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10 Highlights From Mapletree Commercial Trust’s 1Q FY18/19 Results

Mapletree Commercial Trust (SGX: N2IU) owns a portfolio of five commercial and retail properties in Singapore, including the largest shopping mall in Singapore, VivoCity. On Thursday (26 July), it gave an update on its results for the three-month period ending 30 June 2018. Here are the key takeaways from its earnings update:

1. Gross revenue for the quarter increased 0.7% year-on-year to S$108.5 million, from S$107.8 million. Due to lower property operating expenses, net property income increased at a faster tick of 2.1% to S$85.9 million from S$84.2 million the same quarter last year.

2. But income available for distribution rose only 0.4% to S$64.6 million from S$64.3 million a year ago. This is largely due to a 9.3% rise in net finance cost. Distribution per unit for the quarter was 2.23 Singapore cents, unchanged from a year ago.

3. As of 30 June 2018, gearing ratio was 34.7%, slightly up from 34.5% recorded in March. Total assets were valued at S$6.75 billion, with net borrowings of S$2.35 billion. Net asset value per unit remained unchanged at S$1.49.

4. Interest cover (a measure of how easily a REIT can pay off its interest expense with income) stood at 4.6 times, a comfortable level in my opinion. The average term to maturity of its debt was 3.6 years and 75.3% of its debt was on fixed rates.

5. Below is a chart showing the breakdown of gross revenue and net property income by property:

Source: Mapletree Commercial Trust FY18/19 Q1 earnings presentation

6. Overall portfolio occupancy was a solid 99.2%. Notably, VivoCity’s occupancy increased to 99.9% committed occupancy from 93.1%, after the Basement 1 extension was opened in June.

7. 105 retail leases were signed during this 3-month period at a positive 2.1% rental reversion. At the same time, 14 leases were signed in its office and business park at a negative 5.3% rental reversion rate. All in, portfolio rental reversion, including a rent review from a key tenant, was positive 1.2% for the quarter.

8. Weighted average lease expiry was 2.6 years as of 30 June 2018. 12.6% of contracts are due for renewal in FY18/19, which ends in March 2019. The trust seems to have a very well staggered lease profile, as seen below:

Source: Mapletree Commercial Trust FY18/19 Q1 earnings presentation

9. Shopper traffic rose 0.4% year-on-year to 13.5 million. But tenant sales declined 4.1% due in part to spaces temporarily vacated to make way for a public library on Level 3 and to create concept stores on Level 1.

10. On the outlook for the rest of the year, the REIT’s manager cited that CBRE expects a “more stable and sustainable rental growth” in the retail segment, even though key challenges arising from tight labour market conditions and high occupancy costs remain.

With respect to the office segment, the management said:

“The medium-term rental outlook remains positive especially for the Grade A segment, aided by a tapering supply pipeline. However, potential risks remain, particularly on the demand side in light of recent escalations in global trade disputes and their possible dampening effects on global economic growth. Both landlords and occupiers will need careful navigation through the next 6 to 12 months.”

At the time of writing, units of Mapletree Commercial Trust exchanged hands at S$1.65 per piece, giving it a price-to-book ratio of 1.11 and an annualised distribution yield of 5.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of Mapletree Commercial Trust. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.