MLT – DBSV

Expanding Asian footprint

• More acquisitions, maiden foray into Vietnam

• Earnings accretive, increases income visibility

• Maintain Buy with TP of $0.93

Tapping its sponsor for assets. MLT announced that they have acquired 3 logistics properties located in Vietnam, Japan and Singapore for a total consideration of S$83.5m. These acquisitions (roughly c3% of total portfolio value), while relatively small in size, are significant in our view as (i) the assets in Vietnam and Japan are MLT’s first injection of incubated assets from its sponsor, Mapletree Investments; and (ii) it is MLT’s first foray into the fast growing Vietnam logistics market. The Singapore property was purchased from 3rd party vendor – Natural Cool Investments Pte Ltd.

7.9% yield, accretive to earnings. The properties are fully occupied and backed by long lease tenures of up to 10 years, providing MLT with income visibility and stability. Post acquisition weighted average lease to expiry has lengthened to 4.9yrs. Average NPI yield of 7.9% is higher than MLT’s current implied trading yield of 7.1%. The purchase will be funded by debt and will raise gearing to 40.2%, which is within its targeted long term gearing ratio of 40-45%. Accretion to DPU is estimated to be c0.157cts or 2.62% on an annualised basis.

More growth opportunities in the medium term. The acquisitions do not come as a surprise and we have already factored in S$150m worth of new additions into our forward estimates. Looking ahead, in addition to 3rd party assets, MLT’s sponsor is in the process of building cS$700m worth of logistics assets, of which S$300m is nearing completion or undergoing stabilizing and leasing activities. MLT has the right of first refusal to purchase these assets. Furthermore, the trust is also looking to develop a Built-to-suit (BTS) capability by taking on development projects, which in our view, will offer higher yields. We maintain our FY10-11F DPU estimates of 6.1 and 6.4 Scts respectively, translating to 7.4-7.8% yield. We retain our BUY Call with a TP S$0.93, offering 21% total return.