Phillip Securities Research Morning Call 17Th February 2020

Phillip Securities Research Morning Call 17th February 2020

Stock Counter Updates Macro/Sector Outlook

. Singapore REITs Monthly . DBS . SGD Bond Outlook . IREIT Global . Asian PayTV . Micro-Mechanics . NetLink Trust . SATS . Singtel . ThaiBev

Tay Wee Kuang Research Analyst Phillip Securities Research Pte Ltd 17th February 2020

. Asset quality remains healthy  Allowances fell 52% QoQ on lower SP and write-back of $77mn in GP  NPA declined 3% from previous quarter  NPL rate remains low at 1.5%, while SP remain at 21 bps

. Proposed quarterly dividend of 33 cents  Brings FY19 dividend to $1.23  Annualised dividend of $1.32, increase of 10% from 3Q19

. Loans growth continues softening to 3.66% YoY  Flat loans growth across all industries buoyed by ‘building and construction’ and ‘professionals & private individuals’ loans achieving double-digit growth YoY  Housing loans began picking up after shrinking for 3 straight quarters (+0.4% QoQ)

Outlook . Macroeconomic uncertainty lingers  Covid-19 outbreak disrupting global manufacturing supply chain with China at the epicentre  Singapore facing challenges across tourism and aviation industry

. Negative impact of Covid-19 on earnings and asset quality  1-2% impact on total revenue and 3-4 bps increase in SP  Additional stress if outbreak worsens

. Loans growth expected to remain soft . Poorer economic outlook may further impede a slow trade-related growth

Maintain ACCUMULATE; unchanged target price of $27.30. . Revised dividend of $1.32 per annum provides attractive yield (c.5%) despite short-term uncertainties . No changes to FY20e forecasts

Tan Jie Hui Research Analyst Phillip Securities Research Pte Ltd 17th February 2020

Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197501035Z © PhillipCapital 2020. All Rights Reserved. For internal circulation only. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents. IREIT Global ACCUMULATE (Maintained), TP: $0.89, Last: $0.88 + The Positives Results at a glance . Net property income remained stable YoY.  4Q19 DPU was 4.9% lower YoY due to weaker EUR/SGD exchange rates, bringing FY19 DPU down by 2.8%. . Revaluation gains increased NAV per unit by 13% and reduced gearing levels.  Aggregate leverage increased to 39.3% vis-à-vis initial guidance of 42.9%, mainly attributable to a 9.2% increase in appraised value of the German portfolio. Source: Company, PSR  NAV per unit jumped 13% from S$0.75 to S$0.85 Outlook - The Negatives . Take-up in office space and rental growth expectations in . Effective interest rate increased to 1.8% p.a, fewer loans Europe may slow down in 2020 are hedged. . Moving forward, manager will be looking to increase the  Accounting for the CDL bridging loan undertaken for the acquisition, cost of debt increased from 1.5% to 1.8% p.a occupancy rate of the Spanish Portfolio and bring the under-rented properties nearer to market levels  The proportion of loans hedged declined from 100% in 3Q19 to 86.3% in 4Q19. . It will explore possible debt and equity financing options to repay its term loan facility and to exercise the call option Maintain ACCUMULATE with an unchanged TP of S$0.885. granted by Tikehau Capital to acquire its 60% stake.

Natalie Ong Research Analyst Phillip Securities Research Pte Ltd 17th February 2020

FSTREI VS. STI

980

930

880

830

780 Feb-19 May-19 Aug-19 Nov-19 Feb-20 FSTREI Index STI (rebased) Source: Bloomberg, PSR NEUTRALFSTREH Index (Maintained) (rebased)

INDEX RETURN (%) 1MTH 3MTH YTD 1YR FSTREI RETURN 4.0 4.6 4.1 20.8 FSTREH RETURN (1.5) 1.2 (0.8) 6.0 STI RETURN 0.5 (0.4) 0.4 5.7

FTSE Straits Times REIT Index Yield Spread over 10YSGS Fed Fund Rate vs SG Rates

Source: Bloomberg, PSR Source: Bloomberg, PSR

. S-REIT dividend yield: 4.18% . 3-month SOR: 1.62% . 10YSGS yield: 1.76% . Elevated P/NAV supported by investor’s appetite for yield . Current yield spread of 248bps is currently at the -1.5 s.d. level instruments. The current interest rate environment is conducive for REITs

Figure 1: Record amount of funds raised from by SREITs . SREITs raised a record S$9.5bn from equity markets in 2019, double the amount raised in 2018.

. Including funds raised from debt markets, SREITs raise S$20bn

. Scale theme still in play: Continued acquisition momentum to persist

. Singapore to grow in prominence as a vibrant REIT market, leading to a virtuous cycle of more REIT listings

Source: Bloomberg, PSR

Figure 2: Retail index moderating but occupancy holding up Figure 3: 3-yr cycle: positive rental reversions still expected

Figure 4: Office supply above 5-yr average Figure 5: Supply levels deemed moderate

Source: CEIC,URA, PSR

Figure 8: Competition most pronounced among light industrial Figure 9: >50% of light industrial supply pre-committed

Source: CEIC, URA, PSR

Figure 10: Upward trajectory in rental index and occupancy Figure 11: Upward trajectory in retail price index

Figure 12: Weak retail outlook: RSI in negative territory Figure 13: Muted retail supply over next 3 years

RSI RSI RSI RSI F&B Index (excl. motor (Dept stores) (Supermarkets) (Fashion) vehicles) Nov-19 -1.1 -9.1 -1.0 4.5 4.7 Nov-18 0.9 6.5 -1.6 3.8 2.6 Source: CEIC, URA, PSR

Figure 15: Muted room supply marred by Novel Coronavirus Figure 14: Improved RevPAR due to tapering room supply epidemic

Source: CEIC, URA, PSR Source: CEIC, URA, PSR

S$ per Average Luxury Upscale Mid-tier Economy room/night Nov-19 202 406 246 163 91 Nov-18 186 382 225 147 83 YoY% 9.09% 6.55% 9.40% 10.73% 10.46%

Top-down view SREITs under our coverage • With interest rates expected to remain low, we expect the acquisition momentum to continue as SREITs continue to PSR RATING PSR TARGET PRICE (S$) seek growth. ASCOTT RESIDENCE TRUST ACCUMULATE 1.36 CAPITALAND MALL TRUST NETURAL 2.70 • We maintain NEUTRAL on the S-REITs sector, with FRASERS CENTREPOINT TRUST ACCUMULATE 3.11 selective sub-sector preferences. CAPITALAND RETAIL CHINA TRUST ACCUMULATE 1.66 DASIN RETAIL TRUST1 ACCUMULATE 0.94 Tactical bottom-up view CAPITALAND COMMERCIAL TR NEUTRAL 2.18 We continue to favour REITs with the following attributes: ASCENDAS REAL ESTATE INV TR ACCUMULATE 3.31 1)Low gearing MAPLETREE INDUSTRIAL TRUST NEUTRAL 2.03 2)High-interest coverage KEPPEL DC REIT ACCUMULATE 2.06 3)Long weighted average debt to maturity IREIT GLOBAL ACCUMULATE 0.89 4)A high proportion of debt on fixed interest rates EC WORLD REIT BUY 0.84 Source: PSR 1 Covered by PSR under the ‘SGX Stockfacts’ scheme

Timothy Ang Research Analyst Phillip Securities Research Pte Ltd 17th February 2020

Company Bond Maturity / Call Ask YTM/YTC Ask Price Amount (SGD Structure Remarks Date mn) ESR REIT EREIT 4.60% 31-Nov-22 4.52% 100.20 150 * Dividend stopper The yield on this industrial REIT is one of the highest yields within the S-REIT Perp perp space. Portfolio is unencumbered and lease expiry profile is evenly spread.

SPH REIT SPHRSP 30-Aug-24 3.69% 101.70 300 * Dividend stopper Relative to other S-REITs, the retail REIT has a low gearing of 0.27x. Income is 4.10% Perp expected to rise in FY20 with full-year contribution from its Figtree asset. Portfolio leases are evenly spread. As at 1QFY20, no more than 22% of gross rental income expires in any year. Debt maturity well distributed. Between FY20-23, no more than 20% of debt matures in the near term.

Metro Holdings Ltd METRO 02-Apr-24 3.65% 102.45 200 * Cessation/Suspension of Trading The real estate company has sufficient short-term liquidity, with Cash/ST debt 4.30% Corp Put at c.357%. GuocoLand Ltd GUOLSP 23-Jan-23 3.90% 101.95 400 * From 23-Jan-25, coupon step-up The local real estate developer has a strong shareholder, the Quek family, 4.60% Perp 100bps which owns Hong Leong Bank. c6.0% of the company’s total debt is short term. * Dividend stopper * Change of control call

CITIC Envirotech Ltd CELSP 10-Oct-20 4.04% 99.90 240 * From 10-Oct-20, coupon step-up We think the bond, issued by the privatised integrated water treatment 3.90% Perp 500bps solutions provider, is likely to be called on first call date of 10-Oct-20. Due to its * Change of control call high coupon step-up of 500bps. * Dividend stopper * Dividend pusher

ESR Cayman ESRCAY 01-Feb-22 4.65% 103.90 350 The logistics developer specialist has established stakeholders. These include 6.75% Corp Warburg Pincus (18.66%), Redwood group (13.34%), and tenant JD.com (7.65%). We note the company has a significant development pipeline and will require high capex going forward. Net gearing stood at 0.90x after the company’s successful IPO in Hong Kong in November 2019.

Meeting Hike Prob Cut Prob 0.5-0.75 0.75-1 1-1.25 1.25-1.5 1.5-1.75 (Current)

18-Mar-20 0.00% 9.30% 0.00% 0.00% 0.00% 9.30% 90.70%

29-Apr-20 0.00% 24.90% 0.00% 0.00% 1.60% 23.30% 75.10%

10-Jun-20 0.00% 43.20% 0.00% 0.40% 6.90% 35.90% 56.80%

29-Jul-20 0.00% 55.50% 0.10% 1.80% 13.20% 40.40% 44.50%

16-Sep-20 0.00% 70.00% 0.60% 5.50% 22.10% 41.80% 30.00%

05-Nov-20 0.00% 74.70% 1.40% 8.10% 25.10% 39.90% 25.30%

16-Dec-20 0.00% 82.40% 3.40% 13.30% 29.60% 35.50% 17.60%

Company Bond Coupon Maturity/Call Date Amount (SGD mn)

TEMASEK FINANCIAL I LTD TEMASE 3.265 02/19/20 3.265% 19-Feb-20 1000

FCOT TREASURY PTE LTD FCOTSP 2 5/8 02/28/20 2.625% 28-Feb-20 100

NEPTUNE ORIENT LINES LTD NOLSP 4.4 06/22/21 4.400% 28-Feb-20 300

HEINEKEN ASIA MTN PTE LT HEIANA 3.78 03/03/20 3.780% 03-Mar-20 40

IND & COMM BK CHN/SYDNEY ICBCAS 1 1/2 03/06/20 1.500% 06-Mar-20 10

FRASERS PROPERTY TREASUR FPLSP 5 PERP 5.000% 09-Mar-20 700

IND & COMM BK CHN/SYDNEY ICBCAS 1.99 03/12/20 1.990% 12-Mar-20 10

NEPTUNE ORIENT LINES LTD NOLSP 4.65 09/09/20 4.650% 16-Mar-20 280

HYFLUX LTD HYFSP 8 PERP 8.000% 16-Mar-20 400

FIRST SPONSOR GROUP LTD FSGSP 3.98 PERP 3.980% 16-Mar-20 148

CWT LTD CWTSP 4.8 03/18/20 4.800% 18-Mar-20 100

FALCON ENERGY GROUP LTD FALESP 6 1/2 09/19/20 6.500% 19-Mar-20 50

IND & COMM BK CHN/SYDNEY ICBCAS 1.71 03/20/20 1.710% 20-Mar-20 20

IND & COMM BK CHN/SYDNEY ICBCAS 2.12 03/27/20 2.120% 27-Mar-20 88

SINGAPORE POST LIMITED SPOST 3 1/2 03/30/20 3.500% 30-Mar-20 200

LOGINDO SAMUDRAMAKMUR LEADIJ 2.93 03/31/20 2.930% 31-Mar-20 50

PACIFIC RADIANCE LTD PACRA 4.3 03/31/20 4.300% 31-Mar-20 100

PERENNIAL SOMERSET INV PERSOM 10 03/31/20 10.000% 31-Mar-20 229

4Q19 Results Some stability creeping in

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Positives • Cable TV ARPU flat QoQ after falling for 13 consecutive quarters. However, subscribers are still contracting at a rate of around 5,000 per quarter. • Broadband revenue turning more stable. Broadband subscribers rose 10% YoY in 4Q19. However, the pricing strategy resulted in a 12% YoY fall in ARPU. • Content cost falling to stabilize EBITDA. The run-rate for broadcast cost was around S$16mn per quarter two years ago. This has declined to around S$13mn.

Negatives • FY19 capex still elevated. Capex was incurred to deploy more fibre in the network, especially for the data backhaul business. Another drain on cash-flow was $20mn spent on intangibles in FY19.

Outlook: There are some positives we can look forward to in FY20e for APTT – (i) Further signs of stability in operational data which will signal business sustainability; (ii) Capital expenditure (and investments in intangibles) will start to trend downwards, as guided by APTT; (iii) Revenue from data backhaul from Taiwan mobile operators begin to contribute more meaningfully to APTT. Maintain NEUTRAL: Our target price of S$0.165 is maintained. We raised our FY20e EBITDA by 3% as we revised our revenue estimates upwards, and lowered further content cost. We peg APTT at around 10x EV/EBITDA. This is a 10% valuation discount to its much larger Taiwanese peers

Signs of recovery, but priced in

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Positives Negatives • Revenue and earnings growths after five quarters of decline. A large • Temporary closure of Suzhou plant. On 29 January, MMH part of the recoverywas from China (+20% YoY) and Taiwan (+37% YoY). announced the closure of their Suzhou plant. Suzhou • Interim dividends jumped 25% to 5 cents per share. We were accounts for 30% of group sales. pleasantly surprised by the rise in interim dividends. It is the first increase in two years.

Outlook: We are maintaining our FY20e earnings forecast unchanged. This implies a 40% YoY rebound in 2HFY20e earnings. We are modelling revenue growth of 12% in 2H20e, with gross margins improving to 54% (1H20: 53.7%). Maintain REDUCE: Our REDUCE recommendation is maintained and the target price unchanged at S$1.60. MMH still enjoys attractive margins, ROE, net cash balance sheet and a dividend yield of 6%. We believe share price has priced in the earnings recovery for 2H20e.

Slower growth expected

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Positives • Residential revenue rose almost 13%, supported by residential fibre connections growth of 10.7% YoY to 1.42mn. Net addition of 10.5k fibre connection in 3Q20 was the slowest in nine quarters (i.e. since listing). • Non-residential gaining some momentum. Non-residential connections rose by 3.7% YoY to 47,408. On a quarterly basis, the net addition of 666 connections is the highest in four quarters. Government agencies and small & medium enterprises are the targeted segments for NLT. Negatives • Clearer signs of decline in ducts and manhole revenue. This category accounts for 8% of total revenue. Revenue has been trending down from S$9.3mn per quarter last year to currently S$7.6mn.

Outlook: NLT remains a utility with several growth drivers. Longer-term growth will be supported by higher capital expenditure, continuous household formation, 5G rollout and Smart Nation initiatives. Downgrade to NEUTRAL with unchanged TP: The run-up in share price to our target price is the main rationale for our downgrade. NLT offers an attractive yield of 5.1% that is well supported by captive recurrent revenues. However, we currently find limited catalyst to raise our target price.

Brace, Brace

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Results at a glance Positives (SGD mn) 3Q20 3Q19 YoY Comments • Revenue jump of 17% YoY in 3Q20 was entirely due to Revenue 546 464 +17.6% consolidation of Country Food and acquisition of Ground - Gateway services 234 211 +10.9% Excluding GTR acquisition (S$23,5mn), revenue would Team Red (GTR) and Nanjing Weizhou. Core revenue would have neem flat due to weak cargo volumes. have been flat excluding the acquisitions. - Food Solutions 311 252 +23.1% Excluding Country Foods (S$42mn) and Nanjing • Japan to grow even faster. Revenue from Japan rose 10.6% Weizhou ($15mn), revenue would have been flat YoY in 3Q20 to S$70.5mn. It is the 3rd largest geography for EBIT 62.9 65.3 -3.7% Opex rose 21% from acuqisitions and higher IT SATS after Singapore and SATS has invested in sufficient capacity to benefit from increased slots at the Haneda expenses. Excluding acqusition EBIT would fall 9.6%. airport. Associates/JVs 14.7 20.7 -29.0% Absence of S$5.8mn gain from transfer of DFASS SATS to KrisShop and S$2-3mn loss at Daxing Ground Negatives PATMI 59.3 68.9 -13.9% Handling.Excluding one-off PATMI dropped 6% YoY Source: Company, PSR • Core EBIT margins depressed. When we exclude the acquisition, EBIT would have dropped around 9.6% to S$59mn. This is reflected by Singapore PATMI falling 14.2% YoY in 3Q20 despite a 4% improvement in revenues

Outlook: We see multiple near-term challenges ahead for SATS. Even before the outbreak, core earnings in Singapore was weak due to soft cargo volumes, possible lower pricing and higher expenses. The situation is exacerbated the virus outbreak, affecting other parts of the business, namely passenger traffic in all airports and food business in China. Downgrade to NEUTRAL from ACCUMULATE with lower TP: Our lower target price is due to the cut in earnings, reduced terminal growth to 1% and cost of equity raised to 8% in view of the increased uncertainty and risk surrounding the current environment. This pegs SATS to 19x PE FY21e.

Guiding down

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197501035Z © PhillipCapital 2020. All Rights Reserved. For internal circulation only. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents. SingTel (Neutral (Downgraded), TP: S$3.18, Last: S$3.22) Results at a glance SGD 'mn 3Q20 3Q19 YoY Comments 1Q20 2Q20 3Q20 Comments Revenue 4,378 4,626 -5% Weakness across segments, mobile services down 8%. Revenue Grow mid single digit Stable Decline mid-single digit Excludes NBN migration revenue EBIT 531 637 -17% EBIT is better comparable due to accounting change. - Group consumer 398 420 -5% EBITDA Grow high single digit Stable Decline by low teens Excludes NBN migration revenue a) Singapore 132 136 -3% Capex S$2.2bn S$2.1bn S$2.1bn No change b) Australia 266 284 -6% FCF S$2.4bn S$2..4bn S$2.3bn Excludes spectrum paymets and dividends - Group enterprise 204 276 -26% Managed servicess and mobile the worst hit. Associate exceptionals -132 86 N.M. Dividends S$1.2bn S$1.2bn S$1.3bn Revised upwards. Regional Associates PBT 420 371 13% Positives - Telkomsel 289 305 -5% Intense competition outside Java. • India turnaround is more evident. PBT from operations for India rose - AIS 84 80 5% S$37mn profit in 3Q20 from S$50mn loss a year ago. EBITDA rose - Bharti -87 -129 -33% 58% with revenue expanding 7% as prices were raised in December Underlying net profit 551.0 680.0 -19% 2019. Source: Company, PSR • PBT for Globe rose 31% YoY supported by a 10% rise in revenue and 15% improvement in EBITDA as mobile customers expanded 27% YoY. Negatives • Australia hit on multiple fronts. Excluding the NBN contribution, EBIT for Australia consumer collapsed 78% YoY to A$52mn due to SIM only plans. Another drag for Australia is the enterprise business. EBITDA fell 54% YoY due to competition from new entrants re-selling NBN. • Telkomsel PBT fell 5% YoY to S$289mn in 3Q20 (2Q20: S$290mn). Telkomsel premium pricing outside Java will begin to narrow against these entrants.

Outlook: This is the second consecutive quarter of weaker guidance from SingTel. Weakness is stemming from Australia. The situation could worsen as TPG-Vodafone merger is finalised. We worry about the emergence of a strong 3rd mobile operator will only ignite another round of price competition. Downgrade to NEUTRAL from ACCUMULATE with lower TP: Our FY20e earnings was revised higher as we incorporated the one-off NBN payments this quarter but core earnings for our SOTP has been revised lower.

Full of spirit - A record quarter

Paul Chew Head Of Research Phillip Securities Research Pte Ltd 17 February 2020

Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197501035Z © PhillipCapital 2020. All Rights Reserved. For internal circulation only. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents. Thai Beverage (BUY (Upgraded), TP: S$0.95, Last: S$0.785) Results at a glance THB' trn 1Q20 1Q19 YoY Comments THB' trn 1Q20 1Q19 YoY Comments PATMI (excl. non recurring costs) Spirits 34.4 31.6 8.8% Sales volume +4.2% YoY Spirits 7.05 5.62 25.6% PositiveVolumes voumes rose but and hit margins.by lower Beer 33.2 33.2 0.2% Sales volume -0.1%, Sabeco -6% Beer 0.18 0.41 -56.6% margins and higher interest Non-alcoholic beverages 4.2 4.0 4.4% Sales volume up +1.9% YoY expenses Non-alcoholic beverages 0.03 (0.25) -110.7% Significant turnaround. Food 3.9 3.8 1.5% Food 0.13 0.15 -13.2% Total Revenue 75.7 72.6 4.2% F&N/FPL 1.03 1.49 -30.7% Gross profit 21.6 20.3 6.3% Higher mix of brown spirits. 8.42 7.42 13.6% Core EBITDA, ex. FNN/FPL 12.9 10.7 20.8% Source: Company, PSR and non-recurring cost Positives Net interest expense -1.4 -1.5 -6.1% • Margin expansion for spirits business. Volumes were up 4.2% in 1Q20. Sales Associates 1.3 1.7 -23.1% NPAT 9.2 7.5 23.1% volume of brown spirit, which have higher margin and prices, grew 6 to 7%. PATMI 8.4 7.4 13.6% Prices of selected brown spirit will be raised from Dec19 to Feb20 Margins • Non-alcoholic beverage (NAB) turnaround. Hit profitability for the first time Gross 28.6% 28.0% 0.6% due to a large jump in EBITDA margins from negative 0.4% to a positive 10.6%. Core EBITDA 17.1% 14.8% 2.4% PATMI 11.1% 10.2% 0.9% Negatives Source: Company, PSR • Sabeco beer volumes faltered. Sales volumes at Sabeco fell 6% YoY in 1Q20. It was due to the circulation of certain fake news, impacting sales volumes

Outlook: We are more positive on the outlook. Our initial concerns were over consumer spending in Thailand, especially farm incomes. Thai farm income has been resilient especially with the support from the government. Not only has spirit volumes been healthy, customers are purchasing the more premium and higher margin brown spirits. Beer disappointed but we expect a rebound in volumes after the negative episode Upgrade to BUY with higher TP: We are upgrading our recommendation to BUY from REDUCE. Our SOTP-derived TP of S$0.95 (previously S$0.80) is raised due to our 6% increase in FY20e earnings and lowering the valuation discount to peers

The information provided in this seminar is solely for educational purposes and should not be considered as financial advice. The views, statements and opinions expressed in this seminar are solely the views, statements and opinions of the presenter made in his/her personal capacity and do not represent the views, statements or opinions of nor are they made on behalf of Phillip Securities Pte Ltd (PSPL).

The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.

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You should seek advice from a financial adviser regarding the suitability of the investment products mentioned, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products.

Paul Chew, Head of Research

Natalie Ong, REITs | Property

Tay Wee Kuang, Banking & Financial | Healthcare

Tan Jie Hui, Small Mid Cap

Mike Zheng Jieyuan, China/HK Markets

Timothy Ang, Credit (Bonds)

Chua Wei Ren, Technical

Siti Nursyazwina, Research Admin

Have an opinion or questions on our reports? Post them in the comment section of the report!

Tan Jie Hui Research Analyst Phillip Securities Research Pte Ltd 17th February 2020

Background . Food Empire Holdings (Food Empire) is a food and beverage (F&B) company that manufactures and markets instant beverage products, frozen convenience food, confectionery and snack food. . In FY18, beverages constitute 86.8% of their topline. . Its key market, Russia accounts for 40% of its revenue FY18, followed by Indochina (18%), Kazakhstan (13%) and Ukraine (9%). . Star product in Vietnam: Café Pho - 3-in-1 cold coffee mix priced at a premium . Currently top 3 in the 3-in-1 coffee mix subsegment in terms of value

Vietnamese (Instant) Coffee Market . Vietnam is the world’s second-largest producer and exporter of coffee. . Vietnam coffee market is expected to grow with a CAGR of 8.07% from 2019-2024 as the population of c.96mn grows at c.1% YoY. . Growth in the instant coffee market is expected to be boosted by urbanisation in Vietnam. . The instant coffee market in Vietnam is expected to grow annually by 10% (CAGR 2020-2023).