• 3QFY20 DPU rose 5.6% YoY
• Firm retail rental reversions of +6.7%
• Projecting 5.0% DPU growth in FY21F

3QFY20 Results Slightly Above Our Expectations

Mapletree Commercial Trust’s (MCT) recent 3QFY20 results came in slightly above our expectations due to earlier-than-expected completion of the Mapletree Business City (Phase 2) (MBC II) acquisition. Gross revenue and NPI jumped 16.7% and 17.6% YoY to S$131.3m and S$103.3m, respectively. This was driven by contribution from MBC II and stronger performance across its other assets, with the exception of Mapletree Anson. DPU grew 5.6% YoY to 2.46 S cents. On a 9MFY20 basis, MCT’s NPI increased 7.4% to S$279.4m, while DPU of 7.09 S cents represented a growth of 3.8% and formed 76.4% of our original FY20 forecast.

VivoCity Continues to Deliver; Mapletree Anson to See Improved Performance Ahead

Operationally, MCT achieved overall portfolio rental reversions of +5.0%. This was driven largely by the retail segment, which registered a rental uplift of 6.7%. Rental reversions for the Office/Business Park segment were +0.7%. Rental reversions at VivoCity would likely moderate ahead as the strong rental uplift was driven by an anchor tenant renewal.

Overall portfolio physical occupancy improved from 96.1% (as at 30 Sep 2019) to 98.3%, as there was a jump at Mapletree Anson (+21.9 ppt QoQ) since the previously pre-committed spaces commenced their operations. Overall portfolio committed occupancy was 98.9%, relatively stable from the previous quarter.

For the space to be vacated by PSA at PSA Building, management highlighted that 60% of it will be leased to WeWork, which is still experiencing firm leasing demand in Singapore. Shopper traffic and tenant sales at VivoCity fell 2.2% and 0.5% YoY, respectively, in 9MFY20. However, there was already a sequential improvement for the latter (+14.8% QoQ and +2.0% YoY) in 3QFY20 as NTUC FairPrice has contributed a full quarter.

Raise Our FV to S$2.44

We raise our FY20 DPU forecast by 2.3% as we factor in the actual acquisition completion date of MBC II. Our FY21 DPU forecast remains stable (+0.1%), such that we now expect a decent 5.0% growth in DPU for FY21F. As we also lower our cost of equity assumption from 6.2% to 5.9% to align with our recent changes for CapitaLand Mall Trust and Frasers Centrepoint Trust, our fair value is increased from S$2.28 to S$2.44.

Source: OCBC Research - 3 Feb 2020