Extracts fm DMG Report dated 8-Nov-05,

Mapletree had declared a DPU of 0.8 cents for period 28 Jul 05 to 30 Sept 05. On an annualized basis (4.47cents), this is 9.6% higher than the DPU of 4.08 cents as management forecasted for 2005. The net investment income of $4.3 m is 13.7% higher than forecasted mainly due to the lower trust expenses. With the proposed acquisitions, MLT is expecting to double its asset portfolio over the next 6 months. As MLT is trading at premium to its NTA and the industry property rent remains flat, we maintain HOLD.

(I) Results

• The gross revenue of $7m is 1.5% higher than forecast, whereas the net property income is 7.2% increase over forecast, reaching $5.6m.
  
• The property expenses dropped 16.5% from the forecast to $1.4m. This is mainly due to non-recurring property maintenance and upgrading works, expected to be incurred in the next two quarters.
  
• The net investment income of $4.3m is 13.7% higher than forecast. This is contributed by the lower trust expenses which are due to lower borrowing costs and other trust expenses.
  
• The NAV per unit is $0.57 at end Sept 05.

(II) Comparing with other REITs

• At S$1.06, Mapletree is trading at 86% premium to its NTA. The yield is the lowest compared to other SREITs.

(III) Updates and Outlook

• The aggregate leverage ratio at end Sept is 27.6%, which leaves ample room for MLT to proceed with its acquisition plans as the latest ruling allows 60% as cap for aggregate leverage. MLT is expected to obtain a credit rating by 1Q06.
  
• The management expects to acquire about $500m worth of assets by 1Q06, of which 11 warehouse assets form $290m. These 11 properties consisted of 3 Hong Kong and 2 Malaysia properties, with the remaining properties from Singapore. With these proposed acquisitions, MLT is expecting to double its asset portfolio over the next 6 months.
  
• Separately, about $1b worth of acquisitions is still under negotiation.
  
• MLT has plans to harness its parent’s ability to undertake development projects in Singapore and Malaysia, and new markets such as Vietnam and China, according to the operational needs of the trust’s customers. The trust will have the first rights to the developing facilities once they become income generating.
  
• MLT has acquired a 56ha land in Vietnam outside Ho Chi Minh City, with the exclusive right to develop a US$100m logistics park.
  
• The trust had signed MOU with Wuxi New District for an 18-ha land for proposed logistics park. It is also negotiating to develop logistic parks in Shanghai.
  
• We expect Singapore industrial properties’ rent to remain flat as there is an oversupply of conventional factory space and landlords are pressured to keep the rents competitive.

(IV) Recommendation

• Management is confident of delivering the projected DPU of 1.64cents for 2005.
  
• As the industrial rentals are still flat and are expected to recover slowly due to oversupply, and other SREITs are offering more attractive yields, we maintain HOLD.

Acquires APICO Industrial Building

MLT has signed put and call options with to acquire APICO Industrial Building at 39 Changi South Ave 2 for S$9.088m from Asia Paint International Pte Ltd (APICO). APICO will lease back the building for eight years with an option for a further five. The net property income yield for the property before acquisition costs is 7.0%. The property is single-tenanted and classified under Distribution Centre. It is a warehouse complex comprising a 3-storey conventional warehouse as well as a four-storey ancillary office block. Summary in Figure 1.

Impact on MLT

The acquisition is expected to be completed by end of the year and 100% funded by debt. Pro forma, MLT’s gearing will rise to 33% from 31.5%, still within the MAS cap of 35% without having to seek credit rating from a major rating agency. It will be yield-accretive, with the property yields of 7.0% above MLT’s implied trading net property yield of 4.5%. The property has a NLA of 7,232sq m, and will add about 2% to MLT's portfolio in terms of value. This is also MLT’s third acquisition since its listing on 28 July 05. Together, these three acquisitions have total consideration of S$37.8m which represents 9% of the initial asset base of S$422m. MLT’s portfolio will now comprise 18 properties of about S$460m. The weighted average lease term to expiry for MLT’s portfolio will be 8.5 years, down slightly from 8.6 years. MLT will have a reduced tenant concentration and more diversified asset mix.

Comments

The acquisition yield is in line with our forecasted yield for Singapore properties.We were expecting MLT to aquire Singapore properties at 7% net property yield, making up 40% of new acquisitions. We believe MLT is on track to achieving growth via acquisitions of S$1bn in the region by end-08. As a result of earlier-than-expected acquisitions, we raise our DPU forecasts marginally for FY06-07.

The recent change in REITs guidelines benefits MLT most. MAS issued its revised Property Fund Guidelines relating to regulations governing REITs last week. One of the revised guidelines is to introduce greater flexibility in borrowing limits, allowing REITs to raise their gearing to 60%. We believe that this rule will benefit those REITs which a) are able to acquire aggressively, b) and at higher property yields. We believe the key beneficiaries will be the industrial REITs which have favourable industry characteristic (willing sellers) and high property yields (~7%), and in particular MLT which is starting on a small base and have a strong acquisition pipeline going forward. In a simplistic scenario, should MLT raise its portfolio gearing to 50% and grow its assets by 237% to S$1.422bn at 7% yield, raising equity at a stabilised 6% trading yield and debt at 3% rate, we estimate that its DPU will increase by up to 42% (Figure 2). The removal of the 12-month moratorium (from the IPO date) during which REITs cannot do transactions with interested parties will also benefit MLT most as its parent Mapletree Investments already lined up 11 properties (worth about S$255.5m) for its acquisition. Now these acquisitions may be completed earlier than later.

Valuation and Recommendation

Maintain Outperform. Before MLT announces any change in its target capital structure, we maintain our DDM-based target price of S$1.20. This assumes a weighted acquisition property yield of 8.7%, a discount rate of 7.0%, terminal growth of 1.5%, a debt cost of 4%, 30% gearing for its new acquisitions, and a S$1.4bn asset base by FY08. This translates into a 3.9% prospective yield for FY06 and 4.9% yield for FY07, which are fair, given its potentially aggressive growth

SINGAPORE (Dow Jones)--Singapore-listed Mapletree Logistics Trust (M44U.SG) could in a few weeks own assets in Malaysia and Hong Kong, after authorities here removed a 12-month moratorium preventing newly listed property trusts from entering into transactions with their parents. Mapletree Log chief executive Chua Tiow Chye said late Friday that in view of the new Monetary Authority of Singapore guidelines, the REIT "will be liaising with authorities with respect to 11 assets warehoused by (parent company) Mapletree Investments Pte. Ltd." Mapletree Log had earlier applied for a waiver of the rule concerning "interested party transactions" to let it buy the 11 assets, which included three properties in Hong Kong and two in Malaysia, Chua said in an e-mail response to queries from Dow Jones Newswires. The remaining six properties are in Singapore.

Mapletree Investments, a unit of Temasek Holdings Pte. Ltd., Singapore's state-owned investment company, announced June 29 that it had bought 11 logistic properties with a gross floor area of more than 160,000 square meters for around S$255.5 million. It was widely expected then that Mapletree Investments would inject these properties into Mapletree Log, but the deal would now almost certainly take place sooner due to the changes in MAS guidelines. Mapletree Log was then in the process of being listed. Assuming the 11 properties are sold to Mapletree Log for the same price, the value of its portfolio would jump by around 50% to S$765 million.

Mapletree Log, which made its stock market debut in July, currently has a portfolio of 15 logistic properties in Singapore valued at S$422 million. It is also in the process of buying two properties worth S$87.7 million. The REIT had positioned itself from day one as a trust that will invest in logistics property across the region, even though its assets are all currently Singapore-based.

MAS late Thursday announced a set of revised guidelines to safeguard investors' interests while providing greater flexibility to REIT managers. Besides the removal of the one-year moratorium, the new provisions allowed rated REITs to borrow up to 60% of the value of their properties, up from the current cap of 35%.

According to DBS Vickers Securities, Mapletree Log and rival Ascendas Real Estate Investment Trust (A17U.SG) are the biggest beneficiaries of the rule change, as the difference between the yields on industrial properties and borrowing costs was wider than for other property asset classes. Analysts say industrial properties in Singapore are currently being sold at cap rates, or annual yields, of around 6.5%-7.0%, while REITs are able to borrow at 3.0-3.5% per annum.

Extracts fm DMG Report dated 7-Oct-05,

Mapletree announced the acquisitions of two properties – 97 Ubi Ave 4 and 8 Loyang Cresent. With these new acquisitions, the tenant and asset mix is more diversified. We maintain HOLD as the valuation is not attractive.

(I) New acquisitions

• Mapletree Logistics Trust had signed separate put and call agreements to purchase 97 Ubi Ave 4 and 8 Loyang Crescent for an aggregated acquisition price of S$28.67m. This brings the portfolio to a total of 17 properties valued at S$450.7m.
  
• The 97 Ubi Ave 4 is a four-storey production area cum warehouse and ancillary office used solely by SNP. It is the subsidiary of an indirect wholly owned subsidiary of Temasek Holdings (Pte) Ltd ( which is a major shareholder in MLT).
  
• 8 Loyang Crescent is a 6-storey production centre cum warehouse with an ancillary office building. The tenant is Keyon, a chemical processing, petroleum refining and petrochemicals company.

(II) Comparing with other REITs

• At S$0.99, Mapletree is trading at 77% premium to its NTA. Such valuation is not as attractive as other REITs.

(III) Impact on MapletreeLog

• The acquisitions help to diversify the current portfolio and tenant mix.
  
• The weighted average lease term to expiry after the acquisitions will be 8.6 years, a slight drop from 8.7years before the acquisitions.
  
• The leasehold for underlying land after the purchase remains long at 59.4years, compared to 59.8 years before the purchase.
  
• The purchase is expected to be yield accretive and to generate growth through the built-in step-rental increases.

(IV) Recommendation

• Management expects a distribution yield of 1.64cents for the period Aug 05 to Dec 05.
  
• We maintain our projection of 3.9% annualized yield for FY05. Maintain HOLD as the valuation is not attractive.

Extract fm CIMB Report dated 7-Oct-05, 

• MLT has signed put and call options with to acquire two properties in eastern Singapore –97 Ubi Avenue 4 and 8 Loyang Crescent, for S$28.67m. The weighted average property yield for the two properties before acquisition costs is 7.2%. These two properties are single-tenanted and classified as industrial warehousing properties. Summary in Figure 1.

1. 1. 97 Ubi Ave 4: The property comprises a four-storey production area cum warehouse and ancillary office used solely by SGX-listed SNP Corporation (SNP SP, S$0.93, Not Rated). SNP is in the printing business and also publishes and distributes textbooks, magazines etc. It is a subsidiary of an indirect wholly owned subsidiary of Temasek Holdings (which is a key shareholder in MLT).
   
2. 2. 8 Loyang Crescent: The property comprises a 6-storey production centre cum warehouse with an ancillary office building. The tenant is Kenyon (private) which undertakes M&E projects in chemical processing, petroleum refining and petrochemical industry.  

Impact on MLT

• The acquisitions are expected to be completed by end of the year and 100% funded by debt. Pro forma, MLT’s gearing will rise to 31.5% from 25.2%.
  
• These will be yield-accretive, with the property yields of 7.2% above MLT’s implied trading net property yield of 4.6%.
  
• The properties have a total NLA of 24,991 sq m. These two acquisitions will add about 7% to MLT's portfolio in terms of value. MLT’s portfolio will now comprise 17 properties of over S$450m.
  
• The weighted average lease term to expiry for MLT’s portfolio will be 8.6 years, down slightly from 8.7 years.
  
• MLT will have a reduced tenant concentration and more diversified asset mix.

Comments

The acquisition yield is in line with our forecasted yield for Singapore properties.We were expecting MLT to aquire Singapore properties at 7% net property yield, making up 40% of new acquisitions. We believe MLT is on track to achieving growth via acquisitions of S$1bn in the region by end-08.

DPU forecast raised slightly due to earlier-than-expected acquisitions.Earlier we were expecting MLT to start its acquisitions in late 06, due to a 12-month moratorium rule for interested parties transactions. However, MLT has obtained a waiver from MAS in relation to the SNP acquisition and started its acquisitions early. With the leverage effect coming from 100% debt-financing for these two deals, we raise our DPU forecasts by a proportionately higher 9% for FY06. We raise our DPU forecast by 2% for FY07 as it is on a higher base.

Maintain Outperform. We maintain our DDM-based target price of S$1.20. This assumes a weighted acquisition property yield of 8.7%, a discount rate of 7.0%, terminal growth of 1.5%, a debt cost of 4%, 30% gearing for its new acquisitions, and a S$1.4bn asset base by FY08. This translates into a 3.8% prospective yield for FY06 and 4.9% yield for FY07, which are fair, given its potentially aggressive growth profile. With a total return of 26% , we maintain Outperform.