MapleTree – OCBC

Downgrade on valuation

Announced S$181m worth of new acquisitions. Mapletree Logistics Trust (MLT) recently announced three further acquisitions for a total value of S$180.5m. Two of the assets are situated in Malaysia with the third located in Hong Kong. In terms of size, the Hong Kong property is larger, valuing at S$151.0m, while the Malaysian properties collectively make up
only about S$29.5m. This new set of acquisitions, together with those completed since its 1Q07 results, means that MLT asset size has increased to S$2.1b. Moreover at S$2.1b, MLT is ahead of its planned asset acquisition of S$1.0b per year or S$1.9b for FY07. Going forward, we do
not expect this pace of acquisition to relent anytime soon.

Expect 0.19-cent accretion. In 4Q06 MLT successfully raised fresh equity worth about S$349m with the issue of 296.822m new units at a weighted cost of S$1.176 per unit. With the new equity, MLT’s gearing has fallen back to about 40% range. More importantly, it means MLT has a total debt capacity worth S$300m. On that basis we see no issues with the debt
funding the latest acquisition. As for accretion, if we assume full debt funding, we expect the full year DPU accretion to be about 0.19 cent, or about 3% increase to our FY08F estimate. We have thus adjusted our forecasts accordingly, bumping up our FY07F and FY08F DPU from 6.2
cents and 6.5 cents to 6.3 cents and 6.7 cents, respectively.

Next markets in South Korea and Vietnam. Presently MLT has country/territory exposure in Singapore, Malaysia, China, Hong Kong and Japan. In 2H07 we expect it to enter more new markets, namely South Korea, Vietnam and possibly even India.

Downgrade to HOLD on valuation. MLT has done very well since our last report; appreciating from S$1.33 to last traded value of S$1.48, or over 11% within a month. However at present price, it is a stone’s throw from our fair value of S$1.50. More importantly, our valuation is based on a target asset size of S$4.0b while MLT’s present asset size is only S$2.1b.
So the market has obviously factored in future asset growth. At present valuation we would prefer to be cautious and let MLT catch up in terms of its pace of asset acquisition. We thus downgrade MLT purely on valuation grounds to HOLD but maintain our fair value of S$1.50.