• MCT's 1Q19 DPU of 2.23 Scts (flat y-o-y) in line with expectations.
• Steady performance despite temporary fall in effective occupancy at Vivocity owing to current AEIs.
• Sequential improvement ahead as Vivocity’s occupancy hits the 99.2% committed level from 94.2% previously.
• Maintain BUY, Target Price of S$1.80.

What’s New

Transitionary quarter

Mapletree Commercial Trust (MCT) delivered 1Q19 DPU of 2.23 Scts (flat y-o-y) which represented 24% of our FY19F DPU and was in line with our expectations.

1Q19 can be described as a transitionary quarter as the results were impacted by a dip in effective occupancy at Vivocity as tenants had to make way for the construction of a new library on Level 3 as well as AEIs at Basement 1 and Level 1.

Nevertheless, overall revenue and NPI were still up 0.7% and 2.1% y-o-y respectively, primarily due to steady performance at Vivocity (impact from prior positive rental reversions, NPI up 2.3% y-o-y) and MBC 1 (benefitting from annual step-up in rents offsetting the impact from lower effective occupancy of 98.6% versus 99.2% in 1Q18, NPI up 0.5% y-o-y).

Lower effective occupancy at Vivocity

Owing to the AEI being conducted at Vivocity, temporary closure of stores and shifting of tenants, effective occupancy came in at 94.2%. However, this was up from 93.1% at end-4Q18. Over the next 1-2 quarters, we expect effective occupancy to climb towards the 99.2% committed occupancy level as tenants move into their new stores and fit out periods end.

Due to the disruption arising from the AEI works, tenant sales also fell 4.1% y-o-y. We understand, excluding these disruptions, tenant sales would have been flattish.

Shopper traffic remains at an encouragingly healthy level of 13.5m, up 0.4% y-o-y.

The strength of the mall continues to be on display, with 2.1% positive rental reversions achieved over the quarter, marginally up from the 1.5% reported for FY18.

Source: DBS Research - 27 Jul 2018