Company Guide ST

Version 5 | Bloomberg: STE SP | Reuters: STEG.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 10 Nov 2016

BUY Earnings should rebound in FY17 Last Traded Price ( 10 Nov 2016): S$3.11 (STI : 2,834.09) Price Target 12-mth: S$3.50 (13% upside) (Prev S$3.55) Maintain BUY; good entry point. ST Engineering (STE) remains a relatively defensive stock with a healthy balance sheet and Potential Catalyst: Smart city-related contract wins, M&A secure dividend payouts, and the recent share price retreat Where we differ: Slightly more conservative on earnings than consensus creates a better entry point for the stock now. Its Aerospace segment has positioned itself well by investing in growth Analyst markets such as narrow-body aircraft Passenger-to-Freighter Suvro SARKAR +65 6682 3720 [email protected] (PTF) conversions, the Chinese MRO market, and cabin interior Singapore Research Team [email protected] solutions, to name a few. The Electronics segment should also

benefit from the ‘Smart City’ trend, not only in Singapore but What’s New various overseas markets as well.

 3Q16 core earnings in line with expectations 3Q16 earnings in line, excluding one-off writedowns. STE reported headline net profit of S$76.7m, but excluding S$61.1m  Exit from Chinese specialty vehicle business in one-off writedowns and closure costs related to its Chinese removes a significant drag on earnings specialty vehicles subsidiary that has ceased operations, 3Q16 core net profit of S$137.8m (up 3% y-o-y, 8% q-o-q) was  FY16 dividends likely to be maintained at 15 Scts within expectations. Orderbook remained flattish at S$11.4bn. Core forecasts unchanged, no impact to dividends from one-off items. We lower our FY16 headline net profit estimate by 12% Price Relative to account for the one-off items recorded in 3Q16, but our core estimates remain unchanged for FY16/17. We expect a reasonable earnings rebound in FY17, following a kitchen- sinking year in FY16 associated with a management transition. Cessation of losses at the Chinese specialty vehicle subsidiaries, coupled with continued growth at Electronics division, should help offset weakness at the Marine division in FY17. We believe dividends in FY16/17 should be maintained at 15 Scts, notwithstanding the one-off earnings impact in FY16. Forecasts and Valuation FY Dec (S$ m) 2014A 2015A 2016F 2017F Valuation: Revenue 6,539 6,335 6,492 6,543 Our TP is adjusted slightly to S$3.50 as we roll over to FY17 EBITDA 835 834 837 883 numbers. Our TP is based on a blended valuation framework Pre-tax Profit 651 630 552 654 Net Profit 532 529 426 519 to factor in both earnings growth and long-term cash- Net Pft (Pre Ex.) 532 529 487 519 generative nature of the business. Net Pft Gth (Pre-ex) (%) (8.4) (0.5) (7.9) 6.6 EPS (S cts) 17.1 17.1 13.7 16.7 EPS Pre Ex. (S cts) 17.1 17.1 15.7 16.7 Key Risks to Our View: EPS Gth Pre Ex (%) (9) 0 (8) 7 A protracted slowdown in the and commercial Diluted EPS (S cts) 17.1 17.1 13.7 16.7 vehicle businesses could hurt prospects, unless STE can offer Net DPS (S cts) 15.0 15.0 15.0 15.0 niche products or streamline operations quickly. Also, BV Per Share (S cts) 68.4 68.7 67.3 69.0 PE (X) 18.2 18.2 22.7 18.6 continued lack of action on the M&A front could lead to PE Pre Ex. (X) 18.2 18.2 19.8 18.6 inefficient use of balance sheet and lower ROEs in the future. P/Cash Flow (X) 15.5 20.7 18.0 14.7 EV/EBITDA (X) 11.1 11.8 11.9 11.3 At A Glance Net Div Yield (%) 4.8 4.8 4.8 4.8 Issued Capital (m shrs) 3,109 P/Book Value (X) 4.5 4.5 4.6 4.5 Mkt. Cap (S$m/US$m) 9,668 / 6,909 Net Debt/Equity (X) CASH 0.0 0.1 0.1 Major Shareholders (%) ROAE (%) 25.0 24.8 20.2 24.5 Pte Ltd (%) 51.2 Earnin gs Rev (%): (12) 0 Aberdeen Asset Management (%) 6.0 Consensus EPS (S cts): 15.9 17.1 Other Broker Recs: B: 5 S: 0 H: 7 Capital Group (%) 4.2 Free Float (%) 38.6 Source of all data on this page: Company, DBS Bank, Bloomberg 3m Avg. Daily Val (US$m) 6.4 Finance L.P ICB Industry : Industrials / Aerospace & Defense

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ST Engineering

WHAT’S NEW Order win momentum healthy. STE has announced contract 3Q16 results highlights wins totalling S$1bn in 3Q16 – and YTD announced contract wins of S$3.4bn in FY16 remains on track to beat FY15’s Results within expectations. Excluding the impact of the total announced wins of about S$4bn. Orderbook stood at S$61m writedown related to the closure of the Chinese S$11.4bn as of end-3Q16, marginally lower than the specialty vehicle subsidiary Jiangsu Huatong Kinetics (JHK), as S$11.6bn orderbook as of end-2Q16 but still offers good had been guided earlier, profits were in line with expectations visibility of close to two years of revenue. in 3Q16. Headline net profit came in at S$76.7m; core net profit of S$137.8m would have been 3% higher y-o-y and Expect some earnings rebound in FY17 after a lacklustre 8% q-o-q. 3Q16 revenue of S$1,613m was flat q-o-q but up FY16. As we had mentioned earlier, the move to cease losses 8% y-o-y, driven by Aerospace and Electronics segments. at the Chinese auto subsidiary is positive in the longer run and indicative of the new CEO’s desire to start off with a Core margins maintained. Core PBT margin remained flat at clean slate. While we are assuming 8% core earnings decline around 10.4% in 3Q16 compared to 10.5% in 2Q16. in FY16, we should see a reasonable rebound in FY17 Aerospace margins dipped slightly to 11.6% from 12.0% in earnings. Cessation of losses at the Chinese specialty vehicle 2Q16 owing to learning cost curve at its Airbus Passenger-to- subsidiaries, coupled with continued growth at Electronics Freighter operations in Europe, but this was offset by higher division, should help offset weakness at the Marine division in margins from the ship repair business at the Marine segment. FY17. No further impact expected from JHK. Owing to the Operating cash flows remain robust, dividends should be slowdown in Chinese infrastructure building and excess maintained at 15 Scts. STE has generated strong positive supply of commercial vehicle equipment, STE has decided to operating cash flows of S$473m YTD in FY16, compared to exit the specialty vehicle business in fully, by divesting S$350m cash flow generation in the same period in FY15, one subsidiary earlier in FY16 and has now fully written down owing to favourable working capital movements. With a the net book value attributable to its stake in JHK, and also healthy balance sheet to boot, we believe the non-cash accounted for associated closure costs at JHK. With JHK writedown recorded in 3Q16 should not have an effect on racking up more than S$14m in losses YTD in 2016 – dividends, and total payout for FY16 should be similar to following two years of consecutive losses – the winding up of FY15 levels of 15 Scts. its operations is in the best interests of shareholders, in our opinion.

Quarterly / Interim Income Statement (S$m) FY Dec 3Q2015 2Q2016 3Q2016 % chg yoy % chg qoq

Revenue 1,500 1,623 1,613 7.5 (0.6) Cost of Goods Sold (1,181) (1,294) (1,279) 8.3 (1.2) Gross Profit 319 330 334 4.9 1.4 Other Oper. (Exp)/Inc (175) (167) (177) 1.1 5.8 Operating Profit 144 162 157 9.4 (3.1) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - - Associates & JV Inc 15.4 12.4 13.3 (13.3) 7.1 Net Interest (Exp)/Inc (4.6) (4.6) (3.1) 33.1 33.1 Exceptional Gain/(Loss) 0.0 0.0 (61.1) nm nm Pre-tax Profit 155 170 107 (31.1) (37.4) Tax (22.3) (37.3) (34.2) 53.7 (8.3) Minority Interest 0.81 (5.8) 4.21 420.0 (173.2) Net Profit 133 127 76.7 (42.5) (39.8) Net profit bef Except. 133 127 138 3.4 8.2 EBITDA 207 231 236 14.0 2.0

Margins (%) Gross Margins 21.3 20.3 20.7 Opg Profit Margins 9.6 10.0 9.8 Net Profit Margins 8.9 7.8 4.8

Source of all data: Company, DBS Bank

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Page 2 Company Guide ST Engineering

Aerospace sales growth (%) CRITICAL DATA POINTS TO WATCH

Earnings Drivers: Conglomerate with diverse interests in defense and commercial spheres. STE started out life as a defense contractor but has leveraged its technical knowhow over the years to penetrate the commercial market. It boasts multinational operations with a global presence in 23 countries and 41 cities, and hires more than 22,000 employees. The group has reduced its reliance on the defense sector over time from 57% of revenues in 2002 to the current 36%, with another 33% from government agencies and the balance from commercial businesses. Electronics sales growth (%)

STE's four key business divisions bring diversification benefits. Its Aerospace, Electronics, Land Systems and Marine businesses contributed 33%, 27%, 22% and 15% respectively to FY15 revenues, allowing the company to avoid reliance on any particular sector. This has engendered relatively stable revenues and earnings, weathering even crisis periods.

Acquisitions have been a key driver, accounting for around 40% of revenue growth over the last decade. However, the Land Systems sales growth (%) dampening effect of a weakening US dollar and addition of lower-margin businesses meant earnings growth has not kept up with top-line growth. Utilisation of its strong balance sheet and steady cash flows to undertake acquisitions of high-ROE assets could boost future earnings.

Healthy orderbook drives visibility. As of end-3Q16, STE's orderbook stood at S$11.4bn, down slightly from S$11.6bn at end-2Q16 but still provides healthy visibility on revenues over FY16/17 at a roughly 1.8x book-to-bill ratio.

Marine sales growth (%) Aerospace MRO primed for steady growth. Continued initiatives by ST Aerospace to broaden its capabilities should propel its growth in the longer term. These include a partnership with Airbus for passenger-to-freighter conversion of its A320/A321 and A330 jets, marking a diversification of its conversion portfolio; a continued expansion of its cabin interior service solutions business, particularly for VIP aircraft completions; and expansion of its mid-life aircraft leasing business.

Electronics division’s initiatives should be a key long-term growth driver. Within the Smart Nation framework, we estimate projects worth more than S$1bn in the near future, as the Source: Company, DBS Bank Singaporean government pushes for smart technology usage across the utilities, healthcare, housing and transport spaces. The recently launched TeLEOS-1 satellite is now ready to provide commercial imagery services and should herald a new space- centred growth channel for the division. We are also seeing increased importance placed on robotics, which could be another future key growth driver.

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ST Engineering

Leverage & Asset Turnover (x) Balance Sheet: Healthy balance sheet can drive M&A ambitions. STE has traditionally been in net cash position but ended FY15 in a minor gearing position due to channelling of cash into bonds and share buybacks to improve returns on capital. Nevertheless, its balance sheet remains very strong and STE has ample ammunition to pursue attractive acquisitions in growth areas.

Dividend payout should remain steady. Strong operating cash flows provide support to healthy dividend yield levels of around 4.8% currently. Despite the fall in headline net profit expected in FY16, we believe the non-cash writedown recorded in 3Q16 Capital Expenditure should not have an effect on dividends, and total payout for FY16 should be similar to FY15 levels of 15 Scts.

Share Price Drivers: Strong order wins. Total announced order wins in FY15 of S$4bn were slightly lower than previous years, as a result of the Land Systems and Marine divisions seeing some weak industry trends, while the Aerospace and Electronics divisions have announced steady order wins. Improvement of momentum in announced contract wins in 2016 could boost the share price. ROE (%) Recovery in the Marine sector. The Marine sector is arguably facing the strongest industry headwinds on the commercial front, with low offshore oil & gas spending and broad overcapacity in shipping. Cost overruns in the US exacerbate the situation. An industry recovery, as well as better productivity in the US, would provide more confidence in the medium-term earnings of the business.

Key Risks: Aerospace margins could come under pressure during Forward PE Band (x) transition period. As STE has consolidated the European EfW Airbus P2F operations, revenue will increase but margins will be low owing to the learning cost involved in new P2F programmes for the A330-300. STE also faces slowdown in its CFM-56B engine MRO operations owing to increased engine reliability and intense competition.

Protracted slowdown in shipbuilding. The traditional shipping sector has been plagued by overcapacity for some time now, while the slide in oil prices also affects demand for offshore vessels. Visibility on demand recovery is low at this point. PB Band (x)

Company Background ST Engineering (STE) is an integrated engineering group in the aerospace, electronics, land systems and marine sectors. The company has over the years diversified its businesses and geographies.

Source: Company, DBS Bank

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Key Assumptions FY Dec 2013A 2014A 2015A 2016F 2017F

Aerospace sales growth 2.97 (0.9) 1.41 14.1 4.64 Electronics sales growth 4.56 (4.1) 7.96 8.79 6.75 Land Systems sales (2.5) (5.3) (0.1) (14.3) (3.1) Marine sales growth (%) 22.5 8.32 (28.6) (7.3) (16.6)

Boost from Efw Segmental Breakdown acquisition FY Dec 2013A 2014A 2015A 2016F 2017F

Revenues (S$m) Aerospace 2,079 2,061 2,090 2,384 2,494 Electronics 1,650 1,583 1,709 1,859 1,985 Land Systems 1,475 1,397 1,396 1,197 1,159 Marine 1,238 1,341 958 888 740 Others 191 157 182 164 164 Total 6,633 6,539 6,335 6,492 6,543 Marine revenues likely to remain under pressure PBT (S$m) Aerospace 319 283 291 296 309 Electronics 170 184 191 188 205 Land Systems 112 56.2 65.0 10.1 89.9 Marine 146 123 88.3 68.7 53.2 Others (18.1) 4.70 (4.6) (11.0) (3.3) Total 730 651 630 552 654 PBT Margins (%) Aerospace 15.4 13.7 13.9 12.4 12.4 Electronics 10.3 11.6 11.2 10.1 10.3 Land Systems 7.6 4.0 4.7 0.8 7.8 Learning curve in Efw Marine 11.8 9.2 9.2 7.7 7.2 P2F programmes Others (9.5) 3.0 (2.5) (6.7) (2.0) Total 11.0 10.0 9.9 8.5 10.0

Income Statement (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Revenue 6,633 6,539 6,335 6,492 6,543 Cost of Goods Sold (5,201) (5,221) (5,053) (5,193) (5,182) Gross Profit 1,432 1,319 1,282 1,298 1,361 Other Opng (Exp)/Inc (712) (711) (694) (712) (726) Operating Profit 720 608 588 586 635 One-off items related to closure of Chinese Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 specialty vehicle Associates & JV Inc 31.1 57.2 58.3 59.5 53.6 subsidiary JHK Net Interest (Exp)/Inc (20.9) (14.3) (16.3) (32.9) (34.3) Exceptional Gain/(Loss) 0.0 0.0 0.0 (61.1) 0.0 Pre-tax Profit 730 651 630 552 654 Tax (138) (114) (98.7) (121) (131) Minority Interest (10.7) (5.0) (2.6) (4.3) (4.2) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 581 532 529 426 519 Net Profit before Except. 581 532 529 487 519 EBITDA 893 835 834 837 883 Growth Revenue Gth (%) 4.0 (1.4) (3.1) 2.5 0.8 EBITDA Gth (%) 1.9 (6.4) (0.2) 0.3 5.5 Opg Profit Gth (%) 1.9 (15.5) (3.2) (0.3) 8.3 Net Profit Gth (Pre-ex) (%) 0.8 (8.4) (0.5) (7.9) 6.6 Margins & Ratio Gross Margins (%) 21.6 20.2 20.2 20.0 20.8 Opg Profit Margin (%) 10.8 9.3 9.3 9.0 9.7 Net Profit Margin (%) 8.8 8.1 8.4 6.6 7.9 ROAE (%) 29.0 25.0 24.8 20.2 24.5 ROA (%) 6.9 6.2 6.4 5.2 6.4 ROCE (%) 12.4 10.3 10.6 9.9 11.0 Div Payout Ratio (%) 80.2 87.9 87.9 109.5 89.8 Net Interest Cover (x) 34.4 42.7 36.2 17.8 18.5 Source: Company, DBS Bank

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ST Engineering

Quarterly / Interim Income Statement (S$m) FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016

Revenue 1,500 1,779 1,627 1,623 1,613 Cost of Goods Sold (1,181) (1,441) (1,335) (1,294) (1,279) Gross Profit 319 338 292 330 334 Other Oper. (Exp)/Inc (175) (185) (180) (167) (177) Operating Profit 144 153 112 162 157 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 15.4 17.6 22.6 12.4 13.3 Net Interest (Exp)/Inc (4.6) (3.9) (4.2) (4.6) (3.1) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 (61.1) Pre-tax Profit 155 167 130 170 107 Tax (22.3) (23.4) (19.6) (37.3) (34.2) Minority Interest 0.81 (2.3) (0.6) (5.8) 4.21 Net Profit 133 141 110 127 76.7 Net profit bef Except. 133 141 110 127 138 One-off items related to EBITDA 207 221 190 231 236 closure of Chinese specialty vehicle subsidiary JHK

Growth Revenue Gth (%) (2.9) 18.6 (8.5) (0.2) (0.6) EBITDA Gth (%) (0.6) 6.7 (13.7) 21.4 2.0 Opg Profit Gth (%) (2.8) 6.2 (26.7) 45.0 (3.1) Net Profit Gth (Pre-ex) (%) 6.6 5.7 (21.7) 15.5 8.2 Margins Gross Margins (%) 21.3 19.0 18.0 20.3 20.7 Opg Profit Margins (%) 9.6 8.6 6.9 10.0 9.8 Net Profit Margins (%) 8.9 7.9 6.8 7.8 4.8

Balance Sheet (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Net Fixed Assets 1,520 1,578 1,709 1,718 1,724 Invts in Associates & JVs 462 478 462 491 515 Other LT Assets 963 937 1,208 1,208 1,208 Cash & ST Invts 2,065 1,590 1,134 1,035 1,055 Inventory 1,808 1,802 1,943 1,991 2,007 Debtors 1,222 1,319 1,320 1,298 1,309 Other Current Assets 667 615 394 394 394 Total Assets 8,707 8,319 8,169 8,135 8,210

ST Debt 434 74.7 195 195 195 Creditor 1,605 1,667 1,703 1,623 1,636 Other Current Liab 2,055 1,974 1,822 1,903 1,908 LT Debt 939 944 1,019 1,019 1,019 Other LT Liabilities 1,414 1,395 1,170 1,170 1,170 Shareholder’s Equity 2,116 2,132 2,132 2,093 2,146 Minority Interests 144 132 129 133 137 Total Cap. & Liab. 8,707 8,319 8,169 8,135 8,210

Non-Cash Wkg. Capital 37.3 94.8 132 158 166 Net Cash/(Debt) 692 571 (79.3) (179) (159) Debtors Turn (avg days) 65.5 70.9 76.0 73.6 72.7 Creditors Turn (avg days) 119.0 118.2 126.4 121.3 119.2 Inventory Turn (avg days) 134.5 130.4 140.5 143.5 146.3 Asset Turnover (x) 0.8 0.8 0.8 0.8 0.8 Current Ratio (x) 1.4 1.4 1.3 1.3 1.3 Quick Ratio (x) 0.8 0.8 0.7 0.6 0.6 Net Debt/Equity (X) CASH CASH 0.0 0.1 0.1 Net Debt/Equity ex MI (X) CASH CASH 0.0 0.1 0.1 Capex to Debt (%) 20.5 22.0 22.5 16.5 16.5 Z-Score (X) 2.4 2.5 2.4 2.4 2.4 Source: Company, DBS Bank

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Page 6 Company Guide ST Engineering

Cash Flow Statement (S$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Pre-Tax Profit 730 651 630 552 654 Dep. & Amort. 142 171 187 191 194 Tax Paid (110) (133) (111) (121) (131) Assoc. & JV Inc/(loss) (31.1) (57.2) (58.3) (59.5) (53.6) Chg in Wkg.Cap. 154 (72.2) (227) (25.8) (8.0) Other Operating CF 44.8 65.3 44.6 0.0 0.0 Net Operating CF 930 624 465 536 656 Capital Exp.(net) (282) (224) (273) (200) (200) Other Invts.(net) 70.8 79.0 (264) 0.0 0.0 Invts in Assoc. & JV (19.3) 5.67 0.27 (5.0) (5.0) Div from Assoc & JV 39.6 35.0 51.4 35.0 35.0 Other Investing CF (67.1) (53.4) 7.98 0.0 0.0 Net Investing CF (258) (157) (477) (170) (170) Div Paid (521) (499) (498) (465) (467) Chg in Gross Debt 28.2 (394) 109 0.0 0.0 Capital Issues 52.2 10.7 (75.9) 0.0 0.0 Other Financing CF (30.9) (43.8) (55.1) 0.0 0.0 Net Financing CF (472) (926) (520) (465) (467) Currency Adjustments 17.7 (0.3) 12.6 0.0 0.0 Chg in Cash 218 (459) (519) (99.4) 19.6 Opg CFPS (S cts) 25.0 22.3 22.3 18.1 21.4 Free CFPS (S cts) 20.9 12.8 6.20 10.8 14.7 Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank Analyst: Suvro SARKAR, Singapore Research Team

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ST Engineering

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends

Completed Date: 10 Nov 2016 19:03:26 Dissemination Date: 10 Nov 2016 19:07:27

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Page 8 Company Guide ST Engineering

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in the report. The DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. As of 10 Nov 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in ST Engineering recommended in this report as of 30 Sep 2016. 2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services:

3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

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ST Engineering

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

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This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

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DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E

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