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

Yesterday, Mapletree Commercial Trust  (SGX: N2IU) released its second-quarter earnings report for the financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 July 2016 to 30 September 2016.

As a quick background, Mapletree Commercial Trust is a Singapore-focused real estate investment trust (REIT). The REIT has ownership of Singapore’s largest mall, VivoCity, together with the PSA buildingBank of America Merrill Lynch HarbourFront (MLHF), Mapletree Anson, and Mapletree Business City.

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

Financial highlights

The following is a quick view on some of the latest financial figures for Mapletree Commercial Trust:

  1. Gross revenue was $88.1 million in the reporting quarter, up 23.6% from the same quarter a year ago.
  2. Net property income (NPI) rose 24.8% year-on-year to $68.4 million.
  3. The distribution per unit (DPU) for the reporting quarter was 2.05 cents, or up 1.5% from the 2.02 cents seen in the third-quarter a year ago.
  4. The value of the REIT’s investment properties is $6.2 billion as of 30 September 2016. The REIT ended the reporting quarter with a net asset value per unit of $1.32, up 6.5% from a year ago.

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

2016-10-26-mapletree-commercial-trust-debt-table
Source: Mapletree Commercial Trust’s earnings presentations

For the reporting quarter, Mapletree Commercial Trust’s debt load rose from $1.55 billion in the third-quarter of FY15/16 to $2.34 billion. The REIT’s gearing ratio and weighted average all-in interest cost of debt had also both picked up to 37.3% and 2.66%, respectively. Then, the interest cover ratio had also dipped from 5.1 times to 4.9 times.

The REIT has little debt coming due in FY16/17 and FY17/18 (only $82.9 million in total).

Operational highlights and a future outlook

Overall portfolio occupancy for Mapletree Commercial Trust had improved to 98.8%, on the back of improvements at PSA building and Mapletree Anson. A year ago, the REIT’s portfolio occupancy was 96.6%.

Mapletree Commercial Trust also reported a weighted average lease term to expiry (WALE) of about 2.8 years in the reporting quarter. This is an improvement from the 2.3 years seen in the same quarter a year ago.

Meanwhile, shopper traffic at VivoCity was up 7.0% year-on year during the reporting quarter. Tenant sales rose by 2.7% for the same period.

Summing up the quarter, Sharon Lim, the chief executive of the manager of Mapletree Commercial Trust, had this to say:

“We are pleased to report a strong set of financial results. In an environment of heightened economic and financial uncertainties, we continued to grow our total gross revenue and NPI respectively by 23.6% and 24.8% on a year-on-year basis.

Our existing portfolio, in particular, registered about 6% year-on-year growth in both gross revenue and NPI in 2Q FY16/17, underscoring the strength of our portfolio and our asset management capabilities.”

The REIT also provided some insight on the conditions of its markets and business in the earnings release. Regarding demand for retail space in Singapore, this is what Mapletree Commercial Trust said:

“According to CBRE, the weak retail performance and ongoing structural changes in the retail market continued to weigh on occupier demand… CBRE expects demand to remain subdued for the rest of 2016 as the ongoing economic uncertainty in the local and global markets continue to impact both consumer and business sentiment.”

As for the commercial properties market, here are the REIT’s comments:

“CBRE expects rental decline to continue till next year but at a slower pace. Barring any unforeseen circumstances, the potential for market recovery could arrive by early 2018 by which time the supply wave will have passed.”

So, it appears that the market conditions for Mapletree Commercial Trust do not look bright at the moment, according to the comments above. But the REIT also said that its “existing properties are expected to remain relatively resilient, supported by VivoCity’s healthy performance in a challenging wider retail market and manageable expiries in its office/business park portfolio in the next 12 months.”

Mapletree Commercial Trust’s units closed at a price of $1.54 each on Wednesday. This translates to a historical price-to-book ratio of 1.17 and a trailing distribution yield of around 5.3%.

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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 does not own shares in any companies mentioned.