Can the Dividend Growth at Mapletree Commercial Trust Continue? Part 1

Mapletree Commercial Trust  (SGX: N2IU) has outperformed the market since its listing. The real estate investment trust has recorded capital gains of about 60% from 27 April 2011 to its closing price on 31 December 2014. By comparison, tthe SPDR STI ETF (SGX: ES3), a proxy for the Straits Times Index (SGX: ^STI), has climbed by only 5.6% in price for the same duration.

Being a shareholder of a REIT gives you partial ownership to all the real estate that it owns. In the case of Mapletree Commercial Trust, it has offices and shopping malls under its umbrella. As per the Monetary Authority of Singapore (MAS), REITs are mandated to distribute at least 90% of its profits as dividends to enjoy tax transparency. I also wrote about a few pointers for picking REITs here.

Over the past three plus years between 2011 and 2014, Mapletree Commercial Trust has distributed a steady annual distribution totaling around 23 cents per unit.

Financial Year Distribution per unit (Singapore cents)
2011/2012 5.3
2012/2013 6.5
2013 / 2014 7.4
First half of 2014/2015 3.9

Source: Mapletree Commercial website; author’s calculation

So, while the returns from Mapletree Commercial Trust has been fashionable, as Foolish investors, we should look behind the curtains to understand how sustainable the distributions are, and how it can grow.

A closer look

To get a sense of the resilience of Mapletree Commercial Trust’s property portfolio, we can look at the gross revenue by each property. At the local front, Mapletree Commercial Trust has ownership of Singapore’s largest mall, VivoCity, as well as the PSA building, Bank of America Merrill Lynch HarbourFront (MLHF) and Mapletree Anson.


Source: Company Earnings Presentation; FY11/12 is from 27 April 2011 to 31 March 2012

Overall revenue for Mapletree has expanded by 51% over the three financial years examined above. For the financial year ended 31 March 2014 (FY13/14), VivoCity made up close to 65% of total revenue for Mapletree Commercial Trust, making it by far the largest revenue contributor. By virtue of its relative size, VivoCity also contributed most of the revenue growth for the three financial years. The other major sales growth contributor would be the REIT’s acquisition of the Anson property.

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Source: Company Earnings Announcement; FY11/12 is from 27 April 2011 to 31 March 2012

From a business segment point of view, we can look at the revenue contributions from the Office and Retail segments. For FY13/14, the retail segment made up about 68% of total revenue. Majority of the contribution should be from VivoCity. The office segment revenue, though smaller, has more than doubled during this timeframe and is taking up an increasing percentage of total sales. In the past financial year, the office segment had grown mainly due to the Anson property acquisition.

Foolish summary

As lifelong students of Foolish long term investing, it pays to look under the hood to understand whether a rise in Mapletree Commercial Trust’s share price is supported by the quality of growth that we are looking for.

The exercise above is to look at the REIT’s revenue alone. As a next step, we should observe if the top-line growth trickles down to the bottom-line so that the REIT can sustain its share price growth and dividend payments.

But, that’s for the next article.

As of Mapletree Commercial Trust’s closing price of $1.41 on 31 December 204, it’s trading at a price-to-book ratio of around 1.2, and has a dividend yield of around 5.5%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.