Mapletree Commercial to outperform on MNACT merger bid: Analyst

Mapletree Commercial Trust's Mapletree Business City property in Singapore. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree Commercial TrustMapletree Commercial Trust's Mapletree Business City property in Singapore. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree Commercial Trust

Mapletree Commercial Trust‘s units should see “considerable” buying in May if its merger with Mapletree North Asia Commercial Trust, known as MNACT and MAGIC, is approved by unitholders at extraordinary general meetings (EGMs) scheduled for April, Quiddity Advisors‘ analyst/Insight Provider Travis Lundy, who publishes on Smartkarma, said in a note Sunday.

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.

Lundy said the deal will mean a markup for MCT’s units.

“The merger ratio provides an uplift to already strong recent relative performance for MAGIC holders, and strong pro-forma NAV [net asset value] and DPU [distribution per unit] accretion for MCT holders. And it means a lot of flow. Lots and lots of flow,” Lundy said in the note.

“The deal involves a substantial upweight for MCT in the FTSE EPRA Nareit Global Indices, the MSCI indices, and FTSE Straits Times Index. All told, there is about 25-33 days of ADV [average daily volume] of MCT to buy, which will likely be spread across MCT and MAGIC,” Lundy said.

“One should expect that if this passes unitholder muster in April, there will be considerable buying in May by passive funds,” he said. “Both active and passive buying should lead to outperformance of MCT vs a basket of S-REIT Comps.”