MapleTree – OCBC
On target for S$1bn acquisition per year
Growth again due to acquisitions. Mapletree Logistics Trust (MLT) reported a good set of 1Q07 results. Revenue was up over 116% YoY and 7% QoQ to S$28.8m, and distributable income improved 84.2% YoY and 23% QoQ to S$15.3m. Distributable income per unit (DPU) was less robust, improving by 33% YoY and 2% QoQ to 1.48 cents. This is slightly better than OIR’s forecast of 1.40 cents. The bulk of the growth came from the acquisition of 25 properties (worth S$785m) over the last 12 months and 8 properties over the last quarter. MLT currently has a portfolio of 49 properties worth about S$1.5bn and will acquire a further 13 properties worth about S$470m in 2H07. This should bring its total asset size to about S$2.0bn. MLT is well positioned to continue its growth strategy and we see an annual acquisition of S$1.0bn per year as not improbable.
Next markets in South Korea and Vietnam. Presently MLT’s country/ territory exposure is in Singapore, Malaysia, China, and Hong Kong. MLT recently announced a mega acquisition of 5 assets worth S$350m in Japan, a project worth S$17.8m in Xian, and 2 projects worth S$13m in Malaysia. We expect it to enter more new markets in 2H07; namely South Korea, Vietnam and India. All these acquisitions are likely to boost its DPU. We have thus revised up our FY07 and FY08 DPUs from 5.6 cents and 5.9 cents to 6.2 cents and 6.5 cents, respectively.
Successfully raised S$349m. The key event over the last quarter was the successful raising of fresh equity. A gross proceed of S$349m was raised with the issue of 296.822m new units at a weighted cost of S$1.176 per unit. The proceeds of the new equity have been used to finance the acquisition of 15 recently bought properties and to refinance other older acquisitions. With the new equity, MLT’s gearing has fallen back to about 40% range. More importantly, it means that MLT can raise a war chest of S$300m if it maximizes its gearing to 60%.
Maintain BUY with higher fair value. MLT has done well since our last report; appreciating from S$1.19 to our fair value of S$1.33. However, at the current pace of acquisition, our target asset size of S$3.0bn is likely to be breached by 2008. We have thus revised up our target size to S$4.0bn. This, together with lesser dilution from the issue of fewer new units, has a positive impact on our fair value estimate. We have thus revised up our fair value from S$1.34 to S$1.50 and maintain our BUY recommendation.