The document discusses strategies for Cerebration, an Asian travel company, to increase profits over the next 2-4 years and build long-term value. It outlines challenges from the global economic crisis and increasing competition. The strategy focuses on expanding in core Asian geographies, expanding the user base, and improving the user experience through technology, marketing, and personnel changes. Financial analysis projects increasing cash balances, profits over $10 million by 2012, and a 56% increase in market value through responsible spending and positive ROI investments.

1. Bobby Brenman Vishal Patel Anupam Bhandari Kyle Gardner CEREBRATION 2009

2. Objective: Increase profits in next 2-4 years building long-term value

3. Challenges Strategy Implementation Financial Analysis Agenda:

4. Global Economic Crisis Increasing Competition Customer Preferences Personalization One-stop shop Information Best deal

5. What can we control?

6. Expansion Strategy

7. 1 Focus on core geographies 2 3 Expand user base Improve user experience Strategy

8. Value Knowledge & Relationships

9. 1 Focus on core geographies Strategy

10. Singapore China, Hong Kong, Macau Philippines Malaysia Thailand Indonesia 6 core geographies

11. Country Projected Travel Increase 2008-2012 % Originating from Core Region (Source Markets) Singapore 26% 68% China 26% 58% Hong Kong 19% 62% Philippines 52% 16% Malaysia 61% 72% Thailand 32% 25% Indonesia 46% 45%

12. 30% Growth by 2012

13. 2 Expand user base Strategy

14. Leisure + Unmanaged Business

15. > S$ 4 B >6% Unmanaged Business Market Size CAGR 2008-2012

16. Partnerships White label VS. Branded

17. 3 Improve user experience Strategy

18. Enhance Create

19. Asia Pacific 1.52 B Mobile Opportunity 2008 19% CAGR

20. 1 Focus on core geographies 2 3 Expand user base Improve user experience Strategy

22. Implementation Plan Technology ▪ Marketing ▪ People

23. Technology

27. Summary Feasibility High Low High Low MyAsiatravel.com

28. Marketing

30. Asiatravel.com is losing visitor share

31. One-stop travel solution New positioning: Company One-stop Flights Inventory Instant Confirmation Business Travel Asiatravel.com + + + + - Agoda.com - - + + - Asiarooms.com - - + + -

32. Channels Online Offline 80% 20% Search engine marketing Banner ads Promotions Print Conventions Tourism bureaus Conversion Awareness

34. People

37. Proposed Structure

40. Financial Analysis

42. * Assumptions: 5% terminal growth rate, 10.31% discount rate Increase market value S$ 30.4MM

43. Revenue Growth Key Assumption Significant slowdown in 2009-2010

44. Long-Term Profitability Key Assumption: Declining Gross Margins (2% Annually)

45. Leisure Remains Principal Segment

46. Product Investments

47. Significant Returns

48. Grow Cash Balance

50. Conclusion

51. Core Regions User base User experience S$ 30.4MM Increase Value

52. Reinforcing system Referrals User base Site Traffic Sales Partners Profits Long term value

54. CEREBRATION 2009 Thank you Terima kasih

55. Appendix Strategic Implementation SWOT Analysis SEO Examples Environmental Analysis Considerations Transnational Matrix Recommendation Market Core Region Analysis Cost Cutting Measures Global Departures Financial Summary Online Booking Trends Sources Consulted Customer Segment Analysis Key Population Trends

57. Environmental Analysis Demographic Trends Aging population while median age stays the same Macroeconomic Impacts Economic downturn and financial crisis Growing middle class seeking to travel Socio-Cultural Influences Increasing online usage Acceptance of e-commerce Political-Legal Pressures Overall political stability with uncertainty in Thailand and Indonesia Technological Developments Internet penetration Mobile penetration Global Trade Issues Fluctuating exchange rate

58. Transnational Matrix Low High Low High Global Integration Local Responsiveness Technology Operations Sales Marketing

59. Core Region Travel Analysis Country 2008 Forecasted Arrivals (mm) 2012 Forecasted Arrivals (mm) Projected Increase from 2008-2012 Source Markets Malaysia 24.01 38.77 61.33% 71.9% Philippines 3.55 5.00 40.80% 16.0% Singapore 11.00 13.90 26.30% 67.7% Indonesia 6.35 9.28 46.14% 45.0% Thailand 15.59 20.65 32.43% 25.4% Hong Kong 30.98 36.95 19.23% 61.5% China 141.86 179.09 26.20% 58.4% Total 233.34 303.64 30.12%

61. Current Online Travel Booking Trends Source: Thought leaders in Marketing Roundtable 2008 Report

63. Key Population Trends Asia Pacific Region’s mean age is increasing but at relatively slow rate. The 20-54 age cohorts are stable segments that should be targeted

64. SEO Examples SEO Paragraph: Sitemap:

68. Financial Appendix Overview Financial Statement Highlights Cash Balance Grows Significantly Profit Growth Key Ratios Sources of Financing Revenue and Profit by Business Employee Salaries Online Leisure Revenue Growth Investments and Costs Results No New Investment Forecast Business Travel Opportunity Results Mobile Opportunity Adoption Rate Results Mobile Growth Long term growth forecasts Valuation Discount Rate Free Cash Flows Sensitivity Comparables Uncertainties Margin Analysis Drivers of Value Top Uncertainties Delaying Investments 1 Year Base Case Assumptions Income Statement Balance Sheet Assumptions Balance Sheet Statement of Cash Flows

69. Financial Statement Highlights

70. Cash Balance Grows Significantly ‘ 09 ‘ 10 ‘ 11 ‘ 12 Importance of maintaining strong cash reserves 1. Signal company strength in a tumultuous period 2. Maintain dividend to shareholders 3. Preserve resources to pursue growth 4. Protection against exogenous shocks

74. Revenue and Profit by Line of Business Implication: AST’s core business, online leisure, will continue to be the most profitable and should receive the primary focus

75. Employee Salaries

76. Online Leisure: Revenue Growth Revenue growth in 2007 and 2008 equaled 23.3% and 21.6% respectively With global downturn, cut growth by 25%-50% in 2009 and 10-25% in 2010 before returning to above-historical levels

77. Online Leisure: Investments and Costs

80. Business Travel Analysis: Opportunity

81. Business Travel Analysis: Results A lucrative line of business producing significant ROI (Amounts in S$’000) 2009 2010 2011 2012 Revenues 267 11,692 20,578 33,954 Gross Profit 67 2,689 4,321 6,451 Amortized Investment Cost 165 305 376 281 Allocated expenses 43 1,754 2,909 4,027 Total After-Tax Incremental Profits (121) 541 891 1,843 Total Investment 494 421 211 211 ROI (25%) 128% 422% 872%

82. Mobile Distribution: Opportunity

84. Mobile Distribution: Results While not a driver a company value from 2009-2012, the mobile distribution channel represents a source of significant future growth for AST (Amounts in S$’000) 2010 2011 2012 Gross Profit 46 86 1,697 All Additional expenses 30 58 1,059 Total After-Tax Incremental Profits 14 24 549 Total Investment 262.5 752.5 402.5 ROI 5.2% 3.2% 136.3%

85. Mobile Drives Long Term Growth

86. Long-Term Growth Forecasts: 2012-2016

87. Valuation: Discount Rate Objective: Compute a reasonable return on equity, r e , at which to discount AST’s free cash flows * http://8percentpa.blogspot.com/2007/06/price-earnings-ratio-and-earnings-yield.html Parameter Value Method Risk-free rate (r f ) + 1.32% Yield on 5-year government bond 3/16/09 (matches investment horizon) Company beta (β) x 0.996 Regressed last 5 years of AST monthly returns vs. Straits Time Index (STI) returns Market risk premium (r m -r f ) = 4.00% Subtracting monthly 5-year government bond from market return yielded negative premium so outside source consulted* Return on equity (r e ) 5.31% Applied Return on equity (r e ) 10.31% Return on equity doubled because (1) it seems rather low (risk-free rate near historical lows) and (2) new investments bear risk – a higher discount rate accounts for such risk

89. Valuation: Sensitivity Market value is highly sensitive to both the growth and discount rates

91. Valuation: Uncertainties Gross Margins drive value

92. Assuming Constant 25% Gross Margins Doubles Profits in 2012

93. Which Uncertainties Drive Value? Gross margins have largest effect on firm value. Business market penetration rate has second biggest effect Dedicating resources to capturing unmanaged business market increases firm value

94. The Top 20 Uncertainties

95. Delaying Investments 1 Year

97. Base Case: Income Statement - -

98. Base Case: Key Balance Sheet Assumptions Item Assumption (All amounts stated in $S‘000) Cash 12% of revenues Receivables 7% of revenues Inventory 6% of cost of sales Prepayments 7% of revenues Tangible Fixed Assets Grow 500 each year Intangible Assets Grow 2,500 in 2009, 1,000 in 2010, and 500 annually beyond in 2011 and 2012 Trade and Other Payables Benchmarked to cost of sales at past 3-year average Deferred Income and Taxation Benchmarked to revenues at past 3-year average Long-term Borrowings Grow 2,000 in 2009, 2,000 in 2010, and stay constant in 2011 and 2012 Shareholders Fund Plug value

99. Base Case: Balance Sheet - -

100. Base Case: Statement of Cash Flows - -