Is Mapletree Pan Asia Commercial Trust A Good Buy? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Mapletree Pan Asia Commercial Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To July 24

Business Description

Mapletree Pan Asia Commercial Trust [MPACT] is an office and commercial REIT that was formed from the merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust back in 2022.

What I Like About MPACT:

The sponsor is well-established and strong
The lease profile is well diversified and the lease expiry profile is well spread out (Figure 12)
The majority of MPACT portfolio is Singapore properties (Figure 9)

What I Do Not Like About MPACT

Performances post-merger are unproven
I am not a fan of the merger as I believe it was a mistake that was done to package weaker, non-Singapore properties with the more established Singapore properties in hopes that it would boost the overall demand for the entirety of the portfolio.

Updates From Recent Performance (FY 2023/4)

General Comments:

93% of expected distributable income is derived/hedged into SGD.
DPU from operations improved by 5% due to stronger performance in their Singapore properties. ·
Portfolio valuation experienced a slight decline (-0.5%) mainly due to FX losses and valuation deterioration from non-Singapore properties. This was partially offset by the valuation increase from Singapore properties.
At the close of FY23/24, MPACT initiated a divestment of Mapletree Anson at a premium of $95mil above the acquisition price. Funds are expected to be used for debt reduction which would bring the gearing ratio to 37.6%. This is expected to deliver a 1.5% yield accretion. In my opinion, this is a good move as the capitalization rate for Mapletree Anson is also one of the lowest within the portfolio itself and even comparable with the current cost of borrowing.

Positive Headwinds:

A slow but steady recovery in the Chinese consumer would provide some resilience in the performance of HK and China assets.

Negative Headwinds:

The cost of borrowing is expected to increase by around 25 to 50 basis points moving into the next 24 months as around 36% of their debt is due during the period when interest rates are just starting to come back down.
The trend of downsizing due to WFH and slower economic growth may pose some headwinds for the occupancy and hence performance of both the offices and business parks.

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