Mapletree Commercial Trust 4QFY20 - UOB Kay Hian 2020-04-24: Vivocity Feeling The Heat From COVID-19 Pandemic

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust 4QFY20 - Vivocity Feeling The Heat From COVID-19 Pandemic

We are surprised by the huge S$43.7m distribution retained, given that Mapletree Commercial Trust has a balanced portfolio with the mix between office/business park and retail at 63:37 by valuation.
VivoCity suffered a 3.4% drop in tenant sales in FY20. On a brighter note, the timely acquisition of MBC II has strengthened the office/business park portfolio, which provides diversification and resiliency.

Mapletree Commercial Trust (SGX:N2IU) reported DPU of 0.91 S cents for 4QFY20, down 60.6% y-o-y. Management adopted a prudent approach and retained S$43.7m by way of capital allowance claims and capital distribution retention of distribution in order to position itself to weather headwinds from the COVID-19 pandemic.

Revenue contribution from VivoCity contracted 16.9% y-o-y to S$44.9m, due to safe distancing measures implemented nationwide to combat the COVID-19 pandemic. VivoCity’s actual occupancy improved 0.4ppt q-o-q to 99.6%.
Shopper traffic and tenant sales were lower by 6.8% and 3.4% respectively in FY20, driven by an inevitable outcome of the mandatory crowd management measures imposed by the government as well as closures of tenants in non-essential services in 4QFY20.

Mapletree Commercial Trust has rolled out three rental relief packages totalling S$50m to help eligible retail tenants during this challenging period. The packages include up to 3.5 months of rental rebates for eligible tenants, including 1.1 months of property tax rebates.

Occupancies at PSA Building was 88.1% (-1ppt q-o-q), Mapletree Anson 97.8% (+0.8ppt q-o-q) and MLHF 100% (flat q-o-q). Gross revenue and NPI from office/business park properties were up 39.9% and 41.2% y-o-y respectively in 4QFY20, driven largely by added revenue contribution of S$22.7m from newly-acquired MBC II.
Revenue contribution from PSA building declined 11.3% y-o-y due to lower occupancy as well as rental rebates granted to eligible tenants at Alexandra Retail Centre (ARC).

Mapletree Commercial Trust achieved rental reversion of +5.0% on a portfolio basis, driven mainly by VivoCity (+6.7%). Retention rate for VivoCity was also healthy at 89.3%.

Weighted average term to maturity of debt is 4.2 years, while weighted average cost of debt was stable at 2.94%. 78.9% of Mapletree Commercial Trust’s total debt has been hedged on fixed interest rates. Mapletree Commercial Trust has refinanced all term loans due in FY20, leaving a balance of S$160m of medium term notes due in the same period. It has approximately S$321m of cash and undrawn committed facilities, providing Mapletree Commercial Trust with ample financial flexibility.

We have conservatively assumed that occupancy at VivoCity falls to 85% by end-20. We expect gradual recovery and normalisation in occupancy in 2021. We have assumed negative rental reversion of 20% for VivoCity in 2020.
We cut our FY21 DPU forecast by 13.3% due to additional rental rebate of half a month each in June and July.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-04-24

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