Indonesia Consumer. Indonesia Industry Focus. On the road to recovery. DBS Group Research. Equity 8 Jan 2018 JCI : 6,353.70

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1 Indonesia Industry Focus Indonesia Consumer Refer to important disclosures at the end of this report DBS Group Research. Equity 8 Jan 2018 On the road to recovery Consumption-friendly fiscal policy and regional election to support growth in 2018 Household spending recovery and lower raw material price are a boon for consumer staples A more attractive risk/reward profile post 2017 underperformance. To picks: ICBP, MAPI Consumption-friendly fiscal policy and regional election to support growth in We expect household spending to improve as the government launches a number of fiscal stimulus programmes to accelerate purchasing power recovery. In our estimation, the increase in subsidy and social aids represents c.1.4% of total store-based retail sales. Plus, the upcoming regional election in more than 100 regencies and provinces, which will be preceded by four months of campaigning, presents further catalysts for boosting consumption. Household spending recovery and lower raw material price are a boon for consumer staples. We expect to see a gradual pick-up in household spending in 2018 which will be mostly benefit consumer companies targeting the low-income and mass-market segments. Our top picks are still tilted toward consumer staples. Along with top-line growth improvement, we expect margins to tick up, aided by lower raw material prices. The prices of some key soft commodities, i.e. CPO, sugar, skim milk powder, coffee and chocolate, have trended down in 2H17. That said, we expect the gross margins of consumer staples companies to improve this year, after taking into account some inventory lag. A more attractive risk/reward profile post 2017 underperformance. The majority of consumer stocks within our coverage underperformed the JCI in 2017 with the exception of UNVR and MYOR. Excluding UNVR, consumer staples are trading at the five-year mean PE of 22x which we deem attractive. We now have ICBP as our top pick, in place of INDF, in view of its stronger earnings growth prospect. We would turn more positive on retailers once the consumption recovery starts to broaden. At this juncture, we maintain a selective stance as the e-commerce threat and competition among offline retailers are still on the rise. In the retail space, we like MAPI for its strong earnings momentum as it continues to redirect its expansion efforts toward highly profitable brands, restructure the underperforming department stores and further deleverage its balance sheet. JCI : 6, Analyst Tiesha PUTRI tiesha.narandha@id.dbsvickers.com Andy SIM, CFA andysim@dbs.com STOCKS Consumer stocks performance JCI UNVR ICBP INDF MYOR LPPF MAPI MPPA -69% -29% -34% -35% -11% -4% -9% 1% 4% Source: Bloomberg Finance L.P., DBSVI, DBS Bank 9% 15% 15% 20% 23% 23% 44% -80% -60% -40% -20% 0% 20% 40% 60% 2H17 (after Lebaran) y-o-y 12-mth Price Mkt Cap Target Performance (%) Rp US$m Price Rp 3 mth 12 mth Rating Unilever Indonesia 54,000 30,727 51, HOLD Indofood CBP Sukses Makmur 9,275 8,067 10, BUY Indofood Sukses Makmur 7,675 5,026 9,900 (8.6) (1.6) BUY Mayora Indah 2,150 3,585 2, HOLD Matahari Department Store 11,500 2,503 10, (24.1) HOLD Mitra Adiperkasa 6, ,500 (7.8) 17.5 BUY Source: DBSVI, DBS Bank, Bloomberg Finance L.P. Closing price as of 5 Jan 2018 ed: CK / sa:ma, PY, CS

2 Elections and more populist stance from the government should help to accelerate economic recovery Government taking a more populist stance in 2018 We expect the government to exert more efforts in supporting consumers purchasing power, particularly in the low-end segment, ahead of Indonesia s presidential election in Despite the limited increase in total expenditure (4% higher than 2017 revised state budget), we think the 2018 state budget signals a more populist stance from the government, i.e.: 1) Raising energy subsidy budget by 5%. 2) Expanding the coverage of the Family Hope Programme (PKH) from 6m families in 2017 to 10m families in PKH is a programme that provides cash transfers, ranging from Rp500,000 to Rp3,600,000 p.a., to very poor households that meet a set of predetermined criteria. The programme is aimed at reducing poverty and inequality in the country. 3) Expanding the coverage of non-cash food aid programme is to 10m families in 2018 from 1.2m families in This was partly to replace the rice aid or RASTRA programme (refer to the subsequent table). The change from RASTRA to non-cash food aid (BPNT) provides more flexibility for the eligible families to spend the aid. For instance, the families can spend their food aid not only on rice but also eggs and cooking oil, and allow them to carry over the remaining balance to the subsequent months. 4) Cash for Work programme. In 2018, the government plans to launch massive village infrastructure projects that will be labour intensive with the goal to create as many as 6.6m jobs in 100 villages. The programme, which is called Cash for Work, requires village authorities to allocate as much as Rp18tr to employ local workers (including casual labourers) who will be paid on a daily or weekly basis to execute a number of villagelevel projects, such as irrigation and road repair and other construction works. Government subsidy and social aid programme APBN-P 2017 APBN2018 Energy subsidy (in Rp tr) Fuel and LPG 3 kg Electricity Family Hope Program (PKH) No. of eligible families (m) Rice aid (RASTRA) No. of eligible families (m) Subsidised rice (kg/family/month) Non-cash food aid (BPNT) No. of eligible families (m) Monthly aid (Rp/family/month) 110, ,000 Cash for work (in Rp tr) 18,000 Source: Ministry of Finance, DBS Bank, DBSVI, various media sources Regional election to support consumption in rural areas There will be over 100 regional elections to be held in June The elections will be preceded by the campaign period from mid-february to June 23 rd, which we believe would support consumption in rural areas. Consumer companies to benefit from improving economic growth globally On the macro front, improvement in the global economic momentum should continue to filter through Indonesia. Our economist expects investment growth to accelerate, supported by the government s ongoing reform and infrastructure push. Meanwhile, firmer commodity prices will translate into higher contribution of net exports to the country s GDP growth. If the prices of the country s key export commodities increase sustainably, we should see the continued acceleration of the economic recovery process in ex-java islands. For example, GDP growth in Kalimantan improved significantly to 4.68% in 9M17 (vs. 2.01% in 2016) as coal price rallied. We believe these policies would help to boost a demand recovery, particularly in the low-end segment. Page 2

3 Employment based on sector CBOT wheat price Others 25% Agriculture 30% Trade 23% Industrial 14% Mining 1% Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 CBOT wheat (cents/bu.) Quarterly avg. price Construction 7% Export growth trend % Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17 % CPO price 3,500 3,300 3,100 2,900 2,700 2,500 2,300 2,100 1,900 1,700 1,500 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 CPO price (MYR/MT) Quarterly avg. price Indonesia exports y-o-y (LHS) GDP household consumption y-o-y (RHS) Margin to improve on the back of lower raw material prices We believe consumer staples margins would improve as they benefit from lower raw material costs. The prices of some key soft commodities, i.e. CPO, sugar, skim milk powder, coffee and chocolate, have trended down in 2H17. That said, we expect the gross margins of consumer staples companies to improve in FY18, after taking into account some inventory lag. 3.0 Raw sugar price Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Sugar (cents/lb.) Quarterly avg. price Key soft commodity price trends (quarterly avg. price) USDIDR Wheat CPO Skim Milk Powder Arabica Coffee Robusta Coffee Cocoa Sugar yoy 4Q16-4% -18% 32% 20% 25% 28% -23% 42% 1Q17-1% -8% 26% 34% 21% 40% -29% 36% 2Q17 0% -8% 6% 17% 2% 41% -36% -11% 3Q17 1% 13% 3% -4% -9% 23% -34% -31% 4Q17 2% 5% -11% -26% -18% -2% -18% -30% qoq 4Q16 1% -1% 12% 17% 4% 15% -16% 3% 1Q17 1% 6% 6% 0% -4% 7% -16% -6% 2Q17 0% 1% -12% -15% -10% 1% -7% -23% 3Q17 0% 5% -2% -3% 1% 0% 1% -8% 4Q17 2% -7% -3% -11% -6% -8% 4% 4% Source: Bloomberg Finance L.P., Global Dairy Trade, DBS Bank, DBSVI Page 3

4 Consumer staples gross margin trend 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Source: DBS Bank, DBSVI, Bloomberg Finance L.P. As for retailers, a broadened recovery in spending would eventually lead to better revenue and margins on the back of better economies of scale. Nonetheless, we still see downside risk to retailers margins on the back of heightened competition against alternative channels, both online and offline. Online retailers market share 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% - ICBP INDF MYOR Aggregate ex-indf UNVR (RHS) 0.5% 1.1% 0.4% 0.4% 0.7% 0.1% Source: Euromonitor, DBS Bank, DBSVI How to position in 1H18? 2.7% 1.1% 4.6% 1.4% 7.6% Apparel & footwear General 54.0% 53.0% 52.0% 51.0% 50.0% 49.0% 48.0% 1.8% Most of the consumer stocks within our coverage underperformed the broader market in 2017, with the exception of UNVR and MYOR which outperformed the JCI by 24% and 3% respectively. Stock performance UNVR ICBP INDF MYOR LPPF MAPI MPPA -69% -29% -34% -35% PE multiples of staples ex-unvr have reverted to the historical mean. Looking deeper into the individual stocks valuation, ICBP, INDF and MYOR have actually de-rated in 2H17. UNVR is the only stock that saw its PE multiple re-rate upwards in the same period. Excluding UNVR, the staples companies under our coverage are trading at a more reasonable level, i.e. their fiveyear mean PE, thus providing a more attractive risk/reward profile. Staples PE valuation range JCI -11% -4% -9% 1% 4% 9% 15% 15% 20% 23% 23% 44% -80% -60% -40% -20% 0% 20% 40% 60% 2H17 (after Lebaran) y-o-y ICBP INDF UNVR MYOR Staples Staples ex- UNVR Page 4

5 Staples forward PE band sd +1sd Avg. 1sd 2sd As at end of Sep 2017, ICBP had Rp7.8tr cash on its balance sheet, which opens up the possibility of inorganic growth should any acquisition opportunity arise. We project ICBP s sales to grow by 9% y-o-y in FY18F, accelerating from 4% y-o-y in FY17F, as household spending starts to recover. On the back of this, we expect ICBP s net profit to grow by 12% y-o-y in FY18F (vs. 9% y-o-y in FY17F), partly supported by margin expansion as the company benefits from lower soft commodity prices, particularly wheat, sugar, palm oil and skim milk powder. Indofood Sukses Makmur (BUY; TP Rp9,900) Staples ex-unvr s forward PE band Banking on staples As the economy is still being affected by the lagged impact of weak commodity prices in the past two years, our stock picks for 2018 are tilted toward consumer staples. A more populist stance from the government ahead of the regional and presidential elections in 2018 and 2019, respectively, would help to support consumer spending. We believe consumer companies that cater to the low-income or mass-market segment will be among the first to benefit. We recently upgraded ICBP to BUY (from HOLD previously). We also make ICBP our top pick, replacing its parent INDF. Indofood CBP Sukses Makmur (BUY; TP Rp10,200) Weak households spending and concern over margins following a spike in wheat price in Sep have caused ICBP s share price to underperform the JCI. ICBP now trades at c.25x PE 18F, or at its five-year mean PE. We expect ICBP s margins to bottom out in 4Q17 before recovering in 2018, supported by favourable soft commodity prices. +2sd +1sd Avg. 1sd 2sd We maintain our BUY call on Indofood Sukses Makmur (INDF) for its attractive valuation (15x PE 18F and 30% discount to sum-of-parts valuation). However, at this juncture, we prefer ICBP to INDF as we expect the latter to grow at a slower pace due to its exposure in agribusiness. Our plantation analyst expects CPO price to decline by 5% y-o-y in Agribusiness contributed to 20% of INDF s EBIT in 9M17. Selective stance in retail space As for discretionary consumer stocks, we maintain our selective stance and MAPI is our pick for its strong earnings growth prospect. We would turn more positive once the economic recovery starts to broaden. We nonetheless note that structural challenges, i.e. e-commerce disruption and competition among offline retail channels, still loom large and pose a threat to retailers growth prospect. Mitra Adiperkasa (BUY; TP Rp8,500) We expect MAPI s specialty store s performance to improve further as the company continues to expand its highly profitable brands, i.e. Inditex and Starbucks, while restructuring its underperforming department stores. These should help to improve MAPI s margins in FY18, which have yet to be priced in by consensus. We project MAPI s earnings to grow by 47% y-o-y in FY18F, the highest among peers. In 2018, MAPI plans to list its subsidiary MAP Aktif Adiperkasa, which operates multi-brand stores selling sports products and apparel across Indonesia. The IPO would help MAPI to further deleverage its balance sheet. We also like MAPI s growing exposure in the F&B business (through Starbucks) and selective expansion in its backbone specialty store division, which we believe is more insulated from the e-commerce threat. Page 5

6 Key charts DBS earnings growth forecast Consumer companies sales growth trend FY17F FY18F Staples* 11% 12% Retailers -2% 21% Aggregate* 9% 13% *Ex-INDF Source: DBS Bank, DBSVI 14% 12% 10% 8% 12% 7% 13% 12% 10% 10% 11% 11% 9% 7% 8% 6% ICBP s forward PE band sd 27 +1sd 25 Avg sd 19-2sd Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 MAPI s EV/EBITDA band sd 12 +1sd 10 Avg sd 4-2sd 2 0 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 4% 2% 0% Results review 4Q15 1Q16 2Q16+3Q16 4Q16 1Q17 2Q17+3Q17 2Q16 + 3Q16 y-o-y F&B* 4Q16 y-o-y 1Q17 y-o-y 2Q17 + 3Q17 y-o-y Revenue ICBP 9% 5% 6% 2% INDF 2% 2% 8% 6% LPPF 9% 8% -1% 1% MPPA 0% -7% -5% n/a MYOR 19% 22% 6% 8% MAPI 11% 12% 14% 13% UNVR 11% 11% 9% 1% Aggregate* 11% 11% 7% 4% F&B** 12% 11% 7% 3% Retailers*** 10% 11% 9% 8% Comment Net profit ICBP 15% 38% 16% 3% In line INDF 165% -30% 11% -4% In line LPPF 14% 3% 0% -8% In line MPPA -5% -125% 44% n/a n/a MYOR -4% 30% 12% -1% Below MAPI 596% 785% 282% 81% In line UNVR 23% -2% 25% 3% In line Aggregate* 18% 13% 20% 2% F&B** 17% 11% 20% 3% Retailers*** 21% 22% 17% -1% ex-indf & MPPA; **ex-indf; ***ex-mppa Source: Companies, DBSVI Retailers** 3% Page 6

7 Discretionary vs. non-discretionary household consumption GDP growth trend % y-o-y, 2010p 10% 35.0% 7.0 9% 30.0% 6.5 Latest: 3Q17 8% 25.0% 6.0 7% 20.0% Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 6% 5% 4% 3% 5.06% 9.26% Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun % 10.0% 5.0% - Discretionary consumption Non-discretionary consumption Source: Central Bureau of Statistics, DBS Bank, DBSVI Real y-o-y (LHS) Source: Bloomberg Finance L.P. Nominal y-o-y (RHS) CPI trend Consumer confidence index (CCI) trend % Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul (5.0) Food CPI y-o-y Headline CPI y-o-y Administered CPI y-o-y Source: Bloomberg Finance L.P. Retail sales index (RSI) trend CCI 5-year avg. CCI Headline CPI y-o-y (RHS) Source: Bloomberg Finance L.P. Population and monthly expenditure per capita % < Rp0.7mn % 20% 15% 10% 5% 0% -5% < Rp0.7mn - Rp1.0mn < Rp1.0mn - Rp1.5mn < Rp1.5mn - Rp2.0mn < Rp2.0mn - Rp3.0mn < Rp3.0mn - Rp4.5mn > Rp4.5mn RSI index (2010=100) Source: Bloomberg Finance L.P. RSI growth y-o-y (RHS) mn people Source: Central Bureau of Statistics, MarkPlus, PT Matahari Department Store Page 7

8 Indonesian consumer sector: valuation summary Company ICBP INDF MYOR UNVR MAPI LPPF MPPA Market cap (US$m) 8,062 5,023 3,583 30, , Share price (Rp)* 9,275 7,675 2,150 54,000 6,225 11, Recommendation BUY BUY HOLD HOLD BUY HOLD FV Target price 10,200 9,900 2,000 51,900 8,500 10, Upside (downside) 10% 29% -7% -4% 37% -9% 2% PE (x) FY17F nm FY18F FY19F PB (x) FY17F FY18F FY19F Price to sales (x) FY17F FY18F FY19F EV/EBITDA (x) FY17F FY18F FY19F Revenue growth FY16A 8.6% 4.2% 23.8% 9.8% 10.3% 9.9% -2.0% FY17F 4.1% 5.2% 11.0% 7.2% 11.0% 0.3% 4.2% FY18F 9.1% 6.5% 11.5% 9.9% 12.4% 7.6% 10.5% FY19F 9.4% 7.4% 11.5% 10.0% 13.3% 6.8% 7.3% Net profit growth FY16A 20.0% 39.6% 11.1% 9.2% 458.4% 13.4% -82.6% FY17F 9.3% 0.8% -2.4% 14.4% 73.9% -4.0% nm FY18F 11.9% 6.0% 18.0% 10.5% 46.9% 9.2% nm FY19F 10.7% 7.9% 15.0% 9.6% 26.3% 7.8% -11.2% Gros s margin FY16A 31.5% 29.1% 26.7% 51.1% 48.6% 35.7% 16.3% FY17F 31.7% 28.9% 22.8% 51.0% 49.1% 36.2% 15.9% FY18F 32.1% 28.8% 22.9% 50.9% 50.0% 36.3% 16.1% FY19F 32.2% 28.8% 22.9% 50.8% 50.0% 36.3% 16.1% EBIT margin FY16A 14.1% 12.4% 12.6% 21.7% 6.3% 14.5% 1.3% FY17F 14.3% 12.2% 10.6% 22.9% 6.8% 14.2% -0.2% FY18F 14.7% 12.1% 10.8% 23.0% 7.8% 14.3% 0.9% FY19F 14.8% 12.1% 10.9% 22.9% 7.8% 14.4% 0.9% Net gearing FY16A Net cash 16% 27% 30% 90% Net cash 17% FY17F Net cash 17% 16% 24% 77% Net cash 26% FY18F Net cash 15% 10% 20% 61% Net cash 26% FY19F Net cash 13% 2% 16% 45% Net cash 27% ROAE FY16A 20.5% 14.7% 22.1% 134.1% 6.5% 108.9% 1.6% FY17F 20.0% 13.9% 19.0% 141.5% 10.3% 81.5% -3.5% FY18F 19.9% 13.7% 19.4% 134.1% 13.4% 67.4% 1.7% FY19F 19.6% 13.3% 19.3% 123.0% 14.8% 57.9% 1.5% *As at 5 Jan 2018 Page 8

9 DBSVI, 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: 8 Jan :46:52 (WIB) Dissemination Date: 8 Jan :02:26 (WIB) Sources for all charts and tables are DBSVI, DBS Bank unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''), DBS Bank Ltd. 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10 Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. 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. 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DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates have a proprietary position in Matahari Department Store recommended in this report as of 30 Nov Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Indofood Sukses Makmur as of 30 Nov 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: 5. 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 an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). 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. Page 11

12 United Kingdom This report is produced by PT DBS Vickers Sekuritas Indonesia which is regulated by the Otoritas Jasa Keuangan (OJK). 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 PT DBS Vickers Sekuritas Indonesia (''DBSVI''), 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