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Regional

Morning Pack
DBS Group Research . Equity 01 October 2009

Spotlight On
(SP) Hiap Seng: Undervalued oil and gas play (Initiate Coverage) BUY; S$0.69; HSE SP; Price Target: 12-Month S$0.90 • • • • Huge 40-60% discount to peers is unwarranted. Expect high dividends of 4.0-4.5 Scents per share. Margins improvement to support earnings growth. Initiate coverage with a BUY rating. 30% upside to our target price of S$0.90.

Ideas & Updates
REGIONAL US Fed: Two collision courses SINGAPORE Banking: Positive uptick in loans Hiap Seng (Initiate Coverage) – See Spotlight MALAYSIA Tanjong PLC: Attractive yield play BUY; RM15.00; TJN MK; Price Target: 12-month RM19.25 HONG KONG PUBLIC HOLIDAY THAILAND Charoen Pokphand Foods – See Spotlight

(TB) Charoen Pokphand Foods: Earnings surge, costs remain low BUY; Bt7.95; CPF TB; Price Target: 12-Month Bt9.60 (Prev Bt7.50) • • • 3Q09F will beat record high 2Q09 earnings Promising outlook with firm product prices, low raw material costs, and improving margins Raised earnings, and TP to Bt9.60. Undemanding valuation, 21% upside, maintain BUY.

Singapore Research Team – 6533 9688 research@dbsvickers.com www.dbsvickers.com “In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.” “Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”), are to contact DBSVR at +65 6398 7954 in respect of any matters arising from or in connection with this report.”

Regional

Morning Pack
Roadshows & Event Calendar* Analyst Roadshows
Events Date Location DBSV Analyst

Key Indices
Indices Asia JCI Index KOSPI SET BSE Sensex Taiex PCOMP STI Hang Seng KLCI HSCEI Index HSCCI Index Nikkei 225 Close as at 30.09.09 2,468 1,673 717 17,137 7,509 2,801 2,673 20,955 1,202 11,858 3,894 10,133 % chg vs previous close 1.0 -1.0 0.2 1.7 1.1 -0.2 0.3 -0.3 -0.5 -1.1 -0.8 0.3 YTD (%) 82.1 48.8 59.4 77.6 63.6 49.5 51.7 45.6 37.1 50.3 18.3 14.4 QTD (%) 21.7 20.4 20.0 18.2 16.7 14.9 14.5 14.0 11.8 8.2 1.9 1.8 MTD (%) 5.4 5.1 9.8 9.4 10.0 -2.9 3.1 6.2 2.4 5.1 1.3 -3.4

Thai Property and 30 Sep 01 Oct SG Banking 2009 Indo Strategy & Econ 05 – 06 Oct 2009 SG Shipping Sector 06 07 Oct 2009 Indo Strategy & Econ 07 Oct 2009 SG HK

Chanpen & Sugittra Agus Pramono, Lim Su Sian Gideon Lo Agus Pramono, Lim Su Sian
DBSV Analyst

Corp Luncheons / Group Meeting / Events / NDCR
Events Date Location

Ascott Residence Trust THAICOM Plc.

05 09 Oct 2009 12 –16 Oct 2009

US SG

Lock Mun Yee, Derek Tan Chirasit Vuttigrai

To register your interest in the above events, please contact your DBSV Sales representative.

Source: DBS Vickers

Market Data
Earnings Gth (%) 09F 10F PE (x) 09F 10F

Singapore Malaysia HK HSI HK HSCCI (Red) HK HSCEI (H) Thailand Indonesia

(6.2) (8.2) 9.4 (8.5) 19.6 24.8 13.0

14.9 15.4 22.7 14.9 35.6 16.4 16.1

16.5 18.3 16.8 14.1 17.1 12.5 13.5

14.4 14.8 13.7 12.3 12.6 10.7 11.9

Source: DBS Vickers

Commodity Indicators
Commodities Crude Oil Nickel Spot Coal Spot Tin Steel Copper Gold Spot Soybean Oil Spot Soybean Spot Sugar Spot Rice Wheat Spot Palm Oil Spot (CIF R) Palm Oil Spot (FOB Msia) Crude Oil Brent Spot Corn Spot Rubber Spot USD/barrel USD/mt USD/mt USD/mt RMB/mt USD/lb USD/t. oz USD/pound USD/bushel USD/pound USD/cwt USD/bushel USD/mt RM/mt USD/barrel USD/bushel SGD/gram Latest Closing 67 17,055 70 14,450 3,549 339 993 29.97 9.10 24.67 13.29 3.54 673 2,172 65 3.21 304 Previous Closing 67 16,660 14,400 3,581 340 992 29.74 9.12 24.29 13.31 3.62 670 2,204 65 3.21 303
YTD % chng

49.6% 46.9% -1 .4% 1 35.0% -4.0% 0.0% 1 2.6% -5.4% -5.2% -3.0% -26.3% 24.5% 33.2% 55.1 % -1 4.3% 50.4% -50% -30% -1 0% 1 0% 30% 50% 70%

Crude Oil Nickel Spot Coal Spo t Tin Steel Copper Gold Spo t So ybean Oil Spot So ybean Spot Sugar 93.5% Spot Rice Wheat Spot P alm Oil Spo t (CIF R) P alm Oil Spo t (FOB M sia) Crude Oil B rent Spo t Corn Spot Rubber Spo t 90%

Source: Bloomberg

Credit Spreads
Latest Closing 616 379 189 25 Previous Closing 380 189 25
YTD % chng -37% -61 % -58% -70% -60% -50% -40% -30% -20% -10% 0% CB OE SP X Vo latility US IG CDS A sia Convertible Bo nds

US Junk Bond Asia Convertible Bonds US IG CDS CBOE SPX Volatility

Source: Bloomberg

Page 2

Economics

US Fed: two collision courses
DBS Group Research 30 September 2009

• Fed purchases of mortgage-backed securities (MBS) have so far been offset / sterilized by sales of other assets. But the Fed is nearly out of other assets to sell and it has only purchased half the MBS it intends to • MBS purchases are on a collision course with the monetary base. The latter could rise by another 35%, just when the Fed is starting to talk about an “exit strategy” • The Fed will have to raise interest rates once banks start to withdraw their $800bn of reserves from the Fed. That could come well before 2Q10. The Fed is not in the driver’s seat, banks are • The Fed’s MBS program is fiscal policy, not monetary policy. It is stepping on Congress’ toes. Congress may step back. All this is bad

Fed purchases of MBS are colliding with the monetary base

Fed policy is on two collision courses. The first is mechanical / numeric. Fed purchases of US Treasuries and especially mortgage-backed securities (MBS) have been so great over the past six months that they now comprise roughly 90% of the monetary base. That base has remained stable only because the Fed offset (sterilized) these purchases with sales of other assets (chart below). But the Fed is nearly out of assets it can use for sterilization purposes. Under current (and slowed down) plans, Fed purchases of Treasuries and MBSs will collide with the monetary base in another month to six weeks. Either the Fed will have to find a way – a new way – to mop up these purchases or the monetary base will expand by another $634bn (35%) by Mar10. The second collision course is political. The Fed aims to purchase another $634bn of MBS and agency debt and is now looking for ways to offset / sterilize these purchases. The

US Fed – balance sheet items
USD bn, nsa, wk avg 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 20 May 09 18 Feb 09 25 Feb 09 11 Mar 09 25 Mar 09 19 Dec 07 17 Dec 08 31 Dec 08 12 Aug 09 22 Apr 09 23 Sep 09 28 Jan 09 3 Sep 08 5 Feb 09 31 Oct 07 25 Jun 08 6 May 09 17 Jun 09 8 Aug 07 29 Jul 09 2 Apr 08 1 Apr 09 9 Sep 09 1 Oct 08 7 Jan 09 3 Jun 09 1 Jul 09 US Treasuries MBS + agency Other assets Monetary base

David Carbon • (65) 6878 9548 • davidcarbon@dbs.com

US Fed: two collision courses

30 September 2009

The Fed is stepping on Congress’ toes. Congress may step back

large-scale sale of reverse repos mooted by the Fed last week is but the latest trial balloon. Sterilizing MBS purchases plainly begs the question: why not just purchase fewer MBS? The answer is that the Fed is trying to support the housing market and financial institutions exposed to it. Traditionally, the Fed sets the risk-free rate of interest and allows the market or the Congress to pick the winners and losers via fiscal policy. The Fed is now encroaching on Congressional territory and Congress is beginning to bite back. Our view? Two wrongs don’t make a right. The Fed should stick with monetary policy and leave fiscal policy to Congress and the Treasury. Only then is monetary policy likely to remain independent / in Fed hands.

MBS on collision course with monetary base
In March, the Fed announced plans to purchase $1.25tn of mortgage-backed securities and another $0.2tn of agency debt by the end of this year. As of last week, the Fed had purchased $816bn of its target, or a little over half. At the conclusion of its 23Sep FOMC meeting, the Fed announced it would slow down the purchases of the remaining $634bn of MBS assets – it now intends to complete its purchases by Mar10 instead of by year-end. Why slow down? Because unless these purchases are offset / sterilized by sales of other assets, they inject liquidity into a system that is already looking pretty flush. Equity markets have risen 55% from their March lows. More tellingly, Libor-OIS spreads, a key measure of the willingness of banks to lend to other banks, are now below pre-crisis (Aug07) levels. Three month spreads are now about 10bps-11bps compared to 350bps in late-08 (chart below).

US – three month libor and spread over OIS percent basis points
Spread over 3m OIS (expected policy rate) (RHS) 3m libor (LHS)

6.0 5.0 4.0

400 350 300 250 200

Risk spreads are back below pre-crisis (Aug07) levels

3.0 2.0 1.0 0.0 Aug-07 Nov-07 Spreads narrower than pre-crisis

150 100 50

Feb-08 May-08 Aug-08 Nov-08

0 Feb-09 May-09 Aug-09 Nov-09

If things look wet now, they are likely to look wetter in a month – even with Fed slowing down its MBS purchases. The reason is that, so far, the Fed has offset its MBS purchases with sales of other assets, and the change in the monetary base since Mar09 has been minor. The trouble is, the Fed is just about out of assets that it can sell. At current rates, it will tapped out in another month to six weeks. After that, further MBS sales would drive the monetary base north, making liquidity conditions even more, well, liquid. Plainly, the Fed needs to offset its purchases of MBS securities in some way lest the monetary base is going to rise by $634bn (35%) by Mar10. For a Fed that has begun talking about “exit strategies” (from its monetary expansion of the past 18 months), the prospect of another 35% rise in the monetary base plainly is a move in the wrong direction. Something needs to be done.

2

US Fed: two collision courses

30 September 2009

US Fed – balance sheet items
USD bn, nsa, wk avg 2,500 2,000 1,500 1,000 500 US Treasuries 0 18 Feb 09 23 Sep 09 18 Mar 09 26 Aug 09 31 Mar 10 30 Nov 09 19 Dec 07 31 Dec 08 14 Jan 09 25 Jun 08 31 Jan 10 5 Feb 09 6 May 09 8 Aug 07 29 Jul 09 1 Oct 08 1 Apr 09 3 Jun 09 1 Jul 09 Monetary base Latest Collision
Implied Mon base grows by 25%

Misc assets MBS + agency

Target $1450bn

Target $800bn

What to do?
How can the Fed offset its MBS purchases and keep the monetary base from expanding by another 35%? There are several ways. Alas, all are pretty much the same, at least conceptually, all involve the Fed backtracking to some extent and all involve the Fed selling some sort of asset, perhaps a newly invented one. The Fed could: 1) Sell Treasuries: Fed sales of US Treasuries is the normal textbook method by which it mops up excess liquidity. The name usually given to such sales / purchases is ‘open market operations’. No matter. The trouble with this approach is that the Fed is currently in the process of building up its holdings of UST, not selling them down. It has been raising its holdings since March and is now very close to its target of $800bn. The Fed could, of course, reverse course and start selling down its Treasuries. But U-turns raise uncomfortable questions and the 23Sep FOMC Statement gave no indication that the Fed might be considering such an flip. On the contrary, it reconfirmed its commitment to proceed with its $1.45tn of MBS and agency debt purchases and its Treasury program. 2) Have the Treasury sell Treasuries: This is nothing but an application of the Supplementary Financing Program put in place in Oct08. The Fed puts liquidity into the market via MBS purchases and the Treasury takes it out by selling a bond (and putting the proceeds on deposit with the Fed). On the surface, this saves the Fed from an embarrassing U-turn. In fact, though, a U-turn has still been pulled – it’s just that the Treasury would have done the deed. 3) Sell Federal Reserve Bonds: With Congressional approval, the Fed could print its own bonds and sell them to the public, offsetting the expansionary impact of its MBS purchases. This would again save the Fed from an embarrassing U-turn on its Treasuries purchases but conceptually nothing has really changed. A U-turn is a U-turn is a... 4) Sell Repos / Reverse Repos: This approach was broached by the Fed last week and discussed by Bernanke in the WSJ in July [1]. Traditionally, repo sales / purchases have been the way the Fed has fine tuned liquidity in the very short-term, typically 1-3 days. In a contractionary reverse-repo operation, the Fed would sell an asset from its portfolio and buy it back a few days later at a slightly higher price (reflecting the interest earned by the purchaser). The change from past practice would be to conduct these operations on a large-scale and for periods of months rather than days. Plainly, the difference between large-scale and long-term repo operations and bond sales would seem minimal. In any event, the question remains as to what assets the Fed has left on its shelves to sell. It could presumably print its own ‘repo’ asset but, like Federal Reserve Bonds, approval from Congress would have to come first.

The Fed could sell Treasuries... Or it could ask the Treasury to sell Treasuries... Or it could sell Fed bonds ... Or it could sell ‘reverse-repos’... Conceptually, all are identical

3

US Fed: two collision courses

30 September 2009

Paying the piper
The Fed may or may not prevent a 35% expansion in the monetary base by employing one of these 4 methods. Even if it does manage to avoid a collision between its MBS purchases and the monetary base, the Fed’s problems are far from over. The Fed has already expanded the monetary base by some $800bn since Oct08. So far, banks and other financial institutions have not lent this money out into the economy. Rather, they have kept it on deposit at the Fed (chart below). Although the Fed now pays interest on these deposits, that rate is equal to the Fed funds rate for most accounts, i.e., nearly zero. [2] But financial institutions are taking more risk now and as the economy improves they will withdraw those deposits from the Fed (just like you or I might withdraw our money from our local bank). They will lend these deposits into the economy where they earn a higher return. The Fed will have to match or trump that return if it wants to keep those reserves from flooding into a market that is, as already noted, already flush with liquidity.

Banks freely hold $800bn of reserves at the Fed. They earn zero interest. When banks withdraw these funds to lend them into the economy, the Fed will have to raise rates...

Rate policy
Rate policy going forward will be determined more by bank willingness to take risk than it will be by the Fed per se. The Fed has put $800bn of reserves at the beck and call of financial institutions and how and when they employ these reserves will determine how and when the Fed has to respond. The Fed is not in the driver’s seat. Financial institutions have not yet begun to put these reserves to work in a big way but libor-OIS spreads are back below pre-crisis norms, earnings at the Fed are close to nil, and the economy is expanding once again. Banks won’t dally forever, and when one goes, often they all go. Our view has long been that the Fed would start to raise interest rates in 2Q10, about two quarters sooner than current market consensus. This has been predicated on the view that this downturn was less a garden-variety recession than it was “shell-shock” arising from the Lehman Brothers collapse. Such shocks can be deep, as this one was, but they tend to be short-lived. In any event, the data is recovering more quickly than expected, financial markets have recovered more quickly than expected and, we continue to think, the Fed will respond more quickly than it historically does too. Add to this the fact that the Fed’s own policy of MBS purchases is on a collision course with the monetary base. This collision could raise bank reserves and push them into the economy so much the sooner. If so, the Fed would likely have to respond with higher interest rates even sooner than we have been anticipating hitherto.

Rate policy does not rest in Fed hands. It rests in the hands of the banks

US – monetary base
USD bn, nsa, wk avg 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 18 Feb 09 18 Mar 09 19 Dec 07 31 Dec 08 26 Aug 09 23 Sep 09
4

Latest Total monetary base

Bank deposits at the Fed

Currency in circulation

14 Jan 09

5 Feb 09

25 Jun 08

6 May 09

8 Aug 07

29 Jul 09

1 Apr 09

3 Jun 09

1 Oct 08

1 Jul 09

US Fed: two collision courses

30 September 2009

Another kind of collision
The Fed intends to purchase another $634bn of MBS and is scrambling for ways to mop it up. The obvious question is: why not just buy fewer MBS? The fact that the Fed insists on meeting its $1.45tn MBS (+ agency) target makes it plain that its motivation is the support of housing markets and financial institutions exposed to it. Given all the Fed rhetoric about transparency and explaining its policies so that markets understand what is going on, it is sad if not surprising that the Fed feels no obligation to explain why it injects $600bn with the left hand and simultaneously removes $600bn with the right. What is clear is that the Fed is picking winners and losers – and this role traditionally belongs to markets or at least elected officials who are explicitly charged with conducting fiscal policy. This puts the Fed on a collision course with the Congress, where guns are already being aimed back at the Fed. With fiscal policy being run by the Fed and monetary policy at risk of being run by Congress it could be a nasty collision indeed. Our view, expressed earlier, is that two wrongs don’t make aright. The Fed should stick to controlling the risk-free rate of interest (that on government securities) and leave fiscal policy to Congress and the Treasury. The quid-pro-quo of course is that Congress stays out the Fed’s hair and monetary policy continues to be set by an independent central bank.

The Fed is stepping on Congress’ toes. Congress may step back

Notes
1. “The Fed’s Exit Strategy”, Ben Bernanke, The Wall Street Journal, 21Jul09, http://online.wsj.com/article/ SB10001424052970203946904574300050657897992.html. 2. In Nov08, the Fed raised the rate paid on required and excess reserve deposits to nearly equal the Fed Fund rate. For details, see http://www.federalreserve.gov/newsevents/press/monetary/20081105a.htm.

Sources
Data for all charts and graphs come from CEIC and Bloomberg. Estimates are DBS Group Research.

5

US Fed: two collision courses

30 September 2009

Recent research
TW: Can public investment drive? MY: A China - Malaysia FTA? IN policy: turning hawkish SG: Riding the dragon KR & TW: Looking beyond a strong 2Q ID: GDP outlook maintained 24 Aug 09 18 Aug 09 29 Jul 09 23 Jul 09 22 Jul 09 21 Jul 09 SG: Deja-flu Asia: Recovery dashboard ID: Election update SG: Light through the gloom KR: Much better, but risks remain ID: Election time Asia’s exports — China grants Feb reprieve TW: More signs of a bottom SGD NEER policy: Shifting bands PH: Remittances on edge US Fed: No satistraction HK budget: big plans, little detail SG: Job market gloom ahead China: A closer look at the labor market ID: Scrutinizing the ‘09 budget Asia’s export collapse SG: An extraordinary budget China: Betting on the second half SG: That sinking feeling US Fed: The quantity / quality split SG: Fiscal aspirin Asia: Policy stimulus smorgasboard EZ: In the eye of the storm CN: The seeds of inflation Asia: Recovery dashboard 8 May 09 TW: A modest recession 8 May 09 KR: Further growth downgrades 25 Nov 08 25 Nov 08 4 May 09 27 Apr 09 21 Apr 09 15 Apr 09 13 Apr 09 3 Apr 09 30 Mar 09 27 Mar 09 25 Mar 09 20 Mar 09 19 Mar 09 26 Feb 09 25 Feb 09 12 Feb 09 12 Feb 09 6 Feb 09 23 Jan 09 22 Jan 09 21 Jan 09 22 Dec 08 18 Dec 08 1 Dec 08 28 Nov 08

CN: When will China tighten monetary policy? 17 Jul 09 TW & KR: Two tales of excess liquidity India budget: Mind the chasm SG: A stunning turnaround India budget: A 'game-changer' or not? Asia: Recovery dashboard KR: Gauging oil risks VN: Golden trade surplus Asia: Recovery dashboard ID: Eye on oil Flu pandemic: gauging risks for Asia Asia: Recovery dashboard ID: Growing again HK: Divided CN: Hunger for profit TW: China’s investment in Taiwan: how much and where? 10 Jul 09 7 Jul 09 7 Jul 09 30 Jun 09 26 Jun 09 18 Jun 09 17 Jun 09 8 Jun 09 2 Jun 09 27 May 09 25 May 09 22 May 09 21 May 09 21 May 09 8 May 09

Disclaimer:
The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.

Licence No.: MICA (P) 039/11/2008

6

Singapore Industry Focus

Banking sector
DBS Group Research . Equity 1 Oct 2009

Positive uptick in loans
• YTD loan growth in positive territory at 0.9%; support from consumer loans. YTD business loans contracting at a smaller quantum but a positive shift noted with 1.2% m-o-m growth. • Deposit growth still strong though a dip noted in fixed deposits. System remains liquid. • Housing loans, SPRING scheme and tail end of IR loans support 2009 loan growth but corporate repayments may negate overall loan growth. Positive uptick in loans. Aug 09 banking stats indicate a positive uptick in loan growth. Y-o-y, domestic business unit (DBU) loans grew by 2.5% in Aug 09 (Jul 09: 2.2%). Housing loans continued to breach the 10% y-o-y growth momentum. Positively, business loan deceleration appears to have tapered marginally contracting at 1.7% y-o-y compared to 2.1% the previous month. Asian currency unit (ACU) loans, mainly business loans, continued to contract YTD. M-o-m momentum is gradually building up with loans growing at 1.0% compared to flat growth the previous month. While housing loans grew by 1.0% m-om, business loans accelerated by 1.2% m-o-m, clearly indicating a pick up in business sentiments. ACU loans have also seen a positive turn in momentum on a m-o-m basis. YTD, loans growth now stands at 0.9%, with housing loans at 7.0% while business loans are still contracting at 2.7%, albeit at a smaller quantum. Deposits growth remains strong. Y-o-y deposit growth remained strong at 11.5%, driven by low cost deposits. However, YTD basis, we saw a slight slowdown to 7.5% in Aug 09 (compared to 8.0% in Jul 09). Liquidity in the system remains ample with loan-to-deposit ratio at 73.5%. Housing loans driving growth. We believe loan growth for the rest of this year would be driven by the remaining drawdown from the Integrated Resorts loans, SME loans from the SPRING scheme and recovery of mortgage loans following the euphoria in property launches over the last few months. With business loans decelerating and chunks of it repaid, it appears that only housing loans are providing support for loan growth this year. Sustaining this momentum, we project 2% loan growth in 2009, supported mainly by housing loans. UOB (Buy, TP S$18.60) is well positioned for housing loan growth play. UOB has made a head start over its peers with a 5% growth in housing loans in 1H09 (DBS: 2%, OCBC: -1%). This is one of the key theses, which support our preference for UOB over OCBC (Hold, TP S$8.00).
“In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.” www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC

STI :

2,672.57

Analyst Sue Lin Lim +603 2711 0971 suelin@hwangdbsvickers.com.my

“Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”), are to contact DBSVR at +65 6398 7954 in respect of any matters arising from or in connection with this report.”

SINGAPORE BANKS
Price S$ Mkt Cap US$m Target Price S$ Rating

DBS OCBC UOB

13.28 7.85 16.78

21,372 17,670 18,034

NR 8.00 18.60

NR HOLD BUY

Source: DBS Vickers

YTD Aug 09 industry loan growth by sector
8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Total -2.7% Business Consumer Housing -3.1% Construction 0.9% 5.9% 7.0%

Source: MAS; DBS Vickers

Rolling forward P/BV band – Singapore banks x 2.5 2.0 1.5 1.0 0.5 0.0 97 98 99 00 01 02 03 04 05 06 07 08 09 +2SD +1SD Mean -1SD -2SD

Source: Bloomberg; DBS Vickers

Industry Focus Banking sector

Industry loan growth y-o-y
30% 25% 20% 15% 10% 5% 0% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 -5% Aug-09, 2.5%

Industry deposit growth y-o-y
30%

Loan growth remains benign although slight uptick noted

25% 20% 15% 10% 5% 0% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Deposit growth remains strong

Jul-09, 11.2%

Dec-08
Jun-08

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-08

-5%

Total loans y-o-y%

Total deposits y-o-y%

Loan growth y-o-y by type
40% 35% 30% 25% 20% 15% 10% 5% 0% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 -5% -10% Jun-09

Deposits by type
$bn 400 350 300 250 200 150 100 50 0 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08
Jun-09

Y-o-y business loans starting to turn positive. Positive momentum for consumer loans prevails.

Low cost deposits growing strongly

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-09
Dec-08

Business loans

Consumer loans

Housing loans

Demand deposits

F ixed deposits

Sav ings & others

Construction loan growth y-o-y
60% 50% 40% 30% 20% 10% 0% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 -10% -20%

Deposits by sources
$bn 400 350 300 250 200 150 100 50 0 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Construction loan growth decelerating. Note high base last year when drawdown for IR loans began.

Deposit growth largely still funded domestically

Construction loans y-o-y%

Govt

Non-bank FIs

Residents in Spore

Residents outside Spore

Credit card stats
40% 30% 20% 10% 0% -10% -20% -30% Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09

Loan-to-deposit ratio
120% 100% 80% 60% 40% 20% 0% -20% -40% -60%

Bad debts up but absolute amount manageable

30% 25% 20% 15% 10% 5% 0% Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 -5% Jun-09

Liquidity remains ample in the system

Total no. of cards

Total billings

Rollov er

Bad debts

Loans y-o-y%(LHS)

Deposit y-o-y%(LHS)

Loan-to-deposit ratio %(RHS)

Source: MAS, DBS Vickers

Page 2

Jun-09

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Industry Focus Banking sector

Loan growth
Aug-09 S$bn 121.1 85.1 153.5 48.4 274.6 Aug-08 S$bn 111.7 77.1 156.1 48.0 267.8 May-09 S$bn 116.9 81.6 153.8 50.3 270.8 y-o-y % 8.4% 10.4% -1.7% 1.0% 2.5% q-o-q % 3.5% 4.3% -0.2% -3.7% 1.4% m-o-m % 0.9% 1.0% 1.2% -0.8% 1.0% Aug-09 y-t-d % 5.9% 7.0% -2.7% -3.1% 0.9%

Consumer loans Housing Business loans Building & construction Total loans

44% 31% 56% 18% 100%

42% 29% 58% 18% 100%

Deposit growth
Aug-09 S$bn 75.9 171.7 126.0 373.6 16.9 45.5 311.2 373.6 Aug-08 S$bn 61.3 171.8 102.0 335.1 18.8 37.4 278.9 335.1 May-09 S$bn 71.2 170.5 122.8 364.5 17.0 46.2 301.4 364.5 y-o-y % 23.8% 0.0% 23.5% 11.5% -10.2% 21.6% 11.6% 11.5% q-o-q % 6.6% 0.7% 2.6% 2.5% -0.6% -1.6% 3.3% 2.5% m-o-m % 1.7% -1.8% 0.0% -0.5% -3.2% 2.0% -0.7% -0.5% Aug-09 y-t-d % 22.2% -2.2% 14.8% 7.5% -11.4% 8.4% 8.6% 7.5%

Demand deposits Fixed deposits Savings & other deposits Total deposits Government Financial Institutions Others Total deposits

20% 46% 41% 100% 5% 12% 83% 100%

18% 51% 30% 100% 6% 11% 83% 100%

Source: DBS Vickers, MAS

Loan breakdown and market share (up to 2Q09)
S$m Manufacturing Building & constrn Housing loans General commerce Trans, storage & comm FIs, invt& hldg cos Professionals & ind Others Total By currency (Jun-09) SGD Industry Market share By currency (Mar-09) SGD Industry Market share By currency (Jun-08) SGD Industry Market share DBS 15,589 18,220 29,821 12,117 13,043 17,107 10,660 13,849 130,406 56,448 272,206 21% 56,469 270,705 21% 46,778 261,280 18% % 12% 14% 23% 9% 10% 13% 8% 11% 100% y-o-y% 1% 15% 6% -2% 10% 37% 0% 2% 8% q-o-q% -8% -3% 0% -2% 0% 1% 3% -3% -2% UOB 9,101 12,375 25,290 12,508 6,286 15,540 13,045 6,113 100,258 65,239 272,206 24% 56,461 270,705 21% 53,427 261,280 20% % 9% 12% 25% 12% 6% 16% 13% 6% 100% y-o-y% -10% -2% 10% -8% 8% -7% 9% 12% 1% q-o-q% -8% -3% 3% -4% 5% -6% 1% -4% -2% OCBC 5,650 16,052 19,753 6,537 5,661 11,058 7,714 6,757 79,182 45,608 272,206 17% 45,998 270,705 17% 48,400 261,280 19% % 7% 20% 25% 8% 7% 14% 10% 9% 100% y-o-y% -14% 3% 0% -13% 30% -7% 4% 68% 1% q-o-q% -11% -4% 0% 3% -2% -2% 1% 1% -2%

Source: Company data; DBS Vickers

Page 3

Industry Focus Banking sector

Sector valuation
Bank Price (S$) DBS* UOB OCBC 13.28 16.78 7.85 Target Price (S$) NR 18.60 8.00 NR B H FY08A 9.7 13.1 16.3 12.6 14.5 FY09F 17.5 15.3 17.7 16.8 16.4 FY10F 14.4 13.0 15.8 14.0 14.3 ^ (%) (0.2) 0.2 2.2 1.9 1.6 FY08A 1.2 1.8 1.7 1.5 1.8 FY09F 1.3 1.5 1.6 1.4 1.6 FY10F 1.2 1.4 1.6 1.4 1.5 Rating PER (x) CAGR P/BV (x) ROE (%) FY10F 8.7 11.4 10.1 9.6 10.1 Net div (%) FY10F 4.0 3.8 3.7 3.9 3.8

Sector weighted average Sector simple average

Buy (B), Hold (H), Fully Valued (FV), Not Rated (NR) ^Refers to a 2-year EPS CAGR for CY08-10. * Based on Bloomberg consensus

Sources: DBS Vickers, Companies, Bloomberg

Page 4

Industry Focus Banking sector

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Share price appreciation + dividends
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3.

ii.

Page 5

Industry Focus Banking sector

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Page 6

Singapore Company Focus

Hiap Seng
Bloomberg: HSE SP

|

Reuters: HSEN.SI

DBS Group Research . Equity

30 Sep 2009

BUY S$0.69 STI : 2,672.57
(Initiating Coverage) Price Target: 12-Month S$ 0.90 Reason for Report: Undervalued share price Potential Catalyst: New order wins Analyst Pei Hwa HO +65 6398 7968 peihwa@dbsvickers.com Wee Lee CHONG CFA +65 6398 7971 weelee@dbsvickers.com

Undervalued oil and gas play
• Huge 40-60% discount to peers is unwarranted. • Expect high dividends of 4.0-4.5 Scents per share. • Margins improvement to support earnings growth. • Initiate coverage with a BUY rating. 30% upside to our target price of S$0.90. Reputable service provider in oil & gas industry. Hiap Seng businesses are: 1) Construction of storage tanks, and structural and piping works, 2) Engineering, procurement and construction (EPC) for pressure vessels and process equipment for FPSO topsides, and 3) Repair and maintenance works for refineries and petrochemical plants. Huge share price discount to peers is unwarranted. Hiap Seng’s share price is now trading at 8x forward PE, which implies a 40% discount to its local peers’ 14x forward PE, and 60% discount to its global peers’ 18x forward PE. We believe that this is unwarranted, given Hiap Seng’s improved project execution, and sustainable high dividend payouts. High dividend payouts. We believe that Hiap Seng’s positive free cash flow of 5-9 Scents per share in FY10-11 can support management’s intention to pay high dividends to shareholders. We expect Hiap Seng to pay 4.0-4.5 Scents dividend per share per annum in FY10-FY11, with the implied 45-47% payout at the lower end of historical range. Margins to improve on better project execution. We expect Hiap Seng’s S$178m order book and steady repair and maintenance revenue to support our projection of 49% net profit CAGR in FY10-11. Hiap Seng’s gross profit margins are also expected to hold up at 20-21% in FY10-11, vs. 2022% in the last 3 financial quarters, after having resolved execution issues for the relatively new compression segment. We initiate coverage on Hiap Seng with a BUY rating. Our target price for Hiap Seng is S$0.90; using 12x blended FY10/11 PE for its stable repair and maintenance business, and 9x for its construction and EPC businesses. Hence, our target price reflects an implied 9.7x P/E, and has 30% upside potential. We have a BUY rating on Hiap Seng.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Tan Kuay Hoe (%) Buck Poh Cheng (%) Free Float (%) Avg. Daily Vol.(‘000) 304 210 / 148 23.3 12.2 51.3 4,415

Price Relative
S$ 1 .3 0 1 .1 0 0 .9 0 0 .7 0 0 .5 0 0 .3 0 0 .1 0 2005 2006 2007 2008 R e la t iv e In d e x 533 483 433 383 333 283 233 183 133 83 2009

H ia p S e n g E n g in e e r in g ( L H S )

R e la t iv e S T I IN D E X ( R H S )

Forecasts and Valuation
FY Mar (S$ m) 2008A 2009A 2010F 2011F

Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Consensus EPS (S cts):

175 11 9 7 7 2.2 2.2 (60) 2.2 2.1 15.1 31.4 31.4 22.0 19.2 3.1 4.6 CASH 13.0

224 19 16 13 13 4.3 4.3 94 4.3 2.0 18.4 16.2 16.2 12.3 9.8 2.9 3.8 CASH 25.5

253 36 33 27 27 9.0 9.0 110 9.0 4.0 24.3 7.7 7.7 7.2 4.9 5.8 2.8 CASH 42.0 10.7

253 39 36 29 29 9.5 9.5 6 9.5 4.5 29.4 7.2 7.2 6.7 4.3 6.5 2.4 CASH 35.5 N/A

ICB Industry: Industrials ICB Sector: Industrial Engineering Principal Business: Provides construction services, engineering, procurement, construction (EPC) works, and repair & maintenance works to oil & gas, petrochemical, and pharmaceutical industries.

Source of all data: Hiap Seng, DBS Vickers, Bloomberg

www.dbsvickers.com Refer to important disclosures at the end of this report ed: XXX / sa: XXX

Company Focus Hiap Seng

Analyst Pei Hwa HO +65 6398 7968 peihwa@dbsvickers.com Wee Lee CHONG CFA +65 6398 7971 weelee@dbsvickers.com

Table of Contents

SWOT Analysis Company Background Spread of fabrication facilities in Southeast Asia A strong management team Huge oil & gas and petrochemical projects in Asia Segmental Analysis Key Risks Quarterly/Interim Performance Financials – Income Statement Financials – Balance Sheet Financials – Cash Flow Financials – Financial Ratios Valuation Appendix A: Hiap Seng’s group structure Disclaimers

3 4 6 7 8 11 12 13 14 15 16 17 18 20 21

Page 2

Company Focus Hiap Seng

SWOT Analysis
Strengths Niche provider of mechanical engineering services for oil & gas industry. With over 50 years of operating track record, Hiap Seng has gained its reputation for high product quality, reliable service, and prompt delivery. Steady repair and maintenance business. We believe that Hiap Seng is one of the three leading plant repair and maintenance providers in Jurong Island, Singapore. This provides a steady stream of recurring revenue to the group, which enhances its earnings visibility. Established long term relationship with reputable customers. Hiap Seng has developed a long term and trusting relationship with customers, which can be seen in the high customer retention rate of >80%. A strong team of experienced management and technical leaders. Hiap Seng is led by a group of veterans, including the CEO, who has an average 20-40 years of industry experience. Weaknesses Lumpy revenue streams, reliant on timing of contracts. Hiap Seng’s revenue may be affected by its increasing focus on the more lumpy EPC projects in the oil and gas sector. This can be seen in the relatively small number of major contracts win y-t-d in 2009, at S$19m. The saving grace is the ongoing small-sized construction contracts worth 70% of COGS. The skilled labour, comprising engineers, technicians and production workers, play a critical role in project execution. Earnings will be adversely affected in the event of labour shortage or underperformance.

Opportunities Riding on buoyant oil & gas activities in Singapore. Leveraging on its home turf advantage, Hiap Seng is among the main beneficiaries of the robust oil & gas activities in Singapore. The reactivated LNG terminal plan and the ongoing expansion plans of oil majors such as Shell and ExxonMobil may allow steady job flows to Hiap Seng. More orders for compression and FPSO topside. This is a relatively new segment to Hiap Seng, which kicked off only in FY06. The stronger demand for compressions and FPSO vessels would be a growth driver for Hiap Seng in addition to plant constructions. Expansion outside Singapore. Hiap Seng has made inroad into Malaysia and Thailand with the setup of JVs and yard facilities. However, these ventures have not turned out to be major earnings contributors to Hiap Seng yet. The turnaround of operating environment in these areas will have a positive impact on earnings.

Threats Sustained fall in oil price to below US$40 per barrel. A sustained and unforeseen drop in oil prices to below US$40 per barrel may reduce demand for FPSO vessels and refinery plant construction. Project delay and cost overrun. Project execution is the key to profitability. The longer gestation period of engineering designs, delays in engines / parts delivery, lack of skilled labour and unfavourable weather will delay the project progress and lead to cost overrun and margin decline. Weakening USD against SGD. About 30% of Hiap Seng’s receipts are denominated in USD, which are largely revenue from compression segment. With no hedging policy in place, a sudden plunge in USD will likely result in a forex loss and adversely affect bottomline.

Source: DBS Vickers

Page 3

Company Focus Hiap Seng

Company Background
Over 50 years of track record. Listed on SGX in June 1999, Hiap Seng’s history can be traced back to 1950. Mr. Tan Kuay Hoe - the father of current Executive Chairman and CEO, founded the company to provide services in structural steel fabrication. Hiap Seng marched into the oil & gas sector in 1960s, when it successfully completed its first oil & gas project - the construction & erection of storage tanks and related piping works for British Petroleum Singapore. Hiap Seng’s core businesses
Business Pictorial Construction EPC Repair and Maintenance

A reputable service provider for oil & gas industry. Today, Hiap Seng has evolved into a major one-stop service provider to the oil & gas industry in Singapore, covering mechanical engineering, plant fabrication & installation and maintenance. Its core strengths are: 1) Construction of storage tanks, and structural and piping works, 2) Engineering, procurement and construction (EPC) for pressure vessels and process equipment for FPSO topsides, and 3) Repair and maintenance works.

Est. revenue contribution Description

45% Mechanical construction of oil & gas plants, oil storage terminals and pharmaceutical plants. (1) Construction and installation of storage tanks; (2) Equipment installation; (3) Steel structures; and (4) Piping.

30% Engineering, procurement and construction of FPSO topsides, gas compressors, process equipments and tankfarms. (1) Tankage ie. FPSO topside construction and repair; (2) Piping fabrication, erection & modification; (3) Pressure vessel fabrication & erection; and (4) Fabrication of process equipments, compressions & metering skids.

25% Maintenance of oil & gas, chemical and utility plants.

Core strength

(1) Daily plant maintenance; (2) Turnaround plant maintenance; (3) Total integrated plant maintenance.

Source: Hiap Seng, DBS Vickers

Serving a diversified group of international customers. Hiap Seng serves international oil and gas players in both the upstream (exploration and production) and downstream (refinery and storage) parts of the supply chain. Its diversified customer list consists of: 1) International companies like Shell, ExxonMobil, Neste Oil, Glaxo Smith Kline, Chiyoda Corp, Vopak, and 2) National oil companies like Sinopec, Petronas, CNOOC, CNPC, etc. Constructed 85% of pharmaceutical plants in Singapore. Apart from its strong presence in the oil & gas sector, Hiap Seng is virtually the largest mechanical

service provider for the pharmaceutical industry in Singapore. The group was a sub-contractor for plant construction works for six out of the total of seven pharmaceutical plants in Singapore. A major plant repair and maintenance service provider in Singapore. Hiap Seng’s major repair and maintenance competitors in Jurong Island are PEC Ltd and Rotary Engineering Ltd. It was appointed as the in-house contractor for Shell, Singapore Refining Company and ExxonMobil in the last 30 years. It also has term contracts (>3 years) with Sembcorp Utilities, Linde Syngas, etc.

Page 4

Company Focus Hiap Seng

List of major customers - Hiap Seng’s major construction and EPC works
End customers Shell Eastern Petroleum Neste Oil Frontline ExxonMobil GlaxoSmithKline PTT North West Shelf LND CPEC Emerson Process Management CNOOC Chevron Chemicals Vopak CNPC Huntsman Rohmax Linde Syngas Chiyoda Corp Others Combined value of sizeable new orders (>S$2m each) secured in FY07-09 107 63 21 20 19 17 14 12 12 11 9 9 7 7 6 4 3 38 % of total sizable new orders (>S$2m each) secured in FY07-09 28% 17% 6% 5% 5% 4% 4% 3% 3% 3% 2% 2% 2% 2% 2% 1% 1% 10%

Source: Hiap Seng, DBS Vickers

List of major customers - Hiap Seng’s repair and maintenance activities on Jurong Island, Singapore.
Customers Singapore Refining Company Shell Eastern Petroleum Sembcorp Utilities Linde Syngas Merck Sharp Dhome Denka Singapore ExxonMobil Refinery (Pioneer) ExxonMobil Refinery (Jurong Island) Croda Singapore Seraya Power Teijin Polycarbonate (Chiyoda) Work Maintenance works Turnaround plant maintenance (TPM) for 50% of complex Mechanical and integrated tank maintenance TPM of complex TPM of complex Mechanical maintenance TPM of complex Tank maintenance Miscellaneous mechanical work Miscellaneous mechanical work Miscellaneous mechanical work Miscellaneous mechanical work Term contact of >3 years Yes Yes Yes Yes Yes Yes Yes Yes -

Source: Hiap Seng, DBS Vickers

Hiap Seng’s key corporate milestones
Year 1950 1960s 1971 1991 1995 1999 2003 2003 Corporate developments and milestones Hiap Seng was founded by Mr. Tan Kuay Hoe under its former name, Hiap Seng Engineering Works. Made its first breakthrough into oil & gas industry by the successful completion of its first construction & erection of storage tanks and related piping works for British Petroleum, Singapore. Corporatised and changed its name to Hiap Seng Engineering & Construction Pte Ltd. Ventured into Malaysia through PT Technic Engineering Sdn Bhd, a 60% owned subsidiary, to undertake oil & gas and petrochemical projects specialising in piping, tankage, structural steel & mechanical installation works. Awarded "Enterprise 50" award by Singapore government for two consecutive years in 1995-1996 and 1998. Listed on SGX in June and changed its name to the current Hiap Seng Engineering Limited. Set up a JV, Nasco-Hiap Seng Engineering, in Thailand to offer fabrication & integrated engineering services to oil & gas, petrochemical, oil terminals, chemical & pharmaceutical industry. Accredited with 'U' & ' S' stamp certificates for manufacture of pressure vessels and boilers by American Society of Mechanical Engineers (ASME) in Jan and attained ISO 9001-2000 certification for quality management system.

Source: Hiap Seng, DBS Vickers

Page 5

Company Focus Hiap Seng

Spread of fabrication facilities in Southeast Asia
Hiap Seng’s key geographical market is in Singapore. Hiap Seng has over 95% of revenue generated from its Singapore operations, through leveraging on its proven local track record. Expanding regional footprint. In line with its long-term strategy, Hiap Seng has set up yard facilities in Malaysia (1991) and Thailand (2003), tapping into the potential growth and cost competitiveness in the countries. The group has also established representative offices across Asia, including China, Hong Kong, Taiwan, Indonesia, Myanmar, Vietnam and Bangladesh, as well as Australia and UAE. Six fabrication locations in Southeast Asia. Hiap Seng currently operates fabrication facilities in six different locations in Singapore, Malaysia and Thailand. The combined area of these facilities is about 2.6m sq ft, and the fabrication shop in Singapore has waterfront and slipway. The group currently has an employee strength of 2500 in-house workers, and 1500 sub-contract workers. The majority of these workers, including engineers and administrative staff, are based in Singapore, at 90-95%. FY09 revenue breakdown by geographical

Malaysia 3%

Singapore 97%
Source: Hiap Seng, DBS Vickers

Hiap Seng ‘s fabrication and maintenance facilities in Southeast Asia
Location Approx. site area (sqm) Description Tenure

Singapore 4 Benoi Place 19 Tuas Crescent 21 Tuas Crescent 24 Tuas Crescent 28 Tuas Crescent 30 Tuas Crescent Malaysia Block B, Unit no. B3-2, 2nd Floor Centrepoint Business Park, Shah Alam 46 Jalan TPP 1/10, Taman Industri Puchong, Batu 12, 47100, Puchong Mukim Sq. Karang District of Kuantan Thailand 48%-owned Nasco-Hiap Seng Engineering Co. Ltd, 41/13 Moo 1 Ao-Udom Rd, Tungsukha, Srira Cha, Chonburi 48%-owned Nasco-Hiap Seng Engineering Co. Ltd, Highway no. 1032 (Ao UdomPakruam), Bueng, Si Racha, Chonburi

7,501 13,344 10,925 6,200 40,578 8,959

Office and fabrication facilities Office and fabrication facilities Office and fabrication facilities Office and fabrication facilities Office and fabrication facilities Office and fabrication facilities

Leased till June 2031 Leased till August 2012 Leased till June 2011 Leased till May 2019 Leased till February 2018 Leased till May 2019

120 451 10,612

Office Fabrication facilities Empty land

Owned, freehold Owned, freehold Owned, freehold

46,452

Office and fabrication facilities

Leased, expiring in less than 2 years. Owned, freehold

92,903

Office and fabrication facilities

Source: Hiap Seng, DBS Vickers

Page 6

Company Focus Hiap Seng

A strong management team
Experienced management team. A strong team of industry veterans manages Hiap Seng. The key personnel, Mr. Tan Ah Lam, Frankie (Executive Chairman and CEO) and Mr. Tan Leau Kuee, Richard (Executive Director) – the sons of the founder, have more than 37 average years of experience in servicing the oil & gas and petrochemical industries in the mechanical engineering field. They are assisted by a group of managers with more than 20 years of experience, on average, in the oil & gas industry. Commitment of the founder family to Hiap Seng to ensure successor plans. Apart from Mr Frankie and Mr. Richard, their four other siblings are also engaged in the operations of the Group. Moreover, the 3rd generation of the Tan family, namely the son and nephew of the CEO, are also participating in Hiap Seng’s daily operations. We believe this is part of the successor plan for Hiap Seng, with the younger family members being exposed to the various functions of Hiap Seng’s business - at the middle management levels.

Hiap Seng’s key management team members
Manager (Year joined) Mr. Tan Ah Lam, Frankie (1962) Current Appointment Executive Chairman and Chief Executive Officer - Directing Hiap Seng’s overall strategy and growth. Previous Experience Has more than 40 years of experience in the business of providing mechanical engineering services to the oil & gas and petrochemical industries. 2007: Appointed as Executive Chairman and CEO 1972: Appointed as Managing Director 1962: Joined Hiap Seng. Mr. Tan Leau Kuee, Richard Executive Director (Operations & (1971) Strategic Planning) - Overseeing overall operations of the Group as well as strategic planning. Has more than 35 years of experience in the business of providing mechanical engineering services to the oil & gas and petrochemical industries. 1990: Appointed as Executive Director. 1971: Joined Hiap Seng. Mr. Tan Lian Chew (1983) Executive Director (Finance) – Overseeing the Group’s key corporate and financial matters. Has more than 40 years of experience in accounting, taxation, financial and corporate matters. Previous employments prior to joining Hiap Seng include Inland Revenue Department, public accounting firms and TNL Corporate Services Pte. Ltd. – a management consultancy company that he co-founded. A full member of Singapore Institute of Directors. Mr. Tan Hak Jin (2004) Chief Financial Officer – Responsible for the Group’s reporting and accounting functions. Has 30 years of experience in accounting, financial and corporate matters. A non-practising Certified Public Accountant of the Institute of Certified Public Accountants of Singapore. 2009: Promoted to Chief Financial Officer. 2004: Joined Hiap Seng as a Group Financial Controller 1979: Graduated from Nanyang University with a Bachelor of Commerce Degree in Accountancy. 1.01% 23.30% Ownership 24.39%

Source: Hiap Seng, DBS Vickers

Page 7

Company Focus Hiap Seng

Huge oil & gas and petrochemical projects in Asia
Partial revival in construction activities for oil and gas and petrochemical industries. With no alternative to fossil fuels like crude oil in the foreseeable future as a convenient and cheap source of energy, oil and petrochemical products will continue to play a significant part of our everyday life. With the gradual resumption of global economic growth, we have seen a partial revival of onshore plant constructions for the oil and gas and petrochemical industries in Singapore and the Middle East. Our industry checks also reveal higher enquiries for both local and overseas projects since 2Q 2009. Synchronized global economic recovery in 2H 2009 to stabilize existing crude oil demand. DBS economists are expecting a global economic recovery in 2H 2009, with Asia leading the way up. We are projecting USA’s economic growth to be 2.2-2.7% in 1H 2010, while the major emerging economies like China and India will generally sustain their growth momentum into the next 12 months. Oil demand to begin its upward trend in 2010. The IHS Cambridge Energy Research Associates (IHS CERA) said in its quarterly World Oil Watch report that the global oil demand will start growing by 2010. This is after a 2.8 mbd drop in oil demand from a record high of 86.5 mbd in 2007 to an estimated 83.8 mbd in 2009. IHS CERA expects the emerging markets to drive the global oil demand recovery, which is expected to rise to 89.1 mbd in 2014. IHS CERA estimates that 83% of this forecasted cumulative growth, or 4.4 mbd, will come from non-OECD countries, and China will single-handedly account for 1.6 mbd. Tightening of crude oil supply as OPEC members comply with allocated production quota. The expected stabilizing in crude oil demand is likely to be met by global oil supply tightness resulting from OPEC-11’s aggressive production quota cuts since last September. The three production quota cuts in the Sept-Dec 2008 period target the removal of 4.2 mbd of crude oil from the market, which has been kept unchanged since then. The generally high compliance of OPEC-11 to this quota has ensured that the crude oil supply is in line with actual global demand.

DBS' economists expect major developed economies to return to positive growth in 2H 2009
(%) Annual GDP projection 2008 USA Japan Eurozone China India 0.4 -0.7 0.6 9.0 6.7 2009F -2.3 -5.5 -3.8 8.0 5.7 2010F 2.9 2.2 1.0 9.0 7.5 Quarterly GDP projection 1Q09 -6.4 -4.0 -7.4 6.1 6.1 2Q09F -1.0 0.6* -0.6* 7.9 5.7* 3Q09F 4.5 0.8 1.8 8.5 6.1 4Q09F 4.6 0.8 1.8 9.8 5.4 1Q10F 2.2 0.4 0.5 9.0 5.5 2Q10F 2.7 0.4 0.8 9.0 5.9

* Actual GDP growth released. Source: DBS Group Research

Singapore to see more construction activities for refineries and petrochemical plants. The Singapore government is still encouraging investments in downstream production facilities for specialty chemicals to capture the higher value-added product for the entire manufacturing chain. While we do not expect new oil terminal projects to appear on Jurong Island again, the Singapore government will be embarking on construction works for its strategic LNG terminal soon. We also expect the refineries in Singapore to make substantial investments to upgrade their current processes, so as to meet the more stringent environmental standards for oil products in export destinations. These developments are expected to create business opportunities for companies like Hiap Seng.

Two additional world-scale ethylene cracker complexes to enhance Singapore’s position as a major petrochemical hub. There are two ethylene crackers currently being constructed in Singapore, namely: 1) The US$3b Shell Eastern Petrochemicals Complex that will have an ethylene production capacity of 0.8m tonnes per annum (tpa) by 2009/10, and 2) ExxonMobil’s US$5b construction of a new petrochemical complex, which will boast an output of 1m tpa when it is completed by 2010/11, vs. its. existing 0.9m tpa cracker. These two new crackers, when completed, will feature a combined ethylene production capacity of almost 2m tpa, and raise Singapore’s ethylene production capacity to around 4m tpa.

Page 8

Company Focus Hiap Seng

Growing investment commitments in Singapore
S$ m 14000 12000 10000 8000 6000 4000 2000 0 2001 2002 2003 2004 2005 2006 2007 Petroleum & Chemical products (LHS) Pharmaceuticals and biological products (RHS) 2008 S$ m 900 800 700 600 500 400 300 200 100 0

relationship with Shell and the strong market positioning as one of the major providers with facilities in Singapore. Pharmaceutical industry also has strong backing from the Singapore government. The local biomedical industry, which includes pharmaceutical, medical technology, biotechnology, and healthcare services, has been developed by the government into a key element of the Singapore economy. This is done through the continuous development of strong physical and regulatory infrastructure, and a skilled workforce. As more global companies join the likes of Abbott, GlaxoSmithKline, Lonza, Merck & Co, Novartis, Pfizer, Sanofi-Aventis and Schering-Plough to set up manufacturing facilities in Singapore, we expect Hiap Seng to benefit given its construction track record for pharmaceutical plants. We expect the award of sub-contracting works in the Middle East to pick up momentum by 1H 2010. The governments in the Middle East are currently building crude oil refining facilities and petrochemical plants in the region, vs. the more usual exporting of crude oil. This focus on producing higher valued derivatives and functional products have resulted in the award of construction projects in the Middle East, like the Saudi Aramco Total Refinery and Petrochemical Company’s (SATORP) Jubail Refinery and Petrochemical Complex in Saudi Arabia. We expect Hiap Seng to cautiously approach this opportunity through the formation of a joint venture with a reliable Middle East-based partner. Indeed, we expect the award of Jubail-related subcontracting works to pick up momentum in 1H 2010.

Source: Yearbook of Statistics Singapore 2009, DBS Vickers

More subcontracting works to be awarded for these two new ethylene cracker complexes in Singapore. While our industry checks reveal that most of the subcontracting works for these two major plant constructions have been awarded, we believe that Hiap Seng could still be awarded works for the remaining ballpark 20% of the to-beawarded sub-contracting orders. The eventual completion of these plants is also expected to yield more repair and maintenance contracts to Hiap Seng, given its established

The total value of ongoing projects in Singapore has been estimated at >S$13b, which could potentially translate into future project works, and repair and maintenance jobs for Hiap Seng.
Company Project scope Investment (S$ m) 230 940 1,000 3,000 3,000 5,000 Remarks Potential for Hiap Seng

Mitsui Chemicals JTC Singapore LNG Corporation Stolt-Nielsen Jurong Aromatics Corp Shell ExxonMobil

Light resin modifier Jurong rock cavern LNG terminal New chemical terminal Aromatics Petrochemical plant Petrochemical plant

ETC - 2013/14 ETC - 2013 ETC - 2012 ETC - 2013 ETC - 2010 (initial) ETC - 2011 (initial)

Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance Sub-contracting project / repair and maintenance

NB: ETC - estimated time of completion Source: various sources, DBS Vickers

Page 9

Company Focus Hiap Seng

Potential and ongoing oil and gas, and petrochemical projects in the Middle East
Company Project Investment (US$ m) Saudi Arabia Project phase Est. time of completion Known main contractors

Saudi Aramco and Dow Chemical JV Saudi Aramco Total Refinery and Petrochemical Company (SATORP) Saudi Aramco

Ras Tanura Integrated Project (RTIP) - Petrochemical facility Jubail Refinery and Petrochemical Complex

27,000

Open tender in Jun 2009. 13 main EPC contracts awarded in July 2009. Construction in progress.

2015

KBR

9,600

2H 2013

Chiyoda Samsung, Rotary Engineering, Technip, Sumitomo, etc. Saipem, Halliburton, Foster Wheeler, Technicas Reunidas, Jan De Nul Group. Kellogg, Fluor, Samsung Engineering, Simon Carves, Tecnicas Reunidas, Van Leeuwen.

Manifa Offshore Oilfield project

9,000

Mid-2011

SABIC and Kayan Petrochemicals

Saudi Kayan Petrochemicals Complex project

9,000

Construction in progress.

Late-2010

UAE

Abu Dhabi National Oil Co (ADNOC) Dubai Electricity and Water Authority (DEWA)

Shah Sour Gas Field Development project Hassyan Power & Desalination Plant project

10,000

Prepared to open for tender in 2009. Open for tender. Work to begin early 2010.

unknown

ConocoPhillips

8,600

2012

unknown

Qatar

Qatar Petroleum

Pearl GTL project - Petrochemical facility for extremely sour gas field.

24,000

Construction in progress.

2010

JGC, Kellogg, Halliburton, MW Kellogg, Honeywell, Shell, General Electric.

Qatar General Electricity & Water Company

Ras Girtas Power Project

3,900

Construction in progress.

2010-2011

Mitsui Corp, Hyundai Engineering and Construction, Mitsubishi Heavy.

Source: various sources, DBS Vickers

Page 10

Company Focus Hiap Seng

Segmental Analysis
Riding on the growing oil & gas industry. We expect Hiap Seng to continue to benefit from the booming market for new refineries and petrochemical plants in Singapore and the Middle East. The group is expected to leverage on its established client network and technical expertise to target EPC projects for compressors, construction projects for pharmaceutical plants and refineries, and repair and maintenance works for plants in Jurong Island. Net order book of S$178m. Hiap Seng’s latest net order book guidance was on 12 August 2009, at S$178m. The order book consists of all outstanding contracts, including unannounced contracts of S$2m each) of S$94m (including S$19m worth of orders since April 2009) and S$150m for FY10 and FY11, respectively. These contracts are expected to be evenly split between plant construction and EPC projects for FPSO-related compression modules. We have also factored in S$60m and S$70m total value for smallsized projects (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
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3.

ii.

Page 21

Company Focus Hiap Seng

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Page 22

Malaysia Company Focus

Tanjong PLC
Bloomberg: TJN MK

|

Reuters: TJPL.KL

DBS Group Research . Equity

30 Sep 2009

BUY RM15.00 KLCI : 1,202.08
Price Target : 12-month RM 19.25 Reason for Report : 2Q10 results Potential Catalyst: New power asset acquisition, power assets spin-off; revitalisation of Tropical Island; disposal of non-core assets Analyst June Ng +603 2711 2222 june@hwangdbsvickers.com.my

Attractive yield play
• 2Q FY10 result exceeded expectations due to lower NFO prize payout • Raised earnings after imputing lower tax rate and additional NFO draws • Maintain Buy. Catalysts are potential new NFO games, turnaround of Tropical Island, and unlocking of power asset over the longer term. Boosted by additional NFO draws. Tanjong’s 2Q FY10 revenue and EBIT grew 14% and 30%, respectively, as a result of strong power earnings (+26%) due to higher energy payment, and higher gaming earnings (+19%) following seven additional draws and lower prize payout of 62% (65% previously). Power and gaming divisions accounted for 78% and 19% of 1H10 EBIT of RM668.9m. On track for 5% net yield. Tanjong’s annualised 1H10 core earnings exceeded our and market expectations by 8% due to lower prize payout and lower 1H10 tax rate of 21% (26% for FY09). We also factored in additional RM10m plant maintenance for Powertek in 4Q, but still upgraded FY1012F net profit by between 1-5% after accounting for additional draws in 1H10 and 3ppt reduction in tax rate (tax exempt income from foreign operations). Tanjong declared a second interim DPS of 17.5 sen (ex-date 23 Oct). We still expect 5% net yield, supported by resilient power and gaming earnings. Maintain Buy. Tanjong is trading at attractive 9x CY10F PE against local peers’ average of 13x and regional peers’ 15x. Maintain Buy with SOP derived target price of RM19.25. Rerating catalysts include (i) earnings boost from potential new NFO games, (ii) turnaround of Tropical Island after overnight accommodation is completed by end CY10, and (iii) unlocking value of its power businesses over the longer term.
At A Glance Issued Capital (m shrs) Mkt. Cap (RMm/US$m) Major Shareholders Usaha Tegas (%) Khoo Teik Chooi (%) 403 6,049 / 1,737 30.9 7.5

“Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”), are to contact DBSVR at +65 6398 7954 in respect of any matters arising from or in connection with this report.”

Price Relative
RM 20.90 18.90 16.90 14.90 12.90 10.90 8.90 2005 Relative Index

203 183 163 143 123 103 83 2006 2007 2008 63 2009

Tanjong (LHS)

Relative KLCI INDEX (RHS)

Forecasts and Valuation
FY Jan (RM m) 2009A 2010F 2011F 2012F

Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (sen) EPS Pre Ex. (sen) EPS Gth Pre Ex (%) Diluted EPS (sen) Net DPS (sen) BV Per Share (sen) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (sen):

3,694 1,552 749 464 464 115.0 115.0 (16) 115.0 67.5 813.8 13.0 13.0 8.6 7.1 4.5 1.8 1.2 14.1

3,588 1,479 923 677 677 167.9 167.9 46 167.9 76.5 905.2 8.9 8.9 6.9 6.9 5.1 1.7 0.9 19.5 5.3 160.5

3,602 1,496 954 697 697 172.8 172.8 3 172.8 83.3 994.8 8.7 8.7 6.7 6.5 5.6 1.5 0.7 18.2 4.3 167.7

3,587 1,457 954 707 707 175.3 175.3 1 175.3 84.8 1,085.3 8.6 8.6 6.7 6.4 5.7 1.4 0.5 16.9 0.1 170.9

ICB Industry : Utilities ICB Sector: Electricity Principal Business: Gaming group. Number Forecast Totalisator, Racing, Property, Investment, Power and Leisure.

Capital Research
Free Float (%) Avg. Daily Vol.(‘000)

4.0
61.6 448

Source: Company, DBSV, Bloomberg

“In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.” www.dbsvickers.com Refer to important disclosures at the end of this report ed: SGC/ sa: WMT

Company Focus Tanjong PLC

Fig 1: Tanjong – 1Q FY10 result summary
FY Jan (RMm) 2Q10 2Q09 1Q10 % Chg y-o-y % Chg Comments q-o-q

Sales EBIT Finance cost Pretax profit Taxation Net profit EPS EBIT margin (%) Tax rate (%) Net debt Net gearing (x)

1,311.2 330.5 -91.6 262.6 -56.8 181.5 45.0 25.2 -21.6 -3962.6 0.9

1,150.2 254.1 -90.4 190.3 -28.3 136.7 33.9 22.1 -14.8 -4249.1 1.1

1,310.1 338.4 -85.1 269.4 -53.0 191.4 47.5 25.8 -19.7 -4312.4 1.1

14.0 30.1 1.3 38.0 100.8 32.8 32.7 14.1 45.6

0.1 (2.4) 7.6 (2.5) 7.0 (5.2) (5.3) (2.4) 9.8

Supported by stronger revenue from all divisions. Higher revenue and improved margins. Stable finance cost after refinancing of Egyptian plants. Above expectation due to lower prize payout. Lower tax rate of 21% for 1H10 against 26% for FY09 due to non tax deductible items such as refinancing cost incurred in FY09.

25% is fixed rate loans. Manageable gearing, comprising mainly non-recourse loans.

Source: Company, DBS Vickers

Fig 2: Tanjong – Segmental breakdown
FY Jan (RMm) 2Q09 2Q10 % chg Comments

Revenue NFO Power Property Leisure Total EBIT profit NFO Power Property Leisure Others Total EBIT margin % NFO Power Property Leisure Total

475.3 632.4 13.0 29.5 1,150.2

512.7 706.2 15.5 76.7 1,311.2

7.9 11.7 19.7 159.9 14.0

Seven additional draws in 1HFY10. Contribution from Globaleq and higher energy payment. Stable income from Menara Maxis. Stronger contribution from both Tropical Island and TGV cinemas. TGC became a100% subsidiary on 31 Jul 2008.

52.6 207.9 10.1 -13.3 -3.2 254.1

62.4 261.4 16.2 0.7 -10.2 330.5

18.6 Higher revenue and reduction in payout ratio from 65% to 62%. 25.7 Boosted by lower business development and plant maintenance costs. 60.0 -105.3 Mainly from TGV cinemas. 213.3 30.1

11.1 32.9 77.9 -45.0 22.1

12.2 37.0 104.0 0.9 26.0

Source: Company, DBS Vickers

Page 2

Company Focus Tanjong PLC

Fig.3: Tanjong - Quarterly and forecast cashflow
FYE Jan (RMm) 4Q09 1Q10 2Q10 2010F 2011F 2012F Comments

Pre-tax Profit Tax Paid Non operating items Other Non-Cash Adjustments Changes in Non-Cash Work Cap Cash From Operations

148.2 (53.4) 204.8 (27.2) (45.7) 226.7

269.4 (47.0) 146.3 (5.4) (2.8) 360.4

262.6 (51.9) 145.1 2.4 119.5 477.7

874.9 (218.6) 205.2 0.0 348.5 1,209.9

912.8 (210.2) 204.0 0.0 10.8 917.4

951.9 FY09 pretax profit was dragged down by one-off items. (209.0) 200.3 0.0 21.0 964.2 Supported by NFO and power operations. (114.7) Increased investment in power plants. 0.0 0.0 0.0 0.0 (114.7) (341.8) Supported by strong cashflow from NFO operation. (122.4) Due to loan refinancing. 0.0 0.0 Supported by strong operating cashflow. 0.0 (464.2) 385.3 0.0 3,505.6 3,891.0 385.3

Net Change in Capex Net Change In Investments Net Change in Inv. in Assoc & JVs Dividends rec'd from Assoc & JVs Other Investing Activities Cash from Investing Activities Dividends Paid Net Change in Gross Debt Share Issue (m) Interest paid Other Financing Activities Cash from Financing Activities Net Changes in Cash Currency Adjustments Cash at beginning of period Cash at end of period Net Changes in Cash

1.5 0.8 172.5 8.6 6.5 189.9 (52.9) (36.6) 0.0 (104.8) (140.3) (334.6) 51.5 (30.5) 1,151.4 1,202.9 51.5

(9.8) 0.2 0.0 12.0 3.9 6.2 0.0 130.7 0.0 (105.5) (16.3) 8.9 368.9 (6.7) 1,202.9 1,571.7 368.9

(7.3) (17.2) 0.0 14.4 4.5 (5.6) (52.9) 28.1 0.0 (65.5) (38.8) (129.1) 323.5 (19.5) 1,571.7 1,895.3 323.5

(114.7) 0.0 0.0 0.0 0.0 (114.7) (242.0) 1,089.1 0.0 0.0 0.0 847.2 1,942.3 0.0 1,202.9 3,145.2 1,942.3

(114.7) 0.0 0.0 0.0 0.0 (114.7) (326.6) (115.6) 0.0 0.0 0.0 (442.2) 360.5 0.0 3,145.2 3,505.6 360.5

Source: Company

Fig 4: Tanjong - Sum-of-parts valuation
RMm RM/shr

Gaming (8x CY09 PE ) 100% stake in Powertek (DCF @ 9.0%) 100% stake in Egyptian power plant (DCF @ 9.0%) Globeleq power plants (DCF @9%) 67%-stake in Menara Maxis based on book value 75% stake in Tropical Island based on book value Borrowings (net of non-recourse debts) sum-of-parts No. of shares (m) SOP per share (RM)

1,312.8 2,852.2 1,377.7 2,115.1 368.5 76.9 (341.3) 7,761.9 403.3 19.25

3.26 7.07 3.42 5.24 0.91 0.19 (0.85) 19.25

Source: DBS Vickers

Page 3

Company Focus Tanjong PLC

Fig 5: Tanjong - PE and P/NTA band
RM 25 20 15 10 5 0 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Tanjong 1-y r forward PE Band
RM 30 25 20 15 10 5 0 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
(%)

Tanjong 1-y r forward PNTA Band

14.0x 12.0x 10.0x 8.0x 6.0x

3.0x 2.5x 2.0x 1.5x 1.0x

Source: DBS Vickers, Bloomberg

Fig. 6: Regional Peers table
Market Cap Company Currency (US$'m) CY09 PE (x) CY10 EV/EBITDA (x) ROE (%) Div Yield (%) EBIT Margin

Tokyo Electric Power Kansai Korea Electric Power (Kepco) Chubu Electric CLP Holdings American Electric Power Co Datang International Power Hongkong Electric Holdings Huaneng Power International China Resources Power Tenaga Nasional Tata Power GD Power Development Shenergy Company Limited YTL Power International Huadian Power International Contact Energy Lanco Infratech MMC Corp Tanjong Plc GVK Power & Infrastructure China Power International Xinjiang Tianfu Thermoele First Philippine Holdings Shenyang Jinshan Energy Total Average

JPY JPY KRW JPY HKD USD HKD HKD HKD HKD MYR INR CNY CNY MYR HKD NZD INR MYR MYR INR HKD CNY PHP CNY

35,563.4 23,125.1 19,493.4 18,956.3 16,330.4 14,804.4 12,160.8 11,703.8 11,343.7 10,864.1 10,265.6 6,462.2 5,267.2 4,410.9 3,738.8 3,709.3 2,481.2 2,397.5 2,182.1 1,747.9 1,524.9 1,032.8 696.4 474.8 372.2 221,109.3

52.9 22.5 141.2 27.1 16.4 10.9 15.5 14.2 16.1 19.4 16.3 16.4 25.5 18.1 19.5 11.6 18.0 13.2 16.1 9.0 41.0 14.6 38.8 9.2 23.4 25.1

20.1 18.1 14.8 19.6 14.8 10.3 13.0 13.6 13.3 15.0 14.8 15.0 20.1 15.9 14.5 9.7 16.3 10.2 12.2 9.1 28.1 11.2 24.7 9.9 13.0 15.1

12.4 12.1 n.m. 8.2 10.3 7.8 21.4 9.6 29.9 20.3 8.0 n.m. 22.5 13.6 11.6 8.8 10.1 17.9 6.7 7.0 56.5 15.7 14.1 6.1 14.9 15.0

-3.4 -0.5 -6.9 -1.1 16.4 13.3 2.7 16.8 -9.4 6.6 10.4 15.0 1.3 4.4 10.0 -19.9 4.0 14.3 8.8 14.1 4.8 -7.1 3.6 4.4 1.2 4.1

2.5 2.8 0.0 2.8 4.7 5.3 3.1 5.0 2.2 0.7 2.4 0.9 0.5 1.0 5.2 0.0 4.7 0.0 1.0 4.5 0.0 0.0 1.0 0.0 0.3 2.0

1.1 1.1 -11.6 7.3 23.7 17.4 7.6 63.6 -1.6 12.9 14.1 -20.1 6.9 9.6 32.9 8.3 12.9 13.0 29.1 30.3 19.6 3.8 15.4 21.2 13.6 13.3

Source: Bloomberg, DBS Vickers

Page 4

Company Focus Tanjong PLC
Income Statement (RM m)
FY Jan 2009A 2010F 2011F 2012F

Balance Sheet (RM m)
FY Jan 2009A 2010F 2011F 2012F

Turnover Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Effective Tax Rate (%)
FY Jan

3,694 (2,577) 1,117 2 1,119 0 60 (501) 0 749 (200) (85) 0 464 464 1,552 35.7 20.2 14.5 (16.4) 26.7
2009A

3,588 (2,488) 1,100 (2) 1,098 0 53 (299) 0 923 (210) (36) 0 677 677 1,479 (2.9) (4.7) (1.9) 46.0 22.8
2010F

3,602 (2,485) 1,117 (2) 1,115 0 53 (285) 0 954 (220) (37) 0 697 697 1,496 0.4 1.2 1.6 2.9 23.1
2011F

3,587 (2,506) 1,081 (2) 1,079 0 54 (250) 0 954 (209) (37) 0 707 707 1,457 (0.4) (2.6) (3.3) 1.4 22.0
2012F

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt)

2,546 303 7,092 1,209 511 532 261 12,454 732 756 5,046 2,215 3,282 423 12,454 548 (4,569)

2,403 356 7,092 3,178 208 517 261 14,014 732 883 6,135 2,155 3,650 459 14,014 102 (3,689)

2,260 409 7,092 3,555 213 519 261 14,309 732 896 6,020 2,155 4,011 495 14,309 97 (3,197)

2,121 463 7,092 3,948 210 517 261 14,611 732 918 5,897 2,155 4,377 532 14,611 70 (2,682)

Cash Flow Statement (RM m)
Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Net Cashflow

Rates & Ratio
FY Jan 2009A 2010F 2011F 2012F

749 302 (165) (60) 0 289 1,116 (115) 241 (44) 0 79 161 (304) (304) 0 (524) (1,133) 145

923 258 (231) (53) 339 0 1,237 (115) 0 0 0 0 (115) (242) 1,089 0 0 847 1,969

954 257 (220) (53) (4) 0 934 (115) 0 0 0 0 (115) (327) (116) 0 0 (442) 377

954 254 (209) (54) 27 0 971 (115) 0 0 0 0 (115) (342) (122) 0 0 (464) 393

Quarterly / Interim Income Statement (RM m)
FY Jan 2Q2009 3Q2009 4Q2009 1Q2010

Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Asset Turnover (x) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) N. Cash/(Debt)PS (sen) Opg CFPS (sen) Free CFPS (sen)
FY Jan

Segmental Breakdown / Key Assumptions
2009A

30.2 30.3 12.6 14.1 3.8 7.1 58.7 2.2 0.3 51.1 102.3 73.9 1.7 1.2 1.2 1.4 2.0 1.3 (1,133.1) 276.6 248.2

30.7 30.6 18.9 19.5 5.1 6.8 45.6 3.7 0.3 53.4 114.3 58.8 2.6 2.3 0.9 1.0 1.7 1.4 (914.8) 222.5 278.2
2010F

31.0 31.0 19.3 18.2 4.9 6.5 48.2 3.9 0.3 52.5 116.4 34.5 2.8 2.5 0.7 0.8 1.7 1.5 (792.7) 232.5 203.1
2011F

30.1 30.1 19.7 16.9 4.9 6.2 48.3 4.3 0.2 52.7 117.2 34.3 3.0 2.7 0.5 0.6 1.7 1.5 (665.0) 234.2 212.4
2012F

Turnover Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

1,150 (896) 254 0 254 3 14 (81) 0 190 (28) (25) 137 137 0.7 (24.3) (5.9) (32.0) 22.1 22.1 11.9

1,294 (1,068) 226 0 226 (29) 21 (79) 0 139 (26) (16) 97 97 12.5 (19.6) (11.0) (28.9) 17.5 17.5 7.5

1,393 (1,024) 369 0 369 22 11 (253) 0 148 (106) (14) 29 29 7.7 83.9 63.1 (70.2) 26.5 26.5 2.1

1,310 (972) 338 0 338 (3) 15 (81) 0 269 (53) (25) 191 191 (5.9) (12.6) (8.2) 560.3 25.8 25.8 14.6

Revenues (RM m) Gaming Power Property, leisure and others Total Gross profit (RM m) Gaming Power Property, leisure and others Total Gross profit Margins (%) Gaming Power Property, leisure and others Total Key assumptions RM/USD ex rate (RM) Average interest rate (%) NFO draw (x)

715 2,718 261 3,694 210 794 113 1,117 29.4 29.2 43.3 30.2

821 2,566 200 3,588 277 818 5 1,100 33.7 31.9 2.5 30.7 3.60 7.5 166

781 2,604 217 3,602 235 866 16 1,117 30.1 33.3 7.4 31.0 3.50 7.0 166

758 2,593 236 3,587 200 813 68 1,081 26.4 31.3 28.8 30.1 3.50 7.0 166

Source: Company, DBS Vickers

Page 5

Company Focus Tanjong PLC

DBSV 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
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3.

ii.

Page 6

Company Focus Tanjong PLC

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Page 7

Thailand Company Focus

Charoen Pokphand Foods
Bloomberg: CPF TB

|

Reuters: CPF.BK

DBS Group Research . Equity

1 Oct 2009

BUY Bt7.95 SET : 717.07
Price Target : 12-Month Bt 9.60 (Prev Bt 7.50) Reason for Report : Company Update Potential Catalyst: (i) Expanding margins, from cheap raw material cost and rising product prices, and (ii) higher volume Analyst Nalyne Viriyasathien +662 657 7823 nalynev@th.dbsvickers.com

Earnings surge, costs remain low
• 3Q09F will beat record high 2Q09 earnings • Promising outlook with firm product prices, low raw material costs, and improving margins • Raised earnings, and TP to Bt9.60. Undemanding valuation, 21% upside, maintain BUY. Earnings will surge. 3Q09F is a seasonally strong quarter for exports and aquatic business, but should also reap the benefits of continued low raw material costs, firm meat prices due to supply cuts, and stronger demand amid a global economic recovery. Margins are expected to mildly exceed its record high 19.4% in 2Q09, led by falling raw material prices, increase in food sales, and improved productivity at its aquatic business. Q-o-q, price of soybean meal (c. 18% of COGS) was flat at Bt17/kg, but corn (c. 30% of COGS) fell 13% to c. Bt6.3/kg. Revised earnings. We raised FY09F profit by 24% to Bt8.5bn after imputing higher margins in 3Q09F. This implies 286% y-o-y jump, led also by improving domestic and overseas operations.FY10F earnings will ease 9% y-o-y to Bt8.1bn because of exceptional FY09F, but is still relatively strong. Thanks to (i) better raw material cost management, (ii) higher contribution from high margin food business, (iii) higher yields from overseas investments, and (iv) full year profit from wholly-owned chicken operation in Turkey. Limited downside, maintains Buy. Following the earnings upgrade, our target price is raised to Bt9.60 based on 8.5x FY10F PE, in line with its average PE during the normal period (2004-08). The share price has risen 250% YTD, but the counter remains attractive given its strong operation and growth. The group will not sell its 471m treasury stocks and intends to cancel them in Aug 2011. CPF’s valuation is undemanding, at 7x FY10F PE. And coupled with 21% upside potential to our revised target price, we reiterate our BUY call
At A Glance Issued Capital (m shrs) Mkt. Cap (Btm/US$m) Major Shareholders Charoen Pokphand Holding Charoen Pokphand Group (%) Charoen Pokphand Foods (%) Free Float (%) Avg. Daily Vol.(‘000) 7,520 59,784 / 1,778 21.1 16.1 6.3 49.6 32,286

Price Relative
Bt 8 . 50 7 . 50 6 . 50 5 . 50 4 . 50 3 . 50 2 . 50 2005 2006 2007 2008 2009 Relative Index 211 191 171 151 131 111 91 71 51

Charoen Pokphand Foods

( LHS )

Relative SET INDEX

( RHS )

Forecasts and Valuation
FY Dec (Bt m) 2008A 2009F 2010F 2011F

Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (Bt) EPS Pre Ex. (Bt) EPS Gth Pre Ex (%) Diluted EPS (Bt) Net DPS (Bt) BV Per Share (Bt) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (Bt):

156,238 166,529 177,265 184,681 10,466 18,000 17,260 18,314 3,442 11,035 10,003 10,860 3,128 8,944 8,091 8,755 3,128 8,944 8,091 8,755 0.4 1.2 1.1 1.2 0.4 1.2 1.1 1.2 145 186 (10) 8 0.4 1.2 1.1 1.2 0.2 0.6 0.6 0.6 6.3 7.1 7.6 8.0 18.3 6.4 7.1 6.5 18.3 6.4 7.1 6.5 8.6 4.6 4.8 4.5 9.7 5.7 5.7 5.4 2.4 7.8 7.1 7.7 1.3 1.1 1.0 1.0 1.0 0.9 0.8 0.7 7.1 18.6 15.3 15.7 23.7 0.9 2.0 0.8 0.8 0.9

ICB Industry : Consumer Goods ICB Sector: Food Producers Principal Business: Thailand's leading agro-industrial conglomerate that specialises in animal farming and the production of processed meat products. Corporate Governance CG Report (2008)

Source of all data: Company, DBS Vickers, Bloomberg

“In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.” www.dbsvickers.com Refer to important disclosures at the end of this report ed: SGC / sa: XXX

Company Focus Charoen Pokphand Foods
Income Statement (Bt m)
FY Dec 2008A 2009F 2010F 2011F

Balance Sheet (Bt m)
FY Dec 2008A 2009F 2010F 2011F

Turnover Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Effective Tax Rate (%)
FY Dec

156,238 166,529 177,265 184,681 (135,738) (137,719) (148,548) (154,578) 20,500 28,809 28,717 30,103 (17,019) (18,354) (19,535) (20,351) 3,481 10,456 9,182 9,752 1,177 1,204 1,265 1,328 1,162 1,394 1,534 1,687 (2,378) (2,019) (1,978) (1,908) 0 0 0 0 3,442 11,035 10,003 10,860 (218) (2,008) (1,820) (1,976) (96) (83) (91) (128) 0 0 0 0 3,128 8,944 8,091 8,755 3,128 8,944 8,091 8,755 10,466 18,000 17,260 18,314 15.9 32.3 254.1 145.3 6.3
2008A

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt)

44,706 0 15,543 3,453 27,888 14,115 1,804 107,510 29,117 10,792 18,365 3,685 45,053 498 107,510 33,016 (44,029)

44,260 0 16,822 4,243 31,728 16,453 1,804 115,310 27,566 11,802 20,848 3,685 50,912 498 115,311 38,183 (44,171)

43,981 0 18,227 4,177 32,575 15,114 1,804 115,879 22,675 11,660 22,848 3,685 54,512 498 115,879 37,834 (41,347)

42,435 0 18,227 2,974 35,185 18,786 1,804 119,411 19,732 13,343 24,849 3,685 57,304 498 119,411 42,433 (41,607)

Cash Flow Statement (Bt m)
Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Net Cashflow

6.6 72.0 200.4 185.9 18.2
2009F

6.4 (4.1) (12.2) (9.5) 18.2
2010F

4.2 6.1 6.2 8.2 18.2
2011F

Rates & Ratio
FY Dec 2008A 2009F 2010F 2011F

3,442 4,646 0 (1,162) (3,550) (191) 3,186 (5,382) 0 0 0 0 (5,382) (1,458) 3,204 0 824 2,570 374

11,035 4,946 0 (1,394) (5,168) (2,008) 7,411 (4,500) 0 0 0 0 (4,500) (3,053) 932 0 0 (2,121) 790

10,003 5,280 0 (1,534) 350 (1,820) 12,278 (5,000) 0 0 0 0 (5,000) (4,453) (2,891) 0 0 (7,344) (67)

10,860 5,546 0 (1,687) (4,599) (1,976) 8,144 (4,000) 0 1 0 1 (3,998) (4,404) (942) 0 0 (5,346) (1,201)

Quarterly / Interim Income Statement (Bt m)
FY Dec 3Q2008 4Q2008 1Q2009 2Q2009

Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Asset Turnover (x) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) N. Cash/(Debt)PS (Bt) Opg CFPS (Bt) Free CFPS (Bt)
FY Dec

Segmental Breakdown / Assumptions

13.1 2.2 2.0 7.1 3.0 3.5 43.7 1.5 1.5 32.3 21.7 76.6 1.2 0.4 1.0 1.0 11.3 2.3 (6.1) 0.9 (0.3)

17.3 6.3 5.4 18.6 8.0 8.5 50.0 5.2 1.5 33.5 22.3 81.9 1.4 0.5 0.9 0.9 9.3 2.3 (6.1) 1.7 0.4
2009F

16.2 5.2 4.6 15.3 7.0 7.2 50.0 4.6 1.5 32.5 21.8 81.9 1.6 0.6 0.8 0.8 11.0 2.8 (5.7) 1.7 1.0
2010F

16.3 5.3 4.7 15.7 7.4 7.6 50.0 5.1 1.6 33.5 22.8 83.0 1.8 0.7 0.7 0.7 9.0 3.0 (5.8) 1.8 0.6
2011F

2008A

Turnover Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

43,240 (37,195) 6,045 (4,463) 1,582 20 423 (627) 0 1,399 15 (26) 1,388 1,388 3,178 10.6 8.8 57.0 40.9 14.0 3.7 3.2

40,053 (34,909) 5,144 (4,554) 590 280 (21) (631) 0 219 107 (21) 305 305 2,005 (7.4) (36.9) (62.7) (78.1) 12.8 1.5 0.8

34,779 (29,673) 5,107 (3,895) 1,212 256 200 (715) 0 953 (166) (17) 771 771 2,803 (13.2) 39.8 105.6 153.0 14.7 3.5 2.2

40,613 (32,726) 7,888 (4,333) 3,555 320 445 (392) 0 3,928 (678) (56) 3,194 3,194 5,455 16.8 94.6 193.3 314.5 19.4 8.8 7.9

Revenues (Bt m)
Domestic: Livestock Aquaculture Overseas: Livestock Aquaculture Total Domestic: Livestock Aquaculture Overseas: Livestock Aquaculture Total 98,012 33,968 16,045 8,213 156,238 63% 22% 10% 5% 100% 102,229 36,427 17,606 10,266 166,529 61% 22% 11% 6% 100% 107,274 39,227 18,487 12,320 177,308 61% 22% 10% 7% 100% 110,962 40,355 19,041 12,935 183,294 61% 22% 10% 7% 100%

Revenues (%)

Source: Company, DBS Vickers

Page 2

Company Focus Charoen Pokphand Foods

DBSV 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
DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This document is published by DBS Vickers Securities (Thailand) Co., Ltd. (“DBSVT”), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). [This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of DBSVT.] The research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. DBSVT accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a whollyowned subsidiary of DBS Bank Ltd. DBS Bank Ltd. along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBS Vickers Research (Singapore) Pte Ltd (“DBSVR”), DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. The assumptions for commodities in this report are for the purpose of forecasting earnings of the companies mentioned herein. They are not to be construed as recommendations to trade in the physical commodities or in futures contracts relating to the commodities mentioned in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA”), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager 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. ANALYST CERTIFICATION The research analyst 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 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 this report. As of 1 Oct 2009, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Thailand) Co., Ltd. and its subsidiaries do not have a proprietary position in the mentioned 1. company as of 30 Sep 2009 2. 3. i. DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA, may beneficially own a total of 1% or more of any class of common equity securities of the mentioned company as of 1 Oct 2009. Compensation for investment banking services: DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the mentioned company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager 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.

ii.

Page 3

Company Focus Charoen Pokphand Foods

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 DBSVR and DBSVS, which 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. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [“MAS”] under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission. This report is being distributed in Singapore by DBSVR, which holds a Financial Adviser’s licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to “Institutional Investors”, “Expert Investors” or “Accredited Investors” as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to “Accredited Investors” is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3 Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority. Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. rd Hong Kong

Singapore

United Kingdom

Dubai/ United Arab Emirates

United States

Other jurisdictions

DBS Vickers Securities (Thailand) Co., Ltd. – 989 Siam Tower, 9 , 14 -15 Floor, Rama 1 Road, Pathumwan, Bangkok Thailand 10330 Tel. 66 2 657 7831, Fax: 66 2 658 1269

th

th

th

Corporate Governance Report Score Range 90-100 80-89 70-79 60-69 50-59 >50 N/A Number of Logo Description Excellent Very Good Good Satisfactory Pass N/A Disclaimer & Disclosure The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As result, the survey result may be changed after that date. DBS Vickers Securities (Thailand) Co., Ltd. does not confirm nor certify the accuracy of such survey result.

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