pp16832/01/2012 (029059) ma laysiaupload.xinhua08.com/2012/1019/1350629611909.pdf · 2012. 10....

17 October 2011

PP16832/01/2012 (029059)

Initiating Coverage

17 October 2012

PP16832/01/2013 (031128)

Malaysia

IGB REIT The REIT-ail Giant

The rise of another giant REIT. We initiate coverage on IGB REIT

(IGBR) with a HOLD and a MYR1.39 DCF-based TP. IGBR provides

investors the exposure to the largest REIT by market capitalization and

2nd

largest by free float in Malaysia. Growth will be underpinned by

organic growth in its existing retail assets - Mid Valley Megamall (MVM)

and The Gardens Mall (GM).

Superior location draws crowd. Strategically located in the heart of

Mid Valley City and the fringe of Kuala Lumpur CBD, MVM and GM are

supported by offices and mature affluent townships within/surrounding

the Mid Valley City. Footfall of the two malls has been stable at around

34m p.a. despite rising competition from new malls. Its attractiveness

will be further enhanced by ongoing and future mixed developments in

the surrounding areas, which would further grow its catchment.

Benefits from improving connectivity and accessibility. IGBR is set

to benefit from the upcoming MRT Circle Line under the Greater

KL/KV‟s integrated urban transportation system via a proposed linkage

from Mid Valley City to KL Eco City‟s Komuter/LRT/MRT station. We

believe that increased accessibility and connectivity will drive shopper

traffic further and this will in turn serve as a strong catalyst to IGBR‟s

capital value and bargaining power for positive rental reversions.

The perfect match. IGBR has a good combination of mature and

young assets - MVM anchors the earnings base while the relatively

young GM provides significant room to grow average rental, which was

19% below the MVM on a psf basis in 5M12. 18.5% of IGBR‟s rental

income is backed by long lease agreements whilst the portfolio tenancy

expiry profile is well spread out, with 39% and 31% of the tenancies due

for renewal in 2013 and 2014 respectively; provides income stability.

Fairly valued. Our TP translates to an implied yield of 5%, versus a

4.9% average for large cap retail REITs (4.8% for PavREIT and CMMT,

5.3% for SunREIT). We like IGBR for its quality assets, earnings

resilience and liquidity. IGBR‟s relatively low 26% debt-to-asset ratio

allows it the capacity to borrow another MYR2.3b for asset acquisitions.

IGB REIT–Summary Earnings Table *Listed on 21 Sep 12 Source: Maybank KE

FYE Dec (MYR m) 4M2012F* 2013F 2014F Total revenue 114.4 421.1 433.4

Net property income 77.5 287.4 295.6

Recurring Net Profit 54.0 204.3 211.9

Recurring Basic EPU (Sen) 1.6 6.0 6.2

EPU growth (%) - - 3.2

DPU (Sen) 1.8 7.0 6.8

PER ̂-annualised 24.4 23.2 22.5

EV/EBITDA (x) 21.1 20.2 19.6

Div Yield (%) -annualised 4.8 5.0 4.9

P/NAV(x) 1.4 1.4 1.4

Gearing (%) 26.2 26.2 26.2

ROE (%) 5.7 6.0 6.2

ROA (%) 4.1 4.3 4.5

Consensus Net Profit (MYR m) 184.4 198.8 216.1

Hold (New)

Share price: MYR1.39 Target price: MYR1.39 (New)

Wong Wei Sum, CFA [email protected] (03) 2297 8679

Stock Information

Description: The largest retail REIT in Malaysia by asset size. Listing with 2 initial assets – Mid Valley Megamall (MYR3.4b in asset size; 73% of 2011 proforma NPI) and the

Gardens Mall (MYR1.2b; 27%). Ticker: IGBREIT MK Shares Issued (m): 3,400.0

Market Cap (MYR m): 4,726.0 3-mth Avg Daily Turnover (US$ m): 9.02 KLCI: 1,653.52 Free float (%): 49%

Major Shareholders: IGB Corporation 51%

Key Indicators

ROE – annualised (%) 6.1 Net cash (MYR m): (1,155.4) NTA/shr (MYR): 0.996

Historical Chart

1.34

1.35

1.36

1.37

1.38

1.39

1.40

1.41

1.42

1.43

Sep-12 Sep-12 Oct-12 Oct-12

IGBREIT MK Equity

Performance:

52-week High/Low MYR1.44/MYR1.25

1-mth 3-mth 6-mth 1-yr YTD

Absolute (%) - - - - -

Relative (%) - - - - -

mailto:[email protected]

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IGB REIT 17 October 2011

Contents

Executive Summary P3

Key Investment Merits

Merit 1 : MYR4.6b assets dwarves all listed REITs P5

Merit 2 : Superior location draws crowd P6

Merit 3 : Perfect match provides earnings growth and stability P10

Merit 4 : Ample headroom to grow P14

Merit 5 : Strong management team P15

Merit 6 : Favourable macro fundamentals P16

Risks and Concerns P18

Financials P19

Valuations P20

Income Statement & Balance Sheet P22

Property Profile – Mid Valley Megamall P23

Property Profile – The Gardens Mall P25

Appendix 1 – IGB REIT’s structure

Appendix 2 – Who’s who in IGB REIT

Appendix 3 – Background of the Sponsor

Appendix 4 – Background of the Trustee

Appendix 5 – Fee structure of IGB REIT

Appendix 6 – Fee comparison among various M-REITs

Appendix 7 – Accolades / awards

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Executive Summary

Highly sought after retail assets. IGB REIT (IGBR) is the largest

domestic REIT by market capitalization at MYR4.7b and the 2nd

largest

REIT by asset size at MYR4.6b (based on appraised value). It

comprises 2 properties: Mid Valley Megamall (MVM; MYR3.4b in asset

size; 74.8% of total asset portfolio) and The Gardens Mall (GM;

MYR1.2b; 25.2%). These properties form part of Mid Valley City – an

integrated commercial development which includes 1,683 hotel rooms

and serviced residences, seven blocks of commercial office buildings

(2.67m sq.ft. NLA) and 228 residential units.

Key investment merits. IGBR is a primarily retail-focused REIT and

the REIT manager, IGB REIT Management S/B, will continue its focus

on growing the retail-based assets through asset enhancement

initiatives and mall acquisitions both locally and overseas. IGBR‟s key

investment merits in our view include:

(i) Its size as the largest retail-focused REIT by asset size and the

largest REIT in Malaysia by market capitalization, thus providing an

international appeal.

(ii) Its superior location which provides long-term organic growth

potential. The properties are strategically placed within Mid Valley

City, one of the largest integrated developments in Malaysia,

catering to locals, business travelers and tourists. Mid Valley City

itself is located at the fringe of central Kuala Lumpur with proximity

to various middle to high income suburbs. We believe that

surrounding property developments (both current and in the future),

the upcoming MRT Circle line and a proposed linkage to the

existing Abdullah Hukum LRT station will further boost the footfall

and shopper traffic at the malls.

(iii) Its resilient earnings base, given that 18.5% of its gross rental

income is from tenants with long lease agreements. Also, the malls

have a diversified and sizeable tenant base of 663. No single tenant

contributes to more than 6% of total gross rental income.

Meanwhile, the portfolio tenancy expiry profile is well spread out

with 38.7% (by gross rental income) and 31% of the tenancies due

for renewal in 2013 and 2014 respectively, hence reducing earnings

volatility.

(iv) A perfect combination. In our opinion, the mature MVM, which

has 13 years of successful operation, provides for a strong and

stable earnings base while the relatively young GM (since 2007)

has the potential for stronger rental growth and hence higher

blended margins.

(v) Room for inorganic growth. With a relatively low debt-to-asset

ratio of 26%, IGBR has the ability to make yield accretive

acquisitions for growth. It has a potential war chest of approximately

MYR2.3b (at the 50% statutory limit) to fund new acquisitions

without the need to raise fresh equity capital. IGBR has been

granted the right of first refusal to acquire future retail properties in

Malaysia and overseas from its sponsor, IGB Corporation.

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In our opinion, working in favour of the REIT as well are the following

factors:

(i) Favourable macroeconomic fundamentals with (a) Malaysia‟s

population base being one of the fastest growing in the world, (b)

Malaysia‟s young population with a national median age of

approximately 26 years, and (c) rising affluence among Malaysians,

further spurred by the government‟s Economic Transformation

Programme (ETP) which aims at transforming Malaysia into a high

nation income by 2020 by doubling present GNI per capita to

RM48,000. In addition, the ETP‟s Greater Kuala Lumpur / Klang

Valley National Key Economic Area (NKEA) targets 10m population

for Greater KL/KV by 2012 versus 6m in 2010 while tourism will

remain an important income source to the Malaysian economy,

being one of 12 NKEAs emphasized in the ETP blueprint.

(ii) A very experienced management team. An added plus point for

IGBR is the experienced, senior team at the REIT Manager, led by

Anthony Patrick Barragry, who was involved in the development of

Mid Valley City since Day 1.

Valuation. We value IGBR at MYR1.39 based on a DCF approach as

we believe it rigorously accounts for 10 years of cashflow and a

terminal value, taking into consideration various assumptions on rental

reversions, occupancy rates and others. Our MYR1.39 TP translates to

an implied gross dividend yield of 5% (2013) which is marginally higher

than Pavilion REIT (PavREIT)‟s 4.8% and CapitaMall Malaysia Trust‟s

(CMMT) 4.8% but lower than Sunway REIT‟s (SunREIT) 5.3%.

Table 1: Portfolio of properties in IGB REIT

Mid Valley Megamall The Gardens Mall

Type Retail Retail

Appraised value as at 10 April 2012 (MYR`000) 3,440,000 1,160,000

Purchase consideration (MYR „000) 3,440,000 1,160,000

Subject properties weighting (by Appraised Value) (%) 74.8 25.2

NLA (sq ft) 1,718,951 817,053

GFA (sq ft) 6,107,103 3,379,510

Number of tenancies as at 31 Mar 2012 454 209

Occupancy rate as at 31 Mar 2012 (%) 99.8 99.7

Number of car park bays 6,092 4,128

Estimated footfall for 2011 („000) |--------------------------–––34,700 ----------------------------|

Sources: IGB REIT, CBRE

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Merit 1: MYR4.6b assets dwarves all listed REITs

The retail giant. With MYR4.6b in asset size, IGBR will be the 2nd

largest Malaysian REIT (M-REIT) after SunREIT‟s MYR4.9b (post-

acquisition of Sunway Medical Centre) (see Chart 1). Correspondingly,

IGBR will be the largest retail REIT in terms of appraised value and

gross floor area based on current available data from CBRE. In

comparison to its retail peers, it is 29% and 59% larger by asset size

than the likes of PavREIT and CapitaMalls Malaysia Trust (CMMT)

respectively and 4.6x larger than the small-cap Hektar REIT.

The largest REIT by market capitalization. IGBR‟s market

capitalization stood at MYR4.7b as at 15 Oct 2012. This compares

against a market capitalization of MYR4.2b for PavREIT, MYR4.1b for

SunREIT and MYR3.2b for CMMT.

Chart 1: Asset sizes of Malaysian REITs Chart 2: Free float of Malaysian REITs

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

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IGB

MYR mRetail basedMixed

0

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60

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(%)(MYR m) Freefloat (LHS) Freefloat (RHS)

Retail basedMixed

Sources: Annual reports of entities listed, IGB REIT Sources: Annual reports of entities listed, Bloomberg, IGB REIT

Sizeable in free float. IGBR‟s market capitalization of MYR4.7b and its

sponsor‟s stake of 51% of IGBR post listing have made IGBR the 2nd

largest Malaysian REIT in terms of free float – MYR2.3b, compared to

SunREIT‟s MYR2.6b, PavREIT‟s MYR1.1b and CMMT‟s MYR2.1b. In

our view, IGBR‟s huge free float is an attractive feature not only to

domestic but also international investors.

of 39


Merit 2: Superior location draws crowd

Strategic location. Size is not at the expense of quality. MVM and GM

are strategically located at the fringe of Kuala Lumpur CBD and at the

beginning of the Federal Highway which connects the city to the rest of

Greater Kuala Lumpur. The malls‟ close proximity to some affluent

suburbs such as Bangsar, Damansara Heights, Mont Kiara and

Seputeh as well as mature townships like Taman Desa, Old Klang

Road and Petaling Jaya provide for an immediate catchment area. Its

catchment area spans the entire 6.7m population in the Klang Valley

(source: CBRE).

Chart 3: Major areas in Kuala Lumpur

Kuala Lumpur Population (2010)1,674,621

Batu Caves

Gombak / Setapak / Wangsa Maju

Sentul

Kepong / Segambut / Jinjang

Damansara Heights / Mont Kiara

Mid Valley City KL Sentral / Bangsar

Kuala Lumpur CBD

Golden Triangle

Ampang

Pandan Jaya / Taman Maluri

Seputeh / Taman Desa

Sungai Besi / Salak Selatan

Old Klang Road / Kuchai Lama / Sri Petaling

Cheras

Sources: Google Maps, CBRE

The “Mid Valley City” element. One of the features that distinguishes

IGBR from other retail REITs (except for SunREIT) is that its malls are

located in the mature and integrated Mid Valley City, developed by its

sponsor IGB Corporation Berhad (“IGB Corporation”). Apart from MVM

and GM, the entire Mid Valley City development also includes three

hotels (1,484 hotel rooms and 199 suites), seven office buildings

(2.67m sq.ft. in NLA) and 228 service apartments.

of 39


Figure1: Mid Valley City

Sources: IGB REIT

Support from self-contained Mid Valley City. In our opinion, the

substantial commercial content of Mid Valley City has contributed

steady shopper/tourist traffic to MVM and GM. The current office

population in Mid Valley is estimated at around 14,547 workers.

Including the office developments nearby, total office population is

estimated at 117,365 workers, according to CBRE. This will be further

boosted by IGB Corporation‟s last office development in Mid Valley

City, i.e. Mid Valley City Southpoint, which we expect to add a further

5,000-6,000 workers (+4-5%) and 2,000 extra car park lots (+19.6%)

from 2015.

Growing catchment provides long-term organic growth potential.

Ongoing projects such as KL Eco City, Bangsar South and KL Sentral

are still developing, providing for a growing office/resident/hotelier

catchment for IGBR‟s retail assets. For instance, we expect the

MYR6b-7b KL Eco City, which comprises offices, service apartments

and hotel rooms, to have an estimated population of 35,000 upon

completion. Future developments include the 40-acre Setia Federal

Hills which targets mid- to high-income residents. We believe its

residential growth potential and income profile will continue to drive

footfall at MVM and GM.

Excellent accessibility and connectivity. IGBR‟s retail assets are

easily accessible. Apart from a network of highways (Federal Highway,

East-West Link Expressway, New Pantai Expressway and North-South

Highway), major roads which connect to the malls‟ key catchment areas

include Jalan Syed Putra, Jalan Klang Lama, Federal Highway, Jalan

Maarof and Jalan Bangsar. Also, MVM and GM are directly linked to the

Seremban/Rawang KTM Komuter railway line, which registered the

second highest ridership of 2.2m in 2011 after KL Sentral Station

(source: CBRE).

Indirect beneficiary of ETP. Under the Greater Kuala Lumpur National

Key Economic Areas (NKEA) initiative (under the ETP blueprint), new

Mass Rapid Transit (MRT) lines, which include the MRT 2 Circle Line

will be built to improve public transportation and connectivity between

existing rail-based networks. The Circle Line, which is targeted to be

completed by 2020, will link areas such as KL Eco City, Mont Kiara,

Sentul Timur, Ampang and the MATRADE development.

Higher capacity with the MRT. The new MRT line is designed with

higher capacity in mind compared to the existing intra-city rail network.

of 39


And unlike the existing rail network, a portion of the new MRT line will

pass through some of the more affluent neighborhoods in the Klang

Valley (for e.g. Mont Kiara). Also, under the same plan, the KL Monorail

will be extended to Taman Gembira in Old Klang Road and we expect

this to benefit surrounding areas including Mid Valley City.

More than just an MRT station. KL Eco City, a mixed development

opposite Mid Valley City, will be an integrated rail transport hub

accommodating the existing Abdullah Hukum Putra LRT, a new KTM

commuter station along the Sentul-Port Klang route and a station on the

MRT 2 Circle line. We understand that there will be a linkage

connecting Mid Valley City to KL Eco City, enhancing connectivity and

accessibility of MVM and GM (source: CBRE).

Higher property value with superior transportation infrastructure.

We believe shopper traffic to MVM and GM will improve further once

the transport linkages are completed and the MRT Circle Line is fully

operational, thus translating to better accessibility and connectivity. We

believe that this will in turn translate into stronger bargaining power for

rental reversions while eventually boosting the capital values of IGBR.

Chart 4: Proposed MRT line

Sg. Buloh

Kg. BaruSg. Buloh

Kota Damansara

Taman Industri Sg. Buloh

PJU5

Dataran Sunway

The Curve

One Utama

TTDI

Seksyen 16 Semantan

KL Sentral

Pasar Seni

WarisanMerdeka

Bukit Bintang Central

Cochrane

Maluri

Taman Bukit Ria

Taman Bukit Mewah

Leisure Mall

Plaza Pheonix

Taman Suntex

Taman Cuepacs

Bandar Tun Hussein Onn

Balakong

Taman Koperasi

Saujana Impian

Bandar Kajang

Kajang

Pasar Rakyat (KLIFD)

KL Eco City

Pusat Bandar

Damansara

Matrade

Sentul

Kampung Baru

Semantan

Source: Maybank KE, MRT Corp, KL Eco City websites

of 39


Chart 5: Existing transportation system

Sources: Maybank KE, CBRE

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Merit 3: Perfect match provides earnings growth and stability

IGBR’s malls are a resilient asset class, we believe. It is our view

that strategically located sub-urban malls in Klang Valley tends to be a

more resilient asset class during an economic downturn compared to

their peers in the KL City centre due to the residential catchment of the

former. The footfall of MVM and GM are mainly supported by the

office/residential population from Mid Valley City and surrounding

townships. The malls‟ 34.7m shopper traffic in 2011 was spread

between office workers and residents/tourists, hence lowering

concentration risk.

All under one roof. IGBR‟s MVM and GM complement each other with

different niche and style; combined, they create a shopping paradise.

MVM, one of the largest malls in Malaysia “for all kinds of everything” is

served as a family, tourist and lifestyle destination for locals and tourists

whilst GM is positioned as a premium fashion mall focused on the

higher income segment. The complementary nature of IGBR‟s

properties allows it to benefit from the diverse and ever-changing trends

in consumer spending.

Sustainable and diversified earnings base. 18.5% of IGBR‟s total

gross rental income is backed by tenants with long lease agreements.

These include reputable international department stores such as

AEON, Carrefour, Isetan and Robinsons and other retailers such as

Celebrity Fitness and and Golden Screen Cinema. As at May 2012,

IGBR has a diversified and sizeable tenant base of 663 tenants. No

single tenant contributes to more than 6% of gross rental income.

Well spread-out lease expiry. IGBR‟s portfolio tenancy expiry profile is

well spread out with 38.7% (by gross rental income) and 31.0% of the

tenancies due for renewal in 2013 and 2014 respectively, hence

reducing earnings volatility. MVM and GM typically have three-year

lease terms.

Chart 6: Tenancy expiry profile (by gross rental income)- IGBR

Chart 7: Tenancy expiry profile – Mid Valley Megamall

Chart 8: Tenancy expiry profile – The Gardens Mall

19

38.7

31

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2012 2013 2014

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30

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57.5

22.2

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20

30

40

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2012 2013 2014

Source: IGB REIT Source: IGB REIT Source: IGB REIT

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IGBR’s malls have prospered amid the competition. MVM and GM

have weathered recessions, changes in retail trends and demand as

well as rising competition from new supply of retail space; and continue

to prosper. This is reflected in its steady 32 – 34.7m shopper traffic p.a.

despite the surge in new mall spaces between 2009-2011. Instead,

MVM and GM have outperformed most shopping malls in the Klang

Valley with a close to 100% occupancy rate (MVM – 99.8% tenanted;

GM - 99.7% occupied as at May 2012) from 2009 until May 2012.

Chart 9: Mid Valley Megamall remains popular among retailers with close to 100% occupancy rate

Chart 10: Occupancy rate of The Gardens Mall has been improving since 2009

100.0 99.9 100.0 99.8

90.0

92.0

94.0

96.0

98.0

100.0

2009 2010 2011 May-12

(%)

96.7

98.2

99.6 99.7

90

92

94

96

98

100

2009 2010 2011 1Q12

(%)

Sources: IGB REIT Sources: IGB REIT

Chart 11: Occupancy rates for Klang Valley Malls, 2000-2011

85

90

95

100

105

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Occupancy (%) Klang Valley Premium Mid & Mass

Sources: CBRE

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Chart 12: Retail space supply in Klang Valley, 2000-2015e

21.9

3

22.1

4

23.0

4

28.5

3

31.4

5

32.8

5

35.0

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6

37.0

3

38.8

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42.5

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48.3

2

52.8

5

54.5

5

1.38

1.38

1.38

1.38 1.

38 1.38 1.

38 3.37 3.37 3.

37

3.37 3.

56 3.56 3.

56 3.86 4.

31

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

F

2013

F

2014

F

2015

F

Mid & Mass Market Mall Premium Fashion MallRetail Space(m sq ft)

Source: CBRE

Table 2: Future malls in Klang Valley 2011-2015

No. Name of mall Location Category NLA (sq.ft.) Expected completion

Kuala Lumpur

1 1 Shamelin Cheras Mass 420,000 2012

2 Nu Sentral KL Sentral Mass 650,000 2012

3 Damansara City Mall Damansara Heights Mass 188,452 2013

4 Pavilion KL Mall Extension KLCC-Bukit Bintang Premium 300,000 2014

5 Boustead Retail @ Jalan Cochrane Jalan Cochrane Mass 1,200,000 2014

6 Sunway Velocity Lifestyle Shopping Mall Cheras Mass 850,000 2014

7 Suria KLCC Extension KLCC-Bukit Bintang Premium 450,000 2015

Selangor

1 Paradigm Kelana Jaya Mass 700,000 2012

2 Setia City Mall Setia Alam Mass 700,000 2012

3 Atria Shopping Gallery Damansara Jaya Mass 660,000 2013

4 Cheras Central Shopping Mall Cheras Mass 456,973 2013

5 M Square Shopping Centre Puchong Mass 380,000 2013

6 The Strand Mall Kota Damansara Mass 308,800 2013

7 The Wharf Puchong Puchong Mass 302,739 2013

8 Empire City Mall Damansara Perdana Mass 1,000,000 2013

9 da:men USJ Mass 400,000 2014

10 IOI City mall Putrajaya Mass 1,350,000 2014

11 Jaya Shopping Centre Petaling Jaya Mass 300,000 2014

12 Sunway Pyramid 3 (SP3) Retail Extension Bandar Sunway Mass 62,000 2014

13 Avenue Street Mall Sungai Buloh Mass 370,000 2014

14 Damansara Uptown Mall Damansara Uptown Mass 400,000 2015

15 i-City Mall Shah Alam Mass 1,000,000 2015

16 KL Eco City Retail Podium Abdullah Hukum Mass 300,000 2015

Sources: CBRE

High occupancy rates are not at the expense of rental rates. The

substantially fully-tenanted MVM and GM have recorded commendable

growth in rental rates over the past 2 years – MVM recorded a +5.2%

CAGR in average rental rate between 2009-2011 compared to GM‟s

+7.3% for the same period. Their success can be attributed to their

time-tested location, the wide array of offerings and complementary

nature of IGBR‟s malls, as well as the management ability of IGBR. We

expect MVM and GM to continue to excel under the same experienced

management team post-listing of IGBR.

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Chart 13: Mid Valley Megamall’s average rental rate has been growing steadily

Chart 14: The Gardens Mall is playing catch up

9.22

9.69

10.21

10.75

8

8.5

9

9.5

10

10.5

11

2009 2010 2011 May-12

(MYR psf)

+5.2% CAGR between 2009-2011

7.32

7.54

8.43

8.74

6.5

7

7.5

8

8.5

9

2009 2010 2011 May-12

(MYR psf)

+7.3% CAGR between 2009-2011

Sources: IGB REIT, Maybank KE Sources: IGB REIT, Maybank KE

Perfect combination offers both stability and growth. In our view,

MVM is arguably one of the most successful malls in Klang Valley

today. This 99.8%-occupied MVM, which has 13 years of successful

operation, will form a strong and stable base for earnings, while the

relatively young GM (which began operations in 2007) has significant

room to catch up in terms of rentals and margins.

Mature but plenty of growth opportunity. Despite its large size and

high occupancy rate, MVM has strong rental growth potential. As

mentioned earlier, 41.6% of MVM‟s NLA is occupied by anchor tenants.

Therefore, the reconfiguration of some of these low-yielding spaces into

higher-yielding smaller retail units will provide an immediate boost to

rental income. Also, given the strong demand for space in MVM, we

see strong upward rental reversions. MVM‟s waiting list for new space

is still in excess of two years (source: CBRE).

The Gardens Mall to play catch-up. GM is a premium fashion mall in

the suburbs. This 5-year old mall has been designed to cater to more

specialty stores which pay higher rentals and to complement the

existing range offered by MVM. Despite a commendable 7% CAGR in

average rental over the past 2 years, rentals at GM are still at a huge

discount to its peers, at MYR8.7psf average monthly rental, versus

Sunway Pyramid‟s MYR10.3psf, Pavilion KL Mall‟s MYR17.0psf and

Suria KLCC‟s e.MYR20.0-25.0psf. It is also 17% below MVM‟s

MYR10.6psf. This indicates that GM has significant upside over time as

the mall matures.

Table 3: Comparison between The Gardens Mall, Pavilion Mall and Suria KLCC Premium fashion malls Opened since Visitors NLA Average rental

mil sq.ft. MYR psf

The Gardens Mall 2007 34* 0.8m 8.7

Pavilion KL Mall 2007 31 1.7m 17.0

Sunway Pyramid 1997 34 1.7m 10.3

Suria KLCC (including Suria KLCC extension)

1998, 2011 (Suria KLCC extension)

>40 1.2m 20.0-25.0

* estimated footfall for Mid Valley Megamall and The Gardens Mall

Sources: IGB REIT, trusts, KLCC Property, Maybank KE, CBRE

of 39


Merit 4: Ample headroom to grow

There is room for inorganic growth. We estimate IGBR‟s debt-to-total

asset ratio to be 26% upon listing, which is significantly below the

statutory limit of 50% and the industry average of 31%. The

conservative capital structure will allow IGBR to take on additional debt

of up to MYR2.3b (at the 50% statutory limit) without the need to raise

funds in the equity market for future acquisition. We believe that the

MYR2.3b can easily raise IGBR‟s investment portfolio by 50% in asset

value, from MYR4,600m presently.

Chart 15: Comparison of M-REIT gearing (as at Aug 2012)

0

5

10

15

20

25

30

35

40

45

50

Sta

rhill

Bou

stea

d

Tow

er

Axi

s

Atr

ium

Sun

RE

IT

Am

anah

Qui

ll

UO

A R

eit

Am

Firs

t

Al-A

qar

Pav

illio

n

IGB

CM

MT

Hek

tar

Gearing (%)Retail basedMixed

Sources: IGB REIT, quarterly results, Maybank KE

Right of first refusal, 3rd

party acquisitions. IGBR will pursue

opportunities for asset acquisitions that provide attractive cash flows

and yields relative to its weighted average cost of capital (WACC).

However, it will also consider opportunities which are not immediately

yield accretive but will benefit unitholders over the long term. IGBR has

been granted the right of first refusal to acquire IGB Corporation‟s future

retail properties in Malaysia and overseas. In addition, IGBR will

explore third party acquisitions should such opportunity arise that meet

its investment criteria, including investing on a joint venture (JV) basis if

appropriate.

Mid- to long-term potential from its sponsor. IGB Corporation has

partnered with Selia Pantai S/B to set up a 70:30 JV company to

undertake a MYR6b-8b mixed development (which has similar concept

as Mid Valley City) in Johor. The “Southkey Megamall‟ in Johor, which

will be greater than Mid Valley City, will comprise a retail mall, hotels,

residences and commercial towers. It is in the midst of obtaining

approvals from the state government and construction is expected to

start by 1H13 with an estimated 5-year development period. Meanwhile,

IGB Corporation is also mulling the development of a megamall project

in Penang (source: Business Times).

IGBR‟s right of first refusal for IGB Corporation‟s retail properties

overseas also offers a pipeline of injections over the longer term. IGB

Corporation is said to have bid for a mixed development project in

Taipei and London.

of 39


Merit 5: Strong management team

A wealth of retail experience. The IGBR management team is a well-

rounded team with a wealth of experience. The team is headed by Mr

Antony Patrick Barragry, the CEO (almost 35 years of international

experience in the design, development and operations of major mixed-

use developments) and assisted by Mr Daniel Yong, Joint COO (Mid

Valley Megamall; 13 years work experience with Mid Valley City Sdn

Bhd) and Elizabeth Tan Hui Ning, Joint COO (The Gardens Mall).

They are further supported by Ms Rennie Lee Chai Tin, Head of

Operations/Leasing (Mid Valley Megamall) with 19 years working

experience, Mr Ko Chai Huat, Head of Marketing (MVM) with 24 years

of experience and Ms Gabrielle Tan Hui Chween, Head of Marketing

(The Gardens Mall) with 5 years experience (see Appendix 2 for details

of the management team).

Proven management expertise. The MVM and GM were

conceptualized, planned, designed and built under the supervision of

the same team of senior management who are and will be running the

malls post-listing. We believe that this is proof of management expertise

in running the malls. Furthermore, it ensures business continuity and

their intimate knowledge of the properties can be further utilised to

enhance the layout and revenue of IGBR.

Ongoing asset enhancement initatives. The most recent example of

management‟s ability to enhance value is the reconfiguration of the

former MPH Bookstore space in MVM into high-yielding fashion retail

units i.e. MANGO – HE and TOUCH, Forever 21 and UNIQLO which

we believe has doubled its rental rate psf. As for GM, a repositioning

program was undertaken in 2009. The motivation behind the

repositioning program was to increase foot traffic in a more efficient

manner and to better suit the needs of the tenant base.

The management will continue to enhance and maximize NLA,

occupancy and rental rates via its active asset management strategies.

These include: i) ensuring a continued high level of shopper traffic in

MVM and GM, ii) continuing to improve rental rates whilst maintaining

high occupancy rates, iii) delivering high quality services to tenants and

maintain strong tenant relationship, iv) improving operational efficiency

and reducing operating cost and v) enhancing NLA via asset

enhancement initiatives.

of 39


Merit 6: Favourable macro fundamentals

Retail spending on the rise. According to CEIC data, Malaysian retail

sales rose 10.6% YoY to MYR265b in 2011, growing at a faster pace

than the pace of economic growth of 5.1% during the year. Retail sales

currently account for about 39% of Malaysia‟s total GDP. The Retail

Association of Malaysia forecasts growth of 6% in 2012 retail sales.

Under the 10th Malaysia Plan, total retail sales are targeted to grow

annually by 8.3% between 2010 and 2015. The growth is underpinned

by key economic and demographic trends: (i) rising GDP and GDP per

capita which translates to greater spending power; (ii) low

unemployment rate; (ii) a growing, young population; (iii) increasing

urbanization; and (iv) rising tourist arrivals, which augment the domestic

consumer base.

Young and growing population. Malaysia‟s population stands at c.

28m with the estimated growth rate of 1.5% p.a. and the population of

Klang Valley, comprising Kuala Lumpur and its suburbs, has grown

from approximately 4m in 2000 to roughly 7.5m in 2012, with a large

number of migrants from other states within Malaysia and overseas.

Strategically located in the Mid Valley City, we believe that the retail

malls of IGBR benefit from both a city and a suburban catchment

(source: CBRE).

Rising affluence among Malaysians. The country‟s GDP per capita

has been rising steadily over the past 10 years from RM15,312 (2000)

to RM29,680 (2011) save for 2009 following the global financial crisis.

The national unemployment rate is also low at 3.0% (Mar 2012) while

the unemployment rate in KL and Selangor is estimated to be slightly

below 3%.

Government targets to grow GDP by 6% per year till 2020. Under

the Government‟s Economic Transformation Programme (ETP), it

hopes to transform Malaysia into a high-income nation by 2020 by

growing the economy by 6% a year till 2020. The target is to increase

Malaysia‟s Gross National Income (GNI) per capita from USD6,700 (or

RM23,700) in 2009 to more than USD15,000 (or RM48,000) in 2020

(source: PEMANDU).

Recent measures should encourage spending and consumption.

These include a financial aid of MYR500 for low-income households

(monthly income of MYR2,000 and below), a pay rise of up to 13% for

1.4m civil servants and the minimum wage implementation (with effect

from 1 Jan 2013). Further, the people-friendly Budget 2013 with more

goodies including bonus for civil servants, BR1M 2.0, reduced individual

income tax as well as the absence of GST should sustain domestic

demand.

Government on boosting tourism. Tourist arrivals and spending have

been steadily increasing since 2003‟s SARS, with 2011‟s total tourist

spending at RM58.3b, up from RM56.5b in 2010 (+3.2% YoY).

Correspondingly, tourist arrivals reach a new high in 2011 with 24.7m

tourist arrivals, up from 24.6m in 2009 (+0.6% YoY). Under the ETP,

tourism spending is targeted to grow at a rate of 11.5% per year to

reach RM168b by 2020, while tourist arrivals is targeted to grow by

3.9% per year to reach 36.0m by 2020 (source: PEMANDU).

of 39


Chart 16: Malaysian retail sales are expected to continue growing

Chart 17: Rising income supports spending

0

10

20

30

40

50

60

70

80

33

34

35

36

37

38

39

40

Mar

-10

Jun

-10

Sep

-10

De

c-1

0

Mar

-11

Jun

-11

Sep

-11

De

c-1

1

Mar

-12

MYR b% Retail Sales (RHS) as % of Nominal GDP

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0

5,000

10,000

15,000

20,000

25,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

F

2013

F

GDP/Capita(MYR)

GDP/Capita growth (%)

Sources: CEIC Sources: CEIC

Chart 18: Low unemployment rate at 3.0% Chart 19: Age profile of Malaysians

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

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2012F

2013F

Malaysia's Unemployment Rate (%)

0.0 0.5 1.0 1.5 2.0 2.5 3.0

0-4

10-14

20-24

30-34

40-44

50-54

60-64

Above 70

population (m)

Age Group

Sources: CEIC, IMF Sources: CEIC

of 39


Risks and Concerns

Single location risk. The asset portfolio is highly dependent on the

continuous appeal of Mid Valley City as a commercial hub of the Klang

Valley. This risk is partially mitigated by its status as one of largest

suburban malls in the Klang Valley with close proximity to major

townships as well as high connectivity post the start of the new MRT

operations. Going forward, this risk can be mitigated as and when IGBR

seeks to geographically diversify its asset base.

Competition. New suburbs / premium fashion retail malls with equally

good concepts may mushroom over time as Malaysia‟s economy

grows, drawing shopper crowd away from MVM and GM. This risk is

mitigated by the fact that MVM and GM are strategically located in Mid

Valley City, and at the fringe of KL City with its ready catchment of

locals, business crowd and tourists. Furthermore, accessibility of the

mall will be further improved when the proposed linkage to MRT station

is ready.

An economic downturn. An economic downturn would result in

spending cuts by consumers, which in turn may result in the loss of key

tenants. This risk is currently mitigated by the fact that the mall has a

large and well-diversified base of 663 tenants, with no single tenant

contributing over 6% of total gross rental income.

Debt refinancing and interest rate risks. We see these risks as low in

the medium term. IGBR‟s MYR1,200m fixed-rate term loan is due at the

earliest in 2017. 99% of the total financing facilities are at fixed rates

until 2017 at the earliest. The average effective cost of debt is about

4.5%.

of 39


Financials

A retail-focused REIT. IGBR will comprise two retail assets, Mid Valley

Megamall (MVM) and The Gardens Mall (GM) purchased at cost of

MYR3,440m (74.8% of total asset value) and MYR1,160m (25.2%)

respectively. These assets will be recorded in IGBR‟s balance sheet at

MYR4,600m based on the appraised values.

Earnings forecasts. We project IGBR‟s 4M12 (21 Sep - Dec 2012),

2013 and 2014 total revenue at MYR114.4m, MYR421.1m and

MYR433.4m respectively. This, in turn, generates net property income

(NPI) of MYR77.5m (4M12), MYR287.4m (2013) and MYR295.6m

(2014) respectively, and pretax profit (after accounting for manager,

trustee expenses and borrowing costs) of MYR54.0m, MYR204.3m and

MYR211.9m respectively. We forecast the distributable income from

4M12-2014 at MYR62.8m, MYR237.2m and MYR231.2m respectively.

Key assumptions. Our forecasts are based on IGBR‟s initial portfolio

of property assets (i.e. MVM and GM) without taking into account

potential future acquisitions. We assume:

(i) Gross rental income increases by +2.7% in 2013 and +3.1% in

2014. This assumes tenancy agreements expiring in those

financial periods are renewed at 5% (for MVM) and 15% (GM)

higher rental with no step-ups for the next 3 years.

(ii) Occupancy rates of 99.8% and 99.7% throughout the 10-year DCF

period for MVM and GM. We have assumed a vacancy allowance

of 1% to our forecast gross annual rentals for MVM and GM.

(iii) Percentage rent (a.k.a. turnover rent) to increase by +5% p.a. in

2012 and 2013 and +3% p.a. thereafter to 2024. We expect non-

seasonal car park income to grow by +3% p.a. with “zero” hikes

for seasonal parking rate.

(iii) Maintenance fees and other expenses (e.g. utilities, advertising,

general & administrative expenses, property management fees &

reimbursements) to increase by 3% p.a..

(iv) Capital expenditure of MYR2.5m for 4M12, MYR6.3m for 2013,

and MYR6.5m for 2014. We have assumed a +3% annual growth

in capex thereafter till 2023.

(v) Distribution payout policy of 100% for 2012-14, and 95%

thereafter. Note that IGBR manager is committed to pay out at

least 100% of its distributable income in 2012-14 as dividends,

and at least 90% in the subsequent years.

(vi) Our dividend payout also assumes that 100% of the REIT

Manager‟s fee will be payable in IGBR units for 2012-13 and 50%

thereafter to 2023.

(vii) Borrowing cost of 4.06% (revolving credit) to 4.55% (term loan;

99% of total debt) p.a..

(viii) Management fees include base fee of 0.3% p.a. of total asset

value, 5% p.a. of net property income and trustee fee of

MYR280,000 p.a.

of 39


Valuations

MYR1.39 DCF-based TP. We favour the DCF approach, as it

rigorously accounts for 10 years of cashflow and a terminal value,

taking into consideration various assumptions on rental rate changes,

occupancy rates, and others. Revenues are derived mainly from rents

paid by tenants, which are typically on a 2-3 years tenancy agreement,

while property and non-property expenses usually do not fluctuate

significantly. Note that our valuation model has yet to incorporate any

potential property acquisitions or pipeline of potential property injections

by its sponsor.

Our assumptions include: (i) a 10-year cash flow projection, (ii)

terminal yield of 5.5%, reflecting a decent capitalisation rate for prime

asset, and (iii) weighted average cost of capital (WACC) of 6.4%.

Table 4: Assumptions used for WACC discount rate

Risk free rate Rf 4.0% 10-year government bond yield

Cost of debt Kd 4.55%

Market return Rm 10.5% Maybank IB house‟s assumption

Beta β 0.6 Average of retail REITs

Target capital ratio

- Debt / (Debt + equity) Wd 40% Optimum structure

- Equity / (Debt + equity) We 60% Optimum structure

Cost of equity Ke 7.5% = Rf + (Rm – Rf) β

WACC Wc 6.4% = Kd (Wd) + Ke (Wd)

Source: Maybank KE

Deserves premium valuation. IGBR currently trades at a discount to

PavREIT, with a gross yield of 5% (FY13) vs the latter‟s 4.8%. This

could be attributed to the lack of near-term acquisitions as compared to

PavREIT (Pavilion KL Mall extension, farenheit88 and suburban mall in

Subang).

However, IGBR‟s yield is 30bps below SunREIT‟s 5.3%. This premium

to SunREIT is justifiable given IGBR‟s pure exposure to the retail sector

(about 37% of SunREIT‟s MYR4.9b asset size is from non-retail assets

such as medical centre, offices and hotels). Meanwhile, we prefer IGBR

over CMMT given the more superior location of its assets (at the fringe

of KL CBD versus CMMT‟s The Mines Shopping Mall) and full

management control over the properties (CMMT only owns 61.9% of

total NLA of Sungei Wang Plaza).

of 39

IGB REIT

Table 5: Comparison between M-REITs

Trust Al Aqar KPJ

Al Hadharah Boustead

Amanah Raya*

AmFirst Atrium Axis REIT*

CMMT* Hektar Quill Capita*

Starhill SunREIT* Tower UOA REIT

PAV REIT*

IGB REIT*

Price (MYR) @ 15-Oct-12

1.44 1.99 0.93 1.13 1.26 3.05 1.81 1.43 1.20 1.05 1.52 1.43 1.42 1.38 1.38

Market cap (MYR m) 1,002.6 1,247.5 533.1 775.6 153.5 1,392.4 3,200.1 572.9 468.2 1,390.6 4,101.9 401.1 600.5 4,145.7 4,692.0

Asset portfolio

Hospital: 20

Commerci

al/Hotel: 1 Nursing

College: 1

Age Care Centre: 1

Plantation

estate: 12 Palm Mills:

3

Hotel: 2 Education:

2

Office: 5 Industrial:

5

Retail: 1

Office: 7 Mix: 1

(hotel, office, retail)

Office & Warehouse:

4 Office &

Factory: 1

Office &

warehouses: 25

Retail: 2

Retail: 4 Retail:

3

Office: 8 Mix: 1

(retail & parking

lots)

Retail: 1

Hotel: 8

Service Apartm

ent: 1

Hotel: 4 Retail: 4

Office: 3 Medical

centre: 1

Office: 3

Office: 5 Mix: 1

Retail: 1 Office: 1

Retail: 2

Investment

properties (MYR m) 1,453.3 1,280.5 944.8 1,182.1 194.7 1,396.4 2,888.0 822.0 814.8 1,577.2 4,940.0 607.2 1,027.3 3,566.3 4,600.0

Gearing ratio (%) 47.0 14.0 35.1 46.7 31.2 30.0 27.2 45.1 36.1 10.4 33.4 19.1 36.7 18.7 26.2

Free float (%) 14.0 46.4 34.1 61.8 71.7 61.4 64.6 28.8 40.0 30.6 63.3 52.6 23.2 26.3 49.0

Free float (MYR m) 140.1 579.1 181.9 479.2 110.0 854.4 2,067.3 164.9 187.3 425.9 2,595.7 210.9 139.5 1,091.6 2,299.1

6m average trading

volume (m) 0.6 0.2 0.2 0.6 0.0 0.2 1.2 0.1 0.1 0.5 1.2 0.1 0.1 1.2 na

NAV (MYR/sh) 1.10 1.80 1.05 1.39 1.11 2.07 1.15 1.49 1.30 1.15 1.10 1.69 1.43 0.95 0.99

Div yield (%)

- CY12F 5.8 6.0 7.8 8.2 6.3 5.8 4.8 7.7 7.2 7.9 5.0 7.7 7.7 4.7 4.8

- CY13F 6.0 6.3 8.0 8.2 7.1 6.0 4.8 7.7 7.5 9.0 5.2 7.7 7.7 4.8 5.0

P/NAV (x) 1.3 1.1 0.9 0.8 1.1 1.5 1.6 1.0 0.9 0.9 1.4 0.8 1.0 1.5 1.4

Source: Bloomberg, quarterly results, IGB REIT,* forecasts by Maybank KE

of 39

IGB REIT

INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)

FY Dec 4M2012F* 2013F 2014F FY Dec 2012F* 2013F 2014F

Gross rental income 114.4 421.1 433.4 Fixed Assets 4,600.0 4,600.0 4,600.0

Property operating expenses (36.9) (133.7) (137.8) Other LT Assets 19.8 23.6 27.2

interest income 0.3 2.6 2.3 Cash/ST Investments 35.8 85.3 75.8

Net property income (NPI) 77.5 287.4 295.6 Other Current Assets 7.4 5.5 3.7

Interest (Exp)/Inc (15.3) (54.8) (54.8) Total Assets 4,662.9 4,714.4 4,706.6

Non-property expenses (8.4) (30.8) (31.2)

One-offs 0.0 0.0 0.0 ST Debt 12.6 12.6 12.6

Pre-Tax Profit 54.0 204.3 211.9 Other Current Liabilities 27.4 27.4 27.4

Tax 0.0 0.0 0.0 LT Debt 1,193.0 1,193.0 1,193.0

Net Profit 54.0 204.3 211.9 Other LT Liabilities 52.0 52.0 52.0

-realised 54.0 204.3 211.9 Minority Interest 0.0 0.0 0.0

-unrealised 0.0 0.0 0.0 Shareholders' Equity 3,378.0 3,429.5 3,421.7

Distributable income 62.8 237.2 231.2 Total Liabilities-Capital 4,662.9 4,714.4 4,706.6

Distribution to unitholders 62.8 237.2 231.2

Net Property Income Growth (%) NA 3.7 2.9 Number of units (m) 3,400.0 3,415.9 3,431.3

Pretax Profit Growth (%) NA 5.7 3.7 Gross Debt/(Cash) 1,205.6 1,205.6 1,205.6

Realised Net Profit Growth (%) NA 5.7 3.7 Net Debt/(Cash) 1,169.8 1,120.3 1,129.8

Payout ratio (%) 100.0 100.0 100.0 Working Capital 3.2 50.8 39.5

* listed on 21 Sep 2012

CASH FLOW (MYR m) WACC ASSUMPTIONS

FY Dec 4M2012F* 2013F 2014F

Profit before taxation 54.0 204.3 211.9 Risk-free Rate of Return 4.0

Depreciation 3.4 4.3 4.8 Long Term Cost of Debt 4.6

Net interest receipts/(payments) 15.0 52.2 52.5 Market Risk 10.5

Working capital change 0.0 0.0 0.0 Beta 0.6

Cash tax paid 0.0 0.0 0.0 Cost of Equity 7.5

Others (incl'd exceptional items) 7.8 28.5 14.5 Tax Rate -

Cash flow from operations 80.2 289.4 283.7 Weighted Cost of Capital 6.4

Capex (2.5) (6.3) (6.5) Growth 2.0

Disposal/(purchase) (4,612.6) 0.0 0.0 Terminal Value Discount 5.5

Others 0.3 2.6 2.3

Cash flow from investing (4,614.7) (3.7) (4.2)

Debt raised/(repaid) 1,212.6 0.0 0.0

Equity raised/(repaid) 3,400.0 0.0 0.0

Dividends (paid) 0.0 (181.4) (234.2)

Others (35.3) (54.8) (54.8)

Cash flow from financing 4,577.2 (236.1) (289.0)

Change in cash 42.8 49.5 (9.5)

Source: Maybank KE

of 39

IGB REIT

Property Profile

Mid Valley Megamall is one of the biggest one-stop malls for local and

out-of-state residents. Opened in 1999, it was the first mall with a

megamall concept in Malaysia. Since 1999, Mid Valley Megamall has

received more than 18 awards and accolades.

Figure 2: Mid Valley Megamall

Source: IGB REIT

of 39

IGB REIT

Table 6: Top 10 tenants of Mid Valley Megamall

Table 7: Mid Valley Megamall profile

Tenants Trade Sector Occupied NLA (%)

Description : 5-level retail mall with 1 mezzanine floor, 2 levels of basement car park and 4 levels of

elevated car park AEON Dept Store 17.6

Land area : 1,047,532 sq ft

Carrefour Dept Store 12.3

Gross floor area : 6,107,103 sq ft

Metrojaya Dept Store 11.7

Net lettable area : 1,718,951 sq ft

MVEC Exhibition Centre 3.9

Number of car parks : 6,092 (31 May 2012)

GSC Leisure 3.6

Number of tenants : 454 (31 May 2012)

Celebrity Fitness Health & Wellness 2.3

Age of property : 13

Cosmic Bowl Leisure 1.7

Tenure : 99-year leasehold expiring 6 June 2103

Forever 21 Apparel 1.3

Stake : 100%

Why Pay More / Studio R Entertainment & Leisure 1.2

Purchase consideration

: MYR 3,440m

Ace Hardware Home & Gift 1.1

Appraised value : MYR 3,440m (10 Apr 2012)

Total 56.7

Transacted value : MYR 2,003 / sq ft (on NLA)

Occupancy rate : 99.8% (31 May 2012)

Source: IGB REIT

Source: IGB REIT

Chart 20: Trade sector by Gross Rental Income* Chart 21: Trade Sector by NLA*

14.9%

31.1%

11.2%

17.8%

9.1%

6.4%

1.3%

2.2% 1.3%

4.7%

Dept Store

Apparel

Leisure

F&B

Sundry & Services

Health & Wellness

Exhibition Centre

Home & Gift

Discounters

Timepiece & Jewellery

41.6%

14.0%

14.0%

11.6%

5.2%

4.3%

3.9%2.4%

1.8%1.2%

Dept Store

Apparel

Leisure

F&B

Sundry & Services

Health & Wellness

Exhibition Centre

Home & Gift

Discounters


* as at 31 May 2012

Sources: IGB REIT

* as at 31 May 2012

Sources: IGB REIT

Chart 22: Historical renewal rates by NLA

89.6

92.893.1

87

88

89

90

91

92

93

94

2009 2010 2011

(%)

Sources: IGB REIT

of 39

IGB REIT

Property Profile

The Gardens Mall is one of the premium shopping centres in the Klang

Valley. Located in the Mid Valley City, it provides premium shopping

experience for shoppers without having to go into town. The

architecture of The Gardens Mall is designed to create pleasant

environment by using local arts, crafts, flora and fauna.

Figure 3: The Gardens Mall

Source: IGB REIT

of 39

IGB REIT

Table 8: Top 10 tenants of The Gardens Mall

Table 9: The Gardens Mall profile

Tenants Trade Sector Occupied NLA (%)

Description : 8-level retail mall with 4 levels of basement car park and 4 levels of elevated car park

Isetan Dept Store 18.1

Land area : 421,773 sq ft

Robinsons Dept Store 13.0

Gross floor area : 3,379,510 sq ft

GSC Signature Leisure 3.8

Net lettable area : 817,053 sq ft

X-Tra Home & Gift 2.9

Number of car parks : 4,128 (31 May 2012)

mYoga Health & Wellness 2.9

Number of tenants : 209 (31 May 2012)

Marketplace (Cold Storage)

Dept Store 2.8

Age of property : 5

Borders Leisure 2.7

Tenure : 99-year leasehold expiring 6 June 2103

Red Box Leisure 2.0

Stake : 100%

Marks & Spencer Apparel 1.9

Purchase consideration

: MYR 1,160m

Hokkaido Ichiba F&B 1.8

Appraised value : MYR 1,160m (10 Apr 2012)

Total 51.9

Transacted value : MYR 1,420 / sq ft (on NLA)

Occupancy rate : 99.7% (31 May 2012)

Source: IGB REIT

Source: IGB REIT

Chart 23: Trade sector by Gross Rental Income* Chart 24: Trade Sector by NLA*

14.7%

11.7%

18.8%

23.5%

6.6%

4.5%

7.8%

6.7%

5.7%

Dept Store

Leisure

F&B

Apparel

Home & Gift

Health & Wellness

Fashion (Luxury)

Sundry & Services


34.0%

16.0%15.5%

13.3%

7.5%

6.0%

2.9%3.0%

1.8%

Dept Store

Leisure

F&B

Apparel

Home & Gift

Health & Wellness

Fashion (Luxury)

Sundry & Services


* as at 31 May 2012

Sources: IGB REIT

* as at 31 May 2012

Sources: IGB REIT

Chart 25: Historical renewal rates by NLA

67.9

89.1 88.9

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011

(%)

Sources: IGB REIT

of 39

IGB REIT

Appendix 1: IGB REIT’s structure

IGB REIT is established with the principal investment strategy of

investing, directly and indirectly, in a diversified portfolio of income

producing real estate used primarily for retail purposes.

Chart 26: The structure of IGB REIT

IGB REIT

Unitholders

ManagerTrustee

Mid Valley Megamall The GardensMallProperty Manager

Acts on behalf of Unitholders

Trustee fees

Ownership of Deposited Property (Vested in trustee)

Income

ManagementServices

Management Fees

Property Management Fees

Property Management Services

Source: IGB REIT

IGB REIT Management Sdn Bhd is the manager of IGB REIT. The

Manager undertakes primary management activities in relation to IGB

REIT. Its main responsibility is to set the strategic direction of IGB REIT

and give recommendations to the Trustee on the acquisition,

divestment and enhancement of assets of IGB REIT in accordance with

its stated investment strategy. The Manager is wholly-owned by the

sponsor of IGB REIT, IGB Corporation (IGB). IGB is one of the

country‟s largest owners and managers of investment properties and it

is listed on Bursa Securities.

AmTrustee Berhad is the trustee of IGB REIT. The Trustee provides

corporate trusteeship services for IGB REIT. Chartwell ITAC

International Sdn Bhd is the property manager of IGB REIT. The

Property Manager is responsible for providing property management

services for the properties in IGB REIT‟s portfolio.

of 39

IGB REIT

Appendix 2: Who’s who in IGB REIT

Chart 27: Organisation structure of IGB REIT management

Board of Directors

Chief Executive Officer

Antony Patrick Barragry

Joint Chief Operating Officer (Mid Valley Megamall)

Daniel Yong Chen-I

Joint Chief Operating Officer (The Gardens Mall)

Elizabeth Tan Hui Ning

Chief Financial Officer

Chai Lai Sim

Head of Compliance

Tina Chan Lai Yin

Head of Operations/ Leasing

(Mid Valley Megamall)

Rennie Lee Chai Tin

Head of Marketing (Mid Valley Megamall)

Ko Chai Huat

Head of Operations/ Leasing (The Gardens Mall)

Elizabeth Tan Hui Ning

Head of Marketing (The Gardens Mall)

Gabrielle Tan Hui Chween

Head of Investment

Chow Yeng Keet

Source: IGB REIT

Anthony Patrick Barragry, Chief Executive Officer of the Manager.

He is a qualified architect with 35 years of international experience in

the design, development and operations of major mixed-use

developments. His prior work experience includes the Putra World

Trade Centre and the Renaissance Kuala Lumpur Hotel, the Ciragan

Palace Hotel in Istanbul, and Jebel Ali Hotel development in Dubai. He

was previously Project Director in the construction of Mid Valley City

Phase 1, including Mid Valley Megamall and was subsequently

appointed as Executive Director of MVC in 2002. He was also Project

Director for the design and construction of the St Giles Hotel, Heathrow,

London and the upgrading of IGB‟s Pangkor Island Beach Resort. In

January 2008, he was appointed Chief Executive Officer of MVCG. He

holds a Diploma in Architecture from the University of Sheffield and is a

member of the International Council of Shopping Centers and FIABCI.

Daniel Yong Chen-I, Joint Chief Operating Officer (Mid Valley

Megamall) and a Non-Independent Executive Director of the Manager.

Daniel Yong is a law graduate from the University of Bristol, England.

He joined MVC in 1999 as a member of the pre-opening retail

development team. He was appointed an Executive Director of MVC in

2003 and has been responsible for overseeing the marketing, leasing,

management and operation of Mid Valley Megamall since. He was also

involved in the design and pre-opening of The Gardens Mall from 2004

to 2007. His prior work experience includes the development of

bespoke systems with BYG Systems Ltd in England and Operational

of 39

IGB REIT

Management with Wah Seong Engineering Sdn Bhd, the distributor and

manufacturer for Toshiba Elevator and Escalators in Malaysia.

Elizabeth Tan Hui Ning, Joint Chief Operating Officer (The Gardens

Mall), Head of Operations/Leasing (The Gardens Mall) and a Non-

Independent Executive Director of the Manager. She is also the

Director of Leasing of MVCG. She joined MVCG in August 2004 and

subsequently assumed her present role as the Director of Leasing of

MVCG. She is responsible for the conceptualisation and strategy of the

tenant mix of The Gardens Mall as well as overseeing the leasing, retail

development and customer service departments. She graduated with

First Class Honours from Cardiff University, Wales, United Kingdom

with a degree in Business Administration (BSc) in June 2004.

Chai Lai Sim, Chief Financial Officer of the Manager. She has over

30 years of experience in audit, corporate finance, capital management

strategy including treasury, financial accounting and taxation in property

development, commercial and retail property investment and hospitality

industries. She began her career as an articled student with Coopers &

Lybrand (now known as PricewaterhouseCoopers) before joining Tan &

Tan Developments Berhad as the Group Financial Controller in 1993.

Following the completion of the merger between Tan & Tan

Developments Berhad and IGB in 2002, she was appointed the Senior

Group General Manager of Group Finance and subsequently assumed

the present role of Group Chief Financial Officer of IGB. She is a

member of both the Malaysian Institute of Accountants (MIA) and the

Malaysian Institute of Certified Public Accountants (MICPA).

Tina Chan Lai Yin, Head of Compliance of the Manager. She has a

broad knowledge and skill-base in corporate secretarial work, having 20

years working experience. She is presently the Company Secretary of

the IGB group, a position which she has held since 1997. She is also

the Company Secretary of the KrisAssets group. Prior to joining IGB,

she had worked in a legal firm, Rahman Hashim, V.T. Ravindran and

Partners where she was the Company Secretary cum Administrator and

was later attached to Tan & Tan Developments Berhad, her last

position there being the Joint Company Secretary. She is an Associate

of The Institute of Chartered Secretaries and Administrators.

Rennie Lee Chai Tin, Head of Operations / Leasing (Mid Valley

Megamall) of the Manager and General Manager of MVC. She joined

MVC in 1995. She has about 19 years of work experience in leasing

and operations within the retail industry. She is credited with being part

of the founding team in the marketing of Mid Valley City. Her previous

work experience includes the leasing and marketing of Mahkota Parade

in Malacca, Subang Parade and IOI shopping centers in Kuala Lumpur.

She was a key member of Mid Valley Megamall pre-opening team.

Ko Chai Huat, Head of Marketing (Mid Valley Megamall) of the

Manager and Director of Design of MVC. He joined MVC in 1999. He

has about 24 years of work experience in visual merchandising as well

as advertising and promotion. He was formerly Visual Merchandising

Manager at Atria Shopping Centre in Kuala Lumpur. He directs,

conceptualises and leads all design set ups for promotional activities

and events in Mid Valley Megamall. He was a key member of the Mid

Valley Megamall pre-opening team. He holds a Diploma in Fine Arts.

Chow Yeng Keet, Head of Investment of the Manager. He is

presently the General Manager, Corporate Finance of IGB and Director

of Finance of MVC. He has 15 years of experience in corporate finance

of 39

IGB REIT

and advisory covering mergers and acquisitions, equity and debt fund

raising, capital management and restructuring, valuations as well as

take-over offers. He started his career as Corporate Finance Executive

with the then Sime Merchant Bankers Berhad in 1997. Thereafter, he

was with Commerce International Merchant Bankers Berhad (now

known as CIMB) for five years where his last position was as a

Corporate Finance Manager prior to joining IGB in 2004. Currently, he

is involved in corporate finance as well as finance and accounts of the

KrisAssets group. He holds a Bachelor of Economics (First Class

Honours) from University of Malaya and is a Fellow of the Association

of Chartered Certified Accountants.

Gabrielle Tan Hui Chween, Head of Marketing (The Gardens Mall)

of the Manager and Director of Marketing of MVCG. She holds a

Bachelor of Arts in Business Economics from the University of Exeter,

United Kingdom and a Bachelor of Fine Arts degree in fashion design

and marketing from the American Intercontinental University - London,

United Kingdom. She joined MVCG as the Head of Marketing in 2007

and later assumed the role of Director of Marketing. She oversees the

advertising and promotions activities as well as the public relations

initiatives at The Gardens Mall. She is also a director of MVCG.

Directors of the REIT Manager

The Board is entrusted with the responsibility for the overall management of the Manager. The Board consists of nine Directors, as summarized below.

Table 10: Board of Directors of the REIT Manager

No. Name Nationality Position

1. Tan Sri Dato‟ Dr. Lin See Yan Malaysian Chairman and Independent Non-Executive Director

2. Robert Tan Chung Meng Malaysian Managing Director and Non-Independent Executive Director

3. Halim bin Haji Din Malaysian Independent Non-Executive Director

4. Le Ching Tai @ Lee Chen Chong Malaysian Independent Non-Executive Director

5. Tan Boon Lee Malaysian Non-Independent Non-Executive Director

6. Tan Lei Cheng Malaysian Non-Independent Non-Executive Director

7. Daniel Yong Chen-I Malaysian Non-Independent Executive Director

8. Elizabeth Tan Hui Ning Malaysian Non-Independent Executive Director

9. Tan Yee Seng Malaysian Non-Independent Non-Executive Director

Source: IGB REIT

of 39

IGB REIT

Appendix 3: Background of the Sponsor

Listed on Bursa Securities, IGB Corporation Berhad is the Sponsor of

IGB REIT and it is one of the largest owners and managers of

investment properties in Malaysia with diversified interests worldwide.

The Sponsor‟s expertise includes site acquisition and project planning,

design and development, project management and construction,

marketing and leasing and asset and operational management. The

Sponsor‟s property development arm, Tan & Tan Development Berhad,

has a track record of more than 30 years in the Klang Valley.

Development at Mid Valley City is nearing a tail end, with the Sponsor

having commenced work on its final plot of land there, being a new

project called Mid Valley City Southpoint, a mixed office and retail

development which is expected to be completed around 2015.

In addition to the properties in Mid Valley City which it developed, the

Sponsor owns three hotels within Kuala Lumpur and two hotels in Kota

Kinabalu and Pangkor Island respectively. It also has interests in hotels

in the Philippines (Manila), Myanmar (Yangon) the United Kingdom

(London) and the United States of America (New York).

On 28 March 2012, the Sponsor entered into a memorandum of

understanding with Selia Pantai Sdn Bhd, to establish a 70:30 joint

venture to acquire three parcels of leasehold land measuring

approximately 36 acres within Southkey development in Johor, to be

developed into a retail mall and/or mixed development.

of 39

IGB REIT

Appendix 4: Background of the Trustee

AmTrustee Berhad was incorporated in Malaysia under the Act on 28

July 1987. It is registered as a trust company under the Trust

Companies Act, 1949 and is also registered with the SC for trusteeship

service in respect of unit trust funds. As at the Latest Practicable Date,

the authorized share capital of the Trustee is MYR1,000,000 comprising

100,000 ordinary shares of MYR10.00 each, paid-up to MYR5.00 each

in accordance with Section 3(c) of the Trust Companies Act, 1949.

The principal activity of the Trustee is the provision of corporate

trusteeship services. The Trustee has been in the trustee business for

more than 25 years. As at the Latest Practicable Date, the Trustee‟s

staff force comprises of 27 executive staff and four non-executive staff.

The Trustee undertakes all types of trustee business allowed under the

Trust Companies Act, 1949, specializing in corporate trustee services

which include acting as trustee for private debt securities, unit trust

funds, provident and retirement funds, golf clubs and timeshares,

stakeholders and REITs. As of the Latest Practicable Date, the Trustee

is trustee for 22 unit trust funds and four listed REITs.

Table 11: Board of Directors of the Trustee

Name

Directorship

Madam Pushpa Rajadurai Chairman (Non-Independent Director)

En. Shaharuddin Bin Hassan Non-Independent Director

Tuan Hj Mohamad Sabirin Bin HjA.Rahman Non-Independent Director

Dato‟ Ng Mann Cheong Independent Director

Datuk Haji Mohd Idris Bin Mohd Isa Independent Director

Source: IGB REIT

Chief Executive Officer of the Trustee: Mr Tan Kok Cheeng

Mr Tan Kok Cheeng was appointed the Chief Executive Officer of

AmTrustee Berhad with effect from 1 October 2010. Prior to joining

AmTrustee Berhad, he served as the Chief Internal Auditor, Internal

Audit Department, AmBank Group then elevated as Internal Audit

Advisor, AmBank Group. He has been with AmBank for more than 25

years.

of 39

IGB REIT

Appendix 5: Fee Structure of IGB REIT

Fees payable to the REIT Manager:

(i) Base fee

Up to 1% p.a. of the Total Asset Value (TAV), though the

Manager intends to charge a base fee of 0.3% in 2012 and 2013.

(ii) Performance fee

5% per annum of the Net Property Income (NPI) of IGB REIT

(iii) Acquisition fee

1% of the transaction value

(iv) Divestment fee

0.5% of the transaction value

Fees payable to the Property Manager:

(i) Property management fee

MYR20,000 per month and full reimbursement of costs and

expenses incurred in the operation, maintenance, management

and marketing of the two shopping malls.

(ii) Trustee‟s fee

Up to 0.03% per annum of the Net Asset Value (NAV) of IGB REIT, subject to a maximum of MYR280,000 per annum.

of 39

IGB REIT

Appendix 6: Fee comparison among various M-REITs

Table 12: Comparison between M-REITs

Trust Al Aqar KPJ Al Hadharah Boustead

Amanah Raya*

AmFirst Atrium Axis REIT* CMMT* Hektar Quill Capita* Starhill SunREIT* Tower UOA REIT PAV REIT*

Ticker: AQAR MK BIRT MK AARET MK ARET MK ATRM MK AXRB MK CMMT MK HEKT MK QUIL MK STRH MK SREIT MK TRET MK UOAR MK PREIT MK

Fees structure:

Base fees 0.15% of

NAV

0.3 % of

NAV

1.0% of

NAV

0.5% of

GAV

1.0% of

NAV

1.0% of

NAV

1.0% of

GAV

1.0% of

GAV

0.4% of

GAV

1.0% of

GAV

0.3% of

GAV

0.75% of

GAV

1.0% of

NAV

1.0% of

TAV

Performance fees -

2.5% performance-

based profit sharing receivable

- 3.0% of

NPI - -

5.0% of

NPI

5.0% of

NPI

3.0% of

NPI

5.0% of

NPI

3.0% of

NPI

4.0% of

NPI -

5.0% of

NPI

Trust fees 0.03% of NAV

0.03% of NAV

0.1% of NAV

0.1% of NAV

0.04% of NAV subject to a

minimum fee of RM40,000 per annum

0.05% of NAV

0.02% of GAV for 1st

RM2b then 0.01% of GAV

thereafter

0.1% of NAV

0.03% of 1st RM2.5b of GAV and

0.02% on the GAV in excess

RM2.5b

0.03% of GAV

0.03% of NAV

0.03% of NAV

0.045% of NAV

0.05% of NAV

Others

Acquisition Fee 1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

1.0% of acq price

Divestment Fee 0.5% of disposal

price

0.5% of disposal

price

0.5% of disposal

price

0.5% of sale price

0.5% of disposal

price

0.5% of sale price

0.5% of sale price

0.5% of sale price

0.5% of sale price

0.5% of sale price

0.5% of sale price

0.5% of sale price

0.5% of disposal

price

0.5% of disposal

price

Incentive Fee

0.1%-0.2% depending on annual growth of

distributable income

Source: M-REITS’ Annual Reports, Maybank KE * stocks under Maybank KE coverage

17 October 2012 of 39


Page 1 of 2

Appendix 7: Accolades / Awards

Since 1999, Mid Valley Megamall has received more than 18 awards

and accolades and some of the key awards include:

Finalist for Retail Merchant of the Year in the MasterCard Hall of

Fame Awards 2011;

Merit for Innovative Shopping Outlets 2010/2011 by Tourism Malaysia

Best Promotions and Events (Central Business District) Category for

Christmas 2009 in the Malaysia Year End Sale Awards 2009 by

Tourism Malaysia;

Best Promotions and Events (Central Business District) Category for

the Malaysia Mega Sale Carnival Awards 2009 by Tourism Malaysia;

MAXI Gold Award 2009 in Visual Merchandising category for the Hari

Raya 2008 Promotion by International Council of Shopping Centres;

Best Retail Development Award 2001 by FIABCI Malaysia;

Best Shopping Complex Award 2000 by Tourism Malaysia; and

Gold Award in the Shopping Complex of the Year Category 1999 by

Retail World Excellence Award.



Page 1 of 2

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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security‟s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction‟s stock exchange in the equity analysis. Accordingly, investors‟ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may rec eive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available t o us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

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Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

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Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the pri or written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investment s to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.



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DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission.Philippines:MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 17 October 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 17 October 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst‟s personal views about any and all of the subject securities or issuers; and no part of the research analyst‟s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system:

BUY Total return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Total return is expected to be between -10% to +10% in the next 12 months (excluding dividends)

SELL Total return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investm ent ratings are only

applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investm ent ratings

as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings

BV = Book Value FV = Fair Value PEG = PE Ratio To Growth

CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio

Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter

CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset

DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share

NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds

EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital

EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year

EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date



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EV = Enterprise Value PBT = Profit Before Tax

Malaysia

Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore

Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard

#39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090

Fax: (65) 6339 6003

London

Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstan’s Hill

London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers’ Tel: (44) 20 7626 2828

Fax: (44) 20 7283 6674

New York

Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong

Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East,

Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104

Indonesia

PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55

Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

India

Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station,

Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604

Philippines

Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200

Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

Thailand

Maybank Kim Eng Securities (Thailand) Public Company

Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan,

Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

Vietnam

In association with

Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St.

District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36

Fax : (84) 838 38 66 39

Saudi Arabia

In association with

Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz

Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading

Connie TAN

[email protected] Tel: (65) 6333 5775 US Toll Free: 1 866 406 7447

North Asia Sales Trading

Eddie LAU

[email protected] Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267

www.maybank-ke.com | www.kimengresearch.com.sg

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