Mapletree Pan Asia Commercial Trust: Better post-Mapletree Anson divestment?

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Mapletree Pan Asia Commercial Trust (SGX: N2IU), better known as MPACT, is on the news. It is in the process of divesting Mapletree Anson. It will be for a consideration of S$ 775 million, a premium of S$ 10million on top of independent valuation.

MPACT Mapletree Anson divestment

Needless to say, the market took it very positively.

Source: Google Finance

The pros and selling points of the divestments

Since the management already has a deck on the rationales, I will not repeat them, but rather add my analysis. You can find the deck at the link below.

MPACT Mapletree Anson divestment
Source: Proposed Divestment Mapletree Anson

Point 1 is straightforward. MPACT’s gearing ratio has increased post-MNACT merger. In its latest FY 2024, the gearing ratio soared past 40%.

MPACT Gearing ratio
Source: Annual Report tabulation

Most of the proceeds will be to pare down debt levels. This will improve the leverage ratio, ICR and debt headroom.

MPACT Mapletree Anson divestment

This will help deliver a DPU accretion of 1.5% pro forma basis. If fewer proceeds are used for paring down debt, more can be distributed as divestment gains in the next payout. But that could also be at the mercy of higher interest expense.

How much actual divestment proceeds end up as a one-off extra distribution is still a question. I wouldn’t bet too much on that. I would rather the full amount be used to pay down debt and to lower the leverage.

And with the divestment done at a low cap rate and 10% above independent valuation, there is nothing much to nitpick.

Mapletree Anson’s historical performance and contributions

Mapletree Anson is no crown jewel when compared to VivoCity and MBC. It is at most mediocre, especially for a property situated in the CBD area.

Source: Annual Report tabulation

Its total net property income of S$ 29.3 million per unit will be S$ 0.0055. So, the contribution loss is minuscule. NAV per unit will also stay flat.

Would the need for Mapletree Anson’s divestment arise if the MNACT merger had not taken place?

I always like to see REIT acquisitions and divestments on a longer timeline, since it provides me with a time frame to gauge REIT management’s performances and rationales.

MPACT’s current balance sheet, as previously reiterated, is largely contributed by the MNACT merger. Although MPACT is not the only REIT divesting non-key properties to beef up its balance sheet, I wonder if it would be divested in an alternate universe where MNACT did not merge with MCT.

Mapletree Anson’s past 10 years’ performances were nothing to shout out for. But back then there weren’t any reasons to divest it, and there were periods when the divestment cap rates could have been higher.

I think, and don’t quote me, Mapletree Anson became the collateral for the MNACT merger.

MyKayaPlus verdict

Overall, I am slightly positive about the divestment as it will help in deleveraging and improving other key REIT metrics of MPACT.

My only concern is that Gateway Plaza, Sandhill Plaza and the Japan properties are still seeing fair-value losses. It shouldn’t move the needle too much, but it would still be a drag to MPACT overall. The rationale of the merger that MCT + MNACT is better together is still not bearing fruits from the promise back then.

Source: MPACT Investor Presentation 3 May 2024

I am pretty sure Festival Walk could be the 3rd crown jewel in the making, but there is still some uncertainty in the Hong Kong market. And with interest rates remaining in the peaking state, it is a long-term waiting game for MPACT to be fairly revalued per unit basis.

p.s. This is just one of the many free examples that how I analyze stocks and REITs for investment opportunities and build my case. On top of that, I utilize a foolproof blueprint to screen out good dividend stocks and REITs. If you are interested in learning how I do it, I humbly invite you to join my club!

DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities,
or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities, or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
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