MPACT’s Target Price Slashed! Discover Why Festival Walk Mall Is Struggling

CGS International has cut the target price for Mapletree Pan Asia Commercial Trust (MPACT) to $1.58 from $1.59. The main reason? Festival Walk mall in Hong Kong isn’t recovering as quickly as expected.

Key Points:

• Why the Cut?: Sales in Hong Kong dropped by 6.1% year-on-year as of May 2024, hitting sectors like food, beverages, and clothing hard.

• New Forecasts: Analysts now expect Hong Kong’s retail growth to decrease by 6.0% in FY2024 instead of growing by 3.0%.

• Local Shopping Trends: More Hong Kong residents are shopping in Shenzhen on weekends, affecting local sales.

What This Means:

• Challenges Ahead: Festival Walk could see more shifts in local spending with fewer tourists.

• Lease Renewals: About 31.7% of the mall’s leases are up for renewal in the first quarter of FY2025. The supermarket tenant TaSTe, which accounts for around 27% of expiries, just had its lease expire in June.

Ups and Downs:

• Positive: High occupancy at Festival Walk (99.7%) supports negotiations and rents.

• Negative: Some leases are still at pre-Covid rent levels, potentially leading to negative rent revisions.

Bottom Line:

MPACT’s share price has already fallen by 20% year-to-date, but with a DPU yield of 7.1%, it’s still considered attractive. The slower recovery of Festival Walk has been priced in, but potential catalysts include tenant remixing and capital recycling.

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