Mapletree Pan Asia Commercial Trust (MPACT) just reported its 3Q FY23/24 financial results. After a lackluster performance of its unit price over the past year, let’s look into MPACT 3Q FY23/24 results to see if the turnaround is around the corner. Let’s dive in.
Financial Performance
In the following table, we compare Mapletree Pan Asia Commercial Trust (MPACT) 3Q FY23/24 to 3Q FY22/23:
| In SGD thousands | 3Q FY23/24 | 3Q FY22/23 | Change |
|---|---|---|---|
| Gross Revenue | 241,586 | 239,752 | +0.8% |
| Property Operating Expenses | (59,150) | (60,363) | -2.0% |
| Utility Expenses | (9,301) | (8,706) | +6.8% |
| Net Property Income | 182,436 | 179,389 | +1.7% |
| Net Finance Costs | (57,394) | (50,304) | +14.1% |
| Amount Available for Distribution to Unitholders | 115,260 | 127,038 | -9.3% |
| Distribution per Unit | 2.20 cents | 2.42 cents | -9.1% |
This is not an ideal financial performance, but we have seen that the financials have begun to deteriorate less this quarter. Albeit small, MPACT managed to grow its gross revenue by 0.8% to $241m. Expenses were stable as the property operating expenses declined by 2%, but utility expenses grew by 6.8%.
The bad news is that financing costs grew by 14.1% this quarter, from $50.3m to $57.4m. It was still a lower increase than the previous quarter, which increased by a whopping 37.5%.
Despite the increase in income, the DPU declined again this quarter by 9.1% YoY, which was contributed by the rise in financing costs.
Overall, the financing cost will continue to climb should the higher interest rate environment persist for longer throughout 2024 and 2025.
Debt Profile
Here we compare the debt profile for MPACT 3Q FY23/24 with 2Q FY23/24:
| 3Q FY23/24 | 2Q FY23/24 | Change | |
|---|---|---|---|
| Aggregate Leverage Ratio | 40.8% | 40.7% | +0.1% |
| Adjusted Interest Coverage Ratio | 3.0x | 3.0x | N/A |
| % of Fixed Rate Debt | 85% | 79.9% | +5.1% |
| Weighted Average All-In Cost of Debt | 3.33% | 3.34% | -0.01% |
From MPACT 3Q FY23/24 results, we can see that its debt profile was pretty stable. The aggregate leverage ratio, unfortunately, still climbed from 40.7% in the previous quarter to 40.8% this quarter. Adjusted ICR was stable at 3.0 times. This is encouraging news after the ICR’s consistent decline over the past several quarters. The percentage of debt hedged to a fixed rate climbed to a healthy level of 85%, which should reduce the impact of interest rate fluctuation on the REIT’s bottom lines. The weighted average debt cost was also stable, declining by 0.01% to 3.33%.
We think we can breathe a sigh of relief this quarter as MPACT’s debt profile started to show a sign of stabilization after several quarters of deterioration. We will continue to monitor MPACT’s debt profile in the coming quarters.
Debt Maturity Distribution
The good news is that no more refinancing obligation exists in the last quarter of FY23/24. The bad news is that ~21% of debt is due for refinancing in FY24/25. Should the high-interest rate environment continue throughout 2024 and 2025, we may see a further rise in MPACT financing costs, which may create downward pressure on the REIT’s DPU. On the positive side, this is not specific to MPACT, as all REITs will need to refinance at a higher rate.
Regardless, MPACT’s debt maturity distribution is quite well-staggered over the next several years.
Portfolio Occupancy
| 3Q FY23/24 | 2Q FY23/24 | |
|---|---|---|
| Portfolio Occupancy | 96.7% | 96.3% |
| WALE | 2.5 years | 2.5 years |
Overall, MPACT’s portfolio occupancy was strong at 96.7%, indicating high demand for its portfolio properties. Among its portfolios, the lowest occupancy rate was in its China properties, standing at 89.6%. The good news is that it’s higher than the previous quarter’s rate of 88.9%.
Another positive development in MPACT’s portfolio was the improvement of its rental reversion. Singapore properties showed strong positive rental reversion, with its flagship property, VivoCity, registering a notable increase of 14.2%.
China and Hong Kong still reported negative rental reversion of -3.2% and -8.1%, but these numbers were lower than the previous quarter of -3.5% and -9.5%, respectively. This development is a welcome bonus for the overall MPACT’s performance this quarter. We will continue to monitor MPACT’s rental reversion for its China and Hong Kong properties in the coming quarters to see if there is a potential turnaround.
Remarks
Mapletree Pan Asia Commercial Trust (MPACT) 3Q FY/23/24 financial results started to show an early sign of potential stabilization on its bottom line. The demand for MPACT’s portfolio properties was robust, as demonstrated by its high occupancy rate. However, with the weakness in the Greater China and Hong Kong property markets, MPACT’s properties in the region still showed a negative rental reversion, negatively impacting the REIT’s bottom line.
With the market expecting the higher interest rate to persist for longer, we may see a further rise in MPACT’s financing costs, as around 21% of its debt needs to be refinanced in FY/24/25.
MPACT offers an enticing valuation with a dividend yield of >6% and a P/B ratio of 0.78. This makes it attractive, especially if you believe the REIT could experience a turnaround soon.
To learn more about MPACT, please visit our Mapletree Pan Asia Commercial Trust (MPACT) analysis page and our Mapletree Pan Asia Commercial Trust (MPACT) dividend page.
You can view our Singapore REITs page for more analysis on other REITs.
Related page: 3Q FY23/24 presentation slide
