Mapletree Commercial Trust

Mapletree Commercial Trust (MCT): Takeaways from Deutsche non-deal roadshow with mgt in HK.
Mgt reiterated their commitment to abstain from any acquisition/capital raising within 12-mths from IPO (27th Apr) which investors read as a positive signal. Apart from DPU accretion, market conditions would have to be conducive as the acquisition of MBC (valued at $1,035m as at Mar ‘10 or 36% of its portfolio) would entail both debt & equity raising. There were no disagreements on the quality of MBC with stable income from long 5-10 yr leases, embedded rent escalations and good credit worthy tenants. Leasing risk is minimal as MBC is already 90% leased.

On VivoCity, shopper traffic & tenant sales continue to be firm (+13.9% and 9.4% rptvly in 1H11). The Circle Line opening has provided a boost to shopper traffic (+20% MoM in Oct) with the entrance next to MRT seeing a doubling in flow. Occupancy cost of ~17% after recent renewals is comfortable and lease negotiations for FY12/13 are progressing well (36% due out of which 10% has been concluded).
Mgt has been progressively restructuring the leases to incorporate a higher % of step-ups (fr 38.5% to >50% for Vivo) and raising the % of base rents to enhance earnings stability.

Mgt's optimal gearing remains at 40% (currently 38.5%) with limited refinancing and interest rate risk (85% fixed, earliest expiry in Apr 13). Liquidity in the SG debt market remains comfortable and MCT does not have any European bank exposure.

On AEI, Alexandra Retail Centre (ARC) will be progressively opened fr Dec with >50% of space pre-committed and should benefit from the MRT access. Mgt is still studying AEI plans for Vivo which may involve the conversion of car park space in B1 to retail space and improvements to layout and tenant mix in other floors.

Deutsche has a Buy rating with TP $1.