Mapletree Commercial Trust - CGS-CIMB Research 2020-10-23: Office & Business Rentals Still Resilient


Mapletree Commercial Trust - Office & Business Rentals Still Resilient

  • Mapletree Commercial Trust’s 1HFY21 DPU of 4.17 Scts (-9.9% y-o-y) came in within expectations.
  • Negative rental reversion for VivoCity; offices/business parks still resilient.
  • Reiterate HOLD with an unchanged DDM-based Target Price.

In-line 1HFY3/21 results; part of retained income returned

  • Mapletree Commercial Trust (SGX:N2IU)’s 1HFY3/21 revenue declined 2.5%, while NPI declined 2.6%, mainly due to rental rebates granted to eligible VivoCity tenants impacted by the COVID-19 disruptions. Mapletree Commercial Trust has committed > 4 months of rental rebates (including property tax rebates and cash grants from the government) to its retail tenants since Mar20.
  • The revenue decline was partially mitigated by contributions from MBC II (acquired in Nov 2019). Excluding MBC II, revenue would have declined 21% y-o-y.
  • Mapletree Commercial Trust's 1HFY21 DPU of 4.17 Scts (-9.9% y-o-y) accounted for 46.9% of our full-year forecast. Mapletree Commercial Trust also released S$15m of the S$43.7m income retained from 4QFY20.

VivoCity saw inevitable negative rental reversions

  • VivoCity's 1HFY21 revenue declined 41% y-o-y, mainly due to rental rebates given to tenants. Rental reversion decline 8.9% in 1HFY21 but actual occupancy remained high at 96% (-2.3% q-o-q), with committed occupancy at 97.9%. Tenant sales and shopper traffic in 2QFY21 recovered further to 78% and 49% of last year’s level.
  • VivoCity reconfigured its mini-anchor space on Level 2 in 1H20, which achieved > 30% ROI on a stabilised basis. It is also revitalising its Level 1 F&B cluster, which would give a c.30% ROI.

Office/business park continued to be relatively resilient

  • Within the office/business park segment, all assets except Mapletree Anson (MA) reported y-o-y decline in revenue in 1HFY20.
  • PSA Building (PSAB, 10% of total portfolio revenue) registered the largest decline of 16.5%, due to the expiry of a major’s tenant short-term lease; committed occupancy of the building remains relatively high at 87.9%.
  • MLHF and MBC I’s revenue decline slightly by 1.5 to 2.3% y-o-y.
  • Overall office/business park rental reversion declined 1.6%. Excluding the effect of the major tenant’s lease expiry in PSAB, rental reversion would be +2.9%.
  • Overall portfolio valuation declined 2.3% vs. valuation as at 4QFY20, with no change of cap rate.

Reiterate HOLD with an unchanged DDM-based target price

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-10-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.880 SAME 1.880