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AnalysisSGX

8 things I learned from the 2022 Mapletree Commercial Trust AGM

Mapletree Commercial Trust (MCT) is a Singapore-focused REIT that owns a portfolio of retail and office properties. In terms of property valuation, MCT’s top three holdings are VivoCity, Mapletree Business City I, and Mapletree Business City II. As of 31 March 2022, MCT’s total property portfolio was valued at S$8.82 billion.

MCT’s share price is trading at $1.92 today, down 2.54% YTD. As Singapore eases its pandemic restrictions, I was curious about the impact on MCT’s performance and the management’s outlook ahead. To learn more, I attended MCT annual general meeting. Here are eight things that I’ve learned from the Mapletree Commercial Trust 2022 AGM.

1. Gross revenue grew 4.3% year-on-year (y-o-y) to S$499.5 million and net property income (NPI) increased 3.1% y-o-y to S$388.7 million in FY21/22. This was driven by higher revenues from all properties (due to the relaxation of restrictions in Singapore) except Mapletree Anson due to its transitional vacancy. In line with the easing of COVID-19 measures towards the second half of the financial year, MCT has tapered rental rebates for retail tenants and carpark income has improved.

Source: Mapletree Commercial Trust

Over the past decade, MCT’s gross revenue and NPI have grown at a compounded annual growth rate (CAGR) of 10.1% and 11.3% respectively.

2. Distributable income grew 0.7% to S$317 million and distribution per unit (DPU) grew by 0.4% to 9.53 cents in FY21/22. Based on the closing price of S$1.89 as of 31 March 2022, MCT’s yield stood at 5.0%, beating the STI and FTSE ST REIT Index yields. To get the latest yield for MCT and other Singapore REITs, you can check out Singapore REIT data.

Source: Mapletree Commercial Trust

3. MCT portfolio committed occupancy levels rose to 97.0% in 2022, up from 93.5% in 2021. You can refer to the table below for a detailed breakdown.

Source: Mapletree Commercial Trust

Portfolio weighted average lease expiry stands at 2.6 years (retail at 2.1 years and office/business parks at 2.9 years).

4. Gearing level is 33.5% as of 31 March 2022 – 40 basis points lower than the year before. Total debt outstanding stands at S$3.01 billion with 80.3% of borrowings hedged at fixed interest rates. The weighted average cost of debt is 2.4% and average term to maturity is 3.3 years.

5. A unitholder expressed his worries about how the continued growth of e-commerce would affect MCT’s performance. He asked whether MCT would help retail tenants that are affected by this shift in consumer purchasing behaviour. Sharon Lim, Chief Executive Officer of MCT mentioned that despite the growth of e-commerce, she believes in the coexistence of having both online and physical storefronts.

According to Lim, she noticed that retailers are adopting the omnichannel approach as opposed to being purely online. As human beings, consumers still desire for the element of interaction. As such, experiences like dining out at a mall or watching a movie in cinemas are irreplaceable. While e-commerce may negatively affect demand for certain shops, as long as the mall offers the right mix of tenants and connectivity in terms of location, it will continue to thrive. In terms of aid to tenants, MCT will only offer rental rebates to those whom they believe are still relevant to shoppers and are facing temporary downturns.

6. A unitholder expressed his concerns about companies looking to reduce their office space given the shift toward the work-from-home trend. Lim shared that as the government eased restrictions, MCT observed an increasing trend of people coming back to work in offices. While work-from-home remains a viable option, she believes that the social element of running a business cannot be ignored. Productivity is higher when there is face-to-face interaction. Without it, it would be increasingly difficult to establish relationships and productivity over time among new employees. Hence, MCT views that having an office space is still relevant.

7. A unitholder was worried about how the rising interest rates in this recessionary environment would affect DPU. In response, Lim said that interest rate hikes will affect all REITs and MCT has limited control over this. At the same time, she believes in setting the right hedging policies to reduce the impact. For example, MCT has hedged over 70% of its debt at fixed interest rates, providing a level of certainty in terms of distributable income for investors.

Janica Tan, Chief Financial Officer, added that MCT cannot fully eradicate the impact of rising interest rates. Moving forward, MCT will continue to monitor the markets and adjust its hedging policies where necessary. That said, the management does not plan to hedge 100% of its borrowings.

8. Since the announcement of its merger with Mapletree North Asia Commercial Trust, the share price of MCT has remained depressed. According to the management, the reason for this decline was due to multiple factors like geopolitical uncertainties, rising energy prices, interest rate hikes, and the risk of economic slowdown.

That said, MCT reassures unitholders that its business model is resilient even during difficult conditions. The management quoted an example of how MCT delivered steady results despite the challenges faced by COVID-19. Moreover, since its IPO, MCT has delivered consistent performance through economic cycles.

As of 3 August 2022, Mapletree Commercial Trust and Mapletree North Asia Commercial Trust have merged and renamed Mapletree Pan Asia Commercial Trust.

The fifth perspective

Over the past years, MCT’s portfolio has demonstrated resilience as it went through the pandemic. As Singapore started to ease its COVID-19 restrictions, its malls and offices have shown strong signs of recovery. While mega-trends like e-commerce and the work-from-home trend might pose threats, the management believes that certain experiences are irreplaceable and that the impact will be minimal. As it heads into a new era as Mapletree Pan Asia Commercial Trust, the REIT will continue to succeed as long as it stays relevant according to market trends.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Brandon Teo

Brandon has a strong interest in analysing equities, focusing on fundamentals and growth. He graduated with a Diploma with Merit in Business at Temasek Polytechnic and ranked first in his course. With a passion for the finance field, Brandon will be exploring the investment banking sector. He is currently pursuing a business degree as an undergraduate at Singapore Management University.

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