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l Equity Research l
Important disclosures can be found in the Disclosures AppendixAll rights reserved. Standard Chartered Bank 2013 http://research.standardchartered.com
Singapore l Real Estate Investment Trusts 8 February 2013
Cambridge Industrial TrustStrong organic and inorganic growth despite weak industrial outlook
We initiate coverage on Cambridge Industrial Trust(CREIT) with an Outperform rating and PT of SGD 0.77.
CREIT owns a SGD 1.2bn portfolio of 49 industrial assetsacross Singapore. It provides a 2013E DPU yield of 7.7%,one of the highest among SREITs.
We expect acquisitions to drive NPI growth of 10% p.a. in2013-14.
With 33% of its assets under-rented, we anticipate positiverent reversions in 2013-14 despite falling market rents.
Unitholder-friendly fee structure rewards unit performancerather than growth in asset size or income.
OUTPERFORM (initiating coverage)
Attractive 7.7% DPU yield in 2013E: We expectCREIT to
provide 7.7% and 8.2% DPU yield in 2013 and 2014,
respectively, potentially among the highest among SREITs. We
expect NPI to grow 10% p.a. in 2013-14, driven by income
contribution from acquisition assets. Excluding the impact of
asset divestments, we estimate rental escalations and
reversions will drive organic income growth of 3.6% CAGR
in 2012-14.
Positive rental reversions likely, despite weakening sector:
Single-tenanted leases expiring in 2013-14 make up c.33% of
CREITs portfolio. Despite our negative industrial outlook, we
expect these renewals to achieve positive reversions since
effective passing rents rose only c.16% in 2006-12, compared
to 44-74% increases in market rents.
Independent manager, unitholder-friendly fee structure:
CREIT has an independent manager, which may give it better
access to property vendors that equate this with less conflict of
interest. Further, its manager is rewarded for outperformance of
CREITs unit price rather than asset size or NPI. We think
CREIT may potentially be the first SREIT to internalise its
management.
Key risks:An economic slowdown could impact rents and
occupancy rates. We conservatively lower our occupancy
estimates for single-tenanted leases expiring in 2014-15 to
factor in potential conversion to multi-tenanted ones.
Valuation: Our DDM-derived price target uses a risk-free rate
of 2.0%, market risk premium of 5.5%, terminal growth of 0.5%
and beta of 1.0. We have not assumed any acquisitions. We
estimate that a potential divestment of CREITs strata industrial
area at Hillview Ave could be c.14% accretive to our valuation.
Source: Company, Standard Chartered Research estimates
Share price performance
Source: Company, FactSet
PRICE as of 7 Feb 2013
SGD 0.73
PRICE TARGET
SGD 0.77
Bloomberg code Reuters code
CREIT SP CMIT.SI
Market cap 12-month range
SGD 882mn (USD 711mn) SGD 0.50 - 0.73
EPS adj est change NA
Year-end: December 2012 2013E 2014E 2015E
Revenue (SGD mn) 89 100 108 107
Net property income (SGD mn) 76 86 93 92
NPI margin (%) 85.7 86.0 86.0 86.0
Associates and JCEs (SGD mn) 0 0 0 0
Revaluation gains (SGD mn) 42 24 26 27
Interest expense (SGD mn) (20) (20) (21) (23)
Management fees (SGD mn) (10) (9) (7) (7)
Net profit (SGD mn) 89 81 91 89
Net profit adj. (SGD mn) 48 57 65 62
Net profit adj. growth (%) 37.9 18.8 14.0 -4.7
EPU (S) 7.48 6.66 7.42 7.16
EPU adj. (S) 4.00 4.66 5.27 4.98
EPU growth adj. (%) 37.1 16.6 13.0 -5.5
DPU (S) 4.78 5.53 5.88 5.59
DPU growth (%) 12.9 15.6 6.4 -5.0
EV/EBIT (x) 15.9 17.8 15.9 16.2
Net debt / assets (%) 30.9 35.0 33.9 33.1
PBR (x) 1.04 1.08 1.05 1.02
PER adj. (x) 14.5 15.6 13.8 14.6
Dividend yield (%) 8.3 7.6 8.1 7.7
Net asset value/unit (S) 64.69 66.82 68.94 70.97
Prem./(disc.) to NAV (%) -10.5 8.5 5.2 2.2
0.45
1.45
Feb-12 May-12 Aug-12 Nov-12 Feb-13
Cambridge Industrial Trust STRAITS TIMES INDEX (rebased)
Share price (%) -1 mth -3 mth -12 mth
Ordinary shares 7 11 45
Relative to index 5 3 31
Relative to sector - - -
Major shareholder Mitsu & Co. Ltd (1.6%)
Free float 96%
Average turnover (USD) 1,112,552
+65 6596 8506
Regina [email protected]
+65 6596 8502C I
GD0.
GD0.
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Contents
Key highlights 3Valuation 7Key risks 10Structure and management 13Portfolio analysis 16Financials 21Appendix: Property portfolio 24Disclosures appendix 27
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Key highlights
Attractive dividend yield and strong growth
CREIT provides a 7.7% 2013E DPU yield, the highest among industrial REITs and 190bps abovethe SREIT average. This rises to 8.2% in 2014E, as acquisition completions and current under-
renting mitigates the weaker occupancies we expect at properties with expiring master leases.
We estimate CREIT to have one of the highest DPU yields among SREITs in 2013-14.
Fig 1: Industrial SREITs Highest 2013-14E DPU yields
AAREITs DPU yield estimate for YEMar-2014; AREIT YEMar-2014; MINT/MLT YESep-2013
Source: Standard Chartered Research estimates
CREIT is trading at 1.12x P/NAV, lower than the 1.35x average for industrial REITs under our
coverage and 1.17x average for SREITs under our coverage.
Fig 2: Industrial REITs P/NAV
Source: Companies, Bloomberg, Standard Chartered Research
Pro-active management to drive NPI growth of 10% p.a. in 2013-14E
We expect CREITs NPI to grow by 13% in 2013 and 8% in 2014, driven largely by acquisitions
made in 2012.
We expect overall NPI CAGR of 10% in 2012-14:
Acquisition assets: We expect income contribution from assets acquired in 2012 to grow
from SGD 4.5mn in 2012 to SGD 22.9mn in 2014. The jump in contribution results from
acquisition completions for five properties between 4Q12 and 1Q13.
Development assets: We expect income contribution from CREITs two development assets
to rise c.20% in 2014 from 2013E as CREIT receives full-year contributions.
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
CREIT AAREIT CACHE MINT MLT AREIT SREITaverage
2013E DPU yield 2014E DPU yield
0%
5%
10%
15%
20%
25%
30%
35%
40%
AREIT MINT MLT CACHE SREIT
average
CREIT AAREIT
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Existing portfolio: We expect organic income to fall 2.6% p.a. on average in 2012-14, due to
the divestment of four properties between 1Q12 and 1Q13. Excluding the impact of these
divestments, organic income should grow at 3.6% CAGR in 2012-14E, driven by built-in rental
escalations and lease expiries.
Fig 3: CREIT NPI breakdown
NPI contribution from organic assets are from assets already in CREITs p ortfolio before 1 January 2012
Source: Standard Chartered Research estimates
Portfolio and capital management acquisitions, divestments andasset enhancements
The trust actively managed its portfolio in 2012 with accretive acquisitions and several asset
enhancement initiatives. We expect these to mitigate the loss of income from its recent
divestment of two properties to the Singapore Land Authority. We are positive on CREITs active
portfolio management, having sought out accretive acquisitions despite not having a ready
pipeline of properties granted by a sponsor.
Fig 4: CREIT Recent acquisitions, major divestments and asset enhancements
Capex required (SGD mn) RoI
Asset enhancement initiatives 48.0 9.0%
Purchase price (SGD mn) NPI yield
Acquisitions 293.5 7.2%
Divestment price (SGD mn) Exit yield
Major divestments 126.8 8.6%
Source: Company, Standard Chartered Research estimates
CREITs acquisitions in 2012 were funded by divestment gains and debt with interest cost of
c.4.0%, rather than equity raising costing at average cost of equity of 7.8% in that year. We think
management could potentially carry out further asset enhancements at its properties as well as
c.SGD 150mn of acquisitions in 2013. These could potentially be funded by asset divestments.
We have not included any additional enhancement works or acquisitions in our assumptions.
Positive rental reversions still likely despite weak industrial outlook
CREIT will see c.15% of its leases expire in 2013. Of these, 4.4% are multi-tenanted while the
remaining 11.0% are single-tenanted leases. These expiring seven-year single-tenanted leases
are from CREITs IPO batch of assets, which will be going through their first reversion cycle.
40
50
60
70
80
90
100
2012 2013E 2014E 2015E
SGD
mn
Organic Acquisitions Development
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Fig 5: Lease expiry profile Fig 6: Market rents vs CREIT rents (rebased)
Source: Company Urban Redevelopment Authority (URA) rental data for multi-tenantedfactories and warehouses
Source: URA, Company
These leases have average rental escalations of 2.5% p.a. and effective passing rents would
have risen c.16% between 2006 and 2012. In comparison, factory and warehouse rents inSingapore rose 74% and 44%, respectively, over the same period.
We estimate factory and warehouse rents will fall 8% and 6% p.a., respectively, over 2013-14.
However, we expect under-renting at CREITs properties to offset the weaker market signing
rents. We expect CREITs expiring leases to achieve rents closer to market levels in 2013. We
have assumed average passing rents will rise 5-11% in 2013, following positive rental reversions
from expiring leases and built-in escalations for the ongoing leases.
Independent manager with a unitholder-friendly fee structure
CREIT is Singapores first independent industrial REIT. Its manager, Cambridge Industrial
Trust Management (CITM), is not majority controlled by any property company that develops
or owns real estate for commercial sale or investment purposes.
CREIT has a unitholder-friendly fee structure; most SREITs have performance fees tied to
asset size or NPI. CREITs management performance fee structure is formulated to reward
management for total returns achieved by the REIT, versus a benchmark comprising the
seven largest SREITs. In 2012, management received its first performance fees since IPO,
following a 41% rise in its stock price during 2012.
Fig 7: Management fees
CREIT CACHE AAREIT
Base fee 0.5% p.a. ofdeposited property
0.5% p.a. ofdeposited property
0.5% p.a. ofdeposited property
Performance fee 5.0% of total return of Trust
Index less total return ofbenchmark index multipliedby market cap (15% ofamount > 2.0% of totalreturn
1.5% p.a. of
NPI
0.1-0.2% p.a. of
deposited property (basedon DPU growth)
Acquisition fee 1.0% of acquisition price 1.0% of acquisition price Up to 1.0% of acquisitionprice
Divestment fee 0.5% of divestment price 0.5% of divestment price Up to 0.5% of divestmentprice
Source: Companies
CREIT may enjoy better access to property vendors if they perceive it to have less conflict of
interest than sponsored REITs. Unitholders may also prefer its management structure, which
wholly aligns management interest with investor interest. In 2012, CREIT won the Best
Corporate Governance award at the SIAS Investors Choice Awards.
Due to the high free float of c.96%, CREIT could potentially be a takeover target if its unit price
were to fall significantly below NAV. Most other SREITs are 30-70% held by their parent or
sponsor company, making potential takeovers highly challenging.
0%
5%
10%
15%
20%
25%
2013
2014
2015
2016
2017
2018
2019
2020
Multi-tenanted
Single-tenanted
100
120
140
160
180
2006
2007
2008
2009
2010
2011
2012
Factory rents
Warehouse rents
CREIT rents
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We think CREIT could potentially be the first SREIT to internalise its management. While
CITM is not majority controlled by a property company, it is indirectly owned by three strategic
sponsors: National Australia Bank Group (56%), Oxley Group (24%) and Mitsui & Co., Ltd
(20%). If the sponsors of the manager agree on an exit price on their stakes in CITM, CREIT
could potentially internalise its manager.
Potential divestment of Hillview strata industrial property
CREIT owns a 69.4% share of the freehold strata industrial area at 63 Hillview Avenue, which it
acquired in December 2006 for SGD 72.2mn. Under current government regulations, the site may
be redeveloped into a residential development, which would command a significantly higher price.
We estimate the potential divestment of the asset, currently valued at SGD 110mn, could add
S 9/unit to CREITs NAV. This could potentially be c.14% accretive to CREITs current NAV/unit
of S 64.7.
CREIT has a one-year Collective Sale Agreement (CSA) with the minority owners of the property,
which expires on 2 May 2013. Even if a collective sale does not occur before the CSA expires,
we still see significant upside for CREIT if it were to divest its strata stake or undertake
enhancement works at the asset.
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ValuationWe initiate coverage on CREIT with an Outperform rating and our DDM-derived price target of
SGD 0.77 implies a 2013 yield of 7.2% and 2014 yield of 7.6%. Industrial SREITs currently offer a
yield of 6.5% for 2013 and for 2014 on average.
Across the SREITs under our coverage, we use a risk-free rate of 2.0% and market risk premium
of 5.5%. Depending on the asset class, free float market cap and risk profile, we apply betas of
0.80-1.10 and terminal growth rates of -1.00% and 2.25% for the SREITs under our coverage.
We assume a terminal interest rate of 3.3% for all SREITs under our coverage.
For industrial SREITs, we assume terminal growth of 0.5% and discount rates of 6.4-8.0% to
account for the shorter land tenure in their portfolios.
Fig 8: Valuation assumptions for industrial SREITs under our coverage
Name Ticker Terminalgrowth 10-yearbond Beta Discountrate
Price
target(SGD)
Implied
yield atPT
Cambridge Industrial Trust CREIT SP 0.50% 2.0% 1.00 7.50% 0.77 7.2%
Ascendas REIT AREIT SP 0.50% 2.0% 0.80 6.40% 2.63 5.7%
Mapletree Logistics Trust MLT SP 0.50% 2.0% 0.80 6.40% 1.22 5.9%
Mapletree Industrial Trust MINT SP 0.50% 2.0% 0.80 6.40% 1.37 6.6%
Cache Logistics Trust CACHE SP 0.50% 2.0% 1.00 7.50% 1.25 6.9%
Aims AMP Capital Industrial Trust AAREIT SP 0.50% 2.0% 1.10 8.05% 1.55 7.6%
Source: Standard Chartered Research estimates
For CREIT, we utilise a risk-free rate of 2.0% and market risk premium of 5.5%, in line with our
SREIT assumptions. We use terminal growth of 0.5%, in line with the industrial stocks under our
coverage.
We use a beta of 1.0 to account for its relatively small market capitalisation of c.SGD 880mn.
CREIT has a free float of 96%, or free float market cap of c.SGD 810mn. Liquidity is relatively low,
with one-month average daily trading volume at c.SGD 1.5mn.
Fig 9: Industrial SREITs Free float market cap and average daily trading volume
Data as of 28 January 2013
Source: Bloomberg
0
2
4
6
8
10
12
14
0
500
1,000
1,500
2,0002,500
3,000
3,500
4,000
4,500
5,000
AREIT MLT MINT CACHE CREIT AAREIT
SGD
m
nS
GD
mn
Free float market cap 1M ADTV (RHS)
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Fig 10: SREITs under Standard Chartered coverage
NameMkt cap
(SGD mn)
Currentprice
(SGD)
2013EDPUyield
Pricetarget(SGD) Rating
Potentialupside to
PT NAV P/NAVYield at
PT
Currentcaprate
Impliedcaprate
Industr ial REITs
Cambridge Industrial Trust 882 0.73 7.6% 0.77 OP 6.2% 0.65 1.12 7.2% 7.5% 7.0%
Ascendas REIT 5,754 2.57 5.8% 2.63 OP 2.3% 1.85 1.39 5.7% 6.6% 5.3%
Mapletree Logistics Trust 2,913 1.20 6.0% 1.22 IL 1.7% 0.88 1.36 5.9% 6.0% 5.1%
Mapletree Industrial Trust 2,258 1.39 6.6% 1.37 IL -1.1% 1.01 1.37 6.6% 8.0% 6.4%
Cache Logistics Trust 900 1.28 6.7% 1.25 IL -2.3% 0.96 1.33 6.9% 7.5% 6.1%
Ascendas India Trust 762 0.84 6.6% 0.77 IL -7.8% 0.61 1.37 7.1% 10.5% 8.4%
AIMS AMP Capital Industrial Trust 706 1.57 7.5% 1.55 IL -1.3% 1.47 1.07 7.6% 7.4% 7.1%
Total/Weighted average 14,175 6.3% 0.9% 1.35 6.2% 7.1% 5.8%
Retail REITs
CapitaMall Trust 7,329 2.12 5.1% 2.51 OP 18.4% 1.64 1.29 4.3% 5.6% 4.7%
Mapletree Commercial Trust 2,796 1.36 4.9% 1.34 OP -1.1% 1.06 1.28 4.9% 5.0% 4.2%
Starhill Global REIT 1,622 0.84 5.6% 0.85 IL 1.8% 0.97 0.86 5.5% 5.5% 6.1%
Frasers Centrepoint Trust 1,615 1.96 5.4% 2.23 OP 13.8% 1.53 1.28 4.8% 5.5% 4.6%
Lippo Malls Indonesia Retail Trust 1,151 0.53 5.8% 0.51 IL -2.9% 0.53 0.99 6.0% 8.1% 8.1%
Perennial China Retail Trust 701 0.62 6.3% 0.51 IL -17.1% 0.65 0.95 7.6% 8.3% 8.7%
Total/Weighted average 15,213 5.2% 9.3% 1.20 4.9% 5.8% 5.2%
Office REITs
Suntec REIT 3,975 1.77 5.3% 1.77 IL 0.3% 2.07 0.85 5.3% 4.6% 5.1%
CapitaCommercial Trust 4,734 1.67 4.8% 1.73 IL 3.9% 1.62 1.03 4.7% 4.9% 4.8%
Keppel REIT 3,546 1.35 6.1% 1.37 IL 1.9% 1.30 1.03 6.0% 4.5% 4.4%
Frasers Commercial Trust 864 1.32 5.9% 1.27 UP -3.8% 1.50 0.88 6.1% 5.0% 5.4%
Total/Weighted average 13,120 5.4% 1.7% 0.97 5.3% 4.7% 4.8%
Hospital i ty
CDL Hospitality Trusts 1,969 2.03 5.8% 2.15 OP 5.9% 1.61 1.26 5.5% 6.6% 5.5%
Ascott Residence Trust 1,509 1.32 6.9% 1.40 IL 6.1% 1.35 0.98 6.5% 5.3% 5.4%
Ascendas Hospitality Trust 792 0.99 8.0% 1.05 OP 6.6% 0.78 1.26 7.5% 7.1% 6.1%
Far East Hospitality Trust 1,727 1.08 5.5% 0.99 IL -7.9% 0.93 1.16 5.9% 5.1% 4.6%
Religare Health Trust 713 0.91 8.9% 0.96 OP 6.1% 0.87 1.04 8.4% 10.4% 10.0%
Total/Weighted average 6,711 6.6% 2.5% 1.15 6.4% 6.4% 5.8%
Overall total/ weighted average 49,218 5.8% 3.9% 1.17 5.6% 6.0% 5.4%
Bloomberg data as of 7 February 2013
Source: Company, Bloomberg, Standard Chartered Research estimates
CREIT is trading at 1.12x PB, lower than the 1.35x average for industrial REITs under our
coverage and the 1.17x average for SREITs.
Fig 11: Industrial SREITs Premium/discount to NAV
Source: Companies, Bloomberg
39.3%37.1% 36.4%
33.3%
17.4%
12.1%
6.8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
AREIT MINT MLT CACHE SREITaverage
CREIT AAREIT
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CREIT provides a 7.7% 2013E DPU yield, the highest among industrial REITs and 190bps above
the SREIT average. This rises to 8.2% in 2014E, as acquisition completions and current under-
renting mitigates the weaker occupancies we expect at properties with expiring master leases.
CREITs 2013-15E DPU CAGR of 0.6% is c.120bps above the industrial average of -0.4% but
slightly lower than the SREIT average of 1.1%.
Fig 12: Industrial SREITs Highest 2013-14E DPU yields
Source: Bloomberg, Standard Chartered Research estimates
We have not assumed acquisitions for CREIT in our valuations. Assumption of SGD 150mn of
acquisitions at a 7.5% NPI yield and 50:50 equity and debt funded would be c.1.3% accretive to
our price target. This could then see leverage rise by c.2ppt. CREITs leverage as of December
2012 was 38.6%, which management expects to fall to 36.0%, following the repayment of its
bridge loan in 1Q13.
-8%
-6%
-4%
-2%
0%
2%
4%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
CREIT AAREIT CACHE MINT MLT AREIT SREITaverage
2013E DPU yield 2014E DPU yield 2013-15E DPU CAGR (RHS)
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Key risks
Economic downturn will affect vacancy and rents
Our industrial sector estimates are based on assumptions of GDP growth of 2.5% and 4.0% in2013 and 2014, respectively. A slowdown in economic growth, whether homegrown or resulting
from a global economic downturn, could have a negative impact on CREIT. Factory and
warehouse vacancies and rents would be affected. While CREIT is partly protected by having
master leases, which make up c.83% of its portfolio, its vacancy rate and rents could still face
downside risks. These in turn affect CREITs NPI and distributions to unitholders.
We estimate factory and warehouse rents in Singapore will fall an average of 8% and 6%
respectively over 2013-14. We have accounted for a weaker industrial outlook in our valuation
and earnings estimates for CREIT.
We expect industrial SREITs to face headwinds in occupancies when existing master leases
expire, due to higher industrial supply and potential downside to demand. For CREITs propertieswith single-tenanted leases expiring in 2014 and 2015, we conservatively assume 90%
occupancy to factor in potential conversion to multi-tenanted leases. Overall, we assume lower
portfolio occupancy for CREIT by c.1.5ppt in 2014 and 2015.
Fig 13: Singapore GDP growth and industrial warehouse rents
Rental indices are rebased to 1998
Source: Ministry of Trade and Industry, URA, Standard Chartered Research
Short land leases pose a risk
CREIT has a shorter average land lease of c.33 years than Cache or AAREIT. Its recently
acquired property at 15 Jurong Port Road has a remaining land lease of just 22 years.
Management sees enough upside to location and potential GFA to justify the risk of not being
able to renew the land lease from the government. However, we consider this a risk to asset
valuations. If it acquires more assets with shorter land leases, its portfolios average land lease
would fall even lower.
-5%
0%
5%
10%
15%
20%
0
20
4060
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Re
ntalindices
Multi-user factory rental index
Warehouse rental index
GDP growth (RHS)
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Fig 14: Weighted average land lease by property valuation
MLTs weighted average excludes its freehold properties
Source: Companies, Standard Chartered Research
Growth depends on price of equityPrior to 2012, CREIT would raise equity about once a year on average, via rights issues, private
placements and preferential offerings. These issuance proceeds were largely used to fund
accretive acquisitions. We expect CREITs continued growth to depend on its price of its equity.
At our price target, CREITs 2013E DPU yield is 7.2% (compared to 7.7% at current prices).
A higher share price will enable it to equity-fund acquisitions accretively.
Fig 15: Growth via acquisitions depends on price of equity
Equity-raisingdate
Market price(SGD/unit)
Issue price(SGD/unit) Disc
Disc toVWAP
No. of shares(mn)
Amount raised(SGD mn)
Mar-11 0.498 0.429 -13.9% -15.6% 132.10 56.7
Oct-10 0.533 0.531 -0.3% NA 38.48 20.4
Oct-10 0.542 0.531 -2.0% NA 56.50 30.0Aug-10 0.502 0.478 -4.8% NA 83.68 40.0
Jul-09 0.409 0.392 -4.1% -5.0% 71.14 27.9
Oct-07 0.739 0.7 -5.2% -8.8% 276.97 193.9
Source: Bloomberg, Company, Standard Chartered Research
CREITs NAV fell to SGD 0.59/unit in 2009 from SGD 0.74 in 2008, due to a SGD 88mn
downward revaluation and a private placement of 71.14mn units in 2009. After that, however,
NAV began to rise over the past three years to reach SGD 0.65/unit in 2012.
Fig 16: CREIT NAV since listing
Source: Company
0
5
10
15
20
25
30
3540
45
50
AREIT MLT MINT AAREIT CACHE CREIT
years
0.50
0.55
0.60
0.65
0.70
0.75
0.80
2006 2007 2008 2009 2010 2011 2012
SGD/unit
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Higher exposure to SMEs could put CREIT at risk
A survey by the Association of Small and Medium-sized Enterprises (SMEs) in October 2012
showed that 80% of SMEs in Singapore face manpower shortage while 30% are looking to
relocate overseas to remain viable. We expect many of them to be looking at Iskandar Malaysia.
CREIT has one of the highest exposures to SMEs among industrial SREITs. More than 80% of its
assets are under master leases and more than 30% of these will expire in 2013-14. According to
management, none of its tenants has indicated an interest in moving out of Singapore. CREIT
has relatively high security deposits for 12-month rental income, which make for a substantial
cash buffer if tenants should be forced by circumstance to terminate leases prematurely.
For leases expiring in 2014 and 2015, we conservatively assume 90% occupancy (from 100%) of
single-tenanted and multi-tenanted properties.
Fig 17: Industrial SREITs Exposure to
SMEs by rental income
Fig 18: Security deposits by rental income
Data for assets on master lease based on end-users of the properties
Source: Companies, Standard Chartered Research
Source: Company, Standard Chartered Research
0%
10%
20%
30%
40%
50%
60%
MINT
CREIT
AAREIT
Cache
MLT
AREIT
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
CREIT CACHE AAREIT
months
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Structure and management
Background and key milestones
CREIT was listed on the SGX-ST on 19 June 2006. It was established with the objective ofinvesting directly or indirectly in real estate and real estate-related assets that are mainly used for
industrial and warehousing purposes.
Its initial property portfolio at listing comprised 27 properties valued at SGD 519mn. As of
December 2012, CREIT has 49 properties valued at c.SGD 1.2bn portfolio. This excludes four
assets that were acquired in the last half year, but whose transactions have not been completed.
Fig 19: CREIT Milestones
Milestones
2006 - IPO on 25 July 2006 as Singapore's first independent industrial REIT- Made two acquisitions including strata units at Hillview Avenue
2007 - Acquired 13 properties at SGD 326mn- Raised SGD 194mn equity via placement to fund acquisitions
2008 - Oxley and NAB take a combined 80% strategic stake in Manager- New CEO Chris Calvert appointed- Refinanced SGD 390mn loan
2009 - Commencement of Dividend Reinvestment Plan- Raised SGD 28mn equity via private placement for asset enhancements and general workingcapital- Undertook strategic property initiative involving AIMS AMP Capital Industrial REIT
2010 - Raised SGD 90mn equity via private placement and preferential offering for acquisitions- Divestment of non-core assets and used net proceeds to retire debt- Won Asset Triple A Asian Awards' "Best Deal in Singapore 2009" for raising SGD 390mn debt
2011 - Singapore Land Authority announced Compulsory Land Acquisition of three properties- Raised SGD 57mn equity via rights issue for acquisitions- Assignment and allocation of land for 2 Built-to-Suit facilities
- Refinanced SGD 320mn term loan at lower interest rate2012 - SGD 280mn of acquisitions
- Establishment of SGD 500mn MTN; issuance of SGD 50mn of Fixed Rate Notes
Source: Company annual reports
Trust structure
Fig 20: CREIT Structure
(1) The manager is 80% owned by Cambridge Real Estate Investment Management and 20% owned by Mitsui & Co. CREIM in turn is indirectlyowned by National Australia Bank Group with a 70% interest and Oxley Group holds the remaining 30% interest
(2) The property manager is a wholly-owned subsidiary of CREIM
Source: Company
Cambridge
Industrial Trust
TMKsThe Properties
PropertyManagement
Services
Manager(Cambridge Industrial Trust
Management Ltd)1
Trustee(RBC Dexia Trust Singapore Ltd)
Property Manager(Cambridge Industrial Property
Management Pte Ltd)2
Unitholders
PropertyManagement
Fees
Management
Services
Management
Fees
Trustee Fee
Act on behalf o
Unitholders
Ownershipof
Units Distributions
Ownershipof
Asset sNet Property
Income
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Unlike other SREIT peers, CREIT does not have a major developer as a sponsor. CITM, its
manager, is indirectly owned by three strategic sponsors: National Australia Bank (56%), Oxley
Group (24%) and Mitsui & Co (20%).
Fig 21: Cambridge Industrial Trust Management Structure
Source: Company
Mitsui & Co. holds a direct 20% interest in CITM while National Australia Bank (NAB) and Oxley
Group hold their 80% interest in CITM indirectly through Cambridge Real Estate Investment
Management (CREIM). NAB holds a 70% interest in CREIM and Oxley Group holds the
remaining 30%.
Sponsor background
National Australia Bankis Australias fourth largest bank by market value with FY12 (YE
September) net profit of AUD 4.1bn. NAB is also Australias largest business lender. NABs global
network of banking and financial services provider covers Australia, New Zealand, Asia Pacific,
the UK and US.
Oxley Group is a Singapore-based private investment firm and multi-family office specialising in
investments in real estate, agriculture and resources sectors. It has close to USD 1bn of assets
under management. Chancery Managed Investments and Kalzip Asia are its two other real estate
related investments.
Mitsui & Co. is one of the largest conglomerates in Japan with USD 32.2bn in assets. Its
business interests cover commodities, energy, mining, machinery and infrastructure, food
products, healthcare and real estate.
Key management personnel
The manager is owned by three strategic sponsors: NAB, Oxley Group and Mitsui & Co. Ltd.
Current CEO Chris Calvert has over 18 years of experience in finance, fund management and
real estate. All of its key team members in real estate management and development roles have
more than 10 years of experience in real estate.
Manager(Cambridge Industrial Trust
Management Ltd)
Propert y Manager(Cambridge Industrial Property
Management Pte Ltd)
30%
National Australia
Bank (NAB)Oxley Group Mitsui & Co. Ltd.
Cambridge Real Estate
Investment Pte. Ltd.
(CREIM)
70%
20%80%100%
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Fig 22: Key management
Name Designation Biography
ChrisCalvert
Chiefexecutive
officer
Mr Calvert has over 18 years of property and management experience invaluation, consultancy, real estate and investment fund management. Prior to
joining the manager n 2008, he was the Asia CEO for MacarthurCook IndustrialREIT. He was responsible for the creation of MacarthurCooks portfolio and itssubsequent IPO in 2007. He was also the Asia CEO of Blaxland FundsManagement, a real estate fund manager. Mr Calvert holds a Bachelors degreein business and property, and is a qualified valuer from the Australian PropertyInstitute. He is an active advocate of Asia Pacific Real Estate Association(APREA)
DavidMason
Chief financialofficer
Mr Mason has more than 10 years experience in the REIT sector in Singaporeand Australia. He joined the manager in 2010. Previously, he was a financialconsultant to YTL Starhill Global REIT Management and the senior vicepresident for finance & accounting at Starhill Global REIT. He holds a degreein accounting from Birmingham City University and is a chartered accountant.He is also a director on the APREA board.
Nancy Tan Head of realestate
Ms Tan has been head of real estate for the manager since 2011. She joinedthe company in 2009. Ms Tan has over 20 years of experience in the real
estate and fund management sectors. She was previously withMacarthurCook Industrial REIT, where she grew the portfolio from 12 to 21properties valued at SGD 555mn. She held management positions in severalestablished real estate firms, including Far East Organisation and CityDevelopments Limited. She holds a Bachelor of Science (estate management)from the National University of Singapore and a diploma in marketing from theMarketing Institute of Singapore.
CindySeetoh
Compliancemanager
Ms Seetoh has over six years of experience in compliance. She joined themanager in 2010. She holds a Bachelor of Business and Commerce fromMonash University, Melbourne. She is also a member of the Golden KeyInternational Honour Society.
MichaelLong
Developmentmanager
Mr Long joined the manager in 2011 and has more than 20 years experiencein real estate development and construction industry. He was previously withConfluence Project Management in Singapore and Bovis Lend Lease inSingapore, London and Sydney. He holds a Clerk of Works building diploma
from Sydney TAFE.
Source: Company
CREITs top 10 unitholders hold c.27% of its total outstanding shares. The company could
potentially be a takeover target if it trades at a steep discount below NAV, in our view.
Fig 23: Top 10 unitholders
No Unitholder No. of shares % held
1 Franklin Resources 96,076,663 7.90
2 Chan Wai Kheong 56,349,536 4.63
3 Mackenzie Financial Corporation 51,342,000 4.22
4 Splendid Asia Macro Fund 41,644,921 3.42
5 Charlie Chan Capital Partners 30,696,725 2.52
6 State Street 12,952,894 1.07
7 Goldman Sachs JBWere Pty Ltd 11,592,000 0.95
8 Principal Financial Group 11,522,820 0.95
9 Vanguard Group Inc 9,217,078 0.76
10 Cambridge Indst Trust Mgmt 9,198,045 0.76
Source: Bloomberg
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Portfolio analysisCREIT has a portfolio of 49 properties spread across Singapore, whose current portfolio net
lettable area (NLA) of c7.6mn sf has a valuation of SGD 1.2bn as of December 2012. Including
the uncompleted acquisitions of four other assets, CREITs total portfolio NLA reaches c.8.4mn sf.
Fig 24: Portfolio overview
Asset classNo of
properties
Lettablearea
(000 sf)
Purchaseprice
(SGD mn)Valuation(SGD mn)
Purchaseprice
(SGD psf)Valuation(SGD psf)
Logistics 8 2,506 321.4 355.1 128.3 141.7
Light industrial 16 2,088 364.5 435.2 174.6 208.4
arehouse 11 1,385 163.4 186.9 118.0 135.0
Industrial 10 1,048 136.8 158.2 130.5 150.9
Others 2 373 36.1 43.4 96.6 116.2
Development 2 174 NA 23.5 NA 135.4
Total/weighted average* 49 7,574 1,022.2 1,202.3 138.1 159.3
Uncompleted acquisitions 4 839 114.0 NA 135.8 NA
* Excludes development assets
Source: Company, Standard Chartered Research
We think CREITs portfolio, currently focused on Singapore, could potentially extend overseas to
include Iskandar Malaysia.
Fig 25: Portfolio overview Locations of properties
Source: Company
Including development assets that have recently been completed, CREIT has the largest property
portfolio by NLA among small-cap industrial REITs. CREIT has a diversified portfolio with 49
properties and 149 tenants (including end-users for single tenanted buildings),
Fig 26: Portfolio comparison Overview
CREIT Cache AAREIT
Number of properties 49 12 25
Valuation (SGD psf) 1,202 945.6 965.7
NLA (000 sf) 7,574 4,823 4,481*
Number of tenants 149 13 111
Occupancy 99.2% 100.0% 99.2%
ALE (years) 3.3 4.1 2.6ALLE (years) 33 36 42
Security deposits (months) 12.0 11.1 6.8
*Excludes 20 Gul Way, which will add c.1.2msf of NLA post redevelopment to portfolio
Source: Companies, Standard Chartered Research
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CREITs overall portfolio has a current average valuation of SGD 159psf, comprising an average
SGD 139psf for its logistics/warehouse assets and SGD 189psf for its industrial assets. This is
lower than Caches and AAREITs valuations, but CREITs portfolio average purchase price of
SGD 138psf is also lower.
We estimate current average passing rent for CREITs assets at SGD 1.02psfpm, c.20% lower
than Cache and AAREIT. This is consistent with the c.20% gaps between CREIT, Cache and
AAREITs average purchase price and valuations.
Fig 27: Portfolio comparison Purchase price, valuation and passing rents
Purchase price (SGD psf) CREIT Cache AAREIT
Logistics/warehouse 123.3 162.1 164.8
Light/industrial 159.4 NA 161.1
eighted average 138.1 162.1 164.2
Others 96.6 NA 426.6
aluation (SGD psf) CREIT Cache AAREIT
Logistics/warehouse 139.3 196.1 179.7
Light/industrial 189.2 NA 168.1
eighted average 159.3 196.1 177.7
Others 116.2 NA 401.1
Est current passing rents (SGD psfpm) CREIT Cache AAREIT
Logistics/warehouse 0.93 1.28 1.27
Light/industrial 1.14 NA 1.07
eighted average rent 1.02 1.28 1.24
Others 0.80 NA 2.43
(1) Weighted averages do not include other properties (business parks, research facilities, development assets etc)
(2) AAREIT data does not include 20 Gul Way
Source: Companies, Standard Chartered Research estimates
Positive rental reversions still likely despite weak industrial outlook
CREIT will see 15.4% of its leases expire in 2013, of which 4.4% are multi-tenanted while the
remaining 11.0% are single-tenanted leases. These expiring seven-year single-tenanted leases
are from CREITs IPO batch of assets, which will be going through their first reversion cycle.
CREITs single-tenanted leases have average rental escalations of 2.5% p.a. and we estimate
effective passing rents have risen c.16% between 2006 and 2012. In comparison, factory and
warehouse rents in Singapore rose 74% and 44% respectively over the same period.
We currently estimate factory and warehouse rents will fall an average of 8% and 6% p.a.
respectively over 2013-14. However, we expect under-renting at CREITs properties to offset
weaker market signing rents. We expect CREITs expiring leases to achieve rents closer tomarket levels in 2013. We assume average passing rents will rise 5-11% in 2013, following
positive rental reversions from expiring leases and built-in escalations for ongoing leases.
Fig 28: Lease expiry profile Fig 29: Market rents vs CREIT rents
Source: Company Source: URA, Company, Standard Chartered Research
0%
5%
10%
15%
20%
25%
2013 2014 2015 2016 2017 2018 2019 2020
Multi-tenanted Single-tenanted
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012
Factory rents
Warehouse rents
CREIT rents
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CREITs portfolio has been resilient since it listed, with occupancy hovering at 99-100% despite
the global economic crisis in 2008-09. Its portfolio comprises 83% single-tenanted leases. We
think management may try to maintain a target mix of 75:25 between multi-tenanted and single-
tenanted leases in order to strike a balance between stability and growth.
For leases expiring in 2014 and 2015, we conservatively assume 90% occupancy (from 100%) in
single-tenanted as well as multi-tenanted properties.
Fig 30: Resilient portfolio occupancy Fig 31: Multi-tenanted vs single-tenanted
Source: Company Source: Company
Fig 32: Only 20% of CREITs tenants are in
manufacturing
Fig 33: Portfolio rental income by asset
type
Source: Company Source: Company
Weaker industrial demand in Singapore over the next three years
We expect industrial demand to grow weaker as Singapore continues economic restructuring and
lower-value industrial activity moves out of the country. We estimate factory and warehouse rents
will fall c.8% and c.6% on average in 2013-14 respectively, as vacancies rise. We expect rents to
stabilise in 2015 and then grow c.1% on average over 2015-16.
Fig 34: Standard Chartered Industrial rent estimates
GDPgrowth
Multi-tenantedindustrialvacancy
Multi-tenantedfactory rents(SGD psfpm) % change
Warehousevacancy rate
Warehouserents
(SGD psfpm) % change
2013E 2.5% 11.5% 1.70 -10.4% 5.9% 1.69 -8.6%
2014E 4.0% 13.4% 1.60 -5.6% 6.7% 1.64 -2.8%
2015E 4.0% 13.8% 1.61 0.6% 5.8% 1.66 1.5%
2016E 4.0% 14.1% 1.62 0.8% 5.3% 1.67 0.3%
Source: Standard Chartered Research estimates
Factory rents have grown at a 10% CAGR over the past six years, while warehouse rents haverisen at a 9% CAGR over the same period.
99.2%
-4%
0%
4%
8%
12%
16%
90%
92%
94%
96%
98%
100%
2006 2007 2008 2009 2010 2011 2012
Occupancy GDP growth (RHS)
Multi-tenanted17.2%
Single-tenanted82.8%
Manufacturing19.7%
Non-manufacturing82.8%
Logistics 36.7%
Light industrial30.4%
Warehousing15.7%
Industrial 13.2%
Others 4.0%
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Fig 35: Industrial rents Multi-user factories and warehouses
Source: URA
Pro-active portfolio management
We are positive on CREITs active portfolio management, as it has sought out accretive
acquisitions despite not having a ready pipeline of properties granted by a sponsor. CREIT
announced nine acquisitions in 2012, funded by divestment gains and debt with interest cost of
c.4.0%. We think management could potentially execute c.SGD 150mn of acquisitions in 2013.
These could potentially be funded by asset divestments as CREIT recycles capital.
Fig 36: Active portfolio management
Asset enhancement initiatives Capex required (SGD mn) ROI Est completion
88 International Rd 16.4 12.0% 2Q13
4/6 Clementi Loop 23.3 7.0% 1Q13
30 Toh Guan Road 8.3 10.0% 4Q12
Asset enhancements 48.0 9.0%
Acquisitions Purchase price (SGD mn) NPI yield Est completion
30 Teban Crescent 41.0 7.8% 4Q13
16 Tai Seng Street 72.41
7.0% 2Q13
JTC Tuas Biomedical Park2
9.0 16.5% 1Q13
15 Jurong Port Road 43.0 8.0% 1Q13
54 Serangoon North 21.0 7.0% 1Q13
11 Woodlands Walk 17.3 8.0% 4Q12
30 Marsiling Ind Estate 39.0 7.5% 4Q12
25 Pioneer Crescent 15.3 7.0% 1Q12
3C Toh Guan Rd East 35.5 7.5% 1Q12
Acquisitions 293.5 7.2%1Includes SGD 13.1mn for asset enhancement works on 16 Tai Seng St2For CREITs 60% stake; based on NPI yield on valuation of SGD 22.8mn
Source: Company, Standard Chartered Research estimates
With the completion of built-to-suit development projects at Tuas View Circuit and Seletar
Aerospace Park, CREIT now has the capacity to carry out development works while keeping to
the REIT guidelines.
We estimate the redevelopment of properties with under-utilised plot ratios potentially adds
c.770,000sf GFA to its portfolio. They include 3 Pioneer Sector 3, 1 Third Lok Yang Road and 4
Fourth Lok Yang Road, 2 Tuas South Avenue, 31 Kian Teck Way and 7 Gul Lane. Passing rents
at these sites could be low in comparison to similar class assets, in our view. Our price target
currently does not assume any new redevelopment works or acquisitions.
90
100
110
120
130
140
150
160
170
180
190
2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4
Factory Warehouse
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Fig 37: Potential redevelopment opportunities
PropertiesAssetclass
Utilisedplot ratio
Max plotratio
Land area(000sf)
GFA(000sf)
Potential add.GFA (000sf)
Est passingrents
(SGD psfpm)
3 Pioneer Sector 3 Logistics 0.8 1.4 512 413 307 0.811 Third Lok Yang Logistics 0.7 2.5 134 97 238 1.05
2 Tuas South Ave Industrial 1.6 2.5 134 220 114 1.18
31 Kian Teck Way Industrial 0.8 2.5 39 33 65 1.03
7 Gul Lane Industrial 0.7 1.4 68 48 47 0.71
Passing rents are our estimates
Source: Company, Standard Chartered Research estimates
Potential divestment of Hillview strata industrial property
CREIT owns 69.4% share of the freehold strata industrial area at 63 Hillview Avenue, which it
acquired in December 2006 for SGD 72.2mn. Under current government regulations, the site can
be redeveloped into a residential development, which would command a significantly higher price.
We estimate the potential divestment of the asset, currently valued at SGD 110mn, could add
S 9/unit to its NAV. This could potentially be c.14% accretive to its current NAV/unit of S 64.7.
CREIT reached a CSA on 2 May 2012 with the propertys minority owners, which expires a year
later. Even if a collective sale does not take place before the CSA expires, we still see significant
upside for CREIT if it divests its strata stake or undertakes enhancement works at the asset.
Fig 38: Potential divestment of Hillview strata units could be accretive
Total site area (sf) 230,834
Attributable strata area (69.4%) (sf) 382,378
Purchase price (SGD mn) 72.2
Purchase price (SGD psf) 188.8
Current book value (SGD mn) 110.0
Current book value (SGD psf) 287.7
Maximum plot ratio 1.92
Max gross floor area (sf) 443,202
Est residential property price (SGD psf) 1,300
Est developer profit margin 30%
Est developer total cost 1,000
Est development charge (SGD psm) 3,010
Est development charge (SGD psf) 280
Divestment price (SGD psf) 720
Divestment price (SGD mn)* 222
Gain above book (SGD mn) 112
No of existing CREIT units 1,216NAV accretion (SGD/unit) 0.09
*For CREITs 69.4% ownership share
Development charge estimate based on URA data for non-landed residential in the Hillview area
Source: Company, URA, Standard Chartered Research estimates
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FinancialsNet property income
We expect NPI contributions of SGD 86.2mn in 2013 and SGD 93.0mn in 2014, representing
a 10% CAGR over 2012-14. This includes income contributions from acquisition and
development assets.
Capital expenditure
Asset enhancement initiatives: SGD 16.4mn is committed for enhancement works at 88
International Road and SGD 13.1mn for 4 and 6 Clementi Loop. We expect these to be paid
over 2013.
Acquisitions: SGD 41.0mn is committed for the acquisition of 30 Teban Gardens Crescent. We
expect this to be completed in 4Q13. We have not assumed acquisitions for CREIT in our
valuations. An assumption of SGD 150mn of acquisitions at 7.5% NPI yield and 50:50 equity and
debt funded will be c.1.3% accretive to our price target. This could see leverage rise by c.2ppt.
Development projects:CREITs two built-to-suit developments, Tuas View Circuit andSeletar Aerospace Park, were completed before 2013. We have not assumed any other
development projects in our estimates.
We assume maintenance capex of 0.5% of property value annually.
Fee structure
The management fee structure includes a base fee of 0.5% p.a. of deposited property. A
performance fee is also paid to the manager if CREITs total return exceeds the total return of a
benchmark index of SREITs. We do not expect any management fees to be paid in CREIT units.
Fig 39: Fee structure
Management fees
Base fee 0.5% p.a. of deposited propertyPerformance fee 5.0% of total return of Trust Index less total return of benchmark index
multiplied by market cap (and 15.0% of amount > 2.0%)
Other fees
Trustee fee 0.025% of property value p.a.
Acquisition fee 1.0% of the acquisition price
Divestment fee 0.5% of the divestment price
Property managers fees
Property management fee Property management fee of 2.0% of gross revenue p.a.
Lease management fee 1.0% of gross revenue p.a.
Marketing services commission 0.5-2.0 months of gross rent depending on length of renewed lease
Project management fee 1.5-3.0% of project management fee, depending on size of development
Property tax services fee 5.0-7.5% of property tax savings
Source: Company
Revaluations
We assume annual revaluation of 2% p.a.
Cost of debt
We assumed cost of debt of 4.0-4.4% p.a. over 2013-16E. We have assumed a cost of debt of
4.4% in our terminal year 2016.
Debt maturity profile
CREIT took out a SGD 53mn bridge loan in 4Q12, which it expects to repay in 1Q13 with
divestment proceeds from the compulsory sale of the 30 Tuas Road property to the
government.
CREIT has SGD 280mn of term loans expiring in 2014. We expect these to be refinanced
in 2013.
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Fig 40: Debt expiry profile
Source: Company
Leverage CREIT has leverage of 38.6% as of December 2012, which management expects to fall to
36.0% after repayment of the bridge loan. We expect leverage to rise as CREIT pays down
the capex required for enhancement works at 88 International Road and 4&6 Clementi Loop
and the acquisition cost of 30 Teban Garden Crescent. We expect leverage to return to c.39%
if all these commitments are debt-funded.
Cash
Dividend Reinvestment Programme (DRP):CREITs DRP received healthy take-up interest
in 2012, with unitholders reinvesting c.30% of distributions. We assume DRP take-up of 10%
p.a., which would provide CREIT with additional cash flow of c.SGD 7.0mn a year, which
management said it would use as working capital.
Cash holdings: CREIT will have c.SGD 49mn of cash after repayment in 1Q13, after
repayment of its bridge loan. Together with its ongoing DRP, CREITs cash holdings will
continue to rise. Management has indicated it aims to keep cash holdings at c.SGD 15-20mn.
We think CREIT will be able to repay some of its debt, or fund potential acquisitions with part
of its cash holdings.
Capital distribution: In 2012, CREIT paid out c.SGD 5.7mn in capital distributions to offset
reductions in distributable income from asset divestments and ongoing enhancement works.
These were funded by capital gains from divestments and CREITs ex-gratia payments from
the Singapore Land Authority. We assume performance fee of SGD 3.0mn in 4Q13, which we
expect to be totally offset by distribution from capital. As most of its acquisitions and
enhancement works should be completed from 2013 onwards, we do not include any other
capital distributions in our assumptions.
220
100
60.7
50
5
53
0
50
100
150
200
250
300
2013 2014 2015 2016
SGDm
Term loan Acquisition term loan
MTNs Revolving credit facility
Short term bridge loan
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Fig 41: Income statement
Year end: December (SGD mn) 2012 2013E 2014E 2015E 2016E
Total gross revenue 89.0 100.2 108.2 106.9 108.0
Property expenses -12.7 -14.0 -15.1 -15.0 -15.1
Net property income 76.2 86.2 93.0 91.9 92.9
NPI growth 10.3% 13.1% 7.9% -1.2% 1.1%
REIT managers management fees -9.5 -9.2 -6.5 -6.7 -6.9
Other trust expenses -1.7 -0.3 -0.3 -0.3 -0.3
Finance costs -19.7 -19.9 -21.4 -23.2 -24.0
Finance income 0.1 0.0 0.0 0.0 0.0
Finance costs (net) -19.6 -19.9 -21.4 -23.1 -23.9
Total expenses -30.8 -29.4 -28.3 -30.2 -31.2
Total expenses (growth) -7.4% -4.6% -3.8% 6.8% 3.2%
EBIT 65.0 76.7 86.1 84.9 85.7
Net income before tax and fair value change 45.4 56.8 64.7 61.7 61.7
Fair value change in derivatives 0.1 0.0 0.0 0.0 0.0
Fair value change in investment properties 41.6 24.3 26.3 27.0 27.7
Net income before tax 87.4 81.1 91.1 88.7 89.4
Income tax expense 0.0 0.0 0.0 0.0 0.0
Net income after tax 87.4 81.1 91.1 88.7 89.4
Adjusted PAT 45.6 56.8 64.7 61.7 61.7
Adjusted PAT (growth) 20.0% 24.5% 14.0% -4.7% 0.0%
Distributable income before adjustment 87.4 81.1 91.1 88.7 89.4
Non-tax deductible/(chargeable) items: -37.6 -16.5 -18.6 -19.2 -19.9
Management fees in units 0.0 0.0 0.0 0.0 0.0
Distributable income (income) 51.9 64.6 72.5 69.5 69.5
growth % 2.9% 24.5% 12.3% -4.2% 0.0%
Distributable income (capital) 5.7 3.0 0.0 0.0 0.0
Transfer to retained earnings -10.1 0.0 0.0 0.0 0.0
Total distribution amount 57.6 67.6 72.5 69.5 69.5
EFPOWA 1,196.1 1,218.5 1,228.5 1,239.3 1,249.7
EPUc 7.43 6.64 7.40 7.14 7.14adj EPUc 3.98 4.66 5.26 4.97 4.93
growth % 24.5% 16.9% 13.0% -5.5% -0.8%
DPUc 4.78 5.53 5.88 5.59 5.54
growth % 12.9% 15.6% 6.4% -5.0% -0.8%
payout ratio % 111% 105% 100% 100% 100%
Source: Company, Standard Chartered Research estimates
Fig 42: Balance sheet
Balance sheet 2012 2013E 2014E 2015E 2016E
Total investment properties 1,214.0 1,317.5 1,350.4 1,384.1 1,418.7
Trade and other receivables 0.0 0.0 0.0 0.0 0.0
Others 0.0 0.0 0.0 0.0 0.0
Total non-current assets 1,214.0 1,317.5 1,350.4 1,384.1 1,418.7
Trade and other receivables 1.6 1.6 1.6 1.6 1.6
Cash and cash equivalents 89.8 50.1 57.2 62.6 68.8
Total current assets 91.3 51.6 58.8 64.2 70.4
Total assets 1,305.3 1,369.2 1,409.2 1,448.4 1,489.1
Trade and other payables 21.5 21.5 21.5 21.5 21.5
Financial derivatives 0.0 0.0 0.0 0.0 0.0
Total current liabilities 21.5 21.5 21.5 21.5 21.5
Borrowings 493.7 528.6 535.1 541.9 548.7
Financial derivatives 3.4 0.0 0.0 0.0 0.0
Total non-current liabilities 497.1 528.6 535.1 541.8 548.7
Total liabilities 518.7 550.1 556.6 563.4 570.2
Net assets 786.7 819.0 852.5 885.0 918.8
Unitholders' funds 786.7 819.0 852.5 885.1 918.8
Total equity 786.7 819.0 852.5 885.1 918.8
Gearing (Debt/Total Assets) 38.6% 38.6% 38.0% 37.4% 36.9%
Gearing (Debt/Equity) 62.8% 64.5% 62.8% 61.2% 59.7%
NAV/unit (SGD) 0.65 0.67 0.69 0.71 0.73
growth % 4.3% 3.3% 3.2% 2.9% 3.0%
Source: Company, Standard Chartered Research estimates
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Appendix: Property portfolioFig 43: Property portfolio
Property
Land lease
expiry
Net lettable area
(sf)
Purchase price
(SGD mn)
Valuation 2011
(SGD mn)
Valuation 2012
(SGD mn)
Logistics
1 24 Jurong Port Road 2037 817,021 96.00 103.00 95.00
2 3 Pioneer Sector 3 2050 412,818 49.00 54.00 54.00
3 30 Toh Guan Road 2055 251,973 35.00 48.30 56.20
4 31 Tuas Avenue 11 2054 75,579 8.70 10.20 10.50
5 25 Changi South Avenue 2 2054 72,998 7.30 10.60 12.00
6 30 Tuas Road 2039 571,189 73.00 72.40 72.40
71 Third Lok Yang Road & 4Fourth Lok Yang Road 2031 114,111 12.41 12.00 15.00
8 1 Tuas Ave 3 2032 308,644 32.70 29.20 NA
9 4/6 Clementi Loop 2053 189,962 40.00 40.00 40.00
Logistics subtotal 2,814,294 354.12 379.70 355.1Light industrial
1 21 Ubi Road 1 2057 202,770 25.00 34.50 30.60
2 136 Joo Seng Road 2050 101,321 10.31 12.80 13.50
3 2 Ubi View 2059 43,654 7.50 8.50 9.15
4 11 Serangoon North Avenue 5 2057 146,619 14.00 17.50 18.50
5 130 Joo Seng Road 2051 91,958 12.00 12.50 12.50
6 2 Jalan Kilang Barat 2062 66,374 20.00 27.70 28.30
7 87 Defu Lane 10 2050 109,920 13.06 15.00 15.60
8 55 Ubi Ave 3 2056 117,383 18.80 19.20 18.20
963 Hillview Ave Lam SoonIndustry Bldg Freehold 296,295 72.20 90.00 110.00
10 361 Ubi Road 3 2057 96,843 18.00 17.70 18.0011 128 Joo Seng Road 2052 92,849 10.00 12.00 12.40
12 9 Bukit Batok St 22 2053 157,863 18.30 22.90 21.00
13 81 Defu Lane 10 2050 45,242 5.00 5.30 6.10
14 1 & 2 Changi North Street 2 2061/2065 125,870 22.10 22.70 23.10
15 16 Tai Seng Street 2067 175,262 59.25 59.30 59.25
16 54 Serangoon North Ave 4 2026 139,224 21.00 21.00
17 30 Marsiling Ind Est Road 8 2019 217,879 39.00 39.00
Light industrial subtotal 2,227,327 385.52 377.60 456.2
arehousing
1 86/88 International Road 2054 134,688 14.00 17.50 19.00
2 23 Tuas Avenue 10 2056 102,310 8.55 11.10 13.60
3 9 Tuas View Crescent 2058 71,581 5.60 7.30 9.204 28 Senoko Drive 2039 159,338 12.00 12.50 13.40
5 31 Changi South Avenue 2 2055 50,644 5.80 6.80 8.10
6 120 Pioneer Road 2055 244,513 26.50 32.00 30.00
7 23 Woodlands Terrace 2056 124,425 15.41 16.30 16.60
8 6 Tuas Bay Walk 2057 55,697 7.00 6.50 NA
9 21B Senoko Loop 2053 115,770 14.67 14.50 15.50
10 79 Tuas South St 5 2060 67,942 10.40 10.00 10.50
11 22 Chin Bee Drive 2035 120,653 15.00 15.50 15.50
12 3C Toh Guan Road East 2051 192,864 35.50 35.50 35.50
arehousing subtotal 1,440,425 170.43 185.50 186.9
Source: Company
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Fig 44: Property portfolio (contd)
PropertyLand lease
expiryNet lettable
area (sf)Purchase price
(SGD mn)Valuation 2011
(SGD mn)Valuation 2012
(SGD mn)
Industrial
1 7 Gul Lane 2041 48,427 3.20 4.30 5.80
2 31 Kian Teck Way 2042 33,088 3.20 3.70 4.10
3 45 Changi South Avenue 2 2055 73,684 8.25 10.30 12.60
4 2 Tuas South Avenue 2 2059 220,381 23.00 30.00 31.60
5 28 Woodlands Loop 2055 131,857 13.00 15.50 16.90
6 511 & 513 Yishun Industrial Park A 2053/2054 224,689 32.60 33.20 33.20
7 60 Tuas South Street 2065 44,675 6.40 6.40 6.40
8 5 & 7 Gul Street 1 2037 98,864 14.50 14.50 14.50
9 25 Pioneer Crescent 2067 76,003 15.30 15.80
10 11 Woodlands Walk 2056 96,593 17.30 17.30
Industrial subtotal 1,048,260 136.75 117.90 158.20
Others
1 160 Kallang Way 2033 322,604 23.20 26.00 27.40
2 23 Toa Payoh Lorong 8 2052 50,792 12.87 13.40 16.00
3 30 Teban Gardens Cresc 2039 139,041 41.00 41.00
4 JTC Tuas Biomedical park 316,000 9.00 9.00
5 15 Jurong Port Road 2035 245,172 43.00 43.00
Others subtotal 1,073,608 129.07 39.40 136.40
Development
1 43 Tuas View Circuit 2022 121,424 14.70
2 Seletar Aerospace Park 2041 52,170 8.80
Development subtotal 173,594 23.50
Source: Company
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Source: Company, Standard Chartered Research estimates
Income statement (SGD mn) Cash flow statement (SGD mn)
Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Revenue 80 89 100 108 107 EBIT 62 65 77 86 85
Property expenses (11) (13) (14) (15) (15) Depreciation & amortisation 0 0 0 0 0
Net property income 69 76 86 93 92 Net interest 26 20 20 21 23
NPI growth (%) - 10.3 13.1 7.9 -1.2 Tax paid - - - - -
Management fees (5) (10) (9) (7) (7) Changes in working capital (4) 1 6 0 0
Other income - - - - - Others (26) (18) (20) (21) (23)
Other expenses (2) (2) (0) (0) (0) Cash flow from operations 58 68 83 86 85
EBIT 62 65 77 86 85
Capex (3) (15) (36) (7) (7)
Interest expense (26) (20) (20) (21) (23) Acquisitions (42) (120) (42) 0 0
Interest income 0 0 0 0 0 Disposals - - - - -
Associates - - - - - Others 0 (1) (1) 0 0
JCEs - - - - - Cash flow from investing (45) (135) (79) (7) (7)
Property reval. gain/(loss) 51 42 24 26 27
Other exceptional items (1) 2 0 0 0 Dividends (43) (41) (49) (58) (56)
Pre-tax profit 85 89 81 91 89 Issue of shares 54 (0) 0 0 0
Taxation 0 0 0 0 0 Change in debt (15) 118 5 (15) (16)
Minority interests - - - - - Other financing cash flow 0 0 0 0 0
Cash flow from financing (5) 78 (44) (72) (73)
Net profit 85 89 81 91 89
Net profit adj. 35 48 57 65 62 Change in cash 8 11 (40) 7 5
Distributable income 50 57 62 69 76 Exchange rate effect 0 0 0 0 0
Distributed income 51 57 63 72 76 Free cash flow 54 54 47 80 78
Balance sheet (SGD mn) Financial ratios and other Year-end: Dec 2011 2012 2013E 2014E 2015E Year-end: Dec 2011 2012 2013E 2014E 2015E
Investment properties 1,027 1,014 1,318 1,350 1,384 Operating ratios
PP&E - - - - - EBIT margin (%) 77.1 73.1 76.5 79.6 79.4
Associates and JCEs - - - - - Net margin adj. (%) 43.1 53.7 56.7 59.9 57.8
Other non-current assets 0 0 0 0 0 Sales growth (%) - 10.7 12.6 7.9 -1.2
Total non-current assets 1,027 1,014 1,318 1,350 1,384 Net income growth (%) - 5.0 -9.4 12.3 -2.6
Cash & equivalents 79 90 50 57 63 EPU growth (%) - 4.4 -11.0 11.4 -3.4
Short-term investments - - - - - EPU growth adj. (%) - 37.1 16.6 13.0 -5.5
Prop. under dev./held for sale 0 200 0 0 0 DPU growth (%) - 12.9 15.6 6.4 -5.0
Inventory - - - - - DPU/EPU (%) 59.2 64.0 83.1 79.3 78.1Trade and other receivables 1 2 2 2 2
Other current assets 0 0 0 0 0 Efficiency ratios
Total current assets 80 292 52 59 64 ROE (%) - 11.7 10.1 10.9 10.2
Total assets 1,107 1,305 1,369 1,409 1,448 ROCE (%) - 5.5 5.8 6.3 6.0
ROA (%) - 7.4 6.1 6.6 6.2
Short-term debt 0 0 0 0 0
Pre-sale deposits 0 0 0 0 0 Leverage ratios
Trade and other payables 9 22 22 22 22 Net gearing (%) 37.7 51.3 58.4 56.1 54.1
Income taxes payable - - - - - Net debt/assets (%) 25.1 30.9 35.0 33.9 33.1
Other current liabilities 4 0 0 0 0 Net asset value/unit (S) 62.05 64.69 66.82 68.94 70.97
Total current liabilities 13 22 22 22 22 Debt/capital (%) 32.6 38.5 39.2 38.6 38.0
Long-term debt 357 494 529 535 542 Interest cover (x) 2.4 3.3 3.9 4.0 3.7
Deferred tax - - - - - Current ratio (x) 6.2 13.5 2.4 2.7 3.0
Other long-term liabilities 0 3 0 0 0
Total long-term liabilities 357 497 529 535 542 Per share
Total liabilities 369 519 550 557 563 EPU (S) 7.16 7.48 6.66 7.42 7.16Shareholders' funds 738 787 819 853 885 EPU adj. (S) 2.92 4.00 4.66 5.27 4.98
Minority interests 0 0 0 0 0 DPU (S) 4.24 4.78 5.53 5.88 5.59
Total equity 738 787 819 853 885
Total liabilities and equity 1,107 1,305 1,369 1,409 1,448 Valuation
EV/EBIT (x) - 15.9 17.8 15.9 16.2
Gross debt 357 494 529 535 542 PER (x) 6.8 7.7 10.9 9.8 10.1
Net debt (cash) 278 404 479 478 479 PBR (x) 0.77 1.04 1.08 1.05 1.02
YE fully diluted units (mn) 1,189 1,216 1,226 1,237 1,247 Dividend yield (%) 8.7 8.3 7.6 8.1 7.7
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Disclosures appendixThe information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, StandardChartered Bank Singapore Branch, Standard Chartered Securities (India) Limited, Standard Chartered Securities KoreaLimited and/or one or more of its affiliates (together with its group of companies, SCB) and the research analyst(s) named in
this report. THIS RESEARCH HAS NOT BEEN PRODUCED IN THE UNITED STATES.
Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certifythat: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect theirpersonal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and (2) no part of hisor her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in thisresearch report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.
Where disclosure date appears below, this means the day prior to the report date. All share prices quoted are the closingprice for the business day prior to the date of the report, unless otherwise stated.
0.43
0.49
0.55
0.61
0.67
0.73
Feb -10 May-10 Aug -10 No v-10 Feb-11 May-11 Aug-11 Nov-11 Feb -12 May-12 Aug -12 No v-12
SGD Recommendation and price target history for Cambridge Industrial Trust
Date Recommendation Price target Date Recommendation Price target Date Recommendation Price target
Source: FactSet prices, SCB recommendations and price targets
Recommendation Distribution and Investment Banking Relationships
As of 31 December 2012
% of covered companiescurrently assigned this rating
% of companies assigned this ratingwith which SCB has provided investment
banking services over the past 12 months
OUTPERFORM 55.7% 13.0%
IN-LINE 34.6% 14.9%
UNDERPERFORM 9.7% 3.3%
Research Recommendation
Terminology Definitions
OUTPERFORM (OP)The total return on the security is expected to outperform the relevant market index by 5% or moreover the next 12 months
IN-LINE (IL)The total return on the security is not expected to outperform or underperform the relevant marketindex by 5% or more over the next 12 months
UNDERPERFORM (UP)The total return on the security is expected to underperform the relevant market index by 5% ormore over the next 12 months
SCB uses an investment horizon of 12 months for its price targets.
Additional information, including disclosures, with respect to any securities referred to herein will be available uponrequest. Requests should be sent to [email protected].
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