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Mapletree Pan Asia Commercial Trust: Resilient Singapore Assets Offset Overseas Headwinds | 6.9% Yield









Deep Dive Analysis: Mapletree Pan Asia Comm. Trust and Sector Insights

In-Depth Financial Analysis: Mapletree Pan Asia Comm. Trust and Sector Insights

Broker Name: Maybank Research Pte. Ltd.

Date of Report: January 26, 2025

Mapletree Pan Asia Comm. Trust (MPACT SP): Navigating Overseas Headwinds

Mapletree Pan Asia Comm. Trust (MPACT), a commercial real estate investment trust (REIT) with a diverse portfolio spanning Asia, has released its latest quarterly results. Despite challenges, the REIT has shown resilience in its Singapore assets while grappling with overseas pressures.

Performance Highlights

MPACT reported a 3QFY25 distribution per unit (DPU) of SGD 2.0 cents, marking a modest 1% quarter-on-quarter increase but a 9.1% decline year-on-year. Its flagship property, VivoCity, and the stable Singapore portfolio have mitigated the challenges posed by its overseas assets. The REIT’s portfolio occupancy stood relatively stable at 90%, showing slight slippage from 90.3% in the previous quarter. However, backfilling vacancies, particularly in China and Korea, has been slower than anticipated due to sluggish demand and market nuances.

Key Metrics

  • Revenue for 3QFY25 stood at SGD 223.7 million, down 7.4% YoY.
  • Net Property Income (NPI) was SGD 166.9 million, an 8.5% YoY decrease.
  • Debt metrics remained stable with a gearing ratio of 38.2% and a cost of debt at 3.52%.

Singapore Portfolio: A Pillar of Stability

In Singapore, VivoCity showcased remarkable rent reversion growth of 16.9%, while Mapletree Business City (MBC) grew by 2.0%, and other Singapore assets rose by 8.3%. These gains offset the negative rent reversions of approximately 10% in overseas markets. VivoCity also experienced a 3.7% YoY growth in gross property income over the first nine months of FY25, contributing significantly to MPACT’s stable performance.

Overseas Challenges

The overseas portfolio, particularly in China and Japan, faced significant headwinds. Festival Walk in Hong Kong saw a 7.2% decline in rent reversions, and tenant sales dipped by 9.3% YoY. Japan properties reported a sharp 21.1% YoY revenue drop, reflecting a challenging market environment.

Outlook and Recommendation

The report highlighted that MPACT’s attractive FY25E DPU yield of 6.9% is overshadowed by uncertainties in its overseas portfolio and potential higher costs of debt. The target price has been revised to SGD 1.22, down from SGD 1.29, and the recommendation remains at a “HOLD.”

Value Proposition and Risks

MPACT’s value proposition lies in its diversified portfolio of retail, office, and business park properties across Asia. With a robust asset base of SGD 16.9 billion and flagship properties like VivoCity and MBC, it ranks among Asia’s top 10 largest REITs.

Key Risks

  • Non-renewal of anchor leases in China, Japan, and Singapore.
  • Weaker rent reversions in Hong Kong.
  • Prolonged sluggish demand in overseas markets.
  • Potential rise in interest rates, increasing borrowing costs.

Environmental, Social, and Governance (ESG) Initiatives

MPACT has emphasized sustainability, with properties like VivoCity achieving the highest BCA Green Mark Platinum certification. The REIT secured its first SGD 670 million green loan to fund the MBC II acquisition and has set annual energy and water intensity reduction targets.

Historical Financial Performance

MPACT has demonstrated strong financial growth in recent years, driven by strategic acquisitions and asset enhancements. However, FY25 sees a contraction in growth due to overseas headwinds.

Key Financial Metrics

  • Revenue growth: 65.4% in FY23 but projected to decline by 5.3% in FY25.
  • NPI margins: Stable at approximately 75% across FY23 to FY27.
  • DPU yield: Expected to stabilize at 7.0% in FY26 and FY27.

Debt Management

MPACT’s debt-to-assets ratio of 0.38 in FY25 reflects prudent financial management. The REIT’s focus remains on maintaining a stable cost of debt and aggregate leverage ratio.

Conclusion

Mapletree Pan Asia Comm. Trust offers an attractive yield and robust portfolio, but its performance is marred by overseas challenges and higher borrowing costs. While its Singapore assets provide stability, the uncertainties in other markets warrant a cautious approach. Investors are advised to “HOLD” as the REIT navigates these headwinds, with a revised target price of SGD 1.22.


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