Q4 23/24

Apr 29, 2024

Hi, good afternoon. Welcome to MLT's results presentation for the fourth quarter and full year ended March 2024. With the full management team here with us today. To start off the presentation will be Charmaine, our CFO. She will go through the key highlights. Hi, everyone. Thanks for dialing in. I will first run through the highlights of Q4, FY2023/2024. For the Q4, our gross revenue increased 1.2% year-on-year to end at SGD 181 million. NPI is higher by 0.6% year-on-year at SGD 155.3 million. However, DPU is 2.5% lower at 2.211 cents versus the 2.268 cents we announced last year. In terms of our portfolio, our portfolio remains resilient. Portfolio occupancy remains stable at 96%. Average rental reversion is a positive 2.9%, including China. Excluding China, we are looking at a positive 7.1%. Bill remains at about three years. Capital management-wise, our leverage ratio is at 38.9%. About 84% of our total debt has been hedged into fixed rate, with an average debt maturity of three years. About 78% of our income for the next 12 months has been hedged into Sing dollars. We continue to be active in our rejuvenation of the portfolio. We started Q4 with 187 properties. We completed the divestment of 73 Tuas South in Singapore and completed the acquisition of one India asset during the quarter. So our portfolio remains at about 187 properties. During the quarter, we also announced a proposed acquisition of three well-located Grade A assets from the sponsor of about SGD 230 million, one in Malaysia and two in Vietnam. In terms of sustainability, about 39% of our portfolio is LEED certified, and we are generating about 59.8 megawatt peak of solar energy. Also during the quarter itself, we issued our maiden SGD 75 million green bond under the green finance framework. Going into the details of Q4 results. For this quarter, our financial performance continued to be impacted by weaker performance from China, FX losses due to weakening of the regional currencies, as well as higher borrowing costs. Gross revenue is 1.2% higher, mainly due to contributions from acquisitions made at the beginning of the year. Also higher contribution from existing properties. However, this is offset by lower contribution from China, which is down about 8% year-on-year, absence of revenue contribution from divested properties as well as currency weakness. Property expenses is higher, mainly due to acquisitions made at the beginning of the financial year. Gross revenue and NPI would have increased by 3.6% and 3% respectively on a constant currency basis. For our borrowing costs, we are higher by 6.9%. This is mainly due to higher average interest rate due to higher base rate on our unhedged loans, as well as higher replacement rates on the hedges that have expired during the financial year. As well as incremental borrowing costs to fund the current year's acquisition. The higher interest cost is actually offset by loan repayments with proceeds from private placement as well as divestment proceeds. Including our divestment gain of SGD 12 million, amount distributable to unitholders would have increased 1.1% or DPU fell by 2.5% due to the enlarged unit base. For the 12-month results year-on-year, the reasons behind the variances in term of gross revenue, NPI, borrowing costs are largely the same as Q4 this year versus Q4 last year. We are reporting a DPU of 9.003 cents, which is 0.1% lower than 9.011 cents for the full of last year. On quarter Q4 versus Q3, revenue is down 1.7%, mainly due to absence of revenue contribution from divested properties as well as lower contribution from China and Singapore. For Singapore, it's really because of rental incentives given in Q4, as well as currency weakness, which is about SGD 1 million lower quarter-on-quarter. Property expenses is higher, mainly due to higher property tax and maintenance expenses. NPI 2.6% lower Q4 versus Q3. Borrowing costs increased due to higher average interest rate as well, partly offset by loan repayment with the proceeds from divestment. DPU is 2.211 cents, 1.9% lower than 2.253 cents in Q3. Our balance sheet as of March 31, 2024 versus last year, IP has increased from SGD 12.8 billion to SGD 13.2 billion, mainly due to acquisitions of about SGD 1 billion during the financial year, partly offset by divestment of about SGD 180 million and currency translation loss of about SGD 470 million. We also had a SGD 1.8 million net fair value loss in terms of the IP value. That increased from SGD 4.9 billion to SGD 5.3 billion, mainly because our investments of about SGD 1 billion during the year is funded with SGD 180 million of divestment proceeds, a mix of equity as well as debt. NAV has moved from SGD 1.44 last year to SGD 1.38 this year because of FX translation loss due to the weakening of regional currencies. Leverage ratio moved from 36.8% to 38.9%, and our weighted average interest rate 2.7% this year compared against 2.7% last year. The interest cost has kept stable, notwithstanding the rising interest rate environment, mainly because of the proactive capital management we do. This is due to, number one, borrowings JPY loans to fund our acquisition, as well as the active utilization of divestment proceeds and EFR proceeds to pay down the more expensive loans. We expect this to increase to about 3% in the new financial year. Our debt duration remains stable at 3.8 years, and adjusted interest cover is at 3.7 times and 3.1 times respectively. Our debt maturity profile remains well staggered, with a healthy average debt duration of 3.8 years. We have about SGD 950 million available committed credit facilities on hand, more than sufficient to refinance the SGD 270 million that's coming due in the new financial year. Within financing, total about SGD 964 million, accounting for about 18% of our total borrowings. In terms of interest rate risk management, about 84% of our total debt has been hedged or drawn in fixed rates. As for forex, about 78% of our total amount distributable in the next 12 months have been hedged into Sing dollars. The next slide would be the distribution details for this quarter distribution. I will now hand over to James to go through the portfolio update. Hi, everyone, James here. I will update the portfolio. In 4Q, in terms of diversification, we still offer a good mix of diversification between the developed markets, which contribute 70% of our portfolio AUM and gross revenue. This gives us much stability that we need. The other 30% comes from the developing markets, which offers us the growth potential that we need. In terms of the occupancy rates, our portfolio remains very resilient. 4Q, we registered 96% occupancy, no change from the previous quarter. Most of the countries recorded stable occupancy rates, except for Korea and Australia. In Korea, there were lease expiries in two of our properties, the older spec property that we have in Korea. In Australia, it was due to a non-renewal of a small lease in Brisbane Acacia Ridge. Overall, we achieved 2.9% positive rental reversion in the portfolio in 4Q as compared to 3.8% in the previous quarter. Without China, the portfolio reversion rate would have been a positive 7.1%. China rental reversion rate was a negative 10% in 4Q. Overall, we have a well-staggered lease expiry profile, in the next few years. Our top 10 tenants now contribute about 22% of overall gross revenue. The top 10 tenants are coming from a mix of e-commerce companies and 3PL companies supporting those e-commerce companies, and also Hypermarts in Australia, and 3PLs supporting the consumer staples sector in our portfolio. Okay, on the active portfolio rejuvenation. In the FY23/24, we have acquired over SGD 1.1 billion in acquisition of 12 modern Grade A assets and announced or completed in this FY across the developed and high-growth markets. In the financial year, we have acquired eight assets across Japan, Korea, and Australia with a total value of SGD 900 million. In the recent quarters, we have also acquired four assets or are in the process of acquiring four assets in these emerging high-growth markets to capture demand from the growing consumption hubs of Delhi, Kuala Lumpur, Ho Chi Minh City, and Hanoi. In February, we completed the Delhi asset, and in the same month, February, we have signed SPA to acquire three assets from our sponsor, one in Malaysia and two in Vietnam, with a total value of about SGD 240 million. With the four recent acquisitions, it deepens our footprint in Malaysia, Vietnam, and India. These offer attractive fundamentals, driven by positive drivers such as the strong economic growth. Growing consumption across these three markets, as well as the rising urbanization in this market. It also offers us favorable secular trends. As you can see, the supply chain diversification post-pandemic assists daily e-commerce growth and as well as there is still limited Grade A warehouse supply in these three markets. All these present growth opportunities for MLT. With this exposure to developing markets, it augments the MLT growth and, at the same time, complements stability from the developed markets from the recent eight assets that we have acquired in Japan, Korea, and Australia. Next. As part of the MLT ongoing asset enhancement plan, we have identified two projects with total development cost of about SGD 280 million. The first one is on this Subang asset enhancement. We have strategically acquired two land parcels in Subang, and we are currently in the process of seeking approval from authorities for amalgamation with our existing MLT assets in Subang 3 and 4. Once the amalgamation is approved, it can potentially yield about 1.4 million square feet of modern Grade A space, which is about five times the increase from Subang 3 and 4. The next project is on this redevelopment project at 51 Benoi Road. This is currently ongoing. We have started construction in July last year and expected completion in the first half of 2025. Also, as part of MLT active portfolio rejuvenation strategy, we have divested over about SGD 200 million of older specifications with limited redevelopment potential. We have sold seven, three in Malaysia, three in Singapore, and one in Japan. Two assets are under the selling process. We have signed SPA to sell about SGD 40 million worth of assets in Malaysia. Next, on the portfolio valuation. In terms of the valuation, it remains resilient. Portfolio valuation was SGD 13.2 billion, 3.2% higher year-on-year, due to acquisitions of nine assets, as well as capital expenditure incurred on existing MLT assets and a 51 Benoi Road property that is undergoing redevelopment. This was partly offset by divestment of seven properties, currency translation loss of about SGD 471 million, and SGD 1.8 million net fair value loss on investment properties. In terms of the net fair value loss, it is mainly attributable to properties in Australia, China, and Korea, and offset by the gains in the six other geographic markets, and the main bulk of the gain is coming out from Japan and Hong Kong. If you look at the cap rates movement, I will start off with Singapore. For Singapore, there is actually no change in the cap rate. In terms of Australia, there is a cap rate expansion of about 75 to 100 basis points. However, this is partly mitigated by a strong rental growth. In China, there is also no movement in the cap rates. What you are seeing here is that in March 2023, it was a gross cap rate that was adopted, then there was a change in valuer. So in March 2024, the valuers took a net cap rate basis. However, if you look on a like-for-like basis, there's actually no movement on the cap rates, as according to the valuers, there are actually no transactions. Hong Kong, there is also no change in cap rates, and the valuation increase in the Hong Kong portfolio is due to rental growth. Similarly, for India, there's also no change in the cap rates. Besides the acquisition of assets in New Delhi, the same-store assets actually also rise due to rental growth. Next on Japan, there is a slight compression of up to about 40 basis points, and this is due to continued investor interest chasing for good quality assets as well as rental growth seen in this portfolio. For Malaysia, there's also no change in the cap rate movement. The portfolio valuation, there is a slight decline. It's because we have sold three assets over the year. But if you look at the same-store basis, it is actually an increase in the same-store assets in Malaysia due to rental growth. For South Korea, there is a slight expansion, mostly about 10 basis points. At the same time, on the same-store basis, it declined due to the lower rent side for the lower specifications assets in the Korea market. For Vietnam, there's no change in the cap rates, then the same-store valuation increased in Vietnam due to the rental growth. All in all, that sums up, including the right-of-use asset, the total value we're looking at for MLT portfolio valuation is about SGD 13.2 billion for this year. I think that sums up my slides on valuation. Thank you. Okay. Just a quick update on the sustainability front. Pleased to share that we have made quite good progress on our green initiatives this year. To recap, MLT has an interim goal of achieving carbon neutrality for scope one and two emissions by 2030, which is in line with the Mapletree Group's long-term goal of reaching net zero emissions by 2050. We are focusing on two main initiatives, solar and green buildings. For solar, this year, our self-funded solar capacity has more than doubled from last year to about 36.2 megawatt peak. Our interim goal is to reach 100 megawatt peak by 2030. But if we include third-party funded installations, then on the entire MLT platform, our solar capacity has reached a total of about almost 60 megawatt peak, which we believe is the largest amount at risk today. For green buildings, 25 new buildings got certified this year. That brings to a total of about 39% of our portfolio by GFA is now green certified. Our interim goal is to reach more than 80% for our portfolio to achieve green certification by the year 2030. Just a couple more points. Green financing, I think just now Charmaine mentioned that, we issue our first green bond, SGD 75 million under our green finance framework, which recently got second-party opinion from S&P Global Ratings, and this will be channeled towards eligible projects like in green buildings and renewable energy. For the third year running, we have planted an additional more than 1,600 trees across our platform. That is under the Plant a Tree with Mapletree initiative. In line with this effort, we are pleased to share that we have attained a four-star rating under GRESB, as well as being named a joint winner by CRS for the Singapore Corporate Sustainability Awards under the REITs category. With that, I'll now hand over to Kiat for her outlook comments. Okay. I think that this quarter we see the first DPU decline for MLT. I think we're one of the last few REITs that have managed to maintain positive, and then I think we cannot fight against the macroeconomic situation, the Forex weakening of the foreign currencies, as well as the higher interest rate environment. I think we have been telling investors, we've been telling analysts, and the message unfortunately will have to continue. On the macro side, the Forex as well as the high interest rates. Then on the operational side, China continues to be weaker than what we would like it to be. James, can you give the rental reversions? I can go through now? Yeah. The rental reversion. Yeah. Overall, the rental reversion for 4Q was 2.9% compared to 3.8% in the previous quarter. Singapore had the highest rental reversion of 11.1%, this was due mainly to the strong demand for rent-top properties, which continue to be short in supply in Singapore. Followed by Vietnam, 4.0%, Malaysia, 3.1%, Korea, 2.6%, and China, negative 10%, which I mentioned earlier. The China environment, we expect it to be volatile, uncertain for the next 12 months and maybe even beyond. We are trying to get greater clarity on whether we are seeing the bottom. I don't think we are seeing it now. We'll have to wait for a while. If you look at the stability of our portfolio, 19.2, 20% of our revenue comes from China. The emerging markets, Malaysia, Vietnam, India, about 10%. If I take this 30% out, we are looking at 70% of the revenue coming from countries like Singapore, Japan, Hong Kong, and, to a smaller extent, Australia and South Korea. While we continue to put a lot of focus on maintaining the tenant retention, maintaining the occupancy in China, we will have to work even harder to push our Singapore, Japan, and Hong Kong, because these will make up about close to 60%. If we are able to push these three markets and deliver stronger results, then it will compensate for the weakness that we see in China. On the operational front, I'm confident that on the occupancy side, we'll continue to see high occupancy. On the tenant retention side, we have about over- 900 900 tenants. Very diversified across many countries. Not just e-commerce, which we are seeing a slowdown, but we are seeing higher value goods such as pharmaceuticals, such as cold store, such as electronics. We are seeing this movement coming in our portfolio in the other countries outside of China. I think the headwinds really for us can be summarized in ForEx weakness, higher interest rate in China. That will continue to hit us. We now open the floor to questions. Mervin, raise your hand. Would you like to go first? Yeah, good evening, Kate team. Thanks for the call. Maybe get started with Hong Kong. I was looking at the JLL report for the March quarter. They noted a negative absorption about 900,000, and vacancy rate seems to have creeped up to 7.3% from 5.8% in the fourth quarter. Rents are falling for the first time year-on-year and Q-on-Q. I mean, so a bit shocked by that. Can you give us an update in terms of what is happening in the Hong Kong market? I still expect positive rent reversion, but how is the demand? I think next year you have HKTV, which is a top 10 tenant. I think there are some renewals in June next year, so maybe sign off with that. In terms of China, any guidance in terms of rental reversions, occupancy outlook over the next few quarters, and whether we will be able to collect on the rental arrears, which you disclosed in the previous quarter? Thanks. I think for Hong Kong, the ramp-up, warehouses continue to see very, very tight supply. We will start to see this dichotomy and all this differentiation for better quality, flight to quality, if you want to call it that. I think for ramp-up, we will continue to see positive rental reversions. Not the good old days like in 2015, 2016 double digits, but we should see still good positive rental reversions coming out for ramp-up. As you know, some of our portfolio in Hong Kong are rented to data centers, so these are very resilient users. We know that in Hong Kong it's very difficult to get increase in power supply. These are the assets that will continue to hold very good resilience. I think recently we did a rental reversion with one of them, James, is it? It was a double-digit rental reversion. For one of our data centers in Hong Kong. Yes. Mervin, just to add on what Kate said. In Hong Kong, what you mentioned about vacancy rates increasing, that was mainly due to a huge supply coming from the airport area, over 4.5 million sq ft at the Chek Lap Kok Airport, the Cainiao project. That is catered mainly for the air freight and transshipment-related customers. China obviously is only occupying part of a building. They are still trying to rent out the balance. That is very unique product at the airport. Because of the excess capacity, it dragged down the vacancy rates in the market. Yeah. There are restrictions in terms of the tenants, so it is not as wide base. That means not every tenant will qualify for use in that China property. Yes. For China, with regards to the guidance for the next few quarters, we believe the next few quarters continue to be uncertain in terms of the outlook. We are still looking for signs of recovery, and not just any signs, but a sustained kind of a recovery. Yeah. We are still keeping our fingers crossed. In terms of rent reversion, we are looking at low teens, negative low teens in the next few quarters. In the tier 2 cities. In the tier 2 cities, right? Tier 1s are still doing much better than the tier 2s. In terms of occupancy rates, we do not see it going down or below 90%. We will still hover around 92%, 93%, like what we are posting now. Yeah. I think I did not mention about divestment earlier. We will continue with our recycling strategy. We will look to sell some of the poorer specification assets in China. In fact, James is in the process of evaluating, quite close to closing some of those now. Of course, Hong Kong, the lower spec strata title units, these are also the ones that we will be keen to divest. Mervin, does that give you some- Yeah. Okay. Thanks for the color. Just in terms of, any updates on the HKTV lease? I think there is expiry next year. I also asked about the rental arrears in China. Have you been able to collect the rents that are past due? Thanks. Yeah. HKTV is one of our key tenants in Tsing Yi project. We have been engaging with them constantly. They are looking to, what do you call it, expand if possible. At the moment they are still taking a cautious view. We do not think there will be any movements on their end. In terms of the reversions and what Kate has mentioned for Hong Kong, we are still looking at a positive rent reversions, particularly in our Tsing Yi warehouse, because it is still a good location, good spec warehouse, which is in the market is short in supply. Yeah. The new supply that is coming out, like what James mentioned, is from Chek Lap Kok. The time to customer, that parameter still continues to be a key driving factor in terms of the usage that we are seeing in Hong Kong. Tsing Yi being much closer to the city than Chek Lap Kok, and then compared to even Tuen Mun, which is not as close, compared to Tsing Yi. I think the location and also the specs of some of our ramp-ups are going to continue to be attractive for our tenants. Mervin? Yeah. How about the China rental arrears? Have we collected those? People haven't paid on time? Thanks. Chamie? Or Heather? China arrears. For the China arrears, we are monitoring closely, but we are seeing some tenants are still a bit lack in terms of the payment. I think the ground team is actually monitoring very closely and then trying to extend certain helps or in terms of maybe extending installment plan for the tenants as necessary. But we are seeing signs of improvement in terms of the collections, yeah. Especially this quarter, it has come down quite a fair bit. Yes. I think last disclosed was. Sorry? It's improving like what Sandra has mentioned. Yeah. Last quarter, I think it was 6% of annual revenues in China which were in arrears. Has that ratio improved? 5.9. Or 5.9%. About 5.9%. Oh, so it hasn't really changed much at all. 5.9. Because back in terms of dollars, I think for most reasons, it's because the dollar is winning. Yeah. Mervin, I think the long and short of it, China will continue to be very challenging for us. So occupancy, we think based on the specifications and the location we are in, occupancy, we should be able to maintain still a very healthy level, but reversions, that's something that we are going to be seeing negative double digits. And then the arrears, we are going to monitor for the next few quarters, but this quarter, what we are receiving now seems to be strengthening from the last quarter. Okay. Thank you very much, Heather, with others. Yeah. Okay. Derek, DBS, you will be next. Hi, Derek. Hi. Good evening, Kiat. Can you hear me? Yes. Yes. Hi. I will just ask two questions. First one is on China again. If we look at China, I remembered you mentioning that tier 2 is only half of your overall exposure. Just wondering, if you look at tier 1 cities, while it is looking still fairly resilient, are you seeing signs of weakness and should we be worried about it? That is my first question. Yep. Okay. You want to give us your second question so we see whether we need to take it together? Okay. My second question is on the Japanese yen. It is great for consumers, but it is bad for investor like yourself. I mean, you are hedged out. How long is your Japanese yen hedge going to defend you against the current currency drop? I am just wondering if you can give some color on that. Just these two question will do. Thanks. Your second question is easier to answer. Cham? Okay. Yeah. Okay. So specific for Japanese yen, our strategy was to hedge out up to 8 years, actually. So, immediately for the next 12 months, 87% have been hedged. Then of course, progressively as the year, second year will be a slightly smaller amount, then third year will be a smaller amount, but it is all the way up to 8 years. So for the immediate year, FY 2024-2025, the 87%, our hedge rate is at about 84, 85 levels versus the current, yes. Versus the current Versus the current 115. 1415. Yeah. We are 84, 85. Yeah. So this Wow, okay. is specifically because we hedged this a long time ago, so some of it as far as eight years ago. Yeah. Okay. While we will continue to benefit it, I think what we are trying to say in our outlook section is these hedges will gradually fall off, and then the new hedges that we get in will become more and more expensive. Yes. While that's it for JPY, we have this support at least for the next six to 12 months. Yeah. Okay. Great. Sounds good. So now back to your tier 1 and tier 2. What is happening now is, in fact, we are in the process of divesting old specs, old specification, China assets, some of them in tier 1. The reason is because if you look at it, the land tenure, some of them are going below 30 years. So we have been engaging the government to see whether we can redevelop, and then some of them has been rezoned to commercial. So that causes a strain on the occupancy and the uncertainty for the tenants. Yeah. So I think, your question is, for tier 2, there is excess supply. The double digit rental reversions negative will come from the tier 2. The tier 1, we should still see modest- Positive positive rental reversion. Yeah. Okay. Sorry if I- Sorry, Derek, I want to add on is- Yep These have to be the better specification properties. If you go to our annual report, you will see some of these older properties where the specification are not so good. These will be the ones that will also see what we call rental reversion pressure. Okay, great. Sorry, just one last one is if- You can't just generalize now and say all tier 1 is going to be good. Yeah. Okay. You have some land that is rezoned to commercial. Meaning when you sell- Yes It will be a big upside. There will be divestment gain, Okay Until we actually sell, until we actually get the money, then we will be able to have a better feel of what the gain amount. Yes, there will be divestment gain. Yes. Okay. Sounds really good. All right. That's all for me. Thank you. Yeah, but Derek, we are entering negative DPU zone. Okay? Things are not going to sound so good moving ahead because hedges are going to come off and new loans are going to be coming in at higher rates. Really, this is the part on the portfolio, and then we still have China weakness coming at 20%. Really, the 80% of that portfolio has to be generating substantial power to funnel this, what I call, the growth that we want to see as opposed to the decline that we are seeing. Okay. Sounds good. Will take note of that. Thank you. We will continue with our recycling strategy. Low-yielding assets, bad specs, we will sell it out, and then we'll recycle. You see that we are doing a transaction with the sponsor, Jean, on Malaysia and Vietnam. The yield is about 7.5%, 5 to 5.5, 7.5. 7.5%. Yeah. Okay. Sounds really good. All right. Thank you. Yep. No more questions, please? Okay, next is Yu Jia. Hi, Yu Jia. Hi. Thanks. Also, on China. Can you give the breakdown in terms of rent reversions for this quarter between tier 1 and tier 2, tier 3? Looking at your lease expiry for this year, 13% coming from China. How much of that is coming from tier 2, tier 3 cities? Lastly is on acquisition and divestment. Given where your share price is and where your gearing is it safe to assume that acquisition is going to take a back seat? If so, are you likely to focus more on divestments? If that's the case, is it going to be the same amount of quantum that we are seeing in this financial year end? That's it. Okay. Quite a lot. Let me take the first two questions. For China itself, Yeah most of the expiries in Q4 were, 94% were from tier 2 cities. All right? So tier 2, the rent reversion was negative 11%, and the tier 1 was slight positive 2.2%. Yeah. And Yu Jia, I was just confirming the numbers with Jean. This year, we did 1.1 1.1 billion. Then we managed to pull off an EFR sometime last year, March. Yeah, sure. Yeah. Before things went even more downhill. I think you are absolutely right. Cost of equity, looking at where our share price is, cost of debt, where the individual countries are going. We really have to rely a lot more on the recycling strategy. That means we will divest and then recycle from low yielding and then recycle it into higher yielding assets. That will drive us. The other thing is, we will continue to divest coming out from Malaysia, we will continue to divest in Singapore, China, Hong Kong, maybe some more from Japan. To answer your question, the pace we are looking at, we are looking at about SGD 200 million to SGD 500 million for this new financial year. It very much depends on our recycling strategy. Okay. But it seems like all your divestments are pretty small. Yeah, I think that is the interesting part. Yeah. Yeah. You see that, this is the comment I get, because, but if you track us, we have divested almost SGD 1 billion. Yue Min, correct? Or more than SGD 1 billion. We have really divested SGD 1 billion over the last five years. MLT is a very old REIT. We started in 20- 2005 20- 2005 2005. 2005. So we have a lot of old assets to sell, Yu Jia. Okay. Hopefully, we can get the price that we have. I think I always tell you guys, SGD 500 million that I would like to get rid of. So it is still there. It is still sitting on my books. They are not empty. Some of them 100% doing very well. So we will continue that. The thing is, we want to divest when we have a positive acquisition. That means we are not going to divest and hollow out our revenue while we wait for new acquisitions, because these assets are still hitting 100% occupancy. We still see positive rental reversions. These are not in China. So that is where we are coming from. The other interesting point of how we can make our divestment more interesting is the pairing of assets. For example, if we buy SGD 200 million, I buy JPY 100 million Japan, I buy SGD 100 million, let us say in another country, and then if I am able to pair it together and then raise a gearing of 50 using majority Japanese yen debt, the accretion is enhanced. Because you know that at MLT, we do not, Shamir, we do not do what we call- We do not over-gear in the currency. Oh, okay. Yeah, but we gear up 90 odd percent of JPY. You don't do mortgage type of financing. We borrow at the MLT trust level. Right? When we go to the banks, we are able to look at raising loans as a combined basis versus, I'm buying an Australian asset and I need to pay Australian interest rate now is how much now? 5.5. 5.5%. Yes. But if I don't buy Australia and Japan, I put it 2 together, and then I can raise more JPY debt, then the acquisition can be more interesting. These are the avenues that we will look at. I think to add on to Kate's point, I think what we were trying to say was because we looked at it on a portfolio basis, so like for the acquisition we did in the beginning of the year, some of it we actually took on Chinese yuan loan because we were underrated in terms of the Chinese borrowings. In the past, we had always funded our Chinese acquisition with equity. But then, now there's an opportunity and the Chinese yuan loans are of a lower interest rate, so we actually borrowed more Chinese yuan to actually catch up on our capital hedge with regards to Chinese yuan. Yes. I think that is where the diversification of our portfolio has helped us to provide a base that we can still be quite active on acquisition, Yu Jia. I am not ruling out acquisitions. Okay. I just want to go back to slide 34, that 13.2% from China. How much is tier 2, tier 3? Slide 34. Yeah, that green bar there. 13.2%. How much of it is tier 1, tier 2, and tier 3? What is the split? I would say almost 80%-90% will be tier 2. Tier 2 and tier 3. Tier 2, tier 3. Yeah. Okay. That is it for me. I will jump back to the queue. Yeah. Thanks, Kate. Yeah. Okay. Tan Xuan. Hello, Tan Xuan. Hi. Good evening. My first question is on acquisition. Is the quantum also SGD 200 million to SGD 500 million that you're looking at? What geography looks interesting to you now? We are already doing SGD 200 million plus coming from sponsor. Jean has mentioned that. There are some more Vietnam assets and India assets that we can take from the sponsor. If you talk about being the easy way out, there is Vietnam and India coming out from the sponsor. If you look at third-party acquisitions, we are watching it. We hope that the prices will come down to more realistic level, then we can do the recycling. To answer your question, SGD 200 million through SGD 500 million, we're already doing SGD 200 million. Will we be able to do another SGD 200 million? That's a possibility. Okay. Second question is on rent reversion for FY 2025. Do you think the balance of the 60% of the lease expiry from other countries will be sufficient to offset the China weakness? We think so. You are talking about FY 2024, right, not FY 2025? So, 2024/2025, the next financial year, basically. Should we still expect positive rent reversion on a portfolio basis? That is right. We are confident of overall positive rent reversion. Yes. On constant currency basis, we are confident. The only big part that we get hit very badly is actually on the ForEx. You look at, for example, this year, without ForEx, our revenue have gone up year-on-year of 3.6%. But with ForEx, it is 1.2%, a decline of more than 50%. So that will be the main factor that will hit our top line. Got it. Lastly, cost of debt. I think previous guidance was 2.9% for next financial year. Is that still the case? Yeah, 2.9%. Then, depends on your view, Tan Xuan, you are from Goldman Sachs. Yeah. Unless everybody is telling me, "Kate, hold your breath, it's going to be longer." So, 2.9%, 3%, the cost of debt. Yep. Okay. Yeah. Got it. Thank you. That's all from me. Thank you. Okay. Jonathan? Hi, Jonathan. Hi. Thanks for taking my question. I hope you can hear me clearly. I have two questions. First question relates to the currency translation loss of SGD 470 million. It looks quite big. Which are the major countries contributing to this loss? I presume this is mainly translation. Secondly, can we have a breakdown of the occupancy in China into tier 1 and tier 2? I read that a lot of the new supply is coming from actually tier 1 city. Is there some risk that we may have some deterioration in occupancy for your tier 1 portfolio? Okay, I will take the China question first on the occupancy. The breakdown for Q4, we are looking at tier 1 is 95.6%, tier 2 is about 82% plus. That is the breakdown. Yes, there is some softness towards the end of last year in terms of vacancy rates in tier 1 cities, including Shanghai, because there was quite a huge new supply coming into Shanghai, in Songjiang District, and that affected the market dynamics. We are confident because in Shanghai, our assets are located more closer to the city of Shanghai itself rather than in Songjiang District. That is for Shanghai. That is where most of the bulk of the resupply was concentrated in the outskirts. In Guangzhou, again, Guangzhou is very supply limited market and our location near to Baiyun Airport is quite a key location for logistics. We are confident that we can achieve above 90% of occupancy rates. Do you have exposure to, let's say, Beijing? Other Tier 1 cities like Beijing? No. Guangzhou, yeah. Mm-hmm. I think Guangzhou and Shanghai. Okay, thanks. Shall we? Okay. In terms of the FX, the translation on IP value is about SGD 417 million. JPY is down year-on-year 11%. Currencies like Vietnam dong, Chinese yuan, ringgit, they are all down about 6%. The rest of the currency is down about 2%. But, in essence, for the financial year, every single currency that we have exposure to is down against us. Yeah. Unfortunately, Sing Dollar quite strong last financial year. Hopefully that reverses in the new financial year. Yeah. Thank you very much for the update. Thank you. Thank you, Jasper. Okay, Brandon, you want to try unmute yourself, see whether we can hear you. Hi, Brandon. Yeah. Hi, can you hear me? Is it good? Yeah. Yeah. Okay. I just want to touch on a bit on the China valuation. Just looking at your guidance or reversion of what you have achieved, do you actually think that the unchanged cap rates are kind of fair in this market compared to some of these secondary portfolios that are on for sale? I do hear that they are up for sale between 7% and 9% cap rate. Yeah, that's my first question. My second question would be, based on what you have sold, are you able to share how much divestment gains there are left for FY 2025? That's my second one. And the last one would be, your stock is now trading at 3% discount to NAV. Would you be open to doing partial share buyback? Yeah. Thanks. Yeah. We are. Yeah. Share buyback. Yeah. We are open. Yes. Okay. Let's take the simplest question. Are we open to share buyback? Yes. And then the other questions, please. The one on divestment gains. In terms of the divestment gains, we have a balance of about SGD 10 million, including the completion of what we have announced. So we have two Malaysian assets that we have announced but not completed. So including the divestment on those assets, as well as whatever completed this financial year, we have about SGD 10 million. For FY 2024. Well, that is unutilized that we can use in the new financial year. Yeah. In FY 2024, we will make further Yeah divestments, and then we will build on that divestment gain. Yeah. Okay. So on the And the most challenging, yeah. Yes, on the China cap rates. Yes, we have also actually, I believe this is adopted, an advice given by our It is a view taken by our valuers. We have also asked the same question, why there are no movements? Simply because, there is actually no transactions that they can take. It is due to lack of transactions. But if you look at the valuation year on year, it has actually dropped. The drop is primarily caused by this weaker rental reversion, lower rental, as well as the lower occupancy. That has impacted the year on year drop, no doubt that there is no change in the cap rate. If you are just looking at that, Kate, your outlook on China seems very uncertain. If we fast-forward to FY 2024, 2025 valuation, is there a good chance that that may actually come down? I think if you are looking at constant currency basis and then looking at just cap rates alone, I think the question is, will we see cap rates expansion? Expansion. Yeah. I think right now it's difficult to give you an answer. The reason is because we do see Chinese capital chasing some deals, because we're out in the market to sell, right? We do see Chinese capital chasing some of these deals. These are no longer the offshore guys. These are the onshore guys. Let's see whether the transactions materialize. If they do, then we have a greater clarity. But yeah. Are you able to share what is this Chinese capital looking at in terms of yield? I think they are looking at between 5%, around 5%. Okay, great. Thanks so much, Kate. That's all for me. Thank you. Yeah. But that is for the general, but if you are talking about more prime or so-called very tight supply micro markets, maybe we can get slightly better pricing. But yeah, that is where we are. Okay. Okay. Next, we have Terence, UBS. Hi, Terence. Hi. Good evening. Can you hear me? Yes, Terence. Go ahead. Hey, thanks. For the arrears, can I just clarify the understanding? Is it fair to assume that while we say arrears, that this will actually be written off as opposed to it being collected at a later date? Arrears, basically, it means it will be collected. You make provision for that. We only make provisions when it's doubtful that the tenant will be able to pay you. So we did make provisions last year. There was some that was made last year. This year, not so much. Much lesser than last year, actually. So yeah. But definitely the number that we're reporting is what we intend to collect, not what will be written off. Yes. Okay. Terence, does that answer your question? Yeah. I'll have a think about it. But I'll just move on to another question. With regards to divestment gains, do you mind reminding us, in the past, what is the divestment premium percentage that is achieved, and is that premium expectation this year likely to be much lower? For the year transaction, the average premium that we achieved was about 13%. Is this FY 2024? Correct. 2023, 2024. 23. Okay, and- FY 2023/2024. Moving ahead. Yeah. Looking at FY 2025, is that percentage going to come down? It is very likely, yes, because the market is softening. Okay. We will still get gains because of the advantage of being a very old REIT, as you know, we got in at prices that were much lower, say about 10 years ago. The thing is, in terms of buyers' appetite, we are going to see more competitive pricing. Yeah. Okay. And just another question, what is the financial impact of the solar power generated, if any? What is the solar energy? The financial impact. You are talking about contribution to revenue or the NPI yield or the returns we can get? We can get high teens. Anything. Mm. Okay. In terms of solar energy, our returns on investment is in the high teens. But I think in terms of contribution to our revenue, not say like 10%, maybe less than 5%, 2%? Yeah. Got it. Thank you. It is about 2%, right? Yes, although 2%, 3%, less than 5%. Yeah. Terence, I think just to give you some numbers in terms of the loss allowance, the provision for bad debts. Last year, we provided for SGD 1.9 million. This year, it is only about SGD 200,000. Okay. I should think of this SGD 200,000 as incremental to the SGD 1.9 million as of the latest date? It's the P&L, yes. Okay. Got it. Thank you very much. Okay, our next, Vijay. In the interest of time, can we keep it to max two questions? Hi, Vijay. Yeah. Hi, Kate. I have a couple of questions. Maybe I'll take it one by one. My first question is again pertaining to the divestment gain. Considering that you have about SGD 10 million in divestment gain for this year, the total divestment gain for this year seems to be a bit high. What is your policy of divestment gains? Will you be fully distributing all the divestment gains in the financial year? And will you also be looking at returning on DRP for this year? In terms of divestment gains, depending on the divestment gain quantum, we could distribute over four quarters, eight quarters. Yeah. This year, we did make most of the divestments this year. We distributed quite a fair bit this financial year. Yeah. For next year, we will have to consider divesting if it. That will contribute to the divestment gain distribution if any. In terms of DRP, we will continue for the new financial year. Vijay, I think if your question is, do we have a policy of how we distribute our divestment gain? We don't have a fixed policy. We will distribute the divestment gain four quarters to eight quarters, because anything beyond eight quarters, I think it's quite meaningless. We are going to keep within that kind of ratio. That means whatever you divest, you should see it in that year. If not, the gain will be to the following year, but that's max. Okay. We don't intend to hold that gain on our books. Got it. For now, yeah. Got it. I was just looking at it from a smoothening of impact from a borrowing cost perspective, when more of it will come in next year, would you be looking at it. But yeah, I got the idea. Yeah. My second question is, in terms of asset enhancements, what kind of ROI are you looking for 51 Benoi Road and Malaysian property asset enhancements? For the 51 Benoi Road, are you looking at a single tenancy or multi-tenancy? Is there any update in terms of occupancy? For Singapore and Malaysia, the ROI It is about this 51 Benoi. are quite different. For 51 Benoi, both properties, we are looking at a multi-tenancy. We are not looking at a single tenant. What is the progress? For 51 Benoi Road, it is about 22%, 23% completion really, as of 4Q. In terms of the target yields we are looking at for Singapore and Malaysia, we are looking at close to 6% for Singapore and more than 7% for Malaysia. Yeah. Got it. Sorry if I may squeeze in one last question. Your sponsor has a huge pipeline of China assets. Considering the market condition at this point in time, do you think it is a market to bottom fish, or would you be passing on these assets to third parties eventually? The sponsor has set up a China fund. I am not sure whether you are aware. That is an evergreen fund. This fund takes on more development risk. Some of the assets may be attractive for this fund. As far as MLT is concerned, we stick to our investment discipline, whether it is from sponsor or from third party. It has to be accretive. We are not going to buy from sponsor just because it is from sponsor. Got it. Thank you. That is all I have. Yeah. We are not going to be buying China for the next 12 to 18 months. That is clear. Thank you. Until we see China recovering and then there is potential for rental reversion upside and there are some assets that are coming from the sponsor that we consider. But if not, no. Discipline. Okay accretion does not change. Got it. Thank you. Thank you. Okay. Rayson, HSBC. Hi, Rayson. Hey, Anne. Hello. Just wanted to check, for the cap rate for the recent Malaysia acquisition, about 5.7%. Just wondering if it is a little bit under rented, because I think it seems to be a bit tight compared to your valuation cap rate of about 6.5, 6.75%. Then maybe moving forward, if you are likely to acquire at similar cap rates from your sponsor. Okay. I think, just to take a step back, Rayson, we just mentioned just now that if we do our own AEI in Malaysia, we are looking at 7% yield on TDC, meaning construction. Because there is going to be a profit margin that any seller will look at, therefore, when we buy from sponsor or buy from third party, we are not going to get the 7% yield that we are talking about. Right? Jean? Okay. Right. We recently bought at 5.7%, but the valuation that we have is in the range of 6.5%-6.75%. Yeah, like in the middle. Okay. For the 5.7%, it is the NPI yield that we are looking at. Yeah. Versus the cap rates in Malaysia, that is typically a gross basis. Yeah. Jean is trying to say the valuation, the cap rate that you are seeing in the presentation is basically a gross basis. a different Methodology. Yeah. Yeah. Typically, I think in the market, they value based on the gross basis because I think the fee structure and expense for each of the country is different. For Malaysia, what is in there, 5% to 6.75% is a gross basis. For us, the NPI yield that we acquired from the sponsor of 5.7% is after the management expense. Okay. Got it. That's very clear. If I can just squeeze in one more. Is there an update to the Hong Kong divestment? Is it still pending regulatory approval? Yes. It's pending regulatory approval for the potential buyer to bring his funds out from Beijing. Okay. I think- Not much clear. Yeah. Yeah. I think it's one of those very uncertain debts. I think we have activated other potential divestments in Hong Kong, which we will disclose when we get there. But what we are seeing now is buyers from China, we have to be very careful because the ability for them to bring funds out from China is subject to a lot of regulatory processes from central government. It also depends on their business. It also depends on their personal track record with the government. I think the lesson we learned is dealing with Chinese buyers, for them to bring out offshore money is going to be very tricky. Okay. Got it. Thank you, Anne's team. Okay. Terence, JP Morgan. Hi, Terence. Hey. Thanks, Anne team. Just wanted to ask, could you clarify a little bit more on the bad debt provisions again? Was it SGD 200,000 for FY 2025 versus SGD 1.9 million in FY 2024? Yes. So I think- FY24 Yes. This year is SGD 200,000. Last year was SGD 1.9 million. Yeah. Maybe because I think last year we have shared before that we had a Marine- And Marine and Marine, Malaysian tenant that was giving us some issues, haven't paid rent for a long time. Yeah. Because there were court hearings and all that, we made a full provision for it. Also, I think the end of last financial year, we had one of the tenants in China, Suning, I think they went bust. So, we also provided in full for that. This year, 219, it came from smaller tenants. They're also not doing well, and there were doubts in full for collections, but it's more managed numbers as compared to last year. And I think James' side would proactively look into the collectibility, and if the tenant shows signs of default and all, we will look at replacing them ASAP to reduce- Yeah or manage the bad debt. Terence, does it clarify? Yes. You know? That is very clear. Thanks. Okay. Could you also share on the same-store valuation change by country? Okay. Same-store valuation. Can we collect the numbers on that? No, put in with FX, whatever, yeah. Terence, can we come back to you? We will get the numbers. Sure. Thanks. That is all I have. Thank you. Yeah. Okay. Shall we move on to Dale? Dale from? DBS. Hi, Dale. Yep. Hi, Kate. This is Dale from DBS. Thanks for taking my questions. I actually have two questions. Firstly, with regards to your FX hedging, I think it's fantastic that you are able to hedge up to 8 years. Just want to understand, is this a mechanical process? How do you do it? How do you decide what kind of proportion to hedge up to 8 years? Where I'm really coming from is, I'm just trying to find out when will the bulk of the impact from FX, the FX impact to your earnings, really be seen. Okay. The 8 years that we're looking, we're talking about is for JPY alone. We took this as a strategic head-up approach because of the volatility of, past volatility of JPY. As mentioned earlier, we start doing the hedges. Like now, we will hedge 8 years because we get a discount. So 8 years ago, we would have locked in certain percentage, and then as the year passes, we will do it progressively. Immediately for the next 12 months, about 87% of DPU has been hedged. But if you look 8 years ahead, only 16% has been hedged. Of course, the rates may not be as good as what we did years ago because of the current levels that we are looking at. Notwithstanding, there is still a discount from the 114, 116 levels that we're looking at. Okay. Dale, is that- So- Okay. Okay. Meaning this hedging is dynamic and then according to currency now. You guys will decide as and when you think it's a good time to hedge more or not. Correct. We monitor the market, and JPY is the one that goes the longest tenure. If you are looking at the other currencies for Hong Kong dollar, AUD, we're looking at 2-5 years. Okay. Got it. My second question here is, back to China. I think it is good that you're looking at divesting some of the older, lower spec properties. Just now, I think, Kate, you mentioned that there could be some gains from the reclassification of one of the property, right? Yes. But in general, should we be expecting some losses when you divest the China asset? Is this the best time to be divesting? Also because, like you mentioned, your valuations there held up because of lack of transactions. But once you start crystallizing these values, will it actually impact your portfolio? Yeah. I think, in terms of divestment for China, we will be able to get gains from the older assets that we bought much longer ago, primarily because the real estate prices at that point were lower. That is one angle that we will be using. Then in terms of if you are talking about the assets that we recently acquired and then now because of excess supply, rentals actually come down and we are going to divest those, then definitely there will be a loss. I mean- If you look at our Yeah. I am not exactly sure which angle you are looking at, but if you look at our annual report, you may correct me if I am wrong, we have the purchase price, and then we have the valuation. If you look at our annual report, look at our China assets, you have a good feel of where the valuations are and where the original cost was. To generalize, the older the assets are, the higher the chance we have of getting a divestment gain. Mm. Compared to your initial acquisition, definitely, there's a high chance of getting a gain. Just wondering how, compared to your latest valuations, are you able to get divestments at valuations or there could be even more downside from current valuations? Okay. I think we tend to take a very practical view in our valuation. Valuation exercise is one that we do every year. We do not just take whatever values that the valuers give those to us. We actually challenge them, and then we actually ask for proof of transactions. Even if there are, like what Jean said, even if there are what we call no visible transactions, meaning especially in China, it could be one SOE selling to another, so you don't get great visibility, you don't get actual third-party arm's length kind of transactions. From there, we have a gauge as well. To answer your question, is our valuation realistic? I would confidently say that 99%, it should be realistic, meaning that we should be selling at valuation, if not higher, but I don't see us selling below valuation. Okay. Got it. That's clear. Because the valuations should have come down. That means if you look, the valuations should have come down compared to the original cost. Yep. Okay. Got it. Yep. Thank you. Okay. Shall we go back to Terence, from JP Morgan? Thanks on the- Yeah. Can we answer Terence's question? Can we come Country by country. Country by country. We don't have to give consolidated. I'm sure they can add it up. Okay, I'll just cover the country. For Singapore, on a same store basis, it's a 2.6% increase. Okay? For China, it's a drop of 1.1% year-on-year. For Hong Kong, it's an increase of 2.1% year-on-year. For Malaysia, excluding the divestment, just on the same store basis, it's a 1.5% up year-on-year. Japan, on same store basis, 3.4%, excluding divestment and acquisition. Korea, negative 1% on same store and in local currency. Vietnam, 4.2%, up. Australia, dropped by 8.1%. India, increased by 2.9%. All the figures I've mentioned are on local currency basis and excluding divestment and acquisitions. It's like-for-like on same store basis. And sorry, if I may- Terence, just ask on Australia, it seems like a very substantial drop. Could you highlight a little bit more on that? Yeah. For Australia, I mentioned earlier in terms of the CAP rates movement, it's quite a lot- It seems so dramatic. of 75 to 100 basis points. For Australia, same store dropped by 8.1%. Yeah on local currency basis. Yeah. Okay, thanks. Okay. Tam, James, do we have another question? Okay. Only Mervin coming back. Mervin, you still have one more question, is it? Yeah. Just wondering, what is the rental reversion guidance ex-China? Yeah. Is it going to accelerate from here? I mean, Singapore's been accelerating. Yeah. You can read the rental reversions for us, the different countries again. Yeah. Repeat the rental reversions for- Well, I was asking for outlook rather than actual historical- Oh your thoughts, yeah. I think the outlook for the portfolio for the next few quarters will be ranging around this level, between 2% and 3%. Yeah. Including China. Okay. Including China. Including China. Can I get a sense that, I mean, basically a tone that the DPU could still be falling this coming year? Would that be correct given potentially lower amount of divestment being Yeah distributed, FX, interest rates? Yeah. Yes. Yeah. Okay. Mervin, you haven't given up on us yet, right? No, I'm just wondering what I mean, it's quite cautious, but is there something else which should be Yeah positive we should look at? Yeah. Hopefully the next round of results you guys are still on the call. Yeah. I'll probably be on the call. Yeah. I mean, that's- There's a way- still good sign. Yeah. Yeah. Yeah. Go ahead, Mervin. Very positive. How close are we to a low in terms of the DPU performance? Does that make sense? How much about the, all the Are we close to FX, close to the end of the FX headwinds or how we should be thinking about that? Borrowing costs seem to be- I think on the Yeah. Yeah. I think, Mervin, in terms of macro, I think, you know, you may even have more information than us, right? So I think the replacement of new loans at higher interest rates, we are not done yet. Our loans- You can see our, we showed that, right, just now? Yeah. The expiries of our loans. You will see that impact if you put in, you know, whatever you estimate, you would have a feel of the impact. Then the outlook on FX, you will have a feel on the impact. The only good part is, you know, the hedges will help a bit, right? But it will not be able to cushion 100%. That will be the main headwinds that we are not able to control very much. But in terms of the portfolio itself, like I keep on telling our team as well, 20% from China, you have 80%. Out of the 80%, 10%, not large, but coming from emerging markets like Vietnam, Malaysia, India. That we'll still continue to see growth. Really, you're going to have to bank on the Singapore, Hong Kong, Japan, these large mature markets that have demonstrated very deep markets, very deep tenants relationship and supply in a very manageable way. We're not seeing like excess supply being dumped into the market. What I hope is the 60% or 70% of MLT portfolio will be able to cushion some of the negatives that we'll see from the, you know, treasury side, the interest and the FX. We think that, you know, the DPU will continue to come down, yes. Mervin, don't get carried away with the JPY rates like this here on the call. Yeah. No, I appreciate that part. It's just, everything all adds up. It's, it's- Yeah outside your control. Yeah. So- hopefully next quarter you got slightly more positive news to share with us. Yeah. Yes. Yes. So I think that we are entering into, you know, a time, a period where, you know, the uncertainty, the volatility are a lot more pronounced. Okay. Anyway, hope the teams are good teams will be very hot. I think FX- We hear the sign of Mervin. down the question. Okay. Thank you all. That is all we have. Anybody has any last question or last words that you want to get onto the call? I do not see any more raised hands. Okay. I guess we got. Anyway, thanks for joining this rather long call.