Regional Market Focus

ASEAN Small Mid-Caps Radar Refer to important disclosures at the end of this report

DBS Group Research . Equity

Matrix Concepts Holdings (RM2.31, MCH MK) 



Matrix is predominantly a Negeri Sembilan-based township developer. The Group focuses on affordable homes priced at below RM500k/unit and has been able to secure encouraging sales, despite the cautious sentiment in the sector. Matrix’s profitability is impressive with net margins exceeding 20%, high among Malaysia-listed developers. Based on consensus estimates, Matrix is currently trading at an attractive valuation of 6x FY15 EPS and offering 6% yield.

Zhongmin Baihui Retail Group (S$1.78, ZBR SP) 





STI : KLCI: JCI:

2871.47 1639.63 4390.37

Analysts WONG Ming Tek +603 2604 3970 [email protected] Paul YONG, CFA +65 6682 3712 [email protected] Maynard Priajaya ARIF +6221 3003 4930 [email protected]

Backed by 17 years of strong retail experience, Zhongmin Baihui is a retailer in the Fujian province in the People’s Republic of China. The Group currently operates 12 department stores.

QUAH He Wei, CFA; +603 2604 3966 [email protected]

The Group has been expanding its gross floor area (GFA) since 2010. Going forward, the Group plans to expand GFA c. 66% to 2.8m sq. ft between 2014 and 2018. This would involve new stores in Putian, Quanzhou, Xiamen and Zhangzhou.

STOCKS (Sorted by market capitalization)

Cheung Woh Technologies (S$0.21, CWM SP) 

15 September 2015

Cheung Woh is a Hard Disk Drive (HDD) component manufacturer on a turnaround track. From a loss of S$1.5m in FY13, the Group registered a core net profit of S$12.6m in FY15 - driven by strong demand from a new key HDD customer. The Group has at least one new HDD component pending introduction to the market in 2016 - when its key client officially launches its new product. At 5x earnings and dividend yield of 7%, valuations are attractive if the group can sustain its earnings.

PT Panorama Sentrawisata (Rp 429, PANR ID) 

PANR is the largest integrated tourism operator in Indonesia, with 6.6% market share of the retail travel sector. PANR is building up its hospitality division. Going forward, the Group intends to build hotels in Indonesia under the Radisson and Park Inn by Radisson brand.



PANR aims to achieve 15-25% growth in 2015 as they leverage on the government's focus on expanding the tourism industry. The government is targeting 12mn inbound tourists in 2015, a 28% increase from 2014. Based on consensus estimates, PANR is trading at an attractive valuation of 9-10x FY15 EPS.

www.dbsvickers.com ED: JS / sa: YM

Singapore Research Team

Price

Mkt Cap 2013A

2014A 2013A

2014A

LCL

US$m

PE (X)

PE (X)

PB (x)

PB (x)

Matrix Concepts

RM2.31

295

8.4

6.9

2.3

1.9

Zhongmin Baihui Retail Group

S$1.78

247

171.5

53.0

18.7

16.0

Cheung Woh Tech PT Panorama

S$0.21 Rp 429

45 36

60.4 13.1

5.0 11.3

0.7 2.2

0.6 1.9

Source: DBS Bank, AllianceDBS, DBS Vickers

Market Focus Small Mid Caps Radar

Explorations Matrix Concepts Holdings (RM2.31, MCH MK) Matrix is predominantly a Negeri Sembilan-based township developer which has completed projects worth RM3.8bn GDV on ~2,700 acres of land. It is currently developing two flagship projects - Bandar Sri Sendayan in Seremban, Negeri Sembilan (RM6.8bn GDV), and Taman Seri Impian in Kluang, Johor (RM1.4bn GDV).

quick construction and completion of industrial property sales before GST implementation.  Since its IPO in May13, Matrix has rewarded its shareholders with two rounds of bonus issues in view of the strong financial performance. In addition, there is a dividend policy of minimum 40% payout. Meanwhile, its balance sheet remains solid with a mere 5% net gearing as at Jun15.  Based on consensus estimates, Matrix is currently trading at an attractive valuation of 6x FY15 EPS and offering 6% yield.

 Matrix has been enjoying exponential growth over the past few years because of overwhelming demand for its affordable At A Glance Issued Capital (m shrs) landed properties in Bandar Sri Sendayan (BSS). This 2,350 acre township is worth RM6.8bn GDV. The thriving township, Market Cap (RMm/US$m) Major Shareholders (%) estimated to last the Group until 2022, has been able to Dato’ Lee Tian Hock leverage on high price differential between KL and BSS Free Float (%) despite good connectivity between the two areas. Also, the Avg Daily Vol (‘000 shrs) Sendayan Tech Valley (STV) within BSS has attracted foreign players to invest in the industrial cluster, resulting in 463 acres Forecasts and Valuation of industrial land sales out of a total of 685 acres.  There were RM540m unbilled sales as at Jun15; this will provide strong earnings visibility for the next two years. Matrix continues to grow from strength to strength as it continues to focus on affordable homes priced at below RM500k/unit. Nevertheless, its profitability remains impressive with net margins consistently exceeding 20%, which is rare among listed property developers in Malaysia. Matrix’s undeveloped land bank is estimated at 2,350 acres, carrying RM9bn GDV potential which will underpin long-term earnings visibility.

FY Dec (RM m) Turnover EBITDA Pre-tax Profit Net Profit EPS (S cts) EPS Gth (%) Net DPS (S cts) BV Per Share (S cts) PE (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROA (%) ROE (%)

 Take-up for Matrix’s projects remains encouraging despite the cautious sentiment. It secured RM630m property sales in FY14, and is on track to meet its RM700m sales target for FY15 (RM367m in 1H15). Matrix may launch its third flagship *IPO on 28 May 2013 development, Kota Gadong Perdana in Negeri Sembilan (next MYR to BSS) spanning 295 acres and worth RM900m GDV, in 1Q16. The project will boast more than 3,000 units of 3.00 affordable homes priced below RM400k/unit.

550 1,271/ 295 17.7 54.9 809

2011 624.3 108.9 106.3 69.4 12.6 238.3 n.a n.a 18.3 n.a n.a n.a n.a n.a n.a n.a

2012 456.1 146.1 142.8 103.5 18.8 49.09 n.a n.a 12.3 n.a n.a n.a n.a n.a n.a n.a

2013 574.0 205.4 205.1 151.6 27.5 46.46 17.4 1.0 8.4 (0.1) 4.8 8.9 2.3 net cash 17.3 28.6

2014 598.8 247.1 244.6 182.2 33.1 20.24 15.2 1.2 6.9 0.1 4.9 6.6 1.8 net cash 17.6 27.5

Relative Index 250

200

2.50

 Matrix continues to actively scout for strategic land bank in Negeri Sembilan and the Klang Valley. It acquired a 1.1-acre land in KL and a 5.8-acre land in Puchong in Aug 2013 and Apr 2015, respectively, as a strategic move to expand its footprint beyond Negeri Sembilan to secure future earnings.  It had registered 32% earnings CAGR over the past three years, and prospects remain positive as its flagship developments continue to gain traction. FY15 is likely to be a record year for Matrix, thanks to strong 1H15 earnings (+79% y-o-y) driven by accelerated recognition following

2.00

150

1.50

100

1.00 50

0.50

0

0.00 2013

2014 Matrix (LHS)

2015

Relative KLCI INDEX (RHS)

Source: Bloomberg Finance L,P, AllianceDBS Analyst Quah He Wei, CFA; +603 2604 3966 [email protected]

Page 2

Market Focus Small Mid Caps Radar

 Under the BSS master plan, STV complements the township with the offering of a eco-friendly techno-entrepreneur industrial park. Currently, STV still has ~140 acres of readyfor-sale industrial plots valued at RM276m. Industrial land ASP has surged from RM12psf in 2010 when it was first launched, to RM45psf currently, implying strong demand for the STV land. Matrix had also acquired a 164-acre industrial land in Labu, Negeri Sembilan for RM71m (RM10psf) in Sep 2014 to replenish its industrial land bank.  FY15 launch pipeline remains healthy at RM666m despite deferred launches for certain projects because of the softer market condition. Nevertheless, Matrix’s distinct advantage of low land cost will be an unrivalled competitive edge – it can offer competitive product pricing without compromising on profitability. For instance, the BSS land cost is only RM3psf, which explains the high margins fetched by Matrix.

% 60 50 40 30 20 10

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

0

2Q13

 Matrix Global Schools at BSS was opened in Sep 2014. Student enrolment has already hit 450 as at June. The Group is targeting 800 students by end-2015, which is likely to be achieved. The 20-acre campus comprises Matrix Private School, Matrix International School and Matrix International Pre-school, catering to the differing needs of the BSS community. Meanwhile, BSS’ lifestyle facilities - the D’Tempat Country Club spanning six acres of land - cater to the sporting and recreational needs of residents. Free membership is also offered to BSS property purchasers as an incentive.

Consistently high pretax margin

1Q13

 BSS will remain Matrix’s key earnings driver over the next few years. There are 1k acres of undeveloped landbank there with RM3.8bn GDV. The maturing township continues to be popular because of attractive pricing, coupled with value-added features, including landscaping and gated and guarded residential precincts. Demand for BSS properties could also be boosted by the relocation of the academia and training base for the Royal Malaysian Air Force to BSS from the existing base in Sungai Besi, KL, where it occupies 750 acres.

Source: AllianceDBS, company

Resilient property sales for landed properties RMm 250 200 150 100 50 0 1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Source: AllianceDBS, company

Strong unbilled sales to underpin earnings visibility RMm 600 500 400 300 200 100 0 1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Source: AllianceDBS, company

Page 3

Market Focus Small Mid Caps Radar

Explorations Zhongmin Baihui Retail Group (S$1.775, ZBR SP) Listed on the Catalist board on 20th January 2011 and subsequently transferred to the Main Board in 2013, Zhongmin Baihui is principally involved in the ownership and management of department stores in the People’s Republic of China (PRC), under the “中闽百汇” brand-name. It may appear expensive at 22x trailing 12m FY15E EPS, but with gross floor area (GFA) of owned stores expected to grow c. 66% to 2.8m sq. ft between 2014 and 2018, current valuations would be less demanding if the group is able to execute its expansion plans successfully.  Backed by 17 years of strong retail experience, Zhongmin Baihui is a reputed retailer with a dominant presence across the Fujian province in the PRC. Majority of the 12 department stores operated by the company as at 31 Dec 2014 (of which 8 were self-owned and 4 were managed) are located within the province, with the exception of its Nanjing store.  The Group carries and offers a wide variety of merchandise, lifestyle products and customer-oriented services in its stores, which caters to the middle to high income consumer bracket (GNI/capita of US$1,045 and above, according to World Bank). With China’s middle class population forecasted to grow from 80m in 2010 to 208m in 2020, Zhongmin Baihui is likely to benefit as this population subset’s disposable income and willingness to spend rises.  Zhongmin Baihui has 4 key sources of revenue from its selfowned stores: (1) Direct Sales - The Group sources and sells directly purchased merchandise, mostly for their supermarket and electrical appliance sections. (2) Commissions - Under this segment, concessionaires are invited to enter into agreements of 1-year with the Group, which grants them the ability to set up their own sales counters. In return, Zhongmin Baihui will receive commission at a pre-specified percentage (typically between 18% and 35%) of their sales revenue. “Penalties” may also be levied if they are unable to meet sales targets over a period of time. (3) Rental - The Group sublets designated areas within its department store in exchange for a fixed rental rate, each for durations of 1 to 5 years. (4) Managed Rental - Similar to rental income, managed rental income contains an additional management fee component for the provision of cash collection, payroll and staff management services. It is typically negotiated annually.

(2) Advertising and Promotion Services - Fees are charged for activities held and advertisements displayed at the respective department stores. At A Glance Issued Capital (m shrs) Market Cap (S$m/US$m) Major Shareholders (%) Swee Keng Lee Kaitong Chen Caiye Su Free Float (%) Avg Daily Vol (m shrs)

196 348/247 24.6 23.9 12.5 23.3 0.2

Forecasts and Valuation FY Feb (S$ m) Turnover EBITDA Pre-tax Profit Net Profit EPS (S cts) EPS Gth (%) Net DPS (S cts) BV Per Share (S cts) PE (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROA (%) ROE (%)

S$ 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Jan-13

2011 42.3 5.2 4.8 3.2 1.61 (321.2) 7.1 110.5 0.4 47.6 24.9 9.0 22.6

2012 56.6 5.1 4.6 2.3 1.15 (28.4) 7.9 154.3 0.5 56.6 22.6 4.4 14.6

2013 178.9 6.9 5.8 2.0 1.03 (10.0) 0.01 9.5 171.5 0.1 44.1 0.6 18.7 2.1 10.9

2014 181.5 12.2 10.4 6.6 3.35 223.8 0.02 11.1 53.0 0.1 25.2 1.4 16.0 6.1 30.2

Relative Index 150 125 100 75

Jul-13

Jan-14

Jul-14

Jan-15

50 Jul-15

Zhongmin Baihui Retail Group L (LHS) Relative STI Index (RHS)

Source: Bloomberg Finance L.P., DBS Bank Paul YONG, CFA +65 6682 3712 [email protected]

 The Group also receives other income for the provision of: (1) Management Services - Annual fee of c. RMB 1.6m from each store it manages.

Page 4

Market Focus Small Mid Caps Radar

 The Nanjing Nanzhan store was an opportunistic play but as it is located in a new area where infrastructure is still incomplete and relatively dispersed, Zhongmin Baihui has yet to tap into the store’s potential. Even after 5 years of operating rent-free, this venture is still loss-making – about RMB $20m last year, but the company expects to break even in about 2 years time as the area build-up and traffic flow improves. Meanwhile, it has partnered with e-commerce firm, Beijing 19e E-commerce Co. Ltd, to create a platform allowing customers to place online orders for supermarket products for delivery to locations near the Nanjing store, which should improve profitability and cash flow.  Zhongmin Baihui will gradually take ownership of 3 of its 4 managed stores (combined GFA of c. 0.31m sq. ft.), and has 4 new stores in Putian, Quanzhou, Xiamen and Zhangzhou (combined GFA of c. 0.85m sq. ft.) slated to open over the course of the next 2-3 years. The strong pipeline of GFA enhancements and improvements to public transport infrastructure surrounding some of its stores should further drive the Group’s revenue growth over the medium term.  The Group operates an asset-light model by taking on longterm leases (averaging 12 years) for its self-owned stores. As this strategy is less capital-intensive, it enhances Zhongmin Baihui’s ability to take on good investment opportunities should it be able to uncover attractive new locations for the expansion of its retail operations.

 1H15 earnings grew 150% y-oy to RMB 35.8m, which translates to a trailing 12m FY15E PE of c. 22x. However, If Zhongmin Baihui is able to turn around performance at its Nanjing store and grow GFA as planned, valuations could become more palatable. Geographic Footprint: Fujian Province Sanming City

Putian City Quanzhou City Legend Opening 2015-2017

Zhangzhou City

Managed

Xiamen City

Owned

Source: Company, DBS Bank

Key Revenue Segments in FY14 (RMB $m) Rental Income, 60.5

 Post-listing in 2011, Zhongmin Baihui has demonstrated the viability of its business, as it delivered strong growth in its operating cash flows from 2010 to 2014. Cash flows were positive each year despite the ongoing acquisition of managed stores and the opening of new stores. FCF/share of S$0.115 (RMB$0.56) in 2014 also provides support for its ability to fund future expansions internally.

Managed Rental, 42.5

Commission from Concessionaire Sales, 133.9 Direct Sales, 645.5

Source: Company, DBS Bank

GFA of Owned Stores: Expected to Grow 66% by FY18 3

2. 5

GFA (m sq. ft.)

 Key risks: (1) Geographical Concentration – The Group’s performance is largely dependent on the economic health and growth of Fujian Province, where 7 out of 8 of Zhongmin Baihui’s selfowned stores operate. Unfavourable changes to local government policies, if any, may then offset the tax benefits arising from geographical concentration. (2) Competition – Aggressive expansion by competitors with strong brands (such as Wal-mart) into Quanzhou could threaten the Group’s dominance by stealing foot traffic and profitable concessionaires away from the Group’s stores. (3) Rental Costs – Under Zhongmin Baihui’s asset-light model, it rents most of its mall properties. Inability to secure competitive rates at lease expiry could translate to lower margins for the Group.

Fuzhou City

2

1. 5

1

0. 5

0 2009 2010 2011 2012 2013 2014 2015F2016F2017F2018F

Source: Company, DBS Bank

Page 5

Market Focus Small Mid Caps Radar

Explorations Cheung Woh Technologies (S$0.210, CWM SP) Cheung Woh is a HDD (Hard Disk Drive) component manufacturer. The Group is a main supplier to leading global HDD manufacturers - Seagate Technology and Western Digital Corp. At 5x FYE Feb 2015 earnings and dividend yield of 7%, valuations are attractive if the group can sustain its earnings.  Cheung Woh is an established manufacturer, backed by more than 40 years of expertise in the demanding HDD space. Through its manufacturing facilities in Johor and Penang, Malaysia and Zhuhai, China, the Group operates two main business segments: (1) HDD Components business accounts for 80% of Group revenue, while (2) Precision Metal Stamping Components business accounts for about 20%.  Despite the challenging operating environment, Cheung Woh was able to turnaround from a loss of S$1.5m in FY13, to a small profit of S$1.1m in FY14, before registering core net profit of S$12.6m in FY15 - driven by strong demand from a new key HDD customer. This was supported by a 40% increase in capacity between FY13-15, and production lines operating at full capacity.  To maximize output and efficiency, the Group aims to keep utilization rates between 90-95%. However, Cheung Woh will invest S$6m across FY16 and FY17 to fund the construction of a new building, which would allow for future expansion. Given that it has good visibility on its orders through its proprietary 16-month rolling forecast, it can scale up its operations quickly to mop up excess demand - aided by its ability to add on new capacity in as little as 3 months, after construction works on the new building are complete.  Lower-capacity HDDs (2½” drives) that are used in the consumer segment (i.e. laptops, tablets, etc) are increasingly substituted by SSDs as the latter is not only lighter (on average, HDDs weigh 9-10x that of flash-based SSDs), but also quieter and faster. However, the role of HDDs in the technology storage industry are not likely to be eliminated as high-capacity HDDs – as opposed to high-capacity SSDs, are the mainstay in the enterprise segment. Only costing approximately 5% that of high-capacity SSDs, these highcapacity HDDs are considered the most cost effective on a dollar/gigabyte basis to end-users (i.e. banks, data centres, etc) and are in high demand in the enterprise segment (i.e. data centres).

unit capacity (memory size/HDD unit) rather than output capacity, which should drive ASPs upward. Given its technical prowess, Cheong Woh is well-positioned to capitalize on the long-term earnings potential of the HDD industry, as it continues to innovate alongside HDD customers.  At present, Cheong Woh has at least one new HDD component pending introduction to the market in CY16 when its key HDD client officially launches its new HDD product. At A Glance Issued Capital (m shrs) Market Cap (S$m/US$m) Major Shareholders (%) Nexsuss Holdings Pte Hang Ngok Lee Kung Ying Law Free Float (%) Avg Daily Vol (m shrs)

302 60/45 62.7 3.5 3.5 23.5 0.1

Forecasts and Valuation FY Feb (S$ m) Turnover EBITDA Pre-tax Profit Net Profit EPS (S cts) EPS Gth (%) Net DPS (S cts) BV Per Share (S cts) PE (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROA (%) ROE (%)

2012 132.0 15.8 6.5 2.4 0.80 (86.2) 0.00 30.8 26.4 (0.0) 4.0 1.9 0.6 0.3 1.98 2.54

2013 60.7 7.1 (0.2) (1.9) (0.63) (178.8) 0.00 29.2 (33.5) (0.6) 6.1 0.3 0.7 0.2 (1.79) (2.15)

2014 59.3 8.0 1.2 1.1 0.35 (155.4) 0.00 30.0 60.4 0.4 4.6 0.3 0.7 0.2 0.99 1.15

2015 91.9 18.1 12.9 12.6 4.18 1103.7 0.02 35.3 5.0 0.0 2.9 7.3 0.6 0.2 9.53 11.83

Relative Index 150

S$ 0.30

125

0.20

100 0.10

0.00 Jan-13

75 50 Jul-13

Jan-14

Jul-14

Jan-15

Cheung Woh Technologies Ltd (LHS) Relative STI Index (RHS)

 Although the demand for high-capacity HDDs (in terms of volume) is likely to remain flat between 200-300m units p.a. over the next decade, the technology roadmap for HDDs suggest that HDD manufacturers will focus on growing per

Source: Bloomberg Finance L.P., DBS Bank Analyst: Paul YONG, CFA +65 6682 3712 [email protected] Singapore Research Team

Page 6

Market Focus Small Mid Caps Radar

 Today, most of the Air Combs produced by Cheung Woh are for use at data centres, with only 20% of total Air Comb revenues contributed from the 2½“ HDD division. Going forward, in terms of volume, both the Air Comb and VCM businesses are likely to be sustained at current levels – consistent with the outlook for HDDs. The price ratio of VCM: Air Comb is also expected to remain unchanged at 1:5 as price declines are highly unlikely, given the high barriers to entry.  Unlike the HDD components business, the precision stamping components business is not a niche segment for Cheung Woh and is challenged in terms of growth. The company’s pricing power is also weaker for this segment due to the broader customer base. In order for this segment to grow meaningfully, Cheong Woh has to identify alternative avenues of expansion within this space (e.g. develop frame and bracket components for LED light source customers). Meanwhile, Cheung Woh’s advanced technical know-how in the precision stamping business allows it to pass on cost advantages to its customers. Resultantly, this segmental profit should continue to serve as a relatively stable and consistent source of dollar earnings for the Group.  Cheung Woh strengthened its net profit margins at both the HDD business level (from -12.9% in FY13 to 13.2% in FY15) and Group level (from -0.3% in FY13 to 13.7% in FY15). Net profit margins for the precision metal stamping business however, fell y-o-y to 15.3% in FY15 due to the weakening of the RM against USD, in which majority of the segment’s intercompany payables are recorded.

Core HDD Component Products

Source: Company

Revenue Breakdown: HDD Business Leads Growth 100.00 90.00

17.60

80.00 70.00 60.00 50.00

4.34 14.40

16.20

40.00

74.30

30.00 20.00

42.00

43.10

FY13

FY14

10.00 HDD Components

FY15

Precision Metal Stamping Components

Re-rolling Steel

Source: Company, DBS Bank

Net Profit Margin : Turnaround in FY15 35.0%

30.0%

30.0%

24.7%

25.0% 20.0%

15.3%

15.0%

13.7% 13.2%

10.0% 5.0% 0.0% -5.0%

 Key risks: (1) Sustainability and growth potential of Cheung Woh’s earnings is largely pegged to its ability to innovate its HDD component products successfully, in accordance to the HDD industry’s technological roadmap. (2) Upside to the precision metal stamping components business, if any, is uncertain in the near-term and will be dependent on the Group’s ability to secure clients from other sectors. (3) As the majority of Cheung Woh’s earnings are exposed to the HDD sector, it will be impacted by demand weakness in the segment.

Air Comb

VCM Plate

S $ M illions

 Cheung Woh did well in anticipating the growing preference for alternative forms of storage media among retail consumers, as it began to downplay the production of VCM (Voice Coil Motor) plates and Air Combs used in 2½” HDDs from about 4-5 years ago, in favour of the higher-performing 3½“ and ESG (Enterprise Strategy Group) variety.

-0.3% FY13

1.7% FY14

FY15

-10.0% -15.0% -20.0%

-13.9% HDD

-12.1% Metal Stamping

Overall

Source: Company, DBS Bank

 Valuations are undemanding at 5x FY15 EPS and 0.6x FY15 book, against an attractive dividend yield of 7%. If Cheung Woh is able to maintain its earnings and dividends similar to FYE Feb ’15 levels, valuations does seem attractive.

Page 7

Market Focus Small Mid Caps Radar

Explorations PT Panorama Sentrawisata Tbk(Rp 429,PANR IJ) PANR is the largest integrated tourism operator in Indonesia, with 6.6% market share of the retail travel sector. PANR operates two major business divisions: Travel & Leisure and Inbound. The stock is currently trading at 9-10x FY15 EPS. PANR is targeting to achieve 15-25% growth in 2015 as they leverage on the government's focus on expanding the tourism industry. 

PANR was established in 1995 and has been listed since 2001. They focus on the tour & travel business, which contributes c. 86% of consolidated revenue. Other divisions, such as transportation, media, and hospitality, are integrated with the tours & travel business. Their operation is supported by 100 offices across Indonesia and regional offices in Singapore, Malaysia and China.



PANR expects to achieve 15-25% growth in 2015 as they leverage on the government's focus on expanding the tourism industry through infrastructure development, aggressive branding and advertisements, and waiving the visit visa requirement for 45 countries. The government is targeting 12mn inbound tourists in 2015, a 28% increase from 2014.



PANR's business encompasses three sectors: tourism, transportation and hospitality. The inbound tourism caters foreign tourist and travellers while the travel management division services domestic corporate, retail and consolidator markets with products ranging from ticketing, tours and handling of travel documents. The company has partnerships with Carlson Wagonlits and Chan Brothers Travel.



PANR's transportation business offers general transportation, tourism transportation, executive bus, car rental and taxis mainly under White Horse brand name. It also has two global partners: Gray Line and Europe Car.



PANR is also building up its hospitality division. They acquired “The 101” hotel in Jogjakarta last April. And through PT Carlson-Panorama Hospitality, they plan to build 20 hotels in Indonesia under the Radisson and Park Inn by Radisson brand before 2020. They have acquired PT Gajah Mas Mandiri to support the expansion in Java and Bali.



At A Glance Issued Capital (m shrs) Market Cap (Rpbn/US$m) Major Shareholders (%) Panorama Tirta Anugerah DP Konperensi Wali Gereja Free Float (%) Avg Daily Vol (‘000)

1,200 514 / 36 64.3 15.0 17.0 3,000

Forecasts and Valuation FY Dec (Rp bn) Turnover EBITDA Pre-tax Profit Net Profit EPS (S cts) EPS Gth (%) Net DPS (S cts) BV Per Share (S cts) PE (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROA (%) ROE (%)

2011 2,010 944 37 15 12.7 nm 3.8 149.0 33.5 0.0 4.8 2.4 2.9 1.9 2.0 5.9

2012 2,554 134 49 25 21.1 65.62 6.3 165.7 20.2 (0.0) 4.7 3.2 2.6 2.5 2.5 8.7

2013 1,694 183 70 39 32.7 54.7 8.2 193.1 13.1 (0.0) 5.2 2.1 2.2 2.5 3.1 10.7

Source: Bloomberg Finance L.P., DBS Vickers Analyst: Maynard Priajaya ARIF +6221 3003 4930 [email protected]

Key risks for Indonesia’s tourism industry include natural disaster, social and political instability, slow economic growth, and slow execution of infrastructure development, which would affect accessibility. In addition, PANR also faces currency risks as Indonesian government requires all domestic transaction in Rupiah.

Page 8

2014 1,956 219 81 46 37.9 15.95 222.4 11.3 (0.0) 5.6 1.9 2.7 2.7 10.2

Market Focus Small Mid Caps Radar







The Travel & Leisure division is the largest revenue contributor (69% of consolidated revenue). It offers domestic and outbound integrated travel management for retail and corporate clients. The division has been recording double-digit growth, since travel became affordable. This is reflected by the number of outbound tourists (7% CAGR over 5-years to 8.2mn in 2014). And now, given the increasing online retail travel sales (+62% y-o-y), coupled with rising internet penetration in Indonesia (+7% y-o-y to 35%), PANR wants to monetise this opportunity by developing IT and E-commerce infrastructure at all divisions, focus on Travel & Leisure. Online sales currently contribute only 1% of PANR’s total tours & travel revenue, the lowest compared with Smailing, Bayu and Vaya. Agoda leads Indonesia’s online retail travel sector with 22% market share, while PANR is in third place with 3.5%. PANR's long term growth opportunities should be driven by the government's effort to boost tourism sector in Indonesia. Travel and tourism contribution to GDP in 2014 was just 9.3% according to World Travel & Tourism Council, well below Thailand, Malaysia, Phillipines and Cambodia. However, some investments need to be made especially in the infrastructure such as airports, ports and electricity in order to open up many other destinations besides Bali.

Panorama Sentrawisata: Revenue Breakdown 2500 2000 1500 1000 500 0 2010A

2011A

2012A

2013A

2014A

Travel & Leisure

Tours & Travel - Inbound

Transportation Services

Others

Media (MICE & Publication) Service

Source: Company, DBS Vickers

Panorama Sentrawisata: Margin Trend 25% 20% 15% 10% 5% 0% 2010A Gross Margin %

2011A

2012A

2013A

Operating Margin %

2014A

Net Income Margin %

Source: Company, DBS Vickers

Panorama Sentrawisata: Cost Breakdown Depreciation 12% Rental 6%

Electricity & telephone 4% Professional fees 4%

Salaries and employee benefits 52% Others 10%

Office supplies 4% Repairs and maintenance 3% Long term employee benefits 3% Travel 2%

Source: Company, DBS Vickers

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Market Focus Small Mid Caps Radar

DBS Bank 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 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. 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 Aug 2015. 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 mentioned as of 31 Aug 2015.

3.

Compensation for investment banking services: DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may have received compensation, within the past 12

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Market Focus Small Mid Caps Radar months, and within the next 3 months may receive or intends to seek compensation for investment banking services from company mentioned. 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.

Wong Ming Tek, Executive Director, ADBSR Singapore

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.

Dubai

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.

United States

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.

Other jurisdictions

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

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