On 24 April 2024, Mapletree Pan Asia Commercial Trust (“MPACT”) have announced their full year result for FY2024. Overall, there were no significant changes from the previous quarter, and MPACT continues to trade at a discount from its book value and offer a high yield. Investors will need to assess their risk appetite and determine their margins of safety.
With the closure of this financial year, it will mean that the comparative results over the next few quarters will be more comparable as it no longer takes into consideration the merger and preferential offering which happened in FY2023. It may be reflected positively, as the announcement have disclosed that for the fourth quarter of FY2024, DPU saw an increase by 1.8% as compared to the fourth quarter of FY2023. It is still however an overall decrease as compared to pre-merger days, something investors will need to take note.
Website: Financial Statements And Related Announcement::Full Yearly Results
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.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | -7.3% | -10.1% |
DPU for FY2024 decreased by 7.3% to SGD0.0891 from SGD0.0961 in the previous financial year. DPU was weighed down by a full period impact of higher utility costs, higher interest rates and forex pressures from a stronger SGD against all foreign currencies. It was also over an enlarged weighted number of units in FY23/24 as compared to FY22/23. This is Unfavorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 96.1% | 96.7% |
Occupancy rate as of 31 March 2024 decreased to 96.1%. The metric remains Favorable as it is above my expected healthy occupancy rate of 95% and MPACT have been able to fully utilize their assets.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 40.5% | 40.8% |
Gearing ratio remains relatively unchanged at 40.5% as of 31 March 2024. This to me is Unfavorable, as it is substantially high.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 2.9x | 3.0x |
The adjusted interest coverage has decreased to 2.9 times as of 31 March 2024. The metric has worsened slightly to Neutral as it is below my preference of 3.0 times.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.0 years | 2.8 years |
Weighted average term to maturity of their debt lengthened to 3.0 years as of 31 March 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 | 0.70 | 0.74 |
The Price to Book (“P/B”) ratio currently stands at 0.70. This is computed using the closing share price of SGD1.23 on 23 May 2024 and the net asset value per share of SGD1.75 as of 31 March 2024. The metric is Favorable as we are paying below book value for its assets and Mapletree REITs usually command a premium due to their strong reputation, and there is potential that if the results become more unfavorable, they may experience a larger decrease in price.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.65% | SGD 0.045 |
| 2023 | 7.39% | SGD 0.091 |
| 2022 | 8.20% | SGD 0.101 |
The dividend payout is currently still on a downtrend since the merger. With the payout of SGD0.045 per share for the first half of 2024, this will amount to SGD0.090 per share when annualised.
With a closing share price of SGD1.23 as of 23 May 2024, this translates to a dividend yield of 7.30%. For my benchmark, a general reasonable range would be around an average of 5.50% to 6.50% in the current environment. MPACT’s dividend yield is above the range. The dividend yield is Favorable for an asset under a premium manager.
Website: Reasonable Dividend Yield 2024Q2
Interest Rate Sensitivity
The Federal Reserve on 2 May 2024 has signalled that US borrowing costs are likely to remain higher for longer, as it wrestles with persistent inflation across the world’s biggest economy. This was after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Federal Reserve chair Jay Powell signals interest rates will remain higher for longer
In the event that the interest rate increase further, MPACT may be subjected to changes in their cost of debt in the near future. Below is MPACT debt profile as of 31 March 2024.
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $6,800,000 |
| Debt Not Hedged (%) | 23.0% |
| Debt at Floating Rate Exposed | $1,564,000 |
| Distributable Income FY2024 | $468,569 |
I have performed the interest rate sensitivity analysis as below.
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2024 Distribution |
|---|---|---|
| + 50 bps | -$7,820 | -1.7% |
| + 100 bps | -$15,640 | -3.3% |
| + 150 bps | -$23,460 | -5.0% |
| + 200 bps | -$31,280 | -6.7% |
| + 250 bps | -$39,100 | -8.3% |
| + 300 bps | -$46,920 | -10.0% |
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 21.6% of MPACT’s portfolio with no single tenant accounting for more than 6.0% during the period, providing income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -7.3% | Unfavorable |
| Occupancy | 96.1% | Favorable |
| Gearing Ratio | 40.5% | Unfavorable |
| Interest Coverage | 2.9x | Neutral |
| Debt Maturity Profile | 3.0 years | Favorable |
| Price to Book Ratio | 0.70 | Favorable |
| Overall | | Neutral |
Overall, the metrics remain neutral for MPACT. They are still trading at a discount given the continued risks it carries, especially as DPU saw an overall downtrend. While this provides a margin of safety, investors will need to reassess their risk appetite and monitor for any changes.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: Mapletree Pan Asia Commercial Trust (SGX: N2IU): 2024 Third Quarter Result
