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What to Watch For When Mapletree Commercial Trust Releases Results This Week

Mapletree Commercial Trust (SGX: N2IU) is set to release its quarterly results later this week. There are high hopes baked into its share price, which has seen a 22% rise since the turn of the year. Here’s what investors should be looking out for.

Vivocity’s performance

Mapletree Commercial Trust owns Singapore’s largest shopping mall, VivoCity. The prized asset has been one of the reasons the trust has managed to deliver consistently increasing distribution per unit (DPU).

In the last financial year ended 31 March 2019, revenue and net property income from VivoCity increased by 4.9% and 5.9%, respectively. This year, revenue from the asset is expected to increase further, after the completion of major asset enhancement works at the basement and level one.

Investors should look out for updates on the progress of the asset enhancement work and whether it is likely to be completed on schedule.

Rental reversions

The trust managed to achieve a positive 5.4% rental reversion rate in its last financial year. The positive rental reversion should provide the REIT with additional organic rental income growth.

With retail supply pipeline in Singapore expected to tighten over the next few years, retail market rents could continue to increase.

The office market has also seen a healthy rebound. There is also a potential medium-term decline in existing office stock as landlords might consider redevelopment options after the Urban Redevelopment Authority announcement of the central business district incentive scheme.

These industry tailwinds will likely result in another year of positive rental reversions for both its retail and office space.

Capital management

Lastly, Mapletree Commercial Trust has managed its financial position excellently in the past. The trust has a relatively high interest cover of 4.5 times (a measure of how easily a REIT can pay its interest with income) and a low gearing ratio of 33.1%.

Its gearing ratio improved due to the upward revaluation of its investment properties, which appreciated 5.3% collectively, based on the valuation by commercial real estate firm CBRE Pte Ltd. The revaluation gain resulted in net asset value per unit increasing by S$0.11 to S$1.60.

Investors should, however, continue to keep an eye out for updates on any near-term refinancing needs.

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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 Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of Mapletree Commercial Trust.