DBS: Mapletree Logistics Trust TP $1.46

Mapletree Logistics Trust DBS @ S$1.16 (19 Sep 2007)

- BUY S$1.16 STI : 3,477.75
- Price Target : 12-Month S$ 1.46

- Reason for Report : Company Update
- Potential Catalyst: Acquisitions in the pipeline
- Major Shareholders - Meranti Investments (%) 15.2, Mapletree Logistics (%) 7.4, Mangrove Pte Ltd (%) 7.4
- Free Float (%) 70.0
- Analyst - Zy Sew Ho +65 6398 7961
- zysew@dbsvickers.com
- Earnings Rev (%): 2007: - 2008: -
- Consensus EPS (S cts): 2007: 5.9 2008: 6.1
- Variance vs Cons (%): 2007: 5.1 2008: (1.6)
- Sector : REITS

- Principal Business: Real estate investment trust with a portfolio of 18 properties mostly in the logistics sector.

- Expanding its footprint in Asia

- Recent updates. Since our last report, MLT announced the acquisition of five warehouse properties in Singapore for a total consideration of S$47.2m. This will bring MLT’s total portfolio to 72 properties with a total portfolio size of S$2.3bn (includes properties pending completion). Given a target acquisition of S$1bn pa in FY07, MLT is on track to reach its target of S$2.4bn by year-end. Of note, 10-20% of the annual target acquisition pipeline of S$1bn will come from the Sponsor’s properties while the remaining will be from third parties.

- Visible pipeline from Sponsor. The Sponsor, Mapletree Investments, has a pipeline of developments in Vietnam, China and Malaysia worth a total of approximately S$315.0m. First on the plate is the multitenanted logistics and warehousing facility (VSIP I) in Vietnam.

Construction was completed in Jan 07 and once it is fully leased, MLT is expected to acquire this property by end 2007. Together with another logistics park, VSIP II of which construction is expected to commence in 3Q07, the total combined estimated value of VSIP I and VSIP II is S$165m.

- Venturing into new markets. Moving forward, MLT expects contribution from the emerging markets to make up of 25% of its asset value while the core markets (i.e. Singapore, Japan and Hong Kong) will make up 75% of asset value. MLT is looking to expand its presence in China and Malaysia and also to venture into Vietnam with the first property expected to be acquired in 2H07. More growth will be expected from the emerging markets in the medium term. In the medium to long term, MLT will also be exploring emerging markets such as South Korea, India, Thailand and Taiwan.

- Debt headroom. As at 30 Jun 07, MLT has a gearing of 54% with a debt headroom of around S$300m. Given that MLT has targeted to increase its portfolio of assets to S$5bn by 2010, the possibility of an equity raising exercise is high.

- Maintain Buy with target price of S$1.46. With the recent weakness in the stock price, MLT is trading at an attractive current yield of 5.1%. We are reiterating our Buy recommendation with target price of S$1.46 based on DCF valuation (assumed acquisitions of S$1bn p.a. from 2007 to 2009).