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Mapletree Commercial Trust’s Latest Earnings: What Investors Need to Know

Mapletree Commercial Trust  (SGX: N2IU) released its fiscal second-quarter earnings report yesterday evening. The reporting period was from 1 July 2015 to 30 September 2015.

Mapletree Commercial Trust is a Singapore-focused real estate investment trust (REIT). At the local front, the REIT has ownership of Singapore’s largest mall, VivoCity, as well as the PSA buildingBank of America Merrill Lynch HarbourFront (MLHF), and Mapletree Anson.

You can learn more about the REIT in here and here. You can also catch up with the previous quarter’s earnings here.

Financial highlights

The following’s a quick view of the latest financial figures from Mapletree Commercial Trust:

  1. Gross revenue was $71.3 million in the reporting quarter, up 1.9% from the same quarter a year ago.
  2. Net property income (NPI) rose by a healthier 5.1% year-on-year. NPI came in at $54.8 million, compared to $52.1 million for the same quarter a year ago. The REIT’s Manager credited its focus on cost control which resulted in a 7.6% decline in property operating expenses.
  3. Distribution per unit (DPU) for the reporting quarter was 2.02 cents, a 2.5% step up from the 1.97 cents seen in the last fiscal second-quarter.
  4. The value of its investment properties stand at $4.2 billion (as of 30 September 2015). The REIT ended the reporting quarter with a net asset value per unit of $1.24, up 6.9% from a year ago.

Beyond these, Foolish investors might want to keep an eye on a REIT’s debt profile. The debt profile may provide clues on how a REIT is funded, and its sensitivity to the interest rate environment. These are summarized for Mapletree Commercial Trust below:

2015-10 Mapletree Commercial Trust table

Source: Mapletree Commercial Trust’s earnings presentation

For the reporting quarter, there were some positive as well as negative developments in terms of Mapletree Commercial Trust’s debt profile. The increase in the average weighted debt maturity and reduction in the gearing ratio would belong to the former category. As for the latter, that would be the lower interest cover ratio and higher weighted average all-in interest.

The REIT has little outstanding debt in the current fiscal year. The next refinancing hurdle will be the $354 million in bank debt which will come due in the fiscal year ending 31 March 2017 (FY16/17). This is where investors should keep a watchful eye on.

Operational highlights

Mapletree Commercial Trust’s overall portfolio occupancy rate improved to 96.6%, on the back of improvement at the PSA building. That’s better compared to the previous quarter (95.5%), but a regression from the same quarter a year ago (98.5%).

The REIT also reported a weighted average lease term to expiry of about 2.3 years in the reporting quarter. Elsewhere, shopper traffic at VivoCity had slipped by 1.9% year-on-year although tenant sales did manage to inch up by 1.6%. The two metrics are important for VivoCity as it gives investors an indication of the health of the mall’s tenants’ business; ideally, both metrics should show growth.

Summing up the quarter, Sharon Lim, the chief executive of Mapletree Commercial Trust’s Manager, said the following in the earnings release:

“For the second quarter of FY15/16, we delivered a healthy 2.5% DPU growth, driven by a 5.1% year-on-year portfolio NPI growth, despite headwinds in both retail and office sectors. Operating expenses came in at 7.6% lower than the same period last year as the benefits of our efforts in cost management and improving operational efficiency continued into this financial year.

VivoCity closed the quarter with strong tenant sales and improved shopper traffic, affirming its position as the largest destination mall in Singapore.”

As mentioned in the previous earnings report, the outlook in the short to medium term is expected to be challenging for the REIT.

Foolish summary

Mapletree Commercial Trust last traded at $1.32 on Tuesday. This translates to a historical price-to-book ratio of 1.06 and a distribution yield of around 6.1%.

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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.