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Thailand Industry Focus

Property Fund/REIT Sector


Refer to important disclosures at the end of this report

DBS Group Research . Equity

Take shelter in volatile market

The sector now comprises 51 PFPOs and five REITS


with a combined market capitalisation of Bt333bn
(US$9.3bn), representing 2.6% of the SET

The sector is offering generous 2015F distribution


yield of 6.6%, a hefty premium to Thai 10-year
government bond yield of 3.0%

We prefer office and retail PFPO/REITs; there is


excess supply in the industrial space sector

Our preferred picks are CPNRF, CPTCG, FUTUREPF,


SPF and TLGF. These PFPOs/REITs possess good
assets and offer relatively generous distribution yield
of 6-8%, while liquidity is quite decent.

A safe haven in the volatile market. The Thai


PFPO/REIT sector has gained 2.4% YTD, out-performing
the SET Indexs 7.7% loss. Most Thai PFPOs/REITs are
generating strong recurring income streams which
should be less exposed to internal and external risks.
They are also paying generous dividend yields of about
6-8%, mostly quarterly.
Potential upside to yields of property funds which
convert to REITs. The SEC and the Revenue
Department have yet to reveal the transactions costs
involved in converting to a REIT. Since 2014, all new
setups have to be under the REIT structure and existing
PFPOs can no longer increase their capital. On this note,
PFPOs which have access to a pipeline of injection assets
would have to convert in order to grow their fund/trust
sizes. REITs are allowed to take on higher net gearing of
up to 35% of NAV (up to 60% if they have investment
grade rating) vs 10% maximum under the property fund
scheme, suggesting distribution per unit and yields
should rise after conversion.
Our preferred Funds/REITs. We prefer retail and office
to industrial PFPO/REITs, given more balanced demandsupply outlook for the former two asset segments. We
like CPNRF, FUTUREPF, and TLGF in the Retail asset
segment, POPF and CPNCG for Office assets, and
TGROWTH for Industrial assets. We also like SPF (airport
assets) and IMPACT (exhibition centres).

www.dbsvickers.com
ed-SGC / sa- CT

18 Sep 2015
SET :

1,389.70

Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com
Thailand Research Team +662 658 1222
STOCKS

CPTGF
CPNRF
FUTUREPF
IMPACT*
LHSC
POPF
SPF
TLGF
TGROWTH

Type of

Price

Assets

Bt

US$m

Bt

2015F

2016F

Office
Retail
Retail
Exhibition Center
Retail
Office
Airport
Retail
Industrial

10.00
16.70
18.20
11.20
10.40
13.30
19.60
13.20
12.20

269
1,025
267
461
138
178
517
188
856

10.70
18.00
22.30
12.00
11.40
14.00
21.40
15.10
12.90

8.0
6.0
7.0
6.4
7.0
8.1
6.6
6.1
7.6

8.6
7.6
7.3
6.6
7.0
8.3
6.6
6.1
7.6

Mkt Cap Target Price

Yields (%)

*Yields are for FYE Mar 2016-17


Source: DBS Vickers
CP Tower Growth Leasehold (CPTG): CPTGF has leasehold rights to
operate three CP Office Towers namely CP Tower Silom, CP Tower
Fortune Town, and CP Tower Phayathai. Key anchor tenants are
quality names like CP Group and its subsdiaries, Tesco Lotus, etc.
CPN Retail Growth Leasehold Property Fund (CPNRF): Thailands
largest and most liquid property fund. It has leasehold rights to
operate four successful Central Plaza shopping malls, namely Rama 2,
Rama 3, Pinklao, and Chiangmai Airport.
Future Park Leasehold Property Fund (FUTUREPF): FUTUREPF has
leasehold rights to operate Future Park Rangsit, one of Thailands most
successful sub-urban malls, thanks to its location being a gateway to
the Central, North, and Northeastern parts of Thailand.

Samui Airport Property Fund Leasehold (SPF): SPF has leasehold rights
to operate Samui Airport. Revenue is derived from the number of
departing passengers and incoming flights at Samui Airport.

Tesco Lotus Retail Growth Freehold and Leasehold Property Fund


(TLGF) : TLGF owns freehold and leasehold rights to operate 23 Tesco
Lotus shopping malls throughout Thailand. Freehold assets account
for 60% of total leasable area. Tesco Lotus is the key anchor tenant,
accounting for 58% of total leasable area and 28% of total rental
income.

Industry Focus
Property Fund/REIT Sector

Analyst
Chanpen Sirithanarattanakul +662 657 7824
chanpens@th.dbsvickers.com
Thailand Research Team
research@th.dbsvickers.com

Table of Contents
Yield, Valuation and Recommendation

Regional Comparison

Evolution of Thai Property Funds/REITs

10

Key differences between PFPO/REIT

11

Major sponsors of the assets

12

Current Status

13

Price Performance

15

Industry Outlook
Office

15

Retail

17

Ready-Built Factories

19

Warehouses

19

Company Guides
-

CP Tower Growth Leasehold (CPTGF TB)

26

CPN Retail Growth Property Fund (CPNRF TB)

32

Future Park Prop Fund (FUTUREPF TB)

38

Impact Growth REIT (IMPACT TB)

44

LH Shopping Centers REIT (LHSC)

50

Prime Office Property Fund (POPF TB)

56

Samui Airport Property Fund (SPF TB)

62

Tesco Lotus Retail Growth Freehold and


Leasehold Property Fund (TLGF TB)

68

TICON Industrial Growth Property Fund (TGROWTH


TB)
74

Disclaimers

Page 2

80

Industry Focus
Property Fund/REIT Sector

Yield, Valuation and Recommendation


Sector is offering generous 2015F distribution yield of
6.6%. This is a hefty 340bps premium to the Thai 10-year
government bond yield of 3.0% currently. Most funds pay
quarterly dividends, while some pay semi-annually.

Offering better yields than other investments. The following


chart shows Thai PFPO/REITs also pay higher yields than
bank deposits, government and corporate bonds, and
dividend yields of listed corporates.

Distribution Yield of Thai PFPOs/REITs

PFPO offers better yields vs other investment alternatives

7%

9.0

6%

8.0
7.0

5%

6.0

4%

5.0

3%

4.0
3.0

2%

2.0

1%

1.0

0%
PFPO/REIT

2015F

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0.0

Source: SET, DBS Vickers

Note:
1. Distribution includes dividends and capital reduction
2. Price is based on market price at end of year, except
2015 which is current price
Yield-Spread. The following chart shows the yield-spread
between Thai PFPO/REIT and Thai 10-year government bond
averaged 3.2% over the past decade.

Listed 10-year govt 2-year fixed 1-year fixed Savings rate


companies
bond
deposit
deposit
yield

Source: SET, DBS Vickers

PFPO/REIT yield comparison. The following chart shows


our estimated 2015 yields for several types of PFPO/REITs.
2015 yield comparison for various types of PFPO/REIT
%
8.0
7.0
6.0

Yield of Thai PFPOs/REITs vs Thai 10-yr Government Bond

5.0

%
9.0

4.0

8.0

2.0

7.0

1.0

3.0

3.0

Retail

Residential

Office

Hotel

Industrial

4.0

Cineplex

Airport

5.0

Apartment

6.0

Source: SET, DBS Vickers


2014

2013

2012

Bond 10Y

2015F

Dividend Yield

2011

2010

2009

2008

2007

2006

2005

2.0

Source: SET, DBS Vickers

Page 3

Industry Focus
Property Fund/REIT Sector

Valuation and Recommendation

Top Picks

Sector is now trading at average 1.07x P/NAV. This


represents +1SD of its historical average multiple of 0.9x.

CPN Retail Growth Leasehold Property Fund (CPNRF)


Thailands largest and most liquid property fund

2011

2012

2013

2014

2015

Source: SET, DBS Vickers

We prefer Office and Retail over Industrial PFPO/REITs. The


Office sector is now in an up-cycle. With limited new supply
entering the market, the occupancy and rents should
continue to rise. On the Retail front, occupancy remains
high at over 90% for prime retail malls. Nonetheless, the
weak domestic consumption could derail rental hikes in the
near term. But quality malls in good locations should
continue to do well. And for the Industrial sector, high
vacancies amid weakening demand and abundant supply
remain our key concerns. In addition, rents can hardly rise
because of the current high vacancy rate.
Our top picks are CPNRF, FUTUREPF, SPF, CPTGF, and TLGF.
The key factors we take into consideration include:

Industry subsector Prefer office, retail over industrial

Location of the assets

Quality of the assets and the anchor tenants

Quality of the property manager

Occupancy trend

Potential for rental reversion

Potential growth prospects

Remaining leasehold life

Distribution yield

P/NAV

IRR

Upside to our TP

Trading liquidity

Page 4

CPNRF: Yields
%
16

CPNRF's Yield
10-Year Govt Bond Yield

14
12
10
8
6
4
2
-

2015
2015

2010

2014
2014

2009

2013
2013

0.50

2012

-2 sd

0.60

2012

-1 sd

0.70

2011
2011

0.80

2010

Mean

0.90

2010

+1 sd

1.00

2009
2009

+2 sd

1.10

2008

1.20

CPNRF holds leasehold rights to operate four successful


CentralPlaza shopping malls in several locations. They are
Central Rama 2, Central Rama 3, Central Pinklao, and
Central Chiangmai Airport. Portfolio occupancy rate has
always been high at 90% and the fund has been paying
consistently higher dividends since its inception.
Nonetheless, we expect dividend yield to come down to
6.1% in 2015 as Central Pinklao undergoes renovation,
before surging to 7.7% and 8.4% in 2016 and 2017,
respectively. CPNRF plans to convert into a REIT after more
details on transaction costs are available. Successful
conversion would allow higher gearing, which means upside
to yields.

2008

P/NAV (x)
1.30

2007
2007

PFPO/REIT: Price/NAV

Source: SET, DBS Vickers

Samui Airport Leasehold Property Fund (SPF)


Riding on Samuis tourism recovery
SPF holds leasehold right to operate Samui Airport until
2036. Tourist arrivals have continued to improve in 2Q15
following the lifting of martial law. We estimate the funds
DPU will grow 4% this year and 7% each in 2016-17 on
rising number of passengers and flights. The fund is
currently offering generous dividend yield of 6.9% for 2015,
and 7.4% in 2016. Key risk is a sharp drop in Samui
tourism. Nonetheless, downside risk is protected by annual
revenue guarantee of Bt570m from Bangkok Airways, the
Property Manager, which suggests a dividend yield of 3.2%
at current price.

Industry Focus
Property Fund/REIT Sector

SPF's Yield

Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15

10-Year Govt Bond Yield

CPTGF: Yields
%
10

CPTGF's Yield
10-Year Govt Bond Yield

Source: SET, DBS Vickers

TLGF: Yields
%
8

TLGF's Yield

10-Year Govt Bond Yield

6
4

Jul-14

Jan-14

Tesco Lotus Retail Growth Property Fund (TLGF)


Decent yields
TLGF invests in 23 Tesco Lotus shopping malls throughout
Thailand. The majority of the assets (60% of total leasable
area) are freehold assets. Tesco is the anchor tenant,
accounting for 58% of total leasable area and 28% of total
rental income. Occupancy rates have been high at 98-99%
since its inception. The fund now offers generous dividend
yield of 6.2%. Tesco Lotus has granted right of first refusal
to TLGF to acquire its existing and future malls. The
successful conversion to a REIT structure would allow the
fund/REIT to borrow more for future acquisitions and rely
less on equity financing. This should lift distribution per unit
and yields.

Jul-15

%
20
18
16
14
12
10
8
6
4
2

CP Tower Growth Leasehold Property Fund (CPTGF)


Offering very generous yields
CPTGF invests in leasehold rights to operate three successful
CP Towers in prime locations. The Funds assets include i)
C.P. Tower I (Silom), ii) C.P. Tower II (Fortune Town), iii) C.P.
Tower III (Phayathai). Portfolio occupancy rate has been
high, averaging 98%. Anchor tenants are high quality
tenants like CP Group and its subsidiaries, and Tesco Lotus.
The Fund now offers generous 2015F dividend yield of
8.0%.

Jan-15

SPF: Yields

Source: SET, DBS Vickers

Future Park Leasehold Property Fund (FUTUREPF)


One of the most successful suburban malls in Thailand
FUTUREPF invests in leasehold rights to operate a part of
Future Park Rangsit, one of Thailands most successful
suburban shopping malls. The mall is located at the gateway
to Central, North and Northeastern Thailand, covering 56
provinces. Daily customer traffic count has been over 150k
during the last three years, one of the highest among retail
malls in Thailand. The fund now offers generous 2015 and
2016 dividend yield of 7.0 and 7.3%, respectively.
FUTUREPF: Yields

5
4

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

10
8
6
4
2

Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15

Source: SET, DBS Vickers

Mar-14

10-Year Govt Bond Yield

Dec-13

12

Sep-13

FUTUREPF's Yield

Jun-13

%
14

Mar-13

Source: SET, DBS Vickers

Page 5

Industry Focus
Property Fund/REIT Sector

Thailands listed PFPO/REITs


Yield
Name

Samui Airport Leasehold Property Fund


Airport
Land And Houses Freehold And Leasehold Property Fund
Gold Property Fund Leasehold
UOB Freehold Eight Thonglor Property Fund
Urbana Property Fund
Apartment
IMPACT Growth REIT
Others
Major Cineplex Lifestyle Fund
Cineplex
Centara Hotelsl & Resorts Leasehold Property Fund
Dusit Thani Freehold & Leasehold Property Fund
Erawan Hotel Growth Property Fund
MFC Patong Heritage Property Fund
Siri Prime Office Property Fund
Luxury Real Estate Investment
Samui Buri Property Fund
Quality Hospitality Leasehold
Qualty Houses Hotel and Residence Freehold and
Leasehold Proprety Fund
SRI Panwa Hotel Property Fund
Thai Hotel Investment Freehold And Leasehold Property
Fund
Hotel
Amata Summit Growth Freehold And Leasehold Real
Estate Investment Trust
MFC Industrial Investment Property and Leashold Fund
MFC-Strategic Storage Fund
TICON Property Fund
Thai Industrial Fund 1
TICON Industrial Growth Leasehold Property Fund
Hemaraj Industrial Property And Leasehold Fund
101 Montri Storage
Pinthong Industrial Park Property Fund
Sub Sri Thai Property Fund
Subsrithai Smart Storage Property Fund
TPARK Logistics Property Fund
Wha Premium Factory And Warehouse Property Fund
Wha Premium Growth Freehold And Leasehold Real
Estate Investment Trust
Ticon Freehold And Leasehold Real Estate Investment
Trust
Industrial

Source: SET, DBS Vickers

Page 6

Ticker

Freehold/Leasehold

Mkt Cap

(%)

P/NAV

Daily Turnover

(US$)

FY15

(x)

(US$m)

6.4
6.4
8.4
6.1
5.0
9.7
7.3
6.4
6.4
7.7
7.7
9.4
5.1
6.7
7.1
5.9
5.5
14.2

1.8
1.8
0.8
0.5
0.8
0.7
0.7
1.0
1.0
1.1
1.1
0.4
0.8
0.9
1.0
1.0
0.5
0.7
0.4

0.29
0.29
0.02
0.00
0.01
0.00
0.01
0.36
0.36
0.08
0.08
0.01
0.08
0.04
0.00
0.00
0.01
0.00
0.01

SPF

Leasehold

LHPF
GOLDPF
UOB8TF
URBNPF

Freehold and Leasehold


Leasehold
Freehold
Leasehold

IMPACT

Freehold

MJLF

Leasehold

CTARAF
DTCPF
ERWPF
M-PAT
SIRIP
LUXF
SBPF
QHOP

Leasehold
Leasehold & Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Leasehold

518
518
77
31
58
8
174
462
462
120
120
35
97
47
29
51
30
18
23

QHHR
SPWPF

Leasehold & Freehold


Freehold

77
55

9.0
8.3

0.8
0.9

0.03
0.01

THIF

Leasehold & Freehold

860
1,321

3.6
6.8

1.1
0.8

0.01
0.02

AMATAR
M-II
M-STOR
TFUND
TIF1
TGROWTH
HPF
MONTRI
PPF
SSTPF
SSTSS
TLOGIS
WHAPF

Freehold and Leasehold


Leasehold
Freehold
Freehold
Freehold
Leasehold
Freehold and Leasehold
Freehold
Freehold
Freehold
Freehold
Freehold and Leasehold
Freehold

111
45
18
339
18
188
111
15
68
18
22
142
298

7.6
7.5
6.6
6.0
7.3
7.6
7.8
8.0
7.3
7.4
7.2
6.1
6.4

3.3
0.9
0.9
1.0
0.7
1.2
0.8
0.9
1.0
0.9
0.9
1.0
1.1

0.21
0.00
0.00
0.07
0.01
0.09
0.01
0.00
0.01
0.00
0.00
0.03
0.09

WHART

Freehold and Leasehold

91

7.3

n.a.

0.08

TREIT

Freehold and Leasehold

98
1,582

5.8
7.1

1.0
1.1

0.04
0.04

Industry Focus
Property Fund/REIT Sector

Thailands listed PFPO/REITs (continued)


Name

Bangkok Commercial Property Fund


CPN Commercial Growth Leashold Property Fund
JC Property
KPN Property Fund
Millionaire Property Fund
Prime Office Leasehold Property Fund
Sala & Sathorn Property Fund
C.P. Tower Growth Leasehold Property Fund
Quality Houses Property Fund
Thai Commercial Investment Fund
Office
Uniloft Property Fund
MFC-Nichada Thani PF
Nichada-Thani Property Fund 2
Multi-National Residence Fund
TU Dome Residential Complex
Residential
CPN Retail Growth Leasehold Property Fund
Crystal Retail Growth Leasehold Property Fund
Future Park Property Fund
Tesco Lotus Retail Growth Freehold And Leasehold
Property Fund
Trinity Freehold and Leasehold Property Fund
Thai Retail Investment Fund
Talaad Thai Leasehold Property Fund
LH Shopping Centers Leasehold Real Estate Investment
Trust
Retail

Ticker

Freehold/Leasehold

BKKCP
CPNCG
JCP
KPNPF
MIPF
POPF
SSPF
CPTGF
QHPF
TCIF

Freehold
Leasehold
Leasehold
Freehold
Freehold
Leasehold
Freehold
Leasehold
Leasehold
Leasehold

UNIPF
MNIT
MNIT2
MNRF
TU-PF

Freehold
Leasehold
Leasehold
Leasehold
Leasehold

CPNRF
CRYSTAL
FUTUREPF

Leasehold
Leasehold
Leasehold

TLGF
TNPF
TRIF
TTLPF

Freehold and Leasehold


Freehold and Leasehold
Freehold
Leasehold

LHSC

Leasehold

Mkt Cap

Yield (%)

P/NAV

Daily Turnover

(US$)

FY15

(x)

(US$m)

27
140
17
50
106
178
44
269
221
825
1,878
14
11
22
20
5
71
1,028
109
268

6.7
7.1
4.0
6.4
5.8
8.1
2.7
8.0
7.5
5.0
6.1
7.4
5.4
8.7
8.3
6.0
6.0
7.7
7.0

0.8
1.0
1.1
0.9
1.5
1.1
1.0
1.0
0.9
1.1
1.0
0.9
0.5
0.7
0.5
0.3
0.6
1.3
0.9
1.5

0.00
0.15
0.02
0.00
0.10
0.07
0.17
0.08
0.00
0.06
0.00
0.00
0.01
0.01
0.00
0.00
0.56
0.02
0.07

859
20
632
96

6.1
4.3
8.3

1.2
0.5
1.1
1.7

0.47
0.01
0.00
0.00

141
3,153

7.3
5.8

1.0
1.1

0.08
0.15

Source: SET, DBS Vickers

Page 7

Industry Focus
Property Fund/REIT Sector

Regional Comparison
La s t Pri c e

DPU c e n ts

Yi e l d

FYE

1 1 -Se p -1 5

Pri c e Ta rg e t

Up s i d e

2015

2016

2015

2016

R e c o m'd

Dec
Sep
Dec

1.315
1.310
0.950

1.48
1.51
1.12

13%
15%
18%

8.6
9.7
6.9

9.2
9.8
7.1

6.5%
7.4%
7.3%

7.0%
7.5%
7.5%

Buy
Buy
Buy

Dec
Dec
Mar
Sep
Aug

1.890
1.345
0.840
1.895
0.960

2.07
1.69
0.92
2.05
0.99

10%
26%
10%
8%
3%

11.4
10.6
7.6
11.8
5.5

11.8
11.0
7.8
12.0
5.5

6.0%
7.9%
9.0%
6.2%
5.7%

6.2%
8.1%
9.3%
6.3%
5.7%

Buy
Buy
Hold
Buy
Hold

Jun
Dec
Mar
Mar

0.760
1.515
1.320
0.935

0.91
1.58
1.35
1.12

20%
4%
2%
20%

7.6
9.5
8.3
7.3

5.4
10.1
8.6
7.9

10.0%
6.3%
6.3%
7.8%

7.1%
6.6%
6.5%
8.4%

Buy
Hold
Hold
Buy

Mar
Mar
Mar
Mar
Dec
Dec
Dec

2.200
0.840
1.530
1.010
0.610
0.990
0.790

2.30
0.90
1.50
1.11
0.61
1.09
0.86

5%
7%
-2%
10%
0%
10%
9%

14.9
5.6
10.6
7.5
5.0
8.5
6.3

15.0
5.8
10.4
7.8
5.1
8.7
6.4

6.8%
6.7%
6.9%
7.4%
8.2%
8.6%
8.0%

6.8%
6.9%
6.8%
7.7%
8.3%
8.8%
8.1%

Hold
Hold
Hold
Buy
Hold
Hold
Buy

Mar
Dec
Dec
Dec
Sep
Dec
Dec
Mar

0.605
1.210
1.365
0.615
0.725
0.800
2.260
0.950

0.74
1.38
1.65
0.71
0.83
0.98
2.56
0.97

22%
14%
21%
16%
14%
22%
13%
2%

5.6
8.8
11.1
4.7
6.0
6.5
13.1
8.0

5.7
9.2
11.3
4.7
6.1
6.6
12.2
8.7

9.3%
7.3%
8.1%
7.7%
8.3%
8.2%
5.8%
8.4%

9.4%
7.6%
8.3%
7.6%
8.3%
8.2%
5.4%
9.2%

Buy
Buy
Buy
Hold
Hold
Buy
Buy
Hold

Dec
Dec

0.645
1.005

0.90
1.14

40%
13%

6.5
6.4

6.4
7.0

10.0%
6.4%

10.0%
7.0%

Buy
Buy

Ho n g Ko n g (HK$ )
Champion REIT
Fortune REIT
Prosperity REIT
Sunlight REIT
Link REIT

Dec
Dec
Dec
Jun
Mar

3.95
7.50
2.78
3.90
41.25

4.78
9.18
3.06
4.23
48.10

21%
22%
10%
8%
17%

20.0
42.0
16.0
20.0
166.0

19.0
46.0
17.0
22.0
183.0

5.2%
5.6%
5.9%
5.1%
4.0%

4.9%
6.2%
6.2%
5.6%
4.4%

Buy
Buy
Buy
Buy
Hold

M a l a ys i a (R M )
Axis REIT
CapitaMalls Msia Trust
IGB REIT
Pavilion REIT
MRCB-Quill REIT
Sunway REIT

Dec
Dec
Dec
Dec
Dec
Jun

1.66
1.39
1.30
1.52
1.11
1.52

1.75
1.50
1.40
1.60
1.25
1.75

5%
8%
8%
5%
13%
15%

9.9
8.9
7.8
8.0
8.4
8.7

9.0
8.8
8.0
8.1
8.4
9.1

5.9%
6.4%
6.0%
5.2%
7.5%
5.7%

5.4%
6.3%
6.2%
5.3%
7.5%
6.0%

Hold
Buy
Buy
Hold
Hold
Buy

Th a i l a n d (B t)
CP Tower Growth Leasehold
CPN Retail Growth Leasehold Property Fund
Future Park LH Prop Fund
Impact Growth Real Estate Investment Trust
LH Shopping Centers Leasehold
Prime Office LH Prop Fund
Samui Airport Property Fund (Leasehold)
Tesco Lotus Retail Growth
TICON Industrial Growth Leasehold Property Fu

Dec
Dec
Dec
Mar
Dec
Dec
Dec
Feb
Dec

10.00
16.70
18.20
11.20
10.40
13.30
19.60
13.20
12.20

10.70
18.00
22.30
12.00
11.40
14.00
21.40
15.10
12.90

7%
8%
23%
7%
10%
5%
9%
14%
6%

80.0
99.7
127.0
42.0
73.0
108.0
129.6
81.0
93.2

86.0
126.0
133.0
75.0
73.0
111.0
129.6
80.9
93.2

8.0%
6.0%
7.0%
3.8%
7.0%
8.1%
6.6%
6.1%
7.6%

8.6%
7.6%
7.3%
6.4%
7.0%
8.3%
6.6%
6.1%
7.6%

Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy

Si n g a p o re (S$ )
O ffi c e
CapitaLand Commercial Trust
Fraser Commercial Trust
Keppel Reit
R e ta i l
CapitaLand Mall Trust
CapitaLand Retail China Trust
Croesus Retail Trust *
Frasers Centrepoint Trust
SPH REIT
M i xe d (R e ta i l & O ffi c e )
Starhill Global REIT
Suntec REIT
Mapletree Commercial Trust *
Mapletree Greater China Commercial Trust *
I n d u s tri a l
A-Reit *
Ascendas India Trust *
Mapletree Industrial Trust *
Mapletree Logistics Trust *
Cambridge Industrial Trust
Cache Logistics Trust
Soilbuild Business Space Reit
Ho s p i ta l i ty & He a l th c a re
Ascendas Hospitality Trust *
Ascott Residence Trust
CDL Hospitality Trust
Far East Hospitality Trust
Frasers Hospitality Trust
OUE Hospitality Trust
Parkway Life
Religare Health Trust *
O th e rs
IREIT Global
Keppel DC REIT

Page 8

Industry Focus
Property Fund/REIT Sector

Regional Comparison
1 1 -Se p -1 5

Ge a ri n g R a ti o
FY1 5 F

B V Pe r Sh
FY1 5 F

P/B ra ti o

Y/E

La s t Pri c e

Dec
Sep
Dec

1.315
1.310
0.950

19%
36%
37%

1.74
1.67
1.41

Dec
Dec
Mar
Sep
Aug

1.890
1.345
0.840
1.895
0.960

36%
28%
47%
30%
26%

Jun
Dec
Mar
Mar

0.760
1.515
1.320
0.935

Mar
Mar
Mar
Mar
Dec
Dec
Dec

Sh a re Pri c e Pe rfo rma n c e


1M

3M

6M

12M

0.75
0.79
0.67

-4.7%
-7.4%
-9.1%

-16.8%
-11.5%
-17.4%

-22.7%
-10.3%
-22.1%

-21.3%
-5.4%
-23.7%

1.82
1.69
0.94
1.85
0.93

1.04
0.80
0.89
1.02
1.04

-6.0%
-11.2%
-9.7%
-5.7%
-5.4%

-10.9%
-20.7%
-9.7%
-6.2%
-8.1%

-8.7%
-17.5%
-10.6%
-5.7%
-7.3%

-5.3%
-15.4%
-11.1%
-2.8%
-10.3%

36%
35%
36%
41%

0.92
2.07
1.24
1.18

0.83
0.73
1.07
0.79

-8.4%
-8.5%
-2.6%
-7.0%

-11.6%
-13.4%
-10.2%
-10.1%

-7.9%
-18.6%
-13.7%
-9.7%

-7.3%
-16.8%
-9.3%
-1.6%

2.200
0.840
1.530
1.010
0.610
0.990
0.790

34%
35%
35%
39%
36%
40%
36%

2.08
0.68
1.32
1.02
0.68
0.97
0.80

1.06
1.24
1.16
0.99
0.90
1.02
0.99

-4.4%
-9.2%
2.3%
-6.1%
-4.7%
-5.7%
-6.0%

-10.2%
-6.7%
0.7%
-10.2%
-11.6%
-13.9%
-6.0%

-10.9%
-5.6%
0.3%
-17.2%
-12.2%
-14.3%
-1.3%

-6.8%
1.2%
5.9%
-14.4%
-14.7%
-16.1%
0.0%

Mar
Dec
Dec
Dec
Sep
Dec
Dec
Mar

0.605
1.210
1.365
0.615
0.725
0.800
2.260
0.950

37%
39%
35%
32%
40%
42%
36%
15%

0.72
1.35
1.63
0.97
0.94
0.90
1.70
0.94

0.84
0.90
0.84
0.64
0.77
0.89
1.33
1.01

-10.4%
-4.0%
-6.5%
-10.9%
-10.5%
-10.1%
-7.4%
-9.5%

-14.2%
-4.0%
-17.0%
-20.7%
-15.7%
-14.0%
-0.9%
-5.5%

-12.3%
-4.7%
-20.4%
-24.5%
-19.0%
-14.0%
-3.4%
-10.0%

-16.0%
-2.4%
-19.5%
-27.2%
-18.5%
-10.6%
-3.8%
0.0%

Dec
Dec

0.645
1.005

32%
34%

0.75
0.88

0.86
1.15

-4.4%
-8.2%

-6.3%
-4.7%

-6.9%
-2.9%

-16.8%
0.0%

Ho n g Ko n g (HK$ )
Champion REIT
Fortune REIT
Prosperity REIT
Sunlight REIT
Link REIT

Dec
Dec
Dec
Jun
Mar

3.95
7.50
2.78
3.90
41.25

22%
30%
27%
22%
12%

8.36
12.76
4.90
7.99
51.53

0.47
0.59
0.57
0.49
0.80

-6.6%
-7.3%
-4.8%
-0.3%
-6.7%

-12.2%
-4.0%
0.4%
-0.5%
-10.1%

5.9%
-8.5%
-6.7%
4.3%
-13.7%

11.6%
2.3%
6.9%
17.5%
-10.7%

M a l a ys i a (R M )
Axis REIT
CapitaMalls Msia Trust
IGB REIT
Pavilion REIT
MRCB-Quill REIT
Sunway REIT

Dec
Dec
Dec
Dec
Dec
Jun

1.66
1.39
1.30
1.52
1.11
1.52

33%
29%
24%
15%
36%
31%

1.21
1.29
1.06
1.26
1.39
1.26

1.37
1.08
1.22
1.20
0.80
1.21

-0.9%
8.6%
0.8%
5.6%
1.8%
1.3%

-5.4%
-2.1%
-2.3%
0.0%
-4.3%
-8.4%

-6.7%
-4.8%
-2.3%
2.0%
-11.2%
-5.0%

-5.7%
-1.4%
0.8%
10.1%
-5.9%
1.3%

Th a i l a n d (B t)
CP Tower Growth Leasehold
CPN Retail Growth Leasehold Property Fund
Future Park LH Prop Fund
Impact Growth Real Estate Investment Trust
LH Shopping Centers Leasehold
Prime Office LH Prop Fund
Samui Airport Property Fund (Leasehold)
Tesco Lotus Retail Growth
TICON Industrial Growth Leasehold Property Fu

Dec
Dec
Dec
Mar
Dec
Dec
Dec
Feb
Dec

10.00
16.70
18.20
11.20
10.40
19.60
19.60
13.20
12.20

Net Cash
6%
6%
24%
18%
7%
Net Cash
9%
7%

10.34
13.02
12.52
10.80
10.26
11.55
11.04
11.24
10.28

0.97
1.28
1.50
1.04
1.01
1.15
1.78
1.17
1.09

0.0%
0.0%
-1.6%
-1.8%
-3.7%
1.5%
1.6%
-2.2%
0.0%

0.0%
1.2%
1.1%
4.7%
-1.0%
6.4%
9.6%
0.0%
0.0%

0.5%
1.2%
5.3%
8.7%
1.0%
10.8%
12.1%
-0.6%
2.6%

1.5%
-1.2%
4.7%
nm
nm
5.6%
10.8%
-4.6%
13.2%

Si n g a p o re (S$ )
O ffi c e
CapitaLand Commercial Trust
Fraser Commercial Trust
Keppel Reit
R e ta i l
CapitaLand Mall Trust
CapitaLand Retail China Trust
Croesus Retail Trust *
Frasers Centrepoint Trust
SPH REIT
M i xe d (R e ta i l & O ffi c e )
Starhill Global REIT
Suntec REIT
Mapletree Commercial Trust *
Mapletree Greater China Commercial Trust *
I n d u s tri a l
A-Reit *
Ascendas India Trust*
Mapletree Industrial Trust*
Mapletree Logistics Trust*
Cambridge Industrial Trust
Cache Logistics Trust
Soilbuild Business Space Reit
Ho s p i ta l i ty & He a l th c a re
Ascendas Hospitality Trust *
Ascott Residence Trust
CDL Hospitality Trust
Far East Hospitality Trust
Frasers Hospitality Trust
OUE Hospitality
Parkway Life
Religare Health Trust *
O th e rs
IREIT Global
Keppel DC REIT

A-Reit, Ascendas Hospitality Trust, Ascendas India Trust, Croesus Retail Trust, Mapletree Industrials Trust, Mapletree Logistics Trust, Mapletree
Commercial Trust, Mapletree Greater China Commercial Trust, Religare Health Trust
Religare Health Trust (FY16 - 17)
Source: DBS Bank, DBS Vickers, AllianceDBS Research, Bloomberg Finance L.P, Thomson Reuters

Page 9

Industry Focus
Property Fund/REIT Sector

Evolution of Thai Property Funds (PFPOs)/REITs

Number of listed PFPO/REIT


60
3

51

51

Property Funds
40
30
20
10

46

41

35

29

26

2015

2014

2013

2012

2011

2010

Source: SET, DBS Vickers

Market Capitalisation of PFPO/REIT Sector


Btm
350,000
300,000

REITs
Property Funds

250,000
200,000
150,000
100,000
50,000

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

REIT regulations took effect on 1 Jan 2013. The Securities


and Exchange Commission (SEC) has barred existing PFPOs
from increasing capital, and new IPOs of PFPOs from 2014
(except those who had submitted their applications in 2013
and which listing process had not been completed). All new
setups have to be under the REIT structure. Existing PFPOs
can convert to the REIT structure, but there have so far
been no details on the conversion costs. As a result, there
have not been any applications for conversion. Nonetheless,
some larger funds such as CPNRF and TLGF are waiting for
details from the SEC and are likely to convert into the REIT
structure.

REITs

50

2009

The first Thai PFPO, UOB Apartment Property Fund


(UOBAPF, or BOA Apartment Property Fund at that time)
entered the market in late 2003. The sector enjoyed strong
growth in 2005 and 2006, when the listing of several new
PFPOs boosted the sectors market capitalisation
significantly. But growth slowed when the Bank of Thailand
(BOT) introduced the 30% unremunerated reserve
requirement (URR) in late 2006 -for foreign investors who
invested in Thai PFPOs, to prevent speculation on the Thai
baht. But subsequently on 3 Mar 2008, the BOT lifted the
URR for short-term capital inflows, citing an improving
economy. The sectors market capitalisation surged again in
2012-2014 when a number of large funds entered the
market before the expiry of the deadline to set up new
property funds.

Source: SET, DBS Vickers

First REIT listed in 2014. The first Thai REIT, Impact Growth
Real Estate Investment Trust (IMPACT), was listed on the
SET on 1 October 2014. Since then, there have been four
other REIT listings on the SET.
51 PFPOs and 5 REITs listed on the SET currently. Todate,
there are 51 PFPOs and 5 REITs listed on the SET with a
combined market capitalisation of Bt333.4bn (US$9.3bn).
The sector accounts for 2.6% of the SETs total market
capitalisation currently. Initially, these PFPOs were listed
under the Property Sector. But as the number of PFPOs
grew, the SET created a separate Property Fund & REIT
sector in 2009.

Page 10

Growth driven by new listings rather than secondary


offerings. Sector growth in the last decade was driven
mainly by the listing of new PFPOs/REITS, rather than the
growth of existing funds. Of the total, only a few including
CPNRF, TFUND, TLOGIS, and TLGF, have turned to the
market for secondary offerings to acquire new assets. Note
that the maximum gearing allowed for property funds is
only 10% of NAV, meaning that they need to increase
capital for major asset acquisitions as the level of debt alone
would not be sufficient.

Industry Focus
Property Fund/REIT Sector

Key differences between PFPO and REIT


Both PFPO and REIT have the same objective, which is to
invest in income-generating assets. Both must pay out at
least 90% of their net income as dividends, making them
high-yield investment alternatives.

Nonetheless, the legal structure, type of assets they can invest


in, leverage limit, holding restrictions, and taxation of
dividends differ. The key differences are listed below.

Key differences between PFPO and REIT


Topic
General

Property Fund

Legal Structure

Mutual fund

Trust

Minimum Size

Not less than 500 million Baht

Same

Upon establishment: 250

Same

Number of unit holders

REIT

After establishment: 35
Listing of Unit

Investment units must be listed

REIT unit must be listed

Management

Asset management company

REIT Manager, namely an asset management


company or a company with expertise in
managing real estate and is quailed according
to the criteria set by the SEC

Registrar

Not required to be TSD

Requires consent of the SET

Only ones listed on the SECs positive list

Not specified, however the real estate shall not


be used by the lessee to operate immoral or
illegal business

Investment
Type of property in which investment can
be made
Investment in real estate abroad

Not permitted

Permitted

Development of real estate (Green-field


project)

Not permitted

Not exceeding 10% of the total assets

Leverage limit

Not exceeding 10% of the net asset value


(NAV)

Not exceeding 35% of total assets and not


exceeding 60% in the case REIT has received an
investment grade.

Distribution

At least 25% must be offered to the public,


and units must be allocated to all free float
subscribers equally, one board lot at a time,
unit all subscribed units are allocated (Small
Lot First)

Not specified; allocated to free float REIT unit


holders in accordance with the criteria for listing
(no less than 20% of the total trust units and of
each tranche (If any))

Holding Restriction for Any Person of


Group of Persons

No more than 1/3 of the total number of


investment units

No more the 50% of the total number of REIT


unit and of each tranche (if any)

Disclosure

Similar to mutual funds

Similar to listed companies

Annual meeting of unit holders

Not specified

Annually, within four months from the end of


the fiscal year

Codes concerning the acquisition and


disposal of assets / related parties
transactions

Resolution of unit holders not required

Resolution of unit holders holding an aggregate


of not less than 15% of the total REIT unit and
of each tranche (if any)

Fund is exempt from corporate tax

Trust is exempt from corporate tax

In some cases, unit holders are not subject to


tax levied on dividends such as a company
holding units for three months prior and
three months after the date of dividend
payment

REIT unit holders of all types are subject to tax.

Distribution and allocation of units

Tax

Source: SET, DBS Vickers

Page 11

Industry Focus
Property Fund/REIT Sector

Major sponsors
Major sponsors. The following table lists the major
sponsors of the assets for Thai PFPOs/REITs, together with
their current holdings. The top sponsors include TCC Land,
Central Pattana (CPN), Bangkok Land (BLAND), Ek-Chai
Distribution System (TESCO), TICON Industrial Connection
(TICON), and WHA Corporation (WHA).
Benefits to sponsors. Injecting their assets into PFPOs/REITs
is an alternative fund-raising exercise for these companies,
as it helps to unlock the value of their assets and most of
them normally recognise huge disposal gains. The proceeds
were normally used to finance their expansion plans or

develop new properties. They can still own the assets by


taking a stake in the PFPOs/REITs and receive dividend
income from the funds/REITs. Most also retain the property
management role and receive property management fees
from the funds/REITs.
More assets to be injected. Many of these companies still
have a pipeline of assets that can be injected into the REIT.
Among these are TICON and WHA which are now planning
secondary offerings for their REITs. WHA is also planning to
inject their office assets into a new office REIT to be set up.
CPN has a number of assets that can be injected into a REIT
but is waiting for details from the SEC regarding the
conversion into a REIT.

Major sponsors of assets for Thai PFPOs/REITs and their current holdings
Sponsor
Company
CPN

TICON

under TICON Logistic Park


WHA

Investment in
Fund

Mkt Cap

Holding

Mkt Value

(Btm)

(%)

(Btm)

CPNRF

36,948

27%

9,862

CPNCG

5,034

25%

1,259

TFUND

12,185

24%

2,878

TLOGIS

5,090

19%

980

TGROWTH

6,771

25%

1,713

TREIT

3,528

12%

440

WHAPF

10,705

15%

1,606

WHART

3,263

15%

489

HPF

3,995

23%

924

IMPACT

16,604

50%

8,302

TLGF

30,852

25%

7,713

FUTUREPF

9,638

33%

3,212

SPF

18,620

25%

4,674

Asset World Estate

TCIF

29,654

33%

9,786

TVC Investments Ltd.

TCIF

29,654

32%

9,513

Than Tavorn (2012) Ltd.

TCIF

29,654

19%

5,631

Asset World Estate

TRIF

22,723

31%

6,930

Yodying Intertrade

TRIF

22,723

20%

4,440

Asset World Leisure

THIF

30,916

33%

10,208

Panachai Panich

THIF

30,916

18%

5,432

CPTGF

9,670

33%

3,223

HEMRAJ
BLAND under:
Impact Exhibition
Ekchai Distribution (Tesco Lotus)
Rangsit Plaza
BA
TCC Group under:

CP Land

Source: SET, DBS Vickers

Page 12

Industry Focus
Property Fund/REIT Sector

Current status
Sector breakdown by asset ownership. The sector now
comprises 51 PFPOs and 5 REITs. Of the total, 40% hold
freehold assets, 42% hold leasehold assets, and 18% hold
both. For leasehold assets, the remaining leasehold life for
most funds is 20-30 years.

Who invests in PFPO/REITs? Investors in Thai PFPOs/REITs


are mainly locals. Foreign investors in Thai PFPOs/REITs have
increased but are still considered small compared to the
sectors market capitalisation over the last few years.
Foreign ownership (%) of Thai PFPOs/REIT

Asset ownership of Thai PFPOs/REIT


Leasehold
& Freehold
18%

Leasehold
42%
Freehold
40%

Source: SET, DBS Vickers


Source: SET, DBS Vickers

Sector breakdown by business. Retail now make up 34% of


the sectors market capitalisation, followed by Office (20%),
Industrial (17%), and Hotel (14%). The rest are distributed
between Airport (6%), Exhibition Center (5%), Apartment
(2%), and Cineplex (1%).
Sector breakdown by business

Local investors comprise both institutional and retail


investors. Major institutional investors are Social Security
Fund, Government Pension Fund, insurance companies,
banks, universities, sponsors, and mutual funds.
Mutual funds that invest in PFPO/REITs
Fund

NAV
(Btm)

TMB Property Income Plus

TMB A.M.

8,023

One Property Plus Fund

One AM Fund

2,408

One Property Plus Dividend Fund

One AM Fund

972

MFC Property Dividend Fund

MFC Fund

734

MFC Property Wealth Fund

MFC Fund

2,220

Thanachart Fund

1,447

Phatra Asset

1,236

Thanachart Property Sector Fund


Phatra Property Sector Fund
Phatra Property Sector Fund Diviidend
CIMB-Principal Property Income - A
CIMB-Principal Property Income - R
CIMB-Principal Property Income - D

Source: Company, DBS Vickers

By

CIMB-Principal Property Income - C

Phatra Asset
CIMB-Principal
A.M.
CIMB-Principal
A.M.
CIMB-Principal
A.M.
CIMB-Principal
A.M.

61
542
742
199
341

Source: Company, DBS Vickers

Page 13

Industry Focus
Property Fund/REIT Sector

Price Performance
Sector has yielded 13% average annual returns to investors
in last six years. This comprised about 6% price
appreciation and 7% distribution yield p.a. The total returns
are lower than the SET average return of 14% during the
same period, but the level of risk in investing in PFPO/REIT is
much lower. This is mainly because PFPO/REITs normally
invest in recurring income assets which generate steady cash
flows. In addition, it is strictly governed by the SEC to pay
out not less than 90% of net income. The borrowing limit
is also capped at 10% for PFPOs and 35% for REIT; there is
no limit for other stocks.
Total return of investing in Thai PFPO/REIT sector
40%
Distribution Yield
30%

Price Change

20%
10%
0%
-10%
2010

2011

2012

2013

2014

2015

-20%
Source: SET, DBS Vickers

Sector has outperformed the market YTD. The sector index


has inched up 2.4% YTD vs the SETs 7.7% loss as investors
turned to less risky assets amid current high market
volatility.
Thai PFPO/REIT sector index vs SET Index
1.10
1.05
1.00
0.95
0.90
0.85
0.80

SET

0.75

SET PF&REIT

Source: SET, DBS Vickers

Page 14

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

Mar-14

Dec-13

Sep-13

Jun-13

Mar-13

0.70

Most funds/REITs outperformed the market. Of the 56 listed


funds/REITs, 48 have outperformed the market YTD.
An out-performer YTD
Stock

SSPF
WHAPF
CPNCG
SPF
POPF
TGROWTH
QHOP
IMPACT
MIPF
QHPF
MJLF
UOB8TF
FUTUREPF
SIRIP
SPWPF
LUXF
PPF
TLGF
CPTGF
TIF1
WHART
TLOGIS
CPNRF
CRYSTAL
KPNPF
LHSC
TFUND
M-STOR
TTLPF
ERWPF
GOLDPF
JCP
SSTPF
CTARAF
M-PAT
DTCPF
TCIF
BKKCP
LHPF
SSTSS
QHHR
UNIPF
MNIT2
MNIT
M-II
THIF
MONTRI
HPF
TRIF
SBPF
URBNPF
TU-PF
MNRF
TNPF
AMATAR
TREIT

End-2014
(Bt)

Source: SET, DBS Vickers

5.20
9.90
10.30
17.30
11.80
10.90
3.82
10.20
18.50
9.25
12.20
8.20
17.00
10.00
9.30
5.10
10.20
12.40
9.40
7.00
10.00
11.80
16.10
9.70
9.80
10.20
10.40
10.60
19.00
9.60
5.35
10.00
9.40
3.96
9.85
8.55
13.50
9.75
8.60
9.70
8.45
9.80
8.25
3.00
10.00
12.70
9.80
9.50
16.20
9.00
5.15
2.20
8.55
8.70

11-Sep-15
(Bt)

9.55
11.40
11.80
19.60
13.30
12.20
4.24
11.20
20.00
9.95
13.10
8.80
18.20
10.70
9.95
5.45
10.90
13.20
10.00
7.35
10.50
12.30
16.70
10.00
10.00
10.40
10.60
10.70
19.10
9.60
5.35
10.00
9.40
3.94
9.80
8.50
13.40
9.55
8.40
9.45
8.20
9.45
7.90
2.86
9.50
11.80
8.80
8.50
14.30
7.65
4.24
1.74
6.60
4.90
11.10
10.30

Change
(%)

84%
15%
15%
13%
13%
12%
11%
10%
8%
8%
7%
7%
7%
7%
7%
7%
7%
6%
6%
5%
5%
4%
4%
3%
2%
2%
2%
1%
1%
0%
0%
0%
0%
-1%
-1%
-1%
-1%
-2%
-2%
-3%
-3%
-4%
-4%
-5%
-5%
-7%
-10%
-11%
-12%
-15%
-18%
-21%
-23%
-44%
nm
nm

Industry Focus
Property Fund/REIT Sector

Industry Outlook
Office Bright outlook
Favourable demand-supply situation. According to CBRE
(Thailand), the total supply of office space in Bangkok
increased by 86,000 sqm in 1H15 to 8.4m sqm. Among the
major Grade A Buildings completed was Bhiraj Tower at
Emquartier located on Sukhumvit Road, with a total lettable
area of 47,500 sqm. Occupancy rate remained flat at 90.7%
at end-1H15. Net take-up surged to 97,000 sqm in 1H15,
slightly exceeding the total new supply during the period. It
is estimated net take-up of office space for the whole of
2015 will exceed 200,000 sqm.

Future supply not a concern. It is estimated that 103,035


sqm of new supply will be completed in 2H15, 75% of
which are located in non-CBD areas. In 2016, about
119,210 sqm of new supply will enter the market, all of
which will be outside the CBD.
Office: Future supply will be mostly non-CBD
Sqm.
250,000
Non CBD
200,000

CBD

150,000

3,000,000

6%

2,000,000

4%

1,000,000

2%
0%

1H10
2H10
1H11
2H11
1H12
2H12
1H13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15

Stock

Demand

Vacancy Rate

Source: CBRE, DBS Vickers

Net take-up surging in 2015. Despite the slowing economy,


net take-up has been strong YTD, with demand coming
from expanding companies in the finance, logistics,
insurance and e-commerce sectors.
Office: Net take-up is on the rise
Sqm.
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015F

Source: CBRE Thailand, DBS Vickers

2017F

8%

2016F

10%

4,000,000

2015F

12%

5,000,000

2014

6,000,000

50,000

2013

14%

2012

16%

7,000,000

2011

8,000,000

100,000

2010

18%

2009

9,000,000

Vacancy Rate, All Grades

Sqm (Net Lettable Area)

Office: Demand, Supply and Vacancy

Source: CBRE Thailand, DBS Vickers

Office: Future Supply


Building

Lettable
Area
(Sqm)

- 2H15
Major Tower, Thonglor 10
G-Land Tower, Rama 9
Bhiraj Tower, Sathorn
- 2016
The Metropolis, Sukhumvit 39
Bhiraj Tower, BITEC
FYI Center, Rama IV
M Tower, Sukhumvit 62
Rungrojthanakul 4, Ratchadapisek
- 2017
Shinawatra 4, Phaholyothin
Pearl Bangkok, Phaholyothin
Singha Complex, Asoke
Gaysorn Office Tower, Rajdamri
-2018
Whizdom 101, Sukhumvit 101
-2020 and beyond
Super Tower, Rama 9
SJ Infinite II, Bangna KM 7
The Bangkok Mall, Bangna
Suan Lum Night Bazaar, Rama IV

Completion

10,405
65,630
27,000

3Q15
4Q15
2015

13,540
31,880
48,095
9,990
15,705

1Q16
2Q16
4Q16
4Q16
4Q16

13,060
n.a.
36,000
19,500

1Q17
2017
1Q17
2Q17

30,000

2018

94,000
30,000
100,000
137,500

2020
n.a.
n.a.
n.a.

Source: Knight Frank Thailand, DBS Vickers

Page 15

Industry Focus
Property Fund/REIT Sector

Vacancy rate to fall further. With take-up expected to


outpace new supply, we estimate vacancy rate would
continue to fall and there could be a deficit in office space
supply by the year 2020.

Bangkok office rents are still cheap vs regional peers. The


following chart shows prime office rents in major cities in
Asia Pacific. According to Knight Frank, Bangkok office
rents are still one of the cheapest in Asia, averaging
US$29.1/sqm/month in 2Q15 vs US$96.6 in Singapore and
US$173.1 in Hong Kong.

Office: Vacancy should continue to fall


18%

Sqm (Net Lettable Area)

16%
14%
12%
10%
8%
6%
4%
2%

Office: Bangkok office rents vs regional peers


Vacancy Rate, All Grades

10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-

Hong Kong
Singapore
Beijing
Shanghai
Seoul

Stock

Demand

Jakarta

2017F

2016F

2015F

2014

2013

2012

2011

2010

0%

Guangzhou

Vacancy Rate

Bangkok

Source: CBRE Thailand, DBS Vickers

Phnom Penh
Kuala Lumpur

Rising rents. According to Knight Frank Thailand, average


office rental rate in Bangkok increased 7% y-o-y to
Bt674/sqm/month in 2Q15. Rents rose in all segments,
thanks to the strong increase in demand coupled with
moderate new supply. The rising rents and limited new
supply in CBD have led many occupiers to relocate to
emerging business locations, e.g. on Rama 9 and
Ratchadapisek streets where rents are cheaper. Looking
forward, rents should continue to trend up as demand
growth outpaces supply growth.

150

200

Source: Knight Frank, DBS Vickers

Ten office property funds offering average yield of 6.1%.


We expect CP Tower Growth Leasehold Property Fund
(CPTGF) and Prime Office Property Fund (POPF) to offer
2015 yields of 8.1% and 8.0%, respectively, the highest
among peers. Of the total, three hold freehold assets; they
are BKKCP, MIPF, and SSPF. The rest hold leasehold assets.
2015 estimated yield of listed office property funds

1,000

%
9.0

900
800

8.0

700

7.0

600

6.0

500

5.0

POPF

CPTGF

QHPF

CPNCG

BKKCP

2Q2015

Source: SET, DBS Vickers

KPNPF

Source: Knight Frank Thailand, DBS Vickers

MIPF

Non-CBD Grade B

TCIF

Non-CBD Grade A

1.0

JCP

CBD Grade B

2.0

SSPF

CBD Grade A

1Q2015

4Q2014

3Q2014

2Q2014

1Q2014

4Q2013

3Q2013

2Q2013

1Q2013

4Q2012

3Q2012

2Q2012

1Q2012

4Q2011

3Q2011

3.0

2Q2011

4.0

300

1Q2011

400

Page 16

100
US$/sqm/month

Office: Rising rents


Bt per sqm per month

50

Industry Focus
Property Fund/REIT Sector

Retail Competition grows as supply rises


Demand vs supply. Total retail space in Bangkok increased
by 169,040 sqm to 6.9m sqm in 1H15, according to CB
Richard Ellis. The major developments that opened in 1H15
were The EmQuartier with total lettable area of 50,000 sqm,
The Hub which is an expansion of Zeer Rangsit, with a total
area of 70,000 sqm, and The Rest Area community mall
with 3,040 sqm of lettable area at Prachachuen Toll Plaza
on Si Rat Expressway. Take-up rate was about 50,000 sqm
in 1H15, raising occupied space to 6.3m sqm at end-1H15.
Occupancy easing but remains strong. Despite the rising
supply, occupancy rate has eased from 94% at end-2014 to
93.1% at end-1H15, as supply grew faster than demand.
Retail: Demand, Supply and Occupancy
sqm
8,000,000

100%

7,000,000

98%
96%

6,000,000

94%

5,000,000

92%

4,000,000

90%

3,000,000

88%

CentralPlaza WestGate : the biggest mall to open this year.


The project is located on a 100-rai (1 rai =0.4 acre) plot of
land along the West Ring Road at the Bangyai intersection,
where Kanchanapisek Road meets Rattanathibet Road. This
is the largest regional gateway in western Bangkok, with the
most comprehensive transportation system including the
MRT Purple Line, public transportation, piers, a ring road,
expressway and motorway. It is surrounded by a lot of
residential projects.
The mall is developed by Central Pattana (CPN) and was
opened on 28 August 2015 with 83% occupancy rate on
opening date. Occupancy is now over 90%.
The project comprises:
Central Department Store (31,000 sqm)
6 Specialty Anchor stores (14,000 sqm) including Tops
Market, Tops Super Store, Super Sports, PowerBuy,
B2S, Office Mate
4-storey CentralPlaza shopping mall (150,000 sqm),
housing approximately 400 leading retailers
12-screen WestGate Cineplex (10,200 sqm)
Virgin Active Club (3,000 sqm)
Doraemon Comic World (2,600 sqm)

86%

2,000,000

84%

1,000,000

CentralPlaza WestGate

82%

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1H15

80%

Supply (Sqm)

Demand (Sqm)

Occupancy (RHS)

Source: CBRE (Thailand), DBS Vickers

Strong demand from international brands. Take-up


continued to grow with demand coming from international
retailers. According to Jones Lang Lasalle Thailand, a total
of 41 internationally recognised brand-name retailers
recently opened their stores at EmQuartier, and six at The
Emporium.
A lot of new supply entering the market. Colliers
International estimates that 724,920 sqm of new supply will
be completed in 2H15, 88% of which is located in Bangkok
suburban area. These include CentralPlaza WestGate with a
gross area of 500,000 sqm, which aims to be the most
complete Super Regional Mall in Southeast Asia.

Source: CBRE (Thailand), DBS Vickers

Page 17

Industry Focus
Property Fund/REIT Sector

Falling consumer confidence. According to data from the


University of Thai Chamber of Commerce, Thailands
consumer confidence index has been dropping steadily for
eight consecutive months to 72.3 in August, a 15-month
low. This was the result of a combination of factors
including the recent bombing at the Rajchaprasong
intersection, the sharp drop in exports, the low agricultural
produce prices which have led to low farm incomes, a
slowing Chinese economy, global economic uncertainties,
and the sharp correction in the Thai stock market.

Bangkok retail rents still among the cheapest in Asia. The


following chart shows prime retail rents in Asia Pacific.
According to Jones Lang Lasalle, rents in shopping centers in
CBD in Bangkok averaged US$667/sqm/year, still much
lower than US$4,366 in Singapore and US$15,642 in Hong
Kong.
Retail: Asia Pacific shopping centers rents
HK, Central
Sydney
Guangzhou

Consumer Confidence dropped for 8 consecutive months

Shanghai
Melbourne

120
110
100
90
80
70
60
50
40

Brisbane
Singapore
Beijing
Perth
Adelaide
Auckland

CCI Index

Mumbai
Delhi

CCI Index - Current

Bangalore

CCI Index - Future

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

Chennai
Bangkok
Jakarta
Manila
0

Source: Bank of Thailand, DBS Vickers

-5%
-10%

1H15

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

Source: SET, DBS Vickers

TTLPF

0%
50

CRYSTAL

5%

LHSC

100

%
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-

FUTUREPF

10%

TLGF

150

2015 estimated yield of listed retail property funds

CPNRF

20%
15%

2001

20,000

Seven retail property funds offering average yield of 6.7%.


Excluding Trinity Freehold and Leasehold Property Fund
(TNPF) which has not finalised a dividend payment for 2015,
we estimate the seven listed retail property funds are
offeringq an average distribution yield of 6.7% in 2015.

TRIF

25%

Retail sales index


Growth (y-o-y)

200

Page 18

15,000

Source: Jones Lang Lasalle, DBS Vickers

TNPF

Retail sales and growth

Source: Bank of Thailand, DBS Vickers

10,000

Net Rents (US$ /sqm/year)

Retail sales index fell 3.5% y-o-y in 1H15. With consumer


confidence falling amid global economic uncertainties and a
slowing domestic economy, Thailands retail sales index also
fell by 3.5% in 1H15, after falling 5.9% in 2014.

250

5,000

Industry Focus
Property Fund/REIT Sector

Industrial High vacancies


Ready-Built Factories (RBF)
Excess supply. Total new RBF supply increased by 92,000
sqm in 1H15 to 2.5m sqm, according to CB Richard Ellis.
But net take-up rate had slowed to only 10,000 sqm in
1H15 amid the slowing economy. According to Knight
Frank Thailand, as much as 70% of RBF supply is located in
Chonburi, Rayong and Samut Prakan, because these are the
major locations of various industrial hubs and home to
Thailands automotive industry.
RBF: Supply by provinces

Saraburi, 4%

Logistics Property (Warehouses)


Rising vacancies. According to Knight Frank Thailand, total
supply of warehouse rental space increased by 101,327 sqm
in 1H15 to 3.5m sqm at end-1H15. This has dropped from
an increase of 310,000-440,000 sqm semi-annually in the
previous years, as rental warehouse developers slowed
down expansion plans amid weakening demand, which is in
turn the result of deteriorating exports and a slowing
economy. Vacancies rose to 22% in 1H15.
Warehouse: Demand, Supply and Vacancy
Sqm
4,000,000

Prachinburi,
2%
Chachoengsao,
1%

3,500,000
3,000,000

Nonthaburi,
1%

Pathum
Thani, 6%

25%

Supply
Occupied Space
Vacancy (RHS)

20%

2,500,000

15%

2,000,000
Chonburi,
30%

10%

1,500,000

Ayudhya,
16%

1,000,000

5%

500,000

Samut
Prakan, 21%

Rayong,
19%

0%

0
2011

2012

2013

2014

1H15

Source: Knight Frank Thailand, DBS Vickers


Source: Knight Frank Thailand, DBS Vickers

Rents are stagnant. Average rental rate of warehouses


eased to Bt160/sqm/month in 1H15, given weak demand
and rising vacancies. The largest drop was in the Eastern
Seaboard, because of high competition in the area.

Vacancy rate rising steadily since heavy flooding in 2011.


With the increase in supply far outpacing demand, vacancy
rate continued to rise from 33% at end-2014 to 35% at
end-1H15.

Warehouse: Rents were stagnant


RBF: Demand, Supply and Vacancy
Sqm
300,000

Btm/Sqm/Month

175
40%

10%

145

5%

140

0%

135

2015F

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

150

Source: CBRE (Thailand), DBS Vickers

Eastern Seaboard
Pathum-Ayudhya

1H15

50,000

15%

2H14

100,000

SuvarnabhumiBangpakong

155

1H14

20%

150,000

160

2H13

25%

1H13

200,000

Eastern Bangkok

165

2H12

30%

170

1H12

35%

2H11

250,000

1H11

Supply
Demand
Vacancy

Source: CBRE (Thailand), DBS Vickers

Rents remain flat. The average factory rental rate inched up


a meager 1.4% to Bt217/sqm/month in 2Q15, according to
Knight Frank Thailand. With demand likely to remain slow,
we expect rental rate of RBF to remain quite stagnant
during the rest of this year.

Page 19

Industry Focus
Property Fund/REIT Sector

The industrial property funds/REITs that offer the highest


2015 dividend yields include 101 Montri Storage Property
Fund, Hemaraj Industrial Property & Leasehold Fund (HPF)
and Ticon Industrial Growth Leasehold Property Fund
(TGROWTH), which are offering 8.0%, 7.8%, and 7.6%,
respectively.

Industrial REIT offering average 7.1% yield in 2015. There


are now 15 listed property funds/REITs that invest in
industrial assets including ready-built factories, logistic
warehouses and storage. These funds are now offering
generous dividend yield of 7.1% at current price. This is
relatively high, but we are concerned about the
sustainability of the yields of some industrial funds over the
medium- to long-term, given weak demand and still high
vacancy rates. Some funds are now being saved by the
temporary revenue guarantees by the sponsors, which mean
their yields could drop in the future.
2015 estimated yields of listed industrial property funds

%
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0

Source: SET, DBS Vickers

Page 20

TREIT

WHART

WHAPF

TLOGIS

SSTSS

SSTPF

PPF

MONTRI

HPF

TGROWTH

TIF1

TFUND

M-STOR

M-II

AMATAR

Industry Focus
Property Fund/REIT Sector

Major office property funds/REITs


Office
CPNCG

CPTGF

POPF

QHPF

Units (m)

427

967

482

797

Price (Bt)

11.80

10.00

13.30

9.95

Mkt Cap (Btm)

5,034

9,670

6,406

7,930

140

269

178

220

Listing

21-Sep-12

16-Dec-13

12-Apr-11

12-Dec-06

TP (Bt)

12.50

10.80

14.00

n.a.

Upside

6%

8%

5%

n.a.

11.78

10.37

11.40

11.06

1.0

1.0

1.2

0.9

0.84

0.80

1.08

0.74

7.1%

8.0%

8.1%

7.5%

Mkt Cap (US$m)

NAVps (Bt)
P/NAV (x)
DPU (Bt) - 2015
Div. Yield

0.88

0.86

1.11

n.a.

Div. Yield

DPU (Bt) - 2016

7.5%

8.6%

8.3%

n.a.

IRR

8.5%

9.7%

8.6%

n.a.

Asset type

Office

Office

Office

Office

Asset

CentralWorld

CP Tower Silom

UBC II Tower

Q House Ploenchit

CP Tower Fortune
Town
CP Tower Phyathai

Ploenchit Center

Q House Lumpini

Nation Tower

Wave Place

0%

0%

0%

0%

100%

100%

100%

100%

17.3

28.2

22.8

19.5

80,604

70,293

125,184

115,678

4,765

9,660

5,491

7,194

59,119

137,421

43,860

62,193

5,197

9,626

5,754

7,837

Ownership (by leasable area)


Freehold
Leasehold
Remaining leasehold life (yrs)
Leasable area (Sqm)
Cost (Bt)
Acquisition price (Bt/sqm)
Latest appraised value (Btm)

Source: SET, DBS Vickers

Page 21

Industry Focus
Property Fund/REIT Sector

Major retail property funds/REITs


Retail
CPNRF

TLGF

Units (m)

2,212

2,337

530

390

488

Price (Bt)

16.70

13.20

18.20

10.00

10.4

36,948

30,852

9,638

3,900

5,076

1,026

857

268

108

141

Listing

23-Aug-05

19-Mar-12

07-Dec-06

27-Jun-13

26-Dec-14

TP (Bt)

18.00

15.1

22.27

11.44

11.40

Upside

8%

14%

22%

14%

10%

13.06

11.18

12.55

10.95

10.63

1.3

1.2

1.5

0.9

1.0

1.00

0.81

1.27

0.77

0.76

6.0%

6.1%

7.0%

7.7%

7.3%

Mkt Cap (Btm)


Mkt Cap (US$m)

NAVps (Bt)
P/NAV (x)
DPU (Bt) - 2015
Div. Yield
DPU (Bt) - 2016

FUTUREPF

CRYSTAL

LHSC

1.26

0.84

1.33

0.79

0.77

Div. Yield

7.6%

6.3%

7.3%

7.9%

7.4%

IRR

8.8%

7.4%

9.2%

9.3%

8.5%

Asset type

Retail

Retail

Retail

Retail

Retail

Central Rama 2

23 Tesco Lotus
malls

Future Park Rangsit

The Crystal

Terminal 21 Mall

Asset

Central Rama 3

Crystal Design
Center

Central Pinklao
Central Chiangmai
Airport
Ownership (by leasable area)
Freehold
Leasehold
Remaining leasehold life (yrs)
Leasable area (Sqm)
Cost (Bt)
Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 22

0%

60%

0%

0%

0%

100%

40%

100%

100%

100%

34.9

21.7

27.5

28.0

25.0

218,269

331,563

65,500

118,018

34,058

27,973

27,761

6,403

4,132

5,942

128,159

83,729

97,761

35,015

174,456

Industry Focus
Property Fund/REIT Sector

Major industrial property funds/REITs


Indust rial
A MA TA R

HPF

T REIT

WHA PF

WHA RT

T F UND T GROWT H

T L O GIS

Units (m)

358

470

343

939

311

1,150

555

414

Price (Bt)

11.10

8.50

10.30

11.30

10.60

10.60

12.20

12.30

Mkt Cap (Btm)

3,973

3,995

3,528

10,611

3,294

12,185

6,771

5,090

110

111

98

295

92

338

188

141

Mkt Cap (US$m)


Listing

30-J un-15

TP (Bt)

11.0

n.a.

10.4

11.6

11.0

11.0

12.9

11

Upside

-1%

n.a.

1%

3%

4%

4%

6%

-8%

NAV ps (Bt)

10.0

10.1

9.9

10.2

9.8

11.1

10.4

11.8

P/NAV (x)

1.1

0.8

1.0

1.1

1.1

1.0

1.2

1.0

DPU (Bt) - 2015

0.4

0.7

0.6

0.7

0.8

0.6

0.9

0.7

7.6%

7.8%

6.1%

6.3%

7.6%

6.0%

7.6%

5.9%

0.8

n.a.

0.7

0.7

0.8

0.6

1.0

0.8

Div . Yield
DPU (Bt) - 2016

23-J an-14 16-Dec-14 24-Dec-10 18-Dec-14 12-May -15 18-Dec-13 16-Dec-09

Div . Yield

7.5%

n.a.

7.2%

6.5%

7.2%

6.0%

7.9%

6.2%

IRR

9.3%

n.a.

10.3%

9.2%

9.4%

0.0%

8.1%

6.5%

F actories

F actories

Industrial

Industrial

Industrial

Industrial

Asset ty pe
Asset

Industrial Warehouses

88 factories104 factories Warehouses Warehouses Warehouses


F actories

F actories

F actories Warehouses Warehouses


F actories

Ownership (by leasable area)


F reehold

30%

64%

65%

70%

61%

100%

100%

Leasehold

70%

36%

35%

30%

39%

0%

100%

30

n.a.

28-30

22.4

26

n.m.

28.5

n.a.

160,579

150,117

214,523

397,782

342,021

584,550

303,270

243,625

4,750

4,700

4,228

9,780

9,056

11,716

6,003

4,469

29,580

31,309

19,709

24,585

26,479

20,043

19,794

18,344

Remaining leasehold life (y rs)


Leasable area (Sqm)
Cost (Bt)
Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 23

Industry Focus
Property Fund/REIT Sector

Major property funds/REITs in other sectors


Ot hers
IM PA CT

MJ LF

SPF

Units (m)

1482.5

330

950

Price (Bt)

11.20

13.10

19.60

16,604

4,323

18,620

461

120

517

01-Oct-14

18-J ul-07

24-Nov -06

TP (Bt)

12

13.8

21.4

Upside

7%

5%

9%

10.79

12.16

11.08

1.0

1.1

1.8

0.71

1.01

1.30

6.4%

7.7%

6.6%

Mkt Cap (Btm)


Mkt Cap (US$m)
Listing

NAV ps (Bt)
P/NAV (x)
DPU (Bt) - 2015
Div . Yield

0.74

1.03

1.39

Div . Yield

DPU (Bt) - 2016

6.6%

7.9%

7.1%

IRR

8.9%

7.8%

8.4%

Exhibition Center

Lifesty le Entertainment Complex

Airport

Impact Arena

Major Ratchay othin

Samui Airport

Asset ty pe
Asset

Impact F orum

Major Rangsit

Impact Exhibition 1-8

Suzuki Av enue Ratchay othin

Challenger Hall
Ownership (by leasable area)
F reehold
Leasehold
Remaining leasehold life (yrs)
Leasable area (Sqm)
Cost (Bt)
Acquisition price (Bt/sqm)

Source: SET, DBS Vickers

Page 24

100%

100%

0%

0%

0%

100%

n.a.

30.8

21.0

122,165

45,194

n.a.

19,601

3,194

9,301

160,448

70,675

n.m.

Industry Focus
Property Fund/REIT Sector

THAILAND STOCK PROFILES

Page 25

Thailand Company Guide

CP Tower Growth Leasehold


Edition 1 Version 1 | Bloomberg: CPTGF TB | Reuters: CPTGFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

LOW RISK BUT ATTRACTIVE YIELD

Last Traded Price: Bt10.00 (SET : 1,381.80)


Price Target : Bt10.80 (9% upside)

BUY, with Bt10.80 TP based on DCF valuation. CPTGF is


offering attractive distribution yield of 8.0% (FY15F), payable
quarterly. The fund invests in leasehold rights to three office
buildings that are strategically located in the prime business
areas of Bangkok, including Silom, Fortune Town and
Phayathai area. Note that these buildings also offer retail rental
space. The office buildings currently enjoy high average
occupancy rate of 98%, except for office space of C.P. Tower
II (Fortune Town) which is at 93% given the location and age
of the building.

Potential Catalyst: Strong rental reversion


Where we differ: n.a.
Analyst
Thailand Research Team +662 658 1222
Nantika WIANGPHOEM +662 657 7836
nantikaw@th.dbsvickers.com

Price Relative
Bt

Relative Index

Low risks, high quality tenants. The main contracts with anchor
tenant C.P. group and its subsidiaries, Tesco Lotus, and public
sector clients, which cover 34%, 6% and 5% of total lettable
area, respectively, are subject to 10% rental reversion next
year. And, 52 other contracts which account for 9.4% of total
revenue are expiring in FY16 and subject to renewals at 5%
higher rents, at least.

209

10.7

189
10.2

169

9.7

149
129

9.2

109
8.7
8.2
Dec-13

89
69
May-14

Oct-14

CP Tower Growth Leasehold (LHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

Mar-15

Aug-15

Relative SET INDEX (RHS)

2014A
1,307
1,169
727
733
0.75
nm
0.76
nm
10.31
13.2
7.6
1.0
0.0
N/A

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
1,348
1,208
757
771
0.78
4
0.80
5
10.35
12.7
8.0
1.0
0.0
7.6

2016F
1,452
1,301
824
833
0.85
9
0.86
8
10.36
11.7
8.7
1.0
0.0
8.2

2017F
1,469
1,316
869
843
0.90
6
0.87
1
10.39
11.1
8.8
1.0
0.0
8.7

N/A
B: 0

N/A
S: 0

N/A
H: 0

Valuation:
We value CPTGF at Bt10.80 based on DCF valuation (WACC:
6.8%).
Key Risks to Our View:
Key risks are (i) lower-than-expected rental reversion, and (ii)
weaker-than-expected occupancy rate.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
CPL Group Pcl. (%)
KTB (%)
Social Security Office (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

967
9,670 / 269

33.3
15.0
15.0
50.6
0.20

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

VICKERS SECURITIES

Company Guide
CP Tower Growth Leasehold
Net Property Income and Margins (%)

800

92.9%

600

90.9%

400

88.9%

200

86.9%

84.9%

2014A

2015F

2016F

Net Property Income

2017F

Net Property Income Margin %

Net Property Income and Margins (%)


50

73%

45

72%

40

71%

35
30

70%

25

69%

20

68%

15

67%

10

65%

Net Property Income

2Q2015

66%

1Q2015

4Q2014

Low risk with high profile tenants. The main contracts with
anchor tenant C.P. group and its subsidiaries, Tesco Lotus,
and public sector clients, which cover 34%, 6% and 5% of
total lettable area, respectively, are subject to 10% rental
reversion next year. And, 52 other contracts which account
for 9.4% of total revenue are expiring in FY16 and subject
to renewals at 5% higher rents, at least.

94.9%

1,000

3Q2014

Positive rental reversion to drive growth. With the prime


area of each building, we expect growth to come from
rental reversion (estimated at 3.0 - 5.0% p.a. for retail rental
space and +10% every three years for office rental space).
Also, the geographical diversification helps to reduce
concentration risk.

96.9%

1,200

2Q2014

Earnings Drivers:
Invests in leasehold rights to three office buildings in
Bangkoks prime areas. These are successful office buildings
in good locations with 98% average occupancy rate. The
Funds assets include i) C.P. Tower I (Silom), ii) C.P. Tower II
(Fortune Town), iii) C.P. Tower III (Phayathai). With all of the
assets being in prime locations, the Fund stands to benefit
from future rental rate hikes. The remaining tenure of the
lease is about 29 years.

1,400 Bt m

1Q2014

CRITICAL DATA POINTS TO WATCH

Net Property Income Margin %

Distribution Paid / Net Operating CF


(x)

0.5

0.0
2014A

2015F

2016F

2017F

-0.5

Strong occupancy record. Data from 2010-2015 for office


rental shows that the historical average occupancy rate for
C.P. Tower I, II & III were 100%, 99% and 100%, with
occupancy increasing by 3.3%, 5.5% and 16.3% CAGR,
respectively.

-1.0
-1.5

Net Asset Value / Unit

For retail space, the average occupancy rate for C.P. Tower I
and II were 99% and 97%, growing by 3.0% and 7.8%
CAGR, respectively. Occupancy at C.P. Tower III had risen
from 46.4% in 2010 to 100% in 2015, or at 8.4% CAGR.
Payout assumptions. We currently assumed 97%payout ratio
throughout our forecast period. CPTGF has paid Bt0.20
quarterly DPU in 1Q15 and 2Q15, respectively. In addition,
the fund has announced par reduction of Bt0.004 in both
1Q15 and 2Q15.

Occupancy rate in 1H15


C.P. Tower 1 C.P. Tower 2 C.P. Tower 3
(Fortune
(Silom)
Town)
(Phayathai)
Office rental space
Total Office Rental Space
(sqm)

35,717

25,414

9,163

Occupancy rates

100%

92%

97%

Total leasable space (sqm)

9,075

46,528

7,850

Occupancy rates

98%

98%*

97%

Retail rental space

* excluding OR of Tesco Lotus = 100*


Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 27

Company Guide
CP Tower Growth Leasehold
ROE (%)

Balance Sheet:
Currently, the fund is debt-free.

8.0%
7.0%

6.0%

Share Price Drivers:


Strong rental reversion. Strong rental reversion could lift
rental income and distribution per unit.

5.0%

4.0%
3.0%
2.0%

Attractive yield. CPTGF is offering attractive annual yield of


about 8%, compared to 3.0% for 10-year Thai government
bonds and 3.6-3.9% dividend yields for stocks under DBS
coverage (75% of the SET market cap) in FY15-16F.

1.0%
0.0%
2015F

2016F

2017F

Distribution Yield (%)


10.0%

Key Risks:
Economic slowdown
Economic slowdown should result in weaker-than-expected
occupancy rate and slower-than-expected rental reversion,
which would limit the Funds growth, and hence, DPU.

9.0%
8.0%
7.0%
6.0%
5.0%
4.0%

COMPANY BACKGROUND
CPTGF is a property fund that invests in leasehold rights to
three office buildings in Bangkoks prime business areas with
a total leasable area of 132,191 sqm. The assets are C.P.
Tower I (Silom), C.P. Tower II (Fortune Town), and C.P.
Tower III (Phayathai). The key anchor tenants are C.P. group
and its subsidiaries, Tesco Lotus, and also public sector
clients, which cover 34%, 6% and 5% of total lettable area,
respectively.

3.0%
2014A

2015F

2016F

2017F

PB Band (x)

For the office rental space, CPTGF will renew the rental
contract and revise up the rental rate by 10% with the
tenants every 3 years
The fund was listed on the Stock Exchange of Thailand on
16 December 2013. The IPO price was Bt10.15/sh. C.P. Land
Public Company Limited is the funds sponsor, a major
shareholder with 33.33% stake, and the Property Manager.

Details of assets in CPTGFs portfolio

Assets

Appraised
Value (Btm)

Remaining Leasehold
(Years)

C.P. Tower I (Silom)

3,979.86

28

C.P. Tower II
(Fortune Town)

4,752.29

28

853.90

28

C.P. Tower III

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 28

VICKERS SECURITIES

Company Guide
CP Tower Growth Leasehold

Key Assumptions
FY Dec
C.P. Tower I (Silom)
Office rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
Retail rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
C.P. Tower II (Fortune)
Town)
Office rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
Retail rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
C.P. Tower III (Phayathai)
Office rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
Retail rental space
Leasable area (sqm)
Occupancy
Rents (bt/sqm/month)
Dividend payout ratio

Income Statement (Bt m)


FY Dec
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

2014A

2015F

2016F

2017F

35,716
99%
840

35,716
100%
840

35,716
100%
924

35,716
100%
924

7,792
98%
949

7,792
98%
996

7,792
98%
1046

7,792
98%
1088

25,413
93%
600

25,413
93%
600

25,413
93%
660

25,413
93%
660

46,528
99%
855

46,528
99%
895

46,528
99%
943

46,528
97%
978

9,162
99%
576

9,162
100%
576

9,162
100%
634

9,162
100%
634

7,850
98%
788
96%

7,850
98%
828
97%

7,850
98%
869
97%

7,850
98%
904
97%

2014A

2015F

2016F

2017F

1,307
(139)
1,169
(451)
3
7
3
730
0
0
0
730
727
14
733

1,348
(140)
1,208
(456)
3
2
0
757
0
0
0
757
757
0
771

1,452
(151)
1,301
(484)
3
3
0
824
0
0
0
824
824
0
833

1,469
(152)
1,316
(454)
3
4
0
869
0
0
0
869
869
0
843

N/A
nm
nm
95.8
89.4
55.8
56.1

3.1
3.4
3.8
97.0
89.6
56.2
57.2

7.7
7.7
8.7
97.0
89.6
56.7
57.4

1.2
1.2
5.5
97.0
89.6
59.2
57.4

34.5

33.8

33.3

30.9

N/A
N/A
N/A
NM

7.6
7.3
7.5
NM

8.2
7.9
8.2
NM

8.7
8.3
8.6
NM

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 29

Company Guide
CP Tower Growth Leasehold

Quarterly / Interim Income Statement (Bt m)


FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

329
(105)
224
(44)
1
0
0
182
0
0
182
182
10
192

326
(91)
236
(47)
0
3
2
194
0
0
194
194
7
201

332
(107)
225
(49)
1
3
3
182
0
0
182
182
7
189

333
(94)
238
(46)
1
2
(25)
171
0
0
171
171
34
205

341
(102)
239
(43)
1
1
31
230
0
0
230
230
(22)
208

3
(1)
5
68.2
94.8

(1)
5
7
72.2
95.2

2
(5)
(6)
67.7
95.3

0
6
(6)
71.6
97.3

3
0
34
70.1
96.7

Balance Sheet (Bt m)


FY Dec

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

9,651
0
561
0
64
80
10,355

9,651
0
649
0
66
43
10,408

9,651
0
715
0
71
8
10,444

9,651
0
747
0
71
8
10,477

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
64
322
0
0
9,969
0
10,355

0
66
332
0
0
10,010
0
10,408

0
71
356
0
0
10,016
0
10,444

0
72
360
0
0
10,045
0
10,477

(243)
561

(290)
649

(348)
715

(352)
747

1.8
1.6
0.0
NA

1.9
1.8
0.0
NA

1.9
1.8
0.0
NA

1.9
1.9
0.0
NA

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 30

VICKERS SECURITIES

Company Guide
CP Tower Growth Leasehold

Cash Flow Statement (Bt m)


FY Dec

2014A

2015F

2016F

2017F

Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

730
0
0
0
(871)
(3)
(144)
0
(402)
0
0
0
(402)
(553)
0
(29)
0
(582)
0
(1,129)

757
0
0
0
93
0
850
0
0
0
0
0
0
(761)
0
0
0
(761)
0
89

824
0
0
0
59
0
883
0
0
0
0
0
0
(817)
0
0
0
(817)
0
65

869
0
0
0
4
0
873
0
0
0
0
0
0
(841)
0
0
0
(841)
0
33

0.8
(0.1)

0.8
0.9

0.9
0.9

0.9
0.9

Operating CFPS (Bt)


Free CFPS (Bt)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 31

Thailand Company Guide

CPN Retail Growth Property Fund


Edition 1 Version 1 | Bloomberg: CPNRF TB | Reuters: CPNRu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

DIVIDEND HICCUP

Last Traded Price: Bt16.70 (SET : 1,381.72)


Price Target : Bt18.00 (8% upside) (Prev Bt18.00)
Potential Catalyst: Strong rental reversion, converts to a REIT
Where we differ: We have assumed more conservative occupancy and
rental growth assumptions
Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com

DPU to surge in 2016 and 2017. Major renovation is now


under way at CentralPlaza PInklao mall, which contributes
22% of the funds total revenue. We estimate DPU will drop
by 25% in 2015 because of revenue lost during the
renovation. But, DPU will surge in 2016 and 2017 after the
renovation is completed; the management estimates rents at
CentralPlaza Pinklao should increase by about 9-10%.

Price Relative
Bt

Relative Index
212

20.4

192

18.4

172

16.4

152

132

14.4

112
12.4
10.4
Sep-11

92
Sep-12

Sep-13

Sep-14

72
Sep-15

CPN Retail Growth Property Fund (LHS)


Relative SET INDEX (RHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

2014A
3,185
3,024
3,211
2,684
1.62
(2)
1.33
8
12.52
10.3
7.9
1.3
6.4
14.1

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
2,948
2,776
3,483
2,373
1.57
(3)
1.00
(25)
13.02
10.6
6.0
1.3
6.0
12.3

2016F
3,616
3,414
3,004
3,004
1.36
(14)
1.26
27
13.18
12.3
7.6
1.3
6.0
10.4

2017F
3,970
3,715
3,297
3,297
1.49
10
1.39
10
13.32
11.2
8.3
1.3
5.3
11.2

0
1.17
B: 2

0
1.37
S: 1

0
1.43
H: 1

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Reiterate BUY, Bt18.00 TP (DCF valuation). CPNRF is Thailands


largest property fund and is one of the most liquid property
funds in Thailand. It has strong recurring income base from
four successful CentralPlaza shopping malls in diversified
locations. The fund now offers generous dividend yield of
6.0% for 2015 (payable quarterly), a hefty premium over Thai
10-year government bond yield of 2.8%. And yields should
rise to 7.7% in 2016 and 8.5% in 2017 following the
completion of major renovation at CentralPlaza Pinklao.

Conversion to REIT structure could lift future yields. CPNRF is


awaiting details on the total costs to convert from the existing
property fund structure to a REIT. The fund would like to
convert to a REIT and grow by acquiring more assets from
sponsor Central Pattana (CPN). With the larger trust size and
higher gearing allowed under the REIT structure, we estimate
distribution yield under a REIT structure would be higher.
Valuation:
Our target price for CPNRF is Bt18, based on discounted cash
flow (DCF) valuation methodology.
Key Risks to Our View:
Key risks are (i) the lower-than-expected occupancy rate, and
(ii) weaker-than-expected rental rate reversion.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Central Pattana (%)
Mrs.Arunee Chan (%)
Government Savings Bank (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

2,212
36,948 / 1,025
26.7
3.4
3.1
66.9
0.52

VICKERS SECURITIES

Company Guide
CPN Retail Growth Property Fund

CRITICAL DATA POINTS TO WATCH


Earnings Drivers:
A portfolio of four successful malls in diversified locations.
CPNRF currently operates four successful shopping malls in
Thailand, three of which are located in Bangkok and one in
Chiangmai. The four malls are CentralPlaza Rama 2,
CentralPlaza Rama 3, CentralPlaza Pinklao, and CentralPlaza
Chiangmai Airport. Average occupancy rate at the four malls
had dropped to 90.9% at end-2Q15 from 96.6% at end2014, as CentralPlaza PInklao is under renovation.

Assets in the Portfolio


Assets

Leasable

Occupancy
(%)
Dec-14
Mar-15

Area
(Sqm)

Jun-15

Central Plaza Rama 2

88,038

96.5

95.6

96.0

Central Plaza Rama 3

37,324

93.8

90.8

90.7

Central Pinklao (Mall)

21,829

98.3

76.5

50.2

Central Pinklao (Office)

33,760

96.2

97.0

97.5

Central Chiangmai

37,307

98.9

97.5

96.7

218,258

96.6

93.4

90.9

Total

Rental Structure

Major renovation at CentralPlaza Pinklao. This project


currently contributes 27% of the funds total revenue. The
renovation includes improvements to the building and facade,
decoration of common areas, expansion of leasable area at
the mall by 5,820 sqm (27%), and revising merchandise mix
to meet customer needs. The renovation will be done in two
phases, covering 85% of the mall area in 2Q15-4Q15, and
the remaining 15% in 1Q16-2Q16. The mall will remain open
during the renovation period. Total investment cost for the
project is Bt350m, and estimated IRR is 11%.

Assets

Potential DPU hiccup in 2015. We estimate the funds DPU


will drop by 25% in 2015, given revenue lost during the
renovation. But, it will surge in 2016 and 2017 after the
renovation is completed. Management estimates rents would
increase by about 9-10% after the renovation.

3,500

Fixed

% of

Rate

Sales

Central Plaza Rama 2

52%

48%

Central Plaza Rama 3

71%

29%

Central Pinklao (Mall)

95%

5%

100%

0%

72%

28%

Central Pinklao (Office)


Central Chiangmai

Net Property Income and Margins (%)


Bt m

Rental rate reversion. CPNRF managed to renew and sign 81


new leases covering 10,268 sqm, or 5% of total leasable area
in 1H15 at average rental reversion rate of 5.8% p.a. This is
impressive considering the weak domestic consumption YTD.
Going forward, we have assumed CPNRF will grow rental rate
by about 5% p.a. Note that leases for 19% of leasable area
will expire in 2H15, 22% in 2016, and 23% in 2017.

102.5%

3,000

100.5%

2,500

98.5%

2,000

96.5%

1,500

94.5%

1,000

92.5%

500

90.5%

88.5%

2013A

2014A

Net Property Income

2015F

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%)

Converting to REIT could lift future yields. CPNRF is awaiting


further details on the transaction costs involved. The fund
would like to convert to a REIT and grow by acquiring more
assets from sponsor CPN. A REIT can gear up to 35% of total
assets and to 60% of its assets if it has an investment grade
credit rating, compared with 10% maximum gearing for a
property fund. We estimate the larger trust size and higher
gearing allowed under the REIT structure would lift
distribution yields.

Distribtuion Paid / Net Operating CF


(x)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
2013A

2014A

2015F

2016F

2017F

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 33

Company Guide
CPN Retail Growth Property Fund

Balance Sheet:
Net debt amounted to Bt1.95bn, and net gearing reached
6.8% at end-2Q15. This is within the 10% maximum
gearing allowed for property funds.

Aggregate Leverage (%)

6.0%
5.0%
4.0%

Share Price Drivers:


Strong rental reversion. Strong rental reversion could lift
rental income and distribution per unit.

3.0%

2.0%
1.0%
0.0%
2013A

Conversion to a REIT structure. The successful conversion to a


REIT structure would mean the current Fund can gear up
further and rely less on equity financing. This should lift DPU
and yields.
Key Risks:
Political unrest & slowing economy. Political unrest and a
slowing economy could hurt consumer confidence and delay
spending, and in turn affect the potential for rental rate
hikes.

2014A

2015F

2016F

2017F

2016F

2017F

2016F

2017F

ROE (%)
14.0%
12.0%
10.0%
8.0%
6.0%

4.0%
2.0%

Acquisition-led growth is stalled unless the Fund converts to


a REIT. CPNRF and all property funds can no longer increase
capital to acquire additional assets. To be able to grow the
fund size, the fund needs to convert to a REIT. Further
details, e.g. the related transaction costs, have yet to be
announced.

0.0%
2013A

2014A

2015F

Distribution Yield (%)


10.0%
9.0%
8.0%

COMPANY BACKGROUND
CPNRF is Thailand's largest property fund by market CPNRF
is Thailand's largest property fund by market capitalisation.
The fund invests in leasehold rights to four retail assets with
a total gross area of 685,442 sqm and total leasable area of
218,258 sqm. The assets are CentralPlaza Rama 2,
CentralPlaza Rama 3, CentralPlaza Pinklao, and CentralPlaza
Chiangmai Airport. The remaining leasehold life of the
assets is currently 34.9 years. The fund was listed on the
Stock Exchange of Thailand on 23 August 2005. CPN is
the funds sponsor, a major shareholder with 26.7% stake,
and the Property Manager.

7.0%
6.0%

5.0%
4.0%
3.0%
2.0%
2013A

2014A

2015F

PB Band (x)

The followings show details of assets in CPNRFs portfolio


together with the appraised value and remaining leasehold
life of each asset.
Assets
Central Plaza Rama 2
Central Plaza Rama 3
Central Plaza Pinklao
Central Plaza Chiangmai Airport
Total

Appraised
Value
(Btm)
6,532
8,216
5,439
10,856
31,043

ASIAN INSIGHTS
Page 34

Remaining
Leasehold
(Years)
10.0
80.0
9.3
28.7
34.9

Source: Company, DBS Vickers

VICKERS SECURITIES

Company Guide
CPN Retail Growth Property Fund

Key Assumptions
FY Dec
Leasable Area (Sqm)
Occupancy
Occupied Area (Sqm)
Average rents
(Bt/sqm/month)
Rental growth
Total revenue (Btm)
Dividend payout

2013A

2014A

2015F

2016F

2017F

182,204
97.2%
177,054
1218.86
9%
2,590
93%

218,539
92.5%
202,194
1312.74
8%
3,185
98%

218,258
85.2%
186,000
1320.85
1%
2,948
93%

224,078
94.0%
210,724
1423.83
8%
3,600
93%

224,078
96.2%
215,553
1526.95
7%
3,950
93%

2013A

2014A

2015F

2016F

2017F

1,062
622
906

1,146
640
933
522
3,185

1,180
680
292
792
2,944

1,239
752
1,040
831
3,862

1,300
786
1,248
873
4,207

40%
23%
10%
27%
100%

32%
19%
27%
22%
100%

31%
19%
30%
21%
100%

Segmental Breakdown
FY Dec

Revenues (Bt m)
Central Rama 2
Central Rama 3
Central Pinklao
Central Chiangmai Airport
Total
Revenue Breakdown
Central Rama 2
Central Rama 3
Central Pinklao
Central Chiangmai Airport
Total

100%

36%
20%
29%
16%
100%

Income Statement (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

2,590
(176)
2,413
(357)
97
(1)
538
2,691
0
0
0
2,691
2,691
(538)
2,152

3,185
(161)
3,024
(409)
112
(43)
527
3,211
0
0
0
3,211
3,211
(527)
2,684

2,948
(172)
2,776
(476)
118
(44)
1,111
3,483
0
0
0
3,483
3,483
(1,111)
2,373

3,616
(203)
3,414
(486)
119
(43)
0
3,004
0
0
0
3,004
3,004
0
3,004

3,970
(254)
3,715
(505)
120
(34)
0
3,297
0
0
0
3,297
3,297
0
3,297

3.1
3.5
12.9
93.0
93.2
103.9
83.1

23.0
25.3
19.3
100.5
94.9
100.8
84.3

(7.4)
(8.2)
8.5
93.0
94.2
118.2
80.5

22.7
23.0
(13.8)
93.0
94.4
83.1
83.1

9.8
8.8
9.7
93.0
93.6
83.0
83.0

13.8

12.8

16.2

13.4

12.7

15.2
13.8
11.4
2,155.7

14.1
12.6
10.9
60.3

12.3
11.1
7.6
51.7

10.4
9.3
9.5
67.9

11.2
10.1
10.3
94.9

Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

2,590
41%
24%
35%

Major renovation at
CentralPlaza Pinklao

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 35

Company Guide
CPN Retail Growth Property Fund

Quarterly / Interim Income Statement (Bt m)


FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

800
(28)
771
(107)
25
(9)
170
851
0
0
851
851
N/A
N/A

855
(28)
828
(111)
27
(16)
108
835
0
0
835
835
N/A
N/A

861
(30)
831
(134)
31
(15)
(38)
674
0
0
674
674
N/A
N/A

845
(27)
818
(136)
23
(15)
944
1,633
0
0
1,633
1,633
N/A
N/A

742
(28)
715
(132)
24
(17)
116
705
0
0
732
732
N/A
N/A

19
20
0
96.5
104.9

7
7
(2)
96.8
98.3

1
0
(19)
96.5
99.5

(2)
(2)
142
96.8
97.3

(12)
(13)
(55)
96.2
89.8

Balance Sheet (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

18,535
893
351
0
0
0
19,780

29,920
768
304
0
0
0
30,991

31,291
499
210
0
0
0
32,000

31,401
499
663
0
0
0
32,563

31,411
499
832
0
0
0
32,742

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
802
811
340
0
17,827
0
19,780

0
994
352
1,955
0
27,690
0
30,991

0
920
352
1,917
0
28,811
0
32,000

0
1,129
352
1,915
0
29,168
0
32,563

0
1,239
352
1,685
0
29,467
0
32,743

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

(1,613)
11

(1,346)
(1,651)

(1,272)
(1,707)

(1,481)
(1,252)

(1,591)
(853)

0.2
0.2
1.8
8.9

0.2
0.2
6.4
6.4

0.2
0.2
6.0
6.8

0.4
0.4
6.0
6.3

0.5
0.5
5.3
6.3

Unrealized gain from asset


revaluation

Stable gearing

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 36

VICKERS SECURITIES

Company Guide
CPN Retail Growth Property Fund

Cash Flow Statement (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

2,691
0
0
0
(32)
(538)
2,120
(97)
0
0
0
0
(97)
(1,990)
(95)
0
0
(2,085)
0
(62)

3,211
0
0
0
118
(527)
2,801
(10,742)
0
0
0
0
(10,742)
(2,480)
1,615
8,642
0
7,777
0
(163)

3,483
0
0
0
(74)
(1,111)
2,299
(260)
0
0
0
0
(260)
(2,363)
(38)
0
0
(2,401)
0
(363)

3,004
0
0
0
209
0
3,213
(110)
0
0
0
0
(110)
(2,647)
(2)
0
0
(2,649)
0
453

3,297
0
0
0
110
0
3,407
(10)
0
0
0
0
(10)
(2,998)
(230)
0
1
(3,227)
0
170

1.3
1.2

1.4
(4.0)

1.1
0.9

1.4
1.4

1.5
1.5

Operating CFPS (Bt)


Free CFPS (Bt)

Acquisition of
CentralPlaza
Chiangmai Airport

Source: Company, DBS Vickers


Target Price & Ratings History
17.70

Bt
S.No .

17.20

1:
2:
3:
4:

16.70

Ta rg e t
Pri c e
18.00
18.00
18.00
18.00

R a ti n g
Buy
Buy
Buy
Buy

2
16.20

Cl o s i n g
Pri c e
02 Mar 15
16.40
02 Apr 15
16.20
18 May 15
16.40
31 Aug 15
16.30
Da te

15.70

15.20
Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 37

Thailand Company Guide

Future Park Leasehold Property Fund


Edition 1 Version 1 | Bloomberg: FUTUREPF TB | Reuters: FUTUREPFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

STABLE INCOME AND YIELD

Last Traded Price: Bt18.20 (SET : 1,381.72)


Price Target : Bt22.30 (23% upside)
Potential Catalyst: Strong economic recovery could lift occupancy and
rents more than we assumed in our earnings model
Where we differ: n.a.
Analyst
Wasu MATTANAPOTCHANART +662 657 7833
WasuM@th.dbsvickers.com

Rising mall traffic will support future rate hikes. Mall


traffic has been rising since 2006, except during the major
flooding in 2011 and 2013. Daily customer count has risen
from 122k in 2006 to 164k in 2014. We conservatively
forecast 2.2% increase in rental rate for this year because of
the slower economy, but assumed it will improve to 3.5% and
3.2% in FY16 and FY17, respectively, and stabilize at 3% from
FY18 onwards.

Price Relative
Bt

Relative Index

20.8
209
18.8

189
169

16.8
149
14.8

BUY with DCF-based TP of Bt22.30. Amid the current lowinterest-rate environment, the Fund offers attractive 7.1% yield
in FY15, higher than 10-year government bond yield of 2.65%
and dividend yield of 3.6% for DBS Thailand universe.
Supported by growing mall traffic, revenue growth should be
sustainable at c.3% p.a.

129
109

12.8
89
10.8
Sep-11

Sep-12

Sep-13

Future Park LH Prop Fund (LHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

Sep-14

69
Sep-15

Relative SET INDEX (RHS)

2014A
924
751
797
733
1.51
(2)
1.25
5
12.31
12.1
6.9
1.5
6.5
12.4

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
954
767
781
750
1.47
(2)
1.27
2
12.52
12.3
7.0
1.5
5.7
11.9

2016F
987
794
780
780
1.47
0
1.33
4
12.68
12.4
7.3
1.4
4.8
11.7

2017F
1,021
821
810
810
1.53
4
1.38
4
12.84
11.9
7.6
1.4
4.0
12.0

N/A
B: 0

N/A
S: 0

N/A
H: 0

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Valuation:
We value FUTUREPF at Bt22.30, based on DCF valuation
(WACC: 6.9%, Terminal value of Bt0 at the end of 2041). Even
with conservative assumptions of 3% annual increase in rental
income and stable occupancy rate for most of the 27 years,
the Fund still offers 25% upside to our target price.
Key Risks to Our View:
Leases for 40% of the Funds leasable area will expire in FY16.
While we expect occupancy rate to be stable and rents to
increase by 3.5% next year, the extended economic slowdown
could result in lower-than-expected lease renewals and rental
hikes.

At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Rangsit Plaza Co Ltd (%)
Thai Tapioca Dev Institute (%)
Bangkok Bank Pcl (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

530
9,638 / 267
33.3
5.7
5.3
55.7
0.08

VICKERS SECURITIES

Company Guide
Future Park Leasehold Property Fund
Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH

Bt m

900

86.0%

600
84.0%

500

82.0%

400
300

80.0%

200
78.0%

100
0

76.0%

2013A

2014A

2015F

Net Property Income

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%)

77%

10

76%

75%

74%

Net Property Income

2Q2015

78%

15

1Q2015

79%

20

4Q2014

80%

25

3Q2014

81%

30

2Q2014

82%

35

1Q2014

83%

40

4Q2013

84%

45

3Q2013

50

2Q2013

Bridge construction will not affect earnings


Rangsit Plaza, the other owner of Future Park Rangsit mall, is
closing FUTUREPFs share of leasable area (1,336 sqm) in
order to construct a bridge to link the old building and the
upcoming new phase. That is why occupancy rate at the main
area fell from 97% in 2014 to 92% in 2Q15. However, 2Q15
rental income (+1% y-o-y) was stable because of
compensation from Rangsit Plaza.

88.0%

700

1Q2013

Earnings Drivers:
Traffic to remain healthy
Customer traffic has been increasing since 2006, except
during the heavy flooding in 2011 and 2013. Daily customer
count has risen from 122k in 2006 to 164k in 2014, and
peaked at 165k in 1Q15. However, traffic fell 10% q-o-q to
148k in 2Q15 because of renovation work at Centrals mall
and part of Robinsons (total leasable area of 1,936 sqm)
from 20 April to 30 September 2015. Customer count is
expected to normalize to above 160k in 4Q15 and 2016.

800

Net Property Income Margin %

Customer traffic (000 people)

Rental hikes to drive growth


Following the economic slowdown and lackluster rate
increases in 1Q15 (+4%) and 2Q15 (+1%), we conservatively
forecast 2.2% rental hike for this year, 3.5% and 3.2% in
FY16 and FY17, respectively, and 3% p.a. from FY18
onwards. Assuming occupancy rate is stable, total rental
income would grow at the the same rate as rents.
Opportunity for rental reversion
Of the total leasable area (59,986 sqm) of shopping space,
20% will see its leases expire in 2H15 and 40% in 2016. If
the economy grows strongly next year, the upcoming
contract renewals might lead to higher-than-expected rental
hike.

Revenue Breakdown 2014

Upside to occupancy rate at common space


FUTUREPF divides its leasable space into main area (56,986
sqm) and common area (8,514 sqm). The main areas
occupancy rate has been around 98% since 2011, and we
expect it to be the same going forward. The occupancy rate
for the common space was 85% in 2014, and we expect it to
gradually improve to 90% in 2019. Currently vacant space in
the common area leaves room for upside to our forecasts.
Lease expiry (excluding common space)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 39

Company Guide
Future Park Leasehold Property Fund

Aggregate Leverage (%)

Balance Sheet:
As of end-2Q15, FUTUREPF had Bt450m debt, representing
only 6.8% of NAV and 60% of FY15F net investment income.
The fund is scheduled to repay Bt60m every year, so the debt
will be fully repaid by 2022.
Share Price Drivers:
High yield in the low-rate environment
FUTUREPF is offering attractive 7.1-7.4% yields in FY15FFY16F, compared to 2.65% yield for 10-year government
bonds and 3.6-3.9% dividend yield for stocks under DBS
Thailand coverage (75% of the SETs market cap).

ROE (%)
12.0%

Key Risks:
Non-renewal of leases
Leases for 40% of the Funds leasable area will expire in
FY16. While we expect occupancy rate to be stable and
rents to increase by 3.5% next year, the extended economic
slowdown could result in lower-than-expected lease
renewals and rental hikes.

10.0%
8.0%
6.0%

4.0%
2.0%
0.0%
2013A

COMPANY BACKGROUND
FUTUREPF is a property fund and part owner of the lease to
Future Park Rangsit, a shopping mall in Rangsit, Bangkok,
Thailand. It collects rent from common (8,514 sqm) and
shopping (59,986 sqm) areas with a remaining leasehold life
of 27.5 years. The Fund has a solid track record of income
growth; revenue grew at a 3-year average of 11.6% despite
the political instability in FY14 (3.6% growth). Historically,
FUTUREPF raises rents by 2.5%-3.7% per year.
Ninety-three percent of the leases (shopping space only) are
under fixed-rate rental contracts while the rest 7% is under
revenue-sharing scheme.

2014A

2015F

2016F

2017F

Distribution Yield (%)

Lease term (excluding common space)

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 40

VICKERS SECURITIES

Company Guide
Future Park Leasehold Property Fund

Key Assumptions
FY Dec

2013A

2014A

2015F

2016F

2017F

Leasable Area - main (Sqm)


Occupancy

56,906
98%

56,986
97%

56,986
98%

56,986
98%

56,986
98%

Leasable Area - common


(Sqm)
Occupancy

8,514 86% 8,514 85% 8,514 87% 8,514 87% 8,514 88%

Average rental rate


(Bt/sqm/month)
Growth
of rental rate
Rental revenue (Btm)

1,332
10.7%
892

1,393
4.5%
924

1,423
2.2%
954

1,473
3.5%
987

1,524
3.4%
1,021

Income Statement (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

892
(178)
713
(14)
11
(17)
117
811
0
0
0
811
811
(117)
683

924
(173)
751
(14)
11
(15)
64
797
0
0
0
797
797
(64)
733

954
(187)
767
(14)
11
(14)
31
781
0
0
0
781
781
(31)
750

987
(193)
794
(15)
11
(11)
0
780
0
0
0
780
780
780

1,021
(200)
821
(15)
11
(8)
0
810
0
0
0
810
810
810

10.7
10.7
10.2
91.8
80.0
91.0
70.3

3.6
5.3
(1.7)
90.2
81.3
86.3
71.5

3.3
2.2
(2.0)
90.0
80.4
81.9
70.8

3.5
3.5
(0.2)
90.0
80.4
79.0
71.1

3.4
3.4
3.9
90.0
80.4
79.3
71.4

1.5

1.5

1.5

1.5

1.5

13.0
11.3
10.3
41.7

12.4
10.9
10.6
48.9

11.9
10.6
10.8
54.1

11.7
10.5
11.1
72.7

12.0
10.9
11.4
107.2

Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Less: Non-cash gain
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

Asset revaluation gain

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 41

Company Guide
Future Park Leasehold Property Fund

Quarterly / Interim Income Statement (Bt m)


FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

226
(41)
186
(4)
1
(4)
1
181
0
0
181
181
N/A
180

233
(39)
194
(3)
4
(4)
30
221
0
0
221
221
N/A
191

236
(49)
187
(4)
2
(3)
2
184
0
0
184
184
N/A
182

236
(45)
191
(3)
1
(3)
31
216
0
0
216
216
N/A
186

228
(43)
186
(4)
2
(3)
4
185
0
0
185
185
N/A
181

(1)
1
(14)
82.1
90.1

3
4
22
83.2
90.2

1
(4)
(17)
79.2
90.2

0
2
17
81.1
90.1

(3)
(3)
(14)
81.3
90.9

Balance Sheet (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

6,754
N/A
487
0
41
12
7,294

6,820
N/A
490
0
44
12
7,366

6,851
N/A
488
0
44
12
7,394

6,851
N/A
516
0
41
12
7,419

6,851
N/A
544
0
41
12
7,447

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
62
350
510
0
6,372
0
7,294

0
25
372
450
0
6,519
0
7,366

0
25
351
390
0
6,629
0
7,394

0
25
351
330
0
6,713
0
7,419

0
25
351
270
0
6,801
0
7,447

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

(359)
(23)

(341)
40

(320)
98

(324)
186

(324)
274

1.3
1.3
7.4
0.0

1.4
1.3
6.5
0.0

1.4
1.4
5.7
0.0

1.5
1.5
4.8
0.0

1.6
1.6
4.0
0.0

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 42

VICKERS SECURITIES

Company Guide
Future Park Leasehold Property Fund

Cash Flow Statement (Bt m)


FY Dec
Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Operating CFPS (Bt)
Free CFPS (Bt)

2013A

2014A

2015F

2016F

2017F

811
0
0
0
(33)
(117)
661
(9)
(161)
0
0
0
(169)
(526)
(60)
0
0
(587)
0
(95)

797
0
0
0
(18)
(64)
715
(2)
(11)
0
0
0
(13)
(650)
(60)
0
0
(710)
0
(8)

781
0
0
0
(21)
(31)
729
0
(30)
0
0
0
(30)
(671)
(60)
0
0
(731)
0
(33)

780
0
0
0
4
0
783
0
(20)
0
0
0
(20)
(695)
(60)
0
0
(755)
0
8

810
0
0
0
0
0
810
0
(20)
0
0
0
(20)
(722)
(60)
0
0
(782)
0
8

1.3
1.2

1.4
1.3

1.4
1.4

1.5
1.5

1.5
1.5

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 43

Thailand Company Guide

Impact Growth Real Estate Investment Trust


Edition 1 Version 1 | Bloomberg: IMPACT TB | Reuters: IMPACT.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

TAPPING ON A GROWING MICE MARKET

Last Traded Price: Bt11.20 (SET : 1,381.72)


Price Target : Bt12.00 (7% upside)
Potential Catalyst: Increase in occupancy rate and strong potential
growth
Where we differ: n.a.
Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com
Nantika WIANGPHOEM +662 657 7836
nantikaw@th.dbsvickers.com

Price Relative
Bt

Relative Index

12.6

206

12.1

186

11.6

Recommend BUY, Bt12 TP (DCF Valuation). The interim


dividend declared for the first quarter of FY16 is Bt0.175/unit.
This implies 6.3% annualised yield, which is much higher than
current Thai 10-year government bond yields. And yield are
forecast to rise along with net earnings, to 6.4% in FY16 and
6.6% in FY17.
Owns completed and freehold assets
The REIT owns the largest exhibition and convention assets in
ASEAN region covering 66% market share in Thailand (at end
March). The REIT has right of first refusal to future assets
developed by IMPACT and with its freehold rights over the
assets, the REIT will enjoy benefit from assets appreciation in
the future.

166

11.1
146

10.6

126

10.1

106

9.6
9.1
Sep-14

86
Dec-14

Mar-15

Jun-15

Impact Growth Real Estate Investment Trust (LHS)


Relative SET INDEX (RHS)

Forecasts and Valuation


FY Mar (Bt m)
Revenue
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Bt)
EPS Pre Ex. (Bt)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Bt)
Net DPS (Bt)
BV Per Share (Bt)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Earnings Rev (%):
Consensus EPS (Bt):
Other Broker Recs:

2015A
1,110
725
632
632
628
0.43
0.42
nm
nm
0.42
0.42
10.80
26.3
26.5
nm
27.5
3.8
1.0
0.2
N/A

2016F
1,790
1,303
1,111
1,110
1,110
0.75
0.75
76
77
0.75
0.71
10.82
15.0
15.0
15.7
15.3
6.4
1.0
0.2
6.9

2017F
1,861
1,347
1,154
1,154
1,154
0.78
0.78
4
4
0.78
0.74
10.87
14.4
14.4
14.3
14.7
6.6
1.0
0.2
7.2

N/A
B: 0

N/A
S: 0

N/A
H: 0

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Strong growth outlook


We expect growth to be driven by (i) revenues from a
diversified group of customers, (ii) the growing MICE (Meeting
Incentive Convention and Exhibition) market, supported by
higher domestic demand and the AEC initiative, and (iii)
acquisition of new assets.
Accessibility by MRT pink line
The MRT pink line (Khae Rai Min Buri) will run past Mueng
Thong Thani, where the REITs assets are located. This would
drive access traffic, and in turn, boost asset value.
Valuation:
We value IMPACT at Bt12, based on DCF valuation.
Key Risks to Our View:
Key risk is a drop in occupancy rate at the REITs assets as a
result of a slower economy and political and safety issues.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Impact Exhibition Management Co Ltd (%)
Social Security Office (%)
Ayudhya Allianz Cp Life Assur (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

1,483
16,604 / 461
50.00
2.93
2.23
48.3
0.35

VICKERS SECURITIES

Company Guide
Impact Growth Real Estate Investment Trust

CRITICAL DATA POINTS TO WATCH


Earnings Drivers:
Higher occupancy rates. The REIT expects overall occupancy
rate to improve to 58%-63% over the longer-term, driven by
the growing MICE market, supported by higher domestic
demand and the AEC initiative. Furthermore, the REIT is able
to attract and retain customers because of its strategicallylocated assets with full facilities. IMPACT currently has 66%
of the total MICE market share in Thailand (at end March).
This indicates strong earnings growth ahead.
Higher ARR (Average Rental Rate). The management plans to
raise rents for new leases and renewals by 4%-10%
depending on current rent, rental period, and other factors.
The REITs diversified asset offering gives it flexibility to meet
demand for a large range of meetings and exhibitions.
Specifically, the REIT has a major competitive advantage in
being able to offer the space for meetings and exhibitions
that require a large area. The REIT is also targeting to grow
the international customer segment because they can
normally charge higher rental rates. Hence, we expect ARR to
increase by 5%-7% y-o-y.
Cost-saving projects. The REIT is trying to keep cost of
services at less than 15% of total service income (14.2% in
1Q15). This has led to several cost-saving initiatives that were
implemented since last year, including switching to LED light
bulbs, improving efficiency of the cooling tower. The REIT is
also considering solar panel installations in parking lots and
TES (Thermal Energy System) to reduce electricity costs.

ARR

Customer Segment breakdown for FY14/15

Acquisitions in 2016. The REIT will acquire three key assets in


2016 with a total value of Bt2.5-3bn: i) Novotel Bangkok
IMPACT (380 rooms, occupancy rate 75-90%, average room
rate Bt2,500/night); ii) The Geneva office building (50,000
sqm, occupancy rate c.85%, rent Bt280-340/sqm/month);
and iii) indoor car park near the Geneva building.
Furthermore, BLAND is constructing an IBIS hotel (587 rooms
with average room rate of Bt1,000/night) which may be sold
to the REIT when completed. These suggest strong earnings
growth from 2016 onwards.

NAV

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 45

Company Guide
Impact Growth Real Estate Investment Trust

Leverage & Asset Turnover (x)

Balance Sheet:
Investment properties accounted for 96% of total assets at
the end of June. The properties will be revalued annually. The
REIT has a strong balance sheet with a low leverage ratio of
0.24x at end June, represented by Bt3.9bn long-term loans.
However, leverage could surge if the REIT decides to finance
2016 acquisitions with debt. Since incorporation, the fund
has paid out an average of 96% of distributable earnings
with total amount of Bt0.595 per unit, and the management
plans to retain this.
Share Price Drivers:
Improvement in overall occupancy rate. The REITs average
occupancy rate is still not stable (55% in FY14, 49% in 1Q15)
and could miss its latest target of 58-63%. Hence, occupancy
rate will be a key revenue and earnings driver in the future.
Key Risks:
Slowing economy, political turmoil and safety issues. These
could lead to lower occupancy rates at the REITs assets,
which would reduce investment income.

ROE (%)
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

COMPANY BACKGROUND
IMPACT is one of Thailands leading property funds. The
Fund has invested in IMPACT Muang Thong Thani, the
largest exhibition and convention center in South East Asia,
covering a total exhibition area of over 122,165 sqm. The
REITs assets are i) IMPACT Arena, ii) IMPACT Forum, iii)
IMPACT Exhibition Hall 1-8, and iv) IMPACT Challenger.
Customers of the REIT can be split into three main
segments: Public Sector, Domestic Private Sector and
International Private Sector.
The REITs revenue is driven by occupancy rate which can be
affected by economic, political and safety issues, and rental
rates. The REIT absorbs the operating expenses and the fund
management fees and capital expenditures, but the REITs
profit is exempted from tax. The REIT is able to acquire new
assets in the future in accordance with regulations.

2016F

2017F

Forward PE Band (x)

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 46

VICKERS SECURITIES

Company Guide
Impact Growth Real Estate Investment Trust

Key Assumptions
FY Mar

Occupancy rate (%)


Cost of services (%)
Fund management fee
Dividend
payout ratio
(%)
(%)

2013NA

2014NA

2015A

2016F

2017F

54.6%
13.6%
15.2%
99%

54.8%
13.6%
13.7%
95%

54.8%
13.6%
14.2%
95%

54.8%
13.6%
21.3%
95%

54.8%
13.6%
22.9%
95%

2015A

2016F

2017F

1,110
(151)
959
(237)
722
3
0
(97)
4
632
0
0
0
632
628
725

1,790
(243)
1,547
(246)
1,300
3
0
(193)
0
1,111
0
0
0
1,110
1,110
1,303

1,861
(253)
1,609
(265)
1,343
3
0
(193)
0
1,154
0
0
0
1,154
1,154
1,347

N/A
nm
nm
nm

61.3
79.9
80.2
76.9

4.0
3.3
3.3
3.9

86.4
65.0
56.9
N/A
N/A
N/A
96.4
7.5

86.4
72.7
62.0
6.9
5.4
6.5
95.0
6.7

86.4
72.2
62.0
7.2
5.6
6.7
95.0
7.0

Income Statement (Bt m)


FY Mar
Revenue
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA
Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins & Ratio
Gross Margins (%)
Opg Profit Margin (%)
Net Profit Margin (%)
ROAE (%)
ROA (%)
ROCE (%)
Div Payout Ratio (%)
Net Interest Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 47

Company Guide
Impact Growth Real Estate Investment Trust

Quarterly / Interim Income Statement (Bt m)


FY Mar
2Q2015

3Q2015

4Q2015

1Q2016

4
(1)
3
(4)
0
1
0
0
0
1
0
0
1
1
1

561
(78)
483
(91)
393
1
0
(48)
2
347
0
0
347
345
394

545
(72)
472
(143)
329
1
0
(49)
2
284
0
0
284
282
330

497
(71)
427
(116)
310
1
0
(47)
2
266
0
0
266
264
311

N/A
nm
nm
nm

13,858.5
56,560.7
nm
44,943.4

(2.9)
(16.2)
(16.2)
(18.5)

(8.7)
(5.9)
(5.7)
(6.2)

86.7
(1.7)
19.1

86.1
70.0
61.9

86.7
60.4
52.1

85.8
62.4
53.5

2015A

2016F

2017F

Net Fixed Assets


Invts in Associates & JVs
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

19,603
0
0
607
0
180
14
20,404

19,603
0
0
590
0
291
0
20,484

19,603
0
0
663
0
302
0
20,568

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Shareholders Equity
Minority Interests
Total Cap. & Liab.

0
79
335
3,900
84
16,005
0
20,404

0
0
541
3,900
0
16,043
0
20,483

0
0
562
3,895
0
16,111
0
20,568

Non-Cash Wkg. Capital


Net Cash/(Debt)
Debtors Turn (avg days)
Creditors Turn (avg days)
Inventory Turn (avg days)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Net Debt/Equity ex MI (X)
Capex to Debt (%)
Z-Score (X)

(221)
(3,293)
N/A
N/A
N/A
NM
1.9
1.9
0.2
0.2
0.0
NA

(250)
(3,310)
48.0
59.7
N/A
0.1
1.6
1.6
0.2
0.2
0.0
NA

(260)
(3,232)
58.1
N/A
N/A
0.1
1.7
1.7
0.2
0.2
0.0
NA

Revenue
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA
Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)
Balance Sheet (Bt m)
FY Mar

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 48

VICKERS SECURITIES

Company Guide
Impact Growth Real Estate Investment Trust

Cash Flow Statement (Bt m)


FY Mar
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Opg CFPS (Bt)
Free CFPS (Bt)

2015A

2016F

2017F

632
0
0
0
(18,355)
(4)
(17,727)
0
(402)
0
0
0
(402)
(341)
3,900
15,715
0
19,274
0
1,144
0.4
(12.0)

1,111
0
0
0
(55)
0
1,056
0
0
0
0
0
0
(1,073)
0
0
0
(1,073)
0
(17)
0.7
0.7

1,154
0
0
0
10
0
1,164
0
0
0
0
0
0
(1,086)
(5)
0
0
(1,090)
0
73
0.8
0.8

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 49

Thailand Company Guide

LH Shopping Centers Leasehold


Edition 1 Version 1 | Bloomberg: LHSC TB | Reuters: LHSCu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

MODERATE GROWTH POTENTIAL

Last Traded Price: Bt10.40 (SET : 1,381.72)


Price Target : Bt11.40 (10% upside)

Recommend BUY, Bt10.4 TP (DCF valuation). LHREIT has


declared Bt0.022/unit interim dividend for the first half of
FY15. This implies 7.9% annualised yield, higher than the
current Thai 10-year government bond yield of 3.0%. Yields
are forecast to rise along with net earnings, to 7.0% in FY16
and 7.0% in FY17.
Prime location, easy accessibility
The REIT owns Terminal 21, a retail mall with 34,058 sqm of
leasable space, including the food court. The asset is located in
the middle of a major business district (Asoke District) where
there are large office buildings and hotels. Terminal 21 is easily
accessible by both MRT and BTS, which will continue to drive
traffic to the store.

Potential Catalyst: Moderate earnings growth


Where we differ: n.a.
Analyst
Thailand Research Team +662 658 1222
Nantika WIANGPHOEM +662 657 7836
nantikaw@th.dbsvickers.com

Price Relative
Bt

Relative Index

204

11.6

184

11.1

164
10.6

144
10.1

124

9.6

104

9.1
Dec-14

84
Mar-15

Jun-15

LH Shopping Centers Leasehold (LHS)


Relative SET INDEX (RHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

2014A
26
13
12
0
0.02
nm
0.00
nm
10.22
424.2
0.0
1.0
18.2
N/A

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
1,036
442
400
372
0.82
3,242
0.76
nm
10.28
12.7
7.3
1.0
18.2
8.0

2016F
1,048
447
402
373
0.82
0
0.77
0
10.34
12.6
7.4
1.0
18.2
8.0

2017F
1,056
450
405
377
0.83
1
0.77
1
10.40
12.5
7.4
1.0
18.2
8.0

N/A
B: 0

N/A
S: 0

N/A
H: 0

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Unique theme and proactive marketing


Terminal 21 differentiates itself from other malls with its
unique concept of offering shoppers the experience of
shopping in major cities around the world, all under one roof.
They also have an attractive mix of retail and F&B offering to
attract both local customers and tourists.
Mild growth outlook
Occupancy is currently close to 98% of total leasable area.
Hence, we expect growth to be mostly driven by positive rental
reversions and an increase in the share of variable rent
contracts (i.e. as a % of store turnover).
Valuation:
We value LHSC at Bt11.4, based on DCF valuation.
Key Risks to Our View:
Key risk is a drop in occupancy rate as a result of a slower
economy and political and safety issues, and lower-thanexpected average rental rate.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Land and Houses Pcl. (%)
GIC PRIVATE LIMITED (%)
Social Security Office (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

488.06
4,978 / 138
9.0
6.0
6.0
72.9
0.07

VICKERS SECURITIES

Company Guide
LH Shopping Centers Leasehold

CRITICAL DATA POINTS TO WATCH

ARR and Occupancy rate

Earnings Drivers:
Higher ARR (Average Rental Rate). The leases are divided into
two types: (i) fixed rate contracts which accounts for 85% of
total rental income, and (ii) variable rate contracts which are
mostly signed with the F&B and cinema operators. The fixedrate contracts are normally for one to three years, with a rent
review upon renewal. The variable-rate contracts are linked to
the revenues generated by the lessees. We expect overall ARR
to increase by 10% every three years.
High occupancy rates. The REITs portfolio occupancy rate is
currently at 98% of total leasable space with 588 lessees. We
expect occupancy rate to be stable or reach 100% in some
months, because the convenient access and stylish interior
design of the property will attract both local customers and
tourists. Hence, earnings growth should remain relatively
stable in the near future.

Net Property Income and Margins (%)

Development in the surrounding area. The REITs asset is


located in one of Bangkoks major business districts. It stands
between office buildings, hotels, and condominiums. Given
easy access to the Asoke District, there are many property
development projects, including condominiums and malls.
These will drive traffic to the district, as well as Terminal 21,
which suggests growth ahead.
NAV

Rent opportunity in common area. The REIT also has a


common (1,600 sqm) available for rental for special events,
such as promotional product fairs that could run from a few
days to a month. If the REIT expands the common area, there
is a room for upside to our forecasts.

Area breakdown

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 51

Company Guide
LH Shopping Centers Leasehold

Balance Sheet:
Investment properties accounted for 90% of the REITs total
assets end June. The REITs leverage ratio is only 0.11x,
represented by Bt1.1bn long-term loans. The low leverage,
indicates a strong balance sheet. The REIT has no plans to
acquire new assets in the near-term, which means net
gearing will drop as the REIT starts to repay the loan. Since
incorporation in December 2014, the REIT payout has been
c.90% of distributable earnings, or Bt0.022 per unit, implying
0.2% dividend yield (based on IPO price). The REIT will raise
dividend payout ratio to 95% in the future.

Aggregate Leverage (%)


19.0%
18.0%
17.0%
16.0%

15.0%
14.0%
13.0%
12.0%

11.0%
10.0%
2014A

2015F

2016F

2017F

ROE (%)

Share Price Drivers:


Higher ARR. The REITs occupancy is expected to be stable, or
reach 100% in some months. Hence, the key revenue and
earnings drivers would be the ability to increase ARR.

7.0%

6.0%
5.0%
4.0%

Key Risks:
Political turmoil, safety issues and slowing economy. The
political and safety issues could lead to lower traffic at
Terminal 21, which could drive down occupancy rates. And
a slowing economy would make it challenging for the REIT
to increase rents. These would reduce investment income.

3.0%
2.0%

1.0%
0.0%
2015F

2016F

2017F

Distribution Yield (%)

COMPANY BACKGROUND
LH Shopping Centers Leasehold Real Estate Investment Trust
(LHSC) was founded in December 2014 with total registered
capital of Bt4.978bn.

8.0%
7.0%
6.0%

5.0%
4.0%

3.0%

LHSC has signed a 26-year lease agreement for Terminal 21,


the unique and stylish shopping mall covering an area of
97,905 sqm, comprising 34,058 sqm of leasable space,
34,584 sqm of common area, and 29,263 sqm of parking
space. The lease ends on 31 Aug 2040.
The REITs revenue is driven by occupancy and rental rates,
which can be affected by economic, political and safety
issues. The REIT absorbs all cost of services, operating
expenses and fund management fees. The REITs profit is
exempted from tax. The REIT can acquire new assets in the
future in accordance with regulations.

2.0%
1.0%
0.0%
2014A

2015F

2016F

2017F

PB Band (x)

Land and House PCL, GIC Private Limited and Social Security
Office are the major unit shareholders with 9%, 6% and
6% stake, respectively.
Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 52

VICKERS SECURITIES

Company Guide
LH Shopping Centers Leasehold

Key Assumptions
FY Dec

2014A

2015F

2016F

2017F

Net leasable area (sqm)


ARR (Bt/sqm/month)
Occupancy rate (%)
Margin (%)
Dividend payout ratio (%)

31,622
1,760
98%
45%
0%

31,622
2,112
98%
37%
93%

31,622
2,112
98%
37%
93%

31,622
2,112
98%
37%
93%

Income Statement (Bt m)


FY Dec

2014A

2015F

2016F

2017F

26
(13)
13
0
0
(1)
0
12
0
0
0
12
14
0
14

1,036
(594)
442
(3)
2
(40)
0
400
0
0
0
400
400
0
400

1,048
(601)
447
(3)
2
(44)
0
402
0
0
0
402
402
0
402

1,056
(606)
450
(3)
2
(44)
0
405
0
0
0
405
405
0
405

N/A
nm
nm
0.0
49.9
45.2
0.0

3,811.5
3,245.2
3,242.4
93.0
42.6
38.6
35.9

1.2
1.2
0.4
93.0
42.6
38.3
35.6

0.7
0.7
0.9
93.0
42.6
38.4
35.7

1.6

0.3

0.3

0.3

N/A
N/A
N/A
15.7

8.0
6.0
6.9
10.9

8.0
6.0
6.9
10.1

8.0
6.0
6.9
10.2

Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 53

Company Guide
LH Shopping Centers Leasehold

Quarterly / Interim Income Statement (Bt m)


FY Dec
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

26
(13)
13
0
0
(1)
0
12
0
0
12
12
0
12

270
(153)
117
(3)
0
(10)
0
104
0
0
104
104
0
104

274
(159)
115
(3)
0
(10)
0
103
0
0
103
103
0
103

N/A
nm
nm
49.9
0.0

919
784
667
N/A
0.0

2
(1)
(1)
44.1
181.0

Balance Sheet (Bt m)


FY Dec

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

5,942
0
509
0
8
225
6,684

5,942
0
533
0
27
225
6,726

5,942
0
561
0
27
225
6,755

5,942
0
590
0
27
225
6,783

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
14
291
1,080
309
4,990
0
6,684

0
29
291
1,080
309
5,018
0
6,726

0
29
291
1,080
309
5,046
0
6,755

0
29
291
1,080
309
5,075
0
6,783

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

(72)
(571)

(68)
(547)

(68)
(519)

(68)
(490)

2.4
1.7
18.2
NA

2.5
1.8
18.2
NA

2.5
1.8
18.2
NA

2.6
1.9
18.2
NA

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 54

VICKERS SECURITIES

Company Guide
LH Shopping Centers Leasehold

Cash Flow Statement (Bt m)


FY Dec

2014A

2015F

2016F

2017F

Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

12
0
0
0
381
0
393
(5,942)
(389)
0
0
0
(6,331)
0
1,080
4,978
0
6,058
0
120

400
0
0
0
(4)
0
396
0
0
0
0
0
0
(372)
0
0
0
(372)
0
24

402
0
0
0
0
0
401
0
0
0
0
0
0
(373)
0
0
0
(373)
0
28

405
0
0
0
0
0
405
0
0
0
0
0
0
(377)
0
0
0
(377)
0
28

0.0
(11.4)

0.8
0.8

0.8
0.8

0.8
0.8

Operating CFPS (Bt)


Free CFPS (Bt)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 55

Thailand Company Guide

Prime Office Leasehold Property Fund


Edition 1 Version 1 | Bloomberg: POPF TB | Reuters: POPFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

ATTRACTIVE DIVIDEND YIELD

Last Traded Price: Bt13.30 (SET : 1,381.72)


Price Target : Bt14.00 (6% upside)

BUY, Bt14.0 TP (DCF valuation). The Fund has declared


Bt0.262/unit interim dividend for 2Q15; we are expecting
8.1% dividend yield for FY15F. This is higher than the current
Thai 10-year government bond yield of 3.0% and dividend
yield of 3.6% for DBS Thailand universe. And, yields will rise
along with net earnings, to 8.3% in FY16 and 8.8% in FY17.

Potential Catalyst: Rental rate hike and healthy occupancy rate


Where we differ: n.a.
Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com
Nantika WIANGPHOEM +662 657 7836
nantikaw@th.dbsvickers.com

Diversified, prime location of assets


The Fund has leased three assets in different locations: (i) UBC
II Building in Prompong, (ii) Ploenchit Center Building in
Ploenchit, and (iii) Bangna Tower. The diverse locations allow
the Fund to capture rising traffic in several areas and minimise
asset concentration risk (to avoid income being disrupted at all
assets by a single event). This helps to generate stable income.

Price Relative
Bt

Relative Index

16.4

210

15.4

190

14.4

170

13.4

150

12.4

130

11.4

110

10.4

90

9.4
8.4
Sep-11

Sep-12

Sep-13

Prime Office LH Prop Fund (LHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

Sep-14

70
Sep-15

Relative SET INDEX (RHS)

2014A
689
481
422
395
0.82
(21)
1.04
2
11.48
16.2
7.8
1.2
7.4
8.4

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
922
665
546
546
1.13
38
1.08
3
11.55
11.7
8.1
1.2
7.3
9.8

2016F
964
679
561
561
1.17
3
1.11
3
11.61
11.4
8.3
1.1
6.9
10.1

2017F
1,019
715
595
595
1.24
6
1.17
6
11.69
10.8
8.8
1.1
6.5
10.6

1.06
B: 0

1.10
S: 0

N/A
H: 0

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Convenient access
Both the UBC II Building and Ploenchit Center are located in
prime locations and accessible by BTS. And, Bangna Tower is
on Bangna Trad Road, one of the main transportation routes
for goods, and is only 20-km from Suvarnabhumi Airport.
Consequently, traffic at these assets is supported by easy
access.
Potential growth outlook
Portfolio occupancy has been sustainable at 96-99%, and
considering strong demand for the assets, the Fund expects
average rental rate to increase by 10-15% every three years.
Valuation:
We value POPF at Bt14.0, based on DCF valuation.
Key Risks to Our View:
Key risks are (i) a drop in occupancy rate, (ii) lower-thanexpected average rental rate, and (iii) non-renewal of leases.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Social Security Office (%)
SCB Life Assurance PCL (%)
MTLS (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

482
6,406 / 178
19.3
8.8
4.3
67.6
0.10

VICKERS SECURITIES

Company Guide
Prime Office Leasehold Property Fund

CRITICAL DATA POINTS TO WATCH

Occupancy rate (%)


Occupancy rate (%)

Earnings Drivers:
Leasehold rights to three buildings in prime locations. They
are (i) UBC II Building in Prompong, (ii) Ploenchit Center
Building at Ploenchit, and (iii) Bangna Tower. The buildings
are located in prime areas and along the main roads leading
into and out of Bangkok, and register high average
occupancy rates of 96-99%. The remaining tenures of the
lease are 10 - 29 years, which means they will continue to
generate revenues for that period. And, the diversified
location of the assets reduces concentration risk.
Healthy occupancy rate. The Funds portfolio occupancy rate
has been hovering at 96-99% of total leasable space in the
past few years. The Fund expects occupancy rate to be stable
because the convenient access and availability of full facilities
will continue to drive demand for the assets.
Average rental rate (ARR) hikes. ARR dropped in 4Q14
because the Fund had added Bangna Tower which
commands lower ARR than the other two assets because of
location. However, the Fund will be able to raise rents
regularly because the assets are in prime locations. We expect
growth to come from positive rental reversion which would
increase overall ARR by 10-15% every three years.
Strong facilities offering. The properties operated by the Fund
have full facilities, i.e. meeting rooms, catering rooms, fitness
facilities, parking lots, etc. One of the largest advantages is
sufficient parking lots for tenants and visitors; most of the
other office buildings in the Central Business District are
facing a shortage of parking space. In addition, the Fund has
kept parking fees stable so far; this suggests room to raise
fees (and income) when there is stronger demand for the
parking lots.

100

UBC II

100

Ploenchit Center

100

Bangna Tower

99
98 98

98

98 98

98

98
97

97

97
96

96
95

95
94

93
92

1Q14

2Q14

3Q14

4Q14

1Q15

ARR by property
Bt/sq.m.

800

717

697

711

700

611

589

590

1Q15

2Q15

600
500
400

300
200
100
1Q14

2Q14

3Q14

4Q14

Net Property Income and Margins (%)


Bt m

800
700

95.4%

600

93.4%

500

91.4%

400

89.4%

300

87.4%

200

85.4%

100

83.4%

81.4%

2013A

Dividend payout assumptions. We assumed 92% - 100%


dividend payout ratio throughout our forecast period to
reflect its par value reduction plan, vs 79% - 113% historical
payout.

2014A

Net Property Income

2015F

2016F

2017F

Net Property Income Margin %

NAV
Btm
6,000

NAV

5,529

5,563

5,594

2015F

2016F

2017F

5,000
4,000

3,818

3,875

3,000

2,000
1,000
0

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 57

Company Guide
Prime Office Leasehold Property Fund

Balance Sheet:
Investment properties accounted for 97% of the Funds total
assets at end June. Total borrowings amount to Bt455m
(long-term loan), implying low leverage at 0.08x. This
indicates a strong balance sheet and also complies with the
SECs property fund regulations. The Fund has no plans to
drawdown more loans. Hence, net gearing will improve as
the Fund repays the loan.

Aggregate Leverage (%)


7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2013A

Share Price Drivers:


Strong growth in ARR. The Funds occupancy is expected to
remain stable. Hence, the key revenue and earnings drivers
would be the ability to increase ARR, resulting in higher
distribution and yields.

2014A

2015F

2016F

2017F

2016F

2017F

ROE (%)
18.0%
16.0%
14.0%

Key Risks:
Political unrest and slowing economy. Political unrest and a
slowing economy would make it challenging for the Fund to
increase rents, and could even drive down occupancy rates,
and in turn, rental income.

12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2013A

COMPANY BACKGROUND
Prime Office Leasehold Property fund (POPF) was founded in
March 2011 and increased its capital in October 2014,
taking total registered capital to Bt5.03bn.

The Funds revenues are determined by occupancy and


rental rates, which can be affected by economic, political
and safety issues. The Fund absorbs operating expenses and
fund management fees. The Funds profit is exempted from
tax. The Fund cannot acquire anymore assets in accordance
with the SECs regulations.

2015F

EPU and DPU


EPU

0.70

0.60

In March 2011, POPF had signed two agreements for


leasehold rights to (i) UBC II Building in Prompong covering a
leasable area of 33,798 sqm and (ii) Ploenchit Center
Building in Ploenchit covering 42,845 sqm. And in October
2014, the Fund signed another agreement for leasehold
rights to Bangna Tower in Bangna covering 43,466 sqm.

2014A

DPU

0.30

120%

110%

108%
99%

0.50
0.40

Payout ratio

100%
96%

80%

79%
0.28

0.28

0.30

0.26 0.26

0.22

0.24

0.26

0.30 0.29

60%
40%

0.20

20%

0.10
0.00

0%
1Q14

2Q14

3Q14

4Q14

1Q15

Source: Company, DBS Vickers

The major unit holders are Social Security Office, SCB Life
Assurance PCL and Muangthai Leasing PCL with 19%, 9%
and 3% stake, respectively.

ASIAN INSIGHTS
Page 58

VICKERS SECURITIES

Company Guide
Prime Office Leasehold Property Fund

Key Assumptions
FY Dec

2013A

2014A

2015F

2016F

2017F

Net leasable area (sqm)


ARR (Bt/sqm)
Occupancy rate (%)
Margin (%)
Dividend payout ratio
(%) (Bt/sqm)
ARR

76,695
684
99%
56%
127%
684

125,184
614
99%
58%
95%
614

125,184
642
98%
57%
95%
642

125,184
679
98%
57%
95%
679

125,184
702
98%
57%
92%
702

Income Statement (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

634
(206)
428
(91)
8
7
353
49
0
0
401
401
(49)
353

689
(209)
481
(97)
10
1
395
27
0
0
422
422
(27)
395

922
(257)
665
(115)
11
(15)
546
0
0
0
546
546
0
546

964
(285)
679
(117)
12
(12)
561
0
0
0
561
561
0
561

1,019
(304)
715
(121)
12
(11)
595
0
0
0
595
595
0
595

N/A
nm
nm
99.5
85.7
55.6
55.6

8.7
12.2
11.9
127.3
86.0
57.3
57.3

33.7
38.4
38.3
95.0
87.5
59.2
59.2

4.6
2.2
2.8
95.0
87.9
58.2
58.2

5.7
5.3
6.0
95.0
88.1
58.4
58.4

14.3

14.0

12.5

12.1

11.9

18.2
17.1
17.4
NM

8.4
7.5
7.8
NM

9.8
8.6
9.1
37.6

10.1
8.8
9.3
45.2

10.6
9.3
9.8
53.1

Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Net Investment Income
Revaluation Gain
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 59

Company Guide
Prime Office Leasehold Property Fund

Quarterly / Interim Income Statement (Bt m)


FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

165
(51)
113
(22)
2
1
0
95
0
0
95
95
0
95

163
(54)
109
(22)
2
1
0
91
0
0
91
91
0
91

201
(56)
146
(32)
4
(3)
0
114
0
0
114
114
0
114

223
(48)
175
(31)
3
(4)
0
143
0
0
143
143
0
143

224
(54)
170
(32)
4
(5)
0
138
0
0
138
138
0
138

3
1
1
68.8
94.1

(1)
(4)
(5)
66.7
113.3

23
34
26
72.4
92.4

11
20
25
78.6
88.8

0
(3)
(4)
76.1
91.7

Balance Sheet (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

0
3,863
241
0
22
1
4,127

0
6,182
81
0
48
39
6,351

0
6,182
95
0
64
39
6,380

0
6,182
100
0
67
39
6,388

0
6,182
110
0
71
39
6,402

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
240
0
0
12
3,875
0
4,127

0
341
0
455
26
5,529
0
6,351

0
341
0
450
26
5,563
0
6,380

0
341
0
427
26
5,594
0
6,388

0
341
0
404
26
5,631
0
6,402

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

(217)
241

(254)
(374)

(238)
(356)

(235)
(327)

(231)
(295)

N/A
1.1
0.0
0.0

N/A
0.4
7.4
0.0

N/A
0.5
7.3
0.0

N/A
0.5
6.9
0.0

N/A
0.5
6.5
0.0

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 60

VICKERS SECURITIES

Company Guide
Prime Office Leasehold Property Fund

Cash Flow Statement (Bt m)


FY Dec
Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Operating CFPS (Bt)
Free CFPS (Bt)

2013A

2014A

2015F

2016F

2017F

353
0
0
0
0
200
552
0
0
0
0
0
0
(344)
0
0
0
(344)
0
208

395
0
0
0
0
(2,242)
(1,847)
0
0
0
0
0
0
(373)
455
1,606
0
1,687
0
(159)

546
0
0
0
0
(16)
530
0
0
0
0
0
0
(512)
(5)
0
0
(517)
0
13

561
0
0
0
0
(3)
558
0
0
0
0
0
0
(530)
(23)
0
0
(553)
0
5

595
0
0
0
0
(4)
591
0
0
0
0
0
0
(558)
(23)
0
0
(581)
0
10

1.6
1.6

(3.8)
(3.8)

1.1
1.1

1.2
1.2

1.2
1.2

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 61

Thailand Company Guide

Samui Airport Property Fund


Refer to important disclosures at the end of this report

Edition 1 Version 1 | Bloomberg: SPF TB | Reuters: SPFu.BK

DBS Group Research . Equity

18 Sep 2015

BUY

OFFERING GENEROUS YIELDS

Last Traded Price: Bt19.60 (SET : 1,381.72)


Price Target : Bt21.40 (9% upside) (Prev Bt21.40)

Reiterate BUY, Bt21.40 TP (DCF valuation). The fund offers


generous dividend yield of 6.9% for 2015 (payable quarterly),
a hefty premium over the Thai 10-year government bond yield
of 2.65%. And the yields should rise to 7.4% in 2016 and
8.0% in 2017, in line with a recovering tourism industry on
Samui. Unlike many other PFPOs and REITs which are now
running at nearly full capacity, SPF is operating at below its full
capacity, suggesting hefty upside potential.

Potential Catalyst: Strong recovery of Samui tourism


Where we differ: n.a.
Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com

A prime beneficiary of recovering tourism. SPF derives revenues


from departing passengers and incoming flights at Samui
Airport. With politics getting calmer and martial law lifted in
April, we conservatively expect tourist arrivals to grow 5% in
2015, 7% each in 2016-2018, and 5% thereafter until 2036.
Note that despite the political uncertainty, SPFs passenger
numbers still expanded at 7% CAGR over the last decade.

Price Relative
Bt

Relative Index

22.0
20.0

204

18.0

184

16.0

164

14.0

144

12.0

124
104

10.0
8.0
Sep-11

Sep-12

Sep-13

Samui Airport Property Fund (LHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

Sep-14

84
Sep-15

Relative SET INDEX (RHS)

2014A
1,216
1,216
1,178
1,185
1.24
(13)
1.25
0
11.03
15.8
6.4
1.8
0.0
11.2

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
1,263
1,263
1,231
1,231
1.30
5
1.30
4
11.04
15.1
6.6
1.8
0.0
11.7

2016F
1,355
1,355
1,323
1,323
1.39
7
1.39
7
11.07
14.1
7.1
1.8
0.0
12.6

2017F
1,448
1,448
1,415
1,415
1.49
7
1.49
7
11.09
13.2
7.6
1.8
0.0
13.4

1.30
B: 2

1.39
S: 0

1.49
H: 0

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CT

Clears key hurdle. Bangkok Airways (BA), the property


manager, had received approval from the Department of Civil
Aviation to increase the maximum number of flights to Samui
Airport from 36 to 50 effective November 2014. This should
remove earlier concerns about capacity.
Valuation:
We value SPF at Bt21.40, based on the DCF model.
Key Risks to Our View:
Key risk is a sharp drop in tourists to Samui. Nonetheless,
downside risk is protected by annual revenue guarantee of
Bt570m from Bangkok Airways, the Property Manager, which
suggests a dividend yield of 3.2% at current price.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Bangkok Airways (%)
GPF Startegic Investment Fund (%)
Ayudhya Allianz C.P. (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Real Estate / Real Estate Investment Trusts

950
18,620 / 517
25.0
8.1
7.1
46.9
0.31

VICKERS SECURITIES

Company Guide
Samui Airport Property Fund
Monthly Passenger Volume and YoY Growth

CRITICAL DATA POINTS TO WATCH


Earnings Drivers:
Compelling growth story. Unlike many other PFPOs and REITs
which are now running at nearly full capacity, SPF is
operating at below its full capacity. The fund has ample room
to grow - current traffic is only 1.1m passengers per year
compared to its maximum capacity of over 2m passengers at
Samui Airport. In addition, Bangkok Airways (BA), the
property manager, had received approval from the
Department of Civil Aviation to increase the maximum
number of flights to Samui Airport from 36 to 50 effective
November 2014. This should remove earlier concerns over
capacity.

Monthly Flight Volume and YoY Growth

Recovering tourism industry. Despite the low season,


passenger and flight volumes improved substantially in 2Q15
following the lifting of martial law in April. June traffic was
most impressive, with passenger volume surging 11% y-o-y
and flight volume 9%. The positive momentum should
continue into the high tourist season on Samui in 3Q15. We
conservatively expect passenger volume to grow 5% in 2015,
and 7% each in 2016-2017. Note that despite the political
uncertainty, SPFs passenger numbers expanded at 7% CAGR
over the last decade.
Increasing international passenger service charge. BA, the
property manager, has secured the Department of Civil
Aviation (DCA) approval to raise passenger service charge
(PSC) for international passengers at Samui Airport from
Bt600 to Bt700. This was effective June 2015. Under the
agreement with BA, SPF will get 20% of the increment and
the rest will go to BA. SPF share of PSC is now Bt340 per
passenger on international flight (from Bt320 earlier).
Although the impact of the PSC hike is small, it will still lift
revenues.
Rising number of flights in line with passenger growth. The
average daily number of flights to Samui Airport is about 36
vs 50 flights maximum permitted currently. We expect the
number of flights to continue to increase along with
passenger numbers. Note that BA accounts for a large
portion of flight volume at Samui Airport. Other airlines
include Thai Airways, Silk Air, and Firefly. BA currently flies
directly to three international destinations from Samui, and
back. These are Hong Kong, Singapore, and Kuala Lumpur.
The company plans to increase flight frequency to these
international destinations soon, while offering direct flights to
new destinations in the medium to long term. These
additional flights and services should help to support growth
in the future.

Revenue Is On The Rise

Passenger Breakdown

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 63

Company Guide
Samui Airport Property Fund

Distribution per Unit (Bt)

Balance Sheet:
Balance sheet is strong with net a cash position and virtually
no debt. SPF has no operating expenses or capex, as these are
borne by Bangkok Airways, the Property Manager. The fund
has only annual fund expenses of about Bt40m. Hence, any
increases in revenue would flow directly to the bottom line.
The fund normally pays out 100% of cash profits every
quarter. Such distribution has been risen steadily since its
inception, in line with rising passenger and flight numbers.
Despite the political unrest in 2014 which has led to military
coup in May 2014, SPF managed to pay flat dividends as
compared to 2013.
Share Price Drivers:
Recovering tourism industry. Since the funds revenues and
profits are tied directly to Samui tourism, the strong tourist
recovery will be a key driver of both earnings and share price.
1Q and 3Q are normally high seasons for Samui tourism.

ROE (%)
12.0%
10.0%
8.0%
6.0%

Key Risks:
Political unrest. Political unrest, like what happened in 2014
which led to the implementation of martial laws, will affect
tourist arrivals to Thailand including Samui Airport, and
hence, revenues of the fund.
Reliance on a single asset. SPF relies on a single asset to
generate its revenues, which is Samui Airport, and tourism
on Samui.
COMPANY BACKGROUND
SPF is one of Thailand's leading property funds. The Fund
invests in leasehold rights to operate Samui Airport for 30
years (2006-2036). Bangkok Airways, the sponsor, has
voluntarily agreed to retain at least 25% stake in the fund
for 20 years in order to align its interests with the fund. BA
has 25.1% stake in the fund.
SPFs revenues correlate with the number of passengers and
flights flying from and to Samui Airport, based on the
following formula. All operating expenses and capital
expenditure are borne by the operator, Bangkok Airways.
This eliminates operating cost risks at the fund.

4.0%
2.0%
0.0%
2013A

2014A

2015F

2016F

2017F

2016F

2017F

Distribution Yield (%)


8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2013A

2014A

2015F

PB Band (x)

Revenue
Sharing
Passenger revenue (per departing passenger)
Domestic
Bt300
International
Bt340
Flight revenue (per incoming flight)
Cressna
Dash 7
ATR72
Airbus/Boeing

ASIAN INSIGHTS
Page 64

Source: Company, DBS Vickers

Bt5,000
Bt10,000
Bt50,000
Bt80,000

VICKERS SECURITIES

Company Guide
Samui Airport Property Fund

Key Assumptions
FY Dec
No. of passengers (m)
Growth
Sharing (Bt/pax)
Domestic passengers
International passengers
Passenger rev (Btm)
Cabin factor
Operating hours/day
No. of flights p.a.:
ATR
Boeing/Airbus
Sharing:
ATR (Bt/flight)
Boeing (Bt/flight)
Div. Payout
Segmental Breakdown
FY Dec

2013A

2014A

2015F

2016F

2017F

1.1
9.0%

1.1
-1.6%

1.1
5.0%

1.2
7.0%

1.3
7.0%

300.0
320.0
332.2
80%
16.0

300.0
320.0
326.7
80%
16.0

300.0
330.0
348.0
80%
16.0

300.0
340.0
377.5
80%
16.0

300.0
340.0
403.9
80%
16.0

4,968
7,991

4,731
8,146

4,745
8,475

4,745
9,254

4,745
10,088

50,000
80,000
100%

50,000
80,000
100%

50,000
80,000
100%

50,000
80,000
100%

50,000
80,000
100%

2013A

2014A

2015F

2016F

2017F

Political unrest, martial law


in place

Margins Trend
116.0%
111.0%

Revenues (Bt m)
Passenger revenue
Flight revenue
ATR
Boeing
Total flight revenue
Total revenue
Revenue breakdown
Passenger revenue
Flight revenue
ATR
Boeing
Total flight revenue
Total revenue

332

327

348

378

404

106.0%

248
639
888
1,220

237
652
888
1,215

237
678
915
1,263

237
740
978
1,355

237
807
1,044
1,448

101.0%
96.0%
91.0%
2013A

2014A

Operating Margin %

27%

27%

28%

28%

28%

20%
52%
73%
100%

19%
54%
73%
100%

19%
54%
72%
100%

18%
55%
72%
100%

16%
56%
72%
100%

2013A

2014A

2015F

2016F

2017F

1,221
0
1,221
(38)
0
9
168
1,359
0
0
0
1,359
1,359
(168)
1,191

1,216
0
1,216
(40)
0
9
(7)
1,178
0
0
0
1,178
1,178
7
1,185

1,263
0
1,263
(41)
0
9
0
1,231
0
0
0
1,231
1,231
0
1,231

1,355
0
1,355
(42)
0
10
0
1,323
0
0
0
1,323
1,323
0
1,323

1,448
0
1,448
(43)
0
10
0
1,415
0
0
0
1,415
1,415
0
1,415

8.3
8.3
37.6
99.7
96.9
111.3
97.6

(0.4)
(0.4)
(13.3)
100.0
96.7
96.9
97.5

3.9
3.9
4.5
100.0
96.8
97.5
97.5

7.3
7.3
7.4
100.0
96.9
97.6
97.6

6.9
6.9
7.0
100.0
97.0
97.7
97.7

2015F

2016F

2017F

Net Income Margin %

Income Statement (Bt m)


FY Dec
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

3.1

3.3

3.2

3.1

3.0

13.1
13.0
11.3
NM

11.2
11.2
11.2
NM

11.7
11.7
11.6
NM

12.6
12.5
12.4
NM

13.4
13.4
13.3
NM

Martial law lifted in Apr


2015

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 65

Company Guide
Samui Airport Property Fund

Quarterly / Interim Income Statement (Bt m)


FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

286
0
286
(10)
0
2
26
304
0
0
304
N/A
N/A
N/A

319
0
319
(10)
0
2
18
329
0
0
329
N/A
N/A
N/A

277
0
277
(10)
0
2
10
279
0
0
279
N/A
N/A
N/A

326
0
326
(10)
0
2
(58)
260
0
0
260
N/A
N/A
N/A

306
0
306
(10)
0
2
(28)
269
0
0
269
N/A
N/A
N/A

(15)
(15)
14
100.0
N/A

12
12
8
100.0
N/A

(13)
(13)
(15)
100.0
N/A

18
18
(7)
100.0
N/A

(6)
(6)
3
100.0
N/A

Balance Sheet (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

10,182
366
3
0
0
0
10,552

10,175
364
3
0
0
0
10,542

10,175
364
14
0
0
0
10,553

10,175
364
37
0
0
0
10,576

10,175
364
60
0
0
0
10,599

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
0
0
0
62
10,490
0
10,552

0
0
0
0
61
10,481
0
10,542

0
0
0
0
61
10,492
0
10,554

0
0
0
0
61
10,515
0
10,576

0
0
0
0
61
10,538
0
10,599

0
3

0
3

0
14

0
37

0
60

N/A
N/A
0.0
273.9

N/A
N/A
0.0
273.6

N/A
N/A
0.0
273.5

N/A
N/A
0.0
0.0

N/A
N/A
0.0
NA

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

No borrowings

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 66

VICKERS SECURITIES

Company Guide
Samui Airport Property Fund

Cash Flow Statement (Bt m)


FY Dec

2013A

2014A

2015F

2016F

2017F

Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

1,359
0
0
0
(4)
(168)
1,188
0
(24)
0
0
0
(24)
(1,173)
0
0
0
(1,173)
0
(10)

1,178
0
0
0
3
7
1,188
0
(1)
0
0
0
(1)
(1,188)
0
0
0
(1,188)
0
0

1,231
0
0
0
(1)
0
1,230
0
0
0
0
0
0
(1,220)
0
0
0
(1,220)
0
11

1,323
0
0
0
0
0
1,323
0
0
0
0
0
0
(1,300)
0
0
0
(1,300)
0
23

1,415
0
0
0
0
0
1,415
0
0
0
0
0
0
(1,392)
0
0
0
(1,392)
0
23

1.3
1.3

1.2
1.3

1.3
1.3

1.4
1.4

1.5
1.5

Operating CFPS (Bt)


Free CFPS (Bt)

No capex

Source: Company, DBS Vickers


Target Price & Ratings History
20.55

Bt

20.05

S.No .

19.55

1:
2:
3:
4:
5:
6:

19.05

18.55

18.05

Cl o s i n g
Pri c e
10 Mar 15
17.40
20 Apr 15
17.40
15 May 15
17.70
21 May 15
17.70
22 Jul 15
18.70
25 Aug 15
18.60
Da te

Ta rg e t
Pri c e
19.50
18.80
18.80
18.90
21.40
21.40

R a ti n g
Buy
Buy
Buy
Buy
Buy
Buy

17.55

17.05

16.55
16.05
Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 67

Thailand Company Guide

Tesco Lotus Retail Growth Freehold and


Leasehold Property Fund
Edition 1 Version 1 | Bloomberg: TLGF TB | Reuters: TLGFu.BK

Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

DECENT YIELDS

Last Traded Price: Bt13.20 (SET : 1,381.72)


Price Target : Bt15.10 (14% upside)

Maintain BUY rating, with Bt15.10 TP based on DCF valuation.


TLGF is offering decent distribution yield of 6.0% (FY16F),
payable quarterly. We have conservatively assumed 95%
payout ratio in our projections vs 100% historical payout. The
fund invests in freehold and leasehold rights to 23 successful
malls that are strategically located throughout Thailand, thus
reducing concentration risks. These malls currently enjoy high
occupancy rate of 99%.

Potential Catalyst: Strong rental reversion, Convets to a REIT


Where we differ: n.a.
Analyst
Chanpen SIRITHANARATTANAKUL +662 657 7824
chanpens@th.dbsvickers.com

Net investment income to surge this year. The main contracts


with anchor tenant Tesco Lotus, which cover 58% of total
lettable area and account for 28% of revenues, are subject to
10% rental reversion this year. And, 648 other contracts (nonTesco Lotus) covering 30,312 sqm or 9% of total lettable area
are expiring in FY16 and subject to renewals at 5% higher
rents, at least.

Price Relative
Bt

Relative Index
221

16.4
201

15.4

181

14.4

161

13.4
12.4

141

11.4

121

10.4

101

9.4
Mar-12
Mar-13
Mar-14
Mar-15
Tesco Lotus Retail Growth Freehold and Leasehold Property
Fund (LHS)
Relative SET INDEX (RHS)

Forecasts and Valuation


FY Feb (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

2014A
2,414
2,057
1,762
1,783
0.75
17
0.76
10
11.25
17.5
5.8
1.2
8.1
6.7

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

81

2015A
2,736
2,302
1,877
1,888
0.80
7
0.81
6
11.24
16.4
6.1
1.2
9.1
7.1

2016F
2,907
2,453
1,976
1,890
0.85
5
0.81
0
11.28
15.6
6.1
1.2
9.1
7.5

2017F
3,009
2,532
2,136
1,953
0.91
8
0.84
3
11.36
14.4
6.3
1.2
9.1
8.1

N/A
B: 4

N/A
S: 0

N/A
H: 1

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CT

Mulling conversion to a REIT. TLGF is still awaiting the SECs


regulations on transaction costs to transfer assets from a
property fund to a REIT. The funds current borrowing is
Bt2.6bn, representing 9.8% of total assets, slightly below its
10% ceiling. Tesco Lotus has granted right of first refusal to
TLGF to acquire its existing and future malls. The successful
conversion to a REIT structure would allow the fund/REIT to
borrow more for future acquisitions and rely less on equity
financing. This should lift distribution per unit and yields.
Tesco Lotus has a lot of potential assets that can be injected
into the REIT in the future.
Valuation:
We value TLGF at Bt15.10 based on DCF valuation.
Key Risks to Our View:
Key risks are (i) lower-than-expected rental reversion, and (ii)
weaker-than-expected occupancy rate.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
Ek-Chai Distribution System (%)
The Government Pension Fund (PI-NONPHYSICAL)
The Bank(%)
Of New York (Nominees) Limited (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Real Estate / Real Estate Investment Trusts

2,337
30,852 / 856
25.0
8.2
7.2
59.7
0.46

VICKERS SECURITIES

Company Guide
Tesco Lotus Retail Growth Freehold and Leasehold
Property Fund
Revenue Breakdown (1Q15/16) (%)

CRITICAL DATA POINTS TO WATCH


Earnings Drivers:
Portfolio of 23 shopping malls in good locations throughout
Thailand, most of which are freehold assets. Freehold assets
represent 60% of TLGFs total leasable area of 336,291
sqm, and 77% of the appraised value of the assets. These
are successful malls in good locations with 99% average
occupancy rate. 12 of the malls are located in Bangkok and
11 in the provinces. The geographical diversification helps to
reduce concentration risks. With a lot of the assets being
freehold and in good locations, the fund stands to benefit
from future capital appreciation.

Rental Reversion (%)

Proven track record, average 99% occupancy. Tesco Lotus is


the largest anchor tenant, occupying 58% of the funds
leasable area and generating 28% of revenue.
Growth drivers. We expect growth to come from rental
reversion (+estimated at 5.0% p.a. for non-Tesco Lotus
space) and acquisitions. History suggests the fund had been
increasing rents by 8.0-20.0% upon lease renewal for nonTesco Lotus space. The contracts with Tesco Lotus are for a
period of 10 years and renewable automatically for two
terms of 10 years each (total 30 years). Rents are raised by
10% every three years. The main contracts with Tesco Lotus
are subject to 10% rental reversion this year.

Net Property Income and Margins (%)


Bt m

2,500
91.9%

Mulling conversion to REIT. TLGF is still awaiting the SECs


regulations on the transaction costs involved to transfer the
assets to a REIT. The funds current borrowing is Bt2.6bn,
representing 9.8% of its net asset value, slightly below its
10% ceiling. Tesco Lotus has granted right of first refusal to
TLGF to acquire its existing and future malls. The successful
conversion to a REIT structure would allow the fund/REIT to
borrow more for future acquisitions and rely less on equity
financing. This should lift distribution per unit and yields.
Tesco Lotus has a lot of potential assets that can be injected
into the REIT in the future; it operates 133 malls in Thailand
(including the 23 malls under TLGF), and is building more.

2,000

89.9%
87.9%

1,500

85.9%

1,000

83.9%
500

81.9%

79.9%

2013A

2014A

2015A

Net Property Income

2016F

2017F

Net Property Income Margin %

Net Property Income and Margins (%)


50

88%

45
87%

40
35

86%

30
25

85%

20
84%

15
10

83%

Net Property Income

1Q2016

4Q2015

3Q2015

2Q2015

1Q2015

4Q2014

3Q2014

2Q2014

82%

1Q2014

4Q2013

Dividend payout assumptions. We currently assume 95%


dividend payout ratio in our projections vs 100% payout
historically. This reflects the current net gearing which has
hit the ceiling, suggesting the fund needs to reserve cash for
any capital expenditure that may arise.

Net Property Income Margin %

Distribution Paid / Net Operating CF


(x)

0.9
0.8
0.7
0.6

0.5
0.4
0.3

0.2
2013A

2014A

2015A

2016F

2017F

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 69

Company Guide
Tesco Lotus Retail Growth Freehold and
Leasehold Property Fund
Balance Sheet:
Total borrowings amounted to Bt2.6bn, representing 9.8% of
its net asset value at end-1Q16.
Share Price Drivers:
Strong rental reversion. Strong rental reversion could lift
rental income and distribution per unit.
Converting to a REIT. The successful conversion would mean
the REIT can gear up more. It will then rely less on equity
financing. This should lift DPU and yields.

Aggregate Leverage (%)


9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2013A

2014A

2015A

2016F

2017F

ROE (%)
8.0%

Key Risks:
Political unrest & slowing economy
Political unrest and a slowing economy could hurt consumer
confidence and delay spending, and in turn affect the
potential for rental rate hikes.

7.0%
6.0%
5.0%
4.0%
3.0%
2.0%

Acquisition growth stalled unless the fund converts to a REIT


All property funds, including TLGF, can no longer increase
capital to acquire additional assets. To be able to grow the
fund size, the fund needs to be converted to a REIT. But that
cannot be done until the SEC finalises further details, such
as transaction costs.
Losing key anchor tenant
Anchor tenant Tesco Lotus does not renew its contracts.

1.0%
0.0%
2014A

2015A

2016F

2017F

Distribution Yield (%)


8.0%

7.0%
6.0%
5.0%
4.0%

COMPANY BACKGROUND
TLGF is a property fund that invests in freehold and
leasehold rights to 23 retail shopping malls in Thailand, with
Tesco Lotus as a key anchor tenant.
Ek-Chai Distribution System Co., Ltd. (Tesco Lotus) is the
sponsor, major unit holder with 25% stake, and the
Property Manager of the Fund.

3.0%
2.0%
2013A

2014A

2015A

2016F

2017F

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 70

VICKERS SECURITIES

Company Guide
Tesco Lotus Retail Growth Freehold and Leasehold
Property Fund
Key Assumptions
FY Feb
Leasable area (sqm)
Occupancy
Occupied area (sqm)
Rents (bt/sqm/month)
Total rents (Btm)
Dividend payout

2013A

2014A

2015A

2016F

2017F

312,438
99%
309,648
479
1,778
100%

314,097
99%
312,019
645
2,414
100%

334,453
99%
332,108
680
2,708
100%

336,453
99%
334,074
725
2,907
95%

336,453
99%
334,074
751
3,009
95%

2013A

2014A

2015A

2016F

2017F

587
925
249
18
1,778

771
1,300
323
20
2,414

790
1,555
342
21
2,708

869
1,657
360
22
2,907

869
1,740
377
23
3,009

33%
52%
14%
1%
100%

32%
54%
13%
1%
100%

29%
57%
13%
1%
100%

30%
57%
12%
1%
100%

29%
58%
13%
1%
100%

31%
41%
30%
10%
36%

2%
20%
6%
5%
12%

10%
7%
5%
5%
7%

0%
5%
5%
5%
4%

2013A

2014A

2015A

2016F

2017F

1,779
(275)
1,503
(301)
12
17
12
1,243
0
0
0
1,243
1,243
(538)
1,346

2,414
(357)
2,057
(459)
17
13
134
1,762
0
0
0
1,762
1,762
0
1,783

2,736
(435)
2,302
(497)
1
(68)
139
1,877
0
0
0
1,877
1,877
0
1,888

2,907
(454)
2,453
(404)
1
(74)
0
1,976
0
0
0
1,976
1,976
0
1,990

3,009
(477)
2,532
(326)
1
(72)
0
2,136
0
0
0
2,136
2,136
0
2,056

N/A
nm
nm
99.8
84.5
69.9
75.7

35.7
36.8
41.8
100.0
85.2
73.0
73.8

13.3
11.9
6.6
100.0
84.1
68.6
69.0

6.2
6.6
5.3
95.0
84.4
68.0
65.0

3.5
3.2
8.1
95.0
84.2
71.0
64.9

7.3

9.5

9.8

10.7

10.8

N/A
N/A
N/A
NM

6.7
6.3
5.8
NM

7.1
6.4
6.3
26.5

7.5
6.7
7.1
27.8

8.1
7.2
7.6
30.8

Segmental Breakdown
FY Feb

Revenues (Bt m)
Hypermarkets & food court
Long-term lease
Short-term lease
Others
Total
Revenue Breakdown
Hypermarkets & food court
Long-term lease
Short-term lease
Others
Total
Growth
Hypermarkets & food court
Long-term lease
Short-term lease
Others
Total
Income Statement (Bt m)
FY Feb
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

Assuming 95% payout


ratio vs historical 100%
payout

Growth continues to come


from rental reversion

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 71

Company Guide
Tesco Lotus Retail Growth Freehold and
Leasehold Property Fund
Quarterly / Interim Income Statement (Bt m)
FY Feb
1Q2015
2Q2015
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

3Q2015

4Q2015

1Q2016

677
(90)
587
(119)
0
(21)
(0)
429
0
0
429
429
38
467

688
(93)
595
(120)
1
(21)
0
440
0
0
440
440
38
478

679
(90)
589
(121)
0
(21)
76
508
0
0
508
508
(38)
471

693
(101)
592
(138)
0
(22)
64
483
0
0
483
483
(28)
455

708
(101)
607
(92)
0
(22)
(1)
478
0
0
478
478
18
496

8
10
nm
86.7
N/A

2
1
nm
86.5
N/A

(1)
(1)
nm
86.8
N/A

2
1
nm
85.5
N/A

2
3
nm
85.7
N/A

Balance Sheet (Bt m)


FY Feb

2013A

2014A

2015A

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

24,964
716
1,072
0
0
0
26,752

27,469
593
1,029
0
0
0
29,091

28,043
473
1,070
0
0
0
29,586

28,153
380
1,010
0
0
0
29,543

28,263
380
1,113
0
0
0
29,755

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
0
433
0
0
26,319
0
26,752

0
0
510
2,284
0
26,298
0
29,091

0
0
719
2,591
0
26,276
0
29,586

0
0
581
2,600
0
26,362
0
29,542

0
0
595
2,600
0
26,560
0
29,755

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

(433)
1,072

(510)
(1,255)

(719)
(1,521)

(581)
(1,590)

(595)
(1,487)

2.5
2.5
0.0
58.6

2.0
2.0
8.1
27.4

1.5
1.5
9.1
26.1

1.7
1.7
9.1
26.4

1.9
1.9
9.1
26.2

Gain (loss) from asset


revaluation

Net gearing close to


10% limit

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 72

VICKERS SECURITIES

Company Guide
Tesco Lotus Retail Growth Freehold and Leasehold
Property Fund
Cash Flow Statement (Bt m)
FY Feb
Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

2013A

2014A

2015A

2016F

2017F

1,243
170
0
0
(12)
108
1,509
(25,416)
0
0
0
(55)
(25,471)
(877)
0
25,442
0
24,565
0
603

1,762
230
0
0
(134)
34
1,892
(2,372)
12
0
0
(76)
(2,435)
(1,783)
2,284
0
0
501
0
(43)

1,877
230
0
0
(139)
167
2,134
(435)
8
0
0
(76)
(504)
(1,900)
308
0
0
(1,592)
0
39

1,976
94
0
0
0
(61)
2,009
(110)
0
0
0
(76)
(186)
(1,890)
9
0
0
(1,881)
0
(58)

2,136
0
0
0
0
90
2,226
(110)
0
0
0
(76)
(186)
(1,937)
0
0
0
(1,937)
0
102

0.8
(12.4)

0.9
(0.2)

1.0
0.7

0.9
0.8

1.0
0.9

Operating CFPS (Bt)


Free CFPS (Bt)

Source: Company, DBS Vickers


Target Price & Ratings History
14.59

Bt
S.No .

14.09

4
2

13.59

1:
2:
3:
4:

Cl o s i n g
Pri c e
19 Jan 15
13.00
01 Apr 15
13.50
06 May 15
13.50
15 Jul 15
13.70
Da te

Ta rg e t
Pri c e
15.10
15.10
15.10
15.10

R a ti n g
Buy
Buy
Buy
Buy

13.09

1
12.59
12.09
11.59
Sep-14

Jan-15

May-15

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 73

Thailand Company Guide


TICON Industrial Growth Leasehold Property Fund
Edition 1 Version 1 | Bloomberg: TGROWTH TB | Reuters: TGROWTHu.BK Refer to important disclosures at the end of this report

DBS Group Research . Equity

18 Sep 2015

BUY

RESILIENT INDUSTRIAL SPACE LESSOR

Last Traded Price: Bt12.20 (SET : 1,381.72)


Price Target : Bt12.90 (6% upside)

BUY with DCF-based TP of Bt12.90. Amid the low-interestrate environment, the fund offers attractive annual yield of
c.8% over the next three years, higher than the current 2.65%
yield for Thai government bonds and 3.6% yield for stocks
under DBS coverage. It has a solid track record of healthy
occupancy rates and offers 16% total return (price upside +
dividend yield) at the current market price.

Potential Catalyst: Strong economic recovery and rental hike


Where we differ: N/A
Analyst
Wasu Mattanapotchanart +662 658 7826
wasum@th.dbsvickers.com

Withstanding the economic slowdown.


While the occupancy rates at other property funds under
TICON are in the range of 71-76% and declining because of
the slower economy, TGROWTH has been resilient. Its
occupancy rate had bottomed out at 93% in 2H14 and has
rebounded to 96% in 1H15, close to its peak of 98-100% in
2013 and early 2014. We estimate occupancy rate at
96%/97%/95% for FY15/16/17.

Price Relative
Bt

Relative Index
218

13.7

198

12.7

178

11.7

158
10.7

138

9.7

118

8.7

98

7.7
Dec-13

78
May-14

Oct-14

Mar-15

Valuation:
We value TGROWTH at Bt12.90, based on DCF valuation
(WACC: 7.1%, Terminal Value of Bt0 at the end of 2043).

Aug-15

TICON Industrial Growth Leasehold Property Fund (LHS)


Relative SET INDEX (RHS)

Forecasts and Valuation


FY Dec (Bt m)
Gross Revenue
Net Property Inc
Total Return
Distribution Inc
EPU (Bt)
EPU Gth (%)
DPU (Bt)
DPU Gth (%)
NAV per shr (Bt)
PE (X)
Distribution Yield (%)
P/NAV (x)
Aggregate Leverage (%)
ROAE (%)

2014A
593
534
531
516
0.96
nm
0.97
nm
10.26
12.7
7.9
1.2
8.1
N/A

Dist. Inc. Revision (%):


Consensus DPU (Bt):
Other Broker Recs:

2015F
601
543
523
523
0.94
(2)
0.93
(4)
10.28
13.0
7.6
1.2
7.4
9.2

2016F
624
562
541
541
0.98
4
0.97
4
10.30
12.5
7.9
1.2
6.7
9.5

2017F
625
563
544
544
0.98
1
0.97
1
10.31
12.4
8.0
1.2
6.0
9.5

0.80
B: 0

0.90
S: 0

0.90
H: 1

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS
www.dbsvickers.com
ed: SGC / sa: CS

Key Risks to Our View:


Economic slowdown and high-household-debt-to-GDP ratio
(c.85%) could result in extended weak automotive sales in
Thailand. This could, in turn, cause autopart makers (33% of
total leasable areas) to downsize production capacities. Also,
lackluster global growth could hurt exports of electronics parts.
Electronics firms account for 20% of TGROWTHs leasable
area.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Btm/US$m)
Major Shareholders
TICON (%)
HSBC (SINGAPORE) NOMINEES PTE LTD (%)
MTLS (%)
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Financials / Real Estate Investment Trusts

555
6,771 / 188
25.3
11.4
11.4
25.1
0.09

VICKERS SECURITIES

Company Guide
TICON Industrial Growth Leasehold Property Fund
Net Property Income and Margins (%)

CRITICAL DATA POINTS TO WATCH


600

97.5%

500

95.5%

400
93.5%

300
91.5%
200

89.5%

100

87.5%

85.5%

2014A

2015F

Net Property Income

Economic recovery could push up occupancy rates


We project the Funds occupancy rate will be in the range of
95-97% over the next five years, before dropping to 90%
from 2020 onward. The majority its clients are involved in
autoparts (33% of leasable area), logistics (21%), and
consumer products (6%), so TGROWTHs occupancy rate
could beat our estimates during economic upturns. This
would present a mild upside to our forecast earnings and TP.
Its occupancy rate had peaked at 98-100% in 2013 and early
2014.

ASIAN INSIGHTS

Net Property Income Margin %

91%

35

90%

30

90%

25

89%

20

89%

15

88%

10

88%

87%

87%

Net Property Income

2Q2015

91%

40

1Q2015

92%

45

3Q2014

50

2Q2014

5-10% rental reversion every three years


The majority of TGROWTHs rental contracts are for three
years, and the Fund usually raise rents by 5-10% when the
contracts expire, implying 1.7%-3.3% hike p.a. The actual
hikes would depend on the prevailing demand-supply
situation and the size and location of the rental assets. We
forecast average rent would increase by 2.5% p.a. over the
next four years, before slowing to 2% p.a. over FY21-24, and
1% thereafter.

2017F

Net Property Income and Margins (%)

1Q2014

This is in stark contrast with the other TICON-owned property


funds, of which occupancy rates continue dropping. TFUNDs
occupancy rate has fallen from 95.6% in 4Q11 to 70.6%
now, and TLOGISs has fallen from its 95% peak in 2Q13 to
76% in 2Q15. Hence, we believe that TGROWTH would be
able to weather the recession better than other TICON funds.

2016F

4Q2014

Earnings Drivers:
Occupancy rates remain healthy
TGROWTHs operations have been resilient. Despite the
ongoing economic slowdown, its occupancy rate had
bottomed out in 2H14 at 93% (factory: 100%, warehouse:
88%) and rebounded in 1H15 to 96% (factory: 100%,
warehouse: 93%).

Bt m

Net Property Income Margin %

Distribution Paid / Net Operating CF


(x)

1.0
0.9
0.8
0.7
0.6
0.5

0.4
2014A

2015F

2016F

2017F

Source: Company, DBS Vickers

VICKERS SECURITIES
Page 75

Company Guide
TICON Industrial Growth Leasehold
Property Fund
Balance Sheet:
At the end of 2014, TGROWTH had Bt460m debt, equivalent
to 8.1% of NAV. We expect debt to drop to Bt422m (7.4%
of NAV) by the end of this year, and the Fund to be debt-free
by 2026, assuming no acquisition of new rental assets.

Aggregate Leverage (%)


8.0%
7.0%
6.0%
5.0%

4.0%
3.0%

Share Price Drivers:


Attractive yield
TGROWTH is offering attractive annual yield of c.8% for the
next three years, compared to 2.65% for 10-year Thai
government bonds and 3.6-3.9% dividend yields for stocks
under DBS coverage (75% of the SET market cap) in FY1516F.

2.0%

1.0%
0.0%
2014A

2015F

2016F

2017F

ROE (%)
9.0%
8.0%

Key Risks:
Domestic and global economic slowdown
The slower economy and high household debt could result
in extended weak automotive sales in Thailand; falling auto
production could make its autopart makers (33% of
TGROWTHs total leasable area) to downsize production
lines and warehouse space. Also, lackluster global growth
could hurt exports of electronics parts (20% of total leasable
area).

7.0%
6.0%
5.0%

4.0%
3.0%
2.0%
1.0%
0.0%
2015F

2016F

2017F

Distribution Yield (%)

COMPANY BACKGROUND
Ticon Industrial Growth Leasehold Property (TGROWTH)
owns rental warehouse and factories with total leasable
areas of 182k sqm and 121k sqm, respectively. The
remaining leasehold life of its assets is 28.5 years. All its
assets were developed by the SET-listed Ticon Industrial
Connection (TICON); TICON usually develops and holds
rental assets for a few years before selling them to its
network of property funds and REITs, including TLOGIS,
TFUND, TGROWTH and REIT.
The bulk of TGROWTHs leasable area is occupied by
Japanese corporations (61%), followed by Thais (8%),
Germans (7%) and French (6%). TGROWTHs warehouses
and factories are in industrial parks/estates in Ayutthaya,
Patumtani, Chonburi, Chachoengsao and Rayong.

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2014A

2015F

2016F

2017F

PB Band (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 76

VICKERS SECURITIES

Company Guide
TICON Industrial Growth Leasehold Property Fund

Key Assumptions
FY Dec
Leasable area (sqm)
Warehouse
Factory
Total
Occupancy (%)
Warehouse
Factory
Total

2013A

2014A

2015F

2016F

2017F

182,095
104,225
286,320

182,095
121,175
303,270

182,095
121,175
303,270

182,095
121,175
303,270

182,095
121,175
303,270

100%
100%
100%

88%
100%
93%

93%
100%
96%

95%
100%
97%

95%
95%
95%

2014A

2015F

2016F

2017F

593
(59)
534
(14)
10
(14)
16
531
0
0
0
531
531
0
516

601
(59)
543
(13)
10
(17)
0
523
0
0
0
523
523
0
523

624
(62)
562
(13)
10
(17)
0
541
0
0
0
541
541
0
541

625
(62)
563
(13)
10
(15)
0
544
0
0
0
544
544
0
544

N/A
nm
nm
104.1
90.0
89.6
90.6

1.5
1.7
(1.6)
99.0
90.2
86.9
86.0

3.7
3.5
3.6
99.0
90.0
86.8
85.9

0.2
0.2
0.5
99.0
90.0
87.1
86.2

2.4

2.2

2.1

2.1

N/A
N/A
N/A
37.5

9.2
8.2
8.3
31.7

9.5
8.5
8.7
32.0

9.5
8.6
8.7
35.5

Income Statement (Bt m)


FY Dec
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Preference Dividend
Net Income After Tax
Total Return
Non-tax deductible Items
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 & Trustees fees
to sales %)
ROAE (%)
ROA (%)
ROCE (%)
Int. Cover (x)

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 77

Company Guide
TICON Industrial Growth Leasehold
Property Fund
Quarterly / Interim Income Statement (Bt m)
FY Dec
2Q2014
3Q2014
Gross revenue
Property expenses
Net Property Income
Other Operating expenses
Other Non Opg (Exp)/Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Net Income
Tax
Minority Interest
Net Income after Tax
Total Return
Non-tax deductible Items
Net Inc available for Dist.
Growth & Ratio
Revenue Gth (%)
N Property Inc Gth (%)
Net Inc Gth (%)
Net Prop Inc Margin (%)
Dist. Payout Ratio (%)

4Q2014

1Q2015

2Q2015

151
(16)
135
0
7
(4)
0
138
0
0
138
135
N/A
135

147
(15)
132
1
0
(4)
15
144
0
0
144
139
N/A
124

147
(13)
134
0
0
(4)
0
130
0
0
130
126
N/A
126

147
(18)
130
0
1
(4)
0
127
0
0
127
123
N/A
123

147
(16)
131
0
0
(5)
0
127
0
0
127
123
N/A
122

3
2
6
89.4
97.0

(3)
(2)
4
89.8
105.7

0
1
(10)
90.9
98.9

0
(3)
(2)
88.0
101.4

0
1
0
88.9
100.0

Balance Sheet (Bt m)


FY Dec

2014A

2015F

2016F

2017F

Investment Properties
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

6,018
N/A
336
0
14
2
6,370

6,018
N/A
310
0
14
2
6,345

6,018
N/A
289
0
15
2
6,324

6,018
N/A
257
0
15
2
6,293

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Unit holders funds
Minority Interests
Total Funds & Liabilities

0
0
0
460
215
5,696
0
6,371

0
0
0
422
218
5,706
0
6,345

0
0
0
383
226
5,716
0
6,325

0
0
0
345
226
5,722
0
6,293

Non-Cash Wkg. Capital


Net Cash/(Debt)
Ratio
Current Ratio (x)
Quick Ratio (x)
Aggregate Leverage (%)
Z-Score (X)

16
(124)

17
(112)

17
(94)

17
(88)

N/A
N/A
8.1
NA

N/A
N/A
7.4
NA

N/A
N/A
6.7
NA

N/A
N/A
6.0
NA

Source: Company, DBS Vickers

ASIAN INSIGHTS
Page 78

VICKERS SECURITIES

Company Guide
TICON Industrial Growth Leasehold Property Fund

Cash Flow Statement (Bt m)


FY Dec
Pre-Tax Income
Dep. & Amort.
Tax Paid
Associates &JV Inc/(Loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Net Invt in Properties
Other Invts (net)
Invts in Assoc. & JV
Div from Assoc. & JVs
Other Investing CF
Net Investing CF
Distribution Paid
Chg in Gross Debt
New units issued
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Operating CFPS (Bt)
Free CFPS (Bt)

2014A

2015F

2016F

2017F

531
0
0
0
(55)
(16)
461
(460)
(296)
0
0
0
(756)
(412)
460
0
0
48
0
(248)

523
0
0
0
3
0
526
0
96
0
0
0
96
(513)
(38)
0
0
(551)
0
71

541
0
0
0
8
0
549
0
0
0
0
0
0
(531)
(38)
0
0
(570)
0
(21)

544
0
0
0
0
0
544
0
0
0
0
0
0
(538)
(38)
0
0
(576)
0
(32)

0.9
0.0

0.9
0.9

1.0
1.0

1.0
1.0

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES
Page 79

Industry Focus
Property Fund/REIT Sector

DBSV 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


GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers Securities (Thailand) Co., Ltd. (DBSVT), a direct wholly-owned subsidiary of DBS Vickers Securities
(Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is
intended for clients of DBSV Group 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 DBSVR.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to
DBSVT and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are
subject to change without notice. This document 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
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to time have interests in the securities mentioned in this document. DBSVT, DBS Bank Ltd and their associates, their directors, and/or
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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
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
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which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from
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BE RELIED UPON as a representation and/or warranty by DBSVT and/or DBSVH (and/or any persons associated with the aforesaid entities), that:
(a)
(b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
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Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
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The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES
DBS Vickers Securities (Thailand) Co., Ltd. and its subsidiaries do not have a proprietary position in the mentioned company as of
1.
17 Sep 2015.
DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA, may beneficially own a total of 1% or more of any
2.
class of common equity securities of the mentioned company as of 18 Sep 2015.

Page 80

Industry Focus
Property Fund/REIT Sector

3.

Compensation for investment banking services:


i.
DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the
past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking
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ii.

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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
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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 being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning
of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the
UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (DIFC) by DBS Bank Ltd., (DIFC
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Branch) having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial
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United States

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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.
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Tel. 66 2 657 7831, Fax: 66 2 658 1269

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