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REIT SINGAPORE

August 23, 2012

Far East Hospitality Trust


FEHT SP Offer price

NOT RATED
S$0.93 N/A N/A N/A
Conviction

Market Cap

Avg Daily Turnover

Free Float

Target Previous Target Up/downside

US$1,198m
S$1,492m

US$-m
S$-m

44.0%
1,604 m shares

CIMB Analyst

New local tourism proxy


FEHT stands out among hospitality trusts in Singapore for its pure local exposure and potential for improved yields. It has one of the strongest acquisition pipelines among the hospitality trusts, offering growth visibility all the way till 2016.

Tan Siew Ling


T +65 6210 8698 E siewling.tan@cimb.com

Donald Chua
T +65 6210 8606 E donald.chua@cimb.com

Its offer price of S$0.93 translates to yields of 6.0-6.3% for FP12-FY13 and 1x P/BV. This is priced near the forward yields of 6.0-6.2% and 1.2x P/BV for its closest peer, CDLHT, previously the main liquid proxy for the buoyant local tourism industry.

New proxy
Company Visit Channel Check Expert Opinion Customer Views

After its listing on 27 Aug, FEHT will be the first and only Singapore-focused hotel and serviced residence hospitality trust listed locally. Prior to this, CDLHT was the chief proxy for the buoyant local tourism industry. FEHTs listing will provide an alternative. FEHT stands out for its pure local exposure, room for organic growth through improved yields and ROFR pipeline from its sponsor. Its positioning and asset locations are arguably not as strong as CDLHTs, though this could present upside from improved yield management and asset enhancement.

FEHT has one of the strongest local acquisition pipelines among locally-listed hospitality trusts. These include ROFR to seven local assets (three hotels and four residences) at a time when accretive third-party assets are hard to find. This pipeline provides acquisition visibility all the way until 2016. Acquisitions could reinforce FEHTs local hospitality positioning.

Priced near closest peer


FEHTs shareholding structure is tight with its sponsor holding 52/56% stakes (depending on whether the over-allotment option is exercised) and cornerstone investors holding another 23.5%. The institutional offering has been over 30x subscribed, closing at S$0.93, the top end of its pricing range. At pro-forma yields of 6.0-6.3% for FP12-FY13 and 1.0x P/BV, FEHT is priced near its closest peer, CDLHT, which trades at 1.2x P/BV and forward yields of 6.0-6.2%, assuming 90% payouts.

Strongest local acquisition pipeline

Shareholding & other details:


Major shareholders: Far East Organisation AIA APG Indicative timetable: Closing date for public offer 23-Aug, 12nn Commence trading on a ready basis 27-Aug, 2pm % held 52/56% 3.7% 3.4%

Financial Summary
Gross Property Revenue (S$m) Net Property Income (S$m) Net Profit (S$m) Distributable Profit (S$m) Core EPS (S$) Core EPS Growth FD Core P/E (x) DPS (S$) Dividend Yield Asset Leverage BVPS (S$) P/BV (x) Recurring ROE % Change In DPS Estimates Dec-09A 74 65 57 47 0.04 26.38 0.03 3.15% 30.4% 0.93 1.00 3.8% Dec-10A 93 84 56 65 0.04 -0.4% 26.48 0.04 4.37% 30.4% 0.93 1.00 3.8% Dec-11A 104 95 66 76 0.04 17.9% 22.46 0.05 5.07% 30.4% 0.93 1.00 4.4% Dec-12F* 50 45 51 37 0.03 -23.1% 29.21 0.02 2.49% 30.4% 0.93 1.00 3.4% Dec-13F** 125 113 84 94 0.05 64.0% 17.81 0.06 6.27% 30.4% 0.93 1.00 5.6%

* & **: FORECA STS A CCORDING TO FEHT P ROSP ECTUS; FP 201 1A UG 201 31DEC 201 2: 2 2

SOURCE: CIMB, FEHT PROSPECTUS

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


August 23, 2012

1. BACKGROUND 1.1 Local hospitality trust


Notes from the Field

We have a very strong pipeline of projects that we will eventually like to add. When they are added, the value of the assets will easily double, which will make us a very big player, easily one of the biggest.
Gerald Lee, CEO of FEHT

FEHT is the first and only Singapore-focused hotel and serviced residence hospitality trust to be listed on the Singapore Stock Exchange. The institutional offering of its IPO has been over 30x subscribed, closing at the top end of its pricing range of S$0.93/share. This translates to FP12-FY13 yields of 6.0-6.3% with a resultant market cap of about S$1.5bn. Trading will start on 27 Aug. The REIT will be managed by FEO Hospitality Asset Management Pte Ltd and sponsored by a group of companies under the Far East Organisation (FEO). Asset operator will be Jelco Properties Pte Ltd, the hospitality management arm of FEO which is wholly owned by Far East Orchard (renamed from Orchard Parade Holdings Ltd). On listing, FEHT will own 11 assets (seven hotels and four serviced residences) in Singapore with a total asset value of S$2.1bn.
Figure 1: Assets can be found near core central region
1 2 3 4 5 6 Albert Court Village Landmark Village Hotel The Quincy Hotel Regency House Orchard Parade Hotel Oasia Hotel 7 8 9 10 11 Changi Village Hotel Regency House Riverside Village Residences Central Square Village Residences Hougang Village Residences

SOURCES: CIMB, COMPANY REPORTS

2. INVESTMENT HIGHLIGHTS
Against its listed peers, we like FEHT for its: 1) pure local exposure (minimal risks from foreign exchange and tax leakage overseas); 2) fee structure, pegged at a higher percentage of revenue and gross operating profit; 3) organic growth potential; 4) acquisition pipeline from sponsor; and 5) strong backing of FEO. See Appendix 7.2 for a comparison between FEHT and closest peer, CDLHT.

2.1 100% local exposure


FEHTs investment mandate is to invest locally, where the hospitality outlook is favourable and risks from foreign exchange and tax leakage from overseas expansion are minimised. Of these, hotels (including commercial space/ rentals) are responsible for 74.4% and 78.7% of its asset value and FP12 gross revenue respectively, with the rest coming from serviced residences. Although only four of its 11 assets are located near traditionally more hotel-centric areas like the CBD and Orchard Road (Orchard Parade Hotel, Elizabeth Hotel, The Quincy Hotel and Regency House), several others are located nearer tourist districts like Bugis and Clarke Quay. Assets outside the city centre such as Oasia in Novena and Changi Village in Changi have the potential to capture visitors to
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Far East Hospitality Trust


August 23, 2012

the Mount Elizabeth Novena Hospital and Changi Business City respectively, in our view.

Figure 2: Pure exposure to Singapore


No. Asset 1 2 3 4 5 6 7 8 9 10 11 Albert Court Village Changi Village Hotel The Elizabeth Hotel Landmark Village Hotel Oasia Hotel Orchard Parade Hotel The Quincy Hotel Central Square Village Residences Hougang Village Residences Regency House Riverside Village Residences Location 180 Albert Street 1 Netheravon Road 24 Mount Elizabeth 390 Victoria Street 8 Sinaran Drive 1 Tanglin Road 22 Mount Elizabeth 20 Havelock Road 1 Hougang Street 121 Penang Road 30 Robertson Quay Type Hotel Hotel Hotel Hotel Hotel Hotel Hotel Svc Resi Svc Resi Svc Resi Svc Resi Rooms 210 380 256 393 428 388 108 128 78 90 72 GFA (sf) 122,989 126,186 189,428 88,371 436,028 299,982 51,775 145,045 157,725 84,627 101,085 Master lease terms 20+20 20+20 20+20 20+20 20+20 20+20 20+20 20+20 20+20 20+20 20+20 Land tenure 75 yrs 65 yrs 75 yrs 66 yrs 92 yrs 50 yrs 75 yrs 80 yrs 81 yrs 81 yrs 78 yrs Purchase Price S$m 121 239 187 218 318 413 82 183 65 166 113 Valuers' cap rates (%) 5.75-6.00% 6.00-6.25% 5.50-5.60% 6.00-6.10% 5.25-5.40% 6.25% 5.50-5.60% 4.00% 4.25% 3.75% 4.00%

SOURCES: CIMB, COMPANY REPORTS

Figure 3: Hotel revenue*


Albert Court The Elizabeth Village 7.1% 11.4% The Quincy 4.9% Orchard Parade 29.4%

Figure 4: Serviced residence revenue*


Hougang Village 12%

Riverside Village 21%

China Sq Village 39%

Landmark Village 14.3%

Oasia 18.5% Changi Village 14.4%

Regency Hse 28%

* Forecast period between Aug-Dec 2012 SOURCES: CIMB, COMPANY REPORTS

* Forecast period between Aug-Dec 2012 SOURCES: CIMB, COMPANY REPORTS

2.2 Stability with upside potential


To temper volatility from the short stays in hotels/ serviced apartments, master leases for FEHTs assets (likewise CDLHTs) have been structured for downside protection with fixed rents and upside from variable rents tied to underlying revenues and profits. Percentages tied to gross operating revenue and gross operating profit (GOP) for FEHT are higher than for CDLHTs local assets, which we believe could offer higher upside to rising REVPARs. While the above structure could result in larger downside when REVPARs drop, there is protection from fixed and commercial rentals. Excluding commercial space, fixed and variable rentals for its hotel master leases are estimated near 50:50 for FP12, similar to CDLHTs. Downside protection is, however, higher if we were to include commercial rentals (typically on longer leases), given FEHTs higher exposure to commercial rentals than CDLHT.

Far East Hospitality Trust


August 23, 2012

Figure 5: Rentals under master leases


Fixed rent (S$'m) Hotels Albert Court Village Hotel Changi Village Hotel The Elizabeth Hotel Landmark Village Hotel Oasia Hotel Orchard Parade Hotel The Quincy Hotel Serviced Residences Central Square Village Residences Hougang Village Residences Regency House Riverside Village Residences Total/ Simple ave. Variable rent = Sum of % GOP and % of GOP less fixed rent % of gross operating revenue % of GOP 33% 33% 33% 33% 33% 33% 33% 25% 24% 34% 29% 28% 37% 23%

3.5 7.5 5.5 7 8 10 2.5

3.5 1.5 2.5 2.5 54.0

33% 33% 33% 33% 33%

41% 38% 40% 40% 33%

SOURCES: CIMB, COMPANY REPORTS

2.3 Historical RevPAR and RevPAU comparisons


We compare the operating performances of FEHTs assets with those of its closest listed peers, CDLHT and ART. On the whole, REVPARs and ARRs have been generally lower for FEHT, which we attribute to its less-centralised locations, mid-tier positioning and lower corporate-visitor exposure. We note stronger-than-peers occupancy for FEHTs hotels during the recession of 2009, which we believe could be the result of its leisure-visitor exposure and more value positioning, though yoy REVPAR growth was weaker in 2011. Yoy growth in REVPAU for its serviced residences tracked that of its closest peer, ART, despite its less-centralised locations.

Figure 6: FEHTs hotels


S$ 220 200 182 180 160 160 140 120 100 FY09 FY10 FY11* 84% 121 80% 144 84% 88% 85% 82% 169 Occ rate (RHS) ARR (LHS) RevPAR (LHS) 198 86% 88%

Figure 7: CDLHTs hotels


S$ 260 240 220 200 180 160 140 81% 120 FY07 FY08 FY09 FY10 FY11 80% 197 172 87% 85% 149 82% 215 208 184 191 89% 88% 204 Occ rate (RHS) 243 232 ARR (LHS) RevPAR (LHS) 90% 88% 86% 84%

* EXCLUDING OASIA HOTEL SOURCES: CIMB, COMPANY REPORTS

SOURCES: CIMB, CDLHT

Far East Hospitality Trust


August 23, 2012

Figure 8: FEHT's serviced residences: similar REVPAU trends


S$/day 250 25% 200 18% 150 100 146 50 0 FY09 FY10 FY11 214 25% 20% 15% 10% 5% 0%
SOURCES: CIMB, COMPANY REPORTS

Figure 9: ART's serviced residences in Singapore


S$/day
RevPAU (LHS) Yoy Chg (RHS)

RevPAU (LHS)

Yoy Chg (RHS)

30%

300 250 200 150

24%

25% 17%

30% 20% 10% 0%

182

249 100 50 0 FY07 FY08 FY09 201 167 -33%

208

243

-10% -20% -30% -40%

FY10

FY11

* Note addition of new property (Citadines Mount Sophia) in 2010 SOURCES: CIMB, ART

2.4 Organic growth potential


We foresee organic growth from the following: Higher REVPAR and ARRs at Oasia Hotel (highest number of rooms) which commenced operations in Apr 11 and is near the newly-opened Mount Elizabeth Novena hospital Higher REVPAR and ARRs after asset enhancement at: 1) Elizabeth Hotel which was refurbished in 2H11; 2) Landmark Village Hotel in May 12-Mar 13; 3) Orchard Parade Hotel between Aug and Sep 12; and 4) minor refurbishments at Central Square Village Residences and Riverside Village Residences. Higher contributions from higher-yielding corporate customers to about 50% of revenue (managements target) from 44% in FY11 and 48% in 1Q12, given intentions to optimise yields after refurbishment.

2.5 Strong ROFR pipeline from sponsor


FEHT has one of the strongest local acquisition pipelines among locally-listed hospitality trusts. These include rights of first refusal (ROFR) to seven local assets (three hotels and four serviced residences) from its sponsor. The seven have the potential to jack up its number of rooms by 49% from 2,531 (on listing) to 3,773, at a time when accretive third-party hotel acquisitions locally are difficult to find. Three of these are completed properties (Orchard Parksuites and Orchard Scotts Residences are expected to be refurbished before being offered to FEHT) while four are under development. These provide acquisition visibility all the way until 2016, and could reinforce FEHTs local hospitality positioning. The first which could be offered to FEHT is likely The Amoy Hotel, a small boutique hotel with 37 rooms with completion expected in 1H13. We believe that the injection of some assets such as Orchard Parksuites, Orchard Scotts Residences, Oasia Downtown Hotel and The Outpost Hotel can increase the trusts presence in CBD and along Orchard Road.

Far East Hospitality Trust


August 23, 2012

Figure 10: ROFR properties from sponsor


ROFR property Completed Orchard Parksuites Orchard Scotts Residences West Coast Village Residences Under development The Amoy Hotel Oasia Downtown Hotel Oasia West Residences The Outpost Hotel Far East Square Peck Seah Street West Coast Crescent/ Link Far East Square Boutique upscale Mid-tier/ upscale Mid-tier/ upscale Mid-tier/ upscale Hotel Hotel Svc Resi Hotel 1H2013 2H2015 2H2015 1H2016 Subtotal: 37 314 116 292 759 Location Market segment Upscale Upscale Mid-tier Asset type Expected completion date Completed Completed Completed Subtotal: Estimated no. of hotel rooms/ svc resi units 225 207 51 483

11 Orchard Turn 5 Anthony Road 154 West Coast Road

Svc Resi Svc Resi Svc Resi

SOURCES: CIMB, COMPANY REPORTS

2.6 Strong backing of FEO


As FEO does not have an ultimate holding company, FEHT is sponsored by a group of companies under FEO. Formed by 185 private and three listed companies, FEO is Singapores largest private property developer and one of the largest owner-operators of hospitality assets. It has a rather long record in hospitality asset enhancement and operations, having established a dedicated hospitality business in the mid-2000s. It is also a leading developer of mixed-use property projects with residential, commercial and hospitality components. The sponsor has provided a ROFR pipeline to FEHT and will, as a sign of commitment and aligned shareholders interest, hold a majority stake in FEHT. We believe FEOs strong branding has also contributed to attractive borrowing terms and costs for FEHT.

2.7 Tight shareholding structure


Shareholding is tight with the sponsor retaining more than 50% regardless of whether the over-allotment option is exercised. This should help align shareholders interests. The listing has attracted overwhelming response from cornerstone investors. The sponsor and cornerstone investors are expected to hold 75-79% of the stock, depending on whether the over-allotment option is exercised. We believe that this tight shareholding could have partly contributed to the overwhelming response to the institutional offering.

Figure 11: Sponsor retains majority stake; Strong cornerstones


No. of shares Sponsor Cornerstone investors Aberdeen Asset Mgmt AIA APG Havenport Asset Mgmt Hwang Investment Mgmt Bhd Indus JF Asset Mgmt Lion Global Investors Myriad Asset Mgmt NTUC Income Co-operative Subtotal Total 898,178 37,634 59,141 53,763 16,129 48,387 21,505 48,387 26,882 16,129 48,387 376,344 1,274,522 % stake 52% (over-allotment) 56% (w/o over-allotment) 2.3% 3.7% 3.4% 1.0% 3.0% 1.3% 3.0% 1.7% 1.0% 3.0% 23.5% 75% (over-allotment) 79% (w/o over-allotment)

SOURCES: CIMB, COMPANY REPORTS

Far East Hospitality Trust


August 23, 2012

3. RISKS 3.1 Recession and geographical concentration


Given the short stays at hotels and higher percentages of master lease rentals tied to assets underlying revenue and GOP, FEHT could be susceptible to economic slowdowns, disease outbreaks or factors affecting the hospitality industry. Nonetheless, we see mitigation from a higher percentage of its revenue tied to fixed and commercial rentals and exposure to the mid-tier and leisure segment which could be more resilient in a downturn. While FEHTs pure local exposure is a boon when Singapores hospitality outlook is positive, this pure exposure could result in concentration risks during a business downturn, from disease outbreaks, changes in travel patterns, economic slowdowns etc.

3.2 Competition from peers


As leisure visitors are generally more price-elastic and owing to the mid-tier positioning of some of its assets, price competition could be a threat, which could affect its REVPARs and variable rentals. That said, demand-supply dynamics remains favourable in the near term and FEHT plans to build up its corporate-visitor exposure over time.

3.3 Sponsored by group of companies rather than FEO


While the REIT Trustee has been granted a corporate guarantee for each of the master leases, save for Orchard Parade Hotel, there is no assurance that these companies can fulfil their obligations under the corporate guarantees, particularly during bankruptcies, insolvencies or business downturns. That said, risks should be buffered by the substantial operations of each master lessee/sponsor company, and the likelihood that other sponsor companies/master lessees could take over the master tenancies in the worst case.

3.4 Rise in interest rates


Borrowing costs are low at 2.5%, as assumed by management in FEHTs prospectus. This assumes 40% hedging. A rise in interest rates could result in higher interest costs and reduce FEHTs appeal as a yield instrument. That said, interest rates could remain low for some time and FEHT could still hedge its future exposure if required.

3.5 Acquisition risks


Given buoyant expectations for the hospitality industry in Singapore and Asia, the values of hospitality assets could remain elevated. This could result in overpayment for assets or potential delays in acquisitions because of the difficulties of making yield-accretive acquisitions.

Far East Hospitality Trust


August 23, 2012

4. SWOT ANALYSIS
Figure 12: SWOT analysis
Strengths Pure local exposure and local investment mandate Opportunities Positive tourism outlook - riding on growth in leisure visitors with new local tourist attractions Sponsor/ operator has track record of running Increased contributions from newly-opened and wellhospitality assets located Oasia Hotel Shareholders' interests aligned with majority stake from Improved REVPARs after asset refurbishments sponsor Higher leverage to upside from performance given higher Room for yield-management to improve RevPARs % pegged to revenue and gross operating profit High fixed and commercial rentals for stability and ROFR pipeline from sponsor for acquisitions downside protection Strong backing by Far East Organisation Weaknesses Not all assets located within the traditional 'touristcentric' areas Lower exposures to higher-yielding corporate segment Less recognised operator and brand names Threats Macro slowdown or recession Price competition given higher price elasticity of leisure visitors Acquisition risks Rise in interest rates and potential drop in distribution once maintenance capex is to be funded out of distributions rather than debt

SOURCES: CIMB, COMPANY REPORTS

5. FINANCIALS 5.1 Growth led mainly by hotels


FEHT has projected 18.1% growth and 5.4% growth in distributable profits for FP12 (annualised) and FY13 respectively. The bulk of its revenue growth in FP12 is supposed to come from its hotels, led by higher full-year contributions from Oasia Hotel and higher RevPARs from higher room rates after refurbishment on steady occupancy of an estimated 84.9%. Serviced-apartment contributions are expected to be flat, as higher room rates offset a slight weakness in occupancy. In FY13, management is projecting 5% growth for revenue from both hotels and serviced residences on room-rate increases.
Figure 13: Revenue breakdown
140 Hotel 120 16.9 100 Revenue (S$'m) 80 60 40 20 0 FY09 FY10 FY11 FY12F FY13F 46.6 15.5 11.9 62.3 69.7 84.3 15.5 15.1 16.8 17.9 17.8 Svc resi Commercial rentals 17.5 18.7 % of revenue

Figure 14: Variable component to rise over time


100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY09 FY10 Fixed FY11 Variable FY12F FY13F Commercial rentals 62% 50% 47% 45% 43% 17% 34% 37% 40% 43% 21% 17% 16% 14% 14%

88.7

SOURCES: CIMB, FEHT PROSPECTUS

SOURCES: CIMB, FEHT PROSPECTUS

Overall, hotels should remain FEHTs bread-and-butter, accounting for an estimated 71% of its revenue in FP12 and FY13 while serviced residences and commercial rentals form 15% and 14% respectively. NPI from hotels (inclusive of commercial rentals) and serviced residences is expected to be at 81% and 19% of the total respectively. Rising contributions from both should raise the

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August 23, 2012

variable component of its revenue over time, though fixed and commercial rentals should still form 57% of its revenue in FY13. Management fee structures echo those of the other listed peers (see appendix). Management has elected to receive 80% of its fees in the form of stapled securities in FP12-FY13.

5.2 Asset leverage of 30.4%


At listing date, FEHT will have aggregate leverage of 30.4%. Borrowing terms are attractive: 2.5% interest; 40% hedging; all assets unencumbered; and staggered maturities of three, five and seven years. This should provide debt headroom of above S$100m and above S$500m to asset leverage of 35% and 45% respectively for acquisitions.
Figure 15: Debt maturities
350 300 300 250 Debt maturity (S$'m) 250 200 150 100 100 50 0 0 2013 2014 2015 2016 2017 2018 2019 0 0 0

SOURCES: CIMB, COMPANY REPORTS

5.3 100% payouts for FP12 and FY13


FEHT has committed to 100% distribution in FP12 and FY13 and at least 90% thereafter. These compare with CDLHTs guidance of 90%. The difference lies in the funding of annual maintenance capex. FEHT plans to fund its near-term requirements with debt to take advantage of low interest rates while CDLHT prefers to fund capex through distribution.

6. VALUATION 6.1 Priced on par with peer


Figure 16: Valuation comparisons
Far East Hospitality Trust ~S$725k (across hotel & svc resi; stripping out 14% of asset value as commercial in acc with revenue contribution) 1.0x 5.0% 6.0% 6.3% CDL Hospitality Trust S$459k (S$596k for local assets) 1.2x ~5.4% (local hospitality assets) 6.0% 6.2%

Value per room key (S$'k) P/BV (x) FY12 NPI yield (%) FY12 DPU yield (%) FY13 DPU yield (%)

SOURCES: CIMB, COMPANY REPORTS

At pro-forma yields of 6.0-6.3% for FY12-13, FEHT will be priced fairly on par with its closest peer, CDLHT. At 1.0x P/BV vs. CDLHTs current 1.2x, we believe its listing price captures the differential in their book valuations (estimated value per room key of S$725k for FEHT vs. S$596k for CDLHTs local assets). CDLHT currently trades at forward yields of 6.0-6.2% on a 90% payout, though
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this could rise if management decides to pay more than 90%. We believe that FEHT stands out for its pure local exposure, room for organic growth through improved yields and strong pipeline from its sponsor.
Figure 17: CIMB REIT Overview
SREIT Hospitality Ascott Residence Trust CDL Hospitality Trust Industrial Ascendas Reit Cache Logistics Trust Cambridge Industrial Trust Mapletree Logistics Trust Mapletree Industrial Trust Sabana Shariah Office Frasers Commercial Trust CapitaCommercial Trust K-Reit Suntec REIT Retail CapitaMall Trust Frasers Centrepoint Trust Starhill Global REIT Mapletree Commercial Trust Healthcare Parkway Life REIT Bloomberg Ticker ART SP CDREIT SP Simple Average AREIT SP CACHE SP CREIT SP MLT SP MINT SP SSREIT SP Simple Average FCOT SP CCT SP KREIT SP SUN SP Simple Average CT SP FCT SP SGREIT SP MCT SP Simple Average Price as of Mkt Cap 23 Aug 12 (LC $m) $1.23 $1.95 $1,393 $1,882 Last reported asset leverage 39.7% 25.2% 32.5% 32.7% 32.5% 33.1% 37.0% 37.8% 34.1% 34.5% 39.5% 30.1% 41.8% 39.3% 37.7% 38.4% 31.7% 30.5% 37.6% 34.6% 34.8% 34.8% 35.0% Last reported asset leverage 28.4% 35.3% 19.1% 27.6% 24.0% 24.0% 26.7% 33.5% Last stated NAV 1.42 1.60 Price / Stated NAV 0.86 1.22 1.04 1.24 1.21 0.98 1.18 1.31 0.99 1.15 0.86 0.88 0.91 0.73 0.85 1.22 1.27 0.78 1.13 1.10 1.34 1.34 1.07 $ $ Target Price (DDMbased) 1.21 2.21 2012 Yield 7.4% 6.0% 6.7% 6.0% 7.7% 8.1% 6.9% 6.4% 9.0% 7.4% 6.4% 5.6% 6.7% 6.4% 6.3% 5.2% 5.6% 6.2% 5.5% 5.6% 5.5% 5.5% 6.5% 2013 Yield 7.3% 6.2% 6.8% 6.4% 8.0% 8.3% 7.1% 6.7% 8.9% 7.6% 7.6% 5.8% 6.8% 6.4% 6.7% 5.7% 6.0% 6.8% 5.9% 6.1% 5.9% 5.9% 6.8% Total return (Prospective price upside + 2012 yield) 6.0% 19.8%

Rec. N N

$2.29 $1.12 $0.61 $1.06 $1.34 $1.04

$5,124 $782 $725 $2,572 $2,184 $662

1.84 0.92 0.62 0.90 1.02 1.05

$ $ $ $

2.14 1.19 NA 1.07 1.31 NA

N O NR O N NR

-0.7% 14.2% 7.8% 4.5%

$1.12 $1.40 $1.14 $1.45

$721 $3,963 $2,993 $3,241

1.30 1.58 1.25 1.98

$ $ $ $

1.21 1.48 1.21 1.59

O O O O

14.2% 11.6% 13.0% 16.3%

$1.93 $1.79 $0.74 $1.08

$6,428 $1,469 $1,438 $2,010

1.58 1.41 0.95 0.95

$ $ $ $

2.01 1.91 0.75 1.14

N O N O

9.1% 12.4% 7.1% 11.5%

PREIT SP Simple Average Simple average for SIN

$1.95

$1,180

1.46

1.96

6.0%

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

Price as of Mkt Cap 23 Aug 12 (LC $m) $1.74 $1.50 $1.37 $3,072 $4,045 $4,111

Last stated NAV 1.10 1.01 0.96

Price / Stated NAV 1.59 1.48 1.43 1.50 1.48 1.48 1.49 1.15 $ $ $

Target Price (DDMbased) 1.80 1.55 1.42

Rec. O O O

2012 Yield 4.7% 5.1% 4.9% 4.9% 5.9% 5.9% 5.2% 6.2%

2013 Yield 4.9% 5.2% 5.3% 5.1% 6.2% 6.2% 5.4% 6.5%

Total return (Prospective price upside + 2012 yield) 8.0% 8.7% 8.3%

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

$3.05

$1,384

2.07

NA

NR

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

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Far East Hospitality Trust


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7. APPENDIX 7.1 Trust structure


Figure 18: Trust structure similar to CDLHT

SOURCES: CIMB, COMPANY REPORTS

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Far East Hospitality Trust


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7.2 Management team


Figure 19: Management team
Management Team Koh Boon Hwee Chairman and NonExecutive Director Mr Koh Boon Hwee is the Chariman of the REIT Manager Board and of the TrusteeManager Board. Mr Koh is currently executive Chairman at Credence Capital Fund II (Cayman) Ltd and Credence Partners Pte Ltd. He is also currently Non-Executive Chairman of Sunningdale Tech Ltd, Yeo Hiap Seng Limited, Yeo Hiap Seng (Malaysia) Berhad, AAC Technologies Holdings Inc and Rippledot Capital Advisers Pte Ltd. Prior to this, he sat on various boards including S i2i Limited, Sunningdale Tech Ltd, SingTel, DBS Group and Temasek Holdings Pte Ltd. Mr Koh graduated from Imperial College with a Bachelor of Science (Mechanical Engineering), First Class Honours, in 1972 and obtained a Master in Business administration with Distinction from Harvard Business School in 1976. Gerald Lee Hwee Keong Mr Gerald Lee is the CEO of the REIT Manager. He has been employed by the Chief Executive Officer REIT Manager since early 2011, where he is responsible for overseeing hospitality asset management. Prior to this role, he was the Executive Director of 08hundred LLP from 2010-11. He was with Capitaland Ltd/ The Ascott Ltd from 2005-10 with roles including CEO (Europe) and Deputy CEO. From 1991-2005, Mr Lee was with the Singapore Tourism Board, and his last held position was Assistant CEO (Leisure), where he was in charge of all the leisure divisions. Mr Lee graduated from Cornell University with a Bachelor of Science (with Distinction) in 1991, and obtained an Executive Master of Business Adminstration (with Distinction) from INSEAD and Tsinghua University in 2012. Danny Peh Kok Kheng Mr Danny Peh is the CFO and Head of Investor Relations of the REIT Manager. Chief Financial Officer, From 2000-2012, Mr Peh was with Far East Management Pte Ltd, and his last held Head of Investor Relations position at Far East Management Pte Ltd was Director of Financial Management Division. From 2008-2012, Mr Peh was also the Chief Corporate Officer and Group Financial Controller of Far East Orchard. Mr Peh holds directorships in various companies in Far East Organisation. Mr Peh was also a director of several subsidiaries in the Far East Orchard Group. Mr Peh obtained his professional degree from the Association of Chartered Certified Accountants, UK. He is a fellow member of the Association of Chartered Certified Accountants, UK as well as a member of the Institute of Certified Public Accountants of Singapore. Mr Pettey is the Asset Manager of the REIT Manager. From 2010-2012, Mr Pettey Bryant Lee Pettey Asset Manager was with W Hotels (Starwood) and his last held position was Director of Residences, where he was incovled in the opening of The Residences at W Singapore Sentosa Cove. From 2005-9, he was with The January Group and his last-held position was Director of Development. From 2003-4, he was with The Hodgson Company as a project manager. Mr Pettey graduated from Brigham Young University with a Bachelor of Science in 2000, and subsequently obtained a Master of Science in Real Estate Development from Columbia University in 2005. Ms Lee Pei Yee is the Investment Manager of the REIT Manager. From 2011-12, Lee Pei Yee Investment Manager she was with Far East Organisation as a Manager - Special Projects, where she was responsible for providing corporate finance support to loacl and overseas business expansion. From 2009-11, she was with Fortune Capital Management as an Investment Manager and prior to that, PrimePartners Asset Management as an Assistant Manager - Investments. Ms Lee graduated from National University of Singapore with a Bachelor of Arts in 1999 and a Bachelor of Social Sciences (with Honours) in 2000, and obtained a Master in Business Administration (Dean's Honours List) from Nanyang Technological University in 2007.

SOURCES: CIMB, COMPANY REPORTS

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7.3 Comparing FEHT with CDLHT


Figure 20: Comparing FEHT and CDLHT
Structure Sponsor stake Assets No. of assets No. of rooms Asset value (S$'bn) Remaining land tenure for local assets Corporate-Leisure mix (%) Value per room key (S$'k) Leases Master lease tenures for local assets 20+20yrs from listing IPO portfolio: 20+20yrs from listing Novotel Clarke Quay: 13.5yrs from Jun 2007 Studio M: 20+20+20+10yrs from May 11 IPO portfolio: 20% of revenue; 20% of GOP Novotel Clarke Quay: Variable rental of GOP less Accor's management fee (>90% of GOP) Studio M: 30% of revenue; 20% of GOP M&C, the Accor Group, Rendezvous Hotel (NZ) Ltd ~S$65m (~S$38m local; S$27m overseas) Far East Hospitality Trust Stapled security (dormant business trust) 56% or 52% if over-allotment option is exercised 11 (7 hotels and 4 serviced residences) 2,531 (2,163 hotel; 368 serviced residences) S$2.14bn 72yrs (weighted ave) 50-92yrs Hotels: 44%/ 56% Serviced Residences: 88%/ 12% ~S$725k (across hotel & svc resi; stripping out 14% of asset value as commercial in acc with revenue contribution) CDL Hospitality Trust Stapled security (dormant business trust) 36% stake 13 4307 (2,716 local; 1,591 overseas) S$2.03bn (S$1.98bn excl. Orchard Hotel Shopping Arcade) 76yrs (weighted ave) 63-94yrs ~65%/ 35% S$459k (S$596k for local assets)

Fees - % of revenue and gross operating profit (GOP) for local assets Master-lessees/ Operator for portfolio Fixed rent (S$'m) Revenue mix Fixed/variable rental mix (% of revenue) Geographical mix (% of revenue) Asset mix (% of FY11 revenue) Balance sheet/ Yield Asset leverage (%) FY12 NPI yield (%) FY12 DPU yield (%) FY13 DPU yield (%) ROFR Pipeline

33% of revenue; 23-41% of gross operating profit Jelco (prev. Far East Hospitality Services) S$54m (S$44m for hotel; S$10m for service apartments)

FY11: 47% fixed/ 37% variable/ 16% commercial rental FP12E: 45% fixed/ 41% variable/ 14% commercial rental 100% local Hotel (66.8%), Service Apts (17.1%), Commercial (16.1%)

FY11:47% fixed/ 50% variable/ 3% commercial rental 1H12: 45% fixed/ 51% variable/ 4% commercial rental 80% local; 20% overseas Local hotels (76.7%), Overseas hotels (19.6%), Commercial (3.7%)

30.4% 5.0% 6.0% 6.3%

25.2% ~5.4% (local hospitality assets) 6.0% 6.2%

Assets

7 assets Completed: Orchard Parksuites, Orchard Scotts Residences, West Coast Village Residences Under devt: The Amoy Hotel, Oasia Downtown Hotel, Oasia West Residences, The Outpost Hotel

2 potential (W Hotel, St. Regis Hotel)

SOURCES: CIMB, COMPANY REPORTS

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7.4 Management fee comparisons


FEHTs fee structure mirrors those of its peers, particularly CDLHT. Worth noting is its slightly lower acquisition fees for related-party transactions.
Figure 21: Fee comparisons
Far East Hospitality Trust Structure Base fee Stapled security 0.3% p.a. of gross assets CDL Hospitality Trust Stapled security 0.25% p.a. of deposited property Ascendas Hospitality Trust Stapled security 0.3% p.a. of deposited property Ascott Residence Trust REIT 0.3% of property values 4.0% of gross profit; 1.0% of difference between gross profit and 106% of preceding yr's gross profit if gross profit increases by more than 6% 1.0% of acquisition price

Performance fee

4.0% of NPI for REIT; 10% of EBIT for business trust 0.75% for acquisition price for related-party acquisitions 1.0% for all others 0.5% of divestment price 3.0% of total project costs Up to 0.02% p.a. of value of property, subject to min. of S$20k per mth

5.0% of NPI for REIT; 10% of EBIT for business trust

4.0% of NPI for REIT, 4.0% p.a. of NPI for business trust

Acquisition fee

1.0% of acquisition price

1.0% of acquisition price

Divestment fee Development management fee Trustee fee

0.5% of divestment price NA Up to 0.1% of value of deposited property, subject to min. of S$10k per mth

0.5% of divestment price 3.0% of total project costs

0.5% of divestment price NA

0.015% p.a. of deposited property, 0.1% p.a. of value of assets, subject subject to min. of S$13.5k per mth to min. of S$10k per mth All except Belgium, Spain & UK: 23% of total revenue; incentive fee of up to 10.0% of gross operating profit Belgium, Spain & UK: 3% of revenue; 6% of net operating profit (NOP); incentive fee of 50% of any excess NOP achieved above NOP hurdle

Property management fee

3.0% of NPI of excluded commercial premises

Nil.

Variable across assets

SOURCES: CIMB, COMPANY REPORTS

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Recommendation Framework #1 *

Stock
OUTPERFORM: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 3 months. relevant relevant relevant relevant relevant

Sector
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand 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. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

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Recommendation Framework #2 **

Stock
OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months.

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

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.
ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, BEC - Very Good, BECL Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD - Good, IVL - Very Good, JAS Very Good, KBANK - Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good.

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