Cambridge – Phillip

Acquisitions Driven Growth

1Q07 Results. 1Q07 net income available for distribution was 8.8% higher than prospectus’s forecast, giving a DPU of 1.43 cts. Annualised DPU of 5.82 cts was 13.6% higher than the forecasted DPU of 5.12 cts. 1Q07 DPU increased slightly by 0.8% QoQ, mainly contributed by the 2 light-industrial properties acquired for S$91.0m during the quarter. The ex-date of the distribution of 1.43 cts per unit is on 30 Apr 07. This represents an annualized current yield of 6.7%.

CIT’s investment properties under management increased to 29 properties, valued at S$622.0m with 475,374 sqm of NLA. As of 31st Mar 07, portfolio occupancy remained 100% with a weighted average remaining lease term at 7.1 years. The weighted average land lease of CIT’s properties portfolio (excluding freehold property) is 41 years. S$58.3m worth of options agreement have been signed, in addition to S$115m of Memorandum of Understanding (MOU) Agreements.

Capital Management. 65.0% of the outstanding borrowings are fixed, with 0.32 years to expiry. This is positive for CIT as interest rate has been decreasing. The bridging loan facility of S$400.0m has been replaced by a Variable Funding Note (VFN) structure of S$390.0m and an overdraft facility of S$10.0m. As of 31st Mar 07, total loan under VFN is S$281.7m, representing a gearing ratio of 44.7%.

Valuation. Using Dividend Discount Model (DDM), we increase our derived fair value to S$0.99. This translates to a 6.0% yield and a price to net asset value of 1.48x for FY07F. We conservatively assumed S$500m worth of acquistions till FY08F. These acquisitions are assumed to be funded by S$200m worth of equity placement and 300m worth of debt, working out to an optimal gearing of 45.3% after acquistions. We maintain Buy with a 17% return.