Sunday, July 29, 2012

Mapletree Commerical Trust - Buy


Mapletree Commercial Trust is a Singapore based Real Estate Investment Trust (REIT). Its objective is to do long term investments in income producing real estate properties which are based in Singapore and used for office or retail purposes. Mapletree Commercial Trust is managed by Mapletree Commercial Trust Management Ltd (MCTML) which is subsidiary of Mapletree Investments Pte Ltd (“MIPL”). 

The portfolio of Mapletree Commercial Trust comprises mainly three properties i.e. VivoCity, Bank of America Merrill Lynch Harbour Front (MLHF) and PSA Building (PSAB). Vivocity is the largest mall of Singapore located in the Harbour Front Precinct while MLHF is a premium office space located in the Harbour Front Precinct and PSAB is well known commercial complex building located in the Alexandria Precinct which is the tallest building in that area. 


One of the unique characters of Mapletree Commercial Trust properties which makes it stand out is excellent future prospects because of its unique location of assets in highly vibrant, promising HarbourFront and Alexandra Precincts. These locations are in close proximity of Sentosa which is one of the posh destinations and tourist hub.  New MRT circle which opened in October’11 have been a big positive for Mapletree Commercial Trust and upcoming developments in West zone would prove to be positive for Vivo as it would bring in more tourists to Transformer ride and Battlestar Galactica roller coaster ride which would help in improving the margins.

The VivoCity, besides having location advantage of being in HarbourFront, is suitably positioned for promising growth in commercial and office use. It has close to 1 million sq ft of commercial area and gets 40 million visitors annually. Close proximity to Sentosa means more business in future thus increasing profitability.

All the positives associated with MCT properties ensure better rental leases in future and higher occupancy of commercial space, thus making MCT a very promising investment option.


MCT has strong balance sheet with 85% of debt hedged and 100% of its assets are debt free. Also the debt repayment is structured in such a way that it reduces the repayment or refinancing to minimum. Positives ensure that the empty spaces are rented with good rental values in near future

The Management of MCT is more inclined to go for the organic growth path by mainly focusing of improvement and better utilization of existing properties especially Vivocity, where there is strong possibility of taking initiatives for driving earning growth. 


Because of the quality of assets which it hold, MCT doesn’t need to refinance any of its older debt.  Also, company has distribution yield of around 6.1 to 6.5% . Companies’ gearing (Measure of financial leverage funded by owner or creditor) has moved to 37.7% which is in line with its peers. Based on all these criteria stock has been recommended as Buy with a Target Price of S$1.12 by DBS Vickers Research (Singapore) Pte Ltd. 

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