Mapletree Pan Asia Commercial Trust AGM and 2023Q1 Results

MPACT had their AGM on last Friday and released their 2023Q1 results this evening. Since they are just separated by the weekend, I thought I will just write about them together.

AGM Brief

This time round, I did not make the trip to MBC as I had another commitment in the late afternoon. I watched the broadcast and I liked it as the video and audio quality was good.

First thing that caught my attention was the large board which is due to the merger with MNACT. Chairman commented that the REIT is now larger, so they need more experts to provided their views in various aspects of the business. I think it was the company secretary who assured the shareholders that there is no increase in directors’ fees. The same pie is just shared by more people.

Personally I would like to see them trim it down a bit. As the saying goes, too many cooks spoil the broth. So having more directors do not necessary translate to better advice.

I am not delving into the details. The presentation slides and response to substantial questions prior the AGM can be found at their website. Quite a number of questions raised during the AGM are similar in nature to those found in the document.

Yes, there were a number of questions on the merger and overseas properties. As much as I would prefer the REIT to just stay local, the merger is a done deal. So I tell myself that it’s time to look ahead and deliberate if MPACT remains as a good investment to have in my portfolio.

The management is competent but is now taking on a more difficult challenge with the expansion into overseas properties from the merger. Given the tough macro conditions, I would say that they have done alright in the first year with the larger entity.

This being the first time I heard the presentation from CEO Sharon and Chairman Samuel, I do think they would form a good partnership. My perception is Sharon is dynamic and you can sense her feelings – very excited when she shared how they have value added to Vivocity and less energetic when talking about the overseas properties. Probably not because she doesn’t like the overseas properties but it has not turn out as well as she has wanted? The feeling is like a high performer who is not satisfied with a 70% score as she is aiming for 90%.

Samuel just joined MPACT this year, has a calmer demeanour. Initially, I did not like how he responded to the various questions as I felt his responses were non-committal. However, his later responses felt more measured. It also took me some time before I realised that he was the previous CEO of OCBC! Well, I wasn’t that interested in banks when he was helming OCBC then.

In any case, his presence at MPACT does add weight to the team and his experience should be useful. A random though that jumps out from my mind is that this role might fit him even better than what he did previously.

2023Q1 Results

Now let see how things are for the first quarter. Like I mentioned, I am not going to harp on the merger anymore. I will take a look at MPACT as it is now and share my opinions on its performance.

What I like

In general, higher or stable occupancy with the exception of China properties. Also positive rental reversion with the exception of Festive Walk and China properties. Also, the negative rental reversion for Festive Walk is getting smaller. So after renewing the final batch of shops with rents locked in pre-Covid, things should look brighter from next year onwards.

Shopper traffic and tenant sales definitely look bright on both malls. So that will aid in rental reversion going forward.

What I don’t quite like

The low occupancy of China properties. I was once a shareholder of MNACT but decided to divest it after management guided then weaker office demand and occupancy of its two properties. And that was pre-Covid. So even with the re-opening now, I do not have much confidence that they can do well.

Besides that, it’s the increase in borrowing cost. It has gone up by 0.5% over a quarter and if this is to continue, together with the higher operation cost, then the impact on DPU will continued be felt.

Overall rating

It’s hard not to feel disappointed when DPU dropped by 12.8% to 2.18 cents and this is even lower than 2022Q4’s DPU of 2.25 cents. However, there are bright spots which point to a likely improved results in the future. Probably not this year but from FY2024.

As such, I decided to award it with 3 stars. Given its short term outlook is dimmer and there are still uncertainties from its China properties, I am likely to reduce my exposure in the near term.

Update on 1 August

Sold 40% of my stake to bring it to less than 3% of my portfolio.

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