MIT – BT

Mega IPO offers entry into industrial property

Roadshows begin today for Mapletree trust, with price pegged in the $0.88-$0.93 range

Another day, another mega IPO. This time, Mapletree Industrial Trust (MIT) is expected to raise gross proceeds of up to $1.19 billion from a global offering and share subscriptions from cornerstone investors.

It is pricing its offer in a range of $0.88-$0.93 per unit, according to its draft prospectus lodged yesterday.

The mega IPO comes on the back of the foray by Global Logistic Properties (GLP), which is seeking to raise as much as $3.4 billion, having lodged its prospectus just two days before.

Together, MIT and GLP could bring the total IPO funds raised on the Singapore Exchange this year to as much as $6 billion, easily dwarfing the $3.21 billion raised last year, with the potential of hitting $8 billion if market talk on three other upcoming IPOs materialises.

MIT would also be the third real estate investment trust (Reit) to be launched by Temasek's fully-owned Mapletree Investments after the listing of Mapletree Logistics Trust in 2005 and Lippo-Mapletree Indonesia Retail Trust jointly launched with Lippo Group in 2007.

According to its draft prospectus, MIT is issuing 594.91 million units, subject to over-allotment option of another 91.75 million units. The indicative price range of $0.88-$0.93 per unit implies an annualised yield of between 7.6 per cent and 8 per cent for fiscal 2010.

MIT's offering consists of an international placement of 488.77 million units and a public offer of 106.15 million units, of which 25.5 million units are reserved for directors, management, employees and business associates of Mapletree.

Separately, six cornerstone investors have agreed to subscribe for 322.58 million units at the offer price. They are AIA, Prudential Asset Management (Singapore), Henderson Global Investors, Columbia Wanger Asset Management, US investment firm DE Shaw, and Dutch pension fund APG.

The sponsor's two wholly owned subsidiaries Mapletree Dextra Pte Ltd and Sienna Pte Ltd have also agreed to subscribe for 359.45 million MIT units.

MIT's IPO portfolio will comprise 70 properties located across Singapore with an aggregate net lettable area (NLA) of about 1.1 million sq m and a gross floor area of 1.5 million sq m.

These assets include six light industrial buildings from Mapletree Singapore Industrial Trust (MSIT), a private trust that MIT is acquiring for $183.3 million on the listing date.

The IPO is seen as a recapitalisation exercise for MIT, which has some $977.8 million of debt on its balance sheet maturing in July 2012.

MIT will be mainly using the IPO proceeds and a new debt facility of $837 million from three banks – DBS Bank, Standard Chartered Bank and Citibank – to pay down the existing debt as well as pay for the acquisition of MSIT and related costs.

While there have been concerns over whether the market could digest the back-to-back IPOs of GLP and MIT, some say that the two have different appeals.

UOB-KayHian executive director Chan Tuck Sing noted that MIT's structure as a Reit appeals to investors looking for steady, regular returns while GLP caters to investors seeking underlying growth in the markets it has exposure to.

Analysts also note that the domestic focus of MIT works in its favour, given the strong outlook of Singapore's industrial property market.

'I expect healthy interest as investors have been going for yield recently,' said Phillip Securities analyst Lee Kok Joo, citing MIT's implied yield which falls within the 6-10 per cent range seen in the industrial Reits sector.

Investors could also consider potential rental revisions on existing assets as another possible avenue of growth, added OCBC Investment Research analyst Meenal Kumar. She noted that MIT's IPO is priced at between 1.02x and 1.08x book value (using an estimated net asset value per unit of $0.86 as at listing date). This is broadly in line with the broader S-Reit sector average of 0.97x book value and the industrial sector average of 1.06x book value. MIT will begin roadshows today and pricing of the offer is expected to take place on Oct 11. The public offer opens on Oct 13 and closes on Oct 18. Trading of the units is expected to commence on Oct 21.

DBS Bank and Goldman Sachs (Singapore) are the joint global coordinators for MIT's offering. They are also joint bookrunners with Citigroup Global Markets Singapore and Standard Chartered Securities (Singapore).

Some of these banks are also working on GLP's IPO. DBS and Citi are joint bookrunners and underwriters alongside JPMorgan, UBS and CICC, while Citi is also the joint global coordinator and joint issue manager with JPMorgan for GLP's issue.

Other IPOs that could be making their way to the local bourse by year-end include China's New Century Shipbuilding, Malaysia's Mewah Group and the European unit of STX Pan Ocean.