Mapletree Pan Asia Commercial Trust Earnings: Results In Line; Retain SGD 1.82 Fair Value Estimate

Mapletree Pan Asia Commercial Trust’s N2IU fiscal 2023 (ended March) net property income rose 62.6% year on year to SGD 632 million, on the back of the merger with Mapletree North Asia Commercial Trust and a higher contribution from its Singapore properties. The trust’s flagship asset, VivoCity, achieved a record SGD 1.05 billion of tenant sales, which exceeded prepandemic levels. The relaxation of COVID-19 measures in Hong Kong as well as the reopening of the China border also drove the recovery of Festival Walk, which saw year-on-year shopper traffic and retail sales growing 276% and 77%, respectively, in March. As the performance was in line with our expectations, we retain our SGD 1.82 fair value estimate. We continue to expect MPACT’s retail assets to benefit from the reopening of China, which drives travel recovery, but we think the trust is fairly valued at current prices with the positive outlook largely priced in.

For its retail assets, the trust maintained high occupancy rates of 99.1% for VivoCity and 99.6% for Festival Walk in fiscal 2023. Rental reversion for VivoCity was a robust positive 7.7% while Festival Walk had a negative 12.7% as the trust continues to rebase rents from their pre-social-unrest high. Management expects the negative rental reversion for Festival Walk to narrow in fiscal 2024 as the mall rides on the recovery in shopper traffic and tenant sales. On the office front, MPACT’s China properties’ occupancy rate continued to fall to 86.5% in the fourth quarter of fiscal 2023 from 88.6% in the previous quarter due to the challenging market supply situation. Management said it is not ruling out the possibility of divesting the China assets to recycle into younger and better-quality assets. We think this would be a positive move, as we expect the trust’s China assets to require more capital expenditure over time to compete with new supplies.