Slower 2Q, Stronger 2H22

• Mapletree Commercial Trust (SGX:N2IU)’s revenue/NPI rose 1.1% y-o-y/0.4% y-o-y in 2Q22, but was lower at 3.7% q-o-q/4.1% q-o-q. The results were in line to consensus’ and our estimates, and with 1H22 revenue/NPI/DPU at 47% of our FY22E, we have kept our forecasts unchanged.
• We see a stronger 2H22, underpinned by rising office demand, and improvement in VivoCity’s operating metrics alongside a gradual reopening. Mapletree Commercial Trust's valuations are undemanding at 4.5% dividend yield, with better DPU visibility from its MBC assets, and added traction from VivoCity’s recovery into the coming quarters.
• We maintain our forecasts and S$2.35 DDM-based target price (COE: 5.9%, 2.0%) for Mapletree Commercial Trust.

Better Occupancies, Strong Office Demand

• The stronger y-o-y performance in 1H22, with revenue and NPI up 11.5% y-o-y and 10.7% y-o-y, was from lower rental rebates (~S$18m versus S$40.5m for FY21) and the compensation received from a lease pre-termination at mTower.
• Mapletree Commercial Trust's portfolio occupancy climbed to 93.3% (from 92.6% in 1Q22) with improvements across all its assets, except Mapletree Anson (from 99.2% to 93.9%), but its committed occupancy is higher at 97.0%.
• Against strong demand tailwinds, its remaining FY22 office/business park leases (10.3%) were de-risked, with rental reversion at +1.5% (from +0.4% in 2H21).

VivoCity’s Reversion at +3.5%, Flattish Outlook

• Revenue/NPI at VivoCity fell 20.5% h-o-h/22.7% h-o-h in 1H22, but it was up 2.6% q-o-q/4.0% q-o-q in 2Q22, on the back of higher behind Frasers Centrepoint Trust (SGX:J69U) (with tenant sales at 93-98%).
• Retail rental reversion at +3.5% (from -9.6% in 2H21) was helped by the new Dyson lease (at a high single-digit). We think reversions will likely be flattish in 2H22, with upside risk from further easing in capacities.

Sound Balance Sheet, More Resilient AUM

• Mapletree Commercial Trust's AUM was up 0.5% to S$8.8b, with a change of valuers rates and a limited sponsor Singapore pipeline.

Source: Maybank Kim Eng Research - 28 Oct 2021