Mapletree Commercial Trust is “easing into a reopening” following a weak 1Q2021, year ending Jun 2021, owing to Singapore’s eight-week circuit breaker and the subsequent phase 1 in early June, says Maybank analyst Chua Su Tye in a Jul 24 note. Maybank is recommending “buy” on the company, with a target price of $2.15.
MCT is a retail and commercial REIT operating VivoCity, Singapore's largest mall, as well as extensive commercial space in the southern corridor.
Weaker retail performance saw revenue fall 10.5% y-o-y and 21.2% q-o-q in 1Q2021, while NPI dipped 10.7% y-o-y and 20.0% q-o-q, primarily due to Covid-19 rental rebates granted to eligible retail tenants during the quarter, notes Chua.
This was mitigated by the contribution from MBC II, or Mapletree Business City (Phase 2), which was acquired in Nov 2019. Located in Pasir Panjang, MBC II has a total net lettable area of 1.2 million square feet and comprises four blocks of business park space.
Chua notes its portfolio occupancy was stable at 97.1%, with a slight dip at VivoCity (from 99.6% to 98.3%) offset by an improvement at Mapletree Anson (97.8% to 100%). Its portfolio committed occupancy remains high at 98.2%, with MBC I, Mapletree Anson and MLHF fully occupied as of end-Jun 2020.
“[The company’s] balance sheet remains strong with an estimated $1.5 - 3.0 billion in debt headroom at 45 - 50% leverage limit. Valuations are undemanding at 5.2% FY2022 yield, given improved DPU visibility following its MBC II acquisition, and added traction from VivoCity’s recovery into the coming quarters,” says Chua.
Within VivoCity, revenue and NPI declined 56.7% y-o-y and 59.9% y-o-y, after falling 16.9% y-o-y and 20.5% y-o-y in its 4Q2020, while its shopper traffic and tenant sales plunged 78.5% y-o-y and 63.4% y-o-y with the mandated closure of the majority of its retail outlets and restrictions in non-essential activities during the circuit breaker months of April and May.
MCT has topped up its tenant support package by $6 million, on top of the initial $29 million, as it raised the rental rebate from 50% to 100% of fixed rent, which would allow its eligible tenants to gain approximately 4.0 months in fixed-rent waivers, notes Chua.
“[MCT’s] balance sheet remains strong; 33.7% leverage (was 33.3% at end-Mar 2020) and 4.1x interest cover. Its AUM [assets under management] profile has improved following the MBC II deal, as retail contribution has fallen to 36.6% (from 45.5%).”
As at 11.16am, units in MCT are trading at 2 cents higher, or 1.053% up, at $1.92.
