Premium Take-Private Valuation Required for a Premium Asset; Revised Cancellation Consideration to Independent Shareholders Continues to Undervalue the Business

1. 1
August 17, 2016
To: Bracell independent committee of the board (“Bracell IBC”) comprised of:
Mr. John Jeffrey Ying, Chairman
Mr. Jeffrey Lam Kin Fung
Mr. David Yu Hon To
Mr. Lim Ah Doo
Mr. Low Weng Keong
Mr. Armin Meyer
Cc: Bracell Independent Shareholders
Morgan Stanley, as financial adviser to the Company
Bracell Limited
Twitter: @bracellfairness
From: Andrew Peng, Bracell Independent Shareholder
Re: Premium Take-Private Valuation Required for a Premium Asset;
Revised Cancellation Consideration to Independent Shareholders
Continues to Undervalue the Business
Dear Sirs:
The purpose of this letter is to update the analyses based on the valuation framework
presented in my previous letter to the Bracell IBC dated 23 June 2016, using the 1H
2016 results issued by the Company on 15 August 2016. The Company’s financial
outperformance in 1H 2016 was impressive and lends further credence to Bracell’s
claim as one of the most efficient producers in the DWP industry (if not the most
efficient). While the Brazilian Real weakness on a year-over-year basis helped drive
costs lower in 1H 2016, the Company’s margin performance is indicative of its success
in continuing to drive substantial operational improvements, independent of foreign
exchange movements.
Combined with improved pricing for rayon-grade DWP volumes, the Company’s
superior profit potential is being realized despite short-term weakness in specialty grade
shipments (largely due to the timing of customer shipments).
Based on updates to the valuation framework analyses below, it is exceedingly
clear that the revised cancellation consideration of $2.28/share offered to
Independent Shareholders continues to undervalue the Company by a significant
margin. While the revised offer represents a significant increase over the initially
proposed price, the fundamental analyses presented below which has been updated to
reflect new facts, support a meaningfully higher fair value for Independent Shareholders
in a privatisation transaction.

2. 2
As I wrote in my previous letter,
A thorough examination of the privatisation offer must take into account
Company performance through June 30, 2016, considering the magnitude of the
forecasted increase to profits during this period as disclosed in the positive profit
alert.
I respect and appreciate the work of the Bracell IBC to date in conjunction with your
financial advisers to evaluate the controlling shareholder’s offer on behalf of
Independent Shareholders. In light of the new information presented with respect to the
Company and its publicly-traded comparables, I urge you to evaluate the new facts
when making your recommendation to Independent Shareholders regarding the offer.
The updated analyses speak for themselves – against a challenging backdrop for the
DWP industry, Bracell achieves superior margins and cash flow, placing the Company
far above its peers in terms of profit and growth potential. Independent Shareholders
deserve to be rewarded for such outperformance and receive fair value for what I have
previously described as a differentiated “jewel” of an asset, particularly as one of the
only global DWP producers with integrated forestry and mill operations. The controlling
shareholder’s revised proposal remains insufficient compensation to Independent
Shareholders.
As always, I invite any members of the Bracell IBC or other Independent Shareholders
of the Company to contact me with questions or comments about any of the contents of
this letter.
Sincerely,
Andrew Peng
A Bracell Independent Shareholder
drew_peng@yahoo.com

3. 3
1) COMPANY COMPARABLES ANALYSIS
Please refer to the attached Exhibit 1.
Comparables analysis has been updated to reflect financial performance of DWP
industry peers through 30 June 2016. Equity market pricing is as of 17 August 2016.
• Rayonier Advanced Materials (NYSE: RYAM)
• Sappi Limited (JSE: SAP)
• Tembec (TSE: TMB)
• Lenzing AG (VIE: LNZ)
In the prior comparables analysis, LTM financial performance through 31 March 2016
was used, which has now been updated for LTM 30 June 2016 for all comps except
Lenzing AG, which has not yet reported CQ2 financial results. In addition, the prior
analysis did not reflect the presence of underfunded pension balances with respect to
several of the companies. In the updated analysis, underfunded pensions/post-
retirement obligations are included in the calculation of TEV, and clearly disclosed in the
footnotes where applicable. The persistent issue of underfunded pensions represents a
real debt-like item, an example of which can be found in this recent article describing
International Paper’s incurrence of debt to help pay down pension obligations.
• Bracell valuation range implied by comparables analysis: HK$2.81 –
3.34/share.
2) PRECEDENT TRANSACTIONS ANALYSIS
Please refer to the attached Exhibit 2. As discussed previously, precedent transactions
analysis includes the following:
• Georgia Pacific acquisition of Buckeye Technologies, Inc. (completed August 23,
2013)
• International Paper acquisition of Weyerhaeuser Cellulose Fibers assets
(announced May 2, 2016)
There was no change in the Precedent Transactions methodology compared to the
previous letter, aside from updating the LTM 30 June 2016 Bracell financials against
which precedent multiples were applied to establish a valuation range:
• Bracell valuation range implied by comparables analysis: HK$2.84 –
4.17/share.

4. 4
3) DCF ANALYSIS INCLUDING BENEFIT OF TAX ASSETS
Please refer to the attached Exhibit 3.
Note the following key assumptions, including changes from the previous
analysis:
• No change in total production volumes, other than slight degradation to CS
volumes in 2016 and beyond to reflect trends observed YTD
o Debottlenecking capex spent in 1H 2016 will benefit total production
volume increase in 2017 to 485k ADMTs
• Rebound in rayon-grade DWP ASP based on strength cited in Bracell 1H 2016
interim report, as well as data provided by peers
o As per Bracell management, “Since early July, viscose fiber prices started
rising significantly. If recent viscose fiber price increases are sustained,
rayon-grade DWP prices may have further room to increase in the 2H of
the year.”
o Please refer to Exhibit 4 excerpted from Sappi FQ3 results presentation
(attached)
o Long-term ASP trend remains modest at +2% CAGR
o Importantly, by 2025, projected rayon-grade DWP pricing does not exceed
$1,050/ADMT, well below third party long-range forecasts and the long-
term trend
• No change to CS ASP trend vs. previous analysis (+1% long-term CAGR)
• Cash cost of production / ADMT base lowered in 2016 based on 1H 2016 results,
with 2% rate of annual growth thereafter (vs. 2.5% used previously) due to
proven cost controls. Note that +2% cash cost of production growth post-2016
still exceeds blended ASP growth rate of +1.7%.
• No change to OpEx trend assumptions
• No change to depreciation or decrease to harvest charge assumptions
• No change to CapEx or additions to forestation assets assumptions
• Tax model methodology and assumptions remain the same (assume Company
becomes a full tax payer in 2019
• No change in terminal growth rates or WACC used to calculate present value
• Bracell valuation implied by revised DCF analysis: HK$2.72/share.
Note that the revised long-term DCF model, which maintains a conservative
approach to forecasting the business (Revenue and EBITDA growth confined to
+1-2% CAGR), results in sustainable annual free cash flow of $0.27-
0.28/share.

5. 5
ADDITIONAL VALUE CONSIDERATIONS
• No meaningful new production capacity coming into the DWP market in the near-
to-medium term, as current ASPs do not provide adequate returns on investment
in new supply. Note Fortress Paper (smaller DWP competitor) management
commentary during Q2 2016 earnings call:
o “As of today, our understanding is that most [DWP swing capacity] is now
in the market and serving the demand for the dissolving pulp market…as
far as we know and what we can see, there is no new capacity that has
been announced really until sometime in 2018…so that is why we are
getting fairly positive about the market.”
o Given the growth in global demand for rayon-grade pulp (5.5 million metric
tons annually, +4% CAGR from 2015-2020 per Hawkins Wright), lack of
material new supply supports a “capital cycle” dynamic that will likely drive
ASP growth going forward.
• Bracell management commentary in 1H 2016 interim report reiterates confidence
in capturing CS market share going forward:
o “…the Group will continue to further penetrate into the specialty-grade
DWP segment by improving its product quality according to stringent
customer specifications.” (pg. 5)

6. Exhibit 1
LTM 6/30/16 Operating Metrics (Except Lenzing) Market Stats as of August 17, 2016 Valuation Metrics
TEV /
Reporting Adj EBITDA - Trading MRQ Diluted TEV / TEV / Adj EBITDA -
Company Currency Revenue Adj EBITDA Adj EBIT Mtce CapEx Mtce CapEx Currency Exch Rate Share Price Shares Out Market Cap Net Debt TEV Adj EBITDA Adj EBIT Mtce CapEx
Rayonier Advanced Materials(1)
USD $930 $249 $160 $75 $174 USD $12.15 42.5 $516 $807 $1,323 5.3x 8.3x 7.6x
Sappi
(1)
USD $5,204 $731 $478 $229 $502 ZAR 0.0741 66.60 541.9 $2,674 $2,005 $4,679 6.4x 9.8x 9.3x
Tembec
(1)(2)
CAD 1,483 127 77 38 89 CAD 0.99 100 99 788 887 7.0x 11.5x 10.0x
Lenzing AG(1)
EUR 2,015 323 184 76 247 EUR 98.41 26.6 2,613 339 2,952 9.1x 16.1x 12.0x
Min 5.3x 8.3x 7.6x
Max 9.1x 16.1x 12.0x
Median 6.7x 10.7x 9.6x
Average 7.0x 11.4x 9.7x
Bracell
(3)
@ Proposed Offer Price USD $437 $223 $124 $62 $161 HKD 7.75 2.28 3,421.9 $1,007 $79 $1,086 4.9x 8.8x 6.7x
% above/below Median Multiples -> (27%) (18%) (30%)
% above/below Average Multiples -> (30%) (23%) (31%)
Bracell Implied Valuation Based on Comparables Analysis
Bracell % Premium to
Median Comparables Multiples TEV Mkt Cap Share Price Offer
TEV / Adj EBITDA 6.7x $1,493 $1,414 $3.20 40.5%
TEV / Adj EBIT 10.7x $1,319 $1,240 $2.81 23.2%
TEV / Adj EBITDA-Mtce CapEx 9.6x $1,554 $1,475 $3.34 46.5%
Exhibit 2
LTM Operating Metrics prior to acquisition Acquisition Valuation Metrics
TEV /
Adj EBITDA - Acquisition TEV / TEV / Adj EBITDA -
Target - Acquirer Closed Revenue Adj EBITDA Adj EBIT Mtce CapEx Mtce CapEx TEV Adj EBITDA Adj EBIT Mtce CapEx
Buckeye - GP(4)
Aug 2013 $812 $179 $133 $80 $99 $1,456 8.1x 11.0x 14.7x
Wayerhaeuser CF - IP
(5)
[TBD] $1,545 $308 $180 $100 $208 $1,900 6.2x 10.6x 9.1x
Average 7.1x 10.8x 11.9x
Bracell % above/below -> (32%) (19%) (43%)
Bracell Implied Valuation Based on Precedent Transactions Analysis
Precedent Transactions Avg Multiples
TEV / Adj EBITDA 7.1x $1,595 $1,516 $3.43 50.6%
TEV / Adj EBIT 10.8x $1,333 $1,254 $2.84 24.6%
TEV / Adj EBITDA-Mtce CapEx 11.9x $1,920 $1,841 $4.17 82.9%
Notes:
(1) Balance sheet includes pension and other postretirement benefits unfunded obligation amounts (as of last available reporting date). Amounts include: RYAM $161m (as per 6/30/16 10-Q); Sappi $422m (as per FY15 AR); Tembec CAD$76m (as per FY15 AR); Lenzing EUR96m (as per FY15 AR)
(2) Tembec LTM operating metrics pro forma for benefit of Temiscaming boiler project.
(3) Bracell operating metrics are for LTM period ending 6/30/16. Maintenance CapEx estimate excludes estimated $3m for de-bottlenecking spent in 1H 2016.
(4) LTM operating metrics for FYE 6/30/13. Buckeye maintenance CapEx is estimated based on prior years.
(5) LTM operating metrics as of 3/31/16. For Wayerhaeuser Cellulose Fibers segment excluding liquid packaging board sub-segment. Maintenance CapEx estimated based on prior years; acquisition TEV of $1.9 billion is net of $300m NPV of anticipated tax benefits.
Comparable Companies
Precedent Transactions

7. Exhibit 3: Bracell Discounted Cash Flow Analysis
Financial amounts in US$ millions, unless otherwise noted
0 1 2 3 4 5 6 7 8 9 10
FYE 12/31, 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
OPERATING MODEL
Price per ADMT
Rayon-grade $844 877 895 913 931 950 969 988 1,008 1,028 1,049
% change 4.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
CS 1,312 1,273 1,273 1,286 1,299 1,312 1,325 1,338 1,351 1,365 1,379
% change (3.0%) 0.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Blended Average Selling Price per ADMT $964 $975 $985 $1,002 $1,019 $1,036 $1,054 $1,072 $1,090 $1,109 $1,128
% change 1.1% 1.1% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Volume (000s of ADMTs)
Rayon-grade 342 354 369 369 369 369 369 369 369 369 369
% growth 4% 4% 0% 0% 0% 0% 0% 0% 0% 0%
CS 118 116 116 116 116 116 116 116 116 116 116
% growth (2%) 0% 0% 0% 0% 0% 0% 0% 0% 0%
Total 460 470 485 485 485 485 485 485 485 485 485
% growth 2% 3% 0% 0% 0% 0% 0% 0% 0% 0%
Revenue
Rayon-grade $289 $311 $330 $337 $344 $351 $358 $365 $372 $379 $387
CS 155 148 148 149 151 152 154 155 157 158 160
Total Revenue $444 $458 $478 $486 $494 $503 $511 $520 $529 $538 $547
% growth 3% 4% 2% 2% 2% 2% 2% 2% 2% 2%
CoGS (incl depreciation expense) ($274) ($253) ($260) ($259) ($258) ($257) ($256) ($256) ($255) ($259) ($264)
Cash CoGS (excl depreciation expense) ($206) ($185) ($195) ($199) ($203) ($207) ($211) ($216) ($220) ($224) ($229)
Cash cost of production / ADMT ($447) ($395) ($402) ($411) ($419) ($427) ($436) ($444) ($453) ($462) ($472)
% growth (12%) 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Gross Margin $170 $205 $218 $227 $236 $245 $255 $264 $274 $278 $283
% of sales 38.3% 44.7% 45.6% 46.7% 47.8% 48.8% 49.9% 50.8% 51.8% 51.8% 51.8%
% contribution margin 241% 65% 114% 112% 111% 110% 109% 108% 51% 51%
Operating Expenses
Selling & Distribution ($41) ($41) ($41) ($42) ($43) ($44) ($45) ($45) ($46) ($47) ($48)
% of sales (9.3%) (9.0%) (8.6%) (8.6%) (8.7%) (8.7%) (8.7%) (8.7%) (8.8%) (8.8%) (8.8%)
General & Administrative (39) ($36) ($40) ($41) ($42) ($43) ($44) ($44) ($45) ($46) ($47)
% of sales (8.7%) (7.9%) (8.4%) (8.5%) (8.5%) (8.5%) (8.5%) (8.6%) (8.6%) (8.6%) (8.6%)
Total OpEx ($80) ($78) ($81) ($83) ($85) ($86) ($88) ($90) ($92) ($94) ($95)
% of sales (18.0%) (16.9%) (17.0%) (17.1%) (17.1%) (17.2%) (17.2%) (17.3%) (17.3%) (17.4%) (17.4%)
% growth (3.0%) 5.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Depreciation ($68) ($68) ($65) ($60) ($55) ($50) ($45) ($40) ($35) ($35) ($35)
% of sales (15.3%) (14.8%) (13.6%) (12.3%) (11.1%) (9.9%) (8.8%) (7.7%) (6.6%) (6.5%) (6.4%)
Decrease due to harvest charges (29) (30) (32) (32) (33) (33) (34) (34) (35) (35) (36)
% of sales (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%) (6.6%)
Calculated Adj EBITDA $187 $226 $233 $236 $239 $242 $245 $249 $252 $255 $259
Other Income (Expense) ($4) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Adjusted EBITDA $184 $226 $233 $236 $239 $242 $245 $249 $252 $255 $259
% of sales 41.4% 49.2% 48.7% 48.5% 48.4% 48.2% 48.0% 47.8% 47.7% 47.5% 47.3%
% growth 22.7% 3.2% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
Adjusted EBIT $87 $127 $136 $144 $151 $159 $167 $174 $182 $185 $188
% of sales 19.5% 27.8% 28.5% 29.6% 30.6% 31.6% 32.6% 33.6% 34.5% 34.4% 34.3%
% growth 47.0% 7.0% 5.5% 5.3% 5.0% 4.8% 4.6% 4.4% 1.5% 1.5%
CapEx ($51) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70)
Additions of forestation assets ($31) ($35) ($35) ($35) ($35) ($35) ($35) ($35) ($35) ($35) ($35)
Additions to PP&E (20) (35) (35) (35) (35) (35) (35) (35) (35) (35) (35)
% of sales (4.5%) (7.6%) (7.3%) (7.2%) (7.1%) (7.0%) (6.8%) (6.7%) (6.6%) (6.5%) (6.4%)
Interest & financing expense ($19) ($11) ($3) $0 $0 $0 $0 $0 $0 $0 $0
Effective interest rate on average gross debt (6.2%) (6.2%) (6.2%) N/A N/A N/A N/A N/A N/A N/A N/A

8. Exhibit 3: Bracell Discounted Cash Flow Analysis
Financial amounts in US$ millions, unless otherwise noted
0 1 2 3 4 5 6 7 8 9 10
FYE 12/31, 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
TAX MODEL
Adjusted EBT $68 $116 $133 $144 $151 $159 $167 $174 $182 $185 $188
% growth 71.8% 14.7% 7.8% 5.3% 5.0% 4.8% 4.6% 4.4% 1.5% 1.5%
% Portion of EBT against which unused tax losses can be used 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%
$ Portion of EBT against which unused tax losses can be used ($20) ($35) ($40) ($21) $0 $0 $0 $0 $0 $0 $0
Earnings Before Tax after effect of unused tax losses $47 $81 $93 $123 $151 $159 $167 $174 $182 $185 $188
Standard BCT tax rate 34% 34% 34% 34% 34% 34% 34% 34% 34% 34% 34%
$ Taxes at standard BCT rate $16 $28 $32 $42 $51 $54 $57 $59 $62 $63 $64
75% reduction in BCT (through 2018) (12) (21) (24) (31) 0 0 0 0 0 0 0
Net BCT paid $4 $7 $8 $10 $51 $54 $57 $59 $62 $63 $64
Effective tax rate 6% 6% 6% 7% 34% 34% 34% 34% 34% 34% 34%
Delta between Standard BCT owed vs. BCT Paid (Overall tax benefit) $19 $33 $37 $38 $0 $0 $0 $0 $0 $0 $0
Balance of unused tax losses
Opening balance $95.8 $61.0 $20.9 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Used (35) (40) (21) 0 0 0 0 0 0 0
Ending balance $95.8 $61.0 $20.9 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
CASH FLOW MODEL
CFFO (net of interest expense and taxes paid) $206 $198 $222 $225 $188 $188 $189 $189 $190 $193 $195
% of Adj EBITDA 112% 88% 95% 96% 78% 78% 77% 76% 75% 75% 75%
CapEx ($51) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70) ($70)
FCF $155 $128 $152 $155 $118 $118 $119 $119 $120 $123 $125
% growth (17%) 18% 2% (24%) 0% 1% 1% 1% 2% 2%
FCF per share $0.35 $0.29 $0.34 $0.35 $0.27 $0.27 $0.27 $0.27 $0.27 $0.28 $0.28
BALANCE SHEET MODEL (if FCF were not distributed via dividend)
Bank balances and cash ($101) ($96) ($96) ($96) ($96) ($96) ($96) ($96) ($96) ($96) ($96) ($96)
Bank borrowings (current + long-term) 376 233 $122 ($30) ($185) ($303) ($421) ($540) ($659) ($779) ($902) ($1,027)
Net debt $275 $137 $26 ($126) ($281) ($399) ($517) ($636) ($755) ($875) ($998) ($1,123)
As Multiple of Adj EBITDA 0.7x 0.1x (0.5x) (1.2x) (1.7x) (2.1x) (2.6x) (3.0x) (3.5x) (3.9x) (4.3x)
VALUATION MODEL
Terminal growth rate 1.0%
WACC 10%
PV of Modeled Cash Flows (2016-2025) $797
PV of Terminal Cash Flow (2026+) 541 TV CHECK:
Total PV $1,338 Undiscounted TV $1,403
Multiple of 2016 Adjusted EBITDA 5.9x Multiple of Adjusted EBITDA 5.4x
Multiple of 2016 Adjusted EBIT 10.5x Multiple of Adjusted EBIT 7.5x
Multiple of 2016 Adjusted EBITDA - CapEx 8.6x Multiple of Adjusted EBITDA - CapEx 7.4x
Less: Net debt at 12/31/15 ($137)
Net Present Value of Equity $1,201
Shares outstanding 3,421.9
HK$ Exchange Rate 7.75
HK$ NPV per share $2.72
% premium to proposed privatisation offer 19.3%
Discount rate used for Tax Benefits 10%
Memo: NPV of Tax Benefits $89.5
Value per share (HK$) $0.20
as % of current offer price 8.9%

9. Exhibit 4: Rayon-grade DWP ASP beginning to inflect higher
Excerpted from Sappi FQ3 2016 Investor Presentation (slide 17) – data as per CCF
Group