Version 4 Bloomberg: MK Reuters:.KL Refer to important disclosures at the end of this report Malaysia Equity Research 3 Nov 2016 HOLD Last Traded Price ( 2 Nov 2016): RM7.50 (KLCI : 1,659.60) Price Target 12-mth: RM7.60 (1% upside) (Prev RM7.60) Shariah Compliant: Yes Potential Catalyst: Upturn in shipping rates Where we differ: Thinner margin assumptions than consensus Analyst Marvin KHOR +60 32604 3911 marvinkhor@alliancedbs.com What s New 3Q16 performance dipped more than expected on weak petroleum shipping rates Charter rate outlook still soft, but seasonality picking up for petroleum division in 4Q Trim FY16/17/18F core earnings by 11%/11%/7%, RM7.60 TP stays on weaker RM maintain HOLD Price Relative 9.5 8.5 7.5 6.5 5.5 4.5 RM 3.5 85 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 10,908 9,723 10,306 11,374 EBITDA 4,428 4,985 5,315 5,576 Pre-tax Profit 2,567 3,074 2,398 2,605 Net Profit 2,468 2,998 2,325 2,527 Net Pft (Pre Ex.) 2,645 2,151 2,325 2,527 Net Pft Gth (Pre-ex) (%) 42.0 (18.7) 8.1 8.7 EPS (sen) 55.3 67.2 52.1 56.6 EPS Pre Ex. (sen) 59.3 48.2 52.1 56.6 EPS Gth Pre Ex (%) 42 (19) 8 9 Diluted EPS (sen) 55.3 67.2 52.1 56.6 Net DPS (sen) 30.0 35.0 35.0 35.0 BV Per Share (sen) 792 822 839 861 PE (X) 13.6 11.2 14.4 13.2 PE Pre Ex. (X) 12.7 15.6 14.4 13.2 P/Cash Flow (X) 8.1 7.0 7.4 7.0 EV/EBITDA (X) 8.0 8.1 7.4 6.7 Net Div Yield (%) 4.0 4.7 4.7 4.7 P/Book Value (X) 0.9 0.9 0.9 0.9 Net Debt/Equity (X) 0.0 0.1 0.1 0.1 ROAE (%) 7.8 8.3 6.3 6.7 Earnings Rev (%): (10) (11) (7) Consensus EPS (sen): 56.5 57.3 58.8 Other Broker Recs: B: 5 S: 3 H: 7 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P 225 205 185 165 145 125 105 Working hard to stay shipshape Growth outlook still tepid. The continuing softness in LNG and petroleum shipping rates are set to be a dampener for nearterm profitability. While earnings from the group s fleet on contracts are expected to remain secure, new charters to replace earlier terminations could be signed at lower rates given the large supply of vessels available. The group continues to seek opportunities in the offshore space, though we think finding a short-term re-rating catalyst may be a challenge. Maintain HOLD. Supply growth poses challenge for charter rates. Charter rates for petroleum tankers averaged c.12% lower y-o-y in 9M16, as global fleet growth picks up after bottoming out in 2015. Stronger seasonal demand, which picks up during the 4Q-1Q period, will be necessary to lift overall rates. On the other hand, spot LNG shipping rates, which had halved in 2015, looks to continue being depressed as vessel supply continues to outstrip demand. Valuation supported as dollar strength proxy. s functional currency and key assets are denominated in US dollar, though it reports earnings in ringgit. We have revised our average FY17/18F USDMYR forecasts of 4.22/4.37 from 4.10/4.10. A weaker ringgit presents upside risks to reported earnings and valuations and vice versa. Valuation: Our SOP-derived TP for is RM7.60, which implies 0.9x FY17F P/BV. Given the limited upside, we maintain our HOLD recommendation. Key Risks to Our View: Severe changes in crude petroleum shipping rates. Our assumptions are for crude shipping rates to see a decline on average in 2016. If rates move severely due to volatility in crude oil prices, earnings will be impacted. At A Glance Issued Capital (m shrs) 4,464 Mkt. Cap (RMm/US$m) 33,478 / 7,995 Major Shareholders (%) Petroliam Nasional Bhd 62.7 Employees Provident Fund 6.6 Skim Amanah Saham Bumiputera 5.6 Free Float (%) 25.1 3m Avg. Daily Val (US$m) 4.0 ICB Industry : Industrials / Industrial Transportation Refer to important disclosures at the end of this report ed:ck / sa: BC
WHAT S NEW Petroleum rate weakness hit 3Q16 earnings Depressed quarter. reported a sharply lower 3Q16 headline profit of RM134.2m (-72% y-o-y, -90% q-o-q). After stripping out RM164m of impairment provisions, and RM50m of other exceptional net losses, core earnings were still depressed at RM348.2m (-51% y-o-y, -31% q-o-q). 9M16 core earnings thus reached RM1.48bn (-25% y-o-y), which is below our/consensus expectations. Petroleum shipping rates met trough in 3Q. The main culprit for the weaker performance was the Petroleum shipping division (including its Chemical fleet), whose revenue fell 9% y-o-y in USD terms due to a more severe seasonal rate decline than 2015. This, in addition to the higher depreciation costs incurred with its revised policy, led to the segment posting a USD27.7m pretax loss. Note that the Baltic Dirty Tanker Index (BDTI, proxy for charter rates) had slid 22% y-o-y in 3Q16 (see chart overleaf). Limited cushioning from other segments. The LNG segment revenue also saw topline fall 13% y-o-y (-4% q-o-q) in USD terms due to lower vessel days, as more of its fleet are not on jobs with the Puteri Zamrud going for refurbishment after contract expiry. Recall that it also has two Aman class vessels with terminated contracts and two more laid up due to unrest in Yemen. Resultantly LNG PBT fell 35% y-o-y to USD56.2m (-10% q-o-q). Offshore PBT fell 38% y-o-y to USD24.2m, though this was due to a USD20m reversal of gains in FPSO Cendor s finance lease. The heavy engineering division MMHE continued to be loss-making (USD0.6m). Supply-demand factors remain key issue. In its earnings call, continues to highlight a lukewarm rates outlook for the main LNG and petroleum shipping divisions. In particular, vessel supply for both divisions is set to expand in 2017 (see charts overleaf). Efforts made for longer-term growth, expect better 4Q in the meantime. The group notes that organic LNG shipping demand will continue be lower than supply over the coming years, and will seek to find non-conventional demand to augment it such as FSRU (Floating Storage Regasification Unit) work. Its Offshore division will be entering the Thai market with the FSO Benchamas project starting 2Q18, for which the petroleum tanker Bunga Kelana5 will be converted. It will explore opportunities in the West Africa and Brazil region where planned projects are more rife. Looking at the nearer term, 4Q16 is poised to be stronger as year-end seasonal demand kicks in for its Petroleum segment. The BDTI had risen 5% over Oct 16, and is 32% higher than the lowest point in Aug 16. Trimming forecasts, weaker ringgit provides lift. We adjusted our assumed blended petroleum rates for a -10%/-2% decline from -5%/0% for FY16/17F previously to account for weaker charter rates. However, we also incorporate a weaker ringgit against the USD, of 4.22/4.37 in CY17/18F from 4.10/4.10 as per DBS forecasts. Overall, our core earnings forecasts are cut 11%/11%/7% for FY16/17/18F, and headline earnings lowered 10%/11%/7%. Rolling forward our valuations to FY17, our TP is maintained at RM7.60 largely due to the weaker ringgit assumption. Maintain HOLD. Quarterly / Interim Income Statement (RMm) FY Dec 3Q2015 2Q2016 3Q2016 % chg yoy % chg qoq Revenue 2,506 2,392 2,293 (8.5) (4.2) Cost of Goods Sold (1,598) (1,656) (1,781) 11.4 7.5 Gross Profit 907 736 512 (43.6) (30.5) Other Oper. (Exp)/Inc (288) (231) (138) (52.2) (40.2) Operating Profit 619 506 374 (39.6) (26.0) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm Associates & JV Inc 172 91.5 62.7 (63.6) (31.5) Net Interest (Exp)/Inc (40.3) (63.8) (68.1) (69.0) (6.8) Exceptional Gain/(Loss) (231) 841 (214) 7.5 nm Pre-tax Profit 519 1,374 155 (70.2) (88.7) Tax (15.2) (19.4) (11.2) (25.9) (42.0) Minority Interest (20.6) (8.2) (9.2) 55.2 12.1 Net Profit 484 1,347 134 (72.3) (90.0) Net profit bef Except. 715 506 348 (51.3) (31.2) EBITDA 1,156 1,092 951 (17.7) (12.9) Margins (%) Gross Margins 36.2 30.8 22.3 Opg Profit Margins 24.7 21.1 16.3 Net Profit Margins 19.3 56.3 5.9 Source of all data: Company, AllianceDBS Page 2
Petroleum tanker fleet growth Source: Company presentation LNG shipping rates and vessel deliveries Source: Company presentation Baltic Dirty Tanker Index 1,200 Baltic Dirty Tanker Index 1,100 1,000 900 800 700 600 500 400 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Source: Bloomberg L.P. SOP valuation Value (RM m) Per share (RM) Valuation basis LNG Shipping 16,220.4 3.63 10x FY17F EV/EBITDA, net MI Petroleum Shipping 7,298.6 1.64 Estimated market value Chemical Shipping 738.5 0.17 Estimated market value Equity Value - Energy related shipping 24,257.5 5.43 Energy-related shipping 24,257.5 5.43 Refer to above Offshore 8,208.3 1.84 14x FY16F earnings Heavy Engineering 1,064.0 0.24 Based on market price Tank Terminals 265.3 0.06 36% stake of Langsat 1&2, DCF @6% WACC Bintulu Port stake (2.3%) 70.1 0.02 Based on market price Total SOP Equity Value 33,865.2 7.60 Page 3
CRITICAL DATA POINTS TO WATCH Earnings Drivers: Slow increase in LNG fleet. The LNG (liquefied natural gas) segment is s largest contributor at over 25% of topline and >50% of pretax earnings. It owns a fleet of 28 as at end- Sep 16, comprising 26 LNG carriers and two floating storage units (FSUs). Four newbuilds are due to enter the fleet over 1H17-1H18 on novated charters to Petronas. However, four vessels (Puteri class) are due to be dry-docked for around 6-9 months each during 2016-17 for refurbishments before their lease extensions. We assume the total active months from LNG vessels to change by -4%/+19%/11% over FY16/17/18F. Average LNG charter rates to trend down. s LNG fleet is largely on longer-term charters (15-20yrs), mostly to various units of Petronas. Hence, LNG earnings are less affected by the plunge in spot charters since 2015. Nonetheless, we understand that the five refurbished vessels will be on lower rates than before due to their age, while the five newbuilds are likely to see lower rates give current conditions. As such, we assume average revenue/vessel month will see a gradual decline of 10.5%/0.9%/0.3% over FY16/17/18F. Steady crude tanker rates. s petroleum segment profitability depends on the charter rates for the crude tankers (i.e. Aframax, Suezmax, VLCC). As new tanker deliveries are picking up in 2016, we assume average charter rates to change -10%/-2%/0% in FY16/17/18F. Rates are tracked via the Baltic Dirty Tanker Index (i.e. spot freight rates), and seasonality comes into play as crude oil shipping demand is weighed towards 4Q- 1Q of each calendar year. Keeping a lean chemical fleet. had reduced its chemical tanker fleet significantly from 29 vessels in 2012 to only 14 at end-2015, and through the process trimmed losses from the division. It plans to maintain the size of its fleet, and earnings may be closer to break even if bunker costs continue to be benign due to low crude oil prices. USD exchange rate has an impact on earnings. s businesses are generally transacted in USD but its financials are reported in ringgit. As such, a stronger USD would lift reported earnings and vice versa. Our current estimates impute DBS economic teams forecasts of RM4.10/4.22/4.37 to the USD for FY16/17/18F. 382 327 273 218 164 109 55 0 2.54 2.03 1.52 1.02 0.51 0.00 107 85 64 43 21 0 19.2 15.4 11.5 7.7 3.8 0.0 4.41 3.53 LNG - # of vessels months 378 345 342 301 288 LNG - Revenue/vessel months (USD m) 2.49 2.36 2.11 2.1 2.09 Petroleum - Revenue / m DWT (USD m) 104 94 92 92 83 Chemical - Average # of vessels 19 14 14 14 14 RM/USD 4.37 4.1 4.22 3.83 3.22 2.65 1.77 0.88 0.00 Source: Company, AllianceDBS Page 4
Balance Sheet: Keeping a healthy gearing level. ended FY15 with net gearing of only 0.02x or almost net cash. This is projected to rise to 0.15x at end FY16F largely due to the GKL stake acquisition, after assuming GKL s debt as well as a small portion of its cash outlay to be debt-funded. Gearing level should then start to trend down due to the strong cash generation of its businesses. Share Price Drivers: Inorganic growth opportunities. remains open to acquisition opportunities, particularly in the oil & gas sector given distressed valuations. Avenues for organic earnings growth have largely petered out as the petroleum segment has firmly turned around, chemical segment losses have been curtailed, and there are limited contract win opportunities in the LNG shipping and offshore segments (because of the tough operating environment). As such, would have to rely on inorganic growth opportunities in order to lift earnings. Leverage & Asset Turnover (x) 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMm 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 0.3 0.3 0.2 0.2 0.1 Key Risks: Fall in crude petroleum shipping rates. The petroleum tanker market is conducted mostly on spot or short to medium charters of 1-3 years. As such would be more susceptible if tanker rates see a sustained downtrend. Further charter cancellations. The LNG segment will be more exposed to current weak spot charter rates if long term charters are terminated. Persistence of a strengthening ringgit. s earnings in ringgit (reporting currency) will drop if the USD weakens significantly against MYR. 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (x) 21.3 Capital Expenditure (-) ROE (%) Forward PE Band (x) Company Background is Petronas shipping arm, operating vessels capable of LNG, petroleum and chemical transport. Other businesses include offshore O&G assets, marine engineering (via listed MMHE) and tank terminal operations. 19.3 +2sd: 18.4x 17.3 +1sd: 16.4x 15.3 Avg: 14.4x 13.3-1sd: 12.4x 11.3-2sd: 10.4x 9.3 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 (x) 1.6 PB Band (x) 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 +2sd: 1.31x +1sd: 1.19x Avg: 1.07x -1sd: 0.95x -2sd: 0.83x 0.7 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Source: Company, AllianceDBS Page 5
Key Assumptions FY Dec LNG - # of vessels months 345 301 288 342 378 LNG - Revenue/vessel months (USD m) 2.49 2.36 2.11 2.10 2.09 Petroleum - Revenue / m DWT (USD m) 82.5 104 94.0 92.1 92.1 Chemical - Average # of vessels 19.0 14.0 14.0 14.0 14.0 RM/USD 3.22 3.83 4.10 4.22 4.37 Segmental Breakdown FY Dec Revenues (RMm) Energy related shipping 6,303 7,523 7,094 7,777 8,573 Offshore 514 1,006 1,304 1,309 1,324 Heavy Engineering 2,136 1,826 1,121 1,220 1,478 Others 343 553 205 0.0 0.0 Total 9,296 10,908 9,723 10,306 11,374 PBT (RMm) Energy related shipping 1,356 2,145 1,365 1,541 1,745 Offshore 522 651 601 586 576 Heavy Engineering 122 115 75.2 78.5 87.9 Tank terminals 44.1 47.9 39.5 44.4 44.4 Others 104 169 146 148 153 Total 2,149 3,129 2,227 2,398 2,605 PBT Margins (%) Energy related shipping 21.5 28.5 19.2 19.8 20.4 Offshore 101.5 64.7 46.1 44.8 43.5 Heavy Engineering 5.7 6.3 6.7 6.4 5.9 Others 30.4 30.6 71.0 N/A N/A Total 23.1 28.7 22.9 23.3 22.9 Income Statement (RMm) FY Dec Revenue 9,296 10,908 9,723 10,306 11,374 Cost of Goods Sold (6,651) (7,528) (6,588) (6,853) (7,612) Gross Profit 2,645 3,380 3,135 3,453 3,763 Other Opng (Exp)/Inc (953) (1,042) (967) (1,037) (1,165) Operating Profit 1,692 2,338 2,168 2,416 2,598 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 611 587 310 323 333 Net Interest (Exp)/Inc (234) (180) (251) (341) (325) Exceptional Gain/(Loss) 341 (177) 847 0.0 0.0 Pre-tax Profit 2,410 2,567 3,074 2,398 2,605 Tax (90.3) (31.8) (19.6) (18.5) (20.7) Minority Interest (116) (67.3) (56.2) (54.8) (57.8) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 2,204 2,468 2,998 2,325 2,527 Net Profit before Except. 1,863 2,645 2,151 2,325 2,527 EBITDA 3,556 4,428 4,985 5,315 5,576 Growth Revenue Gth (%) 3.6 17.3 (10.9) 6.0 10.4 EBITDA Gth (%) 6.4 24.5 12.6 6.6 4.9 Opg Profit Gth (%) 11.6 38.2 (7.3) 11.4 7.5 Net Profit Gth (Pre-ex) (%) 17.7 42.0 (18.7) 8.1 8.7 Margins & Ratio Gross Margins (%) 28.5 31.0 32.2 33.5 33.1 Opg Profit Margin (%) 18.2 21.4 22.3 23.4 22.8 Net Profit Margin (%) 23.7 22.6 30.8 22.6 22.2 ROAE (%) 8.4 7.8 8.3 6.3 6.7 ROA (%) 5.4 5.5 5.9 4.3 4.6 ROCE (%) 4.4 6.0 4.1 3.9 4.3 Div Payout Ratio (%) 22.3 54.3 52.1 67.2 61.8 Net Interest Cover (x) 7.2 13.0 8.6 7.1 8.0 Source: Company, AllianceDBS Page 6
Quarterly / Interim Income Statement (RMm) FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 Revenue 2,506 3,312 2,394 2,392 2,293 Cost of Goods Sold (1,598) (2,280) (1,600) (1,656) (1,781) Gross Profit 907 1,032 795 736 512 Other Oper. (Exp)/Inc (288) (377) (40.9) (231) (138) Operating Profit 619 655 754 506 374 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 172 169 127 91.5 62.7 Net Interest (Exp)/Inc (40.3) (96.8) (47.7) (63.8) (68.1) Exceptional Gain/(Loss) (231) 36.0 (52.5) 841 (214) Pre-tax Profit 519 763 781 1,374 155 Tax (15.2) (10.7) 14.7 (19.4) (11.2) Minority Interest (20.6) 0.33 (224) (8.2) (9.2) Net Profit 484 753 571 1,347 134 Net profit bef Except. 715 717 624 506 348 EBITDA 1,156 1,239 1,388 1,092 951 Growth Revenue Gth (%) (3.6) 32.2 (27.7) (0.1) (4.2) EBITDA Gth (%) (0.2) 7.2 12.0 (21.3) (12.9) Opg Profit Gth (%) (7.9) 5.8 15.1 (32.9) (26.0) Net Profit Gth (Pre-ex) (%) (3.8) 0.2 (13.0) (18.9) (31.2) Margins Gross Margins (%) 36.2 31.2 33.2 30.8 22.3 Opg Profit Margins (%) 24.7 19.8 31.5 21.1 16.3 Net Profit Margins (%) 19.3 22.7 23.8 56.3 5.9 Balance Sheet (RMm) FY Dec Net Fixed Assets 20,514 25,444 34,416 33,740 32,556 Invts in Associates & JVs 6,251 4,687 2,227 2,550 2,883 Other LT Assets 5,405 6,661 6,640 6,619 6,598 Cash & ST Invts 4,839 5,656 5,816 6,892 8,702 Inventory 244 205 181 188 209 Debtors 3,409 4,888 3,996 4,235 4,674 Other Current Assets 923 0.0 0.0 0.0 0.0 Total Assets 41,584 47,539 53,273 54,221 55,617 ST Debt 1,149 1,110 1,110 1,110 1,110 Creditor 3,401 3,817 3,249 3,380 3,754 Other Current Liab 42.5 29.2 29.2 29.2 29.2 LT Debt 7,590 5,394 10,316 10,316 10,316 Other LT Liabilities 580 729 729 729 729 Shareholder s Equity 27,756 35,361 36,686 37,448 38,413 Minority Interests 1,065 1,098 1,154 1,209 1,266 Total Cap. & Liab. 41,584 47,539 53,273 54,221 55,617 Non-Cash Wkg. Capital 1,132 1,247 898 1,014 1,100 Net Cash/(Debt) (3,900) (849) (5,609) (4,534) (2,724) Debtors Turn (avg days) 122.9 138.8 166.7 145.8 143.0 Creditors Turn (avg days) 236.5 218.6 316.0 282.9 262.2 Inventory Turn (avg days) 17.1 13.6 17.2 15.7 14.6 Asset Turnover (x) 0.2 0.2 0.2 0.2 0.2 Current Ratio (x) 2.0 2.2 2.3 2.5 2.8 Quick Ratio (x) 1.8 2.1 2.2 2.5 2.7 Net Debt/Equity (X) 0.1 0.0 0.1 0.1 0.1 Net Debt/Equity ex MI (X) 0.1 0.0 0.2 0.1 0.1 Capex to Debt (%) 12.4 47.7 28.8 16.5 12.6 Z-Score (X) 2.7 3.0 2.4 2.4 2.5 Source: Company, AllianceDBS Page 7
Cash Flow Statement (RMm) FY Dec Pre-Tax Profit 2,410 2,567 3,074 2,398 2,605 Dep. & Amort. 1,253 1,503 2,507 2,576 2,646 Tax Paid (102) (80.9) (19.6) (18.5) (20.7) Assoc. & JV Inc/(loss) (611) (587) (310) (323) (333) Chg in Wkg.Cap. (1,434) (102) 349 (116) (85.8) Other Operating CF 1,329 817 0.0 0.0 0.0 Net Operating CF 2,846 4,117 4,753 4,517 4,812 Capital Exp.(net) (1,082) (3,103) (3,289) (1,880) (1,440) Other Invts.(net) 232 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 668 3,241 0.0 0.0 0.0 Div from Assoc & JV 0.0 35.8 0.0 0.0 0.0 Other Investing CF 5.00 336 0.0 0.0 0.0 Net Investing CF (177) 510 (3,289) (1,880) (1,440) Div Paid (402) (592) (1,674) (1,562) (1,562) Chg in Gross Debt (1,981) (3,845) 370 0.0 0.0 Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (437) (247) 0.0 0.0 0.0 Net Financing CF (2,819) (4,684) (1,304) (1,562) (1,562) Currency Adjustments 242 872 0.0 0.0 0.0 Chg in Cash 91.1 815 160 1,074 1,810 Opg CFPS (sen) 95.9 94.5 98.7 104 110 Free CFPS (sen) 39.5 22.7 32.8 59.1 75.5 Source: Company, AllianceDBS Target Price & Ratings History 4 5 RM 9.38 2 8.88 1 6 7 8 8.38 3 7.88 10 11 12 7.38 13 9 6.88 Nov-15 Mar-16 Jul-16 Nov-16 S.No. Date of Report Closing Price 12-mth T arget Price Rating 1: 05 Nov 15 9.13 10.80 BUY 2: 15 Dec 15 9.10 10.80 BUY 3: 10 Feb 16 8.63 10.80 BUY 4: 25 Feb 16 8.63 10.80 BUY 5: 02 Mar 16 8.90 10.80 BUY 6: 04 Apr 16 8.92 10.80 BUY 7: 25 Apr 16 8.76 10.80 BUY 8: 04 May 16 8.36 10.80 BUY 9: 09 May 16 7.25 8.65 HOLD 10: 10 May 16 7.60 8.65 HOLD 11: 03 Jun 16 7.60 8.65 HOLD 12: 19 Jul 16 7.50 7.60 HOLD 13: 05 Aug 16 7.50 7.60 HOLD Note : Share price and Target price are adjusted for corporate actions. Source: AllianceDBS Analyst: Marvin KHOR Page 8
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 9
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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 10