public investment bank · 2017-04-10 · public investment bank publicinvest research ipo note...

PUBLIC INVESTMENT BANK

PublicInvest Research IPO Note Monday, April 10, 2017 KDN PP17686/03/2013(032117)

EVERSAFE RUBBER BERHAD Fair Value: RM0.40

1 Important disclaimer is provided at the end of this report.| PUBLIC INVESTMENT BANK of 12

DESCRIPTION

An investment holding company, involves in development, manufacturing and distribution of tyre retreading materials and tyre retreading operations. Fair Value RM0.40 IPO Price RM0.36 Expected Return 11.2% Closing Application Date 10 April 2017 Indicative Listing Date 21 April 2017 Market ACE Bursa Code 0190 Bloomberg Ticker ESR MK Shariah-compliant No IPO DETAILS Shares(m)

Offer for Sale 30 Public Issue 48 UTILISATION OF PROCEEDS RM (m) New manufacturing lines and enhanced automation systems 12.6 Establish intellectual property rights and overseas branding initiative 1.5 Establish listing expenses 3.2

Total 17.3 KEY STOCK DATA

Market Capitalisation (RM m) 86.6 No. of Shares (m) 240 MAJOR SHAREHOLDERS

% Tai Hin & Son (PG) SB 48.6 Eu Ah Seng 6.9 Dato’ Seri Cheah Eu Kiat 6.4 Research Team T 603 2268 3000 F 603 2268 3014 E [email protected]

Dominant Market Player Eversafe Rubber Berhad is involved in the development, manufacturing and distribution of tyre retreading materials and tyre retreading operations, operating across the value chain. Commanding c.22% market share for tyre retreading materials in Malaysia, the Group’s growth going forward will focus on i) increasing its export sales to overseas markets, ii) enhancing its product range through new offerings, value-adding and focus on premium products, and iii) improving efficiencies. We are therefore valuing Eversafe Rubber with a fair value of RM0.40 pegged to a 10.0x PE multiple, based on our FY17F EPS of 4.0sen. The IPO is expected to raise approximately RM17.3m from the issuance of 48m new shares, with c.73% of its proceeds to be utilised for capacity expansion and enhancing automation of its operations.

Key growth drivers. Eversafe Rubber’s growth will focus on i)

increasing its export sales to overseas markets, ii) enhancing its product range through new offerings, value-adding and focus on premium products, and iii) improving efficiencies. The Group we understand has been able to grow its overseas revenue to contribute c.57.1% for 9MFY16 from c. 54.8% in FY15.

Competitive strengths. As one of the prominent manufacturers of tyre

retreading materials in Malaysia, Eversafe Rubber is able to compete against its competitors in securing new customers as well as retaining existing ones, coupled with establishing a wide global outreach with exports to at least 23 countries for FY15 onwards. Its tyre retreading solutions with customisation capabilities furthermore creates value enhancements to reinforce its competitiveness in the market.

Catalysts. i) Increase in commercial vehicles in Malaysia, which is

expected to generate higher demand for retreaded tyres, ii) continued growth in China and Brazil for rubber compounds, iii) higher rubber prices which can translate to higher ASP with effective management of costs.

Key risks. Key downside risks among others include (i) volatility in prices

of raw materials, (ii) fluctuation in foreign exchange rates and (iii) competition from existing and new market entrants locally and overseas.

KEY FINANCIAL SUMMARY

FYE Dec (RM m)

2014A 2015A 2016A 2017F 2018F CAGR

Revenue 81.4 75.3 74.7 80.0 85.2 1.2%

Gross Profit

18.2 17.2 19.2 20.8 22.2 5.0%

Pre-tax Profit

8.0 7.6 10.5 12.3 13.5 14.0%

Net Profit 5.3 5.8 8.3 9.6 10.6 18.7%

EPS (Sen) 2.2 2.4 3.4 4.0 4.4

P/E (x) 16.3 14.9 10.5 9.0 8.2

DPS (Sen) n/a n/a n/a 2.0 2.2

Div Yield (%)

0.0 0.0 0.0 5.7 6.2

Source: Company, PublicInvest Research estimates


PUBLIC INVESTMENT BANK BERHAD

A tyre retreading solutions provider operating across the value chain

Comprehensive experience in rubber-related industries since the 1960s

Company Overview Following the completion of the acquisition of Eversafe Rubber Works Sdn Bhd (Rubber Works), Eversafe Rubber Sdn Bhd, which was incorporated in Malaysia on 5 March 2015 as a private limited company, was then converted into a public limited company and assumed Eversafe Rubber Berhad (Eversafe Rubber) as its present name on 24 June 2016. Leveraging on decades of experience in the rubber compounding industry, Eversafe Rubber is a tyre retreading solutions provider operating across the value chain. For upstream activities, it is principally involved in the development, manufacturing and distribution of tyre retreading materials, which are carried out by Rubber Works and its subsidiaries (excluding Olympic Retreads (M) Sdn Bhd). Complementarily, Olympic Retreads (M) Sdn Bhd (Olympic) carries out tyre retreading operations that contribute c.13% of the Group’s total revenue between FY13 and 9MFY16 as downstream activity. Both Executive Directors (EDs) Dato' Seri Cheah Eu Kiat and Eu Ah Seng, who are founder and co-founder of the Group respectively, play key roles in overseeing the overall developments with their comprehensive experience in rubber-related industries since the 1960s. As part of its succession plan, Cheah Siang Tee is currently another ED as well as CEO overseeing the entire operations, especially in new overseas markets penetration. Figure 1: Company Structure

Source: Company Prospectus

Table 1: Company Milestones

Year Achievement

1967 Ventured into tyre retreading business

1974 Expanded tyre retreading operations to a rented factory

1980 Began development, manufacturing and distribution of tyre retreading materials in a factory at Ipoh

1986 Commenced exports of camelbacks to Hong Kong and Singapore

Implemented cold cure tyre retreading operations

1995 Expanded manufacturing operations and warehousing space to second factory at Ipoh

2005 Commenced import, export and distribution of rubber-based products and related equipment in China

Installed and commissioned new and advanced machinery and equipment in Rubber Works’ and Olympic’s premise

2007 Commenced manufacturing of rubber-based products in China

2015 Third factory at Ipoh commenced manufacturing of tyre retreading materials

Ventured into South America for distribution of tyre retreading materials and secured sales orders from Brazilian market

2016 Entered into a distribution agreement to promote and market the Group’s tyre retreading materials for the South America market

Source: Company Prospectus, PublicInvest Research



Group commands a 22% market share for tyre retreading materials in Malaysia Group commands a 4% market share for tyre retreading operations in Malaysia Also ventured into the manufacturing of other rubber compounds for different industries such as conveyor belts for mining operation and thermal insulation materials for pipes,

Business Overview An established tyre retreading solutions provider for both upstream and

downstream sectors of the tyre retreading value chain. Eversafe Rubber commences its principal activities upstream from sourcing of raw materials to producing masterbatch, which is a chemically compounded material that is essential for manufacturing of other tyre retreading materials, namely pre-cured tread liners, camelbacks, cushion gums, repair ropes, sidewall veneers as well as orbitreads, and ultimately to tyre retreading products and services downstream. Currently, only tyre retreading materials are exported. Tyre retreading is a process where the used tyre casings are serviced by

removing worn and damaged treads and replacing them with new treads. The retreaded tyres are brought back into the same service conditions without sacrificing tyre road performance. This process may be repeated as long as the casings' integrity is still intact. Figure 2: Value Chain Of Tyre Retreading

Source: Company Prospectus Notes: Principal activities of Eversafe Rubber is indicated in the dotted boxes The development, manufacturing and distribution of tyre retreading materials are carried out by Rubber Works and its subsidiaries (excluding Olympic), The rubber compounds used in tyre retreading applications are developed and formulated in-house to achieve qualities that are appropriate to the performance requirements of each type of tyres, adhering to customers’ specifications. At present, Eversafe Rubber’s retreading materials are manufactured in Ipoh, Malaysia and Jiaxing, China with an estimated manufacturing capacity of 81,878MT of tyre retreading materials annually, of which 94% is based in Malaysia. The Group commands a 22% market share for tyre retreading materials in Malaysia in 2015. The primary customers for this business segment are tyre retreaders and rubber material traders in local and international markets. Eversafe Rubber's wholly-owned subsidiary, Olympic is involved in tyre retreading operations, utilising both the cold cure (most commonly used method for greater flexibility and longer operating lifespan of products) and hot cure retreading processes. The retreaded tyres distributed by Olympic are marketed to fleet operators and tyre retailers in Malaysia under its own brand "OLP". Mainly used for commercial vehicles, “OLP” retreaded tyres are there for those who opt for economic yet secure (MS 224:2005 certified by SIRIM in this case) and durable alternative. Currently, the tyre retreading activity is carried out at facility situated in Penang, Malaysia with an estimated maximum manufacturing capacity of 89,100 units of retreaded tyres per annum. The Group commands a 4% market share for tyre retreading operations in Malaysia in 2015. Additionally, in the upstream operations, the Group also ventures into the manufacturing of other rubber compounds for different industries such as conveyor belts for mining operation and thermal insulation materials for pipes, which are not contributing significantly towards revenue generation at current stage. Notably, Eversafe Rubber is entitled to claim a special reinvestment allowance on qualifying capital expenditure incurred between year of assessment 2016 and year of assessment 2018.



Plans to increase its export sales and its geographical footprint outside of the ASEAN

Figure 3: Segment Revenue Based On Geographical Location

Source: Company Prospectus, PublicInvest Research Figure 4: Segment Revenue Based On Business Activities

Source: Company Prospectus, PublicInvest Research

Future Plans Growing overseas markets with high value-added and premium products.

For tyre retreading materials business, Eversafe Rubber plans to increase its export sales and its geographical footprint outside of the ASEAN by focusing on provision of high value-added and premium products with higher gross profit margins into the South American region especially Brazil. Expanding in South America. In 2016, Eversafe Rubber identified a customer in

South America (a trader of tyre retreading materials) to be its business partner for the South American market. The business partner was appointed to be the distributor to promote and market Eversafe Rubber's tyre retreading materials for the South American market in September 2016. Also, they are finalising details of a joint venture arrangement to establish a tyre retreading plant in South America. The joint venture arrangement will be such that Eversafe Rubber will be supplying tyre retreading materials such as pre-cured tread liners and cushion gums for the tyre retreading plant in South America whilst the joint venture entity to be incorporated shall be marketing and distributing the retreaded tyres. The plant is expected to commence tyre retreading operations in mid-2018. Notably, as of 28 February 2017, Eversafe Rubber has not incurred any financial commitments in respect of the joint venture arrangement. Solidifying itself as an international player, the Group also intends to have its

trademarks registered in 18 countries of South American region as a measure for



Improving product quality with enhanced automation Has built a solid reputation and brand name as it has over 260 customers contributing to revenue for FY15 and over 360 customers for 9MFY16 Overseas markets made up 54.8% and 57.1% of total revenue respectively for FY15 and 9MFY16

protection of intellectual property rights besides setting up an office and storage facility in Eastern Europe in mid-2017 to better service its existing and potential customers in the whole European market. Improving product quality with enhanced automation. Eversafe Rubber

intends to utilise a major portion of the IPO proceeds to invest in new manufacturing lines and manufacturing automation systems comprising automated buffing and packing lines, loading and unloading systems, robotic hands as well as conveyor systems in the manufacturing facilities in Malaysia for wider range of new innovative products development. It is believed that with enhanced automation systems in place, the consistency of its product quality will be improved, production efficiency will be increased while having wastage and human error reduced. This is also in line with the Group's strategy to ease the dependency on foreign workers.

Competitive Strengths One of the prominent manufacturers of tyre retreading materials in Malaysia.

With the possession of expertise and experience garnered over half a century, Eversafe Rubber is able to compete against its competitors in securing new customers as well as retaining existing ones, commanding a market share of about 22% in 2015 for the development, manufacturing and distribution of tyre retreading materials in Malaysia. It is believed that through the consistency in quality of its products and services, the Group has built a solid reputation and brand name as it has over 260 customers contributing to its revenue for FY15 and over 360 customers for 9MFY16. Its top ten customers contributed 36.7% of total revenue for FY15 and 47.5% of total revenue for 9MFY16. Half of its top ten customers for 9MFY16 have been in business with the Group for an average of more than 25 years. Wide global outreach with exports to at least 23 countries for FY15 and 9MFY16. In 1986, Eversafe Rubber began to expand its market presence

overseas, starting with the export of camelbacks to Hong Kong and Singapore. Since 2004, export sales have been growing significantly through its active participation in international trade fairs and exhibitions and via other marketing activities. Capitalising on growth opportunities internationally, the Group's overseas markets made up 54.8% and 57.1% of total revenue respectively for FY15 and 9MFY16, with exports of new product range focusing on high value-added and premium products to at least 23 countries globally. Tyre retreading solutions provider with customization capabilities across the value chain. Through integration of business and operations across the value

chain, the Group's supply chain coordination is improved and in turn it leads to high production efficiency, ability to capture upstream and downstream profit margins, accessibility to downstream distribution channels and competencies expansion. Furthermore, the diversity of specific requirements expected by its upstream to wholesale customers across the chain allows Eversafe Rubber to develop and customise various formulations to meet the unique and evolving requirements of its customers. As such, its self-improvised formulation of tyre retreading materials cannot be easily plagiarised by other competitors.

Industry Outlook

Since the production of synthetic rubber is derived from petroleum, the price of synthetic rubber is determined largely by the global price of crude oil and natural gas, but not always in a one-to-one ratio, because there are many steps from the crude oil to the final product. Fluctuating prices of petroleum have an effect on the prices of synthetic rubber in the market, as the prices are transmitted through the supply chain. Depending on market conditions, there is confidential agreement made between the suppliers of synthetic rubber and customers, usually in each quarter. However, supply capacity of synthetic rubber exceeds demand of it at present due to emergence of several new plants and this is anticipated to continue over the next few years, leading to a depressed price of synthetic rubber.



Prices of natural rubber on an uptrend since the last quarter of 2016 Logistics trucks and public buses are the main users of retreaded tyres

Prices of natural rubber were on an uptrend since the last quarter of 2016, due

principally to a recovery in petroleum prices and flooding in southern Thailand, which is a major natural rubber producing area. As the increases in the prices of petroleum may also lead to a corresponding increase in the prices of synthetic rubber, it tends to compel rubber product manufacturers to substitute natural rubber for synthetic rubber, thus pushing up prices of natural rubber. However, the global production of natural rubber is anticipated to exceed the global consumption over the next few years too as rubber trees planted between 2006 and 2008 mature, thus suppressing the price movement. The impact of El Nino occurring in 2016 will not be enough to counteract the large and rising amount of surplus of natural rubber, although it may assist to slow down the declining price trend. Figure 5: Monthly Price For SMR 20

Source: Malaysia Rubber Board In general, an increase in the number of commercial vehicles in use would generate an increase in demand for retreaded tyres, and ultimately, the

tonnage of rubber compounds used in tyre retreading. Logistics trucks and public buses are the main users of retreaded tyres and hence, rubber compounds. China was the biggest consumer of rubber compounds used in tyre retreading, with consumption rising from 245,760MT in 2010 to 398,550MT in 2014, representing a CAGR of 12.8%. Consumption in Brazil rose from 97,860MT in 2010 to 135,405MT in 2014, representing a CAGR of 8.5%. Among selected countries, the forecasted consumption growth of rubber compounds used in tyre retreading in China is expected to show the fastest CAGR of 8.9%, between 2014 and 2019 while the forecasted consumption growth of rubber compounds used in tyre retreading in Brazil is expected to generate a CAGR of 5.9%. Figure 6: Consumption of Rubber Compounds Used in Tyre Retreading Outside of Malaysia

Source: Infobusiness Research

The consumption of rubber compounds used in tyre retreading increased steadily from 15,530MT in Malaysia in 2011 to 18,374MT in 2015, yielding a

CAGR of 4.3% during the corresponding period. The steady increase in the number of commercial vehicles on the road had contributed towards the consumption of rubber compounds used in tyre retreading in Malaysia. The consumption of rubber compounds used in tyre retreading in Malaysia is expected to expand from 18,374MT in 2015 to 21,800MT in 2019, yielding a CAGR of 4.4% during the corresponding period.



Outlook for retreaded tyres depends on the general health of the economy and demand for goods and services. It is expected to remain healthy as both economic benefits and environmental concerns become more important in the future Prices of main raw materials (natural rubber and synthetic rubber) are subject to fluctuations due to supply and demand conditions in the global commodity market

Figure 7: Consumption of Rubber Compounds Used in Tyre Retreading in Malaysia

Source: Infobusiness Research

The number of commercial vehicles in use in Malaysia increased from 1.1m in

2011 to 1.3m in 2015, generating a CAGR of 4.3% during the corresponding period. They form an expanding base of commercial vehicles in the country, which in turn, translates into higher demand for retreaded tyres in the market. This is also supported by an expanding infrastructure, highway networks in specific. In an increasing environment conscious world, recycling of consumer and industrial products, including tyres, is gaining traction. Tyre retreading is a well-established and justifiable practice. The outlook for retreaded tyres depends on the general health of the economy and demand for goods and services. The prospect of the industry is expected to remain healthy as both economic benefits and environmental concerns become more important in the future. Figure 8: Number of Commercial Vehicles In Use In Malaysia

Source: Ministry of Transport

Key Risks Volatility in prices of raw materials. The two main raw materials used in the

manufacturing of the tyre retreading materials are natural rubber and synthetic rubber. The purchases of natural rubber and synthetic rubber collectively accounted for approximately 51 % of the Group's total purchases for FY 2015 and 50% of total purchases for 9MFY16. The prices of these main raw materials are subject to fluctuations due to supply and demand conditions in the global commodity market. The price of the procured natural rubber is subject to fluctuations in the market price of Standard Malaysian Rubber (SMR) 20 grade natural rubber. As the synthetic rubber is a derivative of petrochemicals, the volatility of petroleum prices has an influence on the price of synthetic rubber that usually quoted on quarterly basis. Generally, the price volatility in raw material costs can be passed on to the customers. Nevertheless, the whole industries will be affected ultimately when there is a prolonged material increase in the prices of raw materials.



Still exposed to foreign currency exchange gains or losses arising from timing differences between billings, actual receipt of payments and conversion into ringgit Pricing competition amongst industry players in the Malaysian market against a backdrop of falling rubber prices

Fluctuation in foreign exchange rates. For FY13 to FY15, Eversafe Rubber's

export sales to overseas markets have increased from 40% to 55%, resulting in 36%, 44% and 46% of the total revenue being denominated in foreign currencies for the respective years. For 9MFY16, export sales contributed 57.1% to total revenue, with 47% of the total revenue being denominated in foreign currencies. The Group's export revenue is mainly transacted in US dollar (USD) and Japanese yen (JPY) while the import of the raw materials is mainly denominated in USD. As such, the foreign denominated sales are matched with foreign denominated purchases as a natural hedge to a certain degree against adverse foreign exchange fluctuations. However, it is still exposed to foreign currency exchange gains or losses arising from timing differences between billings, actual receipt of payments and conversion into ringgit. Competition from existing and new market entrants locally and overseas.

Despite its efforts, Eversafe Rubber will still face challenges for market share from both existing competitors and potentially new market entrants in local and international markets. As an example, its local sales volume for tyre retreading materials has been decreasing at a CAGR of -9.0% from FY13 to FY15. The negative CAGR is due to, amongst others, pricing competition amongst industry players in the Malaysian market against a backdrop of falling rubber prices, which was fueled by the euro area sovereign debt crisis. It is believed that the competitors reduced their prices to a greater extent than the reduction made by Eversafe Rubber, resulting in more expensive products for the latter which then led to the decline in the latter’s local sales volume. Nevertheless, it is believed that the negative trend will be improving upon the recovery of rubber prices as the competitors would have to raise their selling prices to a greater extent as compared with Eversafe Rubber, due to more competitive pricing strategy adopted by the latter.

Financials Revenue. Derived from the development, manufacturing and distribution of tyre

retreading materials and tyre retreading operations for its various product offerings. The Group’s revenue growth going forward is mainly driven by its capacity expansion plans to add additional manufacturing lines. The estimated capex of enhanced automation systems for tyre retreading materials is approximately RM14.0m, of which RM4.0m is for new manufacturing lines and automation systems which have been incurred since late 2016 using internally generated funds and bank borrowings in equal proportion. The remaining RM10.0m will be utilised for the acquisition of the remaining items, and another RM2.0m for the replenishment of the expended internally generated funds. The balance of RM0.6m is then meant for the partial repayment of borrowings. Cost of sales. Eversafe’s main cost component is raw materials estimated to be

c.75% of its cost. Within this cost, natural and/or synthetic rubber contributes >c.50% of raw materials. The Group’s performance is thus largely affected by fluctuations in rubber prices. There is however some level of offsetting as higher raw material costs can be pass-through to customers at the revenue level. Gearing. The Group’s gearing level has been trending at 0.3x between FY15 to

FY16. Post listing in FY17, gearing levels is expected to reduce further to 0.2x. We are positive as the Group will be able to gear up for future capacity expansion strategies going forward to cater for the increasing demand from international markets. Dividend policy. The Group's intends to distribute between 40% to 60% of

annual net profit. We have assumed a 40% dividend payout in our estimates, which would translate to an estimated 5.7% and 6.2% yield for FY17F and FY18F respectively.



Valuation PE valuation approach. We are valuing Eversafe Rubber with a PE valuation, to

reflect the Group’s growth potential through its capacity expansion in FY17F. Our fair value of RM0.40 is pegged to a 10.0x PE multiple, based on our FY17F EPS of 4.0sen. We deem this PE multiple to be reflective of its manufacturing peers.

Table 2: PE Valuation Of Eversafe Rubber

FY17F PAT PE Multiple

9.6 10 96.3

No. of Shares ('000) 240.6

Fair Value (RM) 0.40

Listing Price (RM) 0.36

Upside 11.2% Source: PublicInvest Research estimates

IPO Details Eversafe Rubber is seeking a listing with an enlarged issued and paid-up share capital of 240,593,796 shares with RM0.25 par value on Bursa Malaysia’s Ace Market. Pursuant to IPO listing, the company’s market capitalization is RM86.6m based on its IPO price of RM0.36. The IPO allocation, post-IPO share capital of Eversafe Rubber and utilisation of IPO proceeds are shown in the following tables.

Table 3: IPO Allocation

Categories No. of shares % of enlarged

share capital

Public Issue:

Retail offering

Malaysian public (via balloting)

- Bumiputera

- Non-Bumiputera

Eligible persons

Institutional offering

Private placement to institutional and

selected investors

Sub-total

6,250,000

6,250,000

11,500,000

24,000,000

48,000,000

2.6

2.6

4.8

10.0

20.0

Offer for sale (up to):

Institutional offering

- Private placement to institutional and

selected investors

- Bumiputera investors approved by the

MITI (via placement)

Sub-total

6,000,000

24,000,000

30,000,000

2.5

10.0

12.5

Total 78,000,000 32.5%




Table 4: Post-IPO Share Capital

No. of shares

Issued and fully paid-up as at 28 May 2016 192,593,796

To be issued pursuant to the IPO 48,000,000

Enlarged share capital upon listing 240,593,796


Table 5: Utilisation Of IPO proceeds*

Details of utilisation RM m % New manufacturing lines and enhanced automation systems

12.6 72.8

Establish intellectual property rights and overseas branding initiative

1.5 8.7

Establish listing expenses 3.2 18.5

Total 17.3 100.0

Source: Company Prospectus *based on RM0.36 for 48,000,000 new shares issued



KEY FINANCIAL DATA

INCOME STATEMENT DATA

FYE Dec (RM m) 2014A 2015A 2016A 2017F 2018F

Revenue 81.4 75.3 74.7 80.0 85.2

Gross Profit 18.2 17.2 19.2 20.8 22.2

Finance Costs -0.7 -0.7 -0.5 -0.3 0.2

Pre-tax Profit 8.0 7.6 10.5 12.3 13.5

Income Tax -2.6 -1.8 -2.3 -2.6 -2.9

Effective Tax Rate (%) 0.3 0.2 0.2 0.2 0.2

Net Profit 5.3 5.8 8.3 9.6 10.6

Growth (%)

Revenue 0.7% -7.5% -0.7% 7.0% 6.6%

Gross Profit 2.3% -5.4% 11.2% 8.6% 6.6%

Net Profit -18.8% 9.6% 41.9% 16.5% 9.6%

Source: Company Prospectus, PublicInvest Research estimates

BALANCE SHEET DATA

FYE Dec (RM m) 2014A 2015A 2016A 2017F 2018F

Property, Plant & Equipment 34.2 31.8 32.7 37.2 41.6

Cash and Bank Balances 8.2 8.8 10.7 23.7 14.6

Trade and Other Receivables 19.2 20.9 26.9 28.8 30.7

Other Assets 14.9 13.2 13.3 14.0 15.0

Total Assets 76.5 74.8 83.5 103.7 101.9

Trade and Other Payables 7.3 8.3 6.0 6.4 6.8

Borrowings 20.8 13.7 16.8 13.8 5.1

Deferred tax 4.0 4.0 4.2 4.9 6.2

Other Liabilities 0.4 0.7 0.9 0.9 0.9

Total Liabilities 32.5 26.6 28.0 26.1 19.2

Shareholders’ Equity 43.9 48.1 55.6 77.6 82.7

Total Equity and Liabilities 76.5 74.8 83.5 103.7 101.9


PER SHARE DATA & RATIOS

FYE Dec 2014A 2015A 2016A 2017F 2018F

Book Value Per Share 0.2 0.2 0.2 0.3 0.3

NTA Per Share 0.2 0.2 0.2 0.3 0.3

EPS (Sen) 2.2 2.4 3.4 4.0 4.4

DPS (Sen) n/a n/a n/a 2.0 2.2

Payout Ratio n/a n/a n/a 40.0% 40.0%

ROA 7.0% 7.8% 9.9% 9.3% 10.4%

ROE 12.1% 12.1% 14.9% 12.4% 12.8%




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. Published and printed by: PUBLIC INVESTMENT BANK BERHAD (20027-W) 9

th Floor, Bangunan Public Bank

6, Jalan Sultan Sulaiman 50000 Kuala Lumpur T 603 2268 3000 F 603 2268 3014 Dealing Line 603 2268 3129

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