Following its AGM this morning (in case you’re missed it, you can check out my summary of it here), Mapletree Commercial Trust (SGX:N2IU) released its business update for the first quarter of the financial year ended 30 June 2022 (i.e. Q1 FY2022/23) after market hours on the very same day (29 July.)

In case you’re not already aware, this will be the last time the REIT will be reporting its results under the name “Mapletree Commercial Trust”, as unitholders have overwhelming voted in favour of the merger between the REIT (which currently has 5 properties in its portfolio, all located in Singapore) and Mapletree North Asia Commercial Trust (where its portfolio comprises 13 properties located in Hong Kong, China, Japan, and South Korea) in separate Extraordinary General Meetings (EGMs) conducted in end-May, with the enlarged REIT to be renamed as “Mapletree Pan Asia Commercial Trust” with effect from Wednesday, 03 August. Also, Mapletree North Asia Commercial Trust will be delisted on the same day – for those of you who like to learn more about the merger between the 2 REITs, you can read my summary where SIAS facilitated a virtual dialogue session between the CEO of Mapletree Commercial Trust and unitholders here, and also my summary of the EGM conducted by Mapletree Commercial Trust to seek unitholders’ approval on the merger here.

As the REIT has shifted to reporting its full financial results on a half-yearly basis (along with declaring a distribution payout in the same time frequency), it only provided a summary of its financial results, which you’ll read about in this post, together with its portfolio occupancy and debt profile. On top of that, I’ll also be sharing my thoughts about the REIT’s latest business update.

Let’s begin:

Financial Performance (Q1 FY2021/22 vs. Q1 FY2022/23)

The following table is a comparison of the REIT’s results reported for the current quarter under review (i.e. Q1 FY2022/23 ended 30 June 2022), compared against that reported in the same time period last year (i.e. Q1 FY2021/22 ended 30 June 2021):

Q1 FY2021/22Q1 FY2022/23Variance (%)
Gross Revenue
(S$’mil)
$124.1m$135.0m+8.8%
Property Operating
Expenses (S$’mil)
$27.2m$28.3m+4.0%
Net Property
Income (S$’mil)
$96.9m$106.7m+10.1%

My Observations: Compared to its financial performance last year, the REIT’s results was a rather stable one (in my opinion) – where improvements can be attributed to higher contribution from VivoCity (as a result of lower rental rebates, turnover and step-up rents, as well as higher carpark income) and Mapletree Business City.

Portfolio Occupancy (Q4 FY2021/22 vs. Q1 FY2022/23)

When it comes to reviewing a REIT’s portfolio occupancy, I will always take the statistics reported in the current quarter under review (i.e. Q1 FY2022/23 ended 30 June 2022), and compare them against that reported in the previous quarter 3 months ago (i.e. Q4 FY2021/22 ended 31 March 2022) to find out whether it has continued to remain resilient:

Q4 FY2021/22Q1 FY2022/23
Portfolio Occupancy
(%)
97.0%97.2%
Portfolio WALE
(years)
2.6 years2.8 years

My Observations: The REIT’s portfolio occupancy rate have further strengthened by 0.2 percentage point (pp) compared to the last quarter 3 months ago to 97.2% – a very strong one in my opinion.

Its lease expiry over the next couple of years is also well-spread out – with 4.9% of its retail and 4.7% of its office/business park leases expiring in the second half of the current financial year (FY2022/23), another 11.1% of its retail and 9.8% of its office/business park leases expiring in the next financial year 2023/24, 13.0% of its retail and 9.5% of its office/business park leases expiring In FY2024/25, and the remainder of the leases expiring only in FY2025/26 and beyond.

Debt Profile (Q4 FY2021/22 vs. Q1 FY2022/23)

Just like how I have reviewed the REIT’s portfolio occupancy in the previous section, I also study its debt profile by comparing its results reported for the current quarter under review against that reported 3 months ago, as follows:

Q4 FY2021/22Q1 FY2022/23
Aggregate Leverage
(%)
33.5%33.8%
Interest Coverage
Ratio (times)
4.8x4.9x
Average Term to
Debt Maturity (years)
3.3 years3.0 years
Average Cost of
Debt (%)
2.4%2.5%

My Observations: Even though its aggregate leverage have edged up slightly (by 0.3pp) compared to the previous quarter 3 months ago, but at 33.8%, there still remains plenty of debt headroom before the regulatory limit of 50.0% is reached.

78.6% of its borrowings have been hedged at fixed rates, giving the REIT a good “protection” against any negative impacts of interest rate hikes.

Finally, on its debt maturity in the coming years ahead, its also well-staggered, with 15% of its total debt expiring in the second half of the current financial year FY2022/23, 9% of its total debt expiring in FY2023/24, 24% of its total debt expiring in FY2024/25, and 52% of its total debt expiring only in FY2025/26 and beyond.

Closing Thoughts

As a unitholder of the blue-chip retail, office, and business park REIT, I felt that its latest set of results was a resilient one – where strong performances by VivoCity and Mapletree Business City saw its financial performance further improving compared to last year; in terms of its portfolio occupancy, all of its properties were more than 95.0% occupied (except mTower, which is 86.8% occupied); its debt profile also continued to remain very healthy – where its aggregate leverage of 33.8% (as at 30 June 2022) still remains a very good distance away from the regulatory limit of 50.0%.

Finally, while no distributions are declared for the current quarter under review, there will be a clean-up distribution to unitholders of the REIT for the period between 01 April 2022 and 20 July 2022 (being the day immediately before the trust scheme became effective), with the amount to be announced in due course.

With that, I have come to the end of my review on Mapletree Commercial Trust’s first quarter business update. I hope you’ve found the contents above useful, and as always, do take note that all the opinion you have read above are solely mine, which I am sharing for educational purposes only. They do not represent any buy or sell calls for the REIT’s unit. You’re strongly encouraged to do your own due diligence before you make any investment decisions.

Related Documents

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

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