Analysts at OCBC Investment Research (OIR) and DBS Group Research (DBS), along with UOB Kay Hian’s (UOBKH) Jonathan Koh, Citi Research’s Brandon Lee, are all keeping their “buy” calls on Mapletree Pan Asia Commercial Trust (MPACT).
While OIR and UOBKH’s Koh have lowered their respective target prices — to $1.48 from $1.54 previously and $1.60 from $1.71 previously — Citi’s Lee and the team at DBS have kept their target prices at $1.47 and $1.80 respectively.
The team at OIR notes that MPACT’s 3QFY2025 ended Dec 31, 2024 distribution per unit (DPU) of 2 cents met expectations, as did the REIT’s overall results.
They write in their Jan 24 note: “Although finance expenses fell from $58.1 million in 3QFY2024 to $52.3 million, this was not sufficient to prevent a decline in its DPU by 9.1% to 2.00 Singapore cents.”
“Cumulatively, MPACT’s 9MFY2025 net property income (NPI) slipped 5.7% y-o-y to $514.0 million, while DPU decreased by 8.3% to 6.07 Singapore cents. This accounted for 73.9% of our FY2025 forecast,” adds the team.
Meanwhile, MPACT’s aggregate leverage ratio declined slightly to 38.2%, with 81.5% of its debt hedged.
See also: DBS is RHB’s top pick with dividend yield ‘too good to ignore’
The REIT’s weighted average all-in cost of debt inched down from 3.56% to 3.52%, and management expects this to stay around the mid-3% level.
On this, the OIR analysts write: “We raise our cost of equity assumption from 7.0% to 7.2% due to a higher risk-free rate of 2.75% and higher beta but partially offset by the upgrade in MPACT’s ESG rating.”
Potential catalysts noted by them include higher-than-expected valuation uplift, DPU-accretive acquisitions as well as stronger-than-expected momentum in footfall and tenants’ sales at VivoCity and Festival Walk.
Conversely, investment risks include a slowdown in macroeconomic conditions, acquisitions that do not pan out as well as expected and non-renewal of leases by key tenants.
For UOBKH’s Koh however, MPACT’s DPU did not meet expectations. He attributes the decline in gross revenue and NPI to the divestment of Mapletree Anson, lower contributions from overseas properties and headwinds from a strong Singapore dollar.
He notes that the REIT’s VivoCity asset turned in a “stellar” performance with NPI growth of 1.4% y-o-y and positive rental reversion of 16.9%. He adds that the mall maintained a high occupancy of 99.9% and the asset enhancement initiative (AEI) reconfiguration of VivoCity’s basement two floor is progressing well, and is on-track for completion by end-2025 and projected to deliver a return on investment (ROI) of 10%.
In Hong Kong, NPI from Festival Walk declined 7.5% y-o-y with continued negative rental reversion of 7.2%, while occupancy edged slightly higher by 0.7 percentage points (ppts) q-o-q to 97.1%.
On this, Koh writes: “Consumer spending is weak due to high interest rates and softening of the property market. The retail sector is affected by outbound travel and cross-border consumption in Shenzhen, triggered by the strong Hong Kong dollar.”
To combat this, MPACT has intensified marketing efforts through high-impact celebrity appearances and immersive themed experiences to draw shoppers. As a result, the decline in tenant sales has moderated to 1.5% y-o-y in the 3QFY2025.
In Japan, NPI fell 31.6% y-o-y, while occupancy dipped 14.8 ppts y-o-y to 82.6% due to non-renewal by Seiko Instrument for the lease at Makuhari Bay Tower. Fujitsu, the sole tenant at Fujitsu Makuhari Building, has notified MPACT that it will not renew its lease after it expires on Mar 31, 2026.
For more stories about where money flows, click here for Capital Section
“We expect occupancy to further decline to 74% in 1QFY2027. Occupancies and rents in the Makuhari sub-market of Chiba, Japan are under pressure. MPACT will re-let the properties to new tenants, explore a potential change of use and pursue divestment opportunities,” writes Koh.
Overall, the UOBKH analyst is positive on MPACT benefiting from resilience and growth of its Singapore properties. “VivoCity continues to be enhanced and benefits from the recovery in tourism and expansion at Resorts World Sentosa (RWS). Mapletree Business City (MBC) should see progressive backfilling of vacant space. An anchor tenant from the banking sector has recently renewed its lease at MBC.”
The REIT’s China portfolio, however, could deteriorate, with offices in Beijing declining in average rents accelerating to 10.7% in 2024. Negative rental reversion at MPACT’s China properties could worsen compared to the 2.9% drop incurred in 9MFY2025.
“We trimmed our FY2025 and FY2026 DPU forecast by 1% due to expectations of lower occupancies for Gateway Plaza in Beijing and Sandhill Plaza in Shanghai.”
Share price catalysts noted by Koh include resilient growth from VivoCity and MBC in Singapore and MPACT’s four properties in the HarbourFront area benefitting from the development of the Greater Southern Waterfront and rejuvenation of Sentosa Island and Pulau Brani.
Meanwhile, Citi’s Lee writes in his Jan 24 note: “MPACT's underperformance in 2024 has continued into 2025 year-to-date, and while we see limited near-term share price catalysts given operational weakness in overseas markets is unlikely to turn around tangibly in the near-term, we maintain our ‘buy’ rating purely on valuations, with share buyback a key share price catalyst, in our opinion.”
Downside risks noted by Lee include continued negative rent reversion at Festival Walk, foreign exchange (forex) risk and finally, a sharper-than-expected increase in interest rates, which could impact DPUs and cap rates.
On the other hand, upside risks include faster-than-expected improvement in retail outlook post-resumption in cross-border travel, a recovery of anchor or mini-anchor space for new AEIs and a potential acquisition of or joint redevelopment of the sponsor’s assets in Singapore.
For the team at DBS, MPACT’s valuations are a key topic. They note that the manager sees potential cap rate expansion risk in Hong Kong for Festival Walk, which is currently valued at 4.20% and cash flow-led devaluation for its China asset, while the Japan assets should remain largely status-quo.
They add: “We see these risks as priced in at current share price levels which is near a five-year low, forward yields of 6.8% on our revised FY2024/2025 estimates should reflect risks well flagged for the counter.”
Like his fellow analysts, Morningstar Equity Research’s Xavier Lee has maintained his fair value of $1.60 on MPACT, with a four-star rating against Morningstar’s five-tier scale, which means “appreciation beyond a fair risk-adjusted return is likely”.
Lee writes: “Although the trust is currently undervalued, it continues to face challenges in China, Hong Kong and Japan. That said, the trust now offers a fiscal 2026 distribution yield of 7%, making it an attractive option for investors willing to hold through the current downcycle.”
Finally, Maybank Securities' Krishna Guha has a “hold” call on MPACT at a lower target price of $1.22 from $1.29 previously.
He sees that although REIT’s yield of around 7% is “attractive”, downside persists from lower overseas occupancy and debt repricing.
Guha writes in his Jan 26 note: “While 9MFY2025 DPU is tracking 1% below our full-year estimate, we leave our estimates unchanged. We lower our FY2026 DPU estimate by 2.9% on the back of weaker revenue from Greater China, Japan and MBC in Singapore. We also factor in higher borrowing costs on the back of our house view of gradual rate cuts.”
Risks noted by him include non-renewal of anchor leases in China, Japan and MBC in Singapore, as well as weaker reversions in Hong Kong and continued repricing of debt.
As at 4.28pm, units in MPACT are trading flat at $1.20.
