Mapletree Logistics Trust - OCBC Investment 2017-09-22: Subscribe To The Preferential Offering

MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Subscribe To The Preferential Offering

Mapletree Logistics Trust (MLT) recently concluded a private placement exercise, which was 3.3x covered.
The final issue price of S$1.175 came in at the top end of the indicative range between S$1.143 – S$1.175, which we believe reflects the firm interest in MLT’s prospects. Gross proceeds of S$353.5m were raised.
Besides this private placement, MLT has also launched a non-renounceable preferential offering (PO) on the basis of one new unit for every 10 existing units in MLT. The issue price of S$1.145 for the PO is also at the top end of the previous indicative range (S$1.113 – S$1.145), thus raising further gross proceeds of S$286.5m.
Collectively, this equity fund raising (EFR) exercise is expected to generate gross proceeds of S$640m.
Separately, MLT also announced that it has priced S$180m fixed rate perpetual securities (PS) at a distribution rate of 3.65% per annum. We view this as a healthy rate for the issuer, driven by strong demand as the subscription rate was 6.7 times.

As a recap, the main reason for MLT’s EFR exercise is to raise funds for its proposed acquisition of Mapletree Logistics Hub Tsing Yi in Hong Kong from its sponsor Mapletree Investments Pte Ltd. Unitholders’ approval has been obtained at an EGM for this. The purchase consideration of ~HK$4.8b (S$834.8m) is expected to translate into an initial NPI yield of 5.7%, which we deem to be attractive.
The property is an 11-storey modern ramp-up warehouse with direct vehicular ramp access to every floor and has a remaining leasehold period of ~46 years. It is well-connected to the city centre, the Hong Kong International Airport and the Mainland China boundary via major expressways.

We fine-tune our assumptions in accordance to the final issue price of MLT’s EFR and PS exercise which came in better than we had expected. Our FY18F and FY19F DPU forecasts are adjusted marginally upwards by 0.3% and 0.4%, respectively.
We recommend unit-holders to subscribe to their pro rata entitlement of the PO and reiterate our BUY rating on MLT with an unchanged fair value estimate of S$1.35.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-09-22

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.350 Same 1.350