Singapore Company Guide Mapletree Industrial Trust

Transcription

1 Singapore Company Guide Version 10 Bloomberg: MINT SP Reuters: MAPI.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 7 Nov 2017 BUY Last Traded Price ( 6 Nov 2017): S$1.965 (STI : 3,381.85) Price Target 12-mth: S$2.15 (9% upside,6% yield) (Prev S$1.94) Analyst Derek TAN derektan@dbs.com Mervin SONG CFA mervinsong@dbs.com Singapore Research Team equityresearch@dbs.com What s New Strong share price reaction post equity fund raising is seen as a strong mandate from investors for management to pursue growth US data-centers to re-accelerate MINT s growth profile with more to come in the medium term Estimates raised by 2%; TP raised to S$2.15 Price Relative Powerful combination of Certainty and Growth Maintain BUY with a street high TP of S$2.15. We maintain our BUY call and raise our TP to S$2.15. We believe that Mapletree Industrial Trust (MINT) can continue to prove naysayers wrong and continue command premium valuations underpinned by steady DPU FY18-20F CAGR of 3.0% driven by the proposed US datacenter acquisitions; and well-timed contribution from its development projects over FY18-19F. A still conservative gearing of c.34% empowers the REIT to deliver more inorganic growth surprises. BUY! Where we differ. Diversity is the right strategy. We believe that we are among the few who are firm believers of MINT s overseas ventures. While investors have long attributed to MINT s premium valuations for its Singapore pure-play status, we believe that this view is changing, especially with a strong share price reaction post its recent fund raising to fund its acquisition of a portfolio of 14 data-centers in the USA. We see this as a green light from investors to execute on this diversification strategy as it re-accelerates the REIT s growth profile. We raised our earnings estimates by c. 2%, and TP to S$2.15. In addition, we have not priced in upside from development potential on the sites given the sizable land area available to satisfy tenant s expansionary demand. Forecasts and Valuation FY Mar (S$m) F 2019F 2020F Gross Revenue Net Property Inc Total Return Distribution Inc EPU (S cts) EPU Gth (%) DPU (S cts) DPU Gth (%) NAV per shr (S cts) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%)* ROAE (%) Distn. Inc Chng (%): Consensus DPU (S cts): Other Broker Recs: B: 6 S: 0 H: 10 *34% on a gross basis, including associates Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P Turnaround in operational results. While we have imputed flattish reversionary trends in our estimates, we acknowledge that weakness in rental reversions is expected to abate from FY19F onwards as supply tapers off. Higher than projected rental reversions could mean upside to our DPU estimates. Valuation: MINT s resilience is a value trait in this market and has yet to be reflected in its current share price. We maintain our BUY call and raise our TP to S$2.15 based on DCF. Key Risks to Our View: Rising interest rates. An increase in refinancing rates will be negative to distributions. However, we note that MINT has minimised this risk by hedging c.74% of its borrowings into fixed rates. At A Glance Issued Capital (m shrs) 1,885 Mkt. Cap (S$m/US$m) 3,704 / 2,720 Major Shareholders (%) Temasek Holdings 32.8 Schroders Plc 7.5 AIA Group 4.8 Free Float (%) m Avg. Daily Val (US$m) 4.3 ICB Industry : Real Estate / Real Estate Investment Trusts ed: JS / sa: YM, PY

2 WHAT S NEW New era of Certainty of Growth Non-Deal Roadshow (NDR) Feedback We brought management of (MINT) on a roadshow to meet investors in Singapore, USA and UK post recent results and announcement of its maiden overseas acquisition of 14 data-centers located in the USA. Feedback from investors were largely positive. Most were comforted by the Manager s measured approach towards its overseas growth ambitions as it limits portfolio cashflow volatility, and ensures that distributions will continue to grow steadily over time. 1. Maiden acquisition in the USA to reaccelerate growth outlook. Joint Venture with Sponsor with an option to buy-out the Sponsor s stake in the medium term. MINT, via a 40%-60% joint venture (JV) with Sponsor, Mapletree Investments, will acquire a portfolio of 14 datacenters in the USA for US$750m (S$1,020m). MINT s 40% stake in this acquisition amounts to US$300m (S$405m). The agreed purchase price for the portfolio is at a c.3.4% discount to independent valuers appraised value. The structure of the acquisition will be through an unlisted single purpose trust, The Mapletree Redwood Data Centre Trust, to achieve better tax efficiency (effective tax rate of 10%-15% of net property income). Post completion of this deal sometime in 3QFY18, MINT will derive c.9.9% of its total portfolio asset value from overseas assets. Together with its data-centers in Singapore, this subasset class will form c. 15% of total portfolio value. Measured approach in investing in US data-centers. The vendor is Carter Validus Mission Critical REIT, which we understand is approaching its end of its fund life and thus exiting. Out of the available 20 data-centers in the fund, MINT is understood to have chosen 14 properties which fit its investment strategy of mainly shell-and-core assets backed by triple net leases. We believe it is a preferred structure for MINT given that cashflows and returns are visible, resilient and most importantly, limits capex obligations which might eat into returns over time. The geographic focus to invest in USA, which is one of the largest data-center market globally according to the Manager will prove over time to be the right strategy for MINT, given that the USA represents a sizeable and deep market for data-centers, backed by strong growth from end-users and data-center operators. This implies that most data-center operators are likely to look to expand in the medium term and even in the scenario of a tenant vacating the premises, there is a ready pool of replacement tenants. Recapitalised exercise to part fund acquisition well supported by investors; DPU accretion of 2.0%. While MINT s low gearing of c.30% meant that the REIT can gear up to fully debt-fund this deal, the Manager has chosen to raise equity to maintain financial flexibility. The REIT successfully raised close to S$156m in new equity to part fund this deal. This represents close to c.37% of the total investment quantum, with the remainder to be funded by US-dollar denominated debt at an estimated interest rate of 2.5%. Pricing of the new units was at S$1.90, which represents 1.2% discount to the adjusted VWAP of S$1.92 Scts/unit. The strong share price reaction after the equity fund raising, in our view, is a mandate from investors to execute on its overseas investments strategy Acquisition Shells but not infrastructure a positive strategy. Investors generally were receptive of management s strategy of acquiring data-center shells which limits the risk of potential infrastructure obsolescence given the fast changing technological needs in data-centers. While returns might be lower at c. 6.9% yield, we believe that this compensates for lower capex that MINT will have to incur as part of its landlord obligations during the course of the lease. 2. Accretive deal with a myriad of positives. Improved cash flow visibility backed by a sticky tenant profile. The Manager believes that the acquisition of a sizeable portfolio together with Sponsor adds value to unitholders as it provides further diversification for the REIT amid limited acquisition opportunities within Singapore. The target US data-center portfolio s WALE is 6.7 years (longer than the current portfolio average 3.7 years), improving income visibility and boosting stability. The 14 datacenters are leased to 15 tenants, including Fortune Global 500 corporations and NYSE/Nasdaq listed companies, implies a strong credit profile. Most of the leases are on a triple-net basis, meaning that cashflows are generally quite stable with minimal downside in the medium term. We are attracted to the resilient cashflows and tenant stickiness for this datacenter asset class. This is mainly due to the significant capital expenditure invested by tenants to fit out the premises which imply that tenants are usually more sticky, and are likely to renew when leases are due. Freehold land tenures an added positive. We believe that another attractiveness of the acquisition is the freehold land tenure that the data-centers sit on, which will over the medium term, stabilise the portfolio s NAV, given that land-leases for the REIT s Singapore properties are typically shorter term in nature at around years. The portfolio s land-lease tenure before the acquisition of datacenters stood at close to 38.8 years. Development upside in the medium term not priced in yet. We note that the total net lettable area (NLA) of 2.3m sqft is only close to a quarter of the 8.2m sqft of land that the properties are sitting on. This means that there is significant development capacity for MINT in the event that existing or prospective tenants intend to expand within the existing compound. This development strategy is likely to be executed in the medium term, in our view. We have not priced in any upside from development at this point. Page 2

3 Accretive deal on the onset; with gearing inching up to a more optimal 34%. Post acquisition and equity fund raising, MINT s gearing will increase but still remain conservative at 34%. Based on our estimates, the acquisition of the data-centre portfolio will raise DPU by up to c.2% and add 1Sct to the REIT s NAV. Our TP is raised to S$2.15 as we price in the acquisition and adjust our WACC assumptions to reflect higher growth profile for the REIT. 3. 2Q18 DPU of 3.0Scts in line of expectations. MINT reported a steady 2.0% rise in DPU to 3.0Scts in 2QFY18, which is a respectable 6.0% higher y-o-y. This is on the back of 9.9% and 11.1% y-o-y growth in topline and net property income to S$92.6m and S$70.7m respectively. The higher performance was largely due to the contribution from the builtto-suit (BTS) facility for HP Singapore and pre-termination compensation received from Johnson & Johnson Pte Ltd. This had offset the drop in portfolio occupancy to 90.4% (vs 92.6% in 1QFY18), which in our view is transitional in nature. Portfolio rental reversionary rates (renewal and new leases) were largely mixed across the portfolio with the Hi-Tech and Business Park space the most stable. This trend is likely to remain going forward. Portfolio rental retention rate was steady at 78.7%. Target Portfolio of data-centres Page 3

4 Most of leases are shell-and-core Tenant profile for target US portfolio Quarterly / Interim Income Statement (S$m) FY Mar 2Q2017 1Q2018 2Q2018 % chg yoy % chg qoq Gross revenue Property expenses (20.6) (20.6) (21.9) Net Property Income Other Operating expenses (7.4) (7.6) (7.8) Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc (6.6) (7.9) (8.4) (28.5) (6.4) Exceptional Gain/(Loss) (0.2) nm nm Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items (0.2) nm nm Net Inc available for Dist Ratio (%) Net Prop Inc Margin Dist. Payout Ratio Source of all data: Company, DBS Bank Page 4

5 CRITICAL DATA POINTS TO WATCH Net Property Income and Margins (%) Critical Factors Offer investors high level of income visibility and stability. MINT has consistently delivered portfolio occupancy rates averaging 95% (ranging 90.2%-95.5%) which is above industry average. This is mainly due to its diversified asset portfolio and wide tenant base of over 1,600 in different industries. There is therefore no industry specific concentration risk meaning that performance is likely to remain stable across market cycles. Industrial sector projected to turnaround by We believe that the industrial sector is projected to bottom out in This is despite the current high number of new industrial supply hitting the market. Our positive stance is premised on (i) spike in new industrial supply is projected to peak in 2017 and fall substantially from 2018 onwards, (ii) recent positive numbers coming out of Singapore industrial production, if sustained, could mean that the slack in vacancy rates could be absorbed from 2018 onwards. MINT has over 20% of its income up for renewal in Recent acquisition of portfolio of US datacenters to re-accelerate growth. The recently announced joint-acquisition of a portfolio of 14 datacenters with Sponsor, Mapletree Investments, sets MINT on a new growth path. Taking a 40% stake in the JV, MINT s capital commitment of US$300m (c.s$408m) will form c.10% of the REIT s asset value. We like management taking incremental steps towards diversification which aims to limit earnings volatility for investors. The Manager has also undertaken an equity fund raising (EFR) to partfund the deal, which was well received by investors. With the target portfolio of datacenters offering MINT a long WALE and annual stepups, our DPU estimates are raised by c.2% p.a. in FY18-20F. MINT s share price is highly correlated to DPU growth but not to interest rate movements. While most investors believe that higher interest rates will be negative for MINT s share price, we found that the relationship between the two factors is not strong (correlation of 0.5x). We however, found that the correlation of share price movements to distribution growth (or DPU growth) is higher at 0.85x. As such, with MINT expected to deliver a robust 5% CAGR in DPU growth over FY18-19, which is above its peers, we believe that valuations will continue to remain elevated. Net Property Income and Margins (%) Distribution Paid / Net Operating CF Interest Cover (x) Page 5

6 Appendix 1: MINT s share price movements since IPO vs STI vs REIT Index 1.90 (x) Announces Overseas 0.90 mandate FED highlighted the China yuan devaluation HP building completes possibility of rate hikes impacted valuations 0.70 Oct-2011 Oct-2012 Oct-2013 Oct-2014 Oct-2015 Oct-2016 Oct-2017 MINT return since Listing REIT Index Straits Times Index Source: Bloomberg Finance L.P., DBS Bank MINT s share price vs 10-year bond movements 2.20 S$ Scts 3.0% 2.8% % % 2.2% % 1.8% % % 1.2% % Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 MINT Share Price (LHS) 10-year bond yield (RHS) Remarks While rises in interest rates will have a negative impact on share price, the actual impact is not strongly correlated. Correlation between MINT s share price and 10-year bond yield is 0.5x. Source: DBS Bank MINT s share price vs DPU growth 1.45 S$ (%) 12.0% % % % % % % Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 MINT P/NAV (LHS) Rate of DPU Chg (%) (RHS) Remarks We found a strong correlation of 0.8x between MINT s historical share price and DPU growth. Looking ahead, with DPU growth projected to grow at 5% in FY18F and 2% thereafter. Source: DBS Bank Page 6

7 Aggregate Leverage (%) Balance Sheet: Low gearing allows for opportunistic acquisitions, developments. Current gearing is conservative, implying that the Manager has the capability to take on debt-funded acquisitions when the opportunity arises. The Manager will be utilising its headroom towards higher-yielding development projects (built-to-suit project for phase 2 of HP and Kallang Basin cluster 4 and a new built-to-suit data center project). Post development, we believe gearing will still be within management's comfortable level at around 35%-40% Stable weighted average debt-to-maturity. MINT has a wellstaggered debt profile with a majority of debt due for repayment only from FY17/18 onwards. With c.74% of its borrowings on fixed interest rates, MINT is well protected against future increases in interest rates. Share Price Drivers: Better-than-expected rental reversions/acquisitions will boost earnings and share price. We are forecasting modest rental uplifts of 0-3%. The REIT's ability to maintain or beat expectations will mean upside to our/consensus forecasts. In addition, acquisitions or further development projects which are accretive to earnings will likely result in upside to TP and share price. Key Risks: Rising interest rates. An increase in refinancing rates will negatively impact distributions. However, MINT has minimised the impact as c.74% of its interest cost has been fixed. Economic risk. A deterioration of the economic outlook could have a negative impact on industrial rents and occupancies as companies cut back on production and require less space. Industrial rents have a strong historical correlation with GDP growth. ROE (%) Distribution Yield (%) PB Band (x) Company Background (MINT) is a real estate investment trust which invests primarily in income-producing industrial assets located in Singapore. Its portfolio includes a diverse mix of business parks, hi-tech industrial buildings, ramp-up buildings and flatted factories. Page 7

8 Income Statement (S$m) FY Mar 2016A 2017A 2018F 2019F 2020F Gross revenue Property expenses (86.5) (83.7) (97.4) (100) (102) Net Property Income Other Operating expenses (28.9) (29.6) (31.4) (31.8) (32.3) Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc (25.6) (26.9) (28.3) (31.3) (32.9) Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items (74.8) (65.6) Net Inc available for Dist Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee s fees ROAE (%) ROA (%) ROCE (%) Int. Cover (x) Growth driven by acquisition of US datacenters Page 8

9 Quarterly / Interim Income Statement (S$m) FY Mar 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 Gross revenue Property expenses (20.6) (21.0) (21.8) (20.6) (21.9) Net Property Income Other Operating expenses (7.4) (7.4) (7.6) (7.6) (7.8) Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc (6.6) (6.9) (7.1) (7.9) (8.4) Exceptional Gain/(Loss) (0.2) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items (69.8) 0.28 (0.2) Net Inc available for Dist Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) (1) (1) Net Prop Inc Margin (%) Dist. Payout Ratio (%) Balance Sheet (S$m) FY Mar 2016A 2017A 2018F 2019F 2020F Investment Properties 3,558 3,749 3,831 3,855 3,860 Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets 3,624 3,798 4,024 4,069 4,074 ST Debt Creditor Other Current Liab LT Debt ,071 1,115 1,120 Other LT Liabilities Unit holders funds 2,465 2,533 2,681 2,678 2,676 Minority Interests Total Funds & Liabilities 3,624 3,798 4,024 4,069 4,074 Non-Cash Wkg. Capital (68.3) (97.3) (89.0) (91.8) (93.8) Net Cash/(Debt) (967) (1,068) (1,171) (1,195) (1,202) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X) Gearing rises to c.34% Page 9

10 Cash Flow Statement (S$m) FY Mar 2016A 2017A 2018F 2019F 2020F Pre-Tax Income Dep. & Amort Tax Paid Associates &JV Inc/(Loss) (4.7) (14.5) (14.9) Chg in Wkg.Cap (8.3) Other Operating CF Net Operating CF Net Invt in Properties (43.5) (104) (82.1) (23.8) (5.8) Other Invts (net) Invts in Assoc. & JV (160) (1.0) (1.0) Div from Assoc. & JVs Other Investing CF Net Investing CF (43.5) (104) (237) (10.3) 8.16 Distribution Paid (115) (204) (217) (231) (236) Chg in Gross Debt (53.5) New units issued Other Financing CF (25.7) (28.2) Net Financing CF (194) (147) 13.4 (187) (231) Currency Adjustments Chg in Cash (17.6) (16.4) (22.6) 19.9 (1.8) Acquisitions priced in Operating CFPS (S cts) Free CFPS (S cts) Target Price & Ratings History Source: DBS Bank Analyst: Derek TAN Mervin SONG CFA Singapore Research Team Page 10

11 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: 7 Nov :24:21 (SGT) Dissemination Date: 7 Nov :51:20 (SGT) Sources for all charts and tables are DBS Bank unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the DBS Group ) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. 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12 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 associate 1 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 interests 2 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 HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates have a proprietary position in recommended in this report as of 29 Sep 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 HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share capital in recommended in this report as of 29 Sep Compensation for investment banking services: 4. 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. Disclosure of previous investment recommendation produced: 5. 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. 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 12

13 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 ). DBS holds Australian Financial Services Licence no DBSVS is 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. DBSVS is 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 equityresearch@dbs.com. Indonesia Malaysia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. 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 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 Thailand This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No E) or DBSVS (Company Regn No G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at for matters arising from, or in connection with the report. 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. Page 13

14 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 International Financial Centre United Arab Emirates United States Other jurisdictions This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 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. This report is provided by DBS Bank Ltd (Company Regn. No E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. 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. 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. Page 14

15 DBS Regional Research Offices HONG KONG DBS Vickers (Hong Kong) Ltd Contact: Paul Yong 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: Fax: Participant of the Stock Exchange of Hong Kong MALAYSIA AllianceDBS Research Sdn Bhd Contact: Wong Ming Tek ( U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah Kuala Lumpur, Malaysia. Tel.: Fax: general@alliancedbs.com SINGAPORE DBS Bank Ltd Contact: Janice Chua 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel: Fax: equityresearch@dbs.com Company Regn. No E INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: Fax: research@id.dbsvickers.com THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 9th, 14th-15th Floor Rama 1 Road, Pathumwan, Bangkok Thailand Tel Fax: research@th.dbs.com Company Regn. No Securities and Exchange Commission, Thailand Page 15