020413 cambridge ind trust - dbs

7/30/2019 020413 Cambridge Ind Trust - DBS

1/17

www.dbsvickers.com

Refer to important disclosures at the end of this reported: OY / sa: JC

BUY S$0.79 STI : 3307.58Price Target : 12-Month S$ 0.93 (Prev S$ 0.75)Reason for Report : Company updatePotential Catalyst: Divestment/acquisitionDBSV vs Consensus: In LineAnalystDerek TAN CPA +65 6398 [email protected]

LOCK Mun Yee +65 6398 [email protected]

Price Relative

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Relative IndexS$

Cambridge Industrial Trust (LHS) Relative STI INDEX (RHS)

Forecasts and ValuationFY Dec (S$ m) 2011A 2012A 2013F 2014FGross Revenue 80 89 95 103Net Property Inc 69 76 82 89Total Return 85 89 56 60Distribution Inc 50 58 60 64EPU (S cts) 2.9 4.0 4.6 5.0EPU Gth (%) (31) 36 16 8DPU (S cts) 4.2 4.8 5.0 5.3DPU Gth (%) (13) 13 4 6NAV per shr (S cts) 62.0 64.7 64.7 64.4PE (X) 27.1 19.9 17.2 15.9Distribution Yield (%) 5.4 6.1 6.3 6.7P/NAV (x) 1.3 1.2 1.2 1.2Aggregate Leverage (%) 35.3 40.7 39.5 39.8

ROAE (%) 5.0 6.3 7.1 7.7

Distn. Inc Chng (%): - -Consensus DPU (S cts): 5.2 5.4Other Broker Recs: B: 5 S: 2 H: 0ICB Industry :FinancialsICB Sector: Real Estate Investment TrustPrincipal Business: CREIT is a REIT which invest primarily in industrialassets located in Singapore

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

At A Glance Issued Capital (m shrs) 1,224Mkt. Cap (S$m/US$m) 967 / 780Major Shareholders

Franklin Templeton (%) 7.9Free Float (%) 92.1Avg. Daily Vol.(000) 2,377

DBS Group Research . Equity 2 Apr 2013

Singapore Company Focus

Cambridge Industrial TrustBloomberg: CREIT SP | Reuters: CMIT.SI Refer to important disclosures at the end of this report

Immense Value Within

Unlocking hidden value in its portfolio

Sale of Lam Soon Building to result in potentialsubstantial gains

BUY, TP raised to S$0.93

Hidden value to be extracted in its portfolio. The coming

few years could be transformational for Cambridge REIT

(CREIT). With a number of its the master leases rolling off, webelieve it is an opportune time for CREIT to relook at potential

re-development or asset enhancement plans within its

portfolio, which can potentially reap a further 2.6m sqft GFA.

This is a potential 35% expansion in rentable space, which

could raise rental income by up to c44%. While this

redevelopment is likely to take time, additional capital and

further feasibility studies, in our view, it is likely to pay off

handsomely if executed well.

Sale of Lam Soon Building (LSB) to reap handsome

profits. The potential collective sale of Lam Soon Industrial

Buidling (LSB), if completed, is likely to unlock substantialgains for CREIT, which currently owns a 69.2% stake in the

property. As LSB is currently built on land zoned for residential

use and with residential developments in the vicinity trading in

the range of S$1,000-S$1,600 psf, its book value (S$110m,

S$371psf on CREIT balance sheet) understates its true value,

in our view. Our base case scenario of a collective sale,

assumes a fair value of S$277m for LSB, implies an

attributable profit of S$82.3m (S$0.07 / unit) for CREIT.

TP raised to S$0.93. Our forecasts are based on its current

portfolio without taking into account any potential

developments spoken above. We have shown 3 valuation

methodologies (i) DCF on existing portfolio (TP SS$0.78), (ii)DCF on expanded portfolio (TP S$0.88) and (iii) RNAV (TP

S$0.98) to ascertain the underlying value of CREIT and

incorporating various development / asset sale scenarios. Our

TP of S$0.93 pegged to average of the (ii) and (iii), which

incorporates the execution of potential growth initiatives.


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Company Focus

Cambridge Industrial Trust

Page 2

Opportunities to create value

Cambridge REIT (CREIT) had been one of the more activeindustrial S-REITS in 2012, acquiring 9 industrial properties at

a total cost of S$280.4m (5 completed over the course of

2012) and at the same time divesting 2 properties over the

course of the year. The trust has also embarked on various

asset enhancement and development projects within its

portfolio. In some cases, it involves intensification of property

plot-ratios, creating additional leasable space for the trust.

These projects are expected to contribute positively to CREIT

earnings in the coming years.

Asset Enhancement projects and Development Projectsundertaken by CREIT

Properties GFA Created(Sqft) Cost(S$) Completion/CompletingAsset enhancement projects30 Toh Guan Road 14,895 8.3 Dec12

4 & 6 Clementi Loop `110,957 23.3 Jan13

16 Tai Seng 38.703 13.1 1Q13

88 International Road 101,932 16.4 2Q13

61.1Asset enhancement projects43 Tuas View Circuit 122,836 13.2 Sep12

70 Seletar AerospaceView

53,729 8.6 Nov12

21.8Source: Company, DBS Vickers

Looking ahead, the manager continues to see opportunities

to grow the trust through acquisitions and selective

divestment opportunities to optimize capital use. We believe

that there are also various development opportunities within

the portfolio which will result in significant upside for unit

holders, if executed upon.

(i) Re-development opportunities within its portfolio.Cambridge REIT (CREIT) will see a significant 44.6% of its

leases (by rental income) up for renewal (15% in FY13;

29.6% in FY14). We note that close to two-thirds of the

leases are from its portfolio of single-tenanted properties.

Many of these properties are purchased back in 2007 or from

its initial portfolio prior to IPO, which over the coming few

years, are coming off the first lease cycle.

The manager has been in active negotiations with the

vendors to renew the leases ahead of expiry; we understand

that some of the master-leases might not be renewed. Whilethis could present potential earnings risk for CREIT as some of

these master-leases might not roll over, we believe these risks

could be mitigated if expiring rents are lower than market

levels, which means that these properties should see an net

uplift in rental income eventually.

Significant number of leases up for renewal in thecoming years

Source: Company, DBS Vickers

Potential developments - Unlocking value through maximisingplot ratios. In the meantime, with the master leases rollingoff, we believe that it is also an opportune time to re-look atpotential re-development or asset enhancement plans (for

assets that have not maximized their plot ratios) where CREIT

is unable to act on previously given the ongoing leases

obligations. As such, development or asset enhancement

initiatives are expected to increase CREITs industrial footprint

and at the same time improve the quality of its portfolio.

Based on our analysis, the current built-up GFA of its portfolio

is 7.39m sqft (based on 49 properties as of Dec12). Based on

our estimates, this is c35% below the maximum allowable

built-up GFA (per 2008 Master Plan), representing a potential

c2.6m sqft of additional GFA that can be extracted withintheir portfolio.

However, we believe that actual realisation of its full potential

will take time, and more capital and further feasibility studies

to ensure the efficient execution of plans.

11%

22%

11%

16%

10%7% 6%

4%

7%

3%

1%

1%

0% 1%

0%

5%

10%

15%

20%

25%

30%

35%

2013 2014 2015 2016 2017 2018 >2016

Multi-tenanted buildings

Single-tenanted buildings


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Company Focus


Page 3

Properties up for renewal in coming years

Property Type No ofproperties CurrentBuilt-Up GFA(000 sqft)MaximumAllowableGFA**(000 sqft)

Un-utlizedGFA(000 sqft)% Expansion

Lease expiry 2013Industrial 4 434 780 346 80%

Light Industrial 4 551 582 31 6%

Warehousing 2 240 544 305 127%

Car Showroom & Workshop 1 51 118 67 132%

Self Storage & Warehousing - - - - na

Logistics - - - - na

Total in 2013 11 1,275 2,024 749 59%Lease expiry 2014Industrial - - - - -

Light Industrial 3 296 340 44 15%

Warehousing 3 437 520 83 19%

Car Showroom & Workshop - - - - na

Self Storage & Warehousing - - - - na

Logistics 2 1,229 1,530 301 24%

Total in 2014 8 1,962 2,390 428 22%Lease expiry 2015Industrial 1 225 297 73 32%

Light Industrial - - - - na

Warehousing 2 309 400 91 30%

Car Showroom & Workshop - - - - naSelf Storage & Warehousing - - - - na

Logistics - - - - na

Total in 2015 3 533 697 164 31%Lease expiry >2015Industrial 8 784 1,063 278 36%

Light Industrial 8 1,166 1,308 142 12%

Warehousing 5 462 958 495 107%

Car Showroom & Workshop - - - - na

Self Storage & Warehousing 1 322 325 2 1%

Logistics 5 880 1,176 296 34%

Total over 2015 27 3,615 4,829 1,214 34%PortfolioIndustrial 13 1,442 2,140 698 48%

Light Industrial 15 2,013 2,230 217 11%

Warehousing 12 1,447 2,422 974 67%

Car Showroom & Workshop 1 51 118 67 132%

Self Storage & Warehousing 1 322 325 2 1%

Logistics 7 2,110 2,706 597 28%

Portfolio Total 49 7,385 9,940 2,555 35%*As of Dec12. We have not included in the planned acquisition of 54 Serangoon North Ave 4, 30 Teban Gardens, 15 Jurong Port Road and

Tuas Medical Park in our analysis

**Based on site area x the maximum plot ratio per masterplan 2008



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Company Focus


Page 4

Potential gains of up to S$151.3m to be reaped. Based onCREITs lease expiry profile, the trust will be renewing themaster leases of the 19 properties, of which based on our

estimates could yield close to c1.2m sqft of additional GFA, if

CREIT is able to fully maximize available plot ratios. This is

close to 46% of the estimated c2.6m sqft of un-utilized GFAs

for its portfolio.

Assuming that the trust is able to develop and maximize all

the plot ratios from leases expiring in the coming 2 years, weestimate that a total gross development value (GDV) of

S$246.1m. Assuming construction cost of S$150 psf, the

total construction of this additional space to cost S$176.6m

and CREIT to reap a gain of c69.5m as a result.

If we were to translate this to the 2.6m sqft of un-utilized

GFA in the portfolio, we estimate a total GDV of 534.5m and

a gain of up to S$151.3m, at a total construction cost of

S$383.3m ( @ S$150 psf).

.

Estimated value assuming the development of un-utilised GFA

Property Type Un-utlizedGFA AssumedRent(S$ psf/ permth )

Net propertyincome /annumAssumedCap Rate GrossDevelopmentValue(S$m)

ConstructionCost Surplus(S$m)(000 sqft) (%) (S$m)

Industrial 346.0 1.50 5.6 7.00% 80.1 51.9 28.2

Light Industrial 31.0 1.50 0.5 6.75% 7.4 4.7 2.8

Warehousing 305.0 1.25 4.1 7.00% 58.8 45.8 13.1

Car Showroom & Workshop 67.0 1.20 0.9 6.75% 12.9 10.1 2.8

Self Storage & Warehousing - 1.50 - 6.75% - - -

Logistics - 1.30 - 7.00% - - -

Total in 2013 749.0 1.38 11.1 159.2 112.4 46.8Industrial - 1.50 - 7.00% - - -


Warehousing 83.0 1.25 1.1 7.00% 16.0 12.5 3.6

Car Showroom & Workshop - 1.20 - 6.75% - - -

Self Storage & Warehousing - 1.50 - 6.75% - - -

Logistics 301.0 1.30 4.2 7.00% 60.4 45.2 15.2

Total in 2014 428.0 1.38 6.1 86.9 64.2 22.7Industrial 352.0 1.5 5.7 7.00% 81.5 52.8 28.7


Warehousing 586.0 1.3 7.9 7.00% 113.0 87.9 25.1

Car Showroom & Workshop - 1.2 - 6.75% - - -

Self Storage & Warehousing 2.0 1.5 0.0 6.75% 0.5 0.3 0.2Logistics 296.0 1.3 4.2 7.00% 59.4 44.4 15.0

Total > 2014 1,378.0 1.38 20.1 288.4 206.7 81.7Industrial 698.0 1.50 11.3 7.00% 161.5 104.7 56.8


Warehousing 974.0 1.25 13.1 7.00% 187.8 146.1 41.7

Car Showroom & Workshop 67.0 1.20 0.9 6.75% 12.9 10.1 2.8

Self Storage & Warehousing 2.0 1.50 0.0 6.75% 0.5 0.3 0.2

Logistics 597.0 1.30 8.4 7.00% 119.7 89.6 30.2

Portfolio Total 2,555.0 1.38 37.3 534.5 383.3 151.3Source: Company, DBS Vickers


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Company Focus


Page 5

Execution of strategy will take time and feasibility. While weacknowledge the significant gains that may be reaped withinthe portfolio, it is also likely to take time for the trust to

execute on their development plans and more importantly,

we need to take into account the actual feasibility of

undertaking such development plans given market conditions

and site specifications.

Additional considerations for CREIT include (i) ensuring that

distributions to unit holders are not diluted during the

construction phases when the additional space are not

earning income, (ii) 10% development cap at any one time

which limits the total amount of activity and (iii) funding

required for the development.

Yield enhancement of up to +100bps expected. Assumingthe various development scenarios (25% up to 100% of totalun-utilized GFA), we estimate the total portfolio yield to

increase by between 50 bps to 100 bps.

In terms of actual impact on net property income, assuming

that 50-100% of total available un-utilized GFA is being

developed and converted into leasable area, we estimate that

CREIT could see a +11.1% to 44.7% increase in net property

income.

Development of untilized space could see up to +50bps to +100bps improvement in portfolio yield

Development scenarios Un-utlizedGFA ConstructionCost* ProjectedNet propertyincomeIncrease inNet Propertyincome vscurrentportfolio

Return ondevelopmentcostCurrentPortfolioYield(%)

ForecastedPortfolioYield (withdevelopment)(%)

Increasein yield(bps)

(000 sqft) (S$m) (S$m)Formula : A B B/A

Scenario 1: 100% of total avialable GFAProperties expiring in 2013 749 112.4 11.1 13.3% 9.9% 6.6% 6.9%

Properties expiring in 2014 428 64.2 6.1 7.3% 9.4% 6.6% 6.9%Properties expiring > 2014 1,378 206.7 20.1 24.1% 9.7% 6.6% 7.2%

Portfolio Total 2,555 383.3 37.3 +44.7% 9.7% 6.6% 7.6% +100 bpsScenario 2: 75% of total avialable GFA

Properties expiring in 2013 562 84.3 8.3 9.9% 9.9% 6.6% 6.9%


Properties expiring > 2014 1,034 155 15.1 18.1% 9.7% 6.6% 7.2%

Portfolio Total 1,916 287.5 27.9 +33.4% 9.7% 6.6% 7.4% +80 bpsScenario 3: 50% of total available GFA


Properties expiring in 2014 214 32.1 3 3.6% 9.4% 6.6% 6.8%

Properties expiring > 2014 689 103.4 10.1 12.1% 9.7% 6.6% 7.1%Portfolio Total 1,277 191.7 18.6 +22.3% 9.7% 6.6% 7.3% +70bpsScenario 4: 25% of total available GFA



Properties expiring > 2014 344 51.6 5 6.0% 9.7% 6.6% 7.0%

Portfolio Total 638 95.8 9.3 +11.1% 9.7% 6.6% 7.1% +50 bps* assumed to be 50% of total construction cost, which based on our estimates, will keep its current gearing level of c38% stable.

* construction cost assumed at S$150 psf



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Company Focus


Page 6

Funding required. Given that a CREIT pays out 100% of itsdistributable income, there is minimal retention and the trust

has minimal cash on the balance sheet and any investments(acquisitions or developments) have to be funded by a

combination of new debt or equity.

As of latest report date, CREIT has a gearing of 38%, which is

at managements optimal level of c35-40%. If we were to

assume that CREIT maintains current gearing levels, weestimate the trust could require additional equity of up to

S$191.7m or up to 24% of its current equity base.

Development of untilized space could see up to +50bps to +100bps improvement in portfolio yield

Property Type Un-utlizedGFA GrossDevelopmentValueConstructionCost % on currentproperty value EquityFunding* % of currentequity base atDec12

(000 sqft) (S$m) (S$m) (50% of cost)

Scenario 1: 100% of total avialable GFAProperties expiring in 2013 749 159.2 112.4 9% 56.2 7%

Properties expiring in 2014 428 86.9 64.2 5% 32.1 4%

Properties expiring > 2014 1,378 288.4 206.7 16% 103.4 13%

Portfolio Total 2,555 534.5 383.3 29% 191.7 24%

Scenario 2: 75% of total avialable GFAProperties expiring in 2013 562 119.4 84.3 6% 42.2 5%


Properties expiring > 2014 1,034 216.3 155 12% 77.5 10%

Portfolio Total 1,916 400.9 287.5 22% 143.7 18%Scenario 3: 50% of total available GFAProperties expiring in 2013 374 79.6 56.2 4% 28.1 4%


Properties expiring > 2014 689 144.2 103.4 8% 51.7 7%

Portfolio Total 1,277 267.3 191.7 15% 95.8 12%Scenario 4: 25% of total available GFAProperties expiring in 2013 187 39.8 28.1 2% 14.1 2%

Properties expiring in 2014 107 21.7 16.1 1% 8 1%

Properties expiring > 2014 344 72.1 51.6 4% 25.8 3%

Portfolio Total 638 133.6 95.8 7% 47.9 6%

* assumed to be 50% of total construction cost, which based on our estimates, will keep its current gearing level of c38% stable.



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Company Focus


Page 7

(ii) Sale of Lam Soon Industrial Building.

Potential sale in the works? Lam Soon Industrial Building islocated in Hillview estate, surrounded by private residential

developments. Lam Soon Industrial building sits on a prized

freehold land site zoned for residential use with a plot ratio of

1.9. CREIT owns 69.2% of the strata-units of this property

and as of 31st

Dec12, is valued at S$110m (100% basis) or

S$ 288 psf.

While CREIT, together with the other owners of the strata

units of the properties has previously attempted an enbloc

sale of this property, offers were received but the sale did not

happen as bids did not fulfill the terms set out in the

Collective Sale Agreement.

Looking ahead, we note that CREIT has continued to record

Lam Soon Building as an Investment Property held for

divestment which in our view, signals management intent to

re-look the potential sale of this property soon. In recent

news article, it is understood that the property has re-started

its collective sale efforts.

In our view, given that the site is located on land zoned for

residential, the potential sale of this property is expected to

reap significant value for the trust.

Looking at residential transactions done in the vicinity over

the past couple of months, we noted that latest residentialtransactions are in the range of S$ 1,010 psf S$ 1,602 psf,

the former for older property developments.

Selected residential properties in the vicinity and latestselling prices

LandLease Age Latest priceachievedThe Hiller 99Yrs Uncompleted S$1,602

The Lenai 999 Yrs from1885

Uncompleted S$1,432

Natura@Hillview

999 Yrs from1885

Uncompleted S$1,413

Hill Vista Freehold TOP 2010 S$1,086

Parc Palais Freehold TOP 1999 S$1,058HillviewRegency

LH 99 from2000

TO P2005 S$1,010

AverageSource: URA, DBS Vickers

Using the above transactions as a gauge, for computing the

implied land cost for Lam Soon Building and taking

assumptions on construction costs and developers margins,

at an assumed selling price of S$1,300 psf for a residential

unit, we estimate the residual land value at S$277.3m (or S$

625 psf). This is estimated to reap a gain of S$82.3m for

CREIT or up to 7 Scts / unit. In addition, our sensitivity analysis

estimates that every S$100 difference in our assumed

residential price will have a S$26m or 2 Scts impact on CREIT.

Lam Soon Industrial Building is located along Hillview Avenue

Source: Company, OneMap, DBS Vickers

Lam SoonIndustrial Building

The Hiller(out of Map)

Natura@Hillview

Parc Palais

Hillview Regency

The Lenai


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Company Focus


Page 8

Property metrics of Lam Soon Industrial Building

Current DevelopmentAsset Class Light IndustrialSite Area (sqm ) 21,452.7 sqm

Gross Gloor Area (100%) 35,537.0 sqm

Built up plot ratio 1.66x

Tenure Freehold

CREIT's ownership 69.2%*

Valuation of Lam Soon Building (100%) S$110m (or S$288 psf)

Valuation of CREIT attributable stake S$76m

*97 strata unitsSource: Company, DBS Vickers

Estimated residual land price of Lam Soon Building (Conservative, Base and Optismistic scenarios)

Propoposed DevelopmentSite Area 21,452.7 sqmPlot Ratio(as per Master Plan 2008) 1.92xMaximum allowable GFA (sqm) 41,189 sqmMaximum allowable GFA (sqft) 443,357 sq ft

Remarks Conservative Base OptimisticSalesResidential Selling Price per sq ft 1,000.0 1,300.0 1,600.0

Total Sales proceeds 443.4 576.4 709.4Total Net Sales Proceeds (S$m) 436.7 567.7 698.7Assumed Project CostsConstruction Cost Assumed S$350 psf (155.2) (155.2) (155.2)

DC Payable (Change of use) Per URA / SLA (33.7) (33.7) (33.7)

Others (Fees, GST) (16.4) (16.4) (16.4)

Total Project Cost assumed (S$m) (205.3) (205.3) (205.3)Developer's Profit (of gross sales) Assumed 15% 65.5 85.2 104.8Residual Land Price 165.9 277.3 388.6Land Price $ psf/pr 374.2 625.4 876.6

Valuation of Property As of 31st

Dec12 158.3 158.3 158.3

Attributable valuation of property(CREIT)

110.0 110.0 110.0

Gain to be realised 7.6 119.0 230.4

Gain attributable to CREIT 69.2% stake 5.3 82.3 159.4

Total shares 1,212 1,212 1,212

Gain / share 0.01 0.07 0.13Source: Company, DBS Vickers


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Company Focus


Page 9

Valuations

We have presented various potential valuation methodologiesto take into account the scenarios and potential value

unlocking initiatives that might be executed upon in the

coming quarters. These are: (i) Methodology 1: Base DCF on

existing portfolio, which is our base valuation on existing cash

flows of the property, taking into account all previously

announced planned acquisitions, divestments; (ii)

Methodology 2: Expanded portfolio which accounts for the

potential redevelopment of its existing portfolio, bringing its

total built-up area to its full potential; and (iii) RNAV of the

existing portfolio, accounting for both the sale of Lam Soon

Building and development of the un-utilized GFA in its

portfolio.

Our target prices for the various scenarios are as such:

Various valuation methodology

Basis Price Target(S$)Methodology 1 DCF existing Portfolio 0.78

Methodology 2 DCF with development of100% of space

0.88

Methodology 3 RNAV 0.98

Average 0.88Price target Based on 2 and 3 0.93

Source: DBS Vickers

We like to highlight that there are execution risks and

feasibility studies needed to be undertaken to fully realise the

potential of its current portfolio. Our revised TP of S$0.93 for

CREIT is pegged to the average of methodologies 2 and 3,

which incorporates the growth initiatives that might be

executed upon.

Methodology 1: DCF our base case (Current portfolio).Like all the other S-REITs, we use DCF as our main

methodology to value CREIT. Our model is based on the

projected cash flows for its current portfolio, and is updated to

latest announced acquisitions and divestments and not taking

into account any potential development projects. We have

used a WACC of 6.7% to discount our cashflows, based on a

risk-free assumption of 1.8%. Our fair value of S$0.78

.

DCF of Cambridge REIT ( Current Portfolio )

Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 TerminalFY Dec (S$m) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22Total FCF to the Firm 26.7 80.2 81.0 82.3 83.7 85.0 86.4 87.7 89.1 90.4 1,549.7

Discounted FCF 25.0 70.4 66.7 63.5 60.6 57.6 54.9 52.2 49.7 47.3 810.5Total shares 1,208 1,208 1,208 1,208 1,208 1,208 1,208 1,208 1,208 1,208 1,208

PV of Free Cash Flows 548.0

PV of Terminal Value 810.5

Net Cash/(debt) (403.9)

Total Equity Value 903.7

Total Shares 1,223

Value per share 0.78Assumptions:Terminal Growth 1.0%

Cost of Equity 8.6%

Cost of Debt 3.5%

WACC 6.7%

Source: DBS Vickers


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Company Focus


Page 10

Methodology 2: DCF expanded portfolio.Assuming that CREIT were to undertake a development plan

to maximize the allowable GFA in its portfolio, we estimate

that the trust could see net property income and distributable

income growth of 44%, distribution income per unit growth

of c20%.

In our assumption, we have also included additional debt and

equity raisings (50%-50% ratio) in order to maintain current

gearing of 38%. As such, we have derived a fair value of

S$0.88 for the trust.

DCF of Cambride REIT assuming development

Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 TerminalFY Dec (S$m) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22Income from current portfolioTotal FCF to the Firm 26.7 80.2 81.0 82.3 83.7 85.0 86.4 87.7 89.1 90.4 1,549.7

Income from development:EBIT 0.0 11.1 17.4 20.1 38.2 39.0 39.8 40.5 41.4 42.2

Capex assumed (112.4) (64.2) (24.6) (182.0) 0.0 0.0 0.0 0.0 0.0 0.0

Total FCF to the firm(Development)

(112.4) (53.1) (7.2) (161.8) 38.2 39.0 39.8 40.5 41.4 42.2 763.0

Total FCF to the firm(Total) (85.7) 27.1 73.8 (79.5) 121.9 124.0 126.2 128.2 130.5 132.6 2,312.7

Shares:Total shares (current) 1,216

Total Shares( to be issued)

80 46 18 130 - - - - - - -

Total Share(Expanded share base) 1,296 1,342 1,360 1,490 1,490 1,490 1,490 1,490 1,490 1,490 1,490

PV of Free Cash Flows 575

PV of Terminal Value 1,229

Net Cash/(debt) (596)

Total Equity Value 1209

Total Shares 1,380

Value per share 0.88Assumptions:Terminal Growth 1.0%

Cost of Equity 8.6%

Cost of Debt 3.5%WACC 6.7%

Source: DBS Vickers


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Page 11

Methodology 3: RNAV.With continued asset recycling and the potential sale of Lam

Soon Building, we have also used RNAV to value CREITs

portfolio to take into account the various developments (i)

potential sale of Lam Soon Building; and (ii) the value of the

development projects. Our full valuation of CREIT is S$0.98.

RNAV of Cambridge REIT

Industrial Sectors No ofproperties GFA

(msqft)

Gross Revenues

(S$m)

NetPropertyIncome(S$m)

Cap rates

(%)

RNAV

(S$m)Logistics 7 2.1 17.3 16.5 6.75% 244.1

Light industrial 15 2.0 23.7 22.5 6.75% 333.7

Industrial 12 1.2 21.5 20.4 7.00% 291.1

Warehousing 12 1.4 12.6 11.9 7.00% 170.4

Car showroom & Workshop 2 0.4 5.9 5.6 7.00% 80.5Portfolio as of Dec'12 48 7.2 Total 1,120

Recent Acquisitions + MOUs signed 5 1.1 16.4 15.5 7% 230.2Sale of Lam Soon Building 1Attributable fair value 193.0Less debt (457.3)RNAV (existing portfolio) 1,085.9Existing share base 1,223

RNAV/Share 0.93Development Scenario Un-utilized

(m sqft )

AssumedRent psf(S$)

Gross Revenues

(S$m)

NetPropertyIncome(S$m)

Cap rates

(%)

RNAV

(S$m)Industrial 0.7 1.50 13.3 11.9 6.8% 176.7

Light Industrial 0.2 1.50 4.1 3.7 6.8% 55.0

Warehousing 1.0 1.25 15.4 13.9 7.0% 198.3

Car Showroom & Workshop 0.1 1.20 1.0 0.9 7.0% 13.1

Self Storage & Warehousing 0.1 1.50 0.0 0.0 7.0% 0.5

Logistics 0.6 1.30 9.8 8.8 7.0% 126.3

Value of un-utilized GFA 570.0Less additional debt raised (50%) (191.6)

RNAV (with development potential) 1,464.3Current Share base 1,223

Add: Issuance of new shares 273.7

Expanded Share base 1,496.7RNAV/Share 0.98

Source: DBS Vickers


12/17

Company Focus


Page 12

Appendix

Selected selling prices of residential developments in the surrounding area (New & Old property developments)

1000

1100

1200

1300

1400

1500

1600

1700

May-10 Nov-10 Jun-11 Dec-11 Jul-12 Jan-13

S$ psf

The Lenai (New Sale)

Property Development: The LenaiLand Lease: LH 999 years from 1885 (872 years left)Age of development: UncompletedAverage price of residential units sold: S$ 1,350 psfLatest transacted price achieved : S$1,432 psf (Dec12)

0

200

400

600

800

1000

1200

Jun-97 Mar-00 Dec-02 Sep-05 Jun-08 Feb-11

S$ psf

Parc Pa lais (New Sale)

Parc Pa lais (Resale)

Property Development: Parc PalaisLand Lease: FreeholdAge of development: TOP 1999 (13 years old)Average price of residential units sold: S$ 650 psfLatest transacted price achieved : S$1,058 psf (Dec12)

700

800

900

1000

1100

1200

1300

1400

Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13

S$ psf

HillVista (new sa le)

HillVista (Sub Sa le and Resale)

Property Development: Hill VistaLand Lease: FreeholdAge of development: TOP 2010 ( 3 years)Average price of residential units sold: S$ 1,086 psfLatest transacted price achieved : S$1,300 psf (Dec12)

800

1000

1200

1400

1600

1800

2000

Nov-11 Dec-11 Feb-12 Apr-12 May-12 Jul-12 Aug-12 Oct-12 Dec-12 Jan-13

S$ psf

The Hiller (New Sale)

Property Development: The HillerLand Lease: LH 99 years from 2011 (98 years left)Age of development: UncompletedAverage price of residential units sold: S$ 1,340 psfLatest transacted price achieved : S$1,602 psf (Dec12)

Source: URA, DBS Vickers

800

900

1000

1100

1200

1300

1400

1500

1600

Feb-12 Apr -12 May- 12 J ul-12 Aug-12 Oct- 12 Dec- 12 J an- 13

S$ psf

Natura@Hillview Sales

Property Development: Natura@HillviewLand Lease: LH 999 years from 1885 (872 years left)Age of development: UncompletedAverage price of residential units sold: S$ 1,300 psfLatest transacted price achieved : S$1,413 psf (Dec12)

Property Development: Hillview RegencyLand Lease: LH 99 Years from 2000 (87 Years)Age of development: TOP 2005 ( 5 years)Average price of residential units sold: S$ 600 psfLatest transacted price achieved : S$1,010 psf (Nov12)

0

200

400

600

800

1000

1200

May-99 Oct-00 Feb-02 Jun-03 Nov-04 Mar-06 Aug-07 Dec-08 May-10 Sep-11 Jan-13

S$ psf

Hillview Regency (New Sales)

Hillview Regency (Resale)


13/17

Company Focus


Page 13

Income Statement (S$ m)FY Dec 2010A 2011A 2012A 2013F 2014FGross revenue 74 80 89 95 103

Property expenses (9) (11) (13) (13) (14)Net Property Income 65 69 76 82 89Other Operating (6) (7) (11) (7) (7)

Other Non Opg (Exp)/Inc 0 0 0 0 0

Net Interest (Exp)/Inc (25) (26) (20) (20) (21)

Exceptional Gain/(Loss) 4 (1) 2 0 0Net Income 38 35 48 56 61Tax 0 0 0 0 0

Minority Interest 0 0 0 0 (1)

Preference Dividend 0 0 0 0 0Net Income After Tax 38 35 48 56 60Total Return 86 85 89 56 60

Non-tax deductible Items (41) (35) (32) 5 4

Net Inc available for Dist. 45 50 58 60 64

Growth & Ratio

Revenue Gth (%) (0.3) 8.3 10.7 7.2 7.7N Property Inc Gth (%) (0.1) 6.2 10.3 8.2 7.7

Net Inc Gth (%) 42.3 (7.8) 37.9 16.6 7.5

Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0

Net Prop Inc Margins (%) 87.7 86.0 85.7 86.5 86.5

Net Income Margins (%) 50.6 43.1 53.7 58.5 58.4

Dist to revenue (%) 60.3 62.7 64.7 63.2 62.3

Managers & Trusteesfees to sales %)

8.4 8.9 12.6 7.2 6.8

ROAE (%) 6.5 5.0 6.3 7.1 7.7

ROA (%) 3.9 3.3 4.0 4.3 4.7

ROCE (%) 6.3 6.0 5.5 5.9 6.4

Int. Cover (x) 2.3 2.4 3.3 3.8 3.8Source: Company, DBS Vickers

Net Property Income and Margins

81.4%

83.4%

85.4%

87.4%

89.4%

91.4%

93.4%

95.4%

0

10

20

30

40

50

60

70

80

90

100

2010A 2011A 2012A 2013F 2014F

S$ m

Net Property Income Net Property Income Margin %

Quarterly / Interim Income Statement (S$ m)

FY Dec 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012Gross revenue 21 21 22 23 24

Property expenses (3) (3) (3) (3) (3)

Net Property Income 18 18 18 19 21Other Operating (2) (2) (2) (2) (6)

Other Non Opg (Exp)/Inc 0 0 0 3 0

Net Interest (Exp)/Inc (4) (4) (5) (5) (6)

Exceptional Gain/(Loss) 2 0 (5) 0 0Net Income 14 11 6 15 10Tax 0 0 0 0 0

Minority Interest 0 0 0 0 0Net Income after Tax 14 11 6 15 10Total Return 17 11 6 15 56

Non-tax deductible Items (3) 2 8 (1) (42)

Net Inc available for Dist. 13 14 14 15 15

Growth & RatioRevenue Gth (%) 0 1 3 5 7

N Property Inc Gth (%) 3 (1) 2 4 8

Net Inc Gth (%) 20 (19) (45) 141 (36)

Net Prop Inc Margin (%) 87.1 85.9 85.3 85.1 86.4

Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 100.0

Net Property Income and Margins

83%

84%

84%

85%

85%

86%

86%

87%

87%

88%

88%

89%

0

5

10

15

20

25

3Q2010

4Q2010

1Q2011

2Q2011

3Q2011

4Q2011

1Q2012

2Q2012

3Q2012

4Q2012

Net Property Income Net Property Income Margin %

Contribution from recentlyacquired properties coupledwith completion of itsvarious AEIs


14/17

Company Focus


Page 14

Balance Sheet (S$ m)FY Dec 2010A 2011A 2012A 2013F 2014FInvestment Properties 928 1,009 1,214 1,250 1,252

Other LT Assets 0 0 0 0 0

Cash & ST Invts 71 79 90 36 36Inventory 0 18 0 0 0Debtors 1 1 2 1 2Other Current Assets 0 0 0 0 0Total Assets 1,001 1,108 1,305 1,288 1,290ST Debt 0 0 71 71 71

Other Current Liabilities 19 9 20 7 7

LT Debt 339 357 423 423 428

Other LT Liabilities 0 4 5 5 5

Unit holders funds 642 738 787 782 778

Minority Interests 0 0 0 0 1Total Funds & Liabilities 1,001 1,107 1,305 1,288 1,290Non-Cash Wkg. Capital (18) 11 (18) (5) (5)

Net Cash/(Debt) (268) (278) (404) (457) (463)

RatioCurrent Ratio (x) 3.8 10.6 1.0 0.5 0.5

Quick Ratio (x) 3.8 8.6 1.0 0.5 0.5

Aggregate Leverage (%) 36.5 35.3 40.7 39.5 39.8

Z-Score (X) NA 1.5 1.0 1.1 1.1Source: Company, DBS Vickers

Aggregate Leverage

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2010A 2011A 2012A 2013F 2014F

Cash Flow Statement (S$ m)FY Dec 2010A 2011A 2012A 2013F 2014FPre-Tax Income 86 35 48 56 61

Dep. & Amort. 0 0 0 0 0Tax Paid 0 0 0 0 0

Associates &JV Inc/(Loss) 0 0 0 0 0

Chg in Wkg.Cap. 1 (4) 1 (13) 0

Other Operating CF (28) 27 17 0 0Net Operating CF 59 58 66 43 61Net Invt in Properties (1) (66) (133) (36) (2)

Other Invts (net) 0 21 0 0 0

Invts in Assoc. & JV 0 0 0 0 0

Div from Assoc. & JVs 0 0 0 0 0

Other Investing CF 1 0 0 0 0Net Investing CF 0 (45) (133) (36) (2)Distribution Paid (45) (43) (41) (60) (64)

Chg in Gross Debt (67) 17 118 0 5

New units issued 91 54 0 0 0Other Financing CF (7) (33) 0 0 0Net Financing CF (28) (5) 78 (60) (59)Currency Adjustments 0 0 0 0 0

Chg in Cash 31 8 11 (53) 0

Operating CFPS (S cts) 6.5 5.2 5.4 4.6 5.0

Free CFPS (S cts) 6.6 (0.7) (5.6) 0.6 4.9


Distribution Paid / Net Operating CF

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2010A 2011A 2012A 2013F 2014F

Gearing at 39% toremain stable


15/17

Company Focus


Page 15

Spitzer Chart

S.No. Da te ClosingPr iceTargetPr ice Rat ing

1: 15 Mar 12 0.54 0.58 Buy

2: 19 Apr 12 0.56 0.58 Buy

3: 26 Apr 12 0.54 0.58 Buy

4: 01 Aug 12 0.60 0.65 Buy

5: 02 Nov 12 0.67 0.71 Buy

6: 06 Dec 12 0.65 0.72 Buy

7: 21 Jan 13 0.71 0.75 Buy

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

1

2

3

4

5:

6

7

0.48

0.53

0.58

0.63

0.68

0.73

0.78

Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

S$

Source: DBS Vickers


16/17

Company Focus


Page 16

DBSV recommendations are based an Absolute Total Return* Rat ing 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

DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson(www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg(DBSR GO). For access, please contact your DBSV salesperson.

GENERAL DISCLOSURE/DISCLAIMERThis report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), 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 isintended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by anymeans or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which acceptsresponsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein shouldcontact DBS Vickers Securities (USA) Inc (DBSVUSA) directly and not its affiliate.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers toDBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressedare subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this documentdoes not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This documentis for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtainseparate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss(including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given inrelation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is awholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time totime have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/oremployees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking,investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and therecan be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or r iskassessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete orcondensed and it may not contain all material information concerning the company (or companies) referred to in this report.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates andassumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates onwhich the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly fromactual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TOBE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaidentities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating tothe commodity referred to in this report.

DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or researchdepartment, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any USpersons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in anysecurity discussed in this document should contact DBSVUSA exclusively.

ANALYST CERTIFICATIONThe research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about thecompanies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her

compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 Apr 2013,the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securitiesrecommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions).


17/17

Company Focus


COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned asof 28 Mar 2013.

2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-

dealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of2 Apr 2013.

3. Compensation for investment banking services:i. 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 receive or intends to seek compensation for investment banking services from thecompany mentioned.

ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investmentbanking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain furtherinformation, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussedin this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTIONGeneral This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or usewould be contrary to law or regulation.

Australia This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to holdan Australian financial services licence under the Corporation Act 2001 [CA] in respect of financial services providedto the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [MAS] under the lawsof Singapore, which differ from Australian laws. Distribution of this report is intended only for wholesale investorswithin the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated bythe Hong Kong Securities and Futures Commission.

Singapore This report is being distributed in Singapore by DBSVR, which holds a Financial Advisers licence and is regulated bythe MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G),which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a

foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to Institutional Investors, ExpertInvestors or Accredited Investors as defined in the Securities and Futures Act, Chap. 289 of Singapore. Anydistribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to Accredited Investorsis provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the FirstSchedule to the FAA.

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This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3rd

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