Mapletree Commercial Trust.
No surprises from 2Q results as we await contributions from Vivocity post-renewals and the completion of AEI at ARC. Organic growth outlook remains strong with almost all its leases due FY12 renewed with good rental reversions. Positive trend should sustain into FY13. Maintain Outperform.
Deutsche Bank - TP of S$1.00
Another firm quarter; strong retail trading performance MCT’s 2Q results were in line with VivoCity continuing to deliver robust operating performance despite macro uncertainty, complemented by stable income contribution from the office properties. We believe MCT’s strong embedded organic growth profile is intact, with visitor traffic enhanced by the Circle Line opening, and should underpin superior near-term DPU growth. Maintain Buy with valuations attractive at 0.94x P/B and FY12e yield of 6.1%.
2Q DPU of 1.33cts (+21.4% YoY) in line with DBe, 9% above mgmt’s forecast MCT’s DPU exceeded mgmt forecast of 1.22cts on the back of solid performance from VivoCity and lower financing cost (all-in interest cost of 1.95% vs. 2.43% forecast). Revenue and NPI rose 1.4% and 2.8% YoY largely due to VivoCity partially offset by lower income from PSAB. Vivo’s operating performance remains robust, with 1H shopper traffic and tenant sales up 13.9% and 9.4% respectively (albeit a moderation from 16% and 12% respectively in 1Q) and strong reversion growth of 20% (23% in 1Q) with high retention rate of 98.5%, full occupancy at 99.9%). PSAB’s occupancy improved from 89.1% to 92.7% with 7.7% reversion growth. Almost all leases expiring in FY11/12 (57 out of 62) have been renewed or re-let. After the upward rental revisions, Vivo’s occupancy cost will increase from 16.3% to 17% assuming no sales growth vs. mgmt’s comfort range of 16-18%.
Revising up DPU estimates; Alexandra Retail Centre AEI progressing well We have revised up our FY12e/FY13e DPU by 5%/2% respectively to factor in the lower-than-expected financing cost, with annualized FY12e DPU of 5.28cts 6% above mgmt’s forecast. Construction for ARC remains on track (>90% completed) and is on schedule for completion by Dec 11. Pre-commitments have increased from 1/3 to >50% at rents slightly above mgmt’s S$8.00psf forecast and mgmt plans to progressively open some F&B and retail tenants upon completion to cater to the office tenants. In Vivo, mgmt is still calibrating AEI plans with space surrendered by Page One (27k sf) to be decanted and re-tenanted.
Maintain Buy with DDM-pegged TP of S$1.00 (from 0.98) We have revised up our TP by 2% to S$1.00 on the back of our earnings revision. Valuations are attractive at 0.94x P/B and offering 6.1% and 6.4% FY11/12e and FY12/13e respectively, implying 438bps spread over the 10-year bond. Risks: sharp slowdown in growth affecting retail and office leasing demand, concentration risk, acquisition and capital raising risk, execution risk on PSAB AEI.
Credit Suisse - TP of S$1.07
VivoCity and offices continue to see strong reversions MCT signed 47 leases YTD, where retail (40 leases, including large ones, or 42.6% of NLA) saw a strong 20% rent reversion, while office (PSAB) saw an 8% uplift in rents. Passing rents at VivoCity is now at S$10.10 per sq ft (S$9.80 at IPO), but the increase in passing rents will be more apparent in the coming quarters as the higher rents from the recently signed leases flow through. DPU growth is further supported by MLHF’s first rent review in Nov11—we forecast a 12% increase from current passing rents of S$5.36/month. Meanwhile, ARC is over 50% pre-leased, with management bringing forward its opening date (the mall will open in phases) to Dec11, from the initial target soft launch by March 2012 (prospectus forecast of July 2012).
Beneficiary of Circle Line opening + 90% sales conversion Management recently conducted a shoppers’ survey, where the key highlight from the results was that VivoCity’s sales conversion rate is close to 90%, and is probably the highest in Singapore. Meanwhile, the full opening of the Circle Line on 8 Oct has clearly boosted shopper traffic at VivoCity, and coupled with growth in visitor arrivals, shopper traffic is up 15-20% YoY on a 12M basis.
Proxy to thriving tourism and strong retail fundamentals We have raised our DPU for FY12-14E by 1.5-5.4% to adjust for the earlier-than-expected opening ARC, lower interest costs and higher VivoCity rents. Maintain OUTPERFORM on MCT, which offers 6.8% CY12E yield, as we view it as a proxy to the strong Sentosa arrivals (VivoCity makes up 75% of NPI) and resilient retail fundamentals.
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