Version 4 Bloomberg: KLCCSS MK Reuters: KCCP.SI Refer to important disclosures at the end of this report Malaysia Equity Research 4 Nov 2016 HOLD Last Traded Price ( 3 Nov 2016): RM7.80 (KLCI : 1,648.08) Price Target 12-mth: RM8.05 (3% upside) (Prev RM7.70) Shariah Compliant: No Potential Catalyst: Yield-accretive asset injections Where we differ: Largely in line with consensus Analyst Inani ROZIDIN +603 2604 3905 inanirozidin@alliancedbs.com What s New In-line 3Q16 earnings; office segment to remain stable Declares DPU of 8.60 sen, with ex-date of 16 Nov Outlook to be resilient with long lease office space and prime asset locations Maintain HOLD with higher TP of RM8.05 Price Relative 8.5 8.0 7.5 7.0 6.5 6.0 5.5 RM 5.0 76 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 (LHS) Relative KLCI (RHS) Relative Index Forecasts and Valuation FY Dec (RM m) 2015A 2016F 2017F 2018F Revenue 1,340 1,429 1,487 1,531 EBITDA 1,048 1,112 1,151 1,185 Pre-tax Profit 1,392 989 1,025 1,055 Net Profit 1,006 736 759 775 Net Pft (Pre Ex.) 679 736 759 774 Net Pft Gth (Pre-ex) (%) (1.6) 8.5 3.0 2.0 EPS (sen) 55.7 40.8 42.0 42.9 EPS Pre Ex. (sen) 37.6 40.8 42.0 42.9 EPS Gth Pre Ex (%) (2) 9 3 2 Diluted EPS (sen) 37.6 40.8 42.0 42.9 Net DPS (sen) 34.6 35.9 37.2 38.5 BV Per Share (sen) 695 697 700 702 PE (X) 14.0 19.1 18.6 18.2 PE Pre Ex. (X) 20.8 19.1 18.6 18.2 P/Cash Flow (X) 15.1 15.0 14.6 14.1 EV/EBITDA (X) 24.1 22.8 22.1 21.5 Net Div Yield (%) 4.4 4.6 4.8 4.9 P/Book Value (X) 1.1 1.1 1.1 1.1 Net Debt/Equity (X) 0.3 0.3 0.3 0.3 ROAE (%) 21.8 15.4 15.9 16.2 Earnings Rev (%): 0 0 0 Consensus EPS (sen): 41.1 42.4 44.1 Other Broker Recs: B: 5 S: 0 H: 7 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P 216 196 176 156 136 116 96 Challenging times Maintain HOLD. Relative to other M-REITs, KLCC Stapled Security (KLCCSS) has been trading at a premium with yields at about 1ppt above the 10-year MGS. This is attributed to its super-prime KLCC assets in the heart of Kuala Lumpur, some of the best among peers. That said, given the outlook for flat rentals, we see limited upside from current levels for KLCCSS. Best in class assets and tenants. About half of KLCCSS s operating profit is derived from office buildings, comprising four assets and including Malaysia s iconic PETRONAS Twin Towers. They boast long lease terms of up to 15 years, triple-net-lease structures, and solid tenant profiles that include PETRONAS and ExxonMobil. Fixed rental escalations (ranging from 9-14% every three years) built into the tenancies underpin steady revenue growth for the stapled security. Significant growth only from 2019 onwards. Asset enhancement works for Kompleks Dayabumi is on track and it is presently in phase 2 of the extension plan of the 1m sq ft NLA tower comprising 0.5m-sq-ft NLA of office space, with the rest being retail and hospitality space. The vacant Lot D1 (1.3m-sq-ft GLA) is awaiting a suitable anchor tenant before development commences. KLCCSS also has right of first refusal to parent KLCC Holdings planned developments around the KLCC area. Given the low implied yields at current prices, any potential acquisitions will be value-accretive to the REIT. Valuation: Our DDM-derived TP rises to RM8.05, with 7% cost of equity and 1% TG, as we adjust our risk-free rate assumption from 4.0% to 3.9% to reflect the compression in MGS yield. Key Risks to Our View: Weak sentiment could hurt retail and hospitality sector. The soft consumer spending outlook and the GST implementation could have an impact on KLCCSS retail and hospitality assets. The former may be hurt by poorer rental reversions, and the latter by fewer visitors and bookings. At A Glance Issued Capital (m shrs) 1,805 Mkt. Cap (RMm/US$m) 14,082 / 3,367 Major Shareholders (%) Petroliam Nasional Bhd 75.5 Free Float (%) 20 3m Avg. Daily Val (US$m) 1.7 ICB Industry : Real Estate / Real Estate Refer to important disclosures at the end of this report ed: CK / sa:bc
WHAT S NEW Challenging market conditions 3Q16 core net profit of RM178m (+19% y-o-y) was within our/consensus expectations. Earnings were higher owing to a fair value adjustment made in 3Q15 for RM32m write-off of the CityPoint office portion which is closed for redevelopment. Excluding the fair value adjustment, core net profit would have declined by 2% y-o-y due to drop in topline by 2%, dragged by the lacklustre performance of the hotel segment. We expect earnings from the office segment to remain resilient, and the retail and hotel segments to continue to be challenging due to the weak consumer demand. DPU of 8.60 sen was declared, implying a payout of c.93%. Office segment to stay resilient The office segment was steady, with revenue coming at RM148.5m (flat y-o-y) amid a weak market. However, operating profit edged down to RM13m (-1% y-o-y) due to higher cost incurred from maintenance works. Its office portfolio s occupancy was full as at end-3q16. Asset enhancement works for Kompleks Dayabumi are on track and presently in phase 2 of the extension plan. Current conversion works of some atrium spaces on Levels 2-4 of Menara Dayabumi into offices (est. 39k sq ft) are targeted to complete in FY16, and will be added into the existing triple net lease agreement with Petronas. Furthermore, the office portion at CityPoint has also been closed for redevelopment as part of the overall Kompleks Dayabumi enhancement initiative. We also note that the long-term lease at Menara ExxonMobil was renewed as expected, for a term of nine years from early-fy17, with the option to renew for further three successive terms of three years each. Tenant revamping for retail segment The retail segment (mainly Suria KLCC) recorded revenue of RM115.9m (-3% y-o-y), attributable to the shift in tenant mix from the ongoing reconfiguration of men s and women s luxury precinct on level 1. We expect reversion rates to be positive next quarter with the completion of tenant reconfiguration. In 3Q16, five new tenants came onboard in Suria KLCC, replacing the tenants that left. The new tenants are Innisfree, Models Own, belief, A-Saloon Prestige and Calvin Klein Accessories. Marketing initiatives planned for the hotel segment The hospitality segment s topline declined by 22% y-o-y to RM35.1m due to overall weaker market demand. The drop is mainly due to the absence of large-scale banqueting events which dampened F&B performance. Moreover, its hotel segment (mainly Mandarin Oriental) faces intense competition from the newly renovated Ritz Carlton and the opening of St Regis. There are additional plans in the pipeline for refurbishment of all rooms, commencing in 3Q16. In addition, management re-opened the Casbah and Sultan s Lounge with a new concept. Management plans to launch aggressive marketing promotions to drive occupancy and diversify its target market from the oil & gas sector. Quarterly / Interim Income Statement (RMm) FY Dec 3Q2015 2Q2016 3Q2016 % chg yoy % chg qoq Revenue 337 335 330 (2.3) (1.5) Cost of Goods Sold (107) (91.8) (90.8) (15.5) (1.1) Gross Profit 230 243 239 3.9 (1.7) Other Oper. (Exp)/Inc (7.4) (1) (9.1) 23.7 (9.7) Operating Profit 255 247 246 (3.2) () Other Non Opg (Exp)/Inc nm nm Associates & JV Inc 3.02 3.04 3.72 23.4 22.6 Net Interest (Exp)/Inc (20.2) (19.3) (2) 0.9 (3.3) Exceptional Gain/(Loss) (32.2) nm nm Pre-tax Profit 205 230 230 12.1 () Tax (29.1) (25.9) (25.7) (11.5) (0.8) Minority Interest (26.3) (26.6) (26.2) 0.6 (1.4) Net Profit 150 178 178 19.0 0.2 Net profit bef Except. 182 178 178 (2.1) 0.2 EBITDA 265 260 259 (2.2) (0.2) Margins (%) Gross Margins 68.1 72.6 72.4 Opg Profit Margins 75.5 73.7 74.8 Net Profit Margins 44.4 53.2 54.1 Source of all data: Company, AllianceDBS Page 2
3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 Company Guide CRITICAL DATA POINTS TO WATCH Earnings Drivers: Triple net leases for office assets. KLCCSS has four main prime office buildings: the PETRONAS Twin Towers, Menara Petronas 3, Menara ExxonMobil, and Menara Dayabumi. All except Menara Exxon Mobil are on triple-net-lease structures, i.e. insurance, maintenance, quit rent and assessment will be borne by the tenants instead of KLCCSS. Menara Exxon Mobil is on a long-term lease. Hence, NPI margins are high at about 90% with minimal volatility from cost pressures. Rental rates are locked for the long term as well, with three-year built-in stepups. Together, these office assets generate c.45% of topline and over 50% of PBT. Of the four, the Twin Towers, Petronas 3 and Menara ExxonMobil are put in the REIT component of the stapled security so that their earnings are eligible for tax benefits. The effective tax rate for KLCCSS is <15%, and is expected to remain at that level going forward. Retail exposure. KLCCSS owns 60% of the c.1m sq ft NLA Suria KLCC, which sees over 45m footfall annually from locals and tourists. The rental rates, averaging c.rm29psf/mth, reflect its super-prime location. Most of the leases at this property are for three years with about a third of NLA expiring annually. Reversions have historically been strong at double-digit rates, which we expect to be sustained given its prime location. The stapled security also has another 132k sq ft NLA of retail space in the Petronas 3 building. Together, the retail assets contribute c.35% to topline and pretax. 5,197 4,455 3,712 2,970 2,227 1,485 742 0 36.4 29.1 21.8 14.6 7.3 470 376 282 188 94 Office NLA (k sq ft) 5146 5146 5146 5146 5146 Suria KLCC avg rental psf/m (RM) 35.7 33.6 31.6 29.7 27.6 Mandarin Oriental RevPAR (RM) 447.5 461.0 406.3 401.1 292.1 Key development works. KLCCSS is currently in the process of demolishing the Menara Dayabumi / CityPoint Podium asset. A 65-storey office asset, a 6-storey retail area (c.0.5m sq ft NLA), and a 5-star, 500-room hotel to be managed by the Shangri-La group will be built. Completion is targeted for 2019. Also, the vacant Lot D1 (which can be developed into 1.4m sq ft of gross floor area) is seeking an anchor tenant before development works kick off. ROFRs to more prime assets. Holding company KLCC Holdings has separate joint ventures (JVs) with Qatari Diar Asia Pacific and Sapura Resources, and are developing two major assets in the KLCC area (Lot 185 and Lot 91 respectively). KLCCSS has the right of first refusal (ROFR) to both assets, which are expected to be office-centric assets with completion dates in 2019. Additionally, the 4-star, 571-room Traders Hotel within the KLCC area is also a potential candidate for injection. Modest hospitality exposure. KLCCSS also owns the 5-star Mandarin Oriental hotel located within the KLCC area. The 643- room hotel also has meeting, incentive, conference & exhibition (MICE) facilities to cater to its corporate clientele. However, PBT contribution is small at 2-3%. 0 Quarterly operating profit (RM m) and margins (%) 265.0 255.0 245.0 235.0 225.0 215.0 205.0 195.0 Operating profit Operating profit margin 77% 76% 75% 74% 73% 72% Page 3
Balance Sheet: Solid balance sheet. KLCCSS has a net gearing ratio of c.20%, which is relative low compared to 25-35% for other M-REITs. It also has a large cash pile of c.rm1bn. Debt maturity is weighed towards the long term as only c.rm1bn will mature within the next four years. More than 85% of its borrowings (RM2.2bn) are from the RM3bn sukuk facility, and 86% of borrowings are on fixed rates. Share Price Drivers: Asset growth opportunities. KLCCSS management has claimed it is selective on acquisitions, focusing only on super-prime properties. While this could limit near-term non-organic growth options, the completion and injection of key assets in 2019 and beyond implies that growth will only pick up significantly in the medium term. Key Risks: Weak sentiment could hurt retail and hospitality sector. The soft consumer spending outlook and the GST implementation could have an impact on KLCCSS s retail and hospitality assets. The former may be hurt by poorer rental reversions, and the latter by fewer visitors and bookings. Company Background KLCC Stapled Security is a stapled group comprising KLCC REIT (which owns the Petronas Twin Towers, Menara ExxonMobil and Petronas Tower 3), and KLCC Property, (which holds Kompleks Dayabumi, Mandarin Oriental and Suria KLCC). Leverage & Asset Turnover (x) 0.25 0.20 5 0 5 0 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMm 18 16 14 12 10 8 6 4 2 Capital Expenditure (-) 2% 15.0% 1% 5.0% ROE (%) % 22.9 (x) Forward PE Band (x) 20.9 18.9 16.9 14.9 +2sd: 19.6x +1sd: 18.6x Avg: 17.7x -1sd: 16.7x -2sd: 15.7x 12.9 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 (x) 1.5 PB Band (x) 1.4 1.3 1.2 1.1 1.0 0.9 +2sd: 1.17x +1sd: 1.11x Avg: 1.04x -1sd: 0.97x -2sd: 0.9x 0.8 0.7 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Page 4
Key Assumptions FY Dec Office NLA (k sq ft) 5,146 5,146 5,146 5,146 5,146 Suria KLCC avg rental psf/m (RM) 27.7 29.7 31.6 33.6 35.7 Mandarin Oriental RevPAR (RM) 406 292 401 448 461 Segmental Breakdown FY Dec Revenues (RMm) Office 596 557 592 600 600 Retail 472 496 533 563 595 Hotel 183 184 196 212 220 Managed Services 103 102 109 112 115 Others N/A N/A N/A N/A N/A Total 1,354 1,340 1,429 1,487 1,531 Operating profit (RMm) Office 529 526 532 540 540 Retail 388 402 430 455 481 Hotel 35.9 18.2 39.2 42.4 44.1 Managed Services 72.6 74.2 63.1 65.0 67.0 Others (12.9) (15.8) Total 1,012 1,004 1,065 1,102 1,133 Operating Margins (%) Office 88.8 94.4 9 9 9 Retail 82.1 80.9 80.7 80.8 80.9 Hotel 19.6 9.9 2 2 2 Managed Services 70.8 72.4 58.0 58.0 58.0 Others N/A N/A N/A N/A N/A Total 74.8 74.9 74.5 74.2 74.0 Income Statement (RMm) FY Dec Revenue 1,354 1,340 1,429 1,487 1,531 Cost of Goods Sold (342) (336) (364) (384) (398) Gross Profit 1,012 1,004 1,065 1,102 1,133 Other Opng (Exp)/Inc Operating Profit 1,012 1,004 1,065 1,102 1,133 Other Non Opg (Exp)/Inc Associates & JV Inc (6.7) 13.7 13.4 13.4 13.4 Net Interest (Exp)/Inc (111) (78.3) (89.3) (90.5) (91.7) Exceptional Gain/(Loss) 249 453 Pre-tax Profit 1,143 1,392 989 1,025 1,055 Tax (121) (115) (132) (139) (145) Minority Interest (221) (272) (121) (128) (136) Preference Dividend 1.00 Net Profit 800 1,006 736 759 775 Net Profit before Except. 689 679 736 759 774 EBITDA 1,035 1,048 1,112 1,151 1,185 Growth Revenue Gth (%) 5.8 (1.0) 6.6 4.0 3.0 EBITDA Gth (%) 3.9 1.3 6.0 3.6 2.9 Opg Profit Gth (%) 6.4 (0.8) 6.0 3.6 2.8 Net Profit Gth (Pre-ex) (%) 10.3 (1.6) 8.5 3.0 2.0 Margins & Ratio Gross Margins (%) 74.8 74.9 74.5 74.2 74.0 Opg Profit Margin (%) 74.8 74.9 74.5 74.2 74.0 Net Profit Margin (%) 59.1 75.0 51.5 51.0 50.6 ROAE (%) 18.4 21.8 15.4 15.9 16.2 ROA (%) 4.8 5.9 4.2 4.3 4.4 ROCE (%) 5.6 5.5 5.3 5.5 5.6 Div Payout Ratio (%) 95.0 100.9 9 9 9 Net Interest Cover (x) 9.1 12.8 11.9 12.2 12.4 Page 5
Quarterly / Interim Income Statement (RMm) FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 Revenue 337 347 335 335 330 Cost of Goods Sold (107) (93.8) (92.8) (91.8) (90.8) Gross Profit 230 253 242 243 239 Other Oper. (Exp)/Inc (7.4) (8.1) (7.6) (1) (9.1) Operating Profit 255 425 252 247 246 Other Non Opg (Exp)/Inc Associates & JV Inc 3.02 4.97 3.01 3.04 3.72 Net Interest (Exp)/Inc (20.2) (19.7) (19.2) (19.3) (2) Exceptional Gain/(Loss) (32.2) 439 Pre-tax Profit 205 850 236 230 230 Tax (29.1) (32.8) (26.7) (25.9) (25.7) Minority Interest (26.3) (193) (26.7) (26.6) (26.2) Net Profit 150 623 183 178 178 Net profit bef Except. 182 184 183 178 178 EBITDA 265 438 263 260 259 Growth Revenue Gth (%) 2.5 3.0 (3.6) () (1.5) EBITDA Gth (%) 2.1 65.4 (4) (1.2) (0.2) Opg Profit Gth (%) 2.4 67.0 (40.7) (2.2) () Net Profit Gth (Pre-ex) (%) 1.2 1.2 (0.8) (2.7) 0.2 Margins Gross Margins (%) 68.1 73.0 72.3 72.6 72.4 Opg Profit Margins (%) 75.5 122.5 75.4 73.7 74.8 Net Profit Margins (%) 44.4 179.6 54.6 53.2 54.1 Balance Sheet (RMm) FY Dec Net Fixed Assets 610 639 672 706 741 Invts in Associates & JVs 261 265 279 292 305 Other LT Assets 14,717 15,457 15,507 15,557 15,607 Cash & ST Invts 1,127 1,111 1,074 1,035 994 Inventory 2.00 1.84 1.96 2.04 2.10 Debtors 87.2 62.9 67.1 69.8 71.9 Other Current Assets Total Assets 16,804 17,537 17,601 17,662 17,721 ST Debt 357 28.5 28.5 28.5 28.5 Creditor 263 278 302 318 330 Other Current Liab 23.8 24.6 24.6 24.6 24.6 LT Debt 2,155 2,532 2,532 2,532 2,532 Other LT Liabilities 158 162 162 162 162 Shareholder s Equity 4,462 4,775 4,777 4,776 4,775 Minority Interests 9,386 9,736 9,774 9,819 9,869 Total Cap. & Liab. 16,804 17,537 17,601 17,662 17,721 Non-Cash Wkg. Capital (197) (238) (258) (271) (281) Net Cash/(Debt) (1,384) (1,450) (1,486) (1,526) (1,567) Debtors Turn (avg days) 18.7 20.4 16.6 16.8 16.9 Creditors Turn (avg days) 328.7 323.3 32 324.8 329.2 Inventory Turn (avg days) 2.1 2.3 2.1 2.1 2.1 Asset Turnover (x) Current Ratio (x) 1.9 3.5 3.2 3.0 2.8 Quick Ratio (x) 1.9 3.5 3.2 3.0 2.8 Net Debt/Equity (X) 0.3 0.3 0.3 0.3 0.3 Net Debt/Equity ex MI (X) 0.3 0.3 0.3 0.3 0.3 Capex to Debt (%) 2.7 6.0 4.6 4.7 4.8 Z-Score (X) 3.6 3.5 3.5 3.5 3.5 Page 6
Cash Flow Statement (RMm) FY Dec Pre-Tax Profit 1,280 1,518 989 1,025 1,055 Dep. & Amort. 29.6 30.5 33.5 35.6 37.9 Tax Paid (115) (108) (132) (139) (145) Assoc. & JV Inc/(loss) 6.73 (13.7) (13.4) (13.4) (13.4) Chg in Wkg.Cap. (164) (29.1) 19.3 13.6 9.49 Other Operating CF (194) (466) 4 41.6 52.2 Net Operating CF 843 932 936 964 995 Capital Exp.(net) (68.2) (153) (117) (120) (123) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF 6.52 9.12 Net Investing CF (61.7) (144) (117) (120) (123) Div Paid (720) (738) (767) (794) (822) Chg in Gross Debt 163 47.2 Capital Issues Other Financing CF (176) (115) (89.3) (90.5) (91.7) Net Financing CF (734) (806) (857) (884) (914) Currency Adjustments Chg in Cash 47.6 (17.5) (36.7) (39.5) (40.8) Opg CFPS (sen) 55.8 53.3 50.8 52.7 54.6 Free CFPS (sen) 42.9 43.2 45.4 46.8 48.3 Target Price & Ratings History 8.26 8.06 7.86 7.66 7.46 7.26 RM 2 3 4 S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 12 Nov 15 7.05 6.55 HOLD 2: 09 May 16 7.25 6.70 HOLD 3: 28 Jun 16 7.49 7.70 HOLD 4: 03 Aug 16 7.51 7.70 HOLD 7.06 6.86 1 6.66 6.46 Nov-15 Mar-16 Jul-16 Nov-16 Note : Share price and Target price are adjusted for corporate actions. Source: AllianceDBS Analyst: Inani ROZIDIN Page 7
DISCLOSURE Stock rating definitions 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 > -10% over the next 12 months SELL - negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date Page 8
DISCLAIMER This report has been prepared for information purposes only by AllianceDBS Research Sdn Bhd ( ADBSR ), a subsidiary of Alliance Investment Bank Berhad ( AIBB ) and an associate of DBS Vickers Securities Holdings Pte Ltd ( DBSVH ). DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. This report is strictly confidential and is meant for circulation to clients of ADBSR, AIBB and DBSVH only or such persons as may be deemed eligible to receive such research report, information or opinion contained herein. Receipt and review of this report indicate your agreement not to distribute, reproduce or disclose in any other form or medium (whether electronic or otherwise) the contents, views, information or opinions contained herein without the prior written consent of ADBSR. This report is based on data and information obtained from various sources believed to be reliable at the time of issuance of this report and any opinion expressed herein is subject to change without prior notice and may differ or be contrary to opinions expressed by ADBSR s affiliates and/or related parties. ADBSR does not make any guarantee, representation or warranty (whether express or implied) as to the accuracy, completeness, reliability or fairness of the data and information obtained from such sources as may be contained in this report. As such, neither ADBSR nor its affiliates and/or related parties shall be held liable or responsible in any manner whatsoever arising out of or in connection with the reliance and usage of such data and information or third party references as may be made in this report (including, but not limited to any direct, indirect or consequential losses, loss of profits and damages). The views expressed in this report reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendation(s) or view(s) in this report. ADBSR prohibits the analyst(s) who prepared this report from receiving any compensation, incentive or bonus based on specific investment banking transactions or providing a specific recommendation for, or view of, a particular company. This research report provides general information only and is not to be construed as an offer to sell or a solicitation to buy or sell any securities or other investments or any options, futures, derivatives or other instruments related to such securities or investments. In particular, it is highlighted that this report is not intended for nor does it have regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive this report. Investors are therefore advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situations and particular needs and consult their own professional advisers (including but not limited to financial, legal and tax advisers) regarding the appropriateness of investing in any securities or investments that may be featured in this report. ADBSR, AIBB, DBSVH and DBS Bank Ltd, their directors, representatives and employees or any of their affiliates or their related parties may, from time to time, have an interest in the securities mentioned in this report. AIBB, DBSVH and DBS Bank Ltd, their affiliates and/or their related persons may do and/or seek to do business with the company(ies) covered in this report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell or buy such securities from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. AIBB, DBSVH, DBS Bank Ltd (which carries on, inter alia, corporate finance activities) and their activities are separate from ADBSR. AIBB, DBSVH and DBS Bank Ltd may have no input into company-specific coverage decisions (i.e. whether or not to initiate or terminate coverage of a particular company or securities in reports produced by ADBSR) and ADBSR does not take into account investment banking revenues or potential revenues when making company-specific coverage decisions. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ( DBSVUSA ), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the subject company mentioned in this report. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBSVUSA may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager 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 report should contact DBSVUSA exclusively. DBS Vickers Securities (UK) Ltd is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the overriding issue of confidentiality, available upon request to enable an investor to make their own independent evaluation of the information contained herein. Wong Ming Tek, Executive Director Published by 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 9