Mapletree Commercial Trust - OCBC Investment 2020-10-23: Some Bright Spots But Mostly Challenging


Mapletree Commercial Trust - Some Bright Spots But Mostly Challenging

  • Mapletree Commercial Trust's 1HFY21 DPU fell 9.9% y-o-y.
  • Softening in rental reversions and occupancy.
  • Portfolio valuation saw a decline of 0.2-3.5%.

Mapletree Commercial Trust's 1HFY21 results within our expectations

  • Mapletree Commercial Trust (SGX:N2IU) reported its 1HFY21 results which met our expectations. Gross revenue and NPI fell 2.5% and 2.6% y-o-y to S$218.7m and S$171.5m, respectively. This was due to rental rebates granted to eligible tenants, but partially offset by contribution from Mapletree Business City II which was acquired in Nov 2019.
  • DPU fell 9.9% y-o-y to 4.17 S cents, as management released S$15.0m of capital allowance claims and retained capital distribution back to unitholders. There is a balance of S$28. 7m, which Mapletree Commercial Trust intends to release in the future but has not committed on a timeline.
  • Mapletree Commercial Trust's 1HFY21 DPU formed 49.9% of our full-year forecast.

Rental reversions likely to stay negative

  • In terms of portfolio occupancy, this fell 1.8 ppt q-o-q to 95. 3%, due mainly to a significant drop at PSA Building ( -19 ppt to 69.7%) following the expiry of a major tenant’s short-term lease. However, committed portfolio occupancy was higher at 97.7% as Mapletree Commercial Trust has managed to backfill some of the vacant spaces.
  • Portfolio rental reversions were -8.9% in 1HFY21 for Retail and -1.6% for Office/Business Park, such that the overall portfolio figure came in at -3.7%. For Retail, the drag was attributed largely to Fashion tenants, and management is aiming to keep rental reversions within the -10% level.
  • Given the challenging operating environment, Mapletree Commercial Trust is open to accepting a reduction in base rents with a higher gross turnover (GTO) rental component, but is not willing to adopt a full GTO rent lease structure. Shopper traffic and tenant sales at VivoCity slumped 51% and 22% y-o-y to 6.8m and S$183.3m, respectively, in 2QFY21, but there was a firm pick-up in momentum from 1QFY21 following the Phase 2 re-opening.
  • Tenant sales have recovered to ~80% of pre-COVID-19 levels, while recovery in footfall is slower at ~50%. There was some encouraging news, as Mapletree Commercial Trust managed to refresh its retail offerings at VivoCity. This includes reconfiguring part of the Best Denki space and bringing it Love, Bonito, a home-grown online-to-offline fashion retailer. Mapletree Commercial Trust also brought in four new F&B tenants including Shake Shack. These initiatives are expected to achieve ROI of ~30% on a stabilised basis.

Portfolio valuation took a slight impairment

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-10-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.97 SAME 1.97