MapleTree – DBS

Resilient Earnings

Story: Gross revenues and NPI grew 19.6% and 18.7% yoy to S$46.0m and 40.2m respectively. Main drivers were contributions from an enlarged portfolio; 18 properties were bought through the course of the year. Distribution income also increased 33% to $25.4m, translating to a DPU of 1.84cts. DPU, however was 9.8% down sequentially due to diluted from the rights issue completed in Aug’08. YTD, DPU of 5.78 cts was 85% of our projected FY08 estimate. The outperformance came from MLT keeping interest costs low at an average effective rate of 2.7% and interest savings from the repayment of loans.

Point: Faced with slowing global trade moving forward, the focus of MLT will be (i) yield optimization from its existing portfolio and (ii) tenant retention. While we expect slowing economic activity to affect demand for logistics space, we view that any impact from falling occupancies to be mitigated as 61% of its leases are locked in longterm basis with incorporated stepped up rentals clauses. Going forward, we adjust our occupancy assumptions slightly downwards to 95% in FY09-10. With lower occupancies and no further acquisitions assumptions, our DPU estimate over FY09 is adjusted down by 8.9% to 5.4 cts.

Relevance: We have lowered our TP to S$0.57 from S$1.04 previously due to the exclusion of any acquisition assumptions. We continue to like MLT for stable income stream with potential for upside when it executes on its acquisition pipeline going forward. At current price level, MLT offers an attractive fully diluted FY09-10 DPU yield of c.11% and 18% upside to our target price. Maintain BUY