MLT – DBS

Attractive valuations, stable yields

At a glance

• Results were in line with our estimates, above consensus

• Portfolio occupancy remained relatively robust

• Minimal refinancing risk

• Maintain BUY, TP $0.56 based on DCF

Comment on Results

In line with expectations. Gross revenues and net property income grew by 25% to S$53m and S$46m respectively as a result of a larger portfolio. Distributable income improved by 36% to S$28.6m, translating to a DPU of 1.47 Scts. When compared against 4Q08 performance, incomes remained relatively stable.

Portfolio occupancy remained high at 98.5%. Key operating markets remained relatively stable. Slight decline from 4Q08 (99.6%) as a result of MLT taking back a property in China. However, impact on earnings is expected to be within 1% of income and within our projections of a 5% increase in vacancy levels by end FY09. We believe that upside surprise will derive from the trust managing to retain current occupancies for the rest of FY09. As of 1Q09, in excess of 80% of FY08 revenues have been secured till date.

Minimal refinancing risk. MLT has secured sufficient resources to meet its 2009 debt obligations. We remain confident on its financial position given (i) an unsecured loan portfolio leading to no LTV pressures, (ii) ample interest cover expected to remain above 4.0x, and (iii) strong parentage & relationships with bankers.

Recommendation

Attractive valuations. We believe that MLT, trading at 0.5x P/BV, coupled with a prospective forward DPU yield of 12% is attractive. We maintain our BUY call on MLT, TP adjusted to S$0.56, on the back of lower equity risk premium assumptions.