MLT

MLT: UBS sees option value on Japan assets. Notes appraisal values for logistics properties in Japan have been rising, and recent J-REIT acquisitions point to further transactional cap rate compression. Believes this has motivated mgt to evaluate divesting Japan assets to unlock shareholder value. Assuming MLT divests 25% of its Japan assets at a conservative 1.2x P/B, recycling capital to higher yield mkts and paying out capital gains, the house estimates an incremental upside of 8cts per unit, an option value that is currently not priced in by the mkt. MLT trades at 5.7% FY14e yield, inline with UBS' yield estimates for other industrial REITs. Notes if the divestment strategy is successfully executed, there could be an estimated potential 40 bp boost to headline yields. UBS raises TP from $1.24 to $1.41, maintains its Buy rating.