Saturday, July 27, 2013

Mapletree Commercial Trust: Strong 1Q performance (DBSV)

Mapletree Commercial Trust,
 Buy S$1.24,
Strong 1Q performance
Price Target : 12-Month S$ 1.50 (Prev S$ 1.53)

•Strong set of results, making up 27% of our full year forecast
•Robust organic growth from Vivocity and PSA Building
•Maintain Buy, TP S$1.50

Good 1Q showing. MCT continued to deliver a sterling set of results,  with topline growing 26% y-o-y to S$64.4m while NPI improved by a better 31% to S$47.1m in 1QFY14. Distributable income was 26% higher y-o-y at S$36.3m, translating to 1.753Scts DPU and making up 27% of our FY14 forecast. Earnings expansion continued to be driven by contributions from Mapletree Anson as well as higher rents and portfolio occupancy of 98.3%. Excluding Mapletree Anson, revenue and NPI rose by a commendable 11% and 14% y-o-y, respectively.

Organic growth from Vivocity and PSA Building. Income from Vivocity improved 9% with retail leases renewed at 43% higher than preceding levels. Shopper traffic at the mall grew 1.2% to 13.3m for the quarter while tenant sales expanded 5.6% to S$212.1m. Meanwhile, revenue from PSA Building was up 21% y-o-y as rent renewals were transacted at 24% higher than previous levels. Occupancy at ARC was also slightly higher at 81.3%. As a result, c.60% of expiring leases in FY14 have been recontracted to date.

Our View
2Q to benefit from positive 1Q reversions and remaining reversions. With the remaining 7.3% of retail leases to be renewed for FY14 and another 14.7% for FY15, we believe MCT will likely continue to deliver positive growth, although at a slightly more moderate pace, as its portfolio leases are brought up to market levels.  
High proportion of fixed debt. In terms of capital management, gearing remains relatively unchanged at 40.8% and with 74.5% of its debt having fixed rates, interest cost should remain stable at 2.22%. There is no refinancing due in FY14. The REIT has also put in place a dividend reinvestment scheme, which should boost cashflow retention in the longer run and is positive for capital management purposes.

Maintain Buy. We continue to like MCT for its solid organic growth prospects, underpinned by strong performances at Vivocity and PSA Building as well as stable rental escalations from MLHF building. Potential catalysts still remain from the anticipated purchase of MBC, which would likely be accretive. The stock is currently trading at 1.16x P/Bk and at 5.3% yield for FY14. Maintain BUY with a slightly lower TP of S$1.50 as we adjust for higher risk free rates

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 25/07/13

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