JEP Holdings. Overweight. Ready for takeoff

JEP Holdings Overweight Current Price S$0.040 Fair Value Up / (downside) S$0.063 57% Ready for takeoff  Initiate coverage with an Overweight rec...
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JEP Holdings Overweight Current Price

S$0.040

Fair Value Up / (downside)

S$0.063 57%

Ready for takeoff 

Initiate coverage with an Overweight recommendation and a S$0.063 fair value, based on 10x PER FY14, (30% discount to its peers in the Aerospace industry). Despite its smaller size, we like its niche product segment in the aviation industry with stable orders as well as less competition in South-East Asia. This translates into potential upside of 57% from its current price. We are positive on the prospects of the group, as we believe the growth of the aerospace industry and continued spending in the O&G space will be positive for JEP. The group has continued to expand its product ranges, for new airplanes such as the Boeing 787 Dreamliner.



Niche precision engineering capabilities. JEP is a precision engineering firm manufacturing parts mainly for the aerospace and O&G industries. To bolster its manufacturing capabilities, it acquired Dolphin Engineering in 2012, which will add large format precision engineering and equipment fabrication services to its key business segments.



Long-term orders confirm our thesis. We believe that one of the main strengths of JEP is the industry in which it supplies to, where projects (e.g. commercial planes) typically span many years. It was recently awarded long-term contracts of between 2-5 years for both its major business segments. The first contract in the O&G sector, with Aker Solutions is for five years with potential revenue of around S$14m, while in the aerospace segment, it has received increased orders for aircraft landing gear systems with Messier-Bugatti-Dowty valued at around US$6m, with an option for future orders valued at US$45m between 2015 and 2018.



Aerospace and O&G to be growth drivers, where both major aircraft manufacturers, Boeing and Airbus believe airplanes will more than double in the Asia Pacific region in the next 20 years. Boeing expects growth from 4,710 airplanes in 2011 to 13,670 airplanes in 2031, or an average of almost 10% every year. We believe JEP will stand to benefit as Singapore is considered the leader in Maintenance, Repair and Overhaul (MRO) services in the region. As of FY12, majority of its sales are to the Aerospace and Oil & Gas industries, contributing 42% and 25% of total revenues, respectively.



Oil & Gas capex remains robust. With increasing oil demand coming from emerging countries, the US Energy Information Administration (EIA) expects Brent crude prices to average US$108/barrel and US$101/barrel in 2013 and 2014, respectively and are well above the estimated breakeven of US$80/barrel for continued exploration activities.

Stock Statistics Market cap 52-low 52-high Avg daily vol No of share Free float

S$36.2m S$0.030 S$0.064 6,214,744 884.0m 59%

Key Indicators ROE 13F ROA 13F P/BK Net gearing

7.7% 5.0% 0.95 0.05x

Major Shareholders Ellipsiz Ltd Joe Lau

18.9% 17.8%

Initiating Coverage 22 April 2013

Historical Chart

Key Financial Data (S$ m, FYE Dec) Source: Bloomberg

Joel Ng/Jacky Lee (+65) 6236-6886 [email protected] www.nracapital.com

Sales Gross Profit Net Profit EPS (cents) EPS growth (%) PER (x) NTA/share (cents) DPS (cents) Div Yield (%) Source: Company, NRA Capital estimates

2011

2012

2013F

2014F

2015F

23.8 1.1 (2.2) (0.2) (1,617.5) nm 1.8 0.0 0.0

36.0 6.1 0.9 0.1 137.6 43.7 1.8 0.1 2.5

41.2 8.2 3.7 0.4 337.8 10.0 2.5 0.1 2.5

45.4 10.4 5.8 0.6 56.5 6.4 3.0 0.1 2.5

47.3 10.4 6.3 0.7 9.0 5.8 3.6 0.1 2.5

JEP Holdings Company Background JEP Holdings, previously known as Alantac Technology, was listed on SGX Catalist in 2004. The group provides advanced precision engineering services to the aerospace, oil and gas, and other industrial sectors. As of FY12, majority of its sales are to the Aerospace and Oil & Gas industries, with each contributing 42% and 25% of total revenues, respectively. Within the aerospace sector, they completed many new first articles last year and some had started production recently. Most of the products are for the new generation aircraft, like B787, A350 and A380 and this provides a strong foundation for the future growth of JEP. For example, they had started production and delivery of brake rods for the B787. As part of an on-going strategy to deepen its engagement in the Oil & Gas sector, the group inked a 5-year S$13.7m agreement with Akers Solutions on 8 November 2012, a leading global oilfield products, systems and services company, to provide precision engineering and related services for the manufacture of CLIP Riser Connector. JEPS had also previously secured a similar 5-year agreement with Aker Solutions in 2007. It acquired Dolphin Engineering in January 2012 to strengthen its position as a leading manufacturer of advanced engineering services for the aerospace, oil & gas components, and to enlarge the range of engineering products and services.

Revenue by Segment (S$m) 40 35 30 25 20 15 10 5 0 2008

2009

2010

2011

2012

Aerospace

Oil and Gas

Electronics

Precision Machining

Trading and others

Equipment Manufacturing

Source: Company

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JEP Holdings For the Aerospace industry, it specializes in manufacturing engine casings, whereas in the oil and gas industry, it manufactures oil drilling equipment such as Body Connectors, Clip Risers and related rings. Aerospace parts

Source: Company

Source: Company

Oil and Gas parts

Source: Company

Major Customers. The group’s customers include International Aerospace companies that have set up offices and plants in Singapore. As an initiative by the Singapore government with the support of various agencies (e.g. EDB, Spring, IE, MTI) to establish Singapore as a regional aerospace hub, it has been successful in attracting multinational companies to set up operations here, and these in turn have benefited local companies such as JEP. It counts several big names in the aerospace industry as clients, such as UTC Aerospace Systems, Eaton Corporation, Avitron, Messier Bugatti Dowty, Combuster Airmotive Services (CAS) and MOOG. For non-aerospace customers, its customers include Mazak, Makino Asia, AKER Solutions, Halliburton, Weatherford, Flextronics, Kulicke & Soffa, Waters, SafeEffect and Radicon.

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JEP Holdings Competitors. The group competes with other Singapore precision engineering companies, mainly Small and Medium Enterprises (SMEs) that are mostly private. The group’s manufacturing facilities in Changi

Source: Company

Recently acquired Dolphin Engineering’s manufacturing facilities at Loyang Way

Source: Company

Source: Company

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JEP Holdings Industry Outlook The group’s customers are primarily in the aerospace and Oil & Gas industry, with a combined revenue contribution making up 67% of total revenues for FY12. Asia-Pacific’s growth in air travel. During the next 20 years, nearly half of world’s air traffic growth will be driven by travel to, from, or within the Asia Pacific region, according to Boeing. Total traffic for the region will grow by 6.4% per year. As a result, airlines in the region will need 12,030 new airplanes, valued at US$1.7tn over the next 20 years. The number of airplanes in the Asia Pacific region will triple, from 4,710 airplanes in 2011 to 13,670 airplanes in 2031. Another major airplane manufacturer, Airbus forecasts a total of 28,200 new airplanes worldwide in 2031, with a total market value of US$4tn. Boeing Forecast (2012 to 2031)

New Planes

Value (US$bn)

12,030 7,760 7,290 2,370 2,510 1,140 900 34,000

1,700 970 820 470 260 130 120 4,470

Regional Demand (New Airplanes) Asia Pacific Europe North America Middle East Latin America Commonwealth of Independent States Africa Total Source: Boeing

Higher Fuel cost to help drive orders for new planes. In addition to the growth in air traffic, elevated fuel prices will drive more orders for fuel efficient planes, aided by the abundance of financing and leasing options. Boeing expects fuel savings of 13% on the 737 MAX and Airbus expects 15% on the A320 NEO. Boeing’s 787 is advertised as 20% more fuel efficient than comparable sized airplanes. Boeing and Airbus to increase production. The strong order flow has seen Airbus’ backlog increase to 8 years of production mainly driven by recent orders from Lion Air, Lufthansa and Turkish Air. Boeing’s backlog has also jumped to around 7 years, driven mainly by American and Ryanair’s orders. To meet the increasing demand, Boeing expects to produce 10 planes of 787 per month from the current 5 planes, in addition to the 38 planes per month for 737. Meanwhile, Airbus expects to increase production to 38 narrow-body planes a month in 4Q12 and to 10 A330s and 3 A380s a month in 2013. Airplanes Backlog by Region Africa 0.6% 0.4%

Asia-Pac 26.9% 14.4%

Europe 12.6% 6.6%

Latin America 5.4% 4.1%

Middle East 2.7% 1.1%

North America 9.1% 15.9%

Widebody Airbus Boeing

2.2% 1.9%

19.9% 18.5%

6.4% 10.2%

2.2% 3.3%

13.2% 10.4%

3.7% 8.1%

% of Total Boeing and Airbus

1.8%

40.6%

18.5%

8.5%

8.9%

21.6%

Narrowbody Airbus Boeing

Source: Ascend, Bloomberg

page 5

JEP Holdings Net Aircraft Orders 2008 662 777

Boeing Airbus Source: Boeing, Airbus

2009 142 271

2010 530 574

2011 805 1419

2012 1203 833

2013 * 209 410

*As at 31 March 2013

Singapore is the leader of MRO services in the region. Singapore is considered to be the maintenance, repair and overhaul (MRO) services leader in the region. Singapore holds nearly 25% of the Asia-Pacific market share for MRO activities. Engine overhaul made up the largest portion of MRO spending, generating almost half of the MRO Market. Other significant activities include airframe maintenance, component repair, structural and avionics systems repair and aircraft modification and conversion. These have resulted in establishing Singapore as a preferred one-stop solution provider for MRO servicing. Aerospace industry is set to grow strongly. The Singapore government has identified the aerospace industry as a high-growth pillar of its economy. Since 1990, Singapore’s aerospace industry has grown at a CAGR of 10% to become the most comprehensive MRO hub in Asia, according to EDB Research and Statistics Unit. In 2011, the industry achieved a record output of over S$7.9bn and employed more than 19,000 workers. Within Asia Pacific, the Maintenance, Repair and Overhaul (MRO) market is expected to grow by 5% per annum to US15b in 2016, according to research firm, Aerostrategy. Singapore accounts for around 25% of total market share for aerospace MRO activities within Asia. Government initiatives and investment to support growth. Singapore has taken the opportunity to be an aerospace hub with the growth in air traffic in the region. Local companies have contributed to Singapore’s push to reach this goal, with Singapore Technologies Aerospace (ST Aerospace) leading the charge. It has become the world’s largest third-party MRO Provider. Also, the government has planned to meet needs for the future growth by the development of the Seletar Aerospace Park (SAP), which will host various activities such as R&D and MRO services.

Source: JTC

Strong presence of international aerospace companies. As a result of the government’s support and incentives, the country has been able to attract investments from major Global aerospace players. Rolls-Royce opened its first hollow titanium wide chord fan blades manufacturing facility outside the UK, while GE Aviation has constructed an engine components plant here. Other major companies that have set up operations here include Nelco Aerospace, Pratt & Whitney and Goodrich. In addition to providing assistance and incentives to these international companies, it has assisted local SMEs to develop and upgrade their capabilities in engineering and manufacturing services, creating new and innovative products and

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JEP Holdings processes, establish better market outreach and form strategic groupings to offer a more complete value-chain of services. To support the industry in terms of manpower, the government has pushed for developing the talent pool required by graduating 1,500 aerospace professionals per year, according to the Ministry of Manpower. Established OEM Market to support industry. Singapore’s aerospace OEM sector has experienced close to 14% CAGR over the last decade, according to a report by the US Department of Commerce, with most products designed and manufactured including: engine casings, engine gears, and valves to seats actuators, electrical power systems and galley equipment. Oil and Gas industry to ride on demand growth. The oil and gas industry is expected to remain robust even with decreasing demand from OECD countries, which is expected to be offset by increasing demand from emerging countries such as China and India. EIA puts the world’s annual consumption in 2012 at 89mbpd and forecasts growth of 1% and 1.4% in 2013 and 2014, respectively.

World Liquid Fuels Consumption Growth (mbpd) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8

Forecast

2012 OECD*

2013 Non-OECD Asia

Former Soviet Union

2014 Other

* Countries belonging to the Organization for Economic Cooperation and Development Source: EIA, Short-Term Energy Outlook, March 20123

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JEP Holdings Prices expected to remain above US$100/barrel. The US Energy Information Administration (EIA) expects Brent crude prices to average US$108/barrel and US$101/barrel in 2013 and 2014, respectively. At these price levels, it will still be profitable for continuing O&G exploration activities.

Brent and WSI Prices (US$/barrel) $140 $120 $100 $80 $60 $40 $20 $0 2009

2010

2011

2012

West Texas Intermediate Spot Average

2013

2014 Brent Spot Average

Source: EIA, Short-Term Energy Outlook, March 2013

Capex spending set to increase. Global O&G capex is expected to increase from US$1.04b in 2012 to US$1.2b in 2013, implying growth of almost 16%, according to research company Global Information. Exploration and Production (E&P) is expected to grow even faster at almost 19% yoy in 2013 to reach US$851b. The increase will be driven by increasing efforts by companies to go into deep and ultra-deep offshore areas.

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JEP Holdings Key Risks Volatility in oil prices. Although the two main industries in which it operates have a natural hedge against each other (i.e. a rise in oil prices will benefit the O&G industry while negatively affecting aerospace, and vice versa) with regards to the price of oil, the volatility of oil prices will cause uncertainty in the feasibility of certain projects and ultimately prove detrimental to its customers capex plans, thereby affecting JEP's business. The oil and gas industry is directly dependent on the prices of oil. With current oil prices, there is still incentive for oil and gas exploration companies to continue spending on capex, especially on offshore drilling equipment which is most predominant in Asia. Should oil prices however fall due to oversupply of oil or a drop in demand from shocks to the global economic growth, it will have an adverse effect on oil and gas spending, thus affecting the orders from this sector. Inversely, too high oil prices will affect the aviation industry negatively. With higher jet fuel costs, airlines will find it difficult to survive as it is estimated that fuel accounts for nearly a third of industry costs. Passengers too will find it more expensive to travel and this will result in decrease in passenger volumes. As a result, airlines will have to scale down on airplane purchases and demand for MRO activities and aircraft parts will decrease, thereby affecting JEP’s business. Higher labor costs. As its manufacturing plants are located in Singapore, it is subjected to the increasing cost of business as the government pushes for lowering the dependence on overseas workers. Although the group should benefit from the various incentive schemes being doled out to assist SMEs in raising productivity to counter the higher labor costs, this will prove challenging in the short term. The group will have to carefully manage its costs and continually improve productivity. Competition from local and international players. Even with the lower costs of production for parts in Singapore as compared to the US and European regions, we understand from the group that Poland also offers manufacturing of parts at a competitive price.

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JEP Holdings Management Joe Lau – Executive Chairman and CEO. Founder of JEP Precision Engineering Ptd Ltd. He has more than 20 years of experience in the precision engineering industry and drives all operational matters for the group. Mr Lau was the recipient of the 2006 Entrepreneur Award and the EYA Innovation Award in 2006. He successfully built JEP Precision Engineering Pte Ltd to become an Enterprise 50 award winner in 2007. Koh How Thim – Executive Director. He has extensive experience in the banking and finance industry for more than 20 years. Prior to joining the group, he was Director, Head of Compliance with a Swiss-based private bank. His banking and finance experience included holdings positions as Director of Corporate/Relationship Banking and Director of Treasury of an American bank, Manager, Finance and Administration of a Swiss-based private banking and asset management subsidiary. He has worked with Agilent Technologies, an American MNC in Singapore where he was Asia Pacific Treasury Manager overseeing cash and financial management functions, and the Treasury operations of all the entities located in more than 10 of the Asia Pacific countries. His other experiences in MNC and financial institutions included M&A activities, financial structuring, management of treasury risk and operations, and cross-border business activities and projects. He holds a Bachelor of Arts, Hons (Accounting and Finance) from the University of Northrumbria in Newcastle, United Kingdom and a Master of Business Administration from the University of Leicester, United Kingdom. He is also a member of the Singapore Institute of Directors. Soh Chee Siong - CEO, JEP Precision Engineering. Joined JEP Precision Engineering (subsidiary of the group) in October 2011 as CEO. He started his career with Hamilton Sundstrand Pacific Aerospace Pte Ltd, wholly-owned subsidiary of United Technologies Corporation in 1975. He has more than 30 years of aerospace component manufacturing experience. He rose through the ranks and his last held position was the Plant Manager of the Changi Plant. He was instrumental in setting up Plant 3 in Bedok and Changi Plant in 2000 and 2005 respectively, in support of their expansion plant. Mr Soh joined Rolls Royce Singapore as the Operations Director in April 2010 where he lead a new team and was responsible in setting up the new facility in Seletar Aerospace Park, which focuses in the manufacturing of Wide Chord Fan Blade for the Trent Engine. He holds a Bachelor of Science (Hons) in Business and Management Studies from the University of Bradford. He also holds a Certificate of Accounting & Finance (ACCA), Specialist Diploma in Supply Chain Management (NYP), and a Certificate Quality Manager (SQI). Kuek Tee Meng – Senior Finance Manager. Joined JEP in May 2010. He has served in different Finance management positions spanning over a few industries which included supply chain, fast moving consumer goods, manufacturing and management services. Previously, he was Vice-President, Finance of a local management services company, overseeing the company’s finance function. He was Financial Controller of a SGX-listed company which specialized in manufacturing and distribution of food and beverage products and Deputy Chief Financial Officer of an associate company of a listed company. He is a fellow of the Chartered Institute of Management Accountants, United Kingdom and a member of the Institute of Certified Public Accountant of Singapore. He holds a Masters in Business Administration degree from Southern New Hampshire University, USA.

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JEP Holdings 2H12 Financial Overview 2H12 revenues increased 79% yoy to S$19m, mainly attributable to a new business segment, equipment manufacturing which was introduced to the group arising from the acquisition of Dolphin Engineering. Aerospace and Oil & Gas sectors continued to be the main contributors to the group’s revenue. Gross profit margins improved from negative 22% to positive 21% yoy, largely due to an increase in revenue from the aerospace and equipment manufacturing businesses, a saving cost of raw material, contribution from Dolphin engineering and a decrease in deprecation due to revision of the depreciation policy for heavy plant and machinery. Return to black. The group was able to turn profitable after 3 half-yearly results of incurring losses. This was a result of a combination of income boosted by Dolphin Engineering and a forex gain of S$0.6m in 2H12, but offset by an impairment of S$0.5m for its goodwill for JEP Precision Engineering. Improved balance sheet. The group’s net gearing has dropped to 5.4% as at end Dec 2012 as it generated free cash flow of S$2.8m in 2H12. This was on the back of improvement in shortening its cash conversion cycle by 53 days yoy. The group declared a final dividend of 0.1 cts, translating to dividend yield of 2.6%.

Revenue (S$m), Net Income (S$m), Gross Margins (%) and Net Profit Margins (%)

60 

30.0%

50 

20.0%

40 

10.0%

30 

0.0%

20 

‐10.0%

10 

‐20.0%

0  (10)

‐30.0% 2007

2008

2009

2010

2011

2012

2013F 2014F 2015F

(20)

‐40.0% ‐50.0%

Total Revenue

Net Income

Gross margin (%)

Net profit margin (%)

Source: Company, NRA Capital estimates

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JEP Holdings Valuation and Recommendation Ready to fly. We are positive on the prospects of the group, as we believe the growth of the aerospace industry and continued spending in the O&G space will be positive for JEP. The group has continued to expand its product ranges, manufacturing products for new airplanes such as the Boeing 787 Dreamliner, in addition to existing planes like the Boeing 777 and high performance down hole tool for the O&G sector. More product range. The acquisition of Dolphin Engineering in 2012 has added to the group large format precision engineering and equipment fabrication services to the electronics and semiconductor industry, contract equipment manufacturing and aerospace industries. We believe this should enable the group to broaden its customer base and opportunity to cross-sell products and services. We initiate an Overweight recommendation with a S$0.063 fair value, based on 10x FY14 PER. This translates into potential upside of 45% from its current price. We compared JEP to major companies in the aerospace industry which includes its two major customers, Boeing and Airbus. We then applied a 30% discount to take into account its position in the supply chain and its smaller size. Most of its locally publicly traded peers that are in the precision engineering space do not have significant businesses supplying the segments that JEP is in, namely aerospace and O&G. Most of them tend to cater to the semiconductor and IT industry which commands lower margins compared to the industry that JEP is in and are more volatile due to the rapidity in which new technologies are introduced and the quick changes in consumer demand. On the other hand, the aerospace and O&G industry’s time horizon for projects can last several years, as demonstrated by the recent order wins by JEP that were between 2 to 5 years, with options to extend a few more years. In our industry review, the backlog orders for planes from the two biggest commercial plane manufacturers are more than 5 years each, more than enough headroom should air traffic growth prove to be lower than expectations. In terms of competition, most of its direct competitors in this segment are smaller privately owned SMEs operating independently. In this regard, we believe JEP has an advantage of economies of scale due to its size relative to them. We do not project dividend to increase over the next three years as the group plans to expand its capex.

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JEP Holdings Peer Comparison Code Name JEP HOLDINGS LTD JEP SP HEROUX-DEVTEK IN HRX CN SAM ENGINEERING SEQB MK MEGGITT PLC MGGT LN ASTRONICS CORP ATRO US EDAC TECH EDAC US CPI AEROSTRUCTUR CVU US TRIUMPH GROUP TGI US HEICO CORP HEI US AIRCRAFT MANUFACTURERS BOEING BA US EADS NV EAD FP Average

Price (Local) 0.04 8.11 2.20 480.70 27.93 17.74 8.68 81.28 43.99

MktCap (S$ m) 35.4 312.1 64.5 7179.8 498.8 116.8 90.0 5041.2 2502.8

87.82 38.33

82302.4 51562.7

Actual PER (x) 43.7 11.6 7.2 15.6 18.0 17.1 6.2 13.4 28.0

Y1 PER (x) 10.0 15.4 9.2 12.8 14.7 16.6 8.9 13.4 24.6

Y2 PER (x) 6.4 13.2 8.5 11.7 12.4 15.0 7.1 12.1 21.2

Total Equity (S$m) 40.4 307.0 77.7 3780.5 152.9 44.6 98.5 2253.7 959.8

PBR (x) 1.0 1.2 0.5 2.0 3.2 2.6 0.9 2.0 4.4

ROE (%) 2.6 58.8 8.2 13.2 19.2 18.0 16.6 17.6 15.9

Yield (%) 2.5 na 3.4 2.7 na na na 0.2 0.3

17.2 25.6 18.5

13.8 14.4 14.0

12.2 10.8 11.9

7289.3 16821.1 2893.2

11.3 3.0 2.9

83.1 12.8 24.2

2.2 1.6 1.8

Source: Bloomberg, NRA Capital estimates

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JEP Holdings Profit & Loss (S$ m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates' contribution Exceptional items Pretax profit Tax Minority interests Net profit Wt. shares (m) Shares at year-end (m)

2011 23.8 (22.6) 1.2 (5.7) (4.5) 0.8 0.0 0.0 (3.7) 1.3 0.3 (2.2) 895.8 895.8

2012 36.0 (32.5) 3.5 (4.6) (1.1) 1.9 0.0 0.0 0.8 0.2 (0.1) 0.9 927.6 927.6

2013F 41.2 (35.4) 5.8 (4.9) 0.9 3.7 0.0 0.0 4.6 (0.7) (0.2) 3.7 927.6 927.6

2014F 45.4 (37.6) 7.8 (5.4) 2.3 4.5 0.0 0.0 6.8 (0.8) (0.2) 5.8 927.6 927.6

2015F 47.3 (39.7) 7.6 (5.7) 1.9 5.5 0.0 0.0 7.4 (0.9) (0.2) 6.3 927.6 927.6

Balance Sheet (S$ m, as at Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders' funds Minority interests NTA/share (S$) Total Assets Total Liabilities + S’holders' funds

2011 11.3 18.2 0.0 29.4 11.6 2.1 4.4 1.0 19.0 3.3 2.4 0.0 5.7 2.2 3.6 5.8 34.3 2.5 0.02 48.4 48.4

2012 24.3 21.5 0.0 45.9 3.4 4.0 6.5 1.2 15.1 9.9 2.7 0.0 12.6 2.9 5.0 7.9 37.8 2.6 0.02 61.0 61.0

2013F 23.4 17.5 0.0 40.9 13.1 4.3 7.6 1.2 26.2 10.9 2.9 0.3 14.1 4.3 5.4 9.6 40.6 2.8 0.02 67.1 67.1

2014F 20.0 17.5 0.0 37.5 20.8 4.5 8.4 1.2 35.0 11.2 3.2 0.3 14.7 4.0 5.4 9.4 45.5 3.0 0.03 72.5 72.5

2015F 16.4 17.5 0.0 33.9 30.0 4.8 8.8 1.2 44.7 11.8 3.3 0.4 15.5 3.8 5.4 9.1 50.9 3.1 0.04 78.7 78.7

Cash Flow (S$ m, FYE Dec) Pretax profit Depreciation & non-cash adjustments Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2011 (3.7) 5.7 0.4 (0.1) 0.0 2.3 (1.1) 0.7 0.0 (0.3) (5.4) (1.6) (1.1) (3.3) (11.3) (9.3) (3.9) 6.9

2012 0.8 5.1 (2.1) (0.5) 0.0 3.3 (0.9) (6.8) 0.0 (7.8) 1.0 0.0 0.0 (4.7) (3.7) (8.1) (9.1) (2.2)

2013F 4.6 9.8 (0.7) (0.5) 0.0 13.1 (4.0) 0.0 0.0 (4.0) 1.5 0.0 (0.9) 0.0 0.6 9.7 8.2 6.0

2014F 6.8 5.7 (1.0) (0.8) 0.0 10.7 (2.1) 0.0 0.0 (2.1) 0.1 0.0 (0.9) 0.0 (0.9) 7.7 7.7 13.7

2015F 7.4 5.9 (0.2) (0.8) 0.0 12.3 (2.1) 0.0 0.0 (2.1) (0.1) 0.0 (0.9) 0.0 (1.0) 9.1 9.2 22.9

KEY RATIOS (FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011 (17.4) (32.1) (15.6) (9.1) (13.3) 34.6 0.0 67.0 33.1 52.8

2012 50.9 186.3 2.2 2.4 4.3 (21.9) 0.0 66.4 48.6 121.1

2013F 14.6 65.2 11.1 9.0 17.0 15.0 0.0 67.5 47.5 120.5

2014F 10.0 33.4 15.0 12.8 24.7 12.0 0.0 67.5 47.5 116.8

2015F 4.4 (1.7) 15.7 13.4 27.2 12.0 0.0 67.5 47.5 116.8

Source: Company, NRA Capital estimates

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JEP Holdings

NRA Capital Pte. Ltd (“NRA Capital”) has received compensation for this valuation report. This publication is confidential and general in nature. It was prepared from data which NRA Capital believes to be reliable, 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. No representation, express or implied, is made with respect to the accuracy, completeness or reliability of the information or opinions in this publication. Accordingly, neither we nor any of our affiliates nor persons related to us accept any liability whatsoever for any direct, indirect, special or consequential damages or economic loss that may arise from the use of information or opinions in this publication. Opinions expressed are subject to change without notice. NRA Capital and its related companies, their associates, directors, connected parties and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add or dispose of or may be materially interested in any such securities. NRA Capital and its related companies may from time to time perform advisory, investment or other services for, or solicit such advisory, investment or other services from any entity mentioned in this report. The research professionals who were involved in the preparing of this material may participate in the solicitation of such business. In reviewing these materials, you 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. You acknowledge that the price of securities traded on the Singapore Exchange Securities Trading Limited ("SGX-ST") are subject to investment risks, can and does fluctuate, and any individual security may experience upwards or downwards movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling securities traded on the SGXST. You are aware of the risk of exchange rate fluctuations which can cause a loss of the principal invested. You also acknowledge that these are risks that you are prepared to accept. You understand that you should make the decision to invest only after due and careful consideration. You agree that you will not make any orders in reliance on any representation/advice, view, opinion or other statement made by NRA Capital, and you will not hold NRA Capital either directly or indirectly liable for any loss suffered by you in the event you do so rely on them. You understand that you should seek independent professional advice if you are uncertain of or have not understood any aspect of this risk disclosure statement or the nature and risks involved in trading of securities on the SGX-ST.

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