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Wednesday, August 05, 2020

Mapletree Commercial Trust Analysis @ 5 August 2020

Basic Profile & Key Statistics
Mapletree Commercial Trust (MCT) invests in both office and retail properties in Singapore.

Lease Profile
Occupancy is high at 98.2%. WALE is short at 2.6 years where the highest lease expiry of 25.8% falls in FY21/22. Weighted average land lease expiry is slightly long at 76.66 years.

Debt Profile
Gearing ratio, cost of debt, and fixed rate debt are slightly low at 33.7%, 2.6%, and 73.5% respectively. 100% of its debt is unsecured. Interest cover is healthy at 4.1 times. WADE is long at 3.9 years where highest debt maturity of 15% falls in FY22/23. 

Diversification Profile
MCT is not diversified in terms of geographical and property. Top geographical and top property contribute 100% and 39.9% respectively. MCT is, however, diversified in terms of tenants, top tenant and top 10 tenants contribute 8.5% and 27.1% respectively.

Key Financial Metrics
Property yield and distribution on capital are low at 4.3% and 2.9% respectively. Management fee is not competitive in which shareholders receive S$6.45 for every dollar paid. Distribution margin of 47.5% is at the moderate level. 

Related Parties Shareholding
Sponsor, manager, and directors of REIT manager are holding significant stakes in MCT.

If we look at pre-COVID, DPU is on uptrend and distribution margin is maintained. NAV per unit is on uptrend. 

Fundamental Valuation
Favorable Less Favorable
Diversified Sector WALE
Occupancy Top Geographical Contribution
Unsecured Debt Top Property Contribution
WADE Property Yield
Well Spread Debt Maturity Management Fee (Due to Distribution Retention)
Top Tenant & Top 10 Tenants Contribution Distribution on Capital (Due to Distribution Retention)
NAV Uptrend
Without distribution retention, distribution margin would be 59.3% (become 1 of the plus points), where management fees over distribution and distribution on capital would be off from negative points. MCT only provided a business update this quarter, there is no information on COVID impact on income and distribution. 

Relative Valuation
i) Average Dividend Yield
Dividend yield of 3.99 % is based on annualized DPU for the past 1 year. Apply annualized DPU of 7.587 cents to average yield of 5.34 % will get S$ 1.42.  If we take the DPU without retention, then annualized DPU would be 9.537 cents, which translates into S$ 1.79. 
ii) Average Price/NAV 
Average value is at 1.13, apply latest NAV of S$1.75 will get S$ 1.98.

Author's Opinion
Everyone can already seen a lot of retail crowd is back. Retail performance is expected to improve. MCT has been performing well all the time and I believe MCT could continue its good performance. For valuation:
i) Fundamental Intrinsic Value = (Removed)
ii) Relative Valuation - Dividend Yield = S$ 1.79
iii) Relative Valuation - Price/NAV = S$ 1.98
At the current price of S$ 1.90, it is slightly undervalued in terms price/NAV relative valuation. However, it is slightly overvalued in terms of dividend yield relative valuation.

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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