Mapletree Commercial Trust

MAPLETREE Commercial Trust's (MCT) Q4 FY2013 revenue and net property income (NPI) rose by 22 per cent and 23 per cent y-o-y, to $60.7 million and $44.2 million, respectively. Growth was largely driven by strong rental reversions at VivoCity and PSA Building, supported by improved occupancy levels of 97.7 per cent (versus 94.6 per cent a year ago).

Meanwhile, the quarter also saw partial contribution from Mapletree Anson, which was acquired on Feb 4, 2013. Distributable income came in at $34.7 million (+20 per cent y-o-y), translating into a distribution per unit (DPU) of 1.737 cents (+12 per cent y-o-y).

With revaluation of close to $196 million made at the year-end, MCT's NAV increased by 11 per cent to $1.06. Gearing, as a result, fell slightly to 40.8 per cent. Financial metrics remain healthy with an interest cover of 5.4 times, about 70 per cent of interest costs is fixed, and weighted average lease expiry is 3.3 years.

MCT's portfolio achieved a robust uplift in rental revenues for FY2013 with strong retention rates of about 83 per cent (retail) and 65.2 per cent (office). Notably, revenue from VivoCity increased by about 6 per cent y-o-y, supported by a 33 per cent uplift in fixed rents, while its office leases, namely PSA Building, were signed at 44.3 per cent higher rates. Looking ahead, the outlook remains robust based on the following: 1) the trust has 17.9 per cent of its income up for renewal, of which a majority will be leases at VivoCity. The manager has plans to continue to remix the mall's tenant base to maintain its appeal; and 2) full-year contribution from Mapletree Anson, which offers further upside when its leases are up for renewal in the coming year.

While we believe that the current price fully reflects the positives of the current portfolio, we remain optimistic that given the significant pipeline from its sponsor, acquisitions will remain a key feature for MCT. A medium-term target remains Maple Business City, which will provide a solid platform for MCT to grow to the next level. We have assumed $1 billion worth of acquisitions in FY2015 (at 5.25 per cent yield, with an equity/debt funding ratio of 60 per cent/40 per cent, keeping gearing constant). "Buy", with target price raised to $1.53.

BUY