IGB REIT HOLD. Premium size REIT-ail. Company report. Initiation. Rationale for report: Initiation REIT

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1 REIT IGB REIT (IGBREIT MK) 17 October 2012 Company report Tan Ee Zhio Premium size REIT-ail Rationale for report: Initiation HOLD (Initiation) Price Fair Value 52-week High/Low Key Changes Fair value EPS RM1.39 RM1.38 RM1.42/RM1.25 Initiation Initiation YE to Dec FY12F FY13F FY14F FY15F Revenue (RMmil) Net profit (RMmil) Realised Net profit (RMmil) EPU (Sen) EPU Growth (%) Consensus EPS (Sen) DPU (Sen) PE (x) EV/EBITDA (x) Div yield (%) ROE (%) Gearing (%) Stock and Financial Data Shares Outstanding (million) 3,400.0 Market Cap (RMmil) 4,692.0 Book value (RM/share) 1.0 P/BV (x) 1.4 ROE (%) 5.5 Net Gearing 27.1 Major Shareholders IGB Corporation (51.0%) Free Float (%) 49.0 Avg Daily Value (RMmil) n/a Price performance 3mth 6mth 12mth Absolute (%) n/a n/a n/a Relative (%) n/a n/a n/a Investment Highlights We initiate coverage on IGB REIT, with a HOLD recommendation and a fair value of RM1.38/unit, based on a 10% discount to our DCF value of RM1.53/unit. At RM1.38/unit, the implied distribution yield is 4.9% on FY13F earnings. IGB REIT, which comprises Mid Valley Megamall (MVM) and Gardens Mall (GM), is the largest pure retail M-REIT with a market capitalisation of RM4.7bil. We project DPU growth of 6% and 4% for FY13F and FY14F, respectively, underpinned by:- (1) GM 54% of NLA expiring in FY13 with rental growth assumption of 13%; and (2) MVM 37% of NLA expiring in FY14 with an assumed 5% growth in rental. There are two critical value propositions for IGB REIT. Firstly, management s ability to extract higher rentals for its premium mall, GM. As it is, GM s average rental is RM8.74psf at a discount to the premium malls in the city, namely, Suria KLCC at RM25psf and Pavilion Mall at RM17psf. Notwithstanding its location, we note that GM s Grade A office is commanding rentals of RM8psf, comparable to offices located in the Golden Triangle. MVM s average rental of RM10.75psf is comparable to Sunway Pyramid at RM10.30psf. Therefore, we expect a 3-year rental CAGR of 5%. Additionally, KL Eco City, which has been fully sold, could potentially drive rentals further in MVM and GM. The second driver is from acquisitions. IGB REIT does not appear to have a ready pipeline of assets to be injected, unlike CMMT and PavREIT. The sponsor is developing a retail mall in Johor Bahru, called Southkey Mall. This particular injection can only materialise earliest in the eighth year upon completion (5 years time) and stabilisation of the mall (at least 3 years in operation). PavREIT, on the other hand, has a steady pipeline of asset injections Fahrenheit 88 (FY14), da:men Mall in USJ (FY15), and Pavilion Extension (FY16). Likewise, CMMT has the ROFR to Queensbay Mall and an upcoming mall in Taman Melawati and arguably, has the strongest parent, CapitaMalls Asia. For PavREIT, being the premium city mall, we expect a higher rental growth underpinned by 67% of NLA expiring in FY13F and a relatively young mall. Key catalysts for CMMT will be driven mainly by the East Coast Mall as it is in the midst of asset maximisation, whereby average rentals are low at only RM5psf and in view of the potential conversion of the carpark space into an additional 23% NLA. Looking at the Enterprise Value/psf for FY12F, PavREIT (RM3,057psf) is the most expensive given its premium status and location, followed by IGB REIT (RM2,325psf) and CMMT (RM1,578psf). Our fair value implies distribution yields of 4.6% and 4.9% for FY12F and FY13F, respectively. This would therefore put the REIT s distribution yield at parity to PavREIT and CMMT, which stands at 4.5% and 4.3%, respectively, for FY12F. PP 12247/06/2013 (032380) Gearing is manageable at 27%, suggesting room for additional debt for future asset acquisitions, and allowing flexibility for the REIT to either acquire purely by debt or a mix of debt and equity funding.

2 INITIATE WITH HOLD (FV: RM1.38/UNIT) We initiate coverage on IGB REIT, with a HOLD recommendation and a fair value of RM1.38/unit based on a 10% discount to our DCF value of RM1.53/unit. At RM1.38/unit, the implied distribution yield is 4.9% on FY13F earnings. Looking at the Enterprise Value/psf for FY12F, PavREIT (RM3,057psf) is the most expensive given its premium status and location, followed by IGB REIT (RM2,325psf) and CMMT (RM1,578psf). Our fair value implies yields of 4.6% and 4.9% for FY12F and FY13F, respectively. This would therefore put the REIT s distribution yield at parity to PavREIT and CMMT, which stands at 4.5% and 4.3%, respectively, for FY12F. PREMIUM SIZE REIT-AIL Largest pure play retail M-REIT IGB REIT is the largest pure retail REIT in Malaysia with assets comprising Mid Valley Megamall and Gardens Mall with total asset value of RM4.7bil followed closely by Pavilion REIT (RM3.4bil), Sunway REIT (RM2.8bil) and CMMT (RM2.7bil). Given IGB REIT s large size, visibility within Malaysia s and international investors will be enhanced further. This, we believe, will broaden and lift the M-REIT sector as a whole, which will progressively be developed into a distinct asset class. Backed by strong sponsor IGB Corporation The REIT s sponsor IGB Corporation, a property development and investment company has 51% stake. The REIT manager comprises a team with an established track record, and spearheaded by Tan Sri Robert Tan, Group Managing Director. THE NEW RETAIL KING Self-contained Mid Valley City Mid Valley Megamall and Gardens Mall ( the Malls ) are strategically located in the Mid Valley City near the city centre and in close proximity to various affluent suburbs of Kuala Lumpur such as Bangsar, Damansara Heights, Seputeh and Petaling Jaya. The Malls provide an immediate catchment area comprising affluent suburbs in the Klang Valley and thereupon, remain as a preferred destination for residents in the Klang Valley, combined with the superior transportation links within and around Mid Valley City. We opine that good accessibility is one of the key reasons for the Malls success. The Malls are accessible via a network of highways such as the Federal Highway and is well supported by various modes of public transportation including KTM railway system and Mid Valley KTM station. The proposed MRT 2 Circle Line that is targeted to be completed by 2020 and linkage from Mid Valley City to Abdullah Hukum LRT Station via KL Eco City are bound to further strengthen accessibility and shopper traffic. TABLE 1 : COMPARATIVE ANALYSIS AMONGST REIT Description IGB REIT Pavilion REIT CapitaMalls Malaysia Trust Sponsor IGB Corporation Urusharta Cemerlang CapitaMalls Asia Net Lettabale Area (sq ft) 2,534,266 1,499,526 2,458,842 Location Mid Valley City Jalan Bukit Bintang Penang, Selangor, Kuantan Property Component Mid Valley Megamall Gardens Mall Pavilion Mall Pavilion Tower Gurney Plaza Sungei Wang Plaza The Mines East Coast Mall Right of First Refusal Southkey Mall Farenheit 88 Pavilion Extension da:men Mall in USJ Queensbay Mall Upcoming mall in Taman Melawati Positioning Middle income to upper income level Upper-middle to upper income level Middle income Source: Company / AmResearch AmResearch Sdn Bhd 2

3 As at May 2012 TABLE 2 : DETAILS OF THE MALLS Mid Valley Megamall Gardens Mall Land area (sq ft) 1,047, ,773 Appraised value RM3,440mil RM1,160mil Appraised value weighting 74.8% 25.2% NLA (sq ft) 1,718, ,053 Age of property 13 years 5 years No. of tenants Occupancy Rate 99.8% 99.7% No. of car park bays 6,092 4,128 Anchor tenant as % of NLA 41.6% 31.1% Average rental rate (psf/month) RM10.75 RM8.74 CHART 1 : MID VALLEY CITY Mid Valley Megamall matured but yet favourable growth still present Mid Valley Megamall is positioned as a one-stop mall, principally targeting the middle income segment. Being a matured mall and the largest mall in Malaysia, coupled with a well diversified mix, it appeals as an immense attraction to shoppers. Anchor tenants account for 41.6% of occupied NLA consisting of AEON, Carrefour and Metrojaya. As such, we believe the anchor tenants are one of the key pull factors for footfalls (circa 33mil shoppers per year), and thereby creating traffic for speciality stores as well. More importantly, the mall has consistently achieved a strong occupancy rate of nearly 100%, even with the increasing number of malls during this 13-year period. We understand that the anchor tenants are locked-in for a long time. The waiting list for availability of retail space for the mall is in excess of two years. Thus, we are of the view that there is room for potential growth. Re-configuration of the lower yield space into smaller units, coupled with the optimisation of tenant mix, will further boost rental rates. Projected tenant expiry as a percentage of occupied NLA for the next 3 years is rising, hovering between 17%-37%, with 2014 having the most expiries. This will be a good time for any re-configuration of NLA or re-mixing of tenants. Notwithstanding this, average rental rates have been on an upward trend at a stable rate at 5%-5.5% since Currently, the average rental was at RM10.75psf as at May 2012 comparable to Sunway Pyramid at RM10.30psf. Therefore, we expect a 3-year rental CAGR of 5%. Source: Company / AmResearch Topline contribution from the Mid Valley Megamall accounts for 70% and the remaining 30% comes from Gardens Mall as of Mid Valley City has NLA retail space of more than 2.5mil sf, making it the largest inter-linked retail property site in Malaysia comprising the properties with 3 hotels and 7 commercial office buildings. In addition, we reckon the mixed-use development projects within the vicinity Bangsar South and KL Eco City would help multiply footfalls within the Mid Valley City area. KL Eco City, which has been fully sold, could potentially drive rentals of the Malls further. Tenants TABLE 3 : TOP TEN TENANTS Occupied NLA AEON 17.6% Carrefour 12.3% Metrojaya 11.7% Mid Valley Exhibition Centre 3.9% Golden Screen Cinemas 3.6% Celebrity Fitness 2.3% Cosmic Bowl 1.7% Forever % Why Pay More/Studio R and Puma 1.2% Ace Hardware 1.1% Total top 10 tenants 56.7% Others 43.3% Total 100.0% AmResearch Sdn Bhd 3

4 CHART 2 : TRADE SECTOR ANALYSIS AS A PERCENTAGE OF GROSS RENTAL INCOME CHART 5 : PROJECTED TENANT EXPIRY Beauty, Health & Wellness, 6.4% Sundry and Services, 9.1% Timepiece and jewellery, 4.7 % Home and gifts, 2.2% Exhibition Centre, 1.3% Discounters, 1.3% Fashion Apparel, 31.1% 16.5% 26.8% 36.6% 20.1% Entertainment and Leisure, 11.2% Department Store/ Supermarket, 14.9% Food and Beverage, 17.8% and beyond % of occupied NLA expiring CHART 3 : OCCUPANCY RATES CHART 6 : HISTORICAL TENANCY EXPIRY AND RENEWAL RATES 100.0% 100.0% 800, , , % 700, , % 93.1% 99.8% 500, , , , % As at May 2012 Occupancy rates 200, NLA of expired tenancies (sq ft) Renewal Rates by NLA of expired tenancies (%) CHART 4 : AVERAGE RENTAL RATES As at May 2012 Average rental rates (RM per sq ft) AmResearch Sdn Bhd 4

5 Gardens Mall the future growth driver In contrast, Gardens Mall is a premium high-end retail mall, targeting the higher income group. Opened in 2007, the mall is meant to complement Mid Valley Megamall, to cater to the different needs of shoppers that are not met by the latter. Thus, it is differentiated by the presence of strong high-fashion brands, including Louis Vuitton, Mulberry, BCBG, Coach, Hugo Boss, Tods, Longchamp and many others. Bearing in mind, the Malls unique tenant trade mix is completely different from suburban malls in Malaysia, with predominantly luxury and premium brands. CHART 7 : TRADE SECTOR ANALYSIS AS A PERCENTAGE OF GROSS RENTAL INCOME Home & Gifts, 6.6% Sundry and services, 6.7% Fashion (Luxury), 7.8% Timepieces & jewellery, 5.7% Beauty, Health & Wellness, 4.5% Fashion Apparel, 23.5% Given the close proximity to the affluent residential areas, the mall is able to target the middle-to-higher income brackets within the Klang Valley. Only five years old, the mall is considered to be in the early stages of the rental cycle. The next major rental reversion is expected to take place in 2013 with a whopping 54.2% of occupied NLA expiring. This will eventually fetch higher rental rates as the mall matures given the more upmarket speciality stores and as it is currently still under-rented. Entertainment & Leisure, 11.7% Department Store/ Supermarket, 14.7% Food and Beverage, 18.8% As it is, GM s average rental is RM8.74psf at a discount to the premium malls in the city, namely, Suria KLCC at RM25psf and Pavilion Mall at RM17psf. Notwithstanding its location, we note that Garden s Grade A office is commanding rentals of RM8psf, comparable to offices in within the Golden Triangle. We see Gardens Mall as the future growth driver of the REIT and lift the earnings portfolio via a higher rental reversion. We note that in 2011, the mall only contributed 30% to the topline for the REIT and a rental reversion by 12%. On top of this, we believe there is still room for growth in relation to the fashion segment as we anticipate more top notch brands to sign up for space. CHART 8 : OCCUPANCY RATES 99.6% 99.7% 98.2% 96.7% As at May 2012 Occupancy rates TABLE 4 : TOP TEN TENANTS Tenants Occupied NLA Isetan 18.1% Robinsons Department Store 13.0% GSC Signature 3.8% X-Tra 2.9% myoga 2.9% Marketplace by Cold Storage 2.8% Borders 2.7% Red Box 2.0% Marks & Spencer 1.9% Hokkaido Ichiba 1.8% Total top 10 tenants 51.9% Others 48.1% Total 100.0% CHART 9 : AVERAGE RENTAL RATES As at May 2012 Average rental rates (RM per sq ft) AmResearch Sdn Bhd 5

6 CHART 10 : PROJECTED TENANT EXPIRY Counting on growing organically 54.2% 31.4% Within the near- to medium-term, any potential asset acquisition is highly unlikely, as guided by Management. Although the REIT has the Right of First Refusal from its sponsors, management highlights that the REIT intends to grow organically arising from the enhancement of NLA rental revenue via:- 14.2% 0.2% (1) Continued reconfiguration of NLA; (2) Actively engaging in early negotiation of expiring leases; and beyond % of occupied NLA expiring CHART 11 : HISTORICAL TENANCY EXPIRY AND RENEWAL RATES 620, , , % 88.9% 498, (3) Optimising tenant mix; and (4) Ongoing refurbishment of the Malls. In 2009, Gardens Mall underwent an asset enhancement initiative whereby the tenant layout was reconfigured to better suit the needs of tenants, which ultimately lead to higher shopper traffic. Additionally, we understand from management rental rates at Garden Malls are expected to exceed the Mid Valley Megamall in due course given that spending per pax in Gardens Mall is envisaged to be higher and still underrented at this point (currently in the second stage of rental cycle). However, no indication was given as to when this is expected to materialise. 320, , ,000 20, % 264,363 63, Reducing huge percentage of anchor tenants Mid Valley Megamall and Gardens Mall have a huge percentage of anchor tenants accounting for 42% and 31%, respectively in comparison to other retail malls Pavilion Mall (18%), Sungei Wang (35%), The Mines (22%) and Sunway Pyramid (21%). NLA of expired tenancies (sq ft) Renewal Rates by NLA of expired tenancies (%) Given the plan of the REIT to grow organically and to better optimise retail space, we anticipate NLA occupied by anchor tenants will gradually be reduced in the future and be broken down into smaller lots upon expiry of lease terms, whereby each lot would fetch higher rentals per sf than a single tenant. Diverse tenant mix with low risk on one customer segment The Malls complements each other well with a diversified tenant mix across board of 663 tenants attracting all income brackets. Henceforth, the Malls hold a strong position in the market. Evidently, Mid Valley Megamall is positioned as a one-stop mall serving as a family, tourist and lifestyle destination for local and out-of-state residents. Conversely, Gardens Mall is a premium fashion mall for higher income locals, expatriates and the tourist segment; thus providing a lower concentration in customer risk. AmResearch Sdn Bhd 6

7 Although the Malls share the same visitor traffic, shoppers in Mid Valley Megamall are not direct targets of Gardens Mall, and vice versa. Right of First Refusal from sponsor IGB REIT has been granted the Right of First Refusal from its sponsor that provides a steady and secured asset pipeline for the REIT. The sponsor is currently developing an equivalent of Mid Valley City in Johor Bahru called Southkey Mall, which is expected to be completed within five years. Healthy gearing level at 27% implying room for acquisition Based on the REIT s pro-forma balance sheet, gearing is very comfortable at 27%, which is below the average of listed Malaysian REITs of 29.2% as at FY11, and significantly below the threshold limit of 50% as per the REIT Guidelines of the Securities Commission. It can borrow up to an additional RM863mil before hitting the 50% gearing threshold. As such, we are positive that this will provide the REIT additional debt room for future asset acquisitions, allowing flexibility for the REIT to either acquire purely via debt or a mix of debt and equity funding. KEY RISKS Lack of potential asset injection in the pipeline Admittedly, the REIT does not appear to have a ready pipeline of asset to be injected in the short-to-medium term, unlike CMMT and PavREIT. The REIT is therefore relying to grow organically rather than via asset acquisition. Nonetheless, the sponsor is currently developing an equivalent of Mid Valley City in Johor Bahru called Southkey Mall, which is expected to be completed within five years. This development is a joint venture between IGB Corporation and Selia Pantai with a tentative gross development value of RM6bil. We would not be surprised by the injection of the Southkey Mall into the REIT once completed and upon the stabilisation of rental yields (at least 3 years in operation). However, this is expected take an estimated 8 years to materialise. We note that management is actively exploring acquisitions of properties developed by third parties either locally or overseas. Such assets will only be acquired upon meeting the investment objective and criteria of the REIT. Risk on concentration of one location only Both Malls are located in the Mid Valley City. Any fading of the popularity of the Mid Valley City would affect the REIT s earnings portfolio. Nevertheless, we believe any expansion of the REIT s asset base would be out of the Mid Valley City and geographically diversified. Oversupply of malls The number of new (i.e. Paradigm, Setia Alam City) and upcoming retail malls has evolved in recent times. This poses as a competition to the REIT as retailers are presented with plenty of options to look for the right and suitable location. A significant number of upcoming malls exceeding 1mil sf in size, including Boustead Retail at Jalan Cochrane, Empire City Mall in Damansara Perdana, IOI City Mall in Putrajaya and i-city Mall in Shah Alam, may potentially dilute the market share of Mid Valley Megamall. Having said this, these malls either aim to be a mass market or premium mall unlike the Mid Valley Megamall and Gardens Mall (its unique feature as a complementary mall), which target both segments of shoppers and will remain as a strong factor for the support of shoppers and tenants, in our view. Furthermore, the improving accessibility arising from the proposed link to the LRT station, MRT 2 circle line and KL Monorail extension will contribute to higher footfalls. Sustaining shoppers traffic Both the Mid Valley Megamall and Gardens Mall are well known for having the lack of carpark bays and being congested during weekends and peak periods which discourage shoppers traffic to the Malls. The shortage of carpark bays, an important factor, may stunt footfall growth in the future. The possibility for additional carpark bays is very unlikely due to the lack of available space and therefore, growth can only arise from improved efficiency of car park usage and access of alternative means of transport. Currently, each carpark bay has a daily turnover of about three times, each being an average of three hours which suggests carpark usage is almost at an optimum level. A downturn in the economic activity In an economic downturn, consumer spending is bound to decline and thus, affecting the performance of the REIT. However, being a complementary mall in nature, this risk is mitigated as non-discretionary shopping will remain as a necessity. The diverse base of tenants in various trade AmResearch Sdn Bhd 7

8 sector acts as a bolster against the decline in consumer spending. Despite this, the economic downturn may in turn result in loss of tenants particularly for discretionary goods and the inability of the REIT to yield a higher rental reversion during expiry of leases. FINANCIALS Lease expiry to lift earnings portfolio We view that both Malls are able to maintain good rental reversions. We are not overly concerned about the occupancy rate given the long wait-list of retailers who are keen to secure a retail space at the Malls. Tenancy agreements are generally between 2-3 years, with an option to renew upon expiry, while some feature fixed base rent components. We project DPU growth of 6% and 4% for FY13F and FY14F, respectively, underpinned by:- (1) Gardens Mall 54% of NLA expiring in FY13F with rental growth assumption of 13%; and (2) Mid Valley Megamall 37% of NLA expiring in FY14F with an assumed 5% growth in rental. As such, we see EPU growth of 6.8% and 5.8% for FY13F and FY14F, respectively. We forecast a rental growth of circa 4%-5.3% for Mid Valley Megamall and 3.7%-13% for Gardens Mall for FY12F-FY14F. Full impact of expiring tenancy at 54.2% in Gardens Mall for FY13F will be felt in FY14F. Note that Gardens Mall only contributes circa 30% to the topline. We estimate annualised DPU at 6.4sen and 6.8sen FY12F and FY13F, respectively, implying a 100% payout of distributable income. Megamall is likely to reach saturation point and face a slowdown in shoppers traffic. VALUATION We initiate coverage on IGB REIT, with a HOLD recommendation and a fair value of RM1.38/unit based on a 10% discount to our DCF value of RM1.53/unit. The stock opened at RM1.37/unit on its maiden trading day at a premium of 9.6% over its retail IPO price of RM1.25/unit. Looking at the Enterprise Value/psf for FY12F, PavREIT (RM3,057psf) is the most expensive given its premium status and location, followed by IGB REIT (RM2,325psf) and CMMT (RM1,578psf). Our fair value implies yields of 4.6% and 4.9% for FY12F and FY13F, respectively. This would therefore put the REIT s distribution yield at parity to PavREIT and CMMT, which stands at 4.5% and 4.3%, respectively, for FY12F. The recent run-up in share prices for M-REITs has resulted in a significant yield compression given their lofty valuations and defensive nature. Discounted cash flow assumption Our DCF value of RM1.53/unit is centred on the following assumptions:- (1) Risk free rate of 3.5% based on a 10-year Malaysian Government Security yield (2) Market risk premium of 10.4% (3) Cost of debt of 4.7% (4) Beta of 0.7 (5) WACC of 7.4% Higher capex for Mid Valley Megamall There will be a continuous upgrading, renovation and refurbishment programme in respect of the Malls. Management does not expect to have any major capex in FY12F and FY13F. Over the past three years, RM7mil-RM11mil had been set aside for capex for both Malls, of which 82%-87% was for the Mid Valley Megamall. We assume a combined capex of RM8mil for both Malls, on the assumption of no major capex in the immediate term. Being around for 13 years, Mid Valley Megamall has to be regularly revamped to create a fresher appearance and ambience for shoppers as well as to preserve its quality. This, we believe, at least 80% of capex will be set aside for it, in line with the historical practice. Without these initiatives, the Mid Valley AmResearch Sdn Bhd 8

9 TABLE 5 : PEER COMPARISON Share price Market Cap EPU DPU Dividend Yield (%) Fair Value Company RM (MYR mil) FY12F FY13F FY12F FY13F FY12F FY13F Rating (RM) AL-AQAR HEALTHCARE REIT , HOLD 1.39 AMFIRST REIT ATRIUM REIT AXIS REIT , AL-HADHARAH BOUSTEAD REIT , CAPITAMALLS MALAYSIA TRUST , HOLD 1.68 HEKTAR REIT IGB REIT , HOLD 1.38 QUILL CAPITA TRUST PAVILION REIT , HOLD 1.33 STARHILL REIT , SUNWAY REIT , TOWER REIT UOA REIT Source: Company / AmResearch CHART 12 : M-REITS BY APPRAISED VALUE AND ASSETS EXPOSURE Source: Company / AmResearch AmResearch Sdn Bhd 9

10 TABLE 6 : IGB REIT STRUCTURE AmResearch Sdn Bhd 10

11 TABLE 7 : FINANCIAL DATA Income Statement (RMmil, YE Dec) 2012F 2013F 2014F 2015F Gross rental income Revenue from tenancy Other revenue Property mgmt fees (77.7) (80.0) (82.3) (84.6) Other operating expenses (52.0) (52.5) (53.1) (53.6) Net property income Interest income Other income Fair value adj Non property expenses (29.7) (31.4) (32.2) (32.8) Borrowing cost (54.0) (54.4) (54.6) (54.4) Net income before tax Taxation Net income after tax Distributable income* *Net income after tax less fair adj Balance Sheet (RMmil, YE Dec) 2012F 2013F 2014F 2015F Cash Trade & other debtors Others Current Assets Trade & other Creditors Provision for income dist Short term Borrowings Others Current Liabilities Net Current Assets/Liab (19.2) (79.0) Fixed assets Other Long term assets 4, , , ,600.0 Long-term Assets 4, , , ,625.3 Total Assets 4, , , ,735.8 Term loans 1, , , ,193.0 Other Long term Liabilities Long-term Liabilities 1, , , ,257.3 Share Capital 4, , , ,237.0 Reserves (850.0) (882.3) (915.0) (947.9) Undistributed income Shareholders Funds 3, , , ,289.1 Total Liab & SF 4, , , ,735.8 Cash Flow Statement (RMmil, YE Dec) 2012F 2013F 2014F 2015F Pretax profit Working Capital Others 78.4 (24.5) (23.2) (21.5) Operating cash flows Capex (8.0) (8.0) (8.0) (8.0) Enchancement exp Others (4,597.0) Investing cash flows ( ) (6.5) (6.6) (5.6) Issue of shares 3, Dividend paid (218.1) (232.4) (245.7) (255.8) Borrowings 1, Others (54.0) Financing cash flow 4,333.4 (178.0) (191.1) (201.5) Net inflows/(outflows) 50.2 (2.8) (3.0) 5.6 Source: Company, AmResearch estimates AmResearch Sdn Bhd 11

12 Published by AmResearch Sdn Bhd ( P) (A member of the AmInvestment Bank Group) 15 t h F l oor B a ng un an A mb a n k Group 55 Jalan Raja Chulan Kuala Lumpur Tel: ( 03 ) ( r e sea rc h) F a x: ( 03 ) Printed by AmResearch Sdn Bhd ( P) (A member of the AmInvestment Bank Group) 15 t h F l oor B a ng un an A mb a n k Group 55 Jalan Raja Chulan Kuala Lumpur Tel: ( 03 ) ( r e sea rc h) F a x: ( 03 ) The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may 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 AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment 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 judgement as of this date and are subject to change without notice. For AmResearch Sdn Bhd Benny Chew Managing Director AmResearch Sdn Bhd 12