06 December 2013 Asia Pacific/Philippines Equity Research Restaurants

Jollibee Foods Corporation

(JFC.PS / JFC PM) Rating OUTPERFORM* Price (05 Dec 13, P) 174.00 INITIATION

Target price (P) 205.00¹ Upside/downside (%) 17.8 Mkt cap (P mn) 183,112 (US$ 4,175) Great fast food comes at a price Enterprise value (P mn) 179,459 Number of shares (mn) 1,052.37 ■ Initiating coverage with OUTPERFORM and 20% total return potential Free float (%) 40.9 upside. Rather than drawing the obvious conclusion that Jollibee is 52-week price range 185.0 - 102.0 overvalued (history has proven this to be a questionable stance), our thesis ADTO - 6M (US$ mn) 2.6 is that ~20% EPS growth, positive surprise potential, higher returns, 40%+ *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. FCF growth and higher cash distributions to shareholders cannot be ¹Target price is for 12 months. underestimated. Jollibee is an immensely relevant consumer company

Research Analysts where 11% of the Philippine population visits one of the company’s outlets Karim P. Salamatian, CFA every single week. 852 2101 7996 ■ Three pillars to defining a superior consumer franchise. Empirical data [email protected] supports that consistent EPS growth, high and rising excess returns, and Rebecca Kwee financial prowess are the key criteria that determine whether consumer 852 2101 7951 [email protected] companies can trade at PEG ratios of 2.0-2.5x. Jollibee has among the best earnings growth track records, the highest and fastest rising excess returns and one of the best balance sheets and FCF generation profiles of NJA consumer companies. ■ Home is the foundation, abroad is the catalyst. The Philippines is our most preferred consumer market for 2014 because consumption growth can sustain at 1.5-2.0x higher than historical trends. We believe 80% of Jollibee’s sales growth will come from the Philippines over the next three years. By deploying excess capital behind ROIC-accretive expansion both home and abroad, the value of their existing franchise should rise by 16% annually. In addition, we believe there is >50% probability that the company enters Indonesia, which would be incremental to earnings and is not factored into today’s share price. ■ Upside driven by earnings growth. We have a high degree of confidence in our above-consensus EPS forecasts and that this will drive share price gains from here. Our P205 target price assumes flat multiples. Downside risks include macroeconomic, forex, acquisition and natural disaster risks.

Share price performance Financial and valuation metrics

Year 12/12A 12/13E 12/14E 12/15E Price (LHS) Rebased Rel (RHS) Revenue (P mn) 71,059.0 80,688.9 91,710.7 104,100.4 160 180 EBITDA (P mn) 7,052.1 8,512.7 9,943.8 11,673.9 140 EBIT (P mn) 4,346.5 5,505.6 6,595.1 8,234.7 130 120 Net profit (P mn) 3,728.2 4,601.0 5,439.0 6,723.5 100 EPS (CS adj.) (P) 3.51 4.34 5.13 6.34 80 80 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Change from previous EPS (%) n.a. Consensus EPS (P) n.a. 4.31 5.03 5.90 The price relative chart measures performance against the EPS growth (%) 13.5 23.4 18.2 23.6 PHILIPPINE SE COMPOSITE INDEX which closed at 6030.95 P/E (x) 49.5 40.1 33.9 27.5 on 05/12/13 On 05/12/13 the spot exchange rate was P43.86/US$1 Dividend yield (%) 1.3 1.4 1.8 2.3 EV/EBITDA (x) 25.5 21.1 18.0 15.0 Performance Over 1M 3M 12M P/B (x) 9.8 8.8 8.0 7.2 Absolute (%) -2.0 5.8 64.2 ROE (%) 20.5 23.2 24.8 27.6

Relative (%) 5.5 4.8 58.1

Net debt/equity (%) net cash net cash net cash net cash Source: Company data, Thomson Reuters, Credit Suisse estimates. DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683 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.

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06 December 2013 Focus charts

Figure 1: JFC has exposure to strong domestic trends Figure 2: Growth will primarily be driven by extracting and high-potential NJA markets greater profitability from existing assets … 2013E system-wide sales breakdown by country and major format 2013E-16E breakdown of EPS growth (% YoY) China 13% SSSG Store growth EBITDA Margin Expansion USA 3.5% 24% 24% Yonghe ASEAN & Other King Middle East 10% Mang 10% 2.5% 18% 18% Inasal Other 55% 9% 9% 67% Chowking 41% 45% 13% 15% Jollibee 49% 11% 13% Philippines 7% 81% 44% 34% 42% 26%

2013E system-wide sales P104bn FY13E FY14E FY15E FY16E

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

Figure 3: … as EBITDA per store is expected to rise Figure 4: This in turn should extend the impressive streak JFC 2012-16E EBITDA/avg. store (P mn) of consistent earnings growth … Quarterly EPS growth, % YoY 2012-2016E CAGR: 11% 4.2 90% 3.9 3.5 70% 3.1 2.8 50%

30%

10%

-10%

-30%

FY11 FY12 FY13E FY14E FY15E

4Q06 1Q03 4Q03 3Q04 2Q05 1Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 3Q13 2Q02 Source: Company data, Credit Suisse estimates Source: Company data

Figure 5: … and push excess return expansion higher Figure 6: All while generating free cash flow and JFC 2012-15E ROIC and excess (ROIC- WACC) return maintaining strong balance sheet optionality JCF FCF per share and YoY growth (2012-16E) ROIC Excess Return (ROIC-WACC) Free cash flow per share (PHP) YoY% growth (RHS) 21.3% 10.00 140% 18.8% 8.63 17.1% 9.00 120% 8.00 7.60 14.8% 100% 13.1% 7.00 80%

6.00 10.6% 60%

5.00 8.9% 3.99 40% 4.00 3.32 6.6% 2.73 3.00 20%

2.00 0%

1.00 -20%

0.00 -40% FY12 FY13E FY14E FY15E FY16E 2012 2013E 2014E 2015E

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

Jollibee Foods Corporation (JFC.PS / JFC PM) 2 06 December 2013 Great fast food comes at a price Jollibee is the largest foodservice operator in NJA by market capitalisation and sales with Jollibee is the largest 2,800 outlets (48% franchised) in ten different formats/concepts. Around 81% of system- foodservice operator in NJA wide sales come from the Philippines while the balance from nine other markets including with 2,800 stores across ten China, Vietnam, US, Hong Kong, Singapore and the Middle East. Jollibee’s strength can markets be defined by the fact that it is one of the most relevant consumer stories among NJA— Jollibee serves 11% of the Philippine population every single week. At first glance, it is easy to overlook Jollibee shares because of the valuation; however, we Don’t underestimate how believe doing so poses considerable Type II risk even at current levels. We do not the fundamentals can recommend underestimating Jollibee’s ability to deliver ~20% EPS growth, positive sustain the valuation surprises, rising returns and higher cash distributions to shareholders. Defining Jollibee’s consumer franchise Strong consumer franchises that can sustain large premium valuations have three things Jollibee has delivered EPS in common: (1) Consistent and visible earnings growth over long periods of time. Over the growth in 40 of the last 48 last 48 quarters, Jollibee has delivered positive YoY EPS growth 40 times at an average quarters, has high and rising rate of 15% YoY. Seventeen times in the past 21 years Jollibee has posted positive excess returns and a very earnings growth. Empirically, when large consumer companies generate consistent growth strong balance sheet over five years or more, PEG ratios average 2.5x. (2) High and rising excess returns over cost of capital. There is high correlation between valuations (EV/EBITDA and P/E) and excess returns (ROIC less WACC). Jollibee generates among the highest excess returns of its domestic consumer and NJA foodservice peers. On top of this, Jollibee is expected to increase its excess returns at a much faster rate over the next three years. (3) Financial prowess—cash to return to shareholders and/or pursue new growth. Jollibee has maintained a net cash position despite increasing its total assets and store count by 41% and 60%, respectively, since 2009. Its FCF is expected to grow 2x faster than earnings over the next three years. Maximising returns from existing formats With a total invested capital base of US$650 mn, the strongest driver of growth will come Growth will primarily come from existing assets, in our view. Over the next four years, we believe the company can from harvesting existing harvest its existing asset base better by increasing productivity at the Jollibee format in assets both the Philippines and international markets, building on the recent momentum in China and turning Vietnam profitable. We conservatively expect EBITDA/store to increase 11% annually. This is in addition to 5% annual growth in existing formats. Capitalising on the best growth markets The Philippines is our most preferred consumer market heading into 2014 because Private Exposed to the most Consumption Expenditure (PCE) is expected to accelerate 90 bp from an already high attractive markets with base in 2013 and average nearly 2x the historical rate in 2014 and 2015. Furthermore, it possibility of entering has the third lowest penetration of QSRs (Quick Service Restaurants) in NJA after Indonesia in 2014 or 2015 Indonesia and India. We believe 80% of Jollibee’s growth over the next four years will come from the domestic market. International sales growth should be fuelled by China and Vietnam where penetration and per capita spending at QSR are attractively low. Indonesia is the most interesting market that Jollibee does not operate in, and we believe the company could positively surprise the market by entering this country in the next two years. Don’t be deterred by valuation Our key point on valuation is to not let it be immediately off-putting because consumer TP assumes multiples will franchises such as Jollibee often sustain levels this high for considerably long times or at be sustained by strong least until the earnings growth streak comes to an end. Jollibee is on a five-year EPS growth fundamental performance streak that is not expected to end anytime soon. Therefore, our TP of P205 implies flat multiples. If growth accelerates from stronger trends in the Philippines and/or China, plus a sensible acquisition in Indonesia, multiple expansion would not be completely unfathomable. Downside risks include macroeconomic, forex, acquisition and natural disaster risks.

Jollibee Foods Corporation (JFC.PS / JFC PM) 3 06 December 2013

Jollibee Foods Corporation JFC.PS / JFC PM Price (05 Dec 13): P174.00, Rating: OUTPERFORM, Target Price: P205.00, Analyst: Karim Salamatian Target price scenario Key earnings drivers 12/12A 12/13E 12/14E 12/15E Scenario TP %Up/Dwn Assumptions Number of stores 2,628 2,778 2,931 3,084 20% sales growth p.a., 5% multiple System-wide sales growth 12.3 13.1 13.6 13.3 Upside 255.00 46.55 expansion Opex as % of sales 11.7 11.5 11.5 11.4 Central case 205.00 17.82 13% sales growth p.a., flat multiples — — — —

5% sales growth p.a., 5% multiple — — — — Downside 145.00 (16.67) contraction

Income statement (P mn) 12/12A 12/13E 12/14E 12/15E Per share data 12/12A 12/13E 12/14E 12/15E Sales revenue 71,059 80,689 91,711 104,100 Shares (wtd avg.) (mn) 1,061 1,061 1,061 1,061 Cost of goods sold 58,434 65,901 74,563 83,982 EPS (Credit Suisse) (P) 3.51 4.34 5.13 6.34 SG&A — — — — DPS (P) 2.18 2.50 3.09 3.92 Other operating exp./(inc.) 5,573 6,276 7,204 8,445 BVPS (P) 17.8 19.7 21.8 24.3 EBITDA 7,052 8,513 9,944 11,674 Operating CFPS (P) 7.2 7.3 8.3 9.9 Depreciation and amortisation 2,706 3,007 3,349 3,439 Key ratios and 12/12A 12/13E 12/14E 12/15E EBIT 4,346 5,506 6,595 8,235 valuation Net interest expense/(inc.) (64.1) (128.8) (107.5) (156.5) Growth (%) Non-operating inc./(exp.) 503.5 500.0 500.0 500.0 Sales revenue 13.6 13.6 13.7 13.5 Associates/JV (51.0) (50.0) (10.0) — EBIT 11.4 26.7 19.8 24.9 Recurring PBT 4,863 6,084 7,193 8,891 Net profit 15.4 23.4 18.2 23.6 Exceptionals/extraordinaries — — — — EPS 13.5 23.4 18.2 23.6 Taxes 1,150 1,460 1,726 2,134 Margins (%) Profit after tax 3,713 4,624 5,466 6,757 EBITDA 9.9 10.6 10.8 11.2 Other after tax income — — — — EBIT 6.12 6.82 7.19 7.91 Minority interests (15.1) 23.1 27.3 33.8 Pre-tax profit 6.84 7.54 7.84 8.54 Preferred dividends — — — — Net profit 5.25 5.70 5.93 6.46 Reported net profit 3,728 4,601 5,439 6,724 Valuation metrics (x) Analyst adjustments — — — — P/E 49.5 40.1 33.9 27.5 Net profit (Credit Suisse) 3,728 4,601 5,439 6,724 P/B 9.8 8.8 8.0 7.2 Cash flow (P mn) 12/12A 12/13E 12/14E 12/15E Dividend yield (%) 1.25 1.44 1.78 2.25 EBIT 4,346 5,506 6,595 8,235 P/CF 24.3 23.8 20.9 17.6 Net interest (35.4) 128.8 107.5 156.5 EV/sales 2.53 2.22 1.95 1.68 Tax paid (1,363) (1,460) (1,726) (2,134) EV/EBITDA 25.5 21.1 18.0 15.0 Working capital 1,292 536 478 775 EV/EBIT 41.3 32.6 27.2 21.3 Other cash and non-cash items 3,351 3,057 3,359 3,439 ROE analysis (%) Operating cash flow 7,591 7,767 8,813 10,472 ROE 20.5 23.2 24.8 27.6 Capex (3,756) (5,376) (5,848) (3,048) ROIC 17.6 21.6 23.6 28.9 Free cash flow to the firm 3,835 2,391 2,965 7,424 Asset turnover (x) 1.69 1.81 1.94 2.21 Disposals of fixed assets — — — — Interest burden (x) 1.12 1.11 1.09 1.08 Acquisitions (127.6) — — — Tax burden (x) 0.76 0.76 0.76 0.76 Divestments 41.8 — — — Financial leverage (x) 1.92 1.86 1.81 1.64 Associate investments — — — — Credit ratios Other investment/(outflows) (42.0) — — — Net debt/equity (%) (15.6) (15.3) (14.9) (26.8) Investing cash flow (3,884) (5,376) (5,848) (3,048) Net debt/EBITDA (x) (0.49) (0.43) (0.39) (0.66) Equity raised — — — — Interest cover (x) (67.8) (42.7) (61.3) (52.6) Dividends paid (2,274) (2,610) (3,221) (4,079) Net borrowings 72 (232) (235) (3,844) Source: Company data, Thomson Reuters, Credit Suisse estimates. Other financing cash flow 33.4 (225.1) (246.4) (197.5) Financing cash flow (2,169) (3,067) (3,702) (8,121) 12MF P/E multiple Total cash flow 1,538 (675) (736) (697) 20 Adjustments 8.0 — — — 18 Net change in cash 1,546 (675) (736) (697) 16 Balance sheet (P mn) 12/12A 12/13E 12/14E 12/15E 14 Cash and cash equivalents 8,849 8,849 8,849 8,849 12 Current receivables 2,750 2,690 2,620 2,603 10 Inventories 2,630 2,929 3,242 3,574 8 6 Other current assets 1,395 1,395 1,395 1,395 4 Current assets 15,623 15,862 16,105 16,419 2 Property, plant & equip. 11,059 13,428 15,928 15,536 0 Investments 3,894 3,844 3,834 3,834 2006 2007 2008 2009 2010 2011 Intangibles 8,705 8,705 8,705 8,705 Other non-current assets 2,709 2,709 2,709 2,709 Total assets 41,991 44,548 47,281 47,204 12MF P/B multiple Accounts payable 4,717 5,492 6,214 7,303 Short-term debt 4,573 4,341 4,106 262 3.0 Current provisions — — — — 2.5 Other current liabilities 7,281 7,281 7,281 7,281 Current liabilities 16,571 17,114 17,601 14,846 2.0 Long-term debt 854.6 854.6 854.6 854.6 1.5 Non-current provisions — — — — Other non-current liab. 2,672 2,672 2,672 2,672 1.0 Total liabilities 20,097 20,640 21,128 18,372 0.5 Shareholders' equity 18,872 20,864 23,082 25,726 Minority interests 733.1 756.2 783.6 817.3 0.0 Total liabilities and equity 41,991 44,548 47,281 47,204 2006 2007 2008 2009 2010 2011

Source: IBES

Jollibee Foods Corporation (JFC.PS / JFC PM) 4

(JFC.PS / JFCPM) JollibeeFoods Corporation Figure 7: Jollibee vs global foodservice sector valuations Absolute Relative NetDebt/ Market Avg Performance Performance EPS growth P/E EV/EBITDA EBITDA margin DvD Yld ROE P/BV FCF Yld ROIC Equity daily priced as of Dec 5 2013 Ticker Upside cap t/o (%) (%) (%) (x) (x) (%) (%) (%) (x) (%) (%) (%) (%) (USDm) YTD 12m YTD 12m T+1 T+2 T+3 T+1 T+2 T+3 T+1 T+2 T+1 T+2 T+1 Non-Japan Asia Foodservice Jollibee Foods Corporation JFC.PS 18 4,175 2.6 71 58 67 54 23 18 24 40.1 33.9 27.5 14.2%* 13.9%* 10.6 10.8 1.4 22.1 8.8 1.3 17.1 (15.3)

Cafe De Coral 0341.HK n.a. 1,898 1.3 16 13 12 7 14 13 16 27.0 24.0 20.6 14.2 12.0 14.1 14.5 3.5 16.0 4.1 n.a. n.a. n.a. Jubilant Foodworks JUBI.BO (32) 1,404 5.8 1 (1) (6) (9) 10 28 24 57.9 45.3 36.5 29.9 23.4 16.1 16.3 0.0 25.6 14.8 0.1 24.7 (5.8) Ajisen 0538.HK 51 1,054 2.5 1 6 (3) (1) 83 22 18 28.6 23.3 19.8 13.5 10.8 15.2 16.8 1.2 8.9 2.5 5.1 8.3 (57.8) Tsui Wah Holding 1314.HK 20 963 2.1 114 n/a 110 n/a 10 32 62 47.0 35.7 21.9 35.9 26.4 16.8 16.2 0.9 12.5 5.9 1.4 13.2 (88.3) NJA Average 41 19 36 13 28 23 29 40.1 32.5 25.3 23.4 18.1 14.5 14.9 1.4 17.0 7.2 2.0 15.8 (41.8)

International Foodservice McDonald's Corp MCD.N n.a. 95,234 119.2 9 7 (17) (19) 4 7 10 17.2 16.1 14.7 10.5 10.0 36.3 36.2 3.3 35.9 6.1 4.4 n.a. n.a. Yum! Brands, Inc. YUM.N n.a. 33,694 48.1 14 14 (12) (12) (10) 24 17 26.0 21.0 18.0 14.1 12.0 20.2 20.9 1.8 60.4 15.3 3.7 n.a. n.a. Chipotle Mexican CMG.N n.a. 16,033 27.2 74 90 48 63 20 24 23 49.5 40.0 32.6 21.5 17.4 19.8 20.8 0.0 27.1 10.7 1.6 n.a. n.a. Dominos Pizza DPZ n.a. 3,828 44.7 58 64 32 38 21 15 15 28.2 24.5 21.4 15.3 13.8 19.1 19.7 1.2 (10.8) (3.0) 2.9 n.a. n.a. The Wendy's Company WEN.OQ n.a. 3,345 8.5 82 80 56 53 48 17 19 34.0 29.1 24.4 11.3 10.8 14.6 17.9 1.8 4.0 1.7 1.9 n.a. n.a. International Average 47 51 22 25 16 17 17 31.0 26.2 22.2 14.5 12.8 22.0 23.1 1.6 23.3 6.1 2.9 n.a. n.a.

Philippines Consumer Alliance Global Group Inc AGI.PS 25 5,690 8.3 45 50 41 45 14 21 18 15.4 12.8 10.8 7.7 6.3 27.4 27.9 1.6 14.9 2.2 2.7 10.1 (7.9) Universal Robina Corp. URC.PS 22 5,599 7.5 42 48 38 43 19 14 16 27.1 23.7 20.4 18.3 15.6 16.9 17.5 2.0 18.1 4.9 2.2 17.9 (15.5) Puregold Price Club, Inc PGOLD.PS n.a. 2,624 3.6 26 28 22 23 27 26 16 29.4 23.3 20.0 15.9 12.6 8.5 8.9 0.6 13.6 3.7 n.a. 24.0 n.a. Philippines Average 38 42 34 37 20 20 17 24.0 19.9 17.1 14.0 11.5 17.6 18.1 1.4 15.5 3.6 2.5 17.3 (11.7) *comparable gross margin: adjusted COGS (only incl. cost of inventories) and excluding commisary sales to franchises

06 December2013

Source: Company data, IBES, Credit Suisse estimates for covered companies

5

06 December 2013 Defining Jollibee’s consumer franchise At first glance, it is easy to overlook Jollibee shares because of the valuation; however, we Consistent EPS growth, believe doing this poses considerable Type II risk even at current levels because high and rising excess underestimating strong consumer franchises based solely on valuation often leads to high returns and strong financial opportunity costs. position underpin premium valuations of strong The three most important characteristics of a strong consumer franchise are: consumer franchises (1) Consistent and visible earnings growth over long periods of time; (2) high and rising excess returns over cost of capital; (3) Financial prowess – strong balance sheet with cash to return to shareholders and purse new growth opportunities. In the case of Jollibee, its superior consumer franchise in absolute terms and relative to both the Philippines and NJA foodservice peers is what we believe will sustain the current valuation multiple in coming years. As a result, we believe the risk of material multiple contraction is low. Our TP of P205 assumes valuation multiples remain constant over the next 12 months. TP of P205 assumes flat multiples Best-in-class earnings growth consistency For 12 straight years, Jollibee has delivered average quarterly YoY EBITDA, net income Jollibee has increased EPS and EPS growth of 12%, 16% and 15%, respectively. In only 8 of the past 48 quarters was in 40 of the last 48 YoY EPS growth negative. Delivering positive earnings growth 83% of the time is quarters… consistency that is difficult, if not impossible, to replicate in the NJA consumer space. Quarterly EPS growth has been positive for nine consecutive quarters and has averaged 18% YoY. Consumer franchises that can deliver the type of earnings consistency that Jollibee has can sustain PEG ratios of ~2x.

Figure 8: Jollibee’s earnings growth consistency is irreplaceable in NJA consumer

100% EBITDA Growth YoY EPS Growth YoY 80%

60%

40%

20%

0%

-20%

4Q06 2Q09 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 2Q07 4Q07 2Q08 4Q08 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13

-40%

-60%

-80% Source: Company data Jollibee has posted more than two decades of consistent annual EPS growth. In the past … and in 17 of the last 21 21 years, Jollibee has only reported YoY decline in EPS on four occasions (1997, 1999, years 2001 and 2008).

Jollibee Foods Corporation (JFC.PS / JFC PM) 6 06 December 2013

EPS growth has been positive for four consecutive years and we expect this to expand to Forecast 21% EPS CAGR eight years with 23% EPS growth in 2013 and then 20% CAGR over the next three years. over 2012–16E Annual EBITDA growth over the next three years is expected to be 16%. While forward EPS growth should be lower than in 2013, it is materially ahead of historical EPS growth. Historical precedents of the importance earnings growth consistency has on valuation To demonstrate how important strong consumer franchises that can deliver consistent Empirical data shows that growth is for valuation, we combed the developed market universe for large-scale strong consumer franchises consumer companies that delivered quarterly YoY EPS growth for at least five years and can trade at >2x PEG when found eight notable examples. Interestingly, during this period the average PEG ratio earnings growth is these companies traded at was 2.4x. consistent over five years

Figure 9: Consumer franchises that deliver 5 years (or more) of consistent EPS growth command PEG ratios >2x Current Current PE Relative to Company Period of >5yr EPS Growth Avg. PEG Avg. PE 2014E PE Overall Market Nestle 3Q2003 - 2Q2009 3.3x 19.3x 17.8x 1.19x Starbucks 3Q1997 - 1Q2008 2.7x 61.9x 30.0x 2.01x McDonald's Corp 1Q1993 - 3Q1997 2.6x 20.8x 16.1x 1.08x Wal-Mart Stores, Inc. 1Q1997 - 3Q2009 2.5x 28.2x 15.5x 1.04x PepsiCo, Inc. 4Q1999 - 1Q2009 2.5x 24.2x 17.6x 1.18x Procter & Gamble Co. 1Q1995 - 2Q2000, 2Q2001 - 1Q2006 2.2x 25.2x 19.4x 1.31x Yum! Brands, Inc. 3Q2001 - 4Q2012 2.1x 18.3x 21.0x 1.41x ITC Ltd 4Q2005 and counting … 1.4x 28.5x 28.8x 1.85x Nestle India 2Q2006 and counting… 4.2x 38.5x 33.8x 2.41x Chipotle Mexican 1Q2009 and counting … 1.8x 37.6x 40.0x 2.68x Colgate-Palmolive India 1Q2003 - 3Q2011 1.1x 25.5x 33.3x 2.38x Average 2.4x 29.8x 24.8x 1.69x

Jollibee Foods 2H08 and counting … 3.7x 23.7x 33.9x 1.82x Source: Company data, Credit Suisse estimates *Priced as of Dec 5 2013 It is interesting to see from Figure 9 that the three companies still in the midst of a five- JFC, ITC, NEST and CMG year (or more) trend of consistent earnings growth trade at multiples today that are higher are still in the midst of their than the historical average. For Jollibee, ITC Ltd (ITC.BO, Rs313.25, OUTPERFORM, TP 5yr+ run of earnings growth Rs385.00), Nestle India (NEST.BO, Rs5042.4, UNDERPERFORM, TP Rs5,050.00) and Chipotle Mexican (CMG) one could argue that multiples will be maintained until such a streak comes to an end. For Jollibee, we do not expect this to happen any time over the next three years. Superior excess return story Simply put, consumer companies that can generate high excess returns (ROIC less High excess return WACC) will command premium valuations (Figure 10). Between the 1st and 2nd, and 2nd consumer companies are and 3rd quartiles for excess returns of NJA consumer stocks, the valuation declines on rewarded by the market average by 25% and 24%, respectively. The relationship breaks when moving from the 3rd to 4th quartile because the market is often pricing in recovery returns for companies that do not cover their cost of capital and/or their earnings estimates are trending down; therefore, multiples are disproportionately high. For Jollibee, its excess return currently resides at the top of the 2nd quartile at 890 bp, but Jollibee’s 3yr fwd excess looking out three years, Jollibee is expected to have one of the highest improvements in return delta is among the excess returns, so when looking at valuations based on three-year forward excess return highest of domestic and (Figure 11) the relationship holds firmly. regional peers

Jollibee Foods Corporation (JFC.PS / JFC PM) 7 06 December 2013

Figure 10: Excess returns are primary driver of valuations Figure 11: 3-year out excess returns is equally compelling NJA consumer average; excess return = ROIC less WACC NJA consumer average; excess return = ROIC less WACC

-20% -24% -14% +13% -3% -5% -29%

-14% -35% -6%

+5% -1%

23.7x

23.3x

16.7x

16.3x

17.4x

18.7x

18.0x

17.9x

16.0x

11.5x

16.6x

10.9x

9.8x

10.3x

10.2x 10.1x

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

12mf PE 12mf EV/EBITDA 12mf PE 12mf EV/EBITDA

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Now that it is evident that excess returns are a key driver of valuations for consumer companies, it is important to see how Jollibee stacks up against its Philippines peers and regional food service players. Jollibee has the second highest excess returns behind Puregold Price Club, Inc Jollibee’s excess returns are (PGOLD.PS), but its excess returns are expected to grow 4-5x faster than PGOLD’s over expected to increase 4x the next three years; this justifies the P/E valuation premium. Excluding the dramatic ROIC faster than PGOLD but increase at Bloomberry due to its casino coming online in 2013, Jollibee’s excess returns slightly lower than URC are expected to increase faster (647 bp vs 549 bp) than the Philippines consumer peer group average. URC is also increasing at a fast rate, which is the key driver to its multiple being sustained going forward.

Figure 12: ROIC and excess return profile of PH consumer companies 3yr 2012 2015E 2012 2015E Excess NFY Symbol Company Excess Excess NFY PE ROIC ROIC Return EV/EBITDA Return Return Change PGOLD.PS Puregold Price Club, Inc 23.2% 24.7% 14.3% 15.8% 150bps 23.3x 23.3x JFC.PS Jollibee Foods Corporation 14.8% 21.3% 6.6% 13.1% 647bps 33.9x 18.1x URC.PS Universal Robina Corp. 13.9% 21.8% 3.6% 11.5% 789bps 23.7x 15.6x AGI.PS Alliance Global Group Inc 9.3% 12.2% 0.9% 3.8% 291bps 12.8x 6.3x BEL.PS Belle Corporation 1.3% 9.9% -10.0% -1.4% 866bps nmf nmf BLOOM.PS Bloomberry Resorts Corporation -2.9% 20.6% -14.2% 9.3% 2,355bps 17.7x 12.3x

Average 9.9% 18.4% 0.2% 8.7% 850bps 22.3x 15.1x Source: Company data, Credit Suisse estimates *Priced as of Dec 5 2013 Relative to regional foodservice peers, Jollibee also stacks up very favourably in terms of Jollibee also stacks up very ROIC and excess return delta over the coming three years. Jollibee’s ROIC is the second favourably in terms of ROIC highest behind Jubilant Foodworks (JUBI.BO, Rs1321.5, UNDERPERFORM, TP and change in excess return Rs895.00), but more importantly is heading in the right direction. Over the next three years, relative to regional we expect Jollibee to increase its excess returns by 647 bp versus a decline of 705 bp at foodservice peers Jubilant. The latter is a function of increased competition and pressure on menu pricing as a result. In 2015, we expect Jollibee to generate higher excess returns than that of Jubilant, and this will be a key reason why we think multiple risk is much higher at the latter. Relative to the peer group, Jollibee is more profitable, and the excess returns are rising at a superior pace.

Jollibee Foods Corporation (JFC.PS / JFC PM) 8 06 December 2013

Figure 13: ROIC and excess return profile of NJA foodservice operators 3yr 2012 2015 2012 2015E Excess NFY Symbol Company Excess Excess NFY PE ROIC ROIC Return EV/EBITDA Return Return Change JUBI.BO Jubilant Foodworks 30.0% 23.0% 18.0% 11.0% -705bps 46.8x 24.1x JFC.PS Jollibee Foods Corporation 14.8% 21.3% 6.6% 13.1% 647bps 33.9x 18.1x 1314.HK Tsui Wah Holding 11.4% 25.4% 3.5% 17.5% 1,400bps 35.7x 26.4x CENT.BK Central Plaza Hotel PCL 8.3% 12.9% -0.1% 4.5% 453bps 23.6x 13.0x MINT.BK Minor International PCL 7.7% 9.5% -1.1% 0.7% 177bps 21.5x 16.2x 0538.HK Ajisen 4.1% 10.6% -4.0% 2.5% 643bps 23.3x 10.8x

Average 12.7% 17.1% 3.8% 8.2% 449bps 30.8x 18.1x Note: CENTEL and MINT’s food businesses are 57% and 39% of revenues, respectively. Source: Company data, Credit Suisse estimates *Priced as of Dec 5 2013 Financial prowess Consumer companies are rewarded in their valuation for maintaining strong financial Free cash flow generation is stability and maintaining flexibility to capitalise on organic and/or acquisition-driven growth vital for consumer opportunities. franchises to grow For the past four years, Jollibee has operated with 20% and 11% of its equity and total Jollibee generates enough assets on average in net cash while at the same time increasing its asset base by 41%, FCF to maintain a net cash store count by 60% and investing a total of P13 bn in capex. This financial flexibility was balance while increasing its rewarded in the earnings base increasing by 73% from P2.7 bn to P4.6 bn in 2013E. The asset and store base by rewards of free cash flow generation cannot be underestimated. 41% and 60% since 2009

From 2013E to 2016E, we expect FCF to grow at twice the pace of earnings or 47% FCF is expected to grow 2x annually versus EPS growth of 21% annually. The difference is largely explained by capex faster than earnings over levels moderating to historical levels in 2015. Over the next two years, more aggressive the next three years expansion in China and Vietnam should push capex to nearly 2x the long-term average. Nonetheless, we expect Jollibee to maintain net cash to equity and total assets at 23% and 14% respectively, which is higher than historical averages.

Figure 14: Jollibee financial prowess – power of FCF generation cannot be underestimated All figures in P mn 2009 2010 2011 2012 2013E 2014E 2015E 2016E Historical ‘13E – ‘16E CAGR CAGR Cash flow from operations 6,551 5,315 5,596 8,044 8,217 9,303 10,972 12,042 7.1% 13.6% Capex (2,575) (2,553) (3,700) (3,756) (5,376) (5,848) (3,048) (3,048) Acquisitions (835) (2,715) (816) (128) Gross FCF 3,032 190 (1,738) 4,160 2,841 3,455 7,924 8,994 11.1% 46.8% Dividends (844) (2,557) (1,197) (2,274) (2,610) (3,221) (4,079) (5,043) Net FCF 2,188 (2,366) (2,935) 1,886 232 235 3,844 3,951 -4.8% nmf Net cash 6,181 3,936 1,035 3,421 3,653 3,887 7,732 11,683 Net cash-to-equity 38.0% 22.3% 5.1% 15.6% 15.3% 14.9% 26.8% 36.8% Source: Company data, Credit Suisse estimates First, the order of business will be returning cash to shareholders as we assume dividends Jollibee’s strong balance grow at 25% annually from 2013E to 2016E. That being said, given the cash on the sheet can support positive balance sheet, there is the potential for positive dividend surprises. The dividend pay-out dividend surprises ratio could exceed our 75% assumption in 2015. Second, we believe there is over 50% possibility for a large-scale acquisition in the next High probability that Jollibee 12-24 months. The company is looking to enter the highly appealing Indonesian market by makes an acquisition in acquiring a local player(s) in much the same way it did in China and Vietnam. Such an Indonesia acquisition could be incremental to ROIC over 2-3 years, and justify deploying the capital. We believe a new large-scale driver of higher earnings growth over the long term would clearly be positive for the multiple argument on Jollibee shares.

Jollibee Foods Corporation (JFC.PS / JFC PM) 9 06 December 2013 Maximising returns from existing formats The majority of Jollibee’s EPS growth is expected to be derived from rising EBITDA Rising EBITDA margins margins over the next four years, which essentially translates into extracting greater from harvesting existing productivity from the existing store base of 2,800 and deployed capital base of nearly assets will be key driver of US$650 mn. EPS growth

Figure 15: Attribution of Jollibee’s EPS growth % of total EPS growth coming from SSSG, new stores and EBITDA margins expansion. Figure in bold is YoY EPS growth SSSG Store growth EBITDA Margin Expansion 23% 24%

18% 18%

55% 67% 41% 45%

15% 11% 13% 7%

44% 34% 42% 26%

FY13E FY14E FY15E FY16E

Source: Credit Suisse estimates Store profitability drives franchise value and supports valuation Positive relationship between EBITDA/store and EV/store Maximising store profitability (commonly measured as EBITDA/store) is critical for Key driver of enterprise foodservice businesses, as investors tend to reward foodservice businesses that succeed value is productivity— at increasing EBITDA/store. Figure 16 shows a strong (R-square = 0.99) positive EBITDA/store relationship between EBITDA/store and EV/store for regional and global foodservice operators. Jollibee is on the trend line, meaning that the market is appropriately paying for Jollibee’s store/outlet productivity levels. This relationship is exponential, so as profitability per store increases, EV/store should rise at a quicker rate. This is evident in historical precedents for both Jollibee and foreign foodservice operators. The key driver of Jollibee’s growth and valuation will come from leveraging greater EBITDA/store to increase profitability from existing stores. From 2012 to 2016E, we expect EBITDA per store to 11% annually from 2012 to increase by 11% annually from US$63,000 to US$96,000. 2016E

Jollibee Foods Corporation (JFC.PS / JFC PM) 10 06 December 2013

Figure 16: Strong positive relationship between EBITDA/store and EV/store for foodservice operators 2013E EBITDA/ avg. store (log scale) vs EV/ avg. store, US$ mn

40 R²=0.99 35 Tsui Wah 30

25

20

15

10 Chipotle

EV/avg. store (USDm) Jollibee 5 Jubilant Domino's Wendy's McDonald's Ajisen CDC 0 Yum! 0.0 0.1 1.0 EBITDA/avg. store (USDm)

Source: Company data, Credit Suisse estimates

Figure 17: Jollibee has productivity levels in line with Figure 18: …suggesting significant upside potential in most peers … enterprise value as productivity rises 2013E EBITDA/ avg. store, US$ mn 2013E EV/ avg. store, US$ mn 0.42 32.39

0.29

0.20 10.90 0.09 0.08 0.09 0.06 0.07 0.03 2.46 3.09 3.10 0.51 0.67 0.88 1.34 1.58

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Historical precedents show that EBITDA/store growth drives multiple expansion Figure 19 and Figure 20 break down the growth in EV/store for Chipotle and Yum! Brands, Developed market which have experienced EV/store CAGRs of 33% and 26%, respectively, over the last two precedents show that when years. For Chipotle, 22% of the EV/store appreciation from 2010-12 was driven by EBITDA/store rises, EBITDA/store CAGR of 8%, with the remaining 78% from multiple expansion of 25% EV/store increases at a CAGR. Similarly, for Yum! Brands 39% of EV/store growth was due to EBITDA/store quicker pace CAGR of 11%, while 61% was driven by multiple expansion of 15% CAGR.

Jollibee Foods Corporation (JFC.PS / JFC PM) 11 06 December 2013

Figure 19: Chipotle breakdown in EV/store expansion Figure 20: Yum! Brands breakdown in EV/store expansion (2010-12) (2010-12)

(in USDm) 25% multiple (in USDm) 15% multiple CAGR CAGR

7% EBITDA $0.19 $2.70 CAGR 8% EBITDA $0.08 CAGR $0.76 $0.82 $7.89 $0.56 $4.43

2010 EV per EV gain - from EV gain - from 2012 EV per 2010 EV per EV gain - from EV gain - from 2012 EV per store higher profit multiple store store higher profit multiple store expansion expansion

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates From the above examples it is clear that for companies that successfully increase store Rises in EBITDA/store have profitability in a sustainable manner, valuation increases by an even greater degree. Thus, an exponential impact on the relationship between EBITDA/store and EV/store is not just a linear correlation but an enterprise value exponential one, and companies at the early stages of the trend line such as Jollibee have a lot of incentive to focus on store profitability in order to warrant exponential growth in enterprise value. Market has already begun to reward Jollibee’s productivity improvements … more to come Jollibee’s per store valuation has increased by 35% in the last two years, triggered by 15% Market has already improvement in store level profitability Figure 21. This confirms our view that investors rewarded JFC’s 15% respond positively to EBITDA/store growth and suggests that further increases in increase in EBITDA/store, productivity for the firm can continue to drive higher shareholder value. but there is more to come

Figure 21: Jollibee’s recent re-rating has been triggered by EBITDA/store improvement Jollibee breakdown in EV/store expansion (2011-current) (in USDm) 20.6% multiple CAGR

$0.44 14.5% EBITDA CAGR $0.27 $1.58

$0.87

2011 EV per store EV gain - from higher EV gain - from multiple Current EV per store profit expansion

Source: Company data, Credit Suisse estimates

Jollibee Foods Corporation (JFC.PS / JFC PM) 12 06 December 2013

Jollibee’s path to improved profitability The key drivers to Jollibee’s store level profitability rising are strong domestic demand and EBITDA margins expected traffic growth in the Philippines (accounting for 80% of growth going forward), optimising to expand 140 bp over next the format/concept portfolio, achieving greater scale in China, achieving profitability in four years with real SuperFoods Group (Vietnam) and more efficient back-end/IT. We expect these drivers to possibility of positive lead to 140 bp EBITDA margin expansion over the next four years. Interestingly, our surprises 2016E EBITDA margin forecast of 11.3% is below the 2007 peak of 11.7%. Jollibee is a superior operator today with more scale, so by capitalising on the existing assets, EBITDA margin upside potential is a reality. Optimising brand portfolio in the Philippines With a portfolio of six brands in the Philippines, Jollibee has a wide exposure to the overall Six brands in the Philippines QSR industry. led by the highly popular Jollibee brand, account for Figure 22: JFC’s domestic brand portfolio 61% of domestic system- Brand Description 2012 Domestic Number of % franchised wide sales Sales (P mn) stores (3Q13) stores 1 Jollibee American fast food 46,136 795 50.2% 2 Chowking Chinese casual food 11,995 388 60.3% 3 Mang Inasal Filipino casual food 8,304 462 90.3% 4 Greenwich American pizza 4,614 198 38.4% 5 Red Ribbon Bakery 3,691 249 44.2% 6 Burger King American fast food 923 29 0.0% Source: Company data, Credit Suisse estimates However, in terms of productivity, sales/store has always been the highest at the Jollibee Sales/store at non-Jollibee brand, which is 61% of domestic system-wide sales (Figure 23). Therefore, growth in brands to grow 2x faster sales/store will be higher at non-Jollibee brands. We expect Jollibee brand sales/store to than Jollibee brand increase by 6%/year from 2012 to 2016E versus 11%/year at the other brands combined (Figure 23). Jollibee is on the right track as it is actively strengthening the non-Jollibee brands through Burger King stores are very advertising and marketing efforts, refurbishing current stores, and introducing new productive, and will be key products. The 2011 acquisition of the Burger King licence in the Philippines will also drive contributor as count rises up store productivity in the long term, as sales productivity for Burger King at P36 mn/store is the second highest out of Jollibee’s domestic brand portfolio (but currently only 1-2% of domestic sales).

Figure 23: Domestically, Jollibee format leads in sales Figure 24: …but we expect both Jollibee and non-Jollibee efficiency… stores to improve productivity Sales/avg. store by brand (2012, P mn) – Domestic sales only Sales/avg. store by brand (2011-16E, P mn) – Domestic sales only

60.5 Jollibee sales/avg store Non-Jollibee sales/avg store

35.5 30.9 72.6 76.9

(PHPm) 68.5 22.7 64.1 18.6 17.6 60.5

56.2 (PHPm) 31.1 34.7 25.1 27.9 20.7 23.2

FY11 FY12 FY13E FY14E FY15E FY16E

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

Jollibee Foods Corporation (JFC.PS / JFC PM) 13 06 December 2013

Turnaround story in China With 15% of outlets and 13% of system-wide sales coming from China, a turnaround in Stronger trends in China will productivity in the country would have a material impact on overall group productivity. have a material impact on Jollibee operates 401 stores under three key brands in China – Yonghe King, Hong overall JFC earnings Zhuang Yuan and San Ping Wang (acquired in 2012).

Figure 25: JFC’s China brand portfolio Brand Description 2012 sales (P Number of % franchised mn) stores (3Q13) stores 1 Yonghe King Taiwanese casual food 9,227.1 311 2.6% 2 Hong Zhuang Yuan Chinese congee chain 1,845.4 44 2.3% 3 San Pin Wang Chinese noodle chain 922.7 46 2.2% 4 12 Sabu Taiwanese hotpot (48% na 3 0% owned) Source: Company data, Credit Suisse estimates 2012 was a difficult year for China QSR industry as weaker macro led to lower sales growth yet operating cost inflation was high. 2013 challenges for the industry largely came from food scares and changes in meal preferences. Year-to-date, Jollibee’s Chinese trends have improved with SSSG of 8% due to stronger SSSG trends in China have traffic and less discounting. Jollibee’s formats primarily serve beef & pork based meals, so strengthened to high single- benefitted from concerns over poultry by consumers. Jollibee has successfully digits and are ahead of repositioned its brands, invested more in product development, renovated old stores and foreign competitors closed down unproductive stores to drive up sales/store. For example, with Hong Zhuang Yuan, the group closed six foodservices in 2012 and remodelled eight, with the newly modelled foodservices achieving higher average daily sales and double-digit sales growth. We view Jollibee’s commitment to increasing efficiency and productivity in its China outlets Strong commitment to as positive for the firm’s sustainability in the country in the long term. The company’s low Chinese market franchise rate in China also gives it more control in terms of positioning and expanding the brands and efficiently executing turnarounds. With stronger comp store growth coupled with ~40 new stores per year, we believe the Jollibee’s China operations Chinese operations can sustain 25% total growth in coming years. can sustain 25% total growth

Inflection point of margin expansion With sales/store improving across the different brands and regions, margin expansion will Scale benefits still to be be a factor of positive operating leverage through scale reaped from the multiple brands and markets Figure 26 and Figure 27 break down our FY2013-16E forecasts for Jollibee’s system-wide sales. Geographically, we forecast domestic sales/store to increase at an 8% CAGR from 2013 to 2016, and international sales/store at 5.7% CAGR over the same time period. In terms of store type, we forecast both company-owned and franchise sales/store to grow at steady rates of 7% and 8% p.a., respectively, for the next three years. This leads to system-wide sales/store 2013-2016 CAGR of 7.7%, an acceleration from the last two years.

Jollibee Foods Corporation (JFC.PS / JFC PM) 14 06 December 2013

Figure 26: Domestic sales/store acceleration driving Figure 27: Both company-owned and franchised stores growth in system-wide sales per store expected to increase productivity Jollibee sales per avg. store (by region), 2011-16E Jollibee sales per avg. store (by store type), 2011-16E

Domestic sales per avg. store (PHPm) Systemwide sales per avg. store (PHPm) Intl sales per avg. store (PHPm) Company-owned sales per avg. store (PHPm) Systemwide sales per avg. store (PHPm) Franchised stores sales per avg. store (PHPm) 50 50

45 45

40 40

35 35

30 30 FY13E FY14E FY15E FY16E FY11 FY12 FY13E FY14E FY15E FY16E

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates From 2009 to 2012, Jollibee’s gross, EBITDA and EBIT margins deteriorated by 220 bp, Cost inflation is benign and 130 bp and 80 bp, respectively. This was primarily due to COGS (food supplies, only ~20% of RMs are packaging, store and manufacturing costs) growing faster than revenue. The negative imported trend has been reversed and should be sustained because raw material inflation has been less than 1%. Jollibee only imports ~20% of its raw materials. So when combined with higher store productivity, margins will benefit. We forecast Jollibee’s gross, EBITDA and EBIT margins to expand by 192 bp, 134 bp and 215 bp from 2012 to 2016 (Figure 28), resulting in EBITDA/store three-year forward CAGR of 11%. The positive relationship between EBITDA/store and valuation implies material upside for Jollibee’s enterprise value.

Figure 28: Margin expansion has commenced…. Figure 29: …leading to improvement in store profitability Jollibee margins, 2011-2015E relative to regional peers EBITDA/avg. store (US$ mn) , 2011-2015E

Gross margin EBITDA margin EBIT margin Jollibee Ajisen Jubilant

0.13 19.3% 19.7% 0.12 0.11 17.8% 17.8% 18.3% 18.7%

0.09 0.09 10.6% 10.8% 11.2% 11.3% 0.09 10.1% 9.9% 0.09 0.08 0.08 8.3% 0.08 0.07 0.08 0.08 7.2% 7.9% 0.07 6.2% 6.1% 6.8% 0.06

2011 2012 2013E 2014E 2015E 2016E 2011 2012 2013E 2014E 2015E

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

Jollibee Foods Corporation (JFC.PS / JFC PM) 15 06 December 2013

SuperFoods Group JV—Vietnam exposure

Figure 30: JFC’s 2012 investment in SuperFoods Group

Jollibee Group US$35m loan Viet Thai (through Jolliee International Worldwide Pte Ltd)

50% 50% SuperFoods Group

Highlands Coffee Pho 24 Hard Rock Cafe -75 coffee shops as -62 restaurants as of (Macau, HK, and of 2012 2012 Vietnam franchise) -Highlands Coffee -Presence in HK, -3 outlets as of 2012 Packaged Products Japan and ASEAN

Source: Company data, Credit Suisse estimates Joint venture with Viet Thai International On January 20 2012, JFC acquired a 50% stake in SuperFoods Group for US$25 mn Jollibee has optionality on through an agreement with its joint venture partner Viet Thai International Joint Stock Vietnam through attractive Company (VTI). SuperFoods owns and operates Highland Coffee Shops in Vietnam, Hard investment in SuperFoods Rock Café franchises in Macau, Hong Kong and Vietnam, and Pho 24 foodservices in Vietnam, Indonesia, Philippines, Hong Kong, Cambodia and Japan. It also sells packaged coffee under the Highlands brand through retail outlets. The Framework Agreement included a US$35 mn loan to VTI and a US$5 mn advance to SuperFoods Group. The US$35 mn loan to VTI is payable in June 2016 and bears interest of 5% p.a. payable in lump sum also in June 2016. The loan is to be used for general corporate purposes and is secured by a mortgage by all of VTI’s shares in SuperFood Holding Companies. Buying exposure to fastest growing QSR market in APAC at a reasonable price SuperFood’s presence in Vietnam is a key growth driver for JFC over the long term, as it Vietnam expected to be provides JFC exposure to not just the large coffee market but also to the fast-growing fastest growing QSR Vietnamese QSR industry, which is forecasted to grow at 14.3% p.a. over the next five industry in APAC years (highest in APAC). JFC also plans on serving Highlands Coffee in its own outlets to upgrade the quality of its coffee at what we would imagine more favourable margins. Implied P/B for SuperFoods based on the purchase price was around 1.59x (using 2012 Acquired the stake for 50% book value). Implied EV/store was US$0.4 mn/store, which was a 54% discount to JFC’s discount to JFC valuation at EV/store at the time of purchase. Granted, SuperFoods Group is still operating at a net the time loss, and the 2012 impact on JFC’s bottom line was negative P51 mn (albeit only 1.4% of group net income), this is partially due to increasing store costs while accelerating store expansion growth (Highlands Coffee store growth was 39% in 2012). Expanding market share and regional presence is the priority right now and we expect SuperFoods to break even by 2015 due to increasing scale and moderating costs.

Jollibee Foods Corporation (JFC.PS / JFC PM) 16 06 December 2013

Indonesia offers the next leg of upside Indonesia is the most attractive foodservice industry in Asia given its size, future growth High probability that Jollibee and potential for modernisation, yet Jollibee does not have a single foodservice outlet in enters Indonesia in 2014 or this market. We believe within the next two years (likely in 2014), Jollibee will announce its 2015 intention to enter Indonesia, or better yet, acquire an existing player. Jollibee’s overriding strategy is to use the Jollibee format in markets where there is a large Jollibee banner not likely to number of Overseas Filipino Workers (OFWs) who can associate with the brand and its work in Indonesia, so food. For Indonesia, it is estimated that there are less than 10,000 OFWs, so it is unlikely acquisition is preferred route that Jollibee will use this format for expansion. To put that in perspective, as of the end of 2012, there were 160,000, 120,000 and 51,000 OFWs in Singapore, Hong Kong and Malaysia, respectively, and where the company has two Jollibee formats combined. The Singapore Jollibee foodservice is the most productive globally and Hong Kong is not too far behind. Malaysia is a market where the company could enter Kuala Lumpur with its first Jollibee store sometime in 2014. As we mentioned earlier, Indonesia’s foodservice and QSR industries are expected to Indonesians only spend grow at 9% and 12% annually going forward. Penetration rates today are low with 800 and US$7/year on QSR vs NJA 20 foodservice and QSR outlets per 1,000 people, respectively. QSR spending per capita average of US$137 is the second lowest in the region at only US$7/year. If we assume Indonesia reaches the same level of penetration as the Philippines over the next seven years, this would imply a total of 15,000 QSR locations versus 5,200 in 2012 or 13% CAGR. This would be on the back of QSR per capita spending more than quadrupling from US$7 annually to US$30 annually. Indonesia is a foodservice and QSR market simply too enticing for an experienced and Share price does not reflect cash rich operator like Jollibee to ignore. We believe 2014 could be the year Jollibee the Indonesia possibility makes its long awaited foray into Indonesia, and this will likely be accretive to EPS within the next two years and lead to earnings upgrades. The market is not pricing in this possibility, in our view. Indonesia QSR profile The QSR industry in Indonesia is heavily fragmented with more than 5,500 locations, yet KFC is the largest in the largest player KFC (PT Fast Food Indonesia Tbk is the master franchisee) has only Indonesia with 12% of all 12% of the outlets. Chain QSRs dominate the industry over the independents with 83% of QSR outlets sales, and this is expected to increase going forward. Asian fast food is the leading format in Indonesia followed by chicken-based fast food. Western-style QSR concepts (burgers, pizza) have the potential to post the highest growth rates given their extremely low penetration today. A typical Indonesian meal would comprise of steamed rice, one or two main dishes such as meat, fish, poultry or vegetable served together with sides. This preference lends itself to Asian and chicken QSR concepts. But as wealth changes so do preferences, so we would not be surprised to see western style QSR concepts continuing to capture market share.

Jollibee Foods Corporation (JFC.PS / JFC PM) 17 06 December 2013

Figure 31: Indonesian QSR dominated by chains … Figure 32: … while chicken and western style QSR Sales figures in Rp tn concepts have been gaining share Sales figures in Rp tn Chicken QSR Sales 25 Independent QSR Sales 86% 25 34% Other QSR Sales Chain QSR Sales 34% 84% % Chicken QSR 20 % Chain QSR 20 33% 4 33% 3 82% 15 3 15 32% 3 13 3 80% 12 32% 2 11 10 2 10 10 31% 2 9 16 78% 8 15 7 31% 12 14 7 5 10 11 5 30% 8 9 76% 6 7 5 5 5 30% 3 4 4 0 74% 0 29%

Source: Frost & Sullivan Source: Frost & Sullivan The top 12 players in the industry control 62% of the outlets, with the largest, KFC, Asian food QSRs are controlling 12%. Chicken and western style QSR are more concentrated because they are popular in Indonesia relatively new, while Asian QSR is more fragmented with a large number of independent players. KFC controls 50% of the chicken QSR outlets followed by California Fried Chicken at 27%. In terms of pricing, not surprisingly the chicken and western QSR formats have higher average meal and average ticket values.

Figure 33: Leading chain QSR operators in Indonesia Chain QSR Brand Franchisee Format # of Outlets Market Share by Outlet Kentucky Fried Chicken (KFC) PT Fast Food Indonesia Tbk Chicken 446 12.1% California Fried Chicken PT Pioneerindo Gourmet International Tbk Chicken 244 6.6% Baskin Robbins PT Trans Ice Ice Cream 219 5.9% Pizza Hut PT Sarimelati Kencana Pizza & Pasta 207 5.6% Dunkin' Donuts Dunkin' Donuts Indonesia Bakery 200 5.4% A&W PT Biru Fastfood Nusantara Burger & Fries 200 5.4% Es Teler 77 PT Top Food Indonesia Asian 180 4.9% Ayam Bakar Wong Solo Various Franchisees Asian 160 4.3% Hoka Hoka Bento PT Eka Bogainti Asian 150 4.1% Texas Chicken PT Cipta Selera Murni Chicken 140 3.8% McDonald's PT Rekso Nasional Food Burger & Fries 124 3.4% Burger King PT Mitra Adiperkasa Tbk Burger & Fries 40 1.1%

Top 12 2,310 62.4% Source: Company data, Frost & Sullivan Jollibee’s Indonesian opportunity We believe Jollibee’s preference would be to replicate what it did in China and Vietnam by Plenty of rational for Jollibee acquiring an existing QSR operator in Indonesia given the following rationale: to be an acquirer in Indonesia ■ Access to the highly attractive market size and growth;

■ An existing brand/concept that appeals to the unique meal preferences of Indonesians;

■ Filipino Peso relative to Indonesian Rupiah is near all-time highs;

Jollibee Foods Corporation (JFC.PS / JFC PM) 18 06 December 2013

■ Utilise operating, financial and technology scale to growth the chain at a much faster rate;

■ Acquisition capacity of P25 bn (US$570 mn) assuming 3x net debt-to-EBITDA. Having completed seven acquisitions since 2008 (Figure 34Error! Reference source not Jollibee has at least US$600 found.), Jollibee has shown a knack for making acquisitions, especially in acquiring local mn of acquisition capacity brands/concepts in foreign markets such as China and Vietnam. As we mentioned earlier, with capacity of at least US$600 mn and existing operations generating positive cash flow going forward, we believe management is highly motivated to buy assets in Indonesia sooner rather than later. Management has mentioned it is difficult to get families to sell their businesses in Indonesia, but with time and capital, this can often be overcome. We have reason to believe that the Burger King master franchise is for sale. It is currently Burger King master owned by Mitra Adiperkasa (MAPI.JK, Rp5,350.00, NEUTRAL, TP Rp7,300.00) and they franchise could be of have 40 outlets. MAPI has not invested aggressively behind this format and could use the interest to Jollibee … capital to pay down debt levels. If we assume the Burger King stores in Indonesia are 10- 15% less productive than Jollibee’s Burger King stores in the Philippines and an EV/Sales multiple of 1.5-2x, then this acquisition would likely cost US$45-50 mn or P2 bn, well within Jollibee’s capacity. Acquiring the master franchise rights to Burger King Indonesia is an interesting start and … but likely looking for consistent with owning the same rights in the Philippines, but the more interesting and something larger as well earnings impactful acquisition could come from acquiring the local operators such as California Fried Chicken, Es Teler 77, Ayam Bakar Wong Solo and/or Hoka Hoka Bento. These businesses would be equally scalable, likely more profitable currently than Burger King and have formats/concepts that resonate well with Indonesian preferences.

Jollibee Foods Corporation (JFC.PS / JFC PM) 19

(JFC.PS / JFCPM) JollibeeFoods Corporation Figure 34: Jollibee acquisition history—buying local brands in foreign markets Company Name Year % stake Price paid Valuation Country Key brands/description Rationale Acquired (P mn) SuperFoods Group 2012 50% 1,025 1.6x 2012 P/B Vietnam Highlands Coffee: Coffee shop chain in To expand presence in Vietnam, serve Vietnam and producer of packaged coffee; Highlands Coffee within JFC restaurants to

Hard Rock Café: franchisee in Macau, upgrade coffee quality at still affordable Hong Kong and Vietnam prices Wowprime 2012 48% 98 N/A Taiwan 12 Sabu: hotpot restaurant in Taiwan To expand QSR exposure in Taiwan

known for low-priced hot dishes San Ping Wang 2012 55% 196 12.2x 2012 P/E; 4.2x China San Ping Wang: beef noodle business in To expand QSR exposure in China 2012 P/B South China BK Group (Burger King 2011 54% 66 0.6x 2011 P/B Philippines Burger King: Sole franchisee of the brand in To gain presence in premium price segment Philippines) the Philippines of hamburger category in fast food market Chow Fun Holdings 2011 80.55% (from 140 8x 2011 P/B USA Jinja Bar and Bistro: Asian casual To enhance capability in developing Asian 13.89%) restaurant chain in New Mexico, USA restaurant concepts for mainstream consumers in the USA Mang Inasal 2010 70% 2,976 15.3x 2010 P/E; 3.1x Philippines Mang Inasal: Filipino fast food Apply JFC's scale and know-how to increase 2010 P/B Mang Inasal's sales, store network, and operational efficiency Hong Zhuang Yuan 2008 100% 2,648 17.6x 2008 P/B China Hong Zhuang Yuan: congee chain To expand QSR exposure in China, to be restaurant in China leader in category between fast casual and casual restaurants Source: Company data, Credit Suisse estimates

06 December2013

20

06 December 2013 Capitalising on the best growth markets The foodservice industry is underpenetrated in emerging Asia, as category spending per Key drivers of foodservice capita in the region is 85% lower than that of developed Asia. The reason behind the penetration are incomes, disproportionately lower spending levels is significantly lower GDP/capita, wealth levels and wealth and urbanisation urbanisation rates. This is set to change as urbanisation and wealth in emerging Asia is projected to grow ahead of developed peers, leading to accelerating consumption growth and upside potential for the foodservice industry. The foodservices market size in emerging Asia is expected grow 7.1% CAGR over the next five years, compared to a 1.5% CAGR for developed Asia. Jollibee is well positioned to benefit from accelerated spending in the region as it has 79% of outlets in the Philippines and 15% in China, with optionality in Vietnam. Increasing outlet penetration drives spending per capita … but not in all markets There is a direct linear relationship between total foodservice market size and number of Outlet expansion is the foodservice outlets, but the relationship between per capita spending vs outlets per capita leading driver of higher per is slightly more complicated. Saturation can start to occur at 8-10 outlets per 1,000 people, capita spending on but the only Asian market seeing this potentially is Korea (Figure 35 and Figure 36). For foodservice countries oversaturated with QSR outlets, incremental sales per outlet starts to decline for reasons such as cannibalisation, consumers upgrading to different dining formats, etc. Nevertheless, countries at the start of the curve will still experience acceleration in food service spending/capita as outlets/capita rise due to under-penetration. Thus, industry growth can be broken down to two types: (1) Outlet-driven growth: Increase in spending per capita due to higher penetration of outlets. (2) Narrowing the gap: In countries such as China where the market is at risk of being saturated relative to demand (hence lying below the curve), more outlets/capita will not drive incremental spending growth. Instead, demand will have to catch up and “narrow the gap” and this will be due more to factors such as urbanisation and discretionary income growth.

Figure 35: Philippines, China and Vietnam below the curve in food service spending per capita relative to outlet penetration Food service outlets/1,000 persons vs food service spending/capita (USD), 2012. Red markers denote markets where Jollibee is present 2,500 Australia R²=0.23 Japan 2,000 Hong Kong 1,500 USA UK Singapore France South Korea 1,000 Brazil Germany 500 Malaysia Thailand Vietnam Russia Indonesia China 0 India Food service service Food spending/capita (USD) Philippines 0 2 4 6 8 10 12 Food service outlets/1,000 persons

Source: World Bank, Euromonitor

Jollibee Foods Corporation (JFC.PS / JFC PM) 21 06 December 2013

Figure 36: Fast food spending per capita relative to outlet penetration is similarly low in emerging Asian countries Fast food outlets/1,000 persons vs fast food spending/capita (US$), 2012. Red markers denote markets where Jollibee is present 700 Australia USA R²=0.38 600

500 Japan 400 UK 300 Hong Kong France 200 Singapore Germany Brazil South Korea 100 Philippines Russia China Fast spending/capita food (USD) Indonesia MalaysiaThailand 0 India Vietnam 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Fast food outlets/1,000 persons

Source: World Bank, Euromonitor With the exception of China, foodservice outlets in emerging Asia are underpenetrated Compared to developed Asian markets such as Australia, Japan, Hong Kong and Foodservice outlet Singapore, penetration of total foodservice outlets and fast food outlets in emerging Asia is penetration and spending 54% and 59% lower respectively (Figure 37 and Figure 38). The only exceptions are per capital are 54% and Vietnam and China, where the high penetration of food service outlets despite lower 85% lower in EM Asia than spending/capita can be attributed to highly penetrated street stalls segment (although fast DM Asia food outlet penetration in Vietnam remains low). Not surprisingly, the under-penetration in the region is reflected by lower spending per capita, as spending on foodservices (cafes/bars, full service foodservices, fast food, street stalls, etc) per capita in developing markets is 85% lower on average. In the Philippines, where Jollibee has 79% of its stores, foodservice spending per capita each year is the second lowest in the region at only US$100 (Figure 39).

Figure 37: Foodservice outlets underpenetrated in most Figure 38: …with fast food outlet penetration following a emerging countries… similar trend Foodservice outlets/ 1,000 persons, 2012. Red bars denote markets Fast food outlets/ 1,000 persons, 2012. Red bars denote markets where Jollibee is present where Jollibee is present 11.9 1.2 1.0

0.8 6.2 5.8 5.2 4.9 0.6 Avg: 3.8 0.4 Avg: 0.4 2.9 2.0 2.0 1.6 0.3 0.2 1.1 0.8 0.8 0.110.09 0.060.060.02

Source: World Bank, Euromonitor Source: World Bank, Euromonitor

Jollibee Foods Corporation (JFC.PS / JFC PM) 22 06 December 2013

Figure 39: Strong divergence in foodservice Figure 40: Fast food spending/capita in emerging markets spending/capita between developed and developing similarly underpenetrated markets Fast food spending/capita (US$), 2012. Red bars denote markets where Jollibee is present Foodservice spending/capita (US$), 2012. Red bars denote markets where Jollibee is present 649 2,133 2,037

1,678 1,444 392 1,225 319 Avg: 853 168 159 Avg: 159 375 342 340 328 79 158 48 38 100 76 30 12 7 5

Source: World Bank, Euromonitor Source: World Bank, Euromonitor Rising wealth and urbanisation key drivers to outlet and spending growth The key factors driving accelerating growth in the NJA foodservice industry will be rising urbanisation and wealth, as there is a clear positive relationship between foodservice spending per capita and both urbanisation rate and wealth per adult. The income effect There is a strong positive correlation between both foodservice spending/capita and fast Incomes in Jollibee’s core food spending/capita with GDP per capita (Figure 41 and Figure 42). Developing countries markets are expected to in Asia are all clustered in the bottom left corner of the chart, with low levels of both grow by 8% p.a. on average spending and GDP per capita, but as nations get wealthier and per capita income over the next five years increases, spending per capita also starts to increase. Thus, a key driver of rising spending per capita in the food service industry for emerging countries (where Jollibee is present) will be GDP/capita growth.

Jollibee Foods Corporation (JFC.PS / JFC PM) 23 06 December 2013

Figure 41: GDP per capita highly correlated to not only food service spending per capita…. Foodservice spending/capita/annum (US$) vs GDP per capita (US$). Red markers denote markets where Jollibee is present 2,500 R²=0.91 Australia 2,000 Japan Hong Kong

1,500 South Korea Singapore

(USD) 1,000

500 Vietnam CN Malaysia TH Foodservice spending capita per Indonesia 0 IndiaPhilippines 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 GDP per capita (USD)

Source: World Bank, Euromonitor

Figure 42: ….but also fast food spending per capita Fast food spending/capita/annum (US$) vs GDP per capita (US$). Red markers denote markets where Jollibee is present 700 R²=0.83 Australia 600

500 Japan 400 Hong Kong 300

200 Singapore China South Korea Fast foodspending/capita (USD) 100 PH IN TH Malaysia 0 Indonesia 0 VN 10,000 20,000 30,000 40,000 50,000 60,000 70,000 GDP per capita (USD) Source: World Bank, Euromonitor Figure 43 highlights the positive relationship between foodservice spending per capita and Emerging Asia’s wealth wealth per adult for emerging and developed countries globally. Low foodservices growth expected to consumption in emerging Asia is also explained by significantly lower wealth per adult in accelerate in coming years the region, as average wealth per adult in emerging Asia is only 5.5% that of average wealth per adult in more developed Asia (Japan, Hong Kong, South Korea, Singapore, Australia). As per the Credit Suisse Global Wealth Report 2013, Credit Suisse expects the pace of wealth generation in emerging markets to continue to be greater than that of developed markets, with wealth growing by a 9% CAGR over 2013-18 for global emerging markets against 6% CAGR for developed markets. In particular, China is expected to be the fastest growing at 10% over the next five years. Accelerating wealth growth in emerging Asia over the next few years makes a convincing case that foodservice consumption in the region has significant growth potential.

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Figure 43: Rising wealth per adult correlated with higher food service spending/capita…. Foodservice spending/capita/annum (US$) vs Wealth per adult (US$). Red markers denote markets where Jollibee is present 2,500 R²=0.68 Australia Japan 2,000 Hong Kong 1,500 United Kingdom USA Singapore South Korea (USD) 1,000 France Brazil Germany 500 VN MY TH CN

Foodservice spending capita per INDO 0 IN PH -50,000 50,000 150,000 250,000 350,000 450,000 Wealth per adult (USD) Source: World Bank, Euromonitor The relationship with fast food spending is even stronger (to the detriment of wealthy Fast food spending in countries’ waistlines) as Figure 44 highlights. Except for China, emerging Asian countries lie emerging Asia is below the trend line, meaning that fast food spending relative to wealth is disproportionality disproportionately low low and leaves lots of room for “catch-up”. This supports our belief that the fast food industry relative to wealth remains underpenetrated in the region and significant upside exists from closing the gap.

Figure 44: …as well as higher fast food spending/capita Fast food spending/capita/annum (US$) vs Wealth per adult (US$). Red markers denote markets where Jollibee is present 700 R²=0.71 USA Australia 600

500 Japan 400 UK Hong Kong 300 South Korea 200 Germany France Brazil Singapore Fast spending/capita food (USD) 100 China India PH Malaysia 0 Vietnam Indonesia 0 100,000 200,000 300,000 400,000 Wealth per adult (USD) Source: World Bank, Euromonitor Fast food and urbanisation go together like burgers and fries As urbanisation rises, penetration of fast food outlets increases and this drives per capita There is an exponential spending toward fast food (Figure 45 and Figure 46). Urbanisation remains below 50% for relationship between emerging Asian countries. There is still significant spending/capita upside as urbanisation urbanisation rate and food rates in developed countries can reach 80-100%. In the Credit Suisse report, Opportunities in service spending/capita an urbanizing world, CS estimates Non-Japan Asia will urbanise from 40% of its population in 2010 to 63% in 2050, and that the region is closest to the urbanisation per capita GDP growth sweet-spot, where countries achieve peak real GDP/capita growth of close to 6% when urbanisation is in the range of 30-50%. As urbanisation and GDP/capita increase in NJA in the next few years, food services consumption should also accordingly accelerate.

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Jollibee’s core markets (the Philippines, China and Vietnam) are expected to see urbanisation The Philippines, China and increase from an average of 42% currently to 67% in 2050, higher than the regional average. Vietnam have low urbanisation rates of 49%, Figure 45: Foodservice spending/capita accelerates as urbanisation rates rise 47% and 30%, respectively Foodservice spending/capita/annum (US$) vs urban population as % of total. Red markers denote markets where Jollibee is present 2,500 R²=0.62 Australia Japan 2,000 Hong Kong 1,500 USA United Kingdom Singapore

South Korea (USD) 1,000 France Brazil Germany 500 Vietnam China

Thailand Malaysia Foodservice spending capita per India Indonesia Russia 0 Phlippines 0.0 20.0 40.0 60.0 80.0 100.0 120.0 Urban population as % of total Source: World Bank, Euromonitor

Figure 46: Fast food spending/capita accelerates as urbanisation rates rise Fast food spending/capita/annum (US$) vs Urban population as % of total. Red markers denote markets where Jollibee is present 700 R²=0.71 USA Australia 600

500 Japan 400 UK 300 Hong Kong 200 Germany France Singapore China Brazil 100 South Korea Philippines Malaysia Fast spending/capita food (USD) India Thailand Russia 0 Vietnam Indonesia 30 40 50 60 70 80 90 100 Urban population as % of total Source: World Bank, Euromonitor Jollibee well positioned in countries with high growth potential With 79% of outlets in the Philippines and 15% in China, Jollibee has significant exposure China foodservice to to countries where growth potential in the foodservice industry is the highest. Figure 47 maintain high level of shows historical and forward CAGR in the foodservice industry. In the past five years, growth, but the Philippines China’s foodservice market size has grown the fastest at 17.4% CAGR and is projected to presents best upside see 8.9% CAGR over 2012-17, which is the third highest in Asia. The Philippines is also surprise potential expected to grow at an above-average CAGR of 5.3% over the next five years, although we believe growth rates could be even higher as wealth growth in the country is expected

Jollibee Foods Corporation (JFC.PS / JFC PM) 26 06 December 2013 to be the highest in the region (Figure 49) and we expect private consumption expenditure growth to continue to exceed the NJA and ASEAN average over the next two years. Jollibee also has 40 outlets in Vietnam (as of 3Q2013) plus its SuperFoods Group JV, Jollibee has optionality in where the food service industry is projected to grow at 9.4% CAGR over the next five the highest growth market in years, the highest in the region. Further expansion in Vietnam should be a promising long- the region term growth driver in addition to growth in the Philippines and China.

Figure 47: Projected growth rates for the foodservice industry highest in Vietnam, Indonesia and China Foodservice industry 5Y historical CAGR vs 5Y forward CAGR 5Y forward CAGR 5Y historical CAGR

9.4% Vietnam 6.1% 9.0% Indonesia 7.2% 8.9% China 17.4% 7.9% India 6.8% 5.3% Philippines 6.2% 5.0% Malaysia 7.2% 4.2% Singapore 6.9% 4.0% Thailand 4.7% 3.3% Hong Kong 3.4% 2.3% Australia 7.4% 1.5% South Korea -2.4% -3.6% Japan 5.7% Source: Euromonitor Fast food growth rates are expected to outpace those of the overall foodservice industry Fast food format trends are (Figure 48). This is because the former is more underpenetrated. stronger due to low Figure 48: Fast food industry to grow faster than overall foodservice industry penetration Fast food industry 5Y historical CAGR vs 5Y forward CAGR 5Y forward CAGR 5Y historical CAGR

14.3% Vietnam 11.5% 12.0% Indonesia 10.8% 9.3% China 17.7% 9.0% Thailand 15.8% 8.5% India 9.1% 6.9% Philippines 9.8% 6.1% Malaysia 13.7% 5.9% Hong Kong 6.4% 5.4% South Korea 3.5% 5.2% Taiwan 5.8% 4.5% Singapore 10.6% 3.2% Australia 9.6% -1.5% Japan 10.6% Source: Euromonitor In terms of income and urbanisation growth, Jollibee also has exposure to countries with above-average income and urban population growth, and as higher income and urbanisation are correlated to higher fast food spending per capita, this should drive significant upside potential in sales over the next few years. Figure 49 shows that the Philippines and China -- Jollibee’s biggest markets – have had the highest growth rates in wealth per adult over the last three years. Going forward, GDP per capita growth is expected to be the highest in Vietnam and China, which is positive for Jollibee's expansion plans in these countries (Figure 50). Philippines’ forward GDP per capita growth is also above average in the region at 7% p.a. The pace of urbanisation is projected to be the fastest in Vietnam (Figure 51), where Jollibee has not only 40 Jollibee stores but also a

Jollibee Foods Corporation (JFC.PS / JFC PM) 27 06 December 2013 joint venture, showing that it is investing heavily in areas of high growth potential as it seeks to expand regionally.

Figure 49: High wealth growth in the Philippines and Figure 50: Vietnam, China and the Philippines have China to drive foodservice spending among the highest forward GDP per capita growth – Wealth per adult, 2010-13 CAGR (US$) positive implications for Jollibee GDP per capita historical vs forward growth

Philippines 14.2% 7yr historical CAGR 5yr forward CAGR China 6.9% Australia 6.1% 20% Hong Kong 5.8% 16% Singapore 5.6% 14% Thailand 4.4% 12% 10% 10% 10% South Korea 1.7% 8% 9% 7% Vietnam 1.6% 7% 6% 4% Malaysia 1.5% 4% 3% 3% Indonesia 1.4% Japan -1.3% Taiwan -3.3% India -3.9%

Source: Credit Suisse Global Wealth Report 2013 Source: IMF

Figure 51: Urbanising populations to drive Jollibee’s store and topline growth Change in % of population urbanised, 2010-50E (%), ranked by highest to lowest change

% population urbanized 2050E % population urbanized 2010

59 Vietnam 30 60 Thailand 34 73 China 47 54 India 30 63 Non-Japan Asia 40 66 Indonesia 44 69 Philippines 49 69 World 50 88 Malaysia 72

Source: United Nations, Credit Suisse Emerging Market Research Institute Competitive landscape Domestic segment: Resilience at the top Jollibee is the biggest player in the Philippine QSR industry, with a portfolio of six brands Philippines is one of very (Jollibee, Greenwich Pizza, Red Ribbon, Chowking, Burger King and Mang Inasal) and a few EMs where the leader is market share of 58% (Figure 52). The company’s leading position domestically is a rare local rather than McDonald’s success story considering that in almost every APAC country, the top two players in the or YUM! Brands QSR industry are either McDonald’s or Yum! Brands. Management’s success at execution and growing its portfolio has led to continued resilience in market share, with 3x the market share of #2 McDonald’s (Figure 53). While the company has lost ~30 bp share to

Jollibee Foods Corporation (JFC.PS / JFC PM) 28 06 December 2013

McDonald’s in the last two years, we are not too concerned as Jollibee’s sales and store network remains 3.2x and 5.6x bigger than McDonald's, respectively.

Figure 52: Jollibee is the indisputable leader in the Figure 53: …with market share trends quite stable Philippine QSR industry… JFC vs key competitors 2007-2012 market share Philippine QSR market share breakdown, 2012 (by value) Pier One Jollibee Foods Corp Bar & Grill McDonald's Corp 1.1% Yum! Brands Inc Pancake Seven & I Holdings Co Ltd House Other 70% 1.5% 14.4% 60% Seven & I Holdings Jollibee 50% 2.0% Foods Corp 40% Yum! McDonald' 58.1% Brands s Corp 30% 4.5% 18.4% 20% 10% 0% 2012 Philippines QSR market size 2007 2008 2009 2010 2011 2012 USD 2.9bn

Source: Euromonitor Source: Euromonitor Jollibee’s product range remains the broadest, serving not just American, Chinese and Filipino fast food but also cakes and confectionary. Productivity also ranks high on the scale as the company has the third highest sales/store among the top 15 QSR players—if we only look at the Jollibee brand, sales/store would be the highest in the industry. We believe the consistent dominance in store count, sales productivity and absolute sales more than offset the slight drop in market share in 2012. The list below also highlights some smaller QSR chains that are gaining share in the Philippines—Pier One Bar & Grill, Bon Chon and Dairy Queen should be interesting chains to watch out for over the next few years.

Jollibee Foods Corporation (JFC.PS / JFC PM) 29 06 December 2013

Figure 54: Snapshot of Philippines QSR key players (ranked by market share) Company name Key products/brands 2012 Number of Sales/store 2012 market 2012 market retail stores (end- (US$) share (%) share sales 2012) gain/(loss) (US$ mn) (p.p.) 1 Jollibee Foods Corp Western, Chinese and Filipino fast $1,672 2,074 $805,931 58.1% (0.3) food, bakery (Jollibee, Greenwich Pizza, Chowking, Red Ribbon, Mang Inasal, Burger King) 2 McDonald's Corp American fast food $530 370 $1,432,973 18.4% 0.6 3 Yum! Brands American fast food (KFC, Taco Bell, $129 386 $333,679 4.5% 0.0 Pizza Hut) 4 Seven & I Holdings Western and Filipino fast food at 7- $59 829 $70,808 2.0% 0.0 Eleven locations 5 Pancake House Inc Western and Filipino food (Pancake $43 174 $248,851 1.5% 0.0 House, Dencio's, Singkit, Teriyaki Boy, Kabisera, Le Coeur de France, Sizzlin'Pepper Steak) 6 Pier One Bar & Grill Western and Filipino casual food $30 n.a. n.a. 1.1% 0.7 7 Goldilocks Bake Shop Bakery, Filipino casual food $27 365 $73,425 0.9% (0.1) 8 Wendy's American fast food $23 104 $223,077 0.8% (0.1) 9 Duskin Co Ltd Donuts under the "Mister Donut" $23 2,000 $11,350 0.8% 0.0 brand 10 Bon Chon Inc Korean fried chicken $17 41 $417,073 0.6% 0.4 11 Sbarro Inc American Pizza $13 34 $379,412 0.4% 0.0 12 Tropical Hut Food American fast food $10 50 $204,000 0.4% (0.3) Market 13 Pancitng Taga Malabon Filipino casual food $10 10 $960,000 0.3% (0.1) 14 Mexicali Foods Corp Californian-Mexican fast food $10 13 $730,769 0.3% (0.1) 15 International Dairy Ice cream $8 15 $553,333 0.3% 0.2 Queen Source: Company data, Euromonitor, Credit Suisse estimates China: Slow and steady march Unlike the Philippines where a clear leader presides, the QSR industry in China is heavily China’s QSR industry is fragmented with the top ten players holding only 12.3% market share in 2012. As of 2012, much more fragmented, but Jollibee ranked #10 in terms of market share with retail sales of US$123 mn; while the #1 Jollibee has made steady player Yum! Brands has made significant share gains in the last two years. Jollibee has gains in market share in the slowly gained share from competitors such as Ajisen. Share gains from the bigger players last two years should continue as the market consolidates, and we expect Jollibee to have the scale to expand and/or acquire smaller players and maintain its position in the top 10-15. Plus, Jollibee is adding ~40 stores per year and targeting 25% annual growth in China.

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Figure 55: China’s QSR market is fragmented… Figure 56: …as Jollibee’s market share remains low China QSR market share breakdown, 2012 (by value) despite its top 10 position JFC vs key competitors 2007-12 market share Ting Hsin Hua Lai Shi Intl 1.5% Yum! Brands McDonald's Yum! 0.6% Country Brands McDonald' Ajisen Style Ting Hsin Intl Ajisen 0.4% Cooking 6.5% s 2.3% Jollibee Foods Corp 0.2% Yoshinoya 7% 0.1% 6% Jollibee Foods Corp 5% 0.1% 4% 3% 2% 2012 China QSR Other 1% 88.3% market size USD106bn 0% 2007 2008 2009 2010 2011 2012

Source: Euromonitor Source: Euromonitor

Jollibee Foods Corporation (JFC.PS / JFC PM) 31 06 December 2013 Don’t be deterred by valuation Throughout this report we justify that Jollibee’s strong consumer franchise underpinned by Jollibee’s strong consumer consistent long-term earnings growth, high and rising excess returns and financial franchise will support prowess will support valuations going forward. Barring any macro shocks to the valuations going forward, Philippines economy and/or negative fund flows by foreign investors, we feel multiple with upside risk from contraction risk is low because the fundamental outlook is solid. This being said, there is potential acquisitions risk to the upside from accelerated earnings growth as a results of an Indonesian acquisition. This is not priced in by the market, which leaves additional optionality in addition to SuperFodds Group in Vietnam. In determining our target price of P205, we take the average of our three approaches: (1) Flat P/E multiple (40x 2014E EPS and 33x 2015E EPS) – P209/share (2) Flat EV/EBITDA multiple (21x 2014E EV/EBITDA and 18x 2015E EV/EBITDA) – P207/share (3) DCF (8.2% WACC, 10x EBITDA terminal value, 11% FCF CAGR) – P202/share Historical valuations not all that relevant Relative to any historical valuation metric, Jollibee shares are currently trading at or near Historical valuations do not all-time highs. However, this carries relatively low meaning to us because the Philippine capture the streak of domestic economy is the strongest it has been in over a decade, Jollibee has the greatest earnings growth or scale of degree of scale domestically it has ever had; 20% of growth now comes from high-growth Jollibee today international markets where momentum potential is strong (namely China and Vietnam), FCF generation is strongest and visibility to earnings growth is best. Comparison to NJA foodservice peers The NJA foodservice peer group trades at average 2014E EV/EBITDA and 2014E P/E NJA foodservice stocks multiples of 19.5x and 35x, respectively. These high valuations reflect the long-term trade at high multiples given structural growth story in penetration, urbanisation, rising incomes/wealth and per capita the structural story … spending. Interestingly, a material dichotomy has emerged between organic growth rates of local foodservice operators and that of multinational players. The former have formats/concepts that resonate stronger with local consumers and arguably have greater and long growth potential as a result. This is why valuations for local players have expanded while those of multinationals have actually contracted. Within the NJA foodservice landscape (Figure 57), Jollibee trades at lower multiples and … but Jollibee trades at lower FCF and Dividend yields, despite being larger, greater forward ROIC expansion, lower multiples than the comparable margins when adjusted apples-to-apples, has higher store productivity and peers despite greater generates higher returns. forward excess return expansion and higher store productivity

Jollibee Foods Corporation (JFC.PS / JFC PM) 32 06 December 2013

Figure 57: Jollibee head-to-head against NJA foodservice peers JFC Tsui Wah Ajisen Jubilant Average Symbol JFC.PS 1314.HK 0538.HK JUBI.BO Market Cap (US$ mn) 4,175 963 1,054 1,404 6mos ADTO (US$ mn) 2.7 2.0 2.5 6.0 CS Rating OUTPERFORM OUTPERFORM OUTPERFORM UNDERPERFORM P/E 2013E 40.1x 47.0x 28.6x 57.9x 43.4x 2014E 33.9x 35.7x 23.3x 45.3x 34.6x 2015E 27.5x 21.9x 19.8x 36.5x 26.4x EV/EBITDA 2013E 21.1x 35.9x 13.5x 29.9x 25.1x 2014E 18.1x 26.4x 10.8x 23.4x 19.7x 2015E 15.4x 15.2x 9.2x 18.9x 14.7x Gross margin 2013E 18.3%/54.4%* 69.4% 66.8% 73.1% 69.8% 2014E 18.7%/54.6%* 69.4% 66.4% 73.1% 69.6% 2015E 19.3%/55.1%* 69.5% 65.5% 73.1% 69.4% EBITDA margin 2013E 10.6%/14.2%* 16.8% 15.2% 16.1% 16.0% 2014E 10.8%/13.9%* 16.2% 16.8% 16.3% 16.4% 2015E 11.2%/15.0%* 18.9% 16.7% 16.3% 17.3% ROIC 2014E 18.75% 21.07% 9.49% 24.54% 18.46% ROIC 3yr Fwd ROIC Change 647 bps 1,400 bps 643 bps -705 bps 496 bps FCF Yield 2014E 1.61% -1.66% 4.50% 0.97% 1.35% Dividend Yield 2014E 1.78% 1.12% 1.41% 0.00% 1.08% Operating metrics 2013E Sales (USDm) 1,904 140 414 296 Sales growth (3Y Fwd CAGR) 14% 44% 12% 26% 24% Total stores (2013E) 2,778 30 672 576 % franchised 47% 0% 0% 0% Sales/avg store (USDm, 2013E) 0.71 5.59 0.62 0.50 1.85 EBITDA/avg store (USDm, 2013E) 0.08 0.94 0.09 0.09 0.30 Avg check size (USD) 3.72 30.54 6.90 n/a *comparable gross margin: adjusted COGS (only incl. cost of inventories) and excluding commisary sales to franchises Note: Priced as of Dec 5 2013 Source: Company data, Credit Suisse estimates

Jollibee Foods Corporation (JFC.PS / JFC PM) 33 06 December 2013 Investment risks The company’s business involves a number of risks, some of which are listed below: Macroeconomic As 80% of Jollibee’s system-wide sales and revenues come from the Philippines, its business is significantly influenced by the economic, political and social environment in the country. Our model assumes that domestic system-wide sales will grow at 13% p.a. over the next three years, driven by real private consumption growth of 6% p.a. Our economist also forecasts CPI inflation to increase 3-4% per year. Any adverse change in the Philippines’ economic condition could affect consumer sentiment, purchasing power and spending patterns and have a negative impact on consumer demand for Jollibee’s products and lead to downside risks in our revenue and earnings estimates. Foreign currency exchange Jollibee has significant foreign currency exchange risks as 20% of its revenues are from abroad (primarily China, US and Vietnam), and FX exposure is expected to increase as revenue growth from its international operations accelerates. As the company’s reporting currency is the Philippines Peso, any significant change in the RMB, USD, or VND is likely to change the company’s cost and revenue structures, leading to both upside and downside risks to our earnings estimates. Acquisition The company has made significant acquisitions and joint ventures in the past 3-4 years, and we expect acquisitions to continue as Jollibee seeks to expand both its brand portfolio and its regional presence. Therefore there are risks relating to any potential acquisition activity—risk of capital raising to fund investments, execution risk, and risk of overpaying for acquisition targets. Natural disaster As a country prone to multiple typhoons a year, the Philippines faces significant natural disaster risks, and Jollibee’s national presence is prone to business disruption. Management stated that the overall impact of Typhoon Yolanda on 4Q13 results was estimated to be manageable, as property damage sustained on company-owned stores was insignificant and was covered by insurance. As of 13 November 2013, 23 stores mostly in Leyte and Samar remained closed due to property damage and disruption of product supply. While these stores represent only 1.1% of the JFC Group’s total store network in the Philippines, management remains uncertain when the stores will re-open.

Jollibee Foods Corporation (JFC.PS / JFC PM) 34 06 December 2013

Companies Mentioned (Price as of 05-Dec-2013) Ajisen (0538.HK, HK$7.5) Alliance Global Group Inc (AGI.PS, P24.3) Belle Corporation (BEL.PS, P5.27) Bloomberry Resorts Corporation (BLOOM.PS, P9.87) Cafe De Coral (0341.HK, HK$25.55) Central Plaza Hotel PCL (CENT.BK, Bt36.0) Chipotle Mexican (CMG.N, $518.11) Colgate-Palmolive India (COLG.BO, Rs1259.4) Dominos Pizza (DPZ.N, $68.71) ITC Ltd (ITC.BO, Rs308.9) Jollibee Foods Corporation (JFC.PS, P174.0, OUTPERFORM, TP P205.0) Jubilant Foodworks (JUBI.BO, Rs1363.65) McDonald's Corp (MCD.N, $95.71) Minor International PCL (MINT.BK, Bt24.0) Mitra Adiperkasa (MAPI.JK, Rp5,350) Nestle (NESN.VX, SFr64.5) Nestle India (NEST.BO, Rs5077.5) PepsiCo, Inc. (PEP.N, $82.65) Procter & Gamble Co. (PG.N, $83.35) Puregold Price Club, Inc (PGOLD.PS, P41.6) Seven & i Holdings (3382.T, ¥3,740) Starbucks (SBUX.OQ, $79.5) The Wendy's Company (WEN.OQ, $8.54) Tsui Wah Holding (1314.HK, HK$5.4) Universal Robina Corp. (URC.PS, P119.1) Wal-Mart Stores, Inc. (WMT.N, $80.22) Yum! Brands, Inc. (YUM.N, $75.66)

Disclosure Appendix

Important Global Disclosures I, Karim P. Salamatian, CFA, 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 les s 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 American 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; Austr alia, New Zealand are, and 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.

Jollibee Foods Corporation (JFC.PS / JFC PM) 35 06 December 2013

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. A n analyst may cover multiple sectors.

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

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 42% (54% banking clients) Neutral/Hold* 41% (49% banking clients) Underperform/Sell* 15% (41% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d 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 bas is. (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 Jollibee Foods Corporation (JFC.PS) Method: Our 12-month target price of PHP205 for Jollibee Foods Corporation is based on the average of: (1) P/E (price-to-earnings) multiple (40x 2014E EPS and 33x 2015E EPS) of PHP209/share; (2) EV/EBITDA (enterprise value-to-earnings before interest, depreciation and amortisation) multiple (21x 2014E EV/EBITDA and 18x 2015E EV/EBITDA) of PHP207/share and (3) DCF (discounted cash flow) value of PHP202/share (8.2% WACC, 10x EBITDA terminal value, 11% FCF CAGR) Risk: Risks that could impede achievement of our target price of PHP205 for Jollibee Foods Corporation include: macroeconomic risks that would have a negative impact on consumer demand, foreign currency exchange risk (20% of JFC's revenues are from abroad), acquisition risk, and natural disaster risks.

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 (CMG.N, MCD.N, NESN.VX, PG.N, PEP.N, WMT.N, URC.PS, BEL.PS, MINT.BK, MAPI.JK, 3382.T, NEST.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 (CMG.N, MCD.N, NESN.VX, PG.N, WMT.N, URC.PS, MINT.BK, NEST.BO) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (MCD.N, NESN.VX, PG.N, PEP.N, WMT.N) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (NESN.VX, PG.N, WMT.N, URC.PS, NEST.BO) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (CMG.N, MCD.N, NESN.VX, PG.N, WMT.N, URC.PS, MINT.BK, NEST.BO) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (0538.HK, CMG.N, MCD.N, YUM.N, NESN.VX, PG.N, PEP.N, WMT.N, SBUX.OQ, URC.PS, BEL.PS, MINT.BK, MAPI.JK, 3382.T, NEST.BO, COLG.BO) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (MCD.N, NESN.VX, PG.N, PEP.N, WMT.N) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (CMG.N, MCD.N, WEN.OQ, YUM.N, PG.N, PEP.N, WMT.N, SBUX.OQ). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (JUBI.BO, NESN.VX). As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PG.N). An analyst or a member of the analyst's household has a long position in the common stock of (PG).

Jollibee Foods Corporation (JFC.PS / JFC PM) 36 06 December 2013

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PEP.N). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of PEP.N 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 (JFC.PS, JUBI.BO, 1314.HK, 0538.HK, CMG.N, MCD.N, WEN.OQ, YUM.N, NESN.VX, PG.N, PG.N, PEP.N, WMT.N, SBUX.OQ, URC.PS, BLOOM.PS, BEL.PS, AGI.PS, PGOLD.PS, MINT.BK, MAPI.JK, 3382.T, ITC.BO, NEST.BO, COLG.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. 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. The following disclosed European company/ies have estimates that comply with IFRS: (NESN.VX). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (MCD.N, NESN.VX, PG.N, WMT.N, URC.PS, NEST.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: Central Plaza Hotel PCL (Very Good) , Minor International PCL (Excellent) 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 (Hong Kong) Limited ...... Karim P. Salamatian, CFA ; Rebecca Kwee

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Jollibee Foods Corporation (JFC.PS / JFC PM) 37 06 December 2013

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