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Mapletree Commercial Trust: 3 Things Investors Should Know From Its Latest Earnings

Mapletree Commercial Trust (SGX: N2IU) is a real estate investment trust that invests in both office as well as retail properties.

Although its name has the word “Commercial” in it, the REIT generates nearly half of its revenue from VivoCity, Singapore’s largest retail mall. The other four assets that Mapletree Commercial Trust has are PSA Building, Bank of America Merrill Lynch HarbourFront, Mapletree Anson, and Mapletree Business City I.

In late October, Mapletree Commercial Trust reported its second quarter earnings for its financial year ending 31 March 2018 (FY17/18). Let’s take a look at three useful pieces of information investors may want to know from the announcement:

1. The overall result

The following table shows the results of Mapletree Commercial Trust for the reporting quarter:


Source: Mapletree Commercial Trust FY17/18 second quarter earnings presentation

The REIT managed to deliver good growth. Gross revenue, net property income, and income available for distribution all grew by 20% or more. Meanwhile, the distribution per unit increased by 9.3%.

Mapletree Commercial Trust’s positive performance was driven by the accretive acquisition of Mapletree Business City I (the asset was purchased in August 2016) as well as positive contributions from VivoCity.

2. The occupancy rate

The occupancy rate for a REIT is an important metric to look at since it gauges the strength of the market demand for the REIT’s properties. The following chart shows the occupancy rates for Mapletree Commercial Trust across its different properties for its last three quarters:


Source: Mapletree Commercial Trust FY17/18 second quarter earnings presentation

We can see that the REIT’s occupancy rates have remained high for the timeframe under observation. What’s more, the overall committed occupancy is even higher at 98.7%, up from 98.5% in the previous sequential quarter.

3. Debt profile

A REIT’s debt profile can give us clues on its financial health. Here’s a table showing the debt profile of Mapletree Commercial Trust in its last three quarters:


Source: Mapletree Commercial Trust FY17/18 second quarter earnings presentation

There are a few things to note here:

a) The REIT has a high percentage of its debt on fixed rates (78% as of 30 September 2017). This helps to insulate the REIT from any increases in interest rates over the short-term.

b) Its gearing ratio has been flat in the last three quarters and that’s good. There’s also a healthy gap between the REIT’s gearing ratio and the regulatory gearing limit of 45%. This shows that Mapletree Commercial Trust has room to take on more debt for acquisitions, if needed.

c) The interest coverage ratio is at 4.8. This is comfortably higher than what would be considered risky.

d) There has been a slight increase in the all-in cost of debt from 2.66% at 31 March 2017 to 2.70% at 30 September 2017. Investors may want to keep an eye on this. If the all-in cost of debt continues to creep higher, it could negatively impact the REIT’s distributions.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.