Malaysia Company Guide Version 2 Bloomberg: QLG MK Reuters: QLRES.KL Refer to important disclosures at the end of this report DBS Group Research. Equity 7 Jun 2016 HOLD Last Traded Price: RM4.40 (KLCI : 1,648.99) Price Target : RM4.60 (5% upside) (Prev RM4.10) Potential Catalyst: Volume and capacity expansion Where we differ: Higher cost assumptions than consensus Analyst Inani ROZIDIN +60 32604 3905 inanirozidin@alliancedbs.com Marvin KHOR +60 32604 3911 marvinkhor@alliancedbs.com What s New Near term earnings booster as MPM expands into food manufacturing Egg prices likely to remain weak; to depend on raw material feed trade Introducing our interactive QL model; scenario analysis on egg oversupply and surimi prices Price Relative 4.8 4.3 3.8 3.3 2.8 2.3 RM 1.8 78 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 (LHS) Relative KLCI INDEX (RHS) Relative Index Forecasts and Valuation FY Mar (RM m) 2016A 2017F 2018F 2019F Revenue 2,853 3,286 3,623 4,049 EBITDA 372 441 486 559 Pre-tax Profit 249 308 344 407 Net Profit 192 232 260 308 Net Pft (Pre Ex.) 192 232 260 308 Net Pft Gth (Pre-ex) (%) 4.9 20.8 12.1 18.3 EPS (sen) 15.4 18.6 20.8 24.7 EPS Pre Ex. (sen) 15.4 18.6 20.8 24.7 EPS Gth Pre Ex (%) 5 21 12 18 Diluted EPS (sen) 15.4 18.6 20.8 24.7 Net DPS (sen) 4.25 5.58 6.25 7.40 BV Per Share (sen) 127 140 155 172 PE (X) 28.6 23.7 21.1 17.8 PE Pre Ex. (X) 28.6 23.7 21.1 17.8 P/Cash Flow (X) 20.2 19.3 16.4 14.4 EV/EBITDA (X) 16.4 13.9 12.6 10.9 Net Div Yield (%) 1.0 1.3 1.4 1.7 P/Book Value (X) 3.5 3.1 2.8 2.6 Net Debt/Equity (X) 0.3 0.3 0.3 0.2 ROAE (%) 12.7 13.9 14.1 15.1 Earnings Rev (%): 5 7 N/A Consensus EPS (sen sen): 19.1 21.3 N/A Other Broker Recs: B: 1 S: 1 H: 8 218 198 178 158 138 118 98 EXPANSION PLANS IN MOTION Volume, capacity expansion the next steps. QL s core staple food businesses will likely stay resilient despite expectations of a slowdown in Malaysia s private consumption and economic growth. Hence, to boost near term growth, QL plans to ramp up its regional feedmill production, aquaculture (prawn farming) project, and volume of frozen surimi-based products plus snack foods for export. As such, we revised our FY17F/FY18F earnings by 5%/7% to reflect these near-term growth drivers. We also introduced our FY19F forecast. Growth priced in for now. However, FY17F valuation remains high at near 1SD above mean PE and near-term growth is moderated by a consolidation of prices of its surimi-based and poultry products after the strong surge in FY15. While we continue to like QL for its diversified business model, we believe near-term growth initiatives are priced in and a rerating catalyst is in the long term earnings potential of its expansion plans. Introducing an interactive QL model. We invite readers to explore the effects of changes in the various assumptions we imputed with our interactive model. We highlight two possible near-term scenarios: 1) egg oversupply, and 2) surimi price increase these illustrate the stability of QL s integrated and diversified business model, given the relatively contained net profit impact from both events. Valuation: Our DCF-derived TP is revised to RM4.60 (8.0% WACC, 5% TG), and implies 24x FY17F (ending March) PE. Key Risks to Our View: Severe price volatility is a threat to commodity-intensive sectors like poultry. Prolonged weak product prices or high feed costs may hurt earnings, though QL s integrated and diversified structure implies less earnings fluctuations than its peers. At A Glance Issued Capital (m shrs) 1,248 Mkt. Cap (RMm/US$m) 5,491 / 1,345 Major Shareholders (%) CBG Holdings Sdn Bhd 42.1 Farsathy Holdings Sdn Bhd 12.1 Free Float (%) 45.8 3m Avg. Daily Val (US$m) 0.81 ICB Industry : Consumer Goods / Food Producers Source of all data: Company, AllianceDBS Research, Bloomberg Finance L.P ed: JS / sa:bc
WHAT S NEW Recent visit to Hutan Melintang, Perak We paid a visit to QL s Hutan Melintang site to meet management and to have a better understanding of the group s initiatives. The current initiatives will only benefit earnings in the mid-long term horizon. Segmental outlook o QL has three key segments marine product manufacturing (MPM), integrated livestock farming (ILF) and palm oil activities (POA). MPM to expand into food manufacturing Surimi, which forms the backbone of MPM, is made out of different kinds of ocean fish which are unable to be commercially farmed. As such, is difficult to extensively increase the volume of pure surimi. Moving forward, management plans to focus on: 1) margin expansion by improving efficiency, 2) increase in production capacity for surimi-based food manufacturing, and 3) producing innovative new products. QL s Hutan Melintang unit is constructing a new chilled surimi-based production plant with estimated capacity of 25k MT, with target completion by 3QFY18. The Hutan Melintang unit is also constructing another frozen products factory (No.3) with target completion in 3QFY17. Moreover, QL is building a new frozen marine products processing plant in Tuaran, Sabah with target completion in FY17. The new plants will be technologically enhanced with more automation, less manpower labour and improved production efficiency. The group s Indonesian unit is exploring opportunities into downstreaming its surimi-based products manufacturing, either through M&A or organic extension of its existing Surabaya operations. QL is also ramping up its commercial prawn farming initiative with expected earnings contribution of RM1-2m in FY17. We are optimistic on the prospects of commercially cultivated aquaculture-based products as this carries high margins, similar to surimi-based products and it is possible to aggressively expand the farming volume in the future. Weak egg prices expected in 1QFY17 For FY16, QL s blended ASP fell to 27 sen from 33 sen in FY15. The decline is attributable to continued weak egg prices coupled with the EL-Nino effect which caused production of smaller and lower grade eggs. According to Department of Veterinary Services Malaysia (DVS) website, the current average commercial egg price (from grade AA to grade E) in April-May 2016 was lower at 28.60 sen compared to 29.58 sen in the same period last year. Although QL s blended ASP is derived based on its production grade, we expect egg contribution to remain flat in 1QFY17, with lower egg prices mitigated by higher volume of c.0.2m eggs per day from an increase in farm utilisation in Indonesia and Vietnam. We remain cautious in our assumptions and expect egg prices to remain at current levels, with earnings supported by a gradual c.3% annual increase in production volume from improved farm utilisation. Exhibit 1: Malaysia s average commercial egg price 0.3900 0.3700 0.3500 0.3300 0.3100 0.2900 0.2700 0.2500 Avg Commercial ASP - QL Financial Year Source: DVS, AllianceDBS Research ILF to count on raw material feed trade for near-term earnings boost The recent completion of the new commercial feedmill in Bekasi, Indonesia is expected to increase FY17 s total group production by >200k MT/yr from >980k MT/yr currently. This additional volume allows QL to enhance its cost efficiency and expand further into commercial feedmilling. There are plans to build additional commercial feedmill plants in Indonesia and Malaysia, supported by management s effort to replicate its local raw material trade business regionally. While egg prices are currently weak, we are still positive of on ILF s outlook as raw material feed contributes c.66%/40% while eggs contribute c.26%/40% to ILF segment/total group revenue. Page 2
POA to increase FFB production by 50% in FY17 QL s upstream plantation in Indonesia is seeing an increasing maturity profile (4 to 7 years old). Intrinsically, management projected that FFB production for FY17 will increase by 120k MT (FY16: 80k MT). The maturing palm maturity in Indonesia will provide a reliable platform for mid-long term growth. Due to corresponding growth from other segments, we forecast POA to continue contributing c.11% of revenue in FY17/FY18/FY19. FamilyMart venture to offer long l ong-term synergies QL has signed an area franchise agreement with Japan s FamilyMart Co. Ltd to open 300 stores in five years. After the opening of the first store in Dec 2016, QL is looking at 10 more in 2017. We anticipate capex needs for this venture to make up a small proportion of QL s total capex, as the requirement per-store of c.rm200k small in comparison by the group s expected full- year needs of RM200-300m. The intention to focus on ready-to-eat F&B will bring synergies to QL s surimi-based products, snack foods, and processed poultry product businesses. However, earnings impact in the near term is negligible given the necessary 2-3 years gestation period. In the mid-to-long term, positive accretion from this venture will depend a lot on FamilyMart s ability to differentiate itself from its competitors such as 7-11 Malaysia and Bison. Exhibit 2: Estimated capex for FY17 Segment MPM ILF Activities Hutan Melintang Chilled products factory RM40m Frozen products factory RM40m Tuaran, Sabah Frozen products factory RM25m Machinery and maintenance RM15m New feedmilling units and maintenance RM80m Amount (RM m) 120 POA Machinery and maintenance RM20m 20 80 Total 220 Page 3
CRITICAL DATA POINTS TO WATCH Earnings Drivers: Integrated food businesses to be resilient. QL has three key segments marine product manufacturing (MPM), integrated livestock farming (ILF) and palm oil activities (POA). As staple protein food products, MPM and ILF divisions enjoy resilient demand. Also, QL s integrated business operations with both upstream and downstream activities provide some cushion against price volatilities of commoditised goods like eggs, feed material and surimi. 45.5 39.0 32.5 26.0 19.5 13.0 6.5 0.0 Surimi prod (k MT) 45 45 45 40 35 Surimi, the backbone of MPM. As at FY16, QL produced up to 40k MT per annum of surimi ground fish paste - whereby 25k MT came from Malaysia (split between plants in Perak and Sabah), and 15k MT from Surabaya, Indonesia. Based on management s estimates, QL commands around 10% market share of surimi in ASEAN. Most of it is sold directly (typically exported), though around half of Malaysian production is used for surimi-based products (SBP) at the Hutan Melintang plant in Perak with a capacity of 55k MT/yr. Together, surimi and SBP makes up 60-70% of MPM's revenue and PBT. The remainder comes from its sale of fishmeal (>30k MT/yr), deep-sea fishing, and its relatively new venture into aquaculture or prawn farming. Overall MPM is QL s most profitable division, making up 25-30% of revenue but >50% of pretax as margins are strong at c.20%. Solid ILF presence. QL is one of the three largest egg producers in Malaysia, with around 3.3m eggs per day (epd); plus c.0.65m epd in Indonesia and c.0.65m epd in Vietnam. Its other poultry presence is primarily in East Malaysia, with around 20m day-old chicks (DOC) and 12m broilers. Additionally, it has a production of around 20m DOC/yr in Indonesia. QL also has feedmills supplying its own blended feed to all eight farms; plus a poultry processing house in Sabah with capacity of 4,000 birds per hour. The integrated structure supports relatively steady ILF pretax margins of 5-8%. ILF contributes c.60% to group revenue and >40% to group PBT. Feed material trading. A differentiating factor for QL s ILF division is its feed material trading, primarily involving the import of corn and soybean meal used to mix poultry feed. Trading an estimated >980k MT/yr of feed material in FY16, QL has a market share of about 20%. It enjoys cost advantages and stability over other pure poultry players, as feed material makes up to 80% of COGS for layer and boiler operations. This volume-driven business is a significant contributor with up to 60% of ILF revenue and up to 50% of ILF PBT. POA still need time. In FY16, QL has c.10k ha of oil palm plantations in Kalimantan, Indonesia, plus three palm oil mills (two in Tawau, Sabah, and one in Tarakan, Indonesia). Due to the young age profile of its trees (1k ha immature, others 4-7 years old), and low CPO prices, the division has been lossmaking. We expect a gradual turnaround as its palms mature to yield more fruit fresh fruit bunches (FFB), and CPO price recovers. Earnings at the pretax level have been held up by its 41.5% stake in Boilermech Holdings, which manufactures biomass boilers. It currently contributes a minimal c.5% of total group s PBT. 5.15 4.12 3.09 2.06 1.03 0.00 172 137 103 69 34 0 4.16 Eggs prod (m/day) 4.6 4.71 4.82 Own FFB prod (k MT) MPM key indicators and assumptions ILF key indicators and assumptions 5.05 68 86 117 138 168 Total production (MT p.a.) FY15 FY16 FY17 FY18F FY19F Surimi 35,000 40,000 45,000 45,000 45,000 Fishmeal 37,500 45,000 45,000 45,000 45,000 Surimi-based products 47,500 55,000 55,000 55,000 80,000 Aquaculture 600 1,500 1,800 2,813 4,230 Total production FY15 FY16 FY17F FY18F FY19F Eggs (m/day) 4.2 4.6 4.7 4.8 5.1 DOC (m) 34.0 20.0 40.0 40.0 40.0 Broilers (m) 7.0 12.0 12.0 12.0 12.0 Traded feed material (MT) 900 980 1,200 1,257 1,320 ASP (RM) Eggs (ea) 0.33 0.27 0.27 0.28 0.28 DOC (ea) 0.70 0.70 0.71 0.73 0.74 Broilers (/kg) 6.77 6.25 6.25 6.38 6.50 Page 4
Balance Sheet: Solid balance sheet from strong cash flow. QL has a manageable gearing level of <0.5x gross debt-to-equity (0.3x net). Net interest cover is also secure at >8x. Given the strong operating cash generation nature of its businesses, we view that QL would have little trouble gearing up further for any expansion needs. We also forecast QL to continue with a 30% dividend payout, close to its historical trend, though there is no fixed policy. 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Leverage & Asset Turnover (x) Gross Debt to Equity (LHS) Asset Turnover (RHS) 1.2 1.2 1.1 1.1 1.0 Share Price Drivers: Key product pricing. QL s share price is strongly correlated to the pricing outlook and supply-demand dynamics of its core products like eggs, broilers, surimi and fishmeal. Rising prices from low supply or growing demand may boost earnings and share price. Capacity expansion or downstream progress. Growing its capacity will increase QL s long-term earnings potential, particularly for core products like surimi and eggs. We view that further expansion into the higher-margin surimi-based products (SBP), particularly at its Indonesian and Sabah surimi operations, also offer upside potential. Key Risks: Feed costs volatility. ILF margins can be affected by higher feed costs (corn and soybeans). But, as a feed material trader, QL has an edge over industry peers with no direct access to the materials. RMm 255.0 250.0 245.0 240.0 235.0 230.0 225.0 220.0 215.0 210.0 205.0 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Capital Expenditure Capital Expenditure (-) ROE (%) Volatility in prices of commodity products. QL is exposed to risks in falling/weak chicken egg prices, which may be caused by general supply and demand forces and seasonality. This could affect ILF margins. On a regional basis, large supply growth of fishmeal and surimi can also drive down prices and hurt the MPM segment. Company Background QL has three core businesses: ILF - integrated livestock farming (chicken eggs, broilers, day-old chicks, feed material trading), MPM - marine product manufacturing (surimi, surimi-based products, frozen food), and POA - palm oil activities (palm oil plantation, milling). 0.0% 30.3 Forward PE Band (x) (x) 28.3 +2sd: 27.7x 26.3 24.3 +1sd: 24.2x 22.3 20.3 Avg: 20.7x 18.3-1sd: 17.2x 16.3 14.3-2sd: 13.7x 12.3 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 PB Band (x) (x) 4.0 3.5 3.0 +2sd: 3.95x +1sd: 3.4x Avg: 2.85x 2.5-1sd: 2.3x 2.0-2sd: 1.75x 1.5 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Page 5
Key Assumptions FY Mar Surimi prod (k MT) 35.0 40.0 45.0 45.0 45.0 Eggs prod (m/day) 4.16 4.60 4.71 4.82 5.05 Own FFB prod (k MT) 68.0 85.5 117 138 168 Segmental Breakdown FY Mar Revenues (RMm) MPM 733 835 864 925 1,199 POA 345 310 376 392 377 ILF 1,630 1,708 2,046 2,305 2,474 Total 2,708 2,853 3,286 3,623 4,049 Pretax profit (RMm) MPM 127 164 176 192 245 POA 14.8 12.1 26.9 31.7 31.8 ILF 95.6 73.8 105 121 130 Total 246 249 308 344 407 Pretax profit Margins MPM 17.4 19.6 20.4 20.8 20.5 POA 4.3 3.9 7.2 8.1 8.4 ILF 5.9 4.3 5.1 5.2 5.2 Total 9.1 8.7 9.4 9.5 10.0 Income Statement (RMm) FY Mar Revenue 2,708 2,853 3,286 3,623 4,049 Cost of Goods Sold (2,240) (2,351) (2,715) (3,004) (3,356) Gross Profit 467 501 570 619 694 Other Opng (Exp)/Inc (223) (232) (243) (255) (267) Operating Profit 244 269 327 364 426 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 23.3 12.6 13.4 14.1 14.8 Net Interest (Exp)/Inc (29.7) (32.5) (32.3) (33.6) (34.6) Exceptional Gain/(Loss) 8.35 0.0 0.0 0.0 0.0 Pre-tax Profit 246 249 308 344 407 Tax (50.0) (47.7) (64.7) (72.3) (85.4) Minority Interest (4.5) (9.7) (11.4) (12.1) (13.5) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 191 192 232 260 308 Net Profit before Except. 183 192 232 260 308 EBITDA 333 372 441 486 559 Growth Revenue Gth (%) 10.2 5.4 15.2 10.3 11.8 EBITDA Gth (%) 10.9 11.7 18.6 10.3 14.9 Opg Profit Gth (%) 10.1 10.3 21.4 11.4 17.1 Net Profit Gth (Pre-ex) (%) 14.5 4.9 20.8 12.1 18.3 Margins & Ratio Gross Margins (%) 17.3 17.6 17.4 17.1 17.1 Opg Profit Margin (%) 9.0 9.4 9.9 10.0 10.5 Net Profit Margin (%) 7.1 6.7 7.1 7.2 7.6 ROAE (%) 14.1 12.7 13.9 14.1 15.1 ROA (%) 7.9 7.1 7.9 8.1 8.8 ROCE (%) 8.8 9.0 9.8 10.0 10.8 Div Payout Ratio (%) 27.7 27.6 30.0 30.0 30.0 Net Interest Cover (x) 8.2 8.3 10.1 10.8 12.3 Page 6
Quarterly / Interim Income Statement (RMm) FY Mar 4Q2015 1Q2016 2Q2016 2016 3Q2016 4Q2016 Revenue 662 655 690 738 769 Cost of Goods Sold 0.0 0.0 0.0 0.0 0.0 Gross Profit 662 655 690 738 769 Other Oper. (Exp)/Inc (608) (598) (618) (655) (712) Operating Profit 53.3 57.1 72.4 83.1 56.5 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 6.13 3.72 5.24 2.14 1.55 Net Interest (Exp)/Inc (8.7) (8.0) (7.0) (8.7) (8.6) Exceptional Gain/(Loss) 8.35 0.0 0.0 0.0 0.0 Pre-tax Profit 59.2 52.8 70.7 76.5 49.4 Tax (12.0) (11.1) (15.9) (12.4) (8.4) Minority Interest (0.5) (0.8) 0.34 (6.3) (3.0) Net Profit 46.7 40.9 55.2 57.9 38.1 Net profit bef Except. 38.4 40.9 55.2 57.9 38.1 EBITDA 75.9 80.7 99.2 106 80.5 Growth Revenue Gth (%) (9.7) (1.0) 5.4 6.9 4.2 EBITDA Gth (%) (24.1) 6.4 22.9 7.0 (24.2) Opg Profit Gth (%) (32.1) 7.0 26.8 14.8 (32.0) Net Profit Gth (Pre-ex) (%) (31.0) 6.7 34.8 4.9 (34.2) Margins Opg Profit Margins (%) 8.1 8.7 10.5 11.3 7.3 Net Profit Margins (%) 7.1 6.2 8.0 7.8 5.0 Balance Sheet (RMm) FY Mar Net Fixed Assets 1,239 1,377 1,486 1,615 1,734 Invts in Associates & JVs 94.7 105 118 132 147 Other LT Assets 278 230 228 226 225 Cash & ST Invts 201 245 290 347 435 Inventory 335 375 432 476 532 Debtors 307 279 322 355 397 Other Current Assets 131 193 193 193 193 Total Assets 2,585 2,804 3,069 3,344 3,663 ST Debt 431 473 498 523 548 Creditor 238 267 308 339 379 Other Current Liab 16.8 13.5 13.5 13.5 13.5 LT Debt 326 303 328 353 378 Other LT Liabilities 73.7 79.9 79.9 79.9 79.9 Shareholder s Equity 1,427 1,588 1,751 1,933 2,148 Minority Interests 72.9 79.3 90.6 103 116 Total Cap. & Liab. 2,585 2,804 3,069 3,344 3,663 Non-Cash Wkg. Capital 518 566 625 671 729 Net Cash/(Debt) (556) (531) (536) (529) (491) Debtors Turn (avg days) 39.0 37.5 33.4 34.1 33.9 Creditors Turn (avg days) 34.5 41.0 40.4 41.0 40.7 Inventory Turn (avg days) 47.8 57.6 56.6 57.5 57.1 Asset Turnover (x) 1.1 1.1 1.1 1.1 1.2 Current Ratio (x) 1.4 1.4 1.5 1.6 1.7 Quick Ratio (x) 0.7 0.7 0.7 0.8 0.9 Net Debt/Equity (X) 0.4 0.3 0.3 0.3 0.2 Net Debt/Equity ex MI (X) 0.4 0.3 0.3 0.3 0.2 Capex to Debt (%) 32.3 30.4 26.6 28.5 27.0 Z-Score (X) 5.1 4.9 4.8 4.7 4.7 Page 7
Cash Flow Statement (RMm) FY Mar Pre-Tax Profit 246 249 308 344 407 Dep. & Amort. 88.5 102 114 122 132 Tax Paid (50.0) (47.7) (64.7) (72.3) (85.4) Assoc. & JV Inc/(loss) (23.3) (12.6) (13.4) (14.1) (14.8) Chg in Wkg.Cap. (71.5) (48.6) (58.8) (45.8) (57.9) Other Operating CF 35.4 29.5 0.0 0.0 0.0 Net Operating CF 225 272 285 334 381 Capital Exp.(net) (245) (236) (220) (250) (250) Other Invts.(net) (0.4) 60.6 0.0 0.0 0.0 Invts in Assoc. & JV (37.2) 0.0 0.0 0.0 0.0 Div from Assoc & JV 4.82 0.0 0.0 0.0 0.0 Other Investing CF 0.0 2.38 0.0 0.0 0.0 Net Investing CF (277) (173) (220) (250) (250) Div Paid (53.0) (53.0) (69.6) (78.0) (92.4) Chg in Gross Debt 103 19.2 50.0 50.0 50.0 Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (54.8) (12.3) 0.0 0.0 0.0 Net Financing CF (5.2) (46.1) (19.6) (28.0) (42.4) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash (57.5) 53.1 45.3 56.3 88.4 Opg CFPS (sen) 23.8 25.7 27.5 30.5 35.1 Free CFPS (sen) (1.6) 2.91 5.20 6.75 10.5 Target Price & Ratings History 4.81 4.61 4.41 4.21 4.01 RM 2 3 4 5 6 7 S.No. Date Closing Target Rating Price Price 1: 27 Aug 15 3.90 4.15 HOLD 2: 14 Sep 15 4.16 4.10 HOLD 3: 28 Oct 15 4.02 4.10 HOLD 4: 23 Nov 15 4.21 4.10 HOLD 5: 26 Feb 16 4.49 4.10 HOLD 6: 12 Apr 16 4.32 4.10 HOLD 7: 31 May 16 4.41 4.10 HOLD 3.81 1 3.61 Jun-15 Oct-15 Feb-16 Jun-16 Note : Share price and Target price are adjusted for corporate actions. Source: AllianceDBS Research Page 8
AllianceDBS Research 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 AllianceDBS Research Sdn Bhd. 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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 603-2604 3333 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 United States Other jurisdictions This report is distributed in Singapore by DBS Bank Ltd (Company Regn. 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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. AllianceDBS Research Sdn Bhd (128540 U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia. Tel.: +603 2604 3333 Fax: +603 2604 3921 email : general@alliancedbs.com Page 10