from its unitholders at an EGM with regards to the proposed acquisition of Mapletree Business City (Phase2) (MBC II).
We have already factored in this acquisition in our forecasts and thus maintain our S$2.28 fair value estimate.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-10-16

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.280 SAME 2.280