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Equity ResearchNigeria: Company Note

UAC of Nigeria plc

Earnings expectations slightly lower,outlook still robust, in our view

Esili.Eigbe*[email protected]

NSE code UACN

Bloomberg code UACN NL

Recommendation BUY

Share price (NGN) 28.53

Target price (NGN) 47.00

Implied return (%) 65

Historical performance (%)

Absolute Relative

1 month -1.6 -1.8

6 months -25.6 -22.4

12 months -17.1 0.0

Source: Bloomberg, Company data

Price relative to adjusted ASI

0.60

0.70

0.80

0.90

1.00

1.10

1.20

Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-1

UACN NSE ASI

Share statistics (09/03/2012)

Market cap (NGN'm) 45,669

Market cap (USD'm) 290

Shares free float (%) 95

Shares in issue (m) 1,601

Book value (NGN'm) 36,406

Price/book (x) 1.3

ROE (%) 8.6

Debt/equity (%) 67.3

30-day avg. daily trade (NGN'm) 13.6

30-day avg. daily trade (USD'm) 0.1

Key forecasts FY 10 FY 11E FY 12E FY 13E

Revenue (N'm) 52,314 61,031 65,937 77,340

Growth (%) (7.6) 16.7 8.0 17.3

EBITDA margin (%) 21.1 19.6 20.2 20.8

Operating profit (N'm) 8,530 9,213 10,243 12,876

Operating margin (%) 16.3 15.1 15.5 16.6

EPS (N) 2.0 4.7 2.5 3.3

Growth (%) (20.6) 134.1 (45.7) 29.4

CFPS (N) 4.6 5.2 6.4 7.9

Growth (%) (42.3) 13.9 22.3 23.7

DPS (N) 1.10 1.60 1.80 2.30

PE (x) 14.6 6.2 11.5 8.9

Dividend yield (%) 3.8 5.5 6.2 7.9

Source: Company data, Stanbic IBTC estimates

Bunmi Njugo*[email protected]

Earnings expectations slightly lowerWe have cut our earnings estimates for UACN slightly lower over the medium term

on account of higher input cost inflation expectations particularly in FY:12e and

higher than expected administrative costs. These more than offset stronger sales

growth expectations at its animal feeds & edible oil, property and logistics

businesses as well as an improvement at its restaurant business. We expect

UACNs group EPS to be N3.65 in FY:14e (previously N3.98). Relative to FY:11e

EPS of N4.67 (+134% y/y, previously N5.39), this represents a decline of 8% p.a.

over the period. However, this trend is reflective of a significantly higher base in

FY:11e, underpinned by a one-off gain from the sale of 49% of UACNs interest inUAC Foods Ltd to Tiger Brands. On an operating basis, we expect UACNs

earnings to expand 17% p.a. over the same period.

Re-iterating our investment caseWe are constructive on UACN over the longer term because of: (1) the potentially

stronger market position of its major businesses post ongoing restructuring; (2) we

view its diversified business mix as a plus; (3) high dividend yield and strong

operating cash flow; and (4) attractive valuation. In the short term, UACN is our

most preferred play on the Nigerian consumer market because: (1) we believe that

positive dynamics in the food and retail market amid concerns of a softening in

consumer spending is positive for UACN given that 67% of its sales are staple

food which are quite resilient in a weak macro-economic environment; and (2)

we see limited risk to UACNs earnings as a result of a weaker naira of our

universe of Nigerian consumer companies, UACN is the least exposed to imported

raw materials.

ValuationIn light of the slight cut to our earnings estimates over the medium term and a

review of our valuation methodology, we have cut our 12-month TP to N47.00

(previously N47.50), representing upside potential of 65% from current levels.

Therefore, we maintain our Buy recommendation on UACN. Trading on a CY:13e

PE of 8.9x, UACN is one of the most attractive companies within our universe of

Nigerian consumer companies. In comparison to its peer of Nigeria consumer

companies it trades at a 39% discount.

IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS ARE IN THE DISCLOSURE APPENDIX. U.S. Disclosure: Stanbic IBTC Bank does and seeks to do business with companies covered in its research reports. As a

result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this rep ort. Investors should consider this report as only a single factor in making their investment decision. Customers in

the United States can receive independent, third party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can email [email protected]

request a copy of this research.

12 March 2012
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Company Note - 12 March 2012

Equity Research

Earnings expectations slightly lower

We have cut our earnings estimates for UACN slightly lower over the medium termon account of higher input cost inflation expectations particularly in FY:12e and

higher than expected administrative costs. These more than offset stronger sales

growth expectations at its animal feeds & edible oil, property and logistics

businesses as well as an improvement at its restaurant business.

We expect UACNs group EPS to be N3.65 in FY:14e (previously N3.98). Relative

to FY:11e EPS of N4.67 (+134% y/y, previously N5.39), this represents a decline of

8% p.a. over the period. However, this trend is reflective of a significantly higher

base in FY:11e, underpinned by a one-off gain from the sale of 49% of UACNs

interest in UAC Foods Ltd to Tiger Brands. On an operating basis, we expect

UACNs earnings to expand 17% p.a. over the same period. Notably the adjustment

to our FY:11e EPS is sharp (down 13%) largely because of an upward adjustment

to our estimate of earnings due to minorities during the year. We now estimate that

the minority interest charge for the year will amount to N3.0bn (previously N2.2bn),

in line with management guidance and reflective of Tiger Brands interest in UAC

Foods Ltd.

Figure 1: UAC of Nigeria Plc - changes to earnings estimates

FY11E FY12E FY13E FY14E

New old % New old % New old % New old %

Revenue 61.0 57.6 6 65.9 65.1 1 77.3 73.8 5 86.5 83.4 4

EBITDA 12.0 12.5 (4) 13.3 14.1 (6) 16.1 16.7 (4) 18.1 19.3 (7)

PBT 13.6 13.3 2 9.5 9.5 1 11.7 11.8 (0) 12.9 14.3 (10)

Net Income 7.5 8.6 (13) 4.1 4.2 (4) 5.2 5.3 (0) 5.8 6.4 (8)

Net Asset 42.7 51.6 (17) 41.4 55.1 (25) 50.9 60.0 (15) 49.3 67.9 (27)

EPS 4.67 5.39 (13) 2.53 2.64 (4) 3.28 3.28 (0) 3.65 3.98 (8)

DPS 1.60 1.54 4 1.80 1.87 (4) 2.30 1.90 21 2.55 2.05 24

Source: Company annual report, Stanbic IBTC Research estimates

Figure 2: UACN- EPS


Below we discuss factors that influenced changes to our earnings projections.

2.00

2.25

2.652.51

1.99

4.67

2.53

3.28

3.65

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2.50

3.00

3.50

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2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e


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Higher input costs inflation. Our estimates for UACN now incorporate a greater

increase in input costs, underpinned by the partial removal of gasoline subsidy

earlier this year. As highlighted in several of our previous publications in 2012, we

anticipate that the increase in gasoline prices will translate into higher raw materialcosts, particularly those sourced locally. We recall that Standard Bank recently

revised its inflation forecast for 2012e to +12.8% (previously 9.8%); forecasts for

2013e and 2014e are unchanged at 10.5% and 11.5% respectively. We expect this

will have the greatest impact on UACNs animal feeds & edible oil, packaged food

(UAC Foods Ltd) and its paints businesses. These businesses contribute 24%, 11%

and 9% to earnings respectively - based on performance in FY:10. At UACNs

animal feeds & edible oil business, we are concerned that the price of grains could

continue to rise. At its packaged food business, the proposed increase in import

duties on wheat will increase the cost of general purpose flour. With respect to its

paint business, the cost of pigments and solvents are likely to be sticky given trends

in oil prices.

Nevertheless, we expect gross margins to strengthen over the medium term relative

to our previous forecasts except for FY:11e, when management was unable to pass

the higher costs of raw materials to the consumer across the board. In FY:12e

FY:14e, we believe gross margins will receive support from operating efficiency and

an increase in prices. UAC Foods Ltd and Grand Cereal benefited from these

initiatives in the previous year and are likely to continue to build on this. The

restructuring of UACNs restaurant business will also provide support for gross

margins over the medium term as well. We now expect UACNs gross margin to

average 34.0% over FY:12e FY:14e (previously 33.7%). Relative to our previous

forecasts, we expect the trend in gross margins over the medium term to remain

unchanged lower from FY:10.

Figure 3: UACN - gross margin estimates (current vs. previous est.)


Higher than expected administrative costs. We have raised our estimates on

administrative costs as recent trends in earnings and our discussions with UACNs

management indicate that administrative costs are likely to remain high contrary to

our previous estimates. We previously hoped that over time UACNs administrationcosts would moderate as management aims to improve efficiency across its

businesses and bring administrative costs to net revenue closer to that of its peer of

Nigerian consumer companies. However, it would seem the focus for now is on

specific businesses like UAC Foods Ltd, where its JV with Tiger Brands is expected

30.0

31.0

32.0

33.0

34.0

35.0

36.0

37.0

38.0

FY:06 FY:07 FY:08 FY:09 FY:10 FY:11e FY:12e FY:13e FY:14e

Current gross margin estimate Previous gross margin estimate

Figure 4: UACN - admin cost/ net revenue (current vs. previous est.)


6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00


Current admin costs to net revenue

Previous admin costs to net revenue


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to operate more efficiently over the medium term. We now estimate that UACNs

administrative costs to net sales will average 11.2% over the medium term (FY:12e

FY:14e), ahead of our previous estimate of 8.9% and industry average of 6.1%

over the same period. UACNs relatively high admin costs are partly reflective of itsproperty business direct distribution model, but also indicative of inefficiencies in

other businesses. Consequently, we expect EBITDA margins to contract, averaging

20.6% over the medium term below our previous estimate of 22.5%. Relative to its

peer group of Nigerian consumer companies, which we expect to have an EBITDA

margin of 14.0% on average over the same period, UACNs profit margins remain

attractive.

Figure 5: UACN - EBITDA margin estimates (current vs. previous)


UACNs marketing and distribution costs are relatively low when compared with

other brand oriented companies, in our opinion, given its marketing and distribution

costs to net revenue of 2.3% over the medium term. Notably, its peer group of brand

oriented Nigerian consumer companies have a marketing & distribution costs to net

revenue of 12.3% over the same period. We see the potential for UACNs marketing

and distribution costs to rise substantially over the medium to long term as it

consolidates its market share and strengthens its brands. However, we have

deliberately not incorporated this in our estimates due to lack of visibility on this at

present.

Stronger than expected sales growth in certain businesses. Despite a relatively

tough business environment, some of UACNs businesses, including animal feeds &

edible oil, property and logistics are experiencing better than expected growth.

Grand Cereal, UACNs animal feeds and edible oil business witnessed a sharp

improvement in sales volumes in FY:11e, reflective of relatively less restiveness in

Jos its major hub and the location of its main facility. While insecurity in Northern

Nigeria remains a concern for Grand Cereal s earnings outlook, the situation is

much better in comparison to the wide spread ethnic violence in the region about 18

24 months ago. Accordingly, we expect the business will continue to see

sustained growth. We note that Grand Cereal recently expanded its feed mill and is

expected to expand further over the medium term. Grand Cereal began milling feedin Benin (Southern Nigeria) in FY:11 following an agreement with Bendel Feeds.

Management is also considering building new feed mills in Southern Nigeria in a bid

to decentralise its mills and enhance growth. Sales of edible oils are also strong and

recent re-branding efforts are gradually being monetised.

14.0

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0


Current EBITDA margin estimate Previous EBITDA margin estimate


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Figure 6: UACN - Grand Cereal 2010 business mix (revenue)


Figure 8: UACN - revenue estimates by business

FY11e FY12e FY13e FY14e

New old % New old % New old % New old %

UAC Food Ltd 11.4 13.5 (15.5) 13.6 14.9 (8.7) 16.3 17.1 (4.6) 17.9 19.6 (8.8)

Restaurant 5.7 6.0 (5.3) 3.0 6.8 (55.8) 3.3 7.5 (55.8) 3.6 8.2 (55.8)

Edible oil & feeds 22.0 18.8 16.9 24.7 21.2 16.1 29.5 23.4 26.4 33.8 25.7 31.5

Real Estate 11.6 9.5 22.5 13.4 11.2 19.8 15.4 12.9 19.8 17.1 14.8 15.1

Logistics 3.3 2.8 17.6 3.5 2.8 23.5 3.8 3.4 13.2 4.1 3.9 6.3Paint 4.2 4.1 1.5 4.6 4.9 (5.4) 5.3 5.7 (8.5) 5.8 6.8 (14.7)

Vehicles 1.5 1.5 0.0 1.7 1.8 (4.3) 1.9 2.0 (8.5) 2.0 2.2 (8.5)

Bottled water - Warm Springs 0.7 0.7 0.0 0.8 0.8 0.0 0.9 0.9 0.0 1.1 1.1 0.0

Others 0.5 0.5 0.0 0.7 0.7 0.0 0.9 0.9 0.0 1.1 1.1 0.0


Figure 9: UACN - Segment gross profit

FY11e FY12e FY13e FY14e

New old % Ne old % New old % New old %

UAC Food Ltd 2.7 3.7 (27) 3.1 3.9 (22) 3.9 4.9 (20) 4.3 5.6 (23)

Restaurant 1.4 1.5 (5) 1.4 1.7 (22) 1.8 2.0 (10) 2.4 2.1 11

Edible oil & feeds 5.6 4.7 18 5.8 5.3 9 6.9 5.6 23 7.8 6.4 21

Real Estate 6.4 6.2 4 7.1 6.2 15 8.2 7.1 15 9.0 8.2 11

Logistics 1.3 0.8 55 1.3 1.0 31 1.4 1.2 20 1.5 1.4 12

Paint 2.2 2.0 8 2.4 2.2 7 2.8 2.6 4 3.0 3.1 (3)

Vehicles 0.3 0.3 (3) 0.3 0.4 (7) 0.4 0.4 (11) 0.4 0.4 (9)

Bottled water - Warm Springs 0.2 0.2 0 0.2 0.2 0 0.2 0.2 0 0.3 0.3 0

Others 0.5 0.5 (10) 0.6 0.7 (10) 0.8 0.9 (10) 0.9 1.1 (10)


With respect to UAC Property Development Company (UPDC), UACNs propertybusiness, off-plan sales of development property strengthened in the previous year

and are likely to remain robust over the medium term underpinned by demand for

quality housing and credible property developers. UACN was able to consolidate its

market share in the previous year as the recent banking crisis resulted in the

Animal feeds

70%

Edible oil

20%

Maize meal

10%

Figure 7: UACN - Grand Cereal - business mix (N,bn)


11.8

16.218.3

22.025.3

3.4

3.9

4.3

5.2

5.9

1.7

1.9

2.1

2.3

2.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2010 2011E 2012E 2013E 2014E

Animal feeds Edible oil Maize meal


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Equity Research

demise and loss of credibility of a great number of property developers. Further

more, rental income is expanding and its hotel business is starting to gain traction.

Figure 10: UACN - UPDC - business mix FY:09 (revenue)


MDS Logistics, UACNs logistics business enjoyed a better than expected

performance in FY:11e, setting a higher base for growth in subsequent years.

According to management, the companys performance was enhanced by business

from its fast moving goods and pharmaceutical clientele as its diversificationstrategy from telcos deepens. Although this business has great potential given

Nigerias highly fragmented and unorganised logistics market, its potential at the

moment is limited by managements deliberate strategy not to expand the haulage

segment of this business without a partner with strength in haulage. Given the

inadequacy of transportation infrastructure in Nigeria, we see merit in

managements strategy. Given that the search for a strategic partner for this

business has taken a great deal of management time and is likely to continue to do

so, we think management should explore spinning off the business completely. This

will give management more time to focus on other businesses which contribute

significantly more to earnings. In FY:10 MDS Logistics contributed 7% to UACNs

group earnings and we expect its contribution could shrink to 5% over the medium

term on an organic basis.

Improvements in UACNs restaurant business. UACN restaurant franchise is

beginning to witness some improvements facilitated by the franchising of most of its

outlets. UACN is currently shifting from companyoperated outlets/ franchising

business model to a pure franchising business model. According to UACNs

management, total company operated outlets was 12 at the time of writing, down

from 50 outlets for most of FY:11. We note that total outlets stood at 152, at the time

of writing, implying total franchised outlets of 140. We attribute the improvements at

UACNs restaurant business to the following: the closure of non-performing

franchisees, the licensing of credible ones and the strengthening of its management

team. More so, this exercise has enabled UACN to consolidate its franchisees,making the business easier to manage. While we see merit in UACNs pure

franchising model as it reduces the day-to-day burden on UACNs management, we

are concerned about UACNs ability to sustain this model and the quality of its

franchise. As shown in figure 8, we expect revenue from this business to collapse

Property sales

93%

Hotels & rest

house income

0%

Rental

income

5%

Management

fees

2%

Figure 11: UACN - UPDC - business mix FY:14e (revenue)


Property sales

81%

Hotels & rest

house income

10%

Rental income

10%

Management

fees

1%


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Equity Research

over the medium term relative to our previous estimates. However, its earnings

should improve strongly on significantly greater franchised margins.

Dividend payout likely to increase

In our last discussion with UACNs management, it indicated that the company is in

a position to increase its annual dividend payout ratio (which as of FY:10 was 55%)

given its relatively robust cash position. UACNs cash position was greatly

enhanced by its recent transaction with Tiger Brands in which it received N9.2bn for

49% of its interest in UAC Foods Ltd. As at 9M:11, UACN had a cash position of

N10.5bn (+91% y/y). Whilst management has indicated a dividend payout ratio

closer to 100% of earnings over the medium term, we estimate dividend payout

ratio could average 70% over the same period. This compares to an average of

51% over the last five years. Consequently, we expect its DPS to climb 17% p.a.

over the medium term to N2.55 in FY:14e (previously N2.05). At current price

levels, our DPS estimates represents a dividend yield of 7.3% over the medium

term attractive in light of local consumer companies with an average dividend

yield of 4.0% over the same period. Note that dividend yield in developed and other

emerging market are much lower averaging 2.6% and 2.1% respectively over the

same period.

Management Capex guidance moderate

Excluding UPDC, UACNs management guided towards a relatively moderatecapex programme over the medium term, albeit higher relative to previous years.

Managements capex programme collaborates its more optimistic outlook for

dividend policy over the period. Based on our discussion with management, capex

programme over the medium term is likely to focus on the following business: (1)

Figure 13: UACN - DPS yield vs. local peers

Source: Company annual report and management, Stanbic IBTC Research estimates

Figure 12: UACN - DPS and dividend payout ratio

Source: Company annual report and management, Stanbic IBTC Research estimates

10.9

7.3

6.0

3.9 3.93.7 3.7

3.32.8 2.6

2.1

0.00

2.00

4.00

6.00

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DSR

U

ACN

Guinness

Cad

bury

Unilever

NB

HFM

Nestle

PZ

DMc

onsumers

EMc

onsumers

0.80

1.36

1.60

1.041.10

1.60

1.80

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40

60 60

41

55

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71 70 70

-

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2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e

DPS (N) Dividend payout ratio


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UPDC; (2) UAC Food Ltd; (3) Grand Cereal; and (4) CAP Plc, UACNs paint

business. Over the medium term we estimate capex to net revenue is likely to

average 15%, ahead of a five year average of 10.6%. Note that excluding UACNs

property business, we expect annual capex to average N1.0bn per year over theFY:12e FY:14e. This represents a capex to net revenue of 2% on average, which

we believe is reasonable relative to peers. Implicitly, capex at its property business

would be N8.9bn, N10.6bn and N12.0bn in FY:12e, FY:13e and FY:14e

respectively representing 68% of UPDCs net revenue on average over the

period.

UACNs property business is capital intensive, but capex over the medium term is

particularly high as UPDCs management seeks to improve its mix of rental vs.

property development income over the medium to long term. Notably, capex

funding at UPDC will be sourced independent of group resources (based on

management guidance). UPDC is listed independently on the Nigerian Stock

Exchange and can secure funding on its own. At the moment its management has

mentioned launching a REIT fund (N20.0bn) and an equity offering (size unknown)

in the current year to raise capital. Note that we have incorporated funding from the

REIT in our estimates, but delayed incorporating funding from the equity offering as

we have greater visibility on the former.

Figure 14: UACN - Capex


At UAC Foods Ltd, management will continue to expand the capacity of existing

products (Gala and dairy) with the potential of acquiring Deli Foods Ltd, which was

acquired by Tiger Brands in the previous year. UAC Foods expanded its Gala

capacity by 25% toward the end of FY:11. At the same time, there were

investments in packaging and dough processing to enhance efficiency. These,

according to management, resulted in a 20% increase in Galas volumes in FY:11.

In the dairy segment of this business, management is investing in chillers and

logistics. We note that the sale of Gala sausages and dairy products represents

92% of UAC Foods revenue. In our view, the acquisition of Deli Food Ltd by UAC

Foods is most likely to happen over the medium term.

At CAP, management is currently in discussions with potential targets in the

Nigerian paint market. The objective is the diversification of its product portfolio and

deepening its product suite of architectural paints. CAP is predominantly an

architectural paint manufacturer and would like to strengthen its earnings through

(0.6)

2.5

8.1

10.4

7.9

9.2

9.9

11.6

13.0

-2%

7%

15%

18%

15% 15% 15% 15% 15%

-5%

0%

5%

10%

15%

20%

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10.00

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14.00

2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e

Capex (N,bn) Capex, % of net revenue


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greater product offering, capitalising on its established brand (Dulux).

At Grand Cereal, UACNs management is currently expanding its feed milling

capacity. At the moment, its main facility in Jos operates at a relatively high

utilisation rate (+80% - by our estimate), underpinned by strong demand for

livestock feeds particularly in the North. While its facility in Jos will see its current

capacity increase, management is also considering expanding in other regions in a

bid to reduce the impact of restiveness in the North on its operations.

Explaining low group ROAEs

At first glance, UACNs ROAE is low, standing at 8.6% in FY:10 and averaging

13.4% in the last five years. However, using this parameter can be misleading as itlargely reflects the balance sheet of the property business which is notably a low

ROE business as the revaluation gains on its investment property portfolio is

credited to shareholders funds, thus constantly swelling the denominator. UPDCs

low ROE is reflective of its large investment property book, which takes into

account unrealised gains on these assets. UACNs investment property portfolio is

typically re-valued every two years and the excess or deficit on its investment

property relative to its cost or previous book value is credited to shareholders funds.

Analysing a group of DM and EM property companies, we observe that property

companies are naturally low ROE businesses, reflective of their large investment

property reserves. Based on a sample of five hundred global property companies

we examined, average ROE in 2010 was 9.3% (based on Bloomberg data). Figure

15 below shows the ROAE of a group of DM and EM property companies over the

last ten years. We note that some of the property companies below with strikingly

high ROAEs have either witnessed a boom in their local property market in the last

ten years or have earnings enhanced by unrealised gains from investment property

in their books (in line with IFRS reporting standard). In contrast, UPDC does not

incorporate unrealised gains on investment property in its earnings.

Adjusting for UPDCs investment property reserves and high retained earnings

which is also peculiar with property companies, UACNs ROAE stood at 21.6% in

FY:10, which was slightly below its peer of Nigerian consumer companies in 2010,

but still a decent return on equity. We expect UACNs adjusted ROAE to climb to

20.0% in FY:14e, slightly below its peer of Nigerian consumer companies which weexpect will average 20.6% during the same period.


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Figure 15: DM and EM property companies - 10 year average ROE's (%)

Source: Bloomberg, company annual report, Stanbic IBTC Research estimates

36.6

29.8

28.5

24.3

23.0

18.3

15.2

13.9

13.3

12.2

11.3

9.4

9.2

8.5

8.1

7.9

4.9

1.1

0 10 20 30 40

Vincom JSC (Vietnam)

BR Properties SA (Brazil)

Douja Prom Addoha (Mexico)

Risesun Real Estate (China)

Oberoi Realty Ltd (India)

Farglory Land Dev. (Turkey)

Altarea (France)

Azrieli Group (Isreal)

Redefine Properties LT (SA)

UOL Group Ltd (Singapore)

LSR Group (Russia)

Metrovacesa SA (Spain)

UPDC (Nigeria)

Parque Arauco SA

United Industrial Corp (Singapore)

Great Portland Properties (UK)

TMG Holdings (Eygpt)

Aldar Properties (UAE)

Figure 16: UACN- ROAE (%)


19.9

15.7

12.4

10.5

8.6

18.9

9.7

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30

35

2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e

Norminal Adjusted


11/21


Equity Research

Re-iterating our investment case

We are positive on UACN over the longer term because of: (1) the potentiallystronger market position of its major businesses post ongoing restructuring; (2) we

view its diverse business model as a plus; (3) high dividend yield and strong

operating cash flow; and (4) attractive valuation. In the short term, UACN is our

most preferred play on the Nigerian consumer market because: (1) we believe that

positive dynamics in the food and retail market amid concerns of a softening in

consumer spending is positive for UACN given that 67% of its sales are staple food

which are relatively resilient in a weak macro-economic environment; and (2) we

see limited risk to UACNs earnings as a result of a weaker naira within our

universe of Nigerian consumer companies, UACN is the least exposed to imported

raw materials.

Below, we discuss our long term investment case.

Potentially stronger market positioning post ongoing business restructuring .

We believe that post ongoing business restructuring at UACN, its major businesses

will have a much stronger position in their respective markets. Currently, major

businesses such as Grand Cereal, UPDC, UAC Foods, UAC Restaurants and CAP

have a ranking of #1 #2 position in their respective markets. The introduction of

new and experienced partners in UAC Foods and UAC restaurants could, in our

opinion, transform those businesses. UAC Foods is improving the brand value of its

products, enhancing its route to market and consolidating its market share. While

management has no plans at this point to introduce strategic partners in either

Grand Cereal, UPDC or CAP, we believe lesson learned at the UAC Foods andUAC restaurant can be transferred. UAC restaurant is shifting to a pure franchise

business model and UACN will spin it off this later year as an independent business

within the group see figure 23. MDS Logistics is currently seeking a strategic

partner and will also be spun-off as an independent company within the group by

year end. This should make it easier to attract a preferred partner and capital

required to grow the business. Although UACN has been progressively

restructuring its businesses in the last couple of years, more recent developments

will likely have the most significant impact on its businesses, in our opinion.

UACNs management mentioned it was considering a strategic plan for smaller

business like GM Nigeria (auto sales), UNICOM (pension administration - captive)

and UAC Registrars. We advocate that these businesses be spun-off and soldgiven that their contribution to earnings is meagre 5% collectively in FY:10. This

should free up more time for management to focus on businesses which contribute

more meaningfully to group earnings.

Diverse business model is a plus. We view UACNs diverse business model as a

plus to group earnings as it should help mitigate the impact of weakness in any one

business on group earnings in the long term. That said, we note that earnings are

largely skewed to food related businesses UAC Foods, UAC restaurants, Grand

Cereal and Warm Spring. Combined these businesses contribute 49% to group

earnings. Contribution from UPDC is also relatively high at 31% in FY:10. Over the

medium term, we do not expect the contribution of these business segments to

change much; however, within the food segment, we estimate that the contribution

of UAC Foods and Grand Cereal will increase.


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Equity Research

Figure 17: UACN - Gross margin mix (FY:10)


High dividend yield. As mentioned earlier, UACN has a high dividend yield at

current price levels and it is one of the most attractive in the sector from that

perspective. Having lost 26% in the last six month, the companys dividend yield

rose sharply. Over the medium term, UACNs dividend yield averages 7.3%, ahead

of its peer of Nigerian consumer companies which yield 4.0% on average over the

same period. In light of managements positive outlook on dividend payment over

the medium term, we see upside risk to our DPS estimates yields could be

higher. UACNs strong dividend yield will be supported by its relatively robust cash

position following the sale of its 49% interest in UAC Foods to Tiger Brands last

year. More so, its operating cash flow is strong. We expect operating cash to PAT

to average 146% over the medium term. In the last five years, this parameter

averaged 170%.

Figure 19: UACN - DPS and DPS yield


UAC Food Ltd

11%

Restaurant

15%

Edible oil &

feeds

22%

Real Estate

31%

Logistics

7%

Paint

9%

Vehicles

2%

Warm Springs(water)

1%

Others

2%

0.80

1.361.60

1.04 1.10

1.601.80

2.302.55

2.8%

4.7%

5.5%

3.6%3.8%

5.5%

6.2%

7.9%

8.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e

DPS (N) DPS yield

Figure 18: UACN - Gross margin mix (FY:14e)


Figure 20: UACN- operating cash flow and operating cash to PAT (%)


UAC Food Ltd

15%

Restaurant

8%

Edible oil &

feeds

26%

Real Estate

31%

Logistics

5%

Paint

10%

Vehicles

1%

Warm Springs(water)

1%

Others3%

6.1

1.9

17.2

12.8

7.48.4

10.3

12.714.0

217%

42%

251%

206%

135%

80%

149%144% 145%

0%

50%

100%

150%

200%

250%

300%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e

Operating cash Operating cash to PAT


13/21


Equity Research

Attractive valuation. Trading on a CY:13e PE of 8.9x, UACN is one of the most

attractive companies within our universe of Nigerian consumer companies. In

comparison to its peer of Nigeria consumer companies, it trades at a 39% discount.

Based on the CY:13e PE of a composite of similar EM companies (weighted based

on the contribution of each segment to UACNs earnings), UACN trades at a 27%

discount. Relative to its historical one-year forward PE of 12.1x, UACN trades at a

25% discount at current levels.

Figure 21: UACN - CY:13e PE vs. Nigerian peers (x)


Major catalysts we see for the stock over the near term are: (1) better than

expected FY:11e earnings and dividend (due in April 2012); and (2) greater visibility

on all its businesses.

9.1

10.811.8

12.7

17.1 17.518.7

19.3

23.0

0

5

10

15

20

25

UACN

DSR

Cadbury

Guinness P

Z

Unilever

NB

Nestle

HFM


14/21


Equity Research

Figure 22: UACN current group structure

Warm Springs Water Ltd

(76%)

Mr Biggs Ghana (100%) UNICO CPFA Ltd (87%) UAC Registrars (100%)

UACN

Divisions:

UAC Restraurants

MDS LogisticsAssociates:

Opticom Leasing (40%)General Cotton Mills

(18%)

UPDC (46%)Grand Cereals and Oil

Mills Ltd (64%)UAC Food Ltd (51%) GM Nigeria (60%)

Source: Company annual report, Stanbic IBTC Research e stimates


15/21


Equity Research

Figure 23: UACN expected group structure by year end

UPDC (46%)Grand Cereals and Oil

Mills Ltd (64%)UAC Food Ltd (51%) GM Nigeria (60%)

MDS Logistic s (1 00%)

UACN

Mr Biggs Ghana (100%) UNICO CPFA Ltd (87%) UAC Registrars (100%)UAC Restraurants

(100%)

Warm Springs Water

Ltd (76%)

Associates:

Opticom Leasing (40%)

General Cotton Mills

(18%)

Source: Company annual report, Stanbic IBTC Research e stimates


16/21


Equity Research

Valuation

In light of the slight cut to our earnings estimates over the medium term and a

review of our valuation methodology, we have cut our 12-month TP to N47.00(previously N47.50), representing upside potential of 65% from current levels.

Therefore, we maintain our Buy recommendation on UACN.

We arrived at our 12-month TP of N47.00 based on a combination of a blended

relative valuation methodology using sum of the parts. Notably, we now use a

CY:13e exit price to book multiple (based on the valuation of GEM peers) to value

UACNs property, pension and registrars business as we be lieve that the true value

of these businesses lie in the value of their book. UACNs property business in

particular holds a substantial portfolio of investment and development properties,

which an earnings based valuation does not capture. On the other hand we value

UAC Foods, UAC restaurant, Grand Cereal, MDS Logistics, CAP and Warm

Springs using a CY:13e EV/EBITDA exit multiple based on its GEM peers. Note

that in the past we used an EV/EBITDA exit multiple to value all UACNs

businesses. Also worth noting, our exit price to book and EV/EBITDA represent a

15% discount to those of GEM companies in respective sectors.

Figure xx: UACN - Relative valuation using SOTP

Exit 2013 EV/ EBITDA EBITDA (2013) Exit 2013 P/ B Net asset (2013) Interest EV Net debt Fair market value

UAC Foods 8.5 2,305 51% 19,593 0 9,992

Restaurant 7.5 1,155 100% 8,663 0 8,663

Edible oil & animal feed 4.0 4,824 64% 19,297 (3,912) 8,438

Real estate - - 0.80 34,841 46% 36,318 (8,446) 12,822

Logistics 5.5 958 100% 5,269 0 5,269

Paint 6.5 1,704 50% 11,077 703 6,261

Auto Sales - 65 60% 0 0 0

Warm Springs 8.5 94 89% 797 374 1,083

UNICO & Registrars --

2.0 566 94% 397 734 1,068

Total UACN EV 101,410 53,595

Net debt - corporate (9,766)

Fair Mkt. Cap 63,361

Price per share (present value) 40

12 month target price 47.30


Key risk

Key risks to our valuation of UACN are:

Poor execution of ongoing business restructuring.

Greater than expected input cost could weigh on profit margins.


17/21


Equity Research

Income statement (NGN'm)

Year-end: December FY 08 FY09 FY10 FY11E FY12E FY13E

Revenue 53,652 56,605 52,314 61,031 65,937 77,340

EBITDA 10,705 10,566 11,030 11,986 13,288 16,101

EBIT 9,175 8,487 8,530 9,213 10,243 12,876

Profit before taxation 8,851 8,077 7,094 13,596 9,525 11,716

Net profit 6,846 6,177 5,451 10,469 6,858 8,787

EPS (NGN) 2.65 2.51 1.99 4.67 2.53 3.28

DPS (NGN) 1.60 1.04 1.10 1.60 1.80 2.30

Ratios:

Net sales growth (%) 44.4 5.5 (7.6) 16.7 8.0 17.3

EBITDA margin (%) 20.0 18.7 21.1 19.6 20.2 20.8

Operating margin (%) 17.1 15.0 16.3 15.1 15.5 16.6

Interest cover (x) 10.0 5.9 4.6 4.6 5.1 8.1

Effective tax rate (%) 22.6 23.5 23.2 23.0 28.0 25.0

Dividend payout ratio (x) 60 41 55 34 71 70

Source: Company financials, Stanbic IBTC estimates

Balance sheet (NGN'm)

FY 08 FY09 FY10 FY11E FY12E FY13E

Current assets 38,032 37,392 48,548 53,806 49,897 54,672

Cash 4,092 5,531 7,246 12,866 7,940 11,157

Non current assets 57,374 56,699 53,824 57,807 62,180 66,495

Total assets 95,406 94,091 102,372 111,613 112,076 121,167

Current liabilities 38,025 37,478 32,061 34,031 34,678 35,742

Non-current liabilities 11,862 11,625 24,723 22,712 21,045 16,045

Long-term interest bearing debt 6,879 6,933 20,512 18,500 16,833 11,833Minorities interest 6,759 7,477 9,182 12,182 14,983 18,520

Shareholders equity 38,760 37,487 36,406 42,688 41,370 50,860

Ratios:

Debt: Equity (%) 63.8 53.1 67.3 70.9 65.8 52.8

Net debt: Equity (gearing) (%) 50.2 40.5 50.0 45.5 41.1 32.1

ROA (avg) (%) 7.2 6.6 5.3 9.4 6.1 7.3

ROE (avg) (%) 12.4 10.5 8.6 18.9 9.7 11.4

Book value per share (NGN) 24.21 23.42 22.74 26.67 25.84 31.77


Cash flow statement (NGN'm)


EBITDA 10,705 10,566 11,030 11,986 13,288 16,101

Cash from operating activities 17,178 12,751 7,361 8,383 10,251 12,678

Net cash flow from investing activities (8,117) (9,909) (7,552) 916 (8,604) (11,204)

Cash flow from financing activities (10,218) (1,404) 1,906 (3,679) (6,573) 1,743

Net increase/ (decrease) in cash (1,157) 1,439 1,715 5,620 (4,926) 3,217

Free cash flow 9,061 2,843 (191) 9,299 1,647 1,474

Ratios:

Cash flow per share (NGN) 10.73 7.97 4.60 5.24 6.40 7.92

Free cash flow per share (NGN) 7.08 2.22 (0.12) 5.81 1.03 0.92



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Equity Research

Income statement (USD'm)

Year-end: December FY 08 FY09 FY10 FY11E FY12E FY13E

Revenue 452.8 377.9 346.4 396.3 407.8 478.0

EBITDA 90.3 70.5 73.0 77.8 82.2 99.5

EBIT 77.4 56.7 56.5 59.8 63.3 79.6

Profit before taxation 74.7 53.9 47.0 88.3 58.9 72.4

Net profit 58 41 36 68 42 54

EPS (US) 2.24 1.68 1.32 3.03 1.57 2.03

DPS (US) 1.35 0.69 0.73 1.04 1.11 1.42

Ratios:

Net sales growth (%) 44.4 5.5 (7.6) 16.7 8.0 17.3

EBITDA margin (%) 20.0 18.7 21.1 19.6 20.2 20.8

Operating margin (%) 17.1 15.0 16.3 15.1 15.5 16.6

Interest cover (x) 10.0 5.9 4.6 4.6 5.1 8.1

Effective tax rate (%) 22.6 23.5 23.2 23.0 28.0 25.0

Dividend payout ratio (x) 60 41 55 34 71 70


Balance sheet (USD'm)


Current assets 320.9 249.6 321.5 349.4 308.6 337.9

Cash 34.5 36.9 48.0 83.5 49.1 69.0

Non current assets 484.2 378.5 356.5 375.4 384.5 411.0

Total assets 805.1 628.1 678.0 724.8 693.1 748.9

Current liabilities 320.9 250.2 212.3 221.0 214.5 220.9

Non-current liabilities 100.1 77.6 163.7 147.5 130.1 99.2

Long-term interest bearing debt 58.0 46.3 135.8 120.1 104.1 73.1Minorities interest 57.0 49.9 60.8 79.1 92.7 114.5

Shareholders equity 327.1 250.2 241.1 277.2 255.8 314.3

Ratios:

Debt: Equity (%) 63.8 53.1 67.3 70.9 65.8 52.8

Net debt: Equity (gearing) (%) 50.2 40.5 50.0 45.5 41.1 32.1

ROA (avg) (%) 7.2 6.6 5.3 9.4 6.1 7.3

ROE (avg) (%) 12.4 10.5 8.6 18.9 9.7 11.4

Book value per share (cents) 20.43 15.63 15.06 17.32 15.98 19.64


Cash flow statement (USD'm)


EBITDA 90.3 70.5 73.0 77.8 82.2 99.5

Cash from operating activities 145.0 85.1 48.7 54.4 63.4 78.4

Net cash flow from investing activities (68.5) (66.1) (50.0) 6.0 (53.2) (69.2)

Cash flow from financing activities (86.2) (9.4) 12.6 (23.9) (40.7) 10.8

Net increase/ (decrease) in cash (9.8) 9.6 11.4 36.5 (30.5) 19.9

Free cash flow 76.5 19.0 (1.3) 60.4 10.2 9.1

Ratios:

Cash flow per share (cents) 9.06 5.32 3.05 3.40 3.96 4.90

Free cash flow per share (cents) 5.97 1.48 (0.08) 3.77 0.64 0.57



19/21


Equity Research

Companies mentio ned (Price as of 09 March 2012)

UAC of Nigeria plc(UACN NL, NGN29.03, TP: N47.00:BUY)

UAC Property Development Company plc (UACPROP, NGN10.49, NGN21.50, TP:BUY)

CAP plc (CAP NL, NGN15.88,NGN23.00, TP:BUY)

Nigerian Breweries plc (NB NL, NGN98.00,NGN97.00, TP:SELL)

Guinness Nigeria plc (GUINNESS NL, NGN230.00,NGN260.00, TP:HOLD)

Nestle Nigeria plc (NESTLE NL, NGN441.54,NGN389.00, TP:SELL)

Cadbury Nigeria plc (CADBURY NL, NGN10.70, NGN12.90, TP:BUY)

PZ Cussons plc (PZ NL, NGN25.00 ,NGN25.50, TP:SELL)

Unilever Nigeria plc (UNILEVER NL, NGN29.10 ,NGN33.50, TP:HOLD)

PZ Cussons plc (PZ NL, NGN25.00 ,NGN25.50, TP:SELL)

Dangote Sugar Refinery (DANGSUGAR NL, N3.80, N5.25, TP:SELL)

Honeywell Flour Mills plc (HONEYFLOU NL, NGN2.31,NGN2.25, TP:SELL)

Tiger Brands (TBS SJ,R270.20, R210.00, SELL)

Great Portland Properties (GPOR LN,3.69, NR)

United Industrial Corp (UIC SP, SGD2.76, NR)

UOL Group Ltd (UOL SP,SGD4.67, NR)

Douja Prom Addoha (ADH MC,MAD72.44, NR)

Risesun Real Estate (002146 CH,CNY10.16, NR)

Vincom JSC (VIC VN,VND106,000, NR)

BR Properties SA (BRPR3 BZ,BRL23.66, NR)

Altarea (ALTA FP,125.30, NR)

Aldar Properties (ALDAR UH,AED1.34, NR)

DisclosureCertification

The analyst(s) who prepared this research report (denoted by an asterisk*) hereby certifies(y) that: (i) all of the views and opinions expressed inthis research report accurately reflect the research analyst's(s') personal views about the subject investment(s) and issuer(s) and (ii) no part ofthe analysts(s) compensation was, is or will be directly or indirectly related to the specific recommendations or views exp ressed by theanalyst(s) in this research report.

Rating Definitions

Analysts stock ratings are defined as follows*:

Buy (B): The stocks total return* is expected to be more than 20% (or more, depending on perceived risk) over the next 12 months. Hold (H):The stocks total return is expected to be in the range of 10-20% over the next 12 months.Sell (S):The stocks total return is expected to be less than 10% over the next 12 months.As of 15 June 2011, Stanbic IBTC Equity Investment Research ratings are based on (1) a stocks absolute/total return potential to its currentshare price and (2) the relative attractiveness of a stocks total return potential within an analysts coverage universe**, with Buys representingthe most attractive, Holds the less attractive, and Sells the least attractive investment opportunities. The frontier share markets like Kenya,Nigeria and Turkey ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors,for these countries a 25% and 15% threshold replace the 20 and 10% level in the Buy and Sell stock rating definitions, respectively, subject toanalysts perceived risk. The 25% and 15% thresholds replace the +10 -20% and -10-20% levels in the Hold stock rating definition, respectively,subject to analysts perceived risk.* Total return is calculated as the sum of the stocks expected Capital Appreciation and expected Dividend Yield.

**An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.

Restricted (R): In certain circumstances, Stanbic IBTC Equity Investment Research policy and/or applicable law and regulations precludecertain types of communications, including an investment recommendation, during the course of Stanbic IBTC Equity Investment Research sand/or Standard Banks Groups engagement in an investment banking transaction and in certain other circumstances.Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of thepast 24 months or the analyst expects significant volatility going forward.

Prices are valid as at cob 09 March 2012.

Frequency of Next Update

We plan to update this research when there is next substantial financial news about UAC of Nigeria plc.

Conflict of Interest

It is the policy of The Standard Bank Group Limited and its worldwide affiliates and subsidiaries (together the Standard Bank Group) that

research analysts may not be involved in activities in a way that suggests that he or she is representing the interests of any member of theStandard Bank Group or its clients if this is reasonably likely to appear to be inconsistent with providing independent investment research. Inaddition research analysts reporting lines are structured so as to avoid any conflict of interests. For example, research analysts cannot besubject to the supervision or control of anyone in the Standard Bank Groups investment banking or sales and trading departments. However,such sales and trading departments may trade, as principal, on the basis of the res earch analysts published research. Therefore, theproprietary interests of those sales and trading departments may conflict with your interests.


20/21


Equity Research

Disclosures*

Company Disclosure

UAC of Nigeria plc D, G

UAC Property Development Company plc (UPDC) D, E

Chemical And Allied Products plc (CAP Plc) D

A. The analyst is an officer, board member, or director of the CompanyB. The company beneficially owns 5% or more of the equity shares of Standard Bank Group as at Dec 2010C. Standard CIB beneficially owns 1% or more of the equity shares of the companyD. The Company is a client of Standard CIBE. Standard CIB has lead managed or co-lead managed a public offering of the securities of the company in the last 12 monthsF. Standard CIB has received compensation for investment banking services from the company within the last 12 monthsG. Standard CIB expects to receive, or intends to seek, compensation for investment banking services from the company during the next 3

monthsH. This research report has been communicated to the Company and following this communication, its conclusion(s) has been amended

before its dissemination.I. Analyst holds long or short personal positions in a class of common equity securities of this company

J. Standard CIB is a market maker or liquidity provider in the financial instruments of the relevant issuer

* Disclosures are correct as of 29 February 2012.

This report covers UAC of Nigeria plc. All other companies were used for illustrative purposes only. We are not commenting on the

investment merit of the securities of these companies.

Distribution of Ratings / Investment Banking RelationshipsStanbic IBTC Equity Investment Research

For the period 1 October 2011 to 31 December 2011, Stanbic IBTC Research produced investment ratings on equity securities on 131

occasions, of these 80 had a material investment banking relationship with Standard CIB in the last 12 months.

Previous RatingsUACN: We maintained our Buy rating of 1 August 2008, in our reports of 7 November 2008, 20

May 2009, 22 June 2009, 30 July 2009, 27 August 2009, 2 October 2009, 18 November 2009,

24 December 2009 and 12 March 2010. We downgraded the company to a Hold on 7 April

2010, and again to a Sell on 6 September 2010. We maintained this Sell rating on 4 November

2010 and 25 November 2010. We upgraded the stock to a Buy on 25 January 2011, a rating

we maintained on 3 March 2011, 7 April 2011, 5 May 2011, 7 June 2011, 20 June 2011, 3

August 2011, 24 September 2011, 11 October 2011 and 31 October 2011 and 02 February

2012.

25

27

29

31

33

35

37

39

41

43

45

Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-

Risks to our Forecasts

Key risks to our valuation of UAC of Nigeria are: (1) increased competition; and (2) poorexecution of ongoing business restructuring.

Valuation Methodology

We arrived at a target price of N47.00 using a relative valuation methodology (sum of

the parts).

Rating Buy Hold Sell

All Recommendations (%) 82 4 14

Recommendations with InvestmentBanking Relationship (%)

91 3 6


21/21


Legal Entities

To U. S. ResidentsStandard New York Securities Inc. is registered with the Securities and Exchange Commission as a broker-dealer and is also a member of the

FINRA and SIPC. Standard Americas, Inc is registered as a commodity trading advisor and a commodity pool operator with the CFTC and isalso a member of the NFA. Both are affiliates of Standard Bank Plc and Standard Bank of South Africa. Standard New York Securities, Inc isresponsible for the dissemination of this research report in the United States. Any recipient of this research in the United States wishing toeffect a transaction in any security mentioned herein should do so by contacting Standard New York Securities, Inc.

To South African ResidentsThe Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an AuthorisedFinancial Services Provider.

To U.K. ResidentsStandard Bank Plc is authorised and regulated by the Financial Services Authority (register number 124823) and is an affiliate of StandardBank of South Africa. The information contained herein does not apply to, and should not be relied upon by, retail customers.

To Turkey ResidentsStandard Unlu Menkul Degerler A.S. and Standard Unlu Portfoy Yonetimi A.S. are regulated by the Turkish Capital Markets Board (CMB).Under the CMBs legislation, the information, comments and recommendations contained in this report fall outside of the defin ition of

investment advisory services. Investment advisory services are provided under an investment advisory agreement between a client and abrokerage house, a portfolio management company, a bank that does not accept deposits or other capital markets professionals. Thecomments and recommendations contained in this report are based on the personal opinions of the authors. These opinions might not beappropriate for yourfinancial situation and risk and return preferences. For that reason, investment decisions that rely solely on the information contained in thispresentation might not meet your expectations. You should pay necessary discernment, attention and care in order not to experience losses.

To Singapore ResidentsSingapore recipients should contact a Singapore financial adviser for any matters arising from this research report.

Important Regional DisclosuresThe analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (ies) within the past 12months.Principal is not guaranteed in the case of equities because equity prices are variable.Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important

disclosures regarding any non-U.S. analyst contributors:The non-U.S. research analysts (denoted by an asterisk*) are not registered/qualified as research analysts with FINRA. The non-U.S. researchanalysts (denoted by an asterisk*) may not be associated persons of Standard New York Securities Inc. and therefore may not be subject to theNASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities heldby a research analyst account.Each analyst (denoted by an asterisk*) is a Non-U.S. Analyst. The analyst is a research analyst employed by Stanbic IBTC, a member of TheStandard Bank Group Limited

GeneralFor the purposes of this report Standard CIB refers to those divisions of Standard Bank Group Limited who are mainly involved in corporateand investment banking business and does not refer exclusively to any particular entities within Standard Bank Group. This research report isbased on information from sources that Standard CIB believes to be reliable. Whilst every care has been taken in preparing this document, noresearch analyst or member of Standard CIB gives any representation, warranty or undertaking and accepts no responsibility or liability as tothe accuracy or completeness of the information set out in this document (except with respect to any disclosures relative to members ofStandard CIB and the research analysts involvement with any issuer referred to above). All views, opinions and estimates contained in thisdocument may be changed after publication at any time without notice. Past performance is not indicative of future results. The investments

and strategies discussed here may not be suitable for all investors or any particular class of investors; if you have any doubts you shouldconsult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have anadverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financialinstrument. Members of Standard CIB may act as placement agent, advisor or lender, make a market in, or may have been a manager or aco-manager of, the most recent public offering in respect of any investments or issuers referenced in this report. Members of Standard CIBand/or their respective directors and employees may own the investments of any of the issuers discussed herein and may sell them to or buythem from customers on a principal basis. This report is intended solely for clients and prospective clients of members of Standard CIB and isnot intended for, and may not be relied on by, retail customers or persons to whom this report may not be provided by law. This report is forinformation purposes only and may not be reproduced or distributed to any other person without the prior consent of a member of StandardCIB. Unauthorised use or disclosure of this document is strictly prohibited. By accepting this document, you agree to be bound by theforegoing limitations. Copyright 2012 Standard Bank Group Limited. All rights reserved. AG/NER/01812.

UACN_Stanbic IBTC

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