Friday, July 24, 2015

Mapletree Commercial Trust

Mapletree Commercial Trust: (S$1.46) Steady 1QFY16 results, but headwinds looming
MCT’s 1QFY16 results were in line after DPU notched up 3.1% y/y to 2.01¢ on distributable income of $42.5m (+3.8%), representing 24.5% of the street’s FY16 estimate.

Gross revenue rose 1.6% to $69.7m, with bulk of the improvement arising from higher rental at VivoCity.

However, the retail mall which contributes 66.4% of MCT’s total revenue saw an erosion in shopper traffic (-6.7%) and tenant sales (-2%) during the period. In addition, positive rental reversion softened to 14% from 18% in the prior quarter.

NPI bumped up by 5% to $54.3m as property operating expenses shrank 9%. The cost savings were primarily from lower electricity tariffs but were partially offset by higher property taxes and maintenance expenses.

Overall occupancy dipped 0.2ppt q/q to 95.5%, as PSA Building saw a sharp drop in occupancy to 91% (-4.4ppt), while weighted average lease to expiry marginally extended to 2.2 years from 2.1 years.

Although aggregate leverage held steady at 36.4%, MCT’s all-in borrowing cost crept up 0.13ppt q/q to 2.41%. The higher financing cost came at the gain of a longer average debt tenor of 4.1 years (4QFY15: 3.6 years) and rising short-term interest rates on its floating rate debt (70.6% fixed debt).

Going forward, headwinds loom over MCT’s retail portfolio amid subdued economic outlook in Singapore, slower tourist arrivals, tepid retail sales and tighter labor constraints. Office segment is not looking sanguine either as upcoming new and secondary office supply is likely to depress office rents.

The REIT currently trades at 1.2x P/B and offers an annualised 1QFY16 yield of 5.5%.

Latest broker ratings:
Deutsche maintains Hold with TP of $1.58
CIMB maintains Hold with TP of $1.54
Maybank-KE maintains Hold with TP of$1.43

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