Following Mapletree Logistics Trust, which was the first Mapletree REIT to release its results for the 2nd quarter, as well as for the first half of the financial year 2024/25 ended 30 September on Tuesday (22 October) evening (you can read my review of its results here), Mapletree Pan Asia Commercial Trust (SGX: N2IU), or MPACT for short, was the next one to do so yesterday (24 October) evening. The last Mapletree REIT in Mapletree Industrial Trust will be releasing its results next Tuesday (29 October) evening.

MPACT invests in commercial properties located in key gateway cities in Asia – as of 30 September 2024, its portfolio comprises 4 in Singapore (VivoCity, Mapletree Business City, Bank of America Merrill Lynch Harbourfront, and mTower), 1 in Hong Kong (Festival Walk), 2 in China (Gateway Plaza and Sandhill Plaza), 9 in Japan, and 1 in South Korea, valued at S$15.5 billion.

In this post, you will find the essentials you need to note about MPACT's latest financial figures, portfolio occupancy and debt profile, along with its distribution payout to unitholders.

Let's begin:

Key Financial Figures (Q2 FY2023/24 vs. Q2 FY2024/25, and 1H FY2023/24 vs. 1H FY2024/25)

In this section, you will find a review of MPACT's financial figures for the 2nd quarter, as well as for the 1st half of the current financial year, compared against that reported in the corresponding periods last year:

Q2 FY2023/24 vs. Q2 FY2024/25:

My Observations: Overall, it was a weaker set of results reported by MPACT for the 2nd quarter of FY2024/25 compared against the same time period last year.

Its gross revenue fell by 6.1% year on year to S$225.6 million due to lower contribution from its Singapore properties (from the divestment of Mapletree Anson on 31 July 2024), as well as from its overseas properties (as a result of lower occupancy, negative rental reversion, and weaker Japanese Yen and Chinese Renminbi against the Singapore Dollar).

At the same time, its property operating expenses was up by 1.7% year on year to S$57.9 million mainly due to the refund of property tax received last year (but absent this year), and higher staff costs. This led to the REIT's net property income recording a 8.5% year-on-year decline to S$167.7 million.

1H FY2023/24 vs. 1H FY2024/25:

My Observations: For the first half of FY2023/24, its financial results was also largely a weaker one – with its gross revenue and net property income recording a low single-digit percentage decline compared to last year.

Gross revenue was down by 3.1% to S$462.3 million compared to a year ago mainly due to the completion of Mapletree Anson on 31 July 2024, along with lower contributions from its overseas properties as a result of lower occupancy, negative rental reversion, and unfavourable forex impact arising from the depreciating Japanese Yen and Chinese Renminbi against the Singapore Dollar.

On the other hand, property operating expenses inched up by 0.2% year on year to S$115.2 million mainly due to refund of property tax received in 1H FY2023/24 (which is absent this year), and higher staff cost.

As a result, its net property income fell by 4.2% year on year to S$347.1 million.

Portfolio Occupancy Profile (Q1 FY2024/25 vs. Q2 FY2024/25)

When it comes to MPACT's portfolio occupancy profile, it has headwinds in its properties in terms of rental reversions in Japan (where it fell from -1.9% from Q4 FY2023/24 ended 31 March to -12.7% in Q1 FY2024/25 ended 30 June) as well as in South Korea (where it tumbled from +39.0% in Q4 FY2023/24 to -10.9% in Q1 FY2024/25). In my opinion, South Korea is not so much of a concern as it contributed only 1% towards the REIT's gross revenue for Q1 FY2024/25; however, the decline in rental reversions for its leases in Japan is definitely going to impact the REIT to a certain extent as it contributed 8% towards the REIT's gross revenue in Q1 FY2024/25.

With that in mind, let us have a look at some of the key portfolio occupancy figures in this section, where I will be comparing the stats reported in the current quarter under review (i.e., Q2 FY2024/25 ended 30 September) against that reported in the previous quarter 3 months ago (i.e., Q1 FY2024/25 ended 30 June) to find out if it has shown signs of improvement:

My Observations: Portfolio occupancy fell by 3.7pp to 90.3% as a result of a decline in the occupancy rate of the following properties:

• VivoCity: from 99.8% in Q1 FY2024/25 to 99.3% in Q2 FY2024/25
• Festival Walk: from 99.6% in Q1 FY2024/25 to 96.4% in Q2 FY2024/25
• China properties: from 88.2% in Q1 FY2024/25 to 87.1% in Q2 FY2024/25
• Japan properties: from 94.2% in Q1 FY2024/25 to 82.3% in Q2 FY2024/25
• The Pinnacle Gangnam: from 96.8% in Q1 FY2024/25 to 92.7% in Q2 FY2024/25

However, apart from its China and Japan properties, the occupancy rates of its other properties are above 92.7% – which I consider it to be relatively strong.

In terms of rental reversion, on a portfolio level, it was at +4.1% – with positive rental reversions seen in its Singapore properties.

However, rental reversion for its overseas properties were not only negative, but deteriorated from the previous quarter, except for its Japan properties (which went from -12.7% in Q1 FY2024/25 to -9.5% in Q2 FY2024/25), as follows:

• Festival Walk: from -5.0% in Q1 FY2024/25 to -6.1% in Q2 FY2024/25
• China Properties: from -1.3% in Q1 FY2024/25 to -2.9% in Q2 FY2024/25
• The Pinnacle Gangnam: from -10.9% in Q1 FY2024/25 to -27.3% in Q2 FY2024/25

Finally, lease expiries are well-spread out, with 4.6% of retail leases and 3.0% of office/business park leases due for renewal in the 2nd half of the current financial year 2024/25. Between FY2025/26 and FY2027/28 (a period of 3 financial years), it has an average of 11.9% of retail leases and 12.1% of office/business park leases due for renewal each year. The remaining 7.4% of retail leases and 13.1% of office/business park leases will be due for renewal only in FY2028/29 or later.

Debt Profile (Q1 FY2024/25 vs. Q2 FY2024/25)

Next, let us have a look at some of the key stats in MPACT's debt profile – similar to how I have reviewed its portfolio occupancy profile in the previous section, you will find a comparison of the stats reported for the current quarter under review (i.e., Q2 FY2024/25 ended 30 September) against that reported in the previous quarter 3 months ago (i.e., Q1 FY2024/25 ended 30 June), as follows:

My Observations: Aggregate leverage fell by 2.1pp to 38.4% (which is a healthy level) as proceeds from the divestment of Mapletree Anson was used to reduce floating-rate debt. Another thing to highlight is the further increase in borrowings hedged to fixed rates, which went up by another 5pp to 84%.

Debt maturity was also well-spread out, with just 5% of borrowings due for refinancing in the 2nd half of FY2024/25. Between FY2025/26 and FY2028/29 (a period of 4 financial years), it has about 17.5% of borrowings due for refinancing year year, with the remaining 25% of borrowings due for refinancing only in FY2029/30 or later.

Distribution Payout to Unitholders

One of the things I like about Mapletree REITs is its quarterly distribution payout frequency, which gives me a more regular stream of income.

For the current quarter under review (i.e., Q2 FY2024/25), a distribution payout of 1.980 cents/unit was declared – a 11.6% decline compared to its payout of 2.24 cents/unit last year.

If you are a unitholder of MPACT, do take note of the following dates regarding its distribution payout:

Ex-Date: 01 November 2024
Record Date: 04 November 2024
Payout Date: 06 December 2024

CEO Ms Sharon Lim's Comments & Outlook (from the REIT's Press Release)

"While our Singapore portfolio continues to demonstrate resilience, we remain vigilant in addressing overseas challenges. We are exploring all avenues to mitigate headwinds, particularly in the Makuhari submarket of Chiba, Japan. Concurrently, we are focused on active asset management across our portfolio, including the ongoing enhancements at Basement 2 of VivoCity to future-proof it. The mall continues to be on track for long-term success.

In Greater China, near-term challenges persist, but the recent rate cut by the Fed and China's economic stimulus measures are positive steps for overall market sentiment. As we navigate the complex landscape, the Singapore portfolio, which forms the majority of MPACT's portfolio, continues to be our anchor of stability. We are committed to overcome hurdles while continuing to deliver value to our unitholders."

Closing Thoughts

In my opinion, it was largely a negative set of results reported by the commercial REIT.

To recap, its financial performances (particularly its gross revenue and net property income) saw a single-digit percentage decline due to the absence of contribution from Mapletree Anson which was divested, along with a drop in contributions from its overseas properties due to a lower occupancy and weaker Japanese Yen and Chinese Renminbi against the Singapore dollar.

Looking at its portfolio occupancy profile, no doubt most of its properties have an occupancy rate of above 90%, but the rental reversions of most of its overseas properties were at a negative percentage – with most of them recording a deterioration compared to the previous quarter; this is definitely going to further impact MPACT's financial performance in the coming quarters ahead.

The only positive can be seen in its debt profile – with its aggregate leverage at a healthy level of 38.4%, and percentage of borrowings hedged to fixed rates at 84%. Also, in terms of debt maturity, it is also well-spread out over the years.

As a unitholder of the REIT, I will continue to keep a close watch on the occupancy, as well as rental reversion of its overseas properties – where they contribute about 40% towards the REIT's revenue for 1H FY2024/25.

With that, I have come to the end of my review of Mapletree Pan Asia Commercial Trust's latest results for the 2nd quarter, as well as for the 1st half of FY2024/25. I hope you have found the contents presented in this post useful. However, do take note that all the opinions expressed above are purely mine, which I am sharing for educational purposes only. They do not represent any buy or sell calls for the REIT's units. You should always do your own due diligence before you make any investment decisions.

Related Documents

• Press Release
• Financial Results
• Presentation Slides

Disclaimer: At the time of writing, I am a unitholder of Mapletree Pan Asia Commercial Trust.

The post Mapletree Pan Asia Commercial Trust's Q2 and 1H FY2024/25 Results: What You Need to Know first appeared on The Singaporean Investor.