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June 26, 2013

SINGAPORE

REIT

SHORT TERM (3 MTH)

LONG TERM

Conviction| |

Notes from the Field

Nailing down interest rate effect


We see few positive drivers for SREITs as tailwinds from interest rates and S$ have morphed into headwinds, impacting spreads, cap values and borrowing costs. With SREITs yields near the 6.9-7.2% levels we think it could trade at if bond yields rise to historical average of 3%, we think that the sector is near a turning point but is not outright cheap.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Figure 1: Rise in SREITs yields in tandem with bond yields


% 9.0
8.5 8.0 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 REITs forward div yield (LHS) 10-yr bond yield (RHS)

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

7.5 7.0 6.5 6.0 5.5 5.0 2003

Our policies will depend on this scenario coming true If it doesn't come true, we'll adjust our policies.

Ben Bernanke, Fed Chairman

SOURCES: CIMB, COMPANY REPORTS

Highlighted Companies Ascendas REIT


Share price has corrected alongside the sector. At 1.1x P/BV against its historical average of 1.4x since listing, we see opportunities to accumulate AREIT, a quality holding, in our view, given its prudent management and quality assets.

Suntec REIT
Trading at 0.7x P/BV, the lowest within the whole sector, we believe that the market has priced in potential negatives from rising borrowing costs, while according limited value to the AEI at Suntec City Mall.

We evaluate the impact of rising bond yields in this report. Maintain Neutral. We lower our DDM-based target prices after raising the cost of equity by 80bp across the board. We upgrade Suntec to Outperform from Neutral. Top picks are now AREIT, Suntec and FCT.

Higher cap rates and borrowing cost

Frasers Centrepoint Trust


DPU growth should remain underpinned by positive rental reversions while an acquisition of Changi City Point will provide the next stage of growth for FCT. Capital management is optimal, leaving it fairly immune to interest rate hikes.

Are we there yet?

While predicting where bond yields could be difficult at this juncture, we dug into history for periods when bond yields were near 3% or rising for a sense of where REITs could end up. Pegging spreads to historical levels just before bond yields turned higher and normalised levels (2010-Mar 2011) post GFC, we believe that the sector could trade at spreads of 390-422bp. This would imply sector yields of 6.9-7.2% assuming that bond yields hit the historical average of 3%. At current levels (6.6% yield and near historical mean yield and P/BV), we think that the sector is near a turning point but is not outright cheap.

Rising bond yields would also limit cap rate compression and push up borrowing cost. That said, we believe that SREITs book values are fairly well-supported given the premium that transacted values commanded. The near-term impact of higher borrowing cost should meanwhile be manageable, given healthy asset leverage, high percentage of hedges and staggered debt maturity.

Maintain Neutral

Near term, we expect the impact of rising bond yields on spreads to continue dominating. Bond yields may not rise in a straight line, but the direction is a one-way bet. We see little to fuel positivity, with the backdrop of rising rates and weakening S$, and the sector still up 11% on a 1-year basis. The only redeeming factor is growth, but with impediments from restructuring pressures locally. Maintain Neutral.

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

REIT
June 26, 2013

KEY CHARTS Tailwinds turned headwinds


As both yield and leveraged instruments, SREITs enjoyed a good run in 2012 on a combination of record-low interest rates, rising S$, strong liquidity and risk aversion. It is, therefore, no surprise that the recent spike in bond yields and the weakening S$ turned SREITs into major losers, with yields on SREITs up 122bp (in tandem with a 125bp increase in bond yields), taking them 19% down from previous peaks.
% 7 6 % 4

5
LT ave: 4.1% 4 3 2 1 2003 Ex-crisis: 3.7%

1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Spread over 10y GB Ex-crisis spread

LT ave. spread 10Y Bond yields (RHS)

Are we there yet?


While predicting where bond yields could be difficult at this juncture, we dug into history for periods when bond yields were near 3% or rising for a sense of where REITs could end up. Pegging spreads to historical levels just before bond yields turned higher and normalised levels (2010-Mar 2011) post GFC, we believe that the sector could trade at spreads of 390-422bp. This would imply sector yields of 6.9-7.2% assuming that bond yields hit the historical average of 3%. At current levels (6.6% yield), we think that the sector is near a turning point but is not outright cheap.
Period 6/25/2013 When bond yields are near 3% When bond near 3% , strip out 2007-8 When bond yields are increasing Normalised levels post-GFC Bond Spreads yields 2.8 3.8 3.1 3.2 2.4 2.5 3.0 3.0 4.2 3.9 REITs' yields 6.6 6.1 6.2 6.3 2H03-2H08; 1H10 2H03-2H06; 1H10 2010-Mar 2011

6.7 1H03, 2H05, 1H08, 2H10

Higher cap rates and manageable borrowing cost


Rising bond yields would also limit cap rate compression and push up borrowing cost. That said, we believe that SREITs book values are fairly well-supported given the premium that transacted values commanded. The near-term impact of higher borrowing cost should meanwhile be manageable, given healthy asset leverage, high percentage of hedges and staggered debt maturity.

Bloomberg Fixed (% of total Current cost of Impact of a 50bps increase in Ticker Gearing ratio debt) borrowing interest cost on (t+1) DPU PREIT 32% 85% 1.5% -0.6% ART 41% 66% 3.1% -1.6% CDREIT 28% 50% 2.5% -1.2% AREIT 28% 75% 2.3% -0.9% CACHE 29% 70% 3.3% -0.8% CREIT 35% 82% 3.5% -0.9% MLT 34% 70% 4.1% -1.3% MINT 35% 88% 2.4% -0.5% FCOT 39% 63% 2.4% -2.3% CCT 30% 78% 3.2% -1.0% KREIT 43% 60% 3.0% -2.4% SUN 39% 60% 2.2% -2.9% CMT 35% 94% 2.8% -0.3% FCT 31% 94% 3.3% -0.2% SGREIT 32% 81% 2.7% -0.7% MCT 41% 75% 3.1% -1.5% TOTAL 34% 72% 2.8% -1.2%

Recommendations and picks


Near term, we expect the impact of rising bond yields on spreads to continue dominating. Bond yields may not rise in a straight line, but the direction is a one-way bet. We see little to fuel positivity, with the backdrop of rising rates and weakening S$, and the sector still up 11% on a 1-year basis. The only redeeming factor is growth, but with impediments from restructuring pressures locally. Maintain Neutral. We lower our DDM-based target prices after raising the cost of equity by 80bp across the board. We upgrade Suntec to Outperform from Neutral. Top picks are now AREIT, Suntec and FCT.

Top picks: AREIT, Suntec, FCT Recommendations: Outperform AREIT, CACHE, CREIT FCT SUN, FCOT Neutral MINT, MLT CMT, SGREIT, MCT CCT, KREIT CDLHT, ART PREIT
SOURCE: CIMB, COMPANY REPORTS

Underperform

Industrial

Retail Office Hospitality Healthcare

REIT
June 26, 2013

Figure 2: CIMB REIT Overview


Company Ascott Residence Trust CDL Hospitality Trust Hospitality average Ascendas REIT Cache Logistics Trust Cambridge Industrial Trust Mapletree Industrial Trust Mapletree Logistics Trust Industrial average CapitaCommercial Trust Frasers Commercial Trust Keppel REIT Suntec REIT Office average CapitaMall Trust Frasers Centrepoint Trust Starhill Global REIT Mapletree Commercial Trust Retail average Parkway Life REIT Healthcare average CapitaMalls Malaysia Trust IGB REIT Pavilion REIT Sunway REIT Malaysia retail average Axis REIT Malaysia Industrial average Average (all) Bloomberg Ticker ART SP CDREIT SP Recom. Neutral Neutral Price Target Price (local curr) (local curr) $1.23 $1.30 $1.66 $1.71 Market Cap (US$ m) $1,218 $1,271 Core P/E (x) CY2013 CY2014 18.8 17.7 14.7 14.5 16.4 15.9 15.7 15.2 15.3 14.8 14.7 15.2 19.1 23.8 22.5 27.0 22.3 20.6 16.5 15.3 18.4 18.7 20.7 20.7 19.6 na na na 106.3 20.5 20.5 20.7 14.4 14.8 14.1 14.3 14.2 14.3 19.2 19.9 20.9 23.3 20.8 19.6 16.2 15.3 17.9 18.1 19.6 19.6 18.7 na na na 102.1 19.5 19.5 19.6 P/BV (x) CY2013 CY2014 0.9 0.9 1.0 1.0 1.0 1.0 1.1 1.2 1.0 1.2 1.1 1.1 0.9 0.9 1.0 0.7 0.8 1.2 1.2 0.9 1.1 1.1 1.4 1.4 na na 1.5 na 5.6 na na 1.2 1.1 1.2 1.0 1.2 1.1 1.1 0.9 0.9 1.0 0.7 0.9 1.2 1.2 0.9 1.1 1.1 1.4 1.4 na na 1.5 na 5.7 na na 1.2 Recurring ROE (%) Asset leverage (%) Dividend Yield (%) CY2013 CY2014 CY2015 CY2013 CY2014 CY2013 CY2014 4.9% 5.2% 5.4% 41% 41% 7.4% 7.3% 7.1% 7.1% 7.4% 28% 28% 6.9% 7.0% 6.0% 6.1% 6.4% 36% 36% 7.1% 7.2% 7.0% 8.2% 6.9% 8.1% 7.8% 7.5% 4.6% 3.7% 4.4% 2.7% 3.8% 5.6% 7.3% 6.2% 5.8% 6.0% 7.1% 7.1% 7.3% na 0.0% na 2.9% 8.3% 8.3% 5.5% 7.7% 8.2% 7.3% 8.3% 8.0% 7.9% 4.5% 4.6% 4.7% 3.1% 4.1% 5.9% 7.4% 6.1% 5.9% 6.1% 7.3% 7.3% 8.1% na 0.0% na 3.3% 8.7% 8.7% 5.8% 7.9% 8.4% 7.4% 8.7% 8.1% 8.1% 5.1% 5.0% 5.1% 4.0% 4.7% 6.2% 7.5% 6.2% 6.2% 6.3% 7.5% 7.5% 8.6% na 0.0% na 3.5% 9.1% 9.1% 6.1% 28% 31% 37% 35% 34% 32% 30% 39% 41% 38% 36% 35% 31% 31% 41% 35% 37% 37% 30% #DIV/0! 0% #DIV/0! 14% 0% 0% 34% 31% 31% 37% 37% 36% 34% 31% 39% 41% 39% 37% 35% 31% 31% 41% 35% 37% 37% 31% #DIV/0! 0% #DIV/0! 14% 0% 0% 34% 6.6% 7.2% 7.4% 7.1% 6.8% 6.9% 5.6% 6.2% 6.2% 6.2% 6.0% 5.4% 5.8% 6.3% 5.8% 5.7% 4.8% 4.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.2% 7.1% 7.5% 7.9% 7.3% 7.0% 7.2% 5.6% 6.9% 6.2% 6.5% 6.1% 5.6% 6.0% 6.6% 6.0% 5.9% 5.1% 5.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.4% 3-year DPS CAGR (%) 0.1% 0.6% 0.4% 3.8% 1.1% 3.9% 3.2% 1.5% 2.7% 2.6% 10.3% -1.5% 3.2% 3.6% 5.4% 2.4% 5.7% 3.1% 4.1% 3.3% 3.3% na na na na na na na 3.0%

AREIT SP CACHE SP CREIT SP MINT SP MLT SP

Outperform Outperform Outperform Neutral Neutral

$2.13 $1.19 $0.69 $1.30 $1.04

$2.49 $1.31 $0.76 $1.41 $1.08

$4,032 $723 $664 $1,694 $1,997

CCT SP FCOT SP KREIT SP SUN SP

Neutral Outperform Neutral Outperform

$1.42 $1.33 $1.27 $1.49

$1.51 $1.47 $1.29 $1.68

$3,218 $686 $2,685 $2,642

CT SP FCT SP SGREIT SP MCT SP

Neutral Outperform Neutral Neutral

$1.91 $1.84 $0.81 $1.12

$2.06 $2.02 $0.86 $1.22

$5,207 $1,195 $1,241 $1,827

PREIT SP

Neutral

$2.27

$2.33

$1,083

CMMT MK IGBREIT MK PREIT MK SREIT MK

Outperform Outperform Neutral Neutral

$1.65 $1.31 $1.45 $1.54

$1.99 $1.59 $1.59 $1.63

$918 $1,404 $1,370 $1,413

AXRB MK

Neutral

$3.70

$4.03

$534

SOURCES: CIMB, COMPANY REPORTS

Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

REIT
June 26, 2013

Assessing higher interest rates


Table of Contents
1. ASSESSING IMPACT OF HIGHER INTEREST RATES 2. HOUSE VIEW ON S$, INTEREST RATES AND QE 3. IMPACT ON YIELD SPREADS 4. IMPACT ON CAP RATES 5. IMPACT ON BORROWING COSTS 6. SEEKING GROWTH VISIBILITY AND STRONG FINANCES 7. VALUATION AND RECOMMENDATION p.4 p.5 p.6 p.10 p.13 p.15 p.16

1. ASSESSING IMPACT OF HIGHER INTEREST RATES 1.1 Tailwinds turned headwinds


As both yield and leveraged instruments, SREITs enjoyed a good run in 2012 on a combination of record-low interest rates, rising S$, strong liquidity and risk aversion. It is, therefore, no surprise that the recent spike in bond yields and the weakening S$ turned SREITs into major losers, with yields on SREITs up 122bp (in tandem with a 125bp increase in bond yields), taking them 19% lower than previous peaks. We explore in this piece our views on the impact of rising interest rates on REITs.
Figure 3: Performance across select REITs/ business trusts
Share price (lcl curr) AREIT ART Cache CDLHT Cambridge CCT CMT CRCT FEHT FIRT FRT FCOT FCT KREIT LMRT MCT MGCCT MINT MLT PREIT PCRT SSREIT SGREIT Suntec FSTREI FSSTI 2.130 1.225 1.185 1.660 0.685 1.420 1.910 1.330 0.940 1.160 7.020 1.325 1.840 1.270 0.465 1.120 0.930 1.300 1.040 2.270 0.520 1.140 0.810 1.485 724.08 3,089.93 1 month (17.4) (14.0) (11.9) (13.8) (14.9) (13.4) (12.0) (16.6) (9.6) (14.4) (11.7) (11.1) (12.4) (15.9) (13.1) (19.4) (11.0) (11.6) (19.4) (15.3) (13.3) (11.3) (12.0) (18.9) (14.3) (8.9) Performance 3 months (17.1) (9.6) (8.5) (17.4) (13.3) (12.1) (8.6) (22.7) (18.3) (2.9) 2.6 (4.0) (14.4) (5.9) (11.4) (16.4) (11.4) (6.5) (13.7) (8.5) (10.3) (9.2) (9.0) (15.6) (11.5) (5.4) 1 Year 1.9 14.0 13.9 (10.3) 23.4 13.6 5.5 2.3 na 28.2 52.6 37.3 9.9 23.9 19.2 16.7 na 10.2 7.2 22.7 9.5 16.9 26.6 11.7 11.0 9.8 YTD (10.1) (9.9) (4.4) (11.7) 1.5 (15.7) (10.3) (19.1) (6.5) 9.4 10.2 0.4 (8.0) (1.9) (5.1) (7.8) na (4.4) (9.2) 5.6 (8.0) 0.0 3.2 (11.3) (7.6) (2.4)

SOURCES: CIMB, BLOOMBERG

Figure 4: YTD share price performance


%
15

Figure 5: 1M share price performance


%
LMRT FCOT CMT
PCRT MINT

Cache

PREIT

KREIT

AREIT

SSREIT

CDLHT

SGREIT

(2) 10 (4) 5 (6) (8)

Please fill in the values above to have them entered in your rep

PCRT

FCOT

MINT

LMRT

MCT

KREIT

PREIT

SSREIT

AREIT

Cache

CMT

MLT

ART

Suntec

SGREIT

Cambridge

CDLHT

FEHT

CRCT

FIRT

FRT

FCT

CCT

(10) (12) (14)


(16)

(5)

(10)

(15) (18) (20) (20)

SOURCES: CIMB, BLOOMBERG

SOURCES: CIMB, BLOOMBERG

Cambridge

MGCCT

Suntec

FEHT

CRCT

FIRT

MCT

Title: Source:

ART

CCT

MLT

FRT

FCT

REIT
June 26, 2013

2. HOUSE VIEW ON S$, INTEREST RATES AND QE 2.1 On S$ and interest rates
Our FX team believes that S$ will weaken against US$ to 1.27 by end-2013. Our weaker S$ view was an anti-consensus view at the start of the year but recent risk aversion has brought the FX pair close to our target. We expect a combination of 1) risk aversion, 2) receding inflation in Singapore, 3) weaker growth in Asian economies, and 4) likely weakening of the yen again to prevent S$ from returning to the previous appreciating path. The question for interest rates is whether rates will go up in a hurry. We view the rise in 10YR yields across the world as a reflection of increased risk aversion, not central banks changing their stance on interest rates. In fact, the Federal Reserve made a most dovish speech last week after equity markets started to collapse. One has to recognise that the markets decline was in spite of a sustained easy money policy stance in the US, not because the Fed turned hawkish. Without a change in the Fed fund rates, we do not expect the 3M S$ SIBOR to creep up significantly either.
Figure 6: MAS has weakened its firm grip on FX policy
NEER 115 Stronger S$ 113 111 109 Weaker S$ 107
105

Figure 7: Yield curve


%
3.0

Title: Source:
Dec-12 Mar-13 May-13

2.5

Please fill in the values above to have them entered in your rep

2.0

1.5

1.0

103 101 99 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13

0.5

0.0

SOURCES: CIMB, CEIC, BLOOMBERG

SOURCE: CEIC

2.2 On tapering of QE
End of QE must be accompanied by growth. Even though Bernanke noted in the FOMC meeting in June that it will start cutting back on QE later this year, this is contingent on improving economic conditions and sustaining job creation; recent data have been mixed. We expect sufficient signalling, raising of transparency levels and resetting of targets to avoid a disorderly sell-off in the bond market. In the event that yields rise faster than expected due to more aggressive sell-offs, the Fed retains the option of extending its policy guidance of balance sheet expansion to limit these moves. Strong US economy will not solve all of Asias ills. Our strategists believe that a strong US economy prompting a pullback in QE will not solve all of Asias ills, given the risks from disappointing Chinese growth, a strong US$ (driving liquidity withdrawal) and a weak yen impacting North Asian exports. The US recovery will help drive exports higher but the impact will remain selective, especially as growth is still likely to be sub-3% in 2014 and the world will also deal with an unwinding of bond yields which will start to raise valuation concerns.

REIT
June 26, 2013

3. IMPACT ON YIELD SPREADS 3.1 Broad-based re-pricing on rising bond yields


The broad-based yield-compression across S-REITs over the past year was driven mainly by record-low interest rates and a strong S$. The recent spike in bond yields and the strengthening US$ have thus sparked a selldown and repricing across SREITs, with SREITs yields up 122bp, in tandem with a 125bp increase in bond yields. This took spreads to 380bp, back to levels just below the long-term average of 407bp.
Figure 8: Increase in bond yields sparking a pullback in REITs
% 6.5 6.0
5.5 5.0 4.5 LT ave: 4.1% 5.0 4.5 4.0

3.5
3.0 2.5

4.0
3.5 3.0 2.5 2.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ex-crisis ave: 3.7%

2.0
1.5 1.0

Spread over 10y GB (LHS) Ex-crisis ave spread (LHS)

LT ave. spread (LHS) 10-yr bond yield (RHS)


SOURCES: CIMB, BLOOMBERG

Figure 9: Spike in volatility of the sector, skewing risk-rewards


1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 50 45 40 35 30 25 20 15 10

0.1 0.0

5 0

Yield/volatility

Average

Volatility (RHS)
SOURCES: CIMB, BLOOMBERG

3.2 How did REITs fare historically when bond yields rose?
We detail below the performance of REITs relative to respective country indices during past episodes of interest rate increases. US REITs have traditionally underperformed during periods of rising interest rates while S-REITs performance was more mixed though the performance could have been skewed by the limited number of names listed in the early days of 2004-5. That said, we highlight some differences this time round compared to the past 1) Bond yields have never been so low in the listing history of REITs and 2) A structurally slower Asian growth could affect cyclical stocks share-price performance, and SREITs could outperform cyclical stocks in an environment where liquidity still abounds.
6

REIT
June 26, 2013

Figure 10: SG 10Y bond yields previously near historical low


SG 10Y Bond yields (%) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2003

Figure 11: Mixed performance when interest rates increase


Time period May 2003 - Oct 2003 Mar 2004 - Jun 2004 Dec 2004 - Mar 2005 May 2005 - Mar 2006 Mar 2008 - Jun 2008 Jan 2009 - Jun 2009 Sep 2010 - Dec 2010 May - Present Bond yield increase (% pts) 2.0 0.7 0.6 1.1 1.9 1.2 0.7 0.5 FSTREI Chg 21% 11% 17% 3% 3% 27% 2% -10% MSCI Sg 35% -3% 4% 18% 5% 39% 7% -5% Outperforma nce (%) -14% 14% 13% -15% -1% -13% -5% -5%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
SOURCES: CIMB, BLOOMBERG

SOURCES: CIMB, BLOOMBERG

Figure 12: US 10Y Bond yields previously near historical low


US 10Y Bond yields (%) 16

Figure 13: US REITs typically underperform as interest rates rise


Time period Mar 1986 - Oct 1987 Jun 1989 - Apr 1990 Jan 1994 - Sep 1994 Sep 1998 - Dec 1999 May 2003 - May 2004 Dec 2008 - May 2009 Aug 2010 - Dec 2010 Bond yield increase (% pts) 2.6 0.9 2.0 2.3 1.5 1.4 1.0 NAREIT TR Chg (%) 20% -2% 5% -10% 14% 15% 9% MSCI US 25% 2% -3% 51% 17% 17% 18% Outperformance (%) -6% -4% 8% -61% -4% -2% -9%

14
12 10 8 6 4 2 0 1972 1977 1982 1987 1992 1997 2002 2007 2012

SOURCES: CIMB, BLOOMBERG

SOURCES: CIMB, BLOOMBERG

3.3 Is it time to bottom-fish?


The sector is trading at 1.1x P/BV and forward yields of 6.6%. Predicting where long bond yields will head could be challenging at this moment. But using a 3% SG long bond yield based on its simple historical average, we note the following historical trends for the trading of S-REITs. The sector trades at a long-term mean yield of 6.7% (6.3% ex-crisis) Between 2010 and Mar 2011 (which we deem as normalised levels for sector post-GFC and before the recent yield compression), S-REITs yields ranged from 5.8% to 7.0%, translating into an average of 6.3% against average bond yields of 2.5% during the period and spreads of 390bp (rounding difference). Spreads can narrow as bond yields rise. Spreads trended around below the long-term mean at 300bp (to potentially price in stronger growth) during past periods when bond yields were near 3%. This implied forward yields of 6.1-6.2% for the sector. Higher spreads tend to precede periods of bond yield increases. We note an average spread of 422bp before periods of bond yield increases from

REIT
June 26, 2013

average levels of about 2.4%, translating into an overall sector yield of about 6.7%.

Figure 14: Forward dividend yield


% 10.0 9.0 8.0 7.0 6.0 Mean: 6.7%

+1s.d: 8.4%

Ex-crisis mean: 6.3 -1s.s.: 4.9%

5.0
4.0 2003

2004

2005 Forward yield

2006

2007 Mean

2008 +1SD

2009

2010 -1SD

2011

2012

2013

Ex-crisis mean
SOURCES: CIMB, BLOOMBERG

Figure 15: Average bond yields and spreads through history Spreads can compress as yields rise
REITS' spreads against 10Y bond yields (%) 7.7 4.6 3.7 2.7 2.4 2.2 2.4 2.3 1.8 2.1 3.1 5.4 8.8 4.7 3.9 4.0 3.8 5.0 5.8 5.0 4.3 3.8 3.0 3.0 4.2

1H2003 2H2003 1H2004 2H2004 1H2005 2H2005 1H2006 2H2006 1H2007 2H2007 1H2008 2H2008 1H2009 2H2009 1H2010 2H2010 1H2011 2H2011 1H2012 2H2012 1H2013 6/25/2013 When bond yields are near 3% When bond near 3%, strip out 2007-8 When bond yields are increasing

10Y Bond yields (%) 2.2 3.6 3.3 3.2 2.9 2.9 3.4 3.3 2.9 2.8 2.5 3.0 2.1 2.5 2.7 2.2 2.5 1.8 1.6 1.4 1.4 2.8 3.1 3.2 2.4

REITs' forward yields (%) 9.9 8.2 7.0 5.9 5.3 5.1 5.8 5.7 4.7 4.9 5.6 8.5 10.9 7.2 6.6 6.1 6.3 6.8 7.4 6.4 5.7 6.6 6.1 6.2 6.7

GDP Growth (%) 4.6 9.2 7.4 8.8 8.9 1.7 -1.0 14.8 4.9 2.1 2.9

2H03-2H08; 1H10 2H03-2H06; 1H10 1H03, 2H05, 1H08, 2H10


SOURCES: CIMB, BLOOMBERG

Some more downside; but sector is close to being fairly valued. Based on the above, assuming a 10-year bond yield of 3% (historical average) and that yield spreads remain around 390-422bp (in between mean levels and periods of rising interest rates), we estimate that SREITs could still have another 30-60bp of yield expansion to go, implying sector yields of about 6.9-7.2% or 6-11% share price downside. We are thus nearing a turning point, albeit still not at levels where the sector is outright cheap.
8

REIT
June 26, 2013

This is particularly so, considering the backdrop of rising bond yields over the longer run from current record-low levels, regardless of when the QE actually tapers off. More recently, in the Jun FOMC meeting, Bernanke, in fact, noted that it will start cutting back on QE later this year and may stop it entirely by mid-2014 if the economy continues to improve and the unemployment rate falls to 7% by mid-2014.

3.4 What are the risks to our views?


Worth noting is that the gradual end to QE is not the same as tightening in the presence of still-weak growth, low inflation risks and ample liquidity. A strengthening US economy is likewise not the same as economic growth in Asia where selected economies such as India, China, S.Korea and Singapore are navigating structural changes. The recent selldown of bonds/yield stocks may therefore, not yet kick-start a bullish cyclical rotation trade and it may be too early to fully abandon yields. Upside could prevail if 1) bond yields start turning lower, 2) earnings and economic data disappointment fuels a return of risk-aversion and yield trades and 3) flush liquidity prompts fund flows back into bonds and yield stocks. In particular, we note that the recent round of yield curve steepening has already taken local 10-year bond yields to about 2.8%, implying a spread of about 240bp against the current 3-month SIBOR and 2-year bond yields. These are already near previous peaks, implying potentially some form of cap on 10-year bond yields in the near term, with the short-term rates continuing to be anchored by the Fed.

Figure 16: Indication of steepness of yield curve (10yr bond yield- 3M SIBOR)
% 4.0 3.5 3.1% 10yr bond yield - 3MSIBOR 3.3% 2.5% 3MSIBOR

Figure 17: Indication of steepness of yield curve (10yr bond yield- 2yr bond yield)
% 3.5 3.0 2.7% 10yr- 3MSIBOR 2yr bond yield

2.7%

3.0
2.5 2.0 1.5 1.0

2.3%

2.5

2.4%

2.4%
2.3%

2.4%

2.4%
2.0
1.5 1.0

0.5
0.0

0.5

Aug-2011

Aug-1999

Aug-2001

Aug-2003

Aug-2005

Aug-2007

Aug-2009

0.0

Aug-2007

Aug-1999

Aug-2001

Aug-2003

Aug-2005

Aug-2009

-0.5 -1.0

SOURCES: CIMB, BLOOMBERG

SOURCES: CIMB, BLOOMBERG

Conversely, we believe that the sector could see a further leg down on a sharper and faster-than-expected spike in bond yields or underperform cyclical stocks on stronger-than-expected economic growth.

Aug-2011

REIT
June 26, 2013

4. IMPACT ON CAP RATES 4.1 Are book values of REITs safe?


Cap rates and, in turn, capital values are a function of risk-free rates, real estate risk premium and expected growth in future cash flows. With bond yields on the rise, a natural extension of this would be concerns over book values. The supposed positive correlation between SG long-bond yields and commercial property market yields has been patchy in the last 20 years. A strong relationship was seen in the 1990s but this broke down in the 1999-2003 and 2008-2009 downcycles when falling interest rates coincided with rising cap rates. Since QE began in 2009, the positive relationship between bond yields and cap rates returned (lower yields and lower cap rates). Directionally, we believe that cap rates should head up as interest rates begin to rise at some point.
Figure 18: SG10Yr bond yields vs. office rental yields Figure 19: SG10Yr bond yields vs. retail mall yields (prime floors)
8% 7% 4% 6% 5% 3% 4% 3% 2% 2% 2% 1% 1% 0% 1% 5.0% 4.8% 4.6% 4.4% 3% 4%

5%

Title: Source:

5.8% 5.6% 5.4% 5.2%

Please fill in the values above to have them entered in your rep

19 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 1 20 0 1 2 1 C 012 ur re nt

MASB10Y Index (LHS)

Average prime yields (RHS)

SOURCES: CIMB, JLL, BLOOMBERG

A study of office cap values and bond yields. The average office cap rates for Grade A buildings have compressed to c.3.75%, below its historical average of 4.2%. The average spread between commercial yields vs. SG10Yr yields is around 1.6% on a 20-year horizon. Yield spreads (excluding the GFC period of 2H08-1H09) averaged around 1.45% in the last 10 years. With the c.140bp rise in SG long bond yields (to c.280bp) over the past two months, the spread has narrowed from 245bp to 95bp below the historical mean. The 20-year average of the SG long bond yield is around 270bp, at current levels. Simplistically, a mean reversion in yield spreads should imply a c.100bp expansion in commercial cap rates or a c.18-20% downside in capital values.

10

1Q 0 3Q 2 0 1Q 2 0 3Q 3 0 1Q 3 0 3Q 4 0 1Q 4 0 3Q 5 0 1Q 5 0 3Q 6 0 1Q 6 0 3Q 7 0 1Q 7 0 3Q 8 0 1Q 8 0 3Q 9 0 1Q 9 1 3Q 0 1 1Q 0 1 3Q 1 1 1Q 1 1 3Q 2 1 1Q 2 13
MASB10Y Index Retail (Prime)

SOURCES: CIMB, JLL

REIT
June 26, 2013

Figure 20: Office rental yield spreads against 10-year bond yields
6% 5% 4% 2,000 3% 1,500 2% 3,000

Figure 21: Retail rental spread against SG10Yr bond yields

4%

Title: Source:

2,500 3% Average spreads (ex GFC period), 2.70% 2%

Please fill in the values above to have them entered in your rep

1% 0%

1,000

500 1%

1Q 0 3Q 2 0 1Q 2 3Q03 0 1Q 3 0 3Q 4 0 1Q 4 3Q05 0 1Q 5 0 3Q 6 0 1Q 6 3Q07 0 1Q 7 0 3Q 8 0 1Q 8 3Q09 0 1Q 9 1 3Q 0 1Q10 1 3Q 1 1 1Q 1 1 3Q 2 1Q12 13

Grade A cap values Office market yields vs SG10yr yield spread Average spreads (ex GFC period)

SOURCES: CIMB, BLOOMBERG, JLL

The trend analysis above assumes mean reversion and ignores the cyclicality of the office sector. Average yield spreads during downcycles range from 2.5-4% (low interest rates but higher cap rates) and 0.2-1.5% during upcycles (high interest rates but lower cap rates). During periods of bottoming for the office sector, physical yield spreads typically ranged between 1.3 and 1.6% (1993-1995, 2004-2006 and 2009-2010) before narrowing further. We believe that the key drivers of the magnitude of cap rate expansion are ultimately rental growth potential and vacancy, rather than bond yields alone. We note historically a 0.9 positive correlation between office capital values and rents and a 0.9 negative correlation vs. vacancy rates. The relationship of interest rates and capital values has meanwhile not been as strong. Valuers cap rates more conservative than transacted. We also highlight the gap between cap rates used by valuers and transacted cap rates. We note that cap rates used by valuers have generally been more conservative. This probably translated into the NAV premiums that REITs of some subsectors trade at, other than office where expectations are perhaps more muted and cap rates in book values are arguably closest to transacted cap rates due to the higher level of trading activities. The gap in cap rates could provide some buffer to book values (for retail, industrial and hospitality) even if bond yields rise, in our view.

4.2 Transacted cap rates could expand


We expect transacted cap rates to expand as prospective buyers and sellers moderate their pricing expectations of assets. With NAV premiums/discounts bridging the gap between book values and transacted capital values, we believe that REITs had pulled back recently to factor in the expected expansion in transacted cap rates. As a gauge, we compared each REITs implied NPI yields to the cap rates of key assets. Office and hospitality are the two main subsectors where implied NPI yields are trending near or above cap rates (by 50-80bp) while implied NPI yields of retail and industrial REITs are below physical cap rates (by 30-35bp), justified perhaps by the more conservative cap rates used by valuers here (vs. transacted cap rates) and defensive + steady growth traits valued in the current climate. For REITs where implied NPI yields are below physical cap rates, we continue to argue for selectivity and some premium to be attached to i) subsectors like retail where barriers are higher and professional management more critical, ii) leaders in respective sub-sectors like AREIT (business parks) and CMT (retail malls) for professional management and strong tenant bases and iii) those with stronger capital management capabilities.

11

1Q 0 3Q 2 0 1Q 2 0 3Q 3 0 1Q 3 0 3Q 4 0 1Q 4 0 3Q 5 0 1Q 5 0 3Q 6 0 1Q 6 0 3Q 7 0 1Q 7 0 3Q 8 0 1Q 8 0 3Q 9 0 1Q 9 1 3Q 0 1 1Q 0 1 3Q 1 1 1Q 1 1 3Q 2 1 1Q 2 13
Retail rental yields vs SG10yr yield spread Average spreads (ex GFC period)

SOURCES: CIMB, BLOOMBERG, JLL

REIT
June 26, 2013

Figure 22: Implied NPI yields


Implied NPI yield Industrial Ascendas REIT Cache Logistics Trust Cambridge Industrial Trust Mapletree Logistics Trust Mapletree Industrial Trust Retail CapitaMall Trust Frasers Centrepoint Trust Mapletree Commercial Trust Starhill Global REIT Office Capitacommercial Trust Keppel REIT Suntec REIT Frasers Commercial Trust Hospitality Ascott Residence Trust CDL Hospitality Trust Healthcare Parkway Life REIT CY14 (w/o income support) 6.1% 6.8% 7.8% 6.5% 6.4% CY14 (with income support) Cap rates (%)

Weighted ave: 6.6%; Biz/ sci parks: 6.1% 6.5-7.25% Local: 5.5-7.5%, Remaining: 5-12% dep. on country Flatted factories: 7-7.6%

5.3% 5.5% 4.9% 7.0%

Suburban retail: 5.5-5.65% 5.5-5.65% Retail: 5.0-5.3%; Office: 4.3-4.5% Local: 4.25-5.25%

4.8% 4.5% 4.4% 6.6%

5.3% 4.7%

Office: 4-4.5% Office: ~4% for local assets Office: 4.0-4.6%; Retail: 5.5-5.6% Local/ Aus office: 4%/ 7.5-8%

6.6% 6.8%

Europe: ~6%; Sg: 4-4.5% Local: >6%

5.2%

Sg: 5.75-6.25%; JP: 6-8%


SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

Figure 23: Implied cap rates have broadly tracked property yields
6.5%
6.0% 5.5%

Figure 24: but appear to have moved more in tandem with bond yields over the past year
4.0%
3.5% 3.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Implied cap rate (CMT) Prime retail physical yield

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%

5.0%
4.5% 4.0%

2.5%
2.0% 1.5%

3.5%
3.0% 2.5% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Implied cap rate (CCT) Prime office physical yield

1.0%
0.5% 0.0%

10y bond yields (RHS)

10y bond yields (RHS)

SOURCES: CIMB, BLOOMBERG, JLL

SOURCES: CIMB, BLOOMBERG, JLL

12

REIT
June 26, 2013

5. IMPACT ON BORROWING COSTS 5.1 More prepared this time round


As leveraged instruments, a spike in interest rates could result in a higher borrowing cost for REITs with lumpier refinancing, higher percentage of loans on floating rates and asset leverage. That said, we believe SREITs are generally more prepared for any potential spike in borrowing costs and pullback in liquidity after the 2009 global financial crisis. We note a fairly healthy asset leverage of 34% for the sector (with only KREIT and MCT having asset leverage surpassing 40%) and a fairly well-staggered debt maturity of 30% and below each year. Excluding refinancing, we expect the DPU impact from a 50bp increase in interest costs to be fairly modest at -1.2% on average for the sector. With interest rates potentially on the rise, we expect more REITs to proactively stagger lumpy debt expiries while increasing interest rate hedges to lock in interest rates.
Figure 25: Debt maturity fairly well-staggered
Debt maturity (% of debt) Parkway Life REIT Ascott Residence Trust CDL Hospitality Trust Far East Hospitality Trust Ascendas Reit Cache Logistics Trust Cambridge Industrial Trust Mapletree Logistics Trust Mapletree Industrial Trust Fraser Commercial Trust CapitaCommercial Trust Keppel REIT Suntec REIT CapitaMall Trust Frasers Centrepoint Trust Starhill Global REIT PREIT SP ART SP CDREIT SP FEHT SP AREIT SP CACHE SP CREIT SP MLT SP MINT SP FCOT SP CCT SP KREIT SP SUN SP CT SP FCT SP SGREIT SP Simple average: 2013 0% 7% 32% 0% 6% 0% 0% 0% 0% 0% 2% 0% 15% 3% 0% 0% 0% 4% 2014 33% 27% 26% 0% 20% 0% 62% 20% 20% 18% 14% 25% 29% 15% 10% 0% 21% 20% 2015 41% 33% 29% 46% 16% 60% 16% 7% 33% 56% 30% 29% 25% 23% 16% 28% 21% 30% 2016 17% 21% 13% 0% 13% 40% 22% 8% 12% 0% 38% 16% 14% 18% 45% 24% 22% 19% 2017 9% 12% 0% 38% 19% 0% 0% 12% 13% 26% 8% 21% 7% 7% 17% 9% 21% 13% >2018 0% 0% 0% 15% 25% 0% 0% 53% 21% 0% 7% 9% 10% 33% 12% 39% 14% 14%

Mapletree Commercial Trust MCT SP

SOURCES: CIMB, COMPANY REPORTS

5.2 Which are more and less vulnerable?


Taking into consideration asset leverage, percentage of loans on fixed rates and average length of debt maturity, we find that office REITs such as Suntec, KREIT and CDREIT are more exposed. Suntec and KREIT both have higher asset leverage and exposure to floating-rate loans, which could result in higher borrowing costs when rates rise. Suntec also has a shorter weighted average length of debt maturity. Worth noting however is Suntecs and KREITs exposure to a cyclical office sector where sensitivity of rents to economic improvements could provide buffers for interest rate increases. Both could also increase their loan hedges should signs of interest rate increases become more concrete. ART meanwhile has a higher gearing of 40-41% after the recent round of acquisition in China and Japan, a fairly low portion of fixed-rate loans at 66% of total borrowings (+4% of borrowings on floating with interest rate caps) and a short average time to debt maturity of 2.7 years before the incorporation of loans from the recent acquisitions. Nonetheless, we understand that management is proactively looking at increasing its interest rate hedges and terming out debt maturity, which could help to strengthen its balance sheet. On the other hand, we find AREIT, FCT and CMT least exposed given their lower asset leverage and high exposure to fixed rate loans. AREIT and CMT also have among the longest time to debt maturity within the sector, probably due to their ability to secure such loans with their size, track record and quality portfolio.

13

REIT
June 26, 2013

Figure 26: SREITs borrowings as at Mar 2013 or latest available update


Debt maturity (S$m) Bloomberg Ticker PREIT SP ART SP CDREIT SP FEHT SP AREIT SP CACHE SP CREIT SP MLT SP MINT SP FCOT SP CCT SP KREIT SP SUN SP CT SP FCT SP SGREIT SP MCT SP TOTAL 2013 0 69 200 0 125 0 0 0 0 0 50 0 400 107 0 0 0 952 2014 151 272 161 0 395 0 278 287 206 128 300 723 770 500 60 0 339 4,569 2015 188 338 181 300 314 188 71 100 344 405 644 844 680 800 95 256 339 6,085 2016 77 212 84 0 260 126 100 115 126 0 796 447 370 624 264 219 354 4,173 2017 42 125 0 250 375 0 0 172 139 185 175 599 200 250 100 82 329 3,023 >2018 0 0 0 100 502 0 0 760 220 0 148 265 280 1,143 70 350 230 4,068 Total (S$m) 457 1,015 626 650 1,971 313 449 1,434 1,035 718 2,113 2,878 2,700 3,424 589 907 1,591 22,869 Gearing ratio 31.6% 41.2% 28.3% 29.3% 28.3% 29.2% 35.3% 34.1% 34.8% 38.6% 30.4% 43.3% 38.6% 35.2% 30.5% 31.7% 40.9% 34.2% Fixed (% of total debt) 85.0% 66.0% 50.0% 54.0% 74.8% 70.0% 82.4% 70.0% 88.0% 63.0% 78.0% 60.0% 60.0% 94.0% 94.0% 81.0% 74.5% 73.2% Ave cost of debt 1.5% 3.1% 2.5% 2.3% 3.3% 3.5% 4.1% 2.4% 2.4% 3.2% 3.0% 2.2% 2.8% 3.3% 2.7% 3.1% 2.2% 2.8% Ave debt Interest cov maturity (yrs) ratio (x) 2.3 9.9 2.7 3.7 2.0 9.7 3.8 8.4 3.9 4.9 2.6 6.0 1.7 4.8 3.9 6.6 2.7 6.6 2.7 4.6 3.0 4.7 3.2 4.8 2.3 3.5 4.0 4.3 3.4 6.2 3.5 5.8 3.3 5.4 3.0 5.9

SOURCES: CIMB, COMPANY REPORTS

Figure 27: Scoring by exposure of REITs to rising interest rates (combined view of leverage, borrowings hedged and length of debt maturity (to update)
40 35 30 25

Less exposed

20
15 10 5 0

More exposed

SOURCES: CIMB, COMPANY REPORTS

We measure sensitivity of REITs to a 50bp increase in interest costs. Excluding refinancing, REITs which are most exposed to a 50bp increase in interest costs include Suntec, KREIT and FCOT. FCT, CMT and MINT are among the least exposed.

14

REIT
June 26, 2013

Figure 28: Impact of a 50bps increase in interest cost (taking into consideration exposure to floating debt)
Bloomberg Fixed (% of total Current cost of Impact of a 50bps increase in Ticker Gearing ratio debt) borrowing interest cost on (t+1) DPU PREIT 32% 85% 1.5% -0.6% ART 41% 66% 3.1% -1.6% CDREIT 28% 50% 2.5% -1.2% AREIT 28% 75% 2.3% -0.9% CACHE 29% 70% 3.3% -0.8% CREIT 35% 82% 3.5% -0.9% MLT 34% 70% 4.1% -1.3% MINT 35% 88% 2.4% -0.5% FCOT 39% 63% 2.4% -2.3% CCT 30% 78% 3.2% -1.0% KREIT 43% 60% 3.0% -2.4% SUN 39% 60% 2.2% -2.9% CMT 35% 94% 2.8% -0.3% FCT 31% 94% 3.3% -0.2% SGREIT 32% 81% 2.7% -0.7% MCT 41% 75% 3.1% -1.5% TOTAL 34% 72% 2.8% -1.2%
SOURCES: CIMB, COMPANY REPORTS

6. SEEKING GROWTH VISIBILITY AND STRONG FINANCES 6.1 DPU growth


The recent selldown is akin to the bursting of the yield bubble and a lesson on the importance of fundamentals for market participants. We continue to advise investors to keep an eye on growth, particularly organic growth rather than inorganic growth where accretion could be affected by rising funding costs (both debt and equity) and asset values are likely to still be supported by competition for assets. REITs with higher DPU growth include FCOT, CMT and Plife.
Figure 29: 3-year DPU CAGR (%)
3yr DPU CAGR (%) Industrial Ascendas REIT Cache Logistics Trust Cambridge Industrial Trust Mapletree Logistics Trust Mapletree Industrial Trust Retail CapitaMall Trust Frasers Centrepoint Trust Mapletree Commercial Trust Starhill Global REIT Office Capitacommercial Trust Keppel REIT Suntec REIT Frasers Commercial Trust Hospitality Ascott Residence Trust CDL Hospitality Trust Healthcare Parkway Life REIT 4.3% 2.4% 4.3% 3.0% 2.8% 3.4% 5.8% 3.5% 3.3% 4.5% 4.3% 3.5% -0.6% 4.5% 12.7% 5.0% 1.3% 2.2% 2.9% 4.8% 3.3% Sources of growth AEIs/ developments coming on stream; positive rental reversions Rental step-ups, factored in further S$65m of acquisitions S$100m of devt works factored in over FY13-4 S$150m of debt-funded acquisitions factored in for FY14 Positive rental reversions and development projects coming on stream

AEI fruition, full-year impact of previous years' AEIs, Westgate coming on stream Positive rental reversions, particularly Causeway Pt and NorthPt Positive rental reversions at VivoCity and Mapletree Anson Toshin lease rental uplift, rental step-ups at Msian assets & positive rental reversions

Market street carpark development coming on stream in FY15; flattish in the interim Marginal growth near-term eroded by expiring income support Asset enhancements at Suntec City Mall CPPU redemption, ongoing leasing at China Sq, expiry of master lease at

Acquisition accretion for recent S$300m acquisition; further S$80m priced in for FY13 Maldives acqn and Orchard Hotel AEI, offseting near-term decline in revPARs

CPI-pegged rental uplifts; S$130m of Jap/ Msian acquisitions factored in


SOURCES: CIMB, COMPANY REPORTS

15

REIT
June 26, 2013

6.2 Strong balance sheet


While our conversations with some REITs indicate that bank borrowing rates have yet to spike, rates are expected to rise over the longer term. We, therefore, prefer REITs with stronger balance sheets and lower asset leverage. On top of reduced exposure to borrowing rate spikes, the latter should provide more room for REITs to draw on cheaper debt for inorganic growth, vis--vis equity which has turned more expensive after this recent round of selldown.
Figure 30: Asset leverage
Asset leverage 45% 43% 41% 39% 37% 35% 33% 39% 39% 35% 35% 35% 41% 41% 43%

34% 30% 31%


32% 32%

31% 29% 27% 25%


28% 28%

29% 29%

SOURCES: CIMB, COMPANY REPORTS

7. VALUATION AND RECOMMENDATION 7.1 Maintain Neutral


The sector is trading at 1.1x P/BV and forward yields of 6.6%. These are close to the levels of 6.9-7.2% (spreads of 390-422bp or spreads in between mean levels and periods of rising interest rates) where we think the sector could trade at should bond yields head to the historical average of 3.0%. The sector thus appears to be nearing a turning point, albeit not yet at levels where it is outright cheap. We find it hard to be fundamentally positive on REITs. As both yield and leveraged instruments, what were previously tailwinds have morphed into headwinds. A rising rate environment will reduce the attractiveness of REITs, limit cap rate compression and push borrowing costs higher, all of which are negatives for SREITs. Bond yields may not rise in a straight line (as we noted above, the yield curve has steepened to levels where spreads between long and short bond yields are near previous peaks), but the direction is a one-way bet. The only redeeming factor in a rising rate environment is DPU growth but we see significant upside hindered in the near term by restructuring pressures locally and a weak China outlook (for REITs that are less domestically-inclined). Add to that a weakening S$, we see little reason to be positive.

16

REIT
June 26, 2013

7.2 Pricing in higher bond yields


Pricing in a normalisation of valuations and bond yields, we now value REITs by using the five-year average of our in-house risk-free and market risk-premiums, translating into an 80bp increase in the overall market cost of equity from 7.3% to 8.1% (for beta of 1x). With an eye on both growth and strong balance sheet as well as more palatable valuations for some after the recent selldown, we upgrade Suntec REIT to Outperform from Neutral; and CCT, CMT and CDLHT from Underperform to Neutral. Our top picks are AREIT (attractive valuations at 1.1x P/BV vs. historical 1.4x for quality portfolio, strong management, safe balance sheet), Suntec (P/BV of 0.7x among the lowest within whole sector; risk-reward attractive for a play on potential turnaround of Suntec City Mall) and FCT (resilient suburban retail exposure and balance sheet; with upside from acquisition of Changi City Point). We detail changes in discount rates and target prices below.
Figure 31: Changes in discount rate, target price and recommendation
SREIT Hospitality Ascott Residence Trust CDL Hospitality Trust Bloomberg Ticker ART SP CDREIT SP Simple Average Price $1.23 $1.66 Risk-free 3.7% 3.7% Risk premium 4.4% 4.4% Beta 1.10 1.15 Cost of New Target equity Price 8.5% $ 8.8% $ 1.30 1.71 $ $ Old Target Price 1.40 1.94 Implied CY14 yield 6.9% 6.8% Implied Change in Recommen P/BV recommendation dation 1.0 1.1 N N

Upgrade

Industrial Ascendas Reit AREIT SP Cache Logistics Trust CACHE SP Cambridge Industrial Trust CREIT SP Mapletree Logistics Trust MLT SP Mapletree Industrial Trust MINT SP Simple Average Office Frasers Commercial Trust FCOT SP CapitaCommercial Trust CCT SP Keppel REIT KREIT SP Suntec REIT SUN SP Simple Average Retail CapitaMall Trust CT SP Frasers Centrepoint Trust FCT SP Starhill Global REIT SGREIT SP Mapletree Commercial Trust MCT SP Simple Average Healthcare Parkway Life REIT PREIT SP

$2.13 $1.19 $0.69 $1.04 $1.30

3.7% 3.7% 3.7% 3.7% 3.7%

4.4% 4.4% 4.4% 4.4% 4.4%

0.80 0.95 1.05 1.00 1.00

7.2% 7.9% 8.3% 8.1% 8.1%

$ $ $ $ $

2.50 1.31 0.76 1.08 1.41

$ $ $ $ $

3.05 1.50 0.87 1.33 1.62

6.1% 6.8% 7.1% 6.7% 6.7%

1.3 1.3 1.2 1.2 1.3

O O O N N

$1.33 $1.42 $1.27 $1.49

3.7% 3.7% 3.7% 3.7%

4.4% 4.4% 4.4% 4.4%

1.05 0.95 1.05 1.05

8.3% 7.9% 8.3% 8.3%

$ $ $ $

1.47 1.51 1.29 1.68

$ $ $ $

1.65 1.69 1.45 1.96

6.2% 5.3% 6.1% 5.7%

1.0 0.9 1.0 0.8

Upgrade Upgrade

O N N O

$1.91 $1.84 $0.81 $1.12

3.7% 3.7% 3.7% 3.7%

4.4% 4.4% 4.4% 4.4%

0.80 0.85 1.00 0.95

7.2% 7.4% 8.1% 7.9%

$ $ $ $

2.06 2.02 0.86 1.22

$ $ $ $

2.23 2.31 0.93 1.47

5.2% 5.4% 6.2% 5.5%

1.3 1.3 0.9 1.2

Upgrade

N O N N

$2.27

3.7%

4.4%

0.75

7.0% $

2.33

2.72

4.9%

1.5

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

17

REIT | Singapore
June 26, 2013

Ascendas REIT
AREIT SP / AEMN.SI Current S$2.13 S$2.50 S$3.05 17.5%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$4,032m
S$5,114m

US$20.38m
S$25.46m

83.0%
2,399 m shares

CIMB Analyst(s)

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Opportunities to accumulate a quality stock


Share price has corrected alongside the sector. At 1.1x P/BV against its historical average of 1.4x since listing, we see opportunities to accumulate AREIT, a quality holding, in our view, given its prudent management and quality assets.

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Ascendas Funds Mgt CBRE ING 1M -8.6 -17.5 3M -11.7 -17.1 12M -7.9 1.9 % held 17.0 5.0 4.5

We lower our FY14-15 DPU by 1% for marginal adjustments in borrowing costs. We lower our DDM-based target price, now based on a higher discount rate of 7.2% (previously 6.4%; raised across the board following higher bond yields). Maintain Outperform with catalysts expected from accretive AEI and asset developments.

Strong capital management


Asset leverage of 28% (or 30% factoring in committed investments) is among the lowest in the sector. With management traditionally prudent in staggering debt maturities and diversifying borrowings and its strong parentage, we expect AREIT to be among those more immune to any spikes in borrowing costs.

Steady growth
We expect steady DPU growth from positive rental reversions and past investments coming on stream. With current market rents at 9-35% higher than passing rents due for renewal in FY13/14 and room for uplift from the conversion of single-tenanted buildings, we expect double-digit positive rental reversions to continue. A series of past developments and asset enhancement should also bear fruit in FY13, potentially boosting DPU growth over FY14.

Opportunities to accumulate a quality stock


At 1.1x P/BV, we see opportunities to accumulate AREIT, a quality holding given its prudent management and quality assets (in the business-park space, which we deem among those assets best-positioned to meet long-term structural challenges in industrial space). Its low asset leverage should leave room for acquisitions/ developments on a potential correction in pricing expectations by prospective buyers.

Price Close 3.0 2.8

Relative to FSSTI (RHS) 121 118 114 111 107 104 100 97 93 90 86

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Mar-12A 503.3 368.3 494.1 281.7 0.14 11.5% 15.33 0.14 6.37% 36.5% 1.88 1.13 7.62% Mar-13A 575.8 408.8 301.0 304.6 0.12 (12.8%) 17.58 0.14 6.45% 28.4% 1.94 1.10 6.33% Mar-14F 630.0 441.0 334.7 341.8 0.14 15.0% 15.28 0.14 6.67% 31.2% 1.94 1.10 7.19% (0.329%) 1.00 Mar-15F 685.9 487.0 360.7 368.3 0.15 7.5% 14.22 0.15 7.17% 35.8% 1.93 1.10 7.76% (0.376%) 1.01 Mar-16F 695.6 493.9 367.5 375.1 0.15 1.6% 13.99 0.16 7.29% 35.8% 1.92 1.11 7.92% (0.369%) 0.96

2.6
2.4

2.2
40 2.0 30 20 10
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

52-week share price range


2.13
2.09 2.86

Vol m

2.50
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Ascendas REIT
June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Mar-13A 575.8 0.0 575.8 (167.0) 408.8 0.0 (33.2) (4.9) 0.0 370.7 0.0 370.7 (98.7) 0.0 0.0 29.8 301.8 (0.9) 0.0 0.0 301.0 304.6 Mar-14F 630.0 0.0 630.0 (189.0) 441.0 0.0 (35.4) (5.2) 0.0 400.5 0.0 400.5 (65.8) 0.0 0.0 0.0 334.7 0.0 0.0 0.0 334.7 341.8 Mar-15F 685.9 0.0 685.9 (198.9) 487.0 0.0 (38.0) (5.5) 0.0 443.5 0.0 443.5 (82.7) 0.0 0.0 0.0 360.7 0.0 0.0 0.0 360.7 368.3 Mar-16F 695.6 0.0 695.6 (201.7) 493.9 0.0 (38.1) (5.6) 0.0 450.2 0.0 450.2 (82.7) 0.0 0.0 0.0 367.5 0.0 0.0 0.0 367.5 375.1

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Mar-13A 6,447 0 407 6,854 20 0 47 38 105 135 235 71 441 1,744 113 1,857 4,661 0 4,661 Mar-14F 6,857 0 296 7,153 2 0 47 38 87 135 235 71 441 2,025 113 2,138 4,654 0 4,654 Mar-15F 7,360 0 300 7,660 17 0 47 38 102 135 235 71 441 2,547 113 2,660 4,646 0 4,646 Mar-16F 7,382 0 278 7,660 17 0 47 38 102 135 235 71 441 2,547 113 2,660 4,639 0 4,639

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Mar-13A 301.8 98.7 4.2 (0.5) (29.8) 374.5 (113.9) (149.7) 0.0 (263.6) (430.1) 697.6 (309.4) (69.8) (111.7) (0.9) 118.5 (387.3) Mar-14F 334.7 65.8 0.0 0.0 7.5 408.0 (69.4) (168.4) 0.0 (237.8) 280.4 0.0 (341.8) (126.7) (188.1) (17.9) 177.8 384.8 Mar-15F 360.7 82.7 0.0 0.0 7.8 451.3 (17.5) (490.0) 0.0 (507.5) 522.5 0.0 (368.3) (82.7) 71.4 15.2 (48.5) 383.6 Mar-16F 367.5 82.7 0.0 0.0 7.8 458.0 0.0 0.0 0.0 0.0 0.0 0.0 (375.1) (82.7) (457.9) 0.1 465.7 375.3

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Mar-13A 14.4% 11.0% 71.0% 1.33% 3.00 0.285% 101% 0.24 0.24 0.044 188% 4.45% Mar-14F 9.4% 7.9% 70.0% 3.45% 5.45 0.000% 102% 0.20 0.20 0.004 140% 4.71% Mar-15F 8.9% 10.4% 71.0% 7.49% 4.90 0.000% 102% 0.23 0.23 0.038 253% 4.81% Mar-16F 1.4% 1.4% 71.0% 1.59% 4.98 0.000% 102% 0.23 0.23 0.039 251% 4.73%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Mar-13A 2.2 N/A N/A N/A 95.0% 6,599.0 N/A Mar-14F 2.3 N/A N/A N/A 95.0% 6,897.7 N/A Mar-15F 2.3 N/A N/A N/A 95.0% 7,405.2 N/A Mar-16F 2.3 N/A N/A N/A 95.0% 7,405.2 N/A

SOURCE: CIMB, COMPANY REPORTS

19

REIT SINGAPORE
June 26, 2013

Ascott Residence Trust


ART SP / ASRT.SI Current S$1.23 S$1.30 S$1.40 6.1%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,218m
S$1,545m

US$1.94m
S$2.43m

41.0%
1,143 m shares

CIMB Analyst(s)

Lacking compelling catalysts


Valuations are not overly undemanding at 0.9x P/BV, with headline yields of 7% fairly attractive. However, we see no compelling catalysts as the macro outlook affecting travel remains uncertain and a higher asset leverage is likely to inhibit accretive acquisitions.
We keep our DPUs but lower our DDM-based target price on a higher discount rate of 8.5% (previously 7.8%; raised across the board following high bond yields). Maintain Neutral.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders CapitaLand 1M -5.1 -14 3M -4.2 -9.6 12M 4.2 14 % held 48.8

Not that immune to rate increases


Asset leverage is a fairly high 41% after ARTs recent round of acquisitions, albeit due to the need for natural hedging overseas. The percentage of borrowing hedged at fixed rates at 66% is lower than some SREIT peers but slightly above hospitality peers 50%. We estimate that a 50bp rise in interest rates could have a 1.6% impact on ARTs DPU.

Near-term pressures from costs and forex


We expect growth to be led by the completion of asset enhancement and its recently-completed S$287m acquisitions in China and Japan in 2013. Its recent round of acquisitions should increase ARTs exposure (by assets) to 63%, allowing it tap the long-term pick-up in intra-Asian travel and reduce its exposure to Europe where economic/business sentiment remains weak. Near-term, however, ART would still have to grapple with a slow pick-up in travel as economies remain uncertain, rising costs and forex risks from currency exposure in Japan (15% of assets) and emerging markets like Indonesia. We thus expect DPU to be rather flat over the next three years.

Lacking compelling catalysts


Valuations are not overly undemanding at 1x P/BV, with headline yields of 7% fairly attractive. However, we see no compelling catalysts as the macro outlook affecting travel remains uncertain and a higher asset leverage is likely to inhibit accretive acquisitions. Maintain Neutral.

Price Close 1.60 1.50 1.40 1.30 1.20 1.10 20 1.00 15 10 5


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 120 116 112 108 103 99 95

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 288.7 157.5 180.3 96.2 0.065 19.0% 18.99 0.085 6.95% 40.4% 1.36 0.90 4.89% Dec-12A 303.8 159.1 162.4 99.7 0.070 7.7% 17.63 0.088 7.15% 39.6% 1.35 0.90 5.12% Dec-13F 350.4 176.4 80.1 113.4 0.065 (6.0%) 18.75 0.090 7.38% 40.9% 1.37 0.90 4.80% 0% 0.86 Dec-14F 370.8 189.7 88.6 117.0 0.069 6.1% 17.67 0.090 7.34% 41.3% 1.29 0.95 5.21% 0% 0.87 Dec-15F 375.6 192.1 89.7 119.3 0.069 (0.9%) 17.83 0.091 7.44% 41.9% 1.27 0.97 5.37% 0% 0.85

Vol m

Mar-13

52-week share price range


1.23 1.09
1.50

1.30
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Ascott Residence Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 303.8 0.0 303.8 (144.7) 159.1 (3.7) (14.1) (0.3) 1.0 142.0 0.0 142.0 (40.3) 0.0 (10.3) 108.5 200.0 (27.4) (10.2) 0.0 162.4 99.7 Dec-13F 350.4 0.0 350.4 (174.0) 176.4 (4.2) (16.1) (0.4) (2.1) 153.6 0.0 153.6 (43.2) 0.0 0.0 2.3 112.7 (22.3) (10.2) 0.0 80.1 113.4 Dec-14F 370.8 0.0 370.8 (181.1) 189.7 (4.2) (16.1) (0.4) (2.3) 166.7 0.0 166.7 (44.0) 0.0 0.0 0.0 122.8 (24.0) (10.2) 0.0 88.6 117.0 Dec-15F 375.6 0.0 375.6 (183.5) 192.1 (4.2) (16.2) (0.4) (2.3) 169.1 0.0 169.1 (45.0) 0.0 0.0 0.0 124.1 (24.2) (10.2) 0.0 89.7 119.3

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 2,788 0 53 2,841 125 0 36 0 162 111 168 13 292 1,022 47 1,069 1,547 94 1,641 Dec-13F 3,176 0 62 3,238 93 0 36 0 130 111 285 13 409 1,094 47 1,141 1,714 104 1,817 Dec-14F 3,186 0 69 3,255 68 0 36 0 104 111 309 13 433 1,080 47 1,127 1,685 114 1,799 Dec-15F 3,196 0 76 3,271 52 0 36 0 88 111 309 13 433 1,099 47 1,146 1,656 124 1,780

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 200.0 50.6 (19.4) (20.6) (85.4) 125.2 (18.9) 32.4 (5.7) 7.8 0.1 0.0 (100.1) (46.8) (146.8) (13.8) 133.0 89.5 Dec-13F 112.7 43.2 0.0 (22.3) 22.5 156.1 (27.4) (380.0) 1.7 (405.7) 189.0 199.4 (113.4) (57.2) 217.8 (31.8) (249.6) (105.6) Dec-14F 122.8 44.0 0.0 (24.0) 23.9 166.6 (28.6) 0.0 1.3 (27.4) 9.5 0.0 (117.0) (57.5) (165.0) (25.8) 139.3 103.5 Dec-15F 124.1 44.9 0.0 (24.2) 25.0 169.9 (28.7) 0.0 0.9 (27.8) 19.5 0.0 (119.3) (58.2) (157.9) (15.8) 142.1 115.7

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 5.3% 1.1% 52.4% 2.9% 3.35 13.7% 61% 0.55 0.55 0.43 (304%) 5.39% Dec-13F 15.3% 10.8% 50.3% 3.2% 3.42 19.8% 141% 0.32 0.32 0.23 (348%) 2.52% Dec-14F 5.8% 7.6% 51.2% (0.5%) 3.69 19.5% 132% 0.24 0.24 0.16 (504%) 2.63% Dec-15F 1.3% 1.3% 51.1% 1.4% 3.68 19.5% 133% 0.20 0.20 0.12 (712%) 2.67%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A N/A N/A 238.0 N/A N/A 2,785.1 N/A Dec-13F N/A N/A 226.1 N/A N/A 3,173.5 N/A Dec-14F N/A N/A 237.4 N/A N/A 3,183.0 N/A Dec-15F N/A N/A 244.5 N/A N/A 3,192.6 N/A

SOURCE: CIMB, COMPANY REPORTS

21

REIT | Singapore
June 26, 2013

Cache Logistics Trust


CACHE SP / CALT.SI Current S$1.19 S$1.31 S$1.50 10.4%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$723.4m
S$917.5m

US$2.21m
S$2.76m

88.3%
702.4 m shares

CIMB Analyst(s)

Portfolio resilience
We continue to like Caches resilient portfolio, led by rental step-up for its master leases. Portfolio occupancy is a strong 100%. Low asset leverage of 29% leaves room for acquisition growth, which we consider to be its main catalyst.
We keep our DPUs but lower our DDM-based target price on a higher discount rate of 7.9% (previously 7.1%; raised across the board following higher bond yields). Our estimates assume S$120m of acquisitions for FY13. Maintain Outperform with accretive acquisitions as catalysts.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Strong debt profile


Asset leverage at 29% is a tad below the sector average of 34%, leaving debt headroom for acquisition growth. Debt maturities are also fairly well-staggered, with no re-financing requirements till 2015. With 70% of its borrowings hedged as fixed-rate debt, we estimate that a 50bp increase in interest rates could affect its DPU by 0.8%.

Share price info


Share price perf. (%) Relative Absolute Major shareholders CWT Ltd JP Morgan Bank of New York Mellon 1M -3 -11.9 3M -3.1 -8.5 12M 4.1 13.9 % held 8.9 7.7 6.6

Organic growth
We expect growth from locked-in annual rental escalations of 1.25-2.5% and acquisitions, which should mitigate the impact of any rising interest rates. Cache faces no lease-renewal risks in FY13, with the majority of its leases expiring only in FY15-16 and occupancy at 100%. We look forward to contributions from its most recent acquisition, Precise Two, in 2Q13. The property has been leased to Precise Development for six years (with an option for another six), and we expect locked-in rental step-up of 4.0% every two years to add to its organic growth and resilience.

Maintain Outperform
We continue to like Caches resilient portfolio, with built-in growth from rental step-up. On the other hand, locked-in step-up could limit its DPU growth when interest rates rise (vs. some other REITs where rentals could benefit from a pick-up in the economy) while acquisitions could be affected by rising funding costs (both debt and equity). For now, maintain Outperform with catalysts expected from accretive acquisitions.

Price Close 1.50 1.40 1.30 1.20 1.10 10 1.00 8 6 4 2


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 123 120 117 114 111 108 105 102 99 96 93

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 64.61 61.92 69.84 52.49 0.073 47.7% 16.32 0.082 6.95% 29.1% 0.93 1.27 7.91% Dec-12A 72.64 69.14 66.41 57.46 0.060 (17.3%) 19.74 0.084 7.06% 31.2% 0.96 1.24 6.36% Dec-13F 82.90 79.41 57.67 64.37 0.078 29.9% 15.19 0.085 7.16% 30.9% 0.98 1.21 8.06% 0% 1.00 Dec-14F 88.24 84.74 62.48 69.01 0.080 2.9% 14.76 0.088 7.46% 30.9% 0.97 1.22 8.23% 0% 1.00 Dec-15F 89.82 86.32 64.03 70.52 0.082 2.0% 14.48 0.090 7.59% 30.9% 0.97 1.23 8.44% 0% 0.99

Vol m

Mar-13

52-week share price range


1.19 1.04
1.44

1.31
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Cache Logistics Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 72.64 0.00 72.64 (3.49) 69.14 0.00 (5.74) (0.28) (1.97) 61.15 0.00 61.15 (20.80) 0.00 0.00 26.21 66.56 (0.15) 0.00 0.00 66.41 57.46 Dec-13F 82.90 0.00 82.90 (3.49) 79.41 0.00 (6.65) (0.33) (1.97) 70.46 0.00 70.46 (12.79) 0.00 0.00 0.00 57.67 0.00 0.00 0.00 57.67 64.37 Dec-14F 88.24 0.00 88.24 (3.49) 84.74 0.00 (6.73) (0.33) (1.97) 75.72 0.00 75.72 (13.24) 0.00 0.00 0.00 62.48 0.00 0.00 0.00 62.48 69.01 Dec-15F 89.82 0.00 89.82 (3.49) 86.32 0.00 (6.75) (0.33) (1.97) 77.27 0.00 77.27 (13.24) 0.00 0.00 0.00 64.03 0.00 0.00 0.00 64.03 70.52

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 972 0 0 972 13 0 2 0 15 5 0 0 5 308 0 309 672 0 672 Dec-13F 1,092 0 0 1,092 13 0 2 0 15 5 0 0 5 342 0 342 759 0 759 Dec-14F 1,092 0 0 1,092 13 0 2 0 15 5 0 0 5 342 0 342 759 0 759 Dec-15F 1,092 0 0 1,092 13 0 2 0 15 5 0 0 5 342 0 342 759 0 759

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 66.6 20.8 (0.5) (0.2) 4.3 91.0 (0.6) (102.0) (0.2) (102.8) 60.0 59.1 (55.7) (22.9) 40.5 28.8 (22.4) 25.4 Dec-13F 57.7 12.8 0.0 0.0 5.0 75.4 (0.0) (120.0) 0.0 (120.0) 33.2 86.8 (64.4) (9.5) 46.1 1.6 (44.5) (20.8) Dec-14F 62.5 13.2 0.0 0.0 5.0 80.8 (0.0) 0.0 0.0 0.0 0.0 0.0 (69.0) (10.0) (79.0) 1.8 80.8 70.8 Dec-15F 64.0 13.2 0.0 0.0 5.1 82.3 (0.0) 0.0 0.0 0.0 0.0 0.0 (70.5) (10.0) (80.5) 1.9 82.4 72.4

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 12.4% 11.7% 95.2% 1.6% 2.94 0.23% 87% 2.80 2.80 2.51 (1076%) 7.21% Dec-13F 14.1% 14.8% 95.8% 1.4% 5.49 0.00% 112% 2.79 2.79 2.50 (2048%) 5.51% Dec-14F 6.4% 6.7% 96.0% 4.3% 5.70 0.00% 110% 2.79 2.79 2.50 (2201%) 5.64% Dec-15F 1.8% 1.9% 96.1% 1.7% 5.82 0.00% 110% 2.78 2.78 2.49 (2246%) 5.78%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 1.5 N/A N/A N/A 100.0% N/A N/A Dec-13F 1.5 N/A N/A N/A 100.0% N/A N/A Dec-14F 1.6 N/A N/A N/A 100.0% N/A N/A Dec-15F 1.6 N/A N/A N/A 100.0% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

23

REIT | Singapore
June 26, 2013

Cambridge Industrial Trust


CREIT SP / CMIT.SI Current S$0.69 S$0.76 S$0.87 10.9%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$664.4m
S$842.8m

US$2.28m
S$2.84m

94.8%
1,216 m shares

CIMB Analyst(s)

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Organic and inorganic growth drivers


Though its balance sheet may be less immune to rate hikes than that for some peers, we see strong organic and inorganic growth drivers for Cambridge. We expect growth from positive rental reversions and past investments (with upside expected) to come from value-unlocking.

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Franklin Resources Chan Wai Kheong Mackenzie Financial Corporation 1M -6 -14.9 3M -7.9 -13.3 12M 13.6 23.4 % held 8.3 4.6 4.5

Our FY14-15 DPUs are lower after tweaking our borrowing cost numbers. Coupled with a higher discount rate of 8.3% (previously 7.5%), we cut our DDM-based target price. Our estimates factor in S$100m of new developments for FY13-14. Maintain Outperform, with catalysts expected from value-unlocking, accretive investments and strong reversions.

provide Cambridge with ample funds for development, AEIs and acquisitions.

Capital management
Its debt maturity is fairly chunky in FY14 but we believe that management could proactively refinance the loans ahead of maturity. Management has hedged a fairly high 82% of its total borrowings and we estimate that a 50bp increase in borrowing costs could reduce its DPU by 0.9%.

Organic and inorganic growth drivers


We expect DPU growth from positive rental reversions and AEIs/ acquisitions to come onstream. Some 42.9% of leases (by rental income) are due for renewal over FY13-14, with >70% of such renewals involving single-tenanted leases. We expect these to provide opportunities for positive rental reversions off some under-rented single-tenanted leases, while giving management the option to divest some assets to unlock value and reposition its portfolio. Meanwhile, its asset leverage of 35% and divestment proceeds (S$150m of assets held for divestment) should
Price Close 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 20 0.50 15 10 5
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

Maintain Outperform
Its forward yields of >7% post the recent selldown are attractive, in light of the upside from value-unlocking (e.g. strata lots at Lam Soon Industrial Building that can be sold as residential or strata-industrial lots) and accretive investments backed by divestment proceeds. The recent spike in bond yields could affect the pricing expectations of sellers of assets (including holders of strata-lots at Lam Soon Industrial Building), enhancing the likelihood of the Lam Soon deal going through.

Relative to FSSTI (RHS) 142 136 130 123 117 111 105 98 92

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 80.4 69.11 85.17 50.40 0.031 (15.1%) 21.46 0.042 6.19% 32.2% 0.62 1.10 5.19% Dec-12A 89.0 76.23 89.46 57.58 0.038 20.7% 18.13 0.048 6.98% 37.8% 0.65 1.06 5.96% Dec-13F 102.2 87.91 69.33 63.19 0.045 19.0% 15.32 0.050 7.37% 36.6% 0.66 1.04 6.84% 0.00% 1.13 Dec-14F 114.0 96.94 63.38 70.63 0.048 8.4% 14.13 0.054 7.89% 36.7% 0.66 1.04 7.34% (0.73%) 0.88 Dec-15F 116.2 98.75 64.84 72.09 0.049 0.7% 14.03 0.054 7.93% 36.7% 0.66 1.04 7.40% (1.07%) 0.86

52-week share price range


0.69
0.56 0.86

Vol m

0.76
Current Target

SOURCES: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Cambridge Industrial Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 89.0 0.0 89.0 (12.7) 76.2 0.0 (5.9) (1.7) (3.6) 65.0 0.0 65.0 (19.6) 0.0 0.0 44.0 89.5 0.0 0.0 0.0 89.5 57.6 Dec-13F 102.2 0.0 102.2 (14.3) 87.9 0.0 (6.2) (1.8) (4.1) 75.8 0.0 75.8 (19.8) 0.0 0.0 13.4 69.3 0.0 0.0 0.0 69.3 63.2 Dec-14F 114.0 0.0 114.0 (17.1) 96.9 0.0 (6.5) (1.9) (4.6) 84.0 0.0 84.0 (20.6) 0.0 0.0 0.0 63.4 0.0 0.0 0.0 63.4 70.6 Dec-15F 116.2 0.0 116.2 (17.4) 98.7 0.0 (6.5) (1.9) (4.6) 85.7 0.0 85.7 (20.9) 0.0 0.0 0.0 64.8 0.0 0.0 0.0 64.8 72.1

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 1,014 0 0 1,014 90 0 2 200 292 20 71 0 90 423 5 428 787 0 0 787 Dec-13F 1,061 0 0 1,061 123 0 2 200 325 22 71 0 93 437 5 442 850 0 0 850 Dec-14F 1,111 0 0 1,111 118 0 2 200 320 25 71 0 96 454 5 460 876 0 0 876 Dec-15F 1,111 0 0 1,111 119 0 2 200 321 26 71 0 96 454 5 460 876 0 0 876

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 89.5 19.6 1.3 0.0 (44.0) 66.3 (19.8) (113.4) 0.0 (133.2) 137.2 0.0 0.0 (59.3) 77.9 11.0 (66.8) 50.7 Dec-13F 69.3 19.8 2.9 0.0 (13.4) 78.7 (56.6) 9.4 9.0 (38.1) 14.0 50.2 0.0 (71.5) (7.2) 33.4 40.7 34.8 Dec-14F 63.4 20.6 2.6 0.0 0.0 86.6 (50.0) 0.0 (2.9) (52.9) 17.5 25.4 0.0 (81.3) (38.4) (4.6) 33.9 30.6 Dec-15F 64.8 20.9 0.5 0.0 (0.0) 86.2 0.0 0.0 3.8 3.8 0.0 0.0 0.0 (89.7) (89.7) 0.4 90.1 69.1

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 10.7% 10.3% 85.7% 12.9% 3.31 0% 64% 3.23 3.23 0.99 624% 7.42% Dec-13F 14.9% 15.3% 86.0% 5.6% 3.81 0% 91% 3.48 3.48 1.32 42% 5.15% Dec-14F 11.6% 10.3% 85.0% 7.0% 4.05 0% 111% 3.34 3.34 1.23 47% 4.50% Dec-15F 1.9% 1.9% 85.0% 0.5% 4.08 0% 111% 3.33 3.33 1.23 48% 4.53%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A N/A N/A N/A 7,701 98.9% 1,013.6 N/A Dec-13F N/A N/A N/A 8,014 98.9% 1,060.8 N/A Dec-14F N/A N/A N/A 8,014 98.9% 1,110.8 N/A Dec-15F N/A N/A N/A 8,014 98.9% 1,110.8 N/A

SOURCES: CIMB, COMPANY REPORTS

25

REIT | Singapore
June 26, 2013

Capitacommercial Trust
CCT SP / CACT.SI Current S$1.42 S$1.51 S$1.69 6.4%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$3,218m
S$4,082m

US$11.32m
S$14.14m

67.9%
2,843 m shares

CIMB Analyst(s)

Uncertainties in the price


With CCT down 16% vs. FSTREIs 8% YTD, CCT is the largest laggard YTD among SREITs. Trading at mean at 0.9x P/BV (its average since listing), we believe negatives from near-term backfilling uncertainties have been priced in.
We lower our FY13-15 DPUs by 1-2%, factoring in dilution from recent convertible-bond conversion. Our DDM-based target price dips on a higher discount rate of 7.9% (previously 7.3%) for a sector-wide adjustment. Nevertheless, upgrade to Neutral from Underperform as we believe negatives have been largely priced in. Asset leverage of 30.4% is among the lowest in the sector, while debt maturity is fairly well-staggered (apart from some chunkier maturities in FY15-16). Some 78% of its borrowings has been hedged as fixed-rate debt (after the expiry of an expensive interest-rate swap), which is still above the 60+% typical of other office REITs. With these, we believe CCT is fairly immune to potential rate hikes and estimate a 1% impact on DPU from a 50bp increase in cost of borrowing.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders CapitaLand Capital Group CBRE 1M -4.5 -13.4 3M -6.7 -12.1 12M 3.8 13.6 % held 32.1 6.3 6.1

Poised to capture an office turnaround


We expect DPU to be flat over FY13-14 as a fall-off in yield support and downtime from backfilling may offset positive rental reversions and interest cost-savings; before picking up in FY15 when contributions from a completed 60% stake in CapitaGreen kick in. With a more transparent lease structure (limited income support), more typical 3-year leases and room for upside from space vacated by departing tenants at CapitaGreen, CCT could be the best-positioned to capture a turnaround of the office sector, in our view.

Negatives priced in; upgrade to Neutral


With CCT down 16% YTD vs. FSTREIs 8%, CCT is the largest laggard YTD among SREITs under our coverage. Trading at mean at 0.9x P/BV (its average since listing), we believe near-term backfilling uncertainties have been largely priced in. We upgrade CCT to Neutral from Underperform. A potential overhang, meanwhile, stems from its convertible bonds due 2015 (outstanding amount of S$190m), which is in-the-money at a conversion price of S$1.23/unit.

Strong balance sheet

Price Close 1.80 1.70 1.60 1.50 1.40 1.30 150 1.20

Relative to FSSTI (RHS) 129 123 117 112 106 100 94

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 361.2 277.3 474.4 212.8 0.065 (41.0%) 21.76 0.075 5.29% 29.9% 1.60 0.89 4.19% Dec-12A 375.8 295.5 385.9 228.5 0.069 6.0% 20.52 0.080 5.66% 29.6% 1.66 0.86 4.24% Dec-13F 382.5 301.4 224.3 230.7 0.074 7.3% 19.13 0.080 5.64% 30.1% 1.65 0.86 4.49% (1.10%) 1.07 Dec-14F 387.1 303.4 225.9 230.0 0.074 (0.1%) 19.15 0.080 5.60% 31.0% 1.64 0.86 4.50% (1.09%) 1.04 Dec-15F 401.5 313.0 252.7 261.2 0.083 12.2% 17.07 0.090 6.35% 31.7% 1.64 0.87 5.07% (0.68%) 1.05

Vol m

100 50
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

52-week share price range


1.42 1.25
1.73

1.51
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Capitacommercial Trust
June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 375.8 0.0 375.8 (80.3) 295.5 0.0 (20.4) (4.6) 0.0 270.6 (4.6) 265.9 (70.9) 4.9 (3.5) 189.6 386.0 (0.1) 0.0 0.0 385.9 228.5 Dec-13F 382.5 0.0 382.5 (81.1) 301.4 0.0 (20.6) (4.6) 0.0 276.2 (4.4) 271.8 (59.9) 0.0 0.6 11.8 224.3 (0.0) 0.0 0.0 224.3 230.7 Dec-14F 387.1 0.0 387.1 (83.8) 303.4 0.0 (20.8) (4.7) 0.0 277.9 (2.0) 275.9 (62.4) 0.0 0.6 11.9 225.9 (0.0) 0.0 0.0 225.9 230.0 Dec-15F 401.5 0.0 401.5 (88.5) 313.0 0.0 (21.1) (4.7) 0.0 287.3 (6.1) 281.1 (64.6) 23.7 0.6 11.9 252.8 (0.0) 0.0 0.0 252.7 261.2

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 6,826 13 1 6,840 140 0 23 0 163 87 50 18 155 2,022 96 2,119 4,715 0 4,715 Dec-13F 6,961 9 1 6,971 115 0 23 0 139 89 197 18 303 1,942 96 2,039 4,753 0 4,753 Dec-14F 7,123 7 1 7,132 49 0 23 0 73 90 350 18 458 1,883 96 1,980 4,753 0 4,753 Dec-15F 7,220 2 1 7,223 41 0 23 0 65 93 730 18 841 1,583 96 1,680 4,753 0 4,753

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 386.0 74.7 8.0 0.0 (172.0) 296.7 (53.1) (452.8) 4.7 (501.2) 75.1 0.0 (218.6) (89.3) (232.9) (437.4) (203.4) (186.9) Dec-13F 224.3 64.2 1.5 (0.0) 6.6 296.7 (67.5) (0.6) (61.4) (129.5) 67.2 38.0 (235.8) (60.7) (191.4) (24.3) 169.3 174.5 Dec-14F 225.9 64.4 1.1 (0.0) 6.8 298.1 (68.2) (0.6) (88.1) (157.0) 94.1 0.0 (235.2) (65.8) (206.9) (65.8) 143.5 172.8 Dec-15F 252.8 47.0 3.3 (0.0) 6.9 310.0 (68.9) (0.6) 6.2 (63.4) 80.0 0.0 (267.0) (67.5) (254.5) (8.0) 249.1 262.0

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 4.03% 6.57% 78.6% 7.0% 3.59 0.025% 59% 1.05 1.05 0.90 (433%) 5.61% Dec-13F 1.77% 1.99% 78.8% (0.4%) 4.38 0.011% 103% 0.46 0.46 0.38 (401%) 3.18% Dec-14F 1.22% 0.65% 78.4% (0.6%) 4.26 0.011% 102% 0.16 0.16 0.11 (377%) 3.16% Dec-15F 3.72% 3.19% 78.0% 13.2% 4.19 0.011% 103% 0.08 0.08 0.05 (372%) 3.49%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 8.3 N/A N/A N/A 95.2% 6,695.1 N/A Dec-13F 8.1 N/A N/A N/A 94.1% 6,829.8 N/A Dec-14F 8.1 N/A N/A N/A 97.4% 6,992.1 N/A Dec-15F 8.3 N/A N/A N/A 98.3% 6,584.9 N/A

SOURCE: CIMB, COMPANY REPORTS

27

REIT | Singapore
June 26, 2013

CDL Hospitality Trust


CDREIT SP / CDLT.SI Current S$1.66 S$1.71 S$1.94 3.0%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,271m
S$1,612m

US$3.89m
S$4.85m

67.0%
970.0 m shares

CIMB Analyst(s)

More catalysts needed


While we still have a negative outlook on the hospitality sector, we think that CDLHT's current valuation of 1x P/BV has already priced in the negatives. We thus upgrade it from Underperform to Neutral, with a turnaround in the hospitality sector and accretive acquisitions being re-rating catalysts.
We adjust FY14-15 DPUs to factor in disruptions and higher rentals after AEI at Orchard Hotel. Our DDM-based target price is reduced as a result of a higher discount rate of 8.0% (previously 8.8%; raised across the board due to higher bond yields). exerting pricing pressures.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Hospitality Holdings Pte Ltd Aberdeen Investment Bank of America 1M -4.9 -13.8 3M -12 -17.4 12M -20.1 -10.3 % held 32.8 4.4 4.4

Less defensive balance sheet with a cyclical exposure


With a fairly short debt maturity of two years and a hedge ratio of about 50% of borrowings, CDLHTs debt metrics appear to be less defensive compared to its peers. But we believe that this could be due to its high exposure to a more cyclical hospitality sector. Nonetheless, risks are balanced, in our view, by an asset leverage of 28%, which is among the lowest in the sector. We estimate that that a 50bp rise in interest rates would have a 1.2% impact on DPU.

Supply pressures
We expect the combination of bumper supply, subdued corporate travels and the absence of bi-annual events in 2013 to affect CDLHTs local revPARs and DPU in FY13. Local hotels revPAR slipped 8% yoy in 1Q, mainly on a 7% drop in ARRs as higher-yielding corporates are substituted by lower-yielding leisure visitors. The absence of Food & Hotels Asia this year contributed to a similarly muted Apr showing, with CDLHT disclosing an 8% drop in revPAR for the first 23 days of Apr. Looking ahead, a turnaround in corporate travels and CommunicAsia (reported +2k visitors yoy to 51k visitors) and a weaker S$ could provide near-term relief, though we expect the supply of mid-tier hotel rooms to continue

Negatives priced in, upgrade to Neutral


We believe that current levels of 1x P/BV (vs. long-term average of 1.3x) have priced in a weaker hospitality outlook. We upgrade CDLHT to Neutral from Underperform on the back of its compelling valuations, with a turnaround in the hospitality sector and accretive acquisitions acting as re-rating catalysts.

Price Close 2.20 2.10 2.00 1.90 1.80 1.70 15 1.60


Vol m

Relative to FSSTI (RHS) 112 106 100 95 89 83 77

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 141.1 135.2 176.3 106.3 0.11 14.7% 15.21 0.11 6.66% 25.2% 1.60 1.04 6.98% Dec-12A 149.5 139.3 122.2 109.5 0.11 1.8% 14.94 0.11 6.82% 24.8% 1.61 1.03 6.91% Dec-13F 160.1 141.6 109.7 111.5 0.11 1.6% 14.71 0.11 6.89% 27.6% 1.62 1.03 6.99% 0.00% 0.92 Dec-14F 162.8 144.3 111.7 113.4 0.11 1.3% 14.53 0.12 6.97% 28.2% 1.62 1.02 7.06% (1.59%) 0.91 Dec-15F 170.2 150.4 117.9 119.1 0.12 5.0% 13.84 0.12 7.28% 28.1% 1.63 1.02 7.39% 0.94% 0.97

10 5
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

52-week share price range


1.66
1.66 2.12

1.71
Current Target

SOURCES: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

CDL Hospitality Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 149.5 0.0 149.5 (10.2) 139.3 0.0 (12.2) (0.2) (1.6) 125.3 0.0 125.3 (15.7) 0.0 0.0 15.0 124.5 (2.4) 0.0 0.0 122.2 109.5 Dec-13F 160.1 0.0 160.1 (18.5) 141.6 0.0 (12.8) (0.3) (1.6) 126.9 0.0 126.9 (15.4) 0.0 0.0 0.0 111.6 (1.9) 0.0 0.0 109.7 111.5 Dec-14F 162.8 0.0 162.8 (18.4) 144.3 0.0 (12.8) (0.3) (1.6) 129.6 0.0 129.6 (15.9) 0.0 0.0 0.0 113.7 (2.0) 0.0 0.0 111.7 113.4 Dec-15F 170.2 0.0 170.2 (19.9) 150.4 0.0 (12.9) (0.3) (1.6) 135.6 0.0 135.6 (15.7) 0.0 0.0 0.0 120.0 (2.1) 0.0 0.0 117.9 119.1

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 2,045 0 0 2,045 75 0 14 0 89 25 260 0 285 270 15 285 1,564 0 1,564 Dec-13F 2,138 0 0 2,138 83 0 14 0 97 27 260 0 287 357 15 372 1,576 0 1,576 Dec-14F 2,144 0 0 2,144 115 0 14 0 128 27 260 0 287 382 15 397 1,589 0 1,589 Dec-15F 2,151 0 0 2,151 123 0 14 0 136 29 260 0 288 382 15 397 1,602 0 1,602

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 124.5 15.7 1.2 (2.4) (2.8) 136.2 (6.1) 0.0 0.7 (5.5) 0.0 0.0 (110.2) (15.6) (125.9) 4.9 131.4 117.2 Dec-13F 111.6 15.4 1.8 (1.9) 12.8 139.6 (6.2) (86.8) 0.7 (92.3) 86.8 0.0 (111.5) (14.7) (39.3) 8.0 48.0 118.7 Dec-14F 113.7 15.9 0.4 (2.0) 13.0 141.1 (6.5) 0.0 0.7 (5.7) 25.0 0.0 (113.4) (15.4) (103.8) 31.6 136.1 144.4 Dec-15F 120.0 15.7 1.3 (2.1) 13.4 148.2 (6.5) 0.0 1.0 (5.5) 0.0 0.0 (119.1) (15.4) (134.5) 8.2 143.7 127.0

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 6.0% 3.0% 93.2% 2.44% 7.65 1.90% 90% 0.31 0.31 0.26 (2259%) 5.75% Dec-13F 7.1% 1.7% 88.5% 0.98% 7.92 1.67% 102% 0.34 0.34 0.29 (1088%) 5.02% Dec-14F 1.7% 1.9% 88.7% 1.19% 7.77 1.76% 102% 0.45 0.45 0.40 (961%) 4.96% Dec-15F 4.6% 4.2% 88.3% 4.45% 8.13 1.71% 101% 0.47 0.47 0.43 (973%) 5.17%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A N/A N/A 207.4 N/A 88.5% 2,044.9 N/A Dec-13F N/A N/A 193.5 N/A 87.4% 2,137.9 N/A Dec-14F N/A N/A 197.3 N/A 87.9% 2,144.4 N/A Dec-15F N/A N/A 200.1 N/A 87.9% 2,150.9 N/A

SOURCES: CIMB, COMPANY REPORTS

29

REIT | Singapore
June 26, 2013

CapitaMall Trust
CT SP / CMLT.SI Current S$1.91 S$2.06 S$2.23 7.6%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$5,207m
S$6,604m

US$17.26m
S$21.56m

70.0%
3,456 m shares

CIMB Analyst(s)

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

A safe haven in current environment


We turn more positive on CMT due to its defensive attributes and DPU growth profile in the current environment as well as its more palatable valuations following the recent selldown. We upgrade CMT to Neutral from Underperform.

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders CapitaLand Capital Research Capital Group 1M -3.1 -12 3M -3.2 -8.6 12M -4.3 5.5 % held 30.0 7.7 7.0

We hold back from upgrading to Outperform due to the limited upside. We keep DPUs unchanged but lower our DDM-based target price on a higher discount rate of 7.2% (previously 6.7%; raised across the board following higher bond yields). We see re-rating catalysts from accretive asset enhancements and acquisitions.

Immune to rate increases


We expect CMT to be among the most immune to rate increases within the sector. Its weighted average length of debt maturity of four years is the longest within the sub-sector while a high 94% of borrowings are hedged into fixed. We estimate that a 50bp increase in interest costs will only have a 0.3% impact on DPU, barely making a dent.

In-built DPU growth


We expect DPU growth to be led by asset enhancements and developments bearing fruit. FY13 will see full-year contributions from JCube, Bugis+ and Atrium@Orchard, which completed their asset enhancements in FY12. The opening of Westgate (30% stake) by end-2013 and the completion of asset enhancements at Bugis Junction, IMM and Plaza Singapura should contribute to growth in 2014 while the potential acquisitions of StarVista and/or Bedok Mall could add the icing to the cake.

Upgrade to Neutral
We turn more positive on CMT given its defensive attributes and DPU growth profile in the current environment as well as its more palatable valuations following the recent selldown. We upgrade CMT to Neutral from Underperform previously, holding back from an upgrade to Outperform due to limited upside (its share price has held up relatively well in the recent selldown).

Price Close 2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 25 1.7 20 15 10 5
Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 118 115 112 109 106 102 99 96 93

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 630.6 418.2 389.6 301.6 0.08 2.50% 23.17 0.09 4.91% 37.3% 1.58 1.21 5.27% Dec-12A 661.6 445.3 537.1 316.9 0.08 2.57% 22.59 0.09 4.95% 36.1% 1.65 1.16 5.24% Dec-13F 698.7 475.5 320.3 358.8 0.09 9.58% 20.61 0.10 5.43% 34.8% 1.65 1.15 5.61% 0% 0.95 Dec-14F 716.6 487.7 336.9 370.6 0.10 5.19% 19.59 0.11 5.61% 35.2% 1.66 1.15 5.89% 0% 0.94 Dec-15F 734.3 499.7 355.0 387.6 0.10 5.36% 18.60 0.11 5.87% 35.3% 1.66 1.15 6.19% 0% 0.93

Vol m

Mar-13

52-week share price range


1.91
1.84 2.38

2.06
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

CapitaMall Trust
June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 661.6 0.0 661.6 (216.3) 445.3 0.0 (43.4) (4.9) 0.0 397.0 0.0 397.0 (132.4) 20.3 0.0 250.2 535.1 2.0 0.0 0.0 537.1 316.9 Dec-13F 698.7 0.0 698.7 (223.2) 475.5 0.0 (43.8) (4.9) 0.0 426.8 0.0 426.8 (125.7) 19.2 0.0 0.0 320.3 0.0 0.0 0.0 320.3 358.8 Dec-14F 716.6 0.0 716.6 (229.0) 487.7 0.0 (44.0) (4.9) 0.0 438.8 0.0 438.8 (130.1) 28.3 0.0 0.0 336.9 0.0 0.0 0.0 336.9 370.6 Dec-15F 734.3 0.0 734.3 (234.6) 499.7 0.0 (44.1) (4.9) 0.0 450.7 0.0 450.7 (131.0) 35.3 0.0 0.0 355.0 0.0 0.0 0.0 355.0 387.6

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 8,755 0 2 8,757 1,118 0 13 0 1,131 289 405 0 694 3,162 329 3,491 5,703 0 5,703 Dec-13F 8,875 0 5 8,880 846 0 13 0 859 305 300 0 605 3,087 329 3,416 5,717 0 5,717 Dec-14F 8,952 0 8 8,960 862 0 13 0 875 313 300 0 613 3,164 329 3,493 5,728 0 5,728 Dec-15F 8,978 0 12 8,991 878 0 13 0 891 321 300 0 621 3,190 329 3,520 5,741 0 5,741

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 535.1 112.1 55.5 0.0 (160.3) 542.4 (239.4) 116.1 15.3 (108.1) 207.6 242.1 (311.6) (112.0) 26.2 460.4 440.1 529.9 Dec-13F 320.3 106.5 16.9 0.0 5.5 449.2 (74.5) (1.3) 62.9 (12.9) (180.2) 0.0 (358.8) (125.7) (664.6) (228.4) 442.8 130.4 Dec-14F 336.9 101.8 8.5 0.0 5.5 452.8 (38.0) (1.3) 63.5 24.1 76.8 0.0 (370.6) (130.1) (423.8) 53.1 481.9 423.7 Dec-15F 355.0 95.7 8.4 0.0 5.5 464.6 (20.0) (1.3) 67.8 46.4 26.5 0.0 (387.6) (131.0) (492.2) 18.9 516.1 406.5

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 4.92% 6.46% 67.3% 0.96% 2.86 0.000% 59% 1.63 1.63 1.61 (177%) 5.64% Dec-13F 5.61% 6.78% 68.1% 9.73% 3.23 0.000% 112% 1.42 1.42 1.40 (156%) 3.26% Dec-14F 2.57% 2.57% 68.1% 3.28% 3.25 0.000% 110% 1.43 1.43 1.41 (152%) 3.44% Dec-15F 2.47% 2.47% 68.1% 4.61% 3.31 0.000% 109% 1.43 1.43 1.41 (154%) 3.60%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 11.5 N/A N/A N/A 90.7% N/A N/A Dec-13F 11.7 N/A N/A N/A 98.7% N/A N/A Dec-14F 12.2 N/A N/A N/A 98.7% N/A N/A Dec-15F 12.4 N/A N/A N/A 99.5% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

31

REIT SINGAPORE
June 26, 2013

Frasers Commercial Trust


FCOT SP / FRCR.SI Current S$1.33 S$1.47 S$1.65 11.2%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$685.9m
S$870.0m

US$2.09m
S$2.60m

75.0%
645.9 m shares

CIMB Analyst(s)

In-built growth
FCOTs three-year DPU CAGR of 13% is the highest among S-REIT peers, which should help it to offset pressures from a weakening A$ and rising interest rates. Asset leverage is fairly high but we see asset values as well supported.
Proceeds from any divestment of the hotel site at China Square could also be used to pare down loans. We lower DPUs due to adjustments to A$ assumptions and interest costs. Our DDM-based target price is reduced given a higher discount rate of 8.3% (previously 7.7%). Maintain Outperform for strong in-built growth. Re-rating catalysts are further yield-enhancing moves. underlying passing rents on asset and we estimate a 17% uplift in NPI when the master lease lapses.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders F&N 1M -2.2 -11.1 3M 1.4 -4 12M 27.5 37.3 % held 24.6

Asset leverage at 39%


Asset leverage is expected to creep up to 39% after the draw-down of loans to fund its CPPU redemption. Although this is at the higher end among its S-REIT peers, we expect this to be supported by undemanding capital values of local assets. FCOT has also obtained planning permission for additional hotel GFA at China Square Central, which could be sold, with divestment proceeds channelled towards paring down debt. We estimate that a 50bp increase in interest rates will have a 1.2% impact on FCOTs DPU.

Strong in-built growth despite FX pressures


We project a strong DPU CAGR of 13% over FY12-15, led by accretion from CPPU redemption, positive rental reversions and leasing at China Square Central and the expiry of an under-rented master lease at Alexandra Technopark. Committed occupancy at China Square Central was 92.6% as at end-1Q and could rise with the completion of asset enhancement there and nearby the Telok Ayer train station, particularly with management noting healthy enquiries. Implied rents on the master lease at Alexandra Technopark are meanwhile below

Maintain Outperform
DPU CAGR of 13% (with upside potential) is the highest among S-REIT peers, which should help to offset pressures from a weakening A$ and rising interest rates. Maintain Outperform given re-rating catalysts from further yield-enhancing moves.

Price Close 1.7 1.5 1.3 1.1 8 0.9 6 4 2


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 145 139 133 126 120 114 108 101 95

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Sep-11A 119.6 96.0 46.1 36.32 0.023 28% 56.73 0.058 4.34% 36.0% 1.38 0.96 1.69% Sep-12A 132.9 102.5 150.1 43.05 0.023 (1%) 57.41 0.067 5.05% 31.9% 1.53 0.86 1.58% Sep-13F 119.2 90.8 52.4 52.26 0.052 127% 25.26 0.079 5.96% 38.5% 1.50 0.89 3.46% (0.73%) 1.22 Sep-14F 120.6 92.5 43.8 61.32 0.065 24% 20.37 0.089 6.74% 38.8% 1.44 0.92 4.43% (3.15%) 0.87 Sep-15F 142.5 97.8 48.8 66.40 0.071 9% 18.71 0.096 7.23% 38.6% 1.43 0.93 4.93% (2.28%) 0.93

Vol m

Mar-13

52-week share price range


1.33 0.99
1.59

1.47
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Frasers Commercial Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Sep-12A 132.9 0.0 132.9 (30.3) 102.5 0.0 (13.1) (2.2) 0.0 87.3 0.0 87.3 (43.6) 0.0 72.8 68.5 185.0 (16.0) 0.0 (18.8) 150.1 43.1 Sep-13F 119.2 0.0 119.2 (28.4) 90.8 0.0 (11.8) (2.0) 0.0 76.9 (0.7) 76.2 (34.2) 0.0 18.2 0.0 60.2 (0.1) 0.0 (7.6) 52.4 52.3 Sep-14F 120.6 0.0 120.6 (28.1) 92.5 0.0 (11.8) (2.0) 0.0 78.7 (0.2) 78.4 (34.5) 0.0 0.0 0.0 44.0 (0.1) 0.0 0.0 43.8 61.3 Sep-15F 142.5 0.0 142.5 (44.7) 97.8 0.0 (11.8) (2.0) 0.0 84.0 (0.3) 83.7 (34.7) 0.0 0.0 0.0 49.0 (0.1) 0.0 0.0 48.8 66.4

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Sep-12A 1,758 0 0 1,758 459 0 10 113 582 65 0 124 189 747 71 818 990 0 343 1,332 Sep-13F 1,758 0 0 1,758 85 0 10 0 95 59 0 5 64 714 71 785 990 0 14 1,004 Sep-14F 1,758 0 0 1,758 72 0 10 0 82 59 0 5 65 714 71 785 990 0 0 990 Sep-15F 1,758 0 0 1,758 83 0 10 0 93 70 0 5 76 714 71 785 990 0 0 990

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Sep-12A 185.0 (29.2) 36.3 (0.5) (59.6) 132.0 (5.0) 240.1 0.7 235.7 110.7 0.0 (58.0) (27.4) 25.4 393.1 368.5 447.5 Sep-13F 60.2 16.7 (6.7) 0.0 6.4 76.6 0.0 113.5 0.7 114.2 (151.9) (328.2) (59.9) (24.1) (564.1) (373.3) 191.5 4.7 Sep-14F 44.0 34.7 0.7 0.0 6.4 85.7 0.0 0.0 0.7 0.7 0.0 (14.3) (61.3) (24.4) (100.0) (13.7) 87.1 51.9 Sep-15F 49.0 35.1 10.8 0.0 6.4 101.2 0.0 0.0 0.7 0.7 0.0 0.0 (66.4) (24.7) (91.1) 10.8 102.6 67.2

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Sep-12A 11.1% 6.8% 77.2% 16.3% 1.97 8.65% 29% 3.08 3.08 2.42 (358%) 6.85% Sep-13F (10.3%) (11.5%) 76.1% 18.1% 2.19 0.22% 100% 1.49 1.49 1.33 (116%) 2.50% Sep-14F 1.1% 1.9% 76.7% 13.1% 2.23 0.29% 140% 1.26 1.26 1.11 (145%) 2.37% Sep-15F 18.2% 5.8% 68.6% 7.2% 2.36 0.27% 136% 1.23 1.23 1.09 (153%) 2.65%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Sep-12A 6.0 N/A N/A 2,658 95.8% 1,757.5 N/A Sep-13F 7.1 N/A N/A 2,456 94.8% 1,757.5 N/A Sep-14F 7.1 N/A N/A 2,456 96.0% 1,757.5 N/A Sep-15F 7.2 N/A N/A 2,456 96.0% 1,757.5 N/A

SOURCE: CIMB, COMPANY REPORTS

33

REIT | Singapore
June 26, 2013

Frasers Centrepoint Trust


FCT SP / FCRT.SI Current S$1.84 S$2.02 S$2.31 9.8%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,195m
S$1,516m

US$1.95m
S$2.43m

38.0%
823.5 m shares

CIMB Analyst(s)

Awaiting accretive acquisition


DPU growth should remain underpinned by positive rental reversions at its two largest assets while an acquisition of Changi City Point will not just provide accretion but the next stage of growth for FCT. Capital management is optimal, leaving it fairly immune to interest rate hikes.
We keep DPU unchanged but lower our DDM-based target price due to a higher discount rate of 7.4% (previously 6.7%) for a sector-wide adjustment. Maintain Outperform given re-rating catalysts from accretive acquisitions and stronger-than-expected rental reversions. for not just acquisition accretion but greater uplifts from positive rental reversions during its first round of renewal expected in 2014. Although funding costs have risen, we see room for FCT to manage accretion given its fairly comfortable asset leverage of 30.5% as at end-2QFY13.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Fraser Centrepoint Ltd Capital Research AIG entities 1M -3.5 -12.4 3M -9 -14.4 12M 0.1 9.9 % held 42.9 7.9 4.8

Strong capital management Changi City Point for the next stage of growth
We continue to see positive rental reversions at Causeway Point and NorthPoint (which account for 70% of rentals to be renewed for the remaining months of FY13), with occupancy costs still below optimal levels and growing tenant sales. With foot traffic yet to return to pre-AEI levels, Causeway Point could continue to reap benefits from AEI and enjoy upside from rental reversions and growing GTO rents. Growth is, however, expected to moderate with the completion of AEI at Causeway Point. The next stage of growth will thus have to come from an acquisition of Changi City Point, FCTs debt maturity is well staggered (weighted average length of debt maturity of 3.4 years), with no more than 70% of borrowings due in each year (other than FY16 where maturity is a tad lumpier at 45% of total borrowings). Given this, coupled with a high 94% of borrowings hedged, FCT is among those which are least exposed to interest rate hikes, in our view, with a 50bp increase in interest rates barely making a dent on DPU (0.2%).

Maintain Outperform
We continue to like FCT for its resilient suburban retail exposure and defensive balance sheet positioning.

Price Close 2.3 2.1 1.9 1.7 5 1.5 4 3 2 1


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 121 118 114 111 108 104 101 98 94 91

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Sep-11A 117.9 82.6 152.3 64.38 0.07 (11.7%) 25.37 0.08 4.52% 31.3% 1.40 1.31 5.38% Sep-12A 147.2 104.4 185.6 82.35 0.10 41.5% 17.93 0.10 5.44% 30.1% 1.53 1.20 6.99% Sep-13F 156.9 112.2 91.4 87.99 0.11 7.9% 16.61 0.11 5.79% 31.0% 1.53 1.20 7.22% 0% 0.93 Sep-14F 160.9 115.1 93.9 90.51 0.11 2.5% 16.21 0.11 5.94% 31.3% 1.53 1.20 7.40% 0% 0.99 Sep-15F 163.6 117.0 95.4 92.08 0.12 1.4% 15.99 0.11 6.03% 31.6% 1.53 1.20 7.50% 0% 0.95

Vol m

Mar-13

52-week share price range


1.84 1.67
2.32

2.02
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Frasers Centrepoint Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Sep-12A 131.3 15.9 147.2 (42.8) 104.4 0.0 (10.7) (1.4) 0.0 92.3 0.0 92.3 (18.2) 10.4 0.0 101.1 185.6 0.0 0.0 0.0 185.6 82.3 Sep-13F 140.7 16.2 156.9 (44.7) 112.2 0.0 (10.8) (1.4) 0.0 100.0 0.0 100.0 (19.0) 10.4 0.0 0.0 91.4 0.0 0.0 0.0 91.4 88.0 Sep-14F 144.7 16.2 160.9 (45.8) 115.1 0.0 (10.8) (1.5) 0.0 102.8 0.0 102.8 (19.3) 10.4 0.0 0.0 93.9 0.0 0.0 0.0 93.9 90.5 Sep-15F 147.4 16.2 163.6 (46.6) 117.0 0.0 (10.9) (1.5) 0.0 104.6 0.0 104.6 (19.6) 10.4 0.0 0.0 95.4 0.0 0.0 0.0 95.4 92.1

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Sep-12A 1,888 0 0 1,888 23 0 0 6 29 40 58 15 112 519 23 542 1,263 0 1,263 Sep-13F 1,899 0 0 1,899 35 0 0 6 41 34 58 15 107 544 23 567 1,266 0 1,266 Sep-14F 1,910 0 1 1,910 38 0 0 6 44 35 58 15 108 554 23 577 1,270 0 1,270 Sep-15F 1,921 0 1 1,922 40 0 0 6 47 36 58 15 108 564 23 587 1,273 0 1,273

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Sep-12A 185.6 7.8 5.4 0.0 (110.9) 87.9 (19.0) (8.7) 0.0 (27.7) 183.0 (0.8) (78.4) (181.5) (77.6) (17.4) 60.2 226.7 Sep-13F 91.4 8.6 (5.5) 0.0 (8.3) 86.2 (10.9) 4.1 0.0 (6.8) 25.0 0.0 (88.0) (15.1) (78.1) 1.3 79.4 85.4 Sep-14F 93.9 8.9 0.9 0.0 (8.2) 95.4 (11.0) 4.1 0.0 (6.8) 10.0 0.0 (90.5) (15.5) (96.0) (7.4) 88.6 79.2 Sep-15F 95.4 9.2 0.6 0.0 (8.2) 97.0 (11.0) 4.1 0.0 (6.9) 10.0 0.0 (92.1) (15.8) (97.9) (7.8) 90.1 80.5

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Sep-12A 24.9% 26.4% 70.9% 20.3% 5.06 0% 44.4% 0.26 0.26 0.20 (182%) 10.0% Sep-13F 6.6% 7.4% 71.5% 6.5% 5.25 0% 96.3% 0.38 0.38 0.32 (208%) 4.7% Sep-14F 2.5% 2.6% 71.5% 2.6% 5.31 0% 96.4% 0.41 0.41 0.35 (243%) 4.8% Sep-15F 1.7% 1.7% 71.5% 1.5% 5.32 0% 96.5% 0.43 0.43 0.37 (244%) 4.9%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Sep-12A 12.9 N/A N/A 879 96.8% 1,816.0 N/A Sep-13F 12.9 N/A N/A 879 99.1% 1,826.9 N/A Sep-14F 13.1 N/A N/A 879 99.4% 1,837.9 N/A Sep-15F 13.4 N/A N/A 879 99.4% 1,848.9 N/A

SOURCE: CIMB, COMPANY REPORTS

35

REIT | Singapore
June 26, 2013

Keppel REIT
KREIT SP / KASA.SI Current S$1.27 S$1.29 S$1.45 1.6%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$2,685m
S$3,406m

US$13.94m
S$17.47m

40.5%
2,631 m shares

CIMB Analyst(s)

Flattish DPU growth


With a flattish DPU growth outlook (due to income support), higher asset leverage and lower interest rate hedges, we believe that KREIT is among those which could be more vulnerable in the face of a spike in interest rates.
We tweak DPUs lower, factoring in further uplifts in borrowing costs. Our DDM-based target price is lowered, now based on a higher discount rate of 8.3% (previously 7.7%) alongside a sector-wide adjustment. Maintain Neutral.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Keppel Land Keppel Corp Ltd Capital Group 1M -7 -15.9 3M -0.5 -5.9 12M 14.1 23.9 % held 44.3 15.2 1.4

Exposed to spikes in borrowing rates


With aggregate leverage of 43% (as at end-1QFY13) among the highest within the sector and a fairly low 60% of borrowings hedged, we expect KREIT to be among those which are more exposed to rate spikes. We estimate that a 50bp increase in cost of borrowing could reduce DPU by 2.4%.

Expecting flattish DPU growth outlook


We project a flattish DPU outlook for KREIT as i) income support on assets, such as MBFC Phase 1 and OFC, limits the flow-through of any improvements in performance of underlying assets to the DPU level, ii) near-full occupancy of major assets limits upside from occupancy improvements, and iii) high asset leverage caps accretion and upside from acquisitions. Further risks could come from a weakening A$ (limited natural hedge with liabilities denominated in SGD), although the impact should be mitigated by a 6-month rolling FX hedge and small exposure to Australian assets (11% of asset value).

Maintain Neutral
KREITs high headline yields of near 6% remain its key draw, although we see this afforded mainly by its high asset leverage, fairly high percentage of management fees paid by units (50%) and substantial income support (we estimate that income support net of tax makes up about 25% of KREITs distributable income in FY13). The share price has also held up well YTD, making its P/BV among the highest among the office REITs and the company potentially susceptible to selling pressure.

Price Close 1.7 1.5 1.3 1.1 250 0.9 200 150 100 50
Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 138 132 127 121 116 110 104 99 93

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 78.0 61.7 290.1 113.0 0.047 18.6% 37.06 0.071 5.57% 37.0% 1.28 0.99 2.52% Dec-12A 156.9 124.7 327.4 199.6 0.046 (1.8%) 27.44 0.078 6.12% 39.5% 1.32 0.96 3.56% Dec-13F 182.2 144.2 149.9 208.1 0.056 21.9% 22.53 0.078 6.16% 40.7% 1.31 0.97 4.29% (0.61%) 0.94 Dec-14F 189.4 149.9 164.7 214.0 0.061 7.9% 20.89 0.079 6.22% 40.9% 1.30 0.98 4.66% (1.21%) 0.94 Dec-15F 205.0 162.1 179.8 209.4 0.066 7.8% 19.38 0.076 6.01% 40.7% 1.29 0.98 5.05% (1.84%) 0.99

Vol m

Mar-13

52-week share price range


1.27
1.05 1.61

1.29
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Keppel REIT
June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 156.9 0.0 156.9 (32.2) 124.7 0.0 (39.4) (4.2) 0.0 81.0 (65.0) 16.1 (17.6) 46.8 86.5 216.8 348.6 (14.9) (6.3) 0.0 327.4 199.6 Dec-13F 182.2 0.0 182.2 (38.0) 144.2 0.0 (42.8) (4.9) 0.0 96.5 (39.9) 56.6 (14.5) 62.7 61.3 0.0 166.2 (16.2) 0.0 0.0 149.9 208.1 Dec-14F 189.4 0.0 189.4 (39.5) 149.9 0.0 (42.5) (4.9) 0.0 102.5 (31.7) 70.8 (9.2) 69.3 48.8 0.0 179.7 (15.1) 0.0 0.0 164.7 214.0 Dec-15F 205.0 0.0 205.0 (42.8) 162.1 0.0 (42.3) (5.0) 0.0 114.9 (12.4) 102.5 (5.7) 75.2 19.0 0.0 191.0 (11.2) 0.0 0.0 179.8 209.4

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 5,910 92 0 6,002 102 0 29 7 137 140 155 21 316 2,268 90 2,358 3,464 2 3,466 Dec-13F 6,100 52 0 6,153 107 0 29 7 142 105 155 21 281 2,405 90 2,495 3,517 2 3,519 Dec-14F 6,185 21 0 6,206 143 0 29 7 178 109 155 21 285 2,458 90 2,548 3,549 2 3,551 Dec-15F 6,206 8 0 6,214 164 0 29 7 200 118 155 21 294 2,458 90 2,548 3,570 2 3,572

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 349 36 (2) (6) (191) 185 (5) (100) 163 58 255 0 (212) (183) (139) 104 243 452 Dec-13F 166 (8) (35) (16) 37 144 0 (190) 146 (45) 137 53 (208) (76) (94) 5 99 184 Dec-14F 180 (28) 4 (15) 45 185 0 (84) 140 55 53 31 (214) (75) (205) 36 241 239 Dec-15F 191 (57) 9 (11) 49 181 0 (21) 116 95 0 21 (209) (67) (255) 21 276 220

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 101% 102% 79.5% 9.7% 0.34 4.27% 61% 0.43 0.43 0.32 43% 5.46% Dec-13F 16% 16% 79.1% 0.7% 1.08 9.78% 139% 0.51 0.51 0.38 (154%) 2.41% Dec-14F 4% 4% 79.1% 1.0% 1.29 8.38% 130% 0.62 0.62 0.50 (169%) 2.60% Dec-15F 8% 8% 79.1% (3.4%) 1.82 5.86% 116% 0.68 0.68 0.56 (130%) 2.81%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 7.8 N/A N/A 2,861 97.8% N/A N/A Dec-13F 8.2 N/A N/A 3,035 99.2% N/A N/A Dec-14F 8.5 N/A N/A 3,035 99.4% N/A N/A Dec-15F 8.9 N/A N/A 3,035 99.4% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

37

REIT SINGAPORE
June 26, 2013

Mapletree Commercial Trust


MCT SP / MACT.SI Current S$1.12 S$1.22 S$1.47 9.1%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,827m
S$2,318m

US$3.91m
S$4.89m

54.0%
2,068 m shares

CIMB Analyst(s)

Less of the same driver


We expect positive rental reversions at VivoCity and Mapletree Anson to be the key drivers of DPU growth over FY13-15, though growth from the former should moderate in FY14. Debt metrics are a tad less defensive compared to other retail REITs, but should be manageable with MCTs growth profile.
We tweak FY14-16 DPUs lower after marginally raising interest costs. Coupled with a higher discount rate of 7.9% (previously 6.9%; raised across the board following higher bond yields), we lower our DDM-based target price. Maintain Neutral. Re-rating catalysts could come from accretive acquisitions. Business City could add icing to the cake, though accretion could now be affected with funding costs (both debt and equity) on the rise.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Temasek Holdings AIA Group Ltd Citigroup 1M -10.5 -19.4 3M -11 -16.4 12M 6.9 16.7 % held 46.0 7.6 6.2

Fairly high asset leverage


Key debt metrics are fairly healthy but a tad less defensive compared to other retail REITs. Asset leverage at 40.9% is the highest among retail REITs, while the percentage of borrowings hedged is a lower 75%. We estimate that a 50bp increase in interest rates could have a 1.5% impact on DPU, marginally higher than peers, albeit manageable due to its growth profile.

VivoCity in the pink of health


We expect DPU growth to come from positive rental reversions at VivoCity and Mapletree Anson. VivoCity, a star performer, remains in the pink of health as it booked a 33% increase in fixed rents in 4QFY3/13, backed by steady growth in traffic and tenant sales and a healthy occupancy cost of ~16%. While NPI growth from VivoCity could moderate in FY14 due to lower lease expiry, Mapletree Anson should sustain growth in FY15 when more under-rented leases are up for renewal. Looking ahead, an accretive acquisition of Mapletree

Maintain Neutral
With strong rental reversions and acquisition accretion, we believe that MCT has set a high growth benchmark in FY13 that will be difficult to replicate in FY14. Maintain Neutral. Re-rating catalysts could come from accretive acquisitions.

Price Close 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 25 0.8 20 15 10 5
Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 143 137 131 124 118 112 106 99 93

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Mar-12A 177.3 124.0 208.0 98.2 0.048 18.8% 23.13 0.053 4.71% 37.5% 0.96 1.17 5.24% Mar-13A 219.5 156.0 310.8 123.5 0.058 19.6% 19.33 0.065 5.79% 40.8% 1.06 1.06 5.73% Mar-14F 254.7 183.4 127.7 136.1 0.062 6.4% 18.17 0.066 5.86% 40.8% 1.06 1.06 5.82% (0.58%) 0.96 Mar-15F 261.4 188.3 130.7 139.3 0.063 2.2% 17.78 0.067 5.99% 40.8% 1.06 1.06 5.96% (1.68%) 0.97 Mar-16F 270.3 194.6 136.8 145.5 0.066 4.6% 16.99 0.070 6.26% 40.8% 1.06 1.06 6.23% (1.61%) 0.97

Vol m

Mar-13

52-week share price range


1.12 0.96
1.53

1.22
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Mapletree Commercial Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Mar-13A 219.5 0.0 219.5 (63.5) 156.0 0.0 (14.2) (0.5) (1.4) 140.0 0.0 140.0 (26.1) 0.0 0.0 197.0 310.8 0.0 0.0 0.0 310.8 123.5 Mar-14F 254.7 0.0 254.7 (71.3) 183.4 0.0 (16.9) (0.8) (2.5) 163.2 0.0 163.2 (35.6) 0.0 0.0 0.0 127.7 0.0 0.0 0.0 127.7 136.1 Mar-15F 261.4 0.0 261.4 (73.2) 188.3 0.0 (17.1) (0.8) (2.5) 167.9 0.0 167.9 (37.2) 0.0 0.0 0.0 130.7 0.0 0.0 0.0 130.7 139.3 Mar-16F 270.3 0.0 270.3 (75.7) 194.6 0.0 (17.4) (0.8) (2.5) 174.0 0.0 174.0 (37.2) 0.0 0.0 0.0 136.8 0.0 0.0 0.0 136.8 145.5

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Mar-13A 3,831 0 0 3,831 47 0 7 1 55 60 0 6 66 1,586 39 1,625 2,195 0 2,195 Mar-14F 3,831 0 0 3,831 47 0 7 1 55 60 0 6 66 1,586 39 1,625 2,195 0 2,195 Mar-15F 3,831 0 0 3,831 47 0 7 1 55 60 0 6 66 1,586 39 1,625 2,195 0 2,195 Mar-16F 3,831 0 0 3,831 47 0 7 1 55 60 0 6 66 1,586 39 1,625 2,195 0 2,195

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Mar-13A 311 26 10 14 (204) 157 (9) (681) 0 (690) 462 222 (129) (24) 531 (3) (533) (95) Mar-14F 128 36 0 0 8 172 0 0 0 0 0 0 (136) (36) (172) 0 172 136 Mar-15F 131 37 0 0 9 176 0 0 0 0 0 0 (139) (37) (177) 0 177 139 Mar-16F 137 37 0 0 9 183 0 0 0 0 0 0 (145) (37) (183) 0 183 146

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Mar-13A 23.8% 25.8% 71.1% 23.1% 5.33 0% 40% 0.83 0.83 0.71 (237%) 9.03% Mar-14F 16.0% 17.6% 72.0% 1.1% 4.57 0% 107% 0.83 0.83 0.71 (280%) 3.28% Mar-15F 2.7% 2.6% 72.0% 2.3% 4.50 0% 107% 0.83 0.83 0.71 (288%) 3.36% Mar-16F 3.4% 3.4% 72.0% 4.4% 4.67 0% 106% 0.83 0.83 0.71 (298%) 3.52%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Mar-13A 6.4 N/A N/A 2,102 93.8% N/A N/A Mar-14F 6.5 N/A N/A 2,102 95.0% N/A N/A Mar-15F 6.6 N/A N/A 2,102 95.0% N/A N/A Mar-16F 6.8 N/A N/A 2,102 95.0% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

39

REIT | Singapore
June 26, 2013

Mapletree Industrial Trust


MINT SP / MAPI.SI Current S$1.30 S$1.41 S$1.62 8.5%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,694m
S$2,149m

US$4.58m
S$5.73m

69.7%
1,641 m shares

CIMB Analyst(s)

Lacking compelling catalysts


We expect positive rental reversions on MINTs flatted factories and asset enhancements to mitigate any vacancy concerns. Some value has emerged in the wake of the broad-based selldown but we maintain our Neutral call, pending clarity on backfilling at the Signature.
We trim our FY14-16 DPUs on adjustments to the pace of leasing for upcoming asset enhancements. We cut our DDM-based target price due to a higher discount rate of 8.1% (previously 7.3%) on a sector-wide adjustment. We see re-rating catalysts from greater certainty of backfilling and clarity on longer-term growth. factories, management estimates that rental for its flatted factories portfolio is still about 10% below market which still leaves room for positive rental reversions in the near term.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Temasek Holdings Capital Research Capital Group 1M -2.7 -11.6 3M -1.1 -6.5 12M 0.4 10.2 % held 30.3 5.8 5.6

Moderately sheltered from rate increases


An asset leverage of 35% should provide sufficient debt headroom for committed asset enhancements. Its debt maturity is well-staggered with no more than 34% of borrowings due in each year, while a fairly high 88% of its borrowings have been hedged. As such, we expect MINT to be moderately sheltered from interest rate hikes, with a 50bp increase in interest costs expected to have a 0.5% impact on DPU.

Still room for positive rental reversions


We expect positive rental reversions on MINTs flatted factories and asset enhancements to mitigate vacancy concerns surrounding its departing business-park tenants. We understand that management has so far received commitments to backfill about 10% of the space left by Credit Suisse, and is speaking to a couple more which can backfill about ~20% of space vacated by the bank. Rental reversions should likely come in positive against signing rents of S$3.4-3.5 psf for Credit Suisse and Lucas Films. While passing rents are catching up with renewal rents and there could be restructuring pressures for its flatted

Maintain Neutral
Some value has emerged following the broad-based selldown but we keep our Neutral rating, pending clarity on backfilling at the Signature and further growth catalysts. We think that the higher headline yields are aimed at compensating for the shorter remaining land tenure for some assets.

Price Close 1.70 1.60 1.50 1.40 1.30 1.20 15 1.10


Vol m

Relative to FSSTI (RHS) 119 115 111 107 102 98 94

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Mar-12A 246.4 171.3 220.4 131.7 0.082 15.3% 15.91 0.08 6.47% 37.8% 1.02 1.28 8.32% Mar-13A 276.4 195.4 279.3 151.0 0.089 8.5% 14.67 0.09 7.12% 34.8% 1.10 1.18 8.38% Mar-14F 278.2 197.6 144.2 150.8 0.088 (0.9%) 14.80 0.09 7.06% 37.3% 1.10 1.18 7.99% (1.25%) 0.97 Mar-15F 289.3 205.7 150.5 157.1 0.092 4.4% 14.18 0.10 7.36% 38.4% 1.10 1.18 8.35% (2.92%) 0.98 Mar-16F 301.6 214.2 158.7 165.3 0.097 5.4% 13.44 0.10 7.75% 38.4% 1.10 1.18 8.80% (1.91%) 1.00

10 5
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

52-week share price range


1.30
1.19 1.61

1.41
Current Target

SOURCES: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Mapletree Industrial Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Mar-13A 276.4 0.0 276.4 (81.0) 195.4 0.0 (21.2) (0.4) (1.4) 172.4 0.0 172.4 (26.8) 0.0 0.0 134.9 280.5 (1.2) 0.0 0.0 279.3 151.0 Mar-14F 278.2 0.0 278.2 (80.6) 197.6 0.0 (21.6) (0.4) (1.5) 174.1 0.0 174.1 (30.0) 0.0 0.0 0.0 144.2 0.0 0.0 0.0 144.2 150.8 Mar-15F 289.3 0.0 289.3 (83.6) 205.7 0.0 (21.9) (0.4) (1.5) 181.9 0.0 181.9 (31.4) 0.0 0.0 0.0 150.5 0.0 0.0 0.0 150.5 157.1 Mar-16F 301.6 0.0 301.6 (87.4) 214.2 0.0 (22.2) (0.4) (1.5) 190.1 0.0 190.1 (31.4) 0.0 0.0 0.0 158.7 0.0 0.0 0.0 158.7 165.3

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Mar-13A 2,853 0 27 2,880 72 0 15 0 88 81 206 5 291 826 46 872 1,804 0 1,804 Mar-14F 2,895 0 106 3,001 72 0 15 0 88 81 344 5 430 809 46 855 1,804 0 1,804 Mar-15F 2,895 0 160 3,055 72 0 15 0 88 81 126 5 212 1,081 46 1,127 1,804 0 1,804 Mar-16F 2,895 0 160 3,055 72 0 15 0 88 81 139 5 225 1,068 46 1,114 1,804 0 1,804

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Mar-13A 280.5 26.8 3.7 (4.5) (132.6) 173.9 (13.4) (17.2) (0.0) (30.6) (79.4) 44.9 (132.9) (25.6) (193.1) (49.8) 143.6 38.5 Mar-14F 144.2 30.0 0.0 0.0 0.0 174.1 (79.0) (42.0) 0.3 (120.7) 121.0 0.0 (150.8) (23.7) (53.5) (0.0) 53.8 144.5 Mar-15F 150.5 31.4 0.0 0.0 0.0 181.9 (54.0) 0.0 0.3 (53.7) 54.0 0.0 (157.1) (25.1) (128.3) (0.0) 128.3 150.5 Mar-16F 158.7 31.4 0.0 0.0 0.0 190.1 0.0 0.0 0.3 0.3 0.0 0.0 (165.3) (25.1) (190.5) 0.0 190.5 158.7

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Mar-13A 12.2% 14.1% 70.7% 10% 6.35 0.426% 54% 0.30 0.30 0.25 (189%) 9.65% Mar-14F 0.6% 1.1% 71.0% (1%) 5.75 0.000% 105% 0.20 0.20 0.17 (402%) 4.76% Mar-15F 4.0% 4.1% 71.1% 4% 5.73 0.000% 104% 0.41 0.41 0.34 509% 4.83% Mar-16F 4.3% 4.1% 71.0% 5% 5.99 0.000% 104% 0.39 0.39 0.32 212% 5.05%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Mar-13A 1.9 N/A N/A N/A 94.0% N/A N/A Mar-14F 1.9 N/A N/A N/A 94.0% N/A N/A Mar-15F 1.9 N/A N/A N/A 94.8% N/A N/A Mar-16F 1.9 N/A N/A N/A 95.1% N/A N/A

SOURCES: CIMB, COMPANY REPORTS

41

REIT | Singapore
June 26, 2013

Mapletree Logistics Trust


MLT SP / MAPL.SI Current S$1.04 S$1.08 S$1.33 4.3%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,997m
S$2,534m

US$4.46m
S$5.57m

59.0%
2,432 m shares

CIMB Analyst(s)

Lacking in catalysts
Underpinned by its long WALE (more than five years) and high occupancy, lease renewals and hence rental reversions should be fairly limited each year. Funding costs could be on the rise, capping upside in accretion from acquisitions.
We keep our DPUs but lower our DDM-based target price, now based on a higher discount rate of 8.1% (previously 7.1%; raised across the board following higher bond yields). Our estimates factor in S$150m of acquisitions for FY14. Maintain Neutral on a lack of catalysts for now.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Staggered debt maturity


Asset leverage is a fairly healthy 34%, albeit a higher 41% if we consider MLTs perpetual securities as debt as well. Maturities are, however, well-staggered, with no more than 20% of borrowings due in each year and the average debt maturity at a long 3.9 years. Coupled with a fairly high 70% of loans hedged, this should limit MLTs exposure to interest-rate hikes. We estimate that a 50bp increase in borrowing rates could reduce MLTs DPU by 1.3%.

Share price info


Share price perf. (%) Relative Absolute Major shareholders Temasek Holdings Bank of New York Columbia Wanger 1M -10.5 -19.4 3M -8.3 -13.7 12M -2.6 7.2 % held 41.0 6.4 5.0

Awaiting acquisitions
Underpinned by its long WALE (more than five years) and high occupancy, lease renewals and thus rental reversions should be fairly limited each year, with acquisitions/ development being critical sources of growth. To this end, management is on the lookout for acquisitions in China, South Korea, Malaysia and Singapore and recently made a small acquisition in South Korea. However, with funding costs (both debt and equity) potentially on the rise, accretion could be capped, particularly if competition for assets continues to prop up capital values.

Maintain Neutral
Maintain Neutral on a lack of meaningful catalysts and with risks of rising funding costs. We prefer AREIT among the larger-cap industrial REITs, for purer local exposure, lower vulnerability to interest-rate hikes and stronger growth.

Price Close 1.40 1.30

Relative to FSSTI (RHS) 123 120 117 114 111 108 105 102 99 96 93

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Mar-12A 278.7 241.4 160.3 162.7 0.068 (73%) 15.32 0.067 6.45% 35.0% 0.90 1.15 2.01% Mar-13A 307.8 268.1 202.7 166.4 0.067 276% 15.60 0.069 6.59% 33.8% 0.92 1.13 7.32% Mar-14F 318.2 276.3 197.3 174.9 0.072 8% 14.41 0.072 6.91% 36.1% 0.92 1.13 7.87% 0% 1.08 Mar-15F 325.2 282.4 201.5 179.0 0.074 2% 14.07 0.074 7.08% 36.1% 0.92 1.13 8.05% 0% 1.09 Mar-16F 329.2 285.9 204.7 182.3 0.075 2% 13.82 0.075 7.21% 36.1% 0.92 1.13 8.20% 0% 1.05

1.20
1.10

1.00
200 0.90 150 100 50
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

52-week share price range


1.04
0.97 1.35

Vol m

1.08
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Mapletree Logistics Trust


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Mar-13A 307.8 0.0 307.8 (39.7) 268.1 0.0 (31.1) (0.6) (5.2) 231.2 0.0 231.2 (37.9) 0.0 0.0 43.3 236.6 (14.1) (1.0) (18.8) 202.7 166.4 Mar-14F 318.2 0.0 318.2 (41.8) 276.3 0.0 (32.2) (0.7) 0.0 243.4 0.0 243.4 (35.7) 0.0 0.0 23.1 230.9 (13.7) (1.0) (18.8) 197.3 174.9 Mar-15F 325.2 0.0 325.2 (42.8) 282.4 0.0 (32.2) (0.7) 0.0 249.5 0.0 249.5 (37.2) 0.0 0.0 23.1 235.3 (14.0) (1.0) (18.8) 201.5 179.0 Mar-16F 329.2 0.0 329.2 (43.3) 285.9 0.0 (32.2) (0.7) 0.0 253.0 0.0 253.0 (37.2) 0.0 0.0 23.1 238.8 (14.2) (1.0) (18.8) 204.7 182.3

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Mar-13A 4,050 0 0 4,050 135 0 12 40 187 159 289 12 460 1,145 50 1,195 2,232 6 344 2,582 Mar-14F 4,200 0 0 4,200 135 0 12 40 187 159 289 12 460 1,295 50 1,345 2,232 6 344 2,582 Mar-15F 4,200 0 0 4,200 135 0 12 40 187 159 289 12 460 1,295 50 1,345 2,232 6 344 2,582 Mar-16F 4,200 0 0 4,200 135 0 12 40 187 159 289 12 460 1,295 50 1,345 2,232 6 344 2,582

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Mar-13A 236.6 37.9 24.7 (10.4) (44.5) 244.4 0.0 (196.6) 0.0 (196.6) 131.9 0.0 (178.5) (37.2) (83.8) (36.0) 47.8 142.5 Mar-14F 230.9 35.7 0.0 (13.7) (22.3) 230.5 0.0 (149.2) 0.0 (149.2) 150.0 0.0 (174.9) (36.4) (61.3) 20.0 81.2 194.8 Mar-15F 235.3 37.2 0.0 (14.0) (22.3) 236.3 0.0 0.8 0.0 0.8 0.0 0.0 (179.0) (38.0) (217.0) 20.0 237.0 199.0 Mar-16F 238.8 37.2 0.0 (14.2) (22.3) 239.5 0.0 0.8 0.0 0.8 0.0 0.0 (182.3) (38.0) (220.3) 20.0 240.3 202.3

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Mar-13A 302% 303% 87.1% 285% 5.98 5.95% 82% 0.41 0.41 0.29 (159%) 4.76% Mar-14F 3% 3% 86.8% 5% 6.68 5.95% 89% 0.41 0.41 0.29 (191%) 4.57% Mar-15F 2% 2% 86.8% 2% 6.56 5.95% 89% 0.41 0.41 0.29 (196%) 4.59% Mar-16F 1% 1% 86.8% 2% 6.66 5.95% 89% 0.41 0.41 0.29 (199%) 4.67%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Mar-13A N/A N/A N/A N/A 98.5% 4,050.4 N/A Mar-14F N/A N/A N/A N/A 98.5% 4,200.4 N/A Mar-15F N/A N/A N/A N/A 98.5% 4,200.4 N/A Mar-16F N/A N/A N/A N/A 98.5% 4,200.4 N/A

SOURCE: CIMB, COMPANY REPORTS

43

REIT SINGAPORE
June 26, 2013

Parkway Life REIT


PREIT SP / PWLR.SI Current S$2.27 S$2.33 S$2.72 2.8%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,083m
S$1,373m

US$1.26m
S$1.57m

64.2%
605.0 m shares

CIMB Analyst(s)

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Defensive without losing sight of growth


We expect steady growth on the back of hedges on its yen cash flows (till 2017) and an inflation-pegged rental review in Singapore. Though CPI has eased, rental uplifts in Singapore should remain decent while accretive acquisitions in Japan could add icing to the cake.

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Parkway Holdings Bank of New York Symphony International Holdings 1M -6.4 -15.3 3M -3.1 -8.5 12M 12.9 22.7 % held 35.8 10.7 6.4

We lower FY14-15 DPU by 1%, on moderating CPI expectations for Singapore. Coupled with a higher discount rate of 7% (previously 6.2%; raised across the board following higher bond yields), our DDM-based target price dips. Maintain Neutral as we believe positives have been priced in.

boosting accretion. We have assumed S$130m of acquisitions in Japan and Malaysia/Australia.

Defensive positioning
Asset leverage was 31.6% as at end-1Q, leaving debt headroom for acquisitions. While debt maturities appear chunkier in FY14-15, we expect management to term out FY14 borrowings pre-emptively without a major jump in costs. Some 85% of its loans have been hedged as fixed-rate debt and we estimate that a 50bp increase in interest rates would have a 0.6% impact on DPU.

Moderating CPI expectations


We expect steady growth for Plife on the back of its existing hedges on yen cash flows (till 2017) and an inflation-pegged rental review in Singapore. While CPI had eased in Apr to 1.5% (reflecting administrative measures to contain COE premiums), there should still be decent rental uplifts of 3-3.5% for its Singapore portfolio, on a CPI + 1% formula. We see the potential for near-term acquisitions in Japan, with wide spreads between acquisition yields of 6-7% and funding costs of 1.6%

Growth and defensive attributes priced in


While we like Plifes defensive-plus-growth attributes, prudent management and acquisition potential, the market has rewarded the stock with premium valuations (1.4x P/BV). Maintain Neutral.

Price Close 2.9 2.7 2.5 2.3 2.1 1.9 4 1.7 3 2 1


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 137 130 122 115 107 100 92

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 87.8 80.3 102.0 58.05 0.10 20.8% 23.73 0.10 4.23% 34.6% 1.48 1.53 6.62% Dec-12A 94.1 86.4 115.4 62.41 0.11 10.3% 21.50 0.10 4.54% 32.8% 1.57 1.44 6.91% Dec-13F 103.2 94.8 66.5 65.85 0.11 4.1% 20.66 0.11 4.79% 37.1% 1.58 1.44 6.98% 0.08% 1.00 Dec-14F 110.7 101.7 70.2 69.79 0.12 5.6% 19.56 0.12 5.08% 37.0% 1.58 1.43 7.35% (0.18%) 1.06 Dec-15F 113.0 103.9 72.3 71.92 0.12 3.0% 18.98 0.12 5.24% 36.9% 1.59 1.43 7.54% (0.96%) 1.00

Vol m

Mar-13

52-week share price range


2.27 1.84
2.79

2.33
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Parkway Life REIT


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 94.1 0.0 94.1 (7.6) 86.4 0.0 (8.3) (2.3) 0.0 75.9 0.0 75.9 (8.6) 0.0 0.0 54.3 121.6 (6.1) 0.0 0.0 115.4 62.4 Dec-13F 103.2 0.0 103.2 (8.4) 94.8 0.0 (9.0) (2.7) 0.0 83.2 0.0 83.2 (9.3) 0.0 0.0 0.0 73.8 (7.4) 0.0 0.0 66.5 65.8 Dec-14F 110.7 0.0 110.7 (9.0) 101.7 0.0 (9.3) (2.7) 0.0 89.7 0.0 89.7 (11.3) 0.0 0.0 0.0 78.4 (8.2) 0.0 0.0 70.2 69.8 Dec-15F 113.0 0.0 113.0 (9.1) 103.9 0.0 (9.4) (2.7) 0.0 91.8 0.0 91.8 (11.3) 0.0 0.0 0.0 80.5 (8.2) 0.0 0.0 72.3 71.9

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 1,427 0 3 1,430 31 0 9 0 40 13 14 2 29 467 22 490 951 0 951 Dec-13F 1,561 0 3 1,564 4 0 9 0 14 16 14 2 32 570 21 591 954 0 954 Dec-14F 1,565 0 3 1,568 5 0 9 0 14 17 14 2 33 570 21 591 957 0 957 Dec-15F 1,569 0 3 1,572 5 0 9 0 14 17 14 2 34 570 21 591 960 0 960

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 121.6 8.6 2.2 (4.0) (54.5) 73.8 (3.7) (56.9) 0.0 (60.6) 55.1 0.0 (61.0) (7.8) (13.8) (0.6) 13.2 60.5 Dec-13F 73.8 9.3 2.8 (7.4) 0.0 78.6 (3.7) (130.0) 1.2 (132.5) 103.1 0.0 (65.8) (9.4) 27.8 (26.1) (54.0) 39.7 Dec-14F 78.4 11.3 1.1 (8.2) 0.0 82.7 (3.7) 0.0 2.6 (1.2) 0.0 0.0 (69.8) (11.3) (81.1) 0.4 81.5 70.2 Dec-15F 80.5 11.3 0.4 (8.2) 0.0 84.0 (3.7) 0.0 2.6 (1.2) 0.0 0.0 (71.9) (11.3) (83.2) (0.4) 82.9 71.5

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 7.19% 7.62% 91.9% 7.49% 8.78 5.1% 54.1% 1.36 1.36 1.04 (1313%) 7.96% Dec-13F 9.72% 9.73% 91.9% 5.52% 8.89 10.0% 99.1% 0.43 0.43 0.14 (2814%) 4.36% Dec-14F 7.20% 7.21% 91.9% 5.99% 7.92 10.4% 99.4% 0.42 0.42 0.15 (1456%) 4.44% Dec-15F 2.14% 2.20% 91.9% 3.04% 8.11 10.1% 99.4% 0.41 0.41 0.13 (1239%) 4.57%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A N/A N/A N/A 2,265 100.0% 1,427.3 N/A Dec-13F N/A N/A N/A 2,265 100.0% 1,561.1 N/A Dec-14F N/A N/A N/A 2,265 100.0% 1,564.8 N/A Dec-15F N/A N/A N/A 2,265 100.0% 1,568.5 N/A

SOURCE: CIMB, COMPANY REPORTS

45

REIT SINGAPORE
June 26, 2013

Starhill Global REIT


SGREIT SP / STHL.SI Current S$0.81 S$0.86 S$0.93 6.6%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$1,241m
S$1,574m

US$2.65m
S$3.31m

55.0%
1,943 m shares

CIMB Analyst(s)

Awaiting the next big catalyst


FY13-14 DPU growth should be led by rental uplift for its Toshin and David Jones master leases, offset partially by forex weakness. No refinancing is due till 2015. A low leverage and the hedging of 81% of its borrowings should leave Starhill fairly immune to rate hikes.
We keep our DPUs but lower our DDM-based target price after raising our discount rate to 8.1% (previously 7.6%; raised across the board following higher bond yields). Maintain Neutral as we believe the positive attribute of its defensive portfolio has been priced in. lowest among S-REITs, leaving ammunition for acquisition growth. Average debt maturity should be extended to 3.5 years from 1.4, after the refinancing of S$513m worth of borrowings in Sep 13. With these, there will be no refinancing due till 2015. Some 81% of its borrowings has been hedged as fixed-rate debt, leaving Starhill fairly protected against interest-rate increases, in our view.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders YTL Corp Bhd AIA Co. Ltd 1M -3.1 -12 3M -3.6 -9 12M 16.8 26.6 % held 36.0 9.0

DPU growth from rental step-up on master leases


We expect DPU growth in FY14 to come from a full-year 6.7% rental uplift for its Toshin master lease and a 6-7% rental step-up for its David Jones master lease in 2014. These will, however, be offset by dilution from recent CPPU conversion by its sponsor and some forex weakness stemming from its Australian and Japanese assets (10-11% of NPI). Growth should, however, moderate in FY15 on a lack of rental step-up in that year.

Remain Neutral
Standard rental uplifts from master leases should ensure growth while extended debt maturities coupled with fairly-high interest-rate hedges should limit its exposure to rate increases. That said, we believe its defensive portfolio has priced in at 0.9x P/BV, with a lack of clarity for portfolio growth longer term amid the difficulty of making accretive acquisitions of prime properties. Maintain Neutral.

No refinancing due till 2015


Balance sheet is fairly strong with asset leverage of 30.5% among the

Price Close 1.00 0.90 0.80 0.70 20 0.60 15 10 5


Jun-12 Sep-12 Source: Bloomberg Dec-12

Relative to FSSTI (RHS) 140 135 130 125 120 115 110 105 100 95

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 180.1 143.6 104.4 80.1 0.045 7.24% 17.85 0.041 5.09% 30.5% 0.86 0.94 5.29% Dec-12A 186.0 148.4 130.1 85.3 0.049 9.03% 16.37 0.044 5.42% 30.1% 0.88 0.92 5.68% Dec-13F 202.3 161.1 108.3 103.9 0.053 6.85% 15.32 0.051 6.26% 30.8% 0.87 0.93 6.03% 0% 0.85 Dec-14F 210.3 167.5 114.3 114.5 0.053 0.43% 15.26 0.053 6.56% 30.7% 0.87 0.93 6.07% 0% 0.98 Dec-15F 213.3 169.7 116.4 116.6 0.054 1.85% 14.98 0.054 6.68% 30.7% 0.87 0.93 6.19% 0% 1.04

Vol m

Mar-13

52-week share price range


0.81
0.66 0.99

0.86
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Starhill Global REIT


June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 186.0 0.0 186.0 (37.6) 148.4 0.0 (14.1) (3.2) 0.0 131.1 0.0 131.1 (32.1) 0.0 0.0 35.0 134.0 (3.9) 0.0 0.0 130.1 85.3 Dec-13F 202.3 0.0 202.3 (41.1) 161.1 0.0 (14.4) (3.3) 0.0 143.5 0.0 143.5 (30.8) 0.0 0.0 0.0 112.7 (4.4) 0.0 0.0 108.3 103.9 Dec-14F 210.3 0.0 210.3 (42.8) 167.5 0.0 (14.4) (3.3) 0.0 149.8 0.0 149.8 (30.8) 0.0 0.0 0.0 119.0 (4.6) 0.0 0.0 114.3 114.5 Dec-15F 213.3 0.0 213.3 (43.6) 169.7 0.0 (14.4) (3.3) 0.0 152.0 0.0 152.0 (30.8) 0.0 0.0 0.0 121.2 (4.7) 0.0 0.0 116.4 116.6

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 2,713 10 8 2,731 79 0 9 0 89 44 492 4 540 357 41 398 1,709 0 173 1,882 Dec-13F 2,765 10 9 2,785 73 0 9 0 82 48 0 7 55 882 47 929 1,882 0 1,882 Dec-14F 2,765 10 10 2,786 74 0 9 0 84 50 0 7 57 882 48 930 1,882 0 1,882 Dec-15F 2,766 10 11 2,787 75 0 9 0 84 51 0 7 58 882 48 931 1,882 0 1,882

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 134.0 32.1 (11.8) (3.9) (34.5) 115.8 (20.7) (0.3) 0.5 (20.4) (1.2) 0.0 (92.3) (27.6) (121.0) (25.6) 96.0 67.2 Dec-13F 112.7 30.8 4.6 (4.4) 0.3 144.0 (0.3) (62.7) 9.6 (53.3) 33.0 0.0 (109.4) (21.1) (97.5) (6.9) 91.1 92.8 Dec-14F 119.0 30.8 1.9 (4.6) 0.8 147.9 (0.3) (1.7) 0.5 (1.5) 0.0 0.0 (115.6) (28.9) (144.5) 1.9 146.9 115.6 Dec-15F 121.2 30.8 0.7 (4.7) 0.9 148.9 (0.3) (1.7) 0.5 (1.5) 0.0 0.0 (117.7) (29.7) (147.4) 0.1 148.0 116.6

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A 3.29% 3.4% 79.8% 6.6% 4.02 2.93% 66% 0.16 0.16 0.15 (244%) 4.60% Dec-13F 8.74% 8.5% 79.7% 15.6% 4.58 3.89% 96% 1.48 1.48 1.32 (697%) 3.81% Dec-14F 3.98% 3.9% 79.6% 4.8% 4.78 3.90% 100% 1.46 1.46 1.30 (544%) 3.99% Dec-15F 1.41% 1.3% 79.6% 1.8% 4.85 3.90% 100% 1.44 1.44 1.28 (531%) 4.06%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 12.2 N/A N/A 1,660 96.2% N/A N/A Dec-13F 12.9 N/A N/A 1,649 96.7% N/A N/A Dec-14F 13.3 N/A N/A 1,649 96.7% N/A N/A Dec-15F 13.6 N/A N/A 1,649 96.7% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

47

REIT | Singapore
June 26, 2013

Suntec REIT
SUN SP / SUNT.SI Current S$1.49 S$1.68 S$1.96 13.0%
Conviction| |

SHORT TERM (3 MTH)

LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Prev. Target Up/Downside

US$2,642m
S$3,351m

US$13.64m
S$17.04m

95.0%
2,252 m shares

CIMB Analyst(s)

Value hard to ignore


Trading at 0.7x P/BV, a tad below the ex-crisis average of 0.8x since its listing and the lowest within the whole sector, we believe that the market has priced in potential negatives from rising borrowing costs, while according limited value to the AEI at Suntec City Mall.
We tweak DPUs lower, factoring in further adjustments in borrowing costs. We lower our DDM-based target price, now based on a higher discount rate of 8.3% (previously 7.5%). We upgrade to Outperform from Neutral for its attractive valuations. We see re-rating catalysts from the positive execution of Suntec City Malls AEI.

TAN Siew Ling


T (65) 6210 8698 E siewling.tan@cimb.com

Donald CHUA
T (65) 6210 8606 E donald.chua@cimb.com

Share price info


Share price perf. (%) Relative Absolute Major shareholders Perennial Investment Schroder Investment Asean Investment 1M -10 -18.9 3M -10.2 -15.6 12M 1.9 11.7 % held 5.1 5.0 4.9

Susceptibility to interest rate pressures


With a fairly high aggregate leverage of 39%, lower interest rate hedges (about 60% of total borrowings) and a short average length of debt maturity, we believe that Suntec could be among the REITs which are more exposed to interest rate hikes. We estimate that a 50bp increase in the cost of borrowing could have a 3% impact on DPU.

Short-term pain; long-term gain


All eyes are on Suntecs massive asset enhancement plan at Suntec City Mall as a growth-driver for Suntec. Since starting in Jun 2012, Suntec REIT had gone through its worst-hit quarter thus far in 1QFY13 as revenue from the mall fell 44% yoy due to overlapping phases of asset enhancement. The impact was, however, softened by a top-up using the Chijmes divestment proceeds. The asset enhancement initiative (AEI) has been progressing smoothly so far. As at 1Q, pre-commitments at Phase 1 were at a high 96.7% ahead of opening in June, while Phase 2 has achieved pre-commitments of 53% ahead of completion in 4Q13.
Price Close 2.0 1.8 1.6 1.4 40 1.2 30 20 10
Jun-12 Sep-12 Source: Bloomberg Dec-12 Mar-13

Upgrade to Outperform
Trading at 0.7x P/BV, a tad below the ex-crisis average of 0.8x since its listing and the lowest within the whole sector, we believe that the market has priced in potential negatives from rising borrowing costs, while according limited value to the asset enhancement at Suntec City Mall. We see a viable entry point for a play on a potential turnaround of the mall, with near-term downside supported by the Chijmes divestment proceeds. We thus upgrade Suntec to Outperform from Neutral. Key catalysts include a successful turnaround of Suntec City Mall.

Relative to FSSTI (RHS) 137 132 127 122 117 112 107 102 97 92

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x) Dec-11A 270.3 193.4 631.8 220.7 0.11 56.1% 13.76 0.10 6.69% 37.5% 1.99 0.75 5.69% Dec-12A 261.9 163.4 413.2 213.0 0.12 9.7% 12.54 0.09 6.39% 36.7% 2.07 0.72 5.84% Dec-13F 251.9 157.1 124.3 209.8 0.05 (53.6%) 27.04 0.09 6.22% 38.1% 2.05 0.72 2.67% 0.00% 0.76 Dec-14F 280.3 177.8 145.3 221.1 0.06 15.9% 23.34 0.10 6.49% 38.7% 2.03 0.73 3.12% (1.38%) 0.75 Dec-15F 326.2 213.2 185.4 250.5 0.08 26.5% 18.45 0.11 7.29% 38.8% 2.01 0.74 3.98% (1.23%) 0.69

52-week share price range


1.49 1.34
2.00

Vol m

1.68
Current Target

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Suntec REIT
June 26, 2013

Profit & Loss


(S$m) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit Dec-12A 261.9 0.0 261.9 (98.5) 163.4 0.0 (39.0) (3.9) 0.0 120.5 (21.3) 99.2 (51.1) 164.2 66.3 148.4 427.0 (1.7) (12.1) 0.0 413.2 213.0 Dec-13F 251.9 0.0 251.9 (94.7) 157.1 0.0 (38.8) (5.7) 0.0 112.6 (18.1) 94.5 (52.6) 61.9 22.0 0.0 125.8 (1.5) 0.0 0.0 124.3 209.8 Dec-14F 280.3 0.0 280.3 (102.5) 177.8 0.0 (39.4) (5.8) 0.0 132.7 (14.0) 118.7 (57.7) 68.4 17.0 0.0 146.4 (1.2) 0.0 0.0 145.3 221.1 Dec-15F 326.2 0.0 326.2 (113.0) 213.2 0.0 (39.5) (5.8) 0.0 167.8 (11.1) 156.7 (58.1) 74.2 13.5 0.0 186.3 (0.9) 0.0 0.0 185.4 250.5

Balance Sheet
(S$m) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-12A 7,509 39 2 7,551 200 0 5 0 205 50 682 36 767 2,167 38 2,204 4,660 124 4,784 Dec-13F 7,683 39 2 7,724 195 0 5 0 200 48 682 33 763 2,340 38 2,378 4,660 124 4,784 Dec-14F 7,763 39 2 7,804 200 0 5 0 206 53 682 33 768 2,420 38 2,458 4,660 124 4,784 Dec-15F 7,783 39 2 7,824 209 0 5 0 214 62 682 32 776 2,440 38 2,478 4,660 124 4,784

Cash Flow
(S$m) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-12A 427.0 (121.5) 6.2 (5.1) (116.2) 190.4 0.0 (14.5) 147.0 132.5 24.1 0.0 (214.0) (46.4) (236.3) 86.6 346.6 300.6 Dec-13F 125.8 8.8 (1.9) (1.5) 31.1 162.2 (173.7) 61.9 33.9 (77.9) 173.7 0.0 (209.8) (52.6) (88.7) (4.5) 105.6 205.4 Dec-14F 146.4 3.2 5.4 (1.2) 31.5 185.4 (80.0) 68.4 30.0 18.4 80.0 0.0 (221.1) (57.7) (198.8) 5.0 225.1 226.2 Dec-15F 186.3 (5.0) 8.7 (0.9) 31.6 220.8 (20.0) 74.2 22.2 76.4 20.0 0.0 (250.5) (58.1) (288.7) 8.4 318.5 259.0

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-12A (3.1%) (15.5%) 62.4% (4.5%) 1.33 0.40% 52% 0.27 0.27 0.26 81% 5.41% Dec-13F (3.8%) (3.9%) 62.4% (2.7%) 1.28 1.22% 169% 0.26 0.26 0.26 (241%) 1.58% Dec-14F 11.3% 13.2% 63.4% 4.4% 1.50 0.81% 152% 0.27 0.27 0.26 (344%) 1.82% Dec-15F 16.4% 19.9% 65.4% 12.3% 1.97 0.51% 135% 0.28 0.28 0.27 (397%) 2.31%

Key Drivers
Rental Rate Psf Pm (S$) Acq. (less development) (US$m) RevPAR (S$) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (S$) Funds Under Management (m) (S$) Dec-12A 8.2 N/A N/A 3,493 98.3% N/A N/A Dec-13F 8.5 N/A N/A 3,493 89.9% N/A N/A Dec-14F 8.8 N/A N/A 3,493 89.9% N/A N/A Dec-15F 9.1 N/A N/A 3,493 98.6% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

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Distribution of stock ratings and investment banking clients for quarter ended on 31 May 2013 1042 companies under coverage Rating Distribution (%) Outperform/Buy/Trading Buy Neutral Underperform/Sell/Trading Sell 52.1% 34.2% 13.7% Investment Banking clients (%) 7.6% 4.9% 5.5%

Recommendation Framework #1 * Stock OUTPERFORM: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 3 months. relevant relevant relevant relevant relevant Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

Recommendation Framework #2 ** Stock OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months. Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.

** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

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REIT
June 26, 2013

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2012. AAV not available, ADVANC - Excellent, AEONTS Good, AMATA - Very Good, ANAN not available, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH not available, BCP - Excellent, BEC - Very Good, BGH - not available, BJC Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET - Good, CENTEL Very Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, EGCO Excellent, ERW Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD Very Good, IVL - Very Good, JAS Very Good, KAMART not available, KBANK - Excellent, KK Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Good, MAKRO Very Good, MCOT Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS Excellent, SAMART Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Good, SPALI - Very Good, SRICHA not available, SSI not available, STA - Good, STEC - Very Good, TCAP - Very Good, THAI - Excellent, THCOM Very Good, TICON Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TTW Very Good, TUF - Very Good, VGI not available, WORK Good.

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