MMP – UOBKH

Minor disruption from earthquake in Central China

Minor disruption from earthquake in Central China. MMP REIT owns Renhe Spring Department Store located in Chengdu, the capital city of Sichuan Province. The mall experienced tremors and aftershocks during the recent earthquake. The building was successfully evacuated. Preliminary assessment indicates no major damages for the new five years old building. The company has engaged structural engineers to conduct a detailed inspection. The mall will be open for business once MMP REIT secures clearance from the local authorities.

The earthquake is unlikely to have a material impact on financial performance in FY08 due to profit guarantee from Renhe Spring Group. Renhe Spring Departmental Store contributed 11% of total revenue in 1Q08.

Renhe Spring Department Store. The acquisition of Renhe Spring Department Store for Rmb350m, or S$70m was completed in Aug 07. The mall houses premium foreign brands such as Burberry, Prada, Dunhill, Ermenegildo Zegna, Gucci and Hugo Boss. The property achieved sales of Rmb263m in 2006, an increase of 23%. The mall will be linked to Chengdu’s new subway system in 2010. The vendor Renhe Spring Group provided guaranteed net profit of Rmb26.4m for four years, equivalent to a net distribution yield of 7.5%.

Maintain BUY. MMP REIT provides FY08 distribution yield of 6.41%, an attractive spread of 4.06% over 10-year Singapore government bond yield at 2.35%. Our target price is S$1.55 based on two-stage dividend discount model (required rate of return: 7.85%, terminal growth: 2.5%).