Maybank Securities Krishna Guha, who is taking over coverage of Mapletree Pan Asia Commercial Trust (MPACT) N2IU for the brokerage, has downgraded his call to “hold” from “buy” previously.
Guha has also lowered his target price to $1.65 from $2.25 before.
In his Feb 10 report, the analyst notes that the merged entity, which was formerly Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) has the “scale and diversity” as well as “potential growth opportunities from capital recycling”.
“That said, it ceases to be a Singapore pure play and brings along execution and foreign exchange (forex) risk. Higher income contribution from retail assets may be offset from mixed outcome from other properties,” Guha notes.
To the analyst, the REIT’s VivoCity and Festival Walk in Hong Kong is set to anchor its growth with both malls set to benefit from the reopening of China’s borders.
However, the REIT, which is also exposed to the information technology (IT) services and consultancy, may be negatively impacted from the right sizing of tech tenants and hybrid working at the moment. That said, he sees Mapletree Business City (MBC) as possibly mitigating the impact due to its specs and focus on high-value and knowledge industries. “Combined with net negative absorption in 3QFY2022 in Beijing due to downsizing by tech companies, we see risk to occupancy,” Guha writes.
With its relatively high gearing, which came to 40.1% after the merger, Guha notes that the REIT’s execution of its strategy is key.
In his view, lower occupancy of offshore assets, termination of anchor leases in Singapore and higher funding costs are key risks to MPACT’s growth.
As at 4.18pm, units in MPACT are trading 1 cent lower or 0.58% down at $1.71.
