Full Analysis of Mapletree Commercial Trust

Mapletree Commercial Trust (MCT) was listed on the SGX on 27 April 2011 with an initial portfolio of 3 properties. Since then, it had completed 2 major acquisitions and thus, enlarging its portfolio to 5 properties valued at S$ 6.68 billion as at 31 March 2018. Here, I’ll share 9 key things you need to know on MCT before you invest.

#1: Stock Symbol

Ticker Symbol: SGX: N2IU
Market Capitalization: S$ 4.46 billion (26 June 2018)

Share Price: S$ 1.55 (26 June 2018)

Industry: Reit

#2: The Portfolio

MCT owns and derives income from the following properties:

1. VivoCity
   Located at the Harbourfront Precinct, it is the biggest shopping mall in Singapore. The leases are typically structured with 3-years tenures comprising of base rents, service charges, advertising and promotion charges, and turnover rents. As of 31 March 2018, it reported a 99.8% in committed occupancy rate with key tenants such as Tangs, H&M, VivoMart, Golden Village and Kopitiam. In 2018, VivoCity has made S$ 206.6 million in gross revenue and thus, is the biggest contributor of revenues to MCT.  

2. Mapletree Business City 1 (MBC1)
   MCT had acquired MBC 1 for S$ 1.78 billion on 25 August 2016. It is an integrated development consisting of one 18-storey office tower & three business park blocks. As of 31 March 2018, MBC 1 had reported a 99.4% in occupancy rate with key tenants such as HSBC, SAP ASIA Pte Ltd, and Samsung Asia Pte Ltd. In 2018, MBC 1 had generated S$ 126.0 million in gross revenue and hence, is the second largest source of revenues to MCT.

3. PSA Building
   It is a development that integrates one 40-storey office building with a 3-storey retail centre. As of 31 March 2018, PSA Building reported a 98.7% occupancy rate with key tenants such as PSA Corporation Ltd, Casino Regulatory Authority, Bank of Singapore Ltd, and Mapletree Investments Pte Ltd. In 2018, PSA Building has made S$ 48.9 million in gross revenue and hence, is MCT’s third largest source of revenues.

4. Mapletree Anson
   It is a 19-storey Grade-A office building in Tanjong Pagar, Singapore. As at 31 March 2018, Mapletree Anson has secured 100% committed occupancy with tenants such as Yahoo! Southeast Asia, Allied World Assurance Co. Ltd, Sumitomo Corporation Asia Pte Ltd, and J. Aron & Company (Singapore) Pte Ltd. In 2018, Mapletree Anson reported S$ 33.7 million in gross revenue and thus, is MCT’s fourth key source of revenues to MCT.
   
   
5. Bank of America Merrill Lynch Harbourfront (MHLF)
   It is a 6-storey office building leased to Merrill Lynch Global Services Pte Ltd. The lease was renewed in November 2017 for 6 years till the year 2023. It is the smallest revenue contributor to MCT as it has made S$ 18.3 million in gross revenue in 2018.

#3: The Financial

Overall, MCT has reported a steady increase in gross revenue and distributable income. Gross revenues have grown from S$ 177.3 million in 2012 to S$ 433.5 million in 2018. This, in turn, had resulted in growth in distributable income from S$ 98.2 million in 2012 to S$ 260.4 million in 2018. Its distributions per unit (DPU) has increased from 5.27 cents in 2012 to 9.04 cents in 2018.

Source: Annual Report 2017 of MCT

#4: Balance Sheet Strength

As at 31 March 2018, MCT has reported total debt outstanding amounting to S$ 2.33 billion. Its gearing ratio is 34.5%, its all-in cost of debt is 2.75% a year, and its proportion of debt with the fixed interest rate is 78.9%.

#5: Lease Expiry

As at 31 March 2018, MCT has a weighted average lease term (WALE) of 2.7 years for its portfolio. 60.6% of MCT’s lease agreements would expire in the year 2020 and beyond.

Source: Financial Results Presentation Q4 2018 of MCT

#6: Asset Enhancement Initiatives (AEI)

In 2018, MCT has completed AEI works on VivoCity which involved:

1. Conversion of 9,200 sq. ft. of lower to higher yielding spaces on Level 1 & 2. This resulted in the addition of retail spaces for its existing tenants such as Coach, The Diamond Atelier, Aldo and Pazzion. The AEI has brought in a new-to-mall brand: Calvin Klein Jeans.

2. Improved line of sight for Basement 2 food kiosks.
   

Currently, MCT is undertaking AEI works on VivoCity which involves:

1. Conversion part of Level 3 to a 3,000 sq. m. of Public Library.

2. Extension of Basement 1 that would increase over 24,000 sq. ft. of contiguous retail spaces. It will feature tenants such as Adidas, Mi, Fila, Popular Bookstores, New Era, Spectacle Hut and Weston Corp.

3. Expansion of Timezone by 80% in size to become its flagship gaming arcade in Singapore.

4. Expansion of Zara from 16,000 sq. ft. to 32,000 sq. ft. to become the largest Zara outlet in Singapore.

#7: Rights of First Refusal Properties (ROFR) Properties

MCT has a pipeline of ROFR properties for future acquisitions. They are:

1. 100% interest in Harbourfront Centre
2. 100% interest in Mapletree Lighthouse
3. 100% interest in St James Power Station
4. 100% interest in the Comtech
5. 100% interest in Mapletree Anson
6. 100% interest in PSA Vista
7. 61% interest in Harbourfront Tower One
8. 61% interest in Harbourfront Tower Two
9. 30% interest in Keppel Bay Tower

#8: Valuation

As I write, MCT is trading at S$ 1.55 a unit.

As at 31 March 2018, MCT has reported having S$ 1.49 in net asset value a unit. Thus, its current P/NAV works out to be 1.04, the lowest in the 5-year period.

MCT adopts a distribution policy to declare and pay out a minimum 90% of its distributable income on a quarterly basis. In 2018, MCT has paid out 9.04 cents in DPU. If MCT maintains its DPU at 9.04 cents, its expected dividend yield is 5.83%, close to the higher end of its 5-year range of 5.00% – 6.04%.

Year	2014	2015	2016	2017	2018	Current
D/Y	6.04%	5.00%	5.77%	5.63%	5.76%	5.83%
P/NAV	1.05	1.29	1.08	1.11	1.05	1.04

Calculated based on Figures Presented in Annual Reports of MCT

#9: Investor Relations

For further enquiries or to request for additional investment information on MCT’s Investors Relation matters, you may contact:

Ms. Teng Yi Leng

Vice President, Investor Relations

Telephone: +65 6377 6836

Email: enquiries_mct@mapletree.com.sg

Website: http://www.mapletreecommercialtrust.com/en/Investor-Relations/Overview.aspx

#10: Major Shareholders

Temasek Holdings (Private) Ltd is the largest unitholder of MCT with 34.0% unitholdings held through:

1. The Harbourfront Pte Ltd
2. Harbourfront Place Pte Ltd
3. Harbourfront Eight Pte Ltd
4. Sienna Pte Ltd
5. Mapletree Commercial Trust Management Ltd

Conclusion:

MCT has delivered stable distributions to its unitholders for the past 5 years. Moving ahead, MCT remains committed to its AEI works at VivoCity and to retain quality tenants to maintain the stability of its overall portfolio.

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