KEY STORY. Update The United Labs (3933 HK/BUY/HK$4.75/Target: HK$6.32) Page 5 Third-generation insulin: Undeveloped blue ocean.

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1 PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. KEY STORY CHINA Update The United Labs (3933 HK/BUY/HK$4.75/Target: HK$6.32) Page 5 Third-generation insulin: Undeveloped blue ocean. CHINA Sector Banking Page 2 Differentiating between stars and lemons. Update The United Labs (3933 HK/BUY/HK$4.75/Target: HK$6.32) Page 5 Third-generation insulin: Undeveloped blue ocean. INDONESIA Update Tiga Pilar Sejahtera Food (AISA IJ/BUY/Rp2,5/Target: Rp2,5) Page 8 To replicate success from sales force expansion in branded rice segment. MALAYSIA Results Carlsberg Brewery Malaysia (CAB MK/HOLD/RM14.8/Target: RM14.) Page 11 1Q17: Results in line. Strong performances from Malaysia and Singapore operations offset by bigger losses from associate Lion Brewery and higher effective tax rate. Update Inari Amertron (INRI MK/HOLD/RM2.17/Target: RM2.31) Page 14 Earnings growth prospects remain strong but current valuation has largely priced in the earnings optimism. Downgrade to HOLD. Malaysian Resources Corp (MRC MK/HOLD/RM1.74/Target: RM1.63) Page 17 1-for-1 rights issue to raise RM2.16b-2.86b. SINGAPORE Sector Plantation Page 2 1Q17 results review: Weaker qoq due to lower production on seasonality, but stronger yoy supported by better production on yield recovery and higher CPO prices. THAILAND Update CP ALL (CPALL TB/BUY/Bt64.75/Target: Bt72.) Page 22 Steady growth outlook supported by store network expansion and resilient margins. Thai Oil (TOP TB/BUY/Bt74.5/Target: Bt87.) Page 25 Cheaper crude plus huge margin improvement; upgrade to BUY. KEY INDICES Prev Close 1D % 1W % 1M % YTD % DJIA (1.8) (1.6) S&P (1.8) (1.8) FTSE (.2) AS (1.) (1.5) (.8) 1.8 CSI (.5) 2.2 (1.5) 3. FSSTI (.1) (.8) HSCEI (.5) HSI (.2) JCI (.6) (1.4).2 6. KLCI (.1) KOSPI (.1) Nikkei (.5) (.4) SET (.8) (1.7).3 TWSE (.2) BDI 96 (2.) (4.5) (25.9) (.1) CPO (RM/mt) 2839 (.1) (11.2) Brent Crude (5.7) (8.1) (US$/bbl) Source: Bloomberg TOP PICKS Ticker CP (lcy) TP (lcy) Pot. +/- (%) BUY Alibaba BABA US Beijing Ent. Water 371 HK Telekomunikasi TLKM IJ 4,34. 5, Tiga Pilar AISA IJ 2,5. 2, V.S. Industry VSI MK OCBC OCBC SP Bangkok Dusit BDMS TB Siam Cement SCC TB SELL Great Wall Motor 2333 HK (23.9) MGM China 2282 HK (9.2) Hartalega HART MK (29.3) KEY ASSUMPTIONS GDP (% yoy) F 218F US Euro Zone Japan Singapore Malaysia Thailand Indonesia Hong Kong China Brent (Average) (US$/bbl) CPO (RM/mt) 2,653 2,6 2,5 Source: Bloomberg, UOB ETR, UOB Kay Hian CORPORATE EVENTS Venue Begin Close Roadshow with Tonly Electronics Shanghai 18 May 18 May Holdings Roadshow with IGG Inc Taipei 18 May 18 May Site visit to: Fosun Pharma Group Shanghai 18 May 18 May Shanghai Pharma Holding Shanghai 18 May 18 May Mircoport Scientific Corp Shanghai 19 May 19 May Roadshow with Petronas Dagangan Bhd Hong Kong 23 May 23 May Analyst Marketing on China Internet Hong Kong 22 May 23 May Sector Singapore 24 May 24 May Kuala Lumpur 25 May 26 May Roadshow with Singtel Canada 26 May 26 May Roadshow with Tongda Group Holdings Hong Kong 1 Jun 1 Jun Group meeting with Fortune REIT Hong Kong 7 Jun 7 Jun Roadshow with PT Siloam Int l Hospital Canada 5 Jun 16 Jun Luncheon with United Overseas Bank Singapore 3 Jul 3 Jul Roadshow with Top Glove Corporation US/Canada 5 Sep 12 Sep 1

2 SECTOR UPDATE Banking China Differentiating Between Stars And Lemons Asset quality has clearly stabilised since 2H16. Large SOE banks are conservative in recognising NPLs. Conversely, NPL formation at JSCBs is on average 1bp higher in 216 and 42bp higher in 1Q17 compared with large SOE banks. JSCBs are also lax in recognising NPLs with NPLs/9-day overdue loans mostly below 1%. Maintain MARKET WEIGHT. We prefer large SOE banks CCB and ICBC, followed by CMB. WHAT S NEW We reviewed the performance of banks with respect to asset quality. Large SOE banks conservative in recognising NPLs. Judging by NPLs/9-day overdue loans, large SOE banks are conservative in recognising NPLs with CCB being the most conservative. Joint stock commercial banks (JSCBs) are more lax in recognising NPLs with SPDB being the worst culprit, followed by Minsheng Bank. Moderation in NPL formation. NPL formation has moderated in 216, especially since 2H16, and the moderation persisted going into 1Q17. Contrary to the broader trend of stabilisation in asset quality, BOC and CITIC unfortunately continued to experience a pick-up in NPL formation in 1Q17. BOC was affected by NPL formations at north-eastern China while CITIC was affected by NPL formations at the Bohai Rim and western China. Asset quality at large SOE banks are much better. On average, NPL formations for JSCBs are 1bp higher in 216 and 42bp higher in 1Q17 compared with that at large SOE banks. CMB is the only outlier among JSCBs as NPL formation has eased to just 6bp in 1Q17. NPLS/9 DAYS OVERDUE LOANS (%) ICBC Source: UOB Kay Hian CCB ABC 13. BOC Large SOE Banks 71.9 BoCom PSBC Industrial Bank 84.2 Citic Bank CMB 51.4 SPDB JSCBs Clean-up through write-offs/disposals. CCB (94bp in 215) and ABC (96bp in 216) were conservative with write-offs of NPLs. JSCBs were more aggressive to write-off NPLs at 132.3bp in 216 and 77bp in 1Q17 due to more intense stress on asset quality Minsheng Bank 8.4 Everbright Bank MARKET WEIGHT (Maintained) TOP BUYS Share Target Company Rec Price Price (HK$) (HK$) CCB BUY ICBC BUY CMB BUY Source: UOB Kay Hian LARGE SOE BANKS (bp) Q17 NPL Formation Write-off / Disposal Credit Costs Source: UOB Kay Hian JOINT STOCK COMMERCIAL BANKS (bp) Q17 NPL Formation Write-off / Disposal Credit Costs Source: UOB Kay Hian NPL RATIOS 3.% 2.5% 2.% 1.5% 1.%.5% 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Large SOE banks City Commercial Banks Source: UOB Kay Hian ANALYSTS Jonathan Koh, CFA jonathankoh@uobkayhian.com Jasmine Duan jasmine.duan@uobkayhian.com.hk Joint Stock Commercial Banks Rural Commercial Banks PEER COMPARISON Target Market PE P/B P/PPOP Yield ROE Company Ticker Rec 17 May 17 Price Cap FY 217F 218F 217F 218F 217F 218F 217F 218F 217F 218F (HK$) (HK$) (US$m) (x) (x) (x) (x) (x) (x) (%) (%) (%) (%) ABC 1288 HK HOLD ,988 12/ BOC 3988 HK HOLD ,59 12/ BoCom 3328 HK SELL ,459 12/ CCB 939 HK BUY ,387 12/ Minsheng 1988 HK HOLD ,637 12/ CMB 3968 HK BUY ,111 12/ ICBC 1398 HK BUY ,225 12/ Source: Bloomberg, UOB Kay Hian 2

3 DES to accelerate in 217. The total size of Debt-to-Equity Swap (DES) contracts signed was at Rmb767.2b as of Apr 17. The size of DES contracts was Rmb43b in Feb 17, based on comments by the China Banking Regulatory Commission (CBRC) Chairman Guo Shuqing, which indicates that DES contract signings have accelerated over the past two months. DES helps highly-geared companies deleverage and restructure. As of Apr 17, the size of DES contracts completed was only Rmb59.2b, or 8% of total DES contracts. DES contracts typically have maturity of about five years. CCB was the most active and has facilitated more than Rmb3b of DES contracts. ABC and ICBC have also set up asset management companies for DES-related businesses in Apr 17. NPL securitisation programme remains small. China had launched an NPL securitisation trail programme in 216 which granted six large SOE banks total quota of Rmb5b. The six banks issued 14 NPL asset-backed securities last year, which cleared NPL principal and interest totalling Rmb51b. In Apr 17, some medium-sized banks, such as Minsheng, Everbright, CITIC, Industrial Bank and Beijing Bank, were also included in the trial list but the total quota remains unchanged at Rmb5b. ACTION Asset quality has largely stabilised. As of 1Q17, NPL ratio of the banking industry was at 1.74%, flat yoy. We note that asset quality trend of SOE banks has improved, while JSCBs and rural commercial banks saw continued deterioration. Maintain MARKET WEIGHT. Banks benefit from the on-going stabilisation in asset quality and NIM. However, the PBOC focuses on controlling and preventing financial risks and has hence tightened liquidity. Large SOE banks are less affected due to their strong deposit franchise, diversified businesses and lean cost structure. We believe large banks also have better risk culture and more stringent scrutiny on NPLs. Our top picks are large SOE banks CCB and ICBC, followed by CMB. SELL BoCom. We also believe some of the weaker JSCBs are potential SELL candidates. China Construction Bank (BUY/HK$6.38/Target: HK$7.28). Management was conservative and set aside a large provision of Rmb35.3b, despite NPL formation having moderated from 76bp in 216 to 52bp in 1Q17, to improve loan loss coverage by 9.2ppt to 159.5%. Our target price of HK$7.28 is based on 1.18x 217F P/B, derived from the Gordon Growth Model (ROE: 14.3%, COE: 12.6%, Growth: 3%). Industrial & Commercial Bank of China (BUY/HK$5.13/Target: HK$5.95). ICBC achieved a significant 19.5% reduction in operating expense in 1Q17, which allows the bank to jack up provisions by 36% yoy to 94.5bp, helping to improve loan loss coverage by 4.8ppt qoq to 141.5%. ICBC could achieve rapid improvement in loan loss coverage, especially if asset quality continues to remain stable. Our target price of HK$5.95 is based on 1.1x 217F P/B, derived from the Gordon Growth Model (ROE: 13.6%, COE: 12.6% and Growth: 3%). China Merchants Bank (BUY/HK$21.5/Target: HK$22.55). CMB put in provisions of 26.9bp vs NPL formations of just 5.7bp in 1Q17. Thus, loan loss coverage improved by a hefty 28.7ppt to 28.7%. Its earnings growth was also the highest among peers at 8.9% yoy. NPL FORMATION LARGE SOE BANKS (bp) Q17 ICBC CCB ABC BOC BoCom PSBC Source: Respective banks, UOB Kay Hian NPL FORMATION JSCBS (bp) Q17 Industrial Bank Citic Bank CMB SPDB Minsheng Bank Everbright Bank Source: Respective banks, UOB Kay Hian WRITE-OFF/ DISPOSAL LARGE SOE BANKS (bp) Q17 ICBC CCB ABC BOC BoCom PSBC Source: Respective banks, UOB Kay Hian WRITE-OFF / DISPOSAL JSCBS (bp) Q17 Industrial Bank Citic Bank CMB SPDB Minsheng Bank Everbright Bank Source: Respective banks, UOB Kay Hian Our target price of HK$22.55 is based on 1.42x 217F P/B, derived from the Gordon Growth Model (ROE: 15.8%, COE: 12.6% and Growth: 5%). 3

4 Bank of Communications (SELL/HK$5.91/Target: HK$5.75) BoCom s net borrowings from the interbank market accounted for 18% of total assets as of Mar 17. Thus, BoCom suffered severe NIM compression of 21bp qoq to 1.57% due to higher SHIBOR. NPLs/9 days overdue loans is low at 71.9%. BoCom s ROE remains unattractive at 1.5%. Our target price for BoCom of HK$5.75 is based on.72x 217F P/B derived from the Gordon Growth Model (ROE: 1.5%, COE: 13.4% and Growth: 3.%). SECTOR CATALYSTS Stabilisation in asset quality (slowdown in formation of new NPLs) and NIM. Regulators are focused on controlling and preventing financial risks. The clamp-down on funding from the interbank market and rampant sales of WMPs would result in slower growth for smaller banks. Investors are likely to give greater weightage to the big-4 SOE banks, as they are more resilient. ASSUMPTION CHANGES We maintain our existing earnings forecasts. RISKS Banks experience moderation in earnings growth as the authorities control expansion in broad credit, sale of WMPs and interbank activities. 4

5 COMPANY UPDATE The United Labs (3933 HK) Third-generation Insulin: Undeveloped Blue Ocean Among the 114m diabetes patients in China, only 25.8% receive drug treatments while over 5% of treated patients are still using old-generation insulin which has already been eliminated in the US. Riding on the launch of insulin glargine in January and the upcoming submission of application for insulin aspart production, we expect TUL to lead the fast-growing domestic third-generation insulin market. Maintain BUY with a higher target price of HK$6.32. WHAT S NEW China s insulin market highly underpenetrated. There are about 114m diabetics in China, which is ~4 times the size of the diabetic patient base in the US (28.9m). However, the market size of insulin products only amounts to ~Rmb19b in China, compared with Rmb17b in the US. China s much smaller market size is mainly due to: a) late treatment starts; b) high proportion of second-generation insulin in the market (37% in China vs 15% globally); and c) low diagnosis/treatment ratio. This represents great market penetration potential for insulin drugs in China. CHINA S DIABETIC PATIENT BASE IS SIGNIFICANTLY LARGER THAN THE US (m) No. of diabetes patients 114. China 28.9 Source: Chinese Journal of Diabetes Mellitus, UOB Kay Hian US HOWEVER, THE INSULIN MARKET SIZE IS MUCH SMALLER (Rmbb) ~19 China Source: Menet, UOB Kay Hian Insulin market size Third-generation insulin is replacing second-generation ones. Long-acting thirdgeneration insulin only needs a one-time injection per day. This is more convenient than second-generation insulin products, which require 3-4 times injections every day. Rapidacting third-generation insulin can function in a very short time after administration (15 minutes). Since 21, total global market size of second-generation insulin has remained mostly unchanged while the third-generation category grew from US$11.7b in 21 to US$18.2b in 215. Click here for Blue Top dated 17 May 17. KEY FINANCIALS Year to 31 Dec (HK$m) F 218F 219F Net turnover 7, ,62.6 7, ,64. 8,449.3 EBITDA 1, ,21.4 1,61.6 1, ,76.1 Operating profit Net profit (rep./act.) 11.4 (311.3) Net profit (adj.) 397. (24.7) EPS (HK$ cent) 24.4 (1.5) PE (x) 19.5 n.m P/B (x) EV/EBITDA (x) Dividend yield (%)..... Net margin (%) 1.4 (4.4) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) 1.6 n.a Consensus net profit UOBKH/Consensus (x) Source: TUL, Bloomberg, UOB Kay Hian 17 US BUY (Maintained) Share Price HK$4.75 Target Price HK$6.32 Upside +33.1% (Previous TP HK$5.9) COMPANY DESCRIPTION Produces antibiotics finished products, bulk medicine and intermediate products and sells them both domestically and overseas. As one of the major manufacturers of antibiotics in China, TUL has six production bases located in Hong Kong, Zhongshan, Kaiping, STOCK DATA GICS sector Health Care Bloomberg ticker: 3933 HK Shares issued (m): 1,626.9 Market cap (HK$m): 7,727.7 Market cap (US$m): mth avg daily t'over (US$m): 3.2 Price Performance (%) 52-week high/low HK$5.51/HK$2.94 1mth 3mth 6mth 1yr YTD (7.) (2.9) (1.) Major Shareholders % Heren Far East Ltd FY17 NAV/Share (HK$) 4.39 FY17 Net Debt/Share (HK$) 1.8 PRICE CHART (lcy) Volume (m) THE UNITED LABORATORIES INTE THE UNITED LABORATORIES INTE/HSI INDEX (%) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Alex Jiang Lei alex.jiang@uobkayhian.com.hk Fu Jun Wei ext 817 jwfu@uobkayhian.com

6 In China, due to the lack of insurance coverage and low patient awareness, thirdgeneration insulin is highly underpenetrated. Currently, the proportion of secondgeneration products still amounts to 37% in China while it only accounts for a 15% market share globally. The third-generation insulin market in China is expanding rapidly. Based on sample hospital data, sales of insulin glargine increased from Rmb28m in 212 to Rmb54m in 216. However, revenue of Isophane Protamine Insulin, a kind of secondgeneration insulin product, has been on a downtrend since 212. STOCK IMPACT Expect TUL to lead third-generation insulin market. The United Labs (TUL) is becoming a leading domestic player in the third-generation insulin market (insulin glargine + aspart). The company obtained approval for insulin glargine in Jan 17 and targets to apply for production approval for insulin aspart within 1-2 months. Clinical trial for insulin detemir is also ongoing. a) Insulin glargine: Insulin glargine is a long-acting insulin that starts to work several hours after injection and continues to work evenly for a total of 24 hours. Currently, the insulin glargine market in China is dominated by Sanofi with a 78% market share and another 22% is taken by Gan&Lee. We expect the market size of TUL s insulin glargine to reach Rmb1.8b in 221 (taking 15% market share). According to management, TUL has won 4 provincial tenders for insulin glargine: Fujian, Henan, Heilongjiang and Chongqing. Moreover, the 2Q17 Guangdong tender will be put up for bidding soon and the company stands a chance of entering the Guangdong market. b) Insulin aspart: Insulin aspart is a fast-acting insulin that starts to work about 15 minutes after injection, peaks in about an hour and continues to work for the next 2 to 4 hours. For insulin aspart, there was only one manufacturer (Novo Nordisk) in China in 216. Gan&Lee applied for production approval in Dec 14. However, Gan&Lee s potential product was included into the clinical trial data self-check list. TUL targets to submit production application in the next 1-2 months in 217. Considering that the CFDA has been accelerating approvals, we expect TUL s product to be marketed in late-18/early-19. TUL stands a chance of becoming the first domestic manufacturer to participate in the Rmb4.2b insulin aspart market and we expect TUL to hold a 2% market share in 221. Maintain target for second-generation insulin. In 1Q17, the company had won the tender in the Jiangsu province for its second-generation insulin products. Management guided that its second-generation insulin product sales grew ~3% yoy in 1Q17 and maintains previous sales volume target of 15m vials in 217. EBIT of bulk medicine and intermediate products businesses to turn around in 1H17. Although TUL recently reduced the ex-factory price of 6-APA from Rmb175/kg to Rmb16/kg, the average price is still much higher than the price of Rmb145/kg in 4Q16. Moreover, production utilisation rates for 6-APA and amoxicillin have increased to about 75% and 7% respectively (1H16: 7.5% and 46.5%). We expect the two segments to see a strong turnaround with a collective HK$123.6m EBIT in 1H17. VALUATION/RECOMMENDATION Maintain BUY with a higher target price of HK$6.32. Our target price is made up of two parts: a) current business which is valued at HK$3.71, based on 16.x 217F PE, which is at a ~15% discount to the sector average due to price fluctuations at its intermediate products and bulk medicine businesses, and b) newly-launched insulin glargine which is valued at HK$2.61 based on DCF. SOTP VALUATION 217F 217F TP Valuation EPS PE (HK$) Method Existing business x 3.71 PE Insulin glargine 2.61 NPV Total 6.32 Source: UOB Kay Hian 3RD-GENERATION INSULIN IS UNDER- PENETRATED IN CHINA China (~Rmb19b) 2nd generation 37% 3rdgeneration 63% Source: Menet, UOB Kay Hian Global (~Rmb 25b) 2nd generation 15% 3rdgeneration 85% CHINA SALES OF THREE INSULIN PRODUCTS (SAMPLE HOSPITAL DATA) (Rmbm) Source: Menet Insulin glargine ( 甘精胰岛素 ) Insulin aspart ( 门冬胰岛素 ) Isophane Protamine Insulin ( 中效型人胰岛素 ) CHINA INSULIN GLARGINE MARKET SIZE & COMPETITION LANDSCAPE Gan&Lee 22% 216 (~Rmb5.1b) Sanofi 78% Source: Xianda, UOB Kay Hian Tonghua Dongbao 1% TUL 15% Gan&Lee 2% 221F (~Rmb12b) Others 5% Sanofi 5% CHINA INSULIN ASPART MARKET SIZE & COMPETITION LANDSCAPE 216 (~Rmb4.2b) Novo Nordisk 1% Source: Xianda, UOB Kay Hian Tonghua Dongbao 1% Gan&Lee 16% 221F (~Rmb 8.4b) Others 4% TUL 2% Novo Nordisk 5% 6

7 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (HK$m) F 218F 219F Year to 31 Dec (HK$m) F 218F 219F Net turnover 7,62.6 7, ,64. 8,449.3 Fixed assets 8,21.3 9,66.6 9, ,837.4 EBITDA 1,21.4 1,61.6 1, ,76.1 Other LT assets 2,66. 1, , ,982.5 Deprec. & amort Cash/ST investment 1, , , ,655.7 EBIT Other current assets 4, ,627. 4, ,971.1 Total other non-operating income Total assets 16, , , ,446.6 Net interest income/(expense) (249.3) (22.9) (213.7) (182.8) ST debt 3, ,8. 3,8. 3,8. Pre-tax profit Other current liabilities 3, , , ,152.1 Tax (156.7) (29.3) (225.) (255.1) LT debt 1,15.3 1,15.3 1,15.3 1,15.3 Minorities.... Other LT liabilities 2, ,41.8 2,41.8 2,41.8 Net profit (311.3) Shareholders' equity 5, , ,87.4 8,347.4 Net profit (adj.) (24.7) Minority interest.... Total liabilities & equity 16, , , ,446.6 CASH FLOW KEY METRICS Year to 31 Dec (HK$m) F 218F 219F Year to 31 Dec (%) F 218F 219F Operating 1,29.8 1, , ,622.6 Profitability Pre-tax profit (154.6) EBITDA margin Tax (156.7) (29.3) (225.) (255.1) Pre-tax margin Deprec. & amort Net margin (4.4) Working capital changes (511.) (9.1) (9.3) ROA n.a Non-cash items 49. (69.8).. ROE n.a Other operating cashflows (69.3) Investing (636.) (433.2) (42.3) (389.) Growth Capex (growth) (788.7) (51.) (51.) (5.5) Turnover (8.2) Investments EBITDA (21.3) Proceeds from sale of assets.... Pre-tax profit (57.2) Others (68.2) Net profit (382.1) n.a Financing (94.1) (12.4) (294.3) (294.3) Net profit (adj.) (16.2) n.a Dividend payments.... EPS (16.2) n.a Issue of shares.... Proceeds from borrowings Leverage Loan repayment.... Debt to total capital Others/interest paid (42.4) (288.7) (294.3) (294.3) Debt to equity Net cash inflow (outflow) Net debt/(cash) to equity Beginning cash & cash equivalent 1, , , ,716.4 Interest cover (x) Changes due to forex impact (69.1).. Ending cash & cash equivalent 1, , , ,

8 COMPANY UPDATE Tiga Pilar Sejahtera Food (AISA IJ) To Replicate Success Of Sales Force Expansion In Branded Rice Segment AISA should be able to generate 37% yoy core net income growth in 217 on the back of: a) success from growing its branded rice segment which could translate into higher margins and profits, as AISA could replicate the revenue growth success brought about by sales force expansion in its Bihunku segment in its Maknyuss branded rice segment; b) continuous sales growth from its consumer division; and c) distribution point expansion. Maintain BUY. Target price: Rp2,5. WHAT S NEW A new factory for Bihunku. In 216, sales of Tiga Pilar Sejahtera Food s (AISA) Bihunku (instant vermicelli) product grew 13% yoy. Bihunku managed to emerge a market leader with the expansion of market share from 29.7% in 215 to 6.2% in 216. AISA has also recruited 4 exclusive salesmen focused on selling its Bihunku product and other instant noodle products. The stronger sales force resulted in 13% sales growth in the Bihunku product segment and 61% overall sales growth in the instant noodle segment. Branded rice s sales proportion to rise from 25% to 85%. Branded rice formed 25% of AISA s rice sales in 216. AISA plans to raise the proportion to 85% in 217 as it has recruited 6 salesmen to exclusively push its branded rice. If AISA is able to replicate the earlier sucess it saw with Bihunku, the growth of the branded rice segment will benefit AISA in terms of margin expansion and a higher profit. Branded rice brings in a 24% gross margin on average while bulk rice (wholesale rice) sees a gross margin of 11%. Absence of one-off pre-tax gains from 216. In 216, AISA recorded Rp593b in net income, up 83.5% yoy. This however, included one-off and forex gains totalling Rp254.3b before tax. Adjusting for these, core net income in 216 was at Rp389.9b, up 22.3% yoy, 37% core net income growth expected in 217. Adjusting for non-recurring gains in 216, we believe that 217 s core net income could hit Rp534b, up 36.9% yoy. The strong growth in earnings is hinged on the continuous growth in consumer product sales, margin expansion in rice and expansion of the distribution channels. BUY (Maintained) Share Price Target Price Rp2,5 Rp2,5 Upside +22.% (Previous TP Rp2,55) COMPANY DESCRIPTION Tiga Pilar Sejahtera Food produces and distributes various if noodles such as dried noodle, instant noodle and snack noodle. The company also engages its operation with rice milling and distribution STOCK DATA GICS sector Consumer Staples Bloomberg ticker: AISA IJ Shares issued (m): 3,218.6 Market cap (Rpb): 6,598.1 Market cap (US$m): mth avg daily t'over (US$m):.5 Price Performance (%) 52-week high/low Rp2,36/Rp1,285 1mth 3mth 6mth 1yr YTD 2. (6.1) Major Shareholders % Tiga Pilar Corporation 16.1 FY16 NAV/Share (Rp) 1,381 FY16 Net Debt/Share (Rp) 1,17 PRICE CHART 25 (lcy) TIGA PILAR SEJAHTERA FOOD TIGA PILAR SEJAHTERA FOOD/JCI INDEX (%) 17 KEY FINANCIALS Year to 31 Dec (Rpb) F 218F 219F Net turnover 6,11 6,546 7,175 7,981 8,965 EBITDA 878 1,482 1,432 1,669 1,794 Operating profit 739 1,282 1,186 1,391 1,494 Net profit (rep./act.) Net profit (adj.) EPS (Rp) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) n.a Consensus net profit UOBKH/Consensus (x) Source: AISA, Bloomberg, UOB Kay Hian Volume (m) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Stevanus Juanda stevanusjuanda@uobkayhian.com

9 STOCK IMPACT 216 net income significantly above our expectation. AISA reported a 216 net income of Rp593b, up 84% yoy. Its reported net income is higher than UOBKH's expectation of Rp557b and significantly higher than the Rp453b expected by the Street. Its 4Q16 net income came in at Rp248b, up 262% yoy and 179% qoq. Core net income came in at Rp389.9b, up 22.3% yoy, Overall a strong performance. Food manufacturing. In 216, the food segment turned around from a Rp17b loss to a Rp335b profit as sales rose by 3% yoy and on exceptional operational management which was evidenced by operating profit margin s rise from 9.5% to 19.5% in 216. In 4Q16, food manufacturing turned around from a Rp246b loss to a Rp142b profit as operating profit swung from a Rp27b loss to a Rp182b profit. Rice. With the push towards branded rice, the rice business 216 gross margin rose from 14.2% in 215 to 19.4% and net income rose from Rp17b to Rp43b. We foresee a higher gross margin in 217 as contribution from the branded rice business has grown from 25% in 216 to 5% ytd. (Note: Company targets to have rice business account for 85% of sales in 217) In 4Q16, the rice business rose from a Rp33b profit to a Rp24b profit as gross margin improved from 16.4% to 19.1%. 4Q16 operating profit expanded by 127% yoy and net income grew by 515% yoy. SEGMENTAL ANALYSIS Source: AISA, UOB Kay Hiian EARNINGS REVISION/RISK Reduce earnings forecasts. We reduce our 217 and 218 net income forecasts by 4.9% and 1.3% respectively. Our earnings forecasts are in line with consensus forecasts as consensus has raised its earnings forecasts to our levels. REVISED FORECASTS New Original Diff (%) Consn Diff (%) (Rpb) 217F 218F 217F 218F 217F 218F 217F 218F 217F 218F Sales 7,175 7,981 7,913 9,268 (9.3) (13.9) 7,652 8,643 (6.2) (7.7) Gross Profit 1,92 2,29 1,926 2,23 (.3) (.9) 1,924 2,256 (.2) (2.1) Op Income 1,186 1,391 1,239 1,424 (4.2) (2.4) 1,142 1, Net Income (4.9) (1.3) (.3) (1.1) Source: INDF, UOB Kay Hian VALUATION/RECOMMENDATION Maintain BUY and target price of Rp2,5, pegged at 15.1x 217F PE, implying a more than 2% upside. We believe the potential 37% core earnings growth in 217 could lead to AISA s outperformance. 9

10 PROFIT & LOSS Year to 31 Dec (Rpb) F 218F 219F Net turnover 6,546 7,175 7,981 8,965 EBITDA 1,482 1,432 1,669 1,794 Deprec. & amort EBIT 1,282 1,186 1,391 1,494 Total other non-operating income.... Net interest income/(expense) (383) (49) (419) (419) Pre-tax profit ,74 Tax (179) (171) (214) (236) Minorities (126) (73) (91) (11) Net profit Net profit (adj.) BALANCE SHEET Year to 31 Dec (Rpb) F 218F 219F Fixed assets 2,587 2,968 3,73 3,22 Other LT assets Cash/ST investment ,142 1,821 Other current assets 5,653 5,441 5,321 5,678 Total assets 9,255 9,942 1,413 11,67 ST debt 1,96 2,172 2,173 2,173 Other current liabilities LT debt 2,277 1,924 1,924 1,925 Other LT liabilities Shareholders' equity 3,943 4,446 5,61 5,742 Minority interest Total liabilities & equity 9,255 9,942 1,413 11,67 CASH FLOW Year to 31 Dec (Rpb) F 218F 219F Operating 464 1,35 1, Pre-tax profit ,74 Tax (179) (171) (214) (236) Deprec. & amort Working capital changes (1,7) (264) Other operating cashflows 564 (46) 64 (41) Investing (1,158) (676) (552) (456) Capex (growth) (54) (684) (383) (429) Others (618) 8.5 (169) (27) Financing (39) 33 Dividend payments (46) (41) (51) (57) Issue of shares (7.2)... Proceeds from borrowings 136 (141).9.9 Others/interest paid (258) 359 Net cash inflow (outflow) (292) Beginning cash & cash equivalent ,142 Changes due to forex impact (.2)... Ending cash & cash equivalent ,142 1,821 KEY METRICS Year to 31 Dec (%) F 218F 219F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA 68.8 (3.4) Pre-tax profit 79.5 (13.4) Net profit 83.5 (1.) Net profit (adj.) 83.5 (1.) EPS 83.5 (1.) Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

11 COMPANY RESULTS Carlsberg Brewery Malaysia (CAB MK) 1Q17: Strong Showing From Malaysia And Singapore Operations CAB s 1Q17 results were within expectations. Strong performances from Malaysia and Singapore were offset by bigger losses from associate Lion Brewery and a higher effective tax rate, resulting in 1Q17 core net profit growing only 3% yoy. We expect a positive contribution from Lion Brewery only in 2H17. We maintain our view that MLM sales volume will be relatively weak or flattish in 217. Maintain HOLD. Our higher target price of RM14. implies 19.3x 217F PE. Entry price: RM13.. 1Q17 RESULTS Year to 31 Dec qoq yoy (RMm) 1Q17 % chg % chg Remarks Revenue Malaysia Mainly driven by higher ASP. Singapore Driven by higher sales volume. Core EBIT Malaysia Both arms benefitted from Singapore strategic cost management. PBT Core net Profit In line with expectations. Margins (%) (%) +/- ppt +/- ppt Core EBIT margin 18.9 (.5).8 Malaysia 2.2 (1.9) 1.2 Singapore PBT margin 17.5 (1.2).4 Core net profit (.9) Source: CAB, UOB Kay Hian RESULTS 1Q17 results within expectations. Carlsberg Brewery Malaysia s (CAB) core net profit of RM67.2m represents 31% and 29% of our and consensus 217 forecasts respectively. This is after excluding RM148, forex gains (1Q16: RM2.3m forex losses). In 1Q16, net profit accounted for 32% of full-year earnings. Sales rose 1.3% yoy on higher sales from both Malaysia and Singapore arms, driven by solid Chinese New Year festive sales and effective portfolio premiumisation. EBIT grew by a larger 14.9% yoy due to strategic cost management. However, the bigger losses at Lion Brewery (25%-owned) and the higher effective tax rate (after excluding associate contribution) of 23.7% (1Q16: 18.2%) led to bottom line growing only 3% yoy. HOLD (Maintained) Share Price Target Price RM14.8 RM14. Upside -5.4% (Previous TP RM13.5) COMPANY DESCRIPTION Carlsberg manufactures and distributes beer. Its key brands are Carlsberg Green Label. STOCK DATA GICS sector Consumer Staples Bloomberg ticker: CAB MK Shares issued (m): 37.6 Market cap (RMm): 4,552.8 Market cap (US$m): 1,53. 3-mth avg daily t'over (US$m):.5 Price Performance (%) 52-week high/low RM15.3/RM mth 3mth 6mth 1yr YTD (1.3) Major Shareholders % Carlsberg A/S 51. FY17 NAV/Share (RM) 1.5 FY17 Net Debt/Share (RM).3 PRICE CHART (lcy) CARLSBERG BREWERY MALAYSIA B CARLSBERG BREWERY MALAYSIA B/FBMKLCI INDEX (%) KEY FINANCIALS Year to 31 Dec (RMm) F 218F 219F Net turnover 1,66 1,679 1,868 1,931 1,988 EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (sen) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (2.8) (.9) 2.7 (2.7) (6.1) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: CAB, Bloomberg, UOB Kay Hian Volume (m) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Vincent Khoo, CFA vincentkhoo@uobkayhian.com Fong Kah Yan kahyan@uobkayhian.com 9 11

12 Earnings lift from higher ASP at Malaysia arm. Although its Malaysia operation recorded higher yoy sales volume (+6.7% yoy), growth was mainly due to higher ASP. There were two rounds of price increases in 216 (in March and July). EBIT rose 13.5% yoy due to strategic cost management, which we believe came from the cut in lowyielding advertising and promotions (A&P). Strong performance from Singapore operation. Sales rose 18.7% yoy on higher sales volume. EBIT rose 31.3% yoy due to strategic cost management, which we believe came from the in low-yielding A&P. Lion Brewery to get better in 2H17. Lion Brewery was deeper in the red with a net loss of RM5.9m in 1Q17 (4Q16: RM3.2m loss, 1Q16: RM1.2m loss). This was mainly due to a RM47.4m impairment loss on the Miller Brewery Ltd brands in Sri Lanka (the impairment test was carried out due to impact from the flood and the steep increase in excise duty in late-15), and impact from the flood that hit Lion Brewery last year as it is still in the midst of ramping up production after commencing operation on 1 Nov 16. These negative factors were partially mitigated by higher deferred tax assets attributed to its business losses and write-back of fixed assets impacted by the flood. We expect positive contribution from Lion Brewery only in 2H17. STOCK IMPACT Breweries going soft in 217; near-term price hikes unlikely. Notwithstanding the strong yoy sales in 1Q17 mainly due to higher ASP, we expect sales volumes in its maltliquor market (MLM) to be relatively weak or flattish in 217 on the back of still-weak consumer sentiment. Hence, we believe brewers are highly unlikely to hike prices after the expiry of the Anti-Profiteering Act. EARNINGS OVERVIEW Year to 31 Dec EPS (sen) yoy % chg 217F F F Source: UOB Kay Hian ESTIMATED 216 MLM MARKET SHARE Carlsberg 38% Source: UOB Kay Hian CAB S 12-MONTH FORWARD PE Guinness Anchor 62% Royal Malaysian Customs bills of demand still pending. CAB is contesting the bills of demand totaling RM56.3m from the Royal Malaysian Customs. We expect no provisions to be made in 217. EARNINGS REVISION/RISK We raise our net profit forecasts by 2.4%, 4.4% and 2.4% respectively after updating our key assumptions. VALUATION/RECOMMENDATION Maintain HOLD with a higher DCF-based target price of RM14. (from RM13.5), based on WACC of 7.4% and terminal growth of 2%, and implies 19.3x 217F PE. Although the stock has limited upside given that it is trading near its historical mean PE, we see the stock as a dividend play as F yields are decent at %. Entry price is RM13.. SHARE PRICE CATALYST Better-than-expected demand in the malt liquor market. Intensified enforcement over the ban on contraband beers. Source: CAB, UOB Kay Hian KEY ASSUMPTIONS (RMm) 217F 218F 219F Previous Sales 1,771 1,839 1,911 Malaysia 1,94 1,149 1,27 yoy % chg (.2) Singapore yoy % chg Others yoy % chg.. EBIT Malaysia Singapore Others Associate Current Sales 1,868 1,931 1,988 Malaysia 1,142 1,182 1,212 yoy % chg Singapore yoy % chg Others yoy % chg.. EBIT Malaysia Singapore Others Associate (7) 4 5 Source: UOB Kay Hian 12

13 PROFIT & LOSS Year to 31 Dec (RMm) F 218F 219F Net turnover 1,679 1,868 1,931 1,988 EBITDA Deprec. & amort EBIT Associate contributions (5) (7) 4 5 Net interest income/(expense) (5) (7) (7) (7) Pre-tax profit Tax (73) (76) (77) (81) Minorities (6) (5) (6) (6) Net profit Net profit (adj.) BALANCE SHEET Year to 31 Dec (RMm) F 218F 219F Fixed assets Other LT assets LT debt n.a. n.a. n.a. n.a. Cash/ST investment Other current assets Total assets ST debt Other current liabilities Other LT liabilities Shareholders' equity Minority interest Total liabilities & equity CASH FLOW Year to 31 Dec (RMm) F 218F 219F Operating Pre-tax profit Tax (66) (76) (77) (81) Deprec. & amort Working capital changes (2) (17) (3) (5) Other operating cashflows 5 Investing (39) (35) (35) (35) Capex (maintenance) (43) (35) (35) (35) Proceeds from sale of assets Others 4 Financing (23) (214) (221) (238) Dividend payments (22) (221) (221) (238) Proceeds from borrowings (1) 7 Loan repayment n.a. n.a. n.a. n.a. Others/interest paid (9) Net cash inflow (outflow) (14) (5) Beginning cash & cash equivalent Changes due to forex impact 1 Ending cash & cash equivalent KEY METRICS Year to 31 Dec (%) F 218F 219F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit (5.1) Net profit (adj.) (12.3) EPS (12.3) Leverage Debt to total capital Debt to equity Net debt/(cash) to equity (.9) 2.7 (2.7) (6.1) Interest cover (x)

14 COMPANY UPDATE Inari Amertron (INRI MK) Good Prospects Largely Priced In Inari s earnings growth prospects remain strong on the back of existing businesses and the addition of its latest iris scanner job. We estimate a strong earnings growth of 33% in FY18. However, we view that Inari s stretched valuation has largely priced in the earnings optimism. Share price could be sidelined in the near term, until the next catalyst emerges. Downgrade to HOLD. Target: RM2.31. Entry price: RM2.8. WHAT S NEW Making good progress in iris scanning production job. Inari Amertron (Inari) is making good progress in the production ramp-up of its iris scanners which started commercial production in mid-17. With an installed capacity of 5m units/month (1 production line) at Plant P21, Inari produced 2.8m units of iris scanner during mid-feb to March, and is currently running at maximum capacity. Targeting to install second production line by Jul 17. Management guided that the installation of its second production line for iris scanners (a duplication of first production line) would take place in Jul 17, bringing its total capacity to 1m units/month. For its third production line, Inari is looking for alternative machinery suppliers and solutions, in order to lower the existing capex of RM25m per line, and also to improve production efficiency which will be a key value add to its client. Management has targeted for third production line installation to take place sometime during Sep-Nov 17. RM5.5m for plant P13b expansion. With its floor space at plant P13 is now being fully utilised and the space of its new P21 plant being reserved for switches testing and iris scanner jobs, Inari is planning for an expansion. With a RM5.5m capex, Inari targets to add 6, sf of floor space (plant P13b) by Aug-17. The new space will cater to capacity growth for RF testing, fibre-optics chip fabrication and wafer certification (under subsidiary ISL) jobs. Targeting to add 7 units of RF testers in plant P13b. After adding 7 testers in the last two months, Inari currently has 77 RF testers. Post the expansion of plant P13b, Inari could add another 7 units of testers, bringing the total number to 84 units. We believe P13b s floor space that caters to the RF division could be filled up by 2Q-3QFY18. Utilisation rate stood at 7% in 3QFY17. HOLD (Downgraded) Share Price Target Price RM2.17 RM2.31 Upside +6.5% (Previous TP RM2.15) COMPANY DESCRIPTION Inari is the largest semiconductor company in Malaysia and a top OSAT supplier for Broadcom's Radio Frequency (RF) components. It also manufactures and assembles optoelectronics and fibre-optics related components. STOCK DATA GICS sector Information Technology Bloomberg ticker: INRI MK Shares issued (m): 1,985.7 Market cap (RMm): 4,38.9 Market cap (US$m): mth avg daily t'over (US$m): 3.6 Price Performance (%) 52-week high/low RM2.2/RM1.36 1mth 3mth 6mth 1yr YTD Major Shareholders % Insas Berhad 2.9 Employees Provident Fund 8.7 Kumpulan Wang Persaraan 6.4 FY17 NAV/Share (RM).38 FY17 Net Cash/Share (RM).8 PRICE CHART KEY FINANCIALS Year to 3 Jun (RMm) F 218F 219F Net turnover 933 1,41 1,179 1,559 1,81 EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (sen) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (43.1) (25.8) (2.4) (11.9) (1.5) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: Inari, Bloomberg, UOB Kay Hian (lcy) INARI AMERTRON BHD INARI AMERTRON BHD/FBMKLCI INDEX (%) Volume (m) 2 1 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Yeoh Bit Kun bitkun@uobkayhian.com 14

15 Expecting 3% growth from ISL. For fibre-optics chip fabrication and wafer certification jobs under its subsidiary ISL, management guided for RM6m sales in FY18. Coming from a small base, management targets for 3% revenue growth post the full expansion of capacity in plant P13b. Ramping up capacity for switch testing jobs. Inari is progressively ramping up its capacity for switch testing jobs (for data centre application), with 24 units of testers installed in P21 plant currently (March: 17 units). Testing capacity is expected to reach 44 units by Nov 17, a slight delay from the previous guidance of mid-17. We estimate this division to contribute RM8m of revenue in FY18. STOCK IMPACT Earnings forecast remains intact despite recent ringgit strength. Despite the ringgit having strengthened 3.8% ytd to RM4.32/US$ currently, our FY18-19 earnings forecast remains intact. Risk would only emerge if the ringgit strengthened beyond our assumption of RM4.2/US$. We estimate that every 1% change in our base-case scenario of RM4.2/US$ would result in ~2% change in our FY18 net profit forecast. RF division s revenue growth expected to remain unexciting in 4QFY17. To recap, Inari reported 3QFY17 revenue of RM274m, down.4% qoq. The relatively flat revenue was due to lower contribution from the RF segment s wafer processing services, which was offset by sales growth of other divisions. As Broadcom progressively converts its RF wafer from 6-inch to 8-inch, the number of wafers processed by Inari has reduced and hence negatively impacted its revenue. This transition process is expected to persist over the next 1-2 quarters. Having said that, the incremental trend of Inari s RF testing job remains unchanged. In fact, the more complicated RF chips in its end-client s upcoming smartphone model would require more active testing than previously. All in all, we estimate 6-7% revenue growth for the RF division in FY Better cost efficiency achieved at Philippines operation. The Philippines operation, which mainly caters to lower margin legacy products, has seen margin improvement in 3QFY17 due to better cost efficiency. PAT margin improved to around 8% in 3QFY17, from 6-7% previously. We believe there is room for further margin improvement. Inari has yet to reveal the utilisation plan for its new plant, CK2 (floor space: 9,sf) in Clark Field, the Philippines, which is adjacent to its existing plant CK. Inari may revamp the layout of its operation in Paranaque and Clark Field so as to improve operational efficiency, in our view. RM12m capex for FY17. Despite Inari having only spent RM7m capex in 9MFY17, management guided full-year FY17 capex would be around RM12m. Earnings payout to remain generous. 3QFY17 s 2.2 sen DPS represents an impressive earnings payout of 85%. While we believe that this ratio is not sustainable, Inari s earnings payout could remain generous at 5-6%, given its strong operating cash flow. Prospective yield is at 3.7%/4.3% in FY18/FY19. EARNINGS REVISION/RISK We increase our FY17 net profit forecast by 3% on slight adjustments to margin assumption. We increase FY18/19 net profit forecasts by 8%/9%, mainly to reflect the addition of the second and third iris scanner production lines in FY18 and FY19, respectively. VALUATION/RECOMMENDATION Downgrade to HOLD but raise our target price to RM2.31 (previously RM2.15), pegged to 17x 218F PE. While we opine that Inari s earnings growth prospects will remain strong (CAGR of 24% in FY16-19), Inari s stretched valuation could have largely priced in the earnings optimism. Share price could remain flattish in the near term until the next catalyst emerges, such as clients activating more production lines for iris scanners, or developments in new business opportunities. Entry price is RM2.8. REVENUE BY SEGMENT (RMm) 2, 1,8 1,6 1,4 1,2 1, New Income Streams Others Amertron RF FY16 FY17F FY18F FY19F Note: New income streams include fibre optic chip fabrication and wafer certification jobs (under ISL), switch testing job (under IIS) and iris scanning component job (under IoT) Source: UOB Kay Hian NET PROFIT TREND (RMm) (%) Net Profit (LHS) 3 14 Growth (RHS) FY12 FY13 FY14 FY15 FY16 FY17FFY18FFY19F Source: UOB Kay Hian OPERATING CASH FLOW AND CAPEX (RMm) 35 Operating Cash Flow 3 Capex FY12 FY13 FY14 FY15 FY16 FY17F FY18F FY19F Source: UOB Kay Hian 15

16 PROFIT & LOSS Year to 3 Jun (RMm) F 218F 219F Net turnover 1,41 1,179 1,559 1,81 EBITDA Deprec. & amort EBIT Net interest income/(expense) (5) (3) (3) (3) Pre-tax profit Tax (6) (7) (1) (12) Minorities 1 (1) (1) (1) Net profit Net profit (adj.) BALANCE SHEET Year to 3 Jun (RMm) F 218F 219F Fixed assets Other LT assets Cash/ST investment Other current assets Total assets ,131 1,28 ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity Minority interest (3) (4) (5) (6) Total liabilities & equity ,131 1,28 CASH FLOW Year to 3 Jun (RMm) F 218F 219F Operating Pre-tax profit Tax (6) (7) (1) (12) Deprec. & amort Working capital changes (42) (13) (69) (44) Other operating cashflows 12 (4) (1) (1) Investing (173) (12) (15) (15) Capex (growth) (129) (12) (15) (15) Investments (45) Proceeds from sale of assets Others Financing (82) (145) (165) (191) Dividend payments (79) (145) (165) (191) Issue of shares 69 Proceeds from borrowings Loan repayment (33) Others/interest paid (38) Net cash inflow (outflow) (9) (26) (51) Beginning cash & cash equivalent Changes due to forex impact 2 Ending cash & cash equivalent KEY METRICS Year to 3 Jun (%) F 218F 219F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit (2.8) Net profit (adj.) EPS (3.2) Leverage Debt to total capital Debt to equity Net debt/(cash) to equity (25.8) (2.4) (11.9) (1.5) Interest cover (x)

17 COMPANY UPDATE Malaysian Resources Corporation (MRC MK) Strengthening Its War Chest In an unsurprising move, MRCB has proposed a 1-for-1 rights issue to raise RM2.16b-2.86b, mainly to: a) fund the Bukit Jalil stadium job, b) reduce borrowings, and c) for working capital. Gapurna and EPF have committed to undertake their portions (or more) of the rights. Maintain HOLD and target price of RM1.63 (ex-all: RM1.17). Entry price: RM1.4. WHAT S NEW 1-for-1 rights issue. Malaysian Resources Corporation (MRCB) is proposing a renounceable 1:1 rights issue of up to 2.857b shares. The group expects to raise RM2.17b-2.86b (see table on next page). The deal would also be sweetened with one free warrant for every five rights shares subscribed. The issue price and exercise price of the warrants would be determined later. Gapurna and EPF have committed to undertake their portions. Major shareholders - the Gapurna Group and the Employees' Provident Fund (EPF) - would subscribe in full for their entitlement of the rights and also indicated that they may apply for excess rights shares. STOCK IMPACT A well-expected move. We are not surprised by the massive rights issue, given MRCB s relatively high gearing and huge landbanking commitments. As of 4Q16, the group s borrowings stood at RM2.94b (including RM1b from Eastern Dispersal Link), which represents a net gearing ratio of about.73x. Under the maximum scenario, the group would: a) be in net cash which would allow it to further expand; and b) potentially reduce interest cost by up to RM46.7m. In active landbanking mode over last there years. The group has been in a growth mode, particularly its property development business. Over the past three years, the group made several large landbank purchases, including: a) Project MX-1 in Kwasa Damansara (RM817m), b) the 1.9-acre German Embassy land (RM26m), and c) a 53- acre land in Cyberjaya (RM27m). With the exception of the German Embassy land, payment for the remaining land purchases has yet to be fully settled. KEY FINANCIALS Year to 31 Dec (RMm) F 218F 219F Net turnover 1,697 2,48 2,118 2,25 2,48 EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (sen) PE (x) 1, P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: MRCB, Bloomberg, UOB Kay Hian HOLD (Maintained) Share Price Target Price RM1.74 RM1.63 Upside -6.3% COMPANY DESCRIPTION Property and construction company known for developing KL Sentral - an integrated development within a world class transportation hub. STOCK DATA GICS sector Industrials Bloomberg ticker: MRC MK Shares issued (m): 2,18.1 Market cap (RMm): 3,793.4 Market cap (US$m): mth avg daily t'over (US$m): 3.2 Price Performance (%) 52-week high/low RM1.78/RM1.3 1mth 3mth 6mth 1yr YTD Major Shareholders % Employees Provident Fund 38.4 Gapurna Sdn Bhd 16.7 Lembaga Tabung Haji 1.1 FY17 NAV/Share (RM) 1.83 FY17 Net Debt/Share (RM) 1.43 PRICE CHART (lcy) Volume (m) MALAYSIAN RESOURCES CORP BHD MALAYSIAN RESOURCES CORP BHD/FBMKLCI INDEX (%) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Ridhwan Effendy ridhwaneffendy@uobkayhian.com 17

18 Building its war chest for Bandar Malaysia? Recall that in Jan 17, MRCB signed a memorandum of understanding with the owners of Bandar Malaysia for MRCB to potentially acquire or develop the transportation hub for the mega project. Based on available information, some 6 acres of land within the 486-acre Bandar Malaysia project has been earmarked for the development of an integrated transportation terminal. Assuming a RM2,psf selling price for the land, the 6-acre parcel of land could be worth a whopping RM5.2b. EARNINGS REVISION/RISK None. Key risks include: a) rising interest rates, b) tighter lending policies by banks, and c) rising cost of raw materials leading to margin erosion. VALUATION/RECOMMENDATION Maintain HOLD and target price of RM1.63, based on a 25% discount to our RNAV/share of RM2.21. Our target price implies 2.8x 218F PE, which is pegged to its long-term average. It is worth noting that MRCB s PE trading valuations stretched to as high as 46x PE and 34x during the 28 and 213 general elections. Upon completion of the fund-raising exercise, our ex-all target price is RM1.17. SHARE PRICE CATALYST Positive newsflow on the Bandar Malaysia landbank. UTILISATION OF RIGHTS ISSUE PROCEEDS Advances to a subsidiary to finance the Privatisation^ Minimum Maximum Timeframe for Scenario Scenario utilisation* (RMm) Within 6 months Repayment of borrowings Within 6 months Property development activities and/or Within 24 months construction projects General working capital Within 12 months Estimated expenses in relation to the Within 6 months proposed rights issue Total 2, ,856.7 * From the date of completion of the proposed rights issue ^ Refurbishment and upgrading of facilities at the National Sports Complex in Bukit Jalil Source: MRCB ENLARGED TOTAL ISSUED SHARE CAPITAL Minimum Scenario Maximum Scenario (No. of shares) Total issued share capital as at Last Practicable Date 2,172,849,71 2,172,849,71 Upon full exercise of outstanding ESOS Options 17,35,776 Upon full exercise of outstanding Warrants A 576,519,12 2,172,849,71 2,856,719,498 To be issued pursuant to the proposed rights issue 2,172,849,71 2,856,719,498 Enlarged total issued share capital 4,345,699,42 5,713,438,996 Source: MRCB RNAV (RMm) Property 2,196.9 Construction 819. DCF of LRT3 PDP fees Investment Properties 1,536.6 Concession 1,549.3 Net Debt (2,215.) QCT 33% stake Total RNAV 4,588.8 Share base (m) 2,19. RNAV/share 2.18 Discount 25% Target Price (RM) 1.63 Source: UOB Kay Hian PROCEEDS RAISED (INCLUDING WARRANTS) Gross proceeds to be raised Minimum Scenario (RMm) Maximum Scenario (RMm) Upon completion of proposed 2, ,856.7 rights issue Upon full exercise of the rights warrants Total 2, ,77.9 Source: MRCB 18

19 PROFIT & LOSS Year to 31 Dec (RMm) F 218F 219F Net turnover 2,48 2,118 2,25 2,48 EBITDA Deprec. & amort EBIT Total other non-operating income (2) (26) (26) (26) Associate contributions Net interest income/(expense) (152) (15) (152) (153) Pre-tax profit Tax (74) (4) (44) (47) Minorities (1) (1) (1) (1) Net profit Net profit (adj.) BALANCE SHEET Year to 31 Dec (RMm) F 218F 219F Fixed assets Other LT assets 4,149 4,237 4,33 4,427 Cash/ST investment Other current assets 2,443 2,332 2,429 2,545 Total assets 7,752 7,66 7,761 7,971 ST debt Other current liabilities 1,629 1,283 1,364 1,459 LT debt 2,149 2,149 2,149 2,149 Other LT liabilities Shareholders' equity 2,926 3,26 3,14 3,264 Minority interest Total liabilities & equity 7,752 7,66 7,761 7,971 CASH FLOW Year to 31 Dec (RMm) F 218F 219F Operating (141) Pre-tax profit Tax (9) (4) (44) (47) Deprec. & amort. (2) (26) (26) (26) Associates (11) Working capital changes Other operating cashflows (353) (164) (164) (164) Investing 643 (3) (1) (1) Capex (growth) (3) (1) (1) Investments (11) Proceeds from sale of assets Others 744 Financing (248) (167) (167) (167) Dividend payments (77) (24) (24) (24) Issue of shares 42 Proceeds from borrowings (431) Loan repayment n.a. n.a. n.a. n.a. Others/interest paid (142) (142) (142) (142) Net cash inflow (outflow) (34) (3) Beginning cash & cash equivalent Changes due to forex impact 129 Ending cash & cash equivalent KEY METRICS Year to 31 Dec (%) F 218F 219F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover 41.9 (12.1) EBITDA (2.2) (36.6) Pre-tax profit. (55.2) Net profit (19.) (57.7) Net profit (adj.) 4, EPS 4, Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

20 SECTOR UPDATE Plantation Singapore 1Q17 Results Review: Weaker qoq On Seasonality FR s and WIL s 1Q17 results were above expectations, while BAL s results were below estimates and GGR s were in line. Overall sector performance was weaker qoq due to lower production on seasonality, but stronger yoy on a production recovery and strong CPO prices. We expect companies under our coverage to report uneven earnings growth in 2Q17. However, BAL is likely to outperform its peers in 2Q17 on a strong production recovery and lower costs. Maintain OVERWEIGHT. WHAT S NEW Mixed 1Q17 results. All the companies under our coverage except Golden Agri (GGR) registered weaker results qoq for 1Q17 due to lower production on seasonality but this was partly offset by higher CPO prices. First Resources (FR) and Wilmar International s results came in above expectation mainly due to higher-than-expected CPO sales volume and palm kernel prices for the former, while stronger-than-expected contribution from the oilseeds and grains division boosted the performance of the latter s. On the flipside, Bumitama (BAL) registered weaker-than-expected results in 1Q17 mainly due to the frontloaded fertiliser costs. Meanwhile, GGR s results were within expectations. Mixed 2Q17 production outlook. During recent briefings, companies under our coverage guided for differing production outlooks for 2Q17. BAL and WIL are expecting production to improve qoq on the back of a yield recovery, while FR and GGR indicate that production could be weaker qoq mainly due to the 2-24 months of lagged impact from the severe drought in 215. We reckon the discrepancy in production outlook could be due to the difference in severity and timing of dryness as well as the age profile of trees. We understand that young trees tend to recover faster than the old trees. Moreover, North and South Sumatra, Southern part of West Kalimantan, East Kalimantan experienced more severe and longer droughts compared to other regions. All in all, we are expecting Indonesia s production pattern to be similar to 216 s whereby production could be flat or slightly weaker qoq in 2Q17, but significantly higher yoy on the back of a yield recovery. Expect stable CPO prices in 2Q17. Average Dumai/Belawan CPO prices for 1 Apr 17 to 16 Mar 17 was at US$676/tonne vs 1Q17 s average of US$739/tonne and 2Q16 s average of US$681/tonne. We are expecting CPO prices to trade in the range of RM2,4-2,7/tonne in 2Q17 on the back of a potential slowdown in production recovery and better demand from the Middle East and some Africa countries for the preparation of Hari Raya in Jun 17. However, CPO prices are expected to further weaken in 2H17 in the event of palm oil supply outweighing demand. ACTION Maintain OVERWEIGHT. We expect CPO prices to stay firm in 1H17 and to weaken in 2H17 when production recovers and inventory starts to pile up. We forecast CPO prices would average RM2,6/tonne for 217 (216: RM2,653) and RM2,5/tonne for 218. We are reviewing our sector weighting on the back of: a) a likely increase in palm oil supply in 2H17 on the back of a production recovery, b) demand being weaker than expected on less demand from Indonesia s biodiesel blending and stagnant demand from key importing countries such as China and India, and c) anticipation of ample soybean supply from the US. OVERWEIGHT (Maintained) TOP PICKS Share Price (S$) Target Price (S$) Company Rec Bumitama Agri BUY First Resources BUY Source: Bloomberg, UOB Kay Hian INDONESIA DUMAI/BELAWAN CPO PRICE (US$/tonne) Indonesia Dumai/Belaw an CPO Price 9 av erage: av erage: 8 av erage: av erage: av erage: av erage: av erage: av erage: av erage: US$631/t US$614/t US$525/t US$512/t US$593/t US$681/ US$682/t US$78/t US$739/t 7 av erage: av erage: 6 US$484/t US$462/t av erage: av erage: 5 US$631/t US$614/t av erage: av erage: av erage: av erage: 4 av erage: Gross Price US$631/t US$632/t US$658/t US$689/t US$543/t Net Price (after Export Duty) 3 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Source: Reuters FFB PRODUCTION BY 13 INDONESIAN PLANTATION COMPANIES ('tonnes) 1, 9, 8, 7, 6, 5, 4, 3, 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Source: Respective companies ANALYSTS Singapore Research Team research@uobkayhian.com Ooi Mong Huey monghuey@uobkayhian.com PEER COMPARISON Company Ticker Rec Target Market PE F Div 17 May 17 Price Cap F 218F ROE P/B Div Yield (S$) (S$) (US$m) (x) (x) (x) (%) (x) (cent) (%) Wilmar International WIL SP BUY , Bumitama Agri BAL SP BUY First Resources FR SP BUY , Golden Agri-Res GGR SP HOLD , Indofood Agri IFAR SP HOLD*.495.8* * Under Review Source: Respective companies, Bloomberg, UOB Kay Hian 2

21 ESSENTIALS Lower biodiesel volume secured and lower biodiesel subsidies. All plantation companies under our coverage secured lower biodiesel volumes for the period of May- Oct 17, except for GGR which secured a 25% increase in biodiesel volume compared with Nov 16-Apr 17 s allocation. We also gather that the biodiesel subsidy will change to incorporate the new pricing formula of a CPO base price+us$1/tonne from the CPO base price+us$125/tonne, and is most likely to be effective Jun 17. Despite the change in biodiesel subsidy, it is still profitable to companies. FFB yield recovered yoy, but OER dipped yoy in 1Q17. All the companies under our coverage reported FFB yield recoveries in 1Q17, in the range of 9-29% yoy, in contrast to OER which dipped yoy. The lower OER could have been due to 1Q17 s high rainfall which usually leads to more water content in FFB. ASSUMPTION CHANGES No change on our CPO price expectations for RISKS Backtracking of biodiesel mandates in Indonesia and Malaysia. SECTOR CATALYSTS Weather disruption. Agricultural production is usually impacted by extreme weather. Any negative impact from the weather would be positive to prices. Demand from key importing countries picking up significantly. Higher demand from Indonesia s non-pso. AVERAGE CPO PRICES qoq yoy (US$/mt) 1Q16 4Q17 1Q17 % chg % chg BAL FR GGR IFAR Source: Respective companies, UOB Kay Hian FFB YIELD (tonne/ha) 1Q16 4Q17 1Q17 qoq yoy % chg % chg BAL (34.) 12.9 FR (25.9) 29. GGR (23.3) 29.1 WIL (24.6) 7. IFAR (2.) 9.1 Source: Respective companies, UOB Kay Hian AVERAGE PK PRICES (US$/mt) 1Q16 4Q17 1Q17 qoq yoy % chg % chg BAL FR IFAR Source: Respective companies, UOB Kay Hian OER (%) 1Q16 4Q17 1Q17 qoq yoy % chg % chg BAL (1.3) FR (2.6) GGR (2.3) WIL (3.8) IFAR (2.7) Source: Respective companies, UOB Kay Hian FFB NUCLEUS PRODUCTION qoq yoy ( tonnes) 1Q16 4Q17 1Q17 % chg % chg DSNG FR (18.5) 42.2 GGR 1,468 2,374 1,9 (2.) 29.4 BAL (28.3) 25.5 AALI 1,1 1,668 1,249 (25.1) 24.8 LSIP (26.) 21.9 KAGR (38.8) 16.7 SIMP (18.4) 16.3 SGRO (44.) 16.3 ANJT (21.4) 12. WIL 92 1, (22.3) 4.1 TBLA (3.4) 2.8 BWPT (41.7) 1.1 Total 6,53 9,648 7,382 (23.5) 21.9 Source: Respective companies, UOB Kay Hian CPO PRODUCTION qoq yoy ( tonnes) 1Q16 4Q17 1Q17 % chg % chg DSNG (5.6) 37.2 FR (21.6) 33.9 SGRO (44.4) 31.7 GGR (2.4) 25.6 ANJT (16.1) 25. BAL (24.1) 22.5 AALI (24.1) 14.1 LSIP (27.1) 14. SIMP (2.) 11.8 WIL (27.9) 4.7 KAGR (4.5) 3.5 BWPT (41.2) (4.) Total 1,975 3,77 2,318 (24.7) 17.3 Source: Respective companies, UOB Kay Hian PRODUCTION STATISTICS New mature areas Target new planting FFB nucleus production growth estimate Company Guidance UOB KH (ha) (ha) (%) (%) BAL 14,5 3, FR 17, 1,-2, GGR 9,8 1,* +15 to 2 12 IFAR 5, to +1 - * replanting Source: Respective companies, UOB Kay Hian SUMMARY OF 4Q16 RESULTS Company Core net profit qoq yoy vs Comments 1Q17 % chg % chg expectation BAL Rp267b (46.2) 48.1 Below Results came in weaker than expected mainly due to higher-than-expected fertiliser costs in 1Q17. Management has changed its fertiliser application schedule whereby about 56% of the fertiliser was applied in 1Q17 in contrast to 3% in 1Q16. The weaker qoq performance was mainly due to lower production despite higher CPO prices. The better yoy results was supported by higher CPO prices, while CPO sales volume was flat yoy despite higher yoy CPO production as there was a huge drawdown in inventory in 1Q16 but not in 1Q17. FR US$46m (4.4) >1. Above The positive variance was mainly attributed to stronger realised palm kernel (PK) prices and higher sales volume from an inventory drawdown. The significant yoy improvement in 1Q17 net profit was supported by higher production and the jump in CPO prices. The marginal qoq decrease was due to weaker production on seasonality despite better CPO prices. GGR US$84m 34.7 n.m. Within The strong performance qoq in 1Q17 was supported by a marginal improvement in plantation segment as well as a turnaround in the oilseeds segment. On a yoy basis, the plantation segment s EBITDA increased significantly, supported by higher sales volume on the back of production recovery as well as the jump in CPO prices. Wilmar US$313m (47.) 4.5 Above The variance was mainly due to stronger-than-expected soybean crushed volume and margins, higher contributions from China associates and no losses from its sugar associate in India. Source: Respective companies, UOB Kay Hian 21

22 COMPANY UPDATE CP ALL (CPALL TB) Steady Growth Outlook While recovery in spending remains slow, CPALL s earnings continued to grow impressively in 1Q17, reaffirming the company s solid profitability. We maintain our positive view on the company s earnings growth outlook which will be supported by continued store network expansion and solid gross margins. Maintain BUY. Target price: Bt72.. WHAT S NEW Review of 1Q17 results and outlook for rest of the year. Last week, CP ALL (CPALL) reported stronger-than-expected 1Q17 results. While SSS growth could remain sluggish from the slow recovery in consumer spending, we maintain our positive view on CPALL s earnings outlook which will be supported by continued store count expansion and resilient gross margin. STOCK IMPACT 1Q17 results recap. CPALL posted 1Q17 net profit of Bt4.7b, up 17% yoy, in line with our expectation. Key growth drivers came from all fronts. Sales grew 8% yoy, supported by continued store network expansion and resilient SSS growth (+1.2%). Gross margin widened 32bp, helped by a better sales mix at Siam Makro (MAKRO) and improving merchandise margins at convenience stores (thanks to ready-to-eat meals, beverages and personal care products). Other income also expanded 1%, supported by higher promotional revenue from suppliers. 1Q17 earnings accounted for 23% of our full-year forecast. 2Q17 likely to be a soft quarter. Owing to the seasonal effect (rainy season), CPALL could see a slight qoq decline in earnings. However, continued store and margin expansion would help boost earnings yoy. At this juncture, we expect earnings growth to slow to 8% yoy (5% qoq) in 2Q17. Healthy margin outlook. CPALL will continue to focus on its product mix (ready-to-eat foods, bakery, drinks and personal/health/beauty products) to enhance profit margins. Given that the company only rolls out its ready-to-eat meals to around 6% of its stores, there is room for further margin improvement. BUY (Maintained) Share Price Target Price Bt64.75 Bt72. Upside +11.2% COMPANY DESCRIPTION Operator of Thai 7-Eleven stores, controlling more than 5% share of convenience store market in Thailand. STOCK DATA GICS sector Consumer Staples Bloomberg ticker: CPALL TB Shares issued (m): 8,983.1 Market cap (Btm): 581,655.8 Market cap (US$m): 16, mth avg daily t'over (US$m): 25.7 Price Performance (%) 52-week high/low Bt65./Bt47.5 1mth 3mth 6mth 1yr YTD Major Shareholders % CP Group 47.1 AIA 7.2 NVDR 3.9 FY17 NAV/Share (Bt) 7.47 FY17 Net Debt/Share (Bt) PRICE CHART (lcy) CP ALL PCL CP ALL PCL/SET INDEX 7 65 (%) KEY FINANCIALS Year to 31 Dec (Btm) F 218F 219F Net turnover 391, , , ,32 573,483 EBITDA 18,92 18,89 22,23 25,27 27,987 Operating profit 11,398 11,358 13,574 15,379 17,653 Net profit (rep./act.) 13,683 16,676 2,863 23,319 26,531 Net profit (adj.) 13,683 16,676 2,863 23,319 26,531 EPS (Bt) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit ,513 22,98 27,317 UOBKH/Consensus (x) Source: CPALL, Bloomberg, UOB Kay Hian Volume (m) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Thananchai Jittanoon thananchai@uobkayhian.co.th

23 Store expansion on track. We remain positive on Thailand s convenience store market and we still believe there is more room for expansion of the small-sized store format vs the big-box store (ie super stores) format which is facing a slowdown in industry expansion. Looking at Japan as a benchmark, there are about 6, convenience stores in the country and store numbers are still growing vs Thailand which has only 15, stores (of which 9,788 are 7-Eleven stores). Management estimates Thailand could accommodate up to 3, convenience stores. Hence, the company is maintaining its store expansion plan of 7 stores p.a. to bring its nationwide network to 13, stores by 221 (1Q17: 9,788 stores). Short-term weakness in SSS growth likely in 2Q17. We expect some weakness in SSS growth in 2Q17 as a result of last year s high base (2Q16: SSS growth of +5%) and less favourable weather conditions this year (more rainfall). However, we expect SSS growth to gain momentum again in 2H17 along with the improvement in the underlying economy and noting that 2H16 SSS growth has been impacted by the mourning period. For the year, we still expect SSS growth at around 3%. EARNINGS REVISION/RISK None. VALUATION/RECOMMENDATION Re-iterate BUY. We maintain our positive view on CPALL on the back of the continued recovery in consumption on the back of a further improvement in the economy. Re-iterate BUY and target price of Bt72., pegged to 31x 217F PE, or its long-term mean PE. SHARE PRICE CATALYST Solid earnings capability should continue to support share price in the long term. 23

24 PROFIT & LOSS Year to 31 Dec (Btm) F 218F 219F Net turnover 434, , ,32 573,483 EBITDA 18,89 22,23 25,27 27,987 Deprec. & amort. 7,532 8,656 9,648 1,334 EBIT 11,358 13,574 15,379 17,653 Total other non-operating income 17,227 19,742 21,134 22,626 Associate contributions Net interest income/(expense) (8,442) (8,151) (7,35) (6,99) Pre-tax profit 2,142 25,165 29,163 33,37 Tax (3,323) (4,152) (5,687) (6,674) Minorities (143) (15) (157) (165) Net profit 16,676 2,863 23,319 26,531 Net profit (adj.) 16,676 2,863 23,319 26,531 BALANCE SHEET Year to 31 Dec (Btm) F 218F 219F Fixed assets 99,127 1,71 1,23 99,289 Other LT assets 183, , , ,242 Cash/ST investment 33,443 13,738 23,212 23,354 Other current assets 36,456 36,5 39,27 42,667 Total assets 352, ,11 345, ,551 ST debt 31,453 13,516 15,16 14,516 Other current liabilities 82,365 94,391 13,155 16,668 LT debt 156,87 148,87 138,87 128,87 Other LT liabilities 22,4 4,816 5,263 5,735 Shareholders' equity 55,196 67,76 78,921 92,626 Minority interest 4,47 4,495 4,585 2 Total liabilities & equity 352, ,11 345, ,551 CASH FLOW Year to 31 Dec (Btm) F 218F 219F Operating 37,94 42,11 38,67 37,147 Pre-tax profit 2,142 25,165 29,163 33,37 Tax (3,323) (4,152) (5,687) (6,674) Deprec. & amort. 7,532 8,656 9,648 1,334 Associates Working capital changes 1,12 12,432 5, Non-cash items 12, Other operating cashflows Investing (18,794) (26,974) (9,311) (9,294) Capex (growth) (18,634) (12,6) (12,6) (12,6) Capex (maintenance) Investments (126) (15) (157) (165) Proceeds from sale of assets 352 (17,225) Others (387) 3, 3, 3, Financing (7,22) (34,832) (19,885) (27,711) Dividend payments (8,85) (8,983) (11,475) (12,826) Issue of shares 9,953 Proceeds from borrowings (621) (25,937) (8,5) (1,5) Loan repayment Others/interest paid (8,467) 88 9 (4,385) Net cash inflow (outflow) 11,925 (19,75) 9, Beginning cash & cash equivalent 21,519 33,444 13,739 23,213 Ending cash & cash equivalent 33,444 13,739 23,213 23,354 KEY METRICS Year to 31 Dec (%) F 218F 219F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

25 COMPANY UPDATE Thai Oil (TOP TB) Cheaper Crude Plus Huge Margin Improvement; Upgrade To BUY We upgrade our net profit forecasts by 36.% for 217 and 45.2% for 218 to reflect better-than-expected GRM outlook on by better product spreads, cheaper crude cost and benefits from the margin improvement programme. Our core profit for 217 (+37% yoy) is 41% above consensus estimate. We expect consensus to also upgrade their earnings. TOP is trading at a cheap 6.9x 217F PE vs domestic refinery & petrochemical peers 8x. Upgrade to BUY. Target price: Bt87.. WHAT S NEW Expect OPEC supply cut to continue for another 6-9 months. Thai Oil (TOP) expects stronger crude prices in 2H17 vs 1H17, backed by the Organization of Petroleum Exporting Countries (OPEC) and non-opec extension of supply cut by another 6-9 months from the current production cut to end on 3 June at the upcoming OPEC meeting on 25 May. However, there are some risks from rising oil production from Libya, Nigeria and the US shale oil, given the rise in crude prices. Bullish GRM run to continue into 2H17 (6-65% of profit). TOP expects the average Singapore gross refining margin (GRM) in 2H17 to sustain at US$6-7/bbl on: a) heavier maintenance shutdown in global refineries in 2H17 vs 1H17, especially during September to October this year, resulting in a 5-1% loss in supply, b) better gasoline margin due to solid demand growth, and c) steady middle distillate margins backed by high demand on the back of an improved economy and tight supply. Asia Pacific gasoline demand is forecast to grow by 5.3% yoy to 7.1m bpd, coming mainly from China and India. For diesel - the main product for Thai refiners, Asia Pacific demand is expected to increase 2.2% yoy to 11.6m bpd. Softer hoh aromatics margin outlook in 2H17 (2% of profit). Paraxylene (PX) spread over unleaded gasoline 95 (ULG95) in 2H17 should soften hoh due to high capacity addition and fewer PX plants in Asia Pacific undergoing maintenance. Benzene (BZ) margin over ULG95 in 2H17 will also come under pressure due to higher supply amid lower maintenance in the region. Softer hoh lube base margin in 2H17 but still favourable (7% of profit). Management expects slightly softer hoh base oil margin in 2H17 due to fewer plants in the region undergoing maintenance. However, margins are still in the high range as there is no new base-oil capacity coming on stream in the region. KEY FINANCIALS Year to 31 Dec (Btm) F 218F 219F Net turnover 296,65 275, , , ,745 EBITDA 24,32 35,15 35,924 34,128 34,588 Operating profit 17,537 27,343 3,45 28,473 29,134 Net profit (rep./act.) 12,181 21,222 22,182 2,813 21,296 Net profit (adj.) 21,596 16,188 22,182 2,813 21,296 EPS (Bt) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit ,753 15,643 16,388 UOBKH/Consensus (x) Source: TOP, Bloomberg, UOB Kay Hian BUY (Upgraded) Share Price Target Price Bt74.5 Bt87. Upside +16.8% (Previous TP Bt74.) COMPANY DESCRIPTION TOP is an oil refinery company. It also produces oil related products including LPG, Kerosene, fuel oil and chemicals. STOCK DATA GICS sector Energy Bloomberg ticker: TOP TB Shares issued (m): 2,4. Market cap (Btm): 151,982.1 Market cap (US$m): 4, mth avg daily t'over (US$m): 8.2 Price Performance (%) 52-week high/low Bt78.25/Bt57.5 1mth 3mth 6mth 1yr YTD (2.9) (3.6) Major Shareholders % PTT 49.1 NVDR 4.5 HSBC (Singapore) Nominees Pte. Ltd. 2.6 FY17 NAV/Share (Bt) 6.11 FY17 Net Debt/Share (Bt) 1.87 PRICE CHART (lcy) THAI OIL PCL THAI OIL PCL/SET INDEX Volume (m) (%) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Tanaporn Visaruthaphong tanaporn@uobkayhian.co.th Chaiwat Arsirawichai chaiwat@uobkayhian.co.th

26 STOCK IMPACT Raise GRM assumptions for We expect TOP s GRM to remain high at US$6.5/bbl (previously US$ /bbl) for , or at the same level as in 1Q17, supported by : a) Better-than-expected product spreads, mainly in gasoline (28% of TOP s refinery product output which provided US$15.4/bbl ytd spread vs US$14/bbl in our previous assumption) and diesel (35% of TOP s refinery product output which provided US$11.9/bbl ytd spread vs US$11.5/bbl in our previous assumption). b) Cheaper crude cost given lots of crude supply globally, especially from rising US crude oil production. Murban crude premium over Dubai was US$2.7/bbl in 216 (4Q16: US$2.2/bbl), which fell to US$1.6/bbl in 1Q17 and was US$1.1/bbl in Apr 17. Factoring margin improvement programme into our model. In 1Q17, one of factors contributing to the great core profit of Bt6b was the Bt1.2b contribution from the margin improvement programme which was implemented since last year (4Q16: Bt1.1b, 1Q16: Bt648m). The market including us had ignored this project as it may not be sustainable. At the analyst meeting, management highlighted that its target contribution from this programme is Bt2.5b (or US$.7/bbl). We believe this amount is too conservative vs the Bt1.2b reported in 1Q17 (almost 5% of the budget). We have assumed Bt4b for (or US$1/bbl). EARNINGS REVISION/RISK We raise our net profit forecasts by 36.% for 217 and 45.2% for 218 to reflect better-than-expected GRM driven by better product spreads, cheaper crude cost and benefits from the margin improvement programme. We forecast core profit to grow 37% yoy to Bt22.2b in 217, which is 41% higher than consensus estimate. We foresee the street upgrading its forecasts after 2Q17 results are announced. VALUATION/RECOMMENDATION Upgrade to BUY with a higher target price of Bt87., based on the refinery and petrochemical sector s 217 PE mean of 8x. DEMAND GROWTH OUTPACING CAPACITY ADDITION Source: FACTs Semi Annual Reports, Spring 217, Reuters (May 17), IEA Medium Term Outlook (Mar 17) and TOP s estimate AP & ME PX DEMAND AND CAPACITY Source: PCI WoodMackenzie (Dec 16), TOP AP & ME BZ DEMAND AND CAPACITY GRM sensitivity. Our sensitivity analysis shows that every US$1/bbl increase in GRM will raise our net profit forecast for 217 by Bt2.8b. PX spread sensitivity. Every US$1/tonne increase in PX spread will raise our 217 net profit forecast by Bt1,18m (our market PX spread assumption is US$32/tonne). BZ spread sensitivity. Every US$1/tonne increase in BZ spread will raise our 217 net profit forecast by Bt49m (our market BZ spread assumption is US$17/tonne). Source: IHS as of Jan 17, TOP PRICES AND SPREAD 1Q16 4Q16 1Q17 2Q17 (qtd) Dubai price (US$/bbl) GRM (US$/bbl) PX Spread over ULG95 (US$/tonne) BZ Spread over ULG95 (US$/tonne) Source: Bloomberg, UOB Kay Hian KEY ASSUMPTIONS CHANGE IN F F (Btm) Old New Old New Net Profit 16,312 22,182 14,589 21,185 Profitability - 3,96-3,96 Improvement GRM (US$/bbl) Source: TOP, UOB Kay Hian 26