ANN JOO RESOURCES BERHAD

24TH ANNUAL GENERAL MEETINGDATO’ LIM HONG THYE, GROUP MANAGING DIRECTOR

28 JULY 2020

INDUSTRY OVERVIEW

1700

1900

2100

2300

2500

2700

2900

MALAYSIA vs CHINA STEEL BAR PRICE (RM/MT)

Malaysia Rebar Price (RM/mt delivered) China Rebar HRB400 (RM/mt Ex-work)

(source : Mysteel, MITI Weekly Bulletin)

2019 STEEL MARKET REVIEW - SUPPLY-DEMAND IMBALANCE

3

DEPRESSED DOMESTIC STEEL PRICE (↓ 17% Y-O-Y)

OCT 18DECLINED DOMESTIC BARPRICE SINCE THE START-UPOF A FOREIGN-OWNED STEELMILL

4Q19DOMESTIC PRICE ONRECOVERY TREND

❑ DOMESTIC BAR PRICE DEPRESSED BY EXCESS SUPPLY MAINLY FROM A NEWLY STARTED FOREIGN-OWNED STEEL MILL IN OCT 2018

❑ SOFTER STEEL DEMAND FROM SLOW PROGRESS OF INFRASTRUCTURE PROJECTS

3Q19DOMESTIC PRICEDECLINED SHARPLYGIVEN OVERSUPPLYSITUATION

MAY 18GE-19

31ST MAY 19ANN JOO 23RD AGM As at

31 Dec 2019

220

260

300

340

380

USD/MT Scrap Price (2018-2019)

Scrap HMS, East Asia Import CFR $/t Yearly Avg. Price

60

80

100

120

USD/MT Iron Ore Price (2018-2019)

IODEX 62% Fe / North China import CFR Yearly Avg. Price

4

KEY RAW MATERIAL PRICE MOVEMENT

Iron Ore ↑ 35% y-o-y Scrap ↓ 13% y-o-y

(source : Steel Business Briefing)

(2018 @ USD 69/mt)

(2019 @ USD 93/mt)

(2019 @ USD300/mt)

(2018 @ USD 343/mt)

IRON ORE PRICE SURGED TO USD126/MT IN 1H19 TRIGGERED BY INCIDENT OF VALE’S DAM COLLAPSE

SCRAP PRICE SOFTENED ON WEAKER DEMAND

As at 31 Dec 19

As at 31 Dec 19

5

KEY RAW MATERIAL PRICE MOVEMENT

(source : Steel Business Briefing)

DOWNTREND OF COKING COAL PRICE DUE TO PRODUCTIONCURBS & IMPORT RESTRICTION IN CHINA

COKE PRICE MOVED IN TANDEM WITHCOKING COAL PRICE TREND

240

280

320

360

400

USD/MT Coke Price (Jan 18 – Dec 19)

Coke (CSR 62% North China FOB) Yearly Avg. Price

100

150

200

250

USD/MT Coking Coal Price (Jan 18 – Dec 19)

Premium Coking Coal (Australia Export FOB) Yearly Avg. Price

Coking Coal ↓ 14% y-o-y Coke ↓ 13% y-o-y (2018 @ USD 207/mt) (2018 @ USD 350/mt)

(2019 @ USD 177/mt)

(2019 @ USD 305/mt)

As at 31 Dec 19 As at

31 Dec 19

FINANCIAL HIGHLIGHTS

Profit & Loss (RM mil)

1Q20 2019 2018

Revenue 445.7 2,221.4 2,322.1

EBITDA (10.1) (70.8) 229.6

Pretax Profit/(Loss) (34.9) (162.0) 149.9

Net Profit/(Loss) (30.6) (89.9) 149.5

Basic EPS (sen) (5.66) (16.67) 28.13

DPS (sen) - - 12.0

FINANCIAL HIGHLIGHTS

Notes:1. Free Cash Flow defined as Operating Cash Flow less Investing Cash Flow

Balance Sheet (RM mil)

1Q20 2019 2018

Shareholders’ Funds 1,178.4 1,204.6 1,325.2

Net Borrowings 1,032.3 970.5 966.6

Inventory 916.4 872.2 1,085.4

Trade Receivables 376.5 368.8 465.77

Financial Position (RM mil)

1Q20 2019 2018

Operating Cash Flow (62.1) 70.9 (59.1)

Free Cash Flow 1 (62.0) 33.0 (99.7)

Borrowings12.6

(+1.2%)47.5

(+4.6%)176.6

(+20.9%)

Net Gearing 0.88 0.81 0.73

❑ 2019: Margin erosion on depressed steel prices &temporary shutdown cost from Blast Furnace relining

❑ 1Q20: Initial recovery in domestic demand post CNY2020 was abruptly halted with the sudden MCO

538,124 574,320

505,285

603,706

445,672

1Q19 2Q19 3Q19 4Q19 1Q20

QUARTERLY REVENUE (RM’000)

2019 REVENUE AFFECTED BYDEPRESSED SELLING PRICE DESPITE HIGHER SALE TONNAGE

8

1,760,928 1,870,050

2,195,212 2,322,108

2,221,435

2015 2016 2017 2018 2019

YEARLY REVENUE (RM’000)

MANUFACTURED PRODUCTS SELLING PRICE MOVEMENT

9

1.7%

9.6%

8.5%

6.3%

Wire Rod

Pig Iron

Billet

Bar

1Q20 vs 4Q19

-10.3%

-11.6%

-14.1%

-16.0%

Wire Rod

Pig Iron

Billet

Bar

2019 vs 2018

2019 : DEPRESSED STEEL PRICES ARISING FROM EXCESSSUPPLY

1Q20 : INITIAL RECOVERY IN DOMESTIC DEMAND POST CNY2020 WAS ABRUPTLY HALTED WITH THE SUDDEN MCO

10

HEALTHY FINANCIAL POSITION

1,238

904

789

967 971 1,032

1.34

0.85

0.64 0.73

0.81

0.88

2015 2016 2017 2018 2019 1Q20

Net Borrowings (RM’mil) & Net Gearing Ratio (x)

Net Borowings Net Gearing Ratio

*Net Receivables = Trade Receivables – Trade Payables

952 831 847

1,085

872 916

111171

248

240

257257

1,019

1,063 1,002

1,095

1,325

1,129 1,173

219

1,238

904 789

967 971 1,032

2015 2016 2017 2018 2019 1Q20

Working Capital (RM’mil)

Inventories Net Receivables* Net Borrowings (Trade lines) Bonds

▪ NET GEARING RATIO CONSISTENTLY BELOW 1X▪ ASSETS ARE FREE FROM ENCUMBRANCES

▪ INVENTORIES & NET RECEIVABLES EXCEED NET BORROWINGS (TRADE LINES)▪ NO LONG-TERM BORROWINGS

11

LONG-TERM FINANCIAL PERFORMANCE

17 16 24 37

69

20

127

198

149

31

121

62

(19)

12 23

(135)

167

205

150

(90)

(31)

ANN JOO GROUP PAT for 2000-2019 & 1Q20 (RM’Mil)

2000 Took over Malayawata’smanagement

2007Privatisation of AJSB

2006 AJSB (Malayawata) became subsidiary of AJR

Oct 2011 BF Commissioning

1Q20Business disrupted by COVID-19 pandemic

2016 Total Steel Solution Provider

2019Excess domestic supply & depressed selling price

(8,326)

(347,825)

(89,860)

6,705

65,681

45,202

149,544

Masteel

Lion Ind

Southern

Ann Joo

Profit /(Loss) After Tax (2019 vs 2018)(RM’000)

2018

2019

FINANCIAL PERFORMANCE OF LONG-PRODUCT PRODUCERS

Notes: Southern & Lion Ind yearly PAT are manually calculated accumulating 4 quarters for calendar year 2019;Lion Ind comprises its entire operations (not just the steel segment) 12

(4,172)

(56,709)

(37,479)

(30,558)

688

(98,330)

(334,928)

19,523

Masteel

Lion Ind

Southern

Ann Joo

Profit /(Loss) After Tax (1Q20 vs 4Q19)(RM’000)

4Q19

1Q20

(456,765)

LOSS POSITION OF DOMESTIC LONG PRODUCT PRODUCERS MAINLY INFLUENCED BY DOMESTIC EXCESS SUPPLY & DEPRESSEDSELLING PRICES

PROSPECT

INDUSTRY LANDSCAPE

DOMESTICMARKET

❑ Initial recovery in domestic demand post CNY 2020 was abruptly halted with thesudden MCO

❑ Sharp decline in steel demand in 2Q20 on COVID-19 pandemic impact and lowresumption rate of construction activities

❑ Recovery pace in steel demand will depend heavily on the Government’s spending oninfrastructure projects

EXTERNALFACTORS

❑ Hike in iron ore prices to above USD100/mt in Jun 20 mainly influenced by globalsupply chain disruption due to ongoing COVID-19 infections in Brazil and Vale’s damcollapse incident in Jan 19 (which had already reduced Brazil’s supply of iron ore)

❑ Decline in coking coal prices due to trade tension between China and Australia

❑ China’s strong steel demand, boosted by fast-track infrastructure investments.Construction activities in China are expected to pick up substantially after its rainingseason in Jun-Aug 2020

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1,750

1,950

2,150

2,350

2,550

2,750

2,950

RM/MT End Jan 2019Price rose on iron ore price surge after Vale dam collapse

(source : mysteel, MITI weekly bulletin)

IMPACT OF COVID-19 OUTBREAK ON STEEL PRICES

MALAYSIA vs CHINA STEEL BAR PRICE (RM/MT)

Malaysia Rebar Price (RM.mt delivered) * MS 146 standard ≈ HRB 500 @ RMB100-150.mt > HRB400

China Domestic Shanghai Rebar HRB400 (USD.mt Ex-work)

3Q19Sharp fall in domestic bar price

4Q19 Domestic price on recovery trend

Mar 2020China price recovered after easing of lockdown & economic stimulus measures

M’sia Bar PriceRM 1,980/MT

China Bar Price RM 2,218/MT as

As at 24 July 2020

15

4Q18 1Q19 2Q19 3Q19 4Q19 1Q20

58 143

737

444

735

43826 33

229

313

730

923

58 28

82

86

120 185

142204

1,048

843

1,585 1,546

Malaysia Billet, Bar & Wire Rod Export (‘000 MT)

Bar

Wire Rod

Billet

DIVERSION OF SURPLUS DOMESTIC OUTPUT INTO EXPORT MARKET

16(source: DOSM)

MALAYSIA’S STEEL EXPORTS EXCEEDED 1.5MIL MT OF BAR, WIRE ROD & BILLET IN LAST TWOCONSECUTIVE QUARTERS

KEY RAW MATERIAL PRICES – IRON ORE & SCRAP

IRON ORE❑ Price hovered around range of USD80 - 90/mt in the 1Q20

❑ Price surged above USD100/mt is supported by strong demandfrom China and supply concern over Brazilian COVID-19 spreadwhich caused suspension of Vale’s plant at Itabira

❑ Current spot price @ USD110/mt

(source: Platts, Steel Business Briefing)

60

70

80

90

100

110

120

130

USD/MT Iron Ore Price (Jan 18 –Jul 20)

IODEX 62% Fe / North China import CFR Yearly Avg. Price

❑ Scrap price on downtrend in 1Q20 due to weak global demandimpacted by COVID-19 spread across the world

❑ Price rebounded to USD281/mt on supply tightness due to lowercollection from scrap generation industries

❑ Current spot price at USD267/mt

SCRAP

220240260280300320340360380

USD/MT Scrap Price (Jan 18 – Jul 20)

Scrap HMS, East Asia Import CFR $/t Yearly Avg. Price

17

HIKE IN IRON ORE PRICE DRIVEN BY SUPPLY TIGHTNESS & STRONG DEMAND FROM CHINA

(2018 @ USD 69/mt)

(2019 @ USD 93/mt)

(2020 @ USD 93/mt)

(2019 @ USD300/mt)

(2018 @ USD 343/mt)

(2020 @ USD264/mt)

As at 24 Jul 20

As at 24 Jul 20

KEY FUEL PRICES – COKING COAL & COKE

COKING COAL❑ Coking coal experienced further downtrend since mid Mar 20 due

to weak demand from global market and fell below USD110/mt inearly June

❑ Current spot price hovers @ USD110/mt due to weak demandconsequent to the import restrictions in China port & trade tensionbetween Australia & China

❑ Coke price fell to the lowest at USD249/mt in end Apr 20 drivenby weak demand from global market

❑ Price rebounded to USD283/mt due to firm demand & tightsupply in China domestic market, drive up by the policy to reducecoke output in Shandong & Xuzhou region

❑ Current spot price corrected to USD268/mt

COKE

(source: Platts, Steel Business Briefing)

100120140160180200220240260

USD/MT Coking Coal Price (May 19 – Jul 20)

Premium Coking Coal (Australia Export FOB) Yearly Avg. Price

240260280300320340360380400

USD/MT Coke Price (May 19 – Jul 20)

Coke (CSR 62% North China FOB) Yearly Avg. Price

18

ANN JOO’S COKE PRICE IS CONTRACTED BASED ON COKING COAL PRICE & EXPECTED TO BENEFIT FROMLOW COKING COAL PRICE

(2018 @ USD 207/mt)

(2019 @ USD 177/mt)

(2020 @ USD 134/mt)

(2018 @ USD 350/mt)

(2019 @ USD 305/mt)

(2020 @ USD 272/mt)

As at 24 Jul 20

As at 24 Jul 20

STRATEGIC DIRECTION

STRATEGIC DIRECTION – KEY FOCUS AREAS FOR NEXT 6 MONTHS

Channel to export markets, particularly China, where infrastructure demand is supported by domestic pump priming1

20

Aggressive exports

Disciplined sales collection

Positive free cash flow

Lower Borrowings

(Target

21

MARKET CAPITALIZATION OF STEEL PLAYERS

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Ann Joo Southern Lion Ind Masteel

STEEL PLAYERS’ MARKET CAPITALIZATION (2016 – YTD2020)

2016-2017Ann Joo expanded market leadership due to cost advantage

2019Commenced bar production of a wholly-foreign-owned steel mill

Mar 2020MCO

RM’mil

2019 - PresentAnn Joo remained the largest steel counter by market cap despite slump in domestic market

As at 24 Jul 2020

INVESTMENT RESEARCH ON ANN JOO

RESEARCH REPORTS BASED ON 1Q20 RESULTS

RESEARCH HOUSE DATE OF REPORT

RECOMMENDATION TARGET PRICE (RM)

PE (X)

NET PROFIT (RM MIL)

EPS (SEN)

FY20 FY21 FY20 FY21 FY20 FY21

KAF-Seagroatt & Campbell

30/06/2020 Buy 0.88 (6.1) (8.9) (127.1) (56.2) (19.4) (8.1)

KenangaInvestment Bank

01/07/2020 Underperform 0.55 N/A N/A (60.0) (13.0) (11.1) (2.4)

TA Securities 01/07/2020 Sell 0.42 (6.6) 36.0 (60.7) 11.3 (11.0) 2.0

AmInvestmentBank

01/07/2020 Underweight 0.55 N/A N/A (132.9) (54.1) (20.5) (8.4)

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THANK YOU