F&N 1.5bil CPMTN - Rating Report

The newly assigned rating is preliminary, based primarily on information provided by the issuer and its agent, or the rated institution. RAM Ratings does not verify the accuracy or completeness of such material and is not responsible for any errors or omissions, or the results obtained from the use of the same. The preliminary rating is contingent upon final documents conforming to information already received, and the resolution of outstanding matters deemed pertinent by RAM Ratings. Subsequent information may result in the assignment of the final rating that differs from the preliminary rating. RAM Ratings’ rating is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Rat ings.

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September 2013

F&N CAPITAL SDN BHD

Proposed RM750 million Commercial Papers Programme

(2013/2020)

Proposed RM750 million Medium-Term Notes Programme

(2013/2028)

RM1 billion Commercial Papers/Medium-Term Notes

Programme (2008/2015)

The newly assigned rating is preliminary, based primarily on information provided by the issuer and its agent, or the rated institution. RAM Ratings does not verify the accuracy or completeness of such material and is not responsible for any errors or omissions, or the results obtained from the use of the same. The preliminary rating is contingent upon final documents conforming to information already received, and the resolution of outstanding matters deemed pertinent by RAM Ratings. Subsequent information may result in the assignment of the final rating that differs from the preliminary rating. RAM Ratings’ rating is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Rat ings.

CREDIT RATING RATIONALE

CORPORATE RATINGS

SEPTEMBER 2013

F&N CAPITAL SDN BHD

– Initial Rating & Rating Update

Summary

RAM Ratings has assigned respective long- and short-term ratings of

AA1(s)/Stable and P1(s) to F&N Capital Sdn Bhd’s (F&N Capital) proposed

RM750 million Medium-Term Notes Programme (2013/2028) and proposed

RM750 million Commercial Papers Programme (2013/2020). Concurrently, the

AA1(s)/Stable/P1(s) ratings of F&N Capital’s RM1 billion Commercial

Papers/Medium-Term Notes Programme (2008/2015) have been reaffirmed.

F&N Capital is a treasury company that is wholly-owned by Fraser & Neave

Holdings Bhd (F&N Holdings or the Group), which is engaged in the manufacture

and sale of soft drinks and dairy products as well as property development. As all

the abovesaid debt facilities are backed by full, unconditional and irrevocable

corporate guarantees from F&N Holdings, the enhanced ratings are based on the

credit profile of the Group.

F&N Holdings is a 56%-owned subsidiary of Fraser & Neave Limited (F&N

Limited), a Singapore-based conglomerate involved in the property and food and

beverage (F&B) sectors. F&N Limited is listed on the Singapore Stock Exchange

and is controlled by Thai billionaire Chareon Sirivadhanabhakdi, who in February

2013 (via Thai Beverage Public Company Limited and TCC Assets Ltd) emerged

as F&N Limited’s single largest shareholder, with a 90.3% stake, in this

estimated SGD13.8 billion exercise.

Analysts: Juliana Koay (603) 7628 1169 [email protected] Evelyn Khoo (603) 7628 1075 [email protected] Principal Activity: Funding vehicle of Fraser & Neave Holdings Bhd. Instruments: i) Proposed RM750 million

Commercial Papers Programme (2013/2020)

ii) Proposed RM750 million Medium-Term Notes Programme (2013/2028)

iii) RM1 billion Commercial Papers/Medium-Term Notes Programme (2008/2015)

Ratings: i) P1(s) [Assigned] ii) AA1(s)/Stable [Assigned] iii) AA1(s)/Stable/P1(s)

[Reaffirmed] Coupon Rates: i) Determined at issuance ii) Determined at issuance iii) Determined at issuance Tenure/Maturity Date: i) 7 years ii) 15 years iii) 12 August 2015

F&N Capital Sdn Bhd 2

The ratings reflect the following strengths:

Leader in several F&B segments

F&N Holdings has formidable positions within the soft-drinks and dairy-

products markets in Malaysia. The Group leads the isotonic-drinks (ISO)

and tea segments with its 100Plus (87% share1) and Seasons (32% share)

brands, respectively. Its Seasons brand also holds the second largest

market share in the Asian soft-drinks sector with 28%. Despite the expiry of

its 73-year bottling contract with The Coca-Cola Company (TCCC), the

Group still has a sizeable share of the carbonated soft-drinks market. Via

its F&N brand, the Group garnered a 29% share, albeit behind the

combined 34% share of TCCC’s Coca-Cola, Sprite and Fanta. Elsewhere,

F&N Holdings leads the domestic sweetened condensed-milk (58%) and

evaporated-milk (68%) segments. In Thailand, the Group boasts a 99%

share of the sterilised-milk market with its Bear Brand2.

Conservative balance sheet with strong debt coverage

F&N Holdings boasts a conservative balance sheet. As at end-June 2013,

the Group is in a near net-cash position while gearing ratio inched-up

marginally to 0.32 times (end-September 2012: 0.29 times). It had

assumed more debt in FY Sep 2012 largely for capital expenditure and

higher working-capital requirements amid operational disruptions in

Thailand, as well as subdued operating cashflow subsequent to the expiry

of its bottling contract with TCCC. Nonetheless, backed by the recovery of

its Thai operations and the stronger performance of its soft drinks division,

F&N Holdings’ annualised funds from operations debt coverage (FFODC)

came in strong at 0.77 times for 9M FY Sep 2013 (FY Sept 2012: 0.48

times).

Looking ahead, F&N Holdings’ financial profile is expected to remain

sturdy, underpinned by its stable F&B business profile and commendable

cashflow generation ability. Factoring RM500 million for potential

acquisitions, the Group’s adjusted gearing ratio is expected to be about 0.5

times over the next 3 years, with a corresponding adjusted FFODC of

around 0.4 times. Elsewhere, funding plans for F&N Holdings’ joint-venture

to develop a mixed property in Section 13, Petaling Jaya remain

preliminary at this juncture. The proportionate consolidation of estimated

debt to be assumed by the joint-venture would result in the Group’s

adjusted gearing ratio and adjusted FFODC at about 0.6 times and 0.35

times, respectively.

1 Source: AC Nielsen. Market shares quoted are as at end-FY Sep 2012.

2 Under licence from Nestle SA.

Lead Arrangers: i) Standard Chartered

Bank Malaysia Berhad ii) Standard Chartered

Bank Malaysia Berhad iii) Citibank Berhad and

OCBC Bank (Malaysia) Berhad

Trustees: i) TMF Trustees Malaysia

Berhad ii) TMF Trustees Malaysia

Berhad iii) Malaysian Trustees

Berhad Security: Full, unconditional and irrevocable corporate guarantee from Fraser & Neave Holdings Bhd


Modest product and geographical diversity

The Group offers a variety of F&B products – 7 categories of beverages

and 4 types of milk products – which make up a large portfolio of assorted

brands. F&N Holdings also enjoys a certain degree of geographical

diversity, deriving about 30% of its revenue abroad and having operations

in Thailand. This reduces its dependence on any particular product, market

segment or country. The snack-food brands under its associated company,

Cocoaland Holdings Berhad, are viewed as complementary to the Group’s

existing F&B brands.

Wide distribution channels

F&N Holdings’ soft-drinks division has a vast network of nearly 100,000

sales and distribution points throughout Malaysia, while its dairy-products

division has 77,000 outlets in Malaysia and 78,000 in Thailand. This

provides a competitive edge in ensuring product visibility and availability.

We envisage the Group continuing to broaden its distribution channels.

Stable demand for products

The Group’s portfolio of products caters to consumer lifestyle needs in

terms of refreshments and health. While not entirely recession proof,

demand for these small-ticket items tends to be more stable. Demand for

dairy products, in particular, has grown steadily, underpinned by the

essentiality of the products. Meanwhile, greater affluence has led to a

higher consumption of ready-to-drink beverages. Demand for these

beverages – particularly ISO, tea, juice and water – has grown at

commendable rates in line with an increasing preference for healthier

drinks.

The abovesaid positives are, however, moderated by the following factors:

Uncertainties arising from entry of new ultimate shareholder

We remain cautious of uncertainties arising from the change in F&N

Limited’s shareholding structure. Since the entry of its new shareholder,

there have been changes in senior management at both F&N Limited and

F&N Holdings. F&N Limited also recently submitted a proposal to spin off

its property business, following which its financial position is expected to

improve. We do not discount further reorganisation of the F&B businesses

controlled by Mr Sirivadhanabhakdi. In addition, given the highly leveraged

buyout, there is heightened pressure on F&N Limited (and indirectly F&N

Holdings) to support its new shareholder, as seen in the SGD4.7 billion

cash distribution to F&N Limited’s shareholders recently. In view of the

close affiliation between F&N Limited and F&N Holdings, changes in the

former’s credit profile may affect the latter’s ratings.


More competitive and challenging landscape

F&N Holdings is exposed to intense competition within the mature

beverages sector. Competition is keener with the emergence of TCCC as a

competitor, following the expiry of its bottling arrangements with the Group,

and an operating landscape made more challenging by the introduction of

new products by various players, particularly TCCC. Likewise, in the dairy-

products market, the proliferation of value-for-money brands has added to

the options available to consumers.

Exposure to fluctuating raw-material and packaging costs

Given that the Group’s costs mainly stem from raw materials (milk solids

and sugar), fuel and packaging (aluminium cans and polyethylene

terephthalate bottles), its profit margins are susceptible to the volatility of

the prices of these items. However, this risk is moderated by F&N

Holdings’ ability to pass on the bulk of price increases to customers,

underpinned by its strong brand equity and the essential nature of its

products.

Non-F&N-owned brands exposed to licence renewal risk

The Group’s business involves the sale of products bearing labels not

owned by itself or its parent, F&N Limited. It manufactures and distributes

products under licence from Nestle SA (for a 10-year period3). Other key

brands distributed under licence include Red Bull and Sunkist. Despite the

risk of non-renewal of these licensing agreements upon their expiry, as

seen in the case of TCCC, we opine that the mutual benefits derived from

such arrangements are likely to encourage their extension within the

medium term.

For further details of F&N Holdings’ industry and business assessment, please

refer to the rationale published by RAM on 7 May 2013.

3 For an initial 5-year period, with an option to extend for another 5 years at F&N Holdings’

discretion, up to February 2017.


Financial Assessment Update

Table 1: F&N Holding’s key financial indicators

FY Sep 2010* 2011 2012 9M 2013

Absolute (RM million)

Revenue 3,637.73 3,915.43 3,238.79 2,665.76

OPBDIT 467.83 472.85 249.71 276.58

Pre-tax profit 776.03 463.66 230.21 221.31

Total debt 331.09 192.33 444.75 489.19

Profitability (%)

Adjusted OPBDIT margin 13.74 12.46 8.45 10.38

Adjusted return on capital employed 36.24 26.20 11.98 15.20

Capitalisation (times)

Adjusted gearing ratio 0.20 0.16 0.32 0.32

Adjusted net gearing ratio (0.32) (0.02) 0.17 0.08

Adjusted debt-capital ratio 0.17 0.14 0.24 0.24

Debt coverage (times)

Adjusted interest coverage ratio 62.47 40.59 18.48 25.49

Adjusted FFO debt coverage ratio 1.30 1.66 0.49 0.77

Adjusted OCF debt coverage ratio 1.48 1.70 0.25 0.81

Adjusted FOCF debt coverage ratio 1.01 0.51 (0.18) 0.68

FFO = funds from operations

OCF = operating cashflow

FOCF = free operating cashflow

Note: Figures and ratios for 9M 2013 are not adjusted.

* Following the announcement of F&N Holdings’ intention to divest its glass division on 14 May 2010,

contributions from the division were classified as discontinued operations in accordance with FRS 5.

The Group’s sales rose 12.5% to RM2.67 billion for 9M FY Sep 2013. The

recovery of F&N Holdings’ Thai dairies operations from floods, coupled with the

stronger showing of its soft drinks division had largely contributed to the Group’s

topline growth, notwithstanding the softer sales of its dairies division in Malaysia

amid a competitive operating environment. In line with this improved showing,

F&N Holdings’ OPBDIT augmented an annualised 47.7% y-o-y for the 9M FY

Sep 2013 to RM276.58 million. For FY Sep 2013, improvements in the Group’s

sales are expected to be led by the recovery of its operations in Thailand and the

organic growth of its soft drinks division, backed by resilient demand for its key

brands. These, coupled with lower input costs, are anticipated to widen F&N

Holdings’ OPBDIT margin in the medium term, albeit not to levels seen pre-FY

Sep 2012, when the Group enjoyed greater economies of scale from its bottling

contract with TCCC.

F&N Holdings’ balance sheet has been conservative, with gearing ratios coming

in below 0.4 times over the last 5 years. Notwithstanding the larger debt load

assumed for the Group’s capital expenditure and increased working capital

requirements in FY Sep 2012 – during which it experienced flood-induced

operational disruptions in Thailand and a subdued operating cashflow

subsequent to the expiry of its bottling contract with TCCC – F&N Holdings’

Improved showing

y-o-y

Gearing ratio to remain conservative


financial profile remained strong. As at end-June 2013, its gearing ratio inched-

up marginally to 0.32 times (end-September 2012: 0.29 times). In addition to

funds set aside for the replacements of coolers and routine maintenance, F&N

Holdings’ gearing ratio is expected to remain conservative at about 0.5 times in

the medium term, upon factoring RM500 million of debt for potential acquisition.

Elsewhere, as funding plans for a mixed property development project4 at the

Group’s former manufacturing site in Section 13 are still preliminary at this

juncture, the Group’s adjusted gearing ratio may inch up to around 0.6 times

upon the proportionate consolidation of debt assumed by F&N Holdings in this

joint-venture.

F&N Holdings’ annualised FFODC for the 9M FY Sep 2013 remained robust at

0.77 times (FY Sep 2012: 0.48 times). Accounting for the abovementioned

allocations, the Group’s adjusted FFODC is envisaged to stay strong at about 0.4

times, underpinned by its stable F&B business and commendable cashflow

generation ability. The recovery of F&N Holdings’ operating cashflow in line with

the improvement of its Thai operations and organic growth of its products are

expected to gradually make up for the loss of contributions from the expiry of the

TCCC contract. Meanwhile, F&N Holdings’ adjusted FFODC could ease slightly

to about 0.35 times, upon the proportionate consolidation of funds required for

the abovementioned mixed property development project.

4 F&N Holdings will via Vacaron Company Sdn Bhd – a 50:50 joint venture with its related company, FCL Centrepoint Pte Ltd – carry out a mixed property development project at the Group’s former manufacturing site in Section 13. This development is expected to comprise serviced apartments, retail and SOHO units, boutique offices, a shopping mall, corporate offices and a business hotel over 4 phases, with an estimated gross development value of RM1.85 billion.

Healthy debt

coverage


Corporate Information – F&N Capital Sdn Bhd

Date of Incorporation:

16 May 2008

Commencement of Business:

13 August 2008

Major Shareholders (as at 30 November 2012):

Fraser & Neave Holdings Bhd

100%

Directors:

Dato’ Ng Jui Sia Soon Wing Chong

Auditor:

Ernst & Young

Listing:

Not listed

Key Management: Major Subsidiaries:

None None

Capital History:

Year Remarks Amount (RM)

Cumulative Total (RM)

2008 Share capital 2 2


Corporate Information – Fraser & Neave Holdings Bhd

Date of Incorporation:

15 May 1961

Major Shareholders (as at 30 November 2012):

Fraser & Neave Limited AmanahRaya Trustees Bhd (nominee for Skim Amanah Saham Bumiputera) Employees Provident Fund Board * Includes direct and indirect stake (held via nominees) based on the shareholdings statistics disclosed in the annual report.

56.01% 14.66% 7.87%*

Directors:

Tengku Syarif Bendahara Syed Badarudin Jamalullail (Chairman) Dato’ Anwarrudin bin Ahamad Osman Cheong Fook Seng, Anthony Chin Kwai Yoong Dato’ Johan Tazrin bin Hamid Ngo Lee Kong Yip Dato’ Dr Mohd Shahar bin Sidek Dato’ Ng Jui Sia Dato’ Dr Nik Norzrul Thani bin Nik Hassan Thani Tong Sing Eng Dato’ Jorgen Bornhoft Hui Choon Kit (alternate director to Dato’ Ng Jui Sia)

Auditor:

Ernst & Young

Listing:

Main Market of Bursa Malaysia

Key Management:

Somsak Chayapong Soon Wing Chong Timothy Ooi Soh Swee Hock Suhailah Mohamed Abdulla Khalid Alvi Tan Hock Beng Cheah Hong Chong

Chief Executive Officer Chief Financial Officer and Group Company Secretary Head, Group Legal Head, Corporate Services Head, Group Internal Audit Managing Director, Soft Drinks Managing Director, Dairies Malaysia General Manager, Property

Major Subsidiaries:

F&N Beverages Manufacturing Sdn Bhd F&N Beverages Marketing Sdn Bhd F&N Dairies (Malaysia) Sdn Bhd F&N Dairies (Thailand) Limited F&N Dairies Manufacturing Sdn Bhd (formerly known as PML Dairies Sdn Bhd)

100% 100% 100% 100% 100%

Capital History:

Year Remarks Amount (RM million)

Cumulative Total (RM million)

2000 Balance carried forward 260.74 260.74

2000 Share issuance 95.76 356.49

2010 Shares exercised under Employee Share Option Scheme (“ESOS”)

0.79 357.29

2011 2012

Shares exercised under ESOS Shares exercised under ESOS

3.09 2.62

360.38 363.00

3Q 2013

Shares exercised under ESOS 0.90 363.90


unaudited

STATEMENT OF FINANCIAL POSITION (RM million) 30-Sep-09 30-Sep-10 30-Sep-11 30-Sep-12 30-Jun-13

Property, Plant & Equipment 1,178.21 816.15 1,008.84 1,074.39 1,071.43

Investments in Associates/Jointly-Controlled Entities 0.00 0.00 55.93 73.74 74.37

Deferred Tax Assets 20.99 4.26 4.71 79.05 66.82

Other Investments & Non-Current Assets 31.79 5.47 5.50 62.28 64.57

Goodwill & Intangible Assets 131.65 125.18 127.26 134.97 132.35

Total Non-Current Assets 1,362.64 951.06 1,202.24 1,424.42 1,409.54

Inventory 654.66 540.30 389.24 379.82 407.40

Trade Receivables 464.24 453.28 465.46 397.94 518.15

Other Current Assets 62.81 72.20 107.76 137.49 13.43

Amounts Due from Holding/Related Companies & Directors 27.69 12.74 20.67 38.40 51.36

Amounts Due from Associates/Jointly-Controlled Entities 0.00 0.00 0.19 0.38 0.13

Cash & Bank Balances 187.85 939.34 290.29 227.87 366.42

Money Market Instruments 0.00 0.00 0.00 0.00 0.00

Total Current Assets 1,397.26 2,017.86 1,273.60 1,181.91 1,356.90

Total Assets 2,759.90 2,968.92 2,475.84 2,606.33 2,766.44

Equity Share Capital 356.49 357.29 360.38 363.00 363.90

Equity-Like Hybrid Capital 0.00 0.00 0.00 0.00 0.00

Reserves 395.02 362.40 394.46 403.31 425.82

Retained Profits/(Accumulated Losses) 541.63 1,076.83 803.98 787.97 757.43

Non-Controlling Interests 116.26 0.29 0.29 0.25 0.24

Total Equity 1,409.40 1,796.81 1,559.11 1,554.54 1,547.39

Short-Term Private Debt Securities 97.59 150.00 0.00 380.00 450.00

Amounts Due to Holding/Related Companies & Directors 38.92 31.09 40.13 20.69 38.78

Amounts Due to Associates/Jointly-Controlled Entities 0.00 0.00 2.20 0.35 0.41

Other Short-Term Debts 105.77 0.00 0.00 43.71 0.00

Trade Payables 215.01 275.75 243.49 195.30 244.46

Taxation 31.43 16.52 9.60 2.35 7.47

Dividends Payable 0.00 0.00 0.00 0.00 72.73

Other Current Liabilities 442.58 491.65 421.89 359.11 349.64

Total Current Liabilities 931.30 965.01 717.30 1,001.52 1,163.49

Long-Term Liabilities 58.79 57.10 49.43 50.27 55.55

Debt-Like Hybrid Capital 0.00 0.00 0.00 0.00 0.00

Long-Term Private Debt Securities 300.00 150.00 150.00 0.00 0.00

Other Long-Term Debts 60.40 0.00 0.00 0.00 0.00

Total Non-Current Liabilities 419.20 207.10 199.43 50.27 55.55

Total Liabilities 1,350.50 1,172.11 916.73 1,051.79 1,219.04

Total Equity + Total Liabilities 2,759.90 2,968.92 2,475.84 2,606.33 2,766.44

FINANCIAL SUMMARY Fraser & Neave Holdings Bhd – Group


unaudited

STATEMENT OF COMPREHENSIVE INCOME (RM million) 30-Sep-09 30-Sep-10 30-Sep-11 30-Sep-12 30-Jun-13

Revenue 3,271.16 3,637.73 3,915.43 3,238.79 2,665.76

Operating Profit/(Loss) before Depreciation, Interest & Tax 378.52 467.83 472.85 249.71 276.58

Depreciation & Amortisation (68.75) (78.53) (78.95) (90.47) (66.49)

Operating Profit/(Loss) before Interest & Tax 309.77 389.30 393.89 159.24 210.09

Finance Costs (9.55) (7.17) (11.43) (11.56) (10.85)

Debt-Related Foreign Exchange Gain/(Loss) 0.00 0.00 0.00 0.00 0.00

Operating Profit/(Loss) before Tax 300.23 382.12 382.47 147.68 199.25

Other Income/(Loss) 2.53 6.86 29.14 15.00 3.20

Non-Recurring Items 13.48 387.05 50.21 61.40 15.32

Share of Associates/Jointly-Controlled Entities Profits/(Losses) 0.00 0.00 1.85 6.12 3.55

Pre-Tax Profit/(Loss) 316.24 776.03 463.66 230.21 221.31

Taxation (73.31) (81.98) (80.53) 43.78 (40.98)

Net Profit/(Loss) 242.92 694.05 383.13 273.99 180.33

Other Comprehensive Income/(Loss) 0.00 (2.01) 6.91 (13.14) 8.94

Total Comprehensive Income/(Loss) 242.92 692.04 390.04 260.85 189.27

Additional Disclosure:

Net Profit Attributable to Non-Controlling Interests 18.49 (1.24) 0.00 0.04 0.02

Dividends - Ordinary Shares & Preference Shares 125.58 162.10 655.98 296.00 210.89

unaudited

STATEMENT OF CASHFLOW (RM million) 30-Sep-09 30-Sep-10 30-Sep-11 30-Sep-12 30-Jun-13

Pre-Tax Profit/(Loss) 316.24 776.03 463.66 230.21 225.41

Adjustments 171.34 (234.33) 36.87 23.68 79.40

Operating Profit/(Loss) before Working Capital Changes 487.57 541.69 500.52 253.89 304.81

Tax Paid (78.02) (97.62) (89.53) (38.57) (22.01)

Funds from Operations 409.56 444.07 410.99 215.32 282.80

Changes in Working Capital (3.92) 70.24 13.59 (184.77) 15.69

Other Income/(Expenses) (2.15) (2.90) (3.33) 68.52 0.00

Net Cashflow from Operating Activities 403.49 511.41 421.24 99.08 298.49

Capital Expenditure (295.90) (172.49) (306.82) (213.37) (49.56)

Free Operating Cashflow 107.58 338.93 114.42 (114.30) 248.93

Other Investing Outflows (80.88) (1.79) (58.70) (14.08) (3.12)

Investing Inflows 7.38 758.59 85.92 77.48 6.12

Pre-Financing Cashflow 34.08 1,095.73 141.64 (50.90) 251.93

Interest Payments (17.66) (14.27) (11.43) (11.56) (10.85)

Net Changes in Borrowings 114.72 (162.14) (150.00) 273.71 26.29

Dividend Payments (125.58) (162.10) (655.98) (296.00) (138.16)

Others (1.35) (5.74) 26.73 22.32 9.34

Net Increase/(Decrease) in Cash & Cash Equivalents 4.21 751.48 (649.05) (62.42) 138.55

Opening Cash Balance 183.64 187.85 939.34 290.29 227.87

Closing Cash Balance 187.85 939.34 290.29 227.87 366.42

FINANCIAL SUMMARY Fraser & Neave Holdings Bhd – Group


unaudited

KEY RATIOS 30-Sep-09 30-Sep-10 30-Sep-11 30-Sep-12 30-Jun-13

PROFITABILITY (%):

OPBDIT Margin 11.57% 12.86% 12.08% 7.71% 10.38%

Adjusted OPBDIT Margin 12.44% 13.74% 12.46% 8.45% 10.38%

OPBIT Margin 9.47% 10.70% 10.06% 4.92% 7.88%

Adjusted OPBIT Margin 9.54% 10.72% 10.08% 5.02% 7.88%

Pre-Tax Profit Margin 9.67% 21.33% 11.84% 7.11% 8.30%

Net Profit Margin 7.43% 19.08% 9.79% 8.46% 6.76%

Return on Capital Employed 16.19% 36.81% 27.13% 12.09% 15.20%

Adjusted Return on Capital Employed 15.96% 36.24% 26.20% 11.98% 15.20%

CAPITALISATION (TIMES):

Gearing Ratio 0.43 0.18 0.12 0.29 0.32

Adjusted Gearing Ratio 0.46 0.20 0.16 0.32 0.32

Net Gearing Ratio 0.29 (0.34) (0.06) 0.14 0.08

Adjusted Net Gearing Ratio 0.33 (0.32) (0.02) 0.17 0.08

Debt-Capital Ratio 0.30 0.16 0.11 0.22 0.24

Adjusted Debt-Capital Ratio 0.31 0.17 0.14 0.24 0.24

DEBT COVERAGE (TIMES):

Interest Coverage Ratio 39.65 65.24 41.38 21.61 25.49

Adjusted Interest Coverage Ratio 34.18 62.47 40.59 18.48 25.49

OPBDIT Debt Coverage Ratio 0.63 1.41 2.46 0.56 0.75

Adjusted OPBDIT Debt Coverage Ratio 0.63 1.36 1.90 0.56 0.75

Funds from Operations Debt Coverage Ratio 0.68 1.34 2.14 0.48 0.77

Adjusted Funds from Operations Debt Coverage Ratio 0.68 1.30 1.66 0.49 0.77

Operating Cashflow Debt Coverage Ratio 0.67 1.54 2.19 0.22 0.81

Adjusted Operating Cashflow Debt Coverage Ratio 0.67 1.48 1.70 0.25 0.81

Free Operating Cashflow Debt Coverage Ratio 0.18 1.02 0.59 (0.26) 0.68

Adjusted Free Operating Cashflow Debt Coverage Ratio 0.21 1.01 0.51 (0.18) 0.68

LIQUIDITY (TIMES):

Current Ratio 1.53 2.15 1.86 1.17 1.16

Quick Ratio 0.80 1.57 1.28 0.78 0.80

Cash and Cash Equivalents to Short-Term Debts 0.78 5.19 6.86 0.51 0.75

Short-Term Debts to Total Debts (%) 40.20% 54.70% 22.01% 100.00% 100.00%

CASH CYCLE (DAYS)

Receivables Cycle 51.80 45.48 43.39 44.85 53.21

Payables Cycle 35.60 42.34 33.74 31.52 28.01

Inventory Cycle 108.40 82.97 53.93 61.30 46.68

Operating Cash Cycle 124.60 86.10 63.58 74.63 71.88

Adjusted ratios take into consideration non-cancellable operating leases and/or other liabilities excluded from statement of financial position,

where applicable.

OPBDIT = Operating Profit Before Depreciation, Interest & Tax

OPBIT = Operating Profit Before Interest & Tax

FINANCIAL RATIOS Fraser & Neave Holdings Bhd – Group


KEY FINANCIAL RATIOS FORMULAE

PROFITABILITY (%):

OPBDIT Margin OPBDIT / Revenue

Adjusted OPBDIT Margin Operating Lease-Adjusted OPBDIT / Revenue

OPBIT Margin OPBIT / Revenue

Adjusted OPBIT Margin Operating Lease-Adjusted OPBIT / Revenue

Pre-Tax Profit Margin Pre-Tax Profit / Revenue

Net Profit Margin Net Profit / Revenue

Return on Capital Employed (Pre-Tax Profit + Finance Costs* + Debt-Related Foreign Exchange Loss/(Gain)) /

(Total Debts + Total Equity)

Adjusted Return on Capital Employed (Pre-Tax Profit + Operating Lease-Adjusted Finance Costs* + Debt-Related Foreign Exchange Loss/(Gain)) /

(Total Adjusted Debts + Total Equity)

CAPITALISATION (TIMES):

Gearing Ratio Total Debts / Total Equity

Adjusted Gearing Ratio Total Adjusted Debts / Total Equity

Net Gearing Ratio (Total Debts - Cash & Bank Balances) / Total Equity

Adjusted Net Gearing Ratio (Total Adjusted Debts - Cash & Bank Balances) / Total Equity

Debt-Capital Ratio Total Debts / (Total Equity + Total On-Balance Sheet Debt)

Adjusted Debt-Capital Ratio Total Adjusted Debts / (Total Equity + Total Adjusted Debt)

DEBT COVERAGE (TIMES):

Interest Coverage Ratio OPBDIT / (Finance Costs* + Preference Share Dividends + Interest Capitalised +

Realised Debt-Related Foreign Exchange Loss/(Gain))

Adjusted Interest Coverage Ratio Operating Lease-Adjusted OPBDIT / (Operating Lease-Adjusted Finance Costs* + Preference Share Dividends +

Interest Capitalised + Realised Debt-Related Foreign Exchange Loss/(Gain))

OPBDIT Debt Coverage Ratio OPBDIT / Total Debts

Adjusted OPBDIT Debt Coverage Ratio Operating Lease-Adjusted OPBDIT / Total Adjusted Debts

Funds from Operations Debt Coverage Ratio Funds from Operations / Total Debts

Adjusted Funds from Operations Debt Coverage Ratio Operating Lease-Adjusted Funds from Operations / Total Adjusted Debts

Operating Cashflow Debt Coverage Ratio Net Operating Cashflow / Total Debts

Adjusted Operating Cashflow Debt Coverage Ratio Operating Lease-Adjusted Net Operating Cashflow / Total Adjusted Debts

Free Operating Cashflow Debt Coverage Ratio Free Operating Cashflow / Total Debts

Adjusted Free Operating Cashflow Debt Coverage Ratio Operating Lease-Adjusted Free Operating Cashflow / Total Adjusted Debts

LIQUIDITY (TIMES):

Current Ratio (Current Assets - Amounts Due from Related Parties) /

(Current Liabilities - Amounts Due to Related Parties)

Quick Ratio (Current Assets - Amounts Due from Related Parties - Inventory) /

(Current Liabilities - Amounts Due to Related Parties)

Cash and Cash Equivalents to Short-Term Debts (Cash & Bank Balances + Money Market Instruments) / Short-Term Debts

Short-Term Debts to Total Debts (%) Short-Term Debts / Total Debts

CASH CYCLE (DAYS)

Receivables Cycle Trade Receivables / Revenue x 365

Payables Cycle Trade Payables / Cost of Sales x 365

Inventory Cycle Total Inventory / Cost of Sales x 365

Operating Cash Cycle Receivables Cycle - Payables Cycle + Inventory Cycle

Adjusted ratios take into consideration non-cancellable operating leases and/or other liabilities excluded from statement of financial position, where applicable.

* Include on-going, non-discretionary payments on hybrid securities, if any.

OPBDIT = Operating Profit Before Depreciation, Interest & Tax

OPBIT = Operating Profit Before Interest &Tax

FINANCIAL RATIOS Fraser & Neave Holdings Bhd – Group


CREDIT RATING DEFINITIONS

Issue Ratings

Long-Term Ratings

AAA

AA

A

BBB

BB

B

C

D

Short-Term Ratings

P1

P2

P3

NP

D

An issue rated AAA has superior safety for payment of financial obligations . This is the highest long-term Issue Rating

assigned by RAM Ratings .

An issue rated AA has high safety for payment of financial obligations . The issuer is resilient against adverse changes in

circumstances, economic conditions and/or operating environments .

An issue rated A has adequate safety for payment of financial obligations . The issuer is more susceptible to adverse

changes in circumstances, economic conditions and/or operating environments than those in higher -rated categories .

An issue rated BBB has moderate safety for payment of financial obligations . The issuer is more likely to be weakened by

adverse changes in circumstances, economic conditions and/or operating environments than those in higher-rated

categories . This is the lowest investment -grade category.

An issue rated BB has low safety for payment of financial obligations . The issuer is highly vulnerable to adverse changes

in circumstances , economic conditions and/or operating environments .

An issue rated B has very low safety for payment of financial obligations . The issuer has a limited ability to withstand

adverse changesin circumstances ,economic conditions and/or operating environments .

An issue rated C has a high likelihood of default . The issuer is highly dependent on favourable changes in circumstances ,

economic conditions and/or operating environments, the lack of which would likely result in it defaulting on a particular

debt issue .

An issue rated D is either currently in default or faces imminent default on its financial obligations, whether or not formally

declared . The D rating may also reflect a distressed exchange, the filing of bankruptcy and/or other actions pertaining to

the issuer that could jeopardise the payment of a particular debt issue .

An issue rated P1 has high safety for payment of financial obligations in the short term . This is the highest short -term

Issue Rating assigned by RAM Ratings .

An issue rated P2 has adequate safety for payment of financial obligations in the short term . The issuer is more

susceptible to the effects of deteriorating circumstances than those in the highest -rated category .

An issue rated P3 has moderate safety for payment of financial obligations in the short term . The issuer is more likely to

be weakened by the effects of deteriorating circumstances than those in higher -rated categories . This is the lowest

investment -grade category.

An issue rated NP has doubtful safety for payment of financial obligations in the short term . The issuer faces major

uncertainties that could compromise its capacity for payment of a particular debt issue .

An issue rated D is either currently in default or faces imminent default on its financial obligations, whether or not formally

declared . The D rating may also reflect a distressed exchange, the filing of bankruptcy and/or other actions pertaining to

the issuer that could jeopardise the payment of a particular debt issue .

For long-term ratings, RAM Ratings applies subscripts 1, 2 or 3 in each rating category from AA to C. The subscript 1 indicates that the

issue ranks at the higher end of its generic rating category; the subscript 2 indicates a mid-ranking ; and the subscript 3 indicates that the

issue ranks at the lower end of its generic rating category . In addition, RAM Ratings applies the suffixes (bg) or (s) to ratings which have

been enhanced by a bank guarantee or other supports, respectively .

An Issue Rating is RAM Ratings' current opinion on the creditworthiness of a particular debt issue. It reflects the overallcapacity and willingness of an issuer to meet the financial obligations on a particular debt issue on a full and timely basis,taking into account its expressed terms and conditions .


RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes

third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has

no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the

objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM

Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

RAM Ratings, its rating committee members and the analysts involved in the rating exercise have not encountered and/or are not aware of any

conflict of interest relating to the rating exercise. RAM Ratings will adequately disclose all related information in the report if there are such

instances.

Published by RAM Rating Services Berhad

Reproduction or transmission in any form is prohibited except by

permission from RAM Rating Services Berhad.

Copyright 2013 by RAM Rating Services Berhad

RAM Rating Services Berhad

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F&N 1.5bil CPMTN - Rating Report

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