MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
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
- We believe shopper traffic and tenant sales should continue to improve towards the year-end, driven by the holiday season. Retail and office rental reversions, though, are likely to be under near-term pressure given weak demand.
- Management hopes to keep VivoCity’s negative rental reversion within -10% in FY21F.
- We have imputed a -8% rental reversion for VivoCity and 0 to -3% for offices/business parks into our FY21F forecast. Grade A business parks like MBC (48% of 1HFY21 revenue) should provide income support in our view.
- Reiterate HOLD on Mapletree Commercial Trust, as we believe 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/downside risks: faster-/slower-than-expected recovery from COVID-19.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-10-23
SGX Stock
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