Mapletree Commercial Trust Analysis @ 25 October 2020

 Basic Profile & Key Statistics

Mapletree Commercial Trust (MCT) invests in both office and retail properties and currently owns 5 properties in Singapore. 

Quarter Performance Review

Gross revenue and net property income dropped by 2.5% YoY and 2.6% YoY respectively, while income available for distribution dropped by 7.9%. MBC II which was acquired in Nov 2019 has cushioned the dropped caused by COVID-19 situation. DPU dropped by 9.9% after the release of S$15 million retention and there is S$ 28.7 million retention left. Without the release of retention, DPU would be 3.72 cents, which dropped 19.7% YoY.

For MCT flagship property - VivoCity, its traffic dropped by 64.6% and tenants' sales dropped by 41.5%. The 2Q performance is improved after the Singapore phase 2 opening.

Lease Profile

Committed occupancy is high at 97.7%. WALE is short at 2.5 years where the highest lease expiry of 26.9% falls in the FY24/25 & beyond, without breakdown. Judging from its short WALE, likely majority of lease expiry is within FY24/25. Weighted average land lease expiry is slightly long at 76.41 years.

Debt Profile

Gearing remains slightly low at 33.8%. Cost of debt is slightly low at 2.6% despite 100% unsecured debt. Fixed rate debt % is low at 71.5%. Interest cover ratio is moderate at 4 times. WADE is long at 4.5 years where the longest debt maturity of 21% falls in FY24/25. 

Diversification Profile

All of MCT income is from Singapore properties. Top property contribution is high at 34.9%. Top tenant contribution is moderate at 10.1% where top 10 tenants contribution is low at 27.7%.

Key Financial Metrics

Property yield and distribution on capital are low at 4.2% and 2.7% respectively. Management fees over distribution and distribution margin are slightly high at 15.1% and 51.9% respectively. If we include distribution retention, the management fees over distribution, distribution on capital, and distribution will be 13.5%, 2.9%, and 57.9% respectively. 

Trends

Uptrend - NAV per Unit

Flat - DPU (include retention)

Slight Downtrend - Distribution Margin (include retention)

Downtrend - Interest Cover Ratio, Property Yield

Relative Valuation

i) Average Dividend Yield  - Average yield at 5.26%, apply the past 4 quarters DPU of 7.54 cents will get S$ 1.43. Include retention, DPU would be 8.4 cents, which will translate into S$ 1.60.

ii) Average Price/NAV - Average value at 1.14, apply the latest NAV of S$ 1.709 will get S$ 1.95.

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Short WALE
High Committed Occupancy	100% Geographical Contribution
100% Unsecured Debt	High Top Property Contribution
Long WADE	Low Property Yield
Well Spread Debt Maturity	Low Distribution on Capital
Low Top 10 Tenants Contribution	Interest Cover Ratio Downtrend
High Distribution Margin	Property Yield Downtrend
NAV per Unit Uptrend

MCT performance is less affected by COVID-19 situation because more than 2/3 of its income is from the office sector. However, its performance is still dragged down by mainly Vivocity and a slight drop in revenue from PSA Building due to the expiry of a major tenant’s short-term lease. Due to VivoCity's specific location which is adjacent to Sentosa and Cruise Centre, lack of tourists would mean lower shopper traffic to the mall. Nevertheless, with more and more green land opening as well as upcoming phase 3 opening, VivoCity performance should be improved.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a 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.