Tune Ins Holdings Berhad

Transcription

1 KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES 13 January 2015 Initiating Coverage Tune Ins Holdings Berhad Going places Initiate with BUY Target Price (TP) : RM2.12 INVESTMENT HIGHLIGHTS We are initiating coverage on Tune Ins Holdings Berhad (TIH) with a BUY recommendation. Our target price of RM2.12 is pegged to FY15 PER of 18.8x on EPS of 11.3 sen. Our forward PE multiple of 18.8x is a 20% premium to the sector s average. This is justified based on: (i) growing air travel demand, (ii) stable earnings supported by online travel insurance with lucrative UW margin of >50%, (iii) superior return on equity (ROE) at >18%, (iv) potential new investment opportunities and (v) a diversified insurance portfolio which mitigates risk. Expected dividend payout is 40% of PAT. This will translate into an attractive dividend yield of 2.9%. Strong growth prospects with potential expansion of regional presence as well as its focus on digital platform for insurance franchise. Unique exposure to a rising demand for travel insurance. TIH is a general insurance player which is expected to benefit from the fastgrowing air travel demand in Asia Pacific. Unlike airlines companies, TIH s business is not subjected to exposure in volatility of fuel price and ticket yields. Since FY09, the net earned premium (NEP) for online travel insurance business attained a CAGR of 34.6%, driven by a robust growth in air travel demand. For FY11 and FY12, the number of issued online travel insurance policies recorded a growth of +6.8%yoy and +34%yoy, respectively. Income stability supported by online travel insurance. The online travel insurance contributed 70-75% of the Group PAT. Benefitting from the large E-database of AirAsia s clients, TIH is able to offer its online travel insurance at low cost base, thus reaping lucrative profits (with PAT margin of 50-55%). Its risk exposure in online travel insurance to catastrophic losses is mitigated as the Group subsequently takes on policies with the external reinsurance agents, mainly Lloyds, a reputable insurer in UK to cap the risk. Enhanced revenue stream via regional acquisitions and tie-ups. TIH seeks to acquire more local insurance partners to directly underwrite the online travel insurance to gain higher revenue. The next acquisition target has been identified in Indonesia and is expected to be finalised in mid-fy15. TIH has also extended its product distribution reaches through strategic tie-ups with Cebu Pacific and Air Arabia. In UAE, TIH formed a JV with Cozmo Travel for its foray into MENA. RETURN STATS Price (12 January 2015) Target Price Expected Share Price Return RM1.58 RM % Expected Dividend Yield +2.9% Expected Total Return +39.1% STOCK INFO KLCI 1, Bursa / Bloomberg Board / Sector Syariah Compliant 5230 / TIH MK Main / Finance No Issued shares (mil) Par Value (RM) 0.10 Market cap. (RM m) 1,187.8 Price over NA 3.1x 52-wk price Range RM1.52 RM2.57 Beta (against KLCI) mth Avg Daily Vol 1.79m 3-mth Avg Daily Value Major Shareholders RM3.37m Tune Group 17.1% AirAsia Berhad 13.7% CIMB SI II 9.4% Some insurance abbreviation used in this report: Gross Earned Premium: GEP Net Earned Premium: NEP Malaysian Motor Insurance Pool: MMIP Low Cost Carrier: LCC Capital Adequacy Ratio: CAR Personal Accident: PA

2 INVESTMENT STATISTICS FYE Dec FY13 FY14F FY15F FY16F Net Earned Premium (RM m) Net Commission (RM m) (36.0) (38.9) (44.7) (53.3) Management Expense (RM m) (57.1) (63.1) (68.6) (79.1) Net Claim Expense (RM m) (94.0) (109.1) (122.2) (141.1) Net Profit (RM m) EPS (sen) EPS growth (%) (42.9) PER (x) PB (x) Net Dividend (sen) Net Dividend (%) Source: Company, Forecasts by MIDFR Diversifying general insurance portfolio mix. As part of its rebalancing strategy of insurance portfolio mix, TIMB has reduced its exposure in the less lucrative motor segment to 34.0% in FY13 from 53.5% in FY11. Medical healthcare, PA, engineering and foreign workers are now identified as key growth areas. The Group is expected to improve the underwriting margin to the industry average by FY15. COMPANY BACKGROUND Tune Ins Holdings Berhad (TIH) is an insurance holding company, with core businesses in general insurance, directly and via reinsurance, across the Asia-Pacific region. The company offers a range of online insurance products which comprise primarily of its Travel Protection Plan, complemented with its Tune INSURE Lifestyle Protection Plan. TIH was incorporated in June 2011 as a private limited company under the name of Tune Ins Holdings Sdn Bhd. In August 2011, it was converted to a public company and assumed its present name. In May 2012, TIH acquired Oriental Capital Assurance Berhad (OCA), an established Malaysian general insurance company. The acquisition expanded TIH s ability to cover a wider range of general insurance from a different network of 1,000 agents and 15 branches across Malaysia. OCA was renamed Tune Insurance Malaysia Berhad (TIMB) on 21 September In September 2013, Tune Direct (M) Sdn Bhd (TDM) was incorporated under the Labuan Companies Act The principal activities of TDM are insurance intermediary business for life, general and takaful products sold via TIH s online platform. TIH has inked exclusive long-term agreements with AirAsia group, which allows it to leverage on the latter s regional growth. Apart from that, it has also secured a contractual agreement with Tune Hotels. In 2013, TIH formed partnership with Malayan Insurance Co., Inc. (MICO) to offer travel protection to Cebu Pacific Air, which is the Philippines largest LCC carrier that offers flights around Asia. In January 2014, TIH entered into a joint venture (JV) agreement with Cozmo Travel LLC (Cozmo) for the provision of travel insurance as well as customised travel solutions for independent and corporate travellers in the Middle East and North Africa (MENA) region. In the same year, the company acquired 49% stake in Tune Insurance Public Limited Company (TIPCL, or formerly known as Osotspa), based in Thailand. On 20 February 2013, TIH was successfully listed on the main market of Bursa Malaysia with a market capitalisation of RM1 billion. The company has grown from a team of 16 people at the start of 2011 to a team of more than 350 dedicated employees. Moving forward, TIH s focus is to enhance its regional footprint, concentrating on key markets and to record profits. Its vision is to be recognised as ASEAN s leading regional digital insurance franchise and Malaysia s first home grown regional insurance player. 2

3 Figure 1: TIH s corporate structure Notes: (1) Shareholders: Tan Sri Dr. Anthony Francis Fernandes (50%) and Dato Kamarudin bin Meranun (50%) (2) The remaining 16.7% is owned by minority and unrelated shareholders (3) The remaining 20.0% is owned by Multi-Purpose Capital Holdings Berhad (4) The remaining 51% is owned by various Thai partners including Osotspa Co., Ltd (5) The remaining 51% is owned by Cozmo Travel LLC Figure 2: TIH s brief history 3

4 BUSINESS OVERVIEW Leveraging on convenient online distribution channels. TIH offers its travel insurance products through online insurance partners including AirAsia, AirAsia Expedia and Tune Hotels. Via online distribution platforms, these purchase options of online travel insurance products are integrated with the booking process of flights and accommodations. In essence, the hassle-free purchase method becomes the viable option for most of AirAsia travellers to subscribe to cost-efficient and comprehensive travel protection plans. Additionally, TIH entered into long term arrangements with AirAsia group of companies and Tune Hotels, allowing TIH an access to a substantial pool of client database. Table 1: TIH s long term agreement with AirAsia group of companies and Tune Hotels Host/Online Partner Period Expiring year Thai AirAsia Co. Ltd 5 years 2017 AirAsia Bhd 10 years 2022 AirAsia Japan 10 years 2022 Tune Hotels 10 years 2022 PT Indonesia AirAsia 15 years 2027 AirAsia X Bhd 15 years 2027 AirAsia Inc 15 years 2027 Well-mitigated risks via reinsurance arrangements with well-established local insurance networks. TIH has established a sizeable network with local insurance partners across 15 Asian countries to underwrite online insurance products. Within Malaysia, it is licensed to underwrite the insurance policies through TIMB. Each local insurance partners and TIMB retain a certain portion of risks and reinsure the larger portion of risks to TMGR or TIH (typically on a revenue sharing basis of 25:75). For the purpose of optimization of risk-adjusted returns, TIH pays a small amount of reinsurance premium (normally 1.5% of net earned premium) to reputable global reinsurance companies to cover for catastrophic loss or excess loss claims and cap the risk on its travel insurance policies. In the event of an airplane crash, claims related to insured passengers will be fully reclaimable from the external reinsurers (see Figure 3). In this scenario, TIH is not in the business of aviation hull insurance and thus it will not be liable for the claims on aircrafts. Spreading regional tentacles via strategic acquisitions and partnerships. TIH seeks to acquire more local insurance partners to directly underwrite the online travel insurance and gain higher portion of profits. The first major capital outlay was the acquisition of 49% stake in TIPCL (formerly Osotspa), based in Thailand. Likewise, TIH formed a 49/51 JV with Cozmo Travel LLC. This allows TIH to offer travel insurance and customised travel solutions to independent and corporate travellers. This includes Air Arabia Group, a successful low-cost carrier that flies to 51 destinations in the MENA region which represents another high-growth area. The JV managed to garner 24,000 policies within its first two months of operation. The next acquisition target has been identified in Indonesia and is expected to be finalised in mid-fy15. Apart from its acquisition strategy, TIH has also tied up with another regional airline, namely Cebu Pacific Air to widen its reach in offering online travel insurance. TIMB, a full-fledged general insurer focusing on niche markets with higher profitability. In 2Q12, the acquisition of 83.3% stake in TIMB (previously OCA) enabled the group to directly underwrite all the general insurance products in Malaysia. The full-fledged general insurer offers motor and non-motor insurance products which include insurance for fire, marine cargo, health & dental, personal accident (PA) & medical, engineering and foreign worker. TIMB s core strategy is to focus on the niche markets that could yield a higher profitability with a higher retention rate. 4

5 Some other notable business strategies undertaken by TIMB: i. rebalancing of insurance portfolio mix to switch focus to non-motor segment, ii. cost synergies through business integration, iii. introducing more efficient technology and information system platform, iv. leveraging on AirAsia and Tune s companies for marketing and branding activities, v. enhanced sale agents training and management team, vi. launch of mobile app for product offering, and vii. digitization of sales and claim services process flow. Figure 3: TIH s process flow of online travel insurance business model Figure 4: TIH s regional footprint across four continents Fig 3& 4 : 5

6 FINANCIAL HIGHLIGHTS Lucrative online travel business. The online travel insurance is the highest earnings contributor, contributing in the range of 70-75% to TIH group s PAT. The sale of online travel insurance policy is correlated with AirAsia s passenger growth as well as take-up rates. Generally, international flights command higher take-up rate of online travel insurance in comparison to domestic flights. The NEP for travel insurance is normally the highest during the fourth quarter due to strong travel demands. A lower claim ratio and an efficient cost structure enabled the lucrative PAT margin at circa 50-55% for online travel insurance segment. As for the underwriting of online travel insurance, the commission expense constitutes the largest cost component, taking up to a maximum gross premium of 30%. The marketing expense is capped at 5% of the total sales. Phenomenal growth in online NEP, driven by the surge in air travel demand. Since FY09, the NEP for online travel insurance business attained a CAGR of 34.6%, driven by a robust growth in air travel demand. The historical take-up rate for online travel insurance was 25-32% and was able to reach >40% for certain long-haul flights. For FY11 and FY12, the number of issued online travel policies recorded a growth of +6.8%yoy and +34%yoy, respectively. In addition, the increasing size of the middle income group has quadrupled the number of flights per capita in ASEAN region, as evident by the strong growth of international tourist arrivals at 23.4% CAGR since FY05. Moving forward, we believe that (i) the strategic alliance with regional carriers, (ii) acquisition of insurance companies in key markets in the region and (iii) enlarged LCC market share in ASEAN should sustain the online NEP growth at the range of 10-20% for FY Figure 5: Intra-SEA LCC market share (% of total seats) Figure 6: International tourists arrivals ( m) in ASEAN *Surge in penetration from : reclassification of Lion Air to LCC Source: ASEAN, MIDFR Source: ASEAN, MIDFR Reducing exposure in motor insurance segment. Being the largest among the general insurance segment, motor insurance faces intense competitive pricing in the domestic market. Motor insurance also has high claims ratio. As part of TIH s strategy to rebalance its general insurance portfolio, TIMB has reduced its exposure to the motor segment to 34.0% in FY13 from 53.5% in FY11. The full de-tariffication of motor premiums by 2016 will spur stiffer competitions. While premium rates on motor policies will generally be more competitive, premium rates for vehicle owners with higher risk profiles will be charged higher premiums. TIH is confident that the change which will differentiate premiums in accordance to risk profiles of individual vehicle owners will benefit them. Moving forward, the Group has identified, PA and medical, as well as engineering and foreign workers insurance (all non motor segments) as the key growth areas. Typically, TIMB is obligated to share the loss claims in MMIP. Malaysian Motor Insurance Pool (MMIP) is a high-risk insurance pool which insures certain higher risk vehicles such as buses and taxis which are not able to obtain insurance coverage from insurers while the loss is shared equally by all 23 licensed general insurers. We understand that provisioning made for MMIP entitles to a tax relief of 25%. Latest performance review. For 3Q14, the number of earned online travel policies dropped 11.3%yoy to 1.81m, mainly attributable to the local political unrest in Thailand and route rationalisation in Indonesia which both dragged down AirAsia s passenger traffics. The alteration of AirAsia s online booking engine also contributed to the minor drop 6

7 in its take-up rate but the booking system has been rectified for the improvement in take-up rate. Due to two large fire claims of RM8-10m each and higher-than-budgeted medical claims from two corporate accounts, TIMB posted a mere 5% for underwriting margin (before MMIP) in this quarter. On the other hand, the RM2.4m of tax allowance from MMIP cash call helped to offset the decline in underwriting profits. Indonesian acquisition target and higher retention rate to drive NEP growth in FY15. The management seeks to increase the retention rate of gross written premium (GWP) for TIMB to 50% in FY15 from previously 40%. If this materialises, we view that it will accretive to its NEP and earnings growth. In addition, should its next acquisition target in Indonesia materialises, this will enable the Group to bypass the revenue sharing portion by the local insurance agent to gain another 25-30% of the written premium for travel insurance. Presently, Indonesia contributes circa 12% of the total number of travel policies earned for the Group. The estimated cost to acquire its target in Indonesia will be around USD10m and will be funded via internal-generated funds. TIH s Capital Adequacy Ratio (CAR) stood at 252% as at September 2014, comfortably above the internal CAR target of 220% and statutory CAR requirement of 130%. CAR is expected to remain at a comfortable level post-acquisition in Indonesia. Figure 7: TIH s key operating ratios (before MMIP) Figure 8: TIH s NEP and PAT 7

8 Figure 9: Geographical breakdown of issued Policies FY12-13 Asia: Middle East: Figure 10: TIH s general insurance portfolio and investment portfolio General Insurance Portfolio Mix Investment Portfolio Mix (as at 30 September 2014) 8

9 INVESTMENT MERITS (i) Strong niche in the travel insurance business with low claims ratio of 3-4%, (ii) Regional exposure via partnerships with airlines such as AirAsia, Cebu Pacific and Air Arabia as well as established arrangements with local insurance partners across the region, (iii) Focus on digital distribution platforms provide the opportunity to market to the large customer base at low marketing and operation costs (iv) Regional acquisitions which will give it the right to underwrite the travel insurance business directly in these countries instead of relying on its insurance partners (v) Reduced reliance on motor insurance but with a focus shift to more profitable sub-segments within motor insurance such as franchise dealerships (vi) Its business model and IT system are replicable to allow a relatively easy tie-up with other airlines (vii) Increased consumer awareness on the importance of travel insurance and what it covers will help to increase take-up rates (viii) Long-term arrangements with AirAsia group of companies and Tune Hotels, allowing TIH an access to a substantial pool of client database. (ix) The Group s investment in equities which is riskier is low, representing only 4.1% of its total investment portfolio. INVESTMENTS RISKS (i) (ii) Dependency on AirAsia as there is no assurance that the agreements will be renewed upon expiry, Risks associated with new regional acquisitions will could strain its capital position in the event of insurance claims and uncertainties airline s operations in foreign markets, (iii) Any economic slowdown will pose an adverse impact on the group s travel insurance business as consumers spending on air travel is discretionary, (iv) Reliance on local insurers in other countries to underwrite its business and reinsure some of the risks to its entities in Labuan, (v) High and volatile claims ratio for TIMB, which contributes about 60% to the group s net earned premium, (vi) Outbreak of infectious diseases in the countries it covers will increase claims costs in its PA & Medical insurance segment, which accounts for 27% of TIMB s portfolio mix, (vii) High MMIP expense will eat into TIH s net profit and dilute the positive growth impact in profitable segments, (viii) De-tariffication of fire and motor insurance in 2016 may lead to a drop in premium rates and a stiffer competition in the non-life insurance sector in Malaysia, which consists of 23 players. VALUATION AND RECOMMENDATION In valuing TIH, we have opted for P/E method. Our target price of RM2.12 is based on FY15 PER of 18.8x on EPS of 11.3 sen. Our TP implies a P/BV multiple of 3.5x. The forward PER of 18.8x is a 20% premium against the average P/E of regional non-life insurance players (see Table 2 below). Our higher-than-average derived P/E is justified given: (i) its bright earnings prospects by tying up with the rising air travel demand growth without exposure to fuel price volatility, (ii) income stability supported by online travel insurance with low net claim ratio of <5% and high underwriting margin of >50%, (iii) superior return on equity at >18% (versus regional peers 2015F average of 12.0%) (iv) potential new investment opportunities through regional acquisition and tie-up with other airlines and (v) improving asset quality through diversified general insurance portfolio and a comfortable level of CAR which is above industry CAR. At current share price, TIH trades at undemanding 13.9x FY15-PER and 2.6x P/BV. In FY15 horizon, the acquisition of Indonesian asset and recovery in Thailand s take-up rate for travel insurance will be the key catalysts to the stock price. 9

10 Table 2: Comparison of regional non-life insurance players FYE Dec PER 2014 PER 2015 P/BV ROE (%) ROA (%) Dividend Yield (%) LPI Capital Berhad Allianz Malaysia Berhad MPHB Capital Berhad Bangkok Insurance PLC Dongbu Insurance Co Ltd Cover-More Group Ltd Average Tune Ins Holdings Berhad Source: Bloomberg, MIDFR Table 3: Benefits for Tune Insure AirAsia Travel Protection (One-way) Benefits 1. Personal Accident Benefit Domestic/Regional (For AK/FD/QZ/PQ/Z2 flights only) International (For AirAsia X/ D7 flights only) Accidental Death & Bodily Disablement Up to RM300, Up to RM300, Travel Inconvenience Benefits Flight Cancellation (Reimbursement for the cost of flight if the Insured Person has to cancel the Trip due to Insured events) Baggage and Personal Effects (Covers lost or damage to baggage, clothing and personal effects of Insured Person) Baggage Delay (For every 6 hours delayed from time of arrival) AirAsia Flight Delay (For every 6 hours delayed from original departure time of Scheduled Flight due to inclement weather, equipment failure or strike) Missed Flight Connection (No Onward connecting flight available within 6 hours from the missed Scheduled Flight due to delay of AirAsia s Incoming connecting flight) On Time Guarantee (Delay of more than 2 hours from scheduled departure time caused solely by AirAsia /AirAsia X) 3. Travel Assistance Services Up to original flight cost With Receipt: Up to RM1,500 (Anyone item RM500 subject to RM50 excess per claim) Without Receipt: Fixed at RM100 per item (No excess) Up to RM400 (RM200 per 6 hour delay period) Up to RM1,050 (RM150 per 6 hour delay period) Up to RM600 (RM300 per 6 hour delay period) Up to RM200 Up to RM5, With Receipt: Up to RM5,000 (Anyone item RM500 subject to RM50 excess per claim) Without Receipt: Fixed at RM100 per item (No excess) Up to RM800 (RM200 per 6 hour delay period) Up to RM800 ( RM200 per 6 hour delay period ) Up to RM600 ( RM300 per 6 hour delay period ) Up to RM Hours Worldwide Travel Assistance Services Included Included 4. Emergency Medical Evacuation Reimbursement of expenses incurred due to accidental injury (Only applicable within 48 hours upon arrival) Limit: RM10,000 Limit: RM25,000 10

11 5. Coverage for Accompanying Infant For one (1) infant who is named in the confirmation slip Personal Accident benefit up to 10% of the stated limit RM30,000 *For travel protection purchased on/after 12 th September 2014 Personal Accident benefit up to 10% of the stated limit RM30,000 Table 4: Insurance plan rates for Tune Insure AirAsia Travel Protection Insurance Plan Online Rate Offline Rate For One-Way: Tune Insure One-way Cover Domestic RM9.00 RM12.00 Tune Insure One-way Cover Regional RM13.00 RM16.00 Tune Insure One-way Cover International RM29.00 RM32.00 For Return-Trip: Tune Insure Return Cover Domestic RM20.00 RM23.00 Tune Insure Return Cover Regional RM25.00 RM28.00 Tune Insure Return Cover International (1-10 Days) RM49.00 RM52.00 Tune Insure Return Cover International (1-10 Days) RM79.00 RM82.00 *For travel protection purchased on/after 12 th September 2014 DAILY PRICE CHART Chua Boon Kian Sofia Sukor

12 FINANCIAL SUMMARY Income Cash flow FY12 FY13 FY14F FY15F FY16F FY12 FY13 FY14F FY15F FY16F Statment Statement Op. revenue Operating Activities GEP Net Income Ceded premium (56.5) (126.4) (147.9) (182.7) (210.9) Depre. & Amort NEP Othr Non- Cash Adj (62.5) Invest. inc Chg in Non- Cash Capital (42.5) (53.2) (1.5) (47.3) 32.8 Other income Operating CF Net claims (43.6) (94.0) (109.1) (122.2) (141.1) Commissions Investing Activities Mgmt exp CAPEX (0.6) (1.4) (4.8) (1.0) 0.0 Interest exp (10.0) (1.9) Net Invest (41.6) PBT Othr Investing (78.6) (1.3) Taxation (9.8) (3.7) (2.7) (4.5) (5.0) Investing CF (79.2) (2.7) (33.4) (1.0) 0.0 Net profit Balance Sheet Assets Financing Activities FY12 FY13 FY14F FY15F FY16F Dividends paid (31.0) (30.1) (34.1) PP&E Associate Chg in net borrowings Chg in capital stocks Other Financing (132.1) (0.1) Investments Financing CF (31.0) (30.1) (34.1) Reins. assets Receivables Net Chg in cash Cash Key Ratio FY12 FY13 FY14F FY15F FY16F Other assets Reinsurance ratio 26.3% 34.4% 36.0% 38.0% 38.0% TOTAL ASSETS , , , ,368.9 Retention ratio 73.7% 65.6% 64.0% 62.0% 62.0% Claim ratio 27.5% 39.0% 41.5% 41.0% 41.0% Equity Commission ratio 17.4% 14.9% 14.8% 15.0% 15.5% Share Capital Expense ratio 18.7% 23.7% 24.0% 23.0% 23.0% Other reserves (14.5) (17.1) (17.1) (17.1) (17.1) Retained earnings Minority interests Combined ratio 63.6% 77.6% 80.3% 79.0% 79.5% UW margin 36.4% 22.4% 19.7% 21.0% 20.5% TOTAL EQUITY Liabilities Ins. contract liab Borrowings Payables Other liab TOTAL LIABILITIES Forecasts 12

13 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Negative total return is expected, by -15% or more, over the next 12 months. Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 13