padini holdings - alliance bank

Refer to important disclosures at the end of this report

ed: CK / sa:BC

FULLY VALUED (Downgrade from Hold)

Last Traded Price ( 27 Aug 2018): RM6.04 (KLCI : 1,811.60)

Price Target 12-mth: RM5.05 (-16% downside)

Analyst CHEAH King Yoong +60 32604 3908 [email protected] Abdul Azim Muhthar +60 32604 3967 [email protected]

What’s New FY18 earnings within expectations

Rich valuation, trading at +2SD of its mean

Downgrade to FULLY VALUED with RM5.05 TP

Price Relative

Forecasts and Valuation FY Jun (RMm) 2017A 2018A 2019F 2020F

Revenue 1,571 1,679 1,752 1,808 EBITDA 250 273 326 327

Pre-tax Profit 212 240 299 304 Net Profit 156 178 221 225

Net Pft (Pre Ex.) 157 178 221 225 Net Pft Gth (Pre-ex) (%) 14.1 13.3 24.0 1.8

EPS (sen) 23.7 27.1 33.6 34.2

EPS Pre Ex. (sen) 23.9 27.1 33.6 34.2 EPS Gth Pre Ex (%) 14 13 24 2

Diluted EPS (sen) 23.9 27.1 33.6 34.2 Net DPS (sen) 11.5 11.5 11.5 11.5

BV Per Share (sen) 83.9 98.0 120 143 PE (X) 25.5 22.3 18.0 17.7

PE Pre Ex. (X) 25.2 22.3 18.0 17.7

P/Cash Flow (X) 18.0 20.1 16.4 16.3 EV/EBITDA (X) 14.4 12.8 10.2 9.7

Net Div Yield (%) 1.9 1.9 1.9 1.9 P/Book Value (X) 7.2 6.2 5.0 4.2

Net Debt/Equity (X) CASH CASH CASH CASH

ROAE (%) 30.6 29.8 30.8 26.0 Earnings Rev (%): 5 0 0 Cons ensus EPS (sen): 27.1 31.6 35.2 Other Broker Recs: B: 5 S: 1 H: 6

Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P

Still trendy, but getting pricey

Getting pricier. We downgrade our recommendation for Padini

to FULLY VALUED with an unchanged TP of RM5.05. We are

taking a more bearish stance on the stock as we believe that

Padini’s current valuation has priced in its near-term growth

prospects. As such, we believe the stock has run ahead of its

fundamentals.

Where we differ. Our TP and recommendation are more

conservative relative to consensus. Despite its bright earnings

prospects, we believe that the group’s risk reward profile has

turned unfavourable view of its rich valuation. The stock is

currently trading at 18x FY19 PE, which is about +2SD of its

historical mean.

Potential (negative) catalyst. Weaker-than-expected topline

growth due to (1) reduced demand for its product offerings,

and (2) weaker- than-expected rebound in consumer spending. Valuation:

We downgrade our recommendation for the stock to FULLY

VALUED with RM5.05 TP, pegged to a forward PE of 15x. This

represents about +1SD of its historical mean.

Key Risks to Our View:

Stronger-than-expected rebound in consumer spending and

profit margin comes in higher than expected

At A Glance

Issued Capital (m shrs) 658

Mkt. Cap (RMm/US$m) 3,974 / 971

Major Shareholders (%)

Yong Pang Chaun Holdings Sdn Bhd 43.7

Skim Amanah Saham Bumiputera 5.0

Free Float (%) 50.1

3m Avg. Daily Val (US$m) 1.3

ICB Industry : Consumer Goods / Personal Goods

AllianceDBS Research, Malaysia Equity

28 Aug 2018

Company Guide

Padini Holdings Version 13 | Bloomberg: PAD MK | Reuters: PDNI.KL

Refer to important disclosures at the end of this report

65

115

165

215

265

315

365

1.2

2.2

3.2

4.2

5.2

6.2

Aug-14 Aug-15 Aug-16 Aug-17 Aug-18

Relative IndexRM

Padini Holdings (LHS) Relative ACCESS_DENIED (RHS)

Company Guide

Padini Holdings

WHAT’S NEW

FY18 earnings came within expectations

FY18 earnings within expectations: 4QFY18 core earnings

grew 42% y-o-y to RM57m, supported by (1) 3.8% topline

growth, (2) GP margin strengthening from 34% in 4QFY17 to

40% in 4QFY18 due to better sales mix, and (3) higher other

income. We believe that q-o-q performance does not serve as

a good comparison given that Padini’s business is highly

seasonal.

FY18 core earnings amounted to RM178m, accounting for

104%/101% of our/consensus full-year forecast, which is

within expectations.

Topline growth supported by new outlet openings. Revenue

for 4QFY18 increased by 3.8% y-o-y, mainly driven by new

store openings. Padini has opened five Padini Concept stores

(PSCs) and seven Brands Outlet stores (BOs) during the 12-

month period under review.

2.5 sen/share fourth interim dividend declared. The group

declared its fourth interim dividend of 2.5 sen/share. This

brings its FY18 DPS to 11.5 sen, in line with our expectations.

We make no changes to our earnings forecasts.

Stock price has run ahead of its fundamentals. While we

continue to like Padini for its solid fundamentals and hands-

on management, we believe that the group’s valuations have

run ahead of its fundamentals. The group is currently trading

at about 18x forward PE, which is about +2D of its historical

mean.

Downgrade to FULLY VALUED. We downgrade our

recommendation for Padini to FULLY VALUED with an

unchanged TP of RM5.05. We are taking a more bearish

stance on the stock as we believe that Padini’s current

valuation has priced in its near-term growth prospects. Our TP

is still pegged to 15x forward PE.

Quarterly / Interim Income Statement (RMm)

FY Jun 4Q2017 3Q2018 4Q2018 % chg yoy % chg qoq

Revenue 461 425 478 3.8 12.4

Cost of Goods Sold (302) (247) (286) (5.5) 15.8

Gros s Profit 158 179 192 21.6 7.7

Other Oper. (Exp)/Inc (104) (131) (114) 9.9 (12.6)

Operating Profit 54.4 48.1 78.3 43.9 62.6

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm

Associates & JV Inc 0.0 0.0 0.0 nm nm

Net Interest (Exp)/Inc 1.00 1.98 2.46 145.8 24.2

Exceptional Gain/(Loss) 0.0 0.0 0.0 nm nm

Pre-tax Profit 55.4 50.1 80.7 45.7 61.1

Tax (14.9) (10.3) (23.4) 57.3 127.5

Minority Interest 0.0 0.0 0.0 nm nm

Net Profit 40.5 39.8 57.3 41.5 43.9

Net profit bef Except. 40.5 39.8 57.3 41.5 43.9

EBITDA 65.2 58.9 88.7 36.0 50.5

Margins (%)

Gross Margins 34.4 42.0 40.3

Opg Profit Margins 11.8 11.3 16.4

Net Profit Margins 8.8 9.4 12.0

Source of all data: Company, AllianceDBS

Company Guide

Padini Holdings

CRITICAL DATA POINTS TO WATCH

Critical Factors

SSSG and number of new outlets are key revenue drivers. Like

other fashion retailers, same store sales growth (SSSG) and the

number of outlets opened in the financial year is a key revenue

driver for the group. After a relatively weak SSSG (<1%) registered

in FY18, we estimate SSSG for FY19 to be about 3%, mainly driven

by rebound in consumer spending in Malaysia.

Brand Outlet could benefit from downtrading. We observe that

consumers are increasingly looking for value in the competitive

apparel market. This bodes well for the expansion of the group’s

rising star, Brands Outlet, over the next 2-3 years.

S izeable untapped market in suburban cities. The group will focus

on the Brands Outlet (BO) chain over the next three years, to

improve business scale, distribution network, and operating

leverage, to strengthen its presence in the local apparel market.

Management sees business opportunities in the huge underserved

markets in Malaysia’s suburban cities, and tapping these markets

should keep it busy over the next few years. Once BO hits

saturation point, management will review its growth strategy,

including expanding its product lines and overseas business.

Potential waning of its mix-and-match bundling strategy and

margin compression remain key concerns. We are concerned that

the popularity of its mix-and-match bundling strategy implemented

in Padini Concept Store (PCS) will eventually taper off, which could

drag down SSSG, given the slower-than-expected recovery in

domestic consumer spending.

Furthermore, potentially high cost of inventories and marketing

costs could erode its margins. At present, the group sources about

70% of its products from China through its sourcing agents. We

understand that the group has experienced rising inventory costs

due to rising costs in China.

Total retail floor space (k sq ft)

Revenue growth (%)

SSS growth (%)

Revenue growth from exports, consignment & others (%)

Revenue growth from new floor spaces (%)

Source: Company, AllianceDBS

1151 11511191

12311271

0.0

183.4

366.8

550.2

733.5

916.9

1100.3

2016A 2017A 2018A 2019F 2020F

33.1

20.2

6.88 6.33

1.08

0.0

6.7

13.5

20.2

27.0

33.7

2016A 2017A 2018A 2019F 2020F

13

8

0.5

2.9

0.52

0.00

2.65

5.30

7.96

10.61

13.26

2016A 2017A 2018A 2019F 2020F

0.14 0.1

-2.78

0.21 0.2

-3.1

-2.4

-1.8

-1.1

-0.4

0.2

2016A 2017A 2018A 2019F 2020F

19.9

8.15

2.6

5.32

0.260.0

4.0

8.0

12.1

16.1

20.1

2016A 2017A 2018A 2019F 2020F

Company Guide

Padini Holdings

Appendix 1:Padini’s share price vs FBM KLCI

Source: Company, Bloomberg L.P., AllianceDBS

Padini’s share price vs quarterly reported revenue Remarks

Padini’s share price performance is closely correlated to its quarterly revenue growth (correlation coefficient of ~

0.8). This is due the group’s ability to continue beat market expectations in growing its topline through (1)

store expansion, (2) popularity of its product offerings and mix-and-match bundling strategy, and (3) benefiting

from downtrading.


Padini’s share price vs quarterly reported EBITDA Remarks

The group’s share price performance is also highly

correlated with the quarterly reported EBITDA

(correlation coefficient of ~ 0.6)as potentially higher raw material costs and selling & distribution expenses could

dampen its earnings prospects, despite strong revenue growth.


1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

1.10

2.10

3.10

4.10

5.10

6.10

7.10

Jan

-13

Apr

-13

Jul-

13

Oct

-13

Jan

-14

Apr

-14

Jul-

14

Oct

-14

Jan

-15

Apr

-15

Jul-

15

Oct

-15

Jan

-16

Apr

-16

Jul-

16

Oct

-16

Jan

-17

Apr

-17

Jul-

17

Oct

-17

Jan

-18

Apr

-18

Jul-

18

RM PAD (LHS) FBMKLCI (RHS)

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

RM'mRMPAD (LHS) Revenue (RHS)

20

30

40

50

60

70

80

90

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

RM'mRMPAD (LHS) EBITDA (RHS)

Strong earnings growth

supported by (1) benefiting from

downtrading, (2) popularity of mix and

match strategy, and (3)

store expansion Weak consumer sentiments and

challenging business

environment

Company Guide

Padini Holdings

Balance Sheet:

St rong balance sheet – net cash position. The group is in a net

cash position, which allows the group to (1) sustain its dividend

policy of at least 10 sen per share, and (2) undertake outlet

expansion without stretching its balance sheet.

Share Price Drivers:

Stable margins – key share price driver. Margins could come

under pressure due to (1) aggressive sales campaigns to drive

sales and maintain market leadership, (2) the group’s hesitance

to raise prices despite rising inventory costs, and (3) more

expensive imported merchandise due to the weaker ringgit.

Sustaining high dividend payout. Management is committed to

pay out a minimum DPS of 10 sen over the next few years, even

if earnings prospects remain sluggish, thanks to its: (1) strong

cash-generating capability, and (2) net cash posit ion.

Key Risks:

Competitive sector. Padini continues to face strong

competition from a large pool of retail brands in Malaysia.

Prolonged slump in consumer sentiment. Although the group

has so far benefited from downtrading, a prolonged slump in

consumer sentiment could dampen discretionary spending.

Company Background

Padini is a 43-year-old Malaysia-based fashion retailer that

offers clothing, accessories and shoes under the brands of

Padini, Vincci, Seed, Miki, Padini Authentic, P&Co, PDI, etc.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)


1.5

1.6

1.6

1.7

1.7

1.8

1.8

1.9

1.9

0.00

0.05

0.10

0.15

0.20

0.25

2016A 2017A 2018A 2019F 2020F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2016A 2017A 2018A 2019F 2020F

Capital Expenditure (-)

RMm

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2016A 2017A 2018A 2019F 2020F

Avg: 11.4x

+1sd: 14.9x

+2sd: 18.3x

-1sd: 7.9x

-2sd: 4.4x3.9

5.9

7.9

9.9

11.9

13.9

15.9

17.9

19.9

Aug-14 Aug-15 Aug-16 Aug-17

(x)

Avg: 3.68x

+1sd: 4.88x

+2sd: 6.08x

-1sd: 2.47x

-2sd: 1.27x1.1

2.1

3.1

4.1

5.1

6.1

Aug-14 Aug-15 Aug-16 Aug-17

(x)

Company Guide

Padini Holdings

Key Assumptions

FY Jun 2016A 2017A 2018A 2019F 2020F

Total retail floor space (k sq ft)

1,151 1,151 1,191 1,231 1,271

Revenue growth (%) 33.1 20.2 6.88 6.33 1.08

SSS growth (%) 13.0 8.00 0.50 2.90 0.52

Revenue growth from

exports, consignment & others (%)

0.14 0.10 (2.8) 0.21 0.20

Revenue growth from new floor spaces (%)

19.9 8.15 2.60 5.32 0.26

Income Statement (RMm)

FY Jun 2016A 2017A 2018A 2019F 2020F

Revenue 1,301 1,571 1,679 1,752 1,808

Cost of Goods Sold (759) (952) (991) (1,030) (1,063)

Gros s Profit 543 619 688 722 745

Other Opng (Exp)/Inc (356) (407) (455) (433) (453)

Operating Profit 187 211 232 289 292

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0

Associates & JV Inc 0.0 0.0 0.0 0.0 0.0


Exceptional Gain/(Loss) (0.6) (1.3) 0.0 0.0 0.0

Pre -tax Profit 187 212 240 299 304

Tax (49.3) (55.8) (61.4) (77.7) (79.1)

Minority Interest 0.0 0.0 0.0 0.0 0.0

Preference Dividend 0.0 0.0 0.0 0.0 0.0

Net Profit 137 156 178 221 225

Net Profit before Except. 138 157 178 221 225

EBITDA 222 250 273 326 327

Growth

Revenue Gth (%) 33.1 20.7 6.9 4.3 3.2

EBITDA Gth (%) 56.2 12.7 9.4 19.3 0.2

Opg Profit Gth (%) 67.7 13.1 10.0 24.4 0.8

Net Profit Gth (Pre-ex) (%) 72.0 14.1 13.3 24.0 1.8

Margins & Ratio

Gross Margins (%) 41.7 39.4 41.0 41.2 41.2

Opg Profit Margin (%) 14.4 13.5 13.8 16.5 16.1

Net Profit Margin (%) 10.6 9.9 10.6 12.6 12.5

ROAE (%) 31.4 30.6 29.8 30.8 26.0

ROA (%) 19.6 18.6 19.5 21.5 19.0

ROCE (%) 27.5 26.1 25.5 27.4 23.2

Div Payout Ratio (%) 55.1 48.5 42.4 34.2 33.6

Net Interest Cover (x) NM NM NM NM NM


Company Guide

Padini Holdings

Quarterly / Interim Income Statement (RMm)

FY Jun 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018

Revenue 461 315 460 425 478

Cost of Goods Sold (302) (179) (280) (247) (286)

Gros s Profit 158 136 181 179 192

Other Oper. (Exp)/Inc (104) (95.7) (115) (131) (114)

Operating Profit 54.4 40.2 65.9 48.1 78.3

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0

Associates & JV Inc 0.0 0.0 0.0 0.0 0.0


Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0

Pre -tax Profit 55.4 41.9 67.0 50.1 80.7

Tax (14.9) (10.7) (17.0) (10.3) (23.4)

Minority Interest 0.0 0.0 0.0 0.0 0.0

Net Profit 40.5 31.2 50.0 39.8 57.3

Net profit bef Except. 40.5 31.2 50.0 39.8 57.3

EBITDA 65.2 50.3 75.6 58.9 88.7

Growth

Revenue Gth (%) 23.2 (31.6) 46.1 (7.6) 12.4

EBITDA Gth (%) 18.1 (22.8) 50.3 (22.1) 50.5

Opg Profit Gth (%) 19.5 (26.1) 63.9 (27.0) 62.6

Net Profit Gth (Pre-ex) (%) 15.8 (23.0) 60.2 (20.4) 43.9

Margins Gross Margins (%) 34.4 43.1 39.2 42.0 40.3

Opg Profit Margins (%) 11.8 12.8 14.3 11.3 16.4

Net Profit Margins (%) 8.8 9.9 10.9 9.4 12.0

Balance Sheet (RMm)

FY Jun 2016A 2017A 2018A 2019F 2020F Net Fixed Assets 123 137 129 123 118

Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0

Other LT Assets 14.4 19.5 18.2 17.2 16.4

Cash & ST Invts 350 467 537 685 839

Inventory 263 193 196 209 216

Debtors 49.3 64.9 66.8 72.4 74.7

Other Current Assets 0.28 0.06 0.06 0.06 0.06

Total Assets 800 881 946 1,107 1,264

ST Debt

60.2 76.0 45.0 45.0 45.0

Creditor 235 221 225 239 247

Other Current Liab 16.5 13.5 13.5 13.5 13.5

LT Debt 9.64 6.34 6.34 6.34 6.34

Other LT Liabilities 9.23 12.1 12.1 12.1 12.1

Shareholder’s Equity 469 552 645 790 940

Minority Interests 0.0 0.0 0.0 0.0 0.0

Total Cap. & Liab. 800 881 946 1,107 1,264

Non-Cash Wkg. Capital 61.0 23.4 24.9 28.6 29.9

Net Cash/(Debt) 280 385 485 634 787

Debtors Turn (avg days) 14.0 13.3 14.3 14.5 14.9

Creditors Turn (avg days) 94.2 91.2 85.6 85.3 86.4

Inventory Turn (avg days) 109.0 91.2 74.8 74.4 75.4

Asset Turnover (x) 1.9 1.9 1.8 1.7 1.5

Current Ratio (x) 2.1 2.3 2.8 3.2 3.7

Quick Ratio (x) 1.3 1.7 2.1 2.5 3.0

Net Debt/Equity (X) CASH CASH CASH CASH CASH

Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH

Capex to Debt (%) 44.2 58.1 58.4 58.4 58.4

Z-Score (X) 10.3 10.6 11.3 11.0 10.7


Strong balance sheet- net cash position

Company Guide

Padini Holdings

Cash Flow Statement (RMm)

FY Jun 2016A 2017A 2018A 2019F 2020F

Pre-Tax Profit 187 212 229 299 304

Dep. & Amort. 34.9 38.7 39.3 37.1 35.4

Tax Paid (42.0) (64.2) (59.4) (77.7) (79.1)

Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0

Chg in Wkg.Cap. (9.7) 8.06 (1.4) (3.7) (1.3)

Other Operating CF 6.02 26.0 (9.7) (12.6) (15.7)

Net Operating CF 176 220 197 242 243

Capital Exp.(net) (30.8) (47.8) (30.0) (30.0) (30.0)

Other Invts.(net) 0.0 0.0 0.0 0.0 0.0

Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0

Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0

Other Investing CF 2.46 71.4 9.67 12.6 15.7

Net Investing CF (28.4) 23.6 (20.3) (17.4) (14.3)

Div Paid (75.7) (75.7) (75.7) (75.7) (75.7)

Chg in Gross Debt 27.8 12.9 (31.0) 0.0 0.0

Capital Issues 0.0 0.0 0.0 0.0 0.0

Other Financing CF 0.0 (4.1) 0.0 0.0 0.0

Net Financing CF (47.9) (66.9) (107) (75.7) (75.7)

Currency Adjustments 0.0 0.0 0.0 0.0 0.0

Chg in Cash 99.7 177 70.4 149 153

Opg CFPS (sen) 28.2 32.3 30.2 37.3 37.2

Free CFPS (sen) 22.1 26.2 25.4 32.2 32.4


Target Price & Ratings History

Source: AllianceDBS

Analyst: CHEAH King Yoong

Abdul Azim Mukhthar

S.No.Date of

Report

Closing

Price

12-mth

Target

Price

Rat ing

1: 28 Aug 17 4.06 3.55 HOLD

2: 30 Nov 17 5.05 3.55 FULLY VALUED

3: 27 Feb 18 5.13 3.55 FULLY VALUED

4: 17 May 18 5.19 5.05 HOLD

5: 24 May 18 5.30 5.05 HOLD

6: 07 Aug 18 5.99 5.05 HOLD

Note : Share price and Target price are adjusted for corporate actions.

1

2

3

4

5

6

3.71

4.21

4.71

5.21

5.71

6.21

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18

RM

Company Guide

Padini Holdings

DISCLOSURE

Stock rating definitions

STRONG BUY - > 20% total return over the next 3 months, with identifiable share price catalysts within this time frame BUY - > 15% total return over the next 12 months for small caps, >10% for large caps

HOLD - -10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps FULLY VALUED - negative total return > -10% over the next 12 months

SELL - negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame

Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax

bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio

CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter

Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets

Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price

DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital

EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date

Company Guide

Padini Holdings

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investment banking transactions or providing a specific recommendation for, or view of, a particular company.

This research report provides general information only and is not to be construed as an offer to sell or a solicitation to buy or sell any securities or other investments or any options, futures, derivatives or other instruments related to such securities or investments. In particular, it is

highlighted that this report is not intended for nor does it have regard to the specific investment objecti ves, financial situation and particular needs of any specific person who may receive this report. Investors are therefore advised to make their own independent eval uation of the

information contained in this report, consider their own individual investment objectives, financial situations and particular needs and consult their own professional advisers (including but not limited to financial, legal and tax advisers) regarding the appropria tenes s of investing in any

securities or investments that may be featured in this report.

ADBSR, AIBB, DBSVH and DBS Bank Ltd, their directors, representatives and employees or any of their affiliates or their related parties may, from time to time, have an interest in the securities mentioned in this report. AIBB, DBSVH and DBS Bank Ltd, their affiliates and/or their related persons may do and/or seek to do business with the company(ies) covered in this report and may from time to time act as market maker

or have assumed an underwriting commitment in securities of such c ompany(ies), may sell or buy such securities from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relati ng to such

company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.

AIBB, DBSVH, DBS Bank Ltd (which carries on, inter alia, corporate finance activities) and their activities are separate from ADBSR. AIBB, DBSVH and DBS Bank Ltd may have no input into company-specific coverage decisions (i.e. whether or not to initiate or terminate coverage of a

particular company or securities in reports produced by ADBSR) and ADBSR does not take into account investment banking revenues or potential revenues when making company-specific coverage decisions.

ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc (“DBSVUSA”), a U.S. -registered broker-dealer,

may beneficially own a total of 1% or more of any class of common equity securities of the subject company mentioned in this report. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBSVUSA may, within the past 12 months, have received compensation and/o r within the

next 3 months seek to obtain compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the

past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this report should contact DBSVUSA exclusively. DBS Vickers Securities (UK) Ltd is an authorised

person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients.

In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential

conflicts of interest. Additional information is, subject to the overriding issue of confidentiality, available upon request to enable an investor to make their own independent evaluation of the information contained herein.

Wong Ming Tek, Executive Director

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AllianceDBS Research Sdn Bhd (128540 U)

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