What is the news?
Mapletree Industrial Trust (MIT) announced the acquisition of 18 Tai Seng from its Sponsor, Mapletree Investments Pte Ltd. A date for the extraordinary general meeting (EGM) has not been set, as the Circular is pending approval by SGX. However, the manager is working towards making the date of the EGM known by January 2019. MIT has sufficient debt headroom to acquire the property fully-fund by debt, but a final decision on the funding structure has not been reached. The manager commented that it would be dependent on market conditions.
Pro forma illustrations by the manager for 100%, 60% and 40% loan to value scenarios show that the acquisition is DPU and NAV accretive. Aggregate leverage would rise to 38.7% if fully-funded by debt. The occupancy of the property is currently 87.4%, and committed leases of 95.7% to commence progressively by 1 March 2019.
How do we view this?
Upgrade to Accumulate from Neutral; higher target price of $2.03 (previously $1.99)
We have assumed that the property is acquired fully-funded by debt and DRP is maintained for 12 quarters. Minimal DPU impact for FY18/19, but our FY19/20 DPU estimate increases by 3.4% to 12.42 cents from previous 12.01 cents.