MIREIT’s credit rating was downgraded by Moody’s to B1. The main reason for the downgrade is the impending refinancing need of MIREIT for its debt of $220.8 million due in April 2009. This is also our main concern regarding MIREIT. Although we understand the REIT manager has been in talks with various parties, nothing has been announced thus far.

Financial results are in line with expectations. Revenue for 3QFY09 is up 54.0%, net property income increases 49.1% and DPU increases 22.4%. MIREIT has maintained a quarterly DPU of 2.35 cents for FY09. Quarterly payout ratio was 92.7%, 87.7% and 98.5%. We believe the REIT manager has anticipated higher operating cost and therefore has maintained a fixed quantum of quarterly DPU so that there is buffer to withstand any volatility. With the retained cash on hand, MIREIT should be able to maintain at least the same amount of DPU for 4QFY09.

Funding remains the key concern. Besides refinancing its existing debt, MIREIT also has funding needs of $91 million in the third quarter of 2009 when construction of IBP is expected to complete. Current gearing is 39.7%, and will increase to approximately 47% if the $91 million is funded by debt.

Although revenue growth is backed by built-in rental escalation, we have assumed some degree of revenue softening. We maintain revenue assumptions for FY09F and lowered our revenue forecast for FY10F by 3%. Our DPU forecasts for FY09F and FY10F are 9.62cents and 8.58cents, a reduction of 4.5% for FY10F. We lower our fair value from $0.60 to $0.30. Downgrade from Buy to Hold.