IHH Healthcare (LHS) Singapore Company Guide

Transcription

1 Singapore Company Guide Version 2 Bloomberg: IHH SP Reuters: IHH.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 26 Feb 2016 HOLD Last Traded Price: RM6.53/ S$2.10 (KLCI: 1, / STI : 2,603.40) Price Target : RM6.33/ S$2.09 (0% downside) (Prev S$2.04) Potential Catalyst: Acquisitions Where we differ: Below consensus on higher costs assumptions Analyst Andy Sim andysim@dbs.com Singapore Research Team What s New 4Q15 headline earnings aided by exceptional items; core earnings fell 11% on interest, start-up costs Earnings growth to moderate slightly in FY16F Long term prospects reflected in share price on premium valuation at 51.2x FY16F earnings Maintain HOLD, TP revised to RM6.33/ S$2.09 Price Relative S$ 1.0 Jul-12 Jul-13 Jul-14 Jul-15 (LHS) Relative STI INDEX (RHS) Relative Index Forecasts and Valuation FY Dec (RM m) 2014A 2015A 2016F 2017F Revenue 7,344 8,455 9,473 10,613 EBITDA 1,953 2,233 2,363 2,818 Pre-tax Profit 1,221 1,218 1,396 1,779 Net Profit ,016 1,295 Net Pft (Pre Ex.) ,016 1,295 Net Pft Gth (Pre-ex) (%) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): (8) 0 Consensus EPS (S cts): Other Broker Recs: B: 9 S: 6 H: 11 Source of all data: Company, DBS Bank, Bloomberg Finance L.P Core results within expectations HOLD, TP: RM6.33. We maintain our HOLD recommendation for IHH with a revised TP of RM6.33/ S$2.09. While we like its geographical diversification and premium healthcare services provider status, we believe current valuation at c.51.2x FY16F PE reflects this. 4Q15 strong due to exceptional items; FY15 core in line. IHH s 4Q15 reported net profit surged 74% y-o-y to RM415.8m on revenues of RM2.3bn (+18%). This was due exceptional items (EI) of RM201.2m. Excluding EI, 4Q15 core net profit would have been RM214.6m, down 11% y-o-y, due to higher finance costs and depreciation expenses of new hospitals. FY15 core profits were in line, growing by 15% y-o-y to RM899m on revenues of RM8.46bn (+15%) arising from organic growth and contribution from new hospitals. While inpatient admissions numbers were fairly lacklustre, revenue growth was helped by higher revenue intensities and more complex cases handled. Growth to continue but a tad slower pace. We project growth to continue but a tad slower in FY16F. We trimmed our earnings forecast by 8% to factor in slower growth in admissions, higher costs, pre-operating expenses and interest expenses. Valuations continue to remain lofty at 51.2x FY16F PE, reflecting its long-term growth profile and premium status. Valuation: Our target price is revised to RM6.33 (S$2.09), rolling our valuations forward to FY17F/18F. We continue to adopt the sum-of-parts valuation methodology to reflect IHH's various operations and growth profiles across the different geographies. Key Risks to Our View: Economic slowdown. While healthcare is deemed as a defensive sector, private healthcare will, nonetheless, be impacted by a slowdown in the economy, since elective procedures can be deferred and patients may choose public hospitals as a lower-cost alternative. At A Glance Issued Capital (m shrs) 8,224 Mkt. Cap (S$m/US$m) 17,270 / 12,289 Major Shareholders (%) Khazanah Nasional Bhd 43.4 Mitsui & Co Ltd 20.1 Employees Provident Fund 8.7 Free Float (%) m Avg. Daily Val (US$m) 0.07 ICB Industry : Health Care / Health Care Equipment & Services ed: JS / sa: SM

2 WHAT S NEW FY15 core results within expectations 4Q15 headline profit boosted by exceptional items; 4Q15 core dipped. IHH s recorded a strong surge in net profit to RM415.8m (+74%) on the back of 18% y-o-y revenue growth to RM2.3bn. This was aided by exceptional items (EI) amounting to RM201.2m arising from fair value gains in investment properties (RM49m), investment in tax allowance claims (RM93.1m) and foreign exchange gains from translation of its non-turkish Lira (TRY) denominated loans (RM121.3m). Excluding these items, 4Q15 core net profit would have been RM214.6m, down by 11% y-o-y, due to higher finance costs and depreciation expenses of new hospitals. FY1FY15 core profit within expectations. Notwithstanding the dip in 4Q15 core profits, FY15 was within our expectations, rising by 15% y-o-y to RM899m. Revenue expanded 15% to RM8.46bn from organic growth and contribution from new hospitals, while EBITDA increased by 11% to RM2.14bn. EBITDA margins dipped on start-up costs, higher costs. EBITDA margins for FY15 dipped 1ppt to 25.3% due to start up losses from its new hospitals in Malaysia (Kota Kinabalu and Medini) and Turkey, coupled with pre-operating expenses in preparation for Gleneagles Hong Kong. Margins were also impacted by higher wages and benefits of nurses, and sharebased expenses. Singapore contributing to Parkway Pantai Limited (PPL). Singapore operations continue to shine, with continued growth in inpatient admissions to 67,917 (+5%) while revenue per inpatient grew by 2.7% to RM27,237. Due to operating leverage, Mount Elizabeth Novena Hospital is ramping up well, achieving an EBITDA of RM140.1m (+61% y-o-y). Malaysia s performance impacted by new hospitals, weaker sentiment and GST implementation. In FY15, Malaysia s operations were impacted by softer consumer sentiment which saw admissions fall by 0.9% to 183,265. This was compensated by price increases and higher revenue intensities. PPL International growth partially eroded by new investments. While growth was strong at its Singapore operations, its international operations were impacted by start-up costs, losses from recently acquired Global Hospital and acquisition related expenses. Acibadem saw improvement in average inpatient revenue. While admissions dipped marginally by 0.6% in Acibadem, revenue registered a strong growth of 11% to RM2.9bn as average inpatient revenue grew strongly by 15.3% arising from price increases and higher number of complex cases. Trimmed FY16F earnings by 7.7%. We trimmed our FY16F earnings by 7.7% arising from (i) slower revenue growth on expectations that inpatients admissions growth would be slower given the macroeconomic uncertainties; (ii) higher operating costs, particularly staff and pre-operating expenses, particularly in the lead-up to the opening of Gleneagles Hong Kong (Jan 2017); (iii) higher interest expenses arising from loans undertaken. We left FY17F earnings unchanged. Focusing on delivering operating leverage; growth, albeit slower in FY16F, to continue. IHH would be focusing on delivering results from its recent expansion activities, and extracting operating leverage going forward. We expect growth for IHH to continue, albeit slower in FY16F. We are projecting net profit growth of 9% for FY16F, driven by continued ramp up of new hospitals and revenue intensities, offset partially by weaker sentiment and start-up expenses. That said, we believe growth in FY17F should be stronger as new investments bear fruit. Valuations continue to reflect premium status. Valuations continue to remain lofty at 51.2x FY16F PE, reflecting its long-term growth profile and premium status. Upside risks to our recommendation lie in better-than-expected ramp up in new and existing operations, and/or acquisitions. Our TP is revised marginally to RM6.33 (S$2.09). We raised our sum-of-parts TP to RM6.33 (S$2.09), rolling our valuations to FY17F/18F. Page 2

3 Quarterly / Interim Income Statement (RMm) FY Dec (RM$ m) 4Q14 3Q15 4Q15 yoy% FY14 FY15 yoy% Comments Sales 1,937 2,064 2,295 18% 14,688 16,911 15% Organic growth and ramp up of new hospitals Other Operating Income % (1,627) (1,854) 14% Inventories and consumables (326) (347) (398) 22% (2,434) (2,812) 16% Purchase and contracted services (177) (192) (204) 15% (1,277) (1,450) 14% Depreciation & impairment losses on PPE (127) (156) (183) 45% (3,430) (3,945) 15% New hospitals Amortisation & impairment losses on intangible (17) (15) (12) -30% (3,088) (3,540) 15% Staff costs (724) (800) (870) 20% (3,774) (4,383) 16% Higher headcount, salary increases; Long term incentive plan Operating lease expenses (51) (58) (62) 21% (952) (1,127) 18% Operating expenses (209) (234) (265) 27% (7,029) (8,159) 16% Start up costs, higher vol Other Operating Expenses (1,631) (1,803) (1,994) 22% (4,940) (5,726) 16% EBIT % 1,401 1,622 16% Within expectations Interest Income % (122) (324) 165% Interest Expense (36) (270) 67 nm (180) (404) 125% 4Q due to strengthening of Lira Share of Associates' % % Share of JV Income (net of tax) (2) 4 3 nm 1,229 1,230 0% Pretax Profit % % Tax (94) (9) (29) -70% % Tax allowance on investment Minority Interests (96) 49 (118) 23% % Net Profit % % Within expectations, if exclude unrealised fx gain on USD loans Exceptional items (total) (264) nm % FY15 loss on FX translation, tax allowance Less: non-controlling EI items (2) (113) 63 nm (30) (122) nm PATMI, excl. EI % % Within expectations Source of all data: Company, DBS Bank Quarterly / Interim Income Statement (RMm) Sum-of-parts % owned FY16F FY17F FY18F EV/EBITDA RM m (x) Singapore operations (ex.novena) 100% ,702 Mt. Elizabeth Novena 100% 7,979 Malaysia operations 100% ,436 Turkey operations 60% ,873 International operations 100% ,576 IMU 100% ,066 Listed entities Plife REIT 35.8% 1,745 Apollo 11.1% 1,406 Trust management 100% Enterprise Value (RM m) 56,963 Less: Minority Interests (4,749) Less: Net debt (attributable)* (126) Equity Value (RM m) 52,088 Price per share (RM) 6.33 Price per share (S$) 2.09 Source: DBS Bank s estimates Page 3

4 CRITICAL DATA POINTS TO WATCH Earnings Drivers: Providing premium quality healthcare. IHH is a leading international provider of premium healthcare services with a global network of over 7,000 licensed beds in 39 hospitals and medical centres. Its key markets include Singapore, Malaysia and Turkey, which contribute 37.3%, 20.8% & 36.1% of Group s revenue respectively. In Singapore, it operates 4 hospitals with a total of 908 licensed beds. Singapore s inpatient admissions have been steadily rising from 55,251 in FY12 to 67,917 in FY15. Average inpatient revenue per inpatient day has also increased from S$2,091 in FY10 to S$2,839 in FY14 on the back of higher revenue intensities. Increasing scale in Malaysia. The group is focused on increasing scale in Malaysia and the number of operational hospitals is now at 14 as at end FY15. Average revenue per inpatient day has increased to RM1,763 in FY14 because of higher revenue intensities that resulted from more complex cases undertaken by the group as well as price increases. Earnings will continue to be driven by growth in inpatient admission numbers as well as average inpatient revenue. Turkey operations through Acibadem. IHH holds a 60% stake in Acibadem, which operates 17 hospitals as of FY15. Revenue was driven by strong performance from its existing hospitals as well as new revenue contributions from the newly opened Acibadem Atakent hospital. Inpatient admissions have grown from 66,428 in FY10 to 130,429 in FY15. Long term outlook in Turkey is likely to improve due to the continuing growth in private healthcare demand. Other than growth in inpatient admissions and average inpatient revenue, earnings are also influenced by the volatility of the Lira against the Malaysian Ringgit a stronger Lira will translate into higher earnings in Ringgit terms. Tapping onto new markets such as China and India. Besides its home markets, IHH is also building up presence and, for its next stage of growth, is looking at India and China. The group is in the midst of its development of a 60:40 Greenfield hospital in Hong Kong, and has signed a long-term lease agreement to start and operate a 380-bed hospital in Chengdu. In India, it made two acquisitions in 2015 : (i) a 51%-stake in Continental Hospitals in Hyderabad, India; and (ii) Global Hospital, a 5- hospital chain with 1,100 beds for INR12,838m (MYR819m). These developments will help the group gain a strategic foothold in new markets that can provide strong growth avenues in the future. 66,500 57,000 47,500 38,000 28,500 19,000 9, ,800 2,100 1, , , ,800 85,200 42, ,100 1,800 1,500 1, , ,800 77,200 SGP inpatients adm 74,878 71,313 67,917 64,723 59,258 SGP avg patient rev (S$) 3,382 3,190 3,010 2,839 2,629 Msia inpatient adm 208, , , , ,684 Msia avg patient rev (RM$) 2,200 2,056 1,904 1,763 1,632 Turkey adm 191, , , , ,083 38,600 0 Source: Company, DBS Bank Page 4

5 Balance Sheet: Low gearing for inorganic growth. Gearing remains low for the group, and this provides ample war chest for management to pursue inorganic growth opportunities, particularly in China and India Leverage & Asset Turnover (x) Share Price Drivers: Inorganic growth and greenfield operations. The group is embarking on its next phase of growth for the longer term, particularly into China and India. Further initiatives via acquisitions and/or greenfield should be viewed positively and helped in boosting growth for the longer term. In addition, the ramp up of upcoming greenfield projects such as Gleneagles Hong Kong, if it progresses better than expected, will provide catalyst for the share price RM 3, , ,000.0 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure Key Risks: Economic slowdown. While healthcare is deemed as a defensive sector, private healthcare will, nonetheless, be impacted by a slowdown in the economy, since elective procedures can be deferred and patients may choose public hospitals as a lower-cost alternative 1, , Capital Expenditure (-) ROE (%) Staff costs. Staff costs account for close to one-third of the Group s revenue. Supply shortages in doctors and/or skilled allied healthcare workers could result in higher wages needed to retain or attract talent 5.0% 4.0% 3.0% Outbreak of epidemics. Outbreak of epidemics, such as SARS, could adversely affect healthcare services as consumers may opt to delay elective surgery and this could negatively impact bed occupancy. Exchange rate risk. As the group reports its results in the MYR, any depreciation of the SGD and the TRY against the MYR will negatively affect its results. Company Background Berhad is a leading international provider of premium healthcare services in Asia and Central & Eastern Europe, the Middle East and North Africa. As at end-2015, it operates over 7,000 licensed hospital beds in 39 hospitals, and there are plans to add over 3,000 beds across 19 new hospitals and existing hospitals. 2.0% 1.0% 0.0% Forward PE Band (x) (x) sd: 53.3x sd: 49.1x 44.8 Avg: 44.9x sd: 40.7x 2sd: 36.5x Jul-12 Jul-13 Jul-14 Jul-15 (x) 2.8 PB Band (x) Jul-12 Jul-13 Jul-14 Jul-15 Source: Company, DBS Bank +2sd: 2.51x +1sd: 2.23x Avg: 1.94x 1sd: 1.66x 2sd: 1.37x Page 5

6 Key Assumptions FY Dec SGP inpatients adm 59,258 64,723 67,917 71,313 74,878 SGP avg patient rev (S$) 2,629 2,839 3,010 3,190 3,382 Msia inpatient adm 170, , , , ,932 Msia avg patient rev 1,632 1,763 1,904 2,056 2,200 Turkey adm 120, , , , ,064 Segmental Breakdown FY Dec Revenues (RMm) PPL-Total 3,888 4,375 5,160 5,858 6,509 Acibadem 2,586 2,652 2,953 3,235 3,694 IMU Health Plife REIT Others Total 6,756 7,344 8,455 9,473 10,613 EBITDA (RMm) PPL-Total 1,024 1,180 1,271 1,473 1,817 Acibadem IMU Health Plife REIT Others (87.9) (93.7) (38.1) (42.7) (47.8) Total 1,658 1,939 2,142 2,348 2,802 EBITDA Margins (%) PPL-Total Acibadem IMU Health Plife REIT Others (2,097.4) (1,992.6) (484.2) (493.2) (502.3) Total FY16F/17F does not take into account potential revaluation gains of PREIT properties. Income Statement (RMm) FY Dec Revenue 6,756 7,344 8,455 9,473 10,613 Other Opng (Exp)/Inc (5,607) (6,008) (6,926) (7,835) (8,571) Operating Profit 1,149 1,336 1,529 1,638 2,041 Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (270) (124) (326) (257) (279) Exceptional Gain/(Loss) Pre-tax Profit 882 1,221 1,218 1,396 1,779 Tax (148) (278) (165) (190) (242) Minority Interest (103) (189) (118) (190) (242) Preference Dividend Net Profit ,016 1,295 Net Profit before Except ,016 1,295 EBITDA 1,752 1,953 2,233 2,363 2,818 Growth Revenue Gth (%) (3.0) EBITDA Gth (%) Opg Profit Gth (%) (2.9) Net Profit Gth (Pre-ex) (%) (15.9) Margins & Ratio Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Increase largely due to FX translation loss on non-turkish Lira denominated loans Source: Company, DBS Bank Page 6

7 Quarterly / Interim Income Statement (RMm) FY Dec 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 Revenue 1,937 2,003 2,093 2,064 2,295 Other Oper. (Exp)/Inc (1,493) (1,648) (1,706) (1,749) (1,824) Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc (1.8) Net Interest (Exp)/Inc (13.7) (125) (48.7) (240) 87.6 Exceptional Gain/(Loss) Pre-tax Profit Tax (93.9) (52.3) (75.7) (8.9) (28.6) Minority Interest (95.9) (9.2) (39.1) 48.5 (118) Net Profit Net profit bef Except EBITDA Growth Revenue Gth (%) (1.4) 11.2 EBITDA Gth (%) 35.4 (11.8) 7.5 (11.8) 36.8 Opg Profit Gth (%) 62.1 (20.1) 9.2 (18.7) 49.5 Net Profit Gth (Pre-ex) (%) 62.8 (28.3) 33.0 (48.1) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (RMm) FY Dec Net Fixed Assets 9,366 9,895 11,436 13,214 14,146 Invts in Associates & JVs Other LT Assets 14,307 14,822 19,191 19,131 19,070 Cash & ST Invts 2,145 2,468 1,978 1,248 1,664 Inventory Debtors 1,002 1,028 1,234 1,383 1,549 Other Current Assets ,213 1,213 1,213 Total Assets 27,261 28,640 35,498 36,677 38,177 ST Debt Creditor 1,331 1,391 2,555 2,854 3,107 Other Current Liab LT Debt 4,170 3,593 6,323 6,323 6,323 Other LT Liabilities 1,325 1,376 1,518 1,518 1,518 Shareholder s Equity 18,075 19,452 22,340 23,087 24,040 Minority Interests 1,848 1,862 2,081 2,271 2,514 Total Cap. & Liab. 27,261 28,640 35,498 36,677 38,177 Non-Cash Wkg. Capital (283) (408) (196) (260) (369) Net Cash/(Debt) (2,316) (1,801) (4,719) (5,449) (5,033) Debtors Turn (avg days) Creditors Turn (avg days) (812.4) (817.7) (1,044.6) (1,390.6) (1,431.0) Inventory Turn (avg days) (88.1) (97.5) (103.4) (119.9) (126.0) 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, DBS Bank Page 7

8 Cash Flow Statement (RMm) FY Dec Pre-Tax Profit 882 1,221 1,218 1,396 1,779 Dep. & Amort Tax Paid (183) (203) (315) (247) (190) Assoc. & JV Inc/(loss) (2.2) (9.9) (14.3) (15.0) (16.4) Chg in Wkg.Cap. (187) (11.3) Other Operating CF Net Operating CF 1,328 1,631 1,698 1,965 2,390 Capital Exp.(net) (1,415) (854) (1,380) (2,427) (1,632) Other Invts.(net) (705) Invts in Assoc. & JV (0.5) Div from Assoc & JV Other Investing CF (146) 92.8 (1,322) Net Investing CF (1,556) (746) (3,396) (2,427) (1,632) Div Paid 0.0 (164) (247) (268) (342) Chg in Gross Debt 630 (179) 1, Capital Issues Other Financing CF 102 (184) (122) Net Financing CF 732 (526) 824 (268) (342) Currency Adjustments 18.1 (35.7) Chg in Cash (778) (730) 416 Opg CFPS (sen) Free CFPS (sen) (0.4) (1.9) 3.06 Source: Company, DBS Bank Target Price & Ratings History S$ S.No. Date Closing Price Target Price Rating 1: 27 Feb HOLD 2: 29 May HOLD 3: 27 Aug HOLD 4: 31 Aug HOLD 5: 27 Nov HOLD Feb-15 Jun-15 Oct-15 Feb-16 Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Page 8

9 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 GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the DBS Vickers Group ) 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 DBS Bank Ltd. 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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 and it may not contain all material information concerning the company (or companies) referred to in this report. 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. 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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. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-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 this report. As of 26 Feb 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report ( interest includes direct or indirect ownership of securities). Page 9

10 COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Jan DBS Bank Ltd does not market make 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. 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 Hong Kong Indonesia Malaysia This report is being distributed in Australia by DBS Bank Ltd. ( DBS ) or DBS Vickers Securities (Singapore) Pte Ltd ( DBSVS ), both of which are 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. Both DBS and DBSVS are 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. This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission. This report is being distributed in Indonesia by PT DBS Vickers Securities 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 United Kingdom Dubai 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. Research reports distributed are only intended for institutional clients only and no other person may act upon it. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients. This research report is being distributed in The Dubai International Financial Centre ( DIFC ) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 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 10

11 United States Other jurisdictions This report was prepared by 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. DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel Company Regn. No E Page 11