PP10551/09/2012 (030567) 04 Jan 2012

MALAYSIA EQUITY Investment Research Daily

Initiating Coverage
The Research Team +60 (3) 9207 7688 research2@my.oskgroup.com

Oldtown
Delivering a Potent Brew
The share price of Oldtown Bhd has rebounded strongly from its post IPO low of RM0.89 since the companys listing due to its consistent earnings, favorable catalysts and attractive valuation. We like the companys solid fundamentals, favorable consumer factors and rapid regional expansion, which look set to boost its revenue and net profit by double digits. We initiate coverage with a BUY recommendation, valuing the stock at RM1.55 based on 13.0x FY12 EPS. An extensive caf network. Oldtown started its business in 1999 when its co-founders formulated their own blend of 3-in-1 instant white coffee mix and commenced manufacturing under the OLDTOWN brand. Five years later, the company expanded vertically into the food services industry by opening a chain of cafs. Today, the company exports its coffee mix to more than 12 countries and operated 194 cafe outlets as of end Nov 2011. Fast moving consumer goods (FMCG) business to outpace food and beverage business (F&B). We are bullish on the growth of Oldtowns FMCG business (the manufacturing and distribution of its coffee) given the strength of its brand and quality. The group recently appointed its first FMCG distributor in Beijing, China. Management has guided that the company delivered its first direct shipment to China in Oct at a volume that is double its FY10 indirect export sales to China (via Hong Kong). Moving forward, we expect revenue from the FMCG business to overtake its F&B business. F&B business tickling palates regionally. Oldtown started tapping into Chinas booming consumption recently, opening its first licensed outlet in Guangzhou with a vision of opening 172 outlets in 10 years. We gather that management is pleased with the numbers from its first outlet in the opening month of operation. The groups prospects in China look promising given the growing population and consumer spending, low unemployment, plus the fact that China was not as hard hit by the recession in 2008, are all factors fuelling its F&B market. Overall catalysts for its F&B business include i) favorable consumer trends, ii) halal certification to penetrate the Muslim market in Malaysia, iii) strong outlet rollout, iv) expansion to Indonesia, Singapore and China, and iv) nifty pricing strategy. Initiate with BUY. We like Oldtown for exposure to the defensive F&B subsector in anticipation of a feeble 2012 for: i) its attractive valuation, ii) decent top- and bottom-line growth, and iii) stabilizing margins. As the group has been consistently reporting earnings that were consistent with our conservative forecasts, we maintain our IPO note earnings forecast but upgrade its valuation from 12.5x to 13.0x FY12 EPS. With that, we initiate coverage of this stock with a BUY recommendation and a fair value of RM1.55 based on 13.0x FY12 EPS.

BUY
Fair Value Price RM1.55 RM1.25

CONSUMER Oldtown manufactures 3-in-1 coffee and instant tea mixes and operates a chain of caf outlets under the OLDTOWN WHITE COFFEE brand Stock Statistics Bloomberg Ticker Share Capital (m) Market Cap 52 week H | L Price 3mth Avg Vol (000) YTD Returns Beta (x) Shariah Compliant Major Shareholders (%) Old Town International Lee Siew Heng

OTB MK 330.0 412.5 1.40 0.89 807.7 0.0 NO

59.12 5.39

Share Performance (%) Month Absolute 1m 11.1 3m 30.4 6m 12m -

Relative 11.2 22.2 -

6-month Share Price Performance

1.40

1.30

1.20

1.10

1.00

0.90

0.80 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Nov-11 Dec-11

FYE Dec
Revenue Net Profit % chg y-o-y Consensus EPS DPS Dividend yield (%) ROE (%) ROA (%) PER (x) BV/share P/BV (x) EV/EBITDA (x)

FY09
193.7 30.2 47.9 9.2 0.0 -

FY10
255.1 31.7 4.8 9.6 0.0 16.8 12.4 13.0 0.57 2.2 8.2

FY11f
293.8 35.3 11.5 35.3 10.7 5.3 4.3 15.3 11.4 11.7 0.70 1.8 7.4

FY12f
357.8 39.4 11.6 39.4 11.9 6.0 4.8 15.8 11.8 10.5 0.76 1.7 6.3

FY13f
423.9 44.7 13.4 13.5 6.8 5.4 16.3 12.5 9.2 0.83 1.5 5.8

13.6

OSK Research | See important disclosures at the end of this report

OSK Research

COMPANY BACKGROUND Oldtown at a glance. The groups history traces back to the incorporation of White Caf in 1999 when its co-founders, Mr Goh Ching Mun and Mr Tan Say Yap, formulated their own blend of 3-in-1 instant white coffee. The duo commercialized the coffee product that year with the OLDTOWN brand name and began exporting it to Singapore the following year. Subsequently, the company diversified into instant milk tea mixes, instant chocolate beverages and roasted coffee powder. In 2005, it decided to expand vertically into the food services industry by opening a chain of cafs encapsulating the traditional Ipoh coffee shop setting and ambience. This expansion into food services has met with success because Oldtown is today a regional food services company with cafs in Malaysia, Singapore, Indonesia and China. Beverage manufacturer with extensive caf network. Oldtowns own manufactured products - the 3in-1 coffee mixes and instant tea mixes, and NANYANG roasted coffee powder - are marketed to the retail segment under the OLDTOWN brand name. The beverages in the FMCG business that it produces in-house are sold in more than 7,768 retail outlets in Malaysia, 752 in Singapore, 2,870 retail outlets in Hong Kong, as well as in other countries. Meanwhile, the groups caf outlets under the retail segment operate under the brand name OLDTOWN WHITE COFFEE and OLDTOWN WHITE COFFEE SIGNATURE for the premium segment, which is a modern version of its original coffee shop in Ipoh. The group has an extensive chain of cafes in Malaysia via 194 outlets as of end Nov 2011, and also operates a few outlets that are open 24/7 in certain areas. This tally includes fully and partially owned outlets, franchise outlets and licensed outlets. Figure 1: Principal business activities

Source: OSK, Company

Local franchises. Nearly half of Oldtowns caf outlets are franchise outlets. A typical franchise agreement in Malaysia has the following structure: i) ii) Term: 5 years + 5 years (option) Fee: Upfront franchise fee of RM80,000 (one-off) and an additional RM10,000 if franchisee exercises option to extend tenure and then 5% royalty fee on the gros s revenue derived from monthly sales, and 3% advertising and promotion fees of the gross revenue derived from monthly sales Fit-out cost: A typical store will cost around RM700,000 to fit out, although this may vary according to size of the outlet Franchisees benefits: Use of trade name, use of trade mark, use of Oldtowns franchise business operating system and sales of Oldtowns products and services.

iii) iv)

OSK Research | See important disclosures at the end of this report

OSK Research

Overseas franchises. A typical overseas franchise agreement will entail the following terms: i) ii) Term: Negotiable Fee (Overseas): Master licensee to pay upfront franchise fee, which is negotiable (USD100,000 for Indonesia and USD400,000 for China) and other fees, depending on a schedule set by Oldtown at initiation of contract namely: i) franchise fee ranging from USD10-30k per outlet (one-off), ii) 1-5% royalty of the gross revenue derived from sales, and iii) 1% for advertising and promotion (A&P). The rule of thumb is the earlier the franchisee fulfills the outlet opening criteria or achieves the terms and conditions set in the license agreement, the lower the franchise fee and royalty charges. Fit-out cost: Varies according to size of the outlet and country. Franchisees benefits: Use of trade name, use of trade mark, use of the groups franchise business system and sales of Oldtown products and services

iii) iv)

Rapid expansion of FMCG business. Oldtowns current manufacturing facility is located in Ipoh. Its existing instant coffee mix and instant milk tea mix facility is running at 82% utilization, while that for roasted coffee stands at 36% as of 3QFY11, but we are forecasting an average utilization of 71% and 30% respectively throughout 2011. The facility is able to manufacture 7,920 tonnes of instant coffee mix and instant milk tea mix p.a., and 1,248 tonnes of roasted coffee powder p.a. The group also owns 19 mixers with a total production capacity of 14,298 tonnes p.a. and 3 roasters with a total production capacity of 781 tonnes p.a. In tandem with the growth in its FMCG business, Oldtown will set up a factory in Tasek Industrial Estate in Kinta, Perak, for which construction started in 2Q11 with completion slated for 4Q12. To date, the piling has been completed and construction of the projects first phase is expected to commence in 1Q11. The new plant, when completed, is expected to raise production capacity by a whopping 500%. Listing summary. OIdtown was listed on the Main Board of Bursa Malaysia on 13 Jul 2011. The IPO comprised an offer for sale of 33.0m shares and a new issue of 63.4m shares of RM1.00 each at an issue/offer price of RM1.25 per share. With a market capitalization of RM412.5m upon listing, the group raised total proceeds of RM79.2m, of which 48% was to be used as capital expenditure (new cafes and new plant), 25% for acquiring companies not owned by Oldtown International (the holding company of Oldtown), 13% for working capital, 8% to repay bank borrowings, and the remaining 6% for listing expenses.

OSK Research | See important disclosures at the end of this report

OSK Research

WHAT WE LIKE ABOUT OLDTOWN Favourable consumer trends feeding its growth. The F&B industry in Malaysia is set to grow healthily moving forward, driven by rising incomes, low unemployment and robust consumer spending. The average household income of Malaysians grew at a CAGR of 5.0% from 2002-2009. While average household expenses grew at a CAGR of 3.0% from 1999-2010, the expenditure per household for food and non-alcoholic beverages expanded at a strong CAGR of 4.9%. Moreover, food and beverage (F&B) is the largest component of household spending in Malaysia, as shown in Figure 4. We like Oldtowns footprint in the F&B industry, as the demand for its products has always stayed firm during both good and bad times. The positive consumption trend as well as the groups strong fundamentals and expansion plans, are expected to add impetus to Oldtowns earnings moving forward. Figure 2: Average household income, Malaysia (2002-2009)
RM'000

Figure 3: Average household expenses, Malaysia (1999-2010)

RM'000 2.5

4.5 Average household income Bumiputera

4.0

2.0

3.5 Chinese 3.0

1.5

Expenditure per household

Indian

1.0

2.5

Others
0.5

Expenditure per household for food and non-alcoholic beverages

2.0
2002 2004 2007 2009

0.0 1999 2005 2010

Source: OSK, CEIC, BNM

Source: OSK, CEIC, BNM

Figure 4: Household consumption by purpose, Malaysia (%) (2002-2009)

Alcoholic, beverages and tobacco 2% Clothing and footwear 3% Recreation and culture 5% Furnishings, household equipment and maintenance 5% Communication 6% Restaurants and hotels 7% Miscellaneous goods and services 13% Housing, water, electricity, gas and fuels 19% Health 2% Education 2% Food and non-alcoholic beverages 23%

Transport 13%

Source: OSK, CEIC, Department of Statistics

Figure 5: Household consumption by purpose, Malaysia (%) (2002-2009)

RM 600.0

500.0

400.0

300.0 2005 2010 200.0

100.0

0.0
24yrs and below 24yrs and below 25 to 34 yrs (Food 25 to 34 yrs (Coffee 35 to 44 yrs (Food 35 to 44 yrs (Coffee 45 to 64 yrs (Food 45 to 64 yrs (Coffee 65 yrs and above 65 yrs and above (Food & Non(Coffee & Non& Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic (Food & Non(Coffee & NonAlcoholic Beverage) Alcoholic Beverage) Beverage) Beverage) Beverage) Beverage) Beverage) Beverage) Alcoholic Beverage) Alcoholic Beverage)

Source: OSK, CEIC, Department of Statistics

OSK Research | See important disclosures at the end of this report

OSK Research

Tapping into a larger market. Oldtown already enjoys a huge following among the Chinese population in Malaysia, which makes up more than 80% of its customers. Currently, the groups beverages and food processing centres are already certified HALAL by the Islamic Religious Department of Perak but its F&B outlets are not. Since being certified HALAL is key to winning over the majority Muslim community, most F&B players targeting Muslim customers need to ensure that their products are HALAL-compliant. The group is serious in expanding its market share among the Muslims, who comprise more than half of Malaysias population, and expects to receive HALAL certification from the most prominent HALAL certifier, Department of Islamic Development Malaysia (JAKIM) by 3QFY12 for its F&B outlets. Given that HALAL compliance is growing in importance, especially in view of the emerging global HALAL market, we are forecasting a 13.4% growth in net profit for FY13 vis--vis a net profit growth of 11.6% for FY12, backed by strong consumption among local Muslims and higher contributions from other regions. Figure 6: Malaysias breakdown of population by race as of December 2010 Figure 7: JAKIMs certification logo

Source: OSK, CEIC, BNM

Source: OSK, JAKIM

FMCG to lead future growth. We are bullish on the growth of Oldtowns FMCG segment given the popularity of its drinks and strength of its brand. In 2010, Oldtown was ranked second in Hong Kong in the instant coffee blend market, with a 23% share, behind Nescafes 29%. We believe that Oldtown could make further market share gains in Hong Kong given its strong brand equity and enormous A&P budget. We are positive on its initiatives to expand capacity and grow its footprint in existing and new markets, especially in China, whose population is huge and consumer spending power is rapidly growing. The group recently appointed its first FMCG distributor in Beijing, China (which previously imported Oldtown products through Hong Kong distributors). Management said it delivered its first shipment to China in Oct, with volume double FY10 exports to China and Hong Kong. We expect revenue from the FMCG business to overtake its F&B business owing to the bright prospects. Entering the dragons lair before the Year of the Dragon. Oldtown ventured into China in Nov by launching its first licensed outlet in Guangzhou, in tandem with its vision of opening 172 outlets in 10 years. We particularly like its choice of Guangzhou as the province boasts of the highest urban household income per capita in China. We note that the management invested some RM12m-15m to set up a central kitchen (pending registration for operations and official approval by January 2012) to cater for its business needs. The central kitchen will cater for up to 80 outlets. The management is taking a more conservative approach in its China venture by licensing the franchise to a master franchisee (for some USD400,000) to minimize its capex requirements instead of fully owning the outlets. Moving forward, the group will generate income from its China business via franchise fees for every outlet opened (ranging from USD10-30k per outlet) and royalty fees (ranging between 1-5%), depending on the criteria or achievement targets set in the terms and conditions of the licence agreement. We expect the group make good progress as that countrys growing population and consumer spending, low unemployment, government stimuli and the fact that China was not as hard hit by the recession in 2008/09 are powering Chinas food and beverage market.

OSK Research | See important disclosures at the end of this report

OSK Research

Figure 8: Urban household income per capita by province, China (2007-2010)

RMB 100,000.00 90,000.00 80,000.00 70,000.00 60,000.00 50,000.00 40,000.00 30,000.00 20,000.00 10,000.00 0.00 2007 2008 2009 2010 Urban Household: 36 Cities Average Urban Household: Beijing Urban Household: Shanghai Urban Household: Guangzhou Urban Household: Shenzhen

Source: OSK, CEIC, National Bureau of Statistics China

Figure 9: Cover page of Oldtowns menu in China

Figure 10: Oldtowns menu in China MySignature

Source: OSK,Company

Source: OSK, Company

Figure 11: Oldtowns menu in China My All Time Favourites

Figure 12: Oldtowns menu in China Oldtown blends

Source: OSK, Company

Source: OSK, Company

OSK Research | See important disclosures at the end of this report

OSK Research

Aggressive rollout locally and regionally. In the local front, Oldtown is the second largest F&B caf operator with 182 outlets, behind Secret Recipes more than 212 outlets as of end Nov. In tandem with the managements aspirations to match KFCs outlets in Malaysia, the group intends to open up to 30 outlets per year in Malaysia, 2-3 outlets a year in Singapore, 75 outlets in Indonesia over 10 years, and 172 outlets in China over 10 years. We expect the groups international branch network to grow at a 2011f-2013f CAGR of 107% to 60 outlets, largely driven by its expansion in China (2011f-2013f CAGR of 466%). Given the strong reputation of its brand and a strong balance sheet, we believe that the group is in a sound position to open more outlets. While we are positive on managements plan to aggressively expand the number of outlets, we are taking a more conservative approach in our outlet growth forecast (shown in Figure 13) as such a pace of expansion for fully owned and partially owned outlets may strain its cash flow while franchising too aggressively may slow down its quality control efforts. Figure 13: Forecast growth of caf outlets by type

Source: OSK, Company

Strong A&P and brand building. Oldtowns marketing strategy capitalizes on tri-media (print, TV and radio) advertising campaigns. The companys large revenue base allows it to spend more on advertising and promotion (A&P) vs its competitors. Oldtown collects 3% of gross sales from its outlets in Malaysia and 1% of gross sales from its regional franchisees for A&P. We are forecasting that the group will spend some RM14m and RM15m in FY12 and FY13 respectively on A&P. We like the groups emphasis on strengthening and promoting the OLDTOWN brand name, which is its key strategy in building brand equity and winning customer loyalty. Affordable products focusing on different target markets. Oldtown primarily targets the low- to middle-income segment of consumers who simply want to meet their dining needs. As such, a typical meal would cost around RM6.90-RM10.00 on average (with value meals costing less). It recently introduced the OLDTOWN SIGNATURE outlets targeting the mid- to higher-end of the middle income segment of customers who are more discerning and prefer finer dining. In such outlets, a typical meal would cost about RM10.00-RM15.00. By having two categories of cafe outlets, Oldtown is able to target customers from the low end up to the high end, which effectively enlarges its addressable market overall. Among the local caf operators adopting the kopitiam concept are Papparich, Hailam Kopitiam, Desa Kopitiam, Georgetown White Coffee and Uncle Lims. However, Oldtown enjoys a strong competitive edge over its competitors, thanks to its tactical pricing strategy. As shown in Figure 27 in the Appendix, Oldtown is able to price its items more cheaply due to greater economies of scale, which enables the group to spread its fixed and operating costs across a wide network of outlets. As such, during bad times the group would be able to reduce its pricing to draw more customers, while giving little or no room for its peers to grow, although this strategy may not be sustainable over the long term.

OSK Research | See important disclosures at the end of this report

OSK Research

WHERE WE HAVE CONCERNS Changes in consumer preferences. The F&B business is highly dependent on the goodwill and the markets receptiveness to a particular brand. Hence, Oldtown would have to continuously adapt to these changes. Branding is vital in Malaysias F&B business owing to the highly competitive nature of th e industry and the tendency for consumer preference to change. Thus, Oldtown will have to strive to achieve brand loyalty among its existing and prospective customers via A&P and customer acquisition programmes over a sustained period of time. Consistency of quality. We like Oldtowns variety of food as it caters to the general population, regardless of age and time of the day. The group seems to be in a strong position in terms of pricing, but we are concerned over service standards and food quality in the long run. We note that Oldtown is aware that the quality of food at its outlets is average but reiterated that it is branding Oldtown as a practical dining place that a top-of-the-mind choice for daily dining targeting the low-middle income customers who are less discerning. Service quality. We note that labor shortage and the inability to get locals to work in the retail sector is a common problem in the F&B subsector, hampering efforts to maintain consistent quality of food and service standards throughout all outlets among local F&B operators. Hence, Oldtown will need to ensure that their salary package is competitive and continuously invest in internal training and development programmes to ensure that all outlet staff is skilled in preparing food and providing top-notch customer services. Failure to do so may lead to customer dissatisfaction and adversely impact the patronage at Oldtown outlets. Risks inherent in franchising. Although Oldtown has aggressively opened outlets over the last six years, there is a downside to this as this gives rise to the risk of deterioration in the quality of its services and products. For instance, the negative perception of a few below-par outlets may have impact on the group as a whole. As such, it must ensure that its franchisees are properly trained and abide by the same system. The potential risks are the ability to retain staff at reasonable wages while continuing to expand. Specific risks related to ability to secure new outlets. To facilitate Oldtowns expansion, management faces the need to secure new outlets at strategic locations. Tenants who intend to secure new premises for outlet expansion are usually required to prepay their rents 3-12 months in advance. Hence, the groups aggressive expansion plans, esp ecially with regard to fully owned outlets, may strain its cash flow. Generic risks related to business concentration in Malaysia. Given that a large portion of Oldtowns operations is in Malaysia, broader investment risks such as economic instability in Malaysia may adversely affect general consumption expenditure. Furthermore, consumer spending can also be negatively affected by unemployment, high interest rates, high consumer debts, tight credit conditions and an increase in tax rates, etc. These can in turn adversely affect the groups financial performance. Low barriers to entry. The food industry is a highly competitive one, where the barriers to entry are low and where operators ranging from restaurant chains that are large and diverse, to individual restaurants and cafs compete for market share. Oldtown has to compete by offering quality food, competitive pricing, good customer services and accessibility. Failure to keep up with, let alone outclass, its competitors may adversely affect its financial performance over the longer term. Dependence on raw materials whose prices are dictated by global commodities. Raw materials are essential input for any business, especially those involved in the F&B sector. As such, any interruption in the supply of these raw materials to Oldtown can severely disrupt its operations, which may in turn materially affect its profitability. Also, the cost of raw materials such as coffee beans and sugar which Oldtown uses, are dictated by global commodity prices. Hence, the groups earnings could to a certain extent be eroded when raw material prices trend up.

OSK Research | See important disclosures at the end of this report

OSK Research

FINANCIAL FORECASTS 9MFY11 net profit as anticipated. Oldtowns 9MFY11 revenue and net profit came in line with our expectations, accounting for 68.6% and 80.8% of our adjusted revenue and net profit forecasts respectively. Revenue from its FMCG business made up 39.1% of total revenue while the remaining 60.9% was from its F&B business. Revenue for 3QFY11 surged 9.5% q-o-q while the PBT dipped 17.3% q-o-q due to a gain on disposal of investment in associated companies of RM5.1m registered in the preceding quarter. We believe Oldtowns earnings will meet our full year forecasts given that 4Q is generally the best quarter for the group due to the holiday season. Positive outlook ahead. We believe that revenue growth from its F&B business will be highly correlated with the number of new outlets the group will open in future, especially fully owned outlets. W e expect revenue from the FMCG business to outpace that from the F&B business as we anticipate the extra production capacity from its new manufacturing plant to contribute to a significant spike in earnings in FY13. Hence we are forecasting a 2011f-2013f CAGR for revenue for the FMCG and F&B business at 25.5% and 16.8% respectively. Figure 14: Revenue breakdown by business (RMm)
RM'm
450.0 400.0 350.0
171.2 134.9 108.7

Manufacturing of beverages

300.0 250.0
200.0 150.0 100.0 50.0 0.0 2009
Source: OSK, Company
64.8 166.0 185.1

89.1
252.7

Operation of caf outlets

223.0

128.8

2010

2011f

2012f

2013f

Compared to the numbers in our IPO note in July, we are lowering our revenue forecasts for FY11 and FY12 to RM293.8m and RM357.8m respectively but maintain our net profit forecast at RM35.3m and RM39.4m as we expect the company to benefit from the price increase at its F&B outlets in October by an average of 5.0%, coupled with the retracement in commodity prices, which was one of our greatest concerns during the companys IPO and internal cost saving efforts. We are lowering our original outlet forecast of 209 outlets to 196 outlets for FY11, and forecast a total of 234 outlets in FY12 and 278 outlets in FY13. Figure 15: Food commodity prices (base year = 2007)

Source: OSK, Company

OSK Research | See important disclosures at the end of this report

OSK Research

Figure 16: Forecast number of caf outlets by country

Source: OSK, Company

Whats in store for F&B and FMCG segments. Although we expect Oldtown to benefit from its HALAL status by 3QFY12, we remain conservative in forecasting its forward revenue. Hence we are forecasting a revenue growth of 20.5% for FY12 and FY13 growth of 13.3% for its F&B business, mainly driven by new outlets. As the construction of its new plant in Ipoh would only be completed in 4QFY12, any substantial increase in sales from this segment would only be felt in FY13 due to capacity constraints. Hence, we are forecasting revenue growth of 24.1% for FY12 and 26.9% for FY13 for the FMCG segment, fuelled by production capacity increases and bright growth prospects in its current markets (such as China) and potential markets (Iran). In our forecast, we are assuming an average utilization of 71.0% for FY11, 80.0% for FY12 and 46.5% for FY13 for the instant coffee and instant milk tea mixes. Our average selling price assumptions are as shown in Table 1. Table 1: Assumptions used to derive revenue and net profit FY07 79.2 47.9 31.3 FY08 138.4 93.3 45.1 FY09 193.7 128.8 64.8 FY10 255.1 166.0 89.1 FY11f 293.8 185.1 108.7 FY12f 357.8 223.0 134.8 FY13f 423.9 252.7 171.2

Revenue (RM m) - F&B - FMCG

Average revenue per store (RMm) F&B 0.64 0.87 0.89 0.95 0.94 0.95 0.91 Average cost of sales & direct expenses per store (RMm) F&B 0.46 0.57 0.57 0.64 0.65 0.66 0.66

Average selling price of FMCG products (RM per kg) Local Overseas Total capacity instant coffee mix and instant milk tea (000 kg per year) Average utilization rate instant coffee mix and instant milk tea (%)
Source: OSK, Company

9.0 14.0

10.0 15.0

11.8 17.5

14.1 20.6

14.9 21.8

15.7 21.8

Other parameters (FMCG business) 7,920 7,920 7,920 7,920 7,920 7,920 15,840

69.0

71.0

80.0

46.5

OSK Research | See important disclosures at the end of this report

10

OSK Research

Healthy topline growth but overseas F&B contribution may take time. While the growth prospects overseas seem attractive, it may take some time for Oldtown to establish its brand in those countries. We expect the groups international branch network to grow at a 2011f-2013f CAGR of 107% to 60 outlets, largely driven by its expansion in China (2011f-2013f CAGR of 466%), while its local network is expected to grow at a 2011f-2013f CAGR of 9.4% to 218 outlets. As management will continue to focus on building scale overseas, we anticipate its local operations to make up a larger share of net sales in the short to medium term. Margin slide to stabilize. We note that EBITDA and net profit margins have eased from 25.3% to 22.5% and 15.6% to 12.4% respectively from FY09 to FY10. The dip was mainly attributed to higher rental cost for its existing and new caf outlets as well as higher raw material prices, which have pressured margins. Despite our view that commodity prices should stabilize in the medium term co upled with managements efforts to pass on some of its costs to customers (management raised the product prices by an average 5%-10% in October) and other internal cost saving initiatives , we still think that the managements aggressive expansion could cap overall margins due to higher depreciation costs. To recap, the group intends to build a new FMCG facility which will cost RM52. We gather that the cost may swell to as high as RM62m. Hence we forecast Oldtowns depreciation expenses for FY11 and FY12 at RM14.9m and RM20.2m respectively. Nevertheless, we anticipate that the management will be able to keep its net profit margin well above 10% moving forward. Figure 17: Net profit (RM m)
RM'm 90.0 80.0
25.0%

Figure 18: Margins (%)

Margins, % 30.0%

70.0 60.0 50.0 40.0 30.0 20.0

5.0%

EBITDA EBIT PBT PAT

20.0%

EBITDA EBIT

15.0%

PBT PAT

10.0%

10.0 0.0 2009 2010 2011f 2012f 2013f

0.0% 2009 2010 2011f 2012f 2013f

Source : OSK, Prospectus

Source : OSK, Prospectus

Healthy balance sheet, positive free cash flow as of 3QFY11. Oldtowns retained earnings stood at RM94m as at 3QFY11 while cash and bank balances totaled RM86m. Its long term borrowings stood at RM19.3m while short term borrowings amounted to RM3.4m. In view of its low debt to equity ratio of 0.11 and net cash position in 3QFY11, we believe that the group would be able to fund its expansion plans without borrowing. We project that the group will maintain its net cash position even after constructing its new factory in Ipoh. Attractive dividend yield envisaged. The group declared its first interim dividend of 2.5 sen per share for FY11. Management intends to distribute dividends of at least 50% of its net profit for FY11 and FY12. Hence we are forecasting another dividend payout of at least 2.8 sen per share for FY11 (bringing the total to 5.8 sen for FY11) and 6 sen per share for FY12. This translates into a dividend yield of 4.3% and 4.8% for FY11 and FY12 respectively. Stock undervalued by 24.0%. Compared with its local peers, Oldtown is trading at a discounted FY11 forward PE of 11.7 x versus Berjaya Foods 13.3x, although the latter is more than 4 times smaller than Oldtown. Its closest comparable at the regional level is Breadtalk group, which is priced at 12.9x FY11 EPS. As the group has been consistently reporting earnings that were consistent with our conservative forecasts, we are upgrading its valuation from 12.5x in our IPO Note to 13.0x FY12 EPS. With that, we initiate coverage of this stock with a BUY recommendation and a fair value of RM1.55 based on 13.0x FY12 EPS.

OSK Research | See important disclosures at the end of this report

11

OSK Research

Table 2: Local peer comparison (as at 3 Jan 2012) Company Current Market Cap (RMm) 3,030.3 1,969.3 143.6 412.5 Revenue (1) (RMm) 2,732 3,321 70.7 305.5 Net profit (1) (RMm) 156.6 122.0 10.8 35.3 EPS (1) (RM) 0.20 0.41 0.08 0.11 ROE (1) (%) 15.7 15.0 19.9 17.1 FY11 Forward PE (X) 19.2 15.9 13.3 11.7

KFC QSR Brands Berjaya Food OldTown

(1) Consensus data for FYE11 Source: OSK, Bloomberg

Table 3: Regional and international peer comparison (as at 3 Jan 2012) Current Market Cap (USD) Revenue (1) (USDm) Regional Breadtalk Group Jollibee Foods Dunkin Brands Starbucks McDonalds OldTown SGX PSE Net profit (USDm)
(1)

Company

Listed In

EPS (USDsen)
(1)

Forward PE (X)

117.6 2,204.9

285.3 1,398.1
International

9.3 72.3

3.3 7.0

12.9 30.6

NASDAQ NASDAQ NYSE KLSE

3,000.9 34,295.9 102,659.5 130.1

615.6 13,004.0 26,952.7 96.74

95.8 1,386.2 5,457.9 11.18

0.9 1.8 5.2 3.8

27.1 25.2 19.2 11.7

(1) Consensus data for FYE11 SGX Singapore Stock Exchange PSE Philippines Stock Exchange IDX Indonesia Stock Exchange NYSE New York Stock Exchange Source: OSK, Bloomberg

OSK Research | See important disclosures at the end of this report

12

OSK Research

SHARE PRICE PERFORMANCE IN 2011 As of 30 Dec, Oldtowns share price has retraced by 4.0% from RM1.25 to RM1.20 since its listing in July this year, underperforming the FBMKLCIs 3.0% (12 Jul 30 Dec) loss during the same period. The stock appears to be trading close at mean FY12 prospective earnings at about 9.3x since Oct until a pre2012 rally on 27 Dec, rendering the stock to be trading around 10.5x FY12 PE. The stock has underperformed its peers, including Berjaya Food, QSR Brands and KFC during the same period. Figure 19: Oldtowns share price performance vs FBM KLCI (12 Jul 30 Dec)
10.0% 5.0% 0.0% 12-Jul -5.0% -10.0% 12-Aug 12-Sep 12-Oct 12-Nov 12-Dec

-15.0%
-20.0% -25.0% -30.0% -35.0% Oldtown FBMKLCI Index

Source: OSK, Bloomberg

Figure 20: Forward P/E analysis (FY12)

12.00

11.00

10.00

Forward PE
Mean

9.00

-1 StDev +1 StDev

8.00

-2 StDev +2 StDev

7.00

6.00 12-Jul 12-Aug 12-Sep 12-Oct 12-Nov 12-Dec

Source: OSK, Bloomberg

Figure 21: Oldtowns share price performance vs other local F&B companies
15.0%
10.0% 5.0%

0.0% 12-Jul -5.0% -10.0%

-15.0% -20.0%

12-Aug

12-Sep

12-Oct

12-Nov

12-Dec

-25.0% -30.0% -35.0%

Oldtown Berjaya Food KFC QSR FBMKLCI Index

Source: OSK, Bloomberg

OSK Research | See important disclosures at the end of this report

13

OSK Research

APPENDICES

MALAYSIA ECONOMIC OUTLOOK FOR CONSUMER SECTOR AND F&B BUSINESS

F&B industry remains resilient. According to a report by IMAP, the global food and beverage (F&B) sector which comprises farming, food production, distribution, retail and catering was valued at USD5.7trn in 2008. The industry is one of the major contributors to the economic growth of most countries and has historically witnessed consistent growth. The industry is expected to expand at a CAGR of 3.5% to USD7trn by 2014, according to Dow Jones Factiva. Undeniably, the recent economic slump has had an adverse impact on most global industries and the F&B industry was not spared. The major problems faced by the F&B players are rising food prices (leading to higher COGS), increasing logistic costs (due to increasing oil prices) and a decline in consumer spending. Nevertheless, the F&B industry has been relatively less affected when compared to other industries. This is mainly attributed to the fact that the F&B industry continues to be part and parcel of everyones lives during good or bad times. OVERWEIGHT on the local consumer sector. In Malaysia, the consumer sector remained rather resilient during the last crisis in 2008/09 and in fact, has been rerated strongly post crisis. During the last crisis in 2008/09, most consumer companies top and bottom lines continued to register double -digit growth, driven mainly by promotional activities which spurred consumer spending, firm demand for food and internal cost saving initiatives. Despite the revenue foregone or expenses incurred arising from heavy discounting, promotional activities and opening new outlets, most retail companies reported flat to improved margins in 2008-2010. The same applies to F&B companies, though food commodity prices have spiraled upwards after the crisis as shown in Figure 22. Having implemented various countermeasures to cope with the last recession in 2008/09 and learnt the crucial lessons, we believe consumer-centric companies could perform even better now than before. Previously downgraded due to concerns over high commodity prices. Our house previously downgraded the F&B subsector from OVERWEIGHT to NEUTRAL back in Feb 2011, as we had expected high food commodity prices to impact the sentiment of the stocks in the sector, though we still believed that F&B companies would continue to grow. Although the prices of food commodities have remained at elevated levels since 2007, prices have generally stabilized and those of some food commodities have even retraced from their recent highs. As the global economy continues to deteriorate, we expect prices to decline further, although they are not likely to touch the previous lows. In the event of the prices of food commodities staying high, most F&B companies would have developed a higher tolerance level in view of their ability to stomach the high raw material costs after the 2008/09 crisis. The F&B subsector, which has a low equity beta, would be a safer bet in view of the deteriorating global economic and equity market outlooks for 2012. Hence, we have upgraded the F&B subsector from NEUTRAL to OVERWEIGHT in Oct 2011, based on its unchanged strong fundamentals and defensive nature. Figure 22: Food commodity prices (base year = 2007)

Source: OSK, Bloomberg

OSK Research | See important disclosures at the end of this report

14

OSK Research

Once bitten, twice shy. Having adopted the necessary countermeasures during the last recession in 2008/09 and having learnt the lessons on how to deal with such turbulent situations should they recur in the future, we believe that consumer companies in general could fare even better now than before. Hence, we view that such companies would continue to post profit growth, albeit the rate of growth would be at a slower pace. Growth to be supported by two-pronged expansion. In line with the governments Economic Transformation Programme (ETP) that encourages local businesses to expand overseas, we view that more consumer companies, including those from the F&B subsector, will embark on more aggressive expansion plans both on the local and overseas fronts over the next few years. New openings in selected locations and the refitting of old outlets will attract new customers and generate new revenue streams, which can buffer against any potential sales decline for existing outlets. Table 4: Local F&B companies expansion plans
Company Oldtown Expansion plan China Indonesia Cambodia India China Increase number of stores by 15 stores Singapore Thailand Philippines China Australia Targeted opening date 2011 2011 April 2012 3Q12 2012 2012 At negotiating stage

Secret Recipe

Kenny Rogers KFC Papparich

Source: OSK, Company

Our view is further supported by favourable consumer factors. Aside from being supported by endogenous factors as mentioned above, we expect consumer demand to stay relatively resilient. While consumer sentiment may be affected by the generally weak global economic outlook, we view that sentiment will be rebound once consumers have somewhat adapted to the prevailing uncertain and volatile economic environment. Our positive view on the F&B industry is further supported by low unemployment, rising disposable income and a trending-up expenditure per household for food and nonalcoholic beverages. As shown in Figure 23, the average household income of Malaysians recorded a CAGR of 5.0% from 2002-2009. While the average household expenses recorded a CAGR of 3.0% from 1999-2010, the expenditure per household for food and non-alcoholic beverages recorded a strong CAGR of 4.9%. Moreover, F&B remains the largest component of household spending in Malaysia as shown in Figure 25. Figure 23: Average household income, Malaysia (2002-2009)
RM'000

Figure 24: Average household expenses, Malaysia (1999-2010)

RM'000 2.5

4.5 Average household income Bumiputera

4.0

2.0

Expenditure per household

1.5

3.5

Chinese

3.0

Indian

1.0

2.5

Others
0.5

Expenditure per household for food and non-alcoholic beverages

2.0
2002 2004 2007 2009

0.0 1999 2005 2010

Source: OSK, CEIC, BNM

Source: OSK, CEIC, BNM

OSK Research | See important disclosures at the end of this report

15

OSK Research

Figure 25: Household consumption by purpose, Malaysia (%) (2002-2009)

Alcoholic, beverages and tobacco 2% Clothing and footwear 3% Recreation and culture 5% Furnishings, household equipment and maintenance 5% Communication 6% Restaurants and hotels 7% Miscellaneous goods and services 13% Housing, water, electricit y, gas and fuels 19% Health 2% Education 2% Food and non-alcoholic beverages 23%

Transport 13%

Source: OSK, CEIC, Department of Statistics

Table 5: Household consumption by purpose (%) 2000 24.1% 2.2% 3.5% 21.7% 5.9% 2.1% 12.6% 4.9% 4.3% 1.5% 5.8% 11.6% 2009 21.8% 2.3% 2.4% 16.7% 5.2% 2.1% 13.1% 7.4% 4.9% 1.6% 9.7% 12.7%

Food and non-alcoholic beverages Alcoholic, beverages and tobacco Clothing and footwear Housing, water, electricity, gas and fuel Furnishings, household equipment and maintenance Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services
Source: OSK, BNM

Figure 26: Household consumption by purpose, Malaysia (%) (2002-2009)

RM 600.0

500.0

400.0

300.0 2005 2010 200.0

100.0

0.0
24yrs and below 24yrs and below 25 to 34 yrs (Food 25 to 34 yrs (Coffee 35 to 44 yrs (Food 35 to 44 yrs (Coffee 45 to 64 yrs (Food 45 to 64 yrs (Coffee 65 yrs and above 65 yrs and above (Food & Non(Coffee & Non& Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic & Non-Alcoholic (Food & Non(Coffee & NonAlcoholic Beverage) Alcoholic Beverage) Beverage) Beverage) Beverage) Beverage) Beverage) Beverage) Alcoholic Beverage) Alcoholic Beverage)

Source: OSK, CEIC, Department of Statistics

While some F&B stocks are rich in valuation, they are safer bets. Due to the F&B companies business nature, their earnings are generally expected to be resilient. While revenue and earnings may not grow exponentially in the short term, they are still expected to grow organically in tandem with the population growth. Any cost pressures could most probably be passed onto consumers easily as the price increase per unit is minimal, coupled with the fact that food and beverage products are necessities. In the event that any cost increase is not passed onto consumers, companies that have achieved economies of scale are expected to withstand pressure on their margins during times of high commodity prices. Due to its safer and resilient nature, we believe that the F&B subsector offers an interesting investment proposition for 2012 in anticipation of generally weaker economic conditions moving forward.

OSK Research | See important disclosures at the end of this report

16

OSK Research

INDICATIVE PRICE COMPARISON FOR SOME BEST SELLING PRODUCTS AMONG LOCAL KOPITIAM OPERATORS
Figure 27: Indicative Pricing of Oldtowns best selling products vis --vis other Kopitiam operators in Malaysia Operator/Items Oldtown Papparich Hailam Desa Georgetown Kopitiam Kopitiam White Coffee RM7.50* Ipoh Koey Teow Soup With Chicken RM6.90* Assam Laksa RM10.50 RM10.90 Nasi Lemak With Sambal/ Curry Chicken RM1.70* Kaya & Butter Toast (Single) RM3.00 Omega Soft Boiled Eggs RM3.90 White Coffee (Iced) RM4.50* Enriched Chocolate (Ice) RM7.90 RM6.80 RM6.20 RM4.80 RM3.80 RM3.50* RM2.80* RM2.80* N/A RM4.20 RM2.50 RM2.30 RM9.60 RM8.90* RM10.90 RM8.20 RM7.90 RM8.90 RM8.90 Shop Lot RM9.90 RM8.50 RM8.90 N/A Uncle Lims Type of Outlet

N/A

Shop Lot

(Shopping (Shopping Mall) Mall) RM9.90 RM9.90 Shop Lot

(Shopping (Shopping Mall) Mall)

RM3.80

RM2.50

Shop Lot

(Shopping (Shopping Mall) Mall) RM4.20 RM4.20 Shop Lot

(Shopping (Shopping Mall) Mall) RM4.20 RM3.50* Shop Lot

(Shopping (Shopping Mall) Mall) RM4.50* (Shopping Mall) N/A Shop Lot

*Cheapest among operators Note: Price of items are obtained in outlets of respective kopitiam operators within the Klang Valley between 3-17 Dec Source: OSK

OSK Research | See important disclosures at the end of this report

17

OSK Research

A VISIT TO OLDTOWNS FOOD PROCESSING CENTRE IN SUBANG, SELANGOR

We came, we saw, we got convinced. We visited one of Oldtowns three food processing centres in Subang Jaya, Selangor, during which we got a first-hand look at how this facility processes and distributes food, along with other items, to the companys caf outlets in the central and southern regions of Peninsular Malaysia. Oldtowns two other food processing centres are located in Ipoh (see Figure 28). We also took a tour of one of the companys six central warehouses, which is located just next to the central kitchen and serves as a store for items such as furniture, electrical appliances, as well as rice and instant coffee mix from Ipoh. Figure 28: Process flow of distribution activities for Oldtowns products

Source: OSK, Prospectus

Figure 29: Process flow for Oldtowns food processing centres and warehouses

Order from outlets received

Food processed and frozen

Prepared food sent to warehouse for storage pending delivery

Warehouse delivers item to outlets

Source: OSK

Operation framework in a nutshell. During our visit, we were taken to a tour of Oldtowns three facilities, namely the warehouse, food processing centre and the research and development (R&D) facility. As depicted in Figures 28 and 29, the food processing centre takes on the role of procuring the food items for Oldtowns caf outlets. Firstly, the centre receiv es all the food orders from each of the outlets under its coverage. A staff member then processes the order and upon approval, passes it to the food processing centre. After preparing the food, it is then packed, pasteurized and frozen. While waiting for the items to be delivered to the outlets, the prepared food will be stored in the cold room of the designated warehouse, while other items such as rice, sugar, instant coffee mix, furniture and electrical appliances are kept in other parts of the warehouse at room temperature (see Figures 32 to 34). The R&D facility is responsible for creating new products to be added to the menu. The R&D team formulates new recipes and prepares test tube products, initiating up to two new products every two months on average.

OSK Research | See important disclosures at the end of this report

18

OSK Research

Zooming into Oldtowns food processing centre. The food served at Oldtowns caf outlets is supplied by its food processing centres, which allows the group to ensure consistency in the quality of food sold at all its outlets. By using the central kitchen concept, the group has been able to eliminate the need for chefs at its outlets, which is the key to its food consistency strategy. We also note that many of the processes have yet to be automated to improve efficiency, although the implementation of which will not significantly contribute to earnings at this juncture, given that its manpower does not seem excessive. The food processing centre we visited currently caters to more than 120 outlets, but it has the capacity to serve up to 200 caf outlets running on a 12-hour shift in a day. The food processing centre is divided into five areas, namely the work-in-progress (WIP) area, meat processing room, pre-weight and weighting area, cooking area and packing area. Manned by 7-10 kitchen staff, the WIP area prepares raw materials, such as onions, garlic and raw vegetables. The kitchen staff will dice the raw materials into designated sizes, which will be used for processing at a later stage. They are also responsible for blending food items into paste form (such as chili and ginger). Just right beside the WIP room is the meat processing room, where chicken meat is washed and diced. Once the preparation of the items in both rooms is completed, they will be sent to the weighing area where the kitchen staff will sort the items by weight according to the given recipe. Upon completing the weighing process, all items are placed on pallets and sent upstairs to the cooking area. In this area, Oldtown currently has more than 10 machines to cook, bake, steam and mix food items. The prepared food will then be sent to the packing area, where workers will pack the food according to the designated rations and weight into plastic containers. The packing machine will then pasteurize plastic containers and seal them in vacuum before they are frozen for two hours. The frozen food is then stored in the cold room before being delivered to the caf outlets to be finally consumed by customers. We were impressed with the food processing facility as its management appeared to have taken all reasonable measures to keep the environment clean. Figure 30: Process flow for food processing

Source: Prospectus

OSK Research | See important disclosures at the end of this report

19

OSK Research

Figure 31: Loading supplies to be delivered to Oldtowns caf outlets

Source: OSK Research Snapshots

Figure 32: Oldtowns warehouse where dry food stock is stored

Figure 33: Oldtowns warehouse stores furniture and electrical appliances

Source: OSK Research Snapshots

Source: OSK Research Snapshots

Figure 34: Oldtowns warehouse where instant coffee mix and roasted coffee powder are stored

Figure 35: Preparing to enter the cold room (sub-zero temperature)

Source: OSK Research Snapshots

Source: OSK Research Snapshots

OSK Research | See important disclosures at the end of this report

20

OSK Research

Figure 36: Processed food sorted according to outlets ready for delivery in the cold room

Figure 37: Staff conducting research and development initiatives

Source: OSK Research Snapshots

Source: OSK Research Snapshots

Figure 38: Oldtown staff member giving visitors a short briefing before they enter the food processing centre

Figure 39: Attendees washing their hands in a sterilized environment before entering the food processing centre

Source: OSK Research Snapshots

Source: OSK Research Snapshots

Figure 40: Visit ended with an investor briefing and a snacking session in Oldtown Signature, Taipan branch

Figure 41: Oldtown COO Clarence DSilva briefing investors on Oldtowns future plans

Source: OSK Research Snapshots

Source: OSK Research Snapshots

OSK Research | See important disclosures at the end of this report

21

OSK Research

EARNINGS FORECAST

FYE Dec Turnover EBITDA PBT Net Profit EPS (sen) DPS (sen) Margin EBITDA (%) PBT (%) Net Profit (%) ROE (%) ROA (%) Balance Sheet Fixed Assets Current Assets Total Assets Current Liabilities Net Current Assets LT Liabilities Shareholders Funds Net Gearing (%)

FY09 193.7 48.9 40.2 30.2 9.2 0.0

FY10 255.1 57.5 43.3 31.7 9.6 0.0

FY11f 293.8 63.3 47.5 35.3 10.7 5.3

FY12f 357.8 74.3 53.0 39.4 11.9 6.0

FY13f 423.9 80.3 59.7 44.7 13.5 6.8

25.3 20.7 15.6 -

22.5 17.0 12.4 16.8 12.4

21.6 16.2 12.0 15.3 11.4

20.8 14.8 11.0 15.8 11.8

18.9 14.1 10.5 16.3 12.5

167.5 87.7 255.2 49.3 38.4 17.7 188.2 Net Cash

186.1 123.8 310.0 54.6 69.2 25.0 230.3 Net Cash

207.2 126.7 333.8 60.6 66.1 23.3 250.0 Net Cash

217.6 140.2 357.8 61.8 78.4 21.7 274.4 Net Cash

OSK Research | See important disclosures at the end of this report

22

OSK Research

OSK Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated (NR): Stock is not within regular research coverage All research is based on material compiled from data considered to be reliable at the time of writing. However, information and opinions expressed will be subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the securities mentioned. Distribution in Singapore This research report produced by OSK Research Sdn Bhd is distributed in Singapore only to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with, this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd ("DMG"). All Rights Reserved. No part of this publication may be used or re-produced without expressed permission from OSK Research. Published by OSK Research Sdn. Bhd., 6th Floor, Plaza OSK, Jalan Ampang, 50450 Kuala Lumpur Printed by Xpress Print (KL) Sdn. Bhd., No. 17, Jalan Lima, Off Jalan Chan Sow Lin, 55200 Kuala Lumpur OSK RESEARCH SDN. BHD. (206591-V) (A wholly-owned subsidiary of OSK Investment Bank Berhad) Kuala Lumpur
Malaysia Research Office OSK Research Sdn. Bhd. 6th Floor, Plaza OSK Jalan Ampang 50450 Kuala Lumpur Malaysia Tel : +(60) 3 9207 7688 Fax : +(60) 3 2175 3202

Hong Kong
OSK Securities Hong Kong Ltd. 12th Floor, World-Wide House 19 Des Voeux Road Central, Hong Kong Tel : +(852) 2525 1118 Fax : +(852) 2810 0908

Singapore
DMG & Partners Securities Pte. Ltd. 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315 Tel : +(65) 6533 1818 Fax : +(65) 6532 6211

Jakarta
PT OSK Nusadana Securities Indonesia Plaza CIMB Niaga, 14th Floor, Jl. Jend. Sudirman Kav. 25, Jakarta Selatan 12920 Indonesia Tel : (6221) 2598 6888 Fax : (6221) 2598 6777

Shanghai
OSK (China) Investment Advisory Co. Ltd. Room 6506, Plaza 66 No.1266, West Nan Jing Road 200040 Shanghai China Tel : +(8621) 6288 9611 Fax : +(8621) 6288 9633

Phnom Penh
OSK Indochina Securities Limited No. 1-3, Street 271, Sangkat Toeuk Thla, Khan Sen Sok, Phnom Penh, Cambodia Tel: (855) 23 969 161 Fax: (855) 23 969 171

Bangkok
OSK Securities (Thailand) PCL 191, Silom Complex Building 16th Floor, Silom Road,Silom, Bangrak, Bangkok 10500 Thailand Tel: +(66) 2200 2000 Fax : +(66) 2632 0191