Singapore 100 2018 The annual report of the most valuable Singaporean brands 2018 August 2018 Contents.

Foreword 4 Introduction 6 About Brand Finance 7 Definitions 8 Methodology 10 Getting a Grip on Intangibles 12 Brand Governance 16 Singapore’s Top 10 Brands Most Valuable Brands 19 Brand Finance Singapore 100 (USD m) 20 Background on Intangible Asset Value 24 Brand Finance Global 500 28 New International Standard on Brand Valuation 30 How Should Brands Value Existing Marks? 34 Glossary of Terms 37 Consulting Services 38 Brand Valuation Report 39 Communication Services 40 Contact Details 42

Brand Finance Singapore 100 August 2018 3. Foreword. Foreword.

What is the purpose of a strong brand; to attract customers, to build loyalty, to motivate 2018 continues to be an unpredictable year. There will be new challenges emerging each staff? All true, but for a commercial brand at least, the first answer must always be ‘to day, some that the global economies are used to and some that come and surprise make money’. Huge investments are made in the design, launch and ongoing everyone out of nowhere. Being in ASEAN markets with a growing consumer base isn’t promotion of brands. Given their potential financial value, this makes sense. enough. Business growth is getting more and more unpredictable. Forecasting is impossible. This will be the new norm for everyone. And the brands will not be immune to it Unfortunately, most organisations fail to go beyond that, missing huge opportunities to either. effectively make use of what are often their most important assets. Monitoring of brand performance should be the next step, but is often sporadic. Where it does take place it We are seeing more and more unpredictable behaviour from brands and customers alike. frequently lacks financial rigour and is heavily reliant on qualitative measures poorly Loyalty has been put aside for discounts. Brand equity has been put aside for sales. understood by non-marketers. As a result, marketing teams struggle to communicate “Short term”, “quick results” and “sell and move on” are some of the new mantras. So the the value of their work and boards then underestimate the significance of their brands only thing that remains a constant is the brand and that’s why it is the most critical David Haigh to the business. Skeptical finance teams, unconvinced by what they perceive as Samir Dixit business asset. Shareholders invest for the intangible value increase of the share price, CEO, Brand Finance marketing mumbo jumbo may fail to agree necessary investments. What marketing Managing Director, mostly driven by brands. Business managers however seldom look at Wit that way giving spend there is can end up poorly directed as marketers are left to operate with Brand Finance Asia Pacific their undivided focus to sales, balance sheet performance and cost cuts. insufficient financial guidance or accountability. The end result can be a slow but steady downward spiral of poor communication, wasted resources and a negative A strong external brand must be managed effectively internally first. Internal brand impact on the bottom line. management therefore is more critical than external brand management.

Brand Finance bridges the gap between the marketing and financial worlds. Our Consistency is the single largest brand value driver and that comes from everyone inside teams have experience across a wide range of disciplines from market research and the organisation being on the same page, having the same brand understanding, its visual identity to tax and accounting. messaging, its application and so on. In our assessment, 10-15% of the total brand value is influenced by how well the brand is managed and understood internally. This is the We understand the importance of design, advertising and marketing, but we also challenge that we address in our 2018 annual Brand Forum and our report. believe that the ultimate and overriding purpose of brands is to make money. That is why we connect brands to the bottom line. By valuing brands, we provide a mutually Valuation is a great tool to evaluate, monitor and track the internal brand management intelligible language for marketers and finance teams. contribution for your business success. This becomes critical since huge investments are already being made in the design, R&D, launch and re-launch and ongoing tactical Marketers then have the ability to communicate the significance of what they do and promotion of numerous products around the world. Unfortunately, most corporates fail to boards can use the information to chart a course that maximises profits. Without effectively measure the ROI for their important and valuable asset – their brand. We have knowing the precise, financial value of an asset, how can you know if you are also observed that a number of brand valuation consultancies produce brand ranking maximising your returns? If you are intending to license a brand, how can you know tables using methods that do not stand up to technical scrutiny or to the ISO Standards you are getting a fair price? If you are intending to sell, how do you know what the for Brand Valuation. We use methods that are technically advanced, which conform to right time is? How do you decide which brands to discontinue, whether to rebrand and ISO Standards and are well recognised by our peers, by various technical authorities and how to arrange your brand architecture? Brand Finance has conducted thousands of by academic institutions. brand and branded business valuations to help answer these questions. Brand Finance published brand rankings are the world’s only published ranking of ISO Brand Finance’s recently conducted share price study revealed the compelling link compliant brand values. This annual report pits the best brands against one another in between strong brands and stock market performance. It was found that investing in the most definitive list of brand values available. The Brand value accorded to each brand the most highly branded companies would lead to a return almost double that of the is a summary of its financial strength. Each brand has also been given a brand rating, average for the S&P 500 as a whole. Acknowledging and managing a company’s which indicates its strength, risk and future potential relative to its competitors. intangible assets taps into the hidden value that lies within it. The following report is a first step to understanding more about brands, how to value them and how to use that This report provides an opinion regarding the point in time valuations of the most valuable information to benefit the business. The team and I look forward to continuing the Singaporean brands as at 1st January 2018. The sheer scale of these brand values show conversation with you. how important an asset these brands are to their respective owners. As a result, we firmly believe that brand valuation analysis can offer marketers and financiers insight into their brand management efforts and the impact of a stronger brand on marketing activities and should be considered as a key part of the decision making process.

4. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 5. Introduction. About Brand Finance.

The balance between tangibles and intangibles has intangible growth ought to have outstripped enterprise Brand Finance is the world’s leading We are one of the few companies certified to provide brand changed dramatically over the past 50 years as corporate value rather than the reverse. valuation that is fully compliant with ISO 10668, the global performance is increasingly driven by exploitation of ideas, independent brand valuation and standard on monetary brand valuations information, expertise and services rather than physical The fact that most of the intangible value is not disclosed on strategy consultancy. products. company balance sheet further illustrates how poorly Transparency understood intangibles still are by investors and Brand Finance was set up in 1996 with the aim of ‘bridging Intangible assets have traditionally tipped the scales over management alike – and how out of date accounting the gap between marketing and finance’. For over 20 years There are no black boxes. Our approach is to work openly, tangible assets to create value for companies and the practice is. we have helped companies to connect their brands to the collaboratively and flexibly with clients and we will always global economy. They now make up for a significantly large bottom line, building robust business cases for brand reveal the details of our modelling and analysis. This means value of an enterprise. Yet, it’s an area of least focus Such ignorance leads to poor decision-making companies decisions, strategies and investments. In doing so, we have our clients always understand what lies behind ‘the amongst the management. and systematic mis-pricing of stock by investors. helped finance people to evaluate marketing programmes number’. and marketing people to present their case in the Whilst accountants do not measure intangible assets, the Purpose of study Board Room. Expertise discrepancy between market and book values shows that investors do. To this end, our study aims to examine the performance of Independence We possess a unique combination of skills and experience. Singapore’s intangible assets and brands. We employ functional experts with marketing, research and Brand Finance has been researching and tracking the role Brand Finance is impartial and independent. We access financial backgrounds, as well as ex-client-side senior of intangible assets since 2001 as part of its annual Global For the intangible asset study, the total enterprise value of and help to manage brands, but we do not create or own management who are used to ‘making things happen’. This Intangible Finance Tracker (GIFT™) with an emphasis on corporate Singapore is divided into four components shown them. We are therefore able to give objective, unbiased gives us the mindset to think beyond the analysis and to helping corporations understand brand strength and value. below. advice because we have no vested interest in particular consider the likely impact on day-to-day operations. We like outcomes of a project and our recommendations are to think this differentiates us because our team has real Brand Finance has found that intangible assets play a entirely independent. We are agency agnostic that works operational experience. Undisclosed Value Disclosed Goodwill significant part in enterprise value generation. The GIFT™ is collaboratively with many other agencies a study that tracks the performance of intangible assets on The difference between the Goodwill disclosed on and consultancies. For more information, please visit our website: a global level. market and book value of balance sheet as a result of brandfinance.com shareholders’ equity, often acquisitions Technical credibility referred to as the premium The GIFT™ is the most extensive study on intangible assets, book value covering more than 160 jurisdictions, more than 57,000 Brand Finance has high technical standards. companies. The analysis goes back over a fifteen-year Our work is frequently peer-reviewed by the big four audit Disclosed Intangible Tangible Net Assets period from the end of December 2016. and our work has been accepted by tax authorities and Assets regulatory bodies around the world. Currently, 52% of global market value is vested in intangible Intangible assets disclosed Tangible net assets is on balance sheet including added to investments, assets. There is just a marginal increase as compared to Brand Finance puts thousands of the world’s biggest brands to the test every year, evaluating which are the strongest and trademarks and licences working capital and other last year. However, the management paradigm is yet to shift most valuable. The Singapore 100 is just one of the many annual reports produced by Brand Finance. in tandem with large proportion and the importance of net assets intangible assets. Visit www.brandirectory.com to access all the sector and country reports.

Globally, intangible value continues to soar, rising from $19.8 trillion in 2001 to $47.6 trillion in 2016, despite a drop of over 50% during the financial crisis of 2008.

Though the values of disclosed intangibles on company balance sheets have increased by 5% annually over the last five years, total enterprise value grew 13% over the same period. More strikingly, global undisclosed intangible value rose from $15tn in 2011 to $35tn in 2016, an 18% annual increase, suggesting that, with effective reporting, disclosed

6. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 7. Definitions.

Definitions. Brand Value Brand Strength

Brand Strength is the efficacy of a brand’s + Enterprise Value Each brand is assigned a Brand Strength Index (BSI) The value of the entire enterprise, made performance on intangible measures, relative to its score out of 100, which feeds into the brand value up of multiple branded businesses. competitors. [Volkswagen Group] calculation. Based on the score, each brand is assigned a Where a company has a purely mono- corresponding rating up to AAA+ in a format similar to a In order to determine the strength of a brand, we look at branded architecture, the ‘enterprise value’ credit rating. is the same as ‘branded business value’. Marketing Investment, Stakeholder Equity, and the impact Enterp of those on Business Performance. rise Analysing the three brand strength measures helps inform Va lue + Branded Business Value managers of a brand’s potential for future success. The value of a single branded business Bra operating under the subject brand. nded Bu si [Bentley] A brand should be viewed in the context of ne Marketing Widely recognised factors deployed by marketers to create brand loyalty and ss the business in which it operates. Brand V market share. a Finance always conducts a branded Investment Bran lu d C e business valuation as part of any brand on tr valuation. We evaluate the full brand value ib u t chain in order to understand the links io n between marketing investment, brand- Stakeholder Stakeholder Perceptions of the brand among different stakeholder groups, with customers tracking data, and stakeholder behaviour. Equity Equity being the most important. + Brand Contribution Brand The overall uplift in shareholder value that the business derives from owning Quantitative market and financial measures representing the success of the Value Business Business the brand rather than operating a brand in achieving price and volume premium. [Bentley] Brand Strength Index Performance Performance generic brand.

The brand values contained in our league tables are those of the potentially transferable brand assets only, making ‘brand contribution’ a wider concept. An Marketing Investment assessment of overall ‘brand contribution’ to • A brand that has high Marketing Investment but low Stakeholder Equity may be on a a business provides additional insights to path to growth. This high investment is likely to lead to future performance in Stakeholder help optimise performance. Equity which would in turn lead to better Business Performance in the future. Investment • However, high Marketing Investment over an extended period with little improvement in + Brand Value Stakeholder Equity would imply that the brand is unable to shape customers’ preference. The value of the trade mark and associated marketing IP within the Stakeholder Equity branded business. • The same is true for Stakeholder Equity. If a company has high Stakeholder Equity, it is [Bentley] Equity likely that Business Performance will improve in the future. Brand Finance helped to craft the • However, if the brand’s poor Business Performance persists, it would suggest that the internationally recognised standard on brand is inefficient compared to its competitors in transferring stakeholder sentiment Brand Valuation – ISO 10668. It defines to a volume or price premium. brand as a marketing-related intangible Performance asset including, but not limited to, names, Business Performance • Finally, if a brand has a strong Business Performance but scores poorly on Stakeholder terms, signs, symbols, logos, and designs, Equity, it would imply that, in the future, the brand’s ability to drive value will diminish. intended to identify goods, services or • However, if it is able to sustain these higher outputs, it shows that the brand is entities, creating distinctive images and particularly efficient at creating value from sentiment compared to its competitors. associations in the minds of stakeholders, thereby generating economic benefits.

8. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 9. Running Header Here

Methodology.

Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in Brand Strength ISO 10668. Index (BSI) Brand strength This involves estimating the likely future revenues that expressed as a BSI are attributable to a brand by calculating a royalty rate score out of 100. that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a licensor would achieve by licensing the brand in the open market.

The steps in this process are as follows: Brand 1 Calculate brand strength using a balanced scorecard Royalty Rate of metrics assessing Marketing Investment, BSI score applied to an Stakeholder Equity, and Business Performance. Brand appropriate sector strength is expressed as a Brand Strength Index (BSI) royalty range. score on a scale of 0 to 100. 2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database. Brand Revenues 3 Calculate royalty rate. The BSI score is applied to the Royalty rate applied to royalty range to arrive at a royalty rate. For example, if forecast revenues to CONNECTIVITY the royalty range in a sector is 0-5% and a brand has derive brand value. a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%. 4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable HUMAN CAPITIAL to a brand. Brand Value DEVELOPMENT 5 Determine forecast revenues using a function of Post-tax brand historic revenues, equity analyst forecasts, and revenues discounted to economic growth rates. a net present value (NPV) which equals the brand 6 Apply the royalty rate to the forecast revenues to value. derive brand revenues. CONTINUINg 7 Brand revenues are discounted post-tax to a net EDUCATION present value which equals the brand value.

10. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 11. Getting a Grip on Intangibles.

Getting a Grip on Intangibles.

Intangible assets make up nearly half the value of quoted companies around the world. Yet intangibles remain poorly understood and managed.

Intangible assets including brands have never been more important. Survey after survey But a fourth category, ‘undisclosed intangible assets’, is Therefore, intangible assets that may be recognised on a shows that brands and other intangibles typically account for between 30 per cent and 70 usually more valuable than the disclosed intangibles. The balance sheet under IFRS are only a fraction of what are per cent of a company’s market value, and in certain sectors, such as luxury goods, this category includes ‘internally generated goodwill’, and it often considered to be ‘intangible assets’ in a broader figure can be even higher. accounts for the difference between the fair market value sense. of a business and the value of its identifiable tangible and Bryn Anderson Research from Brand Finance, the 2017 BrandFinance Global Intangible Financial Tracker intangible assets. Although not an intangible asset in a However, the picture has improved since 2001, when COO, Brand Finance (GIFT) report is the most extensive research ever compiled on intangible assets. Over the strict sense — that is, a controlled ‘resource’ expected to IFRS3 in Europe, and FAS141 in the US, started to require past fourteen years, GIFT has tracked the performance of more than 57,000 companies provide future economic benefits (see below) — this companies to break down the value of the intangibles they domiciled in 160 over jurisdictions and it shows that in 2016, intangibles across the world residual value is treated as an intangible asset in a acquire as a result of a takeover into five different accounted for 52 percent of the value of quoted companies, continuing the increase since business combination when it is converted into goodwill categories — including customer-and market related the global economic downturn in 2008. The proportion of intangible assets not recognised on the acquiring company’s balance sheet. intangibles — rather than lumping them together under on the global balance sheet is up from 34 per cent to 38 percent comparing from the year the catch-all term ‘goodwill’ as they had in the past. before. The increase can be attributed strong stock prices in the mining and oil and gas Current accounting practice does not allow for internally sector. generated brands to be disclosed on a balance sheet. But because only acquired intangibles, and not those Under current IFRS only the value of acquired brands can internally generated, can be recorded on the balance The balance between tangible to intangible assets has changed dramatically over the past be recognised, which means many companies can never sheet, this results in a lopsided view of a company’s value. 50 years, as corporate performance has become increasingly driven by the exploitation of use the controlled ‘resource’ of their internally generated What’s more, the value of those assets can only stay the ideas, information, expertise and services rather than physical things. Yet despite the rise in brands to their full economic benefit. For example, they same or be revised downwards in each subsequent year, intangible value, the fact that most of it is not disclosed on company balance sheets can’t take out a loan against the asset and potentially thus failing to reflect the additional value that the new highlights how poorly understood intangibles still are by investors and management alike bolster their balance sheet. stewardship ought to be creating. — and how out of date accounting practice is. Such ignorance leads to poor decision making by companies and systematic miss-pricing of stock by investors. In accounting terms, an asset is defined as a resource that Clearly, therefore, whatever the requirements of is controlled by the entity in question and which is accounting standards, companies should regularly Overall, the 2017 GIFT study shows that the value of the top 57,000 companies in the world expected to provide future economic benefits to it. The measure all their tangible and intangible assets (including has recovered from the ‘double drip’ result in 2011. Globally, intangible value continues to International Accounting Standards Board’s definition of internally-generated intangibles such as brands and soar, rising from $19.8 trillion in 2001 to $47.6 trillion in 2016, despite a drop of over 50% an intangible asset requires it to be non-monetary, without patents) and liabilities, not just those that have to be during the financial crisis of 2008. physical substance and ‘identifiable’. reported on the balance sheet. And the higher the proportion of ‘undisclosed value’ on balance sheets, the Categories of intangible assets under IFRS 3 In order to be ‘identifiable’ it must either be separable more critical that robust valuation becomes. (capable of being separated from the entity and sold, 1. Rights. Leases, distribution agreements, employment contracts, covenants, financing transferred or licensed) or it must arise from contractual or arrangements, supply contracts, licences, certifications, franchises. legal rights (irrespective of whether those rights are themselves ‘separable’). 2. Relationships. Trained and assembled workforce, customer and distribution relationships.

3. Intellectual property. Patents; copyrights; trademarks; proprietary technology (for example, formulas, recipes, specifications, formulations, training programmes, marketing strategies, artistic techniques, customer lists, demographic studies, product test results); business knowledge — such as suppliers’ lead times, cost and pricing data, trade secrets and knowhow.

12. BrandBrand FinanceFinance SingaporeSingapore 100100 AugustAugust 20182018 Brand Finance Singapore 100 August 2018 13. Getting a Grip on Intangibles. Getting a Grip on Intangibles.

Executive Summary Global intangible and tangible value by country (%) Global intangible and tangible value by sector (%) Figure 11: Most Intangible Countries (%) Figure 4: Sectors by Enterprise Value (%) ■ Tangible Net Assets ■ Disclosed Intangible Assets (ex g/w) ■ Disclosed Goodwilll ■ Undisclosed Value ■ Tangible Net Assets ■ Disclosed Intangible Assets (ex g/w) ■ Disclosed Goodwilll ■ Undisclosed Value United States Belgium Advertising Denmark Aerospace & Defense Ireland Cosmetics & Personal Care United Kingdom Healthcare Products Switzerland Pharmaceuticals Mexico Software Sweden Media Finland Beverages Germany France Biotechnology South Africa Agriculture India Internet Netherlands Housewares Australia Healthcare Services Israel Commercial Services Canada Apparel Indonesia Thailand Miscellaneous Manufacturing Spain Environmental Control Peru Food New Zealand Computers Pakistan Retail Philippines Entertainment Italy Hand & Machine Tools Jamaica Home Furnishings China Bangladesh Machinery - Diversified Luxembourg Telecommunications Brazil Packaging & Containers Vietnam Semiconductors Norway Electrical Components & Equipment United Arab Emirates Leisure Time Chile Electronics Egypt Machinery - Construction & Mining Malaysia Taiwan Chemicals Poland Lodging Colombia Oil & Gas Services Tunisia Water Kenya Engineering & Construction Saudi Arabia Auto Parts & Equipment Austria Building Materials Singapore Mongolia Metal Fabricate & Hardware Japan Pipelines Turkey Airlines Kuwait Gas Jordan Transportation Bermuda REITS Slovakia Storage & Warehousing Sri Lanka Mining Nigeria Hong Kong Textiles Croatia Energy - Alternate Sources Oman Home Builders South Korea Savings & Loans Zimbabwe Forest Products & Paper Ukraine Coal Cyprus Insurance Romania Russia Electric Macedonia Shipbuilding Mauritius Distribution & Wholesale Bulgaria Oil & Gas Greece Auto Manufacturers Serbia Banks & DFS Montenegro Iron/Steel Kazakhstan Real Estate

-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 40. Brand Finance GIFT™ June 2017 14. Brand Finance Singapore 100 August 2018 Brand FinanceBrand Singapore Finance 100 GIFT™ August June 2018 2017 15. 33.

BF GIFT Report 2017 WITHOUT TEXT IN EXEC SUM.indd 40 28/06/2017 11:41:43 BF GIFT Report 2017 WITHOUT TEXT IN EXEC SUM.indd 33 28/06/2017 11:41:41 Brand Governance: The Essential Inside Out Brand Management.

Brand Governance: The Essential Inside Out Brand Management.

The Context Brand Finance “Brand Governance” 5. Operational processes: How will the organisation All the above components come together in the GSI Approach operationalize the Brand Management? Who will be the key framework and allow the overall brand governance process The “brand” is the most powerful and valuable of all the people involved? Responsibilities for individuals/groups/ to be managed and maintained as a crucial management intangibles yet it’s the least areas of focus from the teams. KPI with a clear focus on “what next”. Brand Finances’ Brand Governance Framework enables a management internally. corporate to understand and continues to grow the Brand 6. Auditing: No audit means no success measure and no And do remember, information is critical. So without an Equity and Brand Value of the brand effectively managing it gaps identification. Keeping track of what is being cascaded internal tracking of brand understanding and equity It’s every organisation’s biggest challenge to ensure “Inside Out”. consistent brand usage and communication is in place. is being implemented correctly is critical to the success of amongst the staff, a brand policy, internal brand audits etc., any brand management program. the process would not work. It’s “garbage-in, garbage-out”. The fundamental difference of approach taken by brand It’s almost taken for granted that the brand management finance is not to be inputs driven but to be more output (internal or external) is the sole responsibility of the few 7. Risk perspectives: Risk integration with a brand To conclude, this might make the brand teams a bit focussed. The output is measured via a GSI (Governance management process, though seem far-fetched, is uncomfortable about letting go of the control and people/ team in a department titled “brand management strength Index) which is very similar to our BSI index except team”. And even for them, the focus more often than not is extremely critical. Defining the downsides of not thinking empowerment that they have. They must understand that it measures and scores the inputs, equity, outputs for and following the charted brand course and highlighting the this is to get the whole organisation work for them and with to manage PR, corporate brand campaigns and the policing internal brand management practices. of the logo applications. And therein lays the fundamental associated business risks such as the operational/ them vs against them. It’s not about creating more problem. Policing vs. organisation wide understanding of reputational/financial/ strategic/legal risk shows the guidelines and policing opportunities. It’s about making the brand. The latter is far more important and impactful in Key Components of Brand Governance importance of the brand to the organisation. every employee responsible and empowering everyone consistency of brand application than the former. It is the across the organisation for the brand. And this is also about driver of the brand strength and the incremental value There are nine key components of brand governance which 8. Measurability Aspects: What gets measured gets how the success of the brand team would be measured externally. help drive the internal brand management in a more robust done. How will the organisation measure the success/failure and demonstrated to the senior management. How much and structured manner thereby improving the brand equity against the defined benchmarks and KPI’s? brand value is contributed by the brand team through their actions and efforts? If the brand team wasn’t there, what’s So the sooner the companies realise that brand is the externally. And make the brand more competitive. the brand value at risk? responsibility of every single individual in the organisation, 9. Improvement: Putting feedback channels in place for not just the brand team or the people directly involved in the 1. Information: Information on brand development, learning, constant improvement and enhancement of brand marketing functions( IT, HR, Shared Services, property direction the corporate is moving in, reasons of doing the experience across stakeholders is the last mile connectivity. management, frontline staff, back office staff etc.) the more changes, who to go to for brand and related information, impactful and consistent will be their brand messaging and etc. brand application. 2. Education: Education and understanding of people on The Importance do’s and don’ts. This is the foundation and essence of Brand Management. The need and logic for consistency.

Given a corporates global span and diverse workforce of 3. Benchmarking: Creating the benchmarking measures thousands of employees, all this is easier said than done through consistent brand tracking, both internally and unless the corporate has a structured brand governance (or externally, becomes essential. These help define the internal brand management) framework that effectively common platforms and common measurement tools that covers all individuals/staff in the organisation and makes the brand will be measured on both internally and every one of them responsible for the brand vs. a handful of externally. These are also redefined against /in sync with members of the brand team. current measures to identify the gaps, intensity of push and effort required in each of the countries to achieve success. Brand governance is generally driven by the culture within the organisation. However, at the most basic level, savvy 4. Leveling: Get everyone (or as many people) around the organisations know the value of the brand and what the world in the corporate on the same page as far as brand drivers of the brand value are. The organisations Board of understanding and priorities are concerned. Directors also understand the importance of the brand.

What is the organisation doing? Why are they doing it? How It’s just not managed from an “inside out” perspective. are they doing it? How would the organisation benefit from this? There should be more answers than the questions.

16. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 17. Singapore’s Top 10 Most Valuable Brands 2018.

Currency: USD millions 1 Brand Value: US$6,498m Market Capitalisation: BV/MC US$46,163m 14%. Brand Rating: AAA- 2 3 4 Brand Value: Brand Value: Brand Value: US$4,023m US$3,739m US$3,426m Market Capitalisation: BV/MC Market Capitalisation: BV/MC Enterprise Value: BV/EV US$38,197m US$32,396m US$23,533m Brand Rating: 11%. Brand Rating: 12%. Brand Rating: 15%. AA+ AA+ AAA- 5 6 7 Brand Value: Brand Value: Brand Value: US$2,829m US$1,665m US$1,242m Enterprise Value: BV/EV Enterprise Value: BV/EV Enterprise Value: BV/EV US$17,457m 16%. US$9,030m US$6,492m Brand Rating: Brand Rating: 18%. Brand Rating: 19%. A+ AA AAA- 8 9 10 Brand Value: Brand Value: Brand Value: US$1,150m US$1,053m US$1,050m Enterprise Value: BV/EV Enterprise Value: BV/EV Enterprise Value: BV/EV US$8,956m 13%. US$3,878m 27%. US$8,770m 12%. Brand Rating: Brand Rating: Brand Rating: AA- AA+ AA

18. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 19. Brand Finance Singapore 100 (USD m). Brand Finance Singapore 100 (USD m).

Rank 2018 Rank 2017 Brand Logo 2018 Brand Value 2017 Brand Value 2018 Brand 2017 Brand Brand Value / Rank 2018 Rank 2017 Brand Logo 2018 Brand Value 2017 Brand Value 2018 Brand 2017 Brand Brand Value / (USD m) (USD m) Rating Rating Enterprise Value (USD m) (USD m) Rating Rating Enterprise Value (%) (%)

1 1 DBS 6,498 5,403 AAA- AAA- 14% 26 M1 232 A+ 24%

2 2 OCBC Bank 4,023 3,643 AA+ AAA- 11% 27 SPH 422 AA- 10%

3 3 UOB 3,739 3,619 AA+ AA+ 12% 28 CWT 264 A- 23%

4 5 Singtel 3,426 2,625 AAA- AA 15% 29 SGX 307 AA- 6%

5 4 Wilmar 2,829 2,833 A+ A+ 16% 30 Singapore Post 369 AA 13%

6 7 Great Eastern 1,665 1,516 AA A+ 18% 31 UIC 207 A+ 6%

7 6 Singapore Airlines 1,242 1,632 AAA- AAA- 19% 32 UOL 178 A 4%

8 10 Genting Singapore 1,150 1,003 AA- A+ 13% 33 Ascendas Reit 284 A 3%

9 13 Starhub 1,053 850 AA+ AA 27% 34 Ascott 227 A+ 6%

10 12 SPC 1,050 934 AA AA+ 12% 35 Copthorne Hotels 254 AA 16%

11 ComfortDelGro 1,080 AA- 29% 36 Guocoland 279 A 6%

12 CapitaLand 939 AA 5% 37 OUE 140 A+ 6%

13 Jardine Cycle & Carriage 589 A- 29% 38 SBS 215 AA- 33%

14 Sembcorp 832 AA- 7% 39 SATS 244 A+ 7%

15 Frasers Property 1,102 A+ 5% 40 SMRT 209 AA- 21%

16 Keppel 550 A+ 5% 41 SIA Engineering 267 A+ 10%

17 Tiger Beer 374 A+ 28% 42 Hong Leong Asia 230 A- 21%

18 ST Engineering 443 A 8% 43 United Engineers 294 BBB 11%

19 Fraser and Neave 814 AA+ 20% 44 Scoot - - 17%

20 Olam 511 A- 4% 45 Sembcorp Marine 309 A 4%

21 Mapletree 458 A+ 2% 46 Sheng Siong 88 A- 15%

22 Venture 321 A+ 14% 47 Courts 132 A+ 44%

23 HPH Trust 552 A+ 5% 48 SUNTEC REIT 114 AA- 2%

24 City Developments 467 AA- 8% 49 OSIM 123 A 47%

25 Millennium Hotels 354 AA 13% 50 CapitaMalls Asia 165 AA- 5%

20. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 21. Brand Finance Singapore 100 (USD m). Brand Finance Singapore 100 (USD m).

Rank 2018 Rank 2017 Brand Logo 2018 Brand Value 2017 Brand Value 2018 Brand 2017 Brand Brand Value / Rank 2018 Rank 2017 Brand Logo 2018 Brand Value 2017 Brand Value 2018 Brand 2017 Brand Brand Value / (USD m) (USD m) Rating Rating Enterprise Value (USD m) (USD m) Rating Rating Enterprise Value (%) (%)

51 BreadTalk 117 AA- 36% 76 Tiger Balm 30 A+ 3%

52 Raffles Medical 155 AA- 9% 77 Far East Orchard 40 A 7%

53 The Hour Glass 118 BBB 41% 78 Hotel Grand Central 27 A 6%

54 Yeo's 124 A+ 38% 79 Wee Hur 23 BBB 19%

55 SilkAir - - 21% 80 Kingsmen 23 A- 57%

56 UOBKayHian 57 BBB 10% 81 Maxi-Cash 23 BBB 20%

57 Banyan Tree 85 A+ 11% 82 Hyflux 71 A 2%

58 Hi-P - - 12% 83 Nera 19 A 33%

59 Food Empire 67 A 28% 84 Lianhe Zaobao 33 AA- 9%

60 The Straits Times 75 AA- 10% 85 World Class Land 21 A- 4%

61 Ho Bee Land 93 A 3% 86 Q & M 18 A 6%

62 KrisEnergy - - 10% 87 Aspial - - 25%

63 Wing Tai 54 BBB 4% 88 SoilBuild 42 A 2%

64 Stamford 42 A- 11% 89 Metro 22 A 3%

65 Amara 39 A 12% 90 Her World 27 A+ 7%

66 Cortina 47 BB 49% 91 iFAST - - 11%

67 Challenger 74 A 66% 92 Raffles Education - - 3%

68 PanUnited 56 A 9% 93 LHN - - 30%

94 ASL Marine - - 3% 69 Jumbo 33 A 19%

95 Stamford Tyres - - 13% 70 CSE 37 A- 35%

96 Haw Par - - 9% 71 Delfi 61 A -

97 Choo Chiang - - 18% 72 GP Batteries 29 A 14%

98 Huationg Global - - 12% 73 ValueMax 42 BBB 14%

99 Goldheart - - 8% 74 Eu Yan Sang 51 BBB -

75 Neo Group 25 A 29% 100 Pacific Radiance - - 1%

22. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 23. Background on Intangible Asset Value.

Background on Intangible Asset Value.

There are different definitions of ‘intangible assets’. market value of a business and the value of its identifiable • Poor non-financial metrics to measure the quality of • Customer-related intangible assets According to Singapore Financial Reporting Standard (FRS) net assets. Although this residual value is not strictly an intangible asset: Nevertheless, useful valuation insights • Contract-based intangible assets 38 ‘Intangible Asset’, an intangible asset is ‘an identifiable intangible asset in a strict sense (i.e. a controlled “resource” can be gained from sources such as market research, non-monetary asset without physical substance held for use expected to provide future benefits), it is treated as an intellectual property audits and business plans. Goodwill: After initial recognition of goodwill, FRS 103 in the production or supply of goods or services, for rental intangible asset in a business combination when converted requires that goodwill be recorded at cost less accumulated to others, or for administrative purposes’. According to FRS into goodwill on the acquiring company’s balance sheet. • Value is derived from interactions with other assets impairment charges. Whereas previously goodwill was 38 the definition of an intangible asset requires it to be: (both tangible and intangible): This results in a complex amortised over its useful economic life, it is now subject to Intangible assets that may be recognised on a balance value chain, and thus calls for the need of value maps to impairment testing at least once a year. Amortisation is no • Non-monetary sheet under FRS 38 are typically only a fraction of the total explore the interactions between them. longer permitted. • Without physical substance intangible asset value of a business, with the remaining value continuing to be classified as ‘goodwill’. Brands, if • Specific bundle of rights (legal and otherwise): There Negative Goodwill: Negative goodwill arises where the • Identifiable acquired, can be identified under these rules and added to are rights associated with the existence of any purchase price is less than the fair value of the net assets In order to be ‘identifiable’ it must either be separable the balance sheet. This results in an unusual situation intangible asset. acquired. It must be recognised immediately as a profit in (capable of being separated from the entity and sold, where internally-generated brands of the acquiree may be the profit and loss account. However, before concluding transferred or licensed) or it must arise from contractual or recognised on the acquirer’s balance sheet but the • The need for convenient identification: For valuation that “negative goodwill” has arisen, FRS 103 requires that legal rights (irrespective of whether those rights are acquirer’s own internally-generated brands may not. For purposes, the intangible assets must be readily an acquirer should “reassess” the identification and themselves ‘separable’). this reason, Brand Finance thinks there is a strong case for identifiable and capable of being separated from the measurement of the acquired identifiable assets and the inclusion of internally generated brands on the balance other assets employed in the business. It is sometimes liabilities. Intangible assets can be broadly grouped into three sheet. necessary to group complementary intangibles for categories: valuation purposes. FRS 36: Impairment of intangible assets Brands fulfil the definition of intangible assets above, in that 1. Rights: leases; distribution agreements; employment they are controlled by management, provide future • The need for a detailed and precise definition of and goodwill contracts’; covenants’; financing arrangements; supply economic benefits and are identifiable and therefore can be the asset: This is particularly important where this contracts; licenses; certifications; franchises. sold, transferred or licensed as appropriate. We are consists of a bundle of rights. The components should be Previously an impairment test was only required if a increasingly seeing companies taking advantage of this broken down in terms of specific trademarks, copyright, ‘triggering event’ indicated that impairment might have 2. Relationships: trained and assembled workforce; transferability by moving brands (including trademarks and design rights, formulations, patents, and trade secrets. occurred. Under the revised rules, FRS 36 ‘Impairment of customer and distribution relationships. other associated intellectual property, such as design rights Assets’, there is requirement for an annual impairment test. The test is required for certain assets, namely: and other marketing collateral) to special purpose vehicles, FRS 103: Allocating the cost of a 3. Intellectual property: trademarks; patents; copyrights’; such as brand holding companies, for the purpose of proprietary technology (e.g. formulas; recipes; raising finance and tax planning. business combination • Goodwill acquired in a business combination. specifications; formulations; training programs; marketing strategies; artistic techniques; customer lists; demographic Value characteristics of definition of In Singapore, the Financial Reporting Standard (FRS) 103 • Intangible assets with an indefinite useful economic life ‘Business Combination’ is consistent with IFRS 3 in all (e.g. strong brands) and intangible assets not yet studies; product test results; business knowledge – intangible assets processes; lead times; cost and pricing data; trade secrets material aspects. At the date of acquisition, an acquirer available for use. The recoverable amount of these assets and know-how). must measure the cost of the business combination by must be measured annually (regardless of the existence Valuation of intangible assets requires an understanding of recognising the acquiree’s identifiable assets (tangible and or otherwise of an indicator of impairment) and at any their characteristics and the role that they play in the entire In addition, there is what is sometimes termed ‘Unidentified intangible), liabilities and contingent liabilities at their fair other time when an indicator of impairment exists. value chain. The following attributes of intangible assets Intangible Assets’, including ‘internally generated goodwill’ value. Any difference between the total of the net assets have important value implications: (or ‘going concern value’). It is important to recognise the acquired and the cost of acquisition is treated as goodwill Brands are one major class of intangible assets that are distinction between internally-generated and acquired (or negative goodwill). often considered to have indefinite useful economic lives. intangible assets. Current accounting standards only allow • Absence of efficient trading markets: Unlike tangible acquired intangible assets to be recognised on the balance assets, the absence of efficient trading markets for The classifications of intangible assets under FRS 103 Where acquired brands are recognised on the balance sheet. However, this is provided that they meet the above- intangible assets makes the market approach to valuation include: sheet post acquisition, it is important to establish a robust by using transaction price not possible. and supportable valuation model using best practice mentioned criteria i.e. internally generated intangibles of a • Artistic-related intangible assets company cannot be explicitly stated on its balance sheet. valuation techniques that can be consistently applied at • Lack of a linear relationship between investment and • Marketing-relating intangible assets each annual impairment review. There is also new returns: This limits the use of the cost approach to disclosure requirements, the principal one being the This results in what is sometimes described as ‘internally • Technology-based intangible assets generated goodwill’. This is the difference between the fair valuation, except for easily replicable assets. disclosure of the key assumptions used in the calculation.

24. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 25. Background on Intangible Asset Value. Background on Intangible Asset Value.

Increased disclosure is required where a reasonably Impact on management asset) valuation, where a high degree of subjectivity can • Internal royalties result in greater visibility of the true possible change in a key assumption would result in actual exist, it is important to demonstrate that best practices have economic performance of operating companies improved earnings streams from external licenses. impairment. Perhaps the most important impact of new reporting been applied and that the impairment review process is robust. standards has been on management accountability. Greater • More effective and efficient IP protection will reduce the IFRS 13: Fair value measurment transparency, rigorous impairment testing and additional risk of infringement or loss of a trademark in key disclosure will mean more scrutiny both internally and Tax and intangable assets: IPCO aspect categories and jurisdictions. IFRS 13 Fair Value Measurement applies to IFRSs that externally. The requirement of the acquiring company • Internal licenses should be used to clarify the rights and require or permit fair value measurements or disclosures having to explain at least a part of what was previously Other than M&A, strategic planning and ROI analysis, the responsibilities of the IPCo and operating units. The and provides a single IFRS framework for measuring fair considered as “goodwill” should help analysts to analyse rise in the importance of marketing intangibles can often adoption of consistent and coherent brand strategy, value and require disclosures about fair value deals more closely and gauge whether management have mean that there is a strong business case for setting up a marketing investment and brand control improves brand measurement. The Standard defines fair value on the basis paid a sensible price. The new standards will also have a central intellectual property (IP) holding company (IPCo). performance. of an ‘exit price’ notion and uses a ‘fair value hierarchy’, significant impact on the way companies plan their Locating and managing an IPCo from one central location, which results in a market based, rather than entity-specific, acquisitions. When considering an acquisition, to assess potentially in a low tax jurisdiction, makes a compelling This can have the following results: measurement. the impact on the consolidated group balance sheet and commercial case, particularly where a group is active in a profit and loss post-acquisition, a detailed analysis of all the number of different territories. • Accumulation of profits in a low tax jurisdiction. IFRS 13 was originally issued in May 2011 and applies to target company’s potential assets and liabilities is • Tax deductions in high tax jurisdictions. annual periods beginning on or after 1 January 2013. The recommended. The size and authority of the IPCo are variable and objective of IFRS 13 is to set out a single IFRS framework dependent on the requirements of the group in question. • Tax deductions for the amortisation of intangibles in IPCO. for measuring fair value. Companies need to pay close attention to the likely The benefits include greater IP protection and consistency classification and useful economic lives of the identifiable and improved resource allocation. It is important that • Depending on double tax treaties, the elimination or reduction of withholding taxes on income flows resulting IFRS 13 seeks to increase consistency and comparability in intangible assets in the target company’s business. This will genuine commercial drivers for the establishment of IPCo from the exploitation of the IP fair value measurements and related disclosures through a have a direct impact on the future earnings of the acquiring can be demonstrated. ‘fair value hierarchy’. The hierarchy categorises the inputs group. In addition to amortisation charges for intangible used in valuation techniques into three levels. The hierarchy assets with finite useful economic lives, impairment tests on deductions from 2011 onwards for investments in a broad The Singapore government has several IP friendly tax gives the highest priority to (unadjusted) quoted prices in assets with indefinite useful economic lives may lead to range of activities along the innovation value chain. These policies for IP rights holders to establish Singapore as an active markets for identical assets or liabilities and the one-off charges. This is particularly so if the acquired activities include R&D, registrations of IP rights, acquisition attractive country to manage their IP. lowest priority to unobservable inputs. [IFRS 13:72] business falls short of expectations post-acquisition. The of IP rights, and investment in Design. requirement for separate balance sheet recognition of There are a variety of IP tax incentives, deduction, benefits If the inputs used to measure fair value are categorised into intangible assets, together with impairment testing of those Examples of established IPCO’s by global companies and grants to encourage the creation, ownership, protection different levels of the fair value hierarchy, the fair value assets and also goodwill, is expected to result in an include: and exploitation of IP in Singapore. For instance: increase in the involvement of independent specialist measurement is categorised in its entirety in the level of the • Unilateral tax credit scheme is available for royalty income valuers in valuations and appropriate disclosure. lowest level input that is significant to the entire • BATMark (in UK, US, Switzerland & Netherlands) received in Singapore. measurement (based on the application of judgement). [IFRS 13:73] Impact on investors • Shell Brand International AG (Switzerland) • Single tax deduction for patent costs. • Société des Produits Nestlé (Switzerland) • Patent application fund (PAF) Plus, Initiatives in New • Level 1 inputs: Level 1 inputs are quoted prices in active The requirement for companies to attempt to identify what Technology (INTECH) and several IP grants. • Philip Morris Products SA (Switzerland) markets for identical assets or liabilities that the entity can intangible assets they are acquiring as part of a corporate • Automatic written down allowance for five years for the access at the measurement date. [IFRS 13:76] transaction may provide evidence as to whether a group • Marvel Characters, Inc (USA) capital expenditure incurred by a Singapore company in has overpaid in a deal. Subsequent impairment tests may acquiring any intellectual property rights for use in that • Level 2 inputs: Level 2 inputs are inputs other than also shed light on whether the price paid was a respectable Commercial benefits of centralIPC O’s include: trade or business. quoted market prices included within Level 1 that are one for the acquiring company’s shareholders. Regular

observable for the asset or liability, either directly or impairment testing is likely to result in a greater volatility in • Better resource allocation. • Reported in Singapore’s 2010 Budget, the Productivity indirectly. [IFRS 13:81] financial results. Significant one-off impairment charges and Innovation Credit will provide significant tax may indicate that a company has overpaid for an • Higher return on brand investment. • Level 3 inputs: Level 3 inputs are unobservable inputs for acquisition and have the potential to damage the credibility • Tax savings under certain circumstances. the asset or liability. [IFRS 13:86] of management in the eyes of the investment community. Analysts and investors are often sceptical about disclosed • Clarity of the strength, value and ownership of the IP will intangible assets. In the case of brand (and other intangible ensure that full value is gained from third party agreements. 26. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 27. Brand Finance Global 500.

Brand Finance Global 500.

revenue. Poor Q4 2017 sales of iPhone X at only 29 Top 10 Most Valuable Brands million handsets fell short of expectations, and the model is predicted to be discontinued later this year. Rank 2018: 1 2017: 3 With the advent of emerging world brands like Huawei, BV 2018: $150,811m 1 +42% Apple’s increasing focus on what are effectively luxury BV 2017: $106,396m products may cost the brand a fair share of the global Brand Rating: AAA- mass market, limiting the potential for brand value growth. Rank 2018: 2 2017: 2 BV 2018: $146,311m 2 +37% Google has dropped from 1st to 3rd position, recording a BV 2017: $107,141m relatively slow brand value growth of 10% to US$120.9 Brand Rating: AAA+ billion. Google’s online ads generated more traffic than expected as aggregated paid clicks rose by 47% in Q3 Rank 2018: 3 2017: 1 BV 2018: $120,911m 2017, boosting revenues. However, to compete with the 3 +10% BV 2017: $109,470m world’s most valuable brands, presenting a solid Brand Rating: AAA+ performance is not always enough. Google is a champion in internet search, cloud and mobile OS Rank 2018: 4 2017: 6 technology but, similarly to Apple, its focus on particular BV 2018: $92,289m 4 +39% sectors is holding it back from unleashing the full BV 2017: $66,218m potential of its brand. Google’s investments in self- Brand Rating: AAA+ driving cars and handsets still lack the scale and Amazon Claims Prime Spot The strength and value of the audacity demonstrated by Amazon’s new ventures. Rank 2018: 5 2017: 9 BV 2018: $89,684m 5 +45% Amazon brand gives it BV 2017: $61,998m Amazon is the world’s most valuable brand ahead of Brand Rating: AAA+ Apple and Google in the Brand Finance Global 500. The stakeholder permission to extend e-commerce giant’s brand value increased by 42% year relentlessly into new sectors and Brand Value Change 2017-2018 (%) Rank 2018: 6 2017: 4 on year to a whopping US$150.8 billion. geographies. All evidence 6 BV 2018: $82,422m -5% BV 2017: $87,016m Wuliangye 161% Since the brand’s humble beginnings as an online suggests that the amazing Brand Rating: AAA- UQ Communications 140% bookstore, Amazon has become the world’s largest Amazon brand is going to Haval 124% internet business by both market capitalisation and Rank 2018: 7 2017: 5 Evergrande 118% revenue. It is no longer just an online retailer, but also a continue growing indefinitely and 7 BV 2018: $81,163m YouTube 114% +6% provider of cloud infrastructure and a producer of BV 2017: $76,265m exponentially. Tesla 106% Brand Rating: AAA+ electronics. Now, it is moving beyond the digital space, Gree Electric Appliances 106% as last year’s takeover of Whole Foods for US$13.7 David Haigh NatWest 100% Rank 2018: 8 2017: 7 billion gave the brand a foothold in the realm of bricks CEO, Brand Finance Applied Materials 98% BV 2018: $62,826m and mortar. Amazon is also present in shipping, music 8 -5% Nvidia 97% BV 2017: $65,875m and video streaming, alongside industry speculation on -24% Hyundai Group Brand Rating: AAA- an impending bank acquisition in 2018. -24% Hilton -25% L’Oréal Rank 2018: 9 2017: 8 -27% Heinz BV 2018: $61,480m Apple and Google Left Behind 9 -1% -28% Lotte Group BV 2017: $62,211m -34% Poly Real Estate Brand Rating: AA+ nd Although Apple defended 2 place in the ranking, with -35% Sumitomo Group brand value rebounding to US$146.3 billion after the -36% ExxonMobil Rank 2018: 10 2017: 10 BV 2018: $59,189m 27% decline last year, its future looks bleak. Apple has -36% Under Armour 10 +24% failed to diversify and grown over-dependent on sales of -43% Toshiba BV 2017: $47,832m its flagship iPhones, responsible for two thirds of Brand Rating: AAA+

28. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 29. New International Standard on Brand Valuation.

New International Standard on Brand Valuation.

In 2007, the International Organisation for Standardisation It is a summary of existing best practice and intentionally The brand valuer must precisely determine the bundle of IA • Contribution of brand to the purchase decision - (‘ISO’), a worldwide federation of national standard setting avoids detailed methodological work steps and and IPR included in the definition of ‘brand’ subject to determining the monetary brand contribution in the bodies, set up a task force to draft an International Standard requirements. valuation. He may include names, terms, signs, symbols, geographical, product and customer segments under (‘IS’) on monetary brand valuation. logos, designs, domains or other related IPR intended to review. As such, ISO 10668 applies to all proprietary and non- identify goods and services and which create distinctive • Attitude of all stakeholder groups to the brand - to assess the After 4 years of discussion and deliberation ISO 10668 proprietary brand valuation approaches and methodologies images and associations in the minds of stakeholders, long-term demand for the brand, any risks to the branded – Monetary Brand Valuation – was released in 2010. This that have been developed over the years, so long as they generating economic benefits for the branded business. business and the appropriate cost of capital. sets out the principles, which should be adopted when follow the fundamental principles specified in the meta valuing any brand. standard. The brand valuer is required to assess the legal protection • All economic benefits conferred on the branded business afforded to the brand by identifying each of the legal rights by the brand - to assess the sustainability of future The new ISO applies to brand valuations commissioned for ISO 10668 specifies that when conducting a brand that protect it, the legal owner of each relevant legal right revenues and profits. all purposes, including: valuation the brand valuer must conduct 3 types of analysis and the legal parameters influencing negatively or positively The brand valuer needs to research brand value drivers, before passing an opinion on the brand’s value. the value of the brand. including an evaluation of relevant stakeholders’ • Accounting and financial reporting perceptions of the brand in comparison with competitor These are Legal, Behavioural and Financial analysis. All It is vital that the brand valuation includes an assessment of • Insolvency and liquidation brands. Measures commonly used to understand brand the legal protection afforded to the brand in each three types of analysis are required to arrive at a thorough strength include awareness, perceptual attributes, • Tax planning and compliance geographical jurisdiction and product or service registration brand valuation opinion. This requirement applies to knowledge, attitude and loyalty. The brand valuer needs to category. These legal rights vary between legal systems valuations of existing brands, new brands and extended assess the brand’s strength in order to estimate future sales • Litigation support and dispute resolution and need to be carefully considered when forming the brands. volumes, revenues and risks. • Corporate finance and fundraising brand valuation opinion. For example, the legal rights protecting brands exist at a national (UK), supra-national Module 1 - Legal analysis Module 3 - Financial analysis • Licensing and joint venture negotiation (EU) and global (WIPO) level and have different • Internal management information and reporting characteristics. The first requirement is to define what is meant by ‘brand’ The third requirement when valuing brands under ISO and which intangible assets should be included in the • Strategic planning and brand management 10668 is a thorough financial analysis. brand valuation opinion. Extensive due diligence and risk analysis is required in the Legal analysis module of an ISO 10668 compliant brand The last of these applications includes: valuation. It should be noted that the Legal analysis must be ISO 10668 specifies three alternative brand valuation ISO 10668 begins by defining Trademarks in conventional approaches - the Market, Cost and Income Approaches. terms but it also refers to other Intangible Assets (‘IA’) segmented by type of IPR, territory and business category. • Brand and marketing budget determination The purpose of the brand valuation, the premise or basis of including Intellectual Property Rights (‘IPR’) which are often value and the characteristics of the subject brand dictate The brand valuation opinion may be affected positively or • Brand portfolio review included in broader definitions of ‘brand’. which primary approach should be used to calculate its negatively by the distinctiveness, scope of use or • Brand architecture analysis value. International Financial Reporting Standard (‘IFRS’) specifies registration (territory and business category), extent of use, • Brand extension planning how all acquired assets should be defined, valued and notoriety of the brand, risk of cancellation, priority, dilution accounted for post-acquisition. It refers to five specific IA and the ability of the brand owner to enforce such legal Market approach Under ISO 10668 the brand valuer must declare the types, which can be separated from residual Goodwill rights. purpose of the valuation as this affects the premise or basis arising on acquisition. The market approach measures value by reference to what of value, the valuation assumptions used and the ultimate Module 2 - Behavioural analysis other purchasers in the market have paid for similar assets valuation opinion, all of which need to be transparent to a These are: technological, customer, contractual, artistic and to those being valued. The application of a market user of the final brand valuation report. marketing related IA. The second requirement when valuing brands under ISO approach results in an estimate of the price expected to be 10668 is a thorough behavioural analysis. The brand valuer realised if the brand were to be sold in the open market. Required work streams in an ISO ISO 10668 mirrors this classification by defining brands as must understand and form an opinion on likely stakeholder behaviour in each of the geographical, product and Data on the price paid for comparable brands is collected compliant brand valuation? marketing related IA, including trademarks and other associated IPR. customer segments in which the subject brand operates. and adjustments are made to compensate for differences between those brands and the brand under review. ISO 10668 is a ‘meta standard’ which succinctly specifies This refers inter alia to design rights, domain names, To do this, it is necessary to understand: the principles to be followed and the types of work to be As brands are unique and it is often hard to find relevant copyrights and other marketing related IA and IPR which may • Market size and trends - determined by conducting a conducted in any brand valuation. comparables, this is not a widely used approach. be included in a broader definition of ‘brand’. critical review of predicted trends in distribution channels, demographics, market volumes, values and margins.

30. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 31. New International Standard on Brand Valuation. New International Standard on Brand Valuation.

Cost approach Price and Volume premium methods Brand Valuation Approaches

The cost approach measures value by reference to the cost The Price Premium method estimates the value of a brand invested in creating, replacing or reproducing the brand. by reference to the price premium it commands over Market Approach Cost Approach Income Approach This approach is based on the premise that a prudent unbranded, weakly branded or generic products or Market Approach Cost Approach investor would not pay more for a brand than the cost to services. In practice it is often difficult to identify unbranded recreate, replace or reproduce an asset of similar utility. comparators. To identify the full impact on demand created by a brand, the Price Premium method is typically used in Based on an estimate of the price Based on the premise that a prudent Based on estimating the expected As the value of brands seldom equates to the costs conjunction with the Volume Premium method. Indirect or expected to be realised if the brand investor wouldDirect not Methods pay more for a future, after-tax cash flows attributable invested creating them (or hypothetically replacing or Residual Methods were to beMarket sold in Approach an open market. brand thanCost the cost Approac to recreate,h replace to the brandIncome then discountingApproach them to reproducing them), this is not a widely used approach. The Volume Premium method estimates the value of a or reproduce an asset of similar utility. a present value using an appropriate brand by reference to the volume premium that it generates. Royalty relief method discountIncome-split rate. method Income approach Additional cash flows generated through a volume premium are determined by reference to an analysis of relative market shares. The cash flow generated by an above Price Premium & Volume Multi-periodIndirect oexcessr The income approach measures value by reference to the PriceDirect Premium Methods & Volume Multi-period excess average brand is deemed to be the cash flow related to its Premium method Residualearnings Methodsmethod economic benefits expected to be received over the Premium method earnings method ‘excess’ market share. In determing the volume premiums, remaining useful economic life of the brand. This involves the valuer has to consider other factors which may explain a estimating the expected future, after-tax cash flows RoyaltyIncremental relief method cash Income-split method dominant market share, such as legislation which attributable to the brand then discounting them to a present flow method establishes a monopoly position for one brand. value using an appropriate discount rate. Price Premium & Volume Multi-period excess Combined, the Price Premium and Volume Premium Premium method earnings method As the value of brands stems from their ability to create methods provide a useful insight into the value a brand higher profits for either their existing or potential new adds to revenue drivers in the business model. Other owners, this is a widely accepted and utilised brand Incremental cash methods go further to explain the value impact of brands on valuation approach. When conducting a brand valuation flow method revenue and cost drivers. using the income approach, various methods are suggested by ISO 10668 to determine future cash flows. Multi-period excess earnings method Cash flows are generated through increased revenues and Income-split method reduced costs. This is a detailed and complex approach, Royalty relief method The multi-period excess earnings method is similar to the which tends not to be used in technical brand valuations The income-split method starts with net operating profits income-split method. In this case the brand valuer first but is extremely useful for strategic, commercial purposes This is the most widely used method used to determine and deducts a charge for total tangible capital employed in values each tangible and intangible asset employed in the such as when Virgin negotiates a new brand license with a brand cash flows. This method assumes that the brand is the branded business, to arrive at ‘economic profits’ branded business (other than the brand). He uses a variety new licensee. The incremental value added to the licensee’s not owned by the branded business but is licensed in from attributable to total intangible capital employed. Behavioural of valuation approaches and methods depending on what business form’s the starting point for the negotiation. a third party. The value is deemed to be the present value of analysis is then used to identify the percentage contribution is considered most appropriate to each specific asset. the royalty payments saved by virtue of owning the brand. of brand to these intangible economic profits. The same Discount rate determination analysis can be used to predict the percentage contribution Having arrived at the value of all other tangible and The royalty rate applied in the valuation is determined after of other intangible assets such as patents or technology. intangible assets employed in the branded business, a Under the income approach, risks that are not already an in-depth analysis of available data from licensing charge is then made against earnings for each of these arrangements for comparable brands and an appropriate The value of the brand is deemed to be the present value of assets, leaving residual earnings attributable to the brand reflected in future cash flows must be considered in the split of brand earnings between licensor and licensee, using the percentage of future intangible economic profits alone. The brand value is the present value of all residual discount rate. The discount rate used for discounting future behavioural and business analysis. The Royalty Relief attributable to the brand. earnings over the remaining economic life of the brand. expected cash flows attributable to a brand is usually method is used because it is grounded in commercial derived from the Weighted Average Cost of Capital (‘WACC’) of the business. reality and can be benchmarked against real world Incremental cash flow method transactions. The incremental cash flow method identifies all cash flows generated by the brand in a business, by comparison with comparable businesses with no such brand.

32. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 33. How Should Brands Value Existing Marks?

How should brands value existing marks?

ISO 10668 was developed to provide a consistent Rationalisation and extension was supported by Legal Dove was launched in the UK in the 1990s. In 2001, Dove If brands diversify, what challenges does this create for framework for the valuation of local, national and Analysis to establish the strength and extendibility of its made its first foray into antiperspirant deodorant lines. Hair trademark counsei? international brands both large and small. The primary brands. Extensive Behavioural Analysis was applied care products followed in 2003. Dove was launched in the concern was to create an approach to brand valuation throughout its portfolio and Financial Analysis was soap category but has always been positioned without Brand valuations following the ISO 10668 standard help to which was transparent, reconcilable and repeatable. In the conducted by a cadre of internal marketing finance referring to it as “soap”. It is always referred to as a “beauty alert management to all manners of opportunities and wake of the standard’s launch, it is expected that many analysts. bar” with 25% cleansing cream. Positioning the brand this threats. They consider the Legal ability of the brand to win way has allowed it to extend into antiperspirants, businesses will either value their brands for the first time or protection in new categories, the financial attractiveness of If any mistakes were made, it merely demonstrates that deodorants, body washes, beauty bars, lotions, extending into any new categories, the risks posed by new revalue them compliant with the standard. brand valuations are a mechanism for decision making moisturisers, hair care and facial care products globally. It is extensions and above all the Behavioural response of which are driven by data, analysis and assumptions that now a global brand with a variety of sub-brand ranges consumers to further brand extension. How should companies approach the question of brand may prove to be incorrect. The ISO standard insists that (Original, Go Fresh, Intensive Care, Supreme, Summer diversification versus entrenchment? sensitivity analysis showing a range of values, based on Care). Conclusion different assumptions, should be included in an opinion, not Common commercial applications of brand valuation are just a single value. To become a global brand, Dove needed wide appeal, A robust brand valuation can help avoid the fate which brand portfolio and brand architecture reviews. The first across cultural, racial and age boundaries. In 2004, it considers whether the right number of brands and sub- befell the Pierre Cardin brand, which was extended and A brand valuation is an opinion at a point in time. Brand therefore launched the Campaign for Real Beauty, which brands are in the portfolio. The second considers whether diluted to such an extent that over extension is now referred valuation models need to be updated and reviewed on a highlighted the brand’s commitment to broadening individual brands are too fragmented and extended. to as ‘Cardinisation’. regular basis, and management decisions need to change definitions of beauty. Dove launched the Self Esteem Fund in the light of changing conclusions flowing from them. in 2005, which acts as an agent of change to educate and A good example of both applications at work can be found inspire young girls on a wider definition of beauty. It aims to The role of trademark counsel in this process is vital. in Unilever’s ‘Path to Growth’ strategy. In 2000, Niall Brand valuation is a technique to support management, boost the self-confidence of young girls and women, • Firstly, to keep up with marketing management keen to Fitzgerald announced a plan to increase Unilever’s annual which is vital that the technique should be consistent, enabling them to reach their full potential in life. In 2007, extend and extend. revenue growth rate to 5-6% with margins of 16%. transparent and reproducible as required by ISO 10668. Dove also launched Pro*Age, a range of skin care, deodorant and hair care specifically designed for mature • Secondly, to advise whether and how brands and sub- To achieve this, Unilever’s 1600 brands were to be valued, brands can be registered. How do you value an existing brand, then extend the skin. reviewed and rationalised down to 400 power brands. The a analysis to measure The positive and negative impact of • Thirdly, providing advice on the cost efficiency of ever priori assumption was that many smaller, local brands were additional trademarks/brand extensions to the existing Dove’s apparently effortless success makes brand extending trademark protection; some global brands find sub-optimal and offered slower growth prospects than the business/marks? extension look easy. But the Unilever marketing team could that they have tens of thousands of trademarks which global brands. Within 2 years, 1200 under-performing local have stumbled at many points. They needed a clear and require huge financial and management support. and regional brands were sold or starved of investment to Dove is a good example of a Unilever brand, which was universally appealing brand proposition...simple, natural, Trademark counsel working within the brand valuation feed the growth of the 400 global power brands. prioritised in the ‘Path to Growth’ strategy. It has been caring, feminine, healthy, inclusive, multi-cultural, team help to answer the question of whether this is a extended into many product categories and each extension unpretentious, good value. They then needed a strong and value enhancing strategy. In many respects the Unilever policy made sense. For was rigorously valued. memorable brand name that could be registered and example, Dove has been turned into a global power brand defended in all likely product categories and geographical ISO 10668 will help integrate Trademark Counsel into a with diversification into many product lines and market multi-disciplinary brand management team. Trademark The Dove brand was launched in the US in 1955, as a jurisdictions. They needed defensible sub-brand names. segments, rapid volume growth, and revenues and profits Counsel will no longer be working in their own technical cleansing soap bar with moisturising properties, which had They needed a logo (a simply drawn dove), trade dress measured in billions of dollars. silo. been developed to treat burn victims during the Korean war. (predominantly white packaging), compelling copyright In 1957, the basic Dove soap bar formula was refined and (advertising and collateral) and they needed a compelling However, the strategy sacrificed many new or developing ISO 10668 is a major breakthrough, which will help further developed into the “Original Dove Beauty bar”. It was trade sales force and campaign. brands in countries like India because they could not be professionalise the business of brand management. launched as a beauty soap, clinically proven to be milder on turned into global brands quickly. Local brand owners dry and sensitive skins. In 1979, an independent clinical Having gone global in many SKUs, a valid question now enthusiastically bought the divested brands or exploited the dermatological study proved Dove “Beauty bar” was milder hangs over the Dove brand. Has it reached the limits of its gap created by starving local Unilever brands of investment. than 17 leading bar soaps. The phrase “cleansing cream” capacity to extend? There is a danger that if Dove is was replaced with “moisturiser cream” in its marketing extended any further into fragrance, personal care or In this case, internal brand valuation teams were used to materials. household products, its brand equity with consumers will evaluate and prioritise the brand portfolio. Unilever is a become diluted and confused. Its brand value may decline. leading edge company which follows best practices represented by ISO 10668.

34. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 35. Glossary of Terms.

Brand Enterprise Value

Trademarks and trademark licenses together with The combined market value of the equity and debt of a associated goodwill business less cash and cash equivalents

ßrandßeta® Fair Market Value (FMV) SingaporeSingapore MediaMedia AAwwararddss Brand Finance’s proprietary method for determining the The price at which a business or assets would change strength, risk and future potential of a brand relative to its hands between a willing buyer and a willing seller, neither of competitor set whom are under compulsion to buy or sell and both having reasonable knowledge of all relevant facts at the time 202011 88 Branded Business Holding Company The whole business trading under a particular brand or portfolio of brands, the associated goodwill and all the A company controlling management and operations in intangible elements at work within the business another company or group of other companies

CallingCalling AllAll Brands!Brands! Brand Rating Intangible Asset Have you ever wondered... “How do our brands compare?” A summary opinion, similar to a credit rating, on a brand An identifiable non-monetary asset without physical based on its strength as measured by Brand Finance’s substance “What is my brand worth?” ‘Brand Strength Index’ “What return am I gettting on my marketing budget?” Net Present Value (NPV) Brand Value “What is the optimal brand strategy?” The present value of an asset’s net cash flows (minus any Get your answers by participating in the Brand Awards! The net present value of the estimated future cash flows initial investment) attributable to the brand (see Methodology section for more detail) Tangible Value

Discounted Cash Flow (DCF) The fair market value of the monetary and physical assets of a business A method of evaluating an asset value by estimating future cash flows and taking into consideration the time value of Weighted Average Cost of Capital (WACC) money and risk attributed to the future cash flows EnterEnter Now!Now! An average representing the expected return on all of a (Please refer to pages 31 to 40 of our Entry Kit) Discount Rate company’s securities. Each source of capital, such as stocks, bonds, and other debts, is assigned a required rate FOR ENQUIRIES The interest rate used in discounting future cash flows of return, and then these required rates of return are Jenny +65 9848-7979 OR Wainee +65 9271-5497 weighted in proportion to the share each source of capital contributes to the company’s capital structure SMA IS GOING DIGITAL! FOR MORE DETAILS, VISIT www.sma.com.sg

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36. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 37.

GOLD SPONSOR BRAND AWARDS PARTNER CREATIVE PARTNER DIGITAL AGENCY EVENTS PRODUCTION OFFICIAL JUDGING PLATFORM Consulting Services. Brand Value Report.

A Brand Value Report provides a complete Each report includes expert recommendations for growing 1. Valuation: What are my intangible 2. Analytics: How can I improve breakdown of the assumptions, data sources, and brand value to drive business performance and offers a assets worth? marketing effectiveness? calculations used to arrive at your brand’s value. cost-effective way to gaining a better understanding of your position against competitors. Valuations may be conducted for technical Analytical services help to uncover drivers purposes and to set a baseline against of demand and insights. Identifying the which potential strategic brand factors which drive consumer behaviour scenarios can be evaluated. allows an understanding of how brands What is a Brand Value Report? What are the benefits of a Brand N 2. IO AN create bottom-line impact. Value Report? + Branded Business Valuation T A Brand Valuation Summary A L + Trademark Valuation U Y Market Research Analytics + L T + Internal understanding of brand + Intangible Asset Valuation A I Return on Marketing Investment + V C + Brand value tracking + Brand Contribution . S Brand Audits + Insight 1 + Competitor benchmarking Brand Scorecard Tracking + Provide insight as to how the brand is + Historical brand value Brand & performing vs. key competitors on

Business Value underlying measures and drivers of

S Brand Strength Index

4. Transactions: N 3. Strategy: How can brand value and brand strength. 3

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O + Brand strength tracking

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Is it a good deal? S I increase the value of T

T + Brand strength analysis C

R Strategy

Can I leverage my A my branded business?

A + Management KPIs S

T

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E Understand where brand value is being

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intangible assets? A Strategic marketing services enable + Competitor benchmarking R Y

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. 4 generated by region and channel in Transaction services help buyers, brands to be leveraged to grow order to identify areas of opportunity sellers, and owners of branded businesses businesses. Scenario modelling will Royalty Rates identify the best opportunities, ensuring that warrant further investigation. get a better deal by leveraging the value of + Transfer pricing resources are allocated to those activities which their intangibles. + Licensing/franchising negotiation have the most impact on brand and business value. Benchmarking + M&A Due Diligence + International licensing Track year-on-year changes to brand + Franchising & Licensing Brand Governance + + Competitor benchmarking + Tax & Transfer Pricing Brand Architecture & Portfolio Management + value and set long-term objectives Brand Transition + against which high-level brand + Expert Witness Cost of Capital Brand Positioning & Extension + performance can be benchmarked. + Independent view of cost of capital for internal valuations and project appraisal exercises Education Provide a platform of understanding Customer Research which the company can use to educate + Utilities employees on the importance of the + Insurance brand. MARKETING FINANCE TAX LEGAL + Banks + Telecoms Communication We help marketers to We provide financiers and We help brand owners We help clients to enforce Communicate your brand’s success to connect their brands to auditors with an and fiscal authorities to and exploit their shareholders, customers, and other For more information regarding our Brand Value business performance by independent assessment understand the intellectual property rights strategically selected audiences. evaluating the return on on all forms of brand and implications of different by providing independent Reports, please contact: investment (ROI) of intangible asset tax, transfer pricing, and expert advice in- and Understanding brand-based decisions valuations. brand ownership outside of the courtroom. Samir Dixit and strategies. arrangements. Understand and appreciate the value of Managing Director, Brand Finance Asia Pacific your brand as an asset of the business. [email protected]

38. Brand Finance Singapore 100 August 2018 Brand Finance Singapore 100 August 2018 39. CommunicationsCommunications Services. Services.

We offer a variety of services to help communicate your brand’s success.

CEO Quote Social Media Supply a quote in Coordinate with your recognition of your social media activity brand’s performance to communicate your for you to use in brand’s success more external and internal effectively. communications. Awards Press Release Produce an accolade Assist with the creation plaque and hand-written of a press release certificates, personally communicating your signed by our CEO, to brand’s success. recognise your brand’s performance.

Advertising Allow full use of the Your Brand Value Brand Finance logo on Explain and discuss your your ad designs and brand’s performance in How we can help create a bespoke digital more depth. endorsement stamp for your website and investor relations use.

Strongest Global Brand 2018 Your Brand

Example digital endorsement stamp for use on your website as well as in investor relations and advertising, to recognise your brand’s performance.

40. Brand Finance Singapore 100 August 2018 Brand Finance Global 500 February 2018 29. Brand Finance Singapore 100 August 2018 41. Contact details.

For enquiries, For further information on Brand Finance®’s services and valuation experience, please contact: please contact your local representative:

Country Contact Email Address Samir Dixit Asia Pacific Samir Dixit [email protected] +65 906 98 651 Managing Director Australia Mark Crowe [email protected] +61 282 498 320 Brand Finance Asia Pacific Canada Charles Scarlett-Smith [email protected] +1 647 3437 266 Caribbean Nigel Cooper [email protected] +1 876 8256 598 [email protected] China Scott Chen [email protected] +86 1860 118 8821 +65 6727 8383 East Africa Jawad Jaffer [email protected] +254 204 440 053 Germany Holger Mühlbauer [email protected] +49 1515 474 9834 India Savio D’Souza [email protected] +44 207 389 9400 Indonesia Jimmy Halim [email protected] +62 215 3678 064 Ireland Simon Haigh [email protected] +353 087 6695 881 Bernard Lee Italy Massimo Pizzo [email protected] +39 230 312 5105 Senior Manager Japan Jun Tanaka [email protected] +8190 7116 1881 Brand Finance Asia Pacific Mexico & LatAm Laurence Newell [email protected] +52 1559 197 1925 Middle East Andrew Campbell [email protected] +971 508 113 341 [email protected] Nigeria Babatunde Odumeru [email protected] +234 012 911 988 +65 6727 8388 Romania Mihai Bogdan [email protected] +40 728 702 705 Spain Teresa de Lemus [email protected] +34 654 481 043 South Africa Jeremy Sampson [email protected] +27 828 857 300 Sri Lanka Ruchi Gunewardene [email protected] +94 114 941 670 linkedin.com/ Turkey Muhterem Ilgüner [email protected] +90 216 3526 729 UK Richard Haigh [email protected] +44 207 389 9400 company/brand- USA Laurence Newell [email protected] +1 917 794 3249 finance Vietnam Lai Tien Manh [email protected] +84 473 004 468

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42. Brand Finance Singapore 100 August 2018 Contact us.

The World’s Leading Independent Valuation and Strategy Consultancy T: +65 6727 8388 E: [email protected] www.brandfinance.com