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The Private Clients Group sees significant upside in Emperador’s recent acquisitions (Whyte &

Mackay, Fundador) and its partnership with E&J Gallo. These moves position the company for (i)

international expansion, (ii) to capitalize on the premiumization of the Filipino market; and (iii)

to take advantage of the inventory shortage of the global whisky market.

We have been recommending Emperador Distillers Inc. (EMP) given our Group’s favorable view of the strength and prospects of the company in the next 12-18 months. We think the stock has lagged due to an under appreciation and misunderstanding by investors and analysts of Emperador’s positively evolving storyline.

Ginebra San Miguel

Emperador, Inc.

Tanduay

As of 9M15, ex-WMG

Source: EMP

A decade after the launch of the first EMP brandy, the

company now offers a broad range of products across all

price points– from value for money brandies to the ultra

premium single malt Scotch Whiskies.

We did not buy EMP in 2013 on belief its industry dominance had hit a point of saturation. However, most recommendations then were BUYS -- on bets that rapid growth will continue. The stock price has since fallen 34% (vs +10% for PSEi) from Nov2013 to March 2016. EMP sought to resolve the issue of a mature Philippine market by embarking on a major expansion overseas in the past 17 months – spending Php 45.5bn to purchase major brands and assets. Today, there is a big mismatch – acutely reflected in the low share price - between the market’s perception of EMP vs. the changes we see. EMP’s focus of premiumization and international expansion are major global trends in the liquor space, which can carry them beyond their current state of affairs.

Acquired 50% stake in Feb. 2014 for Php3.7bil. Bodegas Las Copas is a fully-intergrated producer of

Spanish brandy and owns a 275 hectare vineyard exclusively for brandy distillation in Toledo

Entered into an exclusive agreement to distribute Dalmore,

Jura and John Barr products (W&M) in the U.S. E&J Gallo is the largest wine producer in the world

and one of the biggest importers of int’l brands in the US.

Acquired 100% stake in Oct. 2014 for Php 31.7bn (£430mil). WMG is the 5th largest Scotch Whisky manufacturer in the world and has distribution linkages in over 50 countries

Acquired in Nov 2015 for Php14bil (€275mil). Bodegas Fundador has the largest and

oldest brandy facility in Spain. Its products are sold in over 30

countries worldwide.

Fundador and WMG products are distributed

and sold in over 300+ duty free outlets worldwide

Acquired 100% stake in

Jan. 2013 as part of an initial Php 5.8bn

investment in Spain. Bodega San Bruno is also a Spanish brandy

maker with vineyards in Jerez and owns a collection of rare and

aged brandy

EMP has gained access to the foreign drinking population by pursuing

connections with int’l companies.

W&

G

50 COUNTRIES

E&J GALLO

DUTY FREE

FUNDADOR

Consumers are trading up to more premium products across the globe. This

is due to the rising incomes of the

middle class and emergence of the

Millenials, which makes up a large

portion of EMP’s target market.

This makes consumers more willing to

spend in exchange for better quality

products.

MILLENIALS

Demand for single malt Scotch whiskies

continue to surge, with demand most

aggressive in the U.S. and China.

Meanwhile, supply for age-labeled whiskies (15 yrs above) is in rapid

decline due to limited quantities

produced the past 20 yrs.

Read more >>

Whyte &

Mackay

£540mil

• 5

th largest Scotch whisky

manufacturer in the world

• History of more than 170 years, w/ ownership of the industry’s most iconic brands

• Select whiskies from the Dalmore line listed in the top 10 most expensive liquors in the world

• Products are currently distributed in more than 50 countries, mainly Europe

• Largest wine producer in the world

• Largest exporter of California wine & one of biggest importers of international brands in the US

• Established in 1933, remains one of the world’s most valuable privately held companies and currently employs over 6,000 people worldwide

• Offers broad array of products that total 90 brands, including household names such as Carlo Rossi

Sources: Winefolly.com, E&J Gallo

Company Website

Source: EMP

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