MMP – DMG

Maiden Acquisition

MM Prime REIT has made its maiden acquisition of seven properties, predominantly for retail purposes, in Tokyo for about S$182.5m. The acquisitions will anchor MMP with a strategic foothold in Japan. Based on pro forma NPBT of S$0.7m from the properties these assets could add 0.108 cents to DPU, to be felt from FY08. We are maintaining our FY07 forecast of 5.8 cents, translating to a yield of 4.8%. Maintain BUY with a price target of S$1.28.

Acquired seven properties in Tokyo. MMP has entered an agreement with Yugen Kaisha Triton Property and Fund Creation Co. Ltd to acquire six completed retail properties under the Fund Creation portfolio located in prime areas of Tokyo, Japan for S$110.4m. Currently these properties are enjoying close to 100% occupancy.

The 7th property, the FLEG America-Bashi Building, is a seven-storey retail-cum-office development located in the Ebisu area, which is expected to be completed in September this year. This property will be acquired for S$72.1m from FLEG International a major Japanese retail leasing group and a growing real estate developer.

Full impact to be felt from FY08. The acquisitions will be yield accretive to MMP’s distribution per unit (DPU). The pro forma financial effect would be an additional NPBT of S$0.7m or 0.108 cents per unit, representing an initial yield accretion of 1.8%. As completion of transaction is expected at end May 07, the boost to income would be felt from FY08.

Capacity for expansion. The acquisition would be funded by debt, thus further enhancing to bottomline post acquisition. MMP would have a gearing ratio of 34.0%, up from 26.5% previously. This leaves the group with significant funding capacity for new purchases.

Maintain FY07 forecast. We are maintaining our FY07 forecast of 5.8 cents, translating to a yield of 4.8%. Maintain BUY with price target of S$1.28.