120604 大整合

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1/32SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Sector Update 4 June 2012

SingaporeCo. Reg No: 198700034E

MICA (P) : 099/03/2012

Singapore REITsTake Our Prist ine Picks

Track record matters. The myth that S-REITs are good income-

yielding instruments for retail investors has generated much debate. On

the one hand, REITs proponents like the recurring distributions paid out

from steady streams of rental income. On the other hand, naysayers

argue that whatever REITs managers pay out in dividends, they will

likely take back in the form of rights issues. We examined the total rate

of return of the 10 largest S-REITs since their listing, namely, those with

a trading history of at least five years, and put forward our pristine picksto ride through the impending economic down cycle.

Industrial and retail REITs top of the league. REITS in the more

resilient subsectors like industrial and retail topped our league table,

with CDL Hospitality Trusts, Frasers Centrepoint Trust and Ascendas

Real Estate Investment Trust the best performers. K-REIT Asia was the

worst performer, given the numerous equity cash calls it made to fund

acquisitions. While past performance may not guarantee future returns,

we take the view that our league table does provide some insights into

the track record of the individual S-REITs.

Good mix of stability and grow th potential. Rental income resilience,

total rate of return, accretive distributions and stable payout track record

are some of the parameters we scrutinised by delving into the operating

history of the S-REITs since their initial public offering. Barring a full-

blown European debt crisis, we also think that it is unlikely that S-REITs

will be de-rated to the levels seen during the global financial crisis (GFC)

due to stronger balance sheets and the absence of credit tightening.

Four S-REITs to ride through turbulence. S-REITs currently trade atan average of 0.94x P/BV and 6.8% yield compared to their troughvaluations of 0.34x P/BV and 17.2% yield seen at the height of the GFC.Our top four S-REITs are CapitaMall Trust and Frasers CentrepointTrust in the retail subsector, and Ascendas REIT and Mapletree

Logistics Trust in the industrial subsector. Our top SELLs are K-REITAsia and CapitaCommercial Trust as we see further downside risk intheir DPU which would render valuations unattractive.

Our Picks

Stocks

Bloomberg

CodeMkt cap(USD m)

Currentprice

(SGD)Rating

Targetprice

(SGD)

Top BUYs

Ascendas REIT AREIT SP 5,789 2.05 BUY 2.23

Mapletree Logistics Trust MLT SP 3,047 0.975 BUY 1.06

CapitaMall Trust CT SP 7,700 1.815 BUY 2.20

Frasers Centrepoint Trust FCT SP 1,728 1.625 BUY 1.79

Top SELLs

K-REIT Asia KREIT SP 3,247 0.98 SELL 0.83

CapitaCommercial Trust CCT SP 4,497 1.23 SELL 1.06

Closing price as at 31 May 2012

Source: Maybank KE

ONG Kian [email protected](65) 6432 1470

Wilson [email protected]

(65) 6432 1454

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Singapore REITs

Investment Summary

Track record matters. We examined the total rate of return of the 10

largest S-REITs since their listing, namely, those with a trading history

of at least five years, and put forward our pristine picks to ride through

the impending economic down cycle.

Good mix of stability and grow th potential. Rental income resilience,

total rate of return, accretive distributions and stable payout track record

are some of the parameters we scrutinised by delving into the operating

history of the S-REITs since their initial public offering. Our sector picks

are based on the stocks past track record of DPU accretions as well as

projected performance in FY12F-13F. Figure 1 summarises the

parameters of our bottom-up approach.

Figure 1: Stock selection criteria

Summary Parameters

Past Performance

Listing history Trading history > 5 years.

Equity fund raising (EFR) record Do not substantially dilute shareholders.

Total rate of return (TRR) Track record of REIT. Total returns to shareholder since IPO/listing.

Stable DPU payout

- Rental income resilience during crisis (lease expiry, arrears ratio)- No refinancing risk (debt maturity, minimal covenants,preferably no CMBS)

- No occupancy/concentration risks- Sponsor support

Asset devaluationInvestment properties not devalued substantially during crisis (NAVdecline).

Future Projected Performance

Organic growth- Asset enhancement, solid growth profile- Positive rental reversion

Acquisition growth- Acquisition potential within 12 months- Better-than-expected ROI from recent acquisitions

DPU accretion- Yield attractiveness (on a relative basis)- DPU accretion over FY12F-13F

Source: Maybank KE

Top BUYs. Barring a flare-up of new macro-sensitivities that could

derail our base case, our top four S-REIT picks are CapitaMall Trust

(CMT) and Frasers Centrepoint Trust (FCT) in the retail subsector, and

Ascendas REIT (A-REIT) and Mapletree Logistics Trust (MLT) in the

industrial subsector. CDLHT, riding the tourism boom, also appears

attractive but we remain wary of macro-economic headwinds curtailing

business and leisure travel. Its relative yield of around 6.5% also posesconcern for investors, who may be better off with the more defensive

industrial and retail REITs.

Top SELLs. We would avoid the relatively more cyclical office

subsector as occupancy pressure could translate to further downside

risks for earnings. Our top SELLs are office landlords K-REIT Asia and

CapitaCommercial Trust (CCT) as we see further downside risk in their

DPU which would render valuations unattractive.

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Singapore REITs

Surviving turbulence

Stronger post-GFC. We note that most of the S-REITs have emerged

from the GFC stronger and with healthier balance sheets, forthcoming

acquisition proposals, overseas expansion and more asset

enhancement work being done. YTD, the sector has returned anaverage of 11.2%, compared to -16% in 2011 and 10.6% in 2010, and

during the GFC, 69% in 2009 and -59% in 2008. With the end of the

GFC, four new REITs listed on the SGX-ST Cache Logistics Trust (12

Apr 2010), Mapletree Industrial Trust (21 Oct 2010), Sabana Shariah

Compliant Industrial REIT (26 Nov 2010) and Mapletree Commercial

Trust (27 Apr 2011). The asset-expansion years of 2010-12 were a

stark contrast to 2008-09 when most of the S-REITs were burdened

with deleveraging plans, decompressing cap rates and rights issues.

Figure 2: YTD price performance of members in the FTSE REIT sub-index

Source: Bloomberg, Maybank KE

Figure 3: FSTI ST REIT Index

200

300

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Jun-08

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Mar-12

FSTREI Ind ex +1stdev Avg -1 stdev


Total rate of return (TRR) study. From the retail investors perspective,

we analysed the total returns (capital return +distributions) since listing of

the 10 largest S-REITs with a trading history of at least five years. We have

assumed that they subscribed 100% to all rights issues and divested their

positions on 31 May 2012 closing price. Of the 10, only Suntec REIT andFrasers Centrepoint Trust have not made any rights issue to-date,

though Suntec did a private placement in 2010. Private placements

typically dilute the shareholdings of retail investors, but the subsequent

share price adjustments will correct for our TRR computation.

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Singapore REITsFigure 4: Total rate of return study

S-REITs

Years

listed

Total return

since IPO/listing

Ann uali sed

return Subsector

CDL Hospitality Trusts 5.87 126% 14.92% HOSPITALITY

Ascendas Real Estate Investment Trust 9.53 211% 12.65% INDUSTRIAL

Frasers Centrepoint Trust 5.90 101% 12.50% RETAIL

CapitaCommercial Trust 8.05 110% 9.65% OFFICE

CapitaMall Trust 9.87 142% 9.35% RETAIL

Mapletree Logistics Trust 6.84 83% 9.26% INDUSTRIAL

Suntec Real Estate Investment Trust 7.47 94% 9.26% OFFICE/RETIAL

Starhill Global REIT 6.69 27% 3.60% RETAIL

Ascott Residence Trust 6.17 22% 3.30% HOSPITALITY

K-REIT Asia 6.09 13% 2.01% OFFICE


Our league table offers a sneak peek. As expected, REITs in the

more resilient subsectors such as industrial and retail having endured

SARs, the subprime crisis and GFC topped our league table with thebest performers being CDL Hospitality Trusts (CDLHT), Ascendas Real

Estate Investment Trust (A-REIT) and Frasers Centrepoint Trust (FCT).

CDLHT stands out, its share price having soared by about 151% since

2008 on the heels of a tourism boom. The worst performer was K-REIT

Asia, dragged down by a 17-for-20 rights issue for the OFC acquisition

in 2011 and a 1-for-1 rights issue in 2009 and an 8-for-5 rights issue in

2008 for acquiring one-third ORQ interest and Prudential Tower Strata.

While past performance may not guarantee future returns, we take the

view that our league table does provide some insights into the track

record of the individual REITs.

Debt maturity well spread out. An analysis of the sectors debtmaturity profile suggests that refinancing risk is low. S-REITs average

term to expiry improved from 2.7 years since 2008-09 to 3.14 years as

of 31 Mar 2012. Sector gearing remains healthy at 34.5%, compared to

40.7% at the height of the GFC. The debt maturity profile is also better

spaced out with no more than SGD5.2b to be refinanced each year. As

of 31 Mar 2012, debt among the S-REITs maturing by 2017 stands at

approximately SGD22.3b.

Figure 5: Debt maturi ty profil e of S-REITs* (as of 31 Mar 2012)

2,593

4,8285,126 5,106

3,671

968 966

21%22% 22%

16%

4%4%

11%

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2013 2014 2015 2016 2017 >=2017

0%

5%

10%

15%

20%

25%

30%

35%

40%

Debt Maturing [LHS] Proportion to Total Debt [RHS]

(S$'m)Avg. termto maturity: 3.14 yrs

Sector Gearing: 34.5%

*Excludes Fortune REIT and Saizen REIT. Source: Bloomberg, Maybank KE

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Singapore REITsFigure 6: Debt maturi ty profile of S-REITs (as of 31 Mar 2012)

(SGD m) 2012 2013 2014 2015 2016 2017 >=2017

Office

Frasers Commercial Trust 0 608 0 138 0 0 0

CapitaCommercial Trust 0 197 350 730 776 0 0

K-REIT Asia 535 100 635 825 428 0 0

Suntec REIT 200 670 773.5 681.5 370.0 0 0

Office subtotal 735 1,575 1,759 2,375 1,574 0 0

Retail

CapitaMall Trust 783.0 580 500.0 800 598.7 250 0

Frasers Centrepoint Trust 80 55 60 25 264 70 0

Starhill Global REIT 26 548 1 259 25 0 0

CapitaRetail China Trust 40.0 150.5 120.3 88.0 50 0 0

Lippo-Mapletree Indonesia 0 0 147.5 0 0 0 0

Mapletree Commercial Trust 0 282.2 338.6 339 169.3 0 0

Retail subtotal 929 1,616 1,167 1,510 1,107 320 0

Healthcare

Parkway Life REIT 9 50 185 217 0 49 0

First REIT 0 48.2 0 51 0 0 0

Healthcare subtotal 9 98 185 268 0 49 0

Hospitality

Ascott Residence Trust 221 106 275 241 327 0 0

CDL Hospitality REIT 0 452 0 84 0 0 0

Hospi talit y subtotal 221 558 275 325 327 0 0

Industrial

Ascendas REIT 376 257 395 300 350 375 348

Cambridge Industrial Trust 0 0.0 266.5 50 100 0 0

AIMS AMP Capital Indus REIT 0 130.0 29 123.0 0 0 0

Mapletree Industrial Trust 84 251 344 126 139 0 125

Mapletree Logistics Trust 239 299 135 30 75 224 493

Cache Logistics Trust 0 0 249 0 0 0 0

Sabana Shariah Comp. Indus REIT 0 44 321 0 0 0 0

Industri al subtotal 699 981 1,739 629 664 599 966

S-REITs total2,593(11%)

4,828(21%)

5,126(22%)

5,106(22%)

3,671(16%)

968(4%)

966(4%)

Source: Companies

Resilience is the name of the game. Barring a full-blown European

debt crisis, we think it is unlikely that S-REITs will decline to irrationally

low levels as in the days of the GFC. This is partly because S-REITs

have stronger balance sheets this time around. Moreover, interest rates

are still relatively low and a tightening of credit (credit crunch) among

financial institutions, which prevailed in 2008-09, has yet to occur.

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Singapore REITsFigure 7: Cash calls in the midst of the subprime crisis and the GFC

S-REITs Cash call Date announced Reason

FCOT 3-for-1 [email protected] 30-J un-09 Refinancing of the maturing debt

CCT 1-for-1 [email protected] 22-May-09 Reduce borrowings

K-REIT Asia 8-for-5 [email protected] 25-Mar-08 Partly repay debt and finance 1/3 stake of ORQ

Suntec REIT [email protected] 11-Dec-09 Strengthen balance sheet and capital structureCMT 9- for-10 [email protected] 09-Feb-09 Repay borrowings

Starhill Global 1- for-1 [email protected] 22-J un-09 Pare down some of its existing debt

A-REITPrivate placement & preferential [email protected]

15-J an-09 Reduce aggregate leverage and fund development projects

MLT 3- for-4 rights [email protected] 24-J un-08 Repay borrowings


Stay selective, stay invested. The unfolding of the Eurozone crisis,

the slow US economic recovery and the prospect of a slowing economy

in China will no doubt increase the downside risk to investors. With the

European debt crisis lingering and possibly worsening, global markets

look set to remain volatile. Elevated inflation also does not justifyholding on to cash for too long. We recommend that investors be

selective with S-REITs and stay invested but only in the right counters.

Four S-REITs to ride through turbulence. Rental income resilience,

TRR, accretive distributions and stable payout track record are some of

the parameters we scrutinised by delving into the operating history of

the S-REITs since their initial public offering. Barring a full-blown

European debt crisis, we also think that it is unlikely that S-REITs will

be de-rated to GFC levels, due to stronger balance-sheets and the

absence of credit tightening.

Sector valuations. S-REITs currently trade at an average 0.94x P/BVand 6.8% yield compared to their trough valuations of 0.34x P/BV and

17.2% yield seen at the height of the GFC.

Figure 8: Price-to-book of S-REITs in various subsectors

Min (midst

of GFC) 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 YTD 2012

Office 0.20x 0.74x 0.30x 0.89x 0.87x 0.59x 0.73x

Retail 0.44x 1.35x 0.55x 1.01x 1.08x 0.93x 1.01x

Healthcare 0.47x 0.83x 0.53x 0.87x 1.08x 1.11x 1.18x

Hospitality 0.27x 1.22x 0.46x 1.09x 1.16x 0.85x 0.99x

Industrial 0.46x 1.34x 0.55x 1.13x 1.38x 1.01x 1.09x

Overal l S-REITs 0.34x 1.07x 0.45x 0.99x 1.07x 0.83x 0.94xSource: Bloomberg, Maybank KE

Figure 9: Distribut ion yields of S-REITs in various subsectors

Max (midst

of GFC) 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 YTD 2012

Office 21.5% 3.9% 14.6% 7.5% 5.6% 8.0% 5.5%

Retail 13.9% 4.1% 10.2% 5.8% 5.3% 6.2% 6.2%

Healthcare 11.7% 8.7% 10.9% 7.0% 5.9% 6.5% 7.0%

Hospitality 25.1% 3.8% 14.8% 5.3% 5.4% 7.8% 6.1%

Industrial 18.4% 6.0% 15.1% 7.4% 6.7% 7.9% 7.6%

Overal l S-REITs 17.2% 4.5% 13.0% 6.7% 5.7% 7.3% 6.8%

Source: Bloomberg
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Singapore REITs

Figure 10: Valuation matrix

StocksMkt Cap(USDm)

CurrentPrice Rating

TargetPrice

Upside /(downside)

2012f DPU(Cents)

2012F DPUyield (%)

Total return(%)

2012FRoE (%)

2012fD/A (%)

REITs

Ascendas REIT 5,789 $2.05 BUY $2.23 8.8% 13.45 6.6% 15.3% 8.4% 34.1%

Cache Logistics Trust 929 $1.035 HOLD $1.08 4.3% 8.09 7.8% 12.2% 8.4% 31.4%

CapitaCommercial Trust 4,497 $1.23 SELL $1.06 -13.8% 7.3 5.9% -7.9% 4.1% 30.3%

CapitaMall Trust 7,700 $1.815 BUY $2.20 21.2% 9.8 5.4% 26.6% 5.9% 35.2%

CDL Hospitality Trusts 2,309 $1.835 HOLD $1.92 4.6% 12 6.5% 11.2% 7.0% 25.7%

Frasers Centrepoint Trust 1,728 $1.625 BUY $1.79 10.2% 9.57 5.9% 16.0% 5.7% 32.3%

K-REIT Asia 3,247 $0.98 SELL $0.83 -15.3% 6.9 7.0% -8.3% 3.2% 37.8%

Mapletree Logistics Trust 3,047 $0.975 BUY $1.06 8.7% 6.98 7.2% 15.9% 7.7% 35.4%

Starhill Global REIT 1,577 $0.625 HOLD $0.65 4.0% 4.24 6.8% 10.8% 5.1% 30.3%

Suntec REIT 3,718 $1.285 HOLD $1.285 0.0% 9.19 7.2% 7.2% 5.5% 37.1%

Source: Maybank KE

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Singapore REITs

S-REITs in a changing landscape

In the series of charts below, we highlight the forward DPU yield

performance of S-REITs in our coverage universe against the backdrop

of a changing economic landscape. It should be noted that the different

yields reflect the different risk levels individual REITs face as a result ofa wide array of factors including subsector dynamics, sponsor support,

access to capital, debt rating, leverage ratio, management quality and

location of properties. Ideally, a balanced portfolio would contain

different kinds of REITs tailored to the investors risk profile.

Figure 11: Forward DPU Yields of our coverage universe

Ascendas REIT Cache Logi st ic REIT

CapitaCommercial Trust CDL Hospitality Trusts

CapitaMall Trust Frasers Centrepoint Trust

K-REIT Asia Mapletree Logistics Trust

Starhill Global REIT Suntec REIT

Source: Bloomberg

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Singapore REITsFigure 11: S-REITs /Real Estate Business Trusts yield table (as at 31 Mar 2012)

LastPrice Currency

Market Cap inlocal urrency

(m)

YTD%

Change

Equity FreeFloat

(%)Distribution

frequency

loomberg

ConsFY-1DPU

(in cents)

Bloomberg

ConsFY-2

DPUin cents)

FY-12Yield

(%)

FY-13Yield

(%)

Leverageratio

(%)

Bookvalue

per unit(in

SGD)

Price-to-

book(x)

Office

CapitaCommercial Trust 1.235 SGD 3,505 17.1% 67.8% Semi-Anl 7.50 7.60 6.07 6.15 30.2 1.58 0.8

Frasers Commercial Trust 0.945 SGD 606 27.7% 72.9% Semi-Anl 6.40 7.40 6.77 7.83 35.8 1.38 0.7

K-REIT Asia 0.990 SGD 2,534 19.3% 16.1% Quarter 7.10 7.10 7.17 7.17 37.4 1.27 0.8

Suntec REIT 1.290 SGD 2,875 19.5% 89.8% Quarter 9.10 8.90 7.05 6.90 37.4 1.99 0.6

Indiabulls Properties Investment Trust (Biz Trust) 0.104 SGD 384 -25.7% 14.9% None NM NM NM NM 20.7 0.45 0.2

Treasury China Trust (Biz Trust) 1.450 SGD 368 0.7% 64.7% Irreg 1.30 5.00 0.90 3.45 33.9 4.41 0.3

Offi ce Average SGD10,271 6.5 6.6 34.1 1.7 0.70

Retail

CapitaRetail China Trust 1.255 SGD 865 9.1% 60.3% Semi-Anl 9.20 9.50 7.33 7.57 30.2 1.27 1.0

CapitaMall Trust 1.795 SGD 5,977 5.6% 61.1% Quarter 10.00 10.60 5.57 5.91 40.3 1.59 1.1

Fortune REIT 4.330 HKD 7,327 15.2% 60.9% Semi-Anl 29.30 31.80 6.77 7.34 25.6 7.81 0.6

Frasers Centerpoint Trust 1.645 SGD 1,354 14.2% 59.0% Quarter 9.50 10.00 5.78 6.08 30.9 1.42 1.2

Lippo-Mapletree Indonesia 0.375 SGD 818 7.1% 55.7% Quarter NM NM NM NM 9.5 0.57 0.7

Mapletree Commercial Trust 0.920 SGD 1,718 NM 48.8% Quarter 6.00 6.10 6.52 6.63 39.0 0.91 1.0

Starhill Global REIT 0.635 SGD 1,234 12.4% 70.5% Quarter 4.20 4.50 6.61 7.09 30.2 0.87 0.7

Perennial China Retail Trust (Biz Trust) 0.460 SGD 517 NM 37.3% Semi-Anl 3.90 3.30 8.48 7.17 1.4 0.67 0.7

Retail Aver age SGD13,698 6.2 6.4 33.0 1.9 1.0

Healthcare

First REIT 0.875 SGD 551 15.1% 76.8% Quarter 7.00 7.20 8.00 8.23 14.9 0.80 1.1

Parkway Life REIT 1.830 SGD 1,107 2.2% 57.3% Quarter 9.80 10.50 5.36 5.74 35.2 1.49 1.2

Healthcare Aver age SGD1,659 6.2 6.6 28.4 1.3 1.2

Hospitality

Ascott Residence Trust 1.060 SGD 1,203 7.1% 50.6% Semi-Anl 8.40 8.70 7.9 8.2 40.7 1.31 0.8

CDL Hospitality REIT 1.850 SGD 1,788 19.7% 67.5% Semi-Anl 11.50 11.80 6.2 6.4 25.5 1.58 1.2

Hospital ity Average SGD2,990 6.9 7.1 31.6 1.5 1.0

Industrial

AIMS AMP Capital Indus REIT 1.145 SGD 510 21.2% 92.3% Quarter 11.30 12.00 9.9 10.5 29.5 1.41 0.8

Ascendas India Trust (Biz Trust) 0.765 SGD 591 10.9% 68.2% Semi-Anl 6.80 7.20 8.9 9.4 23.4 0.71 1.1Ascendas REIT 2.000 SGD 4,472 9.3% 77.2% Quarter 13.90 14.30 7.0 7.2 36.5 1.88 1.1

Cache Logistics Trust 1.030 SGD 721 8.4% 81.6% Quarter 8.30 8.60 8.1 8.3 27.3 1.02 1.0

Cambridge Industrial Trust 0.535 SGD 636 12.6% 80.1% Quarter 4.90 5.10 9.2 9.5 35.1 0.62 0.9

Mapletree Industrial Trust 1.150 SGD 1,874 7.0% 69.4% Quarter 8.60 8.80 7.48 7.7 37.8 1.02 1.1

Mapletree Logistics Trust 0.975 SGD 2,366 15.4% 58.8% Quarter 7.00 6.90 7.2 7.08 41.3 0.86 1.1

Sabana Shariah Comp. Indus REIT 0.950 SGD 607 8.6% 88.4% Quarter 9.50 9.30 10.0 9.8 26.9 0.99 1.0

Indust rial Average SGD11,776 7.6 7.8 35.6 1.3 1.1

Residential

Saizen REIT 0.137 SGD 184 -2.1% 88.9% Semi-Anl - - NM NM 31.6 0.4 0.3

Resident ial Aver age SGD184 NM NM 31.6 0.4 0.3

S-REITs Average SGD40,578 6.8 7.0 33.7 1.6 0.9

Source: Bloomberg , Maybank KE

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Singapore REITs

Ascendas REIT

Slow and Steady Wins the RacePositioned for growth. Ascendas REIT (A-REIT) is one of the best

performers in our TRR study, with an annualised TRR of 12.65%. It also

has a proven track record of portfolio expansion. Its ongoing asset

enhancement initiatives, development projects and recent acquisitions

would continue to drive growth in distributable income. We resume

coverage on the stock and upgrade our recommendation to BUY from

HOLD with the target price of SGD2.23

Busy, busy. With the acquisition of the multi-tenanted Cintech properties at

the Science Park completed, A-REIT now owns 101 properties in

Singapore and one business park property in China. The REIT has several

development and asset enhancement projects that are expected to wrap up

in the coming quarters. We believe that these initiatives and the recentacquisition would spur growth in distributable income. We forecast DPU

yield of 6.6% for FY3/13F.

Positive rental reversion to continue. A-REIT achieved positive rental

reversions of 5.2-15.7% across all its industrial subsectors in FY3/12

despite a slowdown in the domestic economy. Portfolio occupancy rate was

healthy at 96.4%. We expect A-REIT to continue to enjoy positive rental

reversions as the current market rates are at least 16% higher than its

passing rents for the leases due for renewal in FY13F.

Strong capital management gives peace of mind. A-REIT has a well-

balanced debt maturity profile with not more than SGD400m due for

refinancing in any one year. Its funding structure is well balanced between

debt instruments and bank loans. 62.2% of its interest rate exposure is

fixed for the next 4.2 years and its weighted average all-in cost of debt has

declined from 3.84% as of Dec 2010 to 3.5% as of Mar 2012.

Conviction BUY among industrial REITs. We like A-REIT for its stable

DPU yield that is underpinned by portfolio diversification (business/science

parks, hi-tech industrials, flatted factories, light industrials, logistics and

distribution centres and warehouse retail). Potential acquisitions overseas

could provide further upside for DPU growth. Importantly, A-REIT is also

less vulnerable to asset erosion, with its defensive properties located

primarily in Singapore. We upgrade the stock to BUY from HOLD with aDDM-derived target price of SGD2.23.

Ascendas REIT Summary Earnings Table

FYE Dec(SGD m) FY10 FY11 FY12F FY13F FY14FRevenue 447.6 503.3 511.8 524.1 541.8Net property income 339.4 368.3 371.4 379.6 392.6Distributable income 248.0 281.7 280.9 289.7 300.5DPU (cents) 13.2 13.6 13.5 13.9 14.3DPU growth (%) 1.0 2.5 -0.8 3.0 3.6DPU yield (%) 6.5 6.6 6.6 6.8 7.0P/BV(x) 1.2 1.1 1.1 1.1 1.0

Gearing (Debt to deposited assets) (%) 35.1 37.6 34.1 33.9 33.7

ROE (%) 17.6 12.6 8.4 8.5 8.6

ROA (%) 10.7 7.5 4.9 5.0 5.1Source: Company, Maybank KE

BUY(from HOLD)

Share price: SGD2.05Target price: SGD2.23


Stock Information

Description: Ascendas REIT (A_REIT) is a property trustconstituted by a trust deed. A-REIT owns and invests in adiverse, income producing portfolio of business park(including science park), light industrial, hi-tech industrial andlogistics properties in Singapore.

Ticker: AREIT SPShares Issued (m): 2,236.0Market Cap (USD m): 3,491.03-mth Avg Daily Turnover (USD m): 7.4ST Index: 2,759.58Free float (%): 77

Major Shareholders: %Ascendas Funds Mgmt Ltd 18.1

Key Indicators

ROE annualised (%) 7.5Debt to deposited assets (%): 36.6NAV/shr (SGD): 1.87Interest cover (x): 5.3

Historical Chart

Performance:

52-week High/Low SGD2.16 /SGD1.815

1-mth 3-mth 6-mth 1-yr YTD

Absolute (%) -3.4 -2.4 0.0 -1.0 9.8Relative (%) 4.3 5.3 0.1 13.8 5.3

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Singapore REITsPROFIT AND LOSS (SGD m) BALANCE SHEET (SGD m)

YE Dec 2010A 2011A 2012F 2013F 2014F YE Dec 2010A 2011A 2012F 2013F 2014F

Gross Revenue 447.6 503.3 511.8 524.1 541.8 Total assets 5,419.8 6,564.4 6,745.2 6,833.6 6,926.0

Property expenses -108.2 -135.0 -140.4 -144.5 -149.2 Current assets 38.0 59.7 80.5 51.7 50.0

Net Property Income 339.4 368.3 371.4 379.6 392.6 Cash & equivalent 8.1 19.6 41.4 11.7 8.7

Finance income 3.3 5.4 6.6 6.5 5.4 Trade receivables 28.5 38.4 39.0 40.0 41.3

Performance fees -5.4 -29.1 -31.7 -32.4 -33.0 Non-current assets 5,381.8 6,504.6 6,664.8 6,781.9 6,876.0Management fees -24.7 -29.1 -31.7 -32.4 -33.0 Investment properties 5,254.6 6,170.3 6,335.8 6,480.7 6,603.6

Trust expenses -3.6 -5.0 -5.1 -5.2 -5.3 Plant & equipment 2.8 1.8 1.2 0.9 0.6

Finance expense -77.7 -64.2 -70.3 -69.1 -69.5 Others 124.4 332.6 327.7 300.4 271.8

Net income b/f tax & change in 233.7 274.5 271.0 279.4 290.0 Total liabil ities 2,128.2 2,649.0 2,773.3 2,795.0 2,817.2

Change in FV of Inv Pty 344.8 224.5 61.7 63.4 64.8 Current liabilities 671.6 753.7 439.5 584.2 496.4

Others 1.1 -4.2 0.0 0.0 0.0 Trade and other payables 119.5 116.2 120.9 124.5 128.5

Income tax -1.0 -1.6 -1.6 -1.6 -1.6 Short term borrowings 349.9 575.5 257.0 395.0 300.0

Total return 578.6 493.2 332.7 342.8 354.9 Others 202.2 62.0 61.6 64.7 68.0

Non-tax deductibles & o'er adj 9.4 9.0 5.0 5.1 5.2 Long-term liabilities 2,128.2 2,649.0 2,773.3 2,795.0 2,817.2

Distributable income 248.0 281.7 280.9 289.7 300.5 Long-term debts 820.3 1,044.5 2,046.2 1,923.2 2,033.2

DPU (cts) 13.2 13.6 13.5 13.9 14.3 Others 1,307.8 1,604.5 727.2 871.8 784.1

Unitholders' funds 3,291.7 3,915.4 3,971.9 4,038.6 4,108.8

CASH FLOW (SGD m) KEY RATIOS (SGD m)


Growth (% YoY) Operating cash flows 300.6 328.8 352.3 440.0 453.7

Sales 8.2 12.4 1.7 2.4 Total return before tax 233.7 274.5 271.0 279.4 290.0

NPI 6.1 8.5 0.8 2.2 Adjustments for

Net income 291.0 -14.8 -32.5 3.0 Net interest expense 74.4 58.8 70.3 69.1 69.5

Distributable income 5.6 13.6 -0.3 3.1 Depreciation 1.3 1.1 0.7 0.5 0.3

DPU 1.0 2.5 -0.8 3.0 Mgt fees in units 4.9 5.8 6.3 6.5 6.6

Profitability (%) Others -2.3 0.9 0.0 0.0 0.0

NPI margin 77.4 75.8 73.2 72.6 72.4 Trade and other receivables -3.5 -6.8 -0.6 -40.0 -41.3

Net income margin 35.8 129.3 98.0 65.0 65.4 Trade and other payables -7.8 -5.4 4.7 124.5 128.5

ROA 3.0 10.7 7.5 4.9 5.0 Income tax paid 0.0 -0.1 0.0 0.0 0.0

ROE 5.0 17.6 12.6 8.4 8.5 Investi ng cash flows -370.1 -850.5 -103.4 -54.3 -29.7

Stability PPE -0.2 -0.1 -0.2 -0.1 -0.1

Gross debt/asset (%) 31.5 35.1 37.6 34.1 33.9 Capex on Inv Pty & others -9.0 -37.5 -5.0 -5.0 -5.0

Total debt/Investment Prop 32.2 36.1 39.2 35.7 35.3 Purchase of Pty -239.2 -474.2 0.0 0.0 0.0

Int. coverage (X) 4.2 4.0 5.3 4.9 5.0 Properties under development -91.0 -196.5 -98.3 -49.1 -24.6

Int. & ST debt coverage (X) -1.6 -0.7 -0.7 -1.8 -1.1 Others -30.6 -142.2 0.0 0.0 0.0

Cash flow int. coverage (X) 4.1 3.9 5.1 5.0 6.4 Financing cash flows 68.9 533.4 -227.1 -415.4 -427.1

Per share data (Scts) Equity net proceeds 0.0 400.0 0.0 0.0 0.0

EPU 8.2 30.9 23.7 16.0 16.5 Borrowing costs -69.3 -65.5 -71.6 -70.4 -70.9DPU 13.1 13.2 13.6 13.5 13.9 Net borrowing proceeds 378.4 479.3 -95.0 15.0 15.0

CFPS 15.2 16.0 15.8 16.9 21.0 Distribution to unitholders -237.7 -270.1 -280.9 -289.7 -300.5

NAV 157.2 175.6 187.8 190.2 193.1 Others -2.5 -10.3 220.5 -70.3 -70.6

SPS 22.1 23.9 24.1 24.5 25.1 Net change in cash -0.6 11.8 21.8 -29.7 -3.0

Beginning cash balance 8.7 8.1 19.6 41.4 11.7

Forex 0.0 -0.2 0.0 0.0 0.0

Ending cash balance 8.1 19.6 41.4 11.7 8.7

Free cash flow 291.3 291.3 347.2 434.8 448.6

Source: Company, Maybank KE

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Singapore REITs

Cache Logistics Trust

Defensive Play with Stable Income StreamDefensive play. Cache Logistics Trust is a defensive play, not least

because of its 100% occupancy rate and fixed rental escalation. It also

provides an attractive yield. Cache has 11 high-quality logistics properties,

which are 100% leased with triple-net master lease structures (operating

expenses borne by lessee) and locked-in annual rental escalations of about

1.5-2%. Modern ramp-up warehouses account for 86% of its portfolio GFA,

a trait which distinguishes it from its competitors. Its aggregate leverage

stands at 27.7%. Under the Property Funds Appendix (Code on Collective

Investment Schemes), Cache is permitted to borrow up to 35.0% of total

assets, which gives it a comfortable debt headroom of SGD103m for

additional acquisitions or asset enhancement initiatives. YTD Cache has

under-performed the FSTI REIT Index by 2.4%, but outperformed theStraits Times Index (STI) by 4%. Its forward yield of about 7.8% for FY12F

compares favourably with the overall S-REITs sector average DPU yield of

6.8%.

Leading ramp-up logistics provider in Singapore. Seven of Caches 11

properties are modern ramp-up logistics properties (21.2% market share in

Singapores ramp-up warehouses), equipped with large vehicular ramps for

easy access. All properties are also relatively new, with a weighted average

age of 4.8 years. This means that less capex will be required for asset

enhancements in the near term. In addition, ramp-up warehouses are more

resilient as their rents are likely to recover faster than conventional cargo-lift

warehouses when the economy improves and conversely would be less

severely impacted during a downturn.

Stable recurring income adds resiliency. Cache enjoys stable rental

income streams as seven of its properties are on triple-net master lease to

its sponsor (CWT) and CWTs parent (C&P). The master lease agreements

are also secured by a 12-month rental deposit in the form of cash or

bankers guarantees. Caches weighted average lease expiry is 4.4 years

and most of its assets have 1.5-2% rental step-up clauses. The stable

lease structures provide a high degree of predictable cash flow and stable

earnings for the trust, making Cache a defensive play in turbulent markets.

Assume coverage with HOLD and TP of SGD1.08. Cache also has the

right of first refusal to a rich pipeline of CWT/C&P-owned assets for future

acquisitions. It is in the midst of acquiring Pandan Logistics Hub from CWT

for SGD66m. We forecast an initial yield on cost of 7.9% with average rentof SGD1.39 psf pm and 2.5% pa rental escalation. More yield-accretive

acquisitions above its FY11 existing portfolio yield of 7.35% provide further

catalyst for re-rating. We assume coverage with a HOLD rating on valuation

grounds and target price of SGD1.08.

Cache Logisti cs Trust Summary Earnings Table

FYE Dec(SGD m) FY2011 FY2012F FY2013F FY2014FRevenue 64.6 71.2 75.6 76.4Net property income 61.9 67.7 71.8 72.5Distributable income 52.5 56.9 59.9 60.2DPU (cents) 8.2 8.1 8.5 8.5DPU growth (%) 47.4 -1.7 4.7 -0.1DPU yield (%) 8.0 7.8 8.2 8.2

P/BV(x) 1.1 1.1 1.1 1.1Gearing (Debt to Total Assets) (%) 29.6 31.4 31.7 32.1ROE (%) 11.8 8.4 8.9 8.9ROA (%) 8.2 5.6 6.0 5.9


HOLD



Stock InformationDescription: Cache Logistics Trust is a Singapore-basedREIT. The REIT invests in income-producing real estate usedfor logistics purposes in Asia-Pacific, as well as real estate-related assets.

Ticker: CACHE SPShares Issued (m): 699.9Market Cap (USD m): 560.03-mth Avg Daily Turnover (m): 1.1ST Index: 2,759.58Free float (%): 81.6%

Major Shareholders: %CWT Ltd 10

Key Indicators

ROE annualised (%) 7.27Debt to deposited assets (%): 27.7NAV/shr (SGD): 0.93Interest cover (x): 8.0

Historical Chart

Performance:

52-week High/Low SGD1.06/SGD0.915


Absolute (%) -0.5 3.0 8.4 9.6 8.4Relative (%) 7.4 11.2 8.5 26.0 4.0

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Singapore REITs

Figure 12: Maybank KE rental assumptions for Pandan Logistics Hub

FY12F FY13F FY14F FY15F

Average passing rent (SGD) 1.39 1.40 1.44 1.47

Occupancy 100% 100% 100% 100%

Period occupied (mths) 5.74 12.00 12.00 12.00

Gross rent (SGD m) Turnover 2.62 5.54 5.68 5.82

NPI (SGD m) 2.49 5.26 5.40 5.53

Yield on cost 7.9% 8.0% 8.2% 8.4%


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Singapore REITsPROFIT AND LOSS (SGD m) CASH FLOW (SGD m)

YE Dec (SGD m) 2010A 2011A 2012F 2013F 2014F YE Dec (SGD m) 2010A 2011A 2012F 2013F 2014F

Gross Revenue 42.4 64.6 71.2 75.6 76.4 Operating cash flows 41.6 62.0 66.6 69.0 69.4

Property expenses -1.1 -2.7 -3.6 -3.8 -3.8 Net Income before tax 31.2 46.5 50.6 53.3 53.5

Net Property Income 41.4 61.9 67.7 71.8 72.5 Adjustments for

Net financing costs -6.1 -8.9 -9.8 -10.9 -11.3 Net interest expense 6.1 8.9 9.8 10.9 11.3

Manager's fees -3.3 -5.0 -5.6 -5.9 -6.0 Depreciation 0.0 0.0 0.0 0.0 0.0Trustee's fees -0.2 -0.2 -0.3 -0.3 -0.3 Mgt fees in units 2.5 3.8 4.2 4.4 4.5

Other trust expenses -0.6 -1.3 -1.4 -1.5 -1.5 Others 0.0 0.0 0.0 0.0 0.0

Other Income 0.0 0.0 0.0 0.0 0.0 Trade and other receivables -0.1 -0.2 0.0 0.0 0.0

Net income b/f tax & change in FV 31.2 46.5 50.6 53.3 53.5 Trade and other payables 1.9 3.1 2.0 0.5 0.1

Change in FV of Inv Pty 30.8 23.7 4.2 5.7 5.8 Income tax paid 0.0 -0.1 0.0 0.0 0.0

Income tax 0.0 -0.4 0.0 0.0 0.0 Investi ng cash flows -713.3 -74.3 -109.1 -8.0 -8.0

Total return 62.0 69.8 54.9 59.0 59.3 PPE -0.1 0.0 0.0 0.0 0.0

Non-tax deductibles & o'er adj -26.6 17.3 2.0 0.9 0.9 Capex on Inv Pty & others 0.0 -6.6 -8.0 -8.0 -8.0

Income available for Dist. 35.4 52.5 56.9 59.9 60.2 Purchase of Pty -713.2 -67.7 -101.2 0.0 0.0

Distributable income 35.4 52.5 56.9 59.9 60.2 Properties under devt 0.0 0.0 0.0 0.0 0.0

DPU (cts) 5.6 8.2 8.1 8.5 8.5 Others 0.0 0.0 0.0 0.0 0.0

Financing cash flows 679.7 16.4 46.1 -60.4 -62.6

Equity net proceeds 556.3 0.0 59.1 0.0 0.0

Borrowing costs -10.2 -7.2 -8.0 -8.9 -9.3

Net borrowing proceeds 178.0 75.0 51.7 7.6 6.8

Distribution to unitholders -23.1 -51.4 -55.8 -59.2 -60.2

Others -21.3 0.0 -0.9 0.0 0.0

Net change in cash 8.0 4.1 3.5 0.6 -1.2


Forex 0.0 -0.1 0.0 0.0 0.0


Free cash flo w 41.5 55.4 58.6 61.1 61.4

BALANCE SHEET (SGD m) KEY RATIOS

YE Dec (SGD m) 2010A 2011A 2012F 2013F 2014F YE Dec (SGD m) 2011A 2012F 2013F 2014F

Total assets 752.2 855.2 972.1 986.5 999.1 Growth (% YoY)

Current assets 8.1 12.3 15.8 16.5 15.3 Sales 52.2 10.3 6.1 1.0

Cash & equivalent 8.0 12.1 15.6 16.2 15.0 NPI 49.7 9.3 6.1 1.0

Trade receivables 0.1 0.2 0.3 0.3 0.3 Net income 12.6 -21.4 7.6 0.5

Non-current assets 744.1 842.9 956.3 970.0 983.8 Distributable income 48.1 8.4 5.3 0.5

Investment properties 744.0 842.8 956.2 969.9 983.7 DPU 47.4 -1.7 4.7 -0.1

Plant & equipment 0.1 0.1 0.1 0.1 0.1 Profitability (%)

Others 0.0 0.0 0.0 0.0 0.0 NPI margin 95.8 95.0 95.0 95.0

Total l iabilities 177.1 261.1 315.7 325.8 334.8 Total return margin 108.1 77.0 78.1 77.7

Current liabilities 3.1 6.0 8.0 8.5 8.6 ROA 8.2 5.6 6.0 5.9

Trade and other payables 3.1 6.0 8.0 8.5 8.6 ROE 11.8 8.4 8.9 8.9

Short term borrowings 0.0 0.0 0.0 0.0 0.0 Stability

Others 0.0 0.0 0.0 0.0 0.0 Gross debt/asset (%) 29.6 31.4 31.7 32.1

Long-term liabilities 173.9 255.1 307.7 317.3 326.2 Total debt/Investment Prop 30.0 31.9 32.3 32.6Long-term debts 172.7 248.9 302.4 312.0 320.9 Int. coverage (X) 6.2 6.2 5.9 5.7

Others 1.3 6.2 5.3 5.3 5.3 Int. & ST debt coverage (X) 6.2 6.2 5.9 5.7

Unitholders' funds 575.1 594.1 656.4 660.7 664.4 Cash flow int. coverage (X) 7.0 6.8 6.4 6.1

Per share data (Scts)

EPU 11.0 7.8 8.3 8.3

DPU 8.2 8.1 8.5 8.5

CFPS 9.7 9.5 9.8 9.7

NAV 92.99 93.37 93.39 93.34

SPS 10.1 10.1 10.7 10.7


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Singapore REITs

CDL Hospitality Trusts

Cyclical Hospitality Weighs on DefensivenessPure play on Singapore hospitality. CDL Hospitality Trusts (CDREIT)

has a stake in 2,716 rooms in Singapore (or 5.6% of all hotel rooms) as

at end-2011. It derived 77-84% of its revenue from Singapore and the

region accounted 82.5% of its asset value. We believe that CDREIT is

the purest play on the booming Singapore hospitality sector, and the

increase in average room rates (ARRs) in FY11 has been a boon for

the company. The bulk of its rent from Singapore is variable (60.3% as

of 1Q12). However, CDREITs assets have consistently enjoyed better

occupancy rates than the rest of the system due to their central location

and high share of business travellers. Thus, we expect its Singapore

assets to maintain robust occupancy of 85-88% and ARR to stay aboveSGD230 over FY12F-13F, barring a downturn in the global economy.

Another acquisi tion due th is year. CDREIT has set its sights on

acquiring hospitality assets worth SGD200-300m each year. It bought

Studio M Hotel, Singapore, in early-2011 for SGD150m and we believe

it still has sufficient room for another acquisition in FY12-13. With a

target gearing of 40%, CDREIT has further headroom of SGD503m for

acquisitions. Management has previously found the Japanese and

Australian hospitality sectors attractive.

Singapore QoQ ARR growth a key share price driver. In our view,

the main trigger for CDREITs share price is overall ARR growth for the

Singapore hotel segment. CDREITs share price exhibits a highcorrelation (72%) to Singapore hotels QoQ ARR growth. Nonetheless,

we remain wary of macro-economic headwinds and its drag on

business and leisure travellers. A deeper-than-expected global

slowdown might lead to a sudden drop in tourist numbers, which could

adversely impact the stocks performance. We also think the 2,586 and

3,909 hotel rooms scheduled to be completed in 2012 and 2013

respectively will put pressure on ARRs.

Assume coverage wi th HOLD and TP of SGD1.92. With volatility in

the stock markets and more hotel rooms coming on-stream, we would

advise investors to be cautious ahead. CDREIT has risen 19% YTD

and 151% since end-2008, in the midst of the GFC. At FY12F DPUyield of 6.5% (on a relative basis), we think investors are better off with

the more defensive industrial and retail REITs such as A-REIT (~7%

yield) and FCT (~6% yield).

CDL Hospitality REIT Summary Earnings Table

FYE Dec(SGD m) FY2010 FY2011 FY2012F FY2013F FY2014F

Revenue 122.3 141.1 150.4 141.9 139.4

Net property income 115.1 135.2 144.1 136.0 133.6

Distributable income 100.7 118.1 126.3 118.5 113.2

DPU (cents) 10.2 11.1 12.0 11.9 11.6

DPU growth (%) 18.9 8.3 8.6 -0.5 -3.0

DPU yield (%) 5.6 6.0 6.5 6.5 6.3

P/BV(x) 1.2 1.1 1.1 1.2 1.2Gearing (Debt to deposited assets) (%) 20.4 25.2 25.7 25.6 26.0

ROE (%) 9.3 11.4 7.0 6.5 6.2

ROA (%) 7.3 8.3 5.1 4.8 4.5


HOLD


Ong Kian [email protected](65) 6432 1470

Stock InformationDescription: CDL Hospitality Trusts is a stapled groupcomprising H-REIT and HBT. H-REIT is a real estateinvestment trust that invests in a portfolio of income-producing properties and HBT is a business trust.

Ticker: CDREIT SPShares Issued (m): 966.2Market Cap (USD m): 1,396.03-mth Avg Daily Turnover (USD m): 1.9ST Index: 2,759.58Free float (%): 67.5%

Major Shareholders: %Hospitality Holdings 32.5

Key Indicators

ROE (%) 11.4Debt to deposited assets (%): 25.6NAV/shr (SGD): 1.58Interest cover (x): 9.7

Historical Chart

Performance:



Absolute (%) -1.6 8.5 27.0 -9.3 20.4

Relative (%) 6.2 17.1 27.1 4.3 15.4

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Singapore REITs

Figure 13: ARRs and occupancy to come under pressure with 6,495 hotelrooms to be added over 2012-13 (6,391 now under construction)

Source: URA 1Q12 Realis Data

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Singapore REITs

PROFIT AND LOSS (SGD m) CASH FLOW (SGD m)


Gross Revenue 122.3 141.1 150.4 141.9 139.4 Operating cash flows 116.3 131.1 139.8 129.6 128.0

Property expenses -7.2 -5.9 -6.3 -6.0 -5.8 Total return 135.9 176.3 109.0 101.5 96.3

Net Property Income 115.1 135.2 144.1 136.0 133.6 Adjustments for

Finance income 4.0 1.4 1.0 1.1 1.4 Net interest and non-cash 24.7 24.1 25.2 24.6 27.5Performance fees 0.0 0.0 0.0 0.0 0.0 Depreciation 0.0 0.0 0.0 0.0 0.0

Management fees -10.2 -11.7 -12.3 -11.9 -11.8 Others -48.9 -68.7 5.3 3.8 4.3

Trust expenses -0.2 -0.2 -0.4 -0.4 -0.4 Trade and other receivables -1.7 -2.9 -1.2 1.1 0.3

Finance expense -20.5 -14.6 -16.4 -16.2 -19.4 Trade and other payables 6.3 3.1 1.5 -1.4 -0.4

Others -1.2 -2.5 -2.5 -2.5 -2.5 Income tax paid 0.0 -0.7 0.0 0.0 0.0

Net income b/f tax & change in FV 86.9 107.6 113.5 106.0 100.8 Investi ng cash flows -244.4 -166.2 -5.1 -5.0 -4.8

Change in FV of Inv Pty 51.4 73.2 0.0 0.0 0.0 PPE 0.0 0.0 0.0 0.0 0.0

Others 0.0 0.0 0.0 0.0 0.0 Capex on Inv Pty & others -6.7 -12.4 -6.1 -6.1 -6.2

Income tax -2.4 -4.5 -4.5 -4.5 -4.5 Purchase of Pty -237.9 -154.5 0.0 0.0 0.0


Non-tax deductibles & o'er adj -35.2 -58.2 17.3 17.0 16.9 Financing cash flows 190.2 37.8 -124.0 -148.7 -140.4

Income avail. for distri. 100.7 118.1 126.3 118.5 113.2 Equity net proceeds 200.0 0.0 0.0 0.0 0.0

DPU (cts) 10.2 11.1 12.0 11.9 11.6 Borrowing costs -12.4 -13.1 -16.4 -16.2 -19.4

Net borrowing proceeds 87.3 153.6 16.1 -3.9 6.2

Distribution to unitholders -80.5 -102.3 -111.3 -116.2 -114.7

Others -4.2 -0.5 -12.5 -12.5 -12.5

Net change in cash 62.1 2.7 10.8 -24.1 -17.2


Forex 0.0 0.0 0.0 0.0 0.0


Free cash flow 109.6 118.8 133.7 123.5 121.8



Total assets 1,869.9 2,118.5 2,144.5 2,133.4 2,130.0 Growth (% YoY)

Current assets 82.7 88.5 100.5 75.3 57.8 Sales 33.3 15.4 6.6 -5.6 -1.8

Cash & equivalent 67.8 70.5 81.3 57.2 40.0 NPI 33.9 17.5 6.6 -5.6 -1.8

Trade receivables 15.0 18.0 19.2 18.1 17.8 Net income 105.6 29.8 -38.2 -6.9 -5.2

Others 0.0 0.0 0.0 0.0 0.0 Distributable income 32.7 17.4 6.9 -6.2 -4.5

Non-current assets 1,787.2 2,029.9 2,044.0 2,058.1 2,072.2 DPU 18.9 8.3 8.6 -0.5 -3.0

Investment properties 1,787.1 2,029.8 2,043.9 2,058.0 2,072.2 Profitability (%)

Plant & equipment 0.0 0.0 0.0 0.0 0.0 NPI margin 94.1 95.8 95.8 95.8 95.8

Others 0.1 0.1 0.1 0.1 0.1 Net income margin 111.1 124.9 72.5 71.5 69.1

Total l iabilities 409.7 570.8 589.2 583.2 588.8 ROA 7.3 8.3 5.1 4.8 4.5

Current liabilities 21.8 23.6 75.0 73.7 73.3 ROE 9.3 11.4 7.0 6.5 6.2

Trade and other payables 20.6 22.7 24.2 22.9 22.5 Stability

Short term borrowings 0.0 0.0 50.0 50.0 50.0 Gross debt/Asset (%) 20.4 25.2 25.7 25.6 26.0

Others 1.2 0.8 0.8 0.8 0.8 Total debt/Investment Prop 21.3 26.3 27.0 26.6 26.7Long-term liabilities 387.9 547.2 514.1 509.5 515.5 Int. coverage (X) 5.2 8.4 7.9 7.5 6.2

Long-term debts 381.1 534.8 500.9 497.0 503.2 Int. & ST debt coverage (X) 5.2 8.4 2.0 1.8 1.7

Others 6.7 12.5 13.3 12.5 12.3 Cash flow int. coverage (X) 5.7 9.0 8.5 8.0 6.6

Unitholders' funds 1,460.2 1,547.7 1,555.3 1,550.2 1,541.3 Per share data (Scts)

EPU 15.1 18.3 11.3 10.4 9.9

DPU 10.2 11.1 12.0 11.9 11.6

CFPS 12 14 14 13 13

NAV 152 160 160 159 157

SPS 13 15 16 15 14


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Singapore REITs

Frasers Centrepoint Trust

Pure Exposure to Suburban RetailPure exposure to suburban retail. Frasers Centrepoint Trust (FCT) isone the best performers in our TRR study, with an annualised TRR of

12.5%, and it has not done any equity fund-raising since its initial public

offering. With investments in five malls located in the suburbs, FCT

offers pure exposure to suburban retail space. Its portfolio, valued at

SGD1.7b, has a total NLA of ~0.88m sq ft and an occupancy rate of

93.5%. FCT achieved 11% positive rental reversion in 2Q12 and 9.6%

in 1Q12, in line with our expectations that suburban asking rentals will

continue to climb at 2% pa in FY12F-13F.

No refinancing needs unti l FY16. FCTs next major refinancing is dueonly in FY16 (SGD264m or 48% of borrowings), while only SGD80m isdue this financial year. Gearing is relatively low at 30.9%, implying debtheadroom of SGD114m based on managements guided target gearingof 35%. Should opportunities for acquisitions arise, gearing can bestretched up to 45%, with debt headroom of SGD461m.

DPU upside. We forecast 7.5% DPU CAGR growth from FY11F-14F inview of positive rental reversions and resilience of the suburban malls.Asset enhancement works on Causeway Point is also on track for fullcompletion in Dec 2012 with occupancy expected to improve from91.3% to 100%. Management remains confident that (1) average psfrental will increase by 20% from SGD10.20 (2011) to SGD12.20 and(2) NPI will increase by 22% (incremental NPI of SGD9.3m), with ROIof 13% from a capex of SGD71.8m.

Resilience play, assume coverage with BUY. The suburban retail

sector (with necessity shopping) is historically one of the most resilient

sectors through economic cycles. Though the global growth outlook

remains murky and risks lean towards the downside, we are confident

that FCT, with a NLA lease expiry of 2.03 years, will be able to ride out

this economic morass. We like its defensive assets and strong balance

sheet. At the current price, FCT is trading at 5.9% FY12F yield. We

assume coverage with a BUY rating and a DDM-derived target price of

SGD1.79. Further catalysts stem from accretive acquisitions (such as

sponsors Changi City Point, Centrepoint and possibly Compass Point

recent SGD519m purchase by a J V between Prudential UK andFrasers Centrepoint) and asset enhancement initiatives.

Frasers Centrepoint Trust Summary Earnings Table

FYE Sep(SGD m) FY2010 FY2011 FY2012F FY2013F FY2014F

Revenue 114.7 117.9 134.4 142.6 147.8



DPU (cents) 8.2 8.3 9.6 10.0 10.3

DPU growth (%) 9.2 1.5 15.0 4.1 3.8

DPU yield (%) 5.0 5.1 5.9 6.1 6.4

P/BV(x) 1.3 1.2 1.2 1.2 1.2

Gearing (Debt to deposited assets) (%) 30.3 31.3 32.3 32.6 32.9

ROE (%) 9.5 13.4 5.7 6.8 7.1ROA (%) 6.2 8.7 3.6 4.3 4.5


BUY



Stock Information

Description: Frasers Centrepoint Trust is a retail real estate

investment trust focused on growing unitholder value throughasset management, financial management and strategicinvestments. The trust invests in retail properties inSingapore and overseas.

Ticker: FCT SPShares Issued (m): 822.9Market Cap (USD m): 1,041.93-mth Avg Daily Turnover (USD m): 0.9ST Index: 2,759.58Free float (%): 59

Major Shareholders: %Frasers Centrepoint 40.8

Key Indicators

ROE annualised (%) 13.4Debt-to-deposit assets (%): 30.9NAV/shr (SGD): 1.42Interest cover (x): 5.49

Historical Chart

Performance:



Absolute (%) 2.2 7.6 11.6 10.9 13.2

Relative (%) 10.3 16.1 11.7 27.5 8.5

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Finance income 0.0 0.0 0.1 0.1 0.1 Trade receivables 2.9 5.4 4.0 4.3 4.4

Performance fees 0.0 0.0 0.0 0.0 0.0 Non-current assets 1,493.5 1,750.9 1,779.6 1,786.7 1,796.7Management fees -8.2 -8.9 -10.1 -10.7 -11.1 Investment properties 1,439.0 1,697.0 1,725.7 1,732.8 1,742.8

Trust expenses -1.2 -1.5 -1.9 -2.0 -2.1 Plant & equipment 0.1 0.1 0.1 0.1 0.1

Finance expense -17.7 -19.1 -21.5 -20.8 -21.2 Investment in associate 54.3 53.8 53.8 53.8 53.8

Net income b/f tax & change in FV 53.0 53.1 61.5 74.3 77.5 Total l iabilities 526.9 635.0 665.7 675.5 687.1


Share of associate's profit 4.6 4.6 4.6 4.6 4.6 Trade and other payables 35.5 41.0 43.0 45.6 47.3

Others -5.0 -2.6 0.0 0.0 0.0 Short term borrowings 305.0 155.0 183.7 190.9 200.9

Income tax -0.6 2.6 0.0 0.0 0.0 Others 10.6 15.4 15.4 15.4 15.4

Total return 94.4 154.9 66.0 78.9 82.1 Long-term liabilities 175.8 423.6 423.6 423.6 423.6

Non-tax deductibles & o'er adj -35.2 -90.5 12.8 3.3 3.5 Long-term debts 155.0 404.0 404.0 404.0 404.0

Income avail for Distribution 59.2 64.4 78.8 82.2 85.6 Others 20.8 19.6 19.6 19.6 19.6

Distributable income 59.2 64.4 78.8 82.2 85.6 Unitholders' funds 992.3 1,156.2 1,156.2 1,156.2 1,156.1

DPU (cts) 8.20 8.32 9.57 9.96 10.34

CASH FLOW (SGD m) KEY RATIOS


Operating cash flows 79.7 81.6 89.2 100.6 103.4 Growth (% YoY)

Net Income 53.0 53.1 61.5 74.3 77.5 Sales 32.5 2.7 14.0 6.1 3.6

Adjustments for NPI 33.7 3.2 14.7 13.7 3.7

Net interest expense 17.7 19.1 21.5 20.8 21.2 Net income 132.1 64.0 -57.4 19.5 4.1

Depreciation 0.0 0.0 0.0 0.0 0.0 Distributable income 26.1 8.8 22.4 4.4 4.0

Mgt fees in units 2.5 8.1 3.0 3.2 3.3 DPU 9.2 1.5 15.0 4.1 3.8

Others -0.9 -3.0 -0.1 -0.1 -0.1 Profitability (%)

Trade and other receivables -0.4 -1.1 1.4 -0.2 -0.2 NPI margin 69.8 70.1 70.5 75.5 75.6

Trade and other payables 7.9 5.3 2.0 2.6 1.7 Net income margin 82.3 131.4 49.1 55.3 55.6

Income tax paid 0.0 0.0 0.0 0.0 0.0 ROA 6.2 8.7 3.6 4.3 4.5

Investi ng cash flows -290.8 -156.9 -14.6 -2.6 -5.5 ROE 9.5 13.4 5.7 6.8 7.1

PPE -0.1 0.0 0.0 0.0 0.0 Stability

Capex on Inv Pty & others -9.9 -36.7 -28.7 -7.2 -10.0 Gross debt/equity (%) 30.3 31.3 32.3 32.6 32.9

Purchase of Pty -284.8 -123.9 0.0 0.0 0.0 Total debt/Investment Prop 32.0 32.9 34.1 34.3 34.7

Properties under development 0.0 0.0 0.0 0.0 0.0 Int. coverage (X) 2.2 2.0 2.1 2.8 2.9

Others 4.0 3.8 14.1 4.5 4.5 Int. & ST debt coverage (X) 0.1 0.2 0.2 0.3 0.3

Financing cash flows 219.3 86.0 -71.3 -95.6 -96.4 Cash flow int. coverage (X) 4.5 4.3 4.2 4.8 4.9

Equity net proceeds 178.1 66.7 0.0 0.0 0.0 Per share data (Scts)

Borrowing costs -14.4 -13.2 -21.2 -20.5 -20.9 EPU 12.3 20.0 8.0 9.6 9.9

Net borrowing proceeds 111.0 99.0 28.7 7.2 10.0 DPU 8.2 8.3 9.6 10.0 10.3

Distribution to unitholders -55.4 -62.6 -78.8 -82.2 -85.6 CFPS 10 10 11 12 12Others 0.0 -4.0 0.0 0.0 0.0 NAV 129 140 140 139 139

Net change in cash 8.3 10.7 3.4 2.4 1.5 SPS 15 14 16 17 18


Forex 0.0 0.0 0.0 0.0 0.0


Free cash flow 69.8 44.8 60.5 93.4 93.4


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Singapore REITs

K-REIT Asia

Propped by Temporary SupportsBeleaguered growth, initiate with SELL. K-REIT Asia showed up as

the worst performer in our TRR study of 10 REITs, delivering an

annualised return of just 2%. Highly exposed to the Grade A office

sector in Singapore, yields may fall off a cliff when rental supports for

various acquisitions end by 2014. If it proceeds on its growth path,

further equity fund-raising is almost inevitable, possibly to the chagrin of

unitholders. We initiate coverage on K-REIT with a SELL rating and

target price of SGD0.83.

Poster boy for the New Downtown. K-REIT has five properties in

Singapore and three in Australia in its current portfolio. In Singapore, it

has a strong foothold in the New Downtown at Marina Bay, with stakesin One Raffles Quay (ORQ), Marina Bay Financial Centre (MBFC) Ph1

and Ocean Financial Centre (OFC). Its attributable NLA of International

Grade A space stands at 1.8m sq ft.

Sustainability of yields may be tested. K-REIT has grown by nearly

ten-fold in terms of asset size in its six years of listing. Many of the

acquisitions, such as ORQ, MBFC Ph1 and OFC, have rental supports

which buffer yields typically for the first 3-5 years. However, as the

Singapore office sector continues to soften amid the global economic

malaise and ample new supply in the pipeline, we estimate that

K-REITs DPU yield may contract by 8.4% in FY14F and as much as

15.2% in FY15F, when the various rental supports end.Hungry for another mega-deal? K-REIT is expected to someday

acquire Keppel Lands one-third stake in MBFC Ph 2, which is 67%

committed and has already obtained its Temporary Occupation Permit

in 1Q12. While there is no definite timeline, we estimate that the stake

may eventually cost K-REIT around SGD1.0b, valued at a capital value

of SGD2,400 psf. With its current look-through gearing already at

around 42%, an equity fund-raising will be inevitable.

At tract iveness to wane over time. At current levels, K-REIT offers

DPU yields of around 7%, mainly backed by the rental supports. Longer

term however, DPU yields are likely to normalise to around 5.5%, which

is not attractive for a REIT in a sector expected to face economicheadwinds. We initiate coverage on K-REIT with a SELL rating and a

DDM-derived target price of SGD0.83.

KREIT Asia Summary Earnings TableFYE Dec (SGD m) 2010A 2011A 2012F 2013F 2014FRevenue 84.6 78.0 174.7 184.6 197.0Net property income 67.3 61.7 131.2 138.3 147.1Distributable income 85.6 113.0 178.2 184.9 170.6DPU (SG cts) 6.3 8.3 6.9 7.2 6.6DPU growth (%) 19.6 30.8 -15.9 3.0 -8.4DPU yield (%) 6.4 8.3 7.0 7.2 6.6P/BV (x) 0.7 0.8 0.8 0.8 0.8Gearing(debt-to-deposited assets) (%)

31.8 37.0 37.8 38.8 39.2

ROE (%) 5.3 9.1 3.2 3.7 4.1ROA (%) 3.5 5.1 1.7 1.9 2.1


SELL


Wilson [email protected](65) 6432 1454

Stock InformationDescription: A commercial REIT under the Keppel Group,K-REIT has a portfolio of International Grade A officeproperties in Singapore, as well as three office properties inAustralia.

Ticker: KREIT SPShares Issued (m): 2,559.2Market Cap (USD m): 1,958.03-mth Avg Daily Turnover (USD m): 0.8ST Index: 2,759.58Free float (%): 23.7

Major Shareholders: %Keppel Land 46.3Keppel Corp 30.0

Key Indicators

ROE annualised (%) 9.1Debt to deposited assets (%) 37.0NAV/shr as at Mar 2012 (SGD) 1.25Interest cover (x) 4.0

Historical Chart

Performance:



Absolute (%) -1.5 7.1 14.5 -17.1 18.7

Relative (%) 6.3 15.6 14.6 -4.7 13.8

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Singapore REITs

PROFIT AND LOSS (SGD m) CASH FLOW (SGD m)

FYE Dec 2010A 2011A 2012F 2013F 2014F FYE Dec 2010A 2011A 2012F 2013F 2014F

Gross Income 84.6 78.0 174.7 184.6 197.0 Operating cash flow 323.6 208.0 297.7 283.1 213.8Operating expenses 17.3 16.3 43.4 46.4 49.9 Net profit 190.3 196.0 187.3 190.6 134.3

Net property income 67.3 61.7 131.2 138.3 147.1 Depreciation & amortisation 0.7 0.4 0.3 0.3 0.4Net interest -4.8 -5.9 -33.1 -33.7 -35.5 Change in working capital 28.3 -66.4 18.4 0.5 0.4

Interest income 12.1 23.0 20.4 22.1 22.6 Others 104.3 78.0 91.8 91.7 78.6

Interest expense -16.8 -28.9 -53.6 -55.8 -58.1 Investment cash flow 554.3 -238.3 -439.5 5.5 5.4Rental support 26.4 45.6 78.7 72.8 39.7 Net capex -30.0 -279.2 0.0 0.0 0.0

Managers fees -15.1 -23.7 -32.0 -32.4 -32.8 Change in LT investment 582.7 39.3 -440.2 4.9 4.9

Trust expenses -28.4 -41.3 -67.2 -59.6 -35.5 Change in other assets 1.6 1.6 0.6 0.6 0.5

Share of associate income 9.7 37.4 37.8 44.1 51.4 Financing cash flow -554.1 36.1 -328.5 -298.6 -297.5

Divestment gain/(loss) 26.0 0.0 0.0 0.0 0.0 Change in share capital -5.0 -12.7 -10.0 -10.9 -9.9Revaluation gain/(loss) 31.6 228.7 0.0 0.0 0.0 Net change in debt -263.4 328.1 -62.6 -28.3 -30.3

Net profit 109.2 296.1 102.1 117.0 127.6 Change in other LT liab. -70.8 -61.8 -75.6 -75.6 -76.3

Non-tax deductible expenses -23.6 -177.1 84.0 76.8 53.0 Distribution to unitholders -214.9 -217.6 -180.4 -183.8 -181.0

Distributable income 85.6 113.0 178.2 184.9 170.6 Net cash flow 323.8 5.8 -470.4 -10.0 -78.4

EBITDA 82.4 116.4 214.1 221.1 203.7 Free cash flow 876.3 -32.0 -142.4 288.0 218.7

DPU (SG cts ) 6.3 8.3 6.9 7.2 6.6


FYE Dec 2010A 2011A 2012F 2013F 2014F FYE Dec 2010A 2011A 2012F 2013F 2014F

Total assets 3,115.9 5,856.9 6,038.0 6,082.6 6,101.6 Growth (% YoY)

Current assets 72.0 121.9 323.0 378.1 414.2 Sales 34.6 -7.8 124.0 5.7 6.7

Cash & ST investment 49.9 85.7 248.9 300.1 331.3 Net property income 37.7 -8.4 112.9 5.4 6.4

Trade receivables 22.1 30.6 68.5 72.4 77.3 Distributable income 21.4 31.9 57.8 3.7 -7.7

Inventories 0.0 5.6 5.6 5.6 5.6 Net profit -337.9 171.1 -65.5 14.6 9.0

Other assets 3,043.9 5,735.0 5,715.0 5,704.6 5,687.5 DPU 19.6 30.8 -15.9 3.0 -8.4

Investment properties 1,025.6 3,472.1 3,482.5 3,492.9 3,503.4 Profitability (%)

Associates ad investments 1981.0 2112.9 2148.0 2185.0 2184.0 Operating margin 79.6 79.1 75.1 74.9 74.7

Net fixed assets & others 37.2 150.0 84.5 26.6 0.0 EBITDA margin 97.5 149.3 122.6 119.7 103.4

Total l iabilities 1,060.4 2,381.4 2,588.2 2,679.0 2,729.5 Net margin 129.2 379.8 58.4 63.4 64.8

Current liabilities 64.3 660.7 285.8 296.3 369.3 ROA 3.5 5.1 1.7 1.9 2.1

Trade and other payables 58.6 144.0 172.4 182.3 194.5 ROE 5.3 9.1 3.2 3.7 4.1

ST borrowings 0.0 510.1 100.0 100.0 160.0 Stability

Current portion of sec deposit 2.4 1.2 1.2 1.2 1.2 Gross debt/equity (%) 48.2 66.4 70.7 74.3 76.3

Taxation 3.3 5.4 12.1 12.8 13.7 Net debt/equity (%) 45.7 63.8 63.0 64.9 65.7

Long-term liabilities 996.1 1,720.7 2,302.4 2,382.7 2,360.2 Int. coverage (X) 4.9 4.0 4.0 4.0 3.5

Long-term debts 989.9 1,655.8 2,183.5 2,258.5 2,229.3 Int. & ST debt coverage (X) -4.0 0.1 2.8 3.1 1.4

Others 6.2 64.9 118.9 124.2 130.9 Cash flow int. coverage (X) -19.2 -7.2 -5.6 -5.1 -3.7

Unitholders funds 2,055.6 3,262.6 3,229.2 3,174.0 3,132.4 Cash flow int. & ST debt (X) -19.2 0.4 6.4 6.4 2.1

Net tangible assets 2,055.6 3,262.6 3,229.2 3,174.0 3,132.4 Current ratio (X) 1.1 0.2 1.1 1.3 1.1Quick ratio (X) 1.1 0.2 1.1 1.3 1.1

Net debt (SGD m) 928.3 1,440.6 1,915.5 1,925.5 1,915.8

Per share data (SG cts)

DPU 6.3 8.3 6.9 7.2 6.6

CFPS 23.7 8.1 11.5 10.9 8.2

BVPS 150.4 127.1 124.9 121.9 119.5

SPS 6.2 3.0 6.8 7.1 7.5

EBITDA/share 6.0 4.5 8.3 8.5 7.8


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Singapore REITs

Mapletree Logistics Trust

Acquisitions to Bear FruitScale and stability advantages. Mapletree Logistics Trust (MLT)

yielded an annualised TRR of 9.30% in our TRR study. Its recent issue

of perpetual securities has also lowered its gearing from 41.4% in 4Q11

to 35.2% in 5Q11. With a portfolio of 109 properties in Asia, MLT is

increasingly being viewed as a proxy to the broader Asian logistics

sector, a Pan-Asian partner for global players keen to expand their

regional footprint. No longer is it just an industrial landlord alongside

Global Logistic Properties (GLP), Prologis and Goodman. We believe

MLT will continue to reap the benefits of its large installed base, in

terms of economies of scale. With a sale-and-leaseback-heavy portfolio,

occupancy rate of 98.7% and an average lease expiry of six years, itprovides a high degree of predictable cash flow and stable rental

income. In addition, MLT has a strong sponsor, Mapletree Investments,

and has forged a strategic alliance with Itochu Corporation in Japan.

Yield spread vis--vis A-REIT. MLT has historically traded at a one-

year forward DPU yield-spread of 135bps above A-REIT. We believe

this premium is due to its footprint in other geographic regions (country

risk exposure) and its relative higher gearing. MLT is currently trading at

51bps spread above A-REIT.

Acqu is it ions to bear frui t. MLTs assets have increased by almost

ninefold since the company listed in J uly 2005. Given its larger asset

base, macro-economic headwinds and unfavourable risk-reward ahead,

we expect management to trade growth for stability in turbulent times.

MLT also has one of the industrys highest weighted average lease

expiry profiles (six years). Despite having exposure to six overseas

markets, Singapore and J apan (tier-1 mature markets) still constitute

73% of revenue and 72% of NPI in FY11 and 70% of our FY12F GAV,

which should prove defensive in volatile markets.

Assume coverage with BUY and TP of SGD1.06. MLT has an existing

portfolio yield of 6% as seen in its latest 5Q11* results. Barring further

acquisitions, it should be able to maintain relatively stable DPU payouts

going forward. Mounting uncertainties in the recent month have skewed

risks to the downside but we are confident that MLTs stable assets and

rental income resilience will help it navigate the choppy waters. At thecurrent price, MLT is trading at 7.2% FY12F yield. We assume

coverage with a BUY rating and target price of SGD1.06.*5Q11: MLT is changing its financial year from Dec to Mar,

Mapletree Logistics Trust Summary Earnings Table

FYE Dec(SGD m) FY2010 FY2011* FY2012F FY2013F FY2014F

Revenue 218.9 339.5 286.1 288.6 291.2



DPU (cents) 6.1 8.2 7.0 7.0 7.1

DPU growth (%) 1.2 35.3 -15.3 0.9 1.1

DPU yield (%) 6.2 8.5 7.2 7.2 7.3


ROE (%) 7.8 14.7 7.7 7.8 7.9

ROA (%) 4.5 7.5 4.0 4.0 4.0


BUY



Stock InformationDescription: Mapletree Logistics Trust is an Asia-focusedlogistics real estate investment trust. The Company invests ina diversified portfolio of income-producing real estate whichis used for logistics purposes.

Ticker: MLT SPShares Issued (m): 2,426.3Market Cap (USD m): 1,837.53-mth Avg Daily Turnover (USD m): 1.7ST Index: 2,759.58Free float (%): 58.8

Major Shareholders: %Temasek Holdings 41

Key Indicators

ROE annualised (%) 7.7Debt to deposited assets (%): 35.2NAV/shr (SGD): 0.90Interest cover (x): 6

Historical Chart

Performance:


1-mth 3-mth 6-mth 1-yr YTDAbsolute (%) -0.5 6.0 16.8 6.6 15.4

Relative (%) 7.4 14.4 16.9 22.5 10.6

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Singapore REITs

Figure 14: MLT FY12F GAV breakdown by geography

Singapore

42%

Hong Kong

16%

China

4%

Malaysia

4%

J apan

29%

South Korea

5%

Vietnam

0%


7/28/2019 120604

24/324 June 2012 Page 24 of 32


YE Dec 2010A 2011A* 2012F 2013F 2014F YE Dec 2010A 2011A 2012F 2013F 2014F




Interest income 0.3 0.9 0.8 0.8 0.8 Trade receivables 21.6 25.7 16.7 16.8 17.0

Other income 0.0 0.0 0.0 0.0 0.0 Others 25.1 20.9 20.9 20.9 20.9Manager's management fees -23.1 -34.4 -29.0 -29.2 -29.5 Non-current assets 3,459.2 4,058.3 4,082.9 4,082.9 4,082.9

Trustee's fee -0.5 -0.7 -0.6 -0.6 -0.6 Investment properties 3,459.2 4,058.3 4,082.9 4,082.9 4,082.9

Other trust expenses -2.4 9.4 -4.6 -4.6 -4.7 Plant & equipment 0.0 0.0 0.0 0.0 0.0

Borrowing costs -29.2 -44.4 -34.4 -34.7 -34.7 Others 0.0 0.0 0.0 0.0 0.0

Others 0.0 0.0 0.0 0.0 0.0 Total li abilities 1,539.1 1,734.8 1,736.5 1,737.6 1,738.8

Net income b/f tax & change in 138.1 224.4 179.6 181.2 183.1 Current liabilities 319.3 427.1 378.2 451.9 206.2

Change in FV of Inv Pty 32.1 113.0 0.0 0.0 0.0 Trade and other payables 102.8 152.4 129.7 130.9 132.0

Others 0.0 0.8 0.0 0.0 0.0 Short term borrowings 172.3 243.8 217.8 290.4 43.6

Income tax -13.4 -27.9 -10.0 -10.1 -10.2 Others 44.2 30.9 30.6 30.6 30.6

Total return 162.7 321.8 169.6 171.1 172.9 Long-term liabilities 1,219.8 1,307.7 1,358.3 1,285.7 1,532.5

Non-tax deductibles & o'er adj -32.6 -121.9 -0.3 -0.3 -0.3 Long-term debts 1,181.8 1,251.3 1,301.8 1,229.2 1,476.1

Distributable income 130.1 199.9 169.3 170.8 172.6 Others 38.0 56.4 56.4 56.4 56.4

DPU (cts) 6.1 8.2 7.0 7.0 7.1 Unitholders' funds 2,072.8 2,186.4 2,201.9 2,201.9 2,201.9

Perpetual securities 0.0 344.0 344.0 344.0 344.0

*2011 has a change of FY from Dec to Mar (5 Qtrs) Non-controlling interests 2.4 7.4 7.4 7.4 7.4




Total return 162.7 321.8 169.6 171.1 172.9 Sales 5.9 55.1 -15.7 0.9 0.9

Adjustments for NPI 6.8 52.1 -15.7 0.9 0.9

Net interest expense 28.0 41.6 33.7 33.9 33.9 Net income 71.8 97.8 -47.3 0.9 1.1

Depreciation 0.7 1.2 0.0 0.0 0.0 Distributable income 10.3 53.7 -15.3 0.9 1.1

Revaluation of Inv Pty -32.1 -113.0 0.0 0.0 0.0 DPU 1.2 35.3 -15.3 0.9 1.1

Others 2.2 13.4 10.0 10.1 10.2 Profitability (%)

Trade and other receivables -12.7 -3.8 9.0 -0.1 -0.1 NPI margin 88.2 86.5 86.5 86.5 86.5

Trade and other payables 22.0 52.8 -22.7 1.1 1.2 Net income margin 74.3 94.8 59.3 59.3 59.4

Income tax paid -5.4 -8.7 -4.0 -4.0 -4.0 ROA 4.5 7.5 4.0 4.0 4.0

Investi ng cash flows -566.1 -514.0 -23.8 0.8 0.8 ROE 7.8 14.7 7.7 7.8 7.9

PPE 0.0 0.0 0.0 0.0 0.0 Stability

Capex on Inv Pty & others 0.0 0.0 0.0 0.0 0.0 Gross debt/asset (%) 37.5 35.0 35.4 35.4 35.4

Purchase of Pty -565.1 -565.6 -24.6 0.0 0.0 Total debt/Investment Prop 39.1 36.8 37.2 37.2 37.2

Others -1.0 51.7 0.8 0.8 0.8 Int. coverage (X) 5.7 6.1 6.2 6.2 6.3

Financing cash flows 443.3 267.8 -170.2 -211.9 -213.8 Int. & ST debt coverage (X) 0.8 0.9 0.8 0.7 2.8

New Issue proceeds 305.0 0.0 0.0 0.0 0.0 Cash flow int. coverage (X) 5.7 6.9 5.7 6.1 6.2

Borrowing costs -28.2 -38.8 -31.0 -31.2 -31.2 Per share data (Scts)

Net borrowing proceeds 282.8 150.3 24.6 0.0 0.0 EPU 6.7 13.2 7.0 7.0 7.1

Distribution to unitholders -115.5 -190.5 -169.3 -170.8 -172.6 DPU 6.1 8.2 7.0 7.0 7.1Others -0.8 346.7 5.5 -9.9 -10.0 CFPS 7 13 8 9 9

Net change in cash 42.6 59.2 1.6 1.0 1.0 NAV 85.53 90.11 105.23 105.23 105.23

Beginning cash balance 67.4 108.4 167.6 169.2 170.2 SPS 9 14 12 12 12

Forex -1.6 0.0 0.0 0.0 0.0


Free cash flow 165.4 305.4 195.6 212.1 214.1


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Singapore REITs

Starhil l Global REIT

Courting Greater UpsideDeserving better. A prime retail play trading at a sharp 27% discount

to its book value, Starhill Global REIT deserves better in our opinion.

For one, its key assets are in the coveted Orchard Road area, where

tight supply and the entry of new international retailers should give it

greater bargaining power in terms of leasing its space. We like Starhill

for the rental upside it stands to enjoy in Singapore and income stability

in Malaysia and Australia.

Courting greater upside. A number of Starhills major leases (42% of

gross rent) are due to expire next year. Chief among them is its master

lease with Toshin at Ngee Ann City mall that has an option for renewal.

If Starhill wins its fight at the Court of Appeal for a transparent rentreview mechanism, its ability to maximise the potential for rental

increase at the mall would be assured. Currently, the 225,000-sq-ft

space is estimated to be leased at low teens psf to Toshin, which then

subleases it to luxury brands like Chanel, Louis Vuitton, Burberry and

Tiffany & Co. In prime Orchard Road, the average retail rent currently

stands at SGD31.60 psf pm, according to CRBE.

Race for prime space. CBRE estimates that new supply of retail spacewill amount to 4.37m sq ft between 2012 and 2015. Of this, only 12.4%or 540,000 sq ft will be located in Orchard Road and the rest in non-prime areas. Several international retailers such as Abercrombie &Fitch and Michael Kors opened their maiden stores in Orchard Road

last year and other new-to-market brand names are said to be huntingfor prime retail space. We expect Starhill to benefit from the scarcity ofnew prime retail space and healthy retail sales growth in Singapore. Itsasset enhancement initiative at Wisma Atria, targeted for completion by3Q12, will also boost DPU in the near term.

No major refinancing need yet. Starhills next major refinancing is duenext year (SGD548m, or 64% of borrowings) and only SGD26m is duethis year. Gearing is relatively low at 30.8%, implying debt headroom ofSGD451m for acquisitions before hitting managements target of 40%.

Consumer discretionary vulnerable, assume coverage with HOLD.

Consumer discretionary income is still susceptible to downturns. We

caution that macro-economic headwinds may curtail the number of

business and leisure travellers who frequent the Orchard Road malls. If

this eventuates, Starhills tenant lease structures would provide some

protection via rental income but we think it will still inhibit its ability to

sustain tenant base growth rates. At 6.8% FY12F yield, we assume

coverage with a HOLD rating and DDM-derived target price of SGD0.65.

Starhill Global REIT Summary Earnings Table

FYE Dec(SGD m) FY2010 FY2011 FY2012F FY2013F FY2014FRevenue 165.7 180.1 183.0 189.6 194.8Net property income 130.5 143.6 146.2 151.4 156.9Distributable income 82.5 90.8 91.7 96.1 100.8DPU (cents) 3.9 4.1 4.2 4.4 4.6DPU growth (%) 2.5 5.7 3.0 3.7 3.9DPU yield (%) 6.2 6.6 6.8 7.0 7.3

P/BV(x) 0.7 0.7 0.7 0.7 0.7Gearing(Debt to deposited assets) (%)

29.9 30.5 30.3 30.2 30.0

ROE (%) 8.2 5.6 5.1 5.3 5.5ROA (%) 5.4 3.7 3.4 3.5 3.6


HOLD



Stock Information

Description: Invests mainly in retail and office assets inSingapore, Malaysia, China, Australia and Japan, and has aportfolio size of SGD2.7bn. Managed by YTL Starhill GlobalREIT Management Ltd.

Ticker: SGREIT SPShares Issued (m): 1,943.0Market Cap (USD m): 950.83-mth Avg Daily Turnover (USD m): 0.7ST Index: 2,759.58Free float (%): 70.5

Major Shareholders: %YTL Corp Bhd 28.7

AIA 9.8

Key Indicators

ROE annualised (%) 5.6Debt to deposit assets (%): 30.4NAV/shr (SGD): 0.96Interest cover (x): 4.8

Historical Chart

Performance:



Absolute (%) -3.8 4.1 9.6 -0.8 11.5Relative (%) 3.8 12.4 9.7 14.1 6.9

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Singapore REITs

PROFIT AND LOSS (SGD m) BALANCE SHEET (SGD m)





Finance income 0.8 0.7 0.7 0.7 0.8 Trade receivables 4.7 2.5 2.6 2.6 2.7FV adj on security deposits 1.8 -0.1 0.0 0.0 0.0 Non-current assets 2,668.9 2,728.3 2,728.4 2,728.4 2,728.5

Management fees -13.0 -13.9 -13.9 -14.4 -14.8 Investment properties 2,654.5 2,709.7 2,709.7 2,709.7 2,709.7

Trust expenses -3.5 -3.4 -3.5 -3.6 -3.7 Net fixed assets 0.6 1.9 1.9 1.9 2.0

Finance expense -32.3 -34.3 -28.6 -28.9 -29.2 Others 13.8 16.7 16.7 16.8 16.8

Net income b/f tax & change in 84.4 92.6 101.0 105.3 110.0 Total liabil ities 956.5 988.1 989.2 990.4 991.5


Others -7.4 -11.2 0.2 0.2 0.2 Trade and other payables 33.5 42.9 43.4 43.8 44.2

Income tax -3.3 -5.2 -5.3 -5.4 -5.5 Short term borrowings 1.1 27.9 27.9 27.9 27.9


Non-tax deductibles & o'er adj -67.6 -13.6 5.4 5.6 5.7 Long-term liabilities 126.7 896.2 886.6 887.3 888.0

Distributable income 82.5 90.8 91.7 96.1 100.8 Long-term debts 832.5 838.3 838.3 838.3 838.3

DPU 3.9 4.1 4.2 4.4 4.6 Others 63.8 48.4 49.0 49.8 50.5

Unitholders' funds 1,830.2 1,851.0 1,865.9 1,880.9 1,896.0




Total return before tax -41.6 153.4 109.6 101.2 105.5 Sales 23.1 8.7 1.6 3.6 2.7

Adjustments for NPI 22.0 10.1 1.9 3.5 3.6

Net interest expense 23.3 31.4 33.6 27.9 28.1 Net income -424.5 -30.4 -8.2 4.4 4.6

Depreciation 0.2 0.3 0.3 0.4 0.4 Distributable income 9.3 10.1 1.0 4.8 4.9

Mgt fees in units 5.6 0.0 0.0 5.6 5.8 DPU 2.5 5.7 3.0 3.7 3.9

Others 109.4 0.0 -16.9 -0.2 -0.2 Profitability (%)

Trade and other receivables 0.4 -1.3 -9.6 -0.1 -0.1 NPI margin 78.7 79.7 79.9 79.9 80.5

Trade and other payables -2.2 4.6 17.3 0.5 0.5 Net income margin 90.6 58.0 52.4 52.8 53.7

Income tax paid -2.1 -3.3 -2.5 -5.3 -5.4 ROA 5.4 3.7 3.4 3.5 3.6

Investi ng cash flows -15.2 -410.0 -17.1 15.6 6.3 ROE 8.2 5.6 5.1 5.3 5.5

PPE -0.2 -7.4 -1.6 -7.6 -7.8 Stability

Capex on Inv Pty & others -0.5 -290.3 -16.2 22.5 13.4 Gross debt/asset (%) 29.9 30.5 30.3 30.2 30.0

Interest on deposits 0.8 0.7 0.7 0.7 0.8 Total debt/Investment Prop 31.4 32.0 32.0 32.0 32.0

Others 0.0 0.0 0.0 0.0 1.0 Int. coverage (X) 3.6 3.7 4.5 4.6 4.8

Financing cash flows 188.1 107.1 -121.2 -129.7 -124.9 Int. & ST debt coverage (X) 3.5 2.0 2.3 2.4 2.4

Equity net proceeds 328.0 0.0 0.0 0.0 0.0 Cash flow int. coverage (X) 3.7 3.8 4.5 4.7 4.8

Borrowing costs -20.2 -37.5 -31.7 -28.6 -28.9 Per share data (Scts)

Net borrowing proceeds -47.2 221.4 0.5 0.0 0.0 EPU 7.8 5.4 4.9 5.1 5.3

Distribution to unitholders -72.5 -74.3 -80.6 -91.7 -96.1 DPU 3.9 4.1 4.2 4.4 4.6Net change in cash 265.9 -183.8 -6.5 15.9 16.0 CFPS 4.8 5.5 6.0 6.0 6.2

Beginning cash balance 32.7 297.9 113.0 108.0 123.9 NAV 0.9 0.9 0.9 0.9 0.9

Forex -0.6 -1.0 1.4 0.0 0.0 SPS 8.6 9.3 8.4 8.7 8.9


Free cash flow 92.3 -178.6 114.0 144.9 140.2


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Singapore REITs

Suntec REIT

Looks Fairly Valued; Office Drag RemainsPrime office and retail play. With investments in five commercial

properties in Singapores Central Business District, Suntec REIT offers

exposure to prime office (68% of income contribution), retail (29%) and

convention space (3%). Its portfolio, valued at SGD7.7b, has a total

NLA of 4.1m sq ft with office and retail occupancy rates at 99% and

97%, respectively.

Downgrading office rental assumptions.The stock of Grade A office

space (including Marina South) will increase by 91% between 2H12 and

2016. Consequently, we expect Grade A office rents to fall by 8-13% in

2013-14; 43.6% of Suntecs office leases are up for renewal in thosetwo years and we expect DPU to decline by 1.8% CAGR over FY11-14.

MBFC Phase 2 acquisition unlikely in 2012. Suntec acquired a one-

third stake of MBFC Phase 1 from affiliate Cheung Kong four months

after its completion in 2010. MBFC Phase 2 was completed in 1Q12.

We estimate it will cost Suntec approximately SGD1.04b to acquire a

similar one-third stake. If fully debt-funded, the purchase will raise

Suntecs aggregate leverage to 46.6% (from 39.2% in 1Q12), above its

optimal gearing of 40-45%. Equity fund-raising may be required, which

poses a challenge as the stock is trading at a 35% discount to book.

We therefore believe that it will be too strenuous for Suntec to complete

the acquisition in 2012.Assume coverage w ith HOLD and TP of SGD1.285. We like Suntecs

retail exposure, which not only sets it apart from pure office landlords

like K-REIT, but also serves as a buffer should the market take a turn

for the worst. Moreover, we do not expect the near-term growth driver

(MBFC Phase 2 acquisition) to happen in 2012. At its current price,

Suntec is trading at 7.2% FY12F yield. We assume coverage with a

HOLD recommendation and DDM-derived target price of SGD1.285.

Competition and macro-economic risks remain our top concerns for

Suntec and we expect management to take steps to address these

issues going forward.

Suntec REIT Summary Earnings TableFYE Dec(SGD m) FY2010 FY2011 FY2012F FY2013F FY2014F

Revenue 249.5 270.3 255.3 276.5 302.0

Net property income 193.1 193.4 197.5 214.0 233.7Distributable income 182.5 220.7 206.9 209.6 215.6DPU (cents) 9.9 9.9 9.2 9.2 9.4

DPU growth (%) -15.8 0.7 -7.5 0.4 1.9DPU yield (%) 7.7 7.7 7.2 7.2 7.3


ROE (%) 9.7 14.3 5.5 5.4 5.6

ROA (%) 5.8 8.4 3.3 3.2 3.3


HOLD



Stock Information

Description: Suntec Real Estate Investment Trust is a real

estate investment trust established with the objective ofinvesting in income-producing real estate properties whichare used primarily for retail and office properties.

Ticker: SUN SPShares Issued (m): 2,237.4Market Cap (USD m): 2,241.93-mth Avg Daily Turnover (USD m): 6.4ST Index: 2,759.58Free float (%): 89.8

Major Shareholders: %Suntec City Development 6.23

Key Indicators

ROE annualised (%) 5.7Debt to deposit assets (%): 39.2NAV/shr (SGD): 1.99Interest cover (x): 4.2

Historical Chart

Performance:



Absolute (%) -1.5 4.9 13.2 -14.0 20.0

Relative (%) 6.3 13.2 13.2 -1.1 15.1

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Singapore REITsFigure 15: Suntec REIT FY12F GAV

8%4%

15%

19%

54%

100%

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

Suntec City

(Office +Mall)

Suntec

Convention

(consolidated

if 100%)

Park Mall One Raffles

Quay

(33% interest)

MBFC1

(33% interest)

Total

Source: Maybank KE

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Singapore REITs

RESEARCH OFFICESREGIONAL

PKBASURegional Head, Research & Economics(65) 6432 1821 [email protected]

WONG Chew Hann, CARegional Head of Institutional Research(603) 2297 8686 [email protected]

THAM Mun HonRegional Strategist(852) 2268 0630 [email protected]

ONG Seng YeowRegional Products & Planning

(852) 2268 0644 [email protected]

ECONOMICSSuhaimi ILIASChief Economist

Singapore | Malaysia(603) 2297 8682 [email protected]

Luz LORENZOEconomist

Philippines | Indonesia(63) 2 849 8836 [email protected]

Chaiyachoke SUWISUTTANGKULEconomist Thailand(662) 658 6300 [email protected]

MALAYSIAWONG Chew Hann, CAHead of Research(603) 2297 8686 [email protected] Strategy Construction & InfrastructureDesmond CHNG, ACA(603) 2297 8680 [email protected] Banking - RegionalLIAW Thong Jung(603) 2297 8688 [email protected] Oil & Gas Automotive ShippingONG Chee Ting(603) 2297 8678 [email protected] Plantations

Mohshin AZIZ(603) 2297 8692 [email protected] Aviation Petrochem PowerYIN Shao Yang, CPA(603) 2297 8916 [email protected] Gaming Regional Media PowerWONG Wei Sum, CFA(603) 2297 8679 [email protected] Property & REITsLEE Yen Ling(603) 2297 8691 [email protected] Building Materials Manufacturing Technology

LEE Cheng Hooi Head of [email protected] Technicals

HONG KONG / CHINAEdward FUNGHead of Research

(852) 2268 0632 [email protected] ConstructionIvan CHEUNG(852) 2268 0634 [email protected] Property IndustrialIvan LI(852) 2268 0641 [email protected] Banking & FinanceJacqueline KO(852) 2268 0633 [email protected] Consumer Staples

Andy POON(852) 2268 0645 [email protected] Telecom & equipmentSamantha KWONG(852) 2268 0640 [email protected] Consumer Discretionaries

Alex YEUNG(852) 2268 0636 [email protected] IndustrialCatherine CHAN(852) 2268 0631 [email protected]

CementAnit a HWANG, CFA | Jacky WONG, [email protected] | [email protected](852) 2268 0142 | (852) 2268 0107 Special Situations Quants

INDIAJigar SHAHHead of Research(91) 22 6623 2601 [email protected] Oil & Gas Automobile Cement

Anubh av GUPTA(91) 22 6623 2605 [email protected] Metal & Mining Capital goods PropertyHaripreet BATRA(91) 226623 2606 [email protected] Software MediaGanesh RAM(91) 226623 2607 [email protected]

Telecom ContractorDarpin SHAH(91) 226623 2610 [email protected] Banking & Financial ServicesGagan KWATRA(91 )226623 2612 [email protected] Small Cap

SINGAPOREStephanie WONGHead of Research(65) 6432 1451 [email protected] Strategy Small & Mid CapsGregory YAP(65) 6432 1450 [email protected] Technology & Manufacturing Telcos - RegionalWilson LIEW(65) 6432 1454 [email protected] Hotel & Resort Property & ConstructionJames KOH(65) 6432 1431 [email protected] Logistics

Resources Consumer Small & Mid CapsYEAK Chee Keong, CFA(65) 6433 5730 [email protected] Healthcare Offshore & Marine

Ali son FOK(65) 6433 5745 [email protected] Services S-chipsBernard CHIN(65) 6433 57

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