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Mapletree Logistics Trust
Earnings Call Analysis
Q4-2024 Analysis
Mapletree Logistics Trust
For the fourth quarter of fiscal year 2023-2024, the company saw a modest increase in gross revenue by 1.2% year-on-year, ending at SGD 181 million. Net property income (NPI) rose by 0.6% to SGD 155.3 million. However, the distributable per unit (DPU) fell by 2.5% to SGD 0.02211, driven by higher borrowing costs, and weaker performance from China, as well as currency translation losses from regional currency weakening.
The company's portfolio maintained stability with an occupancy rate of 96%. The average rental reversion was a positive 2.9% including China, and 7.1% excluding China. Despite challenges, the portfolio saw constant rejuvenation, concluding the quarter with 187 properties after divesting a Singapore property and acquiring one in India. Notably, the company announced proposed acquisitions of three Grade A assets from its sponsor, valued at approximately SGD 230 million located in Malaysia and Vietnam.
Revenue for Q4 increased mainly due to contributions from acquisitions made earlier in the year and higher contributions from existing properties. However, this growth was mitigated by an 8% year-on-year revenue decline in China and currency weaknesses. On a constant currency basis, gross revenue and NPI growth would have been 3.6% and 3%, respectively.
Borrowing costs increased by 6.9% due to higher average interest rates from unhedged loans and expired hedges, partially offset by loan repayments funded through private placements and divestment proceeds. Despite cost management efforts, the leverage ratio increased to 38.9%, and the average debt maturity stood at 3.8 years. About 84% of the total debt is hedged into fixed interest rates.
In anticipation of rising interest rates, the company stabilized interest costs at 2.7% but expects this to increase to about 3% in the new financial year. Approximately 78% of distributable amounts over the next 12 months are hedged into Singapore dollars, reflecting proactive currency risk management.
Balancing growth with sustainability, the company reported that about 39% of its portfolio is green-certified, generating nearly 59.8 megawatts of peak solar energy. During the quarter, it issued a maiden SGD 75 million green bond under its Green Finance Framework.
Looking forward, the company aims to continue its portfolio enhancement strategy, targeting acquisitions worth SGD 230 million in Malaysia and Vietnam. Despite current headwinds in China, the firm looks to stabilize its performance by leveraging mature markets like Singapore, Hong Kong, and Japan. The company remains cautious yet optimistic about achieving overall positive rental reversions amid market volatility.
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Hi, good afternoon. Welcome to MLT's results presentation for the fourth quarter and full year ended March 2024. We've 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 4Q FY '23-'24. So for the 4Q, 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 SGD 0.02211 versus the SGD 0.02268 we announced last year. In terms of our portfolio, our portfolio remains resilient. Portfolio occupancy remained stable at 96%. Average rental reversion is a positive 2.9%, including China. Excluding China, we are looking at a positive 7.1%.WALE remains at about 3 years. Full -- capital management-wise, our leverage ratio is at 38.9%. Debt; about 84% of our total debt has been hedged into fixed rates with an average debt maturity of 3.8 years. About 78% of our income for the next 12 months has been hedged into Sing dollars.So we continue to be active in our rejuvenation of the portfolio. We started 4Q with 187 properties. We completed the divestment of 73 Tuas South in Singapore -- and completed acquisition -- 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 the proposed acquisition of 3 well-located Grade A assets from the Sponsor of about SGD 230 million; 1 in Malaysia and 2 in Vietnam.In terms of sustainability, about 39% of our portfolio is green certified, and we are generating about 59.8 megawatts peak of solar energy. And also during the quarter itself, we issued our maiden SGD 75 million green bond under the Green Finance Framework.So going into the details of 4Q results. So 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 based on the hedges that have expired during the financial year, this is partly offset by -- as well as incremental borrowing costs to fund the current year's acquisition.Then this is -- 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%, while 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 terms of gross revenue, NPI, borrowing costs are largely the same as 4Q this year versus 4Q last year, so we are reporting DPU of SGD 0.09003, which is 0.1% lower than SGD 0.09011 for the full of last year.On quarter 4Q versus 3Q 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 4Q as well as currency weakness, which is down by -- 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 4Q versus 3Q and borrowing costs increased due to higher average interest cost -- interest rate partly offset by loan repayments with the proceeds from divestments. The DPU is SGD 0.02211, 1.9% lower than SGD 0.02253 in 3Q.Our balance sheet as of 31st March 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.Debt 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. So 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% compared -- I mean 2.7% this year compared with 2.7% last year. The interest cost is kept stable, notwithstanding the rising interest rate environment, mainly because of the proactive capital management we do.So this is due to, I mean, number one, borrowing 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 remained stable at 3.8 years and interest cover and interest -- adjusted interest cover is at 3.7x and 3.1x, respectively.So, 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. Green financing totaled 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.And the next slide would be the distribution details for this quarter's distribution. I'll now hand over to James to go through the portfolio update.
Hi, everyone. So, James here. So I'll 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. In 4Q, we registered 96% occupancy, unchanged from the previous quarter. Most of the countries recorded a stable occupancy rates, except for Korea and Australia. In Korea, there were lease expiries in 4 of our properties; the older spec property that we have in Korea. And in Australia, it was due to a non-renewal of a small lease in Brisbane, [Indiscernible].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 positive 7.1%. Also, China rental reversion rate was a negative 10% in 4Q.So, overall, we have a well staggered lease expiry profile in the next few years. And our Top 10 tenants now contribute about 22% of overall gross revenue. And 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.
See, on the active popular rejuvenation. So in the financial year '23, '24, we have acquired over SGD 1.1 billion in acquisition of 12 modern Grade A assets, announced and/or completed in this FY across the developed and high-growth markets. So we have acquired -- in the financial year, we have acquired 8 assets across Japan, Korea and Australia with a total value of SGD 900 million. In the recent quarters, we have also acquired 4 assets or in the process of acquiring 4 assets in these emerging high-growth market to capture demand from the growing consumption hubs of Delhi, Kuala Lumpur, Ho Chi Minh City and Hanoi.So, in February, we have completed the Delhi asset. And in the same month, February, we have signed SPA to acquire 3 assets from our sponsor; 1 in Malaysia and 2 in Vietnam with a total value of about SGD 240 million. With the 4 recent acquisitions, it deepens our footprint in Malaysia, Vietnam and India. So this offer attractive fundamentals are driven by positive drivers such as the strong economic growth, growing consumption across these 3 markets as well as the uprising urbanization in this market.It also offers us favorable secular trends. As you can see, the supply chain diversification post pandemic as this steady e -commerce growth and as well as there's still limited Grade A warehouse supply in these 3 markets, and all these presents growth opportunities for MLT. So with this exposure to developing markets, it augments MLT growth and, at the same time, complement stability from the developed markets from the recent 8 assets that we've acquired in Japan, Korea and Australia.Next, as part of the MLT ongoing asset enhancement plan, we have identified 2 projects with total development cost of about SGD 380 million. So the first one is on this Subang asset enhancement. We have strategically acquired 2 land parcels in Subang, and we are currently in the process of seeking approval from authorities for amalgamation with our existing MLC 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 spec, which is about 5x the increase from Subang 3 and 4.The next project is on this redevelopment project 51 Benoi. This is currently ongoing. We have started construction in July last year and expected completion in first half 2025. And also as part of MLT active portfolio rejuvenation strategy, we have divested over about SGD 200 million of older specifications with limited redevelopment potential. So we have sold 7; 3 in Malaysia, 3 in Singapore and 1 in Japan, and 2 assets are under the selling process. We have 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 about SGD 13.2 billion, 3.2% higher year-on-year due to acquisitions of 9 assets as well as capital expenditure incurred on existing MLT assets and 51 Benoi property that's undergoing redevelopment. This was partly offset by divestment of 7 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's mainly attributable to properties in Australia, China and Korea and offset by the gains in the 6 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'll start out with Singapore. So for Singapore, there is actually no change in the cap rate. In terms of Australia, there is a cap rate expansion of about 75 bps to 100 bps. However, this is partly mitigated by a strong rental growth. In China, there is also no movement in the cap rates. What we are seeing here is that in March 2023, it was the gross cap rate that was adopted, and then there was a change in valuers. 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 movements on the cap rates, as according to the valuers, there are actually no transaction.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, and 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 a 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 and the portfolio valuation, there's a slight decline, It's because we have sold 3 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's a slight expansion, mostly about 10 bps -- and also at the same time, there was -- on the same-store basis, it declined due to the lower rent size or the lower specification assets in the Korea market.For Vietnam, there's no change in the cap rates and then the same-store valuation increased in Vietnam due to the rental growth. So all in all, that sums up, including the right-of-use assets, the short-term value we're looking at for MLT portfolio valuation is about SGD 13.2 billion for this year.Yeah. I think that sums up my slides on valuation.
Yes. Okay. So, 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 1 and 2 emissions by 2030, which is in line with the Mapletree Group's long-term goal of reaching net 0 emissions by 2050.So, we are focusing on 2 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 among actuaries today.For green buildings, our 25 new buildings got certified this year. So, 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 reach -- to achieve green certification by the year 2030.Just a couple more points. Green financing. I think just now Charmaine mentioned that we issued our first green bond, SGD 75 million under our Green Finance Framework, which recently got second-party opinion from S&P, and this will be channeled towards eligible projects like in green buildings and renewable energy. And for the third year running, we have planted an additional more than 1,600 trees across our platform. So that is under the Plant-a-Tree with Mapletree initiative.And in line with this effort, we are pleased to share that we have -- we have attained a 4 Star rating under GRESB as well as being named a joint winner by SIAS for the Singapore Corporate Sustainability awards under the REITs category.So with that, I'll now hand over to Kiat for the -- for her outlook.
I think this quarter, we see the first DPU decline for MLT. So I think we're one of the last few weeks 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.So I think we have been telling investors, we've been telling analysts and the message, unfortunately, will have to continue. The -- so on the macro side, the ForEx as well as the higher interest rates. Then on the operational side, China continues to be weak than -- weaker than what we would like it to be. James, did you give the rental reversions?
I can go through now, the rental reversions?
Yes.
So, overall, the rental revision for 4Q was 2.9% compared to 3.8% in the previous quarter. So Singapore had highest rental reversion of 11.1%. This was due mainly to the strong demand for ramp -up properties, which continue to be short in supply in Singapore, followed by, 4.0%; Malaysia, 3.1%; Korea, 2.6%; and China, negative 10%, which I mentioned earlier.
So 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. But I don't think we are seeing it now. We'll have to wait for a while. So, if you look at the stability of our portfolio, 20% -- 19.2%, 20% of revenue comes from China. The emerging markets, Malaysia, Vietnam, India, about 10%. So 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.So 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%. So if we are able to push these 3 markets and deliver stronger results, then it will compensate for what -- for the weakness that we see in China.So 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 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 stores, such as electronics. So we're seeing this movement coming in our portfolio in the other countries outside of China.So, I think the headwinds really for us can be summarized in ForEx weakness, higher interest rates in China. That will continue to hit us.
Okay, we now open the floor to questions. Mervin, you raised your hand, would you like to go first?
Maybe to start off with Hong Kong. I was looking at the JLL report for the March quarter, they noted a negative absorption, about 900,000 and vacancy rates seems to have creeped up to 7.3% from 5.8% in the fourth quarter. And rents are falling for the first time year-on-year and Q-on-Q. So a bit shock by that. Can you give us an update in terms of what's happening in the Hong Kong market? I still expect -- I presume we still expect positive rental reversions, but how are you seeing demand and I think next year, you have Hong Kong TN, which is the top 10 tenant. I think there's some renewals in June of next year, so maybe sign off with that.And then in terms of China, any guidance in terms of rental reversions, occupancy outlook over the next few quarters and whether we'll be able to collect some of the rental arrears which you disclose in the previous quarter.
So, I think for Hong Kong, the ramp-up access, the ramp-up warehouses continue to see very, very tight supply. So we will start to see this dichotomy and all this differentiation for better quality, flight to quality, if you want to call it that. So I think for a ramp up, we'll 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 up for ramp-up.And then, as you know, some of our portfolio in Hong Kong are rented to data centers. So these are very resilient users. And then we know that in Hong Kong it's very difficult to get power supply, increase in power supply. So, these are the assets that will continue to hold very good resilience in terms -- and I think recently, we did a rental reversion with one of them, James?
Yes. It was a double-digit rental reversion.
For one of our data centers in Hong Kong.
Yes. So, So, Mervin, just to add on what Kiat said; in Hong Kong, yes, what you mentioned about vacancy rates increasing, that was mainly due to a huge supply coming from the [Inaudible] over 4.5 million square feet at Chek Lap Kok airport, the China project. So we have -- so that is created mainly for the air freight and consumer-related customers and China, obviously, is only occupying part of the building. They are still trying to rent out the balance. So that is very unique product at the airport. So because of the excess capacity, it dragged down the vacancy rates in the market
And there are restrictions in terms of the tenants. So it's not at white base. That means not every tenant will qualify for use in that China property.
And for China, with regards to the guidance for the next few quarters, we believe the next few quarters continues to be uncertain in terms of the outlook, we're still looking for signs of recovery and not just any signs, but sustained financial recovery and we're still keeping our fingers crossed. So in terms of rent reversion, we're looking at low teens, negative low teens in the next few quarters.
In the Teir-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 don't see it going down below 90%. We're still hover around 92%, 93%. That's what we are posting now.
So I think I did not mention about divestment earlier. So we will continue with our recycling strategy. So we will look to sell some of the poorest [ rectification ] assets in China. And then, in fact, we're in the process -- James was in the process of evaluating -- quite close to closing some of those now. And then, of course, Hong Kong the lower spec strata-title units, these are also the ones that we will be keen to divest.So, Mervin, does that give you some...
Yes. But just in terms of -- any updates on the Hong Kong TV lease. It is expiring next year, and then I also asked about the rental arrears in China, have you been able to collect the rents which are past due? Thanks.
Yes. Hong Kong TV is one of the key tenants in [Inaudible] from -- we've been engaging with them constantly. So they are looking to what you call it, expand if possible. But at the moment, they are still taking cautious view. So we don't think there will be any movements on their end. And in terms of the reversions, like what Kiat has mentioned for Hong Kong, we're still looking at a positive rent reversions, particularly in TV warehouse, because it's still a good location, good spec warehouse, which is in a market that's short in supply.
Yes. So, the new supply that's coming up, like what James mentioned, is from Chek Lap Kok. So 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. So [Inaudible] much closer to the city than Chek Lap Kok and then compared to even Tuen Mun which is not as close compared to [Inaudible]. So, I think the location and also the specs of some of our ramp-ups are going to continue to be attractive for our tenants.
Yes. How about the China rental arrears? Have we collected those? People have paid on time?
For the China arrears, we are still -- we are monitoring closely, but we are seeing some tenants are still a bit lag in terms of the payment. But I think the ground team is actually monitoring very closely and then trying to extend certain helps in terms of maybe expanding installment plan for the tenants as necessary. But we are seeing signs of improvement in terms of the collections, yes. Especially this quarter, it has come down quite a fair bit, yeah.
I think last disclosed was...
Sorry?
Yes, it's including, like what [Inaudible] has mentioned.
Yes. Last quarter, I think it was 6% of annual revenues in China, which were in arrears. So has that ratio improve?
5.9%.
About 5.9%.
About 5.9%.
So, hasn't really changed much.
[Inaudible] So 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 at very healthy level. But reversions, that's something that we are going to be seeing negative double-digit, yes. And in the arrears, we are going to monitor for the next few quarters, but this quarter seems to be -- I mean, what we are seeing now seems to be strengthening from the last quarter.
Okay. I hand over to other.
Okay, Derek, DBS. I think you'll be next.
Hi, can you hear me?
Yes.
I'll just ask 2 questions. First one is on China again, right? If we look at China, I remember you mentioning that Tier 2 is only like half of your overall exposure. And just wondering, if you look at Tier 1 cities, while it's looking still fairly resilient, are you seeing signs of weakness, and should we be worried about it? That's my first question.
So, I think the -- 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's great for consumers, but is it bad for investors like yourself? I was just wondering, I mean, you're hedge all, how long is your Japanese yen hedge going to defend you against the current currency drop? Just wondering if you can give some color on that. So, yes, just these 2 questions will do.
The second question is easier to answer. Go on Charmaine.
Okay. So, specific for Japanese yen. I mean, our strategy was to hedge up to 8 years, actually. So immediately for the next 12 months, 87% have been hedged. And then, of course, progressively as the year -- second year would be a slightly smaller amount and then third year it would be a smaller amount, but it's all the way up to 8 years. So, for the immediate year, FY '24, '25 we set 87%, our hedge rate is at about 84%, 85% levels versus the current 115%. [Inaudible].
Yes. We are 84%, 85%.
Yes, so this is really because we hedged this more than like 7 -- a long time ago. So some of it as far as 8 years ago.
Yes. So, while we will continue to benefit it, but I think like what we are trying to say in our outlook section is, this hedges will gradually fall off and then the new hedges that we get in will become more and more expensive. So, while definitely for Japanese yen, we have this support at least for the next 6 to 12 months, yes.Okay. So, now back to your -- Tier 1 and Tier 2. So what is happening now is, in fact, we're in the process of divesting all specs -- all specification on China assets, some of them in Tier 1. And the reason is because if you look at it, the land tenure, some of them are going below 30 year. 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. Yes. 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 rental reversion. Okay.And I want to add on is, this has to be the better specification properties. So if you go through our annual report, you will see some of these older properties there with 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...
So you can't just generalize now and say all Tier 1s are going to be good.
Okay. Okay. But you have some land rezoned to commercial. So, meaning when you sell, it will be a big upside.
There will be divestment gain. But until we actually sell, until we actually get the money, then we will be able to have a better feel of what's the gain amount. Yes, but there will be divestment gain, yes.
Okay. Okay. Sounds really good. All right. That's all for me.
Yes. But Derek, we are entering negative GP zone, okay? So 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. So really, this is a part on the portfolio. And then we still have China weakness coming at 20%. So 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. Okay. Sounds good. We'll take note of that. Thank you.
So, we will continue with our recycling strategy. So low-yielding assets specs, we will sell it out, and then we'll recycle. So you see that we are doing a transaction with the Sponsor on Malaysia and Vietnam. And then the yield is about 7.5% -- 5.5 to 7.5%?Some more questions, please.
Okay, next is Yiew Kiang.
Hi. Also on China, can you give the breakdown in terms of rent reversions for this quarter between Tier 1 and Tier 2, Tier 3? And then looking at your lease expiry for this year, right, 13% coming from China. How much of that is coming from Tier 2, Tier 3 cities?And then lastly is on acquisition and divestment, given where your share price is and where your gearing is? Is it safe to assume that acquisitions is going to take a backseat? And if so, are you likely to focus more on divestments? And if that's the case, is it going to be the same amount of quantum that we are seeing in this financial year end. Thats it. Quite a lot.
Yes. So, let me take the first 2 questions. For China itself, most of the expiries in 4Q were -- 94% were from Tier 2 cities. So, Tier 2, the rent reversion was minus, negative -- negative 11% and the Tier 1 was slight positive, about 2.2%.
Yes. And you can be -- I was just confirming the numbers with Jean. I mean this year, we did SGD 1.1 billion, and then we managed to pull off an EFR sometime last year March. Yes, before things off, when even more downhill. Right?So I think looking -- you're absolutely right, cost of equity, looking at where our share price is, cost of debt where the individual countries are going. So, we really have to rely a lot more on the recycling strategy. So that means we will divest and then recycle from low yielding and then recycle it into higher-yielding assets.So that will drive us. And then 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. So, 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.
Yes, I think that's the interesting part. Yes, if you see that, I mean, this is the comment I get because -- but if you track us, we have divested almost SGD 1 billion, you may correct? Or more than SGD 1 billion. We have re-divested SGD 1 billion over the last 5 years. So each one is 2050, but we have divested a lot. So the MLP is a very old REIT. We started in 2005, and then -- so we have a lot of old assets to sell, Yiew Kiang. So, hopefully, we can get the price that we have. I think I always tell you guys, at SGD 500 million that I would like to get rid of. So it is still there, it's still sitting on my books. They are not empty. Some of them are 100% doing very well. So we are continuing to do that.So the thing is, we want to divest when we have a positive acquisition. So that means we're 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's where we are coming from. The other interesting point on how we can make our divestment more interesting is the pairing of assets.So, for example, if we buy SGD 200 million, I bought SGD 100 million, Japan, I buy SGD 100 million let's say, in another country. And then if I'm 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, Charmaine, we do not do what we call...
We do not over-gear in the currency
Yes. But we gear up 90%-odd percent of Japanese yen. You don't do a mortgage type of financing. We borrow at the MLT trust level, right? So, therefore, when we go to the banks, we are able to look at raising loans at a combined basis versus, you know I'm buying an Australian asset, and I need to pay Australian interest rate now is how much?
5.5%?
5.5%, yes, because I don't buy Australia and Japan, I put it 2 together and then I can raise more Japanese yen debt, then the acquisition can be more interesting. So these are the avenues that we will look at.
So I think, to add on to Kiat's point, I think what we were trying to say was because we look at it on a portfolio basis. So for the acquisition we did in the beginning of the year, some of it, we actually took on Chinese Yuan loan because we were underweighted 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 loans are of a low interest rate, so we actually borrowed more Chinese yuan to actually catch up on our capital hedge with regards to Chinese yuan.
Yes. So, I think that is where the diversification of our portfolio has helped us to provide a base that we are still -- we can still be quite active for the acquisition, Yiew Kiang. I'm not ruling out acquisitions.
Okay. Just want to go back to Slide 34 that 13.2% from China. How much is Tier 2 Tier 3, Slide 34, yes, that green bar there, 13.2%. How ow much of it is Tier 1, Tier 2 and Tier 3 What's the split?
I would say, almost 80% to 90% will be Tier 2.
Tier 2 and Tier 3.
Tier 2, Tier 3.
Yes.
Okay. Okay, that's it for me. I'll jump back to the queue.
Okay. Tan Xuan?
My first question is on acquisition, right? If the quantum was still SGD 200 million to SGD 500 million that you're looking at? And what geography that looks interesting to you now?
Okay. We are already doing SGD 200-plus-million coming from sponsor. Jean has mentioned that. So there are some more Vietnam assets and India assets that we can take from the sponsor. So, if you talk about, being the easy way out, there is Vietnam and India coming out from the sponsor. But 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.So to answer your question, SGD 200 million to SGD 500 million, I mean, we're already doing SGD 200 million. Will we be able to do another SGD 200 million? That's a possibility.
Okay. And second question is on rent reversion for FY '25, right? 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're talking about FY '24, right? Not FY '25.
So, '24/'25, the next financial year basically. Should we still expect positive rent reversion on a portfolio basis?
That's right. yeah, We're confident of overall positive rent reversions.
Yes. On constant currency basis, we are confident. So the only big part that we get hit very badly is actually on the ForEx. You look at, like for example, this year, without ForEx, our revenue have gone up year-on-year of 3.6%, but with ForEx it's 1.2%; a decline of more than 50%. So that will be the main factor that will hit our top line.
Got it. And lastly, cost of debt. I think previous guidance 2.9% for next financial year. Is that still the case?
Yes, 2.9%. And then depends on your Tan Xuan, you are from Goldman Sachs. Yes. So, unless -- everybody is telling me, get a hold your breath. It's going to be longer. So 2.93% the cost of debt. yes.
Okay. Jonathan?
Hi, I hope you can hear me clearly. I have 2 questions. First question relates to the currency translation loss of SGD 470 million looks quite big. Which are the major countries contributing to this loss? And 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. So is there some risk that we may have some deterioration in occupancy for your Tier 1 portfolio?
I'll take the China question first on the occupancy. The breakdown for 4Q, we are looking at Tier 1 is 95.6%; Tier 2 is about a 2% plus. That is the breakdown. And yes, there's 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 they have affected the market dynamics. But we're confident because in Shanghai, our assets are located more closer to the city of Shanghai itself, rather than in Songjiang district. So that's for Shanghai.So that's where most of the -- half of the new supply was concentrated, in the outskirts and Guangzhou -- again, Guangzhou is very supply limited market. And our location in -- near to Baiyun airport is quite a key location for logistics. And we're confident that we continue to achieve a high -- above 90%-over of occupancy rates.
Do you have exposure to let's say Beijing, other Tier 1 cities like Beijing?
No.
But Guangzhou we have. We have Guangzhou.
[Inaudible] to the Shanghai.
Okay, thanks.
Sheh Min?
Okay. So, in terms of the FX, the translation on IP value about [ SGD 402 million ] JPY is down year-on-year, 11%. And then currencies like Vietnamese Dong, Chinese yuan, ringgit, they are all down about 6%. And actually, I mean, 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.
Yes. Yes, unfortunately, Sing dollar quite strong last financial year. Hopefully, that reversed in the new financial year. Yes, Thank you very much for the update.
Okay, Brandon, do you want to try unmute yourself, see whether we can hear you.
Yes. Can you hear me? Okay, I just want to touch on a bit on the China valuation. I mean, just looking at your guidance or reversion of what you've 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 for sales between 7% to 9% cap rate. Yes, 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 that are left for FY '25? 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?
Yes, share buyback; yes, 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 gain. In terms of the divestment gains, we have about balance of about SGD 10 million, including the completion of what we have announced. So we have 2 Malaysian assets that we have announced but not completed. So, including the divestment on those assets as well as whatever we completed this financial year is about SGD 10 million. That is unutilized that we can use in the new rents.
Yes. And then in FY '24, we'll make further divestments and then we'll build on that divestment gain. Yes.
Okay. So on the China cap rates, right?
Yes, So we have also actually, you know, because this is adopted, I mean, an advice given by our -- it's a view taken by our valuers. So we have also asked the same question, why there are no movements. So, simply because there's actually no transactions that they can -- due to the lack of transactions.But if you look at the valuation year-on-year, it has actually dropped. So the drop is primarily caused by this weaker rental reversion, lower rental as well as the lower occupancy. So that has impacted the year-on-year drop. No doubt that there's no change in the cap rate.
So if we -- just looking at that Kiat, I mean your outlook on China seems very uncertain. So if you fast forward to FY say '24, '25 valuation, right? 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 rate expansion? So 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?So, we do see Chinese capital chasing some of these deals. These are no longer like the offshore guy, these are the onshore guys. So let's see whether the transactions materialize. And if they do, then we have greater clarity. But -- yes.
Are you able to share what these Chinese capital looking at in terms of yield?
I think they are looking at about, between 5% -- around 5%.
Okay, great. That's all from me.
Yes. But that is for the general, but I mean, if you're talking about more prime or so-called very tight supply micro markets, maybe we can get slightly better pricing. But, yes, that's where we are.
Okay. Next we have Terence, UBS.
Good evening. Can you hear me?
Yes, Terence, we can.
For the arrears, can you 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...
And then you make provisions 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. This -- there was some that was made last year. And this year, not so much, much lesser than last actually. So, yes -- but definitely the number that we're reporting is what we intend to collect, not what will be written off.
Terence, did that that answer your question?
I'll have to take the money but I'll just move on to another question. When it to divestment gains, do you mind reminding us like 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%.
So this is FY '24?
Correct, '23, '24, FY '23, '24 moving ahead.
Yes. And looking at FY '25, is that percentage going to come down?
It's very likely, yes, because the market is softening. So that we will still get gains because of the advantage of being a very old REIT as we got it at prices that were much lower, say, about 10 years ago. But the biggest -- in terms of buyers' appetite, so we are going to see more competitive pricing, yes.
Okay. And just another question. What is the financial impact of the solar power generated?
So, what's the solar energy, you're talking about in the context of revenue or the NPI yield of the returns we can get? We can get high teens.
Anything.
Okay. So in terms of solar energy, our returns on investment is in the high teens.
But I think in terms of contribution to our revenue, it's not say like 10%, maybe, less than 5% to 3%.
So it is up 3%, right?
Yes, It's about 3%. Less than 5%.
Yes. So, Terence, I think just to give you some numbers in terms of the loss allowance, the provision for that debt or the full debt. Last year, we provided for SGD 1.9 million. This year, it's about SGD 200,000.
So, 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. Next, Vijay.
Hi, Kiat. I have a couple of questions. Maybe I'll take it one by one. My first question is, again, pertaining to the divestment gains. I mean, considering that you have about SGD 10 million in divestment gain for this year. I mean, the divestment -- total divestment gain for this year seems to be a bit high. What is your policy of divestment gains? Will it -- will you be fully distributing all the divestment gains in the financial year? And will you also be looking at DRP -- turning on DRP for this year?
So, in terms of divestment gains, I mean, depending on the divestment gain quantum, we could distribute over 4 quarters, 8 quarters. So, this year -- I mean, we did make most of the divestments this year, so we distributed quite a fair bit this financial year. And for next year, we will have to continue divesting to -- yes, and that will contribute to the divestment gain distribution, if any. In terms of DRP, we will continue for the new financial year.
Yes. So, Vijay, I think if your question is, what -- do we have a policy of how we distribute our divestment gain? We don't have a fixed policy. We will divest -- I mean, we will distribute the divestment gain 4 quarters to 8 quarters, because anything beyond 8 quarters, I think it's quite meaningless. So 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. We don't intend to hold that gain on our books.
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, I mean, looking at it? But, yes, I got the idea.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? And for the 51 Benoi Road, are you looking at a single tenancy or multi-tenancy? Is there any update in terms of occupancies?
For Singapore and Malaysia, our ROI is...
It's about this 51 Benoi...
Quite different, so for 51 Benoi both properties, we are looking at multi-tenant. We're not looking at a single tenant.
And the progress?
For 51 Benoi, it's about 22%, 23% completion, really as of 4Q. And in terms of the target views, we are looking at for Singapore and Malaysia, we're looking at close to 6 for Singapore and more than 7 for Malaysia.
Got it. So, if I may squeeze in one last question. I mean, your sponsor has a huge pipeline of China assets. Considering the market conditions at this point of time, do you think it is a market to bottom fish or would you be passing on this assets to third parties eventually?
Okay. The sponsor had set up a China fund. I'm not sure whether you are aware. So that is an evergreen fund. So this fund takes on more development risk. So some of the assets may be attractive for this fund. But as far as MLT is concerned, we stick to our investment discipline, whether it is from sponsor or from third party. So it has to be accretive. So we are not going to buy from sponsor just because it's from sponsor.
Got it. That's all I have.
Yes. So, we're not going to be buying China for the next 12 to 18 months. 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 want consider, but if not, no. Disciplined accretion does not change.
Okay. [ Rayson ], HSBC.
Kiat and team, hello. Just wanted to check right, for the recent Malaysia acquisition, about 5.7%. Just wondering if it's 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%. And then maybe moving forward, if you are likely to acquire at similar cap rates from your sponsor?
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, you know construction. So -- but because there's going to be a profit margin that any seller will look at. So therefore, whether we buy from a sponsor or buy from third party, we're not going to get the 7% yield that we're talking about, right? So, we recently bought at 5.7%. And then -- but the valuation that we have is in the range of 6.5% to 6.75%
So, for the 5.7%, right, the NPI yield that we are looking at, yes. So versus the cap rates in Malaysia that is typically a gross basis.
Yes. So, what Jean is trying to say is the valuation that -- the cap rates that you are seeing in that presentation is basically a different...
Methodology, yes. Typically, I think in the market, the value based on the gross basis, because I think the fee structure and expense for each of the country is different. So, for Malaysia, what has been 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 [Inaudible].
Yes, it's pending regulatory approval for the potential buyer to bring his funds out from Beijing. So I think it's one of those very uncertain debts. So 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 out from central government. It also depends on their business. It also depends on their personal track record with the government. So I think the lesson we learned is dealing with Chinese buyers, we -- for them to bring our offshore money is going to be very tricky.
Okay, Terence JP Morgan.
Thanks, Kiat and 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 '25 versus SGD 1.9 million in FY 24?
Yes. So I think, this year is it's SGD 200,000. Last year was SGD 1.9 million, mainly because I think last year, we have shared before that we had a Malaysian tenant that was giving us some issues, haven't paid rents for a long time. So because there was 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 swooning. I think they went last, right? So we also provided info for that.This year, 219, it came from smaller tenants. They're also not doing well, and there were doubts in terms of collections, but it's more measured numbers as compared to last year. And I think James said, would proactively look into the collectability and if the tenants show signs of defaults and all, we will look at replacing them ASAP to reduce or manage the bad debt.Terence, does it clarify your...
Yes. Very clear. Could you also share on the same-store valuation change by country.
Same-store valuation. Can we -- we can't tell the numbers on the [Inaudible] Terrence, can we come back to you? We'll get the numbers.
Sure. That's all I have.
Okay. Shall we move on to Dale from DBS.
Yes. Hi Kiat. This is Dale from DBS. I actually have 2 questions. I think firstly, with regards to your FX hedging, I think it's fantastic that you are able to hedge up to 8 years. But 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. So the 8 years that we're looking, we're talking about is for [ APY ] alone. I mean -- and we took this as a strategic kind of approach because of the volatility of -- cross volatility of APY. And as mentioned earlier, we start doing the hedges -- okay, so like now, we were hedged 8 years, because it's at a discount.So 8 years ago, we would have locked in certain percentage. And then as the year passes, we will do it progressively. So, like, immediately for the next 12 months, about 87% of DEI has been hedged. But if you look 8 years ahead, only 16% has been hedged. And of course, the rates may not be as good as what we did [Inaudible] because of the current levels that we're looking at. Notwithstanding there is still a discount from the 114, 116 levels that we're looking at.
Okay. So meaning this hedging is dynamic and then according to currency, so you guys would decide as and when you think it is a good time to hedge more or...
Correct, correct, correct. So, we monitor the market and JPY is the one that goes the longest tenure. So, I mean if you're looking at the other currencies for Hong Kong dollar, Aussie dollars, we're looking at 3 to 5 years.
Okay. Okay. Got it. Got it. Okay. And my second question here is back to China. I think it's good that you're looking at divesting some of the older, lower specs properties. And then just now, I think Kiat, you mentioned that there could be some gains from the reclassification of one of the property. 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 valuation, they held up because of lack of transactions. But once you start crystallizing these values, will it actually impact your portfolio?
Yes. So I think -- in terms of divestment for China, we will be able to get gains from the older assets that we bought long, you know much longer ago, primarily because the real estate prices at that point were lower. So that is one angle that we'll be using. And then in terms of -- if you're 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.So, I'm not exactly sure which angle you're looking at, but if you look at our annual report, Charmaine correct me if I'm wrong. We have the purchase price and then we have the valuation. So 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. So the -- to generalize, the older the assets are, the higher the chance we have of getting a divestment gain.
I mean, compared to your initial acquisition, definitely, there's a high chance of getting a gain. But just wondering, 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, is that valuation exercise is one that we do every year. So we do not just take whatever values that the valuers give to us. We actually challenge them and then we actually ask for proof of transactions. So 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 1 SOE selling to another. So you don't get great visibility, you don't get actual third-party arm's length kind of transaction. But from there, we have a gauge as well.So, to answer your question, will we -- is our valuation realistic? I would confidently say that 99% should be realistic, meaning that we should be selling at valuation if not higher, but I don't see us selling below valuation, because the valuation should have come down. That means, if you look the valuations should have come down compared to the original cost.
Okay, okay. Got it.
Okay. Shall we go back to Terence from JPMorgan? Can we answer Terence question? Yes, Sheh Min Lum? Yes, go country by country. Yes, you don't have to be consolidated, I'm sure they can add it up.
So, okay, I'll just cover the country. So for Singapore, on a [ twin score ] 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 is 1.5% 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%.So all the figures I've mentioned are on local currency basis and excluding divestment and acquisition. So, it's a like-for-like -- on a same-store basis.
And sorry, if I may ask one, on Australia, it seems like a very substantial drop. Could you highlight a little bit more on that?
Yes. So, for Australia, I mentioned earlier, in terms of the cap rate movement, it's quite a lot of 75 to 100 bps. So for Australia, same-store dropped by 8.1% on local currency basis.
Okay. We have another question.
Okay, only Mervin coming back. Mervin, you still have one more question, Is it?
Yes, just wondering what is the rental reversion guidance ex-China. Is it going to accelerate from here? I mean, Singapore has been accelerating?
You can just go back to reversions for different countries again.
Yeah. I'll repeat the rental reversions.
No, I was asking for outlook rather than actual historical, you throughs around it?
I think the outlook for the portfolio for the next few quarters will be ranging around this level between 2% and 3%, including China.
Including China.
Including China. So, can I -- yes, I said that, I mean, basically [ atone ] that the GP could still be falling this coming year? Would that be correct given potentially lower amount of divestment gains that can be distributed FX, interest rates? Yes.
Yes.
Yes. Okay.
So Mervin, you haven't given up on that yet, right?
No, I just wondering what -- I mean, it's quite cautious, but is there something else we should be...
Yes. So, hopefully, the next round of results, you guys are still on the call.
I was positive [Inaudible] are we to a low in terms of the GPU performance. Is that -- how much was [Inaudible] are we close to FX to the end of the FX headwinds? Or how probably should we think about that? Borrowing costs seem to be...
Yes. I think, Mervin, in terms of macro, I think 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, the expiries of our loans. So you will see that impact. If you put in whatever estimate, you would have a feel of the impact. And then the outlook on FX, you have a feel on the impact. The only good part is the hedges will help a bit, right? But it will not be a cushion 100%.So 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 will still continue to see growth. So really, if 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 tenant relationship and supply in a very manageable way.So we're not seeing excess supply being dumped into the market. So the -- what I hope is the 60% or 70% of MLT portfolio, we'll be able to cushion some of the negatives that we'll see from the treasury side, the interest and the FX. Yes. So we think that the DPU will continue to come down yet.
Mervin, Don't get carried away with the JPY rates I gave you on the call.
Yes, I appreciate that part. It's just -- I mean everything, all adds up, it's -- asked a lot is outside of control. So anyway, hopefully next quarter, you got slightly more positive news to share with us.
Yes, yes. So, yes, so I think that we are entering into a time, a period where the uncertainty, the volatility are a lot more pronounced.
Okay, thank you all. Anybody has any last question or last words that you want to get onto the call? I don't see any more raise hands. Okay, anyway thanks for joining this rather long call.