Dear All,

Some of you may have noticed that one of our blogs, http://mreit.blogspot.com/ (on Malaysia REITs) had been removed by blogger (the service provider) as of yesterday. We do not know the reasons behind this and have appealed to them. We have yet to receive any reply.

In the meantime, we have created a temporary replacement at http://m-reit.blogspot.com/ but currently, there’s only one entry (July 2009).

This sudden action by blogger has made us realized how vulnerable we are, of losing all our data. We will be considering the possibilities of creating a mirror site with another blog service provider or to start our own website (so that we won’t be at the mercy of any provider). So, watch this space as we will keep you updated of our alternative actions.

Thank You!

Not more than a small tidy-up of balance sheet required

• The optics of gearing in a market intolerant of it: CapitaMall Trust (CMT)’s gearing is the highest of the top four S-REITs at 43.3%. Whilst our review of CMT’s financials in an adverse but (in our view) plausible downside scenario indicates a high level of resilience in the
REIT’s credit position, a modest equity fund-raising of between 10-20% new units would push gearing down below 40% whilst a 1-for-3 entitlement offer would raise sufficient equity to lower gearing to 31%.

• Operating and financing conditions have changed: Whilst Singapore’s suburban retail property fundamentals have been resilient through recessions, CMT’s operating risk has risen with 28% of the portfolio in non-suburban retail property assets (by value). The trust has S$1.8billion of debt (56% of the total) maturing in 2011-2012, which is sufficiently distant but we believe a far-sighted CFO will want to keep those debt maturities in view in any re-configuration of the REIT’s liability profile. CMT’s 2013 convertible bonds are trading at a yield to 2011 put at approximately 13.5%, and skew the trust’s aggregate cost of capital. We estimate CMT’s current implied cost of equity at 12.1%.

• Sectoral re-capitalization to be the dominant price factor: We expect the S-REIT sector’s debt refinancing and re-capitalization, including CMT’s own initiatives, to be the most significant factor propelling the trust’s unit price in the next 6 months.

• Dec 09 price target of S$2.20/unit: Our new price target (previously S$2.78) is based on a DDM using an 8.1% discount rate. A 1-for-3 entitlement issue raising about S$551 million would lower our estimate of CMT’s NPV by an immaterial 4% due to the offsetting effects of reduced financial risk. Key risks to our price target and rating come from a worse than expected deterioration in operating fundamentals, or a prolonged capital markets disruption which prevent a resolution of the anomalous costs of equity and debt capital.

From Budget 2008. The Key initiatives for REIT and Trust is as followed:

1. Allow listed real estate investment trusts (REIT) and registered business trusts to claim input GST on business expenses