MapleTree – DBS

Branching out with acquisitions

Increased presence in the Japan market. MLT has penetrated into the Japanese market further with its recent acquisition of five logistics facilities – four in Tokyo and one in Kyoto. The total consideration of the acquisition is S$350.8m. The five logistics facilities have a total land area of 108,968sqm (GFA: 103,864sqm) with lease terms ranging from seven to 18 years. The acquisition is expected to be completed by mid 2007 and given the relative lower cost of borrowing in Japanese yen, the purchase would be wholly funded by debt.

Acquisition of a distribution centre in China. MLT has also recently announced its first acquisition in inland China with the purchase of Xian Seastar distribution centre for S$17.8m. As the Chinese government continues to increase its efforts to develop the inland regions, this would allow MLT to ride on the growth. The acquisition is expected to be completed by mid 2007 and would be wholly funded by debt.

Strategy. MLT still has around S$440m of debt headroom to maintain its gearing limit of 60%. MLT expects to make its first acquisitions into South Korea and Vietnam this year and to increase its exposure in China with more acquisitions. MLT intends to move into India next year and in the medium term, its growth will come from the emerging markets of India and China. The initial acquisitions in India are likely to come from its sponsor, Mapletree Investments, which has tied up with Bangalorebased developer Embassy Group to build logistics developments in India. With the recent acquisitions of the five logistics facilities in Japan and a distribution centre in China, MLTs portfolio has an exposure of 48%, 5%, 24%, 5% and 19% in Singapore, Malaysia, Hong Kong, China and Japan respectively.

Maintain Buy with raised target price of S$1.46. With the recent increase in the stock price by 14% since our last report, we have increased the assumed issue price for further equity raising activities to fund its acquisitions pipeline. As such, we have a lower number of assumed units issued and hence, higher DPU and a raised target price of S$1.46 based on DCF valuation. This derives a total return, including yield, of 17%. In our valuation, we have assumed acquisitions of S$1bn p.a. from 2007 to 2009. Maintain Buy.