Ariel A.

Alvarez October 12, 2019

MBA II

5. Internal Assessment
5.1 CULTURE

5.1.1 STRENGTH: Iconic brand in the Philippines widely recognized for reliability, efficiency and service
excellence

LBC Express believes that the strength of “LBC” brand is one of its key competitive advantages. The “LBC”
brand has gained significant recognition in the Philippines and among OFWs throughout LBC Express’ over 60-year
operating history. As the first Filipino-owned company to provide time-sensitive courier and cargo delivery services
and the pioneer in 24-hour door-to-door delivery services in the Philippines, LBC Express has a long-established
reputation for being a trustworthy and dependable provider of on-time deliveries of important goods and documents.
Today, LBC Express believes that the “LBC” brand has become synonymous with top quality service. When LBC
Express expanded into the remittance business in the early 1980s, the brand equity and goodwill of the trusted “LBC”
brand contributed to the success of this new business. In addition to its extensive geographic reach and marketing
efforts, LBC Express’ dedication to efficiency, reliability and general service excellence has earned it considerable
goodwill and trust from its customers. The “LBC” brand was one of Reader’s Digest’s Trusted Brand Winners –
Philippine Airfreight/Courier Service Category in 2012 and one of Socialbakers’ top Socially Devoted brands in 2012
and 2013. According to the LISBON Survey, a survey conducted by Market Research Solutions, Inc., an independent
marketing and research firm, LBC Express was considered one of the Best-in-Class Companies in the Philippines for
both the freight forwarding and remittance industries in 2012. According to the LISBON Survey, in 2012, LBC
Express achieved 81% brand awareness/market reach for sea cargo, the highest in the segment, with the closest
competitor achieving 47% recognition. Other prestigious awards bestowed upon LBC Express include: Readers Digest
Trusted Brand Platinum Award Airfreight and Courier Category 2017, Readers Digest Trusted Brand Gold Award
Remittance Category 2017, The Filipino Times Preferred Freight Forwarding Company in the Middle East 2015-2016,
The Filipino Times Preferred Remittance Service Provider in the Middle East 2015-2016, Asia Pacific
Entrepreneurship Award for Corporate Excellence in the Transportation and Logistics Industry category for 2018,
TFC Champion of the Filipino Consumer Award 2015, Silver Anvil Award for LBC “Moving Spaces” Public
Relations Category 2015, Silver Anvil Award for LBC “#moveitformanny” Public Relations Tools Category 2015,
Araw Values Bronze Award for #moveitformanny, branded communications category 2014. To keep up with growing
expectations of customers, LBC Express continues to set challenging targets for itself in terms of delivery efficiency
and customer satisfaction, as well as goals for further improving its image and brand.

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MBA II

5.2 MANAGEMENT

The overall management and supervision of the Company is undertaken by the Company’s Board of Directors.
The Company’s executive officers and management team cooperate with its Board by preparing appropriate
information and documents concerning the Company’s business operations, financial condition and results of
operations for its review. Pursuant to the Company’s articles of incorporation as amended on October 12, 2015, the
Board consists of nine members. Eight of the incumbent directors were duly elected during the Company’s annual
shareholders’ meeting on July 9, 2018, and will hold office until their successors have been duly elected and qualified.

The table below sets forth each member of the Company’s Board.

Name Age Nationality Position

Miguel Angel A. Camahort . 56 Filipino Chairman of the Board
Enrique V. Rey, Jr. 48 Filipino Director
Rene E. Fuentes 45 Filipino Director
Mark Werner J. Rosal 44 Filipino Director
Augusto Gan 56 Filipino Director
Anthony A. Abad 55 Filipino Independent Director
Jason Michael Rosenblatt 42 American Director
Luis N. Yu, Jr. 63 Filipino Independent Director
Solita V. Delantar 75 Filipino Independent Director

The table below sets forth each member of the Company’s senior management.

Name Age Nationality Position

Miguel Angel A. Camahort . 56 Filipino President and Chief Executive Officer
Enrique V. Rey, Jr. 48 Filipino Investor Relations Officer, Chief Finance
Officer, Chief Risk Officer
Rosalie Infantado 43 Filipino Treasurer
Cristina S. Palma Gil- Fernandez. 50 Filipino Corporate Secretary
Mahleene G. Go 38 Filipino Assistant Corporate Secretary, Corporate
Information Officer and Compliance Officer
Ernesto C. Naval III 26 Filipino Alternate Corporate Information Officer
Jeric C. Baquiran 40 Filipino Chief Audit Executive

5.2.1 STRENGTH: Best-in-class management team with established track record

LBC Express’ senior management team has extensive experience in business management and market
development, combined with a deep understanding of the Philippine logistics and remittance industries and a track
record for successful expansion into overseas markets. Their strong management skills and business clear-sightedness
have also been recognized by the wider business community in the region. Under their leadership and guidance, LBC
Express utilizes targeted strategies to maintain and grow its market leadership in established business segments and
compete for additional market share in growing business segments. LBC Express believes that its strong management
team enables it to continue improving the efficiency of its operations, the quality of its service offerings and its ability
to satisfy its customers’ requirements.

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5.3 HUMAN RESOURCE

As of December 31, 2018, LBC Express had, on a consolidated basis, 7,652 full-time employees, compared
to 6,921 and 6,539 full-time employees as of December 31, 2017 and 2016, respectively. The company continues to
add to its workforce on a regular basis in line with the growth of its business. In the next twelve months, the company
expects its workforce to increase to 9,500 full-time employees. Under LBC’s hiring policy, all branch employees must
have at minimum a college degree, while exchange associates and drivers and couriers are generally required to have
completed a two-year vocational course or the second year of college. Employees of LBC Express in the Philippines
are primarily trained in-house. The company maintains a non-contributory defined benefit plan covering all qualified
employees in the Philippines. In addition, in the fourth quarter of fiscal year 2013, the company established an early
retirement option for its employees in the Philippines with a tenure exceeding 10 years. The early retirement option
involves a one-time severance payout for employees who opt in based on annual salary and years of service at the
company. LBC Express expects the early retirement option to bring down the average age and salary of its workforce
in the Philippines and to decrease its salaries and wages expense moving forward.
The following table sets out the number of employees of LBC Express and its subsidiaries by job function as
of December 31, 2018:
Number of Employees
Management and Administrative Associates 189
Central Exchange and Regional Distribution Center Associates 263
Branch Associates 3,602
Drivers and Couriers 1,887
Other 1,711
Total 7,652
____________
Note: Figures presented do not include probational employees (i.e. individuals who had been employed by the company for less than six-months as of
the period indicated)

As of December 31, 2018, four LBC Express subsidiaries in the Philippines have entered into collective
bargaining agreements with their respective employees, with approximately 805 employee memberships.
Approximately 442 of these employees in the Philippines belong to one of the six labor unions and the remaining
approximately 111 employees belong to one of the other five labor unions. LBC Express believes that there is sufficient
coverage by its other, non-unionized subsidiaries to provide back-up support in the event of a disruptive labor dispute
at any given unionized subsidiary. In addition, because freight forwarding and messengerial services may be
considered indispensable to national interest in the Philippines, the Secretary of the Department of Labor and
Employment in the Philippines has the discretion to end strikes or certify the same to the National Labor Relations
Commission for compulsory arbitration pursuant to Article 263(g) of the Philippine Labor Code, even in cases
involving private providers of such services. Such cessation order or arbitration certification would have the effect of
automatically enjoining an intended or impending strike or, if one has already taken place, of requiring all striking or
locked out employees to immediately return to work and all employers to immediately resume operations. LBC
Express has not experienced any disruptive labor disputes, strikes or threats of strikes for at least the past decade.
Management believes that LBC Express’ relationship with its employees in general is satisfactory.
LBC Express complies with minimum compensation and benefits standards as well as all other applicable
labor and employment regulations in all of the jurisdictions in which it operates. The company has in place internal
control systems and risk management procedures, primarily overseen by its Corporate Compliance Group, Labor
Department and Legal Department, to monitor its continued compliance with labor, employment and other
applicable regulations. In addition to full-time employees, the company relies on contractors for the peak seasons, such
as during the Easter and Christmas seasons, to satisfy increased demand for services.

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5.3 MARKETING

The company believes that strategic marketing and targeted sales are crucial to maintaining its competitive
advantage over competitors. In this regard, LBC Express regularly advertises on television, radio and billboards, as
well as in print and on the Internet. LBC Express also brands its ground fleet with the “LBC” logo. In addition, it has
dedicated teams to promote the value of its brand among general consumers as well as to manage long-term corporate
client relationships. It also engages in several community outreach initiatives in line with its commitment to corporate
social responsibility.

5.3.1 Brand Equity

The company considers the “LBC” brand, which has been cultivated over LBC Express’ over 60-year
operating history, to be an integral component of its operational success. LBC Express believes that the brand, the
distinctive red and white “LBC” logo and its key marketing slogans (formerly, “Hari ng Padala,” and currently, “We
like to move it”) have become associated with its reputation for being a convenient, affordable and reliable provider
of its services. As part of its marketing strategy, LBC Express outfits its delivery fleet, branch offices, advertisements
and other marketing materials with the “LBC” logo and believes that its brand equity is one asset that puts it ahead of
its competitors in gaining market share in a fierce competitive environment.

5.3.2 Corporate Salesforce

Corporate sales are conducted through LBC Express’ dedicated sales and marketing teams which, as of
December 31, 2018, comprised 15 field account managers in charge of client relationship management. To better
manage its corporate accounts, LBC Express has also invested in sales order management software designed by SAP
that helps LBC Express maintain records on the processing of sales orders, accounts, inquiries, quotations, contracts,
billing, returns processing, consignment, sales planning, sales reporting and customer analytics. In addition to
automating several aspects of sales record keeping, this program is also expected to help the salesforce gain marketing
and business intelligence as well as improve customer retention.

5.3.3 Advertising
LBC Express regularly advertises over media channels such as TV, radio and print. LBC Express also sponsors
community events such as the Ronda Pilipinas, the largest Philippine cycling race, and sporting events of the Filipino
world champion boxer Manny Pacquiao.

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5.4 FINANCIAL STATUS

The table below sets forth key financial performance indicators for the company for the years ended
December 31, 2016, 2017 and 2018.
Financial Key Performance Indicators
For the years ended
December 31
2016 2017 2018
audited audited audited
Gross profit (service fees less
cost of services) (P millions) ........ 3,104.9 3,414.1 3,950.6
Operating income(1)
(P millions) ................................... 1,386.2 1,438.8 1,603.5
EBITDA(2) (P millions) ............... 1,681.6 1,568.2 2,412.5
EBITDA margin (3)(%) ............... 19% 16% 19%
Net income (4) (P millions) ........... 913.9 707.9 1,349.0
Net profit margin (5) (%) ............ 11% 7% 11%
Total debt(6) (P millions) ............. 1,480.9 4,033.8 3,553.8
Net cash(7) (P millions) ................ (153.1) (255.4) 583.6
__________________
Notes:
(1) Operating income is calculated as income before income tax, interest expense-net and income (expense) related to convertible bonds.
(2) EBITDA is calculated as income before income tax plus depreciation and amortization and interest expense-net. EBITDA is not a measure of
performance under IFRS or PFRS, and investors should not consider EBITDA in isolation or as alternatives to net profit as an indicator of
the company’s operating performance or to cash flow from operating, investing and financing activities as a measure of liquidity or any other

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measures of performance under PFRS. Because there are various EBITDA calculation methods, the company’s presentation of this measure
may not be comparable to similarly titled measures used by other companies.
(3) EBITDA as a percentage of service revenues.
(4) Net income before other comprehensive income.
(5) Net income as a percentage of service revenues.
(6) Total debt includes notes payable (current and non-current portion), lease liabilities (current and non-current, excluding deferred lease
liability from PAS 17 adjustment), convertible instrument and other liabilities (including current portion presented under Accounts Payable).
(7) Calculated as total cash and cash equivalents less total debt.

FINANCIAL RATIOS

2018 2017 2016

Current ratio Current Assets/Current Liabilities 1.71:1 2.51:1 1.67:1
Debt to equity ratio Total Liabilities/Stockholders’ Equity 2.47:1 2.98:1 1.74:1
Debt to total assets ratio Total Liabilities/Total Assets 0.71:1 0.75:1 0.63:1
Return on average assets Net income attributable to Parent 13.08% 8.71% 14.52%
Company/Average Assets(1)
Book value per share Stockholders’ Equity (including non- P2.30 P1.66 P1.73
controlling interest)/Total Number of
Shares
Earnings/(Loss) per share(2) Net Income or (Loss) attributable to Parent P0.95 P0.49 P0.65
Company/ Weighted Average Number of
Common Shares Outstanding

__________________
Notes:
(1) Average assets is Total Assets at the beginning of the period plus Total Assets at the end of the period, divided by two.
(2) Basic and diluted earnings/(Loss) per share are the same for 2016 and 2017. Diluted earnings/(loss) per share for 2018 is P0.68.

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5.5 OPERATIONS

The company’s Philippine Operations puts packages at the heart of their growth strategy. The parcel is a
representation of how LBC does business for the Filipinos. Every innovation ever implemented by the company is in
the interest of making sure these packages arrive safely in the hands of each recipient. No other company recognizes
the sentiment that goes behind each package entrusted to the company. And during a time of evolving priorities, rising
customer demand, and tougher competition, LBC’s Philippine Operations stands out because of the value they place
in every padala. Policies and processes may change, but when you know what truly matters to your customers, LBC
will always find better ways of doing things for their customers.

5.5.1 STRENGTH: Extensive domestic network and broad global reach

LBC Express is a leading provider of express courier services to retail consumers in the Philippines, offering
a reliable, convenient and cost-effective alternative to the Government-owned and operated postal service. From 2006
to 2017, according to the CAB, LBC Express has consistently been the leader in domestic air freight forwarding in the
Philippines in terms of weight. LBC Express’ services are accessible to retail clients through its expansive domestic
distribution network which, as of December 31, 2018, comprised 1,397 owned branches covering nearly 30,000, or
approximately 70% of the total number of, barangays in the Philippines. In addition, LBC Express’ domestic fleet of
2,635 motorcycles and 552 vans as of December 31, 2018 enables the convenience of the door-to-door pick-up service
that has become a hallmark of LBC Express’ value-added offerings. LBC Express’ network also provides coverage in
key international markets with significant overseas Filipino worker (“OFW”) presence, making its services attractive
for both domestic and overseas Filipinos. LBC Express believes that, with its established platform and market position
in the retail logistics industry, it will benefit significantly from the positive growth prospects of the Philippine domestic
economy and private consumption in the coming years, and it seeks to continue growing its core retail Logistics
business, while at the same expanding its logistics offerings and its Money Transfer Services business.
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5.5.2 STRENGTH: Uniquely positioned to benefit from the surging demand for corporate logistics solutions

As the Philippine economy continues to grow and certain industries mature, Philippine corporations are
increasingly outsourcing logistics functions to third party logistics providers. Along with improvement and penetration
of technology and E-commerce in the consumer industries, logistics has become increasingly global in nature, creating
new business opportunities for LBC Express in areas such as international freight forwarding, warehousing and
inventory management. With an established operational platform which includes an extensive domestic and
international distribution network, an integrated IT infrastructure and a widely recognized and trusted brand, LBC
Express believes it is favorably positioned to compete for market share in the growing corporate logistics industry.
LBC Express has already increased its focus on the corporate sector in recent years, broadening its scope of services
from traditional courier and freight forwarding services to specialized corporate solutions such as fulfillment
processing, packaging and repacking, printing and mailing of invoices and others. LBC Express has established close
working relationships with several carriers throughout the Philippines’ major ports. The company also maintains an
extensive network of strategically located warehouses, distribution centers and delivery hubs, which are not yet at full
utilization and can be scaled to grow LBC Express’ corporate logistics segment. LBC Express believes that it will be
well-positioned to capture growth from corporate clients as the Philippine economy continues to grow.

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5.5.3 WEAKNESS: Operation depends to a large extent on the quality of its IT systems

The company’s ability to continue to provide services to a growing number of consumers, as well as to enhance
its existing services and offer new services, is dependent to a large extent on the quality of its IT systems. If the
company is unable to effectively manage the technology associated with its business, it could experience increased
costs, reductions in system availability and loss of agents or consumers. Any failure of its systems in scalability,
reliability and functionality could adversely impact its business, financial condition and results of operations.
LBC Express is currently implementing a series of technology upgrades and believes that its IT systems in
their present format represent one of its competitive strengths. However, its competitors may at any time develop
similar or better systems. The introduction of services embodying new technologies could render the company’s
existing services and features obsolete or less attractive to customers. In addition, the intended benefits of the
company’s technology upgrades may fail to materialize or may cost more than expected. For example, the company
has invested in the put-to-light sorting technology for the processing of its non-bulk mail. It also provided all of its
couriers with handheld scanners and implementing a new integrated technology system. While the company believes
that these improvements will enable it to remain competitive in its industry, there can be no assurance that these
improvements will bring the operational efficiencies, increased capacity and cost-savings sought by the company.
Moreover, even with the technology upgrades, some of the LBC Express’ procedures are not yet fully
automated. For example, certain steps in the sorting of parcels and cargo at the LBC Express’ Central Exchange and
regional distribution centers are still performed manually, which leaves the process more susceptible to human error.
The company expects to continue to commit significant financial resources, time, management expertise, technological
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know-how and other resources to the maintenance and further modification and enhancement of its IT systems in the
future. However, there is no guarantee that its IT systems in their present format, or any improvements and new
developments thereto, will yield the desired results, and there can be no certainty that costs incurred in this respect
will result in improved operational efficiency and/or cost savings. If the company is not successful in achieving
anticipated benefits through maintaining, improving and continuing to develop its IT systems, its operational efficiency
and cost structure relative to its competitors could deteriorate. This could have a material adverse effect on its business,
financial condition and results of operations.

5.5.4 WEAKNESS: Dependent on third party contractors to provide various services

LBC Express relies on third party contractors to provide critical services in connection with its Logistics
business. Most notably, LBC Express does not own its own air fleet or shipping vessels and instead forwards shipments
on commercial carriers such as, among others, Cebu Pacific Air and Philippine Airlines (for domestic air cargo
shipments), Air Asia (for international air cargo shipments) and Oceanic Container Lines, Inc., 2Go Freight and Asian
Marine Transport Corporation (for domestic sea cargo shipments). LBC Express relies on these carriers to provide the
appropriate crew, insurance and maintenance of their respective vessels, as well as timely and reliable service. In
addition, LBC Express relies on Orient Freight International, an international freight forwarder, to arrange for the
shipping (including selection of the international shipping company) of all international sea cargo it handles, as well
as customs brokers in the Philippines and other jurisdictions in which it has operations to facilitate the customs
clearance of all items in international transit. Furthermore, LBC Express also relies on third party contractors to provide
trucking service to supplement LBC Express’ trucking fleet. There can be no assurance that the services rendered by
such third party contractors will be satisfactory and match the quality levels required by LBC Express. Furthermore,
there is a risk that domestic airline carriers such as Cebu Pacific Air and Philippine Airlines may lack the capacity to
meet LBC Express’ volume requirements as LBC Express’ business grows and its throughput increases. If third party
contractors are unable to render their respective services in a manner satisfactory to LBC Express’ qualitative or
quantitative requirements, LBC Express may in turn be unable to render services to its customers or may face
reputational damage for poor service, which could result in a material adverse effect on LBC Express’ business,
financial condition and results of operations. Because of the limited number of alternative domestic commercial airline
carriers, unavailability or unsatisfactory performance of LBC Express’ existing contractors could affect the ability of
LBC Express to provide its services in a cost-effective and satisfactory manner, or at all. LBC Express may also be
vulnerable to increases in the cost of services provided by such third party contractors, as it may have little bargaining
power in a concentrated market. Accordingly, LBC Express business, financial condition and results of operation are
heavily dependent upon third parties over whom it has limited control.

5.5.5 WEAKNESS: The Company does not own any real property

The company does not own any real property, and LBC Express’ registered office, distribution centers,
delivery hubs, warehouses, branch offices and administrative office space are located in leased premises. LBC Express
enters into lease agreements that are typically renewable at LBC Express’ option at such terms and conditions which
may be agreed upon by both parties. Most of the lease agreements for branch offices are for a term of three to seven
years and include rental rate escalations during the term of the lease. LBC Express believes that the leases it enters
into in the future will likely be on similar terms and have similar renewal options. However, if the company is subject
to substantial and/or unforeseen increases in rental rates upon renewal, its profitability may be materially and adversely
affected. Likewise, if LBC Express is unable to renew the leases for its distribution centers, delivery hubs, warehouses,
branch offices and administrative offices, LBC Express may be forced to close or relocate its operation centers, which
could subject the company to significant costs and risks, including loss of customer traffic. Moreover, certain spaces
that LBC Express leases, such as the hangar in the General Aviation Center that serves as its corporate headquarters
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as well as the Central Exchange and is only renewable on a month-to-month basis, are not easily substituted given the
specific uses for which they are applied. A need to relocate any of LBC Express’ distribution center locations could
have a material adverse effect on the company, financial condition and results of operations. In general, LBC Express’
leases for its branches and offices average five (5) year terms. This excludes the leasing of the hangar since regulations
dictate that this be renewed monthly. If, at any point, LBC Express is not able to renew its hangar lease agreement,
LBC Express will move its operations to any of its other 14 distribution centers.

5.6 INFORMATION SYSTEM

The company uses a comprehensive suite of customized business management solutions software designed
and licensed by SAP. LBC Express has utilized SAP’s Financial Accounting and Controlling (SAP FICO), Sales and
Distribution (SAP SD) and Materials Management (SAP MM) modules. The company has migrated SAP System
Landscape to SAP HANA Enterprise Cloud which enables scalability with low risk deployments and leverage on SAP
HEC’s Fully Managed Services which covers Infrastructure and Database related activities. Thus, freeup IT resources
and saves on cost for the company. SAP Financial modules were also rolled-out to Middle East countries like UAE,
KSA and Bahrain for ease of financial reporting and consolidation and in compliance with the VAT Implementation
in the Gulf Cooperation Council (GCC) Region.

5.6.1 WEAKNESS: The Company does not own the perpetual license of its IT software

LBC Express does not own the perpetual use license for its software and the use of the license for the software
is normally renewable periodically. In the event that the company is not able to renew its software licenses at
acceptable terms, the company’s operating and financial results may be adversely affected. While LBC Express relies
on software providers for the use of their systems for its key operations, these software providers are by no means the
only providers of such software in the market. There are a number of software providers that provide similar systems
and technology with the same functionality. In the event that current software providers will not renew the software
licenses on acceptable terms, the company believes that other software providers will be available to provide similar
and comparable systems as alternatives.

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Weighted
Internal Factors Weight Rating
Score
Strengths

1. Iconic brand in the Philippines widely recognized for reliability, efficiency

0.15 3 0.45
and service excellence.

2. Best-in-class management team with established track record. 0.05 3 0.15

3. Extensive domestic network and broad global reach 0.15 5 0.75

4. Uniquely positioned to benefit from the surging demand for

0.05 3 0.15
corporate logistics solutions.

Weaknesses

1. Operation depends to a large extent on the quality of its IT systems 0.30 3 0.90

2. Dependent on third party contractors to provide various services 0.20 3 0.60

3. The Company does not own any real property 0.05 2 0.10

4. The Company does not own the perpetual license of its IT software 0.05 2 0.10

Total Scores 1.00 3.20

INTERNAL FACTOR EVALUATION

ANALYSIS:

Strengths

1. Iconic brand in the Philippines widely recognized for reliability, efficiency and service excellence

This factor is given a weight of 0.15 and a rating of 3. LBC Express continues to set challenging targets for
itself in terms of delivery efficiency and customer satisfaction, as well as goals for further improving its image and
brand to keep up with growing expectations of customers.

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MBA II
2. Best-in-class management team with established track record.

This factor is given a weight of 0.05 and a rating of 3. Their strong management skills and business clear-
sightedness have also been recognized by the wider business community in the region. LBC Express believes that its
strong management team enables it to continue improving the efficiency of its operations, the quality of its service
offerings and its ability to satisfy its customers’ requirements.

3. Extensive domestic network and broad global reach

This factor is given a weight of 0.15 and a rating of 5. LBC will benefit significantly from the positive growth
prospects of the Philippine domestic economy and private consumption in the coming years, and it seeks to continue
growing its core retail Logistics business, while at the same expanding its logistics offerings and its Money Transfer
Services business.

4. Uniquely positioned to benefit from the surging demand for corporate logistics solutions.

This factor is given a weight of 0.05 and a rating of 3. The company believes it is favorably positioned to
compete for market share in the growing corporate logistics industry. LBC Express has already increased its focus on
the corporate sector in recent years, broadening its scope of services from traditional courier and freight forwarding
services to specialized corporate solutions such as fulfillment processing, packaging and repacking, printing and
mailing of invoices and others.

Weaknesses

1. Operation depends to a large extent on the quality of its IT systems

This factor is given a weight of 0.30 and a rating of 3. Even with the technology upgrades, some of the LBC
Express’ procedures are not yet fully automated. For example, certain steps in the sorting of parcels and cargo at the
LBC Express’ Central Exchange and regional distribution centers are still performed manually, which leaves the
process more susceptible to human error. This could have a material adverse effect on its business, financial condition
and results of operations.

2. Dependent on third party contractors to provide various services

This factor is given a weight of 0.20 and a rating of 2. There can be no assurance that the services rendered
by such third party contractors will be satisfactory and match the quality levels required by LBC Express. If third
party contractors are unable to render their respective services in a manner satisfactory to LBC Express’ qualitative
or quantitative requirements, LBC Express may in turn be unable to render services to its customers or may face
reputational damage for poor service, which could result in a material adverse effect on LBC Express’ business,
financial condition and results of operations. LBC Express may also be vulnerable to increases in the cost of services
provided by such third party contractors, as it may have little bargaining power in a concentrated market. Accordingly,
LBC Express business, financial condition and results of operation are heavily dependent upon third parties over
whom it has limited control.

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3. The Company does not own any real property

This factor is given a weight of 0.05 and a rating of 2. LBC Express believes that the leases it enters into in
the future will likely be on similar terms and have similar renewal options. However, if the company is subject to
substantial and/or unforeseen increases in rental rates upon renewal, its profitability may be materially and adversely
affected. Likewise, if LBC Express is unable to renew the leases for its distribution centers, delivery hubs, warehouses,
branch offices and administrative offices, LBC Express may be forced to close or relocate its operation centers, which
could subject the company to significant costs and risks, including loss of customer traffic.

4. The Company does not own the perpetual license of its IT software

This factor is given a weight of 0.05 and a rating of 2. LBC Express does not own the perpetual use license
for its software and the use of the license for the software is normally renewable periodically. In the event that the
company is not able to renew its software licenses at acceptable terms, the company’s operating and financial results
may be adversely affected.

References:

http://www.lbcexpressholdings.com/

http://www.lbcexpressholdings.com/files/2019/08/19/1134/08_19_2019_PSE_4-
31_Press_Release_Q2_Report.pdf

https://en.wikipedia.org/wiki/LBC_Express

https://www.tangible.com.sg/lbc-logistics-brand-philippines/

https://quotes.wsj.com/PH/LBC/company-people

https://business.inquirer.net/271348/opportunities-abound-in-ph-logistics-industry

https://www.bloomberg.com/press-releases/2019-05-23/philippines-logistics-and-warehousing-market-is-
expected-to-reach-php-1-100-billion-in-terms-of-revenues-by-the-year-2024-ken

http://www.lbcexpressholdings.com/files/2019/04/16/902/04_15_2019_LBCEH_2018_AFS_of_LBC_Express_Holdi
ngs__Inc_and_Subsidiaries_(Consolidated).pdf

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