Mermaid Maritime. SingaporeCompany Guide. HOLD Last Traded Price( 15 Nov 2017): S$0.138(STI : 3,368.70) Price Target 12-mth:S$0.

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1 SingaporeCompany Guide Version 9 Bloomberg: MMT SP Reuters: MMPC.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 16 Nov 2017 HOLD Last Traded Price( 15 Nov 2017): S$0.138(STI : 3,368.70) Price Target 12-mth:S$0.14 (1% upside) Analyst Suvro SARKAR suvro@dbs.com Glenn Ng glennng@dbs.com What s New Net loss of c.us$2m in 3Q17 was below expectations Low revenue/utilisation in 3Q17 on deferment of subsea jobs and competitive pressure Orderbook recovers to US$174m, from US$99m in 2Q 4Q17 expected to be better q-oq-, but major drydocking downtime will drag down 1Q18 earnings Price Relative S$ Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 (LHS) Relative STI (RHS) Relative Index Forecasts and Valuation FY Dec (US$ m) 2015A 2016A 2017F 2018F Revenue EBITDA Pre-tax Profit (231) Net Profit (229) Net Pft (Pre Ex.) Net Pft Gth (Pre-ex) (%) (90.2) (87.2) EPS (S cts) (22.0) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) (90) 243 (87) 119 Diluted EPS (S cts) (22.0) Net DPS (S cts) BV Per Share (S cts) PE (X) nm PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) 0.2 CASH CASH CASH ROAE (%) (51.7) Earnings Rev (%): (58) (40) Consensus EPS (S cts): Other Broker Recs: B: 0 S: 1 H: 1 Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P Near term outlook is a mixed bag Orderbook up on charter renewal, but subsea industry remains challenging. Mermaid s orderbook at end-3q17 has recovered to US$174m from the low of US$99m at end-2q17, boosted by the extension of a contract on the Asiana s long-term charter in the Middle East. However, continued competitive pressures and a deferment of subsea jobs by oil companies resulted in low vessel utilisation and revenues in 3Q17. 4Q17 should be better as these delayed contracts are executed, but visibility on 2018 recovery is weak at this point. 1Q18 should also be particularly weak as three key vessels go into drydock for their intermediate and 5-year surveys. Meanwhile, Seadrill s restructuring process remains an overhang on the stock, as key associate Asia Offshore Drilling (AOD; Seadrill holds a c.66.2% stake) could see impairments/change of ownership if Seadrill s debt restructuring plan fails to garner support. On the plus side, Mermaid has a healthy balance sheet and thus does not warrant the kind of distressed valuations seen in other O&M stocks. We maintain our HOLD call on the stock but lower earnings in FY17/FY18F to account for 3Q17 weakness and drydocking downtime in 1Q18. Where we differ: We note that Mermaid has impaired an above-average proportion of book value of its vessel fleet (c.30%), thus P/BV ratios are more conservative. Potential catalyst: Deferment or cancellation of jobs, or negative news relating to AOD s debt refinancing could result in downward pressure on its share price. Valuation: We base our valuation of Mermaid s core subsea business (excluding stacked vessels) on a P/BV peg of 0.6x and ascribe zero value to associate AOD, giving us a TP of S$0.14. Key Risks to Our View: A better-than-expected outcome for associate AOD s debt refinancing could lead to revaluation. At A Glance Issued Capital (m shrs) 1,413 Mkt. Cap (S$m/US$m) 195 / 144 Major Shareholders (%) Thoresen Thai Agencies PCL 58.2 Mahagitsiri Chalermchai 10.7 Mahagitsiri Prayudh 8.4 Free Float (%) m Avg. Daily Val (US$m) 0.40 ICB Industry :Oil & Gas / Oil Equipment; Services & Dist ed: JS / sa:ym, PY

2 WHAT S NEW Near-term outlook is a mixed bag 3Q17 net loss of US$2.04m on low utilisation rate. 3Q17 was a weak quarter for as the company reported losses of US$2.04m on the bottomline, which was below expectations. This was due to a sharp drop-off in workload, despite 3Q typically being a seasonally strong quarter (due to lack of strong monsoon winds/tides). Revenue declined by 32% q-o-q / 42% y-o-y to US$30.2m this quarter, driven by lower vessel utilisation rates on deferments of job start dates by oil majors as well as some issues in the Middle East which led to port closures and thus a re-routing of vessels to their final destinations. Expect a stronger 4Q17, but 1Q18 looks to be weak again as three vessels undergo drydocking. Management expects a better 4Q, as some jobs intended for 3Q are rolled over all the major vessels should be well utilised in 4Q17. However, going into 2018, 1Q18 looks to be weak as the Commander, Endurer, and Asiana have to undergo surveys in drydock, and there looks to be limited visibility on workload (aside from the Asiana) for the rest of the year. Orderbook up to US$174m, boosted by Middle East contract for Asiana. Mermaid s orderbook increased to US$174m this quarter, up from a low of US$99m last quarter. About 80% of the orderbook should be recognised in the next one year or so. During the quarter, a one-year extension on the Asiana s contract in the Middle East was secured, with a total contract value of US$96m, and Mermaid s portion a major part of that figure. The extension contract begins in 4Q17. Other smaller contracts secured during the quarter include a 21-month submarine cable survey contract for the Resolution (chartered-in vessel) worth US$7m; a 60-day saturation diving and inspection job for the Commander in Malaysia (started in 3Q17); and survey, spool-piece tie-in and free span correction work secured for the Endurer on subsea pipelines in the Middle East (also started in 3Q17). Some uncertainty over AOD s action plan remains. It was clarified that as part of Seadrill s restructuring agreement, AOD (66% owned by Seadrill; 33% by Mermaid) was granted a temporary waiver and forbearance from default that may have arisen under AOD s bank credit facility agreement. Going forward, the focus will be on how AOD handles the bullet payment of US$180m on its debt facility due in April 2018 (i.e. whether it is able to refinance, or perhaps potentially join in as part of Seadrill s comprehensive restructuring package). Quarterly / Interim Income Statement (US$m) FY Dec 3Q2016 2Q2017 3Q2017 % chg yoy % chg qoq Revenue (41.8) (32.1) Cost of Goods Sold (39.2) (35.3) (27.5) (29.8) (22.2) Gross Profit (78.7) (70.4) Other Oper. (Exp)/Inc (6.4) (6.0) (5.4) (15.5) (10.6) Operating Profit (2.7) nm nm Other Non Opg (Exp)/Inc Associates & JV Inc (45.0) (4.9) Net Interest (Exp)/Inc (0.7) (0.7) (0.7) Exceptional Gain/(Loss) Pre-tax Profit (2.2) nm nm Tax (0.1) nm Minority Interest nm nm Net Profit (2.0) nm (156.3) Net profit bef Except (2.0) nm nm EBITDA (73.9) (61.3) Margins (%) Gross Margins Opg Profit Margins (8.9) Net Profit Margins (6.7) Source of all data: Company, DBS Bank Page 2

3 CRITICAL DATA POINTS TO WATCH Critical Factors Subsea fleet utilisation is critical. With orderbook levels declining, Mermaid had negotiated a penalty-free return in 2016 for its three long-term chartered-in vessels post completion of their jobs (one has been re-chartered so there is some flexibility to this arrangement). Three of the smaller vessels on its owned fleet are idle, which is dragging down overall fleet utilisation. Mermaid s four major vessels Commander, Endurer, Asiana and Sapphire had maintained utilisation levels of around 72% in FY16, and 48%/73% in 1Q17/2Q17, though that declined to 42% in 3Q17. Utilisation rate - subsea fleet (%) (no. of days) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Vessel working days - LT Chartered-in Vessel working days - Owned Blended utilisation rate (RHS) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Seadrill s debt restructuring efforts create an overhang, as it is majority partner at Mermaid s key associate Asia Offshore Drilling (AOD). If Seadrill is unable to successfully negotiate restructuring terms and is forced to liquidate, there may be significant impairment losses related to Mermaid s investment in AOD given the US$180m balloon repayment of AOD credit facility due in April 2018 and the contracts for the three drilling rigs owned by AOD may also come under the scanner. Orderbook replenishment is key. We note that Mermaid s orderbook tends to be replenished in 4Q every year, before the seasonal upswing in 2Q/3Q. This year Mermaid seems to have won contracts early, in 3Q. Additional contracts secured in the remaining half of 4Q would be a boon. Drilling segment contribution has reduced after rate revisions as part of contract extensions. As day rates on Mermaid s three associate-owned rigs had been negotiated lower to ~US$100,000/day over the course of FY16, profitability has declined, with profits from associates standing at about US$1.1m per quarter. Thus, overall contributions in FY17F/18F will be much lower at around US$4.5m, compared to the US$11.5m contribution in FY16. New cable-laying business has lost its sheen. Mermaid established a new cable-laying business in the Middle East in late 2014 and seemed to have conquered the learning curve in FY15, when the business generated a positive contribution margin. However, securing additional projects were a challenge in FY16, and this trend has spilled into FY17. (US$ mil) (20.00) (40.00) (60.00) Revenue-implied order wins 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Net orderbook (US$m) (US$ mil) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Subsea Cable-laying Source: Company, DBS Bank Older tender rigs have seen a dearth of potential buyers. Mermaid has a long track record in the niche tender rig business in SE Asia but its older rigs are more than 30 years old and are currently being marketed for sale. While cold stacking of the two older rigs has reduced operating expenses to c.us$300,000/quarter, a successful sale of these old assets would be incrementally positive, as it would help alleviate some of this cash outflow, and monetise the asset s remaining value. Page 3

4 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Company Guide Appendix 1: A look at Mermaid's listed history what drives its share price? Share price has been highly correlated to crude oil prices, but recently more tied to key announcements relating to orderbook and financing 120 Mermaid share price vs Brent crude oil price Outperformance on cancellation of newbuilds without penalty, hence removing financing risk But the announcement of refinancing risk related to Seadrill's restructuring (affecting key jackup JV Asia Offshore Drilling, in which Seadrill is partner) created overhang. Declining orderbook also contributed to underperformance 20 0 Mermaid Oil Px Source: Bloomberg Finance L.P., DBS Bank Mermaid s share price relative to DBS Singapore OSV Index 2.50 Mermaid share price relative to DBS SIngapore OSV Index Cancellation of newbuild DSV and two drilling tender rigs under construction w/o penalty was a positive catalyst Source: Bloomberg Finance L.P., DBS Bank Page 4

5 Balance Sheet: Balance sheet stress removed with cancellation of newbuild orders. Mermaid s balance sheet went into net cash position by end-fy16, with no bonds and no capex outstanding, quite a feat compared to peers; the deal to cancel the orders for two tender rigs and one DSV in December 2016 helped alleviate the capex overhang. Mermaid also has in place a US$500m multicurrency debt issuance programme, but this may not be put to much use in the current market environment unless some M&A opportunities arise Leverage & Asset Turnover (x) 2014A 2015A 2016F 2017F 2018F Gross Debt to Equity (LHS) Asset Turnover (RHS) Share Price Drivers: Higher oil major spending on higher oil prices. The rebound in oil prices needs to result in decisions by oil majors to increase spending meaningfully again; we are already seeing an increase in the offshore working rig count, but substantial increases in spending may be dependent on further inventory drawdowns and the extent of OPEC/non-OPEC cuts, which are key drivers of the oil price. Privatisation cannot be ruled out. With O&G sector valuations near multi-year lows, share price upside could stem from possible privatisation by parent Thoresen Thai and its associated promoter group (the Mahagitsiri family), which hold at least a 77% stake in Mermaid. Thoresen Thai has a gross cash balance of about US$230m and net gearing is quite low as well; thus we believe there is enough financial muscle to buy out Mermaid s remaining free float at current prices. Key Risks: Subsea engineering operations are sensitive to delays in the award of offshore projects. The short-term nature of shallowwater subsea projects makes Mermaid's subsea engineering revenue sensitive to delays in the award of projects, which oil majors have recently tended towards. US$m % 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (x) 88.6 Capital Expenditure 2014A 2015A 2016F 2017F 2018F Capital Expenditure (-) ROE (%) 2014A 2015A 2016F 2017F 2018F Forward PE Band (x) Failure to refinance bank debt at the associate AOD level could lead to unwanted instability. AOD has a credit facility with a balloon payment of US$180m maturing in April 2018, and majority shareholder Seadrill is currently working on a refinancing programme for this and its other facilities. Failure to refinance the bank debt at associate AOD level could trigger impairments and/or change of majority shareholder. Seadrill is currently working on a comprehensive restructuring plan with creditors, and has filed for Chapter sd: 70.7x +1sd: 49.9x 28.6 Avg: 29x 8.6-1sd: 8.1x Nov Nov-14 Nov-15 Nov-16 Nov-17 (x) 1.3 PB Band (x) Company Background PCL (Mermaid) is a provider of drilling and subsea engineering services for the offshore oil & gas industry, serving a diverse client base globally sd: 1x +1sd: 0.79x Avg: 0.57x -1sd: 0.36x 0.1-2sd: 0.14x Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Source: Company, DBS Bank Page 5

6 Segmental Breakdown FY Dec 2014A 2015A 2016A 2017F 2018F Revenues (US$m) Subsea services Drilling services Others/ Elimination (9.2) Total Operating Profit(US$m) Subsea services 27.3 (68.9) Drilling services 4.84 (92.1) (0.5) (0.8) (1.2) Others/ Elimination (7.4) 147 (0.6) Total 24.8 (14.0) Income Statement (US$m) FY Dec 2014A 2015A 2016A 2017F 2018F Revenue Cost of Goods Sold (340) (304) (152) (132) (81.5) Gross Profit Other Opng (Exp)/Inc (46.6) (47.0) (27.1) (22.5) (25.4) Operating Profit 24.8 (14.0) Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (4.1) (3.2) (3.0) (3.1) (3.5) Exceptional Gain/(Loss) (1.5) (234) Pre-tax Profit 57.5 (231) Tax (7.9) (0.5) 2.83 (0.1) (1.2) Minority Interest (0.1) 2.23 (0.1) Preference Dividend Net Profit 49.5 (229) Net Profit before Except EBITDA Growth Revenue Gth (%) 52.8 (18.3) (45.0) (16.3) (27.7) EBITDA Gth (%) 77.5 (59.9) (1.6) (30.0) 17.2 Opg Profit Gth (%) 6.0 (156.3) (142.2) (85.7) Net Profit Gth (Pre-ex) (%) (90.2) (87.2) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) 6.0 (4.1) Net Profit Margin (%) 12.0 (68.1) ROAE (%) 9.2 (51.7) ROA (%) 6.7 (36.3) ROCE (%) 3.2 (2.5) Div Payout Ratio (%) 24.9 N/A Net Interest Cover (x) 6.0 (4.3) Day rates of AOD rigs have been lowered Source: Company, DBS Bank Page 6

7 Quarterly / Interim Income Statement (US$m) FY Dec 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 Revenue Cost of Goods Sold (39.2) (36.8) (32.2) (35.3) (27.5) Gross Profit Other Oper. (Exp)/Inc (6.4) (9.8) (5.3) (6.0) (5.4) Operating Profit 6.31 (2.4) (1.0) 3.10 (2.7) Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (0.7) (0.7) (0.7) (0.7) (0.7) Exceptional Gain/(Loss) Pre-tax Profit 7.62 (1.4) (2.2) Tax (0.1) 2.08 (0.1) Minority Interest 0.0 (0.1) Net Profit (2.0) Net profit bef Except (0.6) 3.62 (2.0) EBITDA Growth Revenue Gth (%) 4.5 (14.8) (17.2) 21.7 (32.1) EBITDA Gth (%) (0.4) (78.4) (61.3) Opg Profit Gth (%) 24.5 (138.0) (60.1) (423.7) (186.3) Net Profit Gth (Pre-ex) (%) (3.3) (91.8) (191.1) (743.8) (156.3) Margins Gross Margins (%) Opg Profit Margins (%) 12.2 (5.4) (2.6) 7.0 (8.9) Net Profit Margins (%) (6.7) Balance Sheet (US$m) FY Dec 2014A 2015A 2016A 2017F 2018F Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Shareholder s Equity Minority Interests 1.77 (0.5) (0.4) (0.4) (0.4) Total Cap. & Liab Non-Cash Wkg. Capital Net Cash/(Debt) (23.3) (50.0) 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 Net Debt/Equity ex MI (X) CASH CASH CASH Capex to Debt (%) Z-Score (X) Balance sheet in an enviable net cash position Source: Company, DBS Bank Page 7

8 Cash Flow Statement (US$m) FY Dec 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 57.5 (231) Dep. & Amort Tax Paid (10.9) (6.6) (3.7) (0.1) (1.2) Assoc. & JV Inc/(loss) (38.3) (20.5) (11.5) (4.6) (4.4) Chg in Wkg.Cap. (1.7) (18.0) 19.1 (5.6) 11.9 Other Operating CF Net Operating CF Capital Exp.(net) (87.6) (25.1) (5.4) (11.0) (26.0) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF (0.6) (1.3) (27.6) Net Investing CF (88.2) (19.6) (26.2) (11.0) (26.0) Div Paid (12.2) (12.3) Chg in Gross Debt (24.2) (5.4) (18.0) Capital Issues Other Financing CF Net Financing CF (23.5) (17.7) (18.0) Currency Adjustments 0.63 (1.0) (0.4) Chg in Cash (59.4) (32.0) Opg CFPS (S cts) Free CFPS (S cts) (3.4) (1.8) Source: Company, DBS Bank Target Price & Ratings History S$ Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 16 Nov HOLD 2: 21 Nov HOLD 3: 01 Dec HOLD 4: 12 Dec HOLD 5: 09 Jan BUY 6: 02 Mar BUY 7: 06 Mar BUY 8: 13 Mar BUY 9: 17 May HOLD 10: 17 Aug HOLD Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Analyst: Suvro SARKAR Glenn Ng 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: 16 Nov :06:19(SGT) Dissemination Date: 16 Nov :55:08(SGT) Sources for all charts and tables are DBS Bankunless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. 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10 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 HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Oct 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. 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. 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 10

11 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 This report is being distributed in Australia by DBS Bank Ltd. ( DBS ) or DBS Vickers Securities (Singapore) Pte Ltd ( DBSVS ). DBS holds Australian Financial Services Licence no DBSVS is 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. DBSVS is 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. Hong Kong 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). 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 11

12 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 International Financial Centre United Arab Emirates 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 is provided by DBS Bank Ltd (Company Regn. No E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. 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. Page 12

13 DBS Regional Research Offices HONG KONG DBS Vickers (Hong Kong) Ltd Contact: Paul Yong 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: Fax: Participant of the Stock Exchange of Hong Kong MALAYSIA AllianceDBS Research Sdn Bhd Contact: Wong Ming Tek ( U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah Kuala Lumpur, Malaysia. Tel.: Fax: general@alliancedbs.com SINGAPORE DBS Bank Ltd Contact: Janice Chua 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel: Fax: equityresearch@dbs.com Company Regn. No E INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: Fax: research@id.dbsvickers.com THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 9th, 14th-15th Floor Rama 1 Road, Pathumwan, Bangkok Thailand Tel Fax: research@th.dbs.com Company Regn. No Securities and Exchange Commission, Thailand Page 13