IndonesiaCompany Guide

Telekomunikasi Indonesia
Version 10 |Bloomberg: TLKM IJ| Reuters: TLKM.JK Refer to important disclosures at the end of this report

DBS Group Research . Equity 23 Oct 2018

HOLD Street underestimating ex-Java share loss and costs

Last Traded Price( 22 Oct 2018): Rp3,800(JCI : 5,840.40)
Price Target 12-mth:Rp3,400 (-11% downside) (Prev Rp3,600)
Analyst
Sachin MITTAL+65 66823699sachinmittal@dbs.com
What’s New
 Substantial exposure to legacy revenue and aggressive
competitors to hurt Telkomsel’s growth prospects.
 Consensus ignores ex-Java revenue share losses and
potential margin dilution from rising contribution of
non-Telkomsel segments.
 Non-consensus HOLD with a revised TP of Rp3,400.
Price Relative
TLKM is not cheap, consensus EPS likely to be cut. Firstly, ~65%
of Telkomsel’s (Telekomunikasi Indonesia’s (TLKM) cellular arm)
revenue comes from outside the Java (ex-Java) region where
competition is ramping up and reducing Tekomsel’s market
share. Secondly, Telkomsel has ~50% exposure to declining
voice and SMS services, much higher than its competitors.
Thirdly, non-Telkomsel businesses (~32% of the group’s
revenue) not only have lower EBITDA margins but also suffer
from high operation expenditure and depreciation costs. In
conclusion, consensus FY19F EPS is likely to be cut 8%. TLKM is
not cheap either at 18x 12-month forward PER similar to its
historic 5-year average.
Where we differ? Our FY19F/20F EPS is 8%/10% below
consensus. We project Telkomsel to lose ~2-3% ex-Java
revenue market share in FY19F and see only ~5% growth in the
ex-Java business versus ~12% growth in the Java business.
Growing contribution from the company’s non-Telkomsel
businesses, which attract ~30% EBITDA margins vs. ~55% for
Telkomsel, would also weigh on TLKM’s blended EBITDA
margins as the former continues to grow faster than Telkomsel.
Potential catalysts: More clarity on ex-Java business with 3Q18
and 4Q18 results could prompt consensus earnings downgrade.

Valuation:
Forecasts and Valuation Maintain HOLD with lower TP of Rp 3,400. Mantain HOLD call
FY Dec (Rpbn) 2017A 2018F 2019F 2020F
with a revised DCF-based TP of Rp 3,400 (WACC 9.2%,
Revenue 128,256 133,810 147,503 159,581
EBITDA 64,609 61,864 67,202 70,777 terminal growth 1%) as we raise our FY19 capital expenditure
Pre-tax Profit 42,659 37,203 39,461 40,215 (capex) on recent depreciation of the Indonesian Rupiah.
Net Profit 22,145 20,151 21,805 22,639
Net Pft (Pre Ex.) 22,145 20,151 21,805 22,639 Key Risks to Our View:
Net Pft Gth (Pre-ex) (%) 14.4 (9.0) 8.2 3.8 Bear case valuation of Rp 3,000 if Java turns competitive.
EPS (Rp) 224 203 220 229
EPS Pre Ex. (Rp) 224 203 220 229 Smartfren Telecom is ramping up its coverage in Java although
EPS Gth Pre Ex (%) 14 (9) 8 4 it is still quite small at this stage. However, if big players react,
Diluted EPS (Rp) 224 203 220 229 we project FY19F revenue growth of 5% for Telkomsel vs. 7%
Net DPS (Rp) 168 153 165 171
base case.
BV Per Share (Rp) 936 910 916 913
PE (X) 17.0 18.7 17.3 16.6 Bull case valuation of Rp 4,200 if ex-Java share loss is minimal.
PE Pre Ex. (X) 17.0 18.7 17.3 16.6 We project ~10% FY19F cellular revenue growth for Telkomsel
P/Cash Flow (X) 7.6 7.4 6.4 6.0
if its ex-Java business secures 9% growth.
EV/EBITDA (X) 6.3 6.7 6.3 6.0
Net Div Yield (%) 4.4 4.0 4.3 4.5
P/Book Value (X) 4.1 4.2 4.1 4.2 At A Glance
Net Debt/Equity (X) 0.1 0.1 0.1 0.0 Issued Capital (m shrs) 99,062
ROAE (%) 25.0 22.0 24.1 25.0 Mkt. Cap (Rpbn/US$m) 376,436 / 24,767
Earnings Rev (%): 0 0 (4) Major Shareholders (%)
Consensus EPS (Rp): 215 240 265 0Republic of Indonesia (%) 51.2
Other Broker Recs: B: 27 S: 0 H: 7 Bank of New York (%) 6.0
Source of all data on this page: Company, DBS Bank, Bloomberg Free Float (%) 42.8
Finance L.P 3m Avg. Daily Val (US$m) 24.6
ICB Industry :Telecommunications / Fixed Line Telecommunications

ed: KK / sa:MA, CW, CS

Company Guide
Telekomunikasi Indonesia

WHAT’S NEW

Ex-Java the main battleground in FY19 the market’s focus should shift to operations outside Java in F19,
as ex-Java would likely account for the lion’s share of incremental
Ex-Java the key focus in FY19, network expansions are underway..growth in the mobile industry.
Our channel checks confirm that ex-Java is the key area of focus
for all three telecommunications companies (telcos) in FY19. Telkomsel likely to record high single digit growth in FY19. We
Tower operators have also indicated that co-location orders from expect Telkomsel’s top line to contract in FY18 by ~2%, driven by
operators for expansion in regions outside Java have accelerated subscriber losses and intense competition in the first half of the
over the past few months. year, due to the prepaid SIM registration period. Whilst, operating
conditions have improved since the end of the prepaid SIM
Telkomsel is not a monopoly in many Tier-2 and Tier-3 cities registration period in May 2018, we believe that Telkomsel’s top
outside Java and there is a second operator offering 4G services line is unlikely to record positive growth in FY18F as no major
now. We estimate that Telomsel’s effective monopoly of mobile upward revisions in data pricing has yet to take place. In addition,
network has reduced from ~60% of population outside Java 4- the telco still generates ~50% of its top line through declining
years back to ~20% now. Telkomsel’s revenue share outside Java legacy services. We expect Telkomsel’s revenue to decline by ~2%
is ~90% currently and is expected to lose 2-3% revenue share on a y-o-y basis during FY18F before recovering to single digit
each year to competitors offering much cheaper prices. growth of ~7.3% in FY19F, supported by 12% growth in Java
and 5% outside Java.
With all major operators racing to expand coverage and leverage
on the rising adoption of smartphones in the region, we believe

Telkom secures 65% of Telkomsel’s earnings; non-Telkomsel earnings suffer from high opex and depreciation costs
RP bn TLKM Telkomsel Non‐Telkomsel
FY16 FY17 1H17 1H18 FY16 FY17 1H17 1H18 FY16 FY17 1H17 1H18
Revenue  
116,333  128,256 64,021  64,368 86,725 93,217 45,995 42,741 29,608 35,039 18,026 21,627
EBITDA     59,498     64,609 33,235  28,343 49,781 53,592 27,185 22,239 9,717 11,017 6,050 6,104
PAT before MI     29,172     32,701 17,495
   
12,807 28,195 30,395 15,500 11,722 977 2,306 1,995 1,085

Growth
Revenue 10% 1% 7% ‐7% 18% 20%
EBITDA 9% ‐15% 8% ‐18% 13% 1%
PAT before MI 12% ‐27% 8% ‐24% 136% ‐46%

Margins
EBITDA 51% 50% 52% 44% 57% 57% 59% 52% 33% 31% 34% 28%
Source: Telkom Indonesia, DBS Bank

Non-Telkomsel businesses are diluting TLKM’s margins. Whilst,

non-Telkomsel businesses comprising fixed broadband,
enterprise and wholesale segments are recording double digit
growth, the cost escalations pertaining to their expansion have
continued to weigh down TLKM’s margins. Expanding non-
Telkomsel services, particularly TLKM’s fibre broadband service
indiHome, which attracts heavy opex on expansion and
inherently carry lower margins, is weighing on TLKM’s EBITDA.
Higher depreciation attached to network roll-outs of fibre
broadband has also weighed on TLKM’s PAT margins, Whilst we
expect better monetisation of IndiHome subscribers, with TLKM
planning to raise pricing by 5-10% for ~500k of its subscribers
to further improve the margin profile of non-Telkomsel business
segments, we do not believe TLKM would be able to continue
expanding its EBIT margins as projected by the street, given
rising contribution from margin-dilutive non-Telkomsel
businesses.

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Telekomunikasi Indonesia

GSM subscribers (m)

CRITICAL DATA POINTS TO WATCH
Critical Factors
Legacy revenue and aggressive competitors to hurt Telkomsel’s
growth prospects. Telkomsel, TLKM’s cellular arm, continues to
be the key contributor to TLKM’s top line with ~68%
contribution in FY17. Telkomsel remains vulnerable to legacy
declines with ~50% exposure to legacy services. Telkomsel’s
revenue growth entered negative territory on a y-o-y basis for
the first time in 1Q18, marred by accelerating legacy declines
and intense competition during the prepaid SIM registration era.
The y-o-y declines continued through to 2Q18 with revenue Data revenue
contracting 12% y-o-y (-4.6% q-o-q), and the quarter marking
the fourth consecutive quarter of accelerating declines in legacy
services for the telco.

We believe the trend of legacy revenue declining will continue

through FY18/19 before stabilising in FY20, when top line
exposure to legacy services is expected to edge below ~40%.
Telkomsel also remains vulnerable to losing revenue market
share to major operators outside Java, as they continue to
bridge the network gap with Telkomsel, challenging the high
pricing premiums commanded by Telkomsel in the region. We EBITDA margin %
expect Telkomsel to record mid-single digit growth in revenue
from Ex-Java (~60% of Telkomsel’s top line) in FY19 as legacy
declines in the region accelerate and Telkomsel’s pricing
premiums come under attack from other operators. With
benign competition supporting over 12% growth in Java, we
expect Telkomsel to record 7.3% cellular growth in FY19 vs.
6.2% previously.

Non-Telkomsel businesses ease top line burden slightly.

Revenue from non-Telkomsel businesses derived from fixed
data, enterprise and wholesale segments expanded 20% y-o-y Net Capex (Rp tr)
in 1H18, partially offsetting the poor performance of Telkomsel.
TLKM’s fixed broadband brand IndiHome reported strong
growth during the quarter, recording an average revenue per
user (ARPU) of Rp251, 000 for 2Q18. TLKM management
indicated that the telco plans to increase tariffs by 5-10% over
3Q18 on ~500k IndiHome subscribers with room for further
increases in the future. We project non-Telkomsel businesses to
grow 22/17% in FY18/19 largely supported by expansion and
price hikes of IndiHome.

However, the declining proportion of high margins legacy EBITDA (Rptn)

services for Telkomsel and growing contribution from non-
Telkomsel businesses, which inherently carry lower margins,
should escalate operating expenses for TLKM. We project
TLKM’s EBITDA margins to contract ~500bps by FY20 to 45%
from the levels recorded in FY17.

Source: Company, DBS Bank

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Company Guide
Telekomunikasi Indonesia

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

Market share of Telkomsel is a critical factor for TLKM. In our critical factor analysis, conducted to identify what drives the share
price of a stock, we have seen share price movements of TLKM follow mobile revenue share changes of Telkomsel closely.

TLKM share price movement with Telkomsel revenue share changes in the last reported quarter

Source: Reuters, DBS Bank

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Telekomunikasi Indonesia

Leverage & asset turnover (x)

Balance Sheet:
Strong balance sheet to support expansion. TLKM has the strongest
balance sheet among its peers with ~94% of debt carried in
Indonesian Rupiah. TLKM also boasts a FY17A net debt to EBITDA
ratio of 0.13x which is well below the industry average. Low
leverage means that TLKM has better flexibility for network
expansion and acquiring digital and other businesses. We have
projected for FY18/19F capex of Rp 33/35t (~25/24% of revenue)
which TLKM should be able to fund comfortably through operating
cash flows.
Capital expenditure
Share Price Drivers: Rpbn

Legacy decline and key competitors’ aggressive growth plan to

thwart Telkomsel. Key competitors of TLKM are aggressively
ramping up ex-Java coverage, bridging their network gap with
Telkomsel and challenging the high pricing premiums commanded
by Telkomsel in the ex-Java region. These competitors are already at
Telkomsel’s heels in most major 2nd and 3rd tier cities outside Java
and they plan to increase their revenue market share, much of
which would be at the expense of Telkomsel. Given TLKM’s weak
outlook, with a FY17A-20F EBITDA CAGR of 3.5%, we believe
TLKM is likely to remain range bound until signs of legacy ROE (%)
stabilisation and an ex-Java strategy for Telkomsel emerges.

Key Risks:
Bull case valuation of TLKM at Rp 4,200. Under our bull case
scenario, we assume substantial improvements in industry yields
supported by collaborative pricing revisions by TLKM with its key
competitors, as the telcos opt for territorial dominance in ex-Java
regions. This should drive up TLKM’s FY19F y-o-y cellular revenue
growth to 10% vs 7% under our base case scenario.

Bear case valuation of TLKM is Rp 3,000. Under our bear case Forward PE Band (x)
scenario, we assume steep declines in industry yields as TLKM
counters its keycompetitors outside Java and instigates price wars
within Java. This would drive down TLKM’s FY19F y-o-y cellular
revenue growth to 5% vs 7% in our base case scenario. We value
TLKM at Rp 3,000 under our bear case assumptions,

Company Background
TLKM Indonesia is the largest telecommunications and network
provider in Indonesia. The company offers a wide range of network
and telecommunications services, including fixed line connection
services, cellular services, network and interconnection services, as PB Band (x)
well as internet and data communications services. TLKM also
operates multimedia businesses such as content and applications,
completing its business portfolio that spans Telecommunications,
Information, Media, Edutainment and Services (TIMES).

Source: Company, DBS Bank

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Telekomunikasi Indonesia

Key Assumptions
FY Dec 2016A 2017A 2018F 2019F 2020F
GSM Subscribers (m) 175 182 189 197 205
Data revenue 59.0 68.5 80.4 94.0 107
EBITDA Margin % 51.1 50.4 46.2 45.6 44.4
Net Capex (Rp tr) 29.4 33.3 32.1 35.4 36.2
EBITDA (Rptn) 59.5 64.6 61.9 67.2 70.8

Segmental Breakdown
FY Dec 2016A 2017A 2018F 2019F 2020F
Revenues (Rpbn)
Fixed Line 7,542 6,665 5,865 4,692 4,223
Wireless Voice 38,497 37,246 27,935 25,141 22,627
Interconnection 4,151 5,175 4,916 4,670 4,437
Data/Internet & SMS 58,971 68,535 80,392 94,009 107,085 Strong growth in non-
Others 7,172 10,635 14,702 18,991 21,208 Telkomsel businesses.
Total 116,333 128,256 133,810 147,503 159,581

Income Statement (Rpbn)

FY Dec 2016A 2017A 2018F 2019F 2020F
Revenue 116,333 128,256 133,810 147,503 159,581
Cost of Goods Sold (56,835) (63,647) (71,946) (80,301) (88,804)
Gross Profit 59,498 64,609 61,864 67,202 70,777
Other Opng (Exp)/Inc (18,532) (20,446) (23,361) (26,462) (29,322)
Operating Profit 40,966 44,163 38,503 40,741 41,455
Other Non Opg (Exp)/Inc (1,771) (230) 0.0 0.0 0.0
Associates & JV Inc 88.0 61.0 64.1 67.3 70.6
Net Interest (Exp)/Inc (1,094) (1,335) (1,365) (1,347) (1,311)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 38,189 42,659 37,203 39,461 40,215
Tax (9,017) (9,958) (8,929) (9,471) (9,652)
Minority Interest (9,820) (10,556) (8,123) (8,185) (7,925)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 19,352 22,145 20,151 21,805 22,639
Net Profit before Except. 19,352 22,145 20,151 21,805 22,639
EBITDA 59,498 64,609 61,864 67,202 70,777
Growth
Revenue Gth (%) 13.5 10.2 4.3 10.2 8.2
EBITDA Gth (%) 15.7 8.6 (4.2) 8.6 5.3
Opg Profit Gth (%) 24.6 7.8 (12.8) 5.8 1.8
Net Profit Gth (Pre-ex) (%) 24.9 14.4 (9.0) 8.2 3.8
Margins & Ratio
Gross Margins (%) 51.1 50.4 46.2 45.6 44.4
Opg Profit Margin (%) 35.2 34.4 28.8 27.6 26.0
Net Profit Margin (%) 16.6 17.3 15.1 14.8 14.2
Growing non-Telkomsel
ROAE (%) 24.3 25.0 22.0 24.1 25.0
businesses to weigh on
ROA (%) 11.2 11.7 10.0 10.3 10.1
margins.
ROCE (%) 22.4 22.1 17.9 18.2 17.7
Div Payout Ratio (%) 69.7 75.0 75.0 75.0 75.0
Net Interest Cover (x) 37.4 33.1 28.2 30.3 31.6
Source: Company, DBS Bank

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Telekomunikasi Indonesia

Quarterly / Interim Income Statement (Rpbn)

FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018

Revenue 32,999 32,982 31,253 32,343 32,025

Cost of Goods Sold (16,573) (16,168) (16,693) (16,227) (19,798)
Gross Profit 16,426 16,814 14,560 16,116 12,227
Other Oper. (Exp)/Inc (4,857) (5,051) (5,765) (5,373) (4,958)
Operating Profit 11,569 11,763 8,795 10,743 7,269
Other Non Opg (Exp)/Inc (256) 66.0 (451) 149 (61.0)
Associates & JV Inc 0.0 0.0 0.0 0.0 29.0
Net Interest (Exp)/Inc (382) (443) (326) (360) (580)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 10,931 11,386 8,018 10,532 6,657
Tax (2,812) (2,868) (1,330) (2,554) (1,828)
Minority Interest (2,703) (2,700) (2,465) (2,244) (1,865)
Net Profit 5,416 5,818 4,223 5,734 2,964
Net profit bef Except. 5,416 5,818 4,223 5,734 2,964
EBITDA 16,426 16,814 14,560 16,116 12,227

Growth
Revenue Gth (%) 6.4 (0.1) (5.2) 3.5 (1.0)
EBITDA Gth (%) (2.3) 2.4 (13.4) 10.7 (24.1)
Opg Profit Gth (%) (3.9) 1.7 (25.2) 22.1 (32.3)
Net Profit Gth (Pre-ex) (%) (19.0) 7.4 (27.4) 35.8 (48.3)
Margins
Gross Margins (%) 49.8 51.0 46.6 49.8 38.2
Opg Profit Margins (%) 35.1 35.7 28.1 33.2 22.7
Net Profit Margins (%) 16.4 17.6 13.5 17.7 9.3

Balance Sheet (Rpbn)

FY Dec 2016A 2017A 2018F 2019F 2020F

Net Fixed Assets 114,498 130,171 138,925 147,864 154,714

Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0
Other LT Assets 17,412 20,752 20,816 20,883 20,954
Cash & ST Invts 31,238 27,318 23,562 25,750 28,862
Inventory 584 631 755 843 932 Strong balance sheet
Debtors 7,363 9,222 9,367 10,325 11,171 to support expansion.
Other Current Assets 8,516 10,390 12,100 12,559 13,020
Total Assets 179,611 198,484 205,525 218,224 229,653

ST Debt 5,432 7,498 7,943 7,943 7,943

Creditor 13,518 15,574 20,145 22,484 24,865
Other Current Liab 20,812 22,304 19,198 21,216 23,088
LT Debt 26,367 27,974 27,529 27,084 26,639
Other LT Liabilities 7,938 13,004 13,004 13,004 13,004
Shareholder’s Equity 84,384 92,713 90,166 90,767 90,464
Minority Interests 21,160 19,417 27,540 35,725 43,650
Total Cap. & Liab. 179,611 198,484 205,525 218,224 229,653

Non-Cash Wkg. Capital (17,867) (17,635) (17,121) (19,973) (22,830)

Net Cash/(Debt) (561) (8,154) (11,910) (9,277) (5,720)
Debtors Turn (avg days) 23.3 23.6 25.4 24.4 24.6
Creditors Turn (avg days) 131.1 122.9 134.2 144.5 145.3
Inventory Turn (avg days) 5.3 5.1 5.2 5.4 5.4
Asset Turnover (x) 0.7 0.7 0.7 0.7 0.7
Current Ratio (x) 1.2 1.0 1.0 1.0 1.0
Quick Ratio (x) 1.0 0.8 0.7 0.7 0.7
Net Debt/Equity (X) 0.0 0.1 0.1 0.1 0.0
Net Debt/Equity ex MI (X) 0.0 0.1 0.1 0.1 0.1
Capex to Debt (%) 91.9 93.9 90.5 101.1 104.6
Z-Score (X) 4.8 4.4 4.4 4.2 4.0
Source: Company, DBS Bank

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Telekomunikasi Indonesia

Cash Flow Statement (Rpbn)

FY Dec 2016A 2017A 2018F 2019F 2020F

Pre-Tax Profit 38,189 42,659 37,203 39,461 40,215

Dep. & Amort. 18,532 20,446 23,361 26,462 29,322
Tax Paid (14,000) (13,788) (9,487) (9,335) (9,606)
Assoc. & JV Inc/(loss) (88.0) (61.0) (64.1) (67.3) (70.6)
Chg in Wkg.Cap. 7,297 2,192 43.9 2,717 2,812
Other Operating CF (2,699) (2,043) 0.0 0.0 0.0
Net Operating CF 47,231 49,405 51,057 59,237 62,671
Capital Exp.(net) (29,223) (33,292) (32,114) (35,401) (36,172)
Other Invts.(net) 1,307 (1,003) 0.0 0.0 0.0
Operating cash flows
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 to support higher
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 dividend payouts.
Other Investing CF 359 1,288 0.0 0.0 0.0
Net Investing CF (27,557) (33,007) (32,114) (35,401) (36,172)
Div Paid (10,555) (9,289) (22,699) (21,204) (22,942)
Chg in Gross Debt (3,734) 542 0.0 (445) (445)
Capital Issues 3,259 0.0 0.0 0.0 0.0
Other Financing CF (6,875) (12,305) 0.0 0.0 0.0
Net Financing CF (17,905) (21,052) (22,699) (21,648) (23,387)
Currency Adjustments (119) 32.0 0.0 0.0 0.0
Chg in Cash 1,650 (4,622) (3,756) 2,188 3,112
Opg CFPS (Rp) 405 477 515 571 604
Free CFPS (Rp) 183 163 191 241 267
Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank

Analyst: Sachin MITTAL

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Telekomunikasi Indonesia

DBS Bank recommendations are based 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 catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 23 Oct 2018 16:44 (WIB)

Dissemination Date: 23 Oct 2018 17:15:43(WIB)

Sources for all charts and tables are DBS Bankunless otherwise specified.

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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.

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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
1
(s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 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
2
his associate does not have financial interests 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 do not have a
proprietary position in the securities recommended in this report as of 30 Sep 2018.
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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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. (“DBS”), DBS Vickers Securities (Singapore) Pte 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).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at equityresearch@dbs.com

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

Malaysia This report is distributed in Malaysia 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.

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

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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, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS
Financial Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for
Centre professional clients (as defined in the 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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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
18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard,
68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3
Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982
Tel: 65 6878 8888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888
Fax: 65 65353 418 Tel.: 603 2604 3333 Fax: 65 65353 418
e-mail: equityresearch@dbs.com Fax: 603 2604 3921 e-mail: equityresearch@dbs.com
Participant of the Stock Exchange of Hong Kong e-mail: general@alliancedbs.com 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: 62213003 4943
e-mail: research@th.dbs.com e-mail: research@id.dbsvickers.com
Company Regn. No 0105539127012
Securities and Exchange Commission, Thailand

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