Bangkok Dusit Medical Services

Transcription

1 Thailand Company Guide Version 9 Bloomberg: BDMS TB Reuters: BGH.BK Refer to important disclosures at the end of this report DBS Group Research. Equity 30 Mar 2018 HOLD Last Traded Price ( 29 Mar 2018): Bt23.50 (SET : 1,766.92) Price Target 12-mth: Bt22.00 (-6% downside) (Prev Bt21.00) Analyst Apichaya Ketruttanaborvorn apichayak@th.dbs.com What s New We expect strong 1Q18F earnings of Bt2.3bn(+16% y- o-y, +12% q-o-q) The strong growth was on the back of the epidemic outbreak and low base in 1Q17 Maintain HOLD with a higher DCF-based TP of Bt22 Price Relative Bt Relative Index Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 (LHS) Relative SET (RHS) Forecasts and Valuation FY Dec (Btm) 2016A 2017A 2018F 2019F Revenue 65,237 69,123 76,035 82,118 EBITDA 16,118 16,910 19,219 20,352 Pre-tax Profit 10,694 12,453 11,564 12,459 Net Profit 8,386 10,215 9,127 9,879 Net Pft (Pre Ex.) 8,178 8,020 9,127 9,879 Net Pft Gth (Pre-ex) (%) 6.1 (1.9) EPS (Bt) EPS Pre Ex. (Bt) EPS Gth Pre Ex (%) 6 (2) 14 8 Diluted EPS (Bt) Net DPS (Bt) BV Per Share (Bt) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) CASH ROAE (%) Earnings Rev (%): 11 4 Consensus EPS (Bt): Other Broker Recs: B: 21 S: 1 H: 9 Source of all data on this page: Company, DBSVTH, Bloomberg Finance L.P Entering high season in 1Q18F but valuation is lofty Maintain HOLD with a higher TP of Bt22. We expect BDMS s operating performance to recover in FY18F, thanks to a rebound in international patients, strong domestic demand from the epidemic outbreak in 1Q18F, as well as a low base in FY17. We expect BDMS to register a strong earnings growth of 14.2% (vs 1.9% earnings contraction in FY17). However, the expected 14% earnings growth CAGR over FY17- FY20F is still not justified with its rich valuation of 40x FY18F PE. As a result, we maintain our HOLD rating on BDMS with a higher DCF-based TP of Bt22. Where we differ. Market is overestimating the recovery in operating performance. In the wake of signs of a rebound in operating performance in FY18F as well as management s more bullish view, consensus now has a more optimistic view on BDMS. However, we think its current valuation of 40x FY18F PE is not justified given its 14% earnings CAGR over FY17-FY10F. This should cap the share price upside at least in the short term, given no new catalyst. Potential catalysts. Recovery in EBITDA margins, sustainable increase in revenue intensity cases, and higher proportion of international patients. After the current mega investment cycle, in the longer term, we believe that BDMS should be able to record sustainable earnings growth from its strong healthcare network, coupled with its ability to take care of patients with high complexity diseases at tertiary care as well as a solid reputation and ability to deliver world-class services at a lower cost (vs healthcare service providers in developed countries) via its global and local partnerships. This should bring about sustainable revenue intensity growth and a higher proportion of international patients. Valuation: We maintain HOLD with a higher DCF-based TP of Bt22.0/sh. (WACC = 7.4%, Terminal Growth = 3%) Key Risks to Our View: Political unrest could affect medical tourism in the country and derail BDMS s international revenue growth targets. At A Glance Issued Capital (m shrs) 15,491 Mkt. Cap (Btm/US$m) 364,037 / 11,647 Major Shareholders (%) Prasarttong-Osoth's Family 21.8 Thongtang's Family 14.1 Bangkok Airways 6.5 Free Float (%) 3m Avg. Daily Val (US$m) 20.9 ICB Industry : Health Care / Health Care Equipment & Services ed: CK / sa: PY, CS

2 WHAT S NEW Entering high season in 1Q18F Strong healthcare demand in 1Q18F: BDMS s 2M18 revenue growth turned out to be strong, at high teens. The credit goes to the low base in 1Q17 (when earnings contracted by 17% on the lack of epidemic outbreak in the quarter), the recovery in international patients as well as an epidemic outbreak, including diarrhoea from Rotavirus and influenza. Expect impressive earnings performance in 1Q18F: We expect 1Q18F earnings to be strong at Bt2.3bn (15.9% y-o-y, 12.3% q-o-q). This was on the back of (i) the expected 13% revenue growth in revenue following the epidemic outbreak during the quarter, and (ii) gross profit margin (GPM) inching up to 31% (vs 30.9% in 1Q17), thanks to expectations of higher utilisation rates. Revising up revenue growth assumption: Thanks to the bright outlook for healthcare demand in 1Q18F as well as the recovery for the international patient group, we bump up our revenue growth assumption in FY18F from 7% to 10% and our FY19F-FY25F growth assumption of 8% from 5% (vs management s revenue growth guidance of 6-8%). Improving operation but with rich valuation. We expect FY18F core earnings to register growth of 14% (vs core earnings contraction of 2% in FY17). However, as its improving operations imply only 14% earnings CAGR over FY17-FY20F, its current valuation of 40x FY18F PE is still not justified. Thus, we maintain our HOLD call on BDMS with a higher DCF-based TP of Bt22. BDMS: 1Q18F earnings preview FY Dec 1Q2017 4Q2017 1Q2018F % chg yoy % chg qoq Revenue 16,535 17,795 18, Cost of Goods Sold (11,431) (12,457) (12,889) Gross Profit 5,104 5,338 5, Other Oper. (Exp)/Inc (3,426) (3,702) (3,888) Operating Profit 1,678 1,635 1, Other Non Opg (Exp)/Inc Associates & JV Inc (4.8) 0.0 Net Interest (Exp)/Inc (363) (330) (330) 9.0 nm Exceptional Gain/(Loss) nm nm Pre-tax Profit 2,506 2,568 2, Tax (462) (447) (469) Minority Interest (70.4) (84.7) (84.7) (20.2) 0.0 Net Profit 1,974 2,036 2, Net profit bef Except. 1,974 2,036 2, EBITDA 4,121 4,221 4, Margins (%) Gross Margins Opg Profit Margins Net Profit Margins Source of all data: Company, DBSVTH Page 2

3 CRITICAL DATA POINTS TO WATCH Critical Factors Slowing down its expansion plan. BDMS now has 45 operational hospitals and is only a few steps from reaching its goal of 50 hospitals in However, management has revised up its topline growth guidance for its hospital business in FY18 from 5% previously to 6-8%), and will focus more on improving profitability. The outlook for its non-hospital businesses, such as Saline, is still strong (35% p.a. revenue growth) but its revenue contribution is just c.5% of BDMS s total revenue 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Profitability 31.7% 32.6% 32.3% 31.1% 30.9% 29.0% 29.6% 29.1% 30.0% 28.5% 22.1% 23.6% 22.2% 21.8% 22.7% 19.9% 20.7% 20.8% 19.7% 13.1% 14.7% 13.5% 11.2% 11.9% 11.9% 11.4% 5.6% Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 To upgrade ten existing hub hospitals to excellence centres. BDMS is aiming to increase the portion of international patients to account for 50% of its portfolio (vs 30% currently), and plans to focus on maximising the group s profitability instead of volume growth. In the first phase, BDMS plans to upgrade its ten hub hospitals to excellence centres* (tertiary-care centres) of a high standard, similar to the leading hospitals in Singapore and Australia. Thereafter, it plans to achieve the same standards as leading hospitals in the US and Europe but at competitive prices. In order to achieve this goal, BDMS has formed both international and local medical partnerships. Tapering of capex at least in the short-term. After the Bt10.8bn investment of the acquisition of 6k sqm site of Swiss Hotel Park Nai Lert and the Promenade building, to develop a wellness clinic with capex of Bt2bn, management aims to taper capex at least in the short term. We forecast FY18F capex of Bt5.3bn (vs average capex of Bt14.4bn in the past five years). Additionally, management expects to continue its cost containment measures by decreasing SG&A expense from supporting expenses as well as headcount freeze and job enlargement. Target to increase hospital utilisation rate to boost both revenue and profitability. Management aims to increase the IPD utilisation rate to 70% from 64% in FY17. This is on the back of the expected increase in proportion of patients under insurance coverage, which accounts for 26% of BDMS s total revenue. Note that the health insurance premium nationwide had grown at 10% p.a. since FY15. Additionally, only 10% of Thai people are covered by health insurance, which means more room to grow. Delay of the full opening of wellness clinic. Its wellness clinic, Royal Life Clinic, had its soft opening in Feb 2018 but visits are via appointments only. The next clinic, Musculoskeletal and Sports clinic, is expected to be opened by Mar Management expects the full opening of its OPD section to take place by 3Q18F. The membership subscription for its IPD section should be opened in FY19F, given that the IPD section is expected to be completed by 1H19F. However, the gradual opening of the wellness clinic implies limited loss contribution to BDMS. Patient revenue by type Increasing insurance portion Expansion Plan Hospitals Capacity 1st phase Commission Date BDMS Wellness Clinic BDMS Wellness Clinic n/a OPD section 3Q18 Green Field Hospitals Bangkok Hospital Chiangrai Phoenix 220 n/a 2019 Bangkok International 100 n/a 2019 Bangkok Hospital Jomtien Pattaya n/a n/a n/a Expansion of Existing Hospitals Chiva Transitional care Japanese Hospital 45 n/a 2019 Top 5 international patient group by country (% of total revenues) 2.5% 2.0% 1.5% 1.0% 0.5% Gross Profit Margin (GPM) EBITDA margin Net Profit Margin (NPM) Insurance, 26% 2.3% Contract, 9% Others, 5% 1.7% Social Security, 2% 1.6% 1.6% Selfpay, 58% 1.5% 0.0% Japan Myanmar UAE UK USA Page 3

4 Mar-95 May-96 Jul-97 Sep-98 Nov-99 Jan-01 Mar-02 May-03 Jul-04 Sep-05 Nov-06 Jan-08 Mar-09 May-10 Jul-11 Sep-12 Nov-13 Jan-15 Mar-16 May-17 Company Guide Appendix 1: BDMS s price correlation with critical factors BDMS s share price vs net income Btm 3,000 2,500 2,000 1,500 1, Bt Remarks BDMS s share price tends to move in tandem with its net income. A sustained rise in net profit ahead should translate into positive catalysts for the share price. Net Income (Btm) Last Price (RHS) Source: Company, Bloomberg Finance L.P., DBSVTH BDMS s share price vs SET health care index Bt Remarks BDMS s share price tends to move in line with SET healthcare index. This is because BDMS is the largest healthcare service provider in Thailand in terms of patient service revenue and market capitalisation. Thus, BDMS seems to be a good proxy for the healthcare sector in the Thai market. The recent healthcare sector s PE de-rating has also caused BDMS s share price to drop 16% from its peak. 0 0 SETHELTH Index (LHS) BDMS TB Equity (R1) Source: Company, Bloomberg Finance L.P., DBSVTH Page 4

5 Balance Sheet: Despite its recent mega investment in the BDMS wellness clinic, BDMS ended FY17F with a net gearing ratio of 0.2x. Share Price Drivers: Strong economic recovery (c.4% growth), especially in the provincial markets, could boost EBITDA for the new hospitals and the group. Additionally, BDMS is now targeting to intensify revenue intensity and is focusing on the premium market. Thus, a strong economic recovery should boost its revenue and profitability. Key Risks: Political turmoil. Political unrest could deter medical tourism in the country and derail BDMS s international revenue growth targets. Weak economy in the provinces. The group s operations in Bangkok is less vulnerable to the Thai economy as i) the volume of foreign patients going to headquarters and Phayathai group continues to increase, and ii) the provincial economy was hit by lower farm income. Since seven of the new hospitals (which are currently loss-making) are located outside Bangkok. Leverage & Asset Turnover (x) A 2016A 2017A 2018F 2019F Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure Btm 25, , , , , A 2016A 2017A 2018F 2019F Capital Expenditure (-) 16.0% ROE (%) Company Background Public Company Limited (BDMS) owns and operates 45 hospitals with a total of 7,592 active beds under six hospital brands. It is the largest private hospital in Thailand in terms of revenue from patient services and market capitalisation. With its hub-and-spoke model, BDMS aims to provide a strong patient referral system and higher efficiency through scale Revenue breakdown FY17 Thai: 70%, Int l: 30% OPD: 47%, IPD: 53% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (x) A 2016A 2017A 2018F 2019F Forward PE Band (x) +2sd: 46.2x +1sd: 42.5x Avg: 38.8x -1sd: 35x -2sd: 31.3x 25.1 Mar-14 Mar-15 Mar-16 Mar-17 (x) 7.8 PB Band (x) sd: 7.02x +1sd: 6.48x Avg: 5.93x -1sd: 5.38x -2sd: 4.83x 4.3 Mar-14 Mar-15 Mar-16 Mar-17 Page 5

6 Appendix 2: Hospitals Structured beds Group 1 (Bangkok hospital brand) 1 Bangkok Hospital Bangkok Heart Hospital 97 3 Wattanosoth Hospital 48 4 Bangkok Huahin 60 5 Bangkok Sanamchan Thepakorn Muang Petch Bangkok Muangraj Royal Phnom Pehn Royal Angkor International 30 Group 2 (Samitivej and BNH brand) 11 Samitivej Sukhumvit Samitivej Srinakarin Samitivej Sriracha Samitivej Thonburi Samitivej Chonburi BNH Hospital Bangkok Chinatown 59 Group 3 (East) 18 Bangkok Pattaya Bangkok Rayong Bangkok Chanthaburi Bangkok Trat Sri Rayong 195 Group 4 (North, Northeast and Cambodia) 23 Bangkok Chiangmai Bangkok Ratchasima Bangkok Pakchong Bangkok Udon Bangkok Phitsanulok Bangkok Khon Kaen Bangkok Phrapradaeng 60 Group 5 (Phyathai and Paolo brand) 30 Phyathai Phyathai Phyathai Phyathai Sriracha Phyathai Nawamin Paolo Paholyothin Paolo Samutprakarn Paolo Chokchai Paolo Rangsit Paolo Kaset 162 Group 6 (South) 40 Bangkok Phuket Phuket International Dibuk Bangkok Hat Yai Bangkok Samui Bangkok Suraj 150 Total 7,592 Group 7: Non-Hospital Ownership i) National Healthcare System 100% ii) Bio Molecular Laboratories 95% iii) The Medicipharma 87% iv) A.N.B Laboratories 100% v) Save drug Center 100% vi) General Hospital Products 45% Page 6

7 Appendix 3: Upgrading existing ten hospitals to Centre of Excellence with focus on international patients Appendix 4: BDMS wellness clinic Page 7

8 Appendix 5: BDMS completed continuum of healthcare Page 8

9 Appendix 6: Medical cooperation with international and local partners Page 9

10 Income Statement (Btm) FY Dec 2015A 2016A 2017A 2018F 2019F Revenue 60,262 65,237 69,123 76,035 82,118 Cost of Goods Sold (41,130) (45,277) (47,975) (53,485) (57,476) Gross Profit 19,133 19,960 21,148 22,550 24,642 Other Opng (Exp)/Inc (12,827) (13,644) (14,488) (15,967) (17,245) Operating Profit 6,305 6,316 6,660 6,583 7,397 Other Non Opg (Exp)/Inc 3,411 3,629 3,665 4,504 4,301 Associates & JV Inc 1,259 1,370 1,417 1,713 1,927 Net Interest (Exp)/Inc (1,089) (829) (1,484) (1,235) (1,166) Exceptional Gain/(Loss) , Pre-tax Profit 10,095 10,694 12,453 11,564 12,459 Tax (1,864) (1,922) (1,879) (2,077) (2,221) Minority Interest (314) (385) (359) (359) (359) Preference Dividend Net Profit 7,917 8,386 10,215 9,127 9,879 Net Profit before Except. 7,709 8,178 8,020 9,127 9,879 EBITDA 15,362 16,118 16,910 19,219 20,352 Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) (4.6) (1.2) 12.4 Net Profit Gth (Pre-ex) (%) (1.9) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Page 10

11 Quarterly / Interim Income Statement (Btm) FY Dec 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 Revenue 16,535 16,216 18,577 17,795 18,685 Cost of Goods Sold (11,431) (11,503) (12,584) (12,457) (12,889) Gross Profit 5,104 4,713 5,992 5,338 5,796 Other Oper. (Exp)/Inc (3,426) (3,559) (3,800) (3,702) (3,888) Operating Profit 1,678 1,154 2,192 1,635 1,909 Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (363) (409) (433) (330) (330) Exceptional Gain/(Loss) 0.0 #,##0;(#,## 2, Pre-tax Profit 2,506 2,076 5,988 2,568 2,841 Tax (462) (1,091) (564) (447) (469) Minority Interest (70.4) (75.9) (128) (84.7) (84.7) Net Profit 1, ,297 2,036 2,287 Net profit bef Except. 1, ,417 2,036 2,287 EBITDA 4,121 3,769 4,850 4,221 4,494 Growth Revenue Gth (%) (0.8) (1.9) 14.6 (4.2) 5.0 EBITDA Gth (%) 3.4 (8.5) 28.7 (13.0) 6.5 Opg Profit Gth (%) 18.8 (31.3) 90.0 (25.4) 16.7 Net Profit Gth (Pre-ex) (%) (0.2) (53.9) (15.7) 12.3 Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (Btm) FY Dec 2015A 2016A 2017A 2018F 2019F Net Fixed Assets 52,950 56,164 71,559 71,551 68,919 Invts in Associates & JVs Other LT Assets 35,803 38,180 36,708 37,398 38,432 Cash & ST Invts 5,557 4,765 5,663 12,643 19,083 Inventory 1,286 1,516 1,735 1,908 2,057 Debtors 6,484 6,033 6,940 8,191 12,296 Other Current Assets Total Assets 102, , , , ,207 ST Debt 2,939 5,964 1,558 1,558 1,558 Creditor 4,935 4,546 4,750 5,222 5,631 Other Current Liab 6,300 7,368 7,110 8,060 8,544 LT Debt 27,013 13,327 18,110 18,110 16,110 Other LT Liabilities 4,974 17,430 25,229 25,229 25,229 Shareholder s Equity 53,676 55,719 63,071 70,741 80,618 Minority Interests 2,499 2,586 2,800 3,159 3,518 Total Cap. & Liab. 102, , , , ,207 Non-Cash Wkg. Capital (3,209) (4,083) (3,163) (2,795) 598 Net Cash/(Debt) (24,395) (14,526) (14,005) (7,024) 1,416 Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) CASH Net Debt/Equity ex MI (X) CASH Capex to Debt (%) Z-Score (X) Page 11

12 Cash Flow Statement (Btm) FY Dec 2015A 2016A 2017A 2018F 2019F Pre-Tax Profit 10,095 10,694 12,453 11,564 12,459 Dep. & Amort. 4,387 4,803 5,168 6,420 6,727 Tax Paid (2,198) (2,179) (2,332) (2,465) (2,598) Assoc. & JV Inc/(loss) (1,259) (1,370) (1,417) (1,713) (1,927) Chg in Wkg.Cap (633) (436) (3,393) Other Operating CF 1,420 12,542 10,235 1,188 1,048 Net Operating CF 12,572 24,694 23,473 14,559 12,315 Capital Exp.(net) (10,613) (7,795) (20,341) (6,188) (3,874) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF (10,613) (7,795) (20,341) (6,188) (3,874) Div Paid (3,563) (3,083) (4,492) (5,577) (1.6) Chg in Gross Debt (1,471) (10,661) (2,000) Capital Issues Other Financing CF 2, , Net Financing CF (2,444) (13,694) (2,159) (5,577) (2,002) Currency Adjustments Chg in Cash (484) 3, ,793 6,440 Opg CFPS (Bt) Free CFPS (Bt) Target Price & Ratings History Bt Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Note : Share price and Target price are adjusted for corporate actions. Source: DBSVTH Analyst: Apichaya Ketruttanaborvorn S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 28 Apr BUY 2: 02 May BUY 3: 16 May BUY 4: 19 May HOLD 5: 06 Jun HOLD 6: 14 Jul HOLD 7: 26 Jul HOLD 8: 15 Aug HOLD 9: 24 Aug HOLD 10: 13 Sep HOLD 11: 13 Nov HOLD 12: 14 Dec HOLD 13: 13 Feb HOLD 14: 02 Mar HOLD THAI-CAC Corporate Governance CG Rating (as of Oct 2017) n/a THAI-CAC is Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of Feb 2018) are categorised into: Score Declared Certified Description Companies that have declared their intention to join CAC Companies certified by CAC. Corporate Governance CG Rating is based on Thai Institute of Directors (IOD) s annual assessment of corporate governance practices of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure and transparency (20%), role of stakeholders (20%), equitable treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to each company based on their scoring as follows: Score Range Number of Logo Description Excellent Very Good Good Satisfactory Pass <50 No logo given N/A Page 12

13 DBSVTH 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: 30 Mar :47:03 (THA) Dissemination Date: 30 Mar :06:33 (THA) Sources for all charts and tables are DBSVTH unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). 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14 DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests 2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 28 Feb Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. Page 14

15 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). 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 15

16 United Kingdom This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Commission, Thailand. This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom. In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. Dubai International Financial Centre United Arab Emirates United States Other jurisdictions This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. This report is provided by DBS Bank Ltd (Company Regn. No E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. This report was prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). 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 16

17 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 17