MapleTree – CIMB

Biggest acquisition to date

MLT has acquired five logistics facilities in Japan from Itochu Corp for ¥27.8bn S$350.8m). Four of the properties are located in the Greater Tokyo area and the fifth in the Kyoto (Kansai) area. All five properties are freehold and have a total GFA of 103,864 sq m. The multi-tenanted assets come with long lease tenures of 7-18 years. The acquisition is expected to be completed by mid-2007.

Second acquisition in Japan, following the completion of the purchase of Gyoda Distribution Centre (S$24.4m, floor area 17,094 sq m; also from Itochu) last month. This is also the largest acquisition by MLT since its listing two years ago, beating its S$211.1m acquisition of Hong Kong’s Shatin No. 4 (floor area 60,215 sf) in April last year.

Demand for quality logistics space in Japan is rising, according to Colliers International. There is now a shortage of large high-quality distribution centres in key areas and modern distribution facilities with floor areas of over 3,000 sq m make up less than 50% of the total stock in Japan. The five properties that MLT has acquired have floor areas of above 3,000 sq m, with the biggest measuring 41,171 sq m.

Initial yield lower than expected. The acquisition will be funded entirely by debt as MLT wishes to take advantage of the low cost of borrowing in Japanese yen. The resulting proforma accretion to MLT’s FY06 DPU is 0.56ct (+11%). Assuming a cost of debt of 1% and a weighted average management fee of 2%, we estimate the average initial yield of the assets at 4.3%. While this is lower than the weighted average yield of 4.9% that we had assumed for MLT’s acquisitions this year, we expect the impact to be offset by acquisitions of higher-yielding assets in other markets such as China later in the year.

Valuation and recommendation

Reaching our target price; downgrade to Neutral. With the acquisition of these five properties, MLT’s total assets now amount to just under S$2bn (including acquisitions that are pending completion). We had projected an increase of S$1bn in asset size to S$2.4bn by the end of this year. We believe MLT is on course to meet our target. As such, our DPU forecasts and DDM-target price of S$1.32 remain unchanged. With the REIT trading near our target price, we downgrade MLT to Neutral from Outperform. Above-average forward