OCBC Report 14 Jan 14

KEY IDEA Mapletree Logistics Trust: Acquires Iskandar warehouse Summary: Mapletree Logistics Trust (MLT) proposed to acquire an industrial warehouse in Iskandar Malaysia last Friday. Based on the purchase price of RM$88.5m (~S$34.3m), the initial NPI yield of the property is expected to be ~8.4%. This is higher than the implied yield of 7.1% for MLT’s existing Malaysia portfolio. We estimate the income from the asset will add 0.1 S cents to MLT’s DPU on an annualised basis, thus making the deal DPU-accretive. Management intends to fund the acquisition wholly by debt, which should see its aggregate leverage increase marginally by 0.5ppt to 34.9% upon completion. However, we do not expect any near-term impact to its DPU and gearing given that the transaction is projected to complete by 3QFY15 (Dec 2014). Nevertheless, as we switch our valuation method from RNAV to DDM due to uncertainty in cap rate movement, our fair value on MLT drops from S$1.11 to S$1.06. Maintain HOLD. (Kevin Tan)

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