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SEEAPPENDIXIFORIMPORTANTDISCLOSURESANDANALYSTCERTIFICATIONSCo.RegNo:198700034EMICA(P):090/11/2009

SUNNYSIDEUPStart

your

day

the

Kim

Eng

way

WhatscookingSingaporeHealthcare:Arecapofunderlyingdrivers

HealthcarestocksinAsiatypicallytradeatpremium

valuations. Other than the defensive nature of the

sector, the appeal lies in the demographic and

structural drivers which point to an increasing

demandforqualityhealthcareservicesoverthe long

term.

We

believe

that

private

healthcare

operators

in

Singaporewouldcontinuetoenjoyrobustgrowthas

we review the underlying drivers and factors that

supportsuchagrowthanditspremiumvaluation.yeakcheekeong@kimeng.com

HotstockLonza Group Ltd (LONZ SP/LONN VX, S$79.97/

CHF58.6, NOT RATED) Lonza is a leading Swiss

contract manufacturer to the pharmaceutical,

healthcareand lifesciences industries.Thecompany

recently secondarylisted on the SGX by way of

introduction as it looks towards Asia as a strategic

region for future growth. Despite a 28% YoY decline

in 1H11 net profit, it expects its underlying order

pipelinetocontinuetospurgrowthinsalesandEBIT

for FY11. The stock currently trades at FY12

consensusPERof10.5x.

yeakcheekeong@kimeng.com TopnewsinbitesizedpiecesOVERNIGHT

Dow Jones ended sharply lower last night

followingGreekPrimeMinisterGeorgePapandreous

announcementthathewillputGreecesbailouttoa

referendum.ThisraisesrealfearsofaGreekdefault.LOCAL

Singapores productivity gains best among 19

economies. A study by the US Department of Labor

has shown that Singapores push for higher

productivity

is

starting

to

pay

off.

The

Republics

manufacturing output per manhour last year made

thebiggestjumpamong19majoreconomies.

Todays marketforecast 2November2011

RAINYLast:2,789.35(66.42)

High:2,820

Low:2,732STITECHNICALSMarket direction is still upward, with resistance

at

2,800

on

the

upside

and

supported

at

2,700

on the downside. But bulls ought to take note

that momentum indicators are approaching

overbought and could turn downward if poor

newsflowemerges.

OvernightmarketsnapshotsDowJones 11,657.96 297.1

Nasdaq 2,606.96 77.5

FTSE100 5,421.57 122.7

CAC40 3,068.33 174.5

DAXIndex 5,834.51 306.8

PlatinumprivilegesKim Eng Research Portal: This is part of our

efforts to better engage YOU, our valued client.

Everything is just a click away. Get actionable

trading ideas each day. Its even iPhone friendly.

Freepublicaccessfornow,somarkdownthissite

and share the joy with your friends!

www.kimengresearch.com.sg

TheRealDealswebcast

Ins & Outs o f Commerc ia l

Proper ty Investment

Speaker:OoiYiTung

In yet another educational session, our property

analyst Ooi Yi Tung shares his views on the retail

property scene and sheds light on the valuation

methodsusedbytheindustry.

Watch

the

video

presentation

of

the

hour

long

talk

(sixparts inall)attendedbymorethan500property

agentson7October2011.

http://www.youtube.com/user/kimengvideohttp://www.youtube.com/user/kimengvideohttp://www.youtube.com/user/kimengvideohttp://www.youtube.com/user/kimengvideo

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2

WHATSCOOKING SingaporeHealthcareAnalyst:YeakCheeKeong6564325730 yeakcheekeong@kimeng.com

Event

Healthcare stocks in Asia typically tradeat premium

valuations.

Other

than

the

defensive

nature

of

the

sector, the appeal lies in the demographic and

structural drivers which point to an increasing

demandforqualityhealthcareservicesoverthelong

term.Webelievethatprivatehealthcareoperatorsin

Singaporewouldcontinuetoenjoyrobustgrowthas

we review the underlying drivers and factors that

supportsuchagrowthanditspremiumvaluation.

OurView

Scarcitycommandsapremium

Since

the

delisting

of

Parkway

Holdings

(Parkway)

andThomsonMedicalCentre (TMC) in 201011,the

onlyreasonablysizedhospitalstockthatisstilllisted

ontheSGXisRafflesMedicalGroup(RMG).Thestock

therefore commands a scarcity premium, even

though it also offers highquality earnings. Likewise,

regional healthcare operator stocks are trading at

suchpremiumlevels.

Thebenchmarkhasbeenset

ParkwayandTMCwereprivatisedatabout31xFY10

PER,setting

a

benchmark

for

valuation

in

the

sector.

Parkwayislookingtorelistinthenext13yearsasan

enlarged entity under its parent, Integrated

Healthcare, combining the assets of Singapores

Parkway and Malaysias Pantai Holdings with 16

hospitals throughout Asia. We believe that the

relisting may happen as early as next year and this

would ignite interest in the sector and reinforce

valuations.

Demographictrendsandrisingaffluence

Singapores population stood at 5.18m as at June

2011

and

this

could

reach

about

6m

in

eight

years,

assuminganannualgrowthrateof2%.Aswithmany

developed countries, it faces an ageing population

due to declining birth rate. At the same time, the

population has been growing from an influx of

foreigners who are not eligible for healthcare

subsidies, thus creating opportunities for private

operators.Risingaffluencealsodrivestheabilityand

willingness to opt for private healthcare over public

healthcare, auguring well for the private sector to

gainmarketshare.

Medicaltourismbuzz

Singapore is also wellestablished as a medical hub,

attracting medical travellers to seek highquality

services with Indonesians forming the majority.

According to the Singapore Tourism Board, tourism

receipts on medical expenses grew by $208m last

yeartoreach$940m.

PeerComparison

Mktcap Price PER(x) P/S P/B ROE NPM NetD/E Yld

Company (b) (lcl) Hist Curr Fwd (x) (x) (%) (%) (%) (%)

RafflesMedicalGroup SGD 1.2 2.23 24.1 23.5 20.8 4.5 3.8 16.9 18.9 1.2 1.6

HealthwayMedicalCorp SGD 0.2 0.08 47.5 1.9 0.8 1.7 3.3 0.2 0.0

ApolloHospitalsEnterprise Rs 69.0 525.50 35.4 28.7 25.0 2.5 3.5 10.4 7.1 69.0 0.7

FortisHealthcareIndia Rs 52.0 128.30 39.7 3.3 1.6 4.8 8.4 52.0 0.0

BangkokDusitMedicalServices Bt 104.7 67.75 26.2 25.4 21.9 3.1 3.6 15.4 9.7 104.7 1.2

BumrungradHospital Bt 29.0 39.75 19.6 20.3 18.8 2.7 4.6 21.8 12.8 29.0 2.4

KPJHealthcare RM 2.5 4.23 19.2 18.9 15.4 1.3 3.0 17.0 7.2 2.5 3.2

Average 30.2 23.3 20.4 2.8 3.0 12.6 9.6 1.3

Source:Bloomberg

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HOTSTOCK LonzaGroupLtdAnalyst:YEAKCheeKeong6564335730 yeakcheekeong@kimeng.com

Uptodatein60seconds

Background: Lonza Group Ltd is a leading

contract

manufacturing

supplier

to

the

pharmaceutical, healthcare and life sciences

industries. Based in Switzerland, its products

span from research to final product

manufacturing. Its four key business divisions

are life science ingredients, microbial control,

custommanufacturingandbioscience.

Recent development: Lonza was secondary

listed by way of introduction on the SGX on

21

October

this

year.

Its

primary

listing

is

on

the

SIXSwissExchangeanddatesbacktoNovember

1999. The rationale for the SGX listing is to

broaden its investor base in Asia and open up

options for capitalraising as Asia emerges as a

strategicimportantregionforfuturegrowth.

Keyratios

Pricetoearnings:10.5x.

PricetoNTA:2.9x

Dividendpershare/yield:CHF2.15/3.7%

Netcash/(debt)pershare:(CHF24.5)

Netgearing:

60.5%

Source:Company,BloombergEverythingelse

Shareprice(CHF) 58.6

Issuedshares(m) 52.92

Marketcap(CHFm) 3,101.12

Freefloat(%) 72%

Recentfundraising

activities

Nil

FinancialYE 31Dec

Majorshareholders

Manning&

Napier

Advisers

(10.00%);

FranklinResources(9.95%)

YTDchange 19.42%

52wkpricerange CHF44.3084.66

Source:Company,Bloomberg

Ourview

Many challenges ahead. Lonza operates 27

productionand

R&D

facilities

globally.

Given

the

complex nature of the business, the barrier to

entry is high. However, it faceschallenges from

a strong Swiss franc, higher raw material cost

and increasing volatility in the pharmaceutical

markets, especially for contract manufacturing.

It seeks to capture new business opportunities

in BRICS and move towards the downstream

valuechain.

Future

growth

and

sustainability

in

Asia.

Asia

offers both an opportunity for growth and cost

advantages. Lonza is investing in several new

plantsinSingaporeandChinaoverthenexttwo

years. Management expects sales in Asia to

growat1420%pathroughto2015,supporting

510%growthinthegroupsoverallsales.

Buildingleadershipinmicrobialcontrol.Lonza

completed the acquisition of US firm Arch

Chemicals on 21 October this year, which

expanded

its

microbial

control

business.

Theacquisition allows it to emerge as a leading

microbial control player and to balance the

volatility in its custom manufacturing business.

Combined 2010 sales for this business would

havebeenUS$1.6bonaproformabasis.

Order pipeline supports underlying growth.

Though 1H11 net profit declined by 28% YoY,

management expects underlying sales and EBIT

growth for 2011 to be supported by its current

order

pipeline.

Based

on

Bloomberg

consensus

estimates, the stock currently trades at 10.5x

FY12PER.

SummaryFinancials

YearEndDec31 2008 2009 2010 1H10 1H11

Revenue(CHFm) 2,937 2,690 2,680 1,301 1,193

Grossprofit(CHFm) 839 545 711 356.0 319.0

Netprofit(CHFm) 419 159 284 135.0 97.0

EPS(CHF) 8.8 3.2 5.6 2.6 1.9

EPSgrowth

(%)

39.2

63.8 74.0 n.a.

n.a.

PER(x) 6.7 18.4 10.6 n.a. n.a.

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4

ResultsCalendar

Company Period Company Period Company Period Company Period Company Period

Frasers

Centrepoint

TrustFY11 Mercator

Li ne s 2Q Biosensors

International2Q China

Merchants3Q HTL

International3Q

GreatEa ste rn 3Q Osim

International3Q

Broadway

Industrial

Group

3QCitySpring

Infrastructure3Q

Sembcorp

Industries3Q

TreasuryChina

Trust3Q Cos co 3Q

LippoMalls

Indonesia

Retail Trust

3Q STEn gi n ee ri n g 3Q

TuanSing

Holdings3Q DBSGroup 3Q

LMA

International3Q

United

Overseas

Insurance

3QHi P

International3Q OCBC 3Q

SinoGrandness

3Q ParkwayLife

REIT3Q

UOB 3Q Sembcorp

Marine3Q

Singapore

Airlines2Q

Company Period Company Period Company Period Company Period Company Period

China Sunsine

Chemical3Q

ARAAsset

Management3Q ASLMa ri ne 1Q Breadta l k 3Q

De l Monte 3Q BestWorld

International3Q

China Aviation

Oi l3Q El l ips i z 1Q

KreuzHol di ngs 3Q Hi apHoe 3Q City

Developments3Q

GoldenAgri

Resources3Q

Ho Be e

Investments3Q CSEGl oba l 3Q IFSCa pi ta l 3Q

Hotel Roya l 3Q DMX

Technologies3Q

Mewah

International3Q

Noble Group 3Q Genting

Singapore3Q OttoMa ri ne 3Q

QAF 3Q Global Logistic

Properties2Q

Pan Pacific

Hotels3Q

Sta rHub 3Q

Macquarie

International

Infrastructure

Fund

3Q

Perennial

China Retail

Trus t

3Q

SuperBowl

Holdings3Q Pe tra Foods 3Q SBSTra ns i t 3Q

Wilmar

International3Q

Qingmei

Group1Q

Singapore

Reinsurance3Q

XinRen

Aluminum3Q Sa izenREIT 1Q SMBUni ted 3Q

SATS 2Q UOLGroup 3Q

ShengSiong

Group3Q

WBL

CorporationFY11

Si ngTel 2Q

StracoCorp 3Q

SuperGroup 3Q

World

Precision

Machinery

3Q

11Nov11

01Nov11

10Nov11

04Nov1103Nov1102Nov11

08Nov11

31Oct11

07Nov11

DAYAFTERHARIRAYA

HAJI

09Nov11

WEDNESDAY THURSDAY FRIDAYMONDAY TUESDAY

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5

APPENDIXI: TERMSFORPROVISIONOFREPORT,DISCLOSURES

AND

DISCLAIMERS

Thisreport,andanyelectronicaccesstoit,isrestrictedtoandintendedonlyforclientsofKimEngResearchPte.Ltd.("KER")ora

relatedentitytoKER(asthecasemaybe)whoare institutional investors(forthepurposesofboththeSingaporeSecuritiesand

FuturesAct

(SFA)

and

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Singapore

Financial

Advisers

Act

(FAA))

and

who

are

allowed

access

thereto

(each

an

"Authorised

Person")andissubjecttothetermsanddisclaimersbelow.

IFYOUARENOTANAUTHORISEDPERSONORDONOTAGREETOBEBOUNDBYTHETERMSANDDISCLAIMERSSETOUTBELOW,

YOUSHOULDDISREGARDTHISREPORTINITSENTIRETYANDLETKERORITSRELATEDENTITY(ASRELEVANT)KNOWTHATYOUNO

LONGERWISHTORECEIVESUCHREPORTS.

Thisreportprovidesinformationandopinionsasreferenceresourceonly.Thisreportisnotintendedtobeanddoesnotconstitute

financialadvice,investmentadvice,tradingadviceoranyotheradvice.Itisnottobeconstruedasasolicitationoranoffertobuy

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offeringsofanysecurities,options,stocksorotherinvestmentvehicles.

Thereporthasbeenpreparedwithoutregardtotheindividualfinancialcircumstances,needsorobjectivesofpersonswhoreceive

it. Thesecuritiesdiscussedinthisreportmaynotbesuitableforallinvestors.Readersshouldnotrelyonanyoftheinformation

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Readersshouldindependentlyevaluateparticularinvestmentsandstrategies,andareencouragedtoseektheadviceofafinancial

adviserbeforemakinganyinvestmentorenteringintoanytransactioninrelationtothesecuritiesmentionedinthisreport. The

appropriatenessofanyparticularinvestmentorstrategywhetheropinedonorreferredtointhisreportorotherwisewilldepend

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Additionalinformationonmentionedsecuritiesisavailableonrequest.

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ANDMAY NOT BE REPRODUCED INANY FORM AND MAYNOT BE TAKEN OR TRANSMITTED INTOTHEREPUBLIC OF KOREA, OR

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TRANSMITTED TO ANY MALAYSIAN PERSON. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF

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2

November

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Research

Pte.

Ltd.

and

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covering

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do

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AnalystCertification:

The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject

securities or issuers; andno partof the researchanalyst'scompensation was, is,or will be, directly or indirectly, relatedto the

specificrecommendationsorviewsexpressedinthereport.

2011 Kim Eng Research Pte Ltd. All rights reserved. Except as specifically permitted, no part of this presentation may be

reproducedordistributedinanymannerwithoutthepriorwrittenpermissionofKimEngResearchPte.Ltd.KimEngResearchPte.

Ltd.acceptsnoliabilitywhatsoeverfortheactionsofthirdpartiesinthisrespect.

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CEO,KimEngResearch