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Background

The purpose of this study is to:


enhance recognition of the importance of intangible assets and brands identify the most valuable, most productive brands and brand portfolio of Malaysia highlight the impact of intangible assets on Malaysian companies

Brand Finance 2008

Agenda

1. Intangible Asset Study - Global Intangibles Tracker (GIT) 2. Malaysia Brand League Table
- Methodology
- Malaysias Best Rated Brand - Malaysias Most Valuable Brand - Malaysia Top 10

3. Implications for Malaysia Companies

Brand Finance 2008

Agenda

1. Intangible Asset Study - Global Intangibles Tracker (GIT) 2. Malaysia Brand League Table
- Methodology
- Malaysias Best Rated Brand - Malaysias Most Valuable Brand - Malaysia Top 10

3. Implications for Malaysia Companies

Brand Finance 2008

Global Intangible Tracker (GIT)


The Brand Finance Global Intangible Tracker (GIT) is annual review of the worlds intangible study. GIT 2007 covers more than 10,000 companies quoted in 32 countries over a six year period. Most extensive study on intangible assets covering the leading stock markets and incorporates 99% of global listed value.

Brand Finance 2008

GIT Approach and Methodology


Brand Finance took the Enterprise Value of each company in the study, and this was divided into
Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value

Intangible Value refers to the total value of the Enterprise over and above its Tangible Net Assets. This includes brands, patents and technology, contracts, customer lists an relationships, copyrights, design rights, confidential information, human capital, workforce

Brand Finance 2008

Graphically .

Brand Finance 2008

Country Comparisons
The U.S. has the highest proportion of intangible value at 75%. Switzerland has the second highest proportion of intangible value at 74%.

The five countries with the highest level of disclosed intangible asset value 2007 : France (25% of total enterprise value), Germany (19%), Belgium (18%), Italy (17%), and the UK (16%). The five countries with the largest proportion of their value made up of tangible net assets are S. Korea, Croatia, Turkey, Malaysia and Japan.
Brand Finance 2008

How did Malaysia fare ?


100%

90% 80% 36%

70% 7%

Malaysia is in 29th position of the ranking of the intangible component of enterprise value.
Unrecorded Value Disclosed Intangibles

60% 50%

40%

Lags behind Australia, UAE, Singapore, HK Only 43% of Malaysias listed value is contributed by intangibles

30%

57%

Tangible Assets

20% 10%

0% Malaysia

Brand Finance 2008

Agenda

1. Intangible Asset Study - Global Intangibles Tracker (GIT) 2. Malaysia Brand League Table
- Methodology
- Malaysias Best Rated Brand - Malaysias Most Valuable Brand - Malaysia Top 10

3. Implications for Malaysia Companies

Brand Finance 2008

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Selection Criteria
Brand Finance has valued brands and brand portfolios owned by Malaysian companies listed on Bursa Malaysia Companies must be of Malaysian origin. Hence, brands like Guinness-Anchor, Pelikan, Lafarge, KFC etc are excluded. Brands (for e.g. Maxis) are not listed on KLSE, but are of Malaysian origin and have sizeable revenue, so they are included Due to the de-merger of Telekom Malaysia, Brand Finance has valued Celcom separately Many Malaysian conglomerates adopt a monolithic branding strategy. We have valued them as an aggregate of individual listed entities
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Brand Finance 2008

Selection Criteria

Brand Portfolio Value has been defined as the value of trade marks and trade mark licenses, together with associated goodwill.

Valuation date is as at 31 Dec 2007 All quantitative data and listed company sources are obtained from Bloomberg, company annual reports, analyst and industry reports, and all publicly available sources We have used the Relief from Royalty Method

Brand Finance 2008

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Summary of our definitions

Branded Enterprise

Branded Business

Brand
Trademarks

Brand Finance 2008

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Overview of Valuation Approach

Segment A Segment B

1) Overall market and risk analysis

Segment C

Forecasts

revenue costs

3) Financial analysis

Segment A

2) Segment analysis

Royalty Earnings

Segment B
Branded or Brand values

4) Brand Strength / Royalty Rate Study

Segment C

5) Discount Rate

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Understanding value by segment

Geography

Product

Customer
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Brand value mapping (Example)


Site Acquisition Forecourt Hardware Manager Incentives Staff Training Product R&D Systems & Software Promotions Brand Equity Brand Building
Brand Finance 2008

Volume Retail Network Domestic Customers Price

Growth Retail Team Business Customers

Opex

Profits Product Portfolio Capex Working Capital Cashflow


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Royalty relief methodology

Market due diligence

Risk Analysis

Segment Analysis

Comparable Royalties

Margin analysis Sales Forecasts Royalty Rate Study Brand Strength Analysis

Royalty Earnings Discount rate Brand Value

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Relief from Royalty Method


Step 1: Determine forecast revenue

5 key steps

Step 2: Establish Royalty Rate Range

Step 3: Assess the Brand Strength

Step 4: Determine the Discount Rate

Step 5: Brand Valuation Results


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Why use the Royalty Relief approach?

Brand Finance uses the Royalty Relief methodology for three key reasons:1. It is the approach recognised by technical authorities worldwide and favoured by accounting, tax and legal users because it calculates brand values by reference to comparable, third-party transactions It ties back to the commercial reality of brands - their ability to command a premium in an arms length transaction Compliant to the requirement under the International Valuation Standards Committee (IVSC) to determine Fair Market Value of brands
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2.

3.

Brand Finance 2008

Determining Brand Strength


Brand Management

Input Measures

Brand Presence

Brand Awareness

Brand
Strength

Brand Equity

Functional Performance Emotional Connection Brand Preference

Sources: Available market research data Brand Finance panel External panel

Revenue Growth

Output Measures

Market Share Profitability Analyst Ratings S&P Rating

Sources: Bloomberg Historical performance IBES forecasts S&P Credit Rating


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Brand Finance 2008

Brand Strength to Brand Rating


Brand Index 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Brand Rating D D DD DDD C CC CCC B BB BBB AA A+ AAAA AA+ AAAAAA AAA+ AAA+ AAA+

Computed Brand Strength Index = 62

Brand Rating Definitions Rating Definition AAA Extremely Strong AA Very Strong A Strong BBB Average BB Under-performing B Weak CCC Very Weak CC Extremely Weak C Failing

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Malaysias Best Rated Brand with AA + rating

Malaysias Top 50 Brand Rating

AA+
Genting

AAMaybank Maxis TNB Malaysian Airlines Astro

A
Petronas Sime Darby CIMB TM Resorts World Celcom YTL Berjaya Group Lion Group Hong Leong Group DiGi Proton Magnum MISC AmBank UEM KLK PLUS Expressway

BBB
UMW Affin Holdings MMC The Star AirAsia EON Bank Group PPB Setia Hap Seng Boustead WCT Titan Chemicals SCOMI OSK IJM KPJ Healthcare AmInvestment Sin Chew
IOI RHB Capital Alliance Financial Group Kulim Tradewinds Bank Islam

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Malaysias Top 50
Malaysias Top 50 largest brands and brand portfolio amount to MYR64.8bil(US$20bil) Compare this with Australias Top 50 brands at A$80bil (US$70b) and Singapores Top 50 at SGD 36.2bil (US$25bil) Combined value of Top 10 brand account for 56% of total brand portfolio of Malaysias Top 50. We expect (and hope) to see more brand creation and developments effort in future
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Malaysias Top 10
Brand Value
% to Enterprise Value

Brand rating

PETRONAS Genting Maybank Maxis TNB Sime Darby CIMB TM Public Bank Resorts World
Brand Finance 2008

8.3b 4.2b 2.2b 3.3b 3.2b 2.9b 2.7b 2.6b 2.5b 2.3b

2% 12% 8% 9% 5% 6% 7% 13% 7% 12%

AAA+ AAAAAAA A A+ AAA+


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Beyond the Number

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Mapping resources to cash flows Resources


Customer Equity
Acquisition
Marketing Resource

Performance

Value
Business Value Financial Performance
Sales NOPAT CAPEX Margin Growth Risk

Retention

Cross Purchase

In-Market Performance Market

Human Resources

Market Share

Resources and Activities

Relational Resources

Volume Growth

Brand Association
Technology Resource

Brand Preference
Production Resources

Customer Share

Brand Equity

Brand Usage

Physical Resources

Brand Loyalty
Organisational Resources

Brand Commitment
Brand Finance 2008

Brand Value
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Linking marketing metrics to financials

Inputs
Actions

Intermediate Measures
Perceptions Behaviour

Outputs
Perceptions Financials

Activity measures

Brand equity measures

Performance measures

Value and financial measures

Brand Scorecard

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Using your Brand to leverage value


Brand equity affects branded business (and shareholder) value
The brands effect on different stakeholders has a direct impact on the revenue and P&L, and on the long-term value of the business (we term the overall value of the Wilmar business as the enterprise value, which comprises a number of branded businesses) IMPACT OF BRAND DIRECT AUDIENCES Customers/Partners
Customers/Partners: - Gain trust & reputation - Price premium - Increased volume - Market share Suppliers: - Improved terms of business = improved working capital Internal: - drives down staff costs and improves productivity Financial: - reduces risk i.e. drives down WACC

Branded Business Valuation Model


Forecast revenues Costs

Suppliers

Earnings Discount Rate Branded Business Value

Staff

Bankers/Investors

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I can make a whole lot money skillfully managing intangible assets than tangible assets
- Warren Buffet, CEO Berkshire Hathaway

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Contact details
Lucy Gwee
l.gwee@brandfinance.com

Brand Finance 2008

Brand Finance Consultancy (Singapore) Pte Ltd One North Bridge Road Level 6, Unit 34 Singapore 179094 T : (65) 6336 8691 F : (65) 6337 1209 www.brandfinance.com 58