Singapore REITs EQUITY: PROPERTY

Rent reviews to drive reversion upside

Global Markets Research

AREIT remains top pick

4 February 2014

Anchor themes Despite the correction, we think REIT valuations are not exactly cheap, but are now more fairly valued — investors should remain selective. Key factors for selection include: 1) a reasonable return based on the "true" yield analysis; 2) a decent DPU growth projection; and 3) low gearing.

Action: Rent reviews to drive office reversion upside The latest results of office and business park REITs under our coverage mostly beat our expectations, with the exception of KREIT (in line), but we note that most of the outperformance was driven by non-Singapore/office properties (with the exception of 6BR and ORQ) and lower-than-expected interest expenses. Going into FY14F, while we expect headline office reversion rents to be overall flat, we expect rent reviews at 6BR and MBFC 1 to provide reversion upside for CCT, SUN and KREIT. As well, we introduce our FY16F DPU forecasts for CCT, SUN and KREIT with this report. JLL projects CBD Core office supply of 1.45mn sq ft in 2016F but we expect CBD Core occupancy to remain above 94% by end-2016F and office rents to remain overall flat. While business park supply appears more daunting, the 56% pre-commitment rate and the 7.7% jump in market rents in 4Q2013 suggest the higher supply is driven by robust demand, especially in the One North area. We expect occupancy to remain above 85% by end2016F and believe a significant fall in business park rents is unlikely. Catalyst: Top-up upside for SUN; dilution risk for CCT The better-than-expected performance of the refurbished Suntec City Convention Centre and Mall suggest no distribution top-up is required for SUN in FY14F and this could therefore be a source of positive surprise, in our view (we think SUN could potentially pay an additional 0.4Scts/unit). On the other hand, there could be potential dilution to CCT’s DPU if the CB due 2015 is converted to new units. Our numbers suggest a dilution of 3-3.2% to CCT’s FY14-15F DPU, assuming full conversion of the CB.

Nomura vs consensus While the market prefers the office REITs, we believe AREIT provides better risk-reward at current valuations. Research analysts Singapore Property Min Chow Sai - NSL [email protected] +65 6433 6959

Valuation: AREIT remains top pick AREIT remains our top pick among office and business park REITs under our coverage, on account of 1) decent DPU growth (average 5.5% projected over the next two years), 2) above-average yield quality (minimal financial engineering), 3) reasonably geared balance sheet (leverage = just 30.7% at end-December, taking into account unfunded committed capex), and 4) favourable risk-reward (trading at trough P/B multiple of 1.1x). Fig. 1: Stocks for action AREIT remains top pick amongst office and business park REITs under coverage

Bberg code

AREIT SP

Price (SGD) as of 30-Jan2014 2.13

Nomura Target price Upside/dow rating (SGD) nside (%) Buy

2.50

17.4

FY1 yield Total return (%) (%) 7.1

24.5

CCT SP

1.42

Neutral

1.47

3.5

5.8

9.3

SUN SP

1.61

Neutral

1.68

4.3

5.9

10.2

KREIT SP

1.12

Neutral

1.21

7.6

6.6

14.2

Source: Bloomberg, Nomura estimates; FY1 = FY15F for AREIT, FY14F for the others

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Singapore REITs

4 February 2014

Contents 3

Rent reviews to drive FY14F reversion upside 3

FY13 outperformance mostly driven by non-Singapore/office properties, lower interest expenses

3

What to look out for in FY14F? Rent reviews to drive office reversion upside

4

FY16F DPU forecasts introduced – overall headline reversion rents could remain flat in spite of supply

6

AREIT remains top pick amongst office and business park REITs in our coverage

8

Ascendas REIT

13

CapitaCommercial Trust

18

Suntec REIT

23

Keppel-REIT

28

Appendix A-1

2

Nomura | Singapore REITs

4 February 2014

Rent reviews to drive FY14F reversion upside “Surprise 4: REITs outperform on the back of a flatter yield curve” “Surprise 5: An overall flattish year for office rents” – “Five possible property surprises for 2014”, 14 January 2014 (Singapore property Five possible property surprises for 2014)

FY13 outperformance mostly driven by non-Singapore/office properties, lower interest expenses While the latest results of office and business park REITs under our coverage – namely Ascendas REIT (AREIT), CapitaCommercial Trust (CCT), Suntec REIT (SUN) and Keppel REIT (KREIT) – were mostly better than our expectation (with the exception of KREIT, which was in line), we note that the outperformance was mostly driven by nonSingapore/office properties and lower-than-projected interest expenses. The only Singapore Prime Grade A office exceptions being 6 Battery Road (6BR) and One Raffles Quay (ORQ), which did better than our expectation. Fig. 2: Results summary for AREIT, CCT, SUN and KREIT Outperformance still largely driven by assets other than Singapore office properties and low interest expenses

Bberg code

FYE

9MFY14A NOM FY14F % m et DPU (Scts) DPU (Scts)

Rem arks

AREIT SP

Mar

10.7

Light industrial and logistic properties outperformed, interest expense low er than expected

Bberg code

FYE

FY13A DPU NOM FY13F % m et (Scts) DPU (Scts)

Rem arks

CCT SP SUN SP

Dec Dec

8.1 9.3

8.0 9.0

102.0 103.9

KREIT SP

Dec

7.9

7.9

99.8

6BR outperformed, interest expense low er than expected Suntec City Convention outperformed, interest expense low er than expected ORQ and 8ES outperformed, interest expense higher than expected

13.5

79.3

Source: Company data, Nomura estimates; 6BR = 6 Battery Road, ORQ = One Raffles Quay, 8ES = 8 Exhibition Street in Melbourne

What to look out for in FY14F? Rent reviews to drive office reversion upside While we expect headline office reversion rents to be overall flat in 2014F, we expect rent reviews at 6BR and Marina Bay Financial Centre Tower 1 (MBFC 1) to drive most of the reversion upside for CCT, SUN and KREIT in FY14F. In addition, the refurbished Suntec City Mall and convention centre performed better than our expectation in FY13. Our numbers now suggest SUN could generate a DPU of 9.6Scts in FY14F from its operations alone (vs. 8.7Scts previously), compared to 8.5Scts in FY13 (distribution top-up of 0.8Scts brought total FY13 DPU to 9.3Scts). As such, we now assume no distribution top-up in FY14F. A potential positive surprise could therefore be additional top-up to SUN’s core DPU in FY14F (our estimates suggest the manager could pay c.SGD10mn in addition, or 0.4Scts/unit, as distribution top-up to unit-holders based on Chijmes’ divestment gain in FY12). On the other hand, we see potential dilution to CCT’s base case DPU forecasts from the conversion of the SGD190.3mn CB due 2015 (conversion price of SGD1.23/unit vs. the current share price SGD1.42/unit). Our base case FY14-15F DPU forecasts are 8.3Scts and 8.9Scts respectively and a full conversion of the CB would dilute our numbers by 3% and 3.2% respectively.

3

Nomura | Singapore REITs

4 February 2014

FY16F DPU forecasts introduced – overall headline reversion rents could remain flat in spite of supply With this report, we introduce our FY16F DPU forecasts for CCT, SUN and KREIT: • CCT: DPU is projected to grow 2.1% in FY16F, before any adjustment for dilution from the CB due 2015. • SUN: DPU is projected to decline 3.4% in FY16F on account of the absence of income support at MBFC Tower 1 and 2, which we expect to run out by FY15F. • KREIT: DPU is projected to grow 2.4% in FY16F. Our current FYE March 2016F DPU forecast for AREIT is 15.9Scts (+5.5%y-y). Our FY16F DPU forecasts are chiefly based on the assumption that headline office reversion rents could remain flat in 2016F. Jones Lang LaSalle (JLL) projects Core CBD office supply at 1.45mn sq ft in 2016F, with Tanjong Pagar Centre (0.9mn sq ft) accounting for the bulk of it. While we expect Core CBD office vacancy to expand as a result of more supply, we expect occupancy to remain above 94% by end-2016F, which should argue for an overall flattish rental market, in our view. Fig. 3: Projected new office supply (000 sq ft)

Fig. 4: CBD Core office occupancy (%)

Tanjong Pagar Centre accounts for bulk of 2016F Core CBD supply

93.1% as of end-3Q13

3,000

100.0

2,500

95.0

2,000

90.0

1,500 85.0 1,000 80.0 500 4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13

75.0 0 2012 Core CBD

2013 Orchard

Rest of Central

2014F

2015F

2016F

Decentralised area

Source: Jones Lang LaSalle (JLL), URA REALIS, Nomura research

CBD Core occupancy %

Source: AREIT, URA REALIS, Nomura research

Compared to the office market, the supply of new business park space in 2014-16F appears more daunting (total of 0.5mn sq m, according to AREIT, vs. available stock of 1.55mn sq m as of end-2013). Fig. 5: Projected business park supply (000 sq m)

Fig. 6: Business park occupancy (%)

Projects in One North account for 65% of new supply in 2014-16F

84.1% as of end-4Q13

250

100.0

200

93.0

86.0

150

79.0

100

72.0 50 65.0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F2015F2016F Business Park net supply (000 sq m)

Source: Jones Lang LaSalle (JLL), Nomura research

Business park occupancy %

Source: URA REALIS, Nomura research

However, we note that: • 56% of the projected supply has already been pre-committed as of end-2013, according to AREIT.

4

Nomura | Singapore REITs

4 February 2014

• Market rent for the Business and Science Park segment jumped 7.7% to SGD4.20psfpm during the last quarter of 2013, according to AREIT. We understand the jump can be attributed to the higher rents for business park space in the One North area during the quarter and projects in One North account for 65% of new supply in 2014-2016F. The observations therefore suggest the higher supply is largely driven by robust demand for business park space in the One North area. In addition, we note the increase in business park rents has mostly kept pace with the rise in decentralised office rents (decentralised office rents 1.45x business park rents as of end-4Q13, in line with the average multiple since 2000). We believe new high-spec office buildings in decentralised areas completing in 2014F, such as JEM and Westgate in Jurong East, could command premium rents (Westgate, for instance, was sold for c.SGD1,900psf in January and an initial yield of 3.5-4% would imply an average rent of SGD7-8psfpm, vs. the current average decentralised office rent of c.SGD5.50psfpm), which could in turn provide additional buttress to business park rents. As a result, we think it is unlikely for business park rents to fall significantly in 2016F, notwithstanding the projected supply, and we expect overall business park occupancy to remain above 85% by end-2016F. Fig. 7: Decentralised office rents vs. business park rents (x) Decentralised office rents at 1.45x business park rents, in line with historical average

2.50

2.00

1.50

1.00

0.50

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13

0.00

Decentralised office rent/business park rent (x)

Average (x)

Source: JLL, Nomura estimates

5

Nomura | Singapore REITs

4 February 2014

AREIT remains top pick amongst office and business park REITs in our coverage The yield spreads of the office and business park REITs under our coverage have more or less reverted to their historical mean. Valuation has therefore become “fairer” but has yet to reach “very attractive” levels, in our view. Fig. 9: AREIT’s yield spread over 10Y bond (pp)

3.4pp as of end-December vs. 3.8pp average since 2005

3.6pp as of end-December vs. 3.8pp average since 2003 10.0

18.0

9.0

16.0

8.0

14.0

7.0

12.0

6.0

10.0

5.0

8.0

4.0

6.0

3.0

4.0

2.0

2.0

1.0

0.0

0.0

Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13

20.0

Office REITs' yield spread (pp)

Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13

Fig. 8: Office REITs’ yield spread over 10Y bond (pp)

Adj mean (pp)

AREIT's yield spread (pp)

Source: Bloomberg, Nomura estimates; office REITs = CCT, SUN and KREIT

Adj mean (pp)

Source: Bloomberg, Nomura estimates

Following the recent results, we have made changes (-4.2% to 5.7%) to the TPs of office and business park REITs under our coverage. In particular, we now take into account the potential dilution from the conversion of CB due 2015 in deriving our TP for CCT. In AREIT’s case, we ascribe a higher FY15F yield of 5.8%, taking into account the historical average yield spread of 3.8pp since 2003 (we had previously based our TP on a tighter spread of 3.1pp which has proven to be overly bullish). Fig. 10: Changes to target prices (TP) Adjustments of -4.2% to 5.7% following latest results; CCT's TP assumes full conversion of CB due 2015

Prev NAV (SGD/unit)

Curr NAV (SGD/unit)

Prev FY1 DPU (Scts)

Curr FY1 DPU (Scts)

Prev Curr Prev TP ascribed ascribed (SGD) FY1 yield (%) FY1 yield (%)

Curr TP (SGD)

AREIT SP

2.31

2.39

14.8

15.1

5.1

5.8

2.61

2.50

CCT SP* SUN SP KREIT SP

1.57 1.71 1.17

1.51 1.74 1.20

7.9 9.0 7.5

8.0 9.6 7.4

5.7 6.1 6.0

5.6 5.9 6.0

1.48 1.59 1.21

1.47 1.68 1.21

Source: Nomura estimates; FY1 = FY15F for AREIT, FY14F for the others; *CCT’s current TP is derived assuming full conversion of the CB due 2015, which was previously not taken into account.

Our top pick amongst the office and business park REITs under our coverage remains AREIT despite the lower TP on account of: • Decent DPU growth profile. We project DPU to grow an average 5.5% over the next two years. • Above-average yield quality. As detailed in our report published on 2 October 2013 (“What are the true yields?” Singapore REITs - What are the “true” yields?), AREIT’s yield remains one of the least financially engineered (i.e. artificially low cost of debt, high percentage of management fees paid in units, rental support, distribution from capital) in our coverage.

6

Nomura | Singapore REITs

4 February 2014

Fig. 11: The “true” yields: a difference of 75-317bps AREIT's yield remains one of the highest quality with minimal short-term boosts, in our view.

Price as of Base case 30-Jan-2014 FY2 DPU (SGD) (Scts) - (1)

Assum ing LT avg cost of debt (Scts) - (2)

Assum ing m gm t fees paid in cash (Scts) - (3)

Assum ing no rental support (Scts) - (4)

AREIT SP

2.13

15.9

-1.1

-0.3

CCT SP SUN SP KREIT SP

1.42 1.61 1.12

8.9 11.0 6.6

-1.3 -3.2 -2.5

-0.4 -1.3 -0.9

-0.1

Assum ing no distribution from capital (Scts) - (5) -0.1

Adjusted Adjusted FY2 DPU FY2 yield (%) (Scts) = (1) (2) - (3) - (4) (5) 14.3 6.7

0.0 -0.6 0.0

0.0 0.0 0.0

7.2 5.9 3.2

5.1 3.7 2.9

Source: Bloomberg, Nomura estimates; FY2 = FY16F for AREIT, FY15F for the others

• Reasonably geared balance sheet. Leverage was just 30% (30.7% if taking into account unfunded committed capex) as of end-December. • Favourable risk-reward. AREIT is now trading at 1.1x end-December book value of SGD1.98/unit, which is in line with its trough P/B multiple (mean less 1SD) since 2003.

7

Ascendas REIT AEMN.SI

AREIT SP

EQUITY: PROPERTY

Business park supply mostly demand driven

Global Markets Research

Still top pick despite TP cut

4 February 2014 Rating Remains

Action: Buy; business park supply mostly demand driven AREIT’s 9MFY14 DPU of 10.7Scts met 79.3% of our previous full-year forecast and we note the outperformance was principally driven by better-thanexpected performance of the light industrial and logistic properties as well as lower-than-expected interest expenses. We raise our FY14F DPU forecast by 5.4% to 14.2Scts (from 13.5Scts).

Catalyst: Decentralised high-spec office to command premium The increase in business park rents has mostly kept pace with the rise in decentralised office rents. New high-spec office buildings in decentralised areas completing in 2014F could command premium rents (we think the new owners of Westgate could be asking SGD7-8psfpm, for instance) and we believe the leasing of these buildings in the next few months could in turn provide the catalyst for business park landlords such as AREIT.

FY13

FY14F

FY15F

Closing price 30 January 2014

SGD 2.13

Potential upside

+17.4%

Research analysts Singapore Property Min Chow Sai - NSL [email protected] +65 6433 6959

FY16F

Actual

Old

New

Old

New

Old

New

Revenue (mn)

576

600

608

667

676

678

686

Income for distribution (mn)

378

324

342

357

363

378

383

Normalised dist income (mn)

306

324

342

357

363

378

383

Normalised DPU

0.13

0.13

0.14

0.15

0.15

0.16

0.16

Norm. DPU growth (%)

-5.7

5.8

11.7

10.1

6.0

5.7

5.5

FD normalised P/E (x)

15.6

N/A

15.0

N/A

14.1

N/A

13.4

BVPU

1.9

1.9

1.9

1.9

1.9

1.9

1.9

Price/book (x)

1.1

N/A

1.1

N/A

1.1

N/A

1.1

DPU yield (%)

6.0

N/A

6.7

N/A

7.1

N/A

7.5

ROE (%)

8.8

6.9

7.3

7.7

7.8

8.1

8.2

30.0

35.1

33.4

35.2

32.4

35.2

32.4

Gearing (%)

SGD 2.50

Nomura vs consensus Our TP is 2.8% above consensus. We think AREIT's overall quality deserves a premium valuation.

Valuation: Top pick notwithstanding TP cut We cut our TP to SGD2.50 (from SGD2.61) principally on account of a higher ascribed FY15F yield of 5.8% (from 5.1%). Notwithstanding the TP cut, AREIT remains our top pick amongst the office and business park REITs under our coverage on account of: 1) decent DPU growth; 2) above-average yield quality; 3) reasonably geared balance sheet; and 4) favourable risk-reward (already trading at trough P/B multiple of 1.1x). Maintain Buy. 31 Mar

Target price Reduced from 2.61

Anchor themes Despite the correction, we think REIT valuations are not exactly cheap, but are now more fairly valued — investors should remain selective. Key factors for selection include: 1) a reasonable return based on the "true" yield analysis; 2) a decent DPU growth projection; and 3) low gearing.

While the supply of new business and science park space (41% of AREIT’s intrinsic value on our numbers) in 2014-16F appears daunting (0.5mn sq m, vs current available stock of 1.55mn sq m), we note: 1) 56% of the space has already been pre-committed; and 2) business and science park market rents in fact jumped 7.7% during the last quarter of 2013. This suggests the higher supply is largely demand-driven, especially in the One North area.

Currency (SGD)

Buy

Source: Company data, Nomura estimates Key company data: See page 2 for company data and detailed price/index chart

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Ascendas REIT

4 February 2014

Key data on Ascendas REIT Income statement (SGDmn) Year-end 31 Mar Rental income Other Revenue Revenue Land rent & property tax Property management fees Other operating expenses Management expenses Trust expenses Other operating expenses EBITDA Depreciation Amortisation of intangible assets EBIT Net property income Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other & non tax deductible items Preferred dividends Normalised income for distn Extraordinary items Income for distribution

Relative performance chart (one year) FY12 503

FY13 576

FY14F 608

FY15F 676

FY16F 686

503 -51 -18 -66 -29 -5

576 -64 -19 -84 -40 -5

608 -68 -20 -90 -35 -5

676 -76 -22 -106 -50 -5

686 -77 -22 -108 -35 -5

334

364

390

418

439

Source: ThomsonReuters, Nomura research

334 368 -64

364 409 -99

390 430 -59

418 472 -58

439 480 -59

1M

3M 12M

Absolute (SGD)

-3.2

-9.7 -15.8

Absolute (USD)

-3.8 -12.5 -18.5

Relative to MSCI Singapore Market cap (USDmn) Estimated free float (%) 52-week range (SGD)

270 -2 269

264 -1 264

331 -2 329

360 -3 357

380 -3 377

3-mth avg daily turnover (USDmn) Major shareholders (%) Ascendas

1.8

-2.2

-9.2

4,008.0 83.0 2.86/2.07 11.23

17.1

Source: Thomson Reuters, Nomura research

13

42

12

6

6

282 224 506

306 73 378

342 0 342

363 0 363

383 0 383

Valuation and ratio analysis Reported P/E (x) Normalised P/E (x) FD normalised P/E (x) FD normalised P/E at price target (x) Dividend yield (%) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) ROA (pretax %)

8.3 15.0 15.0 17.6 6.3 1.1 22.4 22.4 66.4 0.6 5.6

12.6 15.6 15.6 18.3 6.0 1.1 19.5 19.5 63.2 0.3 5.4

15.0 15.0 15.0 17.6 6.7 1.1 19.1 19.1 64.1 0.5 5.5

14.1 14.1 14.1 16.6 7.1 1.1 17.7 17.7 61.8 0.8 5.7

13.4 13.4 13.4 15.7 7.5 1.1 16.9 16.9 64.0 0.8 6.0

Growth (%) Revenue EBITDA EBIT Normalised EPU Normalised FDEPU DPU

12.4 9.3 9.3 7.5 7.5 2.1

14.4 8.8 8.8 -4.2 -4.2 -5.7

5.5 7.2 7.2 4.5 4.5 11.7

11.2 7.1 7.1 6.0 6.0 6.0

1.6 5.1 5.1 5.5 5.5 5.5

25.57c 14.23c 14.23c 1.88 0.14

16.87c 13.63c 13.63c 1.94 0.13

14.24c 14.24c 14.24c 1.94 0.14

15.09c 15.09c 15.09c 1.94 0.15

15.92c 15.92c 15.92c 1.93 0.16

Per unit Reported EPU (SGD) Norm EPU (SGD) Fully diluted norm EPU (SGD) Book value per unit (SGD) DPU (SGD)

(%)

Notes

We have assumed performance fees of SGD14.2mn in FY15F based on our projection of 10.6% DPU growth before the performance fees

Source: Company data, Nomura estimates

9

Nomura | Ascendas REIT

4 February 2014

Cashflow (SGDmn) Year-end 31 Mar EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Acquisition of investment properties Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt

FY12 334 -3 -2 329 -37 291

FY13 364 -17 29 375 -60 316

FY14F 390 44 -41 393 -15 378

FY15F 418 19 -22 414 -15 399

FY16F 439 3 3 444 -15 429

-818

-206

-372

-23

15

5 -522 -270 394 501

10 119 -309 698 -419

10 16 -333 0 381

9 385 -267 0 -60

8 453 -373 0 0

-91 533 12 8 20 2,378

-88 -119 0 20 20 1,959

-68 -20 -5 20 15 2,345

-67 -394 -8 15 7 2,293

-67 -440 13 7 20 2,280

FY12 20 38 2 60 6,293

FY13 20 47 38 105 6,600

FY14F 15 50 2 67 7,056

FY15F 7 56 2 64 7,094

FY16F 20 56 2 78 7,094

211 6,564 575 116 62 754 1,823

254 6,959 235 135 71 441 1,744

222 7,345 314 142 74 531 2,046

152 7,311 350 158 83 591 1,950

144 7,316 375 160 84 619 1,925

73 2,649

113 2,298

113 2,689

113 2,654

113 2,657

3,915

4,661

4,656

4,657

4,659

3,915 6,564

4,661 6,959

4,656 7,345

4,657 7,311

4,659 7,316

5.2 38.1 7.1 60.7

3.7 30.0 5.4 42.0

6.6 33.4 6.0 50.4

7.2 32.4 5.5 49.2

7.5 32.4 5.2 48.9

100.6 0.08 8.4 1.7 14.0

65.7 0.09 5.6 1.6 8.8

56.2 0.08 4.8 1.5 7.3

53.7 0.09 5.0 1.6 7.8

55.8 0.09 5.2 1.6 8.2

Notes

Net acquisitions include capex on new developments

Source: Company data, Nomura estimates

Balance sheet (SGDmn) As at 31 Mar Cash & equivalents Accounts receivable Other current assets Total current assets Investment properties Acquisitions Capital expenditure Net appreciation in value Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Non convertible prefs Total unitholders' funds Total units' funds & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)

Notes

Gearing as of end-December 2013 = 0.3x

Source: Company data, Nomura estimates

10

Nomura | Ascendas REIT

4 February 2014

Fig. 12: Intrinsic NAV summary FY15F NAV estimate is raised to SGD2.39/unit (from SGD2.31/unit)

NLA (m n sq FY15F NPI @ m ) 100% (S$ m n)

Capital value (S$ m n)

Capital value (S$ psf)

Im plied yield %

Portfolio Singapore Business and science park

0.589

184.7

3,303.6

521

5.6

Hi-Tech industrial

0.461

123.1

1,831.3

369

6.7

Light industrial

0.509

70.7

1,079.5

197

6.5

Warehouse and logistic

0.729

98.6

1,466.5

187

6.7

Warehouse retail facilities

0.071

13.2

172.1

226

7.7

Sub-total/average - Singapore

2.359

490.3

7,852.9

309

6.2

China Business park assets

0.110

@ book value 195.9

166

Total/average - Overall

2.468

8,048.8

Gross asset value S$ m n Less adjusted net debt S$ mn NAV S$ m n Outstanding units (mn) NAV per unit (S$)

8,048.8 -2,293.0 5,755.9 2,405.3 2.39

Source: Nomura estimates

Fig. 13: TP cut to SGD2.50 (from SGD2.61) Higher ascribed FY15F yield of 5.8% (from 5.1%)

FY15F DPU forecast S$ SG 10Y GB yield % … ascribed yield spread % … implied fair trading yield %

0.151 2.0 3.8 5.8

Im plied fair value on yield S$

2.60

NAV S$/unit

2.39

Price target (50:50 w td avg), S$

2.50

Source: Nomura estimates

11

Nomura | Ascendas REIT

4 February 2014

Fig. 14: NPI (SGDmn) and DPU (Scts)

Fig. 15: Net debt to assets (x)

S$ m

(X)

450

16.50

0.40

425

16.00

0.35

400

15.50

0.30

15.00

0.25

375

14.50

350

0.20

14.00

325

13.50

0.15 0.10

300

13.00

275

12.50

0.05

250

12.00

0.00

FY12

FY13

NPI (SGD mn)

FY14F

FY15F

FY12

FY16F

FY13

FY14F

FY15F

FY16F

Net debt/asset (x)

DPU (Scts)

Source: Company data, Nomura estimates

Source: Company data, Nomura estimates

Fig. 16: FY15F intrinsic value mix (%)

Fig. 17: Debt maturity (SGDmn) As at end-December 2013

2% 3%

600

18%

500 41%

400 300

13% 200 100 23% Business and science park Light industrial WRF

0

Hi tech industrial Logistic China business park

2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Debt maturity profile (SGD mn)

Source: Nomura estimates

Source: Company data, Nomura research

Fig. 18: Yield spread over 10Y bond (pp)

Fig. 19: P/B (x)

Mean = 3.8pp

Mean = 1.3x

10.0

2.50

9.0 8.0

2.00

7.0 6.0

1.50

5.0 4.0

1.00

3.0 2.0

0.50

Hist yield spread over SG 10Y GB (ppts)

Source: Bloomberg, Nomura estimates

Mean (ppts)

Jun-13

Nov-13

Jan-13

Aug-12

Oct-11

Mar-12

May-11

Jul-10

Dec-10

Feb-10

Apr-09

Sep-09

Jun-08

Nov-08

Jan-08

Aug-07

Oct-06

Mar-07

May-06

Jul-05

Historical P/B (x)

Dec-05

Feb-05

Apr-04

Sep-04

Jun-03

0.00

Nov-03

0.0

Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13

1.0

Mean (x)

Source: Bloomberg, Nomura research

12

CapitaCommercial Trust CACT.SI CCT SP EQUITY: PROPERTY

FY14-15F rent reviews to drive reversion

Global Markets Research

Fairly valued but relative pick amongst office REITs

4 February 2014

Action: Neutral; FY14-15F rent reviews to drive reversion upside CCT’s FY13 DPU of 8.1Scts was 2% higher than our forecast, with the outperformance principally driven by better-than-expected performance of 6 Battery Road (6BR) and lower-than-expected interest expense. Going into FY14F, while we expect headline office reversion rents to be overall flat in 2014F, we expect rent reviews at 6BR to drive most of the reversion upside. Similarly, we expect rent reviews at Capital Tower (CT) in 2015F to drive most of the reversion upside for CCT in FY15F.

Catalyst: CapitaGreen leasing positive, potential dilution negative Our base-case DPU forecasts have not taken into account the potential conversion of the SGD190.3mn CB due 2015 (conversion price SGD1.23/unit) into new units. A full conversion would dilute our FY14-15F DPU forecasts by 3-3.2%, respectively, on our numbers. On the more positive side, we believe leasing announcements with respect to CapitaGreen in the coming months will likely be positive for CCT’s unit price.

FY13

FY14F

FY15F

SGD 1.47

Closing price 30 January 2014

SGD 1.42

Potential upside

+3.5%

Research analysts Singapore Property Min Chow Sai - NSL [email protected] +65 6433 6959

FY16F

Actual

Old

New

Old

New

Revenue (mn)

387

375

390

414

423

436

Income for distribution (mn)

389

227

240

252

258

264

Normalised dist income (mn)

234

227

240

252

258

264

Normalised DPU

0.08

0.08

0.08

0.09

0.09

0.09

Norm. DPU growth (%)

1.2

-0.5

2.0

10.6

7.5

FD normalised P/E (x)

17.2

N/A

16.8

N/A

15.6

BVPU

1.7

1.6

1.7

1.6

1.7

Price/book (x)

0.8

N/A

0.8

N/A

0.8

N/A

0.8

DPU yield (%)

5.7

N/A

5.8

N/A

6.3

N/A

6.4

ROE (%)

8.1

4.8

4.9

5.4

5.3

5.4

29.9

32.0

31.3

31.8

31.8

32.3

Gearing (%)

Target price Reduced from 1.48

Nomura vs consensus Our TP is 5.1% below consensus likely on account of more conservative cap rate assumptions.

Valuation: Relative pick amongst office REITs but fairly valued We had previously not taken into account potential dilution from the conversion of the CB due 2015 in deriving our TP. On a fully diluted basis, our TP is now SGD1.47 (from SGD1.48 before). CCT is our relative pick amongst the office REITs under our coverage (ie, against SUN and KREIT) but at 0.85x endDecember book value of SGD1.67/unit, we believe the stock is fairly valued and we maintain our Neutral rating on valuation. 31 Dec

Neutral

Anchor themes Despite the correction, we think REIT valuations are not exactly cheap, but are now more fairly valued — investors should remain selective. Key factors for selection include: 1) a reasonable return based on the "true" yield analysis; 2) a decent DPU growth projection; and 3) low gearing.

As well, we introduce our FY16F DPU forecast at 9.1Scts (+2.1%y-y). While JLL projects new Core CBD office supply at 1.45mn sq ft in 2016F (vs no new Core CBD office supply in 2015F), we expect occupancy to remain above 94% by end-2016F, which should argue for an overall flattish rental market.

Currency (SGD)

Rating Remains

Old

New

2.1 N/A

15.2 1.7

Source: Company data, Nomura estimates Key company data: See page 2 for company data and detailed price/index chart

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | CapitaCommercial Trust

4 February 2014

Key data on CapitaCommercial Trust Income statement (SGDmn) Year-end 31 Dec Rental income Other Revenue Revenue Land rent & property tax Property management fees Other operating expenses Management expenses Trust expenses Other operating expenses EBITDA Depreciation Amortisation of intangible assets EBIT Net property income Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other & non tax deductible items Preferred dividends Normalised income for distn Extraordinary items Income for distribution Valuation and ratio analysis Reported P/E (x) Normalised P/E (x) FD normalised P/E (x) FD normalised P/E at price target (x) Dividend yield (%) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPU Normalised FDEPU DPU Per unit Reported EPU (SGD) Norm EPU (SGD) Fully diluted norm EPU (SGD) Book value per unit (SGD) DPU (SGD)

Relative performance chart (one year) FY12 376

FY13 387

FY14F 390

FY15F 423

FY16F 436

376 -20 -22 -38 -20 -5

387 -27 -22 -42 -21 -3

390 -27 -22 -42 -24 -3

423 -29 -23 -46 -26 -3

436 -30 -24 -48 -26 -3

271 0

272 0

272 0

296 0

304 0

Source: ThomsonReuters, Nomura research

271 296 -67 5

272 297 -57 4

272 299 -57 4

295 324 -59 5

304 334 -60 5

208

220

220

241

249

208

220

220

241

249

(%)

1M

3M 12M

Absolute (SGD)

-0.4

-5.3 -13.7

Absolute (USD)

-1.0

-8.2 -16.4

Relative to MSCI Singapore Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) CapitaLand

4.7

2.2

-7.1

3,201.6 51.0 1.75/1.32 6.87

32.2

Source: Thomson Reuters, Nomura research

20

14

20

17

15

229 178 406

234 155 389

240 0 240

258 0 258

264 0 264

9.9 17.6 17.6 18.3 5.7 0.9 22.1 22.1 72.0 0.0 4.2

10.4 17.2 17.2 17.8 5.7 0.8 22.1 22.1 70.3 0.0 4.0

16.8 16.8 16.8 17.4 5.8 0.8 23.0 23.0 69.7 0.0 3.8

15.6 15.6 15.6 16.1 6.3 0.8 21.3 21.3 69.8 0.0 4.1

15.2 15.2 15.2 15.8 6.4 0.8 20.8 20.8 69.8 0.0 4.2

4.0 5.8 5.8 7.0 7.0 7.0

3.0 0.6 0.6 2.5 2.5 1.2

0.9 0.0 0.0 2.3 2.3 2.0

8.4 8.5 8.5 7.8 7.8 7.5

3.0 3.0 3.0 2.4 2.4 2.1

14.32c 8.05c 8.05c 1.66 0.08

13.71c 8.25c 8.25c 1.71 0.08

8.44c 8.44c 8.44c 1.70 0.08

9.10c 9.10c 9.10c 1.69 0.09

9.32c 9.32c 9.32c 1.69 0.09

Notes

Our FY14-15F DPU forecasts of 8.3Scts and 8.9Scts respectively have not taken into account the potential conversion of the SGD190.3mn CB due 2015 at the price of SGD1.23/unit. A full conversion would dilute our forecasts by 3-3.2% respectively. We introduce our FY16F DPU forecast at 9.1Scts (+2.1% on undiluted FY15F DPU), based on the assumption that headline office reversion rents will remain flat into 2016F

Source: Company data, Nomura estimates

14

Nomura | CapitaCommercial Trust

4 February 2014

Cashflow (SGDmn) Year-end 31 Dec EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Acquisition of investment properties Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt

FY12 271 -18 38 290 -60 230 -453

FY13 272 17 9 298 -82 216 -1

FY14F 272 1 14 286 -30 256 -216

FY15F 296 9 -2 302 -30 272 0

FY16F 304 3 6 314 -30 284 0

18 -204 -219 0 55

4 219 -231 0 -11

5 45 -238 0 174

5 277 -254 0 50

5 289 -263 0 50

-69 -233 -437 577 140 1,997

-12 -254 -36 140 104 2,022

-58 -121 -76 104 28 2,272

-59 -262 15 28 42 2,308

-60 -273 16 42 58 2,342

FY12 140 23 0 163 6,774

FY13 104 15 0 118 7,035

FY14F 28 15 0 42 7,281

FY15F 42 16 0 58 7,325

FY16F 58 17 0 75 7,361

66

65

65

65

65

7,003 50 87 20 157 2,087

7,218 0 97 18 116 2,126

7,389 460 98 18 577 1,840

7,448 848 107 20 974 1,502

7,500 175 110 20 305 2,225

44 2,288

64 2,306

65 2,481

68 2,544

69 2,599

4,715

4,913

4,908

4,904

4,901

4,715 7,003

4,913 7,218

4,908 7,389

4,904 7,448

4,901 7,500

4.0 31.2 7.4 42.4

4.8 29.9 7.4 41.2

4.8 31.3 8.3 46.3

5.0 31.8 7.8 47.1

5.1 32.3 7.7 47.8

108.1 0.05 5.9 1.5 8.8

100.5 0.05 5.5 1.5 8.1

61.4 0.05 3.3 1.5 4.9

61.0 0.06 3.5 1.5 5.3

60.7 0.06 3.5 1.5 5.4

Notes

The acquisition of investment properties includes capex for CapitaGreen

Source: Company data, Nomura estimates

Balance sheet (SGDmn) As at 31 Dec Cash & equivalents Accounts receivable Other current assets Total current assets Investment properties Acquisitions Capital expenditure Net appreciation in value Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Non convertible prefs Total unitholders' funds Total units' funds & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)

Notes

Gearing as of end-December 2013 = 0.29x

Source: Company data, Nomura estimates

15

Nomura | CapitaCommercial Trust

4 February 2014

Fig. 20: Intrinsic NAV summary FY14F NAV estimate is cut to SGD1.53/unit (from SGD1.57/unit); full conversion of CB due 2015 would dilute estimate to SGD1.51/unit

NLA (m n FY14F NPI sq @ 100% (S$ ft)/room s m n) Singapore Capital Tow er 6 Battery Road HSBC Building Bugis Village Golden Shoe Car Park Tw enty Anson Market Street Car Park … MSCP redevelopment One George Street Wilkie Edge Raffles City Singapore - 60% stake … retail … office … hotel & convention

… Quill Capita Trust

Bloom berg ticker

Im plied yield %

0.741 0.499 0.200 0.122 0.044 0.203

48.7 54.6 20.4 9.8 9.7 14.6

1,179.7 1,043.3 355.1 61.1 128.3 372.9

1,592 2,092 1,771 499 2,895 1,841

4.1 5.2 5.8 16.0 7.5 3.9

0.288 0.448 0.146

na 37.0 9.0

495.5 830.8 147.6

1,721 1,854 1,010

na 4.5 6.1

0.252 0.228 1,218

43.2 16.8 37.5

695.7 340.1 971.9

2,755 1,491 797,911

6.2 4.9 3.9

3.172

263.8

5,650.2

1,781

4.7

Stake (%) O/S shares (m n)

Price (S$)

Total/average (ex-RC hotel) Listed entity

Capital Capital value (S$ value (S$ m n) psf/S$ per rm )

QUIL MK

30.00

390.1

0.5

Gross asset value S$ m n Less adjusted net debt S$ mn NAV S$ m n Outstanding units (mn) NAV per unit (S$)

53.5 6,675.6 -2,272.4 4,403.2 2,887.0 1.53

Source: Nomura estimates

Fig. 21: TP cut to SGD1.47 (from SGD1.48) FY14F DPU = 8.3Scts (from 7.9Scts); 8Scts if assuming full conversion of CB due 2015

FY14F DPU forecast S$ SG 10Y GB yield % … ascribed yield spread % … implied fair trading yield %

0.083 2.0 3.6 5.6

Im plied fair value on yield S$

1.48

NAV S$/unit

1.53

Price target (50:50 w td avg), S$

1.50

Diluted PT, assum ing CB due 2015 are converted S$

1.47

Source: Nomura estimates

16

Nomura | CapitaCommercial Trust

4 February 2014

Fig. 22: NPI (SGDmn) and DPU (Scts)

Fig. 23: Net debt to assets (x)

S$m

(x)

340

9.20

0.35

9.00

330

8.80 320

0.30

8.60

310

8.40

300

8.20

0.25 0.20

8.00

290

7.80 280

0.15

7.60 7.40

270 FY12

FY13

NPI (SGD mn)

FY14F

FY15F

0.10 FY12

FY16F

DPU (Scts)

FY13

FY14F

FY15F

FY16F

Net debt/asset (x)

Source: Company data, Nomura estimates

Source: Company data, Nomura estimates

Fig. 24: FY14F intrinsic value mix (%)

Fig. 25: Debt maturity (SGDmn) As of end-December 2013 S$m

17%

18%

900.0 800.0 700.0 600.0 16%

500.0 400.0

30%

300.0 7%

200.0 100.0

12%

0.0 Capital Tower Market Street Raffles City stake

6 Battery Road One George St Others

2014F

2015F

2016F

2017F

2018F

2019F

2020F

Debt maturity profile (SGD mn)

Source: Nomura estimates

Source: Company data, Nomura research

Fig. 26: Yield spread over 10Y bond (pp)

Fig. 27: P/B (x)

Mean = 3.6pp

Mean = 0.9x

25.0

1.80 1.60

20.0

1.40 1.20

15.0

1.00 0.80

10.0

0.60 0.40

5.0

Historical yield spread over SG 10Y GB (%)

Source: Bloomberg, Nomura estimates

Mean (%)

0.00

Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13

Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13

0.20 0.0

Historical P/B (x)

Mean (x)

Source: Bloomberg, Nomura research

17

Suntec REIT SUNT.SI

SUN SP

EQUITY: PROPERTY

Robust growth, fairly priced

Global Markets Research

Maintain Neutral with higher TP SGD1.68

4 February 2014

Action: Neutral; income support absence likely = FY16F decline SUN’s FY13 DPU of 9.3Scts (8.5Scts from operations + 0.8Scts distribution top-up) was 3.9% above our forecast, with the outperformance principally driven by better-than-expected performance at the refurbished Suntec City Convention Centre and Mall as well as lower-than-expected interest expense. We raise our FY14F DPU forecast by 6.7% to 9.6Scts (from 9Scts) and now assume no distribution top-up will be required.

Catalyst: Top-up surprise Given we now assume no distribution top-up will be paid in FY14F, on account of the better-than-expected performance at the Suntec City Convention Centre and Mall, an obvious source of positive surprise would then be the announcement of a top-up, in our view. Our estimates suggest the manager could pay c.SGD10mn in addition, or 0.4Scts/unit, as distribution top-up to unit-holders based on Chijmes divestment gain booked in FY12.

FY13

FY14F

FY15F

Closing price 30 January 2014

SGD 1.61

Potential upside

+4.3%

Singapore Property Min Chow Sai - NSL [email protected] +65 6433 6959

FY16F

Old

New

Old

New

Revenue (mn)

234

250

274

290

313

316

Income for distribution (mn)

350

205

218

230

253

247

Normalised dist income (mn)

211

205

218

230

253

247

Normalised DPU

0.09

0.09

0.10

0.10

0.11

0.11

Norm. DPU growth (%)

-1.7

0.4

2.5

11.4

15.2

-3.4

FD normalised P/E (x)

17.2

N/A

16.8

N/A

14.6

Old

N/A

New

15.1

BVPU

2.2

2.1

2.2

2.0

2.1

Price/book (x)

0.7

N/A

0.7

N/A

0.7

N/A

0.8

DPU yield (%)

5.8

N/A

5.9

N/A

6.8

N/A

6.6

Gearing (%)

SGD 1.68

Research analysts

Actual

ROE (%)

Target price Increased from 1.59

Nomura vs consensus Our TP is 10% below consensus on account of a more conservative NAV estimate.

Valuation: Robust growth, fairly priced Our TP is raised to SGD1.68 (from SGD1.59) chiefly on account of the higher FY14F DPU forecast of 9.6Scts. While we expect SUN to deliver robust DPU growth over the next two years (8.6% on average on our numbers), at 0.75x end-December book value, we believe the stock is fairly priced on account of: 1) relatively high gearing (0.39x as of end-December); and 2) relatively high content of short-term boosts (such as rental support) in its yield. 31 Dec

Neutral

Anchor themes Despite the correction, we think REIT valuations are not exactly cheap, but are now more fairly valued — investors should remain selective. Key factors for selection include: 1) a reasonable return based on the "true" yield analysis; 2) a decent DPU growth projection; and 3) low gearing.

We also introduce our FY16F DPU at 10.6Scts (-3.4%y-y). While we expect rental reversion upside from rent reviews at MBFC Tower 1 and 2 in FY14F and FY15F, respectively, our estimates suggest the absence of income support at the MBFC buildings (runs out in FY15F on our numbers) will contribute to a y-y decline in FY16F DPU.

Currency (SGD)

Rating Remains

2.1

7.2

4.4

4.4

4.9

5.1

5.0

39.0

38.3

39.0

39.0

40.0

40.4

Source: Company data, Nomura estimates Key company data: See page 2 for company data and detailed price/index chart

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Suntec REIT

4 February 2014

Key data on Suntec REIT Income statement (SGDmn) Year-end 31 Dec Rental income Other Revenue Revenue Land rent & property tax Property management fees Other operating expenses Management expenses Trust expenses Other operating expenses EBITDA Depreciation Amortisation of intangible assets EBIT Net property income Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other & non tax deductible items Preferred dividends Normalised income for distn Extraordinary items Income for distribution Valuation and ratio analysis Reported P/E (x) Normalised P/E (x) FD normalised P/E (x) FD normalised P/E at price target (x) Dividend yield (%) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPU Normalised FDEPU DPU Per unit Reported EPU (SGD) Norm EPU (SGD) Fully diluted norm EPU (SGD) Book value per unit (SGD) DPU (SGD)

Relative performance chart (one year) FY12 262

FY13 234

FY14F 274

FY15F 313

FY16F 316

262 -21 -24 -51 -39 -4

234 -18 -20 -47 -40 -3

274 -21 -23 -45 -38 -3

313 -24 -27 -48 -40 -4

316 -24 -27 -48 -41 -4

147 -3 -21 123 166 -51 164 37 273 -2 271 -12 -46

122 -1 -15 107 149 -44 172 20 254 5 259 -18 -30

163 -1 -18 144 185 -35 66 18 193 -3 190 0 28

188 -1 -17 171 214 -29 68 17 227 -4 223 0 30

173 0 -2 171 216 -45 68 2 196 -5 192 0 55

213 178 391

211 139 350

218 0 218

253 0 253

247 0 247

9.2 16.9 16.9 17.6 5.9 0.8 20.2 21.9 47.1 0.6 3.8

10.4 17.2 17.2 18.0 5.8 0.7 22.6 23.9 45.5 -1.9 3.5

16.8 16.8 16.8 17.5 5.9 0.7 30.0 32.7 52.5 1.5 2.5

14.6 14.6 14.6 15.2 6.8 0.7 27.4 29.4 54.6 1.7 2.8

15.1 15.1 15.1 15.7 6.6 0.8 29.3 29.5 54.3 2.4 2.8

-3.1 -23.8 -19.5 -4.4 -4.4 -4.5

-10.6 -17.0 -13.6 -1.8 -1.8 -1.7

17.2 33.4 35.0 2.5 2.5 2.5

14.1 15.4 18.8 15.2 15.2 15.2

0.8 -8.0 0.3 -3.4 -3.4 -3.4

17.49c 9.53c 9.53c 2.13 0.09

15.51c 9.36c 9.36c 2.20 0.09

9.59c 9.59c 9.59c 2.17 0.10

11.05c 11.05c 11.05c 2.15 0.11

10.67c 10.67c 10.67c 2.13 0.11

Source: ThomsonReuters, Nomura research (%)

1M

Absolute (SGD)

4.7

-6.3

-5.4

Absolute (USD)

4.0

-9.2

-8.4

Relative to MSCI Singapore

9.7

1.2

1.2

Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Suntec City Development

3M 12M

2,869.6 86.1 1.99/1.46 11.62

6.2

Source: Thomson Reuters, Nomura research

Notes

The asset enhancement at the Suntec City Convention Centre and Mall appears to be performing better than our initial expectations, judging from the 4Q13 numbers. Our estimates suggest FY14F operational numbers alone would produce a DPU of 9.6Scts (vs FY13’s 9.3Scts), which implies no distribution top-up will be required (vs 0.8Scts in FY13). We introduce our FY16F DPU at 10.6Scts (-3.4%y-y) on account of the absence of income support at MBFC Tower 1 and 2

Source: Company data, Nomura estimates

19

Nomura | Suntec REIT

4 February 2014

Cashflow (SGDmn) Year-end 31 Dec EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Acquisition of investment properties Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt

FY12 147 25 23 195 -67 128 145

FY13 122 3 28 153 -189 -37 -117

FY14F 163 14 2 180 -2 178 -205

FY15F 188 14 5 207 -2 205 -169

FY16F 173 1 52 226 -2 224 -42

77 351 -213 0 39

84 -69 -208 0 318

100 72 -216 0 89

112 149 -244 0 150

98 280 -248 0 50

-82 -256 95 104 200 2,700

-59 51 -19 200 181 2,980

-70 -197 -125 181 57 3,193

-73 -168 -19 57 38 3,362

-74 -272 7 38 45 3,405

FY12 200 5

FY13 181 29

FY14F 57 34

FY15F 38 39

FY16F 45 39

205 5,315

210 5,783

91 5,999

76 6,171

84 6,212

2,236

2,329

2,329

2,329

2,329

7,756 682 50 36 767 2,161

8,322 772 91 21 884 2,389

8,418 682 107 24 813 2,569

8,576 370 122 28 520 3,030

8,625 200 123 28 351 3,250

43 2,972

64 3,337

72 3,453

80 3,629

80 3,681

4,784

4,985

4,965

4,947

4,944

4,784 7,756

4,985 8,322

4,965 8,418

4,947 8,576

4,944 8,625

2.4 37.7 18.3 56.4

2.4 39.0 24.4 59.8

4.1 39.0 19.6 64.3

6.0 40.0 17.9 68.0

3.8 40.4 19.6 68.9

149.4 0.03 5.1 1.6 8.4

149.5 0.03 4.4 1.6 7.2

79.5 0.03 2.6 1.7 4.4

80.9 0.04 3.0 1.7 5.1

78.1 0.04 2.9 1.7 5.0

Notes

Acquisitions include asset enhancement capex

Source: Company data, Nomura estimates

Balance sheet (SGDmn) As at 31 Dec Cash & equivalents Accounts receivable Other current assets Total current assets Investment properties Acquisitions Capital expenditure Net appreciation in value Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Non convertible prefs Total unitholders' funds Total units' funds & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)

Notes

Aggregate leverage = 0.39x as of end-December 2013

Source: Company data, Nomura estimates

20

Nomura | Suntec REIT

4 February 2014

Fig. 28: Intrinsic NAV summary FY14F NAV estimate is raised to SGD1.74/unit (from SGD1.71/unit)

NLA (m n FY14F NPI sq @ 100% (S$ ft)/room s m n)

Capital Capital value (S$ value (S$ m n) psf/S$ per rm )

Im plied yield %

Suntec City … office … retail … convention centre

1.297 0.904 0.529

97.8 98.0 3.8

2,509.8 1,869.0 120.4

1,935 2,067 227

3.9 5.2 3.2

Park Mall … office … retail

0.126 0.144

7.0 11.4

149.2 181.9

1,184 1,264

4.7 6.3

One Raffles Quay - 1/3 stake

0.445

45.5

1,025.0

2,303

4.4

MBFC Phase 1 - 1/3 stake

0.582

55.8

1,316.4

2,260

4.2

SG portfolio - total/w td avg

4.029

319.4

7,171.7

1,780

4.5

Australia portfolio - book value 177-199 Pacific Highw ay

0.424

483.4

Gross asset value S$ m n Less adjusted net debt S$ mn NAV S$ m n Outstanding units (mn) NAV per unit (S$)

7,655.1 -3,692.5 3,962.6 2,283.0 1.74

Source: Nomura estimates

Fig. 29: TP raised to SGD1.68 (from SGD1.59) Higher FY14F DPU forecast of 9.6Scts (from 9Scts)

FY14F DPU forecast S$ SG 10Y GB yield % … ascribed yield spread % … implied fair trading yield %

0.096 2.0 3.9 5.9

Im plied fair value on yield S$

1.62

NAV S$/unit

1.74

Price target (50:50 w td avg), S$

1.68

Source: Nomura estimates

21

Nomura | Suntec REIT

4 February 2014

Fig. 30: NPI (SGDmn) and DPU (Scts)

Fig. 31: Net debt to assets (x)

S$m

(x)

300

11.50

250

11.00 10.50

200

0.44 0.43 0.42 0.41

10.00

0.40

9.50

0.39

150 100

9.00

0.38 0.37

50

8.50

0.36

0

8.00

0.35

FY12

FY13

NPI (SGD mn)

FY14F

FY15F

FY12

FY16F

FY13

FY14F

FY15F

FY16F

2017F

2018F

Net debt/asset (x)

DPU (Scts)

Source: Company data, Nomura estimates

Source: Company data, Nomura estimates

Fig. 32: FY14F intrinsic value mix (%)

Fig. 33: Debt maturity (SGDmn) As of end-December 2013 1000.0

6%

900.0 17%

33%

800.0 700.0 600.0 500.0

14%

400.0 300.0 4%

200.0 26%

100.0

Suntec City - office

Suntec City - retail + convention

Park Mall

One Raffles Quay stake

MBFC Phase 1 stake

177-199 Pacific Highway

0.0 2014F

2015F

2016F

Debt maturity (SGD mn)

Source: Nomura estimates

Source: Company data, Nomura research

Fig. 34: Yield spread over 10Y (pp)

Fig. 35: P/B (x)

Mean = 3.9pp

Mean = 0.76x 1.4

20.0 18.0

1.2

16.0 14.0

1.0

12.0

0.8

10.0 0.6

8.0 6.0

0.4

4.0

Source: Bloomberg, Nomura estimates

Mean (%)

Historical P/B (x)

Dec-13

Apr-13

Aug-13

Dec-12

Apr-12

Aug-12

Dec-11

Apr-11

Aug-11

Dec-10

Apr-10

Aug-10

Dec-09

Apr-09

Aug-09

Dec-08

Apr-08

Aug-08

Dec-07

Apr-07

Aug-07

Dec-06

Dec-05 Historical yield spread over SG 10Y GB (%)

Apr-06

0.0

0.0

Aug-06

0.2

2.0

Mean (x)

Source: Bloomberg, Nomura research

22

Keppel-REIT KASA.SI

KREIT SP

EQUITY: PROPERTY

MBFC rent reviews to drive reversion upside

Global Markets Research

Maintain Neutral with unchanged TP

4 February 2014

Action: Neutral; MBFC rent reviews to drive reversion upside KREIT’s FY13 DPU of 7.9Scts was in line with our forecast. While One Raffles Quay (ORQ) and 8 Exhibition Street (8ES) in Melbourne performed better than our expectation, interest expenses were higher than our projection (as the manager hedged/fixed more of KREIT’s borrowing costs in FY13). While we expect headline office reversion rents to remain overall flat, we expect rent reviews at MBFC Tower 1 and 2 in FY14F and FY15F respectively to drive reversion upside for KREIT and raise our FY15F DPU forecast by 3.1% to 6.6Scts (from 6.4Scts) accordingly. As well, we introduce our FY16F DPU forecast at 6.7Scts (+2.4%y-y). While JLL projects Core CBD new office supply to increase to 1.45mn sq ft in 2016F (from nothing in 2015F), we expect occupancy to remain above 94% by end-2016F, which argues for an overall flattish rental market, in our view.

FY13

FY14F

FY15F

SGD 1.21

Closing price 30 January 2014

SGD 1.12

Potential upside

+7.6%

Research analysts Singapore Property Min Chow Sai - NSL [email protected] +65 6433 6959 FY16F

Actual

Old

New

Old

New

Revenue (mn)

174

173

171

176

176

183

Income for distribution (mn)

603

210

208

181

187

193

Normalised dist income (mn)

214

210

208

181

187

193

Normalised DPU

Old

New

0.08

0.07

0.07

0.06

0.07

0.07

Norm. DPU growth (%)

0.1

-5.5

-3.8

-14.2

-10.8

2.4

FD normalised P/E (x)

14.2

N/A

15.2

N/A

17.0

1.4

1.3

1.4

1.3

1.4

Price/book (x)

0.8

N/A

0.8

N/A

0.8

N/A

0.8

DPU yield (%)

6.8

N/A

6.6

N/A

5.9

N/A

6.0

ROE (%)

16.4

5.9

5.4

5.1

4.8

5.0

Gearing (%)

40.4

40.4

40.0

40.9

40.1

40.1

BVPU

Target price Remains

Nomura vs consensus Our FY14F DPU forecast is 4% below consensus. We suspect the market's projected reversion may be too bullish.

Valuation: Maintain Neutral with TP unchanged We keep our TP unchanged at SGD1.21. At 0.88x end-December book value of SGD1.38/unit (vs the average multiple of 0.84x since 2006), we believe the stock is fairly priced, considering 1) a potential short-term decline in DPU as income support runs down, 2) the high content of short-term boosts (such as income support and low interest cost), and 3) relatively high gearing. We maintain our Neutral rating.

31 Dec

Neutral

Anchor themes Despite the correction, we think REIT valuations are not exactly cheap, but are now more fairly valued — investors should remain selective. Key factors for selection include: 1) a reasonable return based on the "true" yield analysis; 2) a decent DPU growth projection; and 3) low gearing.

Catalyst: Opportunity to address asset-liability currency mismatch KREIT’s aggregate leverage was 42.1% as of end-December, with all borrowings in SGD, and we believe the lower cost of AUD borrowings provides the opportunity for the manager to address the asset-liability currency mismatch, in our view.

Currency (SGD)

Rating Remains

N/A

16.6 1.3

Source: Company data, Nomura estimates Key company data: See page 2 for company data and detailed price/index chart

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Keppel-REIT

4 February 2014

Key data on Keppel-REIT Income statement (SGDmn) Year-end 31 Dec Rental income Other Revenue Revenue Land rent & property tax Property management fees Other operating expenses Management expenses Trust expenses Other operating expenses EBITDA Depreciation Amortisation of intangible assets EBIT Net property income Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other & non tax deductible items Preferred dividends Normalised income for distn Extraordinary items Income for distribution Valuation and ratio analysis Reported P/E (x) Normalised P/E (x) FD normalised P/E (x) FD normalised P/E at price target (x) Dividend yield (%) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPU Normalised FDEPU DPU Per unit Reported EPU (SGD) Norm EPU (SGD) Fully diluted norm EPU (SGD) Book value per unit (SGD) DPU (SGD)

Relative performance chart (one year) FY12 157

FY13 174

FY14F 171

FY15F 176

FY16F 183

157 -11 -4 -17 -39 -4

174 -11 -4 -20 -43 -7

171 -11 -4 -20 -41 -7

176 -11 -4 -21 -42 -7

183 -11 -5 -22 -42 -7

146

133

124

91

96

Source: ThomsonReuters, Nomura research

-65 81 125 -18 47 87 196 -15 181 -3 24

-45 89 138 -18 64 73 207 -17 191 0 24

-36 88 136 -21 85 36 188 -9 179 0 29

0 91 140 -25 94 0 161 -3 158 0 29

0 96 145 -31 102 0 167 -3 164 0 29

202 217 419

214 389 603

208 0 208

187 0 187

193 0 193

7.0 14.4 14.4 15.9 6.8 0.9 28.3 42.7 51.7 7.6 2.2

5.1 14.2 14.2 15.7 6.8 0.8 29.0 37.5 50.9 8.1 2.4

15.2 15.2 15.2 16.7 6.6 0.8 27.6 33.3 51.4 4.8 2.6

17.0 17.0 17.0 18.7 5.9 0.8 31.3 31.3 51.9 1.8 2.7

16.6 16.6 16.6 18.3 6.0 0.8 29.3 29.3 52.5 1.8 2.9

101.2 87.0 92.8 34.7 34.7 73.0

10.9 -8.6 9.2 1.3 1.3 0.1

-1.6 -6.8 -0.5 -6.1 -6.1 -3.8

3.0 -26.4 3.8 -10.8 -10.8 -10.8

3.6 4.9 4.9 2.4 2.4 2.4

16.17c 7.80c 7.80c 1.32 0.08

22.26c 7.90c 7.90c 1.40 0.08

7.42c 7.42c 7.42c 1.37 0.07

6.62c 6.62c 6.62c 1.36 0.07

6.77c 6.77c 6.77c 1.35 0.07

(%)

1M

3M 12M

Absolute (SGD)

-3.9

-6.7 -16.3

Absolute (USD)

-4.5

-9.5 -18.9

Relative to MSCI Singapore Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Keppel Land

1.1

0.8

-9.7

2,462.1 55.2 1.62/1.13 3.02

44.7

Source: Thomson Reuters, Nomura research

Notes

Our estimates suggest OFC’s income support could be fully utilised by 2H2014.

Source: Company data, Nomura estimates

24

Nomura | Keppel-REIT

4 February 2014

Cashflow (SGDmn) Year-end 31 Dec EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Acquisition of investment properties Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt

FY12 146 12 -61 98 -5 93 -100

FY13 133 -49 -24 60 -18 42 -378

FY14F 124 -20 49 153 -2 151 -61

FY15F 91 2 24 118 -2 116 -33

FY16F 96 2 24 122 -2 120 0

163 156 -212 70 257

173 -163 -211 171 260

117 206 -209 0 -3

123 205 -192 0 20

124 244 -191 0 0

-254 -139 17 86 102 2,320

-55 165 1 102 104 2,579

-53 -265 -58 104 45 2,635

-53 -225 -20 45 25 2,675

-53 -245 -1 25 25 2,675

FY12 102 29

FY13 104 34

FY14F 45 33

FY15F 25 34

FY16F 25 36

131 3,621

137 4,006

78 4,015

60 4,015

60 4,015

2,388

2,632

2,693

2,726

2,726

6,139 155 140 21 316 2,268

6,776 282 94 23 399 2,401

6,786 825 93 4 922 1,855

6,800 473 95 4 572 2,227

6,801 631 99 4 734 2,069

90 2,674

76 2,877

148 2,925

140 2,940

138 2,941

3,466

3,899

3,862

3,861

3,860

3,466 6,139

3,899 6,776

3,862 6,786

3,861 6,800

3,860 6,801

4.4 40.3 15.9 66.9

4.9 40.4 19.3 66.2

4.1 40.0 21.2 68.2

3.7 40.1 29.3 69.3

3.1 40.1 27.9 69.3

266.9 0.03 7.0 1.7 12.0

346.6 0.03 9.3 1.8 16.4

121.3 0.03 3.1 1.7 5.4

106.0 0.03 2.8 1.8 4.8

105.6 0.03 2.8 1.8 5.0

Notes

Acquisitions include additional commitments at the Old Treasury Building project to be called over the next two years.

Source: Company data, Nomura estimates

Balance sheet (SGDmn) As at 31 Dec Cash & equivalents Accounts receivable Other current assets Total current assets Investment properties Acquisitions Capital expenditure Net appreciation in value Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Non convertible prefs Total unitholders' funds Total units' funds & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)

Notes

Gearing = 0.42x as of end-December 2013.

Source: Company data, Nomura estimates

25

Nomura | Keppel-REIT

4 February 2014

Fig. 36: Intrinsic NAV summary FY14F NAV estimate is raised to SGD1.20/unit (from SGD1.17/unit)

NLA (m n FY14F NPI sq @ 100% (S$ ft)/room s m n)

Capital Capital value (S$ value (S$ m n) psf/S$ per rm )

Im plied yield %

Singapore portfolio Prudential Tow er - strata space Bugis Junction Tow er One Raffles Quay - 1/3 stake MBFC Phase 1 - 1/3 stake OFC - 99.9% stake

0.224 0.246 0.445 0.581 0.887

16.9 15.8 45.5 55.9 77.8

397.2 355.1 1,025.0 1,316.6 1,991.8

1,775 1,442 2,303 2,264 2,247

4.2 4.4 4.4 4.2 3.9

SG portfolio - total/w td avg

2.383

211.9

5,085.6

2,134

4.2

Australia portfolio - book value 275 George Street - 50% stake 77 King Street 8 Chifley Square - 50% stake (est. 3Q13 completion) Old Treasury Building - 50% stake (est. 3Q15 completion) 8 Exhibition Street - 50% stake

0.225 0.148 0.103

224.6 146.3 201.8

0.166

164.7

0.242

198.0

Gross asset value S$ m n Less adjusted net debt S$ mn NAV S$ m n Outstanding units (mn) NAV per unit (S$)

6,020.9 -2,654.9 3,366.0 2,811.8 1.20

Source: Nomura estimates

Fig. 37: TP unchanged at SGD1.21 Lower FY14F DPU forecast of 7.4Scts (from 7.5Scts)

FY14F DPU forecast S$

0.074

SG 10Y GB yield % … ascribed yield spread % … im plied fair trading yield %

2.0 4.0 6.0

Im plied fair value on yield S$

1.23

NAV S$/unit

1.20

Price target (50:50 w td avg), S$

1.21

Source: Nomura estimates

26

Nomura | Keppel-REIT

4 February 2014

Fig. 38: NPI (SGD mn) and DPU (Scts)

Fig. 39: Net debt to assets (x)

S$m

(x)

150

8.00 7.80

145

7.60 140

7.40

135

7.20 7.00

130

6.80

125

6.60

120

6.40 6.20

115

6.00 5.80

110 FY12

FY13

NPI (SGD mn)

FY14F

FY15F

0.44 0.44 0.44 0.43 0.43 0.43 0.43 0.43 0.42 0.42 0.42 0.42 FY12

FY16F

DPU (Scts)

FY13

FY14F

FY15F

FY16F

Net debt/asset (x)

Source: Company data, Nomura estimates

Source: Company data, Nomura estimates

Fig. 40: FY14F intrinsic value mix (%)

Fig. 41: Debt maturity (SGD mn) As of end-December 2013

15%

900.0

7% 6%

800.0 700.0 17%

600.0 500.0 400.0 300.0

33%

200.0 22%

100.0 0.0

Prudential Tow er One Raffles Quay stake OFC

Bugis Junction MBFC Phase 1 stake Austraila portfolio

2014F

2015F

2016F

Source: Nomura estimates

Source: Company data, Nomura research

Fig. 42: Yield spread over 10Y bond (pp)

Fig. 43: P/B (x)

Mean = 4.8pp

Mean = 0.84x

30.0

2017F

2018F

2019F

Debt maturity (SGD mn)

1.80 1.60

25.0

1.40 1.20

20.0

1.00 15.0

0.80 0.60

10.0

0.40 5.0

0.20

Hist yield spread over SG 10-yr GB (ppts)

Source: Bloomberg, Nomura estimates

Mean (ppts)

P/B (x)

Oct-13

Jun-13

Oct-12

Feb-13

Jun-12

Oct-11

Feb-12

Jun-11

Oct-10

Feb-11

Jun-10

Oct-09

Feb-10

Jun-09

Oct-08

Feb-09

Jun-08

Oct-07

Feb-08

Jun-07

Oct-06

Feb-07

Jun-06

0.00 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13

0.0

Mean (x)

Source: Bloomberg, Nomura research

27

Nomura | Singapore REITs

4 February 2014

Appendix A-1 Analyst Certification I, Min Chow Sai, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures The term "Nomura Group" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries, and may refer to one or more Nomura Group companies.

Materially mentioned issuers Issuer Ascendas REIT CapitaCommercial Trust Keppel-REIT Suntec REIT

Ticker AREIT SP CCT SP KREIT SP SUN SP

Price SGD 2.10 SGD 1.40 SGD 1.12 SGD 1.61

Price date 03-Feb-2014 03-Feb-2014 03-Feb-2014 03-Feb-2014

Stock rating Buy Neutral Neutral Neutral

Sector rating Disclosures N/A A1,A2,A3 N/A N/A N/A A4,A5,A6

A1

The Nomura Group has received compensation for non-investment banking products or services from the issuer in the past 12 months.

A2

The Nomura Group had a non-investment banking securities related services client relationship with the issuer during the past 12 months.

A3

The Nomura Group had a non-securities related services client relationship with the issuer during the past 12 months.

A4

The Nomura Group had an investment banking services client relationship with the issuer during the past 12 months.

A5

The Nomura Group has received compensation for investment banking services from the issuer in the past 12 months.

A6

The Nomura Group expects to receive or intends to seek compensation for investment banking services from the issuer in the next three months.

Ascendas REIT (AREIT SP)

SGD 2.10 (03-Feb-2014) Buy (Sector rating: N/A)

Rating and target price chart (three year history) Date 02-Oct-13 02-Oct-13 09-Apr-13 07-Mar-13 11-Oct-12 10-Jul-12 17-Jan-12 06-Oct-11 07-Sep-11 07-Sep-11

Rating Buy

Target price 2.61 2.47 2.50 2.25 2.04 2.16 2.10

Neutral 2.09

Closing price 2.29 2.29 2.67 2.65 2.43 2.149 2.009 1.979 2.099 2.099

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price of SGD2.50 is based on an average of our NAV estimate of SGD2.39 (SG portfolio's initial yield 6.2%) and yield-based fair value of SGD2.60, based on an ascribed FY15F yield of 5.8% and FY15F DPU forecast of SGD0.151.The benchmark index for this stock is MSCI Singapore. Risks that may impede the achievement of the target price Risks include weaker-than-expected economic growth or even a recession, coupled with rising costs, which could pose major downside risk to our forecasts.

28

Nomura | Singapore REITs

CapitaCommercial Trust (CCT SP)

4 February 2014

SGD 1.40 (03-Feb-2014) Neutral (Sector rating: N/A)

Rating and target price chart (three year history) Date 02-Oct-13 05-Aug-13 11-Jul-13 07-Mar-13 08-Nov-12 08-Nov-12 20-Jul-12 10-Jul-12 07-Sep-11

Rating

Target price 1.48 1.46 1.43 1.58

Neutral 1.57 1.55 1.49 1.47

Closing price 1.46 1.425 1.495 1.65 1.565 1.565 1.33 1.29 1.195

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price of SGD1.47 is the average of: 1) our diluted (assuming the SGD190.3mn CB due 2015 are converted into units) NAV estimate of SGD1.51 (implied initial yield of 4.7%); and 2) yield-based fair value of SGD1.44, based on an ascribed FY14F yield of 5.6% and our diluted FY14F DPU forecast of SGD0.08. The benchmark index for this stock is MSCI Singapore. Risks that may impede the achievement of the target price A worse-than-expected economic performance is likely to cause housing demand and leasing demand to slow, which would likely widen the discount to NAV at which the stock trades. Suntec REIT (SUN SP)

SGD 1.61 (03-Feb-2014) Neutral (Sector rating: N/A)

Rating and target price chart (three year history) Date 11-Jul-13 07-Mar-13 08-Nov-12 08-Nov-12 19-Jul-12 10-Jul-12 07-Sep-11

Rating

Target price 1.59 1.68

Neutral 1.67 1.70 1.61 1.64

Closing price 1.603 1.786 1.554 1.554 1.455 1.375 1.335

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our TP of SGD1.68 is the average of: 1) NAV of SGD1.74 (implied initial yield of 4.5%); and 2) fair value of SGD1.62, based on an ascribed FY14F yield spread of 5.9% and FY14F DPU forecast of SGD0.096. The benchmark index for this stock is MSCI Singapore. Risks that may impede the achievement of the target price An unexpected decline in economic activity and/or office demand could potentially negatively affect our rental and occupancy expectations, which could have an adverse impact on our DPU estimates as well as our valuations of the underlying real estate assets.

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Keppel-REIT (KREIT SP)

SGD 1.12 (03-Feb-2014) Neutral (Sector rating: N/A)

Rating and target price chart (three year history) Date 02-Oct-13 02-Oct-13 11-Jul-13 27-Jun-13 22-May-13 22-May-13 22-Feb-13 10-Oct-12 10-Jul-12 17-Jan-12 07-Sep-11 07-Sep-11

Rating Neutral

Target price 1.21 1.23 1.17

Reduce 1.34 1.29 1.16 1.14 0.98 Neutral 1.23

Closing price 1.233 1.233 1.329 1.274 1.557 1.557 1.364 1.169 1.064 0.882 1.054 1.054

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our TP of SGD1.21 is based on the average of 1) NAV estimate of SGD1.20 (implied initial yield of 4.2% for SG portfolio, Australia portfolio at book value), and 2) fair value of SGD1.23 based on an ascribed FY14F yield of 6.0% and our FY14F DPU forecast of SGD0.074.The benchmark index for this stock is MSCI Singapore. Risks that may impede the achievement of the target price An unexpected decline in economic activity and/or office demand could negatively affect our rental and occupancy expectations, which could adversely affect our DPU estimates and our valuations of the underlying real estate assets. K-REIT operates in multiple geographies, with its asset valuations exposed to translation gains and losses. Rating and target price changes Issuer

Ticker

Old stock rating

New stock rating

Old target price

New target price

Ascendas REIT CapitaCommercial Trust Suntec REIT

AREIT SP CCT SP SUN SP

Buy Neutral Neutral

Buy Neutral Neutral

SGD 2.61 SGD 1.48 SGD 1.59

SGD 2.50 SGD 1.47 SGD 1.68

Important Disclosures Online availability of research and conflict-of-interest disclosures Nomura research is available on www.nomuranow.com/research, Bloomberg, Capital IQ, Factset, MarkitHub, Reuters and ThomsonOne. Important disclosures may be read at http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email [email protected] for help. The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. Nomura Global Financial Products Inc. (“NGFP”) Nomura Derivative Products Inc. (“NDPI”) and Nomura International plc. (“NIplc”) are registered with the Commodities Futures Trading Commission and the National Futures Association (NFA) as swap dealers. NGFP, NDPI, and NIplc are generally engaged in the trading of swaps and other derivative products, any of which may be the subject of this report. Any authors named in this report are research analysts unless otherwise indicated. Industry Specialists identified in some Nomura International plc research reports are employees within the Firm who are responsible for the sales and trading effort in the sector for which they have coverage. Industry Specialists do not contribute in any manner to the content of research reports in which their names appear. Marketing Analysts identified in some Nomura research reports are research analysts employed by Nomura International plc who are primarily responsible for marketing Nomura’s Equity Research product in the sector for which they have coverage. Marketing Analysts may also contribute to research reports in which their names appear and publish research on their sector.

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Distribution of ratings (Global) The distribution of all ratings published by Nomura Global Equity Research is as follows: 42% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 43% of companies with this rating are investment banking clients of the Nomura Group*. 47% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 55% of companies with this rating are investment banking clients of the Nomura Group*. 11% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 26% of companies with this rating are investment banking clients of the Nomura Group*. As at 31 December 2013. *The Nomura Group as defined in the Disclaimer section at the end of this report.

Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America, and Japan and Asia ex-Japan from 21 October 2013 The rating system is a relative system, indicating expected performance against a specific benchmark identified for each individual stock, subject to limited management discretion. An analyst’s target price is an assessment of the current intrinsic fair value of the stock based on an appropriate valuation methodology determined by the analyst. Valuation methodologies include, but are not limited to, discounted cash flow analysis, expected return on equity and multiple analysis. Analysts may also indicate expected absolute upside/downside relative to the stated target price, defined as (target price - current price)/current price.

STOCKS A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. Benchmarks are as follows: United States/Europe/Asia exJapan: please see valuation methodologies for explanations of relevant benchmarks for stocks, which can be accessed at: http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology; Japan: Russell/Nomura Large Cap.

SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Sectors that are labelled as 'Not rated' or shown as 'N/A' are not assigned ratings. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Japan/Asia ex-Japan: Sector ratings are not assigned.

Explanation of Nomura's equity research rating system in Japan and Asia ex-Japan prior to 21 October 2013 STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies.

SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

Target Price A Target Price, if discussed, reflects in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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