CGS-CIMB Research analysts Natalie Ong and Lock Mun Yee have kept “hold” on Mapletree Pan Asia Commercial Trust (MPACT) N2IU with a lower target price of $1.76 from $.190 previously following the trust’s 1QFY2024 ended June results announcement.
In their report, Ong and Lock note that although MPACT’s 1QFY2024 DPU was in line with their expectations, the trust’s top line growth was dragged by foreign exchange impact, higher utilities as well as interest expense.
The higher utilities expense mainly attributed to VivoCity, for instance, eroded the top line growth for the Singapore portfolio, resulting in muted 0.2% y-o-y growth in net property income (NPI).
MPACT’s overseas assets were acquired through its merger with Mapletree North Asia Commercial Trust (MNACT), which was completed on July 22, 2022. Comparing the performance of MPACT's overseas assets with MNACT's 1QFY2023 performance, the revenue and NPI of $99.6 million and $77.5 million was down 7.7% and 11.0% respectively y-o-y.
Half of the NPI decline was due to the depreciation of the Hong Kong dollar, Renminbi and Yen against the Singapore dollar. Another 25% attributed to the absence of one-off income and government subsidies while the remaining 25% was due to reduced occupancy in the China assets.
Portfolio reversions for the quarter came in at 2.4%, led by VivoCity, MBC, the Singapore office assets and The Pinnacle Gangnam.
Addressing the -3.6% reversions from the China properties, MPACT’s management said it prioritised occupancy over rents to retain tenants, as the softer China office market has resulted in some vacant spaces being listed on the market for up to 18 months. Nonetheless, these leases were signed at or above market rents, Ong and Lock point out.
Reversions at Festival Walk (FW) narrowed to -9.4% from -12.7% in FY2022, as positive reversion on some leases signed were offset by negative reversions from leases that were at pre-Covid-19 rents. CGS-CIMB expects FW’s negative reversion trend to continue for FY2024 given that about 10% of leases were still at pre-Covid-19 levels as at end-1QFY2024.
CGS-CIMB has lowered its FY2024-FY2026 DPU estimates by 4.1% to 6.5% as the analysts factor in lower average rents for FW and higher interest cost for FY2025 to FY2026, partially offset by higher reversions for the Singapore portfolio.
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Ong and Lock cites unfavourable foreign exchange movement and longer-than-expected downtime for tenant movements at MBC as downside risks, which could result in near-term income vacuum for MPACT.
As at 10.12am, units in MPACT are trading 1 cent lower or 0.61% down at $1.62.
