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TPARK Logistics Property Fund

Strong link to modern trade capex cycle BUY

TPARK Logistics Property Fund

- Mid-2015F TP at Bt13/unit, IRR attractive IRR at 8.3% - 400-460pbs above

alternative investments; BUY

- Modern trade capex uptrend underwrites occupancy and rent increases

- 2014F: No extras means net investment income to fall 7% with 2percent slip in

DPU - but steady growth of 2-3% in 2015-2016F

- Good dividend yield of 6.9-7.2percent for 2014-2016F

Attractive TP at Bt13/unit. TLOGIS's unit prices have rise 8% after the 2011 floodcaused

nosedive to now trade at its NAV, slightly below historical average of 1.1x. We

see this as unjustified given its steady recovery and continue to like the fund, with a

solid asset quality and promising long term demand outlook for ready-built

warehouses (RBW). With an attractive ETR of 15% plus IRR of 8.3%, 400-460bps above

alternative investments, we keep it on our Buy list.

Driven by modern trade expansion. More than half of the fund's income is supplied

by customers with their fingers in the consumer pie. This means the aggressive

expansion of modern trade will provide solid support to earnings growth, providing

high occupancy rates and allowing for regular rent hikes. The growth in Thailand's

urbanization, estimated to reach 46% in 2030 from 34% in 2010, carries with it greater

demand for consumer products and is a positive indicator of continued strong demand

for RBWs.

Slight drop in 2014 but steady growth moving forward. In 2014, 35% of the fund's

net leasable area is estimated to expire, with another 41% expiring in 2015. We see this

as a growth opportunity since TLOGIS's strong renewal record means it will be able to

raise rents without problem. Without insurance claims, we forecast a 7percent fall in net

investment income in 2014, followed by 2-3% growth in 2015-2016F. Based on dividend

payout ratio of 95% on adjusted net income, by our estimates, DPU will slip to

Bt0.82/unit in 2014F, then rise to Bt0.85/unit in 2015F and Bt0.86/unit in 2016F, implying

a dividend yield of 6.9% in 2014, 7.1% in 2015 and 7.2% in 2016. There is 6% downside to

our 2014 DPU forecast if Big C decides not to renew its contract.

TLOGIS may be converted into REIT. TICON, the fund's sponsor, has announced

plans to merge TLOGIS, TFUND, TGROWTH and a new REIT (expected to be set up

before end-2014) into a single REIT sometime next year. Positives are: 1) higher market

capitalization, implying higher trading liquidity and 2) greater asset diversification.

Negatives are:1) existing unit holders will lose their privileges of holding freehold assets

as the new REIT will be leasehold; 2) current TLOGIS unit holders will have to shoulder

TFUND's assets, many of which have not done very well after the floods; and 3) tax

benefits for some unit holders will lower in an REIT. The final details will determine

whether the merger will be positive or negative overall to existing unit holders. We

note conversion requires the approval of at least 50% of unit holders.

1Q14 drop YoY and QoQ. TLOGIS reported 1Q14 net investment income of Bt87mn,

down 26% YoY and 3% QoQ. The large YoY drop was due to the absence of insurance

claims worth Bt30mn in 1Q13, while the fall QoQ came from yearend property tax

adjustments in 4Q13 that left expense lower than usual. DPU for the quarter was at

Bt0.21, implying an annualized yield of 7.1%

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