China / Hong Kong Company Guide China Hongqiao Group

Transcription

1 China / Hong Kong Company Guide Version 5 Bloomberg: 1378 HK Equity Reuters: 1378.HK Refer to important disclosures at the end of this report DBS Group Research. Equity 23 Nov 217 HOLD Last Traded Price ( 23 Nov 217):HK$9.32 (HSI : 29,78) Price Target 12-mth: HK$9.55 (2% upside) (Prev HK$6.85) Analyst Addison Dai addisondai@dbs.com FY17F earnings lowered to reflect impairment losses and cost inflation; raised FY18F earnings slightly to reflect higher ASP outlook Winter heating season capacity curtailment so far has disappointed, which will weigh on Al prices in the near term Expect better supply and demand dynamics in 218 Price Relative HK$ Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 (LHS) Relative HSI (RHS) Relative Index Forecasts and Valuation FY Dec (RMB m) 216A 217F 218F 219F Turnover 61,396 87,932 94,14 98,94 EBITDA 18,76 2,48 25,613 28,291 Pre-tax Profit 9,764 9,435 14,897 17,47 Net Profit 6,85 6,536 1,32 12,12 Net Pft (Pre Ex) (core profit) 6,85 8,896 1,32 12,12 Net Profit Gth (Pre-ex) (%) 84.8 (4.6) EPS (RMB) EPS (HK$) Core EPS (HK$) Core EPS (RMB) EPS Gth (%) 62.4 (9.9) Core EPS Gth (%) Diluted EPS (HK$) DPS (HK$) BV Per Share (HK$) PE (X) Core PE (X) P/Cash Flow (X) P/Free CF (X) nm EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): -35.2% 2.3% new Consensus EPS (RMB) Other Broker Recs: B: 3 S: H: 2 Source of all data on this page: Company, DBSV, Thomson Reuters, HKEX Extended correction in alumina prices to weigh on Al prices in near term Maintain HOLD, TP raised to HK$9.55. We have cut FY17F earnings by 35% to reflect impairment losses (estimated at Rmb3.4bn) arising from illegal capacity shut down of 2.68mt in 3Q17 and projection of higher production cost. We estimate that electricity cost and carbon anodes will increase unit aluminium (Al) production cost by Rmb1,838/t y-o-y (electricity: Rmb1,283/t; carbon anodes: Rmb556/t) in 217. As such, we lower our FY17F Al unit GP to Rmb2,32/t from Rmb2,87/t. We raised FY18F earnings by 2% to reflect higher forecast of SHFE Al prices, which will more than offset raw material cost inflation. In 218, we project SHFE Al prices to rise 6.% y-o-y. Aluminium s winter heating season capacity curtailment so far has disappointed. The winter heating season officially kicked off on 15 Nov. We estimate output capacity to be curtailed by around 1.25mt (mainly Henan, which contributes to around.8mt). Shandong, a dominant producing province which accounts for 28% of national Al output, has not contributed to any significant cuts as Hongqiao and Xinfa have not announced further halts after illegal capacity was shut down in 3Q17. Meanwhile, upstream alumina producers are slashing selling prices, anticipating output of aluminium to reduce. Alumina prices have pulled back to the current Rmb3,52/t from the peak of Rmb3,76/t in early- Nov. Given alumina still enjoys robust profitability at current price levels, an extended correction in alumina prices could continue to weigh on SHFE Al prices in the next three months. SHFE Al prices should shape uptrend in 218. We project China s supply and demand dynamics to improve in the year ahead as growth in new capacity is expected to moderate to 2.8mt by end-218 (versus 3.6mt in FY17F and 4mt in 216). Leading Al producers have no plans to add new capacity. We project Al output growth of 3.6% to be slower than demand growth of 6.% in 218. Valuation: Maintain HOLD, TP raised to HK$9.55. We have rolled over our valuation base to 218. Our target valuation is largely unchanged at 6.3x FY18F PE. The valuation is.5sd above the company s historical five-year average, justified by improving industry supply/demand dynamics and expected improvement in corporate governance as CITIC Group (a SOE) has become the company s substantial shareholder, holding 1% equity stake through subscription of share placement in August 217. Key Risks to Our View: Slower-than-expected recovery in aluminium prices in 218 as high social Al inventory lingers longer. At A Glance Issued Capital (m shrs) 7,26 Mkt. Cap (HK$m/US$m) 67,661 / 8,663 Major Shareholders China Hongqiao Holdings Ltd. (%) 81.1 Free Float (%) m Avg. Daily Val. (US$m) 37.6 ICB Industry : Basic Materials / Industrial Metals ed-js/ sa- CS/AH

2 CRITICAL FACTORS TO WATCH Critical Factors China aluminium (Al) supply and demand dynamics. During January to October 217, China s Al output rose 14.52% y-o-y to 3.5mt, primarily driven by consumption growth (China s Al consumption grew 11.5% y-o-y in 1H17). Based on total aluminium capacity under operation of 36.2mt, this implies an utilisation of 84%. In 217, we estimate China to add net new capacity of 3.6mt, taking into consideration of new supply, capacity shut-down and capacity resumption, representing a y- o-y growth of 8.7%. Meanwhile, we estimate consumption to grow by 1% y-o-y (or 3.3mt y-o-y) to 36.3mt. In 218, we project China s supply and demand dynamics to improve as growth in new capacity is expected to moderate to 2.8mt by end-218 (versus 3.6mt in FY17F and 4mt in 216). Leading Al producers have no plans to add new capacity. In 218, we project Al output growth of 3.6% to be slower than demand growth of 6.% Social Al inventory. China s aggregate social inventory at five major warehouses (covering Shanghai, Wuxi, Hangzhou, Nanhai and Gongyi) had increased to 1.67mt for week ended 16 November 217 from.34mt in the beginning of the year and 1.2mt by end-june 217. The restocking YTD represents market s high expectations of supply-side reform and capacity curtailment in winter heating season. The winter heating season officially kicked off on 15 November 217. We project there will a gradual decline in social Al inventory going forward. SHFE Al prices. At present, SHFE Al prices have declined to Rmb15,355/t from September s peak of Rmb16,51/t, triggered by disappointed execution of winter heating season capacity curtailment and lowered alumina prices (retreated to current Rmb3,52/t from the November s peak of Rmb3,76/t). Given alumina still enjoys robust profitability at current price levels, an extended correction in alumina prices could continue to weigh on Al prices in the next three months. In 218, due to improvement in industry supply/demand dynamics and 1H17 s low base as well, we forecast SHFE Al prices to increase 6.% y-o-y to Rmb15,442/t (incl.vat). We estimate that every 1% change in SHFE Al prices will swing FY17F earnings by 9.2%. Unit production cost. Electricity cost accounts for c.37% of the company s COGS. As of end-1h17, the company is 79% selfsufficient in electricity. H17 s average electricity tariff was Rmb.276/kWh vs Rmb.18/kWh in 216 due to increase in thermal coal prices. Alumina cost accounts for c.28% of the company s COGS. As of end-1h17, the company is 9% selfsufficient in alumina. YTD carbon anode prices have rallied 49% y-o-y to Rmb3,855/t (incl.vat), which we estimate to account for 17% of FY17 COGS. We estimate every 1% change in production cost will swing FY17F earnings by 7.6%. 7,355 6,34 5,254 4,23 3,152 2,11 1,51 13,847 11,77 8,38 5,539 2,769 3,39 2,431 1,823 1, Sales volume (thousand tonne) ASP for aluminium products (Rmb/t) 13, , , , ,786.8 Unit GP for aluminium products (Rmb/t) 2, , , ,32. 2,98.9 Unit production cost - electricity (Rmb/kWh) F 218F 219F Unit production cost - alumina (Rmb/t) 1,636 1,49 1,554 1,63 1,66 Page 2

3 Appendix 1: China Hongqiao: Share price performance (HK$/sh) European sovereign debt crisis China's economy downward adjustment China aluminium industry's production cut due to loss making since 2H13 Concern over the company's stretched balance sheet as anticorruption in 215 dampened fixed asset investment growth and thus commodity prices Stock trading suspension due to short seller reports and change of auditor delayed results announcement of 216 and 1H17 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source: Bloomberg Finance L.P., DBS Vickers China Hongqiao: Share price vs SHFE Al prices (Rmb/t) 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, (HK$/sh) Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 SHFE Al prices (LHS) Share price (RHS) Source: Bloomberg Finance L.P., DBS Vickers Page 3

4 Balance Sheet: Fund raised. On August 217, Hongqiao placed 86.6mn new shares to CTI Capital Management Ltd. (an indirect subsidiary of CITIC Group) and raised net proceeds of HK$5,481mn (Rmb4,683mn). On the same day, Hongqiao issued US$32mn (Rmb2,139mn) aggregate principal amount of 5% convertible bonds due 222. Capex to slow down as no new capacity plan. We forecast 217/218 capex to decline to be Rmb8bn and Rmb5bn respectively versus Rmb18bn in 216. Our FY17/18F Op-CF is Rmb4,795mn and Rmb7,38mn respectively. We forecast net gearing in 218 to decline to 114% from 139% in 217. Share Price Drivers: SHFE Al prices to recover on dwindled inventory and restocking after 218 CNY (Chinese New Year) holidays. Key Risks: Alumina price risks. If domestic alumina prices continue to weaken, it will weigh on SHFE Al prices. Leverage & Asset Turnover (x) Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMBm 2,. 18,. 16,. 14,. 12,. 1,. 8,. 6,. 4,. 2, Supply risks. If leading producers are to resume the operation of shut-down illegal capacities in 218, this is downside risk to SHFE prices. Company Background Headquartered in Shandong, CHQ is the largest aluminium producer in China with vertical integrated operations (power/alumina/aluminium). At end-216, the company owned an aluminium output capacity of 7.44mt. 18.% 16.% 14.% 12.% 1.% 8.% 6.% 4.% 2.%.% x Capital Expenditure (-) ROE Avg: 5.5x Forward PE Band +1SD: 7x -1SD: 4x Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 PB Band x SD:.6x +1SD:.9x Avg:.8x Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Page 4

5 Key Assumptions FY Dec 215A 216A 217F 218F 219F Sales volume (thousand tonne) 4, , ,. 7,7. 7,282.1 ASP for aluminium products (Rmb/t) 1, , , , ,575.3 Unit GP for aluminium products (Rmb/t) 2,98.9 2, ,32. 2, ,979.1 Unit production cost - electricity (Rmb/kWh) Unit production cost - alumina (Rmb/t) 1, , , ,63.4 1,66.1 Segmental Breakdown (RMB m) FY Dec 215A 216A 217F 218F 219F Revenues (RMB m) Molten aluminium alloy 4,292 53,848 77,123 82,567 86,745 Aluminium alloy ingots 1,731 5,89 7,289 7,83 8,198 Others 2,87 2,458 3,521 3,769 3,96 Total 44,11 61,396 87,932 94,14 98,94 Income Statement (RMB m) FY Dec 215A 216A 217F 218F 219F Revenue 44,11 61,396 87,932 94,14 98,94 Cost of Goods Sold (35,82) (47,199) (71,776) (74,879) (77,163) Gross Profit 9,28 14,196 16,156 19,261 21,741 Other Opng (Exp)/Inc (967) (2,245) (1,642) (1,758) (1,847) Operating Profit 8,61 11,952 14,514 17,53 19,894 Other Non Opg (Exp)/Inc (58) 1,3 (1,514) 1,14 1,81 Associates & JV Inc Net Interest (Exp)/Inc (2,217) (3,346) (3,947) (4,2) (3,925) Dividend Income Exceptional Gain/(Loss) Pre-tax Profit 5,336 9,764 9,435 14,897 17,47 Tax (1,658) (2,949) (2,932) (4,629) (5,428) Minority Interest Preference Dividend Net Profit 3,77 6,85 6,536 1,32 12,12 Net Profit before Except. 3,77 6,85 6,536 1,32 12,12 EBITDA 12,197 18,76 2,48 25,613 28,291 Growth Revenue Gth (%) EBITDA Gth (%) (.3) Opg Profit Gth (%) (6.2) Net Profit Gth (%) (3.2) 84.8 (4.6) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Page 5

6 Interim Income Statement (RMB m) FY Dec 1H215 2H215 1H216 2H216 1H217 Revenue 22,453 21,657 25,375 36,2 46,197 Cost of Goods Sold (17,217) (17,865) (18,854) (28,345) (39,284) Gross Profit 5,236 3,792 6,521 7,675 6,913 Other Oper. (Exp)/Inc (476) (491) (547) (1,698) (893) Operating Profit 4,76 3,31 5,974 5,977 6,2 Other Non Opg (Exp)/Inc 139 (647) (2,38) Associates & JV Inc Net Interest (Exp)/Inc (968) (1,249) (1,897) (1,449) (2,7) Exceptional Gain/(Loss) Pre-tax Profit 3,931 1,45 4,462 5,32 2,13 Tax (1,222) (436) (1,197) (1,751) (61) Minority Interest (12) Net Profit 2, ,279 3,57 1,482 Net profit bef Except. 2, ,279 3,57 1,482 Growth Revenue Gth (%) Opg Profit Gth (%) 36.5 (35.3) Net Profit Gth (%) 33.4 (69.8) (54.8) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Page 6

7 Balance Sheet (RMB m) FY Dec 215A 216A 217F 218F 219F Net Fixed Assets 69,95 86,658 89,37 89,15 88,826 Invts in Associates & JVs Other LT Assets 3,882 7,84 1,548 12,935 15,893 Cash & ST Invts 8,489 12,842 4,795 7,38 1,827 Inventory 12,235 17,143 18,2 18,5 18,8 Debtors 1, ,65 2,7 2,73 Other Current Assets 1,954 18,43 28,337 29,696 3,776 Total Assets 16, , ,9 16,2 167,851 ST Debt 25,911 25,311 29, 29, 29, Creditors 5,754 7,56 13,3 13,5 13,7 Other Current Liab 1,462 16,836 22,264 22,584 22,84 LT Debt 23,371 44,417 38,228 36,228 34,728 Other LT Liabilities 4,724 2, Shareholder s Equity 35,567 44,798 49,641 57,287 66,254 Minority Interests Total Cap. & Liab. 16, , ,9 16,2 167,851 Non-Cash Wkg. Capital 8,25 11,595 13,623 14,812 15,82 Net Cash/(Debt) (4,794) (56,885) (62,433) (58,189) (52,91) 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) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) Page 7

8 Cash Flow Statement (RMB m) FY Dec 215A 216A 217F 218F 219F Pre-Tax Profit 5,336 9,764 9,435 14,897 17,47 Dep. & Amort. 4,643 5,65 6,666 6,695 6,896 Tax Paid (2,71) (2,318) (2,932) (4,629) (5,428) Assoc. & JV Inc/(loss) (Pft)/ Loss on disposal of FAs Chg in Wkg.Cap. (3,569) (3,317) Other Operating CF 3,431 3,49 3,894 3,964 3,866 Net Operating CF 7,77 12,829 17,232 21,77 22,973 Capital Exp.(net) (17,12) (18,) (8,) (5,) (5,) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF (276) (11,249) (9,83) (8) (8) Net Investing CF (17,396) (29,249) (17,83) (5,8) (5,8) Div Paid (1,368) (931) (1,642) (1,634) (2,58) Chg in Gross Debt 2,984 4,431 (2,5) (2,) (1,5) Capital Issues Other Financing CF (9,144) (18,911) (3,37) (1,12) (1,25) Net Financing CF 1,473 2,589 (7,45) (13,754) (14,15) Currency Adjustments Chg in Cash 846 4,169 (8,47) 2,243 3,788 Opg CFPS (RMB) Free CFPS (RMB) (1.49) (.72) Target Price & Ratings History HK$ S.No. Date Closing 12-mth Rating Price Target Price 1: 6-J an-17 HK$6.7 HK$6.85 Hold 2: 29-J un-17 HK$7.5 HK$6.85 Hold Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Source: DBS Vickers Analyst: Addison Dai Page 8

9 DBSVHK recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>2% 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, >1% for large caps) HOLD (-1% to +15% total return over the next 12 months for small caps, -1% to +1% for large caps) FULLY VALUED (negative total return i.e. > -1% over the next 12 months) SELL (negative total return of > -2% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 23 Nov :18:42 (HKT) Dissemination Date: 23 Nov :24:12 (HKT) Sources for all charts and tables are DBS Vickers unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers (Hong Kong) Limited ( DBSV HK ). This report is solely intended for the clients of DBS Bank Ltd., DBS Bank (Hong Kong) Limited (DBS HK), DBSV HK, and DBS Vickers Securities (Singapore) Pte Ltd. ( DBSVS ), 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 DBSV HK. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the DBS Group ) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. 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10 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, 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 21 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. 3. Compensation for investment banking services: 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. 4. Disclosure of previous investment recommendation produced: DBS Bank Ltd, DBSVS, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA 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, DBSVHK, their subsidiaries and/or other affiliates of DBSVUSA 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 1

11 RESTRICTIONS ON DISTRIBUTION General Australia 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. 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 21 ( CA ) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSVHK is regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for wholesale investors within the meaning of the CA. Hong Kong Indonesia Malaysia This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures Commission to carry out the regulated activity of advising on securities. 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. Singapore Thailand United Kingdom Dubai International Financial Centre Wong Ming Tek, Executive Director, ADBSR 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. This report is produced by DBSVHK which is regulated by the Hong Kong Securities and Futures Commission 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. This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 56538, 3 rd 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. Page 11

12 United Arab Emirates United States Other jurisdictions 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 DBSVHK. 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. DBS Vickers (Hong Kong) Limited 18 th Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong Tel: (852) , Fax: (852) Company Regn. No Page 12

13 DBS Regional Research Offices HONG KONG DBS Vickers (Hong Kong) Ltd Contact: Carol Wu 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: Fax: Participant of the Stock Exchange of Hong Kong Ltd MALAYSIA AllianceDBS Research Sdn Bhd Contact: Wong Ming Tek (12854 U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah 51 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 1294, 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 133 Tel Fax: research@th.dbs.com Company Regn. No Securities and Exchange Commission, Thailand Page 13