Inline 4Q19; Maintain HOLD on DPU Growth Levers

• Our forecasts are unchanged following MAPLETREE COMMERCIAL TRUST (SGX:N2IU)'s in-line 4Q19 results; FY19 revenue, NPI and DPU met 100% of our full year estimates.
• The quarter benefitted from stable portfolio occupancy and steady growth at VivoCity post its AEI, and amid an on-going rejig in tenancies. In our previous report (Mapletree Commercial Trust - Maybank Kim Eng 2019-01-24: Simply Steady) we factored in a stronger rental outlook to account for its expansion and changeover leases and see no reason to make further adjustments to our profit estimates.
• Mapletree Commercial Trust's share price have performed well due to stronger NPI and tighter cap rates on its assets, but the dividend yield is now high at 5.1% ( > 1SD above the historical average). Maintain HOLD.

Steady Growth at VivoCity

• Mapletree Commercial Trust's 4Q19 revenue, NPI and DPU increased by 3.7% y-o-y, 3.0% y-o-y and 1.8% y-o-y, respectively. Its portfolio occupancy was stable across all assets at 98.1%, while rental reversion increased 3.6% for its retail segment (VivoCity) versus +4.0% in 3Q19 and +10.3% for its office leases, in line with 3Q19.
• VivoCity shopper traffic improved 0.5% y-o-y to 55.2m in FY19 despite AEI downtime, changeover of its hypermarket, and tenant remixing during the year. However, tenant sales decreased 2.0% y-o-y to SGD939.1m.
• In Apr 2019, Grocer Fairprice commenced fit-out works for its 91,000 sf across Level 1 and Basement 2, scheduled for completion by 3Q 2019; Management estimates a 40% ROI on a stabilised basis for this changeover. This initiative should further entrench its positioning as a destination mall, with rising shopper traffic to support leasing demand.

Maintain HOLD; Prefer Frasers Centrepoint Trust on Higher Yield, DPU’s

• Long-term investors will be attracted by rental and AUM gains from master plan redevelopment initiatives, as well as potential DPU growth; Not factored into our estimates are its MBC II deal.
• Our DDM-based Target Price remains SGD1.80 (COE: 7.0%, LTG: 2.0%).
• We prefer FRASERS CENTREPOINT TRUST (SGX:J69U) (Rating: BUY, Target Price: SGD2.60, see report: Frasers Centrepoint Trust - Maybank Kim Eng 2019-04-24: On Track For Growth) on higher yields and stronger DPU growth profile.

Source: Maybank Kim Eng Research - 25 Apr 2019