MapleTree – JP Morgan

Incorporating proposed acquisitions and EFR

• Acquisitions and EFR announced. MLT today proposed a private placement of 115million new units to raise S$79 – 82million equity capital, at 8.3 – 8.6% FY09E dividend yield. The net proceeds will be used to finance 3 potential acquisitions with a total value of S$145million, and a weighted average entry yield of 8.4% according to management. Post proposed acquisitions and EFR, gearing for the trust will remain at 38%, and we estimate very modest accretion towards the trust DPU.

• A step forward, but smaller than expected. MLT management has moved into the ‘new strategy’ this year in which they will try to bundle acquisitions together with permanent/stable funding structure being put in place. A successful close of both proposed EFR and acquisitions would signal a step forward for management’s execution capability in our view, but the size of the EFR is smaller than our expectation.

• Fine tuning our estimates. We have fine tuned our estimates to reflect a better than expected earnings announced earlier during results and to incorporate the proposed acquisitions and EFR, assuming done at the bottom of the range. Our DPU estimates for FY09 – FY11 have, as a result, been raised by 3 – 6% and our 1-year forward NPV raised to S$0.67/unit, from S$0.65/unit based on discount rate of 9.4% and LT growth assumption of 0.5%.

• We maintain our Neutral rating on MLT, with Dec-10 DDM based price target raised to S$0.67/unit due to earnings revision above (S$0.65/unit previously). Key risks to our rating and price target include a better than expected rental reversion cycles and management executions on the upside, or a re-tightening of the credit market and management’s inability to close both acquisitions and EFR successfully on the downside.