M&L Hospitality Trust (IPO)

[FFNow]

Company Background
M&L Hospitality Trusts is a stapled group comprising a real estate investment trust, M&L REIT, and a business trust, M&L BT.

M&L REIT is a hospitality REIT, with the principal investment strategy of investing in a portfolio of income-producing hospitality real estate or real estate-related assets in the Asia Pacific region

Based on the book building price range of S$0.80 to S$0.87 per unit, the estimated yield for M&L Hospitality Trusts is 7.4% to 8.0% (FY2012 Annualised) and 7.7% to 8.3% (FY2013)

The initial property portfolio of M&L Hospitality Trusts comprises the following hotels:-
Hotel Locations Hotel Segment
Ibis on Bencoolen Singapore Economy
Ibis Novena Singapore Economy
Four Points by Sheraton Sydney, Australia Mid-scale
Swissotel Sydney Sydney, Australia Upper-scale
Travelodge Docklands Melbourne, Australia Economy
Hilton Nagoya Nagoya, Japan Upper-scale



Competitive Strength

1. Diversified portfolio of quality cash-flow generating assets in key Asia Pacific markets, with 5 out of 6 hotels located in the world’s top 5 fastest growing hospitality markets (2010-2011 RevPAR growth for Sydney, Singapore and Melbourne is 17.6%, 11.8% and 8.3% respectively)

Ø Hotels are all situated in prime areas within these cities

Ø High barriers-to-entry markets underpinned by favorable supply / demand dynamics

2. Hotels managed by internationally renowned brands (Starwoods, Swissôtel, Ibis / Accor, Hilton International)

3. Stable cash flow from master leases and flexible capital structure with additional debt headroom for growth


Issue Statistics

Listing: The Main Board of the Singapore Stock Exchange
Issue Size: 532,192,000 ordinary units
Overallotment: 10% of the issue size or 53,219,000 units
Price range: S$0.80 – 0.87 per unit
Implied Yield (Ann.2012) 7.4% to 8.0%
Estimated Yield (FY2013): 7.7% to 8.3%
Offer size: S$426 – 463mm
Free float: 55% (pre-overallotment) and 61% (post-overallotment)

P/B at $1.54 (using book value of $800+ million as seen in prelim prospectus and issue size as above). Listing price max at $0.87. Undervalued price. Why would an IPO list at undervalued price? Seems too good to be true. Am I missing out on something or did I calculate wrongly?