• Mapletree Commercial Trust’s 1QFY3/21 NPI was a slight miss at 20% of our full-year forecast.
• Revenue was mainly impacted by rental waivers.
• Maintain HOLD, with a lower Target Price of S$1.88.

Mapletree Commercial Trust's 1QFY21 NPI Came in Slightly Lower Than Expectation

• Mapletree Commercial Trust (SGX:N2IU)’s 1QFY21 revenue declined 10.5% while NPI declined 10.7%, mainly due to rental rebates granted to eligible tenants impacted by Covid-19. Mapletree Commercial Trust has committed ~4 months of rental rebates (include property tax rebates and cash grant from the government), the highest quantum among the retail REITs so far.
• The decline was partially mitigated by contribution from MBC II which it acquired in Nov 2019. Excluding MBC II, revenue would have declined ~29% y-o-y.
• Mapletree Commercial Trust's 1QFY21 NPI of S$78.9m accounted for 20% of our FY20F; this is slightly below our expectation after taking account of the rental rebates.

VivoCity Impacted by Rental Waivers

• VivoCity's 1QFY21 revenue declined 56.7% y-o-y, mainly due to rental rebates given to tenants as well as slightly lower occupancy rate of 98.3% at end-Jun vs. 99.1% last year. Rental reversion was not disclosed.
• Shopper traffic plunged 78.5% y-o-y to 2.8m while tenant sales declined 63.4% y-o-y to S$76.5m in 1QFY20 which was not surprising as the mall was largely closed during the circuit breaker period. However, since its reopening, VivoCity has been receiving encouraging traffic recovery.
• Management expects VivoCity to take some time to get back to pre-Covid-19 levels as the majority of Singaporeans are still working from home while its borders remain close.

Office/business Park Segment Saw Mixed Performance

• Within the office/business park segment, Mapletree Business City I (MBC I), PSA Building (PSAB) and Merrill Lynch Harbour Front (MLHF) reported y-o-y revenue decline of 3.1%,15.7% and 2.4% to S$31.8m, S$10.8m and S$4.9m respectively due to lower y-o-y occupancy rates. MBC I and PSAB experienced a y-o-y occupancy decline of 2.5% pts and 1.9% pts to 96.4% and 88.7% respectively.
• Committed occupancy, however, remained relatively high at 98.7% and 90.4% respectively. MLHF remained 100% occupied. The only office building which reported positive revenue was Mapletree Ason (MA). MA had been a weak asset but it achieved 100% occupancy rate in Jun vs. 92.7% a year ago despite Covid-19.

Maintain HOLD, With a Lower DDM-based of S$1.88

• Compared with its pure retail peers, Mapletree Commercial Trust will be less impacted by Covid-19, thanks to its office assets and quality business park. We reduce our FY21-22F DPU by ~3-4% to factor in mainly weaker rental reversion for VivoCity.
• We maintain HOLD on Mapletree Commercial Trust as we see few re-rating catalysts going forward and believe the market has priced in its more resilient income.
• Upside/down risk includes faster-/slower-than expected recovery from Covid-19.

Source: CGS-CIMB Research - 23 Jul 2020