Thursday, 23 April 2020

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. 



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