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REIT SINGAPOREJune 26, 2012

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.

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A fuller OFCWe are net positive on K-REITs acquisition of another 12.4% in OFC,with increased control and good placement price outweighing slightnegatives from higher asset leverage. Placement price of S$1.17 (15%premium to VWAP) could provide a benchmark for the share price.

We raise our DPU estimates andDDM-based target price (discount

rate: 8.2%), factoring in accretionfrom the purchase. MaintainOutperform on favourablerisk-reward. We see catalysts from anearlier bottoming of the office marketand tax savings.

What HappenedK-REIT announced the acquisition ofan additional 12.4% stake in OceanFinancial Centre (OFC) for S$261.6m(S$2,380 psf) or S$285.7m (2,606psf)including S$24.1m in income support

till Dec 2017 from Avan Investments.This acquisition will take its stake inOFC to 99.9%. Equity cost of S$228mwill be funded by a mix of debt(S$158.2m) and equity (S$70.2mprivate placement at S$1.17 apiece toOng Holdings, 14.6% premium toVWAP of S$1.02, though still belowNAV at 0.9x P/BV).

What We ThinkOverall acquisition price and termswere fairly similar to that for

K-REITs acquisition of its initial

87.5% stake back in Oct 11. Slightdifference came from a lower support

quarterly NPI of S$27.6m (prev:S$30.5m) and rental of S$13-14psf.Positives came from increased controland stake in the asset and premiumon the placement price (which couldset a target/support for share price).We understand that K-REIT hadapproached the vendor for thepurchase who apparently paid apremium to VWAP due to hisconfidence in K-REIT. Slightnegatives however came from a fairlyhigh aggregate leverage of 43.9%

(previously 41.8%) after the deal.

What You Should DoOverall, we are net positive on thedeal, as we see advantages fromincreased control in OFC and goodplacement price, outweighing slightnegatives from higher asset leverage.We raise our DPU estimates andDDM-based target price (discountrate: 8.2%), factoring in accretionfrom the purchase. MaintainOutperform on favourable risk-

reward.

CIMB Analyst

Tan Siew LingT (65) 62108698E siewling.tan@cimb.com

Donald Chua

T (65) 62108606E donald.chua@cimb.com

K-REIT Asia FLASH NOTEKREIT SP / KASA.SI

Current S$1.03 SHORT TERM (3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target S$1.17

US$2,044m US$0.74m 24.1% Previous Target S$1.14S$2,623m S$0.93m 2,559 m shares Up/downside 14.0%

0.70

0.80

0.90

1.00

1.10

1.20

1.30

73

79

85

91

96

102

108Price Close Relative to FSSTI (RHS)

Source: Bloomberg

5

10

15

Jun-11 Sep-11 Dec-11 Mar-12

Volm

Financial Summary

Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F

Gross Property Revenue (S$m) 84.6 78.0 170.3 183.7 190.0

Net Property Income (S$m) 67.3 61.7 131.0 141.2 146.1

Net Profit (S$m) 109.2 290.1 114.1 133.7 147.0

Distributable Profit (S$m) 85.6 113.0 195.3 202.5 200.1

Core EPS (S$) 0.040 0.047 0.044 0.051 0.056

Core EPS Growth 59.2% 18.6% (6.3%) 15.2% 9.7%

FD Core P/E (x) 25.81 29.91 23.23 20.17 18.39

DPS (S$) 0.064 0.071 0.076 0.077 0.076

Dividend Yield 6.21% 6.91% 7.37% 7.49% 7.40%

Asset Leverage 31.8% 37.0% 40.5% 41.1% 41.1%BVPS (S$) 1.52 1.28 1.27 1.27 1.27

P/BV (x) 0.68 0.80 0.81 0.81 0.81

Recurring ROE 2.63% 2.52% 3.46% 4.01% 4.40%

% Change In DPS Estimates 0.43% 2.36% 2.58%

CIMB/consensus EPS (x) 0.83 0.94 0.84

1.03

1.17

0.81 1.26

Target

52-week share price range

Current

SOURCE: CIMB, COMPANY REPORTS

Share price info

Share price perf. (%) 1M 3M 12M

Relative 3.1 14.9 -7.6

Absolute 4.6 9 -15.8

Major shareholders % held

Keppel Land 45.5Keppel Corp Ltd 30.4

Odyssey America 0.6

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Figure 1: CIMB REIT Overview

SREIT Price as of

25 Jun 12Hospitality

Ascott Residence Trust ART SP $1.08 $1,220 41.6% 1.31 0.82 1.18$ N 8.2% 8.0% 18.2%

CDL Hospitality Trust CDREIT SP $1.85 $1,788 25.6% 1.60 1.16 2.08$ O 6.2% 6.4% 18.7%

Simple Average 33.6% 0.99 7.2% 7.2%

Industrial

Ascendas Reit AREIT SP $2.09 $4,673 36.6% 1.84 1.14 2.14$ N 6.6% 7.0% 8.8%

Cache Logistics Trust CACHE SP $1.04 $728 29.6% 0.93 1.12 1.13$ O 8.1% 8.5% 17.2%

Cambridge Industrial Trust CREIT SP $0.56 $665 33.1% 0.62 0.90 NA NR 8.8% 9.2%

Mapletree Logistics Trust MLT SP $0.97 $2,354 37.0% 0.90 1.08 1.07$ O 7.4% 7.6% 17.7%

Mapletree Industrial Trust MINT SP $1.18 $1,923 37.8% 1.02 1.16 1.24$ O 7.3% 7.7% 12.6%

Sabana Shariah SSREIT SP $0.98 $622 34.1% 1.05 0.93 NA NR 10.3% 9.5%

Simple Average 34.7% 1.05 8.1% 8.3%

Office

Frasers Commercial Trust FCOT SP $0.97 $618 36.1% 1.33 0.73 1.14$ O 7.3% 8.6% 25.7%

CapitaCommercial Trust CCT SP $1.25 $3,548 30.2% 1.60 0.78 1.41$ O 6.3% 6.4% 19.1%

K-Reit KREIT SP $1.03 $2,623 41.8% 1.25 0.82 1.17$ O 7.4% 7.5% 21.4%

Suntec REIT SUN SP $1.33 $2,976 39.2% 1.99 0.67 1.51$ O 6.8% 6.9% 20.3%Simple Average 36.8% 0.75 6.9% 7.3%

Retail

CapitaMall Trust CT SP $1.81 $6,027 38.4% 1.58 1.15 2.02$ O 5.5% 6.1% 16.9%

Frasers Centrepoint Trust FCT SP $1.68 $1,378 30.8% 1.41 1.19 1.78$ O 5.8% 6.4% 12.1%

Starhill Global REIT SGREIT SP $0.64 $1,244 30.4% 0.96 0.67 0.72$ O 6.8% 7.5% 18.7%

Mapletree Commercial Trust MCT SP $0.96 $1,793 37.6% 0.95 1.01 1.02$ O 6.2% 6.5% 11.9%

Simple Average 34.3% 1.00 6.1% 6.6%

Healthcare

Parkway Life REIT PREIT SP $1.85 $1,119 34.8% 1.46 1.27 1.96$ O 5.9% 6.3% 11.8%

Simple Average 34.8% 1.27 5.9% 6.3%

Simple average for SIN 35.0% 0.97 7.1% 7.4%

MREIT Price as of

25 Jun 12

Retail

Capitamalls Malaysia Trust CMMT MK $1.61 $2,842 28.4% 1.10 1.47 1.80$ O 5.2% 5.3% 16.7%

Sunway REIT SREIT MK $1.32 $3,559 35.3% 1.01 1.30 1.41$ O 5.6% 5.8% 12.5%

Pavilion REIT PREIT MK $1.21 $3,631 19.1% 0.96 1.26 1.27$ O 5.2% 5.6% 9.9%

Simple Average 27.6% 1.34 5.3% 5.6%

Industrial

Axis REIT AXRB MK $2.83 $1,284 24.0% 2.07 1.37 NA NR 6.4% 6.6%

Simple Average 24.0% 1.37 6.4% 6.6%

Simple average for MAL 26.7% 1.35 5.6% 5.8%

Simple average for ALL 33.4% 1.05 6.8% 7.1%

2012

Yield

2013

Yield

Total return

(Prospective

price upside +

2011 yield)

2012

Yield

2013

Yield

Total return

(Prospective

price upside +

2012 yield)

Target

Price

(DDM-

based) Rec.

Last

stated

NAV

Price /

Stated

NAV

Target

Price

(DDM-

based) Rec.

Last

stated

NAV

Bloomberg

Ticker

Mkt Cap

(LC $m)

Last

reported

asset

leverage

Price /

Stated

NAVBbg Code

Mkt Cap

(LC $m)

Last

reported

asset

leverage

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

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its opinion or the information in this research report.

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The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS doesnot confirm nor certify the accuracy of such survey result.

Score Range 90 100 80 89 70 79 Below 70 or No Survey Result

Description Excellent Very Good Good N/A

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Recommendation Framework #1 *

Stock Sector

OUTPERFORM: The stock's total return is expected to exceed a relevantbenchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, isexpected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevantbenchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expectedto perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevantbenchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, isexpected to underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevantbenchmark's total return by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, isexpected to outperform the relevant primary market index over the next 3 months.

TRADING SELL: The stock's total return is expected to be below a relevantbenchmark's total return by 5% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, isexpected 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 and Jakarta 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.

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