Business Overview

Mapletree Pan Asia Commercial Trust (MPACT) is a real estate investment trust (REIT) managing a diversified portfolio of 17 commercial properties located across five key gateway markets in Asia: Singapore, Hong Kong, China, Japan, and South Korea. Its assets under management (AUM) total S\$15.7 billion. Core business operations span office, retail, and business park properties, with VivoCity, Singapore’s largest mall, serving as its flagship asset.

MPACT’s competitive advantage lies in its geographic diversification and strong presence in Singapore, which underpins long-term stability. Key competitors include other REITs operating in Asia, such as CapitaLand Integrated Commercial Trust and Link REIT. The company’s revenue streams are derived from rental income, with a significant portion hedged into SGD, providing income stability.

Position Within the Industry

MPACT is well-positioned within the commercial REIT sector, leveraging high-quality assets and a diversified geographic footprint. VivoCity and Mapletree Business City (MBC) anchor its Singapore portfolio, contributing 53% of gross revenue and net property income (NPI) for 3Q FY24/25. While the industry faces headwinds from global economic uncertainties, MPACT’s prudent capital management and stable core assets provide resilience.

Financial Performance Analysis

Income Statement

• Gross Revenue: Declined by 7.4% year-on-year (yoy) for 3Q FY24/25 to S\$223.7 million, primarily due to the divestment of Mapletree Anson in Singapore and lower overseas contributions, exacerbated by adverse forex movements.
• Net Property Income (NPI): Declined by 8.5% yoy to S\$166.9 million, driven by reduced revenue and higher utility costs.
• Net Profit Growth: Amount available for distribution to unitholders fell 9.2% yoy to S\$104.7 million for 3Q FY24/25.
• Distribution Per Unit (DPU): Reduced by 9.1% yoy to 2.00 Singapore cents for 3Q FY24/25, reflecting lower net income.

Balance Sheet

• Total Assets: S\$15.85 billion as of 31 December 2024, a decline from S\$16.66 billion as of 31 March 2024, due to the divestment of Mapletree Anson and interim revaluation of Makuhari properties in Japan.
• Net Asset Value (NAV) per Unit: Decreased to S\$1.73 from S\$1.75.
• Aggregate Leverage: Maintained at a prudent 38.2%, below the 40% cap.

Capital Management

• Weighted Average Cost of Debt: Improved marginally to 3.52% from 3.56% in the previous quarter, reflecting proactive debt management.
• Hedging Measures: Approximately 81% of total debt is fixed-rate, and 91% of expected distributable income is derived from or hedged into SGD, mitigating forex risks.

Key Actions and Initiatives

• Divestment: The sale of Mapletree Anson has reduced borrowings and improved financial flexibility.
• Asset Enhancement Initiatives (AEI): VivoCity’s phased upgrading, including a 14,000 sq ft expansion of retail area at Basement 2, is expected to deliver over 10% return on investment.
• Commitment to Sustainability: MPACT aims to achieve net-zero by 2050, with ongoing investments in green certifications across its portfolio.

Investment Recommendations

If You Currently Hold the Stock

Investors holding MPACT should consider maintaining their position. Despite the decline in net profit and DPU, MPACT’s core assets in Singapore provide stability, and its prudent capital management mitigates risks. The phased AEI and sustainability initiatives signal long-term growth potential.

If You Do Not Currently Hold the Stock

For potential investors, it is advisable to monitor MPACT’s recovery from overseas headwinds and the success of its AEI at VivoCity. The current valuation reflects short-term challenges, but long-term prospects remain attractive for risk-tolerant investors seeking stable income.

Key Risks

• Forex volatility impacting overseas revenue and NPI.
• Economic uncertainties in Greater China and Japan pose risks to occupancy and rental growth.
• Higher interest rates could increase finance costs over time.

Report Details

Date of Report: 23 January 2025.

Financial Year: 1 April 2024 to 31 December 2024 (YTD FY24/25).