Mapletree Commercial Trust - Maybank Kim Eng 2020-10-23: Cushioning Retail Headwinds


Mapletree Commercial Trust - Cushioning Retail Headwinds

Mapletree Commercial Trust's 1HFY21 In line, maintain BUY

  • Mapletree Commercial Trust (SGX:N2IU)’s 1HFY21 (Apr 2020 to Sep 2020) DPU was down 9.9% y-o-y, and in line (with consensus, MKE) as it returned a-third (SGD15.0m) of the capital retained in 4Q20. See Mapletree Commercial Trust's announcements.
  • VivoCity has entered into a negative reversion cycle amid slow demand, but its asset management know-how should help cushion occupancies and NPI. Contributions from its office and business park assets have risen and should continue to support DPU visibility.
  • We maintain our forecast and DDM-based Target Price (COE: 6.0%, 2.0%).
  • Mapletree Commercial Trust's balance sheet remains strong with an estimated SGD1.8-5-3.0b in debt headroom. Valuations are undemanding at 4.9% FY22 yield.
  • BUY.

Lower occupancies, lift from MBC II

  • Mapletree Commercial Trust's revenue fell 5.6% y-o-y but rose 18.0% q-o-q in 2Q21 while NPI dipped 5.5% y-o-y and climbed 17.3% q-o-q as rental rebates to its affected tenants eased off from 1Q21. Excluding the contribution from MBC II, acquired in Nov 2019, revenue and NPI would have declined by 13.1% y-o-y and 13.7% y-o-y.
  • Mapletree Commercial Trust's portfolio occupancy dipped from 97.1% to 95.3%, with the expiry of PSA Corp’s short-term lease (at PSA Building) while committed occupancy as of end-Sep 2020 remaining high at 97.7% with MBC II, Mapletree Anson and MLHF all fully occupied. Displacement tenants from upcoming CBD redevelopments should bolster occupancies at MBC.

VivoCity recovering, negative reversions to persist

  • Revenue and NPI at VivoCity fell 24.9% y-o-y and 27.1% y-o-y, but jumped 80.6% q-o-q and 89.0% q-o-q. Rental reversion for its retail assets (including ARQ) was -8.9% for 1H21, from +6.7% for FY20, reflecting softer market rents in line with weaker demand in FY21-22, according to management. Tenant sales are back to 78.0% of pre-Covid levels, from 36.6% in 1Q21, and ahead of a 50.0% improvement in shopper traffic.
  • A redesign of Best Denki’s footprint at level 2 to add Love, Bonito (at 4,300 sf) has achieved > 30% ROI, while the rejuvenation of its promenade-facing F&B cluster to accommodate four new tenancies by 3Q21 aims for similar returns.

Cap rates stable, balance sheet strong

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-10-23
SGX Stock Analyst Report BUY MAINTAIN BUY 2.150 SAME 2.150