Mapletree Commercial Trust is “recovering well” on resilient occupancy in its office and business park spaces, as well as increased footfall at shopping mall VivoCity, say CGS-CIMB Research analysts Eing Kar Mei and Lock Mun Yee. 

The CGS-CIMB analysts raise their target price to $2.26 from $1.88, while maintaining “hold” on the company due to limited upside.

“We believe shopper traffic should continue to improve going forward driven by the gradual return of the office crowd. We believe local shoppers would be able to partially make up the sales gap created by tourists as Singaporeans spend locally,” write Eing and Lock in a Jan 27 note. 

Mapletree Commercial Trust (MCT) portfolio comprises VivoCity, Mapletree Business City, mTower (formerly PSA Building), Mapletree Anson and MLHF. These five assets have a total NLA of 5.0 million square feet with a total value of $8.9 billion.

The acquisition of Mapletree Business City II in November 2019 diversified its asset base. 

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“Mapletree Commercial Trust’s (MCT) 9MFY2021 revenue of $348.7 million (-1.9% y-o-y) and net property income (NPI) of $275.9 million (-1.2% y-o-y) came in at 75% and 70% of our full-year forecast respectively,” note the analysts. 

The decline in revenue and NPI was mainly due to rental rebates granted to eligible VivoCity tenants impacted by Covid-19 disruptions, offset by contribution from MBC II (acquired in Nov 2019), they add.

MCT has rendered a total of approximately $70 million in rental assistance since the start of the pandemic, equivalent to 4.2 months of rental rebates.

See: Mapletree Commercial Trust reports 1.9% lower 3Q revenue; sees rebound in shopper traffic and tenant sales in update

Despite the pandemic, VivoCity added new tenants which were well received by shoppers. Adidas Originals doubled its space at Basement 1, creating its largest flagship store in Southeast Asia. Adidas will be opening another flagship store on Level 1 by 1QFY2022, further defining VivoCity’s position as a key destination mall, say Eing and Lock.

VivoCity's revenue continued to improve on a q-o-q basis on reduced rental rebates. While 9MFY2020/21 revenue declined 29.1% y-o-y to $117.3 million, the decline in 3QFY2020/21 alone was only 7.4% y-o-y, indicating that its recovery is well on track. 

Actual occupancy declined 2.3% pts y-o-y to 96.9% but improved 0.9% pts q-o-q. Committed occupancy stayed high at 99.5%.

On the other hand, weaker occupancy in MCT’s office/business park spaces caused a 9MFY2020/21 revenue decline for mTower (formerly known as PSA Building; -19.7% y-o-y to $30.5 million) and MBC I (-2.5% y-o-y to $96.5 million). 

“However, we expect their revenues to improve as committed occupancy remains relatively high for both mTower (committed occupancy 88.4% vs actual occupancy of 71.1%) and MBC I (committed occupancy 98.2% vs. actual occupancy of 95.2%). The relatively weaker occupancy of mTower was due to the expiry of a major’s tenant short-term lease. MBC II, Mapletree Anson and MLHF remained fully occupied with stable revenues,” write Eing and Lock. 

Despite the slight decline in actual occupancy, OCBC Investment Research highlights MCT’s healthy balance sheet. “In terms of financial position, MCT’s gearing ratio remains healthy at 34.0%, comparable to end-1HFY2021 level (33.8%).”

OCBC analysts are recommending “hold” on MCT with a target price of $2.18. “We believe this is justifiable given more given more visible signs of a recovery in the global economy and retail sector, coupled with continued resiliency for MCT’s business park portfolio.”

“Although there are macro and industry headwinds from the Covid-19 pandemic, we believe MCT’s strong parentage and healthy balance sheet will allow it to tide over near-term uncertainties, while its strong management team and portfolio are well positioned over the longer-term,” says OCBC. 

As at 11.35am, units in Mapletree Commercial Trust are trading at 2 cents higher, or 0.97% up, at $2.09.