INITIATING COVERAGE

18 February 2011

SINGAPORE
OUTPERFORM
Mapletree Industrial Trust S$1.09 @17/02/11
Low-risk yields Target: S$1.24
REIT

MINT SP / MAPI.SI Janice Ding +(65) 6210 8609 – janice.ding@cimb.com

• Initiate with Outperform and target price of S$1.24. Sponsored by Mapletree

Investments, MIT is a REIT that invests in income-producing industrial assets in
Singapore. With an 11.2% market share of Singapore’s flatted factory space, MIT’s
S$2.1bn portfolio is a good proxy for Singapore’s SME space, we believe. We
anticipate a 3-year DPU CAGR of 5.3% for the next two years as existing rental
caps on its non-business park space are lifted by June. Using DDM valuation
(discount rate 8.4%), we arrive at a target price of S$1.24. Trading at 1.24x P/BV
and a 2010 yield of 6.6%, MIT is not cheaper than industrial leader AREIT (1.25x
P/BV; 7% yield). However with a under-rented portfolio, pure Singapore exposure,
and large tenant base point, rental downside is limited whilst upside is conversely
strong. We expect catalysts from announcements of accretive acquisitions or
development projects.
• Demand to outpace supply. A healthy Singapore economy and manufacturing
growth backed by the global electronics and semiconductor recovery are likely to
boost take-up for flatted factories as firms expand to increase demand. Net new
demand for flatted factories could surpass net new supply at least till 2013. The
resultant rise in occupancy should lend support to rents and capital values.
• JTC’s trade sale could represent acquisition opportunity. JTC’s Phase 2
divestment of assets is likely to be finalised in 1H11. Its 3.5m sf portfolio will have no
rental cap imposed, representing good opportunities for upward rental reversions at
the onset, in our opinion. This represents a good acquisition opportunity for MIT to
acquire a portfolio of similar asset quality and positioning as its existing one.

Financial summary
FYE Mar 2009 2010F 2011F 2012F
Revenue (S$ m) 178.6 202.7 214.4 226.9
Net property income (S$ m) 124.2 140.2 149.1 157.7
Net property income margins (%) 69.5% 69.2% 69.6% 69.5%
Pretax profit (S$ m) 144.9 102.4 111.6 119.8
Net profit (S$ m) 144.9 102.4 111.6 119.8
Distributable profit (S$ m) 88.3 104.5 113.7 121.9
EPU (S cts) 9.9 7.0 7.6 8.2
EPU growth (%) N/A (29%) 9% 7%
P/E (x) 11.0 15.6 14.3 13.3
Core EPU (S cts) 5.9 7.0 7.6 8.2
Core EPU growth (%) N/A 18% 9% 7%
Core P/E (x) 18.4 15.6 14.3 13.3
Gross DPU (S cts) 6.0 7.1 7.8 8.3
Dividend yield (%) 5.5% 6.6% 7.1% 7.6%
P/BV (x) 1.3 1.3 1.3 1.3
ROE (%) 11.5% 8.1% 8.9% 9.5%
Asset leverage (%) 38.5% 38.7% 38.7% 38.7%
EV/EBITDA (x) 22.1 19.4 18.1 17.0
CIMB/Consensus (x) 1.01 1.02 0.97
Note: FY2010F refers to the year ended 31 March 2011 Source: Company, CIMB Research, Bloomberg

Price chart Market capitalisation & share price info

1.3
1.3
3.50 Market cap S$1,594m/US$1,250m Share price perf. (%) 1M 3M 12M
1.2
1.2
3.00
12-mth price range S$1.16/S$0.93 Relative 5.4 2.8 6.2
2.50
1.1
2.00
3-mth avg daily volume 5.7m Absolute 0.0 (0.9) 17.2
1.1
1.0 1.50 # of shares (m) 1,463 Major shareholders % held
Est. free float (%) Temasek Holdings 31.3
1.0
62.6
1.00
0.9
0.50
0.9
0.8 0.00
Conv. secs (m) AIG 5.4
Oct-10 Dec-10
Conv. price ( ) APG Tactical 5.2
Volume 100m (R.H.Scale) Mapletree Industrial Trust

Source: Bloomberg Source: Company, CIMB Research, Bloomberg

Please read carefully the important disclosures at the end of this publication.
 Background
Closest proxy for SME industrial space. Listed on the SGX on 21 Oct 10, MIT is a
REIT that invests in income-producing industrial assets in Singapore. Its investment
mandate excludes buildings and properties used primarily for logistics purposes.
MIT’s initial Singapore-centric property portfolio was valued at S$2.1bn at 31 Aug 10,
comprising 70 properties in 23 clusters with 12.1m sf of net lettable area. The portfolio
was essentially made up of: 1) Mapletree’s private trust portfolio (whole portfolio
except for Light Industrial) which the sponsor had acquired from the public industrial
landlord JTC in 2008; and 2) Mapletree Singapore Industrial Trust’s (MSIT) portfolio
which consisted of five single-user buildings acquired from various third parties and
one building (Tata Communications Exchange) developed by the sponsor. Essentially,
the six buildings made up the full Light Industrial segment in MIT’s portfolio.

MIT is sponsored by Mapletree Investments Pte Ltd (MIPL), an indirect wholly-

owned subsidiary of Temasek Holdings. Both the REIT and property managers of MIT
are wholly owned subsidiaries of the sponsor.

Figure 1: Asset breakdown by net property income (NPI) and asset value
Contribution to NPI for the year ended Mar 10 Contribution to asset value as at Jun 10*
Warehouse
Warehouse Light industrial 1%
Light Industrial 1% 9% Flatted
5%
Flatted Factories
Business Park
factories 53%
19% Business Park
57%
21%

Stack-up / Stack-up /
Ramp-up Ramp-up
18% 16%

*Asset values used are the average of two sets of valuation.

Source: Company, CIMB Research

Figure 2: Contribution to gross rental income by tenant type

SME
56%

MNCs
44%

Source: Company

Differentiating factory and warehouse space. In the industrial property space, there
are two broad categories: 1) factories (including business and science parks, data
centres, hi-tech space, flatted factories, stack up factories); and 2) warehouses
(including distribution centres and ramp-up warehouses). Factories are much higher in
value than warehouses due to their specifications (usually referring to extent of
electrical powering, and presence of other fit-outs such as air-conditioning, raised
flooring etc). Conversely, warehouses tend to be much more bare and lower in
specifications and fit-out. For this reason, factory rents are higher than warehouse
rents, in general. MIT’s portfolio is almost pure factory space except for one
warehouse in Clementi.

[ 2 ]
Single largest owner of flatted factory space. Two things differentiate MIT from the
other industrial SREITs:
• MIT’s large exposure to multi-tenanted flatted factories (57% of net property
income) and SME tenants (56% of gross rental income), a result of having acquired
the bulk of its portfolio from JTC. MIT also has the single largest share of the flatted
factory market in Singapore, giving it some autonomy in setting standards in pricing,
leasing and management practices.
• Its focus on factory space (or non-logistics use space) means it could avoid conflicts
of interest with its sister company Mapletree Logistics Trust. It is the only industrial
REIT with no exposure to logistics.
Closest comparables are JTC and AREIT. JTC would be MIT’s single largest
competitor in terms of scale and product offerings. However, JTC has shifted its focus
from providing and managing conventional industrial space to providing strategic
infrastructure for Singapore’s economic growth. Commensurate with this, it has plans
to exit from ready-built facilities through trade sales of these assets. In the private
sector, AREIT would be the closest comparable with also a pure Singapore portfolio
(for now) and a significant portion (about 45%) of multi-tenanted space. Nonetheless,
the two are still different: MIT with its SME-focused portfolio has a large market share
of flatted factories (11.2% vs. 4%); while AREIT is MNC-focused with a leading share
of business park space (24.3% vs. 8.3%).

Figure 3: Major players in Singapore’s factory market as at 2Q10 (NLA = 30.3m sq m)

Source: Colliers International

Figure 4: MIT is the single largest flatted factory player by market share

Source: Colliers International

[ 3 ]
 Figure 5: AREIT is the single largest business park player by market share

Source: Colliers International

Centralised location a plus. MIT’s portfolio is located in established industrial

clusters and in close proximity to major expressways. Well-sought-after industrial
clusters include Redhill/Tiong Bahru, Toa Payoh, Kallang and Tai Seng.

Figure 6: Location of assets

Source: Company

[ 4 ]
Figure 7: MIT’s IPO assets
Market Value Market
(Avg of 2 Value on
Type Property Address NLA valuers) NLA
(sm) (S$ m) (S$/psf)
Business Park The Signature 51 Changi Business Park Central 2 33,166 108 304
Business Park The Strategy 2 International Business Park 52,993 234 409
Business Park The Synergy 1 International Business Park 26,001 102 363
Flatted factories Changi North 11 Changi North Street 1 6,833 18 249
Flatted factories Kaki Bukit 2,4,6,8 &10 Kaki Bukit Avenue 1 89,201 147 153
Flatted factories Kallang Basin 4 26, 26A, 28 & 30 Kallang Place 35,603 55 145
Flatted factories Kallang Basin 5 19,21 & 23 Kallang Avenue 26,118 45 161
Flatted factories Kallang Basin 6 25 Kallang Avenue 19,346 34 163
Flatted factories Kampong Ampat - KA Foodlink 171 Kampong Ampat 27,387 63 213
Flatted factories Kolam Ayer 1 8, 10 & 12 Lorong Bakar Batu 31,560 55 161
Flatted factories Kolam Ayer 2 155, 155A & 161 Kallang Way 32,480 51 146
Flatted factories Kolam Ayer 5 1,3,& 5 Kallang Sector 41,565 66 147
Flatted factories Loyang 1 30 Loyang Way 35,182 44 115
Flatted factories Loyang 2 2,4,& 4A Loyang Lane 21,952 26 110
Flatted factories Redhill 1 1001, 1001A & 1002 Jalan Bukit Merah 29,036 47 149
Flatted factories Redhill 2 1, 3 & 3752 Bukit Merah Central 21,250 38 167
Flatted factories Serangoon North 6 Serangoon North Avenue 5 54,698 139 237
Flatted factories Tanglin Halt 115A 115B Commonwealth Drive 15,996 33 189
Flatted factories Telok Blangah 1160, 1200 & 1200A Depot Road 26,500 48 170
Flatted factories Tiong Bahru 1 1090 Lower Delta Road 10,273 16 146
Flatted factories Tiong Bahru 2 1080, 1091, 1091A, 1092 & 1093 Lower Delta Road 31,717 50 148
Flatted factories Toa Payoh North 1 970, 970A & 998 Toa Payoh North 32,619 51 144
Flatted factories Toa Payoh North 2 1004 Toa Payoh North 10,095 16 143
Flatted factories Toa Payoh North 3 1008 & 1008A Toa Payoh North 12,739 19 139
Flatted factories Woodlands Central 33 & 35 Marsiling Industrial Estate Road 3 32,444 45 128
2 Woodlands Sector 1 and 201, 203, 205,207, 209 & 211
Stack-up/ramp-up Woodlands Spectrum 1 & 2 Woodlands Avenue 9 280,990 325 108
Light industrial 19 Changi South Street 1 19 Changi South Street 1 6,958 12 163
Light industrial 19 Tai Seng Drive 19 Tai Seng Drive 8,607 14 147
Light industrial Tata Communications Exchange 35 Tai Seng Street 13,405 95 657
Light industrial 65 Tech Park Crescent 65 Tech Park Crescent 9,975 13 122
Light industrial 45 Ubi Road 1 45 Ubi Road 1 13,992 23 154
Light industrial 26 Woodlands Loop 26 Woodlands Loop 14,476 22 140
Warehouse Clementi West 1 Clementi Loop 19,750 25 116
Total 1,124,906 2,079 172
Multi-tenanted only 1,057,492 1,900 167
Single-tenanted only 67,413 179 247
Source: Company, CIMB Research

Multi-tenanted industrial space yields lower margins but higher upward

reversion potential. MIT’s portfolio is dominated by multi-tenanted factory space
which contributes 94% of its net property income (NPI) and 90% of its portfolio asset
value. Multi-tenanted industrial space refers to properties that can be subdivided into
small units for several users which share common facilities such as cargo lifts and
loading areas. Multi-user facilities used to take the form of conventional flatted
factories/warehouses but have evolved in sophistication over the years to hi-tech,
stack-up/ramp-up factories and business park space.

Unlike single-user factory space (the dominant industrial type at 83% of islandwide
factory space) which is often characterised by high NPI margins, multi-user factory
space typically offers much lower NPI margins as property-related expenses such as
insurance, property tax and maintenance are borne by landlords. NPI margins for
multi-user space with more common facilities (such as business parks) including food
courts and ancillary retail space are also much lower than those with fewer common
facilities.

Despite the lower margins, multi-tenanted industrial landlords are better positioned to
capture upward rental reversions particularly in a rising leasing market as lease
periods are typically much shorter (three years vs. five or more for single-user sale-
and-leaseback facilities), and allowable uses are more generic than their single-user

[ 5 ]
counterparts.
Strong organic growth potential with lifting of rental caps, short weighted
average lease to expiry (WALE) and tenant mix. MIT’s acquisition of the MIT Private
Trust Portfolio had come with rental caps imposed on all non-business park buildings,
affecting 76% of its net property income. These rental caps – which limit rental
increases of non-business park space to 5% p.a. since the acquisition of the portfolio
from JTC in 2008 - will be lifted from 30 Jun 11. A comparison done by Colliers
International shows that current portfolio rents are 18-36% below current market rates.
Portfolio WALE is also short at 2.7 years (against the 5-year average for industrial
REITs) and more than half of its leases are due for renewal over FY11-12. We believe
there is much opportunity for organic growth for MIT over the next two years through
increasing rents to market levels, and reconfiguring its tenant mix to high-growth
sectors so as to maximise rental growth.

Figure 8: MIT’s portfolio average rent is 18-36% below market levels

IPO portfolio
average rent Market rent % Difference
S$ psf/mth S$ psf/mth
(Apr- Jun 2010) (Apr- Jun 2010)
Business Park $3.01 $3.64 20.9%
Flatted Factories / Stack-up / Ramp-up Buidlings $1.20 $1.42 18.3%
Light Industrial Buildings $1.43 $1.93 35.0%
Warehouse $0.99 $1.35 36.4%
Source: Colliers International

Figure 9: Lease expiry profile as at 31 Dec 10

Source: Company

[ 6 ]
Figure 10: Increase in rents for renewals and new leases as at Dec 10

Source: Company

Consistent performance of portfolio attests to successful asset management. A

largely multi-tenanted portfolio is innately much more demanding on asset managers
than a largely single-tenanted portfolio that is mainly triple-net leased. MIT’s portfolio
historically boasts consistent occupancy (92.3% as at Dec 10), high retention rates of
above 80% and increasing rental rates (+11% yoy) since it was acquired from JTC in
2008. This is no mean feat in view of the economic downturn in 2008-09. We are
particularly impressed that occupancy at its multi-tenanted buildings was in line with its
larger competitor AREIT (91.1%) at the end of Dec 10. We attribute this to successful
asset management, which is led by MIT’s current Head of Asset Management, Mr Lee
Seng Chee. Management tracks the promptness of rental payments and lowers risks
by increasing tenants’ security deposits and screening prospective tenants thoroughly.
We are comfortable that the management team will be able to manage its large 1,537
tenant base.

Figure 11: Stable occupancy and increasing rental rates since acquisition of portfolio from JTC

Source: Company

[ 7 ]
 Figure 12: MIT’s top 10 tenants as at 31 Dec 10

Source: Company

JTC’s trade sale could be source of major acquisition growth. MIT would have
three main sources of acquisition opportunities: 1) JTC’s trade sale of its ready-built
facilities; 2) its sponsor’s pipeline where it has right first of refusal; and 3) third-party
assets in Singapore. In our view, there is limited scope for MIT for acquire both from
the sponsor and third parties as there is no ready pipeline from the parent suitable for
injection in the immediate future. Mapletree Business City and Comtech, both owned
by the sponsor, although suitable, have been excluded from first rights of refusal. Also,
there is fierce competition for third-party industrial assets from four industrial REITs
(excluding MapleLog and Cache Logistics as both are logistics REITs), other private
funds and investors. As such, with JTC’s long-term plan to divest all of its ready-built
facilities, we see this as a major source of acquisitions for MIT. Future acquisition
opportunities from JTC are more likely to be paced out and bite-sized, in our view.
JTC’s discouragement of monopolistic ownership to restrict acquisition growth.
JTC’s Phase 2 divestment of its ready-built facilities will be carried out through a
tender process that will close on 1 Mar 11. This exercise will comprise nine property
clusters with a total of 15 flatted factory blocks, six amenity centres and 1,749 car-park
lots totalling 3.5m sf of net rentable area. Average occupancy is high at 96% and the
assets can be found in established industrial estates close to major roads and
expressways. Most importantly, we understand that there would be no rental caps
imposed on this portfolio (unlike Phase 1 divestment), representing good opportunities
for upward rental reversions. Phase 2 would be sold in two tranches. We believe this is
an indication of JTC’s unwillingness to see monopolistic ownership of SME facilities, in
which case MIT is likely only to acquire one tranche. We have a ballpark estimate of
S$600m for the Phase 2 portfolio, or about S$300m for a single tranche.
Assuming that MIT acquires S$300m worth of assets at 7% NPI yields with 50:50
debt/equity funding and its current cost of debt of 2.4%, MIT’s DPU could grow by
1.4%.

Figure 13: JTC’s Phase 2 divestment portfolio

Source: DTZ

[ 8 ]
Figure 14: Location of JTC’s Phase 2 divestment assets

Source: DTZ

More build-to-suit projects may follow. MIT’s sister REIT MapleLog earlier
expressed its intention to grow via build-to-suit developments. We believe MIT would
follow suit in the mid-term by tapping the building capabilities of its sponsor, which has
demonstrated its skills so far with the development of Tata Communications
Exchange. Yields from development projects could be 9-12%, more attractive than the
6.5-8% yields from acquisitions. With the 10% regulatory cap on development for
REITs, MIT can undertake about S$200m of such work.

Strong business-park performance through the economic downturn. Its business

park portfolio, comprising The Signature in Changi Business Park, and The Strategy
and The Synergy in International Business Park, has been sustaining occupancy at
above 92% since 3Q08 and strong double-digit rental-growth rates in spite of low
retention rates of 48-54% in 4Q08 and 1Q09. This indicates the demand resilience of
its Business Park portfolio.

Figure 15: Business parks’ performances from 3Q08

Source: Company IPO prospectus

[ 9 ]
Flatted factories’ performances healthy. Flatted factories, the largest component of
MIT’s portfolio, has been sustaining occupancy at above 85% since 3Q08 with steady
rental increases of 5% p.a. We believe the high retention rates for this segment can be
partially attributed to the highly-sought locations of some assets, including Redhill, Toa
Payoh and Kallang.

Figure 16: Flatted factories’ performances from 3Q08

Source: Company IPO prospectus

Stack-up / ramp-up factories boast high occupancy rates of above 90%, since
3Q08, with annual rental increases of slightly under 5% p.a. Their high occupancy
rates can be attributed to the popularity of such buildings which offer ground-floor
convenience for the loading and unloading of cargo to users and enable landlords to
charge ground-floor rents for upper-floor units.

Figure 17: Stack-up/ramp-up factories’ performances from 3Q08

Source: Company IPO prospectus

Light Industrial portfolio. This segment consists of all single-tenanted buildings

where maintenance, insurance and property taxes are borne by the tenants rather than
landlord. With typical long leases of 5-15 years, occupancy is typically 100%. 2Q10
occupancy dipped to 99.3% as the newly completed Tata Communications Exchange
Building – a data centre facility in Tai Seng − was added to the portfolio. Nonetheless,
the sustainability of rental inflow is highly dependent on tenants’ business viability. To
mitigate the higher negative impact on the REIT in times of default, security deposits
collected are much longer, from 10 months onwards. Due to their long leases and the
small number of tenants, average rents from 3Q08 have remained stable since 3Q08.
The spike in rents to S$1.43psf/month in 2Q10 reflected largely the addition of the
Tata Communications Exchange building with much higher specifications and rents.

[ 10 ]
Figure 18: Light Industrial’s performances from 3Q08

Source: Company IPO prospectus

Outlook
Manufacturing continues to power Singapore’s economy. Despite the strong
growth of the financial and business sectors in Singapore, manufacturing continues to
be the single largest driver of GDP in Singapore, accounting for 25.9% of GDP in the
12 months ended 30 Jun 10. The country’s rebound from recession in 2009 was also
led by manufacturing, with growth of 37.9% and 44.5% yoy in the first and second
quarters of 2010. Notably, the strong manufacturing rebound was led by a surge in
output from higher value-add industries such as electronics, biomedical manufacturing
and precision engineering. Further, manufacturing value-added per worker (proxy for
workforce productivity) had jumped 6x over the last three decades to S$108,257 in
2009 from S$18,400 in 1979. This reflected the evolution of Singapore’s manufacturing
sector towards higher value-added manufacturing and its importance to Singapore’s
economic productivity. The manufacturing sector is poised for continued growth as the
government has an output target of S$300bn by 2018, double that of 2005. Further,
the Economic Strategies Committee highlighted in its Feb 10 report that manufacturing
shall remain a key pillar of the Singapore economy, accounting for 20-25% of its GDP,
with the accompanying investment by manufacturers.

Figure 19: Manufacturing contributes a quarter of Singapore’s GDP

Source: Company IPO prospectus

[ 11 ]
Demand for flatted factory space dependent on SMEs’ role in manufacturing
sector. In Singapore, SMEs are defined as companies with at least 30% local equity
and fixed productive assets including buildings, machinery and equipment not
exceeding S$15m, and staff strengths of not more than 200 for the commerce and
service sectors. SMEs form the backbone of Singapore’s economy in creating
economic growth and employment. Of the 170,000 enterprises in Singapore, 99% are
SMEs. This ratio has remained stable since 2003-09, but their value-added
contribution to the economy had climbed to 50% from 46%, while employment share
had remained around 60% in the same period. The growing productivity of SMEs
ensures their continuing importance and relevance to the government’s master plan to
move towards high value-added manufacturing. Recognising the importance of SMEs,
the government continues to support their growth and development through incentive
programmes targeted at productivity/capability development (Technology Innovation
and Business Capabilities schemes), financing schemes (Bridge Loan programmes,
and Local Enterprise Finance Scheme) and industry promotion programmes
(Capability Development Programme and Local Enterprise and Association
Development). The growth of SMEs should continue to support demand for MIT’s
portfolio.
Resilient industrial’s performance vs. offices. Over the last decade, industrial
properties have performed better in terms of occupancy and rents than their office
peers, particularly in an economic downturn. Net new demand for industrial space has
been climbing steadily from 2002, through the major crises of the dot.com bust (2001-
2), SARs (2003) and global financial crisis (2009), while demand for retail and office
space had shrank accordingly. By rentals and values, industrial properties are also
stable. In the 2009 financial crisis, islandwide industrial rents slipped only 13.4% vs.
the 24.6% plunge for office space in the central area. Similarly, prices of industrial
properties fell 14.4% in the same period vs. a 22.3% decline for office properties.

Figure 20: Net new demand and occupancy rates for industrial, office and retail space

Source: Company IPO prospectus

[ 12 ]
Figure 21: Rental indices across the segments

Source: Company IPO prospectus

Demand to outpace supply. Moving forward, a healthy Singapore economy and

manufacturing growth are likely to boost take-up for flatted factories. Real estate
consultancy Colliers International forecasts that net new demand for flatted factories
will surpass net new supply at least till 2013. The resultant rise in occupancy would
lend support to rents and capital values. Colliers expects rents and capital values to
grow at annual averages of 7% and 7.5% respectively till 2013.

Figure 22: Rents and capital values to rise up to 10% p.a. over 2011-13

Source: Company IPO prospectus

Figure 23: Net new demand and occupancy of flatted factory space as at 2Q10

Source: Company IPO prospectus

[ 13 ]
Figure 24: SWOT analysis

Strengths
• Pure Singapore mandate ensures full tax transparency and low
geographical risks
• Sizeable portfolio with many tenants, eliminating concentration risks
• Risks for rental trends very low as rents are below market levels.
• Government’s support for manufacturing sector and SMEs is positive for
demand for MIT’s portfolio.
• Strong asset management team which has worked with the JTC portfolio
since it was acquired from JTC in 2008.
• Strong sponsor which is able to support the REIT in terms of branding and
financing
Opportunities
• Short WALE, below market rents, and lifting of rental caps represent
potential for strong rental reversions in the short term and higher propensity
of capturing rental upside in an improving economy
• Opportunity to grow via the acquisition of JTC’s Phase 2 trade sale
• Opportunities to improve margins from an under-managed public portfolio
• Asset enhancement and development opportunities within a sizeable
portfolio.

Weaknesses Threats
• Acquisition growth is limited with no visible pipeline from sponsor and • If inflation rises seriously, profit margins could be hurt more than peers as
intense competition for third-party assets. almost all property-related expenses are borne by the REIT.
• Relatively high gearing indicates the likelihood of requiring equity for • MIT’s strong reliance on borrowings makes it vulnerable to interest-rate
upcoming acquisitions fluctuations.
• Defaults and arrears ratio could rise in an economic downturn from a high
concentration of SME tenants
Source: Company, CIMB Research

Risks
Inflation may hit profit margins. Concerns of inflation are raging through Asia and
rising utility costs could affect MIT’s profit margins. MIT is especially vulnerable as it
bears most property-related expenses (maintenance, insurance and property taxes)
while other industrial REIT peers have a greater portion of triple-net leases which
move most of their operational costs to tenants.
Acquisition growth limited. JTC will be running a trade sale of another batch of
factories this year and MIT is expected to be a keen participant. However, the quantum
is expected to be much smaller than Phase 1 as JTC has decided to split the sale into
two tranches. This is telling of its concerns with the rise of monopoly, in our view.
Separately, although sponsor Mapletree Investments has granted MIT a general right
of first refusal for its industrial assets (excluding logistics), there is actually nothing in
the pipeline with Mapletree Business City and ComTech excluded from this scheme.
Competition for third-party assets is also intense from other industrial RETIs and funds
actively looking for industrial assets. Hence, MIT’s ability to grow via acquisitions may
be muted.
Arrears and defaults could rise in an economic downturn. With MIT’s greater
concentration of SME tenants, we expect defaults and arrears to be much higher in an
economic downturn. Nonetheless, this risk is attenuated by the large number of
tenants of more than 1,500 in its portfolio, reducing concentration risks.
Gearing is relatively high. MIT’s gearing is 39% vs. the sector average of 33%. Even
though it is quite a long way from its gearing limit of 60%, the invisible ceiling is more
realistically at about 45%. At this level, debt headroom is about S$241m. We believe
that any acquisition in excess of S$200m is likely to require equity fund-raising, which
would be less accretive than a wholly debt-funded acquisition.

Strong reliance on borrowings. As with all the other SREITs, MIT relies strongly on
borrowings, which makes it vulnerable to interest-rate fluctuations.

Financials
Balance sheet healthy but gearing is above sector average. As at Dec 10, MIT had
a reported asset leverage of 39%, above the sector average of 33%. With a BBB+
credit rating from Fitch, MIT can gear up to 60% of its asset size. Other financial
indicators look healthy: interest cover is high at 6.6x; all-in blended cost of debt at
2.4% is one of the lowest among SREITs, though in line with its sister REIT MLT. At
the point of listing, MIT had taken on total debt of S$848m at 2-5-year tenures. Hence,
it has no loans due for refinancing over the next two years. About 68% of its debt is
subject to fixed interest rates and 85% of its asset value subject to negative pledge.

[ 14 ]
Figure 25: MIT’s debt maturity profile

300
$251 $251
250 $209
200
$126

S$ m
150

100

50

0
2011 2012 2013 2014 2015
Source: Company, CIMB Research

Debt headroom of S$241m, assuming 45% asset leverage. We take the view that
management will not leverage up beyond 45%. Based on its current asset leverage of
39%, MIT has debt headroom of about S$241m before reaching that level. This seems
to point to near-term equity issuance, if there are new acquisitions exceeding S$200m
in value.
Key assumptions. We assume stable occupancy for MIT’s portfolio but with rent
reversions growing at up to 30% for the next three years. We do not assume any
acquisitions or asset-enhancement work. The manager’s fees and interest costs
(2.4%) are assumed to be stable, with dividend payouts at 100%.

[ 15 ]
Figure 26: Key assumptions used in our model
Rental growth forecast (%) 2009 2010 2011
Business Park 25% 5%
Flatted Factories 0% 20%
Stack-up/ramp-up 0% 30%
Light industrial 0% 3%
Light industrial - Tata Communications 0% 0%
Warehouse 0% 10%

Renewal rents S$psf/mth 2009 2010 2011

Business Park 3.01 3.76 3.95
Flatted Factories 1.37 1.37 1.64
Stack-up/ramp-up 0.85 0.85 1.11
Light industrial 1.43 1.43 1.47
Warehouse 0.99 0.99 1.09

NLA (sqm) 2009 2010 2011

Business Park 112,160 112,160 112,160
Flatted Factories 644,592 644,592 644,592
Stack-up/ramp-up 280,990 280,990 280,990
Light industrial 54,008 54,008 54,008
Light industrial - Tata Communications 13,405 13,405
Warehouse 19,750 19,750 19,750
Portfolio 1,111,500 1,124,906 1,124,906

Occupancy Rates (%) 2009 2010 2011

Business Park 93.5% 94.0% 94.0%
Flatted Factories 86.3% 91.5% 92.5%
Stack-up/ramp-up 92.5% 96.0% 96.0%
Light industrial 100.0% 100.0% 100.0%
Light industrial - Tata Communications 100.0% 100.0%
Warehouse 100.0% 97.0% 98.0%

PROJECTED GROSS REVENUE

(Existing) S$m 2009 2010 2011
Business Park 37.581 43.578 46.645
Flatted Factories 94.636 110.465 116.155
Stack-up/ramp-up 27.767 28.920 31.794
Light industrial 6.764 6.767 6.767
Light industrial - Tata Communications 10.389 10.389
Warehouse 2.465 2.598 2.654
TOTAL PROJECTED REVENUE 169.213 202.717 214.403

NPI margin 2009 2010 2011

Business Park 57.5% 58.0% 59.0%
Flatted Factories 70.7% 69.0% 69.0%
Stack-up/ramp-up 80.0% 77.0% 77.0%
Light industrial 85.0% 86.0% 89.0%
Warehouse 66.6% 65.0% 65.0%

Other assumptions 2009 2010 2011

Cost of debt 2.44% 2.44% 2.44%
REIT manager fees (paid in cash)
Base fees (% of Deposited Property) 0.50% 0.50% 0.50%
Performance fees (% of Net Property Income) 3.60% 3.60% 3.60%
REIT manager fees (paid in units)
Acquisition fees (of purchase price) 1.00% 1.00% 1.00%
Divestment fees (of divestment price) 0.50% 0.50% 0.50%
Trustee fees (paid in units) (% of Deposited Property) 0.02% 0.02% 0.02%
Property manager fees (% of Gross Revenue) 2.00% 2.00% 2.00%
Lease management fees (% of Gross Revenue) 1.00% 1.00% 1.00%
Source: CIMB Research

[ 16 ]
 Valuation and recommendation
DDM-derived valuation of S$1.24. We have used DDM to value MIT, the
methodology we use to value all REITs under our coverage. We use a discount rate of
8.1%, derived from a risk-free rate of 4%, an equity risk premium of 4.4% and a beta of
1.0. The discount rate used is in line with that used for AREIT and Cache Logistics,
which are equally Singapore-centric. We have also assumed a terminal growth rate of
1.8%. We arrive at a DPU estimate of 7.14 cts for FY3/10 and 7.77cts for FY3/11. This
translates to prospective dividend yields of 6.6% for FY10 and 7.2% for FY11.

At 1.2x P/BV and trading yield of 6.6%, MIT is not cheaper than industrial leader
AREIT (1.26x P/BV; 7% yield). However with a under-rented portfolio, pure Singapore
exposure, and large tenant base point, rental downside is limited whilst upside is
conversely strong. We expect catalysts from announcements of accretive acquisitions
or development projects

Figure 27: Measuring up against other industrial peers

Portion of rental Portion of rental Contribution % of Development

Asset size from Factory from Warehouse WALE Portfolio from top 10 Approx. no of % of Sg overseas headroom
REITs (S$ m) component component (years) occupancy tenants tenants assets assets (S$ m)
MINT 2,092.5 99% 1% 2.6 92.3% 21% 1,537 100% 0% 209
AREIT 4,819.1 97% 3% 4.8 95.6% 28% 950 100% 0% 482
MLT 3,459.2 0% 100% 5.0 98.1% 29% 235 50% 50% 346
CACHE 744.0 0% 100% 6.4 100.0% 100% 2 100% 0% 74
CREIT 928.5 47% 53% 4.1 99.0% 57% 83 100% 0% 93
Source: Company, CIMB Research

Figure 28: NPI yields vs implied yields

Implied NPI Premium of implied

REITs NPI yield* yield yields over NPI yields
MINT 7.0% 9.2% 2.16
AREIT 6.9% 8.8% 1.87
MLT 6.2% 9.6% 3.37
CACHE 7.7% 9.4% 1.70
CREIT 6.8% 12.2% 5.38
*Annualised from last quarter’s net property income
Source: CIMB Research

[ 17 ]
Figure 29: SREIT overview

Last Target Total return

reported Last Price / Price (Prospective
Bloomberg Price as of Mkt Cap asset stated Stated (DDM- 2010 2011 2012 price upside +
SREIT Ticker 17 Feb 2011 (S$m) leverage NAV NAV based) Rec. Yield Yield Yield 2010 yield)
Hospitality
Ascott Residence Trust ART SP $1.22 $1,354 39.6% 1.28 0.95 $ 1.24 U 6.2% 6.6% 6.8% 8.5%
CDL Hospitality Trust CDREIT SP $2.03 $1,946 20.4% 1.52 1.34 $ 2.21 N 5.0% 6.0% 6.4% 15.1%
Hospitality simple average 30.0% 1.14 5.6% 6.3% 6.6%
Industrial
Ascendas Reit AREIT SP $2.02 $3,786 34.6% 1.60 1.26 $ 2.09 U 6.8% 7.0% 7.4% 10.3%
Cache Logistics Trust CACHE SP $0.96 $609 23.0% 0.91 1.05 $ 1.30 O 8.1% 9.8% 9.8% 44.8%
Cambridge Industrial Trust CREIT SP $0.52 $550 34.7% 0.61 0.86 $ 0.60 NR 9.4% 9.4% 9.8%
Mapletree Logistics Trust MLT SP $0.93 $2,244 37.5% 0.86 1.08 $ 1.05 O 6.6% 7.0% 7.5% 20.6%
Mapletree Industrial Trust MINT SP $1.09 $1,594 38.7% 0.87 1.25 $ 1.24 O N.A 6.6% 7.1% 20.3%
Industrial simple average 33.7% 1.10 7.7% 8.0% 8.3%
Office
Fraser Commercial Trust FCOT SP $0.85 $531 38.0% 1.35 0.63 $ 0.96 NR 5.9% 6.9% 7.9%
CapitaCommercial Trust CCT SP $1.40 $3,955 28.3% 1.51 0.93 $ 1.38 U 5.6% 5.4% 5.4% 3.9%
K-Reit KREIT SP $1.33 $1,805 37.0% 1.52 0.88 $ 1.50 N 4.8% 5.6% 5.4% 18.4%
Suntec REIT SUN SP $1.54 $3,402 38.4% 1.80 0.86 $ 1.61 N 5.4% 6.1% 6.3% 10.4%
Office simple average 34.6% 0.82 5.4% 6.0% 6.2%
Retail
CapitaMall Trust CT SP $1.82 $5,797 36.1% 1.55 1.17 $ 1.98 N 5.1% 5.5% 5.9% 14.1%
Frasers Centrepoint Trust FCT SP $1.51 $1,161 30.6% 1.29 1.17 $ 1.86 O 5.4% 5.5% 6.1% 28.7%
Starhill Global REIT SGREIT SP $0.66 $1,273 29.3% 0.82 0.80 $ 0.74 NR 6.0% 6.4% 6.4%
Retail simple average 32.0% 1.05 5.5% 5.8% 6.1%
Healthcare
Parkway Life REIT PREIT SP $1.76 $1,065 34.4% 1.41 1.25 $ 1.96 O 5.0% 5.9% 6.6% 17.3%
Healthcare simple average 34.4% 1.25 5.0% 5.9% 6.6%
S-REIT simple average 33.4% 1.03 6.1% 6.7% 7.0%
Source: CIMB Research

[ 18 ]
Financial tables

PROFIT & LOSS KEY RATIOS

(S$ m, FYE Mar) 2008 2009 2010F 2011F 2012F (FYE Mar) 2008 2009 2010F 2011F 2012F
Revenue N/A 179 203 214 227 Revenue growth (%) N/A N/A 13.5 5.8 5.8
Operating expenses N/A (54) (63) (65) (69) EBITDA growth (%) N/A N/A 14.7 7.5 6.3
Net property income N/A 124 140 149 158 Pretax margins (%) N/A 81.1 50.5 52.0 52.8
Management fees N/A (15) (16) (16) (16) Net profit margins (%) N/A 81.1 50.5 52.0 52.8
Trustee's fees N/A 0 0 0 0 Interest cover (x) N/A 5.3 6.0 6.5 6.9
Net interest & invt income N/A (20) (20) (20) (20) Effective tax rates (%) N/A 0.0 0.0 0.0 0.0
Associates' contribution N/A 0 0 0 0 Net dividend payout (%) N/A 61.0 102.0 101.9 101.7
Exceptional items & revaluation N/A 58 0 0 0 Debtors turnover (days) N/A 12.4 10.9 10.3 9.7
Others N/A (2) (2) (1) (1) Stock turnover (days) N/A 0.0 0.0 0.0 0.0
Pretax profit N/A 145 102 112 120 Creditors turnover (days) N/A 115.3 101.6 96.0 90.7
Tax N/A 0 0 0 0
Minority interests N/A 0 0 0 0
Net profit N/A 145 102 112 120
Distributable profit N/A 88 105 114 122
Adj. wt. units (m) N/A 1,463 1,463 1,463 1,463
Unadj. year-end units (m) N/A 1,463 1,463 1,463 1,463

BALANCE SHEET KEY DRIVERS

(S$ m, end Mar) 2008 2009 2010F 2011F 2012F (FYE Mar) 2009 2010F 2011F 2012F
Investment properties N/A 2,093 2,095 2,096 2,097 Occupancy (%) 94.5% 96.4% 96.8% 96.8%
Intangible assets N/A 0 0 0 0 Avg rent growth (%) 4.2% 11.3% 4.7%
Other long-term assets N/A 0 0 0 0
Total non-current assets N/A 2,093 2,095 2,096 2,097
Cash and equivalents N/A 65 49 48 46
Stocks N/A 0 0 0 0
Trade debtors N/A 6 6 6 6
Other current assets N/A 0 0 0 0
Total current assets N/A 71 55 54 52
Trade creditors N/A 56 56 56 56
Short-term borrowings N/A 0 0 0 0
Other current liabilities N/A 14 0 0 0
Total current liabilities N/A 70 56 56 56
Long-term borrowings N/A 833 833 833 833
Other long-term liabilities N/A 3 3 3 3
Total long-term liabilities N/A 836 836 836 836
Shareholders' funds N/A 1,257 1,257 1,257 1,257
Minority interests N/A 0 0 0 0
NTA/unit (S$) N/A 0.86 0.86 0.86 0.86

CASH FLOW CURRENT P/BV(X)

(S$ m, FYE Mar) 2008 2009 2010F 2011F 2012F 1.40
Pretax profit N/A 145 102 112 120
Depreciation & non–cash adj. N/A 0 0 0 0
Working capital changes N/A 21 (6) 15 10 1.35
Cash tax paid N/A 0 0 0 0
Others N/A (8) 18 18 18
Cash flow from operations N/A 158 114 145 148 1.30
Capex N/A 0 (2) (1) (2)
Net investments & sale of FA N/A 0 0 0 0
Others N/A (236) 0 0 0 1.25
Cash flow from investing N/A (236) (2) (1) (2)
Debt raised/(repaid) N/A (176) 0 0 0
Equity raised/(repaid) N/A 1,159 0 0 0 1.20
Dividends paid N/A (6) (105) (114) (122) Oct-10 Feb-11
Cash interest & others N/A (20) (20) (20) (20)
Cash flow from financing N/A 958 (125) (134) (142)
Change in cash N/A 880 (12) 10 4
Change in net cash/(debt) N/A 1,056 (12) 10 4
Ending net cash/(debt) N/A (768) (784) (785) (787)
Source: Company, CIMB Research, Bloomberg

[ 19 ]
APPENDICES…

[ 20 ]
1. Management profile
Mr Tham Kuo Wei
Chief Executive Officer
Ms Loke Huey Teng
Chief Financial Officer
Mr Lee Seng Chee
Head of Asset Management
Ms Tan Ling Cher
Head of Investment
Source: Company, CIMB Research
[ 21 ]
Mr Tham Kuo Wei is both an Executive Director and the CEO of the Manager. Prior
to joining the Manager, he was the Deputy Chief Executive Officer (from August
2009) and Chief Investment Officer (from April 2008 to August 2009) of the
Sponsor’s Industrial Business Unit where he was responsible for structuring, setting
up, and managing real estate investment platforms in Singapore and the region.
Prior to this, Mr Tham was the Chief Investment Officer of CIMB-Mapletree
Management Sdn Bhd in Malaysia from July 2005, and he was responsible for
setting up and managing the private equity real estate fund. He was instrumental in
securing investments from institutional investors in Malaysia and overseas. Mr
Tham holds a Bachelor of Engineering degree from the National University of
Singapore.
Ms Loke is CFO of the Manager. Prior to joining the Manager, she was CFO of the
Sponsor’s Industrial Business Unit, overseeing its finance, accounting, corporate
finance and treasury activities. She had also been Vice-President (Finance) of the
Sponsor’s Singapore Investments Divisions and Deputy CFO / Vice-President
(Corporate Finance) of Mapletree Logistics Trust. Ms Loke holds a Bachelor of
Accountancy (Second Class Upper Honours) degree from the Nanyang
Technological University, Singapore.
Mr Lee is Head of Asset Management of the Manager. Prior to joining the Manager,
he was the head of Asset Management of the Sponsor’s Industrial Business Unit,
leading a team of asset managers in managing the MIT private Trust Portfolio. Mr
Lee holds a Bachelor of Engineering (Second Class Upper Honours) degree from
the National University of Singapore.
Ms Tan is the Head of Investment n the Manager. Prior to joining the Manager, Ms
Tan was Senior Investment Manager in the Sponsor’s Industrial division, where she
was responsible for acquisitions of industrial assets in Singapore and the region.
She was also part of the team responsible for MIT’s acquisition of the MIT Private
Trust Portfolio from JTC in 2008. and concurrently, asset manager for the Singapore
properties in the portfolio of MIF. Ms Tan holds a Bachelor of Science (Real Estate)
(Second Class Upper Honours) degree from the National University of Singapore
and is also a Chartered Financial Analyst.
2. Trust structure

Source: Company

[ 22 ]
 4. Fees payable by MIT
1. Manager’s management fees
2. Trustee's fee
3. Other fees or charges
(i) Acquisition fee
(ii) Divestment fee
(iii) Property management fee
Source: Company
[ 23 ]
Fee structure
(a) Base fee
0.5% per annum of the value of consolidated assets.
(b) Performance fee
3.6% per annum of the net property income of MIT in the relevant
financial year.
0.02% per annum of the value of the deposited property, subject to a
minimum of S$12,000 per month, excluding out-of-pocket expenses
and GST.
1.0% of the acquisition price of any real estate purchased, whether
directly or indirectly through one or more SPVs of MIT, plus any other
payments in connection with the purchase of the real estate (pro-rated if
applicable, to MIT’s interest);
0.5% of the sale price of any real estate sold or divested, whether
directly or indirectly through one or more SPVs of MIT, plus any other
payments in connection with the sale or divestment of the real estate
(pro-rated if applicable to MIT’s interest)
(a) Property management fee of 2.0% per annum of Gross Revenue of
each property, payable to the Property Manager
(b) Lease management fee of 1% per annum of Gross Revenue of each
property, payable to the Property Manager
The property management fee and lease management fee are payable
to the Property Manager in the form of cash.
5. Mapletree Investments
Wholly-owned subsidiary of Temasek Holdings. The sponsor, Mapletree
Investments (MIPL), is an Asian-focused real estate capital management company that
is based in Singapore. As at 31 Mar 10, Mapletree Investments and its subsidiaries
owned and managed S$12.9bn of office, logistics, industrial, residential and retail /
lifestyle properties, comprising S$6.8bn of owned real estate assets and S$6.1bn of
third-party assets under management in two REITs and four private equity real estate
funds. To support its regional business, the Mapletree Group has established a
network of offices in Singapore, China, Hong Kong, India, Japan, Malaysia and
Vietnam. MIPL is an indirect, wholly-owned subsidiary of Temasek Holdings, through
its wholly-owned subsidiary, Fullerton Management Pte Ltd.
Recurrent fee-based income. MIPL’s business model is to incubate real estate assets
where value can be created by either developing, rejuvenating or performing asset
enhancement and subsequently unlocking the value of these assets by bundling
suitable asset to originate, or sell to, REITs and private real estate funds. Essentially,
this business model moves towards a recurrent fee-based income model which should
be better able to weather the cyclical nature of the real estate market.
Private fund business. The Mapletree Group is experienced in structuring, originating
and managing a number of real estate-related financial products. Investors in
Mapletree Group’s private real estate funds include, among others, Singapore
Industrial Investments Limited (controlled by Arcapita Bank B.S.C and its affiliates), Ahli
United Bank’s AUB Pan Asian Industrial Fund Limited, Temasek, HSBC Emerging
Growth Real Estate Investments Limited and CIM Real Estate Sdn. Bhd. The funds
currently or previously managed by the Group include:
• Mapletree India China Fund (MIC): MIC closed with US$1,157m of committed
capital in 2008. As at 31 Mar 10, MIC’s portfolio comprised one investment property
and two mixed development properties, all of which are located in China. MIC is a
10-year private fund established with the objective of maximising total returns by
acquiring, development and realising real estate projects in India and China. The
fund primarily invests in commercial, residential and mixed development projects in
Tier 1 and 2 cities. MIPL is the sponsor for MIC with a 43.2% interest in the fund.
MIC is managed by Mapletree MIC Fund Management Pte Ltd, a wholly-owned
subsidiary of MIPL.
• MIF: MIF closed with US$310m of committed capital in Nov 06 and with Bahrain-
based Ahli United Bank’s AUB Pan Asian Industrial Fund Limited as a cornerstone
investor. MIF is a 7-year private fund established with the objective of investing in
industrial properties in Asia. The MIF portfolio had an asset size of US$516m as at
31 Mar 10, consisting of 13 properties in Singapore (being the MSIT portfolio),
Japan, Malaysia and China, and prior to the listing date, an 18.4% interest in MIT.
MIPL has a 40.2% interest in MIF, which is managed by Mapletree Industrial Fund
Management Pte Ltd, a wholly-owned subsidiary of MIPL.
• CIMB-Mapletree Real Estate Fund 1 (CMREF 1): MIPL jointly manages CMREF1,
a Malaysia-focused real estate fund, through a joint venture with ICMB in Malaysia.
With a mandate to make direct investments in properties in Malaysia, including
investments in distress assets, real estate investment products and listed real
estate securities, CMREF1 has committed capital of RM402m. As at 31 Mar 10,
committed investments totalled about RM991m. CMREF1 is developing a Grade A
office and a shopping mall in KL and has formed a joint venture with listed
Malaysian developer E&O Berhad, and Al Salam Bank Bahrain to develop
bungalow lots in Penang. CMREF1 has acquired Patimas Computers Berhad’s
headquarter in Technology Park Malaysia, underwritten two residential
condominium projects in KL and invested in real estate investment trusts in
Malaysia and the region.
• Mapletree Real Estate Mezzanine Fund 1: This is a pan-Asia real estate fund that
focuses on originating and executing real estate mezzanine loans. It had completed
and divested three mezzanine investments aggregating S$51m as at 31 Mar 07.
Source: Company, CIMB Research

[ 24 ]
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[ 25 ]
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RECOMMENDATION FRAMEWORK #1*

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: The stock's total return is expected to exceed a relevant
benchmark's total return by 5% or more over the next 12 months.
NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant
benchmark's total return.
UNDERPERFORM: The stock's total return is expected to be below a relevant
benchmark's total return by 5% or more over the next 12 months.
TRADING BUY: The stock's total return is expected to exceed a relevant
benchmark's total return by 5% or more over the next 3 months.
TRADING SELL: The stock's total return is expected to be below a relevant
benchmark's total return by 5% or more over the next 3 months.
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 12
months.
NEUTRAL: The industry, as defined by the analyst's coverage universe, is
expected to perform in line with the relevant primary market index over the next
12 months.
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,
is expected to underperform the relevant primary market index over the next 12
months.
TRADING BUY: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 3
months.
TRADING SELL: The industry, as defined by the analyst's coverage universe,
is expected to underperform the relevant primary market index over the next 3
months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be
temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

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 RECOMMENDATION FRAMEWORK #2 **

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: Expected positive total returns of 15% or more over the next OVERWEIGHT: The industry, as defined by the analyst's coverage universe,
12 months. has a high number of stocks that are expected to have total returns of +15% or
better over the next 12 months.
NEUTRAL: Expected total returns of between -15% and +15% over the next NEUTRAL: The industry, as defined by the analyst's coverage universe, has
12 months. either (i) an equal number of stocks that are expected to have total returns of
+15% (or better) or -15% (or worse), or (ii) stocks that are predominantly
expected to have total returns that will range from +15% to -15%; both over the
next 12 months.
UNDERPERFORM: Expected negative total returns of 15% or more over the UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,
next 12 months. has a high number of stocks that are expected to have total returns of -15% or
worse over the next 12 months.
TRADING BUY: Expected positive total returns of 15% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe,
months. has a high number of stocks that are expected to have total returns of +15% or
better over the next 3 months.
TRADING SELL: Expected negative total returns of 15% or more over the next TRADING SELL: The industry, as defined by the analyst's coverage universe,
3 months. has a high number of stocks that are expected to have total returns of -15% or
worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the
prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

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