Yesterday was certainly a busy for me, where 3 REITs in my long-term investment portfolio (you can check out a list of all the companies I have invested in here) released their latest financial results for the quarter ended 30 September 2020 – CapitaLand Mall Trust (for the third quarter, which you can check out here), and Suntec REIT (also for the third quarter, which you can read here) before market hours, and Mapletree Commercial Trust (SGX:N2IU) in the evening (its results are for the second quarter and first half of the financial year 2020/21 – it has a year-end every 31 March.)

In my post today, I will be sharing key aspects you need to know about the REIT’s latest update – particularly its financial performance, debt and portfolio occupancy profile, along with its distribution per unit. On top of that, you will also find my personal thoughts about the blue chip REIT’s latest set of results peppered throughout the post.

Let’s get started…

Financial Performance (1H FY2019/20 vs. 1H FY2020/21, and Q2 FY2019/20 vs. Q2 FY2020/21)

I will start off by looking at the REIT’s results for the first half of the financial year, followed by a comparison of its financial performance for the second quarter (which I have manually computed based on updates provided by the REIT in the first quarter, and the REIT’s results for the first half of the financial year.)

1H FY2019/20 vs. 1H FY2020/21:

1H FY2019/201H FY2020/21% Variance
Gross Revenue
(S$’mil)
$224.2m$218.7m-2.5%
Property Operating
Expenses (S$’mil)
$48.1m$47.2m-1.8%
Net Property
Income (S$’mil)
$176.1m$171.5m-2.6%
Distributable Income
to Unitholders
(S$’mil)
$134.1m$138.4m+3.2%

For the first half of FY2020/21, the REIT’s financial results was a weaker one compared to last year, largely due to the negative impacts caused by the two-month circuit breaker between 07 April and 18 June 2020 (which resulted in the REIT’s first quarter results taking a huge tumble.)

Looking at its gross revenue, it saw a 2.5% year-on-year (y-o-y) decline, which can be attributed to rental rebates granted to eligible tenants affected by Covid-19 and the circuit breaker period, lower revenue contribution from VivoCity, PSA Building, Mapletree Business City I, and Merrill Lynch Harbourfront, offset by higher revenue contribution from Mapletree Anson, and first time contribution from the newly acquired Mapletree Business City II (S$42.1m.)

Property operating expenses dipped by 1.8% on a y-o-y basis as a result of lower property maintenance expenses, utilities expenses, marcom expenses, property tax expenses, and property management fees incurred by existing properties.

However, its distributable income to unitholders edged up 3.2% y-o-y due to the release of S$15.0m of capital allowance claims in Q4 FY2019/20. Excluding that, its distributable income to unitholders would have fallen by 7.9% compared to last year.

Q2 FY2019/20 vs. Q2 FY2020/21:

Based on financial updates posted by the REIT for the first quarter (you can check out my post about it here), and its financial results for the first half of the year, I have manually calculated its results for the second quarter, and compare it against the time period last year (i.e. Q2 FY2019/20), which you can find in the table below:

Q2 FY2019/20Q2 FY2020/21% Variance
Gross Revenue
(S$’mil)
$112.0m$118.4m+5.6%
Property Operating
Expenses (S$’mil)
$24.3m$25.7m+5.7%
Net Property
Income (S$’mil)
$87.7m$92.6m+5.5%

My Thoughts: As a unitholder, it is definitely encouraging to know that its gross revenue and net property income have recorded improvements on a quarter-on-quarter (q-o-q) basis, after both statistic suffered q-o-q declines in the first quarter.

Especially with Singapore on the verge of moving into Phase 3 of the safe transition, I am confident of the REIT being able to continue to record q-o-q improvements in its financial results for the third and fourth quarter – barring any second wave of outbreak.

Debt Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

Compared to the previous quarter (i.e. Q1 FY2020/21 ended 30 June 2020), has its debt profile improved or deteriorated? Let us take a look in the table below:

Q1 FY2019/20Q2 FY2020/21
Gearing Ratio
(%)
33.7%33.8%
Interest Coverage
Ratio (times)
4.1x4.0x
Average Term to
Debt Maturity (years)
3.9 years4.5 years
Average Cost of
Debt (%)
2.61%2.57%

My Thoughts: While its gearing ratio have inched up by 0.1 percentage points (pp), and its interest coverage ratio have edged down slightly, on the other hand, its average cost of debt saw a 0.04pp dip to 2.57%, and its average term to debt maturity have also went up.

Additionally, I understand that the REIT have also refinanced all of its bank debts up till FY2021/22.

Personally, I feel that the REIT have a conservative debt profile – with a gearing ratio at 33.8%, there is plenty of debt headroom for it to make further yield accretive acquisitions before it reaches the regulatory limit of 50.0%.

Portfolio Occupancy Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

Compared to the previous quarter, Mapletree Commercial Trust’s overall portfolio occupancy rate saw a 0.5pp drop to 97.7% (Q1 FY2020/21: 98.2%), due to a dip in occupancy in VivoCity (from 98.3% in Q1 FY2020/21 to 97.9% in Q2 FY2020/21), as well as in PSA Building (from 88.7% in Q1 FY2020/21 to 87.9% in Q2 FY2020/21.)

In terms of rental reversions, its retail suffered a negative rental reversion of -8.9%, while its office/business park suffered a negative rental reversion of -1.6% – pretty much expected in my opinion.

Distribution Per Unit (1H FY2019/20 vs. 1H FY2020/21)

Starting from FY2020/21, as the REIT have switched to half-yearly reporting, it has also switched its distribution payout frequency from quarterly to half-yearly.

As such, the following table is the REIT’s distribution per unit for the first half of FY2020/21, compared against the same time period last year (i.e. 1H FY2020/21):

1H FY2019/201H FY2020/21% Variance
Distribution Per
Unit (S$’cents)
4.63 cents4.17 cents-9.9%

If you are a unitholder of the REIT, you may want to take note of the following dates:

Ex-dividend: 29 October 2020
Record date: 30 October 2020, at 17:00hrs
Payout date: 27 November 2020

In Conclusion

On the whole, I am happy with the REIT’s latest set of results – especially with its q-o-q improvements recorded in the second quarter of the current financial year. In terms of its debt profile, it is also a conservative one, with plenty of debt headroom for the REIT to make yield-accretive acquisitions should an opportunity come their way.

Moving forward, as I have mentioned in the previous section, I am confident of the REIT reporting improvements in its results for the remaining quarters of the current financial year 2020/21. I am also quietly confident of the RIET reporting similar sets of FY2020/21 results (compared to the previous year) for the full-year, if not one with a marginal improvement. However, this is taken into consideration that there is no second outbreak of Covid-19 cases in Singapore.

With that, I have come to the end of my review of Mapletree Commercial Trust’s latest set of results. I hope you will find it useful (but at the same time, please do your own due diligence before you make any investment decisions), and here’s wishing you a wonderful weekend ahead!

Related Documents

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

 

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