MapleTree – OCBC

All eyes on equity fund raising

Growth again due to acquisitions. Mapletree Logistics Trust (MLT) will be reporting its 4Q06 results on 16 Jan 2007. We are forecasting FY06 DPU of 5.0 cents or 1.38 cents for 4Q06. This represents a 4.5% QoQ and 29% YoY improvement and comes mainly from completed acquisitions over the last quarter. The market is going for 4Q06 DPU of 0.98 to 1.88 cents.

Equity cash call as expected. In our last report dated 27 Oct 2006, we had warned that an equity cash call was imminent. This was because we saw the rapid rate of acquisition that is likely to push MLT’s gearing close to the maximum allowable of 60%. Indeed, MLT has over the last two months of 2006 bought a total of 14 properties with a total value of S$227m. Assuming that MLT continues to debt finance its acquisitions, gearing would be at an unacceptable level of 58%. Over Christmas, MLT announced its intention to raise S$359m in new funds via an Equity Fun Raining exercise (EFR). With this new funding, MLT’s gearing would fall to about 46% and this would position it well to continue its growth strategy via acquisition. The EFR is expected to complete no later than end Feb 2007 with an Extraordinary General Meeting to be held on 17 Jan 2007.

Expect more of the same in 2007. Including the recently announced purchases and when completed, MLT’s asset size will increase to about S$1.7bn. Going into 2007 and with the expected success of the EFR, MLT is well positioned to continue its growth strategy. We see an annual acquisition of S$1.0bn as not improbable with at least two cash calls per year.

Maintain BUY for now. MLT has done exceedingly well since our “A possible laggard play” report in Oct. The unit price has risen from S$0.97 to current S$1.17 or up about 21%. At present valuation, it is trading in line with our fair value of S$1.12 based on an asset size of S$2.1bn. At the current pace of acquisition, our target size could be breached fairly soon and we are likely to revise up our asset target size. In light of MLT’s impending FY06 results, to be released in a week’s time, we are maintaining our estimates and our BUY recommendation for now.