Singapore Industry Focus Industrial REITs Industry Focus Industrial REITs Page 2 Hewlett Packard...

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ed-CK / sa: JC Remain or Exit New Hewlett Packard (HP) building to rock the industrial market; MINT will be the prime beneficiary Downside risk from FCOT if HP vacates but opportunity to embark on an AEI will be a positive Boost to MINT but this is likely to be priced in Maintain BUY on FCOT (S$1.49) and AREIT (S$2.55) HP rocks the industrial market. The latest built-to-suit (BTS) property along 1160 & 1200 Depot Road anchored by Hewlett Packard (HP) is expected to be a major industry shaker when it completes in end-2016/1H17. With a total GFA of close to 824,500 sqft, the new building represents one of the largest industrial leasing deals in recent times. HP currently occupies an estimated 2.3m sqft of space across three main locations in Singapore, (1) Alexandra Technopark, (2) Tuas, and (3) Depot Road. Committing close to 20 years for the new building, we believe that HP is likely to consolidate part of its operations in Singapore to the new property in order to improve operational efficiency and optimise its real estate footprint in Singapore. While it is still not clear which existing buildings that HP will vacate from, we believe that properties nearest to the new integrated facility at Depot Road might be at risk of non-renewal. Certain properties located near the new integrated facility include properties owned by AREIT (<1% of GRI), FCOT (17% of GRI) and United Engineers’ (UE). MINT the prime beneficiary post consolidation; impact likely priced in (HOLD.TP S$1.81). The contribution from new HP facility (c.9% of FY19F top-line) will be timely just when the REIT is expected to face downside pressures to income given the weak industrial outlook. Completed in two phases, we expect an 8% jump in FY19F DPU (March year end) once the full contribution from HP kicks in. The initial contribution starts from 1QFY18F. Nevertheless, given the recent share price rally, we believe the boost from HP has largely been priced in and recommend investors look to re-enter on a pull back. TP is raised to S$1.81 on roll-forward valuations. Impact on FCOT from loss of HP as tenant is overblown, FCOT (BUY, TP S$1.49). Being an anchor tenant at Alexandra Technopark (ATP), we estimate that HP forms c.17% of FCOT’s income. While a scenario of non-renewal of partial/all HP lease at ATP at end- Sep/Nov 17, could potentially result in a 20% downside to our FY18F DPU, it will allow the REIT to undertake an asset enhancement initiative (AEI) to help close the 10-30% discount in rents to properties near ATP. Assuming an AEI, our base case of HP partially moving out of ATP and a tweak in the proportion of management fee units, FCOT should be able to maintain a flattish DPU profile but still offer an attractive forward yield of 7.4-7.6% which is above its mean yield of 7%. We believe fears over the loss of HP are overblown priced in. We reiterate our BUY call with a revised TP of S$1.49. Ascendas REIT (BUY, TP S$2.55). The contribution from HP building is <1% of topline and impact marginal. We believe that the lease is likely to be renewed given its location within the new Depot Road cluster. STI : 2,901.82 Analyst Mervin SONG CFA +65 6682 3715 Derek TAN +65 6682 3716 [email protected] [email protected] STOCKS Source: DBS Bank New HP building under construction by MINT Source: MINT, DBS Bank Current and future exposure to HP REIT % of GRI AREIT <1% FCOT 17% MINT 9% UE n/a Source: Various REITS, DBS estimates DBS Group Research . Equity 12 Jul 2016 Singapore Industry Focus Industrial REITs Refer to important disclosures at the end of this report Price Mkt Cap Target Price Performance (%) S$ US$m S$ 3 mth 12 mth Rating Ascendas REIT 2.48 4,908 2.55 0.8 0.5 BUY Frasers Commercial 1.33 782 1.49 1.9 (13.5) BUY Mapletree Industrial 1.785 2,379 1.81 10.0 14.7 HOLD Page 1

Transcript of Singapore Industry Focus Industrial REITs Industry Focus Industrial REITs Page 2 Hewlett Packard...

ed-CK / sa: JC

Remain or Exit

New Hewlett Packard (HP) building to rock the industrial market; MINT will be the prime beneficiary

Downside risk from FCOT if HP vacates but opportunity to embark on an AEI will be a positive

Boost to MINT but this is likely to be priced in

Maintain BUY on FCOT (S$1.49) and AREIT (S$2.55)

HP rocks the industrial market. The latest built-to-suit (BTS) property along 1160 & 1200 Depot Road anchored by Hewlett Packard (HP) is expected to be a major industry shaker when it completes in end-2016/1H17. With a total GFA of close to 824,500 sqft, the new building represents one of the largest industrial leasing deals in recent times. HP currently occupies an estimated 2.3m sqft of space across three main locations in Singapore, (1) Alexandra Technopark, (2) Tuas, and (3) Depot Road. Committing close to 20 years for the new building, we believe that HP is likely to consolidate part of its operations in Singapore to the new property in order to improve operational efficiency and optimise its real estate footprint in Singapore. While it is still not clear which existing buildings that HP will vacate from, we believe that properties nearest to the new integrated facility at Depot Road might be at risk of non-renewal. Certain properties located near the new integrated facility include properties owned by AREIT (<1% of GRI), FCOT (17% of GRI) and United Engineers’ (UE). MINT the prime beneficiary post consolidation; impact likely priced in (HOLD.TP S$1.81). The contribution from new HP facility (c.9% of FY19F top-line) will be timely just when the REIT is expected to face downside pressures to income given the weak industrial outlook. Completed in two phases, we expect an 8% jump in FY19F DPU (March year end) once the full contribution from HP kicks in. The initial contribution starts from 1QFY18F. Nevertheless, given the recent share price rally, we believe the boost from HP has largely been priced in and recommend investors look to re-enter on a pull back. TP is raised to S$1.81 on roll-forward valuations. Impact on FCOT from loss of HP as tenant is overblown, FCOT (BUY, TP S$1.49). Being an anchor tenant at Alexandra Technopark (ATP), we estimate that HP forms c.17% of FCOT’s income. While a scenario of non-renewal of partial/all HP lease at ATP at end- Sep/Nov 17, could potentially result in a 20% downside to our FY18F DPU, it will allow the REIT to undertake an asset enhancement initiative (AEI) to help close the 10-30% discount in rents to properties near ATP. Assuming an AEI, our base case of HP partially moving out of ATP and a tweak in the proportion of management fee units, FCOT should be able to maintain a flattish DPU profile but still offer an attractive forward yield of 7.4-7.6% which is above its mean yield of 7%. We believe fears over the loss of HP are overblown priced in. We reiterate our BUY call with a revised TP of S$1.49. Ascendas REIT (BUY, TP S$2.55). The contribution from HP building is <1% of topline and impact marginal. We believe that the lease is likely to be renewed given its location within the new Depot Road cluster.

STI : 2,901.82

Analyst Mervin SONG CFA +65 6682 3715 Derek TAN +65 6682 3716 [email protected] [email protected]

STOCKS

Source: DBS Bank

New HP building under construction by MINT

Source: MINT, DBS Bank

Current and future exposure to HP

REIT % of GRI

AREIT <1%

FCOT 17%

MINT 9%

UE n/a

Source: Various REITS, DBS estimates

DBS Group Research . Equity 12 Jul 2016

Singapore Industry Focus

Industrial REITs

Refer to important disclosures at the end of this report

Price Mkt Cap Target Price Performance (%)

S$ US$m S$ 3 mth 12 mth Rating

Ascendas REIT 2.48 4,908 2.55 0.8 0.5 BUY Frasers Commercial 1.33 782 1.49 1.9 (13.5) BUY Mapletree Industrial 1.785 2,379 1.81 10.0 14.7 HOLD

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Industry Focus

Industrial REITs

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Hewlett Packard (HP) new hi-tech building in Depot Road to rock the Industrial scene

HP currently located in three main locations in Singapore. The latest built-to-suit (BTS) property along 1160 & 1200 Depot Road built by MINT and anchored by Hewlett Packard (HP) is expected to be a major industry shaker when it completes in end-2016/1H17. With a total GFA of close to 824,500, the new building represents one of the largest industrial leasing deals in recent times. Based on press reports and HP’s website, HP Inc and HP Enterprise are located across three main locations in Singapore. The group currently occupies an estimated 2.3m sqft of space across three main locations in Singapore, (1) Alexandra Technopark, (2) Tuas, and (3) Depot Road. Unclear whether new facilities being built by MINT to consolidate operations or for expansion plans. At this stage, it is unclear whether the new facilities at 1160 & 1200 Depot Road were intended to be used to help consolidate HP operations that are spread across Singapore or to cater for HP

demerger’s expansion plans. In addition, MINT has not disclosed the exact specifications for the new facilities or whether HP will do any light assembly/manufacturing. The two buildings are expected to be completed in two phases over 2H16 and 1H17. However, given the close to 20-year lease commitment (initial lease term of 10.5 years with two five-year options) by HP before its demerger into two entities HP Inc (printers, personal computers) and HP Enterprise (servers, storage, services) on the new building, we believe that some form of space optimisation is likely. REITS that may be impacted by potential changes in HP’s leasing requirements include AREIT (<1% of GRI), FCOT (17% of GRI) and United Engineers’ (UE) properties.

Existing properties that HP is located in and new build-to-suit building

Property Owner of Property GFA (sqft) NLA (sqft) % of existing NLA Existing Buildings 138 Depot Road AREIT 318,891 285,082 13% 1150 Depot Road (1) n/a 594,326 505,177 23% Depot Road cluster 913,217 790,259 36% 3 Tuas Link 4 (2) n/a 264,144 224,522 10% 4 Tuas West Avenue (3) n/a 184,901 157,166 7% Tuas Cluster 449,045 381,688 17% Alexandra TechnoPark – HP Inc FCOT 318,978 318,978 15% Alexandra TechnoPark – HP Enterprise FCOT 191,847 191,847 9% 450 Alexandra Road UE 155,932 155,932 7% 452 Alexandra Road UE 345,101 345,101 16% Alexandra TechnoPark Cluster 1,011,858 1,011,858 46% Fusionopolis - HP Labs n/a n/a n/a Total Estimated existing Footprint 2,374,120 2,183,805 New Built-to-Suit Building 1160 & 1200 Depot Road MINT 824,500 700,825 32% (1) GFA based on plot ratio of 3 and plot area of 18,405 sqm. NLA assuming 85% of GFA (2) GFA based on plot ratio of 2. Plot area not available but assume similar size to 4 Tuas West Avenue. NLA assuming 85% of GFA (3) GFA based on plot ratio of 1.4 and plot area of 12,270 sqm. NLA assuming 85% of GFA Source: AREIT, FCOT, MINT, Singapore Land Authority, press reports, DBS Bank estimates

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Industry Focus

Industrial REITs

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Locations of HP in various locations in Singapore (not to scale)

Alexandra TechnoPark cluster

Tuas cluster

Depot Road cluster

Locations in Singapore

Source: Onemap.sg, streetdirectory.com, DBS Bank

New HP building under construction

3 Tuas Link 4 & 4 Tuas West Avenue

138 Depot Road & 1150 Depot Road

Alexandra Technopark

Tuas Cluster

Depot Road Cluster

450 & 452 Alexandra Road

Alexandra Cluster

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Industry Focus

Industrial REITs

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Impact on Frasers Commercial Trust (FCOT)

Concerns over expiry of HP leases at Alexandra Technopark. Investors have been concerned over the expiry of the HP Inc and HP Enterprise leases at Alexandra Technopark at end- Sep/Nov-17 which combined represent c.17.2% of FCOT’s group gross rental income. These concerns have risen over fears that the two HP entities would move to the two build-to- suit Hi-Tech buildings with total GFA of 76,599 sqm (GFA) at 1160 & 1200 Depot Road which Mapletree Industrial Trust (MINT) is in the process of constructing. Probability of HP Enterprise moving out of Alexandra Technopark most likely in our view. While we are not privy to the exact lease terms for the various properties HP is located in, we believe the most likely scenario would be for HP Enterprise to consolidate its operations at the new facility built by HP Enterprise. This is due to the following factors: 1. HP sold its properties (450 Alexandra Road and 453

Alexandra Road) to United Engineers in 2013 on a sale and lease back arrangement. The lease at 450 & 453 Alexandra Road (mainly occupied by HP Enterprise) is up for renewal 2017/2018, close to when the construction of 1160 & 1200 Depot Road is completed.

2. If a part of HP Enterprise were to move from 450 Alexandra Road, it may be more efficient for HP Enterprise at Alexandra Technopark to also relocate to 1160 & 1200 Depot Road

3. Based on press reports, HP invested in new facilities for its printing business at its Tuas property recently, so we believe there may less incentive to relocate HP Inc’s operations to 1160 & 1200 Depot Road.

Detailed in the table overleaf are other potential scenarios, our thoughts on the probability of such scenarios occurring and potential impact on FCOT’s DPU. But Alexandra Technopark’s favourable location should aid the sourcing of replacement tenant. While FCOT in our view would take a short-term hit should HP Inc or HP Enterprise move out, we believe the likelihood of FCOT finding a replacement tenant is high. This is due the proximity of the property to the CBD (10-20 minutes’ drive) and affordable rents (mid-S$3 to mid- S$4 psf) in comparison to the nearby Mapletree Business City (c.S$6) and CBD (Grade A of S$9.90). In addition, we understand there have been prospective tenants who have wanted to base themselves at Alexandra Technopark but FCOT has not been able to cater to these potential tenants due to the lack of available space. Thus, we believe any vacated space would be filled up within a year without any significant incentives given by FCOT.

Alexandra Technopark

Source: Company, DBS Bank A potential blessing in disguise. Should HP Inc or HP Enterprise move out of Alexandra Technopark, this may be a potential blessing in disguise as it may provide FCOT the opportunity to undertake an AEI following which it can help close the rental gap to Mapletree Business City. Based on our assumption that passing rents at Alexandra Technopark will average in the low S$4 per sqft range in FY18 and FCOT intends to increase rents by 10% to mid S$4 per sqft level post AEI, we estimate FCOT could spend around S$25m based on a 10% IRR. Potential cut in DPU largely priced in. Currently, FCOT’s forward yield is elevated ranging from mid to high 7% level and close to +1SD. We believe this is reflective of investors anticipating a potential cut in DPU should HP Inc and HP Enterprise vacate from Alexendra Technopark. However, we believe a large proportion of this risk has been priced in as under our base case scenario of HP Enterprise moving out, the cut in our DPU estimates will still result in a 6.8% yield which is close to FCOT’s mean yield of 7% since 2010. Under our new earnings estimates for FCOT which assumes (1) HP Enterprise moving out, (2) FCOT conducting an AEI and (3) adjustment of the percentage of management fees in units from around one third to 100, FCOT will offer an attractive forward yield of 7.3-7.5%. Historical yield chart since 2010

Source: Thomson Reuters, DBS Bank

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2010 2011 2012 2013 2014 2015 2016

FCOT Yield Mean -1 SD

+1 SD -2 SD +2 SD

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Industry Focus

Industrial REITs

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Scenarios potentially under consideration

No. Scenario Rationale Proportion of NLA taken up at 1160 & 1200 Depot Road

Likelihood

1 HP Inc and HP Enterprise both move from Alexandra Technopark to 1160 & 1200 Depot Road

Move to newer facilities with comparable rent

510,825 sqft out of 700,825 sqft

Moderate

2 HP Inc and HP Enterprise both stay at Alexandra Technopark with operations from Tuas Cluster moving to 1160 & 1200 Depot Road

Consolidates all operations nearby. Alexandra Technopark and Depot Road properties are within three to five minutes drive of each other

381,688 sqft out of 700,825 sqft

Low/Moderate as according to press reports HP recently expanded its Indigo Ink Manufacturing facility at Tuas

3 HP Enterprise stays at Alexandra Technopark. HP Inc at Alexandra Technopark and operations from Tuas Cluster move to 1160 & 1200 Depot Road

Consolidates all of HP Inc’s operations at Depot Road. According to press reports properties at Tuas Cluster mainly relate to HP’s Indigo Ink manufacturing operations

700,666 sqft out of 700,825 sqft

Moderate as according to press reports HP recently expanded its Indigo Ink Manufacturing facility at Tuas

4 HP Inc and HP Enterprise both stay at Alexandra Technopark with operations at 1150 Depot Road moving to 1160 & 1200 Depot Road

Significant rental incentives provided by FCOT for HP Inc and HP Enterprise to stay at Alexandra Technopark and operations from 1150 Depot Road benefit from newer facilities

505,177 sqft out of 700,825 sqft

Low as HP may lose its clustering effect if its operations move from 1150 Depot Road and its operations remain at 138 Depot Road. We understand 138 and 1150 Depot Road are connected by an elevated walkway

5 HP Enterprise moves from Alexandra Technopark and HP moves from 450 and 452 Alexandra Road to 1160 & 1200 Depot Road

No incentive to move from Tuas given newly completed printing manufacturing facilities and consolidation of HP Enterprise business into new building

692,880 sqft out of 700,825 sqft

Moderate/High given benefits from consolidating Enterprise operations together. Also, leases for 450 and 452 Alexendra Road expire in 2016 and 2018, around the same time as completion of the new buildings at 1160 & 1200

Source: Press reports, DBS Bank

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Industry Focus

Industrial REITs

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Potential financial Impact on FCOT under different scenarios

Scenario New FY16F DPU (Scts)

% change from existing estimates

New FY17F DPU (Scts)

% change from existing estimates

New FY18F DPU (Scts)

% change from existing estimates

New FY19F DPU (Scts)

% change from existing estimates

New FY20F DPU (Scts)

% change from existing estimates

Existing estimates 9.92 0% 9.98 0% 9.91 0% 9.92 0% 10.43 0%

HP Inc and HP Enterprise move out and no replacement tenant for 12 months

9.92 0% 9.98 0% 7.92 -20% 9.35 -6% 10.42 0%

HP Inc and moves out and no replacement tenant for 12 months but HP Enterprise stays

9.92 0% 9.98 0% 8.65 -13% 9.51 -4% 10.42 0%

HP Enterprise moves out and no replacement for 12 months but HP Inc stays

9.92 0% 9.98 0% 9.03 -9% 9.71 -2% 10.42 0%

HP Inc and HP Enterprise move out and FCOT finds replacement tenant

9.92 0% 9.98 0% 9.91 0% 9.92 0% 10.43 0%

HP Inc and HP Enterprise move out and FCOT finds replacement tenant at same rents but with six months rent-free

9.92 0% 9.98 0% 8.78 -11% 9.92 0% 10.42 0%

HP Inc and HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 months downtime

9.92 0% 9.98 0% 7.90 -20% 9.62 -3% 10.79 3%

New FCOT estimates – HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 months downtime. Adjust percentage of management fees in units from around one third to 100%

9.92 0% 9.98 0% 9.75 -2% 9.86 -1% 10.70 3%

Source: DBS Bank

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Industry Focus

Industrial REITs

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Potential distribution yields under different scenarios, assuming FCOT share price of S$1.33

Scenario FY16F FY17F FY18F FY19F FY20F Existing estimates 7.5% 7.5% 7.4% 7.5% 7.8% HP Inc and HP Enterprise move out and no replacement tenant for 12 months

7.5% 7.5% 6.0% 7.0% 7.8%

HP Inc and moves out and no replacement tenant for 12 months but HP Enterprise stays

7.5% 7.5% 6.5% 7.2% 7.8%

HP Enterprise moves out and no replacement for 12 months but HP Inc stays

7.5% 7.5% 6.8% 7.3% 7.8%

HP Inc and HP Enterprise move out and FCOT finds replacement tenant

7.5% 7.5% 7.4% 7.5% 7.8%

HP Inc and HP Enterprise move out and FCOT finds replacement tenant at same rents but with six months rent-free

7.5% 7.5% 6.6% 7.5% 7.8%

HP Inc and HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 months downtime

7.5% 7.5% 5.9% 7.2% 8.1%

New FCOT estimates – HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 months downtime. Adjust percentage of management fees in units from around one third to 100%

7.5% 7.5% 7.3% 7.4% 8.0%

Source: DBS Bank .

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Industry Focus

Industrial REITs

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Impact on Mapletree Industrial Trust (MINT)

MINT the prime beneficiary. The contribution from new HP facility (c.9% of FY19F top-line) will be timely as contribution will more than compensate for the expected downside to income given the weak operational outlook. Completed in two phases, we project income contribution from 1QFY18F onwards and full contribution to kick in from FY19F. Over the next three years, we project income to grow at a CAGR of 2%, backloaded from FY19F.

DPU growth to accelerate by 7% in FY19F Yield at above + 1 SD

Source: DBS Bank

11.15

10.94

11.09

11.89

16A 17F 18F 19F

DPU (Scts)

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

2010 2011 2012 2013 2014 2015

MINT Yield Mean Yield -1 SD +1 SD

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ASIAN INSIGHTS VICKERS SECURITIES ed: TH / sa: YM

BUY Last Traded Price: S$2.48 (STI : 2,901.82) Price Target : S$2.55 (3% upside) (Prev S$2.50) Potential Catalyst: Acquisitions Where we differ: Estimates are more conservative Analyst Derek TAN +65 6682 3716 [email protected] Mervin SONG CFA +65 6682 3715 [email protected] Singapore Research Team

Price Relative

Forecasts and Valuation FY Mar (S$ m) 2016A 2017F 2018F 2019F Gross Revenue 761 808 805 811 Net Property Inc 534 577 586 592 Total Return 349 399 412 413 Distribution Inc 378 408 423 425 EPU (S cts) 13.9 14.6 14.7 14.7 EPU Gth (%) (5) 5 0 0 DPU (S cts) 15.4 15.0 15.1 15.1 DPU Gth (%) 5 (2) 1 0 NAV per shr (S cts) 207 207 206 205 PE (X) 17.8 16.9 16.9 16.8 Distribution Yield (%) 6.2 6.0 6.1 6.1 P/NAV (x) 1.2 1.2 1.2 1.2 Aggregate Leverage (%) 37.1 33.0 33.3 33.6 ROAE (%) 6.7 7.1 7.1 7.2 Distn. Inc Chng (%): - 1.0 1.2 Consensus DPU (S cts): 15.8 16.0 16.5 Other Broker Recs: B: 14 S: 0 H: 9

Source of all data: Company, DBS Bank, Bloomberg Finance L.P

Powering ahead

Maintain BUY, TP S$2.55. We continue to believe A-REIT will deliver stable returns, supported by a prospective yield of 6.0-6.1%. The Manager, under the new CEO, Mr Chia Nam Toon, will continue to strive to deliver growth and value through a disciplined approach. Our numbers are tweaked slightly as we update them to reflect recent divestments in China. Modest rental growth but expected to remain positive despite market headwinds. A-REIT reported a 7.0% rise in average rentals during renewals in FY16 (5.1% in 4Q16) which in our view is a good showing despite ongoing headwinds. The rise came mainly from the Business & Science Park Segment (+6.6% in 4Q16/+9.6% in FY16) and Logistics & Distribution Centres (+7.4% in 4Q16/6.5% in FY16). Rental reversionary outlook is likely to turn more muted given closing gap between market and passing rental levels. Acquisitions to drive earnings. A-REIT has acquired assets worth more than S$1bn in Singapore and Australia in FY16F and is searching for more acquisitions in its existing core markets, to complement a moderating growth profile. The medium-term target is to have overseas assets form c.30% of A-REIT’s revenues. In addition, A-REIT has a visible pipeline of over S$1bn worth of business park assets under the Sponsor’s balance sheet which can be acquired in the medium term. Valuation:

Our DCF-based TP is tweaked to S$2.55 as we account for the recent divestments in China. Maintain BUY given total returns of >10%. Key Risks to Our View: Interest rate risk. An increase in lending rates will negatively impact distributions. However, A-REIT's strategy has been to actively manage its exposure and it currently has c.70% of its interest cost hedged into fixed rates. At A Glance Issued Capital (m shrs) 2,674 Mkt. Cap (S$m/US$m) 6,633 / 4,908 Major Shareholders (%) Ascendas Pte Ltd 20.0 Blackrock 5.4 Mondrian Investment 5.1

Free Float (%) 69.5 3m Avg. Daily Val (US$m) 18.4 ICB Industry : Real Estate / Real Estate Investment Trust

DBS Group Research . Equity 12 Jul 2016

Singapore Company Guide

Ascendas REIT Version 3 | Bloomberg: AREIT SP | Reuters: AEMN.SI Refer to important disclosures at the end of this report

84

104

124

144

164

184

204

1.9

2.1

2.3

2.5

2.7

2.9

3.1

Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Relative IndexS$

Ascendas REIT (LHS) Relative STI INDEX (RHS)

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ASIAN INSIGHTS VICKERS SECURITIES Page 2

Company Guide

Ascendas REIT

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Rebounding occupancy rates. A-REIT’s occupancy rates are stable with portfolio occupancy rate dipping to 87.9% (vs 88.9% in March 2016), mainly due to the non-expiry of a master-lease property in Singapore. For multi-tenanted properties, occupancy rate was 85.4% in 4Q16, a slight dip from 86.3% a quarter before. On average, occupancy rates are higher than the average for industrial properties reported by JTC. Looking ahead, with vacancy rates standing at c.12.1%, we believe that A-REIT will have upside to earnings if the Manager is able to back-fill the unoccupied space, which is not included in our earnings estimates. Modest rental growth but still positive. A-REIT reported a 7.0% rise in average rentals during renewals in FY16 (5.1% in 4Q16) which in our view is a good showing despite ongoing headwinds. The rise came mainly in the Business & Science Park Segment (+6.6% in 4Q16/+9.6% in FY16) and Logistics & Distribution Centres (+7.4% in 4Q16/6.5% in FY16). Looking ahead, A-REIT will be renewing 19.4% of its revenues in FY17F and 20.5% in FY18F which is manageable in our view. In Singapore, close to 21.3% of its Singapore revenues will expire in FY17F (WALE of 3.5 years), and we understand that the passing rents across its portfolio is near market transaction levels, meaning that reversionary outlook is likely to remain flattish. Portfolio occupancy rate declined slightly to 87.9% (vs 88.9% in December 2015) and should remain stable. In Australia, 7.1% of its income will expire in FY17F (WALE of 5.2 years), of which a majority will come from single-tenanted building which we understand will not be renewed. The Manager plans to lease the space on a short-term basis before executing on a longer-term lease with an end-tenant. Portfolio occupancy in Australia remains stable at c.94.7%. For China, occupancy rate has dipped to 51.2% mainly due to the completion of A-REIT Jiashan Logistics Centre which is unoccupied; we understand that 34% of space at the property is under negotiations. Ascendas Z-Link remains 100% taken up while A-REIT City@Jinqiao has a 56.7% occupancy rate. Inorganic growth to drive contributions in Australia and Singapore. A-REIT has regularly embarked on acquisitions and development projects, which have helped the REIT to deliver sustained growth in distributions over time. Given limited opportunities in Singapore and the fragmented market in China, the Manager has looked overseas for higher returns. The Manager remains focused on deepening its presence in the core markets of Singapore, Australia and China, when the opportunity arises.

Net Property Income and Margins (%)

Net Property Income and Margins (%)

Distribution Paid / Net Operating CF

Interest Cover (x)

Source: Company, DBS Bank

65.3%

67.3%

69.3%

71.3%

73.3%

75.3%

77.3%

79.3%

0

100

200

300

400

500

600

2015A 2016A 2017F 2018F 2019F

S$ m

Net Property Income Net Property Income Margin %

62%

64%

66%

68%

70%

72%

74%

103

108

113

118

123

128

133

138

143

148

3Q20

14

4Q20

14

1Q20

15

2Q20

15

3Q20

15

4Q20

15

1Q20

16

2Q20

16

3Q20

16

4Q20

16

Net Property Income Net Property Income Margin %

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

2015A 2016A 2017F 2018F 2019F

(x)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2015A 2016A 2017F 2018F 2019F

(x)

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ASIAN INSIGHTS VICKERS SECURITIES

Page 3

Company Guide

Ascendas REIT

Balance Sheet:

Optimal gearing level of c.37%. A-REIT’s gearing is estimated to dip to 34% (from c.37%) upon the assumed conversion of S$300m of Exchange Collateralized Securities (ECS). This will be at the lower end of management’s comfortable 35-40% range. We believe that there is still capacity for management to utilise its debt headroom for further acquisitions but any significant deals could mean potential issuance of new equity or perpetuals. Well-staggered debt maturity profile. The Manager adopts a prudent interest rate risk management strategy with a weighted average cost of debt of 2.8% with 77.2% hedged. The debt tenure is long at 3.4 years.

Share Price Drivers:

Direction of 10-year long bonds impacts share price. Seen by investors as a key S-REIT proxy, A-REIT’s share price has typically been closely linked to investors’ perception on the direction of the benchmark 10-year bonds. A fall in 10-year bond yields on the back of a delay in Fed hikes is likely to mean a higher share price. Capital recycling strategy. With limited acquisition opportunities in Singapore, A-REIT regularly looks to divest older, lower-yielding properties and re-cycle the capital into asset enhancement exercises (AEI), development projects or acquisitions. The aim is to optimise the portfolio returns and distributions which have a positive impact on share price. Key Risks:

Interest rate risk. Any increase in interest rates will result in higher interest payments, which will reduce income available for distribution and result in lower distribution per unit (DPU) to unitholders. Economic risk. A deterioration in the economic outlook could have a negative impact on industrial rents and occupancies as companies cut back production and require less space; industrial rents have a strong correlation with GDP growth.

Company Background

A-REIT is Singapore’s first and largest listed business space and industrial real estate investment trust. It has a diversified portfolio comprising assets in Singapore, China and Australia. A-REIT is managed by Ascendas Funds Management (S) Limited, a wholly owned subsidiary of the Singapore-based Ascendas Group.

Aggregate Leverage (%)

ROE (%)

Distribution Yield (%)

PB Band (x)

Source: Company, DBS Bank

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2015A 2016A 2017F 2018F 2019F

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2015A 2016A 2017F 2018F 2019F

Avg: 6.1%

+1sd: 6.5%

+2sd: 6.9%

‐1sd: 5.7%

‐2sd: 5.3%

4.3

4.8

5.3

5.8

6.3

6.8

7.3

7.8

2012 2013 2014 2015

(%)

Avg: 1.17x

+1sd: 1.25x

+2sd: 1.33x

‐1sd: 1.09x

‐2sd: 1.01x

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

Jul-12 Jul-13 Jul-14 Jul-15

(x)

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Company Guide

Ascendas REIT

Income Statement (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Gross revenue 673 761 808 805 811 Property expenses (211) (227) (231) (219) (220) Net Property Income 463 534 577 586 592 Other Operating expenses (43.8) (67.4) (50.6) (52.3) (52.4) Other Non Opg (Exp)/Inc 41.7 (5.7) 0.0 0.0 0.0 Net Interest (Exp)/Inc (105) (77.5) (109) (102) (106) Exceptional Gain/(Loss) 2.02 0.0 0.0 0.0 0.0 Net Income 357 383 418 432 433 Tax (6.7) (25.1) (4.2) (4.7) (5.0) Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 (6.6) (15.0) (15.0) (15.0) Net Income After Tax 351 351 399 412 413 Total Return 398 349 399 412 413 Non-tax deductible Items 0.57 26.9 9.52 11.5 11.5 Net Inc available for Dist. 351 378 408 423 425 Growth & Ratio Revenue Gth (%) 9.8 13.0 6.2 (0.4) 0.9 N Property Inc Gth (%) 6.1 15.3 8.2 1.4 1.0 Net Inc Gth (%) 0.0 0.2 13.5 3.2 0.4 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 Net Prop Inc Margins (%) 68.7 70.1 71.5 72.8 72.9 Net Income Margins (%) 52.1 46.2 49.4 51.2 50.9 Dist to revenue (%) 52.1 49.7 50.6 52.6 52.3 Managers & Trustee’s fees 6.5 8.9 6.3 6.5 6.5 ROAE (%) 7.1 6.7 7.1 7.1 7.2 ROA (%) 4.5 3.9 4.1 4.2 4.2 ROCE (%) 5.5 5.0 5.4 5.5 5.6 Int. Cover (x) 4.0 6.0 4.8 5.2 5.1

Source: Company, DBS Bank

Increase due to the full year contribution from the recently acquired properties in Australia

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ASIAN INSIGHTS VICKERS SECURITIES

Page 5

Company Guide

Ascendas REIT

Quarterly / Interim Income Statement (S$m)

FY Mar 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Gross revenue 174 181 183 194 204 Property expenses (56.6) (56.2) (58.8) (51.6) (60.6) Net Property Income 117 124 124 142 143 Other Operating expenses (11.7) (11.0) (12.2) (21.3) (23.1) Other Non Opg (Exp)/Inc 22.5 (13.3) 32.3 3.16 (12.6) Net Interest (Exp)/Inc (36.8) (12.3) (5.3) (22.8) (37.0) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Net Income 91.2 87.7 123 101 70.8 Tax (3.6) (0.4) (0.7) (7.3) (16.7) Minority Interest 0.0 0.0 0.0 0.03 0.0 Net Income after Tax 87.6 87.3 123 93.9 54.1 Total Return 106 91.8 123 93.9 47.3 Non-tax deductible Items (17.2) (0.1) (23.9) 3.02 41.8 Net Inc available for Dist. 89.3 91.6 98.9 96.9 89.1 Growth & Ratio Revenue Gth (%) 1 4 1 6 5 N Property Inc Gth (%) 2 6 0 15 1 Net Inc Gth (%) (5) 0 41 (24) (42) Net Prop Inc Margin (%) 67.4 68.8 67.8 73.4 70.3 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 102.0

Balance Sheet (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Investment Properties 7,868 9,599 9,443 9,473 9,503 Other LT Assets 135 96.2 96.2 96.2 96.2 Cash & ST Invts 41.6 56.2 49.6 53.9 58.9 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 90.1 89.3 94.8 94.4 95.2 Other Current Assets 25.8 35.6 35.6 35.6 35.6 Total Assets 8,160 9,876 9,719 9,753 9,789 ST Debt 286 1,180 1,010 1,040 1,070 Creditor 189 172 183 182 183 Other Current Liab 32.8 43.5 39.8 40.4 40.7 LT Debt 2,442 2,485 2,195 2,205 2,215 Other LT Liabilities 198 199 205 210 216 Unit holders’ funds 5,014 5,797 6,087 6,076 6,064 Minority Interests 0.04 0.02 0.02 0.02 0.02 Total Funds & Liabilities 8,160 9,876 9,719 9,753 9,789 Non-Cash Wkg. Capital (105) (90.6) (92.0) (92.2) (93.2) Net Cash/(Debt) (2,686) (3,608) (3,155) (3,191) (3,226) Ratio Current Ratio (x) 0.3 0.1 0.1 0.1 0.1 Quick Ratio (x) 0.3 0.1 0.1 0.1 0.1 Aggregate Leverage (%) 33.4 37.1 33.0 33.3 33.6 Z-Score (X) 1.3 1.0 1.1 1.1 1.1

Source: Company, DBS Bank

Gearing to remain conservative

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Company Guide

Ascendas REIT

Cash Flow Statement (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Pre-Tax Income 357 383 418 432 433 Dep. & Amort. 0.37 0.18 0.0 0.0 0.0 Tax Paid (2.4) (4.5) (7.9) (4.2) (4.7) Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. (10.2) 11.5 5.09 (0.4) 0.75 Other Operating CF 17.4 (6.6) (15.0) (15.0) (15.0) Net Operating CF 362 384 400 412 414 Net Invt in Properties 0.0 0.0 0.0 0.0 0.0 Other Invts (net) (643) (1,496) 156 (30.0) (30.0) Invts in Assoc. & JV 0.0 0.04 0.0 0.0 0.0 Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0 Other Investing CF 5.50 5.50 5.50 5.50 5.50 Net Investing CF (638) (1,491) 162 (24.5) (24.5) Distribution Paid (261) (442) (408) (423) (425) Chg in Gross Debt 577 1,218 (460) 40.0 40.0 New units issued 0.0 342 300 0.0 0.0 Other Financing CF (68.1) 0.0 0.0 0.0 0.0 Net Financing CF 249 1,118 (568) (383) (385) Currency Adjustments 0.80 (1.7) 0.0 0.0 0.0 Chg in Cash (25.7) 9.56 (6.6) 4.26 5.04 Operating CFPS (S cts) 15.5 14.7 14.5 14.7 14.7 Free CFPS (S cts) 15.1 15.2 14.7 14.7 14.8 Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank

S.No. DateClosing

PriceTarget Price

Rat ing

1: 31 Aug 15 2.23 2.29 HOLD

2: 23 Sep 15 2.24 2.45 BUY

3: 10 Dec 15 2.28 2.57 BUY

4: 14 Dec 15 2.23 2.52 BUY

5: 08 Jan 16 2.25 2.52 BUY

6: 04 Feb 16 2.34 2.52 BUY

7: 18 May 16 2.32 2.50 BUY

8: 10 Jun 16 2.32 2.50 BUY

Note : Share price and Target price are adjusted for corporate actions.

1

2

34

5

67 8

2.02

2.12

2.22

2.32

2.42

2.52

2.62

Jul-15 Nov-15 Mar-16

S$

Net proceeds from China

Page 14

ASIAN INSIGHTS VICKERS SECURITIES ed: CK/ sa: YM

BUY Last Traded Price: S$1.33 (STI : 2,901.82) Price Target: S$1.49 (12% upside) (Prev S$1.47) Potential Catalyst: Better-than-expected reversions and clarity over HP’s tenancy at Alexandra Technopark Where we differ: Forecasts are in line with consensus Analyst Mervin SONG CFA +65 6682 3715 [email protected] Derek TAN +65 6682 3716 [email protected]

What’s New Base case of partial exit of HP as a tenant from

Alexandra Technopark largely priced in

AEI opportunity at Alexandra Technopark to help close 10-30% rental discount to surrounding properties

Raise TP to S$1.49 from S$1.47 following uplift at AEI at Alexandra Technopark

Price Relative

Forecasts and Valuation FY Sep (S$m) 2015A 2016F 2017F 2018F Gross Revenue 142 152 154 150 Net Property Inc 102 113 111 107 Total Return 75.2 67.2 65.8 60.8 Distribution Inc 67.8 78.0 78.7 77.7 EPU (S cts) 9.56 8.54 8.34 7.64 EPU Gth (%) 8 (11) (2) (8) DPU (S cts) 9.71 9.92 9.98 9.75 DPU Gth (%) 15 2 1 (2) NAV per shr (S cts) 154 153 152 149 PE (X) 13.9 15.6 16.0 17.4 Distribution Yield (%) 7.3 7.5 7.5 7.3 P/NAV (x) 0.9 0.9 0.9 0.9 Aggregate Leverage (%) 36.0 36.1 36.2 37.2 ROAE (%) 6.1 5.6 5.5 5.1 Distn. Inc Chng (%): - - (1) Consensus DPU (S cts): 9.9 9.8 9.7 Other Broker Recs: B: 7 S: 0 H: 0

Source of all data: Company, DBS Bank, Bloomberg Finance L.P

Potential headwinds largely priced in Negatives priced in. We maintain our BUY call with a revised TP of S$1.49. FCOT has de-rated over past year due to fears over a downturn in the Singapore office market and concerns over HP Inc and HP Enterprise leaving (c.17% of group GRI) Alexandra Technopark in Sep/Nov-2017. However, we believe these risks have been overblown given (1) relative stability of Grade B office and business park rents, and (2) the potential cut in FY18F DPU (assuming our base case of HP Enterprise moving out) will still result in FCOT offering an attractive yield of around 7% from the current 7.5% yield, which is in line with FCOT’s historical mean yield since 2010. Potential loss of HP as a tenant a blessing in disguise. Based on our analysis of HP Inc and HP Enterprises’ property footprint in Singapore, we anticipate that HP Enterprise will leave Alexandra Technopark. However, we think this is a blessing in disguise as it offers FCOT an opportunity to undertake an AEI to increase rents and the value of the property in the medium term. Downside risk to FY18F DPU is also mitigated by the ability to increase the proportion of management fees paid in units from around one third currently to 100%. Steady near-term earnings underpinned by inbuilt organic growth. While we expect a slight dip in DPU in FY18 due the loss of HP Enterprise as a tenant, FCOT’s still offers attractive and steady yields over the next couple of years. The resilience in the face of slowing office market is underpinned by WALE of 3.9 years and c.50% of leases having annual rental escalations of above 3%. Valuation:

After incorporating the potential loss of HP Enterprise as a tenant in FY18 and S$25m AEI which will raise average rents by c.10%, we raise our DCF-based TP to S$1.49. Key Risks to Our View:

Unfavourable forex movements. As FCOT derives c.45% of its NPI in AUD while distributions are based in SGD, foreign currency fluctuations will have an impact on distributions. The manager has hedged its AUD exposure on a rolling basis of 6-9 months to mitigate such risks. At A Glance Issued Capital (m shrs) 794 Mkt. Cap (S$m/US$m) 1,056 / 782 Major Shareholders (%) Frasers Centrepoint Ltd 27.1

Free Float (%) 72.9 3m Avg. Daily Val (US$m) 0.74 ICB Industry : Real Estate / Real Estate Investment Trust

DBS Group Research . Equity 12 Jul 2016

Singapore Company Guide

Frasers Commercial Trust Version 5 | Bloomberg: FCOT SP | Reuters: FRCR.SI Refer to important disclosures at the end of this report

88

108

128

148

168

188

208

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Relative IndexS$

Frasers Commercial Trust (LHS) Relative STI INDEX (RHS)

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Company Guide

Frasers Commercial Trust

WHAT’S NEW

Positive medium-term opportunity at Alexandra Technopark

Near-term concerns over expiry of HP leases at Alexandra Technopark. Investors have been concerned over the expiry of the HP Inc and HP Enterprise leases at Alexandra Technopark at end Sep/Nov-17 which combined represent c.17.2% of group gross rental income. These concerns have risen over fears that the two HP entities would move to the two build to suit Hi-Tech buildings with a total GFA of 76,599 sqm (GFA) at 1160 & 1200 Depot Road that Mapletree Industrial Trust (MINT) is in the process of constructing. HP before its demerger into two entities HP Inc (printers, personal computers) and HP Enterprise (servers, storage, services) had already committed to a lease term of 10.5 years with two five-year options. The two buildings are expected to be completed in two phases over 2H16 and 1H17. HP Enterprise likely to relocate in our view. Based on the locations of HP Inc and HP Enterprise’s various properties across Singapore, existing investments made at its current facilities, known lease expiries and history of HP’s sale and lease back of older properties, we believe that there is a high likelihood of HP Enterprise consolidating its operations in the new HP property being built by MINT. Thus, we anticipate HP Enterprise will exit Alexandra Technopark when the lease

expires at end-2017. For more details on our analysis, please see our Industrial sector report entitled “Remain or Exit”. But not a disaster and offers FCOT an AEI opportunity. While the loss of HP Enterprise would likely cause a 9% cut in our FY18F DPU, we believe this can be partially mitigated by the tweaking of management fee units from around one third currently to 100%. In addition, the relocation of HP Enterprise presents FCOT with the opportunity to conduct an AEI to drive rents higher over the medium term and narrow the rental gap (10-30% discount) to properties in the vicinity of Alexandra Technopark. Based on a 10% IRR, we believe FCOT could undertake a S$25m AEI to drive passing rents 10% higher over time and accelerate FCOT’s medium-term growth prospects.

Incorporating loss of HP Enterprise, AEI and tweaking of management fee units. Given our base case of HP Enterprise leaving Alexandra Technopark, FCOT undertaking a S$25m AEI and tweaking the proportion of management fee units from around one third currently to 100% in FY18, we trim our FY18F DPU by 2%. Nevertheless, given the faster medium-term DPU growth (see table below) arising from the AEI, we raise our DCF-based TP from S$1.47 to S$1.49.

Changes to DPU estimates

Scenario New FY16F DPU (Scts)

% change from existing estimates

New FY17F DPU (Scts)

% change from existing estimates

New FY18F DPU (Scts)

% change from existing estimates

New FY19F DPU (Scts)

% change from existing estimates

New FY20F DPU (Scts)

% change from existing estimates

Existing estimates 9.92 0% 9.98 0% 9.91 0% 9.92 0% 10.43 0%

New FCOT estimates - HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 month downtime. Adjust percentage of management fees in units from around one third currently to 100%

9.92 0% 9.98 0% 9.75 -2% 9.86 -1% 10.70 3%

Source: DBS Bank Faster medium y-o-y growth post AEI

Scenario FY17 FY18 FY19 FY20 Existing estimates 1% -1% 0% 5% New FCOT estimates – HP Enterprise move out and FCOT conducts AEI with 10% increase in rents but 12 months’ downtime. Adjust percentage of management fees in units from around one third to 100%

1% -2% 1% 8%

Source: DBS Bank

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Page 3

Company Guide

Frasers Commercial Trust

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Office portfolio in the fringes has proven to be less volatile. While Grade A office rents face headwinds due to an increase in new supply over the next 1-2 years, FCOT’s performance is likely to remain stable given its exposure is mainly to Grade B and business parks which have been proven to be more resilient. This is because of its more diversified tenant base (insurance, F&B, consulting, etc.) compared to Grade A office space which has a higher concentration of clients in the financial sector. In the last quarter, Grade A CBD Core rents fell 4.8% q-o-q but that for Grade B CBD Core fell only 3.0%. Rental reversions to remain positive despite office headwinds in Singapore and Australia. Despite the headwinds in the Singapore office market, FCOT has guided for single-digit rental reversions. In addition, more than 50% of FCOT’s portfolio (mainly related to its Australian properties) has built-in annual rental escalations (weighted average of 3.9% in FY16). Thus, FCOT remains positive on its DPU outlook for the coming year. Acquisition of 357 Collins Street boosts DPU growth. FCOT acquired 357 Collins Street in Melbourne, Australia, from its Sponsor, for an all-in consideration of A$237.7m. With a WALE of 5.3 years, full occupancy and in-built rental escalation clauses of 3.75-4% p.a., the property is expected to further offer improved income visibility for FCOT from FY16 onwards. Actual contributions from this property have been 12.9% higher than IPO forecast for 1HFY16. Medium-term upside if HP moves out of Alexandra Technopark. HP Inc and HP Enterprise contribute c.17% of group GRI and lease c.49% of the NLA at Alexandra Technopark. Investors have been concerned about both HP Inc and HP Enterprise vacating Alexandra Technopark at the end of their respectively leases in Sep-17 /Nov-17. While we acknowledge this to be significant risk and we actually expect HP Enterprise to leave, we believe the impact on FY18 DPU can be mitigated via the increase in the proportion of management fees paid in units from around one third currently to 100%. In addition, it also opens up the prospects of FCOT undertaking an AEI to increase rents over the medium term. We estimate a S$25m investment assuming a 10% IRR can drive up rents by 10%.

AEI at China Square Central. Following the sale of land at China Square Central (CSC) to FCOT’s sponsor for the development of a hotel, FCOT will undertake an AEI at China Square Central closer to the completion of the hotel in mid-2019. We believe the AEI as well as the improved vibrancy of the area and foot traffic once the hotel is open – which will help drive rents higher in the medium term.

Net Property Income and Margins (%)

Net Property Income and Margins (%)

Distribution Paid / Net Operating CF

Interest Cover (x)

Source: Company, DBS Bank

67.5%

69.5%

71.5%

73.5%

75.5%

77.5%

79.5%

81.5%

83.5%

0

20

40

60

80

100

120

140

160

180

200

2014A 2015A 2016F 2017F 2018F

S$ m

Net Property Income Net Property Income Margin %

66%

68%

70%

72%

74%

76%

78%

21

23

25

27

29

31

1Q20

14

2Q20

14

3Q20

14

4Q20

14

1Q20

15

2Q20

15

3Q20

15

4Q20

15

1Q20

16

2Q20

16

Net Property Income Net Property Income Margin %

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

2014A 2015A 2016F 2017F 2018F

(x)

3.40

3.50

3.60

3.70

3.80

3.90

4.00

4.10

4.20

4.30

2014A 2015A 2016F 2017F 2018F

(x)

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Company Guide

Frasers Commercial Trust

Balance Sheet:

Gearing expected to remain steady at c.36%. We project FCOT to maintain a gearing of about 36%, which is within management’s comfortable range of 35-40%. We do not expect the manager to look to raise gearing beyond current levels and future acquisitions are likely to be funded through a combination of debt/equity. Well-spread debt maturity profile. The trust has no refinancing needs until FY2017, and has hedged 81% of gross borrowings, giving it a measure of protection against short-term fluctuations in interest rates. However, we expect interest rates to climb slowly going forward in line with market expectations of a rate hike. Share Price Drivers:

More acquisitions. In addition to the Australand office portfolio, FCL has three Singapore assets which could be injected into the REIT in the medium term, with Alexandra Point being the most likely target, and priced at the c.S$200m level. Update on HP lease. An update on the renewal of HP, a major tenant at Alexandra Technopark, will remove any uncertainties that investors have on the group’s earnings sustainability. Key Risks:

Rising interest rates. Any increase in interest rates will result in higher interest payments for FCOT. However, we note that close to 80% of FCOT’s loans are on fixed rates. Unfavourable forex movements. As FCOT derives c.45% of its income from AUD while distributions are based in SGD, foreign currency fluctuations will have an impact on distributions. The manager has hedged out its AUD exposures on a 6- to 9-month rolling basis. Company Background

Frasers Commercial Trust (FCOT) is a real estate investment trust that invests in income-producing commercial office properties in Singapore and Australia. As of 31 March 2016, FCOT’s portfolio was worth an aggregate S$122bn, with 61% of its assets being derived from its properties in Singapore and the remaining 39% from Australia.

Aggregate Leverage (%)

ROE (%)

Distribution Yield (%)

PB Band (x)

Source: Company, DBS Bank

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2014A 2015A 2016F 2017F 2018F

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014A 2015A 2016F 2017F 2018F

Avg: 6.3%

+1sd: 7.1%

+2sd: 7.9%

‐1sd: 5.5%

‐2sd: 4.7%

4.2

5.2

6.2

7.2

8.2

9.2

2012 2013 2014 2015

(%)

Avg: 0.85x

+1sd: 0.92x

+2sd: 0.99x

‐1sd: 0.78x

‐2sd: 0.72x

0.6

0.7

0.8

0.9

1.0

1.1

1.2

Jul-12 Jul-13 Jul-14 Jul-15

(x)

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Page 5

Company Guide

Frasers Commercial Trust

Income Statement (S$m)

FY Sep 2014A 2015A 2016F 2017F 2018F Gross revenue 119 142 152 154 150 Property expenses (28.3) (40.3) (38.8) (42.7) (43.4) Net Property Income 90.6 102 113 111 107 Other Operating expenses (13.9) (14.8) (16.3) (16.3) (16.2) Other Non Opg (Exp)/Inc 1.77 (0.8) 0.0 0.0 0.0 Net Interest (Exp)/Inc (20.5) (21.7) (22.7) (22.8) (23.6) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Net Income 58.0 64.6 73.8 72.3 66.8 Tax 1.85 5.20 (6.6) (6.5) (6.0) Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Income After Tax 59.8 69.8 67.2 65.8 60.8 Total Return 87.2 75.2 67.2 65.8 60.8 Non-tax deductible Items (29.9) (7.4) 10.9 13.0 16.9 Net Inc available for Dist. 57.3 67.8 78.0 78.7 77.7 Growth & Ratio Revenue Gth (%) 0.5 19.6 6.7 1.6 (2.7) N Property Inc Gth (%) (0.4) 12.5 10.8 (1.3) (4.3) Net Inc Gth (%) 1.1 16.8 (3.8) (2.1) (7.5) Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 Net Prop Inc Margins (%) 76.2 71.6 74.4 72.3 71.1 Net Income Margins (%) 50.3 49.1 44.3 42.7 40.5 Dist to revenue (%) 48.2 47.7 51.5 51.1 51.8 Managers & Trustee’s fees 11.7 10.4 10.8 10.6 10.8 ROAE (%) 5.6 6.1 5.6 5.5 5.1 ROA (%) 3.2 3.6 3.3 3.2 3.0 ROCE (%) 4.2 4.5 4.4 4.3 4.1 Int. Cover (x) 3.7 4.0 4.2 4.2 3.8

Source: Company, DBS Bank

Lowered earnings forecasts at Alexandra Technopark (Singapore) and Central Park (Perth, Australia).

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Company Guide

Frasers Commercial Trust

Quarterly / Interim Income Statement (S$m)

FY Sep 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 Gross revenue 34.8 34.7 37.2 39.6 39.0 Property expenses (10.1) (10.4) (9.8) (10.3) (10.2) Net Property Income 24.7 24.3 27.4 29.4 28.8 Other Operating expenses (3.4) (3.4) (4.5) (3.9) (3.8) Other Non Opg (Exp)/Inc (0.5) (0.7) (0.1) (0.5) 0.01 Net Interest (Exp)/Inc (5.3) (5.4) (6.0) (6.0) (5.9) Exceptional Gain/(Loss) 0.0 0.0 6.40 0.0 0.0 Net Income 15.5 14.8 23.2 19.1 19.1 Tax (1.0) (0.8) 8.14 (1.2) (1.1) Minority Interest 0.0 0.0 0.0 0.0 0.0 Net Income after Tax 14.5 14.0 31.3 17.8 18.0 Total Return 14.5 14.0 31.3 17.7 18.0 Non-tax deductible Items 1.69 2.08 (12.5) 2.00 1.31 Net Inc available for Dist. 16.2 16.1 18.8 19.7 19.4 Growth & Ratio Revenue Gth (%) (2) 0 7 6 (2) N Property Inc Gth (%) (3) (2) 13 7 (2) Net Inc Gth (%) (6) (3) 124 (43) 1 Net Prop Inc Margin (%) 71.0 70.1 73.6 74.1 73.9 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0

Balance Sheet (S$m)

FY Sep 2014A 2015A 2016F 2017F 2018F Investment Properties 1,825 1,955 1,958 1,961 1,989 Other LT Assets 0.07 0.39 0.84 1.29 1.74 Cash & ST Invts 47.4 62.2 61.7 57.5 53.0 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 8.88 8.82 8.82 8.82 8.82 Other Current Assets 0.63 8.18 8.18 8.18 8.18 Total Assets 1,882 2,034 2,037 2,037 2,061 ST Debt 0.0 0.0 0.0 0.0 0.0 Creditor 21.7 29.7 29.7 29.7 29.7 Other Current Liab 4.43 9.67 13.1 13.0 12.5 LT Debt 692 732 735 738 766 Other LT Liabilities 72.2 56.3 56.3 56.3 56.3 Unit holders’ funds 1,091 1,207 1,203 1,200 1,196 Minority Interests 0.08 0.0 0.0 0.0 0.0 Total Funds & Liabilities 1,882 2,034 2,037 2,037 2,061 Non-Cash Wkg. Capital (16.6) (22.4) (25.8) (25.7) (25.2) Net Cash/(Debt) (645) (670) (673) (680) (713) Ratio Current Ratio (x) 2.2 2.0 1.8 1.7 1.7 Quick Ratio (x) 2.2 1.8 1.6 1.6 1.5 Aggregate Leverage (%) 36.8 36.0 36.1 36.2 37.2 Z-Score (X) 4.4 4.1 4.2 4.2 4.2

Source: Company, DBS Bank

Gearing to be maintained at around 35-40%.

Actual contributions from

357 Collins Street have been

12.9% higher than IPO

forecast for 1HFY16.

Page 20

ASIAN INSIGHTS VICKERS SECURITIES

Page 7

Company Guide

Frasers Commercial Trust

Cash Flow Statement (S$m)

FY Sep 2014A 2015A 2016F 2017F 2018F Pre-Tax Income 58.0 64.6 73.8 72.3 66.8 Dep. & Amort. 0.0 0.0 0.0 0.0 0.0 Tax Paid (1.8) (0.6) (3.2) (6.6) (6.5) Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. 9.80 1.53 0.0 0.0 0.0 Other Operating CF 16.0 23.0 7.36 9.35 13.3 Net Operating CF 82.0 88.6 78.0 75.0 73.6 Net Invt in Properties (3.2) (197) (3.0) (3.0) (28.0) Other Invts (net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0 Other Investing CF (0.3) (0.5) (0.5) (0.5) (0.5) Net Investing CF (3.5) (197) (3.5) (3.5) (28.5) Distribution Paid (49.2) (53.9) (78.0) (78.7) (77.7) Chg in Gross Debt 2.27 58.0 3.00 3.00 28.0 New units issued 0.0 142 0.0 0.0 0.0 Other Financing CF (26.6) (22.0) 0.0 0.0 0.0 Net Financing CF (73.6) 124 (75.0) (75.7) (49.7) Currency Adjustments (0.2) (0.6) 0.0 0.0 0.0 Chg in Cash 4.83 14.9 (0.5) (4.2) (4.5) Operating CFPS (S cts) 10.7 11.9 9.91 9.50 9.24 Free CFPS (S cts) 11.7 (14.8) 9.53 9.12 5.72 Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank

S.No. DateClosing

PriceTarget Price

Rat ing

1: 21 Jul 15 1.55 1.76 BUY

2: 19 Aug 15 1.35 1.51 BUY

3: 26 Oct 15 1.42 1.53 BUY

4: 05 Apr 16 1.30 1.53 BUY

5: 21 Apr 16 1.31 1.47 BUY

Note : Share price and Target price are adjusted for corporate actions.

1

2 3

4

5

1.09

1.19

1.29

1.39

1.49

1.59

Jul-15 Nov-15 Mar-16

S$

Page 21

ASIAN INSIGHTS VICKERS SECURITIES ed: TH / sa: JC

HOLD Last Traded Price: S$1.785 (STI : 2,901.82) Price Target : S$1.81 (1% upside) (Prev S$1.64) Potential Catalyst: Acquisitions Where we differ: Below consensus on lower top line Analyst Derek TAN +65 6682 3716 [email protected] Mervin SONG CFA +65 6682 3715 [email protected] Singapore Research Team

What’s New Revised estimates to account for higher and

earlier-than-projected contribution for HP building

Stock trading near record highs; positives priced in

Upside to earnings will come from acquisitions or

development projects

Price Relative

Forecasts and Valuation FY Mar (S$m) 2016A 2017F 2018F 2019F Gross Revenue 332 336 352 375 Net Property Inc 245 247 254 272 Total Return 273 190 194 211 Distribution Inc 198 197 200 215 EPU (S cts) 10.6 10.5 10.8 11.7 EPU Gth (%) 4 0 2 8 DPU (S cts) 11.2 10.9 11.1 11.9 DPU Gth (%) 8 (2) 1 7 NAV per shr (S cts) 137 137 136 136 PE (X) 16.9 16.9 16.6 15.3 Distribution Yield (%) 6.2 6.1 6.2 6.7 P/NAV (x) 1.3 1.3 1.3 1.3 Aggregate Leverage (%) 30.3 30.3 30.3 30.4 ROAE (%) 8.0 7.7 7.9 8.6 Distn. Inc Chng (%): (1) 2 1 Consensus DPU (S cts): 11.1 11.8 12.7 Other Broker Recs: B: 5 S: 1 H: 12

Source of all data: Company, DBS Bank, Bloomberg Finance L.P

Fairly priced Positives price in. We maintain our HOLD call for Mapletree Industrial Trust (MINT) on valuation grounds. We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price. Our TP is raised to S$1.81 on the back of roll-forward valuations and raising our estimates from the built-to-suit project for Hewlett-Packard (HP). Development projects to drive upside from FY18F onwards. MINT will only reap the benefits from the completion of development projects from 2HFY18F onwards (built-to-suit project for HP and a new hi-tech building at Kallang Basin 4 cluster). At a total estimated cost of c.S$250m, we estimate returns of c.8.5% which would result in a rebound in DPU growth in the medium term. Eventual gearing will still remain at a conservative c.31%. Low gearing a positive. MINT has a low gearing of c.25%, which makes it one of the lowest geared industrial REITs, offering the Manager significant debt-funded capacity for acquisitions or to undertake development by taking part in built-to-suit projects (BTS) or asset enhancement initiatives. We have not priced in any further acquisitions or developments (apart from those that have been announced) in our numbers. Valuation:

We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price. We maintain our HOLD recommendation with roll-forward TP of S$1.81. Key Risks to Our View:

Rising interest rates An increase in refinancing rates will negatively impact distributions. However, we note that MINT has minimised these risks by having c.88% of its interest cost hedged into fixed rates. At A Glance Issued Capital (m shrs) 1,801 Mkt. Cap (S$m/US$m) 3,215 / 2,379 Major Shareholders (%) Mapletree Investments Pte Ltd 34.2 Schroders Plc 7.0 AIA Group 5.0

Free Float (%) 53.8 3m Avg. Daily Val (US$m) 3.2 ICB Industry : Real Estate / Real Estate Investment Trusts

DBS Group Research . Equity 12 Jul 2016

Singapore Company Guide

Mapletree Industrial Trust Version 5 | Bloomberg: MINT SP | Reuters: MAPI.SI Refer to important disclosures at the end of this report

90

110

130

150

170

190

210

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Relative IndexS$

Mapletree Industrial Trust (LHS) Relative STI INDEX (RHS)

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ASIAN INSIGHTS VICKERS SECURITIES Page 2

Company Guide

Mapletree Industrial Trust

WHAT’S NEW

Prime Beneficiary of new HP deal

MINT the prime beneficiary. The contribution from new HP facility (9% of FY18F top line) will be timely as it will more than compensate for the expected downside to income given the weak operational outlook. Completed in two phases, we project income contribution from 1QFY18F onwards and full contribution to kick in from FY19F. Over the next two years, we project income to grow by a CAGR of 2%, backloaded from FY19F.

DPU growth to accelerate by 7% in FY19F Yield at above +1SD

Source: Company, DBS Bank

11.15

10.94

11.09

11.89

16A 17F 18F 19F

DPU (Scts)

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

2010 2011 2012 2013 2014 2015

MINT Yield Mean Yield -1 SD +1 SD

Page 23

ASIAN INSIGHTS VICKERS SECURITIES

Page 3

Company Guide

Mapletree Industrial Trust

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Modest organic growth outlook. MINT has consistently delivered strong returns to shareholders post IPO, driven mainly from the marking to market of its leases which were below market rates. As most of its properties have already undergone at least one round of reversions, most of the leases are now at or near-market levels in our view. With the softening of market rents due to a slowing economy, we are forecasting rental reversions to moderate further and expect the Manager to be increasingly focused on maintaining occupancies, a strategy which we believe will result in the trust delivering steady dividends in an increasingly competitive environment. HP building a key kicker to earnings. With organic growth slowing, the next thrust of growth will come from the completion of its built-to-suit project from HP, which is the redevelopment of Telok Blangah Cluster (expected TOP for phases 1 and 2 in 2H16 and 1H17 respectively). Contribution from the new HP property will come timely just when the REIT is facing rental pressure on its portfolio. We project the full-year contribution from this project to propel DPUs higher by 8% y-o-y in FY19. Development projects in Kallang Basin cluster to optimise portfolio rent. MINT has also kick-started the development of a new hi-tech building at Kallang Basin cluster 4 at an estimated cost of S$77m, returning c.8% when completed in 4Q17. We believe that demand for the property will be strong given the good location in the central part of Singapore. The Manager has ample headroom to fund this development. Low gearing a positive. MINT has a low gearing of c.25%, which makes it one of the lowest-geared industrial REITs, offering the Manager significant debt-funded capacity for acquisitions or to undertake development by taking part in built-to-suit projects (BTS) or asset enhancement initiatives. With a centrally located industrial portfolio, we believe that there is an opportunity to do more re-development projects which will be value accretive (to NAV and DPUs).

Net Property Income and Margins (%)

Net Property Income and Margins (%)

Distribution Paid / Net Operating CF

Interest Cover (x)

Source: Company, DBS Bank

68.4%

70.4%

72.4%

74.4%

76.4%

78.4%

80.4%

0

50

100

150

200

250

300

2015A 2016A 2017F 2018F 2019F

S$ m

Net Property Income Net Property Income Margin %

69%

70%

71%

72%

73%

74%

75%

51

53

55

57

59

61

63

65

3Q20

14

4Q20

14

1Q20

15

2Q20

15

3Q20

15

4Q20

15

1Q20

16

2Q20

16

3Q20

16

4Q20

16

Net Property Income Net Property Income Margin %

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2015A 2016A 2017F 2018F 2019F

(x)

7.20

7.40

7.60

7.80

8.00

8.20

8.40

8.60

8.80

2015A 2016A 2017F 2018F 2019F

(x)

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ASIAN INSIGHTS VICKERS SECURITIES Page 4

Company Guide

Mapletree Industrial Trust

Balance Sheet:

Low gearing allows for opportunistic acquisitions, developments. Current gearing is conservative; implying that the Manager has the capability to take on debt-funded acquisitions when the opportunity arises. The Manager will be utilising its headroom towards higher-yielding development projects (built-to-suit project for HP and Kallang Basin Cluster 4) which we estimate to yield 8-9%, which is higher than acquisitions. Post development, we believe gearing will still be within management's comfortable level of <30%. Stable weighted average debt-to-maturity. MINT has a well-staggered debt profile with a majority of debt due for repayment only from FY17/18 onwards. With c.80% of its borrowings on fixed interest rates, MINT is well protected against future increases in interest rates. Share Price Drivers:

Better-than-expected rental reversions/acquisitions will boost earnings and share price. We are forecasting modest rental uplifts of between 0-3%. The REIT's ability to maintain or beat expectations will mean upside to our/consensus forecasts. In addition, acquisitions or further development projects which are accretive to earnings will likely result in upside to TP and share price. Key Risks:

Rising interest rates. An increase in refinancing rates will negatively impact distributions. However, MINT has minimised the impact as c.80% of its interest cost has been fixed. Economic risk. A deterioration of the economic outlook could have a negative impact on industrial rents and occupancies as companies cut back on production and require less space. Industrial rents have a strong historical correlation with GDP growth. Company Background

Mapletree Industrial Trust (MINT) is a real estate investment trust which invests primarily in income-producing industrial assets located in Singapore. Its portfolio includes a diverse mix of business parks, science parks, ramp-up warehouses and flatted factories.

Aggregate Leverage (%)

ROE (%)

Distribution Yield (%)

PB Band (x)

Source: Company, DBS Bank

10.0%

15.0%

20.0%

25.0%

30.0%

2015A 2016A 2017F 2018F 2019F

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2015A 2016A 2017F 2018F 2019F

Avg: 6.9%

+1sd: 7.2%

+2sd: 7.6%

‐1sd: 6.5%

‐2sd: 6.2%

5.2

5.7

6.2

6.7

7.2

7.7

8.2

2012 2013 2014 2015

(%)

Avg: 1.2x

+1sd: 1.26x

+2sd: 1.33x

‐1sd: 1.13x

‐2sd: 1.06x

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

Jul-12 Jul-13 Jul-14 Jul-15

(x)

Page 25

ASIAN INSIGHTS VICKERS SECURITIES

Page 5

Company Guide

Mapletree Industrial Trust

Income Statement (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Gross revenue 314 332 336 352 375 Property expenses (85.3) (86.5) (89.1) (98.6) (103) Net Property Income 229 245 247 254 272 Other Operating expenses (27.1) (28.9) (30.2) (30.7) (31.4) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc (23.6) (25.6) (26.4) (28.8) (30.4) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Net Income 178 191 190 194 211 Tax (1.1) 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Income After Tax 177 191 190 194 211 Total Return 374 273 190 194 211 Non-tax deductible Items (194) (74.8) 6.98 5.51 4.06 Net Inc available for Dist. 181 198 197 200 215 Growth & Ratio Revenue Gth (%) 4.9 5.6 1.3 4.9 6.5 N Property Inc Gth (%) 6.5 7.2 0.6 2.9 7.3 Net Inc Gth (%) 8.2 7.7 (0.3) 2.3 8.3 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 Net Prop Inc Margins (%) 72.8 73.9 73.5 72.0 72.5 Net Income Margins (%) 56.4 57.5 56.6 55.2 56.1 Dist to revenue (%) 57.6 59.7 58.7 56.7 57.2 Managers & Trustee’s fees 8.6 8.7 9.0 8.7 8.4 ROAE (%) 8.2 8.0 7.7 7.9 8.6 ROA (%) 5.2 5.3 5.2 5.2 5.6 ROCE (%) 6.0 6.2 6.0 6.1 6.6 Int. Cover (x) 8.6 8.4 8.2 7.8 7.9

Source: Company, DBS Bank

Driven by the contribution from HP

Page 26

ASIAN INSIGHTS VICKERS SECURITIES Page 6

Company Guide

Mapletree Industrial Trust

Quarterly / Interim Income Statement (S$m)

FY Mar 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Gross revenue 79.4 81.6 82.7 83.3 84.0 Property expenses (21.6) (21.4) (21.7) (21.4) (22.0) Net Property Income 57.8 60.2 61.0 61.9 62.0 Other Operating expenses (12.4) (7.2) (7.3) (7.3) (7.2) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc (0.6) (6.4) (6.3) (6.4) (6.6) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Net Income 44.8 46.7 47.4 48.2 48.3 Tax 0.01 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 Net Income after Tax 44.8 46.7 47.4 48.2 48.3 Total Return 242 46.7 47.4 48.2 130 Non-tax deductible Items (195) 1.56 1.51 2.08 (79.9) Net Inc available for Dist. 46.7 48.2 48.9 50.3 50.4 Growth & Ratio Revenue Gth (%) 2 3 1 1 1 N Property Inc Gth (%) 0 4 1 1 0 Net Inc Gth (%) (2) 4 2 2 0 Net Prop Inc Margin (%) 72.8 73.7 73.8 74.3 73.8 Dist. Payout Ratio (%) 200.0 200.0 200.0 200.0 200.0

Balance Sheet (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Investment Properties 3,424 3,558 3,660 3,702 3,705 Other LT Assets 3.63 0.36 0.36 0.36 0.36 Cash & ST Invts 72.0 54.3 77.1 36.5 42.2 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 16.2 11.4 16.1 16.9 18.0 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 3,516 3,624 3,753 3,755 3,766 ST Debt 125 47.4 47.4 47.4 47.4 Creditor 70.3 79.7 98.2 103 110 Other Current Liab 0.0 0.0 0.0 0.0 0.0 LT Debt 949 974 1,089 1,089 1,094 Other LT Liabilities 58.8 57.9 57.9 57.9 57.9 Unit holders’ funds 2,312 2,465 2,461 2,458 2,457 Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Funds & Liabilities 3,516 3,624 3,753 3,755 3,766 Non-Cash Wkg. Capital (54.0) (68.3) (82.1) (86.2) (91.8) Net Cash/(Debt) (1,003) (967) (1,059) (1,100) (1,099) Ratio Current Ratio (x) 0.5 0.5 0.6 0.4 0.4 Quick Ratio (x) 0.5 0.5 0.6 0.4 0.4 Aggregate Leverage (%) 28.2 30.3 30.3 30.3 30.4 Z-Score (X) 1.8 1.9 1.8 1.8 1.8

Source: Company, DBS Bank

Gearing to remain low

Page 27

ASIAN INSIGHTS VICKERS SECURITIES

Page 7

Company Guide

Mapletree Industrial Trust

Cash Flow Statement (S$m)

FY Mar 2015A 2016A 2017F 2018F 2019F Pre-Tax Income 178 191 190 194 211 Dep. & Amort. 0.0 0.0 0.0 0.0 0.0 Tax Paid (1.0) 0.0 0.0 0.0 0.0 Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. (4.7) 14.3 13.8 4.06 5.63 Other Operating CF 32.5 14.8 2.77 2.81 2.88 Net Operating CF 205 220 207 201 219 Net Invt in Properties (54.5) (43.5) (102) (42.0) (3.8) Other Invts (net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0 Other Investing CF 0.0 0.0 0.0 0.0 0.0 Net Investing CF (54.5) (43.5) (102) (42.0) (3.8) Distribution Paid (97.5) (115) (197) (200) (215) Chg in Gross Debt (54.3) (53.5) 115 0.0 5.00 New units issued 0.0 0.0 0.0 0.0 0.0 Other Financing CF (22.4) (25.7) 0.0 0.0 0.0 Net Financing CF (174) (194) (82.0) (200) (210) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash (23.8) (17.6) 22.8 (40.7) 5.70 Operating CFPS (S cts) 12.0 11.4 10.7 10.9 11.8 Free CFPS (S cts) 8.62 9.78 5.82 8.83 11.9 Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank

S.No. DateClosing

PriceTarget Price

Rat ing

1: 22 Oct 15 1.53 1.62 BUY

2: 26 Apr 16 1.64 1.64 BUY

Note : Share price and Target price are adjusted for corporate actions.

1

2

1.30

1.40

1.50

1.60

1.70

1.80

Jul-15 Nov-15 Mar-16

S$

Page 28

Industry Focus

Industrial REITs

Page 9

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 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.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.

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, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction

in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION

The research analyst(s) 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(s) also certifies that no part of his/her

Page 29

Industry Focus

Industrial REITs

Page 10

compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 12 Jul 2016, the

analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), 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 have a proprietary position in

Ascendas REIT, Frasers Commercial Trust, Mapletree Industrial Trust recommended in this report as of 30 Jun 2016

2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. 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 Frasers Commercial Trust as of 30 Jun 2016.

4. Compensation for investment banking services:

DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for

investment banking services from Ascendas REIT, Frasers Commercial Trust, Mapletree Industrial Trust as of 30 Jun 2016.

DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for

Ascendas REIT, Frasers Commercial Trust, Mapletree Industrial Trust in the past 12 months, as of 30 Jun 2016.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a

manager or co-manager or in any other investment banking transaction 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 and/or by DBS Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where this publication relates to a research report, unless otherwise stated in the research report(s), DBS Bank (Hong Kong) Limited is not the issuer of the research report(s). This publication including any research report(s) is/are distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS Bank (Hong Kong) Limited. This report is intended for distribution in Hong Kong only to professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules promulgated thereunder.)

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

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Industry Focus

Industrial REITs

Page 11

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 This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. 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

e-mail: [email protected]

Company Regn. No. 196800306E

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