South East Asia Industry Focus

ASEAN Consumer: Food for thought Refer to important disclosures at the end of this report

DBS Group Research . Equity

Stability in staples

20 Mar 2015 STI : KLCI : JCI : SET : PCOMP :

3,361.75 1,797.57 5,413.15 1,531.50 7,756.58



Advocating picks on stable staples in our inaugural ‘Asean consumer: Food for thought’ publication



Asean consumer stocks look pricey on valuations; look for cheaper proxies, potential upside margin surprise



Potential risks are stronger USD against regional currencies, higher opex

Analyst Andy SIM CFA +65 6682 3718 [email protected]



Prefer grocery retailers, staple F&B plays: SSG SP, PGOLD PM, INDF IJ, OTB MK, TUF TB.

Alfie YEO +65 6682 3717 [email protected]

Advocate stable staples in our inaugural Asean consumer issue. We believe Asean consumer companies currently face a fluid environment marked by currency volatility, increased competition and operating costs. In our inaugural “Asean Consumer: Food for thought” publication, we seek stability in our regional Asean consumer strategy with stocks exposed to consumer staples. Guarded outlook. While the region is still in the midst of reporting earnings, those already announced were largely in line, given tempered expectations post 3Q14 results. We see pockets of optimism going forward, even though most companies are cautiously optimistic. Possible upside surprise to food producers’ input costs and margins. In our view, subdued consumer sentiment within the region will likely linger on the back of muted GDP growth, weaker regional currencies (against USD), high household debt, etc. However, we believe that lower raw materials and energy prices could possible benefit F&B manufacturers in 2H15 in terms of upside to margins. We remain selective on our picks on the back of rich valuations across the region. Stock picks: Grocery retailers, staple F&B plays. We prefer grocery retailers - Sheng Siong (SSG, Buy; TP: S$0.83) and PureGold Price Club (PGOLD, BUY; TP: PHP 49) - given their resilient profiles. PGOLD is trading at cheaper valuation vis-àvis other consumer plays in Philippines. We see upside margin surprise and likelihood of a strong 1Q15 for SSG due to a longer Lunar New Year selling season. Old Town Berhad (OTB, BUY; TP: RM 2.20) looks attractive relative to other branded F&B peers, while we believe Indofood Sukses Makmur (INDF, BUY; TP: Rp 9,050) offers investors a cheaper alternative as an Indonesian staple play. Lastly, TUF (BUY; TP: THB27.50)’s earnings profile looks interesting in FY15, driven by organic growth and acquisitions, while a strong USD bodes well for earnings.

www.dbsvickers.com ed-TH / sa- YM

King Yoong CHEAH CFA +603 2604 3908 [email protected] TAN Kee Hoong +603 2604 3913 [email protected] Thailand Research Team +662 658 1222 [email protected] Indonesian Research Team +6221 3003 4900 [email protected] Reuben Mark ANGELES Ghia Paula YUSON STOCKS PICKS

Sheng Siong PureGold Price Club Old Town Berhad Indofood Sukses Thai Frozen Union

Price Local

Mkt US$m

Target Performance (%) i 3 mth 12 mth Local

0.76 40.20 1.74 7,400 19.80

830 2,491 209 4,962 2,891

0.83 49.00 2.20 9,050 27.50

13.4 8.7 19.2 15.6 (13.2)

Rating

27.7 (11.8) (9.8) (3.6) 18.2

Source: DBS Bank, DBS Vickers, AllianceDBS, First Metro Securities

ASEAN Consumer ideas S’pore

M’sia

Thai

Indo

Phil

F&B mfg

-

OTB MK

TUF TB

INDF IJ

-

Grocery

SSG SP

-

-

-

retail Specialty

PGOLD PM

-

-

-

-

-

retail

Source: DBS Bank, DBS Vickers, AllianceDBS, First Metro Securities

BUY BUY BUY BUY BUY

Industry Focus ASEAN Consumer: Food for thought

Table of Contents Summary of key events by Analysts-on-Ground

3

Regional benchmark performance

4

DBS Asean Consumer Stock universe performance

5

Feature in Pictures

6

Country briefings  Singapore  Malaysia  Thailand  Indonesia  Philippine

7 8 9 11 13

Macro Charts/ Data  GDP  Inflation  Forex  Input costs

14 15 16 17

Peer comparison

19

Page 2

Industry Focus ASEAN Consumer: Food for thought

EETG – Ears Eyes on the Ground [DBS Asean Consumer team: In this section, we bring you quick updates from the ground, pertaining to policies, economics, consumer sentiment, corporate developments, competition analysis, price wars, new product developments, which we believe will keep you up-to-date] Country Singapore

Comments 

Intended implementation of after-hours alcohol ban is not expected to impact grocery retailers significantly.



We believe Sheng Siong is expected to gain market share with the opening of Tampines store on 15 January.



Retail sales excl motor vehicles in Jan grew 2.4% q-o-q but was down by 8.7% largely due to Chinese New Year taking place in Jan last year (2014) and Feb this year (2015). Driving the sequential increase was Watches & Jewelry (+11%) and F&B/minimarts/supermarkets (+6-7%).

Malaysia



Consumer sentiment remained weak. January CPI slowed to a multi-year low of 1%, led by cheaper pump prices in line with moderating global inflation. We expect CPI to trend higher post GST implementation in April.



OldTown guided that FMCG sales could be slower q-o-q between Jan-Mar as retailers are cautious in restocking prior to GST implementation, hence we trimmed our FYMar15 earnings estimates for the group. In view of the continued weak consumer sentiment, we do not anticipate any late purchases by consumers prior to GST implementation.

Indonesia



Fuel subsidies were cut to free up funds for more spending on infrastructure. On the monetary front, Bank Indonesia unexpectedly cut rates on 17 Feb after CPI fell to 6.29% y-o-y in Feb 15 from 8.36% in Dec 14. The budget that was announced in Feb 2015 will see this year’s infrastructure spending increase to Rp290tr, up from 200tr in 2014.

Thailand



Jan 2015 retail sales grew 3.3% y-o-y.



Alcohol ban in convenience stores likely to impact beverage producers as convenience stores account for c.12% of sales.



South Korea is expected to lift a ban on Thai fresh chicken after 10 years since the bird flu outbreak in Thailand. Impact should be minimal for now on as only 2% of Thailand’s chicken production is exported to South Korea.

 Philippines



Corporate tax rate cut is expected to benefit smaller businesses as SMEs are a major driving force of the economy. Jan 2015 inflation decelerated to 2.4% (est: 2.3%), slower than December's 2.7%, followed by a marginal acceleration in Feb 2015 to 2.5%. Potential uptick in the summer due to foreseen rise in electricity prices in Mar-Apr on account of thin supply amid seasonally higher demand. Meanwhile, food prices are still easing, particularly on account of lower rice prices.

Source: DBS Bank, DBSVickers, AllianceDBS, First Metro Securities

Page 3

Industry Focus ASEAN Consumer: Food for thought

Regional benchmark Investors continue to be bullish on Philippines, Indonesia. YTD, within Asean, Philippines and Indonesia consumer stocks continues to be the top performances (based on MSCI indices)

despite steep valuations. Thailand’s consumer discretionary and staples took the bottom spots in terms of performance.

Regional benchmark consumer indices’ valuation and performance Benchmark Indices Index M SCI Consumer St aples MSCI SINGAPORE/CON STPL MSCI MALAYSIA/CON STPL MSCI THAILAND/CON STPL MSCI INDONESIA/CON STPL MSCI PHILIPPINES/CON STP MSCI CHINA/CON STPL MSCI AC AS xJ /CON STPL MSCI EM ASIA/CONSUM STAP M SCI Consumer Discret ionary MSCI SINGAPORE/CONS DIS MSCI MALAYSIA/CONS DIS MSCI THAILAND/CONS DIS MSCI INDONESIA/CONS DIS MSCI PHILIPPINE/CONS DIS MSCI CHINA/CONS DIS MSCI AC AS xJ /CONS DIS MSCI EM ASIA/CONSUM DISC

PE (A c t )

PE (Y r 1)

Div Y ield

17.33 16.74 24.11 27.29 39.57 24.84 26.07 27.21

11.40 21.39 19.93 21.32 34.00 21.45 22.56 24.34

2.32 3.30 2.46 1.71 1.39 2.00 1.82 1.79

(3.37) (3.94) (7.28) 0.36 (0.64) (5.90) (3.15) (2.98)

(1.68) 4.23 (11.54) 7.27 10.77 0.06 4.33 4.88

(7.36) (5.18) (18.69) 5.13 21.35 (8.90) (3.58) (2.67)

(14.90) (7.93) (15.27) 10.06 54.18 (16.36) 2.27 4.18

(4.91) (1.26) (13.15) 4.87 10.20 (4.08) 2.49 3.21

(4.91) (1.26) (13.15) 4.87 10.20 (4.08) 2.49 3.21

17.51 20.64 25.26 20.04 42.80 14.10 11.54 11.18

16.21 16.52 21.66 17.26 35.96 10.82 11.31 10.66

3.30 1.54 2.48 2.19 0.77 2.31 2.48 1.83

(6.44) (0.74) (9.45) (0.50) (6.82) 3.39 (2.69) 0.84

(6.47) (0.22) (12.46) 11.93 2.40 17.37 (0.35) 3.48

(9.67) (7.22) (8.68) 4.26 7.03 4.65 (11.86) (8.25)

(14.43) (5.77) 1.71 2.54 26.33 13.66 (15.19) (6.38)

(8.08) (0.68) (8.18) 8.99 (0.93) 14.18 (1.27) 2.36

(8.08) (0.68) (8.18) 8.99 (0.93) 14.18 (1.27) 2.36

Source: Bloomberg Finance L.P., DBS Bank (as of 19 Mar 2015)

Regional benchmark consumer indices’ performance

Source: Bloomberg Finance L.P., DBS Bank

Page 4

1m

3m

6m

12m

QT D %

YTD %

Industry Focus ASEAN Consumer: Food for thought

DBS Asean consumer universe performance DBS A sean St ock Univ erse

Company

Rat ing

Dairy F arm Intl Thai Beverage Petra F oods Super Group Sg Osim Internation Sheng Siong Courts Asia Del Monte

PADINI HOLDINGS QL RESOURCES MSM Oldtown BAT Malaysia

12m

YTD %

M ark et Cap (US$m)

M k t cap w eight ed av g ret urn

TP

Count ry

1m

3m

6m

Buy Buy Fully V alued Buy Hold Buy Hold Hold

10.42 0.80 3.29 1.38 1.94 0.83 0.45 0.57

Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore

11.4% 4.2% -5.7% 22.8% 4.5% 5.6% -5.4% -5.8%

4.3% 8.8% 1.9% 30.5% 3.5% 13.4% -8.3% -29.5%

-2.1% 0.7% -3.8% 7.8% -21.3% 15.2% 0.0% -32.2%

-0.4% 6.6% 19.3% 7.2% 5.4% -0.8% -15.0% 27.1% -18.4% 4.5% 32.6% 10.1% -22.2% -9.3% -43.6% -29.5% Singapore ret urn

12,751 13,373 1,658 1,168 1,161 822 177 455

0.9% 1.0% 0.0% 0.3% 0.1% 0.1% 0.0% -0.1% 2.2%

Hold Buy Buy Buy Hold

1.20 4.00 5.75 2.20 69.94

Malaysia Malaysia Malaysia Malaysia Malaysia

-1.7% 1.6% 2.8% -2.8% -2.1%

-9.4% 13.8% 5.1% 16.8% 8.5%

-24.3% 9.5% 5.3% -7.8% -1.8%

-28.2% -3.8% 16.7% 12.1% 9.6% 4.0% -11.9% 16.0% 21.5% 4.9% M alay sia ret urn

246 1,249 979 213 5,211

0.0% 0.2% 0.0% 0.0% 0.3% 0.5%

Charoen Pok F ood Hold Thai Unin Frozen Buy MK Restaurant Buy Khon Kaen Sugar Buy

27.00 27.50 71.00 4.60

Thailand Thailand Thailand Thailand

-13.0% -9.7% 3.0% -5.5%

-24.9% -13.1% 6.6% 1.6%

-31.5% 13.4% -1.2% -9.0%

-25.6% -21.5% 21.9% -11.4% 19.2% 3.4% -11.6% 3.3% T hailand ret urn

5,035 2,871 1,668 609

-1.2% -0.3% 0.1% 0.0% - 1.4%

Puregold Robinsons Retail Universal Robina JFC Emperador Centry Pac F ood

Buy Buy Hold Hold Hold Buy

49.00 90.00 225.00 219.00 11.30 21.10

Philippines Philippines Philippines Philippines Philippines Philippines

-4.1% -0.7% 0.4% -7.3% 1.2% 0.1%

6.0% 12.0% 11.9% 1.9% 10.7% 15.7%

13.3% 35.3% 22.6% 7.0% 3.3% 17.0%

-8.2% 4.8% 34.5% 14.9% 56.2% 11.3% 28.2% -1.4% -0.3% 9.8% N/A 14.8% Philippines ret urn

2,490 2,705 10,538 5,077 4,125 939

0.1% 0.4% 1.3% -0.1% 0.4% 0.1% 2.3%

Indofood Sukses Indofood CBP Kalbe Farma

Buy Hold Hold

9,050 14,300 1,900

Indonesia Indonesia Indonesia

-0.3% 4.2% -1.1%

14.7% 24.2% 0.6%

4.2% 32.7% 6.9%

0.9% 9.6% 39.4% 13.7% 26.9% -2.5% Indoneisa ret urn A sean c ov erage ret urn

4,934 6,597 6,353

0.5% 1.0% -0.2% 1.3% 5.0%

93,403

Source: ThomsonReuters, DBSBank, DBS Vickers, AllianceDBS, First Metro Securities (as of 18 March 2015)"

Page 5

Industry Focus ASEAN Consumer: Food for thought

FIP: Feature in Pictures Best bargain for your instant daily brew Do you know how much you are paying for instant coffee in the region? We compare average prices (online and offline) of the ubiquitous Nescafe 3 in-1 instant coffee in USD per kilogram using rates as of 12 March 2015.

Nescafe 3-in-1 original

DBS Asean Consumer team: We checked prices in the stores (yes, through our network of analysts) and also online websites. Interestingly, prices in Vietnam look to be the highest and prices in the most developed Asean country – Singapore - is not the highest. This could be due to exchange rate differences, noting that USD has strengthened in the last couple of weeks. Going forward, we hope to bring you more interesting tidbits on the consumer sector in this section. So, watch this space!

Price parity of Nescafe regionally

USD 5.68 THB 186.86

USD 7.08 VND 151,176.47 USD 5.96 PHP 263.89

USD 6.82 MYR 25.16

USD 6.23 SGD 8.65 USD 5.54 IDR 73,081.10

Source: FairPrice, SM, Tesco, Tops, Lotte Mart, Sukamart, Carrefour, Puregold, Robinson’s, Dairy Farm, Gaisono Metro, DBS Bank

Page 6

Industry Focus ASEAN Consumer: Food for thought

Singapore – Some recovery post disappointing 3Q14

(Alfie YEO)

Latest developments Area of focus

Details/ Comments

Alcohol restriction

Government tabled a bill to ban alcohol consumption in public places and sale of alcohol at retail outlets from 2230-0700 hrs. Impact on Singapore grocery retail players is expected to be small. 7-Eleven Singapore accounts for approximately 3% of Dairy Farm (DFI)'s sales and alcohol sales represent a small component of Sheng Siong Group (SSG)'s sales.

January real retail sales

Retail sales ex-motor vehicles +2.4% q-o-q in Jan 2015. On a y-o-y basis, retail sales ex-motor vehicles declined 8.7%. This is largely due to Chinese New Year taking place in Jan last year (2014) and Feb this year (2015).

Supermarkets

BIG BOX retail and Sheng Siong’s Tampines stores commenced operations on 27 Dec 2014 and 15 Jan 2015 respectively.

Source: DBS Bank

Outlook & what to look out for. We see earnings momentum in play for most Singapore stocks. Stocks under our coverage such as Courts, Super and OSIM have reported better earnings on a y-o-y basis (CY4Q14) compared to one quarter ago (CY3Q14). However, revenue growth remained largely muted at <+7% y-o-y. We expect earnings growth to gain momentum in CY1Q15.

Stock picks. We continue to be positive on Sheng Siong Group (SSG). New stores, margin expansion and positive SSSG is expected to support SSG’s earnings growth. The stock is priced below peer average and dividend yields are attractive at 4%

Singapore retail sales (ex motor vehicles)

Singapore grocery retail sales

Source: Thomson Reuters, Datastream, DBS Bank

Source: Thomson Reuters, Datastream, DBS Bank

Singapore F&B retail sales

Singapore real wage

Source: Thomson Reuters, Datastream, DBS Bank

Source: Thomson Reuters, Datastream, DBS Bank

Page 7

Industry Focus ASEAN Consumer: Food for thought

Malaysia – Weak consumer sentiment ahead of GST implementation

(CHEAH King Yoong )

Latest developments Area of focus

Details/ Comments

Overnight interest rate

Bank Negara maintained Overnight Policy Rate at 3.25% in March.

Private consumption

Bank Negara expects private consumption to grow by 6.0% in 2015, moderating from 7.1% growth in 2014.

Source: AllianceDBS

Outlook & what to look out for. 4Q14 consumer sentiment index fell 15 points q-o-q to settle below the threshold of 100 at 83 points (3Q2014: 98 points), indicating consumers are concerned about the future and becoming more cautious due to the rising cost of living. On the other hand, 4QCY14 results were unexciting. We observe that the sector has been generally plagued by rising cost pressures and the inability to pass on the higher costs due to (1) a slowdown in consumer spending, and (2) increasingly competitive operating environment. As such, margins may continue to be suppressed.

Malaysia Consumer Sentiment Index

In view of the continued weak consumer sentiment, we believe that the anticipation of a late spending spree by consumers prior to the implementation of GST in April is unlikely to occur. Stock picks. OldTown (BUY, RM2.20 TP) serves as our pick for exposure to the consumer sector in Malaysia in view of its attractive valuation relative to regional peers. Besides that, the sugar industry is expected to benefit from the expiry of the Long Term Contract (LTC) mechanism in 2015, as it will allow sugar refiners to purchase raw sugar at global market prices (c.15 US cents/lb vs LTC price of 26 US cents/lb). MSM (BUY, RM 5.75 TP) is our pick to ride this theme. Malaysia private consumption growth

140 120 100 80 60 40

Dec-14

Jun-14

Sep-14

Dec-13

Mar-14

Jun-13

Sep-13

Dec-12

Mar-13

Jun-12

Sep-12

Dec-11

Mar-12

Jun-11

Sep-11

Dec-10

Mar-11

Jun-10

Mar-10

0

Sep-10

20

Consumer Sentiment Index: Malaysia

Source: MER, Bloomberg Finance L.P.

Source: Thomson Reuters Datastream

Malaysia food, beverages and tobacco retail sales

Malaysia retail trade index

Source: Source: Thomson Reuters Datastream

Source: Thomson Reuters Datastream

Page 8

Industry Focus ASEAN Consumer: Food for thought

Thailand – Improving sentiment, pinning on tourist arrivals rebound

(Thailand Research Team)

Latest developments Area of focus

Details/ Comments

Policy changes

South Korea is expected to lift the ban on Thai fresh chickens after ten years since Thailand's bird flu outbreak. This should take place in 2H15. The Joint Public-Private Consultative Committee has agreed to a cut in corporate tax income that would benefit smaller firms.

Interest rate

Bank of Thailand unexpectedly cut rates by 25bps on 12 Mar 2015, citing the steep fall in CPI inflation as a reason.

Economic data

NESDB (National Economic and Social Development Board) is forecasting the economy to grow by 3.5%-4.5% in FY15.

Deflationary risks have been dormant thus far in 2015.

Source: DBS Vickers

Outlook & what to look out for. Months of political unrest in Thailand during 1H14 led to domestic economic contraction, which saw the economy growing only 0.7% in FY14, compared to 2.3% in FY13. Nonetheless, things picked up in 2H14 and recovery is expected to continue in FY15. This is in line with consumer confidence index which continues to rise, from 68 during the beginning of political chaos in FY14 to 79 as of Feb 2015.

Thailand consumer confidence index

We believe the restoration of public spending on infrastructure projects and rebound in tourist arrivals would be the key drivers to support domestic economic growth and private consumption in FY15. Coupled with a more stable political situation, the World Bank has estimated the Thai economy to grow by 3.5% this year. But, the recovery would be slow, with lingering high household debt as a drag. Hence Thailand’s economic growth will still be a laggard in the South East Asia region. Note that agricultural areas in Thailand will have slower recovery than Bangkok and tourist cities due to weak crop prices. Thailand retail sales growth

Source: Thomson Reuters, Datastream

Source: Thomson Reuters, Datastream

Thailand private consumption (Food, F&B, leather) growth

Thailand private consumption (Food) growth

Source: Thomson Reuters, Datastream

Source: Thomson Reuters, Datastream

Page 9

Industry Focus ASEAN Consumer: Food for thought

Agricultural processors: For agricultural processors such as TVO and KSL, there has been no big excitement to drive the stocks just yet as global soybean and sugar prices are less likely to post a significant recovery in the near term. According to USDA, global soybean output in FY15F is projected to be at a record 315m tons (+11% y-o-y). Soybean prices in Feb continue to edge down slightly from FY14 to US$10/bushel, however there is limited downside risk for price to fall deeper as farmers’ cost of production is approximately at US$9/bushel. Meanwhile, world sugar prices are still pressured by high inventories and a record depreciation of Brazilian Real agains US Dollar. We should see a recovery in prices in 2H15 following smaller global surplus. Food processors: For food processors, particularly CPF, we expect to see lower meat prices (broiler and swine) in 1H15 due to higher supply in the market. Although raw material costs such as corn and soybean meal should be stable or slightly lower y-o-y, livestock segment margins will be under pressure. Nonetheless, meat prices are likely to pick up in 2H15, given the potential for South Korea to lift the ban on Thai fresh chicken imports which has been applied since 2004, but price rises are not expected to be significant. Nonetheless, this should lower domestic supply. On a positive note, we believe the domestic aquatic business should continue to improve and breakeven at gross margin level this year, based on CPF’s efforts to adjust farming techniques to improve shrimp survival rates, as reflected in the smaller losses recorded in the last few quarters. The outlook for shrimp is better as shrimp production in Thailand is expected to recover to 300,000 tons in 2015 (+30% y-o-y), based on estimates made by the Thai Shrimp Association (TSA). For TUF, current skipjack tuna raw material price remains low, which is positive for the Group.

Page 10

Tuna price stood at US$1,150/mt in Jan-Feb, 3% down from 4Q14 average price. With stable prices, TUF should be able to manage its raw material prices better and hence should be able to maintain stable gross margins. For restaurant operators, all reported negative SSSG in 1H14, which started to improve in 2H14. With improving consumption and a low base in FY14, marginal stronger growth with positive SSSG should be achieved. However, operators with restaurants in upcountry should record slower growth due to lower spending power, with the blame on the problematic rice pledging scheme and weak crop prices. In our view, hospitality players, namely MINT and CENTEL, who have both hotel and restaurant businesses, should outperform the pure restaurant operators, thanks to expected strong rebound in international arrivals. Stock pick: TUF (BUY, THB27.50). Despite TUF’s recent announcement on Preferential Public Offering (PPO) to fund the acquisition of Bumble Bee, we continue to be positive on the Group as value accretion from the deal should outweigh the dilution effect. FY15F earnings should be driven by organic growth and recent acquisitions. We expect revenue from TUF’s existing businesses to grow 11% in FY15F. On top of this, additional revenue from King Oscar, MerAlliance, and Bumble Bee should drive TUF’s revenue to Bt150bn in FY15F. Margins should also be healthy, boosted by its recent acquisitions and more product innovations. TUF is poised to become an even larger global seafood player with more high-margin products in its portfolio. Given promising longterm growth prospects and recent softer stock price, TUF is our top pick in the food space with a TP of Bt27.50, pegged to 19x FY15F PE (+1.0SD of its average 5-year historical PE).

Industry Focus ASEAN Consumer: Food for thought

Indonesia – Low oil price offset cuts in fuel subsidies

(Indonesia Research Team)

Latest developments Area of focus

Details/ Comments

Alcohol restriction

Government has passed a law that bans sales of alcoholic beverages in convenience stores nationwide. This law will take effect on 16 April. Impact to convenience store operators will be small as alcohol sales contribute to a small portion of total revenue. However, it will be more impactful to the alcoholic beverage producers as c.12% of alcohol sales came from convenience stores.

F&B industry

The Indonesian F&B Association has cut revenue growth forecast this year to 6% from 8%. First quarter revenue is expected to grow only 4-5% compared to 9% in 1Q2014. This cut is partly contributed by the low commodity exports, as well as a weakening Rupiah.

Source: DBS Vickers

Outlook & what to look out for. Subsidized fuel price has been adjusted down by 20% YTD following a decrease in global oil price. This should provide slight relief for consumer staples spending and this was reflected in a higher Consumer Confidence Index in January relative to December 2014. However, it is worth noting that Rupiah has depreciated against the USD by c.6% YTD. We believe the weak Rupiah has yet to be reflected in ASPs but has deterred spending on discretionary products as reflected in the negative SSSG by one of the retailers, Ace Hardware (ACES IJ). Furthermore, if the weak Rupiah persists, margins for companies in the consumer sector should see some pressure going forward as a fair portion of

COGS is imported – Indofood CBP uses imported wheat and skimmed milk powder as raw materials, while retailers like Ace Hardware and Mitra Adiperkasa (MAPI IJ) source most of their products in USD. Stock picks. We continue to prefer Indofood (INDF IJ) for exposure into Indofood CBP (ICBP IJ) which we believe is a good proxy to Indonesia’s rising consumption trend. At the current share price, the valuation gap between the two companies is at a historical high and investors are getting ICBP at a discount through INDF. Moreover, INDF is less impacted by Rupiah depreciation given its diverse business segments, and we also expect further share price upside when its divestment on China Minzhong materializes.

Indonesia consumer confidence index

Indonesia 3-month price expectations

Source: Thomson Reuters Datastream

Source: Thomson Reuters Datastream

Page 11

Industry Focus ASEAN Consumer: Food for thought

Indonesia food, beverages and tobacco retail sales

Indonesia 2-wheeler sales 800,000 

700,000 

600,000 

500,000 

400,000 

300,000  Jan‐13

Apr‐13

Jul‐13

Oct‐13

Jan‐14

Apr‐14

Indonesia 2W monthly  sales

Source: Thomson Reuters Datastream

Indonesia Retail Sales Index

Source: Thomson Reuters Datastream

Page 12

Source: Indonesia 2W association (AISI)

Jul‐14

Oct‐14

Jan‐15

Industry Focus ASEAN Consumer: Food for thought

Philippines – Buoyant outlook comes with lofty valuations

(Ghia YUSON)

Latest developments Area of focus Inflation

Details/ Comments Feb-2015 inflation at 2.5% (vs 2.4% in the previous month). Food prices, in particular rice, which is the biggest food component, are still easing. This should support benign inflation going forward.

Excise tax reform

Implementation from 2013 had increased ASPs of alcoholic drinks significantly. This negatively impacted sales especially beer, as demand looks to be more elastic. After a pause, the next round of excise tax increases for distilled spirits was implemented on 1 Jan 2015 (i.e. ad valorem tax per proof increases to 20% from 15%).

Source: First Metro Securities

Outlook & what to look out for. On account of the buoyant outlook on domestic consumption this year, Philippine consumer stocks within our coverage universe have outperformed the benchmark index by almost 400bps YTD. In addition, we see potential margin surprise in 1H15 on lower raw material prices for manufacturers. However, valuations remain lofty and the risk-to-reward is no longer attractive, which prompts us to be more selective. Earnings season underway: watch out for retailers. FY14 earnings reporting season is underway. Watch out for results from retailers (i.e. RRHI; PGOLD results were largely in line). Based on our channel checks, we believe there

could be potential for upside surprise in 4Q numbers, which may spillover to 1H15. Earnings look to be supported by more rationalized competition as well as robust demand on increased purchasing power due to lower inflation (brought about by lower oil prices). Stock picks. In the near term, we prefer grocery/general retailers over food and beverage manufacturers. At current price levels, retailers are trading at a 15% discount to manufacturers. Within the retailer space, we prefer PGOLD over RRHI. We believe positives are not yet priced in for the former; the latter has run up quite a bit YTD.

Philippines consumer confidence index

Philippines food retail price

Source: Thomson Reuters Datastream

Source: Thomson Reuters Datastream

Philippines beverages and tobacco retail price

Philippines annual disposable income 12.0% 10.0%

% YoY

8.0% 6.0% 4.0% 2.0% 0.0% 1991 Source: PSA

Source: Thomson Reuters Datastream

1996

2001

2006

2011

Source: Thomson Reuters Datastream

Page 13

Industry Focus ASEAN Consumer: Food for thought

Macro – Economic Charts Economic Growth: Commentary

Singapore GDP



Malaysia’s growth will likely be slower this year on cut backs in government spending and low oil prices.



We see downside risks for Singapore’s 2015 GDP forecast as growth outlook for Eurozone, China and Japan remain dicey.



The Thai economy is undergoing recovery, albeit at a slowerthan-expected pace. Domestic demand remains weak amid the on-going deleveraging among households



Expect GDP growth for Philippines to accelerate ahead of Presidential election next year



GDP growth for Indonesia is likely to recover to about 5.5%, on anticipated increase in fiscal spending and a modest recovery in investment, but a weak rupiah means some downside risks to our forecast

20

15

10

5

0 2010

GDP Growth (%) Singapore Malaysia Thailand Indonesia Philippines

2014 2.9 6.0 0.7 5.0 6.1

2015F 3.2 4.9 3.6 5.5 6.3

2016F 3.5 5.0 4.3 5.7 6.0

2011

2012

2013

Source: DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Malaysia GDP

Thailand GDP

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Indonesia GDP

Philippines GDP

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Page 14

2014

GDP AT MARKET PRICES : Singapore

Industry Focus ASEAN Consumer: Food for thought

Inflation: Commentary

Singapore



Lower oil prices, muted wage growth, a cooling property market, moderating healthcare costs (due to Pioneer Generation Package) will keep Singapore inflation low.



While the introduction of the GST in Malaysia will likely drive inflation higher, the effect is expected to be blunted by the GST offset package and low energy prices



Thailand’s CPI inflation is set to average below 1% this year while core inflation has also been trending down, suggesting that underlying demand has yet to pick up pace



For Philippines, lower crude oil price has led to deflation in the utilities and transport components of the CPI basket. Look for average CPI inflation to come in at 3.2% in 2015, well within the BSP official target of 2-4%.



Average CPI inflation in Indonesia is likely to ease to about 6% this year, but some upside risks persist given recent rice shortage and the weak rupiah

CPI Inflation (%) Singapore Malaysia Thailand Indonesia Philippines

2014 1.0 3.1 1.9 6.4 4.2

2015F 0.4 3.4 0.8 6.0 3.2

2016F 1.3 3.0 2.8 5.5 3.8

Source: DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Malaysia

Thailand

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Indonesia

Philippines

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Page 15

Industry Focus ASEAN Consumer: Food for thought

Forex: Commentary

USD/ SGD



The Monetary Authority of Singapore (MAS), on 28 Jan, eased the appreciation pace of the SGD nominal effective exchange rate (NEER) policy band. Our economics desk now expects the policy band to be re-centered lower in the upcoming April meeting.



We believe the ringgit is expected to remain under pressure due to deteriorating fiscal balance, declining current account surplus and Fed hike risks



We expect BoT to keep interest rates stable although there is risk of another 25bps rate cut to further boost underlying consumption.



Markets continue to price in Indonesia rupiah’s vulnerability to Fed rate hikes and capital outflows risk, even though BI remains on a tight policy bias.



Robust foreign remittances and record-high FDI will continue to provide the underlying support for the peso. Current account balance expected to be >3% of GDP this year.

Exchange Rates, eop Singapore Malaysia Thailand Indonesia Philippines

Current 1.38 3.71 32.70 13,178 44.80

2Q15F 1.38 3.67 33.00 13,250 45.20

3Q15F 1.39 3.69 33.20 13,460 45.30

Source: DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

USD/ MYR

USD/ THB

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

USD/ IDR

USD/ PHP

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Page 16

Industry Focus ASEAN Consumer: Food for thought

Input costs – Possible margin expansion on the cards Input costs generally remain favourable. Input costs are likely to be favourable for F&B companies as prices are below their near term peak or are trading at two year lows. Our input cost outlook for F&B companies is generally positive. Margins could also surprise as compression seen in 2014 might ease.

Oil prices have more than halved. Oil prices in particular have more than halved, from US$100/bbl to around US$50/bbl currently. We expect lower oil prices to provide relief for consumer companies to benefit from lower transportation/freight and utilities costs.

Sugar

Coffee

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Cocoa

Palm Oil 1400 1300 1200

US$/MT

1100 1000 900 800 700 600 2010

2011

2012

2013

2014

Palm Oil Crude MAL CIF Rdam US$/MT

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Milk

Rice - Thailand 700 650 600 550 500 450 400 2010

2011

2012

2013

2014

Rice, White 100% FOB Bangkok U$/MT

Source: Thomson Reuters Datastream, DBS Bank

Source: Thomson Reuters Datastream, DBS Bank

Page 17

Industry Focus ASEAN Consumer: Food for thought

Barley

WTI 120 110 100 90 80 70 60 50 40 2010

2011

2012

2013

Crude Oil WTI Cushing U$/BBL

Source: Thomson Reuters Datastream , DBS Bank

Source: Thomson Reuters Datastream , DBS Bank

PET

Aluminium

Source: Thomson Reuters Datastream , DBS Bank

Source: Thomson Reuters Datastream , DBS Bank

Tin

Source: Thomson Reuters Datastream , DBS Bank

Page 18

2014

Industry Focus ASEAN Consumer: Food for thought

Regional retailer peer comparison Company

Count ry

Sout h East A sia Ret ailers Dairy Farm Intl SGX CP ALL SET Kalbe F arma Big C Supercent Siam Makro Home Product Robinsons Retail Puregold Sumber Alfaria Matahari Putra Osim Internation PSC Ace Hardware ID Siam Gbl House Aeon Thana TH Sheng Siong Mitra Adiperkasa Parkson Holdings Hero Supermarket 7 Elev en Ramay ana Lestari Hour Glass Parkson Retail PADINI HOLDINGS Modern Internasi Midi Utama ID Courts Asia electronic city Challenger POWER ROOT F J Benjamin Epicentre

IDX SET SET SET PSE PSE IDX IDX SGX PSE IDX SET SET SGX IDX N/A IDX KLSE IDX SGX SGX KLSE IDX IDX SGX IDX SGX KLSE SGX SGX

M ark et Cap (US$m) 12,751 10,441

Px Last

PE (A ct )

PE (Y r 1)

PE(Y r 2)

P/BV (x)

P/Sales (x)

ROE (%)

Operat ing M argin (%)

Net M argin (%)

Div idend Y ield (%)

9.29 38.25

25.5x 33.8x

23.7x 25.9x

23.5x 24.3x

7.8x 11.2x

1.1x 1.0x

35% 42%

4.8% 2.1%

4.6% 2.8%

2.6% 2.1%

6,390 1,825 5,716 224 5,251 36.00 3,018 8.00 2,660 87.00 2,491 40.10 1,378 470 1,795 4,230 1,162 2.04 1,111 100 951 740 998 9.35 826 108.00 830 0.76 767 23.09 621 2.05 632 1,980 510 1.53 420 785 373 0.72 295 0.61 247 1.39 215 620 164 745 173 0.44 127 1,265 129 0.52 139 1.69 49 0.12 11 0.17 Regional av erage

40.8x 26.0x 35.4x 21.8x 32.1x 25.0x 33.3x 42.7x 14.6x 55.4x 22.0x 32.0x 10.5x 24.3x 39.0x 11.1x 190.3x N/A 14.4x 9x N/A 10.0x 45.4x N/A 8.7x N/A 36.3x 13.3x nm (9.2) 30.8x

35.4x 22.9x 28.4x 18.6x 28.2x 21.5x 29.6x 40.0x 14.9x N/A 23.4x 22.3x 9.3x 22.8x 47.9x 14.6x 104.7x N/A 14.5x 14.6x N/A 13.8x 53.8x N/A 12.6x N/A N/A 0.2x 11.9x N/A 26.7x

30.6x 22.1x 27.3x 16.9x 25.0x 18.1x 28.1x 38.1x 13.4x N/A 19.9x 15.0x 8.6x 21.7x 23.3x 14.2x 95.9x N/A 13.6x N/A N/A 10.8x 35.9x N/A 11.9x N/A N/A N/A 9.7x N/A 23.8x

7.8x 4.5x 13.5x 5.0x 2.8x 2.9x 6.3x 8.3x 3.2x 17.2x 5.7x 2.5x 2.2x 4.7x 3.3x 0.8x 1.5x N/A 1.7x 1.4 N/A 2.3x 2.4x N/A 0.8x N/A 2.7x 2.2x 0.7x 1.6 4.5x

4.3x 1.4x 1.2x 1.4x 1.3x 1.1x 0.4x 1.7x 2.2x 2.5x 2.8x 1.5x N/A 1.5x 0.7x 0.6x 0.6x N/A 0.9x 0.7x N/A 0.9x 2.0x N/A 0.3x N/A 0.5x 1.7x 0.2x 0.1 1.3x

23% 23% 52% 27% 10% 14% 27% 24% 23% 44% 36% 12% 26% 21% 21% 14% 1% 68% 15% 20% 19% 17% 6% 16% 5% 25% 29% 24% -16% -25% 21%

16.6% 4.4% 4.0% 10.1% 6.0% 7.6% 2.1% 4.6% 18.3% -7.3% 14.5% 9.3% N/A 7.4% 7.7% 0.9% -1.4% N/A 5.9% 9.2% N/A 9.4% 7.6% N/A 5.6% N/A 5.2% 15.0% -6.2% -2.9% 5.9%

12.2% 5.5% 3.4% 7.5% 4.6% 5.3% 1.3% 4.1% 14.8% 4.8% 13.1% 6.7% N/A 6.7% 3.4% 3.9% 0.3% N/A 6.5% 8.1% N/A 6.7% 3.9% N/A 2.1% N/A 4.2% 12.7% -6.0% -1.7% 5.2%

1.1% 1.1% 2.1% 1.6% 0.7% 0.8% 0.9% N/A 2.9% 0.4% 0.0% 1.3% 3.3% 3.9% 0.4% 0.0% N/A 0.0% 3.8% 2.7% 4.1% 6.0% 0.3% N/A 2.0% N/A 4.5% 5.3% 2.1% N/A 2.1%

Source: Thomson Reuters, DBS Bank, DBS Vickers, AllianceDBS, First Metro Securities

Page 19

Industry Focus ASEAN Consumer: Food for thought

Regional F&B peer comparison Company

Count ry

M ark et Cap (US$m)

Px Last

PE (A c t )

PE (Y r 1)

PE(Y r 2)

P/BV (x)

P/Sales (x )

ROE (%)

Operat ing M argin (%)

Net M argin (%)

Div idend Y ield (%)

Sout h East A sia F &B Thai Bev erage Univ ersal Robina Indofood CBP JFC Charoen Pok F ood Indofood Sukses Nestle MY

SGX PSE IDX PSE SET IDX KLSE

13,496 10,556 6,635 5,090 5,069 4,962 4,693

0.75 215.20 14,850 212.00 24.30 7,400 74.00

20.3x 40.8x 33.1x 42.4x 26.7x 16.2x 176.5x

18.2x 34.6x 28.1x 36.2x 17.3x 14.9x 30.3x

16.8x 29.6x 25.0x 30.1x 13.3x 12.3x 28.8x

4.0x 7.8x 5.6x 7.3x 1.5x 2.3x 22.3x

2.6x 4.1x 2.5x 2.2x 0.3x 0.9x 3.6x

23% 23% 20% 22% 8% 15% 88%

15.4% 15.6% 11.2% 7.6% 3.7% 11.8% 15.1%

14.1% 11.9% 9.0% 6.0% 1.9% 5.9% 11.5%

3.6% 1.9% 1.7% 0.9% 2.9% 3.1% 3.2%

Emperador Thai Unin F rozen Petra Foods May ora Indah MK Restaurant QL RESOURCES Guinness Anchor Carlsberg Brew

PSE SET SGX IDX SET KLSE KLSE KLSE

4,153 2,891 1,673 1,908 1,679 1,254 1,193 1,123

11.40 19.72 3.62 28,250 60.00 3.76 14.60 13.36

30.3x 18.7x 33.3x 47.4x 26.9x 28.9x 20.7x 65.5x

26.6x 14.0x 29.4x 57.6x 23.5x 23.2x 19.8x 18.9x

23.5x 10.9x 24.6x 27.7x 20.3x 21.3x 19.1x 18.6x

3.5x 2.1x 5.2x 6.5x 4.1x 3.3x 12.5x 13.1x

3.8x 0.6x 3.1x 1.8x 3.3x 2.0x 2.6x 2.5x

13% 15% 18% 40% 18% 15% 74% 94%

21.0% 6.6% 15.3% 10.9% 17.6% 11.4% 16.6% 16.1%

14.3% 4.5% 10.6% 8.7% 14.1% 8.5% 12.3% 12.9%

1.9% 3.6% 2.2% N/A 3.4% 1.5% 4.4% 5.3%

Super Group Sg MSM Centry Pac F ood

SGX KLSE PSE

1,179 983 936

1.49 5.13 18.76

27.9x 14.1x 26.1x

24.1x 12.5x 23.6x

22.3x 12.4x 20.9x

3.1x 1.8x 4.1x

2.8x 1.7x 1.7x

13% 14% 19%

14.0% 17.5% 10.6%

11.5% 13.4% 7.2%

2.1% 5.2% 1.2%

Thai President Dutch Lady Milk

SET KLSE

867 822

160.00 47.50

62.9x 28.1x

N/A 24.9x

N/A 24.1x

2.3x 19.4x

2.4x 4.1x

17% 86%

13.7% 14.1%

14.4% 11.0%

2.4% 2.1%

President Bakery Thai V ege Oil Nippon Indosari Del Monte Oishi Group Khon Kaen Sugar BreadTalk Group President Rice

SET SET IDX SGX SET SET SGX SET

574 536 446 459 433 256 278 209

42.50 21.90 1,165 0.32 77.00 5.00 1.35 46.25

18.2x 10.5x 29.5x nm 26.2x 10.5x 100.4x 12.4x

N/A 12.1x 31.3x nm 25.0x 14.2x 26.3x N/A

N/A 11.7x 22.2x 8.5x 23.5x 12.9x 25.0x N/A

4.1x 2.5x 6.5x 1.3x 4.3x 1.4x 3.8x 2.1x

2.8x 0.7x 3.2x 0.2x 1.2x 1.1x 0.7x 4.7x

26% 28% 29% (16%) N/A 11% 23% N/A

16.1% 7.7% 13.9% 2.2% 4.6% 12.0% 1.3% 7.9%

15.2% 6.5% 10.5% (1.9%) 3.7% 7.9% 2.1% 32.1%

2.8% 8.0% 0.3% 0.0% 1.2% 2.8% 1.1% 3.5%

Oldtown

KLSE

209 1.73 Regional av erage

16.2x 34.6x

16.7x 22.8x

14.4x 20.0x

2.3x 5.5x

2.1x 2.3x

14% 28%

16.7% 12.0%

12.3% 10.1%

3.7% 2.7%

Source: Thomson Reuters, DBS Bank, DBS Vickers, AllianceDBS, First Metro Securities

Page 20

Industry Focus ASEAN Consumer: Food for thought

DBS Bank Ltd 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 GENERAL DISCLOSURE/DISCLAIMER BY FIRST METRO SEC All information contained herein is obtained by First Metro Securities from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, the information is provided “as is” without warranty of any kind and First Metro Securities, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose of any such information. Under no circumstances shall First Metro Securities or its directors, officers, analysts, and other duly authorized representatives (“Affiliated Persons”) ,or its Parent Company and the latter’s Affiliated Persons have any liability to any person or entity for any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of First Metro Securities. The information contained herein is, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell, or hold any securities. This document, and any opinion contained herein, must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make his/her own study and evaluation of each security and of each issuer that it may consider purchasing, selling, or holding. ANALYST CERTIFICATION BY FIRST METRO SEC The research analyst 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 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 this report. As of the date the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests of more than 1% in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions). GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) 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 DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. 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. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.

Page 21

Industry Focus ASEAN Consumer: Food for thought

ANALYST CERTIFICATION The research analyst 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 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 this report. As of the date the report is published, the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Jan 2015 except Indofood Sukses, Thai Beverage Public Company, Charoen Pokphand Foods, Indofood CBP Sukses Makmur Tbk. 2.

DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may beneficially own a total of 1% of any class of common equity securities of the company as of 31 Jan 2015

3.

Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates have received compensation, within the past 12 months, and within the next 3 months may have receive or intends to seek compensation for investment banking services from of the Indofood Sukses. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager 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.

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. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which 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 and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, 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 is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Indonesia

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

Malaysia

This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR") (formerly known as HwangDBS Vickers Research Sdn Bhd). 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.

Singapore

Wong Ming Tek, Executive Director, ADBSR 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. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

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Industry Focus ASEAN Consumer: Food for thought

Dubai

United States

Other jurisdictions

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) rd having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. 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. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Bank Ltd. 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888, Company Regn. No. 196800306E

Page 23