Mapletree Logistics Trust

DBS on 29 Feb 2012

Acquisition of two industrial warehouse properties in Malaysia: Mapletree Logistics Trust (MLT) announced the proposed acquisition of two industrial warehouse properties located within Iskandar Malaysia, for a total consideration of RM59 million (S$24.6 million). The purchase price implies an initial yield of 8.7-8.8 per cent, which is higher than the implied NPI yield of 7.1 per cent for its Malaysian properties. Deal size is relatively small in comparison to its portfolio and we believe that MLT has the financial and funding capacity to fund these acquisitions.

Gearing is expected to stay relatively stable (assuming 100 per cent debt financed) while DPU impact is estimated to be minimal at less than one per cent. Completion of this deal is expected in H2 FY2012, and will grow MLT's portfolio to 100 properties with a total appraised value of S$3.77 billion.

Quality tenants within an emerging industrial hub: The manager has once again shown its ability to source for accretive deals and we see the following positives: (i) The properties will be leased back to quality end users - Padiberas Nasional Berhad (a major supplier in the Malaysian paddy and rice industry) and Celestica (AMS) Sdn Bhd, a leading global EMS company, which implies strong credit quality and cashflows, and (ii) MLT is an early mover within Iskandar Malaysia, an emerging regional investment hub within Asia. Governmentefforts towards promoting investors' interest in the region through upgrading of supporting infrastructure and policies should enable MLT to tap the anticipated growing demand for quality warehouse space in the medium term.

BUY maintained, $1.07 TP based on discounted cashflow model: Yields of close to 7.6 per cent remain attractive in our view for its large cap, quality sponsor status. Re-rating catalysts likely to hinge on the manager's ability to continue sourcing accretive acquisitions and potential acquisition of sponsor's pipeline properties that will grow its portfolio meaningfully.
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