BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD (BAT)

BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD (BAT) All figures in millions of Ringgit Malaysia except per share values and ratios Analysis Date: 01/04/2013 Financial Year: 2012 31/12/2012 Latest Quarter: 31/12/2012 Price: 62.16 Stock Category: Investment Grade Overview: British American Tobacco (Malaysia) Berhad is a tobacco company. The Company provides day-to-day management and administrative services to its subsidiaries, which are principally engaged in the manufacture, importation and sale of cigarettes, pipe tobaccos and cigars. Its portfolio includes names, such as DUNHILL, KENT and PALL MALL. British American Tobacco p.l.c. is the ultimate holding company of the Company. It also offers products under brand PETER STUYVESANT. The KENT range consists of Triple Filter Charcoal Technology 3TEK and KENT Red. Its wholly owned subsidiaries include Commercial Importers and Distributors Sdn. Bhd., Commercial Marketers and Distributors Sdn. Bhd., Rothmans Brands Sdn. Bhd. and Tobacco Importers and Manufacturers Sdn. Bhd. In January 2011, the Company launched its capsule product, DUNHILL Boost. In May 2011, it launched DUNHILL Switch. In March 2011, PALL MALL introduced PALL MALL Ice, a mentholated product with spearmint in Malaysia. Board: FBMKLCI: Industry: Sub-Sector: Ownership: Main Board YES CONSUMER PRODUCTS TOBACCO COMPANIES Corporate Owned (Foreign) Investment Strategy Portfolio Strategy: Lump Sum + Top Up Averaging Down Method: Dollar Cost/Value Averaging Portfolio Execution: Buy and Hold Basis for Buying & Selling: DY % Estimated Intrinsic Value Institutional Sponsorship

Due-Diligence Measures 2003/12/31 2004/12/31 2005/12/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31 5-Y Avg. 10-Y Growth 5-Y Growth Sparkline Grade Profitability Consistently increasing Sales 3,200 3,264 3,564 3,612 3,831 4,135 3,923 3,965 4,127 4,365 4,181 3.21% 1.59% Revenue (Pref. 8%) Consistent and increasing ROIC 126.28% 86.44% 67.18% 135.91% 97.84% 132.96% 100.02% 120.18% 211.71% 143.66% 152.59% 5.89% 9.05% (Pref. 15%) Cash Flow Consistently increasing Net Cash 977 859 734 836 837 955 924 876 808 733 808-1.02% -6.62% from Ops. (Pref. 8%) Consistent and increasing CROIC N/A 87.13% 77.56% 153.89% 116.02% 127.23% 120.21% 155.42% 215.27% 107.49% 145.64% 6.60% 2.45% (Pref. 15%) Increasing Free Cash Flow / Sales N/A 25.31% 20.27% 23.68% 23.71% 19.25% 23.42% 24.45% 18.18% 13.88% 17.97% -4.46% -9.07% (Pref. 5%) Consistently increasing Cash 16.38 19.20 22.66 28.40 24.81 19.08 17.77 6.53-3.16 5.44 5.43-9.96% -22.30% Conversion Cycle Financial Risks Debt/Equity Ratio (Pref. < 100%) 132.82% 109.06% 113.26% 126.85% 216.82% 159.79% 147.97% 132.54% 150.56% 103.11% 128.04% N/A N/A Increasing Debt Coverage Ratio (Pref. 150%) Increasing Quick Ratio (Pref. 100%) Reporting Quality Balance Sheet Aggregate Accruals Ratio (Pref. < 8%) Cash Flow Aggregate Accruals Ratio (Pref. < 8%) N/A 118.02% 103.23% 122.21% 121.12% 122.47% 141.35% 149.18% 115.41% 121.20% 126.26% N/A -2.24% 59.01% 118.45% 121.99% 50.03% 78.59% 55.49% 112.54% 140.05% 61.78% 42.74% 71.00% -2.84% -11.22% N/A 2.45% -2.04% -1.81% -3.76% -2.75% -8.01% -16.05% -1.12% 15.38% 2.63% N/A 0.42% N/A -6.97% -19.20% -15.40% -11.81% -22.74% -26.18% -14.44% -17.90% 3.30% -9.56% N/A 0.59%

Thousands Thousands Growth Quality Performance Comparison 5000 1200 200.00% 4500 180.00% 174. 4000 1000 160.00% 3500 800 140.00% 3000 120.00% 103.11% 2500 600 100.00% 2000 80.00% 1500 400 60.00% 1000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 200 0 40.00% 20.00% 0.00% 7.50% 7.83% 2.64% 1.74% 31.94% Sales - 5Y Growth EPS - 5Y Growth Debt to Equity - 5Y Avg 18.56% 7.87% Net Profit Margin - 5Y Avg 18.86% ROE - 5Y Avg Revenue EBIT Net Income Cash From Ops. FCF Company Sector

Shareholder Wealth Creation Buy and Hold Return (Pref. 8%) 8% 3-Y Price CAGR % 12.84% 5-Y Price CAGR % 7.90% 10-Y Price CAGR % 4.84% Full History Price CAGR % 9.54% Consistent and increasing Dividend Payout % (Pref. 60%) 60% 180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% Dividend Payout % 0.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Increasing EPS EPS 3.00 2.50 2.66 2.74 2.52 2.56 2.84 2.62 2.56 2.52 2.79 2.00 2.08 1.50 1.00 0.50 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Increasing DPS DPS 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Historical Weekly Price Chart

Market Timing Discounted Cash Flow 3-Y 5-Y 10-Y Good Base Bad Ugly Good Base Bad Ugly Good Base Bad Ugly NOSH. 285.53 Fair Value 20.42 18.46 16.64 14.95 20.97 18.33 15.98 13.90 21.61 17.93 14.90 12.42 Desired M.O.S. Buy Under 13.17 11.90 10.73 9.64 13.52 11.82 10.30 8.96 13.94 11.56 9.61 8.01 Current Price 62.16 Actual M.O.S. -204% -237% -274% -316% -196% -239% -289% -347% -188% -247% -317% -401% EY % Oscillator EY% Price ($) High Green Zone EY% 6.45% Green Zone Price($) RM43.32 Low Trading Range 1.21% 6.33% Price ($) RM44.14 10% 5. Price ($) RM52.11 10% Low Red Zone EY% 5.24% Red Zone Price($) RM53.31 High Buy Under From 44.14 To 34.65 Sell Above 52.11 DY % 6% CU DY%: 4.38% R-4Q DY%: 4.38% The current quarter's EPS is up more than 15% from the same quarter the year before. Quarterly EPS 0.90 0.80 0.70 0.60 0.67 0.65 0.60 0.64 0.63 0.65 0.62 0.63 0.68 0.77 0.65 0.69 0.50 0.40 0.30 0.20 0.10 0.00 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Dec-11 0.63 Dec-12 0.69 Growth 8.85%

Discounted Cash Flows Valuation 13 Discount Rate Average risk Average Risk Unadjusted Business Risk Financial Risk Discount % premium free rate Discount % Factor Factor Default Value 7.25% 3.44% 10.69% 0.94 1.32 13.34% Custom Value Margin of Safety Initial RRR Dividend Yield Est. EPS Growth Unadjusted MOS Business Risk Factor Financial Risk MOS Factor Default Value 35% 4% 1% 28% 0.94 1.32 Custom Value Growth Estimation Est. FCF Growth (Base Line) Terminal % Decay Rate (Yr4E-Yr7E) Extra Decay (Yr8E-Yr10E) Default Value 8% 3% 8% 15% Custom Value 4% 15% 20% Financial Figures Shares Out. 2012 FCFE Excess Cash Intangibles Assets Intangibles% add to DCF Default Value 285.53 501.78-65.50 414.42 0% Custom Value 50.00% Projection of Future Free Cash Flow (Base Line - 4%) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Yearly Growth Future Value 521.85 542.73 564.44 573.59 593.09 613.25 634.10 621.95 638.87 656.24 Discounted Perpetuity Value 3,859.70 3,156.87 1,867.26 Present Value 5,271.91 5,233.66 5,119.92 Shares Outstanding Fair Value Desired M.O.S. Buy Under Current Price Actual M.O.S. 3-Y 5-Y 10-Y 285.53 18.46 18.33 17.93 11.90 11.82 11.56 62.16-237% -239% -247% Projection of Future Free Cash Flow (Good Scenario - 8%) 8% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Yearly Growth Future Value 541.93 585.28 632.10 652.83 697.22 744.63 795.27 766.58 808.28 852.26 Discounted Perpetuity Value 4,322.39 3,711.16 2,424.99 Present Value 5,831.90 5,988.94 6,171.63 Shares Outstanding Fair Value Desired M.O.S. Buy Under Current Price Actual M.O.S. 3-Y 5-Y 10-Y 285.53 20.42 20.97 21.61 13.17 13.52 13.94 62.16-204% -196% -188%

Projection of Future Free Cash Flow (Bad Scenario - 0%) 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Yearly Growth Future Value 501.78 501.78 501.78 501.78 501.78 501.78 501.78 501.78 501.78 501.78 Discounted Perpetuity Value 3,431.26 2,670.88 1,427.76 Present Value 4,750.86 4,562.75 4,255.21 Shares Outstanding Fair Value Desired M.O.S. Buy Under Current Price Actual M.O.S. 3-Y 5-Y 10-Y 285.53 16.64 15.98 14.90 10.73 10.30 9.61 62.16-274% -289% -317% Projection of Future Free Cash Flow (Ugly Scenario - -4%) -4% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Yearly Growth Future Value 481.71 462.44 443.95 436.94 422.09 407.74 393.87 402.44 391.50 380.85 Discounted Perpetuity Value 3,035.76 2,246.67 1,083.65 Present Value 4,267.31 3,968.60 3,545.16 3-Y 5-Y 10-Y Shares Outstanding 285.53 Fair Value 14.95 13.90 12.42 Desired M.O.S. Buy Under 9.64 8.96 8.01 Current Price 62.16 Actual M.O.S. -316% -347% -401%

Notes Created Date Note 01/04/2013 Judging from normal fundamental analysis, BAT is overvalued too much. Its current price basically supported by high dividend, and defensive business. For some people, it looks BAT as a safe heaven. My average price for BAT is around RM48.00. I will just leave it for collecting good dividends. I will not add any new position.

Basis for Buying and Selling Buy Criteria No. Method Description 1 EPS The current quarter's EPS is up more than 15% from the same quarter the year before. 2 Intrinsic Value Price is below Intrinsic Value 3 DY% Current DY% or Rolling 4Q DY% > 8% 4 Market Direction Stock price breaks out of consolidation/dip on an uptrend. 5 Institutional sponsorship Company owner, EPF, Khazanah and PNB heavily buying 6 EY % Oscillator Price is below or around the price derived from EY% High Sell Criteria No. Method Description 1 EPS Quarterly EPS drop for 5 consecutive months. 2 Intrinsic Value Has the stock risen too far from its intrinsic value? 3 DY% Current DY% or Rolling 4Q DY% < 4% for a long period 4 Market Direction Long term trend changed from bullish to bearish 5 Institutional sponsorship Company owner, EPF, Khazanah and PNB heavily selling. 6 EY % Oscillator Price is above or around the price derived from EY% Low 7 Fundamental Analysis Fundamental of business turns unattractive or bad Found a better opportunity to replace this stock