Building on Melaka’s transformation - listed companyhattenland.listedcompany.com/misc/...Building-on-Melaka-Transform… · Building on Melaka’s transformation Investment thesis

Property Devt & Invt│Singapore│June 20, 2017

Company Note

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Hatten Land Ltd Building on Melaka’s transformation

Hatten Land is a developer of integrated developments, largely in Melaka. ■ It has a large pool of locked-in sales, which we believe underpin its medium-term ■earnings outlook.

Melaka property market is likely to benefit from the development of numerous mega ■projects.

Strong sponsor (Hatten Group) landbank pipeline to extend forward income visibility, ■in our view.

Initiate with Add rating and target price of S$0.38. ■

Company background Hatten Land (Hatten) is a developer of integrated developments, headquartered in Melaka. The company is led by CEO Mr Colin Tan and Deputy MD Mr Edwin Tan, who both have more than 10 years of experience in this market. Backed by sponsor Hatten Group, Hatten is one of the first developers in Melaka to introduce innovative property products and develop award-winning integrated projects to suit the changing lifestyle needs of consumers.

Large unrecognised sales underpin medium-term earnings outlook The group has four ongoing projects in its initial portfolio and recently acquired three land parcels. Underpinning our projected core net profit (before restructuring expenses) CAGR of 28.5% for FY16-19F are these ongoing development projects (excluding landbank) with a remaining potential GDV of c.RM1.65bn. Of this, RM660m is locked as yet-to-be-recognised presales, which we expect to be largely booked in FY17F-18F.

New infrastructure development to catalyse Melaka market The Melaka property market is the fifth-largest market in Malaysia. We believe there is significant growth potential in this market, which caters to not only the 0.9m domestic population but also more than 16m tourists that visit the city annually. In addition, new infrastructure projects such as the Kuala Lumpur-Singapore High Speed Rail and completion of the Melaka Impressions and Melaka Gateway tourist attractions are likely to draw more visitors and investors to Melaka as a holiday and investment destination.

Additional sponsor landbank to provide long-term income visibility To date, Hatten has exercised its right of first refusal (ROFR) for three land parcels within MOU period with its sponsor. There are two remaining land parcels measuring 74.86 acres. We estimate net debt-to-equity ratio to decline from 2.78x now to below 0.31x by FY6/19F. This puts the group in a strong position to acquire land for growth. In addition, the advantage of buying land from its sponsor would mean timely purchase and rapid asset turn, in our view, translating into higher ROEs over the medium-to-long term.

Initiate with Add rating We initiate with an Add rating and a target price of S$0.38, premised on a 45% discount to RNAV. We like Hatten for its exposure to the growth market of Melaka that is likely to benefit in the medium term from the mega infrastructure projects currently underway. Key risks include unfavourable forex translation and changes in local government policies on property market that could negatively affect end-buyer demand for properties.

SOURCE: COMPANY DATA, CIMB FORECASTS

▎ Singapore

ADD Consensus ratings*: Buy 1 Hold 0 Sell 0

Current price: S$0.18 Target price: S$0.38 Previous target: S$ Up/downside: 108.6% CIMB / Consensus: na

Reuters: HATT.SI Bloomberg: HATT SP Market cap: US$180.8m S$250.3m Average daily turnover: US$0.15m S$0.21m Current shares o/s: 1,375m Free float: 17.2% *Source: Bloomberg Key changes in this note

N/A

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -4.2 -35 6.4 Relative (%) -5.1 -37.5 -11.1

Major shareholders % held Hatten Holdings 82.8

Analyst(s)

LOCK Mun Yee T (65) 6210 8606 E [email protected]

Financial Summary Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FTotal Net Revenues (RMm) 436.3 412.3 450.1 742.2 952.8Operating EBITDA (RMm) 33.5 88.2 95.0 131.0 186.5Net Profit (RMm) 25.8 68.6 (11.8) 102.8 145.9Normalised EPS (RM) 0.02 0.09 0.08 0.10 0.14Normalised EPS Growth 37% 422% (7%) 22% 42%FD Normalised P/E (x) 33.93 6.50 6.98 5.72 4.03DPS (RM) 0.007 0.046 0.004 0.007 0.011Dividend Yield 1.33% 8.25% 0.65% 1.33% 1.89%EV/EBITDA (x) 40.63 8.98 9.58 7.02 4.73P/FCFE (x) NA 6.22 NA 11.04 16.89Net Gearing 263% 278% 168% 67% 31%P/BV (x) 14.29 10.29 6.16 3.55 2.21ROE 199% 184% 107% 79% 68%% Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)

73.0

94.9

116.8

138.6

0.140

0.190

0.240

0.290

Price Close Relative to FSSTI (RHS)

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Jun-16 Sep-16 Dec-16 Mar-17

Vol m

Property Devt & Invt│Singapore│Hatten Land Ltd│June 20, 2017

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Building on Melaka’s transformation Investment thesis Company background Hatten Land (Hatten) is the largest property developer, by market cap, listed on the SGX Catalist Board. Hatten is one of the niche property developers in Malaysia, specialising in integrated residential, hotel and commercial developments, largely in Melaka. Its sponsor is Hatten Group, which commenced its first development project in 2005 by rebuilding an abandoned project into Melaka’s largest shopping mall – Dataran Palawan Melaka Megamall. Successful completion of this project paved the way for other developments such as Terminal Palawan, including the hospitality, retail and residential properties.

Figure 1: Corporate structure of Hatten

SOURCE: CIMB RESEARCH, COMPANY

Track record in the Melaka property market Hatten ventured into property development in Melaka in 2005 through the acquisition from Lianbang Ventures Sdn Bhd of an abandoned mall project sitting on a 7.7ha site in the heart of Melaka town. The first phase of Dataran Pahlawan Melaka Megamall was completed in 2006 and the second phase was completed in 2008. To date, this mall remains the largest in Melaka and attracts c.1m shopper footfall per year. This was followed by the development of the Hatten Square project, comprising retail and hospitality properties. This project was completed in 2012. This is a testament to the group’s ability to develop, as well as manage properties. The focus on the differentiated integrated projects has led Hatten Group to win various awards such as “Best Luxury Suite Hotel” in 2014 and 2015 from the World Luxury Hotel Awards. Dataran Pahlawan Melaka Megamall was awarded the “Highly Commended Retail Development Malaysia” and “Highly Commended Retail Architecture Malaysia” at the Asia Pacific Property Awards 2013/14.


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Figure 2: Dataran Pahlawan Megamall Figure 3: Hatten Square Figure 4: Terminal Pahlawan

SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY

Management structure The company is helmed by Dato’ Colin Tan as executive chairman and Managing Director as well as Dato’ Edwin Tan as executive director and Deputy Managing Director. They are the founders of the Hatten group with more than 10 years of experience in the property market. Dato’ Colin’s expertise in in the area of sales and marketing, business growth, development and asset management and land acquisition, while Dato Edwin’s focus is on operations and development management. In addition, there is an experienced management team comprising John Lee (Head of Corporate & Finance), Johnson Chua (Group FC), Chang Foh Siong (Head of Development Management) and Mark Tan (Head of Business Development)

Figure 5: Management structure of Hatten


Benefiting from the transformation of Melaka Leading player in the Melaka property market Hatten is one of the largest players in the Melaka property scene. Today, Hatten has a total portfolio of 4.3m sq ft of net saleable area (NSA) in Melaka and a development landbank estimated at 7.93m sq ft gross floor area (GFA) in Melaka and Selangor. Its projects are progressively selling and will likely underpin near-term profit growth, in our view.

Board of Directors

Dato' Colin Tan (Executive Chairman & Managing Director and Head of Marketing

and Sales)

Dato' Edwin Tan (Executive Drector & Deputy

Managing Director and Head of Operations)

Lee Sok Khian John (Executive Director & Head

of Corporate & Finance)

Chong Foh Siong (Head of Development

Management)

Tan Kay Yan Mark (Head of Business

Development)

Chua Thiam Siew Johnson (Group

Financial Controller)


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Figure 6: Projects at a glance


Good location in Melaka Hatten’s projects are well located in the heart of Melaka Town with sea-facing views and proximity to tourist attractions. The completed Hatten City P1 is the tallest building in Melaka while Hatten City P2 enjoys beautiful sea-facing views. Meanwhile, its landbank pipeline, such as Movie-Town project is facing the Melaka Gateway project. Harbour City is located on Pulau Melaka where part of the Melaka Gateway project is being built and near the new international cruise terminal.

Figure 7: Location of Hatten’s existing and new projects

SOURCE: CIMB RESEARCH, COMPANY, GOOGLE MAPS

Launched projects Total Units GFA (sf) NSA (sf) Total GDV (RMm) (as at Jun 16)

% sold (as at Mar 17)

% completed (as at Mar 17)

Hatten City P1 Elements Mall 1,530 1,530,238 686,682 34% 100%

Silverscape Residences 745 820,188 591,638 85% 100%

Hatten Suites 589 240,616 165,132 93% 100%

Double Tree by Hilton 277 283,521Hatten City P2 Imperio Mall 786 622,313 285,885 60% 87%

Imperio Residence 950 797,478 545,478 51% 87%

Vedro by the River Vedro by the River 736 213,547 95,504 65 65% 99%Harbour City Harbour City Mall 1,831 1,766,847 1,033,914 17% 12%

Harbour City Suites 648 661,498 297,706 88% 12%

Harbour City Resort 637 586,771 407,545 37% 12%Harbour City Luxury Hotel 325 322,959 233,055 0% 12%

Unlaunched projects Site area (acre) GFA (sf) Est GDV (RMm)

Thea Wellness 2.05 517,928 300

MICC 9.34 1,627,402 942

Cyberjaya* 25.55 5,787,382 3,000

* Signed conditional SPA in Feb 2017. Plot ratio is estimated based on surrounding developments, subject to development order approval

849 (for Harbour City)

628 (for Hatten City P1)

363 (for Hatten City P2)


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Potential of the Melaka market The Melaka property market has grown steadily since 2010, aided by improving economic performance and increasing investments in the state. Although Melaka accounted for only 2.8% of the total population of Malaysia in 2015, its GDP per capita and median household income were higher than national averages in 2014, while its unemployment rate of 1% was lower than the national level of 3.1% in 2015. This bodes well for the property market in the state. Malaysia is targeting GDP growth of 5-6% p.a. between 2016 and 2020F, while Melaka is targeting economic growth of 5.5% for the same period, to be led by medium-term growth in the services industry, including wholesale, retail trade, accommodation, restaurants and utilities, transport, storage and communication sectors.

Figure 8: Melaka GDP growth and unemployment rate Figure 9: Melaka GDP by sector (2015)

SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BANK NEGARA MALAYSIA (BNM)

SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BNM

Property prices have risen by about 42% between 2010 and 2016, but are still lagging prices in Selangor and Kuala Lumpur. As at 4Q16, there were 172,359 housing units in Melaka, accounting for 3.5% of the total stock in Malaysia. Incoming supply is also moderate, amounting to just 3.3% of the total stock as at 4Q16, while unsold inventory makes up only 0.9% of the total stock. This bodes well for the outlook of the Melaka property market, in our view.

Figure 10: Breakdown of housing stock by state Figure 11: House price index by state

SOURCE: CIMB RESEARCH, NATIONAL PROPERTY INFORMATION CENTRE (NAPIC) SOURCE: CIMB RESEARCH, NAPIC

0%

1%

2%

3%

4%

5%

6%

7%

8%

2011 2012 2013 2014 2015

GDP growth Unemployment rate

Manufacturing40%Construction

3%

Services46%

Import duties0%

Agriculture11%

Mining and quarrying

0%

As at 4Q16 Msia KL Selangor Penang Johor Melaka

Existing stock 4,945,140 424,434 1,389,220 407,107 731,633 172,359

% of Msia 8.6% 28.1% 8.2% 14.8% 3.5%

Incoming supply 829,687 42,773 164,848 94,124 138,369 27,111

% of stock 5.2% 19.9% 11.3% 16.7% 3.3%

Planned supply 601,671 50,588 92,785 48,120 147,296 14,026

% stock 8.4% 15.4% 8.0% 24.5% 2.3%

Unsold unitsCompleted 14,792 717 1,718 1,896 3,671 1,080

Under construction 64,077 5,307 12,451 8,119 11,774 443

Sub-total 78,869 6,024 14,169 10,015 15,445 1,523

Unsold as % of stock 1.6% 1.4% 1.0% 2.5% 2.1% 0.9%

0

50

100

150

200

250

300

350

2000 2002 2004 2006 2008 2010 2012 2014 2016

Msia KL Selangor Johor Penang Melaka


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New infrastructure catalysts The inflow of mega projects and new infrastructure developments, such as Melaka Gateway and Kuala Lumpur-Singapore (KL-Singapore) High Speed rail, are likely to spur the growth of Melaka as well as increase the attractiveness of this location as an investment destination. KL-Singapore High Speed Rail (HSR) The 350km High Speed Rail is expected to cost RM43bn and is targeted for completion by 2026F. The bilateral agreement between the two countries was signed in Dec 2016, and civil works and tender for the private entity overseeing the train and rail assets are expected in late 2017F. Total travel time from KL to Singapore is anticipated to be 90 mins with the Singapore-Melaka leg expected to be 50 mins, and 40 mins from Melaka to KL. Ayer Keroh has been identified as one of the eight stations along this route. When completed, we expect the shortened travelling time to boost the attractiveness of Melaka as a holiday and investment destination.

Figure 12: Planned KL-Singapore HSR stations

SOURCE: THE JAKARTA POST, CIMB RESEARCH

A

Expansion of the Melaka International Airport Melaka International Airport currently enjoys flights from both international and domestic locations, the latest being direct flights operated by China Southern Airline from Guangzhou, which started in Sep 2016. In addition, weekly scheduled flights to and from Guangdong that would be operated by China Southern Airlines may further boost Chinese visitor arrivals, which made up 13% (1.68m) of the total foreign tourist arrivals into Malaysia in 2015. Of this, 53% visited Melaka. Melaka Gateway The planned RM42bn Melaka Gateway is a premier mixed development project comprising three reclaimed islands and one natural island, totalling 1,366 acres. Developed by KAJ Development, the entire project is expected to be completed by 2025F. The development will comprise an international cruise terminal, marina, entertainment and lifestyle, retail and luxurious residential condos (island 1), free trade economic zone (island 2), a deep sea port (island 3) as well as a shipbuilding, ship repair and maritime industrial park. According to media sources, Melaka Gateway is projected to generate an additional 2.5m tourists over the next 12 years. In addition, the Melaka International Cruise


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Terminal, part of the Melaka Gateway project, is scheduled to be completed in 2017F and around 250 cruise ships are expected to dock at the terminal annually by 2020F. The RM8bn deep sea port component is targeted for completion by 2019F.

Figure 13: Location of Melaka Gateway

SOURCE: THE JAKARTA POST, CIMB RESEARCH

More upside prospects for Hatten’s projects Hatten currently has four ongoing projects – Hatten City Phases 1 and 2, Harbour City and Vedro by the River. These projects total 4.34m sq ft, of which about 46% were sold as at Mar 2017. The group has a remaining RM660m of progress billings from these locked-in sales to be recognised in FY17F and FY18F.

Hatten City Phase 1 Hatten City Phase 1 is an integrated project comprising four blocks sitting atop a 13-storey shopping complex, together with five levels of carpark podium, two 44-storey service apartment blocks, a 19-storey hotel block, a 16-storey hotel block, and retail, residential and hotel (Doubletree Hilton) components. It sits on a total land area of 7 acres with a remaining land lease tenure of 94 years (expiring 20 Jun 2110F).

Construction of this project was completed on 31 Mar 2016. Under the JV agreement, the hotel, 1,567 carpark bays and levels 43 and 44 of Silverscape Residences are the landowners’ entitlement, in lieu of the land cost. These make up 9.6% of the total net saleable area of Hatten City Phase 1 and are equivalent to about RM200m, based on the gross development value (GDV) of Hatten City Phase 1.


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Figure 14: Hatten City Phase 1 Figure 15: Project details

SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY

Hatten City Phase 2 Hatten City Phase 2, also known as Imperio Melaka, is an adjoining project next to Phase 1and comprises a residential and commercial component with a 7-storey retail mall, two blocks of serviced residences and a 7-storey carpark with 1,412 lots. The development is currently under construction with an expected completion date in 2H17F. Under the JV agreement, all the parcels on the ground floor and mezzanine floor of the Imperio Mall, Cabana on level 13, penthouse units at levels 26 and 28 of Imperio Residences and 544 carparks on levels 6-8 belong to the landowners. These represent 9.8% of the total saleable area of Hatten City Phase 2 and are equivalent to RM111.1m based on the estimated GDV of the project.

Figure 16: Hatten City Phase 2 under construction Figure 17: Project details

SOURCE: CIMB RESEARCH SOURCE: CIMB RESEARCH, COMPANY

Vedro by the River Vedro by the River is a boutique retail development along the Melaka River. It comprises a 3-storey retail podium, one level of retail basement and two basement carparks with 128 bays. The development is expected to be completed by 2017F. Under the JV agreement, 6595.1 sq ft of Vedro’s ground floor belongs to the landowners.

Project Total Units GFA (sf) NSA (sf)% sold (as at

Jun 16)Hatten City P1 Elements Mall 1,530 1,530,238 686,682 34%

Silverscape Residences 745 820,188 591,638 85%Hatten Suites 589 240,616 165,132 93%Double Tree by Hilton 277 283,521

Project Total Units GFA (sf) NSA (sf) Total GDV (RMm) (as at Jun 16)


Hatten City P2 Imperio Mall 786 622,313 285,885 60%

Imperio Residence 950 797,478 545,478 51%363 (for Hatten City

P2)

Hatten Suites

Double Tree by Hilton Silverscape


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Figure 18: Vedro by the River

SOURCE: CIMB RESEARCH

Harbour City Harbour City is located on a 6-acre site on Pulau Melaka with a remaining land lease of 94 years (expiring 28 Sep 2110F). It is an integrated commercial development comprising a 5-storey commercial retail mall with one level of lower ground, 8-storey serviced suites together with six storeys of elevated carpark podium with 2,436 slots. There is a 5-storey indoor and outdoor theme park, one level of facilities floor and two 12-storey serviced suites blocks. The project is scheduled to be completed in 2019. Harbour City is located on Pulau Melaka, where the mega Melaka Gateway development is being built. We believe the attractiveness of Harbour City will gain momentum as the development of Melaka Gateway gathers momentum.

Figure 19: Artist’s impression of Harbour City Figure 20: Project details

SOURCE: COMPANY SOURCE: CIMB RESEARCH, COMPANY

Project Total Units GFA (sf) NSA (sf) Total GDV (RMm) (as at Jun 16)


Harbour City Harbour City Mall 1,831 1,766,847 1,033,914 17%

Harbour City Suites 648 661,498 297,706 88%

Harbour City Resort 637 586,771 407,545 37%Harbour City Luxury Hotel 325 322,959 233,055 0%

849 (for Harbour City)


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Figure 21: Location of Harbour City

SOURCE: COMPANY

New acquisitions bolster forward income visibility Hatten recently acquired three land parcels through its MOU pipeline from its sponsor Hatten Group. We estimate the additional 7.9m sq ft of GFA could effectively double its initial portfolio GFA and boost potential GDV by another RM2.3bn when fully completed and sold. Contributions from these projects have not been factored into our profit estimates.

Figure 22: Newly acquired landbank

SOURCE: COMPANY

Thea Wellness project We expect Thea Wellness, the group’s first venture into the wellness industry, to be launched in 2H17F. The project comprises a hotel block and a serviced apartment block. Located in Taman Melaka Raya, we estimate the 2.05-acre site would have a GDV of RM300m when fully sold. The project is slated for completion by 2020F.

Development Acre Tenure Location Type Plot ratio (x) Status

Thea Wellness project 2.05 99-yr till Feb 2094 MelakaIntegrated mixed development with hotel and service apartment blocks 5.8

Obtained development order approval

MICC project 9.34 99-yr till Feb 2110 Melaka

Integrated mixed development with shopping mall, cineplex, convention hall and auditorium, meeting rooms hotel block and serviced apartment 4

Obtained development order approval

Plot K to E project 66 na Melaka Reclamation land 6 Concept planning


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Figure 23: Artist’s impression of Thea Wellness

SOURCE: COMPANY

MICC project The MICC site is to be developed into an integrated mixed development that will comprise a shopping mall, cineplex, convention hall, auditorium, meeting rooms, hotel and serviced apartments. The site spreads over 9.34 acres of land area in the Melaka Tengah area and we estimate it will have a GDV of RM942m when completed.

Figure 24: Artist’s impression of MICC

SOURCE: COMPANY

Cyberjaya project The Cyberjaya project is slated to be developed in three phases into an integrated mixed development comprising retail, commercial (offices), residential, hospitality and a hospital. This will be the group’s first venture into medical tourism. The project spans 25.55 acres of freehold land in Cyberjaya and we expect it to have a GDV of RM3bn when completed.


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Figure 25: Artist’s impression of Cyberjaya project

SOURCE: COMPANY

Remaining assets under MOU and call options Under the non-binding MOU signed in Feb 2017, Hatten has the option to purchase another two land parcels totalling 74.86 acres in Melaka. These sites are well-located, facing Pulau Melaka and near the Melaka Gateway development.

Figure 26: List of remaining ROFR assets

SOURCE: COMPANY, CIMB RESEARCH

SWOT analysis Strengths: In our opinion, Hatten’s strength lies in its strong brand positioning in Melaka with a dominant market share. This is in addition to the good quality and strategic locations of its projects. Backed by an experienced management team and a supportive sponsor, the group has developed a good track record for its projects in Melaka. In addition, a ready development landbank would mean a short ‘time-to-market’ for its projects, in our view. Weaknesses: We believe Hatten’s activities are limited by its small balance sheet and high gearing. This may constrain Hatten’s ability to take on development opportunities that may arise in the next few years. Opportunities: We believe there are opportunities in the Melaka property market, given the numerous investment and infrastructure projects that have been identified, such as KL-Singapore High Speed Rail, Melaka Gateway and the expansion of the sea port and airport. This would raise Melaka’s profile as an investment destination and potentially attract more domestic and investment buyers into the property market. Threats: Given that the group’s exposure is almost entirely confined to the Melaka market, we believe any change in the socio-political environment in Melaka is a key risk faced by Hatten.

Development Acre Tenure Location Type Plot ratio (x) StatusPlot K to E project 66 na Melaka Reclamation land 6 Concept planning

Movie-Town project 8.8699-yr till Jun 2110

and Sep 2114 MelakaIntegrated development with retail, residential and hospitality units 6 Reclamation


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Figure 27: SWOT analysis


Business strategies and operations Continued focus on developing integrated projects The group intends to continue to leverage on its expertise in mixed development projects with prominent lifestyle features at accessible locations with developed amenities. This would enable the group to cater to the changing needs of customers and innovate on design. We believe this would allow the group to compete effectively in the market place.

Exploring opportunities to expand through M&As, JVs and strategic alliances In addition to outright land acquisitions, the group could also consider expansion via mergers and acquisitions, JVs or strategic alliances to strengthen its market position or expand into new complementary business areas.

Expansion into the region In the longer run, the group could look to expand its business in mixed developments and leverage on its established base in Melaka to expand into other markets in the Southeast Asian region. This would enable it to collaborate with other developers on prominent projects for longer-term earnings growth.

Financials We project core net profit (excluding exceptional items) CAGR of 28.5% for FY16-19F. This is underpinned by RM660m of unbilled sales at end-Mar 17 from ongoing projects, largely from Hatten P1 and P2. We project Hatten to incur net loss of RM11.8m in FY17F, before earnings pick up in FY18F-19F due to a one-off listing and reverse takeover (RTO) expense of RM87.8m. The construction of Hatten City Phase 1 was completed in FY16 and Hatten City Phase 2 is scheduled for completion in FY17F. We anticipate that these projects will continue to see good take-up rates post-completion.

Figure 28: Estimated profit contribution timeline by project


Dominant positioning in Malacca with strong brand awareness Small balance sheet

Ready landbank translates to quick asset turnaround time

Lack of township development could limit longer term income visibility

Experienced management team and Sponsor

Opportunity ThreatsStrong potential demand from domestic and investment buyer catchment pool

Changes in political landscape in markets where Hatten is in such as Melaka

New infrastructure and other investments in Melaka such as Melaka Gateway should increase the awareness of Melaka market as an investment destination

Location concentration risk

Strength Weakness

Project FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Hatten City P1Hatten City P2Vedro by the RiverHarbour City


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As a result of the fund raising and higher profitability, we project that net debt-to-equity ratio will decline from 278% at end-FY15 to 31% by end-FY19F. This would put the group in a strong position to reinvest for future earnings growth, in our view.

Figure 29: Our projections for Hatten net gearing level


The group’s dividend payout ratio policy is 10% of core net profit. Assuming this payout ratio, we estimate DPS of 0.4-1.1sen for FY17F-19F. This translates into FY17F-19F dividend yields of 0.6-1.8%, based on the current share price.

Valuation and recommendation We evaluate Hatten based on the RNAV of its current property portfolio and include the net present value (NPV) of the surplus from the remaining MOU assets. Hatten is currently trading at a 73% discount to its RNAV of S$0.69. Our target price of S$0.38 assumes a 45% discount to RNAV, taking into account Hatten’s smaller market cap and the Singapore developers’ average discount of 31%. Key catalysts include the faster-than-expected completion of the KL-Singapore High Speed Rail and Melaka Gateway, as well as Hatten’s other ongoing projects. Key risks include forex volatility, which could lead to translation risks, as well as unfavourable changes in local and property market policies that could negatively affect end-buyers’ demand.

Risks Forex translation volatility is the key risk to our view, as Hatten reports its financial statements in RM but its share price is in S$. Regulatory risk is also a concern as Hatten’s operations are largely located in Melaka. Any changes in state policies on land matters and changes in nationwide property policies could have adverse impact on its business.

0.0

0.5

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2.5

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FY15 FY16 FY17F FY18F FY19F

(x)


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Figure 30: Hatten Land RNAV breakdown


Figure 31: Singapore developers peer comparison


Properties Stake GFA (sf)Assumed

ASP (RMpsf)NPV of development

surplus (RMm)Hatten City P1 - Total 100% 3,565,541 233.0- Elements Mall 100% 1,530,238 1,600- Silverscape 100% 820,188 750- Hatten Suites 100% 240,616 600Hatten City P2 100% 2,051,391 209.0- Imperio Mall 100% 622,313 2,100- Imperio Residences 100% 797,478 850Harbour City 100% 4,178,231 780.0- Harbour City Mall 100% 1,766,847 1,700- Harbour City Suites 100% 661,498 900- Harbour City Resort 100% 586,771 1,700- Harbour City Hotel Tower B 100% 322,959 1,400Vedro by the River 100% 213,547 2,500 55.4Thea Wellness 100% 517,928 1,150 75.8MICC 100% 1,627,402 1,150 226.4Cyberjaya 100% 5,787,382 1,150 307.2

Total 1886.8

Add other net assets 229.2Less net debt -168.5Add new capital raised 82.6RNAV (before ROFR) 2030.1RNAV (before ROFR)/share (RM) 1.48

Add NPV of surplus from remaining ROFR assets 911.9

RNAV (incl ROFR assets) 2942.0RNAV (incl ROFR assets)/share (RM) 2.14RNAV (incl ROFR assets)/share (S$) 0.69

Assumed discount 45%

Target price (S$) 0.38

Price Tgt Px Mkt Cap RNAV Prem./(Disc.)(lc) (lc) (US$ m) FY17F FY18F FY19F FY17F to RNAV (%) FY17F FY18F FY17F FY18F

CapitaLand CAPL SP Add 3.57 4.19 10,958 16.5 17.6 15.0 5.24 -32% 0.84 0.82 2.7% 2.6%City Developments CIT SP Add 10.61 11.63 6,972 17.2 15.5 13.8 14.54 -27% 1.04 0.99 1.6% 1.8%Frasers Centrepoint Ltd FCL SP Add 1.91 2.05 4,011 12.8 10.9 9.8 2.94 -35% 0.67 0.64 4.5% 4.5%Global Logistic Properties GLP SP Hold 2.96 3.05 10,026 119.5 35.1 31.1 3.05 -3% 1.16 1.15 2.0% 2.0%Guocoland GUOL SP Add 1.93 2.59 1,646 10.7 8.1 8.0 3.46 -44% 0.67 0.63 2.8% 2.6%Hatten Land Ltd HATT SP Add 0.19 0.38 184 9.3 7.7 5.4 0.69 -73% 6.26 3.61 0.6% 1.3%Ho Bee Land HOBEE SP Add 2.38 2.78 1,145 12.1 20.2 na 3.97 -40% 0.54 0.53 3.7% 3.7%Hongkong Land Holdings Ltd HKL SP Add 7.51 8.50 17,670 17.3 16.6 16.8 13.00 -42% 0.62 0.63 2.7% 2.8%Perennial Real Estate Holdings PREH SP Add 0.90 1.08 1,077 na 85.1 15.2 1.79 -50% 0.55 0.54 0.4% 0.3%UOL Group UOL SP Add 7.61 7.96 4,427 17.5 16.6 15.7 9.95 -24% 0.73 0.71 2.0% 2.0%Wing Tai Holdings WINGT SP Add 2.02 2.05 1,130 626.4 55.9 20.2 3.16 -36% 0.51 0.50 3.0% 3.0%Singapore average 19.8 na 19.8 -31% 0.77 na 2.5% na

Div. Yield (%)Company Bloomberg Ticker

Recom. P/BV (x)Core P/E (x)


16

Appendix Industry outlook Overview of Melaka economy The Melaka property market has grown steadily since 2010, aided by improving economic performance and increasing investments in the state. Although Melaka accounted for only 2.8% of the total population of Malaysia in 2015, its GDP per capita and median household income were higher than national averages in 2014, while its unemployment rate of 1% was lower than the national level of 3.1% in 2015. This bodes well for the property market in the state. Malaysia is targeting GDP growth of 5-6% p.a. between 2016 and 2020F, while Melaka is targeting economic growth of 5.5% for the same period, to be led by medium-term growth in the services industry, including wholesale, retail trade, accommodation, restaurants and utilities, transport, storage and communication sectors.

Figure 32: Malaysia GDP growth and unemployment rate Figure 33: Malaysia GDP by sector (2015)

SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BNM SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BNM

Figure 34: Melaka GDP growth and unemployment rate Figure 35: Melaka GDP by sector (2015)

SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BNM SOURCE: CIMB RESEARCH, DEPARTMENT OF STATISTICS, BNM

0%

1%

2%

3%

4%

5%

6%

7%

2011 2012 2013 2014 2015


Manufacturing23%

Construction4%

Services54% Import duties

1%

Agriculture9%


9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2011 2012 2013 2014 2015


Manufacturing40%Construction

3%

Services46%

Import duties0%

Agriculture11%


0%


17

Property market outlook Residential The Melaka residential market recorded sales CAGR of 1.7% in 2010-15. As at end-1Q16, there was total stock of 168,021 units in the state, of which the majority were located in Melaka Tengah. Most of the total supply (68%) comprised landed housing, while non-landed (condos/apartments/service apartments) only made up 6% of the total stock.

Figure 36: Existing residential supply by type (2015) Figure 37: Incoming supply

SOURCE: CIMB RESEARCH, NAPIC SOURCE: CIMB RESEARCH, NAPIC, NTL RESEARCH CONSULTING

The recent increase in non-landed housing in Melaka was likely due to increasing number of tourists and property investors. As a result, as at end-1Q16, there were 6,400 high-rise properties under construction and slated for completion over the next three years. A further 3,135 units are in the planning stage. Notable upcoming developments include Impression City, Melaka Gateway, Cheng Ho City and Eco Marine Theme Park.

Figure 38: Breakdown of housing stock by state Figure 39: House price index by state

SOURCE: CIMB RESEARCH, NAPIC SOURCE: CIMB RESEARCH, NAPIC

The outlook for the residential market remains positive in the short-to-medium term, with the planned completion of the KL-Singapore High Speed Rail (with stop in Ayer Keroh) in 2026F, as well as the establishment of a new port at Melaka Gateway. Retail There is currently 4.5m sq ft of retail space in Melaka, of which 65% is located in Melaka town. Average occupancy was c.80% in 2015. Over the next 3-4 years, we expect an additional 2.24m sq ft of new space to be completed, including the Elements, Vedro, Imperio and Harbour City Mall. Rental rates

Terrace51%

Semi-D7%

Detached9%

Townhse1%

Cluster0%

Low cost 26%

Svc apt0% Condo/Apt

6% Project Developer Area Units Launched Completion ASP (RMpsf) % soldSilverScape Residences Hatten Grp Melaka City 745 2011 2016 654 85%Imperio Residence Hatten Grp Melaka City 950 2013 2017 849 47%The Wave Residences Faithview Grp Kota Laksamana 450 2014 2017 700-800 80%The Atlantis Teladan Setia Kota Laksamana 1360 2014 2017 420-540 60%The Greens Block B Jaya Mapan Kota Laksamana 255 2014 2018 600-700 80%The Greens Block C Jaya Mapan Kota Laksamana 306 4Q16 2018 899-900 naThe Apple Yong Tai Melaka City 361 2014 2018 600-700 60%

As at 4Q16 Msia KL Selangor Penang Johor Melaka

Existing stock 4,945,140 424,434 1,389,220 407,107 731,633 172,359

% of Msia 8.6% 28.1% 8.2% 14.8% 3.5%

Incoming supply 829,687 42,773 164,848 94,124 138,369 27,111

% of stock 5.2% 19.9% 11.3% 16.7% 3.3%

Planned supply 601,671 50,588 92,785 48,120 147,296 14,026

% stock 8.4% 15.4% 8.0% 24.5% 2.3%

Unsold unitsCompleted 14,792 717 1,718 1,896 3,671 1,080

Under construction 64,077 5,307 12,451 8,119 11,774 443

Sub-total 78,869 6,024 14,169 10,015 15,445 1,523

Unsold as % of stock 1.6% 1.4% 1.0% 2.5% 2.1% 0.9%

0

50

100

150

200

250

300

350

2000 2002 2004 2006 2008 2010 2012 2014 2016

Msia KL Selangor Johor Penang Melaka


18

have been flattish and we expect them to remain stable over the next two years, with yields of around 7%. The increased competition would mean that new malls with differentiated concepts are likely to attract more shopper footfall, in our view.

Figure 40: Supply and occupancy of retail space in Melaka Figure 41: Selected upcoming retail centres

SOURCE: CIMB RESEARCH, NAPIC, NTL RESEARCH CONSULTING SOURCE: CIMB RESEARCH, NAPIC, NTL RESEARCH CONSULTING

Hospitality Melaka saw 15.74m tourist arrivals in 2015. Of this, 4.4m were international arrivals and the remaining were domestic tourists. Chinese nationals made up a significant 20% of international tourists in 2015. There are currently 144 hotels in Melaka offering 11,853 rooms. Average hotel occupancy was 66% in 2015 and the average room rate stood at RM141/night. Tourists stayed an average of 2.18 nights in 2015. In our view, the outlook for Melaka’s hotel occupancy remains positive as there are c.3,422 new rooms expected over the next three years. Malaysia is targeting 36m tourist arrivals by 2020F and Melaka aims to attract half of that number (18m tourists). Based on our estimates, hotels in Melaka generally have an indicative yield of 7-8%, while those for sale have yields of 6% for a lease term of 6-9 years.

Figure 42: Tourist arrivals in Malaysia and Melaka Figure 43: Breakdown of domestic and foreign tourists in Melaka


77%

78%

79%

80%

81%

82%

83%

84%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2010 2011 2012 2013 2014 2015 1Q16Stock (msf) Occupancy

Project Opening NLA (sf)Freeport A'Famosa Outlet P2 2016 62000Elements Mall 2017 686682Vedro by the River 2017 95504Imperio Mall 2018 285885Harbour City Mall 2020 1033914Freeport A'Famosa Outlet P3 na 73000

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015

m

Melaka Total

0

2

4

6

8

10

12

14

16

18

20

2010 2011 2012 2013 2014 2015

m

Domestic Foreign


19

Figure 44: Melaka hotel average occupancy rate (AOR) and average room rate (ARR)

Figure 45: Selected new hotel openings in Melaka (2016-2021F)


126

128

130

132

134

136

138

140

142

144

58%

60%

62%

64%

66%

68%

70%

72%

2010 2011 2012 2013 2014 2015

AOR ARR (RM/rm nite)

Hotel Area Opening Star rating No of roomsIbis Hotel Melaka City 2016 3 247Double Tree by Hilton Melaka City 2017 4 277Courtyard by Marriott Melaka City 2018 4 284Park Hotel, The Green Kota Laksamana 2019 4 245Harbour City Resort Pulau Melaka 2021 4 637Harbour City Luxury Hotel Pulau Melaka 2021 5 325


20

BY THE NUMBERS

SOURCE: CIMB RESEARCH, COMPANY DATA

50%73%96%119%141%164%187%210%

050

100150200250300350

Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F

P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (rhs)

-60%26%111%197%283%369%454%540%

0.82.84.86.88.8

10.812.814.8

Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F

12-mth Fwd FD Normalised P/E vs FD Normalised EPS Growth

12-mth Fwd Rolling FD Normalised P/E (x) (lhs)

Diluted Normalised EPS Growth (rhs)

Profit & Loss

(RMm) Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FTotal Net Revenues 436.3 412.3 450.1 742.2 952.8Gross Profit 93.9 154.7 173.8 275.8 391.4Operating EBITDA 33.5 88.2 95.0 131.0 186.5Depreciation And Amortisation 0.0 0.0 0.0 0.0 0.0Operating EBIT 33.5 88.2 95.0 131.0 186.5Financial Income/(Expense) (0.2) 3.3 0.5 (0.3) 1.0Pretax Income/(Loss) from Assoc. 0.0 0.0 0.0 0.0 0.0Non-Operating Income/(Expense) 3.5 4.5 4.5 4.5 4.5Profit Before Tax (pre-EI) 36.8 96.0 100.0 135.2 192.0Exceptional Items 0.3 0.4 (87.8) 0.0 0.0Pre-tax Profit 37.1 96.4 12.2 135.2 192.0Taxation (11.3) (27.9) (24.0) (32.5) (46.1)Exceptional Income - post-taxProfit After Tax 25.8 68.6 (11.8) 102.8 145.9Minority Interests 0.0 0.0 0.0 0.0 0.0Pref. & Special Div 0.0 0.0 0.0 0.0 0.0FX Gain/(Loss) - post taxOther Adjustments - post-taxPreference Dividends (Australia)Net Profit 25.8 68.6 (11.8) 102.8 145.9Normalised Net Profit 36.8 96.0 100.0 135.2 192.0Fully Diluted Normalised Profit 36.8 96.0 100.0 135.2 192.0

Cash Flow

(RMm) Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FEBITDA 33.55 88.24 94.99 131.04 186.51Cash Flow from Invt. & Assoc. 0.00 0.00 0.00 0.00 0.00Change In Working Capital (41.19) (54.91) (75.92) (34.96) (112.66)Straight Line Adjustment(Incr)/Decr in Total ProvisionsOther Non-Cash (Income)/ExpenseOther Operating Cashflow 2.36 2.62 2.48 4.08 10.48Net Interest (Paid)/Received (0.71) (0.86) (1.10) (1.10) (1.10)Tax Paid (10.65) (17.48) (53.35) (24.01) (32.45)Cashflow From Operations (16.65) 17.61 (32.90) 75.06 50.79Capex (10.68) (29.03) (5.00) (5.00) (5.00)Disposals Of FAs/subsidiariesDisposals of Investment PropertiesAcq. Of Subsidiaries/investments 0.00 0.00 (1.19) 0.00 0.00Other Investing Cashflow 0.00 0.00 0.00 0.00 0.00Cash Flow From Investing (10.68) (29.03) (6.19) (5.00) (5.00)Debt Raised/(repaid) 4.16 111.66 0.00 0.00 0.00Proceeds From Issue Of Shares 25.00 0.00 82.93 0.00 0.00Shares RepurchasedDividends Paid (0.32) (51.49) (5.06) (10.28) (14.59)Preferred DividendsOther Financing Cashflow 0.00 0.00 0.00 0.00 0.00Cash Flow From Financing 28.84 60.17 77.86 (10.28) (14.59)


21

BY THE NUMBERS… cont’d

SOURCE: CIMB RESEARCH, COMPANY DATA

Balance Sheet

(RMm) Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FTotal Cash And Equivalents 24.1 81.9 39.0 104.1 141.9Properties Under Development 479.8 476.4 523.8 602.1 692.1Total Debtors 352.2 212.5 264.8 436.6 560.5InventoriesTotal Other Current Assets 43.1 47.1 47.1 47.1 47.1Total Current Assets 899.2 817.9 874.7 1,189.9 1,441.5Fixed Assets 39.1 64.1 66.6 67.5 62.1Total Investments 0.0 0.0 0.0 0.0 0.0Intangible Assets 0.0 0.0 0.0 0.0 0.0Total Other Non-Current Assets 39.1 51.3 51.3 51.3 51.3Total Non-current Assets 78.2 115.4 117.9 118.8 113.4Short-term Debt 40.4 51.9 51.9 51.9 51.9Current Portion of Long-Term DebtTotal Creditors 464.3 289.0 312.7 527.9 629.1Other Current Liabilities 190.0 159.9 130.5 139.0 152.6Total Current Liabilities 694.6 500.8 495.1 718.8 833.6Total Long-term Debt 98.5 198.6 198.6 198.6 198.6Hybrid Debt - Debt ComponentTotal Other Non-Current Liabilities 140.6 173.3 173.3 173.3 173.3Total Non-current Liabilities 239.1 371.9 371.9 371.9 371.9Total Provisions 0.0 0.0 0.0 0.0 0.0Total Liabilities 933.7 872.7 867.1 1,090.7 1,205.5Shareholders' Equity 43.7 60.6 125.5 218.0 349.3Minority Interests 0.0 0.0 0.0 0.0 0.0Total Equity 43.7 60.6 125.5 218.0 349.3

Key Ratios

Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FRevenue Growth 78.0% (5.5%) 9.2% 64.9% 28.4%Operating EBITDA Growth 42% 163% 8% 38% 42%Operating EBITDA Margin 7.7% 21.4% 21.1% 17.7% 19.6%Net Cash Per Share (RM) (0.10) (0.15) (0.15) (0.11) (0.08)BVPS (RM) 0.04 0.05 0.09 0.16 0.25Gross Interest Cover 47.1 103.2 86.3 119.1 169.5Effective Tax Rate 0% 0% 0% 0% 0%Net Dividend Payout Ratio 22.6% 53.6% 5.1% 7.6% 7.6%Accounts Receivables Days 225.0 250.6 193.5 172.5 191.0Inventory Days - - - - - Accounts Payables Days 371.4 535.1 397.4 328.9 376.1ROIC (%) 14.3% 21.0% 17.9% 19.5% 26.4%ROCE (%) 21.9% 37.4% 28.1% 31.2% 35.3%Return On Average Assets 4.5% 9.8% 10.3% 11.8% 13.4%

Key Drivers

Jun-15A Jun-16A Jun-17F Jun-18F Jun-19FUnbooked Presales (m) (RM) N/A N/A N/A N/A N/AUnbooked Presales (area: m sm) N/A N/A N/A N/A N/AUnbooked Presales (units) N/A N/A N/A N/A N/AUnsold attrib. landbank (area: m sm) N/A N/A N/A N/A N/AGross Margins (%) N/A N/A N/A N/A N/AContracted Sales ASP (per Sm) (RM) N/A N/A N/A N/A N/AResidential EBIT Margin (%) 7.7% 21.4% 21.1% 17.7% 19.6%Investment rev / total rev (%) N/A N/A N/A N/A N/AResidential rev / total rev (%) 100.0% 100.0% 100.0% 100.0% 100.0%Invt. properties rental margin (%) N/A N/A N/A N/A N/ASG&A / Sales Ratio (%) N/A N/A N/A N/A N/A


22

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Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AMATA, AOT, AP, BA, BANPU, BBL, BCH, BCP, BDMS, BEAUTY, BEC, BEM, BH, BIG, BLA, BLAND, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EGCO, EPG, GLOBAL, GLOW, GPSC, GUNKUL, HANA, HMPRO, ICHI, IFEC, INTUCH, IRPC, ITD, IVL, KAMART, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MINT, MTLS, PLANB, PSH, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, RS, S, SAMART, SAWAD, SCB, SCC, SCN, SGP, SIRI, SPALI, SPCG, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TTCL, TTW, TU, TVO, UNIQ, VGI, VIBHA, VNG, WHA. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. 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Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A

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Spitzer Chart for stock being researched ( 2 year data )

Hatten Land Ltd (HATT SP)

Rating Distribution (%) Investment Banking clients (%)Add 55.9% 5.2%Hold 30.0% 1.6%Reduce 10.4% 0.3%

Distribution of stock ratings and investment banking clients for quarter ended on 31 March 20171244 companies under coverage for quarter ended on 31 March 2017

0.030

0.080

0.130

0.180

0.230

0.280

0.330

Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16

Price Close


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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2016, Anti-Corruption 2016 AAV – Very Good, n/a, ADVANC – Very Good, Certified, AEONTS – Good, n/a, AMATA – Excellent, Declared, ANAN – Very Good, Declared, AOT – Excellent, Declared, AP – Very Good, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Very Good, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – not available, Declared, BCP - Excellent, Certified, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, Declared, BEC - Good, n/a, BH - Good, Declared, BIGC - Excellent, Declared, BJC – Good, n/a, BJCHI – Good, Declared, BLA – Very Good, Certified, BPP – not available, n/a, BTS - Excellent, Certified, CBG – Good, n/a, CCET – not available, n/a, CENTEL – Very Good, Certified, CHG – Very Good, n/a, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, Declared, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, Declared, ECL – Good, Certified, EGCO - Excellent, Certified, EPG – Good, n/a, GFPT - Excellent, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Very Good, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Declared, ICHI – Very Good, Declared, INTUCH - Excellent, Certified, ITD – Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Declared, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Declared, M – Very Good, Declared, MAJOR - Good, n/a, MAKRO – Good, Declared, MALEE – Very Good, Declared, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Declared, MEGA – Very Good, Declared, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Very Good, Declared, PLAT – Good, Declared, PSH – not available, n/a, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Declared, RATCH – Excellent, Certified, ROBINS – Very Good, Declared, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI - Good, n/a, SPALI - Excellent, Declared, SPRC – Very Good, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, Declared, TCAP – Excellent, Certified, THAI – Very Good, Declared, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Very Good, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Good, n/a, TMB - Excellent, Certified, TNR – not available, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Very Good, Declared, TTW – Very Good, Declared, TU – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a. Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into: - Companies that have declared their intention to join CAC, and - Companies certified by CAC

CIMB Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

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