MLP's earnings call for the second quarter of the financial year ending March 2025 revealed a mixed financial performance with declines in gross revenue and net property income, alongside a drop in distribution per unit. The company's portfolio occupancy remained solid at 96%, but faced headwinds, particularly in the China market. Despite these challenges, MLP completed strategic property divestments and advanced its environmental, social, and governance (ESG) initiatives, with an emphasis on increasing green-certified assets and solar capacity.
Key Takeaways
- Gross revenue declined by 1.8% year-on-year to S$183.3 million.
- Net Property Income (NPI) fell by 2.1% to S$158.6 million.
- Distribution Per Unit (DPU) dropped 10.6% to S$2.027.
- Portfolio occupancy stable at 96%, with average rental reversion of -0.6%.
- China portfolio saw a negative rental reversion of 12.2%.
- Aggregate leverage increased to 40.2%.
- Property divestments in Singapore and Malaysia totaled approximately S$50 million.
- Issued S$180 million of perpetual securities at a lower interest rate to redeem existing securities.
- For the first half of FY24-25, gross revenue and DPU were down 7.5% and 9.8%, respectively.
- MLP targets carbon neutrality by 2030 and aims to increase solar capacity and green-certified assets.
- S$395 million in new green loans secured year-to-date, totaling S$966 million.
- Negotiations for additional asset divestment in China are ongoing.
Company Outlook
- MLP is cautiously optimistic about China’s market recovery by late 2026.
- Plans to leverage its diversified portfolio to navigate macroeconomic headwinds.
- Expects to capitalize on rental rebounds when market conditions improve.
- No further equity fundraising planned for the current financial year.
Bearish Highlights
- Negative rental reversion in China portfolio, primarily due to challenges in Tier-1 cities.
- Net asset value (NAV) per unit dropped to 1.33.
- Rental reversion in Hong Kong softened to over 2%.
Bullish Highlights
- High portfolio occupancy rate, outperforming peers in China with 93% occupancy.
- Stable interest coverage ratio maintained at 3.5 times.
- Positive rental reversion excluding China at 3.6%.
Misses
- Absence of revenue from divested properties impacted overall financial performance.
- Rental reversions expected to stabilize, but dependent on consumer sentiment and government interventions.
Q&A Highlights
- Management confirmed no onshore loans for Chinese assets, with plans to convert some borrowings to renminbi.
- Interest rates for Singapore dollars have decreased, with benefits expected to materialize gradually.
- Rental collections remain stable, with arrears under 2%.
MLP's earnings call reflected the company's resilience in the face of market fluctuations and its commitment to sustainability and strategic financial management. While the China market poses challenges with negative rental reversions, MLP's diversified portfolio and proactive capital management provide a buffer against these headwinds. The company's focus on ESG goals, such as increasing solar capacity and green-certified assets, align with broader industry trends and may offer a competitive advantage in the long term. As MLP navigates the changing landscape, it remains optimistic about market stabilization and future growth potential.
Full transcript - None (MAPGF) Q2 2025:
Yuen May: Hi, good morning. This is Yuen May here. Welcome to MLP's Second Quarter Results for the Financial Year ending March 2025. I'll now hand over the session to Charmaine, who will kick off the presentation.
Charmaine Lum: Hi, good morning everyone. We'll quickly go through the key highlights for the quarter before going into details of the financial results. Key highlights. Okay, so for the quarter, our gross revenue is 1.8% lower year-on-year at S$183.3 million. NPI is 2.1% lower year-on-year at S$158.6 million. And DPU is 10.6% lower, S$2.027. Portfolio occupancy remains stable at 96% with an average rental reversion of a negative 0.6% mainly due to our China portfolio. Excluding the China portfolio, our rental reversion is a positive 3.6%. WALE remains stable at [technical difficulty]. Aggregate leverage at 40.2%, higher than 39.6% against last quarter mainly because of the strengthening of the JPY as well as lower fair value on our financial derivatives. Our debt hedged has a fixed rate at 84% that means debt maturity of 3.6 years and income for the next 12 months 77% has been hedged into Sing dollar or is divided into Sing dollar. We have three properties in Malaysia where we announced divestment and spending contract share. A total of about S$50 million and what we completed during the quarter would be one property in Singapore and one property in Malaysia. We also proactively issued $180 million of perps at 4.3% and this is with the intention of redeeming the S$180 million which is at 5.2% at the end of September. So the S$180 million at 4.3% was issued at the end of August, while the redemption was at the end of September. You would notice in our financial results that there is a one-month overlap this resulted in the distribution of perps to entire quarter-on-quarter. But in the meantime, I mean, between that one-month overlap, we had achieved some relief of proceeds to par down a loans of similar interest rates. Moving on to 2Q versus 2Q one-year results, gross revenue was lower, mainly due to the rule of constitution from China, absence of revenue contribution from divested properties as well as currency weakness. And this is mitigated by stronger performance in the rest of our country. As well as contributions from acquisitions completed at the end of last financial year and the beginning of this financial year. On a constant currency basis, gross revenue would be flat and NPI would have declined by 0.3%. Borrowing costs increased mainly due to higher average interest rates on our existing debt where we replaced our expiring or expired IRFs at higher rates. Incremental borrowing, to fund 1Q FY24 and 4Q FY23 results and then the increase is actually partly mitigated with loan repayments of proceeds. So out of the 8.2% increase, which is about S$3 million, about S$2.3 million is due to incremental borrowings to fund the acquisitions. While the remaining is actually whatever increase in our IRFs is actually offset by interest savings on the loan repayments and proceeds on divestment as well as our proactive capital management. And accordingly, our NPI is 8% lower, S$109 million versus S$118 million. Translating to a DPU of S$2.02, 10.6% lower than S$2.268. Excluding the DG of S$6.1 million in this quarter and DG of S$8.8 million in 2Q last year, our adjusted PI would have been 7.2% lower. And the adjusted DPU excluding the effects of divestment gain would have been S$9.07 versus S$2.091 last year. For the one-half result versus one-half last year, the reasons behind the gross revenue and end-time disbursements are largely the same that's what I have mentioned earlier. Borrowing cost is also similar trending as what I mentioned 2Q versus 2Q last year. Amount distributable to unitholders is 7.5% lower than last year translating to a DPU which is 9.8% lower than last year, S$4.095 this first half versus S$4.539 the first half of last year. Excluding DG, our first half DPU would have been 7.9% lower, S$3.861 this first half of FY24-25 versus S$4.191 one-half last year. Quarter-on-quarter, our gross revenue is 0.9% higher, 2Q versus 1Q. This is mainly due to higher contribution from our same store assets in Singapore and Australia and full contribution from the acquisitions made in 1Q this year, partly offset by lower contributions from China as a currency witness. The increase in gross revenue is mainly due to the acquisitions made last quarter. Otherwise, whatever shortfall or lower contribution by China would have been offset by the same store performance in the other markets. NPI is 1.2% higher accordingly. Borrowing cost increased by about S$1.4 million, mainly due to incremental borrowings to fund 1Q acquisitions. Otherwise, whatever higher interest we have in terms of IRFs replacement is offset by savings from the repairing down of loans with divestment proceeds. DPU is 2% lower, S$2.07 versus S$2.058. Excluding DG, it's S$1.907 versus S$1.954, 2.4% lower, quarter-on-quarter. Moving on to the balance sheet and capital management ratios, NAV is at S$1.33 versus S$1.37, mainly due to two key reasons. One is translation losses, and the other would be lower fair value on our financial diversions because I think at the end of September, because of the interest rate movement, I think generally all our IRXs [ph] are of lesser fair value as compared to 30 June last 2024. Gearing peaked up to 40.2%, 0.6% higher than 39.6%, mainly due to the strengthening of the JPY debt, as well as the lower fair value on our financial diversions, which decreased the total asset base. Our debt duration remains at about 3.6 years. Interest cover is 3.5 times, and I think I'm glad to share that we have managed to keep our interest rate stable at 2.7% for the third quarter already. I think moving on to the debt maturity profile, I think our debt duration remains healthy at 3.6 years. We have more than sufficient credit facilities of S$987 million to refinance whatever is coming due for the rest of this financial year, as well as next financial year. And moving on to our hedging strategies, at the end of the quarter, our total debt that has been hedged into fixed rate is 84%. Out of the remaining 16%, we only have unhedged portion in JPY and Sing Dollar, JPY because of the low interest rate environment, and then Sing Dollar because we needed the flexibility to par down loans with our diversion proceeds. And similarly, for FX, 77% of our VI for the next 12 months has been hedged towards VI and Sing Dollar. I think I will now hand the mic over to James to walk you on the portfolio.
James Sung: Good morning, everyone. So, the portfolio update on this slide, it shows that from last quarter 2Q, our portfolio split by developed markets and developing markets, 17% and 20% remains similar, by AUM and South Korean banks. In terms of portfolio accuracy, it improves slightly it continues to remain 96.0%, since you may need to factor in more space in all these countries, like Vietnam, South Korea, and Hong Kong. So, overall, the portfolio accuracy remains pretty robust and stable. In terms of rental reversions, we registered an effective 0.6% drop in the overall portfolio rental reversions. This is only due to China's negative earnings and negative reversions of 12.2%. Overall, the portfolio was 3.6% up, if we exclude China as an example. So, from the top, you can see that Singapore's resolution is pretty healthy and strong. It may lead to the robust demand for Padi warehouses. And Japan is flat, Hong Kong is 1.2%, South Korea is 1.2%, Malaysia is 2.9%, and Vietnam, we had a 4.1% and Singapore, India. In terms of lease expiry, we managed to reach it as of the 30th of September. Almost half of the lease expiry is due for a different year. It may only be 3.7% due for the second half of this year. So, this is commonly due from China and from Korea. For top 10 tenants, this is a shared lease value table. What's important is the CWT. We managed to cut off the concentration rates from 4% to 12.7% as of the first half of this year. This is mainly due to the conversion of some of the other leases to MTB property. So, it's tied directly with the 10 underlying tenants. In terms of portfolio rejuvenation, we announced earlier today three acquisitions. There are now three, two in Vietnam and one in China. And these are in the growing markets. I think you need access to be able to take over. These are some of the ongoing initiatives that we are doing in Malaysia and Singapore. For Singapore's case, this project is now due for completion in the middle of June. We also have expected divestments. So far, we have announced and completed eight divestments in our portfolio. Five in Malaysia, two in Singapore and one in China. So, this enables us to be able to be deployed to the higher region and other assets in our portfolio. That's all for my updates.
Yuen May: Okay. I'll quickly give you a quick update on our ESG journey. And you recall we are committed, MLP is committed to achieve carbon neutrality for Scope 1 and 2 emissions by 2030. And this is, of course, in line with the paper tree group's longer term target of net zero by 2050. So, growing our solar capacity as well as green building certification is one of the two of the key focus areas. Please to update that as of September, our solar capacity, self-funded one, has already grown now to 44.8 megawatt peak, which puts us well on track to achieve this year's target of 45 megawatt peak. And as well as, of course, we still are driving our effort to reach the 2030 target of 100 megawatt peak. Then for green building, we have also grown it to about 45% as of now. And this will be in line with our, and this year's target of 50% of our portfolio by GFA to be green certified. Of course, our longer term target is to grow it to 80% by the year 2030. For green financing, we continue to make good progress and we procure about S$395 million of new green load and private facilities year-to-date. Currently, we total green or sustainability loan amount to about S$966 million. Then for green lease, we're also pleased to update that since last year where we ended at about 22% of our portfolio, we'll have, you know, the leases are all incorporated green lease provision. That statistic has now grown to 40% as of September. Okay, now I'll hand over the session to Jean to conclude.
Jean Kam: Hi, good morning all. Okay, in terms of the outlook, right, we continue to see this macro headwind with this rising geopolitical tensions that is affecting, you know, the business and the consumer sentiment. We're actually monitoring the current economic situation closely, especially on China. So I think for China, right, despite the current weak property market and, you know, the domestic consumption, it still offers a very healthy fundamental, you know, we have a large population base, rising urbanization, a high savings rate that offers actually a very significant demand potential. So, I mean, as you can see from some of the reports, right, we are seeing that, you know, the analysts are actually anticipating some property market turnaround in the second half of 2026. So I think, and with that, right, we have also seen that China has entered into a rate cut cycle and, you know, they have this low interest rate that is likely to continue in the medium term. So because we have our asset in China, right, we are actually able to benefit from this low interest rate as it offers us a very attractive interest rate being the second lowest in our portfolio after the Japan debt call. And if you look at the reversions in China, I mean, this quarter we reported a negative 12%. On the other hand, we are actually seeing that 90% of our leases have been marked down to market. And in terms of the negative double-digit reversion, we expect it to persist over the next two quarters. And bearing any further unforeseen circumstances or any external shock, right, we should hopefully see it trending down, meaning in a negative reversion in a single-digit zone instead thereafter. So the other thing is, despite the high vacancy rate that is happening in the China market, our team continues to follow our trend very closely. We have a very strong and experienced local team, and with that, we are able to achieve a high occupancy of 93% as compared to our peers, which is mainly in the high 70s to 80s range. And if you ask me in terms of the signing leases, the real issue shock right now, our tenants are still signing short at around 19 months. But I think it also means that we can capture the rental rebound when the market recovers. So I think that's what I want to say for China. And for the rest of the markets, right, I would say it remains resilient with our diversified portfolio. As you hear from James, we have a high occupancy rate of 96%, and then in terms of the reversions excluding China, we are looking at a positive rate of 3.6%. And in terms of the financial performance, as you have heard from Charmaine, we have also sustained a stable performance in local currency terms. So for first half, you have seen in terms of the gross revenue and NPI, you know, we grew by about 1% to 0.5% respectively on the local currency terms. And with our proactive capital management, we actually managed to maintain 2.7% average interest cost for three consecutive quarters despite the higher interest rate environment. We have actually refinanced, you know, the more expensive debt with hedged borrowing. You know, we have also done things like cross-currency block from currencies like Australia dollar, Hong Kong dollar, U.S. dollar into hedged. And of course, I think Charmaine mentioned earlier, we have done a part that actually gave us a 90% savings in terms of the interest cost. Despite that, I mean, we still foresee that our financing cost is still expected to rise. As Charmaine mentioned, you know, our replacement loan and hedges will be progressively go off and these will be entered into a higher rate because, you know, as you are all aware, we entered the earlier in a cheap debt during the COVID years. So the borrowing cost, the high borrowing cost will continue to hit us. And now in terms of the portfolio rejuvenation effort, you have seen us acquired about S$220 million this year. And we are also actively on the lookout for acquisitions. And we continue to see potential opportunities in emerging markets like Vietnam, India, and as well as some developed markets like Japan. As you are all aware, it is still no doubt that the interest cost has risen, it still offers a positive yield spread. And as for Korea, Australia, I think we are still watching the environment closely. Korea, there's still a gap in terms of the buyers and the sellers. And then for Australia, I think there's still quite a tight yield that we are expecting. So that's on the acquisition side. And on the divestment front, you have seen us announced and completed about S$130 million to date across -- it accepts in three countries, Singapore, Malaysia, and China. And we continue to have a pipeline to divest. And I'm pleased to say that we're actually halfway mark there. I have identified about S$300 million of assets to be divested. And we are right now close to a halfway mark there. Because at the same time, while we want to accelerate on the execution front, right, we also need to balance against the tenancy expiry, the time taken for the regulatory to review. As well as, you know, for some of the assets that we are looking to divest, we are waiting out for macro market recovery for better pricing, particularly in the China and Hong Kong assets. So I think -- so I've talked about the divestment. So in terms of the AEIs, right, so as Charmaine and Jim has mentioned, we are accepting our Benoi AEIs completed by around May, June next year. And we are actually, based on the current team feedback that we have, we are actually receiving pretty healthy level of inquiry from a broad spectrum of industries such as electronics, industrial goods, and consumables. And we hope to be able to secure some pre-commitment ahead of completion. I mean, prospects would like to generally view the space and feel it before, you know, they would like to commit. And hopefully we can have some traction by early next year. So I think that sums up what I want to share on this. So maybe I'll hand over to Yuen May.
A - Yuen May: Okay. Now we will open the floor to questions. Marvin, you're always first in the line. Please raise your first question.
Mervin Song: Yes, Thanks Yuen May. And thanks, Jean and team, for the call. Yes, maybe we can go through all the bad stuff first, and then hopefully we end up the call on a positive note. I mean, China is terrible. But in terms of the negative rental reversion double digits, would it be still around that 12%?
Jean Kam: Marvin? Marvin is a bit muffled.
Yuen May: Yes, a bit muffled.
Mervin Song: Yes. Can you hear me now?
Jean Kam: Yes. Okay. Can you start again?
Mervin Song: Yes, maybe we can start with all the bad stuff first, get out of the way, and then end the call on a positive note. Just on China. Yes, China is terrible, clearly. In terms of the guidance on the negative rental reversion double digit for the next two quarters, would it be around that 12%? Or would it be worse? And in terms of leasing inquiries, are you seeing a pickup in interest, or is it starting to slow off? Have any sponsors been talking about buying properties from MLT? Is there anything imminent? Then the second question I have is for Japan. It seems rather weak on the NPI basis, Q-on-Q and year-on-year, even if I adjust for FX headwinds. What's happening there, given the occupancy has been somewhat stable? Thanks.
James Sung: Yes. Well, thanks for these two questions. The first one I'll take is in terms of reversion, the Chinese reversion, yes, it's a negative chart for this quarter, certainly last quarter. But based on our field on the ground and the feedback on the ground, it's likely to remain around this level in the next two quarters, in the next six months. We don't see that you, what do you call it, get significantly worse than this at this level. So it should fall around this level for the next two quarters, until such time that, you know, the effect of the monetary stimulus and all these other factors is to the ground. So we think that it will take about six months or so, and then we should, you know, everybody is crossing their fingers and optimistic that things will turn around after that. So that's for China. And the second question is related to, you said Japan?
Mervin Song: Yes, Japan seems weak. What’s happening there?
Jean Kam: Yes, I think for Japan, right, in terms of the NPI, because we, you know, we acquired, you know, the larger assets like Kuwana and Kobe. So these are MTP in nature. And typically, you know, on a quarter to quarter basis, there will be movements in the occupancy. So we deem it as a more frictional kind of movement, mainly due to Kuwana and Kobe.
Mervin Song: Okay, so Kobe is hard, but we had some, yeah, frictional in between. Okay. Then the China divestments, any progress there, or still more next year?
Jean Kam: Okay. Okay, so for China divestments, we are in negotiation on one asset in China. So that is currently under exclusivity. So on top of the China divestment in Xi'an that we have announced earlier, we are working on another one that we hope to be able to announce sometime in this quarter. Yes, we hope to be able to, you know, make some announcement this quarter.
Mervin Song: Okay, excellent. I'll hand it over to rest.
Yuen May: Okay, next on the line is Derek Tan DBS. Please go ahead.
Derek Tan: Good morning, can you hear me?
Yuen May: Yes.
Jean Kam: Yes, Derek.
Derek Tan: Hi, Jean. Just going back to China, right, I thought that the negative reversions were quite in line with what you were guiding. Maybe your thoughts on your rent currently in China, right, versus where you think you could get. You mentioned that there's still negative rental reversions, but I thought you have already mark-to-market 90%. So is there further weakness from what you've signed recently? Just want more color on that. And if you give us a sense, how is Tier-1 doing versus Tier-2?
James Sung: Okay. Hi, Derek. Most of our markets in China, we estimate about 90% is already mark-to-market, meaning about 10% that is still, you know, coming out for renewal in the next 12 months or so. So they start for this it's paper-like. That's what we can say in terms of working out. So that's the mark-to-market portion that we can advise. And in terms of -- what's the second question again?
Derek Tan: Sorry, Tier-1 versus Tier-2?
James Sung: Okay, Tier-1 versus Tier-2. So Tier-1, in this quarter, second quarter, there was about 93% negative reversion in Tier-1 cities, right, compared to minus 30%, 40% in Tier-2 cities. The negative reversion in Tier-1 cities came mainly due to oversupply in the Shanghai market, because of the new stock came in in the first half of this year, in the outskirts of Shanghai, towards the south and west side. So that is for the negative reversion in the first year. But we believe in this phenomenon, you know, in the next, you know, hopefully in the next few quarters, it should stabilize in terms of the occupancy. Because the occupancy is still, because of the excess supply in Shanghai itself, we understand it's close to 20%. And hopefully in the last, sorry, in the next one year, the drop-in should be there. Because Shanghai being Shanghai, it's still a core Tier-1 consumption market, so we're quite confident when things move on, we should be very strong for Tier-1 cities.
Derek Tan: I see. Okay, okay. Thanks for this, color. So I just have one more question, and it's on your interest costs, right? I think, Jean, you mentioned that you're still expected to trend up as we approach to next financial year, right? I'm just curious, could you give us some guidance, you expect to come off next year with interest rate coming up?
Jean Kam: So we are stable at 2.7% now. I think previously, I've guided that we will increase to about 3% by end of this year, and about 3.3% for next financial year. But I think with interest rates cut and all that, we are looking at debt reducing. So by the end of this financial year, maybe about 2.8%. Bearing in mind that we report this percentage on a quarter-by-quarter basis. And then I think next year, we will probably trend up to about 3%.
Derek Tan: Oh, okay. So you're dialing back your interest cost assumptions that we should be looking at slightly lower versus your initial guidance?
Jean Kam: Yes, that was, I think, previously before expected cut, 50 basis point cuts, I think, during the quarter itself. But, yes, we think it will still increase, definitely, because of the IRXs [ph]. I mean, we have stressed many times the IRXs are locked in during the really low period. So you would still see them being replaced at higher rates. Although now that they have cut the rates, it would be probably slightly lower and also proactively converting them from the Aussie dollars and Hong Kong dollars, which are still high, to Sing dollar [ph], via swaps.
Derek Tan: Okay, that's good news. Okay, that's all for me. All right, thank you.
Yuen May: Okay, there are no more questions, right? So I move on to Rachel McQuarrie.
Unidentified Analyst: Hi, good morning. Thanks for the call. Sorry, could you repeat your comments on the Tier 1 and Tier 2 markets? It was a bit breaking, so I couldn't quite catch. Was it 93% of the leases signed is in Shanghai, and what was the reversions for Tier 1 and Tier 2?
James Sung: Okay, and that's what the reversions for Tier 1 and Tier 2. We think Tier 1 is about a negative 3%. Tier 2 is minus 30% to 40% negative. That's on the reversions side for Tier 1 and Tier 2, respectively. So the question which was asked by Derek was in terms of whether it stabilizes the markets. Of course, we're advising that in terms of the leases that we have renewed and signed so far, 90% are already off the market. So we can say it has come to a level which is at a market. So we estimate about 10% of the leases that is up for renewal, right? If you don't renew, that could be, so this 10% is due in the next 12 months. So we believe this could be off the market in the next 12 months or so. So overall, we think because it's stabilizing and it should not be any much opportunity whatsoever, it's important.
Unidentified Analyst: Okay, got it. Thanks. And probably moving on to brighter spots, I think for Singapore, double-digit reversions, is it still sustainable?
James Sung: Well, with new supply coming out, we believe this double-digit reversion should cripple it all. So we should still be strong, but probably be closer to as you’re looking, -- I'm sorry, high single digit than 12%, right? But we are looking around this level, but I think high single digit reversion is probably more realistic to expect.
Unidentified Analyst: Okay, so by end of financial year, probably close to high single digit, is that right?
James Sung: Yes, that's right.
Unidentified Analyst: Okay, and Hong Kong, I saw reversions seems to have reduced, although it's still in positive. I'm just wondering whether, has there been any softening in terms of the Hong Kong rent?
James Sung: Yes, Hong Kong's reversion is a little more than 2%. We see some softening, yes, because of the demand has tapered off, but I think we believe it's more in the short term, but overall, it's still quite bullish on Hong Kong market. So the softness is due, like I mentioned, some business is expanding, and also, to some extent, in this supply or latency, actually, one particular project in the airport, they were expanding a project which is only half occupied. So that's a factor, one sentiment that I'd say is, overall, it's still positive for the Hong Kong market.
Jean Kam: I think at least to add on, in terms of the supply, the market is actually still supported by a limited supply over the next three years’ horizon. So with that, I think, though the retail momentum is not as strong, but I think the market is still supported by a limited supply, and I think the China asset, which we have articulated a few times, it doesn't pose a direct competition to our assets, in particular, our [indiscernible] assets, which is a different location and a different product type that we are targeting on our tenants profile.
Unidentified Analyst: Got it, thanks. Just one last question, in terms of the debt refinancing, can I just understand how much of your debt has still not been mark to market just yet? The debt expires in this year, next year, or up to 2027?
Jean Kam: We should see the mark to market by the end of next year. So, yes. Whatever is not bad, we'll see the higher rates this year and next year.
Unidentified Analyst: Okay, got it. Thank you so much.
Yuen May: Okay, next is Hans Xuan [ph]. Please go ahead.
Unidentified Analyst: Good morning. Can I follow up on China in terms of expiry rate? It's roughly about 40% of NLA, but can you give us what is China's least expiry as a percentage of rental income for the rest of 2025 and 2026?
Jean Kam: Maybe we'll go back, we'll come back to you on that. Do you have another question?
Unidentified Analyst: Yes. And then the reversion guidance to narrow to single digit, right? After two quarters, is the underlying assumption that by then 100% of the leases will be marked down to market, but market rent continues to decline?
James Sung: We believe the market rents in terms of decline is still down, so it's not as severe as this year. So back to the question, in FY ‘25, China's return to expiry is 45% of portfolio in FY ‘25. In FY ‘26, it's about 36%.
Unidentified Analyst: Sorry, you're quite loud. Yes, I can't hear you.
James Sung: In terms of China's expiry of portfolio in FY ‘25, it's about 45% by NLA and 36% in FY ‘26.
Unidentified Analyst: Yes, I get the NLE, but would you be able to share the rental income, lease expiry by rental income? How much does China make up in this year and next year?
James Sung: We'll be starting to ask because the China's rentals spread throughout the market is lower, so the impact will be much less, but it's probably 3% to 4% less.
Unidentified Analyst: Okay.
Jean Kam: I think Tan Xuan will come back to you on the proportion in terms of by GR.
Unidentified Analyst: Okay, thank you.
Jean Kam: In terms of the exact numbers, yes.
Unidentified Analyst: And just to clarify, the underlying assumption is that spot rent continues to decline, right, but at a lower magnitude and hence the single-digit negative diversion.
James Sung: That is correct.
Unidentified Analyst: Okay, just one last question on acquisitions. I think the previous guidance was that acquisitions would be funded by divestments and you're not expecting any EFR, but given rates movement and what peers are doing, has your stance towards that changed?
Jean Kam: For the time being, I think for any acquisitions, it's still primarily to be funded by the recycled proceeds. So in terms of whether there are any plans for further equity fundraising, we do not have any plans at the moment, at least for this financial year. So any acquisitions, if any, we would prefer to recycle it with the divestment that is ongoing and we are pretty confident that we are able to actually divest the target that we are looking at, you know, 250, 300, and we have done half of it and the other half is actually under exclusive negotiations. So we are looking at markets like again Singapore, Malaysia, the small one in Japan, as well as in China. So to sum up, to answer your question, it is really to priority to funded by divestment proceeds and any EFR will not be happening for this FY.
Unidentified Analyst: Okay, got it. Thank you.
Yuen May: Okay, next we have, Brandon, please go ahead.
Brandon Lee: Hey, morning. Can you hear me?
Jean Kam: Yes, Brandon.
Brandon Lee: Yes, morning, morning, Jean. Just two questions on Hong Kong, right? I think recently there's been a site at Yuen Long coming up for development. Will MLT be keen on that? That's my first one. And the second question would be any latest updates on the funding divestment? Is it totally caught off already? Yes, thanks.
Jean Kam: Okay, so on the Yuen Long site, it is actually a greenfield site to be launched by the Hong Kong government. We, together with the sponsor, you know, we have reviewed that potential opportunity, but I think in terms of some of the restrictions that they have, you know, some of the tender restrictions that they are putting in, it is something that we felt that is a bit prohibitive and it is something that we do not think we will come in to participate on the Yuen Long site. And for the funding side, I think we, as I mentioned earlier, we are trying to wait out for better pricing. We are still trying to sell, you know, at a target pricing that we are looking at. So in the meanwhile, though it is still an asset that we would still want to divest, but at the same time, we have actually managed to actually lease up the place. So we have actually leased back to [indiscernible] Express in this quarter. That's why I think in terms of the occupancy, we have seen that, you know, Hong Kong occupancy has improved this quarter. So, Brandon, I hope this answers your question.
Brandon Lee: Yes, so out of this $250 million, $300 million, right, is it safe to say that it doesn't include funding?
Jean Kam: No, doesn’t, yes, it doesn't. So I actually, it doesn't include. So I actually have identified quite a huge pipeline. It's about 1B, but not everything can be implemented right away. So like I mentioned, it depends on the market, whether there's a buyer's appetite, but at least for this FY, right, I'm seeing about executing one-third of it.
Brandon Lee: Okay, okay, thanks. I just have one last quick one, right? Your comments on single digit negative reversion subsequent to the next two quarters, right? How long do you see that? How long do you see that level being sustained?
Jean Kam: In terms of the single digit on China?
Brandon Lee: Yes, correct. Is it going to be another like two years or another like four quarters, you know? Yes, basically I just want to know when do you see that negative magnitude kind of turning around.
James Sung: Turning around is totally not negative.
Brandon Lee: Turning around is totally not negative, like maybe positive or like flat, you know.
James Sung: Well, if anybody can answer this, well, obviously we hope that it will turn out faster than later. But I think it will turn around pretty much depending on the, you know, how much the feel good factor goes down to the individual consumers. What the government has already done, hopefully can do more, right? To put more money into the pockets of the people to spend. So, yes, I mean, it's anyway, you can see the market is stabilizing. So, looking forward, hopefully we can see an uptick in demand growth.
Brandon Lee: Got it. Okay. Hey, thanks so much, everyone. Thank you, Trevor.
Yuen May: Okay, Joy from HSBC, please go ahead.
Joy Wang: Thank you. Morning all. Just a few questions from me. First, if I can just follow up on the divestment pipeline you mentioned, Jean. Out of the S$1 billion, what would be the geographic split? And also, you know, for this year, we've done quite a bit already in Malaysia. Can I say for the rest of it, it sits predominantly in China?
Jean Kam: Okay. So, in terms of the 1B pipeline, yes, we would probably have about half coming out from China and Hong Kong. And the other half would be, we still do have a few more in Malaysia. We still have assets in Singapore. And we have also, you know, one or two in Japan, Australia, and Korea. So, these are the countries that we have identified, you know, where assets are no longer relevant. It doesn't fit with our strategy and doesn't have much potential for redevelopment. But of that, right, of the 300 that I gathered for this financial year, we are expecting, you know, to sign one in China.
Joy Wang: Got it. Okay. That's helpful. And then secondly, just in terms of China, can I get a, you know, your occupancy is really high. Is that because you have a very high retention ratio? Or what's the retention ratio in China, actually?
James Sung: Okay. The retention ratio is about, it's pretty important, it's about 70% to 80% in the world. The other factor, it's high, it's also an option of, you know, market flexibility, this, you know, as you're aware, other landlords are pushing, trying to push their tenants, and we try to push other remote tenants. So it's an incentive, so it's more incentive for them, right, to ensure that the tenants have an incentive to stay on. So that's the other factor.
Joy Wang: And your rental, your negative rental reversion would have included the incentives or that's not part of the rental reversion?
James Sung: Partially included.
Joy Wang: Okay, got it. Cool. And lastly, just one question on Japan. Could you share your JPN hedging rate and the percentage that's hedged for this financial year?
Jean Kam: For whatever that's coming due, whatever the hedge is for the next 12 months, we are looking at about 90.
Joy Wang: And is there still about -- 90 is the rate, right, and then is there still about 85% hedged, or?
Jean Kam: 80% hedged now.
Joy Wang: 80%. Okay, great. Thank you so much. That's all.
Yuen May: Brandon, do you have a follow-on question?
Brandon Lee: No, no, no. I'm good. The hand is too long. Let me lower it.
Yuen May: Yes. How about Mervin? Marvin, are you -- do you have a follow-on question?
Mervin Song: Yeah, I have a question. It's a question from a client. So in regards to your investments, what exit yields are you targeting in China? Singapore, Australia, Korea, and Japan, or what have you achieved thus far? I think the question's coming from the fact that they're worried that you're selling at very high yields and actually the divestment exercise is actually DPU diluted. Thanks.
Jean Kam: I can't hear. Mervin, I can't hear you clearly.
Yuen May: No, he's asking, what kind of yield are you expecting for the divestment in China as well as for the other countries? What have you achieved so far? And whether, the concern is whether are you selling at high yields and therefore will be diluted?
Jean Kam: Okay. In terms of the target that we are looking at, in terms of the exit yields for the assets that we are looking to divest, right, so those that we have divested, we actually are able to, for example, like Malaysia, we are actually able to exit at tight yields ranging about 3 over percent, below 4%. And for the, let me see, for the, in fact for the CN asset that we've divested is actually, you know, 2% in terms of the exit yields. So really I think in terms of the pricing that we are able to achieve, I think it depends, really depends on the special niche target segment that our, that we are able to identify. So mainly they are all end users in terms of the divestment pipeline. Then as for the China assets that we are looking to divest, right, it is about, around 4% kind of exit yield that we are looking at. So we are still able to achieve a decent, you know, tight exit yields for the assets that we are looking to sell. And mostly it's because I think we are able to find some niche buyers that are keen in this particular asset. And for the one that we are actually currently working on, the China asset that we're currently working on, it is also, you know, it's a bit confidential at this point, but it is actually also going to be a very decent tight yield.
Mervin Song: Okay, great.
Jean Kam: So Mervin, I hope I answered your question, yes.
Mervin Song: Client's dialing in, so hopefully this is the right answer. So the funding occupancy, where does it stand now in Hong Kong?
Jean Kam: Did you ask funding occupancy?
Mervin Song: Yes.
Jean Kam: It's 100%.
Mervin Song: 100%. Oh, fantastic.
Jean Kam: Yes, so I mentioned earlier, I mentioned, yes, I mentioned earlier, you know, for the funding asset last year, you have heard us wanting to divest, but I think we will look out, you know, we have a certain target pricing that we have in mind, and a target yield. So, but in the meantime, while we wait out for the market recovery and for the buyer's appetite to improve, right, so we have managed to lease out to a tenant called Tunbong [ph] Express that actually took on the full building, just this quarter.
Mervin Song: Okay, excellent. I noticed the DRP is still activated for this quarter. Given your divestments, should we be turning it off given it's actually quite dilutive to your EPU performance going forward?
Jean Kam: As of now, we are still, I think the intention of the DRP is we need to fund the 51 but not redevelopment. So as of now, we still would, I mean, we will still keep it activated, but yeah. It is something that we are reviewing. Yes, but for now, it remains to be available for us to tap to actually fund our CapEx as well as AEI, you know, we have our 51, but no AEI that's ongoing. But it's something that we are reviewing internally.
Mervin Song: Last question for me, the NAV seems to have dropped quite a bit this quarter. I'm just wondering what's exactly happening there.
Yuen May: Sorry, what is your question?
Jean Kam: What has dropped? What has dropped?
Mervin Song: Your net asset value per unit seems to drop quite a bit to 1.33. Yes.
Jean Kam: Sorry, come again?
Yuen May: NAV drop. NAV drop.
Jean Kam: Okay.
Mervin Song: Yes, it's quite a lot. It's bigger than normal. Yes.
Jean Kam: Yes, unfortunately -- okay, I think the first reason is because I think, I tried explaining earlier in the call. The first reason is because of the lower fair value on our financial derivatives. So we have all the interest rate swaps and currency power. These are actually mark-to-market on a quarterly basis. So because of the fed cut last, I mean during the last quarter, generally our IRFS and our CCFs as well as forwards, because of FX movement, have actually moved against us in that sense. While it's still a mark-to-market gain, it is a lesser mark-to-market gain and it has hit our, the NAV amount. Okay, that's on the first point. So because, you know, it's a total asset. Your gearing is computed against total asset and when that value goes down, your total asset base reduces and therefore negatively impacts our gearing. So that's the first point. The other point is because of the strengthening of the JPY just at that quarter end. So I think we closed our books when JPY was about S$109 versus S$10. Of course now it has depreciated back to about S$130, S$140 levels. Because of that FX impact -- I mean FX rate at that point in time and because we have about 80% of our JPY, I mean our borrowings of the JPY portfolio is actually JPY loans. That movement has actually negatively impacted our gearing and NAV.
Mervin Song: Okay, thanks very much. Hopefully all this bad news is in the prize already. Thanks.
Jean Kam: Thank you.
Yuen May: Okay, I've got a few questions from the floor. These are from the audience who dialed in. Okay, I think this question is on China related. Okay, not sure about the question but I'll read out anyway. Are all the Chinese related debt converted into RMB? If not, when will you convert them to RMB? Not sure what that means. And then second question is interest rate for SGD has come down somewhat. When will this benefit be felt by MLT?
Jean Kam: Okay, so I think on the first question, our Chinese assets, when we acquired them, it was during very high renminbi borrowing rate environment. So a lot of these were actually funded with equity. So we do not have any onshore loans in terms of our assets investments in China. But progressively what we can do now is whenever there is an Aussie dollar or a Hong Kong dollar or maybe Sing dollar, our assets coming in, we will actively convert this and replace it renminbi thereby increasing our percentage of borrowings to Chinese related debts. Then on the interest rate for Sing dollars, yes, I mean we will benefit. But I think what we have locked in in terms of our assets in Sing dollars that has really climbed in the cuts. So that one that fixed rate cut, I think it will take some time before we'll benefit. But definitely on the unhatched portion we will benefit from the interest rate cut. And I think we are benefiting from it now already. Do we have any more questions?
Yuen May: I think we have some more questions. Any lease payment default or indications of delayed payments?
James Sung: So far, based on the last quarter, the coupon was lower than in terms of earlier percentage, below 2%, 1.8%. It's actually lower than the first quarter. And last week, in fact, even the earliest percentage is 1.5%. So it's very manageable currently. So I'm not sure what...
Jean Kam: We do not actually see a further deterioration in the rental collection. I think in terms of the arrears, it remains a comfortable range. It is around, you know, under 2%. And we didn't see any further deterioration in terms of the rental collection by the portfolio.
Yuen May: Okay. I think this should be the final question from the webcast audience. Okay. This question is about long-term. What is MLP's long-term strategy for China? And whether any plans to renew the exposure? I think you have talked about our plan to divest. So what's the longer-term view for China?
Jean Kam: I think I've mentioned in the outlook is that no doubt currently China is suffering, you know, in terms of the property market in terms of the domestic consumption that is currently weak. But on the other hand, if we look at China, they are the second largest in terms of, you know, economy and the property. They are in terms of the large population base. And as well as, you know, with the rising urbanization rate that we are seeing and as well as if you look at some of the savings rate that we have based on some of the statistics that we have. They actually have a lot of high savings rate, but they are just afraid to spend. You know, they're just afraid to spend because of the current weak sentiment and, you know, when the market starts to turn around, when the property market starts to turn around, the people would then, you know, feel richer because they see some positive wealth effects and they will start to be able to spend. And we would then see, you know, there's actually a huge significant potential in terms of the demand, primarily because they are very large consumer base. So I think in the long term, it still offers a very healthy economic fundamentals and China still remains an important market for us, for MLP. So I think that's, do we have another question?
Yuen May: I think no, there's no more questions from the web as well as the webcast for this, but I think coming back to earlier on, Tan Xuan, your question on the lease expiry on China's portion.
James Sung: So China's, for the balance of this year is 3.4% for China, for MLP. For next year, FY ‘25 its 7.5% and FY ‘26 is 4%.
Yuen May: Okay, so thanks to everyone for dialing in. Thank you. If you have any follow-up questions, please just email me. Okay, thank you.
Jean Kam: Thank you. Thank you, everyone.
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