Analysts are positive about Mapletree Commercial Trust (MCT), in light of the easing of safe distancing measures this week that stand to improve shopper traffic and tenant sales at VivoCity, as well as physical occupancy at its office and wider business park properties.
MCT has also recently reported its FY2022 ended March results, reporting revenue and net property income (NPI) growth of 4.3% and 3.1% y-o-y to $255.8 million and $198.8 million, respectively.
Distribution per unit (DPU) for MCT in FY2022 rose 0.4% to 9.53 cents including cash of $15.7 million retained in 4QFY2020. DPU came in at 5.14 cents for 2HFY2022.
To recap, MCT and Mapletree North Asia Commercial Trust (MNACT) planned for a merger earlier this year to create Mapletree Pan Asia Commercial Trust (MPACT). Under this merger, MCT acquires all units of MNACT in exchange for new units in MCT, or a mix of both cash and new MCT units.
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UOB Kay Hian Group Research analyst Jonathan Koh has kept a “buy” rating on MCT with an increased target price of $2.52 from $2.48.
MCT’s 2HFY2022 DPU was in line with the analyst’s expectations.
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Most notably, VivoCity was able to sustain positive rental reversion of 2.1% in spite of Covid-19, where actual occupancy edged higher by 0.2ppt q-o-q to 98.6% and committed occupancy staying high at 99.2%. This has led to 172 leases committed and retention rate healthy at 78.6%.
In addition, Dyson opened its largest demo store in Southeast Asia at VivoCity during the quarter, along with MCT providing rental rebates of 1.4 months of fixed rents to eligible retail tenants in FY2022, of which $5 million was disbursed in 4QFY2022.
Tenant sales increased 10% y-o-y to $224 million in 4QFY2022, in lieu of the series of safe distancing measures eased since January and pent-up consumption. As such, tenant sales have recovered back above pre-Covid-19 levels in 4QFY2022.
Meanwhile, the analyst has noticed a positive leasing momentum for the REIT’s office and business park assets. For instance, occupancy at Mapletree Business City (MBC) edged higher by 1.2ppt q-o-q to 94% in 4QFY2022.
MCT also has secured new Fast Moving Consumer Goods (FMCG) and technology tenants at MBC I, leading to committed occupancy at MBC higher at 97.3% as of March.
MCT will gradually ratchet up signing rents currently at about $6.50 per sq ft/month. In addition, actual occupancy for mTower has improved 9.7ppt q-o-q to 84.7% as MCT continues to backfill vacant spaces.
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Merrill Lynch HarbourFront (MLHF) maintained full occupancy and Google has renewed a substantial portion of its leases at MBC II in Nov 21.
Overall, MCT’s office/business park portfolio achieved positive rental reversion of 1.7%.
Similarly, CGS-CIMB Group Research analysts Eing Kar Mei and Lock Mun Yee have kept an “add” rating on MCT with an unchanged target price of $2.18.
Considering VivoCity’s positive revenue and NPI growth driven by higher occupancy of 98.6%, coupled with lower rental rebates and promising shopper traffic and tenant sales, the analysts expect VivoCity to benefit further from the relaxation of Covid-19 measures from 29 Mar.
Furthermore, the analysts are upbeat on the REIT’s growth in occupancy of its business parks and office assets.
In light of all their considerations of MCT, the analysts have decided to tweak their FY2023-FY2024 DPU forecasts up 0.31-0.52% post results.
Meanwhile, the analysts note that the proposed merger with MNACT is ongoing and believe that it could leapfrog MCT to be among the top 10 largest REITs in Asia and allow the enlarged entity to pursue accelerated growth opportunities.
“MCT’s proposed merger with MNACT is ongoing, with the extraordinary general meeting (EGM) on the issue targeted to be held by end-May 2022.”
Units in MCT closed at $1.91 on Apr 26, giving it a FY2023 P/B ratio of 1.09x and dividend yield of 5.16%, according to CGS-CIMB estimates.
Photo: MNACT
