BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Friday, 27 July, 2012

Initial Coverage

Guan Chong Berhad

Grinding a regional path
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Guan MK 965.6 319.7 3.15 1.97 323,269 36.4% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Guan Chong Resources Misi Galakan Sdn Bhd LTAT 3.6 46.6% 6.8% 1.2 52.1% 6.5% 5.1%

Buy
Price Target Price RM3.02 RM3.72
Guan Chong Bhd (GCB) is Malaysias largest and the worlds top 10 largest bean processors with total grinding capacity of 200k MT versus the global industrys total of 3.87m MT and Malaysias of 305k MT. With the upcoming secondary listing exercise on the SGX-ST via a public issue of up to 31m new shares and an offer for sale of up to 31m existing shares, we believe this will improve the liquidity of GCB shares and potentially boost its valuation, expand/diversify the geographical shareholder base, as well as lift the profile among international investors. We are initiating coverage on GCB with a BUY recommendation with a target price of RM3.72. Earnings growth intact. For the past 7-years, GCB has been consistently delivering positive net earnings with impressive CAGR of 39.9% on the back of a CAGR of 22.3% for its revenue. Even though we expect global consumption is likely to be flat due to weak global growth which are expected to impact consumption, we do believe GCBs earnings growth will remain intact driven by (i) its Batams capacity expansion, (ii) potential huge take-off from two renowned F&B MNCs, (iii) secured orders from long-standing customers and (iv) further expansion into downstream industrial product. Continuous innovation. One of GCBs strength in expanding its revenue based is through ongoing product innovation. Tapping into growing market of downstream industrial products, GCB has recently invested RM42m CAPEX for production equipment and to purchase a factory near Port of Tanjung Pelepas (PTP) to increase its industrial chocolate output. With that the groups total capacity is expected to reach 10,400 MT/year, adding to the current capacity of 2,400 MT/year with commercial production is expected to begin in 2Q2013. Higher production capacity. We understand that GCBs 2nd grinding facility in Batam has commenced operation in July 2012 bringing up total annual capacity to 120k MT. To date GCs have already sold close to 90k MT of the capacity of both Batam lines, thus providing earnings visibility for FY12. We expect this additional capacity to be the main revenue driver in FY12 and FY13 and have projected FY12 net earnings to grow by 5.3% thereafter by a further 12.2% for FY13. View & Valuation. With GCBs impending listing of its shares on the SGX-ST together with its impressive margins improvement and consistent earnings growth, we expect valuation parameter for the stock to improve. As such, we are assigning an adjusted PER multiple of 8x which is above 1stdev of its past 5-years PE valuation to its FY13 EPS of 46.5 sen and derived the fair value of RM3.72. We initiate coverage on GCB with a BUY rating.

Share Performance (%) Absolute vs. KLCI Financial Highlights

FYE 31 Dec (RMm)

1mth 7.1 6.1

3mth 9.6 4.2

12mth 17.2 6.1

Revenue EBIT Pretax profit Net Profit EPS (sen) EPS growth (%) PER (x) Gross DPS (sen) Div. Yield (%) NTA/share (RM) EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pre-tax profit Net profit Share Price Chart
3.30 3.10 2.90 2.70 2.50 2.30 2.10 1.90 1.70 1.50 Jul-11 Sep-11

2009 642.6 26.5 20.7 14.3 4.5 110.5% 67.7 2.8 0.7% 0.33 4.1% 3.2% 28.0% 14.1% 3.5% 2.1

2010 1,160.1 116.5 111.4 101.1 31.6 609.1% 9.5 11.6 2.9% 0.56 10.0% 9.6% 9.0% 70.3% 20.9% 1.1

2011 1,381.8 156.7 150.1 125.9 39.4 24.5% 7.7 11.3 3.7% 0.82 11.3% 10.9% 15.0% 56.3% 14.0% 1.6

2012E 1,699.8 170.6 162.5 132.5 41.4 5.3% 7.3 11.6 3.8% 1.14 10.0% 9.6% 17.4% 42.0% 12.8% 1.2

2013E 1,999.1 191.9 182.3 148.7 46.5 12.2% 6.5 12.0 4.0% 1.48 9.6% 9.1% 17.4% 35.3% 12.6% 1.0

-7.4% 45.8% 117.6% 110.5%

80.5% 339.5% 437.3% 609.1%

19.1% 34.5% 34.7% 24.5%

23.0% 8.9% 8.3% 5.3%

17.6% 12.5% 12.2% 12.2%

Nov-11

Jan-12

Mar-12

May-12

Jul-12

The Research Team research@bimbsec.com.my 03-26918887 ext 111

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27 July 2012 Brief Background

Initial Coverage: Guan Chong Bhd

GCB is principally engaged in the manufacturing of cocoa butter, cocoa powder, cocoa cake and cocoa liquor, for the manufacturing of cocoa-based food and beverages (F&B) products. The company began its cocoa business in the early 1980s as a trader before setting up a factory in Parit Jawa, Muar, Johor processing cocoa beans. In 1990, the management sold the plant in Parit Jawa and built a new plant in Pasir Gudang, Johor, the place where it proudly stands now. GCB was listed on the main board of Bursa Malaysia in April 2005. Currently GCB is one of the largest cocoa processors in the region and among the top 10 cocoa processors in the world, with a total annual grinding capacity of 200,000 MT/year, comprising of 80,000 MT/year in Pasir Gudang and 120,000 MT/year in Batam, Indonesia. Figure 1a: Corporate Structure

Source : Company

Figure 1b: Corporate Milestones 1991 2002 2005 2006 2009 2011 Began producing cocoa ingredients in Malaysia. (capacity grew from 6k MT to 80k MT in 21 years) Began producing cocoa preparation in Malaysia. Commenced production of value-added cocoa ingredients in USA Began producing chocolate and beverages for private labels in Malaysia Began producing industrial chocolate, covertures and compound chocolate in Malaysia. Commenced production of cocoa ingredients in Indonesia.

Source : Company

Business background. Apart of its primary production facilities in Pasir Gudang (grinding, blending and mixing), GCB has also a cocoa cake grinding facility in Delaware, USA (via a 49% stake in Carlyle Cocoa), and beans grinding in Batam, Indonesia Figure 1a. GCBs brand Favorich has a global distribution network of more than 70 distributors/agents and exports cocoa products to established clientele in more than 60 countries which include world-famous chocolate makers and leading cocoa ingredients traders such as ADM, Arcor, Hersheys and Tate & Lyle, among others. GCB also deals directly with its key customers such as MARS and Lotte amongst others.

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27 July 2012 Figure 2: Product Range

Initial Coverage: Guan Chong Bhd

Source : Company

GCB main product range. GCBs products range consists of cocoa liquor, cocoa butter, cocoa cake and cocoa powder (figure 2). As of FY11, cocoa butter has been the biggest contributor to the groups total revenue (39%), followed by cocoa cake (30%), cocoa powder (22%), others which comprise of Industrial chocolate (6%), and cocoa liquor (3%) Figure 3. Figure 3: Revenues by Product Breakdown - FYE2011
Others RM82.3m, 6% Cocoa Powder RM295.5m, 22% Cocoa Cake RM418m, 30% Cocoa Liquor RM46.1m, 3%

Cocoa Butter RM541.1m, 39%

Source : Company

Revenue segmentation. Overseas market remains the largest contributor accounting in excess of 90% of GCBs revenue (chart in figure 4). On a geographical basis, USA is the largest market taking up 36% of revenue, followed by Singapore (10%) and Russia (7%). In the near term, we expect global consumption is likely to be flat due to prevailing slowdown of both the US and Euro zone and thanks to relatively strong demand growth from emerging markets (i.e. Russia and China); the overall adverse effects are muted. As for GCB, demand growth are expected to come from two renowned F&B brand names which are still pending follow-up audit and the installation of special packaging line. Figure 4: Geographical Sales FY2011
FY11 Revenue: RM1,381.8 million
Local 6% USA Singapore Russia Netherland Export 94% 0% 7% 6% 10% 20% 30% 40% 10% 36%

Top 5 markets in FY11

Malaysia 6%

Source : Company

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27 July 2012

Initial Coverage: Guan Chong Bhd Benefit of Batam plant. GCBs second grinding facility in Batam has just commenced operation in July 2012, bringing total annual capacity to 120,000 MT. To date GCBs have already sold close to 90,000 MT of the capacity of both Batam lines, thus providing earnings visibility for FY12. We expect this additional capacity to be the main revenue driver going forward. Meanwhile, it is worthwhile noting that the nd Batams 2 line facility include not only grinding facility but also other value added activities namely powder pulverizing and deodorized butter plant. The plant should benefit GCB as it is close-to-source thus enabling GCB to purchase cocoa beans at more competitive prices due to export duty imposed by Indonesian Authority on cocoa beans. Indonesia started to impose an export duty on cocoa beans in 2010 as an effort to discourage the export of cocoa beans in a bid to help the local grinders. Capacity expansion. GCB has spent RM42m in CAPEX this year to further expand into industrial chocolate market. As an effort to tap into the growing market of downstream industrial products, GCB has recently purchased a factory near Port of Tanjung Pelepas (PTP) to increase its industrial chocolate output (invested RM12m for factory and RM30m for production equipment). With this, the groups total capacity is expected to reach 10,400 MT/year from the current capacity of 2,400 MT/year with commercial production expected to begin in 2Q2013. We understand that building refurbishment and renovation had begun in May 2012 and expected to be completed by Aug 2012. GCBs main raw material. The main raw material for CGB is cocoa beans. Cocoa beans account for approximately 90% of GCBs total cost of goods sold while the remaining are manufacturing overheads. One of the core competencies of GCB is on how it manages overhead cost, besides locking its profit margin by securing sales 3-12 months forwards. Others raw materials include sugar, and milk. Figure 5: Commodity
Cocoa Price
4500 4000 3500 3000 2500
5

Sugar

USD/MT
USD/lb
30 25 20 15 10

1/10/2009

1/12/2009

1/10/2010

1/12/2010

1/10/2011

1/12/2011

1/6/2009

1/8/2009

1/2/2010

1/4/2010

1/6/2010

1/8/2010

1/2/2011

1/4/2011

1/6/2011

1/8/2011

1/2/2012

1500 26/5/2009

26/5/2010

26/5/2011

26/5/2012

Source: Bloomberg

Source: Bloomberg

Palm Oil Price

MYR/MT
4000 3500 3000 2500 2000 1500 1000 500

Milk
EUR/MT 3000 2500 2000 1500 1000 500 0
23/6/2011 23/8/2011 23/2/2012 23/10/2011 23/12/2011

16/11/2010

Source: Bloomberg

16/11/2011

Source: Bloomberg

23/4/2012

0
16/7/2010 16/9/2010 16/1/2011 16/3/2011 16/5/2011 16/7/2011 16/9/2011 16/1/2012 16/3/2012

1/4/2012

2000

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27 July 2012 Growth Prospects

Initial Coverage: Guan Chong Bhd

Outlook. Worldwide purchase of chocolate and cocoa based products namely cocoa butter, cocoa cake and cocoa powder has been growing at 23% p.a. As such world cocoa consumption as measured by cocoa grindings, has risen by 2.6% CAGR over the past 20 years. However, it is expected that the growth in the near-term may be lacklustre due to slower global growth. As shown in figure 6, world cocoa consumption has increase by 4.1% in 2011 albeit at slower pace compared to 5.8% in 2010. Cocoa consumption has increased tremendously in Indonesia, up by 34.6% in 2011 suggesting strong demand growth from emerging markets. Outsourcing trend. We forsee that moving forward, outsourcing trend amongst chocolate manufacturers for grinding are set to continue. This is the fact that as a specialised cocoa processors, they are better able to maximise yields through economies of scales on production and R&D in order to meet a range of customers with differing product requirements. GCB is set to benefit from this increasing trend of outsourcing since most of the chocolate manufacturers business model nowadays have shifted to concentrate on their core business of producing, marketing and brand building rather than do their own in-house cocoa processing. Industry trends. Growth in chocolate industry especially due to greater applications of cocoa powder within the F&B segment will be driven mainly by population growth as well as expansion into new markets, product innovation and rising disposable income level. Taste for chocolate is now expanding into highly populated nations with a growing middle class such as China, India, and Southeast Asia with a cumulative population of 3.2bn or 45% of worlds population. Based on Euromonitor International data, Indonesia is the fastest growing chocolate confectionery market in Southeast Asia, with consumption growth at a 10-year CAGR of 21%, followed by Thailand 10% and the Philippines 8%. The robust demand for chocolate confectionery is expected to come from this region as per capita consumption in Indonesia, Malaysia and the Philippines of 0.3 kg per annum is still low compared to develop countries such as Singapore (0.9 kg), Japan (1.2 kg) and the UK (8.3 kg) suggesting room for further growth as income per capita rises. This trend is poised to benefit GCB as its core competencies is technologically-equipped to produce a wide range of value-added products for up and downstream users.

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27 July 2012 Figure 6: World Grindings of Cocoa Beans by Country (000 tonne)
COUNTRY WESTERN EUROPE Germany Netherlands United Kingdom France Others TOTAL EASTERN EUROPE AND RUSSIAN FEDERATION Russian Federation and others Ukraine Switzerland Others TOTAL AFRICA Cote' D'Ivoire Ghana Cameroon Nigeria Others TOTAL AMERICAS USA Brazil Colombia Canada Others TOTAL ASIA AND OCEANIA Malaysia Indonesia Singapore Turkey Others TOTAL WORLD TOTAL 278.2 120.0 79.5 57.0 119.8 654.5 3,511.9 298.1 130.0 83.0 68.0 128.6 707.7 3,715.9 7.2% 8.3% 4.4% 19.3% 7.3% 8.1% 5.8% 360.7 216.1 41.7 55.4 105.9 779.8 381.9 226.1 39.5 59.2 108.0 814.7 5.9% 4.6% -5.3% 6.9% 2.0% 4.5% 418.6 133.1 24.0 34.0 12.0 621.7 411.4 212.2 26.9 25.0 9.0 684.5 -1.7% 59.4% 12.1% -26.5% -25.0% 10.1% 54.0 16.1 38.7 17.5 126.3 51.9 14.0 40.2 16.6 122.7 -3.9% -13.0% 3.9% -5.1% -2.9% 341.7 470.0 90.9 154.4 272.5 1,329.5 361.1 515.0 87.0 145.0 278.2 1,386.3 5.7% 9.6% -4.3% -6.1% 2.1% 4.3% 2008/09 2009/10 (+/-)

Initial Coverage: Guan Chong Bhd

2010/11

(+/-)

438.5 535.0 87.0 155.0 245.8 1,461.3

21.4% 3.9% 0.0% 6.9% -11.6% 5.4%

58.0 15.0 42.5 15.7 131.2 360.0 220.0 28.0 25.0 7.0 640.0

11.8% 7.1% 5.7% -5.4% 6.9% -12.5% 3.7% 4.1% 0.0% -22.2% -6.5%

397.0 239.1 40.0 61.6 113.9 851.6 305.2 175.0 85.0 71.0 146.1 782.3 3,866.6

4.0% 5.7% 1.3% 4.1% 5.5% 4.5% 2.4% 34.6% 2.4% 4.4% 13.6% 10.5% 4.1%

Source: Malaysian Cocoa Monitor, Vol.20 No.2, Dec 2011; and ICCO

Risks. Unfavourable economic environment, new cocoa selling system in the Ivory Coast and contract defaults pertaining to forward sales and procurement are several risk factors that will adversely affect the cocoa processing industry. The unfavourable economic environment have resulted in concerns over a potential drop in demand for chocolate products. Besides, the continued drop in cocoa prices may result in pull-back sales or contract defaults pertaining to forward sales. On the other hand, concerns of over the implementation by Ivory Coast on a new selling system that involves the forward selling of Ivory Coasts crop and provision of a guaranteed price for farmers may seen backwardation, which tends to increase costs for cocoa processors and could potentially put pressure on margins. www.bimbsec.com.my

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27 July 2012

Initial Coverage: Guan Chong Bhd Re-rating in store. We believe GCBs impending secondary listing exercise on SGX-ST would be a positive value proposition on GCBs share price. Together with improved valuation parameters, share price is further buoyed by prospective earnings growth not only from the new capacity in Batam, but also potential huge take-off from two renowed F&B MNCs. GCB also extend its reach in branded consumer segments by tapping into fast growing regional market of downstream industrial products, where it had recently purchased a factory near Port of Tanjung Pelepas (PTP). Industrial chocolate is widely used as an ingredient by the bakery and confectionary industries while chocolate beverages will be marketed under its own brand name Cocorich and OEM brands via hypermarkets in Malaysia. Performance Highlights Track record. In FY2005 FY2011, GCB has enjoyed a 6-year revenue CAGR of 22.3% and a 6-year net profit CAGR of 39.9%. Most remarkably, the company remained profitable and has been able to rebound swiftly following the 2008 crisis. Profit margins have been on the ascension since 2008 and ROE has recovered convincingly from the lowest level of 7% in 2008 to 56% in FY2011. GCBs revenue and net profit grew significantly in FY10 by 80.5% and 609% YOY respectively, due to a sharp increase in prices of cocoa during the period as a result of the political instability in Ivory Coast. FY11 saw the average selling price of cocoa products ingredients declined but yet GCBs revenue grew 19% on the back of a 37% jump in sales tonnage to 108.9k MT. High gearing to cater working capital. In FY11, GCBs net gearing ratio stands at 1.6x from 1.1x in FY10. We understand that the higher gearing is to cater for the rise in CAPEX and working capital for its Batam plant. As of 1Q12, net gearing has declined to 1.33x due to lower working capital requirement from Batam plant. We are not concern of the high gearing as the interest cover is still manageable at 24x for the 1Q12. Committed minimum 25% dividend payout. Historically, GCB has been distributing more than 20% of its net income to shareholders (except in FY11: 17.7%), and currently they had implemented a dividend policy of 25%. So far they had paid 4.5sen for FY12 and we based on our estimates, GCB would declare dividends of 11.6sen for FY12 and 12sen for FY13, representing a gross dividend yield of approximately 4.0%.

Figure 7a: Revenue Trend (FYE2005 FYE2011)

1600 1400 1200 1000 800 22.2% 600 400 200 0 2005 2006 2007 Revenue
Source: Company/BIMB Securities

RM'm 80.5%

90.0% 80.0% 70.0% 49.6% 60.0% 50.0% 40.0% 30.0% 19.1% 20.0% 10.0% -8.0% 2008 -7.4% 0.0% -10.0% -20.0% 2009 2010 2011

Annual Growth Rate (%)

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27 July 2012 Figure 7b: Revenue and Sales Tonnage (FYE2005 FYE2011)
1600 1400 1200 1000 800 600 400 200 413 0 2005 2006 2007 2008 2009 380 464 694 643 58.96 50.02 51.48 71.74 59.85 79.24 RM'm

Initial Coverage: Guan Chong Bhd

120.00 108.86 100.00 80.00 60.00 40.00 20.00 1160 2010 1382 0.00 2011

Revenue (RM'm)
Source: Company/BIMB Securities

Sales Volume (MT)

Figure 8: Earnings Trend Net Profit and Margin

140 120 100
7.8%

RM'm
10.7%

12.2%

14.0% 12.0%

9.1% 8.7% 6.5% 5.3% 4.1% 4.6% 3.7% 3.1% 2.2% 1.0% 7.0%

10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

80 60 40 20 0

2005

2006

2007
Net Profit

2008

2009
Net Margin (%)

2010

2011
EBITDA Margin (%)

Source: Company/BIMB Securities

Figure 9: DPS and Dividend Yield based on current price (FYE2005 FYE2011)
12.0 10.0 8.0 6.0 4.0 2.0 0.1% 0.0 2005 2006 2007 2008 2009 Div Yield (%) 2010 2011 1.1% 1.1% 0.6% 0.7% sen 3.8% 4.0% 3.5% 2.9% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%

Gross DPS (sen)

Source: Company/BIMB Securities

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27 July 2012

Initial Coverage: Guan Chong Bhd

Recommendation
Initiate with BUY Call. We peg a target price of RM3.72 by applying a FY13 EPS over its adjusted PER multiple of 8x which is above 1 standard deviation of its past 5-years PE valuation justified by its impending listing on the SGX-ST, margin improvement, efficient management and positive attributes such as good relationship with its trading partners, efficient cost control, leading position in supplying cocoa ingredients in Malaysia, and recent capacity expansion that would provide significant contribution by FY2012 onwards. We initiate coverage on GCB with a BUY rating. Based on adjusted 5 years average P/E ratio 8x, we derived a target price of RM3.72. Average Standard Deviation
* excluding P/E ratio > 10x

P/E Ratio* 6.6x 1.4x

Figure 10: Historical 5-year PE Chart

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Nov-07 Nov-08 Nov-09 Nov-10 Mar-08 Mar-09 Mar-10 Mar-11 Nov-11 May-08 May-09 May-10 May-11 Mar-12 May-12 Jan-08 Jan-09 Jan-10 Jan-11 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Jan-12 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11

RM

14 12 10 8 6 4 2 0

Px Last

PE_RATIO

-1 Stdev

Avg

+1 Stdev

Figure 11: Peers Valuation

Company GUAN CHONG BHD PETRA FOODS LTD ARCHER-DANIELSMIDLAND CO (ADM) Average ex-GCB Price 3.02 1.94 26.71 EPS (RM) FY12 0.41 0.11 2.50 FY13 0.47 0.12 2.94 P/E (X) FY12 7.37 13.77 10.69 FY13 6.43 12.44 9.09 P/B (X) FY12 3.31 2.93 0.96 FY13 2.70 2.79 0.92 56.27 20.51 12.19 2.87 2.72 2.62 ROE Div Yield Market Cap. 965.6 1185.6 17589.2

12.23

10.76

1.95

1.86

16.35

2.67

Figure 12: Relative Performance

3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 06-Jul-09 Guan Chong price 400.0% 350.0% 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% -50.0% 06-Jul-10 Relative Performance 06-Jul-11 -100.0% 06-Jul-12

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27 July 2012

Initial Coverage: Guan Chong Bhd

Earnings Estimates
FYE 31 Dec (RMm) Revenue Pretax profit Net profit EPS (sen) EPS growth (%) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) P/NTA (x) Div. yield (%) EV/ EBITDA (x) ROE (%) Interest Cover (x) 2009 2010 2011 2012E 2013E

642.6 20.7 14.3 4.5 110.5% 2.8 0.33 2.1 67.7 9.2 0.7% 34.7 14.1% 4.6

1,160.1 111.4 101.1 31.6 609.1% 11.6 0.56 1.1 9.5 5.4 2.9% 9.3 70.3% 23.1

1,381.8 150.1 125.9 39.4 24.5% 11.3 0.82 1.6 7.7 3.7 3.7% 8.3 56.3% 23.7

1,699.8 162.5 132.5 41.4 5.3% 11.6 1.14 1.2 7.3 2.7 3.8% 7.6 42.0% 21.0

1,999.1 182.3 148.7 46.5 12.2% 12.0 1.48 1.0 6.5 2.0 4.0% 6.9 35.3% 20.1

Balance Sheet
FYE 31 Dec (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2008 2009 2010 2011 2012E

115.9 216.9 332.8 207.6 25.8 97.6 1.8 332.8

112.0 299.1 411.1 270.0 33.7 105.3 2.0 411.1

154.5 329.9 484.4 270.4 26.8 182.4 4.7 484.4

250.6 650.1 900.6 606.2 23.1 265.0 6.3 900.6

285.9 752.3 1,038.2 645.1 23.1 365.6 4.4 1,038.2

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27 July 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Initial Coverage: Guan Chong Bhd

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in 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 Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TAKE PROFIT TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable 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. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

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