“Although the offer price is 61% higher than MP REIT’s last traded price of S$0.51 (RM1.22) per unit, it is at a massive 49% discount to its net asset value of S$1.62 per unit,” it said in a note yesterday.

On Tuesday, YTL Corp announced that it plans to buy a 26% stake in MP REIT and 50% of Prime REIT Management Holdings Pte Ltd (PRMH) from Macquarie Bank Ltd for S$285 million or 82 Singapore cents a unit.

The acquisition will be funded by the proceeds from the US$300 million (RM1.07 billion) nominal value five-year guaranteed exchangeable bonds issued by YTL subsidiary, YTL Corp Finance (Labuan) Ltd on May 15, 2007.

YTL said MP REIT, which would be rebranded to Starhill Global REIT, was expected to offer an attractive yield of 9.4% based on Bloomberg market consensus on a distribution of 7.7 Singapore cents per unit next year.

ECM Libra estimated additional earnings of RM65.6 million from the acquisition, which would only increase its projected FY09 revenue by 0.9%. “As such, we will maintain our FY09 projections and target price, until there are indications of a stronger contribution from the acquisition,” it said.

The research house maintained a target price of RM8 for YTL based on a 25% discount to sum-of-the-parts value of RM10.50.

It added that YTL would have a new earnings stream due to MP REIT’s distribution policy. The REIT would distribute at least 90% of its taxable income to its unit holders on a quarterly basis. It said the REIT had distributed a total of S$0.0345 per unit.

“PRMH’s dividend policy is to distribute all of its after-tax profits for distribution in respect of any financial year as cash dividends,” the research house said.

“If the distribution remains consistent, YTL can expect a distribution of about S$0.0708 per unit, which would amount to about RM61.8 million for FY08. Meanwhile, YTL can also expect a dividend payout from PRMH of about RM3.8 million,” it added.