Singapore Company Guide Version 3 Bloomberg: CNMC SP Reuters: CNMC.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 18 May 2017 HOLD (Downgrade from BUY) Last Traded Price ( 17 May 2017): S$0.30 (STI : 3,224.10) Price Target 12-mth: S$0.31 (4% upside) (Prev S$0.60) Analyst Singapore Research Team equityresearch@dbs.com Paul YONG CFA +65 6682 3712 paulyong@dbs.com What s New 1Q17 earnings below expectations as lower ore grades weighed on gold production and sales, leading to core losses, excluding unrealized forex gains. Embarking on several initiatives to boost longerterm profitability, but negatives outweigh positives for now Steep 98%/55% cuts in FY17F/18F earnings on low ore grade production coupled with higher operating cost Downgrade to HOLD, TP cut to S$0.31. We are suspending coverage on the stock Price Relative 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 S$ Relative Index 0.2 61 May-13 May-14 May-15 May-16 May-17 Forecasts and Valuation FY Dec (US$ m) 2015A 2016A 2017F 2018F Revenue 36.5 34.7 23.0 33.0 EBITDA 18.0 15.8 4.57 13.0 Pre-tax Profit 14.4 12.3 0.41 8.66 Net Profit 10.7 9.09 0.31 5.75 Net Pft (Pre Ex.) 10.7 9.09 0.31 5.75 Net Pft Gth (Pre-ex) (%) (12.9) (14.8) (96.6) 1,784.4 EPS (S cts) 3.64 3.10 0.10 1.96 EPS Pre Ex. (S cts) 3.64 3.10 0.10 1.96 EPS Gth Pre Ex (%) (13) (15) (97) 1,784 Diluted EPS (S cts) 3.64 3.10 0.10 1.96 Net DPS (S cts) 1.31 1.30 0.04 0.82 BV Per Share (S cts) 11.4 13.5 13.6 14.7 PE (X) 8.1 9.5 282.6 15.0 PE Pre Ex. (X) 8.1 9.5 282.6 15.0 P/Cash Flow (X) 4.3 5.1 13.2 6.3 EV/EBITDA (X) 3.8 4.1 14.9 5.0 Net Div Yield (%) 4.5 4.4 0.1 2.8 P/Book Value (X) 2.6 2.2 2.2 2.0 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 36.4 24.9 0.8 13.9 Earnings Rev (%): (97) (55) Consensus EPS (S cts): 3.0 3.4 Other Broker Recs: B: 4 S: 0 H: 0 Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P 241 221 201 181 161 141 121 101 81 Earnings under pressure Downgrade to HOLD with TP cut to S$0.31; Steep cuts to FY17F/18F earnings of 98%/55% on low ore grades. 1Q17 earnings was below expectations as lower ore grades weighed on gold production and sales. 1Q17 net profit was US$54,834, helped by unrealised forex gains of US$0.31m; excluding this, CNMC would have recorded a second consecutive quarter of losses. Until a sustainable improvement in ore grades can be delivered, we lower our gold output estimates, and combined with a higher operating cost base, we cut FY17F/18F earnings by 98%/55% to US$0.3m/US$5.7m. Hence, we arrive at a lower TP of S$0.31, based on a blend valuation of DCF (WACC of 10.7%, terminal growth of 1%) and 14x FY18F PE. We are suspending coverage on the stock due to lack of earnings visibility. Embarking on several initiatives to boost longer-term profitability... To mitigate current challenges and raise longer-term growth prospects, CNMC has implemented several initiatives such as 1) expansion of its mining asset portfolio recent acquisitions include Pulai Mining and KelGold Mining, and 2) the setting up of a new carbon-in-leach (CIL) plant at Sokor which could raise total processing capacity by 15% to c.1.38m tonnes p.a. by end-2017. but negatives outweigh positives for now. While the completion of the new CIL plant later this year could add to output, we believe that near-term earnings performance could further worsen before potentially getter better. Persistently lower ore grades and a growing cost base especially as CNMC ramps up exploration work at the new Pulai and KelGold sites which are unlikely to contribute to earnings anytime soon is putting pressure on the near-term earnings outlook. Valuation: Downgrade to HOLD with lower TP of S$0.31, based on blended valuation. After cutting earnings estimates for FY17F/18F, we arrive at a lower TP of S$0.31 based on a blended valuation using DCF (which assumes WACC of 10.7% and terminal growth of 1%) and PE (pegged to larger peers average of 14x) metrics. Key Risks to Our View: Susceptibility to volatility in gold prices and mining conditions. As price takers, gold miners are generally susceptible to volatility in gold prices. Their output may also be hampered in the event of unfavourable weather conditions. Every US$10/oz decrease in gold prices could lower FY17F earnings by 1.7%. At A Glance Issued Capital (m shrs) 407 Mkt. Cap (S$m/US$m) 120 / 86.1 Major Shareholders (%) Innovation China Limited 26.3 Messiah Limited 13.0 Ng Eng Tiong 9.8 Free Float (%) 50.9 3m Avg. Daily Val (US$m) 0.82 ICB Industry : Basic Materials / Mining ed: JS / sa:jc, PY
WHAT S NEW Unrealised forex gains aside, CNMC would have otherwise been unprofitable in 1Q17. CNMC posted its third consecutive decline in quarterly revenues to US$4.73m (- 48.3% y-o-y) as slightly higher average gold prices realised over the quarter was more than offset by lower grades of mined ores. All-in cash costs doubled y-o-y from US$487/oz in 1Q16 to US$983/oz in 1Q17 as operating costs were spread over substantially lower gold output of 3,670 oz (- 49.5% y-o-y). 1Q17 net profit came in at US$54,834, which was held by unrealised forex gains of US$0.31m barring which, would have resulted in a second consecutive quarter of losses for CNMC. New processing facility and recent string of acquisitions could drive longer-term profitability. Apart from the recent expansion of its mining asset portfolio to include Pulai Mining and KelGold Mining, CNMC also disclosed that it is in the process of setting up a new CIL processing plant at Sokor, which is aimed at improving gold recovery. According to CNMC, this method of extraction is expected to deliver gold recovery rates of up to 95% (vs 65% for existing heap leaching facilities). When complete, total production capacity is expected to be raised to 1.38m tonnes p.a. by end-2017, from 1.2m currently. But likely to get worse before potentially getting better. While there are these new initiatives to raise the group s longer-term productivity and earnings profile, we believe that near-term performance could further worsen before potentially getter better later on given 1) persistently low ore grades and, a 2) growing cost base. As costs continue to creep up under the new (higher) royalty fee compensation structure and on a ramp-up in exploratory and mining activities at the new Pulai and KelGold sites - which are unlikely to contribute to earnings anytime soon - we expect near-term earnings potential to remain under pressure. Steep cuts to FY17F/18F earnings. Until a sustainable improvement in ore grades can be delivered, we remain cautious on bottom-line performance and cut FY17F/FY18F earnings by 98%/ 55% from US$10.6m/US$12.7m to US$0.3m/US$5.7m. Downgrade to HOLD; TP cut to S$0.31. After cutting our earnings estimates, we arrive at a lower TP of S$0.31, based on a blend of DCF (WACC of 10.7%, terminal growth of 1%) and 14x FY18F PE. We are suspending coverage on the stock. Quarterly / Interim Income Statement (US$m) FY Dec 1Q2016 4Q2016 1Q2017 % chg yoy % chg qoq Revenue 8.40 5.19 4.73 (43.8) (8.9) Cost of Goods Sold 0.0 0.0 0.0 - - Gross Profit 8.40 5.19 4.73 (43.8) (8.9) Other Oper. (Exp)/Inc (2.7) (7.5) (4.7) 73.1 (36.8) Operating Profit 5.66 (2.3) 0.0 (100.3) (99.2) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - - Associates & JV Inc 0.0 0.0 0.0 - - Net Interest (Exp)/Inc 0.19 0.25 0.21 13.0 (15.6) Exceptional Gain/(Loss) 0.0 0.0 0.0 - - Pre-tax Profit 5.85 (2.1) 0.20 (96.6) nm Tax (0.3) (0.1) (0.1) (48.3) (1.1) Minority Interest (1.1) 0.25 0.0 98.7 nm Net Profit 4.55 (1.9) 0.05 (98.8) nm Net profit bef Except. 4.55 (1.9) 0.05 (98.8) nm EBITDA 5.66 (2.3) 0.0 nm 99.2 Margins (%) Gross Margins 100.0 100.0 100.0 Opg Profit Margins 67.4 (44.6) (0.4) Net Profit Margins 54.2 (37.3) 1.2 Source of all data: Company, DBS Bank Page 2
Revised Forecasts and Key Assumptions Currency US$ FY Dec (US$m) FY13 FY14 FY15 FY16 FY17F FY18F Revenue: Gold Mining 16.6 33.2 36.5 34.7 23.0 33.0 Total Revenue 16.6 33.2 36.5 34.7 23.0 33.0 % chg in forecast (44%) (30.7%) Gold Resources and Production: Gold Resources (ounces) 465,000 506,000 618,000 623,000 654,000 687,000 % chg in forecast (12.4%) (18.6%) (22.2%) Fine Gold Production (ounces) 12,649 26,122 31,206 27,404 18,690 26,160 % chg in forecast (44%) (30.7%) Implied Average Gold Price (US$) 1,314 1,271 1,169 1,265 1,230 1,260 Operating Expenses: Changes in Inventories (0.1) (0.1) 0.3 (0.2) 0.1 0.1 Amortisation and Depreciation (1.8) (3.1) (4.0) (4.5) (5.2) (5.2) Contractor Expenses (0.0) 0.0 0.0 0.0 0.0 0.0 Employees' Compensation (1.2) (2.5) (2.7) (3.1) (3.0) (3.2) Key Management Remuneration (1.5) (2.0) (2.5) (3.0) (3.2) (3.4) Marketing and Publicity Expenses (0.1) (0.1) (0.2) (0.3) (0.2) (0.2) Office and Administrative Expenses (0.3) (0.3) (0.3) (0.4) (0.3) (0.3) Professional Fees (0.7) (0.6) (0.6) (0.5) (1.0) (1.0) Rental Expense on Operating Lease (0.3) (0.5) (0.9) (0.9) (1.0) (1.0) Royalty Fee Expenses (1.3) (2.5) (2.7) (3.1) (3.2) (4.5) % of Revenue 8% 8% 7% 10% 14% 14% Site and Factory Expenses (3.5) (5.5) (5.8) (5.6) (6.0) (6.3) Travelling and Transportation Expenses (0.2) (0.2) (0.2) (0.3) (0.3) (0.3) Other Expenses (0.4) (1.0) (3.1) (1.6) (0.5) (0.4) Total Operating Expense (11.4) (18.5) (22.6) (23.4) (23.7) (25.7) Effective Tax Rate 34% -3% 7% 6% 6% 15% Growth (%) Revenue 100% 10% (5) (34%) 43% Operating Expenses 62% 22% 3.5% 1.3% 8.4% Margins (%) EBIT 31% 45% 33% (3%) 24% Lower gold production estimates as lower ore grades seen over the last three quarters likely to persist. Operating costs to continue creeping up despite lower gold output as CNMC ramps up on exploratory work, weighing on near-term profitability. Profitability in FY17F likely supported by interest income earned on CNMC s strong net cash position of US$24.2m as at end-1q17 Source: Company, DBS Bank Page 3
CRITICAL DATA POINTS TO WATCH Critical Factors Positive on medium-term gold prices. In 2016, CNMC had an implied average gold price of US$1,265/oz. With gold prices having rebounded from below US$1,150/oz in December to above US$1,230/oz currently, we have assumed that average prices will go up slightly to US$1,230 in FY17F and US$1,260/oz in FY18F on higher investment demand, which is largely in line with industry estimates. Separately, our sensitivity analysis suggests that every US$10/oz decrease in gold prices could lower FY17F earnings by c.1.7%. 693870.0 594745.7 495621.4 396497.1 297372.9 198248.6 99124.3 0.0 Gold Resources (Ounces) 687000 618000 623000 654000 506000 Fine Gold Production (Ounces) Fine gold production to decline in FY17F as lower ore grades persist. CNMC s gold production continued to suffer as the lower ore grades continue to persist for the third consecutive quarter in 1Q17. Until there is a sustainable improvement in delivery of ore grades, we remain cautious on the production rates ahead and now assume a 31.8% decline in annual production for FY17F. 31830.1 25464.1 19098.1 12732.0 6366.0 26122 31206 27404 18690 26160 However, the commissioning of a new CIL facility with daily processing capacity of 5000 tonnes, has higher recovery rates (of up to 95% vs 65% for existing heap leaching facilities). This would raise effective processing capacity from 1.2m p.a. to 1.38m p.a. by end-2017, should provide some relief only in FY18F. Higher operating costs to weigh on near-term earnings potential. But, we expect costs to continue creeping up under the new royalty fee compensation structure (at 14% of revenue vs 8% previously) and as CNMC ramps up on exploratory and mining activities at the new Pulai and KelGold sites, - which are unlikely to contribute to earnings anytime soon, further compounding pressures on near-term profitability. 0.0 1296.90 1037.52 778.14 518.76 259.38 0.00 13.9 Implied Average Gold Price (US$) 1271 1265 1230 1260 1169 Royalty Fees as % of Sales 13.8 13.8 11.2 8.4 7.65 7.46 8.89 5.6 2.8 0.0 Capacity Expenditure (US$ m) 9.1 9 7.3 7 5.5 3.6 1.8 2.06 1.25 0.89 0.0 Source: Company, DBS Bank Page 4
Balance Sheet: Strong balance sheet. Already cash-generative, CNMC s strong balance sheet, backed by net cash of US$24.2m as at end- 1Q17, provides a buffer against near-term volatility in commodity prices, and can be readily deployed to finance the acquisition and/or development of mines, should suitable opportunities arise. Share Price Drivers: Success in Pulai and/or KelGold could propel earnings growth. Further down the road, should CNMC be successful in discovering new gold veins, and if the concentration of newfound gold proves to be commercially viable for extraction, contributions from Pulai and/or KelGold could then propel the group s earnings growth. We have yet to incorporate potential contributions from Pulai or KelGold in our forecasts. Key Risks: Susceptibility to volatility in gold prices and mining conditions. As price takers, gold miners are generally susceptible to volatility in gold prices. Their output may also be hampered by unfavourable weather conditions. Every US$10/oz decrease in gold prices could lower FY17F earnings by 1.7%. Leverage & Asset Turnover (x) 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure US$m 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Capital Expenditure (-) 60.0% 50.0% 40.0% 30.0% ROE (%) 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 No guarantees of commercially viable concentrations of gold at new sites. There are no guarantees that the group will be successful in uncovering gold deposits that are commercially viable for extraction and sale in its new acquisitions. As such, we have not factored in upside from Pulai or KelGold in our forecasts and valuations. Company Background Limited (CNMC SP), together with its subsidiaries, is principally engaged in the business of exploration, mining of gold and the processing of mined ores into gold dores. It is currently focused on the development of its flagship Sokor Gold Field Project, and has recently completed the acquisition of a 51% stake in Pulai Mining Sdn. Bhd, and 100% of KelGold Mining Sdn Bhd. 20.0% 10.0% 0.0% Forward PE Band (x) (x) 385.9 335.9 285.9 235.9 185.9 135.9 85.9 +2sd: 127.4x +1sd: 77.8x 35.9 Avg: 28.1x -14.1 May-13 May-14 May-15 May-16 May-17 1sd: 21.6x -64.1 8.5 PB Band (x) (x) 7.5 6.5 5.5 4.5 3.5 +2sd: 6.9x +1sd: 5.32x Avg: 3.75x 2.5 1sd: 2.18x 1.5 0.5 2sd: 0.6x May-13 May-14 May-15 May-16 May-17 Source: Company, DBS Bank Page 5
Key Assumptions FY Dec Gold Resources (Ounces) 506,000 618,000 623,000 654,000 687,000 Fine Gold Production 26,122 31,206 27,404 18,690 26,160 Implied Average Gold 1,271 1,169 1,265 1,230 1,260 Royalty Fees as % of Sales 7.65 7.46 8.89 13.8 13.8 Capacity Expenditure (US$ 2.06 1.25 0.89 9.00 7.00 Income Statement (US$m) FY Dec Revenue 33.2 36.5 34.7 23.0 33.0 Cost of Goods Sold 0.0 0.0 0.0 0.0 0.0 Gross Profit 33.2 36.5 34.7 23.0 33.0 Other Opng (Exp)/Inc (18.4) (22.5) (23.4) (23.6) (25.2) Operating Profit 14.8 14.0 11.3 (0.6) 7.76 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc 0.04 0.46 1.01 0.99 0.90 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 14.8 14.4 12.3 0.41 8.66 Tax 0.49 (1.0) (0.8) 0.0 (1.3) Minority Interest (3.1) (2.8) (2.4) (0.1) (1.7) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 12.2 10.7 9.09 0.31 5.75 Net Profit before Except. 12.2 10.7 9.09 0.31 5.75 EBITDA 17.9 18.0 15.8 4.57 13.0 Growth Revenue Gth (%) 99.8 9.8 (4.9) (33.7) 43.4 EBITDA Gth (%) 154.1 0.6 (11.9) (71.1) 184.6 Opg Profit Gth (%) 183.5 (5.5) (19.1) (105.2) (1,430.8) Net Profit Gth (Pre-ex) (%) 356.9 (12.9) (14.8) (96.6) 1,784.4 Margins & Ratio Gross Margins (%) 100.0 100.0 100.0 100.0 100.0 Opg Profit Margin (%) 44.5 38.3 32.6 (2.5) 23.6 Net Profit Margin (%) 36.9 29.2 26.2 1.3 17.4 ROAE (%) 62.2 36.4 24.9 0.8 13.9 ROA (%) 45.2 27.9 19.1 0.6 10.3 ROCE (%) 55.0 32.7 23.3 2.7 13.3 Div Payout Ratio (%) 22.5 36.1 41.9 41.9 41.9 Net Interest Cover (x) NM NM NM NM NM Source: Company, DBS Bank Page 6
Quarterly / Interim Income Statement (US$m) FY Dec 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 Revenue 8.40 12.6 8.45 5.19 4.73 Cost of Goods Sold 0.0 0.0 0.0 0.0 0.0 Gross Profit 8.40 12.6 8.45 5.19 4.73 Other Oper. (Exp)/Inc (2.7) (6.9) (6.2) (7.5) (4.7) Operating Profit 5.66 5.71 2.24 (2.3) 0.0 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc 0.19 0.26 0.31 0.25 0.21 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 5.85 5.97 2.54 (2.1) 0.20 Tax (0.3) (0.1) (0.3) (0.1) (0.1) Minority Interest (1.1) (1.2) (0.5) 0.25 0.0 Net Profit 4.55 4.70 1.76 (1.9) 0.05 Net profit bef Except. 4.55 4.70 1.76 (1.9) 0.05 EBITDA 5.66 5.71 2.24 (2.3) 0.0 Growth Revenue Gth (%) (9.6) 50.2 (33.0) (38.7) (8.9) EBITDA Gth (%) 23.3 0.9 (60.9) nm 99.2 Opg Profit Gth (%) 23.3 0.9 (60.9) (203.4) (99.2) Net Profit Gth (Pre-ex) (%) 39.4 3.3 (62.5) (209.7) (102.8) Margins Gross Margins (%) 100.0 100.0 100.0 100.0 100.0 Opg Profit Margins (%) 67.4 45.3 26.5 (44.6) (0.4) Net Profit Margins (%) 54.2 37.3 20.9 (37.3) 1.2 Balance Sheet (US$m) FY Dec Net Fixed Assets 14.1 17.8 20.5 24.4 26.1 Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other LT Assets 4.99 2.08 2.20 2.20 2.20 Cash & ST Invts 12.3 22.1 27.0 24.3 28.7 Inventory 0.80 0.87 0.66 1.08 1.10 Debtors 0.61 0.83 1.40 0.46 0.65 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 32.8 43.7 51.7 52.4 58.7 ST Debt 0.07 0.04 0.04 0.04 0.04 Creditor 3.16 3.00 2.79 3.30 3.36 Other Current Liab 1.07 1.26 1.71 1.66 2.90 LT Debt 0.18 0.10 0.06 0.06 0.06 Other LT Liabilities 0.54 1.25 1.58 1.58 1.58 Shareholder s Equity 25.2 33.5 39.6 39.8 43.2 Minority Interests 2.65 4.55 5.91 5.99 7.64 Total Cap. & Liab. 32.8 43.7 51.7 52.4 58.7 Non-Cash Wkg. Capital (2.8) (2.6) (2.4) (3.4) (4.5) Net Cash/(Debt) 12.1 22.0 26.9 24.2 28.6 Debtors Turn (avg days) 10.2 7.2 11.7 14.7 6.1 Creditors Turn (avg days) (393.7) (281.8) (233.5) (215.6) (231.4) Inventory Turn (avg days) (113.3) (76.5) (61.6) (61.6) (75.8) Asset Turnover (x) 1.2 1.0 0.7 0.4 0.6 Current Ratio (x) 3.2 5.5 6.4 5.2 4.8 Quick Ratio (x) 3.0 5.3 6.2 5.0 4.7 Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH Capex to Debt (%) 830.0 875.9 929.0 9,355.2 7,276.3 Z-Score (X) 17.4 15.5 12.3 11.8 9.6 Source: Company, DBS Bank Page 7
Cash Flow Statement (US$m) FY Dec Pre-Tax Profit 14.8 14.4 12.3 0.41 8.66 Dep. & Amort. 3.05 3.99 4.53 5.15 5.25 Tax Paid (0.3) (0.3) (0.4) (0.1) 0.0 Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. (0.5) (0.9) (1.1) 1.03 (0.2) Other Operating CF 0.82 3.00 1.56 0.0 0.0 Net Operating CF 18.0 20.2 16.9 6.51 13.7 Capital Exp.(net) (2.1) (1.3) (0.9) (9.0) (7.0) Other Invts.(net) (2.8) (2.9) (5.5) 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 0.0 0.0 0.0 0.0 0.0 Net Investing CF (4.9) (4.2) (6.4) (9.0) (7.0) Div Paid (1.6) (2.9) (3.9) (0.1) (2.4) Chg in Gross Debt (0.3) 0.0 0.0 0.0 0.0 Capital Issues 0.0 (0.1) 0.0 0.0 0.0 Other Financing CF (0.1) (0.1) (0.1) 0.0 0.0 Net Financing CF (2.1) (3.1) (3.9) (0.1) (2.4) Currency Adjustments (0.9) (3.2) (1.8) 0.0 0.0 Chg in Cash 10.1 9.79 4.82 (2.6) 4.31 Opg CFPS (S cts) 6.27 7.20 6.13 1.87 4.73 Free CFPS (S cts) 5.42 6.47 5.46 (0.8) 2.29 Source: Company, DBS Bank Target Price & Ratings History 0.65 0.60 0.55 0.50 S$ S.No. Date of Report Closing Price 12-mth Target Price Rating 1: 16 Nov 16 0.45 0.65 BUY 2: 24 Feb 17 0.42 0.60 BUY 0.45 0.40 0.35 1 2 0.30 0.25 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Analyst: Singapore Research Team Paul YONG Page 8
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 Completed Date: 18 May 2017 11:51:00 (SGT) Dissemination Date: 18 May 2017 12:49:18 (SGT) Sources for all charts and tables are DBS Bank unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of 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 ) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. 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DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not 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 and does not engage in market-making. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests 2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 28 Apr 2017. 2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. 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. Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. Page 10
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