MIREIT – UBS
MACARTHURCOOK, ubs put new rating BUY with target price $2.07
- MacarthurCook Limited’s foothold in Asia . MacarthurCook Limited (MCK), a specialist fund manager in Australia, launched MacarthurCook Industrial REIT (MI-REIT) with an initial portfolio of 12 Singapore industrial assets valued at S$316m. MCK sees MI-REIT as the primary vehicle to expand its direct industrial real estate funds management business in Asia. MI-REIT aims to grow its portfolio in Asia by S$300-500m pa over the next three years.
- First right of refusal from MCK and UEL . The manager of MI-REIT is jointly owned by MCK (92.5%) and United Engineers (UEL, 7.2%). MI-REIT has been granted first right of refusal for five years for industrial assets offered to MCK in Asia. We believe UEL has also granted MIREIT first right of refusal to buy Print Media Hub in 2007, and is considering selling other assets in Singapore to MI-REIT.
- Debt capacity of over S$200m and potential 23% accretion . MI-REIT’s current portfolio provides 2% pa organic rental growth. In addition, MI-REIT’s current gearing is 8%. We expect MI-REIT to acquire more assets in Singapore and reach its gearing target of 45% within the next 18 months. We estimate this could increase DPU by 23% between now and end-FY09.
- Valuation initiate coverage with Buy 2, S$2.07/unit PT . Our DCF valuation is S$2.04/unit, with our 12-month forward DCF-based price target of S$2.07/unit. At the current price level, MI-REIT’s DPU yield for FY08 is 6.5%.