Saturday, October 2, 2010

Global Logistics Properties and MapleTree Industrial Trust do not look that great

Updated 11 Oct 2010: More information about GLP's dilution based on the latest prospectus as of now.
Updated 12 Oct 2010: More information about MIT's dilution based on the latest prospectus as of now. 

I guess most people are talking about the upcoming IPOs by GIC (Global Logistics Properties) and MapleTree (MapleTree Industrial Trust). However, I am unsure why the choice was made to launch these 2 IPOs because based on their prospectus, the offers do not look appealing at all.

One thing for investors to note about the Global Logistics Properties (GLP) is that it is not a REIT. You're investing in a company that invests in/build logistic properties, that does not have any dividend policy. In fact based on the wording, I have the impression that there will not be any dividends issued because the funds will be mostly used to fund acquisitions in China. Personally, I feel that there are other better companies to invest in, especially of the fact that GLP's properties are all concentrated in China and Japan.

What that was shocking to me is that according to the prospectus, investors subscribing for and/or purchasing the Offering Shares at the Offering Price will experience an immediate dilution in net asset value (“NAV”) per Share immediately after the completion of the Offering. The dilution percentage is approximately 29.2%.

Seriously, this is the first IPO I've seen in the last 5 years that will suffer an immediate NAV dilution upon completion of the IPO. Is that good? Not to me.

Based on the latest prospectus, the dilution has been reduced to 8%. That's much better than the 29.2% which was in the preliminary prospectus. However, there is a reference to the recent developments where GLP will be purchasing 2 companies, paying 70% of USD335 million using shares. I've roughly estimated that the dilution will be around 13%, give and take due to the exchange rates. The dilution will be dependent on the share price when the payment is made. This is still better than the 29.2% dilution which was noted previously. However, as I'm looking more for dividends in this type of companies, I do not think I will subscribing to this IPO.

Next one I thought that I might consider is MapleTree Industrial Trust. This is a Singapore REIT consisting of industrial properties that MapleTree has acquired from JTC. Although the Sponsor is MapleTree, it is stated specifically that MapleTree Business Centre and Comtech will be excluded from the first right of refusal by the Sponsor over future sales of industrial properties by the Sponsor or any of its wholly-owned subsidiaries. Seriously though, I'm more interested in the MapleTree Business Centre than the other properties that are in the REIT.

One thing I also had an issue with was that out of the ~$1.1billion that is raised, only 183million will be used for the acquisition of the 6 properties held by MapleTree Singapore Industrial Trust (MSIT). The majority of the proceeds will be instead used for:
  • payment of the MIT Private Trust Distribution to the Existing MIT Unitholders;
  • partial redemption of the MIT Private Trust Units; and
  • repayment of S$977.8 million of MIT’s existing debt.

In fact, the majority of the proceeds will be used to repay MIT's existing debt. If the issue price is higher than expected, more payment will instead be given to the MIT Private Trust Distribution. I would have very much preferred that the extra amount raised will be put into working capital, which is not the case. This IPO to me seems to be an avenue for MapleTree to get a new debt facility. Furthermore, the REIT managers are the same as MapleTreeLog. Their track record isn't that great to me and they did commit a mistake initially that pushed the gearing of MapleTreeLog quite high just before the great recession. The MIT gearing upon listing is around 38.5%, quite high I would say even though they have spare cash of about $65 million.

MIT, like GLP, will be also be priced above their NAV. The dilution upon listing will approximately be around 7.5%.

All in all, my take is that both of these IPOs can be given a miss and will most probably drop below IPO price after 6 months. I do not see how the use of the proceeds of the IPO can aid the companies to grow post-IPO.


chantc said...

MIT prospectus states that they are looking at Singapore properties for future expansion. However, they verbally told the press that they may expand overseas. If that is the intention, why put the word "Singapore" in the prospectus?

The amount that was verbally given to the press for expansion of MIT also includes drawing down debt which I believe will cause the gearing to hit above 40%. Good financial prudence?

SGDividends said...


Dont know why peter lim invest in honestly doesnt seem good to me.

There is also no holding period for the cornerstone investors also which means they can dump immediately after IPO.

What the heck man this IPO??

MIT is better than GLP but still not attractive. At least they have a dividend policy BUT the gearing at 38% is way too high which might result in rights issuance resulting in dilution resulting in less distributions.....

Agree with you about giving them a miss. Though honestly with such bullish sentiments, they might chong up after listing!


Anonymous said...

the irrationality of market at its best. momentum will carry it forward and crash like.. CapMallsAsia (launched with PE higher than mother company) and TigerAir

Anonymous said...

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Anonymous said...

It is very helpful!

Anonymous said...

Yes there should realize the reader to RSS my feed to RSS commentary, quite simply

kamenriderv3 said...

prospectus are for suckers. simply said GLP = no dividen = dont buy!!!!!

chantc said...

This I do not agree. Prospectus will have a mountain of information if you know where to look. Otherwise, how else could I derive my analysis?

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