Excerpts from Maybank report

Mapletree Pan Asia Commercial Trust (SGX: N2IU)

• Mapletree Pan Asia Commercial Trust (MPACT) 1Q25 DPU of SGD2.09cts fell 8.7% QoQ and -4.1% YoY, in line with our est. Forex headwinds and pockets of weakness in overseas markets offset growing contribution from Singapore assets.
• Reversion picked up in 1Q25 to +5.2% due to the strong performance of VivoCity and Singapore office assets. We expect reversions in VivoCity to remain strong as low leases signed during the pandemic continue to be repriced.
• As the divestment of Anson is close to completion, gearing will be reduced to c.37.6% (from 40.5%) on a pro-forma basis. MPACT could benefit from lower interest rates due to its floating rate exposure.

Stable fundamentals of Singapore portfolio

Seasonal impacts such as Singaporeans travelling overseas led to a modest cooldown in shopper traffic and tenant sales at VivoCity (-4.3% YoY/- 3.4%YoY).

Nonetheless, rental reversion at VivoCity accelerated to +19.9% in 1Q25, driven by management’s strategy to actively introduce new tenants to replace non-performing ones and ongoing lease renewals.

Management announced an AEI at VivoCity, with a 10% target ROI and estimated capex of SGD42m. Performance at MBC was largely stable with positive reversions (+2.3%), notwithstanding a slower leasing market and rising competition.

We observe tenants are more conscious about capex for renovations and incentives, which may mean leasing decisions may take longer. Management expects slight movements in reversions as the spread between new signings over expiring rents narrowed.

Revitalizing Festival Walk mall

While the Festival Walk mall continued to weather the challenges from northbound travel, reversions are improving (-5% in 1Q25 vs.c.-9% in 3Q4Q24).

Management is prioritizing occupancy (99.6%) over rent reversions in the near term, in view of upcoming renewal with large tenants such as
the cinema operator.

The mall’s operations team is hosting more events such as celebrity tie-ups at the atrium and reducing carpark charges to boost traffic. Other initiatives such as floor reconfiguration and refreshing the tenant mix are in the pipeline.

Cashflow further de-risked in 1Q25

COD is 19bps higher QoQ due to prior interest rate hedges rolling off and exposure to floating rates. On the flip side, Mapletree Pan Asia Commercial Trust could benefit from its floating rate exposure in a declining interest rate scenario.

Management is exploring other financing options such as panda bonds and swaps to lower COD by c.50bps. Earlier Mapletree Pan Asia Commercial Trust locked in a lower electricity tariff for two years, which cushioned higher staff costs in 1Q25.

Management has the capacity to utilize up to SGD100m for share buybacks.

Valuation/Recommendation

Our forecasts and DDM-based TP of SGD1.30 are unchanged. Maintain HOLD. Upside will be earlier-than-expected pick-up in leasing demand for retail, office and business park space driving improvement in occupancy.

You can find the full report here and the company website here.