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2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: SGC / sa: JC STI : 3,195.10 Analyst Andy SIM CFA +65 6398 7969 Alfie YEO +65 6398 7957 [email protected] [email protected] LOCK Mun Yee +65 6398 7972 Derek TAN +65 6398 7966 [email protected] [email protected] LING Lee Keng +65 6398 7970 [email protected] STOCKS *Note: FV = Fully Valued NR = Not Rated UR = Under Review Source: DBS Vickers, Bloomberg (Price as of 16 Jan 2013) DBSV’s population projection – 7m by 2030? DBS Group Research . Equity 18 Jan 2013 Singapore Thematic Report Population White Paper Potential beneficiaries Expecting c.7m population parameter in upcoming White Paper Medium term beneficiary will be the Construction sector, and longer term Transport, Property and Healthcare LTA has started the ball rolling with announced plans to double rail lines to 360km by 2030 Picks are CD over SMRT, Pan United, Tat Hong over contractors, and property plays CAPL and WINGT; Sin Heng and CordLife are other potential beneficiaries. A White Paper to set the stage. The Singapore Population White Paper to be released soon will draw great interest. Firstly, this should set the stage for Singapore’s Concept Plan and subsequently, the Masterplan. Secondly, we expect details of the population planning parameter, which we believe may be revised up to c.7m from 6.5m, given the population growth in recent years. Sector beneficiaries. As mentioned in our last population report in Nov’09, the impact of a higher population will be far reaching and wide. The sector beneficiaries we see now are: Construction: Infrastructure has lagged population growth, and will be a key beneficiary on this theme. LTA has started the ball rolling with announced plans to double rail network to 360km by 2030. On this secular trend, we like resource providers such as Tat Hong [BUY, TP: S$1.80], Pan United [BUY, revised TP: S$1.02] and Sin Heng [NR, Fair Value: S$0.29] over pure contractors due to margin pressure. Land Transport: Expect public transport ridership to grow by 1.4x to 13.8m rides per day by 2030. Near term, a fare review would help transport operators. Prefer CD [BUY, revised TP: S$2.05] over SMRT [FV, TP: S$1.50] as we still see near term challenges for the latter. Property: Longer term, oversupply seems to be less of an issue assuming a 7m parameter. However, recent policy measures may continue to weigh down on stock prices. Our picks are Wing Tai [BUY, TP: S$2.33] which is trading at 0.63x P/NAV, CAPL [BUY, TP: 4.09] for its diversified exposure, and MCT [BUY, TP: S$1.35]. Healthcare: Infrastructure and resource needs mentioned in Nov’09 report largely materialised when the MOH announced the Healthcare 2020 plans. RFMD (26x FY13F PE) and IHH (37x FY13F PE) are long- term beneficiaries, though we would rather buy on pull back. Cordlife Group [NR, Fair Value: S$0.65] should be a beneficiary of measures promoting procreation to raise Singapore’s Total Fertility Rate. Price Mkt Cap Target Price Performance (%) S$ S$m S$ 3 mth 12 mth Rating Land Transport ComfortDelgro 1.89 3,966 2.05 14.2 30.9 BUY SMRT 1.68 2,555 1.50 (2.9) (3.5) FV Construction Tat Hong 1.44 818 1.80 7.5 67.4 BUY Pan-United 0.85 472 1.02 23.2 86.8 BUY Sin Heng Heavy 0.24 108 0.29 9.3 83.6 NR Property CapitaLand 3.80 16,154 4.09 17.3 61.7 BUY Wing Tai 1.81 1,417 2.33 7.7 79.2 BUY MCT 1.215 2,273 1.35 (3.2) 41.3 BUY Healthcare IHH Healthcare 1.40 11,277 1.38 10.7 N.A UR Raffles Medical 2.92 1,591 2.75 16.3 36.5 HOLD Cordlife Group 0.57 131 0.65 (1.7) N.A NR 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 1990 1994 1998 2002 2006 2010 2014F 2018F 2022F 2026F 2030F Optimistic Bear Mean Total population - historical 7m Mean: Reaches 7m in 2030 Optimistic: Reaches 7m in 2025 Source: Singstats, DBSVickers [email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.
Transcript
Page 1: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

www.dbsvickers.com Refer to important disclosures at the end of this report ed: SGC / sa: JC

STI : 3,195.10

Analyst Andy SIM CFA +65 6398 7969 Alfie YEO +65 6398 7957 [email protected] [email protected]

LOCK Mun Yee +65 6398 7972 Derek TAN +65 6398 7966 [email protected] [email protected] LING Lee Keng +65 6398 7970 [email protected]

STOCKS *Note: FV = Fully Valued NR = Not Rated UR = Under Review Source: DBS Vickers, Bloomberg (Price as of 16 Jan 2013) DBSV’s population projection – 7m by 2030?

DBS Group Research . Equity 18 Jan 2013

Singapore Thematic Report

Population White Paper

Potential beneficiaries • Expecting c.7m population parameter in upcoming

White Paper

• Medium term beneficiary will be the Construction sector, and longer term Transport, Property and Healthcare

• LTA has started the ball rolling with announced plans to double rail lines to 360km by 2030

• Picks are CD over SMRT, Pan United, Tat Hong over contractors, and property plays CAPL and WINGT; Sin Heng and CordLife are other potential beneficiaries.

A White Paper to set the stage. The Singapore Population White

Paper to be released soon will draw great interest. Firstly, this should

set the stage for Singapore’s Concept Plan and subsequently, the

Masterplan. Secondly, we expect details of the population planning

parameter, which we believe may be revised up to c.7m from 6.5m,

given the population growth in recent years.

Sector beneficiaries. As mentioned in our last population report in

Nov’09, the impact of a higher population will be far reaching and

wide. The sector beneficiaries we see now are:

Construction: Infrastructure has lagged population growth, and will be

a key beneficiary on this theme. LTA has started the ball rolling with

announced plans to double rail network to 360km by 2030. On this

secular trend, we like resource providers such as Tat Hong [BUY, TP:

S$1.80], Pan United [BUY, revised TP: S$1.02] and Sin Heng [NR, Fair

Value: S$0.29] over pure contractors due to margin pressure.

Land Transport: Expect public transport ridership to grow by 1.4x to

13.8m rides per day by 2030. Near term, a fare review would help

transport operators. Prefer CD [BUY, revised TP: S$2.05] over SMRT

[FV, TP: S$1.50] as we still see near term challenges for the latter.

Property: Longer term, oversupply seems to be less of an issue

assuming a 7m parameter. However, recent policy measures may

continue to weigh down on stock prices. Our picks are Wing Tai [BUY,

TP: S$2.33] which is trading at 0.63x P/NAV, CAPL [BUY, TP: 4.09] for

its diversified exposure, and MCT [BUY, TP: S$1.35].

Healthcare: Infrastructure and resource needs mentioned in Nov’09

report largely materialised when the MOH announced the Healthcare

2020 plans. RFMD (26x FY13F PE) and IHH (37x FY13F PE) are long-

term beneficiaries, though we would rather buy on pull back. Cordlife

Group [NR, Fair Value: S$0.65] should be a beneficiary of measures

promoting procreation to raise Singapore’s Total Fertility Rate.

Price Mkt Cap Target Price Performance (%)

S$ S$m S$ 3 mth 12 mth Rating

Land Transport ComfortDelgro 1.89 3,966 2.05 14.2 30.9 BUY SMRT 1.68 2,555 1.50 (2.9) (3.5) FV Construction Tat Hong 1.44 818 1.80 7.5 67.4 BUY Pan-United 0.85 472 1.02 23.2 86.8 BUY Sin Heng Heavy 0.24 108 0.29 9.3 83.6 NR Property CapitaLand 3.80 16,154 4.09 17.3 61.7 BUY Wing Tai 1.81 1,417 2.33 7.7 79.2 BUY MCT 1.215 2,273 1.35 (3.2) 41.3 BUY Healthcare IHH Healthcare 1.40 11,277 1.38 10.7 N.A UR Raffles Medical 2.92 1,591 2.75 16.3 36.5 HOLD Cordlife Group 0.57 131 0.65 (1.7) N.A NR

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1990 1994 1998 2002 2006 2010 2014F 2018F 2022F 2026F 2030F

Optimistic Bear Mean Total population - historical

7m

Mean: Reaches 7m in

2030

Optimistic: Reaches 7m in

2025

Source: Singstats, DBSVickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 2: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

Singapore: Thematic Report

Population White Paper

Page 2

Analysts Andy SIM CFA +65 6398 7969

[email protected]

Alfie YEO +65 6398 7957

[email protected]

LOCK Mun Yee +65 6398 7972

[email protected]

Derek TAN +65 6398 7966

[email protected]

LING Lee Keng +65 6398 7970

[email protected]

Table of Contents Executive Summary 3 Singapore Population: Potential beneficiaries 4 Valuation Table 6

Land Transport 7 Construction 10 Property 15 Healthcare 18

Appendix 20 Stock Profiles CapitaLand 22

ComfortDelgro 24

Cordlife Group 26

Mapletree Commercial Trust 28

Pan-United Corporation 30

Sin Heng Heavy 34

Tat Hong 40

Wing Tai 42

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 3: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Executive Summary 6.5m population parameter back then. In our report dated Nov 2009 (“6.5m population: What does it mean?”), we explored the potential beneficiaries of a strong population growth when it reached 5m. In fact, it was a surprising fact back then, given that Singapore saw strong non-resident growth during the last recession. In the previous dot-com/ SARS downturn, Singapore saw negative non-resident growth for two years in a row, in 2002 and 2003.

Review of Nov’09 report: views and stock picks have done well. We had identified that public transport ridership would remain firm but possibly need additional investment, and more houses needed to be built then, amongst others. Our stock picks also performed well: Allgreen, was privatised in mid-2011 with a cash offer of S$1.60/share, 40% above the price in that report; F&N’s price has doubled since then. Suntec REIT, FCT and CD have also done well.

Expecting a c.7m population planning parameter in the upcoming White Paper. The government has indicated that it will be releasing a White Paper to look at issues and impact of rising population. This is expected sometime in Jan 2013. We expect a higher population parameter of 7m to be used, from 6.5m previously. There will likely to be no mention of timeframe, but in our base scenario, we are projecting it to reach 7m by 2030, implying average growth of 1.5% per annum.

Beneficiaries. We continue to see long term benefits accruing to domestic driven sectors, particularly public transport, property and healthcare. There will be a need for infrastructure to cater to a larger population, so we expect the construction sector to benefit as well. Our views are summarised below:

1. Land Transport. We project ridership to remain robust, up to 1.4x higher than it is today to a daily ridership of 13.8m, from 5.8m in 2011. This assumes 60% train rides, and implies c.7% ridership CAGR till 2030. This is possible with LTA’s latest announcement to double the rail network to 360km by 2030.

Prefer ComfortDelGro over SMRT. While both public transport operators will be beneficiaries, our preferred pick is ComfortDelGro. We like it for its stable growth profile, geographical exposure, and PE valuation that is still at its historical average (15x) vs SMRT’s 18x. For SMRT, we are still concerned with near term cost challenges and see potential downside if DPS is cut to fund capex investment plans.

2. Construction. We expect to see a step up in infrastructure spend to cater for a larger population following comments from the government that population growth has outpaced infrastructure capacities in recent years. In fact, LTA has just announced plans to double the rail network to 360km by 2030, from 178km today. Our back-of-the envelope calculation indicates this would equate to an investment of over S$100bn, including the S$60bn previously announced.

Prefer resource providers to pure contractors. Our picks are Tat Hong, Pan United and Sin Heng. Near term, we see continued pressure on contractors’ margins from rising material and resource costs, and squeeze on foreign labour levy as Singapore embarks on its drive towards higher productivity.

3. Property. A larger population would no doubt create demand for more homes. In our base case scenario, we estimate there is a need for 367,000 homes, or a 31% increase from 1.2m in 2012 (public and private). This translates into an annual average of 20,000 to 21,000 units per year. We see a higher average of 34,317 units completed per year (2011 – 2016F), but based on our analysis, this seems to be a move to fill the shortfall in recent years (2001 – 2010). Notwithstanding a long term positive view, we are cognizant of the recent property cooling measures and are selective in our picks.

We like Wing Tai as a purer residential developer in Singapore and for its attractive valuation. It is trading at 37% discount to its NAV of $2.91 (0.63x P/NAV) and 45% discount to our RNAV of S$3.33. We also like Capitaland as a diversified player, exposure to improving sentiment in the China residential sector, and improved performance of CapitaMall Asia. We like Mapletree Commercial Trust as it stands out as a key beneficiary of the growth potential in the “Southern corridor” in Singapore.

4. Healthcare. We expect the White Paper to focus substantially on the falling birth rates and aging population. Healthcare providers will be long term beneficiaries to this secular trend, but valuations seem stretched. Raffles Medical is trading at 25x FY13F PE while IHH is trading at 37x.

A potential beneficiary of policies to encourage procreation to address the falling birth rates would be Cordlife Group, a stem cord blood bank. With additional incentives to boost birth rates and create a more educated population, Cordlife can capitalise on this trend to grow.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 4: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

Singapore: Thematic Report

Population White Paper

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Singapore Population: Potential beneficiaries

Singapore has seen strong population growth, outpacing earlier expectations. Back in Nov 2009, we had issued a Singapore thematic report exploring the potential implications of 6.5m population in Singapore. We had argued that it would be a boost to transport, property and healthcare.

Back then, we had used a planning parameter of 6.5m population; and based on an average growth rate of 1.5% per year, we had projected that Singapore would reach this by Year 2025/26. In 2009, Singapore’s population was just at 4.97m.

Population at 5.3m; growth had been strong from 2009 – 2012. It seems that the growth rate had outpaced our

previous expectations. In the last three years, Singapore’s population had grown at an average pace of 2.4% per year. The latest population figure for Singapore stood at 5.3m, consisting of 3.8m residents and 1.49m non-residents, up from 3.73m and 1.25m in 2009, respectively.

A review: Our prognosis had been fairly accurate. For instance, we had expected plans for additional 3-4 hospitals that would add 1,700 beds. To-date, the Ministry of Health has indicated plans to add an additional 1,900 beds by 2020. We also highlighted that there had been an undersupply of new public housing, which has since been ramped up to c.25,000 per year, driven partly by a change in policy stance.

Review of highlights in sector beneficiaries of population growth

Sector What we highlighted? What had happened since?

Transport o Ridership to grow 3-folds to 4.8m daily rides by 2020

o Estimated MRT ridership growth of 9% per annum

o Transport infrastructure may need to be further

enhanced

o Public transport ridership continued to grow

o Strain on rail network with train breakdowns, thus

focused on bus service network improvement as rail

infrastructure is improved progressively

Property o 82% increase in private housing over next 20 years; net

increase of 9,800 units per year

o HDB need to severely ramp up building programme,

average of 14,000 units needed per year

o HDB ramped up flats supply to c.25,000 per year

Healthcare o Estimate additional need for 350 doctors and 1,700

nurses per year to improve doctors and nurses to

population ratio

o Need for 3-4 hospitals adding about 1,700 beds post

2014

o 500 doctors

o 1,900 additional acute hospital beds by 2020 under

Healthcare 2020 Masterplan

o Higher wages for public sector healthcare workers

Source: DBSVickers Our stock picks in Nov 2009 report have performed well

Stock picks in Nov'09 report

Price as of 19 Nov 2009

(S$)

Price as of 17 Jan 2013

(S$)

% gain (Nov'09 to

Jan'13) Remarks

Allgreen Properties* 1.14 1.60* 40.4% Privatized at S$1.60 cash offer, announced in May 2011

Bukit Sembawang 4.77 6.62 38.8%

ComfortDelGro 1.53 1.83 19.6%

Fraser & Neave 3.96 9.50 139.9% General offer currently.

Fraser Centrepoint Trust 1.18 2.00 69.5%

SATS 2.46 2.96 20.3%

SMRT 1.77 1.67 -5.6% Downgraded to Fully Valued on 3 May 2010, when share price reached S$2.28

Suntec REIT 1.27 1.68 31.9%

*Note: Allgreen has been privatized, and price is the cash offer price of S$1.60 Source: DBSVickers, Bloomberg

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 5: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

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Singapore Population Growth at CAGR of 3% since 2007 Composition of 1.46m Non-resident population (as of Dec 2011)

Source: Singstats, DBSVickers Source: National Population & Talent Division, MOM, Singstats

As announced in the Budget Debate 2012, the Government will examine Singapore’s population goals and policies. The National Population and Talent Division (NPTD) had gathered feedback and worked with other agencies, and the government is widely expected to release a White Paper on population in Jan 2013.

The White Paper on Population will be looking at issues and impact arising from a larger population, and ways to address this. While it will cover numerous issues, the key points would likely be on transport infrastructure, healthcare and housing.

A higher planning parameter for Singapore? This is likely given the relatively robust population growth in the past five years; it may be raised to 7m. Though we expect growth rates to moderate, a higher figure is highly probable to prepare for the future. Furthermore, based on current population of 5.3m, we are just 1.2m people away from that. Assuming an average growth of 2.1% - the average in the past three years – Singapore would reach 6.5m by 2022, just 9 years from now. We assume a population parameter of 7m in this report. In our report in 2009, we used a 6.5m parameter. But assuming an average growth rate of 1.5%, the 20-year average resident’s growth rate, Singapore could see a total population of 7m by 2030.

DBSV expects a planning parameter of around 7m

Population

Planning

Parameter

Population

at that time

Variance

Concept Plan 2001 5.5m 3.9m 1.6m

Concept Plan 2007 6.5m 4.5m 2.0m

DBSVickers assumption

- Population White

Paper/ Concept Plan

2013

c.7m 5.3m c.1.7m

Source: DBSVickers assumption, Concept Plan 2001/2007, Singstats We continue to see benefits accruing to domestic driven sectors, particularly public transport, healthcare, and property. And because there would also be a need for infrastructure to cater for a larger population, the construction sector will also benefit.

What would the Population White Paper address?

It is widely expected that the white paper would address issues pertaining to transportation, falling birth rates, aging population, and housing. We will discuss each of these in subsequent sections. While these are long term beneficiaries, we do recognise near term challenges for each. For instance, while public transport ridership is projected to continue to grow, near term cost pressures are expected to weigh on SMRT. We like CD over SMRT.

Dependents of Citizens/ PRs/ Work

Pass Holders, 15%

Foreign Domestic Workers,

14%

Work Permit Holders (ex.

Foreign Domestic Workers),

46%

S Pass Holders, 8%

Employment Pass Holders,

12%

Students, 6%

Note: Numbers do not add up due to rounding

3,583 3,643 3,734 3,772 3,789 3,818

1,0061,197 1,254 1,305 1,394 1,494

4,5894,839

4,988 5,077 5,184 5,312

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011 2012

Singapore Residents (000's) Non-residents (000's) Total population (000's)

CAGR (07-12)

3.0%

8.2%

1.3%

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 6: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

Singapore: Thematic Report

Population White Paper

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Valuation Table

Source: DBS Vickers. Bloomberg

Mkt Price Target Div Yield EPS CAGR

Cap (S$) Price % 12-14

Company FYE (S$m) 16-Jan (S$) Upside Rcmd 13F 14F 13F 14F 13F 14F 13F 14F 13F (%)

Land Transport

ComfortDelgro Dec 3,966 1.885 2.05 9% Buy 14.6x 14.5x 1.8x 1.7x 5.4x 5.1x 13% 12% 3.7% nm

SMRT Mar 2,555 1.680 1.50 -11% FV 18.2x 17.5x 3.1x 3.0x 9.2x 8.4x 17% 17% 4.0% 10.4

Construction

Tat Hong Mar 818 1.440 1.80 25% Buy 11.4x 8.6x 1.3x 1.2x 5.9x 5.1x 12% 13% 1.7% 45.0

Pan-United Dec 472 0.850 1.02 20% Buy 10.7x 9.7x 1.4x 1.3x 5.1x 4.6x 14% 14% 4.1% 12.2

Sin Heng Jun 108 0.235 0.29 23% NR 10.5x 9.0x 1.1x 1.0x 5.6x 4.5x 11% 11% 1.9% 12.8

Property

Capitaland Dec 16,154 3.800 4.09 8% Buy 23.9x 13.0x 1.0x 1.0x 18.3x 13.7x 4% 8% 1.6% 51.4

Wing Tai Jun 1,417 1.810 2.33 29% Buy 8.1x 7.3x 0.7x 0.6x 7.9x 7.1x 8% 9% 3.8% -6.6

Mapletree Commercial Trust Mar 2,273 1.215 1.35 11% Buy 20.9x 21.6x 1.3x 1.2x 25.7x 27.1x 6% 6% 5.2% 7.8

Healthcare

IHH Dec 11,277 1.400 1.38 -1% UR 36.7x 30.3x 1.6x 1.5x 18.2x 15.1x 4% 5% 0.0% 14.4

Raffles Medical Dec 1,591 2.920 2.75 -6% Hold 25.2x 22.7x 3.8x 3.5x 18.2x 16.3x 16% 16% 1.7% 12.8

Cordlife Group Jun 131 0.565 0.65 15% NR 14.7x 13.2x 1.7x 1.6x 11.7x 10.4x 12% 13% 3.4% 19.7

(%)

ROAE

P/BV (x)PE (x) EV/EBITDA (x) (%)

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 7: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

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Land Transport Continued focus on public transport usage. With a higher planning parameter, the push will continue towards public transport usage. In the upcoming White Paper, there should be a greater focus on public transport infrastructure in preparation for a larger population. DPM Teo has indicated that population growth has “outpaced our planned infrastructure capacity”.

Translating into robust ridership growth over the long term – to grow by 1.4x from 2011. Based on our assumption of 7m population planning parameter by 2030, the average daily public transport ridership could grow by about 1.4x to about 13.8m rides per day, from 5.8m rides in 2011. We based our projections on the following main assumptions: (i) average population growth of 1.5% per annum; (ii) public transport journeys per person to continue to increase by 0.6% per year, the average in 2007-2011; and, (iii) rides per journey to continue to increase by 2.5% per year.

DBSV projected public transport ridership

Source: DBSVickers, Singstats We project that a c.60% of daily rides would be on MRT and LRT given the expected better connectivity by 2030, up from 40% in 2011. This implies c.7% CAGR for train ridership. Meanwhile, we project bus ridership to account for a smaller 40%, down from 60% in 2011, implying lower rate of 2.5% CAGR. This suggests significant resources are needed to keep up the public infrastructure, and ridership for public transport operators should remain firm. With the high growth in ridership and gripes about crowded trains, one of the key focus would be on the further development of the transport infrastructure to prepare for a larger population in the future. As it is, the LTA has just announced plans to double the rail network from 178km today, to 360km by 2030.

New MRT Lines: Cross Island Line, Jurong Region Line by 2030. The LTA has just announced two additional lines – Cross Island Line (CIL) and Jurong Region Line (JRL) - on top of several other extensions at Downtown Line (DTL), Circle Line (CCL), and North East Line (NEL). In total, these additions will double the rail network to 360km by 2030. With these additions, and an assumed population of 7m, the rail network density per million persons would increase to 51km/ million persons from 33.8km in 2011. This will be similar to New York and London’s current rail density.

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2005 2009 2013F 2017F 2021F 2025F 2029F

MRT LRT Bus

Daily ridership (000's)

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 8: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

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Singapore’s rail density lagging behind other global cities 360km of new lines by 2030

Year Rail km/

million persons

Rail km Remarks

2011 33.8 146.5 2020F 46.2 247.8 Includes planned lines

such as TSL, ESL 2030F 51.3 360 Double from 178km in

end 2012. New new lines Cross Island Lie (CRL) and Jurong Region Line (JRL) with extensions on CCL, DTL and NEL

Source: LTA “Singapore Land Transport Statistics in brief 2012” Source: DBSVickers’ estimates, Singstats, LTA Nearer term, fare review will bode well for PTOs. There have been indications from the Transport Minister that fares would be raised to improve service offerings to commuters. The Public Transport Council (PTC) is currently reviewing the fare review formula; the new formula is expected to be released in early 2013 for implementation later this year.

According to an update by the Fare Review Mechanism Committee (FRMC) in November 2012, it is of the view that the price cap approach and productivity component should be retained. In addition, it is likely that the other refinements on the formula will reflect the operators’ cost structure, particularly energy and wage costs.

MRT fares/ Bus Fares in global cities vs Singapore

Source: LTA “Singapore Land Transport Statistics in brief 2012”

Current Annual Fare Review Formula

Maximum Fare Adjustment = 0.5 CPI +0.5 WI – 1.5%

CPI = Change in CPI over the preceding year

WI = Change in Average Monthly Earnings (Annual National Average) over the preceding year, adjusted to account for any change in the

employer’s CPF contribution rate

1.5% = The productivity extraction based on sharing of productivity gains achieved by PTOs

Source: Public Transport Council

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Stock picks Buy ComfortDelGro, TP raised to S$2.05. We reiterate our BUY recommendation for ComfortDelGro with a revised TP of S$2.05. We see CD’s stable growth profile and geographical exposure as a key attribute. It has leading market positions in the markets it operates in. While it has performed relatively well in 2012 (+26%), we still see upside in the share price given that it is still trading only at its average of 15x PE, below SMRT’s 18x. Near term catalyst could be the new fare review formula which could see fares closely mirroring operators’ cost structures. There may also be additional catalysts in the form of a higher than expected fare increase in 2013 and a higher dividend payout ratio (FY11: 53%). Our TP is raised to S$2.05 after shifting PE/DCF-backed valuation to FY13F from FY12F.

SMRT, maintain Fully Valued, TP: S$1.50. While the long term projection for rail ridership growth will bode well for SMRT, it may be outweighed by near term cost challenges (such as staff, repair and maintenance expenses). We project EBIT margins to remain suppressed at c.15%, down from about 20% in FY11 prior to the train breakdown incidents and operation of Circle Line. Furthermore, there may be downside from cuts in DPS to its minimum payout ratio of 60%, in view of its capex investment plans. We estimate that at 60% payout, dividend yield would equate to 3.3% - 3.5%, lower than CD’s 3.5% - 3.7% (assumed 55% payout).

ComfortDelGro Price vs PE band SMRT Price vs PE band

Source: DBSVickers, Bloomberg Source: DBSVickers, Bloomberg ComfortDelGro PE standard deviation SMRT PE standard deviation

Source: DBSVickers, Bloomberg Source: DBSVickers, Bloomberg

0.50

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(x)

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(x)

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+2sd: 24.7x

-1sd: 11.9.0x

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[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Singapore: Thematic Report

Population White Paper

Page 10

Construction – beneficiary of more infrastructure spending Government indicated that infrastructure in Singapore has lagged population growth. According to 2012 Mercer Quality of Living Study, Singapore has the best urban infrastructure in the world. Yet, Deputy Prime Minister Teo Chee Hean had commented in parliament on 15 Nov 2012 that population growth in recent years has outpaced planned infrastructure capacities. DPM Teo added that the government has ramped up infrastructure development in transport, housing and healthcare and these are coming on stream progressively, emphasising the need to develop the current state of infrastructure further. Assuming a planning parameter of 7 million population (by 2030), more infrastructure developments will be needed. Separately in Sep 2012, Prime Minister Lee was quoted in the media saying that a six million population should not be a

problem. This was in response to a question on Singapore’s ideal population size. Assuming a higher planning parameter is used in the upcoming White Paper on population, we believe that investment would continue into the foreseeable future. Key areas of development will be in rail network, public housing, road infrastructure, healthcare More efficient infrastructure needed to keep up with population growth, overcrowding. We identify rail network, public housing, road infrastructure and healthcare as key sectors requiring long term infrastructure development to meet a growing population. While a population of between 5-7m is comparable to cities such as Miami and Hong Kong, Singapore’s small land area and a relatively high population density implies the crucial need for an efficient urban plan and infrastructure support due to greater vulnerability to overcrowding.

Singapore is densely populated unlike other metropolitan cities, efficient infrastructure is necessary

City Country Population Year Land area Population density

Singapore Singapore 5.312 2012 714.3 km2 7,436 / km2

Greater Houston USA 5.947 2010 26,060 km2 228 / km2

Atlanta metropolitan USA 5.269 2010 21,694 km2 243 / km2

Philadelphia – Delaware Valley USA 5.965 2010 13,256 km2 449 / km2

Washington DC metropolitan area USA 5.582 2010 14,412 km2 387 / km2

Miami metropolitan area USA 5.565 2010 15,896 km2 350 / km2

Hong Kong China 7.136 2012 1,104 km2 6,464 / km2

Toronto metropolitan Canada 5.583 2011 5,905 km2 945 / km2

Berlin Brandenburg metropolitan area Germany 5.055 2011 5,730 km2 882 / km2

Madrid metropolitan area Spain 6.369 2011 4,610 km2 1,382 / km2

Source: Census.gov, Census and Statistics Department (HK), Statistics Canada, Eurostat, DBS Vickers Basic infrastructure will be first priority – rail network, public housing, road infrastructure and healthcare. The growing population will need for more housing. Assuming an annual population growth rate of 1.5%, the housing market would require additional 367,000 housing units by 2030 (31% increase from 2012). Based on a population of 7m, there should be 12,500 hospital beds, an increase of c.50% in acute hospital bed capacity. Similarly, Singapore would also require a more extensive transportation network to facilitate smooth commute.

Doubling rail network to 360km by 2030. Beyond 2020 and after completion of Thomson Line currently on plan, the Land Transport Authority (LTA) has just announced that it will be doubling the rail network to 360km by 2030. Amongst the extensions, there will be two new lines, namely Cross Island Line (CIL, 50km) and Jurong Region Line (JRL, 20km), which should help to spur construction demand over the longer term.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 11: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

Singapore: Thematic Report

Population White Paper

Page 11

Near term project pipeline supports long term infrastructure development plans Infrastructure spending in land transport, utilities, air and sea ports, healthcare and housing is already aligned to address growing infrastructure needs. The Singapore government’s near term projects suggest development towards adequate infrastructure to support a larger population. This is consistent with DPM Teo’s remark that infrastructure developments in transport, housing and healthcare are coming on stream progressively. If developments are to keep up with population

growth, we should expect infrastructure spending to accelerate. Construction activity is a key barometer of infrastructure development, will grow in line with population growth. Growth in construction activity has traditionally trailed population growth. The value of construction works grew significantly between 2005 and 2008. It was also in line with rapid population growth, from 4.3m to 4.8m people. We note a disparity with population growth trend since construction slowed down in 2011.

Construction growth has tracked population growth until 2011

Source: Singstat, BCA, DBS Vickers Singapore’s construction growth has been cyclical, but we believe construction activity will pick up from 2012. We believe construction spending has to gather pace from 2012. The recent construction growth years between 2005 and 2011 included construction of Singapore’s two integrated resorts, a wave of private enbloc housing and redevelopment trend, development of MRT lines, and Changi Airport terminal 3.

2009 was an exception as construction activities slowed down due to the global financial crisis. The decline in 2012 was in line with the global slowdown in business activities and slower GDP growth in Singapore and the region. Nonetheless, looking at Singapore’s current infrastructure and population growth expectations, construction growth will pick up from there.

Key short term infrastructure pipeline

Type Description Developer Start Completion Value

Land transport Thomson line Land Transport Authority 2012 2021 S$18b

Utilities SP Power SP Power 2012 2018 S$2b

Aviation Changi Airport Terminal 4 Changi Airport Group 2013 2017 n/a

Ports Pasir Panjang Terminal Phases 3 & 4 PSA Singapore Terminals 2012 2015 S$3.5b

Healthcare Jurong Hospital (Ng Teng Fong) Ministry of Health 2010 2014 n/a

Housing Built-to-Order units till 2015 (70k) HDB n/a 2015 n/a

Source: DBS Vickers, LTA, CAAS, MOH, BCA, HDB

-5%

-4%

-3%

-2%

-1%

0%

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5%

6%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Construction growth (LHS) Population growth (RHS)

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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More Rail Lines – Sustaining contracts for construction Estimate new lines announced could see total rail investment above S$100bn. As it is, it seems like the first indication of the start of infrastructure spending has been taken by LTA. It has just announced on 17 January 2013, that the rail network will

be doubled to 360km, from 178km currently, under its long term plan. Assuming we apply the same cost per km estimated for Thomson Line (S$600m per km rail), the two new lines will need see an additional of S$42bn, not taking into account cost inflation. Adding the S$60bn for planned lines, this would mean an investment of over S$100bn on rail infrastructure up till 2030.

Current, planned and future rail network – Double rail network to 360km by Year 2030

Rapid Transit System Route Length (km)

No. of stations

Est. Contract values (S$bn)

Remarks

Current existing MRT rail lines 146.2 104

Future lines Announced prior to Jan 2013 Downtown Line Stage 1 (DTL1) 4.3 6 20.8

(DTL1-3) End 2013. Bugis to Marina Bay, Chinatown

NSL extension 1.0 1 By 2014. Extension into Marina Bay Cruise Centre DTL2 16.6 12 In 2015. Bukit Panjang to Bugis area Tuas extension 7.5 4 By 2016. Expect to carry 100k commuters daily when completed DTL3 21.0 16 In 2017. Chinatown to Eastern part of Singapore Thomson Line (TSL) 30.0 22 18 First stretch from 2019 to open (Woodlands). Second stretch, 6

stations in 2020, final stretch of 13 stations by 2021. Expect fully completed in 2021.

Eastern Region Line (ESL) 21.0 12 na Original completion by 2020. Possibly some delay with TSL completion only in 2021.

Rapid Transit System (SGP-JB) na na By 2018

101.4 73.0

Newly announced (Jan 2013) Cross Island Line (CIL) 50.0 By 2030. Connect Changi Airport to Pasir Ris, Punggol,

Hougang, Bukit Timah to Jurong Jurong Region Line (JRL) 20.0 By 2025. Network around Jurong, Tengah, Choa Chu Kang area. Circle Line Stage 6 (CCL6) 4.0 By 2025. Closing loop between HarbourFront and Marina Bay. Downtown Line Extension (DTL Ex) 2.0 By 2025. Connecting EWL and ERL. North-East Line extension (NEL ex) 2.0 By 2030. Extending from Punggol to Punggol North.

78.0

Total MRT (ex LRT) 325.6 LRT (current) 28.8

Total Rail 354.4

Source: LTA, DBSVickers Construction industry to benefit from infrastructure spending – prefer building resources stocks to contractors Buoyant demand in infrastructure spending will support the construction industry. We believe construction industry will benefit from continued infrastructure spending since we see public housing, healthcare, and transport network driving long

term infrastructure demand in Singapore. While we are positive on construction demand as a whole, we are more bullish on building resource providers as opposed to contractors.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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More competitive tender process in higher cost environment yields lower margins for contractors. Near term project pipeline may support demand for construction services, but cost pressures and margins have been a factor for contractors to decide if they should take on projects. Contractors today are operating in a lower margin, higher cost environment.

Labour, a key construction resource, has seen basic median wages increase by an average of 16% since 2007. Similarly, keen competition from contractors have made project tenders competitive and hence, compressing profitability.

Basic median construction wages have grown between 1% to 6% annually

Basic median Wage (S$ per month) 2007 2011 4 yr CAGR (%) Wage increase since 2007

Managers 4,300 5,100 4% 19%

Professionals 3,000 3,600 5% 20%

Associate Professionals and technicians 2,400 2,575 2% 7%

Clerical Support 1,200 1,500 6% 25%

Craftsmen and related trade 1,900 2,324 5% 22%

Plant and machine operators 1,470 1,650 3% 12%

Cleaners, labourers and related workers 800 850 2% 6%

Average 2,153 2,514 4% 16%

Source: Ministry of Manpower report on wages, DBS Vickers Profitability of contractors in general have declined due to pricing and cost pressures

Source: Companies, DBS Vickers Resource stocks offer more exposure, less profitability risks than contractors. We are currently more bullish on construction resources stocks as opposed to contractors. We recognise that part of the compression in contractors’ profitability stems from rising material and resource costs. Whether these are caused by supply shortages or basic material price increases, we believe that building resources stocks offer more resilience in terms of margins and demand. These stocks tend to have more stable margins as they generally operate in a cost plus environment. Furthermore, building resources stocks have the ability to supply to several contractors, exposing themselves to more projects. They are

unlike contractors who occasionally decline projects because margins are too low. We prefer resource providers to contractors. Our key reasons are summarized as follows: 1) Contractors are facing a low margin/profitability environment, which means greater margin pressure; 2) Contractors can sometimes face negative growth because they decline projects due to low profitability; 3) Building resource stocks enjoy uptick in resource pricing as demand for resources outstrips supply; and 4) Building resource stocks tend to have more resilient margins as they generally operate on a cost plus model. Top picks are Tat Hong and Pan-United Two of our five construction stocks are building materials stocks. Our Singapore construction universe involves five stocks – three contractors/sub-contractors and two resources stocks. DBSV construction sector universe - top picks are Tat Hong and Pan-United

Recommendation Price TP (S$) Upside

Yong Nam Hold S$0.24 S$0.25 4%

Tiong Seng Buy S$0.23 S$0.25 8%

OKP Hold S$0.51 S$0.49 -4%

Tat Hong Buy S$1.45 S$1.80 24%

Pan-United Buy S$0.87 S$1.02 17%

Source: Companies, DBS Vickers

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%

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 14: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

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Stock picks Tat Hong (TAT SP; TPS$1.80). Tat Hong is one of the world’s leading crane hirer by available tonnage to the construction industry and oil & gas industry. We are positive on Tat Hong’s growth prospects on the back of a robust outlook, increasing fleet size, and better rental rate environment. With outlook for cranes remaining robust, we expect utilisation to creep from 73% to 80% over the next two years. Earnings growth will come primarily from unit fleet size expansion and higher tonnage cranes. This is expected to impact better overall available hired out tonnage and marginally better rates. Pan-United (PAN SP, TP S$1.02). We like Pan-United for its leading position in ready-mix concrete (RMC) supply in Singapore. Pan-United has approximately one third share of the Singapore RMC market, and had been a key RMC supplier for projects such as Singapore’s Sports Hub, Downtown line MRT project, LNG terminal, Changi Airport Terminal 3, PSA port expansion, and Jurong Hospital. Therefore, we believe it

will be a key beneficiary of the upcoming infrastructure developments in Singapore. We expect it to supply RMC to the new Thomson Line construction project valued at S$18b, among other projects. Sin Heng (Non-Rated, Fair Value: S$0.29) has more than 40 years of experience in rental and trading of cranes and aerial lifts. In FY12, Sin Heng derived close to 50% of its revenue from Singapore. Domestic crane demand is expected to be strong, supported by a strong pipeline of construction and civil engineering projects, as the population of Singapore increases. The Building and Construction Authority (BCA) expects demand to hit S$26-32bn this year through a strong pipeline of public sector projects, vs about S$28.1bn last year. Sin Heng is also expanding into new markets like Myanmar for better exposure and opportunities. Its newly formed JV in Myanmar could present abundant business opportunities. The outlook for crane is expected to be buoyant on the back of the tight supply in the industry.

Tat Hong Price vs PE band Pan United Price vs PE band

Source: DBSVickers, Bloomberg Source: DBSVickers, Bloomberg Tat Hong PE standard deviation Pan United standard deviation

Source: DBSVickers, Bloomberg Source: DBSVickers, Bloomberg

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-2 sd 4.8x

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 15: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

Page 15

Property

More housing needed. The upcoming Population Paper will be looking at issues and impact of an increasing population as well addressing issues such as low birth rates, longer life expectancies, aging population and work force. We see this strategic plan also in conjunction with the economic restructuring moves that Singapore is undergoing currently to prepare for the next quantum leap. In its Issue paper published in 2012, it also highlighted choices and trade-offs of different approaches such as migration, optimising land use, raising productivity and labour force participation and assessing foreign worker participation in different sectors. From a housing need perspective, all these factors are likely to affect demand for home in both the public and private segments. Land use could be addressed in its upcoming Concept Plan and Master Plan.

Base case of 7m by 2030. In our scenario analysis below, we assumed a population target of 7m by 2030 compared to 5.3m in June 2012. This translates to an annual average 1.5% CAGR per annum or a net addition of 91,000 headcount per annum. In our bull case scenario, we expect an average annual population growth of 2.3%, in which case the 7m objective would be reached by 2025 with an average additional 140,000 net population growth a year. 83% of population staying in public housing. Singaporeans’ and non residents’ housing needs are met by both the Housing Development Board (public housing) and private housing sectors, with an estimated 83% of Singapore’s population housed in HDB housing. The Housing Development Board provides the bulk of housing needs through its BTO, DBSS and ECs, while private developers cater to the private housing sector.

Singapore Population and Composition Singapore Population Projections (up to 2030F)

Implication for housing sector

Long term positive…The implication for the housing sector is a long term positive, although factors such as volatility in economic growth, interest rates and affordability could lead to fluctuations in demand for housing. …estimate 20,000 to 21,000 household units formed per annum on average. Based on the current household size, the 32% expansion in population size by 2030 would translate to a total additional 367,335 homes by 2030 or 20,000-21,000 units a year. Assuming the optimistic case of reaching 7m by 2025, this would mean an average 31,000-32,000 additional

housing needs a year. Of the 20,000-30,000 housing units that could be required over the long term, the private housing component makes up at least one quarter. The upside risk to our projections is that any decrease in household sizes would translate to more upside in housing demand as our current projections are premised on household sizes remaining constant over time. We see this as more a medium term catalyst with the current bottlenecks in infrastructure and housing sectors. .

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Singapore residents Non-residents

Source: Singstats, DBSVickers

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1990 1994 1998 2002 2006 2010 2014F 2018F 2022F 2026F 2030F

Optimistic Bear Mean Total population - historical

7m

Mean: Reaches 7m in

2030

Optimistic: Reaches 7m in

2025

Source: Singstats, DBSVickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

Page 16: 2013-01-18 C31=SG (DBS Vickers) (SG) Population White Paper_ Potential beneficiaries

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Population White Paper

Page 16

Housing Needs Based on 7m Population Projection by 2030 (Base Case)

Housing Needs Based on 7m Population Projection by 2025 (Optimistic Case)

Source: URA, HDB, DBS Vickers Source: URA, HDB, DBS Vickers

What is happening at present?

Undersupply seen in the past decade… The housing market was undersupplied in the past decade, due in part to policy oversight as well as a rapid influx of immigrants. As such, policy makers are playing a catch up game to increase housing supply over the next few years. This is done through ramping up the HDB housing programme as well as increasing land supply through the Government Land Sale Programme.

…higher average of 34k units/yr till 2016 to fill previous shortfall gap. Effectively, this means that an average of 34,317 housing units will be completed over 2011-2016, double that seen in the past decade. This is higher than the average long term demand and is a move to fill the shortfall in recent years.

Total Housing Completions Government Land Sales Programme (Est. no of units)

Source: HDB, URA, DBS Vickers

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000 2003 2006 2009 2012 2015E 2018E 2021E 2024E 2027E 2030E

Private

HDB

units

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000 2003 2006 2009 2012 2015E 2018E 2021E 2024E

Private

HDB

units

‐10000

0

10000

20000

30000

40000

50000

60000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012E 2014E 2016E

Public

Private

Ave 1990‐2000 = 31425

Ave 2001‐2010 = 16036

Ave 2011‐2016 = 34317

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Population White Paper

Page 17

Prices

With this significant ramp up in completed supply over the next few years, the upside for pricing is likely to be modest. That said, we do not expect significant price drag given the still low unemployment levels and positive GDP growth.

Beneficiaries

Developers that would benefit from this long term growth prospect remain those with exposure to the residential sector. These would include those with large landbank such as City Developments and Bukit Sembawang as well as developers who have quicker asset turn business models and tap more frequently into the government land sale programme for land parcels such as Capitaland, Keppel Land, UOL, Wing Tai and Ho Bee as well as the smaller developer cum construction companies. But in the short term, the overhang from upcoming supply and recent seventh round of property curbs including higher additional buyers’ stamp duty, further reductions in loan to value ratios, increased minimum cash downpayment and lowering mortgage servicing ratio for HDB flats are likely to erode buying sentiment in the short term. Hence, we expect a 5% decline in private residential prices and anticipate a 20% decline in primary private home sales this year.

That said, we continue to like listed developers Capitaland and Wing Tai from a longer term perspective. We like Wing Tai [BUY, TP: S$2.33] as one of the purer residential developers in Singapore for its attractive valuations. With the recent decline in share price after the announcement of the government’s property cooling measures, the stock offers a decent upside to its book NAV of $2.91 and our target price of $2.33. Potential catalyst should come from its upcoming new launch at Tampines Road as well as another mid-market development at Prince Charles Crescent. Meanwhile, ongoing restructuring plans at its Hong Kong listed vehicle to unlock value will continue to have a positive impact on the group’s valuation. We also like Capitaland [BUY, TP: S$4.09], which should enjoy a positive knock-on impact from the improved performance of CMA. With improved sentiment in the China residential sector and faster asset turn strategy in its Singapore residential business, we believe the group’s activities and earnings are on an upward ttrajectory. Our TP of $4.09 is based on a 25% discount to revalued asset backing. Lastly, Mapletree Commercial Trust (MCT) [BUY, TP: S$1.35] stands out as a key beneficiary of the growth potentials in the Southern corridor. Having a first-mover presence will allow the trust to leverage on the long-term benefits of the redevelopment and rejuvenation of the Harbourfront-Alexandra- Tanjong Pagar locality as well as Pulau Brani into a new waterfront city. These will have a positive knock-on effect on property values and rentals in the area. The iconic Resorts World @ Sentosa is expected to underpin strong visitor arrivals in the medium term while a growing office and residence population will enable the trust to benefit from rising sales and shoppers’ footfall.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Healthcare In our Nov 2009 report, we highlighted the need for a net increase of 350 doctors and 1,700 nurses per year. We also estimated that there would be a need for about 1,700 additional hospital beds by 2020. While not spot-on, the Ministry of Health has indicated figures that are close to ours.

In Mar 2012, the MOH unveiled its Healthcare 2020 Plan. Amongst others, it announced that there would be 1,900 more acute hospital beds by 2020 as well as 20,000 more allied healthcare professionals, an increase of 50%. The table below summarises some of the key points made in Mar 2012 by the Minister of Health.

Highlights of Healthcare 2020 Masterplan

Building capacity More acute and community hospital beds by 2020

Acute hospitals - 1,900 more beds (30% increase) Community hospitals - 1,800 more beds (from 800 currently)

Ng Teng Fong hospital (700 beds) in Jurong to open in 2014 (Jurong). Community hospital (400 beds) to open in 2015.

Start work another acute hospital if needed before 2020, to be ready after 2020.

Sengkang General Hospital (c.500-700 beds) to open in 2018, from 2020.

Changi General Hospital expansion with St Andrew's Community Hospital (250 beds)

Increase long term care services To more than double capacity of facilities such as nursing homes, day care, home care and rehabilitation facilities

Adding 560 nursing home beds per year on average from '13 to '15.

Private-Public sector Private sector engagement Tap on spare capacities in private sector In-principle agreement with Parkway East to lease beds,

MOU with Raffles Hospital.

Workforce Grow healthcare professionals workforce

Increase healthcare professionals workforce by 50%, or about 20,000 more, by 2020.

Expand intake of schools. Lee Kong Chian School of Medicine open in 2013 with initial 50 students, growing to 150 eventually.

3 local medical schools to produce 500 doctors annually Expand intake of nurses from 1,700 to 2,700 annually.

Supplement with foreign trained professionals through pre-employment grant for medical students studying overseas.

New pay framework Doctors & dentists Increase doctors total compensation of c.20% by 2014. Increases thereafter.

Nurses, pharmacists and allied health professionals

One-time base pay increase of 4%-17% from Apr 2012.

Source: Ministry of Health, DBSVickers What are the key issues to be addressed? Instead of focusing on infrastructure, we are zeroing in on the key issues. We expect two main issues to be brought up in the White Paper for population. They are: (i) falling fertility rate among Singapore Citizens; and, (ii) an aging population in Singapore. Further incentives to enhance pro-creation. Currently, the Total Fertility Rate (TFR) in Singapore is 1.2, below the replacement level of 2.1. This is despite the Marriage and Parenthood package introduced in 2001, and which was enhanced in 2004

and 2008. The enhanced package is estimated to cost the government S$1.6bn a year, double that under the 2004 package. Older citizen population. NPTD’s occasional paper in April 2012 on Citizen Population Scenarios highlighted that based on its determined set of assumptions, the median age of Singapore’s citizen population will rise from 39 years in 2011 to 47 years in 2030. It indicated that 1 in 5 will be aged 65 and above by then, a 3-fold increase to 900,000 from 350,000 today.

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Singapore: Thematic Report

Population White Paper

Page 19

Given that there has been continued focus on population growth and aging, we have reasons to believe there will be strong inclination to enhance the Marriage and Parenthood package. One potential beneficiary we see is CordLife Group, which provides cord blood stem banking. Based on historical trend, Singapore’s birth rate in the past 15 years has been susceptible

to economic fluctuations, but there was an obvious strong growth in the lunar year of the Dragon. With the past three marriage and parenthood package, there seems to be a lagged effect of about two years. Assuming there is added incentive for procreation, we expect to see a further perk up in birth rates from 2014, which could benefit CordLife.

Marriage & Parenthood Package measures (selected)

Type of measures Details DBSV's Remarks

Raising & Caring for Children

Baby Bonus Parents can get a cash gift of S$4,000 each for their 1st and 2nd child, and S$6,000 for their 3rd and 4th child.

Savings into their children's Child Development Account (CDA) will be matched dollar for dollar up to S$6,000 for their 1st and 2nd child, up to $12,000 for each for 3rd and 4th child, and up to $18,000 each from 5th child onwards.

Monies in CDA is approved for use to pay for cordblood banking procedures, amongst others.

Parenthood Tax Rebate (PTR) Parents can claim the PTR of S$5,000 for their 1st child, $10,000 for their 2nd child, and $20,000 per child for all subsequent children.

Qualifying/ Handicapped Child Relief (QCR/HCR)

Parents can claim $4,000 per child under the QCR or $5,500 per child under the HCR.

Working Mother's Child Relief (WMCR)

Working mothers can claim the WMCR at 15% of earned income for their 1st child, 20% for their 2nd child and 25% per child for all subsequent children.

Subsidies for centre based infant care & childcare

Parents can enjoy a monthly subsidy of up to $600 and up to $300 for infant care and child care respectively.

Foreign Domestic Worker Levy Concession

Parents can enjoy a $95 levy concession if they have a young child aged below 12 staying with them

Work-Life Support Maternity Leave Mothers have maternity leave of 16 weeks Expected to increase, and possibly

option to consider as paternity leave

Source: National Talent & Population Division, Ministry of Social and Family Development, DBSVickers Long term positive for healthcare providers, but valuations seem stretched; HOLD Raffles Medical. We see healthcare providers as key beneficiaries in this secular trend. Valuation looks nearer the high end of historical trends, and we prefer to be buyers on pull back. Raffles Medical is currently trading at more than 0.5SD above its historical average. We maintain our HOLD rating for Raffles Medical, with a marginally higher TP of S$2.75 as we roll our valuation over to 24x of FY13/14F.

Raffles Medical PE standard deviation

Source: DBSVickers

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

(x)

Avg: 19.3x

+1sd: 23.9x

+2sd: 28.5x

-1sd: 14.7.0x

-2sd: 10.1x

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Population White Paper

Page 20

Appendix Rail Network Expansions in Land Transport Masterplan 2013

Source: LTA

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Population White Paper

Page 21

Stock Profiles

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: CAPL SP | Reuters: CATL.SI

BUY S$3.80 STI : 3,208.50 Price Target : 12-month S$ 4.09 Potential Catalyst: Better operational performance and capital usage DBSV vs Consensus: Slightly Below Analyst LOCK Mun Yee +65 6398 7972 [email protected]

Price Relative

1.6

2.1

2.6

3.1

3.6

4.1

4.6

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

S$

57

77

97

117

137

157

177

197

217

Relative Index

CapitaLand (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Dec (S$ m) 2011A 2012F 2013F 2014F

Turnover 3,020 3,541 4,110 4,927 EBITDA 1,763 1,413 1,598 2,285 Pre-tax Profit 1,614 1,200 1,091 1,750 Net Profit 1,057 829 688 1,244 Net Pft (Pre Ex.) 772 542 688 1,244 EPS (S cts) 24.8 19.5 16.1 29.2 EPS Pre Ex. (S cts) 18.1 12.7 16.1 29.2 EPS Gth (%) (17) (22) (17) 81 EPS Gth Pre Ex (%) (11) (30) 27 81 Diluted EPS (S cts) 33.6 26.4 21.9 39.6 Net DPS (S cts) 8.0 6.0 6.0 6.0 BV Per Share (S cts) 349.6 361.1 371.2 394.4 PE (X) 15.3 19.5 23.6 13.0 PE Pre Ex. (X) 21.0 29.9 23.6 13.0 P/Cash Flow (X) nm 14.7 nm nm EV/EBITDA (X) 14.9 19.0 18.1 13.7 Net Div Yield (%) 2.1 1.6 1.6 1.6 P/Book Value (X) 1.1 1.1 1.0 1.0 Net Debt/Equity (X) 0.3 0.3 0.4 0.5 ROAE (%) 7.3 5.5 4.4 7.6 Earnings Rev (%): - - - Consensus EPS (S cts): 14.5 17.7 21.6 Other Broker Recs: B: 18 S: 1 H: 6 ICB Industry : Financials ICB Sector: Real Estate Principal Business: Residential, commercial and industrial property owner and developer.

Source of all data: Company, DBS VickersVickers, Bloomberg

At A Glance Issued Capital (m shrs) 4,251 Mkt. Cap (S$m/US$m) 16,154 / 13,197 Major Shareholders Temasek Holdings Pte Ltd (%) 39.5 Janus Capital Mgmt LLC (%) 5.0 Free Float (%) 55.5 Avg. Daily Vol.(‘000) 10,574

Thematic Report

CapitaLand

Best foot forward

On a growth trajectory

Boosting operational performance and optimising capital usage to lift performance

Maintain BUY, TP $4.09

Best foot forward. Capitaland is expected to be on an earnings and ROE growth path over the next few years. With improved sentiment in China residential sector, quicker asset turns in Singapore residential, better performance at CMA as well as undertaking a strategic review of its investment in Australand, we believe the group is set to enjoy better returns on its balance sheet going forward. Boosting operational performance, strategic review of non-core assets could optimise capital usage. Earnings visibility is also extended with improved sales momentum in China as well as the maiden roll out of its value homes in Wuhan. In Singapore, progressive recognition of billings from Bedok Residences as well as quicker asset turns at D’Leedon and Sky Habitat Recurrent income business through CMA and Raffles City China developments are likely to accelerate over the next few years as the former ramps up its operational portfolio. Meanwhile, potential strategic review of its 56.3% stake in Australand and potential value unlocking could free capital to be redeployed into its core geographic focus of Singapore and China. With a gearing on 0.46x as at Sep 12, its balance sheet remains healthy with good capacity for further deployment into new investments. Maintain BUY. We believe strength in Capitaland’s share price could be supported by the anticipated expansion in ROE going forward. Our target price of $4.09, is premised on a 25% discount to sum of parts RNAV.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

CapitaLand

Page 23

Income Statement (S$ m) Balance Sheet (S$ m)

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Turnover 3,020 3,541 4,110 4,927 Net Fixed Assets 1,076 1,198 1,320 1,443 Cost of Goods Sold (1,947) (2,349) (2,668) (2,740) Invts in Associates & JVs 10,685 11,557 12,285 12,918 Gross Profit 1,073 1,191 1,442 2,187 Invt & Devt Properties 7,075 7,861 8,361 8,861 Other Opng (Exp)/Inc (230) (259) (320) (386) Other LT Assets 0 0 0 0 Operating Profit 843 932 1,123 1,800 Cash & ST Invts 6,459 5,940 3,944 1,766 Other Non Opg (Exp)/Inc 1 3 3 3 Dev Props held for sale 6,905 6,548 7,838 9,646 Associates & JV Inc 877 436 431 440 Inventory 0 0 0 0 Net Interest (Exp)/Inc (392) (458) (465) (494) Debtors 1,769 1,864 2,163 2,593 Exceptional Gain/(Loss) 285 287 0 0 Other Current Assets 0 0 0 0 Pre-tax Profit 1,614 1,200 1,091 1,750 Total Assets 35,319 36,319 37,262 38,576 Tax (191) (137) (164) (262) Minority Interest (366) (234) (240) (244) ST Debt 860 860 860 860 Preference Dividend 0 0 0 0 Other Current Liab 2,712 3,170 3,558 3,759 Net Profit 1,057 829 688 1,244 LT Debt 11,330 11,330 11,330 11,330 Net Profit before Except. 772 542 688 1,244 Other LT Liabilities 1,178 1,178 1,178 1,178 EBITDA 1,763 1,413 1,598 2,285 Shareholder’s Equity 14,902 15,391 15,824 16,813 Minority Interests 4,338 4,389 4,512 4,635 Sales Gth (%) (10.7) 17.3 16.1 19.9 Total Cap. & Liab. 35,319 36,319 37,262 38,576 EBITDA Gth (%) (9.8) (19.8) 13.1 43.0 Opg Profit Gth (%) (21.3) 10.6 20.4 60.4 Non-Cash Wkg. Capital 5,963 5,242 6,443 8,480 Net Profit Gth (%) (17.0) (21.6) (17.0) 80.8 Net Cash/(Debt) (5,731) (6,251) (8,247) (10,425) Effective Tax Rate (%) 11.8 11.4 15.0 15.0 Cash Flow Statement (S$ m) Rates & Ratio

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Pre-Tax Profit 1,614 1,200 1,091 1,750 Gross Margins (%) 35.5 33.6 35.1 44.4 Dep. & Amort. 42 42 42 43 Opg Profit Margin (%) 27.9 26.3 27.3 36.5 Tax Paid (149) (148) (147) (146) Net Profit Margin (%) 35.0 23.4 16.7 25.2 Assoc. & JV Inc/(loss) (877) (436) (431) (440) ROAE (%) 7.3 5.5 4.4 7.6 Chg in Wkg.Cap. (1,328) 732 (1,218) (2,153) ROA (%) 3.1 2.3 1.9 3.3 Other Operating CF (111) (287) 0 0 ROCE (%) 2.4 2.5 2.9 4.5 Net Operating CF (809) 1,103 (663) (947) Div Payout Ratio (%) 32.1 30.7 37.0 20.5 Capital Exp.(net) (135) (164) (164) (164) Net Interest Cover (x) 2.2 2.0 2.4 3.6 Other Invts.(net) (1,156) (500) (500) (500) Asset Turnover (x) 0.1 0.1 0.1 0.1 Invts in Assoc. & JV (183) (545) (405) (302) Debtors Turn (avg days) 235.9 187.3 178.8 176.2 Div from Assoc & JV 533 109 108 110 Creditors Turn (avg days) 414.0 396.3 406.7 426.6 Other Investing CF (169) 0 0 0 Current Ratio (x) 4.2 3.6 3.2 3.0 Net Investing CF (1,110) (1,100) (962) (857) Quick Ratio (x) 2.3 1.9 1.4 0.9 Div Paid (402) (522) (372) (374) Net Debt/Equity (X) 0.3 0.3 0.4 0.5 Chg in Gross Debt 1,771 0 0 0 Net Debt/Equity ex MI (X) 0.4 0.4 0.5 0.6 Capital Issues (61) 0 0 0 Capex to Debt (%) 1.1 1.3 1.3 1.3 Other Financing CF (327) 0 0 0 Z-Score (X) 1.6 1.5 1.5 1.5 Net Financing CF 982 (522) (372) (374) N. Cash/(Debt)PS (S cts) (134.5) (146.6) (193.5) (244.6) Currency Adjustments 0 0 0 0 Opg CFPS (S cts) 12.2 8.7 13.0 28.3 Chg in Cash (937) (520) (1,996) (2,178) Free CFPS (S cts) (22.2) 22.0 (19.4) (26.1) Quarterly / Interim Income Statement (S$ m) RNAV Breakdown

FY Dec 4Q2011 1Q2012 2Q2012 3Q2012

Turnover 1,059 641 862 687 Cost of Goods Sold (784) (395) (522) (402) Gross Profit 275 246 341 285 Other Oper. (Exp)/Inc (70) (116) (209) (139) Operating Profit 204 130 132 146 Other Non Opg (Exp)/Inc 0 0 28 0 Associates & JV Inc 411 102 323 99 Net Interest (Exp)/Inc (81) (83) (121) (99) Exceptional Gain/(Loss) 173 78 213 112 Pre-tax Profit 707 226 574 258 Tax (67) (29) (49) (55) Minority Interest (164) (64) (138) (55) Net Profit 477 133 386 148 Net profit bef Except. 304 56 173 37 EBITDA 625 244 491 258 Sales Gth (%) 74.0 (39.5) 34.5 (20.4) EBITDA Gth (%) 173.1 (61.0) 101.4 (47.6) Opg Profit Gth (%) 53.0 (36.3) 1.3 10.9 Net Profit Gth (%) 494.1 (72.0) 189.6 (61.5) Gross Margins (%) 26.0 38.3 39.5 41.5 Opg Profit Margins (%) 19.3 20.3 15.3 21.3 Net Profit Margins (%) 45.0 20.8 44.7 21.6 Source: Company, DBS Vickers

Property Stake NLA (sf)Rent

($psf) YieldValue

$psf OMV ($m)Huiteng Metropolis 50% 200,049 5.0 7% 643 64.3Red Diamond Plaza 100% 243,988 5.0 7% 643 156.8Capital Plaza Ningbo 100% 1,054,237 4.5 7% 579 610

No of shares (m)

TP ($) Exchg rate

CCT 31% 2,838.0 1.50 1 1,336.8 CMA 66% 3,887.7 2.15 1 5,474.9 ART 48% 1,134.8 1.39 1 754.0Total 7,565.7 book value 6,415.7 Surplus 1,150.0

No of shares (m)

Share price (LC)

Exchg rate

Australand 59% 577 2.99 1.25 1,278.5 Lai Fung 20% 8,048.0 0.156 0.167 41.9 Total 1,320.4 Book value 1,732.1 Surplus (411.7)

Surplus from residentialSpore 789.7China and overseas 563.1

Serviced residence 791.3

Fee income 1,378.1

Add total assets 37,266.3 less total liabilities 18,008.8

RNAV 24,758.4 No of shares 4,548.6 RNAV/share 5.44Discount -25%TP 4.09

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: CD SP | Reuters: CMDG.SI

BUY S$1.85 STI : 3,196.07 Price Target : 12 months S$ 2.05 (Prev S$ 1.86) Potential Catalyst: Higher dividend payout ratio, acquisitions DBSV vs Consensus: Marginally above Analyst Andy SIM CFA +65 6398 7969 [email protected]

Price Relative

48

68

88

108

128

148

168

188

208

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Relative IndexS$

ComfortDelgro (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Dec (S$ m) 2011A 2012F 2013F 2014F

Turnover 3,411 3,551 3,713 3,880 EBITDA 721 756 801 834 Pre-tax Profit 379 397 423 436 Net Profit 236 248 264 272 Net Pft (Pre Ex.) 236 248 264 272 EPS (S cts) 11.3 11.9 12.6 13.0 EPS Pre Ex. (S cts) 11.3 11.9 12.6 13.0 EPS Gth (%) 3 5 6 3 EPS Gth Pre Ex (%) 3 5 6 3 Diluted EPS (S cts) 11.2 11.8 12.6 13.0 Net DPS (S cts) 6.0 6.5 6.9 7.2 BV Per Share (S cts) 90.5 96.3 102.4 108.5 PE (X) 16.4 15.6 14.7 14.2 PE Pre Ex. (X) 16.4 15.6 14.7 14.2 P/Cash Flow (X) 5.0 5.6 5.4 5.2 EV/EBITDA (X) 6.2 5.9 5.4 5.0 Net Div Yield (%) 3.2 3.5 3.8 3.9 P/Book Value (X) 2.0 1.9 1.8 1.7 Net Debt/Equity (X) 0.0 CASH CASH CASH ROAE (%) 12.8 12.7 12.7 12.3 Earnings Rev (%): - -- 0.0 Consensus EPS (S cts): 11.8 12.2 12.9 Other Broker Recs: B: 12 S: 2 H: 5 ICB Industry : Consumer Services ICB Sector: Travel & Leisure Principal Business: Major operator of taxi, bus and rail passenger transport services.

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 2,104 Mkt. Cap (S$m/US$m) 3,893 / 3,175 Major Shareholders Singapore Labour Foundation

12.0

Blackrock (%) 6.7 Capital Group (%) 6.4 Free Float (%) 65.8 Avg. Daily Vol.(‘000) 3,720

Thematic Report

ComfortDelgro

Riding on with Comfort

• Population growth and improving transport networks will augur well for public transport operators’ ridership growth

• Management delivering on stable growth

• New fare review formula could see fares track closer to operators’ cost environment

• Preferred land transport play; BUY with TP at S$2.05

A beneficiary of higher population. We see CD as a key beneficiary of population growth and improving public transport network. This will underpin long-term public transport ridership growth in Singapore. We project public transport ridership to grow by 1.4x to c.13.8m/day by 2030.

Management delivering slowly and surely. CD has reported relatively strong results to-date with 9M12 net profit of S$191.3m (+6.8% y-o-y). In fact, 3Q12 saw a record new profit quarter, driven by growth from almost all business segments and tight cost controls. Despite having risen by c.26% in 2012, CD valuations are not stretched and still trades only at its historical average PE of c.15x, but still lower compared to SMRT’s 18x.

Preferred land transport player, BUY, TP: S$2.05. We like CD for its geographical diversification and leading market positions in the areas it operates in. A near-term catalyst could come from the new fare review formula which could see fares mirror closer to operators’ cost environment. In addition, a higher-than-expected fare increase in 2013 and a higher dividend payout ratio (FY11: 53%) could be an additional catalyst for the counter. Our TP is raised to S$2.05 as we roll over our PE/DCF backed valuation to FY13F, from FY12F.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

ComfortDelgro

Page 25

Income Statement (S$ m) Balance Sheet (S$ m)

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Turnover 3,411 3,551 3,713 3,880 Net Fixed Assets 2,604 2,718 2,725 2,710 Cost of Goods Sold 0 0 0 0 Invts in Associates & JVs 6 12 18 25 Gross Profit 3,411 3,551 3,713 3,880 Other LT Assets 1,000 1,000 1,000 1,000 Other Opng (Exp)/Inc (3,012) (3,137) (3,275) (3,434) Cash & ST Invts 577 696 905 1,136 Operating Profit 399 414 437 447 Inventory 57 65 68 71 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 151 142 149 155 Associates & JV Inc 5 6 6 7 Other Current Assets 196 196 196 196 Net Interest (Exp)/Inc (25) (23) (21) (18) Total Assets 4,589 4,828 5,060 5,293 Exceptional Gain/(Loss) 0 0 0 0 Pre-tax Profit 379 397 423 436 ST Debt 198 198 198 198 Tax (82) (83) (89) (92) Other Current Liab 804 854 889 922 Minority Interest (62) (66) (70) (72) LT Debt 434 434 434 434 Preference Dividend 0 0 0 0 Other LT Liabilities 680 680 680 680 Net Profit 236 248 264 272 Shareholder’s Equity 1,892 2,014 2,141 2,268 Net Profit before Except. 236 248 264 272 Minority Interests 582 648 718 791 EBITDA 721 756 801 834 Total Cap. & Liab. 4,589 4,828 5,060 5,293 Sales Gth (%) 6.4 4.1 4.5 4.5 Non-Cash Wkg. Capital (401) (452) (478) (501) EBITDA Gth (%) 5.2 4.8 6.0 4.0 Net Cash/(Debt) (55) 64 273 504 Opg Profit Gth (%) 2.8 3.8 5.6 2.2 Net Profit Gth (%) 3.1 5.2 6.4 3.2 Effective Tax Rate (%) 21.5 21.0 21.0 21.0 Cash Flow Statement (S$ m) Rates & Ratio

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Pre-Tax Profit 379 397 423 436 Gross Margins (%) 100.0 100.0 100.0 100.0 Dep. & Amort. 317 336 358 380 Opg Profit Margin (%) 11.7 11.7 11.8 11.5 Tax Paid (44) (57) (83) (89) Net Profit Margin (%) 6.9 7.0 7.1 7.0 Assoc. & JV Inc/(loss) (5) (6) (6) (7) ROAE (%) 12.8 12.7 12.7 12.3 Chg in Wkg.Cap. 99 25 20 21 ROA (%) 5.3 5.3 5.3 5.3 Other Operating CF 33 0 0 0 ROCE (%) 8.4 8.4 8.5 8.3 Net Operating CF 778 695 711 741 Div Payout Ratio (%) 53.3 55.0 55.0 55.0 Capital Exp.(net) (503) (450) (365) (365) Net Interest Cover (x) 15.8 18.0 20.7 25.2 Other Invts.(net) 7 0 0 0 Asset Turnover (x) 0.8 0.8 0.8 0.7 Invts in Assoc. & JV (7) 0 0 0 Debtors Turn (avg days) 14.6 15.0 14.3 14.3 Div from Assoc & JV 6 0 0 0 Creditors Turn (avg days) (681.2) (688.9) (673.6) (663.2) Other Investing CF 11 0 0 0 Inventory Turn (avg days) (66.4) (65.8) (67.4) (66.3) Net Investing CF (487) (450) (365) (365) Current Ratio (x) 1.0 1.0 1.2 1.4 Div Paid (115) (126) (136) (145) Quick Ratio (x) 0.7 0.8 1.0 1.2 Chg in Gross Debt (120) 0 0 0 Net Debt/Equity (X) 0.0 CASH CASH CASH Capital Issues 6 0 0 0 Net Debt/Equity ex MI (X) 0.0 CASH CASH CASH Other Financing CF (61) 0 0 0 Capex to Debt (%) 79.7 71.2 57.8 57.8 Net Financing CF (290) (126) (136) (145) Z-Score (X) 2.5 2.5 2.6 2.6 Currency Adjustments 9 0 0 0 N. Cash/(Debt)PS (S cts) (2.6) 3.1 13.1 24.1 Chg in Cash 10 119 209 231 Opg CFPS (S cts) 32.5 32.1 33.0 34.5 Free CFPS (S cts) 13.1 11.7 16.5 18.0 Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Key Assumptions

FY Dec 4Q2011 1Q2012 2Q2012 3Q2012 FY Dec 2011A 2012F 2013F 2014F

Turnover 888 855 885 901 Revenues (S$ m) Cost of Goods Sold 0 0 0 0 Bus & Bus Station 1,708 1,760 1,820 1,883 Gross Profit 888 855 885 901 Rail 147 156 172 187 Other Oper. (Exp)/Inc (792) (762) (779) (784) Taxi 1,039 1,095 1,157 1,222 Operating Profit 96 93 106 117 Automotive Engn 352 369 388 407 Other Non Opg (Exp)/Inc 2 2 2 5 Others 165 171 176 182 Associates & JV Inc 2 1 1 0 Total 3,411 3,551 3,713 3,880 Net Interest (Exp)/Inc (8) (8) (8) (8) EBIT (S$ m) Exceptional Gain/(Loss) 0 0 0 0 Bus & Bus Station 156 162 168 174 Pre-tax Profit 91 88 101 114 Rail 28 17 20 22 Tax (20) (20) (21) (25) Taxi 130 137 145 153 Minority Interest (15) (15) (15) (17) Automotive Engn 38 48 50 53 Net Profit 57 54 65 73 Others 49 50 54 45 Net profit bef Except. 57 53 65 73 Total 399 414 437 447 EBITDA 181 175 188 203 EBIT Margins (%) Bus & Bus Station 9.1 9.2 9.2 9.2 Sales Gth (%) 1.3 (3.7) 3.4 1.8 Rail 18.8 11.0 11.5 12.0 EBITDA Gth (%) (8.7) (3.3) 7.4 7.9 Taxi 12.5 12.5 12.5 12.5 Opg Profit Gth (%) (15.8) (2.5) 13.8 10.0 Automotive Engn 10.7 13.0 13.0 13.0 Net Profit Gth (%) (18.2) (5.3) 21.5 12.0 Others 29.4 29.1 30.8 24.5 Gross Margins (%) 100.0 100.0 100.0 100.0 Total 11.7 11.7 11.8 11.5 Opg Profit Margins (%) 10.8 10.9 12.0 13.0 Key Assumptions Net Profit Margins (%) 6.4 6.3 7.3 8.1 SGP bus ridership growth 6.0 3.0 1.5 1.5 SGP fare chg (%) (2.7) (0.5) 1.5 1.5 Avg oil price (US$) 100.0 105.0 105.0 110.0 Chg in staff strength (%) 1.0 2.0 1.0 1.0 Source: Company, DBS Vickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC

Bloomberg: CLGL SP | Reuters: CORD.SI

NOT RATED S$0.57 STI : 3,208.50 Price Target : 12-Month S$ 0.65 Potential Catalyst: Acquisitions in Indonesia, India and Philippines DBSV vs Consensus: Below consensus Analyst LING Lee Keng +65 6398 7970 [email protected] Andy SIM CFA +65 6398 7969 [email protected]

Price Relative

82

102

122

142

162

182

202

222

0.4

0.5

0.5

0.6

0.6

0.7

0.7

0.8

0.8

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

Relative IndexS$

Cordlife Group Ltd (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Jun (S$ m) 2012A 2013F 2014F 2015F

Turnover 29 32 35 41 EBITDA 7 10 11 13 Pre-tax Profit 8 10 12 13 Net Profit 7 9 10 11 Net Pft (Pre Ex.) 7 9 10 11 EPS (S cts) 3.0 3.8 4.3 4.9 EPS Pre Ex. (S cts) 3.0 3.8 4.3 4.9 EPS Gth (%) (47) 28 12 15 EPS Gth Pre Ex (%) (47) 28 12 15 Diluted EPS (S cts) 3.0 3.8 4.3 4.9 Net DPS (S cts) 2.0 1.9 2.1 2.5 BV Per Share (S cts) 30.6 32.5 34.6 37.1 PE (X) 19.0 14.8 13.2 11.5 PE Pre Ex. (X) 19.0 14.8 13.2 11.5 P/Cash Flow (X) 21.8 19.0 17.6 14.4 EV/EBITDA (X) 17.1 11.9 10.4 8.8 Net Div Yield (%) 3.5 3.4 3.8 4.3 P/Book Value (X) 1.8 1.7 1.6 1.5 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 12.4 12.1 12.7 13.7 Earnings Rev (%): - - - Consensus EPS (S cts): 4.5 4.3 4.9 Other Broker Recs: B: 1 S: 0 H: 1 ICB Industry : Consumer Services ICB Sector: General Retailers Principal Business: Provides cord blood banking services in Singapore and Hong Kong. Its services include the collection, processing, testing, cryopreservation and storage of umbilical cord blood at birth. Source of all data: Company, DBS Vickers, Bloomberg

Thematic Report

Cordlife Group Ltd

Stable recurring income

Larger of only two private cord blood banks in Singapore; among the top 3 in Hong Kong

Increasing penetration rate, awareness of cord blood banking and pro-family initiatives to drive growth

Stable recurring income; potential acquisitions in Indonesia, India and Philippines

Fair value of S$0.65 offers 12% potential upside

Market leader in cord blood banking. Cordlife provides cord blood banking services in Singapore and Hong Kong. Its services include the collection, processing, testing, cryopreservation and storage of umbilical cord blood at birth. It also provides umbilical cord tissue banking services in Hong Kong.

Increasing penetration rate, awareness of cord blood banking and pro-family initiatives to drive growth. According to the group’s IPO prospectus, the penetration level in Singapore is expected to rise to 38% by 2015, from 24% in 2010. The pro-family initiatives by the government, such as the Baby Bonus Scheme, which entitles eligible parents to cash gifts and dollar-for-dollar saving accounts, should also benefit Cordlife. With our expectations for further initiatives by the government to encourage pro-creation in the upcoming White Paper, we believe Cordlife will be a beneficiary.

Stable recurring income, acquisitions to boost revenue. The bulk of its revenue is recurring, as >50% of its customers are on an annual payment scheme. Cordlife’s target acquisition markets include Indonesia, India and the Philippines.

Fair value S$0.65. The stock current trades at 15.0x FY13F PE. We believe a target PE of 16x based on a slight (<10%) discount to blended forward PE of its peers is reasonable, given its shorter trading history. This translates to a fair value of S$0.65, which offers potential upside of 12% from the current share price.

At A Glance Issued Capital (m shrs) 232 Mkt. Cap (S$m/US$m) 131 / 107 Major Shareholders China Stem Cells East Co Ltd (%) 10.5 Lau Wai Chi Stellan (%) 9.4 Coop International Pte Ltd (%) 8.8 Free Float (%) 64.1 Avg. Daily Vol.(‘000) 1,383

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Cordlife Group Ltd

Page 27

Income Statement (S$ m) Balance Sheet (S$ m)

FY Jun 2012A 2013F 2014F 2015F FY Jun 2012A 2013F 2014F 2015F

Turnover 29 32 35 41 Net Fixed Assets 6 6 7 7 Cost of Goods Sold (9) (10) (11) (12) Invts in Associates & JVs 18 20 22 24 Gross Profit 20 22 25 29 Other LT Assets 38 38 39 41 Other Opng (Exp)/Inc (16) (15) (17) (19) Cash & ST Invts 19 20 20 21 Operating Profit 4 7 8 10 Inventory 0 0 1 1 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 9 9 11 12 Associates & JV Inc 2 2 2 2 Other Current Assets 1 1 1 2 Net Interest (Exp)/Inc 2 2 2 2 Total Assets 90 95 101 107 Exceptional Gain/(Loss) 0 0 0 0 Pre-tax Profit 8 10 12 13 ST Debt 0 0 0 0 Tax (1) (2) (2) (2) Other Current Liab 8 8 9 10 Minority Interest 0 0 0 0 LT Debt 2 2 2 2 Preference Dividend 0 0 0 0 Other LT Liabilities 8 8 8 9 Net Profit 7 9 10 11 Shareholder’s Equity 71 76 81 86 Net Profit before Except. 7 9 10 11 Minority Interests 0 0 0 0 EBITDA 7 10 11 13 Total Cap. & Liab. 90 95 101 107 Sales Gth (%) 12.1 10.0 12.0 14.2 Non-Cash Wkg. Capital 2 3 3 5 EBITDA Gth (%) (29.2) 42.8 13.9 17.1 Net Cash/(Debt) 16 18 18 19 Opg Profit Gth (%) (44.1) 72.3 18.0 21.5 Net Profit Gth (%) (18.3) 28.0 12.0 15.1 Effective Tax Rate (%) 11.0 15.2 15.2 15.2 Cash Flow Statement (S$ m) Rates & Ratio

FY Jun 2012A 2013F 2014F 2015F FY Jun 2012A 2013F 2014F 2015F

Pre-Tax Profit 8 10 12 13 Gross Margins (%) 69.6 70.0 70.1 70.6 Dep. & Amort. 1 1 1 1 Opg Profit Margin (%) 14.0 22.0 23.1 24.6 Tax Paid (2) (1) (2) (2) Net Profit Margin (%) 24.1 28.0 28.0 28.2 Assoc. & JV Inc/(loss) (2) (2) (2) (2) ROAE (%) 12.4 12.1 12.7 13.7 Chg in Wkg.Cap. (1) (1) (1) (1) ROA (%) 9.5 9.6 10.1 11.0 Other Operating CF 2 0 0 0 ROCE (%) 5.5 7.0 7.8 8.9 Net Operating CF 6 7 7 9 Div Payout Ratio (%) 67.2 50.0 50.0 50.0 Capital Exp.(net) (2) (1) (1) (1) Net Interest Cover (x) NM NM NM NM Other Invts.(net) 0 0 0 0 Asset Turnover (x) 0.4 0.3 0.4 0.4 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 97.5 104.0 103.1 102.1 Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 112.8 110.7 101.9 102.7 Other Investing CF (18) 0 (2) (2) Inventory Turn (avg days) 14.4 17.9 17.7 17.6 Net Investing CF (20) (1) (3) (3) Current Ratio (x) 3.5 3.7 3.6 3.6 Div Paid (5) (4) (5) (6) Quick Ratio (x) 3.3 3.5 3.4 3.4 Chg in Gross Debt 2 0 0 0 Net Debt/Equity (X) CASH CASH CASH CASH Capital Issues 26 0 0 0 Net Debt/Equity ex MI (X) CASH CASH CASH CASH Other Financing CF 0 0 0 0 Capex to Debt (%) 93.6 38.9 38.9 38.9 Net Financing CF 23 (4) (5) (6) Z-Score (X) 5.1 5.2 5.2 5.2 Currency Adjustments 0 0 0 0 N. Cash/(Debt)PS (S cts) 7.0 7.7 7.7 8.1 Chg in Cash 9 1 0 1 Opg CFPS (S cts) 2.9 3.4 3.7 4.5 Free CFPS (S cts) 1.6 2.5 2.8 3.5 Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Key Assumptions

FY Jun 3Q2012 4Q2012 1Q2013 FY Jun 2012A 2013F 2014F 2015F

Turnover 7 7 8 Revenues (S$ m) Cost of Goods Sold (2) (2) (3) North Asia 7 8 9 10 Gross Profit 5 5 6 South Asia 22 24 27 30 Other Oper. (Exp)/Inc (4) (3) (3) Operating Profit 1 2 3 Other Non Opg (Exp)/Inc 0 0 0 Associates & JV Inc 0 0 0 Total 29 32 35 41 Net Interest (Exp)/Inc 0 1 1 Pretax profit (S$ m) Exceptional Gain/(Loss) 0 0 0 North Asia 2 2 3 3 Pre-tax Profit 1 2 3 South Asia 6 8 9 10 Tax 0 0 0 Minority Interest 0 0 0 Net Profit 1 2 3 EBITDA 1 2 3 Total 8 10 12 13 Pretax profit Margins (%) Sales Gth (%) N/A 8.2 9.8 North Asia 29.0 30.0 30.0 31.0 EBITDA Gth (%) N/A 134.4 44.4 South Asia 25.8 34.0 34.0 34.0 Opg Profit Gth (%) N/A 157.5 52.6 Net Profit Gth (%) N/A 177.9 21.1 Gross Margins (%) 69.3 70.0 69.0 Opg Profit Margins (%) 10.0 23.7 33.0 Total 26.6 33.0 33.0 33.3 Net Profit Margins (%) 12.0 30.9 34.1 Key Assumptions Revenue Growth North Asia 10% 10% 12% 15% South Asia 13% 10% 12% 14% Source: Company, DBS Vickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Page 28

www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: MCT SP | Reuters: MACT.SI

BUY S$1.215 STI : 3,208.50 Price Target : 12-Month S$ 1.35 Potential Catalyst: Acquisitions/stronger than expected operational results DBSV vs Consensus: We have factored in S$1bn acquisition in our forecasts vs consensus where most have yet to do so Analyst Derek TAN +65 6398 7966 [email protected] LOCK Mun Yee +65 6398 7972 [email protected]

Price Relative

88

108

128

148

168

188

208

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Apr-11 Sep-11 Feb-12 Jul-12 Dec-12

Relative IndexS$

Mapletree Commercial Trust (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Mar (S$ m) 2011A 2012A 2013F 2014F

Gross Revenue 183 177 209 266 Net Property Inc 126 124 146 189 Total Return 90 90 109 133 Distribution Inc 96 99 118 159 EPU (S cts) 4.8 4.8 5.8 5.6 EPU Gth (%) 9 0 20 (3) DPU (S cts) 5.2 5.3 6.3 6.7 DPU Gth (%) 16 2 19 7 NAV per shr (S cts) 89.4 95.4 95.0 100.7 PE (X) 25.1 25.2 20.9 21.6 Distribution Yield (%) 4.3 4.3 5.2 5.5P/NAV (x) 1.4 1.3 1.3 1.2Aggregate Leverage (%) 39.5 37.5 38.1 38.9 ROAE (%) 5.6 5.2 6.1 6.4 Distn. Inc Chng (%): - - Consensus DPU (S cts): 6.1 6.6 Other Broker Recs: B: 7 S: 0 H: 5 ICB Industry : Financials ICB Sector: Real Estate Investment Trusts Principal Business: MCT is a Singapore-focused commercial reit that invests in income producing retail/commercial properties

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 1,871 Mkt. Cap (S$m/US$m) 2,273 / 1,857 Major Shareholders Temasek Holdings (%) 42.5 American International Group Inc (%) 7.8 Free Float (%) 49.7 Avg. Daily Vol.(‘000) 2,456

Thematic Report

Mapletree Commercial Trust

Significant pipeline to tap

Organic growth robust with VivoCity and ARC continuing to deliver positively

Significant pipeline from sponsor a key attraction

BUY, TPS$1.35

Strong positioning in the Southern growth Corridor of Singapore. Mapletree Commercial Trust (MCT) stands out as a key beneficiary of the growth potential in the Southern corridor. Having a first-mover presence will allow the trust to leverage on the long-term benefits of the redevelopment and rejuvenation of the Harbourfront-Alexandra- Tanjong Pagar locality as well as Pulau Brani into a new waterfront city. These will have a positive knock-on effect on property values and rentals in the area. The iconic Resorts World @ Sentosa is expected to underpin strong visitor arrivals in the medium term while a growing office and residence population will enable the trust to benefit from rising sales and shoppers’ footfall. Significant pipeline for acquisition in the medium term. The management is proposing the acquisition of Mapletree Anson, a prime office asset in Tanjong Pagar for S$680m, which we have yet to factor into our forecasts as the financing details have yet to be disclosed. We however note that the management has highlighted that they expect this deal to be DPU and NAV accretive. BUY TP S$1.35. MCT is one of the few REITs with a significant pipeline from its sponsor that can grow its asset base in the medium term. Further upside earnings surprises include the acquisition of Mapletree Business City, which would add further earnings stability to the trust.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Mapletree Commercial Trust

Page 29

Statement of Total Return (S$ m) Balance Sheet (S$ m)

FY Mar 2011A 2012A 2013F 2014F FY Mar 2011A 2012A 2013F 2014F

Gross revenue 183 177 209 266 Investment Properties 0 0 0 0 Property expenses (57) (53) (63) (77) Other LT Assets N/A N/A N/A N/A Net Property Income 126 124 146 189 Cash & ST Invts 17 50 52 58 Other Operating expenses (14) (13) (15) (28) Inventory 0 0 0 0 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 6 5 7 9 Net Interest (Exp)/Inc (21) (21) (22) (28) Other Current Assets 1 0 0 0 Exceptional Gain/(Loss) 0 0 0 0 Total Assets 2,847 3,000 3,005 4,013 Net Income 90 90 109 133 Tax 0 0 0 0 ST Debt 0 0 0 0 Minority Interest 0 0 0 0 Other Current Liabilities 57 64 49 42 Preference Dividend 0 0 0 0 LT Debt 1,124 1,126 1,146 1,561 Net Income After Tax 90 90 109 133 Other LT Liabilities 4 30 30 30 Total Return 90 90 109 133 Unit holders’ funds 1,662 1,780 1,780 2,380 Non-tax deductible Items 6 8 9 26 Minority Interests 0 0 0 0 Net Inc available for Dist. 96 99 118 159 Total Funds & Liabilities 2,848 3,000 3,004 4,013 Revenue Gth (%) 5.7 (3.0) 18.1 27.2 Non-Cash Wkg. Capital (50) (59) (41) (33) N Property Inc Gth (%) 5.0 (1.2) 17.9 29.2 Net Cash/(Debt) (1,108) (1,076) (1,094) (1,502) Net Inc Gth (%) 15.1 0.1 20.9 21.8 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 Cash Flow Statement (S$ m) Rates & Ratio

FY Mar 2011A 2012A 2013F 2014F FY Mar 2011A 2012A 2013F 2014F

Pre-Tax Income 90 90 109 133 Net Prop Inc Margins (%) 68.7 69.9 69.8 70.9 Dep. & Amort. 0 (13) 4 26 Net Income Margins (%) 49.2 50.8 52.0 49.8 Tax Paid 0 0 0 0 Dist to revenue (%) 52.5 55.6 56.2 59.7 Associates &JV Inc/(Loss) 0 0 0 0 Managers & Trustee’s fees 7.9 7.5 7.1 10.4 Chg in Wkg.Cap. 0 16 (13) (8) to sales (%) Other Operating CF 84 26 0 0 ROAE (%) 5.6 5.2 6.1 6.4 Net Operating CF 175 120 100 150 ROA (%) 3.2 3.1 3.6 3.8 Net Invt in Properties (830) (828) 0 (1,000) ROCE (%) 4.1 3.9 4.5 4.7 Other Invts (net) 0 0 0 0 Int. Cover (x) 5.3 5.4 5.9 5.7 Invts in Assoc. & JV 0 0 0 0 Current Ratio (x) 0.4 0.9 1.2 1.6 Div from Assoc. & JVs 0 0 0 0 Quick ratio (x) 0.4 0.9 1.2 1.6 Other Investing CF (1) 0 0 0 Aggregate Leverage (%) 39.5 37.5 38.1 38.9 Net Investing CF (831) (828) 0 (1,000) Z-Score (X) 1.3 1.3 1.3 1.2 Distribution Paid 0 (69) (118) (159) Operating CFPS (S cts) 9.4 5.6 6.0 6.7 Chg in Gross Debt (851) (713) 20 415 Free CFPS (S cts) (35.3) (38.0) 5.3 (35.9) New units issued 1,562 1,506 0 600 Other Financing CF (40) (18) 0 0 Net Financing CF 670 706 (98) 856 Currency Adjustments (20) 0 0 0 Chg in Cash (6) (2) 2 7 Quarterly / Interim Income Statement (S$ m) P/Book Value (x)

FY Mar 3Q2012 4Q2012 1Q2013 2Q2013

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Apr-11 Sep-11 Feb-12 Jul-12 Dec-12

Gross revenue 50 50 51 52 Property expenses (16) (14) (15) (15) Net Property Income 34 36 36 36 Other Operating expenses (4) (4) (4) (4) Other Non Opg (Exp)/Inc 0 0 0 0 Net Interest (Exp)/Inc (6) (6) (6) (6) Exceptional Gain/(Loss) 0 0 0 0 Net Income 25 27 27 26 Tax 0 0 0 0 Minority Interest 0 0 0 0 Net Income after Tax 25 27 27 26 Total Return 25 27 27 26 Non-tax deductible Items 2 2 2 2 Net Inc available for Dist. 27 29 29 29 Revenue Gth (%) 10 0 2 1 N Property Inc Gth (%) 6 6 0 2 Net Inc Gth (%) 8 9 0 0 Net Prop Inc Margin (%) 67.9 71.7 70.2 70.4 Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0 Source: Company, DBS Vickers

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: PAN SP | Reuters: PANU.SI

BUY S$0.85 STI : 3,208.50 Price Target : 12-Month S$ 1.02 (Prev S$ 0.80) Potential Catalyst: Better than expected construction demand DBSV vs Consensus: Higher on more bullish construction outlook Analyst Alfie YEO +65 6398 7957 [email protected] HO Pei Hwa +65 6398 7968 [email protected]

Price Relative

58

78

98

118

138

158

178

198

218

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Relative IndexS$

Pan-United Corporation (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Dec (S$ m) 2011A 2012F 2013F 2014F

Turnover 513 705 773 840 EBITDA 75 89 96 100 Pre-tax Profit 49 66 71 76 Net Profit 30 41 45 49 Net Pft (Pre Ex.) 30 39 45 49 EPS (S cts) 5.5 7.4 8.1 8.8 EPS Pre Ex. (S cts) 5.5 7.0 8.1 8.8 EPS Gth (%) 50 35 10 8 EPS Gth Pre Ex (%) 50 28 17 8 Diluted EPS (S cts) 5.4 7.3 8.1 8.7 Net DPS (S cts) 3.5 3.5 3.5 3.5 BV Per Share (S cts) 53.6 57.8 62.5 67.8 PE (X) 15.6 11.5 10.4 9.7 PE Pre Ex. (X) 15.6 12.2 10.4 9.7 P/Cash Flow (X) 8.4 10.4 5.2 6.3 EV/EBITDA (X) 6.7 5.8 5.0 4.6 Net Div Yield (%) 4.1 4.1 4.1 4.1 P/Book Value (X) 1.6 1.5 1.4 1.3 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 10.5 13.2 13.5 13.5 Earnings Rev (%): 0.0 8.7 7.7 Consensus EPS (S cts): 7.3 7.4 8.1 Other Broker Recs: B: 4 S: 0 H: 0 ICB Industry : Industrials ICB Sector: Industrial Transportation Principal Business: Diversified industrial group with interests in marine, port, shipping and industrial & trading across the Asia-Pacific region. Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 555 Mkt. Cap (S$m/US$m) 472 / 385 Major Shareholders Han Whatt Ng (%) 61.6 Bee Soon Ng (%) 4.2 Free Float (%) 34.2 Avg. Daily Vol.(‘000) 454

Thematic Report

Pan-United Corp

Buy for re-rating New MRT construction pipeline bodes well for

PAN’s long-term prospects

Competitive advantage will strengthen on stronger project pipeline, high entry barriers

Expect stock to re-rate ahead of construction peak in 2015

Maintain BUY with increased TP of S$1.02

Positive on construction sector from two new MRT

lines. The government has announced plans for two new MRT lines by 2030 – the Cross Island Line and the Jurong Regional Line. This is a boost to the construction industry as visibility is now lengthened to 2030. We favour PAN’s long-term prospects now that there is clearer visibility of pipeline projects into 2030. We believe PAN’s competitive advantage will strengthen on stronger project pipeline and high entry barriers

Accumulate for up-cycle, expect stock to re-rate. We advocate that investors’ position into construction stocks through PAN as it as a construction resource stock that is not seeing margin compression like contractors. Based on our analysis of the construction sector’s peak cycle and PAN’s historical valuations, we expect the constructor sector to peak in 2015 and PAN to re-rate before that. We have also increased our earnings growth outlook for FY13F/FY14F from 7% and 9% previously to 17% / 8% in anticipation of increased RMC sales towards 2015.

Maintain BUY with higher TP of S$1.02. We find PAN’s trading near average valuations at 10.4x FY13F earnings. In anticipation of a stock’s re-rating, we re-rate PAN’s Building Materials Business’s valuation from 7x to 10x in our SOTP valuation. Our TP of S$1.02 represents a valuation 12.6x FY13F earnings, reflecting our view that PAN can potentially re-rate to +1 SD of its mean before 2015. Maintain BUY for 20% upside.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Pan-United Corp

Page 31

New MRT construction pipeline bodes well for PAN’s long-term prospects Two more new MRT lines have been planned, construction industry’s visibility now lengthened till 2030. The government has announced plans for two new MRT lines by 2030. The two new lines that are planned will be the Jurong Regional Line and the Cross Island Line, both to be completed by 2025 and 2030 respectively, effectively doubling Singapore’s rail network from 178km today to 360km in 2030. This is a boost to the construction industry as visibility is now lengthened to 2030. We favour PAN’s long-term prospects – clearer visibility of pipeline projects. We hold the view that we prefer construction resources stocks as opposed to contractors due to margin pressure from competitive tender pricing and higher labour, equipment and material costs. As opposed to contractors, PAN is a market leader for Ready Mix Concrete (RMC) supply in the Singapore construction scene. It is a major RMC supplier to recent developments such as Singapore Sports Hub, Changi Airport Terminal 3, Downtown Line MRT project, LNG Terminal, PSA Port expansion, Jurong Hospital. We are confident that as a major supplier of RMC, PAN will be one of the clear beneficiaries to the new development. Visibility is now well beyond 2030, clearer as the previous pipeline for a an MRT line (excluding extensions) was planned up till 2025 for Circle Line stage 6.

PAN’s competitive advantage will strengthen on stronger project pipeline, high entry barriers Competitive advantage will strengthen on the demand side. We believe that PAN’s competitive advantage will strengthen. First we believe that PAN already enjoys a competitive advantage by being the largest RMC player in Singapore with >30% market share and therefore is more capable of ensuring reliable RMC supply to customers. Second, being a major supplier to various projects in Singapore, PAN’s operational scale will place it on the forefront of securing RMC supply contracts for the MRT lines’ construction. Higher entry barriers mean higher demand yet limited competition. There are five key players in Singapore’s cement market. Hong Leong Asia, Holcim, Alliance Concrete, Pan United and YTL. PAN already has a market share of >30% in the RMC business which means it will be more difficult to displace over smaller RMC operators. New entrants will require 1) waterfront sites for silos; 2) cement supply; 3) capability to deliver. New entrants are unable to build up considerable capability overnight to compete meaningfully with the larger players; 4) enjoy more operational efficiencies than smaller players and new entrants. We believe higher demand is to PAN’s benefit because high entry barriers will ensure competition remains limited.

MRT projects

Rail lines Length Stations Scheduled Completion Remarks

North-East Line 20 km 16 2003 Punggol to Harbourfront

Circle Line 1 & 2 11 km 11 2010 Dhoby Ghaut to Bartley

Circle Line 3 5.7 km 5 2009 Bartley to Marymount

Circle Line 4 & 5 16.6 km 12 2011 Marymount to Harbourfront

Circle Line extension 2.4 km 2 2012 Promenade to Marina Bay

Downtown Line 1 4.3 km 6 2013 Bugis to Chinatown

North-South Line extension 1 km 1 2014 Extension into Marina Bay Cruise Centre

Downtown Line 2 16.6 km 12 2015 Petir to Sim Lim

Tuas West extension 7.5 km 4 2016 Joo Koon to Tuas Link

Downtown Line 3 21 km 16 2017 Expo to Chinatown

Thomson Line 30 km 22 2018 Woodlands North to Gardens by the Bay

Eastern Region Line 21 km 12 2020 Changi to Marina Bay

Circle Line 6 4 km - 2025 Harbourfront to Marina Bay

Downtown Line ext. 2 km - 2025 Expo to Eastern Region Line

Jurong Regional Line 20 km n/a 2025

North-East Line extension 2 km n/a 2030

Cross Island Line 50 km n/a 2030

Source: LTA, DBS Vickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Pan-United Corp

Page 32

Position for construction up-cycle We recommend investors get into construction stocks through PAN. We classify PAN as a construction resource stock and advocate positioning for the construction upcycle via construction resources rather than contractors. PAN offers the following in comparison with contractor stocks: 1) Limited margin pressure as opposed to contractors who are facing labour, equipment, and raw materials cost pressures; 2) PAN which is an RMC supplier has the capability of supplying across different parts of the project to various contractors. This is unlike individual contractors which will have rights to construct certain parts of the rail infrastructure only if they successfully secure tenders; 3) RMC supply space is less competitive than the contractor space. There are a few large RMC suppliers as opposed to many qualified contractors/sub-contractors bidding for the same projects. Expect PAN to re-rate ahead of uptick in construction demand, strengthening competitive advantage. Our analysis of PAN’s valuation cycle through the past years shows that the stock is currently trending towards +1 SD valuations. PAN’s valuations have the tendency to re-rate and peak a year or two before the construction peaks. In 2006, PAN hit peak valuation of +2 SD leading the 2008 construction peak. Similarly, 2009’s peak valuations of +2 SD also lead the 2011 construction peak. PAN’s valuation cycles led upswings in construction demand

Source: Bloomberg, DBS Vickers

Construction activity may peak in 2015 and PAN may re-rate ahead of 2015 peak based on historical evidence. Our further analysis into the MRT construction projects suggests that we may see concurrent construction for five MRT lines at various stages – Thomson Line, Downtown Line stage 2; Downtown Line stage 3, Eastern Regional Line and Tuas Extension – in 2015. This could well imply that we could see another construction peak in 2015, prompting our view that PAN may re-rate from average valuations in the next two years. Along with stronger demand, we expect PAN’s competitive advantage to also strengthen for reasons explained in the previous section. PAN re-rated ahead of construction peaks in 2008 and 2011

Source: BCA, DBS Vickers Increase growth rate for FY13F/FY14F to 17% / 8% Expect RMC demand to gradually increase in anticipation of construction peak in 2015. We believe that construction peak could happen in 2015. In anticipation of this, we have revised our RMC sales outlook for PAN to reflect a steadily improving demand for RMC to up to 2015. Following a revision of RMC sales volumes by an average of 12% each from FY13F-FY14F, our (pre-exceptional items) growth rate for the stock is now increased to 17% / 8%, from 7% and 9% previously for FY13F/FY14F.

0

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15

20

25

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35

40

2001

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F

2013

F

S$

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ion

Private Sector

Public Sector

2

4

6

8

10

12

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16

18

Jan

-06

May

-06

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-06

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-07

Jul-

07

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-07

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-08

Oct

-08

Feb

-09

Jul-

09

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-10

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-10

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-11

Jul-

11

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-11

Ap

r-1

2

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-12

(x)

+1 sd

+2 sd

-1 sd

Avg

-2 sd

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Pan-United Corp

Page 33

Maintain Buy, TP raised to S$1.02 Bullish on near-term growth prospects and valuations. We had been bullish on PAN in CY2012 and the stock yielded an annual return of 101% from S$0.44 to S$0.85 today taking into account dividends of 3.5 Scents expected for FY12’s earnings. Following the announcement that two more MRT lines will be constructed by 2030, we now turn more bullish on PAN’s near-term prospects. We expect higher construction demand to drive RMC sales growth and in anticipation of a 2015 construction peak, we expect valuations to re-rate very soon. Targeting PAN’s valuation cycle to reach +1SD

Source: Bloomberg, DBS Vickers

Possibility of higher dividends in the next two years. PAN’s determines dividends to shareholders using absolute payout per share rather than employing a payout ratio. We note that PAN has paid dividends of 3.5 Scents per share in 2011 and anticipate that it can maintain at least 3.5 Scents dividend payout annually to shareholders. We have assumed and now maintain 3.5 Scents as the sustainable dividend payment in our forecasts. However, in anticipation of an improving earnings outlook environment, this will translate into a declining payout trend. Our payout ratio outlook for FY12F/FY13F/FY14F is 63%/43%/42%. Assuming management believes that the payout ratio can be sustained at 60%, dividend per share has the potential to be as high as 5 Scents per share, yielding 6% at the current stock price. Maintain BUY; higher TP of S$1.02 on based on SOTP valuation. We find PAN’s trading near average valuations (of 10x forward earnings) at 10.4x FY13F earnings. As we hold the view that 2015 will be another construction cycle’s peak and that PAN’s valuation tends to peak one to two years ahead of the construction cycle’s peak, we re-rate PAN’s Building Materials Business’s valuation from 7x to 10x in anticipation of the stock’s re-rating. Our TP of S$1.02 represents a valuation 12.6x FY13F earnings reflecting our view that PAN has the potential to re-rate to +1 SD of its mean before 2015. Maintain BUY for 20% upside.

Higher SOTP valuation of PAN – Re-rate Basic Building Materials business from 7x to 10x in anticipation of upcycle

Sum of parts

FY13F Net Profit (S$ m) Basis Remarks FY13F Value (S$ m) Prev Value (S$m)

Basic Building Material 33.1 10.0x P/E Prev 7x 331.2 207.7

Shipping 0.9 0.8x P/B 47.6 47.6

Port 11.2 7.0x P/E 78.3 70.9

Others* 1.0x P/B 91.5 91.5

Add cash/(debt) 18.1 18.1

Total value (S$ m) 45.0 566.7 435.8

Number of shares (m) 555 555

SOTP per share (S$) 1.02 0.78

Source: DBS Vickers

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Thematic Report

Pan-United Corp

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Income Statement (S$ m) Balance Sheet (S$ m)

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Turnover 513 705 773 840 Net Fixed Assets 272 282 290 299 Cost of Goods Sold (430) (596) (653) (713) Invts in Associates & JVs 5 6 8 10 Gross Profit 83 109 119 127 Other LT Assets 20 20 20 20 Other Opng (Exp)/Inc (31) (42) (47) (49) Cash & ST Invts 91 82 125 153 Operating Profit 52 67 73 77 Inventory 16 23 25 27 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 122 160 176 191 Associates & JV Inc 2 2 2 2 Other Current Assets 2 2 2 2 Net Interest (Exp)/Inc (4) (4) (4) (4) Total Assets 528 575 647 702 Exceptional Gain/(Loss) 0 2 0 0 Pre-tax Profit 49 66 71 76 ST Debt 0 0 0 0 Tax (11) (13) (15) (15) Other Current Liab 101 120 153 165 Minority Interest (8) (12) (11) (12) LT Debt 73 68 70 72 Preference Dividend 0 0 0 0 Other LT Liabilities 13 13 13 13 Net Profit 30 41 45 49 Shareholder’s Equity 298 320 345 374 Net Profit before Except. 30 39 45 49 Minority Interests 43 55 66 77 EBITDA 75 89 96 100 Total Cap. & Liab. 528 575 647 702 Sales Gth (%) 31.0 37.6 9.6 8.7 Non-Cash Wkg. Capital 39 65 50 55 EBITDA Gth (%) 34.0 18.8 8.1 4.8 Net Cash/(Debt) 18 14 55 81 Opg Profit Gth (%) 49.6 27.9 8.9 6.5 Net Profit Gth (%) 49.7 34.4 10.4 7.9 Effective Tax Rate (%) 22.0 20.2 20.9 20.4 Cash Flow Statement (S$ m) Rates & Ratio

FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F

Pre-Tax Profit 49 66 71 76 Gross Margins (%) 16.1 15.5 15.4 15.1 Dep. & Amort. 21 20 22 21 Opg Profit Margin (%) 10.2 9.4 9.4 9.2 Tax Paid (4) (8) (13) (15) Net Profit Margin (%) 5.9 5.8 5.8 5.8 Assoc. & JV Inc/(loss) (2) (2) (2) (2) ROAE (%) 10.5 13.2 13.5 13.5 Chg in Wkg.Cap. (9) (32) 14 (6) ROA (%) 6.0 7.4 7.4 7.2 Other Operating CF 0 0 0 0 ROCE (%) 9.5 12.0 12.1 11.9 Net Operating CF 56 45 91 75 Div Payout Ratio (%) 64.1 47.4 43.0 39.8 Capital Exp.(net) (17) (30) (30) (30) Net Interest Cover (x) 12.0 15.2 19.2 22.0 Other Invts.(net) 1 0 0 0 Asset Turnover (x) 1.0 1.3 1.3 1.2 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 76.3 73.0 79.3 79.6 Div from Assoc & JV 2 0 0 0 Creditors Turn (avg days) 63.7 58.7 66.4 72.1 Other Investing CF 4 0 0 0 Inventory Turn (avg days) 13.5 12.3 13.9 13.9 Net Investing CF (9) (30) (30) (30) Current Ratio (x) 2.3 2.2 2.1 2.3 Div Paid (17) (19) (19) (19) Quick Ratio (x) 2.1 2.0 2.0 2.1 Chg in Gross Debt (30) (5) 2 2 Net Debt/Equity (X) CASH CASH CASH CASH Capital Issues 0 0 0 0 Net Debt/Equity ex MI (X) CASH CASH CASH CASH Other Financing CF (3) 0 0 0 Capex to Debt (%) 22.6 44.0 42.8 41.6 Net Financing CF (50) (24) (17) (17) Z-Score (X) 3.7 3.9 3.6 3.6 Currency Adjustments (1) 0 0 0 N. Cash/(Debt)PS (S cts) 3.2 2.5 10.0 14.6 Chg in Cash (3) (9) 43 27 Opg CFPS (S cts) 11.7 13.9 13.9 14.6 Free CFPS (S cts) 7.1 2.8 11.0 8.1 Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Key Assumptions

FY Dec 4Q2011 1Q2012 2Q2012 3Q2012 FY Dec 2011A 2012F 2013F 2014F

Turnover 145 162 182 185 Revenues (S$ m) Cost of Goods Sold (123) (137) (153) (156) Port 59 67 66 68 Gross Profit 22 25 28 29 Shipping 21 28 28 26 Other Oper. (Exp)/Inc (9) (10) (11) (10) Basic Building Materials 433 611 679 746 Operating Profit 12 15 17 18 Others 0 0 0 0 Other Non Opg (Exp)/Inc 0 0 0 0 Associates & JV Inc 0 0 0 0 Total 513 705 773 840 Net Interest (Exp)/Inc (1) (1) (1) (1) Net Profit Ex EI (S$ m) Exceptional Gain/(Loss) 0 0 2 0 Port 9 8 10 7 Pre-tax Profit 12 14 19 17 Shipping (6) (2) 1 2 Tax (3) (3) (4) (3) Basic Building Materials 28 25 33 36 Minority Interest (2) (2) (2) (2) Others (1) 0 1 1 Net Profit 7 10 13 12 Net profit bef Except. 7 10 11 12 Total 30 31 45 46 EBITDA 21 21 23 24 Net Profit Ex EI Margins Port 15.0 12.5 15.5 10.9 Sales Gth (%) 6.0 11.8 12.0 1.8 Shipping (27.1) (7.1) 3.4 6.5 EBITDA Gth (%) (3.5) (0.1) 10.2 4.6 Basic Building Materials 6.4 4.1 4.9 4.8 Opg Profit Gth (%) (12.9) 20.6 14.6 6.2 Net Profit Gth (%) (23.5) 42.8 38.6 (12.4) Gross Margins (%) 15.0 15.3 15.5 15.5 Total 5.9 4.4 5.9 5.4 Opg Profit Margins (%) 8.5 9.2 9.4 9.8 Key Assumptions Net Profit Margins (%) 4.6 5.9 7.3 6.3 RMC sales volume (m3) 3,358.8 4,557.7 5,236.0 5,753.0 RMC prices (S$ / m3) 108.8 110.4 114.4 115.8 Source: Company, DBS Vickers

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*This Equity Explorer report represents a preliminary assessment of the subject company, and does not represent initiation into DBSV’s coverage universe. As such DBSV does not commit to regular updates on an ongoing basis. The rating system is distinct from stocks in our regular coverage universe and is explained further on the back page of this report.

www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

NOT RATED S$0.235 STI : 3,208.50 Return *: 1 Risk: Moderate Potential Target * : 12-Month S$ 0.29 (23% upside) Analyst LING Lee Keng +65 6398 7970 [email protected]

Price Relative

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Relative IndexS$

Sin Heng Heavy (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Jun (S$ m) 2012A 2013F 2014F 2015F

Turnover 129 151 177 206 EBITDA 21 24 28 33 Pre-tax Profit 10 12 14 17 Net Profit 9 10 12 14 Net Pft (Pre Ex.) 9 10 12 14 EPS (S cts) 2.0 2.2 2.6 3.1 EPS Pre Ex. (S cts) 2.0 2.2 2.6 3.1 EPS Gth (%) 16 7 19 19 EPS Gth Pre Ex (%) 16 7 19 19 Diluted EPS (S cts) 2.0 2.2 2.6 3.1 Net DPS (S cts) 1.0 0.4 0.5 0.6 BV Per Share (S cts) 19.9 21.6 23.7 26.2 PE (X) 11.5 10.7 9.0 7.6 PE Pre Ex. (X) 11.5 10.7 9.0 7.6 P/Cash Flow (X) 3.9 9.1 5.0 4.1 EV/EBITDA (X) 6.7 5.7 4.5 3.5 Net Div Yield (%) 4.3 1.9 2.2 2.6 P/Book Value (X) 1.2 1.1 1.0 0.9 Net Debt/Equity (X) 0.3 0.3 0.2 0.1 ROAE (%) 10.6 10.6 11.5 12.4 Consensus EPS (S cts): - - Other Broker Recs: B: 0 S: 0 H: 0 ICB Industry : Industrials ICB Sector: Industrial Engineering Principal Business: Rental and trading of cranes, aerial lifts and other heavy lifting equipment.

At A Glance Issued Capital (m shrs) 459 Mkt. Cap (S$m/US$m) 108 / 88.2 Major Shareholders TTC Corp (%) 28.1 Toyota Tsusho Corp (%) 26.9 Free Float (%) 45 Avg. Daily Vol.(‘000) 3,972

Source of all data: Company, DBS Vickers, Bloomberg

DBS Group Research . Equity 18 Jan 2013

Singapore Equity Explorer

Sin Heng Heavy Bloomberg: SHHM SP | Reuters: SHHM.SI

Rising crane • More than 40 years of experience in rental and

trading of cranes and aerial lifts

• Expansion into new markets for better exposure and opportunities

• Healthy demand in Singapore, supported by strong pipeline of projects

• Fair Value of S$0.29 offers 23% potential upside

The Business More than 40 years of operating history. Sin Heng has >40 years of experience in providing rental and trading of cranes, aerial lifts and other heavy lifting equipment. Its customers are mainly in infrastructure and construction, offshore and marine as well as oil and gas industries.

Exploring new markets. The business alliance with Toyota Tsusho Corporation enables the company to have access to a wider marketplace, and also to expand its product portfolio. Sin Heng’s JV company in Myanmar could present abundant business opportunities. It also has a presence in Malaysia, Indonesia and Vietnam.

Healthy demand in Singapore. Crane demand is expected to be strong in Singapore, supported by a strong pipeline of construction and civil engineering projects.

The Stock PE near historical average and peer. The stock currently trades near its average historical PE since listing in Feb 2010, and also in line with its peer, Tat Hong. We believe 11x FY14F PE valuation, slightly below Tat Hong, is fair, on the premise that though it is much smaller in size, the company is expanding in the region, which offers more growth opportunities. Fair value works out to S$0.29 per share, which translates to a potential upside of 23% from the current price.

Key risks for Sin Heng are mainly related to macro risks, in particular slowdown in economies where it has a presence.

SMC Research

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Sin Heng Heavy

Page 37

REVENUE DRIVERS

More than 40 years of operating history. Sin Heng has more than 40

years of experience in the rental and trading of cranes, aerial

lifts and other heavy lifting equipment. The equipment rental

segment contributed 63% to FY12 gross profit while the trading

segment accounted for the balance 38%.

Rental business key growth driver. Gross profit contribution from

the equipment rental segment has been increasing from 30% to

40% previously to >60% of total gross profit. This unit also

commands higher gross margins, compared to the Trading unit. Sin

Heng’s comprehensive fleet of cranes and aerial lifts allows it to

offer complete lifting solutions to customers. The rental segment

will be the key earnings driver, and this segment is relatively more

stable when compared to the volatile nature of the Trading

segment. Current rental rate has increased about 30% y-o-y due to

the supply shortage in the industry.

Reputable distributor of new and used cranes. Sin Heng has built up

an excellent reputation in providing reliable used cranes over the

past 20 over years, mainly due to its established relationships with

its suppliers and strong track record of providing used cranes in

good working condition after reconditioning and refurbishing. Sin

Heng has been awarded the dealership rights for the sale and

distribution of cranes and spare parts for Kobelco, one of the

world’s top crane manufacturers. It is also the authorised distributor

for Kato, one of the world’s leading hydraulic crane manufacturers,

to deal in new cranes and spare parts in Indonesia, Brunei and

Malaysia.

COST STRUCTURE

Wages is main cost component. Staff cost, including for crane

operators, accounts for the bulk, c.30% - 40%, of total costs, while

depreciation accounts for 20% to 30%. Maintenance cost is lower

at 20% of total costs, as most of its cranes are relatively new.

KEY OPERATING ASSETS

Fleet of 159 cranes and 198 aerial lifts. Sin Heng currently has 159

cranes and 198 aerial lifts. The bulk of the cranes are crawler cranes,

widely used for construction projects, and rough terrain cranes

which are highly suitable for shipyards and petrochemical plants.

The aerial lifts provide temporary access for personnel or equipment

to inaccessible areas, usually at a height.

High utilisation rates. The utilisation rate for Sin Heng’s cranes for

both local and overseas projects is high, at >90% for projects in

Singapore and about 80% to 90% for overseas projects, despite the

increase in fleet.

Young fleet. The average life span of a crane is about 25 years but

Sin Heng strives to maintain a young fleet with an average life span

of about eight years. This enables the group to qualify to tender for

bigger projects, which tend to have more stringent requirements.

Chart 1 : FY12 Revenue Breakdown By Region

Source: DBS Vickers, company Chart 2: Gross Profit and Gross Margins

Source: DBS Vickers, company Table 1: Capacity and usage of cranes

Cranes Crawler All Terrain Rough

Terrain Truck

Capacity 5-450 tons 100-500 tons 7-80 tons 50-160 tons Usage Construct’n Infrastructure Shipyards,

Petrochem Infrastructure

Aerial Lifts Boom Lifts Scissor Lifts Capacity 12-45.7m 6-12m Usage Wide usage Wide usage

Source: DBS Vickers, company

Table 2: Fleet of Cranes and Aerial lifts

Source: DBS Vickers, company

Singapore49%

Indonesia33%

Middle East0%

Malaysia10%

Vietnam2%

India1%

Brunei1% Others

4%

5.08.9

12.79.6 11.0 12.8

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10%

15%

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25%

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FY07 FY08 FY09 FY10 FY11 FY12

Rental Trading Gross margins

2007 2008 2009 2010 2011 2012Aggregate crane lifting capacity (tons) 4,703 5,857 7,662 9,200 12,071 15,253

Average crane lifting capacity (tons) 81 108 114 121 113 96Cranes (units) 58 54 67 76 107 159Aerial Lifts (units) 72 174 187 185 149 198

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Sin Heng Heavy

Page 38

GROWTH PROSPECTS

Going regional. Sin Heng has formed a business alliance with Toyota

Tsusho Corporation (TTC), a member of Toyota Motor Group, with

TTC acquiring a 27% stake in Sin Heng. This will enable Sin Heng to

have access to a wider marketplace, leveraging on TTC’s marketing

network, subsidiaries and other resources. Sin Heng should also be

able to expand its product portfolio and enjoy speedier access to a

wider Japanese customer base.

Spreading its wings in Asia. Sin Heng has formed a JV company to

enter Myanmar, where ongoing political and economic reforms

could present abundant business opportunities. Going forward,

Myanmar is expected play a significant part in Sin Heng’s expansion

plan. Sin Heng has also established its presence in Malaysia, Vietnam

and Indonesia. Its Kato distributorship agreement for Indonesia

announced in Jul 12 puts the group in a strong position to tap on

the development in Indonesia.

Contributions from overseas have increased to 51.4% of total

revenue, from 45.7% in FY11. Thus, Sin Heng will not have to

depend heavily on the local market. Margins from overseas are also

higher as cost is generally lower.

Tight crane supply to stay. The supply constraint situation is

expected to last for another two years. Demand for cranes,

especially for the offshore market and infrastructure segment

remains strong but the supply of cranes is limited, especially for five-

year old crane as there were hardly any cranes purchased during the

2007-08 financial crisis.

Buoyant offshore market; healthy demand in Singapore. About

20% of its customers are from the Offshore & Marine and Oil & Gas

industries, where the outlook is buoyant, spurred by increasing

exploration and production (E&P) spending. Crane demand is

expected to be strong in Singapore, supported by a strong pipeline

of construction and civil engineering projects. Close to 50% of

revenue in FY12 were derived from Singapore. The Building and

Construction Authority (BCA) expects demand to hit S$26-32bn this

year through a strong pipeline of public sector projects, vs about

S$28.1bn last year.

MANAGEMENT & STRATEGY

Experienced management team. At the helm of Sin Heng are Tan

Cheng Soon Don, Tan Cheng Guan and Tan Cheng Kwong, the

sons of the founder, each with more than 17 years of experience in

the equipment rental and trading business. The three siblings have

been well-trained, working their way up from junior positions, such

as crane operators, to management positions.

Tapping on Toyota Group’s expertise. With TTC on board, Sin Heng

will gain valuable insights into the “Toyota Method”, and tap on the

expertise of the Toyota Group, to better its efficiency in its day to

day business operations, client relations and other business aspects.

Table 3: Key Competitors Sin Heng Tiong Woon* Tat Hong No. of cranes 159 376 >1200 Haulage Equipt. - 208 n.a. Aerial Lifts 198 - n.a.

*as at end Jun 2012 Source: DBS Vickers, company

Table 4: Key Management Team Name Key Responsibilities Tan Cheng Soon Don, Managing Director

Mr Tan joined in 1989 and worked his way up to Managing Director in Aug 08. Mr Tan is responsible for overall strategy, management and operations of the company. He also heads the crane rental business unit. Mr Tan has more than 20 years experience in rental and trading of cranes and other heavy equipment.

Tan Cheng Guan, Exec. Director

Mr Tan joined in 1993 and worked his way up to his current position of Executive Director. Mr Tan is the head of the crane trading business. Mr Tan has 19 years of experience in rental and trading of cranes and other heavy lifting equipment. Mr Tan is also in charge of the maintenance service team.

Tan Cheng Kwong, Exec. Director

Mr Tan joined in 1995 and worked his way up to his current position of Executive Director. He heads the aerial lift business and in charge of the management and operation of Sin Heng Aerial Lifts. Mr Tan has 17 years experience in the equipment rental and trading business.

Source: DBS Vickers, company

Table 5: Management Remuneration Structure Remuneration Bands Salary Bonus Other

benefits Fees Total

Executive Directors: S$500,001 to S$1,000,000 Tan Cheng Soon Don 64% 22% 9% 5% 100% Tan Cheng Guan 64% 20% 10% 6% 100% Tan Cheng Kwong 66% 21% 7% 6% 100% Up to S$250,000 Hiroshi Takahashi - - - 100% 100% Hideki Okada - - - 100% 100% Non-Executive Directors: Up to S$250,000 Derrick Lee Meow Chan

0% 0% 0% 100% 100%

Leong Wing Kong 0% 0% 0% 100% 100% Teo Yi-Dar 0% 0% 0% 100% 100% Yeo Yun Seng, Bernard

0% 0% 0% 100% 100%

Tan Keh Yan, Peter 0% 0% 0% 100% 100% Renny Yeo Ah Kiang 0% 0% 0% 100% 100% Kuniyoshi Furukawa 0% 0% 0% 100% 100%

Source: DBS Vickers, company

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Sin Heng Heavy

Page 39

Key Assumptions FY Jun 2010A 2011A 2012A 2013F 2014F 2015F

Revenue Growth Rental -3% 3% 20% 22% 20% 20% Trading 1% -30% 21% 15% 15% 15% Segmental Breakdown FY Jun 2010A 2011A 2012A 2013F 2014F 2015F

Revenues (S$ m) Rental 33 33 40 49 59 70 Trading 104 74 89 102 118 135 Total 137 107 129 151 177 206 Gross profit (S$ m) Rental 10 11 13 16 19 23 Trading 13 6 8 9 10 12 Total 23 17 20 25 29 35 Gross profit Margins (%) Rental 29.4 32.8 32.0 33.0 33.0 33.0 Trading 12.8 8.1 8.5 8.5 8.5 8.5 Total 16.8 15.8 15.8 16.4 16.7 16.9 Income Statement (S$ m) FY Jun 2010A 2011A 2012A 2013F 2014F 2015F

Revenue 137 107 129 151 177 206 Cost of Goods Sold (114) (90) (109) (127) (147) (171) Gross Profit 23 17 20 25 29 35 Other Opng (Exp)/Inc (8) (7) (9) (12) (14) (17) Operating Profit 15 10 11 13 15 18 Other Non Opg (Exp)/Inc 0 0 0 0 0 0 Associates & JV Inc 1 1 1 1 1 1 Net Interest (Exp)/Inc (1) (1) (2) (2) (2) (2) Exceptional Gain/(Loss) 0 0 0 0 0 0 Pre-tax Profit 15 10 10 12 14 17 Tax (2) (2) (1) (2) (2) (3) Minority Interest 0 0 0 0 0 0 Preference Dividend 0 0 0 0 0 0 Net Profit 12 8 9 10 12 14 Net Profit before Except. 12 8 9 10 12 14 EBITDA 25 18 21 24 28 33 Growth Revenue Gth (%) (0.2) (21.8) 20.8 17.2 16.6 16.7 EBITDA Gth (%) (23.8) (29.4) 15.0 17.6 16.4 16.7 Opg Profit Gth (%) (43.6) (28.9) 5.4 19.1 17.2 17.6 Net Profit Gth (%) (44.2) (34.2) 16.5 7.4 18.6 18.9 Margins & Ratio Gross Margins (%) 16.8 15.8 15.8 16.4 16.7 16.9 Opg Profit Margin (%) 10.7 9.7 8.5 8.6 8.6 8.7 Net Profit Margin (%) 9.0 7.6 7.3 6.7 6.8 6.9 ROAE (%) 16.4 9.5 10.6 10.6 11.5 12.4 ROA (%) 10.8 5.6 5.4 5.1 5.6 6.2 ROCE (%) 12.2 7.5 7.9 7.5 8.3 9.1 Div Payout Ratio (%) 37.4 56.9 48.9 20.0 20.0 20.0 Net Interest Cover (x) 18.3 8.7 6.3 7.5 8.8 10.3 Source: Company, DBS Vickers

Sensitivity Analysis 2013 Revenue growth +5% EBIT +3.5%

Margins Trend

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

2011A 2012A 2013F 2014F 2015F

Operating Margin % Net Income Margin %

Growth in revenue from overseas markets and robust infrastructure and construction projects in Singapore.

Improvement in margins due to higher contribution from overseas markets, where costs are generally lower.

Dividend payout ratio of at least 20%, as stated in IPO prospectus

Income tax credit received

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Sin Heng Heavy

Page 40

Balance Sheet (S$ m) FY Jun 2010A 2011A 2012A 2013F 2014F 2015F

Net Fixed Assets 77 92 126 125 123 119 Invts in Associates & JVs 2 5 6 6 7 8 Other LT Assets 2 1 3 3 3 3 Cash & ST Invts 23 19 15 15 24 38 Inventory 9 8 10 12 14 16 Debtors 16 30 30 41 48 56 Other Current Assets 2 3 2 2 2 2 Total Assets 131 157 191 204 221 242 ST Debt 10 13 20 20 20 20 Other Current Liab 22 36 49 53 61 70 LT Debt 11 15 24 24 24 24 Other LT Liabilities 5 6 7 7 7 7 Shareholder’s Equity 84 87 91 99 109 120 Minority Interests 0 0 0 0 0 0 Total Cap. & Liab. 131 157 191 204 221 242 Non-Cash Wkg. Capital 5 4 (7) 1 3 4 Net Cash/(Debt) 2 (9) (29) (29) (20) (6) Debtors Turn (avg days) 38.3 77.7 84.8 85.7 92.0 92.9 Creditors Turn (avg days) 31.5 103.8 134.4 139.5 134.9 134.8 Inventory Turn (avg days) 33.2 36.8 32.3 34.2 35.3 35.3 Asset Turnover (x) 1.2 0.7 0.7 0.8 0.8 0.9 Current Ratio (x) 1.6 1.2 0.8 0.9 1.1 1.2 Quick Ratio (x) 1.2 1.0 0.7 0.8 0.9 1.0 Net Debt/Equity (X) CASH 0.1 0.3 0.3 0.2 0.1 Net Debt/Equity ex MI (X) 0.0 0.1 0.3 0.0 0.2 0.1 Capex to Debt (%) 44.3 35.6 74.5 22.8 22.8 22.8 Z-Score (X) NA NA NA NA NA NA Cash Flow Statement (S$ m) FY Jun 2010A 2011A 2012A 2013F 2014F 2015F

Pre-Tax Profit 15 10 10 12 14 17 Dep. & Amort. 10 7 9 11 12 14 Tax Paid (1) (1) (1) (1) (2) (2) Assoc. & JV Inc/(loss) (1) (1) (1) (1) (1) (1) Chg in Wkg.Cap. (15) (22) 11 (9) (2) (2) Other Operating CF 0 0 0 0 0 0 Net Operating CF 7 (6) 27 12 22 27 Capital Exp.(net) (9) (10) (33) (10) (10) (10) Other Invts.(net) 0 0 0 0 0 0 Invts in Assoc. & JV 0 0 0 0 0 0 Div from Assoc & JV 0 0 0 0 0 0 Other Investing CF 0 0 0 0 0 0 Net Investing CF (9) (9) (33) (10) (10) (10) Div Paid (17) (5) (5) (2) (2) (3) Chg in Gross Debt 8 4 (2) 0 0 0 Capital Issues 22 0 0 0 0 0 Other Financing CF 3 0 0 0 0 0 Net Financing CF 15 (1) (6) (2) (2) (3) Currency Adjustments 0 0 0 0 0 0 Chg in Cash 14 (17) (12) 0 9 14 Opg CFPS (S cts) 4.9 3.4 3.7 4.6 5.2 6.1 Free CFPS (S cts) (0.4) (3.6) (1.1) 0.4 2.5 3.6 Source: Company, DBS Vickers

Asset Breakdown (2013)

Debtors - 19.3%

Inventory - 5.2%

Bank, Cash and Liquid

Assets - 12.2%

Assocs'/JVs 3.3%

Net Fixed Assets - 60.0%

Capital Expenditure

0

5

10

15

20

25

30

35

2011A 2012A 2013F 2014F 2015F

Capital Expenditure (-)

Expect Sin Heng to increase its fleet of cranes and aerial lifts as it expands into new markets.

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Equity Explorer

Sin Heng Heavy

Page 41

Quarterly / Interim Income Statement (S$ m) FY Jun 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013

Revenue 34 32 32 27 39 43 Cost of Goods Sold (32) (27) (28) (22) (32) (36) Gross Profit 5 5 4 4 7 7 Other Oper. (Exp)/Inc (2) (3) (2) (2) (3) (3) Operating Profit 3 2 2 2 4 4 Other Non Opg (Exp)/Inc 0 0 0 0 0 0 Associates & JV Inc 0 0 0 0 1 0 Net Interest (Exp)/Inc 0 0 0 0 0 (1) Exceptional Gain/(Loss) 0 0 0 0 0 0 Pre-tax Profit 3 2 2 2 4 4 Tax 0 0 1 0 (1) (1) Minority Interest 0 0 0 0 0 0 Net Profit 3 2 3 1 4 3 Net profit bef Except. 3 2 3 1 4 3 EBITDA 6 6 6 6 7 8 Growth Revenue Gth (%) 25.6 (6.7) 1.1 (17.1) 45.5 11.1 EBITDA Gth (%) (8.2) 11.5 3.9 (3.9) 13.6 20.3 Opg Profit Gth (%) 60.4 (34.4) 19.9 (12.4) 97.9 1.1 Net Profit Gth (%) 127.0 (44.6) 62.7 (46.2) 171.0 (13.1) Margins Gross Margins (%) 15.5 15.0 13.4 16.2 18.1 16.8 Opg Profit Margins (%) 9.2 6.5 7.7 8.1 11.0 10.0 Net Profit Margins (%) 8.5 5.0 8.1 5.2 9.7 7.6 Source: Company, DBS Vickers

Revenue Trend

0

5

10

15

20

25

30

35

40

45

2Q

201

0

3Q

201

0

4Q

201

0

1Q

201

1

2Q

201

1

3Q

201

1

4Q

201

1

1Q

201

2

2Q

201

2

3Q

201

2

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Revenue Revenue Growth % (QoQ)

VALUATIONS

Trading near historical average valuations. The stock currently trades

near its average historical PE since listing in Feb 2010, and also its

bigger peer, Tat Hong. The share price shot up to near +2SD back in

early April last year, on news that the company was entering

Myanmar. We believe 11x FY14F PE valuation, slightly below Tat

Hong, is fair, on the premise that though it is much smaller in size,

the company is expanding in the region, which offers more growth

opportunities. Fair value works out to S$0.29 per share, which

translates to a potential upside of 23% from the current price.Net

gearing is also relatively low, at 0.3x.

Risk Assessment: Moderate Category Risk Rating Wgt Wgtd Score

1 (Low) - 3 (High) Earnings 2 40% 0.8 Financials 1 20% 0.2 Shareholdings 1 40% 0.4 Overall 1.4

Past problems. In FY10 and FY11, Sin Heng’s equipment rental and

trading businesses faced several challenges, including fewer major

projects in Singapore, softer equipment rental rates and cautious

customers’ buying sentiment. Coupled with unforeseen events such

as the earthquake and tsunami in Japan that caused delays in

shipments and affected the supply of cranes, Sin Heng’s bottomline

was affected, with net profit declining 44% and 34% respectively.

Earnings have since bottomed out in FY12.

Chart 3: Historical 12 month forward PE ratio (x)

Table 6: Peers’ Comparisons Source: DBS Vickers, Bloomberg

4

6

8

10

12

14

Aug

-10

Oct

-10

Dec

-10

Feb-

11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug

-12

Oct

-12

Dec

-12

+2SD

+1SD

Avg

-1SD

Name FYE

Market Cap

(S$m) Price PE FY1 PE FY2

Act. Net Profit (S$m)

Net Profit Margin

(%)Div Yld

(%)

Tiong Woon Jun-12 132.4 S$0.29 n.a. n.a. (4.8) -3.2 n.a.

Tat Hong Mar-12 777.3 S$1.37 11.1 9.7 719.8 5.9 1.7

Hiap Tong Mar-12 38.7 S$0.15 n.a. n.a. 27.1 10.1 3.3

Average 11.1 9.7

Sin Heng Jun-12 110.3 S$0.24 10.9 9.2 9.4 7.3 4.2

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Page 42

www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: TAT SP | Reuters: TAT.SI

BUY S$1.44 STI : 3,208.50 Price Target : 12-month S$ 1.80 Potential Catalyst: Higher utilisation and rental rates DBSV vs Consensus: Higher on more optimistic capex expansion Analyst Alfie YEO +65 6398 7957 [email protected] HO Pei Hwa +65 6398 7968 [email protected]

Price Relative

52

72

92

112

132

152

172

192

212

0.5

0.7

0.9

1.1

1.3

1.5

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Relative IndexS$

Tat Hong (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Mar (S$ m) 2012A 2013F 2014F 2015F

Turnover 720 895 1,004 1,122 EBITDA 151 206 233 259 Pre-tax Profit 58 107 138 160 Net Profit 42 73 97 112 Net Pft (Pre Ex.) 46 73 97 112 EPS (S cts) 7.4 12.7 16.8 19.5 EPS Pre Ex. (S cts) 8.0 12.7 16.8 19.5 EPS Gth (%) 63 72 32 16 EPS Gth Pre Ex (%) 76 59 32 16 Diluted EPS (S cts) 7.4 12.0 15.0 17.4 Net DPS (S cts) 2.5 2.5 2.5 2.5 BV Per Share (S cts) 97.7 108.9 121.5 136.5 PE (X) 19.4 11.3 8.6 7.4 PE Pre Ex. (X) 18.0 11.3 8.6 7.4 P/Cash Flow (X) 7.9 13.3 7.9 5.0 EV/EBITDA (X) 8.2 5.9 5.1 4.3 Net Div Yield (%) 1.7 1.7 1.7 1.7 P/Book Value (X) 1.5 1.3 1.2 1.1 Net Debt/Equity (X) 0.6 0.4 0.4 0.2 ROAE (%) 7.9 11.7 13.1 13.6 Earnings Rev (%): - - - Consensus EPS (S cts): 12.3 14.6 16.0 Other Broker Recs: B: 8 S: 0 H: 0 ICB Industry : Industrials ICB Sector: Industrial Engineering Principal Business: Heavy equipment distributor and crane rental company.

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 568 Mkt. Cap (S$m/US$m) 818 / 668 Major Shareholders Chew Cheng & Sons (%) 44.7 Ng Chwee Cheng (%) 9.8 Free Float (%) 45.5 Avg. Daily Vol.(‘000) 788

Thematic Report

Tat Hong

Strong growth outlook • 32% FY14F growth forecast driven by regional

construction demand

• Robust crane rental outlook supports rising crane utilisation, rental rates and growth

• BUY with TP of S$1.80 Growth momentum will be strong driven by regional construction demand. We believe growth momentum will remain strong for TAT in FY14F/FY15F. TAT operates in an environment of rising crane demand on the back of robust regional construction outlook. With crane rental demand outpacing crane supply, utilisation and rental rates will therefore be buoyant in our view. TAT’s crane fleet expansion of c.165 cranes in FY13F thus validates our view, positioning itself to exploit the strong rental demand situation for the next two years. We see construction demand coming from Malaysia and Thailand, where infrastructure spending is expected to be strong, including MRT construction projects and oil & gas projects. In Singapore, the S$18b Thomson MRT Line is expected to commence construction this year.

Growth is fundamentally supported by rising utilisation and crane rental rates. We believe strong crane rental demand and tight crane supply in the market will drive near term utilisation and crane rental rates higher. We see fleet utilisation reaching 80% by FY15F and rates trending 16% higher by FY15F. Our strong growth outlook in FY14F/FY15F at 32%/16% reflects these trends.

Maintain BUY, TP S$1.80. TAT has rallied 39% from S$1.04 following our upgrade on 14 August last year. Our TP (fully diluted for its Redeemable Convertible Preference Shares) is S$1.80 based on a 12x FY14F PE. Maintain BUY for 25% upside.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Thematic Report

Tat Hong

Page 43

Income Statement (S$ m) Balance Sheet (S$ m) FY Mar 2012A 2013F 2014F 2015F FY Mar 2012A 2013F 2014F 2015F

Turnover 720 895 1,004 1,122 Net Fixed Assets 765 766 758 715 Cost of Goods Sold (457) (557) (614) (682) Invts in Associates & JVs 66 76 86 97 Gross Profit 263 338 390 441 Other LT Assets 56 56 56 56 Other Opng (Exp)/Inc (182) (220) (243) (273) Cash & ST Invts 77 71 92 202 Operating Profit 81 118 147 168 Inventory 234 298 335 374 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 185 224 251 281 Associates & JV Inc 1 10 10 11 Other Current Assets 0 0 0 0 Net Interest (Exp)/Inc (21) (21) (19) (19) Total Assets 1,383 1,491 1,577 1,724 Exceptional Gain/(Loss) (3) 0 0 0 Pre-tax Profit 58 107 138 160 ST Debt 174 119 119 119 Tax (22) (25) (30) (35) Other Current Liab 309 323 317 356 Minority Interest 6 (9) (11) (13) LT Debt 282 282 282 282 Preference Dividend 0 0 0 0 Other LT Liabilities 20 20 20 20 Net Profit 42 73 97 112 Shareholder’s Equity 556 697 777 873 Net Profit before Except. 46 73 97 112 Minority Interests 42 51 62 75 EBITDA 151 206 233 259 Total Cap. & Liab. 1,383 1,491 1,577 1,724 Sales Gth (%) 23.2 24.4 12.2 11.8 Non-Cash Wkg. Capital 110 199 268 299 EBITDA Gth (%) 29.9 36.0 13.4 10.8 Net Cash/(Debt) (379) (330) (309) (200) Opg Profit Gth (%) 41.4 45.4 25.3 13.9 Net Profit Gth (%) 62.8 73.1 32.1 15.8 Effective Tax Rate (%) 37.1 23.2 22.0 22.0 Cash Flow Statement (S$ m) Rates & Ratio FY Mar 2012A 2013F 2014F 2015F FY Mar 2012A 2013F 2014F 2015F

Pre-Tax Profit 58 107 138 160 Gross Margins (%) 36.5 37.8 38.9 39.2 Dep. & Amort. 70 79 77 81 Opg Profit Margin (%) 11.2 13.1 14.7 15.0 Tax Paid (12) (11) (25) (30) Net Profit Margin (%) 5.9 8.2 9.6 10.0 Assoc. & JV Inc/(loss) (1) (10) (10) (11) ROAE (%) 7.9 11.7 13.1 13.6 Chg in Wkg.Cap. (41) (103) (75) (35) ROA (%) 3.3 5.1 6.3 6.8 Other Operating CF 31 0 0 0 ROCE (%) 4.9 8.1 9.5 10.0 Net Operating CF 104 62 105 164 Div Payout Ratio (%) 33.7 21.9 16.5 14.3 Capital Exp.(net) (82) (80) (69) (39) Net Interest Cover (x) 3.8 5.7 7.6 8.8 Other Invts.(net) 0 0 0 0 Asset Turnover (x) 0.6 0.6 0.7 0.7 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 83.7 83.3 86.3 86.4 Div from Assoc & JV 2 0 0 0 Creditors Turn (avg days) 210.5 227.3 198.7 184.2 Other Investing CF 4 0 0 0 Inventory Turn (avg days) 204.7 203.0 214.9 214.9 Net Investing CF (76) (80) (69) (39) Current Ratio (x) 1.0 1.3 1.6 1.8 Div Paid (9) (15) (16) (16) Quick Ratio (x) 0.5 0.7 0.8 1.0 Chg in Gross Debt 11 (55) 0 0 Net Debt/Equity (X) 0.6 0.4 0.4 0.2 Capital Issues 0 82 0 0 Net Debt/Equity ex MI (X) 0.7 0.5 0.4 0.2 Other Financing CF (16) 0 0 0 Capex to Debt (%) 18.0 19.8 17.1 9.6 Net Financing CF (13) 12 (16) (16) Z-Score (X) 1.6 2.0 2.2 2.3 Currency Adjustments 0 0 0 0 N. Cash/(Debt)PS (S cts) (66.6) (51.5) (48.3) (31.2) Chg in Cash 15 (5) 21 109 Opg CFPS (S cts) 25.5 28.7 31.3 34.7 Free CFPS (S cts) 3.8 (3.0) 6.4 21.8 Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Key Assumptions FY Mar 3Q2012 4Q2012 1Q2013 2Q2013 FY Mar 2012A 2013F 2014F 2015F

Turnover 196 182 215 216 Revenues (S$ m) Cost of Goods Sold (129) (110) (131) (136) Equipment Sales 339 375 374 398 Gross Profit 67 72 84 80 Crane Rental 225 339 414 471 Other Oper. (Exp)/Inc (44) (53) (54) (52) General Equipment Rental 97 107 130 148 Operating Profit 23 18 31 28 Tower Crane Rental 59 75 86 105 Other Non Opg (Exp)/Inc 0 0 0 0 Associates & JV Inc 0 1 2 3 Total 720 895 1,004 1,122 Net Interest (Exp)/Inc (6) (4) (6) (6) Gross profit (S$ m) Exceptional Gain/(Loss) 0 (3) 0 0 Equipment Sales 68 61 57 61 Pre-tax Profit 18 11 26 25 Crane Rental 129 200 243 275 Tax (4) (9) (7) (5) General Equipment Rental 52 55 68 77 Minority Interest (1) 9 (2) (2) Tower Crane Rental 14 22 23 28 Net Profit 13 11 17 17 Net profit bef Except. 13 14 17 17 Total 263 338 390 441 EBITDA 42 39 51 51 Gross profit Margins (%) Equipment Sales 19.9 16.2 15.3 15.3 Sales Gth (%) 7.0 (7.3) 18.3 0.3 Crane Rental 57.3 59.1 58.7 58.3 EBITDA Gth (%) 0.5 (6.4) 30.3 (1.1) General Equipment Rental 53.9 51.9 52.0 52.0 Opg Profit Gth (%) (5.5) (22.6) 69.3 (8.6) Tower Crane Rental 24.3 28.9 26.5 26.5 Net Profit Gth (%) 2.7 (13.7) 48.9 4.0 Gross Margins (%) 34.4 39.4 39.2 37.2 Total 36.5 37.8 38.9 39.2 Opg Profit Margins (%) 12.0 10.0 14.3 13.0 Key Assumptions Net Profit Margins (%) 6.6 6.1 7.7 8.0 Crawler fleet size 595.8 760.5 793.8 817.5 Crawler utilisation (%) 67.3 74.1 77.0 80.0 Tower fleet size 712.0 784.3 790.0 795.0 Tower utilisation (%) 66.1 74.7 75.0 75.0 Source: Company, DBS Vickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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Page 44

www.dbsvickers.com Refer to important disclosures at the end of this report ed: OY / sa: JC

Bloomberg: WINGT SP | Reuters: WTHS.SI

BUY S$1.81 STI : 3,167.08 Price Target : 12-Month S$ 2.33 Potential Catalyst: New project launch DBSV vs Consensus: Above Analyst LOCK Mun Yee +65 6398 7972 [email protected]

Price Relative

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

S$

73

93

113

133

153

173

193

213

Relative Index

Wing Tai (LHS) Relative FSTRE Index (RHS) Forecasts and Valuation FY Jun (S$ m) 2011A 2012A 2013F 2014F

Turnover 751 625 874 644 EBITDA 434 325 278 300 Pre-tax Profit 466 300 241 263 Net Profit 371 242 180 198 Net Pft (Pre Ex.) 297 226 180 198 EPS (S cts) 46.8 30.5 22.6 24.9 EPS Pre Ex. (S cts) 37.4 28.5 22.6 24.9 EPS Gth (%) 131 (35) (26) 10 EPS Gth Pre Ex (%) 92 (24) (21) 10 Diluted EPS (S cts) 46.8 30.5 22.6 24.9 Net DPS (S cts) 6.9 9.2 6.8 7.5 BV Per Share (S cts) 241.7 265.3 278.8 296.9 PE (X) 3.9 5.9 8.0 7.3 PE Pre Ex. (X) 4.8 6.3 8.0 7.3 P/Cash Flow (X) 8.0 4.2 nm 8.2 EV/EBITDA (X) 5.3 6.1 7.8 7.1 Net Div Yield (%) 3.8 5.1 3.8 4.1 P/Book Value (X) 0.7 0.7 0.6 0.6 Net Debt/Equity (X) 0.3 0.2 0.2 0.2 ROAE (%) 20.6 12.0 8.3 8.6 Earnings Rev (%): - - Consensus EPS (S cts): 21.1 21.2 Other Broker Recs: B: 6 S: 2 H: 5 ICB Industry : Financials ICB Sector: Real Estate Principal Business: Core business in property development, investment and management.

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 783 Mkt. Cap (S$m/US$m) 1,417 / 1,158 Major Shareholders Wing Sun Development (%) 28.4 Winlyn Investment (%) 9.3 Ascend Capital (%) 8.7 Free Float (%) 53.6 Avg. Daily Vol.(‘000) 1,257

Thematic Report

Wing Tai

Ramping up activities

Top mid cap sector property pick

Faster asset turn in mid-tier to boost medium term ROE

Maintain BUY with TP of $2.33

Preferred mid-cap stock. Wing Tai is our top mid-cap developer pick. Valuations are attractive at 0.6x P/bk and a 43% discount to RNAV estimate of S$3.33. Its recent acquisition of a land parcel at Prince Charles Crescent and conversion of an industrial plot at Tampines Rd into a residential development has expanded the group’s landbank to c.0.8msf GFA and widened exposure to the mid-tier market. This has extended the group’s earnings visibility going forward. Lanbank bought at attractive levels, sales of ongoing projects are on track. Apart from moving the inventory at Helios Residences, Bellevue residences and Foresque residences, the anticipated launch of its project at Tampines Rd should be well received given the scarcity of new and freehold projects in the area. Margins are also likely to be robust given its low land cost. Recent win of the site in the Redhill area has added positively to both its landholdings as well as potential earnings base. Recent imposition of more property curbs may dampen the short-term sentiment but should be good for the long-term prospects of the sector. Maintain BUY. Wing Tai is currently trading at 0.6x P/bk NAV and at a steep discount to our RNAV of S$3.33. We believe near-term catalysts can be found when the group launches the Tampines Rd development. Maintain BUY with a 29% upside based on a TP of S$2.33, premised on a 30% discount to asset backing.

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Thematic Report

Wing Tai

Page 45

Income Statement (S$ m) Balance Sheet (S$ m)

FY Jun 2011A 2012A 2013F 2014F FY Jun 2011A 2012A 2013F 2014F

Turnover 751 625 874 644 Net Fixed Assets 192 197 194 191 Cost of Goods Sold (320) (341) (554) (332) Invts in Associates & JVs 744 819 934 1,035 Gross Profit 431 284 321 311 Invt & Devt Properties 560 578 578 578 Other Opng (Exp)/Inc (173) (143) (173) (127) Other LT Assets 205 213 213 213 Operating Profit 258 140 147 184 Cash & ST Invts 504 849 489 361 Other Non Opg (Exp)/Inc 5 1 0 0 Dev Props held for sale 1,275 1,093 1,093 1,093 Associates & JV Inc 159 172 120 105 Inventory 19 21 23 17 Net Interest (Exp)/Inc (32) (29) (27) (26) Debtors 213 83 75 56 Exceptional Gain/(Loss) 75 16 0 0 Other Current Assets 54 77 77 77 Pre-tax Profit 466 300 241 263 Total Assets 3,766 3,930 3,676 3,619 Tax (58) (37) (24) (32) Minority Interest (36) (21) (37) (33) ST Debt 167 26 26 26 Preference Dividend 0 0 0 0 Other Current Liab 304 314 129 109 Net Profit 371 242 180 198 LT Debt 1,012 1,200 1,000 800 Net Profit before Except. 297 226 180 198 Other LT Liabilities 169 120 107 93 EBITDA 434 325 278 300 Shareholder’s Equity 1,919 2,107 2,214 2,357 Minority Interests 195 164 200 234 Sales Gth (%) (8.6) (16.8) 39.9 (26.4) Total Cap. & Liab. 3,766 3,930 3,676 3,619 EBITDA Gth (%) 43.6 (25.2) (14.2) 7.7 Opg Profit Gth (%) 8.4 (45.6) 4.8 25.0 Non-Cash Wkg. Capital 1,257 961 1,140 1,134 Net Profit Gth (%) 131.0 (34.8) (25.8) 9.9 Net Cash/(Debt) (675) (377) (537) (465) Effective Tax Rate (%) 12.5 12.3 10.0 12.0 Cash Flow Statement (S$ m) Rates & Ratio

FY Jun 2011A 2012A 2013F 2014F FY Jun 2011A 2012A 2013F 2014F

Pre-Tax Profit 466 300 241 263 Gross Margins (%) 57.4 45.4 36.7 48.4 Dep. & Amort. 11 11 11 12 Opg Profit Margin (%) 34.4 22.5 16.8 28.6 Tax Paid (28) (52) (84) (24) Net Profit Margin (%) 49.4 38.8 20.6 30.7 Assoc. & JV Inc/(loss) (159) (172) (120) (105) ROAE (%) 20.6 12.0 8.3 8.6 Chg in Wkg.Cap. (15) 257 (120) (2) ROA (%) 10.0 6.3 4.7 5.4 Other Operating CF (94) 1 35 31 ROCE (%) 6.5 3.5 3.7 4.6 Net Operating CF 180 346 (37) 175 Div Payout Ratio (%) 14.7 30.0 30.0 30.0 Capital Exp.(net) (33) (8) (8) (8) Net Interest Cover (x) 8.1 4.8 5.5 7.0 Other Invts.(net) 0 0 0 0 Asset Turnover (x) 0.2 0.2 0.2 0.2 Invts in Assoc. & JV (10) (10) (10) (10) Debtors Turn (avg days) 62.1 86.5 33.1 37.1 Div from Assoc & JV 21 107 16 14 Creditors Turn (avg days) 221.4 250.0 112.5 103.1 Other Investing CF 35 9 0 0 Current Ratio (x) 4.4 6.3 11.4 11.9 Net Investing CF 12 98 (2) (4) Quick Ratio (x) 1.5 2.7 3.7 3.1 Div Paid (39) (55) (73) (54) Net Debt/Equity (X) 0.3 0.2 0.2 0.2 Chg in Gross Debt (176) 0 (200) (200) Net Debt/Equity ex MI (X) 0.4 0.2 0.2 0.2 Capital Issues 0 0 0 0 Capex to Debt (%) 2.8 0.7 0.8 1.0 Other Financing CF (56) (48) (48) (45) Z-Score (X) 1.8 1.7 2.0 2.1 Net Financing CF (271) (102) (321) (299) N. Cash/(Debt)PS (S cts) (85.0) (47.5) (67.6) (58.6) Currency Adjustments (10) 3 0 0 Opg CFPS (S cts) 24.6 11.1 10.5 22.3 Chg in Cash (90) 344 (360) (128) Free CFPS (S cts) 18.5 42.5 (5.6) 21.1 Quarterly / Interim Income Statement (S$ m) Segmental Breakdown

FY Jun 2Q2012 3Q2012 4Q2012 1Q2013 FY Jun 2011A 2012A 2013F 2014F

Turnover 186 128 202 247 Revenues (S$ m) Cost of Goods Sold (104) (62) (104) (140) Development Properties 503 364 599 367 Gross Profit 82 66 98 107 Investment Properties 37 38 42 31 Other Oper. (Exp)/Inc (52) (40) (31) (44) Retail 202 216 227 239 Operating Profit 30 27 68 63 Others 9 7 7 7 Other Non Opg (Exp)/Inc 1 1 0 0 Total 751 625 874 644 Associates & JV Inc 25 32 89 40 EBIT (S$ m) Net Interest (Exp)/Inc (7) (7) (8) (7) Development Properties 251 119 205 215 Exceptional Gain/(Loss) 0 0 16 0 Investment Properties 98 39 29 30 Pre-tax Profit 49 53 165 96 Retail 20 22 23 24 Tax (8) (6) (16) (14) Others (31) (22) (14) (10) Minority Interest (7) (5) (9) (10) Total 338 157 243 259 Net Profit 34 42 141 72 EBIT Margins (%) Net profit bef Except. 34 42 125 72 Development Properties 50.0 32.7 34.3 58.5 EBITDA 59 63 160 106 Investment Properties 264.9 103.3 70.2 97.9 Retail 9.8 10.0 10.0 10.0 Sales Gth (%) 70.3 (31.0) 57.9 22.2 Others (363.9) (335.4) (210.8) (141.2) EBITDA Gth (%) 38.5 7.2 152.2 (33.6) Total 45.0 25.2 27.8 40.2 Opg Profit Gth (%) 98.1 (8.8) 151.5 (6.8) Net Profit Gth (%) 36.1 23.9 231.9 (48.7) Gross Margins (%) 43.9 51.9 48.7 43.4 Opg Profit Margins (%) 15.9 21.0 33.5 25.6 Net Profit Margins (%) 18.4 33.1 69.5 29.2 Source: Company, DBS Vickers

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends DBSV Equity Explorer return ratings reflect return expectations based on an assumed earnings profile and valuation parameters:

1 (>20% potential returns over the next 12 months)

2 (0 - 20% potential returns over the next 12 months)

3 (negative potential return over the next 12 months)

The risk assessment is qualitative in nature and is rated as either high, low or moderate risk. (see section on risk assessment)

Note that these assessments are based on a preliminary review of factors deemed salient at the time of publication. DBSV does not commit to ongoing coverage and updated assessments of stocks covered under the Equity Explorer product suite. Such updates will only be made upon official initiation of regular coverage of the stock.

DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBS Vickers Securities (USA) Inc (“DBSVUSA”) directly and not its affiliate. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.

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DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 18 Jan 2013, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, have interests in the Capitaland recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as of 16-Jan-2013

2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 18 Jan 2013.

3. Compensation for investment banking services:

i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the CapitaLand, Wing Tai, IHH Healthcare, Capitamalls Asia, UOL.

ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to hold an Australian financial services licence under the Corporation Act 2001 [“CA] in respect of financial services provided to the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [“MAS”] under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Singapore This report is being distributed in Singapore by DBSVR, which holds a Financial Adviser’s licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to “Institutional Investors”, “Expert Investors” or “Accredited Investors” as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to “Accredited Investors” is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA.

United Kingdom This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients.

Dubai/ United Arab Emirates

This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3rd Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority.

United States Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations.

Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Vickers Research (Singapore) Pte Ltd

12 Marina Boulevard, Level 40, Marina Bay Financial Central Tower 3, Singapore 018982

Tel. 65-6327 2288 Company Regn. No. 198600295W

[email protected] FooSuan Yee 05/23/14 06:05:32 AM IMC INVESTMENTS PTE. LTD.


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