MPACT Earnings: Cutting Fair Value by 5% on Lower Rental Growth Assumption in Hong Kong and China

We lowered our fair value estimate of Mapletree Pan Asia Commercial Trust, or MPACT, to SGD 1.74 from SGD 1.82 after second-quarter fiscal 2024 (ending March) results came in slightly below our expectations. The miss is due to currency headwinds and lower-than-expected contribution from Festival Walk. We trimmed our rental growth assumption on Festival Walk and its China office portfolio, given the slower-than-expected retail recovery in Hong Kong and the weaker office market outlook in China. As a result, our distribution per unit forecasts for fiscal 2024, 2025, and 2026 are reduced by 1.5%, 3.6%, and 4.6%, respectively. Based on the last closing price of SGD 1.30, we think the units are undervalued and trade at an attractive fiscal 2024 dividend yield of 6.7%.