MapleTree – CIMB
Respite from debt woes
• 1Q08 results in line on traditionally quiet quarter. Distribution income of S$21.0m was in line with our expectation (23% of our full-year forecast) on a traditionally quiet quarter. However, DPU of 1.9cts came in above Street (27% of full-year) and our estimates (28%) as our assumption of an increased share base from equity fund-raising this year has not yet happened. Gross revenue of S$42.6m was up 48% yoy on contributions from 23 properties acquired in 2007. This was in line with our expectation (24% of full-year) due to a traditionally quieter first quarter; contributions from new acquisitions usually come in in the second half of the year (1Q07: 21% of full-year DPU, 1Q06: 20% of full-year).
• Short-term debt refinanced, cost of debt lowered. Management announced the conversion of S$155m of borrowings due in 2008 into term loans and in-principle approval from banks to convert another S$300m. After conversion, MLT’s shortterm debt of S$476m (35% of total debt of S$1.36bn) should be reduced to 2% of its total debt. Weighted average interest rates also declined from 3.3% p.a. in 4Q07 to 2.9% p.a. in 1Q08, as interest rates for major currencies dropped sharply during the quarter. With this refinancing, Moody’s confirmed MLT’s original Baa2 rating after an earlier review for possible downgrade.
• Sale of non-core properties under consideration. As at 31 Mar 08, MLT’s asset leverage ratio was 54.7%, up slightly from 53.4% a year ago. This was largely due to borrowings drawn down to fund committed acquisitions in 1Q08. Management is considering the sale of some non-core assets to lower its gearing, which is pushing near the regulatory limit of 60%.
• Maintain Outperform and target price of S$1.36. Our DDM-derived target price (discount 6.9%) stays at S$1.36, with no changes in our estimates. Although gearing levels remain high and equity-raising looks difficult in 1H08, we draw confidence from: 1) management’s ability to refinance its significant short-term debt; 2) MLT’s quality asset portfolio; and 3) the positive outlook for the Asian logistics industry. Maintain Outperform.