COMPANY UPDATE

Singapore Telecommunications

UNDERPERFORM S$3.45

SINGAPORE

5 September 2008

Downgraded @04/09/08

Looming face-off with StarHub

Target: S$3.50 Telecommunications - Integrated

ST SP / STEL.SI

Kelvin Goh CFA +60(3) 2084 9699 – [email protected]

• Downgrading our call. We are cutting our recommendation on SingTel to UNDPERFORM from neutral as we are concerned over the looming bidding war for content with StarHub and the strengthening S$ which may dilute overseas earnings. • Get your popcorns ready. We expect a very intense bidding war between SingTel and StarHub over the exclusive rights of the 2010-2012 seasons of the Barclays Premier League and 2010 World Cup in mid-09. BPL is the crown jewel of content, and a must-have of for any pay TV operator looking to have traction in Singapore. • Concerns over content costs. Based on our discussions with industry players, we expect the cost for the BPL rights to double to S$400m in Singapore. If SingTel loses again, which is our base case, we think it will be another setback for its fledgling pay TV franchise mio TV and quadruple-play aspiration. If SingTel wins, it would be a crucial foot in the door to gain traction in the pay TV industry, but at a hefty price and likely at the expense of shareholder value in the short term. • Rising S$. The strengthening Singapore vis-à-vis the regional currencies continues to be a concern, which we believe will further dilute overseas contributions. • Cutting target price. We are tweaking FY09-11 net profit estimates by -1% to 2% on the back our revision in currency forecast. We have not imputed higher content cost for SingTel for FY11 as we assume StarHub will clinch the rights. However, we are cutting our SOP-based target price from S$3.80 to S$3.50 after raising SingTel Singapore’s WACC to 9.1% vs 8.0% due to the risk of overbidding. Key de-rating catalysts are rising concerns over a bidding war; and a strengthening S$. Financial summary FYE Mar Revenue (S$ m) EBITDA (S$ m) EBITDA margins (%) Pretax profit (S$ m) Net profit (S$ m) EPS (S cts) EPS growth (%) P/E (x) Core EPS (S cts) Core EPS growth (%) Core P/E (x) Gross DPS (S cts) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2007 13,376.9 4,390.9 32.8% 4,899.9 3,989.9 25.1 0.5% 13.8 24.2 16.2% 14.3 20.5 5.9% 2.6 19.0% 24.4% 18.3 13.7

2008 14,844.4 4,451.9 30.0% 5,128.9 3,961.2 24.9 (0.7%) 13.8 24.6 1.5% 14.0 12.5 3.6% 2.6 18.9% 29.4% 14.5 13.7

2009F 14,376.6 4,532.7 31.5% 5,115.2 3,870.0 24.3 (2.4%) 14.2 24.3 (1.0%) 14.2 21.0 6.1% 2.4 17.5% 19.8% 20.1 13.1 (0.3%) 0.98

2010F 15,243.9 4,826.2 31.7% 6,010.1 4,502.2 28.3 16.3% 12.2 28.3 16.3% 12.2 14.0 4.1% 2.2 18.6% 17.6% 17.8 12.3 (1.0%) 1.01

2011F 16,535.1 5,198.7 31.4% 6,673.9 4,992.2 31.4 10.9% 11.0 31.4 10.9% 11.0 15.0 4.3% 1.9 18.7% 10.4% 15.8 11.1 1.6% 1.04

Source: Company, CIMB-GK Research, Bloomberg

Price chart

Market capitalisation & share price info 0.70

4.2

0.60

4.0

0.50

3.8

0.40 0.30

3.6

0.20 3.4

0.10

3.2 S e p-07

0.00 Fe b-08

Volume 100m (R.H.S c a le )

Source: Bloomberg

J ul-08

Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Conv. secs (m)

S$54,942m/US$38,279m S$4.08/S$3.41 23.3m 15,925 43.6 None

Share price perf. (%) Relative Absolute Major shareholders Temasek Hldgs

S ing a pore Te le c ommunic a tions

Source: Company, CIMB-GK Research, Bloomberg

Please read carefully the important disclosures at the end of this publication.

1M 5.9 (2.8)

3M 12.3 (6.3)

12M 22.9 (4.4) % held 56.8 N/A N/A

Lose-lose scenarios playing out Crown jewels up for grabs. We expect a very intense face-off between SingTel and StarHub over the exclusive rights of the 2010-2012 seasons of the Barclays Premier League and 2010 World Cup. BPL is the crown jewel of content, and a must-have of for any pay TV operator in Singapore to gain traction among households. We estimate about 60-70% of StarHub’s subscribers are subscribers of BPL. Pay TV the last bastion. SingTel has made no secret of its intention in pursuing market share. Having successfully reclaimed leadership in prepaid mobile while widening its pole position in postpaid and broadband (see Fig 1-3), we view pay TV as a key laggard in SingTel’s domestic portfolio and an area it is keen on shoring up on. StarHub is the undisputed leader here ruling the pay TV space with a 92% market share as at end Jun 08, primarily because of its attractive content and SingTel’s late entry. Pay TV also has the lowest penetration rate among mobile, broadband and fixed, offering the most attractive growth opportunities. Singapore’s CEO Allen Lew said, “Owning a customer today is very important to us because whatever we’re getting today [in terms of revenue] is just the tip of the iceberg.” Figure 1: Prepaid mobile subscriber market share (%) – SingTel leads SingTel

50.0%

StarHub

M1

45.0% 40.0% 35.0% 30.0% 25.0% 3Q07

4Q07

1Q08

2Q08

3Q07

4Q07

1Q08

2Q08

2Q07

1Q07

4Q06

3Q06

2Q06

1Q06

4Q05

3Q05

2Q05

1Q05

4Q04

3Q04

2Q04

1Q04

20.0%

Source: Company, CIMB-GK Research

Figure 2: Postpaid mobile subscriber market share (%) – SingTel leads SingTel

50.0%

StarHub

M1

45.0% 40.0% 35.0% 30.0%

Source: Company, CIMB-GK Research

[ 2 ]

2Q07

1Q07

4Q06

3Q06

2Q06

1Q06

4Q05

3Q05

2Q05

1Q05

4Q04

3Q04

2Q04

1Q04

25.0%

Figure 3: Broadband market share (%) - SingTel leads StarHub

65.0%

SingTel

60.0% 55.0% 50.0% 45.0% 40.0%

2Q08

1Q08

4Q07

3Q07

2Q07

1Q07

4Q06

3Q06

2Q06

1Q06

4Q05

3Q05

2Q05

1Q05

4Q04

3Q04

2Q04

1Q04

35.0%

Source: Company, CIMB-GK Research

Figure 4: StarHub Pay TV ARPUs (S$) vs subscriber (‘000) – StarHub has 92%market share Pay TV ARPUs

70

Pay TV subscribers

60

520 500

50

480

40

460

30

440

20

420

10

400

0 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 Source: Company, CIMB-GK Research

Content is king. We believe a stiff bidding war will erupt over: • The rights for the 2010-2012 seasons of the Barclays Premier League (BPL). We gather from industry players that the rights for the 2010-2012 seasons should be tendered in Jun 09 with bid submissions due by Nov 09. FA Premier League will then evaluate the bids and call for a re-bid if it is not satisfied with the numbers. • The rights for the 2010 World Cup expected to open for bidding in mid-09. As StarHub has ring-fenced the bulk of its must-have content on long-term contracts the earliest of which is not due until 2010-11, SingTel has little else to nibble on and this window of opportunity is critical for SingTel to drive its own bundling strategy and market share. Content cost to rise. Therefore, we view escalating content cost at potentially unprofitable levels as almost inevitable and the price to pay for these rights. If SingTel is successful in clinching the rights for BPL, its Singapore margins are bound to come under pressure. • It was widely reported that StarHub could have paid about US$150m or S$200m for the 2007-2009 BPL rights. We gather from industry players that the 2010-2012 BPL rights are expected to see an increase of 25-50%, but jostling between SingTel and StarHub is likely to amplify this. All in, we expect the winner may have to bid up to 100% more or as much as $400m to win the rights, comprising a 50% natural inflation for the content and 50% “competition premium”. • Based on early indications, the cost for the rights for the 2010 World Cup is likely rise a few fold. We gather that Indonesia has witnessed a staggering fourfold rise to US$40m for securing the rights to the 2010 World Cup vs 2006. Again in Singapore, competition for this content will likely magnify the increase, in our opinion. SingTel has shown its seriousness in winning compelling content by winning the exclusive rights to UEFA Champions League football and UEFA Cup matches for 2009-12. It is more than mioTV. While some may argue that the rights to BPL are already inflated (StarHub reportedly increased their winning bid by a staggering fourfold in the last round of bidding), we feel that SingTel has little choice but to be aggressive to position itself on a long-term basis for mioTV and its quadruple-play to truly take off. The quadruple-play strategy aims to bundle its mobile, broadband, pay TV and fixed [ 3 ]

line services to encourage stickiness, which StarHub has successfully been doing. We also believe that SingTel has gained sufficient experience in content bidding over the last few years and would be able to bid in a more savvy manner. Coupled with its strong cashflow and large balance sheet, we think SingTel is prepared to sink in a lot of money into the right content to grow market share. Two scenarios. We see two outcomes from this: • If SingTel loses again, which is our base case, it will be another setback for its fledgling pay TV franchise mio TV, and quadruple-play aspiration. • If SingTel wins, it would be a crucial foot in the door to gain traction in an industry with estimated revenue of S$400m p.a. in Singapore, but at a hefty price and likely at the expense of shareholder value in the short term. Other content in SingTel’s sights. In the longer term, we believe SingTel is eyeing the exclusive rights for other compelling channels – such as movie channels HBO, Cinemax and Star Movies, and educational channels such as Discovery and National Geographic. We gather that these are currently locked up by StarHub for around 5 years, expiring around 2010-2011. The costs of these contents are bound to balloon with SingTel looking to bid aggressively, in our opinion.

Weaker regional currencies vs Singapore dollar The strengthening Singapore dollar vis-à-vis the regional currencies continues to be a concern, which we believe will further dilute contributions from overseas which make up 71% of SingTel’s FY09 PBT and 80% of SOP-based target price. Figure 5 below illustrates that the Singapore dollar, in recent months, has been strengthening against the Australian dollar and Indian rupee, while it has been weakening against the Indonesian rupiah. We note that the A$ has been weakening particularly rapidly, due to the recent rate cuts by the Reserve Bank of Australia.

SGD appreciating

Figure 5: SGD vs AUD, IDR and INR 1.20 INR/SGD

1.15 1.10

SGD depreciating

SGD/AUD 1.05 1.00 IDR/SGD

0.95 Jan-08

Jan-08

Mar-08

Mar-08

Apr-08

May -08

Jun-08

Jul-08

Aug-08

Source: Company, CIMB-GK Research, xxx

Forecast and assumptions Tweaking forecast. We are revising our FY09-11 core net profit estimates by -1% to 2% on the back of CIMB Treasury research changing its currency forecast, as summarised in Figure 6. We have not imputed higher content cost for SingTel for FY11 as we assume StarHub will clinch the rights. (We are revising StarHub’s CY10 core net profit estimates by 22% to account for the higher cost of BPL and World Cup rights).

[ 4 ]

Figure 6: Currency forecast Dec Current forecast INR/SGD IDR/SGD THB/SGD PHP/SGD AUD/SGD TWD/SGD

2008F

2009F

2010F

32.4 6,207 25.2 33.1 1.13 22.1

31.7 6,000 24.0 32.0 1.17 22.0

30.1 5,696 22.2 30.4 1.26 20.9

Previous forecast INR/SGD IDR/SGD THB/SGD PHP/SGD AUD/SGD TWD/SGD

31.2 6,538 24.6 32.7 1.16 23.8

28.3 6,159 21.7 30.4 1.06 22.5

27.5 6,377 21.7 30.4 0.98 22.8

% chg INR/SGD IDR/SGD THB/SGD PHP/SGD AUD/SGD TWD/SGD

4.0% -5.1% 2.3% 1.3% -2.6% -7.5%

12.1% -2.6% 10.4% 5.1% 10.2% -2.1%

9.2% -10.7% 1.9% -0.2% 29.1% -8.5%

Source:, CIMB Treasury Research

Valuation and recommendation Cutting target price. We are cutting our SOP-based target price from S$3.80 to S$3.50 after raising SingTel’s WACC to 9.1% vs 8.0% due to the risk of overbidding, and factoring in our new currency assumptions. Our valuation for SingTel Singapore falls by S$0.17/share to S$0.70, while that of Bharti falls by S$0.10 to $1.07, as summarised in Figure 7. Downgrade to UNDPERFORM. We are cutting our recommendation of SingTel from neutral to UNDERPERFORM due to concerns over: • The potentially value-destroying bidding war between StarHub and SingTel over the exclusive rights for the 2010-212 BPL seasons and 2010 World Cup. • The strengthening Singapore dollar vis-a-via regional currencies. • Rising political uncertainties in Thailand, where SingTel has a 21% stake in Advance Info Service (ADVANC TB, Outperform, Target price: Bt110), which may weigh down on sentiments. AIS contributes to 5% of SingTel’s SOP valuation. While SingTel has outpaced the market by 6% and 12% over the last 1 and 3 months, we think rising concerns over the bidding war and appreciating SGD may reverse this trend. Key de-rating catalysts are rising concerns over a bidding war; a strengthening S$, and the deteriorating situation in Thailand. Switch to Telkom Indonesia, TM International, MobileOne. We recommend switching out of SingTel to Telkom Indonesia (TLKM IJ, Outperform, Target price: Rp10,000) or TM International (TI MK, Neutral, Target price: RM7.20). For exposure to a Singapore telco, we recommend MobileOne (M1 SP, Neutral, Target Price: S$2.05) for its attractive dividends of 7-8%, and little risks to its free cashflow.

[ 5 ]

Figure 7: SingTel’s sum-of-the-parts valuation Subsidiaries

Valuation method

WACC

SingTel Optus Total subsidiaries

DCF to equity DCF to equity

9.3% 10.1%

Associates

Valuation method

Stake

Bharti (India) Telkomsel (Indonesia) Globe (Philippines) AIS (Thailand) Warid SingPost Far EasTone Telecom PTBL (Bangladesh) Total associates Total Equity Value

Consensus target price 14x CY09 EPS Consensus target price CY08 Target price, based on DCF Acquisition price CY08 target price, based on DCF Consensus target price Acquisition price

30.5% 35.0% 47.3% 21.4% 30.0% 25.8% 4.0% 45.0%

Valuation Exch rate (in local ccy) (S$/local ccy) S$11,176 1.00 A$7,167 1.13

Valuation Per share % of total (S$m) (S$) 11,176 0.70 20% 8,106 0.51 14% 19,282 1.21 34%

Share price/ Exch rate Valuation (local ccy/S$) INR 956 32.4 not listed 6,207 PHP 1,369 33.1 THB 110.0 25.2 not listed 40.3 S$1.20 1.00 NT$51.47 22.1 not listed 47.7

Valuation (S$m) 16,940 12,420 2,583 2,759 1,137 591 359 192 36,981 56,264

Per share (S$) 1.06 0.78 0.16 0.17 0.07 0.04 0.02 0.01 2.32 3.54

30% 22% 5% 5% 2% 1% 1% 0% 66% 100%

Source: CIMB Research

Figure 8: Sector comparison B'berg ticker Mobile operators ADVANC ADVANC TB Bakrie Telecom BTEL IJ China Mobile 941 HK China Unicom 762 HK DiGi DIGI MK Dialog Telekom DIAL SL DTAC DTAC TB Excelcomindo EXCL IJ Indosat ISAT IJ M1 M1 SP Mobile-8 FREN IJ TM International TI MK Simple average

Target Price price Recom. (local CCY) (local) O U O U O NR O NR U N U N

Fixed line/integrated telcos China Netcom 906 HK U China Telecom 728 HK N SingTel ST SP U StarHub STH SP U Telekom Msia T MK TB Telkom Indon TLKM IJ O TRUE TRUE TB N Simple average Simple average of telcos in our universe

Mkt cap (US$ m)

Core P/E (x) CY08 CY09

3-yr EPS P/NTA ROE Div (%) yield (%) EV/EBITDA (x) CAGR (x) (%) CY08 CY08 CY09 CY08 CY08 CY09

91.5 295 84.00 12.56 23.10 11.00 43.8 2,500 6,050 1.95 110 6.15

110.0 270 138.00 9.68 27.50 n.a. 58.5 n.a. 6,000 2.15 90 7.20

7,873 911 221,806 21,560 5,043 740 3,010 1,922 3,566 1,216 241 6,719

14.1 30.3 12.9 18.1 15.4 27.5 12.1 15.0 17.1 11.5 >100 14.7 17.1

13.3 14.7 11.5 12.4 14.4 18.0 11.8 9.6 14.8 11.1 nm 12.7 13.1

8.6 51.8 20.2 15.5 6.1 (9.1) 15.7 67.0 4.1 0.8 (155.0) 14.6 17.8

3.4 1.7 3.4 1.0 16.2 1.9 1.7 3.1 1.8 8.3 1.4 2.1 3.8

25.0 8.3 29.3 4.5 86.6 6.3 15.3 23.1 11.2 73.7 nm 15.0 27.1

25.8 11.2 27.8 7.5 156.1 9.2 13.8 27.2 12.0 69.7 nm 15.4 34.2

6.0 0.9 3.6 1.6 13.0 0.0 1.7 2.4 7.4 0.0 1.5 3.2

5.9 8.7 6.0 5.5 7.9 7.9 5.4 5.6 5.2 6.1 9.4 6.3 6.7

5.5 6.0 5.0 3.9 7.3 6.0 5.0 4.7 5.1 5.5 8.2 6.7 5.8

18.66 3.69 3.45 2.71 3.48 7,550 2.80

14.60 4.42 3.50 2.30 4.00 10,000 3.40

15,666 39,281 38,279 3,230 3,624 16,508 309

10.1 10.6 14.2 15.8 15.6 11.2 >100 12.9 15.7

9.3 7.9 12.6 13.8 15.8 10.0 12.9 11.8 12.6

8.9 10.6 5.3 (4.2) 2.3 6.1 210.8 34.3 14.7

1.2 1.1 2.4 43.1 1.3 3.8 1.2 7.7 5.3

13.2 11.2 17.8 >100 8.3 37.0 0.4 14.6 22.7

13.1 13.8 18.3 >100 8.4 35.2 8.8 16.3 27.8

3.6 3.7 5.5 6.6 7.8 5.0 4.6 3.7

3.6 3.7 13.3 8.7 4.3 4.4 4.5 6.1 6.4

3.2 3.5 12.5 8.1 4.0 4.1 4.0 5.6 5.7

O = Outperform, N = Neutral, U = Underperform, NR = Not Rated, TB = Trading Buy and TS = Trading Sell Source: CIMB-GK Research, Bloomberg

[ 6 ]

Financial tables PROFIT & LOSS (S$ m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

KEY RATIOS 2007 2008 13,377 14,844 (8,986) (10,393) 4,391 4,452 (1,855) (1,887) 2,536 2,565 120 (98) 2,073 2,591 171 71 0 0 4,900 5,129 (909) (1,168) (1) 1 3,990 3,961 15,907 15,902 15,907 15,902

2009F 14,377 (9,844) 4,533 (1,888) 2,645 (248) 2,719 0 0 5,115 (1,245) 0 3,870 15,916 15,916

2010F 15,244 (10,418) 4,826 (1,945) 2,881 (225) 3,354 0 0 6,010 (1,508) 0 4,502 15,916 15,916

2011F 16,535 (11,336) 5,199 (2,069) 3,130 (212) 3,757 0 0 6,674 (1,682) 0 4,992 15,916 15,916

2007 9,730 10,091 8,553 28,374 1,390 93 2,448 342 4,273 3,106 197 372 3,675 6,272 1,851 8,122 20,847 3 0.68

2009F 10,234 10,057 11,609 31,899 2,262 100 2,674 14 5,051 3,403 1,875 521 5,798 5,003 2,868 7,871 23,278 3 0.83

2010F 10,313 10,057 13,984 34,353 2,453 106 2,836 14 5,409 3,601 1,875 521 5,997 5,003 3,653 8,656 25,106 3 0.95

2011F 10,336 10,057 16,644 37,036 3,943 115 3,076 14 7,148 3,918 1,875 521 6,314 5,003 4,549 9,552 28,316 3 1.15

BALANCE SHEET (S$ m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (S$)

2007 1.8 0.8 36.6 29.8 N/A 18.6 65.4 61.3 3.8 86.1

2008 11.0 1.4 34.6 26.7 26.1 22.8 41.2 61.3 2.7 79.5

2009F (3.2) 1.8 35.6 26.9 10.7 24.3 70.8 66.2 2.8 85.8

2010F 6.0 6.5 39.4 29.5 12.8 25.1 40.6 66.0 2.5 83.8

2011F 8.5 7.7 40.4 30.2 14.7 25.2 39.2 65.2 2.4 83.0

KEY DRIVERS 2008 10,124 10,057 10,484 30,664 1,372 124 2,541 14 4,050 3,360 1,875 521 5,756 5,668 2,288 7,956 21,000 3 0.69

CASH FLOW (S$ m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

(FYE Mar) No of mobile subscribers (m) Mobile subscribers (m) - Singapore Blended mobile ARPU (S'pore, S$) Mobile subscribers (m) - Australia Blended mobile ARPU (Aust, A$) Singapore - fixed line subscriber Singapore fixed line ARPU (S$)

2008 2009F 2010F 2011F 9,708.0 10,336.5 10,830.2 11,287.2 2.57 2.85 3.03 3.20 54.8 53.4 52.4 51.3 7.14 7.49 7.80 8.09 44.0 44.0 44.0 44.0 1,761 1,708 1,657 1,608 56.5 56.3 54.8 54.3

12M - FORWARD FD CORE P/E (X) 2007 4,900 1,347 (78) (335) (1,249) 4,585 (1,790) 385 747 (658) (933) (2,213) (1,921) (240) (5,307) (1,380) (447) (5,078)

2008 5,129 1,816 104 (335) (1,260) 5,454 (1,954) (1,104) 310 (2,748) 1,074 (31) (3,436) (331) (2,724) (19) (1,093) (6,171)

2009F 5,115 1,888 (68) (665) (877) 5,393 (1,998) 0 0 (1,998) (665) 0 (1,592) (248) (2,505) 890 1,555 (4,615)

2010F 6,010 1,945 31 (723) (2,150) 5,113 (2,024) 0 0 (2,024) 0 0 (2,674) (225) (2,899) 190 190 (4,425)

2011F 6,674 2,069 68 (786) (2,447) 5,578 (2,093) 0 0 (2,093) 0 0 (1,783) (212) (1,995) 1,490 1,490 (2,935)

Source: Company, CIMB-GK Research, Bloomberg

[ 7 ]

17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

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As of 4 September 2008, CIMB has a proprietary position in the following securities in this report: (a) Singapore Telecommunications As of 5 September 2008, the analyst, Kelvin Goh who prepared this report, has an interest in the securities in the following company or companies covered or recommended in this report: (a) –.

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If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. [8]

Singapore: This report is issued and distributed by CIMB-GK Research Pte Ltd (“CIMB-GKR”). Recipients of this report are to contact CIMB-GKR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GKR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMB-GKR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. 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RECOMMENDATION FRAMEWORK #1* STOCK RECOMMENDATIONS

SECTOR RECOMMENDATIONS

OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months. * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange.

CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M)

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RECOMMENDATION FRAMEWORK #2 ** STOCK RECOMMENDATIONS

SECTOR RECOMMENDATIONS

OUTPERFORM: Expected positive total returns of 15% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: Expected total returns of between -15% and +15% over the next 12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: Expected negative total returns of 15% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months

TRADING BUY: Expected positive total returns of 15% or more over the next 3 months. TRADING SELL: Expected negative total returns of 15% or more over the next 3 months. ** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange.

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