PSPC ACTIVIST

SHAREHOLDERS GROUP
PRESENTATION OF DEMANDS TO THE
MANAGEMENT

What is Shareholder Activism?

Shareholder activism is a way in which shareholders can influence a
company's behavior, by exercising their rights as owners. Although
shareholders don't run the company, there are ways for them to
influence the board of directors and management. These can range
from dialogue with management to voice their concerns about a
particular issue, to formal proposals that are voted on by all
shareholders at a company's annual meetings.
And the ultimate responsibility to protect the best interest in the
shareholders lies with investors themselves.

Management Responsibility
Our group commended PSPC Management for its strong operational
execution over the past years for the Company.
However, we should point out that the Management is also directly
responsible for protecting and managing shareholders' interests in the
company. They are obligated to generate, enhance and maximize
shareholder values and this require that our invested money are put
into use in forms most suitable to our best interest. More so, they
should make sure the stock is not being undervalued in the market
they should prevent the market to unduly establish low prices for the
stock.

How the Stock Is Performing in the Market?

On December 2014, the Company listed 15% of its shares to the public for a
price of 3.15/sh. Since then, the price slumped to average at around 2.50/sh
in 2015 and at around 1.50/sh this year. The stock is currently traded at
1.35/sh or 57% lower than the initial public offering price.

How its Peers Performed in the Market?

The Companys stock is trading currently at a dismal 3.8x earnings multiple.
While peers in the market are trading at the average PE ratio of 14.1x. Can
we blame the bear market? But PSPC stock is trading way below the average
performance of its peers and of the market in general, something might be
missing or wrong on PSPC. Is it the Company or the Management or the
Controlling Interest?
As of February 12, 2016

Revenue (in $ million)

2014
3Q 2015

Earnings (in $ million)

2014
3Q 2015

Estimated
Market Value
Price In $ million In PhP billion Earnings Ratio

PSPC

235

170

17.5

12.1

73.4

3.5

3.8

TECH
ION
IMI

52
66
861

48
50
624

4.9
1.0
29.1

5.8
2.5
22.0

170.8
40.6
211.1

8.1
1.9
10.0

22.4
12.3
7.6

Estimated PERs are from Bloomberg.com while IMI's PER is computed based on its reported 2015 EPS.

Public Perception on the Stock, the

Management, and the Controlling Interest
Below are some of the views and perception weve got from various
online groups:
This stock reminds me of that Korean movie, The Scam.
PSPC is not the only stock in PSE, its just a waste of time.
Due diligence should have been done before "investing" in this
company.
The longer term vision to try be something in the future is gone, the
parent is just on survival mode and short term oriented in its
motivations.
Don't waste your money. Scam yan.

IPO Promises Are Yet to be Fulfilled

Strengthen further the business relationships with Samsung before
the end of the Agreement through a persistent quest for the most
cost competitive manufacturing process and finest quality control
system in the OSAT business; and
Establish new business partnerships with identified customers from
the top tier market.

Why We Are Doing this Activism?

We understand that the 85% controlling interest will not trade its
Companys shares in the market. Hence, the concern and urgency on
the stock performance might be lacking.
It is just unfortunate that the 85% Korean interest, who controls the
Management and the Company, lacks or has little interest on the stock
performance. And the 15% public shareholders interest, which are
mostly held by Filipinos and have no control on the Management, were
the one adversely impacted by the markets undervaluation of the
stock.

So, What Are Our Activist Demands?

1. Establishment of a Stock Option/Compensation Program based on stock
performance, to align Management with the one of the best interest of the
public shareholders;
2. Approval of a 1-year Buy Back Program for a maximum 4% of the
outstanding shares with a budget of around $6 million;
3. Increase of dividend payout to 30% for this year;
4. Start studying legal options for the collection of the $23 million unfunded
power subsidy;
5. Requiring Samsung to buy-in when contract with them is renewed; and
6. Requiring the Prospective Partner in Phase II expansion to also buy-in
stakes in the company;

Proposal #1 Stock Option/Compensation

Program
Currently, it seems Management has no incentives, in whatsoever
forms, to encourage them to be mindful of the stock price.
Hence, a stock option program and/or share-based compensation to
Management and key executives based on stock performance in the
market will align themselves to one of the best interests of the public
shareholders, as reward grows in with the price of the stock. The
program will not only keep them motivated on ensuring efficient
operation but as well efficient use of shareholders capital.
Key performance metrics for the said stock options/compensation may
include certain average price level or price-earnings level to be
achieved for a certain period of time.

Proposal #2 Stock Buy Back Program

The stock is currently traded at less than 4.0x PE ratio. And based on
EBITDA, it is trading at unjustifiable very low 1.4x price-EBITDA ratio. The
current market value minus surplus working capital is just around 75% of its
EBITDA for 2015. This is the great time to reinvest our surplus cash and
liquidity to our own shares.
Not having a buyback program is totally unjustifiable. It will provide wrong
signal to the public that Management agrees with the current market price.
And it will appear that they have fooled the public when they offered it to
them at 3.15/sh, just a little more than a year ago.
Having a 1-year buyback program for a maximum of 4% of the outstanding
shares at below IPO price with a budget of around $6m (or around 35% of
the earnings last year) might be aggressive, but to be aggressive in the
market should be the case right and what the public shareholders need now.

Financial Numbers & Soundness of Share

Buy Back Program
Cash
Receivable from Clark
Development Corp.
EBITDA
Net cash from operating activities
before changes in working capital
Payments of Bank Loan

For Nine Months

Ended September
30, 2015
Adjusted Earnings Per
Share (PhP)
Annualized Returns at
Current Price

0.27
22%

In US $ Thousands
As of and for Nine
As of and for Year
Months Ended Ended December 31,
September 30, 2015
2014
35,396
36,794

For Year Ended

December 31,
2014
0.38
24%

23,170
32,546

20,205
42,927

28,264
17,375

37,408
20,750
Public Shareholdings (In US$ Thousands)
At IPO price
At current price

21,419
10,948

4% of Outstanding Shares (or 27% of all Public Shareholdings)

(In US$ Thousands)
At IPO price
At current price

5,731
2,929

Proposal #3 Increasing Dividend Payout for

this Year by Additional 10%
The Management is urged to increase the dividend payout from 20% to
at least 30% in order to reward the loyal public shareholders who
stayed with PSPC since IPO days. A higher dividend will give the public
shareholders opportunity to buy more shares of the stock.
The 10% increase is equivalent only to around $1.5 million. The 30%
payout this year will likely equate to 7-8% dividend yield.

Proposal #4 Studying Legal Options on the

Collection of the Unfunded Power Subsidy
We are recommending the start of studying the legal options for the
collection and settlement of the $23 million receivable from Clark
Development Corp. Management can consider that the idea of legal
action against the government entity is being initiated by the public
shareholders of the company.

Proposal #5 Samsung Buy-in when Contract

is Renewed
When Samsung and the Company renew their contract, it would be
ideal to require Samsung to acquire a maximum 4% equity interest to
the company. It would be beneficial for both companies if Samsung
has an equity stakes in the company.
Although the 4% equity interest will have a dilutive impact to earnings,
valuation will be enhance because revenue stream is being
strengthened. In addition, the proceeds can be used to pay off debt,
use for capital expansion or distributed as dividends.
Samsung will benefit on this arrangement since it will strengthen its
supply chain by having equity stakes on its supplier.

Proposal #6 Prospective Partners Buy-in

when Partnership for the Expansion Closed
Similarly with Samsung buy-in, it would also be good to require our
Prospective Partner in Phase II expansion to acquire a maximum 4%
equity interest to the company.
The Company revenue stream will be strengthened with the buy-in and
hence its valuation multiple too. On the other hand, for the new
Partner/Customer, their supply chain will also be strengthened by
having an equity interest over its supplier.

Key Decision Dates to Watch

March Board of Directors Meeting which is probably around the first
week of March.
Annual Stockholders Meeting which is scheduled on April 1.

Concluding Thoughts Value Creation

Our demands will be beneficial to the Company for several reasons:
1. Increase shareholder value;
2. Improve management focus and alignment to public shareholders
interest;
3. Increase transparency between Management and public
shareholders.

Concluding Thoughts Management

Actions
We will be expecting favorable actions from the Management on our
demands. Our demands are also beneficial to the controlling interest
and we dont expect this to become a struggle of Filipino minority
public shareholders interest against the controlling Korean interest.