Thursday, January 23, 2014

Mapletree Commercial Trust - Stronger than expected

Strong organic growth 
Mapletree Commercial Trust (MCT) reported 3QFY14 revenue of S$68.4m (+22.4% yoy) and DPU of 1.865 Scts (+15.5% yoy), mainly driven by the 38.7% rental uplift in leases renewed at VivoCity. Similarly, the rising occupancy in the PSA Building office to 100% and in the Alexandra Retail Centre (ARC) to 97.4% has attributed to the strong earnings growth. With 1.8% of retail space and 1.2% of office space up for renewal in FY13/14, we are confident that the high portfolio occupancy of 98.7% will be maintained as we step into the new financial year. In addition, with 15.4% of retail space and 7.3% of office space up for renewal in FY14/15, we expect MCT to benefit from the strong positioning of VivoCity and the recovery in the office market.   
Well-shielded from the rising interest rates 
During the quarter, MCT secured term loan facilities of S$397.6m to refinance all of its debts (S$338.6m) due in FY14/15 and some of its debts due in FY17/18. Although its gearing is relatively high at 40.8%, we seek comfort in MCT’s accessibility to loans and the fact that the next tranche of debt is only due to be refinanced in FY15/16. The all-in interest cost at the moment stands at 2.18% (unchanged from a quarter ago), with 74.5% of its total debt under a fixed rate. With these structures in place, we expect MCT to be well-shielded from any hikes in interest rates. 

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