MLT – CIMB

Busy quarter

5QFY12 was boosted by positive rental reversions and completed acquisitions. Resilience should stem from Asian logistics demand, its long WALE and geographical diversification.

5Q12/FY12 DPU meets our estimate and consensus at 20%/99% of FY12. MLT has changed its year-end to Mar from Dec. We tweak our DPU by 1-6% for FY12-13 factoring the change in year-end but keep our DDM target (discount rate: 9.0%) pending its briefing. Maintain Outperform.

Stable occupancy, stronger rents

Portfolio stability was underpinned by a long WALE of six years and high occupancy of 98.7%. 5Q12 NPI was up 12% yoy on organic growth and acquisitions. NPI was flat qoq due to the depreciation of the HK$ and yen, although the DPU impact was buffered by hedging. Occupancy was slightly lower at 98.8% in Singapore (5QFY11: 99.4%) after the conversion of two single-tenanted assets into multi-tenanted buildings. Rental reversions remained healthy at 12%, led mainly by Singapore and Hong Kong, albeit slightly lower than 4Q’s 16%. Rental reversions should remain positive, with most expiring leases in 2012 coming from Singapore and Hong Kong.

Acquisitions

Management acquired 11 properties for S$365m during the quarter. While the acquisition momentum could moderate, MLT still has ROFR to its sponsor’s >S$300m greenfield pipeline and continues to look at AEI and lease management to optimise yields. We have factored in S$150m of acquisitions for FY13. Asset leverage will be fairly healthy at 37% following its perpetuity issuance, acquisitions and a 3% portfolio revaluation − still conducive for debt-funded acquisitions.

Capital management

Balance sheet strengthened with the extension of a ¥17bn loan maturing in Apr 12 to Apr 16. Average cost of borrowing is up 10bp after this but remains fairly low at 2.4%.