Malaysia Company Guide

OldTown Berhad
Version 9 | Bloomberg: OTB MK | Reuters: OLDT.KL Refer to important disclosures at the end of this report

DBS Group Research . Equity 24 Feb 2017

BUY Riding on China’s craving for white coffee

Last Traded Price ( 23 Feb 2017): RM2.21 (KLCI : 1,704.48)
Price Target 12-mth: RM2.65 (20% upside) (Prev RM2.15) Craving for a nice cup of coffee. We maintain our positive
stance on OldTown Berhad (Oldtown) given that (1) the strong
Potential Catalyst: Stronger-than-expected FMCG sales
3QFY17 results has reaffirmed our investment thesis that the
Where we differ: Earnings forecasts higher than consensus due to
group is firmly on a growth trajectory, (2) its valuation remains
higher FMCG sales assumptions
attractive despite the recent run-up, (3) expansion to regional
markets offer the group’s multi-year growth potentials, and (4)
Analyst
King Yoong CHEAH +60 32604 3908 cheahky@alliancedbs.com
we maintain that there is now higher chance of paying out
dividends amounting to 9 sen/share for FY17, giving a decent
What’s New yield of about 4%.
 Regional expansion could offer the group multi-
year growth expansion 3Q strong earnings, multi-year sustained growth path ahead. To
recap, Oldtown has delivered a set of impressive quarterly
 Raise FY17-19 earnings by 13-16% figures. The group reported strong core earnings of RM24.4m
for 3QFY17 (+119% y-o-y, +92% q-o-q), mainly boosted by
 BUY with a higher TP of RM2.65 26% FMCG revenue y-oy growth. We understand that the
 Potentially a multi-year growth stock strong FMCG sales were mainly driven by > 1-fold revenue
growth to the China market. Given that China sales still
accounts for <15% of its total FMCG sales, we believe that its
regional expansion story, particularly to the China market, offers
Price Relative Oldtown multi-year growth potentials. We raise our FY17-19
earnings by 13-16%, mainly to account for higher FMCG sales
RM Relative Index
2.9
2.7
2.5
204
184
volume growth assumptions.
2.3
164
2.1
144
1.9
1.7
124
104
Higher probability of 9-sen dividend per share payout for FY17.
Given that the group has declared 6-sen DPS for 9MFY17 (vs 3-
1.5
1.3 84

sen DPS for 9MFY16), we believe that there is a high chance of

1.1 64
Feb-13 Feb-14 Feb-15 Feb-16 Feb-17

OldTown Berhad (LHS) Relative KLCI (RHS)

a cumulative 9 sen/share payout for FY17, which provides a
decent yield of about 4%.
Forecasts and Valuation
FY Mar (RM m) 2016A 2017F 2018F 2019F
Valuation:
Revenue 393 436 470 490
EBITDA 87.3 103 112 115 Post earnings revisions, we maintain our BUY recommendation
Pre-tax Profit 67.9 88.0 97.3 101 with a TP of RM2.65 as we roll over our valuation base to FY18
Net Profit 52.0 66.9 73.9 77.1 (end-March). Our TP is pegged to an unchanged PE of 16x.
Net Pft (Pre Ex.) 55.0 66.9 73.9 77.1
Net Pft Gth (Pre-ex) (%) 13.1 21.6 10.6 4.3 Stripping out net cash, our target price implies a forward PE
EPS (sen) 11.5 14.4 16.0 16.6 (ex-cash) valuation of 13x.
EPS Pre Ex. (sen) 12.2 14.4 16.0 16.6
EPS Gth Pre Ex (%) 12 19 11 4 Key Risks to Our View:
Diluted EPS (sen) 12.2 14.4 16.0 16.6
Net DPS (sen) 9.00 6.00 7.00 7.00
Weaker-than-expected consumer spending could be a drag on
BV Per Share (sen) 80.2 86.6 95.6 105 its F&B business.
PE (X) 19.2 15.3 13.8 13.3
PE Pre Ex. (X) 18.1 15.3 13.8 13.3 At A Glance
P/Cash Flow (X) 16.2 13.1 12.0 11.5 Issued Capital (m shrs) 451
EV/EBITDA (X) 9.6 8.0 7.0 6.3 Mkt. Cap (RMm/US$m) 998 / 224
Net Div Yield (%) 4.1 2.7 3.2 3.2
Major Shareholders (%)
P/Book Value (X) 2.8 2.6 2.3 2.1
Net Debt/Equity (X) CASH CASH CASH CASH Old Town International 42.6
ROAE (%) 15.0 17.5 17.5 16.6 Mawer Global Fund 10.0
Free Float (%) 46.1
Earnings Rev (%): 13 15 16
Consensus EPS (sen): 12.8 14.2 15.0 3m Avg. Daily Val (US$m) 0.22
Other Broker Recs: B: 5 S: 0 H: 1 ICB Industry : Consumer Goods / Beverages
Source of all data on this page: Company, AllianceDBS, Bloomberg
Finance L.P

ASIAN INSIGHTS VICKERS SECURITIES

ed: CK / sa:BC, PY
 Company Guide
OldTown Berhad

WHAT’S NEW

A strong dose of caffeine stimulant

Hot coffee: We maintain our positive stance on Oldtown post
its analyst briefing, given that (1) the strong 3QFY17 results
has reaffirmed our investment thesis that the group is firmly
on a growth trajectory, (2) its valuation remains attractive
despite the recent run-up, (3) expansion to regional markets
offers the group’s multiyear growth potentials, and (4) we
maintain that there is now higher chance of paying out
dividend amounting to 9 sen/share for FY17, giving a decent
yield of about 4%.
3QFY17 – record quarterly earnings. To recap, Oldtown has
delivered a set of impressive quarterly figures. The group
reported strong core earnings of RM24.4m for 3QFY17
(+119% y-o-y, +92% q-o-q), mainly boosted by 26% FMCG
revenue y-oy growth. We understand that the strong FMCG
sales were mainly driven by > 1-fold increased revenue on its
sales to the China market.
Regional expansions offer multi-year sustained growth
potentials. We understand that Greater China (Mainland
China, Hong Kong, Taiwan) now contribute 45% of its total
FMCG sales, followed by Malaysia (35%), South East Asia (ex-
Malaysia) (14%) and others (6%).
Given that China alone sales still accounts for <15% of its
total FMCG sales, we believe that its regional expansion story,
particularly to the China market, offers Oldtown a multi-year
growth trajectory. Although the group only venture directly
to the China market since 3QCY14, its instant coffee mix
products have been well received in China. At present, we
gather e- commerce sales constitutes about 80% of Oldtown
sales in the China market, where the group’s distribute its
products through three key online platforms: (1) Tmall, (2)
Taobao, and (3) JD.com. According to a study done by Tmall,
Oldtown’s online flagship store in Tmall was ranked number
3 as of June 2016 based on coffee mix powder sales.
Table 1 : Position in Tmall under coffee mix powder catagory
Raise FY17-18 earnings estimates. We raise our earnings by
13-16%, mainly to account for higher FMCG sales volume
growth assumptions – FY17: 15%, FY18: 13%, FY19: 13%
(previously FY17: 9%, FY18: 12%, FY19: 12%).
F&B operations, still challenging. Oldtown’s F&B operations
continue to face challenges. While 3QFY17 topline was flat at
RM49m, PBT dropped 8% y-o-y to RM6.0m, dragged by
higher staff cost and depreciation expenses. Nonetheless,
9MFY17 results illustrate that investors should not be overly
concerned about the challenging environment of its F&B
business, given that FMCG contributions to the group’s
earnings have risen significantly. For 9MFY17, FMCG
contributed 76% of the group’s pretax profit.
Higher chance of 9-sen DPS for FY17. As we understand that
probability of M&A may not crystallise this financial year as
the group has not identified an attractive M&A target. Given
that the group has declared a DPS of 6 sen for 9MFY17 ( vs a
DPS of 3 sen for 9MFY16), we believe that there is a high
chance of a cumulative 9 sen/share payout for FY17, which
provides a decent yield of about 4%.
Maintain BUY, a potential multi-year growth story. Post
earnings revisions, we maintain our BUY recommendation
with a TP of RM2.65 as we roll over our valuation base to
FY18 (end-March), pegged to an unchanged PE of 16x.
Stripping out net cash, our target price implies a forward PE
(ex-cash) valuation of 13x.

Source: Company

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
OldTown Berhad

Avg revenue/ self&partly owned outlet (RM k/yr)

CRITICAL DATA POINTS TO WATCH
1198
1210.0 1141
1073 1087
1035
Earnings Drivers: 1037.1

FMCG sales to be its key earnings driver. FMCG revenue grew 864.3

by 10.5% y-o-y in FY16. Management is targeting double-digit 691.4

growth in FY17 while we have assumed FMCG sales volume to 518.6

grow by 15% in FY17 with the China market being the key 345.7

growth driver. We estimate that sales to China only represents 172.9

<15% of its FMCG sales in 9MFY17, As such, we are positive 0.0

that there is plenty of room for the group to boost export sales 2015A 2016A 2017F 2018F 2019F

with the completion of the restructuring of its China Number of total outlets
distributorship in late 2015.
264.2 254 259
245 244 249

Room to utilise its production capacity. The manufacturing plant 211.3

in Tasek Industrial Estate, Ipoh, has an annual designed

158.5
production capacity of 24k kg for instant coffee mix and instant
tea mix, with only <50% utilised so far. This provides room to 105.7

accommodate rising demand without further capacity

52.8
expansion.
0.0
2015A 2016A 2017F 2018F 2019F
F&B – challenging operating environment. On the other hand,
we believe that the growth prospects of its F&B business remain FMCG sales volume (k kg)
challenging. The group operated 238 café outlets in Dec 2016, 15105
15407.28
with 204 (86%) based in Malaysia. 13487
12325.82 12042
10471
F&B – potential M&A? As at 31 Dec 2016, the group had net 10100
9244.37
cash of RM154m, and management may undertake M&As in
the F&B space to enhance future growth. Although we 6162.91

understand that there is no attractive M&A target in sight at

3081.46
present, we will not be surprised if the group announces an
acquisition before the end of this financial year. Given that 0.00

Oldtown is likely to finance its acquisition with internal funds 2015A 2016A 2017F 2018F 2019F

and the current challenging operating environment favours FMCG ASP (RM)
industry consolidation, we are positive that any potential M&A 20.0
19.8 19.8 19.8 19.8
18.7
exercise will be earnings accretive for the group.
16.0

12.0

8.0

4.0

0.0
2015A 2016A 2017F 2018F 2019F

Source: Company, AllianceDBS

ASIAN INSIGHTS VICKERS SECURITIES

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Company Guide
OldTown Berhad

Leverage & Asset Turnover (x)

Balance Sheet: 1.0
0.14
Strong balance sheet – net cash position. As at 31 Dec 2016, 1.0
0.12 1.0
Oldtown had a net cash position of RM154m, which allows the 0.9
0.10
group to (1) sustain its dividend policy at a minimum 50% 0.9

payout, (2) continue its share buyback scheme, and (3) 0.08
0.9

undertake attractive M&A activities to expand its operations. 0.06 0.9

0.9
0.04
0.8
0.02
Share Price Drivers: 0.8

Profitability and prospects – key share price drivers. We are 0.00

2015A 2016A 2017F 2018F 2019F
0.8

positive that there is plenty of room for the group to boost its Gross Debt to Equity (LHS) Asset Turnover (RHS)

export sales with the completion of the restructuring of its

Capital Expenditure
China distributorship in late 2015. On the other hand, we RMm
believe its F&B operations are still facing challenges, although 12.0

F&B earnings contribution to the group has declined over the 11.5

years (20%-30% of group earnings). 11.0

10.5

Key Risks: 10.0

Increasing competition in F&B segment. Oldtown’s cafe chain 9.5
has been challenged by small specialty cafe chains in the local
9.0
market since 2013. If the group fails to transform and adapt to 2015A 2016A 2017F 2018F 2019F

rapidly changing consumer demand, the decline in F&B Capital Expenditure (-)

contributions will drag its overall earnings. ROE (%)

Failure to pass on higher costs to consumers. Given that raw 16.0%

14.0%
material costs make up over 30% of Oldtown’s total operating
12.0%
cost, an unexpected swing in food commodity prices, e.g. due
10.0%
to changes in climate and government regulations, could result 8.0%
in a spike in the prices of key raw materials such as sugar, 6.0%
coffee beans, and flour. 4.0%

2.0%

Company Background 0.0%

2015A 2016A 2017F 2018F 2019F
Oldtown is a regional cafe chain operator (F&B) and an
established beverage manufacturer (FMCG) based in Malaysia. Forward PE Band (x)
In FY16, the group derived 45% of its revenue from F&B and 26.8
(x)
55% from FMCG.
21.8 +2sd: 22.3x

+1sd: 18.7x
16.8
Avg: 15x

11.8
-1sd: 11.3x

-2sd: 7.7x
6.8
Feb-13 Feb-14 Feb-15 Feb-16

PB Band (x)
(x)
3.4

+2sd: 3.02x
2.9

+1sd: 2.68x
2.4
Avg: 2.34x

-1sd: 1.99x
1.9

-2sd: 1.65x
1.4
Apr-13 Apr-14 Apr-15 Apr-16

Source: Company, AllianceDBS

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
OldTown Berhad

Key Assumptions
FY Mar 2015A 2016A 2017F 2018F 2019F

Avg revenue/ self&partly 1,073 1,035 1,087 1,141 1,198

owned outlet (RM k/yr)
Number of total outlets 245 244 249 254 259
FMCG sales volume (k kg) 10,100 10,471 12,042 13,487 15,105
FMCG ASP (RM) 18.7 19.8 19.8 19.8 19.8

Income Statement (RMm)

FY Mar 2015A 2016A 2017F 2018F 2019F
Revenue 398 393 436 470 490
Cost of Goods Sold (256) (247) (274) (297) (313)
Gross Profit 141 146 162 173 177
Other Opng (Exp)/Inc (76.2) (75.6) (74.1) (76.2) (76.2)
Operating Profit 65.2 70.6 87.7 96.7 101
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (0.2) 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc 0.31 0.28 0.28 0.57 0.88
Exceptional Gain/(Loss) (1.1) (3.0) 0.0 0.0 0.0
Pre-tax Profit 64.2 67.9 88.0 97.3 101
Tax (15.1) (15.9) (21.1) (23.3) (24.4)
Minority Interest (1.6) 0.0 0.0 0.0 0.0
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 47.5 52.0 66.9 73.9 77.1
Net Profit before Except. 48.6 55.0 66.9 73.9 77.1
EBITDA 83.9 87.3 103 112 115
Growth
Revenue Gth (%) 4.1 (1.1) 10.9 7.8 4.2
EBITDA Gth (%) (2.4) 4.1 18.4 8.3 3.1
Opg Profit Gth (%) (1.9) 8.3 24.2 10.3 4.0
Net Profit Gth (Pre-ex) (%) (0.2) 13.1 21.6 10.6 4.3
Margins & Ratio
Gross Margins (%) 35.5 37.2 37.1 36.8 36.1
Opg Profit Margin (%) 16.4 17.9 20.1 20.6 20.5
Net Profit Margin (%) 11.9 13.2 15.3 15.7 15.7
ROAE (%) 14.3 15.0 17.5 17.5 16.6
ROA (%) 11.0 11.7 14.1 14.2 13.6
ROCE (%) 13.4 14.2 16.2 16.3 15.5
Div Payout Ratio (%) 56.5 78.2 41.6 43.9 42.1
Net Interest Cover (x) NM NM NM NM NM
Source: Company, AllianceDBS

ASIAN INSIGHTS VICKERS SECURITIES

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Company Guide
OldTown Berhad

Quarterly / Interim Income Statement (RMm)

FY Mar 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017

Revenue 102 105 103 99.6 116

Cost of Goods Sold (60.4) (65.9) (65.3) (65.3) (70.1)
Gross Profit 41.8 38.6 37.6 34.2 45.7
Other Oper. (Exp)/Inc (24.6) (15.0) (17.8) (18.0) (14.3)
Operating Profit 17.2 23.6 19.8 16.2 31.4
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc 0.10 0.02 0.0 0.0 0.0
Net Interest (Exp)/Inc 0.10 0.0 0.04 0.05 0.15
Exceptional Gain/(Loss) 0.0 (3.0) 0.0 0.0 0.0
Pre-tax Profit 17.4 20.6 19.8 16.3 31.6
Tax (6.2) (2.2) (6.1) (3.8) (7.5)
Minority Interest (0.1) (0.1) 0.18 0.20 0.24
Net Profit 11.1 18.3 13.9 12.7 24.4
Net profit bef Except. 11.1 21.3 13.9 12.7 24.4
EBITDA 21.5 28.3 24.1 20.6 35.7

Growth
Revenue Gth (%) 10.3 2.3 (1.5) (3.2) 16.3
EBITDA Gth (%) 4.2 31.7 (15.0) (14.4) 73.4
Opg Profit Gth (%) 4.2 37.1 (16.1) (18.1) 93.8
Net Profit Gth (Pre-ex) (%) (15.0) 92.2 (34.8) (8.9) 92.3
Margins
Gross Margins (%) 40.9 36.9 36.5 34.4 39.4
Opg Profit Margins (%) 16.8 22.6 19.2 16.3 27.1
Net Profit Margins (%) 10.9 17.5 13.5 12.7 21.0

Balance Sheet (RMm)

FY Mar 2015A 2016A 2017F 2018F 2019F

Net Fixed Assets 125 126 122 120 117

Invts in Associates & JVs 1.50 1.40 1.40 1.40 1.40
Other LT Assets 52.5 47.2 45.6 43.1 40.7
Cash & ST Invts 162 180 221 265 310
Inventory 30.1 25.5 28.3 30.7 32.3
Debtors 61.0 63.0 69.9 75.3 78.5
Other Current Assets 4.70 7.50 7.50 7.50 7.50
Total Assets 436 450 496 543 588

ST Debt 9.80 9.80 9.80 9.80 6.00

Creditor 63.4 56.3 62.5 67.7 71.4
Other Current Liab 2.60 2.20 2.20 2.20 2.20
LT Debt 15.7 12.1 12.1 12.1 12.1
Other LT Liabilities 8.00 7.10 8.12 8.70 8.70
Shareholder’s Equity 333 362 401 443 488
Minority Interests 3.80 0.0 0.0 0.0 0.0
Total Cap. & Liab. 436 450 496 543 588

Non-Cash Wkg. Capital 29.8 37.5 41.0 43.6 44.8

Net Cash/(Debt) 137 158 199 244 292
Debtors Turn (avg days) 49.1 57.5 55.6 56.3 57.3
Creditors Turn (avg days) 87.1 94.8 83.8 84.2 85.0
Inventory Turn (avg days) 40.4 44.0 38.0 38.2 38.5
Asset Turnover (x) 0.9 0.9 0.9 0.9 0.9
Current Ratio (x) 3.4 4.0 4.4 4.8 5.4
Quick Ratio (x) 2.9 3.6 3.9 4.3 4.9
Net Debt/Equity (X) CASH CASH CASH CASH CASH
Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH
Capex to Debt (%) 44.7 48.4 45.7 45.7 55.2
Z-Score (X) 6.9 7.8 7.7 7.5 7.6
Source: Company, AllianceDBS

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
OldTown Berhad

Cash Flow Statement (RMm)

FY Mar 2015A 2016A 2017F 2018F 2019F

Pre-Tax Profit 64.2 67.9 88.0 97.3 101

Dep. & Amort. 18.9 16.7 15.7 15.2 14.8
Tax Paid (11.5) (15.7) (21.1) (23.3) (24.4)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (12.6) (14.5) (3.5) (2.6) (1.2)
Other Operating CF 1.64 7.32 (1.2) (1.5) (1.8)
Net Operating CF 60.6 61.7 77.9 85.1 88.9
Capital Exp.(net) (11.4) (10.6) (10.0) (10.0) (10.0)
Other Invts.(net) (67.9) (15.0) 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 62.9 32.1 1.19 2.00 2.00
Net Investing CF (16.4) 6.50 (8.8) (8.0) (8.0)
Div Paid (27.0) (26.8) (27.8) (32.4) (32.4)
Chg in Gross Debt (5.4) (4.5) 0.0 0.0 (3.8)
Capital Issues (19.7) (0.4) 0.0 0.0 0.0
Other Financing CF (4.8) (0.3) 0.0 0.0 0.0
Net Financing CF (56.9) (32.0) (27.8) (32.4) (36.2)
Currency Adjustments (5.3) (1.8) 0.0 0.0 0.0
Chg in Cash (18.0) 34.4 41.3 44.7 44.7
Opg CFPS (sen) 16.3 16.9 17.6 18.9 19.5
Free CFPS (sen) 11.0 11.3 14.7 16.2 17.0
Source: Company, AllianceDBS

Target Price & Ratings History

2.32
RM
12- mt h
Dat e of Closing
S.No. T arget Rat ing
15 Report Pric e
2.12 Pric e
1: 26 F eb 16 1.50 1.60 BUY
2: 29 F eb 16 1.48 1.70 BUY
1.92 10 11 12 14 3: 03 Mar 16 1.56 1.70 BUY
13 4: 24 Mar 16 1.48 1.70 BUY
9 5: 23 May 16 1.40 1.70 BUY
8
1.72 6: 25 May 16 1.42 1.70 BUY
7: 27 May 16 1.66 1.70 BUY
7 8: 30 May 16 1.69 2.10 BUY
1.52 2 4
9: 26 Aug 16 1.87 2.10 BUY
3 6
1 10: 29 Aug 16 1.85 2.15 BUY
11: 04 Oct 16 2.00 2.15 BUY
1.32 5 12: 25 Nov 16 1.87 2.15 BUY
Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 13: 28 Nov 16 1.91 2.15 BUY
14: 13 Dec 16 1.87 2.15 BUY
Not e : Share price and Target price are adjusted for corporate actions. 15: 23 Feb 17 2.21 2.15 BUY

Source: AllianceDBS
Analyst: King Yoong CHEAH

ASIAN INSIGHTS VICKERS SECURITIES

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 Company Guide
OldTown Berhad

AllianceDBS 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: 24 Feb 2017 08:09:56 (MYT)

Dissemination Date: 24 Feb 2017 08:10:38 (MYT)

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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.

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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 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. As of 24 Feb 2017, 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). 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.

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 2017.

Compensation for investment banking services:

2. 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:

3. 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.

RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be
contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”),
both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act
2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary
Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended
only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by or on behalf of, and is attributable to DBS Vickers (Hong Kong) Limited
which is licensed and regulated by the Hong Kong Securities and Futures Commission and/or by DBS Bank (Hong Kong)
Limited which is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where this
publication relates to a research report, unless otherwise stated in the research report(s), DBS Bank (Hong Kong) Limited is not
the issuer of the research report(s). This publication including any research report(s) is/are distributed on the express
understanding that, whilst the information contained within is believed to be reliable, the information has not been
independently verified by DBS Bank (Hong Kong) Limited. This report is intended for distribution in Hong Kong only to
professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any
rules promulgated thereunder.)

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at equityresearch@dbs.com.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from
ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this
report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that
ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and
associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of
them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to
perform broking, investment banking/corporate advisory and other services for the subject companies. 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 This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.

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Company Guide
OldTown Berhad

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.

Thailand 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.

United Kingdom This report is produced by AllianceDBS Research Sdn Bhd which is regulated by the Securities Commission Malaysia.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and
regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, 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 DBSVUK. This communication is directed at
persons having professional experience in matters relating to investments. Any investment activity following from this
communication will only be engaged in with such persons. Persons who do not have professional experience in matters
relating to investments should not rely on this communication.

Dubai 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, 3rd 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.

United States This report was prepared by AllianceDBS Research Sdn Bhd. 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.

Other jurisdictions 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.

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

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