"Both assets should further benefit in 2026 with the completion of the Circle Line loop," say Wong and Tan, referring to the construction of an MRT line that will link up both properties.
They expect the REIT's earnings to reach a bottom this financial year, with further negative reversions at Festival Walk, its mall in Hong Kong, and weaker occupancies in Japan, where it owns office properties.
Wong and Tan figure that Festival Walk rents should stabilise in the coming 1 to 2 years as Hong Kong’s retail sector hits a bottom and sets the stage for a rebound. To this point, there had been three consecutive quarters of higher retail sales y-o-y.
With savings from lower interest costs, they estimate a 4% upside to distribution per unit. Completion of asset enhancement works at VivoCity may add another 1% that they have yet to reflect.
In another positive point, MPACT, having channelled proceeds from the divestment of Mapletree Anson to pare debt, has reduced its gearing to 38% and strengthened its balance sheet.
Further asset sales, likely of overseas assets so as to streamline the portfolio, will create dry powder for acquisitions from its sponsor or third parties.
The analysts also allude to possible inorganic growth. "There are significant opportunities in Singapore, which can be funded in a DPU-accretive manner while keeping gearing at the 40% handle."
See also: RHB raises DBS target price to $57.10 after bank’s stock hits new high
Via a SOTP valuation, they've reached a higher target price of $1.60, from $1.50 now.
At this level, it implies a c.0.9x target price-to-book, which is at the mid-point of S-REIT peers that are trading at above 1.0x P/B and Hong Kong quoted Link REIT, which is at 0.7x P/B.
MPACT units changed hands at $1.41 as at 2.17 pm, down 0.71% for the day but up 15.57% year to date.
