Date of Report: October 28, 2024
Broker: Maybank Research Pte Ltd
Overview of Mapletree Pan Asia Comm. Trust (MPACT)
Mapletree Pan Asia Comm. Trust (MPACT) is a prominent commercial Real Estate Investment Trust (REIT) investing in income-producing retail, office, and office-like commercial properties across key markets in Asia. It has a substantial footprint, holding assets in five major markets, including Singapore, Hong Kong, China, Japan, and South Korea, with an asset under management (AUM) totaling SGD 16.9 billion.
Financial Performance Summary
Dividend Per Unit (DPU) and Distributions
MPACT reported a DPU of SGD1.98 cents for 2QFY25, reflecting a decline of -5.3% quarter-on-quarter (QoQ) and -11.6% year-on-year (YoY), primarily due to the absence of a property tax refund that was recorded in 2QFY24. Adjustments were made to forecasted DPUs for FY25 and FY26, lowering them by 1.8% and 0.9%, respectively.
Revenue and Net Property Income (NPI)
For 2QFY25, MPACT’s revenue dropped by 4.7% QoQ and 6.1% YoY, reflecting challenges in its overseas markets and the impact of the Mapletree Anson property divestment. Net property income similarly declined, down by 6.5% QoQ and 8.5% YoY.
Property Revaluation and Gearing
An interim revaluation led to a SGD113 million devaluation of three properties in Makuhari, Japan. This affected the trust’s overall gearing, which now stands at 38.4% as of 2QFY25. Management remains comfortable with this level, which has been partially offset by proceeds from divestments.
Key Properties and Market Trends
Singapore
Occupancy in MPACT’s Singapore portfolio remained stable, with some space at Mapletree Business City (MBC) filled by tech tenants following the exit of Unilever, Google, and Julius Baer. VivoCity, one of MPACT’s key assets, experienced a slight uptick in shopper traffic but faced a 2.6% QoQ dip in vacancy. Overall, tenant sales at VivoCity fell by 4.1% YoY.
Hong Kong – Festival Walk
Festival Walk, one of MPACT’s flagship properties in Hong Kong, showed mixed results. Shopper traffic improved; however, tenant sales were down by 13.2% YoY, indicating a challenging retail environment. The office component saw occupancy dip by 3.2 percentage points, with sluggish backfilling progress.
Japan
MPACT’s Japan portfolio experienced significant occupancy declines, mainly attributed to Seiko vacating a substantial part of the Makuhari property. Additionally, the company conducted revaluation adjustments to align with upcoming operational expenses and expected leasing downtime, especially in its Makuhari assets.
China
In China, MPACT faced continued supply headwinds, particularly in Shanghai, which impacted occupancy and rental reversions at Sandhill Plaza. Conversely, the Gateway Plaza showed modest improvements, albeit offset by broader market challenges.
South Korea
In South Korea, MPACT holds The Pinnacle Gangnam property, where management observed a plateau in office rents. Though there was limited positive reversion, leasing demand is expected to remain cautious.
Strategic Outlook and Challenges
Leasing and Occupancy Strategies
MPACT remains focused on sustaining high occupancy across its portfolio, particularly as it anticipates challenges in securing retail and office tenants in certain markets. Positive reversions from re-letting spaces at market rents are expected, though tempered by sluggish demand.
Divestments and Financial Flexibility
Management has shown openness to divesting non-core assets, particularly in Japan, to enhance the trust’s financial flexibility. Proceeds from these divestments were allocated to reduce floating-rate debt, which helped improve gearing levels.
Macro and Market Risks
MPACT is vigilant regarding several macroeconomic risks, such as currency fluctuations, especially in Hong Kong where foreign exchange impacts are pronounced. The trust’s near-term focus includes maintaining strong occupancy and managing operational costs, particularly in regions facing oversupply pressures.
ESG Initiatives
MPACT has placed a strong emphasis on sustainability, committing to maintaining at least the current BCA Green Mark certification levels across its portfolio. VivoCity, one of its prime assets, holds a Green Mark Platinum certification and has implemented several energy-saving initiatives, including chiller upgrades expected to yield over a million kWh in energy savings.
This summary captures key aspects of Mapletree Pan Asia Comm. Trust as outlined in the October 28, 2024 report by Maybank Research Pte Ltd.
