MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
Mapletree Commercial Trust - 1HFY22 Oasis Of Positive Reversions Despite Tightened COVID-19 Restrictions
- VivoCity achieved positive rental reversion of 3.5% in 1HFY22, a remarkable feat given the cessation of dining in at F&B outlets under Phase 2 (Heightened Alert) from 22 Jul to 9 Aug 21. Revenue from MBC grew 1.6% y-o-y in 1HFY22 due to built-in rental escalation and higher revenue from car park.
- Mapletree Commercial Trust (SGX:N2IU)’s properties are strategically located to benefit from GSW and Sentosa-Brani master plan. Aggregate leverage is low at 33.7%. Maintain BUY. Target price: S$2.48.
Mapletree Commercial Trust (MCT) reported DPU of 4.39 cents for 1HFY22 (+5.3% y-o-y), in line with expectations.
- VivoCity: Remarkable feat of generating positive reversion. Gross revenue and NPI from VivoCity grew 28.2% and 27.6% y-o-y respectively in 1HFY22. Mapletree Commercial Trust provided lower rental rebates of 1.1 months of fixed rents to eligible retail tenants, about half the level dished out last year. Committed occupancy remains high at 99.6%. VivoCity achieved positive rental reversion of 3.5% in 1HFY22. VivoCity introduced Lululemon Athletica for high-performance sports gear and Mr. Coconut for coconut-based beverages. Existing tenants Marks & Spencer, Paradise Dynasty, Gram Cafe & Pancakes and Timezone underwent expansions and revamps.
- Shopper traffic and tenant sales slipped marginally by only 3% and 4% y-o-y respectively in 2QFY22 despite the cessation of dining in at F&B outlets under Phase 2 (Heightened Alert) from 22 Jul to 9 Aug 21. These accounted for 47% and 75% of pre- COVID-19 levels respectively. Tenant sales rebounded 9% q-o-q. VivoCity has weathered the lack of an office crowd due to prevalence of work-from-home and an absence of tourists that usually flock to Sentosa.
- Office/Business Park: Substantial renewals with mild positive reversions. Gross revenue from Mapletree Business City (MBC) grew 1.6% y-o-y in 1HFY22 due to built-in rental escalation and higher revenue from car park. Occupancy for MBC was 94%, and Mapletree Commercial Trust has secured new tenants to bring committed occupancy to 97% as of Sep 21. Google has renewed a substantial portion of its leases. Revenue from mTower increased 22.2% due to one-off compensation of about S$7m for pre-termination of a lease. Committed occupancy for mTower remains low at 80.4% and management continues to work on backfilling the vacant space. Merrill Lynch HarbourFront (MLHF) maintained full occupancy. Mapletree Commercial Trust’s office/business park portfolio achieved positive rental reversion of 1.5% and has substantially extended its WALE from 2.6 to 3.3 years.
- Maintains resilient balance sheet with low aggregate leverage of 33.7%. Mapletree Commercial Trust’s average all-in cost of debt was stable at 2.42%. It has cash and undrawn committed facilities of more than S$500m, which provides financial flexibility. Its debt maturity is well spread out with no more than 24% of debt due in any financial year. Mapletree Commercial Trust has completed all refinancing for FY22.
Potential easing forthcoming.
- Current elevated new cases of COVID-19 infections are expected to persist for another 3-6 months before reaching a new normal of manageable new cases at a few hundred per day. If the weekly growth rate for COVID-19 infection falls below 1x, the Multi-ministry Taskforce would consider easing safe distancing measures. The government could allow groups of up to five household members to dine in at F&B outlets, which would usher shoppers back to VovoCity.
- More employees working from offices in 2022. From 1 Jan 22, employees who are fully vaccinated or have recovered from COVID-19 are able to work at their offices. Unvaccinated employees must be tested negative for COVID-19 before they can return to their offices. Thus, physical occupancy for Mapletree Commercial Trust’s office/business park properties is expected to improve significantly in 2022.
Strategic location benefitting from government’s long-term plans.
- Mapletree Commercial Trust has five properties located in the HarbourFront area, which accounted for 91.5% of its assets under management (AUM) in aggregate. It will benefit immensely from the development of the Greater Southern Waterfront (GSW) and rejuvenation of Sentosa Island and Pulau Brani.
- HarbourFront precinct at the heart of GSW. GSW covers 1,000ha of land stretching across the southern coastline from Pasir Panjang to Marina East which will be freed up for development after the City Terminals and Pasir Panjang Terminal relocate to Tuas Mega Port. Keppel Club will be one of the first developments in the GSW. Up to 9,000 new residential homes (both public and private) could be built on the Keppel Club site when the current lease expires in 2021. Residents could easily access VivoCity via the MRT through Labrador Park and Telok Blangah MRT stations on the Circle line.
- Beneficiary of Sentosa-Brani Master Plan. Sentosa Island and Pulau Brani will be redeveloped into five distinct zones, namely the Vibrant Cluster, Island Heart, Waterfront, Ridgeline and Beachfront. Each zone will deliver unique experiences, such as nature and heritage trails, adventure attractions, eco-resorts, water shows and beach events. Vibrant Cluster, which spans both islands, will have large-scale attractions. Waterfront on Pulau Brani will house a “futuristic” discovery park.
- Sentosa-Brani Master Plan will be rolled out over the next 20-30 years. Phase 1 of the Master Plan named Sentosa Sensoryscape, a two-tiered linkway connecting Resorts World Sentosa and the Southern Beaches, is scheduled to complete in 2022.
Mapletree Commercial Trust - Earnings revision
- We have kept our DPU forecast relatively unchanged.
- Maintain BUY. Our target price of S$2.48 is based on DDM (cost of equity: 5.75%, terminal growth: 1.8%).
- See
- Catalysts:
- Gradual but steady recovery in shopper traffic and tenant sales, accompanied by progressive easing of social distancing measures.
- GSW will increase the population of residents staying within VivoCity’s catchment area. Its office buildings, namely MBC I, MBC II, mTower and Merrill Lynch HarbourFront (MLHF), will benefit from an expanded pool of potential employees.
- Development of tourism attractions at Sentosa and Pulau Brani, which will improve shopper traffic and tenant sales at VivoCity.
Jonathan KOH CFA
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-11-01
SGX Stock
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