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Singapore REITs

Vikrant Pandey

+65 6590 6623

[email protected]

Derek Chang

+65 6590 6614

[email protected]

2

OVERWEIGHT On REITs Sector

• Upcycle yield spreads indicate 23% upside potential. Top

BUYs: AREIT, FLT, CCT and FHT

• Opportunity to invest in REITs at attractive levels as Fed rate

hike expectations dampens share prices

• Singapore Yield Spreads Remain Most Attractive Regionally at

3.88%

• Fixed-rate Debt And Longer Maturities To Mitigate Interest

Impact

• Meagre supply of industrial business park space

• Prefer diversified, deep value REITs with exposure to the

Business Park and Hospitality segments.

3

Singapore Yield Spreads Remain Most Attractive In The

Region

• Upcycle yield

spreads indicate 23%

upside potential

(Current spread at

3.88% vs upcycle

spread of 2.77%).

• 10Y SGS yield

stands at 2.09%.

• We are currently

factoring in a risk-

free rate of 2.5%.

Source: Bloomberg, UOB Kay Hian


Regional Yield Spread

Historical Yield Spreads Of S-REITs vs 10Y SGS

as at 22 May 17

REIT Yields (%) 10-Yr Govt Bond Yield (%) Yield Spread (%)

Singapore 5.97 2.09 3.88

Malaysia 5.42 3.88 1.54

Hong Kong 4.73 1.41 3.32

Japan 3.32 0.05 3.26

United States 4.29 2.25 2.04

Australia 4.67 2.49 2.18

4

US Fed Rate Hikes: A Sense of Deja Vu

• Positive US REIT and S-

REIT returns during rate

hike cycles, with the US

REITs (FTSE NAREIT All

Equity Total Return Index)

doubling from mid-04 to

end-06 when US FFTR

rose 425bp from 1% to

5.25%.

• US REITs also gained 3%

during the previous rate

hike cycle in mid-99 to mid-

2000 when FFTR rates

were hiked 175bp to 6.5%

from 4.75%

• Historical gap between US

and domestic interest rates

suggests healthy buffer.



FTSE US NAREIT Index (RHS) and FFTR (LHS)

FSSTI REIT Index (RHS) and 3M SIBOR (LHS)

0

200

400

600

800

1000

1200

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

3M Sibor (LHS)

FTSE ST REIT

(%)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0

1

2

3

4

5

6

7

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

FFTR (LHS)

FTSE NAREIT All Eq REIT Total Return

(%)

5

Historical Gap Between US And Domestic Interest Rates Suggests

Healthy Buffer

• An existential average

spread of 73bp since 2002

between 10Y Treasuries and

10Y SGS suggests sufficient

headroom before 10Y SGS

yields follow a rise in

Treasury yields.

• Previous muted FFTR rate

hike impact also suggestive.

In 2004, when a 430bp hike

in FFTR only resulted in a

50bp increase in 10Y

Treasuries.

• We note a similar trend

where 3M SIBOR rose over

200bp between mid-04 and

mid-06, while 10Y SGS

yields remained unchanged.


US vs Singapore 10 Year Yield

6

Fixed-rate Debt And Longer Maturities Mitigate Interest Impact

• REITs have largely

locked in 56-99% of

fixed-rate debts.

• Average debt maturity

for S-REITs reached

3.4 years in 4Q16,

approximately double

the debt maturity in

4Q08.

• Longer debt maturities

and high percentage of

fixed-rate debts will

cushion the impact of

rising interest rates.

• S-REITs can opt to

reduce loan tenure

upon refinancing to

benefit from lower

rates for shorter-

duration debt.

Source: Respective companies, UOB Kay Hian

Source: Respective companies, UOB Kay Hian

Weighted Average Debt Maturity (4Q16)

Fixed Rate Debt As Percentage Of Total Debt (4Q16)

Debt Maturity 4Q16 4Q08

Ascendasreit 3.9 2.2

AscottREIT 4.7 2.3

CACHE 2.8 -

CapitaLComm 3.2 2.6

CapitaLMall Tr 5.3 2.4

CDL Htrust 3.0 0.5

FrasersCT 2.6 2.1

FrasersHosp 2.1 -

Kep REIT 3.5 2.3

MapletreeInd 3.2 -

MapletreeLog 3.5 2.5

Plife REIT 3.6 2.8

Starhill Gbl 3.1 1.6

SuntecREIT 3.1 2

Average 3.4 1.7

0%

20%

40%

60%

80%

100%

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7

Sector Highlights

Segment Demand

Ranking

Supply

Ranking

Investment Positives Investment Negatives Stocks

Industrial

1

(Business

park )

1

(Business

park)

Positive rental reversions to offset muted headline rental growth

Upcoming supply of factory and warehouse space largely pre-

committed

AEI, BTS and redevelopment opportunities

Business parks to benefit from spillover office demand

REITs increasingly seeking overseas assets

Sizeable incoming supply

Near-term weakness in business park

occupancies

Further government measures

AREIT (BUY)

FLT (BUY)

Hotel 3 2

Pickup in global economy

Continued growth in visitor arrivals and corporate traffic

High occupancies and stable ARRs


Higher labour costs/lower foreign

labour allocation

Strong S$

Increasing competition from

neighbouring countries

Frasers

Hospitality (BUY)

ART (HOLD)

CDREIT (HOLD)

Office 2 3

Limited supply from 2017 onwards.

Singapore Occupancy costs half that of HK (Ranked 20th ).

Demolitions and conversions could remove over 60% of upcoming

supply

Demand to rise on improving macro outlook


Difficulty in acquiring properties due to

yield compression in the space

Grade-A rentals to drop ~20% from

1Q15’s peak of S$11.40 psf.

CCT (BUY)

KREIT (BUY)

Suntec REIT

(HOLD)

Retail 4 4

Rentals to remain resilient

AEIs to drive mall performance

Acquisitions from sponsor and third-party pipelines

New and upcoming supply largely pre-committed

Successful retail concepts expanding, new entrants continuing to

enter

Labour curbs

Competition from online retail

Pockets of weakness in suburbs (eg

Jurong East) on larger supply

Starhill (BUY)

FCT (HOLD)

CMT (HOLD)

8

Industrial: Business Park Sole Bright Spot

Outlook:

• Business park & high tech segment to benefit from spillover office demand.

• Flattish rental outlook for factory and warehouse as the market absorbs a larger upcoming supply of new space

• Potential revaluation losses for factory / warehouse landlords on supply-side pressure on rents

Key Trends:

• Single-tenanted buildings seeing increasing

multi-tenanted conversions and landlords

grapple with JTC subletting requirements

• Upcoming supply largely pre-committed

• AEI, BTS and redevelopment opportunities

• Increasing overseas acquisitions

• Risks: Older business park occupancies,

further government measures

Industrial Rents

Source: CBRE, URA REALIS, UOB Kay Hian

Business / Science Park Supply Fully Pre-committed In 2017 And Beyond

Source: A-REIT

1

2

3

4

2Q09 2010 4Q10 3Q11 2Q12 2013 4Q13 3Q14 2Q15 1Q16 4Q16

Business & Science Parks

Hi-Tech

Multi User Factory

Multi User Warehouse S$1.84

S$3.70

S$3.10

S$1.82

(S$/psf pm)

9

Sector Highlights

Segment Demand

Ranking

Supply

Ranking


Industrial

1

(Business

park )

1

(Business

park)



committed






occupancies


AREIT (BUY)

FLT (BUY)

Hotel 3 2






labour allocation

Strong S$



Frasers

Hospitality (BUY)

ART (HOLD)

CDREIT (HOLD)

Office 2 3




supply







CCT (BUY)

KREIT (BUY)

Suntec REIT

(HOLD)

Retail 4 4






enter

Labour curbs




Starhill (BUY)

FCT (HOLD)

CMT (HOLD)

10

Hotel: Watch out for supply driven turnaround

Source: CDL Hospitality, Horwath HTL

Source: CDL Hospitality, Horwath HTL, UOB Kay Hian

Hotel Rating Rooms Est Opening

Aqueen Hotel Little India Economy 83 2Q17

Novotel Singapore on Stevens Upscale/Luxury 254 2Q17

InterContinental Singapore Robertson Quay (formerly

Gallery Hotel)

Upscale/Luxury 225

2Q17

Sofitel Singapore City Centre (Tanjong Pagar Centre) Upscale/Luxury 222

2Q17

The Patina Capitol Singapore Upscale/Luxury 157 2Q17

Ibis Singapore on Stevens Mid-Tier 528 2Q17

Destination Singapore Beach Road (fmr Premier Inn) Mid-Tier 300 2Q17

Park Hotel Farrer Park Mid-Tier 300 2Q17

Courtyard Marriott at Novena Mid-Tier 250

2Q17

YOTEL Orchard Road Economy 610 2Q17

Dusit Thani Hotel & Resort Upscale/Luxury 197 1H17

Andaz Singapore (DUO Project) Upscale/Luxury 342 3Q17

Novotel Singapore on Stevens Upscale/Luxury 254 3Q17

Duxton Terrace (formerly Murray House) Upscale/Luxury 138 4Q17

Duxton House (formerly Blakes) Upscale/Luxury 50 4Q17

Grand Park City Hall Mid-Tier 181 4Q17

Aqueen Hotel Lavender (Additional Rooms) Economy 69 2018

The Outpost @ Sentosa Upscale/Luxury 230 2019

Village Hotel Sentosa Economy 620 2019

The Clan Mid-Tier 292 2019

YOTEL Changi Jewel Economy 130 2019

THE EDITION by Marriott Upscale/Luxury 190 2019

Source: STB, UOB Kay Hian estimates

REVPAR, ADR & OCCUPANCY TRENDS

HOTEL ROOM SUPPLY

11

Sector Highlights

Segment Demand

Ranking

Supply

Ranking


Industrial

1

(Business

park )

1

(Business

park)



committed






occupancies


AREIT (BUY)

FLT (BUY)

Hotel 3 2






labour allocation

Strong S$



Frasers

Hospitality (BUY)

ART (HOLD)

CDREIT (HOLD)

Office 2 3




supply







CCT (BUY)

KREIT (BUY)

Suntec REIT

(HOLD)

Retail 4 4






enter

Labour curbs




Starhill (BUY)

FCT (HOLD)

CMT (HOLD)

12

Office: Early signs of stablization

* UOB-ETR GDP forecast: 2016F: 2.7%,

Source: CBRE, UOB Kay Hian

Office Supply Demand Occupancy

Office Rental Outlook:

•Preleasing activity showing signs of

stabilization.

Key Trends:

•Grade A office rentals have corrected 21.5%

from the peak to S$8.95 psf pm in 1Q17.

•We opine that Grade A rental decline could

fast be approaching a bottom, especially as

qoq declines have been slowing since 3Q16 (-

2.1% qoq), vs qoq declines during 3Q15-2Q16

(-3.5% to -4.8%).

•Upcoming supply concentrated in 2017 with

limited supply beyond 2018.

•Leasing momentum picking up (Marina One

and UIC Building pre-commitments at

approximately 60% and 50% respectively)

•Nascent demand from firms in TMT sector

(Agoda, Amadeus, Netflix, Booking.com,

LinkedIn, Facebook, Avepoint, Quantium).

75%

77%

79%

81%

83%

85%

87%

89%

91%

93%

95%

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2003 2005 2007 2009 2011 2013 2015 2017F 2019F

Annual Supply Take-Up Occupancy

(%)(sf m)

13

Limited Supply Beyond 2017

• High supply of commercial space to hit the

market in 2017.

• Marina One (1.9m sf of space in 1Q17), has

seen anchor tenant pre-commitment (Julius

Baer, Virgin Active, Cold Storage, Koufu).

Media reports indicate c.35% pre-

commitment while market intelligence places

it at ~50%

• Research from industry consultant Edmund

Tie & Company (formerly DTZ) show that

Marina Bay rents fell 1.8% qoq to S$10.65psf

pm in 4Q16.

• Beyond 2017, core CBD supply remains

meagre at below 0.84m sf pa (Frasers Tower

and redevelopment projects) which should

underpin a pick-up in rental growth.

Period Proposed Project City Area Estimated Net

Lettable Area (sf)

2Q17 Marina One Marina Bay 1,876,000

2Q17 UIC Building Shenton Way 278,000

2017 EON Shenton (Strata Office) Shenton Way 101,000

2017 2,255,000

1Q18 Redevelopment of International Factors Building and Robinson Towers

Core CBD 194,380

2Q18 Frasers Tower Core CBD 645,000

2018 808,000

4Q19 Redevelopment of Funan DigitaLife Mall City Hall 204,000

2019 Park Mall Redevelopment Fringe CBD 352,000

2019 556,000

2020 79 Robinson Road (former CPF Building) Robinson Road 500,000

2020 Afro-Asia Buildings Redevelopment Shenton Way 154,000

2020 654,000


14

Sector Highlights

Segment Demand

Ranking

Supply

Ranking


Industrial

1

(Business

park )

1

(Business

park)



committed






occupancies


AREIT (BUY)

FLT (BUY)

Hotel 3 2






labour allocation

Strong S$



Frasers

Hospitality (BUY)

ART (HOLD)

CDREIT (HOLD)

Office 2 3


Singapore occupancy costs half that of HK (Ranked 20th ).


supply







CCT (BUY)

KREIT (BUY)

Suntec REIT

(HOLD)

Retail 4 4






enter

Labour curbs




Starhill (BUY)

FCT (HOLD)

CMT (HOLD)

15

Retail: Challenging Retail Climate

Outlook:

• Muted 0-3% rental growth

• Growth drivers from AEI and

acquisitions

Key Trends:

• Rising Risks: Labour curbs, online

retailing, high supply in Jurong East

• Malls continue to undergo AEIs (CMT:

Tampines Mall, Bugis Junction)

• New potential AEIs to drive future

growth. (CMT: Funan, FCT: Northpoint,

Starhill: Plaza Arcade, Suntec: Park

Mall)

• Successful retail concepts expanding

(H&M, Uniqlo, Tim Ho Wan), while new

entrants enter (Hello Kitty Cafe, Japan

Food Town)

Orchard And Suburban Retail Rents


Rent reversions on a downward trend

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 4Q16

Frasers Centrepoint Tr CapitaLand Mall Tr

(Rental reversions)

16

Prefer Business Park exposure

• Industrial pick –

AREIT, FLT

• Hospitality pick –

FHT

• Office pick –

CCT

Source: Datastream, Bloomberg, UOB Kay Hian

Peer Comparison

Price Target Market Yield Debt to Debt to

Name Ticker Rec Curr 22 May 17 Price Cap Hist Curr Fwd Fwd 2 yr Equity Asset P/NAV

(S$) (S$) (S$m) (%) (%) (%) (%) (%) (%)

HOSPITALITY REITS/TRUSTS

Ascendas-hTrust ASCHT SP NR S$ 0.77 n.a. 867.4 7.4 7.0 n.a. n.a. 53.7 32.2 0.84

AscottREIT ART SP HOLD S$ 1.125 1.15 2,412.9 7.0 5.5 6.4 6.8 90.4 41.1 0.87

CDL HTrust CDREIT SP HOLD S$ 1.615 1.47 1,611.3 6.2 5.7 5.6 n.a. 60.1 36.8 1.05

Far East HTrust FEHT SP NR S$ 0.605 n.a. 1,097.0 7.2 6.6 6.9 7.1 50.3 32.3 0.67

Frasers HTrust FHT SP BUY S$ 0.7 0.74 1,291.9 7.5 7.3 7.3 7.4 56.5 33.2 0.91

OUE HT OUEHT SP NR S$ 0.71 n.a. 1,279.4 6.5 6.9 6.9 7.0 62.4 38.1 0.93

INDUSTRIAL REITS

AIMSAMPIReit AAREIT SP NR S$ 1.395 n.a. 890.9 7.9 8.6 8.6 n.a. 59.6 36.1 1.00

Ascendas Reit AREIT SP BUY S$ 2.59 2.75 7,469.4 6.1 6.3 6.3 n.a. 57.1 33.8 1.26

Cambridge CREIT SP NR S$ 0.575 n.a. 750.0 7.3 7.1 7.1 7.8 62.6 37.8 0.91

CACHE CACHE SP BUY S$ 0.89 0.95 802.6 8.7 8.2 8.3 n.a. 77.6 43.1 1.15

EC World Reit ECWREIT SP NR S$ 0.775 n.a. 604.6 7.4 7.7 n.a. n.a. 59.2 28.6 0.87

Frasers L&I Tr FLT SP BUY S$ 0.995 1.11 1,424.2 6.9 6.8 6.9 7.0 41.5 28.9 1.08

Keppel DC Reit KDCREIT SP NR S$ 1.25 n.a. 1,408.8 4.9 5.8 5.9 6.2 40.8 27.9 1.32

MapletreeInd MINT SP HOLD S$ 1.795 1.69 3,235.4 6.3 6.4 6.6 6.6 43.7 29.2 1.28

MapletreeLog MLT SP BUY S$ 1.155 1.20 2,888.1 6.4 6.3 6.4 n.a. 84.4 38.4 1.12

Sabana REIT SSREIT SP NR S$ 0.425 n.a. 447.6 9.8 n.a. n.a. n.a. 58.2 36.0 0.71

SoilbuildBizREIT SBREIT SP NR S$ 0.675 n.a. 707.3 9.0 8.1 7.9 7.7 63.9 37.5 0.94

Viva Ind Tr VIT SP NR S$ 0.805 n.a. 778.8 8.6 9.1 8.9 8.9 68.0 39.2 1.02

OFFICE REITS

CapitaLand Comm Trust CCT SP BUY S$ 1.655 1.75 4,926.4 5.5 5.5 5.6 n.a. 63.8 38.1 0.95

Frasers Comm FCOT SP NR S$ 1.345 n.a. 1,078.6 7.3 7.4 7.2 7.2 60.1 35.9 0.86

IREIT Global IREIT SP NR S$ 0.76 n.a. 473.2 8.3 8.6 8.6 n.a. 76.2 42.1 1.17

Kep REIT KREIT SP BUY S$ 1.095 1.18 3,644.9 5.8 5.7 5.6 5.7 69.9 38.4 0.76

ManulifeReit USD MUST SP NR US$ 0.88 n.a. 553.6 6.5 7.0 7.2 7.0 55.4 34.2 1.04

OUE Com Reit OUECT SP NR S$ 0.705 n.a. 1,084.7 7.3 7.2 7.2 n.a. 89.1 36.2 0.82

SuntecReit SUN SP HOLD S$ 1.79 1.80 4,560.1 5.6 5.7 5.5 n.a. 61.0 37.7 0.83

RETAIL REITS

BHG Retail Reit BHGREIT SP NR S$ 0.67 n.a. 332.9 8.1 7.6 n.a. n.a. 59.0 32.5 0.82

CapitaLand Mall Trust CT SP HOLD S$ 1.97 1.95 6,984.4 5.6 5.4 5.2 n.a. 57.4 35.6 1.04

CapitaLand Retail China CRCT SP NR S$ 1.565 n.a. 1,390.9 6.4 6.9 7.0 7.7 70.6 36.0 0.99

Fortune Reit HK$ FRT SP NR HK$ 9.32 n.a. 17,756.5 5.3 5.5 5.6 5.8 44.6 29.5 0.72

FrasersCT FCT SP HOLD S$ 2.04 2.15 1,880.5 5.8 5.7 5.6 5.8 43.7 29.4 1.06

LippoMalls LMRT SP NR S$ 0.42 n.a. 1,186.1 8.1 8.1 8.3 8.6 61.7 32.2 1.12

MapletreeCom MCT SP NR S$ 1.555 n.a. 4,472.7 5.5 5.7 5.7 5.9 58.8 36.3 1.13

MapletreeGCC MAGIC SP NR S$ 1.055 n.a. 2,949.1 6.9 6.9 6.9 6.8 70.3 39.2 0.81

SPHREIT SPHREIT SP NR S$ 0.985 n.a. 2,516.9 5.6 5.7 5.8 6.0 35.4 25.6 1.05

Starhill Gbl SGREIT SP BUY S$ 0.75 0.90 1,635.9 6.9 7.0 6.8 6.6 56.5 35.3 0.81

17

OVERWEIGHT On REITs Sector

• Upcycle yield spreads indicate 23% upside potential. Top

BUYs: AREIT, FLT, CCT and FHT

• Opportunity to invest in REITs at attractive levels as Fed rate

hike expectations dampens share prices

• Singapore Yield Spreads Remain Most Attractive Regionally at

3.88%

• Fixed-rate Debt And Longer Maturities To Mitigate Interest

Impact

• Meagre supply of industrial business park space

• Prefer diversified, deep value REITs with exposure to the

Business Park and Hospitality segments.

THANK YOU

Appendix

20

Peer Comparison

4 Price Target Upside/ Fwd Curr Fwd Price/ (Disc)/

Rec 5/22/17 Price (Downside) Price Performance (%) PE Yield Yield Book Gearing * RNAV ps Prem to

(S$) (S$) to TP (%) 5D 1M 3M YTD 1Y 52-wk Low 52-wk High (%) (%) (%) (x) (%) (S$) RNAV (%)

FSSTI FSSTI Index n.a. 3213.57 n.a. n.a. (1.6) 2.3 2.9 11.6 16.3 18.9 (1.9) 27.7 6.8 7.3 1.19 n.a. n.a. n.a.

Real Estate Index FSTRE Index n.a. 793.31 n.a. n.a. (1.0) (0.6) 4.6 13.5 16.6 19.8 (2.1) 22.2 5.6 5.9 0.86 n.a. n.a. n.a.

Property Developers Index FSTREH Index n.a. 836.1 n.a. n.a. (2.9) (2.3) 4.5 18.9 27.6 33.4 (4.5) 39.1 5.5 5.9 0.75 n.a. n.a. n.a.

Property REITs Index FSTREI Index n.a. 774.81 n.a. n.a. 0.6 1.0 4.6 9.2 8.5 10.9 (0.3) 15.9 5.8 6.0 1.00 n.a. n.a. n.a.

Developers

CapitaLand CAPL SP BUY 3.51 4.30 22.5 (2.8) (3.0) (3.0) 16.2 17.4 23.2 (7.4) 24.0 2.3 2.3 0.84 43.9 5.06 (31)

CityDev CIT SP HOLD 10.36 11.40 10.0 (2.5) 1.0 12.1 25.1 26.7 31.9 (5.6) 16.2 1.5 1.5 1.01 18.2 12.95 (20)

GLP GLP SP HOLD 2.9 2.50 (13.8) (0.3) 1.8 5.5 31.8 58.9 67.6 (1.7) 34.6 2.1 2.1 0.81 26.6 3.06 (5)

Ho Bee Land HOBEE SP BUY 2.37 3.02 27.4 0.9 2.6 3.0 16.7 8.2 17.9 (4.0) 14.3 1.7 1.7 0.56 36.6 3.77 (37)

Wing Tai WINGT SP BUY 1.845 2.54 37.7 (1.6) 0.3 2.8 16.0 7.3 18.5 (5.9) 31.7 3.3 3.3 0.46 6.3 3.39 (46)

Healthcare REITs

First REIT FIRT SP NR 1.32 NR n.a. (2.9) (1.5) 1.9 4.3 5.2 9.1 (5.0) 16.3 6.4 6.6 1.31 31.0 n.a. n.a.

PLife REIT PREIT SP HOLD 2.58 2.50 (3.1) 1.2 1.2 5.3 9.3 5.3 11.2 (2.6) 21.7 4.7 4.7 1.50 37.6 1.64 57

Hospitality REITs

Ascendas-hTrust ASCHT SP NR 0.77 NR n.a. (3.8) (0.0) 1.3 9.2 15.8 18.5 (4.3) n.a. 7.0 n.a. 0.84 32.2 n.a. n.a.

CDL HTrust CDREIT SP HOLD 1.615 1.47 (9.0) 3.2 8.8 15.4 20.5 17.0 26.2 0.0 19.0 5.7 5.6 1.05 36.8 1.45 12

AscottREIT ART SP HOLD 1.125 1.15 2.2 0.4 3.2 (0.1) 3.8 4.3 8.6 (1.4) 16.7 5.5 6.4 0.87 41.1 1.07 6

Far East HTrust FEHT SP NR 0.605 NR n.a. 0.0 0.0 1.7 0.8 0.0 6.1 (6.9) 16.8 6.6 6.9 0.67 32.3 n.a. n.a.

Frasers HTrust FHT SP BUY 0.7 0.74 5.7 (0.7) (2.1) 1.4 7.7 (6.0) 11.1 (7.2) 14.4 7.3 7.3 0.91 33.2 0.81 (14)

Industrial REITs

AIMSAMPIReit AAREIT SP NR 1.395 NR n.a. (0.4) (0.4) 3.7 6.5 1.1 12.0 (6.4) 11.6 8.6 8.6 1.00 36.1 n.a. n.a.

Ascendas Reit AREIT SP BUY 2.59 2.75 6.2 (0.4) 0.8 4.0 14.1 12.1 17.7 (1.1) 18.5 6.3 6.3 1.26 33.8 2.21 17

Ascendas-iTrust AIT SP NR 1.115 NR n.a. (5.9) (1.3) 0.9 9.9 16.8 21.9 (10.4) 16.4 5.8 6.0 1.38 28.1 n.a. n.a.

CACHE CACHE SP BUY 0.89 0.95 6.7 (1.7) 0.6 8.5 9.9 2.3 12.7 (5.8) 13.2 8.2 8.3 1.15 43.1 1.04 (14)

Cambridge CREIT SP NR 0.575 NR n.a. 0.9 (0.0) (3.4) 6.5 6.5 9.5 (3.4) 14.4 7.1 7.3 0.91 37.8 n.a. n.a.

Frasers L&I Tr FLT SP BUY 0.995 1.11 11.6 (1.0) (2.5) 3.1 7.6 9.3 11.8 (4.3) 16.3 6.8 6.9 1.08 28.9 0.90 11

Keppel DC Reit KDCREIT SP NR 1.25 NR n.a. 2.5 1.6 7.8 5.5 18.2 20.4 (2.3) 16.7 5.8 5.9 1.32 27.9 n.a. n.a.

MapletreeInd MINT SP HOLD 1.795 1.69 (5.8) 0.6 (0.3) 7.5 9.1 11.1 16.6 (2.7) 15.4 6.4 6.6 1.28 29.2 1.55 16

MapletreeLog MLT SP BUY 1.155 1.20 3.9 3.1 3.1 7.9 13.2 17.3 20.3 (0.4) 15.9 6.3 6.4 1.12 38.4 0.98 18

Office REITs

CapitaLand Comm Trust CCT SP BUY 1.625 1.75 7.7 1.2 6.6 4.5 9.8 10.9 19.0 (0.9) 15.9 5.8 5.9 0.93 38.1 2.59 (37)

Frasers Comm FCOT SP NR 1.34 NR n.a. 1.1 5.5 4.3 6.3 2.3 9.4 (7.6) 15.4 7.4 7.1 0.86 36.0 n.a. n.a.

IREIT Global IREIT SP NR 0.74 NR n.a. (0.7) 3.5 1.4 3.5 3.5 5.0 (3.3) 13.0 8.5 8.5 1.18 41.6 n.a. n.a.

Kep REIT KREIT SP BUY 1.055 1.18 11.8 (0.0) 3.9 1.4 3.4 5.0 6.6 (8.3) 23.2 5.9 5.8 0.73 38.4 1.51 (30)

SuntecReit SUN SP HOLD 1.79 1.80 0.6 1.7 1.7 2.6 8.5 10.2 14.0 (1.1) 24.0 5.7 5.5 0.83 37.7 2.01 (11)

Retail REITs

CapitaLand Mall Trust CT SP HOLD 1.97 1.95 (1.0) 0.5 (1.5) 0.8 4.5 (3.9) 5.3 (12.4) 19.5 5.4 5.2 1.04 35.6 1.84 7

CapitaLand Retail China CRCT SP NR 1.565 NR n.a. 1.3 3.3 9.8 14.2 6.8 17.7 (6.0) 15.7 6.9 7.0 0.99 36.0 n.a. n.a.

Fortune Reit HK$ FRT SP NR 9.32 NR n.a. (0.2) 5.1 6.6 8.2 9.0 12.3 (7.9) 19.5 5.5 5.6 0.72 29.5 n.a. n.a.

FrasersCT FCT SP HOLD 2.04 2.15 5.4 (0.5) (1.9) 0.5 7.4 3.0 9.4 (8.5) 19.0 5.7 5.6 1.06 29.4 1.92 6

LippoMalls LMRT SP NR 0.42 NR n.a. 1.2 3.7 7.7 13.5 23.5 27.3 (2.3) 14.5 8.1 8.3 1.12 32.2 n.a. n.a.

MapletreeCom MCT SP NR 1.555 NR n.a. 1.0 (0.3) 2.6 11.5 9.4 13.5 (3.7) 18.1 5.7 5.7 1.13 36.3 n.a. n.a.

MapletreeGCC MAGIC SP NR 1.055 NR n.a. 1.4 1.4 7.7 11.1 7.7 14.7 (7.9) 18.5 6.9 6.9 0.81 39.2 n.a. n.a.

SPHREIT SPHREIT SP NR 0.985 NR n.a. 0.0 1.0 1.5 3.7 6.5 8.8 (2.0) 18.6 5.7 5.8 1.05 25.6 n.a. n.a.

Starhill Gbl SGREIT SP BUY 0.75 0.90 20.0 0.7 (2.0) 0.7 1.4 (2.0) 3.4 (10.7) 13.4 7.0 6.8 0.81 35.3 0.91 (17)

* Property Developers: Net Debt to Total Equity * REITs: Total Debt to Total Assets

21

Non-linear Relationship Between REIT And Bond Yields

• Relationship between REIT

yields and bond yields need

not be linear. Eg Jul 03, bond

yields expanded by 180bp to

4.1% while REITs compressed

by 130bp to 7.7%

• REITs are growth vehicles as

well, unlike traditional yield

plays.

• Growth supported by rental

growth, asset enhancements

and acquisitions.

• The STI Index is highly

correlated with the FSTREI

(Property REITs Index),

whereby a 1% increase in the

FSSTI is correlated with a

0.7% increase in the FSTREI.

Source: Datastream, UOB Kay Hian


Graph Of FSSTI And FSTREI

Graph Of REITs’ Yield And 10Y SGS Yield

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

03 04 05 06 07 08 09 10 11 12 13 14 15 16

(%)

Av erage: 6.45%(ex cl. 2008 crisis)

REITs Yield

10-y r SGS Bond Yield

Av erage: 2.57%

0

200

400

600

800

1000

1200

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

FSSTI (LHS)

FSTREI (RHS)

Interest rate sensitivity

• On 15 Dec, the US Federal Reserve

raised interest rates by another 25bps,

with another three hikes anticipated

for 2017 (probability at 35.5% in Sep

17, according to Fed Funds Futures)

• Financing impact on REITs

minimised due to diversified

funding sources. The average debt

maturity across REITs within coverage

has about doubled to 3.4 years,

implying lower likelihood of near-term

debt refinancing, from the GFC period

of about 1.7 years.

• Longer debt maturities to further

mitigate impact as REIT managers

have actively been tapping debt

markets, eg AREIT and CMT, with

medium-term loans maturing as far

back as 2029 and 2031 respectively.

• Defensive REITs, eg PLife and CMT,

are most sensitive to changes in RFR

as a low-base effect amplifies

sensitivity when yields rise.


Change in Risk Free Rate Change in Borrowing Costs Company Ticker +50bps +75 bps +100 bps +50 bps +75 bps +100 bps

% chg in

TP % chg in

TP % chg in

TP % chg in

TP % chg in

TP % chg in

TP

Ascendasreit AREIT SP (6.5) (9.6) (12.4) (3.4) (5.0) (6.9)

AscottREIT ART SP (7.7) (11.2) (14.4) (4.8) (6.9) (9.8)

CACHE CACHE SP (5.4) (7.9) (10.3) (4.3) (6.0) (8.0)

CapitaComm CCT SP (3.2) (7.1) (10.8) (2.8) (4.2) (5.5)

CapitaMall CT SP (10.) (15.) (19.3) (4.8) (7.3) (9.7)

CDL Htrust CDREIT SP (7.5) (10.9) (14.0) (3.4) (4.6) (6.3)

FrasersCT FCT SP (8.7) (12.5) (16.0) (3.3) (5.2) (6.6)

Frasers Hosp FHT SP (6.8) (9.5) (12.2) (4.1) (5.4) (8.1)

Frasers Log FLT SP (8.5) (12.2) (15.6) (2.8) (4.2) (5.5)

Kep REIT KREIT SP (8.5) (12.2) (15.6) (4.0) (6.1) (8.1)

MapletreeInd MINT SP (6.7) (9.8) (12.8) (6.8) (9.7) (13.8)

MapletreeLog MLT SP (7.3) (10.5) (13.6) (3.3) (4.5) (6.4)

PLife REIT PREIT SP (11.7) (16.6) (21.0) (3.3) (5.0) (6.6)

Starhill Gbl SGREIT SP (8.3) (12.0) (15.3) (4.9) (7.7) (10.3)

Suntec REIT SUN SP (8.5) (12.2) (15.7) (6.1) (9.2) (12.3)

Estimated Impact Of Rising Interest Rates


Company Debt Cost of Debt 2016 2017 2018 2019 2020 2021 and

Maturity (years) Debt (%) (S$m) Beyond

Ascendasreit 3.80 3.02% 3370 10% 6% 22% 15% 16% 31%

AscottREIT 4.60 2.40% 1984 0% 13% 11% 8% 15% 53%

CACHE 2.40 3.62% 533 0% 14% 43% 34% 9% 0%

CapitaComm 3.50 2.50% 3283 0% 5% 16% 21% 37% 20%

CapitaMall 5.50 3.20% 3842 0% 7% 16% 13% 12% 53%

CDL Htrust 3.20 2.40% 926 0% 0% 35% 24% 20% 22%

FrasersCT 2.70 2.10% 734 0% 30% 8% 16% 10% 36%

Frasers Hosp 2.35 2.55% 810 0% 14% 15% 69% 1% 0%

Frasers Log 3.90 2.80% 499 0% 34% 32% 34% 0% 0%

Kep REIT 3.70 2.53% 3324 0% 0% 14% 28% 23% 36%

MapletreeInd 3.50 2.60% 1064 3% 17% 17% 27% 9% 26%

MapletreeLog 3.50 2.30% 2047 1% 15% 16% 14% 17% 37%

PLife REIT 3.40 1.40% 678 2% 0% 14% 31% 27% 27%

Starhill Gbl 3.40 3.06% 1139 1% 35% 28% 9% 9% 18%

Suntec REIT 2.91 2.28% 2985* 0% 3% 37% 27% 10% 22%

Spread Out Debt Maturity Profile Reducing Refinancing Risk

22

23

Brexit: Low impact from currency translation

Company FY17 P&L UK

exposure (%) B/S or RNAV exposure (%) Remarks

FHT 22% 19% (24% of Europe) FHT has hedged 70-80% of distributions from the UK (policy to

hedge distributions on a 6-month rolling basis).

CDREIT 5% 5% Natural hedging of UK assets would mitigate adverse impact on

income should the pound weaken.

ART 13% 11% (28% of Europe)

At least 30% of full-year foreign income hedged as of 1Q16 (12-

month rolling basis). While currently unhedged, management has

guided for up to 80% of pound income going forward. Every 10%

depreciation of the pound will negatively impact earnings by 1.3%.

Ho Bee 29% 30% (GAV) On the income side, every 10% depreciation of the pound will

negatively impact earnings by 2.9%.

CDL 14% 11% (GAV), (12% Europe)

Minimal impact on balance sheet due to natural hedge. On the

income side, every 10% depreciation of £ will negatively impact

earnings by1.4%.

Currency Translation impact

24

Office: Conversions To Mitigate Oversupply Concerns

• Demolition in 2011-15 had

removed an average of 1m sf of

space p.a.

• Another 2.5m sf slated for

demolition/conversion.

• Office buildings may be

redeveloped into residential or

commercial premises.

• Even if buildings are redeveloped

into offices, development will

take 3-5 years and the likelihood

is that offices will re-emerge

strata-titled.

Source: URA, UOB Kay Hian, media reports

Potential Demolitions/Conversions In 2016-18

Gross And Net New Supply Of Office Space

Source: URA, UOB Kay Hian

2012 2013 2014 2015

Gross New Supply (m sf) 2.3 2.5 2.4 1

Demolitions/ Conversions (m sf) -1.4 -0.7 (~1) (~1)

Net New Supply (m sf) 0.9 1.8 ~1.4 ~0

Building Existing NLA (sf) Developer

Keppel Towers/ GE Towers 430,000 Keppel Land

51 Cuppage Road (former Starhub Centre) 280,000 Frasers Centrepoint

Keypoint Building (Residential redevelopment) 304,000 Fragrance/ Aspial

NOL Building 208,000 Fragrance

79 Anson Road 202,000 UE

15 Hoe Chiang Road (Hotel redevelopment) 190,000 Fragrance

International Factors Building 48,000 Tuan Sing

Robinson Towers 86,000 Tuan Sing

San Centre (En-bloc) 132,000 Chip Eng Seng

2HR ( Partial conversion of into retail) 40,000 Guthrie GTS

6 Shenton Way (Conversion into serviced

apartments and retail)

313,000 OUE

Eminent Plaza Redevelopment (Arc 380) 100,000 Tong Eng

700 Beach (Hotel redevelopment) 67,400 Master Contract/ Fine Grain

McDonald's Place at KAP (Residential/ Retail) 15,000 Oxley

Katong Junction (Retail conversion) 36,000 Buxani Group/ Capital Management

Finexis Building 53,800 Offshore fund (Sin Capital)

2,505,200

25

Office: Substantially Cheaper Than Hong Kong

• Hong Kong occupancy costs are at a

90-207% premium to Singapore office

rentals, vs a historical average of 64%.

• Singapore offices’ occupancy costs

rank 20th globally compared to second-

ranked Hong Kong.

Singapore Ranked 20th In Occupancy Costs

Source: CBRE

Rank City/ Location Prime office occupancy cost

(US$ps p.a.) 1Q16

1 Hong Kong (Central), Hong Kong 290.21

2 London–Central (West End), United Kingdom 262.29

3 Beijing (Finance Street), China 188.07

4 Beijing (CBD), China 181.6

5 Hong Kong (West Kowloon), Hong Kong 179.49

6 Tokyo (Marunouchi/Otemachi), Japan 160.47

7 New Delhi (Connaught Place–CBD), India 149.71

8 London–Central (City), United Kingdom 145.38

9 New York (Midtown Manhattan), U.S. 136.71

10 Shanghai (Pudong), China 132.78

11 Moscow, Russian Federation 121.94

12 San Francisco (Downtown), U.S. 120.48

13 Shanghai (Puxi), China 106.65

14 Paris Ile-de-France, France 105.99

15 Boston (Downtown), U.S. 103.75

16 San Francisco (Peninsula), U.S. 97.38

17 Seoul (CBD), South Korea 96.43

18 Shenzhen, China 94.87

19 Mumbai (Bandra Kurla Complex), India 94.79

20 Singapore, Singapore 94.47

Rental Differential Between Singapore And Hong Kong

0

20

40

60

80

100

120

140

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rental Diff HK & SG SG (LHS) HK (LHS)

(%)(S$psf pm)

26

Hotel: Supply led turnaround in sight

Outlook:

• Expect visitor arrival growth of 3% yoy in 2017.

Retain 2016 growth estimates at 5% yoy, on more

sombre 2H16 visitor arrivals (compared to 1H16),

post the Zika outbreak.

• Occupancy to remain stable at 84-85% level.

• Pressure on room rates to remain due to supply

indigestion

Key Trend:

• Operating data for Singapore hoteliers in Oct

16 still poor, likely in wake of August’s domestic

Zika outbreak (13.4% yoy RevPAR decline).

• Strong growth in Chinese visitors offset by

overall weaker spend on accommodation and

shorter length of stay

• Deterioration in Chinese length of stay

coinciding with sharp increase in cross border

(Malaysia-Singapore) travel by tourists from

China (up 105.4% in 9M16). Source: STB, CBRE, UOB Kay Hian

Average Length Of Stay and Proportion Of Chinese Visitors Travelling By Land

Per capita Tourist Expenditure On Accommodation

Source: STB, CBRE, UOB Kay Hian

200

220

240

260

280

300

320

340

360

380

70%

75%

80%

85%

90%

2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16

Overall Occupancy Average Room Rate Accomodation Expenditure per Tourist

(S$)

2.0

2.5

3.0

3.5

4.0

4.5

5.0

14%

16%

18%

20%

22%

24%

26%

28%

2007 2008 2009 2010 2011 2012 2013 2014 2015 6M16

% of Chinese travelling by land Chinese ALOS* Total ALOS*

(days)

27

Residential: Drag On Rents To Impact Capital Values


URA Price / Rental Indices

Slowing Influx of Foreigners And Permanent Residents

Source: URA, HDB, UOB Kay Hian

• 2015 saw foreigner and PR growth

rate of 1.6% yoy, down from the

peak in 2008 (+15.1% yoy)

• Growth translates to 13,314

households, lower than the annual

supply of ~22,000 units in 2016

• Bottoming out in private home

prices to hinge on rent stabilisation

• Foreigners and PRs accounted for

39% of total population (5.5m) in

2015

• Watch out for signs of policy

easing on immigration, which

could likely happen in 2018

-5%

0%

5%

10%

15%

0

500

1,000

1,500

2,000

2,500

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

growth Foreigners & PRs

(000)

40

60

80

100

120

140

160

180

4Q93 2Q95 4Q96 2Q98 4Q99 2Q01 4Q02 2Q04 4Q05 2Q07 4Q08 2Q10 4Q11 2Q13 4Q14 2Q16

Price

Rental Index

28

Residential: Signs of stabilization

Source: URA,CEIC, UOB Kay Hian

SRX Index

URA & HDB

Source: MND

Monthly Developer Sale Volume


• 3Q16 URA private home price index

flash estimates displayed 12th

consecutive price decline from

3Q13’s peak (-10.8% from peak)

• Recent uptick in sales volumes, on

the back of recent launches that

include Forestwoods and Queens

Peak.

• High end completed projects like

OUE Twin Peaks saw healthy

demand which was not captured in

URA’s newly released data

• Long-term property prices to trend in

line with GDP growth.

0%

50%

100%

150%

200%

250%

0

200

400

600

800

1000

1200

1400

1600

Nov15

Dec15

Jan16

Feb16

Mar16

Apr16

May16

Jun16

Jul16

Aug16

Sep16

Oct16

Nov16

Launched Sold Takeup

60

70

80

90

100

110

120

130

140150

160

3Q06 3Q08 3Q10 3Q12 3Q14 3Q16

HDB PPI

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

155

160

165

170

175

180

Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16

SRX Private Housing mom change

28

29

FX Hedging Policy

Healthcare REITs Hedging Policies

First REIT Indonesian leases in SGD. Hence no hedging required as sponsor bears the currency risks.

Parkway Life REIT Hedge distributable income through forward forex contracts, aim to coincide with underlying loans. Balance sheet side policy is to adopt natural hedging as much as possible.

Hospitality REITs

Ascendas Hospitality Trust 25% of foreign income hedged through forwards. Balance sheet side policy is to adopt natural hedging as much as possible.

CDL Hospitality Trust Distributable income unhedged.

Ascott Residence Trust Overall income hedge of about 40% over 12 months, mainly in three currencies, Euro (70%), JPY (80%), GBP (80%). Balance sheet side policy is to adopt natural hedging as much as possible

Far East Hospitality Not Applicable, mainly SG assets

Frasers Hospitality Trust Hedge fixed income for 6-9 months rolling basis, variable component a month after book closure. Balance sheet policy to adopt natural hedging as much as possible

OUE HT Not Applicable, mainly SG assets

Industrial REITs

A-REIT Planning to hedge 100% of Aus DI on 6-12 mths rolling basis post the recent Australian acquisition

Cache Logistics Trust Unhedged on income side. Balance sheet side policy is to adopt natural hedging as much as possible.

Cambridge Industrial Trust Not Applicable, mainly SG assets

Mapletree Industrial Trust Not Applicable, mainly SG assets

Mapletree Logistics 80% of overseas Distributable Income hedged over 12 months, policy to match lease expiry. Balance sheet side policy is to ado pt natural hedging as much as possible.

Sabana REIT Not Applicable, mainly SG assets

SoilbuildBizREIT Not Applicable, mainly SG assets

Office REITs

CapitaCommercial Trust Not Applicable, mainly SG assets

Frasers Comm Hedge 100% on 6-9month rolling basis

Keppel REIT 50-70% hedge on average for full year, 90% hedge on 3-6 month rolling basis. Adopt natural hedging as much as possible on balance sheet side.

Suntec REIT Hedge on ad hoc basis. Balance sheet side policy is to adopt natural hedging as much as possible.

Retail REITs

CapitaMall Trust Not Applicable, mainly SG assets

CapitaRetail China Trust Unhedged RMB income. Balance sheet hedged using non- deliverable forwards in SGD

Fortune REIT No hedging policy for Distributable Income. All HKD-denominated only loans are hedged using forwards

Frasers Centrepoint Trust Not Applicable, mainly SG assets

Lippo Malls Retail Trust 70% of Indonesian Income hedged for 8 quarters as of Feb 15. Balance sheet hedged through Cross Currency Swaps

Mapletree Commercial Trust Not Applicable, mainly SG assets

MapletreeGCC 60% of distributable income hedged. Balance sheet policy to adopt natural hedging as much as possible

SPHREIT Not Applicable, mainly SG assets

Starhill Global REIT Hedge 50% of MYR income. Balance sheet policy to adopt natural hedging as much as possible

30

Leveling The Playing Field: Gearing, Hedging, Volatility

Initial Yield Gearing Hedge Hedged Observed Adjusted Pickup in Share Adjusted

Company Price Yield Pickup Adjusted Costs Prob Adj Upside to Upside to Adjusted Px Upside to

Name 5-Oct-16 Yields Yield Fair Yield Fair Yield upside Volatility Volatility

(%) (%) (%) (%) (%) (%) (%) ppt ppt (x)

Hospitality REITs

AscottREIT 1.145 7.37 0.23 7.60 (0.29) 7.89 19.7 28.1 8.5 6.9 4.1

CDL HTrust 1.39 6.78 0.35 7.13 (0.04) 7.16 11.5 17.9 6.3 18.2 1.0

Far East HTrust 0.615 6.99 0.54 7.53 - 7.53 9.8 18.3 8.5 9.2 2.0

Frasers HTrust 0.7 7.67 0.32 7.99 (0.47) 8.46 15.7 27.7 12.0 5.8 4.8

OUE HT 0.685 7.15 0.44 7.59 - 7.59 7.1 13.6 6.6 8.4 1.6

Industrial REITs

AIMSAMPIReit 1.42 8.17 0.44 8.61 (0.01) 8.61 14.1 20.3 6.2 6.0 3.4

Ascendasreit 2.48 6.61 0.34 6.95 0.03 6.92 14.5 19.8 5.3 10.9 1.8

Cambridge 0.55 8.18 0.40 8.59 - 8.59 6.4 11.6 5.3 7.1 1.6

CACHE 0.88 9.14 0.23 9.37 0.00 9.36 27.3 30.4 3.1 13.5 2.3

Keppel DC Reit 1.22 5.82 0.65 6.47 (1.21) 7.68 3.7 36.8 33.1 6.3 5.8

MapletreeInd 1.74 6.59 0.73 7.31 - 7.31 (2.3) 8.5 10.8 8.9 1.0

MapletreeLog 1.06 6.95 0.71 7.67 (0.33) 8.00 20.8 38.9 18.1 9.5 4.1

Sabana REIT 0.53 11.55 0.24 11.79 - 11.79 58.5 61.8 3.3 14.9 4.1

SoilbuildBizREIT 0.715 8.81 0.38 9.19 - 9.19 14.3 19.2 4.9 5.6 3.4

Office REITs

CapitaComm 1.625 6.22 0.34 6.55 - 6.55 18.8 25.2 6.4 15.9 1.6

Frasers Comm 1.425 6.95 0.18 7.12 (0.13) 7.25 3.6 8.1 4.5 10.0 0.8

Kep REIT 1.135 5.78 0.12 5.90 (0.05) 5.95 15.4 18.8 3.3 11.2 1.7

SuntecReit 1.75 5.81 0.27 6.09 (0.03) 6.11 8.6 14.2 5.6 13.4 1.1

Retail REITs

CapitaMall 2.13 5.19 0.25 5.44 - 5.44 2.3 7.2 4.9 10.4 0.7

CapitaRChina 1.615 7.18 0.74 7.92 1.32 6.61 0.3 (7.7) (8.0) 11.1 (0.7)

FrasersCT 2.13 5.56 0.58 6.14 - 6.14 10.8 22.4 11.6 9.2 2.4

MapletreeCom 1.57 5.48 0.23 5.70 - 5.70 3.5 7.7 4.3 9.9 0.8

MapletreeGCC 1.1 6.73 0.23 6.95 (0.09) 7.04 1.4 6.1 4.7 6.6 0.9

SPHREIT 1 5.70 0.55 6.25 - 6.25 2.7 12.6 9.9 5.4 2.3

Starhill Gbl 0.825 6.47 0.43 6.91 0.28 6.63 21.2 24.1 2.9 4.2 5.7

GEARING EFFECT HEDGING EFFECT VOLATILITY EFFECT

31

REITs’ Geographic Diversification

Singapore China South Korea Hong Kong Japan Vietnam Malay sia Philippines Australia Indonesia Europe New Zealand Maldiv es India Total

A-REIT 87% 2% 0% 0% 0% 0% 0% 0% 11% 0% 0.0% 0% 0% 0% 100%

Ascott Residence Trust 15% 20% 0% 0% 15% 8% 2% 4% 3% 3% 31% 0% 0% 0% 100%

Cache Logistics Trust 91% 1% 0% 0% 0% 0% 0% 0% 8% 0% 0% 0% 0% 0% 100%

CapitaCommercial Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

CapitaMall Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

CDL Hospitality Trust 71% 0% 0% 0% 3% 0% 0% 0% 9% 0% 5% 4% 8% 0% 100%

Frasers Centrepoint Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Frasers Hospitality Trust 45% 0% 0% 0% 7% 0% 9% 0% 22% 0% 17% 0% 0% 0% 100%

Keppel REIT 88% 0% 0% 0% 0% 0% 0% 0% 12% 0% 0% 0% 0% 0% 100%

Mapletree Industrial Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Mapletree Logistics 39% 7% 8% 22% 20% 0% 4% 0% 0% 0% 0% 0% 0% 0% 100%

Parkw ay Life REIT 66.3% 0.0% 0.0% 0.0% 33.1% 0.0% 0.5% 0.0% 0.0% 0.0% 0% 0.0% 0% 0% 100%

Sabana REIT 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Starhill Global REIT 66% 2% 0% 0% 3% 0% 13% 0% 16% 0% 0% 0% 0% 0% 100%

Suntec REIT 95% 0% 0% 0% 0% 0% 0% 0% 5% 0% 0% 0% 0% 0% 100%

Far East Hospitality 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Cambridge Industrial Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

AIMS ASP Capital Industrial REIT 86% 0% 0% 0% 0% 0% 0% 0% 14% 0% 0% 0% 0% 0% 100%

Ascendas Hospitality Trust 23% 9% 0% 0% 22% 0% 0% 0% 46% 0% 0% 0% 0% 0% 100%

Mapletree Commercial Trust 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

First REIT 3% 0% 1% 0% 0% 0% 0% 0% 0% 96% 0% 0% 0% 0% 100%

Lippo Malls Indonesia Retail Trust 0% 0% 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 100%

CapitaRetail China Trust 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Fortune REIT 0% 0% 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

MapletreeGCC 0% 29% 0% 71% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

OUE HT 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

SoilbuildBizREIT 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Viv a Ind Tr 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

Frasers Comm 60% 0% 0% 0% 0% 0% 0% 0% 40% 0% 0% 0% 0% 0% 100%

SPHREIT 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%

32

OVERWEIGHT On Property & REITs

• Prefer diversified, deep value developers and REITs with exposure to

the Business Park and Hospitality segments. Top picks – CapitaLand,

City Developments, AREIT, FLT, and CCT.

• REITs – Upcycle yield spreads indicate 23% upside potential.

Preferred picks: AREIT, FLT, CCT and FHT. - Regionally, Singapore’s yield spreads (at 3.91%) remain the most attractive.

- Prefer REITs with exposure to Business Park space.

- Fixed-rate Debt And Longer Maturities Mitigate Interest Impact.

• Developers – Prefer plays that are well-diversified, have strong

balance sheets and offer deep value. Preferred picks: CapitaLand and

City Developments. - Silver Lining in Supply

- P/B analysis indicates attractive upside potential of 206% vs downside risk of

39%.

- Supply-side led shift in fundamentals beyond 2017

33

Residential: Silver Lining in Supply


Expect Fundamental Improvement in Private Residential Market (Ex-EC)

Total Unsold Private Residential Market Inventory


• Expect overall private housing

vacancy to peak at 11.5% in 2017

before fundamentals begin

improving from 2018 (11.5%

vacancy) to 2020 (10.1%

vacancy).

• Underpinned by tapering private

residential supply. Our forecast

incorporates muted residential

demand of about 8,200 units p.a.

from 2015 to 2020, with

conservative population growth

estimates (1.2% CAGR).

• As of 4Q16, unsold inventory

(including completed units) of

28,557 units was near trough

levels (historic low of 27,820 units

in 1Q16), based on URA data

stretching back to 1999.

0.0%

5.0%

10.0%

15.0%

0

5,000

10,000

15,000

20,000

25,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F 2018F 2019F 2020F

Demand Supply Vacancy

34

Residential: Real Fundamental turn in 2018

Source: URA,CEIC, UOB Kay Hian

Total Supply of Private Residential Projects in the Pipeline

Overall supply

Source: MND

Outlook:

•Increased property stamp duties in Hong Kong to dim

expectations of easing property cooling measures in

Singapore, with the authorities expected to maintain

measures to mitigate excess foreign capital inflow

•Capital values to remain under pressure on lacklustre rental

market, as influx of foreigners show steady decline

•Property prices to fall 15-20% yoy from the peak in 2013.

•Bottoming out in private home prices to hinge on rent

stabilisation

•Watch out for signs of policy easing on immigration, which

could likely happen in 2018

Key Trends:

•Price decline slowing, nascent signs of pickup in high end

segment.

•Developers slashing prices and offering creative schemes to

move inventory.

•Rental market remains subdued due to declining foreign

population growth.

35

OVERWEIGHT On Developers

• Developers are deep in value trading at 0.6x SD below the average historical

discount to RNAV of about 15% (GFC:-1.59SD, AFC: -2.21SD).

• Prefer CapitaLand and City Developments.

Developers’ RNAV Discount

Source: Datastream, UOB Kay Hian

Peer Comparison


Price Target Upside/ Market Curr Fwd Curr Fwd Book Price/ RNAV Fwd Company Ticker Rec 21 Apr 17 Price (Downside) Cap. PE PE Yield Yield NAV ps Book ps ROE Gearing (S$) (S$) to TP (%) (US$m) (x) (x) (%) (%) (S$) (x) (S$) (%) (%)

CapitaLand CAPL SP BUY 3.63 4.30 18.5 15,417 23.3 23.9 2.2 2.2 4.15 0.87 5.06 3.9 41.4

CityDev CIT SP BUY 10.28 11.40 10.9 9,348 16.2 16.1 1.6 1.6 10.22 1.01 12.95 5.7 16.3

GLP GLP SP HOLD 2.86 2.50 (12.6) 13,405 35.6 33.9 2.1 2.1 2.57 1.11 3.06 3.3 26.6

Ho Bee Land HOBEE SP BUY 2.31 3.02 30.7 1,538 16.6 13.9 1.7 1.7 4.16 0.56 3.77 3.7 43.9

Wing Tai WINGT SP BUY 1.825 2.54 39.2 1,412 22.6 19.2 3.3 3.3 4.09 0.45 3.39 2.4 3.3

36

Developers: Attractive Rewards vs Risk Proposition

• Peak/trough P/B multiples in past cycles suggest developers offer upside potential of

206% vs downside risk of 39%.

• Prefer deep value and diversified developers: CapitaLand and City Developments.

Private Property Index vs Developers Index

Source: Bloomberg

P/B Valuation

* Average of Peak monthly P/B's in past three cycles, **Average of peak monthly P/B's in the past two cycles,

Source: UOB Kay Hian

UpCycle DownCycle Upside Price @ BV ps Current LT Avg Upside Peak Avg Upside Peak Avg Downside to Downside Company Ticker 21 Apr 17 (S$) P/B P/B to Curr P/B P/B* to Curr P/B P/B** to Curr P/B Ratio (S$) (x) (x) (%) (x) (%) (x) (%) (%)

CapitaLand CAPL SP 3.63 4.15 0.87 1.15 31.3 2.15 145.6 0.43 (50.2) 2.9

CityDev CIT SP 10.28 10.22 1.01 2.01 100.3 2.71 169.1 0.76 (24.0) 7.0

Ho Bee Land HOBEE SP 2.31 4.16 0.56 0.84 50.8 2.22 299.8 0.32 (43.1) 7.0

Wing Tai WINGT SP 1.825 4.09 0.45 0.92 106.0 1.38 208.3 0.27 (38.9) 5.4

Average 0.72 1.23 72.1 2.11 205.7 0.45 (39.1)

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