On 24 October 2024, Mapletree Pan Asia Commercial Trust (“MPACT”) announced their half year result for FY2025. Unfortunately for MPACT, their DPU and occupancy continues its downtrend. The overall decrease in occupancy this quarter is likely to continue to have downward pressures on MPACT DPU over the next few quarters.
There is a decrease in valuations of investment properties by SGD120 million this quarter. The main write-down came from the Fujitsu Makuhari Building, which saw a valuation decrease by SGD74 million which is approximately 41.5% of the property valuation as of 31 March 2024. This was because Fujitsu Limited, the single tenant of Fujitsu Makuhari Building, has expressed intention not to renew its lease upon expiry on 31 March 2026. This property accounted for approximately 1.2% of the portfolio’s FY23/24 net property income and is also the main contributor for the decrease in occupancy rate. Management is currently actively assessing strategic options.
On a separate note, the divestment of Mapletree Anson was used to pay down debts which were mainly on floating rates, increasing the percentage of fixed rate debt to 83.6%. For some investors, this might provide stability given that it reduces any surprises arising from changes in interest rates. It is, however, unlikely to mitigate the other negative impacts and investors should assess their risk appetite accordingly.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: Financial Statements And Related Announcement::Second Quarter And/OR Half Yearly Results
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | -5.3% | -4.1% |
| Rating | Unfavorable | Unfavorable |
With effect from November 2024, I will be using the quarter-on-quarter DPU changes as references for REITs that share their quarterly DPU changes. This is due to REITs are usually not as affected by seasonal changes.
For MPACT, DPU disclosed are as follows:
- First Half Year of FY2025: SGD0.0407 per share
- Second Quarter of FY2025: SGD0.0198 per share
- First Quarter of FY2025: SGD0.0209 per share
DPU for the second quarter of FY2025 decreased by 5.3% to SGD0.0198 per share from SGD0.0209 per share for the previous quarter. This metric is Unfavorable. Further breakdown as below:
- Amount Available for Distribution to Unitholders decreased by 6.1% to SGD103 million from SGD110 million in the previous quarter.
- Distributable Arising from Income (Taxable and Tax-Exempt Income) decreased by 23.5% to SGD74 million from SGD97 million in the previous quarter.
The DPU decrease was mainly due to the absence of Mapletree Anson as well as lower overseas contributions and further dampened by adverse forex movements. This is supported by higher capital distributions, which includes balancing allowances totaling SGD7.7 million which relate to the divestment of Mapletree Anson.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 90.3% | 94.0% |
| Rating | Unfavorable | Neutral |
Occupancy rate as of 30 September 2024 decreased significantly to 90.3% and is Unfavorable. The sharp decrease was mainly contributed by the collective Japan Properties, which saw a decrease in occupancy to 82.3% from 94.2%. Management disclosed that Fujitsu Limited, the single tenant of Fujitsu Makuhari Building, has expressed intention not to renew its lease upon expiry on 31 March 2026. This property accounted for approximately 1.2% of the portfolio’s FY23/24 Net Property Income. The rest of the portfolio saw smaller decreases as well.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 38.4% | 40.5% |
| Rating | Neutral | Unfavorable |
Gearing ratio decreased to 38.4% as of 30 September 2024. The reduction was due to repayments after divestment of non-core asset. The metric shifted towards Neutral.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 2.8x | 2.8x |
| Rating | Neutral | Neutral |
The adjusted interest coverage remained unchanged at 2.8 times as of 30 September 2024. The metric remains Neutral as it is still below my preference of 3.0 times.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.3 years | 3.1 years |
| Rating | Favorable | Favorable |
Weighted average term to maturity of their debt lengthened to 3.3 years as of 30 September 2024. This is Favorable and it allows them sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.72 | 0.75 |
| Rating | Favorable | Favorable |
The Price to Book (“P/B”) ratio currently stands at 0.72. This is computed using the closing share price of SGD1.23 on 3 December 2024 and the net asset value per share of SGD1.71 as of 30 September 2024. The metric is Favorable as we are paying below book value for its assets.
As of 3 December 2024, the Market Capitalization is approximately SGD6,475 million.
Website: Yahoo Finance: Mapletree Pan Asia Commercial Trust (N2IU.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 6.96% | SGD 0.086 |
| 2023 | 7.39% | SGD 0.091 |
| 2022 | 8.20% | SGD 0.101 |
With a total dividend payout for the calendar year 2024 of SGD0.086 per share and a closing share price of SGD1.23 as of 3 December 2024, this translates to a dividend yield of 6.96%. For my benchmark, a general reasonable yield would be around 5.00%. MPACT’s dividend yield is above the benchmark. The dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
Interest Rate Sensitivity
The Federal Reserve on 7 November 2024 have further slashed interest rate by a quarter point to a range of 4.50% to 4.75%. This is in line with earlier expectations for future rate cuts, which will benefit REITs in general.
Website: Federal Reserve cuts interest rates by a quarter point
The Federal Reserve has subsequently announced on 15 November 2024 that they will cut their key interest rate slowly and deliberately in the coming months, in part because inflation has shown signs of persistence, and the officials want to see where it heads next.
Website: Powell says Fed will likely cut rates cautiously given persistent inflation pressures
In the event that the interest rate change, MPACT may be subjected to changes in their cost of debt in the near future. The debt profile of MPACT is as below:
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $6,084,300 |
| Debt Not Hedged (%) | 16.4% |
| Debt at Floating Rate Exposed | $997,825 |
| Distributable Income FY2024 | $468,569 |
I have performed the interest rate sensitivity analysis as below.
| Change in Interest Rates | Change in Distributable Income (SGD’000) | Change as % of FY2024 Distribution |
|---|---|---|
| 50 bps | $4,989 | 1.1% |
| 100 bps | $9,978 | 2.1% |
| 150 bps | $14,967 | 3.2% |
| 200 bps | $19,957 | 4.3% |
Do note the above is my estimation which may be different from management’s estimation. Nonetheless, if the interest rates were to increase by the basis points above, MPACT may experience a fall in DPU accordingly.
Tenant Profile
MPACT has an enlarged portfolio covering multiple trade sectors. The high quality and diverse tenant base provide resilience to the MPACT portfolio across challenging events. The top 10 tenants accounted for only 21.7% of MPACT’s portfolio with no single tenant accounting for more than 5.8% during the period, providing income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -5.3% | Unfavorable |
| Occupancy | 90.3% | Unfavorable |
| Gearing Ratio | 38.4% | Neutral |
| Interest Coverage | 2.8x | Neutral |
| Debt Maturity Profile | 3.3 years | Favorable |
| Price to Book Ratio | 0.72 | Favorable |
| Overall | Neutral |
Overall, the metrics remain Neutral for MPACT. Although MPACT is still trading at a discount, there is a need to keep in mind that the likelihood of DPU continuing its downtrend remains high, especially given the high-interest rate environment and decrease in occupancy. Investors will need to assess their risk appetite.
Background
MPACT is a real estate investment trust (“REIT”) positioned to be the proxy to key gateway markets of Asia. Listed on the Singapore Exchange Securities Limited (“SGX-ST”), it made its public market debut as Mapletree Commercial Trust on 27 April 2011 and was renamed MPACT on 3 August 2022 following the merger with Mapletree North Asia Commercial Trust.
Its principal investment objective is to invest on a long-term basis, directly or indirectly, in a diversified portfolio of income-producing real estate used primarily for office and/or retail purposes, as well as real estate-related assets, in the key gateway markets of Asia (including but not limited to Singapore, China, Hong Kong, Japan and South Korea).
MPACT is managed by MPACT Management Ltd. (“MPACTM” or the “Manager”), a wholly owned subsidiary of MIPL. The Manager aims to provide unitholders of MPACT (“Unitholders”) with a relatively attractive rate of return on their investment through regular and steady distributions, and to achieve long-term stability in Distribution per Unit (“DPU”) and Net Asset Value (“NAV”) per Unit, while maintaining an appropriate capital structure for MPACT.
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Website: Mapletree Pan Asia Commercial Trust (SGX: N2IU): 2025 First Quarter Result
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