Insights Patchy Recovery For Singapore Industrial Reits

Singapore Industry Focus
Industrial REITs
Refer to important disclosures at the end of this report
DBS Group Research . Equity 26 Jul 2017
Uneven path to recovery STI : 3,327.83

Analyst
• Manufacturing growth momentum to taper in Derek TAN +65 6682 3716 Mervin SONG CFA +65 6682 3715
2H17; recovery to be more gradual and patchy derektan@dbs.com mervinsong@dbs.com
• Rental reversions are likely to remain negative for Singapore Research Team
most sub-sectors till at least 2019 equityresearch@dbs.com
• Acquisitions a key driver to upside but only

limited REITs have the ability and propensity to
deliver accretive deals
• BUY A-REIT, MLT and FLT STOCKS
Manufacturing growth momentum to moderate but dissipating 12-mth
supply supports an uneven recovery in 2018. We believe that the Price Mkt Cap Target Price Performance (%)
recent improvement in activity in manufacturing sectors will start to S$ US$m S$ 3 mth 12 mth Rating
moderate in 2H17 after an initial burst in recent months driven by a
low base effects and broad improvement in demand mainly from the Ascendas REIT 2.72 5,762 2.78 6.7 6.7 BUY
electronics sector. A slowing growth momentum could mean that Frasers Logistics &
manufacturers might instead choose to pick up the slack in current 1.10 1,219 1.15 7.4 11.2 BUY
Industrial Trust
production capacities first before looking for expansionary plans. That
said, with the industrial sector seeing a supply drop off to mean that Mapletree
1.88 2,487 1.94 5.0 9.9 BUY
operating environment should improve year-on-year but a more Industrial Trust
sustained recovery will only come from 2H18 onwards. Mapletree Logistics
1.24 2,267 1.28 8.9 16.8 BUY
Street could be too optimistic on reversionary prospects in 2018 Trust
as recovery will likely to be patchy. While investors have turned ESR REIT 0.58 555 0.60 0.9 2.7 HOLD
positive on industrial REITs supported by prospects of higher rents in Soilbuild Business
2018, we like to caution that the recovery is likely to be gradual and 0.71 546 0.73 7.6 6.0 HOLD
Space Reit
uneven. While we forecast a c.3-5% growth in market rents in 2018,
we believe rental reversions are however, expected to remain negative
at least till 2019 where we see a closing of the spread between market Source: DBS Bank, Bloomberg Finance L.P.
and expiring levels. Assuming a 3-year rental reversionary cycle, Closing price as of 25 Jul 2017
negative spreads are in the warehouse (-15%) followed by multi-user
factory sector (-13%). Rental reversionary trends to turn positive only from 2019
We project that the business park sector is probably the only subsector
that will see positive rental reversions in 2018F but upside potential is
capped by the high market vacancy rate of 17% (as of 1Q17) meaning
that more slack need to be absorbed first before a more meaningful
rise in rents can be seen. Therefore, given this trend, we believe that
industrial REITs are expected to continue to see at best a flattish DPU
growth trend in FY18F (ranging -3.0% to 3.0%) and turning upwards
only from FY19F.
Continued pursuit for acquisitions. With low gearing of c.34%, we
see debt headroom to acquire to boost DPUs but competition remains
intense for industrial assets given the strong liquidity environment.
Given limited investable opportunities in Singapore, diversifying
overseas, especially into Australia where longer weighted average lease
expiries (WALE) freehold tenures and higher yields should improve
industrial REITs’ income visibility and portfolio NAVs remains a core
strategy. In addition, given average P/NAV of 1.1x, we believe that Source: DBS Bank
REITs could potentially look at equity raisings to part fund growth
opportunities. Amongst industrial REITs, we believe that A-REIT, MLT,
FLT have the availability and propensity to acquire inorganically and still
deliver upside to earnings.
ASIAN INSIGHTS VICKERS SECURITIES

ed: TH / sa: JC, PY
Page 1
Industry Focus
Industrial REITs
Manufacturing growth to taper in 2H17 will dampen growth momentum
Manufacturing Sector’s expansion gave industrial REITs sector The improvement mainly came on the back of a jump in
a boost. The Singapore Manufacturing sector in recent times manufacturing activities which is an encouraging read-through
is showing signs of a rebound in activity with the Singapore’s for future demand for industrial space if the positive momentum
purchasing managers’ index continued to record an expansion is sustained for the remainder of the year. The improvement in
in April 2017, albeit at a slower rate than a month before. The manufacturing and steady growth in the services producing
electronics, precision engineering, chemicals and biomedical, industries (up 1.5% y-o-y in 1Q17) should also help drive
and manufacturing clusters registered an increase in output incremental demand for space in the business park and hi-tech
while the transport engineering and general manufacturing space.
clusters contracted.
Growth momentum to moderate in 2H17. That said, DBS
The Ministry of Trade and Industry’s advanced estimates economist expects that the explosive growth from the
reporting Singapore’s 1Q17 GDP grew by 2.5% y-o-y, above manufacturing sector which is has been driven mainly by
initial estimates Since then, we have seen consensus raising electronics cluster will likely taper off in 2H17, as seen by a
estimates for Singapore GDP since the start of the year. In general softening of the PMIs in the US, China and Singapore,
addition, latest posturing from our Government imply that 2017 implying that the growth in 2H17 will likely turn sideways.
growth could come in at the higher end of GDP estimate of
1%-3% can also be read positively.
Manufacturing Sector Business expectations shows improving sentiment Remarks
20%
16% Overall, a net weighted
15% balance of 7 per cent of
manufacturers anticipates a favorable
10% business situation for the period Apr-
7% 7%
4% Sept’17, compared to the 1Q17
5% 3%
2%
1%
0%
A net weighted balance of 16% of
Apr-Sep'16 Jul-Dec'16 Oct'16-Mar'17 Jan-Jun'17 Apr-Sep'17 manufacturers expects to see a 16%
-5% rise in output from Apr-Sept’17.
-1% -4%
-10%
-9%
-15%
General Business outlook Output forecast
Source: EDB, Singstat, DBS Bank
Manufacturing Sector Business expectations shows improving sentiment Remarks

SG: IPI peaking
YoY% Singapore industrial production (IP)
25 has “peaked” and projected to taper
IPI
20 after initial spike driven by the
IPI - 3mma electronics sector.
15
10 The momentum is also tapering off

(measured by the 3 month moving
5
average). Looking forward, DBS
0 economist expects Singapore IP to
-5
remain positive but growing at a
slower rate of c. 5% in 2H17.
-10
Latest: Mar17
-15
Ja n-1 5 Jul-1 5 Ja n-1 6 Jul-1 6 Ja n-1 7
Source: CEIC,Singstat, DBS Bank

Page22
Page
Industry Focus
Industrial REITs
Industrial REITs: A improved operating climate but still an inorganic growth story
Absorption remain weak in 1Q17. As of first quarter 2017, to c.12m sqft). The business park space will add another 0.9m
take-up for industrial space still lagged behind the increase in sqft. However, most of the space is pre-committed and thus
supply, with a net increase in unoccupied space of close to not an issue for existing landlords.
1.0m sqft. It is expected that the majority of this space will be
taken up progressively by end-user occupiers in the coming While supply growth appears high, we note a majority of
quarters. supply will complete in 2017 and fall off thereafter. As such,
with the industrial market close to the end of a period of
Supply pressures to abate from 2018 but recovery to be supply spikes over 2014-2017, we believe that operating
gradual. Based on the 1Q17 data released by Jurong Town conditions will improve, albeit at a modest pace.
Corporation (JTC), an estimated 46m sqft of new space,
implying an increase of 9.0%. The new supply is projected to Vacancy rates to bottom in 2018. Taking into account
be completing over the next four years, from 2017 to 2020. assumed pre-commitment rates and projected new demand,
and faced with an increasing supply outlook, the average
Among industrial types, factory space (multi-user and single- vacancy rate is now c.10.6% (as of 1Q17) and we project
user factories) will see close to 32m sqft (+9%) increase in new further weakness in the near term. We expect market vacancy
space which we estimate that more than 60% to be pre- to bottom at close to 11% by the end of 2017 before
committed, followed by the warehouse space at 12% (or close improving in 2018 and beyond.
Supply tapering down from 2018F onwards Remarks

m s qft
A drop off in supply in 2018 will ease
25.00
pressures from industrial REITs.
20.00
Downwards pressures to rentals and
occupancy rates are expected to
15.00 taper off in the medium term.
10.00
5.00
-
2014 2015 2016 2017F 2018F 2019F
2013
Supply Demand
Source: JTC,DBS Bank

Net Absorption remain negative but significant improvement from 2018F Remarks
m' sqft
8.0 10.7% 10.6% 11.0%
10.3% Net absorption is projected to
6.0 9.7% turn positive in 2019F.
9.1% 9.4% 10.0%
4.0
9.0%
2.0 8.1%
- 8.0%
2013 2014 2015 2016 2017F 2018F 2019F
(2.0)
7.0%
(4.0)
6.0%
(6.0)
(8.0) 5.0%
Net Absorption Rate Market Vacancy Rate (%)

Page33
Page
Industry Focus
Industrial REITs
Warehouse supply tapering down from 2018F onwards Remarks

m Sqft
9.0 12%
Warehouse supply is still expected to
8.0
10% see an increase in supply in 2017, a
7.0 majority of which are end-user
6.0 8% facilities.
5.0
6%
4.0 We expect vacancy risk from existing
3.0 4% facilities as end users consolidate their
2.0 positions. The drop in new supply in
2%
1.0 2018 will help in preventing a larger
- 0% fall in rents.
2013 2014 2015 2016 2017F 2018F 2019F
Supply Demand Vacancy Rates
Remarks
Business Parks space remains undersupplied
m Sqft
3.0 25% The business park sector continue to
see minimal supply completing, if any
2.5 are mainly end-user driven.
20%
2.0 We expect market vacancy rates to

15% head close to 10% after hitting a
1.5 high of c.20% back in 2014. This
10% comes mainly from existing older
1.0 business park assets (Science park
and properties in the west).
5%
0.5
- 0%
2013 2014 2015 2016 2017F 2018F 2019F
Supply Demand Vacancy
Net Absorption remain negative but significant improvement from 2018F Remarks
m Sqft
6.0 16% Supply completing in the mulit-user
factory space remains elevated
14% compared to amount of space
5.0
12% completing since 2013. This means
4.0 that competition for tenants to remain
10% high in the medium term and vacancy
3.0 8% rates should remain elevated at close
to 14%.
6%
2.0
4%
1.0
2%
- 0%
2013 2014 2015 2016 2017F 2018F 2019F
Supply Demand Vacancy

Page44
Page
Industry Focus
Industrial REITs
Industrial REITs: Rental reversions to turn positive only from 2019 for most industrial types.
Spot rents to bottom in 2018 but rental reversions to turn space will be supportive of landlords raising rents going
only 2019. Taking into account assumed pre-commitment forward.
rates and projected new demand for industrial space, we
believe that there is improving prospects of a recovery in spot Inorganic growth still a key driver. With organic growth still
market rents come 2018 for the high specs industrial, expected to remain anemic in the near term, we believe that
business park and warehouse sub-sectors. This is supported industrial REITs will look for acquisitions and developments
by dissipating supply risk from 2018 onwards. We project are likely to remain key earnings drivers for earnings and
rentals increase by 2-5% per annum over 2018F-2019F. NAVs.
Rental reversions still negative for most sectors. Rental On average, gearing is at c.35% (ranging between 29%-
reversions however are still likely to remain negative in the 42%), this implies acquisition upside of up to S$2.3bn or up
immediate term as projected expiring rental levels are still an increase of 20% in their respective portfolios, assuming
below new signing levels. We expect market to turn around that the REIT decides to gear up to acquire. With most of the
only from 2019 onwards. REITs trading at a yield of 6.8% and are generally trading
above book values, we believe that the amount of equity fund
The only exception is in the business park space where we see raisings (EFR) could also increase as REIT manager’s look to
continued expansionary and new demand from firms looking recapitalize their balance sheets to fund growth initiatives.
to set up operations in these suburban locations. With a
majority of new supply pre-committed, the lack of available
Market rents estimated to bottom in 2018 Remarks
Market rents are projected to bottom

4.70 2.20 by end of 2017 and increase by c.2-
4.50 2.00
5% per annum over 2018F-2019F.
S$ psf per month
S$ psf per month
4.30 1.80 We project the business park

segment to deliver the fastest growth
4.10 1.60 given that the sector has the tightest
supply amongst the various industrial
3.90 1.40
types.
3.70 1.20
3.50
Mark 1.00
2013 2014 2015 2016 2017F 2018F 2019F
Business Park (LHS) Factory (RHS) Warehouse (RHS)
Source: JTC, DBS Bank

Market rental reversionary trends to remain negative (%) Remarks
25%
Assuming a typical 3-year rental
20% renewal cycle, we believe that 2018
will continue to see negative rental
15% reversions for most industrial types,
albeit at a lower rate compared to
10% 2017F.
5%
The industrial sector is likely to only
start seeing positive rental reversions
0%
2013 2014 2015 2016 2017F 2018F 2019F 2020F in 2019 onwards.
-5%
-10%
-15%
Business Park Warehouse Factory
-20%
Source: JTC, DBS Bank

Page55
Page
Industry Focus
Industrial REITs
REITs weighted average lease (by Revenues) Remarks

Industrial WALE FY17/18F FY18/19F FY19/20F >FY20F
(years) (%) (%) (%) (%) An average WALE for industrial REITs
AIMSAMP REIT AIMS 2.3 27% 20% 18% 35% is close to 3.3 years but range
between 2.3 years to as long as 6.7
Ascendas REIT A-REIT 3.3 17% 16% 19% 48%
years.
Mapletree Industrial Trust MINT 3.5 28% 21% 24% 27%
One of the key reasons for the longer
Mapletree Logistics Trust* MLT 3.9 18% 21% 15% 46% WALE is a larger proportion of their
ESR REIT ESR REIT 2.9 18% 25% 18% 40% respective portfolios that are leased
to single-tenants which typically hare
Cache Logistics Trust** Cache 2.6 4% 22% 25% 49% longer tenures.
Soilbuild Business Space REIT SBREIT 2.6 13% 39% 8% 41%
Viva industrial Trust Viva 3.1 11% 16% 31% 42%
Frasers Logistics & Industrial FLT 6.7 0% 4% 15% 81%

Trust
EC World REIT EC REIT 3.0 0% 0% 3% 97%
*By NLA
** According to reported numbers as of 1Q17
Source: various REITs as of 1Q17, DBS Bank
Industrial REITs country exposures (by revenues) Remarks

REIT Singapore Australia HK China Other
Asia Industial REITs have been diversing
overseas with Australia a key country
A-REIT 87% 13% 0% 0% 0%
that offers best returns. The long
MINT 100% 0% 0% 0% 0% WALE, high yields an freehold nature
of those assets are attractive to
MLT 37% 10% 15% 6% 32% industrial REITs.
ESR REIT 100% 0% 0% 0% 0%
Cache* 84% 15% 0% 1% 0%
SBREIT 100% 0% 0% 0% 0%
Sabana REIT 100% 0% 0% 0% 0%
Viva Trust 100% 0% 0% 0% 0%
FLT 0% 100% 0% 0% 0%
* According to reported numbers as of 1Q17

Page66
Page
Industry Focus
Industrial REITs
Most Industrial REITs are generally well capitalized and have capacity to acquire
REITs Total Assets Total Debt Gearing as at Acquisition Mkt Cap Enterprise Book Yield Implied
1Q17 Upside* Value (S$'bn) (%) Yield
(S$'bn) (S$’bn) (%) (S$'bn) (S$’bn) (%)
A-REIT 9.7 3.1 32% 2.30 7.6 11.0 6.4% 5.7%
MINT 3.7 1.2 29% 0.80 3.4 4.6 6.9% 5.5%
MLT 5.6 1.8 39% 1.30 3.0 5.4 5.7% 5.9%
ESR REIT 1.3 0.5 38% 0.25 0.8 1.3 6.1% 6.1%
SBREIT 1.3 0.5 38% 0.10 0.7 1.3 5.7% 5.8%

*Assuming a 45% debt limit
REITs can acquire accretively
REITs Dividend Target Yield* Countries Target > Will an EFR be Sponsor’s pipeline
Yield Dividend accretive
(%) Yield
A-REIT 5.9% 6.5%-7.0% Singapore, Australia Yes Yes Business Parks in Singapore
MINT 6.5% 6.5%-7.0% Singapore, Australia Yes Yes Tai Seng Property
MLT 6.3% 5.0%-8.0% Hong Kong, Korea, Asia Mostly Likely Warehouses across Asia
ESR REIT 6.6% 6.5%-7.0% Asia Mostly Likely Warehouses across Asia
7.6% 6.5%-7.0% Singapore, Australia No Gearing needed Industrial Properties in
SBREIT
Singapore
** Estimated yields for target assets that the group is keep to acquire in countries that
Flattish DPU growth in 2018

FYE 2017F 2018F 2019F % Chg % Chg % Chg
Ascendas REIT Mar 15.7 15.9 16.0 2% 1% 1%
ESR REIT Dec 3.9 4.0 4.1 -7% 1% 4%
Frasers Logistics & Industrial Trust Sep 6.7 7.0 7.1 4% 3% 1%
Mapletree Industrial Trust Mar 11.4 11.7 12.2 2% 3% 4%
Mapletree Logistics Trust Mar 7.4 7.5 7.7 3% 0% 3%
Soilbuild Business Space REIT Dec 5.4 5.3 5.4 -9% -3% 3%
-2% 0% 2%
Source: DBS Bank

Page77
Page
Industry Focus
Company Guide
Page 8
Singapore Company Guide
Ascendas REIT
Version 9 | Bloomberg: AREIT SP | Reuters: AEMN.SI Refer to important disclosures at the end of this report
BUY Powering ahead

Last Traded Price ( 21 Jul 2017): S$2.68 (STI : 3,314.12)
Maintain BUY, TP maintained at S$2.78. We continue to like
Price Target 12-mth: S$2.78 (4% upside) (Prev S$2.65)
Ascendas REIT (A-REIT) for its solid yield of close to c.6.0%,
coupled with ample opportunities to drive earnings higher with
Analyst
Derek TAN +65 6682 3716 derektan@dbs.com upside from potential acquisitions yet-to-be priced in, supported
Singapore Research Team equityresearch@dbs.com by a conservative leverage level of c.34%. The ability of the
Mervin SONG CFA +65 6682 3715 mervinsong@dbs.com Manager to drive value and growth through various market
cycles is a testament of the portfolio’s resilience. We raised our
TP to S$2.78 on the back of lower WACC assumptions given
Price Relative brighter operational prospects in 2018.
S$ Relative Index
2.9
2.7
204
Where we differ. Conservative estimates but see upside bias if
184
2.5
164 acquisitions are executed upon. Going into 2018, given the
2.3
144
124
REIT’s leading operational scale in Singapore and its focus on
2.1
104 the Business Park space (37% of earnings), we believe that A-
1.9
Jul-13 Jul-14 Jul-15 Jul-16
84
Jul-17 REIT is in a strong position to deliver stable returns. In fact, we
Ascendas REIT (LHS) Relative STI (RHS) see ample opportunities that the Manager can deliver earnings
surprise on the back of (i) ability of the REIT to re-let close to
Forecasts and Valuation 12% of vacant space in its portfolio, and (ii) acquisitions which
FY Mar (S$m) 2016A 2017A 2018F 2019F we have not priced in.
Gross Revenue 761 831 873 885
Net Property Inc 534 611 639 648 Gearing up to acquire; potential fund raisings to strengthen the
Total Return 349 413 454 459 balance sheet. The Manager remains on the lookout for
Distribution Inc 378 446 468 473 acquisitions in Singapore and Australia to complement a fairly
EPU (S cts) 13.9 15.5 15.5 15.7 flattish rental outlook. While A-REIT’s low gearing of c.35%
EPU Gth (%) (5) 11 0 1
offers ample headroom, the strong share price performance
DPU (S cts) 15.4 15.7 16.0 16.1
DPU Gth (%) 5 2 1 1 (implied yield of c.5.9%) means that new equity could also be
NAV per shr (S cts) 207 206 205 205 issued to fund any meaningful acquisition opportunities.
PE (X) 19.3 17.3 17.3 17.1 Valuation:
Distribution Yield (%) 5.7 5.9 6.0 6.0 Our DCF-based TP is raised to S$2.78. Maintain BUY on the
P/NAV (x) 1.3 1.3 1.3 1.3 back of total potential returns of c.11%.
Aggregate Leverage (%) 37.1 33.4 34.5 35.0
ROAE (%) 6.7 7.5 7.5 7.6
Key Risks to Our View:
Interest rate risk. An increase in lending rates will negatively
Distn. Inc Chng (%): 1 1 impact dividend distributions. However, A-REIT's strategy has
Consensus DPU (S cts): 15.9 16.4
Other Broker Recs: B: 13 S: 1 H: 9 been to actively manage its exposure and it currently has
c.80% of its interest cost hedged into fixed rates.
Source of all data on this page: Company, DBS Bank, Bloomberg
Finance L.P
At A Glance
Issued Capital (m shrs) 2,886
Mkt. Cap (S$m/US$m) 7,734 / 5,677
Major Shareholders (%)
TJ Holdings 20.2
Mondrian Investment 8.3
Blackrock 6.1
Free Float (%) 65.4
3m Avg. Daily Val (US$m) 20.5
ICB Industry : Real Estate / Real Estate Investment Trust

ed: TH / sa: AS, PY
Page 9
Company Guide
Ascendas REIT
Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH S$ m
700
79.3%
600
Critical Factors 500
77.3%
Rebound in occupancy rates to provide upside to earnings. A- 400

75.3%
73.3%
REIT’s Singapore portfolio’s occupancy rate is projected to 300
71.3%
remain stable in the medium term and hover around the 85- 200 69.3%
88% level as the Manager looks to actively engage tenants and 100 67.3%
new prospects. Given A-REIT’s scale in Singapore, the Manager 0 65.3%

2015A 2016A 2017A 2018F 2019F
continues to attract a diverse tenant base to its properties,
Net Property Income Net Property Income Margin %
despite the competitive operating environment. The key reasons
are the variety of asset types and its focus on the business parks
and hi-tech properties which continue to see good demand. Net Property Income and Margins (%)
76%
159
74%
Looking ahead, with close to 12% of the portfolio still vacant, 149 72%
the ability to back-fill the unoccupied space provides potential 139 70%
upside to our earnings estimates. A long portfolio-weighted 68%
129
average lease expiry (WALE) profile of 4.3 years means good 66%
earnings visibility for the REIT. 119

64%
109 62%
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
3Q2017
4Q2017
Potential upside to DPUs as Business Park segment outlook
remains bright; Australia exposure offers upside to earnings. Net Property Income Net Property Income Margin %
Rental reversionary trends are moderating but is expected to
remain flattish at the low single digits in the coming year (A- Distribution Paid / Net Operating CF
REIT achieved c.3.1% in FY17) which is commendable. Given (x)
1.2
the narrowing spread between passing and market rents, we 1.1
expect rental reversionary trends to remain flattish or even turn 1.0
negative for selected sectors. We are positive on A-REIT’s 0.9

0.8
business and science park exposure which accounts for close to
0.7
37% of portfolio value. 0.6
0.5
We project its Australia portfolio to deliver resilient earnings 0.4

0.3
backed by a weighted average lease expiry (WALE) of 4.9 years 2015A 2016A 2017A 2018F 2019F
and with minimal expiries, do not anticipate too much volatility
in rentals. In Australia, the Manager has seen a pick-up in
demand for space in the recent quarter and reported a 4.2-ppt Interest Cover (x)
(x)
increase in occupancy to 96.1%, back-filling most of the empty 7.00
space in the previous quarter. 6.00
5.00
Inorganic growth to drive contributions in Australia and
4.00
Singapore. A-REIT has regularly embarked on acquisitions and
3.00
development projects, which have helped the REIT to deliver
2.00
sustained growth in distributions over time. Given the limited
opportunities in Singapore and the fragmented market in 1.00
China, the Manager has looked overseas for higher returns. The 0.00
2015A 2016A 2017A 2018F 2019F
Manager remains focused on deepening its presence in the core
markets of Singapore, Australia and China, when the
Source: Company, DBS Bank
opportunity arises.
Page 10
Company Guide
Ascendas REIT
Appendix 1: A look at Company's listed history – what drives

its share price?
Manufacturing Sector Business expectations show improving sentiment Remarks
S$ Share Price vs Industrial Production DPU (Scts) A-REIT is seen as a proxy to the
120 Singapore economy as shown in its
2.80 historical price performance, it is
110 closely correlated to the pace of
growth in the Singapore industrial
2.30 production.
100
Looking ahead, DBS economist
90 expects the industrial production to
1.80 remain positive albeit growing at a
80 more conservative rate, meaning
that share price remains elevated.
1.30
70
0.80 60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
AREIT Share price (LHS) PMI Index (RHS)
Manufacturing Sector Business expectations show improving sentiment Remarks
S$ Share Price vs DPU DPU (Scts) DPU is a key driver for share price
17.00 with close correlation to DPU
2.80 growth historically. Given low
16.00 gearing and the propensity to
acquire, we believe that AREIT can
surprise on the upside.
2.30 15.00
14.00
1.80
13.00
1.30
12.00
0.80 11.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
AREIT Share price (LHS) DPU (Scts) RHS
Page 11
Company Guide
Ascendas REIT
Aggregate Leverage (%)

Balance Sheet:
Optimal gearing level of c.34%. A-REIT’s gearing is stable at
close to the lower end of management’s comfortable 35-40% 35.0%
range. We believe that there is still capacity for management to 30.0%
utilise its debt headroom for further acquisitions but any 25.0%
significant deals could mean potential issuance of new equity. 20.0%
15.0%
Well-staggered debt maturity profile. The Manager adopts a 10.0%
prudent interest rate risk management strategy with a weighted 2015A 2016A 2017A 2018F 2019F
average cost of debt of 3.0% with c.79% hedged into fixed

rates. The debt tenure is long at c.3.0 years, with a well spread-
out refinancing profile ensuring no concentration risk. ROE (%)
7.0%
Share Price Drivers:
6.0%
Direction of 10-year long bonds impacts share price. Seen by
5.0%
investors as a key S-REIT proxy, A-REIT’s share price has typically
4.0%
been closely linked to investors’ perception on the direction of
3.0%
the US benchmark 10-year bond yields. A fall in 10-year bond
2.0%
yields on the back of a delay in Fed hikes is likely to mean a
higher share price. 1.0%
0.0%
2015A 2016A 2017A 2018F 2019F
Capital recycling strategy. With limited acquisition opportunities
in Singapore, A-REIT regularly looks to divest older, lower-
yielding properties and re-cycle the capital into asset- Distribution Yield (%)
(%)
enhancement exercises (AEI), development projects or 7.9
acquisitions. The aim is to optimise the portfolio returns and 7.4
distributions which have a positive impact on its share price. 6.9 +2sd: 6.9%
+1sd: 6.6%
6.4
Key Risks: Avg: 6.3%
-1sd: 6%
Interest rate risk. Any increase in interest rates will result in 5.9
-2sd: 5.7%
higher interest payments, which will reduce income available 5.4
for distribution and result in lower distribution per unit (DPU)
4.9
to unitholders. 2013 2014 2015 2016
Economic risk. A deterioration in the economic outlook could

have a negative impact on industrial rents and occupancies as PB Band (x)
companies cut back production and require less space, given 1.5
(x)
that industrial rents have a strong correlation with GDP
1.4
growth.
1.3
+2sd: 1.27x
Company Background 1.2 +1sd: 1.21x
A-REIT is Singapore’s first and largest listed business space and Avg: 1.15x
1.1 -1sd: 1.1x
industrial real estate investment trust. It has a diversified -2sd: 1.04x
portfolio comprising assets in Singapore, China and Australia. 1.0
A-REIT is managed by Ascendas Funds Management (S) 0.9

Limited, a wholly owned subsidiary of the Singapore-based
Ascendas-Singbridge.
Page 12
Company Guide
Ascendas REIT
Income Statement (S$m)

FY Mar 2015A 2016A 2017A 2018F 2019F
Gross revenue 673 761 831 873 885
Property expenses (211) (227) (220) (235) (236)
Net Property Income 463 534 611 639 648
Other Operating expenses (43.8) (67.4) (60.7) (57.2) (57.5)
Other Non Opg (Exp)/Inc 41.7 (5.7) (13.0) 0.0 0.0 Driven from past
acquisitions
Net Interest (Exp)/Inc (105) (77.5) (111) (108) (112)
Exceptional Gain/(Loss) 2.02 0.0 0.0 0.0 0.0
Net Income 357 383 427 473 478
Tax (6.7) (25.1) 19.0 (4.7) (5.0)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Preference Dividend 0.0 (6.6) (14.3) (14.3) (14.3)
Net Income After Tax 351 351 432 454 459
Total Return 398 349 413 454 459
Non-tax deductible Items 0.57 26.9 33.1 14.0 14.1
Net Inc available for Dist. 351 378 446 468 473
Growth & Ratio
Revenue Gth (%) 9.8 13.0 9.1 5.1 1.3
N Property Inc Gth (%) 6.1 15.3 14.5 4.5 1.5
Net Inc Gth (%) 0.0 0.2 22.8 5.2 1.1
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0
Net Prop Inc Margins (%) 68.7 70.1 73.6 73.1 73.3
Net Income Margins (%) 52.1 46.2 52.0 52.0 51.9
Dist to revenue (%) 52.1 49.7 53.7 53.6 53.5
Managers & Trustee’s fees 6.5 8.9 7.3 6.6 6.5
ROAE (%) 7.1 6.7 7.5 7.5 7.6
ROA (%) 4.5 3.9 4.3 4.4 4.5
ROCE (%) 5.5 5.0 5.6 5.8 5.8
Int. Cover (x) 4.0 6.0 5.0 5.4 5.3

Page 13
Company Guide
Ascendas REIT
Quarterly / Interim Income Statement (S$m)

FY Mar 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017
Gross revenue 204 208 205 209 209

Property expenses (60.6) (58.1) (53.0) (53.7) (54.9)
Other Non Opg (Exp)/Inc (12.6) (9.3) (13.2) 4.24 (5.9)
Net Interest (Exp)/Inc (37.0) (36.8) (28.2) (11.6) (34.3)
Exceptional Gain/(Loss) 0.0 0.0 5.70 16.3 (18.4)
Net Income 70.8 88.7 101 140 79.0
Tax (16.7) (2.1) 13.7 8.86 (1.5)
Net Income after Tax 54.1 86.6 115 149 77.5
Total Return 47.3 86.6 115 149 77.5
Non-tax deductible Items 41.8 15.7 (7.8) (41.4) 26.4
Net Inc available for Dist. 89.1 102 107 107 104
Growth & Ratio
Revenue Gth (%) 5 2 (1) 2 0
N Property Inc Gth (%) 1 4 2 2 (1)
Net Inc Gth (%) (42) 60 33 29 (48)
Net Prop Inc Margin (%) 70.3 72.0 74.2 74.3 73.7
Balance Sheet (S$m)

FY Mar 2015A 2016A 2017A 2018F 2019F
Investment Properties 7,868 9,599 9,999 10,079 10,119

Other LT Assets 135 96.2 71.8 71.8 71.8
Cash & ST Invts 41.6 56.2 22.0 18.0 35.5
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 90.1 89.3 63.5 102 104
Other Current Assets 25.8 35.6 14.3 14.3 14.3
Total Assets 8,160 9,876 10,171 10,286 10,345
ST Debt 286 1,180 824 854 884

Creditor 189 172 193 197 200
Other Current Liab 32.8 43.5 105 79.5 79.8
LT Debt 2,442 2,485 2,576 2,696 2,736
Other LT Liabilities 198 199 138 138 138
Unit holders’ funds 5,014 5,797 6,335 6,321 6,307
Minority Interests 0.04 0.02 0.03 0.03 0.03
Total Funds & Liabilities 8,160 9,876 10,171 10,286 10,345
Non-Cash Wkg. Capital (105) (90.6) (220) (160) (162)

Net Cash/(Debt) (2,686) (3,608) (3,378) (3,532) (3,585) Conservative gearing
Ratio
Current Ratio (x) 0.3 0.1 0.1 0.1 0.1
Quick Ratio (x) 0.3 0.1 0.1 0.1 0.1
Aggregate Leverage (%) 33.4 37.1 33.4 34.5 35.0
Z-Score (X) 1.4 1.0 1.2 1.3 1.3

Page 14
Company Guide
Ascendas REIT
Cash Flow Statement (S$m)

FY Mar 2015A 2016A 2017A 2018F 2019F
Pre-Tax Income 357 383 427 473 478

Dep. & Amort. 0.37 0.18 0.0 0.0 0.0
Tax Paid (2.4) (4.5) (7.9) (30.3) (4.7)
Associates &JV Inc/(Loss) 0.0 0.0 (0.5) 0.0 0.0
Chg in Wkg.Cap. (10.2) 11.5 (23.8) (34.4) 1.25
Other Operating CF 17.4 91.5 135 (14.3) (14.3)
Net Operating CF 362 482 529 394 461
Net Invt in Properties 0.0 0.0 0.0 0.0 0.0
Other Invts (net) (643) (1,496) (138) (80.0) (40.0)
Invts in Assoc. & JV 0.0 0.04 0.0 0.0 0.0
Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0
Other Investing CF 5.50 5.50 0.0 0.0 0.0
Net Investing CF (638) (1,491) (138) (80.0) (40.0)
Distribution Paid (261) (442) (501) (468) (473)
Chg in Gross Debt 577 1,218 (72.7) 150 70.0
New units issued 0.0 342 155 0.0 0.0
Other Financing CF (68.1) 0.0 (7.2) 0.0 0.0
Net Financing CF 249 1,118 (426) (318) (403)
Currency Adjustments 0.80 (1.7) 0.0 0.0 0.0
Chg in Cash (25.7) 108 (34.5) (4.0) 17.4
Operating CFPS (S cts) 15.5 18.6 19.8 14.6 15.7

Free CFPS (S cts) 15.1 19.1 19.0 13.5 15.7
Target Price & Ratings History
S$
12- mt h
2.79 Dat e of Closing
S.No. T arget Rat ing
Report Pric e
Pric e
2.69
1: 22 Aug 16 2.42 2.61 BUY
12 2: 29 Aug 16 2.44 2.61 BUY
2.59
10 3: 20 Sep 16 2.42 2.61 BUY
11
2.49 2 4 4: 26 Sep 16 2.46 2.61 BUY
5: 21 Oct 16 2.40 2.65 BUY
8
2.39 6 6: 08 Nov 16 2.34 2.65 BUY
1 3 5 7: 06 Dec 16 2.37 2.65 BUY
2.29
7 9 8: 06 J an 17 2.38 2.65 BUY
9: 25 J an 17 2.40 2.65 BUY
2.19 10: 17 Mar 17 2.50 2.65 BUY
11: 26 Apr 17 2.60 2.65 BUY
2.09 12: 17 May 17 2.58 2.65 BUY
Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17
Not e : Share price and Target price are adjusted for corporate actions.
Source: DBS Bank

Analyst: Derek TAN
Singapore Research Team
Mervin SONG CFA

Page 15
Frasers Logistics & Industrial Trust
Version 5 | Bloomberg: FLT SP | Reuters: FRAE.SI Refer to important disclosures at the end of this report
BUY Not resting on its laurels

Price Target 12-mth: S$1.15 (5% upside) (Prev S$1.10) Maintain BUY, TP S$1.15. Pricing in recent equity raising and
proposed acquisition of seven properties in Australia, our TP for
Analyst Frasers Logistics & Industrial Trust (FLT) is raised to S$1.15. The
Derek TAN +65 6682 3716 derektan@dbs.com stock offers an attractive 14% return backed by a growing
Mervin SONG CFA +65 6682 3715 mervinsong@dbs.com
Rachel TAN +65 6682 3713 racheltanlr@dbs.com
yield. With an under-geared balance sheet, FLT has the ability to
surprise on the upside through acquisitions, if executed from a
What’s New
myriad of opportunities available from its sponsor. Maintain
 Recent equity placement of 78m shares well received at
BUY and increase TP to S$1.15.
a tight 1.2% discount to VWAP
 Proceeds to partly fund recently announced A$169.3m Where we differ. Consensus estimates are conservative;
worth of properties in Australia currency tailwinds and acquisitions could surprise on the upside.
We believe that street estimates are conservative given FLT’s
 Attractive deal metrics as portfolio earnings strengthen
strong earnings visibility (WALE of 6.9 years) while the earlier-
further
than-projected completion of the development projects could
 Raising TP to S$1.15 from S$1.10 drive earnings higher. Moreover, with the strength of the AUD-
SGD rate, we believe that there could be currency upside when
FLT rolls forward its currency hedges.
Price Relative
Positioned to acquire still. Post-deal gearing to remain at a
conservative 33% which means that there is still headroom for
acquisitions or any potential asset enhancement initiatives (AEI),
which will remain as the key upside to earnings estimates. We
believe that the sponsor’s pipeline of a further 11 properties
might be acquired in the medium term.
Forecasts and Valuation Valuation:

FY Sep (A$m) 2017F 2018F 2019F 2020F BUY maintained, TP S$1.15. Our TP is based on DCF and we
Gross Revenue 173 173 173 173 have not assumed any further acquisitions. Our TP offers 15%
Net Property Inc 148 146 145 144
upside to current price.
Total Return 84.3 94.0 95.5 99.6
Distribution Inc 96.7 107 108 112
EPU (S cts) 6.35 6.64 6.73 6.95 Key Risks to Our View:
EPU Gth (%) 1,062 5 1 3 Currency risk. As the manager pays its distributions in SGD but
DPU (S cts) 7.28 7.53 7.62 7.84
earns in AUD, the REIT is exposed to currency fluctuations. The
DPU Gth (%) 265 3 1 3
NAV per shr (S cts) 94.0 94.0 93.2 92.4 manager attempts to reduce foreign fluctuations by hedging
PE (X) 17.2 16.4 16.2 15.7 distributions regularly.
Distribution Yield (%) 6.7 6.9 7.0 7.2
P/NAV (x) 1.2 1.2 1.2 1.2 At A Glance
Aggregate Leverage (%) 30.8 33.0 33.0 33.1 Issued Capital (m shrs) 1,509
ROAE (%) 6.7 7.3 7.2 7.5
Mkt. Cap (S$m/US$m) 1,645 / 1,208
Distn. Inc Chng (%): 6 6 6 FCL Investments (Industrial) Pte 19.8
Consensus DPU (S cts): 7.45 7.56 - Nimmo Asset Management 6.3
Other Broker Recs: B: 5 S: 0 H: 1 TCC Group Investments 6.0
Source of all data on this page: Company, DBS Bank, Bloomberg Free Float (%) 68.0
Finance L.P 3m Avg. Daily Val (US$m) 2.9
ICB Industry : Financials / Real Estate Investment Trusts

ed: TH / sa:AS, PY
Page 16
Company Guide
WHAT’S NEW
Growth by acquisitions
Acquisition of seven properties in Australia. Frasers Logistics &

Industrial Trust (FLT) recently announced its maiden acquisition Lower yield to account for longer-term WALE. The target yield
of seven properties for A$169.3m (S$174.7m) from its sponsor, of 6.43% is lower than the current portfolio cap rate of 6.9%
Frasers Centrepoint Limited (FCL). All-in acquisition price: but we reckon this is mainly due to the longer WALE of the
A$179.5m (inclusive of A$9.5m fees and stamp duties payable). three development properties, which are long in excess of ten
years. This is testament to the strength of the underlying tenant
Blended yield of 6.4% with long-term income visibility: The business and its prospects in Australia.
seven properties are located in Melbourne (four), Sydney (two)
and Brisbane (one). Four properties are completed and income Fund raising to part-fund acquisitions. FLT also recently
producing, while the remaining three are currently under announced an equity placement of 78m shares at S$1.01/unit,
development but are pre-committed to tenants with strong which is at a 1.2% discount to the VWAP, representing one of
credit standing on long-term leases. About 75.1% of the gross the tightest discounts that we have seen in recent times. The
rental income of target portfolio are leased to multi-national proceeds are expected to partly fund the proposed acquisition
corporations (MNCs). of the seven properties which will be subject to an extraordinary
general meeting (EGM) on 26 July 2017.
The blended initial yield of 6.4% can be broken down into the
following: Four completed properties (yield of 6.83%); three Given the strong response to the equity placement and the
development properties (yield of 6.07%). The target portfolio's positive deal metrics, we believe that the chance of unitholders
weighted average lease expiry (WALE) is 9.6 years and is a fairly approving the deal is high. As such, we have updated our
young portfolio with an average age of 2.4 years. estimates to account for the transaction, with DPU FY17-18F
estimates raised by 1% to A 6.98 cts and A 7.06 cts.
Our thoughts:
Gearing is estimated to increase marginally to 33% upon
Attractive deal metrics. We like the metrics of the deal (i.e. long completion of the acquisition of the seven properties by the
WALE, quality tenant base, accretion to DPUs) and believe that middle of next year. We project DPU growth of c.1-3% over
these positives will be supportive by investors and thus see this FY19-2020F.
as a re-rating catalyst for the stock going forward.
Target acquisitions
Source of all data: Company, DBS Bank

Page 2
Page 17
Company Guide
Weighted average lease expiry (WALE)
Strengthening freehold and long leasehold Increasing tenant focus in the consumer sector

Page 3
Page 18
Company Guide

CRITICAL DATA POINTS TO WATCH
Critical Factors
Amazon's entry into Australia shaking things up in the logistics
sector in Australia. As a pure-play Australia logistics and
industrial REIT, we believe that Frasers Logistics & Industrial
Trust (FLT) offers investors a unique exposure to the robust
outlook of the Australia logistics and industrial sector supported
by limited new supply.
Amazon's recent announcement of its launch into Australia has

positive implications for FLT, in our view. We see in media Net Property Income and Margins (%)
reports that Amazon is seeking warehouses to form its
distribution hub for its business across the country, which is an
opportunity for FLT and FCL to capture, if a partnership is
formed. From FLT’s perspective, while seen to be a disruptor to
the traditional retail stores, we believe that FLT could benefit as
we see possible spillover demand for quality and modern
warehouse space once Amazon's operations ramp up. Given
that the pipeline of new supply remains below its historical
mean, we believe that markets should remain on an uptrend.
Long WALE of 6.9 years with in-built organic growth a key trait. Distribution Paid / Net Operating CF
In our view, the long WALE by Adjusted Gross Rental Income of
6.9 years, which is longer than the majority of Singapore
industrial REITs (between 2.9 and 4.7 years), provides strong
cashflow visibility which is a valued trait in current market
volatility. In addition, FLT’s organic growth is underpinned by in-
built rental escalations. The fixed rental increments, which are
built into the existing leases, range from 2.5-3.75% which
translates to an average annual rental increment of c.3.2% for
the Initial Portfolio.
Inorganic growth presents potential upside. One potential

surprise to our/consensus estimates will come on the back of Interest Cover (x)
acquisitions, which FLT's sponsor Frasers Property Australia Pty
Limited (FPA) is currently warehousing and could inject into the
REIT at an appropriate time in the future.
Sensitivity to interest rates not a concern. A weighted cost of

2.8% with 79% of the interest rates fixed implies that the REIT
has substantially hedged its interest rate risk in the medium
term. In addition, with no debt up for renewal till 2019, we see
little risk to earnings on that front in the near term.

Page 4
Page 19
Company Guide
Appendix 1: A look at Company's listed history – what drives its share price?
S-REIT P/NAV vs 10-year bond movements Remarks

3% 1.20
(%) (x) While interest rates rises will
1.15
negatively impact on share
3% 1.10 price, we saw that S-REITs'
P/NAV tends to lead interest
1.05
rates.
2% 1.00
0.95
2% 0.90
0.85
1% 0.80
MAS 10 Year Sector P/BV
Source: DBS Bank
FLT share price vs DPU growth rate Remarks
FLT P/NAV and DPU performance Scts

(X) While FLT's trading history is
1.10 1.8
short, we note that the REIT’s
1.08
P/NAV is higher after two
1.06
quarters of strong DPU
1.04
1.75 growth.
1.02
1.00
0.98
1.7
0.96
0.94
0.92
0.90 1.65
Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17
P/NAV (LHS) DPU (quarterly) RHS
Source: DBS Bank

Page 5
Page 20
Company Guide

Balance Sheet:
Balance sheet; gearing up for acquisitions. Gearing is projected
to remain fairly stable at c.31% in the medium term. The low
gearing level allows significant headroom for the manager to
execute on opportunistic acquisitions when the time arises. The
manager has a medium-term target gearing level of c.35%,
implying there is headroom to gear up.
Healthy financial metrics. The REIT has minimal debt expiries till
FY19 with a weighted average cost of borrowing of 2.8%.
Interest coverage ratio remains healthy at c.9.0x. Close to 79%
of the debt is hedged, implying minimal volatility to distributions ROE (%)
in the event of an interest rate hike.

Executing on acquisitions. Post the completion of the planned
acquisition of Martin Brower property, gearing remains
undemanding at c.31%. Despite this, we believe that the
portfolio remains under-geared in relation to peers and its
optimal level. With opportunities abound in the market, we
believe that the execution of more acquisitions which are
projected to be accretive to earnings, will be a catalyst for its
stock price.
Distribution Yield (%)
Key Risks:
Single-country concentration. While FLT provides exposure to
the Australian industrial market, as a pure-play REIT, its
portfolio is 100% concentrated in Australia. However, this risk
is mitigated by the diversification of its portfolio across five
states in Australia and various industries. The geographic and
tenant diversity across various industries imply that the REIT is
not dependent and over-reliant on the performance of any
particular industry.
Company Background PB Band (x)

FLT offers investors a unique opportunity to gain exposure to
the growing Australia industrial and logistics sector. Frasers
Logistics & Industrial Trust (FLT) offers investors a unique
opportunity to invest in a quality portfolio of industrial assets in
Australia. FLT’s initial portfolio consists of 54 properties spread
across five states in Australia with an appraised value of
A$1.74bn. The initial portfolio is well diversified across the key
states of Victoria (40% of appraised value), New South Wales
(28%) and Queensland (28%).

Page 6
Page 21
Company Guide
Income Statement (A$m)

FY Sep 2016A 2017F 2018F 2019F 2020F
Gross revenue 43.1 173 173 173 173
Net Property Income 35.7 148 146 145 144
Other Non Opg (Exp)/Inc (5.7) 0.0 0.0 0.0 0.0
Exceptional Gain/(Loss) 0.0 (23.8) (7.1) (0.7) 4.80
Net Income 13.4 93.7 104 106 111
Tax (6.1) (9.4) (10.4) (10.6) (11.1)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Income After Tax 7.24 84.3 94.0 95.5 99.6
Total Return 3.87 84.3 94.0 95.5 99.6
Net Inc available for Dist. 26.4 96.7 107 108 112
Growth & Ratio
Revenue Gth (%) N/A 302.6 0.0 0.0 0.0
N Property Inc Gth (%) nm 315.8 (1.9) (0.7) (0.6)
Net Inc Gth (%) nm 1,064.2 11.4 1.7 4.3 Growth driven by
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 acquisitions and annualised
Net Prop Inc Margins (%) 82.9 85.6 84.0 83.4 82.9 rental escalations.
Dist to revenue (%) 61.3 55.8 61.5 62.4 64.8
ROAE (%) 0.6 6.7 7.3 7.2 7.5
ROA (%) 0.4 4.7 4.9 4.7 4.9
ROCE (%) 0.7 6.7 6.1 5.8 5.8
Int. Cover (x) 6.0 8.2 6.8 5.7 5.7

Page 22 Page 7
Company Guide
Quarterly / Interim Income Statement (A$m)

FY Sep 4Q2016 1Q2017 2Q2017
Gross revenue 43.1 39.7 40.9

Property expenses (7.4) (6.3) (6.4)
Net Property Income 35.7 33.4 34.6
Other Operating expenses (12.8) (3.5) (3.3)
Other Non Opg (Exp)/Inc (5.7) 0.17 (3.0)
Net Interest (Exp)/Inc (3.8) (4.0) (4.0)
Exceptional Gain/(Loss) 0.0 0.0 0.0
Net Income 13.4 26.0 24.2
Tax (6.1) (3.1) (4.5)
Minority Interest 0.0 0.0 0.0
Net Income after Tax 7.24 22.9 19.7
Total Return 3.87 22.9 19.7
Non-tax deductible Items 22.5 2.02 5.38
Net Inc available for Dist. 26.4 24.9 25.1
Growth & Ratio
Revenue Gth (%) N/A (8) 3
N Property Inc Gth (%) nm (7) 4
Net Inc Gth (%) nm 216 (14)
Net Prop Inc Margin (%) 82.9 84.1 84.4
Dist. Payout Ratio (%) 100.0 100.0 100.0
Balance Sheet (A$m)

FY Sep 2016A 2017F 2018F 2019F 2020F

Other LT Assets 0.0 0.0 0.0 0.0 0.0
Cash & ST Invts 85.8 80.7 78.6 78.8 79.2
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 4.96 8.67 8.67 8.67 8.67
Total Assets 1,768 1,842 2,024 2,026 2,029
ST Debt 0.0 0.0 0.0 0.0 0.0

Creditor 2.24 8.67 8.67 8.67 8.67
Other Current Liab 17.2 9.37 10.4 10.6 11.1
LT Debt 492 567 667 669 671
Other LT Liabilities 8.21 8.21 8.21 8.21 8.21
Non-Cash Wkg. Capital (14.5) (9.4) (10.4) (10.6) (11.1)

Net Cash/(Debt) (406) (486) (589) (591) (592) Gearing remains low at 33%
Ratio
Current Ratio (x) 4.7 5.0 4.6 4.5 4.5
Quick Ratio (x) 4.7 5.0 4.6 4.5 4.5
Z-Score (X) 2.6 2.7 2.8 2.7 NA

Page 8 Page 23
Company Guide
Cash Flow Statement (A$m)

FY Sep 2016A 2017F 2018F 2019F 2020F
Pre-Tax Income 13.4 93.7 104 106 111

Dep. & Amort. 0.0 0.0 0.0 0.0 0.0
Tax Paid 0.0 (17.2) (9.4) (10.4) (10.6)
Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. 12.0 2.72 0.0 0.0 0.0
Other Operating CF 6.69 12.3 12.6 12.7 12.6
Net Operating CF 32.1 91.6 108 108 113
Net Invt in Properties (1,365) (75.0) (184) (2.0) (2.0)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF (29.6) 0.0 0.0 0.0 0.0
Net Investing CF (1,394) (75.0) (184) (2.0) (2.0)
Distribution Paid (26.4) (96.7) (107) (108) (112)
Chg in Gross Debt 491 75.0 101 2.00 2.00
New units issued 982 0.0 80.0 0.0 0.0
Other Financing CF (9.0) 0.0 0.0 0.0 0.0
Net Financing CF 1,438 (21.7) 74.3 (106) (110)
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash 75.8 (5.1) (2.1) 0.18 0.45

Free CFPS (S cts) (101) 1.25 (5.4) 7.49 7.73
Source: DBS Bank

Analyst: Derek TAN
Mervin SONG CFA
Rachel TAN

Page 24 Page 9
Mapletree Industrial Trust
Version 9 | Bloomberg: MINT SP | Reuters: MAPI.SI Refer to important disclosures at the end of this report
DBS Group Research . Equity 25 Apr 2017
BUY Dividends going up.. up.. and up!

Last Traded Price ( 24 Apr 2017): S$1.80 (STI : 3,144.03)
Price Target 12-mth: S$1.94 (8% upside) Maintain BUY, TP S$1.94. We maintain our BUY call and TP of
S$1.94 on Mapletree Industrial Trust (MINT) on the back of a
Potential Catalyst: Acquisitions
steady DPU growth profile of 3-4% per annum, higher than its
Where we differ: Our estimates are more conservative
industrial peers. The REIT offers high earnings visibility and we
Analyst
Derek TAN +65 6682 3716 derektan@dbs.com have confidence that the Manager has the flexibility to execute on
Mervin SONG CFA +65 6682 3715 mervinsong@dbs.com more developments to exploit its conservative balance sheet. This
Singapore Research Team equityresearch@dbs.com implies potential upside to earnings.
What’s New
Robust end to FY17(FYE March). Revenues and net property
 Robust 4Q17 results in line income (NPI) grew by 4.5% and 6.4% respectively, mainly
 Steady operational metrics; completion of HP driven by higher rental rates achieved across all property
segments as well as revenue contribution from Phase One of the
built-to-suit project a key driver to earnings
built-to-suit (BTS) development for Hewlett-Packard (HP).
 Strong financial flexibility from low gearing level Operational metrics remain stable with occupancy rate inching
higher to 93.1% (vs 92.1% q-o-q) while rental reversions were
flattish. Apart from the soon-to-be completed phase 2 of the
BTS project for HP, further growth drivers will mainly come from
Price Relative two developments in the pipeline, which are scheduled to
complete from 2H18 onwards.
Strong financial flexibility. One of the key advantages is the

REIT’s strong financial flexibility, with gearing at close to 30%,
one of the lowest amongst peers. With the Manager selective in
their deployment and allocation of use of capital, we remain
confident that deals, when announced, will be value accretive to
unitholders.
Valuation:
Forecasts and Valuation
FY Mar (S$m) 2016A 2017A 2018F 2019F MINT’s resilience is a value trait in this market and has yet to
Gross Revenue 332 341 364 381 be reflected in its current share price. We maintain our BUY
Net Property Inc 245 257 264 278 call and TP S$1.94 based on DCF.
Total Return 273 271 205 215
Distribution Inc 198 205 211 220
EPU (S cts) 10.6 11.1 11.3 11.9
EPU Gth (%) 4 5 2 5 Rising interest rates. An increase in refinancing rates will be
DPU (S cts) 11.2 11.4 11.7 12.2 negative to distributions. However, we note that MINT has
DPU Gth (%) 8 2 3 4 minimised this risks by having c.74% of its borrowings hedged
NAV per shr (S cts) 137 141 140 140
PE (X) 17.0 16.1 15.8 15.1 into fixed rates.
Distribution Yield (%) 6.2 6.3 6.5 6.8
P/NAV (x) 1.3 1.3 1.3 1.3 At A Glance
Aggregate Leverage (%) 29.1 30.6 31.1 31.2 Issued Capital (m shrs) 1,802
ROAE (%) 8.0 8.0 8.1 8.5 Mkt. Cap (S$m/US$m) 3,235 / 2,316
Mapletree Investments Pte Ltd 34.2
Distn. Inc Chng (%): - (1)
Schroders Plc 7.0
Consensus DPU (S cts): 11.0 11.9 12.2
Other Broker Recs: B: 10 S: 0 H: 7 AIA Group 5.0
Free Float (%) 53.8
Source of all data on this page: Company, DBS Bank, Bloomberg 3m Avg. Daily Val (US$m) 3.0
Finance L.P.
ICB Industry : Real Estate / Real Estate Investment Trusts

ed: JS / sa: YM, PY
Page 25
Company Guide
WHAT’S NEW
Dividends going up.. up.. and up
4Q17 results in line. MINT reported a strong set of Rental reversions were flattish, in line with expectations.
operational results. Revenue and net property income (NPI) Looking ahead, we expect rental reversions to remain flat but
rose by 4.5% and 6.4% to S$87.8m and S$65.9m may decline, given the negative spreads between passing and
respectively. The uplift was mainly driven by the completion market rent levels.
of the development of phase one of the built-to-suit (BTS)
project for Hewlett-Packard Singapore in the middle of Dec Low gearing and minimal interest rate risk.
2016. This was supported by positive rental reversions Strong balance sheet with gearing inching lower to 29.2%, one
achieved for its Flatted Factories, Hi-Tech Buildings and Stack- of the lowest among the industrial REITs. Interest cost moved
up/Ramp-up Buildings. NPI margins remain stable at c.75% as 10bps higher to 2.7% as the REIT rolled over interest rate
the Manager continues to hold a tight rein on cost. hedges through the financial year. Looking ahead, MINT is
Distributable income rose by a tad slower 2.7% to S$51.8m substantially hedged against interest rate rises given (i) close to
(DPU of 2.88 Scts,+2.5% y-o-y) due to higher interest costs. 75% of its borrowings is hedged and (ii) there is no-rollover of
interest rate hedges in FY18F.
Positive revaluations. NAV inch up 2.9% to S$1.41/unit on
the back of positive revaluations and completion of HP’s BTS Developments to drive value. The completion of HP’s BTS
project (phase 1) and ongoing capex incurred at Kallang Way. project will continue to drive value and earnings in FY18F. The
Cap rates were stable y-o-y and ranged between 6.5%- Manager is investing close to S$147m in two more
7.25% (flatted factories), 6.5%-7.0% (Hi-tech buildings), 7% developments (30A Kallang Place and data-center BTS). This
for Stack-up/ramp-up buildings, 6.5%-6.75% (light industrial presents upside to earnings when completed from 2H18
buildings), and 6.0% (business parks). onwards.
Operational results projected to be stable. Portfolio BUY call with TP of S$1.94 maintained. Our BUY call and TP
occupancy improved by 1ppt q-o-q to 93.1%, mainly due to are maintained. While MINT’s share price has done well in
the contribution from HP. Overall retention rates remained recent times, MINT still offers an attractive total return of
stable at 68.7%. Stack-up/Ramp-up and light industrial space c.15% (8% upside + 7% yield). Catalysts will be potential
recorded a dip in retention rate due to tenant relocations but acquisitions or development projects that are currently not
we understand that a substantial amount of the vacated priced into estimates.
space has been re-let or is under negotiation.
Page 26
Company Guide

FY Mar 4Q2016 3Q2017 4Q2017 % chg yoy % chg qoq
Gross revenue 84.0 84.5 87.8 4.5 4.0

Property expenses (22.0) (21.0) (21.8) (0.6) 3.9
Net Property Income 62.0 63.4 66.0 6.4 4.0
Other Operating expenses (7.2) (7.4) (7.6) 5.6 2.2
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Net Income 48.3 49.2 51.3 6.3 4.4
Tax 0.0 0.0 0.0 - -
Minority Interest 0.0 0.0 0.0 - -
Net Income after Tax 48.3 49.2 51.3 6.3 4.4
Total Return 130 49.2 122 (6.7) 147.3
Non-tax deductible Items (79.9) 1.94 (69.8) (12.6) nm
Net Inc available for Dist. 50.4 51.1 51.8 2.7 1.3
Ratio (%)
Net Prop Inc Margin 73.8 75.1 75.1
Dist. Payout Ratio 200.0 200.0 200.0
Page 27
Company Guide

CRITICAL DATA POINTS TO WATCH
Earnings Drivers:
Ability to maintain higher-than-industry average
occupancy rates. MINT has consistently delivered portfolio
occupancy rates averaging 95% (ranging from 90.2-95.5%)
which is above industry average. This is mainly due to a
diversified asset portfolio and wide tenant base of over 1,600
from different industries. There is therefore no industry specific
concentration risk meaning that performance is likely to remain
stable across market cycles.
Industrial sector to turn around by end of 2017.
We project the industrial sector to bottom out in 2017
and turn around in 2018. This is despite the current high
volume of new industrial supply hitting the market. Our positive
stance is premised on the following: (i) spike in new industrial
supply is projected to peak in 2017 (c.13% increase from 2016)
and fall substantially from 2018 onwards, (ii) recent positive
numbers coming out of Singapore industrial production, if
sustained, could mean that the slack in vacancy rates could be
absorbed from 2018 onwards. Therefore, 2018 is expected to
be a turnaround year for the sector. Distribution Paid / Net Operating CF
MINT, which has over 31% of its income up for renewal in

2018, could potentially benefit when these leases are due as
projected business expansion activities could relieve the pressure
on portfolio vacancy rates. When this happens, we see potential
upside to our FY18-19F DPU estimates.
Low gearing a positive; potential upside surprise from

acquisitions. MINT’s gearing is low at close to 30%, making it
one of the lowest-geared industrial REITs, offering the Manager
significant debt-funded capacity for acquisitions or to undertake
development by taking part in built-to-suit projects (BTS) or Interest Cover (x)
asset enhancement initiatives. On top of the current
development project at Kallang Way, MINT recently reported
that the REIT will undertake a new BTS data-centre project
which will add positively to earnings sustainability and NAVs
when completed.
MINT's share price is highly correlated to DPU growth but

not to interest rate movements. While most investors believe
that higher interest rates will be negative for MINT's share price,
we found that the relationship between the two factors is not
strong (correlation of 0.5x). However, we noted that the
relationship between share price movements and distribution
growth (or DPU growth) is higher (correlation of 0.85x). As
such, with MINT expected to deliver a robust 5% CAGR in DPU
growth over FY18-19, higher than its peers, we believe that
valuations will continue to remain elevated.
Page 28
Company Guide

Balance Sheet:
Low gearing allows for opportunistic acquisitions,
developments. Current gearing is conservative, implying that
the Manager has the capability to take on debt-funded
acquisitions when the opportunity arises. The Manager will be
utilising its headroom towards higher-yielding development
projects (built-to-suit project for phase 2 of HP and Kallang
Basin cluster 4 and a new built-to-suit data center project. Post
development, we believe gearing will still be within
management's comfortable level at around 30%.
Stable weighted average debt-to-maturity. MINT has a well- ROE (%)

staggered debt profile with a majority of debt due for
repayment only from FY17/18 onwards. With c.74% of its
borrowings on fixed interest rates, MINT is well protected
against future increases in interest rates.

Better-than-expected rental reversions/acquisitions will boost
earnings and share price. We are forecasting modest rental
uplifts of 0-3%. The REIT's ability to maintain or beat
expectations will mean upside to our/consensus forecasts. In
addition, acquisitions or further development projects which are Distribution Yield (%)
accretive to earnings will likely result in upside to TP and share
price.
Key Risks:
Rising interest rates. An increase in refinancing rates will
negatively impact distributions. However, MINT has minimised
the impact as c.80% of its interest cost has been fixed.
Economic risk. A deterioration of the economic outlook could

have a negative impact on industrial rents and occupancies as
companies cut back on production and require less space. PB Band (x)
Industrial rents have a strong historical correlation with GDP
growth.
Company Background
Mapletree Industrial Trust (MINT) is a real estate investment
trust which invests primarily in income-producing industrial
assets located in Singapore. Its portfolio includes a diverse mix
of business parks, hi-tech industrial buildings, ramp-up
buildings and flatted factories.
Page 29
Company Guide

FY Mar 2015A 2016A 2017A 2018F 2019F
Gross revenue 314 332 341 364 381
Property expenses (85.3) (86.5) (83.7) (99.8) (104)
Other Operating expenses (27.1) (28.9) (29.6) (31.3) (31.9) Driven mainly from HP
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 and completion of
Net Interest (Exp)/Inc (23.6) (25.6) (26.9) (28.3) (31.0) Kallang Basin
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 development project
Net Income 178 191 200 205 215
Tax (1.1) 0.0 0.0 0.0 0.0
Total Return 374 273 271 205 215
Non-tax deductible Items (194) (74.8) (65.6) 6.08 5.13
Growth & Ratio
Revenue Gth (%) 4.9 5.6 2.7 6.8 4.8
Net Inc Gth (%) 8.2 7.7 5.1 2.1 5.0
Dist to revenue (%) 57.6 59.7 60.2 57.9 57.7
ROAE (%) 8.2 8.0 8.0 8.1 8.5
ROA (%) 5.2 5.3 5.4 5.3 5.5
ROCE (%) 6.0 6.2 6.3 6.2 6.5
Int. Cover (x) 8.6 8.4 8.4 8.2 7.9
Page 30
Company Guide

FY Mar 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017
Gross revenue 84.0 84.1 84.2 84.5 87.8

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Net Income 48.3 50.1 49.7 49.2 51.3
Tax 0.0 0.0 0.0 0.0 0.0
Total Return 130 50.1 49.7 49.2 122
Non-tax deductible Items (79.9) 1.38 0.89 1.94 (69.8)
Growth & Ratio
Revenue Gth (%) 1 0 0 0 4
N Property Inc Gth (%) 0 3 0 0 4
Net Inc Gth (%) 0 4 (1) (1) 4
Balance Sheet (S$m)

FY Mar 2015A 2016A 2017A 2018F 2019F

Other LT Assets 3.63 0.36 0.0 0.0 0.0
Cash & ST Invts 72.0 54.3 38.0 24.3 32.6
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 16.2 11.4 11.4 17.4 18.3
Total Assets 3,516 3,624 3,798 3,873 3,905
ST Debt 125 47.4 115 115 115

Creditor 70.3 79.7 109 106 111
LT Debt 949 974 991 1,071 1,101

Net Cash/(Debt) (1,003) (967) (1,068) (1,162) (1,184) Gearing to remain steady
Ratio
Current Ratio (x) 0.5 0.5 0.2 0.2 0.2
Quick Ratio (x) 0.5 0.5 0.2 0.2 0.2
Z-Score (X) 1.8 2.0 1.8 1.8 1.8
Page 31
Company Guide

FY Mar 2015A 2016A 2017A 2018F 2019F
Pre-Tax Income 178 191 200 205 215

Dep. & Amort. 0.0 0.0 0.0 0.0 0.0
Tax Paid (1.0) 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (4.7) 14.3 29.0 (8.3) 4.25
Net Operating CF 205 220 232 199 222
Net Invt in Properties (54.5) (43.5) (104) (82.1) (23.8)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Net Investing CF (54.5) (43.5) (104) (82.1) (23.8)
Distribution Paid (97.5) (115) (204) (211) (220)
Chg in Gross Debt (54.3) (53.5) 85.5 80.0 30.0
New units issued 0.0 0.0 0.0 0.0 0.0
Other Financing CF (22.4) (25.7) (28.2) 0.0 0.0
Net Financing CF (174) (194) (147) (131) (190)
Chg in Cash (23.8) (17.6) (16.4) (13.6) 8.28

Free CFPS (S cts) 8.62 9.78 7.13 6.49 11.0
Source: DBS Bank

Analyst: Derek TAN
Mervin SONG CFA

Page 32
Mapletree Logistics Trust
Version 9 | Bloomberg: MLT SP | Reuters: MAPL.SI Refer to important disclosures at the end of this report
BUY Stay on for the ride

Price Target 12-mth: S$1.28 (5% upside) Maintain BUY, TP S$1.28. Despite the recent rise in its share
price, we see reasons to remain vested in Mapletree Logistics
Analyst Trust (MLT) as it offers investors a diversified but rising exposure
Derek TAN +65 6682 3716 derektan@dbs.com to growth in the Asia-Pacific region's logistics sector. We believe
Mervin SONG CFA +65 6682 3715 mervinsong@dbs.com
Singapore Research Team equityresearch@dbs.com
that MLT remains on a growth path, with the manager scouting
for opportunities across its main markets of Singapore, Hong
What’s New
Kong, Korea, and Australia. BUY!
 1QFY18 DPU of 1.887 scts a strong start
 Operational performance remains stable; vacancies stay Where we differ. Consensus estimates to see upside bias, DPU
low across major countries with significant exposure trend to bottom out from 2017 onwards. Another strong
quarter in 1Q18 as MLT kept up the positive growth
 Asset-recycling strategy to optimise capital use
momentum from a quarter ago, with DPU up 2% y-o-y. We
continue to believe that earnings is bottoming out and the
Singapore warehouse subsector (c.38% of revenues) will be
Price Relative
S$ Relative I n dex
approaching a cyclical bottom by the end of 2017, when new
supply will fall off significantly after that. We see brighter
1.4
204
1.3
1.2
184
164
prospects in MLT’s major markets of Hong Kong, China and
1.1
1.0
144
124
Australia, and the group is poised to reverse its downward trend
0.9 104
in DPU seen in the past two years. Acquisitions - we have priced
0.8 84
Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
in S$200m (50% funded by equity) - will be a key catalyst for
Mapletree Logistics Trust (LHS) Relative STI (RHS)
consensus to re-rate earnings.
Forecasts and Valuation
FY Mar (S$m) 2016A 2017A 2018F 2019F Interest savings from refinancing its perpetual securities. With
Gross Revenue 350 373 383 400 the first call date for its 5.375% perpetual in September 2017,
Net Property Inc 291 312 323 339 we believe that MLT can refinance with a new perpetual at a
Total Return 190 184 185 195 lower coupon rate. Potential savings could be an upside surprise
Distribution Inc 183 186 191 199
EPU (S cts) 6.20 5.81 7.28 7.54 to consensus estimates. Portfolio interest rates are expected to
EPU Gth (%) (3) (6) 25 4 remain stable, given a majority of loans are in JPY, for which we
DPU (S cts) 7.38 7.44 7.51 7.69 see lower risks of higher rates in the medium term.
DPU Gth (%) (2) 1 1 2
NAV per shr (S cts) 102 104 104 103
PE (X) 19.7 21.0 16.8 16.2 Valuation:
Distribution Yield (%) 6.1 6.1 6.2 6.3 We maintain our BUY call and TP of S$1.28. The stock offers a
P/NAV (x) 1.2 1.2 1.2 1.2 total potential return of >10%.
Aggregate Leverage (%) 39.5 38.4 38.7 38.7
ROAE (%) 6.1 5.7 7.0 7.3
Acquisitions ramping up faster than expected. A faster-than-
Distn. Inc Chng (%): 1 0 projected acquisition pace or a better-than-expected outlook
Consensus DPU (S cts): 7.50 7.80
for the Singapore warehouse market will translate to positive
Other Broker Recs: B: 8 S: 1 H: 9
adjustments to our earnings estimates.
Source of all data on this page: Company, DBS Bank, Bloomberg
Finance L.P At A Glance
Issued Capital (m shrs) 2,501
Mkt. Cap (S$m/US$m) 3,051 / 2,240
Temasek Holdings Private Ltd 39.4
Free Float (%) 60.6

ed: JLC / sa:JC, PY
Page 33
Company Guide
WHATS NEW
Stay on for the ride
1Q18 DPU of 1.887scts in line majority of which will come from Singapore (4.0% of
 Mapletree Logistics Trust (MLT) reported a strong start portfolio NLA), China (3.3%) and Malaysia (1.6%),
to FY18F, posting a 2% y-o-y growth in 1QFY18 DPU which we believe will likely remain mixed in the
to 1.887 scts. immediate term.
 This was mainly on the back of a 7.0% rise in revenues
to S$95.8m, largely due to four acquisitions in the last Financial Metrics
financial year, coupled with organic revenue growth  The manager remains prudent in capital management.
from their properties in Singapore and Hong Kong. Gearing inched up marginally to 39% within the
 This was further boosted by higher translation gains management’s comfort level. Average debt duration
from the HKD, AUD, and KRW. increased to 4.0 years, with all refinancing needs in
 Higher revenues and new contributions more than FY18F addressed. Average interest cost remains stable
compensated from the loss of income from a at 2.3%.
conversion of a property into a multi-tenanted building  We believe that the manager will be looking to
in Korea and AEIs at Ouluo Logistics Centre in China. refinance perpetual securities in Sept 2017 where MLT
 While property expenses increased due to an enlarged has the right to call back prior to the first reset date.
portfolio, net property income margins rose marginally
by 0.4% ppt to 84.4% due to net leases from new Asset reconstitution strategy
contributions.  The recent sale of two properties in Japan (completion
in 2QFY18) for a total consideration of JPY13,500m
Operational performance (S$165.4m), 10% above purchase price and 32% over
 Portfolio occupancy dipped slightly on-quarter to the latest valuation – at a projected 4.2% exit yield –
95.5%. This came mainly on the drop of a conversion is a signal that the manager will consistently review its
of a lease in South Korea which saw the country's portfolio and manage capital to optimise returns.
occupancy rate falling to 83.3%. We however note Estimated gain of JPY 234m (S$2.9m) will be
that there has been a general improvement in distributed to MLT unitholders.
occupancies across most of its major markets  We are projecting a 4.0% CAGR over FY18-20F,
(Singapore, + 0.5%pt to 94.6%), China (+1.3%Pt to driven mainly by acquisitions (priced in S$200m) in our
96.0%), and Vietnam (99.3%, +2.9%ppt). estimates. With the stock trading at 1.15x P/NAV and
 Rental reversions prospects remain mixed, with Hong trading at a yield of 6.3%, we believe that the
Kong projected to remain positive given the lack of manager could consider an equity fund-raising (EFR) to
supply. Singapore is likely to remain under pressure in recapitalise and part-fund its growth initiatives.
the near term, given the high number of new space
completing in 2017. Leases expiring in Japan were all
renewed, which is a positive.
 Looking ahead, the REIT has over 12% of portfolio
NLA with the leases expiring the remainder of FY18F, a
Page 34
Company Guide

FY Mar 1Q2017 4Q2017 1Q2018 % chg yoy % chg qoq
Gross revenue 89.6 96.5 95.8 7.0 (0.7)

Property expenses (14.4) (16.2) (15.0) 4.2 (7.7)
Other Non Opg (Exp)/Inc (17.2) (2.6) (9.0) 47.5 246.9
Net Interest (Exp)/Inc (11.6) (12.8) (12.7) (9.3) 0.2
Exceptional Gain/(Loss) 0.0 1.09 0.0 nm nm
Net Income 30.9 56.1 49.3 59.7 (12.1)
Tax (3.5) (27.2) (4.3) 23.9 (84.2)
Minority Interest (0.2) (0.1) (0.2) 16.3 91.6
Total Return 21.5 60.5 37.6 74.9 (38.0)
Non-tax deductible Items 24.6 (13.9) 9.64 (60.8) (169.2)
Ratio (%)
Page 35
Company Guide

400 93.0%
350 91.0%
Critical Factors 300
89.0%
Strength in diversity as major markets seeing an upturn in 250
87.0%
200
demand. MLT offers investors a diversified but rising exposure 85.0%
150
to growth in Asia-Pacific’s logistics sector. Looking ahead, MLT 100
83.0%
sees improved operational stability and higher rents in most of 50 81.0%
its markets. Hong Kong (c.15% of revenue) and Australia (c.8% 0 79.0%
2015A 2016A 2017A 2018F 2019F
of revenue) are expected to see the highest growth in rents,
driven by strong demand for space. Even Singapore (c.40% of
revenues), its biggest exposure, has seen worse days, with the
supply pressure now easing off. Japan (c.19% of revenues) Net Property Income and Margins (%)
85 85%
remains stable, given its long lease profile. 83 85%
81 84%
79 84%
The worst is almost over as Singapore’s logistics sector (39% of 77 83%
revenues) will see minimal supply completion from 2018 75 83%
onwards. We believe that the Singapore warehouse subsector 73 82%

71 82%
will approach a cyclical bottom by the end of 2017. New supply 69 81%
of logistics space to be completed, while high in 2017 at c.1.1 67 81%
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
3Q2017
4Q2017
1Q2018
m sqft (9% of total warehouse supply), is expected to fall
significantly in 2018 onwards. While supply of new warehouse Net Property Income Net Property Income Margin %
space remains high, we see risk of over-supply abating in the
medium term from 2018 onwards and will be supportive of Distribution Paid / Net Operating CF
rents. In addition, recent positive numbers coming out of (x)
1.0
Singapore’s industrial production, if sustained, could mean that
0.9
the slack in vacancy rates could be absorbed from 2018
0.8
onwards. Therefore, we believe that the logistics sector should
0.7
post a turnaround from 2018 onwards.
0.6
0.5
MLT has a diversified portfolio, with close to 28% of its income
expiring in FY18F, a majority of which comes from Singapore 0.4
and China. A sustained growth in business expansion activities 0.3

2015A 2016A 2017A 2018F 2019F
might relief the pressure on portfolio vacancy rates and rentals;
it could also mean upside surprise to distributions.
Interest Cover (x)
(x)
Sizable pipeline from Sponsor to be acquired; equity fund 9.00
raising to fund. We are excited about the acquisition prospects 8.00
that is available to MLT from the Sponsor. We see a sizeable 7.00
and growing pipeline of development properties which are 6.00

5.00
approaching maturity that could be injected in the medium
4.00
term. Given supportive capital markets (MLT is trading above 3.00
NAV with an implied cost of capital of c.6.5%), we see the 2.00
ability to acquire accretively, which is not priced in our and 1.00
consensus estimates at this point. In addition, MLT is also 0.00

2015A 2016A 2017A 2018F 2019F
embarking on development projects to rejuvenate its portfolio
to remain relevant.
Interest rates have minimal impact. A majority of their loans are

taken in foreign currencies, a substantial portion of which is
denominated in JPY. Interest rate hikes thus have minimal
impact on its portfolio’s cost of funds and should remain stable.
Page 36
Company Guide
Appendix 1: A look at Company's listed history – what drives its share price?
MLT share price return vs Purchasing Manager Index (PMI)
Index Value MLT vs PMI (x)

56 1.60
54 1.40
52 1.20
50 1.00
48 0.80
46 PMI heads 0.60

higher above
44 50 which is 0.40
ahead of MLT
42 PMI dips below 50 in peak in share 0.20
Jan’08 which is close price
40 -
to 6 months ahead
Jan-07 Jan-08 of Jan-09
MLT Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
PMI Index (LHS) MLT Share Price (RHS)
MLT share price vs10-year bond movements Remarks
(S$) MLT vs interest rates

1.60 4.0% While interest-rate rises will
1.40 3.5% negatively impact its share
1.20 3.0% price, the actual impact has
been historically shown to be
1.00 2.5%
not strongly correlated.
0.80 2.0%
0.60 1.5%
Correlation coefficient
0.40 1.0% between MLT share price and
0.20 0.5% 10-year bond yield at 0.1.
- 0.0%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
MLT Share Price (LHS) 10-year bond rate (%) (RHS)
Source: DBS Bank

MLTT share price vs DPU growth rate Remarks
(S$)
MLT vs Forward DPU growth rate Scts
We found a strong correlation
1.60 15.0%
of 0.8x between MLT’s
1.40 10.0% historical share price and its
1.20 DPU growth rate. Looking
5.0%
1.00 ahead, with DPU projected to
0.0% grow strongly in FY19F by 9%
0.80
-5.0% - which is an above-consensus
0.60 estimate - we believe that
-10.0%
0.40 valuations will remain
0.20 -15.0% elevated.
- -20.0%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
MLT Share Price (LHS) DPU (Scts) (RHS)
Source: DBS Bank
Page 37
Company Guide

Balance Sheet:
Gearing of c.40% remains within management's comfortable 40.0%
range. With a fairly optimised balance sheet, we believe that 35.0%
the manager may need to raise new equity if any acquisition 30.0%
opportunity arises in the medium term.
25.0%
20.0%
Well-staggered debt maturity profile; interest cost remains
15.0%
stable. Interest rates remain stable at 2.3%, and are expected to
10.0%
remain low, given that a majority of its debts are in JPY, HKD, 2015A 2016A 2017A 2018F 2019F
and RMB, and interest rates in those currencies are still soft. To
hedge against currency volatility, the manager typically takes on
local-denominated loans (pegged to the maximum of asset ROE (%)
values in each overseas market). MLT has a long debt-to- 7.0%
maturity of more than 3.0 years and proactively renews its loans 6.0%
ahead of time. 5.0%
4.0%
Potential buyback of perpetuals in September 2017. Given the
3.0%
strong demand for perpetual securities (S$250m @ 4.18%), we
2.0%
see the potential for MLT to refinance its first tranche of
perpetual securities (S$350m @ 5.375%) at a lower rate. The 1.0%
first callable date will be in September 2017. A 1% drop in 0.0%

2015A 2016A 2017A 2018F 2019F
coupon will mean S$3.5m in savings (c.1.5% of distributions).
Share Price Drivers: Distribution Yield (%)

(%)
Ability to drive growth through acquisitions. We remain 8.7
optimistic on MLT’s ability to drive growth through acquisitions. 8.2
After its first foray into Australia, we see MLT further deepening +2sd: 7.8%
7.7
its exposure through strategic purchases over the medium term. +1sd: 7.3%
7.2
The manager is also looking to divest of low-yielding assets in Avg: 6.8%
6.7
Singapore and Japan, and re-cycle the proceeds into higher- ‐1sd: 6.3%
6.2
yielding assets. ‐2sd: 5.9%
5.7
5.2
Key Risks: 2013 2014 2015 2016
Rise in interest rates. The manager has hedged the majority of

its debt into fixed rates but is expected to see increased cost of PB Band (x)
funds when these loans are rolled over in the coming year. 1.4
(x)
1.3
Company Background +2sd: 1.24x
Mapletree Logistics Trust (MLT) is a real estate investment trust 1.2
+1sd: 1.16x
which invests in logistics warehouses in the Asia-Pacific region. 1.1
Avg: 1.08x
It currently owns a diversified portfolio of warehouses in
1.0 ‐1sd: 1x
Singapore, Japan, China, South Korea, Vietnam, Australia, and
‐2sd: 0.91x
Hong Kong. 0.9
0.8
Page 38
Company Guide
Key
FY Mar 2015A 2016A 2017A 2018F 2019F
Gross revenue 330 350 373 383 400
Other Non Opg (Exp)/Inc (15.4) (2.3) 1.80 0.0 0.0
Net Income 205 199 214 230 239
Tax (29.1) (25.8) (40.2) (16.1) (16.7)
Minority Interest (0.5) (0.5) (0.7) (0.7) (0.7)
Preference Dividend (18.8) (18.9) (27.7) (27.7) (26.2)
Total Return 241 190 184 185 195
Non-tax deductible Items (56.1) (6.9) 1.82 2.00 2.00
Growth & Ratio
Revenue Gth (%) 6.2 6.0 6.6 2.7 4.5
Net Inc Gth (%) (16.2) (2.0) (5.6) 27.5 5.5 Earnings driven by
Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0 acquisitions
Dist to revenue (%) 56.0 52.4 49.9 49.9 49.8
ROAE (%) 6.4 6.1 5.7 7.0 7.3
ROA (%) 3.4 3.1 2.7 3.2 3.4
ROCE (%) 4.9 4.2 4.0 4.6 4.8
Int. Cover (x) 7.8 5.4 5.4 5.8 5.7

Page 39
Company Guide

FY Mar 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Gross revenue 89.6 91.6 95.5 96.5 95.8

Other Non Opg (Exp)/Inc (17.2) (9.2) 30.8 (2.6) (9.0)
Net Income 30.9 37.2 89.7 56.1 49.3
Tax (3.5) (4.8) (4.6) (27.2) (4.3)
Minority Interest (0.2) (0.2) (0.2) (0.1) (0.2)
Total Return 21.5 24.8 77.5 60.5 37.6
Non-tax deductible Items 24.6 21.8 (30.6) (13.9) 9.64
Growth & Ratio
Revenue Gth (%) 1 2 4 1 (1)
N Property Inc Gth (%) 4 2 4 0 1
Net Inc Gth (%) 3 15 212 (72) 74
Balance Sheet (S$m)

FY Mar 2015A 2016A 2017A 2018F 2019F

Other LT Assets 12.4 14.8 17.3 17.3 17.3
Cash & ST Invts 107 93.3 92.6 66.7 69.3
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 20.5 18.2 21.8 9.58 10.0
Total Assets 4,788 5,207 5,687 5,812 5,819
ST Debt 56.7 234 224 224 224

Creditor 164 154 170 128 133
LT Debt 1,575 1,824 1,960 2,023 2,027
Other LT Liabilities 94.6 111 135 135 135
Non-Cash Wkg. Capital (136) (130) (141) (121) (126)

Net Cash/(Debt) (1,525) (1,965) (2,092) (2,181) (2,182) Gearing remains at optimal
Ratio level
Current Ratio (x) 0.6 0.3 0.3 0.2 0.3
Quick Ratio (x) 0.6 0.3 0.3 0.2 0.2
Z-Score (X) 1.1 0.9 0.8 0.8 0.8

Page 40
Company Guide

FY Mar 2015A 2016A 2017A 2018F 2019F
Pre-Tax Income 205 199 214 230 239

Dep. & Amort. 0.0 0.0 0.0 0.0 0.0
Tax Paid (3.9) (3.7) (12.2) (6.5) (16.1)
Chg in Wkg.Cap. (0.8) (7.0) 9.56 (30.2) 5.27
Net Operating CF 236 231 267 193 228
Net Invt in Properties (247) (389) (359) (163) (4.0)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.82 (0.6) 0.0 0.0 0.0
Net Investing CF (246) (390) (359) (163) (4.0)
Distribution Paid (177) (183) (175) (191) (199)
Chg in Gross Debt 207 426 89.3 63.4 4.00
New units issued 0.0 17.5 0.0 100 0.0
Other Financing CF (29.9) (18.9) 177 (27.7) (26.2)
Net Financing CF 0.08 242 91.4 (55.4) (222)
Chg in Cash (7.4) 82.9 (1.0) (25.9) 2.61

Free CFPS (S cts) (0.5) (6.4) (3.7) 1.16 8.65
1.27 S$
12- mt h
Dat e of Closing
8 S.No. T arget Rat ing
1.22 Report Pric e
Pric e
1: 27 J ul 16 1.08 1.15 BUY
1.17 9 2: 22 Aug 16 1.08 1.15 BUY
6 3: 26 Oct 16 1.06 1.15 BUY
1.12
2 4: 24 J an 17 1.06 1.15 BUY
7
5: 30 Mar 17 1.09 1.28 BUY
1.07 4
5 6: 02 May 17 1.12 1.28 BUY
1
7: 17 May 17 1.13 1.28 BUY
1.02 3
8: 12 J un 17 1.20 1.28 BUY
9: 03 J ul 17 1.20 1.28 BUY
0.97
0.92
Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17
Source: DBS Bank

Analyst: Derek TAN
Mervin SONG CFA

Page 41
ESR REIT
Version 7 | Bloomberg: EREIT SP | Reuters: ESRR.SI Refer to important disclosures at the end of this report
HOLD (Downgrade from BUY) Waiting for a new chapter to unfold

Last Traded Price ( 14 Jul 2017): S$0.59 (STI : 3,287.43) Downgrade to HOLD, awaiting clarity on the new roadmap.
Price Target 12-mth: S$0.60 (1% upside)
With a new sponsor in place, we remain optimistic about ESR
Analyst REIT’s ability to access growth initiatives that new Sponsor
Singapore Research Team equityresearch@dbs.com Eshang Redwood offers. But we believe that this has been
Derek TAN +65 6682 3716 derektan@dbs.com priced in at current valuations (P/NAV and yield) which is at
historical average level, till more clarity is seen to drive
What’s New valuations higher. Given limited upside to our TP since our
 2Q17 DPU down 11.3% y-o-y due to loss of efficiency upgrade in early 2017, we downgrade ESR REIT to a HOLD.
on conversion from single- to multi-tenants Where we differ: DBS’ earnings estimates are more
 Divestment of two non-core assets will reduce gearing conservative; potential cut in consensus estimates could
from 38% to 35% pressure near-term share price. The manager has taken the
right steps to maintain a stable occupancy rate and is trading
 Downgrade to HOLD as TP is reached
off by lowering rents and thus more downside in DPUs is
 More clarity needed on synergistic benefits that new expected. We continue to see conversion from single- to multi-
Sponsor brings to drive valuations higher tenant properties to result in more downside to DPUs in the
immediate term. Our numbers are slightly below consensus and
we believe that might add pressure to the REIT’s share price if
Price Relative consensus continues to cut estimates. A surprise might come
S$
0.9
Re la tiv e In d e x
from the potential redevelopment of divestment proceeds to
new acquisition opportunities.
0.9 209
0.8 189
0.8
169
Potential catalyst: Clarity on the roadmap from the new

0.7
0.7 149
0.6 129
0.6
0.5
109
89
Sponsor. We believe that market will start to price in premiums
0.5
0.4
69
Jul-17
to NAVs once we have clarity on the roadmap put forth by
ESR REIT (LHS) Relative STI (RHS) Sponsor and the REIT, which might mean diversifying overseas.
One of the immediate benefits is the ability to be more active in
Forecasts and Valuation acquisitions, given a potentially more significant pipeline of deal
FY Dec (S$m) 2016A 2017F 2018F 2019F opportunities. A potential wildcard will be a proposed
Gross Revenue 112 109 108 110 consolidation within the mid-cap industrial REIT space, which
Net Property Inc 82.3 78.3 77.9 79.1
Total Return 7.09 50.7 51.2 53.1 should lift valuations, in our view. See details in the report
Distribution Inc 54.5 51.2 51.7 53.6 Catalyst Abound.
EPU (S cts) 4.09 3.89 3.93 4.07
Valuation:
EPU Gth (%) (6) (5) 1 4
DPU (S cts) 4.17 3.93 3.96 4.11 Maintain TP at S$0.60, cut DPU by 1.5% to account for asset
DPU Gth (%) (13) (6) 1 4 divestments. The stock has reached our TP and offers 6.6%
NAV per shr (S cts) 63.5 63.4 63.3 63.3 yield. Downgrade to HOLD.
PE (X) 14.4 15.2 15.0 14.5
Distribution Yield (%) 7.1 6.7 6.7 7.0 Key Risks to Our View:
P/NAV (x) 0.9 0.9 0.9 0.9 Lease conversion from single- to multi-tenant. The unfavourable
Aggregate Leverage (%) 37.3 35.3 35.5 35.8 rental reversion resulting from the ongoing conversion of
ROAE (%) 6.2 6.1 6.2 6.4
tenancy may bring downside surprises.
At A Glance
Distn. Inc Chng (%): 0 0 0 Issued Capital (m shrs) 1,304
Consensus DPU (S cts): 4.10 4.10 4.50 Mkt. Cap (S$m/US$m) 770 / 562
Other Broker Recs: B: 3 S: 0 H: 2
Source of all data on this page: Company, DBS Bank, Jinquan Tong 18.5
Bloomberg Finance L.P E-Shang Infinity Cayman Ltd 12.0
Credit Suisse Group AG 5.0
Free Float (%) 64.5

ed: JLC / sa:YM, PY
Page 42
Company Guide
ESR REIT
WHAT’S NEW
2Q17 results: lease conversion continues to pull down performance
Rebranding to ESR-REIT. The REIT announced the change of and targeted completion in 4Q17 and 3Q17. Assuming all
its name from Cambridge Industrial Trist to ESR-REIT, effective divestment proceeds are used to pay off debt, its gearing
from 12 June 2017, to strengthen its alignment with its ratio could fall from the current 37.9% to 35.0-35.5%. After
Sponsor, ESR. We believe the rebranding is more than a removing earnings from these two divestment assets, we
simple name-changing exercise, as it integrates with the forecast FY18F DPU to drop by around 1.5%.
Sponsor’s corporate identity and signifies the Sponsor’s
commitment to the REIT, following the Sponsor’s increase of DRP switched on. The Manager has determined that the
its stake in the REIT since February 2017. distribution reinvestment plan (DRP) will apply to the
distribution for the period from 1 April 2017 to 30 June 2017,
Lease conversion from single- to multi-tenancy continued to with a 2% discount to the market price. The pricing of the
pull down performance. 1Q17 gross revenue was S$27.7m, DRP units will be announced on 24 July 2017. We believe the
down 2.2% y-o-y. NPI decreased by 9.2% to S$19.2m. This DRP will have an insignificant impact on either the stock price
was mainly due to loss of efficiency from several lease or distribution. However, this may be a signal of the REIT
conversions from single- to multi-tenanted as well as ability to accumulate cash on the balance sheet which might
divestment of properties. Single- vs multi-tenanted properties be used opportunistically.
by rental income dropped to 41% vs 59%, compared to 44%
vs 56% a year ago. DPU was 0.956 Scts, down 11.3% y-o-y. OUR VIEW
Tenancy conversion at two assets dragged down rental Downgrade to HOLD. We upgraded the stock from HOLD to
reversion. Over 1H2017, lease expiry concentration was BUY in January 2017 after the REIT’s lacklustre performance
reduced from 21.5% to 14.8%. Leases from three out of the in 2016 and the announcement of the new Sponsor whom
five single-tenanted buildings were renewed with two assets we believed would remove some of the overhanging risk.
being converted to multi-tenancy properties. Rental reversion Since then, the stock price has moved up over 10% from
rate was a glaring -18.3%, and the two assets converted S$0.54 to our target price S$0.60. While we are still
from single- to multi-tenancy accounted for 80% of such low optimistic about the REIT’s prospects, renewed by its Sponsor,
reversion rate. we have decided to maintain our TP and downgrade our
recommendation to HOLD, pending more pointers on a
Continued divestment of non-core assets will pare down clearer roadmap for growth.
gearing. Following the proposed divestment of 55 Ubi
Avenue 3 (sales consideration of S$22.1m, target completion Recap of new sponsor ESR. ESR is the second-largest
date 3Q17), the REIT has further proposed the divestment of developer in North Asia focusing on warehouses, with 6.5m
two more assets, namely 23 Woodlands Terrace and 87 Defu sqm of projects or more than US$5bn of assets under
Lane 10, with sales consideration of S$17.7m (2.8% above management. Click here to find out more details about the
valuation) and S$17.5m (0.6% above valuation), respectively, Sponsor.
Page 43
Company Guide
ESR REIT

FY Dec 2Q2016 1Q2017 2Q2017 % chg yoy % chg qoq
Gross revenue 28.3 27.7 27.7 (2.2) (0.2)

Property expenses (7.1) (8.1) (8.5) 18.6 5.1
Net Property Income 21.2 19.7 19.2 (9.2) (2.4)
Other Operating expenses (2.3) (2.1) (2.1) (5.3) 3.7
Net Interest (Exp)/Inc (5.5) (5.0) (5.1) 7.6 (1.1)
Exceptional Gain/(Loss) (0.1) 0.0 0.0 - -
Net Income 13.4 12.6 12.0 (10.0) (4.8)
Tax 0.0 0.0 0.0 - -
Net Income after Tax 13.4 12.6 12.0 (10.0) (4.8)
Total Return 12.5 12.6 11.7 (7.1) (7.8)
Non-tax deductible Items 1.53 0.46 0.81 (46.8) 75.4
Net Inc available for Dist. 14.1 13.1 12.5 (11.4) (4.9)
Ratio (%)
Page 44
Company Guide
ESR REIT

CRITICAL DATA POINTS – a new chapter unfolds S$ m
100 84.4%
90 82.4%
Clarity of new strategic direction from Sponsor to drive prices 80
80.4%
70
going forward. The price of ESR-REIT has been trending 60 78.4%
sideways in recent years, given changes in the key management 50

40
76.4%
74.4%
team and the fact that strategic initiatives to grow the REIT have 30
72.4%
20
come to naught. However, we expect things to change with the 10 70.4%
emergence of a new Sponsor in Eshang Redwood which we 0 68.4%

2015A 2016A 2017F 2018F 2019F
and the market took positively. We believe that in the next few
years, a new chapter will unfold as ESR REIT undertakes a new
strategic roadmap to put itself back onto the growth path.
While ESR REIT struggled for inorganic growth previously, we Net Property Income and Margins (%)
23 80%
expect the REIT to be more active in acquisitions, and with a 22 78%
Sponsor offering a potential significant pipeline of assets, deal 22 76%
opportunities and even development capability gives ESR REIT 21

74%
21
more flexibility to pursue inorganic growth. 20
72%
70%
20
19 68%
In addition, we maintain a close watch on a potential 19 66%
consolidation within the mid-cap industrial space, which in our 18 64%
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
view could result in an emergence of a giant industrial REIT, led
by Eshang Redwood. We expect a series of M&As, which could
re-rate the stock price. Please refer to our report: Catalyst
Abound, published on 17 March 2017.
Distribution Paid / Net Operating CF
(x)
DPU growth impaired by oversupply in industrial sector. ESR- 1.0

0.9
REIT (previously known as Cambridge Industrial Trust) continues
0.8
to reposition its portfolio amid a challenging operating 0.7
environment in the industrial space. DPU has been under 0.6
pressure since 2014. One of the key pressures has been coming 0.5
from the spike in supply, resulting in the manager needing to 0.4
cut rents fairly significantly, which contributed to a c.20% drop 0.3
in DPU from the peak back in 2014. In addition, we note that 0.2
2015A 2016A 2017F 2018F 2019F
switching from paying its management fees in cash has also
contributed to the fall.
Interest Cover (x)
(x)
As supply starts to taper off from 2018 onwards, we continue 4.00
to see near-term downside as single- to multi-tenant lease 3.90
conversions (c.9.2% of income expiring in 2018F) could lead to 3.80
potentially more downside to occupancy rates and eventually 3.70
DPUs. Our numbers are slightly below consensus and we believe 3.60
that if consensus cut earnings, there might be near-term 3.50
pressures to the share price. 3.40
3.30
Interest rates not a key risk factor. We have found minimal 3.20
2015A 2016A 2017F 2018F 2019F
correlation between the 10-year bond yield and the price of
ESR-REIT. Interest rate risks are likely to be mitigated by the
proactive management of the REIT’s debt profile. As such, we
believe that ESR-REIT’s distributions are well hedged against
interest-rate movements.
Page 45
Company Guide
ESR REIT
Appendix 1: Critical Factors – high correlation with S-REIT index broke down in 2014
Table 1: Correlation Coefficient between EST-REIT’s price and yield versus other factors
ESR-REIT DPU DPU Growth Singapore PMI S-REIT Index Singapore 10Y
Government
Bond Yield
From IPO to Dec 2013
Price 0.24 0.37 0.13 0.96 0.18
Yield 0.19 (0.22) (0.25) (0.76) 0.01
From Jan 2014 to Present (Jul 2017)
Price 0.81 0.60 (0.07) 0.42 0.38
Yield (0.26) (0.54) (0.15) (0.71) 0.01
Source: ESR-REIT, Bloomberg Finance L.P., Thomas Reuters, DBS Bank
Chart 1: Price of ESR-REIT driven by DPU in recent years, detaching from S-REIT’s Index performance
Chart 2: ESR-REIT’s Price vs S-REIT Index since IPO (correlation coefficient 0.93)
Page 46
Company Guide
ESR REIT
Chart 3: A closer look – ESR-REIT’s price since 2014 with weak correlation to S-REIT Index (coefficient 0.42)
Source: ESR-REIT, Bloomberg Finance L.P., Thomas Reuters, SGX, DBS Bank
Chart 4: ESR-REIT’s Price vs DPU since 2014 Chart 5: ESR-REIT’s Price vs DPU Growth since 2014
Page 47
Company Guide
ESR REIT

Balance Sheet:
Gearing remains stable. Looking ahead, there is some capacity
to pursue acquisition opportunities, with gearing at close to 35.0%
35% in the medium term. Proceeds from recent divestments 30.0%
could be used for acquisitions, if any. 25.0%
20.0%
Pro-active capital management. ESR-REIT has refinanced most of 15.0%
its loans expiring and has no refinancing due till 2H18. In
10.0%
addition, the Manager has fixed c.88% of its interest rates over 2015A 2016A 2017F 2018F 2019F
the next c.3 years, meaning that volatility from a hike in interest
rates should only have a marginal impact on distributions.
ROE (%)
Share Price Drivers: 6.0%
Pick-up in occupancy rate. We believe that expected vacancies
5.0%
and earnings weakness arising from property conversions from
single- to multi-tenanted could be an overhang on the stock. 4.0%
The ability to retain tenants will alleviate such risks and may 3.0%
result in higher prices. 2.0%
1.0%
Acquisitions likely to be beyond Singapore. The Manager
remains keen to grow the portfolio through acquisitions. Given 0.0%
2015A 2016A 2017F 2018F 2019F
limited accretive deals in Singapore, ESR-REIT has broadened its
investment focus to Australia, Japan, and Malaysia, which the
Manager has identified as having similar sovereign risks and Distribution Yield (%)
(% )
transparency characteristics as Singapore. 10.5
Blueprint from new Sponsor. The Trust Manager has been 9.5
acquired by a new Sponsor, e-Shang Redwood (aka ESR), with 8.5

+2sd: 8.8%
an 80% indirect interest. Given the Sponsor’s large portfolio +1sd: 8.1%
and leading position in North Asia, exciting synergies could be 7.5 Avg: 7.5%
-1sd: 6.8%
created with the REIT. No detailed plans have been 6.5
-2sd: 6.2%
communicated to investors so far.
5.5
2013 2014 2015 2016
Key Risks:
Interest-rate risk. Any increase in interest rates will result in PB Band (x)
higher interest payments, which will reduce income available 1.3
(x)
for distribution and result in lower distribution per unit (DPU)
1.2
to unitholders. That said, ESR-REIT has substantially hedged its +2sd: 1.13x
1.1
interest-rate exposure. +1sd: 1.04x
1.0
Avg: 0.94x
Economic risk. A deterioration in Singapore’s economic 0.9
-1sd: 0.85x
outlook could have a negative impact on industrial rents and 0.8
-2sd: 0.76x
occupancies as companies cut back production and require less 0.7
space. Industrial rents have a strong correlation with GDP 0.6
growth. Ju l-13 Ju l-14 Ju l-15 Ju l-16
Company Background Source: Company, DBS Bank

ESR-REIT (previously known as Cambridge Industrial REIT) is a
real estate investment trust which invests primarily in income-
producing industrial assets located in Singapore.
Page 48
Company Guide
ESR REIT

FY Dec 2015A 2016A 2017F 2018F 2019F
Gross revenue 112 112 109 108 110
Other Operating expenses (9.4) (8.9) (7.8) (7.8) (7.8) Lower distributable
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 income due to
Net Interest (Exp)/Inc (22.1) (21.1) (19.7) (18.9) (18.2) divestment of assets
Exceptional Gain/(Loss) 0.40 0.74 0.0 0.0 0.0 whose sales proceeds
Net Income 55.2 53.0 50.7 51.2 53.1 are assumed to repay
Tax 0.0 0.0 0.0 0.0 0.0 debt
Total Return 52.5 7.09 50.7 51.2 53.1
Growth & Ratio
Revenue Gth (%) 13.0 (0.1) (3.0) (0.5) 1.5
N Property Inc Gth (%) 10.7 (4.5) (4.9) (0.5) 1.5
Net Inc Gth (%) 5.8 (4.0) (4.3) 1.0 3.7
Dist to revenue (%) 55.1 48.6 47.1 47.8 48.8
to sales(%)
ROAE %) 6.3 6.2 6.1 6.2 6.4
ROA (%) 3.9 3.8 3.8 3.9 4.1
ROCE (%) 5.6 5.3 5.3 5.4 5.5
Int. Cover (x) 3.5 3.5 3.6 3.7 3.9

Page 49
Company Guide
ESR REIT

FY Dec 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017
Gross revenue 28.3 27.6 27.8 27.7 27.7

Exceptional Gain/(Loss) (0.1) 0.0 0.53 0.0 0.0
Net Income 13.4 12.2 12.9 12.6 12.0
Tax 0.0 0.0 0.0 0.0 0.0
Total Return 12.5 12.9 (32.2) 12.6 11.7
Growth & Ratio
Revenue Gth (%) 0 (2) 1 0 0
N Property Inc Gth (%) (2) (6) (1) 0 (2)
Net Inc Gth (%) (3) (9) 6 (2) (5)
Balance Sheet (S$m)

FY Dec 2015A 2016A 2017F 2018F 2019F

Other LT Assets 0.0 0.0 0.0 0.0 0.0
Cash & ST Invts 2.66 3.70 1.84 4.31 7.90
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 9.65 9.28 1.67 1.66 1.69
Total Assets 1,431 1,367 1,302 1,307 1,312
ST Debt 0.0 0.0 0.0 0.0 0.0

Creditor 24.0 21.5 7.50 7.46 7.57
LT Debt 525 510 459 464 470
Unit holders’ funds 873 827 827 826 826
Non-Cash Wkg. Capital 26.9 9.81 (5.8) (5.8) (5.9)

Net Cash/(Debt) (523) (506) (457) (460) (462) Gearing to pare down after
Ratio assuming divestment
Current Ratio (x) 2.2 1.6 0.5 0.8 1.3 proceeds to repay debt
Quick Ratio (x) 0.5 0.6 0.5 0.8 1.3
Z-Score (X) 1.1 1.1 1.2 1.2 1.2

Page 50
Company Guide
ESR REIT

FY Dec 2015A 2016A 2017F 2018F 2019F
Pre-Tax Income 55.2 53.0 50.7 51.2 53.1

Dep. & Amort. 0.0 0.0 0.0 0.0 0.0
Tax Paid (0.1) (0.1) 0.0 0.0 0.0
Associates &JV Inc/(Loss) (0.1) 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (0.3) 0.30 13.6 0.0 0.09
Net Operating CF 79.1 68.6 64.3 51.2 53.2
Net Invt in Properties (40.6) 21.2 33.3 (2.0) (2.0)
Other Invts (net) (10.6) 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Net Investing CF (50.1) 22.5 33.3 (2.0) (2.0)
Distribution Paid (48.4) (52.9) (51.2) (51.7) (53.6)
Chg in Gross Debt 16.1 (36.9) (50.3) 5.00 6.00
New units issued (0.3) (0.2) 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF (32.6) (90.0) (102) (46.7) (47.6)
Chg in Cash (3.6) 1.04 (3.9) 2.47 3.59

Free CFPS (S cts) 3.02 6.92 7.49 3.77 3.92
0.63 S$
12- mt h
Dat e of Closing
Report Pric e
0.61 Pric e
1: 25 J ul 16 0.56 0.60 HOLD
0.59 8 2: 22 Aug 16 0.55 0.60 HOLD
9 3: 26 Oct 16 0.55 0.54 HOLD
0.57 6 4: 28 Nov 16 0.53 0.54 HOLD
5: 19 J an 17 0.56 0.54 HOLD
2 7
0.55 1 5 6: 24 J an 17 0.56 0.54 HOLD
3 4 7: 26 J an 17 0.57 0.60 BUY
0.53 8: 26 Apr 17 0.58 0.60 BUY
9: 14 J ul 17 0.59 0.60 HOLD
0.51
0.49
Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17
Source: DBS Bank

Analyst: Singapore Research Team
Derek TAN

Page 51
Soilbuild Business Space Reit
Version 8 | Bloomberg: SBREIT SP | Reuters: SBSR.SI Refer to important disclosures at the end of this report
HOLD (downgrade from BUY) Still very attractive yield

Price Target 12-mth: S$0.73 (-1% downside) TP reached but with no imminent catalyst, downgrade to HOLD.
With a dividend yield of over 7%, Soilbuild Business Space REIT
Analyst (SBREIT) offers one of the highest yields in the industrial space.
Singapore Research Team equityresearch@dbs.com Operational headwinds and continued near-term downtrend in
Derek TAN +65 6682 3716 derektan@dbs.com DPUs are likely to dampen investors’ confidence in the REIT's
ability to maintain returns. Given that its share price has
What’s New achieved our TP of S$0.73, downgrade to HOLD.
 2Q17 DPU down 6% as anticipated
Where we differ: Stronger earnings recovery in FY19. DPUs are
 Recovery seen at 76 Loyang Way’s non-anchor space,
expected to remain under pressure in the immediate term,
though still a key challenge mainly on the back of difficulty in backfilling the space at 72
 Occupancy rate found to be a key determinant to DPU Loyang Way (c.8% of top line) and we have conservatively
and price assumed the property to remain vacant till 2H18. A recovery in
DPUs will likely come only from 2H18, upon the expiry of the
 Downgrade to HOLD as TP has been reached, high yield master lease at Solaris, a business park asset which is projected
still attractive to continue to perform strongly. As a result, our FY19F DPU
forecast is 4.4% higher than the market average.
Price Relative Potential catalyst: Sooner-than-expected vacancy improvement.

1.0
S$ Re la tive In d ex We found a high correlation of 0.93 between occupancy rates
and share price. Further signs of a sustained recovery in
216
1.0
196
0.9
0.9
176
156
occupancy rates as in 1H17 will restore investors’ confidence in
DPU sustainability which will lead to potential NAV revaluation
0.8
136
0.8
116
gains and thus a price recovery.

0.7
0.7 96
0.6 76
Aug-13 Aug-14 Aug-15 Aug-16
Soilbuild Business Space Reit (LHS) Relative STI (RHS)

Valuation:
Trimmed FY18F by 4% to account for lower occupancy,
Forecasts and Valuation primarily from the slow backfill of vacancy at 72 Loyang Way.
FY Dec (S$m) 2016A 2017F 2018F 2019F Maintain DCF-backed TP at S$0.73. Downgrade to HOLD as
Gross Revenue 81.1 84.0 85.4 88.0 we see no imminent catalyst, while yield of over 7% is still
Net Property Inc 70.7 71.6 72.8 75.4
attractive.
Total Return (0.6) 50.2 49.7 51.1
Distribution Inc 60.3 57.0 55.6 57.7
EPU (S cts) 4.82 4.80 4.71 4.81 Key Risks to Our View:
EPU Gth (%) (9) (1) (2) 2 Look out for asset revaluation. NAV fell by 10.0% in FY16 due
DPU (S cts) 6.09 5.45 5.27 5.43 to softening asset valuations and enlarged unit base. Gearing
DPU Gth (%) (6) (11) (3) 3 was pushed up to 37% from 36%. We expect additional
NAV per shr (S cts) 72.1 72.0 71.8 71.7
PE (X) 15.3 15.4 15.7 15.4
revaluation losses of up to 10% to occur in FY17. Gearing
Distribution Yield (%) 8.2 7.4 7.1 7.3 could inch up by another c.100bps, while still within the
P/NAV (x) 1.0 1.0 1.0 1.0 comfortable level, limits funding options for acquisitions.
Aggregate Leverage (%) 37.1 37.1 37.0 36.8 At A Glance
ROAE (%) 6.7 6.7 6.6 6.7 Issued Capital (m shrs) 1,048
Mkt. Cap (S$m/US$m) 775 / 566
Distn. Inc Chng (%): 1 (4) (1)
Chap Huat Lim 8.2
Consensus DPU (S cts): 5.50 5.30 5.20
Other Broker Recs: B: 3 S: 0 H: 2 Jinguan Tong 6.8
Lim Han Feng 6.7
Source of all data on this page: Company, DBS Bank, Bloomberg Free Float (%) 64.9
Finance L.P
ICB Industry : Real Estate / Real Estate Investment Trusts

ed: TH / sa:YM, PY
Page 52
Company Guide
WHAT’S NEW
2Q17 results: DPU decline not a surprise; occupancy improvement at 72 Loyang Way’s non-anchor space
Top line up, thanks to timely acquisition. Gross revenue for Recovery at 72 Loyang Way, though still a key challenge.
2Q17 was S$21.6m, S$2.0m or 10.1% higher y-o-y. The Since the default of the master tenant, Technics, the manager
increase was largely attributed to higher contribution from has sought regulatory waiver to uplift the restriction on
new asset Bukit Batok Connection (S$2m in revenue). Higher tenant’s industry for the 30% non-anchored space until
revenue contributions were also received from West Park 2020. Seventy percent of the property is still under
BizCentral, Solaris, Tuas Connection and Tellus Marine, but regulations to be leased out to one anchor tenant from the
were offset by a reduction in revenue from 72 Loyang Way. marine & offshore industry. Occupancy improved from 9.9%
Property operating expenses were S$0.6m higher y-o-y at to 22.8% for the non-anchor space. However, the challenge
S$2.8m mainly due to higher property expense of S$0.4m at remains at sourcing the anchor tenant. With the full
West Park BizCentral which was due to a one-off property tax utilisation of the security deposit received for 72 Loyang Way
reversal adjustment made in 1HFY16 arriving from revision of in May 2017, the distributable income will be negatively
FY15 and FY16 annual values by the tax authority. Net impacted until the Manager finds a suitable replacement
Property Income (NPI) was 8.1% higher at S$18.7m y-o-y anchor tenant. We have further cut our occupancy
accordingly. Finance expenses increased by S$0.4m to expectations to below 30% for FY18F, which lowers our
S$4.0m, mainly due to the S$40m unsecured loan drawn FY18F DPU forecast by c.4%.
down in 2H16 and higher notional interest expense on the
No financing requirement in FY17. Cost of debt is still 3.37%
S$55m interest-free loan (the same amount of S$0.2m has
and weighted average debt maturity stands at 2.3 years.
been offset in finance income).
Interest rate exposure is 86.5% fixed. SBREIT has no debt due
DPU down 6% as expected due to enlarged unit base and in FY17, and S$155m or 32.3% of total debt will be due in
absence of fees payable in units. Distributable income was FY18 comprising S$100m MTN and S$55m interest-free loan.
S$15.4m, 4.3% higher y-o-y. However, distribution per unit We have assumed that SBREIT will refinance the interest-free
(DPU) was 1.47 Scts, or 5.8% lower y-o-y. This was due to loan at the prevailing market rates and have priced in an
the enlarged unit base as well as Manager’s decision to pay increase in interest cost expenses in our model.
the property management and lease management fees in
Downgrade to HOLD, TP S$0.73. The stock has reached our
cash as opposed to units in 2Q16. In the longer term, this
TP of S$0.73. Without imminent catalysts, we maintain our
decision should mitigate the dilutive effect on DPUs. 2H17
TP and downgrade the stock to HOLD. Although DPU is
DPUs represent 51% of our full-year FY17 forecast, in line
expected to decline further in FY17-18F, we believe such
with our expectations.
negativity has already been absorbed by the market. A high
Continued improvement in occupancy including 76 Loyang yield of over 7% is attractive for many to stay invested. We
Way. Portfolio occupancy rate continued to improve from its believe that the ability to source a replacement tenant at 72
low of 89.6% at the end of 2016 to 92.6% as at 2Q17. This Loyang Way will be a catalyst for a re-rating, though the odds
was mainly lifted by Tuas Connection (from 86.3% to 93.0%) are low in the immediate term. In addition, current market
from securing short-term leases, West Park BizCentral (from talk of a potential consolidation within the mid-cap industrial
90.7% to 91.2%), as well as 76 Loyang Way (from 9.9% to space could lift sentiment and prices higher (Please refer to
22.8%). Occupancy at Eightrium bounced back to 100% our report: Catalyst Abound, published on 17 March 2017).
after a slight dip last quarter following the exit of Huawei.
Over the quarter, 8.0% of portfolio NLA were renewed or
newly signed. Three leases were renewed at flat rate, nine
new leases were signed and eight leases were forward
renewed at 9.8% lower. With 7.6% of portfolio NLA expiring
in 2H17, the key focus remains on retaining existing tenants
and improving occupancy in multi-tenanted buildings.
Page 53
Company Guide

FY Dec 2Q2016 1Q2017 2Q2017 % chg yoy % chg qoq
Gross revenue 19.6 22.0 21.6 10.1 (2.0)

Property expenses (2.2) (2.8) (2.8) 25.7 1.8
Net Property Income 17.3 19.2 18.7 8.1 (2.5)
Other Operating expenses (1.7) (1.9) (1.8) 4.6 (2.7)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Net Income 12.4 13.9 13.4 7.6 (3.5)
Tax 0.0 0.0 0.0 - -
Net Income after Tax 12.4 13.9 13.4 7.6 (3.5)
Total Return 12.4 13.9 13.4 7.6 (3.5)
Non-tax deductible Items 2.31 0.0 1.99 (13.5) nm
Ratio (%)
Page 54
Company Guide

100
94.9%
90
DPUs remain on a downtrend which will likely cap re-rating 80 92.9%

70 90.9%
opportunities. Given a myriad of factors ranging from 60
88.9%
heightened supply pressures and an unfortunate scenario of a 50
40 86.9%
tenant default close to a year ago, Soilbuild Business Space REIT 30 84.9%
20
(SBREIT) has traded sideways and broadly underperformed the 10 82.9%
S-REIT market since June 2015. Over FY17-19F, we project DPU 0 80.9%
2015A 2016A 2017F 2018F 2019F
to fall by 14% (c.7% per annum) and with potential downside
risks to distributions to persist especially given the uncertain
outlook for its oil & gas/marine offshore clients (13.8% of
income), we believe this will dampen investors’ confidence and Net Property Income and Margins (%)
89%
20
immediate re-rating opportunities.
88%
19
87%
Ability to drive occupancy rate higher will improve earnings 18
trend in the future. While the REIT maintained full occupancy 86%
17
rates from IPO till 2015, we started to see signs of a 85%
deterioration back in 2015 as tenants vacated their premises at 16 84%
its multi-tenanted properties (Tuas Connection and WestPark 15 83%
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
BizCentral) and the master-tenant defaulted at 72 Loyang Way
[c.8%] of top line). While the occupancy rate at 72 Loyang Way
had recovered from c.9.9% to 22.8% in 2Q17, we believe that
given limitations set by the authorities on the tenant mix for the
Distribution Paid / Net Operating CF
property, the manager will likely face a significant hurdle to re- (x)
let out the remaining space in the medium term and thus, the 1.0
property will likely remain vacant for some time. With the 0.9
drawdown in security deposit ending in 2Q17, earnings will 0.8
likely remain on a downtrend at least for another year. Portfolio 0.7
occupancy rate of 92.6% (as of 2Q17) is likely to remain flattish 0.6
going forward. 0.5
0.4
Solaris a key driver to an earnings recovery in 2H18. The expiry 0.3

2015A 2016A 2017F 2018F 2019F
of the master lease at Solaris (c.21% of top line) will cushion
the impact of the income vacuum at 72 Loyang Way but will
only start to contribute more meaningfully from August 2018 Interest Cover (x)
(x)
onwards. When that happens, we will see a reversal of fortunes 5.00
and earnings to remain on an uptrend then. Underlying 4.80
occupancy is at 100% with the manager achieving strong rental
4.60
reversions of c.10% on underlying leases. The full-year
4.40
contribution of Solaris will drive FY19F earnings by 3.0%.
4.20
Interest rate risk not a major concern. We have not found 4.00
meaningful correlations between interest rates and SBREIT’s 3.80
Price (Table1). This could be due to investors attestation of the 3.60

2015A 2016A 2017F 2018F 2019F
Manager’s proactive management of the REIT’s debt profile
which has largely mitigated interest rate risks.
Page 55
Company Guide
Appendix 1: Critical Factors
Table 1: Correlation Coefficient between SBREIT’s Price or DPU and other factors
SG 10Y
SBREIT Rental SBREIT
SBREIT SBREIT DPU PMI S-REIT Index Government
Reversion Occupancy Rate
Bond Yield
IPO (Aug 2013) – May 2015
Price 0.62 0.08 (0.19) (0.52) 0.81 (0.38)
DPU 1.00 (0.04) 0.18 (0.09) 0.45 (0.30)
Rental Reversion (0.04) 1.00 (0.78) (0.10) 0.11 n.m
Occupancy Rate 0.04 (0.78) 1.00 0.15 (0.11) n.m.
Jun 2015 – Present (Jul 2017)
Price 0.56 0.39 0.93 (0.84) 0.03 0.57
DPU 1.00 0.20 0.86 (0.61) (0.53) 0.69
Rental Reversion 0.64 1.00 0.29 (0.37) 0.29 n.m
Occupancy Rate 0.86 0.29 1.00 (0.81) (0.09) n.m.
n.m. stands for not meaningful
Chart 1: SBREIT’s Price vs S-REIT Index – high correlation until June 2015
Chart 2: SBREIT’s Price vs Occupancy Rate – high correlation from June 2015
Source: SBREIT, Bloomberg Finance L.P., Thomas Reuters, DBS Bank
Page 56
Company Guide
Appendix 2: Critical Factors
Chart 3: SBREIT's Price vs DPU

Decline in DPU since FY16 on the back of industrial space
oversupply that has been resulting in lower occupancy rate
and rental reversion.
DPU of FY16A was 6% lower than that of FY15A. We

expect DPU to slide further by 16-19% in FY17F and FY18F
from its FY15 level before stabilising. Nonetheless, we
believe the current stock price has largely priced in DPU
downside.
Chart 4: SBREIT’s Price vs Rental Reversion Chart 5: SBREIT’s DPU vs Rental Reversion
Chart 6: SBREIT’s DPU vs Occupancy Rate
Source: SBREIT, Bloomberg Finance L.P., Thomas Reuters, DBS Bank
Page 57
Company Guide

Balance Sheet:
Gearing remains within management's comfort level. SBREIT's
current gearing remains at the lower end of management’s range 35.0%
of 35-40% which provides sufficient headroom and financial 30.0%
flexibility for the REIT to acquire opportunistically. 25.0%
20.0%
Prudent capital management; 100% of interest costs hedged into 15.0%
fixed rates. All-in cost of debt is around 3.4%. Average debt
10.0%
maturity stays at around three years with no debt due in FY17. 2015A 2016A 2017F 2018F 2019F
Close to 90% of interest rate has been fixed or hedged.
Share Price Drivers: ROE (%)

High yields of >7%; one of the highest among S-REITs. SBREIT
currently offers one of the highest yields among industrial REITs. 6.0%
We believe this is unjustified given the REIT’s superior portfolio of 5.0%
high-quality industrial assets with a niche exposure in the business 4.0%
park segment, which is expected to deliver a more resilient 3.0%

performance than peers. In addition, with around half of its income
2.0%
pegged to single-tenant properties, we believe that SBREIT offers
one of the strongest income visibilities among industrial REITs. 1.0%
0.0%
2015A 2016A 2017F 2018F 2019F
Better-than-expected operational performance. Better-than-
projected rental reversions from its main assets - namely West Park
Biz Central and Tuas Connection - will mean upside to our DPU Distribution Yield (%)
(%)
forecasts, implying higher TPs. In addition, with investors’ concerns 12 .0
+ 2 sd: 2 0 x
of rising vacancy risks due to increased competition from new
10 .0
completing supply, the ability to maintain a sustained occupancy + 1 sd: 1 7 x
profile will lift investors’ confidence in SBREIT’s ability to deliver 8.0

A vg: 7 .1 %
consistent returns over time. 6.0
-1 sd: 1 0 .9x
4.0
Key Risks: 2.0

-2 sd: 7 .8 x
Look out for asset revaluation. NAV fell by 10.0% in FY16 due to
softening asset valuations and enlarged unit base. Gearing was 0.0
20 13 20 14 20 15 20 16 20 17
pushed up to 37% from 36%. We expect additional revaluation
losses of up to 10% to occur in FY17. Gearing could inch up by
another c.100bps, while still within the comfortable level, limits PB Band (x)
(x)
funding options for acquisitions. 1.2
1.1
Company Background
Soilbuild Business Space REIT (SBREIT) is a real estate investment 1.0
trust that invests in income-producing real estate used primarily for A vg: 0 .9 5x
0.9
business space purposes in Singapore. Its flagship asset is Solaris,
located in one-north business park. 0.8
0.7
Aug-13 Aug-14 Aug-15 Aug-16
Page 58
Company Guide

FY Dec 2015A 2016A 2017F 2018F 2019F
Gross revenue 79.3 81.1 84.0 85.4 88.0
Other Operating expenses (7.8) (7.3) (7.6) (6.7) (7.9) Higher top lines driven
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 by acquisitions
Net Income 47.1 50.3 50.2 49.7 51.1
Tax 0.0 0.0 0.0 0.0 0.0
Total Return 51.7 (0.6) 50.2 49.7 51.1
Growth & Ratio
Revenue Gth (%) 16.4 2.3 3.6 1.6 3.0
Net Inc Gth (%) 12.0 6.7 (0.2) (0.9) 2.7
Dist to revenue (%) 72.9 74.3 67.8 65.1 65.6
Managers & Trustee’s fees 9.8 9.0 9.0 7.8 9.0 Lower Non-tax items due to
to sales(%)
ROAE %) 6.7 6.7 6.7 6.6 6.7 the absence of fees payable
ROA (%) 4.2 4.0 3.9 3.9 4.0 in units
ROCE (%) 5.3 5.2 5.1 5.2 5.3
Int. Cover (x) 4.7 4.8 4.6 4.0 4.1

Page 59
Company Guide

FY Dec 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017
Gross revenue 19.6 19.7 21.7 22.0 21.6

Net Income 12.4 12.1 13.4 13.9 13.4
Tax 0.0 0.0 0.0 0.0 0.0
Total Return 12.4 12.1 (37.5) 13.9 13.4
Growth & Ratio
Revenue Gth (%) (3) 1 10 1 (2)
N Property Inc Gth (%) 1 0 9 2 (3)
Net Inc Gth (%) 0 (3) 11 3 (4)
Balance Sheet (S$m)

FY Dec 2015A 2016A 2017F 2018F 2019F

Other LT Assets 3.41 0.88 0.88 0.88 0.88
Cash & ST Invts 16.8 25.7 28.0 29.8 32.9
Inventory 0.0 0.0 0.0 0.0 0.0
Debtors 2.44 4.29 0.84 0.85 0.88
Total Assets 1,215 1,275 1,276 1,280 1,285
ST Debt 0.0 0.0 0.0 0.0 0.0

Creditor 10.1 12.0 8.40 8.54 8.80 Acquisition of Bukit Batok
Other Current Liab 2.72 5.62 5.62 5.62 5.62 Connection added to
LT Debt 399 472 472 472 472 property values, but existing
Other LT Liabilities 57.2 33.8 33.8 33.8 33.8 portfolio suffered a
Unit holders’ funds 746 752 756 760 765 revaluation loss mainly due to
Minority Interests 0.0 0.0 0.0 0.0 0.0 Loyang Way.

Net Cash/(Debt) (382) (447) (444) (443) (439)
Ratio
Current Ratio (x) 1.6 1.8 2.1 2.2 2.4
Quick Ratio (x) 1.5 1.7 2.1 2.2 2.3
Z-Score (X) 1.0 1.0 1.1 1.1 1.1

Page 60
Company Guide

FY Dec 2015A 2016A 2017F 2018F 2019F
Pre-Tax Income 47.1 50.3 50.2 49.7 51.1

Dep. & Amort. 0.0 0.0 0.0 0.0 0.0
Tax Paid 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (0.7) 3.27 (0.2) 0.12 0.23
Net Operating CF 57.1 71.3 55.0 54.0 56.2
Net Invt in Properties (124) (136) (2.0) (2.0) (2.0)
Other Invts (net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Net Investing CF (124) (136) (2.0) (2.0) (2.0)
Distribution Paid (55.7) (58.9) (57.0) (55.6) (57.7)
Chg in Gross Debt 29.6 74.4 0.0 0.0 0.0
New units issued 90.0 59.4 6.29 5.41 6.66
Other Financing CF (1.6) (1.4) 0.0 0.0 0.0
Net Financing CF 62.3 73.4 (50.7) (50.2) (51.1)
Chg in Cash (4.2) 8.97 2.33 1.73 3.09

Free CFPS (S cts) (7.5) (6.2) 5.07 4.93 5.10
0.78
S$
12- mt h
0.76 Dat e of Closing
Report Pric e
0.74 Pric e
1: 22 Aug 16 0.67 0.78 BUY
0.72 2 2: 13 Oct 16 0.71 0.75 BUY
3: 25 J an 17 0.65 0.70 BUY
0.70 4 4: 13 Apr 17 0.69 0.73 BUY
0.68
0.66
1
0.64 3
0.62
0.60
Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17
Source: DBS Bank

Analyst: Singapore Research Team
Derek TAN

Page 61
Industry Focus
Industrial REITs
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 26 Jul 2017 08:27:27 (SGT)

Dissemination Date: 26 Jul 2017 08:46:22 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
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only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
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arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
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
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Industry Focus
Industrial REITs
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Space Reit, Frasers Logistics & Industrial Trust, as of 30 June 2017.
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recommended in this report as of 30 June 2017.
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Industry Focus
Industrial REITs
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Industry Focus
Industrial REITs
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Insights Patchy Recovery For Singapore Industrial Reits

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Singapore Industry Focus

DBS Group Research . Equity 26 Jul 2017

Uneven path to recovery STI : 3,327.83

• Acquisitions a key driver to upside but only

ASIAN INSIGHTS VICKERS SECURITIES

Manufacturing growth to taper in 2H17 will dampen growth momentum

Manufacturing Sector Business expectations shows improving sentiment Remarks

General Business outlook Output forecast

Source: EDB, Singstat, DBS Bank

Manufacturing Sector Business expectations shows improving sentiment Remarks

10 The momentum is also tapering off

ASIAN INSIGHTS VICKERS SECURITIES

Supply tapering down from 2018F onwards Remarks

Source: JTC,DBS Bank

Net Absorption Rate Market Vacancy Rate (%)

Source: JTC,DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Warehouse supply tapering down from 2018F onwards Remarks

Source: JTC,DBS Bank

2.0 We expect market vacancy rates to

Supply Demand Vacancy

Source: JTC,DBS Bank

Supply Demand Vacancy

Source: JTC,DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Market rents estimated to bottom in 2018 Remarks

Market rents are projected to bottom

4.30 1.80 We project the business park

Source: JTC, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

REITs weighted average lease (by Revenues) Remarks

Viva industrial Trust Viva 3.1 11% 16% 31% 42%

Frasers Logistics & Industrial FLT 6.7 0% 4% 15% 81%

Industrial REITs country exposures (by revenues) Remarks

ASIAN INSIGHTS VICKERS SECURITIES

MINT 3.7 1.2 29% 0.80 3.4 4.6 6.9% 5.5%

MLT 5.6 1.8 39% 1.30 3.0 5.4 5.7% 5.9%

SBREIT 1.3 0.5 38% 0.10 0.7 1.3 5.7% 5.8%

Flattish DPU growth in 2018

ASIAN INSIGHTS VICKERS SECURITIES

ASIAN INSIGHTS VICKERS SECURITIES

DBS Group Research . Equity 24 Jul 2017

BUY Powering ahead

ASIAN INSIGHTS VICKERS SECURITIES

Net Property Income and Margins (%)

Rebound in occupancy rates to provide upside to earnings. A- 400

new prospects. Given A-REIT’s scale in Singapore, the Manager 0 65.3%

earnings visibility for the REIT. 119

negative for selected sectors. We are positive on A-REIT’s 0.9

We project its Australia portfolio to deliver resilient earnings 0.4

ASIAN INSIGHTS VICKERS SECURITIES

Appendix 1: A look at Company's listed history – what drives

AREIT Share price (LHS) PMI Index (RHS)

Source: EDB, Singstat, DBS Bank

Manufacturing Sector Business expectations show improving sentiment Remarks

AREIT Share price (LHS) DPU (Scts) RHS

Source: EDB, Singstat, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Aggregate Leverage (%)

range. We believe that there is still capacity for management to 30.0%

average cost of debt of 3.0% with c.79% hedged into fixed

acquisitions. The aim is to optimise the portfolio returns and 7.4