Singapore Market Focus 19Apr2017 - DBS Bank Our Singapore property analyst comments the strong figure came as no surprise given the recent robust selling rates for new property launches

ASIAN INSIGHTS VICKERS SECURITIES

ed: TH / sa:JC, PY

Analyst Yeo Kee Yan CMT +65 6682 3706 Derek TAN +65 6682 3716 [email protected] [email protected]

Straits Times Index STI and 12-mth fwd PE

Source of all data on this page: DBS Bank; Bloomberg Finance L.P.

Closing price as of 18 Apr 2017

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

3,300

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Avg @ 13.6x

- 1SD @ 12.1x

+1SD @ 15.2x

- 2SD @ 10.6x

DBS Group Research . Equity 19 Apr 2017

Singapore

Market Focus Refer to important disclosures at the end of this report

A Breather for Property Stocks

Singapore government unlikely to announce furtherproperty measures easing anytime soon givenstrong March new home sales figure

Property developer stocks vulnerable to short-termprofit taking – trading at post-GFC mean P/NAV of0.86x

Buy only after pullback as continued positivephysical property transactions can underpin stocks –Picks UOL and Frasers Centrepoint Ltd

Strong technical support for UOL at $6.54.Capitaland to pull back to $3.58 followed by $3.47.

Singapore’s strong March new home sales figure well anticipated. Singapore’s March new private home sales rose 82% m-o-m and 111% y-o-y to 1,780 units, the highest figure since June 2013 when property prices peaked. The improved sentiment was partly driven by the recent tapering of seller stamp duties.

Therein lies the irony. Given the strong March new home sales figure, we see no reason why the Singapore government should announce further easing of property measures anytime soon, especially those targeted at buyers such as ABSD or LTV limits. We think investors’ euphoria regarding the start of a multi-year relaxation trend of current property curbs will fade in the weeks/month ahead.

Property stocks susceptible to short-term profit taking. Singapore property developer stocks have re-rated higher by close to 20% YTD and are trading at 0.86x P/NAV. This level coincides with the post-GFC mean and is seen as a near-term target for property developers. We see the FTSE ST Real Estate Holdings Index pulling back 3.5% (maximum of 6%) in the weeks ahead to 827 (maximum to 801).

Watch property transactions. Short-term traders should thus be watchful of near-term profit taking following the YTD run-up in stock prices. Investors with a mid-term horizon can look to buy on pullback. Watch the physical property transactions. Property stocks should find support on pullback if the figure remains strong going forward.

Picks UOL and Frasers Centrepoint Ltd (FCL) We have a $2 fundamental price objective for FCL. For UOL, the initial pullback level is $6.76 while a deeper pullback to $6.54 will be similarly a good BUY opportunity. For Capitaland, we see a pullback to $3.58 followed by $3.47.

STOCKS

12-mth

Price Mkt Cap Target Price Technical support levels

S$ US$m S$ 1st Level 2nd Level Rating

UOL Group 7.00 4,036 7.64 6.76 6.54 BUY CapitaLand 3.64 11,077 3.85 3.58 3.47 BUY Frasers Centrepoint Ltd 1.80 3,748 2.00 N.A. N.A. BUY

Model Portfolio

Price (S$)

12-mth Target Price

(S$) Upside

(%) Rec

Conservative Sheng Siong 0.990 1.13 14 BUY

Croesus Retail Trust 0.945 0.99 5 BUY

Frasers Logistics & Ind'l 0.995 1.10 11 BUY

BalancedUOL Group 7.000 7.64 9 BUY ST Engineering 3.750 3.80 1 BUY Growth

Ezion Holdings 0.330 0.62 88 BUY

PACC Offshore Services 0.330 0.42 26 BUY

Singapore O&G 1.370 1.60 17 BUY Blue Chips

UOL Group 7.000 7.64 9 BUY ST Engineering 3.750 3.80 1 BUY

Dividend

Croesus Retail Trust 0.945 0.99 5 BUY Sheng Siong 0.990 1.13 14 BUY

Frasers Logistics & Ind'l 0.995 1.10 11 BUY

Small Mid Cap

Cityneon Holdings 0.830 1.26 51 BUY

Ezion Holdings 0.330 0.62 88 BUY

Japfa Ltd 0.700 1.25 79 BUY

Midas Holdings 0.230 0.36 57 BUY

Singapore O&G 1.370 1.60 17 BUY

Page 1

Market Focus

ASIAN INSIGHTS VICKERS SECURITIES Page 2

Singapore’s strong March new home sales well anticipated

Data released by the Urban Redevelopment Authority (URA) earlier this week showed that new private home sales (excluding executive condominiums [ECs]) in Singapore rose to 1,780 units in March, up nearly 82% compared to February, and 111% higher versus March 2016. The latest figure is the highest since June 2013, when developers sold 1,806 private homes. Including ECs, developers sold 2,358 units in March, higher than the 1,308 units in February. 1Q17 primary sales transactions amounted to nearly 3,026 units, one of the highest since 2013 (c.3,800 units in 1Q13).

Great news! But that’s all well anticipated

Our Singapore property analyst comments the strong figure came as no surprise given the recent robust selling rates for new property launches at Grandeur Park (484 units); Park Place Residences (217 units) and Parc Riveria (163 units). At the same time for ECs, Inz Residences sold 187 units while Sol Acres sold 147 units.

The improved sentiment was boosted by the recent government relaxation of seller stamp duties (SSD). This resulted in potential buyers becoming more willing to commit to an investment purchase given that their “holding period” have been reduced from four years to three.

The irony of the strong March figure

The post-March 10 gains came about from optimism that the easing of SSD may well signal the start of a multi-year relaxation trend of current property curbs that will mean continued sector-wide re-rating opportunities. The move that everyone is waiting for would be a tapering of the Additional Buyers Stamp Duty (ABSD) or loan-to-value (LTV) limits.

Therein lies the irony – given the strong March new home sales figure, we see no reason why the Singapore government should announce further easing of property measures anytime soon, especially those targeted at buyers such as ABSD or LTV limits.

The Singapore government reminded that the current property measures are necessary to “promote a sustainable residential property market and financial prudence among households”. We think investors’ euphoria regarding the start of a multi-year relaxation trend of current property curbs will fade in the weeks/month ahead.

Bottoming process takes time

Our property analyst maintains the view that the Singapore property market is in a bottoming out process this year, led by the luxury market. For the suburban region, we still expect a 3-5% dip in prices given expectations of lower rental yields, high vacancy rates and the risk of higher interest rates. The process of bottoming takes time.

Property stocks susceptible to short-term profit taking

Singapore property developer stocks have re-rated higher by close to 20% YTD and are trading at 0.86x P/NAV. This level coincides with the post-GFC mean and is seen as a near-term target for property developers.

Singapore developers have re-rated to post-GFC mean of 0.86x P/NAV (ex-GLP)

Source: DBS Bank

Short-term traders should thus be watchful of profit taking in the near term following the YTD run-up in stock prices.

Investors with a mid-term horizon should look to buy on the anticipated short-term consolidation. Watch the property transactions, which should underpin property stocks on pullback if the figure remains strong going forward. The first two months’ primary sales (pre-property relaxation) were 61% higher y-o-y, suggesting good positive momentum, which bodes well for the sector in general.

Our picks are UOL and Frasers Centrepoint Ltd. We have a $2 fundamental price objective for FCL. For UOL, the initial pullback level is $6.76 while a deeper pullback to $6.54 will be similarly a good BUY opportunity. For Capitaland, we see a pullback to $3.58 followed by $3.47.

Page 2

Market Focus


Singapore residential property stocks

Company Price

17 Apr 17

Target Price

Target Return

Mkt Cap

(S$m) Rcmd

Div Yield

17 (%)

Net Debt / Equity 17 (%)

P/BV 16 (x)

Technical support levels

1st Level 2nd Level

UOL 6.980 7.64 9% 5,617 BUY 2.1 0.2 0.7 6.76 6.54

CapitaLand 3.640 3.85 6% 15,460 BUY 2.7 0.4 0.9 3.58 3.47

Frasers Centrepoint 1.755 2.00 14% 5,100 BUY 4.9 0.8 0.8 N.A. N.A.

Source: DBS Bank

Technical outlook - FTSE ST Real Estate Holdings Index to pull back 3.5% (maximum of 6%) short-term

The FTSE ST Real Estate Holdings Index (FSTREH) has risen 21% YTD and remains the best performing sector index in Singapore. The initial lift was brought about by M&A activity on Global Logistics Properties. The March 10 announcement on the tapering of property measures lifted the FSTREH by another 6%.

The recent high at 868 coincided with levels around the 2013 and 2015 peaks. With technical oscillators such as the 14-day RSI stretched overbought and negative divergences apparent on the daily MACD, we see likelihood for the FSTREH to pull back to 827 (23.6% downward retracement) or at most to 801 (38.2% downward retracement) in the weeks ahead. This represents a 3.5-6% decline from current levels.

FTSE ST Real Estate Holdings Index (FSTREH): Daily

Source: DBS Bank

Page 3

Market Focus


UOL technical outlook – Pull back to $6.76, at worst $6.54

Shares of UOL look to have completed a 5-wave up intermediate cycle up move that started from a low of $5.56 last November. We observe negative divergence on the daily MACD, which is a forewarning of price weakness. The stock

currently rests at its 15-day exponential moving average. We see the likelihood of an initial pullback to $6.76, which coincides with the 23.6% downward retracement level. In the event that the pullback gets deeper, we look for the $6.54 level (38.2% downward retracement level) as a BUY opportunity.

UOL (Daily)

Source: DBS Bank

Capitaland technical outlook – Pullback to $2.59 followed by $2.48

The leading technical indicators are forewarning a consolidation of the stock’s YTD gains. The daily MACD and the 14-day RSI

have been showing negative divergences and the 14-day RSI is also declining from an overbought level above 70. The stock is starting to dip below its 15-day exponential moving average, currently at $3.67. We see downside to initial support at $2.59 while a deeper pullback will bring the stock lower to $2.48.

Capitaland (Daily)

Source: DBS Bank

Page 4

Market Focus


Sources: Data for all charts and tables are from CEIC, Bloomberg Finance L.P. and DBS Group Research (forecasts and transformations).

Page 5

Market Focus


FTSE ST Financials FTSE ST Real Estate Holdigs FTSE ST REITs

FTSE ST Telecommunications FTSE ST Consumer Goods FTSE ST Consumer Services

Shanghai Composite Index Hang Seng Index Nikkei Index

FTSE100 (UKX Index) S&P500 (SPX Index) NASDAQ Index

Source: Datastream, Bloomberg Finance L.P., DBS Bank

12 mth: 11.4% YTD: 10.3% 12 mth: 24.9% YTD: 21.7% 12 mth: 4.0% YTD: 7.8%

1 mth: 0.5% 1 Wk : -0.6% 1 mth: 1.6% 1 Wk : -0.6% 1 mth: 3.5% 1 Wk : 0.3%

500

550

600

650

700

750

800

850

900

Apr-16 Jul-16 Oct-16 Jan-17 Apr-17

ST Real Estate Holdings

600

650

700

750

800

850

900


ST Financials

680

700

720

740

760

780

800


ST REITs

12 mth: 26.6% YTD: 6.1% 12 mth: 14.8% YT D: 12.4% 12 mth: -2.0% YT D: 7.7%

1 mth: 6.1% 1 Wk : 1.3% 1 mth: 1.6% 1 Wk : -0.7% 1 mth: 1.7% 1 Wk : -0.7%

800

900

1,000

1,100

1,200


ST Telecommuications

120

150

180

210

240


ST Consumer Goods

600

700

800

900


ST Consumer Serv ices

12 mth: 5.4% YTD: 3.0% 12 mth: 13.1% YTD: 8.7% 12 mth: 13.2% YTD: -3.6%

1 mth: -1.3% 1 WH: -2.8% 1 mth: -1.6% 1 Wk: -0.7% 1 mth: -5.7% 1 Wk : -1.8%

2,500

2,750

3,000

3,250

3,500


Shanghai Comp

17,000

19,000

21,000

23,000

25,000


Hang Seng

14,000

15,200

16,400

17,600

18,800

20,000


Nikkei 225

12 mth: 12.5% YTD: 0.1% 12 mth: 11.8% YTD: 4.6% 12 mth: 17.9% YTD: 8.7%

1 mth: -3.7% 1 Wk : -3.0% 1 mth: -1.5% 1 Wk : -0.5% 1 mth: -0.9% 1 Wk: -0.3%

5,000

5,500

6,000

6,500

7,000

7,500

8,000


FTSE 100

1,600

1,800

2,000

2,200

2,400

2,600


SPX 500

4,000

4,500

5,000

5,500

6,000

6,500


Nasdaq

Page 6

Market Focus


Brent Crude Oil Palm Oil Soya Oil

Copper Steel Gold

USD/SGD USD/JPY Euro/USD

USD/RMB SGD/RMB AUD/SGD

Source: Datastream, Bloomberg Finance L.P., DBS Bank

12 mth: 28.0% YTD: -3.0% 12 mth: -9.7% YTD: -15.8% 12 mth: -9.4% YTD: -12.1%

1 mth: 6.3% 1 Wk: -1.2% 1 mth: -10.6% 1 Wk: -6.1% 1 mth: -3.3% 1 Wk: 0.0%

35

40

45

50

55

60

65


Brent Crude OilUS$/barrel

500

550

600

650

700

750

800


Palm OilUS$/ton

0.26

0.28

0.30

0.32

0.34

0.36

0.38


Soya OilUS$/Ib

12 mth: 14.2% YTD: 0.3% 12 mth: 1.7% YTD: -7.1% 12 mth: 4.3% YTD: 11.2%

1 mth: -6.4% 1 Wk: -3.5% 1 mth: -9.3% 1 Wk: -5.4% 1 mth: 4.7% 1 Wk: 1.2%

4,200

4,600

5,000

5,400

5,800

6,200


CopperUS$/MT

7,000

8,000

9,000

10,000

11,000

12,000


NickelUS$/MT

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400


GoldUS$/Ounce

12 mth: 3.3% YTD: -3.5% 12 mth: -0.4% YTD: -7.3% 12 mth: -5.2% YTD: 2.0%

1 mth: -0.4% 1 Wk: -0.6% 1 mth: -3.8% 1 Wk: -1.1% 1 mth: -0.1% 1 Wk: 1.2%

1.30

1.35

1.40

1.45

1.50


usd/SGD

95.00

100.00

105.00

110.00

115.00

120.00


usd/JPY

1.00

1.05

1.10

1.15

1.20


Euro/USD

12 mth: 6.3% YTD: -0.9% 12 mth: 2.9% YTD: 2.4% 12 mth: 0.8% YTD: 1.2%

1 mth: -0.3% 1 Wk : -0.1% 1 mth: 0.0% 1 Wk : 0.2% 1 mth: -2.3% 1 Wk : 0.3%

6.40

6.50

6.60

6.70

6.80

6.90

7.00


usd/RMB

4.70

4.75

4.80

4.85

4.90

4.95

5.00


sgd/RMB

0.98

1.00

1.02

1.04

1.06

1.08

1.10


aud/SGD

Page 7

Market Focus


Source: Bloomberg Finance L.P.

At A Glance Currencies

Other Important Indicators

Important Dates (Singapore)

Announced Dividends and Capital Issues

Upcoming IPOs

Recent IPO Trading

Last Close

Pts chg

% Chg 1 wk

SG$/US$ 1.40 0.0 0.3

Yen/US$ 108.53 (0.3) (0.3)

US$/Euro 0.93 0.0 0.8

AUS$/US$ 1.32 0.0 0.1

Pound/US$ 1.28 0.0 0.4

Last Close

Pts chg 1wk

% Chg 1 wk

Gold 1289.23 2.3 0.2

Crude Oil 52.41 (1.0) (1.9)

US$ Yield10-year 2.17 (0.1) (5.6)

Event Period DateCPI Core YoY Mar 24-Apr-17CPI YoY Mar 24-Apr-17CPI NSA MoM Mar 24-Apr-17Automobile COE Open Bid Cat B Apr 26-Apr-17Automobile COE Open Bid Cat A Apr 26-Apr-17Automobile COE Open Bid Cat E Apr 26-Apr-17Industrial Production YoY Mar 26-Apr-17Industrial Production SA MoM Mar 26-Apr-17Credit Card Billings SGD Mar 28-Apr-17Credit Card Bad Debts SGD Mar 28-Apr-17Money Supply M2 YoY Mar 28-Apr-17Money Supply M1 YoY Mar 28-Apr-17Bank Loans and Advances YoY Mar 28-Apr-17Unemployment rate SA 1Q 28-Apr-17URA Private Home Prices QoQ 1Q F 28-Apr-17

Company Ty pe Part iculars Ex Date Paid/ Pay ableGREAT EASTERN HLDGS LTD DIV IDEND SGD 0.4 ONE-TIER TAX 20-Apr-17 08-May-17

SEMBCORP INDUSTRIES LTD DIV IDEND SGD 0.04 ONE-TIER TAX 24-Apr-17 16-May-17

CHINA AV IATION OIL(S) CORP LTD DIV IDEND SGD 0.045 ONE-TIER TAX 25-Apr-17 09-May-17

EXCELPOINT TECHNOLOGY LTD DIV IDEND SGD 0.015 ONE-TIER TAX 25-Apr-17 18-May-17

EXCELPOINT TECHNOLOGY LTD DIV IDEND SGD 0.025 ONE-TIER TAX 25-Apr-17 18-May-17

SEMBCORP MARINE LTD DIV IDEND SGD 0.01 ONE-TIER TAX 25-Apr-17 12-May-17

SINGAPORE TECH ENGINEERING LTD DIV IDEND SGD 0.1 ONE-TIER TAX 25-Apr-17 09-May-17

JAPFA LTD. DIV IDEND SGD 0.01 ONE-TIER TAX 26-Apr-17 16-May-17

KEPPEL CORPORATION LIMITED DIVIDEND SGD 0.12 ONE-TIER TAX 26-Apr-17 11-May-17

KEPPEL TELE & TRAN DIVIDEND SGD 0.045 ONE-TIER TAX 26-Apr-17 12-May-17

LEE METAL GROUP LTD DIV IDEND SGD 0.01 ONE-TIER TAX 26-Apr-17 22-May-17

LONZA GROUP LTD DIV IDEND CHF 2.75 26-Apr-17 03-May-17

RIVERSTONE HOLDINGS LIMITED DIV IDEND MYR 0.0519 ONE-TIER TAX 26-Apr-17 18-May-17

SING INVESTMENTS & F INANCE LTD DIV IDEND SGD 0.05 ONE-TIER TAX 26-Apr-17 09-May-17

UNITED OVERSEAS BANK LTD DIV IDEND SCRIP DIV SCHEM SGD 0.35 ONE-TIER TAX 26-Apr-17 13-Jun-17

CITY DEVELOPMENTS LIMITED DIV IDEND SGD 0.04 ONE-TIER TAX 27-Apr-17 22-May-17

CITY DEVELOPMENTS LIMITED DIV IDEND SGD 0.08 ONE-TIER TAX 27-Apr-17 22-May-17

DESIGN STUDIO GROUP LTD. DIV IDEND SGD 0.04 ONE-TIER TAX 27-Apr-17 17-May-17

DESIGN STUDIO GROUP LTD. DIV IDEND SGD 0.0125 ONE-TIER TAX 27-Apr-17 17-May-17

FOOD EMPIRE HOLDINGS LIMITED DIV IDEND SGD 0.006 ONE-TIER TAX 27-Apr-17 19-May-17

PROCURRI CORPORATION LIMITED DIVIDEND SGD 0.00475 ONE-TIER TAX 27-Apr-17 11-May-17

QAF LTD DIV IDEND SCRIP DIV SCHEM SGD 0.04 ONE-TIER TAX 27-Apr-17

SINGAPORE O&G LTD. DIV IDEND SGD 0.0157 ONE-TIER TAX 27-Apr-17 15-May-17

SMARTFLEX HOLDINGS LTD DIV IDEND SGD 0.01 ONE-TIER TAX 27-Apr-17 12-May-17

BBR HOLDINGS (S) LTD DIV IDEND SGD 0.002 ONE-TIER TAX 28-Apr-17 23-May-17

BBR HOLDINGS (S) LTD DIV IDEND SGD 0.004 ONE-TIER TAX 28-Apr-17 23-May-17

GOLDEN AGRI-RESOURCES LTD DIV IDEND SGD 0.00635 28-Apr-17 11-May-17

HANWELL HOLDINGS LIMITED DIV IDEND SGD 0.005 ONE-TIER TAX 28-Apr-17 15-May-17

NORDIC GROUP LIMITED DIVIDEND SGD 0.00731 ONE-TIER TAX 28-Apr-17 12-May-17

OKP HOLDINGS LIMITED DIV IDEND SGD 0.008 ONE-TIER TAX 28-Apr-17 17-May-17

OKP HOLDINGS LIMITED DIV IDEND SGD 0.007 ONE-TIER TAX 28-Apr-17 17-May-17

SARINE TECHNOLOGIES LTD DIV IDEND USD 0.025 LESS TAX 28-Apr-17 11-May-17

SINWA LIMITED DIVIDEND SGD 0.012 ONE-TIER TAX 28-Apr-17 15-May-17

SOILBUILD CONSTRUCTION GRP LTD DIV IDEND SGD 0.0075 ONE-TIER TAX 28-Apr-17 23-May-17

SOILBUILD CONSTRUCTION GRP LTD DIV IDEND SGD 0.005 ONE-TIER TAX 28-Apr-17 23-May-17

TALKMED GROUP LIMITED DIVIDEND SGD 0.02283 ONE-TIER TAX 28-Apr-17 11-May-17

VALUEMAX GROUP LIMITED DIVIDEND SGD 0.0108 ONE-TIER TAX 28-Apr-17 31-May-17

VICOM LTD DIVIDEND SGD 0.1 ONE-TIER TAX 28-Apr-17 11-May-17

VICOM LTD DIVIDEND SGD 0.085 ONE-TIER TAX 28-Apr-17 11-May-17

Company Total Shares (m) Price Range (S$) Tra ding Da te

Aoxin Q & M Dental Group 57.00 $0.20 26-Apr-17

Name IPO Pric ing

Closing Price

18.4.17 Sector L ist ing

DateShares

Of feredIPO Mkt

CapSamurai 2K Aerosol Ltd 0.20 0.230 Chemicals 16/01/2017 100 20Kimly Limited 0.25 0.470 Food & Drug Retailers 20/03/2017 1,155 289Unusual Ltd 0.20 0.475 Media 10/04/2017 643 129

Page 8

Market Focus


April 2017 \

Source: Bloomberg Finance L.P., Companies, SGX

Mon Tues Wed Thu Fri

EMAS Offshore Ltd 2Q 17

Purchasing Managers Index Nikkei Singapore PMI Foreign ReservesElectronics Sector Index Automobile COE Open Bid Cat B GDP YoYURA Private Home Prices QoQ Automobile COE Open Bid Cat E GDP SAAR QoQ

SPH REIT 2Q 17 SPH 2Q 17Soilbuild Business 1Q 17

Retail Sales SA MoMRetail Sales YoYRetail Sales Ex Auto YoY

First Real Estate Investment Trust 1Q 17 Keppel T & T 1Q 17 CapitaLand Commercial Trust 1Q 17 Ascott Residence Trust 1Q 17 Ascott Residence Trust 1Q 17Keppel DC REIT 1Q 17 China Aviation Oil Singapore 1Q 17 CapitaLand Mall Trust 1Q 17 CapitaLand Retail China Trut 1Q 17Keppel Infrastructure Trust 1Q 17 Keppel REIT 1Q 17 Cache Logistics Trust 1Q 17M1 1Q 17 United Overseas Insurance 1Q 17 Keppel Corp 1Q 17Qian Hu Corp 1Q 17 Singapore Exchange 3Q 17

Non-oil Domestic Exports SA MoMElectronic Exports YoYNon-oil Domestic Exports YoY

Mapletree Industrial Trust 4Q 17 AREIT 4Q 17 Capitaland 1Q 17 Sembcorp Marine 1Q 17 Frasers Hospitality 2Q 17Raffles Medical 1Q 17 Cambridge Industrial Trust 1Q 17 Ascendas India Trust 4Q 17 Mapletree Logistics 4Q 17 Great Eastern Holdings 1Q 17

Frasers Centrepoint Trust 2Q 17 CDL Hospitality 1Q 17 YTL Starhill Global 3Q 17 iFast Corp 1Q 17Ho Bee Land 1Q 17 MAGIC 4Q 17 UOB 1Q 17Mapletree Commercial Trust 4Q 17 Suntec Reit 1Q 17 Venture Corp 1Q 17Parkway Life REIT 1Q 17

Credit Card Billings SGDCredit Card Bad Debts SGD

Automobile COE Open Bid Cat A Money Supply M2 YoY

Automobile COE Open Bid Cat B Money Supply M1 YoY

CPI Core YoY Automobile COE Open Bid Cat E Bank Loans and Advances YoY

CPI YoY Industrial Production YoY Unemployment rate SA

CPI NSA MoM Industrial Production SA MoM URA Private Home Prices QoQ

3 4 5 6 7

17 18 19 20 21

10 11 12 13 14

24 25 26 27 28

Page 9

Market Focus


Company Guide

Page 10


ed: JS / sa: YM, PY

BUYLast Traded Price ( 24 Feb 2017): S$6.65 (STI : 3,117.03)

Price Target 12-mth: S$7.64 (15% upside) (Prev S$7.20)

Potential Catalyst: Strong pre-sales for residential projects

Where we differ: Earnings generally more conservative vs peers

Analyst Rachel TAN +65 6682 3713 [email protected] Derek TAN +65 6682 3716 [email protected]

What’s New FY16 results below expectations, impacted by fair

value losses

New launches mostly in 2018

UOL most aggressive in landbanking

FY16 dividend of 15 Scents was flat y-o-y

Price Relative

Forecasts and Valuation FY Dec (S$ m) 2015A 2016A 2017F 2018F

Revenue 1,279 1,441 1,286 1,192 EBITDA 514 483 558 679 Pre-tax Profit 460 354 422 542 Net Profit 391 287 343 447 Net Pft (Pre Ex.) 343 324 343 447 Net Pft Gth (Pre-ex) (%) (5.9) (5.3) 5.8 30.2 EPS (S cts) 49.2 35.7 42.7 55.5 EPS Pre Ex. (S cts) 43.0 40.3 42.7 55.5 EPS Gth Pre Ex (%) (7) (6) 6 30 Diluted EPS (S cts) 49.2 35.7 42.7 55.5 Net DPS (S cts) 15.0 15.0 15.0 15.0 BV Per Share (S cts) 991 1,010 1,038 1,078 PE (X) 13.5 18.6 15.6 12.0 PE Pre Ex. (X) 15.5 16.5 15.6 12.0 P/Cash Flow (X) 10.2 9.9 19.8 18.9 EV/EBITDA (X) 15.6 16.4 14.3 11.6 Net Div Yield (%) 2.3 2.3 2.3 2.3 P/Book Value (X) 0.7 0.7 0.6 0.6 Net Debt/Equity (X) 0.3 0.2 0.2 0.2 ROAE (%) 5.0 3.6 4.2 5.2

Earnings Rev (%): (8) 16 Consensus EPS (S cts): 48.7 47.7 Other Broker Recs: B: 10 S: 0 H: 3

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

One of the cheapest landlords in Singapore

Valuations still attractive. We maintain our BUY rating on UOL Group (UOL) based on its attractive valuation of c.0.65x P/NAV, which is below the low end of its historical trading range, making it one of the cheapest large cap landlords in Singapore. The successful launches of recently purchased land sites in the enbloc market will be re-rating catalysts for the stock. We have lifted our TP to S$7.64 based on a 30% discount to RNAV of S$10.90 as we updated the valuation with newly acquired projects.

FY16 results below expectations; impacted by fair value losses. UOL’s FY16 net profit fell 27% y-o-y to S$287m, mainly due to fair value losses recorded vs gains in FY15. Property sales had halved in FY16. However, management believes the Singapore property market has stabilised and UOL has been more aggressive in land banking than the other large cap developers. Key positives from the results were: i) revenue growth from all divisions, except Investments, ii) rental reversions were largely positive with stable occupancy rates, and iii) overall RevPAR was up 2%. Key negatives: i) property sales had halved, ii) lower margins, and iii) challenginghospitality sector.

Most aggressive in landbanking in Singapore; bulk of new launches in 2018. The Clement Canopy (1Q17; 505 units) was officially launched last weekend (25 Feb 16). Management expects to launch Raintree Garden, Amber Road and Bishopsgate in 2018. Management continues to keep an eye on the take-up rates from The Clement Canopy.

Valuation: Maintain BUY on attractive valuations. We raise our TP to S$7.64, pegged to a 30% discount to our RNAV of S$10.90, taking into account new properties acquired.

Key Risks to Our View: Economic slowdown. The downside risk to our projections is if residential sales are slower than our projections or if commercial properties and hotels operations are impacted by slower-than-projected growth in rental/room rates.

At A Glance Issued Capital (m shrs) 805

Mkt. Cap (S$m/US$m) 5,351 / 3,808

Major Shareholders (%)

CY Wee & Co Pte Ltd 13.9

Wee Investment Pte Ltd 13.4

United Overseas Bank 7.5

Free Float (%) 59.8

3m Avg. Daily Val (US$m) 4.4

ICB Industry : Real Estate / Real Estate

DBS Group Research . Equity 27 Feb 2017

Singapore Company Guide

UOL Group Version 7 | Bloomberg: UOL SP | Reuters: UTOS.SI Refer to important disclosures at the end of this report

87

107

127

147

167

187

207

4.7

5.2

5.7

6.2

6.7

7.2

7.7

8.2

8.7

Feb-13 Feb-14 Feb-15 Feb-16 Feb-17

Relative IndexS$

UOL Group (LHS) Relative STI (RHS)

Page 11


Company Guide

UOL Group

WHAT’S NEW

A clement improvement in Singapore property

FY16 results below expectations, impacted by fair value

losses. FY16 net profit fell 27% y-o-y to S$287m, below

consensus’ full-year estimates, mainly due to fair value losses

of S$37m recorded in FY16 vs fair value gains of S$41m in

FY15, and lower profits from JV companies due to

completion of JV projects such as Archipelago and Thomson

Three. FY16 revenue grew 13% to S$1.4bn, supported by

higher earnings from all segments led by property

development, except for dividend income from UOB as there

was a special dividend paid in 2015 for the latter’s 80th

anniversary.

4Q16 net profit fell 15% y-o-y on muted revenue growth of

3% y-o-y coupled with lower gross margin of 33% vs 36% in

4Q15 and lower profit from associates / JV companies (-5%).

Declared a final dividend of 15 Scents, flat y-o-y.

Sold 484 units (S$558m in value) in 2016; half of the sales in

FY15. UOL sold 484 residential units (S$558m in value) in

FY16 which was half of the sales made in FY15. However,

management has turned positive on the Singapore property

market despite the government’s statement that ‘there will

be no relaxation of property measures’ in the near term.

Management believes that the Singapore property market is

in a steady state and the increase in industry sales volume is

encouraging. Its latest project, Clement Canopy was soft

launched on 10 Feb, drawing a large crowd to the showroom

over the weekend. Clement Canopy was officially launched

on 25 Feb 17, and take-up rates will be a testament to

management’s optimism on Singapore property market.

Among the large-cap developers in Singapore, UOL has been

the most aggressive in landbanking with the enbloc and land

acquisition of Raintree Garden and Amber Road respectively

to ride on the pick-up in property sales momentum in

Singapore. Both projects are expected to be launched in

2018. Management continues to look for landbanking

opportunities.

In China, Park Eleven sold 126 units out of 168 units in phase

1 and achieved selling prices of c.RMB 77k per square metre.

Management expects to launch phase 2 in 1H17.

Strong revenue growth from property development on lower

margins. Revenue from property development grew 27% y-o-

y from higher progressive recognition from development

projects – Riverbank@Fernvale, Botanique at Bartley and

Principal Garden. However, EBIT margin fell to 7%.

Hotel revenues

Projects expected to be completed in 2017 are

Riverbank@Fernvale, while Principal Garden and Park Eleven,

Shanghai are expected in 2018 and Botanique at Bartley in

1Q2019.

Commercial portfolio holding firm: The Group’s Property

Investment segment is holding firm with topline up 3% y-o-y,

mainly driven by newly acquired (in June 2016) 110 High

Holborn. Occupancy rates for its office portfolio is understood

to be above 90%, with the exception of United Square (88%

occupancy rate), which management said is still challenging.

Its retail properties continue to see high occupancy rates of

96-98%.

Rental reversions for FY16 were positive to the tune of 0.7%

(retail) and 3% (office). While rental reversions have remained

strong in FY16, management expects potentially marginal

negative rental reversions from OneKM (FY16 rental

reversions of -3.8%) as the mall undergoes its first cycle of

renewals (63% of leases expiring in FY17) in view of potential

competition from upcoming developments in Paya Lebar.

Other commercial properties with substantial leases expiring

in 2017 include Faber House (60%), United Square office

(32%) and United Square mall (25%).

More contributions from new UK commercial properties in

FY17. FY16 recorded some contribution from newly acquired

(in June 16) 110 High Holborn. Management expects higher

contributions in FY17 from Holborn Island which was

acquired in Nov16. Management believes these properties are

less susceptible to the impact from Brexit as these have

tenants mostly from media, publishing and professional firms

and less from the financial sector. On its first investment in

UK – Bishopsgate, London, management has obtained

approval to increase residential and hotel rooms to 160 and

237 respectively (previously 106 units and 196 rooms).

Management expects to launch the project in 2018, and

hotel to be completed by 2020.

Management continues to explore new commercial

properties with attractive yields especially in countries in

which they have a presence in, such as the UK, China and

Australia.

Revenue from its hotel operations grew 2% y-o-y. But, EBIT

fell 2%. Overall RevPAR increased 2% y-o-y. RevPAR

continues to see pressure in countries such as Singapore (-

3%) and Southeast Asia (-3%) while China and America

performed very well, rising by 18% each. China benefitted

from higher contributions from the second year of operations

at Pan Pacific Tianjin. Hotels in Australia recorded 4%

increase in RevPAR, marginally offset by weaker RevPAR in

Perth. Management believes the hospitality sector in Asia

Pacific will continue to face challenges.

Gearing to remain steady. UOL’s gearing is expected to

remain stable at current levels of c.0.2x which is within

management’s comfortable range. Net gearing on a see-

through basis is 0.4x, which gives UOL plenty of room to

make new investments / landbanking.

Page 12


Page 3

Company Guide

UOL Group

Quarterly / Interim Income Statement (S$m)

FY Dec 4Q2015 3Q2016 4Q2016 % chg yoy % chg qoq

Revenue 344 393 354 2.7 (10.1)

Cost of Goods Sold (221) (263) (238) 7.8 (9.5)

Gross Profit 123 130 115 (6.4) (11.4)

Other Oper. (Exp)/Inc (56.2) (56.5) (55.6) (1.0) (1.5)

Operating Profit 67.1 73.7 59.8 (10.9) (18.9)

Other Non Opg (Exp)/Inc (2.4) 6.75 1.24 nm (81.7)

Associates & JV Inc 36.8 29.1 35.0 (5.0) 20.2

Net Interest (Exp)/Inc (9.8) (5.7) (8.0) 18.5 (40.0)

Exceptional Gain/(Loss) (15.1) 0.0 (11.0) 27.3 nm

Pre-tax Profit 76.6 104 77.0 0.6 (25.9)

Tax (10.5) (12.3) (12.9) 23.5 4.8

Minority Interest (2.3) (4.4) (10.1) (343.7) 127.8

Net Profit 63.8 87.1 54.0 (15.3) (38.0)

Net profit bef Except. 79.0 87.1 65.0 (17.6) (25.4)

EBITDA 123 123 117 (4.5) (4.7)

Margins (%)

Gross Margins 35.8 33.1 32.6

Opg Profit Margins 19.5 18.7 16.9

Net Profit Margins 18.5 22.1 15.3

Source of all data: Company, DBS Bank

Page 13


Company Guide

UOL Group

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Retail and office sub-segments to offer stable returns. UOL

Group Limited (UOL) derives a significant 47%-58% of its

revenues from retail, office and hotel segments which should

continue delivering stable cashflows in the coming years.

While we see headwinds in both the retail and office segments

ahead, we believe that the positioning and location of UOL’s

portfolio of commercial properties mainly along the fringe areas

of the CBD will result in lower volatility in rents. Thus,

operational performance is likely to remain stable going

forward.

Its retail malls - United Square and Novena Square - are located

in the Novena area, close to the emerging medical hub. The

malls have formed a niche, which should result in high tenant

stickiness. This is especially so for United Square, which houses

tenants well known for providing various children’s education

programs. On the other hand, Novena Square’s tenant mix

mainly caters to necessity shopping and the needs of the

vicinity’s growth as a medical hub.

Hotel performance – weakness in Asia; overall outlook stable.

Growth will be driven by the addition of close to 1,582 rooms

(6 hotels), implying 16% growth in total rooms under

management. Performances from hotels and serviced residences

are expected to remain mixed. We expect the operational

performance of the group’s hotels & residences in Singapore

and Malaysia to be weak, but partially offset by a better

performance from its hotels in Australia. We project portfolio

RevPAR to remain fairly flattish.

Presales for residential projects doing well amid muted

residential outlook. Despite tepid residential transactions year-

to-date, UOL’s projects have continued to do fairly well. As at

end 2016, the Group has substantially sold most of its projects

that are completed or currently under development. UOL sold

484 residential units (S$558m in value) in FY16 which was half

of the sales made in FY15. However, management has turned

positive on the Singapore property market despite the

government stating that ‘there will be no relaxation of property

measures’ in the near term. Management believes that the

Singapore property market has found a steady state at current

levels and the increase in industry sales volume has been

encouraging. The Group added two enbloc sites in its land-

bank- Raintree Gardens and 45 Amber Road, which the group

intends to launch from 2018 onwards.

Revenue (S$’m)

PATMI (S$’m)

Operating Margins (%)

RNAV (S$’m) Breakdown of RNAV Properties OMV ($m) Investment Properties 3,481 less book value -4,300 Surplus/deficit -819

NPV of devt profits 324

Listed equities/Strategic Holdings 3,271 Hotel operations 2,218 Total 5,489 less book value -4,355 Surplus 1,134

Book NAV 8,127

RNAV 8,766 Total Shares 805 RNAV/share ($) 10.90 Discount 30% Price Target ($) 7.64

Source: Company, DBS Bank

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

15 16F 17F 18F

S$'m

Investments Management ServicesHotel Operations Property InvestmentsProperty Development

330.0

340.0

350.0

360.0

370.0

380.0

390.0

400.0

15 16F 17F 18F

S$'m

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

FY13 FY14 FY15F FY16F FY17F

Page 14


Company Guide

UOL Group

Balance Sheet:

Balance sheet remains strong. Debt to equity ratio is expected

to remain stable at 0.3x from FY17F-FY18F. This leaves UOL

with sufficient headroom to acquire projects / new sites when

such opportunities come by.

Share Price Drivers:

Replenishing land bank key to income sustainability. The Group

turns around its projects quickly and has little land bank on its

balance sheet. UOL has always been active in land tenders to

replenish its land bank especially in Singapore but remains

selective given the high competitive environment seen in recent

government land tenders. The ability to secure additional land

bank at lower prices will mean upside to RNAVs and this could

re-rate the stock.

Relaxation of property cooling measures in Singapore.

Expectations of policy relaxation (especially cyclical measures like

the buyers’ and sellers’ stamp duties) may improve market

sentiment and spark a revival in transacted volumes in the

Singapore residential market. This would also lift sentiment on

property stocks, which should enable UOL to close the gap

between its stock price and its NAV.

Deep value from its hotel business. We believe that deep value

lies in the group’s portfolio of well located hotels and serviced

residences in Singapore, Malaysia and Australia. These hotels

are held on a historical cost basis, which we believe are

conservative compared to potential realisable value. We

estimate potential upside of more than S$1bn if these

properties are valued on marked-to-market basis.

Key Risks:

Economic slowdown. The downside risk to our projections is if

residential sales are slower than projected or if its hotel

operations are impacted by slower-than-projected RevPAR

performance. The upside risks to our view and target price

would be higher-than-expected selling prices or upgrades to

the target prices of its listed investment holdings.

Company Background

With a track record of nearly 50 years, UOL Group's impressive

list of property development projects includes best-selling

residential units, office towers, shopping centres, hotels and

serviced suites.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)


0.0

0.0

0.0

0.1

0.1

0.1

0.1

0.1

0.2

0.2

0.2

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

2014A 2015A 2016A 2017F 2018F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2014A 2015A 2016A 2017F 2018F

Capital Expenditure (-)

S$m

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2014A 2015A 2016A 2017F 2018F

Avg: 15.2x

+1sd: 16.8x

+2sd: 18.5x

-1sd: 13.5x

-2sd: 11.8x

10.6

12.6

14.6

16.6

18.6

20.6

Feb-13 Feb-14 Feb-15 Feb-16

(x)

Avg: 0.68x

+1sd: 0.77x

+2sd: 0.85x

-1sd: 0.6x

-2sd: 0.51x

0.4

0.5

0.6

0.7

0.8

0.9

1.0


(x)

Page 15


Company Guide

UOL Group

Segmental Breakdown

FY Dec 2014A 2015A 2016A 2017F 2018F

Revenues (S$m)

Property Development 676 578 734 621 520

Property Investment 198 219 225 241 245

Hotel Operations 438 419 430 371 374

Investments 20.3 42.3 30.2 30.2 30.2

Others 28.8 20.2 22.0 22.6 23.3

Total 1,361 1,279 1,441 1,286 1,192

Income Statement (S$m)

FY Dec 2014A 2015A 2016A 2017F 2018F

Revenue 1,361 1,279 1,441 1,286 1,192

Cost of Goods Sold (780) (775) (956) (762) (694)

Gross Profit 581 504 485 524 497

Other Opng (Exp)/Inc (209) (231) (222) (206) (191)

Operating Profit 372 273 263 318 307

Other Non Opg (Exp)/Inc 13.4 18.4 17.2 17.2 17.2

Associates & JV Inc 158 156 136 157 288

Net Interest (Exp)/Inc (28.5) (35.6) (24.9) (69.5) (70.2)

Exceptional Gain/(Loss) 322 48.8 (37.3) 0.0 0.0

Pre-tax Profit 837 460 354 422 542

Tax (76.7) (47.2) (48.3) (50.7) (65.0)

Minority Interest (74.3) (21.8) (18.6) (28.5) (29.9)

Preference Dividend 0.0 0.0 0.0 0.0 0.0

Net Profit 686 391 287 343 447

Net Profit before Except. 364 343 324 343 447

EBITDA 604 514 483 558 679

Growth

Revenue Gth (%) 28.5 (6.0) 12.7 (10.7) (7.3)

EBITDA Gth (%) 15.1 (14.8) (6.2) 15.7 21.5

Opg Profit Gth (%) 10.1 (26.6) (3.8) 21.1 (3.6)

Net Profit Gth (Pre-ex) (%) 39.5 (5.9) (5.3) 5.8 30.2

Margins & Ratio

Gross Margins (%) 42.7 39.4 33.7 40.7 41.7

Opg Profit Margin (%) 27.3 21.4 18.2 24.7 25.7

Net Profit Margin (%) 50.4 30.6 19.9 26.7 37.5

ROAE (%) 9.5 5.0 3.6 4.2 5.2

ROA (%) 6.2 3.4 2.5 2.9 3.7

ROCE (%) 3.2 2.2 2.0 2.4 2.3

Div Payout Ratio (%) 17.2 30.5 42.0 35.2 27.0

Net Interest Cover (x) 13.0 7.7 10.6 4.6 4.4


Pre-sales of residential units to add to earnings.

Page 16


Company Guide

UOL Group


FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016

Revenue 344 330 364 393 354

Cost of Goods Sold (221) (216) (238) (263) (238)

Gross Profit 123 114 125 130 115

Other Oper. (Exp)/Inc (56.2) (55.0) (55.2) (56.5) (55.6)

Operating Profit 67.1 59.0 70.2 73.7 59.8

Other Non Opg (Exp)/Inc (2.4) 5.33 3.86 6.75 1.24

Associates & JV Inc 36.8 34.1 38.1 29.1 35.0

Net Interest (Exp)/Inc (9.8) (4.8) (6.3) (5.7) (8.0)

Exceptional Gain/(Loss) (15.1) 0.17 (26.5) 0.0 (11.0)

Pre-tax Profit 76.6 93.7 79.3 104 77.0

Tax (10.5) (12.4) (10.7) (12.3) (12.9)

Minority Interest (2.3) (4.3) 0.19 (4.4) (10.1)

Net Profit 63.8 77.1 68.8 87.1 54.0

Net profit bef Except. 79.0 76.9 95.3 87.1 65.0

EBITDA 123 115 128 123 117

Growth

Revenue Gth (%) (2.7) (4.1) 10.1 8.2 (10.1)

EBITDA Gth (%) (14.8) (6.3) 11.7 (4.3) (4.7)

Opg Profit Gth (%) (20.5) (12.1) 18.9 5.1 (18.9)

Net Profit Gth (Pre-ex) (%) (19.4) (2.6) 23.9 (8.5) (25.4)

Margins

Gross Margins (%) 35.8 34.5 34.5 33.1 32.6

Opg Profit Margins (%) 19.5 17.9 19.3 18.7 16.9

Net Profit Margins (%) 18.5 23.3 18.9 22.1 15.3

Balance Sheet (S$m)

FY Dec 2014A 2015A 2016A 2017F 2018F

Net Fixed Assets 1,241 1,179 1,166 1,299 1,282

Invts in Associates & JVs 3,162 3,366 3,488 3,644 3,932

Other LT Assets 4,528 4,981 5,312 5,312 5,312

Cash & ST Invts 935 276 302 251 364

Inventory 0.80 0.73 0.65 0.58 0.54

Debtors 248 197 99.6 88.9 82.4

Other Current Assets 1,735 1,501 1,191 1,191 1,171

Total Assets 11,848 11,501 11,558 11,787 12,144

ST Debt 1,292 523 728 728 728

Creditor 282 238 203 181 168

Other Current Liab 75.2 42.1 51.0 51.0 65.3

LT Debt 1,737 1,980 1,614 1,614 1,614

Other LT Liabilities 332 317 326 326 326

Shareholder’s Equity 7,643 7,894 8,127 8,350 8,676

Minority Interests 488 507 508 537 567

Total Cap. & Liab. 11,848 11,501 11,558 11,787 12,144

Non-Cash Wkg. Capital 1,626 1,419 1,038 1,049 1,021

Net Cash/(Debt) (2,094) (2,227) (2,041) (2,091) (1,979)

Debtors Turn (avg days) 83.9 63.5 37.6 26.8 26.2

Creditors Turn (avg days) 184.8 134.1 90.6 100.9 101.5

Inventory Turn (avg days) 0.4 0.4 0.3 0.3 0.3

Asset Turnover (x) 0.1 0.1 0.1 0.1 0.1

Current Ratio (x) 1.8 2.5 1.6 1.6 1.7

Quick Ratio (x) 0.7 0.6 0.4 0.4 0.5

Net Debt/Equity (X) 0.3 0.3 0.2 0.2 0.2

Net Debt/Equity ex MI (X) 0.3 0.3 0.3 0.3 0.2

Capex to Debt (%) 5.2 1.9 10.6 8.5 2.1

Z-Score (X) 2.0 2.2 2.1 2.1 2.1


Gearing to remain healthy

Page 17


Company Guide

UOL Group

Cash Flow Statement (S$m)

FY Dec 2014A 2015A 2016A 2017F 2018F

Pre-Tax Profit 760 413 354 422 542

Dep. & Amort. 60.1 67.2 66.6 66.6 66.6

Tax Paid (96.5) (66.7) (33.5) (50.7) (50.7)

Assoc. & JV Inc/(loss) (158) (156) (136) (157) (288)

Chg in Wkg.Cap. (726) 259 260 (11.1) 13.7

Other Operating CF (250) (0.1) 27.7 0.0 0.0

Net Operating CF (411) 517 539 271 283

Capital Exp.(net) (157) (47.0) (248) (200) (50.0)

Other Invts.(net) (0.8) 0.68 0.0 0.0 0.0

Invts in Assoc. & JV (1.6) 79.8 (61.7) 0.0 0.0

Div from Assoc & JV 18.7 42.0 57.4 0.0 0.0

Other Investing CF 8.89 (12.3) 3.12 0.0 0.0

Net Investing CF (132) 63.2 (249) (200) (50.0)

Div Paid (57.1) (64.3) (66.3) (121) (121)

Chg in Gross Debt 690 (466) (105) 0.0 0.0

Capital Issues 3.58 7.93 1.10 0.0 0.0

Other Financing CF (103) (62.1) (88.2) 0.0 0.0

Net Financing CF 534 (584) (259) (121) (121)

Currency Adjustments 2.42 (5.7) (5.9) 0.0 0.0

Chg in Cash (6.9) (10.1) 25.1 (50.1) 112

Opg CFPS (S cts) 40.1 32.4 34.6 35.0 33.5

Free CFPS (S cts) (72.2) 59.0 36.1 8.77 29.0


Target Price & Ratings History

Source: DBS Bank

Analyst: Rachel TAN

Derek TAN

S.No.Date of

Report

Closing

Price

12-mth

Target

Price

Rat ing

1: 29 Feb 16 5.66 7.39 BUY

2: 13 May 16 5.70 7.39 BUY

3: 27 May 16 5.68 7.39 BUY

4: 09 Jun 16 5.61 7.39 BUY

5: 05 Aug 16 5.83 7.20 BUY

6: 16 Sep 16 5.51 7.20 BUY

7: 30 Sep 16 5.61 7.20 BUY

8: 07 Oct 16 5.85 7.20 BUY

9: 18 Oct 16 5.76 7.20 BUY

10: 11 Nov 16 5.66 7.20 BUY

11: 06 Jan 17 6.20 7.20 BUY

12: 16 Feb 17 6.55 7.20 BUY

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

1

2

3

45 6

7

8

9

10

11

12

4.99

5.49

5.99

6.49

6.99

Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16

S$

Acquisition of 2 properties in London and Raintree Gardens in 2017

Page 18

ASIAN INSIGHTS VICKERS SECURITIES ed: TH / sa: JC, PY

BUY Last Traded Price ( 16 Feb 2017): S$3.45 (STI : 3,096.69) Price Target 12-mth: S$3.85 (12% upside) Potential Catalyst: Better-than-projected pre-sales & redeployment Where we differ: Estimates generally more conservative Analyst Derek TAN +65 6682 3716 [email protected] Rachel TAN +65 6682 3713 [email protected]

What’s New Acquires properties in Japan to bulk up portfolio

to S$2.5bn

Stable returns, supported by low carrying cost,

clear exit strategy through a REIT/fund in medium

term

BUY with TP of S$3.85

Price Relative

Forecasts and Valuation FY Dec (S$ m) 2015A 2016A 2017F 2018F Revenue 4,762 5,252 5,561 4,668 EBITDA 2,325 2,374 1,881 1,953 Pre-tax Profit 1,839 1,907 1,590 1,428 Net Profit 1,066 1,190 960 843 Net Pft (Pre Ex.) 1,066 1,190 799 843 Net Pft Gth (Pre-ex) (%) (8.2) 11.7 (32.9) 5.6 EPS (S cts) 25.0 28.0 22.5 19.8 EPS Pre Ex. (S cts) 25.0 28.0 18.8 19.8 EPS Gth Pre Ex (%) (8) 12 (33) 6 Diluted EPS (S cts) 25.0 28.0 22.5 19.8 Net DPS (S cts) 8.98 9.95 9.95 9.95 BV Per Share (S cts) 420 413 426 436 PE (X) 13.8 12.3 15.3 17.4 PE Pre Ex. (X) 13.8 12.3 18.4 17.4 P/Cash Flow (X) 6.0 4.4 13.6 36.9 EV/EBITDA (X) 14.4 13.1 17.2 17.1 Net Div Yield (%) 2.6 2.9 2.9 2.9 P/Book Value (X) 0.8 0.8 0.8 0.8 Net Debt/Equity (X) 0.5 0.4 0.4 0.5 ROAE (%) 6.1 6.7 5.4 4.6 Earnings Rev (%): 0 1 Consensus EPS (S cts): 19.8 20.3 Other Broker Recs: B: 18 S: 0 H: 3


Bulking up on recurring incomes Improving earnings quality. Despite the recent run-up in share price, we continue to see good value in CapitaLand Limited (CAPL), trading at an attractive 0.8x P/NAV and 0.7x P/RNAV. Our TP of S$3.85 is based on a 20% discount to RNAV (vs 25% before) given the projected completion of major projects in 2017 which will lift NAVs upwards. Coupled with opportunistic asset recycling of mature assets into its listed REITs/funds, we see re-rating opportunities going forward. BUY! CapitaLand announced the acquisition of a portfolio of commercial properties in the greater Tokyo region for JPY49.7bn (S$620.1m). A key question is why now after years of asset reflation in Japan which have lifted asset values higher. The key investment rationale in our view will be to add to a stable recurring income base and it is also an ROE-enhancing deal at close to 10%. There is also upside to returns (4.3-4.5% yield vs entry yield of 4.1%) with active property management. We reckon that there is also a clear exit strategy in the form of an income fund or REIT to be launched in the medium term given an enlarged portfolio size of S$2.5bn. 2017 to be a banner year for the group. The group’s various business units are expected to deliver strongly in 2017. Noteworthy are (i) S$161m in one-off gains to be recorded in 1Q17 post the bulk-sale of The Nassim in Singapore, (ii) launching of 7,000 units in 2017 in China which will add to the unrecognised RMB8.9bn in sales, and (iii) the completion of close to 1 million sqm of retail GFA through the year which is expected to contribute significantly to recurring revenues. Valuation:

Our target price of S$3.85 is based on a 20% discount to our adjusted RNAV of S$4.81/share. Key Risks to Our View:

Slowdown in Asian economies. The risk to our view is if there is a slowdown in Asian economies, especially China, which could dampen demand for housing and private consumption. At A Glance Issued Capital (m shrs) 4,237 Mkt. Cap (S$m/US$m) 14,619 / 10,318 Major Shareholders (%) Temasek Holdings Private Ltd 41.1

Free Float (%) 53.9 3m Avg. Daily Val (US$m) 21.8 ICB Industry : Real Estate / Real Estate

DBS Group Research . Equity 17 Feb 2017


CapitaLand Version 9 | Bloomberg: CAPL SP | Reuters: CATL.SI Refer to important disclosures at the end of this report

66

86

106

126

146

166

186

206

2.4

2.9

3.4

3.9

4.4

Feb-13 Feb-14 Feb-15 Feb-16 Feb-17

Relative IndexS$

CapitaLand (LHS) Relative STI (RHS)

Page 19

ASIAN INSIGHTS VICKERS SECURITIES Ă

Company Guide

CapitaLand

WHAT’S NEW

Acquiring Japan portfolio

What has happened?

CapitaLand (CAPL) invested JPY49.7bn (S$620.1m) in a portfolio of office and retail assets in Greater Tokyo area of Japan. The agreed consideration is in line with independent valuers (Tanizawa Sogo Appraisal and Cushman & Wakefield Kabushiki Kaisha). The portfolio was valued at JP 49.8bn.

The portfolio consist of two office buildings in Yokohama (Yokohama Blue Avenue and Sun Hamada), one office building in Tokyo (Kokugikan) and one shopping mall in Saitama (Seiyu & Sundrug).

Initial property yield is estimated at 4.1% but is expected to rise to 4.3-4.5% in the next two to three years driven mainly from (i) renewing lease expiring for the shopping mall at Saitama, and (ii) bumping up occupancy rates at Yokohama blue office building (78%).

Investment expected to be funded through debt (estimated to close to 1% for close to 95% of the acquisition cost); implying an IRR of close to 10%.

Investment Rationale

Stable returns. Management believes that the acquisition will add to the stable of recurring revenues for the group. Portfolio estimated to contribute c.S$25m in cashflows annually to the group and deepens their exposure in a developed, transparent and liquid real estate market.

Deepens exposure. This will also enlarge CapitaLand’s exposure in Japan from S$1.8bn to S$2.5bn; well diversified across asset classes of shopping malls, offices and serviced residences.

Accretion. ROE of close to 10% for the deal expected. A big question is – why now?

We believe investors will be asking "Why now?" This is because prices have remained elevated after years of quantitative easing in Japan which led to a reflation in asset prices. In addition, the group has generally taken a very conservative view on adding to its Japan portfolio given lower returns.

A recent report that we saw from JLL also indicated that rents and capital values growth are moderating but should be on a steady uptrend given high competition for assets putting downward pressure on yields in the coming year. This might allay investors’ concerns that the group is investing at towards the last leg of asset reflation story in Japan.

What are future plans; in our view

Future plans could involve a launch of an income fund or Japan-focused commercial REIT which adds to Capitaland’s fund management business in the medium term. This will also tie in with the group's longer-term US$8-10bn AUM target for its fund management business.

So in summary, stable yields, low carrying cost, and a clear exit strategy pushed the group to invest in Japan once again.

Page 20


Company Guide

CapitaLand

Target Portfolio

Source of all data: Company, DBS Bank

Page 21


Company Guide

CapitaLand


Earnings Drivers:

Growing recurring revenues from retail mall portfolio and Ascott. While trading properties (residential development and strata offices) account for 24% of assets, we see continued strength from CMA (CAPL’s retail mall division) and commercial integrated developments, including Ascott Group, its successful serviced residence brand, which form a significant 76% of total assets and is expected to contribute to growing recurring income for the group. CapitaMalls Asia (CMA) continues to perform steadily despite ongoing operational headwinds. There are 87 operating properties across Asia (56 of them in China). For 2016, the group’s shopping malls continued to record steady sales and occupancy rates. Portfolio tenant sales remained healthy at 2.6% for Singapore and 10.2% in China on the back of improving traffic. Shopper traffic and tenant sales generally performed better on a y-o-y basis. CAPL will be completing a substantial 1m sqm of retail GFA in 2017, a majority coming from China (Suzhou Center Mall) and three raffles city projects (Raffles City Changning, Raffles City Hangzhou and Raffles City Shenzhen) which have seen strong pre-leasing interest with committed rates of north of 80% as of 30 December 2016. The Ascott Limited remains on the fast track to achieve its 80,000-unit target by year 2020 and will add another 770 units by 4Q16. Ascott’s investment in China’s largest and fastest-growing online apartment sharing platform, Tujia has yet to bear fruit meaningfully but we continue to believe in its longer-term synergies and ability to leverage on Tujia’s platform to reach out to a wider addressable market in the medium term. Residential sales see strong uplift. CAPL continue to see strong momentum in its residential division in both Singapore and China. In Singapore, the group has substantially sold most of its available development projects and will book a one-time gain of close to S$161m post the bulk-sale of The Nassim in 1Q17. In addition, China sales momentum remains strong and the group will look to launch another 7,000 units in 2017. In addition, the group has close to RMB8.9bn in unrecognised revenues which will be booked in 2017-2018. Launch of new PE funds. CAPL remains on track to reach its S$8-10bn AUM target by 2020. We think that by tapping on third-party capital, CAPL would be able to leverage on larger economies of scale, better capitalise on market opportunities and at the same time de-risk its property level exposure. The group launched the US$1.5bn Raffles City China Investment Partners III (RCCIP III) aimed at prime integrated developments in gateway cities in China which will likely be seeded by their properties.

Revenue (S$’m)

EBIT (S$’m)

AUM breakdown (%) : S$44.2bn as of Dec’16

RNAV

RNAV of CapitaLand S$'bn

Value of CapitaLand Singapore 7,331.8

Value of CapitaLand China 9,819.4

CapitaMalls Asia 17,399.3

Ascott 4,237.1

Others 855.0

GDV of CAPL Group 39,642.6

Less: Net Debt (11,552.3)

Less: devt capex (7,709.0)

RNAV of CAPL 20,501.3

Total Shares 4,258.6

RNAV per share 4.81

Discount to RNAV 20%

Target price 3.85


-

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

13A 14A 15A 16A 17F 18F

S$'m

CapitaLand Singapore CapitaLand China and CMA Ascott Financial

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

13A 14A 15A 16A 17F 18F

S$'m

CapitaLand Singapore

24%

Capitaland China 26%

CapitaMalls Asia30%

Ascott 16%

Others4%

CapitaLand Singapore Capitaland China CapitaMalls Asia Ascott Others

Page 22


Company Guide

CapitaLand

Balance Sheet:

Balance sheet remains strong. We forecast debt/equity ratio to remain stable, at below c.0.6x over the coming years. Debt maturity profile remains long at 3.5 years (as of 3Q16) with an average cost of 3.4%. Approximately 70% of the interest cost is hedged into fixed rate debt. Share Price Drivers:

De-risking its Singapore residential exposure to replenishing land bank. CAPL has been actively de-risking its Singapore residential exposure through active marketing of its unsold units and is now substantially sold.. Looking ahead, while the group has not been an active investor in Singapore’s residential market, winning any new land tenders will imply improved confidence in the outlook for Singapore’s residential market in the medium term. Relaxation of government policies. Expectations of policy relaxation (especially cyclical measures like the Buyers’ and Sellers’ stamp duties) may improve buyers’ market sentiment and spark a revival in transactional volumes in the Singapore residential market. This is also expected to lift sentiment on property stocks, which we believe will enable CAPL to close the gap between its stock price and NAV. Asset recycling into listed S-REITs/funds. CAPL will continue to demonstrate its ability to crystallise value through strategic divestments of mature assets to its listed REITs, which are market leaders in their respective subsectors of retail, office and hospitality. The ability to recycle capital efficiently will enable the group to free up capital, improve its balance sheet position and deploy capital to projects with higher returns. Key Risks:

Slowdown in Asian economies. The risk to our view is a further slowdown in Asian economies which could dampen demand for housing and private consumption expenditure and retail sales. This in turn could result in slower-than-expected projections. Company Background

CapitaLand (CAPL) is one of Asia’s largest real estate companies headquartered and listed in Singapore. Its two core markets are Singapore and China; while Indonesia, Malaysia and Vietnam have been identified as new growth markets.


Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)


0.0

0.0

0.0

0.1

0.1

0.1

0.1

0.1

0.2

0.2

0.2

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

2014A 2015A 2016A 2017F 2018F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

2014A 2015A 2016A 2017F 2018F

Capital Expenditure (-)

S$m

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2014A 2015A 2016A 2017F 2018F

Avg: 13x

+1sd: 14.8x

+2sd: 16.6x

‐1sd: 11.2x

‐2sd: 9.3x8.4

10.4

12.4

14.4

16.4

18.4

20.4


(x)

Avg: 0.81x

+1sd: 0.89x

+2sd: 0.97x

‐1sd: 0.73x

‐2sd: 0.64x

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3


(x)

Page 23


Company Guide

CapitaLand

Segmental Breakdown

FY Dec 2014A 2015A 2016A 2017F 2018F Revenues (S$m) CapitaLand Singapore 1,242 1,229 1,192 1,607 927 CapitaLand China 638 2,039 2,376 2,005 1,641 CMA 1,178 663 588 997 1,128 Ascott 683 744 1,032 775 794 Others 185 86.1 65.3 176 178 Total 3,925 4,761 5,252 5,561 4,668


FY Dec 2014A 2015A 2016A 2017F 2018F Revenue 3,925 4,762 5,252 5,561 4,668 Cost of Goods Sold (2,543) (3,287) (3,654) (3,465) (2,489) Gross Profit 1,382 1,475 1,598 2,096 2,179 Other Opng (Exp)/Inc (513) (431) (435) (444) (466) Operating Profit 869 1,044 1,163 1,652 1,713 Other Non Opg (Exp)/Inc 541 490 437 0.0 0.0 Associates & JV Inc 970 726 708 164 174 Net Interest (Exp)/Inc (382) (422) (401) (386) (459) Exceptional Gain/(Loss) 0.0 0.0 0.0 161 0.0 Pre-tax Profit 1,997 1,839 1,907 1,590 1,428 Tax (238) (344) (403) (257) (257) Minority Interest (599) (430) (314) (373) (328) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 1,161 1,066 1,190 960 843 Net Profit before Except. 1,161 1,066 1,190 799 843 EBITDA 2,444 2,325 2,374 1,881 1,953 Growth Revenue Gth (%) 11.8 21.3 10.3 5.9 (16.1) EBITDA Gth (%) 7.4 (4.9) 2.1 (20.7) 3.8 Opg Profit Gth (%) 27.8 20.2 11.3 42.1 3.7 Net Profit Gth (Pre-ex) (%) 32.7 (8.2) 11.7 (32.9) 5.6 Margins & Ratio Gross Margins (%) 35.2 31.0 30.4 37.7 46.7 Opg Profit Margin (%) 22.1 21.9 22.1 29.7 36.7 Net Profit Margin (%) 29.6 22.4 22.7 17.3 18.1 ROAE (%) 7.1 6.1 6.7 5.4 4.6 ROA (%) 2.6 2.3 2.6 2.1 1.8 ROCE (%) 1.9 2.0 2.2 3.4 3.3 Div Payout Ratio (%) 33.0 35.9 35.6 44.2 50.2 Net Interest Cover (x) 2.3 2.5 2.9 4.3 3.7


Boosted by bulk-sale of The Nassim.

Boosted by close to RMB8.9bn of unrecognised revenues as of 4Q16, of which 60% to be recognised in 2017.

Page 24


Company Guide

CapitaLand


FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Revenue 1,740 894 1,132 1,374 1,853 Cost of Goods Sold (1,359) (615) (828) (950) (1,261) Gross Profit 381 279 304 423 592 Other Oper. (Exp)/Inc (28.4) 2.70 77.9 (89.3) 10.8 Operating Profit 352 282 382 334 602 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 224 165 198 149 195 Net Interest (Exp)/Inc (97.1) (108) (102) (101) (90.1) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 479 339 477 383 707 Tax (84.7) (51.6) (82.1) (61.2) (208) Minority Interest (147) (69.6) (101) (74.1) (69.0) Net Profit 248 218 294 248 431 Net profit bef Except. 248 218 294 248 431 EBITDA 576 447 580 483 797 Growth Revenue Gth (%) 61.7 (48.6) 26.6 21.4 34.9 EBITDA Gth (%) 28.6 (22.4) 29.6 (16.6) 64.9 Opg Profit Gth (%) 14.4 (19.9) 35.3 (12.5) 80.3 Net Profit Gth (Pre-ex) (%) 28.5 (11.9) 34.7 (15.8) 73.9 Margins Gross Margins (%) 21.9 31.2 26.8 30.8 31.9 Opg Profit Margins (%) 20.3 31.5 33.7 24.3 32.5 Net Profit Margins (%) 14.2 24.4 26.0 18.0 23.2

Balance Sheet (S$m)

FY Dec 2014A 2015A 2016A 2017F 2018F Net Fixed Assets 1,047 808 781 880 978 Invts in Associates & JVs 12,781 12,858 12,617 12,924 13,237 Other LT Assets 18,705 20,760 20,577 21,882 22,382 Cash & ST Invts 2,941 4,257 5,067 4,868 4,352 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 963 1,424 1,859 1,854 1,556 Other Current Assets 7,676 6,945 4,839 3,958 4,139 Total Assets 44,113 47,053 45,741 46,365 46,644 ST Debt 3,469 2,246 2,373 2,373 2,373 Creditor 3,070 4,064 4,685 3,850 3,111 Other Current Liab 463 620 670 627 584 LT Debt 12,517 13,812 12,479 13,229 13,729 Other LT Liabilities 1,386 1,373 1,233 1,233 1,233 Shareholder’s Equity 16,758 17,905 17,605 18,140 18,560 Minority Interests 6,451 7,032 6,696 6,912 7,053 Total Cap. & Liab. 44,113 47,053 45,741 46,365 46,644 Non-Cash Wkg. Capital 5,107 3,685 1,343 1,335 2,000 Net Cash/(Debt) (13,045) (11,801) (9,785) (10,735) (11,750) Debtors Turn (avg days) 99.1 91.5 114.1 121.8 133.3 Creditors Turn (avg days) 438.9 404.1 444.9 458.3 524.4 Inventory Turn (avg days) N/A N/A N/A N/A N/A Asset Turnover (x) 0.1 0.1 0.1 0.1 0.1 Current Ratio (x) 1.7 1.8 1.5 1.6 1.7 Quick Ratio (x) 0.6 0.8 0.9 1.0 1.0 Net Debt/Equity (X) 0.6 0.5 0.4 0.4 0.5 Net Debt/Equity ex MI (X) 0.8 0.7 0.6 0.6 0.6 Capex to Debt (%) 0.8 0.4 0.5 1.1 1.0 Z-Score (X) 1.1 1.1 1.1 1.1 1.1


Gearing to remain stable.

Page 25


Company Guide

CapitaLand


FY Dec 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 1,997 1,839 1,907 1,590 1,428 Dep. & Amort. 64.6 65.0 66.0 66.0 66.0 Tax Paid (256) (145) (350) (300) (300) Assoc. & JV Inc/(loss) (970) (726) (708) (164) (174) Chg in Wkg.Cap. 51.9 1,264 2,292 51.2 (622) Other Operating CF 111 169 97.5 (161) 0.0 Net Operating CF 999 2,466 3,305 1,082 398 Capital Exp.(net) (127) (64.0) (75.2) (164) (164) Other Invts.(net) (1,357) (718) (575) (1,144) (500) Invts in Assoc. & JV 841 509 65.3 (200) (200) Div from Assoc & JV 406 394 393 57.3 60.9 Other Investing CF (102) 33.0 121 275 0.0 Net Investing CF (339) 154 (71.4) (1,177) (804) Div Paid (705) (727) (752) (581) (610) Chg in Gross Debt 177 (212) (809) 750 500 Capital Issues 1.38 0.0 0.0 0.0 0.0 Other Financing CF (3,746) (274) (901) 0.0 0.0 Net Financing CF (4,272) (1,213) (2,462) 169 (110) Currency Adjustments 55.0 16.9 (153) 0.0 0.0 Chg in Cash (3,557) 1,424 619 75.2 (516) Opg CFPS (S cts) 22.2 28.2 23.8 24.2 24.0 Free CFPS (S cts) 20.5 56.4 75.8 21.6 5.49



Source: DBS Bank

Analyst: Derek TAN

Rachel TAN

S.No.Date of Report

Closing Price

12-mth Target Price

Rat ing

1: 16 Feb 16 2.90 3.73 BUY

2: 18 Feb 16 2.91 3.70 BUY

3: 02 Mar 16 3.07 3.70 BUY

4: 16 Mar 16 3.14 3.70 BUY

5: 18 Apr 16 3.16 3.70 BUY

6: 20 Apr 16 3.17 3.70 BUY

7: 27 May 16 2.98 3.70 BUY

8: 31 May 16 2.99 3.70 BUY

9: 09 Jun 16 3.05 3.70 BUY

10: 05 Aug 16 3.22 3.60 BUY

11: 16 Sep 16 3.12 3.60 BUY12: 30 Sep 16 3.20 3.60 BUY13: 18 Oct 16 3.13 3.60 BUY14: 24 Oct 16 3.17 3.60 BUY

Note : Share price and Target price are adjusted for corporate actions. 15: 07 Nov 16 3.04 3.60 BUY16: 10 Nov 16 3.08 3.60 BUY17: 14 Nov 16 3.00 3.60 BUY18: 16 Nov 16 2.99 3.60 BUY19: 21 Nov 16 2.98 3.60 BUY20: 25 Nov 16 3.02 3.60 BUY21: 06 Jan 17 3.09 3.60 BUY22: 09 Jan 17 3.09 3.60 BUY23: 16 Jan 17 3.15 3.60 BUY24: 06 Feb 17 3.43 3.60 BUY25: 13 Feb 17 3.50 3.60 BUY26: 16 Feb 17 3.45 3.85 BUY

1

2 3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2021

22

23

2425

26

2.71

2.81

2.91

3.01

3.11

3.21

3.31

3.41

3.51

3.61

Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17

S$

Page 26

ASIAN INSIGHTS VICKERS SECURITIES ed: TH / sa:JC, PY

BUY Last Traded Price ( 6 Apr 2017): S$1.76 (STI : 3,175.59) Price Target 12-mth: S$2.00 (14% upside) Potential Catalyst: Better operating results Where we differ: Our estimates are conservative Analyst Rachel TAN +65 6682 3713 [email protected] Derek TAN +65 6682 3716 [email protected]

What’s New • Seaside Residences poised to benefit from post-

government relaxation fever

• Frasers Tower – well-timed completion in 2018

with no major competitive supply

• Waterway Point ripe for asset recycling soon

Price Relative

Forecasts and Valuation FY Sep (S$ m) 2016A 2017F 2018F 2019FRevenue 3,440 2,412 3,103 2,633EBITDA 993 1,051 1,153 1,107Pre-tax Profit 960 830 886 836Net Profit 533 387 415 378Net Pft (Pre Ex.) 368 387 415 378Net Pft Gth (Pre-ex) (%) (23.8) 5.0 7.2 (8.8)EPS (S cts) 18.4 13.3 14.3 13.0EPS Pre Ex. (S cts) 12.7 13.3 14.3 13.0EPS Gth Pre Ex (%) (24) 5 7 (9)Diluted EPS (S cts) 18.4 13.3 14.3 13.0Net DPS (S cts) 8.61 8.60 8.60 8.60BV Per Share (S cts) 230 234 240 245PE (X) 9.6 13.2 12.3 13.5PE Pre Ex. (X) 13.8 13.2 12.3 13.5P/Cash Flow (X) 4.6 nm 15.9 nmEV/EBITDA (X) 18.0 19.2 17.8 19.7Net Div Yield (%) 4.9 4.9 4.9 4.9P/Book Value (X) 0.8 0.7 0.7 0.7Net Debt/Equity (X) 0.6 0.8 0.8 0.8ROAE (%) 8.1 5.7 6.0 5.4

Earnings Rev (%): 0 0 0Consensus EPS (S cts): 16.4 19.4 19.7Other Broker Recs: B: 8 S: 0 H: 0


Timely home run Growing developer with high dividend yields. We maintain our BUY rating on Frasers Centrepoint Ltd (FCL) for its attractive valuations at 0.7x P/NAV and 12x FY17F PE, and offering one of the highest dividend yields among developers at c.5%. While most developers have re-rated to an average of 0.9x P/NAV following the government’s recent tweaking of property measures, FCL has lagged behind, implying that the market has broadly overlooked the potential of its upcoming Singapore projects. Where we defer. Upcoming Singapore projects yet to be fully priced in at current price. Following an uptick in the sentiment in the Singapore residential market post government policy relaxation and upgrades to GDP forecasts, we believe that FCL’s latest residential project - Seaside Residences, which is launching soon, will garner good buyer interest. In addition, Frasers Tower, which is the only major building completing in the Central Business District (CBD) in 2018, should do well in the midst of a drop off in competitive supply that year. With this two well-timed projects entering the market, we see re-rating catalysts for the stock. Historically, we have seen that strong property sales translate to higher prices for FCL (charts in page 5). Potential catalyst: Improved property sales and asset monetisation. Asset recycling into its listed S-REITs. FCL will continue to demonstrate its ability to crystallise value by strategically divesting matured assets to its listed REITs. Potential assets include Waterway Point and Northpoint City. Valuation:

We maintain our BUY rating and target price at S$2.00 (30% discount to RNAV) from rolling forward our earnings estimates. Key Risks to Our View:

Dependent on the outlook of the Australian real estate market and currency. The group derives an estimated 30% of PBIT from Australia, and returns could be impacted by the weakening AUD/SGD exchange rate. At A Glance

Issued Capital (m shrs) 2,906Mkt. Cap (S$m/US$m) 5,100 / 3,637Major Shareholders (%) TCC Assets Ltd 59.1Thai Beverage 28.4

Free Float (%) 12.53m Avg. Daily Val (US$m) 0.45ICB Industry : Real Estate / Real Estate Investment & Services

DBS Group Research . Equity 7 Apr 2017


Frasers Centrepoint Ltd Version 7 | Bloomberg: FCL SP | Reuters: FRCT.SI Refer to important disclosures at the end of this report

Page 27


Company Guide

Frasers Centrepoint Ltd

WHAT’S NEW

Timely home run

The recent positive sentiment in Singapore’s property market and economic growth bodes well for Frasers Centrepoint Ltd (FCL) with a few recent/upcoming launches (Frasers Towers and Seaside Residences) and projects in Singapore. In addition, we see FCL continuing with its asset monetisation strategy with potential divestments of Waterway Point and Northpoint City into its REIT in the coming few years. We highlight below these projects that could benefit from the improved sentiment on Singapore currently.

Seaside Residences could bring in total sales of c.S$1.2bn @ estimated ASP of S$1,700psf: Seaside Residences, which sits on the highly contested Siglap residential site that FCL won last year will launch soon. The project will offer 841 residential units with a higher composition of smaller units; 1-bedroom (35%), 2-bedroom (29%) and 3-bedroom (29%) and two units of shops.

The recent government move to relax SSD and TDSR came in timely for the launch. The strong buying interest seen in Park Place Residences at Paya Lebar (take-up rates of 50% @ ASP S$1,700psf) is an encouraging sign and we expect the same interest for Seaside Residences. Although slightly further away from the city, it is located two minutes away from the upcoming Siglap MRT station (expected completion by 2019) with seaside view, which are key attributes that will attract buyers.

Assuming that the project is priced at an average of S$1,700psf, similar to Park Place Residences, we estimate FCL to book potential sales of S$1.2bn when fully sold. Our forecasts assume 1-5% contribution to the group’s EBIT over four years of construction period adjusted for FCL’s 40% interest in the project.

Frasers Tower, positive leasing momentum ahead of completion in 2018: Frasers Tower is expected to be completed by mid-2018, where we are expecting to see a drop off in new supply completions, meaning that there will be limited alternative office space for tenant prospects.

Frasers Tower has a total NLA of 663,000 sqft with floor plates of between 20,000 and 22,000 sqft. The smaller floor plates compared to the bigger office buildings have seen interests from multi-sector conglomerates, financial firms, and legal services and technology firms.

Since its launch, we understand that Frasers Tower has attracted interest (a few looking for large space) and is in discussions for close to 40% of the building. The first leased signed with service office provider, The Executive Centre which will be taking an entire floor of 20,000 sqft and the group will be setting up a city office there.

In addition, based on media and consultant reports, competition for tenants is expected to ease, especially with new buildings - Marina One, DUO Tower and Guoco Tower

having achieved 60%, 45% and 90% commitment rates respectively.

When completed, on a stabilised basis, we estimate that rental income from Frasers Tower could contribute approximately 4-5% of the group’s recurring EBIT.

Asset-recycling opportunities - Waterway Point is coming soon; Northpoint City is on the way. FCL’s newest mall, Waterway Point opened its doors in January 2016, is trading well and is at close to full occupancy. We understand that the mall, situated in an integrated development sitting atop Punggol MRT station, has been flourishing since it opened its doors, attracting 21m shoppers as at FY16. We believe this mall could be the most imminent acquisition target for its REIT (divestment from FCL), likely to take place within the next two years, in our view.

In addition, another integrated mall, Northpoint City which is expected to complete by 2017 (possibly concurrently with Northpoint Shopping Centre’s AEI completion by September 2017 and in time to open for the Christmas season in 2017), would likely be an attractive acquisition target for its REIT. With direct linkages to the existing Northpoint shopping mall (owned by FCT), the enlarged integrated shopping centre will be the largest shopping mall in the north with a combined retail space of 859,000 sqft GFA.

Our ballpark estimate for both malls (100% basis) could be valued at a total of S$2bn (assumed at close to S$2,500psf).

Maintain BUY; TP S$2.00. We maintain our BUY rating on FCL for its attractive valuations at 0.7x P/NAV, and offering one of the highest dividend yields among developers at c.5%. While most developers have re-rated to an average of 0.9x P/NAV following the governments’ tweaking of property measures, FCL has been lagging behind, implying its upcoming Singapore projects has yet to be fully priced in.

Key re-rating catalysts include i) improved property sales across its major markets following a potential recovery / continued positive sentiment in the property market, ii) potential asset monetisation from ongoing strategies to crystallise value across its portfolio including Northpoint and Waterway Point, and iii) improve free float and liquidity in the market.

Page 28


Company Guide


Photos from Seaside Residences Tour (sneak peak)

Seaside Residences… …smell the sea and feel the sky…

Source: DBS Bank Source: DBS Bank

Imagine waking up to a sea view below!... …or only 30% of the home dwellers will getSingapore’s skyline



Page 29


Company Guide


Waking up and feel like you are on a cruise….


Photos from Frasers Towers

Frasers Tower Efficient floor plate with no interior columns


Progress of construction – up to 19th floor going to 20th floor


Page 30


Company Guide



Critical Factors:

Growing recurring revenues from its commercial and hospitality divisions. Frasers Centrepoint Limited (FCL) is one of the largest property developers in Singapore with an asset base of over S$24bn as at end-FY16. The group aims to grow recurring revenues to 60-70% of PBIT in the medium term.

The group’s commercial portfolio will see incremental income from the completions of Waterway Point (completed in January 2016), Northpoint City (retail) and Frasers Towers (commercial) from 2018 onwards, which will boost its earnings further while The Centrepoint mall’s asset enhancement initiative (AEI) was completed in September 2016. Frasers Hospitality is also expected to expand its footprint to 30,000 managed units by 2019. In addition, the acquisition of the Malmaison Hotel du vin Group (MHDV), which has a portfolio of 29 boutique lifestyle hotels and 2,082 keys within 25 regional cities in the UK, will further deepen its presence and clientele reach. We see cross-selling opportunities and synergies between MHDV and the Frasers brand, propelling the division’s performance to greater heights.

New launches across its portfolio; more than 20m sqft of development space to be realised. The group currently has more than 20m sqft of development space to be progressively realised, largely in Australia industrial properties. The group continues to replenish its land bank with recent purchases mostly in Australia (residential and industrial). Unrecognised revenues from its property division, including Frasers Property Australia totalled about S$3bn.

Sustainable high dividend. FCL has one of the highest ROEs among property developers (c.8-11% over FY14A-16A) and dividend yield of close to 6% vs industry average ROE of close to 6% and dividend yield of c.2-3%. This is mainly due to the group’s efficient operating model of quick-asset turns for its residential development projects and its focus on a portfolio of recurring commercial properties (hotels, retail and office) which boosts returns.

Golden Land acquisition to bear fruit in the medium term. The group currently owns close to a 40% stake in Golden Land Property Development PCL (GOLD) and management believes that this acquisition offers good synergies to FCL as both companies share similar investment philosophies with an aim to continue growing its recurring income base. GOLD also offers FCL the ability to tap into the growing real estate market in Thailand, supported by favourable market fundamentals.

Revenue (FY15A-FY19F)

PBIT breakdown by divisions (FY16)

PATMI (FY15A-19F)

RNAV RNAV S$'mSurpluses from:Commercial Portfolio (Office, retail, hotels) (699)Stakes in REITs 190Frasers Australand 519Fee income : Hotel Mgmt 854Fee income : REITs 373NPV development projects 346Total Surpluses 1,583Add:Book NAV 8,053Gross Development Value 9,636less: preference shares (1,392)less: MI (3,791)Add: MI Attributable to REITs 3,827RNAV 8,280RNAV/share ($) 2.86Discount 30%TP ($) 2.00


0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

2015 2016 2017F 2018F 2019F

S$'m

Development properties

31%

Commercial properties

30%

Hospitality13%

Frasers P roperty Australia

26%

-

100.0

200.0

300.0

400.0

500.0

600.0

2015 2016 2017F 2018F 2019F

S$'m

Page 31


Company Guide


Balance Sheet:

Balance sheet remains strong. Debt/equity ratio is expected to remain fairly stable at between 0.8-0.9x over FY16F-19F which is within management's comfortable range. Debt maturity profile remains long at approximately three years with an average cost of debt of c.3%. Fixed rate percentage of its loans remains high at 81%.

Share Price Drivers:

Replenishing land bank key to income sustainability. The group currently has more than 20m sqft of development space, mainly in Australia. It is actively looking to replenish its land bank especially in Singapore but remains selective, given the sustained high land prices seen in recent government land tenders. The ability to secure additional land bank at lower prices will mean upside to RNAVs, which could re-rate the stock.

Relaxation of property cooling measures in Singapore. Expectations of policy relaxation (especially cyclical measures like the buyers’ and sellers’ stamp duties) may improve sentiment for property buyers, and spark a revival in transaction volumes in the Singapore residential market. This would also lift sentiment on property stocks, which we believe will enable FCL to close the gap between its stock price and NAV.

Gains from asset recycling into its listed S-REITs to boost share price. Recycling activities are perceived positively by investors as FCL is able to free up capital by selling its matured assets to its listed REITs, which will improve the group’s balance sheet position and recycle capital to projects with higher returns.

Key Risks:

Small free float. The stock has a low free float with 87.9% held by major shareholders TCC Group and Thai Beverage, thus leading to low liquidity.

Dependent on the outlook of Australia's real estate market, currency outlook. The group derives an estimated 30% of PBIT from Australia which is dependent on the real estate market there, and whose returns could be impacted by the weakening AUD/SGD exchange rate.

Company Background

Frasers Centrepoint Ltd (FCL) is a one of Singapore’s main real estate companies with assets exceeding S$20bn. The group has four key core businesses focused on residential, commercial, hospitality and industrial sectors spanning 77 cities across Asia, Australasia, Europe and the Middle East.


Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)


Page 32


Company Guide


FCL relative performance vs Singapore property sales Remarks

Strong property sales

preclude the re-rating of

share prices.

Source: DBS Bank, Thomson Analytics, Company

FCL relative performance vs group property sales Remarks

Strong group property sales (led by all major countries – Singapore, China and Australia) led to a continued share price outperformance from September 2014 to December 2015.

Source: DBS Bank, Thomson Analytics, Company

FCL relative performance vs asset recycling strategy (major divestment / acquisitions) Remarks

Some correlation of share price outperformance prior to the listing of FHT and FLT. However, we do not find much share price movements from divestment of assets.

The acquisition of Australand which was perceived as expensive at the time could have led to the fall in share price in 2H14.

Source: DBS Bank, Thomson Analytics, Company, SGX

-5

0

5

10

15

20

25

0

100

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300

400

500

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Dec-

13

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-14

Jun-

14

Sep-

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Dec-

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-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

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Dec-

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Mar

-17

Shar

e pr

ice R

el P

erf (

%)

Uni

ts o

f res

iden

tial p

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SG property sales (Q) - RHS Relative Performance - LHS

RiverTreesResidences -218 units

North Park Residences -570 units

...Seaside Residences?

Share price re-rating led by strong property sales f rom SG, CH, AU

-5

0

5

10

15

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25

0

500

1,000

1,500

2,000

2,500

Dec-

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-15

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-16

Jun-

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-17

Shar

e pr

ice R

el Pe

rf (%

)

Units

of r

eside

ntial

pro

perty

Property sales (Q) - RHS Relative Performance - LHS

St rong property sales f rom SG, CH, AU

-5

0

5

10

15

20

25

-3,500

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

Dec-

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-14

Jun-

14

Sep-

14

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14

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-15

Jun-

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Sep-

15

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16

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Shar

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%)

Proc

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from

dive

stmen

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Property sales (Q) - RHS Relative Performance - LHS

Sold Changi Cit y Point

to FCTF HT listing

A ustraland acquisition

Sold 357Collins St to

F COT

A cquire Malmaison Hotel du

V in

A cquire 30% of Golden Land

Sold One@Changi City to

A REIT

F LT listing

A cquire 36% of TICON

Page 33


Company Guide



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

Revenue 3,562 3,440 2,412 3,103 2,633Cost of Goods Sold (2,479) (2,407) (1,337) (1,827) (1,440)Gross Profit 1,082 1,033 1,075 1,276 1,193Other Opng (Exp)/Inc (257) (266) (193) (248) (184)Operating Profit 825 767 882 1,028 1,009Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0Associates & JV Inc 279 171 114 70.6 44.1Net Interest (Exp)/Inc (149) (142) (166) (212) (216)Exceptional Gain/(Loss) 241 164 0.0 0.0 0.0Pre-tax Profit 1,197 960 830 886 836Tax (184) (194) (141) (151) (142)Minority Interest (241) (169) (238) (257) (252)Preference Dividend (46.9) (64.5) (64.3) (64.3) (64.3)Net Profit 724 533 387 415 378Net Profit before Except. 483 368 387 415 378EBITDA 1,146 993 1,051 1,153 1,107Growth

Revenue Gth (%) 61.7 (3.4) (29.9) 28.6 (15.1)EBITDA Gth (%) 47.2 (13.3) 5.9 9.7 (4.0)Opg Profit Gth (%) 33.0 (7.1) 15.1 16.5 (1.9)Net Profit Gth (Pre-ex) (%) 16.6 (23.8) 5.0 7.2 (8.8)Margins & Ratio

Gross Margins (%) 30.4 30.0 44.6 41.1 45.3Opg Profit Margin (%) 23.2 22.3 36.6 33.1 38.3Net Profit Margin (%) 20.3 15.5 16.0 13.4 14.4ROAE (%) 11.2 8.1 5.7 6.0 5.4ROA (%) 3.3 2.3 1.6 1.6 1.4ROCE (%) 3.4 2.8 3.2 3.7 3.5Div Payout Ratio (%) 34.4 46.9 64.5 60.1 65.9Net Interest Cover (x) 5.5 5.4 5.3 4.8 4.7


Page 34


Company Guide



FY Sep 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017

Revenue 672 898 682 1,188 972Cost of Goods Sold (420) (610) (453) (924) (614)Gross Profit 252 288 229 264 357Other Oper. (Exp)/Inc (73.8) (57.3) (85.6) 210 (50.1)Operating Profit 178 231 143 474 307Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0Associates & JV Inc 32.8 4.77 23.8 110 23.7Net Interest (Exp)/Inc (32.7) (37.3) (38.2) (33.9) (23.9)Exceptional Gain/(Loss) (1.3) 9.41 64.0 92.3 5.14Pre-tax Profit 177 207 193 643 312Tax (35.6) (37.2) (29.0) (92.4) (59.0)Minority Interest (42.7) (47.0) (9.5) (69.7) (65.8)Net Profit 98.7 123 154 481 188Net profit bef Except. 100.0 114 90.0 388 182EBITDA 241 262 192 611 331

Growth

Revenue Gth (%) (35.3) 33.7 (24.0) 74.2 (18.2)EBITDA Gth (%) (17.4) 8.8 (26.7) 218.4 (45.9)Opg Profit Gth (%) 61.6 29.4 (38.0) 231.7 (35.2)Net Profit Gth (Pre-ex) (%) 204.4 13.9 (20.9) 331.4 (53.0)Margins

Gross Margins (%) 37.5 32.1 33.5 22.2 36.8Opg Profit Margins (%) 26.5 25.7 21.0 39.9 31.6Net Profit Margins (%) 14.7 13.7 22.6 40.5 19.3

Balance Sheet (S$m) FY Sep 2015A 2016A 2017F 2018F 2019F

Net Fixed Assets 1,991 1,972 1,919 1,867 1,814Invts in Associates & JVs 585 793 907 978 1,022Other LT Assets 14,150 14,467 14,615 14,764 14,912Cash & ST Invts 1,393 2,169 576 633 455Inventory 7.47 5.68 2.12 2.93 2.29Debtors 844 678 345 443 376Other Current Assets 4,096 4,120 6,961 8,088 8,721Total Assets 23,067 24,204 25,326 26,774 27,302

ST Debt 1,020 1,470 1,470 1,470 1,470Creditor 1,315 1,695 2,137 2,954 2,310Other Current Liab 218 284 188 198 189LT Debt 9,255 8,325 8,725 8,925 9,725Other LT Liabilities 608 586 586 586 586Shareholder’s Equity 7,803 8,053 8,190 8,356 8,485Minority Interests 2,848 3,791 4,028 4,285 4,537Total Cap. & Liab. 23,067 24,204 25,326 26,774 27,302

Non-Cash Wkg. Capital 3,415 2,825 4,983 5,383 6,601Net Cash/(Debt) (8,882) (7,627) (9,620) (9,763) (10,740)Debtors Turn (avg days) 84.8 80.7 77.4 46.3 56.8Creditors Turn (avg days) 196.8 263.0 608.3 608.3 608.3Inventory Turn (avg days) 1.1 0.9 0.6 0.6 0.6Asset Turnover (x) 0.2 0.1 0.1 0.1 0.1Current Ratio (x) 2.5 2.0 2.1 2.0 2.4Quick Ratio (x) 0.9 0.8 0.2 0.2 0.2Net Debt/Equity (X) 0.8 0.6 0.8 0.8 0.8Net Debt/Equity ex MI (X) 1.1 0.9 1.2 1.2 1.3Capex to Debt (%) 0.4 (0.5) 0.0 0.0 0.0Z-Score (X) 0.0 0.0 0.0 1.0 1.0


Gearing to remain stable at 0.8x

Page 35


Company Guide



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

Pre-Tax Profit 955 766 830 886 836Dep. & Amort. 781 54.5 54.5 54.5 54.5Tax Paid (184) (194) (237) (141) (151)Assoc. & JV Inc/(loss) (279) (171) (114) (70.6) (44.1)Chg in Wkg.Cap. 302 344 (2,063) (409) (1,210)Other Operating CF (891) 298 0.0 0.0 0.0Net Operating CF 684 1,097 (1,529) 320 (514)Capital Exp.(net) (45.3) 50.6 0.0 0.0 0.0Other Invts.(net) (1,501) (264) (150) (150) (150)Invts in Assoc. & JV (57.9) (317) 0.0 0.0 0.0Div from Assoc & JV 350 197 0.0 0.0 0.0Other Investing CF (146) (389) 0.0 0.0 0.0Net Investing CF (1,401) (722) (150) (150) (150)Div Paid (249) (456) (249) (249) (249)Chg in Gross Debt 936 (940) 400 200 800Capital Issues 649 1,000 0.0 0.0 0.0Other Financing CF (111) 340 (64.3) (64.3) (64.3)Net Financing CF 1,225 (56.2) 86.3 (114) 486Currency Adjustments (8.4) 39.1 0.0 0.0 0.0Chg in Cash 500 358 (1,593) 56.5 (177)Opg CFPS (S cts) 13.2 26.0 18.4 25.1 24.0Free CFPS (S cts) 22.1 39.6 (52.7) 11.0 (17.7)



Source: DBS Bank

Analyst: Rachel TAN

Derek TAN

Page 36

Market Focus


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: 19 Apr 2017 12:04:25 (SGT) Dissemination Date: 19 Apr 2017 15:56:34 (SGT)

Sources for all charts and tables are DBS Bank uness 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

investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees

only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial

advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)

arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not

to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons

associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have

positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and

other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can

be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.

The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, 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

update the information in this report.

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

UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and

(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Page 37

Market Focus


Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)

mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the

commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public

offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage

in market-making.

ANALYST CERTIFICATION

The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the

companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her

compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)

primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the

issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real

estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the

management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or

his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has

procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of

research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment

banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment

banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the

DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have proprietary positions in

Sheng Siong Group, Croesus Retail Trust, Frasers Logistics & Industrial Trust, UOL Group, ST Engineering, Ezion Holdings, CapitaLand, Midas,

as of 31 Mar 2017.

2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research

Report.

3. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a net long position

exceeding 0.5% of the total issued share capital in Croesus Retail Trust, Frasers Logistics & Industrial Trust, recommended in this report as of

31 Mar 2017.

4. DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of common equity

securities of Croesus Retail Trust, Frasers Logistics & Industrial Trust, as of 31 Mar 2017.

5. DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates beneficially own a total of 5% of any class of common equity

securities of Croesus Retail Trust, as of 31 Mar 2017.

Compensation for investment banking services:

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

investment banking services from Croesus Retail Trust, Frasers Logistics & Industrial Trust, Ezion Holdings, Midas, Japfa Ltd as of 31 Mar

2017.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of

which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

Page 38

Market Focus


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

Croesus Retail Trust, Frasers Logistics & Industrial Trust, UOL Group, Ezion Holdings, Midas Holdings, in the past 12 months, as of 31 Mar

2017.

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

manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further

information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document

should contact DBSVUSA exclusively.

Directorship/trustee interests:

9. Lim Sim Seng, a member of DBS Group Executive Committee, is an Independent Non-Executive Director of ST Engineering as of 1 Apr 2017

10. Euleen Goh Yiu Kiang, a member of DBS Group Holdings Board of Directors, is a Non-Exec Director of CapitaLand as of 31 Mar 2017.

Disclosure of previous investment recommendation produced:

11. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other

investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12

months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by

DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

RESTRICTIONS ON DISTRIBUTION

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

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.

198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial

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Market Focus


Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom. In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, 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 DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai

This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

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

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd

12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888

e-mail: [email protected] Company Regn. No. 196800306E

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Singapore Market Focus 19Apr2017 - DBS Bank Our Singapore property analyst comments the strong figure came as no surprise given the recent robust selling rates for new property launches