Mapletree Pan Asia Commercial Trust Reports a DPU of S$0.022 for 3Q FY2024: 5 Things Investors Need to Note

Mapletree Pan Asia Commercial Trust (SGX: N2IU), or MPACT, is the last of the three Mapletree REITs to report its latest fiscal 2024 third quarter (3Q FY2024) earnings.

Last week, both industrial REITs Mapletree Logistics Trust (SGX: M44U) and Mapletree Industrial Trust (SGX: ME8U) reported encouraging sets of financial numbers.

MPACT put up a resilient performance for the quarter but faced the dual challenges of currency headwinds and higher finance costs.

As a result, its distribution per unit (DPU) for 3Q FY2024 fell by 9.1% year on year to S$0.022.

Here are five highlights from the retail and commercial REIT that investors may be interested to know more about.

1. A gentler DPU decline

Gross revenue for the quarter inched up 0.8% year on year to S$241.6 million, contributed by better performance from the REIT’s Singapore properties.

However, overseas rental income from Hong Kong, Japan and China was negatively impacted by the strong Singapore dollar.

Utility expenses saw a full quarter of contribution, rising by 6.8% year on year to S$9.3 million.

Despite this, total property operating expenses dipped by 2% year on year to S$59.2 million because of a one-off refund of property tax along with lower marketing expenses.

As a result, net property income (NPI) rose 1.7% year on year to S$182.4 million.

Finance costs continued to climb, increasing by 14.1% year on year to S$57.4 million.

As a result, MPACT reported a lower distributable income of S$115.3 million.

DPU, however, would have been lower by just 1.8% year on year as there was a one-off interest rate swap gain recognised in 3Q FY2023.

2. Healthy operating metrics except for China

MPACT maintained a high committed occupancy of 96.7% across its portfolio as of 31 December 2023.

The tenant retention rate also stood healthy at 77.3%, showcasing healthy demand for the REIT’s properties.

MPACT’s China properties still saw occupancy slightly below 90% but have inched up slightly from 88.6% a year ago.

The portfolio’s overall rental reversion came in positive at 4.1% but China and Hong Kong continued to experience a drag with rental reversion coming in at negative 3.2% and 8.1%, respectively. 

The manager announced that 3.9 million square feet of new retail space is coming online in Hong Kong this year which may continue putting pressure on rents.

Over in China, overall office vacancy rates hit a 10-year high of 19.8% in 3Q FY2024, putting pressure on overall rents.

The REIT’s Shanghai business park asset also saw softer demand from companies downsizing and holding off expansion plans, thus putting pressure on occupancy and rental rates.

3. Stabilising cost of debt with higher fixed-rate loans

MPACT’s aggregate leverage stood at 40.8%, in line with the previous quarter’s 40.7%.

The good news is that the REIT’s cost of debt has stabilised at around 3.33% compared with 2Q FY2024’s 3.34%, though this was a sharp jump from the 2.57% logged in the prior year because of the surge in interest rates.

The proportion of fixed-rate debt has increased further to 85% from close to 80% in the previous quarter, further shielding the REIT from large increases in interest costs.

The REIT manager has also refinanced all loans for FY2024 and talks are underway to refinance the debt for FY2025.

4. Completed AEI for VivoCity

Moving on to MPACT’s crown jewel, VivoCity, the mall saw shopper traffic increase 10.3% year on year to 33.1 million in the first nine months of FY2024 (9M FY2024).

Tenant sales inched up 1.3% year on year to S$813.8 million over the same period.

The mall’s asset enhancement initiative (AEI) involving the reconfiguration of level one’s food and beverage cluster was completed.

A new indoor refreshment area was added that improves the visibility of shopfronts from the main thoroughfare.

MPACT estimates that this AEI garnered a return on investment of more than 20%.

5. Encouraging numbers for Festival Walk

Festival Walk in Hong Kong is also seeing a recovery of sorts.

Shopper traffic has improved by 6.3% year on year in 9M FY2024 to 22.8 million while tenant sales increased by 3.8% year on year to HK$3 billion.

Management has taken proactive steps to enhance Festival Walk’s appeal by including new brands such as Little Scientists and Lu Lu Cheung.

Fun and engaging events were also held to draw in the crowds and improve footfall throughout the mall.

Get Smart: A muted outlook with a note of caution

MPACT sounded a note of caution amid a muted outlook.

The manager warned about persistent geopolitical issues and a slowing global economy accompanied by high interest rates.

Over in Japan, three of its Chiba properties are facing occupancy risks as the market there remains soft, but these assets make up just 6% of MPACT’s gross rental income.

The manager will continue to focus on cost control and will rely on its key assets Mapletree Business City and VivoCity to remain resilient.

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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.

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