MLT – DBSV

Moving up a gear

• DPU of 1.5 Scts in line, backed by stable portfolio occupancies

• Acquisition opportunities aplenty, raising forward assumptions by another S$100m

• Maintain BUY with raised TP of S$0.98

DPU of 1.5 Scts (+1.4% yoy, flat qoq). Gross revenue and net property income remained relatively flat at S$51.9m and S$45.8m respectively. Contributions from newly acquired properties were offset by weaker HKD/JPY vs S$ & frictional vacancies in S’pore, Hong Kong and Malaysia. Distributable income however increased by 8% yoy to S$30.9m due to lower average borrowing costs, translating to a DPU of 1.5 Scts.

Portfolio occupancies at 97%, heading up in subsequent quarters. Vacancy levels rise slightly in HK, Singapore and Malaysia this quarter due to MLT’s deliberate repositioning of assets as multi-tenanted buildings to further drive yields. Occupancies are expected to head back in the coming quarters.

An eye on 2012 refinancing (cS$700 m or 58% of debt expiring). MLT has sufficient facilities to repay S$100m debt expiring in 2H10. Management is keen to tap the bond market or its MTN program to term out its debt maturity profile.

Acquisitions worth S$117.5m to-date but further opportunities exist – we raise assumptions by another S$100m. Management is evaluating further opportunities & potential built-to-suit developments. In addition, its sponsor stands ready with another S$300m worth of assets that are completing/ competed to be injected into the REIT. With a myriad of growth opportunities, we raised our acquisition assumptions by another S$100m, funded on 40% debt and 60% equity basis, raising our TP by 5 Scts to S$0.98

BUY, TP S$0.98 based on DCF. MLT’s back on the growth path and we are excited over its prospects in the medium term. Maintain BUY, TP revised to S$0.98 on higher forward acquisition assumptions. Forward yields of 6.9-7.3% remains attractive.