Company Guide CPN Growth Leasehold REIT

Version 10 | Bloomberg: CPNREIT TB | Reuters: CPNREITu.BK Refer to important disclosures at the end of this report

DBS Group Research . Equity 28 Feb 2019

FULLY VALUED Brace for huge NAV fall Last Traded Price ( 27 Feb 2019): Bt27.00 (SET : 1,665.27) Price Target 12-mth: Bt20.50 (-24% downside) (Prev Bt22.80) Maintain FULLY-VALUED with a lower DCF-based TP of Bt20.50. We believe CPN Retail Growth Leasehold REIT’s Analyst (CPNREIT) current valuation is too stretched. The stock is now Chanpen SIRITHANARATTANAKUL +662 857 7824 trading way above our revised target price (TP) of Bt20.50 based [email protected] on DCF. We therefore recommend investors take profit. At the current price of Bt27.00, CPNREIT is offering 2019 dividend What’s New yield of 6.2% and an internal rate of return (IRR) of 5.1%. Note • 4Q18 results below expectations that two of CPNREIT’s major assets (CentralPlaza 2 and CentralPlaza ) accounting for 53.5% of total revenue will • Announced 4Q18 DPU of Bt0.4163, representing a see their leasehold contracts expire in about six years (2024 and 103.9% payout ratio; XD on 8 Mar 2019 2025). Although we believe it’s highly likely that these contracts • Cut forecast by 4-5% in 2019-20 to reflect a more will be extended, the extensions could come with additional conservative rental reversion assumption costs. CPNREIT’s current gearing is at 31%, which is not low. Acquiring additional assets or extending lease agreements will • TP cut to Bt20.50 based on DCF certainly involve both debt and equity financing, making

dilution inevitable. Investors should also brace for a potentially huge asset revaluation losses and big drop in net asset value Price Relative (NAV) in the years ahead.

Where we differ. Our TP is over 20% below consensus. We believe this is due to different assumptions on rental reversions. We now assume rental reversion of 3-4% in our forecasts.

Potential catalysts. Improving occupancies and rents of the malls following major and minor renovations, acquisition of new Forecasts and Valuation FY Dec (Btm) 2017A 2018A 2019F 2020F assets, successful extension of lease contracts at CentralPlaza Gross Revenue 3,410 4,739 5,062 5,298 Rama 2 and CentralPlaza Pinklao. Net Property Inc 3,185 4,480 4,762 4,986 Total Return 1,997 3,827 3,800 4,009 Valuation: Distribution Inc 2,724 3,578 3,800 4,009 Our target price for CPNREIT is Bt20.50, based on discounted EPU (Bt) 0.90 1.73 1.72 1.81 EPU Gth (%) (37) 92 (1) 5 cash flow (DCF) valuation methodology. DPU (Bt) 1.14 1.62 1.68 1.78 DPU Gth (%) (1) 42 4 5 Key Risks to Our View: NAV per shr (Bt) 13.3 13.6 13.6 13.7 Key risks are; (i) lower-than-expected occupancy rates (OR) PE (X) 29.9 15.6 15.7 14.9 Distribution Yield (%) 4.2 6.0 6.2 6.6 and, (ii) weaker-than-expected rental rate reversion. P/NAV (x) 2.0 2.0 2.0 2.0 Aggregate Leverage (%) 31.4 31.2 31.3 31.3 At A Glance ROAE (%) 6.7 12.9 12.7 13.3 Issued Capital (m shrs) 2,212 Mkt. Cap (Btm/US$m) 59,737 / 1,899 Major Shareholders (%) Distn. Inc Chng (%): (5) (4) (5) 26.7 Consensus DPU (Bt): 1.52 1.60 N/A Other Broker Recs: B: 1 S: 1 H: 1 Government Savings Bank 3.1 TMB Property Income plus. 3.0 Source of all data on this page: Company, DBSVTH, Bloomberg Finance Free Float (%) 73.1 L.P 3m Avg. Daily Val (US$m) 0.75 ICB Industry : Financials / Real Estate Investment Trust

ed: KK/ sa: CW, CS Company Guide

CPN Retail Growth Leasehold REIT

WHAT’S NEW 4Q18 below expectations

4Q18 net investment income grew 34% y-o-y to Bt887m. This Announced 4Q18 DPU of Bt0.4163. This represents a dividend was on mainly on the back of the additional contribution from payout ratio of 103.9%. The stock will go ex-dividend on 8 the two assets acquired in 4Q17 (CentralFestival Beach March and dividend payment will be made on 25 March. mall and Hilton Pattaya ) entirely via debt financing. NAV of Bt13.55 per share. CPNREIT reported NAV of … but eased 4% q-o-q. This was due mainly to; (i) the 52% Bt29.9bn, or Bt13.55 per share as at end-4Q18. jump in selling and administrative expenses (mainly advertising and promotions) towards the end of the year, (ii) the 16% surge Gearing was 30.9% at end-2018. On 8 Feb 2019, CPNREIT in finance costs as CPNREIT issued Bt10bn debentures to issued two more tranches of debentures totalling Bt4.5bn. refinance its loans from banks. The interest rates on the Proceeds were used to repay bank loans. Following these loan debentures were higher than interest rates on bank loans. repayments, CPNREIT now has four tranches of debentures totalling Bt14.5bn. These debentures have various tenures 2018 net investment income grew 31% y-o-y to Bt3.6bn. This from 2-10 years and carry an average interest rate of 3.3%. was on mainly on the back of the additional contribution from the two assets acquired in 4Q17 (CentralFestival Pattaya Beach OUTLOOK mall and Hilton Pattaya Hotel) entirely via debt financing. Lease expiry profile. In 2019, a number of lease contracts occupying 38% of total net leasable area (NLA) will expire and Average occupancy rate of its malls was 94.9% at end- 4Q18. be up for contract renewals. These include CentralPlaza Rama This was up from 91.0% at end-4Q17 and 94.2% at end-3Q18, 2 (30% of leased area), CentralPlaza Rama 3 (35%), following the re-opening of CentralPlaza Rama 3 on 9 August CentralPlaza Pinklao (42%), Central Pinklao Office Tower A&B 2018 after the completion of major renovations. Occupancy (41%), CentralPlaza Chiangmai Airport (38%) and rate at CentralPlaza Rama 3 improved from 93.6% at end-3Q18 CentralPlaza Pattaya Beach (54%). Management expects to 94.3% at end-4Q18. rental reversion of about 3-4%.

Occupancy rate at Hilton Pattaya Hotel eased to 91.1% at end- Land sublease extension at CentralPlaza Rama 2 to be finalised 4Q18, vs 94.2% at end-3Q18. This was due to the sharp drop within a year. Note that its land sublease agreement at in Chinese tourists’ arrivals to Thailand, which also negatively CentralPlaza Rama 2 will end in August 2025, or in just 6.5 affected Hilton Pattaya. years. Central Pattana (CPN) has already managed to have its lease contracts extended for 30 years. It is planning to extend Rental reversion deteriorating. In 2018, CPNREIT the sublease agreement with CPNREIT this year but the terms renewed/signed 850 new contracts, occupying 86,110 sqm or and conditions have yet to be finalised. Both CPN and 36.5% of net leasable area with an average rental reversion of CPNREIT are trying to come with the best payment terms that +3%. On a quarterly basis, rental reversion has been on a would minimise the effects on CPNREIT’s short term declining trend from +4.9% in 1Q18 to +3.6% in 2Q18, +2.2% distribution per unit (DPU). Note that CentralPlaza Rama 2 in 3Q18, and +1.0% in 4Q18. contributed 28.8% of CPNREIT’s revenue in 2018.

Asset revaluation gains of Bt242.8m in 2018. In 2018, CPNREIT Lease contract at CentralPlaza Pinklao to expire in 5.8 years. recorded Bt242.8m net unrealised gains from asset revaluation. The land belongs to , so we believe CPNREIT’s These comprised unrealized gains at CentralPlaza Rama 3 chances of getting a lease extension are high. However, the (+Bt1,470m), CentralPlaza Pinklao (+Bt62m), CentralPlaza lease extension will come with costs. CPNREIT will need to pay Chiangmai Airport (+Bt153m), and unrealized losses at for the lease extension based on the appraised value of the CentralPlaza Rama 2 (-Bt286m), CentralFestival Pattaya Beach assets at that time, plus negotiations. CentralPlaza Pinklao mall (-Bt867m), and Hilton Pattaya hotel (-289m). The contributed 24.7% total CPNREIT’s total revenue in 2018 unrealised gain (losses) were non-cash items, and have no (20.8% for Pinklao mall and 3.9% for Pinklao office tower impact on dividend payment. A&B).

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Company Guide

CPN Retail Growth Leasehold REIT

Brace for big NAV fall in upcoming years. As at end 2018, the RECOMMENDATION appraised value for CentralPlaza Rama II was Bt6,962m and CentralPlaza Pinklao was Bt5,678m. As we are getting closer Maintain FULLY VALUED. CPNREIT now offers a decent 2019 to the end of their leasehold lives in 2024-25, we could see dividend yield of 6.2% at the current price and an IRR of huge asset revaluation losses and a big NAV fall from these 5.1%. We maintain our FULLY VALUED rating with a lower two assets in the years ahead. Gearing could automatically rise DCF-based TP of Bt20.50. The low DCF valuation reflects a as value of total assets drops. more conservative rental reversion assumption of 3-4% (vs 3- 5% earlier) and the short remaining leasehold lives of two Potential acquisition of other assets from CPN. CPNREIT is also major assets - CentralPlaza Rama 2 and Pinklao - that looking to acquire other assets from CPN. Note that CPN now contribute more than 50% of CPNREIT’s total revenue. Their has 32 shopping malls in its portfolio. Among the acquisition lease contracts will expire in about 6+ years. targets could be matured malls such as CentralPlaza

(opening 2009, NLA of 38,391 sqm, OR of 97%), CentralPlaza Chiangrai (2011, 23,996 sqm, OR of 94%), CentralPlaza Phitsanulok (2011, 26,474 sqm, OR of 96%).

Potential consolidation of GLANDRT into CPNREIT. Note that following the tender offer in November 2018, CPN is now the largest shareholder of Grand Canal Land Plc. (GLAND) with a 67.53% stake. The company is now exploring the possibility of combining CPNREIT (retail REIT) and GLANDRT (office REIT) into one REIT. Nonetheless, considering the different types of assets that these two REITs are now investing in, the consolidation of these REITs might not be easy. GLANDRT has two leasehold office assets in its portfolio, including The 9th Tower and Unilever House. Its market capitalisation is now Bt6bn and offers 2018 distribution yield of 5.6%.

Quarterly / Interim Income Statement (Btm) FY Dec 4Q2017 3Q2018 4Q2018 % chg yoy % chg qoq

Gross revenue 909 1,212 1,214 33.6 0.2 Property expenses (74.2) (61.5) (76.7) 3.4 24.7 Net Property Income 835 1,150 1,138 36.3 (1.1) Other Operating expenses (158) (168) (174) 9.9 3.4 Other Non Opg (Exp)/Inc 26.5 40.9 42.3 59.7 3.2 Net Interest (Exp)/Inc (40.9) (104) (120) (193.2) (15.7) Net Investment Income 662 920 886 33.8 (3.6) Tax 0.0 0.0 0.0 N/A N/A Asset revaluation gain (loss) (702) (26.2) (39.6) N/A N/A Increase in net assets (39.2) 894 847 nm (5.2)

DPU (Bt) 0.2879 0.4157 0.4163

Ratio (%) Net Investment Inc Margin 70.8 73.4 70.5 Dist. Payout Ratio 96.2 100.0 103.9

Source of all data: Company, DBSVTH

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CPN Retail Growth Leasehold REIT

CPNREIT: Revenue Breakdown (2018) CPNREIT: Rental Reversion

Hilton 5.0% Pattaya, 7% Pattaya Beach, 13% 4.0% Rama 2, 29% 3.0%

Chiangmai Airport, 14% 2.0%

1.0% Pinklao Office, Rama 3, 14% 4% Pinklao mall, 0.0% 21% 1Q18 2Q18 3Q18 4Q18 Source: Company, DBSVTH Source: Company, DBSVTH

CPNREIT: Assets in the portfolio and remaining leasehold CPNREIT: Outstanding debentures

A ssets V alue Lease ends Remaining NLA % of Amount Interes tFixed/Float Due (Btm) (Years) (Sqm) T otal (Btm) 4Q18 Debentures Central Plaza Rama 2 6,962 15-Aug-25 6.5 82,590 33% Tranche 1, 3 years 2,650 2.70% Fixed 17-Aug-21 Central Plaza Rama 3 10,698 15-Aug-95 76.5 37,122 15% Tranche 2, 10 years 7,390 3.80% Fixed 17-Aug-28 Central Pinklao (Mall) 31-Dec-24 5.8 27,585 11% Tranche 3, 2 years 2,700 2.54% Fixed 8-Feb-21 5,678 Central Pinklao (Office) 31-Dec-24 5.8 34,320 14% Tranche 4, 4 years 1,795 3.30% Fixed 8-Feb-23 Central Chiangmai 10,658 23-Apr-44 25.2 37,803 15% Total 14,535 3.30% Central Pattaya Beach 7,289 31-Aug-37 18.5 29,404 12% Source: Company, DBSVTH Hilton Pattaya Hotel 3,465 31-Aug-37 18.5 302 rooms

Total Retail 44,750 30.5 248,824 100% Source: Company, DBSVTH CPN’s malls opened in 2009-2011 which could be injected into CPNREIT: Occupancy CPNREIT

A ssets Occupancy Mall Opened NLA Occupancy 1Q18 2Q18 3Q18 4Q18 (Sqm) CentralPlaza Udonthani 2009 71,693 90% Central Plaza Rama 2 94.8% 94.8% 94.5% 95.6% CentralPlaza Chonburi 2009 38,391 97% Central Plaza Rama 3 84.2% 90.3% 93.6% 94.3% CentralPlaza Khonkaen 2009 47,370 92% Central Pinklao (Mall) 99.1% 99.2% 99.4% 98.9% CentralPlaza Chiangrai 2011 23,996 94% Central Pinklao (Office) 82.5% 88.3% 88.9% 90.1% CentralPlaza Phitsanulok 2011 26,474 96% Source: DBSVTH Central Chiangmai 92.3% 93.2% 92.2% 92.7%

Central Pattaya Beach 95.2% 95.7% 98.1% 98.4% Hilton Pattaya Hotel 97.5% 91.7% 92.4% 91.1% Total Retail 91.7% 93.6% 94.2% 94.9% Source: Company, DBSVTH

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Company Guide

CPN Retail Growth Leasehold REIT

Net Property Income and margins (%) CRITICAL DATA POINTS TO WATCH Critical Factors Asset enhancement. CPNREIT has completed major renovations at CentralPlaza Rama 3. This has improved occupancy and rents in 2018. Its occupancy rate rose from 77.7% at end-2017 to 94.3% at end-2018 and should continue to improve.

Improved occupancy and rents. Blended occupancy rate for its malls was 94.9% at end-2018. Around 60% of its lease contracts are based on fixed rents, while 40% are based on tenants’ turnover. We expect rental rates to grow at about 3- 4% per annum. Since CPNREIT injected Hilton Pattaya Hotel Net property income and margins (%) into its portfolio in late-2017, the hotel has been performing very well. Despite being a low season, occupancy rate remained high at 91.1% as at end-2018.

Acquisition of new assets. Going forward, the acquisition of new assets is quite vital for CPNREIT, given that two of its assets will see their leases expire in December 2024 and August 2025 respectively. CPN now has plenty of assets that could be injected into CPNREIT. Among the potential targets are matured malls such as CentralPlaza Chonburi (opening 2009, NLA of 38,391 sqm, OR of 97%), CentralPlaza Chiangrai (2011, Distribution paid / Net operating CF 23,996 sqm, OR of 94%), CentralPlaza Phitsanulok (2011, 26,474 sqm, OR of 96%).

Lease extension at Central Rama 2 and Central Pinklao. CPN recently managed to renew the land lease at Central Rama 2 for 30 years. We see this as positive news, as the company will also likely renew the sublease agreement with CPNREIT. Consequently, CPNREIT is now considering various scenarios for its CentralPlaza Rama2 sublease agreement extension with CPN to minimise the impact on its DPU. CPNREIT will need to hire independent appraisers to value the 30-year sublease extension. Although the extension price is still unclear at this moment, it Interest cover (x) should be close to valuation by independent appraisers. We believe CPNREIT will likely need to fund the lease extension via both debt and equity.

Tenants’ leases up for renewals. CPNREIT’s contracts with tenants are normally for a period of three years. In 2019, a total of 38% of its lease contracts are subject to renewals. Rental reversion is typically around 3-5% per annum (p.a.). Around 25% of its lease contracts are subject to renewals in 2019 and 2020. In 2018, CPNREIT managed to renew 850 contracts, covering 86,110 sqm or 36.5% of total leasable area Source: Company, DBSVTH at a rental rate increase of about 3% p.a.

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CPN Retail Growth Leasehold REIT

Balance Sheet: Aggregate leverage (%) Total borrowings stood at Bt14.5bn and gearing reached 31% at end-2018. This is within the 60% maximum gearing allowed for real estate investment trusts (REITs) that secure investment- grade ratings. CPNREIT recently issued four tranches of debentures worth a combined Bt14.5bn to fix its interest rate cost before local interest rates start to rise. The average interest cost for these debentures was about 3.3%.

Share Price Drivers: Strong rental reversion could lift rental income and distribution per unit. ROE (%)

Acquisition of new assets. Acquisition of new assets will not only help expand its rental income and distribution per unit, but also diversify risks.

Key Risks: A sharp slowdown in the Thai economy could result in higher vacancy rates and make rental reversions difficult, as tenants suffer from weaker revenue.

Increase in could negatively affect the demand for physical retail space and rental income for the REIT. Distribution yield (%)

Company Background CPNREIT is Thailand's largest REIT by market capitalisation. The REIT invests in leasehold rights to five retail assets - CentralPlaza Rama 2, Rama 3, Pinklao, Chiangmai Airport and Pattaya Beach and Hilton Pattaya Hotel.

While the blended leasehold life of assets in its portfolio is about 30.5 years, the leasehold lives of two major assets CentralPlaza Pinklao and CentralPlaza Rama II are coming closer to their end, at about 5.8 and 6.5 years respectively. The acquisition of more assets, as well as the leasehold PB band (x) extension of expiring assets, are quite crucial for the fund’s growth going forward.

Source: Company, DBSVTH

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Company Guide

CPN Retail Growth Leasehold REIT

Key Assumptions FY Dec 2016A 2017A 2018A 2019F 2020F

NLA (sqm) 248,823 248,823 248,823 Rental reversion 3% 4% 4%

Segmental Breakdown FY Dec 2016A 2017A 2018A 2019F 2020F

Revenues (Btm) Central Rama II 1,236 1,305 1,365 1,440 1,497 Central Rama III 636 353 645 732 760 Central Pinklao 989 1,128 1,171 1,220 1,267 Central Chiangmai Airport 636 635 640 704 743 Central Pattaya Beach 0 35 607 656 682

Hilton Pattaya 0 35 313 309 349

Others 35 35 186 188

Total 3,531 3,526 4,739 5,062 5,298 Revenue Breakdown Central Rama II 35% 37% 29% 28% 28% Central Rama III 18% 10% 14% 14% 14% Central Pinklao 28% 32% 25% 24% 24% Central Chiangmai Airport 18% 18% 14% 14% 14% Central Pattaya Beach 1% 13% 13% 13% Hilton Pattaya 1% 7% 6% 7% Others 1% 1% 0% 4% 4% Total 100% 100% 100% 100% 100%

Income Statement (Btm) FY Dec 2016A 2017A 2018A 2019F 2020F

Gross revenue 3,425 3,410 4,739 5,062 5,298 Property expenses (185) (225) (259) (299) (312) Net Property Income 3,241 3,185 4,480 4,762 4,986 Other Operating expenses (443) (482) (690) (675) (695) Other Non Opg (Exp)/Inc 99.5 112 184 186 188 Net Interest (Exp)/Inc (66.3) (90.8) (397) (473) (470) Net Investment Income 2,831 2,724 3,578 3,800 4,009 Exceptional Gain/(Loss) 332 (727) 249 0.0 0.0 Increase in net assets 3,162 1,997 3,827 3,800 4,009

Distribution per unit (Bt) 1.1529 1.1371 1.6170 1.6832 1.7758

Growth & Ratio Revenue Gth (%) 12.8 (0.4) 39.0 6.8 4.7 N Property Inc Gth (%) 13.1 (1.7) 40.7 6.3 4.7 Net Inc Gth (%) (20.5) (36.9) 91.6 (0.7) 5.5 Dist. Payout Ratio (%) 90.1 92.4 100.0 98.0 98.0 Net Prop Inc Margins (%) 94.6 93.4 94.5 94.1 94.1 Net Income Margins (%) 92.3 58.6 80.7 75.1 75.7 Dist to revenue (%) 82.6 79.9 75.5 75.1 75.7 Managers & Trustee’s fees 12.9 14.1 14.6 13.3 13.1 ROto salesAE (%) %) 10.7 6.7 12.9 12.7 13.3 ROA (%) 9.5 5.0 8.1 8.1 8.5 ROCE (%) 8.9 7.1 8.6 9.2 9.6 Int. Cover (x) 42.2 29.8 9.6 8.6 9.1 Source: Company, DBSVTH

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CPN Retail Growth Leasehold REIT

Quarterly / Interim Income Statement (Btm) FY Dec 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018

Gross revenue 909 1,150 1,163 1,212 1,214 Property expenses (74.2) (61.0) (59.5) (61.5) (76.7) Net Property Income 835 1,089 1,103 1,150 1,138 Other Operating expenses (158) (179) (169) (168) (174) Other Non Opg (Exp)/Inc 26.5 33.4 67.8 40.9 42.3 Net Interest (Exp)/Inc (40.9) (86.4) (87.1) (104) (120)

Net Investment Income 662 857 914 920 886 Exceptional Gain/(Loss) (702) (26.1) 341 (26.2) (39.6) Increase in net assets (39.2) 831 1,255 894 847

Distribution per unit (Bt) 0.2879 0.3795 0.4055 0.4157 0.4163

Growth & Ratio Revenue Gth (%) 13 27 1 4 0 N Property Inc Gth (%) 11 30 1 4 (1) Net Inc Gth (%) (106) (2,221) 51 (29) (5) Net Prop Inc Margin (%) 91.8 94.7 94.9 94.9 93.7 Dist. Payout Ratio (%) 96.2 98.0 98.1 100.0 103.9

Balance Sheet (Btm) FY Dec 2016A 2017A 2018A 2019F 2020F

Investment Properties 32,309 44,310 44,750 44,749 44,749 Other LT Assets 830 1,693 1,758 1,758 1,758 Cash & ST Invts 465 1,052 342 569 777 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 0.0 0.0 0.0 0.0 0.0 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 33,604 47,056 46,850 47,076 47,285

ST Debt 0.0 0.0 0.0 0.0 0.0 Creditor 1,138 1,424 1,544 1,649 1,726 Other Current Liab 599 1,716 812 812 812 LT Debt 1,875 14,454 14,499 14,535 14,535 Other LT Liabilities 0.0 0.0 0.0 0.0 0.0 Unit holders’ funds 29,993 29,462 29,995 30,081 30,213 Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Funds & Liabilities 33,604 47,055 46,850 47,077 47,285

Non-Cash Wkg. Capital (1,737) (3,140) (2,356) (2,461) (2,538) Net Cash/(Debt) (1,410) (13,401) (14,157) (13,966) (13,758) Ratio Current Ratio (x) 0.3 0.3 0.1 0.2 0.3 Quick Ratio (x) 0.3 0.3 0.1 0.2 0.3 Aggregate Leverage (%) 5.7 31.4 31.2 31.3 31.3 Z-Score (X) 8.6 2.1 2.1 2.3 2.3

Source: Company, DBSVTH

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CPN Retail Growth Leasehold REIT

Cash Flow Statement (Btm) FY Dec 2016A 2017A 2018A 2019F 2020F

Pre-Tax Income 3,162 1,997 3,827 3,800 4,009 Dep. & Amort. 0.0 0.0 0.0 0.0 0.0 Tax Paid 0.0 0.0 0.0 0.0 0.0

Associates &JV Inc/(Loss) 0.0 0.0 0.0 0.0 0.0

Chg in Wkg.Cap. 137 868 (834) 105 77.0

Other Operating CF (332) 727 (249) 0.0 0.0 Net Operating CF 2,968 3,592 2,744 3,905 4,086 Net Invt in Properties (184) (12,729) (197) 0.0 0.0

Other Invts (net) 0.0 0.0 0.0 0.0 0.0 Acquisition of new Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 assets Div from Assoc. & JVs 0.0 0.0 0.0 0.0 0.0 Other Investing CF 0.0 0.0 0.0 0.0 0.0 Net Investing CF (184) (12,729) (197) 0.0 0.0 Distribution Paid (2,412) (2,527) (2,657) (3,714) (3,878) Chg in Gross Debt (61.4) 12,579 45.4 35.9 0.0 Capital Reduction 0.0 0.0 (637) 0.0 0.0 Other Financing CF 0.0 0.0 0.0 0.0 0.0 Net Financing CF (2,474) 10,052 (3,248) (3,678) (3,878) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash 311 915 (701) 227 208

Operating CFPS (Bt) 1.28 1.23 1.62 1.72 1.81 Free CFPS (Bt) 1.26 (4.1) 1.15 1.77 1.85 Source: Company, DBSVTH

Target Price & Ratings History

Source: DBSVTH Analyst: Chanpen SIRITHANARATTANAKUL

THAI-CAC (as of Nov 2018) n/a Corporate Governance CG Rating (as of Oct 2018) n/a

THAI-CAC is Companies participating in Thailand's Private Sector Score Description Collective Action Coalition Against Corruption programme (Thai CAC) Declared Companies that have declared their intention to join CAC under Thai Institute of Directors (as of May 2018) are categorised into: Certified Companies certified by CAC. Score Range Number of Logo Description Corporate Governance CG Rating is based on Thai Institute of 90-100 Excellent Directors (IOD)’s annual assessment of corporate governance practices 80-89 Very Good of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure 70-79 Good and transparency (20%), role of stakeholders (20%), equitable 60-69 Satisfactory treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to each company based on 50-59 Pass their scoring as follows: <50 No logo given N/A

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CPN Retail Growth Leasehold REIT

DBSVTH recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends

Completed Date: 28 Feb 2019 07:11:40 (THA) Dissemination Date: 28 Feb 2019 09:11:21 (THA)

Sources for all charts and tables are DBSVTH unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH'').

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

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

This publication has not been reviewed or authorized by any regulatory authority in , Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

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

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Jan 2019 2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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United This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Kingdom Commission, Thailand.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, Gate International Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Financial Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA Centre rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Emirates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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