MapleTree – CIMB

Acquisitions powered growth

• 3Q07 results in line. MLT’s 3Q07 DPU grew 30% yoy to 1.7cts, bringing YTD DPU to 4.7cts. This represents 75% of consensus and our forecast of 6.4cts for FY07.

• Acquisitions powered growth. Growth through acquisitions continued to power MLT’s growth (refer to our earlier report dated 24 Oct). As at 3Q07, MLT’s portfolio comprised 61 properties, up from 36 in 3Q06. In addition, there were 13 properties pending completion. As a result, revenue increased 12.7% qoq to S$38.5m. Net property income margins averaged 88% in the last four quarters, indicating relatively low property expense over revenue. Gearing was 54.6% as at 3Q07, approaching the 60% regulatory limit. As MLT will continue to make acquisitions, it intends to resort to equity fund-raising in 1H08.

• Rental escalation potential. MLT has a balanced portfolio of long leases (longer than three years with built-in rental escalation) and short leases (less than three years with the potential for rental escalation). Rental reversions have been strong in Hong Kong and China, at 13% and 39% respectively. Occupancy for the entire portfolio is 99.9%.

• Expect more geographical diversification. We expect acquisitions from new emerging markets such as India, Taiwan and Thailand. These would dilute the share of contributions from Singapore, currently at 52%, a positive diversification. In addition, sponsor Mapletree Investments is incubating some 10 development projects in China, Malaysia and Vietnam worth S$846m, which could be injected into MLT’s portfolio when completed.

• Maintain Outperform. With MLT steadily working towards its S$5bn portfolio target by FY10, we expect our DPU estimate of 7cts for FY08 to be achievable. We reiterate our Outperform with a DDM-based target price of S$1.65. This is premised on a cost of equity assumption of 6.9%.