Malaysia Company Guide

Top Glove Corporation

Version 11 | Bloomberg: TOPG MK | Reuters: TPGC.KL Refer to important disclosures at the end of this report

DBS Group Research . Equity 18 Oct 2018

FULLY VALUED Focus on growth

Last Traded Price ( 17 Oct 2018): RM11.50 (KLCI : 1,740.59)
Price Target 12-mth: RM9.28 (-19% downside) (Prev RM6.46) Maintain FULLY VALUED. We are maintaining our FULLY
VALUED call with a higher TP of RM9.28. We make changes to
Analyst our PE multiple from 16x CY19 EPS to 23x CY19 EPS which is
Siti Ruzanna Mohd Faruk +603 2604 3965
sruzannamf@alliancedbs.com equivalent to +1SD of its 5-year mean PE. Top Glove is poised to
deliver strong earnings, backed by its continuous expansion as
What’s New
well as improving efficiency. We believe that using its mean PE
 Volume growth of 26% y-o-y supported by demand in
is no longer justified as no impairment is needed for the
developing markets
acquisition of Aspion. Moving forward, the group will leverage
 Aspion to undergo enhancement and improvement on its expertise to turn around Aspion which will result in better
which will contribute positively to earnings earnings contribution.
 Impairment on goodwill not needed based on
impairment test Where we differ: More conservative on valuations. Our
valuation of 23x CY19 EPS is conservative, given our more
 Maintain FULLY VALUED with higher TP of RM9.28 cautious stance on rising nitrile prices as well as incoming
capacity by the industry as a whole, which may see some
consolidation in the sector in the medium term.
Price Relative
Potential catalyst: Expanding capacity. Top Glove is ramping up
its nitrile glove business by increasing its capacity in this
segment. The expansion plans put in motion, such as Factory 32
in Klang (to commence in early 2019), Factory 33 (early 2019),
Factory 5A (end 2019) and Factory 8A (early 2020), will raise its
total production capacity to 70.3bn gloves p.a. (+16% from
current capacity).
Forecasts and Valuation
FY Aug (RMm) 2018A 2019F 2020F 2021F Valuation:
Revenue 4,214 4,723 5,210 5,697 Maintain FULLY VALUED. We maintain our FULLY VALUED call
EBITDA 692 844 947 1,047
Pre-tax Profit 523 599 665 746 with a higher TP of RM9.28. Our TP is based on 23x CY19F
Net Profit 434 497 552 620 EPS. This is equivalent to +1SD of its 5-year mean PE.
Net Pft (Pre Ex.) 434 497 552 620
Net Pft Gth (Pre-ex) (%) 32.0 14.7 11.1 12.3 Key Risks to Our View:
EPS (sen) 33.9 38.9 43.2 48.5
EPS Pre Ex. (sen) 33.9 38.9 43.2 48.5
Rising competition could erode margins. Competition is
EPS Gth Pre Ex (%) 30 15 11 12 heating up in the glove sector with several glove makers
Diluted EPS (sen) 33.9 38.9 43.2 48.5 expanding aggressively. This could result in higher pressure on
Net DPS (sen) 17.0 19.5 21.7 24.3 margins.
BV Per Share (sen) 188 210 234 261
PE (X) 33.9 29.5 26.6 23.7
PE Pre Ex. (X) 33.9 29.5 26.6 23.7 At A Glance
P/Cash Flow (X) 42.7 24.1 20.8 18.5 Issued Capital (m shrs) 1,278
EV/EBITDA (X) 23.9 19.6 17.4 15.7 Mkt. Cap (RMm/US$m) 14,699 / 3,535
Net Div Yield (%) 1.5 1.7 1.9 2.1 Major Shareholders (%)
P/Book Value (X) 6.1 5.5 4.9 4.4 Tan Sri Lim Wee Chai 28.9%
Net Debt/Equity (X) 0.8 0.7 0.6 0.5 Employees Provident Fund 7.3%
ROAE (%) 19.7 19.5 19.5 19.6
KWAP 5.4%
Earnings Rev (%): 0 0 0 Free Float (%)
Consensus EPS (sen): 40.4 44.8 N/A
Other Broker Recs: B: 7 S: 7 H: 7 3m Avg. Daily Val (US$m) 8.5
ICB Industry : Health Care / Health Care Equipment & Services
Source of all data on this page: Company, AllianceDBS, Bloomberg
Finance L.P

ed: CK / sa: CKY, CW, CS

Company Guide
Top Glove Corporation

WHAT’S NEW
Focus on driving growth
4QFY18 results briefing highlights: Following the 4QFY18
results briefing, Top Glove gave more clarity on the volume
growth, contribution from Aspion as well as the goodwill
impairment test of Aspion.
Volume growth: Top Glove recorded solid volume growth in
4QFY18 (+27% y-o-y; +6% q-o-q). As for FY18, volume
growth came in at 26% y-o-y. This was backed by growing
demand in the developing countries such as Eastern Europe
(+39.6%), Asia ex Japan (+58.0%), Latin America (21.8%),
Africa (+35.3%) as well as the Middle East (38.7%). In terms
of product mix, nitrile tops the chart with 36% of total sales
volume followed by latex glove at 51%. Others are made up
of vinyl and surgical gloves. As Aspion’s volume contribution
is still small, the surgical gloves segment continued to see a
lower mix of 2% of total sales volume. In view of its ongoing
rollout of capacity expansion, we expect the group to record
sales volume growth of 12%/10%/9% for FY19F/20F/21F.
Aspion contribution not material: Following the lawsuit by
Top Glove against Adventa, we have factored in lower
contribution from Aspion as management has guided for the
potential for Aspion’s earnings to fall short. Excluding
Aspion’s contribution and funding costs, FY18 net profit
could have improved by 37% instead of 33%. Moving
forward, management is positive that it can revamp and
improve Aspion’s earnings by leveraging on management’s
expertise and readily available technology. Past acquisitions
such as the Factory 27 and Factory 33 are success stories by
the group, whereby it managed to turn around the factories
to profit-making. For Aspion, guidance on the expected
earnings of RM80m p.a. may require 4-7 years to achieve.
Goodwill impairment test. It has performed a goodwill
impairment test on Aspion using discounted cash flow
method. It has factored in further enhancement, modification
and improvement of the glove production process to its 5-
year discounted cash flow projection. Based on the analysis
under four different scenarios which include different WACC
figures of 6.4% to 8.5%, no impairment is needed for the
goodwill.
Valuation: We maintain our FULLY VALUED call with a higher
TP of RM9.28. We make no changes to our earnings, but we
are bumping up our PE multiple to 23x CY19 EPS (16x
previously) which is equivalent to +1SD of its 5-year mean PE.
We believe earnings will continue to be supported by capacity
expansion and also feel the negatives of Aspion have been
overly priced in as no impairment is needed. We still feel that
its current valuations of 29.8x CY19 EPS is expensive as there
are still headwinds from the rising nitrile prices as well as
incoming capacity by the entire industry in the medium term.

Capacity Expansion Plan

No. of productions Capacity gloves p.a.
Glove Type Target commence operations by
lines (bn)
Current: 32 glove factories 648 lines 60.5

Expansion in progress:
F32 1st Phase (Malaysia) Nitrile 22 lines 2.2 Early 2019
F32 2nd Phase (Malaysia) Nitrile 12 lines 1.2 Early 2019
F33 (Malaysia) Nitrile 12 lines 1.2 Early 2019
F5A (Malaysia) Nitrile 20 lines 2 End 2019
F8A (Thailand) Nitrile/Latex 32 lines 3.2 Early 2020
Total expansion 128 lines 9.8

Total by 2020 746 lines 70.3

Source of all data: Company, AllianceDBS

Sales Volume EBIT/k Gloves

14,000 40% RM/k gloves
13.00
35% 11.79
12,000 11.27
11.00 10.24 10.52 10.50
30% 9.71
10,000 8.88 9.17
25% 9.00
8,000 20%
7.00
6,000 15%
5.00
10%
4,000
5% 3.00
2,000
0%
1.00
- -5%
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 (1.00) 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18

Production Volume (m gloves) y-o-y growth (%) (rhs)

Source of all data: Company, AllianceDBS Source of all data: Company, AllianceDBS

Page 2
 Company Guide
Top Glove Corporation

Capacity (bn gloves)

CRITICAL DATA POINTS TO WATCH
Capacity expansion. Top Glove currently operates 32 glove factories
with a production capacity of 60.5bn gloves p.a., which includes its
Aspion acquisition. Its expansion plans Factory 32 in Klang (to
commence in early 2019), Factory 33 (early 2019) and F5A (end-
2019). Meanwhile, its newest factory F8A in Thailand will be
operational by 2020. These will raise the group’s annual capacity to
70.3bn gloves. Premised on the expected completion dates
provided by management, we expect Top Glove to grow its
effective annual capacity by 7%/10%/9% in FY19/20/21F.
Utilisation rate (%)
Sales volume to grow at 10.4% CAGR. We expect the group’s
utilisation rate to improve to 85% in FY19F and remain flat for
FY20F/21F. Premised on this, we expect Top Glove to grow its sales
volume by 12%/10%/9% in FY19/20/21F. This translates into a 3-
year CAGR of 10.4%, which is in line with the expected
consumption growth of 8-10% p.a. We believe the market will be
able to absorb the supply growth from the top four glove
manufacturers given the continued industry consolidation among
smaller glove manufacturers.

Better metric for profitability. We assess Top Glove’s profitability by Sales Volume (bn gloves)
looking at unit profitability (i.e. EBIT/k gloves), rather than profit
margins. This is because profit margins may fluctuate even if there
are no changes in underlying profitability, due to cost pass-through
pricing (which lags by 1-2 months). Under pricing mechanisms,
profit margins may rise when costs fall, with the same profit levels
on lower average selling price (ASP). Margins may drop when costs
rise, with the same profit levels on higher ASP and no impact on
the bottom line.

EBIT/k gloves to normalise. EBIT/k gloves declined by 17% to

RM9.48 in FY17 as a result of increasing competition among glove EBIT/k gloves (RM)
players, especially in the nitrile segment, as well as rising operating
costs from hikes in natural gas and raw material prices. Due to
better operating environment as well as better efficiencies, EBIT/k
gloves for FY18 came in higher by 16% at RM11.03. We expect
EBIT/k gloves to normalise at this level for FY19F-21F.

Gains from nitrile and surgical gloves. The company’s recent

capacity expansion is geared towards the production of nitrile
gloves, with stronger demand expected in this segment. Top
Glove’s current product mix stands at 64:36 (natural rubber: nitrile).
This could shift to 60:40 once incoming capacity for nitrile gloves
kicks in. The acquisition of Aspion, which will increase the sales mix
of surgical gloves from 2% to 4%, will also improve Top Glove's
earnings with better margins.

Source: Company, AllianceDBS

Page 3
Company Guide
Top Glove Corporation

Appendix 1: Factors driving historical share price performance

TOPG Est Fwd EPS (rhs) TOPG MK USDMYR

RM
13 0.90
Announced the
12 acquisition of Aspion 0.80
11 Earnings delivery from higher which will add additional
sales volume and unit 4.8bn (+9%) to existing
10 capacity 0.70
profitability increase driven
9 by stronger USD and cheaper
raw material cost. 0.60
8

7 0.50

6 0.40
5
0.30
4

3 0.20
2
0.10
1

0 0.00
Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18

*Top Glove forward EPS is based on consensus

Source: Company, AllianceDBS, Bloomberg Finance L.P
Top Glove’s share price versus forward EPS Remarks
TOPG Est Fwd EPS (rhs) TOPG MK Its share price has a positive correlation of 0.97
14.00 1.00 with forward EPS. This shows that its share
12.00 price is strongly driven by earnings delivery,
0.80
10.00 which is backed by capacity expansion as well
8.00 0.60 as unit profitability.
6.00 0.40
4.00
0.20
2.00
- -
Dec-16

Dec-17
Feb-17

Feb-18
Apr-17
Jun-17

Apr-18
Jun-18
Oct-16

Oct-17
Aug-17

Aug-18

Top Glove’s share price versus USD/MYR Remarks

TOPG MK USDMYR From June 2012 to April 2017, Top Glove’s
14.00 5.00 share price had a high correlation of 0.87 with
12.00 4.80
4.60 the USD/MYR trend, as revenue is denominated
10.00 4.40 in USD. However, given a more competitive
8.00 4.20 environment coupled with the cost/savings
4.00 pass-through pricing mechanism, any gains/lost
6.00 3.80
from forex movements will eventually
4.00 3.60
3.40 normalise. Thus, the correlation between Top
2.00 3.20 Glove‘s share price and USD/MYR trend has
- 3.00 dropped to -0.73 from May 2017- Sep 2018.
Aug-16
Mar-16
Dec-14

Oct-15
Apr-13

May-15

Apr-18
Jun-12

Jun-17
Nov-12

Jan-17

Nov-17
Sep-13
Feb-14
Jul-14

Sep-18

Source: Company, AllianceDBS, Bloomberg Finance L.P

Page 4
 Company Guide
Top Glove Corporation

Leverage & Asset Turnover (x)

Balance Sheet:
Solid balance sheet. Top Glove is a strong cash generator and is
currently in a net cash position. With the acquisition of Aspion,
Top Glove will turn into a net debt position with gearing level of
0.55x. However, we remain unconcerned over the heightened
gearing, given Top Glove’s strong cash generation.

Share Price Drivers:

Increased market volatility. Malaysian-listed glove makers have
generally been regarded as defensive and a safe haven by
investors, given their resilient earnings outlook is backed by: (1)
Capital Expenditure
the cost pass-through mechanism; (2) stable demand for
medical glove products; and (3) exposure to global markets (not
dependent on a single geographical region). As such, share
prices in the sector tend to react favourably during periods of
increasing market volatility.

Earnings outlook. Top Glove’s earnings are a function of two

variables: (1) sales volume; and (2) unit profitability (EBIT/k
gloves). We assume sales volume growth of 9%-12% for
FY19F-21F, backed by strong demand. Unit profitability is
influenced by the competitive environment, productivity, and ROE (%)
macroeconomic factors (i.e. currency movements, raw material
prices, etc.).

Key Risks:
Rising competition could erode margins. Competition is
heating up in the glove sector with several glove makers
undertaking aggressive expansion plans, which could see unit
profitability (EBIT/k gloves) suffer going forward. However, Top
Glove will be relatively better off than its peers, as its core
natural rubber glove products will see relatively less
competition than nitrile gloves, because of better supply- Forward PE Band (x)
demand dynamics.

Company Background
Top Glove is the world’s largest rubber glove manufacturer
with an annual production capacity of 60.5bn gloves. Natural
rubber gloves make up the lion’s share of its product mix
(51%), while nitrile rubber gloves account for 36%. Vinyl and
surgical gloves account for the rest. Currently, the group’s
manufacturing facilities are located in Malaysia, Thailand, and
Indonesia.
PB Band (x)

Source: Company, AllianceDBS

Page 5
Company Guide
Top Glove Corporation

Key Assumptions
FY Aug 2017A 2018A 2019F 2020F 2021F
Capacity (bn gloves) 51.9 60.5 65.0 71.7 78.4
Utilisation rate (%) 75.6 81.8 85.0 85.0 85.0
Sales Volume (bn gloves) 39.3 49.5 55.2 60.9 66.6
EBIT/k gloves (RM) 9.48 11.0 11.8 11.8 11.9

Income Statement (RMm)

FY Aug 2017A 2018A 2019F 2020F 2021F
Revenue 3,409 4,214 4,723 5,210 5,697
Cost of Goods Sold (2,804) (3,373) (3,739) (4,139) (4,525)
Gross Profit 605 841 983 1,071 1,172
Other Opng (Exp)/Inc (232) (297) (336) (357) (380)
Operating Profit 373 544 648 714 792
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (1.0) 1.70 1.70 1.70 1.70
Net Interest (Exp)/Inc 10.9 (23.1) (50.4) (50.8) (47.4)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 383 523 599 665 746
Tax (54.7) (85.4) (97.9) (109) (122)
Minority Interest 0.14 (3.7) (3.7) (3.7) (3.7)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 329 434 497 552 620
Net Profit before Except. 329 434 497 552 620
EBITDA 483 692 844 947 1,047
Growth
Revenue Gth (%) 18.0 23.6 12.1 10.3 9.3
EBITDA Gth (%) (8.0) 43.4 22.1 12.2 10.5
Opg Profit Gth (%) (10.2) 45.8 19.0 10.2 10.9
Net Profit Gth (Pre-ex) (%) (8.9) 32.0 14.7 11.1 12.3
Margins & Ratio
Gross Margins (%) 17.8 20.0 20.8 20.6 20.6
Opg Profit Margin (%) 10.9 12.9 13.7 13.7 13.9
Net Profit Margin (%) 9.6 10.3 10.5 10.6 10.9
ROAE (%) 17.2 19.7 19.5 19.5 19.6
ROA (%) 11.8 10.6 9.1 9.5 10.0
ROCE (%) 14.4 11.4 9.2 9.7 10.5
Div Payout Ratio (%) 55.4 50.1 50.1 50.1 50.1
Net Interest Cover (x) NM 23.6 12.9 14.1 16.7
Source: Company, AllianceDBS

Page 6
 Company Guide
Top Glove Corporation

Quarterly / Interim Income Statement (RMm)

FY Aug 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018

Revenue 902 938 958 1,101 1,217

Cost of Goods Sold (748) (764) (771) (890) (994)
Gross Profit 155 174 187 211 223
Other Oper. (Exp)/Inc (57.0) (55.1) (63.8) (67.4) (64.4)
Operating Profit 97.6 119 123 143 158
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (0.1) 0.72 2.09 (0.5) (0.7)
Net Interest (Exp)/Inc 1.69 2.02 (0.9) (8.7) (15.5)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 99.1 122 125 134 142
Tax (0.9) (16.1) (14.5) (14.8) (40.0)
Minority Interest 0.44 (0.5) (1.0) (1.8) (0.4)
Net Profit 98.6 105 109 118 102
Net profit bef Except. 98.6 105 109 118 102
EBITDA 127 151 158 182 201

Growth
Revenue Gth (%) 3.8 4.0 2.2 14.8 10.6
EBITDA Gth (%) 7.2 19.0 4.5 15.1 10.3
Opg Profit Gth (%) 8.2 22.2 3.4 16.2 10.3
Net Profit Gth (Pre-ex) (%) 26.9 6.9 3.4 7.9 (13.6)
Margins
Gross Margins (%) 17.1 18.6 19.5 19.2 18.3
Opg Profit Margins (%) 10.8 12.7 12.9 13.0 13.0
Net Profit Margins (%) 10.9 11.2 11.4 10.7 8.3

Balance Sheet (RMm)

FY Aug 2017A 2018A 2019F 2020F 2021F

Net Fixed Assets 1,564 2,194 2,399 2,567 2,714

Invts in Associates & JVs 0.0 1.70 3.39 5.09 6.79
Other LT Assets 121 1,459 1,459 1,459 1,459
Cash & ST Invts 447 358 351 407 525
Inventory 316 514 570 630 689
Debtors 419 671 752 830 908
Other Current Assets 69.3 76.4 76.4 76.4 76.4
Total Assets 2,936 5,273 5,610 5,974 6,377

ST Debt 315 854 854 854 854

Creditor 419 485 538 595 651
Other Current Liab 62.3 71.0 71.0 71.0 71.0
LT Debt 61.8 1,359 1,359 1,359 1,359
Other LT Liabilities 66.3 88.8 88.8 88.8 88.8
Shareholder’s Equity 2,003 2,405 2,685 2,988 3,331
Minority Interests 9.20 10.6 14.3 18.0 21.7
Total Cap. & Liab. 2,936 5,273 5,610 5,974 6,377

Non-Cash Wkg. Capital 323 705 789 870 951

Net Cash/(Debt) 70.6 (1,855) (1,862) (1,806) (1,688)
Debtors Turn (avg days) 41.0 47.2 55.0 55.4 55.7
Creditors Turn (avg days) 50.9 51.1 52.7 52.9 53.3
Inventory Turn (avg days) 39.3 46.9 55.8 56.1 56.4
Asset Turnover (x) 1.2 1.0 0.9 0.9 0.9
Current Ratio (x) 1.6 1.1 1.2 1.3 1.4
Quick Ratio (x) 1.1 0.7 0.8 0.8 0.9
Net Debt/Equity (X) CASH 0.8 0.7 0.6 0.5
Net Debt/Equity ex MI (X) CASH 0.8 0.7 0.6 0.5
Capex to Debt (%) 122.7 20.0 18.1 18.1 18.1
Z-Score (X) 11.0 5.1 5.1 5.1 NA
Source: Company, AllianceDBS

Page 7
Company Guide
Top Glove Corporation

Cash Flow Statement (RMm)

FY Aug 2017A 2018A 2019F 2020F 2021F

Pre-Tax Profit 383 523 599 665 746

Dep. & Amort. 110 146 195 232 253
Tax Paid (65.5) (36.8) (97.9) (109) (122)
Assoc. & JV Inc/(loss) 0.98 (1.7) (1.7) (1.7) (1.7)
Chg in Wkg.Cap. (52.7) (279) (84.2) (81.0) (80.9)
Other Operating CF 4.74 (7.2) 0.0 0.0 0.0
Net Operating CF 381 344 610 705 795
Capital Exp.(net) (462) (443) (400) (400) (400)
Other Invts.(net) 268 (1,261) 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 0.79 0.0 0.0 0.0 0.0
Other Investing CF 16.9 12.2 0.0 0.0 0.0
Net Investing CF (177) (1,692) (400) (400) (400)
Div Paid (182) (202) (217) (249) (277)
Chg in Gross Debt (28.6) 1,472 0.0 0.0 0.0
Capital Issues 4.96 14.5 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF (205) 1,285 (217) (249) (277)
Currency Adjustments 16.3 (12.9) 0.0 0.0 0.0
Chg in Cash 15.4 (75.9) (6.9) 56.1 118
Opg CFPS (sen) 34.5 48.8 54.3 61.5 68.5
Free CFPS (sen) (6.4) (7.8) 16.5 23.9 30.9
Source: Company, AllianceDBS

Target Price & Ratings History

Source: AllianceDBS
Analyst: Siti Ruzanna Mohd Faruk

Page 8
 Company Guide
Top Glove Corporation

AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 18 Oct 2018 08:24:03 (MYT)

Dissemination Date: 18 Oct 2018 08:25:24 (MYT)

Sources for all charts and tables are AllianceDBS unless otherwise specified.

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Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.

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DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst
(s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of
the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the
real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
2
his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of
the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have a
proprietary position in the securities recommended in this report as of 30 Sep 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services:

3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced:

4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or
a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This
term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or
new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION
General 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.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial
Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the
Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS
are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the
Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures
Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance
(Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank
(Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry
on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at equityresearch@dbs.com

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received
from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection
with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report
are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their
respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties
related or associated with any of them may have positions in, and may effect transactions in the securities mentioned
herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for
the subject companies. They may also have received compensation and/or seek to obtain compensation for broking,
investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn
No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by
the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective
foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the
Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited
Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the
report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327
2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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United This report is produced by AllianceDBS Research Sdn Bhd which is regulated by the Securities Commission Malaysia.
Kingdom
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised
and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and
associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in
any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is
directed at persons having professional experience in matters relating to investments. Any investment activity following
from this communication will only be engaged in with such persons. Persons who do not have professional experience in
matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor,
International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated
Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the
Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as
Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information
purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to
buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular
investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or
investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note
that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or
complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by AllianceDBS Research Sdn Bhd (''AllianceDBS''). DBSVUSA did not participate in its
preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not
associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst
compensation, communications with a subject company, public appearances and trading securities held by a research
analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents.
This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other
institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who
wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE

DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd
Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua
18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard,
68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3
Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982
Tel: 65 6878 8888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888
Fax: 65 65353 418 Tel.: 603 2604 3333 Fax: 65 65353 418
e-mail: equityresearch@dbs.com Fax: 603 2604 3921 e-mail: equityresearch@dbs.com
Participant of the Stock Exchange of Hong Kong e-mail: general@alliancedbs.com Company Regn. No. 196800306E

THAILAND INDONESIA
DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia)
Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif
989 Siam Piwat Tower Building, DBS Bank Tower
9th, 14th-15th Floor Ciputra World 1, 32/F
Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5
Bangkok Thailand 10330 Jakarta 12940, Indonesia
Tel. 66 2 857 7831 Tel: 62 21 3003 4900
Fax: 66 2 658 1269 Fax: 6221 3003 4943
e-mail: research@th.dbs.com e-mail: research@id.dbsvickers.com
Company Regn. No 0105539127012
Securities and Exchange Commission, Thailand

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