Bought back Mapletree Pan Asia Commercial Trust (MPACT) sold last August

Back in August last year, I sold a portion of my MPACT holding due to its dimmer short term outlook.

Based on its latest 4Q2023/24 report, there isn’t much difference in the fundamentals. MPACT’s Singapore properties continue to shine, while the overseas properties continue to post a challenge.

A bright spot is Festive Walk’s rental revision has reduced to a single digit. In the webcast, management has shared that excluding the pre-covid leases, Festive Walk would have a positive single digit rental reversion.

Headwind for the upcoming financial year

There will continue to be some headwind in the coming year.

  • Borrowing cost is expected to increase as weighted average cost of debt will increase from the current 3.35%.
  • China properties will continue to face challenges in both occupancy and rental reversion.
  • The need to replace main tenants for properties in Chiba, Japan. As seen from image, the two tenants take up 3.5% of gross rental income (GRI).

I did not read/hear much on the replacement of NTT Urban Development lease which already expired. As for the SIIMakuhariBuilding, it is undergoing conversion into a multi tenanted building for leasing when Seiko Instruments Inc.’s lease expires on 30 June 2024.

Why am I buying now?

I think that Mr Market is over pessimistic about MPACT’s prospect and is currently offering a good price.

I did some rough computation (read inaccurate) of possible impact from increasing interest rate and lower occupancy of its Chiba properties based on past year data.

Assuming interest rate for borrowing increased to 4.0%, then borrowing cost could increase by about $6.5 million. And if the space from the two main tenants are not fill up, then GRI will decrease by about $8 million.

If there is no other changes (which is unlikely), then quarterly distributable income will drop to $106 mil and quarterly distributable income will be around $0.02.

So a full year DPU of $0.08 will provide a good yield of around 6.5% at the current price!

The strength from Singapore properties and green shoot from Festive Walk means they should be able to mitigate the negativity and quarterly DPU is unlikely to drop to $0.02.

This makes it even a more compelling buy at the current price.

You can listen to the webcast of the results briefing if you would like to have more details.

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