Singapore Company Guide Version 2 Bloomberg: OEL SP EQUITY Reuters: OVER.SI Refer to important disclosures at the end of this report DBS Group Research. Equity 17 Feb 2016 HOLD Last Traded Price: S$0.49 (STI : 2,644.58) Price Target : S$0.56 (14% upside) (Prev S$0.71) Potential Catalyst: Tuition fee hike; rise in enrolment Where we differ: Net profit below consensus Analyst LING Lee Keng +65 6682 3703 leekeng@dbs.com What s New FY15 results in line 5% increase in operating costs; personnel expenses stable Expect enrolment to remain stable in FY16; new campus to fetch higher tuition fees FY16-17F earnings cut by 22%- 25% after imputing lower enrolment and higher costs Price Relative 1.1 1.0 0.9 0.8 0.7 0.6 0.5 S$ 0.4 89 Feb-13 Feb-14 Feb-15 Feb-16 (LHS) Relative Index Relative STI INDEX (RHS) Forecasts and Valuation FY Dec (S$ m) 2014A 2015A 2016F 2017F Revenue 102 97.1 100 108 EBITDA 30.1 28.5 31.4 35.7 Pre-tax Profit 26.4 17.4 13.5 17.8 Net Profit 22.0 14.9 11.2 14.8 Net Pft (Pre Ex.) 22.0 14.9 11.2 14.8 Net Pft Gth (Pre-ex) (%) (2.8) (32.1) (24.9) 31.9 EPS (S cts) 5.29 3.60 2.70 3.56 EPS Pre Ex. (S cts) 5.29 3.60 2.70 3.56 EPS Gth Pre Ex (%) (3) (32) (25) 32 Diluted EPS (S cts) 5.29 3.60 2.70 3.56 Net DPS (S cts) 2.75 2.75 1.35 1.78 BV Per Share (S cts) 37.9 37.3 38.7 40.5 PE (X) 9.3 13.6 18.2 13.8 PE Pre Ex. (X) 9.3 13.6 18.2 13.8 P/Cash Flow (X) 9.5 9.1 8.1 7.0 EV/EBITDA (X) 7.6 10.3 9.7 8.2 Net Div Yield (%) 5.6 5.6 2.8 3.6 P/Book Value (X) 1.3 1.3 1.3 1.2 Net Debt/Equity (X) 0.2 0.6 0.6 0.5 ROAE (%) 14.5 9.6 7.1 9.0 Earnings Rev (%): (25) (22) Consensus EPS (S S cts): 3.10 3.90 Other Broker Recs: B: 1 S: 1 H: 3 Source of all data: Company, DBS Bank, Bloomberg Finance L.P 229 209 189 169 149 129 109 Stable Enrolment Positive free cashflow from FY16F onwards (OEL) presents a highly cash generative business, with operating cashflow growing at 22% CAGR over 2010-2015. We expect free cashflow to turn positive from FY16F onwards, after registering three years of negative cashflow as a result of the new campus. Near term, we expect enrolment to remain stable, compared to our previous assumption of growth, on the back of the slowdown in global economies. Enrolment to remain flat y-o-y y We cut our earlier FY16 enrolment forecast of 3,100 to 3,000, which is about 63% of total capacity of 4,800 students for the new campus. This number is similar to that of FY15 but 17% lower than FY14 s enrolment of about 3,600 students. We now expect a gradual improvement in enrolment from FY17 onwards, instead of the previous assumption of an improvement in FY16. From FY16 onwards, the full impact of depreciation for the new campus and interest costs for the bonds will set in. Thus, we expect earnings for the group to ease 25%, before picking up in FY17F. Valuation: We use a Discounted Cash Flow (DCF) valuation methodology to capture the cash generative business of OEL in the medium and long term. We see tuition fee hikes and gradual improvement in enrolment as the key levers to lift earnings from FY17 onwards. Based on our assumptions of 6% weighted average cost of capital on the projected free cash flow forecast, our DCF-derived target price of S$0.56 translates into 21x FY16F PE and 16x FY17F PE. Key Risks to Our View: Drop in enrolment. Tuition fees forms the bulk of the revenue. A drop in enrolment will result in lower revenue. Operational. A rise in personnel expenses and retention of teaching staff will affect margins and operation. At A Glance Issued Capital (m shrs) 415 Mkt. Cap (S$m/US$m) 204 / 145 Major Shareholders (%) Perry David Alan (%) 32.6 WLH Pte Ltd 31.4 Prudential (%) 7.0 Free Float (%) 29.0 3m Avg. Daily Val (US$m) 0.03 ICB Industry : Consumer Services / General Retailers ed: JS / sa:ym
WHAT S NEW FY15 results commentary FY15 results in line. 4Q15 revenue was S$23.9m (-6% y-o-y, +2% q-o-q). Net profit, however, was down 59% y-o-y on higher depreciation charges and interest costs. On a q-o-q basis, net profit was up 31%. For the full year, total revenue decreased by 5% y-o-y to S$97.1m, attributable to the softening student enrolment numbers, particularly in the junior schools. Tuition fees revenue, which formed the bulk of the revenue, decreased by 4.1% to S$93.8m. The group registered net profit of S$14.9m, vs our forecast of S$14.1m. 5.4% increase in operating costs; personnel expenses stable. Total operating expenses increased by 5.4% to S$79.8m. The increase was due to higher depreciation expenses, finance costs and utilities, offset by the absence of school lease rental after the move to the new school campus in July 2015 and lower upkeep and maintenance expenses. Personnel expenses were maintained fairly constant at S$57.3m for FY15 compared to S$57.1m for FY14. Outlook Expect enrolment number to remain steady in FY16. The foreign system schools (FSS) in Singapore are to a large extent dependent upon the ability of Singapore to continue to attract foreign direct investments. In view of the slowdown in global economies, we expect the enrolment number for OEL to remain constant at about 3000, at least for this year, before a gradual increase from FY17 onwards. New campus to fetch higher tuition fees. With the completion of the new school campus at Pasir Ris and school operations having commenced on 1 July 2015 at the new premises, the group is well placed to compete in the FSS market. We have imputed a 5% p.a. increase in fees in our forecasts for FY16F and FY17F. In the past few years, OEL has raised tuition fees by 8% to 13%. FY16-17F 17F earnings e cut by 22% to 25% after imputing lower enrolment t number and higher costs. We cut our earlier FY16 enrolment forecast from 3,100 to 3,000, which is about 63% of total capacity of 4,800 students for the new campus. This number is similar to FY15 but 17% lower than FY14 s enrolment of about 3,600 students. We expect a gradual improvement in enrolment from FY17 onwards, instead of previous assumption of an improvement in FY16. From FY16 onwards, the full impact of depreciation for the new campus and interest costs for the bonds will set in. Thus, we expect earnings for the group to ease 25%, before picking up in FY17F. Maintain HOLD on lower TP of S$0.56. Quarterly / Interim Income Statement (S$m) FY Dec 4Q2014 3Q2015 4Q2015 % chg yoy % chg qoq Revenue 25.4 23.5 23.9 (5.7) 1.8 Other Oper. (Exp)/Inc (18.6) (19.6) (19.2) 3.1 (2.4) Operating Profit 6.81 3.89 4.78 (29.8) 23.0 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm Associates & JV Inc 0.0 0.0 0.0 nm nm Net Interest (Exp)/Inc 0.0 (2.1) (2.1) nm 0.0 Exceptional Gain/(Loss) 0.0 0.0 0.0 nm nm Pre-tax Profit 6.81 1.81 2.70 (60.3) 49.4 Tax (1.2) 0.0 (0.4) (67.2) nm Minority Interest 0.0 0.0 0.0 nm nm Net Profit 5.63 1.77 2.32 (58.8) 31.1 Net profit bef Except. 5.63 1.77 2.32 (58.8) 31.1 EBITDA 6.81 6.61 6.72 (1.2) 1.8 Margins (%) Opg Profit Margins 26.8 16.5 20.0 Net Profit Margins 22.2 7.5 9.7 Source of all data: Company, DBS Bank Page 2
CRITICAL DATA POINTS TO WATCH Earnings Drivers: New facility to fetch higher tuition fees. The new campus situated on a 5 ha site at Pasir Ris will justify OEL s plan to further raise tuition fees to the level of the industry s top players such as Singapore American School (SAS) and United World College of South East Asia (UMCSEA). OEL s tuition fee is about 10% lower than the industry average. In the last two years, OEL had raised tuition fees once a year, before the start of a new academic year in August. For the academic years 2013/2014 and 2014/2015, it increased its fees on average across the school by 8.5% and 8.0% respectively. For 2015/2016, being a new campus, the average increase in fees is 13%. New campus, strong brand name. With the completion of the new school, coupled with its well recognised name in the private education industry, OEL is well placed in the foreign system schools (FSS) market in Singapore. OEL is truly an international school with students from 75 nationalities. No single nationality represents more than 20% of the school s total population. It is also one of the largest in the world with a single campus. OEL is one of the few foreign system schools in Singapore to offer the full International Baccalaureate (IB) curriculum from Primary Years to Diploma Programme. Removal of capacity constraint. The new campus has a total capacity of 4,800 students, which now resolves OEL s issue of capacity constraint at the old site. Singapore a preferred place for expatriates. Singapore took the overall first spot in HSBC 8th annual Expat Explorer survey 2015, and was ranked among the top 5 for each of the categories - Expat Economics, Expat Experience and Raising Children Abroad. Stable flow of expatriates. Even though the growth in number of Employment Pass holders, which are foreigners earnings at least S$3,300 a month, have tapered in the last few years, the numbers are still relatively stable. Demand for quality education. The constant mobility of expatriates and demand by parents for a smooth transition in their children s education augur well for the FSS industry. Furthermore, the relatively high disposal income of expatriates also make them relatively price inelastic to tuition fees of FSS. Tuition fee S$m 120 CAGR: +3% 104.7 100 91.4 98.6 97.8 93.8 96.5 80 60 40 20 0 2012 2013 2014 2015 2016F 2017F Personnel expenses S$m 70 CAGR: +3% 61.9 56.1 57.1 57.2 59.0 60 53.3 50 40 30 20 10 0 2012 2013 2014 2015 2016F 2017F Student enrolment 4,500 CAGR: -4% 4,000 3779 3833 3610 3,500 3000 3000 3100 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016F 2017F Employment pass holder in Singapore EP holder Growth (%) 200,000 25% 175,400 173,800 175,100 178,900 180,800 180,000 160,000 143,300 20% 140,000 15% 120,000 100,000 10% 80,000 60,000 5% 40,000 0% 20,000 0-5% Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 June 2015 Source: Company, DBS Bank Employment Pass (EP) Growth (%) Page 3
Balance Sheet: Reduction in cash balance. Cash balance as at end-fy Dec 15 decreased to S$60.4m from S$125.5m in FY14, mainly due to the capital expenditure incurred for the new school campus and two dividend payments during FY 2015, offset by the cash generated from operations. 1.00 0.80 0.60 0.40 Leverage & Asset Turnover (x) 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 Issued of bonds to fund new campus. OEL issued an aggregate principal amount of S$150m 5.20% bonds due 2019 in April 2014 to partly fund the building of the new campus. 0.20 0.00 2013A 2014A 2015A 2016F 2017F Gross Debt to Equity (LHS) Asset Turnover (RHS) 0.3 0.3 0.2 Share Price Drivers: Tuition fees main source of income. Tuition fees, which is a function of enrolment, is the main source of income for OEL. Tuition fees forms the bulk of OEL s revenue. The rest of the revenue (<5%) are from registration fees, revenue from the school bookshop and enrichment programmes. We have imputed a 5% increase in fees in our forecasts for FY16F and FY17F. In the past few years, OEL has raised tuition fees by 8% to 13%. Expect flat enrolment growth this year. OEL has seen a drop in enrolment, especially from the junior school as a result of the shift of its campus from Patterson Road to Pasir Ris. The withdrawal of students at all levels due to family relocation away from Singapore is also higher, in view of the slowdown in global economies. We cut FY16 enrolment to 3,000, which is about 63% of total capacity of 4,800 students for the new campus. This number is similar to FY15 but 17% lower than FY14 s enrolment of about 3,600 students. We expect a gradual improvement in enrolment from FY17 onwards, instead of previous assumption of an improvement in FY16. Watchful of personnel costs. Personnel expenses account for about 75% of total operating expenses. So far, OEL has been able to maintain personnel expenses at fairly constant level of S$57.3m for FY 2015 compared to S$57.1m for FY14. S$m 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 20.0% 15.0% 10.0% 5.0% 0.0% (x) 27.9 22.9 Capital Expenditure 2013A 2014A 2015A 2016F 2017F Capital Expenditure (-) ROE (%) 2013A 2014A 2015A 2016F 2017F Forward PE Band (x) +2sd: 28.7x +1sd: 24.1x Key Risks: Drop in enrolment. Tuition fees forms the bulk of the revenue. A drop in enrolment will result in lower revenue. Operational. A rise in personnel expenses and retention of teaching staff will affect margins and operation. Competition. Currently, there are over 30 international schools in Singapore. Company Background A private foreign system school in Singapore. It offers the K-12 IB curriculum and the Cambridge-based IGCSE programmes to children (aged between three and 18 years) of expatriate parents working and living in Singapore. Avg: 19.4x 17.9-1sd: 14.7x 12.9-2sd: 10.1x 7.9 Feb-13 Feb-14 Feb-15 Feb-16 PB Band (x) (x) 3.1 +2sd: 2.92x 2.6 +1sd: 2.58x Avg: 2.23x 2.1-1sd: 1.89x 1.6-2sd: 1.54x 1.1 Feb-13 Feb-14 Feb-15 Feb-16 Source: Company, DBS Bank Page 4
Key Assumptions FY Dec 2013A 2014A 2015A 2016F 2017F Tuition fee change 8.00 8.00 13.0 5.00 5.00 Personnel expenses 5.15 1.84 26.5 3.00 5.00 Student enrolment 3,833 3,610 3,000 3,000 3,100 Student enrolment growth 1.43 (5.8) (16.9) 0.0 3.33 Segmental Breakdown FY Dec 2013A 2014A 2015A 2016F 2017F Revenues (S$m) Tuition fees 98.7 97.8 93.8 96.5 105 Registration fees 1.81 1.78 1.42 1.42 1.47 School bookshop sales 1.17 1.00 0.88 0.92 0.97 Enrichment programme 0.92 0.77 0.56 0.59 0.62 Others 0.44 0.63 0.38 0.53 0.26 Total 103 102 97.1 100 108 Income Statement (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F Revenue 103 102 97.1 100 108 Other Opng (Exp)/Inc (75.8) (75.7) (75.6) (78.6) (82.4) Operating Profit 27.3 26.4 21.5 21.4 25.7 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 0.0 0.0 (4.2) (7.9) (7.9) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 27.3 26.4 17.4 13.5 17.8 Tax (4.7) (4.5) (2.4) (2.3) (3.0) Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 22.6 22.0 14.9 11.2 14.8 Net Profit before Except. 22.6 22.0 14.9 11.2 14.8 EBITDA 31.3 30.1 28.5 31.4 35.7 Growth Revenue Gth (%) 6.9 (0.9) (4.9) 3.0 8.0 EBITDA Gth (%) 8.7 (3.8) (5.4) 10.1 13.7 Opg Profit Gth (%) 11.7 (3.2) (18.6) (0.6) 20.1 Net Profit Gth (Pre-ex) (%) 9.5 (2.8) (32.1) (24.9) 31.9 Margins & Ratio Opg Profit Margin (%) 26.5 25.9 22.2 21.4 23.8 Net Profit Margin (%) 21.9 21.5 15.4 11.2 13.7 ROAE (%) 21.1 14.5 9.6 7.1 9.0 ROA (%) 14.6 8.1 4.2 3.1 4.0 ROCE (%) 20.9 9.6 6.0 5.7 6.7 Div Payout Ratio (%) 50.5 52.0 76.5 50.0 50.0 Net Interest Cover (x) NM NM 5.2 2.7 3.3 Source: Company, DBS Bank Hit by lower junior enrolment as a result of the shift to the new campus, and also withdrawal of students at all levels due to family relocation away from Singapore Assume superior cashflow generation can support 50% dividend Page 5
Quarterly / Interim Income Statement (S$m) FY Dec 4Q2014 1Q2015 2Q2015 2015 3Q2015 4Q2015 Revenue 25.4 24.6 25.1 23.5 23.9 Other Oper. (Exp)/Inc (18.6) (17.8) (19.0) (19.6) (19.2) Operating Profit 6.81 6.74 6.12 3.89 4.78 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc 0.0 0.0 0.0 (2.1) (2.1) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 6.81 6.74 6.12 1.81 2.70 Tax (1.2) (1.1) (0.9) 0.0 (0.4) Minority Interest 0.0 0.0 0.0 0.0 0.0 Net Profit 5.63 5.63 5.22 1.77 2.32 Net profit bef Except. 5.63 5.63 5.22 1.77 2.32 EBITDA 6.81 6.74 6.94 6.61 6.72 Growth Revenue Gth (%) 1.9 (3.2) 2.1 (6.2) 1.8 EBITDA Gth (%) 6.7 (0.9) 2.9 (4.8) 1.8 Opg Profit Gth (%) 6.7 (0.9) (9.3) (36.5) 23.0 Net Profit Gth (Pre-ex) (%) 5.3 0.0 (7.4) (66.1) 31.1 Margins Opg Profit Margins (%) 26.8 27.4 24.4 16.5 20.0 Net Profit Margins (%) 22.2 22.9 20.8 7.5 9.7 Balance Sheet (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F Net Fixed Assets 58.8 214 285 305 308 Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other LT Assets 5.36 4.66 4.26 2.45 0.64 Cash & ST Invts 125 126 60.4 51.7 62.4 Inventory 0.60 0.52 0.59 0.0 0.0 Debtors 1.09 1.19 1.33 1.16 1.25 Other Current Assets 3.52 5.69 2.03 2.03 2.03 Total Assets 194 352 353 362 374 ST Debt 0.0 1.62 1.62 1.62 1.62 Creditor 0.19 0.29 0.25 0.0 0.0 Other Current Liab 46.2 41.8 43.3 46.7 51.2 LT Debt 0.0 150 150 150 150 Other LT Liabilities 1.08 0.94 3.32 3.32 3.32 Shareholder s Equity 147 157 155 161 168 Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Cap. & Liab. 194 352 353 362 374 Drop in enrolment offset by increase in tuition fees Margins hit by increase in depreciation and interest charges Reduction in cash level due to acquisition of property, plant and equipment for the new school campus Issued bonds to part finance new campus Non-Cash Wkg. Capital (41.1) (34.7) (39.6) (43.5) (48.0) Net Cash/(Debt) 125 (26.1) (91.3) (99.9) (89.3) Debtors Turn (avg days) 4.0 4.1 4.7 4.5 4.1 Creditors Turn (avg days) (18.2) (23.9) (14.0) (4.5) N/A Inventory Turn (avg days) (53.1) (55.1) (28.9) (10.7) N/A Asset Turnover (x) 0.7 0.4 0.3 0.3 0.3 Current Ratio (x) 2.8 3.0 1.4 1.1 1.2 Quick Ratio (x) 2.7 2.9 1.4 1.1 1.2 Net Debt/Equity (X) CASH 0.2 0.6 0.6 0.5 Net Debt/Equity ex MI (X) CASH 0.2 0.6 0.6 0.5 Capex to Debt (%) N/A 100.7 43.8 13.2 2.0 Z-Score (X) 4.7 1.8 1.5 1.5 1.6 Source: Company, DBS Bank Page 6
Cash Flow Statement (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F Pre-Tax Profit 27.3 26.4 17.4 13.5 17.8 Dep. & Amort. 4.00 3.69 6.98 10.0 10.0 Tax Paid (4.1) (5.0) (4.6) (0.1) (2.3) Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. (0.2) (3.8) 2.68 1.75 3.68 Other Operating CF 0.14 0.0 0.0 0.0 0.0 Net Operating CF 27.2 21.3 22.4 25.2 29.2 Capital Exp.(net) (53.2) (153) (66.4) (20.0) (3.0) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF (0.4) (4.3) (8.2) (8.2) (8.2) Net Investing CF (53.6) (157) (74.6) (28.2) (11.2) Div Paid (11.4) (11.4) (17.1) (5.6) (7.4) Chg in Gross Debt 0.0 150 0.0 0.0 0.0 Capital Issues 72.0 0.0 0.0 0.0 0.0 Other Financing CF (4.0) (2.2) 0.0 0.0 0.0 Net Financing CF 56.6 136 (17.1) (5.6) (7.4) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash 30.3 0.76 (69.3) (8.6) 10.6 Opg CFPS (S cts) 6.59 6.05 4.75 5.64 6.14 Free CFPS (S cts) (6.2) (31.6) (10.6) 1.25 6.31 Source: Company, DBS Bank Expect capital expenditure to normalize in FY17 and FCF to turn positive Target Price & Ratings History 0.94 0.89 0.84 0.79 0.74 S$ 1 2 S.No. Date Closing Target Rating Price Price 1: 13 May 15 0.87 0.96 HOLD 2: 14 Aug 15 0.77 0.84 HOLD 3: 12 Nov 15 0.60 0.71 HOLD 0.69 0.64 0.59 0.54 3 0.49 0.44 Feb-15 Jun-15 Oct-15 Note : Share price and Target price are adjusted for corporate actions. Source: DBS Bank Page 7
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 (collectively, the DBS Vickers Group ) 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. 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 and it may not contain all material information concerning the company (or companies) referred to in this report. 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. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) (b) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-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 this report. As of 17 Feb 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 8
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 31 Jan 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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