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REIT MALAYSIA

March 18, 2013

Axis REIT
AXRB MK / AXSR.KL Current RM3.34 RM3.68 N/A 10.3%
Conviction| |

COMPANY NOTE
SHORT TERM (3 MTH) LONG TERM

Market Cap

Avg Daily Turnover

Free Float

Target Previous Target Up/downside

US$488.2m
RM1,525m

US$0.38m
RM1.16m

83.8%
989.7 m shares

Notes from the Field

Proxy for Iskandar's industrial boom


Axis REIT is the first listed Islamic industrial/office REIT globally. We like the stock as it offers exposure to the industrial property boom in Iskandar Malaysia. Management's proactive style means that growth will be driven by acquisitions, apart from organic enhancement plans.

Foong Wai Mun, CFA


T (60) 3 20849277 E waimun.foong@cimb.com

Company Visit Channel Check

Expert Opinion Customer Views

We initiate coverage with an Outperform and a target price based on its DDM value. Rerating catalysts are 1) further yield-accretive asset acquisitions, and 2) upside surprises to rental rates post asset enhancement initiatives.

Singapore faces land constraints and there is a big industrial component there. It's getting expensive to do business in Singapore and that makes Johor the default choice for companies to move across. Demand is going through the roof and availability is quite constrained. It's a big opportunity for us to look at some of the assets that are being built there.
Dato' Stewart LaBrooy, CEO

Malaysia's largest industrial REIT


Axis REIT is Malaysia's largest industrial REIT with a total portfolio size of RM1.5bn (31 assets). Its portfolio is occupied by quality tenants, comprising a mix of MNCs, local companies and GLCs.

serves as an attractive low-cost alternative for firms seeking to relocate out of Singapore. Axis AME IP plans to expand the development of its clean and green industrial parks under the brand names i-Park and SME City nationwide. We are positive as such plans will give more visibility to potential future asset injections for Axis REIT.

Proven acquisition track record


Axis REIT has a strong and proven acquisition track record. Since listing, its portfolio has grown more than fourfold from RM0.3bn to RM1.5bn in seven years. Currently, it has plans to buy nine assets worth a total RM660m, of which RM350m (23% increase) is expected to be added this year. Funding will come from the placement of 90.8m new units, of which approval has already been secured from the regulator. The REIT usually matches the timing of placement with new acquisitions to minimise dilution.

Proxy for boom in industrial property in Iskandar


We believe Axis REIT is a good proxy for the boom in industrial properties in Iskandar Malaysia as its promoter (Axis Group) is aggressively co-developing industrial parks and properties in Johor under the JV company Axis AME IP Sdn Bhd, specifically i-Park in Indahpura, Iskandar. Due to its location, i-Park

Price Close

Relative to FBMKLCI (RHS)

Financial Summary
126 123 120 117 114 111 108 105 102 99 96

3.5 3.3 3.1


2.9 2.7 3 2.5 2 2 1 1
Mar-12 Jun-12 Source: Bloomberg Sep-12 Dec-12

52-week share price range


3.34

2.62

3.36

3.68
Current Target

Gross Property Revenue (RMm) Net Property Income (RMm) Net Profit (RMm) Distributable Profit (RMm) Core EPS (RM) Core EPS Growth FD Core P/E (x) DPS (RM) Dividend Yield Asset Leverage BVPS (RM) P/BV (x) Recurring ROE % Change In DPS Estimates CIMB/consensus EPS (x)

Dec-11A 114.7 97.0 68.71 65.80 0.17 7.20% 20.17 0.17 5.01% 24.0% 2.08 1.61 8.09%

Dec-12A 133.1 112.5 78.04 84.81 0.17 3.52% 19.48 0.19 5.58% 34.5% 2.17 1.54 8.07%

Dec-13F 141.0 119.3 82.53 82.53 0.18 5.44% 18.47 0.18 5.41% 34.3% 2.20 1.52 8.29% 0.96

Dec-14F 146.0 123.7 86.80 86.80 0.19 5.17% 17.57 0.19 5.69% 34.3% 2.20 1.52 8.66% 0.99

Dec-15F 151.1 128.0 91.04 91.04 0.20 4.88% 16.75 0.20 5.97% 34.3% 2.20 1.52 9.08% 0.93

Vol m

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Axis REIT
March 18, 2013

PEER COMPARISON

Research Coverage
Ascendas REIT Axis REIT Cambridge Industrial Trust Mapletree Industrial Trust Mapletree Logistics Trust Bloomberg Code AREIT SP AXRB MK CREIT SP MINT SP MLT SP Market SG MY SG SG SG Recommendation OUTPERFORM OUTPERFORM OUTPERFORM NEUTRAL NEUTRAL Mkt Cap US$m 4,575 488 750 1,815 2,280 Price 2.55 3.34 0.77 1.38 1.17 Target Price 2.79 3.68 0.81 1.50 1.20 Upside 9.3% 10.3% 5.3% 8.4% 2.9%

Rolling P/BV (x)


1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling Dividend Yield


30% 25% 20% 15% 10% 5% 0% Jan-09 Jan-10 Ascendas REIT Cambridge Industrial Trust Mapletree Logistics Trust Jan-11 Jan-12 Jan-13

Ascendas REIT Cambridge Industrial Trust Mapletree Logistics Trust

Axis REIT Mapletree Industrial Trust

Axis REIT Mapletree Industrial Trust

Peer Aggregate: P/BV vs Asset Leverage


1.4 1.2 1.0 0.8 37.5% 36.8% 36.1% 35.4%

Peer Aggregate: Dividend Yield


14% 12% 10% 8%

0.6
0.4 0.2 0.0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

34.6%
33.9% 33.2% 32.5%

6%
4% 2% 0% Jan-09 Jan-10 Jan-11 Rolling Dividend Yield Jan-12 Jan-13

Rolling P/BV (x) (lhs)

Asset Leverage (rhs)

Valuation
Dividend Yield Dec-12 Dec-13 5.48% 5.54% 5.58% 5.41% 6.25% 6.56% 6.46% 6.62% 6.00% 6.14% Dec-14 5.94% 5.69% 6.86% 6.77% 6.23% Dec-12 1.31 1.54 1.18 1.36 1.29 P/BV (x) Dec-13 1.29 1.52 1.19 1.36 1.29 Dec-14 1.28 1.52 1.19 1.36 1.29 Dec-12 14.59 19.48 10.28 13.63 16.94 P/E (FD) (x) Dec-13 17.38 18.47 16.88 15.68 16.57 Dec-14 16.69 17.57 16.04 15.31 16.30

Ascendas REIT Axis REIT Cambridge Industrial Trust Mapletree Industrial Trust Mapletree Logistics Trust

Growth and Returns


DPS Growth Dec-12 Dec-13 3.9% 1.0% 11.3% -3.0% 12.9% 4.9% 24.4% 2.4% 7.5% 2.2% Dec-14 7.3% 5.2% 4.5% 2.3% 1.6% Asset Leverage Dec-12 Dec-13 33.1% 31.3% 34.5% 34.3% 37.8% 37.9% 38.8% 39.6% 36.1% 36.5% Dec-14 34.6% 34.3% 38.0% 39.7% 36.5% Fully Diluted EPS Growth Dec-12 Dec-13 Dec-14 -33.8% -16.1% 4.2% 3.5% 5.4% 5.2% -1.9% -39.1% 5.2% -28.6% -13.1% 2.4% 7.2% 2.2% 1.6%
SOURCE: CIMB, COMPANY REPORTS Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

Ascendas REIT Axis REIT Cambridge Industrial Trust Mapletree Industrial Trust Mapletree Logistics Trust

Axis REIT
March 18, 2013

BY THE NUMBERS

Share price info


Share px perf. (%) Relative Absolute Major shareholders Employees Provident Fund (EPF) Tew Peng Hwee 1M 7.1 7.1 3M 12.8 11.3 12M 20.6 23.7 % held 10.8 6.0

P/BV vs Asset Leverage


1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 40% 36% 31% 27% 22% 18% 13% 9% 4% 0%

Dividend Yield vs Net DPS


0.20 0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 6.0% 5.4% 4.8% 4.2% 3.6% 3.0% 2.4% 1.8% 1.2% 0.6% 0.0%

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Rolling P/BV (x) (lhs) Asset Leverage (rhs)

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 DPS (lhs) Dividend Yield (rhs)

Profit & Loss

Only factored in organic growth from rental reversions. Have not included contributions from any new acquisitions. Axis REIT is planning to buy RM350m in properties this year

(RMm) Rental Revenues Other Revenues Gross Property Revenue Total Property Expenses Net Property Income General And Admin. Expenses Management Fees Trustee's Fees Other Operating Expenses EBITDA Depreciation And Amortisation EBIT Net Interest Income Associates' Profit Other Income/(Expenses) Exceptional Items Pre-tax Profit Taxation Minority Interests Preferred Dividends Net Profit Distributable Profit

Dec-11A 114.7 0.0 114.7 (17.8) 97.0 0.0 (7.7) (0.4) (2.1) 86.7 (0.0) 86.7 (21.5) 3.4 68.7 0.1

Dec-12A 133.1 0.0 133.1 (20.5) 112.5 0.0 (9.6) (0.5) (7.0) 95.4 (0.1) 95.4 (20.9) 3.6 78.0 0.0

Dec-13F 141.0 0.0 141.0 (21.7) 119.3 0.0 (10.0) (0.5) (2.8) 105.9 (0.1) 105.9 (23.3) 0.0 82.5 0.0

Dec-14F 146.0 0.0 146.0 (22.3) 123.7 0.0 (10.0) (0.5) (2.9) 110.2 (0.1) 110.1 (23.3) 0.0 86.8 0.0

Dec-15F 151.1 0.0 151.1 (23.1) 128.0 0.0 (10.0) (0.5) (3.0) 114.4 (0.1) 114.4 (23.3) 0.0 91.0 0.0

68.7 65.8

78.0 84.8

82.5 82.5

86.8 86.8

91.0 91.0

Cash Flow
(RMm) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Others Cashflow From Operations Capex Net Investments And Sale Of FA Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Cash Interest And Others Cash Flow From Financing Total Cash Generated Free Cashflow To Firm Free Cashflow To Equity Dec-11A 68.7 21.5 Dec-12A 78.0 21.0 Dec-13F 82.5 23.4 Dec-14F 86.8 23.4 Dec-15F 91.0 23.4

Expecting 100% dividend pay-out

0.2 90.3 (13.2) (68.1) (0.1) (81.4) (32.7) 184.2 (72.8) (96.6) (17.9) (9.1) 10.3 (45.3)

(3.1) 95.9 (18.1) (200.1) (0.9) (219.1) 237.6 7.2 (65.5) (20.9) 158.4 35.2 (121.8) 93.5

12.5 118.5 (15.0) 0.0 0.0 (15.0) 0.0 0.0 (82.5) (23.3) (105.9) (2.4) 104.8 80.1

(0.1) 110.1 (15.0) 0.0 0.0 (15.0) 0.0 0.0 (86.8) (23.3) (110.1) (15.0) 96.5 71.8

(0.1) 114.4 (15.0) 0.0 0.0 (15.0) 0.0 0.0 (91.0) (23.3) (114.4) (15.0) 100.7 76.0

SOURCE: CIMB, COMPANY REPORTS

Axis REIT
March 18, 2013

BY THE NUMBERS

Balance Sheet
(RMm) Total Investments Intangible Assets Other Long-term Assets Total Non-current Assets Total Cash And Equivalents Inventories Trade Debtors Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Long-term Borrowings Other Long-term Liabilities Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-11A 1,276 0 0 1,276 7 15 0 22 16 162 0 178 149 27 176 944 Dec-12A 1,520 0 1 1,520 43 27 0 69 24 341 0 365 208 27 235 990 Dec-13F 1,520 0 16 1,535 40 27 0 67 24 341 0 365 208 27 235 1,002 Dec-14F 1,520 0 31 1,550 25 27 0 52 24 341 0 365 208 27 235 1,002 Dec-15F 1,520 0 46 1,565 10 27 0 37 24 341 0 365 208 27 235 1,002

Axis REIT is negotiating to buy RM661m worth of assets

944

990

1,002

1,002

1,002

Key Ratios
Gross Property Revenue Growth NPI Growth Net Property Income Margin DPS Growth Gross Interest Cover Effective Tax Rate Net Dividend Payout Ratio Current Ratio Quick Ratio Cash Ratio ROIC (%) Return On Average Assets Dec-11A 28.6% 27.1% 84.5% 4.6% 3.79 0% 111% 0.12 0.12 0.04 803% 5.48% Dec-12A 16.0% 16.1% 84.6% 11.3% 4.29 0% 109% 0.19 0.19 0.12 (8782%) 5.40% Dec-13F 6.0% 6.0% 84.6% (3.0%) 4.29 0% 100% 0.18 0.18 0.11 3318% 5.17% Dec-14F 3.5% 3.6% 84.7% 5.2% 4.46 0% 100% 0.14 0.14 0.07 605% 5.42% Dec-15F 3.5% 3.5% 84.7% 4.9% 4.63 0% 100% 0.10 0.10 0.03 345% 5.68%

Key Drivers
Rental Rate Psf Pm (RM) Acq. (less development) (US$m) RevPAR (RM) Net Lettable Area (NLA) ('000 Sf) Occupancy (%) Assets Under Management (m) (RM) Funds Under Management (m) (RM) Dec-11A N/A N/A N/A 4,450 97.2% N/A N/A Dec-12A N/A N/A N/A 5,372 96.2% N/A N/A Dec-13F N/A N/A N/A 5,372 97.0% N/A N/A Dec-14F N/A N/A N/A 5,372 97.0% N/A N/A Dec-15F N/A N/A N/A 5,372 97.0% N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Axis REIT
March 18, 2013

Table of Contents
1. BACKGROUND 2. OUTLOOK 3. RISKS 4. VALUATION AND RECOMMENDATION p.5 p.10 p.15 p.15

Proxy for Iskandar's industrial boom


1. BACKGROUND 1.1 Malaysia's first Islamic office/industrial REIT
Axis REIT is the first listed Islamic office/industrial REIT globally. It was also the first REIT to list on Bursa Malaysia Securities Berhad, going public on 3 Aug 2005. On 11 Dec 2008, Axis REIT was reclassified as an Islamic REIT, which means that it can now appeal to Shariah funds. It is an actively growing REIT as it started with only a modest portfolio of five properties in 2005 and this has now grown to 31 properties. Over seven years, assets under management (AUM) has risen from RM300m to RM1.59bn, with a total NLA of 5.5m sq ft.
Figure 1: Portfolio at a glance
Portfolio size Total area under management Number of tenants Occupancy (%) 2012 Gross Income 2012 Net Property Income (NPI) Average Rental Rate (ARR): - Office properties - Office industrial properties - Across the portfolio RM 4.20psf RM 2.30psf RM 2.00psf
SOURCES: CIMB, COMPANY REPORTS

31 properties 5,463,599 sq ft 135 tenants 96.21% RM132.7m RM112.5m

1.2 Properties mostly located in Klang Valley, Johor and Penang


Axis REIT's 31 properties are situated in good locations. 37% of its properties are located in Petaling Jaya, 18% in Johor and 14% in Penang. The bulk (43%) of its properties is warehouses and other logistics facilities.
Figure 2: Breakdown of portfolio (by property type)
7% 8%

11%

43%

31%

Warehouse logistics

Office/industrial

Office

Light industrial

Warehouse retail

SOURCES: CIMB, COMPANY REPORTS

Axis REIT
March 18, 2013

Figure 3: Breakdown of properties (by geographical location)


3% 2% 5%
8%

37%

13%

14% 18% Petaling Jaya Johor Penang Shah Alam Klang Nilai Kedah Cyberjaya

SOURCES: CIMB, COMPANY REPORTS

Figure 4: Occupancy rates as at 31 Dec 2012

SOURCES: CIMB, COMPANY REPORTS

Axis REIT
March 18, 2013

Figure 5: Portfolio details


No. Name 2012 NLA (sq ft) Occupancy Major tenants Gross rate as at Revenue Dec 2012 (RM m) (%) 11.0 182,859 100.0% Fujifilm (M) Sdn Bhd American International Assurance Berhad Sportathlon (M) Sdn Bhd Phillips Malaysia Sdn Bhd DHL Asia Pacific Shared Services Sdn Bhd 2 Crystal Plaza 10.3 205,102 100.0% Tenaga Nasional Bhd Scope International (M) Sdn Bhd DHL Asia Pacific Shared Services Sdn Bhd Asiaworks Training Sdn Bhd 3 Axis Business Park 11.2 341,467 100.0% Fuji Xerox Asia Pacific Pte Ltd Invida (Singapore) Pte Ltd Hitachi eBworx Sdn Bhd Honeywell Engineering Sdn Bhd Johnson and Johnson 4 Infinite Centre 3.7 143,681 95.6% UTAR Konica Minolta Business Solutions (M) Sdn Bhd FJ Benjamin (M) Sdn Bhd C Melchers Gmbh & Co 5 Axis Plaza 3.1 117,450 89.3% Ricoh (Malaysia) Sdn Bhd CSE Automotive Technologies Sdn Bhd Electrolux Commercial Products Sdn Bhd EMS Asia Group Sdn Bhd 6 Wisma Kemajuan 5.6 199,008 88.0% Goucera Marketing Sdn Bhd Hong Leong Marketing Sdn Bhd Fossil Time Malaysia Sdn Bhd Silverlake Infrastructure & Logistics Sdn Bhd 7 8 9 10 11 12 Axis Business Campus (formerly known as Wisma Bintang) Axis Shah Alam DC1 Giant Hypermarket FCI Senai Fontera HQ (formerly known as Nestle Office and Warehouse) Quattro West 1.9 1.7 3.2 1.5 0.9 5.0 172,967 110,406 138,000 136,619 15.7% 100.0% 100.0% 100.0% Tenaga Nasional Bhd Upeca Aerotech Sdn Bhd GCH Retail (Malaysia) Sdn Bhd FCI Connectors Malaysia Sdn Bhd Fonterra Brands (M) Sdn Bhd Mangosteen Beverages (M) Sdn Bhd Kenanga Investment Bank Bhd Vads Business Process Sdn Bhd 13 14 15 16 17 Strateq Data Centre (formerly known as Strateq HQ) BMW Centre Niro Warehouse Delfi Warehouse Axis Vista 4.4 3.4 1.7 1.3 3.0 104,196 161,474 167,193 130,743 130,743 100.0% 100.0% 100.0% 100.0% 100.0% Strateq Data Centre Sdn Bhd (formerly known as Kompakar CRC Sdn Bhd BMW Asia Technology Centre Sdn Bhd Niro Ceramic (M) Sdn Bhd Delfi Cocoa (Malaysia) Sdn Bhd Skyhutch Line Sdn Bhd Melco Sales Malaysia Sdn Bhd Samsung Malaysia Electronics (SME) Sdn Bhd 18 19 20 21 22 23 24 Axis Steel Centre Bukit Raja Distribution Centre 7.1 6.0 366,839 456,435 106,092 233,579 100.0% 100.0% 100.0% 100.0% Konsortium Logistik Berhad LF Logistics (M) Sdn Bhd LF Logistics (M) Sdn Bhd LF Logistics (M) Sdn Bhd Tesco Stores (M) Sdn Bhd Konsortium Logistik Bhd Packet One Networks (M) Sdn Bhd Fresenius Kabi Malaysia Sdn Bhd Fresenius Medical Care Malaysia Sdn Bhd Sigma Elevator (M) Sdn Bhd 25 26 D8 Logistics Warehouse Axis Eureka 3.3 5.9 171,000 116,883 100.0% 91.6% Nippon Express (M) Sdn Bhd Scicom (MSC) Berhad Multimedia Development Corporation Sdn Bhd Wolters Kluwer Enterprise Services Partners Sdn Bhd 27 28 29 Bayan Lepas Distribution Centre 4.4 205,151 395,225 291,642 100.0% 100.0% 100.0% DHL Properties (M) Sdn Bhd Schenker Logistics (M) Sdn Bhd Emerson Process Management Manufacturing (M) Sdn Bhd K Plastic Industries Sdn Bhd Dataprep Holdings Sdn Bhd Ban Leong Technologies Sdn Bhd Tenaga Nasional Berhad Ingram Micro (M) Sdn Bhd 31 Total The Annex 0.2 131.1 45,400 100.0% 5,371,526 Allrounder Indoor Soccer Sdn Bhd Chong Tin Sam 1,519.5 1,231.5 15.0 12.0 1/10/2012 49.5 63.0 27.8 48.5 59.0 26.5 17/1/2012 15/2/2012 30/8/2012 31.6 53.7 30.0 51.3 1/3/2011 18/4/2011 75.4 90.0 19.6 7.7 87.0 92.0 52.0 65.0 71.8 17.4 6.9 75.6 85.0 49.0 20/10/2009 14/12/2009 5/3/2010 5/3/2010 1/10/2010 15/10/2010 15/11/2010 52.0 29.0 16.2 14.0 36.0 37.0 27.0 14.5 12.5 32.0 25/1/2008 30/4/2008 30/4/2008 4/8/2008 9/12/2008 48.0 21.5 39.6 15.0 13.5 53.0 32.5 18.5 38.0 12.3 7.2 39.8 30/6/2006 1/8/2007 7/7/2007 15/11/2007 16/11/2007 30/11/2007 55.3 29.0 16/12/2005 31.0 22.5 3/8/2005 38.0 25.5 3/8/2005 109.0 84.6 3/8/2005 103.1 56.4 3/8/2005 Book Value (RM m) 108.0 Purchase Purchase price (RM m) date

Menara Axis

71.4

3/8/2005

36,310 85.0% 104 100.0%

Seberang Prai Logistic Warehouse 1 1.5 Seberang Prai Logistic Warehouse 2 0.6 Tesco Bukit Indah Axis PDI Centre Axis Technology Centre 6.2 8.6 4.9

41,893 100.0% 58,009 100.0% 170,730 98.1%

Seberang Prai Logistic Warehouse 3 7.0 Emerson Industrial Facility Nilai 0.9

30

Wisma Academy Parcel

1.9

234,326

100.0%

73.0

73.0

1/10/2012

SOURCES: CIMB, COMPANY REPORTS

Axis REIT
March 18, 2013

Figure 6: REIT structure

SOURCES: CIMB, COMPANY REPORTS

1.3 Quality tenants


Axis REIT's portfolio is occupied by quality tenants, comprising a mix of multi-national companies (MNCs), local companies as well as government-linked companies (GLCs). The top ten tenants made up about 48.9% of total revenue in 2012. Portfolio risk is well-managed as the tenants are in diverse industries. Thus the REIT is not exposed to any particular sector. There is also a good mix of single-tenanted properties (usually longer-term leases) and multi-tenanted properties (usually shorter-term leases). The single-tenanted properties provide a steady, long-term revenue stream as they have pre-agreed rental increases over the fixed period of the lease whereas the multi-tenanted properties give the REIT an opportunity to leverage on the prevailing market rates for exposure to positive rental reversions in the market. All the single-tenanted properties in the portfolio are occupied by high-quality tenants who have signed long-term tenancies and, thus, have much lower maintenance costs as a percentage of revenue.

Axis REIT
March 18, 2013

Figure 7: Top 10 tenants


1 2 3 4 5 6 7 8 9 10 Konsortium Logistik LF Logistics (M) Sdn Bhd Schenker Logistics (M) Sdn Bhd Tenaga Nasional Bhd Tesco Stores (M) Sdn Bhd Fuji Xerox Asia Pacific Pte Ltd Strateq Data Center Sdn Bhd DHL Properties (M) Sdn Bhd BMW Asia Technology Centre Sdn Bhd Scope International (M) Sdn Bhd
SOURCES: CIMB, COMPANY REPORTS

Figure 8: Breakdown of tenants (single-tenant vs. multi-tenant)

42%

Multi-tenant

Single tenant

SOURCES: CIMB, COMPANY REPORTS

1.4 Lease expiry profile


The weighted average lease expiry (WALE) for the entire portfolio is 4.43 years (by NLA) and 4.17 years (by rental income). The long expiry period of its leases suggests that Axis REIT's earnings are more resilient compared to other REITs. The lease expiry profile is quite balanced with 22%, 29% and 17% of rental revenue expiring in 2013, 2014 and 2015 respectively. There is a higher percentage of leases expiring in 2014 as a few single-tenant leases are due for renewal but the REIT is confident about renewing them as these properties are built to suit the tenant's operations.

Axis REIT
March 18, 2013

Figure 9: Lease expiry profile


Property % of NLA Menara Axis Crystal Plaza Axis Business Park Infinite Centre Axis Plaza Wisma Kemajuan Axis Business Campus Axis Vista Quattro West Axis Technology Centre Axis Eureka Emerson Industrial Facility Nilai Wisma Academy Parcel The Annex Axis Steel Centre Niro Warehouse Seberang Prai Logistic Warehouse 3 Fontera HQ Axis PDI Centre Axis Shah Alam DC1 FCI Senai Delfi Warehouse BMW Centre PTP Total 1.4% 2.2% 1.6% 1.8% 1.9% 1.7% 0.5% 1.1% 1.1% 1.7% 0.3% 0.4% 1.1% 0.5% 17.2% 2013 % of Rental income/month 2.6% 4.0% 1.9% 1.8% 2.0% 2.0% 0.7% 1.3% 2.1% 1.5% 0.5% 0.1% 1.3% 0.4% 22.1% % of NLA 1.0% 0.2% 4.1% 0.5% 0.2% 1.1% 0.6% 0.0% 1.1% 0.0% 1.1% 0.3% 6.7% 3.1% 7.2% 0.0% 3.0% 30.2% 2014 % of Rental income/month 2.2% 0.3% 5.1% 0.5% 0.3% 0.9% 1.2% 0.0% 3.0% 0.0% 1.3% 0.3% 5.0% 1.2% 4.9% 0.0% 2.4% 28.7% 14.2% % of NLA 1.4% 0.3% 0.2% 0.0% 0.8% 0.0% 0.2% 1.4% 0.0% 0.0% 2.1% 1.1% 2.0% 2.5% 2.4% 17.0% 2015 % of Rental income/month 2.3% 0.3% 0.2% 0.0% 0.8% 0.0% 0.3% 1.5% 0.0% 0.0% 2.1% 6.1% 1.2% 1.2% 1.0%

SOURCES: CIMB, COMPANY REPORTS

Figure 10: SWOT analysis


Strengths Status as an Islamic REIT will help to attract Shariah funds . Proven acquisition track record. Since listing, management has been aggressively buying yieldaccretive assets to grow its asset portfolio. Boasts of quality tenants including some of the best multi -national companies, local companies and GLCs. Experienced management team . Actively recycling unitholders ' capital to seek better growth opportunities. Opportunities Benefits from the trend of Singapore companies re-locating their business to a cheaper cost alternative like Johor. RM661m worth of properties are currently under negotiation to be injected into the REIT. Conversion of its commercial assets to MSC compliant buildings which could help it to fetch higher rentals. Opportunities for organic growth through re-development of some of its older buildings in Petaling Jaya. Future upgrading works of its assets could include a Green agenda in order to fetch a premium . Refinancing of existing loans with Sukuk bond could help lower financing cost . Shortage of well-developed industrial properties that cater to large multi-national companies (MNCs). Weaknesses Some single-tenanted properties are locked under long-term tenancies, which means lower chance of marking to market the rental rates. Threats May be affected by the introduction of new or changes in existing laws and REIT code regulations in Malaysia. Weak macro-economy hampering industrial activities.
SOURCES: CIMB, COMPANY REPORTS

10

Axis REIT
March 18, 2013

2. OUTLOOK 2.1 Proxy for Iskandar's industrial boom


We believe Axis REIT is also a good proxy for the boom in industrial properties in Iskandar Malaysia as its promoter (Axis Group) is aggressively co-developing industrial parks and properties in Johor. The promoter of Axis REIT (Axis Group) and Johor-based AME Group are jointly developing a 230-acre (93.08ha) industrial city in the flagship Zone E of Iskandar Malaysia in Johor. The project has a total GDV of RM600m and is a 50:50 joint venture (JV) between Axis Group and AME Groups AME Construction Sdn Bhd. The development will be under the brands i-PARK and SME City. The i-PARK brand will house multinationals while SME City is being developed while keeping in mind the small and medium enterprises. The construction is expected to be completed by 2014. Boasting excellent connectivity, i-Park@Indahpura is strategically located in the Indahpura township and is easily accessible via a network of prominent highways and roads. i-Park guarantees easier and faster accessibility through the New Indahpura Interchange, the Second Link Expressway Interchange and the North-South Highway. i-Park is only just 10 minutes away from the Senai International Airport and 20 minutes from the Second Link CIQ complex. Additionally, i-Park provides swift access to important locations, such as the Port of Tanjung Pelepas (PTP), the MSC Cyberport and the MSC Cybercity, which is within Indahpura. As the first Malaysian cybercity, the Cybercity is designed to have comprehensive infrastructure that would be an enabling environment to nurture technopreneurs and grow businesses. The main focus of the i-PARK is to provide multinational companies, manufacturers, logistics providers, food manufacturers and hi-tech industries a place to set up their businesses as the industrial park is designed to international standards. These industries will then act as a catalyst for the creation of jobs in new small and medium industries while driving demand for housing and commercial spaces in Indahpura. The park has a secure gated and guarded environment with perimeter fencing and closed-circuit camera surveillance. A unique aspect of the i-PARK concept is the option for investors to choose a "build to sell" or "build to lease" strategy. Due to its location, the development also serves as an attractive low-cost alternative to firms in nearby Singapore. According to the joint venture company (Axis AME IP), some business associations from Singapore have already visited the company to express their interest in relocating to the industrial city because the cost of doing business is much lower in Johor. With Singapore companies looking to relocate their operations out of Singapore to a lower-cost substitute, we believe there will be demand for industrial hubs in Johor and other parts of Malaysia. Axis AME IP plans to expand the development of its clean and green industrial parks under the brand names i-Park and SME City nationwide after Johor. We are positive as such plans will give more visibility to potential future asset injections for Axis REIT.

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Figure 11: Location of i-Park and SME City

SOURCES: CIMB, COMPANY REPORTS

2.2 Pipeline assets


A total of RM661m worth of properties are currently under negotiation to be injected into the REIT. Out of these RM661m properties, Axis REIT plans to acquire RM350m of them this year. Axis REIT will continue to use the model of raising equity (via placements) to pare down borrowings and then subsequently leverage up for future acquisitions. Axis REIT will be focussing on: 1) Properties that house Shariah-compliant businesses. 2) Logistics facilities with long leases from grade A tenants. 3) Primary locations, namely Petaling Jaya, Klang Valley, Johor and Penang.
Figure 11: Summary of target acquisitions
No. 1 2 3 4 5 6 7 8 9 What? Newly-built warehouse Factory 3 warehouses Great Avenue warehouses Logistics warehouse Factory Hypermarket Distribution centre (DC) Logistics warehouse Location North Port, Port Klang SLiC, Johor Shah Alam Shah Alam Shah Alam Senai, Johor Baru Melaka Sepang PTP, Johor
SOURCES: CIMB, COMPANY REPORTS

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Figure 12: Assets under management (sq ft)


6,000,000 5,463,599 5,000,000 4,288,054 4,000,000 3,679,796 2,858,121 2,175,522 2,000,000 1,186,052 1,000,000 1,656,943 4,449,580

3,000,000

2005 2006 2007 2008 2009 2010 2011 2012

SOURCES: CIMB, COMPANY REPORTS

2.3 Asset enhancement initiatives (AEI)


Axis REIT is constantly planning for AEI activities to upgrade and enhance the properties under its portfolio so as to command higher rental rates. The company is also looking at the possibility of converting some of its commercial assets into MSC-compliant buildings, which would help it fetch higher rentals. There could also be re-development opportunities for some of its older buildings in Section 13, Petaling Jaya. In future, upgrading works involving its assets could include a green agenda as a way of fetching premiums. In 2013, the REIT plans to reposition the existing Wisma Bintang site into Axis Business Campus (ABC). The plan is to tap the growing demand for business park-styled commercial/industrial facilities, which are becoming rare in the Petaling Jaya vicinity but in high demand. Axis REIT expects a significant increase in rentals at the campus upon completion of this rebranding exercise. NLA will rise by 29% to 223k sq ft and 140 additional car parks will be created. The plan is to complete the West Block and the South Block by Apr and May 2013, respectively, while the new six-storey East Block is targeted to complete by July 2014.
Figure 13: Current building complex at Axis Business Campus (formerly known as Wisma Bintang)

SOURCES: CIMB, COMPANY REPORTS

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Figure 14: Artist impression of exterior of proposed Axis Business Campus

Figure 15: Artist impression of interior of proposed Axis Business Campus

SOURCES: CIMB, COMPANY REPORTS

SOURCES: CIMB, COMPANY REPORTS

2.4 Achieved 10% rental reversion in 2012


We believe organic growth could also come from rental reversions as and when tenancies expire. In 2012, Axis REIT successfully renewed 508k sq ft (9.3% of NLA) at a 10% higher rental rate.
Figure 16: Rental reversions in 2012
Property Menara Axis Crystal Plaza Axis Business Park Infinite Centre Axis Plaza Wisma Kemajuan FCI Senai Axis Technology Centre Axis Eureka Delfi Warehouse Quattro West Space renegotiated (sq ft) 12,433 34,142 14,200 50,192 14,575 136,619 75,165 23,283 130,743 16,489 % rental reversion 7.1% 10.6% 3.6% 3.1% 0.1% 6.5% 25.0% 8.5% 3.0% 20.1% 11.3%
SOURCES: CIMB, COMPANY REPORTS

2.5 Actively recycling unitholders' capital to seek better growth opportunities


We believe Axis REIT is active and savvy about recycling its capital by disposing of matured and underperfoming assets in return for higher-growth assets. This is positive as it enables unitholders to benefit from capital gains of the portfolio from time to time. In addition, the investment recovered can be redeployed in new properties with higher growth potential, hence maximising the unitholders' capital. Properties disposed of after five years also do not attract any real property gains tax (RPGT), which is positive. Dividends from these capital gains are exempted from the withholding tax. Since listing, Axis REIT has disposed of two properties. Last year, Axis REIT decided to part ways with Kayangan Depot, a 3-storey office-cum-warehouse complex located in Shah Alam. It was purchased for RM16.1m in June 2006 but disposed of on Dec 2012 for RM23.6m, netting the REIT a capital gain of RM5.93m (distributed to unitholders by way of a tax-exempt DPU of 1.30 sen/unit) after taking into account other incidental costs. In disposing of the
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asset, management believes that it has optimised the potential of the property after owning it for 6 years and given that there is limited upside for future rental growth. In 2011, Axis REIT sold Axis North Port Logistics Centre 1 for RM14.5m and netted a gain on disposal of RM0.79m, which was distributed to unitholders.
Figure 17: Disposal of Kayangan Depot

SOURCES: CIMB, COMPANY REPORTS

3. RISKS 3.1 Macro weakness causing slowdown in industrial activities


Axis REIT's portfolio is made up mostly of industrial properties, which are subjected to macro risks that could stem from a slowdown in industrial activities. However, this is mitigated by the fact that the company has locked in long-term leases with quality tenants. The weighted average lease expiry (WALE) for the entire portfolio is 4.43 years (by NLA) and 4.17 years (by rental income). The long expiry period of its leases suggest that Axis REIT's earnings are more resilient compared to other REITs.

3.2 REITs could underperform in a bullish market


Should there be an increase in investor risk appetite, REITs in general, including Axis REIT, may not perform as well.

4. VALUATION AND RECOMMENDATION 4.1 Start coverage with Outperform


We begin coverage on Axis REIT with an Outperform call and a DDM-based target price of RM3.68. Our target price implies a total return of 10%. We believe that our target price is justified by Axis REIT's status as the largest industrial REIT in Malaysia by market cap. The company also offers investors exposure to the thriving industrial activity currently seen in Iskandar Malaysia as more and more Singapore companies relocate their operations to a lower-cost alternative, which also solves the problem of space constraints in Singapore. Potential rerating catalysts are 1) further yield-accretive acquisitions, and 2) upward rent reversions after enhancements made to existing assets.

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Figure 18: CIMB REIT Overview


Last reported asset leverage 40.1% 37.5% 25.5% 30.4% 33.4% 31.5% 32.8% 31.7% 38.6% 35.9% 37.8% 37.6% 35.1% 29.2% 30.1% 42.9% 38.3% 35.1% 36.7% 30.1% 30.3% 40.8% 34.5% 32.9% 32.9% 34.5% Last reported asset leverage 27.9% 24.7% 37.6% 16.7% 26.7% 34.5% 34.5% 28.3% 33.5% Last stated NAV 1.35 0.77 1.60 0.93 Price / Stated NAV 1.00 1.38 1.32 1.31 1.25 1.10 1.36 1.38 1.18 1.30 1.35 1.19 1.29 0.91 0.98 1.02 0.83 0.93 1.29 1.39 0.93 1.23 1.21 1.52 1.52 1.20 $ $ Target Price (DDMbased) 1.39 NA 2.10 NA Total return (Prospective price upside + 2013 yield) 9.3% 5.0%

SREIT Hospitality Ascott Residence Trust Ascendas Hospitality Trust CDL Hospitality Trust Far East Hospitality Trust Industrial AIMS AMP Ascendas Reit Cache Logistics Trust Cambridge Industrial Trust Mapletree Logistics Trust Mapletree Industrial Trust Sabana Shariah Office Frasers Commercial Trust CapitaCommercial Trust Keppel REIT Suntec REIT Retail CapitaMall Trust Frasers Centrepoint Trust Starhill Global REIT Mapletree Commercial Trust Healthcare Parkway Life REIT

Bloomberg Ticker ART SP ASHT SP CDREIT SP FEHT SP Simple Average AAREIT SP AREIT SP CACHE SP CREIT SP MLT SP MINT SP SSREIT SP Simple Average FCOT SP CCT SP KREIT SP SUN SP Simple Average CT SP FCT SP SGREIT SP MCT SP Simple Average

Price as of Mkt Cap 15 Mar 13 (LC $m) $1.35 $1.06 $2.11 $1.22 $1,701 $853 $2,047 $1,960

Rec. N NR N NR

2013 Yield 6.4% 6.5% 5.6% 5.0% 5.9% 7.3% 5.5% 6.6% 6.6% 6.1% 6.6% 7.6% 6.5% 5.9% 5.1% 5.9% 5.4% 5.6% 4.8% 5.0% 5.7% 5.0% 5.1% 4.6% 4.6% 5.8%

2014 Yield 7.0% 7.2% 5.8% 5.3% 6.3% 7.5% 5.9% 6.9% 6.9% 6.2% 6.8% 7.4% 6.7% 6.7% 5.0% 6.0% 5.6% 5.8% 5.2% 5.1% 5.9% 5.2% 5.3% 5.0% 5.0% 6.1%

$1.59 $2.55 $1.32 $0.77 $1.17 $1.38 $1.27

$712 $5,709 $928 $936 $2,845 $2,265 $815

1.44 1.88 0.96 0.65 0.90 1.02 1.07

$ $ $ $ $

NA 2.79 1.36 0.81 1.20 1.50 NA

NR O O O N N NR

14.8% 9.7% 11.8% 9.1% 15.0%

$1.36 $1.59 $1.33 $1.72

$891 $4,509 $3,560 $3,863

1.50 1.62 1.30 2.07

$ $ $ $

1.55 1.69 1.33 1.80

O U N N

19.6% 11.9% 6.1% 10.4%

$2.11 $2.13 $0.91 $1.30

$7,294 $1,755 $1,758 $2,688

1.64 1.53 0.97 1.06

$ $ $ $

2.23 2.18 0.84 1.39

U O N N

10.4% 7.4% -1.3% 11.8%

PREIT SP Simple Average Simple average for SIN

$2.38

$1,440

1.57

2.32

2.0%

MREIT Bbg Code Retail Capitamalls Malaysia Trust IGB REIT Sunway REIT Pavilion REIT Industrial Axis REIT CMMT MK IGBREIT MK SREIT MK PREIT MK Simple Average

Price as of Mkt Cap 15 Mar 13 (LC $m) $1.79 $1.45 $1.53 $1.65 $3,165 $4,938 $4,464 $4,963

Last stated NAV 1.15 1.02 1.10 1.10

Price / Stated NAV 1.55 1.42 1.40 1.50 1.47 1.58 1.58 1.49 1.26 $ $ $ $

Target Price (DDMbased) 1.99 1.50 1.63 1.59

Rec. O O O O

2013 Yield 5.0% 4.6% 5.2% 4.5% 4.8% 5.4% 5.4% 4.9% 5.6%

2014 Yield 5.3% 4.9% 5.6% 4.7% 5.1% 5.7% 5.7% 5.2% 5.9%

Total return (Prospective price upside + 2013 yield) 16.3% 8.5% 12.1% 1.1%

AXRB MK Simple Average Simple average for MAL Simple average for ALL

$3.34

$1,525

2.11

3.68

15.9%

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

4.2 Dividend policy


Axis REIT has a distribution policy of paying dividends every quarter. From 1Q to 3Q, its policy is to distribute out at least 95% of current year-to-date distributable income while, in the final quarter, it aims to distribute out at least 99% of current year-to-date distributable income.

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Figure 19: Annual DPU


20.00 18.00 16.00 14.00 12.00 10.00 8.00
6.00

18.60 17.20 15.27 12.95 13.63 15.80 16.00

4.70

4.00 2.00 0.00 2005 2006 2007 2008 2009 2010 2011 2012

SOURCES: CIMB, COMPANY REPORTS

4.3 Optimal gearing of 35%


Axis REIT adopts a prudent capital management policy. Although the maximum gearing level allowable by the Securities Commission is 50%, the company maintains gearing in the 28-38% range. Whenever the gearing touches 35%, the REIT will place out new units to pare down the borrowings and to fund new acquisitions.
Figure 20: Breakdown of loans

9%

18%

53%

20%

Revolving credit

10-year Sukuk

5-year fixed term financing

3-year fixed term financing

SOURCES: CIMB, COMPANY REPORTS

4.4 Planning a placement in 2013


Axis REIT obtained approval for the placement of 90.8m new units (19.9% of existing unit base of 456.5m units) from the Securities Commission in Dec 2012. The next step is to seek unitholders' approval at the upcoming AGM in April. Based on the market price of RM3.13 as at 31 Dec 2012, the new placement will be able to raise gross proceeds of approximately RM284m. This will enable the REIT to acquire RM437m worth of properties before the gearing level rises back to 35% again. For future related-party transactions (RPT), Axis REIT is examining the possibility of exchanging the assets for units in lieu of payment. This is in order to maintain the promoters' stake at levels that will assure investors that there is an alignment of interest between the promoters and the minorities.
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4.5 First sukuk programme


In July 2012, Axis REIT successfully launched its first Islamic medium-term note (sukuk) programme in order to refinance its loans. It started off by issuing RM110m of 10-year sukuk at an attractive fixed profit rate of 4.61% p.a. last year. This year, the company plans to roll out the remaining RM190m from the sukuk programme. The advantages of a sukuk programme are that it enables the REIT to lock in fixed interest rates on bonds with tenures that are more than five years long. Also, it gives flexibility to the REIT to tap the debt capital market based on its funding needs. For instance, it could issue either short-tenured commercial papers (CPs) to fund immediate capital requirements or long-tenured medium-term notes (MTNs) for longer-term capex plans.
Figure 21: Breakdown of the RM110m Sukuk issuance
First Sukuk issue Class A Class B Class C Class D Rating AAA AA1 AA2 AA3 Issue Amount (RM m) 95 5 5 5 Financing rate (%) 4.50% 4.95% 5.30% 5.60% Expected Maturity 13 July 2022 14 July 2022 15 July 2022 16 July 2022
SOURCES: CIMB, COMPANY REPORTS

4.6 Income distribution reinvestment plan (IDRP)


Axis REIT is the only M-REIT to introduce the innovative income distribution reinvestment plan (IDRP) and the third listed entity on the Bursa securities to do so. IDRP is a plan whereby unitholders are given an option to reinvest income distribution in new units instead of receiving cash. IDRP is a win-win plan for both unitholders and the REIT. Unitholders benefit as they get to invest in new units at a discount to the existing share price while the REIT gets to retain the cash for any AEI activities. The board of directors has decided that future IDRP will only be done for the 1Q and 3Q distributions (in every April and October).
Figure 22: Income distribution reinvestment plan (IDRP)
No. 1 2 Take-up rate (%) 86% 79% No. of IDRP units (m) 2.732896 2.703125 Listing date 12-Dec-11 12-Sep-12

SOURCES: CIMB, COMPANY REPORTS

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New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). Recipients of this report are to contact CIMBR in S ingapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. 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(2) (a) to (d) (high net worth companies, unincorporated associations etc) of the Order; (d) a re outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. Spitzer Chart for stock being researched ( 2 year data )
Price Close

3.6

3.4 3.2 3.0


2.8 2.6

2.4 2.2 Mar-11


Jul-11 Nov-11 Mar-12 Jul-12 Nov-12

Distribution of stock ratings and investment banking clients for quarter ended on 28 February 2013 959 companies under coverage Rating Distribution (%) Outperform/Buy/Trading Buy Neutral Underperform/Sell/Trading Sell 51.7% 35.0% 13.3% Investment Banking clients (%) 8.6% 4.3% 7.1%

Recommendation Framework #1 *
Stock OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months. Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

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Recommendation Framework #2 **
Stock OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. Sector OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.

UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011. AAV not available, ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH - Good, BEC - Very Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD - Good, IVL - Very Good, JAS Very Good, KAMART not available, KBANK - Excellent, KK Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM Very Good, TICON Good, TISCO - Excellent, TMB - Excellent, TOP Excellent, TRUE - Very Good, TUF - Very Good, WORK Good.

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