NTPM HOLDINGS BERHAD Outperform · Teoh Boon Beng 18.0 ... NTPM has invested USD19.7m to commission an office ... he sold his products as a generic non-brand product naming it

1 Important disclaimer is provided at the end of this report.| PUBLIC INVESTMENT BANK Page 1 of 14

PublicInvest Research Company Initiation Tuesday, January 28, 2014 KDN PP17686/03/2013(032117)

NTPM HOLDINGS BERHAD Outperform

DESCRIPTION

A duopoly in Malaysia, principally manufacturing and

trading of paper products such as tissue, diapers and

personal care related products.

Target Price RM1.04 Current Price RM0.81 Expected Return 28% Market Main Sector Consumer Bursa Code 5066 Bloomberg Ticker NTPM MK Shariah-compliant Yes SHARE PRICE CHART

52 Week Range (RM) 0.44-0.97 Month Average Vol („000) 1,054.4 SHARE PRICE PERFORMANCE

1M 3M 6M

Absolute Returns Relative Returns

9.5 14.5

17.4 20.0

46.6 45.7

KEY STOCK DATA

Market Capitalisation (RM m) No. of Shares (m)

909.8 1,123.3

MAJOR SHAREHOLDERS

%

Lee See Jin 29.6 Teoh Boon Beng 18.0 Lee Chong Choon 11.8

Research Team T 603 2031 3011 F 603 2272 3704 E [email protected]

Paper Power

NTPM Holdings Berhad (NTPM) operates as one of Malaysia‟s tissue duopoly producer, a leading tissue and upcoming personal care products manufacturer. The Group is growing to become a personal care product giant, with its plans to expand regionally to Indochina within the next 3 to 5 years, starting from its first USD19.7m operations in Vietnam by March this year. We recommend NTPM with an Outperform view with TP of RM1.04 premised on 16x PE multiple valuation on

FY15F earnings, supported by its i) 55% Malaysian tissue market share position, ii) emergence as an promising diaper and personal care manufacturer, iii) regional expansion of operations to Indochina, and iv) earnings boost from capacity and higher margins through product diversification including new paper products such as wet tissue and packaging wraps.

Growing regionally. NTPM has invested USD19.7m to commission an office

and 2 warehouses housing 2 paper making machines on 10ha of land in Ho Chi Minh City. The plant will run at c.10,000MT/annum to start off, which equates to about 1/8

th of Vietnam‟s total consumption on tissue products per

year. To kickstart the operations, NTPM will be transferring some of its export sales to be produced in Vietnam, hence breakeven will be achieved despite Vietnam‟s poor domestic environment.

Resilient as a Personal Care player. NTPM is also growing its personal care

offering in diapers (babies and adults), sanitary napkins and facial cotton and ear buds. A contract was also signed with a US-based company Seaman Paper Co. to supply wrapping tissue paper for products such as shoes for exclusive sports brands and fruits, and another with a Japanese company to supply diaper core wraps. The industry is gradually achieving a more balanced premium vs. mass product market hence NTPM‟s move to expand in premium personal care would yield higher margins.

Dividends. The Group‟s consistency in paying out dividends going forward is

maintained at 2.9 sen per share translating to a healthy yield of 3.6% for FY15F.

Reaffirming Outperform. Our valuation of RM1.04 at 16x PE multiple based

on FY15F earnings only considers a 8% growth in revenue with a 12% net profit margin sustained by higher margins expected from baby diapers and new products which we maintain is conservative as we have not taken into account the potential production of wrapping tissue for export. We expect earnings to be boosted further upon the materialising of their strategies.

KEY FORECAST TABLE (RM m)

FY April 2012A 2013A 2014F 2015F 2016F CAGR

Revenue 449.8 480.6 547.8 591.7 644.3 9.4%

Gross Profit 245.9 272.0 317.3 331.4 360.9 10.1%

Pre-tax Profit

59.8 67.6 86.5 96.6 104.4 15.0%

Net Profit 45.0 49.4 68.4 72.5 78.3 14.8%

EPS (Sen) 4.0 4.4 6.1 6.5 7.0 15.0%

P/E (x) 20.2 18.3 13.3 12.5 11.6

DPS (Sen) 1.5 2.9 2.9 2.9 2.9

Dividend Yield

1.8% 3.6% 3.6% 3.6% 3.6%

Source: Company, PublicInvest Research estimates

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14

PUBLIC INVESTMENT BANK


PUBLIC INVESTMENT BANK BERHAD

A Humble Beginning…

Founded by Mr. Lee See Jin 1975, he began NTPM‟s operations in Nibong Tebal, as a simple toilet roll producer by 1979. Starting with only 5MT/day of toilet rolls production, he sold his products as a generic non-brand product naming it “88”,”99” according to the roll number produced. Personally carrying his generic toilet paper roll products to Singapore. Mr. Lee together with his son Chong Choon sold the products in a wet market, which led him to see the potential of tissue paper products and hence bought NTPM‟s first toilet roll manufacturing machine from Taiwan. Mr. Lee‟s son Chong Choon then completed his studies and began learning the ropes of NTPM. After 38 years of experience with the Group, he currently holds an executive director position and plays an instrumental role in spearheading the progress and development of the Group‟s products. Today, NTPM is focused on its extensive distribution network business model supplying to more than 9000 direct customers throughout Malaysia of modern and traditional trades. NTPM‟s main manufacturing premises are in Nibong Tebal spanning across 90 acres of land of which 60 acres are currently utilised. It also has distribution warehouses in Kuala Lumpur, Malacca, Johor Bahru, Pahang and Kota Bahru to cater for the respective areas. A tissue duopoly. Dominating c.55% of Malaysia‟s tissue market share, NTPM

operates with 19 machines at an average of 60% utilisation rate translating to c.10,000MT/mth. NTPM is sizeable and thus with its expansion plans will continue to sustain the group‟s duopoly position coupled by their expertise in the segment. Aside from growing as a tissue giant, NTPM has also been expanding to other paper-related products including diaper, personal care, cotton products and adult diaper. Figure 1: NTPM’s Market Share

Product Type Market Share

Tissue >55%

Baby Diaper 10%

Personal Care (Sanitary towels)

12%

Cotton Products c.30%

Adult Diaper <5%

Source: Company

Figure 2a: Revenue and PBT Contributions for FY13

80% 74%

20% 26%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2012 2013

Revenue

Tissue Personal Care



Source: Company

Figure 2b: Geographical Revenue

Source: Company

Figure 3: Product Range

Brand Product Range Premier Facial Tissue

Kitchen Towel Cotton Buds

Hanky Pack Facial Cotton

Pocket Tissue Cotton Wool

Serviette

Cotton Ball

Bathroom Tissue

Kids Tissue

Royal Gold Facial Tissue

Hanky Pack

Kitchen Towel

Bathroom Tissue

Kids Tissue

Cutie COMPACT Bathroom Tissue

COMPACT Kitchen Towel

COMPACT Serviette

88% 82%

12% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2012 2013

PBT

Tissue Personal Care

Malaysia 74%

Singapore 14%

Others 12%



SOFT Bathroom Tissue

BUDGET Bathroom Tissue

Superior Bathroom Tissue Facial Cotton

Facial Tissue Cotton Wool

Serviette

Cotton Buds

CONV Bathroom Tissue

Single Pull Tissue

Folded Hand Towel

Jumbo Bath Tissue

Hand Roll Towel

Center Flow Hand Towel

Industrial Tissue

Clinical Tissue

Diapex Premium Diapers

Easy Diapers

Travel Pack

Convenient Pack

Jumbo / Mega Pack

Cutie Dry

Wonder Pants

Adult Diapers

Intimate Sanitary Napkin

Pantyliners

Maternity Adhesive

Maternity Loop

Source: Company

Figure 4: NTPM’s Accreditations

ISO 9001 : 2008 Standard since 2002

SIRIM tested

Hazard Analysis and Critical Control Point Certification accredited in 2007

ISO 14001 : 2004 since 2008 Environmental Choice New Zealand (ECNZ) accredited in 2009

Good Environmental Choice Australia (GECA)

Source: Company

Product Diversification Traditionally an OEM and OBM tissue manufacturer, the group identified other related products such as Diapex (diapers for babies and adults – target to achieve estimated c.25% of total group revenue) and Intimate (feminine personal care) as areas which could potentially boost their market share and margins further.



Tissue currently yields c.15% margin, while diapers yield c. 6% margin. The group expects the introduction of enhanced diapers such as premium, pull-up type features to eventually match tissue‟s 15% margin. This year, NTPM will also venture into wet tissue manufacturing while focusing on its expansion plans to Vietnam and other markets for its various products. Figure 5a: Cost Breakdown for Tissue Products as a % of Gross Sales

Source: Company

Figure 5b: Cost Breakdown for Personal Care as a % of Gross Sales

Source: Company Diapex. i) Baby diapers - NTPM began manufacturing baby diapers since 6-

7years ago, however only as an OEM brand manufacturer. Thus we believe the Group has the knowledge and experience to manufacture its own brand successfully enhanced by innovative product variants such as Diapex wonder pants which will increase its bottom-line contributions. The Diapex brand moreover has been introduced into the market since mid-2009, and today captures about 10% of Malaysia‟s baby diaper market share. ii) Adult diapers – dominating more than 5% of Malaysia‟s adult diaper market share. The Group aims to increase its total diapers market share up to 30% going forward.

Sales Charges/ Promotion and

Taxes 12%

Raw Materials 33%

Labour 11%

Research and Maintanence

6%

Depreciation 6%

Overheads 14%

Selling and Distribution

12%

Admin, Finance,

Advertising 6%

Sales Charges/ Promotion and

Taxes 15%

Raw Materials 51%

Labour 8%

Research and Maintanence

1%

Depreciation 2%

Overheads 3%

Selling and Distribution

11%

Admin, Finance,

Advertising 9%



Increasing diaper capacity. Operating at RM250m/yr of baby diapers worth of

annual capacity via 2 machines. NTPM has invested in 2 more machines of which one machine will be dedicated to manufacture the baby pull-up diaper design. Since the pull-up diaper design machine was delivered 2 months ago, NTPM has already placed an order for an additional machine for RM15m which will be delivered by end-2014. 1 pull-up diaper manufacturing machine can translate to c.RM50m in revenue. The diaper segment is currently operating at 50% capacity utilisation from its 4 machines. Figure 6: NTPM’s Production Capacity

Utilisation

Total Current Capacity

Additional capacity

Total Capacity

Tissue 66% 110,000mt/yr 10,000mt/yr (Vietnam)

120,000mt/yr

Baby Diaper 50%

Source: Company Figure 7: Revenue Contribution by OEM vs. OBM

Source: Company Figure 8: Revenue Contribution by Tissue Product Type

Source: Company

OEM 25%

OBM 75%

Facial Tissue 19%

Pocket Tissue 5%

Toilet Roll 42%

Kitchen Towel 10%

Serviette 7%

Jumbo Bath Tissue

12%

Jumbo Roll 5%



NEW wrapping tissue paper production. Going forward, NTPM is in the midst

of diversifying further into manufacturing simple packaging wraps for shoes, shirts, fruits and core wrap for baby diapers. They have a partner contract with Seaman Paper Co. from Massachusetts to produce its wrapping tissue product for its Vietnam operations to then be exported. We would expect some exciting contribution from this partnership, considering the high double-digit margins, with minimal costs from manufacturing a generic product. We also assume this contract is a long-term opportunity with potential order capacity of up to 20,000mt/mth and hence would continue to increase its contributions to the Group. We analysed the potential of wrapping tissue paper, exemplified by an almost pure wrapping tissue paper manufacturer (70% of revenue) in China – You Yuan International Holdings Ltd. With a production capacity of <200,000mt/yr of wrapping tissue paper, You Yuan has been registering c.30% gross profit margins, as well as increase in sales volume from 2012 to 2013 by about 10% for tissue wrap. You Yuan‟s overall net profit margins range from 17%-18%.

Growth Drivers 1

st Vietnam plant. NTPM invested about USD19.7m to commission an office and

2 warehouses on 10ha of land in Ho Chi Minh City. The Ho Chi Minh City plant will cater to the southern areas of Vietnam and Cambodia. The commissioning of the plant is expected in 3Q 2014, with installation of machines to begin by March 2014. The Vietnam operations capacity is about 10,000MT/annum, and to encourage revenue generation, NTPM will be transferring some of its export sales to be produced in Vietnam, hence breakeven will be achieved despite Vietnam‟s poor domestic environment. Upon the commissioning of the Vietnam plant, 50% of its capacity will be used to manufacture tissue wrap for Seaman Paper Co. Additional earnings contribution will only be expected in about 3 years later due to the poor purchasing power in Vietnam, thus there is a need to wait for minimum wage to take effect. Despite the anticipated slow growth, NTPM‟s venture aims to i.) take advantage of the current low labour and pulp costs in Vietnam, and ii.) penetrate into the market ahead of other players. 2 more plants to conquer Indochina. Upon the success of the Vietnam plant,

NTPM already has strategies in place to build 2 more plants in Northern Vietnam to cater for Laos and southern China, and Myanmar for distribution in local markets and Thailand. The Group‟s business strength is dependent on its close distribution network to its clients hence the strategy to develop plants in local markets can aid in its network, logistical savings as well as better management of overall costs from lower labour costs. The additional capacity from these 2 plants are yet to be determined, and execution to be carried out in several phases. Growing distribution network. Aside from the Group‟s continuous production

innovation, NTPM‟s business model is successful based on its strong and wide points of sale have allowed its business to grow rapidly. 60% of the NTPM‟s revenue is from traditional trade, such as mini-markets, while 40% is from modern trade, including hypermarkets such as AEON (45 outlets with c.10% growth YoY in points of sale), Giant and Tesco. The Group boasts more than 9000 direct customers throughout Malaysia, with about 30,000 total outlets. For personal care, NTPM has 4500 points of sales (POS), with the maximum addressable POS currently up to 90% of the 9000 POS. An additional 3500 POS is from mini-markets and Chinese medicine halls.



Figure 9: Distribution Network

No. of Employees

Sales 100

Merchandiser 50

Promoters 250

Truck Distribution 130 trucks

Source: Company

Innovative technology. NTPM is also recycling their waste-paper fibre, by

processing the waste as raw materials for cardboard file manufacturers and pellets. The Group continues this initiative by designing their own machine to recycle purchased, damaged but unused diapers from the market. The machine is able to separate the sap and pulp from the final product to then be cleaned and reused for the lower-end diaper products.

Catalysts

Stable supply of raw materials. NTPM‟s raw materials constitutes c.63% of the

Group‟s raw material costs (c.40% of COGS) comprising of 2 main types of raw materials - 100% virgin pulp and 100% recycled waste office paper. Other raw materials include super absorbent powder (SAP) and tissue wrap for diapers. Figure 10: Raw Material Use Breakdown By Product Type

Product Type 100% Virgin

Pulp* Recycled Office Waste Paper*

Tissue 20% 80%

100% Virgin

Pulp* SAP

and Others*

Sanitary Towels 40% 60%

Diaper 30% 70% Source: Company *The breakdown is an estimated average for each product type, but varies from each individual product.

For pulp, NTPM uses both long (2.3mm) and short (1.8mm) fibres as its tissue products require a composition of 70% short fibre and 30% of long fibre. The softer the tissue, the higher the long fibre component, vice versa. The Group sources the Northern Bleached Softwood Kraft (NBSK) pulp, a type of long fibre used as reinforcement when making tissue paper produced mostly in the cold regions such as Canada and Nordic countries such as Finland. Its short fibres are sourced from Indonesia and Brazil, the warmer climate regions, The difference in pricing is about USD100/MT with long fibres to be more expensive to source. For recycled paper, the Group processes office waste paper from domestic sources, in both black white (photostated paper) and mix white (coloured) paper. The price of recycled paper is determined by newsprint prices, derived from lower pulp prices as its main component is low short pulp fibres. Management expects the average price of raw materials to trend around USD610/MT.



Figure 11: Wood Pulp Monthly Price Trend

Source: World Bank Figure 12: FOEX PIX Pulp BHKP Price

* FOEX receives real trade information from parties in the pulp and paper industry, from buyers, sellers as well as from agents. The highest 10% and lowest 10% of the prices are eliminated and the PIX value is calculated as an average price from the remaining prices. The price is for a minimum amount of 100MT of quality BHK pulp in USD per ton. Terms of delivery are CIF European port and terms of payment 30 days net or the most frequent term of payment used.

Source: Bloomberg

Growth in tissue market. The tissue market is expected to grow globally at a

CAGR of 4.9%. Growth in mature markets is in the low single-digit, while it is considerably higher in emerging markets which NTPM is mainly operating in. Attributed to the increasing disposable incomes and greater use of tissue through hygiene awareness, we see the potential of the tissue products milieu which NTPM is yet to penetrate. Personal care positive industry outlook. Global industry growth for the

personal care fared better than the previous year and total sales reached nearly USD426bn globally for the personal care and beauty industry. Asia Pacific in particular reinforced its dominance further as the region expanded an extra USD6.6bn from a year before. The industry is regarded as one of the faster growing emerging markets in China, driven by economic growth and rise in disposable incomes hence the emerging appeal for premium and quality products. The industry is looking to achieve a more balanced premium vs. mass product market compared to the stronger lead by the mass market in the last five years.

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We believe this would aid in NTPM’s emphasis in expanding its personal care products, coupled with better margins as manufacturing premium products will yield higher margins. Statistics convey that majority of the absolute growth in premium cosmetics globally will be attributed to the developed regions, although Asia Pacific alone will add an extra USD5 billion worth of premium sales by 2016. Expanding to East Malaysia. NTPM is expanding further into the East Coast,

with encouraging growing population of about 1.5% YoY higher than Malaysia‟s growth population of c. 1.3%. We believe there will be a need for NTPM‟s tissue and personal care products. Figure 13: East Malaysia vs. Malaysia Population

Source: Malaysia Department of Statistics, CEIC

Arising opportunities. Thailand, has a growing market with the introduction of a

minimum wage policy of THB300/day this year, NTPM sees the opportunity to expand further to this market and have been penetrating Thailand through Big C and AEON Thailand outlets. The baby diaper market further commands a higher premium to its products. For example, baby diapers cost between RM1.20-RM1.60/piece, whilst in Malaysia the cost is RM0.60-RM0.80/piece. The margins will thus be higher. Large Indochina market. We believe the growing population stimulated by the

gradual minimum wage implementation within the region would allow NTPM to capture more discretionary spending, hence opportunities for expansion. Figure 14: Population For Indochina Countries

Source: World Bank, CEIC

28.59 28.96 29.34

3.26 3.32 3.37 2.49 2.52 2.55 0.09 0.09 0.09

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Person (m)

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Financials

NTPM‟s FY13 results grew 6.8% top-line and 10% bottom-line. We remain positive on the group‟s growth prospects, but have conservatively estimated the group to maintain its 8% revenue growth, but gradually expanding its net profit margin gradually from 12% onwards. Low gearing. Remains at 0.3x, but management has expressed that they are

willing to extend their policy up to 0.5x if necessary to cater for expansion purposes. Figure 15: Financial Summary


Capital Expenditure. The Group consistently invests about RM50m YoY for

capital expenditure, however they will increase their investment when necessary to cater for their expansion plans and new machineries. Dividends. NTPM will continue its DPS payout of 2.9 sen, translating to a 3.6%

yield for both FY14 and FY15 at a 45% and 41% payout respectively. Considering the expansion plans to be on track, margins to improve from diversification and bottom-line to grow steadily, we believe management has the intention to reward shareholders further.

Valuation

Valuation – TP RM1.04. Using a 16x PE multiple, we have valued NTPM using

its forward EPS of 6.5 sen.

Figure 16: PE Valuation

FY15F PAT P/E

72.5 16.0 1159.4

1118.2

Target Price

1.04

Current Price 0.81

% Upside

28%

Source: PublicInvest Research estimates

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

FY12 FY13 FY14F FY15F FY16F

RM m Revenue EBIT PBT Net Profit



Potential higher valuation. Currently trading at 16x PE multiple, we expect with

the group‟s expansion plans domestically and regionally and market position that NTPM is deserving of a higher valuation. In comparison with industry peers who are trading at an average of 21x PE multiple, there is further upside to the Group‟s valuation potential and hence upside to the stock‟s performance.

Figure 17: Peer Comparison

P/E (x)

EPS

ROE (%)

Div Yield (%)

Company Mkt Cap (RM bn)

FY12 Rev FY

14F FY 15F

FY 14F

FY 15F

FY 14F

FY 14F (RM m)

NTPM Holdings

898.6 480.6 16.2 14.7 0.05 0.06 0.17 0.04

Unicharm Corp

36785.2 18564 29.59 26 6.02 6.85 0.12 0.01

Hengan Intl‟

46074.5 7374.9 22.71 19.6 1.63 1.88 0.28 0.03

Kimberly-Clark

135413.5 65047.7 17.36 16.3 20.25 21.6 0.47 0.03

Procter & Gamble

718200.6 259451.6 18.55 17.05 14.25 15.5 0.18 0.03

Average

20.9 18.7

Source: Bloomberg

Key Risks Potential fluctuations in raw material prices. Constituting a bulk of the group‟s

costs, hence the fluctuations in price of pulp (long fibre and short fibre) would affect the Group‟s costs. In the near-term, management believes this cost will be maintained at low stable levels as there is growing supply from mills in the region. A price dictator for the mass segment. NTPM‟s pricing strategy is often up to

c.10% below its main competitor despite being a price dictator for the mass market. The selling price for its products is thus determined by another market leader which puts NTPM‟s potential revenue and hence earnings at risk. The Group has therefore relied on its distribution strength and going forward expansion in volume to mitigate this risk. Recent electricity tariff hike. With the 16.5% hike, NTPM‟s additional expenses

on electricity would increase by about RM4m/yr of total revenue. The Group has decided to absorb the costs and maintain its selling price to remain competitive. Their aim is to build volume for the brand and to increase its sales potential through a more competitive product price. Based on our revenue for FY15F, the effect of the electricity tariff hike would be c0.7% We do concede that the Group will be able to handle and absorb this cost considering its gradual increase in margins, and economies of scale potential from capacity expansion initiatives. Competition. From the key market leader and smaller players especially in the

products variant area. The quality and types of products would also affect the group‟s performance, hence constant research and development and also evolvement in products are crucial to be sustainable in the industry.



KEY FINANCIAL DATA

INCOME STATEMENT DATA

FY April 2012A 2013A 2014F 2015F 2016F

Revenue 449.8 480.6 547.8 591.7 644.3

Cost of sales -203.9 -208.5 -230.5 -260.3 -283.4

Operating Profit 245.9 272.0 317.3 331.4 360.9

Other Gains / (Losses) -182.6 -200.2 -227.4 -231.2 -253.6

Finance Costs -3.5 -4.2 -3.5 -3.6 -2.9

Pre-tax Profit 59.8 67.6 86.5 96.6 104.4

Income Tax -14.8 -18.2 -18.2 -24.2 -26.1

Effective Tax Rate (%) 24.7 27.0 21.0 25.0 25.0

Net Profit 45.0 49.4 68.4 72.5 78.3

Growth

Revenue 7% 7% 14% 8% 9%

Operating Profit -7% 13% 22% 11% 7%

Net Profit -14% 10% 38% 6% 8%


BALANCE SHEET DATA

FY April 2012A 2013A 2014F 2015F 2016F

Property, Plant & Equipment 246.8 273.4 296.8 317.9 336.6

Cash and Cash Equivalents 25.0 31.4 24.6 35.5 52.6

Receivables, deposits and prepayment

91.1 97.9 111.6 120.6 131.3

Other Assets 101.0 117.4 130.6 145.7 158.6

Total Assets 464.0 520.2 563.5 619.7 679.1

Payables 57.8 67.4 43.9 49.3 53.7

Borrowings 100.9 115.6 118.8 93.3 48.6

Deferred tax 19.9 20.8 20.8 20.8 20.8

Other Liabilities 2.9 5.6 8.7 9.4 10.5

Total Liabilities 181.4 209.3 192.1 172.8 133.6

Shareholders‟ Equity 282.6 310.9 371.4 446.9 545.5

Total Equity and Liabilities 464.0 520.2 563.5 619.7 679.1


PER SHARE DATA & RATIOS

FY April 2012A 2013A 2014F 2015F 2016F

Book Value Per Share 0.3 0.3 0.3 0.4 0.5

NTA Per Share 0.3 0.3 0.3 0.4 0.5

EPS (Sen) 4.0 4.4 6.1 6.5 7.0

DPS (Sen) 1.5 2.9 2.9 2.9 2.9

Payout Ratio 36% 66% 47% 45% 41%

ROA 10% 9% 12% 12% 12%

ROE 16% 16% 18% 16% 14%




RATING CLASSIFICATION

STOCKS

OUTPERFORM The stock return is expected to exceed a relevant benchmark‟s total of 10% or higher over the next 12months.

NEUTRAL The stock return is expected to be within +/- 10% of a relevant benchmark‟s return over the next 12 months.

UNDERPERFORM The stock return is expected to be below a relevant benchmark‟s return by -10% over the next 12 months.

TRADING BUY The stock return is expected to exceed a relevant benchmark‟s return by 5% or higher over the next 3 months but the

underlying fundamentals are not strong enough to warrant an Outperform call.

TRADING SELL The stock return is expected to be below a relevant benchmark‟s return by -5% or more over the next 3 months.

NOT RATED The stock is not within regular research coverage.

SECTOR

OVERWEIGHT The sector is expected to outperform a relevant benchmark over the next 12 months.

NEUTRAL The sector is expected to perform in line with a relevant benchmark over the next 12 months.

UNDERWEIGHT The sector is expected to underperform a relevant benchmark over the next 12 months.

DISCLAIMER This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad (“PIVB”). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, Public Bank Berhad, its affiliates and related companies, directors, officers, connected persons/employees, associates or agents. This document is not and should not be construed or considered as an offer, recommendation, invitation or a solicitation of an offer to purchase or subscribe or sell any securities, related investments or financial instruments. Any recommendation in this document does not have regards to the specific investment objectives, financial situation, risk profile and particular needs of any specific persons who receive it. We encourage the addressee of this document to independently evaluate the merits of the information contained herein, consider their own investment objectives, financial situation, particular needs, risks and legal profiles, seek the advice of their, amongst others, tax, accounting, legal, business professionals and financial advisers before participating in any transaction in respect of any of the securities of the company(ies) covered in this document. PIVB, Public Bank Berhad, our affiliates and related companies, directors, officers, connected persons/employees, associates or agents may own or have positions in the securities of the company(ies) covered in this document or any securities related thereto and may from time to time add or dispose of, or may be materially interested in, any such securities. Further PIVB, Public Bank Berhad, our affiliates and related companies, associates or agents do and/or seek to do business with the company(ies) covered in this document and may from time to time act as market maker or have assumed an underwriting commitment in the securities of such company(ies), may sell them or buy them from customers on a principal basis, may have or intend to accommodate credit facilities or other banking services and may also perform or seek to perform investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment advisory or other services from any entity mentioned in this document. The analyst(s) and associate analyst(s) principally responsible for the preparation of this document may participate in the solicitation of businesses described aforesaid and would receive compensation based upon various factors, including the quality of research, investor client feedback, stock pickings and performance of his/her recommendation and competitive factors. Hence, the addressee or any persons reviewing this document should be aware of the foregoing, amongst others, may give rise to real or potential conflicts of interest.

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