Underwriting, Placements and the Art of Investor Relations

Sherilyn Foong Director / Head of Equity Capital Markets Alliance Investment Bank Berhad 11 June 2008

Underwriting & Placements

Stages Of An IPO

Coordination

Approval Process

Status Review
Monitor progress periodically.

Completion Process
Underwriting, placement & distribution. Pricing. Roadshows. Research & marketing. Investor Relations strategy. Despatch of Prospectus. Listing.

Post Completion
Follow-up on any conditions that may be imposed by the relevant authorities.

Coordinate efforts of all advisers, i.e. due diligence, submissions, documentations.

Liaise with the relevant authorities such as the Securities Commission, Foreign Investment Committee, Ministry of International Trade & Industry, Bursa Securities.

Role Of An ECM Unit Within An Investment Bank

Facilitator of equity & equity-linked transactions
Interface between non-retail buyers and sellers of equity & equitylinked instruments. Sourcing of new IPOs & Private Placements for the Bank. Advising corporate clients on equity market conditions and the suitability to undertake equity or equity-linked transactions.

Underwriter of IPOs
Ensuring that the required equity funding for the Company is available in the event of an IPO undersubscription. Risk undertaken involve subscribing for the underwritten shares in the event of undersubscription.

Placement Agent
Sourcing for new investors that would be interested to acquire new / existing Private Placement shares being offered by the company / existing shareholder(s) and facilitating the resultant primary / secondary market transaction.
4

Underwriting
Underwriting - where an Investment Bank / Universal Broker agrees to subscribe for any unsubscribed shares that has been issued / offered by an Issuer. Objective - ensuring that the required equity funding that a Company needs is available in the event of an undersubscription. In return for the risks undertaken, there is an underwriting commission. For large issues, a Managing Underwriter may be appointed to manage the Co-Underwriters. Underwriting Agreement is the primary legal document. Only the shares offered to the public and employees (pink forms) are typically underwritten in an IPO.
5

Placements
Placement - Placement Agent, usually the same as the Adviser, will place out shares reserved under Private Placement portion to qualified investors. Objective - to look for quality shareholders and to those who can bring value to the company. Book-building - price discovery mechanism to determine market price of an IPO which normally conducted for well known larger issues.

Placements Via Book-Building

Book-Building
Book-building is an exercise where investors submit bids throughout the offer period, indicating demand and price sensitivity. Investors pay at a single price determined after book-building to solicit indications of demand by the company and underwriters, usually lower than the highest bid to create an oversubscription and stable aftermarket.

Advantages
Roadshows will generate publicity and awareness for the IPO. Establishes a larger institutional shareholder base and greater stability in aftermarket. Provides an indication of the market valuation of the IPO shares to retail investors. Leads to a more favourable pricing of the retail tranche.

Placements - Targeted Investors

Statutory Bodies Insurance Funds Asset Management Funds Unit Trust Funds Hedge Funds Corporates High Net Worth Individuals Others

EPF, PNB, Lembaga Tabung Haji, AIG, Great Eastern, Prudential, Alliance Investment, HwangDBS, Public Mutual, Pacific Mutual,

Reaching Out To The Investment Community

Investor Roadshow
Whilst promoting the underlying equity story, we also give clients the widest footprint in terms of investors to place-out the shares to. By doing so, we generate the strongest possible demand & interest in the shares prior to listing. Our placement to quality placees will in turn increase the likelihood of a strong after-market share price performance. ECM will work with specialists in investor relations and the investment community comprising of fund managers and investment analysts to maximise market acceptance of the equity story.

IPO Institutional Placement - Live Case Study

Typical Placement Allocation Of A Main Board Company
Local Statutory Bodies 6%

Corporates 3%

High Net Worth Individuals 45%

Local & Foreign Institutional Funds 46%

10

IPO Institutional Placement - Live Case Study

Book Building Demand

Local & Foreign Insurance Funds 17% Local Statutory Bodies 6% Local & Foreign Insurance Funds 20%

Allocation
Local Statutory Bodies 17%

Local & Foreign Institutional Funds 77%

Local & Foreign Institutional Funds 63%

11

IPO Statistics
Funds Raised In 2007 (excluding REITs)
Second Board 17% RM357,039,263 MESDAQ Market 2% RM47,560,600

Main Board 81% RM1,701,544,930

Number Of Listings Excluding REITs Main 2007 2008* 12 2 Second 8 4 MESDAQ 3 5 Total 23 11

Average Forward PE Main 2007 2008* 9.16 10.99 Second 8.16 7.83 MESDAQ 10.11 9.29
12

* Completed IPOs between the months of Jan-Apr 2008.

The Art of Investor Relations (IR)

13

IR - What It Is
IPOs is like a 1st marriage - once in lifetime event.
To ensure many happy returns, its IR strategy needs to be carefully thought out & planned, and convincingly executed.

IR is the continuous dialogue between your Company and investors and / or the channel medium that feeds the info to be conveyed to investors.
Process of crafting & delivering your Companys story to the investment community, demonstrating its strengths and investment worthiness. IR a fight for space in the media for the hearts & minds of investors.

Amplifies your Companys success in executing its business strategy by providing greater recognition and acceptance. Not just about promotion. Not a substitute for a Companys fundamentals. Consider hiring an IR professional - when doing the job, lets do it right.

14

Elements of an IR Programme
Converting Investors to Buy
Fund managers briefing Analyst briefing News releases Profiling Media briefing

Investible Position
Focus on: Industry niche & business Highlight managements track record & experience

Investor Awareness & Preference

Emphasize financial track record & performance

15

How To Start
Basic scope of work for an IR programme. Therefore, you need to:
identify your Companys key business drivers; recognise your Companys strengths & weaknesses; create & prepare key themes & concise corporate messages; develop a pro-active IR communication plan; and once all the above is ready, implement and continuously implement the IR programme over the next 18 months.

16

Nuts & Bolts of IR

Objective - simplifying your Companys complex story to basic, positive messages to be conveyed ultimately translating the shares of your Company to be an attractive investment destination. Each IR material should contain no more than 3 or 4 key messages. When formulating key messages, the KISS (i.e. Keep It Simple, Stupid) principle works best (max. of 20 words). Consistency of messages & its communication is key. Create & establish an IR Tool Kit.

17

IR Tool Kit - Essentials

At the minimum, an IR Tool Kit should at least contain:
Fact sheet(s) containing company history, profile, biodata of directors and key management personnel and website address; Recent quarterly financial statements (relevant post-IPO) and the most recent annual report; Recent press and media clippings / announcements; and Contact details on the key IR person(s) in your Company.

Dont forget to:

tailor the IR Tool Kit to convey the key messages to be brought across; use clear & unambiguous language; ensure layout & format of IR Tool Kit is user friendly; and constantly review, edit and update the IR Tool Kit to ensure information timeliness & relevancy.

18

Newsworthy Key Messages

Examples of positive key messages might include:
growing PAT. expansion of margins. diversification related to existing core competencies. new contracts clinched, entry into a new market. dividend payout increase. appointment of high profile individual into the senior management team whom is able to further value-add. sector / industry growth and your Companys positioning within it.

Emphasis that your Companys business strategies and expansion plans are sound, realistic & achievable. The experienced, capability and trustworthiness of senior management to meet expectations. Being transparent, responsible and accountable for decisions / actions.
19

Building Positive Media Relations

Always be:
accessible and available to the media, even after office hours. responding fast to queries. having more than 1 spokesperson. fast tracking media calls.

Steps to deal with wrong reporting or misquotes:

First, double-check report to ascertain the mistake / misquote. Second, determine seriousness of error on Company / self. If serious:
call the journalist. then send letter to the editor. Last, request for a retraction / clarification of error soonest.
20

No-Nos When Dealing With The Media

When engaging with the media, DO NOT:
say no comments. say off the record. say anything which casts your Company in a bad light, or badmouthing your competitors. disclose too much about yourself / your Company. lie or make-up stories.
Sometimes you say it best, when you say nothing at all

overanswer. request to check and comment on the media piece before release / publication.
21

Continuity Is Key
IR is an on-going process, in good times and bad. Therefore, your Company needs to:
continuously get on & continue be on investors radar screens.
Management pro-activeness is paramount. Coming clean is essential in order to build & gain trust with investors. Maintaining close contact with the analyst, fund management & financial media communities to rectify unrealistic earnings forecasts & manage expectations.

establish and widen analyst / financial media coverage.

Provides support to the IR programme via creation and maintaining awareness of your Company to existing / potential investors. Plays a large influence & shaping investor perception.

increase the number of new shareholders - both retail & institutional.

1 on 1 meetings with buy-side / institutional investors works best.

build a broker network to maximise liquidity and trading opportunities.

22

Final Word Of Warning

When talking to the media about your Company, be mindful of what is being disclosed / revealed, as certain information could be price sensitive and/or be subject to verification by an independent 3rd party before public release, under the SC and Bursa Malaysias guidelines / listing rules.

23

THANK YOU
Sherilyn Foong Director / Head of Equity Capital Markets M. Irtiza Azmel M. Ismail Associate Director Equity Capital Markets Jason Lee Senior Manager Equity Capital Markets Tel: 03-2717 6680 (Direct) E-mail: sherilyn@allianceinvestment.com.my

Tel: 03-2717 6682 (Direct) E-mail: miazmel@allianceinvestment.com.my

Tel: 03-2717 6681 (Direct) E-mail: jason@allianceinvestment.com.my

24

Disclaimer
This presentation was prepared by Alliance Investment Bank Berhad (Alliance) exclusively for the benefit and internal use of our client to indicate, on a preliminary basis, the feasibility of a possible transaction(s). The terms and structure of the possible transaction(s) in this presentation are preliminary only and implementation is subject to, inter alia, the satisfactory outcome of due diligence (including legal and financial) of the client. Accordingly, the terms and structure of the possible transaction(s) and their implementation may be subject to material changes. This presentation is proprietary to Alliance and may not be disclosed to any third party or used for any other purpose without the prior written consent of Alliance. The information in this presentation is based upon management representations and reflects prevailing conditions and our preliminary views as of this date, which are accordingly subject to changes. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information provided by management. Accordingly, Alliance and its officers, agents or employees do not give any representation or warranty, express or implied, with respect to the information pertaining to the financial position, condition, operation, business and prospects of the client nor shall we or any such person be liable for any information or omission in the information pertaining to the financial position, condition, operation, business and prospects of the client. Alliance is not acting as an adviser or agent to any person to whom this presentation is directed. Such persons must make their own independent assessment of the contents of this paper, should not treat such contents as advice or recommendation by Alliance and its officers, agents or employees on investment matters, legal, accounting or taxation matters and should consult their own advisers. Accordingly, such persons are deemed to rely on their own information and assessment as they deem necessary in order to make any investment decision with respect to the securities in this presentation and their own assessment of the merits and risks of any investment in the securities in this presentation. In this respect, Alliance and its officers, agents or employees shall not accept any responsibility and shall not be liable for the economic risk or any consequences sustained by such persons arising from any investment in the client and/or the securities in this presentation. All pricing of securities and the possible transaction(s) shown in this presentation are for illustrative purposes and are subject to changes as the actual pricing shall only be determined at a later date, after receipt of relevant regulatory approvals and shareholders approval and closer to the launch of the possible transaction(s) after taking into consideration the prevailing capital market conditions, economic conditions and industry specific conditions at that time. Alliance and/or its affiliates may act as principal or agent in any transaction(s) contemplated by this paper, or any other transactions connected with such transaction(s), and may as a result earn brokerage, commission or other income. Nothing in this paper is intended to be, or should be construed as an offer by Alliance and its officers, agents or employees to buy or sell, or invitation to subscribe for, any securities. Neither Alliance nor any of its directors, employees or representatives are to have any liability (including liability to any person by reason of negligence or negligent misstatement) from any statement, opinion, information or matter (express or implied) arising out of, contained in or derived from or any omission from the presentation, except liability under statute that cannot be excluded.

25