MapleTree – CIMB
Holding ground
• In line. Distribution income of S$28.7m (+27%) and DPU of 1.48cts (-23%) are in line with Street and our expectations (27% of full-year forecast). DPU contracted 22.6% yoy due to additional units from a rights issue in Aug 08, while qoq growth was marginal at 0.7%. 1H09 DPU of 2.95cts forms 53% of our full-year forecast. Revenue in 2Q09 slipped 2.4% qoq mostly due to a depreciation of the HK$ and ¥ against the S$. The impact of this on net property income (-1.2% qoq) was mitigated by reduced property expenses (-11% qoq) while the effect on distributable income was cushioned by the hedging of income streams from Hong Kong and Japan.
• Occupancy stable at 98.3%; renewals on track. Portfolio occupancy improved 0.3% pt to 98.3% in Jun 09. About 65% of the leases expiring in 2009 were successfully renewed in 2Q09. Average rental reversion rate was flat. Tenant arrears remained small at 1% of annualised gross revenue.
• Capital management. As at end-Jun 09, MLT had S$107m due for refinancing in 2009. Some S$40m has been earmarked from 1Q09 for partial refinancing of its medium-term note due in Oct 09. The remainder will be financed with a S$29m term debt and S$38m revolving credit facilities. In the longer term, management intends to reduce the concentration of debt due in 2012. Current asset leverage is 37.8% (excluding S$40m of borrowings ear-marked for refinancing). Weighted-average cost of debt fell to 2.7% from 3% in 1Q09. Management reiterates that it would not resort to an equity rights issue to lower asset leverage, and future acquisitions are likely to be funded by debt and equity, rather than completely debt.
• Maintain Neutral and target price of S$0.62. We maintain our estimates and DDM-derived target price of S$0.62 (discount rate 9.4%). Although the pressure to maintain occupancy and rents remains, we are encouraged by its relatively high tenant retention rate of 80% and success in securing refinancing at lower interest rates. We believe MLT will be able attain our forecast distribution for FY09.