Wednesday, December 4, 2013

Mapletree Commercial Trust : Growth engine sputters (CIMB)

Mapletree Commercial Trust
Current S$1.22
Target S$1.28
Growth engine sputters

MCT's portfolio growth continues to be underpinned by positive rental reversions in VivoCity. However, as the current market sentiment is not conducive for major AEIs and M&A, we expect MCT's mid-term growth to be limited to organic growth only.

With the recent c.4% correction in share price, coupled with i) a resilient portfolio, ii) only 1.6% of retail leases up for renewal in FY14 and 16% in FY15, and iii) a high portfolio occupancy rate of 98.9%, we have upgraded Mapletree Commercial Trust (MCT) to a Neutral rating. We maintain our DDM-based (discount rate: 7.9%) target price of S$1.28.

What Happened
As VivoCity undergoes space reconfiguration to cater to several smaller anchor-tenants, we expect continual positive rental reversion to come through from this mall. During 2QFY14, MCT renewed/re-let 87% of the leases expiring in FY14, with a positive rental reversion of 37.1% and 23.4% for retail and office space, respectively. These leases are expected to underpin the growth of VivoCity in FY14. Looking ahead, with only 1.6% of retail leases to be renewed in FY14 (and 16% in FY15), coupled with a high portfolio occupancy rate of 98.9%, the mid- to long-term outlook for VivoCity remains clear.

What We Think
With its gearing of 40.8%, coupled with compressed cap rates within the commercial property space, we believe that it will be a challenge to find yield-accretive acquisitions in the near term. As the acquisition date of Mapletree Business City (MBC) is uncertain, we see MCT's near-term growth as being limited to organic growth only.

What You Should Do
On the back of limited room to grow through further acquisitions, we believe MCT's growth potential will be constrained. At this current level, we believe MCT is priced fairly given its resilient and stable portfolio. Upgrade to Neutral as we await meaningful catalysts.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 29/11/13

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