Excerpts from Maybank report
Mapletree Pan Asia Commercial Trust (SGX: N2IU)
- Mapletree Pan Asia Commercial Trust reported 2QFY25 DPU of SGD1.98cts, -5.3% QoQ/-11.6% YoY, in the absence of a one-off property tax refund recorded in 2QFY24.
- FX headwinds, Mapletree Anson divestment, and higher vacancy from overseas portfolio more than offset stable Singapore portfolio performance and interest cost savings.
- We lower our FY25/26E DPU forecasts by 1.8%/0.9%, respectively, to factor in the divestment and falling overseas contribution. We trim our TP to SGD1.29, while applying a lower risk-free rate of 2.75% (vs.3.0%).
Maintain HOLD.
Soft trends across overseas assets
Occupancy at MBC largely held stable, as tech tenants continue to backfill space vacated by Unilever, Google and Julius Baer. Ongoing AEI and tenant fit-outs led to a 50bps movement in vacancy at VivoCity.
While shopper traffic is sequentially higher in 2Q, shopper traffic and tenant sales in 1H25 were 2.0%/4.1% YoY lower. Occupancy at Festival Walk dipped by 3.2ppt at its office component, while backfilling progress was slow in a lukewarm market.
Notwithstanding improving shopper traffic, tenant sales fell by 13.2% YoY, indicating local retailers are facing competition from overseas.
Japan portfolio saw a large drop in occupancy after Seiko vacated most of MBT. An office tenant accounted for a 4.1% dip in occupancy at TPG Korea.
We expect positive reversions from re-letting this space at market rents. Lingering supply headwinds in Shanghai continued to pressure occupancy and rental reversions in its China portfolio.
Challenges ahead
MPACT conducted an interim revaluation exercise for three properties in Makuhari, which led to a SGD113m devaluation. In view of converting Fujitsu Makuhari Building to a multi-tenanted asset after existing master lease expires, valuers factored in higher opex and potential leasing downtime.
Management is open to divesting Makuhari assets. For Festival Walk, reversions at the retail mall are expected to move sideways as leases
signed before 2019 undergo renewal.
Forex remains the key factor for a meaningful turnaround in tenant sales and reversions at Festival Walk. Near-term focus remains on maintaining a high occupancy.
Regaining financial flexibility
Gearing is lower at 38.4% in 2QFY25, after mgmt. pared its floating-rate debt with divestment proceeds of Mapletree Anson. Lower gross debt was offset by the Makuhari valuation dip.
Mgmt. is comfortable with current gearing and expects valuation for other Japan assets to remain stable. COD is expected to remain at mid-3.0% until year end.
Upside factors
Earlier-than-expected pick-up in leasing demand for retail, office and business park space driving improvement in occupancy. Better-than-anticipated rental reversions and accretive acquisitions or redevelopment projects.
Downside factors
Prolonged slowdown in economic activity could reduce demand for retail, office and business park space resulting in lower occupancy and rental rates.
Termination of long-term leases contributing to weaker portfolio tenant retention rate. Sharper-than-expected rise in interest rates could
increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations.
You can find the full report here and the company website here.
