Cambridge – Phillip

CIT has no near term refinancing worries, as its single loan maturity of $390 million is due in 2012. The current gearing is 40%. Although it has not mention any plans of acquisition, CIT has a LTV covenant of 50%, which effectively allows it to gear up a further $200 million. However we feel that acquisition using pure debt to push the gearing limit is not a prudent move as seen in the last round of panic refinancing in the REIT sector. Therefore we believe with the three years time frame to the next loan maturity date, CIT will undertake some form of recapitalization measures to fuel its growth plans.

Property portfolio continues to perform within expectations. Occupancy rate for 1Q09 was 99.2%. The current focus for management is to actively manage its property portfolio so as to maximize the usage of space and renegotiate leases to dilute expiry profile concentration. Management has also indicated asset rebalancing whereby the REIT divests smaller underperforming assets.

We had assumed a 3% vacancy rate for 2009F and 2010F. Demand for industrial space should be buoyant from 2011 as supply is expected to stay flat according to URA schedule of industrial space. We raise the fair value estimate from $0.31 to $0.44 on lower assumption of WACC at 9.96 versus our previous assumption of 11.4. We upgrade our recommendation from Hold to Buy.