Mapletree Pan Asia Commercial Trust offers 7.1% dividend yield. Is it worth buying?

What happened?

I recently asked the Beansprout Telegram group which stocks/REITs the community was most interested in.

Mapletree Pan Asia Commercial Trust, or MPACT, came up top in the poll. 

The REIT has been going through a tough year so far. Its share price has tumbled by nearly 19% year to date and is just a whisker away from its 52-week low of S$1.18.

Earlier, we saw that the Mapletree Pan Asia Commercial Trust's dividends fell for the quarter ending December 2023. 

Mapletree Pan Asia Commercial Trust was also one of the five Singapore stocks that was removed from the MSCI Singapore index last month. 

We find out why investors are pessimistic about the REIT and analyse its latest corporate move to divest Mapletree Anson.

With its depressed share price, could the REIT qualify as an attractive REIT to scoop up?

What you need to know about Mapletree Pan Asia Commercial Trust's FY2024 earnings

Mapletree Pan Asia Commercial Trust released its fiscal 2024 (FY2024) earnings ending 31 March 2024 recently. Here are a few aspects you need to take note of.

#1 – DPU fell for FY2024 but increased in the latest quarter

Mapletree Pan Asia Commercial Trust reported a healthy 16% year on year increase in gross revenue for FY2024 with full-year contributions from overseas assets acquired through the merger with Frasers Commercial Trust.

Singapore also saw a robust performance that more than offset the negative impact of higher utility costs.

Net property income (NPI) increased by 15.2% year on year to S$727.9 million.

However, distribution per unit (DPU) fell by 7.3% year on year to S$0.0891 because of higher interest rates pushing up the REIT’s finance costs.

There was a bright spot amid the weak performance.

For the fourth quarter of FY2024 (4Q FY2024), MPACT’s DPU managed to eke out a small 1.8% year on year increase to S$0.0229.

The increase came on the back of sturdy performances from the REIT’s Singapore assets along with stable contributions from Hong Kong’s Festival Walk Mall.

Singapore still made up the bulk of revenue and NPI for FY2024, as seen in the slide below.

Hong Kong came in second with a 21% contribution to both gross revenue and NPI for FY2024.

MPACT also stated that nearly half of its NPI comes from its core assets.

#2 – High fixed-rate debt proportion with moderate cost of debt

Mapletree Pan Asia Commercial Trust's debt metrics look healthy with an aggregate leverage of 40.5% as of 31 March 2024.

The REIT’s weighted average cost of debt has risen from 2.68% a year ago to 3.35% for FY2024, but only saw a marginal rise from the 3.33% registered in the previous quarter.

77.1% of Mapletree Pan Asia Commercial Trust's loans are on fixed rates, thus protecting the REIT from a sharp jump in finance costs.

The manager also spread out the REIT’s debt maturities with just 15% of total loans coming due in FY2025.

No more than 21% of Mapletree Pan Asia Commercial Trust's debt is set to come due in any fiscal year.

In addition, the REIT has around S$1.5 billion of available liquidity to draw down should it wish to take on more debt for acquisitions.

#3 – Operating metrics impacted by China

MPACT’s operating metrics stood healthy on a portfolio basis but China and Japan were a drag in terms of occupancy and rental reversions.

Committed portfolio occupancy stood at 96.1% but its China properties saw occupancy at just 87.5%, dipping lower than the 89.6% in the previous quarter.

Although portfolio rental reversion came in positive at 2.9% at the portfolio level, China and Hong Kong properties continued to sport negative rental reversions of 2.7% and 8.7%, respectively.

Mapletree Pan Asia Commercial Trust's Japan properties also exhibited negative rental reversion, mainly due to the weakness in Chiba.

#4 – Driving better rental income at VivoCity through an AEI

Mapletree Pan Asia Commercial Trust's star property, VivoCity Mall, continued to record healthy numbers.

Tenant sales hit a new high of S$1.08 billion for FY2024, up 2.6% year on year, while shopper traffic increased by 10.1% year on year to 43.9 million.

VivoCity’s sixth asset enhancement initiative (AEI) was completed in May 2023 with around 80,000 feet of space reconfiguration, providing shoppers with a better shopping experience and enhanced connectivity.

The manager achieved a return on investment of more than 20%.

The mall is also constantly revitalising its tenant mix by bringing in new and trendy offerings such as Kenangan Coffee and partnering with tenants to spruce up their storefronts (e.g. Dior).

Overall, MPACT delivered an encouraging set of results for 4Q FY2024 but investors need to watch for China, Hong Kong and Japan where operating metrics are weaker compared to the overall portfolio.

What you should know about Mapletree Pan Asia Commercial Trust's Mapletree Anson divestment

#1 – Divestmnt expected to lower debt levels

Late last month, MPACT announced the divestment of Mapletree Anson, a 19-storey office building located in Tanjong Pagar, for S$775 million.

This consideration was above the property’s independent valuation of S$765 million and is S$95 million higher than the REIT’s original purchase price of S$680 million.

Note that Mapletree Anson is grouped under “other Singapore properties” that contributed slightly more than 10% of the REIT’s revenue for FY2024 and 11.4% of its net property income.

Proceeds from the divestment will lower MPACT’s gearing to 37.6% while increasing its interest coverage ratio from 2.9 times to 3.3 times.

With a lower gearing, the REIT’s debt headroom will also be lifted to S$3.9 billion, up from the current S$3.2 billion.

The good news is that MPACT’s DPU is expected to rise by 1.5% from S$0.0891 to S$0.0904.

#2 – Divestment in line with capital management strategy

The Mapletree Anson divestment is a good first step taken by the REIT manager to rid the portfolio of lower-yielding properties.

The divested property’s net property income yield stood at 3.8%.

MPACT showcased its “4R” asset and capital management strategy back in September 2022 which involves refocusing, reconstituting, recharging, and resilience (see slide below).

What would Beansprout do?

There are some signs of improvements in Mapletree Pan Asia Commercial Trust’s prospects. 

Its distributions have started to grow again in the most recent quarter, after declining in the past year. 

The divestment of Mapletree Anson will also help to lower its debt levels. 

Mapletree Pan Asia Commercial Trust offers a dividend yield of 7.1%, above its historical average of 5.8%.

Find out how much dividends you would have received as a shareholder of Mapletree Pan Asia Commercial Trust in the past 12 months with the calculator below. 

The dividend yield is higher than Mapletree Logistic Trust’s dividend yield of 6.7%, and Mapletree Industrial Trust’s dividend yield of 5.9%. 

Mapletree Pan Asia Commercial Trust also offers a higher dividend yield compared to other retail and commercial REITs such as CapitaLand Integrated Commercial Trust, which offers a dividend yield of 5.9%. 

The stock is currently trading at a Price-to-book valuation of 0.7x, below it’s historical average.

However, Festival Walk in Hong Kong has yet to stabilise in terms of rental reversion, while China is facing a property market downturn with lower occupancies for MPACT’s China assets.

As such, while the stock appears to offer an attractive dividend yield, investors may need to be patient as it may take some time for Hong Kong and China to turnaround. 

To compare Mapletree Pan Asia Commercial Trust with other REITs, check out our Singapore REIT screener and find the best REIT for your portfolio.

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

Related links:

• Mapletree Pan Asia Commercial Trust (MPACT) share price and analysis

• Mapletree Pan Asia Commercial Trust (MPACT) dividend history