Nestle Nigeria. FSDH Equity Research Report. June 02, 2009 Plc. Equity Research Report: Nestle Nigeria Plc -NIGERIA

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1 Nestle Nigeria June 02, 2009 Plc This publication is produced by FSDH Securities Limited (FSDH Sec) a subsidiary of First Securities Discount House Limited (FSDH) solely for the information of users who are expected to make their own investment decisions without undue reliance on any information or opinions contained herein. The opinions contained in the report should not be interpreted as an offer to sell, or a solicitation of any offer to buy any investment. FSDH Sec may invest substantially in securities of companies using information contained herein and may also perform or seek to perform investment services for companies mentioned herein. Whilst every care has been taken in preparing this document, no responsibility or liability is accepted by any member of FSDH for actions taken as a result of Information provided in this publication. FSDH Equity Research Report FSDH Research Page 1

2 1.0 Executive Summary 1.1 History Nestle Nigeria Plc (Nestle) is a member of the respected and trustworthy nutrition; health and wellness company renowned world-wide for its high quality products. The company commenced simple trading operations in Nigeria in1961 and has today grown into a leading food manufacturing and marketing company. Nestle was listed on the Nigerian Stock Exchange on April 20, Nestle S.A. of Switzerland and Nestle CWA Limited, Ghana are the major shareholders of the company, controlling 3.17% and 59.13% of the company respectively. The brands and products of the company are focus of continuous innovation so that they meet and exceed consumers expectations. The company seeks a clear- cut advantage over competitors products and to ensure that its products are available wherever, whenever and however the consumers want them. Continuous attention is also given to developing the professional and leadership skills of staff at all levels so that they can directly contribute to growth and a higher level of performance. Its business supports an ever- increasing standard of living through employment generation, increased income, infrastructure improvements and a growing concern for the interest of the community here in Nigeria. The company has a general license agreement with Societe Des Produits Nestle S.A., Nestec S.A and Nestle S. A for the provision of technical and other support services. The agreement was made with the approval of the National Office for Technology Acquisition and Promotion and payments are made to Societe Des Produits Nestle S.A. The amount due to other related companies represent balances due on current accounts maintained with other related companies in the Nestle group for he importation of fixed assets, raw materials and finished goods. This is shown on the table 1 below. 1.2 Business: Nestle Nigeria manufactures and markets an impressive array of high quality brands: Infant Cereals-Nestle Nutrend, Nestle CERELAC; Family Cereals Nestle Golden Morn; Beverage Drink Nestle MILO; Confectionery Nestle CHOCOMILO; Bouillon MAGGI Cube, MAGGI Chicken, MAGGI Crayfish, MAGGI Maxi Cube; Sauce- MAGGI Machop and Table Water- Nestle Pure Life. Nestle Nigeria also markets Coffee- NESCAFE Classic and NESCAFE 3-in-1, and Full Cream Milk Product Nestle NIDO. Table 1:Amount Due to Related Companies as at December 31, 2008 Name of Entity Amount % N 000 Nestle Cote D Ivoire 942, Nestle Ghana Limited 300, Nestle World Trade Corporation Ltd 1,774, Nestle Globe Centre AOA 83, Nestle Nederland 162, Nestle France Ltd 28, Nestle Singapore 29, Nestle Malaysia 41, Nestle Deutschland 18, Nestec S. A. 11, Societe des Produits Nestle S.A 290, Others 11, Total Amount Due to Related Company 3,695, Price as at June 01, 2009 N Fair Value N Recommendation BUY Table 2: Professional Parties Party Union Registrars KPMG Professional Limited Role Registrar Auditors Table 3: Directors as at December, 2008 Name Position Holding Olusegun Osunkeye Chairman 300,000 Martin Woolnough MD/CEO Nil Klaus Wachsmuth Director Nil Roger Stettler Director Nil Alexandre Cantacuzene Director Nil Jacques Vauthier Director Nil David Ifezulike Director 63,546 Friedrich Mahler Director Nil Fiama Mshelia Director 3,125 Etienna Benet Director Nil Wilbart De wit Director Nil Martin Kruegel Director Nil John Reed Director Nil Table4: Company Summary Ticker Nestle Sector Food/Beverages & Tobacco Date of Incorporation September 25, 1961 Date of Listing April 20, 1979 Financial Year End December Number of Fully Paid Share 660,546,875 Current Capitalization (N) 118,898,437,500 NSE Capitalization (N) 6,997,586,665, % of NSE Capitalisation Week high (N) Week low (N) YTD Return (%) (5.98) 52 Weeks Volume Traded 111,839 Trailing EPS (N) Trailing P/E ratio (X) Sources of Information: Annual Report & Accounts, Company s website, CBN, NBS, NSE, and FSDH Research. 2.0 Review of Nigerian Economy According to the Central Bank of Nigeria (CBN), Nigeria s Gross Domestic Product (GDP) grew in 2008 by 6.41% as against the growth rate of 6.45% in Even though the performance of the economy in 2008 was good in the light of the global economic recession, it fell below the target of 9.8% for the year. The growth in the economy was driven largely by non-oil sector, while the crisis in the Niger Delta area and the current global economic & financial crisis limited the contribution of the oil sector to the GDP. FSDH Research Page 2

3 N'mn Equity Research Report: Nestle Nigeria Plc -NIGERIA According to the National Bureau of Statistics (NBS), the structure of the Nigeria s economy as at December 2008 (provisional) in term of sectoral contribution to the GDP are: Agriculture: 42.07%; Manufacturing: 4.13%, Solid Minerals: 0.31%; Telecomm/Postal Services: 2.90%, Finance & Insurance: 3.79%; Building & Construction:1.83%; Hotel and Restaurants:0.46%; Crude Petroleum & Natural Gas:17.54%; Wholesale and Retail Trade:17.33% and Others: 9.63%. Currently, more than 95% of the country s foreign exchange earnings and about 85% of its revenue is derived from crude oil. In addition, the economy has a very high propensity for imported goods. The recent sharp drop in the price of oil in the international market as a result of weak demand from the industrialized nations and the weak non-oil exports in Nigeria as a result of infrastructure deficiency, are responsible for the recent depreciation and subsequent devaluation of the value of the country s currency. Some factors which have limited the growth of the economy includes poor trasportation system, epileptic power supply, poor comminucation system, regulatory and institutional environment that are not cost effective for running businesses in in Nigeria and low access to long term finace. The current administration is implementing a number of policies to diversify the productive base of the economy so that the economy is less vulnerable to the international oil price volatility. The government is addressing this through the implementation of its 7- point agenda. In addition it is embarking on a number of reform agenda to stimulate economic growth, and strengthening public expenditure management. 3.0 Strengths & Opportunities Good knowledge and expertise of domestic market Strong brand name Wide product distribution network Improving profit margins Robust working capital Large Market for products Strong technical and research supports from the parent company Renewed government s efforts to fight counterfeit food products 3.1 Weaknesses & Threats Depreciation and Devaluation in the value of Naira Credit crunch in the local financial market leading to rising interest rates Inadequate physical infrastructure The long term assets (fixed assets) of Nestle which stood at N13.82bn in 2008 from N10.44bn in 2007 represented a growth of 32.40%. The CAGR between 2004 and 2008 stood at 33.73%. The current assets which grew by 41.84% to N15.34bn in 2008 from N10.82bn in 2007 was boosted by the growth in trade deposits, which increased by % to N3.12bn, while cash and bank balances increased by 55.98% to N3.64bn. Adding the long term assets and the current assets of the company together, the total assets grew by 37.21% to N29.16bn in 2008 from N21.25bn in This represents a CAGR of 21.46% between 2004 and Composition of Shareholders Fund (2008) 93.92% Share Capital Revaluation Reserve 3.66% 2.06% 0.36% Share Premium Retained Earnings The total assets of the company were financed by a mix of equity, longterm inter-company loan, deferred taxation, long term employee s benefits and other current liabilities in the proportion of 30.97%, 20.51%, 8.94%, 1.54% and 38.04% respectively. As at December 2008, the total Assets of Nestle stood at N29.16bn while total liabilities stood at N20.13bn. The short term liabilities stood at N11.09bn accounting for 55.1% of the total liabilities while the long-term liabilities stood at N9.03bn accounting for 44.9% of the total liabilities. The interest bearing liabilities of Nestle as at the December 31, 2008 stood at N5.98bn all of which is inter-company loan. The company secured two loan facilities of US$54mn and US$40mn during the year from Nestle Treasury Center- Middle East & Africa Limited, a Nestle Group based in Dubai for general corporate purposes. Both loans have tenures of 7 years (inclusive of moratorium period of 2 years) commencing from March 2008 and December 2008 respectively. These facilities attract interest rate at 6 months USD LIBOR plus a margin of 150 basis points and 300 basis points respectively. The working capital stood at N4.25bn at the end of the year, a growth of 64.70% from N2.58bn as at the end of the previous year. We note that between 2004 and 2008 the company operated on a positive working capital recording a CAGR of 62.13%. In addition, the current ratio and the quick ratio as at 2008 stood at 1.38x and 0.80x respectively. Given this situation, Nestle should not find it difficult to meet its short-term obligations as they fall due. 4.0 Analysis & Recommendation 4.1 Capital Structure Total shareholders fund of Nestle grew from N6.24bn in 2007 to N9.03bn in 2008, translating to an increase of 44.81% between the periods. The increase in total shareholders fund was primarily driven by 49.14% growth in General reserve from N5.69bn in 2007 to N8.48bn in The Compound Annual Growth Rate (CAGR) in the total shareholders fund between 2004 and 2008 is 51.07%. The shareholders funds also include N186mn revaluation reserves. 9,000 7,000 5,000 3,000 1,000 Shareholder's Fund FSDH Research Page 3

4 N'mn N'mn N'mn N'mn Equity Research Report: Nestle Nigeria Plc -NIGERIA 4,200 3,200 2,200 1,200 11,000 9,000 7,000 5,000 3,000 1,000 Capital Employed Vs Total Assets ( ) 26,000 21,000 16,000 11,000 6,000 1, Capital Employed Total Assets Working capital ( ) Long Term Vs Short Term Liabilties Long Term liabilities Short Term Liabilities Meanwhile, the capital employed (i.e total assets less current liabilities) increased from N4.94bn in 2004 to N18.07bn in 2008 representing a CAGR of 38.32% and a leap of 38.80% between 2007 and The debt ratio which is the proportion of the company s total assets that is financed by long term and short term liabilities increased to 58.55% from 58.70% in The gearing ratio which is the proportion of the capital employed financed by long term borrowing stood at 33.10% in 2008, while the debt to equity ratio stood at 66.22% in The increase in the debt leverage ratio between 2007 and 2008 was as a result of the intercompany loan that was contracted in Liquidity The current assets of the company increased from N9.08bn in 2004 to N15.34bn in 2008 representing a CAGR of 14.01% and a growth of 41.84% between 2007 and The major contributors to the increase between the immediate two years are: trade debtors (up by % to N3.12bn), cash and bank balances (up by 55.98% to N3.64bn) and foreign currencies purchased for imports (up by 27.48% to N856.35mn). The company needs to develop strategy to reduce the trade debtors. In another development, the current liabilities increased from N8.46bn in 2004 to N11.09bn in 2008 representing a CAGR of 7% between the period and an increase of 34.68% between 2007 and The relationship between the current assets and current liabilities reflects a marginal improvement when considering the marginal increase in the current ratio and quick ratio between 2007 and The current ratio increased to 1.38x in 2008 from 1.31x. In a similar development, the quick ratio increased to 0.80x in 2008 from 0.68x in The net cash generated from operating activities decreased by 28.47% from N7.80bn in 2007 to N5.58bn in 2008 as a result of the huge gratuity of about N5.79bn paid during the year. Net cash used for investing activities increased by 9.48% from N4.23bn in 2007 to N4.63bn in 2008 while the net cash from financing activities increased by 106.8% from a negative position of N5.35bn in 2007 to a positive of N364.41mn in The cash and cash equivalent as at December 31, 2008 which stood at N3.64bn represented an increase of 55.98%. 4.3 Profitability Despite the seemingly harsh operating environment, Nestle performance in 2008 and in the last five years was impressive. Its Turnover increased from N28.46bn in 2004 to N51.74bn in 2008 representing a CAGR of 16.12% and increased by 17.52% between 2007 and An analysis of the turnover by products indicates that the revenue from food accounted for 61.3% of the total, while beverages accounted for 38.7%. 55,000 45,000 35,000 25,000 15,000 5, % Turnover ( ) Anaslysis of Turnover by Product (2008) Food 61.3% Beverages Nestlé s growth strategy combined with costs reduction strategies resulted in impressive performance in the profit before tax which increased from N6.10bn in 2004 to N11.86bn in 2008 representing a CAGR of 18.09% and a growth of 40.15% between 2007 and The cost of sales increased by 12.57% from N27.81bn in 2007 to N31.3bn in 2008, lower than the growth in the turnover, thereby leading to an improvement of 26% growth in Gross Profit(GP) from N16.22bn in 2007 to N20.44bn in The Earnings Before Interest Tax Depreciation and Amortisation (EBITDA), increased by 36.81% from N9.62bn in 2007 to N13.17bn in 2008 while the Earnings Before Interest and Tax increased by 41.77% from N8.39bn in 2007 to N11.90bn in FSDH Research Page 4

5 N N'mn Equity Research Report: Nestle Nigeria Plc -NIGERIA The return on equity stood at 92.25% in 2008, up from 87.26% in Similarly, the return on assets stood at 40.82% an increase from 39.51% recorded in In addition, the company s was able to use the capital employed to generated good return to the providers of capital as the return on capital employed increased marginally from 64.51% in 2007 to 65.89% in Nestlé s GP margin increased to 39.51% in 2008 from 36.85% in EBITDA margin and PBT margin increased to 25.45% and 22.93% in 2007 from 21.86% and 39.51% in 2007 respectively. The contribution of staff to the company s profitability was enormous within two years as PBT per staff increased to N6.67mn in 2008 from N5.27mn in 2007, while staff cost per staff decreased marginally from N4.07mn in 2007 to N3.96mn in ,000 10,000 5,000 - PBT Vs EBITA ( ) PBT EBITDA 4.4 Management Efficiency The number of times capital employed could generate revenue decline from 3.38x in 2007 to 2.86x in The reason that can be attributed to this is the harsh operating environment in which the company operated in the period under review. We expect the ratio to improve further following the current effort of the FGN to improve infrastructure in the country. Nestle needs to put in place strategy to reduce the collection period which increased from 6.45days in 2007 to 22 days in It is good to note that the payment period as at December 2008 which stood at 35 days is longer than the collection period. Looking at the historical performance of Nestle, we note that it has consistently deployed its assets to generate enough revenue to reward the equity holders. In other words, the risk of generating inadequate cash flow to meet interest expenses is minimized. As at 2008, the interest cover which represents the number of time the earnings of a company can cover its interest obligations declined to x from x. The ratio remained above 1x throughout the last five years covering 2004 and Going forward, we are confident that the company will be able to generate enough earnings from its operations. 4.5 Q1 March, 2009 Unaudited Result The unaudited Q1 09 result of Nestle for the period ended 30 March, 2009 showed that its turnover grew by 21.24% to N14.19bn, compared with N11.70bn in the corresponding period of Profit Before Tax (PBT) grew by 11.85% between 2008 and 2009 to N2.46bn from N2.75bn. The company s provision for tax which increased by 18.4% between 2008 and 2009 to N997.56mn from N842.8mn brought about a Profit After Tax (PAT) of N1.75bn as against N1.61bn in 2008, representing a growth of 8.50%. A cursory look at the company s profit margins reveals a decreasing trend compared with the results at the corresponding quarter in The PBT margin decreased marginally to 19.35% in Q1 09 from 20.98% as at Q1 08, and lower than 22.93% as at the end of the financial year in December, This shows that the company s total cost as a percentage of turnover stood at 80.65% in Q1 09, up marginally from 79.02% in the corresponding period in PAT Margin currently stands at 12.33%, down from 13.78% in the corresponding period in 2008, and down from 16.10% as at FY 08. The results also indicate that the percentage of the Turnover, PBT, and PAT in the Q1 result to the Full Year Audited Turnover, PBT and PAT for the period ended December, 2008 are: 27.42%, 23.15% and 20.99%, respectively. 4.6 Investment Analysis An Investment in Nestle shares in the last five year has proved to be worth while investments in terms of capital appreciation and good benefits (cash dividend and bonus payment). The Earnings Per Share (EPS) grew from N7.26 in 2004 to N12.61 in 2008 representing a CAGR of 14.82% and a growth of 53.10% between 2007 and In a similar development, Dividend Per Share (DPS) increased from N7.00 in 2004 to N12.55 in 2008 representing a CAGR of 15.71% and an increase of 53.05% between 2007 and Nestle maintained an average dividend payout in excess of 95% during the last 5 years. The net assets per share (NAPS) also increased from N8.28 in 2004 to N13.67 in 2008 representing a CAGR of 13.36% and a growth of 44.81% between 2007 and Net Asset Value ( ) DPS Vs EPS ( ) Dividend per share(kobo) Earnings per share (kobo) FSDH Research Page 5

6 4.6 Historical Return Analysis An analysis of the historical return on the investment in the Ordinary Shares of Nestle between 2003 and the date of this report was very good. The total return during the period was made up of Capital Appreciation, Bonus, and Dividend that the investors enjoyed on their investments. Our illustration using N100,000 initial investment in January 2003 grew to N386, as a result of capital appreciation, dividend and bonus earned. This resulted in a profit of N286, and a CAGR of 25.29%. The number of shares the initial investment bought, net of transaction costs, was 1,097units. The total dividend earned during the period is N78,305 while the bonus earned during the period was 617units.The share price appreciated by % from N87.50 in 2003 to N180 as at the time of this report. Asset Pricing Model (CAPM), the cost of equity generates 13.62%. We use the cost of Debt of 7.5% and a tax rate of 32%. Weighing the market value of equity with the market value of debt, the Weighted Average Cost of Capital (WAAC) generates 13.21%. We used mn shares in issue. The DCF Model generates N per share, the DFE Model generates N per share and the DDM generates N per share. A simple average of the 3 models generates N which is our fair value. The 2009 forward earnings yield based on our fair value generate 2.25% while the 2009 forward Dividend Yield based on N12.73 Dividend Per Share at our fair value generates 5.19%. We therefore placed a BUY on Nestle at the current market Price for both dividend payment and capital appreciation. 4.7 Valuation In arriving at a fair value for Nestle Nigeria Plc, we used three valuation methods which are Discounted Free Cash Flow(DFCF),Discounted Future Earnings (DFE) and Dividend Discount Model(DDM). We project Turnover, Earnings Before Interest and Tax(EBIT), Earnings Before Interest Tax Depreciation and Amortization(EBITDA), Profit After Tax(PAT) and Dividend Payment for the periods ending December 2009, 2010, 2011, 2012 and We estimate the Turnover of N60.8bn, N71.46bn, N83.99bn, N98.70bn and N115.99bn for 2009, 2010, 2011, 2012 and 2013 respectively. We estimate EBIT of N12.95bn, N15.22bn, N17.89bn, N21.02bn and N24.70bn for 2009, 2010, 2011, 2012 and 2013 respectively based on EBIT Margin of 21.30% for the period. We estimate EBITDA of N14.25bn, N16.56bn, N19.28bn, N22.45bn and N26.19bn for 2009, 2010, 2011, 2012 and 2013 respectively. We also project a FCF of N5.17bn, N7.75bn, N9.55bn, N11.69bn and N14.23bn, PAT of N8.51bn, N10.09bn, N11.96bn, N14.13bn and N16.67bn and Dividend Payment of N8.41bn, N9.98bn, N11.82bn, N13.96bn and N16.48bn for 2009, 2010, 2011, 2012 and 2013 respectively. The dividend payment is based on a dividend payment of 98.83%. We applied a terminal growth rate of 6.32%. We use a beta value of 0.31x based on the 5-year historical returns on the company share price and the Nigerian Stock Exchange All Share Index (NSEASI). We used the coupon rate of 10.50% as our risk free rate and a risk premium of 10.02%. Applying foregoing parameters on the Capital Nestle Nigeria Vs NSE ASI Rebased (May, 08-May, 09) NESTLE NIGERIA PLC NSE REBASED FSDH Research Page 6

7 Table 5: Profit & Loss Account( ), N mn Change (%) CAGR(%) Turnover 51,742 44, ,423 34,336 28, Cost of Sales 31,300 27, ,717 21,116 18, Gross Profit 20,441 16, ,705 13,220 10, Operating Profit 11,904 8, ,013 7,642 5, EBITDA 13,168 9, ,995 8,273 6, PBT 11,862 8, ,198 7,908 6, Tax 3,531 3, ,538 2,605 2, PAT 8,332 5, ,660 5,303 3, Balance Sheet( ), N mn Change(%) CAGR (%) Fixed Assets 13,817 10, ,336 6,183 3, Current Assets 15,342 10, ,572 10,352 9, Total Assets 29,159 21, ,908 16,875 13, Current Liabilities 11,094 8, ,325 7,234 8, Long Term Liabilities 9,035 6, ,223 3,661 3, Total Liabilities 20,128 15, ,548 10,895 11, Working Capital 4,249 2, ,247 3, Total Equity 9,031 6, ,360 5,980 1, Key Financial Ratio( ) Gross Profit Margin(%) EBITDA margin(%) PBT margin(%) ROE(%) ROCE(%) Collection Days Payment Days Current Ratio(x) Debt Ratio(%) Total Debt to Equity(%) Interest Cover(x) Equity/Assets(%) EPS(N) DPS(N) Net Asset Per Share(N) FSDH Research Page 7

8 Table 6: FSDH Research Earnings Forecast for Nestle ( ) Turnover(N mn) 60,809 71,464 83,987 98, ,999 EBIT(N mn) 12,950 15,219 17,886 21,886 24,703 EBITDA(N mn) 14,254 16,564 19,275 22,454 26,185 PBT(N mn) 12,578 14,926 17,671 20,883 24,645 Tax(N mn) 4,068 4,827 5,715 6,754 7,970 PAT(N mn) 8,510 10,099 11,956 14,130 16,675 Dividend Payment(N mn) 8,410 9,980 11,816 13,964 16,479 EBIT Margin(%) EBITDA Margin(%) PBT Margin(%) PAT Margin(%) EPS(N) DPS(N) Earnings Yield(%) Dividend Yield(%) P/E Ratio(x) Number of Shares(mn) Dividend Payout(%) Table 7: Annual Capital Growth & Returns Analysis of N100,000 Investment in Nestle Nigeria Plc since January 02, 2003 Value Receipt Period Amt Invested 100,000 Holding As At January 1,097 1,371 1,371 1,371 1,371 1,741 1,714 Amt. used less cost 96,000 Bonus Shares Received Share Price Jan Cumulated Holding 1,371 1,371 1,371 1,371 1,714 1,714 1,714 No of Units Purchased 1,097 Dividend Earned 6,911 8,639 8,639 12,341 12,465 12,958 16,352 78,305 Date of Valuation June 01, 09 Accumulated Shareholding 1, Increase in Shareholding(%) Price (N) Market Value (N) 308, Total Dividend (N) 78, Value of Investment (N) 386, Cost of Investment (N) 100,000 Profit (N) 286, % Increase CAGR FSDH Research Page 8

9 Table 8 : Comparative Analysis: 2007 Company Nestle Cadbury Flour Mills PZ 7-UP Average Turnover 51,742 24, ,661 65,945 30,572 60,044 Gross Profit 20,441 7,125 20,917 16,300 12,514 15,459 EBITDA 13, ,007 8,407 4,978 9,631 PBT 11,862 2,848 9,878 5,980 2,481 6,610 PAT 8,332 2,590 6,363 4,380 1,609 4,655 Total Assets 29,160 14, ,150 50,397 23,982 45,455 Current Liabilities 11,094 23,180 52,523 14,113 6,752 21,532 Long Term Liabilities 9,035 3,734 21,571 3,570 10,007 9,583 Interest Bearing Liabilities 5,980 15,150 39,198 1,541 10,087 14,391 Working Capital 4,249 (13,867) 5,749 18,141 2,989 3,452 Capital Employed 18, ,628 36,285 17,230 25,786 Net Assets 9,031 (3,013) 35,057 32,714 7,223 16,202 EBITDA Margin(%) Interest Cover(x) (0.40) Debt Ratio(%) Total Debt/Equity(%) N/A The companies shown here have different financial year end. Contact: For enquiries please contact us at our offices: Lagos Office: UAC House (6 th -8 th Floors) 1/5 Odunlami Street, P.M.B Lagos. (Tel.) (Fax) Port Harcourt Office: Afribank Bank Building (2nd floor, 5 Trans Amadi Road, Port Harcourt.(Tel) (Fax) Abuja Office: Sterling Bank Building (Formerly NAL Abuja Complex), Plot 990, Cadastral Zone AO, Central Business District, (Behind Leventis Stores), Abuja FCT (Tel) (Website): fsdhsecurities@fsdhgroup.com Disclaimer Policy This publication is produced by FSDH Securities (FSDH Sec) a subsidiary of First Securities Discount House Limited (FSDH) solely for the information of users who are expected to make their own investment decisions without undue reliance on any information or opinions contained herein. The opinions contained in the report should not be interpreted as an offer to sell, or a solicitation of any offer to buy any investment. FSDH Sec may invest substantially in securities of companies using information contained herein and may also perform or seek to perform investment services for companies mentioned herein. Whilst every care has been taken in preparing this document, no responsibility or liability is accepted by any member of FSDH or FSDH Sec. for actions taken as a result of information provided in this publication. FSDH Research Page 9