Yangzijiang Shipbuilding

Transcription

1 Singapore Company Guide Version 6 Bloomberg: YZJSGD SP Reuters: YAZG.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 2 Mar 2017 BUY Last Traded Price ( 1 Mar 2017): S$0.98 (STI : 3,122.77) Price Target 12-mth: S$1.12 (14% upside) (Prev S$0.95) Potential Catalyst: Shipping recovery, dual-listing Where we differ: In line Analyst Pei Hwa HO peihwa@dbs.com What s New 4Q16 earnings lifted by favourable material cost and currency Secured c.us$170m new orders in 4Q16 Declared dividend of 4 Scts, translating to 4% yield Reiterate BUY; TP S$1.12 Price Relative S$ Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 (LHS) Relative STI (RHS) Relative Index Forecasts and Valuation FY Dec (RMB m) 2015A 2016A 2017F 2018F Revenue 16,014 15,089 13,561 13,720 EBITDA 3,506 3,688 3,100 2,936 Pre-tax Profit 3,185 2,773 2,561 2,293 Net Profit 2,460 1,752 1,812 1,650 Net Pft (Pre Ex.) 1,903 1,850 1,654 1,650 Net Pft Gth (Pre-ex) (%) (45.3) (2.8) (10.6) (0.3) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) (45) (3) (11) 0 Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) Earnings Rev (%): - - Consensus EPS (S cts): Other Broker Recs: B: 5 S: 3 H: Proxy to shipping recovery Reiterate BUY; TP raised to S$1.12. As the largest and most costefficient private shipbuilder in China, (Yangzijiang) is well-positioned to benefit from the State-Owned Enterprise (SOE) reform in China and ride the anticipated shipping recovery. It has a solid balance sheet, sitting on net cash of 65 Scts per share (includes Held-to-Maturity investments), representing 53% of NTA. Valuation is undemanding at 0.8x P/B, against 7-8% ROE and 4% yield. Our SOP-based TP is lifted to S$1.12 (implied 0.9x P/B), after rolling over our valuation to FY17 with higher target PE of 10x (8x previously) for shipbuilding segment in view of a recovery in the newbuild market. Reiterate BUY. The tide is turning, led by dry bulk. The global orderbook-to-fleet ratio has dropped to a low of 11%, of which c.60% is scheduled for delivery in 2017, implying that supply will be much lower from 2018 onwards. On the scrapping side, the new Ballast Water Management Convention rule that will take effect in Sept-2017, could accelerate the demolition of old vessels. This is expected to drive the recovery in the shipping market, led by dry bulk segment, and thus give a boost to newbuild demand. We expect new orders to almost double to US$1.5bn this year, from 2016 s US$823m. Lower margins in 2017; mitigated by preferential tax rate and writebacks. Core shipbuilding revenue is backed by its healthy order backlog of US$4.3bn as at end Dec-2016, which translates to revenue coverage of >2x. While shipbuilding margins are expected to moderate from the average of 25% in 2016 to 16% in , it could be mitigated by a lower tax rate for New Yangzi Shipyard (impact estimated at Rmb150m), recognition of old yard relocation fees (Rmb158m) and absence of significant impairments (net one-offs of c.rmb600m in 2016). Valuation: We value Yangzijiang based on sum-of-parts (SOP) methodology to better reflect the valuations of the various segments. We arrive at a target price of S$1.12, after applying 10x FY17F price earnings (PE) on shipbuilding earnings, 1.0x price-to-book value (P/B) for bulk carriers and 1x P/B for investments. Key Risks to Our View: USD depreciation and hike in steel cost. Revenue is denominated mainly in USD, and only half is naturally hedged. If the net exposure is unhedged, every 1% USD depreciation could lead to a 2% decline in earnings. Every 1% rise in steel costs, which accounts for about 20% of COGS, could result in a 1.1% drop in earnings. At A Glance Issued Capital (m shrs) 3,832 Mkt. Cap (S$m/US$m) 3,755 / 2,674 Major Shareholders (%) Yangzi International 26.2 Lido Point Investment Ltd 10.3 Hongkong Hengyuan 7.9 Free Float (%) m Avg. Daily Val (US$m) 6.8 Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P ed: JS / sa: JC, PY

2 WHAT S NEW Lifted by favourable material cost and currency Results snapshot 4Q16 core profit largely in line. Yangzijiang s headline net profit doubled q-o-q to Rmb607m in 4Q16 due to smaller net one-off impact relative to 3Q16 (refer to Table 1 below). In 4Q16, Yangzijiang made impairments of Rmb481m for its shipping fleet and two shipyards, and Rmb300m fair value adjustment for financial assets. These were offset by the reversal of impairment on Held-to-Maturity (HTM, Rmb180m), tax write-backs (Rmb138m), income from forfeited deposits (Rmb226m) and forex gains (Rmb230m). Revenue grew 42% q-o-q (+Rmb1.6bn) in 4Q16, boosted by the sale of four terminated vessels that totalled Rmb m, and higher orderbook drawdown. FY16 net earnings came in at Rmb1,752m, broadly in line with our expectations. Shipbuilding margin remains strong at 26%. Core shipbuilding gross margin improved q-o-q to c.26%, from 24%. This was supported by reversal of warranty provision and appreciation of USD against Rmb. Solid balance sheet. Including HTM investments, Yangzijiang is in net cash, equivalent to 65 Scts per share or 53% of its NTA. This bodes well for M&A activities. Declared 4 Scts final dividend, implying 4% yield. This translates to 42% payout ratio. We expect Yangzijiang to sustain its dividend payout at around 4 Scts for the next two years. Orderbook Deliveries. Yangzijiang delivered 9 vessels in the quarter, bringing total deliveries to 39 units in FY16. Secured new orders worth c.us$170m in 4Q16. Yangzijang has won contracts to build three units of 39k dwt bulk carriers and three units of 39k dwt oil tankers totalling c.us$170m in 4Q16, lifting FY16 wins to US$823m. We expect Yangzijiang to secure US$1.5bn new orders in Orderbook declined from US$4.4bn to US$4.3bn, still implying revenue coverage of more than 2-years. Yangzijiang is ranked No.1 in China and No.4 in the world based on outstanding order book. Outlook Shipping closer to turning point. Global orderbook-to-fleet ratio has dropped to a low of 11%, of which c.60% are scheduled for delivery in 2017, implying much lower new supply from 2018 onwards. The recovery will be led by dry bulk segment. Containership market continues to be challenging in 2017, potentially seeing more deferments while demand for gas carriers should remain robust. Management seeing a rise in enquiries. Newbuild prices ought to buck the declining trend with stronger demand and cost-push as steel cost has doubled from early Page 2

3 Table 1: Key impairments, write-backs, forex and return from venture capital Key items (Rmb m) 4Q15 1Q16 2Q16 3Q16 4Q16 FY15 FY16 Remarks Net forex gain/(loss) (84.8) (80.5) Fair value change on (298.7) - (298.7) financial assets Impairment loss on HTM (154.8) (22.8) (52.8) (218.7) (94.8) (114.3) Impairment on Jackup rig (369.0) (369.0) - Value marked down from US$170m to US$110m Impairment on shipping fleet (360.0) (531.4) (145.0) (360.0) (676.4) Value of 13 vessels marked down from average of US$24m per vessel to US$11m, below market price. Impairment loss on PPE 7.0 (336.5) 7.0 (336.5) Impaired Changbo and ship demolition yards to scrap value of yards Relocation fees of old yard Relocation fees paid by government Income from forfeited For terminated vessels deposits Tax write-back Preferential tax rate (15% vs 25%) for New Yangzi retroactive to Share of Associates' or JV Income (67.2) (2.8) (95.8) (59.7) Swing from venture capital return Net impact (961.5) (328.6) (252.3) (148.7) Source of all data: Company, DBS Bank Quarterly / Interim Income Statement (RMB m) FY Dec 4Q2015 3Q2016 4Q2016 % chg yoy % chg qoq Revenue 3,125 3,880 5, Cost of Goods Sold (2,196) (3,011) (4,074) Gross Profit , Other Oper. (Exp)/Inc (838) (93.8) (388) (53.7) Operating Profit ,046 1, Other Non Opg (Exp)/Inc Associates & JV Inc (3.9) (95.8) 106 nm nm Net Interest (Exp)/Inc (140) (32.9) (144) (2.5) (336.6) Exceptional Gain/(Loss) 0.0 (97.6) 0.0 nm nm Pre-tax Profit (52.9) 549 1,009 nm 83.6 Tax 61.3 (236) (371) nm 57.3 Minority Interest 33.0 (32.2) (29.5) nm (8.2) Net Profit , Net profit bef Except , EBITDA , Margins (%) Gross Margins Opg Profit Margins Net Profit Margins Source of all data: Company, DBS Bank Page 3

4 CRITICAL DATA POINTS TO WATCH Earnings Drivers: Healthy order backlog offers revenue visibility. Orderbook stood at US$4.3bn as at end-dec 2016, implying a healthy book-to-bill ratio of c.2x, providing revenue visibility for the next two years. Yangzijiang is now ranked no.1 in China and no.4 in the world by orderbook. The group secured orders of US$823m in 2016, substantially lower than the US$2.2bn worth of new orders in 2015 and its target of US$ bn, the desirable level for orderbook replenishment and optimisation of operational activities. This is largely attributable to the sluggish newbuild market, which saw the value of global new contracts plunging by 70% y-o-y. We assume order win to recover to US$1.5bn this year in view of the shipping recovery, especially in the dry bulk segment. Shipping recovery. Global orderbook-to-fleet ratio has dropped to a low of 11%, of which c.60% are scheduled for delivery in 2017, implying much lower new supply from 2018 onwards. On the scrapping side, the new Ballast Water Management Convention rule, that will take effect in Sept-2017, would also accelerate the demolition of old vessels. This is expected to drive the recovery of shipping market, led by dry bulk segment, thus giving a boost to newbuild demand Order wins (US$ m) Steel cost (RMB/t) Recognition of deferred income cushions downturn. Post financial crisis, Yangzijiang has adopted more prudent provision and accounting policies. For instance, it extended the warranty provision (2% of sales in ; 1% from 2016 onwards) from one year to three. The reversal of the warranty provision will be captured under COGS and give a boost margins. We also expect the recognition of the remaining Rmb158m exceptional gains for the old yard s relocation fee in FY17 (in the form of government subsidy, Rmb557m out of total of Rmb715m was recognised in FY15). Near-term upside potential: Write-back of impairment for jack-up rig and grant of preferential tax rate. Yangzijiang could write back up to Rmb369m upon successful delivery of the only jack-up rig on its orderbook which has been marked down from the initial contract value of US$170m to US$110m in 4Q15. Yangzijiang was granted the hightech status for its New Yangzi yard in 4Q16. This reduced the corporate tax rate from the typical 25% to 15% (est. impact of around Rmb150m), effective from The Xinfu yard could potentially obtain the approval in early 2017, which could bring about an additional Rmb50m tax savings based on our back-of-envelope calculation. 0.0 Source: Company, DBS Bank RMB / USD Exploring M&A opportunities for long-term growth. The Chinese shipbuilding industry has shrunk from over 3,000 yards to less than 100 currently. Further consolidation is underway, probably ending with survivors, and Yangzijiang will surely make the list. It has emerged stronger in the past few cycles with Executive Chairman, Mr Ren Yuanlin at the helm. Mr Ren, ranked 82 in Lloyd's List's Top 100 most influential people in shipping, is highly respected for his great foresight, strategic sense, and cost and cash management. Yangzijiang s acquisition of a 2.8% stake in Shenzhen-listed system supplier Beijing Highlander Digital Co. Ltd (Highlander) could in the longer run, pave the way for Yangzijiang to enter the military vessel space. Production efficiency and cost control. Yangzijiang enjoys 5-to 10-ppts higher margins vis-à-vis peers. This is achievable through its premium newbuild prices and better payment terms among Chinese yards, as well as production efficiency and cost control. Page 4

5 Balance Sheet: Sound balance sheet. As at end-dec 2016, including held-tomaturity ( HTM ) investments, Yangzijiang is in net cash, equivalent to 65 Scts per share or 53% of its NTA. It is expected to churn positive free cash flow in the light of its minimal capex requirement. Share Price Drivers: Contract wins is traditionally the leading indicator of shipbuilders share price performance and earnings. In particular, Yangzijiang is gaining a good foothold in the high specs vessel space, which has long been occupied by its Korean peers. Key Risks: Prolonged industry downturn. The shipping market of bulk carriers and containerships remains challenging in view of the influx of new capacity and slower-than-expected demand growth amid China's economic slowdown. The prolonged downturn could affect Yangzijiang's order wins and share price. USD depreciation and hike in steel cost. Revenue is denominated mainly in USD, and only half is naturally hedged. Assuming the net exposure is unhedged, every 1% USD depreciation could lead to a 2% earnings decline. Every 1% rise in steel costs, which account for about 20% of COGS, could result in a 1.1% drop in bottom line. Leverage & Asset Turnover (x) Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMBm Capital Expenditure (-) 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% ROE (%) Company Background Yangzijiang is one of the largest, most efficient and most profitable shipbuilders in China. It has moved up the value chain to produce mega containerships and very large bulk carriers, as well as LNG vessels. 2.0% 0.0% (x) Forward PE Band (x) +2sd: 13.6x +1sd: 11.2x Avg: 8.8x -1sd: 6.5x 3.6-2sd: 4.1x Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Source: Company, DBS Bank PB Band (x) (x) sd: 1.36x sd: 1.17x Avg: 0.98x sd: 0.79x sd: 0.6x 0.5 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Page 5

6 Key Assumptions FY Dec Order wins (US$ m) 1,808 2, ,500 1,478 Steel cost (RMB/t) 4,163 2,914 2,769 3,682 4,050 RMB / USD Segmental Breakdown FY Dec Revenues (RMBm) Shipbuilding 11,590 12,209 10,515 9,553 10,420 Investment 1,688 1,326 1,067 1, Others 2,076 2,480 3,507 3,008 2,432 Total 15,354 16,014 15,089 13,561 13,720 Gross profit (RMBm) Shipbuilding 2,469 2,375 2,594 1,521 1,659 Investment 1,584 1,253 1, Others Total 4,144 3,719 3,637 2,815 2,622 Gross profit Margins (%) Shipbuilding Investment Others Total Income Statement (RMBm) FY Dec Revenue 15,354 16,014 15,089 13,561 13,720 Cost of Goods Sold (11,210) (12,295) (11,453) (10,746) (11,098) Gross Profit 4,144 3,719 3,637 2,815 2,622 Other Opng (Exp)/Inc (238) (757) (430) (186) (159) Operating Profit 3,906 2,963 3,206 2,629 2,464 Other Non Opg (Exp)/Inc Associates & JV Inc (59.7) Net Interest (Exp)/Inc 47.1 (335) (276) (226) (171) Exceptional Gain/(Loss) (97.6) Pre-tax Profit 3,953 3,185 2,773 2,561 2,293 Tax (472) (731) (927) (574) (511) Minority Interest (2.1) 5.36 (93.5) (175) (132) Preference Dividend Net Profit 3,479 2,460 1,752 1,812 1,650 Net Profit before Except. 3,479 1,903 1,850 1,654 1,650 EBITDA 4,336 3,506 3,688 3,100 2,936 Growth Revenue Gth (%) (5.8) (10.1) 1.2 EBITDA Gth (%) (13.3) (19.1) 5.2 (15.9) (5.3) Opg Profit Gth (%) (17.1) (24.1) 8.2 (18.0) (6.3) Net Profit Gth (Pre-ex) (%) 12.4 (45.3) (2.8) (10.6) (0.3) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) NM Source: Company, DBS Bank Page 6

7 Quarterly / Interim Income Statement (RMBm) FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Revenue 3,125 2,707 2,994 3,880 5,508 Cost of Goods Sold (2,196) (2,059) (2,309) (3,011) (4,074) Gross Profit ,434 Other Oper. (Exp)/Inc (838) 71.5 (19.6) (93.8) (388) Operating Profit ,046 Other Non Opg (Exp)/Inc Associates & JV Inc (3.9) (67.2) (2.8) (95.8) 106 Net Interest (Exp)/Inc (140) (24.7) (75.1) (32.9) (144) Exceptional Gain/(Loss) (97.6) 0.0 Pre-tax Profit (52.9) ,009 Tax 61.3 (169) (151) (236) (371) Minority Interest 33.0 (11.6) (20.2) (32.2) (29.5) Net Profit Net profit bef Except EBITDA ,299 Growth Revenue Gth (%) (24.4) (13.4) EBITDA Gth (%) (61.1) Opg Profit Gth (%) (84.5) (7.7) Net Profit Gth (Pre-ex) (%) (66.5) (7.3) (8.8) 60.5 Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (RMBm) FY Dec Net Fixed Assets 6,117 6,402 5,477 5,306 5,133 Invts in Associates & JVs 809 1, Other LT Assets 8,090 7,614 8,668 7,627 6,911 Cash & ST Invts 12,046 12,241 14,856 17,559 18,853 Inventory 2,015 1,613 2,032 2,158 2,183 Debtors 6,721 6,197 5,347 4,520 4,573 Other Current Assets 4,980 5,756 3,966 4,752 5,695 Total Assets 40,778 41,246 41,234 42,809 44,236 ST Debt 5,414 2,209 2,579 2,708 2,844 Creditor 5,723 5,042 4,906 5,424 5,488 Other Current Liab 4,227 3,689 4,165 3,609 3,546 LT Debt 2,636 6,074 4,645 4,877 5,121 Other LT Liabilities 1,702 1,874 1,739 1,739 1,739 Shareholder s Equity 20,473 21,799 22,692 23,769 24,683 Minority Interests Total Cap. & Liab. 40,778 41,246 41,234 42,809 44,236 Non-Cash Wkg. Capital 3,767 4,835 2,274 2,397 3,418 Net Cash/(Debt) 3,995 3,959 7,632 9,974 10,888 Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH Capex to Debt (%) Z-Score (X) Source: Company, DBS Bank Page 7

8 Cash Flow Statement (RMBm) FY Dec Pre-Tax Profit 3,953 3,185 2,773 2,561 2,293 Dep. & Amort Tax Paid (492) (606) (670) (1,130) (574) Assoc. & JV Inc/(loss) Chg in Wkg.Cap. 5, (958) Other Operating CF (140) 353 1, Net Operating CF 9,082 3,735 4,076 2,336 1,234 Capital Exp.(net) (729) (196) (185) (300) (299) Other Invts.(net) Invts in Assoc. & JV (94.4) (554) Div from Assoc & JV Other Investing CF (572) 784 (1,428) 2,024 1,551 Net Investing CF (1,364) 63.3 (1,107) 1,724 1,252 Div Paid (960) (958) (818) (736) (736) Chg in Gross Debt (5,523) 516 (1,058) Capital Issues Other Financing CF (18.6) (16.4) Net Financing CF (6,502) (458) (1,876) (374) (356) Currency Adjustments Chg in Cash 1,216 3,340 1,093 3,686 2,129 Opg CFPS (S cts) Free CFPS (S cts) Source: Company, DBS Bank Target Price & Ratings History S$ Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar S.No. Date of Report Closing Price 12-mth Target Price Rating 1: 15 Mar BUY 2: 13 Apr BUY 3: 20 Apr BUY 4: 29 Apr BUY 5: 03 May BUY 6: 08 Aug BUY 7: 29 Sep BUY 8: 10 Nov BUY 9: 01 Dec BUY Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Analyst: Pei Hwa HO Page 8

9 DBS Bank 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: 2 Mar :09:57 (SGT) Dissemination Date: 2 Mar :50:18 (SGT) GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. 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10 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 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. As of 2 Mar 2017, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report ( interest includes direct or indirect ownership of securities). 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. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in recommended in this report as of 31 Jan DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. 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: 4. 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. 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 is being distributed in Hong Kong by or on behalf of, and is attributable to DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission and/or by DBS Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where this publication relates to a research report, unless otherwise stated in the research report(s), DBS Bank (Hong Kong) Limited is not the issuer of the research report(s). This publication including any research report(s) is/are distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS Bank (Hong Kong) Limited. This report is intended for distribution in Hong Kong only to professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules promulgated thereunder.) For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at equityresearch@dbs.com. Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. Page 10

11 Malaysia 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 United Kingdom 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. 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 in The Dubai International Financial Centre ( DIFC ) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 3 rd 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 11