Section1 Executive Summary

Transcription

1 Section1 Executive Summary Executive summary is part of company prospectus and filing. Executive summary will summarize information about offering information, characteristic and risks of the company that issues and offers the security ( The Company ). Therefore the investor must study and analyze the detailed information from full company prospectus version, which will be provided by the underwriter and the company or can study from full company prospectus and filing in SEC website Summary of Public Offering of Mudman Public Company Limited (Offering Period: 29 March 2017 to 31 March 2017 for Sub Sri Thai s existing shareholder allocated by proportion stake of ownership in Sub Sri Thai (Pre-emptive Right) and 3 April 2017 to 5 April 2017 for Public Offering portion) Offering Information Offeror: Type of Business: Number of Offering Share: Mudman Public Company Limited ( MM ) MM is operating through its subsidiaries ( Holding Company). The subsidiaries of MM are mainly focusing on 1) Food and Beverage Business and 2) Lifestyle Business 210,980,750 shares or 20% of total number of issued and paid-up share after capital increase from this offering 1. Number of share capital increase not more than 41,437,135 shares or 20% of total number of offering share this time. For the purpose offering to the existing shareholder of Sub Sri Thai ( SST ) by proportionate from the stake of ownership in SST (Pre-emptive Right). In case if there are remaining shares from Pre-emptive right, the remain portion will allocate and offer to public 2. Number of offering share not more than 169,543,615 shares or not more than 80% of total number of offering share this time. In case if there are remaining shares from Pre-emptive right portion, the remaining portion will add to public offering portion (Referring to Number of Offering Share 1.) Offering Allocation: Existing Shareholder of Sub Sri Thai portion : Not more than 41,437,135 shares Patronage of underwriter portion : Approximately 64,543,615 shares Institutional Investor portion : Approximately 80,000,000 shares Patronage of the Company portion : Approximately 25,000,000 shares Offering Condition: Firm Underwriting 210,980,750 shares Offering Price: Baht/share Offering Value: 1,054,903,750-1,160,394,125 Baht Section 1 Page 1

2 Offering convertible share or security within 90 days before : None Par Value: 1 Baht/share Book Value as of 31 December 2016: 2.15 Baht/share Mudman Public Company Limited Source of setting offering price and financial information for offering price assessment: The Company, the lead underwriter and the underwriter set the range of offering price for offering common stocks this time at Baht/share. The Company, the lead underwriter and the underwriter shall finalize the offering price (Final Price) by considering the offering price together with number of shares based on institutional investors demand. Offering price shall be set in order to generate sufficient proceeds to the Company after IPO, and result in sufficient secondary market demand that shall lead to price stability after IPO. Proportion of strategic shareholders not included in silent period: million shares or 11.24% of total number of issued and paid-up shares after capital increase from this offering Initial Public Offering ( IPO) Market Registration Criteria Use of Proceeds: : mai : Market capitalization test. The Company has net loss THB 35.2 mm in 2014, THB 42.9 mm in 2015 and THB mm in Estimated Use of Proceeds (THB mm) Estimated Timing 1. Loan repayment to the Siam Commercial Bank Plc. /1,/ , Long-term loan repayment Short-term loan repayment for dividend payout Short-term loan repayment for business expansion Investment and business expansion Total 1, , Note: /1 The Siam Commercial Bank Plc. (SCB). as financial advisor of the Company s public offering this time, company s loan from financial institution for the purpose for operating the business, business expansion and enhance company liquidity as well as payout dividend /2 Repay loan of the Company this time including long-term loan is set the interest rate at MLR 1.5% Section 1 Page 2

3 Dividend Policy Dividend Policy of the Company The Company has dividend policy to make dividend payment of not less than 50% of net profit based on the Company s separate financial statement after deduction of tax expenses and legal reserve (if any). Dividend payout will be considered by the board of directors/shareholders of the Company for the purpose of maximizing benefit to the shareholders. Factors determining dividend payout of the Company are such as reserve for loan repayment, investment plan for expansion, and liquidity support for the Company s subsidiaries under unstable market circumstances etc. The dividend payout shall not exceed retained earnings in the Company s separate financial statements, and shall comply with related laws and regulations. As the Company operates as a holding company which majorly consists of investment in its subsidiaries, its dividend payout capability is mainly subject to subsidiaries performance and dividend payout. Dividend Policy of Subsidiaries Subsidiaries of the Company have dividend policy to make dividend payment of not less 50% of net profit based on their separate financial statements after deduction of tax expenses and legal reserve (if any). Dividend payout will be considered by the board of directors/shareholders of the Company for the purpose of maximizing benefit to the shareholders. Factors determining dividend payout of the Company are such as reserve for loan repayment, investment plan for expansion, and liquidity support for the Company s subsidiaries under unstable market circumstances etc. The dividend payout shall not exceed retained earnings in the Company s separate financial statements, and shall comply with related laws and regulations. Issuer Information MM is operating through its subsidiaries ( Holding Company). The subsidiaries of MM are mainly focusing on 1) Food and Beverage Business and 2) Lifestyle Business Main Businesses 1) Food & Beverage Business under franchise agreement 2) Food & Beverage Business under owned brand Other Business 3) Lifestyle Business Section 1 Page 3

4 Group Structure of MM as of 31 December ) Golden Donuts Company Limited (Thailand) Golden Donuts Company Limited (Thailand) ( GDT ) owns the master franchise license, which allows GDT to produce and distribute donuts and beverage under Dunkin Donuts brand in Thailand. GDT also obtains the solely exclusive right to open Dunkin Donuts stores in Thailand. As of 31 December 2016, there were 307 stores in Thailand, covering Bangkok and other provinces. 2) ABP Café Company Limited (Thailand) ABP Café Company Limited (Thailand) ( ABP ) owns the master franchise agreement from ABP Corporation (USA), which allows ABP to produce and distribute bakery under Au Bon Pain brand in Thailand. ABP also obtains the solely exclusive right to open Au Bon Pain stores in Thailand. As of 31 December 2016, there were 72 stores in Thailand, covering Bangkok and other provinces. 3) Golden Scoop Company Limited Golden Scoop Company Limited ( GS ) owns the master franchise agreement from Baskin Robbins Franchising LLC (USA) same as Dunkin Donuts. Under this master franchise agreement GS is solely allowed to import and distribute Baskin Robbins ice-cream and related products such as ice-cream toppings and whipped cream under Baskin Robbins trademark. As of 31 December 2016, there were 34 stores in Thailand, covering Bangkok and other provinces. 4) Greyhound Café Company Limited Greyhound Café Company Limited ( GHC ) operates full service restaurant in fashion-café dining style under Greyhound Café brand. It also operates as a franchisor, providing the franchisees the right to open and operate the café under Greyhound Café brand. As of 31 December 2016, there were 28 stores in Thailand and oversea, 14 branches in Thailand and another 14 branches oversea such as Hong Kong, Malaysia, and Singapore. In addition, as of 8 March 2016, GHC set up a new subsidiary named GHC Café (UK) Co., Ltd in England with the objective to develop and operate Greyhound s business in England. 5) Greyhound Company Limited Greyhound Company Limited ( GHF ) engages in lifestyle business under Greyhound brand. GHF has been a Section 1 Page 4

5 Section 1 Page 5 Mudman Public Company Limited prominent manufacturer and distributor of fashion garments for both men and women, with over 20 years of wellaccumulated experience. With its strong brand awareness, GHF successfully forms collaboration with other companies in several projects under Greyhound concept. As of 31 December 2016, there were 14 stores in Bangkok, Thailand. Major Shareholders: List of major shareholders and percentage of ownership as of 31 December 2016 and Post-IPO is presented below. Shareholder Pre-IPO Post-IPO /1 Shares % Shares % 1. Sub Sri Thai Co., Ltd. 677,939, ,939, Khon Kaen Sugar Industry Co., Ltd. 78,718, ,718, Chinthammit Family Mr. Somchai Chinthammit 4,498, ,498, Miss Duangkae Chinthammit 4,498, ,498, Miss Duangdao Chinthammit 4,498, ,498, Mrs. Nareerat Chinthammit 4,496, ,496, Miss Kamornwan Chinthammit 2,811, ,811, Mr. Piripon Chinthammit 2,811, ,811, Mr. Kamondanai Chinthammit 2,811, ,811, Mr. Chalush Chinthammit 1,125, ,125, Mr. Chalee Chinthammit 1,125, ,125, Mr. Chatri Chinthammit 1,125, ,125, Mrs. Karnikar Chinthammit 1,125, ,125, Total 30,925, ,925, Mr. Bhanu Inkawat 23,534, ,534, Honour Key Corporation Limited 14,083, ,083, Thaemsirichai Family Mrs. Montanut Thaemsirichai 2,249, ,249, Mr. Pornsin Thaemsirichai 1,124, ,124, Mr. Pornprasong Thaemsirichai 1,124, ,124, Total 4,498, ,498, Mrs. Chalita Waiwittaya 3,007, ,007, Mrs. Kallayarat Sumitr 2,811, ,811, Shine Privilege Limited 2,679, ,679, Mrs. Pornsiri Rojmeta 1,676, ,676, Other Current Shareholders 4,048, ,048, Common Shares for Sub Sri Thai s ,437,

6 Shareholder existing shareholder allocated by proportion stake of ownership in Sub Sri Thai (Pre-emptive Right) Section 1 Page 6 Mudman Public Company Limited Pre-IPO Post-IPO /1 Shares % Shares % Public Shareholders ,543, Grand Total 843,923, ,054,903, Note: /1 Not include SST shareholders who receive offering by proportionate from the stake of ownership in SST (Pre-emptive Right) Classify the shareholder above is preliminary grouping by family name, which not include the grouping by related shareholder under section 258 securities and exchange Act B.E or shareholder under common control or have relationship or behavior that may relate to acting in concert. Revenue Contribution Million Baht As of 31 December / % Million Baht % Million Baht % MM GDT 1, , , ABP GS GHC 236 / GHF 114 / Total Revenue 2, , , /1 Total revenue of Greyhound group from 22 July 2014 or after acquisition by Mudman /2 Revenue contribution base on consolidated financial statement Board of Directors: As of 31 December 2016, Board of directors of MM consisted of 11 members as follows: Name Position 1. Mr. Sompoch Intranukul Chairman of the Board of Directors/Independent Director 2. Mr. Supasith Sukhanindr Vice Chairman of the Board of Directors 3. Mr. Pilunchai Pradubphong Board of Director 4. Mr. Nadim Xavier Salhani Board of Director/Chairman of the Board of Executive Directors 5. Mr. Bhanu Inkawat Board of Director 6. Mr. Chalush Chinthammit Board of Director 7. Miss Kamornwan Chinthammit Board of Director 8. Pol.Gen. Ruengsak Charit-ek Independent Director 9. Pol. Lt. Col. Thaweesin Rakkatanyu Independent Director/Chairman of the Audit Committee

7 Name Position 10. Asst. Dr. Tippawan Pinvanichkul Independent Director/Audit Committee 11. Mr. Pisit Jeungpraditphan Independent Director/Audit Committee Summary of Risk Factors Operational Risk 1. Risk from discontinuation of franchise agreement or termination of franchise agreement due to breach of terms and conditions 2. Risk from competition 3. Risk from procurement of rental areas 4. Risk from discontinuation or change in terms and conditions of rental agreement 5. Risk from lower than targeted sales of branches 6. Risk from reliance of major distribution channel 7. Risk from increase in personnel cost 8. Risk from fluctuations of costs of agricultural raw materials 9. Risk from reliance of sole third-party logistics provider in product transportation and distribution 10. Risk from deterioration of quality of raw materials and products 11. Risk from economic downturn, political instability, and natural disaster 12. Risk from patent infringement 13. Risk from laws and regulations Financial Risk 14. Risk from default on the covenants in loan agreements 14.1 Key financial ratios 14.2 Restriction on dividend payment 14.3 Restriction on change of MM s shareholding structure 15. Risk from dividend payment capability not meeting dividend payment policy 16. Risk from volatility of foreign exchange rates 17. Risk from possibility of impairment loss of goodwill and/or intangible assets from the acquisition of business and capital of subsidiaries Production Risk 18. Risk from personnel recruitment 19. Risk from reliance of limited suppliers 20. Risk from short-term rental contract of production kitchen Management Risk 21. Risk from major shareholders with more than 50% shareholding IPO Risk 22. Risk from registering common shares of MM in mai 23. Risk from fluctuations of price of common shares after IPO Section 1 Page 7

8 Summary of 3-Year Financial Position and Performance Unit Total Assets THB mm 4, , ,814.6 Total Liabilities THB mm 1, , ,999.5 Shareholders Equity THB mm 2, , ,815.1 Total Revenue THB mm 2, , ,991.6 Total Expenses THB mm 2, , ,123.5 Net Profit (Loss) THB mm (35.2) (42.9) (168.3) Earnings Per Share THB (0.04) (0.05) (0.20) (EPS) /1 Debt to Equity Ratio X (D/E ratio) Return on Assets (ROA) % (1.2) (1.0) (4.3) Return on Equity (ROE) % (2.4) (2.0) (8.5) Note : /1 Number of total shares and par value as of 31 December are adjusted to 844 shares and 1 THB/share, respectively (equivalent to number of total shares and par value as of 31 December 2016) for comparison purpose. Discussion and Analysis of Financial Position and Performance MM is operating through its subsidiaries. Its operation is mainly comprised of 2 following businesses. 1. Food and Beverage Business MM s food and beverage business can be divided into 5 sub-businesses as follows: 1.1. Donuts and drinks business under the brand Dunkin Donuts, operated by GDT 1.2. Bakery business under the brand Au Bon Pain, operated by ABP 1.3. Ice cream business under the brand Baskin Robbins, operated by GS 1.4. Fashion café under the brand Greyhound, operated by GHC 1.5. Restaurant under the brand M-Kitchen, operated by MM 2. Lifestyle Business MM consists of lifestyle business under the brand Greyhound, operated by MM s subsidiary GHF. This subsidiary channels its revenue from sales of clothes and accessories in department stores and from collaborating with other companies in projects. In the past 3 years, events that significantly affect MM s financial performance are as below. - On 22 July 2014, MM fully acquired common shares of Greyhound Co., Ltd, and common and preferred shares of Greyhound Café Co., Ltd, all of which totaled to THB 1,853.8 mm, from existing shareholders of Greyhound Group (Greyhound Co., Ltd and Greyhound Café Co., Ltd). The acquisition was completed by cash payment totaling THB 1,265.8 mm and share swap totaling THB 588 mm (1,322,473 common shares, THB/share). Section 1 Page 8

9 - On 28 November 2014, MM invested in Golden Gourmet Co., Ltd ( GGC ), a subsidiary that was established in 13 October 2014 with registered and fully paid-up capital of THB 1 mm in order to operate in food and beverage business. MM held 100% of common shares of GGC. - On 13 January 2015, GGC increased its registered capital by 400,000 shares with par value of 10 THB/share, totaling THB 4 mm. All share increase of GGC was fully acquired by MM. - On 31 May 2016, the Extraordinary General Meeting of GGC s shareholders approved to cease GGC s business. The procedures of business deregistration with Ministry of Commerce and liquidation was completed on 30 December Revenue In 2014, 2015 and 2016, MM and its subsidiaries earned THB 2,235 mm, 2,889 mm, and 2,992 mm, respectively, with Compound Annual Growth Rate (CAGR) of 16%. Significant revenue growth of MM in was attributable to the consolidation of financial position and performance of Greyhound Group as a result of the acquisition of The Group in July In summary, revenue growth of MM s subsidiaries can be divided to 2 main reasons as follows: 1. Same Store Sales Growth (SSSG) 2. Store expansion Profitability Ratios Unit: % Gross Profit Margin / EBITDA Margin Net Profit (Loss) Margin (1.6) (1.5) (5.6) Note: /1 Gross profit margins in 2015 and 2016 are based on re-classification of certain SG&A expenses to cost of sales and services Cost of Sales and Services and Gross Profit Cost of sales and services in MM s food and beverage businesses consists of cost of food and beverage, food supplies, and food waste. For MM s lifestyle business, cost of sales and services includes cost of fabric, sewing, and production waste. In 2015 and 2016, gross profit of MM decreased considerably as a result of re-classification of GHC s expenses, in which the Company shifted expenses related to cooking to cost of sales and services. This shift resulted in reduction of gross profit margin to 61.4% and 60.7%, respectively. Notwithstanding such change, gross profit margins after reclassification were stabilized satisfactorily. Selling General & Administrative Expenses Selling, General & Administrative (SG&A) Expenses of MM in were THB 1,386 mm, THB 1,834 mm, and THB 1,793 mm, respectively. SG&A expenses chiefly included salary, wage and other benefits of employees, rental Section 1 Page 9

10 and services fee, depreciation and amortization, and franchise fee. The Group had seen sizeable increase in SG&A expenses in the past 3 years due to significant increase in employee-related expenses as a result of store expansion and acquisition of Greyhound Group in July Earnings Before Interest and Tax (EBIT) and Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) In 2014, 2015 and 2016, EBIT of MM totaled THB 49 mm, THB 32 mm, and THB (132) mm, respectively. Its EBIT margins were equal to 2.2%, 1.1%, and (4.4%), respectively. EBIT of the Group shrank because of 2 main reasons. Firstly, the pressure on EBIT was an effect of a rise in amortization of intangible assets. This was caused mainly by an acquisition of Greyhound Group which had led to an increase in amortization of THB 48 mm, THB 71 mm, and THB 70 mm, respectively. Secondly, it was as a result of operational loss from the Group s lifestyle business which had been added to the Group s business portfolio since July Furthermore, in 2016, the Group incurred impairment loss from Greyhound group totaling THB 155 mm, which mainly contributed to reducing EBIT in that year. Without such impairment loss, EBIT of the Group was THB 23 mm, equivalent to 0.8% of total sales. In 2014, 2015, and 2016, EBIT totaling THB 49 mm, THB 32 mm, and THB (132) mm, respectively, coupled with depreciation and amortization of THB 167 mm, THB 221 mm, and THB 388 mm, respectively, resulted in EBITDA of THB 216 mm, THB 253 mm, and THB 256 mm, respectively. The Group s EBITDA margins were 9.7%, 8.8%, and 8.6%, respectively. Net Profit (Loss) and Net Profit (Loss) Margin Unit Net Profit (Loss) THB mm (35.2) (42.9) (168.3) Net Profit (Loss) Margin % (1.6) (1.5) (5.6) Net profit (loss) margins of MM in were (1.6%), (1.5%), and (5.6%), respectively. Decrease in net profit (loss) margin since 2014 was attributable to expenses related to acquisition of Greyhound Group, amortization of intangible assets based on fair value measurement of assets from acquisition, and increase in interest expense from loans to support Greyhound Group. Aforementioned factors pressured MM s net profit margin to be in negative level. In 2016, the Group encountered considerable decrease in net profit margin from those of due to impairment loss amounted THB 155 mm, 5.2% of total sales. Nevertheless, this impairment loss is a non-recurring item. Without this impairment loss, the Group s net profit (loss) would be THB (13.4) mm, (0.5%) of total sales, and the Group would have had lessening net loss margin from 2014 onwards. Section 1 Page 10

11 Analysis of Financial Position Total Assets As of 31 December 2014, 2015, and 2016, total assets of MM were THB 4,161 mm, THB 4,057 mm, and THB 3,814 mm, respectively. Total assets in 2014 increased sizably from that of 2013 thanked to the full acquisition of Greyhound Group. The acquisition includes common shares of Greyhound Co., Ltd, and common and preferred shares of Greyhound Café Co., Ltd, all of which totaled to THB 1,854 mm. However, in , total assets of MM shrank chiefly because of a reduction in intangible assets which amounted to THB 1,164 mm in 2014, THB 1,094 mm in 2015, and THB 885 in Reduction in total assets in these particular years was mainly caused by amortization of intangible assets from acquisition of Greyhound Group. Total Liabilities As of 31 December 2014, 2015, and 2016, total liabilities of MM totaled THB 1,974 mm, THB 1,913 mm, and THB 1,999 mm, respectively. The total liabilities were built upon 40% of current liabilities and 60% of non-current liabilities. Majority of total liabilities of the Group were long-term loans from financial institutions. Shareholders Equity As of 31 December 2014, 2015, and 2016, shareholders equity equaled to THB 2,187 mm, THB 2,144 mm, and THB 1,815 mm, respectively. From 31 December 2014 to 31 December 2015, shareholders equity decreased by THB 43 mm due to operational loss of the Group. From 31 December 2015 to 31 December 2016, shareholders equity further reduced by THB 329 mm because of 2 reasons. Firstly, shareholders equity shrank as the Group recorded dividend payable totaled THB mm from interim dividend payment, in accordance with the resolutions of Board of Directors meeting no. 4/2016 dated 14 December Secondly, the reduction in shareholders equity occurred due to impairment loss of assets amounted THB 155 mm, resulting in operational loss of the Group. Liquidity Ratios MM s average receivable days were 5.7 days, 7.2 days, and 5.1 days in 2014, 2015 and Its receivable days mainly reflected the nature of business operation in Greyhound Group. While other food and beverage businesses of MM received cash instantly as payment, Greyhound group received payment in different timing and form. Certain Greyhound stores were located in department stores which collected revenue to themselves before transferring back to the Company. Such collection of revenue follows the rental agreement between the Company and the department stores. Moreover, Greyhound Group consisted of lifestyle business, in which sales was partly supported by non-cash payment. Average inventory days were 21.9 days, 35.1 days, and 30.0 days in 2014, 2015 and Increase in inventory days over the past 3 years was chiefly due to finished goods and raw materials from lifestyle business. Section 1 Page 11

12 Average payable days were stabilized around 60 days since In , cash cycles were (36) days, (26) days, and (17) days, respectively. The cash cycles were in satisfactory level because of 3 reasons. Firstly, MM had low receivable days since its food and beverage businesses received cash instantly as payment. Secondly, it had low inventory days thanked to its food and beverage businesses which had fast inventory turnover. The Group s overall inventory turnover was strong albeit the consolidation of lifestyle business since Thirdly, the Group had average of days of credit period to purchase raw materials and supplies required for production. Liquidity ratios in were 0.9x, 0.7x and 0.7x, respectively. Liquidity ratios were supported by 3 reasons as below. 1. MM mainly received cash as instant payment. Its inventory also had fast turnover. 2. Its creditors provided long credit period, approximately days. 3. There was current portion of long-term debt to be paid quarterly, as indicated in loan agreement. Obligation Repayment Capability (Cash Basis) Obligation repayment capability ratio was calculated from cash flow from operation divided by debt repayment, capital expenditure, purchase of assets, and dividend payment. In 2014, MM s Obligation repayment capability ratio was at 0.1x. The cash was mainly paid for the acquisition of Greyhound Group totaling THB 1,217 mm, and for purchase of assets for THB 140 mm. MM had cash flow from operation amounted THB 197 mm. It also received additional cash from long-term loan from Siam Commercial Bank Plc. totaling THB 1,236 mm, and from increase in capital totaling THB 830 mm. In 2015, MM s Obligation repayment capability ratio was at 0.9x. The Group s cash flow from operation was THB 226 mm. Its cash were paid to purchase assets amounted THB 180 mm and repaid long-term loan with financial institutions totaling THB 79 mm. In this year, the Group borrowed short-term loan from Siam Commercial Bank Plc. in amount of THB 35 mm. In 2016, MM s Obligation repayment capability ratio was at 1.2x. The Group s cash flow from operation was THB 330 mm. Its cash were paid to purchase assets amounted THB 154 mm and repaid long-term loan with financial institutions totaling THB 124 mm. Debt Repayment Capability and Covenant As of 31 December 2016, total long-term loans from financial institutions amounted to THB 1,045 mm (inclusive of current portion of long-term loans). MM utilized the loans to support both of its organic and inorganic business expansion. To comply with the covenant, the Group was required to ensure the procedures as follows: - Maintaining Debt Service Coverage Ratio (DSCR) at not lower than 1.2x in (according to the loan agreement, DSCR was defined as EBITDA divided by principal and interest payments due in the same period). - Maintaining Debt to Equity Ratio (D/E Ratio) at not higher than 2x (according to the loan agreement, D/E ratio was defined as total debt in the consolidated financial statements, divided by total equity in the consolidated financial statements). Section 1 Page 12

13 - Maintaining Net Debt to EBITDA Ratio at not higher than 3.5x in 2014, 3.0x in 2015, 2.5x in 2016, and 2.0x in 2017 (according to the loan agreement, net debt was defined as interest-bearing debt in the consolidated financial statements subtracted by cash in the consolidated financial statements). - Restriction on Dividend Payment of MM and Its Subsidiaries - According to the loan agreement with Siam Commercial Bank Plc. dated 23 September 2014, MM and its subsidiaries were restricted on their dividend payment, including annual dividend payment, interim dividend payment, and any payment of benefit and compensation to any specific shareholder or shareholders of MM and its subsidiaries as a whole. MM and its subsidiaries could not pay dividend unless they were informed by lender in written consent and/or comply completely with the covenant. In this regards, the covenant included the requirement for MM to maintain Dividend DSCR /1 at not lower than 1.2:1 based on the most recent consolidated financial statements prior to dividend payment, as well as for the covenant not to be breached in any manner. Therefore, MM and its subsidiaries required written consent from the lender before each and every dividend payment was made. Note / 1 Dividend DSCR was calculated from historical cash flow from operation (12-month prior), subtracted by projected capital expenditure (12-month forward), dividend payment (12-month prior), and expected dividend payment (current period); the residual was then divided by principal and interest payment due in 12 months forward. Covenant regarding key financial ratios can be summarized as follows: Debt-to-Equity Ratio (D/E) Not higher than 2:1 Not higher than 2:1 Not higher than 2:1 Not higher than 2:1 Debt Service Coverage Ratio (DSCR) Not lower than 1.2: 1 Not lower than 1.2: 1 Not lower than 1.2: 1 Not lower than 1.2: 1 Net Debt to EBITDA Ratio Not higher than 3.5 Not higher than 3.0 Not higher than 2.5 Not higher than 2.0 In MM s Net Debt to EBITDA Ratios were 5.5x, 4.4x, and 3.8x, respectively. The ratios in were higher than the thresholds specified in the covenant. Nevertheless, MM s Net Debt to EBITDA ratios in were exempted by the lender, according to exemption letters dated 29 December 2014, 24 December 2015, and 15 December 2016, respectively. In , GDT, ABP and GHC paid dividend to MM. In the particular years, Dividend DSCR of MM were at 0.7x and 0.4x, respectively. Furthermore, Board of Directors meeting no. 4/2016, dated 14 December 2016, approved interim dividend payment totaled THB mm (0.19 THB/share, par value of 1 THB/share) in which the dividend was paid to shareholders on 13 January The interim dividend payment was made as a return on shareholders investment, and a reward to shareholders for bearing the risk from MM s business development through time. As the dividend payment was made, MM and its subsidiaries were unable to maintain Dividend DSCR by the threshold in the covenant. Nevertheless, MM and its subsidiaries Dividend DSCR were exempted by Siam Commercial Bank Plc. in Section 1 Page 13

14 Interim Dividend Payment The resolution of Board of Directors meeting no. 4/2016, dated 14 December 2016, approved interim dividend payment totaled THB mm (0.19 THB/share, par value of 1 THB/share) in which the dividend was paid to shareholders on 13 January The interim dividend payment was made as a return on shareholders investment, and a reward to shareholders for bearing the risk from MM s business development through time. Such interim dividend payment was made from retained earnings in separate financial statements, based on MM s historical financial performance. MM s source of fund was the loan from Siam Commercial Bank Plc. because the Company has allocated cash flow from its past operation for business expansion. MM did not make dividend payment despite profitable operational result in each period in the financial statements, resulting in retained earnings in its balance sheet. As the dividend payment was made, MM s dividend payment capability could be deteriorated in the future due to reduction in retained earnings and shareholders equity totaled THB mm. MM had retained earnings of THB 38 mm in separate financial statements, and retained earnings deficit of THB 351 mm in consolidated financial statements. Nevertheless, MM would allocate a part of proceeds from IPO to repay the loan from Siam Commercial Bank Plc. that it borrowed for the purpose of dividend payment. Relationship with Financial Advisor On 23 September 2014, MM Group conducted loan agreement with Siam Commercial Bank Plc. totaling THB 1,235 mm. As of 31 December 2016, MM and its subsidiaries had loan outstanding amounted THB 1,059 mm with the Bank. Furthermore, Siam Commercial Bank Plc. also serves as financial advisor of MM in this IPO. MM would allocate THB , mm of the proceeds from this IPO to repay loans from Siam Commercial Bank Plc. The loans included long-term loan, short-term loan for dividend payment, and short-term loan for business expansion. To comply with the covenant, MM and its subsidiaries were required to ensure the following procedures (1) Maintain key financial ratios including (1.1) DSCR (1.2) Debt to Equity Ratio, and (1.3) Net Debt to EBITDA Ratio and (2) Restrict on dividend payment unless approved by Siam Commercial Bank Plc. in written consent and/or maintain Dividend DSCR after dividend payment according to the covenant, as well as fully comply to the covenant. In MM s Net Debt to EBITDA Ratios were higher than the thresholds specified in the covenant. Nevertheless, MM s Net Debt to EBITDA ratios in were exempted by Siam Commercial Bank Plc., according to exemption letters in , respectively. Moreover, within the same years, MM and its subsidiaries were unable to maintain Dividend DSCR by the threshold in the covenant. Nevertheless, MM and its subsidiaries Dividend DSCR were exempted by Siam Commercial Bank Plc. in Section 1 Page 14

15 Investor Relations Name Mr. Jiratch Wongtra-Ngan Telephone ext Caution Investors should study the information Part 2 and 3 prior to making investment decisions. Section 1 Page 15