Should Investors Buy Mapletree Pan Asia Commercial Trust After Its Latest Earnings?

Mapletree Commercial Trust VivoCity

Tim Phillips

November 9, 2022

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Investors in Singapore are in the thick of earnings season. That’s no more true than when it comes to Singapore REITs.

The big ones have been reporting their numbers over the past two or three weeks. One large commercial and retail REIT is Mapletree Pan Asia Commercial Trust (SGX: N2IU), also known as “MPACT”.

Formed from a merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust, the resulting REIT became one of the biggest on the Singapore Exchange (SGX).

At the end of October, the REIT reported its H1 FY2022/2023 earnings (for the six months ending 30 September 2022).

So, here’s what dividend and REIT investors should know about them, and whether MPACT shares are now worth buying.

MPACT revenue and profit surge due to merger

Gross revenue and net property income (NPI) both surged 44.9% year-on-year to S$353.1 million and S$275.1 million, respectively.

Understandably, this massive increase was put down to the merger between the two Mapletree REITs.

The amount available for distribution to shareholders in H1 FY22/23 increased by 37.2% year-on-year to S$201 million.

Meanwhile, the crucial distribution per unit (DPU), or dividend, came to 4.94 Singapore cents. This was a 12.5% year-on-year improvement from the 4.39 Singapore cents paid out in H1 FY21/22.

MPACT portfolio occupancy down marginally

Overall, portfolio occupancy for MPACT was pretty stable in its latest quarter. While its committed occupancy rate was down marginally – as of 30 September 2022 – to 96.9%, it was only down by three basis points from the 97.2% occupancy rate as of 30 June 2022.

The slightly lower occupancy rate was down to lower China property take-up as leasing conditions remained challenging.

On the rental reversion side, MPACT recorded a positive rental reversion rate of +1.1% for H1 FY22/23 for its overall portfolio.

However, this ranged from -11.5% for Festival Walk in Hong Kong to +14.2% for The Pinnacle, Gangnam in Korea.

Locally, VivoCity saw solid positive rental reversion of +7.7% while Mapletree Business City (MBC) also saw a positive rental reversion rate of +3.8% for the period.

Solid shopper traffic in Singapore, lease expiries minimal in H2 FY22/23

As mentioned above, MPACT’s Singapore properties saw solid rental reversions. This wasn’t any coincidence as Singapore’s reopening this year has spurred economic activity.

That came through in metrics for properties such as VivoCity, which saw tenant sales up 48.4% year-on-year and shopper traffic soaring 49.4% year-on-year for H1 FY22/23.

Meanwhile, in Hong Kong, Festival Walk saw tenant sales down 0.5% year-on-year and shopper traffic down 0.7% year-on-year.

On the lease expiry front, the REIT sees less than 10% of its leases expiring for the remainder of FY22/23 (see below).

MPACT lease expiry H1 FY 2022 2023

Source: Mapletree Pan Asia Commercial Trust H1 FY2022/2023 earnings presentation

Its weighted average lease expiry (WALE) is 2.4 years while next year (FY23/24) MPACT has nearly 28% of its overall leases expiring.

Benefitting from Singapore reopening

MPACT reported a solid set of results for H1 FY22/23, which highlighted how its Singapore properties are benefitting from people returning to both the office and to shopping malls in numbers.

However, this was offset by the uncertainty in its Hong Kong and China portfolios.

One key announcement to take note of was that management said it would be moving to detailed quarterly reporting from Q3 FY22/23 (for the three months ending 31 December 2022).

With that, it also announced that dividend distributions starting from Q3 FY22/23 would also be quarterly.

That’s a departure from the current arrangement, where detailed reporting is semi-annually while dividends are also only paid out twice a year.

For dividend investors who want to invest in a solid portfolio of Asian commercial and retail properties, MPACT is a compelling proposition.

It benefits from the Singapore reopening while also being positioned well in the eventuality that China and Hong Kong reopen to the world.

As its current share price, MPACT shares are offering REIT investors a 12-month forward dividend yield of 6.2%.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.