MapleTree – CIMB

Reaching fair value

• 1Q07 in line. 1Q07 distributable income of S$15m (+84% yoy) represents 20% of our full-year forecast and 23% of consensus’s. MLT’s 1Q is traditionally the weakest and we expect earnings to step up over the next three quarters to meet market and our targets for this year.

• Rental revenue more than doubled to S$29m, underpinned by the acquisition of 25 new properties in the last 12 months. MLT’s current S$1.5bn portfolio is over twice its size a year ago. There are now 13 announced acquisitions worth S$467m pending completion, which should take MLT’s portfolio to S$2bn. As such, we are confident that our S$2.4bn target for end-2007 can be met.

• Sustained high occupancy. Overall occupancy stood at nearly 100% at the end of 1Q07. MLT has secured a new tenant for 1,000 sf of space at TIC Tech Centre (NLA 30,758 sq m, third-largest asset by revenue contribution), taking the property to full occupancy in the coming quarter. A three-storey extension with 6,285 sq m of space will be added to TIC Tech Centre. EBITDA yield for the additional space is projected at 8.1%, when the enhancement work is completed in Oct 07.

• Overseas properties from sponsor. Two overseas properties developed by sponsor Mapletree, Lingang Free Port (S$39m, GFA 46,500 sq m) in China and the Vietnam Singapore Industrial Park (VSIP1, GFA 23,600 sq m), have been completed early this year. Three out of five units at VSIP1 have been leased and we believe this property could be injected into MLT as early as this year. It was also reported recently that MLT could be buying its first assets in South Korea and India very soon. As competition for assets on the home turf intensifies, MLT’s capacity for regional expansion should give it an advantage.

• Maintain Neutral. While our FY07-09 DPU forecasts have been maintained, our DDM target price has been raised from S$1.32 to S$1.43 to reflect stronger projected DPU growth for FY10 (cost of equity 6.5%, implied CY07 yield of 4%). With a projected DPU CAGR of 12% for the next four years, MLT remains one of the fastest-growing REITs in Singapore. Above-average forward yields of 4.3-5.3% should provide ample support for the share price.