Singapore Property and REITs

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1 Singapore Industry Focus Singapore Property and REITs Refer to important disclosures at the end of this report DBS Group Research. Equity 17 Mar 2017 Catalysts abound Go for cyclicals (Office and Industrial REITs) on improving economic fundamentals Potential giant industrial REIT to emerge? Developers' rally to continue with improving transaction volumes Go for cyclical (office and industrial) S-REITs on improving economic fundamentals. The Federal Reserve's (Fed) guidance in keeping to a gradual pace of two more hikes in 2017 is in line with expectations, and we see it as positive for S-REITs. We expect prices to be supported in the near term given earlier fears that the Fed would be more hawkish. On the back of better GDP growth prospects for Singapore, we recommend investors to position themselves in more cyclical sectors in the office and industrial REITs, namely in business parks and hi-tech industrials. Our picks are A-REIT, K-REIT, MCT, KDC REIT, FLT and Croesus REIT. Potential giant industrial REIT to emerge? We see a potential mega consolidation of almost all mid-cap industrial REITs with the emergence of a new significant investor in the space, E-Shang Redwood (E-Shang), which is backed by Warburg Pincus. E-Shang recently acquired an 80% stake in the manager of Cambridge REIT, a 12% stake in the REIT and a 5% stake in Sabana REIT. In addition, Warburg Pincus has an interest in the manager of Cache Logistics Trust and is reportedly bidding for Global Logistics Properties. The catalyst to a merger would emerge if E-Shang and Warburg Pincus partner Mr Tong Jinquan (a significant shareholder of Cambridge, Sabana and two other mid-cap industrial REITs) to consolidate their stakes in all the industrial REITs they own, which would be the largest consolidation of almost all the mid-cap industrial REITs. STI : 3, Analyst Derek TAN Mervin SONG CFA derektan@dbs.com mervinsong@dbs.com Rachel TAN racheltanlr@dbs.com STOCKS Price Singapore Research Team equityresearch@dbs.com Mkt Cap Performance 12 mth Target Price S$ US$m S$ 3 mth 12 mth Rating REITs Ascendas REIT , BUY Keppel REIT , (0.5) 2.0 BUY Mapletree , BUY Frasers Logistics & N.A BUY Keppel DC REIT (3.6) 14.1 BUY Croesus Retail Trust BUY Developers Frasers Centrepoint , BUY Ltd UOL Group , BUY Source: DBS Bank, Bloomberg Finance L.P. Closing price as of 16 Mar 2017 Developers rally to continue with improving transaction volumes. Despite the rally in developers share prices, we believe that there is still upside and advocate investors to remain vested and buy on dips, if any. In our view, the recent easing of the seller stamp duty (SSD) as a start of a multi-year relaxation trend of current property curbs will mean continued sector-wide re-rating opportunities. The next catalyst to drive share prices is a healthy number of transactions, where the first two months primary sales (+61% y-o-y) appear to suggest good positive momentum. If this trend continues, we see this as a prelude to an eventual basing out and increase in property prices in the medium term. Developers like FCL and UOL offer good value. ed-th / sa- AS, PY

2 S-REITs - Go Cyclical as economic fundamentals improve Post the hike in interest rates this year and the guidance by the Fed of an additional two increases this year which are in line with market expectations, we believe the S-REIT market will be well supported near term given earlier fears that the Fed would be more hawkish. With consensus expectations for Singapore s GDP growth to be revised upwards (according to the latest Monetary Authority of Singapore Survey, market economists expect GDP growth of 2.3% versus 1.5% previously), we recommend that investors position themselves in more cyclical sectors, namely the office and industrial REITs, specifically the business parks and hi-tech segments. In addition, with the supply for both sectors easing from next year, we believe the prospects of a recovery in spot rents next year are increasing, which is supportive of our positive stance. For retail REITs, we expect a near-term relief rally. But we believe the upside will be capped, given cracks in the previous market assumption that suburban malls are totally resilient, on the back of expectations of heightened competition from the online space due to the imminent launch of Amazon in Singapore. Meanwhile, the hospitality REITs are more of a 2H17 story as there remains potential downside risk to RevPAR expectations and investors are likely to focus on the large-cap office and industrial REITs first. In terms of overall S-REIT valuation, the average yield spread is at 4.1%, close to the average yield spread of 4.2% since Thus, with the risk of a very hawkish Fed receding, we believe downside risk to S-REIT share prices are limited near term. Furthermore, based on the last two interest rate upcycles, there is another 30-40bps increase in the 10-year bond yield from current levels, which would take the average yield spread down to %. Should there be a cyclical upswing in the Singapore economy resulting in an acceleration in rents, translating to growing DPUs again, a tighter yield spread may be justified. Given our positive stance on the office and industrial space, our top picks include A-REIT and KREIT. We also maintain our growth and value themes, with our picks being MCT, FLT, KDC REIT and Croesus. Upward revision to GDP expectations MAS survey Key indicators Dec 2016 Survey (% y-o-y) Overall GDP Manufacturing Finance and Insurance Construction Wholesale and Retail Trade Accommodation and Food Services Private Consumption Non-oil Domestic Exports Unemployment rate (end-period, SA%) Source: Monetary Authority of Singapore, DBS Bank March 2017 Survey (% y-o-y) Page 2

3 000' sqm Industry Focus Declining supply pressures for office, industrial and hotel sectors Office 2,500 '000 sqft 2,000 1,500 1, Fall off in supply due to completion of Marina One in Pre-commitment of major buildings, Marina One (60%), Duo (estimated 45%) and Guoco Tower (90% taken up) has taken pressures off the new supply. 0 Source: URA, STB, DBS Bank Industrial 3,000 Industrial Space 2,500 2,000 1,500 1, Industrial Supply to peak in 2017 and fall off significantly in We estimate that more than 60% of the new incoming space has been pre-committed (majority of it built for end-users) F 2018F 2019F Supply Demand Source: URA, DBS Bank Hotels Rooms 75,000 70,000 65,000 6% 63,518 3,767 1% 2% 375 1,462 Drop in supply due to lack of new land release for development hotels in the last three years. 60,000 55,000 50,000 RevPAR could turn positive in given a 1-2% annual increase in supply over the same period. A drop from the 6% increase in , F 2018F 2019F Hotel rooms Expected net additions Source: URA, STB, DBS Bank Page 3

4 Yield spread chart 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Sector Yield Mean Yield +1 SD -1 SD Source: Bloomberg Finance L.P., DBS Bank Movements in 10-year bond yield during previous interest rate upcycles Previous episodes of rising interest rates Start of interest rate upcycle May-83 Dec-86 Feb-94 Jun-99 Jun-04 Dec-15 End of interest rate upcycle Aug-84 Feb-89 Feb-95 May-00 Jun-06 Mar-17 Length (months) Interest in Fed Funds target rate Increase in 10-year bond yield ahead of first rate hike Increase in 10-year bond yield post first rate hike Source: Bloomberg Finance L.P., DBS Bank Page 4

5 Increase in interest rates versus GDP growth, CPI and Core PCE Year Increase in Fed Funds target rate GDP growth CPI Core PCE Source: Bloomberg Finance L.P., DBS Bank Page 5

6 Potential giant industrial REIT to emerge? We maintain a watchful eye on the industrial REITs as we see potential merger & acquisition (M&A) activities occurring in the near-term horizon. This is on the back of the recent emergence of a new investor in the space, E-Shang Redwood. A new sponsor in the industrial REIT space. E-Shang Redwood is a leading logistics warehousing and infrastructure and facilities developer and total solutions provider for e- commerce, retail and cold chain operators. One of the key investors in E-Shang Redwood is Warburg Pincus, which is also rumoured in media articles to be one of the few bidders for Global Logistics Properties (GLP). E-Shang Redwood reportedly owns and manages a portfolio of logistics properties in China, South Korea and Japan worth over US$5bn. Entities related to Warburg Pincus have taken an interest in various REIT managers and REITs. E-Shang has made the first moves. E-Shang Redwood has recently acquired a strategic stake in the manager of Cambridge REIT and a 10.25% stake in the REIT. We also note that E-Shang recently emerged as a substantial shareholder (>5%) of Sabana REIT, where the embattled REIT manager is facing an unhappy group of unitholders who requested an EGM to remove the manager or unwind the REIT. Warburg Pincus is also part of a consortium that is taking private the sponsor of Cache Logistics Trust (Cache). Winning over Mr. Tong could be a catalyst. One of the major unitholders of industrial REITs is also Mr. Tong Jinquan, who have over the years amassed sizeable stakes in the various industrial REITs. While Mr. Tong is understood to be a fairly passive investor, we believe that if E-Shang Redwood collaborates with Mr. Tong, this could spark a consolidation within REITs that they have a collective interest in. A consolidation in the REITs could re-rate share prices. Struggling with scale and growth, the mid-cap industrial REITs (with an average market cap of S$0.9bn) have seen poor liquidity and generally trade at a discount to NAVs. Therefore, high cost of capital has inhibited the ability to grow through acquisitions. We believe that a consolidation in industrial REITs, with an aim to build operational scale, will be a catalyst for better valuations. Key shareholders across the Industrial REITs Code Sponsor Sponsor Stake E-Shang Redwood Mr. Tong Jinquan Credit Suisse Ascendas REIT A-REIT Ascendas-Singbridge 19.9% Mapletree Logistics Trust MLT Mapletree Investments 39.4% Mapletree Industrial Trust MINT Mapletree Investments 34.2% AIMS AMP REIT AIMSAMP AIMS and AMP Group 37.9% % Frasers Logistics & Industrial FLT Frasers Centrepoint 20.4% Trust Limited Cambridge Industrial Trust CREIT E-Shang Redwood (shown in 12.0% 18.5% 5.0% right) Cache Logistics Trust Cache Sponsor of Cache 4.3% Logistics Trust Viva Industrial REIT Viva Ho Lee Group & Kim 11.8%% % - Seng Holdings Sabana REIT Sabana Vibrant Group 9.7% 5.0% 6.2% - Soilbuild Business Space REIT SBREIT Soilbuild Group 25.7% - 6.6% - Source: DBS Bank, Bloomberg Finance L.P. Page 6

7 Summary of Industrial REITs' valuations Code Annualised NPI (S$'m) Total Assets (S$'bn) Total Debt (S$'bn) Mkt Cap (S$'m) Enterprise Value (S$'m) Book Yield Ascendas REIT A-REIT % 5.9% Mapletree Logistics Trust MLT % 6.2% Mapletree Industrial Trust MINT % 6.0% AIMS AMP REIT AIMSAMP % 5.9% Cambridge Industrial Trust CREIT % 6.5% Cache Logistics Trust Cache % 6.8% Viva Industrial REIT Viva % 6.0% Sabana REIT Sabana % 5.8% Soilbuild Business Space REIT SBREIT % 6.0% Source: DBS, URA, Companies presentation slides Price Differential between large-cap and mid-cap industrial REITs (Yield) Implied Yield 4.0% 3.5% Yield Differential (Large vs Mid Caps) Mean - 1 SD + 1 SD 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: DBS, URA, Companies presentation slides Price Differential between large-cap and mid-cap industrial REITs (P/NAV) (X) P/B differential Mean -1 SD +1 SD Source: DBS, URA, Companies presentation slides Page 7

8 Developers - BUY on dips as rally has legs With guidance by the Fed of an additional two increases in interest rates this year (which is in line with market expectations), we believe that the fact that Fed did not signal any plans to accelerate the pace of monetary tightening relieves some fears of faster-than-expected rate hikes in the coming years. With funding costs not expected to spike and banks clamouring for market share in the new loan space, we believe that the environment remains supportive of transactions in the immediate term. Therefore, although property developers outperformed the REITs by 20% YTD, partially led by the recent property relaxation, we believe that there will still be legs to higher prices going forward, notwithstanding a near-term profit-taking trend. We advocate investors to buy on dips. In prior rallies, developers have outperformed REITs by up to 50%. The recent property relaxation is a clear message from the government that they stand ready to support the property market and prevent an unintended crash in prices, if the market outlook turns. As such, we believe that we are at the start of a multi-year relaxation trend of the current property curbs, which will mean continued sector-wide re-rating opportunities, resulting in investors remaining positively disposed to the developers (Singapore Property : Sentiment lift on relaxation 13 Mar 17 ). The next critical factor that we are tracking is transactions. 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. Now with the implied support from the government, we believe that a sustained transaction momentum will be a prelude to an eventual basing out and increase in prices in the medium term. Developers with a pipeline of launches in 2017/2018 include Frasers Centrepoint Limited (FCL) and UOL Group (UOL) where positive sell-through rates for upcoming new launches could be positive drivers to share prices. Developers still trading at below historical average of 1x P/NAV 2.50 P/NAV (x) SD: 1.3x Mean: 1.0x SD: 0.6x - Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 P/NAV (w/o GLP) Mean - 1 SD +1 SD P/NAV (with GLP) Source: Bloomberg Finance L.P., DBS Bank Page 8

9 List of expected property launches in 2017/2018 (non-exhaustive) Project Name Location No. of units Expected launch 2017 Launches Clement Canopy Clementi Av Feb-17 Grandeur Park Residences Tanah Merah Feb-17 INZ Residences (EC) Choa Chu Kang Av Feb-17 Park Place Residences at PLQ Paya Lebar Central Mar-17 Artra Alexandra View (Parcel A) 400 Mar/Apr 17 Seaside Residences Siglap Road 843 Early 2Q17 Yio Chu Kang EC Yio Chu Kang Rd 520 2Q17 1H17 total 3,914 Jalan Kandis Sembawang 110 TBA Bukit Batok West Avenue 6 Bukit Batok West Avenue TBA Martin Place River Valley 450 TBA Anchorvale Land (EC) Sengkang 635 End-2017/2018 Fernvale Rd Sengkang 575 TBA Gramercy Park (South Tower) Orchard 87 1H2017 New Futura Leonie Hill Road 124 2H2017 South Beach Residences South Beach /2018 Shunfu Ville Bishan 1,150 2H2017 2H17 total 3, total 7,660 Future Launches Raintree Gardens Potong Pasir Amber Road East Coast Central Boulevard Marina Bay 365 TBA Margaret Drive Queenstown 275 TBA Perumal Road Kallang 200 TBA West Coast vale Clementi 520 TBA Total for future launches 2,275 Source: DBS, URA, Companies presentation slides Page 9

10 Four major periods when developers outperformed S-REITs 1,200 1, Developers SREIT Interest rate upcycle Period when developers outperform Source: Bloomberg Finance L.P., DBS Bank Outperformance during Increase in residential property prices and S-REITs impacted by increase in interest rates late in the cycle Outperformance by 44% Developers Source: Bloomberg Finance L.P., DBS Bank SREITs Page 10

11 Four major periods when developers outperformed S-REITs (cont d) Outperformance during 2009 Cyclical stocks doing better at the start of the recovery post the GFC Outperforms by 50% Mar Apr May Jun Jul-09 Developers SREITs Outperformance during 2015 Rally in developers due to Keppel Land takeover Outperforms by 17% Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Developer SREIT Outperformance during 2017 Developers boosted by the potential takeover of GLP and some relaxation of property cooling measures Outperforms by 20% Nov Dec Jan Feb-2017 Developer Source: Bloomberg Finance L.P., DBS Bank SREIT Page 11

12 S-REIT peer comparison table REIT FYE Price Rec 12 mth Target Price Mkt Cap Current Price P/Bk (x) (S$) (S$) S$'m FY16/17F FY17/18F FY16/17F FY17/18F Office CCT Dec BUY , % 6.0% KREIT Dec BUY , % 6.0% OUECT Dec HOLD % 7.4% , % 6.3% Retail CRCT Dec 1.45 BUY , % 7.0% CRT Jun 0.89 BUY % 9.2% FCT Sep 2.03 BUY , % 5.8% SPH REIT Aug 0.97 BUY , % 5.9% , % 6.0% Commercial MCT Mar 1.49 BUY , % 6.0% MAGIC Mar 0.98 BUY , % 7.4% SGREIT Jun 0.73 BUY , % 7.1% , % 6.3% Industrial AIMS Mar NR % 8.3% a-itrust Mar BUY , % 5.7% A-REIT Mar BUY , % 6.3% Cache Dec HOLD % 8.9% CREIT Dec BUY % 7.2% FLT Sep BUY , % 7.1% MINT Mar BUY , % 6.8% MLT Mar BUY , % 6.9% SBREIT Dec BUY % 8.4% , % 6.8% Hospitality ASCHT Mar BUY % 7.2% CDREIT Dec BUY , % 6.8% FEHT Dec HOLD , % 7.0% FHT Sep BUY , % 7.4% OUEHT Dec BUY , % 6.9% , % 7.2% Healthcare P-Life Dec 2.45 BUY , % 5.2% RHT Mar 0.88 HOLD % 35.4% , % 14.9% Others IREIT Dec 0.72 HOLD % 8.9% KDCREIT Dec 1.20 BUY , % 5.9% MUST Dec 0.84 BUY % 7.4% ,532 Sector Average 6.5% 6.8% Source: Bloomberg Finance L.P., DBS Bank Page 12

13 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: 17 Mar :19:13 (SGT) Dissemination Date: 17 Mar :11:04 (SGT) GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. 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14 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. 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DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in CapitaLand Commercial Trust, Keppel REIT, CapitaLand Retail China Trust, Croesus Retail Trust, Frasers Centrepoint Trust, SPH REIT, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, YTL Starhill Global REIT, Ascendas REIT, Cache Logistics Trust, Cambridge Industrial Trust, Frasers Logistics & Industrial Trust, Mapletree Industrial Trust, Mapletree Logistics Trust, Soilbuild Business Space Reit, Ascendas Hospitality Trust, CDL Hospitality Trusts, Far East Hospitality Trust, Frasers Hospitality Trust, OUE Hospitality Trust, Parkway Life Real Estate Investment Trust, RHT Health Trust, Keppel DC REIT, Manulife US Real Estate Inv, UOL Group recommended in this report as of 28 Feb 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 Keppel REIT, CapitaLand Retail China Trust, Croesus Retail Trust, Mapletree Greater China Commercial Trust, YTL Starhill Global REIT, Cache Logistics Trust, Frasers Logistics & Industrial Trust, Mapletree Logistics Trust, Soilbuild Business Space Reit, CDL Hospitality Trusts, Frasers Hospitality Trust, RHT Health Trust, Keppel DC REIT, Manulife US Real Estate Inv recommended in this report as of 28 Feb 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 Keppel REIT, Croesus Retail Trust, Mapletree Greater China Commercial Trust, YTL Starhill Global REIT, Frasers Logistics & Industrial Trust, Soilbuild Business Space Reit, Frasers Hospitality Trust, Keppel DC REIT, Manulife US Real Estate Inv as of 28 Feb 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 28 Feb 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 CapitaLand Commercial Trust, OUE Commercial REIT, Croesus Retail Trust, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, YTL Starhill Global REIT, Ascendas REIT, Frasers Logistics & Industrial Trust, Mapletree Industrial Trust, Mapletree Logistics Trust, Soilbuild Business Space Reit, Ascendas Hospitality Trust, Frasers Hospitality Trust, OUE Hospitality Trust, Parkway Life Real Estate Investment Trust, RHT Health Trust, Keppel DC REIT, Manulife US Real Estate Inv as of 28 Feb 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 14

15 7. DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for CapitaLand Commercial Trust, Croesus Retail Trust, Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, YTL Starhill Global REIT, Ascendas REIT, Frasers Logistics & Industrial Trust, Mapletree Industrial Trust, Mapletree Logistics Trust, Soilbuild Business Space Reit, Ascendas Hospitality Trust, Frasers Hospitality Trust, OUE Hospitality Trust, Parkway Life Real Estate Investment Trust, RHT Health Trust, Keppel DC REIT, Manulife US Real Estate Inv in the past 12 months as of 28 Feb Directorship/trustee interests: 8. Tan Su Shan, a member of DBS Group Executive Committee, is an Independent Non-Executive Director of Mapletree Greater China Commercial Trust as of 1 Mar 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: 10. 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 Hong Kong 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. 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 Page 15

16 Singapore Thailand United Kingdom 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. 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 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 was prepared by DBS Bank Limited. 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. DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel equityresearch@dbs.com Company Regn. No E Page 16