Mapletree Logistics Trust (MLT) proposed to acquire an industrial warehouse in Iskandar Malaysia last Friday. Based on the purchase price of MYR88.5m (~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.

Acquisition of warehouse in Iskandar Malaysia
Mapletree Logistics Trust (MLT) proposed to acquire an industrial warehouse in Iskandar Malaysia last Friday. The property was put up on sale via a closed tender exercise by Mapletree Industrial Fund, a closed-end fund managed by MLT?s sponsor. Hence, the acquisition is considered an interested party transaction. We note that the purchase price of MYR88.5m (~S$34.3m) is below the valuations of MYR91.0m-MYR95.4m by the two independent valuers. Management guided that the property is likely to generate an initial NPI yield of ~8.4%, 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.

Details on warehouse
The warehouse, which is located within Johor Technology Park in Zone E of Iskandar Malaysia, will mark MLT?s fourth asset in this special economic region. The property comprises seven blocks of single and double-storey industrial warehouses and one office block, and has a GFA of ~63,750 sqm. In addition, the asset is designed with good building specifications and is easily accessible via the North-South Highway and Senai Highway. At present, the property is leased to a subsidiary of LCTH Corporation Bhd on a 12-year triple net lease expiring in 2020, which is in turn sub-leased to a subsidiary of Nasdaq-listed Flextronics. Due to the long lease in place, the weighted average lease to expiry post acquisition is expected to improve to 5.0 years from 4.9 years, thus enhancing MLT?s earnings visibility. 

Maintain HOLD
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.   ...last:$1.03..1-yr low:$0.995..2-yr low:$0.841..2-yr high:$1.347...