Better Buy: Mapletree Pan Asia Commercial Trust vs. Frasers Centrepoint Trust

June 7, 2023

As I’ve written about previously, Singapore’s retail REITs are seeing increased interest given the “return to shopping” trend seen post-pandemic.

There are a number of reasons for this; from residents being cooped up during Covid-19 periodic lockdowns to Chinese tourists returning in force.

However, two of the most well-known retail REITs in Singapore are Mapletree Pan Asia Commercial Trust (SGX: N2IU), which was formed by the merging of two former standalone Mapletree REITs last year, and Frasers Centrepoint Trust (SGX: J69U) – a Singapore-focused, suburban heartlands malls owner.

But out of these two heavyweight retail REITs, which one is the better buy for Singapore dividend investors? Let’s find out.

DPU growth

It’s always worth remembering that it’s more important to focus on a REIT’s ability to grow its distribution per unit (DPU), or dividend, rather than just looking at the dividend yield.

For Mapletree Pan Asia Commercial Trust, we have to take Mapletree Commercial Trust’s DPU history. On this front, Mapletree Commercial Trust recorded a DPU of 6.49 Singapore cents for its FY2012/2013 (for the 12 months ending 31 March 2013).

As for Mapletree Pan Asia Commercial Trust’s latest earnings, the REIT posted a full-year DPU for FY2022/2023 of 9.61 Singapore cents.

That means over the past 10 years, Mapletree Pan Asia Commercial Trust has managed to grow its DPU by a compound annual growth rate (CAGR) of 4%.

Meanwhile, Frasers Centrepoint Trust recorded a DPU of 10.01 Singapore cents for its FY2012 (for the 12 months ending 30 September 2012).

Given its DPU of 12.227 Singapore cents for its FY2022, Frasers Centrepoint Trust managed to expand its DPU by a CAGR of 2%.

Winner: Mapletree Pan Asia Commercial Trust

Gearing ratio

In this higher interest rate environment, it’s worth monitoring the gearing (or leverage) ratio of specific REITs, to ensure that they’re well protected.

As of 31 March 2023, Mapletree Pan Asia Commercial Trust had a gearing ratio of 40.9%.

Looking at Frasers Centrepoint Trust’s latest earnings report, the REIT had a gearing ratio of 39.6% – meaning it edges this one slightly.

Winner: Frasers Centrepoint Trust

Cost of debt

Finally, in this environment where interest rates may stay “higher for longer”, controlling the cost of debt is a crucial task for REIT managers.

With Mapletree Pan Asia Commercial Trust, its weighted average all-in cost of debt stood at 2.68% as of 31 March 2023.

If we compare that to Frasers Centrepoint Trust – which had an average all-in cost of debt of 3.5% as of 31 March 2023 – we can see that the Mapletree retail REIT wins out.

Winner: Mapletree Pan Asia Commercial Trust

Look at REITs’ DPU history

While both REITs are solid options in the retail space, it looks like Mapletree Pan Asia Commercial Trust is the better buy now for REIT investors.

That’s given its better DPU growth track record and the fact that its cost of debt is lower than Frasers Centrepoint Trust.

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

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.

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