Company Name: Suntec Real Estate Investment Trust

You are new analysts with a top broker in Singapore and your main role is to make stock recommendations based on fundamentals to retail clients of your firm.

In analysing the company, you may assume that the risk-free rate is 2.0%, and in Singapore, the domestic market risk premium is 6.5%.

The recommendation should be based on absolute total return basis, and indicate a valuation for the short-listed company with the in-house rating recommendation guide.

Question 1

(a) In the preparation of your report, indicate the assumptions used about the companys business environment. (5 marks)

Financial Statements Announcement For First Half ended 30 June 2020 1 (b)(i) Statements of Financial Position as at 30 June 2020 Group 30/6/20 31/12/19 S$'000 S$'000 Trust 30/6/20 31/12/19 S$'000 S$'000 325 1,525 7,140,836 2,961,751 1,648 6,879,695 2,956,834 (b) 5,207,627 1,469,511 1,707,433 237 5,206,000 1,468,719 1,780,370 12,422 10,116,534 9,838,177 8,384,896 8,455,326 Non-current assets Plant and equipment Investment properties () Interest in joint ventures Interests in subsidiaries (c) Trade and other receivables (d) Total non-current assets Current assets Derivative assets) Trade and other receivables") Cash and cash equivalents Total current assets Total assets 180 61,721 355,181 417,082 10,533,616 1 36,987 157,206 194,194 10,032,371 180 50,262 290,622 341,064 8,725,960 1 39,708 107,258 146,967 8,602,293 Current liabilities Interest-bearing borrowings") Trade and other payables Derivative liabilities) Current portion of security deposits Total current liabilities 501,276 135,280 15,991 31,680 684,227 589,429 137,500 11,761 19,967 758,657 501,276 63,910 15,991 21,574 602,751 589,429 70,740 11,761 17,437 689,367 2,923,541 42,581 27,722 2,676,260 50,068 12,540 Non-current liabilities Interest-bearing borrowings (h) Non-current portion of security deposits Derivative liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Represented by: Unitholders' funds Non-controlling interests Total Equity 3,717,141 44,637 50,019 51,793 3,863,590 4,547,817 5,985,799 3,040,819 53,342 20,473 52,936 3,167,570 3,926,227 6,106,144 2,993,844 3,596,595 5,129,365 2,738,868 3,428,235 5,174,058 5,129,365 5,174,058 5,891,794 94,005 5,985,799 5,977,058 129,086 6,106,144 5,129,365 5,174,058 Footnotes: Financial Statements Announcement For First Half ended 30 June 2020 1 (a)(i) Statements of Total Return and Statement of Distribution for the First Half ended 30 June 2020 ("1H FY20") Statement of total return Group 1/1/19 to 30/6/19 S$'000 1/1/20 to 30/6/20 S$'000 Change % -16.1% 0.0% (b) 17.0% 178,073 (19,701) (4,860) (11,786) (27,165) (63,512) 114,561 - 16.6% (d) 22.4% 7.8% -20.6% (g) Gross revenue ) Maintenance charges Property management fees Property tax (c) Other property expenses Property expenses Net property income Other income Share of profit of joint ventures Finance income Finance expenses Asset management fees - base fee) Asset management fees - performance fee Trust expenses Net income Net change in fair value of financial derivatives Net change in fair value of investment properties Total return before tax Income tax expense (m) Total return for the period after tax Attributable to: Unitholders Non-controlling interests Total return for the period 149,448 (19,701) (4,034) (13,738) (21,070) (58,543) 90,905 1,881 35,690 11,229 (48,932) (17,776) (6,845) (2,156) 63,996 (33,173) (66,596) (35,773) (912) (36,685) n.m. 60,673 -41.2% 15,103 -25.7% (54,256) 9.8% (16,737) -6.2% (7,499) 8.7% (1,897) -13.7% 109,948 -41.8% (6,967) -376.1% (k) n.m. -134.7% 102,981 (2,156) 100,825 57.7% -136.4% (1,604) (35,081) (36,685) 100,977 -101.6% (152) -22979.6% 100,825 -136.4% Financial Statements Announcement For First Half ended 30 June 2020 SUMMARY OF SUNTEC REAL ESTATE INVESTMENT TRUST RESULTS Group 1/1/20 to 1/1/19 to 30/6/20 30/6/19 S$'000 S$'000 Change % Gross revenue 149,448 178,073 -16.1% -20.6% -5.8% Net property income Income contribution from joint ventures Distributable income - from operations - from capital) Amount available for distribution (b) 90,905 46,871 103,130 103, 130 114,561 49,749 130,508 117,508 13,000 -21.0% - 12.2% - 100.0% 92,817 130,508 -28.9% Distribution per unit ("DPU") (cents) (b)(c) - 1 January to 31 March (d) - 1 April to 30 June 3.293 1.760 1.533 4.795 2.434 2.361 -31.3% -27.7% -35.1% Group Statement of distribution 1/1/20 to 30/6/20 1/1/19 to 30/6/19 Change % -101.6% S$'000 (1,604) 46,781 45,177 216.5% S$'000 100,977 (40,149) 60,828 56,680 117,508 -25.7% Total return for the period attributable to Unitholders before distribution Non-tax chargeable items in Taxable income Dividend income (0) Income available for distribution to Unitholders Unitholders' distribution: |- from operations |- from capital) Distributable income 2.2% 57,953 103,130 - 12.2% 103,130 117,508 13,000 130,508 -12.2% -100.0% -21.0% 103,130 Amount available for distribution 92,817 130,508 -28.9% Financial Statements Announcement For First Half ended 30 June 2020 1 (b)(i) Statements of Financial Position as at 30 June 2020 Group 30/6/20 31/12/19 S$'000 S$'000 Trust 30/6/20 31/12/19 S$'000 S$'000 325 1,525 7,140,836 2,961,751 1,648 6,879,695 2,956,834 (b) 5,207,627 1,469,511 1,707,433 237 5,206,000 1,468,719 1,780,370 12,422 10,116,534 9,838,177 8,384,896 8,455,326 Non-current assets Plant and equipment Investment properties () Interest in joint ventures Interests in subsidiaries (c) Trade and other receivables (d) Total non-current assets Current assets Derivative assets) Trade and other receivables") Cash and cash equivalents Total current assets Total assets 180 61,721 355,181 417,082 10,533,616 1 36,987 157,206 194,194 10,032,371 180 50,262 290,622 341,064 8,725,960 1 39,708 107,258 146,967 8,602,293 Current liabilities Interest-bearing borrowings") Trade and other payables Derivative liabilities) Current portion of security deposits Total current liabilities 501,276 135,280 15,991 31,680 684,227 589,429 137,500 11,761 19,967 758,657 501,276 63,910 15,991 21,574 602,751 589,429 70,740 11,761 17,437 689,367 2,923,541 42,581 27,722 2,676,260 50,068 12,540 Non-current liabilities Interest-bearing borrowings (h) Non-current portion of security deposits Derivative liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Represented by: Unitholders' funds Non-controlling interests Total Equity 3,717,141 44,637 50,019 51,793 3,863,590 4,547,817 5,985,799 3,040,819 53,342 20,473 52,936 3,167,570 3,926,227 6,106,144 2,993,844 3,596,595 5,129,365 2,738,868 3,428,235 5,174,058 5,129,365 5,174,058 5,891,794 94,005 5,985,799 5,977,058 129,086 6,106,144 5,129,365 5,174,058 Footnotes: Financial Statements Announcement For First Half ended 30 June 2020 1 (a)(i) Statements of Total Return and Statement of Distribution for the First Half ended 30 June 2020 ("1H FY20") Statement of total return Group 1/1/19 to 30/6/19 S$'000 1/1/20 to 30/6/20 S$'000 Change % -16.1% 0.0% (b) 17.0% 178,073 (19,701) (4,860) (11,786) (27,165) (63,512) 114,561 - 16.6% (d) 22.4% 7.8% -20.6% (g) Gross revenue ) Maintenance charges Property management fees Property tax (c) Other property expenses Property expenses Net property income Other income Share of profit of joint ventures Finance income Finance expenses Asset management fees - base fee) Asset management fees - performance fee Trust expenses Net income Net change in fair value of financial derivatives Net change in fair value of investment properties Total return before tax Income tax expense (m) Total return for the period after tax Attributable to: Unitholders Non-controlling interests Total return for the period 149,448 (19,701) (4,034) (13,738) (21,070) (58,543) 90,905 1,881 35,690 11,229 (48,932) (17,776) (6,845) (2,156) 63,996 (33,173) (66,596) (35,773) (912) (36,685) n.m. 60,673 -41.2% 15,103 -25.7% (54,256) 9.8% (16,737) -6.2% (7,499) 8.7% (1,897) -13.7% 109,948 -41.8% (6,967) -376.1% (k) n.m. -134.7% 102,981 (2,156) 100,825 57.7% -136.4% (1,604) (35,081) (36,685) 100,977 -101.6% (152) -22979.6% 100,825 -136.4% Financial Statements Announcement For First Half ended 30 June 2020 SUMMARY OF SUNTEC REAL ESTATE INVESTMENT TRUST RESULTS Group 1/1/20 to 1/1/19 to 30/6/20 30/6/19 S$'000 S$'000 Change % Gross revenue 149,448 178,073 -16.1% -20.6% -5.8% Net property income Income contribution from joint ventures Distributable income - from operations - from capital) Amount available for distribution (b) 90,905 46,871 103,130 103, 130 114,561 49,749 130,508 117,508 13,000 -21.0% - 12.2% - 100.0% 92,817 130,508 -28.9% Distribution per unit ("DPU") (cents) (b)(c) - 1 January to 31 March (d) - 1 April to 30 June 3.293 1.760 1.533 4.795 2.434 2.361 -31.3% -27.7% -35.1% Group Statement of distribution 1/1/20 to 30/6/20 1/1/19 to 30/6/19 Change % -101.6% S$'000 (1,604) 46,781 45,177 216.5% S$'000 100,977 (40,149) 60,828 56,680 117,508 -25.7% Total return for the period attributable to Unitholders before distribution Non-tax chargeable items in Taxable income Dividend income (0) Income available for distribution to Unitholders Unitholders' distribution: |- from operations |- from capital) Distributable income 2.2% 57,953 103,130 - 12.2% 103,130 117,508 13,000 130,508 -12.2% -100.0% -21.0% 103,130 Amount available for distribution 92,817 130,508 -28.9%