Mapletree Commercial Trust - CGS-CIMB Research 2020-07-23: Impacted By VivoCity

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust - Impacted By VivoCity

Mapletree Commercial Trust’s 1QFY3/21 NPI was a slight miss at 20% of our full-year forecast.
Revenue was mainly impacted by rental waivers.
Maintain HOLD, with a lower Target Price of S$1.88.

Mapletree Commercial Trust (SGX:N2IU)’s 1QFY21 revenue declined 10.5% while NPI declined 10.7%, mainly due to rental rebates granted to eligible tenants impacted by Covid-19. Mapletree Commercial Trust has committed ~4 months of rental rebates (include property tax rebates and cash grant from the government), the highest quantum among the retail REITs so far.
The decline was partially mitigated by contribution from MBC II which it acquired in Nov 2019. Excluding MBC II, revenue would have declined ~29% y-o-y.
Mapletree Commercial Trust's 1QFY21 NPI of S$78.9m accounted for 20% of our FY20F; this is slightly below our expectation after taking account of the rental rebates.

VivoCity's 1QFY21 revenue declined 56.7% y-o-y, mainly due to rental rebates given to tenants as well as slightly lower occupancy rate of 98.3% at end-Jun vs. 99.1% last year. Rental reversion was not disclosed.
Shopper traffic plunged 78.5% y-o-y to 2.8m while tenant sales declined 63.4% y-o-y to S$76.5m in 1QFY20 which was not surprising as the mall was largely closed during the circuit breaker period. However, since its reopening, VivoCity has been receiving encouraging traffic recovery.
Management expects VivoCity to take some time to get back to pre-Covid-19 levels as the majority of Singaporeans are still working from home while its borders remain close.

Within the office/business park segment, Mapletree Business City I (MBC I), PSA Building (PSAB) and Merrill Lynch Harbour Front (MLHF) reported y-o-y revenue decline of 3.1%,15.7% and 2.4% to S$31.8m, S$10.8m and S$4.9m respectively due to lower y-o-y occupancy rates. MBC I and PSAB experienced a y-o-y occupancy decline of 2.5% pts and 1.9% pts to 96.4% and 88.7% respectively.
Committed occupancy, however, remained relatively high at 98.7% and 90.4% respectively. MLHF remained 100% occupied. The only office building which reported positive revenue was Mapletree Ason (MA). MA had been a weak asset but it achieved 100% occupancy rate in Jun vs. 92.7% a year ago despite Covid-19.

Compared with its pure retail peers, Mapletree Commercial Trust will be less impacted by Covid-19, thanks to its office assets and quality business park. We reduce our FY21-22F DPU by ~3-4% to factor in mainly weaker rental reversion for VivoCity.
We maintain HOLD on Mapletree Commercial Trust as we see few re-rating catalysts going forward and believe the market has priced in its more resilient income.
See Mapletree Commercial Trust Share Price; Mapletree Commercial Trust Target Price; Mapletree Commercial Trust Analyst Reports; Mapletree Commercial Trust Dividend History; Mapletree Commercial Trust Announcements; Mapletree Commercial Trust Latest News.
Upside/down risk includes faster-/slower-than expected recovery from Covid-19.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.88 DOWN 1.940