Friday, July 27, 2012
MCT: StanChart notes, at 5.8% DPU yield and 2% cost of debt, MCT enjoys the lowest cost of capital (of ~4%) amongst commercial REITs under coverage. Expects the manager to leverage this within the next 6-12 months to make acquisitions. Believes the potential acquisition of Mapletree Business City could be a win-win situation for MCT and its sponsor. Even if the asset is bought at a 10% premium to its $1.2b valuation, StanChart estimates the acquisition could be ~7% accretive to DPU if funded 50:50 debt:equity. Recall, MCT reported 1QFY13 results on 25 July, with DPU of 1.54 cts in line with consensus. NPI was up 11% y/y while portfolio occupancy rose 1.5ppt q/q to 96.1%. VivoCity currently accounts for 75% of MCT’s portfolio revenue. The new leases committed in 1QFY13 have showed rental uplift of ~37% over leases signed in 2009, which is expected to drive DPU growth in FY13. MCT remains among StanChart's top SREIT picks. The house reiterates Outperform with TP $1.14.