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PP 7767/09/2010(025354)

13 April 2010
Corporate Highlights
Malaysia RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
MARKET DATELINE Sector Upda te Company No: 233327 -M

13 April 2010
Plantation
Recom : Overweight
Improvement In Production, But Jump In Exports (Maintained)
Reduced Stock Levels Again

Table 1 : Plantation Sector Valuations


Fair EPS * EPS growth PER P/NTA P/CF GDY
FYE Price Value (sen) (%) (x) (x) (x) (%) Rec
(RM/s) (RM/s) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY10 FY10
Sime Darby Jun 8.79 9.85 40.7 51.6 8.5 26.8 21.6 17.0 2.3 15.5 2.5 OP
KLK Sep 16.78 18.40 87.5 123.3 23.7 40.8 19.2 13.6 3.1 15.4 2.7 OP
IOI Corp Jun 5.50 6.65 27.9 31.5 -13.0 13.0 19.7 17.5 3.9 17.3 2.2 OP
CBIP Dec 2.94 3.60 41.2 49.7 37.5 20.6 7.1 5.9 1.4 5.6 4.8 OP
IJMP^ Mar 2.57 2.35 13.8 15.9 34.8 15.4 18.6 16.1 1.7 14.7 1.9 UP
Genting
Plantation Dec 6.80 6.65 40.3 46.8 34.0 16.0 16.9 14.5 1.9 15.2 1.6 UP
Sector Avg 3.1 23.8 20.1 16.2 2.7
^ FY10-11 valuations refer to those of FY11-12 # Formerly known as Asiatic *Normalised

♦ Improvement in production and jump in exports. Malaysia’s CPO Chart 1. CPO vs soyoil and rapeseed
production recovered in Mar 10, rising 8.7% yoy and 19.9% mom, while oil prices
US$/tonne

exports recorded a jump of 10.6% yoy and 7.7% mom. As a result, closing 1,700
CPO Soy Oil Rapeseed Oil

CPO stock levels fell 7.5% mom to 1.65m tonnes in Mar (from 1.79m 1,500

tonnes in Feb). As a result of the lower CPO stock levels, stock/usage ratio 1,300

fell back to 8.9% (from 9.6% in Feb), which is now lower than the 7-year 1,100

average of 9.1%. We expect this to moderate further for another 1-2 900

months, as the weak seasonal production period continues and as exports 700

pick up further on an improved economic outlook, although this should 500

start reversing subsequently, as we approach the peak production period. 300

100

♦ Six recent developments, including: (1) Argentina soybean issues; (2)


90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Chart 2. CPO vs crude oil prices


Low oilseed crushing in India; (3) China’s drought impact on rapeseed 160 1400

output; (4) Indonesia raises export tax on CPO; (5) Crude oil price rising 140 Correlation factor of 1200
0.9x in 2007

steadily; and (6) Widening of discounts with soyoil and rapeseed oil. narrowed to 0.75x in

C P O s p o t p r i c e s (U S $ / to n n e )
C r u d e o i l p ri c e s (U S $ / b a rr e l )

120
1H08, and rose again 1000
Correlation factor to 0.95x in 2H08.
100 started normalising to


0.7x from Dec-08, but 800

Risks include: (1) a significant change in crude oil price trend; (2) 80
rose again from Sep-
09 onwards to close
to 1x 600

weather abnormalities; (3) change in emphasis on implementing global 60

400

biofuel mandates and trans-fat policies; (4) significant changes in trade


40

20 200

policies of vegetable oil importing or exporting countries; and (5) a faster 0 0

or slower-than-expected global economic recovery.


0

ct- 3

c 4

c 5

O cu l-0 6

O cu l-0 7

O cu l-0 8

O cu l-0 9
r 0

r 1

r 2

r 3

r 4

r -0 5

r 6

r 7

r 8

r -0 9

r -1 0
J a t- 0 0

J a t- 0 1

J a t- 0 2

J a 03

J a t- 0 4

J a t- 0 5

J a t- 0 6

J a t- 0 7

A p n -0 8

A p n -1 9
J -00

J u-0 1

J -02

J -03

J -04

J 5

J -06

J -07

J -08

J 9

0
O cu l-0

O c l-0

O cu l-0

O u l-0

O u l-0

O u l-0
A p n -0

A p n -0

A p n -0

A p n -0

A p n -0

A p n -0

A p n -0

A p n -0

A p n -0

J a t- 0

J a t- 0
Ja

Crude Oil (US$/barrel) CPO (US$/tonne)

♦ Forecasts. No change to our CPO price assumptions and forecasts.

♦ Investment Case. We maintain our Overweight stance on the sector


and continue to apply a target PE of 18x CY10 for the plantation earnings
of the big-cap plantation stocks, 16.5x CY10 for the mid-cap plantation
stocks and 14x CY 10 for the small-cap plantation stocks. We continue to
believe that in the volatile market environment we are expecting for 2010,
the more liquid big-cap stocks will be favoured, especially since the gap
between the big-cap and smaller-cap stocks has narrowed recently. We
maintain our Outperform recommendations on IOIC, KLK, Sime Darby and
CBIP and Underperform on Genting Plantation and IJMP. We continue to
rate KLK as our top pick, due to its inexpensive valuations (as it remains Hoe Lee Leng
the cheapest amongst the big-cap plantation stocks currently) and for its (603) 92802184
strong management with a good track record. hoe.lee.leng@rhb.com.my

Please read important disclosures at the end of this report.

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13 April 2010
Monthly Statistics

♦ Improvement in production and jump in exports... Malaysia’s CPO production recovered in Mar 10, rising
8.7% yoy and 19.9% mom to 1.39m tonnes, while exports recorded a jump of 10.6% yoy and 7.7% mom to
1.39m tonnes. As a result, closing CPO stock levels fell 7.5% mom to 1.65m tonnes in Mar (from 1.79m tonnes in
Feb), although this was still 21.2% higher yoy. Most notably, the mom increase in exports was to Bangladesh
(+25.1%), Benin (+37.9%), China (+10.3%), Pakistan (+28.3%), Ukraine (+212.4%) and the US (+61.7%);
offset by a decline to Egypt (-31.3%), India (-0.6%), UAE (-22.5%) and the EU (-36.8%).

♦ Stock/usage ratio fell back to below average levels. As a result of the lower CPO stock levels, stock/usage
ratio fell back to 8.9% (from 9.6% in Feb), which is now lower than the 7-year average of 9.1%. We expect this
to moderate further for another 1-2 months, as the weak seasonal production period continues and as exports
pick up further on an improved economic outlook, although this should start reversing subsequently, as we
approach the peak seasonal production period.

Table 2: Monthly CPO Statistics

('000 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10
tonnes)
Opening
stocks 1,365.6 1,292.7 1,371.2 1,408.3 1,332.2 1,416.4 1,579.3 1,974.5 1,934.6 2,239.3 2,003.2 1,789.2

Imports 33.0 90.8 82.6 82.4 84.9 109.9 73.3 47.4 153.8 139.4 50.5 35.4

Productn 1,286.1 1,395.3 1,445.9 1,492.2 1,496.1 1,557.8 1,984.0 1,595.6 1,520.1 1,321.0 1,156.8 1,387.2
Total
supply 2,684.6 2,778.7 2,899.8 2,982.9 2,913.1 3,084.2 3,636.6 3,617.5 3,608.5 3,699.7 3,210.5 3,211.8

Exports 1,193.5 1,230.4 1,279.7 1,454.5 1,317.6 1,322.9 1,478.5 1,501.5 1,224.4 1,461.7 1,294.9 1,394.0
Domestic
use 198.4 177.0 211.7 196.2 179.1 182.0 183.6 181.4 144.9 237.3 126.3 162.9
Total
offtake 1,391.9 1,407.5 1,491.4 1,650.7 1,496.7 1,504.9 1,662.1 1,682.9 1,369.2 1,699.0 1,421.3 1,556.9
End mth
stocks 1,292.7 1,371.2 1,408.3 1,332.2 1,416.4 1,579.3 1,974.5 1,934.6 2,239.3 2,000.7 1,789.2 1,655.0

Productn
YTD 5,079.5 6,474.7 7,920.7 9,412.9 10,909.0 12,466.7 14,450.8 16,046.3 17,566.4 1,321.0 2,478.1 3,865.4

Mom (%) 0.8 8.5 3.6 3.2 0.3 4.1 27.4 (19.6) (4.7) (13.1) (12.4) 19.9

YoY (%) (3.1) (4.3) (1.6) (4.4) (6.5) (1.4) 20.1 (3.8) 2.5 (0.7) (2.6) 8.7

YTD (%) (3.7) (3.8) (3.4) (3.6) (4.0) (3.7) (1.0) (1.3) (1.0) (0.7) (1.6) 1.9

Exports
YTD 5,065.5 6,296.0 7,575.7 9,030.2 10,347.8 11,670.7 13,149.2 14,650.7 15,875.0 1,461.7 2,756.6 4,150.6

Mom (%) (5.3) 3.1 4.0 13.7 (9.4) 0.4 11.8 1.6 (18.5) 19.4 (11.4) 7.7

YoY (%) (5.2) 2.5 14.2 3.7 (10.2) 2.0 10.7 10.2 (24.2) 8.0 3.0 10.6

YTD (%) 9.9 8.4 9.3 8.4 5.6 5.2 5.8 6.2 3.0 8.0 5.6 7.2

Stocks

Mom (%) (5.3) 6.1 2.7 (5.4) 6.3 11.5 25.0 (2.0) 15.7 (10.7) (10.7) (7.5)

YoY (%) (27.8) (28.3) (30.8) (32.6) (23.4) (19.1) (5.6) (14.6) 12.3 9.2 14.3 21.2

Source: MPOB, RHBRI

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13 April 2010
Recent Developments

♦ Six recent developments. Over the recent month, there have been six main developments affecting the palm
oil industry which we would like to highlight, including:

(1) Argentina soybean issues;

(2) Low oilseed crushing in India;

(3) China’s drought impact on rapeseed output;

(4) Indonesia raises export tax on CPO;

(5) Crude oil price rising steadily; and

(6) Widening of discounts with soyoil and rapeseed oil.

(1) Argentina soybean issues - Positive

⇒ Although the strikes at the ports and crushing plants in Argentina have ended after two weeks, we note that a
new obstacle has cropped up in the form of the Chinese central government’s decision to stop giving import
permits for soybean oil from Argentina last week by increasing the quality requirements, after assuming full
control for Argentinean soybean oil imports from the provinces from April 1. This was in response to Argentina’s
anti-dumping investigations on Chinese goods like steel pipes and textiles. We believe this will have positive
repercussions for other vegetable oils like CPO and rapeseed oil, but that depends on how long this restriction can
last, given that Argentina does not have many other alternative destinations to send its soyoil to and China does
not have that many other alternatives of vegetable oil supply besides palm oil and rapeseed oil.

⇒ According to Oil World, China needs to have monthly soyoil imports of at least 150,000 tonnes to fulfill demand
satisfactorily. However, we note that at 150,000 tonnes per month, this would only satisfy 72% of the soyoil
imported in Oct-Sep 08/09 and about 80% of the projected import requirements for Oct-Sep 09/10. In addition,
as China is Argentina's second-largest trade partner and its No. 1 buyer of soyoil, with 77% of its soyoil imports
coming from Argentina, this means that the lack of supply from Argentina could potentially be shifted to palm oil
and rapeseed oil, if this issue is not resolved in the near term

(2) Low oilseed crushing in India - Positive

⇒ Indian oilseed crushings lower than expected for soybeans, groundnut and rapeseed, so there is likely to be a
record large stock of oilseeds in India and a much higher dependence on imported oils going forward. We note
that in 2010, Oil World already currently projects Indian soybean crushings to fall 10% yoy to 6.45m tonnes,
while total oilseed crushings are projected to decline 1.1% yoy to 24.3m tonnes. However, should this fall short,
Indian vegetable oil imports would likely rise instead of decline by 1.8% yoy in 2010, as currently projected by Oil
World.

(3) China’s drought impact on rapeseed output - positive

⇒ According to the China National Grain & Oils Information Center, the drought currently affecting the southern
provinces of China (Yunnan and Guizhou) is expected to cut rapeseed output by 0.5m tonnes or about 50% from
last year as more than 997,290 ha of farm land has been affected so far, of which, 621,530 ha of crops have
been seriously damaged and 63,900 ha destroyed as at Mar 29. While we note that a cut of 0.5m tonnes of
rapeseed production in China is not significant, given that it only makes up about 4% of total rapeseed projected
to be produced in China in 2010, this is still a shortage that would have to be made up by other vegetable
oilseeds eventually.

(4) Indonesia raised CPO export tax - positive

⇒ Indonesia has raised export tax on CPO for April to 4.5% (from 3% in Mar), in line with the increase in prices to
between US$800-850/tonne (from between US$750-800/tonne previously). This is positive for Malaysian CPO
producers, as it could increase the price competitiveness of Malaysian CPO producers and result in weaker
exports of Indonesian CPO, going forward. However, as the tax is a fluctuating rate based on prevailing CPO
prices and is, therefore, subject to constant review, Malaysian CPO producers would thus need to take advantage
of the timeframe when there is a price advantage to increase exports.

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13 April 2010
(5) Crude oil price rising steadily - positive

⇒ Crude oil prices have risen steadily over the last month, reaching a high of US$86.84/barrel on 6 Apr (from
US$81.3/barrel average in Mar 2010, before moderating slightly to current levels (Chart 2) of about
US$84.92/barrel. We continue to maintain our view that the medium to long term price trend is expected to be
an upward one, given our oil and gas sector team’s crude oil price forecast of US$80-100/barrel for 2010 and
2011.

⇒ While our positive view of crude oil price direction should have a positive influence on CPO prices, we note that
the correlation between the crude oil and CPO price movement has fallen slightly of late, particularly in the last
three months. This, we believe, could indicate one of two things: (1) the level of financial demand for crude oil
futures is higher than in CPO futures; or (2) the correlation between crude oil and CPO is no longer relevant and
is declining back to historical averages. We believe, in this case, the former would be the more accurate
conclusion, given that the global biofuel mandates would ensure the linkage between crude oil and CPO remains
relevant in the long term. We note that in 4Q2009, crude oil price was about 0.85x CPO price, and in 1Q2010,
this reduced to about 0.75x. However, since the beginning of April, this has climbed back up to about 0.78x CPO
price (Chart 2). Assuming the correlation between crude oil price goes back to the highly correlated level of 0.9x
CPO average, we estimate this would result in CPO prices ranging between RM2,215-2,769/tonne for 2010 and
RM2,769-3,323/tonne for 2011.

⇒ We note that in the month of Feb, the level of financial demand for CPO in the form of monthly CPO futures
Volume / Open Interest ratio (Vol/OI) reduced to 2.7x, 45% below the 4.9x recorded in Jan 2010 (and 32.5%
below historical levels of 4x). Although this has since risen to slightly above historical levels of 4.4x in Mar, we
note that this is still significantly below the highs seen in 2007/2008, and that seen in 2Q2009 of >5x (see Chart
3). We believe this has also got to do with the foreign exchange factor, as the US$ was on a strengthening trend
up to Mar 2010, before weakening in recent weeks (see Chart 4).

Chart 3 : CPO Futures Vol/OI vs CPO Prices

8.0 4,500

7.5
7.0 4,000

6.5
3,500
6.0

5.5
3,000
5.0

4.5 2,500
4.0

3.5 2,000

3.0
1,500
2.5

2.0
1,000
1.5

1.0 500
0.5

0.0 0
Ju -07

Ju -08

Ju -09
Au l-07

Au l-08

Au l-09
Fe -0 7

Ju 7

Fe -0 8

Ju 8

Fe -0 9

Ju 9

Fe -1 0
M 07
Ap -07

O -07

D -07
Ja -07

M 08
Ap -08

O -08

D -08
Ja -08

M 09
Ap -09

O -09

D -09
Ja -09

M 10
0
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N -08

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M -09

-1
0

0
n-

n-

n-
b-

b-

b-

b-
n

ov
ec

ov
ec

ov
ec

n
ay

ay

ay

p
ar

ar

ar

ar
ct

ct

ct
g

g
r

r
Ja

CPO Price Vol/OI (x) 3 yr ave Vol/OI (x)

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13 April 2010
Chart 4 : CPO and Crude Oil Price Movement vs RM:US$ Exchange Rate

850 4.00

800 3.90

750
3.80
700
3.70
650
3.60
600
3.50
550

500 3.40
US$/tonne

RM:US$
450 3.30

400 3.20

350 3.10
300
3.00
250
2.90
200
2.80
150
2.70
100

50 2.60

0 2.50
01 /09

01 /09

02 09

02 /09

03 /09

03 /09

04 /09

04 /09

05 /09

05 /09

06 /09

06 /09

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07 /09

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08 /09

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10 09

11 /09

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12 /09

12 /09

12 /09

01 /09

01 /10

02 /10

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10
9/

8/

8/
1

5
/0

/1

/2

/1

/2

/1

/2

/0

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/0

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/1

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/1

/3

/1

/2

/1

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/1

/2

/0
01

USD/MYR Crude oil (US$/tonne) CPO (US$/tonne)

Source: Bloomberg, RHBRI

(6) Widening of discounts with soyoil and rapeseed oil - negative

⇒ After the significant narrowing of discounts between CPO and soyoil and rapeseed oil last month, and the
resulting “demand rebalancing” by price sensitive markets like India (as mentioned in our sector report dated 1
Apr), the discounts have widened again. The discount between CPO and soyoil is now back up to historical levels
of US$98/tonne (from an average of US$83/tonne last month and versus historical average of US$100/tonne),
while the discount between CPO and rapeseed oil has risen to US$99/tonne (from US$65/tonne last month and
versus historical average of US$200/tonne) (see Chart 5).

Chart 5 : Discount between CPO and Soyoil and CPO and Rapeseed Oil in US$

690

660

630
600

570

540
510

480

450

420
390
US$/tonne

360
330

300

270

240
210

180

150
120

90

60
30

0
Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr-
-30
03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10

CPO v soyoil CPO v rapeseed oil

Source: Bloomberg, RHBRI

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13 April 2010
Forecasts

♦ CPO price forecasts maintained. Although we have not imputed the risk of any untoward external factors into
our price forecasts, we reiterate our view that fundamentals and price prospects for CPO in CY2010 remain
positive. We maintain our CPO price assumptions at RM2,500/tonne for 2010, RM2,700/tonne for 2011 and
RM2,500/tonne for 2012. In view of the many external factors and potential volatilities they bring, we continue to
advise investors to keep to the more liquid stocks and to trade the volatilities.

Risks

♦ Main risks include: (1) a significant change in crude oil price trend resulting in significant movement of CPO
and other vegetable oils prices; (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) significant
changes in trade policies of vegetable oil importing or exporting countries; and (5) a faster or slower-than-
expected global economic recovery, resulting in a higher- or lower-than-expected growth in demand for
vegetable oils.

Valuations and Recommendations

♦ Maintain Overweight on sector. We maintain our Overweight stance on the sector and continue to apply a
target PE of 18x CY10 for the plantation earnings of the big-cap plantation stocks, 16.5x CY10 for the mid-cap
plantation stocks and 14x CY 10 for the small-cap plantation stocks. We continue to believe that in the volatile
market environment we are expecting for 2010, the more liquid big-cap stocks will be favoured, especially since
the gap between the big-cap and smaller-cap stocks has narrowed recently. At current price levels, we note
that valuations of some of the mid-cap plantation stocks have almost caught up with the big-cap stocks,
making the big-cap stocks seem inexpensive in comparison.

♦ Top pick remains KLK. We maintain our Outperform recommendations on IOIC (FV = RM6.65), KLK (FV =
RM18.40), Sime Darby (FV = RM9.85) and CBIP (FV = RM3.60) and Underperform on Genting Plantation (FV =
RM6.65) and IJMP (FV = RM2.35). We continue to rate KLK as our top pick, due to its inexpensive valuations
(as it remains the cheapest amongst the big-cap plantation stocks currently) and for its strong management
with a good track record. Further catalysts could come from better-than-expected FFB production growth as
well as potential return to profitability of the retail division.

Table 3. Valuation Bases


Fair Value
Company (RM/share) Valuation Methodology

Genting 6.65 Target 16.5x PER CY10 earnings.


Plantations
CBIP 3.60 Target PER of 8x CY10 for the oil mill engineering division and 14x CY10 for the plantation division.

IJMP 2.35 Target 16.5x PER CY10 earnings

IOIC 6.65 Target PER of 18x CY10 for the plantation division, 12.5x CY10 for the manufacturing division and
13.5x CY10 for the property development and investment property divisions (on fully diluted basis).

KLK 18.40 Target PER of 18x CY10 for the plantation division, 12.5x CY10 for the manufacturing division, 13.5x
CY10 for the property division and zero value less potential provisions for the retail division.

Sime Darby 9.85 10% discount to SOP comprising: target PER of 18x CY10 for the plantation division, 15x CY10 for the
energy & utilities division, 13.5x CY10 for the heavy equipment and property divisions and 12x CY10
for the motor and other small divisions.
Source: RHBRI

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13 April 2010

Table 4: Impact of every RM100/tonne increase in CPO price

Genting Plantations +5-7%


KLK +4-6%
IJMP^ +5-7%
IOI Corp +3-5%
Sime Darby +4-6%
CBIP +2-4%

Source: RHBRI

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.

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