Friday, June 28, 2013
MCT: CS upgrade MCT to OUTPERFORM (from neutral) with a TP of $1.45 due to its recent share price weakness. CS believe the selling has been overdone as fundamentals continue to be resilient, underpinned by its quality retail assets (mainly VivoCity) and long leases at two of its three offices. House view this as an opportunity to accumulate quality at cheaper valuations. Despite noise concerning potential slowing visitation to Sentosa due to haze (and subsequent impact to VivoCity, due to its proximity), CS understand from management that feedback from mall managers seem to suggest that shopper traffic remains strong. Meanwhile, near-term vacancy risks at its offices are mitigated by the longer leases at BoaML HF and Mapletree Anson. Both VivoCity and BoAML HF make up 71% of NPI. At current levels, valuation for MCT is now looking attractive, where MCT now offers FY14 yields of 6.1% and trades on 1.1x P/B, in line with historical average. Maintain its DDM-based target price of S$1.45, which implies 32% total return.