MLT – DBSV

Tapping sponsor’s pipeline

Proposed accretive acquisition from sponsor’s development pipeline. Mapletree Logistics Trust (MLT) announced that it is proposing to acquire Wuxi International Logistics Park (WILP) from its sponsor Mapletree Investments Pte Ltd. The purchase price of Rmb 116m (S$22.8m) implies an initial yield of 8.0%, and is higher than the implied NPI yield of 6.0% for its China properties. We note that MLT has the financial capacity to

fund these acquisitions, and gearing is expected to stay relatively stable at 37.3% (assuming 100% debt funding). While accretive, impact on DPU is estimated to be minimal at <1%. Completion of this deal is expected in Mar’13, and will grow MLT’s portfolio to 111 properties with a total appraised value of S$4.2bn.

Quality tenants imply stable earnings. This acquisition highlights management’s emphasis on bringing the trust back on the growth track and in line with MLT’s investment strategy in expanding its presence in “growth markets” like China. The proposed acquisition of WILP will be the trust’s 3rd acquisition from its sponsor’s development pipeline, and is leased to a strong pool of tenants including Wuxi Hi-Tech, Kerry Logistics, Fiege International Freight Fowarder and Konoike Logistics.

BUY maintained, S$1.22 TP based on DCF. No change to our earnings estimates as we have previously forecasted close to S$200m worth of acquisitions in our numbers. Yields of close to 6.5% remain attractive in our view for its large cap, quality sponsor status. Further re-rating catalyst is likely to hinge on the manager’s continued ability to continue sourcing accretive acquisitions – either from its sponsor or from third party sources – to grow its portfolio and distributions meaningfully.