Listed in July 2011, Mapletree Commercial Trust (MCT) owns a portfolio of Singapore retail and office properties including VivoCity and Mapletree Business Centre. As at 31 March 2019, its portfolio was valued at S$7.0 billion. In this article, I’ll bring an update on MCT’s latest financial results, long-term performance, and valuation.
Here are 12 things to know about Mapletree Commercial Trust before you invest:
1. VivoCity: Revenue increased 3.0% year-on-year to S$212.9 million in 2019, and net property income (NPI) increased 3.6% to S$162.3 million. This was mainly due to step-up rents in existing leases and securing new leases from Zara, Adidas, Fila, Popular Bookstores, Nike, and the National Library Board.
2. Mapletree Business Centre 1 (MBC1): Revenue increased 0.9% year-on-year to S$127.1 million in 2019, and NPI increased 0.4% rise S$104.2 million. Since it was acquired for S$1.78 billion in August 2016, the business park has contributed steady revenues and income over the past two years.
3. PSA Building: Revenue increased 3.3% year-on-year to S$50.5 million in 2019, and NPI increased 4.1% to S$38.5 million. The office tower has maintained a high occupancy rate and recorded a positive rental reversion from renewed leases.
4. Mapletree Anson: Revenue and NPI remained flat at S$33.6 million and S$26.9 million respectively in 2019. Its financial performance has remained relatively stable over the last five years.
5. Bank of America Merrill Lynch Harbourfront (MLHF): Revenue increased 7.6% year-on-year to S$19.7 million in 2019 and NPI increased 9.7% to S$15.8 million. The management renewed a long-term lease with anchor tenant, Merrill Lynch Global Services Pte Ltd, for Levels 1 to 5 of MLHF in 2017 for six years until 2023. The building also secured two new tenants for Level 6 in 2018 and has been fully occupied since.
6. Overall, portfolio revenue increased 2.4% year-on-year to S$443.9 million in 2019 and distributable income increased 1.4% to S$264.0 million in 2019. This was mainly due to stable performances from MBC1 and Anson properties, and improved results from VivoCity, PSA and MLHF. Distribution per unit (DPU) grew 1.1% to 9.14 cents, and has risen every year since IPO.
7. As of 31 March 2019, MCT has a gearing ratio of 33.1%, a slight drop from 34.5% in 2018. The REIT has a debt headroom of S$1.5 billion which it can use for acquisitions of properties or asset enhancement initiatives in the future. Average all-in cost of debt is 2.97% and 85% of MCT’s debt is at fixed interest rates. Average term to maturity is 3.6 years and MCT has no more than 20% of debt due in a single year. MCT also has a credit rating of ‘Baa1’ with a stable outlook from Moody’s.
8. As of 31 March 2019, MCT has an overall occupancy rate of 98.1% for its portfolio, an improvement from 96.1% a year ago. This is mainly due to the securing of new leases for extended spaces at VivoCity and vacated spaces at Mapletree Anson. Weighted average lease of expiry (WALE) increased to 2.9 years in 2019, up from 2.7 years the year before. MCT’s top 10 tenants contributed 25.5% of gross rental revenue in 2019.
|Property||Occupancy Rate (2018)||Occupancy Rate (2019)|
|Mapletree Business Centre 1||99.4%||97.8%|
|Bank of America Merrill Lynch Harbourfront||100.0%||100.0%|
9. MCT is replacing VivoMart — which had occupied Level 1 and Basement 2 of VivoCity — with local supermarket operator NTUC Fairprice. Fit-out works for the integrated space measuring 91,000 square feet started in April 2019, and the new space will include new stores such as Fairprice Xtra Hypermarket, Unity Pharmacy, and Cheers convenience store. Around 24,000 square feet of space was recovered from VivoMart and will be occupied by Uniqlo and food outlets such as Song Fish, Penang Culture, Nakhon Kitchen, and Wonderland Savour.
10. MCT’s sponsor, Mapletree Investments Pte Ltd, is presently the REIT’s largest unitholder with a 34.2% stake as at 31 May 2019. MCT has the rights of first refusal for seven Mapletree Investment properties. Combined, these properties have a total of 2.9 million square feet in net lettable area.
11. P/B ratio: As of 31 March 2019, MCT has net assets per unit of S$1.60. Based on MCT’s share price of S$2.07, its current P/B ratio is 1.29, the highest in the last seven years.
12. Distribution yield: In 2019, MCT paid 9.14 cents in DPU. Hence, its yield is currently 4.4%, the lowest in the last seven years.
The fifth perspective
Mapletree Commercial Trust has delivered steady growth in revenue, NPI, and DPU since its IPO. However, its exceptional price run since the turn of the year – from S$1.68 to $2.07 – has seen the REIT reach record high valuations. Just like many Singapore REITs at the moment, MCT looks expensive based on its historical averages.