germaine khong - f j benjamin holdings ltddistributor of fashion apparel and timepieces in...

Please read carefully the important disclosures at the end of this publication.

INITIATING COVERAGE

27 June 2007

OUTPERFORM F J Benjamin S$0.89 @25/06/07

Getting it right this time Target: S$1.39

Retail

SIN

GA

POR

E

FJB SP / FJBN.SI Germaine Khong +65 6210-8600 – [email protected] MICA (P) 156/03/2007

F J Benjamin - 27 June 2007 [ 2 ]

Contents

Investment summary ...................................................................................................3 Background .................................................................................................................4 Business model ...........................................................................................................6 Industry outlook ...........................................................................................................7 Company outlook.........................................................................................................8 Risks..........................................................................................................................11 Financials ..................................................................................................................12 Valuation and recommendation .................................................................................14 Appendices… ............................................................................................................16

Shareholding structure .........................................................................................17 Management profile .............................................................................................18


Investment summary

Right place, right time. F J Benjamin is a retailer and distributor of fashion apparel and timepieces in South-east Asia and North Asia. We like the company for its direct exposure to rising discretionary spending in the region and its brand portfolio, which includes luxury and lifestyle brands. We believe that as consumers grow wealthier, they are more likely to spend on higher-end discretionary products like luxury items and high-quality apparel. F J Benjamin is positioned to capture such demand with its aggressive retail network expansion across South-East Asia and diverse brands. We project an earnings CAGR of 64% for FY07-09, backed by: 1) a tripling of retail floor space to over 350sf and doubling of retail stores by FY09; 2) same-store sales growth of 5% per annum; and 3) rising margins from higher fashion retail contributions to the sales mix. Restructured with a focus on scalable brands. F J Benjamin has been restructuring its fashion retail business in South-East Asia. It has closed down retail outlets in Hong Kong, where it was hit by high rental costs in the early 2000s. In addition, it has decided to focus on a few key scalable brands like Guess?, Raoul, Gap and Banana Republic after exiting unprofitable brands. Potential capital management. F J Benjamin recently sold its Orange Grove property and plans to divest two remaining properties in Singapore and Hong Kong. We also expect net proceeds of about S$115m from the conversion of outstanding warrants, which will expire this July. Given its modest capital expenditure of S$9m p.a., we expect the group to return excess cash to shareholders. Initiate with OUTPERFORM and target price of S$1.39. Our sum-of-the-parts target price values its retail business at 16x CY08 earnings and takes into account potential capital distribution. Our target translates into 21x CY08 earnings, which implies an undemanding PEG ratio of 0.3x against F J Benjamin’s fully-diluted EPS CAGR profile of 64% for FY07-09. On an ex-cash basis, our target implies 16x CY08 earnings.

Financial summary FYE Jun 05 06 07F 08F 09F

Revenue (S$ m) 145.7 187.2 257.6 372.0 479.5 EBITDA (S$ m) 6.9 16.7 31.9 43.3 57.3 EBITDA margins (%) 4.7 8.9 12.4 11.6 11.9 Pretax profit (S$ m) 5.7 14.4 32.1 44.8 63.6 Net profit (S$ m) 4.3 10.2 22.7 31.7 45.0 EPS (S cts) 1.5 3.2 5.9 5.6 7.9 EPS growth (%) +111% +117% +83% -6% +42%P/E (x) 59.5 27.4 15.0 16.0 11.3 FD EPS (S cts) 0.7 1.8 4.0 5.6 7.9 FD P/E (x) 119.0 49.9 22.3 16.0 11.3 Gross DPS (S cts) 1.1 2.4 3.0 4.2 5.9 Dividend yield (%) 1.2% 2.7% 3.4% 4.7% 6.7%P/NTA (x) 3.3 2.9 4.0 2.1 1.9 ROE (%) 5.5% 11.8% 21.8% 17.7% 17.4%Net gearing (%) 32% 14% cash cash cashP/CF (x) 45.6 23.1 18.4 17.4 13.0 EV/EBITDA (x) 40.8 17.7 15.2 8.9 6.8 CIMB-GK/Consensus (x) - - 0.85 1.01 1.14

Source: Company, CIMB-GK estimates, Reuters Estimates

Price chart Market capitalisation & share price info

0

0

00

0

11

11

1

1

Jun06 Aug06 Oct06 Dec06 Feb07 Apr07 Jun07

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8Volume (million) (R.H. SCALE)FJ BENJAMIN HOLDINGS LTDRELATIVE TO STI (R.H. SCALE)

Market cap 453.49524 Share price perf. (%) 1M 3M 12M12-mth price range S$0.38/S$0.93 Relative (5.3) 13.2 48.5 3-mth avg daily volume 2.556303 Absolute (2.7) 26.4 126.9 # of shares (m) 512.4 Major shareholders % heldEst. free float (%) 53 Benjamin Family 23%Wrts/ICULS o/s (m) 57.6 Peter Lim 13%Conv. price (S$) 0.5 Raffles Investment 11%

Source: Bloomberg Source: Company, CIMB-GK Research, Bloomberg, Reuters Estimates


Background

Distributor of fashion apparel and timepieces in South-East Asia and North Asia

At the forefront of fashion. Frank Benjamin founded F J Benjamin in 1959 as a trader of paper, consumer novelties and photographic equipment. Later, the company ventured into the fashion business, which would ultimately transform the group into Singapore’s fashion retailing and distribution leader. F J Benjamin was granted exclusive rights to distribute Lanvin accessories in Singapore, Malaysia and Indonesia in 1975. This marked the beginning of a series of distribution agreements with global luxury brands such as Gucci and Fendi. Today, F J Benjamin holds the rights to retail and distribute the following brands: Banana Republic, Celine, Gap, Guess?, La Senza, Valentino, Marciano and Sheridan. It also distributes timepieces for Bell & Ross, Girard-Perregaux, Guess Collection, Marc Ecko, JeanRichard, Nautica, Victorinox Swiss Army and Nike Timing. In addition, the group has two house labels, Raoul and Paint 8, and a stake in the award-winning St. James Power Station.

Figure 1: Revenue has been climbing… Revenue projected to grow at 37% CAGR from FY06 to FY09

146.01 118.76 105.57 116.57 145.66187.24

257.60

372.01

479.54

0

100

200

300

400

500

600

FY01 FY02 FY03 FY04 FY05 FY06 FY07F FY08F FY09F

Source: Company, CIMB-GK Research Figure 2: … and so has profitability Net profit has been doubling since FY04

-40.9

3.1 1.5 2.0 4.3 10.222.7

31.745.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

FY01 FY02 FY03 FY04 FY05 FY06 FY07F FY08F FY09F

Source: Company, CIMB-GK Research

Restructured for better profitability

Regaining its footing. F J Benjamin was listed in 1996, just before the Asian financial crisis. The ensuing slowdown in discretionary consumer spending jolted F J Benjamin and taught the company a harsh lesson: the need to keep a close tab on fixed costs, especially in expensive North Asian markets. From its listing in 1996 to FY01, F J Benjamin’s profitability disappointed the market. Its lowest point was when it posted a net loss of S$40.9m in FY01, mainly due to high operating expenses and an exceptional loss of S$15.1m from discontinued operations. Turbulence continued into the early 2000s, with profitability staying at very depressed levels of below S$4m through FY04. The main reason was the loss of several brands (Gucci, Lanvin, Fendi) as the principals decided to manage their own brands. This taught the company the need to diversify away from distributorship risks by developing its own brands. Raoul was the answer.


In 1999, the group also secured the rights to distribute official merchandise for Manchester United. It subsequently entered into a JV with Mr Dennis Foo to own and operate the Devil’s Bar. F J Benjamin has since dropped the Manchester United brand and closed all its stores and cafes, which were unprofitable. The group now focuses on a few key scalable brands, rather than spread its efforts too thinly. Focusing on scalable brands. Scalable brands include La Senza and Guess?. The group now owns Guess?, Guess Accessories, Guess Kids, Baby Guess and Marciano stores throughout Singapore, Malaysia and Indonesia. In FY07, there will be 55 stores in total, including 20 La Senza stores in South-East Asia and Australia. Two months ago, the group closed its only Inez store to focus on expanding its Guess? and La Senza brands, developing Raoul into an international brand and building up new brands like Gap and Banana Republic. First franchiser of Gap and Banana Republic worldwide. The Gap stores operated by F J Benjamin will feature the new Gap store design that has been rolled out in the US. F J Benjamin, through its associated company in Indonesia, will open 15 Gap, Baby Gap and Gap Kids stores in Jakarta, Surabaya, Bandung and Bali by 2011 and five Banana Republic stores in Jakarta and Surabaya by 2011. This is in addition to the 30 Gap and Banana Republic stores planned for Singapore and Malaysia by 2010. As at Jun 07, there are 10 Gap stores operated by the group: four in Singapore, four in Malaysia and two in Indonesia. The group recently opened one Banana Republic store in Jakarta and one in Malaysia, with one more planned for Singapore in Jul 07. St. James Power Station. The group also holds a 33% stake in St James Power Station, an entertainment outlet in Singapore, which is now the island’s top nightspot. It is Asia’s largest music entertainment outlet, encompassing 70,000 sf of entertainment space. This is a JV between the group and Mr. Dennis Foo. F JBenjamin invested S$2m and expects payback 12-18 months from Dec 06.

Figure 3: Milestones

1959 Incorporated by Frank Benjamin 1975 Opens first-ever single-brand store in Singapore - Lanvin at the Grand Hyatt 1979 Franchise partner of Gucci 1988 Franchise partner of Fendi 1989 Franchise partner of Girard-Perregaux 1990 Franchise partner of Sheridan 1992 Franchise partner of Guess? 1996 Public listing of F J Benjamin Holdings Ltd on Singapore Exchange 1999 Franchise partner of Manchester United 2000 Gucci regains direct control of Asian operation after 25 years 2001 Launched Devils Bar with Dennis Foo, JV franchise partner of Valentino 2002 F J Benjamin develops house label, Raoul and launches it in Singapore, Malaysia and Indonesia 2003 F J Benjamin develops house labels, Inez and Paint8, launches Canadian lingerie label La Senza, and expands

relationship with Callanen International to distribute timepieces for Guess?, Marc Ecko, Nautica. 2005 Raoul's first franchise deal for 10 stores in the Middle East 2006 Gap in Singapore, Malaysia and Indonesia - first Gap franchise partner in the world, first stores in Asia (outside

Japan). Marciano by Guess? launched in SEA. St James Power Station launched in Singapore.

F J Benjamin has long-term relationships with franchise partners like Guess?

2007 Banana Republic launched in Singapore, Malaysia and Indonesia and JeanRichard expands to China. Wins exclusive distributorship rights for Celine in Singapore, Malaysia, Thailand and Indonesia.

Source: Company, CIMB-GK Research Figure 4: Brand portfolio Holds exclusive rights to distribute luxury and lifestyle brands in the region

Luxury labels Mid-priced lifestyle labels House labels Apparel Celine Gap, GapKids, babyGap Raoul Valentino Banana Republic Paint8 Guess?, Guess Kids, Baby Guess La Senza Marciano Timepieces Girard-Perregaux Nike Timing JeanRichard Nautica watches Bell & Ross Marc Ecko Guess Collection, Guess? Victorinox Swiss Army Others Sheridan Nike Vision St. James Power Station



Business model

Fashion business is its core earnings driver. F J Benjamin has four business segments: ongoing retail, distribution, export and others. Ongoing retail refers to sales at retail outlets, distribution refers to timepiece distribution (including North Asia) and export refers mainly to sales to its JV company in Indonesia. Others used to include sales from Manchester United outlets but these have since been discontinued. In FY06, ongoing retail accounted for 36% of its revenue while timepiece distribution and exports accounted for 43% and 20%, respectively. Going forward, we expect the fashion business (including exports, which mainly consist of sales to Indonesian associate) to grow at 54% CAGR over FY07-09, boosted by organic growth of existing brands and new store openings (Gap and Banana Republic). We expect the fashion business to account for 75% of total revenue by FY08. F J Benjamin does not pay franchise fees to its brand principals. Instead, it buys inventory from these principals and is responsible for store fit-out, as well as advertising and promotional costs. Group gross margins in FY06 were 41.7%. Going forward, we see the potential for margins widening on higher contributions from the fashion retail business, which is more profitable than timepiece distribution.

Figure 5: FY06 revenue breakdown by business

Ongoing retail35.89%

Ex port20.41%

Others0.28%

Distribution43.42%



Industry outlook

Singapore’s tourism boom to spur retail sales. The tourism sector generated an estimated S$12.4bn in tourism receipts in 2006, exceeding the official target of S$12.0bn and growing by 14.5% from 2005. Tourists from Indonesia, China, India, Australia and Malaysia accounted for 51% of total visitor arrivals. We believe that the Integrated Resorts and Formula 1 World Championships (Singapore Grand Prix) will continue to boost tourism, spurring retail sales. ‘Late Night Shopping’ boost to sales. The Singapore government has taken steps to improve the retail industry’s performance. The Singapore Tourism Board introduced ‘Late Night Shopping’ in early 2007, allowing tourists and locals to shop at Orchard Road till midnight every last Friday of the month and enjoy special deals from participating retailers. While the recent increase in the cost of living may prove to be a deterrent, we still expect longer operating hours and revamped/new shopping centres to encourage consumers to shop. We believe the retail industry has room to grow further. Excluding motor vehicles, retail sales in April rose 5.1% yoy, which is in line with the five-year average. Datamonitor predicts that Singapore’s apparel retail industry alone will expand by 30.4% from 2005 to reach a value of US$7.1bn in 2010. We believe F J Benjamin is well-positioned to capture this growth, given its diverse brands and numerous points-of-sales across Singapore.

Figure 6: Singapore’s apparel retail industry

5.4 5.8 6.1 6.5 6.8 7.1

012345678

2005 2006 2007 2008 2009 2010

US$b

Source: Datamonitor

Increasing demand for luxury and lifestyle products in the region. We believe

that growth in consumption spending in Singapore and the rest of South East-Asia will continue. We believe the Singapore market has the greatest growth potential for several reasons. First, we expect consumption spending to rise with the completion of the Integrated Resorts, which will open in 2009. Second, Singapore’s retail industry is not as saturated or mature as that of Hong Kong. As a result, new brands would have an easier time penetrating the market. With growing disposable incomes and increasing demand for luxury and lifestyle products from consumers in South-East Asia and North Asia, we believe this is an opportune time for F J Benjamin to expand its brand portfolio and stores. Capturing demand from Chinese population. With the easing of Chinese travel regulations, we believe the number of mainland Chinese travelling to South-East Asia and Australia will rise exponentially over the next few years. There remain substantial differences in the prices of luxury goods sold domestically and overseas, arising from differing consumption taxes, VAT and import tariffs. Thus, we expect mainland Chinese to continue buying luxury goods overseas. According to World Tourism Organisation forecasts, China will become the fourth-biggest tourism source country by 2020, with outbound tourists reaching 100m annually. Overweight on Thailand’s retail sector. Thailand is a relatively new market for F J Benjamin and although there are concerns over business growth in the current environment, our expectations for Thailand contributions are small at the moment. Also, in a recent report on Thailand’s retail sector dated 15 Jun 07, our colleagues highlighted the positive fundamentals of the retailing industry in Thailand, supported by demographics, rising long-term wealth and rapid urbanisation. This is despite current regulatory uncertainties, political turmoil and dented consumer confidence. We believe a turnaround in Thailand can produce future growth opportunities for the company.


Company outlook

Gap’s same-store sales have been declining in the US…

Gap and Banana Republic’s iconic brands hold promise in Asia. F J Benjamin brought Gap and Banana Republic into South-East Asia at a time when consumption spending was rising and consumers in Singapore, Malaysia and Indonesia are increasingly willing to pay premiums for brands never before available in Asia (ex-Japan). Admittedly, Gap Inc has been suffering from declining sales and same-store growth. Its 1Q07 results, though far better than 1Q06’s, were lacklustre. People are worried that Gap is losing (or has lost) its competitive edge. During its heyday in the 1990s, Gap was America’s answer to down-to-earth casual wear, offering high-quality basics at affordable prices. Gap’s mistake was to allow fashion to whiz past it in the 2000s. We are encouraged by Gap Inc’s recent restructuring efforts. Gap’s management plans to open 230 stores and close 200 others, with Old Navy stores representing most of the new store openings and Gap stores representing most of the closures. In addition, Gap Inc is seeking a new CEO to spearhead its recovery efforts.

…but we expect the brand to fare better in South-East Asia, where there is demand for high-quality basic apparel

Although Gap is struggling in the US, we believe consumers in South-East Asia will embrace the brand. Before F J Benjamin stepped in, there were no Gap stores in Asia ex-Japan, vs. 1,201 in the US. We believe the group is moving in the right direction by acquiring the Gap franchise, as it targets consumers who are seeking high-quality basics. Also, the type of apparel offered by Gap suits the weather here, while Banana Republic offers fashionable wear at affordable prices. Management says that its Gap stores are doing well though they have yet to reach their full sales potential. Given Gap’s strong brand name and global presence, F J Benjamin is optimistic that the brand presidents will be able to improve the appeal of the products in the short to mid-term.

Figure 7: Gap Inc Gap is a leading international retailer

Stock code: GPS US

Background: Leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic, Old Navy, Forth & Towne and Piperlime brand names. The company also operates Gap Outlet and Banana Republic Factory Store.

No. of stores: 3,152 as at May 07. For FY07, Gap Inc expects to open about 230 stores, weighted towards Old Navy, and close about 200 stores, weighted towards the Gap brand and including 19 Forth & Towne stores.

Brands: • Gap. It offers iconic American styles to customers of all ages. The brand includes Gap, GapKids, babyGap,

GapMaternity and gapbody. • Banana Republic. It is an accessible luxury brand. • Old Navy. It offers great fashion at great prices for everyone. • Forth & Towne. Grown-up chic for women. • Piperlime. An online shoe shop, it offers a handpicked assortment of the best brands in footwear.

Monthly sales: On June 7, 2007, Gap Inc reported net sales of $1.19bn for May 07. Comparable-store sales decreased 3% compared with the 6% decrease as reported for May 06. Comparable-store sales by division for May 2007 were as follows: • Gap North America: - 7% vs. -5% last year • Banana Republic North America: +3% vs. +3 % last year • Old Navy North America: -3% vs. -8 % last year • International: flat vs. -13 % last year Quarterly earnings: On May 24, 2007, Gap Inc reported 1Q07 earnings of US$178m, compared with US$242 m for the same period last year. 1Q07 net sales were US$3.56bn, compared with US$3.44bn for 1Q06.

Source: Gap Inc, CIMB-GK Research

Growing the Raoul brand via global franchise

Building the Raoul brand. F J Benjamin launched Raoul Men in 2002 and Raoul Ladies in 2005. The group designs and develops Raoul products in-house and outsources manufacturing. In contrast to franchising or managing brands, F J Benjamin owns Raoul and can look to franchising it globally. The ladies’ ready-to-wear shirts sell for US$69-199 each while men’s shirts sell for US$69-135 apiece. There are 27 Raoul stores in Singapore, Kuala Lumpur and Indonesia, including three franchise stores in Dubai and Bahrain. F J Benjamin has signed a franchise deal for 10 Raoul stores in the Middle East. The group plans to open another 11 stores in Singapore, Malaysia, Indonesia and Thailand in FY08. Besides the Middle East, F J Benjamin is eyeing key gateway cities around the world. It typically decides on the retail prices of products sold at its franchise stores, which feature uniform store designs. We like this model as it allows for rapid expansion at minimum inventory risk. Raoul has turnover of S$25m today and the group’s target is S$400m p.a. in seven years’ time.


Celine deal may open doors to more LVMH liaisons. Recently, F J Benjamin won exclusive distributorship rights for Celine in Singapore, Malaysia and Thailand. For an undisclosed sum, the group bought over the fit-out and inventories of seven retail stores in the above countries. In 1988, the group had exclusive rights to retail Fendi but LVMH took over and decided to handle its own brands. We are encouraged by this new deal with LVMH as it indicates that LVMH is beginning to franchise again and has renewed its relationship with F J Benjamin. Although LVMH has expressed a desire to keep franchise agreements to a minimum in order to preserve the lustre of its luxury business, we believe there are chances for F J Benjamin to bid for the other brands in the LVMH portfolio. Asia’s growing demand for luxury timepieces. Timepiece distribution contributed 43% to FY06 revenue. We expect contributions to fall to 20-30% over the next few years as the fashion business grows. Nevertheless, with 739 distribution points across South-East Asia and North Asia, F J Benjamin is poised to gain from the fast-growing demand for luxury timepieces. The group is scaling up to penetrate the huge Chinese luxury timepiece market. Recently, it secured an exclusive deal with a large watch distributor in China with plans for eight doors in FY08 and 10 doors in FY09. F J Benjamin trades on cash terms in China. Store expansion plans. In FY06, F J Benjamin operated 90 stores. It aims to expand by 48% to 133 stores by end-FY07. We expect the group to expand by another 25-30% in FY08-09. We also expect average store size to increase by 28% in FY07, mainly due to Gap’s larger store format. Based on our retail network and average store size assumptions, we forecast that retail floor space will more than triple by FY09.

Figure 8: F J Benjamin’s retail store expansion

Stores in: 03 04 05 06 07FThailand 5 0 0 0 3Australia 0 0 0 2 2Hong Kong 0 0 0 3 3Indonesia 8 14 19 30 45Malaysia 18 20 21 32 47Singapore 20 25 23 23 33Total 51 59 63 90 133


Figure 9: Adding stores to drive growth

6390

133

176

219

0

50

100

150

200

250

FY05 FY06 FY07F FY08F FY09F

Number of stores


Figure 10: Retail floor space

Expect retail floor space to triple by FY09

87.13122.50

232.00

316.80

394.20

0

100

200

300

400

500

FY05 FY06 FY07F FY08F FY09F

'000 sf



Figure 11: LVMH’s brand portfolio (fashion and leather goods)

1. Louis Vuitton 2. Loewe 3. Celine 4. Berluti 5. Kenzo 6. Givenchy 7. Marc Jacobs

8. Fendi 9. StefanoBi 10. Emilio Pucci 11. Thomas Pink 12. Donna Karan 13. ELuxury


Unlocking of value via sale of Orange Grove property. The group had de-

leveraged its balance sheet by selling its head office building at Orange Grove Road in 2Q07. Further value can be unlocked if the group divests its North Point building in Hong Kong and one warehouse at Henderson Industrial Park in Singapore. We estimate the worth of the two buildings at S$35m.

Figure 12: SWOT analysis

Strengths Opportunities

• Experienced and committed management • Revamped brand portfolio • Good execution

• Singapore’s tourism boom to boost retail sales • Government continues to lend a helping hand to the retail industry • Potential divestments • Rising discretionary spending as economy grows

Weaknesses Threats

• Subject to its ability to keep abreast of changing fashion trends • Brand awareness typically takes years to build

• Changing consumer preferences • Inability to renew distributorship agreements • Vulnerable to economic downturns in South-East Asia, North Asia and

Australia • Rising rental rates

Source: CIMB-GK Research


Risks

Changes in consumer preferences. Consumer preferences and tastes in Asia change fast, as consumers are increasingly exposed to international brands via the Internet and other media, and new trends. In the fashion retail business, it is important for F J Benjamin to keep up with these changing trends. Hence, it has to do careful research before signing franchise agreements, which generally last for a number of years. F J Benjamin mitigates this risk by diversifying its brand portfolio and looking out for new brands constantly. While Gap and Guess? target consumers who are looking for American casual wear, Celine and Banana Republic target those seeking higher-end fashion. Likewise, Girard-Perregaux watches cater to the high-end market while Guess? and Nautica watches are more affordable. Inability to renew distributorship agreements. F J Benjamin is highly dependent on exclusive distributorship agreements as only two brands in its portfolio are house labels. In the early 2000s, the group lost several key brands such as Gucci, Fendi and Lanvin when the principals decided to manage their own brands. We are also relieved to know that franchise agreements with Gap Inc will last till 2011, while the recently acquired franchise for Celine will last for seven years. Competition. We expect more entrants competing in the apparel segment. F J Benjamin’s portfolio consists of mainly American brands. Competition is likely to come from European brands such as Zara and Massimo Dutti, which are affordably priced and popular in Asia. Vulnerable to economic downturns in Asia and Australia. FJ Benjamin caters to discretionary spending in Asia. The profitability of discretionary-consumption companies tends to be influenced by economic cycles. In the event of an economic downturn, F J Benjamin’s profitability would be affected.


Financials

FJ Benjamin’s cost structure. COGS accounts for the bulk (62%) of expenses while staff costs are the second largest cost component, at 15%. Given that F J Benjamin has retail outlets in South-East Asia and not North Asia, rental costs account for only 8%. From 2001 to 2002, rental costs accounted for 10% of COGS as the group ran some retail outlets in Hong Kong. Squeezed by the high rental rates in Hong Kong, F J Benjamin closed its retail outlets there in the early 2000s and turned its focus to timepiece distribution instead. Although rental rates in Singapore are rising, rentals as a percentage of fashion retail revenue (excluding associate sales in Indonesia) have been fairly stable, as revenue has been growing at a faster CAGR of 32% vs. the 24% CAGR for rental costs from FY03 to FY06. Going forward, we believe revenue will continue to grow at a faster clip, backed by increasing discretionary spending as the economy grows. In addition, F J Benjamin may be able to negotiate attractive terms with its landlords as the brands it carries are considered crowd-pullers. We have also incorporated higher staff costs for the next few years. In FY06, staff cost was 15.2% of the total cost, up from 13.7% in FY05, the result of improved staff benefits and higher wages.

Figure 13: Cost structure in FY06

COGS62%

Staff costs15%

Rental costs8%

A&P 4%

Others 11%


Figure 14: Rental costs have been rising

FY03 FY04 FY05 FY06Rental costs (S$m) 8.037 10.613 12.683 15.246Rental costs as a % of fashion retail (excluding associate) revenue 27.2% 27.3% 25.2% 22.7%


Figure 15: Segmental assumptions

Expect gross margins to expand from a increasing bias towards higher-margin fashion retail

S$'000 03 04 05 06 07F 08F 09F Business segments Ongoing retail 29.5 38.9 50.3 67.2 107.1 174.0 236.7 Distribution 55.8 55.2 63.0 81.3 84.9 91.3 97.7 Export 24.2 29.9 31.1 38.2 65.6 106.7 145.1 Others 6.0 3.5 1.3 0.5 0.0 0.0 0.0 Total revenue 115.5 127.6 145.7 187.2 257.6 372.0 479.5 Growth in revenue 10% 14% 29% 38% 44% 29% Gross margin (%) 32.5 37.2 37.5 41.0 43.0 44.0 45.0

% of total revenue Ongoing retail 26% 31% 35% 36% 42% 47% 49% Distribution 48% 43% 43% 43% 33% 25% 20% Export 21% 23% 21% 20% 25% 29% 30% MU retail 5% 3% 1% 0% 0% 0% 0% Corporate & others 0% 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100% 100% 100%

Source: Company CIMB-GK Research

Margins to increase by 2% pts to 43% in FY07

Forecast margin improvement. We predict a gross margin improvement for F J Benjamin through a better sales mix. The fashion retail business commands gross margins of around 20% pts more than the distribution business. We expect margins to improve as the group focuses on organic retail growth, franchising its Raoul business and importing new brands.


Figure 16: Earnings drivers Earnings growth driven by tripling of retail floor space and same-store sales growth

FY05 FY06 FY07F FY08F FY09FRetail No. of stores (year-end) 63 90 133 176 219% increase in stores 43% 48% 32% 24%Absolute increase in stores 27 43 43 43Average size of store (sf) 1383.0 1361.1 1744.4 1800.0 1800.0Retail floor space ('000 sf) 87.1 122.5 232.0 316.8 394.2% increase in space 40.6% 89.4% 36.6% 24.4%Sales per sf (S$/sf) 964.6 974.3 1023.0 1074.1Timepiece distribution No. of distribution points 610 739 798 858 918% increase in distribution points 21.1% 8.0% 7.5% 7.0%Absolute increase in distribution points 129 59 60 60


Projected same-store sales growth of 5%

Earnings CAGR of 64% projected for FY07-09. We expect F J Benjamin to sustain its robust earnings growth over the next three years. We forecast a revenue CAGR of 37% for FY07-09, powered by the fashion retail and distribution businesses. We expect earnings to grow at 64% CAGR over FY07-09 on the back of: 1) a tripling of retail floor space and doubling of retail stores by FY09; 2) rising gross margins from higher fashion retail contributions; and 3) rising associate earnings. Our revenue forecasts are supported by retail store expansion and new brands. We expect retail floor space to increase by 89.4% in FY07, mainly from the seven Celine stores acquired at the beginning at 2007 and 11 new stores opened since the end of 2006. Going forward, we expect retail floor space to continue growing but a moderate pace of 24-37%, given that the group has not secured new brands as yet. We project same-store sales growth of 5% per annum.

FY07 net profit to include exceptional gain of S$3.65m. In 2Q07, F J Benjamin sold its head office building at Orange Grove. Excluding exceptional gains from this sale, our FY07 net profit estimate is S$19.1m. Growing associate contributions from St. James and 50% from Indonesia JV. F J Benjamin formed a JV with Mr Dennis Foo and Mr Jopie Ong to open St. James Power Station in Dec 06. The group invested S$2m for a 33% stake. We expect associate contributions from St. James to begin in FY08. In addition, we expect associate income from the Indonesia JV to grow, given that the JV will be opening 15 Gap stores and five Banana Republic stores in Indonesia by 2011, doubling the number of stores in Indonesia from FY06. Strong operating cash flows. F J Benjamin generated positive operating cash flows in FY05 and FY06. Going forward, we expect operating cash flows to be stronger from higher operating profits, offset slightly by increases in working capital needs. The next few years will be an exciting growth period for F J Benjamin as the group rolls out new stores and pursues new brands. We have projected capex of S$18m for the next two years. Dividend payouts assumed at 60% for FY07-08. Although management does not have a fixed dividend policy, we have assumed a payout ratio of 60% for FY07-08, based on trends in previous years. Expect return of excess cash to shareholders. We expect the group to end FY07 with net cash of S$27m. However, cash inflow of S$115m from warrant conversion (outstanding warrants are convertible into shares on a 1-for-1 basis at 45cts/per share, see Appendix) and S$35m from potential divestments of investment properties could lead to excess cash. We do not rule out a special dividend at the end of FY07. We estimate that some S$50m-70m of excess cash can be returned if the above takes place, representing about S$0.10/share.

Figure 17: Shareholding structure – current and diluted

Substantial shareholder Current stake* Fully diluted stake**Frank, Nash and Mavis Benjamin 22.6% 27.0%Peter Lim 12.8% 11.4%Raffles Investment 11.3% 10.0%Estate of Jacob Ballas 5.9% 5.3%Total 54.9% 53.7%

*Based on 506m shares

**Based on fully diluted share capital of 570m shares Source: Company, CIMB-GK Research


Valuation and recommendation Initiate with OUTPERFORM and target price of S$1.39. There is no direct listed

comparable for F J Benjamin in the region. The closest peer is Hong Kong-listed Dickson Concepts, which carries similar brands as the group. Dickson retails and trades luxury products of brands such as Tommy Hilfiger, Brooks Brothers, Michael Kors and Polo Ralph Lauren. It operates stores in Hong Kong, British Virgin Islands, Switzerland, Bermuda, Japan, Singapore, Taiwan and China. Using sum-of-the-parts valuation, we arrive at a target price of S$1.39 for F J Benjamin. We have valued its retail business at 16x CY08 earnings, at a slight discount to regional peers to account for its smaller size. We also took into account the group’s strong balance sheet and potential capital distribution. Our target price translates into 21x CY08 earnings and a PEG ratio of 0.3x, which we believe is undemanding against a fully-diluted EPS CAGR of 64% projected for FY07-09. Initiate with OUTPERFORM.

Figure 18: Valuation

Value (S$m) Valuation basisRetail business 615.6 16x CY08 P/E Expected proceeds from sale of investment properties 35.0 Net cash at end FY07 26.6 Upcoming proceeds from warrant conversion 115.0 Equity value 792.2 Number of shares 570 Fair value (S$) 1.39


Figure 19: Sector comparisons

Core 3-yr EPS P/NTA ROE DivBloomberg Price Mkt cap P/E (x) CAGR (x) (%) yield (%)

ticker Recom. Crcy (S$) (USD) CY07 CY08 (%) CY07 CY07 CY07High-end retailers Dickson Concepts 113 HK NR HKD 9.10 361.2 13.1 10.8 9% 2.2 15.4 4.5 Ports Design 589 HK NR HKD 22.20 1,542.7 37.2 28.5 31% 13.0 30.4 1.3 Lifestyle brandsEsprit 330 HK N HKD 99.25 15,631.7 22.7 19.0 23% 17.1 46.3 2.5 Giordano 709 HK U HKD 3.90 744.0 18.4 16.2 21% 2.9 10.0 6.8 Mass retailersRamayana Lestari RALS IJ O IDR 1,110.00 862.5 21.0 17.8 22% 4.0 16.9 4.0 Mitra Adiperkasa MAPI IJ O IDR 880.00 160.7 8.6 6.7 26% 1.3 9.9 1.6 Simple average 20.2 16.5 22% 6.8 21.5 3.5

O = Outperform, N = Neutral, U = Underperform, NR = Not Rated, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB-GK Research, Bloomberg


Financial tables

PROFIT & LOSS (S$ m, FYE Jun) 05 06 07F 08F 09FRevenue 145.7 187.2 257.6 372.0 479.5 Operating expenses (138.8) (170.5) (225.7) (328.7) (422.3) EBITDA 6.9 16.7 31.9 43.3 57.3 Depreciation & amortisation (3.4) (3.9) (3.9) (3.5) (4.1) EBIT 3.5 12.8 28.0 39.8 53.2 Net interest & invt income (1.3) (1.6) (1.5) (1.0) 0.5 Associates' contribution 2.1 2.0 2.0 6.0 10.0 Exceptional items 1.5 1.2 3.6 - - Pretax profit 5.7 14.4 32.1 44.8 63.6 Tax (1.4) (4.2) (9.4) (13.1) (18.6) Minority interests - - - - - Net profit 4.3 10.2 22.7 31.7 45.0 Wt. shares (m) 285.0 313.5 383.0 570.0 570.0 Shares at year-end (m) 285.0 313.5 509.5 570.0 570.0

BALANCE SHEET (S$ m, FYE Jun) 05 06 07F 08F 09FFixed assets 69.0 69.4 37.5 43.0 47.8 Intangible assets - - - - - Other long-term assets 13.8 15.2 17.1 23.1 33.1 Total non-current assets 82.9 84.5 54.6 66.1 81.0 Cash and equivalents 14.8 24.9 64.4 167.2 162.6 Stocks 32.6 43.7 60.1 86.8 111.9 Trade debtors 19.7 29.1 40.0 57.8 74.5 Other current assets 6.5 9.5 9.5 9.5 9.5 Total current assets 73.6 107.3 174.1 321.3 358.6 Trade creditors 24.6 35.9 49.4 71.4 92.0 Short-term borrowings 20.9 19.9 19.9 19.9 19.9 Other current liabilities 12.1 18.9 25.6 29.3 34.8 Total current liabilities 57.5 74.7 94.9 120.6 146.8 Long-term borrowings 18.4 17.9 17.9 17.9 17.9 Other long-term liabilities 3.3 3.3 3.3 3.3 3.3 Total long-term liabilities 21.6 21.2 21.2 21.2 21.2 Shareholders' funds 77.2 95.7 112.4 245.5 271.5 Minority interests - 0.1 0.1 0.1 0.1 NTA/share (S$) 0.27 0.31 0.22 0.43 0.48

CASH FLOW (S$ m, FYE Jun) 05 06 07F 08F 09FPretax profit 5.7 14.4 32.1 44.8 63.6 Depreciation & non-cash adjustments (7.0) 1.1 1.9 (2.5) (5.9) Working capital changes 7.1 (6.7) (13.9) (22.5) (21.2) Cash tax paid (0.2) (1.1) (2.7) (9.4) (13.1) Others - - - - -Cash flow from operations 5.5 7.7 17.5 10.4 23.5 Capex (3.4) (4.1) (9.0) (9.0) (9.0) Net investments & sale of FA 0.1 0.0 37.0 - - Others (0.6) (0.5) - - - Cash flow from investing (3.9) (4.6) 28.0 (9.0) (9.0) Debt raised/(repaid) 5.1 (2.3) - - - Equity raised/(repaid) - 12.8 - 115.0 - Dividends paid (1.7) (2.5) (6.0) (13.6) (19.0) Cash interest & others (1.5) (1.0) - - - Cash flow from financing 1.9 7.0 (6.0) 101.4 (19.0) Change in cash 3.5 10.1 39.5 102.8 (4.5) Change in net cash/(debt) (1.7) 11.6 39.5 102.8 (4.5) Ending net cash/(debt) (24.5) (12.9) 26.6 129.3 124.8

KEY RATIOS (FYE Jun) 05 06 07F 08F 09FRevenue growth (%) 25.0 28.5 37.6 44.4 28.9 EBITDA growth (%) 30.0 142.4 91.1 35.7 32.3 Pretax margins (%) 3.9 7.7 12.5 12.0 13.3 Net profit margins (%) 2.9 5.4 8.8 8.5 9.4 Interest cover (x) 2.6 7.9 18.4 40.9 nmEffective tax rates (%) 25.2 29.3 29.3 29.3 29.3 Net dividend payout (%) 59% 59% 60% 60% 60%Debtors turnover (days) 49.4 56.7 56.7 56.7 56.7 Stock turnover (days) 81.7 85.2 85.2 85.2 85.2 Creditors turnover (days) 61.6 70.0 70.0 70.0 70.0



APPENDICES…


Shareholding structure

Post-conversion of warrants, the Benjamin family will own 27.0% of the company

Benjamin family owns majority share (22.6%). Frank Benjamin owns the biggest direct stake of 13.5% while his brothers, Nash Benjamin and Mavis Benjamin, own 4.6% and 4.4%, respectively. Nash Benjamin took over as CEO from Frank Benjamin (who has remained as Chairman) in May 06. While Frank Benjamin had established the F J Benjamin label and steered the group through turbulent times during the Asian financial crisis, Nash Benjamin has been responsible for developing its brands organically and acquiring new brands such as Celine. Shareholdings after full conversion of warrants. To date, about 81% of the warrants have been converted. The remainder can be converted into shares on a 1-for-1 basis by 16 Jul 07 at 45cts/per share. After full conversion, the Benjamin family’s stake will be increased from 22.6% to 27.0%.


Management profile

Figure 20: Management biographies

Mr Frank Benjamin Chairman

Chairman and founder of the group. Until Apr 06, he was group CEO. He has more than 40 years of experience in the retail industry. Frank Benjamin has remained as Chairman with his three sons, Douglas, Samuel and Ben taking on management roles.

Mr Nash Benjamin Group CEO

Group CEO. He has been with F J Benjamin since 1968 and has more than 30 years of experience in the retail industry.

Mr Keith Tay Non-Executive Deputy Chairman

Non-executive Deputy Chairman of the group. He was Chairman and managing partner of KPMG Peat Marwick from 1984 to 1993, and is the current Vice-Chairman of the Governing Council of the Singapore Institute of Directors and Chairman of Stirling Capital Limited and Aviva Limited.

Ms Karen Chong CFO

CFO and Joint Company Secretary. She joined F J Benjamin in 1997. She is a Fellow of CPA Australia, Association of Chartered Certified Accountants and a member of the Institute of Certified Public Accountants of Singapore. Karen has more than 10 years of financial and operational experience in the local and overseas retail industry.

Mr Douglas Benjamin

CEO of F J Benjamin (Singapore) Pte Ltd and Divisional CEO of the Creative and Licensing Division. He is responsible for the Singapore operations and international expansion of house labels, Raoul and Paint 8.

Source: CIMB-GK Research


Notes:


CIMB-GK RESEARCH PTE LTD – ANALYSTS’ COVERAGE

SONG Seng Wun (Head of Research & Regional Economist) +65 6210-8602 – [email protected] Regional Economics Singapore, Hong Kong/China

Kenneth NG, CFA (Deputy Head of Research) +65 6210-8610 – [email protected] Banking & Finance DBS Group Holdings Oversea-Chinese Banking Corp. Singapore Exchange United Overseas Bank Limited Others (Materials) Fibrechem Technologies Sino Techfibre Limited

Jonathan NG +65 6210-8650 – [email protected] Technology (IT Services) ECS Holdings Technology (Components & Peripherals) Amtek Engineering Limited Armstrong Industrial Corp Cheung Woh Technologies Limited Creative Technology Limited Elec & Eltek International Limited Huan Hsin Holdings Limited Innovalues Precision Limited Jadason Enterprises Ltd Jurong Technologies Kingboard Copperfoil Magnecomp International Meiban Group Miyoshi Precision MMI Holdings Ltd Seksun Corporation Limited Unisteel Technology Limited Technology (Manufacturing Services) Beyonics Technology Valutronics Holdings Ltd Venture Corporation Limited

KHOO Chen Hsung, CFA +65 6210-8685 – [email protected] Industrial Hong Leong Asia CHT Technology (Semiconductors) Chartered Semiconductor Manufacturing ST Assembly Test Services Limited United Test and Assembly Center Telecommunications MobileOne Limited Singapore Telecoms Limited Starhub Limited Postal Services Singapore Post

Lawrence LYE +65 6210-8994 – [email protected] Industrial Delong Holdings FerroChina Limited Tat Hong Holdings Tai Sin Holdings Yongnam Holdings Limited Transport & Logistics (Land Transport) ComfortDelgro Corporation SMRT Corporation Limited

LIM Siew Khee +65 6210-8664 – [email protected] Conglomerates Keppel Corporation SembCorp Industries Singapore Technologies Engineering Limited Offshore & Marine Cosco Corporation Ezra Holdings Limited Labroy Marine SembCorp Marine Limited Industrial Hiap Seng Engineering Inter-Roller Engineering Rotary Engineering

TAN Wei Ling +65 6210-8669 – [email protected] Transport & Logistics (Airlines & Aviation) SIA Engineering Company Singapore Airport Terminal Services Transport & Logistics Goodpack Limited Petra Foods Olam International

Germaine KHONG +65 6210-8600 – [email protected] Consumer (Retail) Beauty China Best World China Hongxing FJ Benjamin Popular Holdings Limited

Gary NG +65 6210-8699 – [email protected] Healthcare Asiapharm Group Limited Biosensors LMA International Parkway Holdings Limited Raffles Medical Thomson Medical Media Singapore Press Holdings

Jessie LAI +65 6210-8693 – [email protected] Chemicals China Sunsine Sinostar PEC SP Chemicals Industrial (Water Treatment) Hyflux Limited

Sino-Environment Sinomem Technology United Envirotech

Steven TAN +60 (3) 2084-9696 – [email protected] Gaming Genting International Lasseters International

Ivy NG +60 (3) 2084-9697 – [email protected] Plantations Golden Agri Indofood Agri

Raymond YAP, CFA +60 (3) 2084-9769 – [email protected] Transport & Logistics (Airlines & Aviation) Singapore Airlines Transport & Logistics (Shipping) Neptune Orient Lines

Bertram LAI +852 2532-1111 – [email protected] Technology Longcheer Holdings

Alice CHONG +852 2532-1117 – [email protected] Property (China) Pan Hong Property

Robert ADAIR +65 6210-8676 – [email protected] Mining Straits Asia Resources Transport & Logistics (Shipping) Berlian Laju Tanker

Kasem PRUNRATANAMALA +66 2687-0844 – [email protected] Consumer Gems TV Holding Limited Thai Beverage

CIMB-GK Research Pte Ltd Property (REIT) Ascendas REIT CapitaCommercial REIT Mapletree Logistics Trust Property Allgreen Properties Bukit Sembawang CapitaLand Limited City Developments Limited Fraser & Neave Limited Ho Bee Investment Hotel Properties Keppel Land Singapore Land Limited United Overseas Land The Ascott Group Others (Materials) China Sky Chemical Fibre CG Technologies Food & Beverage Celestial NutriFoods Luzhou Bio-Chem Pine Agritech Synear Food


CIMB-GK RESEARCH PTE LTD – DISCLOSURE & DISCLAIMER CIMB-GK Securities Pte. Ltd, a related company of CIMB-GK Research Pte Ltd, does and seeks to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.

By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is strictly confidential and is for private circulation only to clients of CIMB-GK Research Pte. Ltd. (“CIMB-GK”). This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB-GK. CIMB-GK, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB-GK, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB-GK prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.

(i) As of 25 June 2007, CIMB-GK and its affiliates have a proprietary position in the following securities in this report: (a) F J Benjamin. (iv) As of 27 June 2007, the analyst, Germaine Khong who prepared this report, does not own and does not have an interest in the securities in the following company

or companies covered or recommended in this report. (b) F J Benjamin.

The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. This report does not purport to contain all the information that a prospective investor may require. CIMB-GK does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither CIMB-GK nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB-GK’s clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof. This report is issued and distributed by CIMB-GK. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority applies to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GK has no obligation to update its opinion or the information in this research report. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. General: This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia: This research is provided in Australia by CIMB-GK and CIMB-GK notifies each recipient and each recipient acknowledges that CIMB-GK is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cwlth) in respect of financial services provided to the recipient. CIMB-GK is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cwlth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument. Hong Kong: This report is distributed in Hong Kong by CIMB-GK Securities (HK) Limited which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB-GK Securities (HK) Limited. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). Indonesia: Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report has not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE


Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: This report is being distributed by CIMB-GK Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “Order”) who have professional experience in investments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as “relevant persons”). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, £500,000, (b) otherwise, £5 million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than £5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professional experience relating to investments should not rely on this document. United States: Neither this report nor any copy hereof may be taken or distributed into the United States except in compliance with any applicable U.S. laws and regulations. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

CIMB-GK RESEARCH PTE LTD – RECOMMENDATION FRAMEWORK

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months.

TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months.

CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M)


CIMB OFFICES

CIMB Investment Bank Bhd

CIMB-GK Research Pte Ltd

PT CIMB-GK Securities Indonesia

CIMB-GK Securities (HK) Ltd

CIMB-GK Securities (Thailand) Ltd

CIMB-GK Securities (UK) Ltd

(Co. No. 18417-M) (formerly known as Commerce

International Merchant Bankers Bhd) (A Participating Organisation of Bursa

Malaysia Securities Berhad) 10th Floor Commerce Square

Jalan Semantan Damansara Heights

50490 Kuala Lumpur, Malaysia

(Co. Reg. No. 198701620M) 50 Raffles Place #19-00 Singapore Land Tower

Singapore 048623

Jakarta Stock Exchange BuildingTower II, 20th Floor

Jalan Jenderal Sudirman Kav. 52-53

Jakarta 12190, Indonesia

25th Floor, Central Tower 28 Queen’s Road Central

Central, Hong Kong

Unit 3502, 35th Floor Q.House Lumpini Building

1 South Sathorn Road Tungmahamek, Sathorn

Bangkok 10120, Thailand

27 Knightsbridge London, SW1X 7YB

United Kingdom

Tel: +60 (3) 2084-9999 Fax: +60 (3) 2084-9888

Tel: +65 6225-1228 Fax: +65 6224-6906

Tel: +62 (21) 515 1330 Fax: +62 (21) 515-1340

Tel: +852 2868-0380 Fax: +852 2537-1928

Tel: +66 (2) 687-0888 Fax: +66 (2) 677-7538

Tel: +44 (20) 7201-2199 Fax: +44 (20) 7201-2191

germaine khong - f j benjamin holdings ltddistributor of fashion apparel and timepieces in...

Documents