OCBC Report - 07 Jan 2008

Mapletree Logistics Trust: For higher-risk appetite investors

Summary: Mapletree Logistic Trust (MLT) announced recently that it will be raising fresh equity worth S$400-500m via a rights issue. This is in line with our expectation, as it was close to breaching the 60% gearing limit.

However in the current climate of uncertainty, this might not be the best time to raise equity. Furthermore, unlike other REITs which acquire assets conditional on successfully raising fresh equity, MLT’s financing model works on the basis of “buy now with debt and refinance later with equity”.

This model’s key weakness is that it exposes MLT to the volatility of the capital markets. The good news is that MLT’s parent Mapletree Investment Pte Ltd (MIPL) has agreed to underwrite the rights issue. This in turn should help support pricing of the rights and hopefully not lead to DPU dilution.

We mentioned in our 2008 sector report that the industrial sector was not our choice sector as we saw many risk factors. However, corporate development could possibly be a catalyst to MLT’s unit performance.

Nevertheless, we emphasize that MLT is meant only for investors with higher-risk appetite and longer investment horizon. We continue to maintain that view and maintain our BUY with a fair value of S$1.31. (Winston Liew)

For more information on the above, visit www.ocbcresearch.com for detailed report.

NEWS HEADLINES

• The Straits Trading Co Ltd has received a conditional cash offer of nearly S$1.86b from The Cairns - a privately-held investment firm controlled by family members of the late Tan Chin Tuan.
• Thai Beverage Public Co had held talks with the Thai authorities to seek a second listing on the Stock Exchange of Thailand (SET), aside from SGX.
• China Sunsine Chemical Holdings has completed its upgrade plans to cater for the rising demand for its rubber accelerators, which brings its total capacity to 39,000 tonnes. - Cosco Corporation (S) Ltd is seeking to expand capacity in China and South-east Asia as demand rises for moving raw material, fuel and consumer goods.
• CSC Holdings Limited has paid S$2.65m to acquire 70% of signed Wisescan Engineering Services - a surveyor specialising in solutions relating to tunneling and automatic monitoring survey.
• AnnAik Limited has bagged three contracts to build, operate and own wastewater treatment plants in Huzhou, China.
• Labroy Marine Limited looks set to be delisted after Dubai Drydocks World had received valid acceptances of a 98.39% stake in the shipbuilder.