Pharmaniaga - researchnews.affinhwang.com · ` 8 September 2017 Affin Hwang Investment Bank Bhd...

` 8 September 2017

Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com of 14

Transformation in the making

Pharmaniaga is one the largest integrated pharmaceutical companies

in Malaysia. Due to high reliance on its concession agreement

income, earnings were bumpy over the past 2 years as the

government reduced orders for pharmaceutical products. Going

forward, the earnings should improve as Pharmaniaga is increasing

the contribution of non-concession agreement through

manufacturing of in-house generic products, which enjoy better

margins than the logistics and distribution division. Expansion in

Indonesia also provides long term growth opportunities.

Largest integrated pharmaceutical group in Malaysia

Pharmaniaga is the largest listed pharmaceutical company in Malaysia by

market cap that is involved mainly in the distribution of pharmaceutical,

medical products and hospital equipment. 70% of its revenue is derived

from Malaysia and the Ministry of Health (MoH) is its largest client (67% of

total revenue). It has exclusive rights to supply 600 types of medical

products under the Approved Product Purchase List (APPL) to

Government-owned hospitals through a concession agreement, which

amounts for 50% of MoH’s total expenditure in pharmaceutical products

(RM2.1bn). This has provided a stable revenue stream of RM0.9-1.1bn

from the government over the past 6 years.

Reduce reliance on concession agreement

Pharmaniaga has a manufacturing division producing more than 480

pharmaceutical products with a total of 210 approved registrations in 14

countries worldwide. Going forward, the division is expected to be a major

earnings growth driver as it seeks to expand its non-concession revenue

by supplying more in-house generic drugs to government hospitals, private

hospitals and clinics. Non-concession revenue contribution has risen to

49% in 2016 and management expects further growth for this segment.

Indonesia, a new market to provide additional growth Pharmaniaga’s first foray into the Indonesian pharmaceutical industry was

in 2004, through 55% owned PT Millennium Pharmacon International, a

listed distributor that provides L&D services. Subsequently, Pharmaniaga

acquired a 75% stake in PT Errita Pharma, a manufacturing facility of

generics and OTC products in 2014. Indonesian operations now account

for 30% of Pharmaniaga’s total revenue and it has grown at 21% and 27%

yoy for 2015 and 2016 respectively. Given the large population size

(300m) and a relatively lower healthcare expenditure/capita of USD99 (vs

Malaysia’s USD456), longer term growth prospects should be favourable.

Earnings & Valuation Summary FYE 31 Dec 2013A 2014A 2015A 2016A Revenue (RMm) 1,946.6 2,122.9 2,189.3 2,189.0 EBITDA (RMm) 164.4 199.0 192.9 160.4 Pretax profit (RMm) 93.0 125.6 112.7 72.0 Net profit (RMm) 56.8 94.2 84.6 45.9 EPS (sen) 21.3 36.2 32.5 17.6 EPS growth (%) -11% 70% -10% -46% PER (x) 19.8 11.6 13.0 24.0 Core net profit (RMm) 112.2 115.4 85.9 53.9 Core EPS (sen) 43.3 44.6 33.2 20.8 Core EPS growth (%) 12% 3% -26% -37% Core PER (x) 9.7 9.5 12.7 20.3 Net DPS (sen) 16.0 28.0 30.0 16.0 Dividend Yield (%) 4% 7% 7% 4% EV/EBITDA (x) 7.8 6.5 7.8 10.4

Source: Company, Bloomberg, Affin Hwang

Company Update

Pharmaniaga PHRM MK Sector: Healthcare & Pharmaceuticals

RM4.20 @ 7 Sept 2017

Not rated Upside: N.A.

Price Target: N.A. Previous Target: N.A.

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17

(RM)

Price Performance

1M 3M 12M Absolute -5.9% -9.1% -26.5% Rel to KLCI -6.2% -9.5% -30.5%

Stock Data

Issued shares (m) 259.8

Mkt cap (RMm)/(US$m) 1086.1/254.2

Avg daily vol - 6mth (m) 0.0

52-wk range (RM) 4.18-5.7

Est free float 15.0%

BV per share (RM) 2.08

P/BV (x) 2.01

Net cash/(debt) (RMm) (528.45)

ROE (2016) 10% Derivatives Nil Shariah Compliant Yes

Key Shareholders

BOUSTEAD HOLDINGS BH 56.2% LEMBAGA TABUNG ANGKA 10.2% KAMARUDDIN LODIN BIN 4.8% Source: Affin Hwang, Bloomberg

Tan Jun Zhang

(603) 2146 7487 [email protected]

` 8 September 2017


Largest listed integrated Pharmaceutical group in

Malaysia In 1998, Pharmaniaga was an investment holding company formed

through the merger of 3 entities (Remedi Pharmaceutical Sdn Bhd, Raza

Manufacturing Berhad, and Strand Pharmaceutical (M) Sdn Bhd) which

were involved in the manufacturing, marketing, supply and distribution of

pharmaceutical products. Pharmaniaga was subsequently listed in 1999

and is now the largest listed pharmaceutical company in Malaysia by

market capitalisation. Currently its 2 major pharmaceutical operations are

i) logistics and distribution and ii) manufacturing.

i) Logistics and distribution

This is Pharmaniaga’s core business that mainly distributes

pharmaceutical, medical products and hospital equipment, accounting for

98% of its total revenue. While it has growing global presence, we

estimate that approximately 70% is derived from the Malaysian market

and the remaining from Indonesia. Currently it has 4 warehouses located

in Selangor, Penang, Sabah and Sarawak with an approximate total

capacity of 21,000 pallets.

Fig 1: Warehouse locations and capacities

Source: Company, Affin Hwang

` 8 September 2017


Fig 2: L&D's RM2.15bil revenue breakdown in 2016


Malaysia’s Ministry of Health (MoH) remains the biggest client that

accounts for approximately 67% of L&D’s revenue, whereby Pharmaniaga

supplies drugs and medical items to over 148 government hospitals and

1,700 clinics nationwide. Most of the sales to the MoH are under a

concession agreement (CA), in which Pharmaniaga distributes third-party

products and its own in-house pharmaceutical products to MoH.

Fig 3: Overview of Malaysia pharmaceutical industry

Source: Company, IMS, Affin Hwang Note: Market size is derived from IMS MAT 2016/4

According to IMS Health, the market size of Malaysia pharmaceutical was

estimated at RM6.5bn in 2016; RM2.1bn of it was contributed by MoH

while the remaining RM4.4bn was generated from private sector mostly

through out-of-pocket expenditure, private health insurance expenditure,

and corporation health expenditure. Approximately half of the public

sector’s pharmaceutical purchases were procured through concession

agreement managed exclusively by Pharmaniaga.

` 8 September 2017


Concession Agreement (CA)

The concession agreement with the Health Ministry grants Pharmaniaga

the exclusive rights to supply medical products to Government-owned

hospitals. Before 1994, the logistics and distributions of pharmaceutical

and medical products were handled by the government. The concession

agreement started back in 1994 when Pharmaniaga (formerly known as

Remedi Pharmaceutical) signed a 15 years’ concession agreement with

the MoH for the privatisation of the Ministry’s pharmaceutical laboratories

and stores. In the beginning of December 2009, Pharmaniaga renewed a

10-year concession agreement with the Health Ministry until end of 2019.

Under the CA, Pharmaniaga will receive tender submissions from various

potential pharmaceutical and non-pharmaceutical vendors for more than

600 products listed under the Approved Product Purchase List (APPL)

required by the MoH. The government will then evaluate and select

vendors from the list in every 3 years based on tender pricing. As a

distributor, Pharmaniaga procures, stores, and distributes pharmaceutical

and non-pharmaceutical products to government hospitals or clinics at a

certain percentage of mark-up as its profit.

For the non-concession segment, there are more than one distributor such

as Pharmaniaga, DKSH and Zuellig Pharma that handles distribution of

pharmaceutical products which do not fall under the APPL supplied to

MoH. Non-concession revenue to MoH contributes to around 16% of its

total L&D revenue.

Temporary revenue slowdown

Driven by the growing public healthcare segment, Pharmaniaga’s revenue

has been steadily rising since 2010. However, sales from Malaysia slowed

down in 2015 and declined by 9% yoy in 2016 because of a reduction in

government orders. The main reason behind this was due to the MoH

trying to improve its distribution efficiency and reduce inventory levels of

pharmaceutical products stocked up at medical institutions.

The government also announced that the national budget allocated for

pharmaceuticals would be reduced to RM4.0bn in 2017 from RM4.6bn in

2016, which is expected to negatively impact Pharmaniaga’s revenue.

Although the adjustment of inventory levels at public hospitals/clinics

caused the reduced orders, underlying pharmaceutical demand remains

stable as more patients seek treatment. Therefore, any revenue

contraction should be temporary.

Fig 4: Revenue affected by government's reduced order


` 8 September 2017


Updates on concession agreement extension

The concession agreement will be ending in November 2019 and the

company is in discussion for an extension. Management is fairly confident

of securing an extension not only because of Pharmaniaga’s proven track

record but for its logistics and distribution infrastructure. Pharmaniaga has

invested more than RM200m on the implementation of the Pharmacy

Information System (PhIS) at over 1,100 facilities around the country. This

real-time central database system manages and tracks the inventory level

and minimizes medication prescription errors. Pharmaniaga has achieved

consistently 99.8% of orders being delivered successfully to hospital or

clinics nationwide in a timely manner. Moreover, MoH still needs to rely on

a sizeable distributor to manage inventory and delivery of drugs

nationwide without supply disruptions. The extension of concession

agreement is positive for Pharmaniaga as it provides stable revenue

stream from the government.

Reduce reliance on concession agreement

ii) Manufacturing

Pharmaniaga’s manufacturing division produces generic drugs which

comprises of oral solid dosages, liquid, cream and small volume

injectable, totalling over more than 480 products. Of this, there are 210

approved registrations to date to sell its products to 14 countries

worldwide. Approximately 80% of Pharmaniaga’s manufacturing sales are

generated from pharmaceutical products sold to the MoH while the rest

are derived from the private sector.

Figure 5: Manufacturing capacity in Malaysia

Dosage form Capacity per annum

Solid 5.0bn tablets and capsules

Liquid 950m litres

Cream 600 metric tons

Vials 15m units

Ampoules 20m units Source: Company, Affin Hwang

Fig 6: Pharmaniaga's manufacturing plants

` 8 September 2017



Going forward, the manufacturing division is expected to be a major

earnings growth driver for the company. As the sales from concession

agreement is subject to the government’s budget for pharmaceuticals,

Pharmaniaga is thus seeking to expand non concession agreement by

supplying more in-house generic drugs to government hospitals, private

hospitals and clinics. The non-concession business’ revenue contribution

rose from 38% in 2012 to 49% in 2016 and management expects this

segment to outgrow sales from the concession agreement.

` 8 September 2017


Fig 7: Non-concession agreement's contribution increases due to manufacturing and export sales


More importantly, the manufacturing division enjoys much higher EBIT

margin of 20% compared to 1% EBIT margin for the L&D division. Its

revenue of RM420m only contributed 20% to 2016’s total revenue of

RM2.189bn. However, its contribution to EBIT level was approximately

92% in the same year. This is because the L&D division only earns a small

percentage of mark-up for warehousing and distribution services whereas

the manufacturing division develops its own in-house products and has

higher value-add.

Fig 8: EBIT margin comparison


Fig 9: EBIT breakdown by division


By 2024, Pharmaniaga expects to develop more than 250 new products

for various therapeutic segments, such as cardiovascular, central nervous

system, anti-infective, anti-diabetics, gastro-intestinal, respiratory and

others. These products are at various stages of product development and

will be launched to the market upon expiry of the equivalent branded

drugs’ patent. The increased product portfolio should help to drive its

manufacturing growth.

` 8 September 2017


In terms of pharmaceutical manufacturing by revenue size, Pharmaniaga

is the largest among the listed local generic manufacturers. Against the

other companies, its manufacturing division’s PBT margin was fairly

attractive at 23% in 2016, only behind Apex Healthcare’s 28% PBT

margin.

Fig 10: Peer comparison for PBT margin (2016)


Fig 11: Peer comparison for revenue (2016)


Indonesia: additional growth driver Indonesia is one of the main markets for Pharmaniaga’s foray into the

regional pharmaceutical market. In 2004, Pharmaniaga acquired 55%

equity interest in PT Millennium Pharmacon International (MPI), a listed

distributor in Indonesia that provides warehousing and distribution services

for pharmaceutical products, food supplements, and diagnostic products.

Its 5 main principals are Lapi, Guardian, Dipa, Meprofarm, and Meiji.

In 2014, Pharmaniaga successfully acquired 75% PT Errita Pharma, a

manufacturing facility in Bandung, Indonesia for RM74m and has now

increased its stake to 85%. It has more than 45 products, including generic

and branded generics under Ethical segment and Over-The-Counter

segment. Its products are distributed by PT Millenium Pharmacon

International (MPI) and PT Global to government hospitals.

(RM mil)

` 8 September 2017


Fig 12: Pharmaniaga's manufacturing plant and warehouse in Indonesia


Indonesian operations contributed around 30% of Pharmaniaga’s total

sales. Sales growth was stronger in 2015 and 2016 after the acquisition of

PT Errita Pharma. However, profit contribution has been immaterial as PT

Errita is still loss making. The management guided that the utilization rate

of PT Errita is still low at around 40%, but looking at operations to

breakeven this year as production ramps up.

Fig 13: Acquisition of Errita boosted Indonesian operation's growth in 2015


Fig 14: Indonesian operation's PBT dragged by Errita


` 8 September 2017


Financial highlights

Revenue growth underpinned by healthcare demand

Pharmaniaga’s revenue has increased from RM1.38bn in 2010 to

RM2.19bn in 2016, growing at a CAGR of 8%. The growth was mainly

driven by an 8-9% CAGR of pharmaceutical sales in Malaysia over the

same period, underpinned by increasing healthcare demand. Also,

Pharmaniaga’s Indonesian operations helped to boost revenue growth.

Although revenue from Malaysian operations declined by 9% in 2016,

management guided that this was due to reduced inventory level among

public hospitals. As underlying healthcare demand is intact, management

believes that revenue should recover.

Figure 15: Pharmaniga's revenue growth since 2010


Figure 16: Net profit has been volatile


Volatile earnings impacted by one-offs However, Pharmaniga’s earnings growth has been volatile over the past

few years. Note that net profit was affected by a RM28m amortisation

charges on Novation Agreement and RM18m on provision for receivables

impairment in 2013.

Higher PhIS amortization cost

In 2015, net profit dipped to RM84m mainly due to lower government order

and higher amortisation of RM30m mainly for its Pharmacy Information

System (PhIS). According to management, Pharmaniaga is required by the

terms of its concession agreement to spend RM30m each year until 2019

to design, develop, supply, install, configure, test and commission,

maintain and operate the Pharmacy Information System (“PhIS”) and Clinic

Pharmacy System (“CPS”). The amortization period of the PhIS is over the

period of the concession agreement until end of 2019. However, the

management is fairly confident that the agreement will be extended by a

further 10 to 15 years. As a result, the amortization cost for PhIS is

expected to be lower at around RM10-15m annually in the coming years

after extending the amortisation period.

` 8 September 2017


Higher finance cost in 2016

Net profit declined from RM84.6m in 2015 to RM45.9m in 2016, mainly

caused by a reduction in government orders and higher operating cost.

Pharmaniaga increased borrowing to finance working capital, increasing

finance cost from RM15m in 2015 to RM34m in 2016. Pharmaniaga is

mandated by the government to maintain a consistent level of inventory at

its warehouse to avoid penalty charges for late delivery. Pharmaniaga

places orders to the suppliers 6 months ahead to fulfil these orders. When

the government reduced orders in 2016, Pharmaniaga was stuck with

higher inventory level as it needed to honour the order commitment with its

suppliers. As a result, Pharmaniaga had to increase borrowing to pay its

suppliers. Nevertheless, management is undertaking an inventory

optimization process and has reduced orders to its suppliers. With lower

inventory level, Pharmaniaga expects to reduce borrowings and finance

costs.

Figure 17: Increase in inventory due to slower sales


Fig 18: The management intends to reduce debt by 10-20% to lower net gearing to 80% level


` 8 September 2017


Figure 19: Peer comparison Bloomberg Rating Sh Pr TP Mkt Cap Year EV/EBITDA P/B

Code LC (RMm) end CY16 CY17E CY16 CY17E CY16 CY16 CY16 CY17E CY16 CY17E

Y.S.P.SOUTHEAST ASIA* HOLDINGBDMS TB BUY 2.68 3.24 366 Dec 14.1 14.8 -5.8 4.9 7.4 1.3 10.4 9.0 2.8 2.7

PHARMANIAGA BERHAD BH TB N/R 4.19 N/R 1,089 Dec 23.9 17.8 -46.0 34.0 10.4 2.0 10.0 10.3 3.8 4.0

APEX HEALTHCARE BHD APHS IN N/R 4.94 N/R 579 Mar 15.3 14.3 8.5 7.1 7.6 7.4 11.5 11.3 0.3 0.0

KOTRA INDUSTRIES BHD RFMD SP N/R 1.94 N/R 259 Dec 34.5 nm nm nm 8.2 2.0 6.1 0.0 0.0 0.0

HOVID BHD SILO IJ N/R 0.31 N/R 254 Dec 17.2 13.5 -16.3 27.8 13.9 1.3 9.3 9.0 1.6 3.2

CCM DUOPHARMA MIKA IJ N/R 2.10 N/R 586 Dec 21.8 nm -46.7 nm 9.6 1.3 5.9 0.0 3.1 0.0

Average 3,133 21.1 15.0 -21.2 18.4 9.5 2.7 8.9 6.6 1.9 1.7

PE (x) EPS growth (%) ROE (%) Div. Yield (%)

Source: Affin estimates*, Bloomberg Note: Pricing as of 7/09/2017

Note: Kotra has no analyst coverage.

Shareholding structure

In 2010, Boustead Holdings acquired Pharmaniaga from UEM for

RM534m, becoming the holding company of Pharmaniaga. Boustead

Holdings and LTAT (Armed Forces Fund Board, Boustead’s parent

company) hold 56% and 10% equity interest in Pharmaniaga respectively.

Boustead Holdings has a 20.7% equity interest in Affin Holdings Berhad

(AHB), the ultimate holding company of Affin Hwang investment Bank.

Key risks

Key downside risks include: i) termination of concession agreement, ii)

product recall, iii) price competition among generic pharmaceutical

competitors, iv) production line maintenance

Meanwhile, key upside risks include: i) higher government budget for

pharmaceutical products, ii) earlier-than-expected ramp up of PT Errita

plant, iii) faster-than-expected penetration of generic drugs in private

sectors.

` 8 September 2017


Pharmaniaga – FINANCIAL SUMMARY Profit & Loss Statement Key Financial Ratios and Margins

FYE 31 Dec (RMm) 2013 2014 2015 2016 FYE 31 Dec (RMm) 2013 2014 2015 2016

Revenue 1,946.6 2,122.9 2,189.3 2,189.0 Growth

Operating expenses 1,775.6 1,932.2 2,005.5 2,038.4 Revenue (%) 7% 9% 3% 0%

EBITDA 171.0 190.8 183.9 150.6 EBITDA (%) -20% 21% -3% -17%

Depreciation (64.6) (49.7) (57.0) (45.9) Core net profit (%) 12% 3% -26% -37%

EBIT 106.4 141.1 126.8 104.7

Net int income/(expense) (13.4) (15.5) (14.1) (32.7) Profitability

Associates' contribution - - - - EBITDA margin (%) 8% 9% 9% 7%

EI 55.5 21.2 1.3 8.0 PBT margin (%) 5% 6% 5% 3%

Pretax profit 93.0 125.6 112.7 72.0 Net profit margin (%) 3% 4% 4% 2%

Tax (36.2) (31.4) (28.1) (26.2) Effective tax rate (%) 39% 25% 25% 36%

Minority interest 1.6 0.4 0.5 0.3 ROA (%) 5% 8% 6% 3%

Core net profit 112.2 115.4 85.9 53.9 Core ROE (%) 23% 22% 15% 10%

Net profit 56.8 94.2 84.6 45.9 ROCE (%) 7% 13% 10% 4%

Balance Sheet Statement Dividend payout ratio (%) 75% 77% 92% 91%

FYE 31 Dec (RMm) 2013 2014 2015 2016

Fixed assets 353.4 369.8 406.2 420.5 Liquidity

Other long term assets 132.2 268.7 320.6 385.9 Current ratio (x) 1.1 0.9 0.9 0.8

Total non-current assets 485.6 638.5 726.8 806.4 Op. cash f low (RMm) 250 213 7 35

Free cashflow (RMm) 207 182 (54) (8)

Cash and equivalents 32.9 32.0 22.5 70.5 FCF/share (sen) 0.80 0.70 (0.21) (0.03)

Stocks 410.5 427.0 539.9 532.2

Debtors 168.8 142.9 195.3 256.3 Asset managenment

Other current assets 13.2 2.3 11.2 17.7 Debtors turnover (days) 36 27 28 38

Total current assets 625.5 604.3 768.9 876.7 Stock turnover (days) 97 86 96 106

Creditors turnover (days) 71 76 83 80

Creditors 385.5 447.4 487.1 441.9

Short term borrow ings 199.6 200.1 399.6 616.7 Capital structure

Other current liabilities 4.8 7.7 7.4 3.5 Net gearing (%) 33% 31% 67% 98%

Total current liabilities 589.9 655.1 894.2 1,062.0 Interest cover (x) 7.9 9.1 9.0 3.2

Long term borrow ings 0.3 1.1 0.6 0.2

Other long term liabilities 17.6 34.5 40.9 61.4 Quarterly Profit & Loss

Total long term liabilities 17.9 35.6 41.5 61.7 FYE 31 Dec (RMm) 3Q16 4Q16 1Q17 2Q17

Shareholders' Funds 487.6 526.5 529.4 530.6 Revenue 515.2 582.8 618.3 518.0

Minority interests 15.6 25.5 30.6 28.8 Operating expenses 484.7 556.9 571.8 490.3

EBITDA 30.5 25.9 46.5 27.6

Cash Flow Statement Depreciation 2.0 12.6 12.5 11.1

FYE 31 Dec (RMm) 2013 2014 2015 2016 EBIT 28.5 13.3 34.1 16.5

EBIT 106.4 141.1 126.8 104.7 Net int income/(expense) (8.6) (9.2) (6.3) (6.4)

Depreciation & amortisation 64.6 49.7 57.0 45.9 Associates' contribution - - - -

Working capital changes 141.7 68.9 (104.1) (63.7) Exceptional Items 2.0 4.3 0.7 1.4

Cash tax paid (33.6) (21.3) (36.0) (26.2) Pretax profit 19.9 4.1 27.8 10.2

Others (28.8) (24.9) (36.5) (25.2) Tax (7.2) (5.0) (8.5) (0.4)

Cashflow from operation 250.4 213.5 7.3 35.4 Minority interest (413.0) (0.1) 0.3 0.2

Capex (43.5) (31.4) (61.3) (43.6) Net profit 12.7 (0.9) 19.3 9.8

Disposal/(purchases) 0.3 0.6 0.2 0.2 Core net profit 14.7 3.4 19.9 11.2

Others (36.3) (123.7) (57.8) (102.7)

Cash flow from investing (79.5) (154.5) (118.8) (146.2) Margins (%)

Debt raised/(repaid) (134.1) (2.6) 191.5 208.6 EBITDA 5.9% 4.4% 7.5% 5.3%

Equity raised/(repaid) - - - - PBT 3.9% 0.7% 4.5% 2.0%

Dividends paid (37.2) (57.5) (90.6) (52.2) Net profit 2.5% -0.2% 3.1% 1.9%

Others - - - 1.0

Cash flow from financing (171.3) (60.1) 100.8 157.4

Free Cash Flow 206.9 182.0 (54.0) (8.2)


` 8 September 2017


Equity Rating Structure and Definitions

BUY Total return is expected to exceed +10% over a 12-month period

HOLD Total return is expected to be between -5% and +10% over a 12-month period

SELL Total return is expected to be below -5% over a 12-month period

NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information

only and not as a recommendation

The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.

OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months

UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months

This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (“the Company”) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the Company’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or transactions discussed in this report. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. The Company’s research, or any portion thereof may not be reprinted, sold or redistributed without the consent of the Company . The Company, is a participant of the Capital Market Development Fund-Bursa Research Scheme, and will receive compensation for the participation. This report is printed and published by: Affin Hwang Investment Bank Berhad (14389-U) A Participating Organisation of Bursa Malaysia Securities Berhad 22nd Floor, Menara Boustead, 69, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia. T : + 603 2146 3700 F : + 603 2146 7630 [email protected] www.affinhwang.com

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