Malaysia 100 2016 - Brand Finance

Malaysia 100 2016

The Brand Finance Top 100 Malaysia Brands 2016 November 2016

About Brand Finance

Brand Finance is the world's leading independent branded business valuation and strategy consultancy. Brand Finance was set up in 1996 with the aim of `bridging the gap between marketing and finance'. For 20 years we have helped companies to connect their brands to the bottom line, building robust business cases for brand decisions, strategies and investments. In doing so, we have helped finance people to evaluate marketing programmes and marketing people to present their case in the Board Room.

world. We are one of the few companies certified to provide brand valuation that is fully compliant with ISO 10668, the global standard on monetary brand valuations.

Transparency There are no black boxes. Our approach is to work openly, collaboratively and flexibly with clients and we will always reveal the details of our modelling and analysis. This means our clients always understand what lies behind `the number'.

Independence Brand Finance is impartial and independent. We access and help to manage brands, but we do not create or own them. We are therefore able to give objective, unbiased advice because we have no vested interest in particular outcomes of a project and our recommendations are entirely independent. We are agency agnostic and work collaboratively with many other agencies and consultancies.

Technical credibility Brand Finance has high technical standards. Our work is frequently peer-reviewed by the big four audit and our work has been accepted by tax authorities and regulatory bodies around the

Expertise We possess a unique combination of skills and experience. We employ functional experts with marketing, research and financial backgrounds, as well as ex-client-side senior management who are used to `making things happen'. This gives us the mindset to think beyond the analysis and to consider the likely impact on day-to-day operations. We like to think this differentiates us because our team has real operational experience.

For more information, please visit our website:

Brand Finance puts thousands of the world's biggest brands to the test every year, evaluating which are the most powerful and most valuable. The Malaysia 100 is just one of the many annual reports produced by Brand Finance. Visit to access all the sectors and countries report.

2. Brand Finance Malaysia 100 November 2016

Malaysia's Top 10 Most Valuable Brands 2016

1.

13%

BV: 10,024 EV: 77,213

3.

BV: 2,050 EV: 17,209

12%

5.

19%

BV: 1,716 EV: 9,161

Brand Value (BV) Enterprise Value (EV)

25%

2.

BV: 2,996 EV: 11,859

4.

BV: 1,895 EV: 11,606

16%

6.

10%

BV: 1,639 EV: 15,665

7.

BV: 1,187 EV: 20,450

6%

6%

9.

BV: 1,087 EV: 16,851

8.

BV: 1,101 EV: 6,830

16%

8%

10.

BV: 1,080 EV: 13,785

Currency: USD millions Brand Finance Malaysia 100 November 2016 3.

Methodology

What do we mean by `brand'?

`Br`aBnrdaend ed EntEenrtperripseri'se'

E.g. Unilever

Definitions +E nterprise Value ? the value of the

entire enterprise, made up of multiple branded businesses

B`BursainnBde`Bseursdsa'inndesesd'

`Brand' Contribution'

`Brand'

E.g. Persil

+B randed Business Value ? the value of a single branded business operating under the subject brand

E.g. Persil

+B rand Contribution? The total economic benefit derived by a business from its brand

Persil

+B rand Value ? the value of the trade marks (and relating marketing IP and `goodwill' attached to it) within the branded business

Definition of `Brand'

Brand Strength

In the very broadest sense, a brand is the focus for all the expectations and opinions held by customers, staff and other stakeholders about an organisation and its products and services. However when looking at brands as business assets that can be bought, sold and licensed, a more technical definition is required. Brand Finance helped to craft the internationally recognised standard on Brand Valuation, ISO 10668. That defines a brand as "a marketingrelated intangible asset including, but not limited to, names, terms, signs, symbols, logos and designs, or a combination of these, intended to identify goods, services or entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits/value"

Brand Strength is the part of our analysis most directly and easily influenced by those responsible for marketing and brand management. In order to determine the strength of a brand we have developed the Brand Strength Index (BSI). We analyse marketing investment, brand equity (the goodwill accumulated with customers, staff and other stakeholders) and finally the impact of those on business performance. Following this analysis, each brand is assigned a BSI score out of 100, which is fed into the brand value calculation. Based on the score, each brand in the league table is assigned a rating between AAA+ and D in a format similar to a credit rating. AAA+ brands are exceptionally strong and well managed while a failing brand would be assigned a D grade.

4. Brand Finance Malaysia 100 November 2016

Methodology

Brand Strength Index (BSI)

Brand `Royalty rate'

Brand revenues

Brand value

Brand investment

Strong brand

Brand equity

Brand performance

Weak brand

Forecast revenues

Brand strength expressed as a BSI score out of 100.

BSI score applied to an appropriate sector royalty rate range.

Split revenue into separate streams for each service area. Royalty rates applied to forecast revenues to derive brand values

Post-tax brand revenues are discounted to a net present value (NPV) which equals the brand value.

Brand Finance calculates the values of the brands in its league tables using the `Royalty Relief approach'. This approach involves estimating the likely future sales that are attributable to a brand and calculating a royalty rate that would be charged for the use of the brand, i.e. what the owner would have to pay for the use of the brand--assuming it were not already owned.

The steps in this process are as follows:

1C alculate brand strength on a scale of 0 to 100 based on a number of attributes such as emotional connection, financial performance and sustainability, among others. This score is known as the Brand Strength Index.

2D etermine the royalty rate range for the respective brand sectors. This is done by reviewing comparable licensing agreements

sourced from Brand Finance's extensive database of license agreements and other online databases. 3C alculate royalty rate. The brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brand's sector is 1-5% and a brand has a brand strength score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4.2%. 4D etermine brand specific revenues estimating a proportion of parent company revenues attributable to a specific brand. 5D etermine forecast brand specific revenues using a function of historic revenues, equity analyst forecasts and economic growth rates. 6A pply the royalty rate to the forecast revenues to derive brand revenues. 7B rand revenues are discounted post tax to a net present value which equals the brand value.

Brand Finance Malaysia 100 November 2016 5.

Malaysia Top 100 Brands 2016

Rank Rank Brand name 2016 2015

1

1 Petronas

2

2 Genting

3

3 Maybank

4

5 YTL

5

4 CIMB

6

6 Sime Darby

7

8 Tenaga Nasional

8

10 TM

9

11 Public Bank

10 7 Maxis

11 9 DiGi

12 17 IOI 13 12 Astro Malaysia

14 14 Axiata

15 15 Berjaya

16 18 RHB Bank

17 13 Celcom 18 16 Malaysia Airlines

19 -

Felda Global Ventures

20 26 MISC

21 22 Hong Leong Financial

22 -

Sunway

23 20 Airasia

24 23 KLK

25 24 Magnum 26 25 IHH

27 21 AmBank

28 27 Setia

29 -

Proton

30 -

SapuraKencana

31 31 Hap Seng

32 -

Eco World

33 37 Bank Islam

34 33 Gamuda

35 36 Dutch Lady Milk

36 29 Malaysia Airports 37 43 U Mobile

38 30 Boustead

39 -

Malakoff

40 32 Batu Kawan 41 28 Parkson

42 66 IJM

43 40 QL Resources

44 -

Mah Sing

45 41 KPJ Healthcare

46 -

UEM Sunrise

47 47 Kossan Rubber Industries

48 -

UEM Edgenta

49 46 Top Glove 50 42 Affin Bank

* -: Companies not appeared on Brand Finance Top 100 2015 Ranking

6. Brand Finance Malaysia 100 November 2016

Brand

%

Brand

Brand

value ($m) change value ($m) rating

2016

2015

2016

10,024 2,996 2,050 1,895 1,716 1,639 1,187 1,101 1,087 1,080

13% 25% 12% 16% 19% 10% 6% 16% 6% 8%

9,479 2,917 2,243 1,914 1,964 1,699 1,244 1,094 1,063 1,315

AA+ AA AA+ AAAAAAA AA AA AA AA+

Brand rating 2015

AA AAAA+ A+ AAAAAAAAA AA AA

Valuation date: 1 January 2016

Malaysia Top 100 Brands 2016

Rank Rank Brand name 2016 2015

51 38 52 34 53 39 54 35 55 45 56 44 57 58 48 59 60 53 61 50 62 51 63 52 64 58 65 57 66 61 67 68 59 69 60 70 71 55 72 73 56 74 62 75 63 76 77 68 78 65 79 70 80 64 81 49 82 84 83 84 71 85 54 86 73 87 78 88 75 89 69 90 76 91 92 97 93 94 74 95 85 96 77 97 72 98 86 99 80 100 79

DRB-Hicom UMW The Star MBSB Alliance Financial Pos Malaysia UOA Group Padini IGB Ta Enterprise Bonia Time dotCom Westports Yes Wah Seong Cahya Mata Sarawak Nirvana Bursa Malaysia Matrix Concepts Guan Chong Cagamas Tropicana Malaysian Reinsurance Kulim Malaysia LPI Capital Eastern & Oriental The Store Bank Muamalat P1 Tan Chong Motor MMC V.S. Industry Malayan Flour Mills Kenanga Puncak Niaga Tune Protect PPB Group Southern Steel DKSH Hiap Teck Venture REDtone Icon Offshore Ikhmas Jaya Lion Corporation MSM Malaysia CCM Masteel United Plantations Takaful Ikhlas Media Prima

* -: Companies not appeared on Brand Finance Top 100 2015 Ranking

Brand

%

Brand

Brand

value ($m) change value ($m) rating

2016

2015

2016

Brand rating 2015

Valuation date: 1 January 2016 Brand Finance Malaysia 100 November 2016 7.

Understand Your Brand's Value

Brand Value Dashboard

[XXX]

$707m

Brand Value (EUR)

650m

$882m

Brand Value (EUR)

729m

$10,216m

Enterprise Value (EUR)

9,399m

Historic brand value performance (EURm)

800

700

600

500

400

320

275

300

213

200

100

0 2011

2012

2013

607 2014

729 2015

650 2016

Peer Group Comparison (USDm) $6,265

$707

[XXX]

Brand Value by Product Segment

Nutrition Performance Materials Other Activities

$3,031

7%

AA+

78/100

$2,328

$1,913

58%

37% 4%

Drivers of Change

Three key areas impact Brand Value (EURm)

18

131

34

729

729

616

616

650

2015

Brand Strength

Business Performance

External Changes

2016

Brand Strength

[XXX]'s brand strength has increased compared to last year.

As the brand continues its sustainability drive, [XXX] has been improving across all CSR scores. It now has the highest CSR scores it has had in the last four years across Environment, Employees and Governance.

The premium approach is also leading to significant margin advantages ? positively affecting "performance".

Business Outlook

Brands drive higher revenues. An investor would therefore pay more for a brand that makes more money.

[XXX]'s revenue base and the 5 year forecast growth have fallen this year, resulting in a loss of $177m USD to total brand value.

However, it is important to note that this has arisen as a result of the company divesting a number of divisions.

Economic Outlook

All future returns are subject to risk. If the risk of not receiving the forecast returns is higher (increasing the discount rate), the brand's market is not growing as quickly as expected (lower long term growth rate) or the tax rate in the brand's regions of operation is higher, then the brand's value is reduced and vice versa.

Brand Strength

2016 78

2015 76

5 Year Forecast Growth

Base Year Revenue (EURm)

2016 2.6% 8,205

2015 3.4% 9,570

Discount Rate Long Term Growth

Tax

2016 9.1% 3.2% 28.9%

2015 8.6% 2.6% 30.2%

Brand Performance

An ideal balanced scorecard of fundamental brand related measures

Brand Strength Index

Brand Performance

10.0

8.0

6.0

4.0

2.0

0.0

Effective Weighting

Best in Class

8.9

6.25% Akzo Nobel Revenue

D[XSXMX]

8.1 Best in Class

5.0 Competitor Average

6.25% Dow Margin %

6.25% Akzo Nobel Forecast Revenue Growth %

8.9

6.25% Du Pont Forecast Margin %

The brand's ability to drive a volume premium. Implied by current and future revenue.

The brand's ability to drive a price premium. Implied by current and future margins.

The brand's ability to improve business prospects across various KPIs

Brand Investment

Proven inputs that drive the Brand Equity and financial results

Brand Strength Index

Brand Investment

10.0 9.3

8.0

7.7

6.0

6.4

5.3

4.0

[DXSXMX]

Best in Class

Competitor Average

2.0

0.0

Effective Weighting

Best in Class

6.25% [XXX] Product

6.25% Du Pont Place

6.25% Multiple People

6.25% Akzo Nobel Promotion

Relative quality of the brand's investment in its products. The measure can include R&D spend and capital expenditure.

Relative quality of a brand's distribution network. It can include the quality of logistical infrastructure available to the brand, the quality of its online presence, or the number and quality of its retail outlets.

Relative quality of the human network supporting the brand. This may include the size of the support network, its likely future growth or the investment in workforce training and human resources.

Relative quality of the brand's promotions. Marketing investment, the quality of visual identity and the effectiveness of the brand's social media is covered by this measure.

A Brand Value Report provides a complete breakdown of the assumptions, data sources and calculations used to arrive at your brand's value. Each report includes expert recommendations for growing brand value to drive business performance and offers a cost-effective way to gaining a better understanding of your position against competitors.

A full report includes the following sections which can also be purchased individually.

Brand Valuation Summary

Overview of the brand valuation including executive summary, explanation of changes in brand value and historic and peer group comparisons.

+ Internal understanding of brand + Brand value tracking + Competitor benchmarking + Historical brand value

Brand Strength Index

A breakdown of how the brand performed on various metrics of brand strength, benchmarked against competitor brands in a balanced scorecard framework. + Brand strength tracking + Brand strength analysis + Management KPI's + Competitor benchmarking

8. Brand Finance Malaysia 100 November 2016

Brand Strength Index 2016

An ideal balanced scorecard of fundamental brand related measures

Effective Weighting

BSI Attributes

Brand Investment

25%

Inputs

25%

6.25%

6.25% 6.25% 6.25%

Product: R&D expenditure,

Capital expenditure

Place:

Website Ranking

People: Number of Employees, Employee Growth

Promotion: Marketing expenditure

Widely recognised factors deployed by Marketers to create brand loyalty and market share. We therefore benchmark brands against relevant input measures by sector against each of these factors.

Brand Strength Index

Brand Equity

50%

Customer 35%

Staff

5%

Financial

5%

External

5%

5.00% 7.50% 7.50% 7.50% 7.50%

5.00%

2.50% 2.50%

1.67% 1.67% 1.67%

Familiarity Consideration Preference Satisfaction Recommendation/NPS

Employee Score

Credit Rating Analyst Recommendation

Environment Score Community Score Governance Score

How do stakeholders feel about the brand vs. competitors?

? Brand equity accounts for 50% to reflect the importance of stakeholder perceptions to behaviour

? Brand Equity is important to all stakeholder groups with customers being the most important

Brand Performance

25%

Outputs

25%

6.25% 6.25% 6.25% 6.25%

Revenue % Margin % Forecast Margin % Forecast Revenue Growth

Quantitative market, market share and financial measures resulting from the strength of the brand.

Brand Valuation Assumptions

Underlying economic assumptions used in valuation

Brand value (EURm)

$650

Brand Investment

Brand Equity

Brand Performance

Strong brand

%X

=$

Forecast revenues

Weak brand

Revenue

Licensing payments for the use of a brand are derived from revenue. Increases or decreases in forecasted revenue increase or decrease the final valuation.

Long Term Growth Rate

After the explicit forecasts, the brand will continue to grow. However, it is unlikely that the company will sustain extraordinary returns into the future so forecast industry growth rates are applied.

Tax Rate

Forecasted royalties are reduced by the tax rate to reflect the actual amount that would be received by the brand owner after tax.

Discount Rate

Earnings in the future are worth less than consumption now. This rate is therefore used to reduce future earnings to their value today.

5 year Compound Annual Growth Rate (CAGR)

2015

2014

2.6%

3.4%

-0.8%

Long Term Growth Rate

2015

2014

3.2%

2.6%

+0.6%

Tax Rate 2015 29%

2014 30%

-1.3%

Discount Rate 2015 9.1%

2014 8.6%

+0.5%

Determining the Royalty Rate

In order to apply the Brand Strength Index, a hypothetical royalty rate range needs to be set

Following the OECD guidelines, Brand Finance sets the hypothetical brand royalty rate ranges by reference to three tests:

? Comparable Agreements: A search of comparable licensing agreements for brands in each industry is conducted every year. The margin analyses are then compared against the royalty rates found in these agreements to analyse the importance of brand in the industry and set an appropriate average industry royalty rate.

? Industry Margins: An analysis of 25% to 40% of margins, generally accepted as rules of thumb for licensing rates for all intangible assets in a company. These rates are adjusted to take into account the importance of brand in a given industry.

? Affordability: Thirdly, an analysis of the brand's specific royalties is conducted. If the brand has been able to sustain extraordinary profits over an extended time it is likely that hypothetical brand owners would be willing to pay closer to the company's margins than the industry average. In the case of Brand Finance's League Table models, affordability will be based on the forecast EBIT.

? Average industry royalty rate ranges can be seen below

High

Mid

Low

Competitor Royalty Rates

Competitor royalty rates will be different based on different strengths of the brand, having different operating segments and company-specific long term affordability

0.8% 0.6%

0.8% 0.6%

0.6% 0.5%

0.8% 0.6%

0.8% 0.7%

1.2% 1.0%

0.00% DSM

[XXX]

[XXX] 78

0.00% BASF

BASF 78

0.00% Dow

Dow 80

0.00% Du Pont

0.00% Akzo Nobel

0.00% Akzo Nobel

Du Pont 80

Akzo Nobel - Corporate

Akzo Nobel ? Paints and Coatings

82

82

Royalty Rates

Trademark Audit

Analysis of competitor royalty rates, industry royalty rate ranges and margin analysis used to determine brand specific royalty rate. + Transfer pricing + Licensing/ franchising negotiation + International licensing + Competitor benchmarking

Cost of Capital

A breakdown of the cost of capital calculation, including risk free rates, brand debt risk premiums and the cost of equity through CAPM. +Independent view of cost of capital for internal

valuations and project appraisal exercises

Analysis of the current level of protection for the brands word marks and trademark iconography highlighting areas where the marks are in need of protection. + Highlight unprotected marks + Spot potential infringement + Trademark registration strategy

For more information regarding our League Table Reports, please contact:

Alex Haigh Head of Brand Value Reports, Brand Finance

a.haigh@

+44 (0)207 389 9400

Valuation date: 1 January 2016 Brand Finance Malaysia 100 November 2016 9.

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