Version 9 Bloomberg: TNB MK Reuters: TENA.KL Refer to important disclosures at the end of this report Malaysia Equity Research 27 Oct 2017 BUY Last Traded Price ( 26 Oct 2017): RM14.34 (KLCI : 1,736.80) Price Target 12-mth: RM15.80 (10% upside) (Prev RM16.00) Shariah Compliant: Yes Analyst QUAH He Wei, CFA +603 2604 3966 hewei@alliancedbs.com What s New 4QFY17 results met our expectations but missed consensus Higher-than-expected final DPS of 44 sen takes FY17 DPS to 61 sen, implying 4.3% yield Revised dividend payout policy of 30%-60% from 30%-50% Maintain BUY with revised TP of RM15.80 Price Relative 16.4 15.4 14.4 13.4 12.4 11.4 10.4 9.4 RM 8.4 90 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 (LHS) Relative KLCI (RHS) Relative Index Forecasts and Valuation FY Aug (RM m) 2016A 2017A 2018F 2019F Revenue 44,532 47,417 48,092 48,779 EBITDA 14,919 15,619 16,420 16,736 Pre-tax Profit 8,067 8,282 8,972 9,124 Net Profit 7,368 6,904 7,284 7,318 Net Pft (Pre Ex.) 7,758 6,918 7,284 7,318 Net Pft Gth (Pre-ex) (%) 24.8 (10.8) 5.3 0.5 EPS (sen) 131 122 129 130 EPS Pre Ex. (sen) 137 123 129 130 EPS Gth Pre Ex (%) 25 (11) 5 0 Diluted EPS (sen) 131 122 129 130 Net DPS (sen) 32.0 61.3 64.5 64.8 BV Per Share (sen) 928 1,012 1,077 1,141 PE (X) 11.0 11.7 11.1 11.1 PE Pre Ex. (X) 10.4 11.7 11.1 11.1 P/Cash Flow (X) 6.1 6.4 5.1 5.9 EV/EBITDA (X) 6.6 6.6 6.1 6.0 Net Div Yield (%) 2.2 4.3 4.5 4.5 P/Book Value (X) 1.5 1.4 1.3 1.3 Net Debt/Equity (X) 0.3 0.4 0.3 0.3 ROAE (%) 14.8 12.6 12.4 11.7 Earnings Rev (%): (4) (3) Consensus EPS (sen): 134 132 132 Other Broker Recs: B: 18 S: 3 H: 4 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P 210 190 170 150 130 110 Smooth sailing Steady electricity demand. After experiencing electricity demand growth of 4%/1% in Peninsular Malaysia in FY16-17, consumption is set to be stable going forward, growing in tandem with the relatively healthy economic expansion in Malaysia which is projected at 4.7%-5.3% in 2018. Energy reform remains on track. The government is fully committed to the implementation of the Imbalance Cost Pass- Through (ICPT) which has removed the burden of fuel cost volatility and ensures strong earnings clarity for (TNB). More importantly, the gradual increase in piped gas price has quashed concerns over the government s commitment to address the gas subsidy rationalisation issue. TNB s revised dividend payout policy of 30%-60% is the result of improved earnings clarity after the implementation of ICPT. Where we differ. We project a 5% EPS growth in FY18 compared to consensus flattish EPS forecast. We expect any fuel cost increase to be fully passed through and electricity demand to continue to grow healthily, albeit at a moderated pace. Potential catalyst. TNB will be commissioning 3,000 MW worth of new power plants over the next two years, translating into a 25% increase in its existing generation capacity. These more efficient power plants will allow TNB to gain a higher market share. Also, a successful tariff adjustment to reflect higher generation cost could remove any doubts that TNB will remain earnings-neutral in an environment of rising fuel cost. Valuation: We have revised our DCF-derived TP to RM15.80 (WACC 7.5%, 1.5% terminal growth) after incorporating our earnings revision. TNB is trading at an undemanding valuation despite improving earnings visibility arising from the incentive-based regulatory framework. Dividend yield is attractive at ~4.5%. Key Risks to Our View: Operational breakdown. Unplanned outages may result in the shortage of electricity which may necessitate expensive overseas procurement. At A Glance Issued Capital (m shrs) 5,659 Mkt. Cap (RMm/US$m) 81,150 / 19,160 Major Shareholders (%) Khazanah Nasional 28.3 EPF 15.7 Skim ASB 6.8 Free Float (%) 49.2 3m Avg. Daily Val (US$m) 25.7 ICB Industry : Utilities / Electricity Refer to important disclosures at the end of this report ed: JS / sa:bc
WHAT S NEW Bumper dividends to reward shareholders FY17 within our expectation. Excluding RM2.3m translation loss, TNB s 4QFY17 core earnings came in at RM1.72bn on the back of RM12.5bn in revenue. This takes FY17 core profit to RM6.9bn, comprising 97% of our forecast but only 90% of consensus. Steady electricity sales. TNB s 4QFY17 electricity demand in Peninsular Malaysia grew 2% y-o-y, largely lifted by the strong industrial demand growth of 6.9% which is the highest in recent years. This helped to offset tepid consumption growth from commercial and domestic users which dipped 0.5% and 2.5%, respectively. On a full-year basis, electricity demand growth came in at 1%, compared to 4% in FY16 due to the El Nino-induced heat wave. ICPT to buffer increases in fuel cost. TNB reiterated during the results conference call that the expected higher fuel cost, especially arising from coal prices, will be earnings-neutral to the group as per the adjustment under the ICPT mechanism. As at Aug 2017, the government has RM1.1bn in the PPA savings fund (vs RM1.8bn as at May 2017) which will be largely utilised for the existing tariff subsidy for Jul-Dec 2017. Therefore, there will be limited leeway for the government to subsidise subsequent increases in fuel costs in the future, if any. High power generation from coal power plants. While the coal-fired generation mix remained high at 53.5% in 4QFY17, it moderated from 57% in 4QFY16. Therefore, gasfired generation mix improved to 40% in 4QFY17 from 39% in 4QFY16. Healthy financials. TNB incurred RM12.1bn in capex in FY17, 45% of which was utilised for new generation capacity. This is also the highest amount spent over the past five years as there was a noticeable increase in 4QFY17 attributable to the Jimah East Power Plant which is 68% completed. Meanwhile, its balance sheet remains very healthy with a net gearing level of 38%. Higher-than-expected dividend. TNB declared a final DPS of 44 sen in 4QFY17, taking FY17 DPS to 61 sen which is also a record high. This translates into 50% payout which exceeded our expectation as we only assumed 30% payout in FY17. Based on yesterday s closing price, FY17 DPS implies a strong 4.3% yield which is expected to be sustainable. Enhancement in dividend policy. Also, the company announced a revision to its dividend policy with a 30%-60% payout compared to the existing 30%-50% payout. This illustrates the strong confidence TNB has with its earnings visibility given the smooth implementation of imbalance cost pass-through mechanism Earnings revision. We nudged down our FY18-19F earnings by 4%/3% after imputing higher effective tax rate as TNB s reinvestment allowance is set to expire in FY18. Therefore, we have revised our DCF-derived TP (7.5% WACC, 1.5% TG) to RM15.80 after incorporating the earnings changes. Page 2
Quarterly / Interim Income Statement (RMm) FY Aug 4Q2016 3Q2017 4Q2017 % chg yoy % chg qoq Revenue 11,237 12,549 12,464 10.9 (0.7) Cost of Goods Sold (9,355) (10,039) (10,608) 13.4 5.7 Gross Profit 1,882 2,511 1,856 (1.4) (26.1) Other Oper. (Exp)/Inc 203 202 477 134.4 135.5 Operating Profit 2,085 2,713 2,332 11.8 (14.0) Other Non Opg (Exp)/Inc 7.20 20.5 (11.9) nm nm Associates & JV Inc 24.6 (5.3) 68.4 178.0 nm Net Interest (Exp)/Inc (130) (485) (234) (79.9) 51.7 Exceptional Gain/(Loss) (115) 191 (2.3) 98.0 nm Pre-tax Profit 1,872 2,435 2,152 15.0 (11.6) Tax (136) (486) (418) 207.5 (14.0) Minority Interest 25.8 13.7 (15.3) nm nm Net Profit 1,762 1,962 1,719 (2.4) (12.4) Net profit bef Except. 1,877 1,771 1,722 (8.3) (2.8) EBITDA 3,634 4,311 3,949 8.7 (8.4) Margins (%) Gross Margins 16.7 20.0 14.9 Opg Profit Margins 18.6 21.6 18.7 Net Profit Margins 15.7 15.6 13.8 Source of all data: Company, AllianceDBS Page 3
CRITICAL DATA POINTS TO WATCH 4.3 Electricity sales growth (%) 4.21 Critical Factors Electricity demand. This is the key earnings driver for TNB. Historically, the growth in electricity sales has been highly correlated with the country s GDP growth. Industrial and commercial users typically account for ~75% of TNB s electricity usage, and therefore a healthy economy is of utmost importance to TNB. 3.6 3.0 2.4 1.8 1.2 0.6 2.22 0.94 1.35 1.34 Transparent tariff-setting mechanism. The implementation of the Incentive-Based Regulation (IBR) framework will have a base tariff that reflects: 1) capex as well as opex of transmission and distribution business, 2) return on regulated assets, and 3) power purchase cost charged by generators. The implementation of the imbalance cost pass-through (ICPT) mechanism, which is a part of IBR, offers strong earnings clarity going forward with a tariff revision every six months. We believe the government is committed to the energy reform that kicked off on 1 Jan 2014. New power plants coming onstream. TNB is set to benefit from the new generation capacity that is under construction which will progressively increase its capacity by ~25% by 2019. The new power plants will be completed progressively to boost its generation capacity. Ultimately, the new power plants will help reduce generation cost due to the more efficient technology. The new additions will also help replace expiring power purchase agreements/service level agreements which tend to be costlier. Balanced generation mix. TNB s coal-based generation mix has improved to 53.5% in 4QFY17, from 38% three years ago, due to the contribution of new coal-fired power plants in recent years. This enables TNB to consume less LNG for power generation which is more expensive. Overseas expansion. TNB s overseas footprint is still minimal at this juncture, though it intends to expand into energy-related businesses overseas such as project management, operation and maintenance, as well as power generation. Its 100%-owned Liberty Power Ltd, which operates a 235-MW combined-cycle natural gas power plant, currently contributes ~1% of TNB s revenue. We understand the group will focus on the Middle East and ASEAN regions as its target markets. 0.0 69.4 55.5 41.6 27.7 13.9 0.0 21.99 17.59 13.19 8.80 4.40 0.00 49.9 39.9 29.9 20.0 10.0 0.0 Coal price (US$/MT) 68 68 68 57.7 55.7 Gas price (RM/mmbtu) 21.6 20.9 20.9 20.9 20.9 Gas-based generation (%) 49.4 42.7 43.4 41.9 40.8 Coal-based generation (%) 55.9 53.1 52.7 54.3 55.3 44.7 45.6 33.5 22.4 11.2 0.0 Source: Company, AllianceDBS Page 4
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Company Guide Appendix 1: A look at Company's listed history what drives its share price? Share price vs FBM KLCI 400 350 300 250 200 150 100 TNB FBM KLCI Remarks TNB s share price generally underperformed prior to 2014 due to the sustained period of high coal prices, which resulted in high fuel cost. Fuel cost was a major earnings determinant back then due to the lack of transparency on tariff revision. Since 2014, the government has implemented the imbalance cost-pass-through mechanism that incorporates a tariff revision every six months to reflect the actual generation cost on a lagged basis. Fuel cost volatility will be earnings-neutral to the company. Source: Bloomberg L.P., AllianceDBS Share price vs power demand in Peninsular Malaysia 400 350 300 250 200 150 150 140 130 120 110 Remarks There is a positive correlation between share price performance and electricity consumption in Peninsular Malaysia as TNB holds a monopoly of transmission and distribution, and accounts for the lion s share of power generation. Higher power consumption will translate into better earnings growth for TNB. 100 100 TNB Power demand Source: Bloomberg L.P., AllianceDBS Share price vs coal price 400 350 300 250 200 150 100 50 Remarks Prior to the implementation of the Incentive- Based Regulation framework for the power industry in 2014, the changes in coal prices had an inverse relationship with TNB s share price as it formed a major component of fuel cost. The negative correlation has been less apparent since the IBR framework was smoothly implemented. TNB 1-month Aus coal futures Source: Bloomberg L.P., AllianceDBS Page 5
Balance Sheet: More debt headroom to gear up. TNB s net gearing stood at 38% as at end-aug 17. This is after taking into consideration its total capex spending of RM12.1bn in FY17. The construction of the 2,000-MW Jimah East Power has already achieved 68% progress, and this could be the last of its series of major expansion of power-generation capacity. Share Price Drivers: Strong power consumption. Higher-than-expected electricity consumption will be TNB s key earnings driver, given the implementation of the ICPT mechanism which insulates the company from fuel-cost volatility. Government s commitment to ICPT. There have always been doubts about TNB's ability to implement ICPT fully, due to the government s intervention. We believe the government is committed to energy reform, as evidenced by the latest hike in the price of piped gas. A smooth implementation of ICPT will be a strong re-rating catalyst for TNB, as ICPT will remove the burden of volatility in its energy procurement. Key Risks: Increase in fuel costs. Gas and coal account for more than 90% of TNB's fuel mix and a hike in the costs of these inputs would reduce TNB's profitability. Tariff revision is subject to the government s approvals, but TNB has historically been fully compensated for any fuel cost increase by tariff hikes. Demand weakness. TNB's earnings are sensitive to power demand growth, which is affected by overall economic conditions. Company Background Berhad (TNB) is the largest electricity provider in Malaysia. Its core business comprises the generation, transmission and distribution of electricity. It has a total installed generation capacity of 12,000MW. Leverage & Asset Turnover (x) 0.4 0.70 0.60 0.4 0.50 0.4 0.40 0.30 0.3 0.20 0.3 0.10 0.00 0.3 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMm 14,000.0 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 0.0 Capital Expenditure (-) ROE (%) 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 13.8 Forward PE Band (x) (x) 12.8 +2sd: 12.6x 11.8 +1sd: 11.7x 10.8 Avg: 10.9x 9.8-1sd: 10x -2sd: 9.1x 8.8 7.8 6.8 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Source: Company, AllianceDBS PB Band (x) (x) 2.1 2.0 1.9 1.8 +2sd: 1.81x 1.7 +1sd: 1.68x 1.6 Avg: 1.55x 1.5 1.4 1.3-1sd: 1.43x -2sd: 1.3x 1.2 1.1 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Page 6
Key Assumptions FY Aug Electricity sales growth (%) 2.22 4.21 0.94 1.35 1.34 Coal price (US$/MT) 57.7 55.7 68.0 68.0 68.0 Gas price (RM/mmbtu) 21.6 20.9 20.9 20.9 20.9 Gas-based generation (%) 49.4 42.7 43.4 41.9 40.8 Coal-based generation (%) 45.6 53.1 52.8 54.3 55.3 Lifted by heat wave Income Statement (RMm) FY Aug Revenue 43,287 44,532 47,417 48,092 48,779 Cost of Goods Sold (35,483) (36,171) (39,074) (38,943) (39,487) Gross Profit 7,803 8,361 8,343 9,149 9,292 Other Opng (Exp)/Inc 824 712 1,021 817 833 Operating Profit 8,628 9,072 9,364 9,967 10,126 Other Non Opg (Exp)/Inc (833) 31.8 21.6 0.0 0.0 Associates & JV Inc 101 93.3 128 131 137 Net Interest (Exp)/Inc (663) (740) (1,218) (1,125) (1,139) Exceptional Gain/(Loss) (99.3) (390) (13.7) 0.0 0.0 Pre-tax Profit 7,134 8,067 8,282 8,972 9,124 Tax (1,073) (746) (1,370) (1,680) (1,797) Minority Interest 57.5 46.8 (8.1) (8.2) (8.2) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 6,118 7,368 6,904 7,284 7,318 Net Profit before Except. 6,218 7,758 6,918 7,284 7,318 EBITDA 13,190 14,919 15,619 16,420 16,736 Growth Revenue Gth (%) 1.2 2.9 6.5 1.4 1.4 EBITDA Gth (%) 14.0 13.1 4.7 5.1 1.9 Opg Profit Gth (%) 30.9 5.2 3.2 6.4 1.6 Net Profit Gth (Pre-ex) (%) 14.5 24.8 (10.8) 5.3 0.5 Margins & Ratio Gross Margins (%) 18.0 18.8 17.6 19.0 19.0 Opg Profit Margin (%) 19.9 20.4 19.7 20.7 20.8 Net Profit Margin (%) 14.1 16.5 14.6 15.1 15.0 ROAE (%) 13.5 14.8 12.6 12.4 11.7 ROA (%) 5.4 5.9 5.0 5.0 4.8 ROCE (%) 7.2 7.4 6.3 6.2 6.0 Div Payout Ratio (%) 26.7 24.5 50.1 50.0 50.0 Net Interest Cover (x) 13.0 12.3 7.7 8.9 8.9 Expecting steady growth Source: Company, AllianceDBS Page 7
Quarterly / Interim Income Statement (RMm) FY Aug 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 Revenue 11,237 11,242 11,162 12,549 12,464 Cost of Goods Sold (9,355) (9,086) (9,342) (10,039) (10,608) Gross Profit 1,882 2,156 1,821 2,511 1,856 Other Oper. (Exp)/Inc 203 184 158 202 477 Operating Profit 2,085 2,340 1,979 2,713 2,332 Other Non Opg (Exp)/Inc 7.20 5.80 7.20 20.5 (11.9) Associates & JV Inc 24.6 (3.0) 68.2 (5.3) 68.4 Net Interest (Exp)/Inc (130) (116) (384) (485) (234) Exceptional Gain/(Loss) (115) (231) 28.7 191 (2.3) Pre-tax Profit 1,872 1,995 1,700 2,435 2,152 Tax (136) (207) (259) (486) (418) Minority Interest 25.8 (48.0) 41.5 13.7 (15.3) Net Profit 1,762 1,741 1,482 1,962 1,719 Net profit bef Except. 1,877 1,972 1,453 1,771 1,722 EBITDA 3,634 3,796 3,563 4,311 3,949 Steady earnings Growth Revenue Gth (%) (7.4) 0.0 (0.7) 12.4 (0.7) EBITDA Gth (%) (14.9) 4.5 (6.1) 21.0 (8.4) Opg Profit Gth (%) (24.1) 12.2 (15.4) 37.1 (14.0) Net Profit Gth (Pre-ex) (%) (20.1) 5.0 (26.3) 21.9 (2.8) Margins Gross Margins (%) 16.7 19.2 16.3 20.0 14.9 Opg Profit Margins (%) 18.6 20.8 17.7 21.6 18.7 Net Profit Margins (%) 15.7 15.5 13.3 15.6 13.8 Balance Sheet (RMm) FY Aug Net Fixed Assets 90,300 96,513 103,084 106,761 109,288 Invts in Associates & JVs 758 1,838 3,090 3,221 3,358 Other LT Assets 7,282 7,796 8,318 8,318 8,318 Cash & ST Invts 8,910 17,154 17,278 20,380 22,152 Inventory 844 792 829 810 819 Debtors 8,639 8,277 8,962 8,742 8,867 Other Current Assets 402 533 452 452 452 Total Assets 117,135 132,902 142,012 148,684 153,255 ST Debt 1,986 1,489 1,808 1,723 1,751 Creditor 10,412 11,409 10,245 10,816 10,947 Other Current Liab 3,195 3,186 3,273 4,868 4,986 LT Debt 22,713 32,818 37,038 37,979 38,606 Other LT Liabilities 31,363 31,401 32,063 32,063 32,063 Shareholder s Equity 47,208 52,389 57,111 60,754 64,413 Minority Interests 259 211 473 482 490 Total Cap. & Liab. 117,135 132,902 142,012 148,684 153,255 Non-Cash Wkg. Capital (3,721) (4,994) (3,276) (5,680) (5,794) Net Cash/(Debt) (15,789) (17,153) (21,568) (19,322) (18,206) Debtors Turn (avg days) 66.5 69.3 66.4 67.2 65.9 Creditors Turn (avg days) 111.1 130.8 119.9 117.8 120.3 Inventory Turn (avg days) 10.5 9.8 9.0 9.2 9.0 Asset Turnover (x) 0.4 0.4 0.3 0.3 0.3 Current Ratio (x) 1.2 1.7 1.8 1.7 1.8 Quick Ratio (x) 1.1 1.6 1.7 1.7 1.8 Net Debt/Equity (X) 0.3 0.3 0.4 0.3 0.3 Net Debt/Equity ex MI (X) 0.3 0.3 0.4 0.3 0.3 Capex to Debt (%) 43.6 32.5 32.6 25.2 22.3 Z-Score (X) 1.8 1.7 1.7 1.8 1.8 Solid balance sheet Source: Company, AllianceDBS Page 8
Cash Flow Statement (RMm) FY Aug Pre-Tax Profit 7,134 8,067 8,282 8,972 9,124 Dep. & Amort. 5,294 5,722 6,105 6,323 6,472 Tax Paid (811) (721) (626) (85.2) (1,680) Assoc. & JV Inc/(loss) 0.0 0.0 (128) (131) (137) Chg in Wkg.Cap. 974 1,412 (1,886) 810 (4.0) Other Operating CF (1,152) (1,188) 812 0.0 0.0 Net Operating CF 11,439 13,293 12,559 15,889 13,775 Capital Exp.(net) (10,774) (11,143) (12,676) (10,000) (9,000) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF (2,052) (7,253) (9.1) 0.0 0.0 Net Investing CF (12,826) (18,396) (12,685) (10,000) (9,000) Div Paid (1,637) (1,806) (3,459) (3,642) (3,659) Chg in Gross Debt (1,775) 9,063 4,474 856 656 Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (840) (664) 212 0.0 0.0 Net Financing CF (4,252) 6,593 1,227 (2,787) (3,004) Currency Adjustments (2.6) 9.90 (15.1) 0.0 0.0 Chg in Cash (5,641) 1,500 1,085 3,102 1,772 Opg CFPS (sen) 185 211 256 267 244 Free CFPS (sen) 11.8 38.1 (2.1) 104 84.6 Capex to come down after aggressive expansion in recent years Source: Company, AllianceDBS Target Price & Ratings History 15.21 RM 14.71 2 12 14.21 1 4 6 10 8 11 3 5 13.71 9 7 13.21 12.71 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 S.No. Date of Report Closing Price 12-mth Target Rating Price 1: 28 Oct 16 14.42 17.00 BUY 2: 07 Nov 16 14.32 17.00 BUY 3: 06 Dec 16 14.00 17.00 BUY 4: 13 Dec 16 14.06 17.00 BUY 5: 15 Dec 16 13.98 17.00 BUY 6: 09 Jan 17 13.92 17.00 BUY 7: 10 Jan 17 13.80 17.00 BUY 8: 25 Jan 17 13.80 17.00 BUY 9: 28 Apr 17 13.94 15.80 BUY 10: 04 May 17 13.90 15.80 BUY 11: 03 Jul 17 14.12 15.80 BUY 12: 28 Jul 17 14.16 16.00 BUY Note : Share price and Target price are adjusted for corporate actions. Source: AllianceDBS Analyst: QUAH He Wei, CFA Page 9
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 10
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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 11