Mapletree Commercial Trust - Maybank Kim Eng 2021-01-28: Recovery Underway

MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Mapletree Commercial Trust - Recovery Underway

Mapletree Commercial Trust (SGX:N2IU)’s revenue and NPI recovered further in 3Q21 (Oct 2020 to Dec 2020), led by a stronger q-o-q performance at VivoCity, amid a rebound in shopper traffic and tenant sales. Contributions from its office and business park assets have risen and should continue to support DPU visibility.
Mapletree Commercial Trust's fundamentals are intact, with its AUM now more resilient and backed by improving domestic demand-led drivers. We maintain our forecasts, but raise our DDM-based target price to S$2.30 (with lower COE from 6.0% to 5.7%).

Mapletree Commercial Trust's balance sheet remains strong with an estimated S$1.8-5-3.0b debt headroom. Valuations are undemanding at 4.5% FY22E yield on the back of recovering DPU.

Mapletree Commercial Trust's revenue fell 1.0% y-o-y in 3Q21 but rose 9.8% q-o-q, while NPI increased at 1.1% y-o-y and 12.8% q-o-q, with the easing of COVID-19 rental rebates, and higher contribution from MBC II, which was acquired in Nov 2019.
Portfolio occupancy dipped q-o-q from 95.3% to 94.7% due to transitory vacancies at MBC I (which fell from 97.9% to 95.2%), but committed occupancy remains high at 98.1%, with MBC II, Mapletree Anson and MLHF fully committed as of end-Dec 2020.
We believe tenants displaced by upcoming CBD redevelopments should bolster occupancy and rents at MBC.

Mapletree Commercial Trust's revenue and NPI at VivoCity declined by 7.3% y-o-y and 5.0% y-o-y, but jumped 25.7% q-o-q and 32.3% q-o-q respectively, driven by the progressive recovery in both shopper traffic and tenant sales. The latter has returned to 86% of pre-Covid levels, improving from 78.0% in 2Q21 and 36.6% in 1Q21, and ahead of the ~60% recovery in shopper traffic.
The rejuvenation of its promenade-facing F&B cluster to accommodate four new tenants during the quarter aims for ~30% ROI at a steady state, while Adidas doubled its footprint to 6,000 sqft at Basement 1, and will open another flagship store by 1Q22.

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Mapletree Commercial Trust's balance sheet remains strong with gearing stable at 34.0% (from 33.7% in 2Q21). Interest cover is at 4.2x while borrowing costs fell 6bps to 2.51%. Its AUM profile has improved following the MBC II deal, as retail contribution has fallen to ~37% (from ~45%).

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-28

SGX Stock Analyst Report BUY MAINTAIN BUY 2.300 UP 2.150