MCT – CIMB

VivoCity remains the Star

Positive rent reversions from previously negotiated leases at VivoCity kicked in in 3Q, which together with stronger GTO rentals, drove a 10% qoq jump in VivoCity revenue in 3Q. We remain positive on VivoCity, MCT’s largest asset, underpinned by its healthy operating stats.

3QFY13/9M13 met our expectations but was above street, forming 26/75% of our FY13 forecast. We tweak FY13 DPU but retain FY14-15 DPUs. We maintain Outperform with an unchanged DDM-based target price (discount rate: 6.9%). We see catalysts from stronger-than-expected rental reversions.

Strong showing at VivoCity

3QFY13 NPI was up 17% yoy as margin improvements added to a 12% rise in revenue. NPI growth was driven mainly by VivoCity, as positive rental reversions booked in previous quarters, coupled with stronger GTO rentals in 3QFY13 drove a 10% qoq jump in VivoCity. MCT had booked a 33% uplift in fixed rents at VivoCity. We estimate that passing rents at VivoCity edged closer to S$12psf in 3Q. Operating stats remain healthy, with yoy growth in shopper traffic (+3.8%) and tenant sales (+3.1%) still a tad above peers despite fit-outs by some tenants, auguring positively for future rental reversions.

Progress at ARC; Mapletree Anson acquisition approved

Alexandra Retail Centre (ARC) made further leasing progress in 3Q, as committed occupancy rose to 80.4% from 75.9% last quarter. The proposed acquisition of Mapletree Anson was approved by unitholders at the EGM on 23 Jan. Asset leverage should creep up from 35% as at end-3Q (on a revalued book during acquisition) to 41% after the deal.

Maintain Outperform

MCT is currently trading at forward yields of 5.3% and 1.2x P/BV, which appear undemanding relative to other retail REITs given room for further rental growth at a bustling VivoCity. We maintain Outperform as we see catalysts from stronger-than-expected rental reversions at VivoCity and the newly-acquired Mapletree Anson.