Maybank. Malaysia Company Guide

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1 Malaysia Company Guide Version 7 Bloomberg: MAY MK Reuters: MBBM.KL Refer to important disclosures at the end of this report DBS Group Research. Equity 20 Apr 2017 BUY (Upgrade from HOLD) Last Traded Price ( 19 Apr 2017): RM9.05 (KLCI : 1,738.95) Price Target 12-mth : RM10.00 (10% upside) (Prev RM8.00) Analyst Sue Lin LIM suelinlim@dbs.com Lynette CHENG lynettecheng@alliancedbs.com What s New ETIQA and MAY ISL are hidden jewels; market mispricing MAY s ability to unlock shareholder value Gradual improvement in core earnings expected; positive capital markets momentum an added boost; MAY INDO chugging along Earnings raised by 4-6% on lower credit cost and higher non-interest income Upgrade to BUY; TP raised to RM10.00; spinoffs could add RM0.40 to TP Price Relative RM Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 (LHS) Relative KLCI (RHS) Relative Index Forecasts and Valuation FY Dec (RMm) 2016A 2017F 2018F 2019F Pre-prov. Profit 11,686 12,012 12,832 14,046 Net Profit 6,743 7,216 7,855 8,833 Net Pft (Pre Ex.) 6,743 7,216 7,855 8,833 Net Pft Gth (Pre-ex) (%) (1.4) EPS (sen) EPS Pre Ex. (sen) EPS Gth Pre Ex (%) (6) Diluted EPS (sen) PE Pre Ex. (X) Net DPS (sen) Div Yield (%) ROAE Pre Ex. (%) ROAE (%) ROA (%) BV Per Share (sen) P/Book Value (x) Earnings Rev (%): Consensus EPS (sen): Other Broker Recs: B: 10 S: 3 H: 11 Source of all data on this page: Company, DBS Bank, AllianceDBS, Bloomberg Finance L.P Reduced uncertainties Gradual earnings improvement expected; upgrade to BUY. We have reduced our credit cost assumption to 46/42/37bps over FY17-19 (from 50/44/37bps) given the improving economic outlook (firmer commodity prices and exchange rate). This remains high vs its 10-year historical average of 40bps as we believe (MAY) still has some corners to turn before a more pronounced improvement in earnings traction is seen. Some restructuring and rescheduling (R&R) of loans may still take place in the coming quarters, causing gross impaired ratio to remain elevated. We have also raised non-interest income growth as the positive momentum from capital markets should give a boost to fee income. These collectively led us to raise FY17-19F earnings by 4-6%. Where we differ. First take on MAY s sum-of-parts valuation. Spinoff rumours have sparked interest in evaluating the potential value unlocked when each of MAY s business is assessed individually. We believe Etiqa Insurance (ETIQA) and Islamic (MAY ISL) are jewels within the group whose values could be crystallised. Assuming these get listed, there could be another RM0.40 upside to our current TP. Potential Catalyst. Sentiment may boost valuation. Our analysis of the valuation trends exhibited during the year of the past three general elections shows that barring an event risk, there are more pronounced movements in the valuations of MAY and CIMB compared to the other banks. Assuming a potential valuation premium of 0.3x BV for MAY, we still see upside potential from current share price. Valuation: Upgrade to BUY, TP raised to RM10.00 post earnings adjustments. Our TP is equivalent to 1.5x FY17 BV, based on the Gordon Growth Model (assuming 11% ROE, 4% growth and 9.5% cost of equity). Our TP is further substantiated by the sum-of-parts method. Key Risks to Our View: Negative surprises in asset quality may pose downside risk to earnings forecast. Based on our sensitivity analysis, every 10bps reduction in credit cost increases net profit by 6%. At A Glance Issued Capital (m shrs) 10,183 Mkt. Cap (RMm/US$m) 92,155 / 20,890 Major Shareholders (%) Amanah Saham Bumiputera (%) 37.0 EPF (%) 15.7 Permodalan Nasional Bhd (%) 5.7 Free Float (%) m Avg. Daily Val (US$m) 26.5 ICB Industry : Financials / Banks ed: JS / sa: BC, PY

2 WHAT S NEW Renewed avenues to unlock value Sum of its parts add a whole lot of value Potential corporate action led by Permodalan Nasional Berhad (PNB). PNB, the country s largest fund-management company, has embarked on an exercise to unlock value in its companies, encouraged by the substantial rise in market values of its six main listed entities. It has since been busy with the Sime Darby and UMW Holdings de-merger, and more recently, the amalgamation of SP Setia with the unlisted I&P Group. Rumours have surfaced that MAY could be its next project. Under the group, there are two public listed companies ( Indonesia and MCB Bank) and two operating entities with listing potential (MAY ISL and ETIQA). Value behind ETIQA. MAY owns 69% of Ageas Holdings, of which its main operating entities are Etiqa Insurance and Etiqa Takaful. The Etiqa group offers life and general insurance as well as takaful products in Malaysia, Singapore and the Philippines. The revenue mix (by gross premium) is 51:49 for life and general insurance and 56:44 for conventional and takaful. ETIQA has a comprehensive distribution network, with an agency force of over 10,000 agents, 28 branches throughout Malaysia, and a wide bancassurance distribution network thanks to MAY s strong branch presence. In our sum-of-parts (SOP) valuation, we imputed 1.5x BV for ETIQA, supported by its strong market share in both life and general business. Based on latest available data, ETIQA holds the top position in General Insurance and Takaful with 13% market share, and 4th in Life/Family with 9% market share of new business premiums. The closest listed comparison to ETIQA is Allianz Malaysia (ALLZ MK), which also has strong market shares in both life and general insurance. Allianz Malaysia is trading at about 1.2x BV. The most recent M&A transaction for an insurer with a composite license is MCIS insurance, which fetched a valuation of 1.7x BV. MAY ISL is well-positioned to lead in the internationalisation of Islamic finance as it is the nation s biggest bank (both Islamic and conventional) with the most extensive regional reach. In 2011, MAY ISL rolled out the Islamic First strategy in Malaysia, where customers were offered Islamic banking products as the first choice. Its efforts came to fruition as MAY ISL s proportion of financing to the group surpassed the 50% mark in FY15 (from 39% in FY13). MAY ISL emulated the Islamic First strategy in Indonesia in This, along with initiatives such as increasing the awareness of Shariah products and services, a revamp of Shariah offerings and expansion of distribution network (through conversion of conventional-only branches to dual branches offering both conventional and Shariah products), improved Bank Indonesia Unit Usaha Shariah industry s ranking from 12th in FY13 to 5th in FY16, in terms of asset size. Over in Singapore, MAY ISL pioneered several products in the market such as a special savings account for the Hajj pilgrimage, Islamic Auto Finance, Malaysia Residential Property Financing and Malaysia Commercial & Industrial Property Financing in 2013, and Islamic Business Term Financing and Islamic trade facilities and foreign currency deposits in In our sum-of-parts valuation, we valued Islamic at 1.9x BV, on par with our valuation basis for BIMB. We believe this is fair as MAY ISL s regional reach makes up for its lack in asset quality resilience (impaired financing saw almost a two-fold increase y-o-y in FY16). Refer to report titled Malaysian Islamic Banks: The unconventional banking aspect for more details on the Islamic banking industry. Indonesia chugging along. Indonesia posted a respectable set of results in FY16, lifted by higher NIM and lower provisions. Impaired loans ratio was lower y-oy. We saw its strategic cost management programme bearing fruits as cost-to-income dipped to 52%, the lowest in its history. Compared to CIMB Niaga, Indonesia s guidance for FY17 appears more optimistic with ROE of 10-11%, loan growth of 10-12%, deposit growth of 8-10%, NIM compression of 15-20bps, and credit cost of c.130bps. The bank targets to grow its business banking division by participating in financing of infrastructure projects by the government and a focus on SMEs. Meanwhile, Indonesia is refining its focus within the retail segment. Indonesia is also taking measures to boost capitalisation. The bank disposed its 68.55% stake in Wahana Ottomitra Multiartha Tbk (WOM Finance) and is planning to undertake a rights issue of Rp1.5-2tr in 2H17. We imputed Indonesia s current market value in our SOP valuation. MCB Bank; MAY s 20%-owned associate: acquired a 20% stake in MCB Bank, one of the leading banks in Pakistan, back in MCB is listed on the Pakistan Stock Exchange and has a market capitalisation of more than PKR 200bn (c.rm10bn). In FY16, MCB s net profit declined due to lower net interest income as a result of lower NIM. Similar to Indonesia, we imputed current market value of MCB Bank in our SOP valuation. Spinoffs could add RM0.40 to our current TP. We see potential for more value creation when these entities are assessed individually and would not discount the possibility of a spinoff taking place. That said, there is timing and event risk to such corporate actions. Page 2

3 Valuation and recommendation: Upgrade to BUY, TP raised to RM10.00 post earnings adjustments. We have reduced our credit cost assumption to 46/42/37bps over FY17-19 (from 50/44/37bps) given the improving economic outlook (firmer commodity prices and exchange rate). This still remains high vs its 10-year historical average of 40bps as we believe MAY still has some corners to turn before a pronounced improvement in earnings traction can be seen. Some restructuring and rescheduling (R&R) of loans may still be expected in coming quarters. We have also raised non-interest income growth as the positive momentum from capital markets should give a boost to fee income. These collectively led us to raise FY17-19F earnings by 4-6%. Consequently, we arrive at a higher RM10.00 TP (from RM8.00), which is equivalent to 1.5x FY17 BV and based on the Gordon Growth Model (assuming 11% ROE, 4% growth and 9.5% cost of equity). (DRP). The DRP has successfully positioned MAY to be one of the best capitalised bank among its Malaysian banking peers. However, this did come at the expense of ROE. We expect the electable cash and share portion to be tweaked (more cash going forward) thereby limiting further substantial ROE dilution. Added boost to valuations. An analysis of the valuation trends exhibited during the year of the past three general elections shows that barring an event risk, there are more pronounced movements in the valuations of heavyweights such as MAY and CIMB compared to the other banks. Assuming a potential valuation premium of 0.3x BV for MAY, we still see apparent upside potential from current share price. Separately, the possible listing of its insurance unit (ETIQA) and Islamic banking arm (MAY ISL) could see latent value being unlocked within the group. Possible DRP tweak. Its high dividend yield is appealing. We expect MAY to continue with its Dividend Reinvestment Plan Page 3

4 MAY: Sum-of-parts valuation Stake Value Comment (%) (RMm) MAY (ex Ageas, MAY ISL, Indonesia and MCB) ,742 Based on 1.4x FY17F BV Ageas ,265 Based on 1.5x FY16 BV MAY ISL ,268 Based on 1.9x FY16 BV Indonesia ,417 Current market cap MCB 20 2,038 Current market cap Total value 107,730 No of shares (m shares, FY17F) 10,397 Value per share Source: DBS Bank, AllianceDBS, Company MAY: Shareholding structure Permodalan Nasional Bhd Skim Amanah Saham Bumiputera Employees Provident Fund Public 6% 36% 15% 43% Ma la ya n Ba nking Be rha d Banking Insurance Investment Banking Asset Management 100% 69% 100% 100% Islamic Ageas Investment Bank 100% 100% 100% 100% Etiqa Insurance BinaFikir International (L) Ltd. 100% (PNG) 100% 100% Etiqa Takaful Limited 100% Philippines 100% Etiqa Life 100% Incorporated International (L) Ltd 98% PT Bank 100% Etiqa Offshore 100% Syariah Indonesia Insurance (L) Ltd 98% Bank Internasional 100% Indonesia Etiqa Overseas Investment Pte Ltd Asset Management Islamic Asset Management Private Equity Asset Management (Thai) Asset Management Singapore 20% 100% MCB Bank Limited Etiqa Insurance Pte Ltd 20% 100% An Binh Commercial Joint Stock Bank (Cambodia) Plc 100% Uzbek Leasing International A.O. Source: DBS Bank, AllianceDBS, Company Page 4

5 CRITICAL FACTORS TO WATCH Earnings Drivers: NIM trends still on downside bias. Backed by a strong deposit franchise, MAY is in a better position than peers to manage funding cost pressure. MAY s CASA ratio of more than 35% is the highest in the industry. Management has guided for 5-10bps slippage in FY17. Margin Trends RM m 12,000 10,000 8,000 6,000 4,000 2, % 2.6% 2.5% 2.5% 2.4% 2.4% 2.3% 2.3% 2.2% 2.2% Sustainable fee income from core banking activities. Capital market-related activities have started to pick-up since early 2017, which bodes well for MAY s non-interest income. Separately, the share of non-interest income at MAY, which is largely driven by transactional fees from core banking services, should remain stable. MAY s solid deposit franchise and high CASA share give it a natural advantage over peers to strengthen its transaction banking segment. Growing fee-based income remains a strategic priority for MAY. Guiding for ROE of 10-11%. With better containment in NIM slippage, improvement in loan growth traction and lower credit cost, we expect y-o-y earnings growth to rebound in FY17. MAY s Dividend Reinvestment Plan (DRP) has diluted ROE, but we expect it to be managed by tweaking the electable cash and share portion (more cash going forward). Outlook remains uncertain for its regional operations. Singapore historically contributes c.16% to group pretax and MAY is the only Malaysian bank with a Qualified Full Banking (QFB) licence in Singapore. Over in Indonesia, MAY is represented by PT Bank Indonesia Tbk (formerly known as Bank Internasional Indonesia). Indonesia which used to contribute c.8% to group pretax has seen its operations stabilising. However, the outlook for Indonesia banks remains uncertain as the momentum has yet to pick up. Our concern lies with its Singapore operations which have loans extended to the oil & gas sector, which continues to be under pressure. MAY has presence in 18 other countries, but individual contributions will remain small in the near future. MAY has also started work to get a toehold in Myanmar following the Central Bank of Myanmar s decision to grant a foreign banking licence in Overseas operations (ex-singapore and Indonesia) contributed c.4% to group pretax in FY , , , , ,000 0 RM m RM m 600, , , , , , , , , , , ,143 0 RM bn 25,000 20,000 15,000 10,000 5,000 Net Interest Income Gross Loan& Growth Customer Deposit & Growth Loan-to-Deposit Ratio Trend Cost & Income Structure Net Interest Income Margin Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS) Customer Deposits (LHS) Customer Deposits Growth (%) (YoY) (RHS) Loans Deposit Loan-to-Deposit Ratio (RHS) 0 Net Interest Income Islamic Banking Income Non-interest Income Cost-to-income Ratio 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 105% 100% 95% 90% 85% 49.0% 48.5% 48.0% 47.5% 47.0% 46.5% 46.0% 45.5% 45.0% 44.5% 44.0% Source: Company, DBS Bank, AllianceDBS Page 5

6 Balance Sheet: Cautious on asset quality. MAY has reported blips in impaired loans ratio over FY16. All eyes will remain on the bank s assetquality position, particularly on its oil & gas exposure. Credit costs are likely to remain elevated. Negative surprises in asset quality may pose downside risk to earnings forecast. Based on our sensitivity analysis, every 10bps reduction in credit cost increases net profit by 6%. DRP supporting capital ratios. MAY s capital ratios are high compared to peers. This is aided by the DRP, which MAY will continue to utilise as a strategic capital management tool to build capital, rather than the rights issue option taken by some of its peers. The DRP has served well to raise and preserve capital, but if this continues, profit growth must at least equal or exceed equity base growth to remain accretive. Management has made it clear that it intends to keep the DRP in view of capital requirements for certain events on the horizon. Attractive dividend yield. MAY has generously paid out above 70% of profits since FY10, well above its dividend policy of 40-60%. MAY intends to maintain this level of dividend payout as long as the DRP remains in place. We have assumed dividend payout to remain high in FY17-19F. Share Price Drivers: Improvement in sentiments and potential listings. An analysis of the valuation trends exhibited on the year of the past three general elections shows that barring an event risk, there are more pronounced movements in the valuations of heavyweights such as MAY and CIMB compared to the other banks. Assuming a potential valuation premium of 0.3x BV for MAY, we still see apparent upside potential from current share price. Separately, the possible listing of its insurance unit (ETIQA) and Islamic banking arm ( Islamic) could see latent value being unlocked within the group. Key Risks: Asset-quality upset. Further asset-quality deterioration could pose downside risks to our recommendation, target price and earnings. 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 21.0% 20.0% 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (x) Asset Quality NPL Ratio Provision Charge-Off Rate Capitalisation (%) Tier-1 CAR Total CAR ROE (%) Forward PE Band (x) +2sd: 14.4x +1sd: 13.6x Avg: 12.8x -1sd: 12x -2sd: 11.2x Change in dividend policy. A lower dividend payout ratio could cause MAY to lose its appeal as a yield stock. 9.7 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Company Background Malayan Banking Berhad provides commercial and Islamic banking services in Malaysia, Singapore, and other locations. It also owns an Indonesian subsidiary from an acquisition it made in Through its subsidiaries, the bank provides services such as general and life insurance, stock and futures broking, and leasing and factoring. (x) PB Band (x) +2sd: 2.14x +1sd: 1.85x Avg: 1.57x -1sd: 1.29x 1.1-2sd: 1.01x 0.9 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Source: Company, DBS Bank, AllianceDBS Page 6

7 Key Assumptions FY Dec Gross Loans Growth Customer Deposits Growth Yld. On Earnings Assets Avg Cost Of Funds Income Statement (RMm) FY Dec Net Interest Income 11,114 11,568 11,744 12,002 12,712 Islamic Income 3,939 4,189 4,399 4,707 5,036 Non-Interest Income 6,185 6,506 6,586 7,377 8,114 Operating Income 21,238 22,263 22,730 24,086 25,862 Operating Expenses (10,285) (10,577) (10,717) (11,253) (11,816) Pre-provision Profit 10,953 11,686 12,012 12,832 14,046 Provisions (2,013) (3,015) (2,377) (2,336) (2,229) Associates Exceptionals Pre-tax Profit 9,152 8,844 9,818 10,688 12,018 Taxation (2,165) (1,881) (2,356) (2,565) (2,884) Minority Interests (150) (221) (245) (267) (301) Preference Dividend Net Profit 6,836 6,743 7,216 7,855 8,833 Net Profit bef Except 6,836 6,743 7,216 7,855 8,833 Growth (%) Net Interest Income Gth Net Profit Gth 1.8 (1.4) Margins, Costs & Efficiency (%) Spread Net Interest Margin Cost-to-Income Ratio Business Mix (%) Net Int. Inc / Opg Inc Non-Int. Inc / Opg inc Fee Inc / Opg Income Oth Non-Int Inc/Opg Inc Profitability (%) ROAE Pre Ex ROAE ROA Pre Ex ROA Expect provisions to slow, but remain elevated Source: Company, DBS Bank, AllianceDBS Page 7

8 Quarterly / Interim Income Statement (RMm) FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Net Interest Income 2,932 2,903 2,879 2,828 2,959 Islamic Income ,037 1,009 1,165 Non-Interest Income 1,728 1,511 1,430 1,621 1,944 Operating Income 5,615 5,392 5,346 5,458 6,068 Operating Expenses (2,776) (2,620) (2,624) (2,700) (2,633) Pre-Provision Profit 2,839 2,772 2,722 2,758 3,434 Provisions (522) (878) (1,181) (331) (625) Associates Exceptionals Pretax Profit 2,376 1,931 1,584 2,456 2,873 Taxation (649) (480) (385) (593) (423) Minority Interests (75.3) (24.2) (39.4) (67.9) (89.5) Net Profit 1,652 1,427 1,160 1,796 2,361 Growth (%) Net Interest Income Gth 1.2 (1.0) (0.8) (1.8) 4.6 Net Profit Gth (13.0) (13.6) (18.7) Q16 earnings lifted by oneoff disposal gains Balance Sheet (RMm) FY Dec Cash/Bank Balance 55,647 58,141 32,521 38,721 46,121 Government Securities 7,692 2,492 1,745 1,396 1,117 Inter Bank Assets 13,618 13,445 13,848 14,263 14,691 Total Net Loans & Advs. 453, , , , ,874 Investment 122, , , , ,361 Associates 3,121 3,210 3,393 3,584 3,785 Fixed Assets 3,378 3,354 2,683 2,549 2,549 Goodwill 6,958 7,346 7,346 7,346 7,346 Other Assets 37,915 35,152 31,888 31,711 32,370 Total Assets 708, , , , ,546 Customer Deposits 478, , , , ,067 Inter Bank Deposits 39,014 30,855 24,684 22,215 19,994 Debts/Borrowings 56,945 56,968 58,491 60,060 61,675 Others 46,882 63,877 40,254 49,118 60,101 Minorities 1,818 1,959 2,205 2,472 2,773 Shareholders' Funds 61,695 68,516 74,268 80,517 87,521 Total Liab& S/H s Funds 708, , , , ,546 Source: Company, DBS Bank, AllianceDBS Page 8

9 Financial Stability Measures (%) FY Dec Balance Sheet Structure Loan-to-Deposit Ratio Net Loans / Total Assets Investment / Total Assets Cust. Dep./Int. Bear. Liab Interbank Dep / Int. Bear Asset Quality NPL / Total Gross Loans NPL / Total Assets Loan Loss Reserve Coverage Provision Charge-Off Rate Capital Strength Total CAR Tier-1 CAR High capital ratios Source: Company, DBS Bank, AllianceDBS Target Price & Ratings History RM S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 03 May HOLD 2: 30 May HOLD 3: 02 Jun HOLD 4: 04 Jul HOLD 5: 12 Jul HOLD 6: 14 Jul HOLD 7: 01 Aug HOLD 8: 26 Aug HOLD 9: 05 Sep HOLD 10: 31 Oct HOLD 11: 25 Nov HOLD : 07 Dec HOLD Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 13: 13 Jan HOLD 14: 20 Feb HOLD Note : Share price and Target price are adjusted for corporate actions. 15: 21 Feb HOLD 16: 24 Feb HOLD 17: 02 Mar HOLD 18: 03 Mar HOLD 19: 24 Mar HOLD 20: 17 Apr HOLD Source: DBS Bank, AllianceDBS Analyst: Sue Lin LIM Lynette CHENG Page 9

10 DBS Bank, AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 20 Apr :29:08 (MYT) Dissemination Date: 20 Apr :26:51 (MYT) Sources for all charts and tables are DBS Bank, AllianceDBS unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd, AllianceDBS Research Sdn Bhd (''AllianceDBS''). This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd, AllianceDBS Research Sdn Bhd (''AllianceDBS''). The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the DBS Group ) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. Page 10

11 DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests 2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Mar Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA, within the next 3 months, will receive or intend to seek compensation for investment banking services from as of 31 Mar DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. Disclosure of previous investment recommendation produced: 6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. Page 11

12 RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia Hong Kong This report is being distributed in Australia by DBS Bank Ltd. ( DBS ) or DBS Vickers Securities (Singapore) Pte Ltd ( DBSVS ), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 ( CA ) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for wholesale investors within the meaning of the CA. This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at equityresearch@dbs.com. Indonesia Malaysia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek, Executive Director, ADBSR Singapore Thailand This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No E) or DBSVS (Company Regn No G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at for matters arising from, or in connection with the report. This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it. Page 12

13 United Kingdom This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom. In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. Dubai United States Other jurisdictions This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel equityresearch@dbs.com Company Regn. No E Page 13