Corporate Presentation 4 th Quarter 2016 Financial Results 25 - - PowerPoint PPT Presentation

Corporate Presentation 4th Quarter 2016 Financial Results

25 January 2017

Important Notice

This presentation is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for units in MRCB-Quill REIT (formerly know as Quill Capita Trust) (“MQReit”). The past performance of MQReit is not necessarily indicative of the future performance of MQReit. This presentation may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitations) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income and

• ccupancy, changes in operating expenses including employee wages, benefits and

training, property expenses and governmental and public policy changes. You are cautioned not to place undue reliance on these forward-looking statements which are based on the manager’s current view of future events. The value of units in MQReit (Units”) and the income derived from them may fall as well as

• rise. Units are not obligations of, deposits in, or guaranteed by, the manager or any of its
• affiliates. An investment in Units is subject to investment risks, including the possible loss of the

principal amount invested. Investors have no right to request the manager to redeem their Units while the Units are listed. It is intended that unitholders may only deal in their Units through trading on the Main Board of Bursa Malaysia Securities Berhad. Listing of the Units on the Bursa Securities does not guarantee a liquid market for the Units. The information in this Announcement must not be published outside Malaysia.

MRCB-Quill REIT Presentation *January 2017*

Contents

MRCB-Quill REIT Presentation *January 2017*

• Financial Results
• Portfolio Update

KLCA & Cyberjaya Office Market Outlook Penang Retail Market Outlook

• Conclusion

Slide No. 4 12 24

MRCB-Quill REIT Presentation *January 2017*

Quill Building 5 - IBM

Financial Results

Achieved 4Q 2016 EPU of 1.89 sen

(RM’000)

(Audited) 4Q 2015 37,694 31,909 16,375 2.48 sen (Unaudited) 4Q 2016 38,929 30,479 13,304 Net Income 1 EPU 2 Net Property Income Gross Revenue

1 Net Income refers to realised income after taxation (exclude gain from re-measurement of derivatives and revaluation surplus) 2 EPU refers to Realised Earnings Per Unit

1.89 sen

4

Variance +3.3%

• 4.5%
• 18.8%
• 23.8%

MRCB-Quill REIT Presentation *January 2017*

FY 2016 DPU Stable Year-on-Year

(RM’000)

(Unaudited) FY 2016 136,648 107,155 59,156 Total Income for Distribution1 EPU 2 Net Property Income Gross Revenue

1 Total Income for Distributions refers to realised income after taxation (exclude gain from re-measurement of derivatives and revaluation surplus) 2 EPU refers to Realised Earnings Per Unit. FY 2015 normalized EPU excludes one-off gains on divestment of properties of 0.10 sen 3 DPU refers to Distribution Per Unit. DPU of 8.47 sen is 93.4% of realised EPU of 9.06 sen for FY 2015 and DPU of 8.38 sen is 95.2%

• f realised EPU of 8.80 sen for FY 2016

4 Excluding distribution of a one-off gain on divestment of properties of 0.09 sen per unit, the normalized DPU for FY 2015 was 8.38 sen

8.80 sen Variance +13.6% +12.3% +9.5%

• 3.0%

MRCB-Quill REIT Presentation *January 2017*

Normalised EPU 2 8.80 sen

• 1.8%

(Unaudited) FY 2015 120,291 95,388 54,021 9.06 sen 8.96 sen DPU 3,4 8.38 sen

• 1.1%

8.47 sen

(Unaudited) (Unaudited) (Unaudited) (Unaudited) as at as at as at as at 31 Mar 2016 (RM’000) 30 Jun 2016 (RM’000) 30 Sept 2016 (RM’000) 31 Dec 2016 (RM’000) Non Current Assets 1,571,915 1,571,797 1,571,680 2,224,972 Current Assets 33,238 54,407 38,052 72,370 Total Assets 1,605,153 1,626,204 1,609,732 2,297,342 Current Liabilities 199,420 205,424 201,344 252,238 Non Current Liabilities 519,506 519,893 521,774 685,405 Net Assets 886,227 900,887 886,614 1,359,699 No of Units 661,381 661,381 661,381 1,068,000 NAV per Unit (RM) 1.3400 1.3621 1.3406 1.2988

Total Assets – RM2.3 billion NAV per unit – RM1.2988

MRCB-Quill REIT Presentation *January 2017*

Quill Capita Trust Presentation*January 2015*

Market Valuation as at 31 December 2016

(a) The Net Book Value of investment properties as at 31 December 2016 (prior to the Proposed Revaluation) comprise of the brought forward net book value as at 31 December 2015 together with asset enhancement related costs incurred during the year. (b) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. (c) The Properties were valued by CH Williams Talhar & Wong Sdn Bhd, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia.

Name of Properties Net Book Value as at 31 Dec 2016(a) (prior to Proposed Revaluation) (’000) Market Valuation at as 31 Dec 2016 (’000) Surplus /(Deficit) incorporated into fund (’000) % increase / (decrease) Quill Building 1- DHL1 & Quill Building 4- DHL 2(b) RM126,821 RM126,500 (RM321) (0.25) Quill Building 2- HSBC(b) RM120,724 RM121,700 RM976 0.81 Quill Building 3- BMW(b) RM 75,550 RM 76,500 RM950 1.26 Wisma Technip(c) RM172,351 RM173,000 RM649 0.38 Part of Plaza Mont’ Kiara(c) RM114,000 RM116,000 RM2,000 1.75 Quill Building 5 – IBM(b) RM 45,200 RM 45,300 RM100 0.22 Quill Building 8 – DHL (XPJ) (b) RM 26,400 RM 25,000 (RM1,400) (5.30) Tesco Building, Penang(b) RM140,000 RM140,000

• Platinum Sentral(c)

RM750,000 RM750,000

• Menara Shell(c)

RM647,411 RM648,000 RM589 0.09 Total RM2,218,457 RM2,222,000 RM3,543 0.16

Unaudited Unaudited Unaudited Unaudited as at as at as at as at 31 Mar 16 30 Jun 16 30 Sept 16 31 Dec 16 Total Debts (RM’000) 688,607 690,180 689,366 851,567 Gearing Ratio ¹ 0.43x 0.42x 0.43x 0.37x Interest Coverage 2 3.05x 3.05x 3.02x 3.20x Average Term to Maturity (year) 3 2.84 2.60 2.40 2.69 Average Cost of Debt (p.a.) 4 4.4% 4.4% 4.4% 4.4%

Stable Financial Indicators

Notes: 1.Gearing ratio refers to Gross Debt over Total Assets. 2.Interest coverage refers to year to date (YTD) EBITDA / YTD Interest Expense 3.Average Term to Maturity means weighted average time lapse to maturity 4.Average Cost of Debt is calculated based on YTD Interest Expense / Average Weighted Borrowing

MRCB-Quill REIT Presentation *January 2017*

37% 0% 10% 20% 30% 40% 50% 60%

31-Dec

Gearing Ratio

Capital Management

MRCB-Quill REIT Presentation *January 2017*

CPs RM118m MTN RM117m

RM118m CPs

Prudent Capital Management

Average cost of debt

4.4%

68%* of borrowings on fixed rate Total average borrowings : RM860 mil Gearing level

37%

Below SC limit of 50%

SC Limit

Floating rate, 32% Fixed rate, 68%

Next Refinancing Due in March 2017

Debt Maturity Profile

MRCB-Quill REIT Presentation *January 2017*

CPs RM118m TL RM72.2m

RM118m CPs

RM(mil) 22%

Average debt to maturity : 2.69 years

14%

Note;

• 1. MTN - Medium Term Notes
• 2. CP – Commercial Papers
• 3. TL – Term Loan

MTN RM60m

45%

CP RM130mil MTN RM60 mil

50 100 150 200 250 300 350 400 450

2015 2016 2017 2018 2019 2020 2021 CP RM130mil MTN RM60 mil TL RM117m CP RM279mil TL RM110mil CP RM144mil MTN RM20mil

19%

MRCB-Quill REIT Presentation *January 2017*

Quill Building 3 - BMW

Portfolio Update

Portfolio of Quality Assets

a) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd, an independent firm of professional valuer registered with the Board of Valuers, Appraisers & Estate Agents Malaysia. b) The Properties were valued by CH Williams Talhar & Wong Sdn Bhd, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia.

Quill Building 4

• DHL 2(a)

Quill Building 2

• HSBC (a)

Quill Building 3

• BMW(a)

Quill Building 5

• IBM(a)

Part of Plaza Mon’t Kiara(b) Quill Building 1

• DHL 1(a)

TESCO Building Penang(a)

Market Value

• f

11 Properties: RM2.22 bil

MRCB-Quill REIT Presentation *January 2017*

Platinum Sentral

• KL Sentral (b)

Wisma Technip (b) Quill Building 8

• DHL (XPJ) (a)

Total NLA: 2.25 mil sq ft

*Excluding car park area

Portfolio Occupancy Rate: 98%

Menara Shell (b)

Weighted Average Term to Expiry: 5.8 years

Geographical Diversification

By Valuation

¹

Notes: (1) Other Klang Valley Area refers to Klang Valley generally excluding KL city centre, KL Sentral and Mont’ Kiara. Klang Valley refers to Kuala Lumpur and Selangor State excluding Kuala Selangor, Sepang and Sabak Bernam. (2) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd and CH Williams Talhar & Wong Sdn Bhd, independent firm of professional valuers registered with the Board of Valuers, Appraisers & Estate Agents Malaysia.

Klang Valley 77% Cyberjaya 17% Penang 6%

MRCB-Quill REIT Presentation *January 2017*

Cyberjaya 17% Kuala Lumpur City Centre 8% KL Sentral 63% Penang 6% Mont' Kiara 5% Other Klang Valley Area 1%

Diversified Segmental Contributions

Notes: (1) Office comprises Quill Buildings (excluding Quill Building 8-DHL (XPJ) at Glenmarie, Shah Alam), Platinum Sentral, Wisma Technip and Menara Shell (2) Retail refers to retail portion of Plaza Mont’ Kiara & TESCO Building Penang (3) Car Park refers to car parking bays in Plaza Mont’ Kiara (4) Other commercial building refers to Quill- Building 8- DHL (XPJ) at Glenmarie, Shah Alam (5) The Properties were valued by Nawawi Tie Leung Property Consultants Sdn Bhd and CH Williams Talhar & Wong Sdn Bhd, independent firm of professional valuers registered with the Board of Valuers, Appraisers & Estate Agents Malaysia.

By Valuation

MRCB-Quill REIT Presentation *January 2017*

Office 87% Retail Assets 9% Car Park 2% Other Commercial Building 1%

Tenant Mix

By Net Lettable Area

MRCB-Quill REIT Presentation *January 2017*

Well Balanced Tenancy Mix

Government Linked Office 14.2% Retail 18.5% Education 0.8% Banking 8.3% Automotive 2.4% Logistics 11.4% Oil & Gas, 30.3% IT/ Electronics 4.6% Services 0.7% Property / Construction 1.4% Insurance, 7.0% FMCG, 0.2% Manufacturing, 0.2%

Lease Expiry Profile

• 87% of Total NLA Due in 2016 Renewed

% of net lettable area that are due for renewal

sq ft

MRCB-Quill REIT Presentation *January 2017*

1.0% 6% 13% 26% 11% 43%

• 100,000

200,000 300,000 400,000 500,000 600,000 700,000 800,000 2016 2017 2018 2019 2020 - 2032

Lease Up for Renewal by NLA - 31 Dec 2016

Lease Expiring Renewed Not Renewed

Lease Expiry Profile

• 14% of Total NLA due in 2017

% of net lettable area that are due for renewal

sq ft

MRCB-Quill REIT Presentation *January 2017*

14% 26% 13% 9% 38% 100000 200000 300000 400000 500000 600000 700000 800000 900000 2017 2018 2019 2020 2021 - 2032

Lease Up for Renewal by NLA

Lease Expiring

MRCB-Quill REIT Presentation *January 2017*

• KLCA & Cyberjaya Office

Market Outlook

• Penang Retail Market Outlook

Wisma Technip

KL & Cyberjaya Office Market Outlook

MRCB-Quill REIT Presentation *January 2017*

 Klang Valley Purposed-Built Office Market  (extracted from the Property Market Report on the Purpose-Built Office sector in Klang Valley and Purpose-Built Office sector in Klang Valley and Penang Island prepared CH Williams Talhar & Wong Sdn Bhd in December 2016)

• As at 4Q 2016, Klang Valley has a cumulative supply of 103.530 million sq. ft. of
• ffice space with 3 completions recorded during the quarter.
• The trend for expansions from financial institutions, oil & gas companies and local

government agencies were evident prior to the slump in the crude oil price in 3Q

• 2015. Since the onset of the crude oil price crisis from mid-2015 onwards, most
• ffices in the banking and oil & gas sectors have already undergone downsizing
• f their spatial requirements.
• Nevertheless, the overall performance within Golden Triangle area indicated the

sector has been enjoying low vacancy rates for the last 3 years. This is attributed to favourable locational factors i.e. the premium “Kuala Lumpur” address, being centrally located and well connected by rail and road transport services.

• The average occupancy rate in Klang Valley remained stabled at 83.4% during

the review period.

KL & Cyberjaya Office Market Outlook

MRCB-Quill REIT Presentation *January 2017*

 Klang Valley Purposed-Built Office Market (cont’d)  (extracted from the Property Market Report on the Purpose-Built Office sector in Klang Valley and Purpose-Built Office sector in Klang Valley and Penang Island prepared CH Williams Talhar & Wong Sdn Bhd in December 2016)

• The majority of asking rentals for prime office buildings in Central KL and core

business area in Metropolitan KL, i.e. KL Sentral / Mid Valley, Petaling Jaya / Bandar Utama, have improved since 2008 owing to the better quality office buildings which are mostly MSC compliant and / or have Green Building features.

• Selected prime office buildings within Central KL are currently offering monthly

gross rents of around RM6.50–RM9.50 per sq. ft. (excluding Petronas Twin Towers) whereas those in the Metropolitan KL and Greater KL areas generally offer gross rents of between RM4.00–RM5.50 per sq. ft. per month (with the exception of

• ffice space within KL Sentral and Bangsar South development, which generally
• ffers RM6.50-RM8.50 per sq. ft per month for MSC status buildings).
• The PBO sector is expected to continue to be a challenging year with the

slowdown in global economy and domestic economic trends. Weak demand for

• ffice space is expected to continue, affected by external and internal factors.

KLCA & Cyberjaya Office Market Outlook

MRCB-Quill REIT Presentation *January 2017*

 Cyberjaya Purposed-Built Office Market  (extracted from the Property Market Report on the Purpose-Built Office sector in Klang Valley and Purpose-Built Office sector in Klang Valley and Penang Island prepared CH Williams Talhar & Wong Sdn Bhd in December 2016)

• The existing supply of office space in Cyberjaya stood at 5.350 million sq.

ft.

• In general, the occupancy rate in Cyberjaya is much better compared

to Putrajaya as many office buildings in Cyberjaya are owner occupied coupled with the Multi-media Super Corridor (MSC) status for buildings located within Cyberjaya. Occupancy rate of 76.4% was recorded in cyberjaya for 4Q 2016 (Putrajaya: 53.8%).

Penang Retail Market Outlook

MRCB-Quill REIT Presentation *January 2017*

 Penang Purposed-Built Retail (“PBR”) Market  (extracted from the Property Market Report on the Purpose-Built Office sector in Klang Valley and Purpose-Built Office sector in Klang Valley and Penang Island prepared CH Williams Talhar & Wong Sdn Bhd in December 2016)

• The existing supply of Penang PBR stood at 18.537 million sq. ft. with 63% of the

retail space in Penang Island.

• The overall occupancy rate of PBR centres in Penang was relatively stable, which

was in the region of 69% to 72% in the past 5 years.

• Retail malls on Penang Island continues to outperform those in Seberang Perai, of

which the former registered average occupancy rate of about 80% whilst the latter at about 60%. The high occupancy of the retail malls in Penang island, is attributed to the relatively larger working population as well as tourists.

• Gross rentals for the ground floor of selected prime retail malls in Penang Island

commanded the higher rental rates compared to those in Seberang Perai, of up to RM22 per sq. ft per month.

• A mixed outlook in both global and local economy might cut consumer
• spending. However, those established retail centres with strong tenant mix,

coupled with good location and good connectivity to major roads and highways will continue to take lead and enjoy high occupancies with potential catchment market.

MRCB-Quill REIT Presentation *January 2017*

Conclusion

Quill Building 1 – DHL 1

In Summary

MRCB-Quill REIT Presentation *January 2017*

• Proactive asset management strategies to focus on tenant relations and

continuous building improvements

• Prudent capital management strategies
• Continue to explore yield accretive acquisition opportunities

Stable FY 2016 DPU of 8.38 sen declared

• FY 2016 DPU of 8.38 sen is similar to the normalized FY 2015 DPU of 8.38 sen

(less the distribution of a one-off gain on divestment of properties of 0.09 sen per unit)

• Revaluation gains of RM3.5 million from investment properties
• Completed renewals due in 2016 with 87% renewals successfully in place
• Completed the acquisition of Menara Shell on 22 December 2016

Year 2016 Prospects – Ongoing Strategies

Thank you

For enquires, please contact: Ms Yong Su Lin Ms Joyce Loh (General Line: 603-2786 8080) (Fax : 603-2780 0098)