Malaysia Company Guide Version 6 Bloomberg: TOPG MK Reuters: TPGC.KL Refer to important disclosures at the end of this report DBS Group Research. Equity 19 Jun 2017 HOLD Last Traded Price ( 16 Jun 2017): RM5.61 (KLCI : 1,791.31) Price Target 12-mth: RM5.30 (-6% downside) (Prev RM4.80) Analyst Siti Ruzanna MOHD FARUK +603 2604 3965 sruzannamf@alliancedbs.com What s New 3QFY17 earnings up 24% y-o-y; results are below expectations Awaiting for better days Maintain HOLD. We maintain our HOLD call for Top Glove with a higher TP of RM5.30. We believe near-term earnings will be supported by the higher ASP albeit at a lower volume. Raw material prices which have been trending down will see an ease in ASPs and hence higher volume for the upcoming quarters. FY18 will be a better year as we expect better volumes from higher demand coupled with incoming capacity (+12%). Earnings were affected by lower volume and higher operating costs Adjusted earnings by -6%/+1%/+2% for FY17/18/19F Maintain HOLD with TP of RM5.30 Expansion still ongoing. Top Glove is gearing up to increase its nitrile glove segment by increasing its capacity in this segment. The expansion plans are underway such as Factory 30 in Klang (to commence in July 2017), Factory 33 and Factory 34 (August 2017), Factory 31 (January 2018) and Factory 32 (December 2018) which will raise total production capacity to 60.0bn gloves p.a. (+25% from current capacity). Price Relative 6.9 5.9 4.9 3.9 2.9 RM 1.9 62 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 (LHS) Relative KLCI (RHS) Relative Index Forecasts and Valuation FY Aug (RM m) 2016A 2017F 2018F 2019F Revenue 2,889 3,360 3,676 3,866 EBITDA 525 483 567 602 Pre-tax Profit 442 396 468 510 Net Profit 361 323 382 416 Net Pft (Pre Ex.) 361 323 382 416 Net Pft Gth (Pre-ex) (%) 28.9 (10.5) 18.2 9.0 EPS (sen) 28.7 25.7 30.4 33.1 EPS Pre Ex. (sen) 28.7 25.7 30.4 33.1 EPS Gth Pre Ex (%) 28 (10) 18 9 Diluted EPS (sen) 28.7 25.7 30.4 33.1 Net DPS (sen) 14.5 13.0 15.3 16.7 BV Per Share (sen) 145 155 173 190 PE (X) 19.5 21.8 18.4 16.9 PE Pre Ex. (X) 19.5 21.8 18.4 16.9 P/Cash Flow (X) 16.2 17.5 14.5 12.9 EV/EBITDA (X) 12.9 14.0 11.7 10.8 Net Div Yield (%) 2.6 2.3 2.7 3.0 P/Book Value (X) 3.9 3.6 3.3 2.9 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 21.1 17.2 18.6 18.3 Earnings Rev (%): (6) 1 2 Consensus EPS (sen): 27.5 30.9 33.0 Other Broker Recs: B: 11 S: 1 H: 11 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P 262 212 162 112 Profitability to normalise in FY17/18F. We forecast EBIT/k gloves to decrease in FY17F, as we factor in higher operating costs and lower volume. We believe the exceptional 1H16 showing will not be replicated given the unfavourable conditions. Our EBIT/k glove assumptions are conservative vis-à-vis the record-breaking level in FY16, as we expect EBIT/k gloves to normalise in FY18-19F. Valuation: Maintain HOLD. We maintain our HOLD recommendation with a TP of RM5.30. Our TP is based on 17x CY18F EPS which is +0.5SD of its 5-year mean EPS. Our PE multiple reflects its near term earnings growth. Key Risks to Our View: Rising competition could erode margins. Competition is heating up in the glove sector with several glove makers expanding aggressively. This could results in higher pressure on margins. At A Glance Issued Capital (m shrs) 1,254 Mkt. Cap (RMm/US$m) 7,033 / 1,645 Major Shareholders (%) Wee Chai Lim 29.4 Kumpulan Wang Persaraan (KWAP) 9.0 Firstway United 5.1 Free Float (%) 51.4 3m Avg. Daily Val (US$m) 3.5 ICB Industry : Health Care / Health Care Equipment & Servic ed: TH / sa:bc, PY
WHAT S NEW Earnings below expectations 3QFYAug-17 earnings up 24% y-o-y Top Glove booked a net profit of RM77.7m in 3QFY17 (+24.4% y-o-y; -6.4% q-o-q) which brings the 9MFY17 figure to RM234.1m. This made up 67.8%/68.2% of our/consensus full-year estimates which we deem to be below expectations. Top Glove declared its first interim DPS of 6.0 sen, which is in line with expectations. Results review 3QFY17 recorded revenue of RM869.6m (+29.4% y-o-y; +2.1% q-o-q) despite a contraction in sales volume (-1.0% y- o-y; -4.4% q-o-q). Better revenue was contributed by a higher ASP (+15.0% y-o-y; +4.6% q-o-q) as the company passed down the higher raw material prices to customers. The average natural rubber latex price surged to RM7.06/kg (+79.2% y-o-y; +18.7% q-o-q) while that for nitrile latex went up to US$1.34/kg (+54.8% y-o-y; +22.4% q-o-q). EBIT/k gloves came in at RM9.71 (+36.7% y-o-y; -5.1% q-oq). We believe EBIT/k gloves declined q-o-q due to time lag in passing on higher raw material prices. We expect EBIT/k gloves to be better going forward as ASPs are adjusted accordingly. This is coupled with continuous internal enhancements that resulted in efficiency gains. Making adjustments to earnings We cut our FY17F numbers to reflect the lower volume and margin compression from the surge in raw material prices. We remain positive on FY18F/19F as revision in ASP following the downtrend of raw material prices (latex price has dropped by 11% to RM5.62/kg since early June 17) may increase sales volume coupled with the incoming capacity. Premised on this, we have adjusted our EBIT/k gloves by - 3.4%/+2.5%/+2.5% to RM9.43/RM10.03/RM10.01 for FY17F/18F/19F. As for volume, we have decreased FY17F sales volume by 3.7%. This resulted in our earnings to be adjusted by 6.5%/+1.3%/+1.7% for FY17F/18F/19F. Outlook Acquisition of two factories; Factory 33 and Factory 34 Top Glove signed an SPA at the end of May to acquire two factories namely Factory 33 and Factory 34, with a total capacity of 1.4bn gloves p.a. They plan to carry on with existing capacity at these factories while upgrading works are still in planning stage. We note that both factories generate revenue of RM150m p.a. with net margins of 2-3%. This will be reflected in FY18 but incremental earnings are minimal at 1-2%. Completion of upgrade works and increased efficiency will be the key factors for the two factories to have more meaningful impact on earnings. Steady on expansion The expansion plans are already underway with the recent completions of Factory 27 in Lukut (commenced operations in August 2016) and Factory 6 in Thailand (November 2016), which bring its total capacity to 48.0bn gloves p.a. Other expansions include Factory 30 in Klang (to commence in July 2017), Factory 33 and Factory 34 (August 2017), Factory 31 (January 2018) and Factory 32 (December 2018) which will raise total production capacity to 60.0bn gloves p.a. (+25% from current capacity). Valuation We maintain HOLD on Top Glove with a higher TP of RM5.30 as we roll forward our base year to CY18. Our TP is based on a target PE multiple of 17x CY18F PE. Page 2
Quarterly / Interim Income Statement (RMm) FY Aug 3Q2016 2Q2017 3Q2017 % chg yoy % chg qoq Revenue 672 852 870 29.4 2.1 Cost of Goods Sold (558) (701) (736) 32.1 5.0 Gross Profit 115 150 133 16.1 (11.3) Other Oper. (Exp)/Inc (48.1) (50.7) (43.0) (10.6) (15.1) Operating Profit 66.6 99.4 90.1 35.4 (9.3) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm Associates & JV Inc 0.62 0.06 (0.1) nm (205.3) Net Interest (Exp)/Inc 6.54 3.28 1.42 (78.2) (56.6) Exceptional Gain/(Loss) 0.0 0.0 0.0 nm nm Pre-tax Profit 73.7 103 91.5 24.1 (10.9) Tax (11.0) (19.5) (14.0) 27.3 (28.5) Minority Interest (0.3) (0.2) 0.16 nm (210.8) Net Profit 62.5 83.1 77.7 24.4 (6.4) Net profit bef Except. 62.5 83.1 77.7 24.4 (6.4) EBITDA 93.7 127 119 26.7 (6.3) Margins (%) Gross Margins 17.1 17.6 15.3 Opg Profit Margins 9.9 11.7 10.4 Net Profit Margins 9.3 9.8 8.9 Source of all data: Company, AllianceDBS Top Glove's expansion plans No. of productions Capacity gloves p.a. Glove Type lines (bn) Current: 26 glove factories 499 lines 48.0 Target commence operations by Expansion in progress: F30 (Klang, Malaysia) Nitrile 28 lines 2.8 July 2017 F31 (Klang, Malaysia) Nitrile 30 lines 3.0 January 2018 F32 (Klang, Malaysia) Nitrile 48 lines 4.8 December 2018 F33 (Nilai, Malaysia) Natural rubber 16 lines 1.1 August 2017 F34 (Muar, Malaysia) Natural rubber 6 lines 0.3 August 2017 Total expansion by December 2018 128 lines 12.0 Total by December 2018 627 lines 60.0 Source of all data: Company, AllianceDBS Page 3
CRITICAL DATA POINTS TO WATCH Top Glove currently operates 26 glove factories with the capacity to produce 48.0bn gloves p.a. including the latest expansion in Factory 6 Phuket. It is planning a Factory 30 in Klang (to commence in July 2017), Factory 33 and Factory 34 (August 2017), Factory 31 (January 2018) and Factory 32 (December 2018). Together, these expansion projects comprising more than 128 production lines will raise the group s annual capacity to 60.0bn gloves. Premised on the expected completion dates provided by the management, we expect Top Glove to grow its effective annual capacity by 8%/12%/5% in FY17/18/19F. Sales volume to grow at 7.4% CAGR. We expect the group s utilisation rate to decline marginally by 2.0ppts each in FY17F and remain flat in FY18F/19F. The incoming capacity of 5.2bn will keep utilisation rate low at 80% for FY18F. Premised on this, we expect Top Glove to grow its sales volume by 5%/12%/5% in FY17/18/19F. This translates into a 3-year CAGR of 7.4%, which is in line with expected consumption growth of 6-8% p.a. EBIT/k gloves is a better metric to assess profitability. We assess Top Glove s profitability by looking at unit profitability (i.e. EBIT/k gloves), rather than profit margins. This is because profit margins can fluctuate even if there is no change in underlying profitability, because of its cost pass-through pricing (which lags by 1-2 months). Under the pricing mechanism, profit margins can rise when costs are falling (i.e. same level of profits on lower ASP), and margins can drop when costs are rising (i.e. same level of profits on higher ASP), with no impact on the bottom line. EBIT/k gloves to normalise. EBIT/k gloves increased by 9% in FY16 backed by the strengthening of the USD coupled with the lower raw material prices. However, we expect EBIT/k gloves to decline by 17% to RM9.43 in FY17F as a result of increasing competition among glove players especially in the nitrile segment, and rising operating costs from natural gas hike and raw material prices. Thereafter, following the downtrend of raw material prices and better supply-demand dynamics, we assume Top Glove s EBIT/k gloves to increase by 6% in FY18F. Gain from incoming nitrile. The recent capacity expansion has been geared towards nitrile gloves as the company believes there will be stronger demand for nitrile gloves. Current product mix stands at 65:35 (natural rubber: nitrile). This could move towards 60:40 once incoming capacity kicks in. We expect Top Glove's earnings to improve from its expansion in nitrile gloves as they offer better margins. Source: Company, AllianceDBS Capacity (bn gloves) 57.4 54 56.8 49.2 48.1 43.9 44.6 41.0 32.8 24.6 16.4 8.2 0.0 Utilisation rate (%) 83.9 82.3 80 80 80 75.2 67.1 50.3 33.6 16.8 0.0 Sales Volume (bn gloves) 46.35 45.4 43.2 38.5 36.7 37.08 33.1 27.81 18.54 9.27 0.00 EBIT/k gloves (RM) 11.4 11.5 10.4 10 10 9.43 9.2 6.9 4.6 2.3 0.0 Page 4
Balance Sheet: Solid balance sheet. Top Glove is a strong cash generator, and we expect the group to remain in net cash position in FY17-19F. Backed by rising operating cash flow of RM431m-530m amid limited capex of RM200m p.a. over FY17-19F, we expect the cash pile to rise from RM224m in FY16 to RM518m by FY19F. In addition, the group has significant short-term investments (RM480m in FY16) which can be liquidated when required. The large cash pile should be sufficient to fund Top Glove s dividend payments and any M&A opportunities that may arise. 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Leverage & Asset Turnover (x) Gross Debt to Equity (LHS) Asset Turnover (RHS) 1.3 1.3 1.2 1.2 1.1 1.1 1.0 Share Price Drivers: Increased market volatility. Malaysian-listed glove makers have been generally regarded as defensive and a safe haven by investors, given their resilient earnings outlook backed by: (1) the cost pass-through mechanism, (2) stable demand for medical glove products, and (3) exposure to global markets (not dependent on a single geographical region). As such, share prices in the sector tend to react favourably during periods of increasing market volatility. Earnings outlook. Top Glove s earnings are a function of two variables: (1) sales volume, and (2) unit profitability (EBIT/k gloves). We do not expect Top Glove s sales volume growth to exceed 6-8% p.a., except during periods of abnormal demand (i.e. pandemic outbreaks). Unit profitability is influenced by the competitive environment, productivity, and macroeconomic factors (i.e. currency movements, raw material prices, etc.) RMm 220.0 215.0 210.0 205.0 200.0 195.0 190.0 20.0% 15.0% 10.0% Capital Expenditure Capital Expenditure (-) ROE (%) Key Risks: Rising competition could erode margins. Competition is heating up in the glove sector with several glove makers undertaking aggressive expansion plans, which could see unit profitability (EBIT/k gloves) suffer going forward. However, Top Glove will be relatively better off than its peers, as its core natural rubber glove products will see relatively less competition than nitrile gloves, because of better supplydemand dynamics. Company Background Top Glove is the world s largest rubber glove manufacturer with an annual production capacity of 48.0bn gloves. Natural rubber gloves make up the lion s share of its product mix (63%), while nitrile rubber gloves account for 30%. Vinyl and surgical gloves account for the rest. Currently, the group s manufacturing facilities are located in Malaysia, Thailand, and Indonesia. 5.0% 0.0% Forward PE Band (x) (x) 26.8 21.8 16.8 11.8 6.8 Jun-13 Jun-14 Jun-15 Jun-16 5.3 4.8 4.3 PB Band (x) (x) +2sd: 23.8x +1sd: 19.8x Avg: 15.7x -1sd: 11.6x -2sd: 7.6x +2sd: 4.35x 3.8 3.3 2.8 2.3 1.8 1.3 Jun-13 Jun-14 Jun-15 Jun-16 Source: Company, AllianceDBS +1sd: 3.64x Avg: 2.93x -1sd: 2.21x -2sd: 1.5x Page 5
Key Assumptions FY Aug Capacity (bn gloves) 43.9 44.6 48.1 54.0 56.8 Utilisation rate (%) 75.2 82.3 80.0 80.0 80.0 Sales Volume (bn gloves) 33.1 36.7 38.5 43.2 45.4 EBIT/k gloves (RM) 10.4 11.4 9.43 10.0 10.0 Income Statement (RMm) FY Aug Revenue 2,511 2,889 3,360 3,676 3,866 Cost of Goods Sold (1,956) (2,293) (2,812) (3,038) (3,202) Gross Profit 555 596 548 638 664 Other Opng (Exp)/Inc (200) (180) (187) (206) (211) Operating Profit 355 416 362 432 453 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (11.7) 1.28 1.28 1.28 1.28 Net Interest (Exp)/Inc 20.6 25.4 33.2 34.5 54.9 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 364 442 396 468 510 Tax (82.4) (79.8) (71.5) (84.4) (91.9) Minority Interest (1.4) (1.7) (1.7) (1.7) (1.7) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 280 361 323 382 416 Net Profit before Except. 280 361 323 382 416 EBITDA 440 525 483 567 602 Growth Revenue Gth (%) 10.3 15.1 16.3 9.4 5.2 EBITDA Gth (%) 43.9 19.2 (8.0) 17.3 6.2 Opg Profit Gth (%) 68.0 17.2 (13.0) 19.4 5.0 Net Profit Gth (Pre-ex) (%) 51.5 28.9 (10.5) 18.2 9.0 Margins & Ratio Gross Margins (%) 22.1 20.6 16.3 17.3 17.2 Opg Profit Margin (%) 14.1 14.4 10.8 11.7 11.7 Net Profit Margin (%) 11.1 12.5 9.6 10.4 10.8 ROAE (%) 18.6 21.1 17.2 18.6 18.3 ROA (%) 12.1 13.5 11.7 12.8 12.9 ROCE (%) 15.3 16.9 15.2 16.5 17.2 Div Payout Ratio (%) 51.3 50.4 50.4 50.4 50.4 Net Interest Cover (x) NM NM NM NM NM Source: Company, AllianceDBS Page 6
Quarterly / Interim Income Statement (RMm) FY Aug 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 Revenue 672 722 786 852 870 Cost of Goods Sold (558) (607) (647) (701) (736) Gross Profit 115 115 138 150 133 Other Oper. (Exp)/Inc (48.1) (45.1) (52.2) (50.7) (43.0) Operating Profit 66.6 69.9 86.1 99.4 90.1 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.62 0.52 (0.9) 0.06 (0.1) Net Interest (Exp)/Inc 6.54 5.39 4.53 3.28 1.42 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 73.7 75.8 89.8 103 91.5 Tax (11.0) (9.9) (16.1) (19.5) (14.0) Minority Interest (0.3) (0.2) (0.3) (0.2) 0.16 Net Profit 62.5 65.6 73.3 83.1 77.7 Net profit bef Except. 62.5 65.6 73.3 83.1 77.7 EBITDA 93.7 97.4 111 127 119 Growth Revenue Gth (%) (3.1) 7.4 8.8 8.4 2.1 EBITDA Gth (%) (38.3) 4.0 14.4 13.7 (6.3) Opg Profit Gth (%) (46.6) 4.9 23.2 15.5 (9.3) Net Profit Gth (Pre-ex) (%) (40.3) 5.1 11.7 13.3 (6.4) Margins Gross Margins (%) 17.1 15.9 17.6 17.6 15.3 Opg Profit Margins (%) 9.9 9.7 11.0 11.7 10.4 Net Profit Margins (%) 9.3 9.1 9.3 9.8 8.9 Balance Sheet (RMm) FY Aug Net Fixed Assets 1,067 1,196 1,276 1,343 1,396 Invts in Associates & JVs 5.14 3.96 5.24 6.51 7.79 Other LT Assets 143 112 112 112 112 Cash & ST Invts 816 703 711 833 985 Inventory 252 264 323 349 368 Debtors 381 346 402 440 463 Other Current Assets 24.2 24.2 24.2 24.2 24.2 Total Assets 2,688 2,649 2,855 3,108 3,357 ST Debt 530 318 318 318 318 Creditor 326 332 407 440 464 Other Current Liab 64.2 40.9 40.9 40.9 40.9 LT Debt 106 81.6 81.6 81.6 81.6 Other LT Liabilities 47.2 50.8 50.8 50.8 50.8 Shareholder s Equity 1,608 1,818 1,946 2,165 2,389 Minority Interests 6.43 7.83 9.54 11.3 13.0 Total Cap. & Liab. 2,688 2,649 2,855 3,108 3,357 Non-Cash Wkg. Capital 267 260 301 332 350 Net Cash/(Debt) 180 304 312 433 586 Debtors Turn (avg days) 48.7 45.9 40.6 41.8 42.6 Creditors Turn (avg days) 58.3 55.0 50.1 53.3 54.0 Inventory Turn (avg days) 45.1 43.1 39.8 42.3 42.9 Asset Turnover (x) 1.1 1.1 1.2 1.2 1.2 Current Ratio (x) 1.6 1.9 1.9 2.1 2.2 Quick Ratio (x) 1.3 1.5 1.5 1.6 1.8 Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH Capex to Debt (%) 31.4 54.3 50.1 50.1 50.1 Z-Score (X) 5.8 7.3 7.0 6.9 6.9 Source: Company, AllianceDBS Page 7
Cash Flow Statement (RMm) FY Aug Pre-Tax Profit 364 442 396 468 510 Dep. & Amort. 97.3 108 120 133 147 Tax Paid (55.6) (98.5) (71.5) (84.4) (91.9) Assoc. & JV Inc/(loss) 11.7 (1.3) (1.3) (1.3) (1.3) Chg in Wkg.Cap. (67.2) 25.6 (41.0) (31.0) (17.9) Other Operating CF (15.8) (42.2) 0.0 0.0 0.0 Net Operating CF 334 434 402 484 545 Capital Exp.(net) (200) (217) (200) (200) (200) Other Invts.(net) (524) 149 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 3.98 2.26 0.0 0.0 0.0 Other Investing CF 77.8 31.3 0.0 0.0 0.0 Net Investing CF (642) (34.4) (200) (200) (200) Div Paid (105) (169) (195) (163) (192) Chg in Gross Debt 364 (198) 0.0 0.0 0.0 Capital Issues 2.92 38.9 0.0 0.0 0.0 Other Financing CF 0.0 0.0 0.0 0.0 0.0 Net Financing CF 262 (328) (195) (163) (192) Currency Adjustments 2.98 6.62 0.0 0.0 0.0 Chg in Cash (42.5) 77.9 7.89 122 153 Opg CFPS (sen) 32.1 32.5 35.3 41.1 44.9 Free CFPS (sen) 10.8 17.3 16.1 22.7 27.5 Source: Company, AllianceDBS Target Price & Ratings History 5.99 5.49 4.99 4.49 RM 1 2 3 8 6 7 9 4 5 10 S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 23 Jun 16 4.67 6.00 BUY 2: 13 Oct 16 5.01 6.00 BUY 3: 19 Oct 16 5.00 4.30 HOLD 4: 07 Nov 16 4.80 4.30 HOLD 5: 16 Dec 16 5.12 4.30 HOLD 6: 20 Dec 16 5.23 4.30 HOLD 7: 29 Dec 16 5.30 4.30 HOLD 8: 06 Jan 17 5.33 4.80 HOLD 9: 09 Jan 17 5.26 4.80 HOLD 10: 17 Mar 17 5.20 4.80 HOLD 3.99 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Note : Share price and Target price are adjusted for corporate actions. Source: AllianceDBS Analyst: Siti Ruzanna MOHD FARUK Page 8
AllianceDBS 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 Jun 2017 08:08:20 (MYT) Dissemination Date: 19 Jun 2017 08:47:20 (MYT) Sources for all charts and tables are AllianceDBS unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by AllianceDBS Research Sdn Bhd (''AllianceDBS''). 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 AllianceDBS Research Sdn Bhd (''AllianceDBS''). 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. 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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. 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. Page 9
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