The Concerning Performance of Mapletree Pan-Asia Commercial Trust:- What Should I Do Moving Forward?

On 31st July 2023, Mapletree Pan-Asia Commercial Trust (MPACT) released their 1st Quarter FY23/24 earnings.  The performance is summarized below:

Year-on-year performance is not too meaningful in my opinion, as the performance a year ago was meant for Mapletree Commercial Trust (MCT), prior to the merger.  Quarter on quarter, performance is mixed.  Gross revenue and net property income both increased, but operating expenses and finance cost increased by a larger extent, dampening the amount available for distribution per unit, down 3.1% quarter-on-quarter, and down by more than 12% year-on-year.  This is definitely far from the bright prospects and the positive synergistic effects the management painted prior to the merger.

Although the results do not paint a rosy picture, there are little bright spots.  Performance of Mapletree Business City and Vivocity remains robust, and they are the main drivers that helped to support the overall performance of the REIT.  More importantly, their positive rental reversions will help to further boost their performance in the near term.  However, performance of properties in China and Hong Kong remains lackluster.  Their negative rental reversions highlights that their rental income will remain depressed in the near term.  This is definitely not good news, especially when news of slowing economy and low GDP numbers in China are snagging the headlines recently.  The only possible positive thought from here is that the negative rental reversion for Festival Walk is less negative compared to previous quarter, signaling an improvement in its operating conditions.

Overall, as a dividend investor, MPACT doesn't seem to be aligning with the rules.  From a fundamental perspective, the MPACT has evolved significantly from MCT, as MCT was 100% Singapore-focused, but for MPACT, local properties only account for slightly more than 50% of their portfolio.  Since the merger, the overseas properties have largely been a drag, and if not for the superb performance of local properties, the overall performance of MPACT would have been worse.  

However, as the performance of Festival Walk is slowly improving, I decided to give MPACT another year to prove itself, and let the numbers of upcoming quarters speak for the management.  As much as I will just hold on to my existing shares in MPACT, I will not inject new capital through dollar cost averaging into this REIT, and I will not reinvest its dividends into MPACT until the rental reversions are all positive, and the REIT starts to register distribution per unit (DPU) growth.  For now, I will divert the dividends to reinvest in MPACT's competitor, Capitaland Integrated Commercial Trust (CICT).  

In the latest news of potential bankruptcy warning by WeWork, CICT and MPACT, both of whom are landlords of WeWork, have yet to release any updates to inform investors of the potential impact of what is to come.  WeWork is said to occupy the entire building at 21 Collyer Quay and part of Funan under CICT, and also occupy Mapletree Anson under MPACT.  How badly the rental income for the upcoming quarters are going to be impacted remains to be seen, but I believe any negative impact will be temporary.  This event will unlike change my plans for now.

Is this the right move, or will I regret in future for not reinvesting in MPACT for it's possibly bright future as the management has painted prior the merger?  All these seems like a gamble for the unknown, and I prefer to just work with what I know for now.  I believe not selling my existing shares in MPACT is already my most comfortable move currently in the 'bet' towards the 'bright future' it may have, without any regrets.  Only time will tell whether I have made the right decision.  Keeping fingers crossed, Barista FIRE, here I come...!  


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