Mapletree Commercial Trust (SGX: N21U) is a REIT that invests in a portfolio of income-generating real estate primarily used for office and/or retail purposes. MCT’s current portfolio consists of five assets: VivoCity, Mapletree Business City (MBA) I, PSA Building, Mapletree Anson, and MLHF, with a total net lettable area of 3.8 million square feet valued at S$7.35 billion.
The REIT is not only backed by a strong sponsor in Mapletree Investments Pte Ltd but has been performing very well in terms of share price, rising from S$1.47 five years ago to around S$2.37 currently. Even though the REIT has performed very well over the years, there are three reasons I believe there’s still further upside.
1. DPU increase
In MCT’s latest Q2 2020 earnings release, the REIT reported a 1.9% year-on-year increase in gross revenue, while distribution per unit (DPU) rose 2.2% year on year to 2.32 Singapore cents. Most importantly, MCT’s crown jewel, VivoCity, posted 5.1% and 4.9% year-on-year growth in gross revenue and net property income (NPI) respectively.
This demonstrates that there is still ample room for organic growth in footfall and revenue for this asset, and it should eventually flow down to even better DPU. Annualised distribution yield stands at 3.9% at MCT’s last traded price of S$2.37.
2. Growth through acquisitions
In late September, MCT announced the proposed acquisition of MBC Phase 2 from a subsidiary of the sponsor at an agreed property value of S$1.55 billion. This move will consolidate MCT’s ownership of the entire MBC development and will add a sixth property into MCT’s portfolio. The property has a high committed occupancy rate of 99.4% and is acquired at an NPI yield of around 5.0%. Pro-forma DPU is expected to rise by 4% from 9.14 Singapore cents to 9.51 Singapore cents for the fiscal year 2018/2019. Moving into 2020, this acquisition will further boost DPU as the property was acquired at an NPI yield higher than the portfolio’s NPI yield.
3. A beneficiary of the Greater Southern Waterfront plans
The Singapore government announced plans in March this year to develop the Greater Southern Waterfront area over the next five to 10 years. This is the area currently occupied by the Port of Singapore Authority (PSA) in Tanjong Pagar, and the rejuvenation project will be set in motion once PSA relocates to Tuas by 2027. There are around 2,000 hectares of land for potential redevelopment, almost six times the size of Marina Bay, and plans have been unveiled to also redevelop Sentosa and Pulau Brani islands to attract more tourists and locals.
MCT, with its crown jewel VivoCity, stands to benefit directly from these proposed changes. The influx of tourists and locals alike will boost visitor numbers and increase footfall to shops and stores within the mall, leading to many more years of future growth for the REIT.
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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 Royston Yang doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of Mapletree Commercial Trust.
Motley Fool Singapore 2019