• Mapletree Commercial Trust’s 1HFY20 DPU of 4.63 Scts (2.9% y-o-y) came in within expectations.
• Both VivoCity and office/business park portfolio delivered positive reversion.
• Maintain HOLD; we believe near-term catalysts have been priced in.

Stronger 1HFY20 Results

• MAPLETREE COMMERCIAL TRUST (SGX:N2IU)’s 1HFY20 gross revenue and NPI grew by 2.6% and 2.2% y-o-y to S$224.2m and S$176.1m, respectively, thanks to stronger performances by VivoCity, Merrill Lynch Harbourfront (MLHF), Mapletree Business City I (MBC I) and PSA Building (PSAB), though partly offset by weaker Mapletree Anson (MA).
• Portfolio actual occupancy was higher y-o-y at 96.1% while committed occupancy remains high at 98.8%. Portfolio rental reversion was encouraging at 5%.
• Mapletree Commercial Trust's 1H DPU of 4.63 Scts (+2.9% y-o-y) was in line at 49.6% of our FY20 forecast. See Mapletree Commercial Trust's dividend history.
• Slight changes to our DPU forecasts due to housekeeping exercise.

VivoCity Delivered Strong 6.8% Rental Reversion

• VivoCity achieved a 5.1% and 4.6% y-o-y improvement in 1HFY20 gross revenue and NPI respectively, on the back of strong 6.8% positive rental reversion following the completion of asset enhancement initiatives completed to-date and due to the effects of step-up rents.
• While YTD shopper traffic and tenant sales declined 2.8% y-o-y and fell 2% y-o-y respectively, momentum picked up in 2Q with the progressive opening of new stores on B2 and Level 1 as well as NTUC FairPrice full-month contribution from Aug 2019. This was on a high base due to the Tsum Tsum mid-autumn festival event in 2Q last year which attracted strong shopper traffic.
• We expect traffic flow and tenant sales to normalise going forward.

Office/business Park Continued to See Strong Demand

• Higher office NPI in 1QFY20 was driven by higher contributions from all offices/business park, except for Mapletree Anson. The portfolio reported 0.7% positive rental reversion for 1HFY20. It could have been stronger if not for the weaker reversion from Mapletree Anson.
• Mapletree Business City 1’s occupancy remained high at 98.9% while Merrill Lynch Harbourfront was fully leased. PSA Building occupancy improved 0.7% pts to 91.3% q-o-q. While Mapletree Anson’s occupancy declined from 92.7% in 1QFY20 to 75.1% in 1HFY20, committed occupancy is 99%.
• We believe Mapletree Business City 1, which accounted for ~31% of 1HFY20 NPI, would continue to receive strong demand due to its city fringe location and Grade-A building specifications.
• Mapletree Commercial Trust has received approval from unitholders for the proposed acquisition of Mapletree Business City II. Upon the completion of the Mapletree Business City II acquisition, the entire Mapletree Business City would account for 42% of NPI on a full-year basis, based on our estimates.

Maintain HOLD

• We maintain HOLD on Mapletree Commercial Trust with a higher DDM-based Target Price of S$2.39 due to a housekeeping exercise.
• Mapletree Commercial Trust should continue to deliver steady DPU growth, underpinned by Mapletree Business City and VivoCity. However, we believe near-term catalysts have been priced in for now. Upside/downside risks include better/worse-than-expected rental reversion. See Mapletree Commercial Trust's dividend history.

Source: CGS-CIMB Research - 15 Oct 2019