Conglomerate/Property|23November2010

BUY
InitiatingCoverage

GallantVenture
Latentvalueaplenty
We initiate coverage on Gallant Venture with a BUY recommendation andtargetpriceof$0.75/share.WithlandsalesinBintangoingat36x itsbookvalue,itisbecomingclearthatthecompanyslandbankinthe island is grossly undervalued. But the rapid development of Treasure BayandLagoiBayshoulddeflect criticismsaboutitsstallingprogress. Visitorarrivalstotheresortsareexpectedtoreachahighof440,000,a threefold increase since 1996s grand opening. As a bonus, Gallants sideinvestmentinaprimepropertyinShanghaimayoffer180%upside toitsentrycost.Thestockcurrentlytradesathalfitsbookvalue.

Vol ('000) 80,000 60,000 40,000

Analyst
OOIYiTung ooiyitung@kimeng.com (65)64335712

Price Target STIndex

$0.255 $0.75 3,190.92

HistoricalChart

Pri ce($) 0.40 0.35 0.30 0.25 0.20 0.15 25Oct10 10May10 15Mar10 23Nov09 02Aug10 30Aug10 21Dec09 15Feb10 27Sep10 22Nov10 12Apr10 18Jan10 07Jun10 05Jul10 20,000 0

Glaringlyundervaluedlandbank Gallants landbank in Bintan is about a quarter the size of Singapore. It was acquired at $0.28 psf, a fraction of todays average selling price of $10 psf (a hefty 36x multiple). The lack of critical mass in Bintan had previouslystalledprogressonitslandsales,buttherapiddevelopment ofkeyprojectssuchasTreasureBayandLagoiBayshouldprovideashot inthearmgoingforward.

Performance Absolute(%) Relative(%) 1m 5.6 6.1 3m 6.3 2.6

6m 24.4 5.3

StockInformation

SpilloverfromSingaporestourismboom Thanks to the success of Singapores two integrated resorts and the variety of touristgenerating international events held in the Republic, Bintans tourist arrivals crossed the 400,000 mark for the first time in 2009,andareexpectedtoreachahighof440,000in2010.Theincrease invisitorswilltranslatetohigherrevenueforGallantsutilitiesandresort operations.

GLVT.SI Tickercode GALVSP Marketcap(US$m) 474.3 52weekhigh(S$) 0.340 52weeklow(S$) 0.175 Sharesissued(m) 2,412.5 6mavgd.vol(US$m) 0.7 22.7 Freefloat(%) Majorshareholders(%) SalimGroup(53.4) SembCorpIndustries(23.9)

BUYGallantandgetotherinvestmentsforfree Gallantcurrentlytradesathalfitsunderstatedbookvalue,alevelwhich ignores the growth potential of its Lagoi Bay development as well as other investments. We recommend investors to BUY Gallant and get $0.18/share for free. The latter will come from its profitable ventures intoanironoreminingfirmandaprimerealestateprojectinShanghais LaoXiMen,which,atcurrentmarketprices,couldoffer180%upsideto itsentrycost.

KeyIndicators

ROE(%) Netgearing(%)Sep10 NAV($)Sep10 Interestcover(x)

0.7 15.3 0.52 10.8

YearEndDec31 Sales(S$m) Pretax(S$m) Netprofit(S$m) EPS(Scts) EPSgrowth(%) PER(x) EV/EBITDA(x) Yield(%)

2008 225.2 17.9 0.5 0.0 96.7 1263.2 8.0 0

2009 187.6 3.4 10.5 0.4 n.a. n.a. 10.5 0

2010F 225.3 18.9 9.3 0.4 n.a. 65.8 9.5 0

2011F 234.6 27.7 18.5 0.8 97.5 33.3 8.3 0

2012F 242.8 30.5 21.2 0.9 14.8 29.0 7.3 0

SEEAPPENDIXIFORIMPORTANTDISCLOSURESANDANALYSTCERTIFICATIONS
Co.RegNo:198700034E MICA(P):090/11/2009

GallantVenture

23November2010

Makingastrongcomeback

WeinitiatecoverageonGallantVenturewithaBUYratingandtargetprice of$0.75/share.Inouropinion,theinvestmentmeritsareasfollows. Undervaluedlandbank As of October 2010, Gallant generated sales in excess of $70m for its landbankinBintan.Thisrepresentedahugeleapfromthe$9machieved threeyearsago.WeestimatethatGallantispocketing$80innetprofitfor every square meter of land sold, or 73 cents for every $1 of land sold. LagoiBay,whichisabout1,300hainsize,isthelatestresortdevelopment siteithasputupforsale.OurcalculationshowsthatGallantneedsonlyto sell700ha,orabouthalfofLagoiBay,tocoverthetotalcostof$550mitis carrying in its books for its landbank in Batam and Bintan. So far, it has sold50haandisintalkswithprospectiveinvestorstosellanother80ha. SpilloverfromSingaporestourismboom Less than an hours ferry ride away from Singapore, a long shoreline of whitesandbeachesawaitsvisitors.Itisnocoincidencethattouristarrivals in Singapore and Bintan reach record highs in the same period. The spillover effects from Singapores two integrated resorts and tourist generatinginternationaleventsareallgoodnewsforGallant.Itswinning formulaislargelydependentonthesuccessofBintanasatouristhub,and it does seem to be on a winning streak at this juncture. The company projectstouristarrivalsinBintantobreak1mby2015. BUYGallantandgetotherinvestmentsforfree Gallantcurrentlytradesathalfits understatedbookvalue,alevelwhich webelieveignoresthegrowthpotentialofitsLagoiBaydevelopmentand otherprofitableinvestments.Itsentrycostof$14mfora29%stakeina Jakartabased iron ore mining company Silo, which also has large coal reserves, has proven to be cheap. Silos FY09 net profit was $4.7m attributable to Gallant, implying an entry PER of less than 3x. In other words, Gallant will be able to recoup its initial investment capital in less thanthreeyears,assumingstableearnings. Gallantalsopaid$288mfora48%stakeinaprimerealestateprojectin LaoXiMen,Shanghai,nexttothedistrictsmetrostation.Weestimatethe breakeven price to be around RMB25,000 psm, while neighbouring projectsaresellingatRMB70,000psmonaverage.Thisissupportedbya nearby CapitaLand project in the Luwan district, The Paragon, for which CapitaLandisconfidentoffetchingRMB110,000psm.AssumingtheLaoXi Menprojectiscompletedinfourphasesover201316andeachphaseis fullysold,itwilladd$0.17toGallantsRNAVpershare.

GallantVenture

23November2010

Figure1:Gallantsotherinvestments
Currentmarketcap No.ofshares(m) NPVofLagoiBaycashflow(10yrs) NPVofoperationcashflow(10yrs) NPVofterminalvalueofoperationcashflow Remaininglandbank/assetsheldatbook DebtrelatingtoBintan Totalvalue(alreadydoubleofcurrentmarketcap) Gettheseinvestmentsforfree NPVofShanghaidevelopmentprofits NPVofoperationcashflowfromironoreinvestment(10yrs) Totalvalue
Source:Companydata,KimEngestimates

S$m 615.2 2,412.5 257.3 379.8 268.9 461.5 (87.0) 1,280.4 420.6 22.7 448.3

S$/share $0.255 $0.11 $0.16 $0.11 $0.19 ($0.04) $0.53 $0.17 $0.01 $0.18

Figure2:Gallantskeymilestonesandexecutiontimeline,201015F
1,200 1,000 800 600 400 200

2010
439 1,300 Additionof roomsbyRia Bintan

Year
ProjectedVisitorArrivals RoomInventory KeyAchievements

2011

2012

2013

2014
800 1,700 Inaugurate helicopter services

2015
1,000 6,700 Completionof TreasureBay

485 550 650 1,300 1,700 1,700 Express Doubleberthing Secondferry immigration capacity terminal clearance offerryterminal atMarina atBintan South, Completionof Singapore LagoiBeach Completionof Village Phase1of TreasureBay andhotels/ resortsfrom landsales

Source:Companydata,KimEngestimates

GallantVenture

23November2010

Companybackground

Assetreorganisationthefirsttrigger Gallant Venture was formed as a result of the reorganisation of assets heldonbothBintanandBatamislands,mainlyBintanResorts,theBatam Industrial Park (BIP) and the Bintan Industrial Estate (BIE). These assets were previously held by various parties of a consortium, which included theSalimGroupaswellasSingaporegovernmentlinkedcompaniessuch as SembCorp Industries (SCI), Keppel Group and JTC Group. This consortium was formed in the early 1990s to develop the Riau Islands, whenthegovernmentsofSingaporeandIndonesiasignedanagreement on Economic Cooperation in the Framework of the Development of the RiauProvince. Basically, the agreement entails both governments cooperation in promoting international investments in tourist resort development and touristinfrastructureintheRiauProvinceofIndonesia,especiallyBintan. Manufacturing activities were also encouraged, with the suspension of importdutiesand25%ofthetotalexportvolumewaspermittedforsale inthedomesticmarket.Thelowercoststructureandabundantworkforce were key attractions for multinational corporations to set up manufacturingplantsinRiau.ProximitytoSingaporehelpedtoo. BintanResorts,BIPandBIEtospearheaddevelopment Under this agreement framework, the development of the Riau Islands commencedthroughthreemaininitiatives: 1. ThedevelopmentofBintanResorts,throughaholdingcompanycalled PTBMWintheearly1980s.In1990,PTBMWwasgiventherightto developlandforresortsonthenortherncoastofBintan.

2. Batamindo Industrial Park (BIP) started in 1991, with the establishment of PT BIC through a jointventure agreement between PT HR, STIC and Jurong Engineering (part of JTC). The park targets mainlytheelectronicsindustry.

3. Bintan Industrial Estate (BIE) kicked off in 1994, when PT BIIE was formedasajointventurebetweenPTLembahKemakmuran(apartof SalimGroup),STICandtheJTCGroup.Initiallytargetinglightindustries like garment manufacturing, the bulk of the output now comprises electronicsaswell. WhentheAsianfinancialcrisiseruptedin1997,Indonesiawasparticularly hard hit and the land held in various entities controlled by the Salim GroupwaspledgedtotheIndonesianBankRestructuringAgency(IBRA)in 1998whenthegroupranintodifficulties.TheSARSoutbreakin2003took afurthertoll.

GallantVenture

23November2010

Eventually, Bintan Resorts land assets were bought over from IBRA by Parallax Group, a venture company, and held under its Parallax Venture PartnersXXX(PVPXXX)subsidiary. Gallantfinallyemerges The Salim Group purchased a stake in PVP XXX and the whole business was reorganised once again to include the original partners such as SCI and Ascendas (formerly JTC). The aim was to restructure the industrial parkandresortassetsintoanoptimallyorganisedentityunderthename ofGallantVenture.SowhileGallantisnew,havingonlybeenincorporated in 2003, the players behind it are certainly not; they have been running theongoingbusinessessincetheearly1990s.

Figure3:Gallantsexistingshareholdingstructure

SembCorp Industries 23.9% Salim Group 53.4% GallantVenture Ascendas 3.7% Public 19.1%

Source:Companydata

Fourmainbusinessareas Consequenttoitsreorganisation,Gallantsbusinesseswereclassifiedinto four main groups industrial parks, utilities, resort operations and propertydevelopment.

Figure4:Gallantslineofbusiness

GallantVenture

Industry andLineof Business Revenue Streams

Utilities

IndustrialParks

ResortOperations

Property

Power Water Telecommunication WasteManagement

Rental ServiceCharges OtherServices

RentalandService Charges FerryTerminalFee FerryOtherServices

Developmentand SaleofLandand Property

Source:Companydata

GallantVenture

23November2010

Figure 5 below illustrates the asset value of each business segment for FY09andtheassociatefinancialnumbers.

Figure5:GallantsFY09earningsbybusinesssegment

IndustrialParks Value=$406m Revenue=$47.7m EBITDA=$25.9m PBIT=($2.9m)

Utilities Value=$222m Revenue=$117.3m EBITDA=$38.5m PBIT=$19.3m

GallantVenture Value=$1,448m Revenue=$187.6m EBITDA=$56.1m PBIT=($0.7m)

PropertyDevelopment Value=$556m Revenue=$0m EBITDA=($4m) PBIT=($4.4m)

ResortOperations Value=$79m Revenue=$26.3m EBITDA=($0.9m) PBIT=($9.4m)

Source:Companydata

GallantVenture

23November2010

Businesssegments

A.Propertydevelopment

Landsalesamajorrevenuestream Gallantspropertydevelopmentbusinessderivesrevenuefromthesaleof its landbank for development. Its extensive 18,400ha landbank, which includes properties in the Batam and Bintan islands, is valued very conservativelyatS$550m,oranaverageofjustS$0.28persqft. The land is held under Hak Guna Bangunan (or HGB) status under Indonesian land laws. Essentially, HGB confers the right to construct a building on land for a period of 30+20+30 years. This right can be sold, exchanged, transferred and mortgaged, and can be held directly by any corporate entity. Gallants lands are up for their 30year renewal only in the next 1720 years. As the master developer, it has to ensure that the landitsellsisusedaccordingtoitszoningpurpose. Ascheduleofthelandplots,theirplotsizes,theirtenurecommencement datesandvaluationcanbefoundintheAppendix. With most of its industrial land in Batam already developed, Gallant will derivethebulkoffuturerevenuefromBintanwherethereisstillabundant raw land for sale. These are located in northern and western Bintan, ie, part of Bintan Resorts and BIE, respectively. Gallant plans to release the land for sale over the next 2025 years, depending on the progress of developmentinBintan.

GallantVenture

23November2010

Figure6:GallantslandbankinBintan

Source:Companydata

GallantVenture

23November2010

BintanResortsthetouristhub The northern plot of land that is available for sale through Gallant is knownasBintanResorts.Itconsistsofabout15,600haoflanddesignated forresort,commercial,residentialandsupportfacilities.Itsattractiveness as a tourist destination lies in its proximity to Singapore less than an hour by ferry as well as the approximately 100kmlong shoreline of whitesandbeaches.Thereisalsoalargehinterlandthatcansupportother projects,suchasthemeparksandlongtermresidentialdevelopment. Since1990,foursitestotallingabout1,200ha(seeFigure7,areainorange) weresoldtothirdpartiesfordevelopment.Allarecurrentlyoperational.

Nirwana Garden Resort: Established in 1996, this 300ha beachfront resorthas245hotelrooms,100chalets,50villasandafullwatersports beach club. The Mayang Sari Beach Resort, Nirwana Resort Hotel, ManaManaBeachClubandCabanas,IndraMayaVillaandBanyuBiru Villaareamongitsproperties. Laguna Bintan Resort: In operation since December 1995, the 220ha beachfront resort has 70 villas, 128 hotel rooms and an 18hole golf course.TheBanyanTreeBintanandAngsanaResortandSpaaresome ofitsproperties. Bintan Lagoon Resort: The 300ha beachfront resort commenced operationsin1996.Ithas416hotelrooms,57 villasandtwo18hole golfcourses. RiaBintan Resort:This400habeachfrontresortstartedoperationsin 1997.Itspropertiesincludethe300roomClubMedVillageanda27 holegolfcourse. Newferriesforfaster,morecomfortableride BintanResortFerries(BRF)beganoperationsin1994withtwocatamaran ferriesofabout600seatsintotal.Twonewgenerationferrieswereadded tothefleetin2009,cuttingtraveltimeby25%to45minutesandallowing morevisitorstobetransportedtoBintan. The new ferries also offer greater comfort as they come equipped with technologytohandlethechoppyseas.Eachferryhas300seats,ofwhich 57arereservedforpassengersinthepremiumEmeraldClass.Thesecan skipthequeueforimmigrationclearanceonarrivalinBintanasdesignated staff will take care of the process. Currently there are five ferry trips on MondaytoThursday,sixonFridayandsevenduringtheweekend.

GallantVenture

23November2010

Figure7:DevelopmentplanforGallantslandbankinBintan

Legend Location LagoiBay Landbank1 Landbank2 Landbank3 Existingdevelopments Supportservices Parcelinfrastructure Roadandbasicinfrastructure Someroad&expansionfromexistinginfrastructure Partialexpansionfromexistinginfrastructure Noinfrastructure/minorroads&tracks Fullinfrastructure Fullinfrastructure Totalarea 1,505ha 3,376ha 3,325ha 5,806ha 1,601ha 1,819ha

Source:Companydata

Massive14,400halandfordevelopment Apart from the ongoing projects, Gallant has another 14,400ha of land availableforsale.ThisconsistsofLagoiBay,PasirPanjang,SimpangLagoi andthenortheasternplotofTelukSumpatanditssurroundings(Figure7). Combined,thisareaisaround22%thesizeofSingapore. LagoiBeachVillageanewbeachhead The first phase of land sale by Gallant will involve the Lagoi Bay region (Figure7,areainpink).Thiswillbekickstartedbythedevelopmentofthe 1,505haLagoiBeachVillage(LBV),whereplotsoflandwillbeavailablefor sale to property developers, hotel owners and operators, and individual retailinvestors. Freshapproachtocreatevariety ThistimearoundGallantwilltakeadifferenttacktowardsdevelopingLBV. Instead of the singleresort approach adopted for previous land sales at Bintan Resorts, it plans to turn LBV into a diversified township with pedestrianmalls,retailoutlets,entertainmentjoints,boutiquehotelsand

10

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23November2010

residentialdevelopments.Essentially,LBVwillseektocreatealocaleala Patong Beach in Phuket, Chaweng in Koh Samui or Kuta in Bali, where tenantsarefreetocreateandsustainitsoveralltouristattraction. As illustrated in Figure 8 below, LBV will have a good mix of boutique hotels as well as retail and entertainment spaces. We believe this free marketapproachwillbeconducivetothedevelopmentofLBV,creatinga more varied destination where visitors will not be limited to just the attractionsoftheresorttheyarestayingin,asisthesituationcurrently.
Figure8:LagoiBayVillagemasterplan

Source:Companydata

Propertyprospectslookingup In our view, LBV will serve as the springboard for the longterm development of Gallants landbank. While proximity to Singapore has madeBintanResortsdevelopmenthighlydependentonvisitorarrivalsto the Republic, we believe the prospects for overall development still look gooddespitethelimitedsuccesssofarforexistingdevelopments. The opening of the Resorts World Sentosa and Marina Bay Sands integratedresorts in Singapore this year has caused an influx of tourists. This should translate to positive demand for more tropical beachstyle resorts, which are lacking on Singapores shoreline. Therefore, the sheer availabilityoflandinaplacecloseby,namely,Bintan,willopenupmyriad tourism and leisure opportunities that landscarce Singapore cannot provide.Infact,webelieveGallantisbankingonthissurgeintourismto drivedemandforitslandsalesinBintan. AdditionalindustriallandbankinWestBintan InadditiontothelandatBintanResorts,Gallantholds3,868haoflandin 10 parcels in Lobam, West Bintan. This stretch of land is adjacent to the

11

GallantVenture

23November2010

BintanIndustrialEstate(BIE)andiszonedforindustrialandinfrastructure development.GiventhelimitedresponsetoBIE,ourforecastsassumethat Gallantwillnotbeconvertingthislandtoindustrialparksinthenearterm. Upcomingairporttoprovidenewopportunities However,Gallantissettingaside400haofthislandforthedevelopmentof an international airport that will see mediumrange aircraft serving both the industrial park and Bintan Resorts. When built, the airport will be about a 40minute drive from Bintan Resorts. It also will provide greater accesstothetourismsectorwithinIndonesiaitself,aswellasinregional countrieslikeThailand,MalaysiaandthePhilippines.Weunderstandthat Gallant currently is in talks with the Indonesian authorities and potential airportoperatorsonthisdevelopment.

B.Resortoperations

Onestopsupportservicesforresorts Gallant is responsible for the overall master planning and infrastructure developmentofroads,waterandpowersupply,telecommunicationsand associated support facilities in Bintan Island. This includes ferry access between Singapore and Bintan Resorts. The assets held under the resort operations division include land, buildings (eg, the Bandar Bentan Telani FerryTerminal)andtownshipsthatprovideaccommodationtoworkers. Infact,GallantisthemonopolyserviceproviderinBintanResorts,offering onestop support solutions to the four main resorts and seven hotels, a totalof1,370hotelrooms.ItrunsthefastferryservicebetweenBintans maingateway,theBandarBentanTelaniFerryTerminal,andSingapores Tanah Merah Ferry Terminal. Other services include ferry terminal operations, workers accommodation, estate management and security, firefightingandmedicalaid. As an aside, we believe that Bandar Bentan Telani Ferry Terminal will remainthemaingatewaytoBintanevenaftertheairportisbuilt.

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23November2010

Figure9:TransportandsecurityinBintanIsland

Tourist Police

Navy Post at BBT

Source:Companydata

Visitorarrivalscriticaltorevenuegrowth Theresortoperationssegmentreliesheavilyonvisitorarrivalstogenerate revenue,particularlyfortheferryservices.In2009,thenumberofvisitors crossed the 400,000 mark for the first time since its grand opening in 1996,andisexpectedtoreacharecordhighof440,000in2010. Longerterm,turnoverissettogrowintandemwiththedevelopmentof morepropertiesinBintanResorts.Economiesofscalewillalsostarttokick in, thus improving margins. And once critical mass is reached, the developmentsatBintanResortswillgiveGallantachancetobenefitfrom

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23November2010

theprovisionofothersocialservicessuchashospitals,adedicatedpolice forceandpublictransport.Thesecanbeintheformofdirectinvestments orthroughlucrativeconcessionstothirdparties. GallantprojectsthatvisitorarrivalsinBintanwillcontinuetoheadnorth andreach1mby2015(Figure8).

Figure10:VisitorarrivalsinBintan
1,200,000 1,000,000 800,000 600,000 400,000 200,000 0

Year 2003 *Visitors 263 (000)

Source:Companydata

2004 300

2005 288

2006 324

2007 334

2008 398

2009 418

2010 439

2011 485

2012 550

2013 650

2014 800

2015 1000

*Visitorarrivalsfor201015includesprojections

Figure11:Visitorarrivalsbreakdownbynationality
NewZealand,1% Taiwan,2% HongKong,1% Russia,1%

Other,8% Germany,2% Indonesia,2% France,1% Korea,1% Australia,2% USA,3% Malaysia,5%

India,3% China,4% Singapore,28% Other,7%

Germany,2%

UK,5%

Singapore,53%
Indonesia,21%

Japan,6%

Japan,8%
France,2% Korea,8% USA,2% Australia,4%

UK,4% Malaysia,4%

Visitorarrivalsbreakdownbynationality,1996Visitorarrivalsbreakdownbynationality,2008
Source:Companydata

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23November2010

C.Industrialparks

The two main assets of Gallants industrial parks business are the BatamindoIndustrialPark(BIP)inBatamandBintanIndustrialEstate(BIE) in Bintan. These offer selfcontained environments for a variety of manufacturing industries, with the main tenants being multinational corporations,includingSingaporecompanies. Arangeofreadybuiltfactoriesareavailableforrentorsale,andcanbe customised to specifications as well. Also available are support services, such as logistical services, to take advantage of Singapores air and sea portfacilities.Theyincludedailyshippingforcontainerised,conventional and lighttoheavy cargoes. These would be to and from Singapore, transshipment for inbound and outbound cargo via Singapore and warehousing, distribution and relocation services. Gallant also owns and managesaportandferryterminalatBintan. In addition, Gallant provides residential, recreational and medical amenities for tenants and workers. Other support services include security, commercial centres in the industrial parks, power, water and wastetreatmentbyGallantsutilitiesbusiness. Investors and tenants are exempted from import duties in the Bonded Zones, and enjoy the benefit of having 25% of their total export volume permittedforsaleinthedomesticmarketwithoutextratariff.
Figure12:Gallantsindustrialparks
Industrial parks BIP(Batam) BIE(Bintan)
Source:Companydata

NLA (sqm)

Targetindustries

Transportationfacilities BatuAmparandKabilseaport,BatamHang NadimInternationalAirport,fiveferryterminals Selfcontainedwithownportandferryterminal, BintanSriUdana

Electronicproductsandcomponents, 530,000 pharmaceutical,precisionparts,plastic moulding 106,000 Electronics,garmentmaking

Majorcustomersfromelectronicsandelectrical Althoughrevenuefromtheindustrialparksbusinessdoesnotdependon any specific industry, a substantial portion comes from tenants in the electronics and electrical sectors. They include Ciba Vision, Solectron, Perkin Elmer, Philips, Thomson, Schneider Electronics, Varta, Siemens, Panasonic, TEAC, Sony Chemical, Sanyo, Sumitomo and Venture Electronics.

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23November2010

Figure13:Industrialparkscustomerprofile
BIP's customer profile
3.6% 1 .2% 1 .2% 2.4% 2.4% 1 .2% 1 0.7%

BIE's customer profile

3.0% 6.1% 6.1% 3.0% 18.2%

33.3%

44.0%

USA Germany

Singapore France

Japan Finland

Indonesia Australia

Holland

63.6%

Germany

Italy

Japan

Singapore

Switzerland

USA

Source:Companydata

Growthoutlookmaybemuted Over the years, both BIP and BIE have been steady cash cows, despite rentalshavingfallenfromapeakof$812psmintheearlydaysinorderto stay competitive. Average occupancy rates for both industrial parks are currentlyfirmat85%.Althoughthereareadditionallandparcelsthatcan be developed as industrial parks, we are cautious about the nearterm growthprospectsforthisbusinessdivision.Electronicshashithertobeen the manufacturing focus of the two parks until the emergence of lower costmanufacturingcountrieslikeChinainrecentyears.AlthoughGallant intends to attract other industries such as pharmaceuticals and medical suppliestoitsparks,wearelesssanguineaboutthegrowthprospectsof theindustrialparkbusinessovertheshortterm.

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23November2010

D.Utilities

Since 1990, Gallants utilities division has invested about $362m to build and develop utilities infrastructure and resources. These include power generationanddistributionplants,potablewatertreatmentfacilities,waste watertreatmentfacilitiesandlandfill.Underthisumbrella,Gallantprovides telecommunications, electricity and water supplies, as well as waste managementservicestoBIP,BIEandBintanResorts.

Gallants power plants are more reliable than those of other local utilities providers because their design incorporates spare capacity that allows for regular maintenance and overhaul, as well as backup units to prevent powerinterruptions.Thesteadfastelectricitysupplytotheindustrialparks since their inception has given the parks a significant edge in attracting customers.

1. Power:Gallantcurrentlyhas27generators. BIP 16 dieselfired generators and three dualfuelfired generators handlinganaggregatepeakloadof81MW. BIEfourgeneratorshandlinganaggregatepeakloadof11MW. Bintan Resorts four generators handling an aggregate peak load of 8.2MW.

2. Water:Thisiseitherboughtfromthirdpartiesorrawwateristreatedby Gallantbeforebeingpipedtocustomers. Batam water is sourced from two reservoirs at Muka Kuning and Duriangkangwhichareownedbythelocalgovernmentauthority. Bintan water is sourced from Lake Java for BIE and a reservoir for BintanResorts.

3. Telecommunications: PT BBT, Gallants telecommunications subsidiary, has capacity for about 14,000 lines for broadband, IDD, fax, local and dedicatedleaselinestoensurequalityservicesfortenantsandinvestors. It also has a 100mhigh microwave tower that supplements the local authoritysopticalfibrenetworkstominimisepossibleinterruptions.

4. Waste management: BIE, BIP and Bintan Resorts each has its own sewage plant. The utilisation of the sewage plants generally vary at around60%forBIPandaround20%forBIE.Thecostofwastewaterand sewagetreatmentispartiallyrecoveredthroughthewatertariffsGallant chargesitsindustrialparkstenants.

BintanResortstodriveprospects Revenue for the utilities business is determined by the number of customers and the amount of offtake from them. As BIP is almost fully developed, we do not envisage much upside from this facility for the provisionofutilities.Again,wethinkthatmostofthegrowthfortheutilities businesswillmoveintandemwiththenewdevelopmentsatBintanResorts and,toalesserextent,fromBIEandtheplannedairport.Dependingonthe style of individual resorts, potential utilities offtake is likely to be very significant,inourview.

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23November2010

Keydevelopments

LagoiBaywillmakeupthefirstphaseoflandsalesbyGallant,kickstarting thedevelopmentofLagoiBeachVillage.Inthemeantime,Gallantisselling smaller bungalow plots to individual buyers through Aranya Lagoi Residences,whilecollaboratingwithBUHoldingsonaseasidevillaproject, Pantai Indah. Concurrently, Landmarks Berhad, an owner of two plots of landadjacenttotheBandarBentanTelaniFerryTerminal,willsoonbegin constructionofitswaterfrontcityknownasTreasureBay.

Figure14:DevelopmentmapforBintanResorts

LAGOIBAY (Seepicturebelow)

PANTAI INDAH LAGOIBEACH VILLAGE ARANYALAGOI RESIDENCES

Source:Companydata

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23November2010

LagoiBay Land sales for Lagoi Bay reached $70m as of October 2010, a significant improvement from $9m three years ago. Total land area sold is about 50ha, just under 4% of the Lagoi Bay area. The average selling price achievedsofarisaround$110psm.Comparedtoanestimatedbreakeven costof$30psm(takingintoaccountthecostofland,costofinfrastructure andtax),Gallantisgetting$80innetprofitforeverysquaremeterofland sold,or73centsforevery$1oflandsold.Tocoverthecostoftheentire 18,400ha landbank in Bintan held at book value of $3 psm, we estimate Gallantneedsonlytosell700ha,orjusthalfofLagoiBay.Weunderstand thattalksareunderwayforthesaleofanother80haoflandandGallantis alsoapproachingmajordevelopersinSingaporetostrikedeals.

Figure15:Gallantslandsales
LagoiBayCommercial LagoiBayResorts LagoiBayResidential Township&others
Source:Companydata

No.ofland plots 69 6 9 3

Totalsalevalue (S$m) 10.5 52.5 2.4 4.7 70.1

Avgsellingprice (S$psm) 312 119 300 65

AttheheartofLagoiBayistheLagoiBeachVillage.Itcoversabout20haof Lagoi Bay and comprises smaller sites for sale ranging from 65 sq m to 1.1ha. Land sales have been progressing encouragingly, with sites being snapped up by institutional and individual developers to build hotels, commercialshophousesandbeachfrontvillas.Furtherinland,Gallantplans to build a pedestrian mall featuring shopping, entertainment and F&B choices.Themallhasprovedtobepopularwith100%committedleases. To draw traffic to the Lagoi Beach Village, Gallant will be setting up bus services from existing hotels, resorts and the ferry terminal to bring in visitors.Wesawtheconstructionprogressfirsthandandwereencouraged bythecompletionoffoundationworks.Themallisscheduledtobeready for business by end2011. On the other hand, the hotels and commercial shophousesinLagoiBayVillageareexpectedtobeginconstructionatthe endoftheyearandtobecompletedin23yearstime. FurthertothenortheastofLagoiBay,theluxurious162unitseasidevilla project,PantaiIndah,wasrecentlylaunchedforsale.Thisisajointventure between BU Holdings and Gallant. There is a choice of three and four bedroombeachfrontvillasranginginsizefrom400sqmto800sqm,and sellingat$0.71.8m.Tenoutofthe26unitslaunchedhavebeensold. AstonesthrowawayistheAranyaLagoiResidences,wheresmallishplots of land zoned for residential villas are sold to individual buyers. A dozen suchplotshavebeensoldtodate.

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Figure16:ArtistsimpressionofLagoiBeachVillage

Source:Companydata

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Figure17:ArtistsimpressionofPantaiIndah

Source:Companydata

Figure18:AranyaLagoiResidences

Source:Companydata

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TreasureBay Within Lagoi Bay is a 338ha land parcel owned by Landmarks Berhad, a Malaysialistedcompany30.3%ownedbyGentingBerhadandwithresorts and hospitality business in Langkawi. Called Treasure Bay, this region is consideredprimelandgivenitslocationnexttotheBandarBentanTelani FerryTerminal,themaingatewaytoBintanfromSingapore.

TreasureBaywillbedevelopedintofourprecincts,eachwithadistinctive characterandowndesignelements.

TheWestKeyistheentrancetothewholeintegrateddevelopmentwith theferryterminal,amarina,resortsandluxuryhotels.TheNorthIslands feature highend waterfront villas and hillside homes. The South Side offersthemedresortsandparkswithwatercanals.Theareawillalsohave anintegratedwellnessandmedicalspa. TheEastBayisamixofresorts, retail,commercialandresidentialunits.Therewillbeaculturalvillageand abustlingtowncentreaswell.

Phase 1 of Treasure Bay, which includes a marina, a yacht club, themed resorts,privateresidencesandcommercialareas,isexpectedtolaunchby end2010.

Although Gallant does not have a direct stake in Treasure Bay, it will benefit in a number of ways. The completion of Treasure Bays development, as well as those others in Lagoi Beach Village, will add another 400 rooms in Bintan by end2012, up from the current 1,300 which enjoy full occupancy during the weekends. The increase in room inventory will thus encourage more visitors to come and boost revenue collection for Gallants utilities and resort operations businesses. Moreover, the success of Treasure Bay will convince prospective developersthatLagoiBayhasvaluewaitingtobeunlocked.

Figure19:TreasureBaysmasterplan

Source:Companydata

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Otherinvestments

In recent times, Gallant undertook two new investments as part of its expansion and diversification strategy. It acquired a stake in a resource miningcompanyinIndonesiaandinvestedinaprimerealestateprojectin Shanghai. Ironoreandcoalmining,Indonesia InJuly2009,Gallantpaid$14mforaconvertiblebondthatisconvertible fora29%stakeinPTSebukuIronLateriticOres(Silo).Thisisanironore mining company based in the Sebuku Island in South Kalimantan, Indonesia, where its mining operations are principally located. But plans areinplaceforexpansiontoSumatra.Silosmainproductsarecoarsefine andlumpore,whichitexportstoChinaandotheroverseasmarkets.Silois alsobelievedtohavecoalresources. ThisinvestmentisexpectedtoprovidesynergisticopportunitiestoGallant asitscoalfiredpowerplantsinBintancurrentlysupplypowertoSiloand thelatterscoalproductioncaninturnsupplytherawmaterialsforpower generation.SilosFY09netprofitwasUS$12.5m,orS$4.7mattributableto Gallantassumingtheconvertiblebondisconvertedtoequitystake. LaoXiMen,Shanghai In March 2010, the group paid $287.5m for a convertible bond that is exchangeablefora48%stakeinaprimepropertyprojectinLaoXiMen, HuangpuDistrict,Shanghai.The70yearleaseholddevelopment,whichis close to Luwan and The Bund, is situated above the Lao Xi Men metro stationwithexitsdirectlylinkedtotheproperty. Theprojectisdividedintotwolandplots. Thenorthernplotiszoned for residentialuseandthesouthernformixedusepurpose.Thefirstphaseof theprojectisexpectedtobereadyforlaunchattheendof2011.Theland costworksouttoRMB18,000psm.Weestimatethebreakevenpricetobe aroundRMB25,000psmandnotethatneighbouringprojectsaresellingat RMB60,00080,000psm. And near Xintiandi, a trendy shopping and dining complex in the Luwan district, CapitaLands mixed development, The Paragon, is expected to fetchRMB110,000psm.

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Figure20:LocationofprojectinLaoXiMen

Source:GoogleMaps

Figure21:SiteplanprojectinLaoXiMen

Source:Companydata

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Valuationmethodology

Ablendedapproach Gallant is a diversified company with multiple income streams. We thereforeoptforablendedapproachtovaluingthecompany. Fromanassetvalueperspective,Gallantissittingonasizeablelandbank thatiscurrentlyundervaluedatanaveragebookvalueof$3psm.Selling prices average at $110 psm for deals the company has secured so far. LandmarksBerhadsentrycostforitsTreasureBayplotswas$99psm.BU Holdings, Gallants JV partner for Pantai Indah, has also agreed to pay a minimumof$110psmfortheIndahCollectionlandparcels.Also,Keppel Land holds the Ria Bintan golf course at an average of $82 psm in its books. As another rough basis for comparison, land prices in Bali transact at between$80psmand $500psm, dependingonthelocation,withprime beachfront commanding the premium valuations. In Phuket, land prices on average are another 50% higher than in Bali. While we concede that BintancurrentlydoesnotenjoythesamedistinctionasBaliorPhuket,the valuationgapissimplytoowidetoignore. For the Lagoi Bay landbank, we conservatively estimate a land value of $100psmforbeachfrontproperties,$50psmforintermediateproperties and just $30 psm for backlot properties while also factoring in an 80% efficiencyratio.OurscenarioassumesthefulldevelopmentofLagoiBayat an average of $42 psm over the next 10 years of its development plan, whichyieldsadiscountedpresentvalueof$257.3m. Additionally, we are valuing Gallants industrial parks, resort operations andutilitiesbusinessesonadiscountedcashflowbasis.Weexpectmost of the cashflow growth for these businesses to be driven by the developmentofLagoiBayandtheancillaryservicesthatitwillrequire,as wellasfromitsutilitiesrequirements.Rentsfromindustrialparks,onthe otherhand,arelikelytoremainconstant,inlinewiththemutedmedium termgrowthofthebusiness.OurcalculationshowsthatGallantsannual free cash flow will climb to more than $100m by FY17. We estimate the cumulativeDCFvaluefromthesebusinesssegmentstobe$671.3m. Our conservative base case valuation also excludes the potential sale of otherlandplotsoutsideofLagoiBay.Thisisheldatitslowbookvalueof just$461.5mforthepurposeofourcalculations. Fairvalueof$0.75/share;initiatewithBUY Insum,thesecalculationsyieldafairvalueof$0.75pershare,henceour 12monthpricetarget.

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Figure22:Blendedvaluationyieldsfairvalueof$0.75pershare BlendedvaluationofGallantVenture(assumingLagoilandsalesonly) Component S$m NPVofLagoiBaycashflow(10yrs) 257.3 NPV of operation cash flow inclusive of contributions 402.5 fromironoreinvestment(10yrs) NPVofterminalvalueofoperationcashflow 268.9 Remaininglandbank/assetsheldatbook 461.5 NPVofShanghaidevelopmentprofits 420.6 Totalvalue 1,810.7 No.ofshares(m) 2,412.5 Valuepershare Keyassumptions: Taxrateof5%onlandsalesgrossincome WACCof15% Terminalgrowthrateof3%
Source:Companydata,KimEngestimates

S$/share 0.11 0.17 0.11 0.19 0.17 S$0.75

HighPERsdonotreflectlongtermlandsales Gallantsearningshavebeenmutedinthepastfewyearsasitwasunable to offset taxes incurred for its industrial park and utilities businesses againstlossesofunprofitablesubsidiaries.Butfromthisyear,webelieve earningsshouldreceiveasignificantliftfromongoinglandsales. We expectGallant to post a net profit of $9.3m for thecurrent financial year(EPSof0.4cts),buoyedbytherecognitionoflandsalesrevenue.For FY11, we expect net profit to double to $18.5m (EPS of 0.8cts), boosted mainlybylandsalesandcontributionfromtheironoreminingentity.

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Appendix:GallantVentureslandbank
GrossArea LandParcel (ha) IndustrialLandatKecamatan 1 288.8 2 280.6 3 165.2 4 162.7 5 644.6 5a 154.2 6 386.1 7 419.2 8 471.1 9 512.5 10 383.0 3,868.0 LagoiBay A5 203.7 A6 166.0 B1 227.0 B2 209.7 B3 209.7 B4 172.4 B5 111.8 B5a 15.0 B8 146.3 B8a 43.0 1,504.6 Landbank1 AR11a 194.3 A7 143.3 A8 30.1 A9 33.6 C26 200.6 C27 179.5 C28 201.8 ZPZA 480 BP 185 R1 215 RA1 420 1A 536 AR2 15.1 B9 34.2 A13/1717a 192.2 B10 204.8 B11 150 A14 216.9 A15 86.1 3,718.5 Title&LandUse RightHGB Commencement Date 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 11/26/1993 1/12/1994 1/12/1994 2/28/1994 1/12/1994 1/12/1994 1/12/1994 2/28/1994 2/28/1994 1/12/1994 1/12/1994 1/12/1994 1/12/1994 1/12/1994 11/26/1993 1/12/1994 1/12/1994 2/28/1994 1/12/1994 1/28/1994 1/12/1994 1/12/1994 2/28/1994 1/12/1994 1/12/1994 9/22/1993 2/23/1998 2/23/1998 1/12/1994 2/23/1998 107.5 129.5 194.5 Value (S$m) GrossArea Value LandParcel (ha) (S$m) Landbank2 A16 168.2 1/12/1994 C1 219.2 9/22/1993 C2 126.5 11/26/1993 B12 64.6 1/12/1994 B13 51.5 11/26/1993 B16 94 1/12/1994 C24 229.3 1/12/1994 C25 193.8 1/12/1994 RA2 410 2/28/1994 BT2 179.1 1/12/1994 Ra5A 0.5 1/12/1994 Ra5A 399.5 1/12/1994 RA3 502 1/12/1994 C23 191.5 1/12/1994 SP1 495 1/12/1994 3,324.7 64.5 Landbank3 B15 152.6 11/26/1993 C3 233 1/12/1994 C4 305.7 1/12/1994 C5 243.4 1/12/1994 C6 183 6/9/1998 C7 214.1 1/12/1994 C8 141.1 2/28/1994 C9 244.9 2/28/1994 C20 154.3 6/9/1998 C21 150.6 6/9/1998 C18 144.4 1/12/1994 C19 190.3 11/26/1993 B17 231.1 11/26/1993 B18 118.6 1/12/1994 B19 36.7 1/12/1994 B20 45.1 1/12/1994 B21 37.3 1/12/1994 BR2 15.0 6/9/1998 BU1 87.3 1/12/1994 RA4 362.0 1/12/1994 R2 460.0 1/12/1994 SP2 856.1 6/9/1993 C22 256.3 6/9/1998 WR2 943.0 6/9/1998 5,805.9 45.0 InfrastructureandUtilitiesforthefollowingparcels AT1 55.1 1/12/1994 BT1 135.1 1/12/1994 Ferry Terminal 2.8 11/26/1993 AU1 66.0 11/26/1993 WR1 1,560.0 1/12/1994 1,819.0 159.0 Title&Land UseRightHGB Commencement Date

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Profitandloss
YEDec(S$m) Sales Costofgoodssold GrossProfit Operatingexpenses OperatingProfit Netinterest Interestincome Interestexpense Netinvestmentincome/(loss) Netothernonop.JV+Assoc. Netexceptionals Pretaxincome Incometaxes MinorityInterest Netprofit EBITDA EPSbasic(Scts) EPSfullydiluted(Scts) 2008 225.2 168.0 57.2 36.5 20.7 3.3 6.1 2.8 6.5 0.3 0.0 17.9 18.9 1.5 0.5 76.5 0.0 0.0 2009 187.6 72.5 32.8 124.5 0.8 1.1 4.5 9.5 3.9 0.1 0.0 3.4 9.2 2.2 10.5 55.9 0.4 0.4 2010F 225.3 170.3 152.8 34.1 28.3 5.0 4.7 7.6 4.5 0.1 0.0 18.9 11.1 1.5 9.3 90.6 0.4 0.4 2011F 234.6 177.0 64.3 34.6 30.2 2.9 4.9 6.1 4.7 5.1 0.0 27.7 11.4 2.2 18.5 98.8 0.8 0.8 2012F 242.8 177.0 65.8 34.5 31.2 1.2 4.9 6.1 4.9 5.3 0.0 30.5 11.7 2.4 21.2 106.6 0.9 0.9

Cashflow
YEDec(S$m) Operatingcashflow NetProfit Depreciation&amortisation Changeinworkingcapital Others Investmentcashflow Netcapex ChangeinLTinvestment Changeinotherassets Cashflowafterinvt. Financingcashflow Changeinsharecapital Netchangeindebt ChangeinotherLTliab. Netcashflow 2008 36.2 17.9 55.8 15.0 22.4 19.5 19.5 0.0 0.0 16.7 21.5 0.0 21.5 0.0 4.8 2009 67.2 3.4 56.7 18.5 4.5 44.0 29.8 14.2 0.0 23.2 16.5 0.0 16.5 0.0 39.7 2010F 47.8 18.9 62.3 20.0 13.4 320.9 38.6 282.3 0.0 273.0 276.0 0.0 276.0 0.0 3.0 2011F 107.4 27.7 68.5 20.0 8.8 93.3 93.3 0.0 0.0 14.1 20.0 0.0 20.0 0.0 34.1 2012F 77.1 30.5 75.4 20.0 8.8 54.2 54.2 0.0 0.0 22.9 20.0 0.0 20.0 0.0 42.9

Source:Companydata,KimEngestimates

Source:Companydata,KimEngestimates

Keyratios
YEDec Growth(%YoY) Sales OP EBITDA NP EPS Profitability(%) Operatingmargin EBITDAmargin NetProfitmargin ROA ROE Stability Grossdebt/equity(%) Netdebt/equity(%) Int.coverage(X) Int.&STdebtcoverage(X) Cashflowint.coverage(X) Cashflowint.&STdebt(X) Currentratio(X) Quickratio(X) Netdebt(S$m) Persharedata(Scts) EPSbasic CFPS BVPS SPS EBITDA/share DPS 2008 2009 2010F 3.9 16.7 20.1 41.3 103.6 3873.6 9.5 26.9 62.1 96.7 2255.2 189.0 96.7 2255.2 189.0 9.2 0.4 12.6 34.0 29.8 40.2 0.2 5.6 4.1 0.0 0.7 0.5 0.0 0.8 0.7 6.7 7.2 28.6 0.0 0.0 0.2 1.9 41.5 10.8 1.9 41.5 10.8 1.7 14.3 0.3 1.7 14.3 0.3 1.6 1.6 1.9 1.5 1.5 1.8 4.0 27.7 243.0 0.0 0.4 0.4 1.5 2.8 2.0 51.7 51.2 51.6 9.3 7.8 9.3 3.2 2.3 3.8 0.0 0.0 0.0 2011F 4.1 6.8 9.0 97.5 97.5 12.9 42.1 7.9 1.1 1.4 28.1 0.2 26.7 26.7 4.5 4.5 2.3 2.2 207.7 0.8 4.5 52.4 9.7 4.1 0.0 2012F 3.5 3.4 8.0 14.8 14.8 12.9 43.9 8.7 1.2 1.6 27.5 0.1 38.3 38.3 7.0 7.0 2.7 2.6 163.8 0.9 0.0 53.3 10.1 4.4 0.0

Balancesheet
YEDec(S$m) Totalassets Currentassets Cashandbankbalances Developmentproperties Accountsreceivable Others Otherassets Property,plant&Eqt Investmentproperties Others Totalliabilities Currentliabilities Creditors&accruals STborrowings Others Longtermliabilities Longtermdebts Others Shareholder'sequity Paidincapital Reserve Others 2008 2009 2010F 1,463.8 1,448.1 1,728.9 176.1 173.2 196.8 89.9 118.7 121.2 15.6 11.2 10.8 70.6 43.2 66.7 0.0 0.0 0.0 441.9 430.6 416.0 0.0 0.0 0.0 368.9 361.2 348.0 73.0 69.4 68.0 186.3 183.3 454.8 109.7 105.1 102.4 50.6 47.5 41.1 51.4 56.4 56.6 7.6 1.2 4.6 76.6 78.3 352.5 34.4 34.6 307.5 42.2 43.7 45.0 1,277.4 1,264.8 1,274.1 1,206.7 1,206.7 1,206.7 39.8 29.3 38.6 31.0 28.8 28.8 2011F 1,751.1 239.6 155.3 14.0 73.3 0.0 398.6 0.0 330.6 68.0 458.5 105.3 45.2 55.5 4.6 353.2 307.5 45.7 1,292.6 1,206.7 57.1 28.8 2012F 1,776.5 293.4 198.2 18.2 80.7 0.0 382.0 0.0 314.0 68.0 462.7 108.7 49.7 54.4 4.6 354.0 307.5 46.5 1,313.8 1,206.7 78.3 28.8

Source:Companydata,KimEngestimates

Source:Companydata,KimEngestimates

28

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Recommendationdefinitions Ourrecommendationisbasedonthe followingexpectedprice performancewithin12months:

+15%andabove:BUY 15%to+15%:HOLD 15%orworse:SELL

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GallantVenture

23November2010

Additionalinformationonmentionedsecuritiesisavailableonrequest. JurisdictionSpecificAdditionalDisclaimers: THISRESEARCHREPORTISSTRICTLYCONFIDENTIALTOTHERECIPIENT,MAYNOTBEDISTRIBUTEDTOTHEPRESSOROTHERMEDIA, AND MAY NOT BE REPRODUCED IN ANY FORM AND MAY NOT BE TAKEN OR TRANSMITTED INTO THE REPUBLIC OF KOREA, OR PROVIDED OR TRANSMITTED TO ANY KOREAN PERSON. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF SECURITIES LAWS IN THE REPUBLIC OF KOREA. BY ACCEPTING THIS REPORT, YOU AGREE TO BE BOUND BY THE FOREGOINGLIMITATIONS. THISRESEARCHREPORTISSTRICTLYCONFIDENTIALTOTHERECIPIENT,MAYNOTBEDISTRIBUTEDTOTHEPRESSOROTHERMEDIA, AND MAY NOT BE REPRODUCED IN ANY FORM AND MAY NOT BE TAKEN OR TRANSMITTED INTO MALAYSIA OR PROVIDED OR TRANSMITTED TO ANY MALAYSIAN PERSON. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF SECURITIESLAWSINMALAYSIA.BYACCEPTINGTHISREPORT,YOUAGREETOBEBOUNDBYTHEFOREGOINGLIMITATIONS. Withoutprejudicetotheforegoing,thereaderistonotethatadditionaldisclaimers,warningsorqualificationsmayapplyifthe readerisreceivingoraccessingthisreportinorfromotherthanSingapore. Asof23November2010,KimEngResearchPte.Ltd.andthecoveringanalystdonothaveanyinterestinGallantVenture. AnalystCertification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specificrecommendationsorviewsexpressedinthereport. 2010 Kim Eng Research Pte Ltd. All rights reserved. Except as specifically permitted, no part of this presentation may be reproducedordistributedinanymannerwithoutthepriorwrittenpermissionofKimEngResearchPte.Ltd.KimEngResearchPte. Ltd.acceptsnoliabilitywhatsoeverfortheactionsofthirdpartiesinthisrespect.

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