MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
Mapletree Commercial Trust 1HFY21 - MBC I & MBC II Provide Bastion Of Stability
- Mapletree Commercial Trust’s 1HFY21 results were above our expectations due to the release of S$15m previously retained in 4QFY20.
- Gross revenue from VivoCity dropped 40.5% y-o-y. MBC I and MBC II provided stable contribution of S$63.7m and S$42.1m respectively, equivalent to 48% of total gross revenue.
- VivoCity is affected by the absence of tourist spending, but MBC I and MBC II will benefit from demand from technology and pharmaceutical companies.
- Maintain BUY. Target price: S$2.35.
Mapletree Commercial Trust reported 1HFY21 results
- Mapletree Commercial Trust (SGX:N2IU) reported 1HFY21 DPU of 4.17 cents, down 9.9% y-o-y. It released S$15m in 1HFY21 from the S$43.7m retained during 4QFY20 through capital allowance claims.
Newly-acquired MBC II delivered goods.
- Gross revenue and net property income (NPI) declined by a marginal 2.5% and 2.6% y-o-y respectively in 1HFY21. Gross revenue from VivoCity fell 40.5% y-o-y due to rental rebates disbursed to eligible retail tenants (1QFY21: - 57% y-o-y, 2QFY21: -25% y-o-y).
- Contribution from Mapletree Business City (MBC) I was stable at S$63.7m. MBC II, which was acquired in Nov 19, contributed S$42.1m or 19.2% of total gross revenue. The three properties accounted for 78.3% of total NPI.
Portfolio occupancy eased slightly by 1.8ppt q-o-q to 95.3% in 2QFY21.
- Occupancy at VivoCity dropped 2.3ppt q-o-q to 96%. Occupancy at PSA Building dropped 19ppt q-o-q to 69.7% due to the expiry of short-term lease for PSA Corporation, but the vacant space has since been backfilled (committed occupancy: 87.9%).
- MBC II, Mapletree Anson and MLHF registered full occupancy of 100%.
Office/business park properties generated positive rental reversion.
- VivoCity experienced negative rental reversion of 8.9% in 1HFY21. Management targets to maintain rental reversion within -10%. Rental reversion for its office/business park properties was a negative 1.6%. Excluding the impact of expiry of short-term lease for PSA Corporation, rental reversion for office/business park would be a positive 2.9%.
Maintained robust balance sheet.
- Management will exercise prudence in managing its balance sheet due to uncertainties created by the COVID-19 pandemic. It has redeemed S$160m of Fixed Rate Notes due in Aug 20 and refinanced S$369m of term loans ahead of expiry. It has also refinanced bank debt of S$98m in October. Thus, Mapletree Commercial Trust has completed refinancing for all its bank borrowings due in FY21 and FY22. In addition, it has undrawn committed credit facilities of more than S$600m.
Aggregate leverage low at 33.8%.
- Debt maturity is well spread out with no more than 21% of debt due in any financial year. Weighted average cost of debt has dropped 43bp y-o-y to 2.57%, compared to 3.00% a year ago.
Mild drop in NAV per unit.
- Mapletree Commercial Trust has recognised change in fair value of its investment properties of -S$204m. The lower valuations were mainly due to the negative impact of the COVID-19 pandemic on rents and future growth, while cap rates have remained unchanged.
- VivoCity accounted for more than half of the change in Mapletree Commercial Trust's fair value. NAV per unit has dropped 3% h-o-h to S$1.71.
Recovery underway at VivoCity.
- Tenant sales dropped by 22% y-o-y in 2QFY21, a significant moderation compared to a fall of 63% y-o-y in 1QFY21. Rebound in tenant sales has outpaced shopper traffic.
- Tenant sales are affected by:
- lack of office crowd (gradually recovering as more office workers are allowed to work from office); and
- absence of tourist spending (management estimates that tourists accounted for 25% of tenant sales).
- VivoCity accounted for 36% of AUM as of Sep 20.
Further enhancing VivoCity.
- Mapletree Commercial Trust has reconfigured a portion of mini anchor space occupied by Best Denki at Level 2 (4,300sf) to accommodate online-to-offline fashion retailer Love, Bonito. It has also commenced asset enhancement works at the promenade-facing F&B cluster on Level 1. The four new F&B tenants are Afuri Ramen, Green Common, Hoshino Coffee and Shake Shack. The reconfiguration is expected to complete in 3QFY21. Both projects are expected to deliver ROI of 30%.
MBC I and MBC II provide stability.
- Business park space benefits from increased demand from technology and pharmaceutical companies. In particular, Mapletree Commercial Trust is optimistic on demand from Chinese technology giants. MBC I and MBC II, which accounted for 51% of total NPI, provides a bastion of stability.
Prime beneficiary of Sentosa-Brani Master Plan.
- Sentosa Island and Pulau Brani will be redeveloped into five distinct zones, namely Vibrant Cluster, Island Heart, Waterfront, Ridgeline and Beachfront. Each zone will deliver its unique experience, such as nature and heritage trails, adventure attractions, eco-resorts, water shows and beach events. The Vibrant Cluster zone, which spans both islands, will have large-scale attractions. The Waterfront zone on Pulau Brani will house a “futuristic” discovery park.
- Mapletree Commercial Trust will benefit immensely from development of the GSW and rejuvenation of Sentosa Island and Pulau Brani. It has five properties located in the HabourFront area, which accounted for 91.4% of its portfolio valuation in aggregate.
Maintain BUY
- We have trimmed our Mapletree Commercial Trust's FY22 dividend forecast by 3.8% due to full impact of negative rental reversion experienced in FY21. We keep our FY23 dividend forecast relatively unchanged.
- Maintain BUY. Our target price of S$2.35 is based on DDM (required rate of return: 5.75%, terminal growth: 1.8%).
- 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.
- Mapletree Commercial Trust Share Price catalyst:
- Gradual but steady recovery in shopper traffic and tenant sales, accompanied by progressive easing of social distancing measures.
- Development of attractions at Sentosa, Pulau Brani and the Greater Southern Gateway.
Jonathan KOH CFA
UOB Kay Hian Research
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Peihao LOKE
UOB Kay Hian
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https://research.uobkayhian.com/
2020-10-26
SGX Stock
Analyst Report
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