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Reg No: 198700034E MICA (P) : 099/03/2012

Initiating Coverage
12 March 2013

Buy (initiation)
Share price: Target price: SGD0.91 SGD1.49

Courts Asia
Ill See You In Courts!
Reincarnated High Prince of Retailers. Courts Asia is the reincarnation of Courts Singapore and Courts Malaysia, two separately listed companies that were privatised in 2007-2009 following the bankruptcy of its controlling shareholder. Bought out by private investors, its loss-making loss Thai operations closed, its credit facility strengthened and previously-separate previously management teams aligned, and relisted in 2012, Courts Asia is a direct dir play on the ASEAN consumption story in Malaysia, Singapore and soon, Indonesia. The angle of consumer financier has been buttressed and remains a key selling point for both customers and investors. Your Honour, , Courts is a BUY BU with a target price of SGD1.49 for upside of 63.7%. Courting the ASEAN big spenders. If ASEAN were a country, it would rank among the top 10 economies in the world. Its consumption story is played out every day by large young populations salivating for the latest gadget and the most fashionable sofa. The biggest retailer of electrical and IT products and furniture in Singapore, No. 2 in Malaysia ia and soon, Indonesia as well, Courts is a direct play on this story. It has 59 stores in Malaysia and 13 stores in Singapore with 1m sq ft of space. By 2014, it will open its largest outlet in Jakarta, Indonesia. Financing the retail masses for a fat margin gin. Courts unique in-house credit financing facility, offered for up to 60 months and at interest rates exceeding 22% annually, adds additional margin allure for investors, as this facility allows it to enjoy much higher margins than competitors that rely on third-party credit providers. Via an innovative asset securitisation programme program for its consumer loans, Courts is able to tap into cheap funding to grow this non-retail non income stream and earn a lucrative spread. Bad debt risks are controlled through t rigorous credit screening. Growing through new stores, new markets and higher efficiency. The next few years earnings growth of 14-15% 15% annually will be driven by new store openings in Malaysia (adding six stores a year) and by improving efficiency in Singapore to eke out higher revenue per square foot of retail space. In addition, Courts ourts is ultra bullish on Indonesia. By 2014, it will have opened its single largest store throughout its regional network in Indonesias Ind most populated suburb. Valuations s too cheap for this prince of retailers. For its market leadership position and sustainable growth model, Courts is too cheap in our view. v As the first non-underwriter syndicate to cover Courts, our TP of SGD1.49 is the highest on the street, based on 16.4x FY3/14F F earnings, and on par with the best in Singapore for consumer products distributors. distributors Though still 20% lower than highly-priced regional retailers in high consumption countries like Indonesia, Thailand and the Philippines, , we would not discount a rapid catch-up catch on re-rating once investors warm to this prince of retailers. Courts Asia Summary Earnings Table
FYE Mar (SGD m) Revenue EBITDA Recurring Net Profit Recurring Basic EPS (cents) EPS growth (%) DPS (cents) 2011 674.1 47.6 32.2 5.8 112.1 8.5 15.6 12.4 9.4 2.2 35.9% 13.8% 6.3% 2012 724.2 70.3 39.4 7.0 22.2 25.9 12.8 9.2 28.8 2.3 65.2% 18.0% 7.0% 2013F 783.1 76.3 42.4 7.6 7.7 2.3 11.9 8.5 2.5 1.8 52.7% 15.4% 6.5% 41.6 2014F 913.0 89.2 50.9 9.1 20.0 2.7 9.9 7.6 3.0 1.8 61.7% 18.1% 7.5% 49.4 2015F 1063.1 100.5 58.2 10.4 14.3 3.1 8.7 6.8 3.5 1.7 60.5% 19.9% 7.7% 57.0

Alison FOK (65) 6432 1447

Stock Information
Description: A leading electrical and IT products as well as furniture retailer in Singapore and Malaysia. It will make its debut in Indonesia in 2014 with the opening of its largest-ever store in Jakarta. Ticker: Shares Issued (m): Market Cap (USD m): 3-mth Avg Daily Turnover (USD m): ST Index: Free float (%): Major Shareholders: Singapore Retail Asia CEO Terence Connor COURTS SP 560.0 407.9 0.5 3,293.0 43.3 68.2 2.3

Key Indicators
ROE annualised (%) Net debt (SGD m): NTA/shr (SGD): Interest cover (x): 13.9 145.8 0.492 17.3

Historical Chart

Performance: 52-week High/Low 1-mth -8.5 -9.2

SGD0.955/SGD0.655 3-mth 5.2 -0.4 6-mth na na 1-yr na na YTD 5.2 1.2

PER EV/EBITDA (x) Div Yield (%) P/BV(x) Net Gearing (%) ROE (%) ROA (%) Consensus Net Profit (SGD m)

Absolute (%) Relative (%)


Courts Asia

Investment merits
Initiate Courts Asia with a BUY. Our target price of SGD1.49 implies 63.7% upside from the current share price. . Courts Asia is a beneficiary of strong consumer consumption trends in its key ASEAN markets of Singapore, Malaysia and by next year, Indonesia as well. well Delisted between 2007 and 2009 and relisted in 2012, Courts has been cleaned up, restructured and ready for consumption by investors looking for a proxy to ride ASEAN EAN consumption growth but trading at just 10-12x 10 earnings compared to the superheated 20-30x 20 valuations of consumption plays in Indonesia, Thailand and Philippines. Macro stars aligned. The Singapore government is targeting a population number of 6.9m by 2030 (up 1.91% on average annually from 5m now). To support the governments target, the Housing and Development Board (HDB), the public housing authority, has turned on the supply tap to accommodate young starter families. Courts will be a prime beneficiary of the demand for furniture and electrical accessories, reeling consumers in with its in-house house credit facility. facility Malaysia is also experiencing rising household income, , and consumer expenditure is forecast to grow at a CAGR of 7.6% from 2012 to 2016. 2 Revamped, restructured and cleared to go. The previous Courts (under separate listings in Singapore and Malaysia) was the victim of a mismanaged credit facility and misaligned management incentives, incentives which created large spikes in bad debt, , especially in Indonesia and Malaysia. Following privatisation, , Courts has brought its delinquency rate down to all-time lows s and the two separately-managed separately markets have been aggregated under one management. Ready to go, it was relisted in 2012 and now boasts the highest est operating margins among its competitors, with concrete plans to return to Indonesia. Bred for fast expansion and keen competition. competition Courts holds an asset-light balance sheet. Despite fast expansion, it is able to keep capital costs down via supplier rebates for new refurbishments and new store openings (up to 60% of relevant capex). The suppliers also pay for promotions and marketing materials on their products that are sold through Courts. Courts also boasts a competitive business model. The Th Singapore stores have a Price Price Promise Promise where they will match competitors pricing and refund customers if they can find a better deal. Initiate with BUY and target t price of SGD1.49. SGD1.49 Courts has the pole position as the largest retailer of furniture and household fittings in Singapore, and it is the second largest in Malaysia. With clear and obviously robust growth prospects in ASEAN, and a balance sheet equipped for expansion, Courts is on the warpath to secure its position as a top regional retailer. Despite an upside of 63.7% our target price of SGD1.49 is based on 16.4x FY3/14F, still conservatively pegged to a 20% discount to regional retailers.

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Courts Asia

Of its listed peers in Singapore, Challenger is the most direct competitor to Courts. But we are also taking a more regional approach when considering its peers, as Courts is focused on expanding in ASEAN. Regional retailers, typically department stores, are trading at an average of 20.5x x FY13F PER, while local retailers are trading t at a lower 18.4x FY13F PER. We have also taken into account consumer credit financiers, AEON, which is trading at 13.0x forward P/E. We believe Courts deserves to be valued closer to the regional retailers given its growing market position in ASEAN and superior margins. Our target price is pegged at a 20% discount to regional retailers, which implies 16.4x FY3/14F PER.
Figure 1: Peer comparison
Ticker Name Singapore consumer branded retailers DFI SP Dairy Farm Intl EYSAN SP Eu Yan Sang SSG SP Sheng Siong PRA SP Parkson Retail Asia OSIM SP Osim International SUPER SP Super Group CHLG SP Challenger Tech Credit services AEONTS TB Aeon Thana Sinsap 900 HK Aeon Credit Service Asia ACSM MK Aeon Credit Service M Regional department stores/ retailers PRA SP Parkson Retail Asia ISET SP Isetan Singapore ROBINS TB Robinson Department Ramayana Lestari RALS IJ Sentosa AEON MK Aeon Co (M) HMPRO TB Home Product Center CPALL TB Cp All MAPI IJ Mitra Adiperkasa Tbk ACES IJ Ace Hardware Regional supermarkets SSG SP Sheng Siong MAKRO TB Siam Makro PM TB Premier Marketing AMRT IJ Sumber Alfaria Trijaya HERO IJ Hero Supermarket DFI SP Dairy Farm Intl Hldgs BIGC TB Big C Supercenter COURTS SP Courts Asia Ltd Source: Bloomberg Mkt Cap (SGD m) 20,707.9 267.8 857.8 1,043.0 1,345.9 2,102.0 167.4 3,784.5 1,065.8 569.6 727.9 787.8 1,043.0 202.1 3,697.2 1,206.6 1,858.6 4,880.1 17,639.8 1,635.8 1,745.2 3,767.6 857.8 5,504.2 242.5 3,160.8 2,142.9 20,707.9 7,554.4 5,738.6 509.6 Last price (SGD m) 15.333 0.605 0.620 1.540 1.850 3.770 0.485 3.458 4.3 1.4 5.1 3.6 1.540 4.900 3.329 0.170 5.295 0.693 1.964 0.985 0.102 2.109 0.620 22.934 0.405 0.837 0.651 15.333 9.157 7.134 0.910 EPS Growth (%) -7.1 -35.7 36.2 19.3 16.4 27.7 3.5 8.6 -83.9 19.5 50.7 -4.6 19.3 -21.6 42.0 6.2 7.3 34.1 38.2 79.3 66.8 30.2 36.2 36.6 41.7 41.0 10.8 -7.1 13.8 24.7 22.2 Hist. P/E (x) 37.6 14.0 20.8 22.2 15.3 27.2 10.6 21.1 75.0 11.3 14.5 33.6 22.2 20.9 41.8 23.1 21.8 49.4 38.8 32.2 37.4 32.0 20.8 34.8 15.0 52.3 56.1 37.6 29.4 35.1 12.8 Forward P/E (x) 25.6 18.3 19.4 15.6 12.5 19.3 18.4 14.6 11.5 13.0 15.6 0.0 26.4 18.6 19.0 27.9 26.3 22.2 28.9 20.5 19.4 26.4 10.6 33.4 35.3 25.6 20.6 24.5 10.3 P/B (x) 14.2 2.2 5.7 4.4 6.7 5.4 3.9 6.1 3.9 1.7 4.6 3.4 4.4 1.0 8.6 3.2 3.2 11.7 16.0 6.4 9.5 7.1 5.7 11.6 4.6 8.5 10.2 14.2 5.7 8.6 2.3 ROE (%) 42.6 16.0 27.8 25.2 48.1 20.6 42.3 31.8 5.1 15.2 35.2 18.5 25.2 5.3 21.9 14.5 15.4 29.8 45.7 21.9 28.3 23.1 27.8 35.0 34.6 21.4 19.7 42.6 21.9 29.0 17.4

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Courts Asia

Courts 1.0 The Grande Dame

New kid on the block? Hardly! Courts Singapore and Courts Mammoth (Malaysia) were separately listed on two exchanges in 1992 and 2000, respectively. The controlling shareholder then was Courts plc, a UK-based company which went into administration in 2004. This led to a long-drawn-out process in the breakup breaku of Courts global empire. The two Courts operations in Singapore, Malaysia, Thailand and Indonesia were sold to a group of private investors, Barings Private Equity Asia III and Topaz Investment ment Worldwide, Worldwide for a total of SGD221m between 2007 and 2009. The current owners. Asia Retail Group, which is 67.2% 67 owned by Barings Private Equity Asia III (BPEA) and 32.8% owned by Topaz Investment, a Middle Eastern fund, currently holds the majority stake in Courts Asia. BPEA is a private equity fund with USD5b US under its management. It specialises in mid-market market companies requiring capital for expansion, recapitalisation and acquisitions. Figure 2: : Shareholding structure

Barings Private Equity Asia (BPEA) (67.2%)

Topaz Investment (32.8%) 32.8%)

Asia Retail Group (100%) Institutional investors* (13.75%) Public (15.45%) Singapore Retail Group (68.2%) Management (2.6%)

Courts Asia Limited (Singapore)

Source: IPO Prospectus *JF Asset Management, New Silk Road Investment, Target Asset Management, Value Partners Hong Kong

Fraught with problems. Prior to delisting, delisting Courts faced several difficulties, chief of which was a rigid management structure that encouraged short-term profit-driven driven strategies. This led to growth being shored up by a deficient credit infrastructure and a lack of strategic synchronisation between countries. Most importantly, there was no credit control facility and the company subsequently suffered when bad debts spiked during the financial downturn in 2008. Revamp of operations. After both companies were privatised, Courts overhauled its credit facilities and operations, and revamped itself in a matter of five years.

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Courts Asia

Courts 2.0 The Fresh Prince

Centralised management anagement structure structure. Previously, separate management teams in each country made it difficult to coordinate strategies for regional expansion efforts. Now, Courts has centralised the management structure to ensure cohesion between the various business segments on a cross-country basis. It kept Mr Terence OConnor, the previous Singapore CEO who has been with Courts Singapore since 1993, as the CEO in charge of overall operations, as well as Ms Kee Kim Eng as the chief financial officer. Additionally, it hired Mr Chan Yuen Kiong as credit director to oversee regional credit facility. Mr Chan previously worked with American Express Malaysia, in charge of credit function operations. Closure of non-performing operations. Post-delisting, Courts closed down operations in Thailand and Indonesia to focus on its core operations in Singapore and Malaysia. It further closed or relocated stores in Malaysia but kept Malaysia as a core market, reintroducing IT products to boost sales volume despite the lower margins. Figure 3: Courts in ASEAN since 1974

Source: IPO Prospectus

Redesigned credit facility. Inadequate external party credit controls resulted in a sharp increase in bad debts in Malaysia, Indonesia and Thailand. Since delisting, Courts has overhauled its credit infrastructure in Singapore and Malaysia through (1) hardening its approach to credit approvals, and (2) centralising and internalising internalis its entire credit infrastructure in monitoring and collection ection of credit. Improvement on operating efficiency. By centralising the supply chain, Courts has been able to achieve eve better inventory management and reduced transportation costs. It currently outsources its entire warehousing and deliveries to DHL in Malaysia, Mal while Singapore logistics are handled by SCS Logistics. Courts has adopted the Enterprise Resource Planning (ERP) system in Singapore, whereby real-time changes are made to in-store store inventories. It will be implementing this system in Malaysia by end-FY3/14. end Though this will incur capex of SGD1.5m, the system will synchronise overall efficiency and allow uniform monitoring of cross-country country operating processes. processes

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Courts Asia

Going The Expansionary Route

Focus on store expansion. Courts has made its intention clear on each countrys expansion strategy. We estimate it will open a net average of 106,255 sq ft of store space pa between 2014 and 2015. So far, it is on track, having opened a total of six stores with one expected to open next quarter in Kedah, Malaysia. In total, Courts will have 13 stores in Singapore and 59 stores in Malaysia by end-FY3/13.
Figure 4: Number of stores on the rise
80 70 60 50 40 30 20 10 0 9 2010 11 2011 13 2012* 13 By end FYMar13 46 +8 52 +5 55 +4 59 Singapore Malaysia

Source: IPO Prospectus, *2012- since IPO

Singapore improve store productivity. Retail growth opportunities in Singapore are more limited due to land area limitations. We expect the bulk of Courts earnings will continue to be generated by Singapore as its base market, and nd management will improve on existing store productivity by optimising ing product mix, increase the number of retail concepts and by continual refurbishments. refurbishment We have ascribed an increase of 26,255 sq ft in store space on average between FY3/14F FY and FY3/15F. Courts will open a new store each in JEM and Westgate in 1QFY3/14 and 3QFY3/14, respectively. Malaysia focus on the suburbs. In Malaysia, Courts Courts strategy is to focus on penetration of the suburbs in the Klang Valley area, where competition is lower and credit use more common. common Since its IPO, Courts rts have added stores in Jerteh, Terengganu, Ter and Mentakab, Pahang, and will add one more store in Sungai Petani, Kedah. With plans to open six new stores a year, , we have ascribed ascr a conservative average of 80,000 sq ft pa, after factoring in store closures. closures Malaysias electronics distribution industry is more re fragmented than Singapores, which offers more room for growth in credit sales. Courts is slated to open three new stores in Teluk Intan, an, Peran and Pontian Pont in 1QFY3/14.

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Courts Asia

Renewed Foray Into Indonesia

Largest store in its regional network in Indonesia. Courts first site in Bekasi, eastern Jakarta, has been secured and is scheduled to open in 2014. It will be its largest store in the region at over 140,000 sq ft. In addition to retail space, the store will also have a 100,000-sq-ft 100,000 warehouse that will serve as a distribution centre cent for future store openings. Not new to Indonesia. Although Courts Indonesian Indonesia business was previously profitable, management decided to close down all operations to focus on developing its core operations in Singapore and Malaysia. Indonesian sales also accounted for less than 5% of total sales then. Now, with a fully developed in-house house credit facility, it intends to apply the expertise developed in Singapore and Malaysia to tap into the robust consumer consumption trends in Indonesia. Indonesia The larger the better. In order to stay asset-light, asset Courts is currently in discussions with developers lopers in Jakarta to build the facility, and subsequently lease the warehouse and store space. It is eyeing Megastore formats with retail space in excess exce of 60,000 sq ft its way of saying that it is here to stay. With a new warehouse in place, Courts will be fully set to expand in Jakarta by 2014. 2014 Currently, industry average sale price per sq ft stands at SGD250. SGD250 We have ascribed a 30% discount to the industry ASP per sq foot given its large store size. We have also ascribed an addition of 15,000 sq ft pa after the debut of the warehouse.
Figure 5: Courts will open its first store in Indonesia at Bekasi, East Jakarta

Source: Google map

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Courts Asia

Charge It To My Credit Card

Superior margins. Courts EBITDA margin is 3.1ppt higher than Challengers. We believe the wide difference is due to service charges earned from its in-house house credit facility as well as economies of scale. No other direct competitors have an in-house house credit facility, as they usually opt for third-party party services such as those offered by b the major credit card companies.
Figure 6: Gross margin comparison
Challenger 35% 30% 25% 20% 15% 10% 5% 0% 0% 2010 Source: Factset, Maybank KE 2011 2012 -2% 2010 -1.5% 2011 2012 19.7% 20.2% 19.4% 6% 4.3% 12.2% 11.9% 4% 11.6% 2.0% 2% 1.0% 31.2% Best Denki 30.4% Courts Asia 32.0% 10% 8.6% 8% 6.5% 6.0% 6.0% 5.6%

Figure 7: : Operating margin comparison

Challenger Best Denki Courts Asia

Source: Factset, Maybank KE

Figure 8: Net margin comparison

Challenger 5.7% 2.6% 0.3% 2010 2011 0.2% 2012 Best Denki 4.9% 4.8% Courts Asia 4.8% 5.4%

Figure 9: ROE trends

25% 20% 15% 10% 7.3% 5% 2.4% 0% -5% -10% 2010 2011 1.3% 2012 Challenger 20.1% 17.6% 13.8% 18.0% 17.4% Best Denki Courts Asia

6% 4% 2% 0% -2% -4% -6% -8% -10% -12%


-15% Source: Factset, Maybank KE


Source: Factset, Maybank KE

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Courts Asia

Flexible in-house credit facility. Courts offers an in-house in credit facility which provides a range of payment options under Courts Flexi Plan in Singapore and Courts Flexi Credit in i Malaysia. Installment payments can be made up to 60 months and the annual interest rate ranges from 11.6% to 27.9% pa, depending on the qualifications of the applicant. Why is in-house house credit facility better than credit card installment plan? Courts target audience for credit facility is made up of those who cannot afford credit card loans or meet the minimum requirements re for credit card sign-ups. Any tightening in national credit measures will be highly beneficial to Courts in-house credit facility.
Figure 10: Singapore direct sales vs credit, credit 9MFY3/13 Credit 11% Cash 43% Credit 57% Cash 89% Figure 11: Malaysia direct sales vs credit, 9MFY3/13

Source: Company data, Maybank KE

Source: Company data, Maybank KE K

Home Club loyalty programme. In addition, Courts offers exclusive discounts on products and updates on promotions to its Home Club members. Through the information collected, it is also better able to gauge the preferences of its customer base. base As of FY3/12, Courts Asia has more than 1.2m customers.
Figure 12: Product concepts Service Concept Countdown Corner Offers limited-time time discounts or promotion on products Sleep Clinic Offers customers expert advice on choices of bed Dr. Digital Similar to Geek Squad of Best Buy in the US, Dr. Digital offers ffers customers a comprehensive IT consultation services.
Source: IPO Prospectus

Launch of eCourts. Courts Asia first launched eCourts, an online shopping portal in Singapore, , in October 2012. The online website has on sale 7,000 products vs its smaller stores which may carry below 1,000 products. In 3QFY3/12, Courts recorded a tripling in growth of ecommerce sales, as it is starting from a low base. In Jan 2013, Courts extended its offerings into Malaysia. Although we do not expect eCourts to have a significant impact on our earnings estimates for FY3/13F through to FY3/15F, this strategy is in line with most modern shopping trends, which is moving into cyberspace.

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Courts Asia Figure 13: 13 Brand offerings

Source: Maybank KE

Figure 14: : Snapshot of online website

Source:, Maybank KE

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Courts Asia

Retail Consumer Financier

Monetising on in-house house credit facility. Electronics distributors margins have its vulnerabilities as they are price takers in the business. By internalizing its credit system, Courts is able to collect the difference between interest charged to its retail customers and interest charged on its loan facilities. We estimate e net interest income to be 46.4% 46.4 of PBT. While it does not ot report how much interest income contributes to its earnings, it accounts for 16.5% of total sales as of FY3/12. Breakdown of sales. Courts sales are split into sale of goods and earned serviced charges. Sale of goods is the direct purchases made by customers, whilst the credit sales are derived from principal paid via credit purchases by customers. Earned service charges. Service charges harges relate to the repayment which is made in installment over the term of facility, of which service charges will only be recognised if it is paid for by customers progressively. Singapores credit sales account for 8% of sales, while Malaysia accounts for 34% of sale of goods as of FY3/12. FY3/ Overall, it makes up 16.5% of overall net sales as of FY3/12. FY3/12
Figure 15: : Breakdown of sales YE Mar Singapore
Sale of goods - cash Sale of goods - credit Earned service charges Total net sales

78.4% 12.5% 9.2% 100.0% 21.6% 41.4% 37.0% 100.0% 18.3%

83.6% 9.3% 7.1% 100.0% 23.8% 43.8% 32.4% 100.0% 15.4%

83.5% 8.5% 8.0% 100.0% 25.1% 40.7% 34.1% 100.0% 16.5%

83.3% 8.7% 8.0% 100.0% 26.5% 39.7% 33.8% 100.0% 16.9%

83.2% 8.7% 8.0% 100.0% 26.5% 39.7% 33.8% 100.0% 17.2%

83.2% 8.7% 8.0% 100.0% 26.5% 39.7% 33.8% 100.0% 17.4%

Sale of goods - cash Sale of goods - credit Earned service charges Total net sales Earned service charges Source: Company data, data MKE estimates

Figure 16: Breakdown of gross margin Singapore 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Malaysia Indonesia











Source: IPO Prospectus





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Courts Asia

Rapid payback of principal. For a 12-month month loan, we estimate that principal will be fully repaid in 10 months under the normal Flexi credit plan and 9 months under the SmartRent plan. However, the principal can be fully repaid sooner the longer the loan tenure. For example, it takes just 24 months for a 36-month month Flexi credit plan to be repaid and just 19 months for a SmartRental plan.
Figure 17: Estimated Flexi credit plan for a SGD3,000/MYR3,000 loan
Singapore Assuming an average annual EIR of 22% Loan Payment tenure Loan per Total loan (months) amount month (principal+interest) 36 3000 115 4,125 24 3000 159 3,807 12 3000 287 3,439 Malaysia Assuming an average annual EIR of 29% Loan Payment tenure Loan per Total loan (months) amount month (principal+interest) 36 3000 126 4,526 24 3000 169 4,063 12 3000 297 3,563 Source: KE estimate Interest only 1,125 807 439 Months to principal payback 26 19 10 Months to principal payback 24 18 10

Interest only 1,526 1,063 563

Figure 18: SmartRental plan on a SGD1,000 item

Smart Rental EIR No. of month to payback Rates (%) principal 48 months 19.8 22 36 months 21.5 19 24 months 23.7 15 12 months 26.4 9 Source: From Courts website tool, KE estimate Term within loan to take back principal 46% 53% 64% 77%

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Courts Asia

Hardened Approach To o Credit Collection

Rebuilding of credit infrastructure. The old Courts was a victim of poorly designed credit infrastructure. Inadequate credit controls caused a sharp jump in bad debts, especially in Malaysia, Indonesia and Thailand. This led to the eventual closure of Thailands and Indonesias operations. Courts has since overhauled its credit infrastructure in Singapore and Malaysia through (1) hardening its approach to credit approvals, and (2) centralising and internalising internali its entire credit infrastructure in the monitoring and collection of credit. Stringent procedures implemented. Courts has streamlined and shortened its credit approval process by accepting only customers who have a record of timely payments and meet certain pre-determined limits based on monthly salaries and other factors. As of FY3/12, around 84% and 68% of credit users are repeat customers in Singapore and Malaysia, respectively. For first-time time customers, a more detailed process will be drawn out. Consolidated data is reviewed on a bi-annual basis to keep risk levels manageable. Centralised credit system to monitor rise in bad debt. debt Courts currently has a Credit Management-Information Information-System (MIS) that supports both its Singapore and Malaysian operations. By centralising its credit system, it can synchronise its credit portfolio risk management in both countries, as well as detect signs of credit deterioration early and pinpoint key credit performance benchmark. Between 2010 and 2012, delinquency rates fell from a high of 15.4% to 9.6% in Malaysia and from 4.4% to 3.2% in Singapore.
Figure 19: Delinquency rate (Top: Malaysia, Bottom: Singapore)

Source: IPO Prospectus

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Courts Asia

How Courts finances its credit facility

Asset-light balance sheet. Courts holds an asset-light asset balance sheet, where 68% of its total assets are held in receivables and 11% in inventories. Fixed assets only accounted for 3% of total assets. Almost all of its debt is tied to its in-house house credit facility, which in turn drives revenue. Since IPO, it has as held a low net gearing geari of 0.59x. We expect Courts to utilize its funds progressively to set up its credit facility after Indonesia operation begins. Financed inanced through loan securitisation. Courts finances its credit facility by packaging its consumer credit loan receivables into in two separate asset securitisation arrangements in Singapore and Malaysia, with HSBC Bank in Singapore and a syndicate of banks in Malaysia (HSBC Bank, OCBC Bank and HwangDBS Investment Bank). Essentially, the credit receivables are sold into a Special Purpose P Vehicle (SPV) called Assetrust in Singapore and Vista Lavender Sdn Bhd (VLSB) in Malaysia, and the banks will provide Courts with credit facilities backed by the cashflow from these receivables. For Singapore, Courts can draw down up to 70% of the eligible e receivables sold to Assetrust, with the amount available for drawdown dependent on the size and quality of eligible receivables. The receivables are packaged into Senior, Mezzanine and Junior tranches, monthly repayments are deposited into a central centra collections account and are made available to Courts as working capital after deducting for the yields payable to the Senior and Mezzanine beneficiary. Courts pays a fixed interest rate of 5.5% pa for the first SGD94m and Singapore SOR+spread on the balance. nce. The program expires in 2017. For Malaysia, the three banks have provided Courts with a Senior Loan Facility of up to MYR350m (with a fixed interest rate of 6.6% for amounts up to MYR265m and KLIBOR+spread for the rest). It works on the same basis as the Singapore arrangement except that the Malaysian receivables must be rated AAA by the Ratings Agency of Malaysia (Singapore receivables do not need to be rated). Quality of receivables matters. Trade receivables receiva are rated at least AAA ratio to qualify before packaged into Senior Loan Facility in Malaysia. Singapore receivables do not need to be rated but are subject to review. Inherently, there is credit risk involved as Courts assumes 100% liability for the SPVs. However, we argue that highly stringent procedures which Courts have implemented will be enough to keep its delinquency rates low. Collection of payments. For receivables which Courts is unable to collect, it will first utilize field collection units or external collection agencies. If such methods are unsuccessful, it may take legal action via the small claims tribunal. Even when the receivable is written off, Courts continues to pursue impairment losses. How impairment losses are handled. Courts has a 100% write-off policy with the treatment of impairment loss which averages 4.6% of gross receivables as of 3QYMar 2-13. . Any payment done after write-off write will be recorded under Other Income in the P&L, and will boost earnings.

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Courts Asia Figure 20: Credit facility ility financing arrangements

Country Type Asset Securitisation Program 2012 Singapore Packaging of receivables into Special Purpose Vehicle (Assetrust) (Assetrust where eligible receivables can be sold, and capital can be drawn down for up to 70% of the eligible receivables. 5 years from 2012 Dependent on amount of eligible receivables 5.5% pa on first SGD94m, SOR+spread on balance Courts Packaged receivables packed into various tranches. Senior Loan Facility Malaysia Senior Loan Facility up to RM350m has been committed by the lenders. First 3 years is under revolving credit facility, and by 4th year, it turns t into a fully-amortising amortising term loan facility. 3 + 2 years from 2012 Up to MYR350m 6.6% pa on first MYR253m, KLIBOR+spread on balance Courts 1) Absolute bsolute agreement to the receivables acquired by VLSB from CMB 2) A debenture creating a fixed and floating charge over present and future assets of CMB & VLSB 3) Corporate orporate guarantee by CMB for all liabilities owed under the loan 4) Maintenance of certain financial ratios, such as consolidated gearing ratio can't be more than 1.40x during revolving period, and 1.25x during consolidated period 5) Main ain shareholder ARG can't fall below 20% AAA by RAM Rating Service Berhad

Tenure How much can be drawn down? Effective rate of interest (%) Who bears the risk? Safety measures

Credit rating Source: IPO prospectus

Not necessary

Figure 21: : Delinquency losses YE Mar Singapore Allowance for impairment (%) SGDm Actual impairment loss (%) Malaysia Allowance for impairment (%) SGDm Actual impairment loss (%)
Source: Company data

2010 3.4% 4.9 3.1% 10.5% 25.2 7.6%

2011 3.5% 5.0 2.2% 6.8% 18.1 6.1%

2012 2.6% 4.1 2.7% 6.6% 19.9 5.1%

9M11 2.8% 4.2 2.1% 6.6% 19.9 4.4%

9M12 2.7% 5.0 2.0% 5.7% 17.8 4.2%

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Courts Asia

Earnings Projections
Net earnings CAGR of 13.9%. We expect Courts will deliver a threeyear sales ales and net earnings CAGR of 13.7% 13.7 and 13.9%, respectively. Malaysias contribution looks set to increase as Courts penetrates further into the Klang Valley suburbs, , where credit sales are preferred. In Indonesia, it will take some time before it achieves industry average per sq ft sales, but we expect the IPO proceeds will be used u to build a solid credit infrastructure like that in Singapore and Malaysia as this is a key driver of Courts business model. In time, this will allow it to match the industrys sales growth.
Figure 22: : Sales assumptions assumption per sq ft 2010 Sales breakdown Singapore Malaysia Indonesia % of sales Singapore Malaysia Indonesia Sales per sq ft Singapore Malaysia Indonesia Growth (%) Singapore Malaysia Singapore SSSG (%) Megastore Superstore store Small-format format store Malaysia SSSG (%) Megastore Superstore Small-format format store GFA increase (sq ft) Singapore Malaysia Indonesia Total GFA approx. Singapore Malaysia Indonesia Total Source: Maybank KE estimates *Since IPO 83.6 97.5 0.0 46.2% 53.8% 0.0% 100% 913 171 2011 95.2 109.8 0.0 46.4% 53.6% 0.0% 100% 972 192 2012 112.7 119.2 0.0 48.6% 51.4% 0.0% 100% 1,092 194 2013F 118.4 132.5 0.0 47.2% 52.8% 0.0% 100% 1,182 211 2014F 135.2 157.6 0.0 46.2% 53.8% 0.0% 100% 1,267 232 2015F 151.5 182.1 6.0 44.6% 53.6% 1.8% 100% 1,341 247 200 5.8% 6.3% 7.0% 6.0% 1.0% 8.0% 7.0% 6.0% 25,000 80,000 140,000 245,000 451,708 1,007,069 140,000

6.5% 12.8% 11.6% 6.0% -4.9% -1.2% 12.3% 31.1%

12.3% 1.0% 11.3% 14.1% 1.8% 1.9% 0.7% 0.9%

8.2% 8.8% 9.0% 8.0% 1.0% 8.0% 8.0% 7.0% 6,573* 36,000* 0* 42,573*

7.3% 9.8% 7.0% 7.0% 2.0% 8.0% 7.0% 6.0% 27,509 80,000 0 107,509 426,708 927,069 0

392,626* 811,069* 0

399,199 847,069 0

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Courts Asia Figure 23: Quarterly results Sales Cost of sales Gross profit Other income Distribution and marketing Administrative Finance Profit before tax Tax Net profit EPS ( SG ct) 1Q12 171.0 -116.7 54.3 0.8 -14.9 -28.7 -2.7 8.9 -1.0 7.8 1.39 2Q12 191.4 -129.7 61.8 0.8 -16.4 -27.2 -4.8 14.2 -3.2 10.9 1.95 3Q12 178.7 -124.1 54.5 1.7 -14.4 -31.2 -4.3 6.4 -1.3 5.1 0.91 4Q12 183.0 -121.8 61.3 2.2 -13.1 -29.0 -2.7 18.7 -3.1 15.6 2.78 1Q13 194.0 -135.5 58.5 0.9 -15.6 -30.4 -5.2 8.3 -1.6 6.7 1.20 2Q13 215.8 -142.4 73.3 0.8 -15.9 -35.0 -3.4 19.8 -3.9 15.9 2.84 3Q13 195.5 -137.7 57.8 3.4 -16.3 -33.1 -4.4 7.5 -1.3 6.2 1.10 4Q13* 177.8 -116.5 61.3 0.7 -15.2 -27.2 -3.3 16.3 -2.6 13.7 2.44

Source: Company data, Maybank KE estimates *Forecast

Seasonality changes. The second and fourth quarters are Courts strongest quarters due to the festival of Eid and Chinese New Year celebrations. We expect 4QFY3/13F to post robust numbers on seasonal strength. But there could be a small dip QoQ in the absence of a one-off corporate porate service agreement charge paid by ARG and currency gains in 4QFY3/12. In FY3/12, 12, 4QFY3/12 should be the strongest quarter for Courts, , accounting for 40% of full-year full earnings. We also expect continual improvement in same store sales for its newly opened stores, especially the relaunch of Megastore in Tampines.

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Courts Asia

Financial Analysis
Margin trend. Courts margins have shown show progressive improvement between 2010 and 2012, thanks to increased contributions con from service agreement charges and better management of operating costs. Gross margin trend has remained highly stable at between 30% and 32%. We expect gross margin to hold steady even as business expansion expan ramps up in Malaysia and Indonesia, where credit use is more common, while product mix is skewing towards electronic goods. goods Malaysia commands stronger gross margin. Singapore generated a three-year year average gross margin of 21.9%, as opposed to Malaysias three-year year average gross margin of 50.5%. This includes service charges imposed on credit purchases in each country.
Figure 24: 24 Margin trend
Gross profit margin 60% 50% 40% 31.2% 30% 21.5% 20% 10% 2010 2011 2012 2013F 2014F 2015F 21.0% 23.1% 30.4% 32.0% 51.0% 49.9% 50.5% 49.0% 48.5% 48.5% Singapore gross margin Malaysia gross margin

32.0% 23.1%

32.2% 23.0%

32.1% 23.0%

Source: Company data, Maybank Kim Eng

Operating expenses. We expect operating cost to maintain stable, heading slightly up by 0.1-0.2ppts 2ppts between 2013 and 2015 due to labour and rental cost pressures, , as well as penetration into a new market. Courts has hired consultancy group Bain Company between 2QFY3/13 and 3QFY3/13 to improve its cost efficiency. efficiency Despite cost pressures, Courts current operating margin spread of 5.5ppt is undoubtedly superior to Challengers.
Figure 25: 25 SG&A ratio trend
18.0% 16.1% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 2011 2012 2013 2014 2015 8.9% 8.1% 8.1% 8.1% 8.2% Distribution and m exp 16.0% 16.1% Admin exp 16.2% 16.2%

Source: Company data, Maybank Kim Eng

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Courts Asia

Salary structure. Courts relies on a low fixed base, base high commission salary structure to incentivise its workers to make more sales. We expect labour costs to increase, se, as Singapores foreign worker levy is on the rise, , and Courts will be making its foray into a new market, market which will require additional manpower. As of end-FY3/12, end Courts has 695 employees in Singapore and 1,261 employees in Malaysia. Rental costs. Following a restructuring exercise from 2009 to 2012, Courts has rationalised ed its store footprint in Singapore and Malaysia by closing unprofitable ones and refurbishing or relocating others. If a store fails to achieve a certain percentage of operational efficiency, its existence will be reviewed. Small-sized sized outlets could be closed as quickly as three months, while larger outlets would require further deliberation of up to 12 months. Capital expenditure. We estimate Courts will need an average capex of SGD10m over 2013-15 for its store expansion and refurbishment regionally. We anticipate a small spike in 2015 for the construction of the warehouse in Indonesia. No fixed dividend policy as yet. Courts does not have an official dividend policy. However, it plans to pay out 30% of its net profit in FY3/13F and FY3/14F. We believe Courts will be able to deliver 30% dividend payout after FY3/14F, , given its strong operating cash flow. We estimate FY3/14F dividend yield at 3%.
Figure 26: Dividend per share (SG cts) vs yield (%)
DPS 30.0 25.0 20.0 15.0 15.0% 10.0 5.0 0.0 2010 2011 2012 2013 2014 2015 10.0% 5.0% 0.0% Yield (%) 35.0% 30.0% 25.0% 20.0%

Source: Company data, Maybank KE estimates

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Courts Asia

Stakeholder to reduce its stake. Courts stakeholder, Asia Retail Group, holds a 68.2% stake in Courts Asia. The lockup period will be th until April 15 2013, of which we are expecting the investors to loosen their grip on Courts to free up liquidity. This may create temporary share price pressure. Credit risk from in-house house credit facility. Courts relies heavily on its credit facility. During economic downturns, credit risk on its trade receivables may spike up and lead to higher delinquency rates and hence, bad debt write-offs. . This may force lending banks to renegotiate for higher interest rates or apply more stringent measures on receivables to reduce their risk exposure. . If this eventuates, it will be detrimental to Courts earnings model. Interest rate sensitivity. Courts has some borrowings, borrowings which are held at variable rates with no fixed hedging. In the Asset Securitisation Programme of Singapore, 10.9% of eligible receivables drawn down are under a variable interest rate scheme. In Malaysia, the remainder after RM253m, will be based on KIBOR and a spread. Highly competitive landscape. Courts operates in a highly competitive landscape where the sale prices of products are essentially the same across the industry. Rental risks. Courts strives to hold on to an asset-light business model, preferring to lease from landlords. However, this puts it at risk of rental increases, depending on how well the economy is doing.

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Courts Asia

Business Overview
Company background. Courts Asia is one of the leading electrical, IT and furniture product retailers lers in Singapore and Malaysia, with a presence for more than 35 years in Singapore and more than 25 years in Malaysia. As of 3QFY3/13, it has 55 stores in Malaysia and 13 stores in Singapore, spanning more than 1m sq ft in total. Moving into electronics industry. Courts Asia made the move to reenter the IT industry in Malaysia in 2007 because of the high sales volume. Electrical and IT products accounted ed for 76.9% of total sales as of FY3/12, while furniture accounted for 19% of sales. Going forward, we expect sales contribution will continue to come from electronic products, as ASEAN consumers become more technology conscious.
Figure 27: : Electronic and IT offerings in Courts Electrical products Major white goods Vision Refrigerators/ freezer Television sets Washing machines Video players, recorders Air conditioners Vision accessories Dryers IT Computers Desktops Laptops

Small appliances Vacuum cleaners Toasters & blenders Fans Electric irons Cordless phones Photography Digital camera Camcorders Photographic accessories

Audio Home theatre systems Amplifiers Speakers Portable audio equipment

Accessories cessories Monitors Keyboards Peripherals (printer)

Mobile Mobile phones Mobile accessories Smart phones Tablets

Source: IPO prospectus

Figure 28: Singapore sales mix as of FY3/12 12

Services 4% Furniture 19% Electrical products 42%

Figure 29: Malaysia sales mix as of FY3/12 FY

Services 10% Furniture 21% Electrical products 45%

IT Products 35%

IT Products 24%

Source: Company data, Maybank KE

Source: Company data, Maybank KE K

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Courts Asia

Industry Overview
Largest player in Singapore. According to Euromonitor International, the electronics and furniture industries in Singapore are fragmented, with the top five players accounting for only 33.1% of total market size in 2011. In Malaysia, they are even more fragmented with the top five players accounting for only 24.8% in the same year. y Courts is the largest retailer in Singapore, taking 9.8% of market share. Common names in both th countries would include IKEA and Best Denki, with respectively 7.2% and 3.1% of market share in Singapore, and 3.1% and 1.6% of market share in Malaysia in 2011.
Figure 30: Singapore top five retailers by retail sales value 2009 2010 Courts (Singapore) 8.5% 9.7% Best Denki (Singapore) 7.6% 7.5% Pertama Holdings 7.0% 6.8% Challenger Technologies 4.4% 5.3% Ikano Pte. (Ikea) 3.0% 3.1% Others 69.5% 67.6% 100% 100%
Source: IPO Prospectus, Euromonitor International

2011 9.8% 7.2% 6.7% 6.2% 3.1% 66.9% 100%

Figure 31: Malaysia top five retailers by retail sales value 2009 2010 Senheng Electric (KL) 7.0% 8.1% Courts Mammoth Sdn 5.8% 6.5% Elitetrax Marketing Sdn (Harvey 2.5% 3.0% Norman) Ikano Corp Sdn (Ikea) 3.1% 3.2% Best Denki Malaysia 1.9% 2.1% Others 79.6% 77.2% 100% 100%
Source: IPO Prospectus, Euromonitor International

2011 9.9% 7.0% 3.2% 3.1% 1.6% 75.2% 100%

Electronics market trend. The electronics market is highly driven by consumer confidence and spending, which grows in tandem with economic recovery. Demand for electronics products product rises as consumers become more technologically savvy. However, this means retailers must be careful in managing their inventory as consumers have no qualms about moving on to the latest and greatest product. In Singapore, Challenger appears to be the competitor to watch out for, as it saw the largest jump in market share of 25% between 2009 and 2011, whereas Best Denki and Harvey Norman grew more modestly. In Malaysia, Senheng registered the highest value CAGR of 21% from 2009 to 2011 by offering a strong customer experience. Furniture market trend. In the furniture industry, IKEA would be Courts biggest competitor in both Singapore and Malaysia. IKEA provides an integrated experience with an in-house in restaurant and play area for children. The company grew at 3.3% CAGR compared to Denki, which fell 7.6% between 2009 and 2011. In 2014, IKEA will also be opening its first store in Jakarta. Retail space expanding. In general, retail space is getting larger and larger as consumers love the convenience of finding everything in the same store. Retail space is expected to grow at 0.3% CAGR in Singapore over 2012 to 2016, and by 0.6% pa in Malaysia between 2012 and 2016.

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Courts Asia

Management Structure
Mr Terence Donald OConnor, Executive Director and CEO Mr OConnor has been with Courts Singapore since 1993. He was the Managing Director from 2000 to 2007, and led the company through some of its most difficult times. Mr OConnor was appointed the CEO in April 2011. He is also the President of the Institute of Advertising Singapore. Ms Kee Kim Eng, Executive Director and CFO Ms Kee has been with Courts Singapore since 1996, holding h concurrent positions of Deputy Managing Director, Finance Director and Company Secretary. She was appointed an Executive Director in March 2010 and joined the board of directors in May 2012. Ms Kee has more than 25 years of experience in various public listed companies from a diverse range of industries. She holds an ACCA qualification. qualification Mr Jack Hennessy, Non-independent independent and Non-Executive Non Director Mr Hennessy is the managing director of Barings Baring Private Equity Asia, which is the controlling stakeholder of Courts Asia. He is the Chairman of the Remuneration Committee, as well as the Nominating Committee. Previously, Mr Hennessy was a General Partner with Allen & Buckeridge, an Australian private equity firm, as well as an adjunct professor at INSEAD from 2006 to 2008, where he taught a course on leveraged buyout. Mr James Edward Friel, Chief Operating Officer Mr Friel has been with the Courts family since 1997. He has worked his way up the ranks from Electrical Buying Director at Courts (Mauritius), to Managing Director and CEO of Courts Malaysia between 2005 and 2008. He was appointed Chief Operating Officer of Courts Asia in April 2011. Previously, he has held positions such as Commercial Director and Country Director in Courts Singapore. Mr Chan Yuen Kiong, Regional Credit Director Mr Chan was previously the Country Manager and Head of Consumer Services at American Express (M) Sdn in Malaysia, Malaysia where he was in charge of credit functions. Subsequently, he has held positions as Business Controller, Head of Bankcard Head Business, and Head of Operations and Technology ology at Citibank Berhad. He has worked with Courts Malaysia since 2006 and was appointed Regional Credit Director in April 2011.
Source: IPO Prospectus

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Courts Asia
PROFIT AND LOSS (SGD m) FY Mar Sales Cost of goods sold Gross profit Operating expenses Operating Profit Other income Net interest Interest income interest expense Pretax income Income taxes Net profit EBITDA EPS (S cts) 2011 674.1 (469.1) 205.0 (168.0) 37.0 3.6 (10.9) 0.0 (10.9) 29.7 2.5 32.2 47.6 5.8 2012 724.2 (492.2) 231.9 (174.9) 57.0 5.5 (14.4) 0.0 (14.4) 48.1 (8.7) 39.4 70.3 7.0 2013F 783.1 (532.2) 250.9 (188.7) 62.2 5.9 (16.3) 0.0 (16.3) 51.8 (9.4) 42.4 76.3 7.6 2014F 913.0 (620.2) 292.9 (220.0) 72.8 7.3 (17.6) 0.0 (17.6) 62.5 (11.6) 50.9 89.2 9.1 2015F 1063.1 (723.4) 339.7 (257.3) 82.4 8.5 (19.5) 0.0 (19.5) 71.5 (13.2) 58.2 100.5 10.4 BALANCE SHEET (SGD m) FY Mar Total assets Current assets Cash & ST investment Inventories Accounts receivable Others Other assets LT investments Net fixed assets Others Total liabilities Current liabilities Accounts payable ST borrowings Others Long-term liabilities Long-term debts Others Shareholder's equity Paid-in capital Reserve 2011 510.1 289.9 57.9 59.7 170.0 2.4 220.2 178.8 15.1 26.3 276.3 173.4 124.4 43.0 6.0 102.8 98.8 4.0 233.9 221.1 12.7 2012 561.7 308.8 59.2 66.6 183.0 0.0 252.9 208.5 16.3 28.1 342.4 201.5 127.0 66.5 8.0 140.9 135.7 5.2 219.3 221.1 (1.8) 2013F 651.7 372.6 84.6 73.0 215.0 0.0 279.1 232.4 18.1 28.6 375.8 147.0 133.1 5.5 8.4 228.7 224.5 4.2 275.9 270.4 5.5 2014F 677.8 377.7 74.7 82.3 220.7 0.0 300.0 251.7 19.2 29.1 396.2 167.3 152.4 6.1 8.8 228.9 242.5 (13.6) 281.6 270.4 11.2 2015F 755.0 430.9 97.2 97.1 236.6 0.0 324.1 269.8 24.6 29.7 462.6 196.1 174.7 12.2 9.3 266.5 261.9 4.6 292.4 270.4 21.9

CASH FLOW (SGD m) FY Mar Operating cash flow Operating profit Depreciation & amortisation Change in working capital Others Investment cash flow Net capex Change in LT investment Change in other assets Cash flow after invt. Financing cash flow Change in share capital Net change in debt Change in other LT liab. Net cash flow

2011 25.4 32.2 7.0 (12.8) (1.1) (2.3) (7.4) 5.1 23.1 (3.5) 0.0 39.7 (17.1) (26.1) 19.6

2012 6.5 39.4 7.8 (47.8) 7.2 (0.5) (8.6) 8.1 6.0 2.5 0.0 56.2 (51.7) (1.9) 8.5

2013F (13.2) 42.4 8.1 (56.7) (7.1) (9.0) (10.0) 1.0 (22.1) 47.5 43.5 27.9 (12.7) (11.1) 25.4

2014F 14.2 50.9 9.1 (14.9) (31.0) (9.8) (10.2) 0.3 4.4 (14.2) 0.0 18.5 (15.3) (17.4) (9.9)

2015F 48.3 58.2 9.6 (26.5) 7.0 (14.6) (15.0) 0.4 33.7 (11.2) 0.0 25.5 (17.5) (19.2) 22.4

KEY RATIOS FY Mar Growth (% YoY) Sales Operating profit EBITDA Net profit EPS Profitability (%) Gross margin Operating margin EBITDA margin Net margin ROA ROE Stability Gross debt/equity (%) Net debt/equity (%) Int. coverage (X) Int. & ST debt coverage (X) Cash flow int. coverage (X) Cash flow int. & ST debt (X) Current ratio (X) Quick ratio (X) Net cash/(debt) (SGD m) Per share data (SGD) EPS CFPS BVPS SPS EBITDA/share DPS






16.3 75.7 41.1 77.7 112.1 30.4% 5.5% 7.1% 4.8% 6.3% 13.8% 60.6% 35.9% na na na na 1.7 1.3 84.0 5.8 3.5 41.8 1.2 8.5 8.5

7.4 53.9 47.7 22.2 22.2 32.0% 7.9% 9.7% 5.4% 7.0% 18.0% 92.2% 65.2% na na na na 1.5 1.2 143.0 7.0 1.5 39.2 1.3 12.6 25.9

8.1 9.1 8.5 7.7 7.7 32.0% 7.9% 9.7% 5.4% 6.5% 15.4% 83.4% 52.7% na na na na 2.5 2.0 145.5 7.6 4.5 49.3 1.4 13.6 2.3

16.6 17.1 16.9 20.0 20.0 32.1% 8.0% 9.8% 5.6% 7.5% 18.1% 88.3% 61.7% na na na na 2.3 1.8 173.9 9.1 (1.8) 50.3 1.6 15.9 2.7

16.4 13.1 12.7 14.3 14.3 32.0% 7.8% 9.5% 5.5% 7.7% 19.9% 93.7% 60.5% na na na na 2.2 1.7 176.9 10.4 4.0 52.2 1.9 17.9 3.1

Source: Company, Maybank KE

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Courts Asia

P K BASU Regional Head, Research & Economics (65) 6432 1821 WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 ONG Seng Yeow Regional Products & Planning (65) 6432 1453

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 Luz LORENZO Philippines | Indonesia (63) 2 849 8836 Tim LEELAHAPHAN Thailand (662) 658 1420

WONG Chew Hann, CA Head of Research (603) 2297 8686 Strategy Construction & Infrastructure Desmond CHNG, ACA (603) 2297 8680 Banking - Regional LIAW Thong Jung (603) 2297 8688 Oil & Gas Automotive Shipping ONG Chee Ting, CA (603) 2297 8678 Plantations- Regional Mohshin AZIZ (603) 2297 8692 Aviation Petrochem YIN Shao Yang, CPA (603) 2297 8916 Gaming Regional Media TAN CHI WEI, CFA (603) 2297 8690 Power Telcos WONG Wei Sum, CFA (603) 2297 8679 Property & REITs LEE Yen Ling (603) 2297 8691 Building Materials Manufacturing Technology LEE Cheng Hooi Head of Retail Technicals

Gregory YAP Head of Research (65) 6432 1450 Technology & Manufacturing Telcos - Regional Wilson LIEW (65) 6432 1454 Hotel & Resort Property & Construction James KOH (65) 6432 1431 Logistics Resources Consumer Small & Mid Caps YEAK Chee Keong, CFA (65) 6432 1460 Offshore & Marine Alison FOK (65) 6432 1447 Services S-chips Bernard CHIN (65) 6432 1446 Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 REITs / Property Wei Bin (65) 6432 1455 S-chips Small & Mid Caps

Sukit UDOMSIRIKUL Head of Research (66) 2658 6300 ext 5090 Sukit.u@maybank Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 Maria.L@maybank Consumer/ Big Caps Andrew STOTZ Strategist (66) 2658 6300 ext 5091 Andrew@maybank Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 mayuree.c@maybank Strategy Suttatip PEERASUB (66) 2658 6300 ext 1430 suttatip.p@maybank Media Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 sutthichai.k@maybank Energy Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 termporn.t@maybank Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 woraphon.w@maybank Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 jaroonpan.w@maybank Transportation Small cap. Chatchai JINDARAT (66) 2658 6300 ext 1401 Electronics Pongrat RATANATAVANANANDA (66) 2658 6300 ext 1398 pongrat.R@maybank Services/ Small Caps

Katarina SETIAWAN Head of Research (62) 21 2557 1125 Consumer Strategy Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 Base metals Mining Oil & Gas Wholesale Rahmi MARINA (62) 21 2557 1128 Banking Multifinance Pandu ANUGRAH (62) 21 2557 1137 Automotive Heavy equipment Plantation Toll road Adi N. WICAKSONO (62) 21 2557 1128 Generalist Anthony YUNUS (62) 21 2557 1139 Cement Infrastructure Property Arwani PRANADJAYA (62) 21 2557 1129 Technicals


Todd MARTIN Head of Research (852) 2268 0638 Banking & Finance Ivan CHEUNG, CFA (852) 2268 0634 HK Property Industrial Jacqueline KO, CFA (852) 2268 0633 Consumer Andy POON (852) 2268 0645 Telecom & equipment Alex YEUNG (852) 2268 0636 Industrial Warren LAU (852) 2268 0644 Technology - Regional Karen KWAN (852) 2268 0640 China Property Jeremy TAN (852) 2268 0635 Gaming

Michael KOKALARI, CFA Head of Research (84) 838 38 66 47 michael.kokalari@ Strategy Nguyen Thi Ngan Tuyen (84) 844 55 58 88 x 8081 tuyen.nguyen@ Food and Beverage Oil and Gas Ngo Bich Van (84) 844 55 58 88 x 8084 Banking Trinh Thi Ngoc Diep (84) 844 55 58 88 x 8242 diep.trinh@ Technology Utilities Construction Dang Thi Kim Thoa (84) 844 55 58 88 x 8083 thoa.dang@ Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 hoa.nguyen@ Steel Sugar Resources

Jigar SHAH Head of Research (91) 22 6623 2601 Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 Metal & Mining Capital goods Property Urmil SHAH (91) 22 6623 2606 Technology Media Varun VARMA (91) 226623 2611 Banking

Luz LORENZO Head of Research (63) 2 849 8836 Strategy Laura DY-LIACCO (63) 2 849 8840 Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 Consumer Media Cement Kenneth NERECINA (63) 2 849 8839 Conglomerates Property Ports/ Logistics Katherine TAN (63) 2 849 8843 Banks Construction Ramon ADVIENTO (63) 2 849 8845 Mining

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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 rating 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 volume information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may ma 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 indepe 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 connec parties and/or employees (collectively, Representatives) tatives) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance reli 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, ant believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event 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 current available to us and are subject to certain risks and d uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. statemen Readers are cautioned not to place undue relevance on these forward-looking 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 refle the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons 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 p 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 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 rep 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 juri 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 funda ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related 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 Rese Pte. Ltd. (Maybank KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients r 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 th report is not an accredited investor, expert investor or institutional onal investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable liabl for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand losure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant pur to the policy of the The disclosure 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, r therefore, is from the perspective of a third party. It is not an evaluation on 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 pri written permission of MBKET. MBKET BKET 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 defin in Rule 15a-6 under the Securities Exchange hange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer broker 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 re broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted 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 investment 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, regula by the Financial Services Authority and is for Informational Purposes only. This document is not intended 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 consider as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent indepen tax advisers.

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Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) (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) 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 regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) No.01 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) 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 ted (KESI) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Stoc Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI SE 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.

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 he 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 12 March 2013, , Maybank KERPL and the covering 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. rt. 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 requirem under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered Registered with the Securities and Futures Commission. As of 12 March 2013, , 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 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.

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 soph investors who are capable of understanding nding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial fi and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market 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 HOLD SELL Return is expected to be above 10% % in the next 12 months (excluding dividends) Return is expected to be between - 10% % to +10% +1 in the next 12 months (excluding dividends) 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 Investm ratings are only applicable icable 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.

Some common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure BV = Book Value CAGR = Compounded Annual Growth Rate Capex = Capital Expenditure CY = Calendar Year DCF = Discounted Cashflow DPS = Dividend Per Share EBIT = Earnings Before Interest And Tax EBITDA = EBIT, Depreciation And Amortisation EPS = Earnings Per Share EV = Enterprise Value FCF = Free Cashflow FV = Fair Value FY = Financial Year FYE = Financial Year End MoM = Month-On-Month NAV = Net Asset Value NTA = Net Tangible Asset P = Price P.A. = Per Annum PAT = Profit After Tax PBT = Profit Before Tax PE = Price Earnings PEG = PE Ratio To Growth PER = PE Ratio QoQ = Quarter-On-Quarter Quarter ROA = Return On Asset ROE = Return On Equity ROSF = Return On Shareholders Funds WACC = Weighted Average Cost Of Capital YoY = Year-On-Year YTD = Year-To-Date

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Courts Asia




New York

Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

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

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

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

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

PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189
In association with

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
Saudi Arabia
In association with



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

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)

Maybank Kim Eng Securities JSC 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 838 38 66 39

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

North Asia Sales Trading

Kevin Foy Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

Eddie LAU Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267 |

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