209. 40

January 21, 2020

Jollibee Foods (JFC PM) BUY Share Price PHP 209.40 On better footing 12m Price Target PHP 247.00 (+18%) Previous Price Target PHP 247.00

Showing signs of recovery; Reiterate BUY Company Description Engaged in the development, operation, and We are encouraged on JFC’s current state of operations as we recently franchising of quick-service restaurants in the met the company. Although not yet out of the woods, across-the-board Philippines and worldwide

improvement in both domestic and international operations in 4Q19 raised our confidence in JFC’s 2020 outlook. With 2019 behind us, we think that our PHP5.5b (+23.5% YoY) core income forecast for 2020E is Statistics achievable. Reiterate our non-consensus BUY as current price level 52w high/low (PHP) 325.00/184.10 remains attractive. Our earnings forecasts and DCF-based TP (WACC: 3m avg turnover (USDm) 2.7 7.3%; LTG: 3.0%) are unchanged. Free float (%) 42.6 Issued shares (m) 1,097 Baby steps for Smashburger Market capitalisation PHP229.7B USD4.5B

ConsumerStaples In 9M19, Smashburger generated roughly PHP1.3b in losses as SSSG Major shareholders: reached double-digit negative figures. By Dec 2019, Smashburger’s SSSG Hyper Dynamic Corp. 25.6% was negative low single-digit (4Q19: mid- to high- negative), a stark Honeysea Corp. 12.0% improvement. However, we expect the magnitude of losses to sustain in Winall Holding Corp 5.1% the near-term as store closures were back-loaded in 4Q19. JFC Price Performance accelerated store closures in 4Q19 (35 stores closed) from 15 stores 340 150 closed as of 9M19. Moving forward, we expect net store openings for 320 140 Smashburger which should result in positive operating leverage. 300 130 Updates over coffee 280 120 260 110 Philippines Similarly, The Coffee Bean & Tea Leaf (CBTL) showed better results in 240 100 4Q19 with topline growth of 5-7% in Asia Pacific and low single-digit in 220 90 the US. In our view, CBTL is an easier fix than Smashburger as CBTL’s 200 80 problem is more on cost containment. Meanwhile, Jollibee Worldwide 180 70 Pte. Ltd. (JWPL), a wholly owned subsidiary of JFC, recently issued Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 USD600m senior perpetual capital securities that will primarily be used Jollibee Foods - (LHS, PHP) Jollibee Foods / PSEi Philippine SE Index - (RHS, %) to refinance the short-term debt from the CBTL acquisition. This is not yet in our numbers as we await more details on the use of the proceeds. -1M -3M -12M Absolute (%) (2) (7) (36) Domestic recovery story intact Relative to index (%) 2 (2) (31) Source: FactSet On the domestic front, JFC still faced issues on some Chowking branches as some local government units continued to limit mobility of pork in 4Q19. Fortunately, SSSG of Chowking was already flattish by early Jan 2020 from negative figures in 4Q19. On the other hand, JFC is on track to fully fix the issues in the Red Ribbon commissary by 1Q20.

FYE Dec (PHP m) FY17A FY18A FY19E FY20E FY21E Revenue 133,613 161,199 182,798 215,192 242,810 EBITDA 11,415 13,725 11,082 13,490 17,679 Core net profit 7,109 8,330 4,434 5,475 7,961 Core EPS (PHP) 6.61 7.76 4.14 5.11 7.43 Core EPS growth (%) 15.0 17.4 (46.7) 23.5 45.4 Net DPS (PHP) 2.18 2.49 1.80 1.70 2.48 Core P/E (x) 38.3 37.6 50.6 41.0 28.2 P/BV (x) 6.7 6.5 4.3 4.0 3.7 Net dividend yield (%) 0.9 0.9 0.9 0.8 1.2 ROAE (%) 19.1 18.7 11.5 10.1 13.6 ROAA (%) 8.7 8.2 3.5 4.1 5.9 EV/EBITDA (x) 23.5 23.1 22.0 18.1 13.6 Net gearing (%) (incl perps) net cash 6.0 34.6 31.8 23.7 Consensus net profit - - 7,803 9,093 10,691 MKE vs. Consensus (%) - - (26.0) (39.8) (25.5)

Fredrick De Guzman [email protected] (63) 2 8849 8847

THIS REPORT HAS BEEN PREPARED BY MAYBANK ATR KIM ENG SECURITIES INC SEE PAGE 9 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Jollibee Foods

Better prospects for 2020

JFC faced difficulties both in its domestic and international businesses in 2019 with net income (ex. revaluation gains) almost halved to PHP3.2b in 9M19 from PHP6.1b in 9M18. On the domestic front, JFC was challenged by 1) inflation overhang in 1H19, 2) Red Ribbon supply chain disruptions starting 2Q19, and 3) ASF-related issues at Chowking in 3Q19. JFC found no reprieve from its international operations as Smashburger posted losses of around PHP1.3b in 9M19 — already more than the total losses in 2018.

In our initiation report (Jollibee Foods – Reclaiming lost glory; 6 Dec 2020), we recommended a non-consensus BUY on JFC premised on better operating performance by both its domestic and international businesses. Our recent meeting with the company suggests that our thesis for 2020 is on the right track. We believe that 4Q19 was a relatively better quarter as:

 Smashburger SSSG improved — albeit still negative — from double-digit negative figures to low single-digit negative by Dec 2019 (4Q19: mid- to high single-digit).  CBTL topline growth hit mid- to high single-digit in Asia Pacific and low single-digit in the US.  Domestic Chowking SSSG was flattish by early Jan 2020 from negative SSSG in 4Q19. Issues on Red Ribbon supply chain are on track to be fully fixed by 1Q20.

Fig 1: 9M19 losses for Smashburger; 2019 losses are on track Fig 2: Domestic Chowking and Red Ribbon stores account for to exceed the 2016 level 15-17% of JFC’s systemwide sales Chowking Red Ribbon 1,600 1,519m 18.0%

1,400 1,320m 16.0% 5.0% 5.0% 5.0% 5.0% 1,200 14.0% 4.0% 4.0% 4.0% 979m 953m 1,000 12.0% 825m 793m 10.0% 800 8.0% 600 6.0% 12.0% 12.0% 12.0% 12.0% 12.0% 400 11.0% 11.0% 4.0% 200 2.0% - 0.0% 2013 2014 2015 2016 2017 9M19 2013 2014 2015 2016 2017 2018 9M19

Source: Smashburger financials, JFC disclosures, Maybank Kim Eng estimates Source: Company data

*9M19 figure pertains to operating losses

While we continue to take the view that Smashburger will not reach breakeven by 2020-2021, we believe that 2019 results were also not representative of future performance. In 2019, JFC closed 50 Smashburger stores which led to negative operating leverage and store impairments. Moving forward, management indicated that there will be fewer store closures and more store openings. On CBTL, we expect topline growth of 5.8% in 2020E (unchanged) which is in-line with blended sales growth in 4Q19 (mid- to high single-digit in Asia Pacific; low single-digit in the US) as per JFC’s guidance. In our view, CBTL is an easier fix than Smashburger as the problem is more on cost containment. Plans to turnaround CBTL (e.g. relocating head office, moving some production to Malaysia) will be initiated within the next 12 months.

January 21, 2020 2

Jollibee Foods

Fig 3: We expect CBTL to achieve EBIT breakeven by 2022 In PHPm 2017 2018 2019F 2020F 2021F 2022F Remarks Total revenues 15,149 16,487 16,514 17,464 18,491 19,600 Growth based on blended US and Asia Pacific growth as per Cost of goods sold (4,661) (4,837) (5,175) (5,386) (5,517) (5,653) Euromonitor and MKE estimates Gross profit 10,488 11,650 11,339 12,078 12,973 13,948 0.5ppt annual improvement in GPM Labor and labor-related costs (4,983) (5,152) (5,491) (5,719) (5,870) (6,027) Occupancy costs (2,613) (2,799) (3,134) (3,227) (3,231) (3,229) Assumed 0.5ppt annual improvement in the ratio of costs to sales General and admin (2,254) (2,302) (2,801) (2,875) (2,859) (2,834) EBITDA 638 1,398 (86) 258 1,013 1,858 Depreciation and amortization (1,386) (1,476) (1,478) (1,563) (1,655) (1,755) Deferred cost amortization (58) (473) - - - - One-off impairment of territory rights in China Cloud-based arrangement amortization - (28) (28) (28) (28) (28) EBIT (805) (578) (1,592) (1,333) (670) 76 Loss (gain) on sale of PPE 105 (28) - - - - Impairment of PPE (116) (104) (113) (113) (113) (113) Conservatively assumed continuous impairment of PPE and intangible Impairment of intangible assets (387) (179) (292) (292) (292) (292) assets Other income 140 164 - - - - Interest expense (171) (240) (132) - - - Acquisition eliminates debt in CBTL's balance sheet by 2020 EBT (1,235) (966) (2,129) (1,737) (1,074) (329) Provision for income tax (113) (142.8) 426 347 215 66 Tax rate assumed 20% (US corporate income tax rate) Net income before minority (1,348) (1,108) (1,703) (1,390) (859) (263) Minority interests (1) (1) 2 1 1 0 Minority interests as % of net income before minority maintained Net income after minority (1,349) (1,109) (1,701) (1,388) (859) (263)

Source: Company data, Maybank Kim Eng estimates

Issuance of perpetual securities

Last 16 Jan 2020, JFC announced that its wholly owned subsidiary, Jollibee Worldwide Pte. Ltd. (JWPL), will issue USD600m worth of guaranteed senior perpetual capital securities with JFC serving as the guarantor. The securities were initially priced at 4.25%, but pricing was subsequently tightened by 35bps to 3.90% as the original intended issue amounting to USD400m was almost 10 times oversubscribed. Salient points of the issuance are listed below:

ISSUER: Jollibee Worldwide Pte. Ltd. GUARANTOR: Jollibee Foods Corporation ISSUANCE: USD Senior Guaranteed Perpetual Capital Securities MATURITY: Perpetual Non-call 5-year CALL DATES: Year 5 and any Distribution Payment Date thereafter RATE: 3.90%, payable semi-annually in arrear STEP-UP: 2.50% on top of the initial credit spread on Year 5

JFC disclosed that the proceeds will be primarily used to refinance the debt incurred for the CBTL acquisition. Comparing debt levels in the 2Q19 and 3Q19 financial statements, we estimate that JFC borrowed PHP20.9b (~USD410m) for the acquisition. This is close to the original intended perpetual capital securities issuance of USD400m. While the amount of the issuance surprised us (we were expecting only around USD350-400m), we think JFC just took advantage of the robust demand for the security. We have not yet imputed this into our numbers as we await more details on the use of proceeds. We have assumed 3.50% average interest rate for JFC’s debt in 2020E and at 3.90% rate for the perpetual capital securities, this should be slightly negative to our forecasts.

January 21, 2020 3

Jollibee Foods

Fig 4: Estimated change in debt from the CBTL acquisition Fig 5: JFC is trading slightly above 10Y mean 12M fwd P/E of 31.2x, but below 5Y mean of 34.2x 45.0

40.0

In PHPm 2Q19 3Q19 Change 35.0 Short-term debt 769 22,028 21,259 30.0

Current portion of LT debt 2,489 2,838 349 25.0

Long-term debt 21,092 20,368 (724) 20.0 Total 24,350 45,234 20,884 15.0 In USD (USDPHP: 51.0) 409 10.0

Source: Company reports, Maybank Kim Eng estimate Source: Bloomberg

January 21, 2020 4

Jollibee Foods

Value Proposition Price Drivers

. JFC is the country’s biggest restaurant chain operator with Historical share price trend 4 3,238 stores in the Philippines and 2,625 outlets overseas 340 3 180 5 as of 9M19. 320 170 . Euromonitor estimates JFC’s market share in the limited- 300 160 service industry at 51.5%, beating global QSRs in the 280 2 150 260 140 Philippines including McDonald’s and KFC. 240 1 130 . Growth is pursued using two strategies: 1) expansion of 220 120 core brands both locally and internationally; and 2) 200 110 acquisitions of established businesses (e.g. Smashburger). 180 100 160 90 . Medium-term goal to have a 50:50 systemwide sales split Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 between domestic and international has yet to bear fruit Jollibee Foods - (LHS, PHP)

as international operations exhibit weaker profitability. Jollibee Foods / PSEi Philippine SE Index - (RHS, %) . Operating income to grow at a 2Y CAGR of 38.2% from 2020-21E as both domestic and foreign businesses recover. Source: Company, FactSet, Maybank Kim Eng

Fig 1: Systemwide sales breakdown by brand (2018) 1. Announced in October 2015 the acquisition of an initial SuperFoods, Others, 2% Hong Zhuang Greenwich, 2% 40% stake in US-based Smashburger for USD100.3m. 5% Yuan, 1% 2. Strong domestic results were dampened by weak revenue Red Ribbon, 5% growth in China in 2Q16 (-5.7%) and 3Q16 (-2.4%). Smashburger, 3. Heightened talks on the end of labour contractualisation 6% which soured sentiment on JFC.

Yonghe King, Jollibee, 50% 4. JFC announced plans to acquire The Coffee Bean & Tea 7% Leaf for USD350m. 5. 9M19 core income down 48.0% YoY due to weaker-than- Mang Inasal, 11% normal domestic SSSG (9M19: +3.3%), disruptions in the

Chowking, Red Ribbon supply chain and worsening profitability of 12% Smashburger.

Source: Company

Financial Metrics Swing Factors

. Sustainable SSSG targeted at +5-6%. Upside . Strong cash generation and quick cash conversion will help fund capex plans and acquisitions. . Faster-than-expected turnaround of Smashburger and . We expect revenues to grow 14.6% annually from 2019- CBTL, which account for 6%/10% of systemwide sales. 2021 on the back of a recovery in domestic operations and Our forecast assumes Smashburger and CBTL to reach consolidation of CBTL. breakeven in 2022. . Operating losses from Smashburger (PHP1.3b in 9M19) to . More aggressive domestic expansion which is more persist, but slowly improve and reach breakeven by 2022. profitable, based on our estimates. . Core ROE to bottom at 8.6% by end-2019. We expect this . Acquisition that is value and earnings-accretive. to recover to 13.3% by end-2021. Downside Fig 2: ROE to bottom in 2019, then recover up to 2021 22.0% 20.8% . Worsening of operating losses for Smashburger and CBTL. 20.0% . A spike in inflation could negatively affect consumption 20.7% 18.7% 18.0% 18.0% and soften JFC’s sales and margins. 18.5% 16.0% . Unfavourable ruling regarding the “Security of Tenure 16.5% 13.3% 14.0% Bill” might cause a significant increase in manpower- related expenses. 12.0% . Unexpected supply chain or logistics issues that could 10.0% adversely affect sales and/or increase costs. 8.0% 9.9% 8.6% . Prolonged impact of African swine fever, particularly for 6.0% Chowking, will weigh down on domestic recovery. 4.0% 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F Source: Company data, Maybank Kim Eng estimates

[email protected]

January 21, 2020 5

Jollibee Foods

FYE 31 Dec FY17A FY18A FY19E FY20E FY21E Key Metrics P/E (reported) (x) 33.6 35.8 38.8 41.0 28.2 Core P/E (x) 38.3 37.6 50.6 41.0 28.2 P/BV (x) 6.7 6.5 4.3 4.0 3.7 P/NTA (x) 10.9 18.9 116.8 40.0 20.5 Net dividend yield (%) 0.9 0.9 0.9 0.8 1.2 FCF yield (%) 1.4 1.2 0.8 0.4 1.9 EV/EBITDA (x) 23.5 23.1 22.0 18.1 13.6 EV/EBIT (x) 40.3 40.7 52.0 40.5 26.8

INCOME STATEMENT (PHP m) Revenue 133,613.1 161,199.4 182,798.3 215,191.6 242,810.4 Gross profit 23,918.4 27,304.7 29,978.4 43,830.5 50,292.7 EBITDA 11,414.8 13,725.4 11,082.2 13,489.9 17,678.7 Depreciation (4,745.2) (5,909.8) (6,385.0) (7,470.8) (8,710.9) Amortisation 0.0 0.0 0.0 0.0 0.0 EBIT 6,669.7 7,815.6 4,697.2 6,019.1 8,967.8 Net interest income /(exp) (146.3) (473.5) (1,067.9) (811.8) (717.4) Associates & JV (282.6) (86.8) 48.9 51.3 53.9 Exceptionals 0.0 0.0 0.0 0.0 0.0 Other pretax income 2,098.8 3,235.2 4,169.2 2,177.9 2,509.3 Pretax profit 8,339.5 10,490.6 7,847.5 7,436.5 10,813.7 Income tax (1,666.9) (2,719.2) (2,194.7) (2,079.7) (3,024.2) Minorities 436.5 558.5 124.7 118.2 171.9 Discontinued operations 0.0 0.0 0.0 0.0 0.0 Reported net profit 7,109.1 8,329.9 5,777.5 5,474.9 7,961.3 Core net profit 7,109.1 8,329.9 4,434.5 5,474.9 7,961.3 Distributable Income 7,109.1 8,329.9 4,434.5 5,474.9 7,961.3

BALANCE SHEET (PHP m) Cash & Short Term Investments 21,107.5 23,285.9 27,312.6 9,681.9 16,488.6 Accounts receivable 3,941.1 4,862.7 4,998.7 5,880.4 6,637.5 Inventory 6,835.5 8,812.2 8,930.9 10,013.8 11,250.4 Reinsurance assets 0.0 0.0 0.0 0.0 0.0 Property, Plant & Equip (net) 20,893.8 26,694.0 30,229.7 34,590.3 38,916.8 Intangible assets 15,730.2 31,830.1 50,293.5 50,257.7 50,207.1 Investment in Associates & JVs 7,492.8 3,512.2 3,526.5 3,543.1 3,562.4 Other assets 13,783.0 14,854.7 15,082.5 15,352.1 15,583.5 Total assets 89,783.9 113,851.8 140,374.4 129,319.3 142,646.3 ST interest bearing debt 1,216.2 4,892.1 26,005.0 2,977.2 1,109.6 Accounts payable 25,254.6 28,716.8 31,810.1 35,094.0 39,747.4 Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0 LT interest bearing debt 14,901.1 21,372.3 19,848.4 24,871.1 30,161.6 Other liabilities 5,830.0 8,953.0 9,066.0 9,200.0 9,315.0 Total Liabilities 47,201.9 63,933.7 86,729.1 72,142.0 80,333.2 Shareholders Equity 40,782.6 48,363.5 52,215.4 55,865.6 61,173.3 Minority Interest 1,799.3 1,554.6 1,429.9 1,311.7 1,139.8 Total shareholder equity 42,582.0 49,918.2 53,645.3 57,177.2 62,313.2 Total liabilities and equity 89,783.9 113,851.8 140,374.4 129,319.3 142,646.3

CASH FLOW (PHP m) Pretax profit 8,339.5 10,490.6 7,847.5 7,436.5 10,813.7 Depreciation & amortisation 4,745.2 5,909.8 6,385.0 7,470.8 8,710.9 Adj net interest (income)/exp 146.3 473.5 1,067.9 811.8 717.4 Change in working capital 698.4 (1,290.2) 2,711.4 1,168.7 2,530.4 Cash taxes paid (2,396.2) (2,782.4) (2,194.7) (2,079.7) (3,024.2) Other operating cash flow 1,085.2 331.1 (4,218.1) (2,229.2) (2,563.2) Cash flow from operations 12,618.3 13,132.3 11,598.9 12,578.9 17,184.9 Capex (8,904.8) (9,520.7) (9,763.1) (11,659.0) (12,850.5) Free cash flow 3,713.5 3,611.6 1,835.9 919.9 4,334.4 Dividends paid (2,347.2) (2,667.1) (1,925.6) (1,824.8) (2,653.5) Equity raised / (purchased) 861.1 475.5 0.0 0.0 0.0 Change in Debt 3,909.7 5,601.7 19,589.0 (18,005.0) 3,422.8 Other invest/financing cash flow (1,395.1) (4,813.1) (15,472.5) 1,279.2 1,703.0 Effect of exch rate changes (2.4) (30.3) 0.0 0.0 0.0 Net cash flow 4,739.6 2,178.4 4,026.7 (17,630.7) 6,806.6

January 21, 2020 6

Jollibee Foods

FYE 31 Dec FY17A FY18A FY19E FY20E FY21E Key Ratios Growth ratios (%) Revenue growth 15.6 20.6 13.4 17.7 12.8 EBITDA growth 9.1 20.2 (19.3) 21.7 31.1 EBIT growth 3.2 17.2 (39.9) 28.1 49.0 Pretax growth 7.9 25.8 (25.2) (5.2) 45.4 Reported net profit growth 15.3 17.2 (30.6) (5.2) 45.4 Core net profit growth 15.3 17.2 (46.8) 23.5 45.4

Profitability ratios (%) EBITDA margin 8.5 8.5 6.1 6.3 7.3 EBIT margin 5.0 4.8 2.6 2.8 3.7 Pretax profit margin 6.2 6.5 4.3 3.5 4.5 Payout ratio 33.0 32.1 33.3 33.3 33.3

DuPont analysis Net profit margin (%) 5.3 5.2 3.2 2.5 3.3 Revenue/Assets (x) 1.5 1.4 1.3 1.7 1.7 Assets/Equity (x) 2.2 2.4 2.7 2.3 2.3 ROAE (%) 19.1 18.7 11.5 10.1 13.6 ROAA (%) 8.7 8.2 3.5 4.1 5.9

Liquidity & Efficiency Cash conversion cycle (46.6) (41.7) (40.7) (41.3) (40.8) Days receivable outstanding 9.9 9.8 9.7 9.1 9.3 Days inventory outstanding 21.0 21.0 20.9 19.9 19.9 Days payables outstanding 77.5 72.6 71.3 70.3 70.0 Dividend cover (x) 3.0 3.1 3.0 3.0 3.0 Current ratio (x) 1.4 1.3 0.8 0.8 1.0

Leverage & Expense Analysis Asset/Liability (x) 1.9 1.8 1.6 1.8 1.8 Net gearing (%) (incl perps) net cash 6.0 34.6 31.8 23.7 Net gearing (%) (excl. perps) net cash 6.0 34.6 31.8 23.7 Net interest cover (x) 45.6 16.5 4.4 7.4 12.5 Debt/EBITDA (x) 1.4 1.9 4.1 2.1 1.8 Capex/revenue (%) 6.7 5.9 5.3 5.4 5.3 Net debt/ (net cash) (4,990.2) 2,978.4 18,540.8 18,166.4 14,782.6 Source: Company; Maybank

January 21, 2020 7

Jollibee Foods

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MACRO REGIONAL EQUITIES SINGAPORE THAILAND

Sadiq CURRIMBHOY Anand PATHMAKANTHAN CHUA Su Tye Maria LAPIZ Head of Institutional Research Head of Regional Macro Research Head of Regional Equity Research (65) 6231 5842 [email protected] Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (65) 6231 5836 (603) 2297 8783 • REITs [email protected] [email protected] [email protected] • Strategy • Consumer • Materials • Services LAI Gene Lih, CFA Teerapol UDOMVEJ, CFA ECONOMICS WONG Chew Hann, CA (65) 6231 5832 [email protected] • Technology • Healthcare (66) 2658 6300 ext 1394 Head of ASEAN Equity Research [email protected] Suhaimi ILIAS (603) 2297 8686 Chief Economist Thilan WICKRAMASINGHE • Healthcare [email protected] (65) 6231 5840 [email protected] Malaysia | Philippines | Global Jesada TECHAHUSDIN, CFA (603) 2297 8682 • Banks • Consumer (66) 2658 6300 ext 1395 ONG Seng Yeow [email protected] Research, Technology & Innovation TAN Chin Poh Head of Retail Research [email protected] • Banking & Finance CHUA Hak Bin (65) 6231 5839 (65) 6231 5928 [email protected] Regional Thematic Macroeconomist [email protected] Kaushal LADHA, CFA Eric ONG (65) 6231 5830 (66) 2658 6300 ext 1392 (65) 6231 5924 [email protected] [email protected] MALAYSIA [email protected] • Retail Research • Oil & Gas LEE Ju Ye Anand PATHMAKANTHAN, Head of Research Ekachai TARAPORNTIP Head of Retail Research (603) 2297 8783 Matthew SHIM Singapore | Thailand (65) 6231 5929 (66) 2658 5000 ext 1530 (65) 6231 5844 [email protected] [email protected] • Strategy [email protected] [email protected] • Retail Research Surachai PRAMUALCHAROENKIT Desmond CH’NG, BFP, FCA (66) 2658 5000 ext 1470 Linda LIU Kareen CHAN (603) 2297 8680 [email protected] Singapore | Vietnam (65) 6231 5926 [email protected] • Auto • Conmat • Contractor • Steel (65) 6231 5847 [email protected] • Retail Research Suttatip PEERASUB [email protected] • Banking & Finance (66) 2658 5000 ext 1430 INDIA [email protected] Dr Zamros DZULKAFLI LIAW Thong Jung • Media • Commerce (603) 2082 6818 (603) 2297 8688 [email protected] Jigar SHAH Head of Research • Oil & Gas Services- Regional [email protected] (91) 22 4223 2632 [email protected] Jaroonpan WATTANAWONG • Automotive • Strategy • Oil & Gas • Automobile • Cement (66) 2658 5000 ext 1404 Ramesh LANKANATHAN [email protected] ONG Chee Ting, CA (603) 2297 8685 Neerav DALAL • Transportation • Small cap [email protected] (603) 2297 8678 [email protected] • Plantations - Regional (91) 22 4223 2606 [email protected] Thanatphat SUKSRICHAVALIT • Software Technology • Telcos (66) 2658 5000 ext 1401 William POH [email protected] (603) 2297 8683 YIN Shao Yang, CPA Kshitiz PRASAD • Media • Electronics [email protected] (603) 2297 8916 [email protected] • Gaming – Regional • Media (91) 22 4223 2607 Wijit ARAYAPISIT FX [email protected] (66) 2658 5000 ext 1450 TAN Chi Wei, CFA • Banks [email protected] Saktiandi SUPAAT (603) 2297 8690 [email protected] • Strategist Head of FX Research • Power • Telcos INDONESIA Kritsapong PATAN (65) 6320 1379 (66) 2658 5000 ext 1310 [email protected] WONG Wei Sum, CFA Isnaputra ISKANDAR Head of Research [email protected] (603) 2297 8679 [email protected] (62) 21 8066 8680 • Chartist Christopher WONG • Property [email protected] (65) 6320 1347 • Strategy • Metals & Mining • Cement VIETNAM [email protected] LEE Yen Ling • Autos • Consumer • Utility (603) 2297 8691 [email protected] LE Hong Lien, ACCA TAN Yanxi • Glove • Ports • Shipping • Healthcare Rahmi MARINA Head of Institutional Research (65) 6320 1378 (62) 21 8066 8689 (84 28) 44 555 888 ext 8181 [email protected] Kevin WONG [email protected] [email protected] (603) 2082 6824 [email protected] • Banking & Finance • Strategy • Consumer • Diversified Fiona LIM • REITs • Consumer Discretionary • Technology Aurellia SETIABUDI (65) 6320 1374 (62) 21 8066 8691 LE Nguyen Nhat Chuyen Adrian WONG, CFA (84 28) 44 555 888 ext 8082 [email protected] [email protected] [email protected] (603) 2297 8675 [email protected] • Property STRATEGY • Constructions • Building Materials • Oil & Gas Arnanto JANURI QUAN Trong Thanh Willie CHAN Jade TAM (62) 21 8066 8683 (84 28) 44 555 888 ext 8184 Regional (603) 2297 8687 [email protected] arnanto.januri @maybank-ke.co.id • Construction [email protected] (852) 2268 0631 • Consumer Staples • Banks [email protected] Luthfi RIDHO TEE Sze Chiah Head of Retail Research (62) 21 8066 8690 NGUYEN Thi Sony Tra Mi Anand PATHMAKANTHAN (603) 2082 6858 [email protected] [email protected] (84 28) 44 555 888 ext 8084 ASEAN • Macro/Strategy [email protected] (603) 2297 8783 Nik Ihsan RAJA ABDULLAH, MSTA, CFTe • Consumer [email protected] (603) 2297 8694 PHILIPPINES [email protected] Tyler Manh Dung Nguyen FIXED INCOME • Chartist Katherine TAN (84 28) 44 555 888 ext 8180 (63) 2 8849 8843 [email protected] Winson PHOON, ACA Amirah AZMI [email protected] • Utilities (603) 2082 8769 [email protected] (65) 6812 8807 • Banks • Conglomerates • Ports NGUYEN Thi Ngan Tuyen • Retail Research [email protected] Head of Retail Research Romel LIBO-ON (84 28) 44 555 888 ext 8081 (63) 2 8849 8844 SE THO Mun Yi [email protected] [email protected] (603) 2074 7606 • Food & Beverage • Oil&Gas • Banking [email protected] • Property NGUYEN Thanh Lam Kayzer LLANDA (84 28) 44 555 888 ext 8086 (63) 2 8849 8839 [email protected] [email protected] • Technical Analysis • Utilities

Fredrick De GUZMAN (63) 2 8849 8847 [email protected] • Consumer

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Jollibee Foods

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or inte nded as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ fr om fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives” ) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contai ned herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “belie ve”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solic it business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for t he actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this repor t. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Rese arch Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to cont act Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4 A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoeve r for the actions of third parties in this respect. Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of MBKET Institutional and Retail Research Department may differ in either recommendation or target price, or both. MBKET Retail Research is intended for retail investors (http://kelive.maybank-ke.co.th) while Maybank Kim Eng Institutional Research is intended only for institutional investors based outside Thailand only. The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result. The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the ac curacy and completeness of the assessment result. US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a -6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this re port and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 400 Park Avenue, 11th Floor, New York, New York 10022, 1-(212) 688-8886 and not with, the issuer of this report.

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Jollibee Foods

UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers. DISCLOSURES

Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010 538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.

Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to he rein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 21 January 2020, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: As of 21 January 2020, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

India: As of 21 January 2020, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report. In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits fr om the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the re port. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial an d political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

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Jollibee Foods

Historical recommendations and target price: Jollibee Foods (JFC PM)

23 Jul 5 Dec Buy : PHP275.0 Buy : PHP247.0 330.0

300.0

270.0

240.0

210.0

180.0 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

Jollibee Foods

Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (including dividends) HOLD Return is expected to be between 0% to 10% in the next 12 months (including dividends) SELL Return is expected to be below 0% in the next 12 months (including dividends) Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

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Jollibee Foods

 Malaysia  Singapore  London  New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 50 North Canal Road PNB House 400 Park Avenue, 11th Floor 33rd Floor, Menara Maybank, Singapore 059304 77 Queen Victoria Street New York, New York 10022, 100 Jalan Tun Perak, London EC4V 4AY, UK U.S.A. 50050 Kuala Lumpur Tel: (65) 6336 9090 Tel: (603) 2059 1888; Tel: (44) 20 7332 0221 Tel: (212) 688 8886 Fax: (603) 2078 4194 Fax: (44) 20 7332 0302 Fax: (212) 688 3500

Stockbroking Business:  Hong Kong  Indonesia  India Level 8, Tower C, Dataran Maybank, Kim Eng Securities (HK) Ltd PT Maybank Kim Eng Securities Kim Eng Securities India Pvt Ltd No.1, Jalan Maarof 28/F, Lee Garden Three, Sentral Senayan III, 22nd Floor 1101, 11th floor, A Wing, Kanakia 59000 Kuala Lumpur 1 Sunning Road, Causeway Bay, Jl. Asia Afrika No. 8 Wall Street, Chakala, Andheri - Tel: (603) 2297 8888 Hong Kong Gelora Bung Karno, Senayan Kurla Road, Andheri East, Fax: (603) 2282 5136 Jakarta 10270, Indonesia Mumbai City - 400 093, India Tel: (852) 2268 0800 Fax: (852) 2877 0104 Tel: (62) 21 2557 1188 Tel: (91) 22 6623 2600 Fax: (62) 21 2557 1189 Fax: (91) 22 6623 2604

 Philippines  Thailand  Vietnam  Saudi Arabia Maybank ATR Kim Eng Securities Inc. Maybank Kim Eng Securities Maybank Kim Eng Securities Limited In association with 17/F, Tower One & Exchange Plaza (Thailand) Public Company Limited 4A-15+16 Floor Vincom Center Dong Anfaal Capital Ayala Triangle, Ayala Avenue 999/9 The Offices at Central World, Khoi, 72 Le Thanh Ton St. District 1 Ground Floor, KANOO Building Makati City, Philippines 1200 20th - 21st Floor, Ho Chi Minh City, Vietnam No.1 - Al-Faisaliyah,Madina Road, Rama 1 Road Pathumwan, P.O.Box 126575 Jeddah 21352 Tel: (63) 2 8849 8888 Bangkok 10330, Thailand Tel : (84) 844 555 888 Kingdom of Saudi Arabia Fax: (63) 2 8848 5738 Fax : (84) 8 38 271 030 Tel: (66) 2 658 6817 (sales) Tel: (966) 920023423 Tel: (66) 2 658 6801 (research)

 South Asia Sales Trading  North Asia Sales Trading Kevin Foy Andrew Lee Regional Head Sales Trading [email protected] [email protected] Tel: (852) 2268 0283 Tel: (65) 6636-3620 US Toll Free: 1 877 837 7635 US Toll Free: 1-866-406-7447

Indonesia London Iwan Atmadjaja Greg Smith [email protected] [email protected] (62) 21 8066 8555 Tel: (44) 207-332-0221

New York India James Lynch Sanjay Makhija [email protected] [email protected] Tel: (212) 688 8886 Tel: (91)-22-6623-2629

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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