Mapletree Commercial Trust - Maybank Kim Eng 2020-01-23: Acquisition Priced In

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust - Acquisition Priced In

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)’s 3Q20 DPU was ahead of our estimate by 2% but in line with the street. We raised DPU forecasts by 2% due to the better-than-expected accretion from the MBC II acquisition (at +5.6%), financed by its SGD918.5m equity fund raising. See Mapletree Commercial Trust Announcements.

Our DDM-based Target Price rises slightly (COE: 6.1%, 2.0%, see Mapletree Commercial Trust Target Price). But maintain HOLD as it’s fairly valued to slightly-stretched following the rally (up 45% in 12 months) due to the completion of its widely-anticipated MBC II acquisition, and now offers 4% dividend yield.
We prefer industrial REITs Ascendas REIT (SGX:A17U) (BUY, Target Price SGD3.35) and Mapletree Industrial Trust (SGX:ME8U) (BUY, Target Price SGD2.95), and hospitality names CDL Hospitality Trusts (SGX:J85) (BUY, Target Price SGD1.80) and Far East Hospitality Trust (SGX:Q5T) (BUY, Target Price SGD0.80) for their higher yields and stronger DPU growth profiles.

Mapletree Commercial Trust's 3Q20 revenue and NPI jumped 16.7% y-o-y and 17.6% y-o-y with the addition of MBC II (from 1 Nov 2019) and higher contribution across all properties, except Mapletree Anson (revenue and NPI down 1.7% y-o-y and 1.0% y-o-y).
Excluding MBC II, Mapletree Commercial Trust’s existing assets delivered 3.5% y-o-y and 3.9% y-o-y growth in revenue and NPI. Its portfolio occupancy improved from 96.1% to 98.3%, helped by MBC I (up from 98.9% to 99.7%) and backfilling at Mapletree Anson (from 75.1% to 97.0%).
Committed occupancies remain high at 90.6%-100.0% as of end-Dec 2019. Rental reversion was at +6.7% for its retail assets (VivoCity), from +6.8% in 2Q20, and at +0.7% for its office/ business parks.

VivoCity’s revenue and NPI increased 2.3% y-o-y and 2.7% y-o-y, even as shopper traffic and tenant sales fell 2.2% y-o-y and 0.5% y-o-y. We see stronger sales growth momentum in the coming quarters as contributions from grocer NTUC Fairprice and new F&B tenancies gain traction. We expect mid-single digit reversions for the mall for FY20-21E.

Following its MBC II deal, its low 33.4% leverage and SGD1.9b in debt headroom should support further opportunities from its 1.8m sf NLA sponsor pipeline. But acquisitions are unlikely in the short term, in our view.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-01-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.450 UP 2.350