180308_insights_upside_participation_downside_protection.pdf

ed: TH / sa: AS, PY, CS
STI : 3,450.69
Analyst
Lee Keng LING +65 6682 3703 Carmen Tay +65 6682 3719
leekeng@dbs.com carmentay@dbs.com
Key Indices
Current % Chng
FS STI Index 3,450.69 -1.2%
FS Small Cap Index 397.06 -0.3%
SGD Curncy 1.35 2.5%
Daily Volume (m) 2,668
Daily Turnover (S$m) 1,483
Daily Turnover (US$m) 1,100
Source: Bloomberg Finance L.P.
Market Key Data
(%) EPS Gth Div Yield
2017 9.7 4.1
2018F 12.7 3.8
2019F 8.3 3.4
(x) PER EV/EBITDA
2017 17.1 15.7
2018F 15.2 14.9
2019F 14.0 16.8
DBS Group Research . Equity 8 Mar 2018
Singapore Market Focus
SMC strategy Refer to important disclosures at the end of this report
Upside participation, downside
protection
 Earnings still key; go for names with clear growth
catalysts – BreadTalk, Cityneon, mm2 Asia, and
Riverstone
 Keep a firm eye on growth and another on
downside protection as small-mid caps have yet to
recover from recent selldown
 Steady dividends make good safety nets – Chip Eng
Seng, Hong Leong Finance, Riverstone, Sheng
Siong, Sunningdale, and UMS
 Trading cheap and ready to shine in 2018 – China
Aviation Oil, Delfi, Riverstone, and Roxy Pacific
Firm eye on earnings growth. Encouraged by the positive
earnings growth momentum displayed in 4Q, we seek to
identify stocks with clear catalysts to sustain double-digit
earnings growth over the next two years.
Our preferred picks to ride the earnings momentum –
Breadtalk, Cityneon, mm2 Asia, Riverstone
Dividends provide shelter amidst volatility. With results
season now over and dividend payments back in focus, we
believe that growth stocks with a dividend sweetener could
outperform over the next one to two months. Historically,
SMCs that have consistent dividend payouts also tend to be
more resilient.
With the FT ST Small Cap Index and FT ST Mid Cap Index
(FSTM) underperforming YTD and still trending near post-
February correction lows, we believe that selected dividend-
paying stocks are worth a relook, as their attractive
dividends could serve as a valuable safety net amidst volatile
markets.
Riverstone and Sunningdale make attractive dividend
growth plays. We also like Chip Eng Seng, Hong Leong
Finance, Sheng Siong and UMS for their stable dividends.
Opportunities to bottom fish companies currently
trading at attractive valuations. We also see opportunities
to bottom fish, as there are a few other companies that are
on the cusp of an earnings turnaround (Delfi, Roxy Pacific),
or trading at deep discounts despite strong growth
prospects (Riverstone, China Aviation Oil).
STOCKS
12-mth
Price Mkt Cap Target Price Performance (%)
S$ US$m S$ 3 mth 12 mth Rating
Earnings Growth
BreadTalk Group
Ltd
1.79 383 2.05 14.0 38.8 BUY
Cityneon Holdings
Ltd
1.01 188 1.45 2.0 27.0 BUY
mm2 Asia 0.46 403 0.75 (13.3) 0.0 BUY
Riverstone 1.04 587 1.27 0.0 18.2 BUY
Dividend Plays
Chip Eng Seng 0.92 432 1.18 2.2 26.2 BUY
HL Finance 2.67 906 3.20 (1.8) (0.4) BUY
Riverstone
Holdings
1.04 587 1.27 0.0 18.2 BUY
Sheng Siong
Group Ltd
0.95 1,081 1.20 2.2 1.1 BUY
Sunningdale Tech
Ltd
1.83 263 2.70 (1.6) 28.4 BUY
UMS Holdings 1.13 461 1.37 15.9 90.9 BUY
Attractive Valuations
China Aviation Oil 1.50 987 1.98 (5.7) (0.7) BUY
Delfi Ltd 1.52 707 1.80 14.3 (34.5) BUY
Riverstone
Holdings
1.04 587 1.27 0.0 18.2 BUY
Roxy-Pacific
Holdings
0.55 499 0.69 1.9 7.8 BUY
Source: DBS Bank, Bloomberg Finance L.P.
Closing price as of 7 Mar 2018

Market Focus
Page 2
Season of Positive Revisions
Results are in. The recent 4Q reporting season concluded with a
positive earnings revision trend of +2% to +3% for FY18F and
FY19F earnings of stocks under our coverage. Within our small-
mid cap (SMC) universe, c.65% reported results which were
within expectations, while c.16% were above.
The upward revisions were led by APAC, Hi-P, Best World,
Riverstone, UMS and Hong Leong Finance. Notably, APAC
delivered impressive first full-year results post IPO, while Best
World, Riverstone and UMS saw record profits in FY17.
Among the sectors, Technology shone the brightest with
earnings upgrades of +15.6% and +19.0% for FY18F and FY19F
respectively, but results for the Oil & Gas sector remained weak.
Post results earnings revision by sector
Source: DBS Bank
Growth stocks with steady yields are more attractive. Encouraged
by the positive earnings growth momentum displayed in 4Q, we
seek to identify stocks with clear catalysts to sustain firm growth
momentum ahead. There are at least 16 SMCs under our
coverage offering >10% earnings growth in FY18F, as detailed
on the following page.
Apart from potential capital gains, small-mid cap stocks can also
pay good dividends – providing investors with both upside
participation and downside protection. With results season now
over and dividend payments back in focus, we believe that
growth stocks with a dividend sweetener could outperform over
the next one to two months. Historically, SMCs that are
consistent dividend payouts also tend to be more resilient.
Additionally, we also see opportunities to bottom fish, as there
are a few other companies that are trading cheap but offer
steady growth and/or on the cusp of an earnings turnaround.
Key Investment Metrics: Riverstone checks all the boxes
Source: DBS Bank
.
Sector F Y18 F Y19
Banking 3.3% 0.8%
Commodities Related -1.8% 10.9%
Consumer Goods -3.8% 3.2%
Consumer Services 7.0% 9.2%
Financials -2.9% -2.0%
Health Care 0.2% -0.7%
Industrials 3.2% 2.9%
Oil & Gas -3.4% -9.5%
Real Estate 7.6% -3.2%
REITS 2.6% 1.2%
Technology 15.6% 19.0%
Telecommunications -0.4% -0.3%
Grand Total 2.5% 1.5%
Current v s Prev . % Chng
Company Ea rnings
Growth
Dividend Play Attractive
Va luations
BreadTalk √ √
China Aviation Oil √ √
Chip Eng Seng √ √
Cityneon √ √
Delfi √ √
Hong Leong Finance √
mm2 Asia √
Riverstone √ √ √
Roxy Pacific √ √
Sheng Siong √
Sunningdale √ √
UMS Holdings √ √

Market Focus
Page 3
SMC stocks in our BUY list with > 10% earnings growth for FY18F
Source: DBS Bank
Mkt Price Ta rge t EPS CAGR
Ca p (S$) Price % 17-19
Compa ny FYE (S$m) 5-Ma r-18 (S$) Upside Rcmd FY17 FY18F FY19F (%) FY18F FY19F
Roxy-Pacific Dec 661.6 0.56 0.69 24% BUY (80.5) 532.8 66.6 224.7 1.8 1.6
Breadtalk Dec 506.6 1.80 2.05 14% BUY 60.3 57.1 7.0 29.7 3.9 2.2
Spore Medical Group Dec 231.1 0.51 0.73 42% BUY 243.8 46.7 5.8 24.6 - -
Cityneon Dec 254.4 1.04 1.45 39% BUY 165.5 42.6 19.6 30.6 - -
mm2 Asia Mar 523.3 0.45 0.75 67% BUY 21.4 28.4 21.3 24.8 - -
Sunningdale Dec 353.8 1.87 2.70 44% BUY (1.6) 24.3 6.5 15.1 3.7 4.0
Delfi Dec 929.0 1.52 1.80 18% BUY (16.8) 19.8 19.7 19.8 1.8 2.2
Riverstone Dec 763.3 1.03 1.27 23% BUY 7.4 19.5 11.9 15.6 2.3 2.7
iFAST Dec 242.2 0.92 1.26 37% BUY 64.5 16.1 16.4 16.2 3.3 2.5
APAC Dec 433.3 1.22 1.25 2% BUY 63.1 14.3 6.5 10.3 1.6 4.1
Hi-P Dec 2,051.9 2.54 2.48 -3% BUY 131.3 14.0 10.5 12.2 9.8 2.4
Manulife US REIT Dec 1,224.6 0.90 1.00 11% BUY 68.5 14.0 0.4 7.0 6.2 7.0
China Aviation Oil Dec 1,297.3 1.50 1.98 32% BUY (4.0) 12.2 9.1 10.6 3.0 2.9
UMS Dec 611.5 1.14 1.37 20% BUY 84.3 11.6 5.0 8.3 4.9 5.3
CDL Hospitality Trust Dec 1,991.3 1.66 2.00 20% BUY (4.3) 10.3 4.1 7.2 5.6 6.1
Ea rnings Gth (%) Div Yld (%)

Market Focus
Page 4
Look for Earnings Boosters
Firm eye on earnings growth, which remains key for SMCs. While
the earnings growth trend has been positive, we would favour
companies with strong, specific catalysts to help sustain double-
digit earnings growth over the next two years. Our preferred
picks include BreadTalk, Cityneon, mm2 Asia, and Riverstone.
Riding on growing scale and improving operating leverage to
deliver sustainable growth. Cityneon and mm2 Asia stand out as
young and fast-growing companies, and are still in their
transformative stages of growth. Cityneon has successfully
transformed into a creator of innovative and interactive
exhibitions, while mm2 Asia has established a meaningful
presence across the production value chain - from movie/drama
creation to exhibitions.
Meanwhile, Riverstone – which also features in several other
screens as a dividend growth play and bottom-fishing candidate,
is poised to deliver successive earnings records in the coming
years as the group ramps up on new capacity to meet growing
demand. Driven by new stores and cost management, the
outlook for BreadTalk also remains attractive.
Our preferred picks to ride the earnings momentum:
BreadTalk (BUY; TP: S$2.05)
We remain positive on BreadTalk over continued consolidation
of underperforming outlets that will yield better margins going
forward and sale of stakes in properties such as CHIJMES and
AXA Tower that will unlock shareholder value if they
materialise. Growth drivers remain intact and turnaround in
Bakery division led by store growth and better profitability in
FY18F will drive earnings growth. BreadTalk’s valuation, based
on its core business (ex-property investments), seems
compelling at 18x FY18F PE.
Cityneon (BUY; TP: S$1.45)
Though Cityneon has been listed for over ten years, it was
given a new lease of life when VHE Entertainment (VHE) was
injected into the group in September 2015. Cityneon has since
evolved to become a creator of innovative and interactive
exhibitions, focusing on creating captivating cutting-edge
content, and delivering engaging and interactive exhibitions to
audiences, from its traditional exhibition business.
Since its injection into Cityneon, VHE has secured two more
Intellectual Property (IP) rights – Transformers and Jurassic
World. Together with the first IP – Avengers, Cityneon is now
on a stronger and firmer growth path with a total of three IPs,
to help propel the group to even greater heights. We continue
to expect Cityneon to deliver explosive FY16-19F EPS CAGR
growth of 165%. Trading at a low PE-to-growth ratio of 0.2x
FY18F earnings, Cityneon is attractive to investors seeking
unique ideas in the entertainment industry.
mm2 Asia (BUY; TP: S$0.75)
mm2 Asia was listed on the SGX in December 2014 as a
leading producer of films and TV/online content in Asia. In a
short span of about three years, the group has evolved to
become a full-service provider in the entire value chain of
content creation to distribution, with the acquisition of
cinemas (18 in Malaysia and eight in Singapore), event
production and concert promotion company UnUsUaL, and
post-production company, Vividthree.
Having a strong presence in the entire value chain of content
creation and distribution further cements mm2's status as the
leader in the media/entertainment industry. With a much
larger and stronger scale, mm2 can now enjoy the synergistic
benefits from the entire value chain. We expect strong
earnings CAGR of 28% for FY17-20F, underpinned by growth
in productions, expansion into the China market, and
contribution from UnUsUaL. The cinema arm, on the other
hand, helps the group build a recurring income base.
Riverstone (BUY; TP: S$1.27)
A global market leader in niche cleanroom gloves, Riverstone’s
edge in the high-tech cleanroom segment sets it apart from
the bigger boys. Given intense competition in the healthcare
space, we see value in Riverstone’s growing cleanroom
business – which allows the group to command consistently
higher margins vs peers (16% vs peers’ c.10-15% in FY17).
With new cleanroom facilities set to kick in from 2Q18,
cleanroom capacity is expected to grow by c.33% to at least
2bn gloves p.a. The ramp-up on these new capacities should
help drive higher growth in cleanroom gloves vis-à-vis the
lower-margin healthcare business, allowing Riverstone’s
earnings growth of c.16% to catch up with larger peers’
c.17%.

Market Focus
Page 5
Dividends provide shelter amidst volatility
Small- and mid-cap indices have underperformed YTD. YTD,
the FT ST Small Cap Index (FSTS) is down 2.1%, while the FT
ST Mid Cap Index (FSTM) eased 1.6% vs +2.6% for the ST
Index. Both the FSTS and FSTM have not recovered from the
February selldown and are still trending near the February low.
YTD Performance - FSTS, FSTM and STI
As SMC stocks tend to be more volatile, dividends serve as a
safety net and offer stability amidst volatile markets.
In our screen, we focus on:
1) Dividend sweeteners – Companies that have upped
their dividends recently on higher earnings achieved
in FY17
- APAC Realty, BreadTalk, Hi-P
2) Dividend growth – Companies that could pay
increasing dividends over time
- Riverstone, Sunningdale
3) Steady yields – Companies which have been
consistent in paying and/or growing dividends
- Chip Eng Seng, Hong Leong Finance, Sheng Siong,
UMS
(1) Dividend sweetener on record FY17 earnings
On the back of record results, several companies have upped
their dividends as a sweetener. In the large-cap space, DBS
declared a higher S$1.20 dividend for FY17, to be maintained
going forward – which is nearly 2x that compared to previous
years. CapitaLand also hiked its 2017 dividend payout by 20%
to 12 Scts a share.
In the small-mid cap space, several companies that have also
raised their dividend payout in FY17 include APAC Realty,
BreadTalk and Hi-P:
APAC Realty declared a final dividend of 2 Scts per share in
4Q17. This works out to c. 90% of 4Q17 net profit, as APAC
was only listed at end-September 2017. APAC has guided that
it is committed to pay at least 50% of FY18F profit as
dividend.
Assuming a payout ratio of 60% for FY18F, dividend yield is
attractive at 4.5%. We believe that APAC, which owns one of
Singapore’s largest real estate agency, ERA Realty, is poised to
deliver a robust 10% 2-year CAGR in EPS on the back of a turn
in the Singapore residential market, which is at the cusp of a
multi-year recovery.
BreadTalk declared final and special dividends of 2 Scts and 3
Scts respectively, exceeded our expectations of a total of 4
Scts. Going forward, our positive stance for the stock
continues as BreadTalk's financial performance remains on a
growth trajectory. Higher-than-expected special dividends will
support the share price, while any property sale going forward
could act as a share price catalyst.
For Hi-P, the group has declared a special DPS of 19 Scts,
together with the 2Q17 results announcement. For the full
year FY17, dividend yield, excluding the special payout, works
out to 3% or 6 Scts DPS. Going forward, we expect higher
dividend payout ratio of 35% (up from 20%) in FY18F and
FY19F, which works out to a DPS of about 6 Scts, which is
similar to FY17, excluding special DPS of 19 Scts.
We expect earnings momentum for Hi-P to remain strong, on
the back of the new products in the Wireless and IoT
segments, and also an expanding customer base. We are now
expecting EPS CAGR of 41% for FY16-19F. Hi-P is in a sweet
spot now as more than half of its earnings are derived from
the Wireless (smartphone) and Computer Peripherals (IoT
segment, e.g. smart home) segments, which are expected to
continue to do well.

Market Focus
Page 6
(2) Two companies that have emerged as dividend growth plays
Supported by firm earnings growth and strong cash flow
generation, both Sunningdale and Riverstone have been
paying increasingly higher dividends y-o-y over the past few
years:
DPS FY12 FY13 FY14 FY15 FY16 FY17
Sunningdale
(S cts)
3.0 3.5 4.0 5.0 6.0 7.0
Riverstone
(sen)
3.1 3.1 3.5 6.5 6.5 7.0
Source: Companies, DBS Bank
Since FY12, Sunningdale has been growing dividends by at
least 0.5 Sct to 1 Sct p.a., resulting in a substantially higher
dividend payout of 7 Scts per share in FY17 vs 3 Scts in FY12.
While Riverstone does not have a fixed dividend policy, its past
payouts have averaged 40%. As profits grew, its dividend
payments have also more than doubled from 3.1 sen in FY12
to 7 sen for FY17.
Underpinned by capacity growth and ongoing production
ramps amidst robust demand, their core earnings are projected
to grow at 15-16% CAGR over FY17-19F, which provides
support for expectations of even higher dividends to be paid
going forward.
(3) Consistency is key
Apart from REITs/Trusts, several SMCs have also demonstrated
consistency in paying good dividends. UMS has been paying a
fixed 5-6 Scts of dividends since 2010, and maintained its payout
despite issuing bonus shares in FY17. Chip Eng Seng also stands
out for its fixed 4-Sct dividend (with upside from special
dividends in bumper years), which is rare among small-cap
property developers.
Hong Leong Finance and Sheng Siong, which typically manage
dividends based on a target payout ratio rather than a fixed
amount per share, have also paid consistently good dividends in
past years. With earnings set to grow at 4% and 5.5% over
FY17-19F respectively, we believe the positive dividend growth
trend is likely to be maintained going forward.
Stocks with consistently good dividend payouts
Source: Thomson Reuters, DBS Bank
Mkt Price Target Div EPS CAGR
Cap (S$) Price % Yld (%) 17-19
Company F YE (S$m) 5-Mar-18 (S$) Upside Rcmd F Y14 F Y15 F Y16 F Y17 F Y18F F Y19F F Y18F (%) F Y18F F Y19F
UMS Holdings Dec 611.5 1.14 1.37 20% BUY 6.0 6.0 6.0 5.6 6.0 6.0 5.3 8.3 10.5 10.0
Hong Leong Finance Dec 1,204.2 2.70 3.20 19% BUY 10.0 11.0 9.0 13.0 13.6 14.1 5.0 4.0 13.4 13.0
Chip Eng Seng Dec 571.3 0.92 1.18 29% BUY 6.0 4.0 4.0 4.0 4.0 4.0 4.3 28.1 18.0 9.8
Sheng Siong Dec 1,420.8 0.95 1.20 27% BUY 2.9 3.5 3.8 3.3 3.4 3.6 3.6 5.5 19.7 18.3
P/E (x)
DPS (cts)

Market Focus
Page 7
Upcoming distributions (DPS, payout dates and yields*)
Note: Dividend yield is derived based on upcoming distributions only, does not take into account interim dividends that have already been paid.
Company DPS ($) Price @ 7
Mar 18
Div Yld
(%)
Ex Date Pay ment Date
BHG RETAIL REIT 0.0273 0.80 3.4% 08-Mar-18 28-Mar-18
DASIN RETAIL TRUST 0.0415 0.89 4.7% 14-Mar-18 27-Mar-18
ASIAN PAY TELEVISION TRUST 0.01625 0.57 2.9% 14-Mar-18 23-Mar-18
STRAITS TRADING CO. LTD 0.06 2.25 2.7% 16-Apr-18 04-May-18
M1 LIMITED 0.062 1.78 3.5% 18-Apr-18 27-Apr-18
UNITED OVERSEAS INSURANCE LTD 0.19 7.60 2.5% 19-Apr-18 03-May-18
LEE METAL GROUP LTD 0.01 0.41 2.4% 20-Apr-18 07-May-18
GREAT EASTERN HLDGS LTD 0.6 30.33 2.0% 20-Apr-18 08-May-18
SINGAPORE TECH ENGINEERING LTD 0.1 3.35 3.0% 24-Apr-18 08-May-18
KEPPEL TELE & TRAN 0.035 1.54 2.3% 25-Apr-18 09-May-18
CEI LIMITED 0.034 1.00 3.4% 26-Apr-18 15-May-18
UNITED OVERSEAS BANK LTD 0.65 27.65 2.4% 26-Apr-18 13-Jun-18
UOB-KAY HIAN HOLDINGS LIMITED 0.048 1.43 3.4% 27-Apr-18 19-Jun-18
SINGAPORE REINSURANCE COR LTD 0.008 0.32 2.5% 27-Apr-18 28-May-18
SINGAPORE O&G LTD. 0.0089 0.37 2.4% 27-Apr-18 18-May-18
TALKMED GROUP LIMITED 0.0137 0.70 2.0% 27-Apr-18 09-May-18
CSE GLOBAL LTD 0.015 0.37 4.1% 30-Apr-18 18-May-18
FRENCKEN GROUP LIMITED 0.0239 0.62 3.9% 30-Apr-18 11-May-18
VICOM LTD 0.2288 6.05 3.8% 30-Apr-18 10-May-18
HWA HONG CORPORATION LIMITED 0.011 0.32 3.4% 30-Apr-18 18-May-18
AVI-TECH ELECTRONICS LIMITED 0.013 0.51 2.6% 30-Apr-18 15-May-18
TELECHOICE INTERNATIONAL LTD 0.016 0.27 5.9% 02-May-18 21-May-18
TREK 2000 INT'L LTD 0.01 0.27 3.8% 02-May-18 16-May-18
MEMTECH INTERNATIONAL LTD 0.055 1.65 3.3% 02-May-18 18-May-18
UMS HOLDINGS LIMITED 0.03 1.13 2.7% 02-May-18 25-May-18
UOL GROUP LIMITED 0.175 8.45 2.1% 02-May-18 11-May-18
OKP HOLDINGS LIMITED 0.02 0.35 5.8% 03-May-18 17-May-18
DYNAMIC COLOURS LIMITED 0.015 0.28 5.4% 03-May-18 15-May-18
CHALLENGER TECHNOLOGIES LTD 0.022 0.49 4.5% 03-May-18 18-May-18
DBS GROUP HOLDINGS LTD 1.1 28.09 3.9% 03-May-18 15-May-18
WHEELOCK PROPERTIES (S) LTD 0.06 1.79 3.4% 03-May-18 14-May-18
COMFORTDELGRO CORPORATION LTD 0.0605 2.00 3.0% 03-May-18 14-May-18
SINGAPURA FINANCE LTD 0.03 1.03 2.9% 03-May-18 14-May-18
WILMAR INTERNATIONAL LIMITED 0.07 3.18 2.2% 03-May-18 16-May-18
AP OIL INTERNATIONAL LIMITED 0.005 0.24 2.1% 03-May-18 25-May-18
OKP HOLDINGS LIMITED 0.007 0.35 2.0% 03-May-18 17-May-18
OVERSEAS EDUCATION LIMITED 0.0275 0.37 7.4% 04-May-18 17-May-18
HL GLOBAL ENTERPRISES LIMITED 0.03 0.52 5.8% 04-May-18 23-May-18
MULTI-CHEM LIMITED 0.044 0.92 4.8% 04-May-18 23-May-18
CHIP ENG SENG CORPORATION LTD 0.04 0.92 4.4% 04-May-18 23-May-18
HOCK LIAN SENG HOLDINGS LTD 0.018 0.47 3.8% 04-May-18 22-May-18
HONG LEONG FINANCE LIMITED 0.09 2.67 3.4% 04-May-18 23-May-18
CENTURION CORPORATION LIMITED 0.015 0.50 3.0% 04-May-18 18-May-18

Market Focus
Page 8
Upcoming distributions (DPS, payout dates and yields*)
Note: Dividend yield is derived based on upcoming distributions only, does not take into account interim dividends that have already been paid.
Source: DBS Bank, Bloomberg
Company DPS ($) Price @ 7
Mar 18
Div Yld
(%)
Ex Date Pay ment Date
NERATELECOMMUNICATIONS LTD 0.015 0.37 4.1% 07-May-18 25-May-18
MDR LIMITED 7.98E-05 0.00 2.7% 07-May-18 23-May-18
MFG INTEGRATION TECHNOLOGY LTD 0.0075 0.32 2.4% 07-May-18 23-May-18
PAN-UNITED CORPORATION LTD 0.008 0.39 2.1% 07-May-18 18-May-18
FIRST RESOURCES LIMITED 0.0555 1.73 3.2% 08-May-18 17-May-18
UPP HOLDINGS LIMITED 0.005 0.25 2.0% 09-May-18 25-May-18
JARDINE CYCLE & CARRIAGE LTD 0.9248 35.93 2.6% 10-May-18 25-Jun-18
HOSEN GROUP LTD 0.001 0.05 2.2% 11-May-18 25-May-18
FEDERAL INT(2000) LTD 0.02 0.37 5.4% 14-May-18 23-May-18
BBR HOLDINGS (S) LTD 0.006 0.22 2.7% 14-May-18 31-May-18
LHT HOLDINGS LIMITED 0.05 0.81 6.2% 15-May-18 25-May-18
HO BEE LAND LIMITED 0.1 2.55 3.9% 15-May-18 31-May-18
ISDN HOLDINGS LIMITED 0.006 0.22 2.8% 15-May-18 05-Jun-18
KINGSMEN CREATIVES LTD 0.015 0.61 2.5% 15-May-18 31-May-18
BROOK CROMPTON HOLDINGS LTD. 0.05 0.79 6.3% 17-May-18 31-May-18
VENTURE CORPORATION LIMITED 0.6 27.09 2.2% 17-May-18 31-May-18
ENVIRO-HUB HOLDINGS LTD 0.003 0.04 7.9% 22-May-18 08-Jun-18
GLOBAL TESTING CORPORATION LTD 0.09 1.25 7.2% 28-May-18 29-Jun-18

Market Focus
Page 9
Opportunities to bottom fish
Attractive valuations with a chance to shine in 2018. With
positive vibes gathered during the Q4 reporting season and a
handful of companies guiding for stronger operational
prospects in 2018, we would see the February correction as an
opportunity for investors to accumulate selective stocks at
attractive valuations.
In our screen, we favour companies that are: -
1) On the cusp of an earnings turnaround, and/or
i.e. Delfi Ltd, Roxy Pacific
2) Trading at attractive valuations despite strong earnings
growth potential
i.e. Riverstone Holdings, China Aviation Oil (CAO)
Turnaround plays - Delfi and Roxy Pacific may have missed the
mark in their recent Q4 earnings report card compared to a
year ago, but are set for an earnings turnaround in 2018.
Ongoing share buybacks for Roxy signal confidence in future
earnings, providing further support to its share price.
Firm growth but cheap valuations. Trading at relatively cheap
valuations vs peers, the recent pullbacks in Riverstone and CAO
also offer investors a better entry point, ahead of their strong,
anticipated growth in subsequent quarters.
Four stocks to bottom fish in 2018
Company FYE Mkt Price Target Upside Rcmd Core Earnings Gth (%) EPS
CAGR
P/E (x) P/BV (%) Net
Cash
(Debt) as
% of
Mkt Cap
Yield
Cap (S$) Price
17-19
(S$m) 5-Mar-18 (S$) (%) FY17 FY18F FY19F (%) FY18F FY19F FY18F FY19F (%)
Delfi Dec 929.0 1.52 1.80 18% BUY (16.8) 19.8 19.7 19.8 25.0 20.9 3.1 2.9 2.1% 2.2%
Roxy Pacific Dec 661.6 0.56 0.69 24% BUY (80.5) 532.8 66.6 224.7 16.1 9.6 1.2 1.1 (83.0%) 1.6%
Riverstone Dec 763.3 1.03 1.27 23% BUY 7.4 19.5 11.9 15.6 14.7 13.1 3.1 2.7 4.0% 2.7%
China
Aviation Oil
Dec 1,297.3 1.50 1.98 32% BUY (4.0) 12.2 9.1 10.6 10.2 9.3 1.2 1.1 18.2% 2.9%
Source: Thomson Reuters, DBS Bank
Delfi (BUY; TP: S$1.80) - Turning the corner
With its share price currently trading near six-year lows, Delfi’s
weak operating environment appears to be priced in and is
worth a relook. 4Q17 performance suggests that weakness
might have bottomed out, and is set to improve from FY18F.
Riding on the low-base effect, improving sentiment, lower raw
materials, and positive production rationalisation effects,
earnings could grow at c.20% CAGR over FY17-19F and drive
a meaningful recovery in share price.
Our TP of S$1.80 is based on regional peer average of 26x,
pegged to blended FY18F/19F earnings.
Roxy Pacific (BUY; TP: S$0.69) – Ready for launch
One of the earliest to land bank in the current market cycle,
Roxy’s investments in small but freehold residential sites gives
the company the flexibility to launch quickly and hit the
market.
Strong take-up rates for The Navian – its first launch in 2018
have been encouraging. With a total of six residential
developments in Singapore ready for launch in 2018 (two to
three of which will be within 1Q18), the group is well poised to
capture the rise in buyer demand ahead of its peers, and grow
earnings quickly at c.53% CAGR over FY17-19F.
Still largely “undiscovered” among institutional funds, we
believe the ability to surprise on the upside is high over the
near term. Roxy currently trades at 1.3x FY18F P/BV, below
historical average. At its peak, Roxy traded at 2.3x P/BV.

Market Focus
Page 10
Riverstone (BUY; TP: $1.27) – Cleanroom edge not priced in yet
Given the competitive nature of the healthcare glove industry
(which represents the bulk of peer revenues), we see value in
Riverstone’s growing cleanroom glove business, which allows
the group to command consistently higher margins vs peers.
We believe the market has yet to fully appreciate Riverstone’s
unique strengths and leadership in the cleanroom glove arena,
as its shares continue to trade cheaply (below its historical
average forward PE) vs larger peers, which have re-rated
strongly in recent months despite unchanged fundamentals.
Based on consensus estimates, Hartalega is currently trading at
+1SD of its historical average, while Top Glove and Kossan are
at above +2SD.
We see the valuation gap of c.55% (vs larger peers’ c.29x)
narrowing and Riverstone at least trading at its historical
average forward PE of 16x FY19F PE (from c.13x currently) as
the group ramps up on its incoming cleanroom glove capacities
to deliver higher-quality earnings growth at 16% CAGR over
FY17-19F. Better-than-expected execution could spark a
further re-rating to 18x PE (+1 SD), in line with peers.
China Aviation Oil (BUY; TP: $1.98) – Firm growth ahead
CAO’s jet fuel import business segment as well as its key
associate SPIA, which roughly accounts for over 80% of CAO’s
earnings, are set to benefit from the double-digit pace of
international travel growth in China over the next few years.
In particular, with a fifth runway in Shanghai Pudong soon to
start commercial operations, contribution from SPIA is well
poised to enjoy firm growth ahead. The continued expansion in
its jet fuel supply business will also help its trading business to
reap benefits from a greater scale and network.
With over US$300m in cash (net cash of US$180m) and a
strengthened management team, the group will step up its
efforts on the M&A front to make value-accretive acquisitions,
which could act as a further re-rating catalyst for the stock.

ed: TH / sa: YM, PY
BUY
Last Traded Price ( 6 Nov 2017): S$1.605 (STI : 3,381.85)
Price Target 12-mth: S$2.01 (25% upside) (Prev S$2.04)
Analyst
Alfie YEO +65 6682 3717 alfieyeo@dbs.com
Andy SIM CFA +65 6682 3718 andysim@dbs.com
What’s New
• 3Q17 earnings in line, Restaurants and Food Atrium
offset Bakery’s drag on operating profit
• Interim DPS of 1 Sct declared
• Sale of AXA Tower a potential catalyst
• Maintain BUY and S$2.01 TP
Price Relative
Forecasts and Valuation
FY Dec (S$ m) 2016A 2017F 2018F 2019F
Revenue 615 603 630 658
EBITDA 80.0 82.3 84.7 89.0
Pre-tax Profit 29.7 44.8 39.1 42.0
Net Profit 11.4 24.4 21.8 23.5
Net Pft (Pre Ex.) 8.63 16.4 21.8 23.5
Net Pft Gth (Pre-ex) (%) (29.2) 89.7 33.3 7.4
EPS (S cts) 4.07 8.67 7.76 8.34
EPS Pre Ex. (S cts) 3.07 5.82 7.76 8.34
EPS Gth Pre Ex (%) (29) 90 33 7
Diluted EPS (S cts) 4.05 8.63 7.73 8.30
Net DPS (S cts) 3.85 5.00 3.00 3.00
BV Per Share (S cts) 46.9 50.6 55.4 60.7
PE (X) 39.5 18.5 20.7 19.3
PE Pre Ex. (X) 52.3 27.6 20.7 19.3
P/Cash Flow (X) 5.1 5.7 6.2 5.8
EV/EBITDA (X) 6.4 6.1 5.7 5.2
Net Div Yield (%) 2.4 3.1 1.9 1.9
P/Book Value (X) 3.4 3.2 2.9 2.6
Net Debt/Equity (X) 0.3 0.1 CASH CASH
ROAE (%) 8.8 17.8 14.7 14.4
Earnings Rev (%): (4) (1) (1)
Consensus EPS (S cts): 5.5 7.5 8.2
Other Broker Recs: B: 2 S: 0 H: 1
Source of all data on this page: Company, DBS Bank, Bloomberg
Finance L.P
Dough is holding shape
Maintain BUY, TP raised to S$2.01. We remain positive on
BreadTalk over continued consolidation of underperforming
outlets that will yield better margins going forward and sale of
stakes in properties such as CHIJMES and AXA Tower that will
unlock shareholder value if they materialise. Based on 3Q17
results, growth drivers remain intact and turnaround in Bakery
division led by store growth and better profitability in FY18F will
drive earnings growth next year. BreadTalk’s valuation, based
on its core business (ex-property investments), is compelling at
17x FY18F PE.
Where we differ. We believe consensus has yet to factor in the
value of BreadTalk’s investment properties into its share price.
BreadTalk’s core business is undervalued at 17x FY18F PE after
stripping out the value of investment properties from the
current share price. Applying a 22x PE valuation to the retail
business and adding back the value of its investment properties,
our derived a target price is S$2.01, which is above consensus.
Potential catalyst. We see potential for special dividends if
Perennial sells AXA Tower. BreadTalk could pay c.4.5 Scts in
special dividends upon the sale of AXA Tower based on our
estimates.
Valuation:
Our TP of S$2.01 is derived from a sum-of-parts (SOTP)
valuation. On a per share basis, we value its retail business at
22x FY18F PE at S$1.71, investment properties at S$0.43
based on market value, net debt at -S$0.13 per share.
Key Risks to Our View:
Operational risks include food safety and licences as well as
negative publicity. In extreme cases, food operating licences
can be revoked for lapse in food safety. Negative publicity may
also result in weaker demand and poorer marketability when
selling its franchises as the public and franchisees shy away
from their association with BreadTalk.
At A Glance
Issued Capital (m shrs) 281
Mkt. Cap (S$m/US$m) 452 / 332
Major Shareholders (%)
Meng Tong Quek 34.0
Lih Leng Lee 18.6
Primacy Investment Ltd 14.0
Free Float (%)
3m Avg. Daily Val (US$m) 0.24
ICB Industry : Consumer Services / Food & Drug Retailers
DBS Group Research . Equity 7 Nov 2017
Singapore Company Guide
Breadtalk Group Ltd
Version 4 | Bloomberg: BREAD SP | Reuters: BRET.SI Refer to important disclosures at the end of this report

Company Guide
Breadtalk Group Ltd
WHAT’S NEW
3Q17 results
3Q17 within estimates. Headline earnings of S$4m (+22% y-
o-y) and revenue of S$154m (-2% y-o-y) were in line with our
forecasts. Revenue declined 7.8% y-o-y due to lower sales
across all divisions.
Lower revenue dragged by Bakery division. Bakery revenue
declined 2% y-o-y to S$77.2m, affected by 1) the termination
of underperforming franchisees in China and Shanghai; and
2) lower revenue from directly operated stores in Shanghai
and Beijing. Food Atrium revenue declined by 9.4% y-o-y to
S$36.8m on lower number of outlets (decrease of three
outlets). Restaurant sales (Din Tai Fung) improved 8.3% y-o-y
to S$31.1m.
4orth, a separate segment carved out for F&B new concepts.
BreadTalk reported separate segmentals for 4orth, a new F&B
business concepts division. The division has the five operating
outlets of Sō, a rebranded concept from RamenPlay, and
90%-owned Song Fa Bak Kut Teh in China and Thailand.
EBITDA and EBIT for 9M17 were S$0.3m and -S$0.4m
respectively. These numbers were carved out from the
Restaurant segment which previously consolidated them. This
leaves the Restaurant segment with just the Din Tai Fung
operations.
Bakery division led to lower margins. Headline gross and
operating margins declined to 55.2% (-1.1ppt) and 6.7% (-
1.7ppt) on Bakery’s higher raw material costs and lower
profitability from directly operated stores in Singapore and
Shanghai, and rationalisation of underperforming franchisees.
While group margins were lower, Food Atrium’s operating
margin improved to 7.6% from an operating loss in 3Q16.
Restaurant's operating margins remained at 21%.
Operating profit decline was within expectations. EBITDA was
S$20.9m (-19.1% y-o-y) while EBIT was at S$10.4m (-21.2%
y-o-y). Lower one-off items such as PPE write-offs and
disposals gain/loss helped PBT and PAT to reach S$9m
(+8.4% y-o-y) and S$4m (+22.2% y-o-y) respectively. An
interim dividend of 1 Sct was declared, in line with
expectations.
3Q17 tracking our estimates. We have anticipated lower
operating profit led by lower revenue from the Bakery division
undergoing store franchisee rationalisation. Therefore, this set
of results is largely expected. While headline operating profit
declined slightly due to ongoing restructuring of the Bakery
Division, Restaurant Division and Food Atrium Division
remained positive with revenue and operating profit growth
respectively.
Asset sale remains a likely stock catalyst. We remain positive
on the stock as 1) continued consolidation of
underperforming outlets will contribute to better margins
going forward; 2) sale of stake in properties such as CHIJMES
and AXA Tower will unlock shareholder value if they
materialise; 3) full-year headline earnings may even track
slightly ahead due to comparatively lower one-off items.
Maintain BUY, S$2.01 TP. Our earnings remain largely
unchanged and outlook continues to track our estimates.
BreadTalk’s results are largely led by its Bakery division as
seen in this 3Q17 numbers. Post restructuring of Bakery
franchisees in China this year, we expect store opening and
revenue growth to resume from FY18F onwards. No change
to our recommendation since long-term growth drivers
remain intact. Maintain BUY on the stock.

Company Guide
Breadtalk Group Ltd
Quarterly / Interim Income Statement (S$m)
FY Dec 3Q2016 2Q2017 3Q2017 % chg yoy % chg qoq
Revenue 157 148 154 (2.0) 4.5
Cost of Goods Sold (68.8) (65.0) (69.2) 0.5 6.4
Gross Profit 88.5 82.6 85.1 (3.9) 3.1
Other Oper. (Exp)/Inc (79.6) (73.4) (74.7) (6.2) 1.8
Operating Profit 13.2 9.16 10.4 (21.2) 13.4
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm
Associates & JV Inc 0.56 (0.2) 0.0 nm (89.4)
Net Interest (Exp)/Inc (1.2) (0.8) (0.7) 40.5 17.8
Exceptional Gain/(Loss) (4.2) (1.3) (0.7) 84.7 (49.7)
Pre-tax Profit 8.32 6.81 9.02 8.4 32.4
Tax (3.0) (2.8) (2.9) (3.8) 1.5
Minority Interest (2.1) (1.9) (2.2) (4.3) 15.8
Net Profit 3.26 2.11 3.98 22.2 88.3
Net profit bef Except. 7.50 3.41 4.63 (38.3) 35.8
EBITDA 25.9 19.4 20.9 (19.1) 7.7
Margins (%)
Gross Margins 56.3 55.9 55.2
Opg Profit Margins 8.4 6.2 6.7
Net Profit Margins 2.1 1.4 2.6
Source of all data: Company, DBS Bank

Company Guide
Breadtalk Group Ltd
CRITICAL DATA POINTS TO WATCH
Critical Factors
Less aggressive store expansion to focus on driving higher
operating efficiencies and margin improvement. The focus is to
raise efficiency of its existing operations, lower operating costs,
and expand margins. Store openings till year-end will therefore
not be aggressive. We see margins improving at the group level,
driven by the swing to profitability at the Food Atrium business,
cost-saving initiatives at the Bakery, and improved sales mix
from the Restaurant business. We expect store expansion to be
more aggressive once cost efficiencies and margin
improvements are realised from FY18F.
Driving margin improvement through cost efficiencies. Initiatives
such as better demand planning, more efficient human resource
planning, and tighter cost controls have helped to benefit
operating margins. They have led to lower food wastage, and
reduction in unnecessary payroll expenses. Management has
also been spending less on capex, leading to some moderation
in depreciation expenses going forward.
Non-performing legacy franchisees. We expect to see a stronger
franchisee base with less drag from non-performing accounts
post restructuring of franchisee accounts. As franchise outlets
have higher net margins, and lower direct operational risk, there
is potential for Bakery margins to increase as well given that
franchise revenue is royalty income, recognised as a percentage
of franchisee sales with minimal costs to BreadTalk. We expect
margins to increase when a mix of franchise stores improves
going forward.
Changes to management personnel, tenant-mix and tenant
quality have enabled Food Atrium to turn profitable. Food
Atrium division has made a marked turnaround in FY17F. While
its Food Atriums in Singapore were profitable in FY16, Food
Atrium in tier 2 cities in China were a drag. Changes were made
to the China portfolio in FY16 by closing non-performing
outlets especially in tier 3 cities. It also replaced China Food
Atrium’s management team with new personnel which made
changes to tenant quality and tenant mix, which led to
improvements in performance and occupancy at its China Food
Atriums. Food Atrium openings this year will include Shenzhen,
Guangdong and Shanghai.
New outlet in London this year. BreadTalk has already planned
for a new outlet in London this year through a JV (BreadTalk is
the major shareholder of the JV) with Fairy Rise Development
(Din Tai Fung franchise owner), Din Tai Fung Taiwan, a UK
partner and a Taiwanese individual. We also see scope for more
outlets in Thailand as there are currently only three Din Tai Fung
restaurants. As restaurant margins are attractive, better sales
mix from Restaurant business would improve overall
profitability.
Bakery outlets
Restaurant outlets
Food court outlets
Total
Annual sales per outlet S$m
Source: Company, DBS Bank

Company Guide
Breadtalk Group Ltd
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Appendix 1: A look at Company's listed history – what drives
its share price?
Share price has been driven by various factors including earnings, properties and strategic investors
Source: DBS Bank
Earnings
turnaround,
potential sale of
AXA Tower
Re-rated on new
BreadTalk IHQ building
and Minor International
taking a stake
Gain in Perennial CHIJMES
investment, operating
margin expansion
Sale and earnings growth
declined, higher interest
costs, lower net margins

Company Guide
Breadtalk Group Ltd
Balance Sheet:
Cash business; balance sheet currently in net debt. As with all
food service companies, BreadTalk is a cash business. The
business generated S$65-90m of operating cashflows annually
and S$28-54m of positive free cashflows in the last three years.
Net debt as of end-September 2017 was about S$36m,
equivalent to approximately S$0.13 per share, or net debt ratio
of 0.25x. BreadTalk was in net cash till FY12 when it built its
BreadTalk IHQ. In FY13 when it opened its IHQ, net debt was
S$89m. It further issued S$75m of bonds in FY16 due 1 April
2019 at 4.6% coupon for general corporate purposes, including
refinancing of existing borrowings, and financing capital
expenditure and general working capital.
Share Price Drivers:
Changes to property holdings are likely to drive share price.
Valuations for BreadTalk re-rated to an all-time high when it
moved into its IHQ in 2013. Similarly, when it sold 112 Katong
last year and declared special dividends, its share price re-rated
as well. In 4Q16, BreadTalk announced the sale of 111
Somerset, which also lifted BreadTalk’s share price in
anticipation of special dividends.
Key Risks:
Food safety and licences. As a restaurant operator, it is
important to maintain food safety. Lapses would lead to
reputational risks and in extreme cases, food operation licences
could be revoked.
Negative publicity affects consumer confidence and the
marketability of its franchise. BreadTalk has had some negative
publicity, especially in 2015 over food safety and food
preparation procedures in Singapore and China. Incidents such
as these can generate negative response from the public which
can potentially affect sales as well as the marketability of its
franchise overseas.
Company Background
BreadTalk Group is a Singapore-based food and beverage
(F&B) group engaged in the operations and franchising of
bakery/confectionery outlets, food courts and restaurants
across the region. BreadTalk’s portfolio currently has six brands
– BreadTalk, ToastBox, Food Republic, Ramen Play, San Pou Tei
and Din Tai Fung. It operates over 900 outlets across 17
countries.
Leverage & Asset Turnover (x)
Capital Expenditure
ROE (%)
Forward PE Band (x)
PB Band (x)

Company Guide
Breadtalk Group Ltd
Key Assumptions
FY Dec 2015A 2016A 2017F 2018F 2019F
Bakery outlets 862 862 856 859 864
Restaurant outlets 30.0 32.0 34.0 36.0 38.0
Food court outlets 65.0 57.0 61.0 61.0 61.0
Total 957 951 951 956 963
Annual sales per outlet 0.65 0.65 0.63 0.66 0.68
Segmental Breakdown
FY Dec 2015A 2016A 2017F 2018F 2019F
Revenues (S$m)
Bakery operations 308 306 296 303 311
Restaurant sales 143 150 154 166 179
Food Atrium income 173 159 153 161 169
Others 0.0 0.0 0.0 0.0 0.0
Total 624 615 603 630 658
Operating profit (S$m)
Bakery operations 5.15 12.6 9.57 9.39 9.32
Restaurant sales 25.8 23.2 26.5 25.7 27.7
Food Atrium income (2.9) (7.5) 8.57 6.92 7.01
Others 4.51 4.18 (4.8) (0.3) 0.0
Total 32.6 32.5 39.9 41.7 44.0
Operating profit margin (%)
Bakery operations 1.7 4.1 3.2 3.1 3.0
Restaurant sales 18.0 15.4 17.3 15.5 15.5
Food Atrium income (1.7) (4.7) 5.6 4.3 4.2
Others N/A N/A N/A N/A N/A
Others N/A N/A N/A N/A N/A
Total 5.2 5.3 6.6 6.6 6.7
Income Statement (S$m)
FY Dec 2015A 2016A 2017F 2018F 2019F
Revenue 624 615 603 630 658
Cost of Goods Sold (294) (278) (268) (277) (290)
Gross Profit 330 337 334 353 369
Other Opng (Exp)/Inc (298) (305) (295) (311) (325)
Operating Profit 32.6 32.5 39.9 41.7 44.0
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (1.3) (0.8) 0.13 0.13 0.14
Net Interest (Exp)/Inc (1.3) (4.8) (3.2) (2.8) (2.2)
Exceptional Gain/(Loss) (4.6) 2.80 8.01 0.0 0.0
Pre-tax Profit 25.4 29.7 44.8 39.1 42.0
Tax (10.8) (12.1) (11.4) (9.1) (9.7)
Minority Interest (7.0) (6.2) (9.0) (8.2) (8.8)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 7.60 11.4 24.4 21.8 23.5
Net Profit before Except. 12.2 8.63 16.4 21.8 23.5
EBITDA 80.9 80.0 82.3 84.7 89.0
Growth
Revenue Gth (%) 5.9 (1.5) (2.0) 4.5 4.5
EBITDA Gth (%) 0.6 (1.1) 2.9 2.9 5.1
Opg Profit Gth (%) 30.8 (0.2) 22.6 4.6 5.5
Net Profit Gth (Pre-ex) (%) (45.0) (29.2) 89.7 33.3 7.4
Margins & Ratio
Gross Margins (%) 52.9 54.9 55.5 56.0 56.0
Opg Profit Margin (%) 5.2 5.3 6.6 6.6 6.7
Net Profit Margin (%) 1.2 1.9 4.0 3.5 3.6
ROAE (%) 6.0 8.8 17.8 14.7 14.4
ROA (%) 1.4 2.1 4.6 4.0 4.1
ROCE (%) 5.2 5.4 8.6 9.0 8.9
Div Payout Ratio (%) 55.6 94.7 57.7 38.7 36.0
Net Interest Cover (x) 24.7 6.8 12.5 15.1 20.3
Negative on 1) Higher
expenses for corporate
services, treasury functions;
and 2) EBIT losses at new
segment 4orth.

Company Guide
Breadtalk Group Ltd
FY Dec 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017
Revenue 157 153 148 148 154
Cost of Goods Sold (68.8) (67.8) (66.7) (65.0) (69.2)
Gross Profit 88.5 85.5 80.9 82.6 85.1
Other Oper. (Exp)/Inc (79.6) (75.8) (75.3) (73.4) (74.7)
Associates & JV Inc 0.56 (1.0) 0.38 (0.2) 0.0
Exceptional Gain/(Loss) (4.2) 2.40 9.95 (1.3) (0.7)
Pre-tax Profit 8.32 10.1 15.0 6.81 9.02
Tax (3.0) (4.7) (2.6) (2.8) (2.9)
Minority Interest (2.1) (1.4) (1.7) (1.9) (2.2)
Net Profit 3.26 4.02 10.7 2.11 3.98
Net profit bef Except. 7.50 1.63 0.74 3.41 4.63
EBITDA 25.9 20.4 16.8 19.4 20.9
Growth
Revenue Gth (%) 5.1 (2.6) (3.7) 0.0 4.5
EBITDA Gth (%) 18.0 (21.2) (17.6) 15.8 7.7
Opg Profit Gth (%) 28.4 (26.3) (42.0) 62.8 13.4
Net Profit Gth (Pre-ex) (%) 54.8 (78.3) (54.6) 361.2 35.8
Margins
Gross Margins (%) 56.3 55.8 54.8 55.9 55.2
Opg Profit Margins (%) 8.4 6.3 3.8 6.2 6.7
Net Profit Margins (%) 2.1 2.6 7.2 1.4 2.6
Balance Sheet (S$m)
FY Dec 2015A 2016A 2017F 2018F 2019F
Net Fixed Assets 206 181 179 177 172
Invts in Associates & JVs 33.9 35.3 35.4 35.5 35.7
Other LT Assets 126 105 105 104 103
Cash & ST Invts 102 138 140 165 195
Inventory 9.88 9.81 9.70 10.1 10.5
Debtors 60.0 59.2 58.4 61.1 63.8
Other Current Assets 7.28 6.46 6.46 6.46 6.46
Total Assets 545 534 534 559 587
ST Debt 82.0 31.5 45.2 45.2 45.2
Creditor 94.1 86.8 89.2 92.4 96.6
Other Current Liab 86.1 99.8 99.8 99.8 99.8
LT Debt 120 150 114 114 114
Other LT Liabilities 16.8 14.5 14.5 14.5 14.5
Shareholder’s Equity 129 132 142 156 171
Minority Interests 17.2 19.9 28.9 37.1 45.9
Total Cap. & Liab. 545 534 534 559 587
Non-Cash Wkg. Capital (103) (111) (114) (115) (116)
Net Cash/(Debt) (99.6) (43.5) (18.7) 5.89 35.4
Debtors Turn (avg days) 33.5 35.4 35.6 34.6 34.6
Creditors Turn (avg days) 143.3 144.1 142.2 141.5 141.0
Inventory Turn (avg days) 15.3 15.7 15.8 15.4 15.3
Asset Turnover (x) 1.2 1.1 1.1 1.2 1.1
Current Ratio (x) 0.7 1.0 0.9 1.0 1.1
Quick Ratio (x) 0.6 0.9 0.8 1.0 1.1
Net Debt/Equity (X) 0.7 0.3 0.1 CASH CASH
Net Debt/Equity ex MI (X) 0.8 0.3 0.1 CASH CASH
Capex to Debt (%) 18.6 20.2 25.1 25.1 25.1
Z-Score (X) 2.0 2.3 2.3 2.4 2.4

Company Guide
Breadtalk Group Ltd
Cash Flow Statement (S$m)
FY Dec 2015A 2016A 2017F 2018F 2019F
Pre-Tax Profit 25.4 29.7 44.8 39.1 42.0
Dep. & Amort. 49.6 48.3 42.4 42.9 44.9
Tax Paid (6.9) (9.1) (11.4) (9.1) (9.7)
Assoc. & JV Inc/(loss) 1.31 0.83 (0.1) (0.1) (0.1)
Chg in Wkg.Cap. 0.42 10.2 3.25 0.29 0.94
Other Operating CF (3.4) 9.20 0.0 0.0 0.0
Net Operating CF 66.5 89.2 78.8 73.0 77.9
Capital Exp.(net) (37.5) (36.7) (40.0) (40.0) (40.0)
Other Invts.(net) (20.4) 16.3 0.0 0.0 0.0
Invts in Assoc. & JV (22.9) (2.8) 0.0 0.0 0.0
Div from Assoc & JV 1.19 0.46 0.0 0.0 0.0
Other Investing CF 21.7 (2.3) 0.0 0.0 0.0
Net Investing CF (57.9) (25.0) (40.0) (40.0) (40.0)
Div Paid (4.2) (8.0) (14.1) (8.4) (8.4)
Chg in Gross Debt 3.60 (20.6) (22.1) 0.0 0.0
Capital Issues (0.7) 0.0 0.0 0.0 0.0
Other Financing CF (8.7) (9.6) 0.0 0.0 0.0
Net Financing CF (10.0) (38.2) (36.2) (8.4) (8.4)
Currency Adjustments 0.82 (0.4) 0.0 0.0 0.0
Chg in Cash (0.6) 25.7 2.69 24.6 29.5
Opg CFPS (S cts) 23.5 28.1 26.9 25.9 27.4
Free CFPS (S cts) 10.3 18.7 13.8 11.7 13.5
Target Price & Ratings History
Source: DBS Bank
Analyst: Alfie YEO
Andy SIM CFA

Company Guide
Breadtalk Group Ltd
DBS Bank 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
Completed Date: 7 Nov 2017 07:43:14 (SGT)
Dissemination Date: 7 Nov 2017 08:59:27 (SGT)
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Company Guide
Breadtalk Group Ltd
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ed: DT / sa:YM, PY, CS
BUY
Last Traded Price ( 28 Feb 2018): S$1.58 (STI : 3,517.94)
Price Target 12-mth: S$1.98 (25% upside) (Prev S$2.08)
Analyst
Paul YONG, CFA +65 6682 3712 paulyong@dbs.com
What’s New
• FY17 net profit of US$85.3mn (-4% YoY) misses our
projections by 5% due to higher than expected taxes
• Outlook remains positive given firm global air travel
demand, led by strong growth in China
• Net cash of US$180mn and strengthened management
team should help M&A ambitions
• Maintain BUY with S$1.98 TP (13x FY18F PE)
Price Relative
FY Dec (US$ m) 2016A 2017A 2018F 2019F
Revenue 11,703 16,268 19,570 21,765
EBITDA 94.3 95.9 107 116
Pre-tax Profit 91.9 92.2 103 112
Net Profit 88.9 85.3 95.7 104
Net Pft (Pre Ex.) 88.9 85.3 95.7 104
Net Pft Gth (Pre-ex) (%) 45.1 (4.0) 12.2 9.1
EPS (S cts) 13.7 13.1 14.7 16.1
EPS Pre Ex. (S cts) 13.7 13.1 14.7 16.1
EPS Gth Pre Ex (%) 45 (4) 12 9
Diluted EPS (S cts) 13.7 13.1 14.7 16.1
Net DPS (S cts) 4.26 4.46 4.42 4.83
BV Per Share (S cts) 100 111 122 133
PE (X) 11.5 12.0 10.7 9.8
PE Pre Ex. (X) 11.5 12.0 10.7 9.8
P/Cash Flow (X) nm nm nm nm
EV/EBITDA (X) 8.9 8.8 7.8 6.9
Net Div Yield (%) 2.7 2.8 2.8 3.1
P/Book Value (X) 1.6 1.4 1.3 1.2
Net Debt/Equity (X) CASH CASH CASH CASH
ROAE (%) 14.3 12.4 12.6 12.6
Earnings Rev (%): (2) (2)
Finance L.P
Associates continue to shine
Maintain BUY with an adjusted TP of S$1.98, as we still favour
CAO as an aviation growth proxy. We continue to like China
Aviation Oil given its monopolistic position as the sole importer
of bonded jet fuel into China, and for its 33% stake in the
exclusive jet fuel refueller at Shanghai Pudong International
Airport (SPIA). It also has a growing international jet fuel supply
and trading business that will increasingly benefit from CAO’s
greater scale. It is a beneficiary of growing air travel demand
both in China and globally as well.
Net cash of US$180mn or S$0.27 ps to help fund inorganic
growth. CAO had a cash balance of US$300mn, or net cash of
US$180mn, at the end of 2017 and has also recently refreshed
and strengthened its management team with seconded
personnel from parent China National Aviation Fuel Group Ltd
(CNAF). We believe this could help the company deliver on the
M&A front.
Where we differ: We have lower-than-consensus forecasts as
we are more conservative on trading gains in 2018F.
Potential catalysts: CAO’s share price should re-rate as it delivers
steady earnings growth and/or if it can make value accretive
acquisitions using its strong balance sheet position.
Valuation:
Valuations attractive at 8.5x FY18F ex-cash PE. Given that 80%
of its earnings is derived from monopolistic businesses with a
firm growth outlook, we see current valuations at 10.7x
FY18PE, declining to 9.8x FY19F PE, as attractive. Factoring in
net cash per share of S$0.28, valuations are even more
enticing. Our target price is based on 13x FY18F PE, or +1 SD
of its historical average, and has not factored in acquisitions.
Weaker demand for air travel and execution risk. A sustained
slowdown in demand for air travel could hit jet fuel demand
and volumes. Further, the group could also face execution risks
in its trading business and on prospective M&As.
At A Glance
Mkt. Cap (S$m/US$m) 1,366 / 1,032
China National Aviation Fuel Grp 51.0
BP Plc 20.1
Free Float (%) 28.9
ICB Industry : Oil & Gas / Oil & Gas Producers
DBS Group Research . Equity 1 Mar 2018
China Aviation Oil
Version 7 | Bloomberg: CAO SP | Reuters: CNAO.SI Refer to important disclosures at the end of this report

Company Guide
China Aviation Oil
WHAT’S NEW
Better associate contributions offset by higher tax expenses and lower trading gains
CAO’s full-year results missed our expectations by 5%, with
net profit declining 4% YoY to US$85.3mn as tax expenses
were higher than we expected. The company maintained its
full-year dividend at 4.5 Scts, which is equal to a c.30%
payout.
Full-year revenues rose 39% YoY to US$16.3bn on higher oil
prices as well as supply and trading volumes, which increased
by 14.6% YoY to 37.31mn tonnes. Gross profit, however, fell
by 12.1% YoY to US$38.7mn on lower gains from trading
and optimisation activities, as “markets reclined to
backwardation in 3Q17 further exacerbated by increase in
supply & operational costs incurred due to various supply
disruptions caused by weather and refinery outages”.
Contributions from associates rose by 7.8% YoY to
US$71.5mn, led by a 5.8% YoY increase in contribution from
SPIA to US$64.2m while all other associates also saw
improved performances. Tax expenses jumped 133% YoY to
US$6.9mn mainly due to the decline in deferred tax assets
following the utilisation of unabsorbed tax losses from prior
years to offset current year’s profits, the increase in
recognition of deferred tax liabilities on the share of
undistributed retained earnings from associates, and tax
expenses incurred on the transfer of shareholding.
Outlook remains positive. Looking ahead, with international
travel expected to grow at a double-digit pace in China for
the next few years, CAO’s jet fuel import business segment as
well as its key associate SPIA, which we estimate together
account for over 80% of CAO’s earnings, are set to benefit.
In particular, with a fifth runway in Shanghai Pudong soon to
start commercial operations, contribution from SPIA is well
poised to enjoy firm growth ahead.
Meanwhile, continued expansion in its international jet fuel
supply business will also help its trading business to reap
benefits from a greater scale and network. CAO has cash of
over US$300mn (net cash of US$180mn) and we believe that
with a refreshed and strengthened management team
(seconded from parent CNAF), the group will step up on its
efforts on the M&A front to make value accretive
acquisitions, which could act as a further re-rating catalyst for
the stock.
We lower our FY18 and FY19 earnings estimates by 2.6%
and 2.4% respectively, factoring in higher associate
contributions offset by lower gross profit and higher tax
expenses. Our TP is now S$1.98, from S$2.08 previously,
mainly due to a weaker USD/SGD rate.
Quarterly / Interim Income Statement (US$m)
Revenue 3,276 5,223 4,061 24.0 (22.3)
Cost of Goods Sold (3,265) (5,219) (4,052) 24.1 (22.3)
Gross Profit 10.6 4.33 8.34 (21.3) 92.5
Other Oper. (Exp)/Inc (5.4) (2.6) (6.5) 20.5 150.8
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Associates & JV Inc 13.3 21.5 16.8 26.2 (21.8)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Pre-tax Profit 18.3 22.8 17.4 (5.4) (24.0)
Tax (0.4) (1.4) (3.3) 687.5 134.9
Minority Interest 0.0 0.0 0.0 - -
Net Profit 17.9 21.4 14.0 (21.7) (34.5)
Net profit bef Except. 17.9 21.4 14.0 (21.7) (34.5)
EBITDA 18.5 23.3 18.7 0.7 (19.7)
Margins (%)

Company Guide
China Aviation Oil
Critical Factors
Sole importer of jet fuel into China with growing international
presence… Leveraging on the network of its parent CNAF, a
state-owned enterprise that is the largest aviation transportation
logistics services provider in China, CAO has a monopoly in the
supply of imported jet fuel (or bonded jet fuel) to 17
international airports in China. With CNAF’s support, CAO has
also expanded its business to the marketing and supply of jet
fuel to airline companies at 48 international airports outside of
the China, spanning the Asia Pacific, North America, Europe
and the Middle East.
Given its monopoly, CAO is poised to benefit from the long-
term growth of China’s international air travel market. Coupled
with its ongoing international expansion, we expect middle
distillates & jet fuel volumes supplied and traded to grow to
20.8mn by FY18F, and 21.8mn tonnes by FY19F, from 19.8mn
tonnes in 2017.
Optimising margins through trading. Given that CAO enjoys
cost-plus pricing for its China jet fuel import business, and after
hedging downside risk, CAO will seek to further optimise
margins when viable trading opportunities arise. While
opportunities to improve margins are available in both
backwardation and contango markets, CAO generally prefers
contango markets as it allows for superior opportunities for
margin optimisation from the storing and trading of fuels
(which also includes gas oil, fuel oil and avgas).
We project that CAO’s average gross profit per tonne (on a
combined and blended basis), which in 2017 was lower than in
2015 and 2016, will rise gradually from 2018F onwards as it
benefits from economies of scale.
Steady growth in contributions from associates, including prized
asset SPIA. CAO’s best-performing asset, the 33% owned
associate SPIA, has always been a significant contributor to
CAO’s bottom line, accounting for over 90% of total associate
contribution. With two new runways added in the last 18
months, which has doubled the capacity of the airport, and an
additional satellite concourse expected to be completed by
2019, capacity at Shanghai Pudong, China’s second largest
airport, is expected to be raised from 60 million to 80 million
passengers a year, which should underpin SPIA’s long-term
growth prospects.
Middle Distillates Volumes (m tonnes)
Other Oil Product Volumes (m tonnes)
Implied Average Middle Distillate Price (USD/bbl)
Gross Profit per Tonne (US$)
Contribution from Associates (US$ m)

Company Guide
China Aviation Oil
Balance Sheet:
Strong balance sheet with a net cash position of US$180mn as
at end-2017. With net cash of US$180mn as at end-2017, we
believe the group has sufficient firepower with room to gear up
further to finance its M&A opportunities and grow the scale and
reach of its business and profits.
Progress on the M&A front. While CAO is armed with dry
powder for potential acquisitions and investments, it has yet to
announce significant M&A plans – its last major investment was
in 2013, when the company acquired a 39% stake in refueller
CNAF Hong Kong Refuelling Ltd. Management has shared that
they will be looking at both “asset-light” investments, which
will allow the group to gain access to air spaces, customer
contracts, strategic alliances and further trading synergies, as
well as “asset-backed” investments (or infrastructure assets),
which may include airport refueling stations, pipelines going
into airports and storage facilities. We believe that the
deployment of cash to fund value-accretive opportunities should
lead to a further rerating of the stock.
Key Risks:
Weaker demand for air travel. Given the group’s exposure to
the air passenger market, events that could significantly
dampen traveller sentiment, such as the outbreak of diseases
and acts of terror, could weigh on global demand for jet fuel.
Potential mark-to-market losses. As SPIA and CNAF-HKR hold
inventories of 15 days and seven days respectively, these have
to be marked to market. In a declining oil price environment,
these would result in paper losses for these associates, which
add volatility to CAO’s bottom line.
Trading and execution risks. CAO is exposed to a myriad of
risks that are inherent in the lifecycle of trades, which include
market risk, credit risk, and operational risk.
Company Background
China Aviation Oil (Singapore) Corporation Ltd is principally
engaged in the supply and trading of bonded jet fuel, with a
monopoly in China and a growing international presence. Apart
from jet fuel, the group also trades and/or supplies other
transportation fuels (such as fuel oil, gas oil and aviation gas)
and has varying equity stakes in oil-related assets. These assets
include airport refueling facilities (SPIA and CNAF HKR),
pipelines (China National Aviation Fuel TSN-PEK Pipeline
Transportation Corp Ltd) and storage facilities (China Aviation
Oil Xinyuan Petrochemicals Co Ltd and at Oilhub Korea Yeosu
Co Ltd).
Capital Expenditure
ROE (%)
Forward PE Band (x)
PB Band (x)

Company Guide
China Aviation Oil
Key Assumptions
FY Dec 2015A 2016A 2017A 2018F 2019F
Middle Distillates Volumes
(m tonnes)
11.9 18.6 19.8 20.8 21.8
Other Oil Product
Volumes (m tonnes)
8.28 14.0 17.5 18.0 18.6
Implied Average Middle
Distillate Price (USD/bbl)
74.4 52.7 65.2 75.2 80.2
Gross Profit per Tonne
(US$)
1.76 1.35 1.04 1.09 1.14
Contribution from
Associates (US$ m)
42.3 66.4 71.5 78.8 84.7
Segmental Breakdown
FY Dec 2015A 2016A 2017A 2018F 2019F
Revenues (US$m)
Middle distillates 7,010 7,754 10,233 12,398 13,886
Other oil products 1,978 3,949 6,034 7,172 7,879
Total 8,987 11,703 16,268 19,570 21,765
Income Statement (US$m)
FY Dec 2015A 2016A 2017A 2018F 2019F
Revenue 8,987 11,703 16,268 19,570 21,765
Cost of Goods Sold (8,952) (11,659) (16,229) (19,527) (21,719)
Gross Profit 35.4 44.1 38.7 42.3 46.2
Other Opng (Exp)/Inc (13.1) (17.3) (15.3) (15.3) (15.8)
Associates & JV Inc 42.3 66.4 71.5 78.8 84.7
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 63.6 91.9 92.2 103 112
Tax (2.3) (3.0) (6.9) (7.2) (7.9)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 61.3 88.9 85.3 95.7 104
Net Profit before Except. 61.3 88.9 85.3 95.7 104
EBITDA 66.2 94.3 95.9 107 116
Growth
Revenue Gth (%) (47.3) 30.2 39.0 20.3 11.2
EBITDA Gth (%) 19.1 42.5 1.7 11.2 8.8
Opg Profit Gth (%) 104.8 19.7 (12.3) 15.0 12.8
Net Profit Gth (Pre-ex) (%) 24.7 45.1 (4.0) 12.2 9.1
Margins & Ratio
Gross Margins (%) 0.4 0.4 0.2 0.2 0.2
ROAE (%) 10.7 14.3 12.4 12.6 12.6
ROA (%) 5.5 8.1 5.2 4.7 4.5
ROCE (%) 3.7 3.8 2.7 2.8 3.0
Div Payout Ratio (%) 29.8 31.1 33.9 30.0 30.0

Company Guide
China Aviation Oil
Quarterly / Interim Income Statement (US$m)
FY Dec 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017
Revenue 3,276 3,311 3,673 5,223 4,061
Cost of Goods Sold (3,265) (3,296) (3,662) (5,219) (4,052)
Gross Profit 10.6 15.5 10.6 4.33 8.34
Other Oper. (Exp)/Inc (5.4) (3.4) (2.8) (2.6) (6.5)
Associates & JV Inc 13.3 14.9 18.3 21.5 16.8
Pre-tax Profit 18.3 26.4 25.7 22.8 17.4
Tax (0.4) (1.1) (1.1) (1.4) (3.3)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 17.9 25.3 24.6 21.4 14.0
Net profit bef Except. 17.9 25.3 24.6 21.4 14.0
EBITDA 18.5 27.0 26.1 23.3 18.7
Growth
Revenue Gth (%) (16.9) 1.1 10.9 42.2 (22.3)
EBITDA Gth (%) (24.6) 45.6 (3.4) (10.8) (19.7)
Opg Profit Gth (%) 2.6 132.0 (35.7) (77.5) 6.1
Net Profit Gth (Pre-ex) (%) (22.8) 41.1 (2.8) (12.9) (34.5)
Margins
Gross Margins (%) 0.3 0.5 0.3 0.1 0.2
Opg Profit Margins (%) 0.2 0.4 0.2 0.0 0.0
Net Profit Margins (%) 0.5 0.8 0.7 0.4 0.3
Balance Sheet (US$m)
FY Dec 2015A 2016A 2017A 2018F 2019F
Net Fixed Assets 6.21 5.65 5.19 4.95 4.70
Invts in Associates & JVs 266 281 321 333 346
Other LT Assets 9.43 9.18 7.53 7.26 7.00
Cash & ST Invts 171 287 300 318 350
Inventory 56.8 171 210 252 281
Debtors 337 591 1,069 1,286 1,430
Other Current Assets 0.0 0.0 0.0 0.0 0.0
Total Assets 846 1,344 1,913 2,201 2,418
ST Debt 0.0 100 120 120 120
Creditor 247 588 1,060 1,276 1,419
Other Current Liab 0.01 0.62 0.95 7.21 7.86
LT Debt 0.0 0.0 0.0 0.0 0.0
Other LT Liabilities 6.16 6.31 7.92 7.92 7.92
Shareholder’s Equity 593 650 724 791 864
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 846 1,344 1,913 2,201 2,418
Non-Cash Wkg. Capital 147 173 218 255 284
Net Cash/(Debt) 171 187 180 198 230
Debtors Turn (avg days) 26.3 14.5 18.6 22.0 22.8
Creditors Turn (avg days) 21.7 13.1 18.5 21.8 22.6
Inventory Turn (avg days) 1.9 3.6 4.3 4.3 4.5
Asset Turnover (x) 8.1 10.7 10.0 9.5 9.4
Current Ratio (x) 2.3 1.5 1.3 1.3 1.3
Quick Ratio (x) 2.1 1.3 1.2 1.1 1.2
Net Debt/Equity (X) CASH CASH CASH CASH CASH
Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH
Capex to Debt (%) N/A 0.4 0.4 0.4 0.4
Z-Score (X) 14.6 10.7 10.4 10.4 10.1

Company Guide
China Aviation Oil
Cash Flow Statement (US$m)
FY Dec 2015A 2016A 2017A 2018F 2019F
Pre-Tax Profit 63.6 91.9 92.2 103 112
Dep. & Amort. 1.56 1.21 0.94 0.94 0.94
Tax Paid (2.2) 0.0 (0.7) (1.0) (7.2)
Assoc. & JV Inc/(loss) (42.3) (66.4) (71.5) (78.8) (84.7)
Chg in Wkg.Cap. 33.1 (25.8) (46.1) (44.1) (29.4)
Other Operating CF (1.7) (1.4) (2.1) 0.0 0.0
Net Operating CF 52.1 (0.5) (27.2) (19.9) (8.0)
Capital Exp.(net) (0.3) (0.4) (0.4) (0.4) (0.4)
Other Invts.(net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 37.2 36.2 45.5 67.1 71.8
Other Investing CF 0.19 1.47 3.60 0.0 0.0
Net Investing CF 37.2 37.3 48.7 66.6 71.3
Div Paid (12.8) (19.3) (27.7) (28.7) (31.3)
Chg in Gross Debt 0.0 100 20.0 0.0 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF (0.3) (0.3) (1.6) 0.0 0.0
Net Financing CF (13.0) 80.4 (9.3) (28.7) (31.3)
Currency Adjustments (0.1) (0.4) 0.62 0.0 0.0
Chg in Cash 76.2 117 12.8 18.0 32.0
Opg CFPS (S cts) 2.92 3.89 2.90 3.72 3.29
Free CFPS (S cts) 7.99 (0.1) (4.3) (3.1) (1.3)
Target Price & Ratings History
Source: DBS Bank
Analyst: Paul YONG, CFA

Company Guide
China Aviation Oil
DBS Bank 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
Completed Date: 1 Mar 2018 12:02:16 (SGT)
Dissemination Date: 1 Mar 2018 12:13:57 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
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UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
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Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
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commodity referred to in this report.

Company Guide
China Aviation Oil
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.
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Compensation for investment banking services:
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Disclosure of previous investment recommendation produced:
4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
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1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
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accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term
does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

ed: JLC / sa:YM, PY, CS
BUY
Last Traded Price ( 13 Feb 2018): S$0.95 (STI : 3,415.07)
Price Target 12-mth: S$1.18 (24% upside)
Analyst
Carmen Tay +65 6682 3719 carmentay@dbs.com
Derek TAN +65 6682 3716 derektan@dbs.com
What’s New
 FY17 revenue and PATMI of S$859.7m and S$35.5m came
in within expectations on higher development sales
 Spotlight for 2018 and 2019 remains on upcoming
launches at Woodleigh and Changi
 Meanwhile, growing recurring income and strong dividend
track record (even in 2009) are attractive attributes;
Proposes 4 Sct dividend for FY17, representing 4.2% yield
 Maintain BUY with TP of S$1.18
Price Relative
FY Dec (S$ m) 2016A 2017A 2018F 2019F
Revenue 748 860 799 1,228
EBITDA 98.6 102 108 164
Pre-tax Profit 76.1 70.2 67.2 121
Net Profit 35.7 35.5 31.7 58.3
Net Pft (Pre Ex.) 35.7 35.5 31.7 58.3
Net Pft Gth (Pre-ex) (%) (43.3) (0.5) (10.6) 83.7
EPS (S cts) 5.75 5.72 5.11 9.39
EPS Pre Ex. (S cts) 5.75 5.72 5.11 9.39
EPS Gth Pre Ex (%) (43) (1) (11) 84
Diluted EPS (S cts) 5.75 5.72 5.11 9.39
Net DPS (S cts) 4.00 4.00 4.00 4.00
BV Per Share (S cts) 123 125 126 131
PE (X) 16.5 16.6 18.6 10.1
PE Pre Ex. (X) 16.5 16.6 18.6 10.1
P/Cash Flow (X) nm nm 11.0 2.8
EV/EBITDA (X) 13.1 18.6 18.8 12.4
Net Div Yield (%) 4.2 4.2 4.2 4.2
P/Book Value (X) 0.8 0.8 0.8 0.7
Net Debt/Equity (X) 0.9 1.6 1.7 1.5
ROAE (%) 4.7 4.6 4.1 7.3
Earnings Rev (%): 5 27 17
Finance L.P
Attractive Valuations and Yield
Integrated real estate developer with strong capability to
leverage upcoming property upturn. Singapore-based Chip Eng
Seng Corporation (CES) has been selectively acquiring projects
in Singapore and overseas which are ripe for the picking. Most
of the group’s residential projects have already been
substantially sold and, together with an estimated construction
order book of S$560m (as at Jan 2018), CES has locked in at
least S$1bn in sales – which will be recognised progressively,
underpinning strong earnings visibility in the coming years.
Meanwhile, plans to launch recently acquired residential sites at
Woodleigh and Changi in 2H18 and 1H19 respectively, should
boost the group’s earnings and NAV in the medium term.
Where we differ: A largely uncovered stock, we like CES for its
strong earnings visibility and the potential to unlock its
undervalued hotel portfolio.
Potential catalysts: Successful pre-sales, landbanking activities
Potential unlocking of undervalued hotel portfolio. The group
has also built up a sizable hotel and commercial portfolio. The
jewel is Park Hotel Alexandra, which is recorded in its book at
an estimated S$210m (S$475k/key) but potential realisable
value, if sold, could be as high as S$376m (S$850k/key), which
means a 27Scts upside to current NAV. While the hotel provides
stable recurring cash flow to the group, substantial value could
be unlocked, given the robust demand for hotel assets in
Singapore.
Valuation:
Maintain BUY and SOTP-based TP of S$1.18. Assuming a
conservative 45% discount (vs larger peers’ 10%) to RNAV of
S$1.88 and valuing its construction business at peers’ average
of 8x FY18F PE, we arrive at a SOTP-based TP of S$1.18. A
prospective 4.2% yield is also on offer.
(i) Execution risk, (ii) Weaker demand, (iii) Competition, (iv)
Equity fund raising risk
At A Glance
Mkt. Cap (S$m/US$m) 590 / 446
Tiam Seng Lim 12.5
Tiang Chuan Lim 7.1
Lee Meng Chia 4.1
Free Float (%) 76.3
ICB Industry : Financials / Real Estate
DBS Group Research . Equity 14 Feb 2018
Chip Eng Seng
Version 2 | Bloomberg: CHIP SP | Reuters: CESE.SI Refer to important disclosures at the end of this report

Company Guide
Chip Eng Seng
WHAT’S NEW
Chip Eng Seng’s FY17 results in line; Maintains 4 Sct dividend
FY17 PATMI of S$35.5m; Results in line. In 4Q17, CES delivered
PATMI of S$14.5m on revenue of S$256.1m (+22.4% q-o-q),
primarily on stronger contributions from the Property
Development and Hotel segments, which helped offset
weakness in the Construction division.
On a full-year basis, revenue was up 14.9% to S$859.7m, while
earnings (PATMI) held relatively steady y-o-y at S$35.5m, in line
with our expectations.
The Property Development segment was the key revenue driver
for the group this quarter, contributing S$194m (or c.76% of
sales) on the progressive recognition of ongoing development
projects (High Park Residences and Grandeur Park Residences)
and proceeds from the handover of completed townhouses in
Doncaster, Melbourne, which should continue to contribute
positively to 1Q18 revenue.
The Hospitality division continued to gain traction during the
quarter, gaining 31.8% q-o-q to S$13.7m on the back of
higher occupancies for its key hotel assets, Park Hotel
Alexandra (Singapore) and Grand Park Kodhipparu (Maldives),
which only commenced operations in June 2017. Contributions
from a newly-added asset, The Sebel Mandurah in Australia,
also helped.
Expanding investment portfolio to further boost recurring
income. While dwarfed at the top-line (c.6.1% of sales), we
estimate that CES’ portfolio of investment assets roughly
contributed c.13% of FY17 EBIT.
With the recent addition of a Grade-A office building at 205
Queen Street (Auckland) at end-2017 and the proposed
acquisition of its fourth hospitality asset, Mercure & Ibis Styles
Grosvenor Hotel in Adelaide, we believe contributions from this
segment will be even more meaningful in FY18F.
Proposes 4Sct dividend for FY17, which is expected to be paid
on 23 May 2018.
Maintain BUY with TP of S$1.18; Offers attractive 4.2% yield.
Apart from the strong earnings visibility from ongoing
development projects and the potential unlocking of its
undervalued hotel portfolio, we also like CES for its strong
dividend payment record.
Notably, the company has consistently paid dividends through
the property cycle – even in 2008/2009, and has maintained a
fixed dividend of 4 Scts over the last eight years.
Revenue 250 209 256 2.4 22.4
Cost of Goods Sold (204) (174) (204) (0.1) 17.2
Gross Profit 45.7 35.1 52.1 14.0 48.5
Other Oper. (Exp)/Inc (10.4) (4.8) (21.5) 106.9 349.8
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Associates & JV Inc 0.0 0.02 0.39 nm nm
Net Interest (Exp)/Inc (4.7) (5.9) (4.8) (1.0) 18.1
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Pre-tax Profit 30.6 24.5 26.2 (14.3) 7.1
Tax (7.7) (5.7) (4.5) (41.0) (21.2)
Minority Interest 0.0 (4.7) (7.2) nm 53.9
Net Profit 22.9 14.0 14.5 (36.6) 3.5
Net profit bef Except. 22.9 14.0 14.5 (36.6) 3.5
EBITDA 37.2 32.9 35.5 (4.4) 7.9
Margins (%)

Company Guide
Chip Eng Seng
Critical Factors
Substantial proportion of ongoing developments pre-sold ahead
of completion. The progressive sale and revenue recognition
from six available-for-sale development properties provides
earnings visibility over the next few years. Recent launches have
been well received. As at 31 Dec 2017, a substantial proportion
of units at ongoing developments were pre-sold ahead of their
completion – at least 87.5% for Grandeur Park Residences
(which was only launched in March 2017) to 100% for High
Park Residences (a collaboration between CES, Heeton Holdings,
and KSH Holdings).
Growing landbank signals earnings potential beyond 2021.
Beyond the existing development projects, we believe that CES’
unutilised landbank is indicative of the group’s longer-term
earnings potential and cash flow generation capability. While
the majority of CES’ landbank currently lies in Australia, we are
comforted by the group’s recent moves to replenish its
Singapore landbank.
We believe that both the Woodleigh and Changi land plots,
which are slated for launch in 2H18 and 1H19 respectively,
could add more than 1,000 new units for sale, with an
estimated combined GV of close to S$1.5 bn.
Net construction order book estimated at S$560m. CES’
construction revenues are mainly derived from Singapore public
housing, public transport infrastructure, and private residential
projects. While local construction outlook still appears
favourable at this juncture, the extent to which CES is able to
truly benefit from these positive trends hinges upon the success
and viability of its tenders. Following its recent S$168m contract
win in Jan 2018, we estimate CES’ construction order book to
be closer to S$560m (vs S$397.1m at end-4Q17).
Recurring income pool to see further boost on steady expansion
in Hotels and Investments portfolio. Over the years, CES has
been increasingly active in the management of its hotel and
investment portfolio, resulting in a growing asset base (to c.9
properties at end-FY17) and higher recurring income.
With the recent addition of 4.5-star The Sebel Mandurah
(purchase includes strata restaurant property) in Nov 2017 and
a Grade-A office building at 205 Queen Street, Auckland -
through a 50%-joint venture with Roxy-Pacific, we estimate that
CES’ recurring income base would see a 20% boost y-o-y to
c.S$58.5m in FY18F.
This would represent approximately 6.7% of consolidated
revenue, up from 5.1% in FY16. Further acquisitions, including
the completion of its proposed acquisition of Mercure & Ibis
Styles Grosvenor Hotel in Adelaide, could provide more upside.
FY19F Potentially a Banner Year for Property Development
Recent Acquisitions to Boost Recurring Income
RNAV of S$1.88 and SOTP-based TP of S$1.18
347.5 411.7
571.7
492.5
912.7
0
200
400
600
800
1,000
FY15 FY16 FY17 FY18F FY19F
Revenue
(S$
m)
23.1
38.0
48.7
58.5
62.0
0
10
20
30
40
50
60
70
FY15 FY16 FY17 FY18F FY19F
Revenue
(S$
m)
Bre a kdown of RNAV OMV ($m)
Inve stme nt Prope rtie s
Investment Properties (Revalued) 320
less book value -320
Surplus / Deficit 0
De ve lopme nt Prope rtie s
NPV of Development Profits 230
Hote l Ope ra tions 521
less book value (Hotels + Assoc) -355
Surplus / Deficit 166
Book NAV 770
RNAV 1,166
Total Shares 621
RNAV / Sha re (S$) 1.88
Discount 45%
Discounte d RNAV / Sha re (S$) 1.03
SOTP Va lua tion S$
Discounted RNAV / Share (S$) 1.03
Value of Construction Business / Share 0.15
SOTP-ba se d TP (S$): 1.18

Company Guide
Chip Eng Seng
Appendix 1: A look at Company's listed history – what drives its share price?
Prior to May 2015, CHIP SP’s share price was mainly driven by NAV growth
Strong Historical Correlation with SGXREDO Index
Little Correlation with Quarterly Earnings Performance
0.3
0.7
1.1
1.5
Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17
Last
Price
vs
NAVPS
(S$)
CHIP SP Equity NAVPS
Sep 2013: Award of
S$103.8m HDB contract
Nov/Dec 2013: Acquired
28,002sqm of landbank in
Doncaster and investment
property in Melbourne
Aug 2014: JV acquired
178,724sqft of land at
Fernvale Road (Singapore)
Jun 2013: Award of
S$165m HDB contract
Feb 2016: Acquired 24,394
sqm land parcel at New Upper
Changi Road (Singapore)
Oct 2016: JV
acquires Maldivian
resort
Jan 2017: M&A
potential given
cheap valuations
Mar 2017:
Sentiment lifted on
property curb
relaxation measures
0
500
1000
1500
0
0.4
0.8
1.2
Oct-14 Oct-15 Oct-16 Oct-17
CHIP SP Equity (LHS) SGXREDO Index (RHS)
Correlation: +0.732
0
0.1
0.2
0.3
0.4
0.5
0
0.4
0.8
1.2
Oct-14 Oct-15 Oct-16 Oct-17
T12M EPS (RHS) CHIP SP Equity (LHS)
Correlation: + 0.786
Apr - Aug 2015:
Sector-wide sell-
down on macro
weakness
July 2017: JV
acquired 210,404
sqft of land at
Woodleigh Lane

Company Guide
Chip Eng Seng
Balance Sheet:
Net gearing could rise from 0.9x in FY16 to c.2.2x following
recent en-bloc and land tender wins. While this appears high at
first look, successful sale of the Woodleigh site and Changi
Garden will alleviate any potential concerns from its alleviated
gearing level.
Acquisition of further landbank and/or a fourth hotel asset at a
reasonable price.
Potential transactions in Singapore hotel space could spark
revaluation of CES’s Park Hotel Alexandra. On the back of
strong transaction velocity in the office sector, investor attention
has been moving to the hotel sector. Given robust demand for
hotel assets in Singapore, we believe the potential realisable
market valuation for Park Hotel Alexandra would be c. S$850 a
key (when pegged to peers’ average) or close to S$376m vs
current book value of c.S$210m.
Key Risks:
Weaker demand for private residential property across CES’ key
markets of Singapore and Australia could impact the success of
its future launches significantly.
Keen competition across Property Development and
Construction segments. Judging by the recent spike in en-bloc
tenders at record sale prices and heightened competition for
landbank, land prices are expected to rise further. This could
impact CES’ ability to replenish its landbank (at a reasonable
price), which is imperative for future profitability and growth.
Meanwhile for the construction business, we note that EBIT
margins have come off over the years and remain watchful of
the competitive landscape in the local construction sphere as
this could lead to more aggressive bidding among contractors
and ultimately, compression of margins.
Possible equity fund-raising to pare down debt. We project that
net gearing will rise to 2.2x over the next two years on the back
of a rise in landbanking activity, which are primarily covered by
loans. We believe that the company could potentially look at
equity fund-raising ahead to pare down gearing to a more
sustainable level.
Company Background
Founded in the 1960s as a construction company, Singapore-
based Chip Eng Seng Corporation (CES) has expanded its scope
and scale over the past five decades, and has gradually
diversified into property development, investments, and
hospitality businesses.
Capital Expenditure
ROE (%)
Forward PE Band (x)
PB Band (x)

Company Guide
Chip Eng Seng
Segmental Breakdown
FY Dec 2015A 2016A 2017A 2018F 2019F
Revenues (S$m)
Property Development 347 412 572 492 913
Construction 306 298 239 253 258
Hotel Operations 14.1 27.4 38.6 42.9 46.2
Investment Properties 8.97 10.6 10.1 10.4 10.7
Others 0.10 0.06 0.0 0.0 0.0
Total 676 748 860 799 1,228
Income Statement (S$m)
FY Dec 2015A 2016A 2017A 2018F 2019F
Revenue 676 748 860 799 1,228
Cost of Goods Sold (515) (602) (707) (653) (985)
Gross Profit 161 146 153 146 243
Other Opng (Exp)/Inc (81.0) (54.3) (62.0) (54.3) (95.0)
Operating Profit 80.4 92.2 90.5 91.9 147
Associates & JV Inc 1.02 (0.7) 0.58 5.12 5.12
Pre-tax Profit 67.6 76.1 70.2 67.2 121
Tax (10.3) (24.4) (20.3) (21.5) (38.7)
Minority Interest 5.74 (16.0) (14.4) (13.9) (23.9)
Net Profit 63.0 35.7 35.5 31.7 58.3
Net Profit before Except. 63.0 35.7 35.5 31.7 58.3
EBITDA 87.5 98.6 102 108 164
Growth
Revenue Gth (%) (38.8) 10.6 14.9 (7.1) 53.7
EBITDA Gth (%) (73.6) 12.6 3.6 5.8 51.4
Opg Profit Gth (%) (74.1) 14.6 (1.8) 1.5 60.5
Net Profit Gth (Pre-ex) (%) (77.8) (43.3) (0.5) (10.6) 83.7
Margins & Ratio
Gross Margins (%) 23.9 19.6 17.7 18.3 19.8
ROAE (%) 8.5 4.7 4.6 4.1 7.3
ROA (%) 3.2 1.7 1.4 1.1 2.0
ROCE (%) 2.8 1.1 0.6 0.1 1.0
Div Payout Ratio (%) 39.6 69.6 70.0 78.2 42.6

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