Broker: OCBC Investment Research
Date of Report: 31 July 2025

Mapletree Pan Asia Commercial Trust: Navigating Headwinds and Unlocking Value Across Asia

Introduction: A Leading Pan-Asian REIT with Resilient Singapore Core

Mapletree Pan Asia Commercial Trust (MPACT), a prominent Singapore-listed real estate investment trust (REIT), offers investors diversified exposure to retail, office, and business park assets across key Asian markets. Backed by a strong management team and the reputable Temasek Holdings as its top shareholder, MPACT continues to shine domestically at flagship assets like VivoCity, even as it faces challenges in overseas markets, particularly Greater China.

1QFY26 Highlights: Resilient Performance Amid Regional Pressures

• Distribution per unit (DPU) for 1QFY26 declined by 3.8% year-on-year to 2.01 Singapore cents, aligning with expectations.
• Gross revenue dipped 7.6% YoY to SGD218.6 million and net property income (NPI) fell 7.5% YoY to SGD166.0 million. This was mainly due to weaker contributions from overseas assets and the absence of income from the divested Mapletree Anson, partly offset by strong VivoCity performance and lower utility expenses.
• Aggregate leverage ratio improved to 37.9% from 40.5% a year earlier, aided by asset divestments. Average cost of debt also improved, dropping to 3.32% from 3.51% in the prior quarter.
• Portfolio committed occupancy edged down 0.3 percentage points quarter-on-quarter to 89.3%.

Investment Thesis: Strategic Diversification with a Strong Singapore Anchor

MPACT’s portfolio spans Singapore, Hong Kong, China, Japan, and South Korea, offering unique pan-Asian exposure. Its Singapore holdings, particularly VivoCity and Mapletree Business City (MBC), remain best-in-class assets. However, the trust faces ongoing challenges in China and Hong Kong, where negative rental reversions and retail sales leakage from Hong Kong to Shenzhen continue to weigh on performance.

Financial Performance and Outlook

Portfolio Metrics: Occupancy, Rental Reversions, and Segment Performance

• Portfolio Occupancy: 89.3% (-0.3 ppt QoQ), with the main drag from Japan and “Other Singapore Properties”.
• Rental Reversions: Portfolio-wide rental reversions at +1.4%, with notable outperformance at VivoCity (+14.7%) and The Pinnacle Gangnam (+7.9%). However, Festival Walk (Hong Kong), China properties, and MBC saw negative reversions of -19.4%, -7.9%, and -2.7% respectively.
• Management Strategy: The trust is prioritizing occupancy, showing flexibility on rents to secure renewals. Management expects rental softness in China to persist for the next two years, aiming to limit Festival Walk’s negative reversions to single digits.
• Cost of Debt: Weighted average all-in cost improved to 3.32%. MPACT anticipates a further 10bps decline by end-FY26.
• Divestments: Proceeds from asset sales, such as Mapletree Anson and two office buildings in Japan (~SGD 78.7m), have supported balance sheet strength.

ESG and Governance: Enhanced Ratings and Sustainability Commitment

MPACT saw its ESG rating upgraded in December 2024, credited to strengthened corporate governance and a highly independent board. The trust outperforms sector peers in green building certifications and offers green lease agreements to bolster portfolio sustainability. Notably, MPACT earned a four-star, 86-point rating in the 2024 GRESB Real Estate Assessment.

Valuation and Peer Comparison

Company Overview: Portfolio Breakdown and Strategic Focus

• MPACT’s 17 commercial properties span five Asian gateway markets: four in Singapore, one in Hong Kong, two in China, nine in Japan, and one in South Korea.
• Total net lettable area: 11.2 million square feet
• Portfolio valuation: SGD 16.0 billion (as of 31 March 2025)

FY25 Gross Revenue Breakdown by Geography:

• Singapore: 61.1%
• Hong Kong: 22.0%
• China: 9.1%
• Japan: 7.8%
• Korea: 0.0%

FY25 Net Property Income Breakdown by Geography:

• Singapore: 61.8%
• Hong Kong: 21.8%
• China: 10.0%
• Japan: 6.5%
• Korea: 0.0%

Operational Trends: Occupancy and DPU History

• Occupancy has trended lower, reaching 89.6% in FY2025 from 98.1% in FY2019.
• Distribution per unit has seen fluctuations, with FY2025 DPU at 8.02 S cents, down from a high of 9.61 S cents in FY2023.

Financial Summary: Income Statement and Key Ratios

Opportunities and Risks

Potential Catalysts:

• Higher-than-expected uplift in asset valuations.
• DPU-accretive acquisitions that enhance portfolio quality.
• Stronger-than-anticipated footfall and tenant sales at VivoCity and Festival Walk.

Risks:

• Macroeconomic slowdown dampening business and consumer sentiment.
• Poorly performing acquisitions.
• Non-renewal of leases by key tenants.

Conclusion: Valuation, Recommendation, and Investment Horizon

MPACT remains a resilient option for investors seeking diversified Asian commercial property exposure, anchored by robust Singapore assets yet facing headwinds in China and Hong Kong. The trust’s prudent balance sheet management, focus on sustainability, and attractive yield provide a compelling case, though continued vigilance on overseas performance is warranted. The fair value estimate stands at SGD1.45, with an unchanged Buy rating reflecting an anticipated total return (including dividends) exceeding 10% over a 12-month horizon.
Report Published by OCBC Investment Research Private Limited