Giant property IPO if Mapletree decides to list

July 14, 2008
Giant property IPO if Mapletree decides to list
Temasek unit ramping up property funds to lay base for consistently
high ROE model
By KALPANA RASHIWALA

(SINGAPORE) An initial public offering for Mapletree Investments Pte
Ltd, a fully-owned subsidiary of Temasek Holdings, could take place
in the near future, The Business Times understands.

Based on recent valuations, the entity could have a market cap of
over $5 billion.

When contacted, a Mapletree spokeswoman said: 'We are ready for an
IPO in terms of our business profile and track record. However, the
decision to IPO the company will rest with our board and
shareholders.'

'Over the last few years, we have put in place processes and
governance similar to that of a listed company, to ready ourselves
for an eventual IPO. What will drive the IPO decision, however, will
be the readiness and attractiveness of our business model and
strategy as a real estate capital management company.'

A key internal threshold the group has to cross to be IPO-ready is
that the ratio of assets under management (AUM) to assets owned by
Mapletree must exceed 1.0. 'As at March 31, 2008, our AUM to owned
assets was 0.5 and the ratio currently is about 0.8, including the
recently completed acquisition of the $1.7 billion JTC portfolio by a
private trust led and sponsored by Mapletree. We expect the ratio to
exceed 1.0 by March 2009,' the spokeswoman added. The next target
will be to grow this ratio to 3.0 within three to five years.

AUM refers to assets held in Mapletree-managed private and listed
funds with third-party investors.

Growing the AUM business will enable Mapletree to earn more fee
income from managing property funds as well as managing the
properties owned by these funds.

'Strong recurring fee income will be the bedrock of our strategy for
delivering consistently high returns on equity (ROE) of above 10 per
cent to shareholders,' Mapletree's spokeswoman added.

Fees collected from managing funds and the properties held by these
funds generally tend to be more stable than the property development
and ownership business, which is more cyclical and considered more
risky from an investment point of view.

'Our fee income made up about 10 per cent of total revenue for
financial year ended March 2008 and we hope to grow this to 50 per
cent in three to five years.'

One event that could help Mapletree reach the target of a 3.0 ratio
for AUM to owned assets sooner is the much-anticipated flotation of
Mapletree Commercial Trust, which will hold about $3 billion of
assets including Vivocity, St James Power Station, Harbourfront
Centre and some nearby office blocks.

This trust was to have been floated by April this year but has been
held back because of adverse stockmarket conditions.

The investment proposition of a potential IPO for Mapletree
Investment would be that 'we offer a strong real estate capital
management platform with an Asian focus for investors', Mapletree's
spokeswoman said.

'However, investors who want a more targeted approach, for example,
India or China, can invest directly in our funds. So we offer a whole
suite of investment opportunities,' she added.

For the year ended March 31, 2008, Mapletree posted a 3 per cent dip
in net earnings to $1.04 billion due to a lower net revaluation gain
and higher net finance cost. Operating profit, however, rose 35 per
cent to $146.9 million, on the back of first full-year contributions
from VivoCity and St James Power Station and maiden contribution from
The Beacon, a residential project at Cantonment Road.

Mapletree's revenue jumped 69 per cent to $365.6 million.

Shareholder funds increased 28 per cent year-on-year to $4.4 billion
as at March 31, 2008.

That could potentially translate to a market cap of more than $5
billion, assuming that Mapletree shares hypothetically trade at a 23
per cent premium to its net asset value. The 23 per cent premium was
the peer mean based on the July 11 closing share prices of
CapitaLand, City Developments (after taking into account investment
properties at valuation), Keppel Land and Singapore Land.

Mapletree Investments manages six property funds, including the
listed Mapletree Logistics Trust. The group had $3.1 billion of AUM
as at end-March 2008, a 94 per cent jump year on year, while
Mapletree's owned assets rose at a slower pace of 45 per cent to $5.7
billion.

Recently, the group formed a joint-venture private fund with Arcapita
Bank to hold the $1.7 billion portfolio of properties acquired from
JTC Corp. In April, Mapletree launched an India-China fund that has
so far bought $600 million of assets. These initiatives will drive
fee income revenue, which increased nearly 50 per cent to $29 million
in the latest financial year.