l Equity Research l

Singapore l Real Estate Investment Trusts

8 February 2013

Cambridge Industrial Trust

Strong 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 assets across 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. in 2013-14. With 33% of its assets under-rented, we anticipate positive rent reversions in 2013-14 despite falling market rents. Unitholder-friendly fee structure rewards unit performance rather than growth in asset size or income.

OUTPERFORM
PRICE as of 7 Feb 2013

(initiating coverage)
PRICE TARGET

SGD 0.73
Bloomberg code

SGD 0.77
Reuters code

CREIT SP
Market cap

CMIT.SI
12-month range

SGD 882mn (USD 711mn)

EPS adj est change NA

SGD 0.50 - 0.73

Attractive 7.7% DPU yield in 2013E: We expect CREIT 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.

Year-end: December Revenue (SGD mn) Net property income (SGD mn) NPI margin (%) Associates and JCEs (SGD mn) Revaluation gains (SGD mn) Interest expense (SGD mn) Management fees (SGD mn) Net profit (SGD mn) Net profit adj. (SGD mn) Net profit adj. growth (%) EPU (S) EPU adj. (S) EPU growth adj. (%) DPU (S) DPU growth (%) EV/EBIT (x) Net debt / assets (%) PBR (x) PER adj. (x) Dividend yield (%) Net asset value/unit (S) Prem./(disc.) to NAV (%)

2012 89 76 85.7 0 42 (20) (10) 89 48 37.9 7.48 4.00 37.1 4.78 12.9 15.9 30.9 1.04 14.5 8.3 64.69 -10.5

2013E 100 86 86.0 0 24 (20) (9) 81 57 18.8 6.66 4.66 16.6 5.53 15.6 17.8 35.0 1.08 15.6 7.6 66.82 8.5

2014E 108 93 86.0 0 26 (21) (7) 91 65 14.0 7.42 5.27 13.0 5.88 6.4 15.9 33.9 1.05 13.8 8.1 68.94 5.2

2015E 107 92 86.0 0 27 (23) (7) 89 62 -4.7 7.16 4.98 -5.5 5.59 -5.0 16.2 33.1 1.02 14.6 7.7 70.97 2.2

Source: Company, Standard Chartered Research estimates

Share price performance

1.45

0.45 Feb-12

May-12

Aug-12

Nov-12

Feb-13

Cambridge Industrial Trust

STRAITS TIMES INDEX (rebased)

Share price (%) Ordinary shares Relative to index Relative to sector Major shareholder Free float Average turnover (USD)
Source: Company, FactSet

-1 mth -3 mth -12 mth 7 11 45 5 3 31 Mitsu & Co. Ltd (1.6%) 96% 1,112,552

Kai Yip
Kai.Yip@sc.com +65 6596 8506
CREIT SP SGD 0.73 SGD 0.77

Regina Lim
Regina.Lim@sc.com +65 6596 8502

Important disclosures can be found in the Disclosures Appendix

All rights reserved. Standard Chartered Bank 2013 http://research.standardchartered.com

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Contents
Key highlights Valuation Key risks Structure and management Portfolio analysis Financials Appendix: Property portfolio Disclosures appendix 3 7 10 13 16 21 24 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 above the SREIT average. This rises to 8.2% in 2014E, as acquisition completions and current underrenting 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
8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% CREIT AAREIT CACHE MINT MLT AREIT SREIT average 2013E DPU yield 2014E DPU yield

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
40% 35% 30% 25% 20% 15% 10% 5% 0% AREIT MINT MLT CACHE SREIT average CREIT AAREIT

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.

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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

100 Organic 90 SGD mn 80 70 60 50 40 2012 2013E 2014E 2015E
NPI contribution from organic assets are from assets already in CREITs portfolio before 1 January 2012 Source: Standard Chartered Research estimates

Acquisitions

Development

Portfolio and capital management acquisitions, divestments and asset 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) Asset enhancement initiatives Acquisitions Major divestments
Source: Company, Standard Chartered Research estimates

RoI 9.0% NPI yield 7.2% Exit yield 8.6%

48.0 Purchase price (SGD mn) 293.5 Divestment price (SGD mn) 126.8

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.

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Fig 5: Lease expiry profile

25% 20% 15% 10% 5% 0% 2013 2014 2015 2016 2017 2018 2019 2020 Multi-tenanted Single-tenanted

Fig 6: Market rents vs CREIT rents (rebased)

180 160 140 120 100 2006 2007 2008 2009 2010 2011 2012 Factory rents Warehouse rents CREIT rents

Source: Company

Urban Redevelopment Authority (URA) rental data for multi-tenanted factories 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 in Singapore 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 Base fee Performance fee 0.5% p.a. of deposited property 5.0% of total return of Trust Index less total return of benchmark index multiplied by market cap (15% of amount > 2.0% of total return 1.0% of acquisition price 0.5% of divestment price CACHE 0.5% p.a. of deposited property 1.5% p.a. of NPI AAREIT 0.5% p.a. of deposited property 0.1-0.2% p.a. of deposited property (based on DPU growth)

Acquisition fee Divestment fee

Source: Companies

1.0% of acquisition price 0.5% of divestment price

Up to 1.0% of acquisition price Up to 0.5% of divestment price

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. 5

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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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Valuation
We 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
Terminal growth 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 10-year bond 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Discount Beta rate 1.00 0.80 0.80 0.80 1.00 1.10 7.50% 6.40% 6.40% 6.40% 7.50% 8.05% Price target (SGD) 0.77 2.63 1.22 1.37 1.25 1.55 Implied yield at PT 7.2% 5.7% 5.9% 6.6% 6.9% 7.6%

Name Cambridge Industrial Trust Ascendas REIT Mapletree Logistics Trust Mapletree Industrial Trust Cache Logistics Trust

Ticker CREIT SP AREIT SP MLT SP MINT SP CACHE SP

Aims AMP Capital Industrial Trust AAREIT SP

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
5,000 4,500 4,000 SGD mn 3,500 3,000 2,500 2,000 1,500 1,000 500 0 AREIT
Data as of 28 January 2013 Source: Bloomberg

Free float market cap

1M ADTV (RHS)

14 12 10 8 6 4 2 0 SGD mn

MLT

MINT

CACHE

CREIT

AAREIT

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Fig 10: SREITs under Standard Chartered coverage

Mkt cap (SGD mn) 882 5,754 2,913 2,258 900 762 706 14,175 7,329 2,796 1,622 1,615 1,151 701 15,213 3,975 4,734 3,546 864 13,120 1,969 1,509 792 1,727 713 6,711 49,218 2.03 1.32 0.99 1.08 0.91 1.77 1.67 1.35 1.32 2.12 1.36 0.84 1.96 0.53 0.62 Current price (SGD) 0.73 2.57 1.20 1.39 1.28 0.84 1.57 2013E DPU yield 7.6% 5.8% 6.0% 6.6% 6.7% 6.6% 7.5% 6.3% 5.1% 4.9% 5.6% 5.4% 5.8% 6.3% 5.2% 5.3% 4.8% 6.1% 5.9% 5.4% 5.8% 6.9% 8.0% 5.5% 8.9% 6.6% 5.8% 2.15 1.40 1.05 0.99 0.96 OP IL OP IL OP 1.77 1.73 1.37 1.27 IL IL IL UP 2.51 1.34 0.85 2.23 0.51 0.51 OP OP IL OP IL IL Price Potential Current Implied target upside to Yield at cap cap (SGD) Rating PT NAV P/NAV PT rate rate 0.77 2.63 1.22 1.37 1.25 0.77 1.55 OP OP IL IL IL IL IL 6.2% 0.65 2.3% 1.85 1.7% 0.88 -1.1% 1.01 -2.3% 0.96 -7.8% 0.61 -1.3% 1.47 0.9% 18.4% 1.64 -1.1% 1.06 1.8% 0.97 13.8% 1.53 -2.9% 0.53 -17.1% 0.65 9.3% 0.3% 2.07 3.9% 1.62 1.9% 1.30 -3.8% 1.50 1.7% 5.9% 1.61 6.1% 1.35 6.6% 0.78 -7.9% 0.93 6.1% 0.87 2.5% 3.9% 1.12 1.39 1.36 1.37 1.33 1.37 1.07 1.35 1.29 1.28 0.86 1.28 0.99 0.95 1.20 0.85 1.03 1.03 0.88 0.97 1.26 0.98 1.26 1.16 1.04 1.15 1.17 7.2% 5.7% 5.9% 6.6% 6.9% 7.6% 6.2% 4.3% 4.9% 5.5% 4.8% 6.0% 7.6% 4.9% 5.3% 4.7% 6.0% 6.1% 5.3% 5.5% 6.5% 7.5% 5.9% 6.4% 5.6% 7.5% 6.6% 6.0% 8.0% 7.5% 7.4% 7.1% 5.6% 5.0% 5.5% 5.5% 8.1% 8.3% 5.8% 4.6% 4.9% 4.5% 5.0% 4.7% 6.6% 5.3% 7.1% 5.1% 6.4% 6.0% 7.0% 5.3% 5.1% 6.4% 6.1% 8.4% 7.1% 5.8% 4.7% 4.2% 6.1% 4.6% 8.1% 8.7% 5.2% 5.1% 4.8% 4.4% 5.4% 4.8% 5.5% 5.4% 6.1% 4.6% 5.8% 5.4%

Name Industrial REITs Cambridge Industrial Trust Ascendas REIT Mapletree Logistics Trust Mapletree Industrial Trust Cache Logistics Trust Ascendas India Trust AIMS AMP Capital Industrial Trust Total/Weighted average Retail REITs CapitaMall Trust Mapletree Commercial Trust Starhill Global REIT Frasers Centrepoint Trust Lippo Malls Indonesia Retail Trust Perennial China Retail Trust Total/Weighted average Office REITs Suntec REIT CapitaCommercial Trust Keppel REIT Frasers Commercial Trust Total/Weighted average Hospitality CDL Hospitality Trusts Ascott Residence Trust Ascendas Hospitality Trust Far East Hospitality Trust Religare Health Trust Total/Weighted average Overall total/ weighted average

7.1% 10.5%

8.4% 10.4% 10.0%

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
40% 35% 30% 25% 20% 15% 10% 5% 0% AREIT
Source: Companies, Bloomberg

39.3%

37.1%

36.4% 33.3%

17.4% 12.1% 6.8%

MINT

MLT

CACHE

SREIT average

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 underrenting 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
8.5% 8.0% 7.5% 7.0% -2% 6.5% 6.0% 5.5% 5.0% CREIT AAREIT CACHE MINT MLT AREIT SREIT average -4% -6% -8% 2013E DPU yield 2014E DPU yield 2013-15E DPU CAGR (RHS) 4% 2% 0%

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.

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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% in 2013 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 properties with 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
160 140 Rental indices 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Rental indices are rebased to 1998 Source: Ministry of Trade and Industry, URA, Standard Chartered Research

Multi-user factory rental index Warehouse rental index GDP growth (RHS)

20% 15% 10% 5% 0% -5%

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.

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Fig 14: Weighted average land lease by property valuation

50 45 40 35 30 25 20 15 10 5 0 AREIT MLT MINT AAREIT CACHE CREIT

MLTs weighted average excludes its freehold properties Source: Companies, Standard Chartered Research

Growth depends on price of equity

Prior 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-raising date Mar-11 Oct-10 Oct-10 Aug-10 Jul-09 Oct-07 Market price (SGD/unit) 0.498 0.533 0.542 0.502 0.409 0.739 Issue price (SGD/unit) 0.429 0.531 0.531 0.478 0.392 0.7 Disc -13.9% -0.3% -2.0% -4.8% -4.1% -5.2% Disc to VWAP -15.6% NA NA NA -5.0% -8.8% No. of shares (mn) 132.10 38.48 56.50 83.68 71.14 276.97 Amount raised (SGD mn) 56.7 20.4 30.0 40.0 27.9 193.9

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
0.80 0.75 0.70 SGD/unit 0.65 0.60 0.55 0.50 2006
Source: Company

years

2007

2008

2009

2010

2011

2012

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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
60% 50% 40% 30% 20% 10% 0% MLT CREIT AAREIT AREIT Cache MINT

Fig 18: Security deposits by rental income

14.0 12.0 10.0 months 8.0 6.0 4.0 2.0 0.0 CREIT CACHE AAREIT
Source: Company, Standard Chartered Research

Data for assets on master lease based on end-users of the properties Source: Companies, Standard Chartered Research

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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 of investing 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 2007 2008 - IPO on 25 July 2006 as Singapore's first independent industrial REIT - Made two acquisitions including strata units at Hillview Avenue - Acquired 13 properties at SGD 326mn - Raised SGD 194mn equity via placement to fund acquisitions - Oxley and NAB take a combined 80% strategic stake in Manager - New CEO Chris Calvert appointed - Refinanced SGD 390mn loan - Commencement of Dividend Reinvestment Plan - Raised SGD 28mn equity via private placement for asset enhancements and general working capital - Undertook strategic property initiative involving AIMS AMP Capital Industrial REIT - 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 - 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 rate - SGD 280mn of acquisitions - Establishment of SGD 500mn MTN; issuance of SGD 50mn of Fixed Rate Notes

2009

2010

2011

2012

Source: Company annual reports

Trust structure
Fig 20: CREIT Structure

Unitholders

Ownership of Units

Distributions

Manager
(Cambridge Industrial Trust Management Ltd) 1

Management Services

Cambridge Industrial Trust

Management Fees

Trustee Fee

Trustee
(RBC Dexia Trust Singapore Ltd) Act on behalf o Unitholders

Ownership of Assets

Net Property Income

Property Manager
(Cambridge Industrial Property Management Pte Ltd) 2

Property Management Services

The Properties
Property Management Fees

TMKs

(1) The manager is 80% owned by Cambridge Real Estate Investment Management and 20% owned by Mitsui & Co. CREIM in turn is indirectly owned 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

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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
National Australia Bank (NAB)
70%

Oxley Group
30%

Mitsui & Co. Ltd.

Cambridge Real Estate Investment Pte. Ltd. (CREIM)

100% 80% 20%

Property Manager
(Cambridge Industrial Property Management Pte Ltd)
Source: Company

Manager
(Cambridge Industrial Trust Management Ltd)

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 Bank is 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.

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Fig 22: Key management

Name Chris Calvert Designation Chief executive officer Biography Mr Calvert has over 18 years of property and management experience in valuation, consultancy, real estate and investment fund management. Prior to joining the manager n 2008, he was the Asia CEO for MacarthurCook Industrial REIT. He was responsible for the creation of MacarthurCooks portfolio and its subsequent IPO in 2007. He was also the Asia CEO of Blaxland Funds Management, a real estate fund manager. Mr Calvert holds a Bachelors degree in business and property, and is a qualified valuer from the Australian Property Institute. He is an active advocate of Asia Pacific Real Estate Association (APREA) Mr Mason has more than 10 years experience in the REIT sector in Singapore and Australia. He joined the manager in 2010. Previously, he was a financial consultant to YTL Starhill Global REIT Management and the senior vice president for finance & accounting at Starhill Global REIT. He holds a degree in accounting from Birmingham City University and is a chartered accountant. He is also a director on the APREA board. Ms Tan has been head of real estate for the manager since 2011. She joined the company in 2009. Ms Tan has over 20 years of experience in the real estate and fund management sectors. She was previously with MacarthurCook Industrial REIT, where she grew the portfolio from 12 to 21 properties valued at SGD 555mn. She held management positions in several established real estate firms, including Far East Organisation and City Developments Limited. She holds a Bachelor of Science (estate management) from the National University of Singapore and a diploma in marketing from the Marketing Institute of Singapore. Ms Seetoh has over six years of experience in compliance. She joined the manager in 2010. She holds a Bachelor of Business and Commerce from Monash University, Melbourne. She is also a member of the Golden Key International Honour Society. Mr Long joined the manager in 2011 and has more than 20 years experience in real estate development and construction industry. He was previously with Confluence Project Management in Singapore and Bovis Lend Lease in Singapore, London and Sydney. He holds a Clerk of Works building diploma from Sydney TAFE.

David Mason

Chief financial officer

Nancy Tan Head of real estate

Cindy Seetoh

Compliance manager

Michael Long

Development manager

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 1 2 3 4 5 6 7 8 9 10 Unitholder Franklin Resources Chan Wai Kheong Mackenzie Financial Corporation Splendid Asia Macro Fund Charlie Chan Capital Partners State Street Goldman Sachs JBWere Pty Ltd Principal Financial Group Vanguard Group Inc Cambridge Indst Trust Mgmt No. of shares 96,076,663 56,349,536 51,342,000 41,644,921 30,696,725 12,952,894 11,592,000 11,522,820 9,217,078 9,198,045 % held 7.90 4.63 4.22 3.42 2.52 1.07 0.95 0.95 0.76 0.76

Source: Bloomberg

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Portfolio analysis
CREIT 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 class Logistics Light industrial Warehouse Industrial Others Development Total/weighted average* Uncompleted acquisitions No of properties 8 16 11 10 2 2 49 4 Lettable area (000 sf) 2,506 2,088 1,385 1,048 373 174 7,574 839 Purchase price (SGD mn) 321.4 364.5 163.4 136.8 36.1 NA 1,022.2 114.0 Valuation (SGD mn) 355.1 435.2 186.9 158.2 43.4 23.5 1,202.3 NA Purchase price (SGD psf) 128.3 174.6 118.0 130.5 96.6 NA 138.1 135.8 Valuation (SGD psf) 141.7 208.4 135.0 150.9 116.2 135.4 159.3 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
Number of properties Valuation (SGD psf) NLA (000 sf) Number of tenants Occupancy WALE (years) WALLE (years) Security deposits (months) CREIT 49 1,202 7,574 149 99.2% 3.3 33 12.0 Cache 12 945.6 4,823 13 100.0% 4.1 36 11.1 AAREIT 25 965.7 4,481* 111 99.2% 2.6 42 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) Logistics/warehouse Light/industrial Weighted average Others Valuation (SGD psf) Logistics/warehouse Light/industrial Weighted average Others Est current passing rents (SGD psfpm) Logistics/warehouse Light/industrial Weighted average rent Others CREIT 123.3 159.4 138.1 96.6 CREIT 139.3 189.2 159.3 116.2 CREIT 0.93 1.14 1.02 0.80 Cache 162.1 NA 162.1 NA Cache 196.1 NA 196.1 NA Cache 1.28 NA 1.28 NA AAREIT 164.8 161.1 164.2 426.6 AAREIT 179.7 168.1 177.7 401.1 AAREIT 1.27 1.07 1.24 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 to market 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
25% 20% 160 15% 10% 5% 0% 2013 2014 2015 2016 2017 2018 2019 2020
Source: Company

Fig 29: Market rents vs CREIT rents

Single-tenanted 180 Factory rents Warehouse rents CREIT rents

Multi-tenanted

140 120 100 2006 2007 2008 2009 2010 2011 2012
Source: URA, Company, Standard Chartered Research

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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 singletenanted 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
100% 98% 96% 94% 92% 90% 99.2% 16% 12% 8% 4% 0% -4% 2006 2007 2008 2009 2010 2011 2012 Occupancy GDP growth (RHS)
Source: Company

Fig 31: Multi-tenanted vs single-tenanted

Multi-tenanted 17.2% Single-tenanted 82.8%

Source: Company

Fig 32: Only 20% of CREITs tenants are in manufacturing

Fig 33: Portfolio rental income by asset type

Logistics 36.7% Light industrial 30.4% Warehousing 15.7% Industrial 13.2% Others 4.0%

Manufacturing 19.7% Nonmanufacturing 82.8%

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
GDP growth 2013E 2014E 2015E 2016E 2.5% 4.0% 4.0% 4.0% Multi-tenanted industrial vacancy 11.5% 13.4% 13.8% 14.1% Multi-tenanted factory rents (SGD psfpm) 1.70 1.60 1.61 1.62 Warehouse % change vacancy rate -10.4% -5.6% 0.6% 0.8% 5.9% 6.7% 5.8% 5.3% Warehouse rents (SGD psfpm) 1.69 1.64 1.66 1.67 % change -8.6% -2.8% 1.5% 0.3%

Source: Standard Chartered Research estimates

Factory rents have grown at a 10% CAGR over the past six years, while warehouse rents have risen at a 9% CAGR over the same period.

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Fig 35: Industrial rents Multi-user factories and warehouses

190 180 170 160 150 140 130 120 110 100 90 2006Q1
Source: URA

Factory

Warehouse

2006Q4

2007Q3

2008Q2

2009Q1

2009Q4

2010Q3

2011Q2

2012Q1

2012Q4

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 88 International Rd 4/6 Clementi Loop 30 Toh Guan Road Asset enhancements Acquisitions 30 Teban Crescent 16 Tai Seng Street JTC Tuas Biomedical Park 15 Jurong Port Road 54 Serangoon North 11 Woodlands Walk 30 Marsiling Ind Estate 25 Pioneer Crescent 3C Toh Guan Rd East Acquisitions
1 2

Capex required (SGD mn) 16.4 23.3 8.3 48.0 Purchase price (SGD mn) 41.0 72.4
1

ROI 12.0% 7.0% 10.0% 9.0% NPI yield 7.8% 7.0% 16.5% 8.0% 7.0% 8.0% 7.5% 7.0% 7.5% 7.2%

Est completion 2Q13 1Q13 4Q12 Est completion 4Q13 2Q13 1Q13 1Q13 1Q13 4Q12 4Q12 1Q12 1Q12

9.0 43.0 21.0 17.3 39.0 15.3 35.5 293.5

Includes SGD 13.1mn for asset enhancement works on 16 Tai Seng St For 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.

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Fig 37: Potential redevelopment opportunities

Asset class Logistics Logistics Industrial Industrial Industrial Utilised Max plot Land area plot ratio ratio (000sf) 0.8 0.7 1.6 0.8 0.7 1.4 2.5 2.5 2.5 1.4 512 134 134 39 68 Est passing GFA Potential add. rents (000sf) GFA (000sf) (SGD psfpm) 413 97 220 33 48 307 238 114 65 47 0.81 1.05 1.18 1.03 0.71

Properties 3 Pioneer Sector 3 1 Third Lok Yang 2 Tuas South Ave 31 Kian Teck Way 7 Gul Lane

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) Attributable strata area (69.4%) (sf) Purchase price (SGD mn) Purchase price (SGD psf) Current book value (SGD mn) Current book value (SGD psf) Maximum plot ratio Max gross floor area (sf) Est residential property price (SGD psf) Est developer profit margin Est developer total cost Est development charge (SGD psm) Est development charge (SGD psf) Divestment price (SGD psf) Divestment price (SGD mn)* Gain above book (SGD mn) No of existing CREIT units NAV accretion (SGD/unit)
*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

230,834 382,378 72.2 188.8 110.0 287.7 1.92 443,202 1,300 30% 1,000 3,010 280 720 222 112 1,216 0.09

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Financials
Net 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 and Seletar 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 Performance fee Other fees Trustee fee Acquisition fee Divestment fee Property managers fees Property management fee Lease management fee Marketing services commission Project management fee Property tax services fee
Source: Company

0.5% p.a. of deposited property 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%) 0.025% of property value p.a. 1.0% of the acquisition price 0.5% of the divestment price Property management fee of 2.0% of gross revenue p.a. 1.0% of gross revenue p.a. 0.5-2.0 months of gross rent depending on length of renewed lease 1.5-3.0% of project management fee, depending on size of development 5.0-7.5% of property tax savings

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

300 250 SGDm 200 150 100 50 53 0 2013
Source: Company

Term loan 60.7 MTNs Short term bridge loan

Acquisition term loan Revolving credit facility

220 5 50 2014 2015 100

2016

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.

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Fig 41: Income statement

Year end: December (SGD mn) Total gross revenue Property expenses Net property income NPI growth REIT managers management fees Other trust expenses Finance costs Finance income Finance costs (net) Total expenses Total expenses (growth) EBIT Net income before tax and fair value change Fair value change in derivatives Fair value change in investment properties Net income before tax Income tax expense Net income after tax Adjusted PAT Adjusted PAT (growth) Distributable income before adjustment Non-tax deductible/(chargeable) items: Management fees in units Distributable income (income) growth % Distributable income (capital) Transfer to retained earnings Total distribution amount EFPOWA EPUc adj EPUc growth % DPUc growth % payout ratio %
Source: Company, Standard Chartered Research estimates

2012 89.0 -12.7 76.2 10.3% -9.5 -1.7 -19.7 0.1 -19.6 -30.8 -7.4% 65.0 45.4 0.1 41.6 87.4 0.0 87.4 45.6 20.0% 87.4 -37.6 0.0 51.9 2.9% 5.7 -10.1 57.6 1,196.1 7.43 3.98 24.5% 4.78 12.9% 111%

2013E 100.2 -14.0 86.2 13.1% -9.2 -0.3 -19.9 0.0 -19.9 -29.4 -4.6% 76.7 56.8 0.0 24.3 81.1 0.0 81.1 56.8 24.5% 81.1 -16.5 0.0 64.6 24.5% 3.0 0.0 67.6 1,218.5 6.64 4.66 16.9% 5.53 15.6% 105%

2014E 108.2 -15.1 93.0 7.9% -6.5 -0.3 -21.4 0.0 -21.4 -28.3 -3.8% 86.1 64.7 0.0 26.3 91.1 0.0 91.1 64.7 14.0% 91.1 -18.6 0.0 72.5 12.3% 0.0 0.0 72.5 1,228.5 7.40 5.26 13.0% 5.88 6.4% 100%

2015E 106.9 -15.0 91.9 -1.2% -6.7 -0.3 -23.2 0.0 -23.1 -30.2 6.8% 84.9 61.7 0.0 27.0 88.7 0.0 88.7 61.7 -4.7% 88.7 -19.2 0.0 69.5 -4.2% 0.0 0.0 69.5 1,239.3 7.14 4.97 -5.5% 5.59 -5.0% 100%

2016E 108.0 -15.1 92.9 1.1% -6.9 -0.3 -24.0 0.0 -23.9 -31.2 3.2% 85.7 61.7 0.0 27.7 89.4 0.0 89.4 61.7 0.0% 89.4 -19.9 0.0 69.5 0.0% 0.0 0.0 69.5 1,249.7 7.14 4.93 -0.8% 5.54 -0.8% 100%

Fig 42: Balance sheet

Balance sheet Total investment properties Trade and other receivables Others Total non-current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Trade and other payables Financial derivatives Total current liabilities Borrowings Financial derivatives Total non-current liabilities Total liabilities Net assets Unitholders' funds Total equity Gearing (Debt/Total Assets) Gearing (Debt/Equity) NAV/unit (SGD) growth %
Source: Company, Standard Chartered Research estimates

2012 1,214.0 0.0 0.0 1,214.0 1.6 89.8 91.3 1,305.3 21.5 0.0 21.5 493.7 3.4 497.1 518.7 786.7 786.7 786.7 38.6% 62.8% 0.65 4.3%

2013E 1,317.5 0.0 0.0 1,317.5 1.6 50.1 51.6 1,369.2 21.5 0.0 21.5 528.6 0.0 528.6 550.1 819.0 819.0 819.0 38.6% 64.5% 0.67 3.3%

2014E 1,350.4 0.0 0.0 1,350.4 1.6 57.2 58.8 1,409.2 21.5 0.0 21.5 535.1 0.0 535.1 556.6 852.5 852.5 852.5 38.0% 62.8% 0.69 3.2%

2015E 1,384.1 0.0 0.0 1,384.1 1.6 62.6 64.2 1,448.4 21.5 0.0 21.5 541.9 0.0 541.8 563.4 885.0 885.1 885.1 37.4% 61.2% 0.71 2.9%

2016E 1,418.7 0.0 0.0 1,418.7 1.6 68.8 70.4 1,489.1 21.5 0.0 21.5 548.7 0.0 548.7 570.2 918.8 918.8 918.8 36.9% 59.7% 0.73 3.0%

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Appendix: Property portfolio

Fig 43: Property portfolio
Property Logistics 1 2 3 4 5 6 7 8 9 24 Jurong Port Road 3 Pioneer Sector 3 30 Toh Guan Road 31 Tuas Avenue 11 25 Changi South Avenue 2 30 Tuas Road 1 Third Lok Yang Road & 4 Fourth Lok Yang Road 1 Tuas Ave 3 4/6 Clementi Loop Logistics subtotal Light industrial 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 21 Ubi Road 1 136 Joo Seng Road 2 Ubi View 11 Serangoon North Avenue 5 130 Joo Seng Road 2 Jalan Kilang Barat 87 Defu Lane 10 55 Ubi Ave 3 63 Hillview Ave Lam Soon Industry Bldg 361 Ubi Road 3 128 Joo Seng Road 9 Bukit Batok St 22 81 Defu Lane 10 1 & 2 Changi North Street 2 16 Tai Seng Street 54 Serangoon North Ave 4 30 Marsiling Ind Est Road 8 Light industrial subtotal Warehousing 1 2 3 4 5 6 7 8 9 10 11 12 86/88 International Road 23 Tuas Avenue 10 9 Tuas View Crescent 28 Senoko Drive 31 Changi South Avenue 2 120 Pioneer Road 23 Woodlands Terrace 6 Tuas Bay Walk 21B Senoko Loop 79 Tuas South St 5 22 Chin Bee Drive 3C Toh Guan Road East Warehousing subtotal
Source: Company

Land lease expiry 2037 2050 2055 2054 2054 2039 2031 2032 2053

Net lettable area (sf) 817,021 412,818 251,973 75,579 72,998 571,189 114,111 308,644 189,962 2,814,294

Purchase price (SGD mn) 96.00 49.00 35.00 8.70 7.30 73.00 12.41 32.70 40.00 354.12 25.00 10.31 7.50 14.00 12.00 20.00 13.06 18.80 72.20 18.00 10.00 18.30 5.00 22.10 59.25 21.00 39.00 385.52 14.00 8.55 5.60 12.00 5.80 26.50 15.41 7.00 14.67 10.40 15.00 35.50 170.43

Valuation 2011 (SGD mn) 103.00 54.00 48.30 10.20 10.60 72.40 12.00 29.20 40.00 379.70 34.50 12.80 8.50 17.50 12.50 27.70 15.00 19.20 90.00 17.70 12.00 22.90 5.30 22.70 59.30

Valuation 2012 (SGD mn) 95.00 54.00 56.20 10.50 12.00 72.40 15.00 NA 40.00 355.1 30.60 13.50 9.15 18.50 12.50 28.30 15.60 18.20 110.00 18.00 12.40 21.00 6.10 23.10 59.25 21.00 39.00

2057 2050 2059 2057 2051 2062 2050 2056 Freehold 2057 2052 2053 2050 2061/2065 2067 2026 2019

202,770 101,321 43,654 146,619 91,958 66,374 109,920 117,383 296,295 96,843 92,849 157,863 45,242 125,870 175,262 139,224 217,879 2,227,327

377.60 17.50 11.10 7.30 12.50 6.80 32.00 16.30 6.50 14.50 10.00 15.50 35.50 185.50

456.2 19.00 13.60 9.20 13.40 8.10 30.00 16.60 NA 15.50 10.50 15.50 35.50 186.9

2054 2056 2058 2039 2055 2055 2056 2057 2053 2060 2035 2051

134,688 102,310 71,581 159,338 50,644 244,513 124,425 55,697 115,770 67,942 120,653 192,864 1,440,425

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Fig 44: Property portfolio (contd)

Property Industrial 1 2 3 4 5 6 7 8 9 10 Others 1 2 3 4 5 Development 1 2
Source: Company

Land lease expiry 2041 2042 2055 2059 2055 2053/2054 2065 2037 2067 2056

Net lettable Purchase price Valuation 2011 Valuation 2012 area (sf) (SGD mn) (SGD mn) (SGD mn) 48,427 33,088 73,684 220,381 131,857 224,689 44,675 98,864 76,003 96,593 1,048,260 3.20 3.20 8.25 23.00 13.00 32.60 6.40 14.50 15.30 17.30 136.75 23.20 12.87 41.00 9.00 43.00 129.07 39.40 117.90 26.00 13.40 4.30 3.70 10.30 30.00 15.50 33.20 6.40 14.50 5.80 4.10 12.60 31.60 16.90 33.20 6.40 14.50 15.80 17.30 158.20 27.40 16.00 41.00 9.00 43.00 136.40 14.70 8.80 23.50

7 Gul Lane 31 Kian Teck Way 45 Changi South Avenue 2 2 Tuas South Avenue 2 28 Woodlands Loop 511 & 513 Yishun Industrial Park A 60 Tuas South Street 5 & 7 Gul Street 1 25 Pioneer Crescent 11 Woodlands Walk Industrial subtotal 160 Kallang Way 23 Toa Payoh Lorong 8 30 Teban Gardens Cresc JTC Tuas Biomedical park 15 Jurong Port Road Others subtotal 43 Tuas View Circuit Seletar Aerospace Park Development subtotal

2033 2052 2039 2035

322,604 50,792 139,041 316,000 245,172 1,073,608

2022 2041

121,424 52,170 173,594

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Income statement (SGD mn)

Year-end: Dec Revenue Property expenses Net property income NPI growth (%) Management fees Other income Other expenses EBIT Interest expense Interest income Associates JCEs Property reval. gain/(loss) Other exceptional items Pre-tax profit Taxation Minority interests Net profit Net profit adj. Distributable income Distributed income 2011 80 (11) 69 (5) (2) 62 (26) 0 51 (1) 85 0 85 35 50 51 2012 89 (13) 76 10.3 (10) (2) 65 (20) 0 42 2 89 0 89 48 57 57 2013E 100 (14) 86 13.1 (9) (0) 77 (20) 0 24 0 81 0 81 57 62 63 2014E 108 (15) 93 7.9 (7) (0) 86 (21) 0 26 0 91 0 91 65 69 72 2015E 107 (15) 92 -1.2 (7) (0) 85 (23) 0 27 0 89 0 89 62 76 76

Cash flow statement (SGD mn)

Year-end: Dec EBIT Depreciation & amortisation Net interest Tax paid Changes in working capital Others Cash flow from operations Capex Acquisitions Disposals Others Cash flow from investing Dividends Issue of shares Change in debt Other financing cash flow Cash flow from financing Change in cash Exchange rate effect Free cash flow 2011 62 0 26 (4) (26) 58 (3) (42) 0 (45) (43) 54 (15) 0 (5) 8 0 54 2012 65 0 20 1 (18) 68 (15) (120) (1) (135) (41) (0) 118 0 78 11 0 54 2013E 77 0 20 6 (20) 83 (36) (42) (1) (79) (49) 0 5 0 (44) (40) 0 47 2014E 86 0 21 0 (21) 86 (7) 0 0 (7) (58) 0 (15) 0 (72) 7 0 80 2015E 85 0 23 0 (23) 85 (7) 0 0 (7) (56) 0 (16) 0 (73) 5 0 78

Balance sheet (SGD mn)

Year-end: Dec Investment properties PP&E Associates and JCEs Other non-current assets Total non-current assets Cash & equivalents Short-term investments Prop. under dev./held for sale Inventory Trade and other receivables Other current assets Total current assets Total assets Short-term debt Pre-sale deposits Trade and other payables Income taxes payable Other current liabilities Total current liabilities Long-term debt Deferred tax Other long-term liabilities Total long-term liabilities Total liabilities Shareholders' funds Minority interests Total equity Total liabilities and equity Gross debt Net debt (cash) YE fully diluted units (mn) 2011 1,027 0 1,027 79 0 1 0 80 1,107 0 0 9 4 13 357 0 357 369 738 0 738 1,107 357 278 1,189 2012 1,014 0 1,014 90 200 2 0 292 1,305 0 0 22 0 22 494 3 497 519 787 0 787 1,305 494 404 1,216 2013E 1,318 0 1,318 50 0 2 0 52 1,369 0 0 22 0 22 529 0 529 550 819 0 819 1,369 529 479 1,226 2014E 1,350 0 1,350 57 0 2 0 59 1,409 0 0 22 0 22 535 0 535 557 853 0 853 1,409 535 478 1,237 2015E 1,384 0 1,384 63 0 2 0 64 1,448 0 0 22 0 22 542 0 542 563 885 0 885 1,448 542 479 1,247

Financial ratios and other

Year-end: Dec Operating ratios EBIT margin (%) Net margin adj. (%) Sales growth (%) Net income growth (%) EPU growth (%) EPU growth adj. (%) DPU growth (%) DPU/EPU (%) Efficiency ratios ROE (%) ROCE (%) ROA (%) Leverage ratios Net gearing (%) Net debt/assets (%) Net asset value/unit (S) Debt/capital (%) Interest cover (x) Current ratio (x) Per share EPU (S) EPU adj. (S) DPU (S) Valuation EV/EBIT (x) PER (x) PBR (x) Dividend yield (%) 2011 77.1 43.1 59.2 2012 73.1 53.7 10.7 5.0 4.4 37.1 12.9 64.0 2013E 76.5 56.7 12.6 -9.4 -11.0 16.6 15.6 83.1 2014E 79.6 59.9 7.9 12.3 11.4 13.0 6.4 79.3 2015E 79.4 57.8 -1.2 -2.6 -3.4 -5.5 -5.0 78.1

11.7 5.5 7.4

10.1 5.8 6.1

10.9 6.3 6.6

10.2 6.0 6.2

37.7 25.1 62.05 32.6 2.4 6.2

51.3 30.9 64.69 38.5 3.3 13.5

58.4 35.0 66.82 39.2 3.9 2.4

56.1 33.9 68.94 38.6 4.0 2.7

54.1 33.1 70.97 38.0 3.7 3.0

7.16 2.92 4.24

7.48 4.00 4.78

6.66 4.66 5.53

7.42 5.27 5.88

7.16 4.98 5.59

6.8 0.77 8.7

15.9 7.7 1.04 8.3

17.8 10.9 1.08 7.6

15.9 9.8 1.05 8.1

16.2 10.1 1.02 7.7

Source: Company, Standard Chartered Research estimates

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Disclosures appendix
The information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank Singapore Branch, Standard Chartered Securities (India) Limited, Standard Chartered Securities Korea Limited 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 certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research 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 closing price for the business day prior to the date of the report, unless otherwise stated.

SGD
0.73

Recommendation and price target history for Cambridge Industrial Trust

0.67 0.61 0.55 0.49 0.43 Feb-10 May-10 Aug-10

Date Recommendation

Nov-10

Feb-11 May-11 Aug-11

Date Recommendation

Nov-11

Feb-12 May-12 Aug-12

Date

Nov-12
Price target

Price target

Price target

Recommendation

Source: FactSet prices, SCB recommendations and price targets

Recommendation Distribution and Investment Banking Relationships % of companies assigned this rating with which SCB has provided investment banking services over the past 12 months 13.0% 14.9% 3.3%

% of covered companies currently assigned this rating OUTPERFORM IN-LINE UNDERPERFORM As of 31 December 2012 Research Recommendation Terminology 55.7% 34.6% 9.7%

Definitions The total return on the security is expected to outperform the relevant market index by 5% or more over the next 12 months The total return on the security is not expected to outperform or underperform the relevant market IN-LINE (IL) index by 5% or more over the next 12 months The total return on the security is expected to underperform the relevant market index by 5% or UNDERPERFORM (UP) more over the next 12 months OUTPERFORM (OP) 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 upon request. Requests should be sent to scer@sc.com.

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