Recently, I mentioned that I have sold off SoilBuild Business Space REIT and reinvested the cash into another stock. One of the stock is Mapletree Commercial Trust. If you notice, I already own Mapletree Commercial Trust in my stock portfolio. I am only increasing my stake on it.
Why did I buy into Mapletree Commercial Trust? One of the reason is the excellent 2Q FY17/18 financial results that Mapletree Commercial Trust has released recently. While other REITs suffer from either flat DPU or declining DPU, Mapletree Commercial Trust achieved a DPU increase of 9.3%!
| 2Q FY17/18 (S$’000) |
2Q FY16/17 (S$’000) |
YoY(%) | |
| Gross Revenue | 107,210 | 88,082 | 21.7 |
| Net Property Income | 84,424 | 68,414 | 23.4 |
| Distributable Amount | 64,691 | 53,654 | 20.6 |
| Distribution Per Unit (“DPU”) (cents) | 2.24 | 2.05 | 9.3 |
There are many positive points I noted from the latest presentation of the financial results.
- VivoCity recorded stable shopper traffic and 1.1% growth in tenant sales for 1H FY17/18.
- With the addition of a public library on Level 3 of VivoCity, bonus GFA granted under the
Community/Sports Facility Scheme (“CSFS”) will be used to extend Basement 1 by over 24,000 square feet. The library will definitely attract more shoppers as they will eat and shop after borrowing books from the library. Well, at least that is what I always do after I bring my kids to the library. - A major lease of approximately 104,000 square feet of pre-terminated space at MBC I was replaced positively.
- The current gearing ratio as at 30 September 2017 is at 36.4%. This means that there is still room to take up more debt to fund further acquisitions.
- VivoCity is still undergoing Asset Enhancement Initiatives (“AEI”). This will continue to open up more space for additional rent and attract more shoppers. The AEI is targeted to commence in 3Q FY17/18 and complete in phases by 3Q FY18/19.
- Mapletree Commercial Trust also suffers from the current poor office rental headwinds as Mapletree Business City is now part of its portfolio. I believe once the office market rent turns around, Mapletree Commercial Trust will benefit and DPU will continue to increase.
Hi,
may I know why you choose to a slight premium over NAV for Mapletree Commercial Trust now?
Hi JJ, I already held Mapletree Commercial Trust in my portfolio. I bought it at lower prices back then. I am willing to pay a slight premium over NAV for the following reasons.
1. Extra cash on hand. Thus I am investing it for the 5%++ yield.
2. I am not afraid if the stock price drop as the REIT will still give me dividends.
3. At current gearing ratio, it is a matter of time Mapletree Commercial Trust adds the remaining Mapletree Business City into its portfolio and thus increasing its DPU and NAV further.
Just my personal analysis.