Maybank Securities analyst Krishna Guha has kept “buy” on Mapletree Pan Asia Commercial Trust (MPACT) N2IU with a lower target price of $1.70 from $1.90 previously as borrowing costs are set to rise higher.
In his Aug 3 report, Guha notes that MPACT has had a slow start to the year. Excluding the merger with its sister REIT, the trust’s revenue and net property income (NPI) for 1QFY2024 ended June rose 4.1% and 0.3% y-o-y respectively.
The lower NPI growth was the result of higher operating expenses due to utilities. To this end, Guha notes that borrowing cost rose 64 basis points y-o-y to 3.17%, negating the steady operations. He adds that the guidance is for further rise as swaps reprice.
“Coupled with depreciation of Renminbi and Japanese Yen against Singapore dollar and a larger base of units, distribution per unit (DPU) fell 3.1% q-o-q or 12.8% y-o-y,” he adds.
MPACT’s portfolio occupancy inched up by 30 basis points to 95.7% from the previous quarter, largely due to higher occupancy at mTower at Alexandra Road.
Meanwhile, all markets except Greater China recorded positive rental uplifts, contributing to a portfolio rental reversion of 2.4%.
MPACT’s core assets saw strong rental uplifts, ranging from 7.1% at Mapletree Business City to 12.3% at VivoCity, with the latter recording a 3.7% increase in tenant sales y-o-y.
Although Festival Walk in Hong Kong saw tenant sales growth of 12.1%, rents had a negative reversion of 9.4%, Guha highlights.
To reflect lower margins and higher borrowing costs, Guha has lowered his DPU estimates for FY2024 and FY2025 by about 5%.
As at 2.54pm, units in MPACT are trading 2 cents lower or -1.25% down at $1.58.
