MLT – DBSV

Takes 3 in Japan

• Buying 3 Japanese properties for cS$200m

• Yield accretive at 7.3%, above current Japanese portfolio yield of 5.0%

• Gearing at 43%, future acquisitions to be funded through debt/equity

• BUY, TP raised to S$1.00.

Growing its Japanese exposure. Mapletree Logistics Trust (“MLT”) announced the acquisition of 3 Japanese properties for a total consideration of S$200m. Completion of this deal will increase revenue contribution from Japan to 23.7% (from 17.8% currently).

Yield accretive at 7.3%, secured long-term leases. The underlying end users are understood to be major local logistics players in Japan. The assets are signed on long-term 10-year fixed leases, adding to MLT’s earnings visibility and sustainability. The acquisitions will lift MLT’s average lease expiry to 5.0 years from 4.8 years currently. We include these assets in our numbers, raising our FY11F DPU by c3%.

Gearing to head up to 43%, further acquisitions could see equity fund raisings. Gearing post acquisition is expected to head up to c43%, still within the manger’s comfortable range of 40-45%. However, any further acquisitions, which we believe are likely, would be part-funded through new equity. We have assumed further acquisitions of S$100m funded by a 40/60 debt-equity ratio.

Maintain BUY, raised TP to S$1.00. MLT continues to offer attractive and stable FY10-11F yield of 7.0-7.7%. Catalysts for further re-rating will hinge on the trust acquiring more assets and growing its earnings.