Buried within the recent earnings call transcript of Mapletree Pan Asia Commercial Trust (OTCPK:MPCMF), a fascinating strategic shift emerges. While the company overtly emphasizes the enduring strength of its Singapore portfolio, its actions suggest a more nuanced reality - a subtle but strategic rebalancing away from the Singapore dollar.

On the surface, MPACT's commitment to Singapore appears unwavering. Their presentation highlights Singapore as the bedrock of their stability, representing 55% of Assets Under Management (AUM) and generating 60% of their Net Property Income (NPI). Sharon Lim, CEO of MPACT, emphatically states that Singapore "will continue to be a key component of our portfolio, providing a stable foundation."

But a closer look at the numbers and the CEO’s own pronouncements hints at a different story. While the company won't touch their flagship VivoCity and Mapletree Business City (MBC) properties in Singapore, their willingness to divest other Singapore assets reveals a newfound flexibility. This is no knee-jerk reaction to market pressures; it’s a calculated response to a changing landscape.

Consider the company’s stance on gearing. While MPACT insists their 40.5% gearing doesn't cause them concern, they acknowledge investor preference for a "three-handle" instead of a "four-handle." This acknowledgement signals a willingness to adjust their capital structure, and divesting Singapore assets, even at a slight discount to book value, could be the key.

Furthermore, the CEO’s emphatic statements about the untapped valuation potential of VivoCity reveal a keen awareness of market dynamics. Essentially, Lim argues that the valuers haven't fully captured VivoCity's true worth, implying a potential "cushion" if gearing needs to be reduced quickly.

The potential divestment of Singapore assets becomes even more intriguing when juxtaposed with MPACT’s perspective on overseas markets. While acknowledging challenges in China and Hong Kong, they remain committed to these regions for the long haul. Even Japan, a relatively small part of their portfolio, is earmarked for a long-term presence.

Here's where the hypothesis emerges: Could MPACT be anticipating a weakening of the Singapore dollar? Divesting Singapore assets while the Singapore dollar remains relatively strong could unlock capital for reinvestment in overseas markets at a more favorable exchange rate.

This strategy is further corroborated by MPACT’s stance on script dividends. Despite investor inquiries, they’ve shown little interest in using this tool to reduce gearing, likely because it would hinder their ability to swiftly reinvest capital elsewhere.

The numbers bolster this hypothesis. Approximately 93% of MPACT's expected distributable income is derived from or hedged into Singapore dollars, showcasing their adeptness at managing currency risk. But the recent decline in the Singapore dollar's value against foreign currencies, which impacted the valuation of their overseas properties, might be a calculated risk they’re willing to take.

MPACT's Portfolio Composition

Source: Mapletree Pan Asia Commercial Trust Q4 2024 Earnings Call Transcript (Seeking Alpha)

Expected Distributable Income by Currency

Source: Mapletree Pan Asia Commercial Trust Q4 2024 Earnings Call Transcript (Seeking Alpha)

MPACT's actions, coupled with their deep understanding of market dynamics, suggest a strategic bet against the continued strength of the Singapore dollar. By subtly shifting their portfolio weight towards overseas markets, they might be positioning themselves for outsized gains as the Singapore dollar weakens, all while maintaining a core of high-quality Singapore assets.

"Fun Fact: MPACT manages Festival Walk in Hong Kong, a mall featuring an Olympic-sized ice rink, a unique feature in a region known for its warm climate!"