Mapletree Commercial Trust

Mapletree Commercial Trust: 3QFY16 in line. DPU was flat at 2.08¢, while distributable income inched up 1.1% to $44.2m.

Revenue climbed 1.2% to $73.8m, while NPI rose 3.5% to $56.6m as positive contributions from VivoCity were offset by lower revenue from Mapletree Anson and PSAB. Property expenses also fell from lower utilities expenses.

Retail rents rose 12.6% while office rents expanded 8.7%, on the back of 87.8% and 63.7% tenant retention for retail and office respectively. At VivoCity, shopper traffic fell 1.9% while tenant sales rose 2.5%

Portfolio occupancy was 98.4% (+1.5ppt q/q) with WALE of 2.3 years. 21.9% of retail leases and 0.8% of office leases are up for renewal in 2017.

Aggregate leverage was steady at 36.3%, with weighted average cost of debt at 2.47% (2QFY15: 2.4%).

On growth, MCT announced an AEI to strengthen its F&B offerings on Basement 2 of VivoCity by enhancing space utilisation. The $6.1m AEI will begin in 4QFY16 and will be completed in phases by end 1HFY17.

In general, both the retail and office rental outlook is expected to be tepid amid an onslaught of supply. For retail, compounding supply-side fears is a cautious demand stance, as tenants hold back extension plans to grasp new consumer behaviour and technology. Leases are also taking longer to be renewed amid a tepid retail environment.

Nevertheless, MCT cites its expectations for performance to remain resilient, as its assets are within stable commercial hubs.

MCT is currently trading at 6.3% annualized 3QFY16 yield and 1.06x P/B.

Latest broker ratings:
Deutsche Bank maintains Buy with TP of $1.45
JPMorgan maintains Underweight with TP of $1.30