aegis060308

FinancialsWilbur Tong

ASX: MPF Bloomberg: MPF AU Reuters: MPF.AX 06 March 2008

Multiplex Acumen Property Fund1H08 Result: Solid result in a challengingmarket

EventMPF reported a 1H08 NPAT of $15.97M, up 73.9% over the pcp.Reported normalised net profit for 1H08 was $12.6M, up 16.3% on1H07. MPF booked a $3.4M gain on asset disposals (most notablyfrom IPG and Mirvac unlisted funds). NTA remained at the FY07 levelof $1.43 per unit. 1H08 normalised EPU grew 13.1% to 6.23cpu, whiledistributions grew 3.4% over the pcp to 5.5cpu.

ImplicationsOverall we believe MPF has delivered a solid 1H08 result. Retainedcash earnings have increased 11.3% to $14.8M, which provides scopefor MPF to ensure smooth DPU delivery over the short term. MPIF hada strong period with $35.9M of inflows, providing MPF with a relativelycheap source of capital in an increasingly challenging market. MPF'sfund-of-funds business model continues to benefit investors seekingexposure to the unlisted property trust/syndicate market, offeringliquidity and diversification that would otherwise be unachievable fromdirect property investments. Declining values experienced in the LPTsecurities allocation have been off-set by the increase in value of theunlisted allocation of the Fund. MPF's Fund gearing is at 17%, with a'look through' gearing of 61%. We see higher risk going forward at the'look through' level with cap rates expected to soften over CY08, inparticular secondary assets. Our valuation of MPF has droppedto $1.46 from $1.58 on the pcp and reflects a FY08 distribution yield of11% (based on current share price of $1.00).

Investment OpinionThe research on this company has been commissioned and as suchAegis has received a fee for its initiation and ongoing researchcoverage.

No part of either the fee received by Aegis or the compensation paid toits analysts involved in preparing this report was, is or will be directly orindirectly, related to the valuation, earnings forecast or viewsexpressed in this report.

Key Information

Price Performance

Market Statistics

Key Assumptions

Share Price $1.00Valuation $1.46

Market Cap (M) $205

Shares (M) 202.86

% of Market 0.01

% of Sector 0.04

12 Month Range $0.91 - $1.42

Company Risk

Share Price Risk

Ethical rating

Performance against indices (%)3 Months 6 Months 12 Months

MPF (24.5) (23.7) (19.0)Sector (34.6) (32.8) (31.8)Market (20.0) (14.7) (7.5)

Beta: 0.8

Market risk premium (%): 5.5

Risk free rate (%): 6.1

WACC (%): 10.0

Forecast cashflow (years): 10

Residual value % of total valuation: 55.9

Nominal terminal growth rate (%): 3.0

Earnings Summary

1 NPAT and EPS are adjusted by removing non-recurring items. All the above statistics are derived from normalised earnings.

Yr to Jun NPATRep $M

NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%Deferred Tax

%

2007A 29.69 21.34 10.9 4.6 9.2 0.6 0.8 10.7 10.7 0 56

2008F 27.32 23.98 11.8 8.6 8.4 0.6 0.8 11.0 11.0 0 50

2009F 24.08 24.08 11.9 0.3 8.4 0.7 0.9 11.4 11.4 0 50

2010F 24.98 24.98 12.3 3.7 8.1 0.7 0.9 11.7 11.7 0 50

AEGIS Equities Research Pty Ltd ABN 72 085 293 910Level 6 33 York Street Sydney NSW 2000 AustraliaLocked Bag 7 Australia Square Sydney NSW 1215Phone +61 2 8296 1100 Fax +61 2 9299 3777 Email [email protected] Web www.aegis.com.au

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Multiplex Acumen Property Fund

Year end Jun. All figures in A$M

Notes:1. The risk ratings are on a 12 month perspective, where five stars denotes low risk and one star denotes high risk. Company risk takes into account expectedfinancial, strategic and execution risks associated with the company. Share price risk is a measure of the expected volatility of the price and other trading factors.2. The Ethical rating rates a company on an ethical investment basis where five stars denote very good and one star a poor rating. The score is based on four key factors:areas of operating, environmental, corporate governance and social factors. For more information see www.aegis.com.au.

Valuation: $1.46 Company risk 1: Share Price risk 1: Ethical rating 2:

Profit & loss summary 2007A 2008F 2009F 2010F

Operating revenue 29.79 32.13 35.87 36.89Invest & other income (2.94) 1.46 (2.18) (2.17)

EBITDA 25.68 31.39 30.82 31.47Depreciation/Amort 0.00 0.00 0.00 0.00

EBIT 25.68 31.39 30.82 31.47Net Interest (4.22) (5.21) (4.50) (4.17)

Pre-tax profit 21.46 26.18 26.32 27.30Tax expense 0.00 0.00 0.00 0.00

Minorities/Assoc./Prefs (0.13) (2.20) (2.24) (2.32)

NPAT 21.34 23.98 24.08 24.98Non recurring items 8.35 3.34 0.00 0.00

Reported profit 29.69 27.32 24.08 24.98NPAT add Goodwill & Pref 0.00 0.00 0.00 0.00

Adjusted profit 21.34 23.98 24.08 24.98

Cashflow summary 2007A 2008F 2009F 2010F

EBITDA 25.68 31.39 30.82 31.47Working capital changes (6.97) 0.04 0.07 0.03

Interest and tax (4.64) (4.73) (4.50) (4.17)

Other operating items 0.00 (0.50) 0.38 0.15

Operating cashflow 14.07 26.19 26.78 27.48Required capex 0.00 0.00 0.00 0.00

Maintainable cashflow 14.07 26.19 26.78 27.48Dividends (14.50) (20.71) (22.74) (23.43)

Acq/Disp (34.24) (29.54) 0.00 0.00

Other investing items 0.00 2.54 0.00 0.00

Free cashflow (34.68) (21.51) 4.04 4.05Equity 9.60 35.96 0.00 0.00

Debt inc/(red'n) 28.35 (4.38) (4.04) (4.05)

Balance sheet 2007A 2008F 2009F 2010FCash & deposits 4.65 10.00 10.00 10.00

Inventories 0.00 0.00 0.00 0.00

Trade debtors 14.39 9.42 9.42 9.42

Other curr assets 0.00 0.00 0.00 0.00

Total current assets 19.05 19.42 19.42 19.42Prop., plant & equip. 0.00 0.00 0.00 0.00

Non-curr intangibles 0.00 0.00 0.00 0.00

Non-curr investments 381.00 411.99 411.99 411.99

Other non-curr assets 1.87 3.09 3.09 3.09

Total assets 401.92 434.49 434.49 434.49Trade creditors 1.28 1.32 1.39 1.42

Curr borrowings 0.00 0.00 0.00 0.00

Other curr liabilities 5.50 7.01 7.40 7.54

Total current liab. 6.78 8.33 8.79 8.97Borrowings 89.00 79.90 75.87 71.82

Other non-curr liabilities 8.78 9.05 9.05 9.05

Total liabilities 104.56 97.29 93.70 89.83Minorities/Convertibles 9.60 46.66 48.90 51.23

Shareholders equity 297.36 337.20 340.78 344.66

Ratio analysis 2007A 2008F 2009F 2010FRevenue growth (%) 24.5 7.9 11.6 2.9

EBITDA growth (%) 15.5 22.2 (1.8) 2.1

EPS growth (%) 4.6 8.6 0.3 3.7

EBITDA/Sales margin (%) 86.2 97.7 85.9 85.3

EBIT/Sales margin (%) 86.2 97.7 85.9 85.3

Tax rate (%) 0.0 0.0 0.0 0.0

Net debt/equity (%) 29.3 24.1 22.6 21.1

Net debt/net debt + equity (%) 22.7 19.4 18.4 17.4

Net interest cover (x) 6.1 6.0 6.9 7.6

Payout ratio (%) 98.4 93.3 95.9 95.2

Capex to deprec'n (%) 0.0 0.0 0.0 0.0

NTA per share ($) 1.43 1.43 1.44 1.45

ROA (%) 7.4 7.3 7.1 7.2

ROE (%) 8.1 8.3 8.3 8.5

Multiple analysis 2007A 2008F 2009F 2010FMarket cap (M) 205

Net debt ($M) 109.00

Peripheral assets ($M) (0.00)

Enterprise value ($M) 314.34

EV/EBIT (x) 12.2 10.0 10.2 10.0

EV/EBITDA (x) 12.2 10.0 10.2 10.0EV/EBITDA All Ind (x) 7.4 6.6 6.1 5.6

EV/EBITDA rel All Ind (x) 1.7 1.5 1.7 1.8

P/E (x) 9.2 8.4 8.4 8.1P/E rel All Ind (x) 0.6 0.6 0.7 0.8

P/E rel All Ind ex banks (x) 0.5 0.5 0.6 0.6

P/E sector (x) 12.1 10.6 9.5 8.6

P/E rel sector (x) 0.8 0.8 0.9 0.9

Assumptions 2007A 2008F 2009F 2010FGDP growth (%) 2.50 3.02 3.64 3.32

Interest Rates (%) 6.33 7.12 7.50 7.38

Inflation (%) 3.09 2.47 2.50 2.50

Notes To AccountsAll income statement items (except reported profit) now excludeGoodwill Amortisation as per the new IFRS requirements. We alsoexclude revaluation gains from reported profit to estimate theoperating profit generated by the Fund.

Copyright © 2000 - 2007 Aegis Equities Holdings Pty Limited. All rights reserved.This information must be read in conjunction with the Legal Notice which can be located at http://www.aegis.com.au/public/disclaimer.aspx.

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TABLE 1: RESULTS SUMMARY

Source: Company/Aegis Equities

Key Highlights

� Reported result: After adjusting for minority interests (Multiplex Property Income Fund), MPF reported a 1H08 NPAT of$15.97M, an increase of 73.9% on 1H07. MPF's 1H08 normalised NPAT was $12.6M, an improvement of 14% over thepcp. Excluding disposal of investments, NPAT would be $9.2M, a 7% drop from $9.9M in the pcp.

� Total assets Increased by 9.3% over the pcp to $439.2M.

� Unlisted: This growth was driven by $13.9M in revaluation gains, and net investments of $20.3M.

� Listed: Net investments totaled $13.1M, which was offset by a $16.5M decrease in the mark-to-market value oflisted securities.

� Net tangible assets: NTA remained at the FY07 level of $1.43 per unit. Losses experienced in the LPT allocation havebeen off-set by the increase in value of the unlisted allocation of the Fund.

� Distribution: 1H08 distribution grew 3.4% to 5.5cpu, which led to a seventh consecutive increase in distributions.

� Earnings per unit: Normalised EPU increased 13.1% on 1H08 to 6.23cpu. Excluding brokerage income, EPU stood at5.78cpu, an improvement of 18.4% over the pcp. After stripping out asset disposals, our adjusted EPU was 4.54cpu,7% down on pcp.

� Retained earnings: Realised retained earnings for 1H08 was $14.8M, an improvement of 11.3% on the pcp.

� Debt levels: MPF's 1H08 gearing was 17%, a decrease of 4.2% on the pcp and below MPF's target of 20%-25%. Interest coverage on MPF is 6.5x. Interest rates are fixed on 93% of borrowings for an average of 3.4 years at6.96% p.a. (including fees). On a look-through basis (including debt in underlying investments), gearing was 61%.

� Income Fund: 1H08 saw the inflow of $35.9M into MPIF, bringing its total assets to $80.5M. MPF's investment in 100%of the ordinary equity of the Income Fund realised an annualised return of 19.5%.

� Distribution Reinvestment Plan (DRP): Due to the strong performance of MPF's Income Fund, MPF suspended theDRP as of 11 September 2007.

($'000) 1H07 1H08 1H08 v 1H07IncomeDistribution Income 9,133 11,447 25%Distributions from Equity Accounted Investments 2,539 2,539 0%Interest Income 305 366 20%Brokerage Income 1,243 916 -26%Gain on Disposal 951 3,419 260%Other -94 0 n/aTotal Income 14,077 18,687 33%ExpensesFinance Costs-external -2,294 -3,091 35%Responsible entity fees -687 -905 32%Other -244 -971 298%

Total Expenses -3,225 -4,967 54%Less Minority Interests 0 -1,094 n/aNormalised NPAT 10,852 12,626 16%AdjustmentsShare of Associate Profit Less Distributions -1,761 3,344 n/aHedging 94 4 n/a

Reported NPAT 9,185 15,974 74%

DPU (per share) 5.32 5.50 3%


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Investment Portfolio

� The investment portfolio is spread across 29 listed property securities, 32 unlisted property funds, 5 property sectors,and 11 geographic areas. The weighted average lease duration is 5.7 years.

� Portfolio allocation: is 78% unlisted property securities, 21% listed property securities and 1% cash, in line with theFund's strategic objectives (refer Figure 1).

� The portfolio is exposed to 31 different managers, with the top seven managers accounting for approximately 75% of theportfolio by investment value (refer to Figure 3 below). They are major institutions with strong industry experience andsignificant industry expertise.

� Property sector diversification (refer to Figure 2). MPF has continued its bias towards the office sector, increasing itsweighting by 1.4% to 42%. The weighting to the retail sector has increased by 1.2% to 34%, and developments havedropped 2% to 4%. Industrial and other (storage, healthcare, childcare) sectors weightings have marginally decreased,0.9% and 0.5% respectively to 11% and 9%.

� MPF has further diversified its portfolio geographically over the pcp. In July, 2007, MPF invested $12.8M in the MultiplexEuropean Property Fund (ASX: MUE) which owns a diversified portfolio of 67 properties in Germany. The portfolio isnow well spread geographically, with properties across all Australian states, as well as internationally in Europe, USAand New Zealand (Figure 4).

� MPF has limited exposure to Centro vehicles 6%, MCS21, MCS22 and MCS28 (unlisted). We view the underlyingassets in the unlisted vehicles as investment grade, however we are concerned with the outcome of Centro's refinancingissues, and will be monitoring its progress closely.

FIGURE 1: ASSET CLASS DIVERSIFICATION AS AT 31DECEMBER 2007

Source: MPF

FIGURE 2: PROPERTY SECTOR DIVERSIFICATION AS AT 31DECEMBER 2007

Source: MPF

FIGURE 3: MANAGER DIVERSIFICATION

Source: MPF

FIGURE 4: GEOGRAPHIC DIVERSIFICATION

Source: MPF


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Parent Company - Corporate Action Issues

� On 17 December 2007, Brookfield Asset Management (BAM) acquired all of the stapled securities of Multiplex Group,which has resulted in BAM ultimately owning the responsible entity of Multiplex Capital Management Limited, withownership of 23.6% of the fund's units.

� Brookfield is focused on property, power and infrastructure assets, with over US$95B of assets under management andis co-listed on the New York and Toronto stock exchanges (NYSE/TSX:BAM). It is one of the largest owners ofcommercial properties in the world.

Summary

� We believe MPF has delivered a solid 1H08 result. Retained cash earnings have increased 11.3% to $14.8M, whichprovides scope for MPF to guarantee smooth DPU delivery over the short- term. MPIF had a strong period with $35.9Mof inflows and the financial health of the Fund has allowed a seventh consecutive increase in distribution to anannualised level of 11cpu.

� The launch of MPIF continues to provided MPF with a steady capital flow, with improved funding flexibility to pursueearnings-accretive investments. MPIF, which is a sub-trust of MPF, offers investors income-only returns whilst MPFbenefits from the capital gains achieved.

� MPF's business model continues to be structured in a manner beneficial to investors seeking exposure to the high-yielding unlisted property trust/syndicate market with a tax-deferred component. At the same time, they can benefit fromhigher levels of liquidity and diversification, compared with investments in direct property or individual unlisted funds.

� MPF's gearing was 17% over 1H08, a decrease of 4.2% on the pcp and below MPF's target of 20%-25%. On a look-through basis (including debt in underlying investments), gearing was 61%. We are of the view that cap rates across theAustralian market are likely to soften over the short to medium term, with yields in secondary assets expected to re-rate(expand). Over the coming 12-18 months, we expect spreads between premium and secondary grade assets to revertback to long-term averages. We see risk to the health of the underlying unlisted vehicles due to the use of secondaryassets to achieve the higher yields on retail offerings. We remain cautious of the high gearing levels in the underlyingsecurities coupled with secondary assets, where cap rate softening can exert pressure on debt covenants and theoverall health of balance sheets.

� Our valuation of MPF has dropped to $1.46 from $1.58 on the pcp due to revised revenue forecasts, and implies a FY08distribution yield of 11% (based on current share price of $1.00).


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Peter Leodaritsis Managing Director Phone: 61 2 8296 1100 [email protected]

Mamun Rashid Chief Operating Officer & General Counsel Phone: 61 2 8296 1160 [email protected]

RESEARCH

Sharon Loaiza Head of Research Phone: 61 2 8296 1131 [email protected]

Ravi Reddy Head of Equities Analysis Phone: 61 2 8296 1165 [email protected]

Rodney Lay Head of SP Phone: 61 2 8296 1106 [email protected]

SALES

Craig Northey Head of Sales Phone: 61 2 8296 1114 [email protected]

Nigel O’Brien Business Development Manager Phone: 61 2 8296 1166 nigel.o’[email protected]

Joyce Sivris Business Development Manager Phone: 61 2 8296 1125 [email protected]

Joanna Judd Business Development Officer Phone: 61 2 8296 1102 [email protected]

IMPLEMENTED RESEARCH MODELS

Mandy Depangher Client Services Manager Phone: 61 2 8296 1159 [email protected]

CLIENT SERVICES INFORMATION TECHNOLOGY

Pamella McIntosh Manager Client Services Phone: 61 2 8296 1124 [email protected]

Evan Ferris Chief Technical Officer Phone: 61 2 8296 1116 [email protected]

Disclaimer & Disclosure of Interest

This publication has been prepared by Aegis Equities Research Pty Limited (“Aegis”) (ACN 085 293 910), an Australian FinancialServices Licensee (AFSL no. 225072). Whilst the information contained in this publication has been prepared with all reasonable carefrom sources, which Aegis believes are reliable, no responsibility or liability is accepted by Aegis for any errors or omissions ormisstatements however caused. Any opinions, forecasts or recommendations reflects the judgement and assumptions of Aegis as atthe date of publication and may change without notice. Aegis and its officers, agents, employees, consultants and its related bodiescorporate, exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the fullestextent permitted by law. This publication is not and should not be construed as an offer to sell or the solicitation of an offer topurchase or subscribe for any investment. Any securities recommendation contained in this publication is unsolicited generalinformation only. Aegis is not aware that any recipient intends to rely on this publication or of the manner in which a recipientintends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financialsituation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investmentadvisor to determine whether recommendations contained in this publication are appropriate to their investment objectives, financialsituation or particular needs before acting on such recommendations. This publication is not for public circulation or reproductionwhether in whole or in part and is not to be disclosed to any person other than the intended recipient, without obtaining the priorwritten consent of Aegis. Aegis its officers, employees, consultants or its related bodies corporate may, from time to time holdpositions in any securities included in this report and may buy or sell such securities or engage in other transactions involving suchsecurities. Aegis and its Directors and associates declare that from time to time they may hold interests in and/or earn brokerage,fees or other benefits from securities mentioned in this publication. Aegis, its officers, employees, consultants and its related bodies corporate have not and will not receive, whether directly orindirectly, any commission, fee, benefit or advantage, whether pecuniary or otherwise in connection with making anyrecommendation contained in this report and/or on this web site. Aegis discloses that from time to time, it or its officers, employeesand its related bodies corporate may have an interest in the securities, directly or indirectly, which are the subject of theserecommendations; may buy or sell securities in the companies mentioned in this publication; may effect transactions which may notbe consistent with the recommendations in this publication; may have directorships in the companies mentioned in this publication;and/ or may perform paid services for the companies that are the subject of such recommendations. However, under nocircumstances, has Aegis been influenced, either directly or indirectly, in making any recommendation contained in this report and/oron this web site. The information contained in this publication must be read in conjunction with the Legal Notice that can be located at http://www.aegis.com.au/disclaimer.asp.

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