Indonesia Company Guide Matahari Putra Prima

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1 Indonesia Company Guide Version 5 Bloomberg: MPPA IJ Reuters: MPPA.JK Refer to important disclosures at the end of this report DBS Group Research. Equity 19 Feb 2018 HOLD (Upgrade from FULLY VALUED) Last Traded Price ( 15 Feb 2018): Rp462 (JCI : 6,592.00) Price Target 12-mth: Rp430 (-7% downside) (Prev Rp450) Analyst Tiesha PUTRI tiesha.narandha@id.dbsvickers.com Andy SIM, CFA andysim@dbs.com What s New Upgrade to Hold after share price correction Expect MPPA to turn profitable in 2018, driven by costcutting initiatives and better demand outlook Management looks to rationalise SKU and downsize stores gradually Price Relative Reorganising shelves Upgrade to Hold after share price correction. Concerns over weak demand, intensifying competition, and investment in its e- commerce platform has caused MPPA s share price to drop 65% in the past one year. MPPA now trades at 19% discount to its store s replacement cost. We see limited downside at this level, hence we have upgraded our call from Fully Valued to Hold. We expect MPPA s profitability to improve, supported by its cost-cutting efforts in Looking ahead, MPPA looks to cut the slow-moving SKUs and instead focus on basic needs as well as save costs by downsizing the stores gradually. We believe these would translate to a better profitability in Where we differ: our FY17 earnings forecasts are lower than consensus. We expect MPPA to book a net loss of Rp277bn for FY17, higher than the consensus forecast of Rp142bn, mainly due to the expansion of its price-cutting programme from 5,000 SKUs (c. 12% of total SKUs) to all SKUs in 4Q17. Forecasts and Valuation FY Dec (Rp m) 2016A 2017F 2018F 2019F Revenue 13,527 12,803 13,517 14,267 EBITDA Pre-tax Profit 101 (369) Net Profit 38.0 (277) Net Pft (Pre Ex.) 38.0 (277) Net Pft Gth (Pre-ex) (%) (82.6) nm nm 17.0 EPS (Rp) 7.16 (51.4) EPS Pre Ex. (Rp) 7.16 (51.4) EPS Gth Pre Ex (%) (83) (819) (114) 17 Diluted EPS (Rp) 7.16 (51.4) Net DPS (Rp) BV Per Share (Rp) PE (X) 64.6 nm PE Pre Ex. (X) 64.6 nm P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) 1.6 (12.8) Earnings Rev (%): 233 (6) 24 Consensus EPS (Rp): (23.0) Other Broker Recs: B: 2 S: 7 H: 5 Source of all data on this page: Company, DBSVI, DBS Bank, Bloomberg Finance L.P Potential catalyst: stronger same-store sales growth. We expect households spending to improve this year, supported by government stimulus and regional elections. An improvement in same-store sales, along with a leaner management structure and an increase in employee productivity, should pave the way for MPPA to turn profitable in Valuation: Our TP of Rp430/share is based on DCF method. We assume 12.2% WACC and 4% sustainable growth rate in our calculation. Our TP implies 5.2x FY18F EV/EBITDA, 63% discount to the average multiple of regional grocery retailer, given its lower profitability. Key Risks to Our View: Intensifying competition with minimarkets or regional supermarkets could trigger a price war and offset the impact of the cost-cutting programme. At A Glance Issued Capital (m shrs) 5,378 Mkt. Cap (Rpbn/US$m) 2,485 / 183 Major Shareholders (%) Multipolar 50.2 Prime Star Investment Pte. Ltd Free Float (%) m Avg. Daily Val (US$m) 0.18 ICB Industry : Consumer Services / General Retailers ed: JLC / sa:ma, PY, CS

2 WHAT S NEW Reorganising shelves Cost-cutting initiatives to start showing results in In 2017, MPPA focused on cost-cutting, primarily by: 1) reducing the number of employees at the store level by up to 50%, from employees to 80 per store, and 2) cutting headquarter costs. Salary is the largest cost component of MPPA, making up 42% of total opex or 7% of MPPA s gross sales). With a leaner top management structure and an improvement in labour productivity at the store level, we expect the company to turn profitable in We project MPPA to book a net profit of Rp38bn in FY18F vs. a net loss of Rp277bn in FY17F. Redirecting focus to SKU rationalisation and store downsizing. For 2018, MPPA plans to redirect its focus on rationalising its SKUs in The company had expanded its merchandise line aggressively in the past, by adding discretionary goods, many of which are slow-moving. When the economy weakened, sales for such products declined as consumers cut discretionary spending. The company believes that by cutting these slow-moving merchandises and instead focusing only on basic needs, it would be able to optimise its working capital cycle and cut rental costs. Smaller store, better profitability. With less merchandise, it looks to downsize each Hypermart s retail space from 4,000 sqm to 3,000 sqm gradually. For 1H18, the company expects to reduce the size of 20 Hypermart outlets (out of 113 outlets) through re-negotiation with developers and subleasing to third parties, focusing on F&B tenants (which the company believes could help increase traffic to stores). Slowing down expansion pace a step in the right direction. The company will continue to shut non-performing stores in 2018 although at a slower pace compared to Recall that it closed five Hypermart outlets in 2017, whereas in 2018, the company only looks to close down 1-2 nonperforming Hypermart outlets. Hypermart outlets (which will be 25% smaller than existing Hypermart stores), two Foodmart outlets, and eight Boston outlets, but hinted that it will reduce the number of new stores, if necessary. Upgrade to Hold after share price correction. We still see downside risk to consensus earnings forecast as MPPA expanded its Turun Harga (price-cutting) promotion from 5,000 SKUs (c. 12% of total SKUs) to all SKUs in 4Q17. However, the share price has derated sharply; after a correction of 65% in its share price in the past one year, MPPA now trades at 19% discount to its replacement cost. We see limited downside to its share price and expect its losses to have bottomed out in 2017 before recovering in 2018, supported by a better demand environment and a more efficient cost structure. We are upgrading our call from Fully Valued to Hold, with a slightly lower TP of Rp430/share (from Rp450/share previously). We derive our TP using DCF method with WACC of 12.2% and terminal growth of 4%. Our new TP implies 5.2x FY18F EV/EBITDA, 63% discount to the average multiple of regional grocery retailers. Awaiting more details of rights issue plan. After it failed to reach quorum at its extraordinary AGM on 28 December 2017, MPPA held another extraordinary AGM on 19 February 2018 to seek approval for its rights issue plan. The company plans to issue up to 3bn new shares with a maximum ownership dilution of 36% for shareholders who do not participate in the right issue. The company has yet to share the total proceeds that it expects to raise from the rights issue, but announced that the proceeds will be used to pay off its debt and fund working capital. We have yet to factor in potential EPS dilution from the rights issue, awaiting more clarity and Financial Services Authority s approval of the plan. We are encouraged by MPPA s plans to slow down its store expansion plan and re-direct its focus on increasing its store productivity. For 2018, the company plans to open four Page 2

3 Earnings revision 2017F 2018F Old New Change Old New Change Revenue (net) 14,097 12,803-9% 15,580 13,517-13% Gross profit 2,334 1,957-16% 2,610 2,066-21% EBIT (25) (291) 1055% % EBITDA % % Net Profit (83) (277) 233% % Gross margin (%) EBIT margin (%) (0.2) (2.3) EBITDA margin (%) Net margin (%) (0.6) (2.2) Source: DBSVI, DBS Bank DCF assumption WA CC Key assumptions Risk-free rate 7.5% Terminal growth rate 4.0% ERP 5.3% Beta 1.2 Sales CAGR Debt/equity F-2023F 5.5% Tax rate 25.0% 2023F-2028F 4.5% Cost of equity 13.9% Avg, EBIT margin Cost of debt 7.4% 2018F-2023F 0.8% WA CC 12.2% 2023F-2028F 0.9% Present v alue Avg, working capital/sales 2018F-2023F 1, F-2023F -0.2% 2024F-2028F F-2028F -0.2% Terminal value 1,006 Av g, capex/sales Sum of PV 2, F-2023F -1.5% Net cash (debt) (474) 2023F-2028F -1.5% Equity value 2,326 Av g, depreciation/sales No. of shares 5, F-2023F 3.0% Equity value per share F-2028F 2.4% Source: DBSVI, DBS Bank Peers comparison Company Market cap (USD mn) Ticker PE 18F (x) PE 19F (x) *Based on Bloomberg consensus forecasts (14 Feb 2018) Source: DBSVI, DBS Bank Bloomberg Finance L.P. EV/EBITDA 18F (x) EV/EBITDA 19F (x) Price/sales 18F (x) Price/sales 19F (x) PB 18F ROAE (%) Net DER end of 17F 182 MPPA IJ nm % 0.3 Dairy Farm 11,361 DFI SP % 0.2 Sheng Siong Group Ltd 1,368 SSG SP % Net cash Siam Makro* 6,318 MAKRO TB % 0.4 Robinsons Retail Holdings Inc 2,543 RRHI PM % Net cash Puregold Price Club Inc 2,706 PGOLD PM % Net cash Simple avg % Page 3

4 CRITICAL DATA POINTS TO WATCH Critical Factors Store productivity. We think that competition among hypermarket operators in the Greater Jakarta area has been intensifying, with operators revamping stores and pushing promotions to boost demand. The growing number of convenience stores also adds to the competitive pressure. We think this could potentially impede the company s revenue growth going forward, as growth in sales productivity per sqm has become harder to achieve (as evident in the last three years). We estimate revenue to grow at a CAGR of 5.6% over FY17F-19F, driven mostly by improvement in same-store sales (we project 4% SSSG in FY18F-19F). Economic recovery in ex-java cities. MPPA is looking to further strengthen its foothold in underpenetrated ex-java cities. As at end of June 2017, 131 stores, or 45% of MPPA s total stores, are located outside Java. The performance of MPPA s ex-java stores, particularly in Sumatera and Kalimantan, was weak in Given the high dependency of the ex-java economy on commodity prices, the recent rally in commodity prices may help support consumers purchasing power, hence leading to better performance by MPPA s ex-java stores. Significant contribution from marketing income. MPPA has a negative marketing expense item booked under its operating expenses. This is essentially marketing income which is earned from advertising fees (through brochures and pamphlets) as well as supplier rebates and discounts. We note that marketing income s contribution to operating income has been increasing, i.e. 51% in 2013 to 333% in We view this increasing dependency negatively as it reduces earnings visibility and presents risks. In FY16, marketing income accounts for 4.2% of MPPA s gross sales. Furthermore, part of it is uncollectible, causing MPPA to book an account receivable impairment amounting to Rp90bn in 1Q17. We assume an impairment of Rp180bn for FY17 or 1.3% of gross sales. Our sensitivity analysis shows that a 10bps move in AR impairment/gross sales would impact MPPA s bottom line by 4%. Sales per sqm (Rp mn) Retail space (sqm) Same-store sales growth trend 6.0% 5.4% 4.6% 4.0% 4.0% 4.0% 2.0% 0.0% 13A 14A 15A 16A 17F 18F 19F -2.0% -1.9% -4.0% -4.5% -4.5% -6.0% Margin trend and forecasts % Gross margin EBIT margin Net margin A 16A 17F 18F 19F Source: Company, DBSVI, DBS Bank Page 4

5 Appendix 1: A look at Company's listed history what drives its share price? MPPA share price vs. peers Oct 6, 2010 = 100 5,000 MPPA (LHS) MPPA vs. Consumer Sector (RHS) 4,500 4,000 A2 3,500 3,000 2,500 B 2,000 A1 1,500 1, Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Source: Bloomberg Finance L.P, DBSVI, DBS Bank A: Store productivity MPPA s shares move in line with its store productivity. This is evident in and , when the decline in store productivity caused the shares to fall in and An increase in productivity, driven by prudent new store openings or market share gain, led to a share price rally, as shown in MPPA s share price vs. store productivity 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct MPPA s share price vs. EBIT margin 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 MPPA share price (LHS) EBIT margin, % (RHS) Source: Bloomberg Finance L.P, DBSVI, DBS Bank MPPA share price (LHS) Sales/sqm, Rp mn (RHS) Source: Bloomberg Finance L.P, DBSVI, DBS Bank B: Profitability We have also seen a growing correlation between MPPA s share price and its profitability since The subsequent chart shows that MPPA saw its share price derating in 2015 to 1Q17 as intensifying competition and operating deleverage crimped its EBIT margin. Page 5

6 Balance Sheet: Asset-light business model. MPPA has an asset-light business model as it does not own its establishments, but lease them from either affiliated or third parties. As at end of June 2017, MPPA s net and gross gearing was 0.14x and 0.38x, respectively. Share Price Drivers: Recovery in consumer spending. Any signs of recovery in the domestic economy or consumer spending (i.e. reflected in a strong Consumer Confidence Index) will fuel expectations of stronger revenue and earnings growth. This would lead to more positive investor sentiment towards MPPA, thus boosting its share price. Key Risks: Weakness in domestic consumption. Lower consumer spending would naturally reduce the company s revenue. Furthermore, consumers tend to hold off purchases of durable goods, such as electronics, gadgets, and household equipment, which typically carry higher margins. This could lead to margin contraction for MPPA. Leverage & Asset Turnover (x) Capital Expenditure (Rp bn) ROE (%) Intensifying competition. Rising competition against minimarkets, hypermarkets or regional supermarkets may force MPPA to cut its selling price further in order to retain its pricesensitive customers. This will offset the impact of MPPA s costcutting programme. Company Background is a mass grocery retail store operator in Indonesia. Its store formats include hypermarkets under the name Hypermart, supermarkets under Foodmart, as well as health and beauty stores under Boston Health & Beauty. More than 90% of the company s revenue is derived from its hypermarket stores, and currently, it is the second-largest hypermarket store operator in Indonesia, with 25% market share in terms of retail value. Forward EV/EBITDA Band (x) Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 +1sd Avg. -1sd PB Band (x) Source: Company, DBSVI, DBS Bank Page 6

7 Key Assumptions FY Dec 2015A 2016A 2017F 2018F 2019F Sales per sqm (Rp mn) Retail space (sqm) 734, , , , ,924 SSSG (%) Segmental Breakdown FY Dec 2015A 2016A 2017F 2018F 2019F Revenues (Rpbn) Direct sales 13,713 13,436 12,715 13,424 14,169 Consignment sales Total 13,802 13,527 12,803 13,517 14,267 (Rpbn) Direct sales 2,180 2,202 1,869 1,973 2,083 Consignment sales Total 2,269 2,294 1,957 2,066 2,181 Margins (%) Direct sales Consignment sales Total Income Statement (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F Revenue 13,802 13,527 12,803 13,517 14,267 Cost of Goods Sold (11,534) (11,233) (10,846) (11,451) (12,087) Gross Profit 2,269 2,294 1,957 2,066 2,181 Other Opng (Exp)/Inc (1,961) (2,117) (2,248) (1,936) (2,051) Operating Profit (291) Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (36.0) (76.0) (78.0) (80.0) (70.0) Exceptional Gain/(Loss) Pre-tax Profit (369) Tax (50.0) (63.0) 92.0 (13.0) (15.0) Minority Interest Preference Dividend Net Profit (277) Net Profit before Except (277) EBITDA Growth Revenue Gth (%) 1.6 (2.0) (5.4) EBITDA Gth (%) (36.8) (14.9) (82.6) Opg Profit Gth (%) (56.8) (42.4) (264.5) (144.7) (0.4) Net Profit Gth (Pre-ex) (%) (60.0) (82.6) nm nm 17.0 Margins & Ratio Gross Margins (%) Opg Profit Margin (%) (2.2) Net Profit Margin (%) (2.1) ROAE (%) (12.8) ROA (%) (4.2) ROCE (%) (8.7) Div Payout Ratio (%) N/A Net Interest Cover (x) (3.8) Source: Company, DBSVI, DBS Bank Page 7

8 Quarterly / Interim Income Statement (Rpbn) FY Dec 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Revenue 3,736 3,393 3,133 3,101 3,616 Cost of Goods Sold (3,063) (2,834) (2,529) (2,667) (3,048) Gross Profit Other Oper. (Exp)/Inc (560) (470) (518) (651) (537) Operating Profit (218) 31.0 Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (18.0) (21.0) (20.0) (20.0) (25.0) Exceptional Gain/(Loss) Pre-tax Profit (238) 6.00 Tax 8.00 (15.0) (59.0) Minority Interest Net Profit (177) 7.00 Net profit bef Except (177) 7.00 EBITDA (128) 119 Growth Revenue Gth (%) 14.4 (9.2) (7.6) (1.0) 16.6 EBITDA Gth (%) nm (8.8) 1.8 nm nm Opg Profit Gth (%) (202.3) (21.0) (3.4) (353.7) (114.3) Net Profit Gth (Pre-ex) (%) (183.1) (47.9) (88.9) (3,087.7) (103.9) Margins Gross Margins (%) Opg Profit Margins (%) (7.0) 0.9 Net Profit Margins (%) (5.7) 0.2 Balance Sheet (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F Net Fixed Assets 1,462 1,576 1,368 1, Invts in Associates & JVs Other LT Assets 861 1,024 1,145 1,145 1,145 Cash & ST Invts Inventory 2,498 2,747 2,737 2,890 3,050 Debtors Other Current Assets 777 1,060 1,060 1,060 1,060 Total Assets 6,033 6,702 6,537 6,583 6,763 ST Debt Creditor 1,763 2,318 2,309 2,438 2,573 Other Current Liab LT Debt Other LT Liabilities Shareholder s Equity 2,514 2,430 2,153 2,191 2,236 Minority Interests Total Cap. & Liab. 6,033 6,702 6,537 6,583 6,763 Non-Cash Wkg. Capital Net Cash/(Debt) (241) (501) (688) (474) (242) 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) Source: Company, DBSVI, DBS Bank Page 8

9 Cash Flow Statement (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F Pre-Tax Profit (369) Dep. & Amort Tax Paid (50.0) (63.0) 92.0 (13.0) (15.0) Assoc. & JV Inc/(loss) Chg in Wkg.Cap. (559) (26.0) (28.0) Other Operating CF (114) Net Operating CF (141) Capital Exp.(net) (422) (399) (175) (203) (214) Other Invts.(net) (32.0) (158) (121) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF (129) (71.0) Net Investing CF (583) (628) (296) (203) (214) Div Paid (231) (140) Chg in Gross Debt (120) 0.0 Capital Issues Other Financing CF (33.0) (75.0) Net Financing CF 385 (115) 120 (120) 0.0 Currency Adjustments Chg in Cash (339) (160) (66.0) Opg CFPS (Rp) Free CFPS (Rp) (105) 34.2 (12.1) Source: Company, DBSVI, DBS Bank Target Price & Ratings History Source: DBSVI, DBS Bank Analyst: Tiesha PUTRI Andy SIM, CFA Page 9

10 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: 19 Feb :00:27 (WIB) Dissemination Date: 19 Feb :40:23 (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. This report is solely intended for the clients of DBS Bank Ltd, 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 PT DBS Vickers Sekuritas Indonesia (''DBSVI''), DBS Bank Ltd. 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, 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. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Page 10

11 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. 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 31 Jan 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 11

12 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 12

13 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 13

14 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 14