• 3QFY19 DPU +1.3% YoY
• Positive rental reversions
• Tenant sales affected by AEI

3QFY19 Results Within Our Expectations

Mapletree Commercial Trust (MCT) reported its 3QFY19 results which came in within our expectations. Gross revenue rose 2.6% YoY to S$112.5m and this was driven largely by higher contribution from Bank of America Merrill Lynch HarbourFront (MLHF) and VivoCity, which saw revenue growth of 6.6% and 4.6%, respectively, but partially offset by a 0.8% dip in revenue at MBC I.

NPI grew at a smaller magnitude of 2.2% to S$87.9m as a result of higher property maintenance expenses, marketing and promotion expenses and property taxes. DPU of 2.33 S cents represented a growth of 1.3% on a YoY basis.

For 9MFY19, MCT’s gross revenue and NPI grew 2.0% and 2.2% to S$331.0m and S$260.1m, respectively, with the latter forming 75.8% of our FY19 forecast. DPU inched up 0.9% to 6.83 S cents and this constituted 75.4% of our full-year projection.

Rental Reversions Gathered Pace

Operationally, MCT’s properties saw a ramp up in physical occupancy from 95.9% in 2QFY19 to 98.1%. This was led by Mapletree Anson (+6.5 ppt QoQ), VivoCity (+5.2 ppt QoQ) and PSA Building (+2.6 ppt QoQ). MLHF remains fully occupied. Overall portfolio committed occupancy stood at a healthy 98.7%, as at 31 Dec 2018.

Rental reversions came in strong at +5.8% for 9MFY19 (including the effect of rent reviews), versus +2.2% in 1HFY19 (including rent review). The improvement came largely from the Office/Business Park segment, with a rental uplift of 8.7% (+10.3% if we exclude the effect of rent reviews).

However, tenant sales at VivoCity fell 1.2% to S$718.1m for 9MFY19 (1HFY19: -0.7%) and this was attributed to a transitory impact from the AEI and rigorous management of tenant mix. MCT expects the mall’s momentum to recover once the changes are completed. Shopper traffic was up 1.8% for 9MFY19.

Share Price +5.5% Since Our Initiation in End Nov

We maintain our forecasts and fair value estimate of S$1.79 as results were in-line with expectations. MCT’s share price has appreciated 5.5% since we initiated coverage on the stock on 28 Nov 2018 with a ‘Buy’ rating. Based on its closing price of S$1.72 on 23 Jan 2019, distribution yields would be 5.3% for FY19F and 5.4% for FY20F, with potential total returns of ~9%.

Source: OCBC Research - 24 Jan 2019