Mapletree Industrial Trust – Price jumped on Day 1

Mapletree Industrial Trust’s (MIT) initial public offer (IPO) was 37.9 times subscribed. The public offer tranche was 27.7 times subscribed. This was significantly better than Global Logistics Properties’ (GLP) IPO which was 12 times subscribed.

It appears that the retail investors can understand MIT, which is a real estates investment trust (REIT), better than the business model of GLP. Reading the prospectus of GLP is not easy. The financial numbers provided in the prospectus require careful interpretation and analysis. A non-accounting trained person will not understand.

Mapletree Industrial Trust started trading at 2.00 pm today. The IPO was priced at $0.93 for those who were successful in the allotment process. The opening price on the Singapore Exchange was $1.15 (23.6 per cent higher than IPO price). The highest price reached during the one-hour period was $1.20 (29 per cent higher). The volume traded was 275 million units as at 3.29 pm.

When one invests in MIT, the distribution yield has to be calculated based on the price one pays on it. The projected distribution yield was 7.6 per cent on an annualised basis for the financial year 2010/11 based on the IPO price of $0.93. The distribution yield will decline as the price increases. At $1.15, the distribution yield becomes 6.13 per cent. At $1.20, the distribution yield becomes 5.89 per cent.

Because MIT is a REIT, its distribution yield can be compared with similar REIT, other things being equal. Investor should decide on how much more one is willing to pay before biding up the price. At some point, it is not worth the value placed on MIT based on the current operating scenario.

Copyright © 2010, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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