14 July 2014 Asia Pacific/Philippines Equity Research Conglomerates

LT Group, Inc.

(LTG.PS / LTG PM) Rating OUTPERFORM* [V] Price (11 Jul 14, P) 15.22 INITIATION

Target price (P) 20.20¹ Upside/downside (%) 32.7 Tobacco turnaround Mkt cap (P mn) 164,702 (US$ 3,791) Enterprise value (P mn) 179,870 ■ Initiate with OUTPERFORM. We initiate coverage on LT Group with an Number of shares (mn) 10,821.39 Free float (%) 25.6 OUTPERFORM rating and a P20.2 target price, implying 33% potential 52-week price range 24.9 - 13.3 upside. The company's tobacco business is the key driver of our target price ADTO - 6M (US$ mn) 3.2 and 2015 net income forecast, at 57% and 50%, respectively. *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ■ Tobacco business should lead the group's profit recovery. We estimate ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). that the tobacco business (PMFTC) will contribute P5.8 bn, up 609% YoY, to the company's consolidated net income in 2015. Consequently, this should Research Analysts result in a consolidated net income of P11.5 bn in 2015E, up 86% YoY. Alvin Arogo There would be another round of predetermined excise tax increase in 63 2 858 7716 [email protected] 2015E, but it should be lower than what has been implemented in 2014E Danielo Picache and 2013A. We believe that this will provide room for the company to 63 2 858 7758 potentially implement a pricing strategy that will allow it to improve PMFTC's [email protected] gross profit and EBIT margin, which we forecast will expand to 25.4% and 12.8%, respectively. ■ Stable profit contribution from banks and beverages. Next to the tobacco business, the other major sources of the company's consolidated 2015E net income are its banking (PNB) and beverages (ABI) businesses, which we estimate will contribute 37% and 11%, respectively. As a base case forecast for 2015-17, we expect 5% p.a. growth in the profit contribution of banks, and 14% p.a. for beverages. ■ Tobacco and banks should drive NAV. Based on our estimates, 57% of the company's NAV is from its tobacco business, and 23% from banking. Key investment risks for LT Group are a higher-than-expected decrease in tobacco sales volume due to price increases, and the failure of its recent bank merger to bring in synergies and efficiencies.

Share price performance Financial and valuation metrics

Year 12/13A 12/14E 12/15E 12/16E Price (LHS) Rebased Rel (RHS) Revenue (P mn) 55,791.9 64,902.1 68,590.3 72,009.5 40 600 EBITDA (P mn) 9,337.2 11,858.5 12,828.4 13,803.6 30 400 EBIT (P mn) 5,312.0 7,259.0 7,933.6 8,612.7 20 Net profit (P mn) 8,669.2 6,208.7 11,534.2 12,148.1 10 200 EPS (CS adj.) (P) 0.85 0.57 1.07 1.12 0 0 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Change from previous EPS (%) n.a. Consensus EPS (P) n.a. 0.83 0.82 1.065 The price relative chart measures performance against the EPS growth (%) -41.1 -32.4 85.8 5.3 PHILIPPINE SE COMPOSITE INDEX which closed at 6937.21 P/E (x) 17.9 26.5 14.3 13.6 on 10/07/14 On 10/07/14 the spot exchange rate was P43.39/US$1 Dividend yield (%) 1.0 0.7 0.8 2.1 EV/EBITDA (x) 19.6 15.2 13.4 11.7 Performance over 1M 3M 12M P/B (x) 1.4 1.4 1.3 1.2 Absolute (%) 5.5 -12.3 -38.9 — ROE (%) 10.0 5.5 9.6 9.4 Relative (%) 4.2 -16.9 -43.8 — Net debt/equity (%) 12.1 9.6 4.4 net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION® Client-Driven Solutions, Insights, and Access

14 July 2014 Focus charts and tables

Figure 1: Tobacco should lead the group's turnaround… Figure 2: …as we expect price increases in 2015 100 Sales volume (sticks bn) 60 14 LT Group net income (P bn) 90 Blended ASP (P/pack) Blended excise tax (P/pack) 48 50 12 Tobacco 80 45 Others 42 70 10 Banking 6.2 34 40 6.9 6.0 5.8 60 8 30 50 26 26 28 30 3.9 24 6 0.8 1.6 1.8 40 2.1 1.5 17 1.3 20 4 1.3 30 16 14 4.7 2 3.8 4.1 4.3 4.5 20 3.4 6 6 10 10 0 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E 0 - 12/11A 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 3: Our SOTP-based target price of P20.2 implies 33% potential upside Gross Attributable % share 15E NI % share Subsidiary % stake NAV (P mn) NAV (P mn) of NAV (P mn) 15E NI Methodology Tobacco 49.6% 277,275 137,528 57% 5,767 50% 25x target P/E Banking 56.5% 100,748 56,893 23% 4,305 37% Current market price Beverage 99.9% 30,602 30,571 13% 1,224 11% 25x target P/E Distilled Spirits 100.0% 9,557 9,557 4% 138 1% 1Q14 actual book value Property Development 99.3% 7,987 7,931 3% 100 1% 1Q14 actual book value LTG NAV, gross 242,480 100% 11,534 100% less: Parent net debt (cash) 0 1Q14 actual book value LTG NAV, before discount 242,480 less: % target discount 10% Holding company discount LTG NAV 218,232 Shares (mn) 10,821 LTG target price (P) 20.20 Source: Credit Suisse estimates

Figure 4: Domestic and regional comparables for LTG's consumer businesses—valuation summary Company Reuters CS Mkt cap P/E (x) P/B (x) ROE (%) EPS growth (%) name ticker rating (US$ mn) 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E Philippines Universal Robina URC.PS O 8,003 32.1 27.3 6.4 5.9 20.5 22.5 8 18 Jollibee Foods JFC.PS O 4,402 35.3 28.6 8.3 7.5 24.8 27.6 18 24 Emperador EMP.PS N 4,012 24.7 22.2 4.9 4.2 21.1 20.3 17 11 Average 5,472 30.7 26.0 6.5 5.9 22.1 23.4 14 17 Tobacco BAT Malaysia BATO.KL O 5,963 21.3 20.7 32.7 30.8 163.8 152.9 8 3 Gudang Garam GGRM.JK N 8,719 20.2 17.4 3.1 2.8 16.2 16.9 15 17 ITC Ltd ITC.BO O 45,839 31.3 26.7 10.5 9.6 36.2 37.6 18 18 KT&G Corp 033780.KS U 12,508 15.3 14.8 2.3 2.1 14.0 13.7 33 4 Average 18,257 22.0 19.9 12.1 11.3 57.5 55.3 19 10 Beverage Emperador EMP.PS N 4,012 24.7 22.2 4.9 4.2 21.1 20.3 17 11 Thai Beverage TBEV.SI O 12,650 19.6 18.0 3.9 3.4 20.8 20.2 8 9 United Spirits UNSP.BO N 5,551 96.6 55.6 4.1 3.8 5.3 7.1 (387) 74 Average 7,404 47.0 31.9 4.3 3.8 15.7 15.9 (121) 31 Source: RAVE, Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 2 14 July 2014 Tobacco turnaround We initiate coverage on LT Group with an OUTPERFORM rating and a P20.2 target price, We initiate coverage on LT implying 33% potential upside. The company's tobacco business is the key driver of our Group with an target price and 2015 net income forecast, at 57% and 50%, respectively (Figures 5 and 6). OUTPERFORM rating Tobacco business to lead the group's profit recovery We estimate that the tobacco business (PMFTC) will contribute P5.8 bn to the company's We believe that the lower consolidated net income in 2015E—609% higher than our P0.8 bn estimate for 2014 and excise tax increase in 47% higher than P3.9 bn in 2013. Consequently, this will result in a consolidated net 2015E will provide room for income of P11.5 bn in 2015E—86% higher than our P6.1 bn estimate for 2014 and 33% gross profit margin higher than P8.7 bn in 2013A. expansion For 2015, we expect a substantial recovery in the profit contribution of the company's tobacco business, as we forecast PMFTC's net income will increase 609% YoY. There would be another round of predetermined excise tax increase in 2015E, but it should be lower than what has been implemented in 2014E and 2013A. Consequently, we believe that this will provide room for the company to potentially implement a pricing strategy that will allow it to improve PMFTC's gross profit and EBIT margin, which we forecast will expand to 25.4% and 12.8%, respectively. As a percentage of the Philippines minimum wage, we estimate that our blended ASP per stick assumption for 2015E, after assuming a 50% retail mark-up, translates into an 18% YoY increase to 0.63% from 0.54% in 2014E. We note that this is substantially lower than the 25% YoY increase in 2014E and 47% YoY in 2013A. Moreover, we forecast that the increase in 2016E and 2017E would be even lower at 2% YoY and 3% YoY, respectively. Due to our projected price increase in 2015E, we forecast that PMFTC's sales volume will further drop to 59 bn sticks in 2015E from 63.5 bn sticks in 2014E (down 7% YoY). We believe that the net impact to the company's 2015E net income is positive as we forecast that the price increase will outpace the increase unit COGS and decline in sales volume. Stable profit contribution from banks and beverages Next to the tobacco business, the other major sources of the company's consolidated 2015E Next to tobacco, the other net income are its banking (PNB) and beverages (ABI) businesses, which we estimate will major sources of contribute 37% and 11%, respectively. As a base-case forecast for 2015E-17E, we expect consolidated net income are 5% p.a. growth in the profit contribution of banks, and 14% p.a. for beverages. banking and beverages PNB recently merged with Allied Banking Corporation and management expects that this will result in significant synergies and efficiencies through economies of scale. As a base case from 2014E to 2017E, however, we assume that the benefits of the merger would be offset by its accompanying interim costs and disruptions. Meanwhile, the drop in ABI's beer and alcopop sales was due to reduced volumes driven by the price increases in response to the higher excise taxes on beer and distilled spirits starting 2013. From 2014E onwards, we expect the positive trend in non-alcoholic beverages and the price increases will support the stable income contribution to the company. P20.2 SOTP-based TP implies 33% potential upside We have a P20.1 SOTP-based target price for LT Group. Based on our estimates, 57% of 57% of the company's NAV the company's NAV is from its tobacco business, 23% from banking, 13% from beverages, is from its tobacco business 4% from distilled spirits, and 3% property development. Key investment risks for LT Group stem from its tobacco and banking businesses. For tobacco, the key risk is higher-than-expected decrease in sales volume due to price increase, and for banks, it is the failure of the recent merger to bring in synergies and efficiencies.

LT Group, Inc. (LTG.PS / LTG PM) 3 14 July 2014

LT Group LTG.PS / LTG PM Price (11 Jul 14): P15.22, Rating: OUTPERFORM, Target Price: P20.20, Analyst: Alvin Arogo Target price scenario Key earnings drivers 12/13A 12/14E 12/15E 12/16E Scenario TP %Up/Dwn Assumptions Banking 3,435 4,083 4,305 4,517 Upside 25.20 65.57 SOTP, 85% 15E tobacco mkt share Tobacco 3,920 813 5,767 6,000 Central case 20.20 32.72 SOTP, 65% 15E tobacco mkt share Beverage 1,043 1,070 1,224 1,397 Downside 15.20 (0.13) SOTP, 45% 15E tobacco mkt share Distilled spirits 196.5 143.8 137.8 132.8

Others 74.2 97.9 100.0 101.1

Income statement (P mn) 12/13A 12/14E 12/15E 12/16E Per share data 12/13A 12/14E 12/15E 12/16E Sales revenue 55,792 64,902 68,590 72,009 Shares (wtd avg.) (mn) 10,208 10,821 10,821 10,821 Cost of goods sold 46,455 53,044 55,762 58,206 EPS (Credit Suisse) (P) 0.85 0.57 1.07 1.12 SG&A — — — — DPS (P) 0.16 0.10 0.11 0.32 Other operating exp./(inc.) — — — — BVPS (P) 10.8 10.6 11.6 12.4 EBITDA 9,337 11,859 12,828 13,804 Operating CFPS (P) 2.82 2.02 2.48 2.99 Depreciation and amortisation 4,025 4,600 4,895 5,191 Key ratios and 12/13A 12/14E 12/15E 12/16E EBIT 5,312 7,259 7,934 8,613 valuation Net interest expense/(inc.) 341.8 447.6 447.6 447.6 Growth(%) Non-operating inc./(exp.) 4,910 4,068 4,068 4,068 Sales revenue (11.0) 16.3 5.7 5.0 Associates/JV 3,704 813 5,767 6,000 EBIT (15.9) 36.7 9.3 8.6 Recurring PBT 13,584 11,693 17,322 18,234 Net profit (32.0) (28.4) 85.8 5.3 Exceptionals/extraordinaries — — — — EPS (41.1) (32.4) 85.8 5.3 Taxes 2,109 2,143 2,265 2,390 Margins (%) Profit after tax 11,475 9,550 15,056 15,844 EBITDA 16.7 18.3 18.7 19.2 Other after tax income — — — — EBIT 9.5 11.2 11.6 12.0 Minority interests 2,806 3,341 3,522 3,696 Pre-tax profit 24.3 18.0 25.3 25.3 Preferred dividends — — — — Net profit 15.5 9.6 16.8 16.9 Reported net profit 8,669 6,209 11,534 12,148 Valuation metrics (x) Analyst adjustments — — — — P/E 17.9 26.5 14.3 13.6 Net profit (Credit Suisse) 8,669 6,209 11,534 12,148 P/B 1.41 1.43 1.31 1.23 Cash flow (P mn) 12/13A 12/14E 12/15E 12/16E Dividend yield (%) 1.04 0.68 0.75 2.10 EBIT 5,312 7,259 7,934 8,613 P/CF 5.39 7.55 6.14 5.09 Net interest (341.8) (447.6) (447.6) (447.6) EV/sales 3.28 2.77 2.51 2.25 Tax paid (3,193) (2,042) (2,265) (2,390) EV/EBITDA 19.6 15.2 13.4 11.7 Working capital 10,619 11,446 10,414 15,023 EV/EBIT 34.4 24.8 21.7 18.8 Other cash & non-cash items 16,416 5,595 11,208 11,563 ROE analysis (%) Operating cash flow 28,811 21,811 26,843 32,362 ROE 10.0 5.5 9.6 9.4 Capex (6,894) (4,300) (4,300) (4,300) ROIC 4.16 3.48 3.92 4.16 Free cash flow to the firm 21,918 17,511 22,543 28,062 Asset turnover (x) 0.08 0.09 0.09 0.09 Disposals of fixed assets — — — — Interest burden (x) 2.56 1.61 2.18 2.12 Acquisitions — — — — Tax burden (x) 0.84 0.82 0.87 0.87 Divestments 3,427 700 700 700 Financial leverage (x) 4.53 4.51 4.36 4.28 Associate investments 241.7 — — — Credit ratios Other investment/(outflows) 16,449 (5,953) (4,855) (5,098) Net debt/equity (%) 12.1 9.6 4.4 (1.4) Investing cash flow 13,225 (9,553) (8,455) (8,698) Net debt/EBITDA (x) 1.94 1.28 0.59 (0.19) Equity raised 47,834 (0) (0) (0) Interest cover (x) 15.5 16.2 17.7 19.2 Dividends paid (1,622) (1,127) (1,242) (3,460) Source: Company data, Thomson Reuters, Credit Suisse estimates Net borrowings (4,010) 110 — — Other financing cash flow (22,539) 2,650 3,088 3,238 12MF P/E multiple Financing cash flow 19,662 1,633 1,846 (222) 20 Total cash flow 61,699 13,891 20,234 23,442 18 Adjustments — — — — 16 Net change in cash 61,699 13,891 20,234 23,442 14 12 Balance sheet (P mn) 12/13A 12/14E 12/15E 12/16E 10 Cash and cash equivalents 188,320 202,210 222,444 245,887 8 Current receivables 85,896 87,000 87,000 87,000 6 Inventories 10,280 11,682 12,346 12,962 4 Other current assets 21,110 21,900 21,900 21,900 2 Current assets 305,605 322,793 343,691 367,748 0 Property, plant and equipment 42,681 41,682 40,387 38,796 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Investments 91,694 95,761 100,616 105,714 Intangibles — — — — Other non-current assets 238,470 251,453 261,419 271,884 12MF P/B multiple Total assets 678,450 711,689 746,113 784,142 1.80 Accounts payable 24,784 27,276 24,046 24,662 1.60 Short-term debt 1,310 1,300 1,300 1,300 1.40 Current provisions 164.0 200.0 200.0 200.0 1.20 Other current liabilities 456,997 479,684 503,958 529,446 1.00 Current liabilities 483,255 508,460 529,504 555,608 0.80 Long-term debt 16,880 17,000 17,000 17,000 0.60 Non-current provisions 1,816 1,900 1,900 1,900 0.40 Other non-current liab. 26,729 26,500 26,500 26,500 0.20 Total liabilities 528,680 553,860 574,904 601,008 0.00 Shareholders' equity 110,131 115,212 125,505 134,192 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Minority interests 32,235 35,211 38,299 41,537 Total liabilities and equity 678,450 711,689 746,113 784,142 Source: IBES

LT Group, Inc. (LTG.PS / LTG PM) 4 14 July 2014 Tobacco business likely to lead the group's profit recovery We initiate coverage on LT Group with an OUTPERFORM rating and a P20.2 target price, We initiate coverage on LT implying 33% potential upside. Our target price is SOTP-based and translates into an Group with an implied 2015E P/E of 19.0x and P/B of 1.7x. The company's tobacco business is the key OUTPERFORM rating driver of our target price and 2015E net income forecast, at 57% and 50%, respectively.

Figure 5: SOTP-based target price breakdown Figure 6: 2015E net income breakdown Property Distilled Distilled Property Development Spirits Beverage Spirits Development 3% Beverage 4% 11% 1% 1% 13%

Tobacco 57%

Banking Banking 23% 37%

Tobacco 50% Source: Credit Suisse estimates Source: Credit Suisse estimates The company conducts its tobacco business through its 99.6% ownership in Fortune Tobacco Corporation (not listed), which in turn owns a 49.6% stake of PMFTC. The rest of PMFTC is owned by Philip Morris Philippines (not listed), which is a subsidiary of Philip Morris International (PM.N, US$85.4, NEUTRAL, TP US$85.0). PMFTC is the leading tobacco manufacturer and distributor in the Philippines and management said that it has an estimated 79% market share by volume in 2013. 2013A has been tough, and 2014E tougher… In 2013A, the net income contribution of the company's tobacco business declined 43% YoY, as PMFTC's net profit decreased 43% YoY. This was mainly due to a 26% YoY decrease in its sales volume to 68.5 bn sticks in 2013 from 92.8 bn in 2012. The biggest driver behind this was the implementation of a new excise tax structure, which we estimate increased its blended ASP by 54% YoY in 2013. Gross profit and EBIT margins dropped to 24.7% and 10.6%, respectively, in 2013, from 35.8% and 21.2%, respectively, in 2012. For 2014, we expect that the net income contribution of the company's tobacco business will decline further by 79% YoY, as we forecast PMFTC's net income will decrease 78% YoY. This is mainly on the back of continued volume and margin pressure from the impact of the predetermined excise tax increase in 2014. We forecast further declines in gross profit and EBIT margins to 15.1% and 2.1%, respectively. …but we expect substantial recovery in 2015E... For 2015, we expect a substantial recovery (or a 609% YoY increase) in the profit We believe that the lower contribution of the company's tobacco business, as we forecast PMFTC's net income will excise tax increase in increase 609% YoY. There would be another round of predetermined excise tax increase 2015E will provide room for in 2015E, but it should be lower than what has been implemented in 2014E and 2013A. gross profit margin Consequently, we believe that this will provide room for the company to potentially expansion implement a pricing strategy that will allow it to improve its gross profit and EBIT margins, which we forecast will expand to 25.4% and 12.8%, respectively.

LT Group, Inc. (LTG.PS / LTG PM) 5 14 July 2014

Figure 7: Tobacco—financial performance for 2012A to 2017E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Financial highlights Revenue growth (% YoY) 5.8% 13.5% 21.1% 14.0% 6.7% 7.1% Net income growth (% YoY) 62.6% -43.0% -78.1% 609.2% 4.0% 4.0% Gross profit margin (%) 35.8% 24.7% 15.1% 25.4% 24.9% 24.4% EBIT margin (%) 21.2% 10.6% 2.1% 12.8% 12.5% 12.1% Profit and loss (P mn) - PMFTC Revenue 78,941 89,624 108,568 123,805 132,059 141,492 Gross profit 28,262 22,167 16,347 31,397 32,924 34,571 EBIT 16,756 9,515 2,234 15,844 16,484 17,140 Net income 12,512 7,130 1,564 11,091 11,539 11,998 Profit and loss contribution to LTG (P mn) Revenue 2,975 152 - - - - EBIT (69) (123) - - - - Income (loss) from associates 6,499 3,704 813 5,767 6,000 6,239 Net income (before minorities) 6,909 3,937 813 5,767 6,000 6,239 Net income 6,880 3,920 813 5,767 6,000 6,239 Source: Company data, Credit Suisse estimates …which should consequently drive LT Group's overall profit recovery We estimate that the tobacco business (PMFTC) will contribute P5.8 bn to the company's consolidated net income in 2015—609% higher than our P0.8 bn estimate for 2014, and 47% higher than P3.9 bn in 2013. Consequently, this will result in a consolidated net income of P11.5 bn in 2015—86% higher than our P6.1 bn estimate for 2014, and 33% higher than P8.7 bn in 2013.

Figure 8: Net income breakdown for 2012A to 2017E (P bn)

14

12

10 6.2 6.9 6.0 5.8 8 3.9 6 0.8 1.6 1.8 2.1 1.3 1.5 4 1.3

4.3 4.5 4.7 2 3.8 3.4 4.1 0 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Banking Others Tobacco

Source: Company data, Credit Suisse estimates New excise tax structure was implemented in January 2013

■ Cigarettes with a net retail price per pack of more than P11.50 (Tier 1) were required By 2017E, both Tier 1 and to pay a new excise tax of P25.00, or a 108%YoY increase from P12.00 in 2012A. Tier 2 will have an excise From 2014E to 2017E, there is a pre-determined increase of 8%, 3.7%, 3.6%, and tax of P30.00. Thereafter, 3.4% YoY, respectively. this is predetermined to increase by 4% p.a.

LT Group, Inc. (LTG.PS / LTG PM) 6 14 July 2014

■ Cigarettes with a net retail price per pack of less than or equal to P11.50 (Tier 2) were required to pay a new excise tax of P12.00 or a 341%YoY increase from P2.72 in 2012. From 2014E to 2017E, there is a pre-determined increase of 42%, 24%, 19%, and 20% YoY, respectively.

■ By 2017E, both Tier 1 and Tier 2 will have an excise tax of P30.00. Thereafter, this is predetermined to increase by 4% p.a., which is in line with the currently inflation rate.

Figure 9: Philippines tobacco industry excise tax 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Tier 1 (Higher P11.50/pack) Excise tax (P/pack) 12.00 25.00 27.00 28.00 29.00 30.00 %YoY 0.0% 108.3% 8.0% 3.7% 3.6% 3.4% Tier 2 (P11.50/pack and below) Excise tax (P/pack) 2.72 12.00 17.00 21.00 25.00 30.00 %YoY 0.0% 341.2% 41.7% 23.5% 19.0% 20.0% Source: Company data, Credit Suisse estimates From 2015E onwards, the excise tax structure will provide room for price increases The implementation of the excise tax in 2013 was highly disruptive to the tobacco We believe that the net business of the company. PMFTC's sales volume dropped 26% to 68.5 bn sticks in 2013 impact to the company's from 92.8 bn sticks in 2012. This was mainly due to a 54% increase in blended ASP to 2015E net income is P26.2 per pack from P17.0 per pack. However, we note that the predetermined excise tax positive, as we forecast that increase in 2015 will be substantially lower than that in 2014 and 2013 (Figure 9). We the price increase will believe that this will provide room for PMFTC to increase its blended ASP by 23% in outpace the increase in unit 2015E versus a 9% increase in its blended excise tax. Consequently, we forecast gross COGS and decline in sales profit margin to expand to 25.4% in 2015E from 15.1% in 2014E. volume

Figure 10: Tobacco—volume (sticks bn, LHS), blended ASP (P/pack, RHS) and blended excise tax (P/pack, RHS)

100 60 90 48 50 80 45 42 70 34 40 60 26 28 30 50 26 30 24 40 17 16 20 30 14 20 6 6 10 10 0 - 12/11A 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E

Sales volume (sticks bn) Blended ASP (P/pack) Blended excise tax (P/pack)

Source: Company data, Credit Suisse estimates As a percentage of the Philippine minimum wage, we estimate that our blended ASP per stick assumption for 2015E (after assuming a 50% retail mark-up) translates into an 18% YoY increase to 0.63% from 0.54% in 2014E. We note that this is substantially lower than the 25% YoY increase in 2014E and 47% YoY in 2013A (Figure 11). Moreover, we forecast that the increase in 2016E and 2017E would be even lower at 2% YoY and 3% YoY, respectively. Due to our projected price increase in 2015E, we forecast that PMFTC's sales volume will further drop to 59 bn sticks in 2015E from 63.5 bn sticks in 2014E (down

LT Group, Inc. (LTG.PS / LTG PM) 7 14 July 2014

7% YoY). For 2014, we forecast the volume will decrease 7% YoY to 63.5 bn sticks from 68.5 bn sticks in 2013A. We believe that the net impact to the company's 2015E net income is positive as we forecast that the price increase will outpace the increase in unit COGS and decline in sales volume.

Figure 11: Marked-up blended ASP as a percentage of ` Figure 12: Price elasticity of tobacco demand minimum wage 1.0% 50% 50% -30% 47% 45% 45% -25% 0.8% 40% 40% 0.67% 0.63% 0.65% 35% 35% -20% 0.54% 0.6% 30% 30% -15% 0.43% 25% 25% 0.4% 20% -10% 0.29% 25% 20% 15% 15% -5% 18% 0.2% 3% 2% 10% 10% 3% 0% 5% 5% 0.0% 0% 0% 5% 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Marked-up blended ASP as % of miminum wage Marked-up blended ASP as % of miminum wage (%YoY) Marked-up blended ASP as % of miminum wage (%YoY) Sales volume (%YoY) (RHS, inversed)

Source: Credit Suisse estimates Source: Credit Suisse estimates Foreign inflow is a low risk… Based on a study by Oxford Economics and International Tax and Investment Centre, The price of a pack of foreign legal inflows are small in the Philippines as the price of a pack of cigarettes remains cigarettes in the Philippines relatively low compared with the neighbouring countries, thereby reducing the incentive for remains relatively low consumers to legally bring in tax paid cigarettes from these countries. The price of the most compared with the sold brand of cigarettes in the Philippines in October 2013 was US$0.58 per pack of 20 neighbouring countries compared with US$3.67 per pack of 20 in Malaysia, US$2.85 per pack of 20 in Taiwan, US$1.51 per pack of 20 in Indonesia, and US$0.80 per pack of 20 in Vietnam.

Figure 13: Price of the most sold brand of cigarettes (US$ per pack of 20)

4.00 3.67 3.50

3.00 2.85

2.50

2.00 1.51 1.50

1.00 0.80 0.58 0.50

- Philippines Vietnam Indonesia Taiwan Malaysia

Source: Oxford Economics

LT Group, Inc. (LTG.PS / LTG PM) 8 14 July 2014

…and the government has a strong incentive to curb illicit trade According to the same study, illicit consumption increased to 18% of total consumption in 2013, from 6% in 2012. Illicit consumption refers to the consumption of non-domestic illicit counterfeit and contraband (including unspecified variant cigarettes) and domestic illicit cigarettes. Typically, taxes applicable in the market where illicit cigarettes are consumed are not paid. Also, the study found that almost 90% of illicit consumption was from domestically manufactured cigarettes. Management (2013 President's Report) also said that with the implementation of the new In our view, the government excise tax scheme, the negative impact of the price increase was "exacerbated by the illicit has a strong incentive to trade from a competitor who kept prices of low-end cigarettes at an economically intensify its efforts to curb unsustainable level of P1 per stick or a truck price of P14.70 per pack. The P12 excise tax illicit trade as the potential plus P1.58 VAT leaves only P1.12/pack to cover the cost of production and distribution, for lost tax revenues is which is unrealistic, when paying full taxes". substantial

Figure 14: Breakdown of Philippine cigarette consumption for 2012A and 2013A 12/12A % of total 12/13A % of total Legal - domestic 102.2 94% 86.3 82% Legal - foreign 0.1 0% 0.2 0% Total legal 102.3 94% 86.5 82% Illicit - domestic 6.1 6% 17.1 16% Illicit - foreign 0.3 0% 1.9 2% Total illicit 6.4 6% 19.0 18% Grand total 108.7 100% 105.5 100% Source: Oxford Economics and International Tax and Investment Centre In our view, the government has a strong incentive to intensify its efforts to curb illicit trade as the potential for lost tax revenues is substantial. Using the total 2013 industry volume as base (106 bn sticks or 5.3 bn packs of 20) and the predetermined unified tax rate of P30 per pack, we estimate that the potential lost tax revenues for the government ranges from P32 bn (20% illicit trade) to P158 bn (100% illicit trade). Using actual tax revenues collected in 2013A of P1,535 as base, this represents a potential loss of 2.1% to 10.3%.

Figure 15: Potential for lost tax revenues at the unified excise tax rate as a percentage of total national government tax revenues in 2013A 12% 10.3% 10% 8.2% 8% 6.2% 6% 4.1% 4% 2.1% 2%

0% 20% illicit 40% illicit 60% illicit 80% illicit 100% illicit

Source: Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 9 14 July 2014

Philippines tobacco industry overview Historical volume growth Among the Southeast Asian countries, the Philippines has the second-largest cigarette market with 86.7 bn sticks sold in 2013. It also has the second-highest smoking prevalence among adults with 27.7% of the total adult population being smokers. During 2007-12, a period in which there were no major changes in the excise tax, the volume of cigarettes sold in the Philippines expanded at a 1.9% CAGR. In 2013, the implementation of the excise tax in 2013 was highly disruptive to the tobacco Adjusting for illicit volumes, industry. Legal volumes declined 15% YoY, which was mainly due to the introduction of a we estimate that total new excise tax structure. Adjusting for illicit volumes, however, we estimate that total industry volume only industry volumes only declined 3% YoY. Based on a study conducted by Oxford declined 3% YoY in 2013 Economics and International Tax and Investment Centre, the very steep excise tax increase drove the recommended retail sales price of the most sold brand in the “low- price” and “premium-price” segments up by 59%. The recommended retail sales price of the most popular brand in the “super low-price” segment increased by a total of 175%.

Figure 16: 2013 sales volume of cigarettes (bn sticks) Figure 17: 2013 smoking prevalence among adults (%) 250 40.0 221.2 35.5 35.0 200 30.0 27.7 25.3 25.0 22.9 22.0 21.5 20.4 150 19.6 20.0 15.0 100 86.7 85.3 10.0

48.1 5.0 50 -

13.1 China

0 Japan

Vietnam Thailand

Indonesia Philippines Vietnam Thailand Malaysia Malaysia Indonesia

Philippines South Korea Source: Euromonitor Source: Euromonitor

LT Group, Inc. (LTG.PS / LTG PM) 10 14 July 2014

Figure 18: Philippines cigarette volumes for 2007-2013 (bn sticks) 120

6.4 100 19.1

80

60 99.5 101.4 102.5 93.4 94.8 97.4 86.7 40

20

0 2007 2008 2009 2010 2011 2012 2013

Euromonitor data (legal volume) Oxford economics data (illicit volume)

Source: Euromonitor, Oxford Economics

Figure 19: Philippines smoking prevalence among adults for 2008 to 2013 (%) 50.0 45.0 40.0 35.0 30.0 28.1 27.9 27.8 27.8 27.8 27.7 25.0 20.0 15.0 10.0 5.0 - 2008 2009 2010 2011 2012 2013

Source: Euromonitor, Oxford Economics Marketing and distribution In 2007, the Tobacco Regulation Act prohibited all tobacco advertising on television, cable television, radio, cinema and outdoor advertising. The ban on mass media was subsequently implemented in 2008. The only exception to the ban on mass media advertising is the placement of advertising materials within the premises of point-of-sale retail establishments. All stalls, booths, and other displays concerning tobacco promotions are likewise limited to point-of-sale locations or adult-only facilities. Street vendors and sari-sari stores continue to dominate the distribution of cigarettes in the Philippines. Cigarettes are commonly sold by the stick as consumers tend to buy cigarettes only as needed. As such, other grocery retailers such as street vendors and sari-sari stores are able to provide the convenience of cigarettes by the stick. Based on 2011 Euromonitor data (company's 2013 prospectus), approximately 60% of cigarette sales were through other grocery retailers.

LT Group, Inc. (LTG.PS / LTG PM) 11 14 July 2014

Competition The Philippines' cigarette industry is dominated by PMFTC, cornering 79.1% of the market The Philippines' cigarette for 2013. However, this is significantly lower than their 2012 market share of 90.7%, and industry is dominated by as according to management (2013 President's Report), this was mainly due to the PMFTC, cornering 79.1% of implementation of the excise tax beginning January 2013. the market for 2013

Figure 20: 2013 Philippines cigarettes market share by volume Others 5% Mighty Corp. 16%

PMFTC 79%

Source: Euromonitor, Company data

LT Group, Inc. (LTG.PS / LTG PM) 12 14 July 2014 Stable profit contribution from banks and beverages Next to the tobacco business, the other major sources of the company's consolidated As a base case, we expect 2015E net income are its banking and beverages businesses, which we estimate will 5% p.a. growth in the profit contribute 37% and 11%, respectively. As a base case forecast for 2015 to 2017, we contribution of banks and expect 5% p.a. growth in the profit contribution of banks and 14% p.a. for beverages. 14% p.a. for beverages

Figure 21: Banking and beverage as a percentage of LT Figure 22: Banking and beverage profit contribution to LT Group's consolidated net income for 2012A to 2017E Group growth (%YoY) for 2012A to 2017E 70% 250%

60% 200% 50% 150% 40%

30% 100%

20% 50%

10% 0% 0% 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E -50% Banking Beverage Banking Beverage

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates LT Group's banking business The company owns a 56.47% stake of Philippine National Bank or PNB (PNB.PS, P89.9, Not Rated), which is a Philippines-based commercial bank and is the fourth largest bank in terms of total assets, net loans, and by total deposits (as at end March 2014). PNB has 656 domestic and 77 overseas branches in key cities in the United States, Canada, Europe, Middle East and Asia

Figure 23: Philippines banks' total assets (P bn) Figure 24: Philippines banks' loans and receivables (P bn) 1,800 1,200 1,645 1,600 974 1,400 1,000 1,400 1,215 1,200 800 642 1,000 624 600 800 612 600 400 417 408 377 271 245 400 231 200 166 200

- - BDO MBT BPI PNB CHIB RCBC SECB BDO BPI MBT PNB RCBC CHIB SECB

Source: Company data Source: Company data

LT Group, Inc. (LTG.PS / LTG PM) 13 14 July 2014

On 9 February 2013, PNB merged with Allied Banking Corporation (not listed) with the As a base case from 2014E former as the surviving entity. Management expects that the merger will result in to 2017E, we assume that significant synergies and efficiencies through economies of scale. As a base case from the benefits of the merger 2014E to 2017E, however, we assume that the benefits of the merger will be offset by its will be offset by its accompanying interim costs and disruption. For 2014E onwards, we expect modest growth accompanying interim costs but stable net profit contribution from the company's banking business. Our 2014-16 and disruptions forecasts for PNB are 15% lower than IBES consensus estimates.

Figure 25: PNB—financial performance for 2012A to 2017E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Financial highlights Net income growth (% YoY) 1.8% 8.8% 26.2% 5.0% 4.6% 4.7% Net interest margin (%) 2.6% 3.6% 3.1% 3.2% 3.2% 3.2% Trading gains yield (%) 6.4% 5.1% 5.1% 5.1% 5.1% 5.1% Loan growth (%YoY) 15.3% 91.1% 5.7% 5.0% 5.0% 5.0% Loans-to-deposit ratio (%) 54.9% 54.6% 55.0% 55.0% 55.0% 55.0% Trading securities growth (%YoY) 15.3% 3.0% 5.5% 5.0% 5.0% 5.0% ROE (%) 13.0% 8.6% 7.6% 7.4% 7.2% 7.0% Profit and loss (P mn) - PNB Revenue 18,856 26,439 32,306 33,824 35,348 36,948 EBIT 3,257 2,630 4,224 4,626 5,012 5,425 Income (loss) from associates ------Net income (before minorities) 4,718 5,222 6,596 6,926 7,242 7,581 Net income 4,709 5,124 6,464 6,787 7,097 7,429 Profit and loss contribution to LTG (P mn) Revenue 32,098 28,856 35,214 36,868 38,529 40,273 EBIT 3,362 3,601 5,026 5,505 5,964 6,455 Income (loss) from associates ------Net income (before minorities) 6,525 6,235 7,424 7,827 8,213 8,627 Net income 3,771 3,435 4,083 4,305 4,517 4,745 Source: Company data, Credit Suisse estimates LT Group's beverage business The company conducts its beverage business through its 99.9%-owned subsidiary Asia Brewery or ABI (not listed). ABI is one of the Philippines‘ leading producers of non- alcoholic and alcoholic beverages (mainly in energy drinks, bottled water, and beer). In 2013A, the company said the improved sales of bottled water and energy drinks, by 34.7% and 3.4%, respectively, and the continuous traction of the new products, supported 2013 sales and offset the decline in beer and alcopop. The drop in beer and alcopop sales was attributed to reduced volumes mainly due to price increases in response to the increase excise taxes on beer and distilled spirits starting 2013. From 2014E onwards, we expect the positive trend in non-alcoholic beverages and the price increases will support the stable income contribution to the company. Euromonitor forecasts the following for the Philippines beverage industry:

■ Energy drinks market should be at almost US$500 mn by 2018, or approximately a CAGR of 4.9% from 2013.

■ Bottled water market will reach almost US$2 bn in 2018 or a CAGR of 4.8% from 2013.

■ Beer market value should grow by an average of 2.7% from 2013 to 2018 and have a flat volume growth.

LT Group, Inc. (LTG.PS / LTG PM) 14 14 July 2014

Figure 26: Beverage—financial performance for 2012A to 2017E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Financial highlights Revenue growth (% YoY) 1.6% -0.5% 5.1% 5.1% 5.1% 5.1% Net income growth (% YoY) 216.4% 32.6% 2.6% 14.4% 14.1% 13.8% Gross profit margin (%) 27.5% 27.2% 28.7% 30.1% 31.4% 32.8% EBIT margin (%) 9.1% 8.4% 10.3% 11.1% 12.1% 13.0% Profit and loss contribution to LTG (P mn) Revenue 13,451 13,385 14,063 14,774 15,522 16,307 EBIT 1,223 1,120 1,443 1,646 1,873 2,126 Income (loss) from associates ------Net income (before minorities) 787 1,043 1,070 1,224 1,397 1,589 Net income 787 1,043 1,070 1,224 1,397 1,589 Source: Company data, Credit Suisse estimates Energy drinks The Philippines has the second-largest energy drinks market in Southeast Asia by volume, From 2014E onwards, we and third by value. Along with Vietnam, it has the cheapest value per litre among its expect the positive trend in neighbours. From 2007 to 2013, energy drinks have shown strong value growth especially non-alcoholic beverages considering the early stages of the market with a CAGR of 51.4%. Euromonitor expects the and the price increases will market to be at almost US$500 mn by 2018, or approximately a CAGR of 4.9% from 2013. support the stable income contribution to the company ABI's market share is 69.7% by volume, and 67.7% by value, according to Nielsen data (company's 2013 prospectus). ABI's Cobra brand of energy drink was the first in the industry to offer returnable glass bottles in 2007. This led to the penetration of the lower income segment as the returnable glass bottles allowed for a lower unit price. This competitive pricing versus premium brands such as Red Bull allowed Cobra to capture more market share.

Figure 27: 2013 energy drinks sales volume (mn litres) Figure 28: 2013 energy drinks sales value (US$ mn) 400 800 348 682 350 321 700 293 300 600

250 500 401 392 200 400 262 150 114 300 100 200 75 50 23 100

- -

Vietnam

Vietnam

Thailand

Thailand

Malaysia

Malaysia

Indonesia

Indonesia Philippines Philippines Source: Euromonitor Source: Euromonitor Bottled water The Philippines is the second-biggest consumer of bottled water in the Southeast Asia; however, Indonesia consumes 354% more. Indonesia has the cheapest value per litre at only US$0.15/litre but leads the region in sales value due to its large volume base. The Philippines has the second cheapest value at US$0.32/litre, with Thailand the most expensive at US$0.54/litre. The bottled water industry in the Philippines has grown by a CAGR of 10.4% from 2007 to 2013, and we expect it to continue to grow in the future with Euromonitor estimating that the bottled water industry will reach almost US$2 bn in 2018 for a CAGR of 4.8%.

LT Group, Inc. (LTG.PS / LTG PM) 15 14 July 2014

Figure 29: 2013 bottled water sales volume (mn litres) Figure 30: 2013 bottled water sales value (US$ mn) 20,000 3,000 17,733 2,614 18,000 2,500 16,000 14,000 2,000 1,682 12,000 1,583 10,000 1,500 8,000 1,000 6,000 5,004 4,000 3,091 500 327 218 2,000 772 445

0 0

Vietnam

Vietnam

Thailand

Thailand

Malaysia

Malaysia

Indonesia

Indonesia Philippines Philippines Source: Euromonitor Source: Euromonitor Beer Among Southeast Asian countries, the Philippines has the third-largest beer market in The drop in beer and terms of both volume and value. It has one of the lowest priced beers with $2.4/litre, a bit alcopop sales was attributed more expensive than Vietnam at US$2.0/litre, but cheaper than Thailand's US$3.2/litre. to reduced volumes mainly due to price increases in After a value CAGR of almost 10% from 2007 to 2012, the Philippine beer industry response to the increase experienced sales decline of 8.3% and a volume drop of 12.1% in 2013. According to the excise taxes on beer and company, the increase in excise taxes of alcoholic beverages adversely impacted sales in distilled spirits starting 2013 2013. Euromonitor estimates that the industry value will grow by an average of 2.7% from 2013 to 2018 and have a flat volume growth. Per-capita consumption continues to be relatively low compared to other Asian countries. In 2012, the average consumer of legal drinking age consumed 17 litres of beer per year. This is considerably lower compared to other Asian countries such as South Korea, China and Vietnam. For example, in China the average consumption per capital was 36.4 per year, and this is more than double the consumption level in the Philippines.

Figure 31: 2013 beer sales volume (mn litres) Figure 32: 2013 beer sales value (US$ mn) 3,500 7,000 3,214 6,376 6,299 3,000 6,000

2,500 5,000 1,975 2,000 4,000 3,404 1,441 1,500 3,000 1,895 1,000 2,000 1,771

300 500 186 1,000

- -

Vietnam

Vietnam

Thailand

Thailand

Malaysia

Malaysia

Indonesia

Indonesia Philippines Philippines Source: Euromonitor Source: Euromonitor

LT Group, Inc. (LTG.PS / LTG PM) 16 14 July 2014

Other businesses The company conducts its distilled spirits business through its 100%-owned subsidiary The company's other Tanduay Distillers or TDI (not listed). TDI is the second-largest distilled spirits producer in businesses are distilled the country according to Nielsen Philippines, with an approximate 23.3% share of the spirits and property Philippine spirits market in 2013. We expect the distilled spirits will only contribute 1% to development the company 2015E consolidated net income. The company conducts its property development business through its 99.3% stake in Eton Properties or Eton (not listed). Eton has a diverse portfolio of property development projects in various areas throughout the Philippines, primarily in Metro Manila and surrounding areas Eton‘s project portfolio mainly comprises residential real estate projects (including large-scale township projects) but it also develops and leases out commercial properties for retail, office and BPO tenants. We expect the property to only contribute 1% to the company 2015E consolidated net income.

Figure 33: Distilled spirits—financial performance for 2012A to 2017E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Financial highlights Revenue growth (% YoY) 4.4% -18.6% 4.0% 4.0% 4.0% 4.0% Net income growth (% YoY) 0.0% -80.7% -26.8% -4.2% -3.6% -2.9% Gross profit margin (%) 23.4% 21.3% 21.3% 21.3% 21.3% 21.3% EBIT margin (%) 14.1% 6.7% 6.4% 6.1% 5.7% 5.5% Profit and loss contribution to LTG (P mn) Revenue 12,950 10,540 10,961 11,400 11,856 12,330 EBIT 1,823 704 701 690 680 673 Income (loss) from associates ------Net income (before minorities) 1,021 185 144 138 133 129 Net income 1,017 196 144 138 133 129 Source: Company data, Credit Suisse estimates

Figure 34: Property development—financial performance for 2012A to 2017E 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Financial highlights Revenue growth (% YoY) -48.3% 36.2% 27.5% 18.9% 10.0% 10.0% Net income growth (% YoY) -93.7% 130.0% -6.1% 2.2% 1.1% 2.2% Gross profit margin (%) 31.7% 26.7% 25.8% 25.5% 25.5% 25.5% EBIT margin (%) 1.7% 2.6% 1.9% 1.7% 1.6% 1.5% Profit and loss contribution to LTG (P mn) Revenue 2,686 3,657 4,664 5,548 6,103 6,713 EBIT 46 95 88 93 96 101 Income (loss) from associates ------Net income (before minorities) 47 105 98 100 101 103 Net income 45 104 98 100 101 103 Source: Company data, Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 17 14 July 2014 P20.2 SOTP-based TP implies 33% potential upside We have a P20.2 SOTP-based target price for LT Group. Based on our estimates, 57% of the company's NAV is from its tobacco business, 23% from banking, 13% from beverages and 4% from distilled spirits and 3% property development.

Figure 35: SOTP-based target price Gross Attributable % share 15E NI % share Subsidiary % stake NAV (P mn) NAV (P mn) of NAV (P mn) 15E NI Methodology Tobacco 49.6% 277,275 137,528 57% 5,767 50% 25x target P/E Banking 56.5% 100,748 56,893 23% 4,305 37% Current market price Beverage 99.9% 30,602 30,571 13% 1,224 11% 25x target P/E Distilled Spirits 100.0% 9,557 9,557 4% 138 1% 1Q14 actual book value Property Development 99.3% 7,987 7,931 3% 100 1% 1Q14 actual book value LTG NAV, gross 242,480 100% 11,534 100% less: Parent net debt (cash) 0 1Q14 actual book value LTG NAV, before discount 242,480 less: % target discount 10% Holding company discount LTG NAV 218,232 Shares (mn) 10,821 LTG target price (P) 20.20 Source: Credit Suisse estimates Operating segments

■ Tobacco. Supplier and manufacturer of cigarettes, casings, tobacco, packaging, Based on our estimates, labels and filters. 57% of the company's NAV is from its tobacco business ■ Banking. Full range of banking and other financial services to corporate, middle- market and retail customers.

■ Beverage. Brewing, soft drinks and bottled water manufacturing in the Philippines. It also operates other plants to support the requirements of its brewing, bottled water and non-beer products operations.

■ Distilled spirits. Manufacturing, compounding, bottling, importing, buying and selling of rums, spirit beverages, and liquor products.

■ Property development. Ownership, development, leasing and management of residential properties.

Figure 36: Holding structure

LT Group, Inc.

56.47% 99.6% 99.9% 100% 99.3%

Banking Tobacco Beverages Distilled Spirits Property Philippine National Bank Fortune Tobacco Corp. Asia Brewery, Inc. Tanduay Distillers, Inc. Eton Properties (PNB.PS) (not listed) (not listed) (not listed) (not listed)

49.6%

Tobacco PMFTC Inc. (not listed)

Source: Company data

LT Group, Inc. (LTG.PS / LTG PM) 18 14 July 2014

Figure 37: Revenue breakdown 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Revenues (P mn) Banking 32,098 28,856 35,214 36,868 38,529 40,273 Tobacco 2,975 152 - - - - Beverage 13,451 13,385 14,063 14,774 15,522 16,307 Distilled Spirits 12,950 10,540 10,961 11,400 11,856 12,330 Property Development 2,686 3,657 4,664 5,548 6,103 6,713 Parent and others (1,502) (798) - - - - Consolidated 62,657 55,792 64,902 68,590 72,009 75,623 Percentage of consolidated (%) Banking 51% 52% 54% 54% 54% 53% Tobacco 5% 0% 0% 0% 0% 0% Beverage 21% 24% 22% 22% 22% 22% Distilled Spirits 21% 19% 17% 17% 16% 16% Property Development 4% 7% 7% 8% 8% 9% Parent and others -2% -1% 0% 0% 0% 0% Consolidated 100% 100% 100% 100% 100% 100% Growth (% YoY) Banking 8.6% -10.1% 22.0% 4.7% 4.5% 4.5% Tobacco -11.2% -94.9% -100.0% n.a. n.a. n.a. Beverage 1.6% -0.5% 5.1% 5.1% 5.1% 5.1% Distilled Spirits 4.4% -18.6% 4.0% 4.0% 4.0% 4.0% Property Development -48.3% 36.2% 27.5% 18.9% 10.0% 10.0% Parent and others 0.7% -46.9% -100.0% n.a. n.a. n.a. Consolidated 0.7% -11.0% 16.3% 5.7% 5.0% 5.0% Source: Company data, Credit Suisse estimates

Figure 38: Net income breakdown 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Net income to LTG Parent (P mn) Banking 3,771 3,435 4,083 4,305 4,517 4,745 Tobacco 6,880 3,920 813 5,767 6,000 6,239 Beverage 787 1,043 1,070 1,224 1,397 1,589 Distilled Spirits 1,017 196 144 138 133 129 Property Development 45 104 98 100 101 103 Parent and others 257 (30) - - - - Consolidated 12,757 8,669 6,209 11,534 12,148 12,805 Percentage of consolidated (%) Banking 30% 40% 66% 37% 37% 37% Tobacco 54% 45% 13% 50% 49% 49% Beverage 6% 12% 17% 11% 11% 12% Distilled Spirits 8% 2% 2% 1% 1% 1% Property Development 0% 1% 2% 1% 1% 1% Parent and others 2% 0% 0% 0% 0% 0% Consolidated 100% 100% 100% 100% 100% 100% Growth (% YoY) Banking 11.5% -8.9% 18.9% 5.4% 4.9% 5.0% Tobacco 47.0% -43.0% -79.3% 609.2% 4.0% 4.0% Beverage 216.4% 32.6% 2.6% 14.4% 14.1% 13.8% Distilled Spirits 0.0% -80.7% -26.8% -4.2% -3.6% -2.9% Property Development -93.7% 130.0% -6.1% 2.2% 1.1% 2.2% Parent and others -2152.5% -111.7% -100.0% n.a. n.a. n.a. Consolidated 27.2% -32.0% -28.4% 85.8% 5.3% 5.4% Source: Company data, Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 19 14 July 2014

12-month forward NAV methodology

■ Tobacco. Target P/E of 25x applied to 2015E net income. Our target multiple is We use target P/E to slightly lower than the 26x 2015E average P/E of the Philippines consumer names. It estimate the NAV of tobacco is higher than the 20x average of regional tobacco names but the latter only has 10% and beverages and current average EPS growth for 2015E. market price for banks

■ Banking. We use the current market price of PNB. The stock is currently trading at a 2015E P/B of 1.1x, which is lower than the 1.6x 2015E average P/B of the Philippine banks.

■ Beverage. Target P/E of 25x is applied to 2015E net income. Our target multiple is slightly lower than the 26x 2015E average P/E of the Philippine consumer names. It is lower than the 32x average of regional beverage names but the latter has 31% average EPS growth for 2015E.

■ Distilled spirits. Latest available actual net book value (as at end March 2014). We estimate that this business segment will only contribute 1% to company's 2015E net income.

■ Property development. Latest available actual net book value (as at end March 2014). We estimate that this business segment will only contribute 1% to company's 2015E net income.

Figure 39: Domestic and regional comparables for LTG's consumer businesses—valuation summary Company Reuters CS MktCap P/E (x) P/B (x) ROE (%) EPS growth (%) Name ticker rating (US$ mn) 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E Philippines Universal Robina URC.PS O 8,003 32.1 27.3 6.4 5.9 20.5 22.5 8 18 Jollibee Foods JFC.PS O 4,402 35.3 28.6 8.3 7.5 24.8 27.6 18 24 Emperador EMP.PS N 4,012 24.7 22.2 4.9 4.2 21.1 20.3 17 11 Average 5,472 30.7 26.0 6.5 5.9 22.1 23.4 14 17 Tobacco BAT Malaysia BATO.KL O 5,963 21.3 20.7 32.7 30.8 163.8 152.9 8 3 Gudang Garam GGRM.JK N 8,719 20.2 17.4 3.1 2.8 16.2 16.9 15 17 ITC Ltd ITC.BO O 45,839 31.3 26.7 10.5 9.6 36.2 37.6 18 18 KT&G Corp 033780.KS U 12,508 15.3 14.8 2.3 2.1 14.0 13.7 33 4 Average 18,257 22.0 19.9 12.1 11.3 57.5 55.3 19 10 Beverage Emperador EMP.PS N 4,012 24.7 22.2 4.9 4.2 21.1 20.3 17 11 Thai Beverage TBEV.SI O 12,650 19.6 18.0 3.9 3.4 20.8 20.2 8 9 United Spirits UNSP.BO N 5,551 96.6 55.6 4.1 3.8 5.3 7.1 (387) 74 Average 7,404 47.0 31.9 4.3 3.8 15.7 15.9 (121) 31 Source: RAVE, Credit Suisse estimates

Figure 40: Philippines banks—valuation summary Company Reuters CS MktCap P/E (x) P/B (x) ROE (%) EPS growth (%) name ticker Rating (US$ mn) 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E BDO Unibank BDO.PS N 7,500 16.9 14.5 1.8 1.7 11.3 12.0 (13) 16 Bank of Phil Islands BPI.PS N 8,677 18.2 15.7 3.0 2.7 17.4 18.2 (2) 16 Metrobank MBT.PS U 5,654 17.2 13.9 1.7 1.6 10.4 11.7 (34) 23 Security Bank SECB.PS U 1,712 14.1 12.0 1.7 1.5 12.4 13.0 23 18 Asia United Bank AUB.PS N 536 14.6 11.6 1.2 1.0 8.2 9.5 (7) 26 Phil National Bank PNB.PS NR 2,316 17.4 13.9 1.1 1.1 7.0 7.7 6 25 Average 4,399 16.4 13.6 1.8 1.6 11.1 12.0 (4) 21 Source: RAVE, Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 20 14 July 2014

Figure 41: PNB—forward P/B from January 2008 to Figure 42: PNB—forward P/E from January 2008 to present (x) present (x) 1.6 25

1.4 20 1.2

1.0 15

0.8 10 0.6

0.4 5 0.2

- 0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 PBR Ave-2SD Ave-1SD PER Ave-2SD Ave-1SD Average Ave+1SD Ave+2SD Average Ave+1SD Ave+2SD

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 43:Current market valuation breakdown 12/12A 12/13A 12/14E 12/15E 12/16E 12/17E Current P/E breakdown (x) Banks Current 15.1 16.6 13.9 13.2 12.6 12.0 High 18.9 20.8 17.5 16.6 15.8 15.0 Low 10.9 12.0 10.1 9.6 9.1 8.7 Average 14.7 16.1 13.5 12.8 12.2 11.6 Consumer Current 12.0 20.6 50.7 14.9 14.1 13.4 High 24.6 42.2 103.9 30.5 28.9 27.4 Low 10.3 17.6 43.4 12.8 12.1 11.4 Average 15.2 26.1 64.4 18.9 17.9 17.0 Consolidated Current 12.9 19.0 26.5 14.3 13.6 12.9 High 22.9 33.7 47.1 25.3 24.1 22.8 Low 11.3 16.6 23.2 12.5 11.9 11.3 Average 15.1 22.2 30.9 16.6 15.8 15.0 Market capitalisation breakdown (P mn) Banks Current 56,860 56,860 56,860 56,860 56,860 56,860 High 71,374 71,374 71,374 71,374 71,374 71,374 Low 41,118 41,118 41,118 41,118 41,118 41,118 Average 55,253 55,253 55,253 55,253 55,253 55,253 Consumer Current 107,842 107,842 107,842 107,842 107,842 107,842 High 220,803 220,803 220,803 220,803 220,803 220,803 Low 92,283 92,283 92,283 92,283 92,283 92,283 Average 136,778 136,778 136,778 136,778 136,778 136,778 Consolidated Current 164,702 164,702 164,702 164,702 164,702 164,702 High 292,178 292,178 292,178 292,178 292,178 292,178 Low 144,141 144,141 144,141 144,141 144,141 144,141 Average 192,031 192,031 192,031 192,031 192,031 192,031 Source: RAVE, Credit Suisse estimates

LT Group, Inc. (LTG.PS / LTG PM) 21 14 July 2014

Investment risks In our view, the key investment risks for LT Group stem from its tobacco (PMFTC) and Key risks for the group are banking (PNB) businesses. Combined, these businesses account for 80% and 87% of our related to PMFTC and PNB NAV and 2015E net income estimates, respectively. Key risks related to PMFTC

■ Higher-than-expected decrease in sales volume due to price increase, and change in tobacco regulation, etc.

■ Lower-than-expected price increase in order to protect market share against competition and illicit trade.

■ Higher-than-expected manufacturing costs due to commodity risk, loss of production capacity or key suppliers, etc. Key risks related to PNB

■ The recent merger between PNB and Allied Bank may not result in synergies and efficiencies.

■ A substantial portfolio of real and other properties acquired (“ROPA”) exposes PNB to risks related to realising the value of its ROPA, such as an increase in impairment losses and value depreciation.

LT Group, Inc. (LTG.PS / LTG PM) 22 14 July 2014 Appendix Company history LT Group was incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission or SEC on 25 May 1937 under the name The Manila Wine Merchants Inc to engage in the trading business. On 17 November 1947, the company‘s shares were listed in the Philippine Stock Exchange or PSE. The company's corporate life is 50 years from the date of incorporation and was extended for another 50 years after 27 May 1987. On 22 September 1995, the SEC approved the change in company's name to Asian Pacific Equity Corporation and the change in its primary purpose to that of a holding company. On 30 July 1999, the company acquired Twin Ace Holdings Corp, which is now known as Tanduay Distillers Inc or TDI through a share swap with Tangent Holdings Corporation or Tangent. The share swap resulted in the company wholly owning TDI, and Tangent increasing its ownership in the company to 97%. On 10 November 1999, SEC approved the change in the company‘s corporate name from Asian Pacific Equity Corporation to Tanduay Holdings Inc. On 24 September 2012, the company's stockholders approved the amendment in its Articles of Incorporation and By-Laws to reflect the change in its corporate name from Tanduay Holdings Inc to LT Group Inc, which was approved by SEC on 28 September 2012. After a series of restructuring activities in 2012 and 2013, LT Group has expanded and diversified its investments to include the beverages, tobacco, property development and banking businesses, all belonging to Mr Lucio C Tan and his family and assignees (collectively referred to as the controlling shareholders). As at 31 December 2013 and 2012, LTG was 74.4% and 89.6%-owned, respectively, by its ultimate parent company, Tangent, which is also incorporated in the Philippines. Board of directors and top management

■ Dr Lucio C Tan. Chairman of the Board from 2 July 1999 to present, age 80. Also Chairman of the Board for Asia Brewery Inc., Eton Properties Philippines, Inc., Fortune Tobacco Corp., PMFTC Inc., Tanduay Distillers, Inc.; Director of Philippine National Bank. He holds a Bachelor of Science degree in Chemical Engineering from Far Eastern University and is an awardee of several honorary Doctorate degrees.

■ Carmen K Tan. Director from 5 May 2010 to present, age 72. Also Director of Asia Brewery, Inc., Fortune Tobacco Corp., and PMFTC Inc. among others.

■ Harry C Tan. Vice Chairman of the Board and Nomination and Compensation Committee Chairman from 27 May 2009 to present, Director since 28 May 2008; age 68. Also Vice Chairman of the Board for Eton Properties Philippines, Inc.; Director/Chairman for Tobacco Board of Fortune Tobacco Corp.; Director of Asia Brewery Inc., PMFTC Inc., Philippine National Bank, and Tanduay Distillers, Inc. He holds a Bachelor of Science degree in Chemical Engineering from the Mapua Institute of Technology.

■ Michael G Tan. Director/President, Audit Committee Member, Nomination and Compensation Committee since 5 May 2010; Director since 21 February 2003, age 48. He is also the Director/Chief Operating Officer of Asia Brewery, Inc., Eton Properties Philippines, Inc., PMFTC Inc., and Philippine National Bank. He graduated

LT Group, Inc. (LTG.PS / LTG PM) 23 14 July 2014

as head of his class at the University of British Columbia in Canada with a Bachelor of Science degree in Applied Science in Engineering, major in Structural Engineering.

■ Lucio K Tan, Jr. Director, Audit Committee Member, Nomination and Compensation Committee Member since 21 February 2003 to present; age 47. Director/President of Eton Properties Philippines, Inc.; Director/EVP of Fortune Tobacco Corp.; Director of Philippine National Bank, PMFTC Inc., and Asia Brewery Inc.. He graduated from the University of California, Davis in 1991 with a Bachelor of Science degree in Civil Engineering and has a Master's Degree in Business Administration from Kellogg School of Management Northwestern University.

■ Wilson T Young. Director and Audit Committee Member since 31 March 1999; age 57. He also served as the Managing Director and Deputy CEO from 5 May 2010 to 31 July 2012. He holds a Bachelor of Science degree in Accountancy from the University of the East and has a Master's degree in National Security from the National Defense College. He is a Certified Public Accountant and worked with SGV & Co. before joining the Company.

■ Juanita Tan Lee. Director and Nomination and Compensation Committee Member since 2 May 2012; age 71. She was the Assistant Corporate Secretary from 13 September 2000 to 17 September 2012. She is also the Director/Treasurer of Eton Properties Philippines, Inc.; Director/Corporate Secretary of Asia Brewery, Inc., Fortune Tobacco Corp., PMFTC Inc., and Tanduay Distillers, Inc. She holds a Bachelor of Science degree in Business Administration major in Accounting from the University of the East.

■ Washington Z Sycip. Director since 9 July 2013; age 92. He is the founder of the accounting firm SyCip Gorres Velayo & Co., and also serves as a Director of Philippine National Bank, among others.

■ Antonino L Alindogan, Jr. Independent Director and Audit Committee Chairman since 31 July 2012; age 75. He is also an Independent Director of Eton Properties Philippines, Inc. He used to be Chairman of the Board for the Development Bank of the Philippines and was a Member of the Monetary Board of Bangko Sentral ng Pilipinas. He is a Certified Public Accountant and graduated Magna Cum Laude from De La Salle College with Bachelor of Science in Commerce with specialization in Accounting.

■ Wilfrido E Sanchez. Independent Director, Audit Committee Member, Nomination and Compensation Member since 31 July 2012; age 77. Also serves as Independent Director for Eton Properties Philippines, Inc. He has a Post-graduate degree in Bachelor of Laws from Ateneo de Manila University and Masters of Law from Yale Law School.

■ Florencia G Tarriela. Independent Director and Audit Committee Member since 9 August 2012; age 67. She is also the Chairman of the Board of Philippine National Bank. She was a former Undersecretary of Finance, and an alternate member of the Monetary Board of the Bangko Sentral ng Pilipinas, Land Bank of the Philippines and the Philippine Deposit Insurance Corporation. She was formerly Deputy Country head, Managing Partner and the first Filipino lady Vice President of Citibank N.A., Philippine Branch. She obtained her Bachelor of Science in Business Administration, Major in Economics, at the University of the Philippines and her Masters in Economics from the University of California, Los Angeles where she topped the Masters Comprehensive Examination.

■ Jose Gabriel D Olives. Chief Financial Officer since 9 August 2012; age 67. Former Senior Vice President – Finance & Chief Financial Officer of Philippine Airlines, Inc., and Former Chief Finance Officer of Asia Brewery, Inc.

LT Group, Inc. (LTG.PS / LTG PM) 24 14 July 2014

Companies Mentioned (Price as of 11-Jul-2014) BAT Malaysia (BATO.KL, RM66.5) Emperador Inc. (EMP.PS, P11.62) Gudang Garam (GGRM.JK, Rp52,475) ITC Ltd (ITC.BO, Rs346.05) Jollibee Foods Corporation (JFC.PS, P181.0) KT&G Corp (033780.KS, W92,800) LT Group, Inc. (LTG.PS, P15.22, OUTPERFORM[V], TP P20.2) Philip Morris International (PM.N, $85.41) Thai Beverage (TBEV.SI, S$0.62) United Spirits Ltd. (UNSP.BO, Rs2294.8) Universal Robina Corp. (URC.PS, P159.4)

Disclosure Appendix Important Global Disclosures I, Alvin Arogo, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

LT Group, Inc. (LTG.PS / LTG PM) 25 14 July 2014

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 45% (54% banking clients) Neutral/Hold* 40% (50% banking clients) Underperform/Sell* 13% (48% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for LT Group, Inc. (LTG.PS) Method: Our P20.2 target price for LT Group is SOTP-based. Based on our estimates, 57% of the company's NAV is from its tobacco business, 23% from banking, 13% from beverages and 7% from distilled spirits and property development.

Risk: In our view, the key investment risks for LT Group are the risks related to its tobacco and banking businesses. Key risk for its tobacco business is higher than expected decrease in sales volume due to price increase. Key risk for its banking business is its recent merger may not result in synergies and efficiencies.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names The subject company (LTG.PS, PM.N, URC.PS, 033780.KS, TBEV.SI, UNSP.BO) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (LTG.PS, PM.N, URC.PS, UNSP.BO) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (PM.N) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (PM.N, URC.PS, UNSP.BO) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (LTG.PS, PM.N, URC.PS, UNSP.BO) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (LTG.PS, PM.N, URC.PS, 033780.KS, TBEV.SI, UNSP.BO) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (PM.N) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (PM.N). Credit Suisse may have interest in (BATO.KL)

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (LTG.PS, PM.N, URC.PS, JFC.PS, EMP.PS, BATO.KL, GGRM.JK, ITC.BO, 033780.KS, TBEV.SI, UNSP.BO) within the past 12 months Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

LT Group, Inc. (LTG.PS / LTG PM) 26 14 July 2014

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (LTG.PS, PM.N, URC.PS, UNSP.BO) within the past 3 years. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. For Thai listed companies mentioned in this report, the independent 2013 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: Thai Beverage () To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Securities (Philippines) Inc...... Alvin Arogo ; Danielo Picache

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683.

LT Group, Inc. (LTG.PS / LTG PM) 27 14 July 2014

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