150820 insights singapore pockets of opportunity in singapore reits

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ed: TH / sa: JC

Pockets of Opportunity

S-REITs facing an uneasy mix of low growth and higher interest rates

Pockets of opportunity after recent market rout; upgrade CapitaLand Mall Trust, CapitaLand Commercial Trust and CDL Hospitality Trust to BUY

Temporary shelter in S-REITs that offer sustainable growth with solid financial metrics.

Our picks survived the choppy ride. S-REITs price performance have turned increasingly choppy given uncertainties in the timing of FED rate hikes and the recent Yuan devaluation. Our call to stay selective and focus on S-REITs with the ability to drive growth names (MAGIC, MINT, FCT, FCOT) have paid dividends as they have held up better than their peers.

Pricing in slower DPU growth. Looking ahead, we see rising operational headwinds across all major subsectors, taking the hit from slower economic and trade growth in Singapore and the region. We have cut our estimates by up to 5% to factor in these risks. Moreover, acquisitions, which have been a major driver of earnings upside, are likely to slow, given higher cost of capital. Although the sector’s DPU CAGR (FY15-17F) has been cut to 3.2% from 4.0%, this is higher than the 1% growth generated by STI companies.

Opportunities after the recent price correction. We have cut our TPs by 3-25% to reflect higher cost of capital and lower earnings expectations going forward. Despite the revised TPs, we see value in CapitaLand Commercial Trust (CCT) (upgrade to BUY, TP S$1.48), and CDL Hospitality Trust (CDL HT) (upgrade to BUY, TP S$1.61), trading at c.0.77x P/bk and c.0.83x respectively with yield spreads above historical mean. We have also upgraded CapitaLand Mall Trust (CMT) to BUY, TP S$2.07 on attractive yields of 6.1%. We prefer to HOLD Croesus Retail Trust, Cache Logistics Trust, Mapletree Industrial Trust, Frasers Hospitality Trust and Ascendas India Trust due to limited upside to our revised target prices.

REITS with sustainable growth and low gearing should be

more resilient. While we maintain our cautious view on S-REITs, we believe quality S-REITS are positioned to provide temporary shelter till the next rate hike. Our selection criteria to pick resilient names are : (i) a steady DPU growth profile of >3.0% which will more than compensate for interest rate hikes, (ii) conservative financial metrics which include long debt maturity profiles and lower gearing levels and (iii) valuations trading above historical mean. On this front, we like Mapletree Greater China Trust (BUY, TPS$1.12) and Frasers Centrepoint Trust (BUY, TPS$ 2.05) as they meet most of the above metrics.

STI : 3,041.25

Analyst Derek TAN +65 6682 3716 [email protected]

Rachael TAN +65 6682 3713 [email protected]

Mervin SONG CFA +65 6682 3715 [email protected]

TOP PICKS

REIT 18th Aug’15

Price (S$)

Target Price

(S$)

Mkt Cap (US$’m)

FY16F/17F

Yield (%)

P/Bk (x)*

Top Picks

Mapletree Greater China Trust

0.97 1.12 1,975 8.3% 0.85

Frasers Centrepoint Trust 1.98 2.05 1,285 6.1% 1.07

Upgrade to BUY

CapitaLand Commercial Trust

1.35 1.48 2,817 6.9% 0.78

CDL Hospitality Trusts 1.365 1.61 954 8.1% 0.84

CapitaLand Mall Trust 1.94 2.07 4,758 6.1% 1.08

Downgrade to HOLD

Croesus Retail Trust 0.91 0.95 332 8.6% 1.10

Ascendas India Trust 0.92 0.90 600 6.4% 1.14

Cache Logistics Trust 1.05 1.09 584 8.3% 1.07

Mapletree Industrial Trust

1.49 1.50 1,856 7.0% 1.13

Frasers Hospitality Trust 0.775 0.83 747 7.7% 0.92

* Based on the latest NAV per unit

Source: DBS Bank

DBS Group Research . Equity 19 Aug 2015

Singapore Industry Focus

Singapore REITs

Refer to important disclosures at the end of this report

Industry Focus

Singapore REITs

Macro headwinds abound for S-REITs Macro headwinds to persist in the immediate term. The past month hasn’t been a good one for the S-REITs with the FSTREI index losing its gains for the year and is now 7% down YTD. This is in line with the decline of the Straits times index (STI). The REITs have underperformed the Developers who remain marginally higher than at the start of the year. With the recent price correction, S-REITs’ FY16 yield has increased by 40bps to 6.9%, implying a spread of 4.2% against current 10-year bond rates of 2.7%. Looking ahead, we believe the share price performance are likely to be affected by macro drivers, especially (i) timing and magnitude of Fed rate hikes which are expected to increase

investors’ returns expectations and (ii) directional strength of the SGD which affects fund flows in the sector. While we believe that the recent correction in S-REIT share prices have somewhat priced in some of these macro risks, we are seeing a gradual moderation in distribution growth over the coming years (FY15-16F DPU growth of 3.0%) with potential downside in the event of further deterioration of operational environment. With a moderate growth outlook, coupled with possible risks from an environment of rising interest rates and increased currency volatility impacting on returns, we see rising risks to distributions going forward and have cut our forecasts by 1%-5% over the results season to reflect those changes.

Figure 1: S-REITs index have performed in line with

the STI YTD, underperformed the developers Figure 2: S-REITs offer yields of 6.4%; Spreads

widened to 3.8% against current 10-year bonds

Source: Companies, DBS Bank

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S-REITs (FSTREI)

Property Developers (FSTREH)

Industry Focus

Singapore REITs

Dimming growth prospects remain a drag Growth prospects rather than interest rate a key driver for share price performance historically. The market has correctly focusing on the impact of rising interest rates on S-REIT prices and distributions as there is indeed an inverse correlation between historical share prices for S-REITs and movements in interest rates (see table 1). However, we note that the relationship is not as straightforward as people expect. Our analysis shows that S-REITs have historically delivered positive returns (i.e. no capital loss) for investors despite periods of rising interest rates. In fact, over the past 12 years, the performance scorecard for S-REITs has been good in our view, with the sector outperforming the FSSTI index in eight out of the past 12 years, as shown in the table below. One of the key reasons for the positive historical price performance has been the ability of S-REITs to deliver strong growth in distributions, either through rental growth or acquisitions, which more than compensate for the rise in interest costs. Historical S-REIT prices track fairly closely to the sector’s DPU prospects (figure 3). Back in 2004-2007, S-REITs, on average returned a respectable 20.3% over the period,

coinciding with a high-growth period when DPU growth average 11.8%. Since the global financial crisis in 2008, S-REITs have returned on average 5.2%, which coincided with a DPU growth of 4.6% (see figure 3). Dimming growth outlook a concern. The outlook for S-REITs is turning cloudy, with the sector projected to deliver a DPU CAGR of 3.2% over FY15-16F (3.4 % growth in DPU in FY16F, 3.0% growth in DPU in FY17F). This is on the back of continued operational headwinds across all major subsectors of retail, office, industrial and hospitality which are projected to be a drag on rental prospects. While the retreat in share prices has resulted in a spike in yields, we believe this will result in increased difficulty for S-REITs to acquire accretively. As such, the sector is faced with an uncomfortable mix of slowing topline growth, coupled with the risk of higher interest rates. As such, the performance of S-REITs will likely remain bumpy and we advocate investors to remain selective and zoom in on S-REITs that have the nimbleness to acquire and ability to grow distributions to outperform their peers.

Table 1: S-REIT performance against FSSTI and interest rate movements

Year S-REIT Total

Returns

FSSTI Total

Returns

Performance of S-REITs vs

FSSTI

DPU Growth

10-Year Bond Yield

(Start)

10-Year Bond Yield

(End)

Ppt Chg Interest Rate trend

Correlation With S-REITs

(%) (%) (%) (%) (%) (%)

2004 34% 13% Outperform 8.0% 3.4% 2.6% -0.8% Decreasing -47%

2005 18% 17% Outperform 9.0% 2.6% 3.2% 0.6% Increasing -87%


2007 1% 22% Underperform 13.0% 3.0% 2.7% -0.4% Decreasing 1%

2008 -48% -46% Underperform -8.0% 2.7% 2.0% -0.6% Decreasing 20%

2009 77% 67% Outperform -7.0% 2.0% 2.7% 0.6% Increasing 81%

2010 17% 13% Outperform 4.0% 2.7% 2.7% 0.1% Increasing -63%

2011 -10% -14% Outperform 6.0% 2.7% 1.6% -1.1% Decreasing 80%


2013 -3% 3% Underperform 5.0% 1.3% 2.6% 1.3% Increasing -95%


YTD 2015

-2% -1% Underperform 3.3% 2.3% 2.6% 0.4% Increasing -66%

Source: Bloomberg Finance L.P., DBS Bank

Industry Focus

Singapore REITs

Figure 3: S-REIT performance against forward DPU Growth

Source: REIT Managers, DBS Bank Table 2: S-REIT yields and returns across time

Year 10-year

Bon S-REIT Yield

Yield Spread

Growth

S-REIT Total

Returns

FSSTI Total

Returns What is driving growth

(%) (%) (%) (%) (%) (%) 2004 3.2% 6.5% 3.2% 8.0% 30% 10% Rising growth outlook

2005 2.9% 4.9% 2.0% 9.0% 13% 14% Rising growth outlook

2006 3.4% 5.3% 1.9% 17.0% 41% 28% High growth (acquisitions / rental growth)

2007 2.9% 4.1% 1.2% 13.0% -3% 19% High growth (acquisitions / rental growth)

2008 2.8% 7.3% 4.6% -8.0% -59% -49% Global Financial Crisis

2009 2.4% 9.7% 7.3% -7.0% 69% 64% Global Financial Crisis

2010 2.4% 6.4% 4.0% 4.0% 11% 10% Recovery from a low base effect

2011 2.1% 6.5% 4.4% 6.0% -16% -17% Continued recovery and acquisition growth driven by low interest rates

2012 1.5% 6.6% 5.2% 5.5% 37% 20% Acquisition growth fuelled with low interest rates, interest savings a

2013 2.1% 6.0% 3.9% 5.0% -9% 0% Acquisitions (industrial REITs, selected office REITs, hospitality REITs); Positive Rental reversions (all sectors) and interest savings

2014 2.4% 6.3% 3.9% 4.0% 9% 6% Acquisitions (industrial REITs, hospitality REITs), rental growth (office, retail and industrial sector) and interest savings

2015 2.4% 6.0% 3.6% 3.0% -1% -3% Acquisitions YTD. Rental growth outlook moderating

2004-2007 3.1% 5.2% 2.1% 11.8% 20.3% 17.8%

2010-now 2.1% 6.3% 4.1% 4.6% 5.2% 2.7%

Source: REIT Managers, DBS Bank

DBS view: DPU growth is closely intertwined with GDP growth which is expected to slow given ongoing economic restructuring efforts (impacting retail, industrial sectors). Oversupply outlook dampen the rental outlook for office and hospitality sectors. Moderating growth outlook to limit re-rating opportunities for S-REITs

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Industry Focus

Singapore REITs

Acquisitions to slow going forward An active quarter as S-REITs head overseas for growth. S-REITs have announced close to S$4.6bn worth of deals YTD, which is almost the total value of deals transacted in 2014. In terms of target markets, Singapore makes up 48% of total deals transacted to date, helped by large transactions like OUE Commercial Trust's (OUECT) acquisition of One Raffles Place for S$1.0bn. We note that S-REITs have continued to head towards overseas markets in search of higher growth and to diversify their earnings base, given limited opportunities and high prices in Singapore. Australia appears to be an attractive key market for S-REITs, the likes of Cache Logistics Trust, Frasers Commercial Trust, Frasers Hospitality Trust, Starhill Global REIT, Ascott Residence Trust, Keppel DC REIT and Mapletree Logistics Trust (MLT) have taken advantage of the weak AUD to snap up assets in Australia (c.23% of total YTD acquisition value). Australia the first overseas stop for industrial REITs. With new Jurong Town Corporation (JTC) rules regarding anchor tenants coming into force in two years, competition for industrial assets with solid tenant credentials has become more intense, and industrial S-REITs are increasingly hard-pressed to make DPU-accretive acquisitions in Singapore. As such, industrial REITs (Cache and MLT) have made their maiden acquisitions overseas with Australia as a first stop, a country that most managers have been reviewing for some time. Key reasons for growing into Australia are its deep and transparent market with clear tax rules, similar characteristics as Singapore. In addition, leases are typically long and they appeal to S-REITs looking for stable returns with an added kicker from a weak currency.

Looking ahead, we expect more Australia deals given that (i) the manager of MLT has already guided for more acquisitions in order to scale up the business; (ii) Ascendas Group (sponsor of Ascendas REIT) is quoted in the media to be reviewing over $1.1bn of logistics assets. However, acquisitions are tougher to come by as cost of capital rises. Sponsor-related acquisitions accounted for nearly two-thirds of transaction value this quarter, especially in key gateway cities (Singapore, Sydney, Melbourne, and Tokyo) where capital values have grown significantly due to liquidity in the market. Looking ahead, we believe third-party acquisitions are likely to remain tough to come by, given – (i) current elevated yields of 6.4%, implying that most S-REITs will find it tough to find accretive acquisitions, and (ii) lower gearing limits of 45% (vs 60% limit if S-REITs have a rating) from the revised guidelines from the latest revised consultation paper from the Monetary Authority of Singapore (MAS) guidelines. Scale is important as S-REITs with strong sponsors to pull ahead. While we note that the revised gearing limits are within most S-REITs' comfortable level (S-REIT gearing levels are expected to increase to c.34% by FY16F), this could mean that S-REITs have lower flexibility from usage of gearing levels to take on opportunistic acquisitions. On that front, we believe that S-REITs with Sponsors are at an advantage from a warehousing point of view – armed with larger balance sheets, they are able to make opportunistic acquisitions and subsequently inject them into their sponsored REITs at an appropriate time (see FCL’s divestment of Sofitel Wentworth in Australia to FHT as an example). S-REITs under the Mapletree, Frasers, Ascendas, Keppel, OUE and CapitaLand names are in a stronger position compared to some of the smaller S-EITs.

Figure 4: S-REIT total debt vs gearing Figure 5: Acquisitions YTD by geography



19 23 29 30 33 35 36

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Total Debt (LHS) Gearing Level (RHS)

Singapore45%

Japan3%

Australia29%

Other Asia13%

Europe/USA10%

Industry Focus

Singapore REITs

Figure 6: Value of YTD acquisitions comparable to

2014 Figure 7: Acquisition breakdown by seller



Table 3: Acquisitions announced in 2Q15

REIT Acquisitions Sector Country S$’m Yields

(%) SGREIT Myer Centre Adelaide

Retail/Office Australia 302.4 6.60%

FCOT 357 Collins Street

Office Australia 232.2 6.25%

FHT Sofitel Sydney Wentworth

Hotel Australia 235.7 6.20%

MLT Mapletree Logistics Park Bac Ninh Phase 1 and Dakonet Logistics Centre

Industrial Vietnam South Korea

42.2 10% MLPBN P1 8% DLC

ART Citadines Bourke Melbourne, 40% remaining stake in Citadines Shinjuku Tokyo and Citadines Karasuma-Gojo, four rental properties in Osaka

Serviced Residence/ Rental Property

Australia Japan

246.0 5.10%

Keppel DC Intellicentre 2 (IC2) in Sydney

Data Centre Australia 45.9 7.00%

OUECT One Raffles Place

Office Singapore 1,091.4 3.50%

MAGIC Sandhill Plaza, Shanghai

Business Park China 412.2 5-5.5%

LMRT Lippo Plaza Batu and Palembang Icon

Retail Indonesia 106.8 6.74%

IREIT Berlin office

Office Germany 217.7 7.10%

MLT Coles Chilled Distribution Centre Industrial Australia 261.5 5.60%

Total 3,194

Source: various S-REITs, DBS Bank

0

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2012 2013 2014 YTD Aug 2015

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Sponsor Related

63%

3rd Party37%

Industry Focus

Singapore REITs

2Q15 Highlights and Guidance

Investors caught between a rock and a hard place. Of the S-REITs that have announced their 2QCY earnings so far, 19 were in line with our estimates, while seven surprised on the downside. Based on our conversations with the various REIT managers, the various subsector-specific pressure points show no signs of abating. With the MAS guiding for lower economic growth of 2.0-2.5% this year, Singapore's economic outlook is an uncertainly on the horizon which is an added overhang on the sector’s performance going forward. Hospitality REITs generally underperformed; office REITs' guidance turns cautious. Among the hospitality S-REITs, FEHT and OUEHT failed to meet our expectations, largely on the back of weak corporate demand and heightened competition. ASCHT’s DPU came in below due to a cutting back of its payout ratio to 95%. Among the retail REITs, MCT and CMT both came in slightly below due to lower-than-expected occupancy rates. For MCT, contribution from

Mapletree Anson is expected to be weaker this year, as it has taken quite some time for the REIT to backfill spaces vacated by AON. Meanwhile, CMT, IMM, Clarke Quay and JCube reported <90% occupancy rates due to AEI/reconfiguration works. Reversions also dropped to 4.6%, one of the lowest seen in recent years. For the office sector, FCOT’s DPU came in slightly below expectations due to the depreciation of the AUD, which contributes to 40% of earnings. Modest growth outlook with rising uncertainty. With rising operational headwinds seen across most real estate subsectors, we have cut our earnings estimates by 1-5% across the REITs, mostly in the hospitality and office sectors. We are seeing slowing topline growth outlook for most S-REITs, translating into a more modest outlook for distributions in the coming years. Based on our forecasts, the S-REITs are projected to deliver 3.3% growth in DPU over FY15-17F. The growth outlook differs across various real estate sub-sectors, ranging between 0.8% and 4.9%.

Table 4: Summary of Results and Outlook

2Q15 Results CAGR Rental Reversion Market Outlook Sector Beats In line Misses (FY15-17F) Trend Office 0 2 1 4.1%

Retail 0 3 1 2.5%

Commercial 0 3 1 4.9%

Industrial 0 7 0 2.2%

Hospitality 0 3 3 0.8%

Healthcare 0 1 1 1.1%

Total 0 19 7 3.3%

Source: DBS Bank

Figure 8: S-REIT DPU Growth by Sectors (FY15-17F) Figure 9: Earnings cut post results season by sectors

Source: DBS Bank Source: DBS Bank

4.0%

2.5%

4.2%

2.1% 2.3%

1.1%

3.2%

Office Retail Commercial Industrial Hospitality Healthcare S-REIT Average

-4%

-2%

-3%

-1%

-5%

0%

Office Retail Commercial Industrial Hospitality Healthcare

Industry Focus

Singapore REITs

Table 5: Salient points and forward guidance from 2Q15 results

REIT FYE DPU QoQ YoY Results Key take-away Earnings Drivers and Potential Risks (Outlook)

(Scts) % %

Office CapitaLand Commercial Trust (CCT)

Dec 2.19 3.3%

0.5%

In line 57% of leases signed in 2Q15 coming from new leases mainly from TMT, energy/commodities and insurance sectors.

Occupancy and average rentals improved to 98.0% and S$8.88 psf respectively as CapitaGreen achieved 80.4% commitment rate.

Drivers: Upside risks to office rents reversions from greater new and expansionary demand in the near term, potential acquisition of remaining 60% of interest in CapitaGreen Risks: Slower-than-expected leasing activity may cap rental expectations.

Frasers Commercial Trust (FCOT)

Sep 2.35 -1.3% 7.3% Below While Singapore assets (55 Market Street, China Square Central, Alexandra Technopark) reported better than anticipated earnings.

AUD depreciation and lower occupancy rates at Central Park in Perth hit earnings.

Drivers: Further positive rental reversions from Alexandra Techno Park. Risks: Forex volatility as hedges from its AUD exposures expire in end-CY15. We forecasted a 6% decline in the AUD/SGD exchange rate. There could be downside risks to our estimates should the AUD/SGD fall below parity.

Keppel REIT (KREIT)

Dec 1.72 1.2% -9.5% In line 9.5% drop in DPU y-o-y was attributable to the cessation of income support at Ocean Financial Centre and the divestment of Prudential Tower.

Renewed 390k sqft of space for 1H15 at average reversions of 18%, and retention rate of 84%.

Manager expects KREIT's effective exposure of "shadow spaces" to be <100k sqft, and is optimistic that it will be able to re-lease 85-90% of these spaces.

Drivers: Positive rental renewals and reviews for the remaining 22% of NLA due for renewal or review in FY16 will boost earnings and DPU. We understand that underlying leases are c.15-20% below current market levels. Risks: Further downsizing of financial institutions create more shadow space which subsequently compete with, and drive down rents in KREIT's portfolio.


Industry Focus

Singapore REITs


(Scts) % %

Retail CapitaLand Retail China Trust (CRCT)

Dec 2.73 3.4% 5.4% In line CRCT made the strategic decision in 2Q15 to attract various popular international retailers such as UNIQLO, resulting in a short-term dip in reversions to +4.6% y-o-y vs. 13-25% in previous quarters.

Tenant sales remain healthy across the portfolio. Wangjing and Xizhimen Mall continue to perform strongly.

Drivers: Continued strong performance of CRCT's other stabilised multi-tenanted malls (Xizhimen, Wangjing, Grand Canyon, Qibao). Risks: Currency volatility of the RMB and a slowdown in retail sales impacting consumer sales.

CapitaLand Mall Trust (CMT)

Dec 2.71 1.1% 0.7% Below Distributable income fell 3% y-o-y due to lower occupancy at Jcube and Clarke Quay, as well as AEI-related disruptions at Bukit Panjang Plaza and IMM.

Portfolio reversions for 1H15 fell to +4.6%, with suburban malls such as Tampines Mall, Junction 8 and Lot One faring better.

Drivers: Fresh contribution from Bedok Mall which is forecasted to be DPU accretive. Risks: Lower-than-expected rental reversions due to slowing retail sales and retailers consolidating their store network; drop in income from AEIs.

Frasers Centrepoint Trust (FCT)

Sep 3.04 2.5% 0.5% In line Results boosted by new contribution from recently acquired Changi City Point.

Overall rental reversions of 6.2% for 9M15 were healthy, underpinned by tenant sales growth of 3%.

Drivers: Given lack of new retail supply in Woodlands and Yishun over the next 2-3 years, expect healthy growth at Causeway Point and Northpoint. Risks: Lower occupancy at Changi City Point as the Manager fine-tunes the tenant mix.

SPH REIT Aug 1.35 -3.6% 0.0% In line Performance was lifted by higher contribution from Paragon. Portfolio reversions of 9.2% were largely contributed by Paragon, which saw 9.8% uplift in rents.

Clementi Mall saw a 11.4% dip, and we understand that this drop in rent was due to the Manager choosing to retain a fairly popular tenant.

Drivers: Contribution from newly created NLA at Paragon post AEI completion. Risks: Newly completed malls in Jurong could erode earnings for Clementi Mall in the medium term.


Industry Focus

Singapore REITs


(Scts) % %

Commercial

Mapletree Commercial Trust (MCT)

Mar 2.01 0.5% 3.1% In line DPU grew 3.1% y-o-y, as income growth at VivoCity was dragged down by higher frictional vacancies at PSAB and Mapletree Anson.

Shopper traffic and tenant sales at Vivocity fell by 7% and 2% respectively, which the Manager attributed to tenant relocations and fitting outs.

However, reversions were still strong at 14.4% for retail, and 13.4% for office.

Drivers: Income contribution from additional NLA generated post AEI works at Basement 2 of Vivocity. Risks: Vacancy risk at the office properties as spaces are filled more slowly due to high competition from landlords within the CBD.

Mapletree Greater China Commercial Trust (MAGIC)

Mar 1.70 -2.6% 8.7% In line Tenant sales remains robust, up 6.3% y-o-y and bucking the 1.8% decline in overall HK retail sales for the first five months of 2015.

Demonstrates the strong positioning of Festival Walk in terms of location and the mall’s focus on the local catchment area and mid-tier/mass market.

Drivers: Better-than-forecasted rentals and contribution from the newly acquired Sandhill Plaza in Shanghai. Risks: Significant slowdown in retail sales in HK and oversupply of office properties in Beijing could adversely impact earnings.

Starhill Global REIT (SGREIT)

Jun 1.29 2.4% 3.2% In line Performance mainly from (a) continued outperformance of the Singapore assets, (b) 1.5 months' contribution from the newly acquired Myer Centre Adelaide (MCA), as well as (c) the reversal of deferred tax relating to the downward revaluation of Chengdu mall.

Drivers: Contribution from the recently acquired Myer Centre Adelaide in Australia. Risks: Forex volatility could negatively impact distributable income and DPU growth. Further decline in performance of its Chengdu mall.

Suntec REIT (Suntec)

Dec 2.50 12.1% 10.3% In line Committed occupancy at Phase 3 of Suntec City retail AEI has reached 86%. Overall mall occupancy of 95.3%.

S$12.12 psf pm for Suntec retail was below expectations, office continues to hold its own, with average signing rentals of S$9.14 psf pm.

Drivers: Contributions from Phases 1, 2 and 3 of Suntec AEI. Risks: Vacancy risks as Phase 1 of Suntec retail mall will be renewing its rents from 2016 onwards. Office vacancy given heighted competition.


Industry Focus

Singapore REITs


(Scts) % %

Industrial Ascendas India Trust (a-itrust)

Mar 1.37 5.4% 19.1% In line Strong DPU growth underpinned by contributions from newly acquired CyberVale and organic growth in Chennai and Bangalore.

Drivers: Contribution from new acquisitions and development activities. Risks: Volatility in SGD/INR rate.

Ascendas REIT (A-REIT)

Mar 3.84 3.5% 5.5% In line Performance driven by expanded portfolio, in particular the acquisition of the Aperia property.

AREIT also benefitted from 5-13% rental reversions, given low expiry rents.

Portfolio occupancy improves marginally to c.86%.

Drivers: Positive rental reversions in the mid-single-digit range and potential acquisitions from its sponsor. Risks: Higher operating expenses cannot be passed on to tenants and slower-than-expected rental reversions on increased Industrial supply in Singapore.

Cache Logistics Trust (Cache)

Dec 2.14 -0.3% -0.3% In line Lower interest costs offset the 1% dip in NPI which was caused by a marginal drop in occupancy rates to 97.6% and rent-free periods.

Drivers: Contribution from recently acquired Australian properties and an added boost when the DHL built-to-suit project is completed in 2016. Risks: Oversupply of industrial properties.

Cambridge REIT (CREIT)

Dec 1.23 0.4% -1.7% In line 2Q15 DPU fell 2% y-o-y as higher income from newly acquired properties were offset by increased units from DRP, and absence of distribution from capital.

Contribution from newly acquired properties are lower than anticipated due to more muted industrial demand.

Drivers: Contributions from newly acquired properties. Risks: Lower underlying occupancy rates will lead to a drop in income when STB master leases expire and are converted into MTB.

Mapletree Industrial Trust (MINT)

Mar 2.73 3.0% 8.8% In line Strong performance supported by higher rentals and occupancies, and new contribution from Equinix BTS.

Average rentals improved marginally to S$1.86 psf pm from S$1.84.

Portfolio occupancy improved to 93.5% vs 90.2% last quarter.

Drivers: Positive rental reversions, completion of various AEI works. Risks: Deterioration in Singapore's economic outlook leading to tenant downsizing and weaker-than-expected take-up for space in MINT's portfolio.

Mapletree Logistics Trust (MLT)

Mar 1.83 -1.1% -3.7% In line Topline grew due to an expanded portfolio offset by ongoing conversions in SG and weaker JPY.

Distributable income dropped due to (i) enlarged share base (due to DRP programme), and (ii) one-off divestment gain paid last year. Stripping this off, DPU would have been c.1% lower y-o-y.

Drivers: Acquisitions from Sponsor in China. Better-than-projected performance. Risks: Longer-than-expected downtown following conversion to multi-tenanted properties.

Soilbuild Business Space REIT (SBREIT)

Dec 1.62 -1.1% 7.7% In line Performance driven by the acquisition of three industrial properties in 2014.

SBREIT achieved 5.0% and 1.6% uplift in rents over the quarter for renewals and new leases.

Drivers: DPU growth from new acquisitions. Risks: Slowdown in industrial activity which could negatively impact rents and occupancy rates.


Industry Focus

Singapore REITs


(Scts) % %

Hospitality Ascendas Hospitality Trusts (ASCHT)

Mar 1.28 2.4% 3.2% Below ASCHT delivered a second consecutive quarter of y-o-y growth in DPU. However, 1Q16 DPU was below expectations, coming in at 1.28 Scts (+3.2% y-o-y) as payout ratio was reduced to 95%.

Drivers: Continued improvement in RevPAR for the Australian hotels and growth in Japanese hotels. Risks: Increased competition in the Brisbane and Chinese hotel markets, decline in the AUD and JPY.

Ascott Residence Trust (ART)

Dec 2.09 18.8% -4.6% In line Growth largely on the back of contributions from acquisitions made over 2014.

Performance of Chinese properties impacted by refurbishments, depreciation of EUR, and weaker corporate demand in Southeast Asia.

Drivers: Asset refurbishment initiatives and initial contribution from acquisitions in Australia, Japan and US made over the past year. Risks: Slowdown in corporate demand and currency volatility.

CDL Hospitality Trusts (CDREIT)

Dec 2.25 -7.8% -10.0% In line Weak Singapore hotel performance, and depreciation of the NZD and AUD were offset by a stronger USD.

Singapore hotel’s RevPAR was down 4.4% y-o-y to S$173/night

Drivers: Recovery in the Singapore hospitality market and contribution from recently acquired Japanese hotels. Risks: New supply completing earlier than expected and continued weakness in tourist arrivals. Decline in Russian tourists arrivals into Maldives impact hotel yields.

Far East Hospitality Trusts (FEHT)

Dec 1.16 8.4% -6.5% Below Hotel RevPAR declined 2.1% y-o-y to S$147/night due to weak corporate travel.

The serviced apartment saw a 7.3% decline in ADR to S$207/night due to lower demand from project groups, and the oil & gas sector.

Drivers: Improvement in RevPAR after asset refurbishments. Risks: New hotel supply this year could negatively impact FEHT's Orchard hotels.

Frasers Hospitality Trusts (FHT)

Sep 1.56 13.0% 0.6% In line DPU 0.6% ahead of IPO forecasts. With the exception of its hotels in

Malaysia and Singapore which were weaker y-o-y, its hotels in Australia, Japan and UK outperformed forecasts.

Drivers: Uplift from Intercontinental Singapore post AEI. Potential acquisitions. Risks: Depreciation of GBP, AUD, JPY and MYR versus SGD.

OUE Hospitality Trusts (OUEHT)

Dec 1.52 -5.6% -7.3% Below The underperformance came mainly from Mandarin Orchard (MOS) which experienced a 10% fall in RevPAR to S$218.

Crown Plaza Changi Airport saw RevPAR of S$231, marginally higher y-o-y.

Drivers: Acquisition of Phase 2 of Crowne Plaza Changi, which has been delayed to 2Q16 (vs 1Q16) due to delays in overseas pre-fabrication works. Risks: Equity fund raising for the acquisition of CPCA will be an overhang for share price in the near term.


Industry Focus

Singapore REITs


(Scts) % %

Healthcare Parkway Life REIT (P-Life)

Dec 3.35 4.4% 15.5% In line 15.6% rise in distributable income to S$20.3m (DPU to 3.35 Scts) was largely due to payment of S$2.3m in divestment gains.

Drivers: Contribution from Japanese assets acquired over the last 12 months and further acquisitions. Risks: Forex and JPY hedging risk.

Religare Health Trust (RHT)

Mar 1.94 2.6% 7.8% In line 7.4% increase in DPU largely on the back of higher service fee and hospital income.

ARPOB improved from INR13.47m in 1Q15 versus INR12.31m in 1Q14.

Drivers: Continued demand for medical services and development of new hospitals. Risks: Volatility in SGD/INR FX rate

Others IREIT Dec 1.10 -1.0% nm Topline was 4% lower mainly due

lower service incomes. Acquisition of Berlin Campus in

Aug’15 @ 7.1% yield to contribute from 2H15.

Drivers: Potential acquisitions and cap rate compression. Risks: Volatility in EUR/SGD FX rate.

Keppel DC REIT (KDCREIT)

Dec 1.62 nm nm In line Beats IPO forecasts by 4% due to higher variable income from Singapore and cost recovery clawbacks from tenants at Gore Hill.

Acquisition in Australia to contribute positively from 2H15.

Drivers: Potential acquisitions. Risks: Volatility in AUD and EUR/SGD FX rates, though this has been mitigated by hedges for the next two years.


Industry Focus

Singapore REITs

Currency Volatility to impact distributions

Winners and losers when S-REITs head overseas. Due to constraints and limited acquisition opportunities within the Singapore property market, S-REITs have been expanding overseas which has exposed them to currency volatility (for a breakdown of geographic exposures, please see the table overleaf). The REITs which have benefitted from currency tailwinds, i.e. strengthening HKD, CNY and INR, include MAGIC, CRCT, AIT and RHT. Conversely, those with larger exposures to Australia (ASCHT, FCOT, KDCREIT, KREIT, SGREIT, CDREIT and FHT), Japan (CRT, MLT and FHT) and Europe (IREIT) have experienced headwinds despite having hedges in place. For PREIT, it has been insulated from the falls in JPY due to hedges taken out five years ago. ART which has a diversified global portfolio, thereby having exposure to both strengthening and weakening currencies, has been the most resilient with overall FX movements having only a 1.2% impact on earnings.

Going forward, we expect the AUD and MYR to remain a drag on earnings, and to a smaller extent from EUR and JPY, as these currencies have been more stable over the last few months. Meanwhile, the boost from HKD and CNY over the last 12 months may potentially slow, given the PBOC’s recent decision to devalue the CNY. Table 6: Our FX assumptions Currency Pair Assumed long

term rate Spot rate 5 year average

AUD/SGD 1.00 1.03 1.25

SGD/CNY 4.60 4.60 5.02

SGD/HKD 5.60 5.57 6.17

SGD/JPY 92.00 89.28 69.96

SGD/INR 45.00 46.47 42.40

SGD/MYR 2.90 2.87 2.48

USD/SGD 1.40 1.39 1.26

GBP/SGD 2.15 2.18 2.01

EUR/SGD 1.43 1.55 1.69


Figure 10: Winning and losing currencies


-20.0%

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Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

AUD CNY HKD JPY INR MYR GBP EUR

Winners versus SGD - CNY, HKD, INR, GBP

Losers versus SGD - AUD, JPY, MYR, EUR

HKD

CNY

INR

GBP

EUR

JPY

MYR

AUD

Industry Focus

Singapore REITs

Table 7: Forex Exposures for S-REITs with regional/global portfolios

REIT SGD MYR JPY INR AUD HKD CNY IND GBP EUR USD Others

FCOT 63% 37%

CCT 100%

K-REIT 73% 27%

OUECT 62% 38%

IREIT 100%

CMT 100%

CRCT 100%

FCT 100%

SGREIT 65% 14% 2% 16% 4%

Suntec 94% 6%

MCT 100%

Magic 72% 28%

CRT 100%

SPHREIT 100%

AREIT 97% 3%

a-iTrust 100%

MINT 100%

MLT 45% 5% 19% 15% 8% 10%

CREIT 100%

Cache 89% 9% 2%

SBREIT 100%

ASCHT 6% 12% 71% 11%

ART 9% 2% 15% 3% 17% 4% 13% 17% 20%

CDLHT 61% 6% 10% 5%

FEHT 100%

FHT 31% 6% 16% 15% 32%

OUEHT 100%

PREIT 63% 1% 36%

RHT 100%

KDCREIT 39% 4% 27% 29%

Denotes currency headwinds as currency has depreciated against the SGD

Denotes currency tailwinds as currency has appreciated relative to SGD

Indicates currency exposure amounting to >25% of revenue


Industry Focus

Singapore REITs

Interest rates Hikes – Be prepared Interest cost to rise between 0.2-0.4 ppts over the next one year. While the market is looking at a potential delay in Fed hikes due to the devaluation of the RMB, implying a respite in share prices in the immediate term, we believe that investors should continue to be prepared as the general direction in interest rates is likely to be higher in the medium term. As such, with rate hikes anticipated towards the end of 2015, this will kick-start an interest rate up-cycle trend which is expected to hit S-REIT distributions in the medium term. According to DBS economist, Eugene Leow, given the close co-relationship between SGD-USD yields, the rate hikes in the US will likely result in an upward movement in the USD yield curve and the SGD yield curve is expected to move in a similar direction (the 3-month SGD swap offer rate [SOR] & 3-month SGD Sibor track closely and in line with the movements in the 3-month USD Libor). Looking ahead, we are looking at a further “flattening” of the yield curve, meaning that we are expecting rates across the yield curve to rise but the shorter end of the yield curve to increase at a much faster rate than the longer end of the curve.

Based on our estimates, we are projecting a 0.2-0.6ppt rise in Singapore yields over the next one year, meaning that interest costs are likely to rise when S-REITs roll over their debts in the coming two years. Figure 11: SG Yield curve to “flatten” further by 2H16


Figure 12: 3M SGD SOR & 3M SGD Sibor vs 3M USD

Libor. Short-term SGD rates are at a premium Figure 13: 3M SGD SOR & 3M SGD Sibor tracked

closely together during the past Fed hike cycle.


-0.8

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%pa

3M SGD Sibor

3M USD Libor

3M SGD SOR

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Jan-03 Jan-04 Jan-05 Jan-06

%pa

3M SGD Sibor

3M USD Libor

3M SGD SORGap explained by SGD appreciation path

0.0

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1.0

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3.0 (%)

Current 6 Months Ago 1 Year Ago

SG 3mth SIBOR + 0.4% SG 2Y SIBOR + 0.6% SG10Y SIBOR + 0.2%

Industry Focus

Singapore REITs

Higher debt quantum; growth in revenues might not be enough to compensate for hikes in interest rates. Gearing has remained fairly static at c.33% as of Jun’15. However, we note that total quantum of loans has risen over by S$10bn over the past four years as S-REITs grow their portfolios. S-REITs have also diversified their funding sources (i.e. capital markets like MTNs, bonds). While we believe that capital markets will likely continue to support them going forward, cost of debt will most likely increase in tandem with the rise in base rates. Historically, REITs have been able to compensate for the rise in interest costs by growing revenues at a faster rate, we believe the uncertain operational outlook is a cause for concern that future increases in interest rates will eat into distributions. Substantial portion of interest costs are hedged at this point; but roll-over of loans to impact distributions. S-REITs have proactively renewed and taken a higher portion of fixed rate debts over time. While refinancing risks will continue to rise, this is mitigated somewhat by (i) having c.80% of its interest costs hedged into fixed rates, and (ii) an average WALE of three years, meaning that a full 100-bps hike will only see the full impact in the medium term.

REITs with larger refinancing. REITs that have a larger portion of their debts up for renewal (>30%) over 2015-2016 include CapitaLand Commercial Trust, CDL Hospitality Trust , Frasers Centerpoint Trust, Ascendas Hospitality Trust and SPH REIT. In general, we have priced in a 50-bp average weighted cost of debt when these debts become due.

Figure 14: S-REIT debt expiry profile


Figure 15: S-REITs have lengthed


-

0.50

1.00

1.50

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3.50

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4.50

-

0.50

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4.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Years(%) Cost of Debt (%) LHS Debt Maturity (Years) RHS

77%

73%

75% 75%

78%

80%

78%77%

78%

80%

68%

70%

72%

74%

76%

78%

80%

82%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(%)

% Fixed Rates

Shorter Tenure Longer Tenure

2015, 5%

2016, 11%

2017, 15%

2018, 21%

>2018, 46%

Industry Focus

Singapore REITs

Table 7: Debt expiry profile (as of latest reporting date)

Total Debt 2015 2016 2017 2018 >2018 Code (S$’bn) (S$’bn) (S$’bn) (S$’bn) (S$’bn) (S$'bn)

AIMSAMP 0.62 - - 16% 31% 53% ASHT 0.54 - 20% 29% 37% 14% a-itrust 0.32 5% 13% 15% 27% 41% A-REIT 2.83 12% 12% 13% 16% 46% ART 1.53 10% 18% 8% 15% 50% CDREIT 0.78 40% 11% - 28% 20% Cache 0.55 - - 18% 48% 34% CREIT 0.53 - 2% 19% 29% 50% CCT 2.27 25% 27% 8% 9% 31% CRCT 0.68 6% 16% 19% 19% 41% CMT 3.39 5% 12% 7% 15% 60% CRT 0.32 0.00 0.00 0.11 0.30 0.17 FEHT 0.80 15% - 31% 29% 25% FCT 0.72 2% 37% 27% 8% 27% FCOT 0.69 - - 26% 21% 53% FHT 0.68 - - 17% - 83% IREIT 0.17 - - - - 100% KDCREIT 0.29 - - - 55% 46% K-REIT 3.56 - 4% 18% 20% 58% MCT 1.55 - 0% 23% 8% 70% MAGIC 2.20 - 11% 30% 29% 30% MINT 1.06 - - 13% 13% 73% MLT 1.62 - 4% 20% 20% 56% OUECT 0.64 - - 56% - 44% OUEHT 0.88 - 33% - 33% 33% P-Life 0.56 0% - 13% 18% 68%

SBREIT 0.44 - 22% 21% 35% 22%

SPH REIT 0.85 - 29% - 35% 35%

SGREIT 1.16 - 2% 1% 34% 62%

Suntec 2.72 2% 14% 7% 36% 41%

Total 34.31 5.2% 10.9% 15.0% 21.9% 47.0%


Industry Focus

Singapore REITs

Revised target prices and recommendations.

Higher discount rates. We have rolled forward our valuations and raised our discount rates to account for higher assumed risk-free rates (3.0% vs 2.6% previously) and raise our cost of debt assumptions by 50bps. We have also standardised gearing targets to 35% or 40% for REITs with overseas portfolios, given lower gearing limits by MAS.

As such, our target prices are revised by 3-25% and our recommendations, which are as summarized in table 9.

Table 9: Change in target prices and recommendations for S-REITs under coverage

REIT FYE Previous

Recommendation Updated

Recommendation Previous

Target Price Updated

Target Price

(S$) (S$)

Office CCT Dec HOLD BUY 1.81 1.48

FCOT Sep BUY BUY 1.76 1.51

KREIT Dec BUY BUY 1.32 1.12

Retail

CRCT Dec BUY BUY 1.80 1.69

CMT Dec HOLD BUY 2.25 2.07

CRT Jun BUY HOLD 1.00 0.93

FCT Sep BUY BUY 2.20 2.05

SPH REIT Aug HOLD HOLD 1.03 0.99

Commercial MCT Mar HOLD HOLD 1.63 1.35

MAGIC Mar BUY BUY 1.12 1.12

SGREIT Dec BUY BUY 0.91 0.84

Suntec Dec HOLD HOLD 1.76 1.58

Industrial

a-itrust Mar BUY HOLD 0.96 0.90

A-REIT Mar HOLD HOLD 2.65 2.30

Cache Dec BUY HOLD 1.28 1.09

CREIT Dec HOLD HOLD 0.73 0.61

MINT Mar BUY HOLD 1.68 1.50

MLT Mar BUY BUY 1.31 1.11

SBREIT Dec BUY BUY 0.95 0.86

Hospitality ASCHT Mar BUY BUY 0.76 0.74

ART Dec BUY BUY 1.38 1.34

CDREIT Dec HOLD BUY 1.66 1.61

FEHT Dec HOLD HOLD 0.78 0.71

FHT Sep BUY HOLD 0.89 0.83

OUEHT Dec BUY BUY 1.01 0.98

Healthcare P-Life Dec BUY BUY 2.69 2.56

RHT Mar HOLD HOLD 1.04 1.05

Others KDCREIT Dec BUY BUY 1.12 1.14

Source: DBS Bank

Industry Focus

Singapore REITs

Stock Picks.

A tough road ahead. Looking ahead, we believe the outlook remains uncertain given that S-REITs are facing an uncomfortable mix of low growth, heightened currency volatility, coupled with rising risk to distributions from an anticipated rise in interest rates in the medium term. In addition, accretive acquisition opportunities are llikely to turn increasingly difficult given recent price declines and rising cost of capital, meaning that S-REITs are likely to turn to asset optimisation, rely or combine with sponsors for investment opportunities. Screening for winners. Looking ahead, we screen S-REITs for the following broad categories of “Growth”, “Financial metrics” and “Operational” outlook and also “Valuations” as summarised in the table below. We believe that the S-REITs with these characteristics will overcome upcoming challenges better than peers.

Based on the above screens, our top picks are: Frasers Centerpoint Trust (BUY, TP S$2.05)

Reversions outlook underpinned by robust tenants performance; occupancy cost remains low at <16%, particularly at Causeway Point, a key driver to topline at 41% of revenue

Resilient performer even in times of uncertainty given high exposure to necessity shopping

Robust capital management ensures minimal risk to earnings

Mapletree Greater China Trust (BUY, 1.12)

Attractive 15% discount to NAV Growth of 4.8% ahead of peers in the retail REITs

space; upside from better than projected rents Sandhill Plaza

Currency tailwind from the strengthening HKD-SGD which contribute 70% of assets

Table 10: Summary of characteristics that will enable S-REITs to overcome challenges

Catogory Characteristics DBSV Views

(i) Sponsors with ample balance sheet capacity

We believe that S-REITs with sponsors that have ample balance sheet capacity will be ahead of the acquisition game as sponsors can “warehouse” opportunities and offer visible acquisition pipelines when opportunities dry up.

1. Growth (ii) DPU Growth > 3.0%

We believe growth will still be the key driver for share prices and will enable the REITs to continue growing their DPU despite risk of higher interest rates.

(iii) Currency Volatility

Distributions are mainly paid in SGD and given that a majority of the S-REITs have regional portfolios, volatility of source foreign currencies vs SGD will be key. Most S-REITs hedge their foreign currency exposures through natural hedges or forwards.

(i) Gearing < 35% A low gearing will offer more flexibility for acquisitions, given tighter gearing limits of 45%.

2. Financial Metrics (ii) Weighted Average Debt Maturity > 3.0 Years

A longer debt maturity year will mean lower refinancing risks in the medium term in an environment of low growth.

(iii) High Fixed Rated Debt of 60% A higher percentage of fixed debt will shield the REIT from any sudden spikes in short-term interest rates.

3. Outlook (i) Positive/ Stable or Weakening

The operational outlook will determine if there will be potential earnings risks going forward. We acknowledge that S-REITs within the same sector might have differing outlooks and headwinds which we will differentiate in our analysis.

4. Valuations (i) Stocks Trading below historical mean

S-REITs which are trading below historical mean ((yield spread) will mean that price less downside to prices from current levels.

Source: DBS Bank

Industry Focus

Singapore REITs

Table 9: Characteristics of various REITs

FY15-17F Financial Metrics Operational Valuations REIT Sector Sponsor

Acquisition Pipeline

CAGR Growth >3.0%?

Currency Volatility

Gearing < 36%

Debt Maturity >3.0 yrs

Fixed rate > 75%

Outlook Above historical

mean yield spread

CCT Office Y 6.2% Nil 29.5% 3.9 83 Weakening Y

FCOT Office Y 1.7% AUD 37.3% - 75 Stable N

KREIT Office N 2.5% AUD 42.6% 3.9 65 Weakening N

CRCT Retail Y 2.4% RMB 27.7% 2.8 75 Stable N

CMT Retail Y 3.1% Nil 36.5%# 6.1 90 Stable Y

CRT Retail Y -2.0% JPY 49%% - - Stable N

FCT Retail Y 2.5% Nil 28.7% 2.2 66 Stable N

SPH REIT Retail Y 1.7% Nil 26.0% 3.2 85 Stable N

MCT Retail/Office Y 4.1% Nil 36.4% 4.1 70 Stable N

MAGIC Retail/Office Y 4.8% HKD/RMB 41.2% 2.7 86 Growth Y

SGREIT Retail/Office N 5.2% AUD 35.5% 3.5 81 Stable N

Suntec Retail/Office N 5.2% AUD 35.3% 3.1 74 Stable N

a-itrust Industrial Y 8.6% INR 26.0% - 100 Stable N

A-REIT Industrial Y 0.2% Nil 34.7% 3.8 70 Weakening N

Cache Industrial Y 2.4% AUD 38.0% 3.5 67 Weakening N

CREIT Industrial N 1.1% Nil 37.2% 3.6 95 Weakening N

MINT Industrial Y 3.2% Nil 30.0% 4.1 88 Weakening N

MLT Industrial Y 3.9% JPY 34.4% 3.4 80 Weakening N

SBREIT Industrial Y 1.4% Nil 35.5% 2.4 90 Weakening N

ASCHT Hospitality Y 0.3% AUD 34.0% 2.8 89 Stable Y

ART Hospitality Y 2.3% GBP 41.0% 1.3 78 Weakening N

CDREIT Hospitality Y 0.3% AUD 32.0% 2.1 61 Weakening Y

FEHT Hospitality Y -1.6% Nil 31.5% - 60 Weakening Y

FHT Hospitality Y 1.7% AUD 38.8% 3.7 79 Weakening -

OUEHT Hospitality Y 1.3% Nil 42.0% 2.9 66 Weakening N

P-Life Healthcare Y 2.0% JPY 34.0% 4.0 - Stable N

RHT Healthcare N 9.0% INR 12.0% 1.2 - Growth N

IREIT Office N -3.0% EUR 41.0% - 100 Stable -

KDCREIT Data centres Y 7.6% AUD 29.0% 3.9 100 Growth N* *KDCREIT is trading at a lower yield than US peers after adjusting for their lower payout ratios on average # after accounting for the proposed acquisition of Bedok Mall Legend:

Stable/Positive impact

Negative impact


Industry Focus

Singapore REITs

Peer Comparisons

REIT FYE Price Rec Target

Price

Mkt

Cap

Total

Return Yield (%) P/NAV

(S$)

(S$) S$'m (%) FY15/16F FY16/17F FY17/18F (x)

Office

CCT Dec 1.35 Buy 1.48 3,969 16% 6.4% 6.9% 7.2% 0.78

FCOT Sep 1.39 Buy 1.51 1,080 16% 7.0% 7.1% 7.2% 0.83

KREIT Dec 1.01 Buy 1.12 3,214 18% 6.9% 7.1% 7.2% 0.72

Retail

CRCT Dec 1.44 Buy 1.69 1,205 25% 7.4% 7.6% 7.8% 0.85

CMT Dec 1.94 Buy 2.12 6,703 15% 5.9% 6.1% 6.2% 1.07

CRT Jun 0.91 Buy 0.95 468 14% 8.8% 8.6% 8.5% 1.14

FCT Sep 1.98 Buy 2.05 1,811 10% 6.0% 6.1% 6.3% 1.07

SPH REIT Aug 0.99 Hold 0.99 2,491 6% 5.5% 5.6% 5.7% 1.06

Commercial

MCT Mar 1.32 Hold 1.43 2,783 15% 6.3% 6.6% 6.8% 1.06

MAGIC Mar 0.97 Buy 1.12 2,651 23% 7.6% 8.3% 8.3% 0.82

SGREIT Jun 0.79 Buy 0.84 1,723 12% 6.4% 6.9% 7.1% 0.86

Suntec Dec 1.62 Hold 1.58 4,075 4% 5.9% 6.2% 6.5% 0.78

Industrial

a-itrust Mar 0.92 Buy 0.90 846 4% 6.1% 6.4% 7.2% 1.35

A-REIT Mar 2.21 Hold 2.30 5,321 11% 6.7% 6.8% 6.8% 1.06

Cache Dec 1.05 Buy 1.09 823 12% 8.1% 8.3% 8.5% 1.08

CREIT Dec 0.64 Hold 0.61 818 4% 7.9% 8.0% 8.0% 0.94

MINT Mar 1.49 Buy 1.50 2,615 8% 7.1% 7.0% 7.6% 1.13

MLT Mar 1.05 Buy 1.11 2,588 13% 7.2% 7.4% 7.7% 1.03

SBREIT Dec 0.84 Buy 0.86 783 10% 7.5% 7.6% 7.8% 1.05

Hospitality

ASCHT Mar 0.660 Buy 0.74 737 21% 8.6% 8.6% 8.6% 0.92

ART Dec 1.280 Buy 1.34 1,975 11% 6.9% 7.2% 7.2% 0.95

CDREIT Dec 1.365 Hold 1.61 1,345 26% 8.1% 8.1% 8.2% 0.83

FEHT Dec 0.640 Hold 0.71 1,142 19% 7.4% 7.3% 7.2% 0.66

FHT Sep 0.775 Buy 0.83 1,052 15% 7.8% 7.8% 7.9% 0.82

OUEHT Dec 0.855 Buy 0.98 1,139 22% 7.6% 7.7% 7.8% 0.95

Healthcare

P-Life Dec 2.40 Buy 2.56 1,452 12% 5.5% 5.1% 5.2% 1.41

RHT Mar 1.02 Hold 0.97 808 3% 7.2% 7.9% 8.6% 1.09

Others

KDCREIT Dec 1.08 Buy 1.14 954 11% 5.9% 6.5% 6.9% 1.23

6.7% 6.9% 7.3% 0.98


Industry Focus

Singapore REITs

S-REIT yield spread and P/Bk Ratios

Ascendas Hospitality Trust Historical Yield Spread Ascendas Hospitality Trust Historical P/BV

Ascendas REIT Historical Yield Spread Ascendas REIT Historical P/BV

Ascendas India Trust Historical Yield Spread Ascendas India Trust Historical P/BV


0.0%

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2012 2013 2014 2015

ASHT Yield Spread ASHT Yield Mean-1 SD +1 SD

0.5

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2012 2013 2014 2015

ASHT P/BV Mean +1 SD -1 SD

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AREIT P/BV Mean +1 SD -1 SD

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015AREIT Yield Spread AREIT Yield Mean Yield-1 SD +1 SD

0.0%

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4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2007 2008 2009 2010 2011 2012 2013 2014 201

AIT Yield Spread AIT Yield Mean Yield-1 SD +1 SD

0.0

0.5

1.0

1.5

2.0

2.5

2007 2008 2009 2010 2011 2012 2013 2014 2015

AIT P/BV Mean +1 SD -1 SD

Industry Focus

Singapore REITs

Ascott REIT Historical Yield Spread Ascott REIT Historical P/BV

CapitaMall Trust Historical Yield Spread CapitaMall Trust Historical P/BV

CapitaCommercial Trust Historical Yield Spread CapitaCommercial Trust Historical P/BV


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ascott Yield Spread Ascott Yield Mean Yield-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ascott P/BV Mean +1 SD -1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015CMT Yield Spread CMT Yield Mean Yield-1 SD +1 SD

0.0

0.5

1.0

1.5

2.0

2.5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015CMT P/BV Mean +1 SD -1 SD

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CCT Yield Spread CCT Yield Mean Yield-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CCT P/BV Mean +1 SD -1 SD

Industry Focus

Singapore REITs

CapitaRetail China Trust Historical Yield Spread CapitaRetail China Trust Historical P/BV

CDL Hospitality Trust Historical Yield Spread CDL Hospitality Trust Historical P/BV

Cambridge REIT Historical Yield Spread Cambridge REIT Historical P/BV


-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014

CRCT Yield Spread CRCT Yield Mean Yield-1 SD +1 SD

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2006 2007 2008 2009 2010 2011 2012 2013 2014

CRCT P/BV Mean +1 SD -1 SD

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

CDREIT Yield Spread CDREIT Yield Mean Yield-1 SD +1 SD

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

CDREIT P/BV Mean +1 SD -1 SD

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 201

CREIT Yield Spread CREIT Yield Mean Yield-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2006 2007 2008 2009 2010 2011 2012 2013 2014 201

CREIT P/BV Mean +1 SD -1 SD

Industry Focus

Singapore REITs

Cache Historical Yield Spread Cache Historical P/BV

Croesus Retail Trust Historical Yield Spread Croesus Retail Trust Historical P/BV

Far East Hospitality Trust Historical Yield Spread Far East Hospitality Trust Historical P/BV


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2010 2011 2012 2013 2014 2015

Cache Yield Spread Cache Yield Mean Yield-1 SD +1 SD

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

2010 2011 2012 2013 2014 2015Cache P/BV Mean +1 SD -1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2013 2014 2015

Croesus Yield Spread Croesus YieldMean Yield -1 SD+1 SD

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

Croesus P/BV Mean +1 SD -1 SD

0.7

0.8

0.9

1.0

1.1

1.2

1.3

2012 2013 2014 201FEHT P/BV Mean +1 SD -1 SD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2012 2013 2014 2015

FEHT Yield Spread FEHT Yield Mean -1 SD +1 SD

Industry Focus

Singapore REITs

Frasers Commercial Trust Historical Yield Spread Frasers Commercial Trust Historical P/BV

Frasers Centrepoint Trust Historical Yield Spread Frasers Centrepoint Trust Historical P/BV

K-REIT Historical Yield Spread K-REIT Historical P/BV


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015FCOT Yield Spread FCOT Yield Mean-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015FCOT P/BV Mean +1 SD -1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 201FCT Yield Spread FCT Yield Mean Yield-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

FCT P/BV Mean +1 SD -1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

KREIT P/BV Mean +1 SD -1 SD

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

KREIT Yield Spread KREIT Yield Mean Yield-1 SD +1 SD

Industry Focus

Singapore REITs

Mapletree Industrial Trust Historical Yield Spread Mapletree Industrial Trust Historical P/BV

Mapletree Logistic Trust Historical Yield Spread Mapletree Logistic Trust Historical P/BV

Mapletree Commercial Trust Historical Yield Spread Mapletree Commercial Trust Historical P/BV

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2011 2012 2013 2014 2015MINT Yield Spread MCT Yield Mean Yield-1 SD +1 SD

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2010 2011 2012 2013 2014

MINT Yield Mean Yield -1 SD +1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201

MLT Yield Spread MLT Yield Mean Yield-1 SD +1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MLT Yield Mean Yield -1 SD +1 SD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2011 2012 2013 2014 2015MCT Yield Spread MCT Yield Mean Yield

-1 SD +1 SD

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

2011 2012 2013 2014 2015

MCT P/BV Mean +1 SD -1 SD


Industry Focus

Singapore REITs

Mapletree Greater China Commercial Trust Historical Yield Spread

Mapletree Greater China Commercial Trust Historical P/BV

OUE Hospitality Trust Historical Yield Spread OUE Hospitality Trust Historical P/BV

Parkway Life REIT Historical Yield Spread Parkway Life REIT Historical P/BV

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

MAGIC Yield Spread MAGIC Yield Mean

-1 SD +1 SD

0.7

0.8

0.9

1.0

1.1

1.2

1.3

MAGIC P/BV Mean +1 SD -1 SD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2013 2014 2015OUEHT Yield Spread OUEHT Yield Mean Yield-1 SD +1 SD

0.9

0.9

1.0

1.0

1.1

1.1

2013 2014 2015OUEHT P/BV Mean +1 SD -1 SD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2008 2009 2010 2011 2012 2013 2014 2015

PREIT Yield Spread PREIT Yield Mean-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2008 2009 2010 2011 2012 2013 2014 2015

PREIT P/BV Mean +1 SD -1 SD


Industry Focus

Singapore REITs

Religare Health Trust Historical Yield Spread Religare Health Trust Historical P/BV

Soilbuild Business Space REIT Historical Yield Spread Soilbuild Business Space REIT Historical P/BV

SPH REIT Historical Yield Spread SPH REIT Historical P/BV

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

RHT Yield Spread RHT Yield Mean Yield-1 SD +1 SD

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

RHT P/BV Mean +1 SD -1 SD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Aug

-13

Sep-

13O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-14

Feb-

14M

ar-1

4A

pr-1

4M

ay-1

4Ju

n-14

Jul-1

4A

ug-1

4Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

SBREIT Yield Spread SBREIT Yield Mean Yield-1 SD +1 SD

0.70

0.80

0.90

1.00

1.10

1.20

1.30

Aug

-13

Sep-

13O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-14

Feb-

14M

ar-1

4A

pr-1

4M

ay-1

4Ju

n-14

Jul-1

4A

ug-1

4Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

SBREIT P/BV Mean +1 SD -1 SD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2013 2014 2015SPH REIT Yield Spread SPH REIT YieldMean Yield -1 SD

1.00

1.02

1.04

1.06

1.08

1.10

1.12

1.14

1.16

1.18

1.20

2013 2014 2015

SPH REIT P/BV Mean +1 SD -1 SD


Industry Focus

Singapore REITs

Starhill Global REIT Historical Yield Spread Starhill Global REIT Historical P/BV

Suntec REIT Historical Yield Spread Suntec REIT Historical P/BV


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015SGREIT Yield Spread SGREIT Yield Mean Yield-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2007 2008 2009 2010 2011 2012 2013 2014 2015

SGREIT P/BV Mean +1 SD -1 SD

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Suntec Yield Spread Suntec Yield Mean

-1 SD +1 SD

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Suntec P/BV Mean +1 SD -1 SD

Industry Focus

Singapore REITs

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published,the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 July 2015, except for CapitaLand Commercial Trust, Keppel REIT, CapitaLand Mall Trust, CapitaLand Retail China Trust, Croesus Retail Trust, SPH REIT, Starhill Global REIT, Suntec REIT, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, Ascendas REIT, Ascendas India Trust, Mapletree Industrial Trust, Mapletree Logistics Trust, Cambridge Industrial Trust, Cache Logistics Trust, Soilbuild Business Space Reit, Ascendas Hospitality Trust, Ascott Residence Trust, CDL Hospitality Trusts, Far East Hospitality Trust, Frasers Hospitality Trust, OUE Hospitality Trust, Parkway Life Real Estate Investment Trust, Keppel DC REIT, Frasers Commercial Trust, IREIT Global.

2. DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of common equity securities of Croesus Retail Trust, Starhill Global REIT, Soilbuild Business Space Reit, Ascott Residence Trust, Far East Hospitality Trust, Frasers Hospitality Trust, Keppel DC REIT and 5% Croesus Retail Trust as of 31 July 2015.

Industry Focus

Singapore REITs

3.

Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from Croesus Retail Trust, Frasers Centrepoint Trust, Soilbuild Business Space Reit, Ascott Residence Trust, Frasers Hospitality Trust, Religare Health Trust, Keppel DC REIT, IREIT Global.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or

located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States

Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd. 12 Marina Boulevard, Marina Bay Financial Centre Tower 3

Singapore 018982 Tel. 65-6878 8888

Company Regn. No. 196800306E

150820 insights singapore pockets of opportunity in singapore reits

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