INITIATING COVERAGE

28 May 2009
CIMB Research Report

SINGAPORE
RECOM Buy

PRICE/TARGET PRICE S$0.425/ S$0.57

BreadTalk Group Limited MKT CAPITALISATION S$99.8

A stable staple BOARD Catalist

SECTOR Consumer -F&B

BREAD SP Michelle Tan, (65) 6210-8671 – michelle.tan@cimb.com

BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding

company. It was listed on the SGX Catalist Board in 2003 and operates bakery
outlets, food courts and restaurants.
Spreading wings far and wide. BreadTalk has come a long way. To date, it has 246
bakery outlets, 31 food courts and eight restaurants, supported by more than 2,000
employees in 12 countries.
Further growth expected in the PRC and Singapore. The group intends to expand
further in China and Singapore, with the aim of sustaining its earnings. We expect this
to support strong revenue growth over the next few years.
Net profit forecast to grow at 29.3% CAGR over FY09-11. Net profit increased by
64.6% yoy in FY07, before slowing to 6.2% in FY08. The deceleration was blamed on
its underperforming J.Co Donuts business. However, this is no longer part of the
group after the disposal of its 70%-owned Twin Peak Venture Singapore Pte Ltd.
We expect profit growth to pick up to around 31% this year from the opening of new
outlets in 2009 and lower raw material costs. We forecast a net profit CAGR of 29.3%
for FY09-11.
Initiate with Buy and target price S$0.57. We initiate coverage of the stock with a
BUY recommendation and a target price of S$0.57, based on sum-of-the-parts
valuation. This translates to 34.1% upside.
Financial summary
FYE Dec 2007 2008 2009F 2010F 2011F
Revenue (S$ m) 156.6 212.2 244.1 275.8 303.4
EBITDA (S$ m) 21.9 26.4 36.9 45.6 55.0
EBITDA margins (%) 14.0 12.4 15.1 16.5 18.1
Pretax profit (S$ m) 11.2 12.0 13.7 17.8 22.6
Net profit (S$ m) 7.3 7.8 10.2 13.3 16.8
EPS (S cts) 3.2 3.3 4.3 5.6 7.1
EPS growth (%) 70.7 2.4 31.5 29.9 26.6
P/E (x) 13.2 12.8 9.8 7.5 5.9
Gross DPS (S cts) 0.2 1.0 1.6 1.9 2.3
Dividend yield (%) 0.5 2.4 3.7 4.6 5.5
P/NTA (x) 1.4 1.1 1.2 0.9 0.8
ROE (%) 20.9 16.1 18.0 20.1 21.5
Net cash per share (S$) 0.11 0.12 0.09 0.15 0.25
P/CF (x) 3.4 3.0 3.1 2.4 2.0
EV/EBITDA (x) 3.8 3.2 2.3 1.8 1.5
Source: Company, CIMB estimates

Market capitalisation & share price information

Market cap S$99.8m Share price perf. (%) 1M 3M 12M
12-mth price range S$0.25/S$0.43 Relative 8.1 (5.2) 40.0
3-mth avg daily volume S$0.07m Absolute 37.1 37.1 3.7
# of shares (m) 234.9 Major shareholders % held
Est. free float (%) 32 Meng Tong Quek 33.9
Wrts/ICULS o/s (m) None Lih Leng Lee 18.5
Conv. price (S$) None Keywise Capital 11.0
UBS AG 10.01

Source: Company, CIMB estimates

Please read carefully the important disclosures at the end of this publication.
Background
BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding
company. Its principal subsidiary, BreadTalk Pte Ltd, is a private limited company
incorporated in Singapore on 24 Apr 00. The group was founded by its managing
director, Mr George Quek and Executive Director, Ms Katherine Lee. It was listed on
the SGX Catalist Board in 2003.
Principal businesses. BreadTalk started out operating retail outlets selling a wide
selection of breads, buns, cakes and pastries. It has expanded into the restaurant and
food court businesses.
BreadTalk’s businesses now fall into four categories: 1) bakery; 2) food atrium; 3)
restaurant; and 4) franchise. Some bakeries are owned while others are franchised.
Only owned bakeries are grouped under the Bakery segment which contributed
44.7% of FY08 group revenue, the largest. The Food Atrium segment is made up of
food courts operated by the group, contributing 32.6% of FY08 revenue. The
restaurant segment is made up of the Din Tai Fung restaurant chain (six restaurants)
and other outlets such as Station Kitchen and Cosmopolitan Café. Lastly, the
Franchise segment comprises franchised bakery outlets. In FY08, about 7.5% of the
group’s income was derived from franchises. Altogether, BreadTalk has under its
umbrella 246 bakery outlets, 31 food courts (atria) and eight restaurants, supported
by more than 2,000 employees in 12 countries.

Figure 1: Bakeries (owned and operated)

No. of outlets 31-Mar-08 31-Dec-08 31-Mar-09

Singapore 37 42 43
PRC 31 36 37
Hong Kong 2 5 6
Malaysia 7 12 12
Thailand 3 3 3
Total 80 98 101
Figure 2: Bakeries (franchised)

No. of outlets 31-Mar-08 31-Dec-08 31-Mar-09

Indonesia 40 48 50
Philippines 11 15 15
Kuwait 7 7 7
UAE 3 4 -
Oman - 1 1
Taiwan 1 - -
India 4 7 7
Korea - 1 2
Bahrain - - 1
PRC 43 58 62
Total 109 141 145
Figure 3: Food courts

No. of food courts 31-Mar-08 31-Dec-08 31-Mar-09

PRC 20 20 22
Hong Kong 2 5 5
Singapore 3 3 3
Malaysia 1 1 1
Total 26 29 31
Source: Company, CIMB-GK Research

[ 2 ]
Figure 4: Type of food outlet/restaurants run by BreadTalk
Name Description

BreadTalk BreadTalk is an award-winning bakery chain that has over

1,000 different types of bakery items and prides itself in
revolutionising the concept of bakeries with ‘see-through’
kitchens showing the expertise of its bakers.

The Icing Room The Icing Room is a girlish-themed shop that sells a wide
range of cakes, pastries and cookies and brings with it a
unique proposition of allowing customers to decorate their
own cakes.

Toast Box Toast Box was developed in 2005 to recreate the feel of
local Nanyang coffee shops in the 1960s and 70s. It serves
traditional favourites such as peanut butter thick toast, mee
siam, kaya toast and soft boiled eggs. Coffee and other hot
beverages are also prepared in the traditional “pulled” style.

Food Republic Food Republic is the group’s food court business. It offers a
wide spread of local hawker and street food under one roof
and in an air-conditioned environment.

Din Tai Fung Din Tai Fung is known for its delicious and healthy house
specialities such as its ‘Xiao Long Bao’ (steamed pork
dumplings). In 2008, the restaurant was recognised as one
of Taiwan’s best restaurants in the 2008 Taipei Top
Restaurant Guide.

Carl’s Junior Carl’s Junior is a fast-food chain offering juicy, premium-

quality charbroiled burgers in western US.

The Station Kitchen The Station Kitchen is the group’s integrated F&B concept
for diners at the 70,000 sf St James Power Station, one of
Singapore’s latest clubbing hot spots. Established in Dec 06,
the 250-seat restaurant offers two cuisine concepts in its
6,500 sf dining hall – Charcoal and Ah Wok.
Source: Company

Unique bread concept. BreadTalk was the first to adopt a sleek, transparent glass
concept for its kitchens to enable public viewing of the baking of breads and pastries,
so as to draw interest. A wide variety of recipes, bread designs and promotions,
coupled with the constant rollout of new bakery items, caters to the ever-changing
tastes of consumers. Depending on the size of each outlet, between 60 and 80 items
are offered daily. Revenue from the sale of bakery items sold at BreadTalk retail
stores formed more than 44% of FY08 revenue.
Strong branding. The BreadTalk brand has evolved to become one of the most
recognisable local brands in Singapore. In 2002, the group won the “Singapore
Promising Brand Award 2002” awarded by ASME and SPH and was also voted
Singapore’s Most Popular Brand in a joint poll by the ASME and SPH.
Strategic locations. The group’s outlets can be found in accessible locations with
high pedestrian traffic flow. This pulls in customers as they walk by. Many of the
outlets are located near public transport systems such as bus terminals, Mass Rapid
Transit stations and Light Rail Transport stations. Some stores are also located near
popular departmental stores and supermarkets.
IT-savvy. Its central kitchen and retail outlets in Singapore have all been installed
with web-enabled cameras using Internet Protocol. There are at least three cameras
at each outlet, to help management monitor the outlets from any place with Internet
connectivity. If anything is amiss, management can immediately call up the relevant
branch manager and rectify the problem in a short span of time. The retail outlets are
also installed with point-of-sale systems. This means that daily sales figures and
itemised sales volumes can be processed at the end of each day for each outlet,
allowing management to evaluate the popularity of each item and understand
customer trends better.
Experienced management. Mr George Quek, the managing director, has been in the
F&B business for more than 20 years. He is supported by a team of senior managers
with more than nine years of experience on average in the F&B or retail industries.

[ 3 ]
 Seasonality of sales. The group generally generates higher sales during festive
seasons such as Christmas and the Mid-Autumn Festival, as well as school holidays
in the months of June and December.
Main competitors. Direct competitors of BreadTalk outlets are local names such as
Four Leaves and My Bread. For the group’s Din Tai Fung restaurants, the main
competitor is Crystal Jade.
Major customers. No customer accounted for more than 5% of turnover in the past
few financial years as customers are mainly walk-in customers.
Major ingredients. Major purchases are ingredients for baking which include flour,
butter, sugar and fillings for the food items. All the ingredients are sourced in
Singapore.
Inventory management. Inventory management is prudent as most of the required
raw materials are easily available and are delivered daily by suppliers. Inventory
turnover in FY07-08 was 6-7 days. However, the group orders flour in bulk and these
are stored for 3-6 weeks. Inventories are also managed on a first-in-first-out basis.

Figure 5: Revenue breakdown by business Figure 6: Revenue breakdown by geography

segment (FY08) (FY08)

Source: Company

Figure 7: Some awards won over the years

Source: Company, CIMB-GK Research

Figure 8: A sampling of popular BreadTalk items

Source: Company

[ 4 ]
Industry outlook
F&B establishments have been growing. Singapore’s diverse culture has produced
a highly developed F&B sector offering an extensive array of cuisines. Singapore has
been ranked alongside Hong Kong and Australia as one of the three major eating
capitals in the Asia-Pacific. F&B establishments here can be broadly categorised into
restaurants, fast food outlets, food caterers and others (including cafes, coffee
houses, food courts etc.)
According to the Singapore Department of Statistics, there were 5,200 F&B
establishments in Singapore in 2007, up 6.4% yoy. Sector operating receipts grew
8.7% yoy to S$5.0bn in 2007.

Figure 9: F&B establishments are on the rise

2007 2006 Change (%)
F&B establishments 5,244 4,927 6.40%

Source: Economic Survey Series - Food & Beverage Services 2007, CIMB-GK Research

Stiff competition. The F&B industry in Singapore is highly competitive and

fragmented with low barriers to entry. With many bakeries reinventing their existing
products and expanding, it gets increasingly difficult to compete for choice locations
and market share.
Impact of swine flu minimal. As the global swine-flu pandemic is not transmissible
via the consumption of cooked pork, the impact on the F&B industry should be
minimal.
Subject to inflationary pressures. As with most other industries in Singapore, the
F&B industry has been hit by the inflation of rental expenses and utility charges, which
has hurt profitability. As such, many establishments have been raising their ASPs. We
believe prices will continue to trend up and businesses will have to continually adjust
their selling prices in order to maintain profit margins.

[ 5 ]
Figure 10: Historical revenue and net profits of some Singapore-listed F&B (retail) players
BreadTalk Japan Foods

Revenue Net profit

250 10 250 Revenue Net profit 10

200 8 200 8

150 6 150 6

100 4 100 4

50 2 50 2

0 0 0 0

FY06 FY07 FY08 FY06 FY07 FY08

Food Junction Food Empire Holdings

46 Revenue Net profit 7 250 Revenue Net profit 25

45 6
200 20
5
44
4 150 15
43
3 100 10
42
2
41 50 5
1
40 0 0 0
FY06 FY07 FY08 FY06 FY07 FY08

Thai Village Apex-Pal

Revenue Net profit Revenue Net profit

41 3 100 6

40 2 80 4

39 1 2
60
38 0 0
40
37 -1 -2
36 -2 20 -4
35 -3 0 -6
FY06 FY07 FY08 FY06 FY07 FY08

[ 6 ]
 Company outlook
Intention to expand in key markets – PRC and Singapore. Currently, BreadTalk
derives most of its revenue from Singapore and the PRC. It intends to expand further
in both nations. However the PRC market is much larger than Singapore. Thus,
earnings from the former may become the group’s largest revenue source within five
years. We expect this to sustain the group’s revenue growth over the next few years.
Moving into fast-food dining. To ensure continued growth, BreadTalk will be
investing part of its profits in the construction of new platforms and infrastructure for
future revenue growth, such as the introduction of Carl’s Junior restaurants in the
PRC. BreadTalk wants to open two Carl’s Junior restaurants in Shanghai this year
and four ramen restaurants in Shanghai and Singapore in its venture into fast-food
dining to further diversify its business offerings.
Tighter cost management. Management aims to tighten its cost management to
improve operating margins. In addition, it intends to invest more on IT so as to
streamline operations and improve operating efficiency.

Figure 11: SWOT analysis

Strengths Opportunities
• Well-known brand with strong brand equity • Increasing popularity of bread products in Asia
• Innovative products to keep up with changing customer • Rising household income and affluence
tastes
• Strategic retail locations, capturing strong market interest
and creating brand awareness
• Experienced management

Weaknesses Threats
• Intense competition • Vulnerable to food cost increases and supply shortages
• Low barriers to entry in the F&B industry • Exposed to changes in consumer sentiment and preferences
• Possibility of food contamination and adverse publicity
• Failure to procure good locations for bakery outlets and
restaurants
Source: Company, CIMB-GK Research

[ 7 ]
Risks
A fiercely competitive industry. BreadTalk operates in the highly competitive F&B
industry which has close to no barriers to entry. Some of its competitors are
established players in the bakery and confectionery industries and may have greater
financial and marketing resources. The entry of new competitors into the same F&B
segments or into the immediate areas around the group’s retail outlets may affect its
earnings.
Subject to changing consumer tastes. Continued earnings growth would depend
on the popularity of bakery items and other food products. Shifts in consumer
preferences away from the group’s items may hurt its business.
Exposure to food-related diseases. Some of BreadTalk’s products may contain
food fillings made from meat and seafood products. Any outbreak of diseases in meat
or seafood from the region and around the world may affect sales. Such outbreaks
may also result in a shortage of key ingredients or higher costs, hurting margins.
Lack of new strategic locations. Business volume would depend to a large extent
on management’s ability to procure strategic locations for BreadTalk’s retail outlets.
However, there is no assurance that this is possible, which would limit future growth.
Higher rents demanded from landlords and failure to renew existing leases. All
outlets are currently leased from third parties. Rental costs constitute a large portion
of the group’s costs (20% of the total). As such, earnings are highly sensitive to any
increase in rental expenses. In addition, upon expiry of leases, landlords have the
right to review rental rates, which may not be favourable to the group.
Quality control might be an issue due to staff shortage. The quality of food items
may be affected by a change in or a shortage of staff or the lack of proper inspection
by the in-house operations team.

[ 8 ]
Financials
Revenue expectations of 12.6% CAGR for FY09-11. Revenue jumped 35.5% yoy in
FY08, up from the 26.7% growth in FY07, led by higher revenue from more outlets
and the disposal of its loss-making J. Co Donuts. However, we believe this growth
rate is not sustainable due to the highly competitive nature of the food industry, which
has close to no barriers to entry. Furthermore, a country’s GDP is closely related with
consumer spending. With Singapore’s GDP contracting by more than 11% in the
earlier part of the year, we expect BreadTalk’s revenue to grow at a more
conservative 10-15% over FY09-11. This translates to a CAGR of 12.6%.
Net profit forecast to grow at 29.3% CAGR over FY09-11. Net profit increased by
64.6% yoy in FY07, before slowing to 6.2% in FY08. The deceleration was blamed on
its underperforming J.Co Donut business. However, this is no longer part of the group
after the disposal of its 70%-owned Twin Peak Venture Singapore Pte Ltd.
We expect profit growth to pick up to around 31% this year from the opening of new
outlets in 2009 and lower raw material costs. We forecast a net profit CAGR of 29.3%
for FY09-11.
Figure 12: Earnings

350 40%
300 35%

250 30%
Sales (S$ m)

25%
200
20%
150
15%
100
10%
50 5%
0 0%
FY07 FY08 FY09F FY10F FY11F

Rev enue Net profit Total rev enue y oy grow th (%)

Source: Company, CIMB-GK Research

Margins likely to improve due to higher ASPs and lower raw material costs. We
expect gross margins to come in higher at 55% in FY09-11 from 54.4% in FY08, due
to higher average selling prices (ASPs) and lower raw material costs.
We expect operating margins to improve from FY08’s 6.2% due to greater economies
of scale. Net margins are projected at 4.2-5.5% for FY09-11, up from 3.7% in FY08.

Figure 13: Margins

70%
54.4% 55.0% 55.0% 55.0%
60%
55.4%
50%
40%

30% Gross margin Net margin Operating margin

20%
7.8% 6.3% 7.1% 8.0%
10% 6.2%
4.7% 3.7% 4.2% 4.8% 5.5%
0%
FY07 FY08 FY09F FY10F FY11F

Source: Company, CIMB-GK Research

Projected capex of S$20m-35m for FY09-11. BreadTalk generated positive cash

flows in FY07-08. We are projecting higher capex of S$35m for FY09, as the group
will be opening more than 80 bakeries (some directly owned and others franchised)
and six new food courts in the year. The group is also in a strong net cash position
which is vital in tight credit markets.

[ 9 ]
Figure 14: Operating and free cash flows

65.0

55.0 Operating cash flow Free cash flow Net cash

45.0

(S$ m)
35.0
25.0

15.0
5.0
(5.0)
FY07 FY08 FY09F FY10F FY11F

Source: Company, CIMB-GK Research

[ 10 ]
 Valuation and recommendation
Initiate with Buy and target price S$0.57. We initiate coverage of the stock with a BUY
recommendation and a target price of S$0.57, based on sum-of-the-parts valuation. This
translates to 34.1% upside. BreadTalk boasts a robust net profit CAGR of 29.3% for
FY09-11 and is in a healthy cash position. Following worries regarding the global
economy, we would be keeping a close eye on BreadTalk’s margins in its upcoming 2Q09
results.

Figure 15: Sum-of-the-parts valuation

FY09F net profit P/E Value
(S$ m) multiple (S$ m) Assumptions
Singapore 5.5 9.7 53.3 pegged to local F&B industry average
China & HK 4.9 15.6 77.1 40% discount to the local F&B industry average due to the smaller scale of operations
Others 0.5 7.8 4.3 20% discount to Singapore's business to factor in lack of track record
Total 134.72
No. of shares 234.91
Valuation per share $0.57
Source: CIMB-GK Research

Figure 16: Peer comparison table (F&B industry)

Target Core 3-yr EPS P/BV ROE Div
Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%)
ticker Recom. (Local) (Local) (US$ m) CY2009 CY2010 (%) CY2009 CY2009 CY2009
China Green 904 HK O 7.52 6.12 857 11.8 9.6 17.3 2.1 20.8 2.8
Huiyuan 1886 HK U 5.47 3.00 1,036 35.2 26.1 31.8 1.5 4.6 0.8
Mengniu 2319 HK U 15.52 8.35 3,126 32.0 25.3 206.0 3.7 13.0 0.3
China Yurun 1068 HK U 11.16 8.38 2,204 16.5 12.4 30.3 2.9 18.7 1.6
Tingyi 322 HK N 11.68 11.25 8,416 25.4 20.9 25.5 6.3 26.8 2.0
Want Want 151 HK O 3.69 3.52 6,286 20.0 16.0 22.1 5.9 31.5 3.0
CHINA QUANJUDE-A 002186 CH NR 27.31 NA 566 41.2 35.2 14.1 NA 10.7 NA
Simple average 26.0 20.8 49.6 3.7 18.0 1.7

Cerebos CER SP O 3.00 5.22 650 11.0 10.2 7.4 2.6 24.2 8.3
China Fishery CFG SP O 1.15 1.29 680 7.5 7.2 (1.5) 1.7 24.9 4.4
Pacific Andes PAH SP N 0.40 0.53 378 6.0 5.4 0.6 0.5 11.0 4.5
P Food PFH SP U 0.59 0.53 455 5.9 5.1 (0.8) 0.6 10.4 6.0
Petra Foods PETRA SP U 0.65 0.58 238 11.2 9.7 26.9 1.2 11.3 4.6
Synear SYNF SP U 0.30 0.12 279 16.6 16.2 (15.5) 0.6 3.9 -
Simple average 9.7 9.0 2.9 1.2 14.3 4.6
Total Simple average 17.8 14.9 26.2 2.5 16.1 3.2
O = Outperform, N = Neutral, U = Underperform, NR= Stock not under CIMB-GK Research coverage, nm = Not meaningful
Source: Bloomberg, CIMB-GK Research

[ 11 ]
Technical analysis
Stock is a technical BUY. Due to the lack of trading volume, we have used a weekly
chart to see how far the stock has rebounded. The stock has rallied strongly since April
to the 38% FR levels at S$0.43.
The weekly MACD is still positive but the weekly and daily RSI are now overbought.
Despite the overbought RSI, we do not discount another rally towards the 50% FR levels
at S$0.485. Investors looking to buy may want to wait a little before getting in. Wait for a
pullback to S$0.39 or S$0.36 before getting. Put a stop loss at S$0.35.

Figure 17: Technical chart

Source: Bloomberg

[ 12 ]
Board of directors
Figure 18: Management

George Quek Meng Tong Mr Quek, founder of the group, was appointed to the board on 6 Mar 03 and re-
Chairman elected on 28 Apr 08. With more than 30 years of industry experience, he has
been instrumental in setting new standards in food trends in Asia and the Middle
East. Mr Quek started his food and beverage business in Taiwan in 1982,
successfully developing it into a chain of 21 South-East Asia food outlets within a
decade. Returning to Singapore in 1992, he founded Topwin Singapore and
Megabite China in 1996, establishing the food court business. In 2000, he started
the bakery business with BreadTalk Pte Ltd and eventually listed it on the SGX in
2003. To facilitate expansion, the bakery and food court businesses were merged
in 2005. Mr Quek holds a Doctorate in Business Administration (Honorary) from
Wisconsin International University, US.

Katherine Lee Lih Leng Ms Lee was appointed to the board on 6 Mar 03 and last re-elected on 30 Apr 07.
Deputy Chairman She oversees research and development, as well as pioneers new ideas and
concepts. Responsible for product development and brand enhancement locally
and globally, Ms. Lee also formulates product training and technical skill upgrade
programmes. In addition, Ms. Lee spearheads product costing, which is an
integral part of strategic pricing. Ms Lee has more than 15 years of experience in
the industry. She was previously the Finance Director of Topwin Singapore prior
to which she was in charge of the human resource and operations of more than
20 food and beverage outlets in Taiwan.

Chen Kuo Hua Mr Chen Kuo Hua was appointed to the board on 30 Apr 03 and last re-elected on
Non-Executive Director 27 Apr 06. He is in the Audit Committee, Nominating Committee and
Remuneration Committee of the company and is also the President of the group’s
China operations. Mr. Chen has more than 20 years of industry experience
providing consultation and strategic planning in various countries. He had held
various senior positions in Topwin Singapore and Megabite China prior to joining
the group, when the food court business was merged into the group. Mr. Chen
holds a degree in Drama and Mass Communication from the Chinese Culture
University, Taipei, Taiwan.

Ong Kian Min Mr Ong Kian Min was appointed to the board on 30 Apr 03 and last re-elected on
Independent Director 30 Apr 07. He is the Lead Independent Director, Chairman of the Audit Committee
and Nominating Committee, and member of the Remuneration Committee of
BreadTalk. He was called to the Bar of England and Wales in 1988 and to the
Singapore Bar the following year. In addition to practising as a consultant with
Drew & Napier LLC, he is a senior adviser of Alpha Advisory Pte. Ltd. (a financial
and corporate advisory firm) and an executive director of Katana Asset
Management Pte. Ltd. He also serves as an independent director and chairs most
of the audit committees of other SGX-ST listed companies. Mr Ong holds a
Bachelor of Laws (Honours) external degree from the University of London and a
Bachelor of Science (Honours) degree from the Imperial College of Science and
Technology in England. He has been a Member of Parliament in Singapore since
Jan 97, and serves as Deputy Chairman of the Government Parliamentary
Committee for Transport.

Chan Soo Sen Mr Chan Soo Sen was appointed to the board on 14 Aug 06. He is the Chairman
Independent Director of the Remuneration Committee, as well as a member of the Audit Committee and
Nominating Committee of the company. Mr. Chan is currently the Director,
Chairman’s Office of Keppel Corporation Limited. He also holds directorships for a
few listed companies in Singapore. Mr. Chan is a Member of Parliament for Joo
Chiat Constituency. He was previously a Minister of State and served in several
ministries including the Ministry of Community Development, Youth and Sports,
Ministry of Education, and Ministry of Trade and Industry. Before entering politics,
he was involved in the start-up of the China-Singapore Suzhou Industrial Park as
its founding chief executive officer in 1994, laying the foundation and framework
for infrastructure and utilities development for the industrial park. He holds a
Master in Management Science from the University of Stanford, US.

Source: Company

[ 13 ]
Financial Tables
PROFIT & LOSS (S$ m, FYE Dec) 2007 2008 2009F 2010F 2011F
Revenue 156.6 212.2 244.1 275.8 303.4
Operating expenses (64.8) (89.1) (73.0) (78.5) (81.5)
EBITDA 21.9 26.4 36.9 45.6 55.0
Depreciation & amortisation (9.8) (13.1) (21.4) (26.0) (30.6)
EBIT 12.2 13.2 15.4 19.6 24.4
Net interest & invt income (0.9) (1.2) (1.7) (1.7) (1.8)
Associates' contribution - - - - -
Exceptional items - - - - -
Pretax profit 11.2 12.0 13.7 17.8 22.6
Tax (2.8) (3.6) (2.7) (3.6) (4.5)
Minority interests 1.1 0.6 0.8 1.0 1.3
Net profit 7.3 7.8 10.2 13.3 16.8
Wt. shares (m) 226.4 234.9 234.9 234.9 234.9
Shares at year-end (m) 234.9 234.9 234.9 234.9 234.9

BALANCE SHEET (S$ m, FYE Dec) 2007 2008 2009F 2010F 2011F
Fixed assets 44.9 58.2 71.7 65.7 55.1
Intangible assets 9.7 9.2 9.2 9.2 9.2
Other long-term assets 2.0 2.4 2.4 2.4 2.4
Total non-current assets 56.6 69.8 83.4 77.4 66.7
Cash and equivalents 35.5 44.7 36.4 52.0 75.0
Stocks 2.5 3.9 4.5 5.1 5.6
Trade debtors 3.0 4.8 5.7 6.4 7.1
Other current assets 18.0 24.0 28.5 30.2 33.8
Total current assets 59.1 77.3 75.1 93.7 121.4
Trade creditors 8.9 11.6 13.4 15.1 16.6
Short-term borrowings 7.0 9.7 9.7 9.7 9.7
Other current liabilities 47.2 61.5 62.1 61.2 62.0
Total current liabilities 63.0 82.9 85.2 86.0 88.3
Long-term borrowings 4.0 6.4 6.4 6.4 6.4
Other long-term liabilities 1.5 1.8 1.8 1.8 1.8
Total long-term liabilities 5.4 8.2 8.2 8.2 8.2
Shareholders' funds 44.1 52.5 60.8 71.5 85.0
Minority interests 3.2 3.6 4.4 5.4 6.7
NTA/share (S$) 0.3 0.4 0.4 0.4 0.6

CASH FLOW (S$ m, FYE Dec) 2007 2008 2009F 2010F 2011F
Pretax profit 11.2 12.0 13.7 17.8 22.6
Depreciation & non-cash adjustments 12.2 16.1 21.4 26.0 30.6
Working capital changes 7.3 8.0 0.3 0.4 0.4
Cash tax paid (2.0) (3.4) (3.6) (2.7) (3.6)
Others - - - - -
Cash flow from operations 28.7 32.7 31.8 41.5 50.0
Capex (18.0) (25.6) (35.0) (20.0) (20.0)
Net investments & sale of FA (1.2) (0.7) - - -
Others 2.3 0.0 0.0 0.0 0.0
Cash flow from investing (16.9) (26.3) (35.0) (20.0) (20.0)
Debt raised/(repaid) (1.8) 4.8 (2.3) - -
Equity raised/(repaid) 11.8 0.9 - - -
Dividends paid (1.0) (1.3) (2.7) (3.6) (4.5)
Cash interest & others (1.0) (2.0) (2.3) (2.4) (2.5)
Cash flow from financing 7.9 2.3 (7.4) (6.0) (7.0)
Change in cash 19.8 8.8 (10.6) 15.6 23.0
Change in net cash/(debt) 21.6 4.0 (8.3) 15.6 23.0
Ending net cash/(debt) 24.6 28.6 20.3 35.9 58.9

KEY RATIOS (FYE Dec) 2007 2008 2009F 2010F 2011F

Revenue growth (%) 26.7 35.5 15.0 13.0 10.0
EBITDA growth (%) 42.8 20.2 39.8 23.7 20.6
Pretax margins (%) 7.2 5.7 5.6 6.5 7.4
Net profit margins (%) 4.7 3.7 4.2 4.8 5.5
Interest cover (x) 11.4 13.1 9.1 11.6 14.2
Effective tax rates (%) 24.9 30.4 20.0 20.0 20.0
Net dividend payout (%) 13.5 16.6 26.9 26.9 26.9
Debtors turnover (days) 6.9 6.7 7.8 8.0 8.1
Stock turnover (days) 5.3 5.5 6.3 6.3 6.4
Creditors turnover (days) 19.6 17.6 18.7 18.8 19.1

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RETAIL RESEARCH RECOMMENDATION FRAMEWORK

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

BUY: The stock's total return is expected to be +15% or better over the next
three months.
HOLD: The stock's total return is expected to range between +15% and -15%
over the next three months.
SELL: The stock's total return is expected to be -15% or worse over the next
three months.
CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M)
OVERWEIGHT: The industry, as defined by the analyst's coverage universe,
has a high number of stocks that are expected to have total returns of +15% or
better over the next three months.
NEUTRAL: The industry, as defined by the analyst's coverage universe, has
either (i) an equal number of stocks that are expected to have total returns of
+15% (or better) or -15% (or worse), or (ii) stocks that are predominantly
expected to have total returns that will range from +15% to -15%; both over the
next three months.
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,
has a high number of stocks that are expected to have total returns of -15% or
worse over the next three months.

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