Company Guide BreadTalk Group Ltd

Version 11 | Bloomberg: BREAD SP | Reuters: BRET.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 25 Feb 2020 ACCEPT THE OFFER Takeover offer to the rescue Last Traded Price ( 21 Feb 2020): S$0.645 (STI : 3,142.20) Price Target 12-mth: S$0.49 (-24% downside) (Prev S$0.61) ACCEPT THE OFFER of S$0.77. We recommend shareholders to accept the cash offer of S$0.77. The founders and Minor Analyst International are intending to buy out minority shareholders and Alfie YEO +65 6682 3717 [email protected] delist BreadTalk to obtain more operational flexibility, and Andy SIM, CFA +65 6682 3718 [email protected] savings on listing costs since there is no need for the company to tap on capital markets. 4Q19 earnings was below our What’s New estimate, dragged by Bakery business and we see • 4Q19 below, dragged by China Bakery business headwinds from COVID19 affecting F&B Foodservice sector in • No final dividend declared both Singapore and China. Shareholders would be better off accepting the offer as: 1) the valuation is attractive at 33x FY20F • Founders and Minor International are offering to PE; 2) premium of 57% to our TP and 19.4% to yesterday’s privatise BreadTalk at S$0.77 in cash close; 3) we believe shareholders would find it difficult to hold • Takeover Offer above our valuation, accept the offer out for a higher offer price; 4) offer is higher than closing prices in the past 8 months. Where we differ. Our earnings forecasts are below consensus as Price Relative we have factored in a longer breakeven period for the new 4orth division. The division is in its infancy with scope to increase store count, but this will lengthen the division’s EBIT breakeven period. This unit should be capable of delivering similar margins to the restaurant division in the long term. We anticipate margins to head lower following the recent Food Junction acquisition as well. Potential catalyst. We see potential for a special dividend of up Forecasts and Valuation to 4.5Scts if Perennial sells AXA Tower assuming listing status is FY Dec (S$m) 2018A 2019A 2020F 2021F preserved. Revenue 610 665 694 730 EBITDA 79.7 193 217 232 Valuation: Pre-tax Profit 31.1 7.12 24.7 26.0 Our TP of S$0.49 is derived from sum-of-parts (SOTP) Net Profit 15.2 (5.2) 12.8 13.6 valuation. We value the retail business at S$0.50 on 22x PE on Net Pft (Pre Ex.) 16.4 (4.0) 12.8 13.6 FY20F earnings, investment properties at S$0.33 based on Net Pft Gth (Pre-ex) (%) 22.1 nm nm 5.5 EPS (S cts) 2.70 (0.9) 2.28 2.41 market value, and net debt at S$0.34. EPS Pre Ex. (S cts) 2.91 (0.7) 2.28 2.41 Key Risks to Our View: EPS Gth Pre Ex (%) 22 nm nm 6 Diluted EPS (S cts) 2.70 (0.9) 2.28 2.40 Operational risks include food safety and licences as well as Net DPS (S cts) 1.50 0.50 0.50 0.50 negative publicity. In extreme cases, food operating licences can BV Per Share (S cts) 23.7 26.2 28.0 29.9 be revoked for lapse in food safety procedures. Negative PE (X) 23.9 nm 28.3 26.8 publicity may lead to weaker demand and poorer marketability PE Pre Ex. (X) 22.1 nm 28.3 26.8 P/Cash Flow (X) 5.5 2.1 1.7 1.7 when selling its franchises as the public and franchisees would EV/EBITDA (X) 5.4 2.9 1.8 0.9 shy away from their association with BreadTalk. Net Div Yield (%) 2.3 0.8 0.8 0.8 At A Glance P/Book Value (X) 2.7 2.5 2.3 2.2 Net Debt/Equity (X) 0.2 0.8 CASH CASH Issued Capital (m shrs) 563 ROAE (%) 11.5 (3.7) 8.4 8.3 Mkt. Cap (S$m/US$m) 363 / 260 Major Shareholders (%) Earnings Rev (%): (3) (11) Consensus EPS (S cts): 1.4 2.1 Meng Tong Quek 33.9 Other Broker Recs: B: 0 S: 1 H: 2 Lih Leng Lee 18.6 Source of all data on this page: Company, DBS Bank, Thomson Reuters Primacy Investment Ltd 14.0 Free Float (%) 27.6 3m Avg. Daily Val (US$m) 0.55 GIC Industry : Consumer Discretionary / Consumer Services

ed: JS / sa: SM, PY, CS Company Guide

BreadTalk Group Ltd

WHAT’S NEW Takeover offer to the rescue

4Q19 disappoints, no final dividend declared BreadTalk, is close to the level that ensure success given BreadTalk’s sporadic shareholding structure. We therefore 4Q19 earnings below estimates: Net loss of S$8.1m was believe that is why the offeror did not state that the offer below our estimates. Revenue grew 10.1% y-o-y to S$170m price is final and there will be no revision to the offer price. led by Restaurants, Food courts and 4orth division, mainly on higher outlet count. Bakery division’s revenue declined 2% y- Shareholding structure is in favour of the offeror. The o-y to S$68.9m affected by China outlets. Operating and pre- advantage for the offeror at this offer premium is that the tax losses were S$18.3m and S$6.2m dragged by the Bakery shareholding structure of BreadTalk is sporadic, with the Division which recorded pre-tax loss of S$10.1m. No final second largest shareholder holding only a 4.99% stake based dividend was declared compared to 1 Sct final dividend in on shareholding structure listed on Bloomberg. As the second 4Q18. largest shareholder is way smaller, it is difficult for all the minority shareholders to collectively reject the S$0.77 offer to Offer to buy out and delist BreadTalk force the offeror to increase the offer price. Major shareholders looking to acquire all of BreadTalk and Why the offer makes sense for the offeror. At the offer price, delist it at S$0.77: BreadTalk announced that founders BreadTalk’s market cap or equity valuation is c.S$434m. It George Quek and Katherine Lee together with Minor would cost the offeror about S$130m to take out the International are offering to acquire all the issued ordinary remaining c.30% shareholders. Once privatised, the offeror shares in BreadTalk that they collectively do not own at a has 100% access to the balance sheet which has S$157.6m price of S$0.77 through a voluntary conditional cash offer. All cash as of Dec 2019. Over the past five years, the business three parties collectively own 70.53%. The offer is conditional was able to generate operating cash of at least S$65m upon the offeror holding more than 90% of total shares in annually. The owners will enjoy full benefit of this cash after BreadTalk at the close of the offer period. There are plans to privatisation. delist BreadTalk from the SGX should this condition be met. The offer premiums are as follows: More advantages for the offeror with the 90% offer condition. As the offer condition is set at 90%, we can view VWAP premium this as an all or nothing situation. If acceptances result in the Office price S$0.77 Offer premium offeror owning below 90% of total shares, the offer is off Last price S$0.645 19.4% and shareholders revert to status quo before the offer, even 1-month VWAP S$0.592 30.1% for shareholders that accepted the offer early. Once the 3-month VWAP S$0.621 24.0% offeror received acceptances to increase its shareholding to 6-month VWAP S$0.616 25.0% above 90%, it can invoke Rule 723 of the SGX listing manual 12-month VWAP S$0.639 20.5% to refuse to unwind the free float and suspend trading of Source: Offer announcement, DBS Bank shares as the free float is below 10%. At that point in time, the only way for shareholders to realise their investment The reasons for the offer: The offer announcement cited cost would be to accept the offer. Most remaining shareholders of listing status, greater management flexibility and no would by then also accept the offer. Based on Section 215 (1) necessity to access capital markets along with giving of the Companies Act, if the offeror receives 90% shareholders an opportunity to realise their investment as the acceptances of shares it does not own, and arrives at 97.05% rationale for the offer. shareholding, it can invoke compulsory acquisition on all We believe the deal makes sense for both the offeror and remaining shareholders at the prevailing offer price to reach shareholders 100% shareholding. Offer premiums reasonable in view of shareholding structure. Based on our database of successful privatisations on the SGX over the years, average premiums across the last price, 1, 3, 6, 12-month VWAPs of above 25% would normally ensure privatisation success. We feel that the premium offered by

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BreadTalk Group Ltd

Target compulsory threshold level is 97.05% shareholders would unlikely be able to hold out for a higher Shareholding Note offer price for reasons already mentioned above. The current Offeror’s current stake 70.53% offer is an opportunity for existing shareholders to exit the What the offeror does not 29.47% 100%-70.53% stock at an attractive valuation. At S$0.77, on our estimate, have the PE for FY20F earnings based would be attractive at 33x. 90% of what the offeror 26.52% 29.47% x 90% Offer price is higher than the past 8 months does not have Target shareholding for 97.05% 26.52%+70.53% compulsory acquisition Source: Offer announcement, DBS Bank

Offer is above our valuation, accept the offer at S$0.77

We recommend shareholders accept the offer. Operationally, BreadTalk is going through a difficult period especially its bakery business in China, which continues to be a drag. Furthermore, we believe the COVID19 situation would have strained F&B foodservice performance in China and Singapore for 1Q20. The objectives of the founders and strategic shareholders like Minor International have a longer-term Source: Bloomberg Finance L.P., DBS Bank investment horizon than minority shareholders. The near term outlook is not expected to be robust given COVID19 and the poor performance of China Bakery division. We reiterate that

Quarterly / Interim Income Statement (S$m) FY Dec 4Q2018 3Q2019 4Q2019 % chg yoy % chg qoq

Revenue 155 174 170 10.1 (1.9) Cost of Goods Sold (67.1) (57.8) (132) 96.9 128.7 Gross Profit 87.6 116 38.2 (56.4) (67.0) Other Oper. (Exp)/Inc (77.0) (105) (56.5) (26.7) (46.2) Operating Profit 10.6 10.8 (18.3) nm nm Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - - Associates & JV Inc (1.0) 0.07 (0.6) 32.6 nm Net Interest (Exp)/Inc (0.6) (6.2) 13.9 nm nm Exceptional Gain/(Loss) 1.95 0.0 (1.1) nm nm Pre-tax Profit 11.1 4.64 (6.2) nm nm Tax (3.2) (2.7) (2.9) (9.6) 9.9 Minority Interest 1.07 (1.5) 1.02 (4.2) nm Net Profit 8.88 0.51 (8.1) nm nm Net profit bef Except. 6.93 0.51 (7.0) nm nm EBITDA 22.1 59.5 36.1 63.4 (39.3) Margins (%) Gross Margins 56.6 66.7 22.4 Opg Profit Margins 6.9 6.2 (10.7) Net Profit Margins 5.7 0.3 (4.8)

Source of all data: Company, DBS Bank

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BreadTalk Group Ltd

Bakery outlets CRITICAL DATA POINTS TO WATCH

Critical Factors Focus on driving higher operating efficiencies and margin improvement. The focus is to raise efficiency of its existing operations, lower operating costs, and expand margins. We expect operating margins to improve once operating synergies are achieved.

Driving margin improvement through cost efficiencies. Initiatives such as better demand planning, more efficient human resource Restaurant outlets planning, and tighter cost controls have benefitted operating margins. These have led to lower food wastage, and reduction in unnecessary payroll expenses. Management has also been spending less on capex, leading to some moderation in depreciation expenses going forward.

Longer breakeven for 4orth division over the immediate term. We see the new 4orth division concept restaurants as a longer term driver of earnings. Concept brands include Sō Ramen, TaiGai, and Nayuki bakery outlets in Singapore, and Song Fa Bak Kut Teh and Wu Pao Chun Bakery outlets in China. Over Food court outlets time, we expect the division to yield higher margins, similar to the Restaurant division. But for now, the division is in a start-up phase and we see the operation taking a longer-than-expected time reach breakeven. This will be a slight drag on group operating profit and margins in the coming quarters.

Changes to management personnel, tenant mix and tenant quality have enabled Food Atrium to turn profitable. The Food Atrium division made a marked turnaround in FY17 after it closed non-performing outlets in tier 2 cities in China the year before. Food Atrium’s management team in China was Total replaced with new personnel who have made changes to tenant quality and tenant mix, leading to improvements in performance and occupancy at Food Atriums in China. It will now focus on its operations in Beijing, , Shenzhen and Guangzhou where tables can turn more frequently. Earnings recovery is on track, driven by better profitability and cost leverage from Food Atrium division across outlets in Beijing, Xi’an, , and Singapore.

Din Tai Fung is in London. BreadTalk has opened a new outlet in Covent Garden last year via a JV (where BreadTalk is the Annual sales per outlet S$m major shareholder) with Fairy Rise Development ( franchise owner), Din Tai Fung , a UK partner and a Taiwanese individual. Another outlet is scheduled to open in 2020 at Centre Point in Tottenham Court Road. We see scope for more outlets in Thailand as there are only eight Din Tai Fung restaurants there. As restaurant margins are attractive, a better sales mix from the restaurant business would improve overall profitability eventually.

Source: Company, DBS Bank

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BreadTalk Group Ltd

Appendix 1: A look at Company's listed history – what drives its share price?

Share price has been driven by various factors including earnings, properties and strategic investors

Source: DBS Bank

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BreadTalk Group Ltd

Leverage & Asset Turnover (x) Balance Sheet: Cash business; balance sheet in net debt. As with all food service companies, BreadTalk is a cash business. The business generated S$65-170m of operating cashflows annually and with positive free cashflows in the last five years. Net debt as of end-December 2019 was about c.S$199m, equivalent to approximately 33.6 Scts per share, representing a net debt ratio of 1.28x. BreadTalk was in net cash till FY12 when it built its BreadTalk IHQ. In FY13 when it opened its IHQ, net debt stood at S$89m. It has S$100m of medium-term notes issued in 1Q18 due on 17 January 2023 at 4% coupon for general corporate Capital Expenditure purposes, including refinancing of existing borrowings, and financing capital expenditure and general working capital.

Share Price Drivers: Changes to property holdings likely to drive share price. Valuations for BreadTalk re-rated to an all-time high when it moved into its IHQ in 2013. Similarly, when it sold 112 Katong last year and declared special dividends, its share price re-rated as well. In 4Q16, BreadTalk announced the sale of 111

Somerset, which also lifted its share price in anticipation of special dividends. We expect special dividends if and when AXA ROE (%) and/or CHIJMES is sold. The adoption of SFRS (I) 9 in 2Q19 which accounts for investment securities at fair value has led us to increase our SOTP-based TP for the investment properties component.

Key Risks: Food safety and licences. As a restaurant operator, it is important to maintain food safety. Lapses would lead to reputational risks and in extreme cases, food operation licences could be revoked. PB Band (x)

Negative publicity affects consumer confidence and the marketability of its franchise. BreadTalk has had some negative publicity, especially in 2015 over food safety and food preparation procedures in Singapore and China. Incidents such as these can generate negative response from the public which could affect sales as well as the marketability of its franchise overseas.

Environment, Social, Governance:

BreadTalk is focused in ensuring food safety and hygiene, Source: Company, DBS Bank improving customer satisfaction and imparting good values to its people. Sustainability areas include Food Safety and Hygiene, Regulatory Compliance, Business Ethics, Economic Performance, Risk Management and Customer Satisfaction.

Company Background BreadTalk Group is a Singapore-based food and beverage (F&B) group engaged in the operations and franchising of bakery/confectionery outlets, food courts and restaurants across the region. BreadTalk’s portfolio currently has six brands – BreadTalk, ToastBox, , Ramen Play, San Pou Tei and Din Tai Fung. It operates over 900 outlets across 17 countries.

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Company Guide

BreadTalk Group Ltd

Key Assumptions FY Dec 2017A 2018A 2019A 2020F 2021F Bakery outlets 871 863 897 902 907 Restaurant outlets 25.0 28.0 33.0 34.0 36.0 Food court outlets 53.0 60.0 82.0 86.0 90.0 Total 949 951 1,012 1,022 1,033 Annual sales per outlet 0.63 0.63 0.64 0.66 0.69 S$m Segmental Breakdown FY Dec 2017A 2018A 2019A 2020F 2021F Revenues (S$m) Bakery operations 297 282 288 295 303 Restaurant sales 141 152 175 184 199 Food Atrium income 149 157 165 177 189 4orth 7.86 14.2 32.5 34.1 35.8 Others 4.62 4.41 4.27 4.27 4.27 Total 600 610 665 694 730 Operating profit (S$m) ( S$Bakerym) operations 9.46 6.49 10.1 9.74 9.99 Restaurant sales 24.4 22.2 24.1 24.9 26.8 Food Atrium income 8.90 16.6 19.7 20.3 22.5 4orth (0.3) (3.7) (9.6) (9.6) (9.6) Others (7.0) (1.4) (32.3) (16.8) (16.8) Total 35.5 40.2 11.9 28.5 32.8 Operating profit margins (%) Bakery operations 3.2 2.3 3.5 3.3 3.3 Restaurant sales 17.4 14.6 13.8 13.5 13.5 Food Atrium income 6.0 10.6 11.9 11.5 11.9 4orth (4.2) (26.3) (29.7) (28.3) (26.9) Others (150.6) (31.5) (755.5) (394.0) (394.0) Total 5.9 6.6 1.8 4.1 4.5

Income Statement (S$m) FY Dec 2017A 2018A 2019A 2020F 2021F Revenue 600 610 665 694 730 Cost of Goods Sold (266) (267) (295) (309) (325) Gross Profit 333 343 370 385 405 Other Opng (Exp)/Inc (298) (303) (358) (357) (373) Operating Profit 35.5 40.2 11.9 28.5 32.8 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.21 (1.8) (0.7) (0.7) (0.8) Net Interest (Exp)/Inc (3.2) (6.0) (2.8) (3.0) (6.0) Exceptional Gain/(Loss) 8.27 (1.2) (1.3) 0.0 0.0 Pre-tax Profit 40.8 31.1 7.12 24.7 26.0 Tax (11.0) (11.4) (11.0) (9.1) (9.6) Minority Interest (8.1) (4.5) (1.4) (2.7) (2.9) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 21.7 15.2 (5.2) 12.8 13.6 Net Profit before Except. 13.4 16.4 (4.0) 12.8 13.6 EBITDA 76.2 79.7 193 217 232 Growth Revenue Gth (%) (2.5) 1.7 9.0 4.4 5.2 EBITDA Gth (%) (4.7) 4.5 141.8 12.9 6.7 Opg Profit Gth (%) 9.2 13.2 (70.4) 138.9 15.3 Net Profit Gth (Pre-ex) (%) 55.4 22.1 nm nm 5.5 Margins & Ratio Gross Margins (%) 55.6 56.3 55.6 55.5 55.5 Opg Profit Margin (%) 5.9 6.6 1.8 4.1 4.5 Net Profit Margin (%) 3.6 2.5 (0.8) 1.8 1.9 ROAE (%) 16.6 11.5 (3.7) 8.4 8.3 ROA (%) 4.0 2.6 (0.6) 1.0 1.1 ROCE (%) 7.4 6.8 (1.0) 2.0 2.3 Div Payout Ratio (%) 90.9 55.6 N/A 21.9 20.8 Net Interest Cover (x) 11.1 6.6 4.3 9.4 5.5

Source: Company, DBS Bank

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BreadTalk Group Ltd

Quarterly / Interim Income Statement (S$m) FY Dec 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019

Revenue 155 158 163 174 170 Cost of Goods Sold (67.1) (51.1) (54.3) (57.8) (132) Gross Profit 87.6 106 109 116 38.2 Other Oper. (Exp)/Inc (77.0) (97.2) (98.8) (105) (56.5) Operating Profit 10.6 9.22 10.2 10.8 (18.3) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (1.0) 0.0 (0.1) 0.07 (0.6) Net Interest (Exp)/Inc (0.6) (5.4) (5.1) (6.2) 13.9 Exceptional Gain/(Loss) 1.95 (0.2) 0.0 0.0 (1.1) Pre-tax Profit 11.1 3.65 5.01 4.64 (6.2) Tax (3.2) (2.5) (2.9) (2.7) (2.9) Minority Interest 1.07 0.12 (1.1) (1.5) 1.02 Net Profit 8.88 1.32 1.02 0.51 (8.1) Net profit bef Except. 6.93 1.48 1.02 0.51 (7.0) EBITDA 22.1 47.4 49.6 59.5 36.1

Growth Revenue Gth (%) (1.8) 1.8 3.6 6.3 (1.9) EBITDA Gth (%) 10.5 114.6 4.5 20.1 (39.3) Opg Profit Gth (%) 12.3 (13.1) 10.8 5.2 (270.0) Net Profit Gth (Pre-ex) (%) 142.2 (78.7) (30.6) (49.9) (1,457.3) Margins Gross Margins (%) 56.6 67.5 66.7 66.7 22.4 Opg Profit Margins (%) 6.9 5.8 6.3 6.2 (10.7) Net Profit Margins (%) 5.7 0.8 0.6 0.3 (4.8)

Balance Sheet (S$m) FY Dec 2017A 2018A 2019A 2020F 2021F

Net Fixed Assets 169 173 712 563 404 Invts in Associates & JVs 36.7 34.9 31.9 31.1 30.3 Other LT Assets 121 133 211 210 210 Cash & ST Invts 154 190 194 367 542 Inventory 9.72 11.3 15.1 13.7 14.4 Debtors 52.0 56.5 79.6 71.1 74.8 Other Current Assets 8.70 9.92 13.4 13.4 13.4 Total Assets 552 608 1,257 1,270 1,288

ST Debt 57.1 97.6 347 347 347 Creditor 90.3 97.0 106 105 111 Other Current Liab 109 110 271 271 271 LT Debt 126 128 0.0 0.0 0.0 Other LT Liabilities 14.5 12.9 351 351 351 Shareholder’s Equity 129 134 147 157 168 Minority Interests 25.5 29.1 35.6 38.3 41.2 Total Cap. & Liab. 552 608 1,257 1,270 1,288

Non-Cash Wkg. Capital (129) (129) (268) (278) (279) Net Cash/(Debt) (28.5) (36.2) (153) 19.7 195 Debtors Turn (avg days) 33.3 32.5 37.4 39.6 36.4 Creditors Turn (avg days) 143.1 151.7 324.4 322.9 314.9 Inventory Turn (avg days) 15.8 17.0 42.3 44.1 41.1 Asset Turnover (x) 1.1 1.1 0.7 0.5 0.6 Current Ratio (x) 0.9 0.9 0.4 0.6 0.9 Quick Ratio (x) 0.8 0.8 0.4 0.6 0.8 Net Debt/Equity (X) 0.2 0.2 0.8 CASH CASH Net Debt/Equity ex MI (X) 0.2 0.3 1.0 CASH CASH Capex to Debt (%) 20.0 21.2 13.5 11.5 11.5 Z-Score (X) 1.0 1.8 1.0 1.1 1.2

Source: Company, DBS Bank

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Company Guide

BreadTalk Group Ltd

Cash Flow Statement (S$m) FY Dec 2017A 2018A 2019A 2020F 2021F

Pre-Tax Profit 40.8 31.1 7.12 24.7 26.0 Dep. & Amort. 40.5 41.3 181 190 200 Tax Paid (10.1) (9.6) (8.7) (9.1) (9.6) Assoc. & JV Inc/(loss) (0.2) 1.80 0.71 0.75 0.79 Chg in Wkg.Cap. 15.0 (6.9) (31.1) 9.64 0.80 Other Operating CF (1.5) 7.85 22.0 0.0 0.0 Net Operating CF 84.4 65.6 171 216 218 Capital Exp.(net) (36.5) (47.8) (46.7) (40.0) (40.0) Other Invts.(net) 14.6 (3.6) (15.4) 0.0 0.0 Invts in Assoc. & JV (3.3) (0.5) 0.0 0.0 0.0 Div from Assoc & JV 0.06 0.89 0.0 0.0 0.0 Other Investing CF (12.7) (0.5) (89.4) 0.0 0.0 Net Investing CF (37.9) (51.5) (151) (40.0) (40.0) Div Paid (16.9) (11.3) (11.3) (2.8) (2.8) Chg in Gross Debt 1.34 43.8 121 0.0 0.0 Capital Issues 0.0 0.0 (0.4) 0.0 0.0 Other Financing CF (8.9) (2.5) (156) 0.0 0.0 Net Financing CF (24.4) 30.0 (46.8) (2.8) (2.8) Currency Adjustments (1.5) (0.4) 0.0 0.0 0.0 Chg in Cash 20.7 43.7 (27.4) 173 175 Opg CFPS (S cts) 12.3 12.9 35.8 36.6 38.6 Free CFPS (S cts) 8.52 3.17 22.0 31.2 31.6

Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank Analyst: Alfie YEO Andy SIM, CFA

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Company Guide

BreadTalk Group Ltd

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

Completed Date: 25 Feb 2020 08:19:37 (SGT) Dissemination Date: 25 Feb 2020 08:29:21 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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Company Guide

BreadTalk Group Ltd

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary position in Minor International recommended in this report as of 31 Jan 2020. 2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

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

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Company Guide

BreadTalk Group Ltd

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore.

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

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

Wong Ming Tek, Executive Director, ADBSR

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

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Company Guide

BreadTalk Group Ltd

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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

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

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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Company Guide

BreadTalk Group Ltd

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 , Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

THAILAND INDONESIA DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia) Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif 989 Siam Piwat Tower Building, DBS Bank Tower 9th, 14th-15th Floor Ciputra World 1, 32/F Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5 Bangkok Thailand 10330 Jakarta 12940, Indonesia Tel. 66 2 857 7831 Tel: 62 21 3003 4900 Fax: 66 2 658 1269 Fax: 6221 3003 4943 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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