Mapletree Commercial Trust’s Latest Earnings: What’s Next After A 9.6% Increase In Distribution?

Yesterday, Mapletree Commercial Trust  (SGX: N2IU) released its third quarter earnings report for its financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 October 2016 to 31 December 2016.

As a quick background, Mapletree Commercial Trust is a real estate investment trust that focuses on both retail and commercial properties in Singapore. The REIT has ownership of Singapore’s largest mall, VivoCity. It also owns PSA buildingBank of America Merrill Lynch HarbourFront (MLHF), Mapletree Business City I and Mapletree Anson.

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

Financial highlights

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

  1. Gross revenue was $108.8 million in the reporting quarter, representing an impressive 47.4% jump from FY15/16’s third quarter.
  2. Net property income (NPI) also soared 49% year-on-year to $84.4 million. The REIT’s property operating expenses increased at a slower rate than gross revenue, resulting in faster NPI growth.
  3. Distribution per unit (DPU) for the reporting quarter was 2.28 cents, up 9.6% from FY15/16’s third quarter.
  4. The value of Mapletree Commercial Trust’s investment properties was $6.12 billion as of 31 March 2016. The REIT ended its reporting quarter with a net asset value per unit of $1.34, up 8% from the $1.24 seen a year ago.

Beyond these, Foolish investors may also 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. The table below shows Mapletree Commercial Trust’s current and year-ago debt profile:

2017-01-25 Mapletree Commercial Trust Debt Table
Source: Mapletree Commercial Trust’s earnings presentations

The REIT’s debt profile has seen some changes.

Total borrowings increased to $2.33 billion because of the drawdown of a $800 million term loan to finance the August 2016 acquisition of Mapletree Business City I. The REIT’s gearing also increased slightly, along with a step up in the weighted average all-in interest rate.

On the positive end, the percentage of the REIT’s loans with fixed interest rates rose to 81.2% and the average weighted debt to maturity increased to 4.3 years.

Sharon Lim, the chief executive of Mapletree Commercial Trust’s manager, shared some comments in the earnings release on capital management:

“In November 2016, we took the opportunity to issue S$85.0 million of 7-year Fixed Rate Notes at 2.795% p.a., rated Baa1 by Moody’s. With this, refinancing has been completed for FY16/17 and FY17/18.”

Operational highlights and the future outlook

The committed portfolio occupancy for Mapletree Commercial Trust in the reporting quarter improved to 99% compared to the 98.8% seen in the previous quarter. The REIT also reported a weighted average lease term to expiry (by gross revenue) of about 2.8 years.

In the nine months ended 31 December 2016, shopper traffic at VivoCity increased by 3.5% year-on-year while tenant sales climbed by 1.7%. These are positive trends, but investors should also watch out for changes.

Lim had shared a few comments in Mapletree Commercial Trust’s earnings release to sum up the quarter:

“We are pleased to report another quarter of strong financial results. In an environment that continued to face headwinds as well as external and domestic uncertainties, our portfolio remained resilient.

Largely driven by the accretive acquisition of MBC I [Mapletree Business City], and with the continued healthy performance by our Existing Portfolio, total gross revenue and NPI for 3Q FY16/17 grew by 47.4% and 49.0% respectively on a year-on-year basis.”

Regarding the REIT’s outlook, management said that its “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 closed trading yesterday at a unit price of $1.48. This translates to a historical price-to-book ratio of 1.10 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 does not own shares in any companies mentioned.