Project CMA SP

8/12/2019 Project CMA SP

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Issued by Acacia Research

All Rights Reserved

CapitaMalls AsiaObjective Opinion for Investment Analysis


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CapitaMalls AsiaINITIATE COVERAGEFINANCIAL|REAL ESTATE| SINGAPORE

$1.88CMA SP EQUITY

11 November 2011OVERWEIGHT

Price Performance

Forecasts and Valuations

Real Estate | Acacia ResearchLansford Loo, [email protected] Wu,[email protected]

INVESTMENT SUMMARY

Growing Exposure to Emerging Markets

With CAGR in Net Leasable Area (NLA) of 15.4% inChina and 46.7% in India over the past 2 years,Capitamalls Asia (CMA) is fast gaining exposure tothe emerging markets of China and India, implyingan expansion in business operations towards thetwo biggest growth engines in real estate of thefuture. Returns may be further supplemented by the

increase in expected rental rates and possible capitalappreciation.

Unique Capital Structure and Business Model

CMA, being an integrated real estate firm withbusinesses in property development, propertymanagement, and investments through REITs, hasthe capability of low-cost financing through debt.CMAs current low D/E ratio of 0.1178 allows itmuch potential to leverage, with much returns being

expected from investments in projects with IRRgreater than its marginal cost of debt of 1.68%.

Deep Discount from Valuation

CMAs current assets are trading at a discount to itsGross Asset Value (GAV). Furthermore, premiumsfor management fees and revaluation potential arenot being pegged to the asset value, resulting in adeep discount.

Global Index Performance

0

0.5

1

1.5

2

2.5

3

3.5

0

0.5

1

1.5

2

2.5

3

3.5

Thousands

STI CMA

Stock Data SGX (SGD) HKEX (HKD)

Price 1.35 8.00

Price Target 1.87

52 Week Range 1.13 - 2.18 7.76 8.75

Volume Traded ('000) 6,515 50000

Average 3-Month Volume ('000) 7,463

Issued Capital SGX (mln. shares) 3,885

Market Cap ($mln) 5,303 33990

Float (%) 34.45Reuters Code CMAL.SP 6813.HK

ISIN Code JS8:SP 6813.HK

Bloomberg Code CMA SP 6813.HK

2011F 2010 2009 2008

Revenue 235151 245402 228946 205210

EBITDA 494816 479638 533728 310213

Pre Tax Profit 457019 446829 409683 141402

Net Profit 416462 429507 393656 118065

EPS 0.11 0.11 0.20 0.12

EPS Growth (%) -3.06% -45.88% 73.07% -58.33%

DPS/Share 0.03 0.02 0.01 0.06

BV/Share 1.503732 1.500649 0.283388 1.53292

P/E 12.59359 12.20795 6.60672 11.43438

Net Dividend Yield 2.22% 1.48% 0.74% 4.44%

P/Book Value 0.897766 0.899611 4.763785 0.880672

Net Debt/Equity 0.059 CASH CASH CASH

ROE 7.13% 7.37% 7.21% 7.70%

2011F 2010 2009 2008

0

5

10

15

20

25

30

35

2-Jan-07 2-Jan-08 2-Jan-09 2-Jan-10 2-Jan-11

faspr index Hsi index STI index

sensex index fbmklci index nky index
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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TABLE OF CONTENTS

Investment Summary .................................................................................................. 1

Table of Contents ......................................................................................................... 2

Investment Rationale .................................................................................................. 4

Unique Capital Structure and Business Model ....................................................... 4

Joint Ventures and Private Funds ..................................................................... 4

Leverage Ability .................................................................................................. 4Growing Exposure to Emerging Markets ............................................................... 5

Changes in Net Leasable Area ........................................................................... 5

Changes in Geographical Revenue Breakdown .............................................. 6

Industry Outlook in China ......................................................................................... 7

Industry Outlook in Singapore .................................................................................. 8

Price, Rental and Vacancy Rates................................................................................ 8

Model 1- Regression ........................................................................................... 9

Model 2 - ARIMA ................................................................................................ 9Overall Model Results ......................................................................................... 9

Deep Discount from Valuation ................................................................................ 10

Trading Below Market Value ........................................................................... 10

Sum of the Parts ......................................................................................................... 11

Approach ............................................................................................................ 11

Property-income-based Valuation ......................................................................... 12

Singapore ............................................................................................................ 12

China ................................................................................................................... 12Malaysia .............................................................................................................. 13

Japan .................................................................................................................... 13

India ..................................................................................................................... 13

AM Valuation 2 Stage FCFF Approach...............................................................14

High Growth ...................................................................................................... 15

Stable Growth ..................................................................................................... 16

Weighted-Average Cost-of-Capital ................................................................ 17

Bottoms-up Beta ................................................................................................. 182 Stage FCFF Calculation .................................................................................. 19

Scenarion-Weighted Revised-Net-Asset-Valuation...................................... 20

Relative Valuation ..................................................................................................... 21

Sypnosis ............................................................................................................. 21

Defining the Multiple ....................................................................................... 21

Describing the Multiple ................................................................................... 22

Analysis of the Multiple .................................................................................. 22

Application of the Multiples ........................................................................... 23


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Value Enhancement Strategies ................................................................................ 25

Increase Reinvestment Rate ............................................................................. 25

Increase Leverage .............................................................................................. 25

Divest or Liquidate Inefficient Assets .............................................................25

Reconcilliation ............................................................................................................ 26

Relative Valuation Projected Value ................................................................. 26

SOTP Valuation Projected Value ...................................................................... 26

Comparison ......................................................................................................... 27

Conclusion .................................................................................................................. 28

Appendix I: Relative Valuation ............................................................................... 29

Appendix II: List of Comparables (Simple Average) .......................................... 30

Appendix III: List of Comparables (Regression) .................................................. 32


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INVESTMENT RATIONALE

Unique Capital Structure and Business Model

JOINT VENTURES AND PRIVATE FUNDS

CMAs unique capital structure and business model hasreaped numerous advantages for the company, especially

in the area of financing.

CapitaMall Asia is a fully integrated real estate companywith a separation of focus on various aspects of theindustry. It manages a total of 94 retail properties in 49cities in Singapore, Malaysia, China, Japan and India.CMA is concurrently a real estate developer, a propertyportfolio manager and also an asset and investmentmanager with 3 Real Estate Investment Trusts (REITs).

Through its exclusive business model, 27% of assetproperties are under CMAs direct control, with theremaining 73% controlled through joint ventures, privatefunds and REITs. These JVs and funds are platforms fromwhich CMA derives funds from. These additional funds,enhanced through capital recycling, amplifies CMAsability to lever up on size and scale, from a current gearingratio of 16.96% up to an optimal debt-equity mix of 0.30x -0.50x

LEVERAGE ABILITY

Furthermore, with its debt-to-equity ratio at only 20.4%,any additional capital raised would be at its marginal costof debt of 1.68%. At this early stage of debt financing,CMAs adequate amount of equity allows it to lever upwithout incurring too much risk.

With a WACC of 9.43%, a large majority of projects withIRR greater than 10% are justifiable investments with

expected positive cashflows that will stimulate and sustainCMAs long-term growth and expansion.


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CHANGES INNETLEASABLEAREA

CMAs long-term development strategy has been to expandacross the developing markets of Asia, especially China and

India; resulting in the high CAGR of Net Leasable Area(NLA) of 15.45% in China, and 46.7% in India.

This increase in NLA is further in line with CMAs latestreiteration of its expansion plan to penetrate into Chinas 2nd-tier cities and strengthen its presence. With much of recentinvestments being focused on China and India, CMA hasbeen less active in Singapore, increasing its NLA by only2.4% annually; while there has actually been a slight decreasein NLA in Japan, signifying CMAs gradual shift to emerging

markets.

This shift is further justified by the saturation of markets andhigh concentration of retail spaces in developed markets and1st-tier cities, limiting CMAs growth potential.

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Singapore China Malaysia Japan India

Property Value Growth 2009-1H 2011

CAGR

0

2

4

6

8

10

12

14

16

18

20

Millions

31/12/2009

30/6/2010

31/12/2010

30/6/2011

Average Growth of

15.45%

S'pore

22%

China62%

Malaysia8% Japan

6%

India

2%

Other

8%

31/12/2009 - Proportion of NLA

S'pore

19%

China

62%

Malaysia

11% Japan

5%

India

3%

Other

8%

30/6/2011 - Proportion of NLA


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CHANGES IN GEOGRAPHICALREVENUE BREAKDOWN

RENTALINCOME

As CMA is gaining exposure to the emerging markets ofChina, in recent years, there has also been a shift inCMAs strategy to expand into Chinas 2nd-tier cities,especially with the 1st-tier cities edging towardssaturation.

The high momentum of growth in the retail markets inChina has coincided with a stabilization of occupancyrates in the 2nd-tier cities in China. In many inland citiesof China, there has been a shrink in vacancy rate due to

the emergence of new shopping-centers and retailstores.

Furthermore, with many new projects in China stillunder construction, there has been a temporal supplyshortage of rental space. This shortage, coupled with theincrease in demand for retail space as the retail marketgrew, has driven up rental rates, especially in Chinas2ndtier cities.

Rental rates in Chinas majorcities Beijing and Shanghaihad also remained exponentially high, enabling CMA tolease out retail spaces of its 50 properties at a higherrate; signifying a more profitable outlook in the nearfuture.

0

1

2

3

4

5

6

7

8

q4 07 q4 08 q4 09 q4 10

Rental in Tier 2 Cities

USD psm/d

tianjin

shenzhen

dalian

hangzhou

chengdu

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%Rental Growth Rates

CAGR


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CAPITALAPPRECIATION

Appreciation of properties had also boosted CMAs profits withannual marked-to-market revaluation gains on real estate. TheCAGR for property value in China amounted to a high of 58.15%for the past 18 months.

Furthermore, with CMAs acquisition strategy in China being thatof purchase of lower relative valuation properties in lower-tiercities, there is much potential for further revaluation gains.

Such a strong revaluation gain can be attributed to improvedoperational efficiencies for CMA, and the further compression ofcapitalization rate. The improvement of infrastructure anddevelopment of logistical and communications network in Chinas2nd-tier cities can be regarded as one of the key factors below thisreduction in cap rate, leading to the resultant gear-up of CMAsasset-base; and the boosting of income from excessive revaluationsurpluses.

Industry Outlook China

VACANCY ANDRENTALRATES2003-2013F

Rental rates in China have experienced exponential growth in thelast decade. With a CAGR of 14.8% in the last 8 years on effective

rental (nominal rental times vacancy), this trend of growth seemslikely to increase, especially with the possibility of a hard-landingscenario relatively remote at 20%.

SUMMARY OUTPUT - Effective Rental

Coefficients

Intercept 0.28507

Unemployment (%) 0.1192

Nominal GDP (bln US$) 0.00099

BMI - China Scenarios

probability 2010 2011e 2012f 2013f

Base

70%Priv. Consump. 8.7 9 8.5 8.4

GFCF 16.4 10.8 7.5 6.3

Real GDP 10.3 9.2 8.1 7.5

Bear

20%

Priv. Consump. 8.7 9 -0.3 5

GFCF 16.4 10.8 -13 2

Real GDP 10.3 9.2 -5.5 3.3

Bull

10%

Priv. Consump. 8.7 9 9.5 9.5

GFCF 16.4 10.8 9.5 9

Real GDP 10.3 9.2 9.2 9.1

0

5

10

15

20

25

30

0

1

2

3

4

5

6

7

8

q4 03 q4 04 q4 05 q4 06 q4 07 q4 08 q4 09 q4 10

beijing rental

shanghai rental

guangzhou rental

beijing vacancy

shanghai vacancy

guangzhou vacancy

0

2

4

6

8

1012

2003

2004

2005

2006

2007

2008

2009

2010e

2011e

2012f

2013f

Effective Rental Index


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0

50

100

150

200

250

300

350

400

0

50

100

150

200

250

1990Q1

1991Q2

1992Q3

1993Q4

1995Q1

1996Q2

1997Q3

1998Q4

2000Q1

2001Q2

2002Q3

2003Q4

2005Q1

2006Q2

2007Q3

2008Q4

2010Q1

2011Q2

Available Stock Vs Rental

Rental Index available


Industry outlook in Singapore

RENTALRATES (CMAVS SINGAPORE)

Historically, CMA has capital invested in golden retaildistricts in Singapore including the likes of Orchardroad, and Victoria Street where the rental rates tend to

be on-a-whole more volatile and attractive than theirfringe area counterparts. Hence, as expected, both themean return and variance of CMAs Singaporeproperties median rental rates are higher than that ofSingapores.

PRICE,RENTAL CORRELATION

In addition, Singapores property market hasundergone tremendous transformation since 1990s.

Price, Rental and Vacancy Rates

Conducting a similar analysis on vacancy rates showsa similarly high correlation to property prices, albeit anegative one. Hence, with the discovery of these 2factors, we are ready to begin the construction of ourpredictive model.

-1

-0.5

0

0.5

1

1.5

2000/01

2000/09

2001/05

2002/01

2002/09

2003/05

2004/01

2004/09

2005/05

2006/01

2006/09

2007/05

2008/01

2008/09

2009/05

2010/01

2010/09

2011/05

Spore Returns CMA Returns

Spore Empirical Vol:

1.68%

CMA empricial vol:

0

50

100

150

200

250

2000/01

2000/08

2001/03

2001/10

2002/05

2002/12

2003/07

2004/02

2004/09

2005/04

2005/11

2006/06

2007/01

2007/08

2008/03

2008/10

2009/05

2009/12

2010/07

2011/02

2011/09

CMA Spore

Spore Mean Return: 1.19%

CMA Mean Return: 2.56%

70

90

110

130

150

170

190

210

230

1990Q1

1991Q2

1992Q3

1993Q4

1995Q1

1996Q2

1997Q3

1998Q4

2000Q1

2001Q2

2002Q3

2003Q4

2005Q1

2006Q2

2007Q3

2008Q4

2010Q1

2011Q2

Singapore Rental Rates

1990-2011

Central Area Central Region Fringe Area

0

50

100

150

200

250

1990Q1

1991Q2

1992Q3

1993Q4

1995Q1

1996Q2

1997Q3

1998Q4

2000Q1

2001Q2

2002Q3

2003Q4

2005Q1

2006Q2

2007Q3

2008Q4

2010Q1

2011Q2

Rental Index Property Price Index

Correlation since

1997 Q3: 0.902

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

50

100

150

200

250

1990Q1

1991Q3

1993Q1

1994Q3

1996Q1

1997Q3

1999Q1

2000Q3

2002Q1

2003Q3

2005Q1

2006Q3

2008Q1

2009Q3

2011Q1

Rental Index Property Price Index vacc rates

Correl of VacR & Price

since 1997 Q3: 0.75


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SUMMARY OUTPUT - Price

Coefficients

Intercept 103.1098

Rental 0.303568

Vacancy Rate -386.1606

SUMMARY OUTPUT - rental

Coefficients

Intercept 175.5554

Household final

consumption expenditure-3.98E-09

GDP growth 493.4069

SUMMARY OUTPUT - Vac. RateCoefficients

Intercept -0.392036

Growth in Gross fixed

capital formation-0.009329

% Population in the

largest city0.004789


Model 1 Regression

By conducting a multi-factor regression on property Price as afunction of rental and vacancy rates, we obtained the equationoutputs on the right. A further decomposition of both rental andvacancy rates into its constituent broad economic indicatorsavailable at WorldBank, we derived equations for rental and

vacancy rates as well.

Model 2 ARIMA

Further analysis of historical rental rate movement wasconducted using the Auto-Regressive Integrated Moving Averageapproach (ARIMA). With ARIMA, we predicted the rental ratemomentum until 2013 and obtained the following results:

Overall Model Results

The interpretation of our results is as follows. If we base ourestimates on the current rental price momentum, then it seemspossible that rental rates are set to increase into 2012 beforedeclining somewhat in 2013. However if we base our estimates onthe World Bank forecasts of economic indicators, then it seemsmore likely that the recession is imminent in 2011 instead andwould probably continue its decline well into 2013.

Predictive Model Output

2010 2011e 2012f 2013f

rental (regression) 93.4962 101.990 95.0945 92.0600vacc. Rate 0.06437 0.06365 0.06385 0.07377

price 106.633 109.490 107.321 102.568

rental (arima) 93.4962 101.196 108.701 112.432

vacc. Rate 0.06437 0.06365 0.06385 0.07377

price 106.633 109.248 111.451 108.753

average 106.633 109.369 109.386 105.66

An average of the 2 model results therefore gives us the bestestimate moving forward.

98

100

102

104

106

108110

112

114

2010 2011e 2012f 2013f rental (regression)

0

50

100

150

200

250

2000/01

2000/10

2001/07

2002/04

2003/01

2003/10

2004/07

2005/04

2006/01

2006/10

2007/07

2008/04

2009/01

2009/10

2010/07

2011/04

2012/01

2012/10

2013/07

25th Percentile Median 75th Percentile


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Deep Discount From Valuation

TRADING BELOW MARKET VALUE

Another signal justifying CMAs current undervaluation is thevalue their fixed assets are trading at. CMAs directly-ownedproperties and properties managed under its REITs have amarket value discounted at an average of 15.9% to the bookvalue of its revised net asset value (RNAV).

On top of CMAs assets trading at around 0.7 of its propertiesvalue as indicated in chart 3.1, we believe several factors shouldbe pegged to its balance sheet property value to calculate theexpected future value of the assets.

Potential for appreciation, on top of the actual revaluation gainsfor the year, should be tagged as a premium to the propertyvalue. In addition, we can also attach a premium for CMAsmanagement expertise, which generate a steady flow ofmanagement fee income annually; and certain mark-ups havebeen made to reflect the additional benefits.

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

130%

150%

1

1.5

2

2.5

3

25/11/2

009

25/12/2

009

25/1/2

010

25/2/2

010

25/3/2

010

25/4/2

010

25/5/2

010

25/6/2

010

25/7/2

010

25/8/2

010

25/9/2

010

25/10/2

010

25/11/2

010

25/12/2

010

25/1/2

011

25/2/2

011

25/3/2

011

25/4/2

011

25/5/2

011

25/6/2

011

25/7/2

011

25/8/2

011

25/9/2

011

Book-value vs Market-price

premium Adj Close BV


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SUM OF THE PARTS VALUATION

Approach

We have used a scenario weighted sum of the parts valuations to

arrive at a share price of $1.88 for CMA. We have split CMAs

valuation into two segments, namely the property income business,

which is valued using an asset valuation based approach and the

asset management (AM) segment, which is valued using a 2 stageFCFE model approach.

Property Income Based Valuation Approach

RATIONALE

CMAs revenue stream in its property business comes mainly fromtwo components, its revenue from the leasing of its retail properties

space and the revaluation gains which is recognised from theseinvestment properties which it holds. Due to the unique structure ofthe company, a large proportion of its properties are held throughinvestment vehicles such as its REITs and private funds, hence mostof its income is derived from associates and joint ventures. Asaccounting conventions in different countries have different reportingstandards to this regard, the value of these amounts reported on thefinancial statement would not reflect a consistent and fair value hencewe believe that an income based approach of valuation would not beappropriate. Instead, as rental and revaluation income are a function

of property valuation prices, we feel that an asset based valuationwould be a better determinant of companys value in this area.

METHODOLOGY

We have used an asset based valuation approach for the property

income segment by apportioning CMAs effective stake of its

property interests which is directly held and through its investment

vehicles to come up with a GAV of CMAs portfolio in the region.

Property Name Status % Stake Efficiency Ratio GRA NLA Value per sqft NPI NPI Yield Valuation GAV Attributable to CMA

Capitamall Trust

-Bugis Junction Opened 29.72% 72.82% 578,105.00 421,000.00 2,028.50 47,900.00 5.61% 854,000.00 253,808.80

Individual Valuation of CMA Property Interest (Detailed Breakdown of individual property in


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As a combined total of 89% of CMAs property portfoliocomes from both China and Singapore, any changes inproperty value from these two major regions would bringabout a large change in value of the company. As such, wehave done a scenario weighted GAV for these two regionsbased on BMI industry forecasts of frequency and severityof fluctuations in property values.

SINGAPORE

CMA is the largest retail estate owner and manager inSingapore with interests in 17 completed shopping mallsand one retail development project, constituting a total netleasable area of 5.7 million sqft, approximately 19% of itsportfolio. A large majority of the malls are held through itseffective stake of 29.72% in its associate, Capitamall Trust.

Singapore Worst Case Base Case Best Case

-Directly Held Assets 46,518 49,000 54,870

-Joint Ventures 2,090,251 2,218,950 2,484,780

REIT's & Private Funds

-Capitamall Trust 2,156,700 2,289,490 2,563,771

Scenario Weighted GAV 4,619,213

China

CMA owns interest and manages 55 malls spanning a wide

range of cities across China, constituting a total net leasablearea of 18.8 million sqft, around 62% of its current portfolio.Most of the malls are through REITs and private fundswith only 10 malls sitting on CMAs balance sheet. Thegroup owns an effective stake of 26.97% in one REIT,CapitaRetail China Trust, and differing stakes in 5 privatefunds.

Bear Case Base Case Bull Case

Prob. 19.8% 59.3% 20.9%

SGP 5.8% unchanged 11.9%

Prob. 30% 60% 10%

CNY 30% unchanged 13.5%

REIT's % Holding

CapitaRetail China Trust 26.97%


-Capitamall China Income Fund 45.00%

-CapitaRetail China Development Fund II 45.00%

-CapitaRetail China Incubator Fund 30.00%

-Raffles City China Fund 15.00%

China Bear Base Bull

-Directly Held Assets 1,300,435 1,857,764 2,108,562

-Joint Ventures 127,364 181,949 206,512


-CapitaRetail China Trust 241,635 345,193 391,794

-Capitamall China Income

Fund 341,533 487,904 553,771

-CapitaRetail China

Development Fund II 303,546 433,637 492,178

-CapitaRetail ChinaIncubator Fund 155,970 222,814 252,894

-Raffles City China Fund 258,688 369,554 419,443

Scenario Weighted GAV 3,600,554

Singapore

48%China

41%

Malaysia

8%

India

1%Japan

2%

CMA Property Value Breakdown by

Region


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MalaysiaMalaysia $'000

-Directly Held Assets 276,184


-Capitamall Malaysia Trust 2,156,700

Total 2,432,884

CMA owns and manages 4 retailproperties in Malaysia constituting anNLA of 3.34 million sqft, approximately11% of its portfolio. It has a directinterest in one mall while the rest of its properties are being held byits associate, CapitaMall Malaysia Trust, which was listed on July2010.

Japan $'000


-CapitaRetail Japan Fund 158,991

Japan

CMA owns interest and manages seven retail properties in Japanacross 4 cities, constituting a total NLA of 1.46 million sqft, about 5%of its portfolio. These properties are owned via a private fund,CapitaRetail Japan Fund, in whichCMA has a 26.3% stake. India $'000


-CapitaRetail Indian

Development Fund103,865

India

CMA owns and manages 9 retail properties in India across 4 cities,constituting a total net leasable area of 0.89 million sqft, around 3 % ofits portfolio. These properties are owned via a private fund,CapitaRetail Indian Development Fund in which CMA has a 45.5%stake.


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AM Valuation 2 Stage FCFF Approach

RATIONALE USAGE OF2-STAGEFCFFMODEL

The firm has a fluctuating financial leverage

structure, thus to negate computing cash flows to

debt-holders, FCFF is preferred to FCFE model. In addition,Dividend Discount Model (DDM) is not preferred as the

firm has a low dividend payout ratio of 18.41% (Bloomberg)

as compared to its peers of 36.2%.

CMA derives its revenue streams from AM

through being a REIT and mall manager of 3

listed and 6 private funds. We believe that the

AM unit is currently in a high growth stage. This

can be seen from the large pipeline of malls. Inaddition, this high growth period can be seen

from CMAs aggressive reinvestment rate of

51.87% as compared to a peer average of 17.64%.

Based on these factors, we believe that a 2 stage

growth model is appropriate for CMA as we foresee CMA

to continue its high growth rate in the next 5 years before

entering a stable stage.

Capitamall Asia Current Estimated

Gross Debt Outstanding 968 1,752.60

-CapitaRetail Indian Development Fund 5,842 5,842

Debt/Equity Ratio 0.166 0.3

Capitamall Asia

REIT's

Capitamall Trust

Capitamalls Malaysia Trust

CapitaRetail China Trust

Private Funds

Capitamall China Income Fund

CapitaRetail China Development Fund II

CapitaRetail China Incubator Fund

Raffles City China Fund -

CapitaRetail Japan Fund Private

Limited

CapitaRetail India Development Fund

REIT Manager Mall Manager


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High Growth Rate

The growth rate of the EBIT of the firm is derived using

the following formula:

Hence in order to calculate the expected growth rate of

the firm, we will first calculate the reinvestment rate of

the company and its ROC.

REINVESTMENTRATE(RIR)

We have made the assumption that depreciation and

changes in working capital are wholly attributable to the

AM business of CMA while these charges for the

property income business are recognised via its associates

and JVs. As for capital expenditures, we have

apportioned it accordingly to its property income and

AM units. Due to the relatively large developmental

projects requiring irregular capital injections, we have

normalized the RIR to arrive at a trailing twelve month(TTM) figure of 62.6%.

RETURN ON CAPITAL (ROC)

Because CMAs integrated business model provided no

breakdown on how much capital was used to generate

returns on its AM, we had to estimate based on its

proportion of AM EBIT to total EBIT.

0

2

4

6

8

10

2012 2013 2014 2015 2016Malls to be Completed

0

10000

20000

30000

40000

50000

60000

EBIT Revenue

123.31%

8.17%

122.08%

30.20%

-12.75%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

2006 2008 2009 2010 2011YTD

RIR

2006 2007 2008 2009 2010 2011YTD Trailing 12 Months Normalized

EBIT of Mgt Fee Business 23501.16 30480.04 52028 39187 60879 52984 45054

Marginal Tax Rate 17% 17% 17% 17% 17% 17% 17%

EBIT(1-Tax Rate) 23501 30480 52028 39187 60879 52984 37395

Net CAPEX 7668 8301 8894 4995 6424 6217 7391

Change in Working Capital 23641 36165 111 48922 19165 (8056) 20861

Depreciation 2329 2513 4754 6079 7206 4917 4834

Total Reinvestment 28980 41953 4251 47838 18383 -6756 23417

Reinvestment Rate 123.31% 137.64% 8.17% 122.08% 30.20% -12.75% 62.6%


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This proxy ROC of CMA has shown a decreasing trend overthe recent years, due to management fees increasing moreslowly compared to its property-income segment.

From the above rationale, we expect ROC and RIR to movetowards industry average based on number of malls whichhave been developed. Hence, based on the convergence ofROC and RIR, we expect the following growth rates:

Stable Growth

Year ROC Reinvestment Rate Growth Rate

Trailing 12

months 6.60% 62.62%

2012F 7.46% 57.31% 4.27%

2013F 9.74% 43.15% 4.20%

2014F 12.01% 28.99% 3.48%

2015F 12.58% 20.14% 2.53%

2016F 14.01% 16.60% 2.33%

List of Comparable Firms Return on Capital Reinvestment Rate

GUANGZHOU R&F PROPERTIES - H 13.05% 14.93%

AGILE PROPERTY HOLDINGS LTD 14.70% 31.31%

RENHE COMMERCIAL HOLDINGS 30.08% 17.46%

KEPPEL LAND LTD 16.49% 17.46%

SHIMAO PROPERTY HOLDINGS LTD 11.76% 13.80%

SOHO CHINA LTD 13.85% 12.55%

HYSAN DEVELOPMENT CO 18.50% 7.87%

AEON MALL CO LTD 6.71% 11.19%

NEW WORLD DEVELOPMENT 7.49% 7.91%

KERRY PROPERTIES LTD 8.15% 9.34%

COUNTRY GARDEN HOLDINGS CO 11.91% 11.68%

LONGFOR PROPERTIES 14.08% 25.71%

GLOBAL LOGISTIC PROPERTIES L 10.57% 17.25%

EVERGRANDE REAL ESTATE GROUP 18.76% 33.95%

Industry Average 14.01% 16.60%

16.9%

7.8% 7.3%5.9%

6.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2006 2008 2009 2010 2011F

ROC

2006 2007 2008 2009 2010 2011YTD Trailing 12 Months

EBIT of Mgt Fee Business 23501.16 30480.04 52028 39187 60879 52984 69226

Marginal Tax Rate 17% 17% 17% 17% 17% 17% 17%

EBIT(1-Tax Rate) 23501 30480 52028 39187 60879 52984 57458

Capital Invested 1008303 1107245 3181072 5890210 6516211 6810000

Proportion of Mgt Fee EBIT to total EBIT 11.47% 9.48% 17.51% 7.60% 13.10% 16.32% 11.47%

Capital Employed on Management Fee

Business 115671.8 104994.7 556889.6 447712.8 853429.3 1111169

Return on Capital 16.9% 24.1% 7.8% 7.3% 5.9% 4.0% 6.6%

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2011F 2012F 2013F 2014F 2015F 2016F

Reinvestment Rate Growth Rate ROC


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Weighted-Average Cost-of-Capital

PRE-TAX COST-OF-DEBT

= 1.68% + 1.41%

= 2.51%

RISK-FREERATE

We used the ten-year SGS government bond rate as a proxy for

the risk-free rate as CMAs cash-flows are mainly denominated

in Singapore dollars.

CREDIT SPREAD

As the bonds of CMA are unrated and relatively illiquid in the

market, we have used the credit rating BBB+ of its parentcompany bonds, Capitaland, to estimate credit spread.

COST OFEQUITY

BETA

We estimated both historical bottoms up beta in our analysis.a) Historical Beta

To estimate CMAs historical beta, we regressed CMAs stock

returns to the Straits Times Index (STI) returns to yield a beta

of 1.0281:

y = 1.0281x - 0.0056

R = 0.33

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

-8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00%


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Bottom Up Beta

Based on the marginal tax rate of 17% of its country of

domicile and a debt-equity ratio of 0.1657, we then used the

industry average unlevered beta to calculate the levered

beta for CMA as follows:

We have decided to use the bottoms up beta as it will yield

a significantly lower standard error by averaging across a

range of betas.

EQUITYRISKPREMIUM

We have used an implied equity risk premium approach to

derive the equity risk premium of the market. In calculating

the implied equity risk premium, we assumed the

components in the STI to be representative of the entire

market, hence obtaining an average long term EPS growth

of 8.17% and an average dividend yield of 3.01%. We

obtained a market risk return of 11.18 % by using theformula below:

Company Raw Beta:M-1 Debt/Equity LF Tax Rate Country Unlevered Beta

GUANGZHOU R&F PROPERTIES - H 1.394046 148.413406 25.00% CN 0.659715887

AGILE PROPERTY HOLDINGS LTD 2.697079 94.918999 25.00% CN 1.575495548

RENHE COMMERCIAL HOLDINGS 1.332292 61.461498 25.00% CN 0.911928372

KEPPEL LAND LTD 1.47619 63.648701 17.00% SG 0.965913266

SHIMAO PROPERTY HOLDINGS LTD 1.644083 1.11842903 16.50% HK 1.628871164

SOHO CHINA LTD 0.815118 57.902401 25.00% CN 0.568316379

HYSAN DEVELOPMENT CO 0.885526 11.7483 16.50% HK 0.806417782

AEON MALL CO LTD 1.443502 84.103897 40.69% JP 0.963092162

NEW WORLD DEVELOPMENT 1.508166 44.105701 16.50% HK 1.102232826

KERRY PROPERTIES LTD 0.885335 36.752998 16.50% HK 0.677437788

COUNTRY GARDEN HOLDINGS CO 1.537905 102.091202 25.00% CN 0.870996728

LONGFOR PROPERTIES 1.973194 118.201401 25.00% CN 1.045949117

GLOBAL LOGISTIC PROPERTIES L 1.115909 52.8652 16.50% SG 0.774171011

EVERGRANDE REAL ESTATE GROUP 2.480321 173.496994 25.00% CN 1.077825225

Average: 0.973454518

Name EPS LTG Dvd Yld

CAPITALAND LTD 18.033 2.230

CAPITAMALL TRUST 6.458 0.000

CAPITAMALLS ASIA LTD 3.128 1.099

CITY DEVELOPMENTS LTD 8.333 0.745

COMFORTDELGRO CORP LTD 2.750 3.860

DBS GROUP HOLDINGS LTD 10.567 4.389

GENTING SINGAPORE PLC 20.808 0.000

GOLDEN AGRI-RESOURCES LTD 7.867 1.158

HONGKONG LAND HOLDINGS LTD -2.320 2.400

JARDINE MATHESON HLDGS LTD - 2.195

KEPPEL CORP LTD 11.368 4.337

NOBLE GROUP LTD 17.200 1.951

OLAM INTERNATIONAL LTD 19.550 2.000

SEMBCORP INDUSTRIES LTD 6.433 3.580

SEMBCORP MARINE LTD 0.215 2.657

SIA ENGINEERING CO LTD - 5.391

SINGAPORE AIRLINES LTD -3.370 4.476

SINGAPORE EXCHANGE LTD 5.550 4.122SINGAPORE POST LTD - 6.068

SINGAPORE PRESS HOLDINGS LTD -3.500 4.103

SINGAPORE TECH ENGINEERING 8.200 2.431

SMRT CORP LTD 6.000 4.521

STARHUB LTD 8.400 6.944

JARDINE CYCLE & CARRIAGE LTD 12.160 3.437

OVERSEA-CHINESE BANKING CORP 7.660 3.036

UNITED OVERSEAS BANK LTD 6.680 3.297

WILMAR INTERNATIONAL LTD 17.250 1.254

SINGAPORE TELECOM LTD 4.073 5.232

JARDINE STRATEGIC HLDGS LTD - 0.759

FRASER AND NEAVE LTD 12.870 2.615

Average 8.168 3.010


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2-Stage FCFF Calculation

FCFFPROJECTION FORHIGH GROWTH STAGE

Assuming a constantly decreasing reinvestment rate based onthe number of malls completed, we can calculate the FCFFbased on the below formula:

TERMINAL VALUE CALCULATION

Based on a stable growth rate of 2.33%,

Using industry average reinvestment rate of 16.60%,

CALCULATION OFAMBUSINESS TOTAL VALUE

By discounting the FCFFs by the firms WACC of 8.18%, we

arrive at an intrinsic value for the AM business of SGD 852,897.

Year 2012 2013 2014 2015 2016

Return on Capital 7.21% 8.81% 10.42% 10.82% 11.83%

57.43% 43.59% 29.75% 21.10% 17.64%

Growth Rate 4.14% 3.84% 3.10% 2.28% 2.09%

EBIT(1- Tax Rate) 59,836 62,135 64,061 65,524 66,891

Reinvestment Rate 57.43% 43.59% 29.75% 21.10% 17.64%

Free CashFlow To Firm 25,471 35,049 45,002 51,698 55,091

Year 2012 2013 2014 2015 2016

Growth Rate 4.27% 4.20% 3.48% 2.53% 2.33%

EBIT(1- Tax Rate) 59913.69 62430.96 64605.54 66243.01 67783.45

Reinvestment Rate 57.31% 43.15% 28.99% 20.14% 16.60%

Free CashFlow To Firm 25,576.10 35,491.10 45,875.66 52,901.04 56,530.80

Terminal Value 988,801.53

Present Value 23643.16191 30329.25434 36240.63216 38632.14454 724051.7948

Total Value of Management Fee Business: 852,896.99


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20


Scenario-Weighted Revised-Net-Asset-Valuation

Based on the separate valuation of both income generatingunits of CMA, we arrive at a total GAV of S$9,239m. Byadding cash and netting off debt and other liabilities, wearrive at a RNAV of S$7,312m attributable to shareholders,equating to an estimated share price of $1.88 based on

common stock of 3,885 million shares outstanding as at 30Setember 2011.

Assets/Liabilities of CMA $'000

Singapore

-Directly Held Assets 49751.983

-Joint Ventures 2249777.3


-Capitamall Trust 2321297.4

China

-Directly Held Assets 1715645.1

-Joint Ventures 168029.8


-CapitaRetail China Trust 318785.7

-Capitamall China Income Fund 450579.4

-Capita Retail China Development Fund II 400463.8

-CapitaRetail China Incubator Fund 205768.8

-Raffles City China Fund 341283.1

Malaysia

-Directly Held Assets 276184.16REIT's & Private Funds

-CapitaMalls Malaysia Trust 479161.38

Japan


-Ca pita Reta il Ja pa n Fund Priva te Limited 158990.88

India


-CapitaRetail India Development Fund 103865.01

Total Gross Asset Value 9239583.8

Asset Management Busines 852897

Add:

Cash & Cash Equivalents 626000

Less:

Debt Outstanding -968000

Off Balance Sheet Liabilities -1488688.6

Adjusted for Outstanding Capital Commitments -949700

Revised Net Asset Valuation 7312092.1

No of Shares Outstanding 3885100

Estimated Share Price 1.88


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21

Multiple FormulaVariables Used In

RegressionR

2

Dividend Payout, Cost of

Equity, Growth0.3297

ROE(T12M), Cost of

Equity, Growth0.3550

ROE(LF), Cost of Equity,

Growth0.1195

Cost of Equity, Growth 0.0750

RELATIVE VALUATION

Synopsis

We analysed CapitaMall Asia against Asias Real Estateindustry using four different multiples: Price-Earningsratio (P/E), Price-Book ratio (P/B) Price-Net-Asset-Valueratio (P/NAV) and Dividend Yield-Price ratio (D/P).

Taking into account that CMA recognises its revenuesfrom Asia, we decided to compare it across the continent.Within Asia, we generated a list of comparable firms withsimilar fundamental characteristics in terms of marketcapitalization and business structure, after filtering outthose with missing and extreme data. The four multipleswere regressed against a total of 45 firms.

Defining the multiples

We emphasized on consistency of the multiples anduniformity of the variables used.

1) Consistency: The numerator and denominator of all thefour multiples used are equity values. Therefore, themultiples meet the consistency test.

2) Uniformity: TTM data were used for the comparison ofthe firms for all multiples except P/NAV and P/B whichused data from latest filing. Since BV and NAV are balance

sheet (B/S) figures, there is no problem with theuniformity test. The variables used in regression aredefined as follows:

Variables Used Method of Extraction of Variable

DividendPayout

TTM figure (Retrieved from Bloomberg)

WACC Cost ofEquity

TTM figure (Retrieved from Bloomberg)

GrowthBloomberg Estimated Long Term EPS Growth

(Retrieved from Bloomberg)

ROE(T12M) TTM figure (Retrieved from Bloomberg)

ROE(LF) Latest filing (Retrieved from Bloomberg)


23/34


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RELATIVE VALUATION

Application of the multiple

SIMPLE ANALYSIS

The values of the variables and median for the P/E ratio of thecomparable firms were calculated and compared against CMA. Thevalues are shown below:

Median ofComparable Firms

CMA

P/B Ratio 0.8962 0.8896

ROE 11.6445% 7.4753%

Cost ofEquity

11.6500% 10.7110%

Growth 7.2450% 3.1280%

From the analysis above, CMA seems to deserve a much lower P/Bratio owing to its low ROE and growth rate. However, the cost ofequity hovering below the industry median compensates a portion ofthe overvaluation. As such, CMA seems to be slightly overvalueddespite the lower P/B ratio relative to the industry.

However, the data collected may be skewed to the right, consideringthe average P/B value of 1.1958 differs considerably from the medianP/E ratio. Therefore, a further in-depth analysis using the regressionmodel is required to determine whether CMA is overvalued.

REGRESSION APPROACH

The initial 3 variables used for the regression analysis are ROE, betaand growth. However, after running the correlation test betweenpayout and beta, the absolute value was found to be relatively high. Assuch, taking into consideration that the fundamentals affecting the P/Bratio are ROE, growth and risk, we substituted beta with cost of equity.After which, we ran the regression analysis again and the results are asshown below:


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RELATIVE VALUATION

Application of the multiple

The analysis shows that the effects of the coefficients of the variableson the P/B ratio are similar to what we have expected.

With the regression output shown above, we formed the multi-regression line and substituted the respective values of CMA using the

equation:

With a current P/B ratio of 0.8896, we conclude CMA to beundervalued. This draws an inconsistent conclusion with that of the

simpleapproach.

As calculated previously, the expected share price of CMA is $1.43,which is higher than the current share price of $1.35.


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VALUE ENHANCEMENT STRATEGIES

We have identified some strategies that the firm could potentially taketo improve shareholder value.

Increase reinvestment rate

A higher reinvestment rate usually leads to a higher growth rate.However, a higher growth rate does not necessarily mean a highervalue as reinvestment might reduce cash flows due to the risk involve.Value can be created if a reinvestment can increase cash flows.

CMA can potentially recycle its capital through acquisitions. Using itscapital productively by monetizing its assets through its REITs, privatereal estate funds or joint ventures with strategic partners, CMA canrecycle its capital to invest in more retail properties while retaining itsintegrated shopping mall business. With a WACC of 9.43%, CMA canreinvest in projects with IRR greater than 10% to strengthen itsfinancial capacity to seize growth opportunities to further increase its

cash flows.Increase Leverage

With a leverage ratio considerably lower than the industry average,CMA has the potential to increase its debt capacity. Increasing leveragereduces the amount of equity needed to be financed. This increases theamount of tax savings which creates value.

At the optimum leverage ratio, CMA can potentially lower itsweighted cost of capital, which can increase the firms value.

However, CMA must take note that a higher leverage ratio will lead tohigher solvency risk.

Divest or liquidate inefficient assets

CMA can further enhance its overall value by divesting or liquidatingits inefficient assets to generate higher cash flow. In line with recyclingof capital, CMA can use the funds generated from divesting orliquidating the inefficient assets to invest in projects that generateshigher cash flows.

However, this strategy is only optimized when the divestiture orliquidation value is higher than that of the continuing value generatedby the inefficient asset. A possible area for divestment which CMA canlook into is Japan. There has been a decrease in NLA in Japan since Dec2009, with CMAs focus turning to China. With property prices in

Japan showing a slight negative growth, the option of divestingproperty in Japan for additional funds to reinvest in China seemsfeasible.


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RECONCILIATION

Using both the Sum-of-the-parts method and the Relativevaluation method, we arrived at different estimates of shareprice for CMA, namely $1.88 using SOTP and $1.43 usingrelative valuation. Although a difference of $0.44 existsbetween both projected values, they converge to a similarconclusion that CMAs stock price is currently undervalued.

Relative Valuation Projected Value:

Current

Current

Current

SOTP Valuation Projected Value:

A comparison between these 2 projections shows a differenceof $0.44. As can be seen above, the SOTP valuation predicts amuch higher price per share as compared to that of the relative

valuation model. We attribute these differences to 3 possiblereasons:1. Higher probability for a hard-landing scenario2. Complexity discount attached to CMA intricate businessmodel3. Sector undervaluation

Comparison:

HIGHERPROBABILITY FOR HARD LANDING SCENARIO

We believe that the market has factored in a higher probabilityfor a hard-landing scenario across property markets henceresulting in lower long term growth rates, causing the marketto factor in a lower share price as compared to our intrinsicvaluation of CMA. Based on our gross asset valuation ofCMAs property and its current net profit from its retailproperty business segment, we are able to estimate an intrinsicstable growth rate based on the following formula:

Trailing 12 months $Net Income 416,462

Proportion of property

income EBIT to total EBIT 95.47%

Net Income apportioned to

property business 397,582

Cost of Equity 9.29%

Gross Asset value of

CMA's Assets 9,239,584

Implied Stable growth rate

of CMA 4.78%


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Where

Solving for growth, implied growth rate of CMA assets is expected tobe 4.78% as compared to consensus estimates of 3.128%. Hence webelieve that the market is currently pricing a lower growth rate onCMA. Using our stable growth rate calculated, we arrived at a price of$1.52, approximately reconciling 20% of the difference.

COMPLEXITY DISCOUNT

CMA, being a property developer, manager and investor concurrently,has a much more complicated business model than many of its peers,which are either real estate development, real estate management orREITs. CMA also has a minority ownership in a large number ofsubsidiaries and joint ventures.

The larger the number of subsidiaries, the more complex the firmsfinancial statements can get. Probability for misleading potentialinvestors increases, and the lack of transparency in consolidatedfinancial statements can paint an erroneous picture of the actual valueof the firms assets, especially in properties with complicatedownership structure from different parties.

We believe that CMA, being a more complex firm than itscomparables, should deserve a large discount for complexity than itspeers. Hence, a further complexity discount variable can be factoredinto our subsequent regression equation.

SECTOR UNDERVALUATION

In relative valuation, we valued CMA relative to other firms in the realestate industry. However, it is possible that the market is undervaluingthe entire real estate sector on a whole and this might cause adifference in price between relative and intrinsic valuation.


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CONCLUSION

We will be putting forth our recommendation from on adiversified investors viewpoint, with medium to long-terminvestment horizon and moderate risk aversion.The unanimous conclusion from both DCF and relativevaluation is that CMA is undervalued with a current price of$1.35. DCF valuation indicates a price of S$1.88. Similarly, with

a current P/B ratio of 0.8896, relative valuation shows thatCMAs P/B ratio should be 0.9438, thus undervalued.Furthermore, CMA is now in a thriving property retail market,especially in the geographical regions of Asia where growthrates are expected to be high. In addition, expected corporatestrategies and further value enhancement projects to beundertaken by the firm only serves to boost optimism withininvestors in CMAs future performance.Taking into consideration both quantitative and qualitativeanalysis, our recommendation for investors is to BUY at the

current stock price of S$1.35.


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APPENDIX I:RELATIVE VALUATION

I: Relative valuation

P/ERATIO:

P/BRATIO:

P/NAVRATIO:

D/PRATIO:


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APPENDIX II:LIST OF COMPARABLES (SIMPLE AVERAGE)


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APPENDIX II:LIST OF COMPARABLES (SIMPLE AVERAGE)


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APPENDIX III:LIST OF COMPARABLES (REGRESSION)

NameMarket

CapP/B

Cost ofEquity

Growth ROE

PRUKSA REAL ESTATE PCL 806333440 1.556239 14.026 9.935 24.663

PARKWAYLIFE REAL ESTATE 857401728 1.274111 7.266 14.2 7.6978

STARHILL GLOBAL REIT 899975808 0.626119 8.241 3.935 8.782

ASCOTT RESIDENCE TRUST 916959232 0.802193 10.151 1.85 13.9235

BWP TRUST 918370560 0.896284 10.606 4.27 9.1615

FRASERS CENTREPOINT TRUST 950219008 1.038335 8.504 5.698 14.4673

GODREJ PROPERTIES LTD 957449408 5.182469 11.146 65 15.1378

GREENTOWN CHINA HOLDINGS 992562624 0.581519 17.019 22.2 15.4696

K-REIT ASIA 1091046528 0.697534 9.642 11.8 5.3835

CDL HOSPITALITY TRUSTS 1208835200 1.061226 11.366 3.695 10.2246

OBEROI REALTY LTD 1527993600 2.276649 11.577 17.5 20.1253

AUSTRALAND PROPERTY GROUP 1540098432 0.724962 12.74 4.66 9.1846

YANLORD LAND GROUP LTD 1573803264 0.742489 12.45 10.55 15.8535

MAPLETREE LOGISTICS TRUST 1623310848 0.990706 8.593 5.65 8.4832

LIPPO KARAWACI TBK PT 1695163136 1.564625 13.567 7.245 8.3407

INVESTA OFFICE FUND 1697842432 0.845484 11.619 3.735 7.1603

CHARTER HALL OFFICE REIT 1737333504 0.896461 12.529 -1.55 3.5386

BUMI SERPONG DAMAI PT 1887689856 2.472784 15.417 33 7.3613

LAND & HOUSES PUB CO LTD 1896030464 2.027477 16.98 8.273 14.7887

CHAMPION REIT 2008625408 0.415027 11.655 10.57 15.1181

SUNTEC REIT 2034302592 0.629179 10.518 -0.857 10.5495

FRANSHION PROPERTIES 2097396096 0.647617 12.059 26.115 8.6669

SP SETIA BHD 2268617728 2.103251 14.347 28.4 11.9159

HOPEWELL HOLDINGS LTD 2295502336 0.59444 9.366 -3 20.8242

COMMONWEALTH PROPERTY OFFICE 2355727616 0.834628 10.952 4.44 7.9392

CAPITACOMMERCIAL TRUST 2523269376 0.730691 10.13 -3.117 12.1034

UOL GROUP LTD 2724532480 0.701311 10.802 1.667 16.7696

AGILE PROPERTY HOLDINGS LTD 2950043904 0.917859 17.8780 25.2 36.5009

RENHE COMMERCIAL HOLDINGS 3060764672 1.615146 12.685 38.15 29.7074

KEPPEL LAND LTD 3137969152 0.964505 13.767 -2.365 27.2456

ASCENDAS REAL ESTATE INV TRT 3282987520 1.125996 7.278 2.923 18.5492

SOHO CHINA LTD 3433903104 1.047222 12.738 18.185 19.9425

HYSAN DEVELOPMENT CO 3548609536 0.583947 13.565 11.53 9.8699

CAPITAMALLS ASIA LTD 4091183872 0.889615 10.711 3.128 7.4753

AEON MALL CO LTD 4235446528 1.765965 14.38 8 13.3486

DEXUS PROPERTY GROUP 4298123776 0.813172 11.65 2.68 11.1675

LEND LEASE GROUP 4395759616 1.11074 13.733 10.65 14.2471

NEW WORLD DEVELOPMENT 5614776832 0.301385 17.013 -42.59 9.4774

GOODMAN GROUP 4762987008 1.031466 14.029 7.967 9.3452

CFS RETAIL PROPERTY TRUST 5280365056 0.869764 9.586 2.955 9.7753

KERRY PROPERTIES LTD 5374645248 0.690281 14.607 9.735 11.6445

GPT GROUP 5932604928 0.820669 10.838 3.365 10.384

CITY DEVELOPMENTS LTD 7473127424 1.450206 11.128 8.333 12.2286

DAITO TRUST CONSTRUCT CO LTD 7503045632 4.037395 9.352 5.6 19.4659DAIWA HOUSE INDUSTRY CO LTD 7605867520 0.862692 12.45 21.2 4.3593

Median 0.896284 11.65 7.245 11.6445

Average 1.195818556 12.0146 9.5669 13.2971

Correlation Between Cost of Equity

and Growth0.101705652

Correlation Between Cost of Equity

and ROE0.246487527

Correlation Between Growth and ROE 0.216931356


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DISCLAIMER

All information, terms and pricing set forth herein are indicative, based on, among

other things, market conditions at the time of writing and are subject to changewithout notice. This document is for informational purposes only. Acacia Researchhas prepared the information contained in this document in good faith. However, nowarranty (express or implied) is made as to the accuracy, completeness or reliabilityof any statements, estimates or opinions or other information contained in thisdocument (any of which may change without notice) and to the maximum extentpermitted by law, Acacia Research disclaims all liability and responsibility

(including, without limitation, any liability arising from fault or negligence on thepart of any or all of Acacia Research or of any of its members) for any direct orindirect loss or damage which may be suffered by any recipient through relying onanything contained in or omitted from this document. Any reader is stronglyadvised to make their own enquiries and seek independent professional adviceregarding information contained in this document. In no way shall Acacia Researchbe deemed to be holding itself out as a fiduciary of the recipient hereof. Therecipient must independently evaluate any investment including the tax, legal,accounting and credit aspects of any transaction. Instruments and trading strategiesof the type described herein may involve a high degree of risk, and the value ofsuch instruments may be highly volatile and may be adversely affected by the

absence of a market to provide liquidity. This material is proprietary to AcaciaResearch and may not be disclosed to third parties. Any unauthorised use,duplication or disclosure of this document is prohibited

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