First Private Bank Ltd. (FPB)

Company Report Non‐rated (17/18E Target Price Kyat 29,000) Close Kyat 30,000 (OTC) Banking January 19, 2017 Positioned to capitalize on growth cycle Among the gainers to enjoy sector growth Given that the financial sector in Myanmar remains in the expansion stage with a promising growth outlook, First Private Bank Ltd. (FPB), fifteenth‐ranked by assets among 24 private banks, should continue to enjoy the favorable economic and sector growth prospects. Moreover, FPB’s sound financial position, especially its efficient asset quality control and the good support from its major shareholders, should make it one of the prime gainers from the favorable growth outlook. However, the key challenges are the increasing competition in the banking system and the ongoing reform risks.

2018 target price of Kyat 29,000/share based on target P/BV of 1.1x We derive a 2018 target price for FPB at Kyat 29,000/share, for implied target P/BV of 1.1x based on the Gordon growth model (GGM). This is quite comparable to Indochina banks’ average P/BV of 1.0‐1.1x.

Expect 10% net profit CAGR in FY2017‐19E The growth should be backed mainly by anticipated loan growth of 19‐20% and non‐interest income CAGR of 10% in FY17‐19, thanks to Myanmar’s sound economic growth and the supportive industry outlook. However, we still expect the bank’s loan spread and NIM to remain under pressure given the more competitive environment.

Promising sector growth; key challenges are reform risks and competition We see the growth outlook for Myanmar’s banking sector continuing to outpace CLMV and regional peers. This should also be thanks to 1) the Myanmar banking sector’s low penetration rate; 2) favorable economic growth; and 3) the ongoing progress of economic and financial reforms. However, the key challenges are the increasing competition in the banking system and the financial reform given that Myanmar banks will still take several years to be compliant with international practices.

Share data Catalysts & Concerns OTC Closing Price (Kyat , USD) 30,000/ 22.22 The key potential downside risks to its earnings could come from Paid‐up Shares 2,472,053 shares 1) regulatory/reform risks; 2) more intense competition in Myanmar’s (as at 15 August 2016) banking system, especially from large private banks; and 3) the asset Par (Kyat , USD) 10,000/ 7.41 quality issue, given the bank’s rapid expansion. Meanwhile, the main Market cap. (Kyat bn/ USDmn) 74 / 55 catalyst could come from Myanmar’s favorable economic growth, which should continue to outpace regional peers and help boost banking Listing date 20 January 2017 system growth. URL www.firstprivatebank.com.mm Major Shareholders (31 March 2016 ) % Holding Financials and Valuation U Nay Lin Oo 2.54% FY Ended 31 Mar FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Dr. Sein Maung 1.76% Net profit (Kyat mn) 6,573 6,412 6,873 7,534 8,597 MGS (Beverages Co.,Ltd.) 1.67% EPS (Kyat) 3,297 2,710 2,780 3,048 3,478 Daw Shwe Cynn 1.54% U Tun Wing Naing 1.49% EPS growth (%) 1% ‐18% 3% 10% 14% Others 91% BVPS (Kyat) 20,970 21,984 24,175 26,197 28,743 DPS (Kyat) 2,197 2,005 1,946 2,133 2,434 Prapharas Nonthapiboon FY Ended 31 Mar FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E PER (X) 9.10 11.07 10.79 9.84 8.63 Analyst, no 17836 PBV (X) 1.43 1.36 1.24 1.15 1.04 [email protected] Dividend yield (%) 7.32 6.68 6.49 7.11 8.11

66 (0) 2695‐5872 ROE (%) 16.8% 13.7% 12.3% 12.1% 12.7%

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Valuation

2018 target price of Kyat 29,000/share based on target P/BV of 1.1x We value FPB based on the Gordon growth model (GGM) where we assume long‐term sustainable ROE of 12%. Accordingly, we derive a 2017/18E target price for FPB at Kyat 29,000/share, for implied target P/BV of 1.1x. This is relatively comparable to Indochina banks’ average P/BV of around 1.0‐1.1x; see Figure 1.

Note that our conservative valuation for FPB has taken into account the potential upcoming challenges and threats to Myanmar banks, especially in regard to the regulatory and reform risks as Myanmar banks need to comply with international standards in the longer term. These challenges should be the key risk to FPB’s target price and earnings. However, the main positive catalyst could come from how well the bank generates synergy after being a listed firm, especially in terms of funding cost management.

In terms of the price performance for the three listed firms (FMI, MTSH and MCB), we saw a price rally for these firms in the early weeks of trading and price weakening afterward; see Figures 2‐6.

Figure 1: Financial and valuation summary vs. regional peers Regional NP growth (%) PER (X) P/BV (X) Dividend yield (%) ROE (%) Banks 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E China ‐1 2 6.5 6.3 0.8 0.8 4.5 4.6 12.9 12.1 Hong Kong ‐23 12 31.7 28.3 2.3 2.2 3.2 4.5 8.8 9.0 India ‐20 ‐15 8.2 20.2 1.5 2.1 0.9 1.7 3.4 11.9 Indonesia ‐1 18 13.3 10.9 1.6 1.4 2.2 2.5 12.5 12.8 Korea 20207.27.20.50.52.93.27.56.9 Malaysia ‐4 9 12.1 11.3 1.1 1.1 3.8 4.1 10.4 10.3 Philippines 10 10 13.8 12.8 1.4 1.3 1.6 1.5 11.0 10.7 Singapore ‐6 2 11.1 10.8 1.1 1.0 3.5 3.6 10.1 9.8 Thailand ‐0.1 5 11.5 9.9 1.2 1.1 3.8 4.0 10.7 10.9 Vietnam 8 21 18.5 15.8 1.3 1.2 3.3 3.8 7.7 8.5 BCEL LS ‐21 29 8.4 6.5 0.7 0.6 4.2 4.6 10.9 8.2 Regional Average ‐3 10 12.9 12.7 1.2 1.2 3.1 3.5 9.6 10.1 Indochina Average* ‐5 18 12.8 10.7 1.1 1.0 3.8 4.1 9.7 9.2

Myanmar NP growth (%) PER (X) P/BV (X) Dividend yield (%) ROE (%) Banks FY16/17 FY17/18 FY16/17 FY17/18 FY16/17 FY17/18 FY16/17 FY17/18 FY16/17 FY17/18 MCB** 24 20 16.7 15.0 1.4 1.4 4.2 4.7 9.5 9.7 FPB** 7 10 10.8 9.8 1.2 1.1 6.5 7.1 12.3 12.3 Source: KTZMICO Research, Bloomberg * Indochina average includes Thailand, Vietnam and Laos ** Fiscal year ended March

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Figure 2: FMI, MTSH and MCB price performance relative Figure 3: YSX Index and market capitalization to YSX

Index Myanmar Market cap MarketCap. 180 First Myanmar 1400 Investment Myanmar Thilawa SEZ Holdings 1,200,000 160 1300 1,000,000 140 116.67 1200 Myanmar Citizens Bank 120 1100 800,000 100 88.00 1000 600,000 80 900 56.05 400,000 60 800 200,000 40 700 43.55 600 ‐ 20 0 25‐Mar‐16 12‐May‐16 29‐Jun‐16 16‐Aug‐16 3‐Oct‐16 20‐Nov‐16 7‐Jan‐17

MYANPIX INDEX FMI MTSH MCB Mkt. Cap. (m. MMK) MYANPIX INDEX Source: YSX, KT ZMICO Research Source: YSX, KT ZMICO Research

Figure 4: FMI Price performance Figure 5: MTSH Price performance FMI MTSH 45000 7500 40000 7000 6500 35000 6000 30000 5500 25000 5000 4500 20000 4000 15000 3500

10000 3000 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 16 17 16 16 16 16 16 16 16 17 16 16 16 16 16 16 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jan Jan Jun Jun ‐ Jun Jun ‐ ‐ ‐ Jun Oct Oct Oct Oct Apr Sep Sep Apr Sep Sep Dec Dec Dec Aug Aug Aug ‐ Nov Dec Dec Nov Aug Nov ‐ Nov ‐ ‐ ‐ ‐ ‐ Mar ‐ ‐ May May ‐ ‐ ‐ ‐ ‐ May ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4 2 8 6 6 8 9 6 1 28 14 5 7 3 23 5 12 9 30 16 20 23 21 22 24 29 15 21 25 11 20 17 22 20 25 19

24 Source: YSX, KT ZMICO Research Source: YSX, KT ZMICO Research

Figure 6: MCB Price performance

MCB 13000 12000 11000

10000

9000 8000 7000 6000 16 16 16 16 17 16 16 16 16 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jan Oct Oct Sep Sep Dec Dec ‐ Nov Aug Nov ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

8 9 9 25 10 25 10 24 26 24 Source: YSX, KT ZMICO Research

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Investment Highlights

We expect First Private Bank Ltd. (FPB), ranked fifteenth by assets among private banks as of Mar‐16 as per GIZ’s latest research, to be one of the beneficiaries of the favorable growth of the Myanmar banking sector and the country’s fast‐growing economy. This should be thanks to the bank’s long‐standing expertise in the banking field of over 25 years. Moreover, FPB’s sound financial position, especially its well‐managed asset quality (with its NPL ratio much lower than peers), should enable it to enjoy Myanmar’s favorable macro growth prospects. On top of that, the bank has been well supported by its diversified major shareholders as well as its customer base.

Note that Myanmar has maintained the pace of its fast‐growing economy with real GDP expanding by 7.3% in FY2015/16 (ending March 31) and by ~6.5% for FY2016/2017E as estimated by the IMF. Furthermore, the fact that Myanmar’s banking system is in the expansion stage should provide ample room to grow on its low base and low penetration rate.

Meanwhile, the key risks to the bank’s earnings and valuation could come from 1) the higher competition in the Myanmar banking sector, especially from private banks; and 2) regulatory reform, as the bank still has a long way to go to be more in line with international standards.

Company Background First Private Bank Ltd (FPB), set up in 1992, was the first genuine privately‐owned bank in Myanmar, and since then has maintained a track record of paying annual dividends to its shareholders. FPB is considered a medium‐sized bank ranked fifteenth in terms of assets among private banks as of Mar‐16. The bank’s head office is located in Nay Pyi Daw and it currently has 32 branches across the country. The bank has been well supported by diversified shareholders and its customer base. As of 31 March 2016, the top 10 depositors contributed 6.6% of the total deposit amount, which provides the bank with a stable deposit base. At the same time, the number of shareholders is 7,728, providing a stable shareholder base.

Note that FPB’s top shareholders are among the most reputable conglomerates in Myanmar, which have been providing good support to the bank’s operation and growth. Specifically, U Nay Lin Oo (the largest shareholder) is chairman of “Ga Mone Pwint company Limited” (GMP) that engages in retailing, trading, brand developer, property and real estate as well as hotel businesses in Myanmar. They are constructing a hospital in Yangon with a Thai partner. Meanwhile, the third largest shareholder, MGS Beverages, is a subsidiary of Myanmar Golden Star Group (MGS) who has been active since 1989 in the engineering, agricultural, beverage, and construction businesses as well as in the sectors of trading, manufacturing and export/import. MGS Breweries is a strategic partner of Carlsberg Group.

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Figure 7: Shareholding structure (31 Mar‐16) Figure 8: Shareholding structure (31 Mar‐16)

Others 91%

U Nay Lin Oo 2.54% Individuals Directors Dr. Sein Maung 1.76% and others 11.41% 73.20% MGS (Beverages Co., Ltd.) 1.67% Daw Shwe Cynn 1.54% Business U Tun Wing Naing 1.49% groups 15.39%

Source: YSX, FPB, KT ZMICO Research

Figure 9: Loans by Business Type FY16 (as of Mar‐16) Figure 10: Deposit Structure FY16 (as of Mar‐16)

Call deposit Current A/C 1% 8%

Services 24% Fixed deposit 30%

Trade 58% Production 17% Saving deposit 62%

Source: FPB, KTZMICO Research Source: FPB, KTZMICO Research

Figure 11: Income Structure Figure 12: Non‐interest Income Structure FY16 (as of Mar‐16)

100% Others 17% Transaction 25 26 29 80% 35 35 35 34 fees 45% Commission 60% Fee & Remittance 9% 40% 75 74 71 65 65 65 66 20% Income on 0% Foreign FY12/13 FY13/14 FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Exchange Non‐Interest Income Net Interest Income 29%

Source: FPB, KTZMICO Research Source: FPB, KTZMICO Research

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Figure 13: Company Profile (First Private Bank Ltd.)

Company Name First Private Bank Ltd. (FPB) Code 00004 ISIN code MM0000400000 Date Formed 9th September 1991 Management Dr. Sein Maung (Chairman) Date Listed 20th January 2017 Fiscal year 1st April to 31st March Outstanding Shares 2,472,053 shares Paid‐up Capital MMK 24,720.53 million (as of 15th August 2016) (as of 15th August 2016) Phone 01‐251748, 01‐376452 Email [email protected] Address No. 619‐621, Merchant Street, Corner of Bo Soon Pat Street, Pabedan Township, Yangon, Myanmar Business Domestic Financial Services (1) Saving Deposits (2) Current Deposits (3) Fixed Deposit (Time Deposits) (4) Call Deposits (5) Remittances (6) Payment Orders

Loan Services Loan Services of FPB are‐ (1) Loans (2) Overdraft (3) Bank Guarantee (4) Hire Purchase Services are‐ ‐ HP for Motor Cars ‐ HP for Housing

International Transaction International Banking Services are‐ (1) Export & Import Services (L/C, TT) (2) International Remittance and International Money Transfer Services (Inbound and outbound) (3) Payment Orders (4) Money Exchange Services (5) Foreign Exchange Transactions

Western Union Money Transfer Services FPB signed an agreement with Western Union Money transfer services on 12th January, 2013. CBM approved outbound money transfers on 6th January, 2016.

Digital Banking/Mobile Payment/Commencement data FPB started its Mobile Payment Service (myKyat), to offer service to unbanked people and rural areas, on 7th May, 2015. Mobile Banking (myKyat) Services are‐ (1) Mobile Banking Accounts (2) Cash in ‐ Cash out (3) Sending Money (4) Requesting Money (5) Bill Payment (Electricity Bill and YCDC Bill) (6) Phone Top up (E‐Load top up) (7) Air Line & Express Car Ticketing Service (8) Purchases (9) Mobile Payments REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 21

Board of Directors (1) Dr. Sein Maung (Chairman) (2) Daw Hla Hla Win (Executive Director) (3) U Myint Zaw (Director/Senior General Manager) (4) Dr. Aung Min (Director) (5) Dr. Tin Kyi (Director) (6) Dr. Tin Thein (Director) (7) Daw Hla Hla Yi (Director) (8) U Kaung (Director) (9) U Nay Lin Oo (Director) (10) U Myo Tun (Director) (11) U Tun Saing (Director) (12) U Myint Lwin (Director) (13) U Han Myint (Director) (14) U Htin Aung Kyaw Oo (Director) (15) U Phyo Hla Wai (Director) (16) Dr. Tin Win (Independent Director)

Website www.fpb.com.mm, www.firstprivatebank.com.mm

Lead Securities Company Myanmar Securities Exchange Centre Co., Ltd. (MSEC) Auditor U HlaTun & Associates Limited Company History FPB is a public bank established in 1991, with company registration No. (223/1991‐1992) granted on 9th September, 1991 under Myanmar Company Act (1914). The Banking License No. CBM/P‐1 (5)1992 was granted by CBM on 25th May, 1992. It started its business on 10‐6‐1992 at No. 619‐621, Merchant Street, on the corner of Bo Soon Pat Street, Pabedan Township, Yangon, Myanmar.

Authorized/Paid‐up Capital Authorized Capital of FPB is 100 Billion Kyat and its Paid‐up Capital was 24.72 Billion Kyat on 15th August, 2016.

Branches Its branches and mini branches have opened as follows‐

Bank Opening date (1) Head Office (Yangon) 6‐10‐1992 (2) Head Office (Nay Pyi Taw) 10‐1‐2011 (3) Bayint Naung Branch (1) 23‐10‐1993 (4) Manadalay Branch (2) 13‐7‐1995 (5) Monywa Branch (3) 1‐4‐1996 (6) Theingyizay Branch (4) 1‐4‐1996 (7) Pyay Branch (5) 24‐11‐1996 (8) Hinthada Branch (6) 2‐11‐1997 (9) Kyaukpadaung (7) 30‐4‐1998 (10) Pakokku Branch (8) 12‐8‐1998 (11) Magwe Branch (9) 14‐8‐1998 (12) Dawei Branch (10) 26‐10‐1999 (13) Myeik Branch (11) 16‐9‐1999 (14) Latha Branch (12) 22‐1‐2000 (15) Kawthaung Branch (14) 12‐2‐2000 (16) AungBan Branch (15) 26‐3‐2000 (17) Ahlone Branch (16) 10‐7‐2000 (18) Mawlamyaing Branch (17) 19‐10‐2009 (19) Kalay Branch (18) 3‐5‐2010 (20) Taunggyi Branch (19) 29‐8‐2011 REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 7 of 21

(21) Loikaw Branch (20) 21‐3‐2013 (22) Thiriyadanar Branch (21) 2‐6‐2014 (23) Mandalay 30th Street Branch (22) 30‐6‐2014 (24) Hpa An Branch (23) 25‐8‐2014 (25) Gangaw Branch (24) 30‐4‐2015 (26) Monywa Branch (25) 14‐9‐2015 (27) Butalin Branch (26) 14‐12‐2015 (28) Minhla Branch (27) 8‐2‐2016 (29) Pathein Branch (28) 13‐6‐2016 (30) Kanma Branch (29) 8‐2‐2016 (31) Thingangyun Mini Branch 20‐8‐2014 (32) Magwe Mini Branch 12‐9‐2014

Money Changer License FPB was granted a Money Changer License No. CBM FEMD 8/2011 by CBM on 24th October, 2011. It has opened money exchange counters at the Head Office Yangon, Bayint Naung, Mandalay, Monywa, Pyay, Pakokku, Magwe, Dawei, Myeik, Kawthaung, Aung Ban, Mawlamyaing, Kalay, Taunggyi, Loikaw, Thiriyadanar, Mandalay 30th Street, Hpa An, Gangaw, Butalin, Minhla, Pathein, Kanma branches and Thingangyun mini branch.

Foreign Banking License On 24th August, 2012, FPB was granted a Foreign Exchange Authorized Dealer License No. CBM FEMB 93/2012 by CBM and it started Foreign Banking on 2‐10‐2012. It became a member of the Society for Worldwide Interbank financial Telecommunication (SWFT). It has established a correspondence bank relationships with UOB (Singapore), OCBC (Singapore, Hong Kong, Shanghai, Bangkok, Korea), May Bank (Malaysia), First Commercial Bank (Taiwan), ICBC (Taiwan), United Bank of India, Bank of Ayudhya (Thailand), Bank Asia (Bangladesh), E‐Sun Bank (Taiwan), Krung Thai (Thailand), Sumitomo Mitsui Banking Corporation (Japan), Cathy United Bank (Taiwan), and Busan Bank (Korea). By connecting with correspondent banks, FPB is currently providing Foreign Currency current account openings, Export/Import LC, Telegraphic transfer (TT) Account transfer and Foreign Exchange transaction activities to its customers. FPB was approved to be listed on the Yangon Stock Exchange on 30th December 2016. Summary of profile of FPB Type of company Public company Company registration Registration No.223, 1991/92 Date of registration 9 September 1991 Commencement certificate 5 March 1992 Commercial bank license 25 May 1992 License number CBM/P‐1/(5)1992 Investment bank license 10 November 1993 License number CBM‐BAN SIT‐48‐1 Date of opening 6 October 1992 Money changer license 24 October 2011 License number CBM‐FEMD‐8/2011 Authorized dealer license 24 August 2012 License number CBM‐FEMD‐93/2012 Mobile banking license 30 June 2014 License number CBM‐FEMD‐53/2014 Number of branches 32 Branches Number of staff 610 Source: YSX, FPB, KT ZMICO Research

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Figure 14: FPB’s key services Loans & Advances Interest Rate (per annun) Type of Loans Special Industrial Loans 12% Term Loan 12% Overdraft 12% Service Cha rge 1%

Deposit rates Interest Rate (per annun) Saving Deposit 8.25% (interest paid quarterly) Fixed Deposit 3 months 9.25% 6 months 9.50% 9 months 9.75% 1 yea r 10% Ca l l Deposit 4% (interest paid monthly) Source: FPB

Earnings prospects

Sound earnings growth with 17% net profit CAGR in the past four years FPB posted sound earnings growth in the past four years with 17% net profit CAGR during 2013‐16 (Figure 15). The strong earnings were backed mainly by a robust compound annual growth rate (CAGR) of 27% for both loans (42% in FY13, 31% in FY14, 21% in FY15 and 18% in FY16) and non‐interest income for the same period.

FY15/16 net profit declined 2% mainly on a lower net interest margin However, for the latest FY2015/16 performance ended Mar‐16, the bank’s net profit declined by 2% YoY. This was due mainly to the decline in its net interest income by 8% YoY on the narrowing of its net interest margin (from 5.05% in FY2015 to 4.08% in FY2016) and the loan spread (from 3.8% to 2.72%) from more intense competition in both the lending and deposit fields, especially among private banks, which resulted in a decline in its loan yield to 11.9% in FY16 from 13% FY15. However, its non‐interest income grew well at 23% YoY, backed mainly by the sharp increase in income on foreign exchange that jumped by 90% YoY from Kyat583mn in FY15 to Kyat1,105mn in FY16.

Figure 15: Net profit vs. growth and ROE Figure 16: Loans, NII and Non‐NII growth vs. NIM

Kyat mn Net profit NP Growth ROE 50% 6.0%

10,000 37% 40% 40% 5.0% 9,000 8,597 35% 30% 7,534 30% 8,000 30% 6,873 4.0% 7,000 6,573 6,412 6,038 25% 20% 6,000 4,636 3.0% 16.8% 20% 10% 5,000 13.7% 12.3% 12.7% 18.6% 18.7% 12.1% 15% 2.0% 4,000 0% 10% FY12/13 FY13/14 FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E 3,000 14% 1.0% 9% 10% 5% ‐10% 2,000 7% ‐2% 1,000 0% ‐20% 0.0% ‐ ‐5% Net Interest Income Growth (LHS) Non‐Interest Income Growth (LHS) FY12/13 FY13/14 FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Loan Growth (LHS) Net interest margin (RHS)

Source: FPB, KTZMICO Research Source: FPB, KTZMICO Research

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Expect 10% net profit CAGR in the next three years We expect FPB to post moderate earnings growth with projected net profit CARG of 10% backed by anticipated loan growth of 19‐20% and non‐interest income CAGR of 10% for the same period. However, we still expect the bank’s loan spread and NIM to remain under pressure given the more competitive environment on both the lending and deposit sides, especially from large private bank players with more extensive branches and ATM networks, particularly KBZ, AYA and CB (Figure 28‐31). However, we expect FPB’s competitiveness and image to improve after being a listed firm, which could support its business expansion, especially on the funding side, and be a positive catalyst to our current earnings forecasts. We also expect FPB’s cost‐to‐income ratio to go up due in part to the bank’s ongoing expansion of its core banking and IT system. Note that the bank’s main loan growth drivers should come from its effort and competitiveness in lending to SME clients as well as in consumer segments.

The bank’s main strategic intents The bank’s main strategic intents for FY16/17E and in the long term include: 1. To upgrade the core banking technology and IT system, which includes implementing core banking solutions and establishing a data center along with modernizing the bank’s business practices, processes and standards 2. To modernize business practices by introducing international best practices and standards 3. To diversify financial products, including consumer finance 4. To continue making an effort to capture SME clients 5. To expand card business after the core banking has been implemented 6. To open 7 branches in 2016/2017E (vs. 5 new branches in 2015/16) with the aim to open branches in smaller towns and villages to provide access to financial services to low income groups 7. To motivate and increase active cooperation and participation as well as the cross‐selling transactions of its shareholders

Potential downside risks to earnings As Myanmar’s accounting and transparency standards still lag regional peers including the banking sector, it will take Myanmar banks several years to be compliant with international practices. The potential main risks to our earnings forecasts for FPB could come from:

1) The potential for booking provision expenses in the profit and loss statement: Note that Myanmar banks, including FPB, still set aside and book provision expenses for loan loss through the retained earnings item in shareholders’ equity vs. the international practices that book such expenses in the profit and loss statement. Note also that the provision expenses that the bank set aside in the past three years represented around 30‐50bps of loans and around 5‐6% of FPB’s net profit for the same period.

2) The potential increase in reserve/provisioning standard required by CBM: As noted earlier, the current reserve policy for loan loss required by the CBM is at 2% of gross loans with no requirement for a specific provision yet. For a longer‐term perspective, we expect the CBM’s provisioning policy to include a specific provision requirement to be more in line with the international standard. Note that there is still no exact indication from the CBM in relation to the new requirement as well as the timeframe yet. In a longer‐term perspective, the CBM should gradually raise the key accounting standards and regulations (i.e., financial reporting, provisioning, NPLs and capital standards as well as income/expenses recognition) for Myanmar banks to be more in line with international standards. This could post potential downside risk to FPB’s earnings outlook.

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Financial Position

Asset quality and provisioning standards for Myanmar banks still lag regional banks It should be noted that the NPL classification and the provisioning policy for Myanmar banks still lag regional bank peers. FPB (likely the same as other Myanmar banks) classifies loans as NPLs when loans with interest payments and principal are overdue for more than six months, which lags behind other regional banks that use criteria of > three months overdue interest payments.

Moreover, in terms of the provisioning policy, the Central Bank of Myanmar (CBM) requires Myanmar banks to set a provision of only 2% of gross loans for all loan classes with no specific or additional reserve requirement for NPL classes. This standard is relatively more relaxed when compared with Thai and regional banks, which require higher provisioning for NPL classes (see Figure 17). Moreover, provisions are normally made at the end of the budget year as per CBM instructions.

Figure 17: Myanmar’s NPL definitions and provisioning policy vs. regional banks Loan classification by age Criteria Provisioning Policy (months past due) Thailand Vietnam Laos Myanmar 1 Current no 1%** 0.75%* 1%** 2%* 2 Special mention loans (<3 months) 2%** 5%** 3%** 2%* 3 Sub‐standard loans (>3‐6 months) 100%** 20%** 20%** 2%* 4 Doubtful loans (>6‐12 months) 100%** 50%** 50%** 2%* 5 Bad loans (>12 months) 100%** 100%** 100%** 2%* *% of gross loans **% of loans net of collateral (% shortfall in security value) NPLs Source: Central Banks and KT ZMICO Research Note that Myanmar data are based on MCB, CBM and other related sources.

Sound balance sheet should prompt the bank to capitalize on the sector growth outlook FPB’s balance sheet is relatively solid, especially in regard to its asset quality and reserve position. The bank’s asset quality has been well managed with its NPL ratio staying quite low at just 0.01% in FY15/16 vs. Myanmar banks’ average of around >2%. Its liquidity ratio of 29% as of FY15/16 was also ahead of the CBM’s minimum requirement of 20%. The bank’s sound balance sheet will enable it to capitalize on the favorable growth outlook for the banking system and Myanmar’s economy.

Figure 18: LDR vs. Loans to Assets Figure 19: NPLs/Loans vs. Liquidity Ratio

33% 125% 35% 0.05% 30% 29% 0.05% 30% 27% 100% 101% 102% 0.043% 0.04% 100% 94% 95% 25% 0.04% 0.037% 88% 0.03% 84% 20% 0.034% 0.03% 75% 78% 73% 15% 0.02% 75% 69% 65% 63% 10% 0.02% 58% 0.01% 5% 0.01% 0.01% 50% 0% 0.00% FY12/13 FY13/14 FY14/15 FY15/16 FY16/17EFY17/18EFY18/19E FY12/13 FY13/14 FY14/15 FY15/16 Loans to Deposits (LDR) Loans to Assets Liquidity ratio (LHS) NPLs/Loans (RHS)

Source: FPB, KTZMICO Research Source: FPB, KTZMICO Research

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Figure 20: Basel standard Figure 21: Capital Adequacy of Private Banks Country BIS Standard Cambodia Basel I Lao PDR Basel I Myanmar Basel I Vietnam Basel I Brunei Basel I Indonesia Basel II India Basel III Thailand Basel III Philippines Basel III Malaysia Basel III Singapore Basel III Hong Kong Basel III Australia Basel III Japan Basel III Taiwan Basel III

Source: BIS, Central banks Source: CBM, IMF

Figure 22: CBM's current key regulations for Myanmar banks CBM's current key requirements for Myanmar banks Cash ratio 5% Liquidity ratio 20% Capital adequacy ratio >10% Tier 1 ratio >4% Single lending limit <20% of core capital General provision 2% of gross loans Specific provision No specific requirement NPL definition >6 mths overdue payment Minimum reserve requirement 10% of deposits at least 5% cash deposit with CBM Corporate income tax 25% Capital gains tax 10% Minimum paid‐up capital Kyat 20bn for domestic banks USD 75mn for foreign bank branches

CMB policy rate 10% Lending rate 13% (Max) Deposit rate 8% (Min) Call 4.0‐8.5% Savings 8.0‐8.25% Time 8‐10%

Key Lending regulations/restrictions Loan duration: usually one year Loan amount: ~30‐60% of forced‐sale value of land and building collateral and 80% for gold collateral Lending rates: capped at 13% p.a., deposit rate: 8% p.a. Banks are only allowed to lend 70‐80% of total deposits. Source: CBM, KT ZMICO Research and other related sources

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Macro and Banking Sector Outlooks Myanmar has been a fast‐growing economy with 7.3% growth in FY15/16 Myanmar has maintained the pace of its fast‐growing economy with real GDP expanding by 7.3% in FY2015/16 (ending March 31). During the first half of FY2016/17, economic activity softened owing partly to slowing demand from major trading partners and weak commodity prices in tandem with most Asian nations including Thailand. Nevertheless, with an expected increase in FDI and aid inflows following the smooth political transition, a revival of growth is expected in the second half of the year and the full‐year growth is estimated at 6.5%. Inflation, on average, is expected to stay at around 9% for 2016/17 and the external current account deficit should increase to about 6.7% of GDP, according to the IMF’s preliminary findings about developments in Myanmar in late‐Oct before undertaking the official report of the 2016 Article IV consultation discussions, expected in early 2017. The country has made important progress on reforms The preliminary report also indicated that the Myanmar authorities have made important progress since last year’s Article IV consultation, including the passage of the Investment Law. Nonetheless, continued efforts to liberalize the financial sector and create a business‐friendly environment for the private sector are necessary. Myanmar also needs to maintain macroeconomic stability as a top priority for economic policy, which suggests pulling down inflation, strengthening the country’s external position and fortifying the banking system. In particular, the fiscal deficit needs to be kept in check, monetary conditions tightened, and the exchange rate allowed to move more flexibly in line with market conditions.

Figure 23: Myanmar in figures Population: 51.5 million (2014 Census) Area: 676,590 sq. km. GDP (Nominal): USD 65.8 billion (FY 2015‐2016) GDP per capita: USD 1,204 (FY 2015‐2016) Real GDP growth: 7.0% (FY 2015‐2016) Inflation: 11.4 % (FY 2015‐2016, period average) Source: GIZ Report (2016) Reference: WB (2016), CSO (2016), DOP (2015), IMF (2015)

Banking sector reform still has a long way to go to meet international standards Myanmar’s financial system is considered as the least developed financial sector of all the countries in Southeast Asia. The country is mainly a cash‐based economy as less than 20% of the population has access to formal financial services, with rural areas in particular having limited access to banking services. Myanmar’s financial sector currently can fulfill its role as a financial intermediary only to a limited extent as the current range of banking products and services remains quite limited and the transparency and risk management standards for Myanmar banks still lag CLMV and regional banks, especially in terms of accounting and legal framework. After experiencing several cycles of ups and downs starting from the 19th century, the Myanmar banking sector is currently undergoing a considerable reform process, especially regulatory, supervisory and infrastructure reforms that are aimed at meeting international practices and increasing the system’s stability over the longer term. For instance, the new Financial Institution Law (FIL) was enacted on January 25, 2016 to replace the old FIL enacted in 1990. Although we are seeing ongoing progress with Myanmar’s major economic and financial reforms, it will still take several years for the country to be compliant with international practices. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 13 of 21

Growth outlook promising but the challenges are higher competition and reform risks Given that the financial sector in Myanmar remains in the expansion stage, especially when compared with regional bank peers, we see the growth of the Myanmar banking sector continuing to outpace CLMV and regional peers. This should be underpinned by 1) Myanmar’s banking sector’s low base and low penetration rate; 2) favorable economic growth; 3) the ongoing progress of economic and financial reforms; and especially 4) the likelihood of better stability in the political climate after the election. Despite fast growth in recent years (deposits and loans per GDP approximately tripled over the last five years, especially private banks), Myanmar’s financial sector remains small relative to regional countries. The contribution of Myanmar’s financial sector to the country’s economy, measured in terms of credit to the private sector, is still at the lowest level in the ASEAN region (Figure 24‐25). Moreover, as per the GIZ’s latest report, accumulated assets of the banking sector, which consists of 28 local banks and nine foreign banks, amounted to around 55% of GDP as of March 2016. While state‐owned banks currently account for about half of the banking system assets (Figure 29), these banks as well as smaller private banks are struggling to keep pace and survive as the competition in Myanmar’s banking system has become more intense with the speed of reforms and the high growth rates of private sector peers as well as from the increasing role of foreign banks; see Figure 28.

Figure 24: Myanmar’s Loans and Deposits in % of GDP Figure 25: Domestic credit to the private sector in a regional perspective (% of GDP)

% 35 32.4 30.1 Deposits 30 to GDP 24.5 25

20 16.2 Loans to GDP 15 12.3 17.9 10 14.5 10.8 5 7.5 4.8 0 2010/11 2011/12 2012/13 2013/14 2014/15 Source: GIZ Report (2016), IMF (2015) Source: GIZ (2016), IMF (2015)

Figure 26: Total assets of the Myanmar banking sector as Figure 27: Total assets of the Myanmar banking sector to of March 2016 (Kyat billion) GDP as of March 2016 (% of GDP)

Source: GIZ (2016), IMF (2015) Source: GIZ (2016), IMF (2015)

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Figure 28: Financial institutions in Myanmar State‐Owned Banks Private Banks 1Myanma Foreign Trade Bank 1 Myanmar Citizens Bank Ltd 2Myanma Investment and Commercial Bank 2 First Private Bank Ltd 3Myanma Economic Bank 3 Co‐operative Bank Ltd 4Myanma Agriculture and Development Bank 4 Yadanabon Bank Ltd 5Myawaddy Bank Ltd Representative Offices of Foreign Banks and Finance Company 6Yangon City Bank Ltd 1DBS Bank Limited 7 Yoma Bank Ltd 2National Bank Limited 8 Myanmar Oriental Bank Ltd 3First Overseas Bank Limited 9 Asia Yangon Bank Ltd 4CIMB Bank Berhad (New Licence for Name of Change) 10 Tun Foundation Bank Ltd 5Arab Bangladesh (AB)Bank Limited 11 Kanbawza Bank Ltd 6Siam Commercial Bank Public Company Limited 12 Small & Medium Industrial Development Bank Ltd 7 Maruhan Japan Bank PLC 13 Global Treasure Bank Ltd 8Krung Thai Bank Public Company Limited 14 Rual Development Bank Ltd 9United Bank of India 15 Innwa Bank Ltd 10 Kasikornbank Public Company Limited 16 Asia Green Development Bank Ltd 11 Woori Bank 17 Ayeyarwaddy Bank Ltd 12 Vietin Bank 18 United Amara Bank Ltd 13 Korea Development Bank 19 Myanma Apex Bank Ltd 14 Standard Chartered Bank 20 Naypyitaw Sibin Bank Limited 15 Industrial Bank of Korea 21 Myanmar Microfinance Bank Limited 16 First Commercial Bank (New Licence for Change of Management Office) 22 Construction and Housing Development Bank Limited 17 Bank of India (BOI) 23 Shwe Rural and Urban Development Bank Limited 18 Kookmin Bank 24 Ayeyarwaddy Farmers Development Bank Limited (A Bank) 19 Export‐Import Bank of India 20 The Export‐Import Bank of Korea Foreign Banks Branches 21 Eastern Bank Limited 1 The Bank of Tokyo‐Mitsubishi UFJ, Ltd 22 Bank of Ayudhya Public Company Limited 2 Oversea‐Chinese Banking Corporation Ltd 23 RHB Bank Berhad 3 Sumitomo Mitsui Banking Corporation 24 Commercial Bank of Ceylon PLC 4 United Overseas Bank Limited 25 Cathay United Bank 5 Bangkok Bank Public Company Limited 26 State Bank of Mauritius 6 Industrial and Commercial Bank of China 27 BRED Banque Populaire 7 Malayan Banking Berhad (Maybank) 28 Busan Bank Co., Ltd 8 Mizuho Bank Limited 29 AEON Credit Service Company 9 Australia and New Zeland Banking Group Limited 30 PT. Bank Negara Indonesia (Persero)Tbk 10 The Joint Stock Commercial Bank for Investment and 31 Bank of Taiwan Development of Vietnam (BIDV) 32 Taishin International Bank Co., Ltd 11 Shinhan Bank 33 Taiwan Shin Kong Commercial Bank Co., Ltd 12 E.Sun Commercial Bank Limited 34 CTBC Bank Co., Ltd 13 State Bank of India 35 Yuanta Commercial Bank Co., Ltd 36 Taiwan Cooperative Bank Limited Finance Companies 37 Taiwan Business Bank Limited 1 Oriental Leasing Company Ltd 38 Mega International Commercial Bank Co., Ltd 2 Myat Nan Yone Finance Company Ltd 39 Ho Chiminh City Development Joint Stock Commercial Bank 3 National Finance Company Ltd 40 Qatar National Bank 4 Ryuji Finance Company Ltd 41 Sampath Bank PLC 5 Mahar Bawga Finance Company Ltd 42 Bank of China 6 Jewel Spectrum Company Ltd 43 KEB Hana Bank (New Licence for Change of Name) 7 Century Finance Company Ltd 44 BTMU Leasing (Thailand) Co., Ltd 8 Win Progress Services Company Ltd 45 ACLEDA Bank Plc. 9 Z Corporation Company Ltd 46 Chang Hwa Commercial Bank Limited 10 Global Innovations Finance Company Ltd 47 Hua Nan Commercial Bank Limtied 11 Mother Finance Company Limited 12 Morganite Finance Company Limited 13 Best Merchant Finance Company Limited 14 Myanma Ruby Hill Finance Company Limited 15 A1 Capital Company Limited 16 Pristine Global Finance Company Limited Source: CBM, KT ZMICO Research (Updated as of 19 Jan‐2017)

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Figure 29: Market share (in terms of assets) of all operating semi‐governmental and private banks (as of March 2016)

Source: GIZ (2016),CSD (2016), CBM (2016)

Figure 30: Ten largest private banks of Myanmar: their assets (as of Figure 31: ATM and POS installations by domestic March 31, 2016) and their branches (as of June 2016) banks (as of March 31, 2016) Sr. Name of Bank Name Assets No. of Sr. Bank ATM POS (Kyat Bn) Branches 1 KBZ 545 1,194 1 Kanbawza Bank KBZ 8,693 400 2 CB 353 929 2 Ayeyarwaddy Bank AYA 2,913 157 3 AYA 350 255 3 Co‐operative Bank CB 2,061 154 4 MAB 141 122 4 Myawaddy Bank MWD 1,305 47 5 AGD 118 6 6 UAB 70 ‐ 5 Myanmar Apex Bank MAB 1,194 74 7 MWD 41 133 6 Yoma Bank YOMA 1,191 61 8 MOB 28 156 7 United Amara Bank UAB 662 47 9 INNWA 15 44 8 Global Treasure Bank GTB 657 120 10 MCB 11 ‐ 9 Asia Green Development Bank AGO 448 52 11 SMIDB 7 ‐ 10 Myanmar Oriental Bank MOB 320 37 12 CHDB 7 ‐ Total 1,686 2,839

Total of top 10 Banks 19,444 1,142

Source: GIZ (2016) Source: GIZ (2016)

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Figure 32: International remittance service providers and connected domestic banks Sr. Remittance Service Provider Name of connected domestic banks 1 1. FPB, 2. Yoma, 3. MOB, 4. KBZ, 5. GTB, 6. CB, 7. AYA, 8. UAB, and 9. MAB 2 1. MCB, and 2. SMIDB

3 1. MCB, 2. TFB, and 3. AGD

4 1. KBZ, 2. CB, 3. AGD, 4. AYA, and 5. MEB 5 1. MCB, 2. TFB, and 3. AGD

6 1. TFB, 2. KBZ, 3. CB, and 4. AGD

Source: BC Finance Limited (2014), KT ZMICO Research

Figure 33: Commercial bank lending by sector (% share) Figure 34: Banking sector liquidity (loans/deposits)

Source: IMF, Central Bank of Myanmar Source: IMF, Central Bank of Myanmar

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Upside risk/Downside risk

Catalysts & Concerns The key downside risks to its earnings could come from 1) regulatory risk as Myanmar banks still have to comply with international standards over the long term; 2) more intense competition in Myanmar’s banking system, especially from the large private bank, which has continued gaining market share; and 3) the asset quality issue given the bank’s rapid expansion. Meanwhile, the main catalyst could come from Myanmar’s favorable economic growth, which should continue to outpace regional peers and help boost banking system growth.

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Income Statement (Kyat mn) FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Fiscal year ended 31 March Mar‐15 Mar‐16 Mar‐17 Mar‐18 Mar‐19 Total Interest Income 17,763 18,843 21,258 24,489 28,857 Total Interest Expenses 10,077 11,780 13,586 15,946 18,930 Net Interest Income 7,686 7,062 7,673 8,542 9,927 Net Fee and Service income 2,188 2,828 3,076 3,426 3,818 Net trading income 894 974 1,072 1,179 1,297 Other Income 5 1 1 1 1 Total Non‐Interest Income 3,087 3,802 4,148 4,605 5,115 Operating Income 10,773 10,865 11,821 13,147 15,043 Personal expenses/Administration expenses 1,262 1,568 1,834 2,165 2,511 Other Expenses 749 748 822 937 1,069 Total Operating Expenses 2,011 2,315 2,657 3,102 3,580 Operating Profit 8,757 8,549 9,163 10,045 11,462 Extraordinary Items ‐ ‐ ‐ ‐ ‐ Taxation 2,189 2,137 2,291 2,511 2,866 Minority Interests ‐ ‐ ‐ ‐ ‐ Net Profit 6,573 6,412 6,873 7,534 8,597 Pre Provisioning Operating Profit (PPOP) 6,568 6,412 6,872 7,533 8,597 EPS (Kyat) 3,297 2,710 2,780 3,048 3,478

Balance Sheet (Kyat mn) FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Fiscal year ended 31 March Mar‐15 Mar‐16 Mar‐17 Mar‐18 Mar‐19 Assets Cash at bank 15,147 13,444 13,713 13,987 14,267 Cash with CBM and other banks 11,147 16,605 17,401 18,320 19,372 Net Investment 30,611 23,202 20,882 21,509 22,584 Net Loans 121,150 143,103 168,862 202,634 243,161 Premises and Equipment 3,898 5,398 5,830 6,296 6,800 Other Assets 3,565 5,699 6,186 6,511 6,989 Total Assets 185,518 207,451 232,873 269,257 313,173

Liabilities & Equity Deposits 136,986 150,998 168,665 200,037 237,644 Other Lialilities 6,719 4,434 4,445 4,459 4,474 Total Liabilities 143,706 155,432 173,110 204,495 242,118

Paid‐up Capital 19,939 23,662 24,721 24,721 24,721 Premium on Share Capital 5,323 9,852 11,969 11,969 11,969 Retained Earning 503 506 2,620 5,328 8,636 Other Equity Items 16,047 17,999 20,453 22,744 25,729 Minority Interest ‐ ‐ ‐ ‐ ‐

Total Shareholders' Equity 41,813 52,019 59,763 64,762 71,055 Source: FPB, KTZMICO Research

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Valuation and Financial Ratios FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Fiscal year ended 31 March Mar‐15 Mar‐16 Mar‐17 Mar‐18 Mar‐19 Per Share Data (Kyat) EPS 3,297 2,710 2,780 3,048 3,478 DPS 2,197 2,005 1,946 2,133 2,434 BVPS 20,970 21,984 24,175 26,197 28,743

Multiplier P/E (X) 9.10 11.07 10.79 9.84 8.63 P/BV (X) 1.43 1.36 1.24 1.15 1.04 Dividend yield (%) 7.32 6.68 6.49 7.11 8.11

Growth YoY (%) Net Profit 8.9% ‐2.4% 7.2% 9.6% 14.1% EPS 0.6% ‐17.8% 2.6% 9.6% 14.1% Net Interest Income 5.3% ‐8.1% 8.6% 11.3% 16.2% Non Interest Income 21.4% 23.2% 9.1% 11.0% 11.1% Net Fee and Service income ‐13.6% 29.2% 8.8% 11.4% 11.4% Operating Income 9.4% 0.8% 8.8% 11.2% 14.4% Operating Expenses 12.0% 15.1% 14.7% 16.8% 15.4% Operating Profit 8.9% ‐2.4% 7.2% 9.6% 14.1% PPOP 9.0% ‐2.4% 7.2% 9.6% 14.1% Loans 20.7% 18.1% 18.0% 20.0% 20.0% Deposits 27.8% 10.2% 11.7% 18.6% 18.8% NPLs 10.5% ‐75.7% 350.0% 25.0% 20.0%

Key Financial Ratios Gross NPLs (Kyat mn) 41 10 45 56 68 Gross NPLs/Loans 0.03% 0.01% 0.03% 0.03% 0.03% Loan Loss Reserve/Loans 2.0% 2.0% 2.0% 2.0% 2.0%

Capital & Liquidity Ratio Equity/Asset 22.5% 25.1% 25.7% 24.1% 22.7% Loans to Deposits Ratio 88.4% 94.8% 100.1% 101.3% 102.3% Loans to Assets 65.3% 69.0% 72.5% 75.3% 77.6% Liquidity ratio 30.5% 29.2% N.A. N.A. N.A.

Profitability Ratio ROA 3.8% 3.3% 3.1% 3.0% 3.0% ROE 16.8% 13.7% 12.3% 12.1% 12.7% Cost to Income 18.7% 21.3% 22.5% 23.6% 23.8% Non Interest Income/Total Income 28.7% 35.0% 35.1% 35.0% 34.0% Loan spread 3.80% 2.72% 2.40% 2.24% 2.29% Net Interest Margin (NIM) 5.05% 4.08% 3.93% 3.80% 3.76% Tax rate 25.0% 25.0% 25.0% 25.0% 25.0%

Key Assumptions FY14/15 FY15/16 FY16/17E FY17/18E FY18/19E Loan Growth‐ Net 20.7% 18.1% 18.0% 20.0% 20.0% Cost to Income 18.7% 21.3% 22.5% 23.6% 23.8% Loan spread 3.80% 2.72% 2.40% 2.24% 2.29% Net Interest Margin (NIM) 5.05% 4.08% 3.93% 3.80% 3.76% Source: FPB, KTZMICO Research

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Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI. KT ZMICO is a co underwriter of RPH.

Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)

Excellent (scores: 90 ‐ 100) Satisfactory (scores: 60 – 69)

Very Good (scores: 80 – 89) Pass (scores: 50 – 59)

Good (scores: 70 – 79) No Logo N/A (scores: below 50)

Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)  Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws.  Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives  Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes  Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.)  Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases  Insufficient or not clearly defined policy  Data not available / no policy

DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.

KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 21 of 21

KT ZMICO Securities Company Limited Head Office 8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road,

Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 WWW.KTZMICO.COM KT ZMICO Connect 662 695 5555

Central World Branch Amarin Branch Ploenchit Branch 999/9 The Offices at Central World, 22nd Floor, Amarin Building, 8th Floor, Ton Son Tower, 900 16th Fl., Rama 1 Rd, Pathumwan, 496‐502 Ploenchit Road, Lumpini, Ploenchit Road, Bangkok 10330 Pathumwan, Bangkok 10330 Lumpini, Pathumwan, Bangkok Telephone: (66‐2) 264‐5888 Telephone: (66‐2) 018‐6200 10330 Fax: (66‐2) 264 5899 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111 Phaholyothin Branch Sindhorn Branch Viphavadee Branch 1291/1, Shinnawatra Tower II, 3rd Floor, 2nd Floor, Sindhorn Tower 1, 130‐132 G Floor, Lao Peng Nguan 1 Bldg., Phaholyothin Road, Phayathai, Bangkok Wireless Road, Lumpini, Pathumwan, 333 Soi Cheypuand, 10400 Bangkok 10330 Viphavadee‐Rangsit Road, Telephone: (66‐2) 686‐1500 Telephone: (66‐2) 627‐3550 Ladyao, Jatujak, Bangkok 10900 Fax: (66‐2) 686‐1666 Fax: (66‐2) 627‐3582, 627‐3600 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569 BangKhae Branch Chiang Mai Branch Pak Chong Branch 518 The Mall Group Building 422/49 Changklan Road, 173 175, Mittapap Road, Nong Sarai, Bangkhae Branch, 6th Floor, Changklan Subdistrict, Pak Chong, Nakhon Ratchasima 30130 Petchkasem Road, North Bangkhae, Amphoe Meuang, Chiang Mai 50100 Telephone: (044) 279‐511 Bangkhae, Bangkok 10160 Telephone: (053) 270‐072 Fax: (044) 279‐574 Telephone: (66‐2) 454‐9979 Fax: (053) 272‐618 Fax: (66‐2) 454‐9970 Korat Branch Khon Kaen Branch Chonburi Branch 624/9 Changphuek Road, 5th Floor, Charoen Thani Princess Hotel, 4th Floor, Forum Plaza Bldg., T.Naimaung, A.Maung, 260 Srichan Road, T. Naimuang, 870/52 Sukhumvit Road, Nakhon Ratchasima 30000 A. Muang, Khon Kaen 40000 T. Bangplasoy, A. Muang, Telephone: (044) 247222 Telephone: (043) 389‐171‐193 Cholburi 20000 Fax: (044) 247171 Fax: (043) 389‐209 Telephone: (038) 287‐635 Fax: (038) 287‐637 Pattaya Branch Chachoengsao Branch Hat Yai Branch Easy Point 2, 392/65 Moo.9, 108/34‐36 Mahajakkrapad Road, 200/301, 200/303 JULDIS T.Nong Prue, A. Bang Lamung, T.Namuang, HATYAI PLAZA Floor 3 , Chonburi 20260 A.Muang, Chachoengsao 24000 Niphat‐Uthit 3 Rd, Hatyai Telephone: (038) 420‐965 Telephone: (038) 813‐088 Songkhla 90110 Fax: (038) 420‐968 Fax: (038) 813‐099 Telephone: (074) 355530‐3 Fax: (074) 355534

Phuket Branch Phitsanulok Branch Nakhon Pathom 22/61‐63, Luang Por Wat Chalong Road, 227/171 Borom Trilokkanat Road, River Hotel (Building 3rd),1156 Talat Yai, Mueang Phuket, Phuket 83000 Muang, Phitsanulok 65000 Petchakasem Road, Telephone: (076) 222‐811, (076) 222‐683 Telephone: 055‐219‐255 to 8 Sanamchan Subdistrict, Amphoe Fax: (076) 222‐861 Fax: 055‐219‐259 Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100 Cyber Branch Ayutthaya Cyber Branch @ North Nana Cyber Branch Chiangrai KrungThai Bank, Rojana Branch Krung Thai Bank PCL, 2 Floor, KrungThai Bank, Hayaek Phokhun 253 Moo 5, Rojana Road, Phai Ling, North Nana Branch Mengrai Branch Phra Nakhon Si Ayutthaya, 35 Sukhumvit Rd., 116/19 Moo 19, Highway 110 Road, Phra Nakhonsi Ayutthaya, 13000 Klong Toey Nua Subdistrict , Rop Wiang, Mueang Chiang Rai, Telephone: 035‐242‐477 Wattana District , Bangkok 10110 Chiang Rai, 57000 Fax: 035‐242‐476 Telephone: 083‐490‐2871 Telephone: 053‐715‐067 Fax: 053‐715‐068