I have finally found some time to briefly go through the IPO prospectus of MIT a couple of days back, and would just like to present some figures which I think are important to the evaluation of the Reit.
The Sponsor
The sponsor of the reit is Mapletree Investments Pte Ltd, a fully-owned subsidiary of Temasek Holdings. This is definitely a positive factor to the value of the reit.
Yield
With reference to page 14 of the prospectus, under the section "Stable distributions", the projected yield based on the IPO offer price of S$0.93 is as follows:
| Distribution Yield (based on the Offering Price) | |
| From the Listing Date to 31 March 2011 | 7.6% (annualised) |
| Projection Year 2011/2012 | 8.0% |
So for 2010/2011, the annualised DPU is expected to be about 7.068 cents. For 2011/2012, it is expected to be 7.440 cents.
Based on the closing price of S$1.160 on the first day of trading, the expected yield is 6.09% for 2010/2011 and 6.41% for 2011/2012.
Distribution Policy
With reference to page 14 of the prospectus, under the section "Stable distributions":
"MIT’s distribution policy is to distribute 100.0% of its Adjusted Taxable Income (as defined herein) for the period from the Listing Date to 31 March 2012 and thereafter to distribute at least 90.0% of its Adjusted Taxable Income."
Distribution Frequency
With reference to page 64 of the prospectus, under the section on "Distributions", MIT’s first distribution after the Listing Date will be for the period from the Listing Date to 31 December 2010 and will be paid by the Manager on or before 1 March 2011. Subsequent distributions will take place on a quarterly basis.
We should be expecting the first distribution announcement sometime in Jan 2011 when the reit reports its quarterly results for the first time. The distribution will be for earnings for the period from 21 OCT 2010 to 31 DEC 2010, which is actually not a complete quarter.
Debt
With reference to page 66 of the prospectus, under the section on "Capitalization", the reit will fully draw upon a New Debt Facility on the Listing Date in an amount of S$837.0 million. There is an existing debt of S$977.8 million which was used to part refinance the acquisition of the MIT Private Trust Portfolio. This existing debt will be repaid on the Listing Date using proceeds from the IPO.
Asset Value & NAV
With reference to page 71 of the prospectus, under the section on "UNAUDITED PRO FORMA BALANCE SHEETS AS AT 31 MARCH 2010 AND THE LISTING DATE", the value of the Total assets on listing is about S$2164 million. The NAV per unit is S$0.86.
The IPO price of S$0.93 is 1.08 times above NAV per unit.
The first day closing price of S$1.160 is 1.35 times above NAV per unit.
Gearing
We take the debt upon listing to be S$837 million. With the initial total assets of S$2164 million, the gearing will be about 38.6%.
Some Thoughts
One obvious positive factor for this reit is having Mapletree as its sponsor. In one of my previous posts about Sponsors, I have mentioned that the sponsor has the unofficial role of supporting the reit in times of trouble. Mapletree is definitely capable of doing that. I would say at the IPO price of S$0.93, the yield above 7% is quite attractive. At S$1.160, the yield is still above 6% and is still on par with other reits with big name sponsors like Ascendas Reit, Capital Mall Trust, etc. But in terms of price over NAV per unit, at S$1.160, the ratio 1.35 times is definitely too high compared to most of the other S-Reits. One of the main negative factor about this reit, in my opinion, will be the gearing of 38.6%, which is towards the high side compared to other S-Reits. The reit was given a rating of BBB+ by Fitch on its listing day, meaning it can potentially gear up to 60%. Though there is still some debt headroom at 38.6% before it reaches 60%, in recent times it is not uncommon to see reits raising funds by equity (private placement or rights issue or both together) when the gearing is near or above 40%. When that happens, we will have to look out for potential dilution of the yield.
Related Posts
MIT assigned a final rating of BBB+ by Fitch - 21 OCT 2010
Mapletree Industrial Trust Final Ballotting Announcement - 20 OCT 2010
All about REIT - The Basics Part 5: Sponsors
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