MLT – CIMB

Factoring in acquisition growth beyond 2010

• Upgrade to Outperform from Neutral; target price raised to S$1.01 (from S$0.89). We see improved demand for logistics space in MLT’s key markets and are more assured of positive rental renewals for the rest of 2010. With a strong S$1bn acquisition pipeline from its sponsor, and capabilities to take up high-yielding development projects, MLT’s aggressive growth plans are ready to take full flight. We assume S$1bn of acquisitions for 2011-12, partially funded with equity. Our DPU estimate dips 2% for 2010 before rising 6-9% for 2011-12, reflecting our changes. Our DDM target price rises accordingly to S$1.01 from S$0.89 (discount rate 8.6%). MLT offers a prospective dividend yield of 7.2% and price upside potential of 20%. Upgrade to Outperform in anticipation of acquisition catalysts beyond 2010.

• Lease renewals more assured with demand surge in key markets. There has been a strong recovery in warehousing demand in MLT’s two key markets, Singapore and Hong Kong, so far this year, propelled by a manufacturing surge and improvements in external trade, auguring well for MLT’s lease renewals in FY10.

• Higher yielding build-to-suit (BTS) development projects to further fuel growth. Within a development cap of 10% of deposited properties, MLT is able to undertake about S$300m worth of projects, in our estimation.