Broker: Maybank Research Pte Ltd
Date of Report: July 31, 2025

Mapletree Pan Asia Commercial Trust: Stability Amid Overseas Headwinds and Portfolio Optimization

Overview: Navigating Overseas Challenges, Anchored by Local Strength

Mapletree Pan Asia Commercial Trust (MPACT), a leading Singapore-listed commercial REIT, continues to demonstrate resilience despite notable overseas headwinds. The trust reported a first quarter distribution per unit (DPU) of SGD2.01 cents, reflecting a 3.8% year-on-year decline, as lower contributions from overseas assets and the impact of recent divestments overshadowed solid local performance and reduced borrowing costs. Still, MPACT retains a BUY rating, buoyed by a reasonable valuation of 6% DPU yield and 0.7x price-to-book (PB) ratio.

Key Highlights and Financial Performance

• 1QFY26 DPU: SGD2.01c, down 3.8% YoY
• Revenue: SGD218.6m, down 7.6% YoY
• Net Property Income (NPI): SGD165.9m, down 7.5% YoY
• Portfolio Occupancy: 89.3% (slightly down from 89.6%)
• Gearing: Stable at 37.9%
• All-in Debt Cost: Lower at 3.32%
• Proposed Japan Divestment: Two assets at c.SGD78.7m, exit NPI yield 4%
• Target Price Raised: SGD1.35 (+7%) on lower cost of equity

Singapore Assets Provide Core Stability

MPACT’s Singapore portfolio continues to serve as the foundation of stability, offsetting some of the volatility from its overseas operations:

• Same-store NPI Growth: Singapore assets rose 2.9% YoY, driven by a robust 6% growth at VivoCity.
• VivoCity: Remains a high performer, with tenant sales up 2.1% YoY, aided by voucher programs. Rent reversion for VivoCity was a significant +14.7%.
• Local Asset Occupancy: Remains high, with marginal declines primarily due to overseas vacancies.

Despite reduced borrowing expenses from asset divestments, the overall topline decline outpaced these savings, leading to the fall in DPU.

Overseas Headwinds: Challenges in China, Hong Kong, and Japan

The overseas portfolio continued to face adverse market conditions:

• Greater China: Occupancy and rent reversions remain weak, with Festival Walk (HK) rent reversion at -7.9% and tenant sales down 3.2% YoY.
• Japan: Ongoing frictional vacancies contributed to overall lower overseas NPI. The planned divestment of two Japan assets for c.SGD78.7m (0.5% of AUM) at slightly below book value is expected to further optimize the portfolio, albeit with an immaterial impact on DPU and NAV.
• South Korea (The Pinnacle Gangnam): Showed positive NPI momentum with a 14.3% increase QoQ.

Proactive Debt Reduction and Portfolio Optimization

MPACT’s proactive approach to capital management includes:

• Stable Gearing: 37.9% with ongoing efforts to optimize through selective divestments.
• Reduced Debt Cost: All-in financing cost decreased to 3.32% from 3.51%.
• AEI at VivoCity: Asset enhancement initiative (AEI) in the basement is on track for completion by end-2025, expected to support future income growth.

Revised Estimates and Outlook

MPACT has adjusted its forward guidance, factoring in:

• DPU Forecasts: Lowered by 1.0% (FY26) and 2.7% (FY27) due to weaker China performance and the Japan divestment.
• Target Price: Raised to SGD1.35 (from SGD1.30) based on a lower cost of equity assumption.
• Yield and Valuation: Remain attractive, with a projected DPU yield of 6% and a price/NAV ratio of 0.7x.

Table: Key Financial and Operating Metrics

Detailed Asset and Geographic Breakdown

• Asset Mix (Mar 2024): 52% Singapore, 26% Hong Kong, 8% Japan, 3% South Korea, with the remainder in Greater China.
• Sub-sector Exposure: Retail (44%), Office (35%), Business Park (21%).
• Major Singapore Assets: VivoCity, Mapletree Business City I & II, mTower, Bank of America HarbourFront.
• Top Shareholders: Temasek (33.9%), Schroders (8.0%), AIA (3.6%).

ESG and Governance Initiatives

MPACT demonstrates strong commitment to sustainability and governance:

• Environmental: All properties maintain at least BCA Green Mark certification; VivoCity has achieved Platinum status. Energy and water intensity targets set to improve by up to 1% annually.
• Green Financing: Secured SGD670m green loan for MBC II acquisition, guided by Green Loan Principles.
• Governance: High board independence (7 out of 12 are independent); externally managed by Mapletree Investments, a Temasek subsidiary. Management’s fee structure is aligned with DPU growth.
• Social Initiatives: Regular employee workshops at VivoCity and active use of malls for social causes, such as Hair for Hope. Strong gender diversity, with 54% female employees and 72% in management.

Investment Risks and Swing Factors

Key risks to consider:

• Non-renewal of anchor leases in China, Japan, and Singapore’s MBC.
• Weaker rent reversions in Hong Kong and China; slower retail sales in Singapore.
• Potential for higher interest costs impacting earnings and valuations.
• Concentration of tech tenants (notably Google at 14.4% of gross rental income); hybrid work trends could affect business park demand.

Potential swing factors include:

• Faster-than-expected leasing recovery in retail, office, and business park segments.
• Stronger-than-anticipated rental reversions and accretive acquisitions.
• Prolonged economic slowdown, rising interest rates, or major lease terminations could pose downside risks.

Conclusion: BUY Maintained on Value and Optimization

Despite current overseas headwinds and some portfolio challenges, MPACT remains a compelling investment case thanks to its stable Singapore base, proactive portfolio management, and robust ESG credentials. The trust’s attractive valuation, high yield, and disciplined capital allocation underpin its BUY rating and upgraded target price of SGD1.35. Investors seeking a resilient, income-generating REIT with pan-Asian exposure should continue to watch MPACT closely for further asset optimization and market recovery opportunities.