MMP – Nomura
MM PRIME, nomura remains STRONG BUY with target price $1.54 (from $1.52)
– MMP looks undervalued, given its exposure to the Orchard Rd office and retail precinct. Small acquisitions in Japan and China are a precursor to larger deals. Low gearing (end-FY07F: 0.33x) lends MMP scope to leverage its balance sheet and make further yield-accretive acquisitions. Maintain STRONG BUY.
– Attractive valuation, NAV raised to S$1.54unit . MMP owns prime office/retail assets in Orchard Rd and has an underleveraged FY07F yield of 5.0%, versus a REIT sector average of 4.2% and 3.5% for mixed-use office/retail REIT peers. It trades at 1.1x FY07F P/BV, versus a peer average of 1.7x. We remain upbeat on the outlook for offices. Offices contribute circa 15.9% of MMPs revenue and 20.7% of gross asset valuation. Our NAV has been revised up marginally to S$1.54/unit (previously S$1.52), and we retain our STRONG BUY rating.
– Temasek emerges as major shareholder. Temasek announced on 20 June that it is a new substantial shareholder of Macquarie Prime REIT, with a deemed interest of 5.04%. Temasek’s status as a major shareholder appears to have been triggered by the acquisition by Keppel Corporation of 1.8m shares in MMP on 18 June. Given Temasek’s 22% ownership of Keppel Corporation, the purchase resulted in Temasek’s interest increasing by 0.4m shares (0.04%), tipping Temasek over 5%. Prior to the announcement, Temasek owned 4.99%. Based on the announcement it appears Temasek’s ownership now comprises 3.64% directly owned, as well as 1.35% indirectly owned via DBS Asset Management and various nominee companies (DBS Asset Management and associated nominees own 4.8%) and 0.04% via Keppel Corporation. The combined ownership of all three groups is 8.67%.
– Attractive valuation, NAV raised to S$1.54unit . MMP owns prime office/retail assets in Orchard Rd and has an underleveraged FY07F yield of 5.0%, versus a REIT sector average of 4.2% and 3.5% for mixed-use office/retail REIT peers. It trades at 1.1x FY07F P/BV, versus a peer average of 1.7x. We remain upbeat on the outlook for offices. Offices contribute circa 15.9% of MMPs revenue and 20.7% of gross asset valuation. Our NAV has been revised up marginally to S$1.54/unit (previously S$1.52), and we retain our STRONG BUY rating.
– Temasek emerges as major shareholder . Temasek announced on 20 June that it is a new substantial shareholder of Macquarie Prime REIT, with a deemed interest of 5.04%. Temasek’s status as a major shareholder appears to have been triggered by the acquisition by Keppel Corporation of 1.8m shares in MMP on 18 June. Given Temasek’s 22% ownership of Keppel Corporation, the purchase resulted in Temasek’s interest increasing by 0.4m shares (0.04%), tipping Temasek over 5%. Prior to the announcement, Temasek owned 4.99%. Based on the announcement it appears Temasek’s ownership now comprises 3.64% directly owned, as well as 1.35% indirectly owned via DBS Asset Management and various nominee companies (DBS Asset Management and associated nominees own 4.8%) and 0.04% via Keppel Corporation. The combined ownership of all three groups is 8.67%.