MLT – CIMB

Fully valued

• Downgrade to Neutral from Outperform. The outlook for the manufacturing and logistics industries remains weak and we expect new demand for logistics space to ease further. Nonetheless, MLT’s long weighted average lease to expiry of five years and geographical diversification should ensure visible income over the medium term. Occupancy of 98% as at Mar 09 remained materially higher than the islandwide warehouse occupancy rate of 92.8%.

• Lacking catalysts in the short term. MLT’s strategy of growth via acquisitions looks set to take a backseat in the short term, while upward rental reversions are limited by weak demand.

• DDM-derived target price raised to S$0.62 (from S$0.60). We maintain our estimates but use a lower discount rate of 9.4% (from 9.6%) based on a lower riskfree rate of 4.8% applied across our REIT universe. P/BV for MLT has risen to 0.6x, in line with the sector average. At this level, we believe MLT is fully valued, and downgrade it to Neutral.