Singapore Company Focus Bloomberg: MRT SP Reuters:.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 18 Jul 2016 FULLY VALUED (Downgrade from HOLD) Last Traded Price: S$1.55 (STI : 2,925.35) Price Target : S$1.28 (17% downside) (Prev S$1.53) Reason for Report : Announcement of rail financing framework Potential Catalyst: Accretive acquisitions to leverage on balance sheet Where we differ: Revised earnings are below consensus to take into account EBIT margin cap and collar on New Rail Financing Framework Analyst Andy SIM CFA +65 6682 3718 andysim@dbs.com Price Relative 1.9 1.7 1.5 1.3 1.1 S$ 0.9 50 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 (LHS) Relative STI INDEX (RHS) Relative Index Forecasts and Valuation FY Mar (S$m) 2015A 2016A 2017F 2018F Revenue 1,236 1,297 1,283 1,323 EBITDA 315 347 262 194 Pre-tax Profit 111 129 107 86.5 Net Profit 91.0 109 87.5 70.3 Net Pft (Pre Ex.) 91.0 109 87.5 70.3 Net Pft Gth (Pre-ex) (%) 47.1 20.1 (19.9) (19.6) EPS (S cts) 5.98 7.18 5.75 4.62 EPS Pre Ex. (S cts) 5.98 7.18 5.75 4.62 EPS Gth Pre Ex (%) 47 20 (20) (20) Diluted EPS (S cts) 5.98 7.18 5.75 4.62 Net DPS (S cts) 3.25 4.00 4.00 4.00 BV Per Share (S cts) 56.5 60.2 61.9 62.6 PE (X) 25.8 21.5 26.9 33.4 PE Pre Ex. (X) 25.8 21.5 26.9 33.4 P/Cash Flow (X) 8.5 7.1 nm 9.7 EV/EBITDA (X) 9.6 8.5 9.3 12.1 Net Div Yield (%) 2.1 2.6 2.6 2.6 P/Book Value (X) 2.7 2.6 2.5 2.5 Net Debt/Equity (X) 0.8 0.6 0.1 CASH ROAE (%) 11.0 12.3 9.4 7.4 Earnings Rev (%): (12) (28) Consensus EPS (S cts): 6.40 7.20 Other Broker Recs: B: 4 S: 4 H: 5 ICB Industry : Consumer Services ICB Sector: Travel & Leisure Principal Business: Primarily involved in operating the main MRT line in Singapore. Source of all data: Company, DBS Bank, Bloomberg Finance L.P 210 190 170 150 130 110 90 70 Transit to stable but subdued profits NRFF finally concluded and kicks in from 1 Oct 2016 will transit into asset light model; disposal of rail operating assets to LTA Risks sharing mechanism limits s profit volatility but also upside potential Lowered FY17/18F earnings by 12%/28%; TP cut to S$1.28; Downgrade to FULLY VALUED New Rail Financing Framework to kick in from 1 Oct 2016. The New Rail Financing Framework (NRFF) was announced. s train operations will transit into an asset-light model with the disposal of assets to LTA for S$991m. In turn, will pay a Licence Charge to the LTA. The LTA will also share revenue and profitability risks alongside. The licence period is also shortened to 15 years, from 30 years previously. Trade off between earnings upside for sustainable and more stable profits. The NRFF will relief of the heavy burden of future capex, estimated to be S$2.8bn. There are, however, trade-offs. With the risks sharing mechanism, Trains is required to share profits through a tiered structure (of up to 95%) if EBIT margins exceed 5%. On the other hand, LTA will share 50% of the shortfall in the event that EBIT margins fall below 3.5%. This provides less volatility to s future earnings, though it will also limit the upside potential. In addition, we note that risk sharing by LTA is limited to the Licence Charge to be paid by ; LTA is not obliged to subsidise if operating costs exceed this amount, which would result in losses for. Trim margins; FY17/18F earnings cut by 12% - 28% and TP to S$1.28; Downgrade to FULLY VALUED. With the NRFF announcement, we revised our assumptions and cut FY17F/18F earnings by 12%/ 28% mainly on the more subdued margins for Trains (including rental). Valuations look lofty at 26.9x/ 33.4x FY17F/ 18F PE. We believe the market has priced in too much optimism on NRFF, and will be disappointed with the actual outcome. While the NRFF provides sustainability to s financial obligations, it is not a sweet heart deal. Our TP is revised down to S$1.28, implying 22.3x/ 27.8x FY17F/ 18F earnings and dividend yield of 3.1%. Downgrade to Fully Valued. At A Glance Issued Capital (m shrs) 1,524 Mkt. Cap (S$m/US$m) 2,354 / 1,748 Major Shareholders (%) Temasek Holdings Private Ltd 54.01 Free Float (%) 45.99 3m Avg. Daily Val (US$m) 1.4 ed: JS / sa: YM
INVESTMENT THESIS Profile Corporation Limited is the market leader in rail in Singapore as it operates the Mass Rapid Transit (MRT) and LRT (Light Rail Transit) systems. It also provides bus, taxi, charter hire services, and consultancy and project management services. Rationale Trim margins; FY17-18F earnings cut by 12% - 28%. TP cut to S$1.28 and downgrade to FULLY VALUED. In view of the NRFF, we revised our assumptions and cut FY17F/18F earnings by 12%/ 28% mainly on the more subdued margins for trains (including rental). Valuations look lofty at 26.9x/ 33.4x FY17F/ 18F PE. We believe the market has priced in too much optimism on the NRFF, and will be disappointed with the actual outcome. While the NRFF provides sustainability to s financial obligations, it is not a sweet heart deal. Our TP is revised down to S$1.28, implying 22.3x/ 27.8x FY17F/ 18F earnings and dividend yield of 3.1%. Downgrade to Fully Valued. New Rail Financing Framework to kick in from 1 Oct 2016. The New Rail Financing Framework (NRFF) was announced, which will see s train operations transit into an assetlight model with the disposal of assets to LTA for S$991m. In turn, will pay a Licence Charge to the LTA. The LTA will also share revenue and profitability risks alongside. The licence period is also shortened to 15 years, from 30 years previously. Trade off between earnings upside potential for sustainable, more stable profits. The NRFF will relief of the heavy burden of future capex, estimated to be S$2.8bn. There are, however, trade-offs. With the risks sharing mechanism, Trains is required to share profits through a tiered structure (of up to 95%) should EBIT margins exceed 5%. On the other hand, LTA will share 50% of the shortfall if EBIT margins fall below 3.5%. This provides less volatility to s future earnings, but it will also limit the upside potential. Valuation Our target price is adjusted to S$1.28, based on the average of our discounted cash flow (DCF) and price-earnings (PE) ratio valuation methodology. We peg our PE valuation at 25x FY17F/18F earnings, its 5-year historical average. Our DCF methodology is based on a weighted average cost of capital of 5.1% and a terminal growth assumption of 1%. Risks Fare/ ridership changes. Fare changes may not keep pace with the rise in operating costs. While there are risks sharing mechanism with the LTA in place, this is limited to the Licence Charge payable. In the event that costs surge while topline fails to keep pace, resulting in losses greater than the Licence Charge payable, could still face losses. Service disruptions. Further train service disruptions leading to higher repair/maintenance costs, operating expenses and regulatory fines. Accretive acquisitions. We have not factored in any potential acquisition that the group may undertake to leverage on its balance sheet post the disposal of its rail operating assets. Source: DBS Bank Page 2
Highlights Transiting to stable but subdued profitability Finally, the New Rail Financing Framework (NRFF) was announced which will see s train operations transit into an asset-light model. With the transition from 1 Oct 2016, the new framework will relieve of the future heavy capex burden, estimated at S$2.8bn. will transfer its rail operating assets to the LTA at net book value of S$991m, and in return, pay a Licence Charge for the use of the assets. In the NRFF, the Land Transport Authority (LTA) will share revenue and profitability risks alongside, which was not a feature in the current operating model. The outcome of the asset-light model entails the payment of a Licence Charge, which is of no surprise to us. We had expected and communicated this in an earlier report on 29 Oct 2015 (Take a further step back). However, the profitability cap (through an EBIT margin collar) is a new feature which we had not earlier anticipated. This provides less volatility to s future earnings, though it will also limit upside potential. As a result, s absolute net profit is not likely to revert to the high levels seen during FY09 FY11 based on its current operations, notwithstanding any acquisitions in the future. Downgrade to Fully Valued, TP revised to S$1.28. Taking into account the NRFF that is due to kick in from 1 Oct 2016, we cut FY17F/18F earnings by 12%/ 28%. As a results of our profit adjustments, valuations look lofty at 26.9x/ 33.4x FY17F/ 18F PE. We believe the market may have priced in too much optimism on the NRFF, and may be disappointed with the actual outcome. While the NRFF provides sustainability to s financial obligations, it is not a sweet heart deal and it comes with trade-offs. Our TP is revised down to S$1.28, implying 22.3x/ 27.8x FY17F/ 18F earnings and dividend yield of 3.1%. Downgrade to Fully Valued, in view of the downside from current share price. What s new? announced on 15 July 2016 that it has reached an agreement with the LTA to transit to the New Rail Financing Framework (NRFF) from 1 Oct 2016. The NRFF will see operates under an asset-light model and focusing on two main operational areas: providing quality service to commuters and maintaining the trains to ensure smooth operations. The transition will involve the MRT (Mass Rapid Transit) and LRT (Light Rapid Transit) currently operated by. These are: (i) North-South Line (NSL) (red); (ii) East-West Line (EWL) (green); (iii) Circle Line (CCL) (yellow); (iv) Bukit Panjang Light Rail Transit (BPLRT). Map of s rail network Source: Company Page 3
Salient points of the NRFF The NRFF will see the following changes: i. Asset light disposal of operating assets by to LTA and relief of future capital expenditure on thereby making it an asset light operator. will transfer its rail operating assets to the LTA at net book value, estimated at S$991m. This will be paid in tranches, with an initial S$797m made on the completion, and the remaining over the next 3 anniversaries. ii. iii. iv. Shorter licence period at 15 years, down from 30 years. Licence Charge payment a Licence Charge for the right to use the operating assets and operate the lines will be paid by to the LTA. The payment of the Licence Charge will go into the Railway Sinking Fund. Fare revenue risks sharing the fare revenue risk will be shared between and the LTA via a revenue sharing mechanism. For revenue falling between 2% and 6% of a target revenue (determined by the LTA), LTA will share 50% of the shortfall. For shortfall in revenue beyond 6%, LTA will bear 75% of it. v. Profitability risks sharing There will be a Profit Cap and Collar mechanism. For EBIT margins above 5%, the excess will be shared via a tiered structure, up to a maximum of 95% for LTA. For EBIT margins below 3.5%, LTA will provide 50% of the shortfall. Our views/ Changes to our assumptions General form of NRFF and asset pricing within expectations; assume Licence Charge at c.11% of revenue. The NRFF was largely within our expectations, though the timing came slightly faster than expected. The Licence Charge was expected, and we have assumed that it will roughly be equaled to the depreciation charges of s train assets disposed to the LTA. We have assumed this to be about 11% of trains fare and non-fare revenue. Revenue and risk sharing caps: reducing volatility on s profitability, but also limits upside. The revenue and profitability risk sharing mechanism is new to us. In our view, this limits the variance of s profitability, and provides more stability compared to the current structure, as depreciation and investment in operating assets are slated to surge due to the aging network. However, we note that this also limits the potential upside to s profitability. Illustration of the revenue risks sharing resulting in lower variance in s revenue (assuming revenue at S$800m) Target Revenue (S$m) 800 Actual revenue (S$m) % shortfall (Actual vs Target) Adj. Revenue, with payments by LTA Variance against target revenue Shortfall (S$m) % shortfall sharing S$m LTA LTA S$m S$m 800 0% 0 100% 0% 0 0 800 0 792-1% -8 100% 0% -8 0 792-8 784-2% -16 50% 50% -8-8 792-8 776-3% -24 50% 50% -12-12 788-12 768-4% -32 50% 50% -16-16 784-16 760-5% -40 50% 50% -20-20 780-20 752-6% -48 50% 50% -24-24 776-24 744-7% -56 25% 75% -14-42 786-14 736-8% -64 25% 75% -16-48 784-16 Source: DBS estimates Assuming margins at 5%, down from 10%. With the margin cap, we have revised our operating model to take into account the Licence Charge, coupled with the revenue and EBIT margin cap/collar. Cash to pare down debts due in 2017. We have assumed that management will utilise the proceeds to retire an unsecured senior note due to 2017 (S$350m). In addition, would have to pay the Inland Revenue Authority of Singapore (IRAS) about S$159m as tax payable on the difference between the sales proceeds and the residual capital allowances relating to the operating assets. In the meantime, the remaining cash proceeds will be placed under fixed deposits. We have not factored in potential acquisitions to utilise the proceeds. Page 4
No payment of special dividend... It was explicitly indicated that does not intend to use the proceeds from the proposed sale of its rail operating assets to pay a special dividend to share holders. payout ratio likely to creep up to maintain DPS, in our view. Along with its transition into an asset light model and capex relief, we expect its dividend per share to remain relatively stable, notwithstanding its lower profits. We are projecting that dividend payout ratio to remain relatively high, in the 70% to 80% region. Trading stability for upside, trim forecasts by 12% - 28%. Overall, the NRFF provides with a more stable structure relieving it of future capex, lower revenue and earnings volatility but is a trade off for potential earnings upside. Compared to our prior assumptions, we expect group margins to be more subdued on the back of the NRFF at c.6% vis-à-vis our prior estimate of c.9-10%. We note that while its train operations were under pressure in the past few years, group margins were held up by its rental and advertising segments which enjoyed EBIT margins in the region of 75% and over 50%, respectively. TP cut to S$1.28; downgrade to Fully Valued; current share price may have priced in too much optimism. We revised our PE/ DCF based TP to S$1.28, down from S$1.53 previously. Our PE valuation is based on 25x FY17F/18F PE, similar to its 5- year average. Our DCF valuation is based on a WACC of 5.1%, terminal value of 1%. With the cut in forecast, the counter is now trading at 27.6x/ 36x FY17F/18F PE, and implying a dividend yield of 2.6% based on our projected payout ratio (and DPS of 4 Scts). This seems lofty in our view, given it earnings growth will be more subdued than earlier expected, notwithstanding potential acquisitions. Downgrade to FULLY VALUED. At our TP, the implied dividend yield would be 3.1%, based on our DPS assumption of 4 Scts. DBS FY17F/18F earnings revision in view of the NRFF Old New Changes (%) FY16 FY17F FY18F FY17F FY18F FY17F FY18F Comments Revenue 1,297 1,283 1,332 1,283 1,323 0.0% -0.6% EBIT 138 132 130 113 86-14.2% -34.3% Inclusion of Licence Charge, higher costs (including profit cap), offset by depreciation; FY17F : assume half year impact (from 1 Oct) PBT 129 122 119 107 86-12.0% -27.4% Lower EBIT, offset by lower interest costs and higher interest income PAT 109 100 97 88 70-12.2% -27.8% EBIT margin 10.7% 10.3% 9.8% 8.8% 6.5% Group EBIT margins revised down PBT margin 10.0% 9.5% 8.9% 8.3% 6.5% PAT margin 8.4% 7.8% 7.3% 6.8% 5.3% Source: DBS estimates DBS Valuation methodology Methodology Market Cap (S$m) S$/share Remarks PE 1,973 1.30 25x on 17F/18F earnings, 5-year historical average DCF 1,935 1.27 WACC 5.1%, terminal growth 1% Average 1,954 1.28 Average of PE and DCF Price Target (S$/share) 1.28-14% Implied PER - FY17F 22.3 Implied PER - FY18F 27.8 Source: DBS estimates Page 5
Current Rail Financing Framework (CRFF) Source: Company Rationale and Key Features of NRFF Source: Company Page 6
Comparison of CRFF and NRFF Source: Company Page 7
Key Assumptions FY Mar 2014A 2015A 2016A 2017F 2018F MRT ridership growth (%) 2.89 2.78 3.42 2.50 2.50 Bus ridership growth (%) 4.59 5.09 3.54 3.00 3.00 Fare chg (avg) (%) (0.3) 0.50 0.60 (2.0) 3.00 Oil price (US$/bbl) 100 90.0 70.0 51.0 55.0 Chg in staff (%) 6.01 1.49 9.32 (2.0) 4.00 Segmental Breakdown FY Mar 2014A 2015A 2016A 2017F 2018F Revenues (S$m) MRT Operations 624 644 670 673 711 LRT Operations 10.3 9.76 10.8 10.7 11.1 Bus Operations 218 238 248 215 207 Taxi Operations 133 143 148 152 157 Others 97.6 103 107 110 114 Total 1,164 1,236 1,297 1,283 1,323 Income Statement (S$m) FY Mar 2014A 2015A 2016A 2017F 2018F Revenue 1,164 1,236 1,297 1,283 1,323 Other Opng (Exp)/Inc (1,080) (1,115) (1,158) (1,170) (1,238) Operating Profit 84.2 121 138 113 85.6 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (0.4) 0.99 2.22 2.66 3.20 Net Interest (Exp)/Inc (9.2) (10.9) (11.3) (8.6) (2.3) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 74.7 111 129 107 86.5 Tax (13.2) (20.4) (21.1) (18.2) (14.7) Minority Interest 0.40 0.58 1.02 (1.3) (1.4) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 61.9 91.0 109 87.5 70.3 Net Profit before Except. 61.9 91.0 109 87.5 70.3 EBITDA 255 315 347 262 194 Growth Revenue Gth (%) 4.0 6.2 4.9 (1.0) 3.1 EBITDA Gth (%) (2.0) 23.4 10.3 (24.5) (26.0) Opg Profit Gth (%) (23.6) 43.4 14.6 (18.4) (24.2) Net Profit Gth (Pre-ex) (%) (25.7) 47.1 20.1 (19.9) (19.6) Margins & Ratio Opg Profit Margin (%) 7.2 9.8 10.7 8.8 6.5 Net Profit Margin (%) 5.3 7.4 8.4 6.8 5.3 ROAE (%) 7.9 11.0 12.3 9.4 7.4 ROA (%) 2.9 3.9 4.2 3.5 3.2 ROCE (%) 4.3 5.5 5.9 5.0 4.4 Div Payout Ratio (%) 54.1 54.3 55.7 69.5 86.5 Net Interest Cover (x) 9.2 11.0 12.2 13.1 37.6 Source: Company, DBS Bank Margins Trend 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% Lower EBITDA due to disposal of assets 2014A 2015A 2016A 2017F 2018F Operating Margin % Net Income Margin % Margins adjusted down due to risk sharing mechanism and EBIT cap/collar Page 8
Quarterly / Interim Income Statement (S$m) FY Mar 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Revenue 311 320 329 328 320 Other Oper. (Exp)/Inc (284) (293) (296) (282) (287) Operating Profit 27.2 27.6 32.5 45.5 32.8 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 1.03 0.73 1.37 1.25 (1.1) Net Interest (Exp)/Inc (2.8) (2.7) (2.9) (2.9) (2.8) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 25.4 25.6 31.0 43.8 28.9 Tax (4.6) (5.5) (5.2) (7.0) (3.4) Minority Interest 0.04 0.04 0.0 0.05 1.03 Net Profit 20.8 20.1 25.7 36.9 26.5 Net profit bef Except. 20.8 20.1 25.7 36.9 26.5 EBITDA 79.6 79.4 85.0 97.1 82.8 Revenue Trend 340 330 320 310 300 290 280 270 260 3Q2014 4Q2014 1Q2015 2Q2015 Revenue 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 Revenue Growth % (QoQ) 4Q2016 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% Growth Revenue Gth (%) (0.6) 2.9 2.7 (0.4) (2.3) EBITDA Gth (%) (1.5) (0.2) 7.1 14.1 (14.7) Opg Profit Gth (%) (12.5) 1.6 17.9 39.8 (27.8) Net Profit Gth (Pre-ex) (%) (7.8) (3.4) 28.0 43.3 (28.1) Margins Opg Profit Margins (%) 8.7 8.6 9.9 13.9 10.3 Net Profit Margins (%) 6.7 6.3 7.8 11.3 8.3 Balance Sheet (S$m) FY Mar 2014A 2015A 2016A 2017F 2018F Net Fixed Assets 1,642 2,042 2,131 1,144 1,139 Invts in Associates & JVs 52.6 55.8 52.0 54.7 57.9 Other LT Assets 34.3 34.2 32.8 32.8 32.8 Cash & ST Invts 161 156 232 683 416 Inventory 84.3 80.9 80.1 85.5 88.2 Debtors 98.9 168 192 347 282 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 2,073 2,537 2,720 2,347 2,015 ST Debt 156 8.93 71.2 9.17 9.17 Creditor 355 568 668 475 490 Other Current Liab 54.2 62.8 62.0 80.2 76.7 LT Debt 480 813 750 750 400 Other LT Liabilities 225 226 255 90.6 86.3 Shareholder s Equity 802 860 916 943 952 Minority Interests (0.1) (0.6) (1.7) (0.4) 1.09 Total Cap. & Liab. 2,073 2,537 2,720 2,347 2,015 Non-Cash Wkg. Capital (226) (382) (457) (123) (197) Net Cash/(Debt) (476) (665) (589) (75.7) 6.89 Debtors Turn (avg days) 29.0 39.4 50.7 76.7 86.7 Creditors Turn (avg days) 187.3 182.9 237.1 203.8 155.6 Inventory Turn (avg days) 29.0 32.7 30.9 29.5 28.0 Asset Turnover (x) 0.5 0.5 0.5 0.5 0.6 Current Ratio (x) 0.6 0.6 0.6 2.0 1.4 Quick Ratio (x) 0.5 0.5 0.5 1.8 1.2 Net Debt/Equity (X) 0.6 0.8 0.6 0.1 CASH Net Debt/Equity ex MI (X) 0.6 0.8 0.6 0.1 CASH Capex to Debt (%) 102.0 56.1 31.0 (110.6) 24.4 Z-Score (X) 2.1 1.7 1.7 1.8 1.9 Source: Company, DBS Bank Disposal of rail operating assets; Debtors increase in FY17 due to staggered residual payments by LTA Asset Breakdown (2016) Inventory - 3.0% Debtors - 7.2% Net Fixed Assets - 79.3% Bank, Cash and Liquid Assets - 8.6% LT debt gradually retired Improvement in gearing post disposal of rail operating assets Assocs'/JVs - 1.9% Page 9
Cash Flow Statement (S$m) FY Mar 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 74.7 111 129 107 86.5 Dep. & Amort. 171 193 207 147 105 Tax Paid (4.5) (9.0) 7.80 (159) (18.2) Assoc. & JV Inc/(loss) 0.42 (1.0) (2.2) (2.7) (3.2) Chg in Wkg.Cap. (12.8) (10.0) 9.38 (353) 77.4 Other Operating CF 5.36 (6.6) (21.1) (5.3) (4.3) Net Operating CF 234 277 330 (266) 243 Capital Exp.(net) (649) (461) (255) 840 (100.0) Other Invts.(net) 5.00 5.00 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 (1.5) 0.0 0.0 0.0 Div from Assoc & JV 0.21 0.21 4.90 0.0 0.0 Other Investing CF 1.55 1.38 0.15 0.0 0.0 Net Investing CF (643) (456) (250) 840 (100.0) Div Paid (30.4) (41.1) (49.5) (60.9) (60.9) Chg in Gross Debt 28.7 189 4.87 (62.0) (350) Capital Issues 0.05 0.0 0.0 0.0 0.0 Other Financing CF 18.9 30.5 40.9 0.0 0.0 Net Financing CF 17.2 178 (3.8) (123) (411) Currency Adjustments 0.21 0.81 (0.2) 0.0 0.0 Chg in Cash (391) 0.59 76.1 451 (267) Opg CFPS (S cts) 16.2 18.9 21.1 5.70 10.9 Free CFPS (S cts) (27.3) (12.1) 4.93 37.7 9.43 Source: Company, DBS Bank Capital Expenditure S$m 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 2014A 2015A 2016A 2017F 2018F Capital Expenditure (-) Target Price & Ratings History 1.68 1.58 1.48 1.38 S$ 3 4 5 6 S.No. Date Closing Price Target Price Rating 1: 10 Aug 15 1.35 1.27 FULLY VALUED 2: 04 Sep 15 1.18 1.22 HOLD 3: 29 Oct 15 1.50 1.24 FULLY VALUED 4: 26 J an 16 1.42 1.50 HOLD 5: 29 Apr 16 1.53 1.53 HOLD 6: 05 May 16 1.51 1.53 HOLD 1.28 1.18 1 2 1.08 Jul-15 Nov-15 Mar-16 Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Page 10
DBS Bank 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 DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte 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 DBS Bank Ltd. 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 )) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. 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As of 18 Jul 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report ( interest includes direct or indirect ownership of securities). Page 11
COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in recommended in this report as of 30 Jun 2016. 2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. 3. Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction 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 document should contact DBSVUSA exclusively. 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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 This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report. This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients. Page 12
Dubai United States Other jurisdictions This research report is being distributed in The Dubai International Financial Centre ( DIFC ) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3 rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. This report was prepared by DBS Bank Ltd. 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. DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: equityresearch@dbs.com Company Regn. No. 196800306E Page 13