hovid bhd (hov mk)...2014/01/10 · hovid bhd (hov mk) 10 january 2014 see important disclosures at...

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Trading Idea, 10 January 2014

Hovid (HOV MK) Not Rated

Consumer Non-cyclical - Healthcare Target Price: MYR0.42

Market Cap: USD82.6m Price: MYR0.36

Boost From Drug Patent Expiry

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Hovid Bhd (HOV MK)Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)

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Avg Turnover (MYR/USD) 1.97m/0.62m

Cons. Upside (%) 19.4

Upside (%) 52.1

52-wk Price low/high (MYR) 0.22 - 0.38

Free float (%) 57

Shareholders (%)

Ho Sue San 37.6

Lembaga Tabung Haji 5.2

Shariah compliant

Chong Ooi Ming +603 9207 7619

[email protected]

Source: Company data, RHB estimates

Hovid sees great potential in the coming years. It recently launched generic versions of drugs which went off patent 2011. An estimated USD15bn in medicines have gone off patent in 2013, boosting its potential new products pipeline. Plans are already in place to raise production capacity by 30% in 2014. We value the stock at 42 sen, pegged to 17x CY14F fully diluted EPS – an 18% upside.

We hosted a corporate luncheon with Hovid for our clients in Dec

2013. Management was represented by CFO and executive director Mr

Andrew Goh. Given the current trend of patent protection expiry for major “innovator drugs”, management was upbeat on Hovid’s prospects as a generic drug manufacturer. We concur with this view. The company is now ramping up capacity to capitalise on this trend.

Tasty takeaways from the luncheon. Among the notable takeaways

from the luncheon were the fact that Hovid: i) recently launched generic versions of two drugs whose patent protection recently expired – these medicines generated a combined USD9.7bn annually in global sales before their patents ended, and ii) is working on a further six generic versions of major drugs in 2014. Based on estimates, there at least 17 drugs – worth USD15bn in total global sales – whose patents expired last year.

3-year (FY13-16) net profit CAGR of 21.9%. Hovid plans to launch 10-

12 new products annually going forward. To support its ambitions, the company is: i) expanding capacity at its tablet and capsule plant this year with a planned initial “30% increase”, ii) setting up its own bioequivalence test centre for new generic drugs, and iii) building a new central warehouse to better manage the increase in inventory.

MYR0.42 FV, 18% upside. We value Hovid at 17x CY14F fully diluted

EPS, a discount to global peers average of 18x 2014 earnings. That said, while there is a substantial warrant base, we do not think conversions are likely at this juncture. Pre-dilution, Hovid’s share price would be 61 sen at 17x P/E. We like the company for its: i) 21.9% 3-year earnings CAGR, ii) strong exposure to the export market – ie well-positioned to benefit from further USD/MYR appreciation, iii) net cash position, and iv) decent 15% ROE. This stock is Not Rated.

Forecasts and Valuations Jun-11 Jun-12 Jun-13 Jun-14F Jun-15F

Total turnover (MYRm) 153 165 173 192 214

Reported net profit (MYRm) (6.1) 15.7 20.3 24.9 31.3

Recurring net profit (MYRm) 10.9 13.9 19.8 24.9 31.3

Recurring net profit growth (%) na 20.6 42.5 25.9 26.0

Recurring EPS (MYR) 0.05 0.02 0.03 0.03 0.03

Recurring P/E (x) 6.5 19.5 13.7 13.6 12.9

P/B (x) 2.70 2.53 1.74 1.63 1.45

P/CF (x) 6.1 10.8 8.6 13.1 12.3

EV/EBITDA (x) 11.4 8.3 7.8 6.9 6.9

Return on average equity (%) (5.9) 15.1 15.5 12.3 11.9

Net debt to equity (%) 38.7 17.9 net cash net cash net cash

Our vs consensus EPS (%) 0.0 0.0

Hovid Bhd (HOV MK) 10 January 2014

See important disclosures at the end of this report 2

Industry Outlook

Tasty Luncheon Treats

Increasing trend of major drug patents expiring. We understand that generic drug

manufacturers worldwide are preparing to launch their own versions of top-selling innovator drugs whose patents have expired/are expiring in 2011-2016.

This trend is driving pharmaceutical share prices. This is evident in mature

generic drug manufacturing hubs like India. In the past 12 months, selected drug manufacturers have outperformed the benchmark S&P BSE SENSEX index on anticipation of new product launches.

Figure 1: Superb outperformance by Indian generic pharmaceutical companies

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Ranbaxy Laboratories Cipla

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Sun Pharmaceuticals Sensex Index

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Source: Bloomberg

Luncheon takeaway No. 1 – two products already launched. Among major patents that expired in 2012, it was revealed over lunch that Hovid launched Plavix (an anti-clot or blood thinner that prevents heart attacks or strokes) and Singulair (an oral asthma and allergy treatment). Before their patents ended in May and Aug 2012 respectively, both drugs together achieved worldwide sales of USD9.7bn per annum. Assuming Hovid is able to capture just 0.1% of existing sales – taking into account: i) competition from other manufacturers, and ii) lower selling prices – this will translate into MYR31.0m in new sales per annum based on an exchange rate of MYR3.20 to USD1, or a 17% uplift to FY13 revenue from these two products alone.

Figure 2: Hovid's two new products’ original sales

Source: FiercePharma, RHB estimates

Luncheon takeaway No. 2 – six new drugs coming soon. During the luncheon,

management also shared that Hovid has a further six products either under development or pending registration for 2014. While remaining tight-lipped on the specific products, we understand that the company’s next few products will focus on high demand drugs required for longer-term treatments like diabetes, heart ailments and cholesterol, amongst others.

USD15bn market opening up in 2014? We gather that, of the estimated 17

innovator drugs whose patents expired in 2013, the top seven best-selling drugs from this figure generated c.USD14bn in sales in 2012. We note too that all seven were used in the treatment of long-term ailments. The remaining 10, on the other hand, generated close to USD1bn in total.

Assuming that Hovid is able to launch just two of the lowest selling drugs, ie Tricor and Niaspan, and capture just 0.1% of the 2012 global sales figure, this will translate into MYR6.2m in new sales, or equal to 3.6% of FY13 revenue. If the company is eyeing the two highest selling drugs, ie Humalog and Cymbalta, this could generate MYR23.8m in sales (based on the assumptions above), or up to 13.5% of FY13 topline.

2010 2011 2012

Product Company

Plavix Bristol Myers Squibb 6,154 6,315 3,014 Singulair Merck & Co 3,224 3,356 2,178

Worldwide sales (USDm)



Figure 3: Key innovator drug sales and patent expiry dates in 2013

Source: FiercePharma

Background & Business Profile

Healing is Hovid’s heritage. Hovid began in 1941 and was founded by Dr Ho Kai Cheong with its initial Ho Yan Hor herbal tea product, which still accounts for up to

5% of total sales. In the 1980s, Mr David Ho, the current MD, led Hovid into the pharmaceutical manufacturing business.

Malaysian pharmaceutical export leader. Hovid now possesses more than 350

different types of generic drugs, over the counter (OTC) medicines and dietary supplements in its product portfolio. It also exports its products to over 45 countries, with exports making up 52.5% of FY13’s total sales. Of these exports, the majority are Asia-centric (33.4%), while Africa (17.9%) is the new growth market.

We see this strong export success stemming from: i) Malaysia being a member of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S), and ii) Hovid being the sole Malaysian supplier to the United Nations Children's Fund (UNICEF) and United Nations Relief and Works Agency (UNRWA).

Locally, Hovid’s distribution channels cover private general practitioner (GP) clinics, pharmacies, hospitals and the Ministry of Health (MOH). Domestic sales account for 47.5% of 2013’s total sales, of which only c.10% are to the MOH at present.

Generic Drugs What are generic drugs? According to the US Food and Drug Administration (FDA),

a generic drug is identical – or, in industry parlance, bioequivalent – to a brand name drug in terms of: i) dosage form, ii) safety, iii) strength, iv) route of administration, v) quality, vi) performance characteristics, and vii) intended use. Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts. The FDA quotes the US Congressional Budget Office as stating that generic drugs save US consumers an estimated USD8-10bn a year at retail pharmacies.

Are generic drugs as effective as brand-name drugs? Yes. A generic drug is the

same as a brand-name drug in terms of dosage, safety, strength, quality, the way it works, the way it is taken and the way it should be used. The FDA requires generic drugs to have the same high quality, strength, purity and stability as their brand-name counterparts.

Month Product Company Disease 2012 Sales (USDm)

Jan Tricor (fenofibrate) Abbott Laboratories Cholesterol 1,111.0 May Humalog (insulin lispro) Eli Lilly Diabetes 2,520.0 Aug Procit (epoetin alfa) Johnson & Johnson Anemia 1,410.0 Sept Niaspan (niacin ER) Abbott Laboratories Cholesterol 835.0 Nov Aciphex (rabeprazole) Eisai Acid reflux/heartburn 1,930.0 Dec Cymbalta (duloxetine) Eli Lilly Depression 4,900.0 Dec Neupogen (filgrastim) Amgen Cancer 1,290.0

13,996.0



How are generic drugs cheaper? Creating a new drug costs a lot of money, as they

must undergo: i) pre-clinical animal testing, ii) invitro testing, and iii) clinical (human) trials to establish safety and effectiveness. Thus new drugs, like other new products, are developed under patent protection. The patent protects the investment in the drug's development by giving the innovator company the sole right to sell the drug while the patent is in effect.

When the patent expires, other drug companies can start selling a generic version of this medicine. Since generic drug makers do not develop a drug from scratch, the cost to bring the drug to market is less. Therefore, generic drugs are usually less expensive than brand-name ones. However, generic drug makers must show the FDA that their product performs in the same way as the brand-name drug.

How are generic drugs approved? Drug companies must submit an abbreviated

new drug application (ANDA) for approval to market a generic product. The ANDA process does not require the drug sponsor to repeat costly animal and clinical research on ingredients or dosage forms already approved for safety and effectiveness. Instead generic applicants must demonstrate via tests that show that their products are bioequivalent.

Financials & Forecast Consistently strong earnings trend. For FY09-13, Hovid enjoyed a 4-year

pharmaceutical sales CAGR of 11.3%. Excluding losses from former subsidiary Carotech, the estimated net profit CAGR for this period would have been 15.2%. The company’s EBITDA margins too are resilient, sustaining at between 19-22% in the last five years. The recent margins erosion is attributed to the implementation of minimum wage and margins are expected to normalise going forward.

Figure 4: Sales, EBITDA growth and margins since FY09

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Ramping up capacity and new R&D centre. Hovid is about to start construction on

an expansion of its tablet and capsule facility in Chemor, Perak, which will initially boost production capacity by 30% (in Phase 1). This facility will carry approvals from US, EU and Australian pharmaceutical authorities. The company is also setting up a new research & development (R&D) centre in Penang that will allow it to conduct its bioequivalence tests on new generic drugs in-house. Hovid is also building a new central warehouse, which will allow the company to benefit from cost and efficiency savings after consolidating its seven existing warehouses. Going forward, the company aims to launch 10-12 new products annually.



3-year (FY13-16) 21.9% PAT CAGR forecast. We forecast MYR192.2m/

214.2m/239.0m in revenue and MYR24.9m/29.8m/35.5m in net profit for FY14/15/16, on the back of: i) EBITDA margins of 20.7-23.6% – improving with better economies of scale and cost controls (FY10-13: EBITDA margins ranged between 19.1-21.9%), ii) production growth of 8.1-8.3 – we are assuming a gradual ramping up of its new plant capacity expansion, iii) ASP increases of c.3%, iv) export sales gradually expanding to 56.6% of total sales by FY16 (FY13: 52.5%), and v) a stable exchange rate of MYR3.20 to USD1.

Figure 5: Key earnings assumptions

Source: RHB estimates

Valuations

MYR0.42 FV, 18% upside. We value Hovid at 17x fully diluted CY14F EPS, a

discount to global peers average of 18x 2014F earnings. Our FV of 42 sen takes into account its 381m warrants and offers an 18% upside to 9 Jan’s closing price of MYR.035.5. This stock is Not Rated.

We ascribe the discount due to Hovid being the smallest stock. That said, we feel a premium to local peer Pharmaniaga (PHRM MK, Not Rated) is warranted on the former’s higher export sales and implied growth potential. Pharmaniaga, on the other hand, is orientated towards the domestic market. Also, Hovid achieves a decent 15.0% ROE vs Pharmaniaga’s 16.4% despite being in net cash. By comparison, Pharmaniaga’s gearing stands at 50.3%.

Though much smaller than its larger Indian peers, Hovid’s facilities in Ipoh, Perak, are completely certified while Indian pharmaceutical operators’ multiple facilities have varying degrees of certification. In May 2013, Ranbaxy (RBXY IN, NR) was fined USD500m by the US FDA and the company has closed over half a dozen plants over alleged irregularities.

Figure 6: Generic drug manufacturers peer comparison

Call Country Market Cap 2014 2015 2014 2015 2014 2014 2014

(USDm) P/E (x) P/E (x) EV/EBITDA (x) EV/EBITDA (x) ROE (%) P/BV (x) Net gearing

Hovid not rated Malaysia 82.4 10.1 8.2 6.0 4.6 15.0 1.4 (6.3)

Pharmaniaga not rated Malaysia 355.2 12.5 11.8 7.6 7.3 16.4 2.1 50.3

Ranbaxy Laboratories not rated India 3,248.6 17.1 18.4 9.0 13.1 30.5 3.6 56.5

Cipla not rated India 5,230.3 18.4 15.8 12.1 10.2 16.2 2.8 (8.6)

Dr. Reddy's Laboratories not rated India 6,942.2 18.9 16.7 12.4 11.1 23.5 4.2 (2.2)

Lupin Ltd not rated India 6,774.4 20.7 18.6 12.8 11.5 26.5 5.3 (4.2)

Sun Pharmaceuticals not rated India 20,119.4 18.8 19.6 15.0 13.2 28.2 5.9 (34.6)

Aspen Pharmacare not rated South Africa 11,645.3 21.5 18.0 15.5 10.5 18.0 4.2 91.8

Adcock Ingram Holdings not rated South Africa 1,156.9 17.0 14.8 9.7 8.3 20.4 2.6 9.6

Average 18.1 16.7 11.7 10.6 22.5 3.8

Source: RHB estimates, Bloomberg

May-14 May-15 May-16

Revenue 192.2 214.2 239.0 Ave price increases 3.0% 3.0% 3.0%

Quantity increases 8.1% 8.2% 8.3%

USD - MYR forecast 3.15 3.15 3.15 Exports (%) of revenue 53.9% 55.2% 56.6%

EBITDA Margin (%) 20.7% 22.2% 23.6%

Net Profit (MYR m) 24.9 29.8 35.5



Warrant dilution concerns. A potential concern will be the dilution from its

outstanding 381m warrants – at an exercise price of 18 sen, which will balloon Hovid’s share base by 50% if fully converted. This will reduce Hovid’s 2014 EPS to 2.7 sen (from 3.9sen) after taking into account the higher interest income. Hence, our 42 sen FV on the company.

That said, we feel that there is little incentive at present to exercise these warrants, as: i) they will only expire in June 2018, ii) they currently offer warrant holders 2x gearing to the mother share, and iii) currently Hovid does not pay dividends. And, as Hovid will conserve cash in the next few years for expansion, we expect nominal dividends – at best – over the coming years. At 17x P/E pre-dilution, Hovid’s FV would be 62 sen.

Figure 7: EPS dilution Impact

Source: RHB estimates

Investment Risks

Competition from India. Hovid lacks the economies of scale and lower labour cost

enjoyed by the big Indian drug manufacturers. Should these companies launch a generic version first, the company may find it challenging to market its own products.

Trade barriers in emerging markets. Hovid exports a significant percentage of its

products to developing countries, eg Nigeria, the Philippines and Cambodia. These are its main growth markets too. Should these countries impose quotas or other limitations on drug imports, Hovid will be significantly affected.

Margin slippage. Our margin projections could come under risk if a drastic switch in

supplier pricing or product mix occurs.

Growth prospects dependant on patent expiry. In 2012, Pfizer (PFE US, NR)

extended patent protection for its Viagra product to 2019. Should other major drugs have their patent protections extended, this will deprive Hovid of a host of new potential products.

May 2014 May 2015 May 2016

Net Profit (MYR m) 24.9 29.8 35.5

Current share base 762.1 762.1 762.1 Fully diluted share base 1,143.12 1,143.12 1,143.12

EPS 3.3 3.9 4.7 Fully diluted EPS 2.2 2.7 3.2



Financial Exhibits


Cash flow (MYRm) Jun-11 Jun-12 Jun-13 Jun-14F Jun-15F

Operating profit 20 30 27 34 40

Depreciation & amortisation 5 6 6 6 7

Change in working capital 28 (4) 4 (5) (6)

Operating cash flow 53 32 37 35 42

Interest received 2 2 0 1 3

Interest paid (7) (3) (2) (1) (1)

Tax paid (4) (5) (3) (8) (11)

Cash flow from operations 44 25 32 26 33

Other investing cash flow - - 0 - -

Cash flow from investing activities - - 0 - -

Proceeds from issue of shares (0) (9) 28 - -

Increase in debt (300) (6) (31) - -

Other financing cash flow (0) - 0 - -

Cash flow from financing activities (300) (16) (3) - -

Cash at beginning of period 10 9 23 27 92

Total cash generated (255) 9 29 26 33

Implied cash at end of period (246) 18 52 53 125


No major capex required post 2015

Profit & Loss (MYRm) Jun-11 Jun-12 Jun-13 Jun-14F Jun-15F

Total turnover 153 165 173 192 214 Gross profit 153 165 173 192 214 Gen & admin expenses (134) (134) (145) (158) (174) Operating profit 20 30 27 34 40 Operating EBITDA 25 36 33 40 48 Depreciation of fixed assets (5) (6) (6) (6) (7) Operating EBIT 20 30 27 34 40 Net income from investments - (9) - - - Interest income 2 2 0 1 3 Interest expense (7) (3) (2) (1) (1) Exceptional income - net (17) 3 1 - - Pre-tax profit (2) 22 26 33 42 Taxation (4) (6) (5) (8) (11) Minority interests 0 (0) (0) (0) (0) Profit after tax & minorities (6) 16 20 25 31 Reported net profit (6) 16 20 25 31 Recurring net profit 10 14 20 25 31



Financial Exhibits

Balance Sheet (MYRm) Jun-11 Jun-12 Jun-13 Jun-14F Jun-15F

Total cash and equivalents 9 23 27 92 95

Inventories 24 30 26 29 33

Accounts receivable 31 33 30 33 37

Other current assets 7 12 8 8 8

Total current assets 70 98 91 163 172

Total investments 15 2 2 2 2

Tangible fixed assets 92 91 112 135 157

Intangible assets 24 20 19 19 19

Total other assets 0 0 0 0 0

Total non-current assets 131 113 133 156 178

Total assets 201 210 224 319 350

Short-term debt 39 37 8 8 8

Accounts payable 13 14 12 13 15

Other current liabilities 14 23 18 18 18

Total current liabilities 66 74 38 39 41

Total long-term debt 11 6 4 4 3

Other liabilities 19 19 22 22 22

Total non-current liabilities 29 25 26 26 24

Total liabilities 95 99 64 65 65

Share capital 76 76 76 145 145

Retained earnings reserve 12 19 47 72 103

Other reserves 12 11 32 32 32

Shareholders' equity 100 107 155 249 280

Minority interests 5 4 5 5 5

Other equity 0 - 0 - 0

Total equity 106 111 160 254 285

Total liabilities & equity 201 210 224 319 350


Key Ratios (MYR) Jun-11 Jun-12 Jun-13 Jun-14F Jun-15F

Revenue growth (%) (58.0) 7.4 4.7 11.4 11.5

Operating profit growth (%) 0.0 53.7 (9.6) 23.5 19.5

Net profit growth (%) (89.7) 0.0 29.6 22.4 26.0

EPS growth (%) (89.7) 0.0 29.6 (2.1) 5.0

Bv per share growth (%) (5.7) 6.4 45.5 6.8 12.6

Operating margin (%) 12.9 18.4 15.9 17.6 18.9

Net profit margin (%) (3.9) 9.5 11.8 12.9 14.6

Return on average assets (%) (1.6) 7.6 9.4 9.2 9.4

Return on average equity (%) (5.9) 15.1 15.5 12.3 11.9

Net debt to equity (%) 38.7 17.9 (9.1) (31.6) (29.5)

Recurrent cash flow per share 0.06 0.03 0.04 0.03 0.03




SWOT Analysis

Certification of all its manufacturing facilities

Strong back log of new products pending registration

Big pharmaceutical companies may attempt to prolong patent life

Larger GLC drug manufacturers might stymie its ability to grow locally

Multibillion dollar innovator drugs coming off patent

Key export markets are developing countries with increasing health care expenditures

At present lacks the ability to develop its own drugs

Limited inroads with Malaysian Government clinics and hospitals

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Source: Company data, RHB estimates Source: Company data, RHB estimates

Company Profile Hovid is a Malaysian generic drugs manufacturer, which derives more than half of its sales from exports. The company’s manufacturing facilities are located in Perak and it is in the midst of setting up a research & development centre in Penang.



Recommendation Chart

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Price Close


Date Recommendation Target Price Price

2014-01-10


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RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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Hong Kong This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 9 January 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 9 January 2014, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

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