Mapletree Industrial Trust - Further details on equity fund-raising (CIMB)

OUTPERFORM Maintained

S$1.15 Target: S$1.30

Mkt.Cap: S$1,682m/US$1,397m

Equity fund-raising for JTC acquisition

MINT has released details on its equity fund-raising for its JTC acquisition. The overall acquisition cost of S$404.9m will be funded by 57% debt and 43% equity. Equity fundraising will comprise a private placement at S$1.09 and a preferential offering at S$1.06. Pricing for the two tranches appears tight at 2-5% discounts to adjusted VWAP on 27 Jul. Accretion appears slightly higher than our previous expectations on a higher debt component and low cost of debt of about 2.2%. Asset leverage will rise to 39% after the acquisition, still leaving debt headroom of about S$265m for acquisitions. Factoring in the acquisition and rental reversions for its existing portfolio, we adjust our FY12-14 DPU estimates by 1-3%. Accordingly, our DDM target price climbs to S$1.30 (discount rate: 8.4%) from S$1.27. We continue to see re-rating catalysts from higher-than-expected rental reversions.

The news

MINT will be funding its S$404.9m acquisition of Tranche 2 of JTC’s second-phase divestment with 57% debt and 43% equity. Equity fund-raising will comprise a private placement of 48.5m new units at S$1.09 apiece (top end of the S$1.07-S$1.09 range) and a preferential offering at S$1.06 apiece (mid-range of expected pricing). The pricing for both appears tight at 2-5% discounts to adjusted VWAP of S$1.115 for trades done on 27 Jul. Private placement was also well-received with a 13x subscription.

Comments

Accretion boosted by higher debt component and low cost of debt. As previously guided, management has decided to fund the acquisition with debt and equity. FY13 accretion appears higher than our previous expectation of about 1% due to greater debt reliance and low-cost debt of about 2.2% per annum.

Sponsor to retain stake. Unit-holders are allowed the opportunity to participate in the fund-raising through the preferential offering. As a demonstration of its commitment, sponsor and largest unit-holder, Mapletree Investments Pte Ltd, will provide an irrevocable undertaking to accept its provisional allotment of new units under the preferential offering.

Asset leverage to rise to 39%. Asset leverage will rise to 39% after the acquisition. This still leaves debt headroom of about S$265m to management’s mid-term gearing target of 45% to fund further acquisitions.

Valuation and recommendation

Maintain Outperform. Factoring in the acquisition and stronger rental reversions for its existing portfolio, we adjust our FY12-14 DPU estimates by 1-3%. We continue to like MINT for its organic growth potential and expect catalysts from higher-thanexpected rental reversions.