After trading hours last Thursday (23 July), blue chip REIT Mapletree Commercial Trust (SGX:N2IU) released its business updates for the first quarter of the financial year 2020/21 ended 30 June 2020.

As the REIT switched to a half-yearly reporting from this financial year onwards, for the first and third quarter, it will only be posting a business update. Also, the REIT will be paying out a distribution to unitholders on a half-yearly basis (instead of on a quarterly basis in the past.)

With that, I will be highlighting some of the key pointers in the REIT’s latest business update to take note of (along with my thoughts to share):

Financial Performance (Q1 FY2019/20 vs. Q1 FY2020/21)

Q1 FY2019/20Q1 FY2020/21% Variance
Gross Revenue
(S$’mil)
$112.1m$100.3m-10.5%
Property Operating
Expenses (S$’mil)
$23.8m$21.5m-9.7%
Net Property
Income (S$’mil)
$88.3m$78.9m-10.7%

On one look, it was a weaker set of results for the REIT, which Chief Executive Officer Ms Sharon Lim attributed it to the 8-week circuit breaker, and the continued closure of most businesses during the first phase of Singapore’s re-opening from 02 to 18 June 2020.

Ms Lim also updated that a majority of tenants in VivoCity have since resumed their operations with Phase 2 lifting of the circuit breaker from 19 June. However, she opined that it will take some time for the retail business to return to pre-Covid-19 levels due to continued work-from-home directives, border closures, social distancing measures, along with disruptions in manpower and global supply chains.

My Thoughts: The quarter-on-quarter (q-o-q) drop was within my expectation, as the retail mall VivoCity contributed 47.5% towards the REIT’s gross revenue in Q1 FY2019/20, and a drop in the mall’s contribution will definitely impact the REIT’s gross revenue.

That said, I am of the opinion that the worst is beyond us (barring unforeseen circumstances.) However, recovery will be a slow and gradual one (and very much dependent on the overall situation as far as containment of Covid-19 is concerned.)

Debt Profile (Q4 FY2019/20 vs. Q1 FY2020/21)

Compared to the previous quarter (i.e. Q4 FY2019/20 ended 31 March 2020), how is the REIT’s debt profile in the quarter under review (i.e. Q1 FY2020/21 ended 30 June 2020) like?

Let us find out in the table below:

Q4 FY2019/20Q1 FY2020/21
Gearing Ratio (%)33.3%33.7%
Interest Coverage
Ratio (times)
4.3x4.1x
Average Term to
Debt Maturity (years)
4.2 years3.9 years
All-in Average Cost
of Debt (%)
2.94%2.61%

My Thoughts: While there was a slight increase in the gearing ratio, along with a slight decrease in its interest coverage ratio, but in my opinion, its current gearing ratio is still a safe distance away from the 50.0% regulatory limit, so I am not too concerned here.

One positive thing to note is that, compared to the previous quarter, its cost of debt have dropped.

Portfolio Occupancy Profile (Q4 FY2019/20 vs. Q1 FY2020/21)

Similar to the REIT’s debt profile, I will also be looking at its portfolio occupancy profile for the quarter under review (i.e. Q1 FY2020/21) and compare it with the previous quarter (i.e. Q4 FY2019/20) to find out if it has improved or deteriorated:

Q4 FY2019/20Q1 FY2020/21
Committed Portfolio
Occupancy (%)
98.7%98.2%
Weighted Average Lease
Expiry (years)
2.6 years2.6 years

My Thoughts: There was a slight decline in Mapletree Commercial Trust’s committed portfolio occupancy compared to the previous quarter, due to a lower committed occupancy in VivoCity (a 1.3 percentage point drop from 99.7% to 98.4%), and in PSA Building (a 2.3 percentage point drop from 92.7% to 90.4%.) All the other properties in the REIT’s portfolio have their occupancy rates remaining the same.

Again, I am not too concerned by the slight dip, as the REIT’s portfolio occupancy still remains resilient in my opinion at above 90.0%.

In Conclusion

The most recent set of results reported but the REIT should not come as a surprise to us unitholders, as the period under review – 01 April to 30 June 2020, encompassed the entire 2-month circuit breaker period where a huge majority of retail shops had to temporarily shut, with rental rebated handed out by the REIT to affected tenants.

Just as I have mentioned earlier in this post in my opinion, the worst is beyond us, and barring any unforeseen circumstances, we should expect a better set of results over the remaining quarters of the financial year.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Mapletree Commercial Trust.

 

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