Surprisingly, I managed to get all my rights and excess units subscription for Keppel DC REIT ("KDC") preferential rights offering, that is, 5,000 units @ S$2.03 per unit. As per my previous post, I think that KDC is overvalued, so I decided to keep only 1,000 units of the allocated KDC units while selling 4,000 units from the rights allotment to lock in a tiny profit to the market price of S$2.10 per unit and prepare for redeployment in view of the sharp correction in the prices of many blue-chip REITs.
1. Reassessment of Mapletree Pan Asia Commercial Trust ("MPACT")
On the crown jewel front, Vivocity shopping mall continued to shine brightly in terms of its financial performance for the 1st half of FY2024/25. Its other local jewel of Mapletree Business City seems to have lost some of its luster with commited occupancy dropping from 96.8% on 30 September 2023 to 92.5% as at 30 September 2024- nonetheless, its quarter on quarter occupancy has held on well.
MPACT's Hong Kong segment also seems to have finally some signs of optimism sprouting. I think that the fear of all Hong Kong folks going over to Shenzhen to shop and dine via the high speed train and thus marking the end of Hong Kong shopping malls, may have been over-exaggerated. Festival Walk is a major shopping mall in Kowloon and not strictly just catering for tourist. It remains a popular hangout place for the Hong Kong local folks as per my chit chatting with Hong Kong colleagues.
1.1 Hong Kong star property- Festival Walk finally seeing lights at the end of the tunnel with rental stabilising.
The negative rental reversion has slowed down for Festival Walk albeit my Hong Kong colleagues still feeling gloomy with their economic outlook. 6 mths ago, the reported rental reversion is a miserable -8.7% while the recent announcement is a tad lower -6.1%.
There are also ongoing efforts to curate the right retail mix to cater to local's demand for experiential and lifestyle concepts.
1.2 The Accretive Divestment of Non-Core Asset Mapletree Anson on 31 July 2024
The successful divestment of Mapletree Anson at a fair value gain while MPACT is trading at 29% off its NTA thus managed to lower its aggregate leverage to 38.4% (below 40% level) and boost unit-holders return.
1.3 Sharp Drop in market price back to S$1.20 per unit as at 20 December 2024 range from S$1.53 per unit on 3rd October 2024.
MPACT has corrected by approximately 20% in less than 3 months. This is despite the continued interest rate reduction by the US Federal Reserve that was just announced. It is also giving out an attractive distribution yield of 6.5% per annum based on the recent distribution.
Parting thoughts
After selling off my KDC excess stocks, I have snapped up 5,000 units of MPACT last week @ S$1.21 per unit in view of the significant price correction. Come to year end, I intend to invest another S$10K to either MPACT or Link REIT as I think that Hong Kong will eventually rise and shine brightly again given the latest developments- Hong Kong's economy is set on a recovery path with five consecutive quarters of positive GDP growth.
Woah u are showing confidence in MPACT! What about the problems arising with it's Jap properties? Now I'm just holding on, and no longer adding on to the REITs... It's giving me too much headache, haha
ReplyDeleteBFIRE
Hi Bro,
Deletehaha...more optimism given that the US Fed continued to cut rates recently and also given indication that interest rate no longer exploding upwards. I thought that the China, Japan and Korean properties problems made up a lesser amount of the total performance of MPACT.
Also, I would think that MPACT should be lining up corporate actions of removing these underperfomring properties eventually from their portfolio given that its NTA of S$1.70 per unit is way above its current tragic market price of S$1.20 per unit which means that they can afford to even offload the properties at another 30% discount to fair valuation.
Ultimately, Mapletree Investment as Sponsor took up a lot of unsubscribed rights issue during the acquistion of these properties from Mapletree North Asia Commercial Trust days at S$2.00 per unit back in July 2022. It will be in their management team's interest to revive the financial & operational performance to re-deploy the capital towards better investment properties.
Well, I sincerely do hope so, but the 10year yield continue to create downward pressure on MPACT.
DeleteI do hope for the day the turnaround happens, just that I don't know how long that wait is going to be...
BFIRE