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


Mapletree Commercial Trust - Vivocity Gaining Traction

2QFY20 results in-line with our expectations

  • 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.

Positive rental reversions led by VivoCity

  • 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.

Approval for proposed MBC II acquisition obtained

  • 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