Stronger 3Q22

• Mapletree Commercial Trust (SGX:N2IU)’s revenue/ NPI jumped 8.9% q-o-q/ 9.1% q-o-q in 3Q22, from a stronger performance at VivoCity, with its recovery expected to gain traction in coming quarters. Occupancies were lower across its assets but are expected to improve on the back of stronger leasing momentum in FY23.
• The results were operationally in line with our estimates and the street, and we maintain our forecasts and S$2.35 DDM-based target price (COE: 5.9%, 2.0%).

Lower Occupancies Set to Improve

• Mapletree Commercial Trust's portfolio occupancy was lower at 92.5% (from 93.3% in 2Q22), with dips at VivoCity (from 98.6% to 98.4%), MBC (94.0% to 92.8%), mTower (75.5% to 75.0%) and Mapletree Anson (93.9% to 92.8%), while MLHF remained fully occupied.
• Committed occupancy was stronger at 96.3%, helped by successful backfilling at MBC (at 96.7%), mTower (87.6%), and Mapletree Anson (95.9%). We expect leasing momentum to strengthen in FY23 from stronger office demand growth and improving retail sentiment.

VivoCity Recovery Slower Than Peers

• Revenue/ NPI at VivoCity fell 1.1%/ 4.1% y-o-y, but they jumped large-scale sales events, but upside is seen from further relaxation of capacity restrictions in FY23.

Strong Balance Sheet, Upside From Deals

• Mapletree Commercial Trust’s balance a successful Mapletree North Asia Commercial Trust merger, as we expect the larger MPACT to embark on more sizeable office acquisitions with its enlarged Pan Asian mandate.
• Mapletree Commercial Trust's valuations have pulled back following the announcement of its proposed merger with Mapletree North Asia Commercial Trust (SGX:RW0U) on 31 Dec 2021 due to investor concerns on its diluted pure-play AUM. Beyond the strong financial accretion, we continue to see clear strategic merits of the deal. BUY.

Source: Maybank Kim Eng Research - 27 Jan 2022