January 27, 2014

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SEE PAGE 27 FOR IMPORTANTDISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 099/03/2012

Breadtalk Group (BREAD SP)

Why this bread wont talk Initiate BUY on this under-researched company with a TP of

SGD1.40, implying 50% upside. BreadTalk is by far the most successful Singapore F&B company, boasting a solid regional presence for its homemade brands via more than 800 outlets across 15 countries. Its target for 2014 is to raise store count to 1,000.

Operational statistics are healthy with EBITDA growing rapidly. This should allay fears on BreadTalks lacklustre profit growth, hitherto blamed on poor management or a flawed business model though our analysis shows it is a matter of accounting. Going forward, higher-margin businesses should also help lift earnings.

Thailand-based Minor Internationals 11% stake may be a prelude to a takeover offer in the next 12-24 months. If so, this would be a bonus for investors.

China presence an attractive trait Minor International (MINT TB, BUY, TP 24.30THB) has accumulated an 11% stake in BreadTalk Group since Aug 2013. The Thai hospitality and F&B group is noted for its history of acquisitions but reputation aside, we think its portfolio complements that of BreadTalks. We believe BreadTalks presence in China more than 300 outlets in 48 cities is definitely a key attraction.

Value emerging, act before its too late We see value emerging. Our TP of SGD1.40 is based on 7X FY14E EV/EBITDA, which is only half of regional peers average. We expect BreadTalks net profit to grow at 26% CAGR over the next three years as expansion efforts start to bear fruit. Using a SOTP approach to cross-check the replacement value of the firm, we coincidentally arrive at a conservative net value of SGD1.40 per share (SGD403m). Initiate with BUY.

Key Data

Share Price Performance

Maybank vs Market

Share Price: SGD0.94 MCap (USD): 206M Singapore

Target Price: SGD1.40(+50%) ADTV (USD): 0.1M Consumer Staples (New)BUY52w high/low (SGD)

Free float (%)

Issued shares (m)

Market capitalization

Major shareholders:

-QUEK MENG TONG 34%

-LEE LIH LENG 19%

-Minor International PCL 11%

1.17/0.74

282

35.4

SGD263.6M

2,700

2,900

3,100

3,300

3,500

3,700

3,900

4,100

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

Oct-11 Apr-12 Oct-12 Apr-13 Oct-13

Breadtalk Group (L) Straits Times Index (R)

1 Mth 3 Mth 12 Mth

Absolute(%) 2.2 2.2 27.2

Relative to country (%) 3.9 6.9 34.3

Positive Neutral Negative

Market Recs na na na

Maybank Consensus % +/-

Target Price (SGD) 1.40 na na

2013 PATMI(SGDm) 12 na na

2014 PATMI(SGDm) 16 na na

Source: FactSet; Maybank

James Koh(65) 6432 1431 jameskoh@maybank-ke.com.sg

Juliana Cai(65) 6432 1417julianacai@maybank-ke.com.sg

FYE Dec (SGD m) FY12A FY13A FY14E FY15E FY16E Revenue 447.3 532.7 629.8 731.4 860.6 EBITDA 49.6 60.6 70.4 79.6 91.0 Core net profit 12.0 12.5 15.6 19.1 25.1 Core FD EPS (cts) 4.3 4.4 5.5 6.8 8.9 Core FD EPS growth(%) 3.6 3.8 25.3 22.5 31.1 Net DPS (cts) 1.3 1.4 1.7 2.0 2.6 Core FD P/E (x) 22.0 21.2 16.9 13.8 10.5 P/BV (x) 3.2 2.9 2.6 2.3 2.0 Net dividend yield (%) 1.4 1.5 1.8 2.2 2.8 ROAE (%) 13.6 13.0 14.5 15.7 18.0 ROAA (%) 3.9 3.2 3.5 4.2 5.3 EV/EBITDA (x) 4.7 5.5 4.7 3.9 3.0 Net debt/equity (%) 39.0 76.3 53.9 26.7 net cash

January 27, 2014 2

Breadtalk Group

Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-140.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

Minor Intl took initial

5.9%

Up stake to

6.3%

Up stake to 8.9%

Up stake to 10.0% Up stake

to 11.0%

Breadtalk Group Limited0.91 0.00 0.00% 11:05:15 AM VWAP:0.90 High: 1.20 Low: 0. 67 Chg: 31.62%

Investment summary

Bread and creativity BreadTalk Group is a Singapore-based food and beverage (F&B) company founded by current chairman George Quek in 2000. From first popularising the artisan bread retail concept, the company has seen its footprint in the region growing rapidly. Mr Queks initial target of opening 10 BreadTalk outlets in three years is a far cry from the 800 retail stores in 15 countries the company now has under its umbrella. Throughout this time, we believe it has stayed true to its commitment to brand building and creativity.

Enviable regional footprint

BreadTalk has a presence across 15 countries in the Asia Pacific and the Middle East through a variety of formats and brands. Most notably in China, where the retail environment is notoriously difficult, it has more than 300 outlets in 48 cities. We believe it has also been able to make inroads into ASEAN over the last 12 months, making its regional footprint truly enviable.

More impressively, much of the footprint is secured through BreadTalks own internally created brands, which are typically unique concepts. This gives the company better control over its own branding.

Corporate action from MINT may be a bonus

Minor International (MINT), a Thailand-based F&B company, has chalked up an 11% stake in BreadTalk since Aug 2013. Given its history of acquisitions, this may be a prelude to a bigger corporate action in the next 12-24 months.

It could come in the form of an outright M&A and/or a privatisation of BreadTalk. If so, this would be positive for BreadTalks share price. But even without any action by MINT, we believe the two companies can form a working alliance that is mutually beneficial and profitable as they have complementary business portfolios.

Value is emerging on its own, act before its too late

Granted, BreadTalks bottom-line growth over the years has underwhelmed compared to the speed of its operational development. But we believe this is largely a matter of accounting for expansion and does not truly reflect its cash generation ability. We expect EBITDA to grow at 15% CAGR to SGD91m from FY13E-FY16E. In our view, the current EV/EBITDA of 4.5x severely undervalues the company.

We estimate the replacement value of its current network of stores alone to be worth SGD245m. This excludes other assets like brands, its new Singapore headquarters and various real estate stakes.

3 Charts that Matter MINTs shareholding structure Growth in number of stores

EBITDA has risen significantly

278 342 448

534 686

824

1,006

0

400

800

1,200

2008 2009 2010 2011 2012 2013E 2014E

27.0 33.0

38.2 41.4 49.6

60.6 70.4

01020304050607080

2008 2009 2010 2011 2012 2013E 2014E

Replacement cost of stores (SGD m) 244.7

Singapore HQ (SGD m) 67.0

Real estate investments (SGD m) 84.1

Brand value (SGD m) 77.0

Net debt (SGD m) (70.0)

Total (SGD m) 402.8

Per share value (SGD) 1.40 Source: Company, Maybank KE

BreadTalk SOTP replacement cost

January 27, 2014 3

Breadtalk Group

Enviable regional footprint Taking Singapore brands abroad BreadTalk is a Singapore-based F&B company founded by its current chairman, Mr George Quek, in 2000 and listed on the Singapore Exchange (SGX) in 2003. After popularising the artisan bread retail concept under the namesake brand, the company went on to create several other brands in-house, including Food Republic, Toast Box and RamenPlay. More impressively, it has successfully grown these brands overseas, from China to the Middle-East.

Figure 1: BreadTalk bakery Figure 2: Toast Box

Source: Company Source: Company

Figure 3: RamenPlay Figure 4: Food Republic

Source: Company Source: Company

Across different geographies Following its listing in 2003, BreadTalk opened its first overseas outlets in Jakarta, Indonesia, and Shanghai, China. In the same year, the China market was deemed important enough for a separate headquarters. Today, the company has outlets across 15 countries and a staff of more than 7,000. We believe this regional footprint stretching from Asia to the Middle East is invaluable as it enables the company to simultaneously tap into different growth markets.

Figure 5: Revenue breakdown by geography, FY12

Source: Company, Maybank KE

Singapore 51%

Hong Kong 9%

Mainland China 32%

Rest of the World

8%

January 27, 2014 4

Breadtalk Group

Figure 6: BreadTalks regional footprint from Asia to the Middle East

Source: Company

New concepts, constant innovations In our view, BreadTalk has stayed true to its commitment to creativity through the years. For one, its brand image has not stopped evolving, with the BreadTalk bakery concept having undergone three distinct generations since 2000 and is now heading into Generation Four, which combines a rustic retail concept with healthy recipes. The company has even launched a Get Talking multimedia campaign to promote this change.

In addition, there was no let-up in the creation/promotion of new brands across different food genres from Japanese food to fast food. Reception has generally been good, as is evident from the significant growth in revenue. As further testament, the company has won many international and local branding awards. Most recently, World Brand Laboratory, an international branding consultancy, ranked BreadTalk among the 3,000 leading brands in the world.

Figure 7: Generation One - boutique bakery, 2000-2004 Figure 8: Generation Two eye on elegance, 2004-2008

Source: Company Source: Company

Figure 9: Generation Three - jewellery casing, 2008-2011 Figure 10: Generation Four rustic feel, 2012

Source: Company Source: Company

January 27, 2014 5

Breadtalk Group

Brand footprint to get bigger Since 2000, BreadTalk has expanded at breakneck pace. Chairman Queks initial target of opening 10 Breadtalk outlets in three years is a far cry from the more than 800 retail stores in 15 countries the company now has under its umbrella. With established brands facilitating franchising, we believe its brand footprint will just get bigger and bigger.

helped by new headquarters

In mid-2013, BreadTalk completed the building of its new international headquarters in Singapore. The iconic 10-storey building, sitting on 7,000 sq m of land at Paya Lebar, houses offices, warehousing facilities, training academies, production lines, central kitchens and flagship stores. We believe the headquarters will serve as an important platform for international expansion as it will allow BreadTalk to achieve economies of scale. For example, the company recently succeeded in piloting the use of frozen dough without compromising on quality.

Figure 11: New headquarters in PayaLebar

Source: Company

Figure 12: BreadTalks business at a glance

Owned bakery Franchise Restaurant Food court Brands BreadTalk BreadTalk Din Tai Fung Food Republic Icing Room Carl's Junior (China) Da Shi Dai Toast Box Station Kitchen Da Zhi Thye Moh Chan Ramen Play Bread Society Main brands BreadTalk BreadTalk Din Tai Fung Da Shi Dai Toast Box Countries China Indonesia India Singapore China Singapore Philippines Oman China Singapore Thailand China Jordan Thailand Hong Kong Hong Kong Kuwait Vietnam Taiwan Malaysia Bahrain Malaysia Thailand Main countries China China Singapore China Singapore Indonesia Main region of store growth in past 5 years China China Singapore Singapore

Singapore Indonesia Hong Kong Source: Company, Maybank KE

The use of frozen dough may reduce cost.

January 27, 2014 6

Breadtalk Group

Profitability under scrutiny Expansion with no profit growth myth or reality? In the past five years, BreadTalk has expanded its scope of operations visibly, in terms of geographical markets, new brands and number of outlets. This has led to a twofold jump in revenue in the corresponding period. There has also been more substantial investor interest.

Yet there is heard a very common criticism the companys bottom line has failed to catch up. This has caused many to conclude that BreadTalk is either poorly run or its business is simply not scalable. Another common refrain is the company has expanded a lot but it is too much effort for too little profit.

The price of expansion Our analysis suggests that the comments are not a fair reflection of BreadTalks profit potential. Net profit growth has indeed lagged behind revenue growth despite the respectable 12% CAGR from 2008-2012. But, in our view, it is the very aggressive store expansion by the company that was the real drag. BreadTalk has spent big on capex, resulting in significant non-cash depreciation and amortisation (D&A) costs hitting profitability.

Figure 13: Net profit trailed revenue, which saw a twofold increase over 2008-2012

Figure 14: The real drag on net profit was non-cash depreciation and amortisation costs

Source: Company, Maybank KE Source: Company, Maybank KE

Accounting treatment of store expansion For retailers, renovation and fit-out of new stores are accounted for under property, plant and equipment and are depreciated over their useful lives, according to accepted accounting rules. This is no different from companies in other industries. However, since a company like BreadTalk typically rents its outlets, useful life in this case is restricted by the contracted lease period.

Based on our understanding, lease agreements in the markets BreadTalk operates in are typically short-term in nature. This is especially the case in China, where leases may be as short as 12 months even though the store will likely continue to operate beyond that period by extending the initial lease agreement. This implies that the accounting cost of opening new outlets aggressively is very high, as capex is depreciated quickly over a short period of time (1-5 years).

212.2 246.5

302.9 365.9

447.3

7.8 11.1 11.3

11.6 12.0

0

5

10

15

20

25

30

0

100

200

300

400

500

2008 2009 2010 2011 2012

SGD m SGD m

Revenue - LHS Net Profit - RHS

36.9

92.6 107.2

49.7 46.8

13.7 16.7 21.6 24.4 31.0

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

SGD m

CAPEX Dep & Amort.

Fit-out of new stores represent a major capex cost

D&A is the real drag on bottom line.

Such capex is depreciated very aggressively

January 27, 2014 7

Breadtalk Group

Bottom line will show strength when expansion slows down Perversely, we think the bottomline will actually show much better growth when the companys expansion slows down, as D&A will plateau. All said, we believe the current cost of expansion should not deter investors as the underlying cash returns still appear to be healthy.

EBITDA growth tells a different story Against an accounting treatment which is unfavourable for retailers in expansion mode, we think EBITDA provides a better reflection of the underlying profit growth of a company as well as its intrinsic value. For BreadTalk, EBITDA showed reasonably consistent growth at 16% CAGR over 2008-2012. Another point to note is that the company also generates very healthy operating cash flow, with consistent growth in recent years a sign of business viability.

Figure 15: EBITDA grew at much faster pace than net profit Figure 16: Operating cash flow consistently positive

Source: Company, Maybank KE Source: Company, Maybank KE

Segmental operational statistics still healthy BreadTalk provides annual statistics for its four main businesses: 1) its own bakeries, 2) bakery franchises, 3) restaurants, and 4) food courts. A study of the average sales per store in tandem with the number of new stores opened should, in our view, provide a good gauge of whether business at the ground level is healthy. But we also note that the bulk of the increase in BreadTalks new stores from 2008 has been in the less developed markets, which means lower sales per store are not necessarily a sign of business health deterioration.

1) Bakery (self-owned stores) = 45% of FY13E revenue

This is BreadTalks biggest segment, accounting for around 45% of group revenue. The main contributing brands include BreadTalk and Toast Box. Over the past five years, sales per store have contracted by around 10%. Nevertheless, seen as a whole, we think the statistics are still positive, given that overall store count has more than doubled and a large part of the increase has been in China, where sales per store are generally lower than for stores in a developed market like Singapore.

27.0 33.0

38.2 41.4

49.6

7.8 11.1 11.3 11.6 12.0

0

10

20

30

40

50

60

2008 2009 2010 2011 2012

SGD m

EBITDA Net Profit

32.6

39.1

45.5 48.9

53.7

0

10

20

30

40

50

60

2008 2009 2010 2011 2012

SGD m

Figure 17: Business revenue breakdown, 2013E

Source: Company, Maybank KE

Owned Bakery

45%

Franchise 7%

Restaurants 23%

Food Atrium 25%

Operating cash flow is very healthy.

BreadTalk and Toastbox

January 27, 2014 8

Breadtalk Group

Figure 18: Bakery (self-owned stores) sales per store p.a Figure 19: Bakery (self-owned stores) number of outlets

Source: Company, Maybank KE Source: Company, Maybank KE

2) Bakery (franchise) = 7% of FY13E revenue

Outside of Singapore, BreadTalk employs the franchise model for its stores to complement its own outlets. This helps to expand its global presence without putting undue strain on its balance sheet. In this segment, revenue comes from franchise fees as well as goods sold to franchisees. Average revenue per franchisee has declined around 26% over the past five years, but again this is not a negative indicator, considering that the number of franchisees has almost tripled and the majority of new stores were in China and Indonesia, where sales per store are understandably lower.

Figure 20: Bakery (franchise) sales per franchisee p.a Figure 21: Bakery (franchise) number of franchisees

Source: Company, Maybank KE Source: Company, Maybank KE

3) Restaurants = 23% of FY13E revenue

Din Tai Fung, Carls Junior in China, Station Kitchen and RamenPlay are some of the brands BreadTalk operates under in this segment. We believe Din Tai Fung in Singapore is the majority revenue contributor. Average revenue per outlet has fallen by around 20% since 2008, though it should be noted that the decline occurred after the company expanded store count substantially in 2010. We believe cannibalisation of Din Tai Fung restaurants in Singapore (from six to 19 outlets since 2008) and expansion of store count for other less successful brands may be some of the reasons behind the shortfall in revenue.

41 56

52 94

96 120

120

141 182 238

290 384

480

600

720

-5050

150250350450550650750

2008 2009 2010 2011 2012 2013E 2014E 2015E

BreadTalk

Din Tai Fung is the main contributor.

1,097

1,008 993 1,002 984 953 964 946

850

900

950

1,000

1,050

1,100

1,150

2008 2009 2010 2011 2012 2013F 2014F 2015F

SGD '000

19 38

24 44

20 40

49

100 119 157

181 225 245

286 335

050

100150200250300350

2008 2009 2010 2011 2012 2013E 2014E 2015E

134 117

101 95 99 102 102 100

020406080

100120140160

2008 2009 2010 2011 2012 2013F 2014F 2015F

January 27, 2014 9

Breadtalk Group

Figure 22: Restaurants sales per outlet p.a. Figure 23: Restaurants - number of outlets

Source: Company, Maybank KE Source: Company, Maybank KE

4) Food courts = 25% of FY13E revenue

The brands in this segment include Food Republic (Singapore and Hong Kong), Da Shi Dai (China) and Da Zhi (Taiwan). Sales per store have held up well since 2008 and are now higher by 2%. The majority of the new outlets during this period were in Singapore and Hong Kong, under the Food Republic brand.

Figure 24: Food courts sales per store p.a Figure 25: Food courts - number of outlets

Source: Company, Maybank KE Source: Company, Maybank KE

4,596 4,870 3,880

3,275 3,665 3,439 3,137 3,001

01,0002,0003,0004,0005,0006,000

2008 2009 2010 2011 2012 2013F 2014F 2015F

SGD '000

13

5 4

11

9

12

8 8

21 26

30

41

50

62

-5

5

15

25

35

45

55

65

2008 2009 2010 2011 2012 2013E 2014E 2015E

2,612

2,521

2,723 2,739

2,657 2,712

2,750 2,702

2,4002,4502,5002,5502,6002,6502,7002,7502,800

2008 2009 2010 2011 2012 2013F 2014F 2015F

SGD '000

4 5 10

12 11

11

29 33 32 37

47 59

70 81

-55

1525354555657585

2008 2009 2010 2011 2012 2013E 2014E 2015E

January 27, 2014 10

Breadtalk Group

Hotel & Spa 36%

Mixed use 12%

Restaurant 42%

Retail 10%

Minor International biding its time? Thailand-based hospitality and F&B group Minor International (MINT) was founded in 1978 by American-born Thai businessman William Heinecke, who is also the groups current chief executive officer. The business grew rapidly from a single hotel and pizza restaurant in Thailand. In 2005, MINT embarked on an aggressive expansion overseas and today, the Thai-listed company has a presence in 26 countries and is involved in hotels, serviced suites, restaurants and spas.

Figure 26: Minor International today Figure 27: Minor International - revenue breakdown,9M2013

Source: Company Source: Company

An acquisitive history As part of its overseas expansion over the past decade, MINT made numerous acquisitions that included hotels, resorts and F&B companies. The Coffee Club in Australia (US$20.0m), Thai Express (US$31.3m) in Singapore and the Riverside (US$36.5m) casual dining chain in China are all part of its acquisitive history.

Given its vast business empire, it is no surprise that MINT typically holds 50-80% stakes in individual businesses to ensure that management stays on to drive the business. The exception is BreadTalk, in which it has only an 11% stake. Or is this a precursor to a bigger move on MINTs part?

Two entrepreneurs and two kindred spirits? By all accounts, Mr Heinecke is a true entrepreneur, having started his business at the age of 17 with THB25,000 (USD1,200 in 1978) that was borrowed at 60% interest. This is very similar to BreadTalk founder George Quek, who started his business empire selling candy in a kiosk with a loan from his father. In investing into BreadTalk, Mr Heinecke probably recognizes Mr Queks talent and may appreciate having the latter onboard his sprawling empire if they can find a way to work together.

Typically buys a 50-80% stake.

January 27, 2014 11

Breadtalk Group

Figure 28: Minor International expansion milestones

Source: Company

Complementary business portfolios In theF&Bspace, MINT mainly operates casual dining restaurants in several countries under brands like Swensens, Sizzler, Burger King and Thai Express. BreadTalk, on the other hand, has a bigger presence in bakeries and food atriums. The company pioneered the artisan bakery concept in this part of the world, and Mr Quek has been nicknamed the Foodcourt King. We believe the duo have very complementary business portfolios and this would be an attractive trait to MINT.

Figure 29: Minor International - restaurant business by brand, 2012

Figure 30: Minor International number of restaurant outlets

Source: Company Source: Company

The Pizza Company

27%

Swensen's 14%

Sizzler 16%

Dairy Queen

10%

Burger King 5%

The Coffee Club 2%

Thai Express 18%

Others 8%

1,043 1,112 1,147

1,257 1,381

0

400

800

1,200

1,600

2008 2009 2010 2011 2012

MINT: Casual restaurants and fast food BreadTalk: Bakeries and foodcourts

January 27, 2014 12

Breadtalk Group

BreadTalks China presence is enticing Mr Heinecke has been public about his belief in the potential of China. In a television interview in 2012, he said: In China, there are cities the size of Bangkok, where the people have not even experienced fast food.

MINT currently has an estimated 45 F&B outlets in China, under various brands. This obviously pales in comparison to BreadTalk, which entered the country 10 years ago and now has more than 300 outlets across 48 cities. Acquiring BreadTalk would immediately accelerate MINTs progress by five years, which is invaluable in this age of increasing competition.

Figure 31: Minor International - restaurant portfolio

Source: Company

Buying BreadTalk will immediately increase MINTs store count manifold in China.

January 27, 2014 13

Breadtalk Group

Valuing BreadTalk Replacement cost of retail outlets BreadTalk has built up a sizeable network of retail outlets across the region. Although it does not own all the outlets, there is still value in the fit-out, furniture and kitchen equipment. We believe a potential acquirer that wants to build up such a network of outlets will consider the replacement cost of doing this from scratch. This is without taking into account the time-to-market needed. Based on our conservative estimates, we believe the total replacement value of BreadTalks self-owned outlets is at least SGD245m (Figure 32).

Figure 32: BreadTalk replacement value of self-owned outlets Number of outlets Cost per outlet (SGD m) Total cost (SGD m) Owned Bakery (Singapore) 114 0.25 28.5 Owned Bakery (outside Singapore) 131 0.06 7.9 Restaurants (Singapore) 30 3.00 90.0 Restaurants (outside Singapore) 11 0.70 7.4 Food atrium (Singapore, HK) 20 4.00 80.0 Food atrium (China) 29 0.80 23.0 Food atrium (Malaysia, Taiwan) 8 1.00 8.0

Total 343 244.7

Source: Company, Maybank KE

Brand value Brand value is an intangible asset, difficult to quantify but a very real asset no less for consumer companies. It is generally defined as the additional profit (both present and future discounted value) a company can generate from the sale of products/services through the use of a brand name.

In the case of BreadTalk, it owns multi-brands across different geographies. The company is the creative pioneer of categories such as the artisan bread in Singapore and has won various brand accolades in its time. Brand Finance, an international brand valuation company, ranked BreadTalk Group as one of Singapores Top 100 Brands in 2012 and valued the brands at USD61m (SGD77m) as of Apr 2012.

Other real estate investments Based on BreadTalks business model, the company favours operating several F&B outlets in one location, using its various brands. For example, it is not uncommon to find a BreadTalk bakery, Toast Box outlet and Din Tai Fung restaurant all within the same shopping mall. We believe this model provides bargaining power with mall owners as well as economies of scale in terms of managing outlets.

Over the past few years, BreadTalk has also invested in some real estate in Singapore and China. These may be non-core assets, but we believe there is a strategic benefit to owning a stake in selective malls. It secures retail locations, serves as a hedge against rising rental costs and enables BreadTalk to ride the real estate value uplift which it has helped generate through its F&B outlets. We estimate the total cost of such investments at SGD84.1m.

SGD77m according to Brand Finance.

Strategic benefit to owning real estate.

January 27, 2014 14

Breadtalk Group

Figure 33: BreadTalk real estate investments

Date Investment Stake Cost

(SGD m) Location Area

(sqft) Remark

9-Jan-14 TripleOne Somerset 17.5 Singapore 566,000 NLA

15-Apr-13 Phase 2 of Beijing Tongzhou District 2.9% 14.5

Beijing, China 4,590,000 GFA

1-Oct-12 Phase 1 of Beijing Tongzhou District 4.0% 20.1

Beijing, China 4,327,088 GFA

4-Nov-11 Chijimes 18.0 Singapore 49,794 NLA

18-Nov-09 Katong 112 14.0 Singapore 207,000 NLA

Total

84.1

Source: Company, Maybank KE

Figure 34: BreadTAlk SOTP replacement cost

Replacement cost of stores (SGD m) 244.7 Figure 32

Singapore HQ (SGD m) 67.0 Reported in AR

Real estate investments (SGD m) 84.1 Figure 33

Brand value (SGD m) 77.0 According to Brand Finance

Net debt (SGD m) (70.0)

Total (SGD m) 402.8

Per share (SGD) 1.40

Source: Company, Maybank KE, Brand Finance

EV/EBITDA gives better gauge We believe EV/EBITDA is a good metric to value BreadTalk, given the distortion that could arise from the accounting treatment of aggressive expansions by a retailer, as discussed in the earlier section. This valuation metric provides a better gauge of the real cash flow generated by the business in the current state and ignores the accounting sunk-cost bias for capex. We believe potential acquirers would also be more likely to use EV/EBITDA as a valuation tool.

BreadTalk currently trades at just 4.5x FY14E EV/EBITDA, which is a discount to its regional peers despite a comparable net profit CAGR of 26% (15% EBITDA CAGR) over FY14E-16E. We peg our TP of SGD1.40 to 7X FY14E EV/EBITDA, representing 50% upside from current levels.

January 27, 2014 15

Breadtalk Group

Figure 35: Peer comparison

Share Target Market PE 3-yr EPS EV/ EBITDA PB ROE Div Yield

Rating price Price cap FY13 FY14 FY15 CAGR FY13 FY13 FY13 FY15 FY14

(lcl curr) (lcl curr) (USD m) (x) (x) (x) (%) (x) (x) (%) (%) (%) Food Retail ASEAN

BreadTalk NR 0.95 NA 209 20.2 17.6 NA NA NA NA NA NA NA ABR Holdings NR 0.73 NA 115 NA NA NA NA NA NA NA NA NA Auric Pacific NR 1.30 NA 128 NA NA NA NA NA NA NA NA NA Fast Indo NR 2,200.00 NA 361 NA NA NA NA NA NA NA NA NA Jollibee Foods Buy 167.00 191.00 3,880 35.4 30.8 28.5 18 18.2 7.9 21 22 2.1 President Bakery NR 40.75 NA 558 NA NA NA NA NA NA NA NA NA Minor Intl Buy 21.70 28.30 2,641 19.9 17.6 16.3 13 14.5 3.8 18 18 1.5 CentelTB Buy 27.50 45.20 1,129 24.1 18.8 16.0 14 15.2 3.5 15 16 1.1 Average

24.9 21.2 20.2 15.0 16.0 5.1 17.6 18.4 1.6

Food Retail North Asia

Ajisen(China) Sell 9.05 5.78 1,271 34.9 31.3 27.0 33 15.1 3.1 9 9 0.9 CAF De CORAL NR 22.90 NA 1,702 21.8 18.9 16.4 14 12.1 3.7 17 18 3.4 Christine NR 0.79 NA 103 NA NA NA NA NA NA NA NA NA Gourmet Master NR 182.50 NA 852 34.4 22.5 16.5 17 13.5 4.2 12 17 2.1 Xiao Nan Guo NR 1.41 NA 268 24.2 17.3 9.8 8 7.2 1.8 7 10 1.7 Average 26.8 19.6 14.2 12.7 11.0 3.2 12.1 15.0 2.4 Average 26.6 21.8 18.8 16.4 14.0 4.1 14.4 16.0 1.8

Source: Company

Figure 36: Historical P/E band Figure 37: Historical P/BV band

Source: Company Source: Company

Figure 38: Historical EV/EBITDA band

Source: Company

January 27, 2014 16

Breadtalk Group

0

4

8

12

16

20

2003 2005 2007 2009 2011 2013 2015 2017

RMB bn

Artisan Bread Packaged Bread

Industry overview Bread consumption in China set to rise China, the worlds second-largest economy, will continue to be a key market for BreadTalk. Management has set an explicit target to achieve 50% of its group revenue from China (currently 32%) by FY16, with the bakery business likely making up the bulk of the increase.

We believe there is a strong link between urbanisation and per capita consumption of bread. This is because bread is a convenient food that meets the daily dietary demand amid the quickening pace of life. The average per capita consumption of bread in China is currently 1.3kg a year, which is low compared with other developed Chinese nations.

Figure 39: China per capita annual consumption of bread set to pick up on rapid urbanisation

Figure 40: China value of bread market expanding rapidly

Source: Euromonitor, Maybank KE Source: Euromonitor, Maybank KE

Artisan bread likely to remain popular With rising affluence, the Chinese has more discretionary income to select products with greater innovation and healthier ingredients. The proliferation of chained bakeries such as BreadTalk, 85 Caf and Christine further has introduced a new realm of quality baked products to the Chinese consumer. According to Euromonitor, demand growth for artisan bread would be higher than for packaged bread over the next five years, rising at a CAGR of 10.1%.

1.3

7.2 6.8 8.1

51

100 91

100

0

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80

100

0

2

4

6

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China Hong Kong Japan Singapore

% kg

Per capita consumption of bread - LHS Urbanisation - RHS

January 27, 2014 17

Breadtalk Group

80.8 86.1 91.2 96.2 101.5 107.0

149.8 157.5 164.0 170.3

176.8 183.7

0

50

100

150

200

250

300

2013 2014 2015 2016 2017 2018

SGD m

Artisan Bread Packaged Bread

Singapore is a mature market In contrast, Singapore is a mature market for the bakery industry even though we believe there are still growth opportunities in the artisan bread category. Overall bread consumption in the island country has reached its saturation point at about 8.1kg per capita annually. Packaged bread continues to dominate, with big manufacturers such as Sunshine and Gardenia enjoying a large market share.

Artisan bread is expected to maintain its share of volume. However, this market is highly fragmented, with small businesses holding sway. Going forward, we believe there are opportunities for BreadTalk to grow its market share at the expense of smaller players.

Figure 41: Singapore expect moderate growth in value of bread market

Source: Euromonitor, Company

January 27, 2014 18

Breadtalk Group

Financials bottom-line growth to accelerate Revenue to be driven by store count expansion Management has an explicit target to grow store count to 1,000 by 2014, from an estimated 800 currently. We believe this is achievable and is likely to entail additions in all segments, in particular bakery franchises which are less capex intensive. A second more ambitious target is to achieve SGD1b in revenue by 2016, though we expect this may be more difficult to realise. We forecast revenue to grow at 17% CAGR to SGD861m over FY13E-16E.

Figure 42: Revenue growth Figure 43: Total store count growth

Source: Company, Maybank KE Source: Company, Maybank KE

Store count growth to come from China In our view, a big part of BreadTalks growth in terms of both revenue and store expansion is likely to occur outside of Singapore, where the company already has a dominant presence. In particular, China will remain a pillar of growth. Management aims to achieve 50% of its revenue from this enormous market by 2016, up from 32% in FY12.

as well as diversification into non-bakery businesses Since 2008, BreadTalk has devoted a considerable amount of efforts towards expanding outside its original bakery business by creating new brands and opening outlets. We expect part of the store count growth to come from further diversification into non-bakery businesses, namely, restaurants and food courts.

Figure 44: Store count growth breakdown

2011 2012 2013E 2014E 2015E 2016E

Owned bakeries 181 225 245 286 335 391

Franchise 290 384 480 600 720 864

Restaurants 26 30 41 50 62 78

Food atriums 37 47 59 70 81 93

Source: Company, Maybank KE

366 447 533

630 731

861

20.8 22.3

19.1

18.2 16.1

17.7

0

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0100200300400500600700800900

1000

2011 2012 2013E 2014E 2015E 2016E

% SGD m

Revenue - LHS YoY Growth - RHS

152

138

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534

686 824

1,006

1,197

1,426

0

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1,200

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2011 2012 2013E 2014E 2015E 2016E

Management Target 1#: 1,000 outlets by FY14 Management Target 2#: SGD1b revenue by FY16 Management Target 3#: 2,000 outlets by FY20

Management Target 4#: 50% of Group revenue from China by FY16

January 27, 2014 19

Breadtalk Group

Expect margins to improve slightly We expect overall margins to improve as the contributions from food courts and restaurants increase. These businesses have enjoyed higher margins in the past and are rebounding off the lows, due in part to asset write-offs in FY13. Franchise bakeries are expanding fast and the franchisee fees will be another contributor to higher margins.

While overall sales per store may post a decline, we would say this is the result of expanding outside Singapore and not necessarily reflective of lower margins. Moreover, costs are correspondingly lower outside Singapore. These improvements should help mitigate the impact of continued store expansion costs.

partly driven by economies of scale We also expect some economies of scale to be gained following the establishment of BreadTalks new headquarters in Singapore. A centralised manufacturing facility and staff training centre should help lower costs. Continued expansion of store count would also enhance bargaining power against landlords.

Potential for margin upside surprise We see potential for margins to surprise on the upside from 2015E onwards. This may happen if BreadTalk achieves its target of 1,000 stores in 2014 and subsequently moderates its store count expansion from the previous breakneck pace. Such a trajectory would result in lower depreciation costs and higher margins.

Figure 45: Net profit growth expect 26% CAGR over FY14E-

Figure 46: Net profit margin poised to increase

Source: Company, Maybank KE Source: Company, Maybank KE

Net profit to grow at26% CAGR over FY14E-FY16E With sales growing and margins on the mend, we forecast strong bottom-line growth of 26% CAGR over FY14-FY16E. EBITDA, too, would likely continue to trend upwards to SGD91m by FY16E.

11.6 12.0 12.5 15.6

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2011 2012 2013E 2014E 2015E 2016E

% SGD m

3.2

2.7

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2.6

2.9

2.02.22.42.62.83.03.23.4

2011 2012 2013E 2014E 2015E 2016E

%

Lower sales per store is mainly due to expansion outside Singapore, where sales value is lower

Margin may surprise if store count expansion moderates more than expected

January 27, 2014 20

Breadtalk Group

Healthy cash generation to fund capex BreadTalk has gone from net cash in 2011 to net debt the following year, with net gearing estimated at 76% as at end-FY13. This situation is largely the result of its ongoing aggressive store expansion as well as the substantial investments it made in the past two years: It spent SGD67m on its new headquarters in Singapore. But this is no cause for alarm as its new long-term debt is secured against the building.

Operating cash flow remains healthy and should continue to grow from strength to strength. This would allow the company to continue funding its store expansion plans. Net of investments, we still expect free cash flow to stay positive and help pay down debt and dividends. We forecast net gearing to slowly decline to 27% by FY15E.

Figure 47: Operating cash flow vs capex (SGD m)

Source: Company, Maybank KE

48.9 53.7

70.1 71.3 79.2

90.3

36.9

92.6

107.2

49.7 46.8 48.7

0

20

40

60

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120

2011 2012 2013F 2014F 2015F 2016F

OCF CAPEX

The company has mainly been self-funding its own aggressive expansion from 2008

January 27, 2014 21

Breadtalk Group

SWOT analysis

Food retail is a growing industry in China

Franchisee model allows it to grow globally

Artisan bread concept catching on in ASEAN

Strong brand equity

Multiple formats allow bargaining power with landlords

Invaluable experience in F&B retail

Dependent on creative drive of key personnel, George Quek

Constant investments required to expand its presence

Subject to rental costs escalations

F&B is a highly competitive industry, subject to new entrants

New retail concepts may change customer preferences

Food safety issues may harm reputation

January 27, 2014 22

Breadtalk Group

Key risks Keen competition in F&B space The F&B industry is intensely competitive and barriers to entry are low for new entrants. Customer preferences can shift quickly and sometimes be seasonal in nature. Failure to innovate and understand demand preferences would result in brand loyalty diminishing quickly. In turn, revenue and profit would decline.

Rising costs could curtail margins Food retailers are constantly grappling with rising costs, including rental, labour and price of raw materials. Given the competitive nature of the industry, companies may not be able to immediately pass on price increases to end consumers. For example, in Singapore, profits in FY13 were substantially impacted by the rising cost of rental and labour.

Cost is also an issue when renovations and fit-outs are required, given that depreciation forms a big part of BreadTalks cost. An inability to manage costs well will result in profit falling short of expectations.

Food safety scandals Like other food companies, BreadTalk faces the risk of food safety scandals. Such scandals can originate from a variety of sources and a small oversight may have significant repercussions on the groups brand equity and reputation. For example, in Dec 2013, there were reports that elevated levels of aluminium were found in the raisin muffins in Hong Kong due to a higher stipulated amount of baking powder used.

In serious cases, the company may have to pay fines and/or compensation to victims, which would adversely affect its bottom line.

Overly aggressive expansion could stretch balance sheet BreadTalks current net gearing is estimated to be 76%. We expect this to trend downwards as the company continues to generate healthy operating cash flow. But if it should turn more aggressive than expected in new store opening, this could stretch its balance sheet. It would also mean higher depreciation charges dealing a blow to bottom-line profit.

January 27, 2014 23

Breadtalk Group

Key management George Quek Meng Tong, Chairman Mr Quek is the founder of BreadTalk Group and continues to drive the groups strategic direction and development. He started his food and beverage business in Taiwan in 1982 and returned to Singapore in 1992. In 2000, he started the bakery business and listed it on the Singapore Exchange in 2003. Among other awards, he was named the Ernst & Young Entrepreneur of the Year 2006.

Katherine Lee Lih Leng, Deputy Chairman Ms Lee oversees the groups research and development, as well as pioneers new ideas and concepts. She also formulates product training and technical skill upgrade programmes to ensure proper transfer of knowledge and skills to the franchisees. In addition, she spearheads product costing.Ms Lee has more than 15 years of experience in the industry.

Oh Eng Lock, Group Chief Executive Officer Mr Oh was appointed Group CEO on 1 Jan 2011. He oversees the groups global operations, focusing on strategic planning and business development. He joined BreadTalk in 2010 as group managing director. Prior to this, he was regional managing director with Merrill Lynch in Hong Kong, overseeing its North Asia business.

Lawrence Yeo, Group Chief Financial Officer Mr Yeo was appointed Group CEO on 10 Oct 2011. He oversees the groups global financial matters including corporate finance, treasury, capital management, investments, risk management and investor relations. He has extensive experience and capacities including former Group CEO of two other SGX-listed companies. Mr Yeo holds an MBA from the University of Strathclyde and a Bachelor of Accountancy degree from the National University of Singapore.

January 27, 2014 24

Breadtalk Group

FYE 31 Dec (SGD m) FY12A FY13A FY14E FY15E FY16EKey MetricsP/E (reported) (x) 21.9 21.1 16.8 13.7 13.7Core P/E (x) 21.9 21.1 16.8 13.7 13.7Core FD P/E (x) 22.0 21.2 16.9 13.8 13.8P/BV (x) 3.2 2.9 2.6 2.3 nmP/NTA (x) 3.2 2.8 2.5 2.2 2.2Net dividend yield (%) 1.4 1.5 1.8 2.2 2.2FCF yield (%) nm nm 8.2 12.3 0.0EV/EBITDA (x) 4.7 5.5 4.7 3.9 3.0EV/EBIT (x) 12.4 16.2 13.0 10.1 7.3

Income StatementRevenue 447.3 532.7 629.8 731.4 860.6Gross profit 241.4 285.0 336.9 391.3 460.4EBITDA 49.6 60.6 70.4 79.6 91.0Depreciation (30.4) (39.5) (44.4) (48.4) (52.4)Amortisation (0.6) (0.6) (0.7) (0.7) (0.8)EBIT 18.6 20.5 25.3 30.5 37.8Net interest income /(exp) 0.3 (0.9) (1.4) (1.4) (0.3)Associates & JV 0.5 1.3 1.5 1.8 2.0Exceptionals 0.0 0.0 0.0 0.0 0.0Other pretax income 0.0 0.0 0.0 0.0 0.0Pretax profit 19.4 20.8 25.4 30.9 39.6Income tax (5.8) (6.7) (8.0) (9.7) (12.5)Minorities (1.6) (1.7) (1.8) (2.0) (2.0)Reported net profit 12.0 12.5 15.6 19.1 25.1Core net profit 12.0 12.5 15.6 19.1 25.1

Balance SheetCash & Short Term Investments 64.2 68.0 72.5 69.2 67.2Property, Plant & Equip (net) 157.4 225.1 230.4 228.8 225.0Intangible assets 8.5 8.4 8.7 9.0 9.2Investment in Associates & JVs 4.0 10.3 11.8 13.6 15.6Other assets 122.2 121.8 132.9 144.3 159.3Total assets 356.4 433.6 456.3 464.8 476.3ST interest bearing debt 45.8 27.6 27.6 10.0 10.0LT interest bearing debt 50.6 110.0 100.0 90.0 55.0Other liabilities 169.0 194.7 214.6 235.3 262.0Total Liabilities 265.4 332.3 342.2 335.3 327.0Shareholders Equity 82.6 91.2 102.1 115.6 133.4Minority Interest 8.5 10.2 12.0 14.0 16.0Total shareholders equity 91.0 101.4 114.1 129.5 149.3

Cash FlowPretax profit 19.4 20.8 25.4 30.9 39.6Depreciation & amortisation 31.0 40.2 45.1 49.2 53.2Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.0Change in working capital 7.4 16.2 8.9 9.3 11.7Cash taxes paid (5.4) (6.7) (8.0) (9.7) (12.5)Other operating cash flow 1.3 (0.3) (0.1) (0.4) (1.7)Cash flow from operations 53.7 70.1 71.3 79.2 90.3Capex (92.6) (107.2) (49.7) (46.8) (48.7)Free cash flow (38.9) (37.1) 21.6 32.4 41.6Dividends paid (5.6) (3.8) (4.7) (5.7) (7.3)Equity raised / (purchased) (0.1) 0.0 0.0 0.0 0.0Change in Debt 57.7 41.2 (10.0) (27.6) (35.0)OTH investing/financing cash flow (35.9) 3.5 (2.4) (2.4) (1.3)Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0Net cash flow (22.8) 3.8 4.5 (3.3) (2.0)

January 27, 2014 25

Breadtalk Group

Leverage & Expense AnalysisAsset/Liability (x) 1.3 1.3 1.3 1.4 1.5Net debt/equity (%) 39.0 76.3 53.9 26.7 net cashNet interest cover (x) na 22.4 18.4 21.4 nmDebt/EBITDA (x) 1.9 2.3 1.8 1.3 0.7Capex/revenue (%) 20.7 20.1 7.9 6.4 5.7Net debt/ (net cash) 32.2 69.6 55.1 30.8 (2.2)

Liquidity & Efficiency Cash conversion cycle na nm nm nm nm Days receivable outstanding 36.4 32.2 32.3 32.6 32.4 Days inventory outstanding na nm nm nm nm Days payables outstanding na nm nm nm nm Dividend cover (x) 3.3 3.3 3.3 3.4 3.4 Current ratio (x) 0.6 0.7 0.7 0.7 0.6

DuPont analysis Net profit margin (%) 2.7 2.3 2.5 2.6 2.9 Revenue/Assets (x) 1.3 1.2 1.4 1.6 1.8 Assets/Equity (x) 4.3 4.8 4.5 4.0 3.6 ROAE (%) 13.6 13.0 14.5 15.7 18.0 ROAA (%) 3.9 3.2 3.5 4.2 5.3

FYE 31 Dec (SGD m) FY12A FY13A FY14E FY15E FY16E Key Ratios Growth ratios (%) Revenue growth 22.3 19.1 18.2 16.1 17.7 EBITDA growth 20.0 22.2 16.1 13.1 14.3 EBIT growth 9.6 10.1 23.5 20.5 24.0 Pretax growth 13.1 7.5 22.1 21.4 28.2 Reported net profit growth 3.5 3.9 25.3 22.5 31.1 Core net profit growth 3.5 3.9 25.3 22.5 31.1

Profitability ratios (%) EBITDA margin 11.1 11.4 11.2 10.9 10.6 EBIT margin 4.2 3.8 4.0 4.2 4.4 Pretax profit margin 4.3 3.9 4.0 4.2 4.6 Payout ratio 30.4 30.6 30.1 29.8 29.8

January 27, 2014 26

Breadtalk Group

Research Offices

REGIONAL

WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 wchewh@maybank-ib.com

ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 ongsengyeow@maybank-ke.com.sg

Alexander GARTHOFF Institutional Product Manager (852) 2268 0638 alexgarthoff@kimeng.com.hk

ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 suhaimi_ilias@maybank-ib.com

Luz LORENZO Philippines (63) 2 849 8836 luz_lorenzo@maybank-atrke.com

Tim LEELAHAPHAN Thailand (662) 658 1420 tim.l@maybank-ke.co.th

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 Juniman@bankbii.com

Josua PARDEDE Economist / Industry Analyst, BII Indonesia (62) 21 29228888 ext 29695 JPardede@bankbii.com

MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 wchewh@maybank-ib.com Strategy Construction & Infrastructure

Desmond CHNG, ACA (603) 2297 8680 desmond.chng@maybank-ib.com Banking & Finance

LIAW Thong Jung (603) 2297 8688 tjliaw@maybank-ib.com Oil & Gas - Regional Shipping

ONG Chee Ting, CA (603) 2297 8678 ct.ong@maybank-ib.com Plantations - Regional

Mohshin AZIZ (603) 2297 8692 mohshin.aziz@maybank-ib.com Aviation - Regional Petrochem

YIN Shao Yang, CPA (603) 2297 8916 samuel.y@maybank-ib.com Gaming Regional Media

TAN Chi Wei, CFA (603) 2297 8690 chiwei.t@maybank-ib.com Power Telcos

WONG Wei Sum, CFA (603) 2297 8679 weisum@maybank-ib.com Property & REITs

LEE Yen Ling (603) 2297 8691 lee.yl@maybank-ib.com Building Materials Glove Producers

CHAI Li Shin (603) 2297 8684 lishin.c@maybank-ib.com Plantation Construction & Infrastructure

KANG Chun Ee (603) 2297 8675 chunee@maybank-ib.com Consumer

Ivan YAP (603) 2297 8612 ivan.yap@maybank-ib.com Automotive

LEE Cheng HooiRegional Chartist (603) 2297 8694 chenghooi.lee@maybank-ib.com

Tee Sze ChiahHead of Retail Research (603) 2297 6858 szechiah.t@maybank-ib.com

HONG KONG / CHINA

Howard WONGHead of Research (852) 2268 0648 howardwong@kimeng.com.hk Oil & Gas - Regional

Alexander LATZER (852) 2268 0647 alexanderlatzer@kimeng.com.hk Metals & Mining - Regional

Alison FOK (852) 2268 0630 alisonfok@kimeng.com.hk Consumer

Jacqueline KO, CFA (852) 2268 0633 jacquelineko@kimeng.com.hk Consumer

Karen KWAN (852) 2268 0640 karenkwan@kimeng.com.hk Property & REITs

Osbert TANG, CFA (86) 21 5096 8370 osberttang@kimeng.com.hk Transport & Industrials

Philip TSE, CFA FRM (852) 2268 0643 philiptse@kimeng.com.hk Property & REITs

Ricky WK NG, CFA (852) 2268 0689 rickyng@kimeng.com.hk Utilities & Renewable Energy

Simon QIAN, CFA (852) 2268 0634 simonqian@kimeng.com.hk Telecom & Internet

Steven ST CHAN (852) 2268 0645 stevenchan@kimeng.com.hk Banking & Financials

Warren LAU (852) 2268 0644 warrenlau@kimeng.com.hk Technology Regional

William YANG (852) 2268 0675 williamyang@kimeng.com.hk Technology Regional

INDIA

Jigar SHAH Head of Research (91) 22 6623 2601 jigar@maybank-ke.co.in Oil & Gas Automobile Cement

Anubhav GUPTA (91) 22 6623 2605 anubhav@maybank-ke.co.in Metal & Mining Capital Goods Property

Urmil SHAH (91) 22 6623 2606 urmil@maybank-ke.co.in Technology Media

SINGAPORE

NG Wee SiangHead of Research (65) 6432 1467 ngweesiang@maybank-ke.com.sg Banking & Finance

Gregory YAP (65) 6432 1450 gyap@maybank-ke.com.sg SMID Caps Regional Technology & Manufacturing Telcos

Wilson LIEW (65) 6432 1454 wilsonliew@maybank-ke.com.sg Property Developers

ONG Kian Lin (65) 6432 1470 ongkianlin@maybank-ke.com.sg S-REITs

James KOH (65) 6432 1431 jameskoh@maybank-ke.com.sg Consumer - Regional

YEAK Chee Keong, CFA (65) 6432 1460 yeakcheekeong@maybank-ke.com.sg Offshore & Marine

Derrick HENG (65) 6432 1446 derrickheng@maybank-ke.com.sg Transport (Land, Shipping & Aviation)

WEI Bin (65) 6432 1455 weibin@maybank-ke.com.sg Commodity Logistics S-chips

John CHEONG (65) 6432 1461 johncheong@maybank-ke.com.sg Small &Mid Caps Healthcare

INDONESIA

WiliantoIEHead of Research (62) 21 2557 1125 wilianto.ie@maybank-ke.co.id Strategy

RahmiMARINA (62) 21 2557 1128 rahmi.marina@maybank-ke.co.id Banking & Finance

AurelliaSETIABUDI (62) 21 2953 0785 aurellia.setiabudi@maybank-ke.co.id Property

Anthony YUNUS (62) 21 2557 1136 anthony.yunus@maybank-ke.co.id Consumer Poultry

IsnaputraISKANDAR (62) 21 2557 1129 isnaputra.iskandar@maybank-ke.co.id Metals & Mining Cement

PanduANUGRAH (62) 21 2557 1137 pandu.anugrah@maybank-ke.co.id Infrastructure Construction Transport

JanniASMAN (62) 21 2953 0784 janni.asman@maybank-ke.co.id Cigarette Healthcare Retail

Lucky ARIESANDI,CFA (62) 21 2557 1127 lucky.ariesandi@maybank-ke.co.id Telcos Media

PHILIPPINES

Luz LORENZOHead of Research (63) 2 849 8836 luz_lorenzo@maybank-atrke.com Strategy

Laura DY-LIACCO (63) 2 849 8840 laura_dyliacco@maybank-atrke.com Utilities Conglomerates Telcos

Lovell SARREAL (63) 2 849 8841 lovell_sarreal@maybank-atrke.com Consumer Media Cement

Rommel RODRIGO (63) 2 849 8839 rommel_rodrigo@maybank-atrke.com Conglomerates Property Gaming Ports/ Logistics

Katherine TAN (63) 2 849 8843 kat_tan@maybank-atrke.com Banks Construction

Ramon ADVIENTO (63) 2 849 8845 ramon_adviento@maybank-atrke.com Mining

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 Maria.L@maybank-ke.co.th Consumer / Materials

JesadaTECHAHUSDIN, CFA (66) 2658 6300 ext 1394 Jesada.T@maybank-ke.co.th Financial Services

KittisornPRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 Kittisorn.P@maybank-ke.co.th Real Estate

SittichaiDUANGRATTANACHAYA (66) 2658 6300 ext 1393 Sittichai.D@maybank-ke.co.th Services Sector

SukitUDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 Sukit.u@maybank-ke.co.th

MayureeCHOWVIKRAN (66) 2658 6300 ext 1440 mayuree.c@maybank-ke.co.th Strategy

PadonVANNARAT (66) 2658 6300 ext 1450 Padon.v@maybank-ke.co.th Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 Surachai.p@maybank-ke.co.th Auto Conmat Contractor Steel

SuttatipPEERASUB (66) 2658 6300 ext 1430 suttatip.p@maybank-ke.co.th Media Commerce

SutthichaiKUMWORACHAI (66) 2658 6300 ext 1400 sutthichai.k@maybank-ke.co.th Energy Petrochem

TermpornTANTIVIVAT (66) 2658 6300 ext 1520 termporn.t@maybank-ke.co.th Property

WoraphonWIROONSRI (66) 2658 6300 ext 1560 woraphon.w@maybank-ke.co.th Banking & Finance

JaroonpanWATTANAWONG (66) 2658 6300 ext 1404 jaroonpan.w@maybank-ke.co.th Transportation Small cap

Chatchai JINDARAT (66) 2658 6300 ext 1401 chatchai.j@maybank-ke.co.th Electronics VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 lien.le@maybank-kimeng.com.vn Strategy Consumer Diversified Utilities

THAI QuangTrung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 trung.thai@maybank-kimeng.com.vn Real Estate Construction Materials

TRUONG Thanh Hang (84) 844 55 58 88 x 8085 hang.truong@maybank-kimeng.com.vn Consumer

Le Nguyen NhatChuyen (84) 844 55 58 88 x 8082 chuyen.le@maybank-kimeng.com.vn Oil & Gas NGUYEN ThiNganTuyen, Head of Retail Research (84) 8 44 555 888 x 8081 tuyen.nguyen@maybank-kimeng.com.vn Food & Beverage Oil&Gas Banking

NGUYEN TrungHoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 hoa.nguyen@maybank-kimeng.com.vn Macro Steel Real estate

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 diep.trinh@maybank-kimeng.com.vn Technology Utilities Construction

TRUONG QuangBinh (84) 4 44 555 888 x 8087 binh.truong@maybank-kimeng.com.vn Rubber plantation Tyres and Tubes Oil&Gas

PHAM NhatBich (84) 8 44 555 888 x 8083 bich.pham@maybank-kimeng.com.vn Consumer Manufacturing Fishery

NGUYEN Thi Sony TraMi (84) 8 44 555 888 x 8084 mi.nguyen@maybank-kimeng.com.vn Port operation Pharmaceutical Food & Beverage

January 27, 2014 27

Breadtalk Group

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, MKE) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, Representatives) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKEs clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

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. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (Maybank KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (MBKET) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (Maybank KESL) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

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Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 27 January 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 27 January 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analysts compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

Definition of Ratings

Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (PTKES) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines:Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (KESI) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

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Breadtalk Group

Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, MenaraMaybank, 100 JalanTun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003

London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstans Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674

New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

Stockbroking Business: Level 8, Tower C, DataranMaybank, No.1, JalanMaarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queens Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor JlJend. SudirmanKav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604

Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor VincomCenter Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030

Saudi Arabia In association with Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

South Asia Sales Trading Kevin FOY kevinfoy@maybank-ke.com.sg Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

North Asia Sales Trading Alex TSUN alextsun@kimeng.com.hk Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635

www.maybank-ke.com | www.maybank-keresearch.com

Why this bread wont talkChina presence an attractive trait

Value emerging, act before its too lateInvestment summaryBread and creativityTaking Singapore brands abroadAcross different geographiesNew concepts, constant innovationsBrand footprint to get bigger

Profitability under scrutinyExpansion with no profit growth myth or reality?The price of expansionAccounting treatment of store expansionBottom line will show strength when expansion slows downEBITDA growth tells a different storySegmental operational statistics still healthy

Minor International biding its time?Thailand-based hospitality and F&B groupAn acquisitive historyTwo entrepreneurs and two kindred spirits?Complementary business portfoliosBreadTalks China presence is enticingReplacement cost of retail outletsBrand valueOther real estate investmentsBased on BreadTalks business model, the company favours operating several F&B outlets in one location, using its various brands. For example, it is not uncommon to find a BreadTalk bakery, Toast Box outlet and Din Tai Fung restaurant all within the s...EV/EBITDA gives better gauge

Industry overviewBread consumption in China set to riseArtisan bread likely to remain popularSingapore is a mature market

Financials bottom-line growth to accelerateRevenue to be driven by store count expansionStore count growth to come from Chinaas well as diversification into non-bakery businessesExpect margins to improve slightlypartly driven by economies of scalePotential for margin upside surpriseNet profit to grow at26% CAGR over FY14E-FY16EHealthy cash generation to fund capex

SWOT analysisKey risksKeen competition in F&B spaceRising costs could curtail marginsFood safety scandalsOverly aggressive expansion could stretch balance sheet

Key managementGeorge Quek Meng Tong, ChairmanKatherine Lee Lih Leng, Deputy ChairmanOh Eng Lock, Group Chief Executive OfficerLawrence Yeo, Group Chief Financial OfficerResearch Offices