China Merchants Commercial REIT - China / Hong Kong Company Guide

China Merchants Commercial REIT - China / Hong Kong Company Guide
China / Hong Kong Company Guide
 China Merchants Commercial REIT
 Version 1    | Bloomberg: 1503 HK Equity | Reuters: 1503.HK
                                                                                      Refer to important disclosures at the end of this report



  DBS Group Research . Equity                                                  21 Jan 2020

   BUY (Initiating Coverage)                                                     Proxy to promising Qianhai growth
  DBS   Group Research . Equity
  Last Traded Price ( 20 Jan 2020):HK$3.29 (HSI : 28,796)
                                                   U60852                        •
                                                                                                      U60852
                                                                                     Pure REIT play in promising Qianhai
   Price Target 12-mth: HK$4.00 (21.4% upside)                                   •   Decent organic growth
                                                                                 •   Asset injection to power inorganic growth
   Analyst                                                                       •   Initiate with BUY and TP of HK$4.00
   Ken HE CFA, +86 2138968221, ken_he@dbs.com
   Danielle WANG CFA, +852 36684176, danielle_wang@dbs.com                       Pure Qianhai play. China Merchants Commercial REIT (or CMC
   Jason LAM +852 36684179, jasonlamch@dbs.com                                   REIT) is established by China Merchants Shekou Industrial Zone
                                                                                 Holdings (CMSK, 001979.CH, not rated) – a leading city and
                                                                                 industrial park developer owned by China Merchants Group (CMG).
    Price Relative                                                    U60852
                                                                                 The REIT has an initial portfolio of five commercial properties in
                                       U60852
                                                                                 Shenzhen Qianhai-Shekou Pilot Free Trade Zone (FTZ), offering
                                                                                 investors unique exposure to the strong potential in Qianhai. We
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                                                                                 like it for its strategic location and asset injection potentials.
                                                                                 Likely to mimic Yuexiu REIT’s (405.HK, BUY) growth path. We
                                                 U60852
                                                                                 expect its organic growth to come from asset enhancement and
                                                                                 improving connectivity. While CMC REIT’s operations have been
                                                                                 affected by ongoing renovation and construction of metro line 12,
    Forecasts and Valuation
    FY Dec (RMB m)               2018A          2019F     2020F      2021F       there is a guaranteed distribution for the next three years, removing
    Gross Revenue                   389           413       467        515       initial uncertainties. In addition, the REIT manager’s fee is closely
    Net Property Inc                299           311       325        393       tied with the performance of distributable income,    aligning with
                                                                                                                                     U60852
    Net Profit                    1,441           579       201        247
    Distribution Inc                  0             9       235        253       investors’ interests. We expect distributable income to grow at a
    DPU (HK$)
           U60852                  0.00          0.01      0.24       0.25       CAGR of 3.6% in 2022-2025. In terms of inorganic growth, we
    DPU U60852
          Gth (%)                   N/A           N/A     2,438          8       believe CMC REIT has potential to repeat Yuexiu REIT’s success,
    Div Yield (%)                   0.0           0.3       7.2        7.7
    Gross Gearing (%)                 0            25        24         25       leveraged on strong parentage.
    Book Value (HK$)                N/A          3.75      3.83       3.83
    P/Book Value (x)                N/A           0.9       0.9        0.9       Potential catalysts: (i) onshore investors’ growing appetite on
                                                                                 offshore China REITs, (ii) asset appreciation potential on lower
    DPU Rev (%):                                 New       New        New        interest rates and rising interests on Qianhai assets, and (iii)
    Source of all data on this page: Company, DBS Bank (Hong Kong)               management’s unit purchase from open market.
    Limited (“DBS HK”), Thomson Reuters                                                                                                        U60852
                                                                                 Valuation:
                                                                                 Our TP of HK$4.00 is based on a two-stage DDM methodology,
                                                                                 assuming 8% cost of equity and 2% terminal growth. It is now
                                                                                 trading at a FY20F yield of 7.2%, vs. Yuexiu REIT’s 6.3%.
                                                                                 Key Risks to Our View:
                                                                                 Below-expected rental growth and occupancy could be a key risk.
                                                                                 Other risks include rising supply in Shenzhen Nanshan, change in
                                                                                 tax policy and Rmb depreciation.
                                                                                 At A Glance
                                                                                 Issued Capital (m shrs)                                         750
                                                                                 Mkt Cap (HK$m/US$m)                                     3,711 / 477
                                                                                 Major Shareholders (%)
                                                                                    China Merchants Shekou Industrial
                                                                                                                                                33.5
                                                                                    Zone Holdings Co., Ltd.
                                                                                    Star II Ltd.                                                13.0
                                                                                    Pacific Asset Management Co., Ltd.                          12.2
                                                                                 Free Float (%)                                                 41.4
                                                                                 3m Avg. Daily Val. (US$m)                                      3.95
                                                                                 GICS Industry: Real Estate / Real Estate Management & Development




     ed-KK/ sa- CS /AH
China Merchants Commercial REIT - China / Hong Kong Company Guide
Company Guide

China Merchants Commercial REIT




Table of Contents
Investment summary                                                              3

SWOT Analysis                                                                   4

Valuation                                          U60852
                                                              U60852
                                                                                5
                                                                                      U60852
Peer Comparison                                                                 7

Growth drivers and critical factors to watch                                    9
                                                                                               U608

Key risks                                                                       10

Environmental, Social & Governance (ESG)                                        10
                                                                       U60852
Corporate Profile                                                               11

Growth Potential                                                                13
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Industry Overview                                                               16
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Appendix                                                                        26




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Investment summary                                                        Supporting Shenzhen’s Pioneering Demonstration Zone with
                                                                          Chinese Characteristics (關於支持深圳建設中國特色社會主義
• Pure Qianhai play. China Merchants Commercial REIT (CMC                 先行示範區的意見) was recently issued to promote Shenzhen
  REIT) is established and 35% owned by China Merchants                   to play a key role in GBA.
  Shekou Industrial Zone (CMSK, 001979.CH, not rated), which is
  the property arm of China Merchants Group (CMG). The initial •          Proxy to Qianhai growth. Eligible corporates and foreign talents
  portfolio includes one grade-A office building, three grade-B           (including those from Hong Kong, Macau, and Taiwan) could
  business buildings, technically zoned for industrial use andU60852
                                                               one        enjoy
                                                                           U60852 15% corporate income tax or personal income tax rate in

  retail mall in the Qianhai-Shekou FTZ area, with total lettable         Qianhai-Shekou FTZ. In addition, local government recently
  area of 250k sm and 81% occupancy rate as of end-1H19. The              initiated the Homing Plan of Qianhai Enterprises (前海企業歸巢     U60852


  initial portfolio’s valuation of Rmb6.5bn as of end-1H19 implies        行動計畫), providing rental and other subsidies for corporates
  a value of Rmb26,069/sm.                                                to reconsider rental strategies and potential relocation to
                                                                          Qianhai. According to Frank Knight, rental rates of grade A/B         U608

• Distribution based on REIT structure and supported by strong            offices in Shekou are expected to rise from Rmb245/sm and
  parentage. CMC REIT is managed by China Merchants Land                  Rmb137/sm in 2018 to Rmb304/sm and RMB164/sm in 2023,
  (CML, 978.HK, not rated), which is 74.35% owned by CMSK.                respectively, representing a CAGR of 4.41%/3.66%. We also
  The REIT structure enables distributions to be paid from cash           expect potential for strong asset appreciation  in Qianhai-
                                                                                                                     U60852
  generated, which could be higher than core net income. CMSK             Shekou, given rising investor interest, abundant liquidity in the
  will provide distribution guarantee for the first three years           market, and potential cap rate compression.
  (2020-2022) to remove initial uncertainties arising from
  ongoing asset enhancements, and construction U60852 of metro line •     DDM-based valuation at HK$4.00/share. We base our valuation
  12. The five onshore properties are operated and managed by             on a two-stage DDM methodology, assuming 8.0% cost of
                                                    U60852
  CMSK. Leveraging on CMSK’s experience and network, CMC                  equity (COE) and 2% terminal growth. Current share price
  REIT is able to explore value enhancing opportunities internally        translates into a FY20F gross yield of 7.2% (clean yield of
  from CMG, as well as from external sources.                             5.2%), compared to Yuexiu REIT’s (405.HK, BUY) 6.3%,
                                                                          Huixian REIT’s (87001.HK, not-rated) 7.9% and Jinmao Hotel’s
• Management incentives in place, to drive continuous asset               (6139.HK, BUY) 8.4%.
  enhancements and optimise cost structure. CMC REIT
  manager’s fee is very much based on performance. Asset              •   Compared to other HK-listed China REITs, CMC REIT has a
  enhancement initiatives (AEI) will continue to improve the              relatively smaller operating scale, narrower geographic
  attractiveness/ competitiveness   of its portfolio, thus driving up
                                 U60852
                                                                          exposure, and shorter track record. In our view, it deserves a
  rental growth. Given its efficient cost structure, CMC REIT’s net       valuation that is between Yuexiu REIT and the average of the
  property income (NPI) margin (NPI as % of total revenue) has            rest of China REITs listed in HK. Yuexiu REIT has a superior asset
  improved from 67% in 2016 to 77% in 2018.                               quality and much longer track record. Compared to other
                                                                          China REITs, CMC REIT’s assets are better located and there is
• Potential synergy with CMG. CMC REIT is expected to be the              more growth potential from parent support.
  platform to consolidate commercial assets under CMSK and
  other enterprises under CMG. According to CMSK’s 1H19              • U60852
                                                                        Likely to mimic Yuexiu REIT’s growth path. In our view, CMC
  interim report, CMSK has a large investment property (IP)             REIT has the potential to repeat Yuexiu REIT’s success, backed
  portfolio with a book value of Rmb43.3bn as of end-1H19,              by strong parentage. Back in 2011, Yuexiu REIT was still a
  which could form a potential asset injection pipeline for CMC         Guangzhou pure play with much smaller asset portfolio. It has
  REIT in the future. CMSK has granted a Right of first Refusal         then successfully acquired three quality assets at favourable
  (ROFR) to CMC REIT to acquire three premium properties in             pricing from parentco, driving a strong share price performance
  Qianhai-Shekou, which could potentially add 185k sm lettable          over the past several years. We believe CMC REIT could have a
  GFA into its portfolio. CMC REIT’s initial focus is in the Greater    similar growth path, considering the potential asset injection
  Bay Area (GBA other than Guangzhou and Foshan, being two              pipeline from its parentco.
  of the CML cities), plus Beijing and Shanghai.
                                                                     • Key risks include regional concentration risks, rising supply in
• Riding on GBA’s huge potential. The Outline Development Plan Shenzhen Nanshan, change in tax policy, and currency
  for the Guangdong-Hong Kong-Macao Greater Bay Area” (粵                mismatch.
  港澳大灣區發展規劃綱要) was issued in early-2019. GBA is
  benchmarked to the three international bay areas, namely New
  York Bay (NY Bay), San Francisco Bay (SF Bay) and Greater
  Tokyo Bay (Tokyo Bay). We expect GBA’s GDP per capita to
  catch up with international peers, supported by industry
  upgrades. We also expect more room for population inflow,
  benchmarking GBA to Tokyo Bay. In addition, Opinions on

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SWOT Analysis

  Strengths                                                             Weaknesses
  •    Strategic location in Qianhai-Shekou Pilot FTZ zone,             •  Concentration risk. CMC REIT derives 100% of its
       offering investors a unique exposure to the promising               revenue from Shenzhen Qianhai-Shekou.
       Qianhai-Shekou region.U60852
                                                                        •   Discrepancies between land and building use rights.
  •
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       Diverse tenant base. Total number of tenants was 271 as of           The REIT has three business park office buildings with
       end-1H19.                                                            industrial land use rights.
  •    Proactive asset enhancement and cost management. The             •   Initial portfolio not large enough vs. HK-listed China
       company is undertaking various renovation exercises at               REITs peers. CMC REIT’s initial total asset valuation of
       several properties to improve the attractiveness and                 Rmb6.5bn is relatively smaller compared to other HK-
       competitiveness of its assets. Management also strives to            listed China REITs.
       optimise its cost structure to grow its NPI.
                                                                     •      Performance and liquidity of grade-B offices might not
  •    Organic growth coupled with distribution guarantee. With             be as good as grade-A offices. Tenants of grade-B
       support from CMSK, there is a distribution guarantee                 offices might be more vulnerable to economic
       mechanism in place during 2020-2022.                     U60852      uncertainties. Accordingly, grade-B offices are also less
                                                                            liquid compared to grade-A offices.
  •    Strong parent with potential synergies between CMC REIT
       and CMSK/CMG. CMSK has granted a ROFR to CMC REIT                •   Currency mismatch. CMC REIT’s revenue is generated
       to acquire  three premium properties in Qianhai-Shekou. In
              U60852
                                                                            in Rmb terms, while it will pay distribution in HKD,
       addition, CMSK has sizeable IP portfolio and premium land            which exposes it to foreign exchange risks.
       reserves across the nation. Moreover, potential synergies
                                                                        •   Subject to withholding tax, if there are any dividends
       with other enterprises under CMG is also likely in the
                                                                            paid by onshore entities to offshore investors.
       future.


  Opportunities                                                         Threats
  •  Benefiting from policy dividends. Qianhai-Shekou should            •   Rising supply in the vicinity of its assets. There is a
                                                                                                           U60852

     benefit from central government’s master plan of                       huge supply of grade-A offices in Shenzhen in the
     developing GBA and Shenzhen’s pioneering demonstration                 coming five years, with new supply primarily located in
     zone. The area should also benefit from various favourable             the Nanshan district, especially Qianhai sub-district.
     talent and tax policies.
                                                                        •   Economic uncertainties. Economic slowdown in China
                                               U60852
  •    Improving infrastructure and connectivity. The metro line            and peripheral markets arising from escalating trade
       12 connecting Shekou to Bao’an international airport                 tension may affect office demand.
       should greatly improve accessibility and demand for its                                                                            U60852

       properties after the line commences operation in 2022.
                                      U60852
  •    Interest rate on a downtrend. The REIT will benefit from
       lower funding costs. In addition, asset valuation will also be
       supported by a lower interest rate environment.
  •    Rising investor interest in investment properties. Abundant
       liquidity and growing appetite from foreign investors for
       China assets will continue to push up asset valuations
       especially in top-tier cities with strong policy supports.



Source: DBS HK




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China Merchants Commercial REIT
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                                                               U60852

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Valuation                                                               Current valuation translates to 7.2% FY20F yield

Based on our DDM valuation methodology, we derive a TP of               Current valuation translates into  FY20F distribution yield of
                                                                                                      U60852


HK$4.00 for CMC REIT (COE 8.0%, terminal growth of 2%).                 7.2%, compared to Yuexiu REIT’s 6.3%, Huixian REIT’s 7.5%
                                                                        and Jinmao Hotel’s 8.5%.
As required by the REIT code, CMC REIT will pay out at least
90% of its distributable income, and hence we are of the view           Given CMSK’s distribution guarantee in 2020-2022, current
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that cash flow-based valuation methodologies such as the                valuation implies gross yields of 7.2%/7.7%/8.0% in
Dividend Discounted Model (DDM) are most appropriate to                 2020/2021/2022, as well as clean yields (excluding shortfall
value the company.                                                      support from CMSK) of 5.2%/6.5%/7.5%, respectively

Two-stage DDM valuation of HK$4.00/share
                                                                        Current price implied clean yield and gross yield
Two-stage DDM valuation. In our view, DDM is an appropriate
                                                                                                     U60852
valuation model for CMC REIT. Our DDM model is based on a                9%
distribution guarantee for 2020-2022 and distributable income
                                                                         8%
forecast in 2023-2025 when its assets mature, and after metro
line 12 commences operation.                                             7%
                                                                         6%
The REIT will distribute 100% of distributable income in 2020-           5%
2022 and not less than 90% of distributable income thereafter.
                                                                         4%
However, we believe retained cash and paid-out cash will
eventually have the same overall impact on holders’ claim on             3%                          U60852


assets and our DDM valuation is based on future distributable            2%
income instead of amount to be distributed.                              1%
                                                                         0%
                                                                                                                                               U60852
                                                                                     2020                 2021                 2022
Betas of HK-listed China REITs
                                                                                       Clean yield               Gross yield
Company name                St oc k Code         Bet a
Hui Xian REIT               87001 HK             0.51                   Source: Bloomberg Finance L.P., DBS HK
J inmao Hotel               6139 HK              0.51
Yuexiu REIT                 405 HK               0.56
New Century REIT            1275 HK              0.47
                                                                        Asset appreciation on narrower cap rate is likely
Spring REIT                 1426 HK              0.54
Capitaland Retail China     CRCT SP              0.68                   What is not captured in our DDM valuation? Overseas (en-bloc)
BHG Retail REIT             BHGREIT SP           0.46                   investments in China jumped 68% y-o-y to Rmb85bn in 2018,
Mapletree North Asia        MAGIC SP             0.56                   making up 32% of total transactions (vs.21% in 2017). Inbound
EC World REIT               ECWREIT SP           0.46                   investments remained active in 1H19, with Rmb46bn concluded
Sasseur REIT                SASSR SP             0.70
                                                                        and accounting for up to 46% of total investments. According
Ascendas REIT               AREIT SP             0.57
                                                                        to a CBRE survey, China is ranked the most preferred market for
Source: Bloomberg Finance L.P., DBS HK                                  cross-border investments in the Asia Pacific (APAC) and offices
                                                                        the most preferred assets. These factors, coupled with lower
                                                                        interest rates globally, will continue to support valuation
                                                                        appreciation and cap rate compression. We expect onshore and
According to Bloomberg, beta of HK-listed China REITs ranged
                                                                        offshore liquidity will continue to chase office assets in Qianhai-
from 0.47x to 0.56x, with an average of 0.52x. The beta of
                                                                        Shekou. As such, against a favourable policy backdrop, office
Singapore-listed China REITs averaged 0.54x. Therefore, we
                                                                        assets in the area will continue to see value appreciation on the
have assumed a beta of 0.53x.
                                                                        back of rising rental rates as well as narrowing cap rates.
Our cost of equity (COE) of 8.0% is derived from a risk free rate
of 3.1% (based on China 10-year bond yield), beta range of
0.53x, and market risk premium of 9%. We have also assumed
terminal growth rate of 2% per annum (p.a.), reflecting long-
term inflation adjusted rental growth. As such, our TP arrives at
HK$4.00/share.



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China Merchants Commercial REIT



DDM valuation based on 2-stage growth model

FY Dec (HK$ m)                     2019F      2020F               2021F        2022F     2023F            2024F   2025F
NPI                                              358                433          491       528              558     575
 - headquarter expenses                            -6                -6           -7        -7               -7      -8
 - trustee's fee                                   -1                -1           -1        -1               -1      -1
 - actual interest paid                          -73
                                              U60852                -73          -73       -73              -73     -73
 - actual income tax paid                        -56                -74          -89       -98             -105    -110
                                                                      U60852
 - withholding tax paid                            -7               -13          -14       -15              -15     -16
Subtotal                                         215                265          307       335              357     368
 - REIT mgmt base fee                            -22                -27          -31       -33              -36     -37
 - REIT mgmt incentive fee                           0                0            0        -7               -5      -3
Distributable income (clean)                     194                239          277       294              315     328
Shortfall supported by parent                     72                 48           18
Distributable income (gross)          10         266                287          295      294              315     328

Cost of Equity                      8.0%
Terminal growth                     2.0%                                        U60852

PV of FCF                           1,377
PV of Terminal V alue               3,553
Capex                                -423                                                        U60852

Equit y v alue                     4,506
No. of units                        1,128
Target price per share (HK$)         4.00

Source: DBS HK




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 China Merchants Commercial REIT




Peer Comparison                                                                 business scale is much larger. Yuexiu REIT is currently
                    U60852
                                                                                trading at 6.3% FY20F yield. In our view, CMC REIT should
Smaller geographical exposure and business scale,                               offer a higher yield.
compared to HK-listed China REITs. All assets under CMC
REIT are located in Qianhai-Shekou Pilot FTZ. In addition, the                  But deserves higher valuation vs. other HK-listed China
latest book valuation for CMC REIT was Rmb6.5bn, lower                          REITs. Compared to other HK-listed China REITs, CMC REIT’s
than HK-listed peers’ range of Rmb5.0bn-Rmb34.8bn, with                         assets have better strategic location. In addition, it has more
an average of Rmb21.7bn.                                                        visible asset acquisition/injection pipeline, supported by its
                                                                                strong parentage. Currently, Jinmao Hotel (6139.HK, BUY)
CMC REIT deserves discount vs. Yuexiu REIT. Yuexiu REIT                         and Huixian REIT (87001.HK, not rated) are trading at 7.9%-
has a proven execution track record and a series of                             8.4% FY20F yield. In our view, CMC REIT deserves a higher
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successful asset injections/acquisitions. Plus, Yuexiu REIT’s                   valuation.
                      U60852

Peers’ valuation

                                                          U60852
                                                                                                                                           F Y 19
                                                       T arget                     Mkt         Y ield Y ield P/Bk           EV /EBIT DA    Gross
                                      Currency   Price    Price Recom              Cap F iscal 19F 20F 20F                   19F     20F gearing
 Company Name                       Code       Local$ Local$                      US$m      Yr     %      %     x                x      x      %
 HK REIT s
 Champion REIT*                 2778 HK     HKD    5.06     5.47         HOLD 3,825         Dec     5.3       5.3    0.5    19.9    19.6     n.a.
 CMC REIT*                      1503 HK     HKD    3.29     4.00          BUY    478        Dec     0.3       7.2    0.9    13.5    13.2     n.a.
 Fortune REIT*                   778 HK     HKD    9.39    10.90          BUY 2,346         Dec     5.5       5.6    0.5    19.9    19.4     n.a.
 Hui Xian Reit.Tst.            87001 HK     CNY    3.28      n.a.          NR 2,812         Dec     7.8       7.9    0.7    12.6    11.4     n.a.
 J inmao Hotel*                 6139 HK     HKD    4.09     4.88          BUY 1,053         Dec     8.4       8.4    1.3    14.3    13.6     n.a.
 Langham Hospitality Inv.*      1270 HK     HKD    2.31     2.33         HOLD    635        Dec     5.0       4.9    0.4    26.6    26.9     n.a.
 Link REIT*#                     823 HK     HKD   85.55    96.60          BUY 22,911       Mar      3.4       3.7    0.9    25.8    23.5    12.2
 New Century REIT               1275 HK     HKD    1.49      n.a.          NR    186        Dec
                                                                                           U60852
                                                                                                    n.a.      n.a.   n.a.    n.a.    n.a.    n.a.
 Prosperity REIT*                808 HK     HKD    3.04     3.53          BUY    588        Dec     6.0       6.0    0.5    21.8    21.5     n.a.
 Regal REIT                     1881 HK     HKD    1.99      n.a.          NR    834        Dec     7.2       5.4    0.4     n.a.    n.a.    n.a.
 Spring REIT                    1426 HK     HKD    3.23      n.a.          NR    535        Dec     n.a.      n.a.   n.a.    n.a.    n.a.    n.a.
 Sunlight REIT*                  435 HK     HKD    5.10     5.87          BUY 1,087         J un    5.3       5.4    0.5    21.5    20.8    20.4
 Yuexiu REIT*                    405 HK     HKD    5.34     6.11          BUY 2,204         Dec     6.1       6.3    1.0    21.7    20.5     n.a.

 SG- list ed China REIT s
 Capitaland Retail China Unit*    CRCT SP   SGD    1.68     1.80          BUY     1,508     Dec     6.0       6.0    1.1    20.7    19.0     n.a.
 Mapletree North Asia*#         MAGIC SP    SGD    1.24     1.35          BUY     2,941     Mar     5.8       6.1    0.9    25.3    22.6    36.7
 Bhg Retail Reit Units         BHGREIT SP   SGD    0.69      n.a.          NR       259     Dec     n.a.      n.a.   n.a.    n.a.    n.a.    n.a.
 EC World REIT#                ECWREIT SP   SGD    0.75      n.a.          NR       446     Dec     8.3       8.8    0.8     n.a.    n.a.    n.a.
 Ascendas Real Estate It.*       AREIT SP   SGD    3.13     3.45          BUY     8,408     Dec     5.1       5.1    1.2    23.1    22.5    38.6
 Sasseur Reit Units*             SASSR SP   SGD    0.92     0.97          BUY       813     Dec     7.3       7.5    1.0    11.7    11.4     n.a.

Based on closing prices as at 20 Jan 2020
# FY20: FY21; FY21: FY22
Source: Thomson Reuters, *DBS HK




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 China Merchants Commercial REIT


 Business model and scale comparison

                                              Y uexiu REIT         Huixian REIT       New Cent ury          Spring REIT       J inmao Hot el       CM C REIT
 St ock code             U60852                   405 HK             87001 HK            1275REIT
                                                                                               HK             1426 HK              6139 HK          1503 HK
 Current port f olio
 No. of properties                                           8                   5                  8             1+84                      7               5
 No. of cities                                               4                   4                  6     Beijing & UK                      5               1
 Acquisition history                        Guangzhou Neo        Sofitel Shenyang         2 hotels in        Acquiring                     nil            n.a.
                                         Metropolis (2008),           Lido (2011), Shanghai/Kaifeng         commercial
                                             Guangzhou IFC             Chongqing     (2015), Holiday properties (for car
                                           (2012), Shanghai Metropolitan Oriental     Inn Eindhoven     service-related
                                      Hongjia Tower (2015), Plaza (2014), Harbour        Netherlands   business) in the
                                      Wuhan Fortune Centre       Plaza Chongqing              (2016)        UK (2017)
                                            & Starry V ictoria   (2017), Sheraton
U60852
                                         (2017), Hangzhou Chengdu Lido Hotel
                                              V ictory (2018)               (2017)
 Disposal history            U60852   Neo Metropolis (2018)                     nil               nil                 nil                 nil            n.a.
 Total GFA (sm)                                      969,489            1,030,165           457,306            145,372               717,134         262,380
  - office                                           421,802              364,169                   0          120,245               137,121         205,659
  - wholesale                                         50,199           U60852
                                                                                 0                  0                  0                   0               0
  - retail                                           169,777              239,938                   0                  0              35,649          56,721
  - hotel                                             91,461              204,166           457,306                    0             542,479               0
  - serviced apartment                                51,102               81,603                   0                  0                   0               0
  - logistics & industrial                                   0                   0                  0                  0                   0               0
  - car park & others                                185,148              140,289                   0           25,127                 1,885               0
 Earnings and v aluat ions
 Income/earnings structure                    Rental income         Rental income      Master lease in       Rental income    No master lease,   Rental income
                                                                                    place, base rent +                           100% hotel
                                                                                        profit sharing                             profit/loss
 1H19 revenue (Rmb m)                                 1,000                 1,598                 128                  269             1,219             191
  - office                                              453                   660                    0                 239                231            130
  - wholesale                                           185                     0                    0                    0                  0              0
  - retail                                               94                   614                    0                    0                  0            61
  - hotel & serviced apartment                          268                   324                 128                     0               882               0
                                                                                                       U60852
  - others                                                0                     0                    0                  30                105               0
 NPI/EBITDA (Rmb m)                                     729                 1,042                 102                  202                498            148
 NPI/EBITDA margin                                     73%                   65%                 80%                  75%                41%            77%
 Latest GAV (Rmb bn)                                   34.8                  33.1                  5.0                  9.0              26.4             6.5
 Latest book value (Rmb bn)                            14.8                  26.3                  2.3                  6.5                5.8          3.7^
 Current mkt cap (HK$ bn)                              15.9                  18.9                  1.5                  4.1                8.2            3.7
 Debts to GAV or LTV @1H19                           38.1%                 32.2%               37.7%                35.1%             31.7%            25%^

 Source: Company, DBS HK
 *Rmb/HK$=1.1
 ^pro forma statement, based on an IPO price of HK$3.42




                                                                                                                                                       Page 8
U60852
                                                                                                                                                                           U60852



Company Guide
                                     U60852


China Merchants Commercial REIT


Growth drivers and critical factors to watch                                                  Potential to repeat Yuexiu REIT’s growth path. Yuexiu REIT has
                                                                                              successfully acquired three quality assets at favourable pricing
Referencing to Yuexiu REIT. CMC REIT has a short history as a                                 from parentco, driving a strong share price performance over
listed entity, which is not enough for us to analyse share price                              the past several years. Some investors may have concerns over
drivers. Yet, we found several similarities between the current                               the potential placementU60852related to asset injection, but in our
CMC REIT and Yuexiu REIT in 2011: (i) both are SOE entities,                                  view, it is really depending on (i) the target assets’ quality and
supported by strong parentage, (ii) Yuexiu REIT was a pure                                    pricing and (ii) how to structure the funding to mitigate DPU
Guangzhou play in 2011, while CMC REIT is currently a pure                                    impacts. In fact, asset injections used to play as strong catalysts
Shenzhen play, (iii) operation scale and asset valuation are also                             for Yuexiu REIT. We believe CMC REIT has the potential to
similar between current CMC REIT and Yuexiu REIT in 2011.                                     repeat Yuexiu REIT’s success, backed by strong parentage.
                                                                                                                                                                U60852




Current CMC REIT looks like Yuexiu REIT in 2011
                                                                                                                                                      U60852
                                              CM C REIT Y uex iu REIT Y uex iu REIT
                                              end- 2018   end- 2011     end- 2018
 Rev enue (Rmb m)                                   389          522          2,032
 NPI (Rmb m)                                        300          409          1,469
 NPI margin                                         77%          78%           72%
                                                                                                                                                       U60852
 DPU (HK$)                                          n/m          0.26          0.32
 No. of properties                                     5            5             8
 Gross rental area ('000 sm)                        250          211            969
 Occupancy rate                                     90%          99%           91%
 Portfolio v aluation (Rmb bn)                       6.5          6.5          34.0
 DPU y ield (%)                                      n/m        7.7%           6.4%

Source: Thomson Reuters, Company, DBS HK


Asset injections used to be strong catalysts for YuexiuU60852
                                                        REIT

  Price (HK$)
                                                                                                                             21/12/2018:
   6.0                                                                                                                      Disposal of Neo
                                                                                                                               Metropolis
   5.5

   5.0

   4.5

                                                                                           U60852              21/12/2017:
   4.0                                                                                                         Acquisition of
                                                                                                              Wuhan properties        28/12/2018:
                                                                               31/08/2015:
   3.5                                                                     Acquisition of Shanghai                                    Acquisition of
                        28/05/2012:                                                                                                 Hangzhou V ictory
                                                                              Yuexiu Tower
                     Acquisition of GZ IFC
   3.0
         Dec-11


                  Jun-12


                           Dec-12

                                    Jun-13


                                              Dec-13


                                                       Jun-14


                                                                Dec-14


                                                                         Jun-15


                                                                                  Dec-15


                                                                                            Jun-16


                                                                                                     Dec-16


                                                                                                                  Jun-17


                                                                                                                           Dec-17

                                                                                                                                    Jun-18


                                                                                                                                             Dec-18

                                                                                                                                                      Jun-19




                                                                                  Yuexiu REIT


Source: Thomson Reuters, Company, DBS HK




                                                                                                                                                                  Page 9
Company Guide

China Merchants Commercial REIT                                                                              U60852




Key risks                                                           Economic uncertainties. Economic slowdown in China and
                                                                    peripheral markets arising from escalating trade tensions may         U60852

Rising office supply in Nanshan district, especially in Qianhai     affect office demand. Tenants of grade-B offices might be more
sub-district. According to Cushman & Wakefield, total grade-A       vulnerable to economy uncertainties. Accordingly, grade-B
office stock in Shenzhen was 5.1m sm as of end-1Q19. In the         offices are also less liquid compared to grade-A offices.
next five years, total grade-A office stock is expected to go up
                                                                    Asset injection could be affected by share price performance.
to 8.5m sm, with new supply coming primarily from the Qianhai
                                                                    Weak share price performance will drive up CMC REIT’s yield,
sub-district within Nanshan District. CMC REIT’s New Times
                                                                    which may cap its capability of asset injection or other asset
Plaza may face rising competition from new grade-A office
                                                                    acquisitions.
supply in Qianhai-Shekou.
                                                                    Currency mismatch. CMC REIT’s revenue is generated in Rmb,
Discrepancies between land and building use rights. The CMC
                                                                    while it will pay distribution in HKD, thus exposing it to foreign
REIT has three grade-B office buildings with industrial land use
                                                                    exchange risks.
rights. According to the CMC REIT’s legal advisors, there should
not be any problem with such discrepancies. The management
also mentioned the industrial land use rights have been
changed from traditional industrial land (M1) previously to new     Environmental, Social & Governance (ESG)
industrial land (M0) to support industry upgrades   in the area.
                                                U60852


But there is no assurance that the land and buildings will not be   CMC REIT is renovating some of its assets to improve the layout
subject to any enforcement actions in the future.                   and attractiveness of those assets. In addition, the renovation is
                                                                    also looking to use environmentally friendly materials and save
Change in property tax     policy may impact profitability. Beijing's
                       U60852
                                                                    energy.
municipal government changed the basis of its property tax
from cost (從價, 0.84% on original cost) to revenue (從租, 12% CMC REIT is also restructuring its management team and
on rental income) in 3Q16, leaving Shanghai and Shenzhen the internal control mechanism to further improve internal
last two cities with property tax based on cost. Based on our         efficiency and risk control.
understanding and channel checks, any change in property tax
in both cities is unlikely in the near term. However, there is no
assurance that property tax in both cities will not follow other                                   U60852

cities in the long term.




                                                                                                                                          U60852



                                                                    U60852




                                                      U60852




                                                                                                                                Page 10
Company Guide

     China Merchants Commercial REIT




    Corporate Profile                                                                      Diverse tenant base. CMC REIT has a diverse tenant base
                                                                                           from various industries, including new-generation IT, real
    Strategic location in Qianhai-Shekou Pilot FTZ zone. CMC                               estate, F&B, retail, logistics, petroleum and others. Total
    REIT is established by CMSK, one of the flagship subsidiaries                          number of tenants was 271 as of end-1H19. Average
    of CMG. The initial portfolio includes one grade-A office                                                                     U60852
                                                                                           delinquency rate (rental receivables remaining unpaid for
    asset, three grade-B office building complexes, technically                            over 90 days after due dates vs. total rental income) was
    zoned for industrial use and one retail mall in the Qianhai-                           low at 0.3% in FY18. Management will continue to provide
    Shekou FTZ area, with total lettable area of 250k sm and                               value-added services to keep tenants sticky and attract more
    81% occupancy rate. Total valuation of Rmb6.5bn as of                                  quality tenants.
    end-1H19 translates to Rmb26,069/sm.


     Overview of portfolio assets as of end-1H19
                                                                                                                                                  U60852


                                                                                  Gross
                                                                        let t able area                Land use                    V aluat ion         No. of No. of car
         Propert y                   Nat ure          GF A (sm)                    (sm)    Complet ion      right                   (RM B m)         t enant s    park s
         New Times Plaza             Grade-A office      87,337                  67,600          1997 27-J an-45                        2,046              66        212
                                                                                                                                                                   U60852


         Cyberport Building          Grade-B office   40,435.10               40,441.30          2009 22-May-57                         1,038              32        255
         Technology Building         Grade-B office   41,578.50               41,521.70          2002   7-J an-51                         867              15        110
         Technology Building 2       Grade-B office   42,531.40               43,093.50          2010 29-J un-57                        1,079              30        220
         Garden City                 Retail mall      50,496.90               57,331.80          2006 14-Apr-44                         1,487             128        644
         T ot al                                       262,379                249,988                                                  6,517

     Source: Company, DBS HK


U60852

     Tenants’ industry as of end-1H19                                                Lease expiry profile as of end-1H19

                                                Logistics                                 %
                            Departmen             7%
                              t store                        Banking and                  25
                               13%                              financial
                F ood and                     Petroleum                                   20
            U60852
                                                 7%           investment
                bev erage
                                                                   5%                     15
                   11%
                                                                                          10
                                                             Manufacturing
           Real estate                                           5%                       5 U60852
             11%
                                                              Leasing and                 0
                                                                business
                                                                                                                                                                   Vacant
                                                                                                               In 2020



                                                                                                                         In 2021



                                                                                                                                        In 2022


                                                                                                                                                     In 2023 and
                                                                                                     In 2H19




                                                                                                                                                        beyond




                                                                 service
                 New-generation IT                                5%
                      25%                 Others
                                           9%
                                                            Life serv ices
                                                                 4%
                                                                                               as % of gross lettable area           as % of gross rental income

     Source: Company, DBS HK                                                         Source: Company, DBS HK




                                                                                                                                                                            Page 11
Company Guide

     China Merchants Commercial REIT


    Management fee structure is more driven by performance.                          during the distribution commitment period), vs. a normal
    CMC REIT is a REIT product, managed by China Merchants                           practice of 3-4% of NPI for peers. We think such incentive
    Land (978.HK, not rated), which is 74.35% owned by                               will align REIT manager’s interests with unit investors and
    CMSK. The REIT structure enables distributions to be paid                        drive performance. Asset enhancement initiatives (AEI) will
    from cash generated, which could be higher than core net                         continue to improve the attractiveness/competitiveness of its
    income. The five onshore properties are operated and                             properties, and drive rental growth.U60852
    managed by CMSK.
                                                                                     Continue to optimise management team and management
    Different from the fee structure of major HK-listed REITs,                       incentives. CMC REIT continue to recruit senior
    CMC REIT manager’s fee is more based on the performance.                         management from outside including property consultant
    CMC REIT manager’s base fee is 10% of distributable                              and peer REITs. In addition, it is also working on
    income, vs. 0.3-0.4% of property valuation for major peer                        management incentive scheme to further align managers’
    plays. The 10% of distributable income will likely translate                     interests with investors.
    to 0.28-0.29% of property value in early years, which is not
    high vs. peers’ base fee level. Its incentive fee is 25% of                                                               U60852

    incremental distributable income (no such incentive fee

     Management fee structure
                                                                                                                                           U60852

         Fee                            Amount
         REIT manager's fee             base fee = 10% annual distributable income, payable on a semi-annual basis
                                        variable fee = 25% of y-o-y incremental distributable income, payable on an annual basis
                                        acquisition fee
Company Guide

         China Merchants Commercial REIT



         Growth Potential                                                          offices. The average rental rate of CMC REIT’s office
                                                                                   buildings is relatively lower as compared to the market
         Organic growth:                                                           average of Rmb250/sm/month and Rmb140/sm/month for
                                                                                   Grade-A/B offices in Shekou respectively (according from
         The Qianhai-Shekou Pilot FTZ is transforming from a
                                                                                   Knight Frank), affected by ongoing renovation and
         shipping and manufacturing base into a modern service
                                                                                   construction of Metro Line 12.
         industrial zone. The ongoing industry upgrade will continue
         to support office rental appreciation. Knight Frank is                    New Times Plaza No.1’s rental rate was Rmb156/sm/month
         expecting rental CAGR of 4.4%/3.7% for grade A/B offices                  in 1H19, vs. average rental rate of Rmb250/sm/month in
         in Qianhai-Shekou in 2018-2023.                                           Shekou (according to Knight Frank). We expect its rental
                                                                                   rate and occupancy to pick up in 2020 after its on-going
         The REIT is undertaking various renovation exercises at
                                                                                   upgrading exercise is completed.
         several properties to improve attractiveness and
         competitiveness of its assets. Management also strives to                 The rental rate of its 3 grade-B offices ranged from Rmb87-
         optimise its cost structure to improve its NPI.                           105/sm/month in 1H19, vs. average rental rate of
                                                                                   Rmb140/sm/month in Shekou (according to Knight Frank).
         While CMC REIT’s operations are currently affected by
                                                                                   The completion of upgrade in 2021 and operation of the
         ongoing renovation and construction of metro line 12, there
                                                                                   metro line 12 in 2022 is expected to enhance the
         is a distribution enhancement mechanism in place with a
                                                                                   attractiveness and connectivity of those grade-B office
         distribution guarantee for the next three years, removing
                                                                                   buildings. In addition, there is no grade-B office supply
         any initial uncertainty. The metro line 12 connecting Shekou
                                                                                   coming onstream in the region over the next five years,
         and Bao’an International Airport is expected to commence
                                                                                   according to Knight Frank. Therefore, we expect their rental
         operation in 2022, and this will greatly improve the
                                                                                   rates to gradually catch up with regional peers.
         population catchment and attractiveness of CMC REIT’s

         Key assumptions
                                                    2016A       2017A      2018A        2019F      2020F      2021F      2022F
          Occupancy
          New Times Plaza No.1                      78.6%       75.0%      74.2%         74.5%    70.0%      75.0%      80.0%        U60852

          Cyberport Building                        93.3%       75.0%      92.9%         87.0%    91.0%      92.0%      96.0%
          Technology Building                       80.3%       89.4%      92.1%   U6085294.0%   100.0%     100.0%     100.0%
          Technology Building 2                    100.0%
                                                    U60852     100.0%      99.3%         95.0%   100.0%     100.0%     100.0%
          Garden City Shopping Centre              100.0%       98.5%      99.8%         85.0%    94.0%      95.0%      97.0%
                                                                                       U60852

          Average rental (Rmb/sm/month)
          New Times Plaza No.1                         149         147       147           160       184        201        231
          Cyberport Building                            94          93       101           108       117        127        140
U60852
          Technology Building                           77          83        85            93       102        113        124
          Technology Building 2                         80          85        95            97       107        115        126
          Garden City Shopping Centre                  141         151       161           165       185        203        234

          Average rental growth
          New Times Plaza No.1                                    -1%        0%            9%       15%         9%        15%
          Cyberport Building                                      -1%        9%            7%        8%         9%        10%
          Technology Building                                      8%        2%            9%       10%        10%        10%
          Technology Building 2                                    6%       12%            2%       10%         8%         9%
          Garden City Shopping Centre                              7%        7%            2%       12%        10%        15%

         Source: Company, DBS HK



         The below table shows the repair and maintenance
         expenses for the next ten years, forecasted by Knight Frank.
         The methodologies used in the forecasts include: (i) onsite
         inspection, (ii) estimated routine maintenance costs, and (iii)
         estimated market rates and inflation.




                                                                                                                                        Page 13
Company Guide

U60852
         China Merchants Commercial REIT




         10-year forecasts of repair and maintenance expenses

          Rmb m                                 2020F    2021F     2022F   2023F     2024F      2025F     2026F     2027F    2028F     2029F
          New Times Plaza No.1                     18        2         2       6         0          0         0         0        3         6
          Cyberport Building                        1        0         3       0         8          0         0         1        4         3
          Technology Building                       9        1         7       3         8          7         0         1        1         1
          Technology Building 2                     0        0         0       4         0          6         3         1        0         1
          Garden City Shopping Centre               1        2         3       2         0          9         0         3        3         4
          Total                                    29        5        16      16        16         22         3         6       11        15

         Source: Knight Frank, Company


         Breakdown by properties

                                                        2016A      2017A    2018A       2019F       2020F         2021F     2022F
                                                                           U60852
          Total revenue (Rmb m)                           367        360      389         413         467           515       588
          New Times Plaza No.1                            119         99      104         116         125           144       173
          Cyberport Building                               50         45       51          55          62            67        76
          Technology Building                              41         42       47          52          60            66        72
          Technology Building 2                            47         51       56          57          66            71        77
          Garden City Shopping Centre                     111        123      132         132         153           167       190

          Net property income (Rmb m)                     246        274       300        311           325        393        446
          New Times Plaza No.1                             78         74        79         88            75        109        135
          Cyberport Building                               34         34        39         41            46         51         56
          Technology Building                              27         31        35         40            37         50         49
          Technology Building 2                            32         40        43         43            51         54         60
          Garden City Shopping Centre                      75         94       104         98           117        128        146

          NPI margin                                     67%        76%       77%        75%            70%        76%       76%
          New Times Plaza No.1                           66%        74%       76%        76%            60%        76%       78%
          Cyberport Building                             69%        77%       75%        75%            74%        76%       73%          U60852
          Technology Building                            67%        74%       75%        76%            62%        76%       69%
          Technology Building 2                          69%        79%       77%        75%            76%        76%       77%
          Garden City Shopping Centre                    67%        77%       79%        74%            76%        76%       77%
                                                                                                                                                   U60852

         Source: Company, DBS HK



         The repair and maintenance expenditure might lead to some             Inorganic growth:
         fluctuation in the NPI margin in 2019-2022. Yet, we expect
         NPI margin to stabilise at 77% in 2023-2025 and further               CMC REIT is expected to be the platform to consolidate
                                                                                                                                  U60852


         improve to 79% thereafter.                                            commercial assets under CMSK and other enterprises under
                                                                               CMG. According to CMSK’s 1H19 interim report, CMSK’s IP
         CMSK will provide distribution guarantee for the first three          portfolio is diversified across major cities in China with latest
         years (2020-2022) to allay initial uncertainties arising from         book value of Rmb43.3bn; these could form a potential
         ongoing asset enhancement and construction of metro line              asset injection pipeline for CMC REIT in the future.
         12.




                                                                                                                                         Page 14
U60852




         Company Guide

         China Merchants Commercial REIT

                                                                                                                       U60852


         Potential properties subject to the ROFR


          Property                                          Nature                 Expected GFA (sm)       Expected completion
          Taizi Plaza              太子灣廣場                    Grade-A office                   66,100                      2019
          New Times Plaza II       新時代廣場二期                  Grade-A office                      78,700                   2020
          Huigang Centre II        滙港中心二期                   Retail mall                         40,000                   2020
          Total                                                                                184,800

         Source: Company


         CMSK has granted a Right of first Refusal (ROFR) to CMC
         REIT to acquire three premium properties in Qianhai-
         Shekou, which could potentially add 185k sm lettable GFA
U60852
         into its portfolio. The REIT’s initial focus is on GBA other
         than Guangzhou and Foshan, being two of the CML cities,
         plus Beijing and Shanghai. In addition, CMSK also has nearly
         10mU60852
               sm GFA of premium land in Shenzhen, including the
         Sea World, Prince Bay, Qianhai Ma Bay and Shenzhen
         International Convention and Exhibition Centre in Shenzhen
         Bao’an International Airport.
                                                                                      U60852

         CMG also has other non-property subsidiaries in other
         industries, owning various    commercial properties in China.
                                   U60852

         Those assets could also be the potential injection targets in                                   U60852
         the future. In addition, leveraging on CMG’s experience and
         network, CMC REIT is able to explore more value-enhancing
         opportunities from both CMG and other third parties.
                                                                                                                                           U608




                                                                                                                                 Page 15
Company Guide

         China Merchants Commercial REIT




     Industry Overview


         Comparison between GBA and global bay areas                         Comparison of R&D as % of GDP in global bay areas
         - GDP component inferior to global peers                            - R&D as % of GDP is lower in GBA
         - Yet, tertiary industry is catching up                             - GBA’s new position as R&D or innovation hub

                                                                                                                                                                                      U60852
                                                      SF       NY T ok y o    %
U60852                                      GBA      Bay      Bay    Bay      4.0
         Area ('000 km)                      56.0    18.0     22.0   37.0
         Population (m)                      69.6     7.7     20.2   44.0     3.5
         Population density (person/km)     1,185    434      686 2,617       3.0
         GDP (US$ trn)                        1.6     0.8      1.7    1.9
                                                                              2.5
         GDP per capita (US$ 000)            23.0   102.0     82.0   42.0
         Tertiary as % of total GDP           0.7     0.8      0.9    0.8     2.0

                                                                              1.5

                                                                              1.0

                                                                              0.5

                                                                              0.0
                                                                                             GBA                             NY Bay                               SF Bay                      Tokyo Bay
           U60852
                                                                                              U60852
         Source: CEIC, CBRE, DBK HK                                          Source: Local governments, CEIC, DBS HK



         GDP per capita in GBA                                               Tertiary contribution to local GDP to catch up
         - Ramp up in GDP per capita driven by industry upgrade               - High potential for industry upgrade in GBA
         - GDP per capita to expected to grow at CAGR of 5.3%                 - Shenzhen to lead GBA’s industry upgrade


           Rmb                                                                 % U60852
                                                                                   93 93
          300,000                                                             100 94 93 87 87
                                                                               80        71 69 75 67
                                                                                                   U60852                 72 76
          250,000                                                                                           66              66
                                                                                               59       58               57
                                               5.3% CAGR                       60                 52       48   51 51 49
                                                                                                       45      41 40 38
          200,000
                                                                               40

          150,000                                                              20
                                6.7% CAGR
                                                                                 0
          100,000
                                                                                                                             Shenzhen




                                                                                                                                                                                                                         GBA
                                                                                                                                                                                                        GBA excl HK/MO
                                                                                     Macau




                                                                                                                                                                                    Foshan
                                                                                                                                        Dongguan




                                                                                                                                                                          Huizhou
                                                                                                                                                   Jiangmen
                                                                                                        Guangzhou




                                                                                                                                                              Zhongshan
                                                                                             HongKong


                                                                                                                    Zhuhai




                                                                                                                                                                                             Zhaoqing




                                                                                                                                                                                                                                     U60852


           50,000

                    0
                                                            2022F

                                                                    2030F
                        2007
                        2008
                        2009
                        2010
                        2011
                        2012
                        2013
                        2014
                        2015
                        2016
                        2017




                                                                                                                    2017                                                  2030F

         Source: Guangdong Academy of Social Sciences, DBS HK estimates      Source: CEIC, DBS HK




                                                                                                                                                                                                                           Page 16
Company Guide

         China Merchants Commercial REIT



         Population growth in GBA and Shenzhen                                         Top 10 cities in terms of population inflow in China (2018)
          - GBA has been outpacing China’s growth                                       - Shenzhen and Guangzhou topped the list
          - Shenzhen led GBA’s population growth                                        - More room for higher population density in GBA


          6%                                                                            Rank             City
                                                                                        1                Shenzhen
          5%                                                                            2                Guangzhou
                                                                                        3                Beijing                    U60852
          4%
                                                                                        4                Shanghai
U60852
          3%                                                                            5                Dongguan
                                                                                        6                Suzhou
          2%
                                                                                        7                Chengdu
          1%                                                                            8                Chongqing
                                                                                        9                Foshan
          0%
                                                                                        10               Hangzhou
                   2010

                          2011

                                 2012

                                        2013

                                                 2014

                                                        2015

                                                               2016

                                                                        2017

                                                                               2018




                          GBA                  Shenzhen                   China


         Source: CEIC, DBS HK                                                          Source: “China Urban Vitality Research Report 2018” by Baidu Map &
                                                                                       China Academy of Urban Planning & Design, DBS HK

          U60852
                                                                                                    U60852
         Shenzhen GDP                                                 Shenzhen disposable income               Shenzhen retail sales




                                                                                           U60852



                                                                                                                     U60852




         Source: Shenzhen Statistical Bureau, Knight Frank, DBS HK                                                                                          U60852




                                                                                                                                                 Page 17
Company Guide

         China Merchants Commercial REIT
                                                                                                                                                                                                      U60852



         Shenzhen office market distribution, 1Q19                                                    Office rental rates in major districts in Shenzhen
          - Total office stock amountedU60852
                                         to 10.3m sm                                                  - Luohu to lead rental growth
                                                                                                                      U60852
          - 45% in Futian and 37% in Nanshan                                                          - Nanshan’s rental     to pick up from 2020


                                                                               North of                Rmb/sm/month
                                                                               Huaqiang                260
                                                                                 2%                    240
                                         CBD
                                         30%                                                           220
                                                                                        Guomao         200
                                                                                          2%           180
           Hi-tech Park
               14%                                                                     Qianhai
                                                                                      U60852           160
                                                                                         4%            140
                                                                                       Nany ou         120
                Che Kung                                                                 4%
                 Temple                                                                                100
                  13%                                    Shekou




                                                                                                                                                                  2019F

                                                                                                                                                                            2020F

                                                                                                                                                                                     2021F

                                                                                                                                                                                             2022F

                                                                                                                                                                                                     2023F
                                                                                                              2014

                                                                                                                      2015

                                                                                                                               2016

                                                                                                                                         2017

                                                                                                                                                       2018
                                                           6%                     Caiwuwei                                                                                                                        U60852
                               Emerging                                              5%                                                                                                         U60852
                                areas         Houhai
                                11%            9%                                                                    Futian                            Luohu                           Nanshan


         Source: Knight Frank, DBS HK                                                                 Source: Knight Frank, DBS HK
U60852




         Shenzhen grade-A office average monthly rent and                                             Shenzhen grade-B office average monthly rent and
         vacancy                                                                                      vacancy
          - Rising supply to push up vacancy rate                                                      - Vacancy rate to decline gradually
          - Rental growth to pick up from 2020                                                         - Similar pattern to grade-A office
         Rmb/sm/month                                                                                  Rmb/sm/month
         270                                                                                    25%    180                                                                                           18%
          260                                                                                          175                                                                                           16%
                                                                                                20%    170                                                                                           14%
          250
                                                                                                       165                                                                                           12%
          240                                                                                   15%
                                                                                                       160                                                                                           10%
          230                                                                                   10%    155                                                                                           8%
                                                                                                       150                                                                                           6%
          220
                                                                                                5%     145                                                                                           4%
          210                                                                                          140                                                                                           2%
          200                                                                                   0%     135                                                                                           0%
                                                                                        2023F
                                                     2019F

                                                             2020F

                                                                      2021F

                                                                              2022F
                        2015
                 2014



                                2016

                                       2017

                                              2018




                                                                                                                                                          2019F

                                                                                                                                                                    2020F

                                                                                                                                                                             2021F

                                                                                                                                                                                     2022F

                                                                                                                                                                                             2023F
                                                                                                              2014

                                                                                                                     2015

                                                                                                                             2016

                                                                                                                                      2017

                                                                                                                                                2018




                           Rental (LHS)                              Vacancy (RHS)                                      Rental (LHS)                                        Vacancy (RHS)

         Source: Knight Frank, DBS HK                                                                 Source: Knight Frank, DBS HK




                                                                                                                                                                                                             Page 18
Company Guide

         China Merchants Commercial REIT



         Shenzhen retail commercial properties distribution,                       Ground floor average monthly rent and vacancy of retail
         1Q19                                                                      commercial properties in Shenzhen
          - Total retail stock amounted to 6.0m sm                                  - Vacancy to stay low at 4-6%
          - New supply mainly in new districts                                      - Rental growth to see a hiccup in 2019
                                                                                    Rmb/sm/month
                                                                                    705                                                                                   7%

U60852                                                                              700                                                                                   6%
                                                                                    695                                                                                   5%
                                                                                    690                                                                                   4%
                                                                                    685                                                                                   3%
                                                                                    680                                                                                   2%
                                                                                    675                                                                                   1%
                                                                                                                                U60852
                                                                                    670                                                                                   0%




                                                                                                                                  2019F

                                                                                                                                          2020F

                                                                                                                                                  2021F

                                                                                                                                                          2022F

                                                                                                                                                                  2023F
                                                                                            2014

                                                                                                    2015

                                                                                                           2016

                                                                                                                  2017

                                                                                                                         2018
                                                                                                   Ground floor rents (LHS)                           Vacancy (RHS)
                          U60852

         Source: Knight Frank, DBS HK                                              Source: Knight Frank, DBS HK




         Recent favorable policies in Qianhai-Shekou Pilot FTZ

        Date                   Policy
        12-Sep-19              Subsidies to financial companies
   U60852
        11-Sep-19              Subsidies to shipping companies
        12-Jul-19              Initiated the Homing Plan of Qianhai Enterprises (前海企業歸巢行動計畫)
                               To enrich "2+3+6+N" policy:
                               2: corporate income tax + personal income tax
                               3: headquarters + talents + rental subsidy
                               6: finance, modern logistics, technology, cultural, IT and legal
                               N: foreign trade, foreign investment, new industrial land, housing subsidies and others
          17-Jun-19            Office rents subsidies
          18-Mar-19     U60852
                               Personal income tax subsidies from 2019-2023
         Source: Shenzhen government, Qianhai-Shekou Pilot FTZ official website, DBS HK




                                                                                                                                                                           Page 19
Company Guide

         China Merchants Commercial REIT



         No. of registered enterprises in Qianhai Shekou FTZ                                                  Supply/demand dynamics of grade-A office in Shekou
         - 118% CAGR growth in 2014-2018                                                                       - Future new supply mainly in Taizi Bay
         - Strong momentum to continue, back by favourable                                                     - Vacancy to peak at 58% in 2020 and drop thereafter
           policies

          No. of registered enterprises in Qianhai-Shekou FTZ                                                  sm
                                                                                                               500,000                                                                                                   70%
U60852   200,000                                                                                               450,000
                                                                                                                                                                                                                         60%
                                                                                                               400,000
         160,000                                                                                               350,000                                                                                                   50%
                                                                                                               300,000                                                                                                   40%
                                                                                                               250,000
         120,000                                                                                                                                                                                                         30%
                                                                                                               200,000
                                                                                                               150,000                                                                                                   20%
            80,000                                                                                             100,000
                                                                                                                                                                   U60852                                                10%
                                                                                                                50,000
            40,000                                                                                                   0                                                                                                   0%




                                                                                                                                                                                                        2022F
                                                                                                                                                                             2019F
                                                                                                                                                                                      2020F
                                                                                                                                                                                              2021F


                                                                                                                                                                                                                 2023F
                                                                                                                             2013
                                                                                                                                     2014
                                                                                                                                            2015
                                                                                                                                                    2016
                                                                                                                                                            2017
                                                                                                                                                                    2018
                0
                      2013U608522014               2015                                                2018           Supply (LHS)                         Demand (LHS)                                 Vacancy (RHS)

         Source: Qianhai-Shekou Pilot FTZ official website, DBS HK                                            Source: Knight Frank, DBS HK




         Supply/demand dynamics of grade-B office in Shekou                                                   Office average monthly rent in Shekou
          - No more new supply since 2016                                                                     - Metro line 12 to connect Shekou with Houhai, Bao’an
          - Vacancy to decline gradually                                                                      - Grade A/B rental to grow at CAGR of 4.4%/3.7%
   U60852

          sm                                                                                                   Rmb/sm/month
          500,000                                                                                       16%    350
          450,000                                                                                       14%    300
          400,000
                                                                                                        12%
          350,000                                                                                              250
          300,000                                                                                       10%
                                                                                                               200
          250,000                                                                                       8%
          200,000                                                                                              150
                                                                                                        6%
          150,000           U60852
                                                                                                               100
                                                                                                        4%
          100,000
                                                                                                        2%      50
           50,000
                0                                                                                       0%       0
                                                 2017


                                                               2019F
                                                                       2020F
                                                                               2021F
                                                                                       2022F
                                                                                               2023F
                     2013
                            2014
                                   2015
                                          2016


                                                        2018




                                                                                                                                                                     2019F

                                                                                                                                                                                     2020F

                                                                                                                                                                                                2021F

                                                                                                                                                                                                                2022F

                                                                                                                                                                                                                         2023F
                                                                                                                      2015

                                                                                                                                    2016

                                                                                                                                             2017

                                                                                                                                                           2018




                 Supply (LHS)                    Demand (LHS)                          Vacancy (RHS)                                       Grade-A                                            Grade-B

         Source: Knight Frank, DBS HK                                                                         Source: Knight Frank, DBS HK




                                                                                                                                                                                                                                 Page 20
Company Guide

    China Merchants Commercial REIT



   Supply/demand dynamics of retail commercial properties
   in Shekou
    - Limited new supply in 2017-2021
    - New supply in Taizi Bay in 2022/2023
                           U60852


     sm
     500,000                                                                            35%
     450,000
                                                                                        30%
     400,000
     350,000                                                                            25%
     300,000                                                                            20%
     250,000
     200,000                                                                            15%
     150,000                                                                            10%
     100,000                                                                                    U60852
                                                                                        5%
      50,000                                                                           U60852

           0                                                                            0%
                    2006

                           2008

                                  2010

                                         2012

                                                2014

                                                       2016

                                                              2018

                                                                     2020F

                                                                               2022F




                                                                                                         U60852




                  Supply (LHS)             Demand (LHS)                      Vacancy (RHS)

   Source: Knight Frank, DBS HK


U60852




         U60852




                                                                      U60852




                                                                                                                  Page 21
Company Guide

   China Merchants Commercial REIT


                                                                                           KEY ASSUMPTION
  CRITICAL FACTORS TO WATCH
                                                                                                  Revenue
  Critical Factors                                                  Rmb m
  The Qianhai-Shekou
                   U60852Pilot FTZ is transforming from a
                                                                    600
  shipping and manufacturing base into a modern service
                                                                    500
  industrial zone. The ongoing industry upgrade will continue
  to support office rental appreciation. Knight Frank is            400
  expecting rental CAGR of 4.4%/3.7% for grade A/B offices
                                                                    300
  in Qianhai-Shekou in 2018-2023.
                                                                    200
  The REIT is undertaking various renovation exercises at
  several properties to improve attractiveness and                  100
  competitiveness of its assets. Management also strives to            0
                                                                     U60852
  optimise its cost structure to improve its NPI.                             FY16A FY17A FY18A FY19F FY20F FY21F FY22F
                                                        U60852
                                                                                               NPI
   While CMC REIT’s operations are currently affected by
                                                                           Rmb m U60852
   ongoing renovation and construction of metro line 12, there      500
   is a distribution enhancement mechanism in place with a          450
   distribution guarantee for the next three years, removing        400
                                                                    350
   any initial uncertainty. The metro line 12 connecting Shekou
                                                                    300
   and Bao’an International Airport is expected to commence
                                                                    250
   operation in 2022, and this will greatly improve the             200
   population catchment and attractiveness of CMC REIT’s
U60852                                                              150
   offices. The average rental rate of CMC REIT’s office            100
   buildings is relatively lower as compared to the market           50
   average of Rmb250/sm/month and Rmb140/sm/month for                 0
   Grade-A/B offices in Shekou respectively (according from                   FY16A FY17A FY18A FY19F FY20F FY21F FY22F
   Knight Frank), affected by ongoing renovation and                                                DPU
   construction of Metro Line 12.                                   HK$
                                                                    0.35
  New Times Plaza No.1’s rental rate was Rmb156/sm/month            0.30
  in 1H19, vs. average rental rate of Rmb250/sm/month in
                                                                    0.25
  Shekou (according to Knight Frank). We expect its rental
  rate and occupancy to pick up in 2020 after its on-going          0.20
  upgrading exercise is completed.                                  0.15
                                                                    0.10
  TheU60852
       rental rate of its 3 grade-B offices ranged from Rmb87-
  105/sm/month in 1H19, vs. average rental rate of                  0.05
  Rmb140/sm/month in Shekou (according to Knight U60852 Frank).     0.00
  The completion of upgrade in 2021 and operation of the                      FY19F FY20F FY21F FY22F FY23F FY24F FY25F
  metro line 12 in 2022 is expected to enhance the                                                DPU yield
  attractiveness and connectivity of those grade-B office          10%
  buildings. In addition, there is no grade-B office supply
  coming onstream in the region over the next five years,           8%
  according to Knight Frank. Therefore, we expect their rental
  rates to gradually catch up with regional peers.                  6%

                                                                    4%

                                                                    2%

                                                                    0%
                                                                                  2020                 2021                 2022
                                                                                    Clean yield               Gross yield

                                                                  Source: Company, DBS HK



                                                                                                                               Page 22
Company Guide

China Merchants Commercial REIT



Balance Sheet:                                                                                   Gearing
Still have debt
            U60852headroom for acquisitions. We expect the total

capex for the AEI to be around Rmb400m, which will be funded by
debt. Gross gearing is expected to go up to 25% in by end-FY19,
still below the 45% cap, indicating abundant debt headroom for
potential acquisitions. Average funding cost is low at less than 4%.

Guaranteed DPU in 2020-2022 to remove initial uncertainties.
CMC REIT will pay out 100% of distributable income until 2022
and at least 90% of distributable income thereafter. We note that
HK-listed peers are paying 95%-100% of distributable income. We                           Net Capital Expenditure
have assumed 95% payout ratio from 2022 onwards. The
distribution will be on a semi-annual basis.


Share Price Drivers:
Above expected rental revision or occupancy rate and asset
injection.

Key Risks:
Key risks include regional concentration risks, rising supply in
Shenzhen Nanshan, change in tax policy, and currency mismatch.
                                                                                                   ROE              U60852


Environment, Social, Governance:
CMC REIT is renovating some of its assets to improve the layout
and attractiveness of those assets. In addition, the renovation is
also looking to use environmentally friendly materials and save
energy.
                                      U60852

CMC REIT isU60852
             also restructuring its management team and internal
control mechanism to further improve internal efficiency and risk
control.
                                                                       Source: Company, DBS HK
Company Background
China Merchants Commercial REIT (or CMC REIT) is established by
China Merchants Shekou Industrial Zone Holdings (CMSK,
001979.CH, not rated) – a leading city and industrial park
developer owned by China Merchants Group (CMG). The REIT U60852has
an initial portfolio of five commercial properties in Shenzhen
                                                                                                                                 U60852
Qianhai-Shekou Pilot Free Trade Zone (FTZ), offering investors
unique exposure to the strong potential in Qianhai.

The kick-off of CMC REIT is part of CMG’s initiative strategy, and
the platform may have the potential to consolidate CMG’s
commercial properties in the future.




                                                                                                                             Page 23
Company Guide

           U60852
China Merchants   Commercial REIT


U60852


 Segmental Breakdown (RMB m)
 FY Dec                      2017A    2018A     2019F   2020F   2021F
 Revenues (RMB m)
  Gross rental income          303      325      346     396      440
  Others                        56       65       68      71       75
 Total                         360      389      413     467      515

 Source: Company, DBS HK

 Income Statement (RMB m)
 FY Dec                      2017A    2018A     2019F   2020F   2021F
          U60852
 Gross revenue                 360      389      413     467      515
 Property expenses             (87)     (90)    (102)   (142)    (122)
 Net Property Income           273      299      311     325      393
 Other expenses                  0        0        0       0        0
 Interest (Exp)/Inc              6      (20)     (33)    (66)     (66)
 Exceptionals                  707    1,201      382       0        0
 Pre-Tax Profit                987    1,482      660     259      327
 Tax                           (41)     (42)     (80)    (58)     (81)
 Non-Controlling Interests       0        0        0       0         0
 Net Profit                    946    1,441      579     201      247
 Distribution income             0        0        9     235      253

 Revenue Gth (%)                (2)        8       6       13       10
 NPI Gth (%)                    11       10        4        5       21
 Dist. Inc Growth (%)          N/A      N/A
                                       U60852
                                                 N/A    2,438        8
 DPU Growth (%)                N/A      N/A      N/A    2,438        8

 Source: Company, DBS HK



                                                                U60852

                                                                         U60852
                                                                                  U60852




                                                                                   Page 24
Company Guide
                                                  U60852

China Merchants Commercial REIT
                                                                              U60852



 Balance Sheet (RMB m)
 FY Dec                                 2017A          2018A       2019F          2020F       2021F

 Fixed Assets                                1                 0        0             0            0
 Other LT Assets                           N/A               N/A      N/A           N/A          N/A
 Cash & ST Invts                           283                20      965           859          824
 Other Current Assets                      543             1,037       23            23           23
 Total Assets                            5,760             7,193    7,617         7,697        7,693
 ST Debt                                     0                 0        0             0            0
 Creditors                                  84                75       75            75           75
 Other Current Liab                      3,827          3,828          975           975          975
 LT Debt                                      0              0      1,886         1,886        1,886
 Other LT Liabilities                      514            856          940           940          940
 Non-Controlling Interests                    0              0           0             0            0
 Unitholders’ funds                      1,334          2,433       3,741         3,821        3,816
 Total Capital                           5,760          7,193       7,617         7,697        7,693
 Share Capital (m)                         378            378       1,128         1,128        1,128
 Gross Debt                                 N/A            N/A         N/A           N/A          N/A
 Working Capital                        (3,368)        (2,867)     (1,027)       (1,027)      (1,027)
 Book NAV (HK$)                             N/A            N/A        3.75          3.83         3.83
                      U60852
 Gross Gearing (%)                            0              0          25            24           25

 Source: Company, DBS HK

 Cash Flow Statement (RMB m)
 FY Dec                                 2017A          2018A       2019F          2020F       2021F

 Pre-Tax Income                           987           1,482
                                                          U60852
                                                                      660              259       327
 Tax Paid                                 (39)            (39)        (80)             (58)      (81)
 Depr/Amort                                 0                0          0                0         0
 Chg in Wkg.Cap.                           (7)            (18)     (1,839)               0         0
 Other Non-Cash                          (713)         (1,203)       (382)               0         0
 Operational CF                            228              224    (1,642)             201       247
 Net Capex                                  0                 0         0             0           0
 Assoc, MI, Invsmt                       (240)             (423)        0             0           0
 Investment CF                           (240)             (423)     (111)         (187)        (30)
 Net Chg in Debt                            0                 0     1,886             0           0
 New issues/Unit Buyback       U60852       0                 0     3,743             0           0
 Distribution Paid                          0                 0    (2,931)         (121)       (251)
 Other Financing CF                        (5)                0         0             0           0
 Financing CF                              (5)                0     2,698          (121)       (251)
 Chg in Cash                              (17)             (199)      945          (106)        (35)    U60852



 Source: Company, DBS HK                                             U60852


                                                                                                                 U60852




                                                                                                                          Page 25
Company Guide
                                                                                                    U60852

         China Merchants Commercial REIT                                          U60852
                                                          U60852




         Appendix


         Location of CMC REIT’s properties




U60852




                                                                                                                       U60852




                                     U60852
                                                                                           U60852




                                                                                                                           U60852




                            U60852




         The circled Shekou area is based on statutory plan of Nanshan District

         Source: Company, Knight Frank




                                                                                                             Page 26
Company Guide
                                                                       U60852

         China Merchants Commercial REIT             U60852
                                            U60852




         CMC REIT structure




U60852




                                                                                          U60852




                                   U60852
                                                              U60852




                                                                                              U60852




                          U60852




         Source: Company, DBS HK



                                                                                Page 27
U60852



Company Guide

China MerchantsU60852
                 Commercial REIT


Key management team

Manager (age)       Position         Profile
Mr. Huang           Chairman,         −     also non-ED of CML and CFO of CMSK
Junlong (54)        non-ED            −     served as Deputy Supervisor of finance department of CMSK, CFO of CM Petrochemical, CFO of CM
                                            Port, CFO of CM Logistics
                                      −     obtained Bachelor of Engineering from Changsha Institute of Communications in 1988, majoring in
                                            engineering financial accounting                       U60852

                                      −     obtained MBA from China Europe Int'l Business School in 2008
                                      −     obtained a qualification certificate for secretary of the board of directors in 2015
Mr. Guo Jin (51),   ED, Chief         −     has extensive experienceU60852
                                                                      in real estate and financial industry
CFA                 Investment        −     was Head of Greater China at Savills Investment Management
                    and  Asset
                       U60852
                                      −     was ED of the investment management department of ICBC Int'l
                    Managemen         −     obtained Bachelor of Commerce and Bachelor U60852
                                                                                              of Property from The University of Auckland in 2003
                    t Officer         −     was member of the Royal Institution of Chartered Surveyors (Valuation)
Ms. Liu Ning        Non-ED            −     is also the Deputy GM, the secretary of the board of directors, and GM of CM Apartment of CMSK
(51)                                  −     over 15 years of experience in the securities industry
                                      −     served in various positions at CM Property Development during 2001-2015
                                      −     was a member of the listing committee of Shenzhen Stock Exchange during 2016-2018
                                      −     obtained MBA from Macau University of Science and Technology in 2003
                                      −     obtained a qualification certificate for secretary of the board of directors in 2004
Mr. Yu Zhiliang     Non-ED            −     ED of CML since 2012 and served as the GM of CML since 2016
(41)                                  −     CML's CFO during 2012-2016
                                      −     obtained Bachelor of Administration from Xiamen University and an MBA in finance from the
                                            Chinese University of Hong Kong                                                                         U
                                      −     obtained qualification certification of specialty and technology for accountancy
Mr. Lin Hua (44),   Independent       −     Established Shanghai HeYi Financial Services Ltd
CFA                 non-ED            −     independent director of Industrial Bank (601166.CH), independent non-ED of Zhenro Property
                                            (6158.HK) and independent director of Generali China Asset Management, adviser of King & Wood
                                            Mallesons
                                      −     worked at Jin Yuan Capital Management and Xiamen Venture Capital
                                      −     obtained MBA from the University of California, Irvine in 2007
Mr. Lin Chen        Independent       −     has been the Stelux Professor in Finance of the University of Hong Kong, as well as Chair of Finance,
(41)                non-ED                  and Director of the Centre for Financial Innovation and Development, among other roles
                                  U60852
                                      −     member of the Currency Board Sub-Committee of the Exchange Fund Advisory Committee
                                      −     - obtained Bachelor of Engineering from the South China University of Technology, and MBA, M.A.
                                            and Ph.D from the University of Florida
Ms. Lau Sze         Independent       −     Director of RHL Appraisal Ltd. since 2000
Wan, Serena         non-ED            −     obtained Bachelor of Applied Science from University of Technology, Sydney, a Professional Diploma
(51)                                        in Corporate Governance and Directorship from the Hong Kong Institute of Directors, and MBA from
                                            the University of Hong Kong
                                      −     Currently a fellow of the Hong Kong Institute of Surveyors, and a professional member of the Royal
                                            Institution of Chartered Surveyors
                                      −     was a professional member of the Royal Institution of Chartered Surveyors
Source: Company, DBS HK




                                                                                                                                          Page 28
U60852



Company Guide

China MerchantsU60852
                 Commercial REIT


DBS HK recommendations are based on an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return, i.e., > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)
                                                                                                   U60852
*Share price appreciation + dividends

Completed Date: 21 Jan 2020 08:45:15 (HKT)
                                                                      U60852
Dissemination Date: 21 Jan 2020 09:36:49 (HKT)
Sources for all charts and tables are DBS HK unless otherwise specified.
                         U60852
GENERAL DISCLOSURE/DISCLAIMER                                                           U60852

This report is prepared by DBS Bank (Hong Kong) Limited (“DBS HK”). This report is solely intended for the clients of DBS Bank Ltd., DBS HK, DBS
Vickers (Hong Kong) Limited (“DBSV HK”), and DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”), its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS HK.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers,
employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or
sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we
do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions
expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document
does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is
for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain               U
separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss
(including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation
to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along
with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document.
The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform
broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
                                    U60852
update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a)    such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b)    there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
       assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
DBS Vickers Securities (USA) Inc (“DBSVUSA”), a US-registered broker-dealer, does not have its own investment banking or research department,
has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past
twelve months and does not engage in market-making.




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