Mapletree Commercial may see waning investor interest on MNACT deal: Maybank

Singapore’s VivoCity mall, owned by Mapletree Commercial TrustSingapore’s VivoCity mall, owned by Mapletree Commercial Trust Note: Photo taken pre-Covid

Mapletree Commercial Trust (MCT) may see waning investor interest after its merger bid for Mapletree North Asia Commercial Trust as it loses its Singapore pure-play status, Maybank said in a note Monday.

“MCT has executed well to achieve a strong following as a Singapore pureplay, but its Singapore NPI [net property income] is set to fall to c.53 percent with the addition of four overseas markets post-merger. This dilution may be viewed negatively by investors,” Maybank said.

“With likely risk of investor following waning due to a diluted Singapore pure-play thesis, execution will remain key, and management of the new REIT will need to prove it can deliver on an expanded growth mandate,” the investment bank added.

On Friday, the two trusts announced a plan to merge into Mapletree Pan-Asia Commercial Trust in a S$4.22 billion deal, creating one of Asia’s top-10 largest REITs with assets across Singapore, South Korea, China, Hong Kong and Japan.

Under the deal, which will be a trust scheme of arrangement, unitholders of MNACT will receive S$1.1949 for each unit, to be paid by either 0.5963 new MCT unit issued at S$2.0039, or a combination of 0.5009 MCT unit and S$0.1912 in cash, the trusts said Friday.

The pricing is a 7.6 percent premium to MNACT’s unit price of S$1.11 on 27 December, and a 14.4 percent premium to its one-month volume weighted average price (VWAP) of S$1.0449, the trusts said.

Maybank added, however, that the deal has strategic merits from increased diversification of assets under management (AUM), stronger growth in distribution per unit (DPU) and a potentially lower cost of capital.

“We see benefits from an enlarged AUM, as MCT has lagged peers in driving inorganic growth due to its Singapore-focused investment mandate and limited sponsor pipeline,” Maybank said. “Diversification across core Asian markets should add stability and reduce concentration risk by assets (VivoCity) and tenancies.”

Maybank rates Mapletree Commercial Trust at Buy with a S$2.35 price target.

Units of Mapletree Commercial Trust were down 4 percent at S$1.92 at 1:47 p.m. SGT.