GLG Life Tech. Luo Han Guo drives revenue growth. Tate & Lyle LHG contract boosts top line. H3 and H4 leaf should improve stevia margins

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1 GLG Life Tech Luo Han Guo drives revenue growth Q2 update Pharma & biotech While Q215 stevia revenue was below our forecasts, net results matched our expectations of an adjusted C$0.11 EPS loss. We expect margins to improve in the coming quarters, through increased LHG sales and overall capacity utilisation, and the deployment of higher extract-yielding proprietary stevia leaf. We continue to anticipate GLG will reach breakeven EBITDA in 2016 and generate positive operating income in Year end Revenue (C$m) PBT* (C$m) EPS* (C$) DPS (C$) 12/ (21.7) (0.55) 0.0 N/A N/A 12/ (19.2) (0.56) 0.0 N/A N/A 12/15e 38.0 (17.4) (0.45) 0.0 N/A N/A 12/16e 59.6 (14.1) (0.32) 0.0 N/A N/A Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments. P/E (x) Yield (%) 23 September 2015 Price C$0.28 Market cap C$11m C$1.32/US$ Net debt (C$m) at Q Shares in issue 37.9m Free float 86% Code GLG Primary exchange TSX Secondary exchange N/A Share price performance Tate & Lyle LHG contract boosts top line Q215 revenue of C$8.0m was up 100% y-o-y on contributions from the LHG Tate & Lyle contract, but below our C$12.5m estimate given lower than expected stevia revenue. Overall, margins exceeded expectations and the adjusted EPS loss of C$0.11 matched our forecast. The yearly revenue increase was largely due to continued fulfilment of the initial $9-12m LHG purchase order from Tate & Lyle. H3 and H4 leaf should improve stevia margins We expect GLG s EBITDA margin will trend upwards in the coming quarters as the higher extract-yielding proprietary H3 and H4 stevia leaf strains will make up the majority of GLG s leaf supply for processing. We anticipate this, combined with stevia industry growth, market share gains and increased processing facility utilisation for GLG, should lead to consistently positive EBITDA starting in Valuation: NPV of C$161m, equity valued at C$57m After rolling forward our forecasts, lowering near-term stevia revenue and adjusting our forex assumptions, our NPV increases to C$161m (from C$156m previously). As GLG s revenues are mostly incurred in US$, the change in our forex assumption (from C$1.25/US$ to C$1.33/US$) added C$16.9m to our NPV; excluding forex, our NPV would have declined by c C$12m. Our new valuation equates to C$1.51 per equity share after deducting C$103.5m net debt. We expect GLG will need additional capital in H215 and 2016 to fund interest and working capital needs. As recent funding has come from related parties, we believe the sale of one of GLG s underutilised facilities and/or the restructuring (with new proceeds) of its loans to Chinese lenders may ease investors concerns about its debt. With the stock currently trading at less than 0.3x our 2015 sales estimate, we anticipate that if the company succeeds in improving utilisation and profitability (as we forecast) and extends its loan maturities, the share price could react positively and approach our valuation. % 1m 3m 12m Abs (6.7) (6.7) (30.0) Rel (local) (6.8) 2.3 (21.5) 52-week high/low C$0.47 C$0.25 Business description GLG Life Tech is a vertically integrated supplier of stevia-derived and Luo Han Guo (LHG) extracts primarily for use as low-calorie, high-intensity sweeteners (HIS) in the food and beverage industries. It sources raw material in China and processes extracts at its China-based facilities. Next events Q315 results November 2015 Q415 results March 2016 Analysts Pooya Hemami Christian Glennie +44 (0) healthcare@edisongroup.com Edison profile page GLG Life Tech is a research client of Edison Investment Research Limited

2 Update: LHG contributions support sales growth The addition of Luo Han Guo (LHG) revenues from its current supply contract with Tate & Lyle is improving GLG Life Tech s revenue base and enabling the firm to move closer towards sustainable profitability. The firm reported Q215 financials on 12 August 2015, with revenue of C$8.0m (up 100% y-o-y and 30% q-o-q), gross profit of C$2.3m and negative EBITDA of C$0.1m. While the company does not break down its revenue by product line or group (stevia vs LHG), the yearly increase was largely attributable to the shipment of LHG and revenue recognition as part of the $9-12-month initial LHG contract with Tate & Lyle (entered in mid-2014). Fulfilment of this contract should be completed in Q315, and the firm expects a renewal order (at higher volume), leading to LHG shipments resuming in late 2015 or early Total revenue was below our C$12.5m forecast, which we believe is due to lower stevia extract sales than we anticipated. The company continues to position its stevia extract business towards higher-margin sales of higher-purity extracts to developed market customers. Extract volumes have tended to fluctuate quarter to quarter and they tend to be higher in the fourth calendar quarter (historically, GLG fourth-quarter stevia revenue has been 30-40% of full-year revenue). Exhibit 1: Q215 financial results Year-end 31 December (C$000) Q215 Q215e % change Q115 % change q-o-q Q214 % change y-o-y Revenue Total corporate revenue 8,033 12,545 (36) 6, , Expenses Cost of sales (5,714) (11,291) (49) (4,798) 19 (2,158) 165 Gross profit 2,319 1, , , Net R&D costs - - N/A - N/A - N/A G&A expense (excluding D&A) (2,430) (2,056) 18 (2,254) 8 (2,238) 9 EBITDA (111) (801) (86) (885) (87) (388) (71) Depreciation & amortisation. (1,662) (1,152) 44 (1,294) 28 (1,565) 6 Operating income (loss) before exceptionals (1,773) (1,954) (9) (2,179) (19) (1,953) (9) Net interest income (expense) (2,545) (2,403) 6 (2,436) 5 (1,823) 40 Foreign exchange gain (loss) (47) - N/A (853) (95) 620 (108) Financial and other income (loss) N/A Earnings (loss) before tax (3,514) (4,357) (19) (4,765) (26) (2,777) 27 Taxes - - N/A - N/A (32) N/A Net income (loss) (3,514) (4,357) (19) (4,765) (26) (2,809) 25 Net EPS (IFRS, fully diluted) ($0.09) (0.11) (16) ($0.13) (26) ($0.08) 10 Adjusted EPS (fully diluted) ($0.11) (0.11) 4 ($0.12) (6) ($0.11) 0 Source: Company reports, Edison Investment Research Our cost of sales and G&A expense calculations differ slightly from the firm s reported statements, as we remove depreciation and amortisation components from these items (the reported figures include these amounts). Our EBITDA calculation also differs from the firm s reported figures (the firm reported positive EBITDA of $0.2m) as we do not exclude certain components such as noncash share compensation from our EBITDA assessment. The reported EPS loss was C$0.09, but after removing foreign exchange losses and other items (recoveries of bad debts, sales taxes, and prepaid expenses), the adjusted loss of $0.11 was in line with our $0.11 loss estimate. Gross margin of 29% exceeded our forecast, although quarterly EBITDA was still slightly negative due to SG&A costs. Since Q213, (after the company discontinued its Chinese consumer beverages joint venture), SG&A costs have been between $1.7m and $2.4m per quarter; we expect them to remain within this range. As only two of GLG s four manufacturing facilities were operating during Q215, GLG s cost of goods sold also included C$0.5m in capacity charges, which relate to the fixed overhead costs of maintaining and/or running GLG s processing facilities while they operate below peak or optimal utilisation. Increased revenue (from stevia and/or LHG extracts) would improve company-wide GLG Life Tech 23 September

3 capacity utilisation, which should improve margins. We estimate that GLG needs C$50-60m of annual extract (stevia or LHG) sales to cover its fixed costs and reach sustainable positive operating cash flow and EBITDA. Operating cash flow was $4.0m, supported by decreasing working capital requirements and by lender support as only c $1.1m of the quarterly $2.5m in net interest expense was disbursed in cash (interest payable increased C$1.4m from Q115). The firm s working capital levels tend to be highest in the fourth fiscal quarter, corresponding to the company s purchasing of its yearly stevia and LHG raw material needs during the third and fourth quarters (its extract production cycles run October through September each year). Financials and valuation On 30 June 2015, GLG had C$103.5m of net debt ($5.3m cash and equivalents offset by $108.7m in gross debt), down from C$106.8m on 31 March We estimate that the c 1.7% appreciation of the Canadian dollar versus the Chinese renminbi led to a downward revaluation, in Canadian dollar terms, of GLG s total debt by C$ m in Q215. C$66.1m of GLG s debt was owed to Chinese government-affiliated lenders, with over C$64m maturing before year-end 2015, and C$26.6m is owed to related parties (primarily the company CEO). GLG is working to restructure its external debt positions to lengthen their maturity and improve payment flexibility; it expects to negotiate new terms before year-end As Q215 stevia revenue was below expectations, we are lowering our 2015 and 2016 stevia revenue forecasts. Our 2017 and beyond stevia and LHG revenue estimates are largely unchanged on a US dollar basis, although we now use a C$1.33/US$ exchange rate forecast (up from C$1.25/US$ previously). We continue to assume GLG will secure 15% of the global stevia market by 2020 (the market value of which we continue to estimate will exceed US$500m by then). Our stevia market forecasts remain broadly consistent with industry estimates supplied by market research firm Future Market Insights, which in January 2015 estimated the global stevia market size will grow to $565.2m by 2020 (at an 8.5% CAGR). Exhibit 2: Changes to 2015 and 2016 forecasts Year-end 31 December (C$000s) Q315e new 2015e old 2015e new 2016e old 2016e new Revenue Stevia extract revenue 7,920 27,044 22,031 42,503 38,473 LHG and other revenue 4,915 16,353 15,988 20,525 21,164 Total corporate revenue 12,835 43,397 38,019 63,028 59,637 Expenses Cost of sales (11,295) (37,875) (31,472) (53,691) (50,229) Gross profit 1,540 5,522 6,546 9,337 9,408 Net R&D costs G&A expense (excluding D&A) (2,257) (8,644) (9,019) (8,396) (9,087) EBITDA (717) (3,122) (2,472) Depreciation & amortisation (1,098) (4,695) (5,134) (4,280) (4,141) Operating income (loss) before exceptionals (1,815) (7,817) (7,607) (3,339) (3,820) Net interest income (expense) (2,328) (9,817) (9,767) (10,446) (10,291) Foreign exchange gain (loss) - (853) (900) - - Financial and other income (loss) , Earnings (loss) before tax (4,143) (17,785) (16,719) (13,785) (14,111) Taxes Net income (loss) (4,143) (17,785) (16,719) (13,785) (14,111) Net EPS (normalised, fully diluted) ($) (0.11) (0.45) (0.45) (0.32) (0.32) Source: Edison Investment Research GLG Life Tech 23 September

4 We continue to forecast that GLG s normalised margins 1 will trend upwards in the coming quarters as the higher-extract yielding Huinong 3 and Huinong 4 leaf strains make up the majority of its leaf supply for processing. This is compared to the Huinong 1 and 2 strains used in recent years, which had lower RebA content. Further, GLG plans to implement and utilize its proprietary 'Super RA leaf strain (announced in late 2014 and which we estimate can potentially provide up to 50% more RebA compared to Huinong 3) as a significant proportion of its 2016 stevia leaf harvest. This could lead to additional margin improvement during the Q416 through Q317 leaf processing cycle. We continue to assume GLG will generate consistently positive EBITDA starting in mid-2016 (and positive operating income by mid-2017), driven by market share gains, increased processing facility utilisation (leading to decreased capacity charges) and the higher RebA yields of deployed leaf. Exhibit 3: Revenue and EBITDA forecasts (C$000s) Year 2015e 2016e 2017e 2018e Stevia extract revenue 22,031 38,473 56,798 65,920 LHG and other revenue 15,988 21,164 22,140 23,941 Total revenue 38,019 59,637 78,938 89,861 EBITDA (2,472) 321 4,128 7,384 EBITDA margin (%) N/A Source: Edison Investment Research We value GLG using a net present value (NPV) analysis. We use a weighted average cost of capital (WACC) of 10%, given a cost of equity of 12.5% and GLG s capital structure, which is weighted to debt at 90% given current market values (and its average cost of debt is estimated at 9.0%). After rolling forward our forecasts, adjusting forex estimates and lowering our near-term stevia revenue, we now obtain a total NPV for GLG of C$160.6m (vs C$156.1m, previously). As GLG s revenues are mostly incurred in US$, the change in our forex assumption (from C$1.25/US$ to C$1.33/US$) added $16.9m to our NPV. Excluding forex, our NPV would have declined by c $12m. Net of Q215 net debt of C$103.5m, this new valuation provides an equity valuation of C$57.1m, or C$1.51 per share. At the current market price, GLG s market capitalisation is less than 0.3 times our 2015 revenue estimate, which is well below the price-to-sales multiple normally attributable to ingredients or commodity producers. However, much of this discount is likely due to the fact that GLG s operations are currently not profitable (after including SG&A and interest charges) and the company s high financial leverage. Should the company succeed in improving utilisation and profitability as we forecast, and restructure loans without causing equity dilution, we believe the share price could react positively and approach our current valuation. 1 GLG s quarterly gross margins have fluctuated significantly quarter to quarter; in FY14 gross margins (before depreciation or amortisation charges) varied between negative 28% and positive 46%, with a total of 12.7% for the entire year; hence while quarterly margins can fluctuate widely, we project the normalised margin (ie for the entire year) will rise through GLG Life Tech 23 September

5 Exhibit 4: Financial summary C$000s e 2016e 2017e Year-end 31 December IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 16,022 19,982 38,019 59,637 78,938 Cost of Sales (17,724) (17,341) (31,472) (50,229) (65,518) Gross Profit (1,702) 2,641 6,546 9,408 13,419 General & Administrative (8,425) (8,258) (9,019) (9,087) (9,291) EBITDA (10,127) (5,617) (2,472) 321 4,128 Operating Profit (before exceptionals) (14,483) (11,328) (7,607) (3,820) 255 Exceptionals (8,096) (13,442) Other Operating Profit (22,578) (24,771) (6,953) (3,820) 255 Net Interest (7,181) (7,848) (9,767) (10,291) (10,850) Profit Before Tax (norm) (21,664) (19,177) (17,373) (14,111) (10,595) Profit Before Tax (FRS 3) (29,760) (32,619) (16,719) (14,111) (10,595) Tax (49) Minority interests Profit After Tax and minority interests (norm) (18,335) (19,125) (17,373) (14,111) (10,595) Profit After Tax and minority interests (FRS 3) (29,808) (32,567) (16,719) (14,111) (10,595) Average Number of Shares Outstanding (m) EPS - normalised (C$) (0.55) (0.56) (0.45) (0.32) (0.22) EPS - normalised and fully diluted (C$) (0.55) (0.56) (0.45) (0.32) (0.22) EPS - (IFRS) (C$) (0.89) (0.95) (0.43) (0.32) (0.22) Dividend per share (C$) BALANCE SHEET Fixed Assets 55,012 50,722 53,397 49,928 46,794 Intangible Assets Tangible Assets 55,012 50,722 53,397 49,928 46,794 Current Assets 32,784 21,180 28,041 42,819 43,973 Cash 5, ,999 14,893 10,520 Other 27,651 20,039 19,624 27,507 33,035 Current Liabilities (62,229) (88,532) (97,952) (111,932) (119,078) Creditors (16,863) (17,591) (19,066) (33,046) (40,192) Short term borrowings (45,367) (70,941) (78,886) (78,886) (78,886) Long Term Liabilities (38,935) (25,144) (39,922) (49,922) (49,922) Long term borrowings* (35,755) (25,063) (39,850) (49,850) (49,850) Other long term liabilities (3,179) (81) (72) (72) (72) Net Assets (13,367) (41,773) (56,436) (69,106) (78,233) CASH FLOW Operating Cash Flow 8,396 2,660 7,090 7,858 7,216 Net Interest (7,181) (7,848) (9,767) (10,291) (10,850) Tax Capex (81) (1,811) (611) (672) (739) Acquisitions/disposals Financing Net Cash Flow 1,134 (6,999) (3,288) (3,105) (4,373) Opening net debt/(cash) 66,736 75,989 94, , ,424 HP finance leases initiated Other** (10,386) (11,874) (12,169) (0) 0 Closing net debt/(cash) 75,989 94, , , ,797 Source: Company reports, Edison Investment Research; Note: *Convertible notes (valued at C$3.2m in 2013) and related-party liabilities (valued at C$23.1m in 2014 and C$15.9m in 2013) are included as part of long-term borrowings. **Includes effects due to revaluations of assets (eg inventory, doubtful accounts) and liabilities. GLG Life Tech 23 September

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Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. Frankfurt +49 (0) GLG Schumannstrasse Life Tech 34b 23 September 280 High Holborn Park Avenue, 39th Floor Level 25, Aurora Place Level 15, 171 Featherston St Frankfurt Germany London +44 (0) London, WC1V 7EE United Kingdom New York , New York US Sydney +61 (0) Phillip St, Sydney NSW 2000, Australia Wellington +64 (0) Wellington 6011 New Zealand