29 July 2014

Page | 1 MCI (P) 046/11/2013 Ref. No.: SG2014_0111

CitySpring Infrastructure Trust Capitalising on demand for Data Centres

SINGAPORE | UTILITIES| NON-RATED NOTE

Rating: Non-rated

Company Overview CitySpring is the 1st infrastructure business trust to be listed on SGX Mainboard since 2007. Its portfolio comprises 100% of City Gas Trust, 70% of SingSpring Trust, 100% of Basslink (including 100% of Basslink Telecoms) and 100% of CityNet Infrastructure Management Pte Ltd. Recently it has announced forming of a new JV with Shimizu Corporation to develop and lease a data centre in Singapore. In this report, we provide a quick summary of the business for CitySpring. However, we do not commit to an active coverage and do not have a rating on the stock. Investment Strategy Principal objective is to invest in infrastructure assets and to provide unitholders with long-term, regular and predictable distributions as well as the potential for long-term capital growth. Focus within the infrastructure sector will be:

Utilities

Transportation/logistics

Communications CitySpring will seek investment opportunities globally, with a focus primarily on Asia, Middle East, Australia and New Zealand. Investment Merits

Stable stream of cash flows for the long-term.

Offers some hedge against inflation as higher costs are generally passed on to consumers through tariffs and variable payments.

Attractive distribution yield of 6.6%, above most of its peers.

Potential for capital growth through investment opportunities

Risk Factors

Competition from other natural gas retailers, as well as retailers of alternative energy sources such as electricity, LPG.

City Gas risks losing exclusive rights if town gas converts to natural gas.

Disruption to its operations, esp. in SingSpring, Basslink.

FX rate for AUD/SGD as distributions from Australian subsidiaries are in Australian dollar.

Valuation and Outlook In our report, we highlight the positive prospects and potential returns from the new JV to lease a Data Centre (DC) in Singapore. Growth in demand for DC space is expected to outstrip supply growth in Singapore and in Asia-Pacific region. We think this may be a start for CitySpring to venture further in the business of leasing wholesale DCs. Current trading price implies P/B of 2.1x, comparable to its peers and price over cash earnings of 12.7x. Taking into consideration future cash earnings (PSR est.) from the new JV with Shimizu, its 3-years average cash earning would potentially have an 8.5% upside by end FY17. With higher projected cash earnings, distributions to unitholders are likely set to rise. Distribution yield at current price is ~6.6%, above most of its peers. We opined that current price has yet to factor in the potential future cash earnings to be generated from the new JVC. We do not have a rating on CitySpring.

Target Price (SGD)

Forecast Dividend (SGD)

Closing Price (SGD)

Potential Upside

Company Description

Company Data

Raw Beta (Past 2yrs weekly data) 0.41

Market Cap. (USD mn / SGD mn) 612 / 759

Ent. Value (USD mn / SGD mn) 1440 / 1805

3M Average Daily T/O (mn) 0.667

Closing Px in 52 week range 0.45 0.50

Major Shareholders (%)

37.4

0.7

0.6

Valuation Method

N.A.

Analyst

Colin Tan

col intanwh@phi l l ip.com.sg

+65 6531 1221

1. Temasek Holdings

2. Norges Bank

3. Nuveen Asset Management

N.A.

N.A.

0.500

N.A.

CitySpring is an infrastructure bus iness trust

l i s ted on SGX Mainboard. Through its

subs idiaries , i t produces and reta i l town gas

(Ci ty Gas) and suppl ies desa l inated water

(SingSpring) in Singapore, transmitting

electrici ty in Austra l ia (Bass l ink) and is the

trustee-manager (Ci tyNet) of NetLink Trust,

which manages telecom assets in Singapore.

0

1

2

3

4

5

0.40

0.42

0.44

0.46

0.48

0.50

0.52

Jul-13

Au

g-13

Sep-13

Oct-1

3

No

v-13

Dec-13

Jan-1

4

Feb-14

Mar-1

4

Ap

r-14

May-1

4

Jun

-14

Volume, mnCITY SP EquitySTI (rebased)

----

CitySpring Infrastructure Trust 29 July 2014

Page | 2

Close to S$2 billion worth of assets in its portfolio CitySpring’s portfolio comprises 100% of City Gas Trust (City Gas), 70% of SingSpring Trust (SingSpring), 100% of Basslink (including 100% of Basslink Telecoms) and 100% of CityNet Infrastructure Management Pte. Ltd. (CityNet). #1. City Gas City Gas is the sole producer and retailer of town gas in Singapore and also the sole user of the low-pressure piped town gas supply network in Singapore. City Gas holds the sole licence from the Energy Market Authority of Singapore to produce and retail town gas in Singapore and is regulated by Energy Market Authority (EMA) in respect of such activities. The licence also authorises it to retail natural gas. The structure of the gas industry in Singapore is shown in the following diagram: Fig 1: Singapore Gas Industry

Source: EMA The town gas pipeline network serves ~50% of households in Singapore. Town gas is used mainly by domestic and commercial customers for cooking and water heating and is manufactured and retailed by City Gas Pte Ltd. City Gas established a business venture with Osaka Gas Co., Ltd. (“Osaka Gas”) to market and sell natural gas to industrial customers in Singapore. The entity, City-OG Gas Energy Services Pte Ltd, is 51% owned by City Gas and 49% owned by Osaka Gas. Cash earnings is contributed by its town gas production and the retail business. Customer base continues to grow from 670,000 in FYE13 to about 690,000 in FYE14, along with rise in town gas sales volume. City Gas charges customers based on gas tariffs (subject to price control by EMA) and is expected to fully recover its fuel costs over a period of time through tariff adjustments mechanism. Town gas tariffs tracks the High Sulphur Fuel Oil (HSFO) forward price closely. Fig 2: City Gas Business Overview

Source: Company

The gas system in Singapore consists of two separate gas pipeline networks namely, the town gas pipeline network and the natural gas pipeline network. Natural gas is imported into Singapore as piped natural gas from Malaysia and Indonesia via four offshore pipelines. Singapore also imports liquefied natural gas (LNG) from various countries across the world.

City Gas’s production facility in Senoko Avenue, Singapore, has a designed capacity of 1.6 million m3 per day.

CitySpring Infrastructure Trust 29 July 2014

Page | 3

#2. SingSpring SingSpring owns Singapore’s first large-scale seawater desalination plant, that can produce 136,380 m3 (30 million gallons) of desalinated potable water per day, and capable of meeting about 10% Singapore’s current water needs. The desalination plant serves as one of the Four National Taps to provide water for Singapore’s needs. SingSpring and Singapore’s national water agency, the Public Utilities Board (PUB), entered into a 20-year term water purchase agreement (WPA) which commenced in Dec 2005. This ensures a long-term and predictable cashflow for SingSpring till Dec 2025. SingSpring receives 2 forms of payments from PUB throughout the term of the 20-year WPA:

1. Capacity payments: for making available the full water capacity of the desalination plant upon demand and does not vary with the volume of water supplied.

2. Output payments: for the variable costs in supplying water to PUB, whereby the payment is pegged to the volume of water supplied.

Fig 3: Business Overview of SingSpring

Source: Company #3. Basslink Basslink owns and operates the Basslink Interconnector, a 370-km HVDC undersea electricity interconnector between the electricity grids of the States of Victoria and Tasmania across the Bass Strait in Australia. It is the only electricity interconnector between Tasmania and mainland Australia. Basslink enhances the availability and security of electricity supply to both Tasmania and Victoria. At the same time, the interconnector enables Hydro Tasmania to trade in Australia’s National Electricity Market (NEM). Basslink receives facility fee paid from Hydro Tasmania for operation of the Basslink Interconnector under a 25-year term Basslink Services Agreement (BSA), which commenced in 2006. The facility fee is based on Basslink’s cumulative availability in a calendar year and payable in full if availability is greater than 97%. The BSA includes a Commerical Risk Sharing Mechanism (CRSM), whereby CRSM payments are based on the differences between the high and low spreads of Victoria’s electricity pool prices, subject to a cap of +25% and a floor of -25% to the unadjusted facility fee. The CRSM payments can be paid either by Basslink to Hydro Tasmania or Hydro Tasmania to Basslink, depending on the value of arbitrage opportunities presented by price volatility in the Victorian spot market. A low volatility may lead to negative CRSM (i.e. Basslink pay to Hydro Tasmania), and hence, a negative impact on revenue and earnings contribution from Basslink.

Hydro-Electric Corporation (Hydro Tasmania) is an entity owned by the State of Tasmania. Basslink’s principal source of revenue is a facility fee paid monthly by Hydro Tasmania for the operation of the interconnector.

SingSpring engages Hyflux Engineering Pte Ltd, a subsidiary of Hyflux Ltd, as the Operations and Maintenance operator for SingSpring, to ensure it will meet all requirements under the WPA.

CitySpring Infrastructure Trust 29 July 2014

Page | 4

Fig 4: Basslink Business Model

Source: Hydro Tasmania Basslink Telecom Basslink also has a number of fibre optic cables carrying hi-speed telecommunication traffic. Basslink Telecoms, which is wholly owned by Basslink, offers a range of wholesale telecoms transmission services between Hobart in Tasmania and Melbourne in Victoria. Basslink will sell high-capacity network connectivity from Victoria to Tasmania and onward to Hobart, under an agreement with Aurora Energy and the Tasmanian Government. #4. CityNet CityNet is the trustee-manager for NetLink Trust which consists of certain telecommunications infrastructure assets in Singapore since July 2011. NetLink Trust was established as part of the Info-Communications Development Authority’s (IDA) effective open access requirements under Singapore’s Next Generation Nationwide Broadband Network (NGNBN). SingTel transferred certain infrastructure assets (ducts, manholes and exchange buildings) to NetLink Trust as part of its undertaking to IDA. SingTel is the sole unitholder of NetLink Trust. City Net receives annual management fee in its capacity as trustee-manager of NetLink Trust. Acquisition of OpenNet in 2013 CityNet acquired OpeNet Pte. Ltd. (OpenNet) in November 2013, whereby the principal activities of OpenNet are to design, build and operate the fibre network for NGNBN. CityNet will receive an additional S$2m to its annual management fee of about S$2.1m following the acquisition. Its appointment as trustee-manager will be extended for a 3-year period from the completion of acquisition date. Fig 5: Group Structure

Source: Company

OpenNet is appointed as the Network Company, which operates at the passive infrastructure layer (1st layer) of the NGNBN Industry Structure.

AEMO (Australian Energy Market Operator) the NEM. Basslink will transfer any inter-regional revenue generated, which arise from the difference between Tasmanian and Victorian spot prices, to Hydro Tasmina in exchange for facility fee.

*Note: The new JVC with Shimizu is not included in the diagram. Also not included is the 51%-owned City-OG Gas Energy Services under City Gas.

CitySpring Infrastructure Trust 29 July 2014

Page | 5

Financials CitySpring uses cash earnings to measure performance instead of accounting profits/losses. Cash earnings remove the effect of accounting treatment of non-cash expenses (which are fairly large) it has on its financial statements and thus better reflects the cash flows generated by the infrastructure assets. Cash earnings contribution City Gas contributes the most and over 50% on average to CitySpring’s core cash earnings (Gas, Water, Electricity) over the last 5 years. Decline in cash earnings from City Gas was mainly due to rise in fuel costs which fluctuate daily on the open market. City Gas however, can only change the tariffs at which it charges its customers once every 3 months, under EMA’s regulations. This leads to higher volatility on returns from City Gas per fiscal period basis. On a longer-term basis, City Gas is expected to have stable cash earnings as fuel costs are passed through to end users. Cash earnings from Basslink was lower in FY14 mainly due to higher negative CRSM, higher legal costs incurred for various contract disputes with Hydro Tasmania and lower contribution. Excluding FY14, Basslink’s cash earnings typically average S$20m- 30m over the last 5 years. SingSpring’s cash earnings average about S$16-17m. Cash earnings over capital invested, equity CitySpring’s total cash returns on equity average ~18.6% over the last 5 fiscal years. Cash returns from City Gas and Basslink exhibit higher volatility due to lagging gas tariff and CRSM respectively. Total cash return over capital invested was about ~3.9% over the same period, whereby City Gas and SingSpring generated relatively higher cash return over assets to Basslink. Fig 6: Revenue Contribution Fig: 7: Asset Mix by Segments (FY14)

-5%

0%

5%

10%

15%

20%

0

100

200

300

400

500

FY09 FY10 FY11 FY12 FY13 FY14

Gas (SGD mn) Water (SGD mn)Electricity (SGD mn) Total %y-y

550 , 28%

210 , 11%1,085 , 56%

103 , 5%

Gas (SGD mn) Water (SGD mn) Electricity (SGD mn) Others (SGD mn)

Fig 8: Cash Earnings Contribution Fig 9: Cash Earnings (CEPU) vs Distribution (DPU) per unit

0

500

1,000

1,500

2,000

0

2

4

6

8

10

12

14

FY08 FY09 FY10 FY11 FY12 FY13

CEPU (SG cents) DPU (SG cents) Units ('mn)

(50)

(25)

0

25

50

75

100

125

FY09 FY10 FY11 FY12 FY13 FY14

Gas (SGD mn) Water (SGD mn) Electricity (SGD mn)Corporate (SGD mn) Total (SGD mn)

Fig 10: Cash Return on Assets/Capital Invested Fig 11: Cash Return on Equity Basis

0%

5%

10%

15%

FY10 FY11 FY12 FY13 FY14

ROA: Gas (%) ROA: Water (%)ROA: Electricity (%) CitySpring CROCI (%)

5%

10%

15%

20%

25%

30%

FY10 FY11 FY12 FY13 FY14

ROE: Gas (%) ROE: Water (%)ROE: Electricity (%) CitySpring ROE (%)

Source: Company, PSR

CitySpring Infrastructure Trust 29 July 2014

Page | 6

New Joint Venture with Shimizu Corporation CitySpring recently announced on 30 June 2014 that it has entered into a joint venture, DataCentre One Pte Ltd (JVC), with Shimizu Corporation (Shimizu) to develop and lease a purpose built data centre (DC) in Singapore. The JVC will be 51% owned by CitySpring while the remaining 49% will be owned by Shimizu. The JVC will lease the DC to 1-Net Singapore Pte Ltd, a wholly-owned subsidiary of MediaCorp, for a period of 20 years upon commencement of the Data Centre (DC). The DC is expected to be completed by 1st quarter of 2016. We think this may be a start for CitySpring to venture further in the business of leasing wholesale DCs to capture growing demand for DC space in Asia-Pacific region. According to Broadgroup, an international consulting firm, DC space is forecasted to grow at 8.5% CAGR in Singapore and 11.7% CAGR in Asia-Pacific region leading up to 2015. The growth will be fueled by growing cloud traffic, driven by users accessing the cloud for Web surfing, video streaming and digital collaboration across devices. Demand growth for DC space is expected to outstrip supply growth in the region. Management also noted there are relatively fewer purpose-built data centres in the region. Hence this is a potential market for CitySpring to venture in. Total investment for the data centre is about S$130m, which will be funded approximately 50:50 by equity financing and long-term debt financing. Assuming the investment is able to generate ~18% on the cash returns over equity, CitySpring may see about S$6m estimated cash earnings (taking into account CitySpring’s 51% stake) annually on average over the next 20 years from FY17. This would potentially lead to approximately 8.5% upside over its 3-year average cash earnings (S$70m). Fees payable by 1-Net to the JVC are expected to be in the range of S$11m to S$18m yearly. Precise fees are of a commercially sensitive nature and therefore, are not disclosed. Fig 12: Proposed “1-Net North” Data Centre to be built by the JVC

Source: 1-Net Singapore

The Data Centre will have 4 floors of data centre halls and 1 floor of office and ancillary space. (gross floor area of approximately 214,000 square feet). It will be designed to be both carrier-neutral and Tier 3 data centre (i.e. 99.98% availability: redundant components and multiple active paths for cooling and power distribution).

CitySpring Infrastructure Trust 29 July 2014

Page | 7

Investment Merits Revenue comprises mainly of fixed payments over its assets, hence it is largely stable and generally predictable. Higher costs from operations and maintenance are generally passed on to its consumers (e.g. through gas tariffs, output payment to SingSpring), hence earnings are protected against inflation in some form. CitySpring offers an attractive distribution yield of 6.6%. CitySpring will also continue to look for investment opportunities aligned with its long-term investment strategy to achieve growth for its unitholders. Risk Factors Liberalisation of natural gas retail market from 1 April 2014 Prior to opening up of the natural gas retail market in Singapore, all gas retailers other than City Gas are restricted to retailing natural gas only in Jurong Island and the Jurong and Tuas industrial areas (“JIT areas”). With effect from 1 April 2014, gas retailers are able to sell their natural gas services to premises connected to the natural gas network outside the JIT areas. As of date, there are 8 gas retailers that are licensed to retail natural gas in Singapore. Conversion of town gas to natural gas CitySpring risks losing market share of its exclusive franchise should the town gas supply network be converted to carrying natural gas. We understand that there were plans to progressively convert the town gas network and until then, City Gas would continue to be the sole retailer for town gas, which mainly caters to residential households. Full conversion, which includes converting the piped gas network and replacing town gas appliances of customers to work with natural gas, may take 6-7 years and will have to be carried out in phases, according to estimates. Is the gearing high? As its infrastructure assets are able to produce steady cash flows which are largely not affected by volume or utilisation rate over the long term, optimal debt structure can be pursued by CitySpring, while ensuring financial flexibility to service its debt service obligations. With the purchase and cancellation of the Basslink bonds in FY12, overall debt ratio for CitySpring has come down to 67% since. However, we do view that the gearing for Basslink is high, considering that liabilities are over 90% of its assets and finance costs weigh heavily on Basslink’s earnings. In minimising interest rate risks, CitySpring also employs hedging by entering into swaps or other derivatives as its assets were acquired using partly debt financing at variable rates. Other risk factors:

AUD/SGD FX rate, as Basslink make its distribution in Australian dollar

Operation disruptions to its infrastructure

Competition from other LPG retailers and retailers of electricity source in both commercial and residential markets.

Valuation and Outlook In our report, we highlight the positive prospects and potential returns from the new JV to lease a Data Centre (DC) in Singapore. Growth in demand for DC space is expected to outstrip supply growth in Singapore and in Asia-Pacific region. We think this may be a start for CitySpring to venture further in the business of leasing wholesale DCs. Current trading price implies P/B of 2.1x, comparable to its peers and price over cash earnings of 12.7x. Taking into consideration future cash earnings (PSR est.) from the new JV with Shimizu, its 3-years average cash earning would potentially have an 8.5% upside by end FY17. With higher projected cash earnings, distributions to unitholders are likely set to rise. Distribution yield at current price is ~6.6%, above most of its peers. We opined that current price has yet to factor in the potential future cash earnings to be generated from the new JVC. We do not have a rating on CitySpring.

Licensed Gas Retailers in Singapore: 1. Gas Supply Pte Ltd 2. SembCorp Gas Pte Ltd 3. City Gas Pte Ltd 4. Green Energy Supply Pte Ltd 5. City-OG Gas Energy Services Pte Ltd 6. Pavillion Gas Pte Ltd 7. Keppel Gas Pte Ltd 8. Singapore Gas Pte Ltd

CitySpring Infrastructure Trust 29 July 2014

Page | 8

Peer Comparison Fig 13: Comparison between CitySpring and peers listed in Australia and Singapore Source: Bloomberg, PSR

Market Prices as of: 29-Jul-14 Price Mkt Cap

Company FYE (LC$) (SG$'mn) FY13/14 FY13/14 FY13/14 FY14/15F FY13/14

ASX-Listed

Origin Energy Ltd 06/2013 14.18 18,253 1.0 12.4 4.0 3.5 24.1

APA Group 06/2013 7.35 7,168 2.0 15.0 5.9 4.9 56.0

AGL Energy Ltd 06/2013 14.58 9,521 1.1 8.3 4.4 4.4 23.3

SP Ausnet 03/2014 1.35 5,405 6.8 12.6 6.4 6.2 57.2

DUET Group 06/2013 2.41 3,705 1.8 9.8 8.2 7.1 66.7

Spark Infrastructure Group 12/2013 1.91 3,263 1.3 43.0 6.8 6.1 33.4

Energy Developments Ltd 06/2013 4.98 986 2.4 7.0 2.4 4.6 50.0

Energy World Corp Ltd 06/2013 0.36 718 1.1 16.9 0.0 n.a. 35.2

Envestra Ltd 06/2013 1.33 2,778 2.1 10.5 6.2 4.8 62.5

ERM Power Ltd 06/2013 2.04 569 2.0 10.5 4.2 5.9 35.0

Pacific Energy Ltd 06/2013 0.50 211 1.2 5.8 2.5 4.0 24.5

Average 2.1 13.8 4.6 5.2 42.5

SGX-Listed

Hyflux Ltd 12/2013 1.18 977 2.0 18.7 2.0 1.9 52.9

Hankore Environment Tech 06/2013 0.89 452 0.5 11.6 0.0 n.a. 23.8

Keppel Infrastructure Trust 12/2013 1.03 649 1.0 - 4.5 7.6 0.0

Average 1.2 15.1 2.2 4.8 25.6

Average (all) 1.9 14.0 4.1 5.1 38.9

CitySpring Infrastructure Trust 03/2014 0.50 752 2.1 12.4 6.6 6.7 66.6

DIV YIELD (%)P/B EV/EBITDA DEBT RATIO

CitySpring Infrastructure Trust 29 July 2014

Page | 9

Appendix Fig 1: Gas Volume Sold by City Gas Fig 2: Water Capacity Availability of SingSpring

Fig 3: Availability of Basslink

Source: Company Fig 4: Basslink Overview

Source: Company, 2007

CitySpring Infrastructure Trust 29 July 2014

Page | 10

Board Of Directors Daniel Cuthbert Ee Hock Huat (Chairman, Independent Director) Mr Ee serves on the boards of Citibank Singapore Limited and Surface Mount Technology (Holdings) Limited. He is also the Chairman, Board of Advisors of Walton International Group Limited. He is the Deputy Chairman of the Securities Industry Council and a Fellow and Council Member of Singapore Institute of Directors. Mr Ee had also served as the Chairman of Gas Supply Pte Ltd from 2002 to July 2010 and on the board of National Environment Agency from 2006 to March 2012. He was a Member of the Corporate Governance Council from February 2010 till its dissolution in May 2012. Mr Ee has more than 14 years of experience in the banking sector, in particular in corporate finance. Prior to that, he had served in various capacities in the public sector from 1975 to 1985. Mr Ee graduated from the University of Bath, UK with a Bachelor of Science in Systems Engineering (1st Class Honours) and has a Master of Science in Industrial Engineering from the National University of Singapore. He was awarded the Public Service Medal in 2003. Other Non-Executive and Independent Directors:

Ong Beng Teck (Non-Executive)

Mark Andrew Yeo Kah Chong (Independent)

Yeo Wilco (Independent)

Haresh Jaisinghani (Independent) Key Executive Officers Tong Yew Heng, CEO Prior to joining the Trustee-Manager, Mr Tong was with Temasek for 11 years from 1995 to 2006 where he held various positions, including as a director of investments (energy and resources) where he led a team responsible for sourcing, evaluating and making investments in the energy and resources sector.Mr Tong’s experience in Temasek includes stewardship of companies in Temasek, direct investments, investments in private equity funds, mergers and acquisitions, privatisations and divestments. Mr Tong graduated from the University of Strathclyde (United Kingdom) in 1988 with a Bachelor of Engineering (Hons) degree and holds a Master of Business Administration from the Nanyang Technological University. He also attended the Programme for Executive Development at the International Institute of Management Development, Switzerland in 2000 and is a member of the Institute of Singapore Chartered Accountants. Tan Cheong Hin, CIO Prior to joining the Trustee-Manager, Mr Tan was with Temasek for 13 years from 1995 to 2008 where he held various positions, including as a director of investments whose responsibilities include stewardship of Temasek’s portfolio companies, joint ventures, divestments, investments in private equity funds and direct investments. From 2008 to 2009, Mr Tan was with the Raffles Medical Group as its Business Development Director. From 2010 to 2011, Mr Tan was the Senior Vice President of the direct investment business of the Islamic Bank of Asia, a subsidiary of DBS Bank Ltd. Mr Tan graduated from the National University of Singapore with Bachelor of Business Administration (First Class Honours) and Master of Science (Management) degrees. He is a Chartered Financial Analyst (CFA) charter holder. He also attended the Advanced Management Program at INSEAD in Fontainbleau (France). Susanna Cher Mui Sim, CFO & Company Secretary Prior to joining the Trustee-Manager, Ms Cher was the Chief Financial Officer of Singapore publicly listed healthcare company, Thomson Medical Centre Limited (“TMC”). Ms Cher also managed the Patient Service Centre, Business Office, Management Information Systems, Central Supplies Departments and assisted with handling of Investor Relations. She was a key team member who contributed to TMC’s listing on SGX-ST, SESDAQ in 2005. Prior to joining TMC, Ms Cher was the Group Management Accountant of Wearne Brothers Management Services Pte. Ltd., the management arm of WBL Corporation Limited, a company listed on the Mainboard of the SGX-ST. Ms Cher graduated from the National University of Singapore in 1982 with a degree in Accountancy and is a member of the Institute of Singapore Chartered Accountants and CPA Australia. Ms Cher is responsible for all aspects of financial reporting and treasury activities, including distribution planning, cash management, risk management, co-ordinating with external auditors, managing tax affairs and other finance-related management issues. She handles the human resources and administration functions and is also the Joint Company Secretary.

CitySpring Infrastructure Trust 29 July 2014

Page | 11

Jacqueline Ong, Vice President (Investment) Ms Ong was the Vice President (Investments) and Economist with AIMAC for about eight years prior to joining the Trustee-Manager. AIMAC is an infrastructure fund management company which manages a US$400 million infrastructure fund with focus on the Asian infrastructure industries like power, water/waste, roads/logistics, telecommunications and urban development. Ms Ong was responsible for deal-sourcing, due diligence, deal finalisation, post-investment management and divestments. She also provides analysis of country/sector development in areas of interest. She was previously a Senior Regional Economist with IDEAglobal which has offices in Singapore, London, New York and provides independent economic research and market analysis worldwide. Ms Ong helped lead the emerging market research team in macroeconomic analysis and formulating strategies. She is also well-versed in conducting seminars/talks for the banking community on various economic issues. Ms Ong holds a Master’s degree in Applied Economics and a Bachelor of Arts degree in Economics/Statistics from the National University of Singapore. Marc Liu, Vice President (Investment) Mr Liu joined the Trustee-Manager in Jan 2007 after City Gas was restructured to become a core asset of CitySpring Infrastructure Trust. As a member of CitySpring’s investment team, he is responsible for the identification, evaluation and execution of infrastructure related investment projects. Mr Liu was Senior Manager, Business Development at City Gas for 2 years from 2005 to 2006. Mr Liu earned his Bachelor of Economics degree from Shanghai University and received his Masters in Finance from San Diego State University, where he graduated with honors as Beta Gamma Sigma. Mr Liu is a Chartered Financial Analyst (CFA) charterholder and a member of CFA Singapore. Mr Liu also serves as Vice President, Operations and Commercial at SingSpring Pte Ltd, the trustee-manager of SingSpring Trust. Annie Khung, Vice President (Finance) Ms Khung has been with CitySpring since 2007. She assists in the reporting of the Group results, budgeting, taxation and other financial-related matters. She also reviews the financial performance of the subsidiary operating companies and assists in developing Group financial policies and procedures. Prior to joining CitySpring, Ms Khung was with Ernst & Young LLP where she left as an Audit Manager. Ms Khung graduated with degrees in Bachelor of Commerce and Bachelor of Finance from the University of Adelaide, Australia. She is a non-practising member of both the Institute of Singapore Chartered Accountants and CPA Australia.

Source: Company

CitySpring Infrastructure Trust 29 July 2014

Page | 12

Fig: Revenue Contribution Fig: Asset mix by Operations

Fig: Cash Earnings Contribution Fig: DPS with Dividend payout

Fig: Cash Flows Fig: Gearing

Fig: Cash Return over Assets/ Capital Invested Fig: Cash Return over Equity Basis

-5%

0%

5%

10%

15%

20%

0

100

200

300

400

500

FY09 FY10 FY11 FY12 FY13 FY14

Gas (SGD mn) Water (SGD mn)Electricity (SGD mn) Total %y-y

0%

5%

10%

15%

FY10 FY11 FY12 FY13 FY14

ROA: Gas (%) ROA: Water (%)ROA: Electricity (%) CitySpring CROCI (%)

0

500

1,000

1,500

2,000

0

2

4

6

8

10

12

14

FY08 FY09 FY10 FY11 FY12 FY13

CEPU (SG cents) DPU (SG cents) Units ('mn)

550 , 28%

210 , 11%1,085 , 56%

103 , 5%

Gas (SGD mn) Water (SGD mn) Electricity (SGD mn) Others (SGD mn)

0

20

40

60

80

100

120

(100)

(50)

0

50

100

150

FY09 FY10 FY11 FY12 FY13 FY14

CFO (SGD mn) CFI (SGD mn)CFF (SGD mn) FCF (SGD mn)

5%

10%

15%

20%

25%

30%

FY10 FY11 FY12 FY13 FY14

ROE: Gas (%) ROE: Water (%)ROE: Electricity (%) CitySpring ROE (%)

(50)

(25)

0

25

50

75

100

125

FY09 FY10 FY11 FY12 FY13 FY14

Gas (SGD mn) Water (SGD mn) Electricity (SGD mn)Corporate (SGD mn) Total (SGD mn)

0%

20%

40%

60%

80%

100%

0

500

1,000

1,500

2,000

FY09 FY10 FY11 FY12 FY13 FY14

net debt (SGD mn) Debt ratio (%)

Source: Company, PSR

CitySpring Infrastructure Trust 29 July 2014

Page | 13

FYE Mar FY12 FY13 FY14 FYE Mar FY12 FY13 FY14

Income Statement (SGD mn)

Revenue 481 524 521 PPE 1,205 1,161 1,008

EBITDA 132 149 119 Intangibles 416 404 388

Depreciation & Amortisation (56) (55) (52) Associates & JVs 0 0 0

EBIT 76 95 67 Long term investments 0 0 0

Net Finance (Expense)/Inc (89) (69) (65) Others 168 151 146

Other i tems 0 0 0 Total non-current assets 1,790 1,716 1,543

Associates & JVs 0 0 0 Inventories 15 18 20

Exceptional i tems 0 0 0 Accounts Receivables 64 65 69

Profit Before Tax (12) 26 2 Investments 0 0 0

Taxation (23) (6) (2) Cash 161 202 304

Profit After Tax (35) 20 0 Others 10 11 12

Minori ty interest (1) (1) (2) Total current assets 250 297 405

Net Income, reported (36) 18 (2) Total Assets 2,040 2,013 1,948

Cash Earnings 54 95 60 Short term loans 9 138 152

Accounts Payables 90 99 106

Others 7 19 24

FYE Mar FY12 FY13 FY14 Total current liabilities 107 256 282

Per share data (SGD) Long term loans 1,344 1,207 1,145

EPU, reported -0.03 0.01 0.00 Others 156 185 154

CEPU 0.04 0.06 0.04 Total non-current liabilities 1,500 1,392 1,299

DPU 0.04 0.03 0.03 Non-control l ing interest 9 9 11

BVPU 0.28 0.23 0.23 Shareholder Equity 424 356 355

FYE Mar FY12 FY13 FY14 FYE Mar FY12 FY13 FY14

Cashflow statements (SGD mn) Valuation Ratios

CFO P/CE (X), adj. 7.9 7.3 12.7

Profi t before tax (12) 26 2 P/B (X) 1.2 2.0 2.1

Adjustments 130 127 114 EV/EBITDA (X) 12.9 12.3 14.7

WC changes 7 10 20 Dividend Yield (%) 10.5% 7.1% 6.6%

Cash generated from ops 125 162 136 Growth & Margins (%)

Taxes pa id (0) (0) (0) Growth

Cashflow from ops 58 106 83 Revenue 13.4% 8.8% -0.5%

CFI EBITDA 6.4% 13.3% -20.0%

CAPEX, net (3) (3) (2) EBIT 10.1% 24.0% -28.9%

Others 0 0 39 Cash Earnings -23.2% 75.2% -36.9%

Cashflow from investments (3) (2) 38 Margins

CFF EBITDA margin 27.4% 28.5% 22.9%

Unit i s suance 0 0 0 EBIT margin 15.8% 18.0% 12.9%

Loans , net of repayments (2) (9) 40 Net Profi t Margin -7.3% 3.7% 0.1%

Distributions pa id (45) (50) (50) Key Ratios

Others 14 1 (13) CROE (%) 14.1% 24.4% 16.9%

Cashflow from financing (33) (59) (23) CROA (%) 2.6% 4.7% 3.0%

Net change in cash 21 45 98

Effects of exchange rates (0) (0) (3) Net Debt/(Cash) 1,192 1,142 993

CCE, end 120 165 260 Net Gearing (X) 2.8 3.2 2.8

Balance Sheet (SGD mn)

*Historical multiples and yields are based on historical prices

Source: Company Data, PSR est

CitySpring Infrastructure Trust 29 July 2014

Page | 14

Total Returns Recommendation Rating

> +20% Buy 1

+5% to +20% Accumulate 2

-5% to +5% Neutra l 3

-5% to -20% Reduce 4

<-20% Sel l 5

Ratings History

Remarks

We do not base our recommendations entirely on the above quanti tative

return bands . We cons ider qual i tative factors l ike (but not l imited to) a s tock's

ri sk reward profi le, market sentiment, recent rate of share price appreciation,

presence or absence of s tock price cata lysts , and speculative undertones

surrounding the s tock, before making our fina l recommendation

PSR Rating System

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Jan-1

1

Ap

r-11

Jul-11

Oct-11

Jan-1

2

Ap

r-12

Jul-1

2

Oct-12

Jan-13

Ap

r-13

Jul-1

3

Oct-13

Jan-14

Ap

r-14

Jul-1

4

Oct-14

Source: Bloomberg, PSRMarket PriceTarget Price

12345

CitySpring Infrastructure Trust 29 July 2014

Page | 15

Important Information

This publication is prepared by Phillip Securities Research Pte Ltd., 250 North Bridge Road, #06-00, Raffles City Tower, Singapore 179101 (Registration Number: 198803136N), which is regulated by the Monetary Authority of Singapore (“Phillip Securities Research”). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below. This publication has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this document by mistake, please delete or destroy it, and notify the sender immediately. Phillip Securities Research shall not be liable for any direct or consequential loss arising from any use of material contained in this publication. The information contained in this publication has been obtained from public sources, which Phillip Securities Research has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this publication are based on such information and are expressions of belief of the individual author or the indicated source (as applicable) only. Phillip Securities Research has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete, appropriate or verified or should be relied upon as such. Any such information or Research contained in this publication is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, (i) be liable in any manner whatsoever for any consequences (including but not limited to any special, direct, indirect, incidental or consequential losses, loss of profits and damages) of any reliance or usage of this publication or (ii) accept any legal responsibility from any person who receives this publication, even if it has been advised of the possibility of such damages. You must make the final investment decision and accept all responsibility for your investment decision, including, but not limited to your reliance on the information, data and/or other materials presented in this publication. Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this material are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this publication is not indicative of future results. This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This publication should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this publication has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this material is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this publication involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks. Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this research should take into account existing public information, including any registered prospectus in respect of such product.

Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this publication, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this publication.

Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment. To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold a interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this publication. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, which is not reflected in this material, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this material. The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.

Section 27 of the Financial Advisers Act (Cap. 110) of Singapore and the MAS Notice on Recommendations on Investment Products (FAA-N01) do not apply in respect of this publication.

CitySpring Infrastructure Trust 29 July 2014

Page | 16

This material is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this material may not be suitable for all investors and a person receiving or reading this material should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products. Please contact Phillip Securities Research at [65 65311240] in respect of any matters arising from, or in connection with, this document. This report is only for the purpose of distribution in Singapore.

Contact Information (Singapore Research Team) Management Chan Wai Chee (CEO, Research - Special Opportunities)

+65 6531 1231 Research Operations Officer Jermaine Tock +65 6531 1240

Joshua Tan (Head, Research - Equities & Macro)

+65 6531 1249

Equities | Macro Market Analyst | Equities US Equities Joshua Tan +65 6531 1249 Kenneth Koh +65 6531 1791 Wong Yong Kai +65 6531 1685 Soh Lin Sin +65 6531 1516 Finance Real Estate Real Estate Benjamin Ong +65 6531 1535 Caroline Tay +65 6531 1792 Lucas Tan +65 6531 1229 Telecoms Transport Colin Tan +65 6531 1221 Richard Leow, CFTe +65 6531 1735

Contact Information (Regional Member Companies) SINGAPORE

Phillip Securities Pte Ltd Raffles City Tower

250, North Bridge Road #06-00 Singapore 179101 Tel +65 6533 6001 Fax +65 6535 6631

Website: www.poems.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd

B-3-6 Block B Level 3 Megan Avenue II, No. 12, Jalan Yap Kwan Seng, 50450

Kuala Lumpur Tel +603 2162 8841 Fax +603 2166 5099

Website: www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong

Tel +852 2277 6600 Fax +852 2868 5307

Websites: www.phillip.com.hk

JAPAN

Phillip Securities Japan, Ltd. 4-2 Nihonbashi Kabuto-cho Chuo-ku,

Tokyo 103-0026 Tel +81-3 3666 2101 Fax +81-3 3666 6090

Website:www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A Jakarta 10220 – Indonesia

Tel +62-21 5790 0800 Fax +62-21 5790 0809

Website: www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co Ltd

No 550 Yan An East Road, Ocean Tower Unit 2318,

Postal code 200001 Tel +86-21 5169 9200 Fax +86-21 6351 2940

Website: www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak,

Bangkok 10500 Thailand Tel +66-2 6351700 / 22680999

Fax +66-2 22680921 Website www.phillip.co.th

FRANCE King & Shaxson Capital Limited

3rd Floor, 35 Rue de la Bienfaisance 75008 Paris France

Tel +33-1 45633100 Fax +33-1 45636017

Website: www.kingandshaxson.com

UNITED KINGDOM King & Shaxson Capital Limited

6th Floor, Candlewick House, 120 Cannon Street, London, EC4N 6AS

Tel +44-20 7426 5950 Fax +44-20 7626 1757

Website: www.kingandshaxson.com

UNITED STATES Phillip Futures Inc

141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building

Chicago, IL 60604 USA Tel +1-312 356 9000 Fax +1-312 356 9005

AUSTRALIA PhillipCapital

Level 12, 15 William Street, Melbourne, Victoria 3000, Australia

Tel +61-03 9629 8288 Fax +61-03 9629 8882

Website: www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

2nd Floor,Lakshmans Building, No.321, Galle Road, Colombo 03, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 2429 199 Website: www.ashaphillip.net

INDIA

PhillipCapital (India) Private Limited No. 1, C‐Block, 2nd Floor, Modern Center , Jacob

Circle, K. K. Marg, Mahalaxmi Mumbai 400011 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955

Website: www.phillipcapital.in