SINGAPORE (July 29): VivoCity, Singapore’s largest shopping mall, launched its retail extension of its Basement 1 area in July last year as part of the mall’s $16 million asset enhancement initiative (AEI) announced back in Jan 2016 and completed in FY19.
As part of the AEI, the mall also opened a 32,000 sq ft public library and introduced more F&B offerings. VivoCity is also sporting a new hypermarket – NTUC FairPrice – that soft-opened on July 16 this year, replacing the previous tenant Giant.
VivoCity is just one of the properties in Mapletree Commercial Trust’s (MCT) portfolio that also includes Mapletree Business City I (MBC I), PSA Building, Mapletree Anson and Bank of America Merrill Lynch Harbourfront (MLHF).
In its latest 1Q20 results, MCT recorded a 5.2% y-o-y increase in revenue contribution from VivoCity to $53.3 million, with the mall contributing to 47.6% of the trust’s overall revenue. This boosted overall revenue to $112.1 million, up 3.3% from a year ago.
VivoCity recorded higher revenue despite a 2.8% y-o-y decline in shopper traffic and 4% drop in tenant sales, temporarily disrupted by the changeover of hypermarket. The manager of MCT however believes that momentum in shopper traffic and tenant sales will pick up after the changeover is completed.
Meanwhile, the rest of MCT’s properties also recorded higher revenue contributions, except for Mapletree Anson.
For 1Q20, income available for distribution was 4.1% higher at $67.2 million.
MCT has thus declared a 1Q20 DPU of 2.31 cents, 3.6% higher than 2.23 cents in the previous year, while income available for distribution was 4.1% higher at $67.2 million.
See: MCT declares 3.6% higher 1Q DPU of 2.31 cents on higher revenue
With MCT’s positive 1Q20 results and strong performance from VivoCity, analysts are keeping a bullish stance on the counter.
DBS Group Research has a “buy” call on MCT with a target price of $2.25.
In a Friday report, lead analyst Derek Tan believes that VivoCity’s weak operational metrics are not a concern as it is in a transitory. Instead, he sees the changeover in hypermarket tenant as an improvement to VivoCity’s offerings and expects both traffic and sales to pick up.
“We continue to like MCT for its resilient income stream, best in class assets as well as an expected improvement in DPU,” says Tan.
UOB KayHian has also kept its “buy” recommendation on MCT with a target price of $2.22.
In a Friday report, lead analyst Jonathan Koh believes that MCT is a prime beneficiary of the government’s tourism initiatives, which will see the rejuvenation of Sentosa and Pulau Brani, as VivoCity’s is located within close proximity to both tourist attractions.
Similarly, CGS-CIMB Research has an “add” call on MCT with a target price of $2.24.
MCT’s office/business park portfolio saw higher overall contribution this quarter with a positive rental reversion of 0.3%.
PSA Building and Mapletree Anson are MCT’s smaller assets and saw occupancy drop about 5.8 and 4.1 percentage points respectively, but occupancy rate for both assets remained high at more than 90% with committed occupancy at 93.8% to 99%.
“Near-term outlook for the office sector remains robust, driven by tightening vacancy, and we anticipate the rental upcycle to continue,” says analyst Eing Kar Mun in a Thursday report.
As at 3.50pm, units in MCT are trading at $2.05 or 1.3 times FY20 book with a dividend yield of 4.4%.
