The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited – Translation – The Opinion of the Independent Financial Advisor on the Acquisition of Assets of Dental Corporation Public Company Limited Proposed to Shareholders of Dental Corporation Public Company Limited Prepared by Discover Management Company Limited Page 1/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited This English Translation has been prepared solely for the convenience of the foreign shareholders of Dental Corporation Public Company Limited and should not be relied upon as the definitive and official opinion of the Independent Financial Advisor. The Thai language version of the Opinion of the Independent Financial Advisor is the definitive and official document and shall prevail in all respects in the event of any inconsistency with the English translation. The Opinion of the Independent Financial Advisor on Acquisition of Asset of Dental Corporation Public Company Limited 17 October 2017 No. DM094/2017 Subject: The Opinion of the Independent Financial Advisor on Acquisition of Asset of Dental Corporation Public Company Limited To: Board of Directors, Audit Committee, and Shareholders of Dental Corporation Public Company Limited Attachment: 1) Summary of Dental Corporation Public Company Limited Reference: 1) Resolution of Board of Directors’ meeting of Dental Corporation Public Company Limited No. 5/2017 held on 9 August 2017 2) Information Memorandum on the Acquisition of Asset of Dental Corporation Public Company Limited dated 9 August 2017 3) Audited financial statement of Dental Corporation Public Company Limited for 12 months period ended 31 December 2014 – 2016 and reviewed financial statement 6 months period ended 30 June 2017 4) Annual Report 2016 (Form 56-2) of Dental Corporation Public Company Limited 5) Appraisal report prepared by Bangkok Property Appraisal Company Limited dated 31 July 2017 and CPM Capital Company Limited dated 7 August 2017 6) Draft of Land sale and purchase agreement between Bangkok International Dental Hospital Company Limited and seller 7) Other contracts, related documents, and interviews with key management personnel of Dental Corporation Public Company Limited and the independent appraisers Disclaimers: 1) The study results of Discover Management Company Limited (“Independent Financial Advisor” or “Discover”) in this report are based on information and assumptions provided by management of Dental Corporation Public Company Limited. (“D” or “the Company”) and the Discover Management Company Limited Page 2/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited information of the Company disclosed to the public on the websites of the Securities and Exchange Commission (www.sec.or.th) and the Stock Exchange of Thailand (www.set.or.th) 2) The independent financial advisor shall not be responsible for profits or losses and any impacts resulting from this transaction. 3) The independent financial advisor conducted the study with knowledge, skills, and cautiousness based on the professional ethics. 4) The independent financial advisor considers and provides opinion based on the situation and information at the present time. If such situation and information has been changed significantly, the study results in this report may be affected. According to The Board of Director’s meeting of Dental Corporation Public Company Limited (“the Company” or “D”) No. 5/2017 held on 9 August 2017 has passed a resolution to endorse the Company’s transaction to purchase land which is located at 64, 64/1 Soi Sukhumvit 2, Sukhumvit Road, Klong Toei Sub- District, Klong Toei District, Bangkok (title deed no. 4876, parcel no. 1325 dealing file no. 1350, Khlong Ton Sub-District (South Bangkapi), Phrakhanong District, Bangkok Province) and total area is 3 ngans 21.5 square wah or 321.5 square wah with the approximate price of Baht 273.28 million (Baht 850,000 per square wah). The Company intends to invest in the dental hospital project on the acquired land of which the construction and architecture cost is approximately Baht 135 million which is 7-storey building with 1 basement and total areas of 5,866 square meters, equipment and supplies cost is approximately Baht 40 million. Therefore, the total value of the Project does not exceed Baht 450 million. The Company intends to invest under its subsidiary named Bangkok International Dental Hospital Company Limited (“BIDH”) which is held 99.80% of paid-up capital by the Company. The transaction is considered as asset acquisition in accordance with the Notification of the Capital Market Supervision Board No: Tor Jor 20/2008 Re: Rules for Significant Transactions Constituting an Acquisition or Disposal of Assets dated 31 August 2008 and its amendments, and the Notification of the Stock Exchange of Thailand Re: Disclosure of Information and Practice of Listed Companies Concerning the Acquisition and Disposition of Assets B.E. 2547 dated 29 October 2004 and its amendments ("the Notification of the Acquisition or Disposition of Asset"). However, if calculating by referring to the consolidated financial statement of the Company as of 30 June 2017, it accounts for 99.75% of the Company’s total assets according to the total value of consideration paid (the Company’s total asset is Baht 451.15 million), which is greater than 50% (there is no transaction since the first trading date on 3 April 2017) which is required to be disclosed and the Company is required to receive an approval from the shareholders’ meeting. Therefore, The Board of Director’s meeting of Dental Corporation Public Company Limited (“the Company” or “D”) No. 5/2017 held on 9 August 2017 has passed a resolution to convene the Extraordinary General Meeting of shareholders No. 2/2017 dated 1 November 2017 to approve this transaction with the accepting votes not less than 3 in 4 of the total votes of shareholders who present at the meeting and are Discover Management Company Limited Page 3/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited entitled to vote by not including the votes of shareholders who have the conflict of interest in the transaction and in this case there is no votes from the shareholders who have the conflict of interest in the transaction. The Company approved the appointment of Discover Management Company Limited to be the independent financial advisor (“the independent financial advisor” or “Discover”) of the Company to render an opinion on the reasonableness of price and fairness of the entering into the transaction of the acquisition of asset for proposing to the Extraordinary General Meeting of Shareholders No. 2/2017. The independent financial advisor has given opinion based on assumption of the information from interview, information received from the Company, which are the correct and true information. The independent financial advisor has considered the information carefully and reasonably on the standards of the profession ought to be done. The summary data and study results are as follows; Discover Management Company Limited Page 4/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited Abbreviation Meaning Abbreviation Dental Corporation Public Company Limited: The Company or D Bangkok International Dental Center Company Limited: BIDC Bangkok International Dental Hospital Company Limited: BIDH Dental All (Thailand) Company Limited: DAT The dental hospital project which will be constructed on the Dental Hospital Project or purchasing land Dental Hospital Bangkok Property Appraisal Company Limited: BKKPA CPM Capital Company Limited: CPM The Securities and Exchange Commission, Thailand: SEC Discover Management Company Limited: The Independent Financial Advisor or Discover The Stock Exchange of Thailand: SET Extraordinary General Meeting: EGM Reinforced Concrete: RC Discover Management Company Limited Page 5/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited Table of Content Page Executive Summary 7 1. Characteristics and Details on Acquisition of Asset Transaction 14 1.1. The Reason for Entering into the Transaction 14 1.2. Date of Transaction 15 1.3. The Parties Involved and the Relationship with the Company 15 1.4. Category and Size of the Transaction 15 1.5. Details of Asset Acquisition and Related Investment 17 1.6. The Summary of Related Agreement 23 1.7. Sources of Fund 24 2. Information of Dental Corporation Public Company Limited 26 3. Reasonablenesss and Benefit of Entering into the Transaction 27 3.1. Objective of Entering into the Transaction 27 3.2. Advantages, Disadvantages, and Risk of Entering into the Transaction 27 3.3. Advantages and Disadvantage of not Entering into the Transaction 39 4. Appropriateness of Price for Entering into the Transaction 41 4.1. Appropriateness of Land Acquisition’s Price 41 4.2. Project Feasibility Study 53 5. The Appropriateness of Condition for Entering into the Transaction 73 6. Conclusion of Opinion of the Independent Financial Advisor for Transactions 74 6.1 Appropriateness of Price for Entering into the Acquisition of Asset Transaction 74 6.2 Appropriateness of Condition for Entering into the Acqusition of Asset Transaction 75 6.3 Appropriateness of the Acquisition of Asset Transaction 75 Discover Management Company Limited Page 6/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited Executive Summary Dental Corporation Public Company Limited provides a full range of dental services in both of dental center and dental clinic. Its trading commencement was on 3 April 2017 with the initial public offering of 50,000,000 ordinary shares (par value of Baht 0.50 per share), which accounted for 25% of the total issued and paid-up shares of the Company, at the price of Baht 6.00 per share. The objective of utilizing the capital increase were branches expansion in an amount of Baht 60 million, loan repayment to financial institutions in an amount of Baht 60 million, and the Company’s working capital in an amount of Baht 180 million within 2017. After that, the Company obtained the land offering with total area of 321.5 square wah located in Soi Sukhumvit 2, Bangkok which has potential in expanding the Company’s core business by providing the full range of dental services in the form of dental hospital. The Company planned to use the remaining cash of IPO proceeds approximately equal to Baht 180 million in which the original objective was for the company’s working capital (the change in the use of IPO Proceeds will be considered and approved by the Extraordinary General Meeting No.2/2017) to invest in the dental hospital project. According to The Board of Director’s meeting of Dental Corporation Public Company Limited (“the Company” or “D”) No. 5/2017 held on 9 August 2017 has passed a resolution to endorse the Company’s transaction to purchase land which is located at 64, 64/1 Soi Sukhumvit 2, Sukhumvit Road, Klong Toei Sub- District, Klong Toei District, Bangkok (title deed no. 4876, parcel no.1325 dealing file no.1350, Khlong Ton Sub- District (South Bangkapi), Phrakhanong District, Bangkok Province) and total area is 3 ngans 21.5 square wah or 321.5 square wah with the approximate price of Baht 273.28 million. The Company intends to invest in the dental hospital project on the acquired land of which the construction and architecture cost is approximately Baht 135 million which is 7-storey building with 1 basement and total areas of 5,866 square meters, equipment and supplies cost is approximately Baht 40 million. Therefore, the total value of the Project does not exceed Baht 450 million. The Company intends to invest under its subsidiary named Bangkok International Dental Hospital Company Limited (“BIDH”) which is held 99.80%of paid-up capital by the Company. The transaction is considered as asset acquisition in accordance with the Notification of the Acquisition or Disposition of Asset. However, if calculating by referring to the consolidated financial statement of the Company as of 30 June 2017, it accounts for 99.75% of the Company’s total assets according to the Total Value of Consideration paid, which is greater than 50%(there is no transaction since the first trading date on 3 April 2017) which is required to be disclosed and the company is required to receive an approval from shareholders’ meeting. However, in entering into this transaction, the transaction is not in accordance with type 4 of Acquisition of Asset or Backdoor listing, the listed company or its subsidiaries acquire the asset of non-listed company. In this case, the Company does not submit the request for consideration of new securities. In this transaction, the acquired asset is aimed to expand the Company’s existing business which is dental services business. In addition, there is no significant change in operation policy of core business and there is no significant change of the Board of Directors and/or control of the Company and/or the controlling shareholders Discover Management Company Limited Page 7/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited of the Company. However, if there is any situation occurs which increases the transaction size to be more than 100%, the Company shall comply with the rules according to the Notification of the Acquisition or Disposition of Asset. The Company approved the appointment of Discover Management Company Limited to be the independent financial advisor of the Company to render an opinion on the acquisition of assets and study the details of the transaction. The summary of the transaction is as follows; Appropriateness of Price for Entering into the Acquisition of Asset Transaction In comparison between the land price on the draft of land sale and purchase agreement and the appraisal of two independent property appraisers for public purpose who were certified by The Securities and Exchange Commission Thailand (“SEC”), which are Bangkok Property Appraisal Company Limited (“BKKPA”) and CPM Capital Company Limited (“CPM”). BKKPA and CPM appraised the land price which was equal to Baht 276.49 million and Baht 282.92 million, respectively which were higher than the land price on the draft of land sale and purchase agreement which was equal to Baht 273.28 million. Therefore, the appraised value considered by BKKPA and CPM was higher than the land price approximately of 1.16% and 3.41%, respectively. Therefore, the independent financial advisor has an opinion that entering into the transaction is appropriate due to the price is lower than the appraised value by two independent property appraisers. In addition, the Company entered into the purchase of land transaction to construct the dental hospital project in which the independent financial advisor has conducted the project feasibility study based on the initial assumption from the Company and considered the historical information of Bangkok International Dental Center Company Limited (“BIDC”). The return of the project could be summarized as follows; ▪ The project’s internal rate of return (Project IRR) is between 10.61% – 13.23% per annum which is greater than weighted average cost of capital (WACC) of 9.72% – 9.82% per annum. ▪ The project’s net present value is between Baht 29.41 million – Baht 130.03 million. ▪ The project’s payback period is between 8.41 years – 9.91 years. ▪ The equity’s internal rate of return (Equity IRR) is between 13.38% – 17.45% per annum which is greater than shareholder’s required rate of return (R )of 9.82% – 13.30% per annum e ▪ The equity’s net present value is between Baht 74.46 million – Baht 169.58 million. ▪ The equity’s payback period is between 9.33 years – 11.48 years Under the financial projection on the conservative assumption basis. Project Equity Internal Rate of Return: IRR (Per Annum) 10.61% – 13.23% 13.38% – 17.45% Net Present Value: NPV (Baht Million) 29.41 –130.03 74.46 – 169.58 Payback Period (Year) 8.41 – 9.91 9.33 – 11.48 Note: the calculation is mentioned in topic 4.2 Project Feasibility Study Discover Management Company Limited Page 8/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited Therefore, the independent financial advisor has an opinion that the investment on dental hospital project is possible and worth. Appropriateness of Condition for Entering into the Acquisition of Asset Transaction The independent financial advisor has considered draft land and building lease agreement and deems that most of the conditions benefit to the Company as follows; ▪ The sale and purchase price is lower than the appraised price from two independent property appraisers. ▪ There is a cancel condition if the seller breaks the agreement, seller will return deposit of Baht 30 million, including one-time penalty of the deposit which totaling of Baht 60 million and buyer has rights to sue in accordance with this agreement (as mentioned in topic 1.6 The Summary of Related Agreement) ▪ Fees or tax for transfer of ownership and registration will be paid by seller. Therefore, the independent financial advisor has an opinion that the condition for entering into the transaction is reasonable and beneficial to the Company. In addition, if the Company has readiness in finance as the Company receives the loan from financial institution or fully amount of cash, the Company should make payment and transfer the ownership of land within the short period after the date of signing agreement to reduce the risk that may occur during the time. Reasonableness of Entering into the Acquisition of Asset Transaction In reasonableness of entering into the transaction, the independent financial advisor has considered advantage, disadvantage, and risk of entering to the transaction as follows; Advantage of Entering into the Transaction ▪ The location of land is in the city center and close to target customers which is near BTS’s Phloen Chit Station, Chalerm Maha Nakhin Expressway, and two-way entrance of Sukhumvit road and Rama IV road as it is convenient for customer. In addition, the location of land is close to economic zone of Bangkok such as All-Season Place, and Athenee Plaza Tower which is the center of worker in both Thai and foreigners who stay in Thailand (Expatriate). Moreover, the land is located near Soi Nana which is the residences of Thai and especially Middle East foreigners and tourists. ▪ The purchasing price of Baht 273.28 million (Baht 850,000 per square wah) according to the draft of land sale and purchase agreement is lower than appraised price from two independent property appraisers as the appraised price is between Baht 276.49 million– Baht 282.92 million or Baht 860,000 – Baht 880,000per square wah in which the purchasing price is lower than appraised price approximately of Baht 3.22 million– Baht 9.65 million or 1.16% - 3.41%. (as mentioned in topic 4.1 subject: Summary of Appraised Value by Two Independent Property Appraisers). All fees and tax involved in registration of transferred Discover Management Company Limited Page 9/81 The Opinion of the Independent Financial Advisor Dental Corporation Public Company Limited ownership are paid by the seller which is beneficial to the Company in entering into the transaction. In addition, the location of land is in the center business of Bangkok which the Company will gain the benefit of increasing land price in the future. ▪ The Company can operate the full range of dental services which have operation room and hospital room (IPD) as the opportunity of increasing revenue in providing dental services. ▪ The dental hospital project can help the Company manage cost and administrative expense more efficiently than opening dental clinics. In comparison, BIDC’s profitability showed that BIDC’s gross profit is higher approximately 8% - 10% than the average gross profit of dental clinic and BIDC’s EBIT is higher approximately 7% - 13% than the average EBIT of dental clinic (as mentioned in topic 3.2.1-4) which can show that BIDC can attract the group of medium-high income and foreigners and can manage its cost and expense more efficiently than small branches. In addition, the Company expects that dental hospital project will obtain benefit the same as BIDC in providing the full range of dental services. ▪ The Company will benefit from efficient resource management by using personnel together with its branches both dentists and management department. In addition, the Company will benefit from economies of scales which lead the Company to have high power of bargaining due to the increasing demand of dental equipment and supplies and the decreasing cost and expense of the Company due to the management, marketing expense, public relation and administrative expense can use with its other branches. Disadvantages of Entering into the Transaction ▪ The Company must use large amount of investment in purchasing land and constructing the project’s building by using loan of Baht 270 million and its cash flow of Baht 180 million. The Company’s loans with interest burden will be increased while it currently does not have any loans from financial institution as of 30 June 2017. However, after entering into this transaction, the total liabilities to owner’s equity ratio of the Company is approximately 0.75 times and Loan to owner’s equity of the Company is approximately 0.67 times (as mentioned in topic 3.2.2-1). The independent financial advisor has an opinion that even after entering this transaction, the loan to owner’s equity and total liabilities to owner’s equity ratio will still be less than 1 time. At present, the Company can generate operation cash flow every year as well. After the opening of the dental hospital project, the Company can generate more operating cash flows which there will be no consequence on the Company’s financial position and its existing operation. ▪ The Company must invest in large-scale of investment as the investment comprises land acquisition of Baht 273.28 million,the construction and architecture cost approximately of Baht 135 million,and dental equipment and supplies cost approximately of Baht 40 million. However, the Company can still use working capital of Baht 180 million (the remaining cash from the proceeding of the issuance initial public offering and the performance form the past) Discover Management Company Limited Page 10/81