MCT – CIMB

Awaiting Vivocity contributions

No surprises from 2Qas we await contributions from Vivocity after lease renewals and the completion of AEI at ARC.Almost all its leases due in FY12 have been renewed with good rental reversions. The trend shouldcontinueinto FY13.

2Q12/1H12 DPU is broadly in line with our estimates and consensus, forming 25%/51% of FY11. We fine-tuned our numbers but keep our DDM-based target price (discount rate: 8.6%). Maintain Outperform.

Vivocity’s new lease of life

As its largest asset, an under-rented Vivocity should provide strong impetus for future growth. YTD, management has renewed almost all the retail leases due in FY12 at good rental reversions of 20%. Contributions should flow in after the refurbishment of some units. As the mall is substantially under-rented (estimated passing rents of S$10.10 psf vs. peers’ S$11-14), rental reversions should remain positive next year, particularly with footfall and retail sales expected to benefit from the opening of the MRT Circle Line extension.

More to look forward to

The completion of Alexandra Retail Centre (ARC) should provide another leg up. Over 50% of ARC (by NLA) has been pre-committed, up from over 33% last quarter. Construction is more than 90% completed and ARC is on schedule to open by Dec 11. Rather than going for a soft launch, management is looking at the progressive opening of its outlets. Rental step-up provisions in MLHF’s master lease (10-12%) should provide further uplift by Dec 11.

Mapletree Business City not due for injection yet

Still seeing growth potential from its existing portfolio, management is not looking at an injection of Mapletree Business City in the next six months. This puts to rest any concerns about near-term cash calls for the injection, given asset leverage of 38.5%. Pre-commitments have since climbed to 84-5% with asking rents still fairly stable.