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Malaysia
Initiating Coverage
17 October 2012
Hold (New)
Share price: Target price: MYR1.39 MYR1.39 (New)
IGB REIT
The REIT-ail Giant
The rise of another giant REIT. We initiate coverage on IGB REIT (IGBR) with a HOLD and a MYR1.39 DCF-based TP. IGBR provides investors the exposure to the largest REIT by market capitalization and nd 2 largest by free float in Malaysia. Growth will be underpinned by organic growth in its existing retail assets - Mid Valley Megamall (MVM) and The Gardens Mall (GM). Superior location draws crowd. Strategically located in the heart of Mid Valley City and the fringe of Kuala Lumpur CBD, MVM and GM are supported by offices and mature affluent townships within/surrounding the Mid Valley City. Footfall of the two malls has been stable at around 34m p.a. despite rising competition from new malls. Its attractiveness will be further enhanced by ongoing and future mixed developments in the surrounding areas, which would further grow its catchment. Benefits from improving connectivity and accessibility. IGBR is set to benefit from the upcoming MRT Circle Line under the Greater KL/KVs integrated urban transportation system via a proposed linkage from Mid Valley City to KL Eco Citys Komuter/LRT/MRT station. We believe that increased accessibility and connectivity will drive shopper traffic further and this will in turn serve as a strong catalyst to IGBRs capital value and bargaining power for positive rental reversions. The perfect match. IGBR has a good combination of mature and young assets - MVM anchors the earnings base while the relatively young GM provides significant room to grow average rental, which was 19% below the MVM on a psf basis in 5M12. 18.5% of IGBRs rental income is backed by long lease agreements whilst the portfolio tenancy expiry profile is well spread out, with 39% and 31% of the tenancies due for renewal in 2013 and 2014 respectively; provides income stability. Fairly valued. Our TP translates to an implied yield of 5%, versus a 4.9% average for large cap retail REITs (4.8% for PavREIT and CMMT, 5.3% for SunREIT). We like IGBR for its quality assets, earnings resilience and liquidity. IGBRs relatively low 26% debt-to-asset ratio allows it the capacity to borrow another MYR2.3b for asset acquisitions.
IGB REITSummary Earnings Table *Listed on 21 Sep 12 Source: Maybank KE
FYE Dec (MYR m) Total revenue Net property income Recurring Net Profit Recurring Basic EPU (Sen) EPU growth (%) DPU (Sen) PER^ -annualised EV/EBITDA (x) Div Yield (%) -annualised P/NAV(x) YTD Gearing (%) ROE (%) ROA (%) Consensus Net Profit (MYR m) 4M2012F* 114.4 77.5 54.0 1.6 1.8 24.4 21.1 4.8 1.4 26.2 5.7 4.1 184.4 2013F 421.1 287.4 204.3 6.0 7.0 23.2 20.2 5.0 1.4 26.2 6.0 4.3 198.8 2014F 433.4 295.6 211.9 6.2 3.2 6.8 22.5 19.6 4.9 1.4 26.2 6.2 4.5 216.1
Stock Information
Description: The largest retail REIT in Malaysia by asset size. Listing with 2 initial assets Mid Valley Megamall (MYR3.4b in asset size; 73% of 2011 proforma NPI) and the Gardens Mall (MYR1.2b; 27%). Ticker: Shares Issued (m): Market Cap (MYR m): 3-mth Avg Daily Turnover (US$ m): KLCI: Free float (%): Major Shareholders: IGB Corporation IGBREIT MK 3,400.0 4,726.0 9.02 1,653.52 49% 51%
Key Indicators
ROE annualised (%) Net cash (MYR m): NTA/shr (MYR): 6.1 (1,155.4) 0.996
Historical Chart
1.43 1.42 1.41 1.40 1.39 1.38 1.37 1.36 1.35 1.34
Sep-12 Sep-12
IGBREIT MK Equity
Oct-12
Oct-12
IGB REIT
Contents
Executive Summary Key Investment Merits Merit 1 : MYR4.6b assets dwarves all listed REITs Merit 2 : Superior location draws crowd Merit 3 : Perfect match provides earnings growth and stability Merit 4 : Ample headroom to grow Merit 5 : Strong management team Merit 6 : Favourable macro fundamentals Risks and Concerns Financials Valuations Income Statement & Balance Sheet Property Profile Mid Valley Megamall Property Profile The Gardens Mall Appendix 1 IGB REITs structure Appendix 2 Whos who in IGB REIT Appendix 3 Background of the Sponsor Appendix 4 Background of the Trustee Appendix 5 Fee structure of IGB REIT Appendix 6 Fee comparison among various M-REITs Appendix 7 Accolades / awards P5 P6 P10 P14 P15 P16 P18 P19 P20 P22 P23 P25 P3
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IGB REIT
Executive Summary
Highly sought after retail assets. IGB REIT (IGBR) is the largest nd domestic REIT by market capitalization at MYR4.7b and the 2 largest REIT by asset size at MYR4.6b (based on appraised value). It comprises 2 properties: Mid Valley Megamall (MVM; MYR3.4b in asset size; 74.8% of total asset portfolio) and The Gardens Mall (GM; MYR1.2b; 25.2%). These properties form part of Mid Valley City an integrated commercial development which includes 1,683 hotel rooms and serviced residences, seven blocks of commercial office buildings (2.67m sq.ft. NLA) and 228 residential units. Key investment merits. IGBR is a primarily retail-focused REIT and the REIT manager, IGB REIT Management S/B, will continue its focus on growing the retail-based assets through asset enhancement initiatives and mall acquisitions both locally and overseas. IGBRs key investment merits in our view include: (i) Its size as the largest retail-focused REIT by asset size and the largest REIT in Malaysia by market capitalization, thus providing an international appeal. (ii) Its superior location which provides long-term organic growth potential. The properties are strategically placed within Mid Valley City, one of the largest integrated developments in Malaysia, catering to locals, business travelers and tourists. Mid Valley City itself is located at the fringe of central Kuala Lumpur with proximity to various middle to high income suburbs. We believe that surrounding property developments (both current and in the future), the upcoming MRT Circle line and a proposed linkage to the existing Abdullah Hukum LRT station will further boost the footfall and shopper traffic at the malls. (iii) Its resilient earnings base, given that 18.5% of its gross rental income is from tenants with long lease agreements. Also, the malls have a diversified and sizeable tenant base of 663. No single tenant contributes to more than 6% of total gross rental income. Meanwhile, the portfolio tenancy expiry profile is well spread out with 38.7% (by gross rental income) and 31% of the tenancies due for renewal in 2013 and 2014 respectively, hence reducing earnings volatility. (iv) A perfect combination. In our opinion, the mature MVM, which has 13 years of successful operation, provides for a strong and stable earnings base while the relatively young GM (since 2007) has the potential for stronger rental growth and hence higher blended margins. (v) Room for inorganic growth. With a relatively low debt-to-asset ratio of 26%, IGBR has the ability to make yield accretive acquisitions for growth. It has a potential war chest of approximately MYR2.3b (at the 50% statutory limit) to fund new acquisitions without the need to raise fresh equity capital. IGBR has been granted the right of first refusal to acquire future retail properties in Malaysia and overseas from its sponsor, IGB Corporation.
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IGB REIT
In our opinion, working in favour of the REIT as well are the following factors: (i) Favourable macroeconomic fundamentals with (a) Malaysias population base being one of the fastest growing in the world, (b) Malaysias young population with a national median age of approximately 26 years, and (c) rising affluence among Malaysians, further spurred by the governments Economic Transformation Programme (ETP) which aims at transforming Malaysia into a high nation income by 2020 by doubling present GNI per capita to RM48,000. In addition, the ETPs Greater Kuala Lumpur / Klang Valley National Key Economic Area (NKEA) targets 10m population for Greater KL/KV by 2012 versus 6m in 2010 while tourism will remain an important income source to the Malaysian economy, being one of 12 NKEAs emphasized in the ETP blueprint. (ii) A very experienced management team. An added plus point for IGBR is the experienced, senior team at the REIT Manager, led by Anthony Patrick Barragry, who was involved in the development of Mid Valley City since Day 1. Valuation. We value IGBR at MYR1.39 based on a DCF approach as we believe it rigorously accounts for 10 years of cashflow and a terminal value, taking into consideration various assumptions on rental reversions, occupancy rates and others. Our MYR1.39 TP translates to an implied gross dividend yield of 5% (2013) which is marginally higher than Pavilion REIT (PavREIT)s 4.8% and CapitaMall Malaysia Trusts (CMMT) 4.8% but lower than Sunway REITs (SunREIT) 5.3%.
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IGB REIT
1,500
1,000 500
0
Boustead
AmFirst
UOA Reit
Amanah
CMMT
Hektar
Atrium
SunREIT
Pavillion
Starhill
Al-Aqar
Tower
Quill
Axis
IGB
AmFirst
Boustead
UOA Reit
SunREIT
Pavillion
Amanah
Starhill
Al-Aqar
CMMT
Hektar
Atrium
Quill
Sizeable in free float. IGBRs market capitalization of MYR4.7b and its sponsors stake of 51% of IGBR post listing have made IGBR the 2nd largest Malaysian REIT in terms of free float MYR2.3b, compared to SunREITs MYR2.6b, PavREITs MYR1.1b and CMMTs MYR2.1b. In our view, IGBRs huge free float is an attractive feature not only to domestic but also international investors.
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Tower
Axis
IGB
IGB REIT
Batu Caves
Sentul
Golden Triangle
Ampang
Kuala Lumpur CBD Mid Valley City KL Sentral / Bangsar Seputeh / Taman Desa
Cheras
The Mid Valley City element. One of the features that distinguishes IGBR from other retail REITs (except for SunREIT) is that its malls are located in the mature and integrated Mid Valley City, developed by its sponsor IGB Corporation Berhad (IGB Corporation). Apart from MVM and GM, the entire Mid Valley City development also includes three hotels (1,484 hotel rooms and 199 suites), seven office buildings (2.67m sq.ft. in NLA) and 228 service apartments.
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Support from self-contained Mid Valley City. In our opinion, the substantial commercial content of Mid Valley City has contributed steady shopper/tourist traffic to MVM and GM. The current office population in Mid Valley is estimated at around 14,547 workers. Including the office developments nearby, total office population is estimated at 117,365 workers, according to CBRE. This will be further boosted by IGB Corporations last office development in Mid Valley City, i.e. Mid Valley City Southpoint, which we expect to add a further 5,000-6,000 workers (+4-5%) and 2,000 extra car park lots (+19.6%) from 2015. Growing catchment provides long-term organic growth potential. Ongoing projects such as KL Eco City, Bangsar South and KL Sentral are still developing, providing for a growing office/resident/hotelier catchment for IGBRs retail assets. For instance, we expect the MYR6b-7b KL Eco City, which comprises offices, service apartments and hotel rooms, to have an estimated population of 35,000 upon completion. Future developments include the 40-acre Setia Federal Hills which targets mid- to high-income residents. We believe its residential growth potential and income profile will continue to drive footfall at MVM and GM. Excellent accessibility and connectivity. IGBRs retail assets are easily accessible. Apart from a network of highways (Federal Highway, East-West Link Expressway, New Pantai Expressway and North-South Highway), major roads which connect to the malls key catchment areas include Jalan Syed Putra, Jalan Klang Lama, Federal Highway, Jalan Maarof and Jalan Bangsar. Also, MVM and GM are directly linked to the Seremban/Rawang KTM Komuter railway line, which registered the second highest ridership of 2.2m in 2011 after KL Sentral Station (source: CBRE). Indirect beneficiary of ETP. Under the Greater Kuala Lumpur National Key Economic Areas (NKEA) initiative (under the ETP blueprint), new Mass Rapid Transit (MRT) lines, which include the MRT 2 Circle Line will be built to improve public transportation and connectivity between existing rail-based networks. The Circle Line, which is targeted to be completed by 2020, will link areas such as KL Eco City, Mont Kiara, Sentul Timur, Ampang and the MATRADE development. Higher capacity with the MRT. The new MRT line is designed with higher capacity in mind compared to the existing intra-city rail network.
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IGB REIT
And unlike the existing rail network, a portion of the new MRT line will pass through some of the more affluent neighborhoods in the Klang Valley (for e.g. Mont Kiara). Also, under the same plan, the KL Monorail will be extended to Taman Gembira in Old Klang Road and we expect this to benefit surrounding areas including Mid Valley City. More than just an MRT station. KL Eco City, a mixed development opposite Mid Valley City, will be an integrated rail transport hub accommodating the existing Abdullah Hukum Putra LRT, a new KTM commuter station along the Sentul-Port Klang route and a station on the MRT 2 Circle line. We understand that there will be a linkage connecting Mid Valley City to KL Eco City, enhancing connectivity and accessibility of MVM and GM (source: CBRE). Higher property value with superior transportation infrastructure. We believe shopper traffic to MVM and GM will improve further once the transport linkages are completed and the MRT Circle Line is fully operational, thus translating to better accessibility and connectivity. We believe that this will in turn translate into stronger bargaining power for rental reversions while eventually boosting the capital values of IGBR.
Chart 4: Proposed MRT line
Sg. Buloh
Kg. Baru Sg. Buloh Kota Damansara Taman Industri Sg. Buloh
Sentul
TTDI
Warisan Merdeka
Cochrane
Bukit Bintang Central Maluri Taman Bukit Ria Taman Bukit Mewah
Semantan
Taman Suntex Taman Cuepacs Bandar Tun Hussein Onn Balakong Taman Koperasi Saujana Impian Bandar Kajang Kajang
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IGB REIT
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IGB REIT
50
38.7 31 30
50
60
40
57.5
40 31
35.5
50
30
19
40
17.8
20
30
20 10
19.8
20
22.2
10
10
0
2012
Source: IGB REIT
0
2013 2014
0
2012 2013 2014
2012
Source: IGB REIT
2013
2014
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IGB REIT
IGBRs malls have prospered amid the competition. MVM and GM have weathered recessions, changes in retail trends and demand as well as rising competition from new supply of retail space; and continue to prosper. This is reflected in its steady 32 34.7m shopper traffic p.a. despite the surge in new mall spaces between 2009-2011. Instead, MVM and GM have outperformed most shopping malls in the Klang Valley with a close to 100% occupancy rate (MVM 99.8% tenanted; GM - 99.7% occupied as at May 2012) from 2009 until May 2012.
Chart 9: Mid Valley Megamall remains popular among retailers with close to 100% occupancy rate
(%) 100.0 100.0 99.9 100.0 99.8
Chart 10: Occupancy rate of The Gardens Mall has been improving since 2009
(%) 100 98.2 99.6 99.7
98.0
98 96.7
96.0
96
94.0
94
92.0
92
100
95
90
85
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Sources: CBRE
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IGB REIT Chart 12: Retail space supply in Klang Valley, 2000-2015e
Retail Space (m sq ft) 70.00 Mid & Mass Market Mall Premium Fashion Mall
4.31 2015F 54.55
3.37
1.38
1.38
1.38
35.00
10.00 0.00
2000
21.93
2001
22.14
2002
23.04
2003
28.53
2004
31.45
32.85
34.21
2008
35.76
2009
37.03
20.00
2010
38.87
2011
2005
2006
2007
42.55
2012F
45.02
2013F
48.32
Source: CBRE
Cheras KL Sentral Damansara Heights KLCC-Bukit Bintang Jalan Cochrane Cheras KLCC-Bukit Bintang Kelana Jaya Setia Alam Damansara Jaya Cheras Puchong Kota Damansara Puchong Damansara Perdana USJ Putrajaya Petaling Jaya Bandar Sunway Sungai Buloh Damansara Uptown Shah Alam Abdullah Hukum
Mass Mass Mass Premium Mass Mass Premium Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass Mass
420,000 650,000 188,452 300,000 1,200,000 850,000 450,000 700,000 700,000 660,000 456,973 380,000 308,800 302,739 1,000,000 400,000 1,350,000 300,000 62,000 370,000 400,000 1,000,000 300,000
High occupancy rates are not at the expense of rental rates. The substantially fully-tenanted MVM and GM have recorded commendable growth in rental rates over the past 2 years MVM recorded a +5.2% CAGR in average rental rate between 2009-2011 compared to GMs +7.3% for the same period. Their success can be attributed to their time-tested location, the wide array of offerings and complementary nature of IGBRs malls, as well as the management ability of IGBR. We expect MVM and GM to continue to excel under the same experienced management team post-listing of IGBR.
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2014F
52.85
30.00
1.38
1.38
1.38
40.00
1.38
3.37
3.37
3.37
50.00
3.56
3.56
3.56
60.00
3.86
IGB REIT Chart 13: Mid Valley Megamalls average rental rate has been growing steadily
(MYR psf) 11 +5.2% CAGR between 2009-2011 10.5 10 9.5 9 8.5 8 2009 2010 2011 May-12
7
10.75 10.21
8.74
8.43
9.69
9.22
7.54
7.5
7.32
Perfect combination offers both stability and growth. In our view, MVM is arguably one of the most successful malls in Klang Valley today. This 99.8%-occupied MVM, which has 13 years of successful operation, will form a strong and stable base for earnings, while the relatively young GM (which began operations in 2007) has significant room to catch up in terms of rentals and margins. Mature but plenty of growth opportunity. Despite its large size and high occupancy rate, MVM has strong rental growth potential. As mentioned earlier, 41.6% of MVMs NLA is occupied by anchor tenants. Therefore, the reconfiguration of some of these low-yielding spaces into higher-yielding smaller retail units will provide an immediate boost to rental income. Also, given the strong demand for space in MVM, we see strong upward rental reversions. MVMs waiting list for new space is still in excess of two years (source: CBRE). The Gardens Mall to play catch-up. GM is a premium fashion mall in the suburbs. This 5-year old mall has been designed to cater to more specialty stores which pay higher rentals and to complement the existing range offered by MVM. Despite a commendable 7% CAGR in average rental over the past 2 years, rentals at GM are still at a huge discount to its peers, at MYR8.7psf average monthly rental, versus Sunway Pyramids MYR10.3psf, Pavilion KL Malls MYR17.0psf and Suria KLCCs e.MYR20.0-25.0psf. It is also 17% below MVMs MYR10.6psf. This indicates that GM has significant upside over time as the mall matures.
Table 3: Comparison between The Gardens Mall, Pavilion Mall and Suria KLCC
Premium fashion malls Opened since Visitors mil The Gardens Mall Pavilion KL Mall Sunway Pyramid 2007 2007 1997 34* 31 34 >40 NLA sq.ft. 0.8m 1.7m 1.7m 1.2m Average rental MYR psf 8.7 17.0 10.3 20.0-25.0
Suria KLCC (including Suria KLCC 1998, 2011 (Suria KLCC extension) extension) * estimated footfall for Mid Valley Megamall and The Gardens Mall Sources: IGB REIT, trusts, KLCC Property, Maybank KE, CBRE
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IGB REIT
Mixed
Retail based
SunREIT
AmFirst
CMMT
UOA Reit
Amanah
Pavillion
Right of first refusal, 3rd party acquisitions. IGBR will pursue opportunities for asset acquisitions that provide attractive cash flows and yields relative to its weighted average cost of capital (WACC). However, it will also consider opportunities which are not immediately yield accretive but will benefit unitholders over the long term. IGBR has been granted the right of first refusal to acquire IGB Corporations future retail properties in Malaysia and overseas. In addition, IGBR will explore third party acquisitions should such opportunity arise that meet its investment criteria, including investing on a joint venture (JV) basis if appropriate. Mid- to long-term potential from its sponsor. IGB Corporation has partnered with Selia Pantai S/B to set up a 70:30 JV company to undertake a MYR6b-8b mixed development (which has similar concept as Mid Valley City) in Johor. The Southkey Megamall in Johor, which will be greater than Mid Valley City, will comprise a retail mall, hotels, residences and commercial towers. It is in the midst of obtaining approvals from the state government and construction is expected to start by 1H13 with an estimated 5-year development period. Meanwhile, IGB Corporation is also mulling the development of a megamall project in Penang (source: Business Times). IGBRs right of first refusal for IGB Corporations retail properties overseas also offers a pipeline of injections over the longer term. IGB Corporation is said to have bid for a mixed development project in Taipei and London.
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Al-Aqar
Tower
Hektar
Atrium
Quill
Axis
IGB
IGB REIT
Page 15 of 39
IGB REIT
Page 16 of 39
IGB REIT Chart 16: Malaysian retail sales are expected to continue growing Chart 17: Rising income supports spending
GDP/Capita (MYR) 25,000 20,000 GDP/Capita growth (%) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 (1.0) (2.0) (3.0) (4.0)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013F
2012F
% 40
as % of Nominal GDP
39
38
37 36 35
34 33
MYR b 80 70 60 50 40 30 20 10 0
Sep-11
Sep-10
Jun-10
Jun-11
Sources: CEIC
Mar-12
Mar-10
Dec-10
Mar-11
Dec-11
Sources: CEIC
60-64 50-54
40-44 30-34
20-24
10-14
2012F
2013F
0-4 0.0
Sources: CEIC
0.5
1.0
1.5
2.0
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IGB REIT
Page 18 of 39
IGB REIT
Financials
A retail-focused REIT. IGBR will comprise two retail assets, Mid Valley Megamall (MVM) and The Gardens Mall (GM) purchased at cost of MYR3,440m (74.8% of total asset value) and MYR1,160m (25.2%) respectively. These assets will be recorded in IGBRs balance sheet at MYR4,600m based on the appraised values. Earnings forecasts. We project IGBRs 4M12 (21 Sep - Dec 2012), 2013 and 2014 total revenue at MYR114.4m, MYR421.1m and MYR433.4m respectively. This, in turn, generates net property income (NPI) of MYR77.5m (4M12), MYR287.4m (2013) and MYR295.6m (2014) respectively, and pretax profit (after accounting for manager, trustee expenses and borrowing costs) of MYR54.0m, MYR204.3m and MYR211.9m respectively. We forecast the distributable income from 4M12-2014 at MYR62.8m, MYR237.2m and MYR231.2m respectively. Key assumptions. Our forecasts are based on IGBRs initial portfolio of property assets (i.e. MVM and GM) without taking into account potential future acquisitions. We assume: (i) Gross rental income increases by +2.7% in 2013 and +3.1% in 2014. This assumes tenancy agreements expiring in those financial periods are renewed at 5% (for MVM) and 15% (GM) higher rental with no step-ups for the next 3 years. Occupancy rates of 99.8% and 99.7% throughout the 10-year DCF period for MVM and GM. We have assumed a vacancy allowance of 1% to our forecast gross annual rentals for MVM and GM. Percentage rent (a.k.a. turnover rent) to increase by +5% p.a. in 2012 and 2013 and +3% p.a. thereafter to 2024. We expect nonseasonal car park income to grow by +3% p.a. with zero hikes for seasonal parking rate. Maintenance fees and other expenses (e.g. utilities, advertising, general & administrative expenses, property management fees & reimbursements) to increase by 3% p.a.. Capital expenditure of MYR2.5m for 4M12, MYR6.3m for 2013, and MYR6.5m for 2014. We have assumed a +3% annual growth in capex thereafter till 2023. Distribution payout policy of 100% for 2012-14, and 95% thereafter. Note that IGBR manager is committed to pay out at least 100% of its distributable income in 2012-14 as dividends, and at least 90% in the subsequent years. Our dividend payout also assumes that 100% of the REIT Managers fee will be payable in IGBR units for 2012-13 and 50% thereafter to 2023. Borrowing cost of 4.06% (revolving credit) to 4.55% (term loan; 99% of total debt) p.a..
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii) Management fees include base fee of 0.3% p.a. of total asset value, 5% p.a. of net property income and trustee fee of MYR280,000 p.a.
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IGB REIT
Valuations
MYR1.39 DCF-based TP. We favour the DCF approach, as it rigorously accounts for 10 years of cashflow and a terminal value, taking into consideration various assumptions on rental rate changes, occupancy rates, and others. Revenues are derived mainly from rents paid by tenants, which are typically on a 2-3 years tenancy agreement, while property and non-property expenses usually do not fluctuate significantly. Note that our valuation model has yet to incorporate any potential property acquisitions or pipeline of potential property injections by its sponsor. Our assumptions include: (i) a 10-year cash flow projection, (ii) terminal yield of 5.5%, reflecting a decent capitalisation rate for prime asset, and (iii) weighted average cost of capital (WACC) of 6.4%.
Table 4: Assumptions used for WACC discount rate
Risk free rate Cost of debt Market return Beta Target capital ratio Debt / (Debt + equity) Equity / (Debt + equity) Wd We Ke Wc 40% 60% 7.5% 6.4% Optimum structure Optimum structure = Rf + (Rm Rf) = Kd (Wd) + Ke (Wd) Rf Kd Rm 4.0% 4.55% 10.5% 0.6 Maybank IB houses assumption Average of retail REITs 10-year government bond yield
Deserves premium valuation. IGBR currently trades at a discount to PavREIT, with a gross yield of 5% (FY13) vs the latters 4.8%. This could be attributed to the lack of near-term acquisitions as compared to PavREIT (Pavilion KL Mall extension, farenheit88 and suburban mall in Subang). However, IGBRs yield is 30bps below SunREITs 5.3%. This premium to SunREIT is justifiable given IGBRs pure exposure to the retail sector (about 37% of SunREITs MYR4.9b asset size is from non-retail assets such as medical centre, offices and hotels). Meanwhile, we prefer IGBR over CMMT given the more superior location of its assets (at the fringe of KL CBD versus CMMTs The Mines Shopping Mall) and full management control over the properties (CMMT only owns 61.9% of total NLA of Sungei Wang Plaza).
Page 20 of 39
1.13 775.6
1.26 153.5
1.81 3,200.1
1.43 572.9
1.05 1,390.6
1.52 4,101.9
1.43 401.1
Asset portfolio
Retail: 4
Retail: 3
Office: 3
Office: 5 Mix: 1
Retail: 1 Office: 1
Retail: 2
1,280.5 14.0
1,182.1 46.7
194.7 31.2
1,396.4 30.0
2,888.0 27.2
822.0 45.1
814.8 36.1
1,577.2 10.4
4,940.0 33.4
607.2 19.1
1,027.3 36.7
3,566.3 18.7
4,600.0 26.2
14.0
46.4
34.1
61.8
71.7
61.4
64.6
28.8
40.0
30.6
63.3
52.6
23.2
26.3
49.0
Free float (MYR m) 6m average trading volume (m) NAV (MYR/sh) Div yield (%) - CY12F - CY13F P/NAV (x)
2,299.1 na 0.99
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IGB REIT
INCOME STATEMENT (MYR m) FY Dec Gross rental income Property operating expenses interest income Net property income (NPI) Interest (Exp)/Inc Non-property expenses One-offs Pre-Tax Profit Tax Net Profit -realised -unrealised Distributable income Distribution to unitholders Net Property Income Growth (%) Pretax Profit Growth (%) Realised Net Profit Growth (%) Payout ratio (%) * listed on 21 Sep 2012 CASH FLOW (MYR m) FY Dec Profit before taxation Depreciation Net interest receipts/(payments) Working capital change Cash tax paid Others (incl'd exceptional items) Cash flow from operations Capex Disposal/(purchase) Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends (paid) Others Cash flow from financing Change in cash
4M2012F* 114.4 (36.9) 0.3 77.5 (15.3) (8.4) 0.0 54.0 0.0 54.0 54.0 0.0 62.8 62.8 NA NA NA 100.0
2013F 421.1 (133.7) 2.6 287.4 (54.8) (30.8) 0.0 204.3 0.0 204.3 204.3 0.0 237.2 237.2 3.7 5.7 5.7 100.0
2014F 433.4 (137.8) 2.3 295.6 (54.8) (31.2) 0.0 211.9 0.0 211.9 211.9 0.0 231.2 231.2 2.9 3.7 3.7 100.0
BALANCE SHEET (MYR m) FY Dec Fixed Assets Other LT Assets Cash/ST Investments Other Current Assets Total Assets ST Debt Other Current Liabilities LT Debt Other LT Liabilities Minority Interest Shareholders' Equity Total Liabilities-Capital
2012F* 4,600.0 19.8 35.8 7.4 4,662.9 12.6 27.4 1,193.0 52.0 0.0 3,378.0 4,662.9
2013F 4,600.0 23.6 85.3 5.5 4,714.4 12.6 27.4 1,193.0 52.0 0.0 3,429.5 4,714.4
2014F 4,600.0 27.2 75.8 3.7 4,706.6 12.6 27.4 1,193.0 52.0 0.0 3,421.7 4,706.6
WACC ASSUMPTIONS 4M2012F* 54.0 3.4 15.0 0.0 0.0 7.8 80.2 (2.5) (4,612.6) 0.3 (4,614.7) 1,212.6 3,400.0 0.0 (35.3) 4,577.2 42.8 2013F 204.3 4.3 52.2 0.0 0.0 28.5 289.4 (6.3) 0.0 2.6 (3.7) 0.0 0.0 (181.4) (54.8) (236.1) 49.5 2014F 211.9 4.8 52.5 0.0 0.0 14.5 283.7 (6.5) 0.0 2.3 (4.2) 0.0 0.0 (234.2) (54.8) (289.0) (9.5) Risk-free Rate of Return Long Term Cost of Debt Market Risk Beta Cost of Equity Tax Rate Weighted Cost of Capital Growth Terminal Value Discount 4.0 4.6 10.5 0.6 7.5 6.4 2.0 5.5
Source: Maybank KE
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IGB REIT
Property Profile
Mid Valley Megamall is one of the biggest one-stop malls for local and out-of-state residents. Opened in 1999, it was the first mall with a megamall concept in Malaysia. Since 1999, Mid Valley Megamall has received more than 18 awards and accolades.
Figure 2: Mid Valley Megamall
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IGB REIT
AEON Carrefour Metrojaya MVEC GSC Celebrity Fitness Cosmic Bowl Forever 21 Why Pay More / Studio R Ace Hardware Total Source: IGB REIT
Dept Store Dept Store Dept Store Exhibition Centre Leisure Health & Wellness Leisure Apparel Entertainment & Leisure Home & Gift
Land area Gross floor area Net lettable area Number of car parks Number of tenants Age of property Tenure Stake Purchase consideration Appraised value Transacted value Occupancy rate Source: IGB REIT
Leisure
3.9% 4.3%
Leisure
F&B
5.2%
Sundry & Services Health & Wellness 17.8% 31.1% Exhibition Centre Home & Gift 11.2% Discounters Timepiece & Jewellery
* as at 31 May 2012 Sources: IGB REIT * as at 31 May 2012 Sources: IGB REIT
41.6%
11.6%
14.0% 14.0%
94 93 92
91 90 89 88 87 2009
Sources: IGB REIT
92.8
93.1
89.6
2010
2011
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IGB REIT
Property Profile
The Gardens Mall is one of the premium shopping centres in the Klang Valley. Located in the Mid Valley City, it provides premium shopping experience for shoppers without having to go into town. The architecture of The Gardens Mall is designed to create pleasant environment by using local arts, crafts, flora and fauna.
Figure 3: The Gardens Mall
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IGB REIT
Health & Wellness 18.8% 23.5% Fashion (Luxury) Sundry & Services Timepiece & Jewellery
* as at 31 May 2012 Sources: IGB REIT * as at 31 May 2012 Sources: IGB REIT
15.5%
89.1
67.9
88.9
2009
Sources: IGB REIT
2010
2011
Page 26 of 39
IGB REIT
Acts on behalf of Unitholders Trustee Trustee fees Ownership of Deposited Property (Vested in trustee) IGB REIT
Management Services
Manager Management Fees Income
Property Manager
IGB REIT Management Sdn Bhd is the manager of IGB REIT. The Manager undertakes primary management activities in relation to IGB REIT. Its main responsibility is to set the strategic direction of IGB REIT and give recommendations to the Trustee on the acquisition, divestment and enhancement of assets of IGB REIT in accordance with its stated investment strategy. The Manager is wholly-owned by the sponsor of IGB REIT, IGB Corporation (IGB). IGB is one of the countrys largest owners and managers of investment properties and it is listed on Bursa Securities. AmTrustee Berhad is the trustee of IGB REIT. The Trustee provides corporate trusteeship services for IGB REIT. Chartwell ITAC International Sdn Bhd is the property manager of IGB REIT. The Property Manager is responsible for providing property management services for the properties in IGB REITs portfolio.
Page 27 of 39
IGB REIT
Chai Lai Sim Daniel Yong Chen-I Elizabeth Tan Hui Ning
Ko Chai Huat
Head of Operations/ Leasing (The Gardens Mall) Elizabeth Tan Hui Ning
Anthony Patrick Barragry, Chief Executive Officer of the Manager. He is a qualified architect with 35 years of international experience in the design, development and operations of major mixed-use developments. His prior work experience includes the Putra World Trade Centre and the Renaissance Kuala Lumpur Hotel, the Ciragan Palace Hotel in Istanbul, and Jebel Ali Hotel development in Dubai. He was previously Project Director in the construction of Mid Valley City Phase 1, including Mid Valley Megamall and was subsequently appointed as Executive Director of MVC in 2002. He was also Project Director for the design and construction of the St Giles Hotel, Heathrow, London and the upgrading of IGBs Pangkor Island Beach Resort. In January 2008, he was appointed Chief Executive Officer of MVCG. He holds a Diploma in Architecture from the University of Sheffield and is a member of the International Council of Shopping Centers and FIABCI. Daniel Yong Chen-I, Joint Chief Operating Officer (Mid Valley Megamall) and a Non-Independent Executive Director of the Manager. Daniel Yong is a law graduate from the University of Bristol, England. He joined MVC in 1999 as a member of the pre-opening retail development team. He was appointed an Executive Director of MVC in 2003 and has been responsible for overseeing the marketing, leasing, management and operation of Mid Valley Megamall since. He was also involved in the design and pre-opening of The Gardens Mall from 2004 to 2007. His prior work experience includes the development of bespoke systems with BYG Systems Ltd in England and Operational
Page 28 of 39
IGB REIT
Management with Wah Seong Engineering Sdn Bhd, the distributor and manufacturer for Toshiba Elevator and Escalators in Malaysia. Elizabeth Tan Hui Ning, Joint Chief Operating Officer (The Gardens Mall), Head of Operations/Leasing (The Gardens Mall) and a NonIndependent Executive Director of the Manager. She is also the Director of Leasing of MVCG. She joined MVCG in August 2004 and subsequently assumed her present role as the Director of Leasing of MVCG. She is responsible for the conceptualisation and strategy of the tenant mix of The Gardens Mall as well as overseeing the leasing, retail development and customer service departments. She graduated with First Class Honours from Cardiff University, Wales, United Kingdom with a degree in Business Administration (BSc) in June 2004. Chai Lai Sim, Chief Financial Officer of the Manager. She has over 30 years of experience in audit, corporate finance, capital management strategy including treasury, financial accounting and taxation in property development, commercial and retail property investment and hospitality industries. She began her career as an articled student with Coopers & Lybrand (now known as PricewaterhouseCoopers) before joining Tan & Tan Developments Berhad as the Group Financial Controller in 1993. Following the completion of the merger between Tan & Tan Developments Berhad and IGB in 2002, she was appointed the Senior Group General Manager of Group Finance and subsequently assumed the present role of Group Chief Financial Officer of IGB. She is a member of both the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA). Tina Chan Lai Yin, Head of Compliance of the Manager. She has a broad knowledge and skill-base in corporate secretarial work, having 20 years working experience. She is presently the Company Secretary of the IGB group, a position which she has held since 1997. She is also the Company Secretary of the KrisAssets group. Prior to joining IGB, she had worked in a legal firm, Rahman Hashim, V.T. Ravindran and Partners where she was the Company Secretary cum Administrator and was later attached to Tan & Tan Developments Berhad, her last position there being the Joint Company Secretary. She is an Associate of The Institute of Chartered Secretaries and Administrators. Rennie Lee Chai Tin, Head of Operations / Leasing (Mid Valley Megamall) of the Manager and General Manager of MVC. She joined MVC in 1995. She has about 19 years of work experience in leasing and operations within the retail industry. She is credited with being part of the founding team in the marketing of Mid Valley City. Her previous work experience includes the leasing and marketing of Mahkota Parade in Malacca, Subang Parade and IOI shopping centers in Kuala Lumpur. She was a key member of Mid Valley Megamall pre-opening team. Ko Chai Huat, Head of Marketing (Mid Valley Megamall) of the Manager and Director of Design of MVC. He joined MVC in 1999. He has about 24 years of work experience in visual merchandising as well as advertising and promotion. He was formerly Visual Merchandising Manager at Atria Shopping Centre in Kuala Lumpur. He directs, conceptualises and leads all design set ups for promotional activities and events in Mid Valley Megamall. He was a key member of the Mid Valley Megamall pre-opening team. He holds a Diploma in Fine Arts. Chow Yeng Keet, Head of Investment of the Manager. He is presently the General Manager, Corporate Finance of IGB and Director of Finance of MVC. He has 15 years of experience in corporate finance
Page 29 of 39
IGB REIT
and advisory covering mergers and acquisitions, equity and debt fund raising, capital management and restructuring, valuations as well as take-over offers. He started his career as Corporate Finance Executive with the then Sime Merchant Bankers Berhad in 1997. Thereafter, he was with Commerce International Merchant Bankers Berhad (now known as CIMB) for five years where his last position was as a Corporate Finance Manager prior to joining IGB in 2004. Currently, he is involved in corporate finance as well as finance and accounts of the KrisAssets group. He holds a Bachelor of Economics (First Class Honours) from University of Malaya and is a Fellow of the Association of Chartered Certified Accountants. Gabrielle Tan Hui Chween, Head of Marketing (The Gardens Mall) of the Manager and Director of Marketing of MVCG. She holds a Bachelor of Arts in Business Economics from the University of Exeter, United Kingdom and a Bachelor of Fine Arts degree in fashion design and marketing from the American Intercontinental University - London, United Kingdom. She joined MVCG as the Head of Marketing in 2007 and later assumed the role of Director of Marketing. She oversees the advertising and promotions activities as well as the public relations initiatives at The Gardens Mall. She is also a director of MVCG.
Page 30 of 39
IGB REIT
Page 31 of 39
IGB REIT
Tuan Hj Mohamad Sabirin Bin HjA.Rahman Non-Independent Director Dato Ng Mann Cheong Datuk Haji Mohd Idris Bin Mohd Isa Source: IGB REIT Independent Director Independent Director
Chief Executive Officer of the Trustee: Mr Tan Kok Cheeng Mr Tan Kok Cheeng was appointed the Chief Executive Officer of AmTrustee Berhad with effect from 1 October 2010. Prior to joining AmTrustee Berhad, he served as the Chief Internal Auditor, Internal Audit Department, AmBank Group then elevated as Internal Audit Advisor, AmBank Group. He has been with AmBank for more than 25 years.
Page 32 of 39
IGB REIT
Page 33 of 39
IGB REIT
Performance fees
3.0% of NPI
5.0% of NPI
5.0% of NPI
3.0% of NPI
5.0% of NPI
3.0% of NPI
4.0% of NPI
5.0% of NPI
Trust fees
0.03% of NAV
0.03% of NAV
0.1% of NAV
0.1% of NAV
0.04% of NAV subject to a 0.05% minimum fee of NAV of RM40,000 per annum
0.1% of NAV
0.03% of 1st RM2.5b of GAV and 0.03% 0.02% on the of GAV GAV in excess RM2.5b
0.03% of NAV
0.03% of NAV
0.045% of NAV
0.05% of NAV
Others Acquisition Fee 1.0% of acq price 0.5% of disposal price 1.0% of acq price 0.5% of disposal price 1.0% of acq price 0.5% of disposal price 1.0% of acq price 1.0% of acq price 0.5% of disposal price 1.0% of acq price 1.0% of acq price 1.0% of acq price 1.0% of acq price 1.0% of acq price 1.0% of acq price 1.0% of acq price 1.0% of acq price 0.5% of disposal price 1.0% of acq price 0.5% of disposal price 0.1%-0.2% depending on annual growth of distributable income * stocks under Maybank KE coverage
Divestment Fee
Incentive Fee
Page 34 of 39
IGB REIT
17 October 2012
Page 35 of 39
IGB REIT
RESEARCH OFFICES
REGIONAL
P K BASU Regional Head, Research & Economics (65) 6432 1821 pk.basu@maybank-ke.com.sg WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 wchewh@maybank-ib.com THAM Mun Hon, CFA Regional Strategist (852) 2268 0630 thammunhon@kimeng.com.hk ONG Seng Yeow Regional Products & Planning (852) 2268 0644 ongsengyeow@maybank-ke.com.sg
ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 suhaimi_ilias@maybank-ib.com Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 luz_lorenzo@maybank-atrke.com
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 wchewh@maybank-ib.com Strategy Construction & Infrastructure Desmond CHNG, ACA (603) 2297 8680 desmond.chng@maybank-ib.com Banking - Regional LIAW Thong Jung (603) 2297 8688 tjliaw@maybank-ib.com Oil & Gas Automotive Shipping ONG Chee Ting, CA (603) 2297 8678 ct.ong@maybank-ib.com Plantations Mohshin AZIZ (603) 2297 8692 mohshin.aziz@maybank-ib.com Aviation Petrochem Power YIN Shao Yang, CPA (603) 2297 8916 samuel.y@maybank-ib.com Gaming Regional Media Power T AN CHI WEI, CFA (603) 2297 8690 chiwei.t@maybank-ib.com Construction & Infrastructure Power WONG Wei Sum, CFA (603) 2297 8679 weisum@maybank-ib.com Property & REITs LEE Yen Ling (603) 2297 8691 lee.yl@maybank-ib.com Building Materials Manufacturing Technology LEE Cheng Hooi Head of Retail chenghooi.lee@maybank-ib.com Technicals
SINGAPORE
Stephanie WONG Head of Research (65) 6432 1451 swong@maybank-ke.com.sg Strategy Small & Mid Caps Gregory YAP (65) 6432 1450 gyap@maybank-ke.com.sg Technology & Manufacturing Telcos - Regional Wilson LIEW (65) 6432 1454 wilsonliew@maybank-ke.com.sg Hotel & Resort Property & Construction James KOH (65) 6432 1431 jameskoh@maybank-ke.com.sg Logistics Resources Consumer Small & Mid Caps YEAK Chee Keong, CFA (65) 6433 5730 yeakcheekeong@maybank-ke.com.sg Healthcare Offshore & Marine Alison FOK (65) 6433 5745 alisonfok@maybank-ke.com.sg Services S-chips Bernard CHIN (65) 6433 5726 bernardchin@maybank-ke.com.sg Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 ongkianlin@maybank-ke.com.sg REITs / Property Wei Bin (65) 6432 1455 weibin@maybank-ke.com.sg S-chips Small & Mid Caps
THAILAND
Mayuree CHOWVIKRAN Head of Research (66) 2658 6300 ext 1440 mayuree.c@maybank-ke.co.th Strategy Maria BRENDA SANCHEZ L APIZ Co-Head of Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 Maria.L@maybank-ke.co.th Consumer/ Big Caps Andrew STOTZ Strategist (66) 2658 6300 ext 5091 Andrew@maybank-ke.co.th Suttatip PEERASUB (66) 2658 6300 ext 1430 suttatip.p@maybank-ke.co.th Media Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 sutthichai.k@maybank-ke.co.th Energy Petrochem Termporn T ANTIVIVAT (66) 2658 6300 ext 1520 termporn.t@maybank-ke.co.th Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 woraphon.w@maybank-ke.co.th Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 jaroonpan.w@maybank-ke.co.th Transportation Small cap. Chatchai JINDARAT (66) 2658 6300 ext 1401 chatchai.j@maybank-ke.co.th Electronics Pongrat RATANATAVANANANDA (66) 2658 6300 ext 1398 pongrat.R@maybank-ke.co.th Services/ Small Caps
INDONESIA
Katarina SETIAWAN Head of Research (62) 21 2557 1125 ksetiawan@kimeng.co.id Consumer Strategy Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 lariesandi@kimeng.co.id Base metals Coal Oil & Gas Rahmi MARINA (62) 21 2557 1128 rmarina@kimeng.co.id Banking Multifinance Pandu ANUGRAH (62) 21 2557 1137 panugrah@kimeng.co.id Auto Heavy equipment Plantation Toll road Adi N. WICAKSONO (62) 21 2557 1130 anwicaksono@kimeng.co.id Generalist Anthony YUNUS (62) 21 2557 1134 ayunus@kimeng.co.id Cement Infrastructure Property Arwani PRANADJAYA (62) 21 2557 1129 apranadjaya@kimeng.co.id Technicals
VIETNAM
Michael KOKALARI,CFA Head of Research (84) 838 38 66 47 michael.kokalari@kimeng.com.vn Strategy Nguyen Thi Ngan Tuyen (84) 844 55 58 88 x 8081 tuyen.nguyen@kimeng.com.vn Food and Beverage Oil and Gas Ngo Bich Van (84) 844 55 58 88 x 8084 van.ngo@kimeng.com.vn Banking Trinh Thi Ngoc Diep (84) 844 55 58 88 x 8242 diep.trinh@kimeng.com.vn Technololy Utilities Construction Dang Thi Kim Thoa (84) 844 55 58 88 x 8083 thoa.dang@kimeng.com.vn Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 hoa.nguyen@kimeng.com.vn Steel Sugar Resources
INDIA
Jigar SHAH Head of Research (91) 22 6623 2601 jigar@kimeng.co.in Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 anubhav@kimeng.co.in Metal & Mining Capital goods Property Ganesh RAM (91) 226623 2607 ganeshram@kimeng.co.in Telecom Contractor
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 luz_lorenzo@maybank-atrke.com Strategy Laura DY-LIACCO (63) 2 849 8840 laura_dyliacco@maybank-atrke.com Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 lovell_sarreal@maybank-atrke.com Consumer Media Cement Kenneth NERECINA (63) 2 849 8839 kenneth_nerecina@maybank-atrke.com Conglomerates Property Ports/ Logistics Katherine T AN (63) 2 849 8843 kat_tan@maybank-atrke.com Banks Construction Ramon ADVIENTO (63) 2 849 8842 ramon_adviento@maybank-atrke.com Mining
17 October 2012
Page 36 of 39
IGB REIT APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may rec eive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, MKE) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, Representatives) shall not be liable for any direct, indirect or consequential losses or damages t hat may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available t o us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those express ed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, p erform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKEs clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This rep ort is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (Maybank KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on th e Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result i s as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (MBKET) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the pri or written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investment s to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (Maybank KESL) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm d oes not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
17 October 2012
Page 37 of 39
IGB REIT
DISCLOSURES
Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (PTKES) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and t he Securities and Exchange Commission.Philippines:MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (KEVS) (License Number: 71/UBCK-GP) is licensed under the StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (KESI) is a participant of the National Stock Exchange of India Limited (Reg No: INF/I NB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also register ed with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 17 October 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 17 October 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 m onths, significant advice or investment services in relation to the investment concerned or a related investment.
OTHERS
Analyst Certification of Independence The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analysts compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system: BUY HOLD SELL Total return is expected to be above 10% in the next 12 months (excluding dividends) Total return is expected to be between -10% to +10% in the next 12 months (excluding dividends) Total return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investm ent ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investm ent ratings as we do not actively follow developments in these companies.
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IGB REIT
EV = Enterprise Value PBT = Profit Before Tax
Malaysia
Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136
Singapore
Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003
London
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New York
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Stockbroking Business:
Hong Kong
Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queens Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104
Indonesia
PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189
India
Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604
Philippines
Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
Thailand
Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)
Vietnam
In association with
Saudi Arabia
In association with
Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36 Fax : (84) 838 38 66 39
Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787
Connie TAN connie@maybank-ke.com.sg Tel: (65) 6333 5775 US Toll Free: 1 866 406 7447
Eddie LAU eddielau@kimeng.com.hk Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267 www.maybank-ke.com | www.kimengresearch.com.sg
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