Mapletree Commercial Trust - CGS-CIMB Research 2021-01-27: Recovering Well

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust - Recovering Well

VivoCity saw revenue, tenant sales and footfall improved q-o-q in 3QFY21.
Mapletree Commercial Trust's office/ business park remained resilient with high committed occupancy.
We raise our target price to S$2.26 but reiterate HOLD on Mapletree Commercial Trust given the limited upside.

Mapletree Commercial Trust (SGX:N2IU)’s) 9MFY21 revenue of S$348.7m (-1.9% y-o-y) and NPI of S$275.9m (-1.2% y-o-y) came in at 75% and 70% of our full-year forecast respectively. The decline in revenue and NPI was mainly due to rental rebates granted to eligible VivoCity tenants impacted by COVID-19 disruptions, offset by contribution from MBC II (acquired in Nov 2019).
Mapletree Commercial Trust has rendered a total of ~S$70m in rental assistance since the start of the pandemic, equivalent to 4.2 months of rental rebates.

VivoCity's revenue continued to improve on a q-o-q basis on reduced rental rebates. While 9MFY21 revenue declined 29.1% y-o-y to S$117.3m, the decline in 3QFY21 alone was only 7.4% y-o-y, indicating that its recovery is well on track.
Actual occupancy declined 2.3% points y-o-y to 96.9% but improved 0.9% points q-o-q. Committed occupancy stayed high at 99.5%.
Tenant sales continued to pick up on a q-o-q basis from ~78% of the previous year’s level in 2QFY21 to ~86% in 3QFY21; shopper traffic also improved from ~50% of previous year’s level in 2Q to 60%.
Despite the pandemic, VivoCity added new tenants which were well received by shoppers. Adidas Originals doubled its space at B1, creating its largest flagship store in Southeast Asia. Adidas will be opening another flagship store on Level 1 by 1QFY22, further defining VivoCity’s position as a key destination mall.

Weaker occupancy caused a 9MFY21 revenue decline for mTower (formerly known as PSA Building; -19.7% y-o-y to S$30.5m) and MBC I (-2.5% y-o-y to S$96.5m). However, we expect their revenues to improve as committed occupancy remains relatively high for both mTower (committed occ 88.4% vs actual occ of 71.1%) and MBC I (committed occ 98.2% vs actual occ of 95.2%).
The relatively weaker occupancy of mTower was due to the expiry of a major’s tenant short-term lease.
MBC II, Mapletree Anson and MLHF remained fully occupied with stable revenues.

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.
We believe shopper traffic should continue to improve going forward driven by the gradual return of the office crowd. We believe local shoppers would be able to partially make up the sales gap created by tourists as Singaporeans spend locally.
Given the clearer recovery path, we assume our previous terminal growth assumption of 2.5% (from 1.5%) and raise our DDM-based target price to S2.26. However, we reiterate HOLD on Mapletree Commercial Trust given the limited upside to its share price, in our view.
Upside/downside risks: faster-/slower-than-expected recovery in its tenants’ sales from the impact of COVID-19.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-01-27

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.26 UP 1.880