Thailand Industry Focus

Property Fund/REIT Sector Refer to important disclosures at the end of this report

DBS Group Research . Equity

Take shelter in volatile market 

The sector now comprises 51 PFPOs and five REITS with a combined market capitalisation of Bt333bn (US$9.3bn), representing 2.6% of the SET



The sector is offering generous 2015F distribution yield of 6.6%, a hefty premium to Thai 10-year government bond yield of 3.0%



We prefer office and retail PFPO/REITs; there is excess supply in the industrial space sector



Our preferred picks are CPNRF, CPTCG, FUTUREPF, SPF and TLGF. These PFPOs/REITs possess good assets and offer relatively generous distribution yield of 6-8%, while liquidity is quite decent.

A safe haven in the volatile market. The Thai PFPO/REIT sector has gained 2.4% YTD, out-performing the SET Index’s 7.7% loss. Most Thai PFPOs/REITs are generating strong recurring income streams which should be less exposed to internal and external risks. They are also paying generous dividend yields of about 6-8%, mostly quarterly. Potential upside to yields of property funds which convert to REITs. The SEC and the Revenue Department have yet to reveal the transactions costs involved in converting to a REIT. Since 2014, all new setups have to be under the REIT structure and existing PFPOs can no longer increase their capital. On this note, PFPOs which have access to a pipeline of injection assets would have to convert in order to grow their fund/trust sizes. REITs are allowed to take on higher net gearing of up to 35% of NAV (up to 60% if they have investment grade rating) vs 10% maximum under the property fund scheme, suggesting distribution per unit and yields should rise after conversion. Our preferred Funds/REITs. We prefer retail and office to industrial PFPO/REITs, given more balanced demandsupply outlook for the former two asset segments. We like CPNRF, FUTUREPF, and TLGF in the Retail asset segment, POPF and CPNCG for Office assets, and TGROWTH for Industrial assets. We also like SPF (airport assets) and IMPACT (exhibition centres).

www.dbsvickers.com ed-SGC / sa- CT

18 Sep 2015 SET :

1,389.70

Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected] Thailand Research Team +662 658 1222 STOCKS

CPTGF CPNRF FUTUREPF IMPACT* LHSC POPF SPF TLGF TGROWTH

Type of

Price

Assets

Bt

US$m

Bt

2015F

2016F

Office Retail Retail Exhibition Center Retail Office Airport Retail Industrial

10.00 16.70 18.20 11.20 10.40 13.30 19.60 13.20 12.20

269 1,025 267 461 138 178 517 188 856

10.70 18.00 22.30 12.00 11.40 14.00 21.40 15.10 12.90

8.0 6.0 7.0 6.4 7.0 8.1 6.6 6.1 7.6

8.6 7.6 7.3 6.6 7.0 8.3 6.6 6.1 7.6

Mkt Cap Target Price

Yields (%)

*Yields are for FYE Mar 2016-17 Source: DBS Vickers CP Tower Growth Leasehold (CPTG): CPTGF has leasehold rights to operate three CP Office Towers namely CP Tower Silom, CP Tower Fortune Town, and CP Tower Phayathai. Key anchor tenants are quality names like CP Group and its subsdiaries, Tesco Lotus, etc. CPN Retail Growth Leasehold Property Fund (CPNRF): Thailand’s largest and most liquid property fund. It has leasehold rights to operate four successful Central Plaza shopping malls, namely Rama 2, Rama 3, Pinklao, and Chiangmai Airport. Future Park Leasehold Property Fund (FUTUREPF): FUTUREPF has leasehold rights to operate Future Park Rangsit, one of Thailand’s most successful sub-urban malls, thanks to its location being a gateway to the Central, North, and Northeastern parts of Thailand.

Samui Airport Property Fund Leasehold (SPF): SPF has leasehold rights to operate Samui Airport. Revenue is derived from the number of departing passengers and incoming flights at Samui Airport.

Tesco Lotus Retail Growth Freehold and Leasehold Property Fund (TLGF) : TLGF owns freehold and leasehold rights to operate 23 Tesco Lotus shopping malls throughout Thailand. Freehold assets account for 60% of total leasable area. Tesco Lotus is the key anchor tenant, accounting for 58% of total leasable area and 28% of total rental income.

Industry Focus Property Fund/REIT Sector

Analyst Chanpen Sirithanarattanakul +662 657 7824 [email protected] Thailand Research Team [email protected]

Table of Contents Yield, Valuation and Recommendation

3

Regional Comparison

8

Evolution of Thai Property Funds/REITs

10

Key differences between PFPO/REIT

11

Major sponsors of the assets

12

Current Status

13

Price Performance

15

Industry Outlook Office

15

Retail

17

Ready-Built Factories

19

Warehouses

19

Company Guides -

CP Tower Growth Leasehold (CPTGF TB)

26

-

CPN Retail Growth Property Fund (CPNRF TB)

32

-

Future Park Prop Fund (FUTUREPF TB)

38

-

Impact Growth REIT (IMPACT TB)

44

-

LH Shopping Centers REIT (LHSC)

50

-

Prime Office Property Fund (POPF TB)

56

-

Samui Airport Property Fund (SPF TB)

62

-

Tesco Lotus Retail Growth Freehold and Leasehold Property Fund (TLGF TB)

68

-

TICON Industrial Growth Property Fund (TGROWTH TB) 74

Disclaimers

Page 2

80

Industry Focus Property Fund/REIT Sector

Yield, Valuation and Recommendation Sector is offering generous 2015F distribution yield of 6.6%. This is a hefty 340bps premium to the Thai 10-year government bond yield of 3.0% currently. Most funds pay quarterly dividends, while some pay semi-annually.

Offering better yields than other investments. The following chart shows Thai PFPO/REITs also pay higher yields than bank deposits, government and corporate bonds, and dividend yields of listed corporates.

Distribution Yield of Thai PFPOs/REITs

PFPO offers better yields vs other investment alternatives

%

7%

9.0

6%

8.0 7.0

5%

6.0

4%

5.0

3%

4.0 3.0

2%

2.0

1%

1.0

0% PFPO/REIT

2015F

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0.0

Source: SET, DBS Vickers

Note: 1. Distribution includes dividends and capital reduction 2. Price is based on market price at end of year, except 2015 which is current price Yield-Spread. The following chart shows the yield-spread between Thai PFPO/REIT and Thai 10-year government bond averaged 3.2% over the past decade.

Listed 10-year govt 2-year fixed 1-year fixed Savings rate companies bond deposit deposit yield

Source: SET, DBS Vickers

PFPO/REIT – yield comparison. The following chart shows our estimated 2015 yields for several types of PFPO/REITs. 2015 yield comparison for various types of PFPO/REIT % 8.0 7.0 6.0

Yield of Thai PFPOs/REITs vs Thai 10-yr Government Bond

5.0

% 9.0

4.0

8.0

2.0

7.0

1.0

3.0

3.0

Retail

Residential

Office

Hotel

Industrial

4.0

Cineplex

Airport

5.0

Apartment

-

6.0

Source: SET, DBS Vickers 2014

2013

2012

Bond 10Y

2015F

Dividend Yield

2011

2010

2009

2008

2007

2006

2005

2.0

Source: SET, DBS Vickers

Page 3

Industry Focus Property Fund/REIT Sector

Valuation and Recommendation

Top Picks

Sector is now trading at average 1.07x P/NAV. This represents +1SD of its historical average multiple of 0.9x.

CPN Retail Growth Leasehold Property Fund (CPNRF) Thailand’s largest and most liquid property fund

2011

2012

2013

2014

2015

Source: SET, DBS Vickers

We prefer Office and Retail over Industrial PFPO/REITs. The Office sector is now in an up-cycle. With limited new supply entering the market, the occupancy and rents should continue to rise. On the Retail front, occupancy remains high at over 90% for prime retail malls. Nonetheless, the weak domestic consumption could derail rental hikes in the near term. But quality malls in good locations should continue to do well. And for the Industrial sector, high vacancies amid weakening demand and abundant supply remain our key concerns. In addition, rents can hardly rise because of the current high vacancy rate. Our top picks are CPNRF, FUTUREPF, SPF, CPTGF, and TLGF. The key factors we take into consideration include:  Industry subsector – Prefer office, retail over industrial  Location of the assets  Quality of the assets and the anchor tenants  Quality of the property manager  Occupancy trend  Potential for rental reversion  Potential growth prospects  Remaining leasehold life  Distribution yield  P/NAV  IRR  Upside to our TP  Trading liquidity

Page 4

CPNRF: Yields % 16

CPNRF's Yield 10-Year Govt Bond Yield

14 12 10 8 6 4 2 -

2015 2015

2010

2014 2014

2009

2013 2013

0.50

2012

-2 sd

0.60

2012

-1 sd

0.70

2011 2011

0.80

2010

Mean

0.90

2010

+1 sd

1.00

2009 2009

+2 sd

1.10

2008

1.20

CPNRF holds leasehold rights to operate four successful CentralPlaza shopping malls in several locations. They are Central Rama 2, Central Rama 3, Central Pinklao, and Central Chiangmai Airport. Portfolio occupancy rate has always been high at 90% and the fund has been paying consistently higher dividends since its inception. Nonetheless, we expect dividend yield to come down to 6.1% in 2015 as Central Pinklao undergoes renovation, before surging to 7.7% and 8.4% in 2016 and 2017, respectively. CPNRF plans to convert into a REIT after more details on transaction costs are available. Successful conversion would allow higher gearing, which means upside to yields.

2008

P/NAV (x) 1.30

2007 2007

PFPO/REIT: Price/NAV

Source: SET, DBS Vickers

Samui Airport Leasehold Property Fund (SPF) Riding on Samui’s tourism recovery SPF holds leasehold right to operate Samui Airport until 2036. Tourist arrivals have continued to improve in 2Q15 following the lifting of martial law. We estimate the fund’s DPU will grow 4% this year and 7% each in 2016-17 on rising number of passengers and flights. The fund is currently offering generous dividend yield of 6.9% for 2015, and 7.4% in 2016. Key risk is a sharp drop in Samui tourism. Nonetheless, downside risk is protected by annual revenue guarantee of Bt570m from Bangkok Airways, the Property Manager, which suggests a dividend yield of 3.2% at current price.

Industry Focus Property Fund/REIT Sector

SPF's Yield

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

10-Year Govt Bond Yield

CPTGF: Yields % 10

CPTGF's Yield 10-Year Govt Bond Yield

Source: SET, DBS Vickers

TLGF: Yields % 8

TLGF's Yield

7

10-Year Govt Bond Yield

6

6 4

Jul-14

2

Jan-14

Tesco Lotus Retail Growth Property Fund (TLGF) Decent yields TLGF invests in 23 Tesco Lotus shopping malls throughout Thailand. The majority of the assets (60% of total leasable area) are freehold assets. Tesco is the anchor tenant, accounting for 58% of total leasable area and 28% of total rental income. Occupancy rates have been high at 98-99% since its inception. The fund now offers generous dividend yield of 6.2%. Tesco Lotus has granted right of first refusal to TLGF to acquire its existing and future malls. The successful conversion to a REIT structure would allow the fund/REIT to borrow more for future acquisitions and rely less on equity financing. This should lift distribution per unit and yields.

8

Jul-15

% 20 18 16 14 12 10 8 6 4 2

CP Tower Growth Leasehold Property Fund (CPTGF) Offering very generous yields CPTGF invests in leasehold rights to operate three successful CP Towers in prime locations. The Fund’s assets include i) C.P. Tower I (Silom), ii) C.P. Tower II (Fortune Town), iii) C.P. Tower III (Phayathai). Portfolio occupancy rate has been high, averaging 98%. Anchor tenants are high quality tenants like CP Group and its subsidiaries, and Tesco Lotus. The Fund now offers generous 2015F dividend yield of 8.0%.

Jan-15

SPF: Yields

Source: SET, DBS Vickers

Future Park Leasehold Property Fund (FUTUREPF) One of the most successful suburban malls in Thailand FUTUREPF invests in leasehold rights to operate a part of Future Park Rangsit, one of Thailand’s most successful suburban shopping malls. The mall is located at the gateway to Central, North and Northeastern Thailand, covering 56 provinces. Daily customer traffic count has been over 150k during the last three years, one of the highest among retail malls in Thailand. The fund now offers generous 2015 and 2016 dividend yield of 7.0 and 7.3%, respectively. FUTUREPF: Yields

5 4

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

10 8 6 4 2

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

Source: SET, DBS Vickers

Mar-14

10-Year Govt Bond Yield

Dec-13

12

Sep-13

FUTUREPF's Yield

2

Jun-13

% 14

Mar-13

3

Source: SET, DBS Vickers

Page 5

Industry Focus Property Fund/REIT Sector

Thailand’s listed PFPO/REITs Yield Name

Samui Airport Leasehold Property Fund Airport Land And Houses Freehold And Leasehold Property Fund Gold Property Fund Leasehold UOB Freehold Eight Thonglor Property Fund Urbana Property Fund Apartment IMPACT Growth REIT Others Major Cineplex Lifestyle Fund Cineplex Centara Hotelsl & Resorts Leasehold Property Fund Dusit Thani Freehold & Leasehold Property Fund Erawan Hotel Growth Property Fund MFC Patong Heritage Property Fund Siri Prime Office Property Fund Luxury Real Estate Investment Samui Buri Property Fund Quality Hospitality Leasehold Qualty Houses Hotel and Residence Freehold and Leasehold Proprety Fund SRI Panwa Hotel Property Fund Thai Hotel Investment Freehold And Leasehold Property Fund Hotel Amata Summit Growth Freehold And Leasehold Real Estate Investment Trust MFC Industrial Investment Property and Leashold Fund MFC-Strategic Storage Fund TICON Property Fund Thai Industrial Fund 1 TICON Industrial Growth Leasehold Property Fund Hemaraj Industrial Property And Leasehold Fund 101 Montri Storage Pinthong Industrial Park Property Fund Sub Sri Thai Property Fund Subsrithai Smart Storage Property Fund TPARK Logistics Property Fund Wha Premium Factory And Warehouse Property Fund Wha Premium Growth Freehold And Leasehold Real Estate Investment Trust Ticon Freehold And Leasehold Real Estate Investment Trust Industrial

Source: SET, DBS Vickers

Page 6

Ticker

Freehold/Leasehold

Mkt Cap

(%)

P/NAV

Daily Turnover

(US$)

FY15

(x)

(US$m)

6.4 6.4 8.4 6.1 5.0 9.7 7.3 6.4 6.4 7.7 7.7 9.4 5.1 6.7 7.1 5.9 5.5 14.2

1.8 1.8 0.8 0.5 0.8 0.7 0.7 1.0 1.0 1.1 1.1 0.4 0.8 0.9 1.0 1.0 0.5 0.7 0.4

0.29 0.29 0.02 0.00 0.01 0.00 0.01 0.36 0.36 0.08 0.08 0.01 0.08 0.04 0.00 0.00 0.01 0.00 0.01

SPF

Leasehold

LHPF GOLDPF UOB8TF URBNPF

Freehold and Leasehold Leasehold Freehold Leasehold

IMPACT

Freehold

MJLF

Leasehold

CTARAF DTCPF ERWPF M-PAT SIRIP LUXF SBPF QHOP

Leasehold Leasehold & Freehold Freehold Freehold Freehold Freehold Freehold Leasehold

518 518 77 31 58 8 174 462 462 120 120 35 97 47 29 51 30 18 23

QHHR SPWPF

Leasehold & Freehold Freehold

77 55

9.0 8.3

0.8 0.9

0.03 0.01

THIF

Leasehold & Freehold

860 1,321

3.6 6.8

1.1 0.8

0.01 0.02

AMATAR M-II M-STOR TFUND TIF1 TGROWTH HPF MONTRI PPF SSTPF SSTSS TLOGIS WHAPF

Freehold and Leasehold Leasehold Freehold Freehold Freehold Leasehold Freehold and Leasehold Freehold Freehold Freehold Freehold Freehold and Leasehold Freehold

111 45 18 339 18 188 111 15 68 18 22 142 298

7.6 7.5 6.6 6.0 7.3 7.6 7.8 8.0 7.3 7.4 7.2 6.1 6.4

3.3 0.9 0.9 1.0 0.7 1.2 0.8 0.9 1.0 0.9 0.9 1.0 1.1

0.21 0.00 0.00 0.07 0.01 0.09 0.01 0.00 0.01 0.00 0.00 0.03 0.09

WHART

Freehold and Leasehold

91

7.3

n.a.

0.08

TREIT

Freehold and Leasehold

98 1,582

5.8 7.1

1.0 1.1

0.04 0.04

Industry Focus Property Fund/REIT Sector

Thailand’s listed PFPO/REITs (continued) Name

Bangkok Commercial Property Fund CPN Commercial Growth Leashold Property Fund JC Property KPN Property Fund Millionaire Property Fund Prime Office Leasehold Property Fund Sala & Sathorn Property Fund C.P. Tower Growth Leasehold Property Fund Quality Houses Property Fund Thai Commercial Investment Fund Office Uniloft Property Fund MFC-Nichada Thani PF Nichada-Thani Property Fund 2 Multi-National Residence Fund TU Dome Residential Complex Residential CPN Retail Growth Leasehold Property Fund Crystal Retail Growth Leasehold Property Fund Future Park Property Fund Tesco Lotus Retail Growth Freehold And Leasehold Property Fund Trinity Freehold and Leasehold Property Fund Thai Retail Investment Fund Talaad Thai Leasehold Property Fund LH Shopping Centers Leasehold Real Estate Investment Trust Retail

Ticker

Freehold/Leasehold

BKKCP CPNCG JCP KPNPF MIPF POPF SSPF CPTGF QHPF TCIF

Freehold Leasehold Leasehold Freehold Freehold Leasehold Freehold Leasehold Leasehold Leasehold

UNIPF MNIT MNIT2 MNRF TU-PF

Freehold Leasehold Leasehold Leasehold Leasehold

CPNRF CRYSTAL FUTUREPF

Leasehold Leasehold Leasehold

TLGF TNPF TRIF TTLPF

Freehold and Leasehold Freehold and Leasehold Freehold Leasehold

LHSC

Leasehold

Mkt Cap

Yield (%)

P/NAV

Daily Turnover

(US$)

FY15

(x)

(US$m)

27 140 17 50 106 178 44 269 221 825 1,878 14 11 22 20 5 71 1,028 109 268

6.7 7.1 4.0 6.4 5.8 8.1 2.7 8.0 7.5 5.0 6.1 7.4 5.4 8.7 8.3 6.0 6.0 7.7 7.0

0.8 1.0 1.1 0.9 1.5 1.1 1.0 1.0 0.9 1.1 1.0 0.9 0.5 0.7 0.5 0.3 0.6 1.3 0.9 1.5

0.00 0.15 0.02 0.00 0.10 0.07 0.17 0.08 0.00 0.06 0.00 0.00 0.01 0.01 0.00 0.00 0.56 0.02 0.07

859 20 632 96

6.1 4.3 8.3

1.2 0.5 1.1 1.7

0.47 0.01 0.00 0.00

141 3,153

7.3 5.8

1.0 1.1

0.08 0.15

Source: SET, DBS Vickers

Page 7

Industry Focus Property Fund/REIT Sector

Regional Comparison La s t Pri c e

%

DPU c e n ts

Yi e l d

FYE

1 1 -Se p -1 5

Pri c e Ta rg e t

Up s i d e

2015

2016

2015

2016

R e c o m'd

Dec Sep Dec

1.315 1.310 0.950

1.48 1.51 1.12

13% 15% 18%

8.6 9.7 6.9

9.2 9.8 7.1

6.5% 7.4% 7.3%

7.0% 7.5% 7.5%

Buy Buy Buy

Dec Dec Mar Sep Aug

1.890 1.345 0.840 1.895 0.960

2.07 1.69 0.92 2.05 0.99

10% 26% 10% 8% 3%

11.4 10.6 7.6 11.8 5.5

11.8 11.0 7.8 12.0 5.5

6.0% 7.9% 9.0% 6.2% 5.7%

6.2% 8.1% 9.3% 6.3% 5.7%

Buy Buy Hold Buy Hold

Jun Dec Mar Mar

0.760 1.515 1.320 0.935

0.91 1.58 1.35 1.12

20% 4% 2% 20%

7.6 9.5 8.3 7.3

5.4 10.1 8.6 7.9

10.0% 6.3% 6.3% 7.8%

7.1% 6.6% 6.5% 8.4%

Buy Hold Hold Buy

Mar Mar Mar Mar Dec Dec Dec

2.200 0.840 1.530 1.010 0.610 0.990 0.790

2.30 0.90 1.50 1.11 0.61 1.09 0.86

5% 7% -2% 10% 0% 10% 9%

14.9 5.6 10.6 7.5 5.0 8.5 6.3

15.0 5.8 10.4 7.8 5.1 8.7 6.4

6.8% 6.7% 6.9% 7.4% 8.2% 8.6% 8.0%

6.8% 6.9% 6.8% 7.7% 8.3% 8.8% 8.1%

Hold Hold Hold Buy Hold Hold Buy

Mar Dec Dec Dec Sep Dec Dec Mar

0.605 1.210 1.365 0.615 0.725 0.800 2.260 0.950

0.74 1.38 1.65 0.71 0.83 0.98 2.56 0.97

22% 14% 21% 16% 14% 22% 13% 2%

5.6 8.8 11.1 4.7 6.0 6.5 13.1 8.0

5.7 9.2 11.3 4.7 6.1 6.6 12.2 8.7

9.3% 7.3% 8.1% 7.7% 8.3% 8.2% 5.8% 8.4%

9.4% 7.6% 8.3% 7.6% 8.3% 8.2% 5.4% 9.2%

Buy Buy Buy Hold Hold Buy Buy Hold

Dec Dec

0.645 1.005

0.90 1.14

40% 13%

6.5 6.4

6.4 7.0

10.0% 6.4%

10.0% 7.0%

Buy Buy

Ho n g Ko n g (HK$ ) Champion REIT Fortune REIT Prosperity REIT Sunlight REIT Link REIT

Dec Dec Dec Jun Mar

3.95 7.50 2.78 3.90 41.25

4.78 9.18 3.06 4.23 48.10

21% 22% 10% 8% 17%

20.0 42.0 16.0 20.0 166.0

19.0 46.0 17.0 22.0 183.0

5.2% 5.6% 5.9% 5.1% 4.0%

4.9% 6.2% 6.2% 5.6% 4.4%

Buy Buy Buy Buy Hold

M a l a ys i a (R M ) Axis REIT CapitaMalls Msia Trust IGB REIT Pavilion REIT MRCB-Quill REIT Sunway REIT

Dec Dec Dec Dec Dec Jun

1.66 1.39 1.30 1.52 1.11 1.52

1.75 1.50 1.40 1.60 1.25 1.75

5% 8% 8% 5% 13% 15%

9.9 8.9 7.8 8.0 8.4 8.7

9.0 8.8 8.0 8.1 8.4 9.1

5.9% 6.4% 6.0% 5.2% 7.5% 5.7%

5.4% 6.3% 6.2% 5.3% 7.5% 6.0%

Hold Buy Buy Hold Hold Buy

Th a i l a n d (B t) CP Tower Growth Leasehold CPN Retail Growth Leasehold Property Fund Future Park LH Prop Fund Impact Growth Real Estate Investment Trust LH Shopping Centers Leasehold Prime Office LH Prop Fund Samui Airport Property Fund (Leasehold) Tesco Lotus Retail Growth TICON Industrial Growth Leasehold Property Fu

Dec Dec Dec Mar Dec Dec Dec Feb Dec

10.00 16.70 18.20 11.20 10.40 13.30 19.60 13.20 12.20

10.70 18.00 22.30 12.00 11.40 14.00 21.40 15.10 12.90

7% 8% 23% 7% 10% 5% 9% 14% 6%

80.0 99.7 127.0 42.0 73.0 108.0 129.6 81.0 93.2

86.0 126.0 133.0 75.0 73.0 111.0 129.6 80.9 93.2

8.0% 6.0% 7.0% 3.8% 7.0% 8.1% 6.6% 6.1% 7.6%

8.6% 7.6% 7.3% 6.4% 7.0% 8.3% 6.6% 6.1% 7.6%

Buy Buy Buy Buy Buy Buy Buy Buy Buy

Si n g a p o re (S$ ) O ffi c e CapitaLand Commercial Trust Fraser Commercial Trust Keppel Reit R e ta i l CapitaLand Mall Trust CapitaLand Retail China Trust Croesus Retail Trust * Frasers Centrepoint Trust SPH REIT M i xe d (R e ta i l & O ffi c e ) Starhill Global REIT Suntec REIT Mapletree Commercial Trust * Mapletree Greater China Commercial Trust * I n d u s tri a l A-Reit * Ascendas India Trust * Mapletree Industrial Trust * Mapletree Logistics Trust * Cambridge Industrial Trust Cache Logistics Trust Soilbuild Business Space Reit Ho s p i ta l i ty & He a l th c a re Ascendas Hospitality Trust * Ascott Residence Trust CDL Hospitality Trust Far East Hospitality Trust Frasers Hospitality Trust OUE Hospitality Trust Parkway Life Religare Health Trust * O th e rs IREIT Global Keppel DC REIT

Page 8

Industry Focus Property Fund/REIT Sector

Regional Comparison 1 1 -Se p -1 5

Ge a ri n g R a ti o FY1 5 F

B V Pe r Sh FY1 5 F

P/B ra ti o

Y/E

La s t Pri c e

Dec Sep Dec

1.315 1.310 0.950

19% 36% 37%

1.74 1.67 1.41

Dec Dec Mar Sep Aug

1.890 1.345 0.840 1.895 0.960

36% 28% 47% 30% 26%

Jun Dec Mar Mar

0.760 1.515 1.320 0.935

Mar Mar Mar Mar Dec Dec Dec

Sh a re Pri c e Pe rfo rma n c e 1M

3M

6M

12M

0.75 0.79 0.67

-4.7% -7.4% -9.1%

-16.8% -11.5% -17.4%

-22.7% -10.3% -22.1%

-21.3% -5.4% -23.7%

1.82 1.69 0.94 1.85 0.93

1.04 0.80 0.89 1.02 1.04

-6.0% -11.2% -9.7% -5.7% -5.4%

-10.9% -20.7% -9.7% -6.2% -8.1%

-8.7% -17.5% -10.6% -5.7% -7.3%

-5.3% -15.4% -11.1% -2.8% -10.3%

36% 35% 36% 41%

0.92 2.07 1.24 1.18

0.83 0.73 1.07 0.79

-8.4% -8.5% -2.6% -7.0%

-11.6% -13.4% -10.2% -10.1%

-7.9% -18.6% -13.7% -9.7%

-7.3% -16.8% -9.3% -1.6%

2.200 0.840 1.530 1.010 0.610 0.990 0.790

34% 35% 35% 39% 36% 40% 36%

2.08 0.68 1.32 1.02 0.68 0.97 0.80

1.06 1.24 1.16 0.99 0.90 1.02 0.99

-4.4% -9.2% 2.3% -6.1% -4.7% -5.7% -6.0%

-10.2% -6.7% 0.7% -10.2% -11.6% -13.9% -6.0%

-10.9% -5.6% 0.3% -17.2% -12.2% -14.3% -1.3%

-6.8% 1.2% 5.9% -14.4% -14.7% -16.1% 0.0%

Mar Dec Dec Dec Sep Dec Dec Mar

0.605 1.210 1.365 0.615 0.725 0.800 2.260 0.950

37% 39% 35% 32% 40% 42% 36% 15%

0.72 1.35 1.63 0.97 0.94 0.90 1.70 0.94

0.84 0.90 0.84 0.64 0.77 0.89 1.33 1.01

-10.4% -4.0% -6.5% -10.9% -10.5% -10.1% -7.4% -9.5%

-14.2% -4.0% -17.0% -20.7% -15.7% -14.0% -0.9% -5.5%

-12.3% -4.7% -20.4% -24.5% -19.0% -14.0% -3.4% -10.0%

-16.0% -2.4% -19.5% -27.2% -18.5% -10.6% -3.8% 0.0%

Dec Dec

0.645 1.005

32% 34%

0.75 0.88

0.86 1.15

-4.4% -8.2%

-6.3% -4.7%

-6.9% -2.9%

-16.8% 0.0%

Ho n g Ko n g (HK$ ) Champion REIT Fortune REIT Prosperity REIT Sunlight REIT Link REIT

Dec Dec Dec Jun Mar

3.95 7.50 2.78 3.90 41.25

22% 30% 27% 22% 12%

8.36 12.76 4.90 7.99 51.53

0.47 0.59 0.57 0.49 0.80

-6.6% -7.3% -4.8% -0.3% -6.7%

-12.2% -4.0% 0.4% -0.5% -10.1%

5.9% -8.5% -6.7% 4.3% -13.7%

11.6% 2.3% 6.9% 17.5% -10.7%

M a l a ys i a (R M ) Axis REIT CapitaMalls Msia Trust IGB REIT Pavilion REIT MRCB-Quill REIT Sunway REIT

Dec Dec Dec Dec Dec Jun

1.66 1.39 1.30 1.52 1.11 1.52

33% 29% 24% 15% 36% 31%

1.21 1.29 1.06 1.26 1.39 1.26

1.37 1.08 1.22 1.20 0.80 1.21

-0.9% 8.6% 0.8% 5.6% 1.8% 1.3%

-5.4% -2.1% -2.3% 0.0% -4.3% -8.4%

-6.7% -4.8% -2.3% 2.0% -11.2% -5.0%

-5.7% -1.4% 0.8% 10.1% -5.9% 1.3%

Th a i l a n d (B t) CP Tower Growth Leasehold CPN Retail Growth Leasehold Property Fund Future Park LH Prop Fund Impact Growth Real Estate Investment Trust LH Shopping Centers Leasehold Prime Office LH Prop Fund Samui Airport Property Fund (Leasehold) Tesco Lotus Retail Growth TICON Industrial Growth Leasehold Property Fu

Dec Dec Dec Mar Dec Dec Dec Feb Dec

10.00 16.70 18.20 11.20 10.40 19.60 19.60 13.20 12.20

Net Cash 6% 6% 24% 18% 7% Net Cash 9% 7%

10.34 13.02 12.52 10.80 10.26 11.55 11.04 11.24 10.28

0.97 1.28 1.50 1.04 1.01 1.15 1.78 1.17 1.09

0.0% 0.0% -1.6% -1.8% -3.7% 1.5% 1.6% -2.2% 0.0%

0.0% 1.2% 1.1% 4.7% -1.0% 6.4% 9.6% 0.0% 0.0%

0.5% 1.2% 5.3% 8.7% 1.0% 10.8% 12.1% -0.6% 2.6%

1.5% -1.2% 4.7% nm nm 5.6% 10.8% -4.6% 13.2%

Si n g a p o re (S$ ) O ffi c e CapitaLand Commercial Trust Fraser Commercial Trust Keppel Reit R e ta i l CapitaLand Mall Trust CapitaLand Retail China Trust Croesus Retail Trust * Frasers Centrepoint Trust SPH REIT M i xe d (R e ta i l & O ffi c e ) Starhill Global REIT Suntec REIT Mapletree Commercial Trust * Mapletree Greater China Commercial Trust * I n d u s tri a l A-Reit * Ascendas India Trust* Mapletree Industrial Trust* Mapletree Logistics Trust* Cambridge Industrial Trust Cache Logistics Trust Soilbuild Business Space Reit Ho s p i ta l i ty & He a l th c a re Ascendas Hospitality Trust * Ascott Residence Trust CDL Hospitality Trust Far East Hospitality Trust Frasers Hospitality Trust OUE Hospitality Parkway Life Religare Health Trust * O th e rs IREIT Global Keppel DC REIT

*

A-Reit, Ascendas Hospitality Trust, Ascendas India Trust, Croesus Retail Trust, Mapletree Industrials Trust, Mapletree Logistics Trust, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, Religare Health Trust Religare Health Trust (FY16 - 17) Source: DBS Bank, DBS Vickers, AllianceDBS Research, Bloomberg Finance L.P, Thomson Reuters

Page 9

Industry Focus Property Fund/REIT Sector

Evolution of Thai Property Funds (PFPOs)/REITs

Number of listed PFPO/REIT 60 3

5

51

51

Property Funds 40 30 20 10

46

41

35

29

26

2015

2014

2013

2012

2011

2010

0

Source: SET, DBS Vickers

Market Capitalisation of PFPO/REIT Sector Btm 350,000 300,000

REITs Property Funds

250,000 200,000 150,000 100,000 50,000

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

-

2003

REIT regulations took effect on 1 Jan 2013. The Securities and Exchange Commission (SEC) has barred existing PFPOs from increasing capital, and new IPOs of PFPOs from 2014 (except those who had submitted their applications in 2013 and which listing process had not been completed). All new setups have to be under the REIT structure. Existing PFPOs can convert to the REIT structure, but there have so far been no details on the conversion costs. As a result, there have not been any applications for conversion. Nonetheless, some larger funds such as CPNRF and TLGF are waiting for details from the SEC and are likely to convert into the REIT structure.

REITs

50

2009

The first Thai PFPO, UOB Apartment Property Fund (UOBAPF, or BOA Apartment Property Fund at that time) entered the market in late 2003. The sector enjoyed strong growth in 2005 and 2006, when the listing of several new PFPOs boosted the sector’s market capitalisation significantly. But growth slowed when the Bank of Thailand (BOT) introduced the 30% unremunerated reserve requirement (URR) – in late 2006 -for foreign investors who invested in Thai PFPOs, to prevent speculation on the Thai baht. But subsequently on 3 Mar 2008, the BOT lifted the URR for short-term capital inflows, citing an improving economy. The sector’s market capitalisation surged again in 2012-2014 when a number of large funds entered the market before the expiry of the deadline to set up new property funds.

Source: SET, DBS Vickers

First REIT listed in 2014. The first Thai REIT, Impact Growth Real Estate Investment Trust (IMPACT), was listed on the SET on 1 October 2014. Since then, there have been four other REIT listings on the SET. 51 PFPOs and 5 REITs listed on the SET currently. Todate, there are 51 PFPOs and 5 REITs listed on the SET with a combined market capitalisation of Bt333.4bn (US$9.3bn). The sector accounts for 2.6% of the SET’s total market capitalisation currently. Initially, these PFPOs were listed under the Property Sector. But as the number of PFPOs grew, the SET created a separate “Property Fund & REIT” sector in 2009.

Page 10

Growth driven by new listings rather than secondary offerings. Sector growth in the last decade was driven mainly by the listing of new PFPOs/REITS, rather than the growth of existing funds. Of the total, only a few including CPNRF, TFUND, TLOGIS, and TLGF, have turned to the market for secondary offerings to acquire new assets. Note that the maximum gearing allowed for property funds is only 10% of NAV, meaning that they need to increase capital for major asset acquisitions as the level of debt alone would not be sufficient.

Industry Focus Property Fund/REIT Sector

Key differences between PFPO and REIT Both PFPO and REIT have the same objective, which is to invest in income-generating assets. Both must pay out at least 90% of their net income as dividends, making them high-yield investment alternatives.

Nonetheless, the legal structure, type of assets they can invest in, leverage limit, holding restrictions, and taxation of dividends differ. The key differences are listed below.

Key differences between PFPO and REIT Topic  General

Property Fund

Legal Structure

Mutual fund

Trust

Minimum Size

Not less than 500 million Baht

Same

Upon establishment: ≥250

Same

Number of unit holders

REIT

After establishment: ≥35 Listing of Unit

Investment units must be listed

REIT unit must be listed

Management

Asset management company

REIT Manager, namely an asset management company or a company with expertise in managing real estate and is quailed according to the criteria set by the SEC

Registrar

Not required to be TSD

Requires consent of the SET

Only ones listed on the SEC’s positive list

Not specified, however the real estate shall not be used by the lessee to operate immoral or illegal business

 Investment Type of property in which investment can be made Investment in real estate abroad

Not permitted

Permitted

Development of real estate (Green-field project)

Not permitted

Not exceeding 10% of the total assets

 Leverage limit

Not exceeding 10% of the net asset value (NAV)

Not exceeding 35% of total assets and not exceeding 60% in the case REIT has received an investment grade.

Distribution

At least 25% must be offered to the public, and units must be allocated to all free float subscribers equally, one board lot at a time, unit all subscribed units are allocated (Small Lot First)

Not specified; allocated to free float REIT unit holders in accordance with the criteria for listing (no less than 20% of the total trust units and of each tranche (If any))

Holding Restriction for Any Person of Group of Persons

No more than 1/3 of the total number of investment units

No more the 50% of the total number of REIT unit and of each tranche (if any)

 Disclosure

Similar to mutual funds

Similar to listed companies

Annual meeting of unit holders

Not specified

Annually, within four months from the end of the fiscal year

Codes concerning the acquisition and disposal of assets / related parties transactions

Resolution of unit holders not required

Resolution of unit holders holding an aggregate of not less than 15% of the total REIT unit and of each tranche (if any)

Fund is exempt from corporate tax

Trust is exempt from corporate tax

In some cases, unit holders are not subject to tax levied on dividends such as a company holding units for three months prior and three months after the date of dividend payment

REIT unit holders of all types are subject to tax.

 Distribution and allocation of units

 Tax

Source: SET, DBS Vickers

Page 11

Industry Focus Property Fund/REIT Sector

Major sponsors Major sponsors. The following table lists the major sponsors of the assets for Thai PFPOs/REITs, together with their current holdings. The top sponsors include TCC Land, Central Pattana (CPN), Bangkok Land (BLAND), Ek-Chai Distribution System (TESCO), TICON Industrial Connection (TICON), and WHA Corporation (WHA). Benefits to sponsors. Injecting their assets into PFPOs/REITs is an alternative fund-raising exercise for these companies, as it helps to unlock the value of their assets and most of them normally recognise huge disposal gains. The proceeds were normally used to finance their expansion plans or

develop new properties. They can still own the assets by taking a stake in the PFPOs/REITs and receive dividend income from the funds/REITs. Most also retain the property management role and receive property management fees from the funds/REITs. More assets to be injected. Many of these companies still have a pipeline of assets that can be injected into the REIT. Among these are TICON and WHA which are now planning secondary offerings for their REITs. WHA is also planning to inject their office assets into a new office REIT to be set up. CPN has a number of assets that can be injected into a REIT but is waiting for details from the SEC regarding the conversion into a REIT.

Major sponsors of assets for Thai PFPOs/REITs and their current holdings Sponsor Company CPN

TICON

under TICON Logistic Park WHA

Investment in Fund

Mkt Cap

Holding

Mkt Value

(Btm)

(%)

(Btm)

CPNRF

36,948

27%

9,862

CPNCG

5,034

25%

1,259

TFUND

12,185

24%

2,878

TLOGIS

5,090

19%

980

TGROWTH

6,771

25%

1,713

TREIT

3,528

12%

440

WHAPF

10,705

15%

1,606

WHART

3,263

15%

489

HPF

3,995

23%

924

IMPACT

16,604

50%

8,302

TLGF

30,852

25%

7,713

FUTUREPF

9,638

33%

3,212

SPF

18,620

25%

4,674

Asset World Estate

TCIF

29,654

33%

9,786

TVC Investments Ltd.

TCIF

29,654

32%

9,513

Than Tavorn (2012) Ltd.

TCIF

29,654

19%

5,631

Asset World Estate

TRIF

22,723

31%

6,930

Yodying Intertrade

TRIF

22,723

20%

4,440

Asset World Leisure

THIF

30,916

33%

10,208

Panachai Panich

THIF

30,916

18%

5,432

CPTGF

9,670

33%

3,223

HEMRAJ BLAND under: Impact Exhibition Ekchai Distribution (Tesco Lotus) Rangsit Plaza BA TCC Group under:

CP Land

Source: SET, DBS Vickers

Page 12

Industry Focus Property Fund/REIT Sector

Current status Sector breakdown by asset ownership. The sector now comprises 51 PFPOs and 5 REITs. Of the total, 40% hold freehold assets, 42% hold leasehold assets, and 18% hold both. For leasehold assets, the remaining leasehold life for most funds is 20-30 years.

Who invests in PFPO/REITs? Investors in Thai PFPOs/REITs are mainly locals. Foreign investors in Thai PFPOs/REITs have increased but are still considered small compared to the sector’s market capitalisation over the last few years. Foreign ownership (%) of Thai PFPOs/REIT

Asset ownership of Thai PFPOs/REIT Leasehold & Freehold 18%

Leasehold 42% Freehold 40%

Source: SET, DBS Vickers Source: SET, DBS Vickers

Sector breakdown by business. Retail now make up 34% of the sector’s market capitalisation, followed by Office (20%), Industrial (17%), and Hotel (14%). The rest are distributed between Airport (6%), Exhibition Center (5%), Apartment (2%), and Cineplex (1%). Sector breakdown by business

Local investors comprise both institutional and retail investors. Major institutional investors are Social Security Fund, Government Pension Fund, insurance companies, banks, universities, sponsors, and mutual funds. Mutual funds that invest in PFPO/REITs Fund

NAV (Btm)

TMB Property Income Plus

TMB A.M.

8,023

One Property Plus Fund

One AM Fund

2,408

One Property Plus Dividend Fund

One AM Fund

972

MFC Property Dividend Fund

MFC Fund

734

MFC Property Wealth Fund

MFC Fund

2,220

Thanachart Fund

1,447

Phatra Asset

1,236

Thanachart Property Sector Fund Phatra Property Sector Fund Phatra Property Sector Fund Diviidend CIMB-Principal Property Income - A CIMB-Principal Property Income - R CIMB-Principal Property Income - D

Source: Company, DBS Vickers

By

CIMB-Principal Property Income - C

Phatra Asset CIMB-Principal A.M. CIMB-Principal A.M. CIMB-Principal A.M. CIMB-Principal A.M.

61 542 742 199 341

Source: Company, DBS Vickers

Page 13

Industry Focus Property Fund/REIT Sector

Price Performance Sector has yielded 13% average annual returns to investors in last six years. This comprised about 6% price appreciation and 7% distribution yield p.a. The total returns are lower than the SET average return of 14% during the same period, but the level of risk in investing in PFPO/REIT is much lower. This is mainly because PFPO/REITs normally invest in recurring income assets which generate steady cash flows. In addition, it is strictly governed by the SEC to pay out not less than 90% of net income. The borrowing limit is also capped at 10% for PFPOs and 35% for REIT; there is no limit for other stocks. Total return of investing in Thai PFPO/REIT sector 40% Distribution Yield 30%

Price Change

20% 10% 0% -10% 2010

2011

2012

2013

2014

2015

-20% Source: SET, DBS Vickers

Sector has outperformed the market YTD. The sector index has inched up 2.4% YTD vs the SET’s 7.7% loss as investors turned to less risky assets amid current high market volatility. Thai PFPO/REIT sector index vs SET Index 1.10 1.05 1.00 0.95 0.90 0.85 0.80

SET

0.75

SET PF&REIT

Source: SET, DBS Vickers

Page 14

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

Mar-14

Dec-13

Sep-13

Jun-13

Mar-13

0.70

Most funds/REITs outperformed the market. Of the 56 listed funds/REITs, 48 have outperformed the market YTD. An out-performer YTD Stock

SSPF WHAPF CPNCG SPF POPF TGROWTH QHOP IMPACT MIPF QHPF MJLF UOB8TF FUTUREPF SIRIP SPWPF LUXF PPF TLGF CPTGF TIF1 WHART TLOGIS CPNRF CRYSTAL KPNPF LHSC TFUND M-STOR TTLPF ERWPF GOLDPF JCP SSTPF CTARAF M-PAT DTCPF TCIF BKKCP LHPF SSTSS QHHR UNIPF MNIT2 MNIT M-II THIF MONTRI HPF TRIF SBPF URBNPF TU-PF MNRF TNPF AMATAR TREIT

End-2014 (Bt)

Source: SET, DBS Vickers

5.20 9.90 10.30 17.30 11.80 10.90 3.82 10.20 18.50 9.25 12.20 8.20 17.00 10.00 9.30 5.10 10.20 12.40 9.40 7.00 10.00 11.80 16.10 9.70 9.80 10.20 10.40 10.60 19.00 9.60 5.35 10.00 9.40 3.96 9.85 8.55 13.50 9.75 8.60 9.70 8.45 9.80 8.25 3.00 10.00 12.70 9.80 9.50 16.20 9.00 5.15 2.20 8.55 8.70

11-Sep-15 (Bt)

9.55 11.40 11.80 19.60 13.30 12.20 4.24 11.20 20.00 9.95 13.10 8.80 18.20 10.70 9.95 5.45 10.90 13.20 10.00 7.35 10.50 12.30 16.70 10.00 10.00 10.40 10.60 10.70 19.10 9.60 5.35 10.00 9.40 3.94 9.80 8.50 13.40 9.55 8.40 9.45 8.20 9.45 7.90 2.86 9.50 11.80 8.80 8.50 14.30 7.65 4.24 1.74 6.60 4.90 11.10 10.30

Change (%)

84% 15% 15% 13% 13% 12% 11% 10% 8% 8% 7% 7% 7% 7% 7% 7% 7% 6% 6% 5% 5% 4% 4% 3% 2% 2% 2% 1% 1% 0% 0% 0% 0% -1% -1% -1% -1% -2% -2% -3% -3% -4% -4% -5% -5% -7% -10% -11% -12% -15% -18% -21% -23% -44% nm nm

Industry Focus Property Fund/REIT Sector

Industry Outlook Office – Bright outlook Favourable demand-supply situation. According to CBRE (Thailand), the total supply of office space in Bangkok increased by 86,000 sqm in 1H15 to 8.4m sqm. Among the major Grade A Buildings completed was Bhiraj Tower at Emquartier located on Sukhumvit Road, with a total lettable area of 47,500 sqm. Occupancy rate remained flat at 90.7% at end-1H15. Net take-up surged to 97,000 sqm in 1H15, slightly exceeding the total new supply during the period. It is estimated net take-up of office space for the whole of 2015 will exceed 200,000 sqm.

Future supply not a concern. It is estimated that 103,035 sqm of new supply will be completed in 2H15, 75% of which are located in non-CBD areas. In 2016, about 119,210 sqm of new supply will enter the market, all of which will be outside the CBD. Office: Future supply will be mostly non-CBD Sqm. 250,000 Non CBD 200,000

CBD

150,000

3,000,000

6%

2,000,000

4%

1,000,000

2% 0%

1H10 2H10 1H11 2H11 1H12 2H12 1H13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

-

Stock

Demand

Vacancy Rate

Source: CBRE, DBS Vickers

Net take-up surging in 2015. Despite the slowing economy, net take-up has been strong YTD, with demand coming from expanding companies in the finance, logistics, insurance and e-commerce sectors. Office: Net take-up is on the rise Sqm. 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F

0

Source: CBRE Thailand, DBS Vickers

0

2017F

8%

2016F

10%

4,000,000

2015F

12%

5,000,000

2014

6,000,000

50,000

2013

14%

2012

16%

7,000,000

2011

8,000,000

100,000

2010

18%

2009

9,000,000

Vacancy Rate, All Grades

Sqm (Net Lettable Area)

Office: Demand, Supply and Vacancy

Source: CBRE Thailand, DBS Vickers

Office: Future Supply Building

Lettable Area (Sqm)

- 2H15 Major Tower, Thonglor 10 G-Land Tower, Rama 9 Bhiraj Tower, Sathorn - 2016 The Metropolis, Sukhumvit 39 Bhiraj Tower, BITEC FYI Center, Rama IV M Tower, Sukhumvit 62 Rungrojthanakul 4, Ratchadapisek - 2017 Shinawatra 4, Phaholyothin Pearl Bangkok, Phaholyothin Singha Complex, Asoke Gaysorn Office Tower, Rajdamri -2018 Whizdom 101, Sukhumvit 101 -2020 and beyond Super Tower, Rama 9 SJ Infinite II, Bangna KM 7 The Bangkok Mall, Bangna Suan Lum Night Bazaar, Rama IV

Completion

10,405 65,630 27,000

3Q15 4Q15 2015

13,540 31,880 48,095 9,990 15,705

1Q16 2Q16 4Q16 4Q16 4Q16

13,060 n.a. 36,000 19,500

1Q17 2017 1Q17 2Q17

30,000

2018

94,000 30,000 100,000 137,500

2020 n.a. n.a. n.a.

Source: Knight Frank Thailand, DBS Vickers

Page 15

Industry Focus Property Fund/REIT Sector

Vacancy rate to fall further. With take-up expected to outpace new supply, we estimate vacancy rate would continue to fall and there could be a deficit in office space supply by the year 2020.

Bangkok office rents are still cheap vs regional peers. The following chart shows prime office rents in major cities in Asia Pacific. According to Knight Frank, Bangkok office rents are still one of the cheapest in Asia, averaging US$29.1/sqm/month in 2Q15 vs US$96.6 in Singapore and US$173.1 in Hong Kong.

Office: Vacancy should continue to fall 18%

Sqm (Net Lettable Area)

16% 14% 12% 10% 8% 6% 4% 2%

Office: Bangkok office rents vs regional peers’ Vacancy Rate, All Grades

10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 -

Hong Kong Singapore Beijing Shanghai Seoul

Stock

Demand

Jakarta

2017F

2016F

2015F

2014

2013

2012

2011

2010

0%

Guangzhou

Vacancy Rate

Bangkok

Source: CBRE Thailand, DBS Vickers

Phnom Penh Kuala Lumpur

Rising rents. According to Knight Frank Thailand, average office rental rate in Bangkok increased 7% y-o-y to Bt674/sqm/month in 2Q15. Rents rose in all segments, thanks to the strong increase in demand coupled with moderate new supply. The rising rents and limited new supply in CBD have led many occupiers to relocate to emerging business locations, e.g. on Rama 9 and Ratchadapisek streets where rents are cheaper. Looking forward, rents should continue to trend up as demand growth outpaces supply growth.

0

150

200

Source: Knight Frank, DBS Vickers

Ten office property funds offering average yield of 6.1%. We expect CP Tower Growth Leasehold Property Fund (CPTGF) and Prime Office Property Fund (POPF) to offer 2015 yields of 8.1% and 8.0%, respectively, the highest among peers. Of the total, three hold freehold assets; they are BKKCP, MIPF, and SSPF. The rest hold leasehold assets. 2015 estimated yield of listed office property funds

1,000

% 9.0

900 800

8.0

700

7.0

600

6.0

500

5.0

POPF

CPTGF

QHPF

CPNCG

BKKCP

2Q2015

Source: SET, DBS Vickers

KPNPF

Source: Knight Frank Thailand, DBS Vickers

-

MIPF

Non-CBD Grade B

TCIF

Non-CBD Grade A

1.0

JCP

CBD Grade B

2.0

SSPF

CBD Grade A

1Q2015

4Q2014

3Q2014

2Q2014

1Q2014

4Q2013

3Q2013

2Q2013

1Q2013

4Q2012

3Q2012

2Q2012

1Q2012

4Q2011

3Q2011

3.0

2Q2011

4.0

300

1Q2011

400

Page 16

100 US$/sqm/month

Office: Rising rents Bt per sqm per month

50

Industry Focus Property Fund/REIT Sector

Retail – Competition grows as supply rises Demand vs supply. Total retail space in Bangkok increased by 169,040 sqm to 6.9m sqm in 1H15, according to CB Richard Ellis. The major developments that opened in 1H15 were The EmQuartier with total lettable area of 50,000 sqm, The Hub which is an expansion of Zeer Rangsit, with a total area of 70,000 sqm, and The Rest Area community mall with 3,040 sqm of lettable area at Prachachuen Toll Plaza on Si Rat Expressway. Take-up rate was about 50,000 sqm in 1H15, raising occupied space to 6.3m sqm at end-1H15. Occupancy easing but remains strong. Despite the rising supply, occupancy rate has eased from 94% at end-2014 to 93.1% at end-1H15, as supply grew faster than demand. Retail: Demand, Supply and Occupancy sqm 8,000,000

100%

7,000,000

98% 96%

6,000,000

94%

5,000,000

92%

4,000,000

90%

3,000,000

88%

CentralPlaza WestGate : the biggest mall to open this year. The project is located on a 100-rai (1 rai =0.4 acre) plot of land along the West Ring Road at the Bangyai intersection, where Kanchanapisek Road meets Rattanathibet Road. This is the largest regional gateway in western Bangkok, with the most comprehensive transportation system including the MRT Purple Line, public transportation, piers, a ring road, expressway and motorway. It is surrounded by a lot of residential projects. The mall is developed by Central Pattana (CPN) and was opened on 28 August 2015 with 83% occupancy rate on opening date. Occupancy is now over 90%. The project comprises: Central Department Store (31,000 sqm) 6 Specialty Anchor stores (14,000 sqm) including Tops Market, Tops Super Store, Super Sports, PowerBuy, B2S, Office Mate 4-storey CentralPlaza shopping mall (150,000 sqm), housing approximately 400 leading retailers 12-screen WestGate Cineplex (10,200 sqm) Virgin Active Club (3,000 sqm) Doraemon Comic World (2,600 sqm)

86%

2,000,000

84%

1,000,000

CentralPlaza WestGate

82%

-

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1H15

80%

Supply (Sqm)

Demand (Sqm)

Occupancy (RHS)

Source: CBRE (Thailand), DBS Vickers

Strong demand from international brands. Take-up continued to grow with demand coming from international retailers. According to Jones Lang Lasalle Thailand, a total of 41 internationally recognised brand-name retailers recently opened their stores at EmQuartier, and six at The Emporium. A lot of new supply entering the market. Colliers International estimates that 724,920 sqm of new supply will be completed in 2H15, 88% of which is located in Bangkok suburban area. These include CentralPlaza WestGate with a gross area of 500,000 sqm, which aims to be the most complete Super Regional Mall in Southeast Asia.

Source: CBRE (Thailand), DBS Vickers

Page 17

Industry Focus Property Fund/REIT Sector

Falling consumer confidence. According to data from the University of Thai Chamber of Commerce, Thailand’s consumer confidence index has been dropping steadily for eight consecutive months to 72.3 in August, a 15-month low. This was the result of a combination of factors including the recent bombing at the Rajchaprasong intersection, the sharp drop in exports, the low agricultural produce prices which have led to low farm incomes, a slowing Chinese economy, global economic uncertainties, and the sharp correction in the Thai stock market.

Bangkok retail rents still among the cheapest in Asia. The following chart shows prime retail rents in Asia Pacific. According to Jones Lang Lasalle, rents in shopping centers in CBD in Bangkok averaged US$667/sqm/year, still much lower than US$4,366 in Singapore and US$15,642 in Hong Kong. Retail: Asia Pacific shopping centers rents HK, Central Sydney Guangzhou

Consumer Confidence dropped for 8 consecutive months

Shanghai Melbourne

120 110 100 90 80 70 60 50 40

Brisbane Singapore Beijing Perth Adelaide Auckland

CCI Index

Mumbai Delhi

CCI Index - Current

Bangalore

CCI Index - Future

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

Chennai Bangkok Jakarta Manila 0

Source: Bank of Thailand, DBS Vickers

-5% -10%

1H15

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

0

Source: SET, DBS Vickers

TTLPF

0% 50

CRYSTAL

5%

LHSC

100

% 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 -

FUTUREPF

10%

TLGF

150

2015 estimated yield of listed retail property funds

CPNRF

20% 15%

2001

20,000

Seven retail property funds offering average yield of 6.7%. Excluding Trinity Freehold and Leasehold Property Fund (TNPF) which has not finalised a dividend payment for 2015, we estimate the seven listed retail property funds are offeringq an average distribution yield of 6.7% in 2015.

TRIF

25%

Retail sales index Growth (y-o-y)

200

Page 18

15,000

Source: Jones Lang Lasalle, DBS Vickers

TNPF

Retail sales and growth

Source: Bank of Thailand, DBS Vickers

10,000

Net Rents (US$ /sqm/year)

Retail sales index fell 3.5% y-o-y in 1H15. With consumer confidence falling amid global economic uncertainties and a slowing domestic economy, Thailand’s retail sales index also fell by 3.5% in 1H15, after falling 5.9% in 2014.

250

5,000

Industry Focus Property Fund/REIT Sector

Industrial – High vacancies Ready-Built Factories (RBF) Excess supply. Total new RBF supply increased by 92,000 sqm in 1H15 to 2.5m sqm, according to CB Richard Ellis. But net take-up rate had slowed to only 10,000 sqm in 1H15 amid the slowing economy. According to Knight Frank Thailand, as much as 70% of RBF supply is located in Chonburi, Rayong and Samut Prakan, because these are the major locations of various industrial hubs and home to Thailand’s automotive industry. RBF: Supply by provinces

Saraburi, 4%

Logistics Property (Warehouses) Rising vacancies. According to Knight Frank Thailand, total supply of warehouse rental space increased by 101,327 sqm in 1H15 to 3.5m sqm at end-1H15. This has dropped from an increase of 310,000-440,000 sqm semi-annually in the previous years, as rental warehouse developers slowed down expansion plans amid weakening demand, which is in turn the result of deteriorating exports and a slowing economy. Vacancies rose to 22% in 1H15. Warehouse: Demand, Supply and Vacancy Sqm 4,000,000

Prachinburi, 2% Chachoengsao, 1%

3,500,000 3,000,000

Nonthaburi, 1%

Pathum Thani, 6%

25%

Supply Occupied Space Vacancy (RHS)

20%

2,500,000

15%

2,000,000 Chonburi, 30%

10%

1,500,000

Ayudhya, 16%

1,000,000

5%

500,000

Samut Prakan, 21%

Rayong, 19%

0%

0 2011

2012

2013

2014

1H15

Source: Knight Frank Thailand, DBS Vickers Source: Knight Frank Thailand, DBS Vickers

Rents are stagnant. Average rental rate of warehouses eased to Bt160/sqm/month in 1H15, given weak demand and rising vacancies. The largest drop was in the Eastern Seaboard, because of high competition in the area.

Vacancy rate rising steadily since heavy flooding in 2011. With the increase in supply far outpacing demand, vacancy rate continued to rise from 33% at end-2014 to 35% at end-1H15.

Warehouse: Rents were stagnant RBF: Demand, Supply and Vacancy Sqm 300,000

Btm/Sqm/Month

175 40%

10%

145

5%

140

0%

135

2015F

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0

150

Source: CBRE (Thailand), DBS Vickers

Eastern Seaboard Pathum-Ayudhya

1H15

50,000

15%

2H14

100,000

SuvarnabhumiBangpakong

155

1H14

20%

150,000

160

2H13

25%

1H13

200,000

Eastern Bangkok

165

2H12

30%

170

1H12

35%

2H11

250,000

1H11

Supply Demand Vacancy

Source: CBRE (Thailand), DBS Vickers

Rents remain flat. The average factory rental rate inched up a meager 1.4% to Bt217/sqm/month in 2Q15, according to Knight Frank Thailand. With demand likely to remain slow, we expect rental rate of RBF to remain quite stagnant during the rest of this year.

Page 19

Industry Focus Property Fund/REIT Sector

The industrial property funds/REITs that offer the highest 2015 dividend yields include 101 Montri Storage Property Fund, Hemaraj Industrial Property & Leasehold Fund (HPF) and Ticon Industrial Growth Leasehold Property Fund (TGROWTH), which are offering 8.0%, 7.8%, and 7.6%, respectively.

Industrial REIT offering average 7.1% yield in 2015. There are now 15 listed property funds/REITs that invest in industrial assets including ready-built factories, logistic warehouses and storage. These funds are now offering generous dividend yield of 7.1% at current price. This is relatively high, but we are concerned about the sustainability of the yields of some industrial funds over the medium- to long-term, given weak demand and still high vacancy rates. Some funds are now being saved by the temporary revenue guarantees by the sponsors, which mean their yields could drop in the future. 2015 estimated yields of listed industrial property funds

% 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0

Source: SET, DBS Vickers

Page 20

TREIT

WHART

WHAPF

TLOGIS

SSTSS

SSTPF

PPF

MONTRI

HPF

TGROWTH

TIF1

TFUND

M-STOR

M-II

AMATAR

-

Industry Focus Property Fund/REIT Sector

Major office property funds/REITs Office CPNCG

CPTGF

POPF

QHPF

Units (m)

427

967

482

797

Price (Bt)

11.80

10.00

13.30

9.95

Mkt Cap (Btm)

5,034

9,670

6,406

7,930

140

269

178

220

Listing

21-Sep-12

16-Dec-13

12-Apr-11

12-Dec-06

TP (Bt)

12.50

10.80

14.00

n.a.

Upside

6%

8%

5%

n.a.

11.78

10.37

11.40

11.06

1.0

1.0

1.2

0.9

0.84

0.80

1.08

0.74

7.1%

8.0%

8.1%

7.5%

Mkt Cap (US$m)

NAVps (Bt) P/NAV (x) DPU (Bt) - 2015 Div. Yield

0.88

0.86

1.11

n.a.

Div. Yield

DPU (Bt) - 2016

7.5%

8.6%

8.3%

n.a.

IRR

8.5%

9.7%

8.6%

n.a.

Asset type

Office

Office

Office

Office

Asset

CentralWorld

CP Tower Silom

UBC II Tower

Q House Ploenchit

CP Tower Fortune Town CP Tower Phyathai

Ploenchit Center

Q House Lumpini

Nation Tower

Wave Place

0%

0%

0%

0%

100%

100%

100%

100%

17.3

28.2

22.8

19.5

80,604

70,293

125,184

115,678

4,765

9,660

5,491

7,194

59,119

137,421

43,860

62,193

5,197

9,626

5,754

7,837

Ownership (by leasable area) Freehold Leasehold Remaining leasehold life (yrs) Leasable area (Sqm) Cost (Bt) Acquisition price (Bt/sqm) Latest appraised value (Btm)

Source: SET, DBS Vickers

Page 21

Industry Focus Property Fund/REIT Sector

Major retail property funds/REITs Retail CPNRF

TLGF

Units (m)

2,212

2,337

530

390

488

Price (Bt)

16.70

13.20

18.20

10.00

10.4

36,948

30,852

9,638

3,900

5,076

1,026

857

268

108

141

Listing

23-Aug-05

19-Mar-12

07-Dec-06

27-Jun-13

26-Dec-14

TP (Bt)

18.00

15.1

22.27

11.44

11.40

Upside

8%

14%

22%

14%

10%

13.06

11.18

12.55

10.95

10.63

1.3

1.2

1.5

0.9

1.0

1.00

0.81

1.27

0.77

0.76

6.0%

6.1%

7.0%

7.7%

7.3%

Mkt Cap (Btm) Mkt Cap (US$m)

NAVps (Bt) P/NAV (x) DPU (Bt) - 2015 Div. Yield DPU (Bt) - 2016

FUTUREPF

CRYSTAL

LHSC

1.26

0.84

1.33

0.79

0.77

Div. Yield

7.6%

6.3%

7.3%

7.9%

7.4%

IRR

8.8%

7.4%

9.2%

9.3%

8.5%

Asset type

Retail

Retail

Retail

Retail

Retail

Central Rama 2

23 Tesco Lotus malls

Future Park Rangsit

The Crystal

Terminal 21 Mall

Asset

Central Rama 3

Crystal Design Center

Central Pinklao Central Chiangmai Airport Ownership (by leasable area) Freehold Leasehold Remaining leasehold life (yrs) Leasable area (Sqm) Cost (Bt) Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 22

0%

60%

0%

0%

0%

100%

40%

100%

100%

100%

34.9

21.7

27.5

28.0

25.0

218,269

331,563

65,500

118,018

34,058

27,973

27,761

6,403

4,132

5,942

128,159

83,729

97,761

35,015

174,456

Industry Focus Property Fund/REIT Sector

Major industrial property funds/REITs Indust rial A MA TA R

HPF

T REIT

WHA PF

WHA RT

T F UND T GROWT H

T L O GIS

Units (m)

358

470

343

939

311

1,150

555

414

Price (Bt)

11.10

8.50

10.30

11.30

10.60

10.60

12.20

12.30

Mkt Cap (Btm)

3,973

3,995

3,528

10,611

3,294

12,185

6,771

5,090

110

111

98

295

92

338

188

141

Mkt Cap (US$m) Listing

30-J un-15

TP (Bt)

11.0

n.a.

10.4

11.6

11.0

11.0

12.9

11

Upside

-1%

n.a.

1%

3%

4%

4%

6%

-8%

NAV ps (Bt)

10.0

10.1

9.9

10.2

9.8

11.1

10.4

11.8

P/NAV (x)

1.1

0.8

1.0

1.1

1.1

1.0

1.2

1.0

DPU (Bt) - 2015

0.4

0.7

0.6

0.7

0.8

0.6

0.9

0.7

7.6%

7.8%

6.1%

6.3%

7.6%

6.0%

7.6%

5.9%

0.8

n.a.

0.7

0.7

0.8

0.6

1.0

0.8

Div . Yield DPU (Bt) - 2016

23-J an-14 16-Dec-14 24-Dec-10 18-Dec-14 12-May -15 18-Dec-13 16-Dec-09

Div . Yield

7.5%

n.a.

7.2%

6.5%

7.2%

6.0%

7.9%

6.2%

IRR

9.3%

n.a.

10.3%

9.2%

9.4%

0.0%

8.1%

6.5%

F actories

F actories

Industrial

Industrial

Industrial

Industrial

Asset ty pe Asset

Industrial Warehouses

88 factories104 factories Warehouses Warehouses Warehouses F actories

F actories

F actories Warehouses Warehouses F actories

Ownership (by leasable area) F reehold

30%

64%

65%

70%

61%

100%

0

100%

Leasehold

70%

36%

35%

30%

39%

0%

100%

0

30

n.a.

28-30

22.4

26

n.m.

28.5

n.a.

160,579

150,117

214,523

397,782

342,021

584,550

303,270

243,625

4,750

4,700

4,228

9,780

9,056

11,716

6,003

4,469

29,580

31,309

19,709

24,585

26,479

20,043

19,794

18,344

Remaining leasehold life (y rs) Leasable area (Sqm) Cost (Bt) Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 23

Industry Focus Property Fund/REIT Sector

Major property funds/REITs in other sectors Ot hers IM PA CT

MJ LF

SPF

Units (m)

1482.5

330

950

Price (Bt)

11.20

13.10

19.60

16,604

4,323

18,620

461

120

517

01-Oct-14

18-J ul-07

24-Nov -06

TP (Bt)

12

13.8

21.4

Upside

7%

5%

9%

10.79

12.16

11.08

1.0

1.1

1.8

0.71

1.01

1.30

6.4%

7.7%

6.6%

Mkt Cap (Btm) Mkt Cap (US$m) Listing

NAV ps (Bt) P/NAV (x) DPU (Bt) - 2015 Div . Yield

0.74

1.03

1.39

Div . Yield

DPU (Bt) - 2016

6.6%

7.9%

7.1%

IRR

8.9%

7.8%

8.4%

Exhibition Center

Lifesty le Entertainment Complex

Airport

Impact Arena

Major Ratchay othin

Samui Airport

Asset ty pe Asset

Impact F orum

Major Rangsit

Impact Exhibition 1-8

Suzuki Av enue Ratchay othin

Challenger Hall Ownership (by leasable area) F reehold Leasehold Remaining leasehold life (yrs) Leasable area (Sqm) Cost (Bt) Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 24

100%

100%

0%

0%

0%

100%

n.a.

30.8

21.0

122,165

45,194

n.a.

19,601

3,194

9,301

160,448

70,675

n.m.

Industry Focus Property Fund/REIT Sector

THAILAND STOCK PROFILES

Page 25

Thailand Company Guide

CP Tower Growth Leasehold Edition 1 Version 1 | Bloomberg: CPTGF TB | Reuters: CPTGFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

LOW RISK BUT ATTRACTIVE YIELD

Last Traded Price: Bt10.00 (SET : 1,381.80) Price Target : Bt10.80 (9% upside)

BUY, with Bt10.80 TP based on DCF valuation. CPTGF is offering attractive distribution yield of 8.0% (FY15F), payable quarterly. The fund invests in leasehold rights to three office buildings that are strategically located in the prime business areas of Bangkok, including Silom, Fortune Town and Phayathai area. Note that these buildings also offer retail rental space. The office buildings currently enjoy high average occupancy rate of 98%, except for office space of C.P. Tower II (Fortune Town) which is at 93% given the location and age of the building.

Potential Catalyst: Strong rental reversion Where we differ: n.a. Analyst Thailand Research Team +662 658 1222 Nantika WIANGPHOEM +662 657 7836 [email protected]

Price Relative Bt

Relative Index

Low risks, high quality tenants. The main contracts with anchor tenant C.P. group and its subsidiaries, Tesco Lotus, and public sector clients, which cover 34%, 6% and 5% of total lettable area, respectively, are subject to 10% rental reversion next year. And, 52 other contracts which account for 9.4% of total revenue are expiring in FY16 and subject to renewals at 5% higher rents, at least.

209

10.7

189 10.2

169

9.7

149 129

9.2

109 8.7 8.2 Dec-13

89 69 May-14

Oct-14

CP Tower Growth Leasehold (LHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

Mar-15

Aug-15

Relative SET INDEX (RHS)

2014A 1,307 1,169 727 733 0.75 nm 0.76 nm 10.31 13.2 7.6 1.0 0.0 N/A

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 1,348 1,208 757 771 0.78 4 0.80 5 10.35 12.7 8.0 1.0 0.0 7.6

2016F 1,452 1,301 824 833 0.85 9 0.86 8 10.36 11.7 8.7 1.0 0.0 8.2

2017F 1,469 1,316 869 843 0.90 6 0.87 1 10.39 11.1 8.8 1.0 0.0 8.7

N/A B: 0

N/A S: 0

N/A H: 0

Valuation: We value CPTGF at Bt10.80 based on DCF valuation (WACC: 6.8%). Key Risks to Our View: Key risks are (i) lower-than-expected rental reversion, and (ii) weaker-than-expected occupancy rate. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders CPL Group Pcl. (%) KTB (%) Social Security Office (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

967 9,670 / 269

33.3 15.0 15.0 50.6 0.20

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

VICKERS SECURITIES

Company Guide CP Tower Growth Leasehold Net Property Income and Margins (%)

800

92.9%

600

90.9%

400

88.9%

200

86.9%

0

84.9%

2014A

2015F

2016F

Net Property Income

2017F

Net Property Income Margin %

Net Property Income and Margins (%) 50

73%

45

72%

40

71%

35 30

70%

25

69%

20

68%

15

67%

10

65%

Net Property Income

2Q2015

66%

0

1Q2015

5

4Q2014

Low risk with high profile tenants. The main contracts with anchor tenant C.P. group and its subsidiaries, Tesco Lotus, and public sector clients, which cover 34%, 6% and 5% of total lettable area, respectively, are subject to 10% rental reversion next year. And, 52 other contracts which account for 9.4% of total revenue are expiring in FY16 and subject to renewals at 5% higher rents, at least.

94.9%

1,000

3Q2014

Positive rental reversion to drive growth. With the prime area of each building, we expect growth to come from rental reversion (estimated at 3.0 - 5.0% p.a. for retail rental space and +10% every three years for office rental space). Also, the geographical diversification helps to reduce concentration risk.

96.9%

1,200

2Q2014

Earnings Drivers: Invests in leasehold rights to three office buildings in Bangkok’s prime areas. These are successful office buildings in good locations with 98% average occupancy rate. The Fund’s assets include i) C.P. Tower I (Silom), ii) C.P. Tower II (Fortune Town), iii) C.P. Tower III (Phayathai). With all of the assets being in prime locations, the Fund stands to benefit from future rental rate hikes. The remaining tenure of the lease is about 29 years.

1,400 Bt m

1Q2014

CRITICAL DATA POINTS TO WATCH

Net Property Income Margin %

Distribution Paid / Net Operating CF (x)

0.5

0.0 2014A

2015F

2016F

2017F

-0.5

Strong occupancy record. Data from 2010-2015 for office rental shows that the historical average occupancy rate for C.P. Tower I, II & III were 100%, 99% and 100%, with occupancy increasing by 3.3%, 5.5% and 16.3% CAGR, respectively.

-1.0 -1.5

Net Asset Value / Unit

For retail space, the average occupancy rate for C.P. Tower I and II were 99% and 97%, growing by 3.0% and 7.8% CAGR, respectively. Occupancy at C.P. Tower III had risen from 46.4% in 2010 to 100% in 2015, or at 8.4% CAGR. Payout assumptions. We currently assumed 97%payout ratio throughout our forecast period. CPTGF has paid Bt0.20 quarterly DPU in 1Q15 and 2Q15, respectively. In addition, the fund has announced par reduction of Bt0.004 in both 1Q15 and 2Q15.

Occupancy rate in 1H15 C.P. Tower 1 C.P. Tower 2 C.P. Tower 3 (Fortune (Silom) Town) (Phayathai) Office rental space Total Office Rental Space (sqm)

35,717

25,414

9,163

Occupancy rates

100%

92%

97%

Total leasable space (sqm)

9,075

46,528

7,850

Occupancy rates

98%

98%*

97%

Retail rental space

* excluding OR of Tesco Lotus = 100* Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 27

Company Guide CP Tower Growth Leasehold ROE (%)

Balance Sheet: Currently, the fund is debt-free.

8.0% 7.0%

6.0%

Share Price Drivers: Strong rental reversion. Strong rental reversion could lift rental income and distribution per unit.

5.0%

4.0% 3.0% 2.0%

Attractive yield. CPTGF is offering attractive annual yield of about 8%, compared to 3.0% for 10-year Thai government bonds and 3.6-3.9% dividend yields for stocks under DBS coverage (75% of the SET market cap) in FY15-16F.

1.0% 0.0% 2015F

2016F

2017F

Distribution Yield (%) 10.0%

Key Risks: Economic slowdown Economic slowdown should result in weaker-than-expected occupancy rate and slower-than-expected rental reversion, which would limit the Fund’s growth, and hence, DPU.

9.0% 8.0% 7.0% 6.0% 5.0% 4.0%

COMPANY BACKGROUND CPTGF is a property fund that invests in leasehold rights to three office buildings in Bangkok’s prime business areas with a total leasable area of 132,191 sqm. The assets are C.P. Tower I (Silom), C.P. Tower II (Fortune Town), and C.P. Tower III (Phayathai). The key anchor tenants are C.P. group and its subsidiaries, Tesco Lotus, and also public sector clients, which cover 34%, 6% and 5% of total lettable area, respectively.

3.0% 2014A

2015F

2016F

2017F

PB Band (x)

For the office rental space, CPTGF will renew the rental contract and revise up the rental rate by 10% with the tenants every 3 years The fund was listed on the Stock Exchange of Thailand on 16 December 2013. The IPO price was Bt10.15/sh. C.P. Land Public Company Limited is the fund’s sponsor, a major shareholder with 33.33% stake, and the Property Manager.

Details of assets in CPTGF’s portfolio

Assets

Appraised Value (Btm)

Remaining Leasehold (Years)

C.P. Tower I (Silom)

3,979.86

28

C.P. Tower II (Fortune Town)

4,752.29

28

853.90

28

C.P. Tower III

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 28

VICKERS SECURITIES

Company Guide CP Tower Growth Leasehold

Key Assumptions FY Dec C.P. Tower I (Silom) Office rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) Retail rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) C.P. Tower II (Fortune) Town) Office rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) Retail rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) C.P. Tower III (Phayathai) Office rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) Retail rental space Leasable area (sqm) Occupancy Rents (bt/sqm/month) Dividend payout ratio

Income Statement (Bt m) FY Dec Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

2014A

2015F

2016F

2017F

35,716 99% 840

35,716 100% 840

35,716 100% 924

35,716 100% 924

7,792 98% 949

7,792 98% 996

7,792 98% 1046

7,792 98% 1088

25,413 93% 600

25,413 93% 600

25,413 93% 660

25,413 93% 660

46,528 99% 855

46,528 99% 895

46,528 99% 943

46,528 97% 978

9,162 99% 576

9,162 100% 576

9,162 100% 634

9,162 100% 634

7,850 98% 788 96%

7,850 98% 828 97%

7,850 98% 869 97%

7,850 98% 904 97%

2014A

2015F

2016F

2017F

1,307 (139) 1,169 (451) 3 7 3 730 0 0 0 730 727 14 733

1,348 (140) 1,208 (456) 3 2 0 757 0 0 0 757 757 0 771

1,452 (151) 1,301 (484) 3 3 0 824 0 0 0 824 824 0 833

1,469 (152) 1,316 (454) 3 4 0 869 0 0 0 869 869 0 843

N/A nm nm 95.8 89.4 55.8 56.1

3.1 3.4 3.8 97.0 89.6 56.2 57.2

7.7 7.7 8.7 97.0 89.6 56.7 57.4

1.2 1.2 5.5 97.0 89.6 59.2 57.4

34.5

33.8

33.3

30.9

N/A N/A N/A NM

7.6 7.3 7.5 NM

8.2 7.9 8.2 NM

8.7 8.3 8.6 NM

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 29

Company Guide CP Tower Growth Leasehold

Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

329 (105) 224 (44) 1 0 0 182 0 0 182 182 10 192

326 (91) 236 (47) 0 3 2 194 0 0 194 194 7 201

332 (107) 225 (49) 1 3 3 182 0 0 182 182 7 189

333 (94) 238 (46) 1 2 (25) 171 0 0 171 171 34 205

341 (102) 239 (43) 1 1 31 230 0 0 230 230 (22) 208

3 (1) 5 68.2 94.8

(1) 5 7 72.2 95.2

2 (5) (6) 67.7 95.3

0 6 (6) 71.6 97.3

3 0 34 70.1 96.7

Balance Sheet (Bt m) FY Dec

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

9,651 0 561 0 64 80 10,355

9,651 0 649 0 66 43 10,408

9,651 0 715 0 71 8 10,444

9,651 0 747 0 71 8 10,477

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 64 322 0 0 9,969 0 10,355

0 66 332 0 0 10,010 0 10,408

0 71 356 0 0 10,016 0 10,444

0 72 360 0 0 10,045 0 10,477

(243) 561

(290) 649

(348) 715

(352) 747

1.8 1.6 0.0 NA

1.9 1.8 0.0 NA

1.9 1.8 0.0 NA

1.9 1.9 0.0 NA

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 30

VICKERS SECURITIES

Company Guide CP Tower Growth Leasehold

Cash Flow Statement (Bt m) FY Dec

2014A

2015F

2016F

2017F

Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash

730 0 0 0 (871) (3) (144) 0 (402) 0 0 0 (402) (553) 0 (29) 0 (582) 0 (1,129)

757 0 0 0 93 0 850 0 0 0 0 0 0 (761) 0 0 0 (761) 0 89

824 0 0 0 59 0 883 0 0 0 0 0 0 (817) 0 0 0 (817) 0 65

869 0 0 0 4 0 873 0 0 0 0 0 0 (841) 0 0 0 (841) 0 33

0.8 (0.1)

0.8 0.9

0.9 0.9

0.9 0.9

Operating CFPS (Bt) Free CFPS (Bt)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 31

Thailand Company Guide

CPN Retail Growth Property Fund Edition 1 Version 1 | Bloomberg: CPNRF TB | Reuters: CPNRu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

DIVIDEND HICCUP

Last Traded Price: Bt16.70 (SET : 1,381.72) Price Target : Bt18.00 (8% upside) (Prev Bt18.00) Potential Catalyst: Strong rental reversion, converts to a REIT Where we differ: We have assumed more conservative occupancy and rental growth assumptions Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected]

DPU to surge in 2016 and 2017. Major renovation is now under way at CentralPlaza PInklao mall, which contributes 22% of the fund’s total revenue. We estimate DPU will drop by 25% in 2015 because of revenue lost during the renovation. But, DPU will surge in 2016 and 2017 after the renovation is completed; the management estimates rents at CentralPlaza Pinklao should increase by about 9-10%.

Price Relative Bt

Relative Index 212

20.4

192

18.4

172

16.4

152

132

14.4

112 12.4 10.4 Sep-11

92 Sep-12

Sep-13

Sep-14

72 Sep-15

CPN Retail Growth Property Fund (LHS) Relative SET INDEX (RHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

2014A 3,185 3,024 3,211 2,684 1.62 (2) 1.33 8 12.52 10.3 7.9 1.3 6.4 14.1

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 2,948 2,776 3,483 2,373 1.57 (3) 1.00 (25) 13.02 10.6 6.0 1.3 6.0 12.3

2016F 3,616 3,414 3,004 3,004 1.36 (14) 1.26 27 13.18 12.3 7.6 1.3 6.0 10.4

2017F 3,970 3,715 3,297 3,297 1.49 10 1.39 10 13.32 11.2 8.3 1.3 5.3 11.2

0 1.17 B: 2

0 1.37 S: 1

0 1.43 H: 1

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Reiterate BUY, Bt18.00 TP (DCF valuation). CPNRF is Thailand’s largest property fund and is one of the most liquid property funds in Thailand. It has strong recurring income base from four successful CentralPlaza shopping malls in diversified locations. The fund now offers generous dividend yield of 6.0% for 2015 (payable quarterly), a hefty premium over Thai 10-year government bond yield of 2.8%. And yields should rise to 7.7% in 2016 and 8.5% in 2017 following the completion of major renovation at CentralPlaza Pinklao.

Conversion to REIT structure could lift future yields. CPNRF is awaiting details on the total costs to convert from the existing property fund structure to a REIT. The fund would like to convert to a REIT and grow by acquiring more assets from sponsor Central Pattana (CPN). With the larger trust size and higher gearing allowed under the REIT structure, we estimate distribution yield under a REIT structure would be higher. Valuation: Our target price for CPNRF is Bt18, based on discounted cash flow (DCF) valuation methodology. Key Risks to Our View: Key risks are (i) the lower-than-expected occupancy rate, and (ii) weaker-than-expected rental rate reversion. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Central Pattana (%) Mrs.Arunee Chan (%) Government Savings Bank (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

2,212 36,948 / 1,025 26.7 3.4 3.1 66.9 0.52

VICKERS SECURITIES

Company Guide CPN Retail Growth Property Fund

CRITICAL DATA POINTS TO WATCH Earnings Drivers: A portfolio of four successful malls in diversified locations. CPNRF currently operates four successful shopping malls in Thailand, three of which are located in Bangkok and one in Chiangmai. The four malls are CentralPlaza Rama 2, CentralPlaza Rama 3, CentralPlaza Pinklao, and CentralPlaza Chiangmai Airport. Average occupancy rate at the four malls had dropped to 90.9% at end-2Q15 from 96.6% at end2014, as CentralPlaza PInklao is under renovation.

Assets in the Portfolio Assets

Leasable

Occupancy (%) Dec-14 Mar-15

Area (Sqm)

Jun-15

Central Plaza Rama 2

88,038

96.5

95.6

96.0

Central Plaza Rama 3

37,324

93.8

90.8

90.7

Central Pinklao (Mall)

21,829

98.3

76.5

50.2

Central Pinklao (Office)

33,760

96.2

97.0

97.5

Central Chiangmai

37,307

98.9

97.5

96.7

218,258

96.6

93.4

90.9

Total

Rental Structure

Major renovation at CentralPlaza Pinklao. This project currently contributes 27% of the fund’s total revenue. The renovation includes improvements to the building and facade, decoration of common areas, expansion of leasable area at the mall by 5,820 sqm (27%), and revising merchandise mix to meet customer needs. The renovation will be done in two phases, covering 85% of the mall area in 2Q15-4Q15, and the remaining 15% in 1Q16-2Q16. The mall will remain open during the renovation period. Total investment cost for the project is Bt350m, and estimated IRR is 11%.

Assets

Potential DPU hiccup in 2015. We estimate the fund’s DPU will drop by 25% in 2015, given revenue lost during the renovation. But, it will surge in 2016 and 2017 after the renovation is completed. Management estimates rents would increase by about 9-10% after the renovation.

3,500

Fixed

% of

Rate

Sales

Central Plaza Rama 2

52%

48%

Central Plaza Rama 3

71%

29%

Central Pinklao (Mall)

95%

5%

100%

0%

72%

28%

Central Pinklao (Office) Central Chiangmai

Net Property Income and Margins (%) Bt m

Rental rate reversion. CPNRF managed to renew and sign 81 new leases covering 10,268 sqm, or 5% of total leasable area in 1H15 at average rental reversion rate of 5.8% p.a. This is impressive considering the weak domestic consumption YTD. Going forward, we have assumed CPNRF will grow rental rate by about 5% p.a. Note that leases for 19% of leasable area will expire in 2H15, 22% in 2016, and 23% in 2017.

102.5%

3,000

100.5%

2,500

98.5%

2,000

96.5%

1,500

94.5%

1,000

92.5%

500

90.5%

0

88.5%

2013A

2014A

Net Property Income

2015F

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%)

Converting to REIT could lift future yields. CPNRF is awaiting further details on the transaction costs involved. The fund would like to convert to a REIT and grow by acquiring more assets from sponsor CPN. A REIT can gear up to 35% of total assets and to 60% of its assets if it has an investment grade credit rating, compared with 10% maximum gearing for a property fund. We estimate the larger trust size and higher gearing allowed under the REIT structure would lift distribution yields.

Distribtuion Paid / Net Operating CF (x)

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 2013A

2014A

2015F

2016F

2017F

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 33

Company Guide CPN Retail Growth Property Fund

Balance Sheet: Net debt amounted to Bt1.95bn, and net gearing reached 6.8% at end-2Q15. This is within the 10% maximum gearing allowed for property funds.

Aggregate Leverage (%)

6.0% 5.0% 4.0%

Share Price Drivers: Strong rental reversion. Strong rental reversion could lift rental income and distribution per unit.

3.0%

2.0% 1.0% 0.0% 2013A

Conversion to a REIT structure. The successful conversion to a REIT structure would mean the current Fund can gear up further and rely less on equity financing. This should lift DPU and yields. Key Risks: Political unrest & slowing economy. Political unrest and a slowing economy could hurt consumer confidence and delay spending, and in turn affect the potential for rental rate hikes.

2014A

2015F

2016F

2017F

2016F

2017F

2016F

2017F

ROE (%) 14.0% 12.0% 10.0% 8.0% 6.0%

4.0% 2.0%

Acquisition-led growth is stalled unless the Fund converts to a REIT. CPNRF and all property funds can no longer increase capital to acquire additional assets. To be able to grow the fund size, the fund needs to convert to a REIT. Further details, e.g. the related transaction costs, have yet to be announced.

0.0% 2013A

2014A

2015F

Distribution Yield (%) 10.0% 9.0% 8.0%

COMPANY BACKGROUND CPNRF is Thailand's largest property fund by market CPNRF is Thailand's largest property fund by market capitalisation. The fund invests in leasehold rights to four retail assets with a total gross area of 685,442 sqm and total leasable area of 218,258 sqm. The assets are CentralPlaza Rama 2, CentralPlaza Rama 3, CentralPlaza Pinklao, and CentralPlaza Chiangmai Airport. The remaining leasehold life of the assets is currently 34.9 years. The fund was listed on the Stock Exchange of Thailand on 23 August 2005. CPN is the fund’s sponsor, a major shareholder with 26.7% stake, and the Property Manager.

7.0% 6.0%

5.0% 4.0% 3.0% 2.0% 2013A

2014A

2015F

PB Band (x)

The followings show details of assets in CPNRF’s portfolio together with the appraised value and remaining leasehold life of each asset. Assets Central Plaza Rama 2 Central Plaza Rama 3 Central Plaza Pinklao Central Plaza Chiangmai Airport Total

Appraised Value (Btm) 6,532 8,216 5,439 10,856 31,043

ASIAN INSIGHTS Page 34

Remaining Leasehold (Years) 10.0 80.0 9.3 28.7 34.9

Source: Company, DBS Vickers

VICKERS SECURITIES

Company Guide CPN Retail Growth Property Fund

Key Assumptions FY Dec Leasable Area (Sqm) Occupancy Occupied Area (Sqm) Average rents (Bt/sqm/month) Rental growth Total revenue (Btm) Dividend payout

2013A

2014A

2015F

2016F

2017F

182,204 97.2% 177,054 1218.86 9% 2,590 93%

218,539 92.5% 202,194 1312.74 8% 3,185 98%

218,258 85.2% 186,000 1320.85 1% 2,948 93%

224,078 94.0% 210,724 1423.83 8% 3,600 93%

224,078 96.2% 215,553 1526.95 7% 3,950 93%

2013A

2014A

2015F

2016F

2017F

1,062 622 906

1,146 640 933 522 3,185

1,180 680 292 792 2,944

1,239 752 1,040 831 3,862

1,300 786 1,248 873 4,207

40% 23% 10% 27% 100%

32% 19% 27% 22% 100%

31% 19% 30% 21% 100%

Segmental Breakdown FY Dec

Revenues (Bt m) Central Rama 2 Central Rama 3 Central Pinklao Central Chiangmai Airport Total Revenue Breakdown Central Rama 2 Central Rama 3 Central Pinklao Central Chiangmai Airport Total

100%

36% 20% 29% 16% 100%

Income Statement (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

2,590 (176) 2,413 (357) 97 (1) 538 2,691 0 0 0 2,691 2,691 (538) 2,152

3,185 (161) 3,024 (409) 112 (43) 527 3,211 0 0 0 3,211 3,211 (527) 2,684

2,948 (172) 2,776 (476) 118 (44) 1,111 3,483 0 0 0 3,483 3,483 (1,111) 2,373

3,616 (203) 3,414 (486) 119 (43) 0 3,004 0 0 0 3,004 3,004 0 3,004

3,970 (254) 3,715 (505) 120 (34) 0 3,297 0 0 0 3,297 3,297 0 3,297

3.1 3.5 12.9 93.0 93.2 103.9 83.1

23.0 25.3 19.3 100.5 94.9 100.8 84.3

(7.4) (8.2) 8.5 93.0 94.2 118.2 80.5

22.7 23.0 (13.8) 93.0 94.4 83.1 83.1

9.8 8.8 9.7 93.0 93.6 83.0 83.0

13.8

12.8

16.2

13.4

12.7

15.2 13.8 11.4 2,155.7

14.1 12.6 10.9 60.3

12.3 11.1 7.6 51.7

10.4 9.3 9.5 67.9

11.2 10.1 10.3 94.9

Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

2,590 41% 24% 35%

Major renovation at CentralPlaza Pinklao

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 35

Company Guide CPN Retail Growth Property Fund

Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

800 (28) 771 (107) 25 (9) 170 851 0 0 851 851 N/A N/A

855 (28) 828 (111) 27 (16) 108 835 0 0 835 835 N/A N/A

861 (30) 831 (134) 31 (15) (38) 674 0 0 674 674 N/A N/A

845 (27) 818 (136) 23 (15) 944 1,633 0 0 1,633 1,633 N/A N/A

742 (28) 715 (132) 24 (17) 116 705 0 0 732 732 N/A N/A

19 20 0 96.5 104.9

7 7 (2) 96.8 98.3

1 0 (19) 96.5 99.5

(2) (2) 142 96.8 97.3

(12) (13) (55) 96.2 89.8

Balance Sheet (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

18,535 893 351 0 0 0 19,780

29,920 768 304 0 0 0 30,991

31,291 499 210 0 0 0 32,000

31,401 499 663 0 0 0 32,563

31,411 499 832 0 0 0 32,742

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 802 811 340 0 17,827 0 19,780

0 994 352 1,955 0 27,690 0 30,991

0 920 352 1,917 0 28,811 0 32,000

0 1,129 352 1,915 0 29,168 0 32,563

0 1,239 352 1,685 0 29,467 0 32,743

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

(1,613) 11

(1,346) (1,651)

(1,272) (1,707)

(1,481) (1,252)

(1,591) (853)

0.2 0.2 1.8 8.9

0.2 0.2 6.4 6.4

0.2 0.2 6.0 6.8

0.4 0.4 6.0 6.3

0.5 0.5 5.3 6.3

Unrealized gain from asset revaluation

Stable gearing

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 36

VICKERS SECURITIES

Company Guide CPN Retail Growth Property Fund

Cash Flow Statement (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash

2,691 0 0 0 (32) (538) 2,120 (97) 0 0 0 0 (97) (1,990) (95) 0 0 (2,085) 0 (62)

3,211 0 0 0 118 (527) 2,801 (10,742) 0 0 0 0 (10,742) (2,480) 1,615 8,642 0 7,777 0 (163)

3,483 0 0 0 (74) (1,111) 2,299 (260) 0 0 0 0 (260) (2,363) (38) 0 0 (2,401) 0 (363)

3,004 0 0 0 209 0 3,213 (110) 0 0 0 0 (110) (2,647) (2) 0 0 (2,649) 0 453

3,297 0 0 0 110 0 3,407 (10) 0 0 0 0 (10) (2,998) (230) 0 1 (3,227) 0 170

1.3 1.2

1.4 (4.0)

1.1 0.9

1.4 1.4

1.5 1.5

Operating CFPS (Bt) Free CFPS (Bt)

Acquisition of CentralPlaza Chiangmai Airport

Source: Company, DBS Vickers Target Price & Ratings History 17.70

Bt S.No .

17.20

1: 2: 3: 4:

16.70

1

Ta rg e t Pri c e 18.00 18.00 18.00 18.00

R a ti n g Buy Buy Buy Buy

4

2 16.20

Cl o s i n g Pri c e 02 Mar 15 16.40 02 Apr 15 16.20 18 May 15 16.40 31 Aug 15 16.30 Da te

3

15.70

15.20 Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 37

Thailand Company Guide

Future Park Leasehold Property Fund Edition 1 Version 1 | Bloomberg: FUTUREPF TB | Reuters: FUTUREPFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

STABLE INCOME AND YIELD

Last Traded Price: Bt18.20 (SET : 1,381.72) Price Target : Bt22.30 (23% upside) Potential Catalyst: Strong economic recovery could lift occupancy and rents more than we assumed in our earnings model Where we differ: n.a. Analyst Wasu MATTANAPOTCHANART +662 657 7833 [email protected]

Rising mall traffic will support future rate hikes. Mall traffic has been rising since 2006, except during the major flooding in 2011 and 2013. Daily customer count has risen from 122k in 2006 to 164k in 2014. We conservatively forecast 2.2% increase in rental rate for this year because of the slower economy, but assumed it will improve to 3.5% and 3.2% in FY16 and FY17, respectively, and stabilize at 3% from FY18 onwards.

Price Relative Bt

Relative Index

20.8 209 18.8

189 169

16.8 149 14.8

BUY with DCF-based TP of Bt22.30. Amid the current lowinterest-rate environment, the Fund offers attractive 7.1% yield in FY15, higher than 10-year government bond yield of 2.65% and dividend yield of 3.6% for DBS Thailand universe. Supported by growing mall traffic, revenue growth should be sustainable at c.3% p.a.

129 109

12.8 89 10.8 Sep-11

Sep-12

Sep-13

Future Park LH Prop Fund (LHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

Sep-14

69 Sep-15

Relative SET INDEX (RHS)

2014A 924 751 797 733 1.51 (2) 1.25 5 12.31 12.1 6.9 1.5 6.5 12.4

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 954 767 781 750 1.47 (2) 1.27 2 12.52 12.3 7.0 1.5 5.7 11.9

2016F 987 794 780 780 1.47 0 1.33 4 12.68 12.4 7.3 1.4 4.8 11.7

2017F 1,021 821 810 810 1.53 4 1.38 4 12.84 11.9 7.6 1.4 4.0 12.0

N/A B: 0

N/A S: 0

N/A H: 0

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Valuation: We value FUTUREPF at Bt22.30, based on DCF valuation (WACC: 6.9%, Terminal value of Bt0 at the end of 2041). Even with conservative assumptions of 3% annual increase in rental income and stable occupancy rate for most of the 27 years, the Fund still offers 25% upside to our target price. Key Risks to Our View: Leases for 40% of the Fund’s leasable area will expire in FY16. While we expect occupancy rate to be stable and rents to increase by 3.5% next year, the extended economic slowdown could result in lower-than-expected lease renewals and rental hikes.

At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Rangsit Plaza Co Ltd (%) Thai Tapioca Dev Institute (%) Bangkok Bank Pcl (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

530 9,638 / 267 33.3 5.7 5.3 55.7 0.08

VICKERS SECURITIES

Company Guide Future Park Leasehold Property Fund Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH

Bt m

900

86.0%

600 84.0%

500

82.0%

400 300

80.0%

200 78.0%

100 0

76.0%

2013A

2014A

2015F

Net Property Income

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%)

77%

10

76%

5

75%

0

74%

Net Property Income

2Q2015

78%

15

1Q2015

79%

20

4Q2014

80%

25

3Q2014

81%

30

2Q2014

82%

35

1Q2014

83%

40

4Q2013

84%

45

3Q2013

50

2Q2013

Bridge construction will not affect earnings Rangsit Plaza, the other owner of Future Park Rangsit mall, is closing FUTUREPF’s share of leasable area (1,336 sqm) in order to construct a bridge to link the old building and the upcoming new phase. That is why occupancy rate at the main area fell from 97% in 2014 to 92% in 2Q15. However, 2Q15 rental income (+1% y-o-y) was stable because of compensation from Rangsit Plaza.

88.0%

700

1Q2013

Earnings Drivers: Traffic to remain healthy Customer traffic has been increasing since 2006, except during the heavy flooding in 2011 and 2013. Daily customer count has risen from 122k in 2006 to 164k in 2014, and peaked at 165k in 1Q15. However, traffic fell 10% q-o-q to 148k in 2Q15 because of renovation work at Central’s mall and part of Robinson’s (total leasable area of 1,936 sqm) from 20 April to 30 September 2015. Customer count is expected to normalize to above 160k in 4Q15 and 2016.

800

Net Property Income Margin %

Customer traffic (‘000 people)

Rental hikes to drive growth Following the economic slowdown and lackluster rate increases in 1Q15 (+4%) and 2Q15 (+1%), we conservatively forecast 2.2% rental hike for this year, 3.5% and 3.2% in FY16 and FY17, respectively, and 3% p.a. from FY18 onwards. Assuming occupancy rate is stable, total rental income would grow at the the same rate as rents. Opportunity for rental reversion Of the total leasable area (59,986 sqm) of shopping space, 20% will see its leases expire in 2H15 and 40% in 2016. If the economy grows strongly next year, the upcoming contract renewals might lead to higher-than-expected rental hike.

Revenue Breakdown 2014

Upside to occupancy rate at common space FUTUREPF divides its leasable space into main area (56,986 sqm) and common area (8,514 sqm). The main area’s occupancy rate has been around 98% since 2011, and we expect it to be the same going forward. The occupancy rate for the common space was 85% in 2014, and we expect it to gradually improve to 90% in 2019. Currently vacant space in the common area leaves room for upside to our forecasts. Lease expiry (excluding common space)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 39

Company Guide Future Park Leasehold Property Fund

Aggregate Leverage (%)

Balance Sheet: As of end-2Q15, FUTUREPF had Bt450m debt, representing only 6.8% of NAV and 60% of FY15F net investment income. The fund is scheduled to repay Bt60m every year, so the debt will be fully repaid by 2022. Share Price Drivers: High yield in the low-rate environment FUTUREPF is offering attractive 7.1-7.4% yields in FY15FFY16F, compared to 2.65% yield for 10-year government bonds and 3.6-3.9% dividend yield for stocks under DBS Thailand coverage (75% of the SET’s market cap).

ROE (%) 12.0%

Key Risks: Non-renewal of leases Leases for 40% of the Fund’s leasable area will expire in FY16. While we expect occupancy rate to be stable and rents to increase by 3.5% next year, the extended economic slowdown could result in lower-than-expected lease renewals and rental hikes.

10.0% 8.0% 6.0%

4.0% 2.0% 0.0% 2013A

COMPANY BACKGROUND FUTUREPF is a property fund and part owner of the lease to Future Park Rangsit, a shopping mall in Rangsit, Bangkok, Thailand. It collects rent from common (8,514 sqm) and shopping (59,986 sqm) areas with a remaining leasehold life of 27.5 years. The Fund has a solid track record of income growth; revenue grew at a 3-year average of 11.6% despite the political instability in FY14 (3.6% growth). Historically, FUTUREPF raises rents by 2.5%-3.7% per year. Ninety-three percent of the leases (shopping space only) are under fixed-rate rental contracts while the rest 7% is under revenue-sharing scheme.

2014A

2015F

2016F

2017F

Distribution Yield (%)

Lease term (excluding common space)

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 40

VICKERS SECURITIES

Company Guide Future Park Leasehold Property Fund

Key Assumptions FY Dec

2013A

2014A

2015F

2016F

2017F

Leasable Area - main (Sqm) Occupancy

56,906 98%

56,986 97%

56,986 98%

56,986 98%

56,986 98%

Leasable Area - common (Sqm) Occupancy

8,514 86% 8,514 85% 8,514 87% 8,514 87% 8,514 88%

Average rental rate (Bt/sqm/month) Growth of rental rate Rental revenue (Btm)

1,332 10.7% 892

1,393 4.5% 924

1,423 2.2% 954

1,473 3.5% 987

1,524 3.4% 1,021

Income Statement (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

892 (178) 713 (14) 11 (17) 117 811 0 0 0 811 811 (117) 683

924 (173) 751 (14) 11 (15) 64 797 0 0 0 797 797 (64) 733

954 (187) 767 (14) 11 (14) 31 781 0 0 0 781 781 (31) 750

987 (193) 794 (15) 11 (11) 0 780 0 0 0 780 780 780

1,021 (200) 821 (15) 11 (8) 0 810 0 0 0 810 810 810

10.7 10.7 10.2 91.8 80.0 91.0 70.3

3.6 5.3 (1.7) 90.2 81.3 86.3 71.5

3.3 2.2 (2.0) 90.0 80.4 81.9 70.8

3.5 3.5 (0.2) 90.0 80.4 79.0 71.1

3.4 3.4 3.9 90.0 80.4 79.3 71.4

1.5

1.5

1.5

1.5

1.5

13.0 11.3 10.3 41.7

12.4 10.9 10.6 48.9

11.9 10.6 10.8 54.1

11.7 10.5 11.1 72.7

12.0 10.9 11.4 107.2

Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Less: Non-cash gain Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

Asset revaluation gain

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 41

Company Guide Future Park Leasehold Property Fund

Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

226 (41) 186 (4) 1 (4) 1 181 0 0 181 181 N/A 180

233 (39) 194 (3) 4 (4) 30 221 0 0 221 221 N/A 191

236 (49) 187 (4) 2 (3) 2 184 0 0 184 184 N/A 182

236 (45) 191 (3) 1 (3) 31 216 0 0 216 216 N/A 186

228 (43) 186 (4) 2 (3) 4 185 0 0 185 185 N/A 181

(1) 1 (14) 82.1 90.1

3 4 22 83.2 90.2

1 (4) (17) 79.2 90.2

0 2 17 81.1 90.1

(3) (3) (14) 81.3 90.9

Balance Sheet (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

6,754 N/A 487 0 41 12 7,294

6,820 N/A 490 0 44 12 7,366

6,851 N/A 488 0 44 12 7,394

6,851 N/A 516 0 41 12 7,419

6,851 N/A 544 0 41 12 7,447

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 62 350 510 0 6,372 0 7,294

0 25 372 450 0 6,519 0 7,366

0 25 351 390 0 6,629 0 7,394

0 25 351 330 0 6,713 0 7,419

0 25 351 270 0 6,801 0 7,447

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

(359) (23)

(341) 40

(320) 98

(324) 186

(324) 274

1.3 1.3 7.4 0.0

1.4 1.3 6.5 0.0

1.4 1.4 5.7 0.0

1.5 1.5 4.8 0.0

1.6 1.6 4.0 0.0

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 42

VICKERS SECURITIES

Company Guide Future Park Leasehold Property Fund

Cash Flow Statement (Bt m) FY Dec Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Operating CFPS (Bt) Free CFPS (Bt)

2013A

2014A

2015F

2016F

2017F

811 0 0 0 (33) (117) 661 (9) (161) 0 0 0 (169) (526) (60) 0 0 (587) 0 (95)

797 0 0 0 (18) (64) 715 (2) (11) 0 0 0 (13) (650) (60) 0 0 (710) 0 (8)

781 0 0 0 (21) (31) 729 0 (30) 0 0 0 (30) (671) (60) 0 0 (731) 0 (33)

780 0 0 0 4 0 783 0 (20) 0 0 0 (20) (695) (60) 0 0 (755) 0 8

810 0 0 0 0 0 810 0 (20) 0 0 0 (20) (722) (60) 0 0 (782) 0 8

1.3 1.2

1.4 1.3

1.4 1.4

1.5 1.5

1.5 1.5

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 43

Thailand Company Guide

Impact Growth Real Estate Investment Trust Edition 1 Version 1 | Bloomberg: IMPACT TB | Reuters: IMPACT.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

TAPPING ON A GROWING MICE MARKET

Last Traded Price: Bt11.20 (SET : 1,381.72) Price Target : Bt12.00 (7% upside) Potential Catalyst: Increase in occupancy rate and strong potential growth Where we differ: n.a. Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected] Nantika WIANGPHOEM +662 657 7836 [email protected]

Price Relative Bt

Relative Index

12.6

206

12.1

186

11.6

Recommend BUY, Bt12 TP (DCF Valuation). The interim dividend declared for the first quarter of FY16 is Bt0.175/unit. This implies 6.3% annualised yield, which is much higher than current Thai 10-year government bond yields. And yield are forecast to rise along with net earnings, to 6.4% in FY16 and 6.6% in FY17. Owns completed and freehold assets The REIT owns the largest exhibition and convention assets in ASEAN region covering 66% market share in Thailand (at end March). The REIT has right of first refusal to future assets developed by IMPACT and with its freehold rights over the assets, the REIT will enjoy benefit from assets appreciation in the future.

166

11.1 146

10.6

126

10.1

106

9.6 9.1 Sep-14

86 Dec-14

Mar-15

Jun-15

Impact Growth Real Estate Investment Trust (LHS) Relative SET INDEX (RHS)

Forecasts and Valuation FY Mar (Bt m) Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (Bt) EPS Pre Ex. (Bt) EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (Bt) Net DPS (Bt) BV Per Share (Bt) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (Bt): Other Broker Recs:

2015A 1,110 725 632 632 628 0.43 0.42 nm nm 0.42 0.42 10.80 26.3 26.5 nm 27.5 3.8 1.0 0.2 N/A

2016F 1,790 1,303 1,111 1,110 1,110 0.75 0.75 76 77 0.75 0.71 10.82 15.0 15.0 15.7 15.3 6.4 1.0 0.2 6.9

2017F 1,861 1,347 1,154 1,154 1,154 0.78 0.78 4 4 0.78 0.74 10.87 14.4 14.4 14.3 14.7 6.6 1.0 0.2 7.2

N/A B: 0

N/A S: 0

N/A H: 0

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Strong growth outlook We expect growth to be driven by (i) revenues from a diversified group of customers, (ii) the growing MICE (Meeting Incentive Convention and Exhibition) market, supported by higher domestic demand and the AEC initiative, and (iii) acquisition of new assets. Accessibility by MRT pink line The MRT pink line (Khae Rai – Min Buri) will run past Mueng Thong Thani, where the REIT’s assets are located. This would drive access traffic, and in turn, boost asset value. Valuation: We value IMPACT at Bt12, based on DCF valuation. Key Risks to Our View: Key risk is a drop in occupancy rate at the REIT’s assets as a result of a slower economy and political and safety issues. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Impact Exhibition Management Co Ltd (%) Social Security Office (%) Ayudhya Allianz Cp Life Assur (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

1,483 16,604 / 461 50.00 2.93 2.23 48.3 0.35

VICKERS SECURITIES

Company Guide Impact Growth Real Estate Investment Trust

CRITICAL DATA POINTS TO WATCH Earnings Drivers: Higher occupancy rates. The REIT expects overall occupancy rate to improve to 58%-63% over the longer-term, driven by the growing MICE market, supported by higher domestic demand and the AEC initiative. Furthermore, the REIT is able to attract and retain customers because of its strategicallylocated assets with full facilities. IMPACT currently has 66% of the total MICE market share in Thailand (at end March). This indicates strong earnings growth ahead. Higher ARR (Average Rental Rate). The management plans to raise rents for new leases and renewals by 4%-10% depending on current rent, rental period, and other factors. The REIT’s diversified asset offering gives it flexibility to meet demand for a large range of meetings and exhibitions. Specifically, the REIT has a major competitive advantage in being able to offer the space for meetings and exhibitions that require a large area. The REIT is also targeting to grow the international customer segment because they can normally charge higher rental rates. Hence, we expect ARR to increase by 5%-7% y-o-y. Cost-saving projects. The REIT is trying to keep cost of services at less than 15% of total service income (14.2% in 1Q15). This has led to several cost-saving initiatives that were implemented since last year, including switching to LED light bulbs, improving efficiency of the cooling tower. The REIT is also considering solar panel installations in parking lots and TES (Thermal Energy System) to reduce electricity costs.

ARR

Customer Segment breakdown for FY14/15

Acquisitions in 2016. The REIT will acquire three key assets in 2016 with a total value of Bt2.5-3bn: i) Novotel Bangkok IMPACT (380 rooms, occupancy rate 75-90%, average room rate Bt2,500/night); ii) The Geneva office building (50,000 sqm, occupancy rate c.85%, rent Bt280-340/sqm/month); and iii) indoor car park near the Geneva building. Furthermore, BLAND is constructing an IBIS hotel (587 rooms with average room rate of Bt1,000/night) which may be sold to the REIT when completed. These suggest strong earnings growth from 2016 onwards.

NAV

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 45

Company Guide Impact Growth Real Estate Investment Trust

Leverage & Asset Turnover (x)

Balance Sheet: Investment properties accounted for 96% of total assets at the end of June. The properties will be revalued annually. The REIT has a strong balance sheet with a low leverage ratio of 0.24x at end June, represented by Bt3.9bn long-term loans. However, leverage could surge if the REIT decides to finance 2016 acquisitions with debt. Since incorporation, the fund has paid out an average of 96% of distributable earnings with total amount of Bt0.595 per unit, and the management plans to retain this. Share Price Drivers: Improvement in overall occupancy rate. The REIT’s average occupancy rate is still not stable (55% in FY14, 49% in 1Q15) and could miss its latest target of 58-63%. Hence, occupancy rate will be a key revenue and earnings driver in the future. Key Risks: Slowing economy, political turmoil and safety issues. These could lead to lower occupancy rates at the REIT’s assets, which would reduce investment income.

ROE (%) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

COMPANY BACKGROUND IMPACT is one of Thailand’s leading property funds. The Fund has invested in IMPACT Muang Thong Thani, the largest exhibition and convention center in South East Asia, covering a total exhibition area of over 122,165 sqm. The REIT’s assets are i) IMPACT Arena, ii) IMPACT Forum, iii) IMPACT Exhibition Hall 1-8, and iv) IMPACT Challenger. Customers of the REIT can be split into three main segments: Public Sector, Domestic Private Sector and International Private Sector. The REIT’s revenue is driven by occupancy rate which can be affected by economic, political and safety issues, and rental rates. The REIT absorbs the operating expenses and the fund management fees and capital expenditures, but the REIT’s profit is exempted from tax. The REIT is able to acquire new assets in the future in accordance with regulations.

2016F

2017F

Forward PE Band (x)

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 46

VICKERS SECURITIES

Company Guide Impact Growth Real Estate Investment Trust

Key Assumptions FY Mar

Occupancy rate (%) Cost of services (%) Fund management fee Dividend payout ratio (%) (%)

2013NA

2014NA

2015A

2016F

2017F

54.6% 13.6% 15.2% 99%

54.8% 13.6% 13.7% 95%

54.8% 13.6% 14.2% 95%

54.8% 13.6% 21.3% 95%

54.8% 13.6% 22.9% 95%

2015A

2016F

2017F

1,110 (151) 959 (237) 722 3 0 (97) 4 632 0 0 0 632 628 725

1,790 (243) 1,547 (246) 1,300 3 0 (193) 0 1,111 0 0 0 1,110 1,110 1,303

1,861 (253) 1,609 (265) 1,343 3 0 (193) 0 1,154 0 0 0 1,154 1,154 1,347

N/A nm nm nm

61.3 79.9 80.2 76.9

4.0 3.3 3.3 3.9

86.4 65.0 56.9 N/A N/A N/A 96.4 7.5

86.4 72.7 62.0 6.9 5.4 6.5 95.0 6.7

86.4 72.2 62.0 7.2 5.6 6.7 95.0 7.0

Income Statement (Bt m) FY Mar Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (Pre-ex) (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 47

Company Guide Impact Growth Real Estate Investment Trust

Quarterly / Interim Income Statement (Bt m) FY Mar 2Q2015

3Q2015

4Q2015

1Q2016

4 (1) 3 (4) 0 1 0 0 0 1 0 0 1 1 1

561 (78) 483 (91) 393 1 0 (48) 2 347 0 0 347 345 394

545 (72) 472 (143) 329 1 0 (49) 2 284 0 0 284 282 330

497 (71) 427 (116) 310 1 0 (47) 2 266 0 0 266 264 311

N/A nm nm nm

13,858.5 56,560.7 nm 44,943.4

(2.9) (16.2) (16.2) (18.5)

(8.7) (5.9) (5.7) (6.2)

86.7 (1.7) 19.1

86.1 70.0 61.9

86.7 60.4 52.1

85.8 62.4 53.5

2015A

2016F

2017F

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

19,603 0 0 607 0 180 14 20,404

19,603 0 0 590 0 291 0 20,484

19,603 0 0 663 0 302 0 20,568

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab.

0 79 335 3,900 84 16,005 0 20,404

0 0 541 3,900 0 16,043 0 20,483

0 0 562 3,895 0 16,111 0 20,568

Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)

(221) (3,293) N/A N/A N/A NM 1.9 1.9 0.2 0.2 0.0 NA

(250) (3,310) 48.0 59.7 N/A 0.1 1.6 1.6 0.2 0.2 0.0 NA

(260) (3,232) 58.1 N/A N/A 0.1 1.7 1.7 0.2 0.2 0.0 NA

Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (Pre-ex) (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (Bt m) FY Mar

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 48

VICKERS SECURITIES

Company Guide Impact Growth Real Estate Investment Trust

Cash Flow Statement (Bt m) FY Mar Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (Bt) Free CFPS (Bt)

2015A

2016F

2017F

632 0 0 0 (18,355) (4) (17,727) 0 (402) 0 0 0 (402) (341) 3,900 15,715 0 19,274 0 1,144 0.4 (12.0)

1,111 0 0 0 (55) 0 1,056 0 0 0 0 0 0 (1,073) 0 0 0 (1,073) 0 (17) 0.7 0.7

1,154 0 0 0 10 0 1,164 0 0 0 0 0 0 (1,086) (5) 0 0 (1,090) 0 73 0.8 0.8

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 49

Thailand Company Guide

LH Shopping Centers Leasehold Edition 1 Version 1 | Bloomberg: LHSC TB | Reuters: LHSCu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

MODERATE GROWTH POTENTIAL

Last Traded Price: Bt10.40 (SET : 1,381.72) Price Target : Bt11.40 (10% upside)

Recommend BUY, Bt10.4 TP (DCF valuation). LHREIT has declared Bt0.022/unit interim dividend for the first half of FY15. This implies 7.9% annualised yield, higher than the current Thai 10-year government bond yield of 3.0%. Yields are forecast to rise along with net earnings, to 7.0% in FY16 and 7.0% in FY17. Prime location, easy accessibility The REIT owns Terminal 21, a retail mall with 34,058 sqm of leasable space, including the food court. The asset is located in the middle of a major business district (Asoke District) where there are large office buildings and hotels. Terminal 21 is easily accessible by both MRT and BTS, which will continue to drive traffic to the store.

Potential Catalyst: Moderate earnings growth Where we differ: n.a. Analyst Thailand Research Team +662 658 1222 Nantika WIANGPHOEM +662 657 7836 [email protected]

Price Relative Bt

Relative Index

204

11.6

184

11.1

164 10.6

144 10.1

124

9.6

104

9.1 Dec-14

84 Mar-15

Jun-15

LH Shopping Centers Leasehold (LHS) Relative SET INDEX (RHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

2014A 26 13 12 0 0.02 nm 0.00 nm 10.22 424.2 0.0 1.0 18.2 N/A

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 1,036 442 400 372 0.82 3,242 0.76 nm 10.28 12.7 7.3 1.0 18.2 8.0

2016F 1,048 447 402 373 0.82 0 0.77 0 10.34 12.6 7.4 1.0 18.2 8.0

2017F 1,056 450 405 377 0.83 1 0.77 1 10.40 12.5 7.4 1.0 18.2 8.0

N/A B: 0

N/A S: 0

N/A H: 0

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Unique theme and proactive marketing Terminal 21 differentiates itself from other malls with its unique concept of offering shoppers the experience of shopping in major cities around the world, all under one roof. They also have an attractive mix of retail and F&B offering to attract both local customers and tourists. Mild growth outlook Occupancy is currently close to 98% of total leasable area. Hence, we expect growth to be mostly driven by positive rental reversions and an increase in the share of variable rent contracts (i.e. as a % of store turnover). Valuation: We value LHSC at Bt11.4, based on DCF valuation. Key Risks to Our View: Key risk is a drop in occupancy rate as a result of a slower economy and political and safety issues, and lower-thanexpected average rental rate. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Land and Houses Pcl. (%) GIC PRIVATE LIMITED (%) Social Security Office (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

488.06 4,978 / 138 9.0 6.0 6.0 72.9 0.07

VICKERS SECURITIES

Company Guide LH Shopping Centers Leasehold

CRITICAL DATA POINTS TO WATCH

ARR and Occupancy rate

Earnings Drivers: Higher ARR (Average Rental Rate). The leases are divided into two types: (i) fixed rate contracts which accounts for 85% of total rental income, and (ii) variable rate contracts which are mostly signed with the F&B and cinema operators. The fixedrate contracts are normally for one to three years, with a rent review upon renewal. The variable-rate contracts are linked to the revenues generated by the lessees. We expect overall ARR to increase by 10% every three years. High occupancy rates. The REIT’s portfolio occupancy rate is currently at 98% of total leasable space with 588 lessees. We expect occupancy rate to be stable or reach 100% in some months, because the convenient access and stylish interior design of the property will attract both local customers and tourists. Hence, earnings growth should remain relatively stable in the near future.

Net Property Income and Margins (%)

Development in the surrounding area. The REIT’s asset is located in one of Bangkok’s major business districts. It stands between office buildings, hotels, and condominiums. Given easy access to the Asoke District, there are many property development projects, including condominiums and malls. These will drive traffic to the district, as well as Terminal 21, which suggests growth ahead. NAV

Rent opportunity in common area. The REIT also has a common (1,600 sqm) available for rental for special events, such as promotional product fairs that could run from a few days to a month. If the REIT expands the common area, there is a room for upside to our forecasts.

Area breakdown

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 51

Company Guide LH Shopping Centers Leasehold

Balance Sheet: Investment properties accounted for 90% of the REIT’s total assets end June. The REIT’s leverage ratio is only 0.11x, represented by Bt1.1bn long-term loans. The low leverage, indicates a strong balance sheet. The REIT has no plans to acquire new assets in the near-term, which means net gearing will drop as the REIT starts to repay the loan. Since incorporation in December 2014, the REIT payout has been c.90% of distributable earnings, or Bt0.022 per unit, implying 0.2% dividend yield (based on IPO price). The REIT will raise dividend payout ratio to 95% in the future.

Aggregate Leverage (%) 19.0% 18.0% 17.0% 16.0%

15.0% 14.0% 13.0% 12.0%

11.0% 10.0% 2014A

2015F

2016F

2017F

ROE (%)

Share Price Drivers: Higher ARR. The REIT’s occupancy is expected to be stable, or reach 100% in some months. Hence, the key revenue and earnings drivers would be the ability to increase ARR.

7.0%

6.0% 5.0% 4.0%

Key Risks: Political turmoil, safety issues and slowing economy. The political and safety issues could lead to lower traffic at Terminal 21, which could drive down occupancy rates. And a slowing economy would make it challenging for the REIT to increase rents. These would reduce investment income.

3.0% 2.0%

1.0% 0.0% 2015F

2016F

2017F

Distribution Yield (%)

COMPANY BACKGROUND LH Shopping Centers Leasehold Real Estate Investment Trust (LHSC) was founded in December 2014 with total registered capital of Bt4.978bn.

8.0% 7.0% 6.0%

5.0% 4.0%

3.0%

LHSC has signed a 26-year lease agreement for Terminal 21, the unique and stylish shopping mall covering an area of 97,905 sqm, comprising 34,058 sqm of leasable space, 34,584 sqm of common area, and 29,263 sqm of parking space. The lease ends on 31 Aug 2040. The REIT’s revenue is driven by occupancy and rental rates, which can be affected by economic, political and safety issues. The REIT absorbs all cost of services, operating expenses and fund management fees. The REIT’s profit is exempted from tax. The REIT can acquire new assets in the future in accordance with regulations.

2.0% 1.0% 0.0% 2014A

2015F

2016F

2017F

PB Band (x)

Land and House PCL, GIC Private Limited and Social Security Office are the major unit shareholders with 9%, 6% and 6% stake, respectively. Source: Company, DBS Vickers

ASIAN INSIGHTS Page 52

VICKERS SECURITIES

Company Guide LH Shopping Centers Leasehold

Key Assumptions FY Dec

2014A

2015F

2016F

2017F

Net leasable area (sqm) ARR (Bt/sqm/month) Occupancy rate (%) Margin (%) Dividend payout ratio (%)

31,622 1,760 98% 45% 0%

31,622 2,112 98% 37% 93%

31,622 2,112 98% 37% 93%

31,622 2,112 98% 37% 93%

Income Statement (Bt m) FY Dec

2014A

2015F

2016F

2017F

26 (13) 13 0 0 (1) 0 12 0 0 0 12 14 0 14

1,036 (594) 442 (3) 2 (40) 0 400 0 0 0 400 400 0 400

1,048 (601) 447 (3) 2 (44) 0 402 0 0 0 402 402 0 402

1,056 (606) 450 (3) 2 (44) 0 405 0 0 0 405 405 0 405

N/A nm nm 0.0 49.9 45.2 0.0

3,811.5 3,245.2 3,242.4 93.0 42.6 38.6 35.9

1.2 1.2 0.4 93.0 42.6 38.3 35.6

0.7 0.7 0.9 93.0 42.6 38.4 35.7

1.6

0.3

0.3

0.3

N/A N/A N/A 15.7

8.0 6.0 6.9 10.9

8.0 6.0 6.9 10.1

8.0 6.0 6.9 10.2

Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 53

Company Guide LH Shopping Centers Leasehold

Quarterly / Interim Income Statement (Bt m) FY Dec Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

26 (13) 13 0 0 (1) 0 12 0 0 12 12 0 12

270 (153) 117 (3) 0 (10) 0 104 0 0 104 104 0 104

274 (159) 115 (3) 0 (10) 0 103 0 0 103 103 0 103

N/A nm nm 49.9 0.0

919 784 667 N/A 0.0

2 (1) (1) 44.1 181.0

Balance Sheet (Bt m) FY Dec

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

5,942 0 509 0 8 225 6,684

5,942 0 533 0 27 225 6,726

5,942 0 561 0 27 225 6,755

5,942 0 590 0 27 225 6,783

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 14 291 1,080 309 4,990 0 6,684

0 29 291 1,080 309 5,018 0 6,726

0 29 291 1,080 309 5,046 0 6,755

0 29 291 1,080 309 5,075 0 6,783

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

(72) (571)

(68) (547)

(68) (519)

(68) (490)

2.4 1.7 18.2 NA

2.5 1.8 18.2 NA

2.5 1.8 18.2 NA

2.6 1.9 18.2 NA

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 54

VICKERS SECURITIES

Company Guide LH Shopping Centers Leasehold

Cash Flow Statement (Bt m) FY Dec

2014A

2015F

2016F

2017F

Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash

12 0 0 0 381 0 393 (5,942) (389) 0 0 0 (6,331) 0 1,080 4,978 0 6,058 0 120

400 0 0 0 (4) 0 396 0 0 0 0 0 0 (372) 0 0 0 (372) 0 24

402 0 0 0 0 0 401 0 0 0 0 0 0 (373) 0 0 0 (373) 0 28

405 0 0 0 0 0 405 0 0 0 0 0 0 (377) 0 0 0 (377) 0 28

0.0 (11.4)

0.8 0.8

0.8 0.8

0.8 0.8

Operating CFPS (Bt) Free CFPS (Bt)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 55

Thailand Company Guide

Prime Office Leasehold Property Fund Edition 1 Version 1 | Bloomberg: POPF TB | Reuters: POPFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

ATTRACTIVE DIVIDEND YIELD

Last Traded Price: Bt13.30 (SET : 1,381.72) Price Target : Bt14.00 (6% upside)

BUY, Bt14.0 TP (DCF valuation). The Fund has declared Bt0.262/unit interim dividend for 2Q15; we are expecting 8.1% dividend yield for FY15F. This is higher than the current Thai 10-year government bond yield of 3.0% and dividend yield of 3.6% for DBS Thailand universe. And, yields will rise along with net earnings, to 8.3% in FY16 and 8.8% in FY17.

Potential Catalyst: Rental rate hike and healthy occupancy rate Where we differ: n.a. Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected] Nantika WIANGPHOEM +662 657 7836 [email protected]

Diversified, prime location of assets The Fund has leased three assets in different locations: (i) UBC II Building in Prompong, (ii) Ploenchit Center Building in Ploenchit, and (iii) Bangna Tower. The diverse locations allow the Fund to capture rising traffic in several areas and minimise asset concentration risk (to avoid income being disrupted at all assets by a single event). This helps to generate stable income.

Price Relative Bt

Relative Index

16.4

210

15.4

190

14.4

170

13.4

150

12.4

130

11.4

110

10.4

90

9.4 8.4 Sep-11

Sep-12

Sep-13

Prime Office LH Prop Fund (LHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

Sep-14

70 Sep-15

Relative SET INDEX (RHS)

2014A 689 481 422 395 0.82 (21) 1.04 2 11.48 16.2 7.8 1.2 7.4 8.4

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 922 665 546 546 1.13 38 1.08 3 11.55 11.7 8.1 1.2 7.3 9.8

2016F 964 679 561 561 1.17 3 1.11 3 11.61 11.4 8.3 1.1 6.9 10.1

2017F 1,019 715 595 595 1.24 6 1.17 6 11.69 10.8 8.8 1.1 6.5 10.6

1.06 B: 0

1.10 S: 0

N/A H: 0

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Convenient access Both the UBC II Building and Ploenchit Center are located in prime locations and accessible by BTS. And, Bangna Tower is on Bangna – Trad Road, one of the main transportation routes for goods, and is only 20-km from Suvarnabhumi Airport. Consequently, traffic at these assets is supported by easy access. Potential growth outlook Portfolio occupancy has been sustainable at 96-99%, and considering strong demand for the assets, the Fund expects average rental rate to increase by 10-15% every three years. Valuation: We value POPF at Bt14.0, based on DCF valuation. Key Risks to Our View: Key risks are (i) a drop in occupancy rate, (ii) lower-thanexpected average rental rate, and (iii) non-renewal of leases. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Social Security Office (%) SCB Life Assurance PCL (%) MTLS (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

482 6,406 / 178 19.3 8.8 4.3 67.6 0.10

VICKERS SECURITIES

Company Guide Prime Office Leasehold Property Fund

CRITICAL DATA POINTS TO WATCH

Occupancy rate (%) Occupancy rate (%)

Earnings Drivers: Leasehold rights to three buildings in prime locations. They are (i) UBC II Building in Prompong, (ii) Ploenchit Center Building at Ploenchit, and (iii) Bangna Tower. The buildings are located in prime areas and along the main roads leading into and out of Bangkok, and register high average occupancy rates of 96-99%. The remaining tenures of the lease are 10 - 29 years, which means they will continue to generate revenues for that period. And, the diversified location of the assets reduces concentration risk. Healthy occupancy rate. The Fund’s portfolio occupancy rate has been hovering at 96-99% of total leasable space in the past few years. The Fund expects occupancy rate to be stable because the convenient access and availability of full facilities will continue to drive demand for the assets. Average rental rate (ARR) hikes. ARR dropped in 4Q14 because the Fund had added Bangna Tower which commands lower ARR than the other two assets because of location. However, the Fund will be able to raise rents regularly because the assets are in prime locations. We expect growth to come from positive rental reversion which would increase overall ARR by 10-15% every three years. Strong facilities offering. The properties operated by the Fund have full facilities, i.e. meeting rooms, catering rooms, fitness facilities, parking lots, etc. One of the largest advantages is sufficient parking lots for tenants and visitors; most of the other office buildings in the Central Business District are facing a shortage of parking space. In addition, the Fund has kept parking fees stable so far; this suggests room to raise fees (and income) when there is stronger demand for the parking lots.

100

UBC II

100

Ploenchit Center

100

Bangna Tower

99 98 98

98

98 98

98

98 97

97

97 96

96 95

95 94

93 92

1Q14

2Q14

3Q14

4Q14

1Q15

ARR by property Bt/sq.m.

800

717

697

711

700

611

589

590

1Q15

2Q15

600 500 400

300 200 100 1Q14

2Q14

3Q14

4Q14

Net Property Income and Margins (%) Bt m

800 700

95.4%

600

93.4%

500

91.4%

400

89.4%

300

87.4%

200

85.4%

100

83.4%

0

81.4%

2013A

Dividend payout assumptions. We assumed 92% - 100% dividend payout ratio throughout our forecast period to reflect its par value reduction plan, vs 79% - 113% historical payout.

2014A

Net Property Income

2015F

2016F

2017F

Net Property Income Margin %

NAV Btm 6,000

NAV

5,529

5,563

5,594

2015F

2016F

2017F

5,000 4,000

3,818

3,875

3,000

2,000 1,000 0

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 57

Company Guide Prime Office Leasehold Property Fund

Balance Sheet: Investment properties accounted for 97% of the Fund’s total assets at end June. Total borrowings amount to Bt455m (long-term loan), implying low leverage at 0.08x. This indicates a strong balance sheet and also complies with the SEC’s property fund regulations. The Fund has no plans to drawdown more loans. Hence, net gearing will improve as the Fund repays the loan.

Aggregate Leverage (%) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2013A

Share Price Drivers: Strong growth in ARR. The Fund’s occupancy is expected to remain stable. Hence, the key revenue and earnings drivers would be the ability to increase ARR, resulting in higher distribution and yields.

2014A

2015F

2016F

2017F

2016F

2017F

ROE (%) 18.0% 16.0% 14.0%

Key Risks: Political unrest and slowing economy. Political unrest and a slowing economy would make it challenging for the Fund to increase rents, and could even drive down occupancy rates, and in turn, rental income.

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2013A

COMPANY BACKGROUND Prime Office Leasehold Property fund (POPF) was founded in March 2011 and increased its capital in October 2014, taking total registered capital to Bt5.03bn.

The Fund’s revenues are determined by occupancy and rental rates, which can be affected by economic, political and safety issues. The Fund absorbs operating expenses and fund management fees. The Fund’s profit is exempted from tax. The Fund cannot acquire anymore assets in accordance with the SEC’s regulations.

2015F

EPU and DPU EPU

0.70

0.60

In March 2011, POPF had signed two agreements for leasehold rights to (i) UBC II Building in Prompong covering a leasable area of 33,798 sqm and (ii) Ploenchit Center Building in Ploenchit covering 42,845 sqm. And in October 2014, the Fund signed another agreement for leasehold rights to Bangna Tower in Bangna covering 43,466 sqm.

2014A

DPU

0.30

120%

110%

108% 99%

0.50 0.40

Payout ratio

100% 96%

80%

79% 0.28

0.28

0.30

0.26 0.26

0.22

0.24

0.26

0.30 0.29

60% 40%

0.20

20%

0.10 0.00

0% 1Q14

2Q14

3Q14

4Q14

1Q15

Source: Company, DBS Vickers

The major unit holders are Social Security Office, SCB Life Assurance PCL and Muangthai Leasing PCL with 19%, 9% and 3% stake, respectively.

ASIAN INSIGHTS Page 58

VICKERS SECURITIES

Company Guide Prime Office Leasehold Property Fund

Key Assumptions FY Dec

2013A

2014A

2015F

2016F

2017F

Net leasable area (sqm) ARR (Bt/sqm) Occupancy rate (%) Margin (%) Dividend payout ratio (%) (Bt/sqm) ARR

76,695 684 99% 56% 127% 684

125,184 614 99% 58% 95% 614

125,184 642 98% 57% 95% 642

125,184 679 98% 57% 95% 679

125,184 702 98% 57% 92% 702

Income Statement (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

634 (206) 428 (91) 8 7 353 49 0 0 401 401 (49) 353

689 (209) 481 (97) 10 1 395 27 0 0 422 422 (27) 395

922 (257) 665 (115) 11 (15) 546 0 0 0 546 546 0 546

964 (285) 679 (117) 12 (12) 561 0 0 0 561 561 0 561

1,019 (304) 715 (121) 12 (11) 595 0 0 0 595 595 0 595

N/A nm nm 99.5 85.7 55.6 55.6

8.7 12.2 11.9 127.3 86.0 57.3 57.3

33.7 38.4 38.3 95.0 87.5 59.2 59.2

4.6 2.2 2.8 95.0 87.9 58.2 58.2

5.7 5.3 6.0 95.0 88.1 58.4 58.4

14.3

14.0

12.5

12.1

11.9

18.2 17.1 17.4 NM

8.4 7.5 7.8 NM

9.8 8.6 9.1 37.6

10.1 8.8 9.3 45.2

10.6 9.3 9.8 53.1

Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Net Investment Income Revaluation Gain Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 59

Company Guide Prime Office Leasehold Property Fund

Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

165 (51) 113 (22) 2 1 0 95 0 0 95 95 0 95

163 (54) 109 (22) 2 1 0 91 0 0 91 91 0 91

201 (56) 146 (32) 4 (3) 0 114 0 0 114 114 0 114

223 (48) 175 (31) 3 (4) 0 143 0 0 143 143 0 143

224 (54) 170 (32) 4 (5) 0 138 0 0 138 138 0 138

3 1 1 68.8 94.1

(1) (4) (5) 66.7 113.3

23 34 26 72.4 92.4

11 20 25 78.6 88.8

0 (3) (4) 76.1 91.7

Balance Sheet (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

0 3,863 241 0 22 1 4,127

0 6,182 81 0 48 39 6,351

0 6,182 95 0 64 39 6,380

0 6,182 100 0 67 39 6,388

0 6,182 110 0 71 39 6,402

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 240 0 0 12 3,875 0 4,127

0 341 0 455 26 5,529 0 6,351

0 341 0 450 26 5,563 0 6,380

0 341 0 427 26 5,594 0 6,388

0 341 0 404 26 5,631 0 6,402

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

(217) 241

(254) (374)

(238) (356)

(235) (327)

(231) (295)

N/A 1.1 0.0 0.0

N/A 0.4 7.4 0.0

N/A 0.5 7.3 0.0

N/A 0.5 6.9 0.0

N/A 0.5 6.5 0.0

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 60

VICKERS SECURITIES

Company Guide Prime Office Leasehold Property Fund

Cash Flow Statement (Bt m) FY Dec Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Operating CFPS (Bt) Free CFPS (Bt)

2013A

2014A

2015F

2016F

2017F

353 0 0 0 0 200 552 0 0 0 0 0 0 (344) 0 0 0 (344) 0 208

395 0 0 0 0 (2,242) (1,847) 0 0 0 0 0 0 (373) 455 1,606 0 1,687 0 (159)

546 0 0 0 0 (16) 530 0 0 0 0 0 0 (512) (5) 0 0 (517) 0 13

561 0 0 0 0 (3) 558 0 0 0 0 0 0 (530) (23) 0 0 (553) 0 5

595 0 0 0 0 (4) 591 0 0 0 0 0 0 (558) (23) 0 0 (581) 0 10

1.6 1.6

(3.8) (3.8)

1.1 1.1

1.2 1.2

1.2 1.2

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 61

Thailand Company Guide

Samui Airport Property Fund Refer to important disclosures at the end of this report

Edition 1 Version 1 | Bloomberg: SPF TB | Reuters: SPFu.BK

DBS Group Research . Equity

18 Sep 2015

BUY

OFFERING GENEROUS YIELDS

Last Traded Price: Bt19.60 (SET : 1,381.72) Price Target : Bt21.40 (9% upside) (Prev Bt21.40)

Reiterate BUY, Bt21.40 TP (DCF valuation). The fund offers generous dividend yield of 6.9% for 2015 (payable quarterly), a hefty premium over the Thai 10-year government bond yield of 2.65%. And the yields should rise to 7.4% in 2016 and 8.0% in 2017, in line with a recovering tourism industry on Samui. Unlike many other PFPOs and REITs which are now running at nearly full capacity, SPF is operating at below its full capacity, suggesting hefty upside potential.

Potential Catalyst: Strong recovery of Samui tourism Where we differ: n.a. Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected]

A prime beneficiary of recovering tourism. SPF derives revenues from departing passengers and incoming flights at Samui Airport. With politics getting calmer and martial law lifted in April, we conservatively expect tourist arrivals to grow 5% in 2015, 7% each in 2016-2018, and 5% thereafter until 2036. Note that despite the political uncertainty, SPF’s passenger numbers still expanded at 7% CAGR over the last decade.

Price Relative Bt

Relative Index

22.0 20.0

204

18.0

184

16.0

164

14.0

144

12.0

124 104

10.0 8.0 Sep-11

Sep-12

Sep-13

Samui Airport Property Fund (LHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

Sep-14

84 Sep-15

Relative SET INDEX (RHS)

2014A 1,216 1,216 1,178 1,185 1.24 (13) 1.25 0 11.03 15.8 6.4 1.8 0.0 11.2

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 1,263 1,263 1,231 1,231 1.30 5 1.30 4 11.04 15.1 6.6 1.8 0.0 11.7

2016F 1,355 1,355 1,323 1,323 1.39 7 1.39 7 11.07 14.1 7.1 1.8 0.0 12.6

2017F 1,448 1,448 1,415 1,415 1.49 7 1.49 7 11.09 13.2 7.6 1.8 0.0 13.4

1.30 B: 2

1.39 S: 0

1.49 H: 0

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CT

Clears key hurdle. Bangkok Airways (BA), the property manager, had received approval from the Department of Civil Aviation to increase the maximum number of flights to Samui Airport from 36 to 50 effective November 2014. This should remove earlier concerns about capacity. Valuation: We value SPF at Bt21.40, based on the DCF model. Key Risks to Our View: Key risk is a sharp drop in tourists to Samui. Nonetheless, downside risk is protected by annual revenue guarantee of Bt570m from Bangkok Airways, the Property Manager, which suggests a dividend yield of 3.2% at current price. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Bangkok Airways (%) GPF Startegic Investment Fund (%) Ayudhya Allianz C.P. (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Real Estate / Real Estate Investment Trusts

950 18,620 / 517 25.0 8.1 7.1 46.9 0.31

VICKERS SECURITIES

Company Guide Samui Airport Property Fund Monthly Passenger Volume and YoY Growth

CRITICAL DATA POINTS TO WATCH Earnings Drivers: Compelling growth story. Unlike many other PFPOs and REITs which are now running at nearly full capacity, SPF is operating at below its full capacity. The fund has ample room to grow - current traffic is only 1.1m passengers per year compared to its maximum capacity of over 2m passengers at Samui Airport. In addition, Bangkok Airways (BA), the property manager, had received approval from the Department of Civil Aviation to increase the maximum number of flights to Samui Airport from 36 to 50 effective November 2014. This should remove earlier concerns over capacity.

Monthly Flight Volume and YoY Growth

Recovering tourism industry. Despite the low season, passenger and flight volumes improved substantially in 2Q15 following the lifting of martial law in April. June traffic was most impressive, with passenger volume surging 11% y-o-y and flight volume 9%. The positive momentum should continue into the high tourist season on Samui in 3Q15. We conservatively expect passenger volume to grow 5% in 2015, and 7% each in 2016-2017. Note that despite the political uncertainty, SPF’s passenger numbers expanded at 7% CAGR over the last decade. Increasing international passenger service charge. BA, the property manager, has secured the Department of Civil Aviation (DCA) approval to raise passenger service charge (PSC) for international passengers at Samui Airport from Bt600 to Bt700. This was effective June 2015. Under the agreement with BA, SPF will get 20% of the increment and the rest will go to BA. SPF share of PSC is now Bt340 per passenger on international flight (from Bt320 earlier). Although the impact of the PSC hike is small, it will still lift revenues. Rising number of flights in line with passenger growth. The average daily number of flights to Samui Airport is about 36 vs 50 flights maximum permitted currently. We expect the number of flights to continue to increase along with passenger numbers. Note that BA accounts for a large portion of flight volume at Samui Airport. Other airlines include Thai Airways, Silk Air, and Firefly. BA currently flies directly to three international destinations from Samui, and back. These are Hong Kong, Singapore, and Kuala Lumpur. The company plans to increase flight frequency to these international destinations soon, while offering direct flights to new destinations in the medium to long term. These additional flights and services should help to support growth in the future.

Revenue Is On The Rise

Passenger Breakdown

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 63

Company Guide Samui Airport Property Fund

Distribution per Unit (Bt)

Balance Sheet: Balance sheet is strong with net a cash position and virtually no debt. SPF has no operating expenses or capex, as these are borne by Bangkok Airways, the Property Manager. The fund has only annual fund expenses of about Bt40m. Hence, any increases in revenue would flow directly to the bottom line. The fund normally pays out 100% of cash profits every quarter. Such distribution has been risen steadily since its inception, in line with rising passenger and flight numbers. Despite the political unrest in 2014 which has led to military coup in May 2014, SPF managed to pay flat dividends as compared to 2013. Share Price Drivers: Recovering tourism industry. Since the fund’s revenues and profits are tied directly to Samui tourism, the strong tourist recovery will be a key driver of both earnings and share price. 1Q and 3Q are normally high seasons for Samui tourism.

ROE (%) 12.0% 10.0% 8.0% 6.0%

Key Risks: Political unrest. Political unrest, like what happened in 2014 which led to the implementation of martial laws, will affect tourist arrivals to Thailand including Samui Airport, and hence, revenues of the fund. Reliance on a single asset. SPF relies on a single asset to generate its revenues, which is Samui Airport, and tourism on Samui. COMPANY BACKGROUND SPF is one of Thailand's leading property funds. The Fund invests in leasehold rights to operate Samui Airport for 30 years (2006-2036). Bangkok Airways, the sponsor, has voluntarily agreed to retain at least 25% stake in the fund for 20 years in order to align its interests with the fund. BA has 25.1% stake in the fund. SPF’s revenues correlate with the number of passengers and flights flying from and to Samui Airport, based on the following formula. All operating expenses and capital expenditure are borne by the operator, Bangkok Airways. This eliminates operating cost risks at the fund.

4.0% 2.0% 0.0% 2013A

2014A

2015F

2016F

2017F

2016F

2017F

Distribution Yield (%) 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2013A

2014A

2015F

PB Band (x)

Revenue Sharing Passenger revenue (per departing passenger) Domestic Bt300 International Bt340 Flight revenue (per incoming flight) Cressna Dash 7 ATR72 Airbus/Boeing

ASIAN INSIGHTS Page 64

Source: Company, DBS Vickers

Bt5,000 Bt10,000 Bt50,000 Bt80,000

VICKERS SECURITIES

Company Guide Samui Airport Property Fund

Key Assumptions FY Dec No. of passengers (m) Growth Sharing (Bt/pax) Domestic passengers International passengers Passenger rev (Btm) Cabin factor Operating hours/day No. of flights p.a.: ATR Boeing/Airbus Sharing: ATR (Bt/flight) Boeing (Bt/flight) Div. Payout Segmental Breakdown FY Dec

2013A

2014A

2015F

2016F

2017F

1.1 9.0%

1.1 -1.6%

1.1 5.0%

1.2 7.0%

1.3 7.0%

300.0 320.0 332.2 80% 16.0

300.0 320.0 326.7 80% 16.0

300.0 330.0 348.0 80% 16.0

300.0 340.0 377.5 80% 16.0

300.0 340.0 403.9 80% 16.0

4,968 7,991

4,731 8,146

4,745 8,475

4,745 9,254

4,745 10,088

50,000 80,000 100%

50,000 80,000 100%

50,000 80,000 100%

50,000 80,000 100%

50,000 80,000 100%

2013A

2014A

2015F

2016F

2017F

Political unrest, martial law in place

Margins Trend 116.0% 111.0%

Revenues (Bt m) Passenger revenue Flight revenue ATR Boeing Total flight revenue Total revenue Revenue breakdown Passenger revenue Flight revenue ATR Boeing Total flight revenue Total revenue

332

327

348

378

404

106.0%

248 639 888 1,220

237 652 888 1,215

237 678 915 1,263

237 740 978 1,355

237 807 1,044 1,448

101.0% 96.0% 91.0% 2013A

2014A

Operating Margin %

27%

27%

28%

28%

28%

20% 52% 73% 100%

19% 54% 73% 100%

19% 54% 72% 100%

18% 55% 72% 100%

16% 56% 72% 100%

2013A

2014A

2015F

2016F

2017F

1,221 0 1,221 (38) 0 9 168 1,359 0 0 0 1,359 1,359 (168) 1,191

1,216 0 1,216 (40) 0 9 (7) 1,178 0 0 0 1,178 1,178 7 1,185

1,263 0 1,263 (41) 0 9 0 1,231 0 0 0 1,231 1,231 0 1,231

1,355 0 1,355 (42) 0 10 0 1,323 0 0 0 1,323 1,323 0 1,323

1,448 0 1,448 (43) 0 10 0 1,415 0 0 0 1,415 1,415 0 1,415

8.3 8.3 37.6 99.7 96.9 111.3 97.6

(0.4) (0.4) (13.3) 100.0 96.7 96.9 97.5

3.9 3.9 4.5 100.0 96.8 97.5 97.5

7.3 7.3 7.4 100.0 96.9 97.6 97.6

6.9 6.9 7.0 100.0 97.0 97.7 97.7

2015F

2016F

2017F

Net Income Margin %

Income Statement (Bt m) FY Dec Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

3.1

3.3

3.2

3.1

3.0

13.1 13.0 11.3 NM

11.2 11.2 11.2 NM

11.7 11.7 11.6 NM

12.6 12.5 12.4 NM

13.4 13.4 13.3 NM

Martial law lifted in Apr 2015

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 65

Company Guide Samui Airport Property Fund

Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

286 0 286 (10) 0 2 26 304 0 0 304 N/A N/A N/A

319 0 319 (10) 0 2 18 329 0 0 329 N/A N/A N/A

277 0 277 (10) 0 2 10 279 0 0 279 N/A N/A N/A

326 0 326 (10) 0 2 (58) 260 0 0 260 N/A N/A N/A

306 0 306 (10) 0 2 (28) 269 0 0 269 N/A N/A N/A

(15) (15) 14 100.0 N/A

12 12 8 100.0 N/A

(13) (13) (15) 100.0 N/A

18 18 (7) 100.0 N/A

(6) (6) 3 100.0 N/A

Balance Sheet (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

10,182 366 3 0 0 0 10,552

10,175 364 3 0 0 0 10,542

10,175 364 14 0 0 0 10,553

10,175 364 37 0 0 0 10,576

10,175 364 60 0 0 0 10,599

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 0 0 0 62 10,490 0 10,552

0 0 0 0 61 10,481 0 10,542

0 0 0 0 61 10,492 0 10,554

0 0 0 0 61 10,515 0 10,576

0 0 0 0 61 10,538 0 10,599

0 3

0 3

0 14

0 37

0 60

N/A N/A 0.0 273.9

N/A N/A 0.0 273.6

N/A N/A 0.0 273.5

N/A N/A 0.0 0.0

N/A N/A 0.0 NA

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

No borrowings

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 66

VICKERS SECURITIES

Company Guide Samui Airport Property Fund

Cash Flow Statement (Bt m) FY Dec

2013A

2014A

2015F

2016F

2017F

Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash

1,359 0 0 0 (4) (168) 1,188 0 (24) 0 0 0 (24) (1,173) 0 0 0 (1,173) 0 (10)

1,178 0 0 0 3 7 1,188 0 (1) 0 0 0 (1) (1,188) 0 0 0 (1,188) 0 0

1,231 0 0 0 (1) 0 1,230 0 0 0 0 0 0 (1,220) 0 0 0 (1,220) 0 11

1,323 0 0 0 0 0 1,323 0 0 0 0 0 0 (1,300) 0 0 0 (1,300) 0 23

1,415 0 0 0 0 0 1,415 0 0 0 0 0 0 (1,392) 0 0 0 (1,392) 0 23

1.3 1.3

1.2 1.3

1.3 1.3

1.4 1.4

1.5 1.5

Operating CFPS (Bt) Free CFPS (Bt)

No capex

Source: Company, DBS Vickers Target Price & Ratings History 20.55

Bt

20.05

S.No .

19.55

1: 2: 3: 4: 5: 6:

19.05

6

18.55

5

18.05

4

Cl o s i n g Pri c e 10 Mar 15 17.40 20 Apr 15 17.40 15 May 15 17.70 21 May 15 17.70 22 Jul 15 18.70 25 Aug 15 18.60 Da te

Ta rg e t Pri c e 19.50 18.80 18.80 18.90 21.40 21.40

R a ti n g Buy Buy Buy Buy Buy Buy

2

17.55

3

17.05

1

16.55 16.05 Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 67

Thailand Company Guide

Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Edition 1 Version 1 | Bloomberg: TLGF TB | Reuters: TLGFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

DECENT YIELDS

Last Traded Price: Bt13.20 (SET : 1,381.72) Price Target : Bt15.10 (14% upside)

Maintain BUY rating, with Bt15.10 TP based on DCF valuation. TLGF is offering decent distribution yield of 6.0% (FY16F), payable quarterly. We have conservatively assumed 95% payout ratio in our projections vs 100% historical payout. The fund invests in freehold and leasehold rights to 23 successful malls that are strategically located throughout Thailand, thus reducing concentration risks. These malls currently enjoy high occupancy rate of 99%.

Potential Catalyst: Strong rental reversion, Convets to a REIT Where we differ: n.a. Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected]

Net investment income to surge this year. The main contracts with anchor tenant Tesco Lotus, which cover 58% of total lettable area and account for 28% of revenues, are subject to 10% rental reversion this year. And, 648 other contracts (nonTesco Lotus) covering 30,312 sqm or 9% of total lettable area are expiring in FY16 and subject to renewals at 5% higher rents, at least.

Price Relative Bt

Relative Index 221

16.4 201

15.4

181

14.4

161

13.4 12.4

141

11.4

121

10.4

101

9.4 Mar-12 Mar-13 Mar-14 Mar-15 Tesco Lotus Retail Growth Freehold and Leasehold Property Fund (LHS) Relative SET INDEX (RHS)

Forecasts and Valuation FY Feb (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

2014A 2,414 2,057 1,762 1,783 0.75 17 0.76 10 11.25 17.5 5.8 1.2 8.1 6.7

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

81

2015A 2,736 2,302 1,877 1,888 0.80 7 0.81 6 11.24 16.4 6.1 1.2 9.1 7.1

2016F 2,907 2,453 1,976 1,890 0.85 5 0.81 0 11.28 15.6 6.1 1.2 9.1 7.5

2017F 3,009 2,532 2,136 1,953 0.91 8 0.84 3 11.36 14.4 6.3 1.2 9.1 8.1

N/A B: 4

N/A S: 0

N/A H: 1

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CT

Mulling conversion to a REIT. TLGF is still awaiting the SEC’s regulations on transaction costs to transfer assets from a property fund to a REIT. The fund’s current borrowing is Bt2.6bn, representing 9.8% of total assets, slightly below its 10% ceiling. Tesco Lotus has granted right of first refusal to TLGF to acquire its existing and future malls. The successful conversion to a REIT structure would allow the fund/REIT to borrow more for future acquisitions and rely less on equity financing. This should lift distribution per unit and yields. Tesco Lotus has a lot of potential assets that can be injected into the REIT in the future. Valuation: We value TLGF at Bt15.10 based on DCF valuation. Key Risks to Our View: Key risks are (i) lower-than-expected rental reversion, and (ii) weaker-than-expected occupancy rate. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Ek-Chai Distribution System (%) The Government Pension Fund (PI-NONPHYSICAL) The Bank(%) Of New York (Nominees) Limited (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Real Estate / Real Estate Investment Trusts

2,337 30,852 / 856 25.0 8.2 7.2 59.7 0.46

VICKERS SECURITIES

Company Guide Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Revenue Breakdown (1Q15/16) (%)

CRITICAL DATA POINTS TO WATCH Earnings Drivers: Portfolio of 23 shopping malls in good locations throughout Thailand, most of which are freehold assets. Freehold assets represent 60% of TLGF’s total leasable area of 336,291 sqm, and 77% of the appraised value of the assets. These are successful malls in good locations with 99% average occupancy rate. 12 of the malls are located in Bangkok and 11 in the provinces. The geographical diversification helps to reduce concentration risks. With a lot of the assets being freehold and in good locations, the fund stands to benefit from future capital appreciation.

Rental Reversion (%)

Proven track record, average 99% occupancy. Tesco Lotus is the largest anchor tenant, occupying 58% of the fund’s leasable area and generating 28% of revenue. Growth drivers. We expect growth to come from rental reversion (+estimated at 5.0% p.a. for non-Tesco Lotus space) and acquisitions. History suggests the fund had been increasing rents by 8.0-20.0% upon lease renewal for nonTesco Lotus space. The contracts with Tesco Lotus are for a period of 10 years and renewable automatically for two terms of 10 years each (total 30 years). Rents are raised by 10% every three years. The main contracts with Tesco Lotus are subject to 10% rental reversion this year.

Net Property Income and Margins (%) Bt m

2,500 91.9%

Mulling conversion to REIT. TLGF is still awaiting the SEC’s regulations on the transaction costs involved to transfer the assets to a REIT. The fund’s current borrowing is Bt2.6bn, representing 9.8% of its net asset value, slightly below its 10% ceiling. Tesco Lotus has granted right of first refusal to TLGF to acquire its existing and future malls. The successful conversion to a REIT structure would allow the fund/REIT to borrow more for future acquisitions and rely less on equity financing. This should lift distribution per unit and yields. Tesco Lotus has a lot of potential assets that can be injected into the REIT in the future; it operates 133 malls in Thailand (including the 23 malls under TLGF), and is building more.

2,000

89.9% 87.9%

1,500

85.9%

1,000

83.9% 500

81.9%

0

79.9%

2013A

2014A

2015A

Net Property Income

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%) 50

88%

45 87%

40 35

86%

30 25

85%

20 84%

15 10

83%

5

Net Property Income

1Q2016

4Q2015

3Q2015

2Q2015

1Q2015

4Q2014

3Q2014

2Q2014

82%

1Q2014

0

4Q2013

Dividend payout assumptions. We currently assume 95% dividend payout ratio in our projections vs 100% payout historically. This reflects the current net gearing which has hit the ceiling, suggesting the fund needs to reserve cash for any capital expenditure that may arise.

Net Property Income Margin %

Distribution Paid / Net Operating CF (x)

0.9 0.8 0.7 0.6

0.5 0.4 0.3

0.2 2013A

2014A

2015A

2016F

2017F

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 69

Company Guide Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Balance Sheet: Total borrowings amounted to Bt2.6bn, representing 9.8% of its net asset value at end-1Q16. Share Price Drivers: Strong rental reversion. Strong rental reversion could lift rental income and distribution per unit. Converting to a REIT. The successful conversion would mean the REIT can gear up more. It will then rely less on equity financing. This should lift DPU and yields.

Aggregate Leverage (%) 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2013A

2014A

2015A

2016F

2017F

ROE (%) 8.0%

Key Risks: Political unrest & slowing economy Political unrest and a slowing economy could hurt consumer confidence and delay spending, and in turn affect the potential for rental rate hikes.

7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

Acquisition growth stalled unless the fund converts to a REIT All property funds, including TLGF, can no longer increase capital to acquire additional assets. To be able to grow the fund size, the fund needs to be converted to a REIT. But that cannot be done until the SEC finalises further details, such as transaction costs. Losing key anchor tenant Anchor tenant Tesco Lotus does not renew its contracts.

1.0% 0.0% 2014A

2015A

2016F

2017F

Distribution Yield (%) 8.0%

7.0% 6.0% 5.0% 4.0%

COMPANY BACKGROUND TLGF is a property fund that invests in freehold and leasehold rights to 23 retail shopping malls in Thailand, with Tesco Lotus as a key anchor tenant. Ek-Chai Distribution System Co., Ltd. (Tesco Lotus) is the sponsor, major unit holder with 25% stake, and the Property Manager of the Fund.

3.0% 2.0% 2013A

2014A

2015A

2016F

2017F

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 70

VICKERS SECURITIES

Company Guide Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Key Assumptions FY Feb Leasable area (sqm) Occupancy Occupied area (sqm) Rents (bt/sqm/month) Total rents (Btm) Dividend payout

2013A

2014A

2015A

2016F

2017F

312,438 99% 309,648 479 1,778 100%

314,097 99% 312,019 645 2,414 100%

334,453 99% 332,108 680 2,708 100%

336,453 99% 334,074 725 2,907 95%

336,453 99% 334,074 751 3,009 95%

2013A

2014A

2015A

2016F

2017F

587 925 249 18 1,778

771 1,300 323 20 2,414

790 1,555 342 21 2,708

869 1,657 360 22 2,907

869 1,740 377 23 3,009

33% 52% 14% 1% 100%

32% 54% 13% 1% 100%

29% 57% 13% 1% 100%

30% 57% 12% 1% 100%

29% 58% 13% 1% 100%

31% 41% 30% 10% 36%

2% 20% 6% 5% 12%

10% 7% 5% 5% 7%

0% 5% 5% 5% 4%

2013A

2014A

2015A

2016F

2017F

1,779 (275) 1,503 (301) 12 17 12 1,243 0 0 0 1,243 1,243 (538) 1,346

2,414 (357) 2,057 (459) 17 13 134 1,762 0 0 0 1,762 1,762 0 1,783

2,736 (435) 2,302 (497) 1 (68) 139 1,877 0 0 0 1,877 1,877 0 1,888

2,907 (454) 2,453 (404) 1 (74) 0 1,976 0 0 0 1,976 1,976 0 1,990

3,009 (477) 2,532 (326) 1 (72) 0 2,136 0 0 0 2,136 2,136 0 2,056

N/A nm nm 99.8 84.5 69.9 75.7

35.7 36.8 41.8 100.0 85.2 73.0 73.8

13.3 11.9 6.6 100.0 84.1 68.6 69.0

6.2 6.6 5.3 95.0 84.4 68.0 65.0

3.5 3.2 8.1 95.0 84.2 71.0 64.9

7.3

9.5

9.8

10.7

10.8

N/A N/A N/A NM

6.7 6.3 5.8 NM

7.1 6.4 6.3 26.5

7.5 6.7 7.1 27.8

8.1 7.2 7.6 30.8

Segmental Breakdown FY Feb

Revenues (Bt m) Hypermarkets & food court Long-term lease Short-term lease Others Total Revenue Breakdown Hypermarkets & food court Long-term lease Short-term lease Others Total Growth Hypermarkets & food court Long-term lease Short-term lease Others Total Income Statement (Bt m) FY Feb Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

Assuming 95% payout ratio vs historical 100% payout

Growth continues to come from rental reversion

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 71

Company Guide Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Quarterly / Interim Income Statement (Bt m) FY Feb 1Q2015 2Q2015 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

3Q2015

4Q2015

1Q2016

677 (90) 587 (119) 0 (21) (0) 429 0 0 429 429 38 467

688 (93) 595 (120) 1 (21) 0 440 0 0 440 440 38 478

679 (90) 589 (121) 0 (21) 76 508 0 0 508 508 (38) 471

693 (101) 592 (138) 0 (22) 64 483 0 0 483 483 (28) 455

708 (101) 607 (92) 0 (22) (1) 478 0 0 478 478 18 496

8 10 nm 86.7 N/A

2 1 nm 86.5 N/A

(1) (1) nm 86.8 N/A

2 1 nm 85.5 N/A

2 3 nm 85.7 N/A

Balance Sheet (Bt m) FY Feb

2013A

2014A

2015A

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

24,964 716 1,072 0 0 0 26,752

27,469 593 1,029 0 0 0 29,091

28,043 473 1,070 0 0 0 29,586

28,153 380 1,010 0 0 0 29,543

28,263 380 1,113 0 0 0 29,755

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 0 433 0 0 26,319 0 26,752

0 0 510 2,284 0 26,298 0 29,091

0 0 719 2,591 0 26,276 0 29,586

0 0 581 2,600 0 26,362 0 29,542

0 0 595 2,600 0 26,560 0 29,755

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

(433) 1,072

(510) (1,255)

(719) (1,521)

(581) (1,590)

(595) (1,487)

2.5 2.5 0.0 58.6

2.0 2.0 8.1 27.4

1.5 1.5 9.1 26.1

1.7 1.7 9.1 26.4

1.9 1.9 9.1 26.2

Gain (loss) from asset revaluation

Net gearing close to 10% limit

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 72

VICKERS SECURITIES

Company Guide Tesco Lotus Retail Growth Freehold and Leasehold Property Fund Cash Flow Statement (Bt m) FY Feb Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash

2013A

2014A

2015A

2016F

2017F

1,243 170 0 0 (12) 108 1,509 (25,416) 0 0 0 (55) (25,471) (877) 0 25,442 0 24,565 0 603

1,762 230 0 0 (134) 34 1,892 (2,372) 12 0 0 (76) (2,435) (1,783) 2,284 0 0 501 0 (43)

1,877 230 0 0 (139) 167 2,134 (435) 8 0 0 (76) (504) (1,900) 308 0 0 (1,592) 0 39

1,976 94 0 0 0 (61) 2,009 (110) 0 0 0 (76) (186) (1,890) 9 0 0 (1,881) 0 (58)

2,136 0 0 0 0 90 2,226 (110) 0 0 0 (76) (186) (1,937) 0 0 0 (1,937) 0 102

0.8 (12.4)

0.9 (0.2)

1.0 0.7

0.9 0.8

1.0 0.9

Operating CFPS (Bt) Free CFPS (Bt)

Source: Company, DBS Vickers Target Price & Ratings History 14.59

Bt S.No .

14.09

4 2

13.59

3

1: 2: 3: 4:

Cl o s i n g Pri c e 19 Jan 15 13.00 01 Apr 15 13.50 06 May 15 13.50 15 Jul 15 13.70 Da te

Ta rg e t Pri c e 15.10 15.10 15.10 15.10

R a ti n g Buy Buy Buy Buy

13.09

1 12.59 12.09 11.59 Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 73

Thailand Company Guide TICON Industrial Growth Leasehold Property Fund Edition 1 Version 1 | Bloomberg: TGROWTH TB | Reuters: TGROWTHu.BK Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

RESILIENT INDUSTRIAL SPACE LESSOR

Last Traded Price: Bt12.20 (SET : 1,381.72) Price Target : Bt12.90 (6% upside)

BUY with DCF-based TP of Bt12.90. Amid the low-interestrate environment, the fund offers attractive annual yield of c.8% over the next three years, higher than the current 2.65% yield for Thai government bonds and 3.6% yield for stocks under DBS coverage. It has a solid track record of healthy occupancy rates and offers 16% total return (price upside + dividend yield) at the current market price.

Potential Catalyst: Strong economic recovery and rental hike Where we differ: N/A Analyst Wasu Mattanapotchanart +662 658 7826 [email protected]

Withstanding the economic slowdown. While the occupancy rates at other property funds under TICON are in the range of 71-76% and declining because of the slower economy, TGROWTH has been resilient. Its occupancy rate had bottomed out at 93% in 2H14 and has rebounded to 96% in 1H15, close to its peak of 98-100% in 2013 and early 2014. We estimate occupancy rate at 96%/97%/95% for FY15/16/17.

Price Relative Bt

Relative Index 218

13.7

198

12.7

178

11.7

158 10.7

138

9.7

118

8.7

98

7.7 Dec-13

78 May-14

Oct-14

Mar-15

Valuation: We value TGROWTH at Bt12.90, based on DCF valuation (WACC: 7.1%, Terminal Value of Bt0 at the end of 2043).

Aug-15

TICON Industrial Growth Leasehold Property Fund (LHS) Relative SET INDEX (RHS)

Forecasts and Valuation FY Dec (Bt m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (Bt) EPU Gth (%) DPU (Bt) DPU Gth (%) NAV per shr (Bt) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%)

2014A 593 534 531 516 0.96 nm 0.97 nm 10.26 12.7 7.9 1.2 8.1 N/A

Dist. Inc. Revision (%): Consensus DPU (Bt): Other Broker Recs:

2015F 601 543 523 523 0.94 (2) 0.93 (4) 10.28 13.0 7.6 1.2 7.4 9.2

2016F 624 562 541 541 0.98 4 0.97 4 10.30 12.5 7.9 1.2 6.7 9.5

2017F 625 563 544 544 0.98 1 0.97 1 10.31 12.4 8.0 1.2 6.0 9.5

0.80 B: 0

0.90 S: 0

0.90 H: 1

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

ASIAN INSIGHTS www.dbsvickers.com ed: SGC / sa: CS

Key Risks to Our View: Economic slowdown and high-household-debt-to-GDP ratio (c.85%) could result in extended weak automotive sales in Thailand. This could, in turn, cause autopart makers (33% of total leasable areas) to downsize production capacities. Also, lackluster global growth could hurt exports of electronics parts. Electronics firms account for 20% of TGROWTH’s leasable area. At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders TICON (%) HSBC (SINGAPORE) NOMINEES PTE LTD (%) MTLS (%) Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Financials / Real Estate Investment Trusts

555 6,771 / 188 25.3 11.4 11.4 25.1 0.09

VICKERS SECURITIES

Company Guide TICON Industrial Growth Leasehold Property Fund Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH 600

97.5%

500

95.5%

400 93.5%

300 91.5% 200

89.5%

100

87.5%

0

85.5%

2014A

2015F

Net Property Income

Economic recovery could push up occupancy rates We project the Fund’s occupancy rate will be in the range of 95-97% over the next five years, before dropping to 90% from 2020 onward. The majority its clients are involved in autoparts (33% of leasable area), logistics (21%), and consumer products (6%), so TGROWTH’s occupancy rate could beat our estimates during economic upturns. This would present a mild upside to our forecast earnings and TP. Its occupancy rate had peaked at 98-100% in 2013 and early 2014.

ASIAN INSIGHTS

Net Property Income Margin %

91%

35

90%

30

90%

25

89%

20

89%

15

88%

10

88%

5

87%

0

87%

Net Property Income

2Q2015

91%

40

1Q2015

92%

45

3Q2014

50

2Q2014

5-10% rental reversion every three years The majority of TGROWTH’s rental contracts are for three years, and the Fund usually raise rents by 5-10% when the contracts expire, implying 1.7%-3.3% hike p.a. The actual hikes would depend on the prevailing demand-supply situation and the size and location of the rental assets. We forecast average rent would increase by 2.5% p.a. over the next four years, before slowing to 2% p.a. over FY21-24, and 1% thereafter.

2017F

Net Property Income and Margins (%)

1Q2014

This is in stark contrast with the other TICON-owned property funds, of which occupancy rates continue dropping. TFUND’s occupancy rate has fallen from 95.6% in 4Q11 to 70.6% now, and TLOGIS’s has fallen from its 95% peak in 2Q13 to 76% in 2Q15. Hence, we believe that TGROWTH would be able to weather the recession better than other TICON funds.

2016F

4Q2014

Earnings Drivers: Occupancy rates remain healthy TGROWTH’s operations have been resilient. Despite the ongoing economic slowdown, its occupancy rate had bottomed out in 2H14 at 93% (factory: 100%, warehouse: 88%) and rebounded in 1H15 to 96% (factory: 100%, warehouse: 93%).

Bt m

Net Property Income Margin %

Distribution Paid / Net Operating CF (x)

1.0 0.9 0.8 0.7 0.6 0.5

0.4 2014A

2015F

2016F

2017F

Source: Company, DBS Vickers

VICKERS SECURITIES Page 75

Company Guide TICON Industrial Growth Leasehold Property Fund Balance Sheet: At the end of 2014, TGROWTH had Bt460m debt, equivalent to 8.1% of NAV. We expect debt to drop to Bt422m (7.4% of NAV) by the end of this year, and the Fund to be debt-free by 2026, assuming no acquisition of new rental assets.

Aggregate Leverage (%) 8.0% 7.0% 6.0% 5.0%

4.0% 3.0%

Share Price Drivers: Attractive yield TGROWTH is offering attractive annual yield of c.8% for the next three years, compared to 2.65% for 10-year Thai government bonds and 3.6-3.9% dividend yields for stocks under DBS coverage (75% of the SET market cap) in FY1516F.

2.0%

1.0% 0.0% 2014A

2015F

2016F

2017F

ROE (%) 9.0% 8.0%

Key Risks: Domestic and global economic slowdown The slower economy and high household debt could result in extended weak automotive sales in Thailand; falling auto production could make its autopart makers (33% of TGROWTH’s total leasable area) to downsize production lines and warehouse space. Also, lackluster global growth could hurt exports of electronics parts (20% of total leasable area).

7.0% 6.0% 5.0%

4.0% 3.0% 2.0% 1.0% 0.0% 2015F

2016F

2017F

Distribution Yield (%)

COMPANY BACKGROUND Ticon Industrial Growth Leasehold Property (TGROWTH) owns rental warehouse and factories with total leasable areas of 182k sqm and 121k sqm, respectively. The remaining leasehold life of its assets is 28.5 years. All its assets were developed by the SET-listed Ticon Industrial Connection (TICON); TICON usually develops and holds rental assets for a few years before selling them to its network of property funds and REITs, including TLOGIS, TFUND, TGROWTH and REIT. The bulk of TGROWTH’s leasable area is occupied by Japanese corporations (61%), followed by Thais (8%), Germans (7%) and French (6%). TGROWTH’s warehouses and factories are in industrial parks/estates in Ayutthaya, Patumtani, Chonburi, Chachoengsao and Rayong.

10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2014A

2015F

2016F

2017F

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 76

VICKERS SECURITIES

Company Guide TICON Industrial Growth Leasehold Property Fund

Key Assumptions FY Dec Leasable area (sqm) Warehouse Factory Total Occupancy (%) Warehouse Factory Total

2013A

2014A

2015F

2016F

2017F

182,095 104,225 286,320

182,095 121,175 303,270

182,095 121,175 303,270

182,095 121,175 303,270

182,095 121,175 303,270

100% 100% 100%

88% 100% 93%

93% 100% 96%

95% 100% 97%

95% 95% 95%

2014A

2015F

2016F

2017F

593 (59) 534 (14) 10 (14) 16 531 0 0 0 531 531 0 516

601 (59) 543 (13) 10 (17) 0 523 0 0 0 523 523 0 523

624 (62) 562 (13) 10 (17) 0 541 0 0 0 541 541 0 541

625 (62) 563 (13) 10 (15) 0 544 0 0 0 544 544 0 544

N/A nm nm 104.1 90.0 89.6 90.6

1.5 1.7 (1.6) 99.0 90.2 86.9 86.0

3.7 3.5 3.6 99.0 90.0 86.8 85.9

0.2 0.2 0.5 99.0 90.0 87.1 86.2

2.4

2.2

2.1

2.1

N/A N/A N/A 37.5

9.2 8.2 8.3 31.7

9.5 8.5 8.7 32.0

9.5 8.6 8.7 35.5

Income Statement (Bt m) FY Dec Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees to sales %) ROAE (%) ROA (%) ROCE (%) Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 77

Company Guide TICON Industrial Growth Leasehold Property Fund Quarterly / Interim Income Statement (Bt m) FY Dec 2Q2014 3Q2014 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

151 (16) 135 0 7 (4) 0 138 0 0 138 135 N/A 135

147 (15) 132 1 0 (4) 15 144 0 0 144 139 N/A 124

147 (13) 134 0 0 (4) 0 130 0 0 130 126 N/A 126

147 (18) 130 0 1 (4) 0 127 0 0 127 123 N/A 123

147 (16) 131 0 0 (5) 0 127 0 0 127 123 N/A 122

3 2 6 89.4 97.0

(3) (2) 4 89.8 105.7

0 1 (10) 90.9 98.9

0 (3) (2) 88.0 101.4

0 1 0 88.9 100.0

Balance Sheet (Bt m) FY Dec

2014A

2015F

2016F

2017F

Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

6,018 N/A 336 0 14 2 6,370

6,018 N/A 310 0 14 2 6,345

6,018 N/A 289 0 15 2 6,324

6,018 N/A 257 0 15 2 6,293

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities

0 0 0 460 215 5,696 0 6,371

0 0 0 422 218 5,706 0 6,345

0 0 0 383 226 5,716 0 6,325

0 0 0 345 226 5,722 0 6,293

Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X)

16 (124)

17 (112)

17 (94)

17 (88)

N/A N/A 8.1 NA

N/A N/A 7.4 NA

N/A N/A 6.7 NA

N/A N/A 6.0 NA

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 78

VICKERS SECURITIES

Company Guide TICON Industrial Growth Leasehold Property Fund

Cash Flow Statement (Bt m) FY Dec Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Operating CFPS (Bt) Free CFPS (Bt)

2014A

2015F

2016F

2017F

531 0 0 0 (55) (16) 461 (460) (296) 0 0 0 (756) (412) 460 0 0 48 0 (248)

523 0 0 0 3 0 526 0 96 0 0 0 96 (513) (38) 0 0 (551) 0 71

541 0 0 0 8 0 549 0 0 0 0 0 0 (531) (38) 0 0 (570) 0 (21)

544 0 0 0 0 0 544 0 0 0 0 0 0 (538) (38) 0 0 (576) 0 (32)

0.9 0.0

0.9 0.9

1.0 1.0

1.0 1.0

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 79

Industry Focus Property Fund/REIT Sector

DBSV 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 Vickers Securities (Thailand) Co., Ltd. (“DBSVT”), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVT and/or DBSVH) 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. DBSVT 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. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd 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. DBSVT, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVT and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) (b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Thailand) Co., Ltd. and its subsidiaries do not have a proprietary position in the mentioned company as of 1. 17 Sep 2015. DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA, may beneficially own a total of 1% or more of any 2. class of common equity securities of the mentioned company as of 18 Sep 2015.

Page 80

Industry Focus Property Fund/REIT Sector

3.

Compensation for investment banking services: i. DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the mentioned company ii.

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

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia

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