PP 7767/09/2010(025354)

24 May 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New Coverage
MARKET DATELINE

24 May 2010

First Resources Limited Share Price

Fair Value
:
:
S$0.97
S$1.55
Exponential Earnings Growth At Inexpensive Recom : Outperform
(Initiate Coverage)
Valuations

Table 1 : Investment Statistics (FR; Code: EB5) Bloomberg: FR SP

Net EPS C.EPS* Net
FYE Turnover Profit ^ (US Growth PER (US P/CF P/NTA EV/EBITDA Gearing GDY
Dec (US$m) (US$m) cent) (%) (x) cent) (x) (x) (x) (%) (%)
2009 218.9 39.7 2.7 (61.5) 25.2 - 1.8 8.9 20.0 19.2 2.2
2010f 326.5 116.5 7.9 190.6 8.7 7.5 1.5 8.6 17.8 28.3 2.6
2011f 393.4 139.7 9.5 19.9 7.2 8.4 1.3 7.1 18.4 30.9 3.1
2012f 438.5 161.9 11.0 16.0 6.2 9.6 1.1 6.1 18.3 25.3 3.6
Straits Times Index ^normalised * Consensus Based On IBES

♦ Small but growing fast. First Resources (FR) is a small (by Indonesian Issued Capital (m shares) 1,468.5
standards) but efficient pure plantation company listed in Singapore. FR Market Cap (S$m) 1,424.4
has 113,010ha of landbank in Indonesia. It currently operates 8 palm oil Daily Trading Vol (m shs) 1.09
mills with total capacity of 435t/hr, while it has also ventured 52wk Price Range (S$) 0.59-1.26
downstream, via a 250,000 tonne capacity refinery and a 250,000 tonne Major Shareholders: (%)
Eight Capital Inc 74.0
capacity biodiesel plant. It is currently in the midst of constructing a
Infinite Capital Fund Ltd 9.2
300,000 tonne fractionation plant within the same downstream
manufacturing complex, which will be completed by 1HFY12/011.
♦ Exponential earnings growth potential. We believe there are five FYE Dec FY10 FY11 FY12
EPS chg (%) - - -
major reason for investing in FR: (1) Its strong growth profile, given its
Var to Cons (%) 5.4 13.4 14.6
young plantation age profile; (2) Aggressive planting targets, given its
unplanted landbank; (3) Efficient planter, with below average cost of Share PriceChart
production; (4) Downstream expansion to boost bottomline; and (5)
Valuations at unjustifiable significant discount to peers. We project FR to
post a core net earnings (ex-EI and biological gains/losses) CAGR of
59.8% over the next three years to FY12. Besides increasing land
maturity and improving FFB yields, earnings growth is also driven by our
CPO price assumptions of US$730/tonne for FY10, US$800/tonne for FY11
and US$750/tonne for FY12 (up from US$532/tonne in FY09).
♦ Risks. (1) a convincing reversal in crude oil price trend resulting in
reversal of CPO and other vegetable oils price trend; (2) weather
abnormalities resulting in an over or under supply of vegetable oils; (3) Relative Performance To FSSTI
change in emphasis on implementing global biofuel mandates and trans-
fat policies; (4) a faster- or slower-than-expected global economic
recovery, resulting in higher- or lower-than-expected demand for First Resources Limited
vegetable oils; (5) a significant depreciation of the US$ against the
Indonesian rupiah, given that FR derives its revenue in US$, while its
costs are paid in Rp; and (5) a re-emergence of previous corporate FSSTI
governance issues relating to the major shareholder’s father.
♦ Investment case. FR is currently trading at 8.7x CY10 EPS and 7.2x
CY11 EPS, which is a significant discount to the Malaysian plantation
sector’s average PE of 19.2x for FY10 and 15.4x for FY11 and even to the
regional plantation sector’s average of 12.6x for FY10 and 10.6x for FY11.
Given FR’s efficiently run estates, clean operating structure and
sustainable earnings growth for the medium to long term, we believe FR
does not deserve to trade at such a large discount to its industry peers.
We assign a target PE of 11.5x to FR’s FY11 EPS, which is a 30% discount Hoe Lee Leng
to our Malaysian target PER for the mid-cap plantation stocks, to obtain (603) 92802184
hoe.lee.leng@rhb.com.my
our target price of S$1.55/share. We initiate coverage with an
Outperform recommendation.

Please read important disclosures at the end of this report. Page 1 of 9

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Background

♦ Small but growing fast. First Resources (FR) is a small (by Indonesian standards) but efficient pure plantation
company listed in Singapore in Dec 2007, at an offer price of S$1.10/share. FR has 113,010ha of landbank
located in Riau and West Kalimantan in Indonesia, of which 99,844ha is nucleus land and 13,166ha is plasma
land. The weighted average age of its landbank is about eight years. It currently operates 8 palm oil mills with
total capacity of 435t/hr, while it has also ventured downstream, via a 250,000 tonne capacity refinery and a
250,000 tonne capacity biodiesel plant. It is currently in the midst of constructing a 300,000 tonne fractionation
plant within the same downstream manufacturing complex, which will be completed by 1HFY12/011.

♦ … and consistently. Currently, FR has another 105,000ha of unplanted landbank (about 80% in West
Kalimantan and 20% in Riau), of which approximately 75,000ha is plantable. FR intends to plant up about
15,000ha of landbank every year in order to reach its target of having a planted landbank of 200,000ha and 1m
tonnes of CPO in five years.

Chart 1: Map of First Resources’ Operations

Source: Company

♦ Shareholding concerns resolved. FR is owned by Ciliandra Fangiano, the company’s CEO and his siblings,
under the investment vehicle, Eight Capital Incorporated. Mr Martias Fangiano, one of the company’s founders
and the father of the CEO, does not have any shareholding in Eight Capital. This is relevant as Martias Fangiano
was convicted of corruption in May 2007, in connection with the grant of land use rights. Although the Corruption
Eradication Commission of Indonesia (KPK) announced its intention in the press to auction some of First
Resources’ assets to secure payment for the penalty of US$38.3m imposed on Martias (even though the assets
belonged to the company and not Martias), FR was never named a party to the court case. KPK subsequently
withdrew its intention and the fine was paid by Martias, who incidentally, had not been employed by FR since
2003. For all intents and purposes, Martias no longer has any direct connection to the company, and FR is fully
managed by his sons and professional managers.

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Investment Case

♦ We believe there are five major reason for investing in FR:

(1) Its strong growth profile, given its young plantation age profile;

(2) Aggressive planting targets, given its unplanted landbank;

(3) Efficient planter, with below average cost of production;

(4) Downstream expansion to boost bottomline; and

(5) Valuations at unjustifiable significant discount to peers (addressed under Valuation and Recommendation
subtitle).

(1) Strong growth profile due to profile of estates

♦ Benefit from young age profile. Given FR’s young age profile, where 50% of its trees are below prime age (7
years and below) and 47% are in prime age, the potential for FFB growth is significant. We expect between
7,000-10,000ha p.a. of new land area coming into maturity over FY10-12, followed by 13,000-15,000ha p.a. in
FY11-12, following on from FR’s planting schedule, which has been on a rising trend.

Chart 2: First Resources’ Plantation Age Profile

Old (> 18 years)

1% Immature (0-3
years)
31%

Prime (8-17
Young (4-7
years)
years)
47%
21%

Source: Company, RHBRI

Chart 3: First Resources’ Plantation Age Profile

Prim e Age
30
26 26 26 26 26 26
25 25
24 24
25 23 23
22
21
20
19 19
20
FFB Yield (t/ha)

18 18
17
15
15
11
10
6
5
0 0
0
1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Tree Age

Source: Company, RHBRI

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♦ Five-year FFB production CAGR at 14.4%... As FR also plants up the plasma plantation landbank at a similar
pace to its nucleus landbank, the rate of external FFB purchases from plasma farmers is also projected to
increase accordingly. We note that the FFB yield for FR’s plasma plantations is about 10-15% lower than that of
the nucleus plantations currently, at 18.3t/ha in FY09 versus 21.9t/ha in the nucleus land. We believe this is due
to the fact that about 55% of the existing planted plasma areas are currently being managed by the smallholders,
which means less “care” is taken in terms of plantation management. However, going forward, for new plasma
areas that will be planted up in the future, FR will be shifting to the newer plasma scheme whereby management
of the estate is under FR, and FR will earn a mangement fee. This will therefore enable FR to narrow the gap
between FFB yields at its nucleus estates and its plasma estates over the long term. We are projecting FFB yields
for the group to rise to 24t/ha by FY14, from 21.5t/ha in FY09. All in, we are projecting FR to post a five-year FFB
production CAGR of 14.4% to 2014, coming from rising land maturity and improving FFB yields.

♦ … but blip in FY10, due to tree stress. Despite our expectations of a respectable long-term double-digit CAGR
for FFB production, we expect FR to experience a blip in production growth in FY10, as we are projecting a growth
of just 4.6% yoy (nucleus). This is due to the impact of biological tree stress on FR’s estates, which has reduced
FR’s FFB yields by 22.4% yoy to 3.8t/ha in 1QFY10 and FFB production (nucleus) by 9.5% yoy. However, FR’s
CPO extraction rate showed an improvement during the quarter to 23.7% (from 23.2% in 1QFY09), thereby
reducing the level of CPO production decline to 6.7% yoy. Although management maintains its overall FY10 FFB
production growth target of 10% yoy, we prefer to remain conservative for the moment, and stick to our 4.6%
growth projection.

Chart 4: CPO Production Trend

CPO Production ('000 tonnes)

700

600

500

400

300

200

100

0
2005A 2006A 2007A 2008A 2009A 2010F 2011F 2012F 2013F

Source: Company, RHBRI

(2) Aggressive planting targets

♦ Five more years before exhaust available plantable area. As mentioned above, FR has set aggresive new
planting targets of 15,000ha per year, in order to achieve its long-term planted landbank target of 200,000ha by
2015. While this would seem to be a relatively aggressive target, we believe this is achievable, as FR has been
ramping up new planting over the last few years, culminating in 13,676ha of new landbank planted up in FY09.
We note in 1QFY10, FR has already planted up 4,083ha of land and is on track to achieve its target for the year,
notwithstanding any uncontrollable weather extremities. These planting targets should keep management busy
until 2015, and we believe FR may not need to aggressively expand its landbank via further acquisitions for a
while, especially given the fact that mature hectarage should continue to grow consistently at a CAGR of 10%
p.a. all the way up to FY2019. Planting cost is estimated at US$4,000/ha (or about RM13,000/ha), which is

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similar with planting costs in Malaysia of between RM12-15,000/ha. Based on FR’s planting targets of 15,000ha
per year, this would mean plantation expenditure of US$60m p.a. would be required for new planting, which FR
intends to fund internally.

Chart 5: FR’s Yearly New Planting Activities

16,000

14,000

12,000
NewPlanting (ha)

10,000

8,000

6,000

4,000

2,000

0
2006A 2007A 2008A 2009A 2010F 2011F 2012F 2013F

Source: Company, RHVRI

(3) Efficient planter, with below average cost of production

♦ Efficient planter. FR runs a tight ship in terms of productivity and efficiency measures, as average cash cost of
production (excluding kernel credit) for FY09 was about US$180/tonne (or about RM600/t). However, we note
that this only includes production costs up to a gross profit level. To put it on a level more comparative with the
rest of the industry, we look at FR’s production costs up to the operating profit level. On this basis, FR’s cost of
prioduction is estimated at US$226/tonne (or about RM740/t), which is still very impressive, compared to the
most efficient players in Malaysia, who are running at about US$250-300/tonne, at the very least, and to the
average industry standard in Malaysia, of about US$330-350/tonne.

♦ Although costs are rising, still more efficient than peers. Going into FY10, however, we note that
production cost/tonne has risen quite significantly in 1QFY10, due mainly to the decline in FFB yields during the
period and the appreciation of the Indonesian rupiah, which appreciated by 20% yoy ffrom 1Q09. In 1QFY10, we
estimate that FR’s production costs up to the operating profit level has risen to US$330/tonne (from
US$230/tonne in 1Q09). Besides these two factors, the only other component of production costs that has risen is
labour costs, as management noted that minimum wage for labour has gone up by 9% yoy in 2010. Labour
currently comprises 30-35% of costs, while fertiliser makes up 40-45% of costs. We note that FR already has its
fertiliser supplies for 1HFY10 in hand, which were bought at prices similar to FY09’s levels. FR will tender for its
2HFY10 fertiliser requirements in June. For the full year FY10, we are projecting FR to record higher production
cost of US$275/tonne (+21.4% yoy), or cash cost of US$217/tonne (+14% yoy). The main reason for the larger
rise in production costs is the higher export taxes which would be incurred during the year, as a result of the
higher CPO prices. Recall that Indonesian export taxes are levied based on CPO prices, and gradually increase as
CPO prices rise (see Table 2). For FY11-12, we expect production costs to remain between US$270-300/tonne, as
we expect the Indonesian rupiah to continue on its strengthening trend, while fertiliser prices should start its
uptrend again. Despite the higher cost expectation going forward, we note that FR’s production costs would still
be lower than the average Malaysian planter.

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Table 2: Indonesia’s Export Tax Schedule

701- 751- 801- 851- 901- 951- 1001- 1051- 1101- 1151- 1201-
% <700 750 800 850 900 950 1000 1050 1100 1150 1200 1250 >1251
CPO 0.0 1.5 3.0 4.5 6.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0
FFB & PK 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0
Crude Olein 0.0 1.5 3.0 4.5 6.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0
Crude PKO 0.0 0.0 1.5 3.0 4.5 6.0 8.5 11.0 13.5 16.0 18.5 21.0 23.0
Crude Stearin 0.0 0.0 1.5 3.0 4.5 6.0 8.5 11.0 13.5 16.0 18.5 21.0 23.0
RBD Palm Olein 0.0 1.5 3.0 4.5 6.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0
RBD Palm
Stearin 0.0 0.0 0.0 1.5 3.0 4.5 6.0 8.5 11.0 13.5 16.0 18.5 21.0
Fatty acids PME 0.0 0.0 0.0 0.0 0.0 2.0 2.0 2.0 2.0 5.0 5.0 7.5 10.0
RB Palm Olein
branded
cooking oil
(<25kg) 0.0 0.0 0.0 0.0 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0
Biofuel 0.0 0.0 0.0 0.0 0.0 2.0 2.0 2.0 2.0 5.0 5.0 7.5 10.0
Source: Company, RHBRI

(4) Downsteam Expansion to boost bottomline

♦ New refinery to be operational soon. FR currently has a 250,000 tonne capacity refinery and a 250,000 tonne
capacity biodiesel plant, while it is in the midst of constructing a 300,000 tonne fractionation plant within the
same downstream manufacturing complex, which will be completed by 1HFY12/011. The refinery has just been
commissioned, and FR is about to commence operations, while the biodiesel plant is not running at the moment,
given its non-viability. FR intends to source the feedstock for its downstream operations entirely from its own
plantations, which will enable it to capture higher margins, as opposed to buying external CPO.

♦ Downstream operations not included in forecasts yet. While we have not actually included any contributions
from FR’s downstream operations into our forecasts as yet, we estimate that based on an initial utilisation rate of
60-70% for the first full year of operations (of refinery and fractionation plant), FR should be able to add an
additional 1-2% to its bottomline, which will increase as they ramp up capacity. As for the biodiesel plant, we
understand that the cost of not running the plant would basically be the depreciation costs of the plant, estimated
to be about US$200,000-300,000 per year, which is not significant.

Financial Analysis

♦ Exponential 3-year earnings CAGR of 59.8%. We project FR to post a core net earnings (ex-EI and biological
gains/losses) CAGR of 59.8% over the next three years to FY12. Besides increasing land maturity and improving
FFB yields, earnings growth is also driven by our CPO price assumptions of US$730/tonne for FY10,
US$800/tonne for FY11 and US$750/tonne for FY12 (up from US$532/tonne in FY09). We note that in 1QFY10,
FR recorded a core net profit growth of 152.4% yoy, on the back of a 15.3% yoy growth in matured area and a
69.6% yoy rise in CPO prices to US$706/tonne. Note that as FR’s functional currency is still in Indonesian rupiah,
we have assumed an INR/US$ exchange rate of 9,630 for FY10, 9,500 for FY11 and 9,300 for FY12.

♦ Sensitivities. As FR’s downstream facilities are not up and running as yet, we note that FR’s earnings are
extremely sensitive to CPO price movements. Based on our sensitivity analysis, every 10% change in our CPO
price forecast will change FR’s net profit by about 15%. We note also that FR is very sensitive to forex risk, given
that revenue is derived in US$, while costs are paid in Indonesian rupiah, which means that a depreciation of the
US$ against the Rp would be negative for FR. Although FR has tried to hedge some of this risk by taking on some
US$-denominated debts, this does not entirely cover its forex exposure. Based on our sensitivity analysis, every
5% depreciation in the US$ vs. Rp will reduce our net profit forecasts by about 5-6% p.a..

♦ Low net gearing. FR currently has net debt of US$96.85m (or net gearing of 15.9%). Going forward,
management expects capex to be in the range of US$100-110m p.a., to be spent on new planting, mill
expansions as well as for its fractionation plant. Based on FR’s operating cashflow of about US$50-90m p.a., we
believe FR would not need to raise new debt for the next 1-2 years to fund the capex. However, it would need to
refinance its US$140.8m Guaranteed Secured Notes when it falls due in Dec 2011. In the longer term,
management has stated that should opportunities arise to expand its operations further, the group’s maximum
tolerable net gearing level would be up to 1x.

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♦ Rising dividend payouts. FR’s dividend policy is to pay up to a maximum of 30% of net earnings in dividends.
Over the last two years however, FR has only paid out between 13-20% of net earnings in dividends. Going
forward, we have projected FR to declare gross DPS of S$0.025-0.035/share in FY10-12, translating to net
payout of 20-25% p.a.. This would result in net yields of 2.5-4% p.a. for FY10-12.

Risks

♦ Main risks include: (1) a convincing reversal in crude oil price trend resulting in reversal of CPO and other
vegetable oils price trend; (2) weather abnormalities resulting in an over or under supply of vegetable oils; (3)
change in emphasis on implementing global biofuel mandates and trans-fat policies; (4) a faster- or slower-than-
expected global economic recovery, resulting in higher– or lower-than-expected demand for vegetable oils; (5) a
significant depreciation of the US$ against the Indonesian rupiah, given that FR derives its revenue in US$, while
its costs are paid in Rp; and (5) a re-emergence of previous corporate governance issues relating to the major
shareholder’s father.

Valuation and recommendation

♦ Valuations at unjustifiable significant discount to peers. FR is currently trading at 8.7x CY10 EPS and 7.2x
CY11 EPS, which is a significant discount to the Malaysian plantation sector’s average PE of 19.2x for FY10 and
15.4x for FY11 and even to the regional plantation sector’s average of 12.6x for FY10 and 10.6x for FY11 (see
Table 3). Given FR’s efficiently run estates, clean operating structure and sustainable earnings growth for the
medium to long term, we believe FR does not deserve to trade at such a large discount to its industry peers.

♦ Initiate coverage with Outperform. We consider FR to be a mid-cap plantation company, given that its
planted landbank size of 99,844ha is similar to Genting Plantations’ 85,000ha. Although we assign a target PE of
16.5x CY10 to the Malaysian mid-cap plantation stocks, we assign a lower target PE to FR, given that
traditionally, the Singaporean and Indonesian-listed plantation stocks trade at a 20-30% discount to its
Malaysian-listed peers. We also value FR based on its FY11 EPS, given that we are almost mid-way through FY10
already. We assign a target PE of 11.5x to FR’s FY11 EPS, which is a 30% discount to our Malaysian target PER
for the mid-cap plantation stocks, to obtain our target price of S$1.55/share. We initiate coverage with an
Outperform recommendation.

Table 3. Regional Peer Comparison

Company FYE Price * Currency PER (x) EV/EBITDA (x) P/NTA (x)
FY10f FY11f FY10f FY11f FY10f FY11f
WIL SP Equity Dec 5.50 SGD 13.9 12.6 7.9 7.1 1.9 1.7
IFAR SP Equity Dec 2.06 SGD 13.6 11.1 4.4 3.9 1.9 1.6
GGR SP Equity Dec 0.52 SGD 13.6 9.2 6.4 5.7 0.9 0.9

Average (Singapore) 16.5 13.7 10.9 6.2 5.5 1.6

AALI IJ Equity Dec 18,900 IDR 12.3 10.9 9.0 8.1 3.9 3.3
LSIP IJ Equity Dec 8,000 IDR 11.2 10.5 7.9 7.8 2.3 1.9
SGRO IJ Equity Dec 2,250 IDR 10.7 9.4 6.8 6.0 2.0 1.8
UNSP IJ Equity Dec 430 IDR 5.7 6.2 3.8 3.4 0.6 0.6

Average (Indonesia) 17.7 11.4 10.2 7.9 7.3 2.7

Average (ex-Malaysia) 17.1 12.6 10.6 7.1 6.4 2.2

Malaysia Ave 19.2 15.4 12.1 10.1 2.6 2.4

Msia's % premium/(discount) over peers 52.7% 45.3% 71.1% 57.2% 20.9% 29.2%

* @ 20 May, in respective currencies

Source: Bloomberg, IBES Consensus & RHBRI

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Table 4. FR Earnings Forecasts Table 5. FR Forecast Assumptions

FYE Dec (US$m) FY09a FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 218.9 326.5 393.4 438.5 FFB Produced (‘000 t) 1,610 1,794 2,102
Turnover growth (%) (23.9) 49.2 20.5 11.5 CPO Production (‘000 t) 381 415 497
PK Production (‘000 t) 87 97 114
Cost of Sales (88.4) (103.6) (118.7) (136.5) Average CPO price (US$/t) 731 802 754
Gross Profit 130.5 223.0 274.7 302.0

EBITDA 158.7 196.8 235.7 254.6

EBITDA margin (%) 72.5 60.3 59.9 58.1

Depreciation & (0.6) (1.5) (2.3) (3.1)

Amortisation
Net Interest (20.2) (27.2) (22.5) (17.8)
Associates (1.1) 3.3 3.9 4.4
Exceptional items 28.6 0.0 0.0 0.0

Pretax Profit 165.4 171.3 214.9 238.2

Tax (46.5) (42.8) (53.7) (59.5)
PAT 119.0 128.5 161.1 178.6
Minorities (6.5) (11.9) (21.5) (16.7)
Net Profit 112.5 116.5 139.7 161.9
Recurring Net Profit 39.7 116.5 139.7 161.9
Source: Company data, RHBRI estimates

Chart 6: FR Technical View Point

♦ The share price of FR began to recover from a
sideways consolidation phase in Mar 2009, before
piercing through a tough resistance at $0.57 in
May.

♦ The stock continued its uptrend and surpassed

another tough level of $0.88 in Aug, but settled
within a range from $0.88 to $1.00 until early Jan
2010.

♦ It penetrated $1.00 and moved to a high of $1.25,

before see-sawing in a volatile sideways trend
above $1.00.

♦ However, beginning from early Apr, the stock has

been under strong selling pressure.

♦ It recently fell below the $1.00 level to plot a short-

term bearish chart scenario.

♦ Technically, it must reclaim the $1.00 level to lift

trading sentiment. Otherwise, it will ease towards
the $0.88 support level, as the trading momentum
remains weak currently.

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be
contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may
from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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