MapleTree – OCBC

More of the same in FY07

Growth again due to acquisitions. Mapletree Logistics Trust (MLT) reported a good set of 4Q06 results. Revenue was up over 167% YoY to S$26.9m and distributable income improved 97% to S$11.8m. Distributable income per unit (DPU) was less robust, improving by 38% YoY to 1.45 cents and slightly better than market’s forecast of about 1.40 cents. The bulk of the growth came mainly from the acquisition of 23 properties over the last 12 months. At the end of 4Q06, MLT has a portfolio of 41 properties. This enlarged portfolio in turn led to MLT’s asset size increasing by over 3-fold from just above S$460m in FY05 to about S$1.4bn by end FY06.

All eyes on equity raising. Presently, MLT is in the processing of raising new equity from unit-holders. The fund to be raised is estimated at S$359m and will be used in multiple areas; to lower MLT’s high gearing (of about 55%), to finance previously announced acquisition of 15 properties with a total value of about S$221m and finally to provide debt headroom for future acquisitions. Post the equity fund raising, we estimate MLT’s gearing to fall to about 46% and this would position it well to continue its growth strategy via acquisition. The EFR is expected to complete no later than end Feb 2007 with an Extraordinary General Meeting to be held on 17 Jan 2007.

Expect more of the same in 2007. Including the recently announced purchases and when completed, MLT’s asset size will increase to about S$1.7bn. Going into 2007 and with the expected success of the EFR, MLT is well positioned to continue its growth strategy. We see an annual acquisition of S$1.0bn as not improbable with one or two cash calls per year.

Maintain BUY with higher fair value. MLT has done exceedingly well since our “A possible laggard play” report in Oct. The unit price has risen from S$0.97 to S$1.19 currently, up more than 22%. However, at the current pace of acquisition, our target asset size of S$2.1bn is likely to be breached fairly soon. We have thus revised up our target size to S$3.0bn, and this in turn has a positive impact on our fair value estimate. We have thus revised up our fair value from S$1.12 to S$1.34 and maintain our BUY recommendation.