Mapletree Commercial Trust cut 4th quarter dividends by 60.6%

Mapletree Commercial Trust (MCT) just announced their 4th Quarter 2019/2020 Financial Results. MCT shared that they will be paying out only 0.91 cents dividends this quarter in anticipation of uncertainties arising from COVID-19 pandemic. This is a more than 50% cut compared to the previous dividend of 2.31 cents in Q4 FY2018/2019.

Was the financial result really that bad? Lets find out.

REVENUE AND NET PROPERTY INCOME

From Mapletree Commercial Trust Slide

Both revenue and net property income increased by more than 10% compared to the previous financial year (FY). It seems impressive, but this increase seems to be mainly due to contributions from the newly acquired Mapletree Business City II. 

From Mapletree Commercial Trust Slide

The revenue and net property income of the existing properties, excluding Mapletree Businesss City II, shows that both figures dropped. This is likely due to the COVID-19 pandemic. Considering that the circuit breaker started on 7 April, we will see a more drastic drop in the next quarter result.

DISTRIBUTION PER UNIT (DPU)

From Mapletree Commercial Trust Slide

Although the distribution per unit has dropped by 60.6%, it is important to note that this is because $43.7 million of distribution was retained.  

This is part of MAS' plan to extend the period for distribution of taxable income. This will allow companies to manage their cash flow in view of the challenging operating environment. The dividends will still be distributed, but at a later period.

OCCUPANCY LEVEL AND WEIGHTED AVERAGE LEASE EXPIRY (WALE)

From Mapletree Commercial Trust Slide

Occupancy level is still high over 95% while WALE is at 2.6 years. Specifically for the retail sector, the WALE is 2.2 years which is quite usual as F&B companies sign short term lease. Both occupancy and WALE will likely drop in the next quarter.

GEARING

MCT's gearing is at 33.3%. There is still plenty of room for them to take on debt or make acquisition if required. Currently, 78.9% of its borrowings are hedged at a fixed rate while the remaining are tied to the Floating Rate.

NET ASSET VALUE (NAV)

NAV is at $1.75, a slight drop of $0.01 compared to Q3 FY2019/2020.

However, if you look at the NAV by FY, it has been increasing steadily every year. Although there was 2 rights issued in 2016 and 2019, I am still happy with the performance of MCT. The management has done a very good job.

I am quite surprised that MCT's share price is still above NAV at the time of writing. I am expecting the price to drop further with circuit breaker measures in place. I have no intention to sell MCT share since I have them from IPO and they consist of just 4% of my portfolio. I am not considering adding them at the moment unless the price drops further.

In short, I think that this quarter's result is quite decent. Agree?
Dividends was cut not because of a drastic drop in revenue or profit, but due to the need to conserve cashflow. 

How far did DBS, OCBC and UOB shares drop in 2009?

Have you wondered how far the local bank shares (i.e. DBS, OCBC, UOB) fell during the Global Financial crisis, also known as the Subprime Mortgage crisis in 2009?

All 3 bank shares recorded their lowest share price on the same day, on 10 March 2009. As the share prices itself would not provide much context, I have also include other details such as net asset value, price to book ratio and dividend yield. 

The price to book ratio shows an interesting sign as DBS recorded the lowest ratio of 0.59 as its shares dropped to $6.42. 

Compare to today, in the light of the COVID19 developments, the details are as follows:

As of 3 April 2020

OCBC price to book ratio is the lowest at 0.81 while DBS is the highest at 0.93. The dividend yield is for reference. During financial crisis, the banks will likely cut dividends as they conserve cash and prepare for more non-performing loans.

How much would DBS, OCBC and UOB share price be if they were to fall to the price to book ratio of 2009? 

DBS would need to fall to $11.34! Is this possible?

I have no idea. In the meantime,  I did 2 purchases in DBS as stated in my end March portfolio update. I have also recently purchased OCBC. 

My Investment Portfolio (End Mar 2020)

Transactions made in Mar 2020:

- Bought 800 units of DBS at between $18.65 and $21.15
- Sold 5,000 units of Sheng Siong at $1.10

- Sold 1,000 units of SIA at $6.68

- Sold 2,000 units of Sembcorp Marine at $0.73

- Sold 4,000 units of SingPost at $0.72

- Sold 7,000 units of Jumbo at $0.205

I have never made so many transactions in a single month before. I have been using this period of time to re-balance my stock portfolio by selling the weaker links and adding on more solid companies. It was not an easy decision as the realised loss is around $13,000. But I believe this is necessary. 

The epicenter of the COVID19 has just shifted from China to Europe and USA. With this, we can expect more supply chain disruptions globally. The number of COVID19 cases has increased at a tremendous rate. The reproduction figure of COVID19, is key figure to watch for.

I am looking at adding more bank shares, CDG and ST Engineering. Do note that with COVID19, it is likely that all companies will cut dividends in future quarters. There is also a likelihood of zero dividends as companies due to the cashflow constraints companies are facing. This include even the likes of the financial sector (i.e. Banks). 

Dividends received* in Mar 20: $0

Total dividends received in 2020: $549.90

Average dividends per month: $45.83

Total Portfolio Market Value: $160,731.64

Notes:

Dividends are recognised after ex-dividend (xd) date.

Average dividends per month is calculated by dividing the dividends received by 12 months regardless of the month.

Portfolio excludes Singapore Savings Bonds.