Southern Belle

• First mover into Singapore’s Southern growth corridor

• Strong organic expansion with deep acquisition potential

• Recommend Buy, TP $1.05 translates to 26% total return

Strong growth play in the Southern corridor. Mapletree Commercial Trust (MCT) stands out as a key beneficiary of the growth potentials in the Southern corridor. Having a first-mover presence will allow the trust to leverage on the long-term benefits of the redevelopment and rejuvenation of the Harbourfront-Alexandra-Tanjong Pagar locality as well as Pulau Brani into a new waterfront city. These will have a positive knock-on effect on property values and rentals in the area. Recent addition of iconic landmarks such as the Sentosa Integrated Resort boosts tourist arrivals while a growing office and residence population will enable the trust to benefit from rising sales and shoppers’ footfall.

Strong organic growth, significant and visible acquisition growth potential. As VivoCity, Singapore’s largest mall moves into its first rental renewal cycle, we anticipate the trust to enjoy strong rental pricing ability given the robust double-digit growth in shoppers’ traffic and retail sales psf since the opening of the Sentosa IR. In addition, upgrading works at PSA Building (PSAB) and development of the Alexandra Retail Centre (ARC) will enable the trust to capture the growing working population once completed by end 2011. MCT has a ROFR for a pipeline of properties from its Sponsor, which could potentially triple its initial portfolio’s NLA. In our view, the recently completed Mapletree Business City located in the Harbourfront-Alexandra Precinct, could be the maiden purchase.

Recommend Buy, TP $1.05. The investment case for MCT is its first mover advantage into the Southern growth corridor and a very visible acquisition pipeline. The stock is currently trading at FY12 and FY13 yields of 5.8-6.4%. Our DCF-backed TP of $1.05 translates to an absolute total return of 26%. Key risks include location and asset concentration risks as well as susceptibility to general economic climate, which will affect tourism and consumption patterns in Singapore’s relatively open economy.

• Citigroup, the stabilization manager bought 2,270,000 shares between 85.5 cents and 86 cents each yesterday (23 May ’11).

• Since 27 Apr ’11 till date, they have bought back a total of 16.78mln shares from low of 85.5 cents to high of 88 cents, representing 16.53% of their total allowable quota of 101.509mln shares.

• Unfortunately, their stabilization efforts will have to cease on 27 May ’11, one month after the public trading of the stock.

Mapletree Commercial Trust launches $983m IPO

It’ll sell up to 1.12b units at 88 cents apiece; trading likely to begin on April27

Mapletree Commercial Trust (MCT) will raise up to $983 million from its initial public offering (IPO) in Singapore after pricing the shares at 88 cents each – above the mid-point of the marketed range of 84 cents to 91 cents.

MCT, a unit of Temasek Holdings’ property arm Mapletree Investments, also said yesterday that the 548.1 million units set aside for placement to institutional investors were nine times subscribed.

At the offer price, MCT’s projected yield for the year ending March 31, 2012 is 5.7 per cent; while that for the year after is 6.2 per cent.

MCT expects to raise total gross proceeds of around $893 million. But the amount will climb to up to $983 million if an over-allotment option is exercised in full.

The trust had planned to lodge its prospectus in March, but had to delay the IPO process due to volatile markets caused by the March 11 earthquake and tsunami in Japan. MCT’s IPO is the second biggest in Singapore so far this year.

The trust will sell up to 1.12 billion units (including the over-allotment option) at 88 cents per unit. In addition to the shares that will be placed out to investors, cornerstone investors – including insurance company AIA Group – have committed to take up another 302.2 million units.

Another 164.8 million units will be sold to the public in Singapore. The public offer opens today at 9am and will close on April 25 at 9am. Units are expected to start trading on the Singapore Exchange on April 27.

MCT will initially hold three assets worth $2.8 billion in all – Singapore’s largest mall VivoCity, and the Bank of America Merrill Lynch HarbourFront and PSA Building office buildings.

‘MCT is the first commercial Singapore Reit to be listed on the Singapore Exchange since 2007,’ said Amy Ng, chief executive of the trust’s manager. ‘Investors now have an opportunity to own a piece of VivoCity, Singapore’s largest mall, and other quality Mapletree office buildings.’

JP Morgan analyst Christopher Gee noted that the assets were all ‘high profile’. VivoCity, in particular, should be familiar to the public in Singapore, he added.

But in a recent report, Credit Suisse analysts pointed out that while MCT is mainly a retail Reit now, it is likely to become an office Reit in future as the pipeline from sponsor Mapletree Investments comprises mostly office assets.

Mapletree Investments has granted MCT the right of first refusal to acquire 10 properties including HarbourFront Centre and Mapletree Business City.

But the trust, which will have a gearing of 39 per cent after the IPO, is not likely to make any acquisitions in the first 12 months after listing, said Shane Hagan, chief financial officer of MCT’s manager.

Sponsor Mapletree Investments will hold a 40 per cent stake in MCT after its listing, assuming the over-allotment option is exercised. Including the sponsor’s stake, there will be a total of 1.86 billion units.

The property group’s third Reit, Mapletree Industrial Trust, also raised close to $1 billion when it was listed in October 2010.

As at end-December 2010, Mapletree Investments and its subsidiaries own and manage more than $14.4 billion of office, logistics, industrial, residential and retail properties with an extensive network of offices in Singapore, China, Hong Kong, India, Japan, Malaysia, South Korea and Vietnam.

Mapletree Commercial Trust to raise S$898m in IPO

Mapletree Commercial Trust is set to raise at least S$898 million in a Singapore initial public offering after its IPO was priced slightly above the midpoint of an indicative price range, two sources said on Friday.

A source indicated earlier this week that the IPO’s orderbook was at least five times covered and it would be priced at between the midpoint to the upper end of the range.

The pricing, which was delayed by the earthquake that struck Japan last month, could be a good omen for other property-related listings in Singapore.

This week Perennial China Trust, a China-focused business trust managed by former CapitaLand shopping mall chief Pua Seck Guan relaunched, its Singapore IPO, looking to raise S$840 million.

Mapletree Commercial Trust, managed by Singapore state investor Temasek’s property arm, priced the IPO at S$0.88 a unit against an earlier indicative price range of S$0.84-S$0.91, two sources with knowledge of the deal told Reuters.

The company plans to sell 1.02 billion units, excluding an over-allotment option, according to its prospectus.

This is the city-state’s second-biggest IPO this year after Hong Kong billionaire Li Ka-shing’s Hutchison Port Holdings Trust’s completed a US$5.5 billion listing last month.

Mapletree Commercial, whose assets include Singapore’s largest shopping mall VivoCity, offers investors a chance to tap into the growth in Singapore’s retail market and to ride on a recovery in the city-state’s office sector.

The offering includes 302.2 million units, which will be sold to cornerstone investors AIA Group, Hillsboro Capital, Itochu Corporation and NTUC FairPrice.

Mapletree Commercial will have an initial portfolio worth about S$2.8 billion, including two office properties in the city-state, it said in a prospectus.

Mapletree Commercial’s sponsor, Mapletree Investments, has also granted the trust a right of first refusal for the acquisition of 10 properties including Mapletree Business City, an office precinct in the south of Singapore.

Citigroup, DBS Bank, Deutsche Bank and Goldman Sachs are the joint global coordinators and, along with CIMB, are also joint bookrunners and issue managers.

Mapletree was not immediately available to comment, while the banks either declined to comment or were not available to comment on the pricing. — REUTERS

MapletreeCom rated Baa2 by Moody’s

Provisional rating comes with ‘stable’ outlook; trust’s key asset is VivoCity

MOODY’S Investors Service has assigned a provisional Baa2 rating to Mapletree Commercial Trust (MCT). The outlook for the rating is stable, the agency said.

The rating is based on MCT’s stable and recurring income from its investment property portfolio, Moody’s said.

The trust’s initial portfolio comprises three properties, of which the ‘key asset’, VivoCity, accounts for over 70 per cent of the portfolio by income and value.

‘VivoCity is a prize asset. It is a very busy, family destination-cum-retail and leisure mall, located over the HarbourFront MRT Station,’ said Alan Greene, a Moody’s vice-president and senior credit officer.

‘In addition to footfall generated by the resident Singaporean population, VivoCity is at the gateway to Sentosa, and so benefits from the large tourist numbers drawn to Sentosa’s numerous attractions and casino,’ added Mr Greene, who is also Moody’s lead analyst for MCT.

The other two properties – the Bank of America Merrill Lynch HarbourFront and PSA Building office buildings – are fringe area office buildings.

‘Compared with VivoCity, the initial two office properties are relatively modest. However, one is leased to a single tenant until 2017, with built-in triennial rent increases, while rental income from the other building (PSA Building) will benefit later this year once its adjacent retail centre is completed,’ noted Mr Greene.

Based on the properties available under the right of first refusal agreements with sponsor Mapletree Investments, the proportion of income derived from offices will increase over time and may exceed that from retail properties, Moody’s noted.

The agency’s rating for MCT is currently constrained by concentration risk, but this concern is expected to decline with the asset enhancement activities underway and with the potential injection of pipeline properties acquired from the sponsor.