News Analysis: Strategic acquisition of a Singapore asset to pay dividends

MLT given an option to purchase a logistics property in Singapore

  • Proposed acquisition of 9 Changi South Street 2 for S$24.5m.
  • Property is located adjacent to an existing owned property which could imply longer term development upside.
  • Accretive to earnings and potentially NAV in the medium term
  • BUY call, TP S$2.35 maintained.

Our thoughts. 

Positive impact to Singapore numbers. The target property is a part 3 storey and part 5 story temperature controlled warehouse with supporting amenities and is attractively located within the Changi South logistics cluster and will be sold with vacant possession. The pricing is attractive at S$24.5m or at c.S$198psf supported by a relatively long lease tenure of 33.3years. We understand that the manager is looking to lease the property to a 3PL as an anchor tenant. 

Small moves; potentially big impact?  While the impact to overall numbers is accretive (6.2% yield vs expected debt funded cost of c.2.0%) is small, we do note that property sites within a cluster of property that MLT already owns within Changi South Street 2. With a long tenure of 33 years (for SG), there presents an opportunity for potential economies of scale, which could imply redevelopment in the medium term, in our view, subject to JTC approval.