STI : 3,133.76
Price Target : 12-Month S$ 1.32 (Prev S$ 1.32)
Viva la VivoCity
•3QFY14 results slightly above estimate; DPU increased by 12% y-o-y to 1.67 Scts
•Strong rental uplift at VivoCity and PSA Building
•Maintain HOLD, TP S$1.32
3QFY14 above expectations. MCT reported 3QFY14 revenue of S$68.4m (+22% y-o-y) and S$49.4m NPI (+25%), attributed to (i) strong tenant sales and rental reversions at VivoCity, (ii) contribution from Mapletree Anson, and (iii) higher rental income from PSAB. Distributable income grew 24% to S$31.2m, translating into 1.67 Scts DPU (+12% y-o-y). 9MFY14 distributable income is 81% of our full year forecast.
VivoCity continues to shine. The Trust booked a 39% increase in retail rents and 23% increase in office rents. Specifically, VivoCity continued to benefit from the Manager’s proactive leasing strategy. YTD shopper traffic increased by 2.1% y-o-y, and more impressively, tenant sales improved by 6.6% to S$83 psf after the opening of five mini-anchors that replaced the gym, as well as better performance from newer F&B tenants such as Jamie’s Kitchen and Poulet on Level 1.
Strong leasing demand at PSAB. In the office space segment, PSAB booked strong growth of revenues (+18% y-o-y) and NPI (+20% y-o-y) on the back of strong demand for office space at Alexandra Precinct. To date, 92% of leases expiring in FY14 has been renewed, which offers strong income visibility for the Trust. Looking ahead, the Manager plans to supplement organic rental growth with gradual improvements to select areas of the mall to improve efficiency and circulation.
Pre-emptive capital management strategy to mitigate long term interest rate risk. In terms of capital management, the Trust has secured S$397.6m term loan facilities for five year. These will be drawn down to refinance loans expiring in FY15 and some debt expiring in FY18. About 74% of MCT’s debt has been hedged with fixed rates, which should minimize near-term uncertainty over interest rates triggered by the QE tapering.
Maintain HOLD, TP S$1.32. MCT offers resilient 5.7%-6.0% dividend yield. We like MCT as its key asset VivoCity continues to power ahead through the Manager’s active leasing and asset management strategy. But at the current price, most of the positives have been priced in.
Publish date: 24/01/14