Mapletree Industrial Trust IPO

Mapletree Industrial Trust has set an indicative price range of 88 to 93 cents per unit, according to the prospectus filed with the Monetary Authority of Singapore.

The trust is offering 594.9 million units, out of which 488.8 million units are being offered to institutional investors and 106.1 million to the public.

Mapletree Industrial Trust to raise $1.2b

The public offer for Mapletree Industrial Trust opens on Oct 13, with a listing due on Oct 21.

First of all let's take a look at who are the cornerstone investors
APG
AIA
Henderson
Colombia Wanger
DE Shaw
Prudential

I give these section a rating of 4 out of 5

Net Asset Value of this Trust is 0.86

From the pricing of 88cent - 93cent. I expect an upside because Companies backed by Strong Cornerstone investors will usually command a premium. However as most of the properties are already valued pretty fairly and there is unlikely any substantial room for upward revaluation.

I give these section a rating of 4 out of 5

The amount of liability as opposed to asset stands at a ratio of 42% which means that for ever $1,42cents is borrowed money

Gearing stands at 38.5% and with a 837m Debt after fully tapping out their credit line. This will restrict the ability of the company to take more loans because they have already hit the capping.

Out of the 1.2billion that is rasied from IPO and 837m from the credit line. There are 3 debts the company has to repay which is 977.8m,544m and 224m. Basically it means all the money the company can draw from the IPO and from their credit lines has already been tapped and accounted for so there is very limited means for them to raise more money

I give this section a rating of 1 out of 5

Current occupancy of the properties they are managing is 90% which is a good amount but there are substantial amount of lease expiry each year for the next 5 years(Could be good as the average rental is below market price however should economy go for downturn again,this could adverse the earnings significantly)

I give this a rating of 3.5 out of 5 seeing that it is hard to gauge whether it will turn out to be a blessing or disaster over the next 3-5 years

Neither MIT or Manager has long established Operating History and there is high concentration in industrial properties

I give this a rating of 1 out of 5

Dividend yield is projected to be between 7.6%-8% depending on the allocated price. The yield itself is pretty decent but there are matching reits with track record that can give similar type of yield though the average yield in reits right now stands approx 6.5%

I give this a rating of 4 out of 5 as it will be above average if they can meet the amount stated

After tabulating the score,this IPO stands at 3 out of 5.

In a nutshell there is high risk for it over the medium - long term however in the near term,there is scope for price appreciation(15-25%) should you manage to get it in the IPO because of 2 factors 1) It is backed by strong cornerstone investor 2) Mapletree Investment is backed by Temasak 3) Current yield is attractive because bank saving rate is 0.1 - 0.25% driving people to seek for high yield and a reliable name to put their money in and Temasak can instill confidence in people.

I expect the take up rate to be very strong similar to what we seen in the much less attractive SIA 2.15% 5 year bond as the yield for this IPO is a much higher 7.5% and above

Hence i will grade it as an IPO worth to be invested for the next 6 months.

A note of caution the lockup period for the cornerstone investor is only 6 months hence after 6 months there may be more uncertainty for the price.

Trade Ideas

There are a few things i wish to cover today. Despite my belief that Today(Monday 4th Oct) should prove to be an up day with positive newsflow out during the weekend. I still wish to give some cautionary notes as market now is rallying on prospect of QE2 and not on economic improvement

Nevertheless there are opportunities in the market if you employ a stoploss to protect downside. However i am not really a fan on buying when market is expected to gap up because the price i will get will be higher which increases my risk.

Indoagri

Support 2.24-2.26
Entry target 2.30
Target 2.41
Stoploss 2.21


Genting

Support 1.87
Entry Target 1.95
Target 2.15
Stoploss 1.83
Notice the bar on Friday engulf the prior 2 days. This candlestick pattern is called outside bar which denotes the strength of the buyer,the move is supported by above average volume as well which puts a near term positive bias on the stock.

If you are more aggressive you may chose to buy on it when Market opens at 9am later on. Just ENSURE that if the stop are triggered,you will cut and once you are in the money by more than 5 bids,MOVED your stop to breakeven

Last but not least i wish to talk a bit about Gold
There are a lot of excitment when gold broke 1,300 last week. I am not so excited about it because Gold only breaks new high when denominated in USD,the gold in Euro and Aud DID NOT BREAK NEW HIGH This casts a doubt on the validity of the break. I would be a buyer on dip in gold because of the reckless money printing embarked by Central Banks worldwide previously AND their current push for FURTHER money printing to come before end of the year and not now. Although it may still continue to go up however the risk/reward is not that attractive at current level.

In plain terms,people are frontrunning the trade because they anticipate a certain event and the central bankers have made it sure to hammer into their mind that it is a 99.9% confirm that QE2 is a done deal. Price has become distorted as short term speculators rush in in a bid to make quick profit and there may still be some money to be made HOWEVER when the market has moved so much in 1 direction without profit taking,it pays to be careful not to just be a herd.

And as i have mentioned the bullish sentiment has hit a record high less than 2 weeks ago and market has more or less move sideways for last week however there are still way too much bullish positioning for the upside and with the dwindling of volume in up days that is getting me worried.

I believe we may be at some sort of turning point after stocks ramp up so far so long and the yield on the bluechips has overall dropped below 3% average which makes it less attractive. I do not believe that the US will launch a QE2 when market is UP EVERYDAY because that will cause a further surge in asset prices and commodities. There are signs that their companies input cost are surging due to the commodities rise and for the QE2 REALLY BE REALIZED on Nov 2-3rd. We will need to see some sort of steep drop in the month of Oct 2010. If we do not see it then i highly doubt QE2 will come out and the market will drop after it is announced.

At times like these whereby it is hard to predict what a happen a Top-Down Investing Approach will be a disaster hence i propose that people should look for companies to invest based on a Bottom-up investing approach