Mapletree Commercial Trust (MCT) (SGX: N2IU) is a Singapore listed REIT with 5 properties. Since its name has the term commercial, many of us might associate that with office buildings. Ironically, the crown jewel of Mapletree Commercial Trust is VivoCity, a retail mall beside harbour front. Currently, MCT has a market capitalisation of S$4.56 billion.

With that, here are 7 things you need to know about Mapletree Commercial Trust.

Stock Information

1

TICKER SYMBOL: SGX: ND8U

MARKET CAP: S$ 4.6 billion

INDUSTRY: Real Estate Investment Trust

The Business

MCT’s portfolio comprises five properties located in Singapore’s Alexandra Precinct, HarbourFront Precinct and Central Business District. These highly sort after locations due to their location near the CBD and easy access via the nearby train stations. The five properties in MCT’s portfolio are VivoCity, PSA building, Mapletree Anson, Bank of America Merrill Lynch HarbourFront and Mapletree Business City I.

Mapletree Commercial Trust 1
Source: Mapletree Commercial Trust presentation slides

Let’s take a closer look at its properties, Vivo City is Singapore’s largest mall with about 1.04 million sq. ft. of net leasable area (NLA). It is positioned as a family, tourist and lifestyle destination in Singapore. It offers visitors a unique waterfront shopping and dining experience. The mall attracts 53.2 million visitors in the year ended 31 March 2015. This served as evidence of its good location and attractiveness.

Moving on, PSA Building is an established integrated development with a 40-storey office block and a three-story retail center. The retail center, Alexandra Retail Centre, having an aggregate NLA of about 523,872 sq. ft.

Next up is Mapletree Anson, a 19-storey premium office building located close to the Tanjong Pagar MRT station. It is in Singapore’s Central Business District, with a NLA of about 331,000 sq. ft.

Bank of America Merrill Lynch HarbourFront as the name suggests is tenanted by Bank of America Merrill Lynch. It is a premium six-story office building with a NLA of about 217,000 sq. ft.

Lastly, Mapletree Business City I is one of the largest integrated office and business park complexes in Singapore with Grade-A building specifications. It has an estimated total of 1.7 million sq. ft. of NLA.

Occupancy Rate

Having looked at the REIT’s properties, let’s take a quick glance at its Occupancy level.

Mapletree Commercial Trust 2
Source: Mapletree Commercial Trust presentation slides

As seen in the diagram above, MCT’s occupancy over the last 5 quarters has consistently been above 96%. This is a sign of the strength of its assets. Due to their premium location, its space in these properties is highly sorted after.

Mapletree Commercial Trust 3

Source: Mapletree Commercial Trust presentation slides

The above diagram further cements the strength and attractiveness of MCT’s properties. It has been able to raise its fixed rental rate in a tough market and yet keep its retention ratio relatively strong. In the most recently ended quarter and year, MCT saw an 11.6% uplift in rents and had close to 91% retention.

Key Opportunities

Premium location and properties

The key opportunities for MCT are its premium properties and locations.

Mapletree Commercial Trust 4
Source: Mapletree Commercial Trust presentation slides

The diagram above gives a nice snapshot of one of its properties, VivoCity. Vivo City saw shopper traffic grow at 4.8% year on year and tenant sales increase 1.3% over the same period. It looks like tenant sales at Vivo City could soon top S$1 billion.

The same holds true for MCT’s commercial properties which have high occupancy rates and rental revisions are growing at a healthy clip.

Diverse tenant base

The below two diagrams shed light on MCT’s tenant base. The first diagram shows at the top ten tenants only contribute 25.2% of total revenue. This is very healthy and the REIT has effectively removed it concentration risk from any single tenant.

Mapletree Commercial Trust 4
Source: Mapletree Commercial Trust presentation slides

The second diagram shed light on the trade mix, as seen below the biggest trade sector is food and beverage clocking in at 16.1%. This shows that MCT is also not reliant on any one sector for the majority of its income. This is an important point as if any one sector faces a downturn, Mapletree Commercial Trust won’t be as badly affected because it can rely on its other tenants.


Source: Mapletree Commercial Trust presentation slides

Key Risks

Rental Rate Pressure

Premium space at MCT also comes with a premium cost. What this means is that during tough economic times, Grade A space could experience a sharp drop in rental rates. This is the current situation in Singapore, where rental rates have been on a downward trend for the last 4-5 quarters. This is due to the lackluster growth in the global economy, and it is something out of the control of Mapletree Commercial Trust.

Economic Slowdown

The majority of MCT’s commercial space is Grade A space. What this means is that its space is of the highest quality available in the market. While this is good because it attracts big companies to properties, it is also a key risk during economic slowdowns. This is because these big companies are the first to start cutting costs to tide over the tough period. It is during these periods where MCT might see a drop in occupancy.

Valuation

MCT currently trades at a Price to book (P/B) ratio of 1.2 and spots a 5.4 % distribution yield for its investors. That is slightly lower yield than its 5-year average of 5.8% distribution yield.

Investor Relations

Investor Relation Material:

Mapletree Commercial Trust Management Ltd.
10 Pasir Panjang Road, #13-01
Mapletree Business City
Singapore 117438

Tel: +65 6377 6111 (9am – 5pm)
Fax: +65 6274 3185
Email: enquiries_mct@mapletree.com.sg

Top Shareholders (31st March 2017)

  1. Citibank Nominees Singapore Pte Ltd 15.32%
  2. HarbourFront Place Pte. Ltd. 14.37%
  3. DBS Nominees (Private) Limited 14.27%

Financials

Income Statement

Balance Sheet

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ketz’s personal capacity. It does not in any way represent those of his employer and other related entities. Ketz owns shares in Mapletree Commercial Trust.

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