MapleTree – DBS

Beating expectations

• 2Q09 results above street expectations
• Robust occupancy of 98%
• Offers growth on top of stability
• Maintain BUY, TP S$0.70 based on DCF, offering 26% total return

Results slightly above. MLT reported a good set of 2Q09 results, beating market expectations. 2Q09 distributable income came in 26% higher at S$28.6m (DPU of 1.48 Scts), underpinned by 19% growth in topline and net property income to S$51.9m and S$45.7m respectively. Performance on a sequential basis remained stable.

Occupancy remains high at 99%. The better performance came primarily from MLT keeping retentions high at 80%, resulting in high occupancy of 98% vs our estimate of 95%. With two-thirds of expiring revenue secured, come 2H09 forward renewal activities will only account for c7% of total revenue. We reduce our vacancy assumptions to c2% resulting in upward DPU adjustment of c. 5.8-6.6% in FY09-
10F.

Pipeline in waiting – Up to S$300m of assets. Management shared that sponsor’s pipeline lies in waiting, with possible c. S$300m worth of assets to be injected into the trust over the medium term. However, any injection will be financed through a combination of debt and equity and have to be accretive to unitholders. Gearing is targeted to remain at current level of 38%.

Maintain BUY, TP S$0.70. Current price at 0.7x P/BV is in line to its smaller industrial peers is attractive. With a strong sponsor support and a S$3.0bn- unencumbered portfolio, MLT offers a potential for growth, on top of a stable FY09F-10F prospective yield of 10%. Maintain BUY, our TP is raised to S$0.70 premised on increased earnings and a slight lowering in equity risk premium (-50bps to 7.0% WACC).