MMP – UOBKH

Secured refinancing

Secured refinancing for short-term loans. MacQuarie MEAG Prime (MMP) REIT has refinanced S$220m of short-term loans, S$190m of which are due in May 08 and another S$30m in Aug 08. The new funding was arranged to extend the maturity of the facilities until end September in light of the strategic review announced on 19 Feb 08. The renewal was secured on competitive terms and will not have a material impact on Distribution Per Unit (DPU). The refinancing will allow the review to proceed with flexibility.

Strategic review could result in restructuring. MacQuarie Pacific Star has embarked on a strategic review with the objective of enhancing value for all MMP REIT unitholders. The review will consider both corporate and asset level strategies and could involve a proposal to take over 100% of MMP REIT.

Reiterate BUY. We like MMP REIT for strategic frontage on Orchard Road. MMP REIT gains full year contribution from overseas investments in China and Japan in FY08. The on-going strategic review could also unlock value for investors. MMP REIT provides FY08 distribution yield of 6.13%, an attractive spread of 4.09% over 10-year Singapore government bond yield at 2.04%. Our target price is S$1.55 based on 2-stage dividend discount model (required rate of return: 7.85%, terminal growth: 2.5%).