Company Guide CapitaLand Mall Trust

Version 9 | Bloomberg: CT SP | Reuters: CMLT.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 20 Jun 2017

BUY Time to catch up

Last Traded Price ( 19 Jun 2017): S$1.96 (STI : 3,247.18) Attractive valuation. BUY, TP S$2.17. CapitaLand Mall Trust Price Target 12-mth: S$2.17 (11% upside) (CMT)’s share price has been flat this year, which has lagging behind both S-REIT index (up 13.9% YTD) and Singapore 10Y Analyst government bonds which is down by 30bps to 2.08% since the Singapore Research Team [email protected] Derek TAN +65 6682 3716 [email protected] start of the year. We believe the underperformance is due to investors’ concerns on potential downside earnings risk given What’s New the weak operating outlook but we believe these risks are priced in at current levels. Yields spread of close to 3.7% against the • Tactical position into CMT as valuations are close 10-year government bond is at its five-year -1 standard deviation to its 5-year –1 standard deviation levels (S.D.) level, implying that the yield spread will converge to its • Relevant competition from new supply to CMT is long-term mean of 3.3%. BUY!

significantly smaller than investors’ perception Where we differ: We remain positive despite a divided street. • Upside to NAV in upcoming results could be a re- While the street remains divided on the stock given the rating catalyst uncertainties of the impact from surging new retail supply over

2017-2019, we believe the new supply may not be as threatening to CMT. According to our analysis, we estimate that only less than 50% of the incoming new supply are relevant Price Relative competition to CMT’s properties. The major new supply is S$ Relative Index 2.5 222 concentrated in 2018 and will likely have different target 2.4 202 2.3 182 2.2 shoppers than CMT’s portfolio, e.g. Paya Lebar Quarter (office 2.1 162 2.0 142 crowd) vs (night/weekend family), and Changi Jewel 1.9 122 1.8 (tourist and desitnation) vs (neighbourhood) 1.7 102 1.6 82 which means that performance should remain stable. Our DPU Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 estimates are conservative and we believe that the new CEO CapitaLand Mall Trust (LHS) Relative STI (RHS) could bring in fresh blood from expertise in managing retail malls in China, a more dynamic market. Forecasts and Valuation FY Dec (S$m) 2016A 2017F 2018F 2019F Potential Catalyst: Upside from valuations in the upcoming Gross Revenue 690 689 695 706 results. Recent transaction of at 4.2% cap rate is a Net Property Inc 480 479 481 487 significant milestone in Singapore and we believe this to have a Total Return 469 411 413 414 Distribution Inc 424 411 417 418 positive impact on CMT’s portfolio valuations in the upcoming EPU (S cts) 11.3 11.6 11.6 11.7 results. On a P/NAV basis, CMT is already trading at –1 S.D. level EPU Gth (%) (16) 2 0 0 and the discounts to NAV could widen once portfolio DPU (S cts) 11.1 11.0 11.2 11.2 revaluations are updated. Acquisitions, if any, could present as DPU Gth (%) (1) (1) 1 0 earnings surprise for the stock. NAV per shr (S cts) 189 189 190 190 PE (X) 17.3 16.9 16.8 16.7 Valuation: Distribution Yield (%) 5.7 5.6 5.7 5.7 Maintain TP at S$2.17. The stock offers FY17F DPU yield of over P/NAV (x) 1.0 1.0 1.0 1.0 5.5% and total potential return in excess of 13%. Aggregate Leverage (%) 32.8 33.7 34.7 35.5 ROAE (%) 6.0 6.1 6.1 6.1 Key Risks to Our View:

More aggressive rate hikes than consensus’ expectations may

Distn. Inc Chng (%): 0 0 0 cause ripples in the market. CMT being a proxy for interest-rate Consensus DPU (S cts): 11.0 11.0 11.1 investment, may then suffer from selling pressure. Other Broker Recs: B: 11 S: 0 H: 10 At A Glance Source of all data on this page: Company, DBS Bank, Issued Capital (m shrs) 3,545 Bloomberg Finance L.P Mkt. Cap (S$m/US$m) 6,931 / 4,998 Major Shareholders (%) Capitaland Limited 29.4 National Trades Union Congress 5.3 Blackrock 5.0 Free Float (%) 60.3 3m Avg. Daily Val (US$m) 12.9 ICB Industry : Real Estate / Real Estate Investment Trust

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Ed: JS / sa: AS, PY Company Guide CapitaLand Mall Trust

WHAT’S NEW

Surging supply may not be as threatening as you think

Channel check: clear objective on optimising returns: We Relevant supply in 2017: Singapore Post Centre and Triple recently met up with CMT’s new CEO, Mr Tony Tan, who was One Somerset. For the year 2017, Singapore Post Centre is an previously the CEO of CapitaLand Retail China Trust (CRCT) alteration of an existing project and hence it should not from July 2010 to March 2017. We remain optimistic on the capture new market share beyond its own catchment, which renewed focus Mr Tan has put in place. Mr Tan has expressed does not overlap with Bedok Mall; The price point of clear objectives to maintain the REIT’s DPU in the next couple TripleOne Somerset is likely to be quite different from Plaza of years despite headwinds in the retail market. We believe Sing or The Atrium @ Orchard. this is achievable due to the sticky patronage of CMT’s malls and forward thinking of concepts from his experience in Relevant supply in 2018: Paya Lebar Quarter and Bedok Mall. managing retail malls in China, which is a more dynamic and The key supply is concentrated in 2018 from three building - diverse market. the retail component of Paya Lebar Quarter, an integrated project, is understood to target the office crowd, whereas Surging supply may not be as threatening: Table 1 shows the Bedok Mall should continue to differentiate its brand mix and list of planned new retail supply in Singapore. Despite more position itself as a family-oriented shopping centre. than 440,000 sqm of new retail space coming in the next few Meanwhile, Changi Jewel will be located at the airport which years, we believe the relevant competition, from relative size is inconvenient for existing shoppers at Tampines Mall to and location perspectives, to CMT is only around 210,000 access. Moreover, given its mega size of 90,000 sqm, Changi sqm or less than 50%. Jewel will be a designation mall designed to attract transit travelers

Relevant supply in 2019: . Lastly in 2019, the only asset in CMT’s portfolio located in the north region, where Northpoint City is being built, is Sembawang Shopping Centre but its too small to move CMT’s bottom line.

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Table 1: Planned retail supply in Singapore

Percentage Total Retail Space Relev ant Project Name Region Dev eloper of Space (sqm) to CMT (sqm) Relav ance 2017 Hotel development Central Singapore Telecommunications Limited 190 HD 139 Central Ececil Pte Ltd 430 The Biltmore Central Granmil Holdings Pte Ltd 2,240 Singapore Post Centre Central Singapore Post Limited 25,000 F arrer Square Central RB Capital F arrer Hotel Pte Ltd/RB Capital F arrer Commercial Pte Ltd 610 DUO Tower/Galleria/Hotel Central Ophir-Rochor 3,700 Office/retail dev elopment Central F ragrance Grandeur Pte Ltd 11,170 Roy al Square At Nov ena Central Hoi Hup Sunway Nov ena Pte Ltd 5,210 ARC 380 Central Prominent Site Pte Ltd/Prominent Plaza Inv estments Pte Ltd 1,380 Marina One Central MS Commercial Pte Ltd/MS Residential 1 Pte Ltd/MS Residential 2 Pte Ltd 18,380 InterContinental & Robertson Quay Central RB Corp Pte Ltd 4,970 Oasis Terraces North East Housing & Development Board 8,980 Eon Shenton Central 70 Shenton Pte Ltd 480 V On Shenton Central UIC Inv estments (Properties) Pte Ltd 830 Tripleone Somerset Central Perennial (Somerset) Pte Ltd 11,370 Ibis/Novotel Central Oxley Gem Pte Ltd 5,460 J TC Space @ Tuas West J T C Corporat ion 4,970 Tanjong Pagar Centre Central TPC Commercial Pte Ltd/TPC Hotel Pte Ltd/Wallich Residence Pte Ltd 4,970 110,340 36,370 33.0% 2018 Changi J ewel East Changi Airport Group (S) Pte Ltd 90,000 City Gate North Bay front V entures Pte Ltd 9,450 Bayview Hotel Singapore Central Kah Motor Co Sdn Bhd 2,020 F rasers Tower Central F C Commercial Trustee Pte Ltd 2,800 Pay a Lebar Quarter Central Roma Central Pte Ltd/Milano Central Pte Ltd/V erona Central Pte Ltd 43,980 Superluck Project Central Superluck Properties Pte Ltd 7,410 Woods Square North Woodlands Square Pte Ltd 5,550 Northpoint City North North Gem Development Pte Ltd/FC North Gem Trustee Pte Ltd 39,100 Wisteria Mall North Northern Resi Pte Ltd/Northern Retail Pte Ltd 7,740 208,050 173,080 83.2% 2019 and beyond Anson Project Central Hub Sy nergy (S) Pte Ltd 160 Sentosa Project Central F ontaine Inv estment Pte Ltd 5,030 Qingjian Project West Qingjian Realty (BBR) Pte Ltd/Qingjian Realty (BBC) Pte Ltd 5,090 Clay more Project Central UOL Clay more Inv estment Pte Ltd 1,920 Keppel Projector Central Mansfield Dev elopments Pte Ltd (subsidiary of Keppel Land Ltd) 9,310 IMall Central Marine Parade Central Pte Ltd 6,920 The Poiz Residences/The Poiz Centre Central MCC Land (Potong Pasir) Pte Ltd 5,000 Funan Redevelopment Central HSBC Institutional Trust Serv ices (S) Limited 46,160 Northshore Plaza I North East Housing & Development Board 8,250 Yotel Central Yat Yuen Hong Co Ltd (a unit of Hong Fok Corp) 1,070 9 Penang Road Project Central Park Mall Pte Ltd 1,500 AFRO Asia Building Central Afro-Asia Shipping Co (Pte) Ltd 130 Centrium Square Central F eature Dev elopment Pte Ltd 4,010 Raffles Hotel and shopping arcade Central Beach Road Hotel (1886) Ltd 29,020 Office/retail dev elopment Central HSBC Institutional Trust Serv ices (Singapore) Limited 1,390 Office dev elopment Central Southernwood Property Pte Ltd 350 125,310 0.0% Total 443,700 209,450 47.2%

Source: URA, DBS Bank

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CRITICAL DATA POINTS TO WATCH Different drivers during different periods. CMT, being the first and Net Property Income and Margins (%) S$ m longest running REIT in Singapore, has gone through different 500 growth phases. We therefore broke down its historical performance 450 75.5% 400 into three periods below. 73.5% 350 300 71.5% 2003-2009: high growth period, somewhat correlated to rental 250 200 reversion. S-REIT index was led by CMT, as the stock had the 69.5% 150 heaviest weighting in the index. Rental reversion rates were 100 67.5% somewhat correlated to its price with a coefficient of 0.20. It was 50 0 65.5% also highly correlated with retail sales data (coefficient 0.65). 2015A 2016A 2017F 2018F 2019F

Interestingly, there was no correlation between CMT’s price and Net Property Income Net Property Income Margin %

Singapore’s treasury yield during this period. We believe these factors reflect that the investors at the time were growth seekers, Net Property Income and Margins (%) not yield hunters. 72% 131 70% 2010-2012: stabilisation period, correlation with interest rates 126 68% emerged. The stock started to attract more yield-hunting investors, 121 66% with correlation with 10Y treasury yields emerging (coefficient - 116 64% 0.22), while its correlation with rental reversion rates held steady as 111 in the previous period (2003-2009). 106 62%

2013-Present: low growth period, high correlation with interest 101 60% rates. As the Singapore economy slowed down and CMT’s assets 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 became more matured (witnessed by the clear downward trend in Net Property Income Net Property Income Margin % rental reversion in Chart 3), investors were increasingly buying the stock for its stable dividend distributions – its correlation coefficient Distribution Paid / Net Operating CF (x) with 10Y treasury yield intensified to -0.66 (or -0.82 since 2016). 1.2

1.1 Underappreciated so far in 2017. Despite having clear correlations 1.0 with interest rates and S-REITs, we believe CMT has been 0.9 underappreciated this year from both angles (see blue circles in 0.8 Chart 1 and Chart 2). We believe this was due to investors’ fear of 0.7 negative reversions and surging supply which we believe is an 0.6 overreaction. We have built in conservative reversion assumptions 0.5 in our model and believe that CMT may still to beat our forecasts. 0.4 2015A 2016A 2017F 2018F 2019F As for surging new supply, we believe the major assets coming on stream do not pose as direct competition to the catchment area of CMT’s malls. Therefore, we expect consensus to gradually converge Interest Cover (x) (x) to our view. Moreover, given the attractive valuation of the stock 4.65 (1.05x P/NAV), we believe the stock’s performance will soon catch 4.60 up with the other large caps. 4.55 4.50 Re-introducing growth through NPI margin improvement and 4.45 4.40 acquisitions. In the medium term, we believe CMT will look to re- 4.35 introduce growth engines to stimulate its portfolio earnings growth 4.30 4.25 in order to drive share price performance - the redevelopment of 4.20 Funan is such an initiative. For the existing portfolio, we believe 4.15 4.10 investors should focus on the top seven malls as they contribute 2015A 2016A 2017F 2018F 2019F c.70% of the portfolio’s net property income (NPI) (Table 3). In particular, keen attention should be paid to , IMM Source: Corporate, DBS Bank (low margin due to warehouse space) and as they have lower NPI margins. Inorganically, acquisitions of assets or portfolio of assets with turnaround potential could also drive distribution growth. However, such opportunities are now rare in Singapore.

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Table 2: Correlation Analysis T-Bond Rental S-REIT Retail Sales Reversion 2003-2009 0.03 0.20 0.96 0.65 2010-2012 Price (0.22) 0.17 0.89 0.13 2013-Present (0.66) (0.03) 0.71 (0.11) Correlation Trend Stronger Weaker Weaker Weaker

Source: Corporate, DBS Bank

Table 3: CMT’s NPI Contribution Breakdown

Gross Revenue NPI Aggregate Property NPI Margin NPI Contribution S$m S$m Contribution 1 (40%) 93.90 70.1 74.7% 12.4% 2 90.10 67.5 74.9% 11.9% 3 Bugis Junction 83.90 60.8 72.5% 10.7% 4 Tampines Mall 79.30 58.8 74.1% 10.4% 69.8% 5 IMM Building 80.70 54.1 67.0% 9.5% 6 Bedok Mall 58.10 42.7 73.5% 7.5% 7 Junction 8 58.80 41.8 71.1% 7.4% 8 The Atrium@Orchard 49.20 37.8 76.8% 6.7% 9 Shopper's Mall 44.30 30.8 69.5% 5.4% 10 Bugis + 32.60 22.3 68.4% 3.9% 11 Clarke Quay 36.50 21.3 58.4% 3.8% Other Assets 12&13 (Jcube & Sembawang 36.40 19.7 54.1% 3.5% Shopping Centre) 14 Bukit Panjang Plaza 28.40 18.3 64.4% 3.2% 15 Westgate (30%) 23.90 16.9 70.7% 3.0% Funan DigitaLife Mall 16 (under construction – full 11.40 3.8 33.3% 0.7% contribution from FY20F) Total 807.50 566.7 70.2%

Source: Corporate, DBS Bank

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Chart 1: Correlation of CMT’s Price vs S-REITs • CMT’s index weight dropped from 65% to around 10% since 2003. Even at the current level, CMT is still a good proxy of the index performance • The price has lagged behind the index in 2017 – catch-up is expected

Chart 2: Correlation of CMT’s Price vs 10Y SG Government Bond Yield (reverse) • As the economy slows down and earnings growth moderates, CMT’s price becomes increasingly more correlated with treasury yield due to stable distributions of the stock appealing yield- seeking investors • Investors have started to trade CMT as a bond proxy, espcially in the last couple of years • The price has lagged behind gonvernment bond performance in 2017 – catch- up is expected Chart 3: Correlation of CMT’s Price vs Rental Reversion • Reversion rates had been somewhat correlated to the price performance until the rates started trending down • During the first two phases, price was also positivley correlated with Singapore retail sales (Table 2) • Investors of CMT during the earlier time were investing in the growth of Singapore retail, and earnings upside of the stock • The correlation broke down in recent years when the focus of CMT shifted from growth to stabilisation Source: Corporate, Bloomberg Finance L.P., Thomson Reuters, DBS Bank

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Aggregate Leverage (%) Balance Sheet: Gearing to remain stable. CMT’s gearing ratio is forecast to remain fairly stable at 35-38% over FY17-18F. This is after the 35.0% placement of new units as consideration for the purchase of 30.0% Bedok Mall in 3Q15 and assuming 100% debt financing for the 25.0% redevelopment of Funan. Gearing level is within management's 20.0% comfortable level of between 35% and 40%. 15.0%

10.0% Cost of debt to remain stable. The average debt cost is 3.2%, 2015A 2016A 2017F 2018F 2019F which should remain stable in the immediate term. With interest rates on the rise, we have priced in a 25-bps increase in average interest cost once hedges are rolled over in the coming ROE (%) two years. 7.0%

6.0% Share Price Drivers: 5.0% Acquisitions to drive earnings. CMT has the right of first refusal 4.0% to acquire its Sponsor’s retail assets in Singapore. CapitaLand 3.0% has several retail assets in its portfolio which could be injected into the REIT, including Star Vista and the remaining 70% stake 2.0% in Westgate. 1.0% 0.0% 2015A 2016A 2017F 2018F 2019F Better-than-expected operational results. We believe that CMT’s portfolio will remain resilient despite headwinds. The Trust's ability to maintain a steady growth in top line while holding Distribution Yield (%) (%) occupancies will be a strong testament of the Manager's capability to stand out among its peers. 6.3

+2sd: 5.9% 5.8 IMM could be a positive surprise. With the completion of phase +1sd: 5.7% two, IMM is now the largest outlet mall in Singapore, with 85 5.3 Avg: 5.4% outlet stores. Feedback has been positive as the mall renewed -1sd: 5.1% 24.5% of the mall’s NLA in FY16 at a 4.5% reversion rate 4.8 -2sd: 4.9% which is highest among all properties. 4.3 2013 2014 2015 2016 2017

Key Risks: Downside risk to rental reversions. A worse-than-expected PB Band (x) slowdown in consumer sentiment and consumption outlook 1.4 (x) may result in lower reversionary potential (vs our 1.5% estimate) for leases expiring in FY17/18. Funan’s 1.3 redevelopment could be a catalyst in the medium term. Further 1.2 +2sd: 1.21x upside risk is from interest savings. The Trust has been +1sd: 1.15x 1.1 Avg: 1.1x proactive in extending its debt profile, locking in long-tenure -1sd: 1.04x 1.0 MTNs at lower rates than previously achieved. Further interest -2sd: 0.98x savings from refinancing associate debt would offer upside to 0.9 our estimates. 0.8 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

Company Background CapitaLand Mall Trust (CMT) is a real estate investment trust Source: Corporate, DBS Bank which owns and invests in retail properties in the suburban areas and downtown core of Singapore.

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Income Statement (S$m) FY Dec 2015A 2016A 2017F 2018F 2019F

Gross revenue 669 690 689 695 706 Property expenses (203) (210) (210) (214) (219) Net Property Income 466 480 479 481 487 Other Operating expenses (45.8) (49.0) (50.5) (51.1) (51.9) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Funan ceased Net Interest (Exp)/Inc (91.6) (95.0) (95.4) (96.4) (101) operations on 1 July Exceptional Gain/(Loss) 72.8 (0.6) 0.0 0.0 0.0 2016. Net Income 473 402 411 413 414 Earnings for FY17-18 Tax (0.6) (1.0) 0.0 0.0 0.0 expected to be Minority Interest 0.0 0.0 0.0 0.0 0.0 flattish Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Income After Tax 473 401 411 413 414 Total Return 580 469 411 413 414 Non-tax deductible Items (68.3) 23.5 0.0 3.98 4.02 Net Inc available for Dist. 405 424 411 417 418 Growth & Ratio Revenue Gth (%) 1.5 3.1 (0.1) 0.9 1.5

N Property Inc Gth (%) 4.0 2.9 (0.2) 0.5 1.2

Net Inc Gth (%) 3.5 (15.2) 2.5 0.4 0.4 Dist. Payout Ratio (%) 96.9 95.0 95.0 95.0 95.0 Net Prop Inc Margins (%) 69.7 69.5 69.5 69.2 69.0 Net Income Margins (%) 70.7 58.1 59.7 59.3 58.7 Dist to revenue (%) 60.5 61.5 59.7 59.9 59.3 Managers & Trustee’s fees 6.8 7.1 7.3 7.4 7.3 RO AE (%) 7.3 6.0 6.1 6.1 6.1 ROA (%) 4.7 3.9 3.9 3.9 3.8 ROCE (%) 4.2 4.2 4.2 4.1 4.1 Int. Cover (x) 4.6 4.5 4.5 4.5 4.3

Source: Company, DBS Bank

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Quarterly / Interim Income Statement (S$m) FY Dec 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017

Gross revenue 180 171 170 169 172 Property expenses (51.9) (54.8) (50.2) (53.2) (52.0) Net Property Income 128 116 120 116 120 Other Operating expenses (12.1) (12.6) (12.1) (12.3) (12.2) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc (23.4) (23.0) (24.2) (24.4) (23.5)

Exceptional Gain/(Loss) (0.6) 0.06 (0.2) 0.13 0.0 Net Income 111 98.2 104 88.3 103 Tax 0.0 0.0 0.0 (1.0) 0.0

Minority Interest 0.0 0.0 0.0 0.0 0.0 Net Income after Tax 111 98.2 104 87.3 103 Total Return 111 154 104 100 103

Non-tax deductible Items 1.31 1.80 (0.8) (6.3) 1.26 Net Inc available for Dist. 115 97.1 105 107 108 Growth & Ratio Revenue Gth (%) 0 (5) (1) 0 2 N Property Inc Gth (%) 2 (9) 3 (3) 3 Net Inc Gth (%) (38) (12) 6 (16) 19 Net Prop Inc Margin (%) 71.1 67.9 70.4 68.6 69.8 Dist. Payout Ratio (%) 84.0 99.9 93.8 95.2 90.0

Balance Sheet (S$m) FY Dec 2015A 2016A 2017F 2018F 2019F

Investment Properties 8,366 8,509 8,685 8,861 9,016 Other LT Assets 1,357 1,301 1,301 1,301 1,301 Cash & ST Invts 604 483 569 590 613 Inventory 0.0 0.0 0.0 0.0 0.0 Debtors 28.8 33.7 32.5 32.8 33.3 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 10,356 10,327 10,587 10,785 10,963

ST Debt 0.0 250 250 250 250 Creditor 200 215 279 281 285 Other Current Liab 3.56 1.17 0.0 0.0 0.0 LT Debt 3,312 3,038 3,214 3,390 3,545 Other LT Liabilities 147 130 130 130 130 Unit holders’ funds 6,693 6,692 6,715 6,733 6,752 Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Funds & Liabilities 10,356 10,327 10,587 10,785 10,963

Non-Cash Wkg. Capital (175) (183) (246) (248) (252) Net Cash/(Debt) (2,708) (2,805) (2,895) (3,050) (3,182) Healthy gearing level to debt Ratio fund potential acquisitions Current Ratio (x) 3.1 1.1 1.1 1.2 1.2 Quick Ratio (x) 3.1 1.1 1.1 1.2 1.2 Aggregate Leverage (%) 33.0 32.8 33.7 34.7 35.5 Z-Score (X) 5.6 5.6 5.4 5.3 5.2

Source: Company, DBS Bank

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Cash Flow Statement (S$m) FY Dec 2015A 2016A 2017F 2018F 2019F

Pre-Tax Income 473 402 411 413 414 Dep. & Amort. 1.05 1.11 0.0 0.0 0.0 Tax Paid 0.0 (3.6) (1.2) 0.0 0.0

Associates &JV Inc/(Loss) (71.8) (66.9) (78.0) (79.0) (80.8)

Chg in Wkg.Cap. 0.91 1.01 64.7 2.29 3.79

Other Operating CF 18.9 0.0 0.0 0.0 0.0 Net Operating CF 422 334 396 336 337 Net Invt in Properties (95.0) (76.0) (176) (176) (155)

Other Invts (net) 0.0 0.0 0.0 0.0 0.0 Funan’s earnings have Invts in Assoc. & JV (17.6) 0.0 0.0 0.0 0.0 been removed for Div from Assoc. & JVs 70.8 92.1 78.0 79.0 80.8 c.3.5 years from 2H16 Other Investing CF (422) 11.3 0.0 0.0 0.0 (expected opening in Net Investing CF (464) 27.3 (97.9) (96.9) (74.4) 4QFY19). After which, Distribution Paid (389) (394) (390) (396) (397) our new forecast for Chg in Gross Debt 10.2 (85.6) 176 176 155 Funan 2.0 has been New units issued 151 3.88 1.88 1.90 1.91 incorporated in the Other Financing CF (256) (105) 0.0 0.0 0.0 model Net Financing CF (484) (581) (213) (218) (240) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash (525) (220) 86.0 21.0 22.6

Operating CFPS (S cts) 12.0 9.39 9.36 9.41 9.40 Free CFPS (S cts) 9.35 7.27 6.22 4.51 5.14 Source: Company, DBS Bank

Target Price & Ratings History

S$ 12-mth 2.27 Date of Closing S.No. Target Rating Report Price Price 1: 01 J ul 16 2.17 2.20 HOLD 2.17 2 4 2: 25 J ul 16 2.15 2.23 HOLD 1 3: 22 Sep 16 2.12 2.25 BUY 2.07 3 4: 24 Oct 16 2.15 2.25 BUY 5: 23 J an 17 1.96 2.17 BUY 6 6: 04 Apr 17 1.97 2.17 BUY 1.97 7 7: 21 Apr 17 2.00 2.17 BUY 5 1.87

1.77 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17

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

Source: DBS Bank Analyst: Singapore Research Team Derek TAN

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DBS Bank 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: 20 Jun 2017 07:41:53 (SGT) Dissemination Date: 20 Jun 2017 08:49:24 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

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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 Singapore, 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. 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.

ASIAN INSIGHTS VICKERS SECURITIES Page 11 Company Guide CapitaLand Mall Trust

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''), DBSV HK or their subsidiaries and/or other affiliates have a proprietary position in CapitaLand Mall Trust recommended in this report as of 31 May 2017.

2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share capital in CapitaLand Mall Trust recommended in this report as of 31 May 2017.

Compensation for investment banking services: 4. DBS Bank Ltd, DBS HK, DBSVS, DBSV HK, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from CapitaLand Mall Trust as of 31 May 2017.

5. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for CapitaLand Mall Trust in the past 12 months, as of 31 May 2017.

6. 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: 7. 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. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which 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 and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, 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 a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong 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 Vickers Hong Kong Limited, a licensed corporation 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).

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at [email protected].

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

Malaysia This report is distributed in Malaysia 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. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. Kingdom 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 PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

ASIAN INSIGHTS VICKERS SECURITIES Page 13 Company Guide CapitaLand Mall Trust

United States This report was prepared by DBS Bank Ltd. 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.

DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E

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