Appendices

Singer Retailing Company DCF Model

FY10 FY11 FY12 FY13 FY14E FY15E FY16E

In LKRm unless otherwise stated

Revenue 15,177 20,944 23,850 23,717 25,881 27,224 28,603

Growth % nm 38.0% 13.9% -0.6% 9.1% 5.2% 5.1%

Operating expenses (13,529) (18,658) (21,491) (22,052) (23,660) (24,822) (25,912)

Growth % nm 37.9% 15.2% 2.6% 7.3% 4.9% 4.4%

As a % of revenue 89.1% 89.1% 90.1% 93.0% 91.4% 91.2% 90.6%

EBITDA 1,648 2,286 2,359 1,665 2,221 2,402 2,691

Growth % nm 38.7% 3.2% -29.4% 33.4% 8.2% 12.0%

Margin % 10.9% 10.9% 9.9% 7.0% 8.6% 8.8% 9.4%

Depreciation and amortization (183) (214) (239) (217) (237) (250) (262)

Growth % nm 17.0% 11.9% -9.0% 9.1% 5.2% 5.1%

As a % of revenue 1.2% 1.0% 1.0% 0.9% 0.9% 0.9% 0.9%

EBIT 1,465 2,073 2,120 1,448 1,984 2,152 2,429

Growth % nm 41.4% 2.3% -31.7% 37.0% 8.5% 12.8%

Margin % 9.7% 9.9% 8.9% 6.1% 7.7% 7.9% 8.5%

Historicals Explicit forecast

Peer Selection

Peer Selection Softlogic PLC…

Debt Portfolio and Maturity Analysis…

YTD 2013 YTD 2012

LKR Millions

% LKR Millions %

Short Term

5,164 58.6%

5,970 73.7%

Long Term

3,651 41.4%

2,125 26.3%

Total 8,815 8,095

Debt Portfolio of Singer Sri Lanka PLC

Debt Maturity Profile (LKR Millions)

As at 31 December 2012 Total LKR Due in 2014 2015 2016 after 2016

Overdrafts 753.3 753.3 - - -

Short Term Loans 4,772.8 4,772.8 - - -

Long Term Loans - - - - -

Debentures 2,900.0 - 1,999.0 901.0 -

Promissory Notes - - - - -

Commercial Paper 450.0 200.0 250.0 - -

Total borrowings - as at 31/12/2013 8,876.1 5,726.1 2,249.0 901.0 -

Debt Maturity Profile (Rs.Mn)

TTM Operating Margin TTM EPS (LKR) Number of Retail Stores Value Per Share (LKR)

Cargils 3.8% 2.87 232 139.51

Singer 6.1% 3.69 406 131.28

Deal Multiple Cargils 48.6

International Finance Corporation Acquiring 8% of Cargils Retail for LKR 2.5bn

Comparable Deals

2015 Budget Proposals…

2015 Budget Proposals;

Reduce Electricity Tariff by 15% Reduce Water Tariff by10% Reduce VAT by 1% Reduce Price of Domestically Produced Milk Powder by Rs.100 Reduce Price of Domestically Produced Yogurt by Rs.3 Rs.25000 Minimum Salary for Government Servants

Target Economic Growth of 8% Channeling Funds for Rural Infrastructure Development Unemployment of Youth Aged 18-30 t Drop to 13.1% from 15% Per capita GDP to Increase up to USD7500 by 2020

Consumer Spending Habits…

Reduced Interest Rates…

Average Weighted Lending rates by Type of Security (%)

Movement of Money Market Rates Movement of secondary Market Yields for Gvt. Securities

Source: CBSL Annual Report 2013

Financial Sector Consolidation…

Source: CBSL Consolidation Plan 2014

Characteristics of Consumer Durables Industry…

Source: Team Estimates

Intense Competition

Higher Customer Bargaining Power

Relatively High Power of Up Stream Suppliers

High Entry and Exit Barriers

No.1 Consumer Durables Brand……

Source: SINS Annual Report

No.1 Brand in Sri Lanka for the 9th Consecutive Year Top 100 Listed Companies in Sri Lanka

2011/2012 – 26 2012/2013 - 24

No.1 in Customer Relations Ranked Among the Best 10 Corporate Citizens Recognized as Most Respected Entities in Sri Lanka

2012 -16 2013 -15

Singer Business Channels…

Source: SINS Annual Report

Retail Channels; Singer Plus Singer Mega Sisil World Singer Homes

B2B Channels; Apparel Solutions Institutional Sales Central Air Conditioning

Trade Channels; Traditional Consumer Durables Agro and Hardware Digital Media

Revenue From Rendering of Services…

Source: SINS Annual Report

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2009 2010 2011 2012 2013

Revenue from Rendering of Services (Rs.Mn)

By 2015 Approx. 32% of the Population are Estimated to Reside in Urban Areas

Social Responsibility…

Source: SINS Annual Report

Sports Sponsorships – Promote School Rugby Renovation of Hospital Wards Projects at Schools “Thirst for Life” – Donating Dialysis units

Branch Network and Customer Reach…

Competitor No.of Branches

Softlogic PLC 173

Abans 213

Household Users – Over 4.5 Million Online Users – Over 500,000

Source: SINS Annual Report

SWOT of Singer Sri Lanka PLC…

Strengths

One of the leading consumer durables

brands in Sri Lanka over the past decade

86.1% ownership is with parent company,

Singer Asia with strong financial support

from Singer Asia

Nation-wide distribution network (406

retail outlets and 747 independent retailers

at the end of FY2013)

Stable outlook A(lka) from Fitch Ratings

Lanka Ltd. for senior unsecured debt of

Singer Plc.

Sale of multiple brands under one roof

Despite slow economic growth Singer

reported revenue CAGR of 21% FY2009-13

Singer Plc. Has c. 36% overall market

share

Exclusive distributor or co-distributor in Sri

Lanka for Beko, Godrej, Grundig, Hitachi,

Huawei, Philips, Samsung, Skyworth, TCL

and Whirlpool

Credit sales backed by Singer Finance Plc.

via hire purchase agreements

Weaknesses

High gearing ratio of 226% FY2014E

Liquidity risk owing to high net debt to FCF

ratio of 70.1x FY2014E

Reducing margins owing to high

competition and concentration on low

margin earning product segments such as

mobile

Opportunities

High upper single digit growth of per capita

GDP expected over the next 5 years

93% of Sri Lanka’s population has access

to electricity to their place of residence

Threats

Reversal of current low interest

environment

Import tax rate hike

Slower-than-expected growth in private

credit availability

Risk Mitigating Factors…

Operational Risk

Significant decrease in profit margins

Renovation and transformation plan to improve showrooms, reduce cost structure across all channels, develop partnership with strong international brands.

Cyclical demand for Singer products

Diversified produce portfolio targeting different consumer groups, customer loyalty program

Rapidly changing consumer demand leading to obsolete inventory

Stock clearance activities on a regular basis (Quarterly), monthly operational meeting for inventory management, provisions for obsolete inventory, and warranty cost is insured

Credit risk

Risk of customers reneging on a hire-purchase agreement

Branch managers act as del credere agents, database for customer creditworthiness, risk-adjusted pricing

Further downgrade in credit ratings

Strong relationships and facilities with many banks

Risk Mitigating Factors…

Liquidity Risk

Increase in contractual cash outflows Strong supplier relationships

Market Risk

Risk of interest rates increasing

Majority of debentures are fixed rated , balancing short-and-long term borrowing, reputed brand name commands a favorable rate

Market Risk

Importing of 60% of total products leading to high currency risk exposure

Short period between the date of the purchase and the settlement of the related liability.

Product Risk

Risk of defective or inappropriate for the market in terms of price or functionality

Stringent quality control activities, product testing via sampling on all product lines

IT Risk

Significant failure in the IT processes Regular backups of all databases and off-site disaster-recovery system

Risk Management Process…

Steps Activities

Data Collection and Analysis

The management information system (MIS) to pick up relevant business-critical information.

Review and validation before it is submitted to senior management.

Assess Agree and implement measurement and reporting standards and methodologies.

Control Establish key control processes and practices, including limit structures, impairment allowance criteria and reporting requirements.

Monitor the operation of the controls and adherence to risk direction and limits.

Provide early warning of control or appetite breaches.

Ensure that risk management practices and conditions are appropriate for the business environment.

Risk Management Process…

Report Interpret and report on risk exposures, concentrations and risk-taking outcomes.

Interpret and report on sensitivities and Key Risk Indicators.

Communicate with relevant parties.

Manage Review aspects of the Company’s risk profile.

Assess new risk-return opportunities.

Advise on optimizing the Company’s risk profile.

Review and challenge risk management practices.

No. One Consumer Durable Retailer…

Trusted Excellence Through; Market Existence of over 100 Years Multi Channel – Multi Brand Business Model Unmatched After Sales Services

First Mover Advantage to Exploit Industry Opportunities and Increase Current Market Share of 36%

•Over 225 Island Wide Service Centers and 8 Regional Service Centers •24/7 Customer Call Centre

79%

18%

3%

Channel Mix of Revenue - 2013

Retail Channel

Trade Channel

B2B

Competitively Featured and Priced Brand Portfolio

Gold Price Consensus…