Regional Plantations NEUTRAL (Unchanged) l Toothless El ... · September 2, 2015 3 Regional...

September 2, 2015

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SEE PAGE 67 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)

Regional Plantations

Toothless El Nino so far Revise down 2015-17 CPO ASP forecasts by 8-13% to

MYR2,100/2,300/2,400/t following the slump in crude oil

price, weak El Nino, ample soybean, and high stockpile.

For Singapore, our revised earnings incorporated FRS16

impact with higher depreciation charges from 2016 onwards.

Stay NEUTRAL. Focus on companies with good long term

organic growth, take shelter in asset buffer. Downgrade FR to

HOLD. Top BUYs in the region: BAL, GENP, SOP. SELL AALI.

What’s New, What’s Our View While 3M CPO price has corrected by 12% YTD (28Aug: MYR1,991/t) in Ringgit terms, the correction was far steeper in USD terms which was down -27% to USD474/t over the same period. The correction was lesser for soyoil (-13%) and rapeseed oil (-8%), which resulted in a widening of price gap of late. A weakened Ringgit and Rupiah have provided some relief for planters in the region.

As the current El Nino (with indicators resembling the strong 1997/98 El Nino) has failed to live up to expectations with no immediate impact on FFB production, the market has largely ignored this weather risk at the moment but focused on several headwinds, namely: 1) record US soybean planting amidst ample global soybean supply; 2) relatively high palm oil stockpile; 3) low crude oil prices discouraging discretionary biodiesel demand.

Unique to FR and BAL, the Singapore listed companies will adopt FRS16 in their 2016 reporting that effectively treats the oil palm trees as property, plant and equipment. It requires companies to start depreciating the trees which was not required in the past under the fair valuation method. In our revised earnings, we have incorporated our preliminary estimates of FRS16 impact on FR and BAL’s EPS from 2016 onwards.

We revise down our 2015/16/17 CPO ASP forecasts by -13/-8/-8% to MYR2,100/2,300/2,400/t (from MYR2,400/2,500/2,600/t). For our USD forecasts, the revision was steeper at -19/-17/-16% incorporating a weaker Ringgit of 3.80-3.90 (from 3.50). Incorporating the lower CPO ASP and FRS16, we cut 2015-17 net profit forecasts of companies under our coverage by -4-60% (except Ta Ann, with 2015’s earnings lifted by timber earnings).

Given the near term headwinds, we maintain our NEUTRAL call on the sector. But long term investors should look to a better 2016 as we believe there is limited downside to CPO ASP as commodity prices in USD are near post-GFC lows. Indonesia’s B15 will boost demand and we continue to pin hope on the strengthening El Nino to boost prices in 2016. Meanwhile, focus on companies with good long term organic growth, and take shelter in asset buffer. Following our EPS revisions, we downgrade FR to HOLD. Our top Buys are BAL, GENP and SOP. SELL AALI.

Analyst

Regional CPO price forecast

2015F 2016F

MYR/t MYR/t

Full year average (FOB) 2,100 2,300

MDEX:

3M CPO price (1 Sept) 2,013 -

YTD (1 Sept) CPO ASP 2,189 -

Source: Maybank KE, Bloomberg Regional Plantation coverage

Company Rec Shr px Target px

Upside

M’sia listed LCY LCY % Sime Darby Hold 7.47 7.98 6.8 IOI Corp Hold 3.94 3.97 0.8 KL Kepong Hold 20.40 22.24 9.0 FGVH Hold 1.22 1.30 6.6 Gent Plant Buy 9.67 10.55 9.1 SwkOil Palms Buy 3.74 5.23 39.8 TSH Res Hold 1.77 1.80 1.7 Ta Ann Buy 3.39 5.55 63.7

TH Plant Hold 1.22 1.30 6.6 BPlant Buy 1.30 1.56 20.0 S’pore listed Wilmar Buy 2.81 4.14 47.3 First Res Hold 1.54 1.60 4.2 Bumitama Buy 0.74 0.85 15.6 Indo listed Astra Agro Sell 16900 14000 (17.2)

Source: Maybank KE

(Unchanged)NEUTRAL

Ong Chee Ting, CA

(603) 2297 8678

[email protected]

September 2, 2015 2


Fig 1: Sector Summary Table

Company Rating Mkt Cap Shr px TP EPS Growth (%)

PE (x)

Div Yield (%) EV/EBITDA (x)

P/B (x)

ROE (%)

1 Sept 1 Sept 15F 16F 15F 16F 15F 16F 15F 16F 15F 15F

(USD m) (LCY) (LCY) Sime Darby Hold 11,141 7.47 7.98 (22.4) 10.5 21.8 19.8 3.0 3.3 14.0 13.6 1.5 7.1

IOI Corp Hold 5,981 3.94 3.97 (25.7) 11.9 28.4 25.4 2.1 2.0 24.6 17.7 5.3 10.3

KL Kepong Hold 5,217 20.40 22.24 (12.7) 10.8 26.5 23.9 2.3 2.5 15.7 14.2 2.8 10.6

FGVH Hold 1,069 1.22 1.30 46.2 113.2 32.1 15.1 2.0 3.4 10.4 7.8 0.7 2.2

Gent Plant’ns Buy 1,801 9.67 10.55 (29.8) 38.4 27.9 20.2 0.7 1.0 20.9 15.9 1.8 6.7

SOP Buy 395 3.74 5.23 (29.6) 92.8 20.7 10.7 0.6 1.0 9.3 6.4 1.2 5.9

TSH Resources Hold 576 1.77 1.80 (37.1) 47.2 27.7 18.8 1.1 1.6 18.9 16.1 1.9 7.1

Ta Ann Buy 302 3.39 5.55 12.4 10.1 10.1 9.2 4.5 4.9 5.4 4.9 1.1 11.4

TH Plant Hold 259 1.22 1.30 (30.8) 81.5 45.2 24.9 1.1 2.0 18.0 12.5 0.9 2.0

Boustead Plant Buy 499 1.30 1.56 (69.2) 241.7 108 31.7 5.4 1.8 28.1 17.1 0.9 6.2

Malaysia Average 26.8 21.6

Wilmar Buy 12,665 2.81 4.14 8.4 11.7 9.7 8.7 1.9 2.1 11.9 11.0 0.7 8.0

Golden Agri * N.R 2,754 0.305 N.R. (11.8) 40.0 14.4 10.3 2.8 3.7 10.4 8.7 0.3 2.3

First Resources Hold 1,724 1.54 1.60 (26.6) 11.3 13.6 12.2 2.1 2.4 9.0 7.6 1.9 12.8

Bumitama Agri Buy 916 0.74 0.85 (24.6) 21.8 13.8 11.3 1.5 1.8 10.9 8.5 2.2 14.6

Indofood Agri * N.R 465 0.47 N.R. (9.9) 34.2 9.8 7.3 0.9 1.3 8.2 6.7 0.4 3.4

Singapore Average 10.9 9.3

Astra Agro Sell 1,888 16,900 14,000 (70.8) 68.5 36.4 21.6 0.9 1.6 13.4 12.5 2.2 6.3

Salim Ivomas Pratama*

N.R 517 461 N.R. (34.9) 45.3 13.1 9.0 2.3 2.0 6.5 5.4 0.5 3.9

London Sumatera N.R 530 1,095 N.R. (18.2) 16.6 10.0 8.6 4.2 3.9 5.5 4.7 1.0 11.0

Sampoerna Agro * N.R 178 1,325 N.R. (28.0) 32.9 10.2 7.7 3.1 2.2 7.7 6.0 0.8 8.8

BW Plant'n * N.R 584 261 N.R. (74.0) 109.5 61.8 29.5 0.7 0.4 12.5 9.1 1.2 2.1

Indonesia Average 32.1 18.6

Source: Maybank-KE, *bloomberg estimates

September 2, 2015 3


Contents

Page

Subdued near-term outlook

El Nino has failed to live up to expectations 4

Weak crude oil price has killed discretionary biodiesel demand 6

High palm oil stockpile caps near term price outlook 7

US farmers have been planting more soybean in 2015 7

Weak Brazilian Real and Argentinian Peso a boost for farmers 9

Looking forward to a better 2016 outlook

Oil World forecasts marginal surplus in 17 global oils and fats for 15/16F 11

Relatively moderate vegetable oil supply contrasts with ample oilseeds 11

CPO price outlook

Limited downside to CPO price 14

2016 CPO price recovery will be gradual 15

Earnings revision and valuation

New CPO ASP forecasts of MYR2,100/ 2,300/ 2,400/t for 2015/ 16 /17 16

Incorporating new FRS16 standard on Singapore planters 16

Earnings revised down by 4% - 60% except for Ta Ann 17

Target prices revision 18

Strategy 19

Sensitivity and risks 24

Key stock briefs

Astra Agro Lestari 25

Boustead Plantations 28

Bumitama Agri 33

Felda Global Resources 36

First Resources 39

Genting Plantations 42

IOI Corporation 46

Kuala Lumpur Kepong 49

Sarawak Oil Palms 52

Sime Darby 55

Ta Ann Holdings 58

TH Plantations 61

TSH Resources 64

September 2, 2015 4


Subdued near-term outlook

As the current El Nino has yet to cause any immediate impact on FFB

production, we believe investors will continue to ignore the weather risk

for now. Instead, focus will remain on several headwinds, namely 1) record

US soybean planting and relatively good weather in the US which imply

ample soybean supply still, 2) relatively high palm oil stockpile, 3) low

crude oil prices which discourage discretionary biodiesel demand, and 4)

weak Brazilian and Argentinian currencies which are encouraging more

soybean planting in 4Q15 in South America. These headwinds mean that

CPO price will remain weak over the remaining of 2015.

El Nino has failed to live up to expectations

The 2015 El Nino was confirmed by the Australia Bureau of Meteorology

(ABM) since May 2015 and is expected to last till 1H16. Yet, the effects of

the El Nino have been mild thus far and have yet to be fully manifested

across the major planting areas in Malaysia and Indonesia. This is despite

indicators like SST (sea surface temperature) and Southern Oscillation

Index (SOI, a measure of atmospheric pressure) resembling closely the

readings of the 1997/98 strong El Nino (see Fig 2 & 3).

Fig 2: The Sea Surface Temperatures (SST) anomaly map in

1997/98 where El Nino turned up strongest

Fig 3: The SST anomaly map for 2015 continues to show

waters were warmer than average in June

Source: Australia Bureau of Meteorology Source: Australia Bureau of Meteorology

September 2, 2015 5


Fig 4: 30 day moving Southern Oscillation Index (SOI)

Source: Australia Bureau of Meteorology; The latest 30-day SOI to 27 Aug is -20.6. In

general, sustained positive values of the SOI above +7 may indicate a La Niña event, while

sustained negative values below −7 may indicate an El Niño event. Values of between about

+7 and −7 generally indicate neutral conditions.

Strong El Niño indicators … According to ABM, all eight of the surveyed

international climate models indicate that the central Pacific Ocean will

warm further during the coming months. All surveyed models indicate that

NINO3.4 will remain above El Niño thresholds till early 2016. Since the

start of the satellite era of ocean observations in the late 1970's, NINO3.4

values of this high have only been observed during the 1982-83 and 1997-98

El Niño’s. Individual model values now range between +2.4 °C and +3.5 °C

for November; all well above the El Niño threshold and indicative of a

substantial El Niño.

… but El Niño threat confined on paper so far. However, thus far, the El

Niño threat has been confined to just paper threat. Our checks with oil

palm planters in the region suggest they have been largely spared from any

rainfall shortage with the exception of some Sabah planters in 1H15 and

more recently, planters in parts of South and Central Kalimantan, and

South Sumatra (since July 2015). As such, palm oil production in 2Q15 has

been largely good for planters in general.

Fig 5: POAMA monthly mean NINO3.4 – forecast on 2 Aug ‘15 Fig 6: POAMA monthly mean NINO3.4 – forecast on 21 June

Source: Australia Bureau of Meteorology, (POAMA = Predictive Ocean

Atmosphere Model for Australia)

Source: Australia Bureau of Meteorology, (POAMA = Predictive Ocean

Atmosphere Model for Australia)

September 2, 2015 6


Fig 7: Average of international model outlooks for NINO3.4

Source: Australia Bureau of Meteorology

El Niño hope for 2016. Even though El Niño has yet to rear its ugly head so

far, the threat remains as weather forecastors remain convinced that the

current El Nino will last till 1H16 and may even turn out to be as nasty as

the strong El Nino in 1997/98. This could be a bane for planters in terms of

yield but typically compensated by higher CPO price. Hence, we believe

the current El Nino will bring some recovery in CPO price in 2016.

Weak crude oil price has killed discretionary biodiesel

demand

Biodiesel demand accounted for ~13% of the 17 global oils and fats

offtake or 26m MT in 2013; ~10% for chemicals, and ~77% for edible (and

animal feed) purposes. Within the biofuel segment, there are two sub-

segments: (i) mandatory, (ii) discretionary biofuel demand. The mandatory

demand is estimated to be 80-90% of the total biofuel demand, backed by

government policies and subsidies. However, the discretionary demand,

which accounts for the smaller 10-20%, could be largely lost at the current

oil price of <USD50/bbl.

Biodiesel no longer competitive. Crude oil price (Brent) has fallen sharply

(-54%) over the past 12 months to ~USD47/bbl (20 Aug 2015). This has had

a negative drag on CPO price given the biofuel link. With CPO price

(Rotterdam) trading at a premium to diesel price in Europe since 4Q14, a

large part of the discretionary biodiesel blending has been lost as it is no

longer economically viable.

Fig 8: Gas Oil (ie diesel) Europe trades at a wide premium to CPO Rotterdam

Fig 9: Brent vs Crude oil price dropped sharply over the past year

Sources: Bloomberg, Maybank-KE Sources: Bloomberg, Maybank-KE

30

50

70

90

110

130

30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15

USD/brl

WTI Brent

September 2, 2015 7


High palm oil stockpile caps near term price outlook

The Malaysian Palm Oil Board’s (MPOB) July 2015 inventory rose 5% MoM to

2.27m MT (+34% YoY). The stock level is considered high for the month of

July by historical comparison. And we expect the build-up in stockpile to

continue on stronger 2H15 FFB output, with stockpile likely to peak at

2.5m MT by Oct/Nov 2015 (before tapering off). Such high stockpile will

impede any near term CPO price upside as CPO price and stockpile are

inversely correlated.

Fig 10: Monthly Stockpile (by type) Fig 11: Monthly Stock-to-Usage Ratio vs. CPO prices

Sources: MPOB, Maybank-KE Sources: MPOB, Maybank KE

US farmers have been planting more soybean in 2015

More soybean planted in 2015 in the US. Soybean planting has been

favoured over corn planting in the US this spring, for the 2nd consecutive

year. This follows the fall in US corn price by 38% between Dec 2012 to

June 2015 while soybean price fell 26% over the same period. Although

profitability dips for both corn and soybean planting, the latter offers

relatively lower investment outlay making it the preferred crop.

Over the past 2.5 years, the price ratio for soybean-to-corn has stayed

largely above 2.5x, with a high of 3x recorded on 29 Nov 2013.

Traditionally, soybean planting is favoured by US farmers when the

soybean-to-corn price ratio is above 2.5x. As at 20 Aug 2015, the soybean-

to-corn price ratio has come off to 2.32x – see Fig 14. If such trend persist,

corn could be back in demand for next US planting season.

Fig 12: USA corn and soybean planted areas

Source: USDA

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15

tonnes

Crude Palm Oil Processed Palm Oil

500

1000

1500

2000

2500

3000

3500

4000

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

MYR/tonneratio (%) Stock/Usage (LHS) CPO price (RHS)

September 2, 2015 8


Fig 13: Soybean vs Corn prices (USD per bushel) Fig 14: Soybean-Corn Ratio (3M futures)


USA’s record planting comes at a time of an already ample global

soybean supply. According to Oil World’s (June 2015 issue) forecast, the

10 global oilseeds stock-to-usage ratio (SUR) is estimated to be near record

high levels at 21.0% for 2014/15F marketing year. Oil World expects

another round of high oilseeds stockpile for 2015/16F marketing year

following US’s record soybean planting and preliminary estimates that

South American farmers will also follow suit in soybean planting.

Approximately 87% of the 2014/15F global oilseeds stocks are expected in

the form of soybean, which has a lower oil content of ~20% (vs rapeseed

and sunflower seed of ~42%).

Fig 15: Stock-to-usage ratio of 10 Global Oilseeds

Sources: Oil World, Maybank KE

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

-

100

200

300

400

500

600

700

800

900USd/buUSd/bu Corn (LHS) Soybean (RHS)

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90

3.10

3.30

3.50

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Jan-1

4

Jan-1

5

Soybean/Corn price ratio (x) Parity (x)

Favours corn planting

Favours soybean planting

21.0%

17.3%

14.5%

18.6%20.1%

14.5%

15.5%16.3%

21.0%

20.8%

10%

12%

14%

16%

18%

20%

22%

06/07 08/09 10/11 12/13 14/15F

10 Oilseeds

September 2, 2015 9


Weak Brazilian Real and Argentinian Peso a boost for

farmers

While oilseeds and vegetable oil prices have been nearing post-GFC low of

2009, the oilseeds prices in the local currencies of Brazil and Argentina

have not. This is due to significant depreciation of the Brazilian Real (-60%)

and Argentina Peso (-113%) against the US Dollar between Jan 2011 and

Dec 2014. And YTD (28 Aug 2015), the Brazilian Real and Argentinian Peso

have weakened further against the US Dollar by 30% and 10% – see Fig 16 &

17. This has further incentivise farmers in both countries to sustain or do

more new plantings as soybean prices, translated into domestic currencies,

have remain fairly attractive - see Fig 18-21.

Fig 16: US Dollar vs Brazillian Real Fig 17: US Dollar vs Argentinian Peso


Fig 18: Soybean in US Dollar vs Brazilian Real (per tonne) Fig 19: Soybean in US Dollar vs Brazilian Real (Indexation)


1.0

1.5

2.0

2.5

3.0

3.5

4.0

USDBRL

+17% YoY

+10% YoY

+30% YoY

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

USDARS +10% YoY

+48% YoY

+20% YoY

+10% YoY

400

600

800

1000

1200

1400

150

250

350

450

550

650

750

Jan-06 Jan-08 Jan-10 Jan-12 Jan-14

USD/t BRL/t

September 2, 2015 10


Fig 20: Soybean in US Dollar vs Argentina Peso (per tonne) Fig 21: Soybean in US Dollar vs Argentina Peso (Indexation)


Expect still good soybean expansion in 2015/16F by Brazil and

Argentina. Brazil (30% of global soybean production) and Argentina (19%)

are among the top three producers of soybean in the world together with

the USA (32%). These three top producing nations produced approximately

81% of global soybean production in 2014.

Over the past decade, Brazil and Argentina have been gaining bigger

market shares due to massive new plantings, partly encouraged by their

weakened currencies against the US Dollar. According to Oil World’s

preliminary estimates, Brazil is expected to add 0.86m ha of new planting

this 4Q15 while Argentina will add another 0.08m ha.

Fig 22: South America : Soybean planted area (‘m ha)

15/16F 14/15 13/14 12/13 11/12 10/11 03/04 98/99 93/94 83/84

‘m ha ‘m ha ‘m ha ‘m ha ‘m ha ‘m ha ‘m ha ‘m ha ‘m ha ‘m ha Brazil 32.80 31.94 30.17 27.74 25.04 24.18 21.60 13.07 11.54 9.43

Argentina 19.75 19.67 19.78 19.60 18.67 18.89 14.53 8.55 5.81 2.92

Paraguay 3.82 3.73 3.43 2.96 2.87 1.89 1.18 0.70 0.41

Bolivia 1.17 1.09 0.97 0.80 0.60 0.22 0.05

Uruguay 1.35 1.27 1.20 0.95 0.86 0.25 0.01 0.01 0.01

Total 52.89 48.71 47.777 39.07 23.41 18.28 12.82

Addition +4.18 +0.94 +1.22 +3.12 +1.02 +0.06

Source: Oil World

0

1000

2000

3000

4000

5000

150

250

350

450

550

650

750

Jan-06 Jan-08 Jan-10 Jan-12 Jan-14

USD/t ARS/t



Looking forward to a better 2016 outlook

Oil World forecasts marginal surplus in 17 global oils and

fats for 15/16F

Supply growth to exceed demand growth in 15/16F? While still

preliminary, Oil World (June 2015 issue) is forecasting the global supply of

17 oils and fats to grow by 7.0m MT in 2015/16F marketing year compared

to 5.7m MT of demand growth, which will result in a surplus of 1.3m MT.

This is expected to be a reversal from the deficit scenario estimated at

2.2m MT in 2014/15F marketing year when supply growth estimates (1.8m

MT) trails demand (4.0m MT).

Fig 23: Demand & Supply growth of 17 global oils & fats

Sources: Oil World, Maybank KE

Relatively moderate vegetable oil supply contrasts with

ample oilseeds

Moderate global palm oil supply. Despite the initial projection of an

incremental surplus situation in 2015/16F marketing year by Oil World, the

global palm oil supply is expected to be relatively moderate with stock-to-

usage ratio (SUR) estimated at 18.2% (2014/15F: 18.3%), relative to the

peak SUR of 20.7% in 2011/12A. In Oil World’s preliminary forecast, the

global palm oil’s 2015/16F production is expected to increase by 2.9m MT

(+4.8%) to 63.8m MT, roughly in line with the past 10-years’ average

increase of 2.8m MT. This, we believe, has yet to factor in potential

disruption to production in the event a strong El Nino causing rainfall

deficit in the key producing areas.

Global supply of other vegetable oils is also moderate in supply in

2015/16F. As palm oil supply accounts for the largest share at

approximately 30% of global 17 oils and fats supply of 202m MT, the

moderate palm oil supply is also expected to cascade into relatively

moderate stock-to-usage ratio (SUR) of global 17 oils and fats. Soybean oil

(23% share) and rapeseed oil (13%) supplies, which represent the second

and third largest market share supply, will also be moderate in supply. The

SUR of global 17 oils and fats is estimated at 13.0% for 2015/16F, which is

relatively flattish compared to 2014/15F at 13.0%.

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

13/14

14/15F

15/16F

MT

October/ September

Supply Demand



Fig 24: Stock-to-usage ratio of 17 global oils & fats Fig 25: Stock-to-usage ratio of Palm Oil, Soybean Oil and Rapeseed Oil

Sources: Oil World, Maybank KE Sources: Oil World, Maybank KE

Fig 26: 17 Oils and Fats - World Balance (million tonnes)

October / September

10/11 11/12 12/13 13/14 14/15F 15/16F

Opening stocks 21.0 22.3 25.1 24.9 26.6 26.2

Production 177.8 186.6 188.5 199.9 201.7 208.7

Change 3.9% 4.8% 1.0% 6.1% 0.9% 3.5%

Imports 68.1 72.1 75.5 76.6 78.3 81.7

Exports 67.9 72.2 75.4 76.8 78.4 81.8

Consumption 176.6 183.6 188.8 198.0 202.0 207.7

Change 3.9% 4.0% 2.8% 4.9% 2.0% 2.8%

Ending stocks 22.3 25.1 24.9 26.6 26.2 27.0

Stocks-to-usage ratio

12.6% 13.7% 13.2% 13.5% 13.0% 13.0%

Source: Oil World (June 2015)

Moderate vegetable oils supply contrast with ample global 10 oilseeds,

namely soybean. While the global 17 oils and fats are moderate in supply,

the industry’s outlook is bogged down by the amply supply in oilseeds, and

in particular soybean. According to the Oil World forecast, the 10 global

oilseeds SUR is estimated to be near record high levels at 21.0% for

2014/15F marketing year. Oil World expects another round of high oilseeds

stockpile for 2015/16F marketing year. The preliminary forecast for

2015/16F SUR is at 20.8%, just 0.2-ppts below 2014/15F’s.

Approximately 87% of the 2014/15F global oilseeds stocks are expected in

the form of soybean. As for the global soybean SUR, it is expected at an 8-

year high at 31.5% for 2014/15F. This is expected to be marginally lower at

30.8% for 2015/16F but considered to be still high by historical standards.

15.6%

16.7%

19.3%

20.7%

18.0% 17.9%18.3%18.2%

11.9%12.1%12.6%

13.7%13.2%13.5%

13.0% 13.0%

10%

11%

12%

13%

14%

15%

10%

12%

14%

16%

18%

20%

22%

08/09 10/11 12/13 14/15F

Palm Oil 17 Oils & Fats

16.7%

19.3%

20.7%

18.0%17.9% 18.3%

18.2%

11.8%10.4%

10.0% 9.9% 9.8%

9.7% 9.8%10.5% 10.4%

12.4%

16.7%17.3%

15.0% 14.7%

6%

8%

10%

12%

14%

16%

18%

20%

22%

09/10 10/11 11/12 12/13 13/14 14/15F 15/16F

Palm Oil Soybean Oil

Rapeseed Oil



Fig 27: Stock-to-usage ratio of 10 Global Oilseeds Fig 28: Stock-to-usage ratio of Soybean & Soybean Oil

Sources: Oil World, Maybank KE Sources: Oil World, Maybank KE

Oilseeds build-up largely in South America. The soybean stock build-up

has been and will remain largely at South America as the farmers there are

reserved sellers especially in Argentina as the farmers held on to their

stocks anticipating an adjustment in the official exchange rate, and

thereby keeping soybean as a store of value. While officially, the

Argentinian Peso is exchanged at ~9.2 against the US Dollar, the unofficial

rate is said to have exceeded 12.0 and closer to 14.0. The supply risk

therefore emanates from potential devaluation of the Argentinian Peso

which may open the floodgate of soybean supply resulting in depressed

soybean, soybean meal and soybean oil prices.

21.0%

17.3%

14.5%

18.6%20.1%

14.5%

15.5%16.3%

21.0%

20.8%

10%

12%

14%

16%

18%

20%

22%

06/07 08/09 10/11 12/13 14/15F

10 Oilseeds

11.7%

9.7%

11.8%

10.0%9.8%

9.8%

31.7%

25.6%

19.8%

29.8%

20.8%22.8%

31.5%

30.8%

18%20%22%24%26%28%30%32%34%

8%9%9%

10%10%11%11%12%12%

06/07 08/09 10/11 12/13 14/15F

Soybean Oil Soybean



CPO price outlook

Limited downside

Soybean oil and crude oil near post-GFC low. CPO is traditionally a price

taker, following the lead of other major competing vegetable oils like

soybean oil and rapeseed oil, and more recently crude oil. In US Dollar

term, the 3M CPO price at USD474/t (28 Aug) is approximately 63% below

the post-GFC peak of USD1,295/t registered in early 2011. Likewise,

soybean oil, rapeseed oil and crude oil prices are 54%, 50%, and 60% off

their recent post-GFC peaks in early 2011.

With the exception of palm oil and crude oil, soybean oil and rapeseed oil

are already trading close to their post-GFC lows. Hence, we believe there

is limited downside to CPO price from the current levels as competing

vegetable oil prices may have hit near bottom.

Fig 29: Current prices relative to post-GFC levels

Crude Palm Oil Soybean Oil

Rapeseed Oil Crude Oil

USD/t USD/t USD/t USD/bbl

Post-GFC Low in 2008/09 399 638 725 39

Post-GFC High in 2011 1,295 1,341 1,475 126

Current price (28 Aug 2015) 474 621 738 51 - relative to post-GFC Low 19% -3% 2% 30%

- relative to post-GFC High -63% -54% -50% -60%

Source: Bloomberg, Maybank KE

Fig 30: Palm oil price vs major vegetable oils and crude oil (Brent)

Sources: Bloomberg, Maybank-KE



CPO price discount to soybean and rapeseed oils also near historical

average. The price spreads between CPO-soybean oil and CPO-rapeseed oil

have also nearly normalized to their 9-year averages. The current CPO

price discount to soybean oil has widened of late to USD147/t and is

almost nearing its historical average of USD164/t. And the current CPO

price discount to rapeseed oil price has also normalized to USD264/t

compared to its 9-year average of USD277/t. Given the low soybean oil and

rapeseed oil prices, coupled with the widened price discounts towards

historical levels, we believe there is limited downside to CPO price.

Fig 31: 3M Palm Oil price discount to US Soybean Oil have widened to USD147/t as at 28 Aug 15

Fig 32: 3M Palm Oil price discount to Rapeseed Oil still narrow at USD264/t (28 Aug 15)

Average discount since 2006: USD164/t

Average discount since 2006: USD277/t

Source: Bloomberg, Maybank-KE Source: Bloomberg, Maybank-KE

2016 CPO price recovery will be gradual

Expect a gradual improvement in CPO price in 2016. 2015 will be a

washout year for the plantation sector. Although we believe there is

limited downside to CPO price, we doubt CPO price will have a strong

rebound rally in the remaining of 2015 especially in the absence of any

weather anomalies like a strong El Nino. Supply at key producing areas

needs to be curtailed to have a strong positive impact on prices.

Indonesia’s biodiesel B15 roll out is key for stronger CPO price in 2016.

The Indonesia government has imposed a palm oil export levy effective 15

July 2015, ranging from USD20/t (for processed palm oil) to USD50/t (for

CPO). The levy collected will be deposited into a palm oil fund. According

to the media, officials have estimated that the palm oil fund agency could

collect at least USD700m a year, and about 40% of the fund (or USD280m)

will be allocated to fund Indonesia’s B15 biodiesel programme. The

remainder will be allocated to fund Indonesia’s development programme

for the plantation industry.

It is essential that the export funds collected are channeled into

Indonesia’s B15 biodiesel subsidy programme as the potential USD280m

fund allocation can subsidise up to 2.24m MT of palm biodiesel (assuming a

USD125/t subsidy) for domestic consumption. This will, in turn, help

reduce the palm oil stockpile and boost CPO price.

0

200

400

600

800

1000

1200

1400

1600

1800

(500)

(400)

(300)

(200)

(100)

-

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

USD/tUSD/t

Premium/(Discount) (LHS) Palm Oil (RHS) US SoyOil (RHS) 0

200

400

600

800

1000

1200

1400

1600

1800

(650)

(550)

(450)

(350)

(250)

(150)

(50)

50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

USD/tUSD/t

Premium (LHS) Palm Oil (RHS) Rapeseed Oil (RHS)



Earnings revisions and valuations

New CPO ASP forecasts of MYR2,100/2,300/2,400/t for

2015/16/17

We cut our 2015/16/17 CPO ASP forecasts by 12.5/8.0/7.7% to MYR2,100/

2,300/2,400/t (from MYR2,400/2,500/2,600/t) following the correction in

vegetable oil prices and the slump in crude oil price which have dampened

the biofuel demand outlook. Our revised CPO price forecasts have also

considered the weaker Ringgit. Our FX Research expects the MYR to remain

weak against the USD at 4.05 by end 3Q 2015, 3.95 at end 4Q 2015 and

3.85 at end 4Q 2016. We have assumed an average of USD/MYR

3.80/3.90/3.85 for 2015/16/17 (previously 3.50) in our CPO price

forecasts. With the weaker Ringgit, the implied revision in CPO ASP for

2015/16/17 in US Dollar terms is -19/-17/-16% respectively.

Fig 33: CPO ASP revision

2015F 2016F 2017F

CPO ASP (MYR/t) – NEW 2,100 2,300 2,400

CPO ASP (MYR/t) – OLD 2,400 2,500 2,600

Change -12.5% -8.0% -7.7%

USD/MYR ex-rate – NEW 3.80 3.90 3.85

USD/MYR ex-rate – OLD 3.50 3.50 3.50

Implied CPO ASP in USD/t – NEW 553 590 623

Implied CPO ASP in USD/t - OLD 686 714 743

Change -19.4% -17.4% -16.1%

MYR/IDR ex-rate – NEW 3,546 3,513 3,455

MYR/IDR ex-rate – OLD 3,571 3,571 3,571

Implied CPO ASP in IDR/kg – NEW 7,447 8,079 8,291

Implied CPO ASP in IDR/kg – OLD 8,570 8,928 9,285

Change -13.1% -9.5% -10.7%

Source: Maybank KE

Incorporating new FRS16 standard on Singapore planters

Effective 1 Jan 2016, the Singapore listed companies will materially change

the way they recognise their upstream plantations in their books.

Amendments were made to FRS 16 Property, Plant and Equipment and FRS

41 Agriculture which extended the scope of FRS 16 to include biological

assets that meet the definition of bearer plants (eg oil palm trees;

previously classified as biological assets under FRS 41).

Meanwhile, the agricultural produce (ie fresh fruit bunches or FFB) will

remain within the scope of FRS 41. As a result of the amendments:-

(i) bearer plants will be subject to all the recognition and measurement

requirements in FRS 16 including the choice between the cost model

and revaluation model;

(ii) Singapore companies which have previously recognised fair valuation

(FV) gains or losses on biological assets will be required to undo (ie



reverse) those recognition against opening retained earnings (ie prior

year adjustments);

(iii) Singapore companies will be required to depreciate the bearer

plants (ie oil palm trees) over their estimated productive years of 20

to 25 years.

In general, the Singapore listed planters will be hit on several fronts once

their oil palm trees are reclassified as Property, Plant & Equipment (PPE)

under FRS 16 effective 1 Jan 2016: lower equity (from the write-down on

biological assets), lower forward earnings (from new depreciation) and

higher net gearing. The only positive is that the entities’ ROE will improve

and the accounting adjustments are non-cash in nature. By our estimates,

the new depreciation charges alone will impact FR and BAL’s forward EPS

by 7-8% - see our sector report “FRS 16, FRS 41 impact priced in” dated

10 Aug 2015. Hence, we are incorporating the FRS 16 impact into our 2016

forecasts and beyond.

Earnings revised down by 4% - 60% except for Ta Ann

Consequently, we have revised FY15-17 EPS forecasts of plantation stocks

under coverage by -4% to -60% (see Fig 34a) mainly to reflect our changed

CPO ASP and unique to FR and BAL, the adoption of FRS 16 from 2016

onwards. However, for 2015, we revise upwards Ta Ann’s net profit to

reflect stronger timber earnings benefiting from weaker Ringgit against

USD. In general, pure upstream planters and companies with relatively

higher cost of production will experience higher earnings revisions.

Fig 34a: Summary of Net Profit Change, TP and Rating change

Company FY15F net profit

FY16F net profit

FY17F net profit

FY15F net profit

FY16F net profit

FY17F net profit

FY15F net profit

FY16F net profit

FY17F net profit

OLD OLD OLD NEW NEW NEW REV REV REV

Malaysia MYR‘m MYR‘m MYR‘m MYR‘m MYR‘m MYR‘m % % %

Sime Darby 2,313 2,666 3,456 2,313 1,937 2,755 0.0 -27.3 -20.3

IOI Corporation 860 1,183 1,297 860 928 1,069 0.0 -21.6 -17.6

KL Kepong 862 992 1,124 805 868 1032 -6.5 -12.4 -8.2

Felda Global 342 443 557 138 296 391 -59.7 -33.2 -29.9

Genting Plantations 372 471 543 267 369 450 -28.3 -21.6 -17.2

Sarawak Oil Palms 133 197 253 80 153 217 -40.3 -22.2 -14.3

TSH Resources 134 164 211 87 127 182 -35.3 -22.9 -13.7

Ta Ann Holdings 100 143 181 124 137 169 23.8 -4.3 -6.6

TH Plantations 36 68 103 24 43 75 -32.9 -36.6 -26.9

Boustead Plantations 47 84 103 19 65 84 -58.4 -22.3 -18.9

Singapore IDR‘b IDR‘b IDR‘b IDR‘b IDR‘b IDR‘b % % %

Bumitama Agri 1,304 1,526 1,920 936 1,141 1,476 -28.2 -25.2 -23.1

SGD‘m SGD‘m SGD‘m SGD‘m SGD‘m SGD‘m % % %

First Resources 172 204 226 126 141 154 -27.1 -31.0 -31.9

Indonesia IDR‘b IDR‘b IDR‘b IDR‘b IDR‘b IDR‘b % % %

Astra Agro Lestari 1,256 1,597 1,760 731 1,232 1,400 -41.8 -22.8 -20.4

Source: Maybank-KE



Target prices revision

Following our CPO price revisions, we revise our target prices (TP) of

stocks under our coverage by +3% to -33%. However, TPs for selected

stocks like IOI (+3%) and KLK (+4%) were revised upwards as we roll forward

our valuation. Our calls on the individual stocks are largely unchanged

except for FR which we downgraded to HOLD (from BUY) given limited

upside to our new TP of SGD1.60.

Fig 34b: Summary of Net Profit Change, TP and Rating change (cont.)

Company FYE TP TP TP Rating Rating Remarks

OLD NEW REV OLD NEW

Malaysia MYR MYR %

Sime Darby June 8.87 7.98 -10.0 Hold Hold 18x FY17 PER (from 18x 2016 PER)

IOI Corporation June 3.85 3.97 3.1 Hold Hold 24x FY17 PER (from 20x 2016)

KL Kepong Sept 21.40 22.24 3.9 Hold Hold 23x FY17 PER (from 23x FY16 PER)

Felda Global Dec 1.94 1.30 -33.0 Hold Hold 16x FY16 PER (unchanged)

Genting Plantations Dec 11.36 10.55 -7.1 Buy Buy Sum-of-Parts valuation (unchanged)

Sarawak Oil Palms Dec 6.72 5.23 -22.2 Buy Buy 15x FY16 PER (unchanged)

TSH Resources Dec 2.32 1.80 -22.4 Hold Hold 19x 2016 PER (unchanged)

Ta Ann Holdings Dec 5.90 5.55 -5.9 Buy Buy 15x 2016 PER (unchanged)

TH Plantations Dec 1.37 1.30 -5.1 Hold Hold 1x 2014 PNTA (from 1x 2014 PBV)

Boustead Plantations Dec 1.65 1.56 -5.5 Buy Buy Sum-of-Parts valuation (unchanged)

Singapore SGD SGD %

Bumitama Agri Dec 1.14 0.85 -25.4 Buy Buy 13x 2016 PER (unchanged)

SGD SGD %

First Resources Dec 2.22 1.60 -27.9 Buy Hold 13x 2016 PER (unchanged)

Indonesia IDR IDR %

Astra Agro Lestari Dec 17500 14000 -20.0 Sell Sell 18x 2016 PER (unchanged)

Source: Maybank-KE



Strategy

Sector weight

NEUTRAL on the sector. We have a 12M Neutral call amidst a muted 2H15

CPO price outlook. We believe the downside to CPO price is limited from

here as crude oil, soybean oil and rapeseed oil prices are near post-GFC

lows. Consequently, valuations of plantation stocks have taken a de-rating

of late, including Malaysia stocks, which now trade at close to their

historical PER means (after considering our earnings downgrades). In

Singapore and Indonesia, stock valuations are now close to -1SD of mean,

making them relatively more attractive. The sector in Malaysia now trades

at 26.8x 2015 PER while Singapore and Indonesia trade at 10.8x and 12.1x

(based on Bloomberg consensus) respectively. While Malaysia’s large cap

plantation stock valuations are still lofty relative to peers, their share

price performance will be relatively less volatile given the ample domestic

liquidity and growing pool of Shariah funds in Malaysia amidst scarcity of

Shariah-compliant investable stocks. The plantation sector is a big-cap

Shariah-compliant sector in Malaysia.

(i) Malaysia

Malaysia large cap plantations benefit from their Shariah-compliant

status. Large cap KLCI-link plantation stocks in Malaysia are relatively

more defensive, benefiting from the changing investment landscape in

Malaysia, where there has been a growing emphasis on Shariah compliant

stocks. As there are limited asset choices given that Shariah funds are

prohibited from investing in conventional financial institutions and gaming

stocks, plantation stocks have become a natural favourite.

Focus on small-mid caps in 4Q15. The growing pool of Shariah funds in

Malaysia had focused on the large cap plantation companies in the past,

and these stocks are now fairly valued, in our view. We believe small- to

mid-cap plantation stocks will be a natural favourite in 4Q15 given their

valuation gap against the large caps. Amid the seasonal effect of a stronger

CPO price anticipated in 4Q15-1Q16 (on low production cycle), we

advocate adding exposure to small-to-mid caps in 4Q15.

Fig 35a: KLPLN Index vs CPO price (absolute performance) Fig 35b: KLPLN Index vs CPO price (relative performance)

Source: Bloomberg, Maybank-KE Source: Bloomberg, Maybank-KE

1000

1500

2000

2500

3000

3500

4000

4500

2000

3000

4000

5000

6000

7000

8000

9000

10000

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

MYR p

er

tonne

Index

KL Plantation Index CPO Price

0

50

100

150

200

250

300

350

400

450

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

%

KL Plantation Index CPO Price



Fig 36: Malaysian Plantations: 1-year forward rolling PER

Sample comprises Sime, IOI Corp, KLK, GENP, THP, SOP and TSH

Sources: Bloomberg, Maybank KE

(ii) Singapore

Cheaper valuation among peers. The Singapore plantation index has

tracked the performance of CPO price fairly closely over the past six years

as shown below. Companies with strong organic FFB production growth

(like First Resources and Bumitama) offer good long term value proposition

and will likely outperform their peers over the long run.

Fig 37a: Singapore Plantation Index vs CPO price (absolute performance)

Fig 37b: Singapore Plantation Index vs CPO price (relative performance)

Index formed using Golden Agri, Indofood Agri and First Resources

Source: Bloomberg, Maybank-KE

Index formed using Golden Agri, Indofood Agri and First Resources


Fig 38: Singapore Plantations: 1-year forward rolling PER

Sample comprises FR, GGR and IFAR


12

14

16

18

20

22

24

26

28

30

32

Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14

(x)

-1SD = 16.4x

AVG = 21.4x

+1SD = 26.3x

0

200

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600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

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Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

SG Plantation Index SGD 'm (LHS) CPO Price SGD (RHS)

0

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80

100

120

140

160


SG Plantation Index CPO Price

-

5.0

10.0

15.0

20.0

25.0

30.0

Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14

+1SD=19.4x

-1SD=10.9x

AVG: 15.2x



(iii) Indonesia

Cheaper valuation among peers. Similar to Singapore, the Indonesian

plantation index has also tracked the performance of CPO price fairly

closely over the past seven years as shown below. The sector is seen a

natural hedge and beneficiary of higher translated revenue if the

Indonesian Rupiah continues to weaken against the US Dollar in 2016.

Fig 39a: Indonesia Plantation Index vs CPO price (absolute performance)

Fig 39b: Indonesia Plantation Index vs CPO price (relative performance)

Index formed using Astra Agro, Sinar Mas, Sampoerna and London Sumatra


Index formed using Astra Agro, Sinar Mas, Sampoerna and London Sumatra


Fig 40: Indonesian Plantations: 1-year forward rolling PER

Sample comprises AALI, LSIP, Sinar Mas, Sampoerna Agro


Strategy

Stay clear in 3Q15 but revisit in 4Q15. We advocate staying clear of the

sector in 3Q15 but revisit the sector in 4Q15 as several headwinds (low

crude oil price, ample soybean and high palm oil stockpile) are there to

keep CPO price low in the near term. Nonetheless, a strong El Nino

affecting either soybean or palm oil major producing areas will be the

catalyst to a sharp recovery in CPO price. Unfortunately, while the

indicators (ie. ocean and atmosphere) are strong, the weather have been

mild at the major producing areas although weather forecasters are

predicting harsher weathers from now till early 2016.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014

Indonesia Plantation Index IDR 't (LHS)

Indonesia CPO price IDR 'm (RHS)

0

20

40

60

80

100

120

140

160

2007 2008 2009 2010 2011 2012 2013 2014

Indonesia Plantation Index Indonesia CPO price

-

5.0

10.0

15.0

20.0

25.0


+1SD=18.0

AVG=14.5

-1SD=11.1



Advocate companies with strong organic growth. Companies with young

tree age profiles are expected to grow the fastest and outperform their

peers in the long run. In our universe of coverage, BAL, Ta Ann and TSH

have the youngest tree age profile (~7-years old in 2014). Ta Ann (15% 3-

year 2014-17 CAGR in FFB production), BAL (15%), FR (12%) and FR (12%)

are projected to have the highest production growth. This is followed by

SOP (11%), THP (10%), and GENP (10%) – see Fig 36.

Fig 35: Average age profile of companies vs FFB yield (t/ha) in 2014

Fig 36: 3-year 2014-17 FFB production CAGR for companies under our coverage

Source: Companies, Maybank-KE Source: Companies, Maybank-KE

Downside protection from property development potential. Malaysian

planters are rather unique and have relatively longer planting and listing

history than their regional peers. A number of the listed Malaysian planters

have invested in freehold oil palm estates located along the west coast of

Peninsular Malaysia which are now part of nearby cities/towns as

development gains pace and given their improved accessibility. These

estates have the potential to be turned into property development and

would allow the companies to unlock values. Companies that offer such

downside protection in terms of asset revaluation/property development

potentials are SIME, GENP, SOP, BPLANT and KLK.

Top BUYs in the region: Bumitama Agri (BAL), Genting Plantations

(GENP), and Sarawak Oil Palms (SOP). For long term investors, we

advocate adding exposure to companies that offer good organic long-term

growth proposition (TAH, BAL, FR, TSH, SOP, and GENP), and those that

offer downside protection/buffer (planters with strategic estates that have

property development potentials like SIME, GENP, SOP, BPLANT and KLK).

We prefer small- to mid-cap plantation plays for 4Q15 given their relatively

cheaper valuations vis-à-vis large caps, and leveraging on higher CPO ASPs.

1.5%

1.6%

2.8%

3.3%

5.4%

6.7%

9.6%

10.1%

10.3%

10.5%

12.0%

14.7%

14.7%

0% 5% 10% 15% 20%

Boustead Plantations

IOI Corporation

Astra Agro Lestari

Felda Global

Kuala Lumpur Kepong

Sime Darby

TSH Resources

Genting Plantations

TH Plantations

Sarawak Oil Palms

First Resources

Bumitama Agri

Ta Ann Holdings



Fig 37: Sector Summary Table

Company Rating Mkt Cap Shr px TP EPS Growth (%)

PE (x)

Div Yield (%) EV/EBITDA (x)

P/B (x)

ROE (%)

1 Sept 1 Sept 15F 16F 15F 16F 15F 16F 15F 16F 15F 15F

(USD m) (LCY) (LCY) Sime Darby Hold 11,141 7.47 7.98 (22.4) 10.5 21.8 19.8 3.0 3.3 14.0 13.6 1.5 7.1

IOI Corp Hold 5,981 3.94 3.97 (25.7) 11.9 28.4 25.4 2.1 2.0 24.6 17.7 5.3 10.3

KL Kepong Hold 5,217 20.40 22.24 (12.7) 10.8 26.5 23.9 2.3 2.5 15.7 14.2 2.8 10.6

FGVH Hold 1,069 1.22 1.30 46.2 113.2 32.1 15.1 2.0 3.4 10.4 7.8 0.7 2.2

Gent Plant’ns Buy 1,801 9.67 10.55 (29.8) 38.4 27.9 20.2 0.7 1.0 20.9 15.9 1.8 6.7

SOP Buy 395 3.74 5.23 (29.6) 92.8 20.7 10.7 0.6 1.0 9.3 6.4 1.2 5.9

TSH Resources Hold 576 1.77 1.80 (37.1) 47.2 27.7 18.8 1.1 1.6 18.9 16.1 1.9 7.1

Ta Ann Buy 302 3.39 5.55 12.4 10.1 10.1 9.2 4.5 4.9 5.4 4.9 1.1 11.4

TH Plant Hold 259 1.22 1.30 (30.8) 81.5 45.2 24.9 1.1 2.0 18.0 12.5 0.9 2.0

Boustead Plant Buy 499 1.30 1.56 (69.2) 241.7 108 31.7 5.4 1.8 28.1 17.1 0.9 6.2

Malaysia Average 26.8 21.6

Wilmar Buy 12,665 2.81 4.14 8.4 11.7 9.7 8.7 1.9 2.1 11.9 11.0 0.7 8.0

Golden Agri * N.R 2,754 0.305 N.R. (11.8) 40.0 14.4 10.3 2.8 3.7 10.4 8.7 0.3 2.3

First Resources Hold 1,724 1.54 1.60 (26.6) 11.3 13.6 12.2 2.1 2.4 9.0 7.6 1.9 12.8

Bumitama Agri Buy 916 0.74 0.85 (24.6) 21.8 13.8 11.3 1.5 1.8 10.9 8.5 2.2 14.6

Indofood Agri * N.R 465 0.47 N.R. (9.9) 34.2 9.8 7.3 0.9 1.3 8.2 6.7 0.4 3.4

Singapore Average 10.9 9.3

Astra Agro Sell 1,888 16,900 14,000 (70.8) 68.5 36.4 21.6 0.9 1.6 13.4 12.5 2.2 6.3

Salim Ivomas Pratama*

N.R 517 461 N.R. (34.9) 45.3 13.1 9.0 2.3 2.0 6.5 5.4 0.5 3.9

London Sumatera N.R 530 1,095 N.R. (18.2) 16.6 10.0 8.6 4.2 3.9 5.5 4.7 1.0 11.0

Sampoerna Agro * N.R 178 1,325 N.R. (28.0) 32.9 10.2 7.7 3.1 2.2 7.7 6.0 0.8 8.8

BW Plant'n * N.R 584 261 N.R. (74.0) 109.5 61.8 29.5 0.7 0.4 12.5 9.1 1.2 2.1

Indonesia Average 32.1 18.6

Source: Maybank-KE, *bloomberg estimates



Sensitivity and risks

Earnings sensitivity

Whose earnings are most leverage to CPO price movement? Companies

with purer upstream exposure and relatively high all-in cost of production

(per tonne) are the most leveraged due to either their relatively lower oil

yields or higher cost base. Companies with significant brownfield

acquisitions vs organic growth and which requires higher debt servicing,

and has higher depreciation/amortisation are also the more leveraged.

They include Boustead Plantations (BPLANT), THP and FGV whereby for

every MYR100/t deviation in our CPO ASPs, their FY16 earnings would

change by 20%-28% respectively.

Fig 38: Earnings sensitivity for every MYR100/t change in CPO ASP for FY16 forecasts

Source: Company, Maybank KE

Risks to our view

Upside risks: (i) weather anomalies (like recurrence of a strong El Nino) at

major producing countries remain the biggest threat on supply, (ii) further

weakening of Ringgit or Rupiah against US Dollar, (iii) sharp recovery in

crude oil price (Brent).

Downside risks: (i) further slump in crude oil (Brent) which will further

soften biofuel appeal and lead to lower vegetable oils (including CPO)

price; (ii) lackluster enforcement of biodiesel mandates by Indonesia and

Malaysia, (iii) an unexpected steep slowdown in global growth (especially

China and India) impacting demand for palm oil, (iv) changes in

government policies, (v) record planting and harvesting of soybean and

other crops in the next planting season, and (vi) non-governmental

organisational (NGO) activism which pose serious threats to demand.

6.8%

8.0%

8.3%

8.4%

8.5%

8.5%

9.1%

9.9%

10.0%

10.8%

19.9%

27.0%

27.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

IOI Corporation

Astra Agro Lestari

First Resources

Kuala Lumpur Kepong

Genting Plantations

Ta Ann Holdings

Bumitama Agri

Sime Darby

TSH Resources

Sarawak Oil Palms

Felda Global

TH Plantations


September 2, 2015

TP R

evis

ion

CO

MPA

NY

RESEA

RC

H |

SEE PAGE 67 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Astra Agro Lestari (AALI IJ)

No signs of recovery We cut our 2015-17 net profits by 20-42% following the revision

of house CPO (Rupiah) ASP assumptions (-10-13%).

Following the earnings revisions, we also lower our TP to

IDR14,000 based on an unchanged FY16F PER of 18x.

Reiterate SELL on uninspiring CPO price outlook, Rupiah

depreciation, and lower nucleus production. We still expect

downward pressure on CPO price to persist.

What’s New We revise down our industry wide 2015/16/17 CPO ASP forecasts to

MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13%/

-8%/-8%). Our revised CPO price forecasts have also considered the

weaker Ringgit against Rupiah at 3,455-3,546 (previously 3,571).

With the weaker Ringgit, the implied revision in house CPO ASP

forecasts for 2015/16/17 in Rupiah terms is marginal at -13/

-10/-11% to IDR7,447/8,079/8,291/kg.

What’s Our View Consequently, we cut our FY15F/16F/17F net profits by

42%/23%/20%. Following our earnings revision, we lower AALI’s TP

to IDR14,000 based on an unchanged 18x 2016F PER. Our new TP

translates to EV of USD8,500/ha.

We believed that 2015 will be a washout year for the plantation

sector. Going forward, we expect CPO price to remain under

pressure from weak crude oil and soybean price. In addition, the

new export levy is going to make things even more challenging, as

the impact will be negative for upstream planters like AALI.

Furthermore, we are also expecting around 3% lower nucleus

productions this year. Moreover, stronger USD environment will

have a net negative impact to AALI even though its top line is

positively linked to USD, as AALI’s debts are all denominated in

USD. Thus, the more the USD appreciates against IDR, the higher

the forex loss will be and will affect its bottom line directly.

Key Data

Share Price Performance

Maybank vs Market

Share Price: IDR16,900 MCap (USD): 1.9B Indonesia

Target Price: IDR14,000 (-17%) ADTV (USD): 2M Plantations (Unchanged)SELL

52w high/low (IDR)

3m avg turnover (USDm)

Free float (%)

Issued shares (m)

Market capitalization

Major shareholders:

-Astra International 79.7%

-na na

-na na

27,400/14,800

20.3

1.6

IDR26.6T

1,575

70

80

90

100

110

120

130

140

150

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15

Astra Agro Lestari - (LHS, IDR)

Astra Agro Lestari / Jakarta Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (15.8) (32.6) (33.9)

Relative to index (%) (8.4) (20.4) (22.4)

Positive Neutral Negative

Market Recs 6 2 6

Maybank Consensus % +/-

Target Price (IDR) 14,000 21,316 (34.3)

'15 PATMI (IDRb) 730 1,617 (54.8)

'16 PATMI (IDRb) 1,232 2,115 (41.7)

Source: FactSet; Maybank

FYE Dec (IDR b) FY13A FY14A FY15E FY16E FY17E

Revenue 12,675.0 16,305.8 14,569.8 15,914.1 17,229.2

EBITDA 3,646.1 4,506.0 2,459.0 2,659.1 2,976.0

Core net profit 1,801.3 2,503.7 730.5 1,232.1 1,400.0

Core EPS (IDR) 1,144 1,590 464 782 889

Core EPS growth (%) (25.3) 39.0 (70.8) 68.7 13.6

Net DPS (IDR) 558 548 158 266 302

Core P/E (x) 14.8 10.6 36.4 21.6 19.0

P/BV (x) 2.7 2.3 2.2 2.1 2.0

Net dividend yield (%) 3.3 3.2 0.9 1.6 1.8

ROAE (%) 19.0 23.5 6.3 10.1 10.8

ROAA (%) 13.2 14.9 3.8 5.8 6.2

EV/EBITDA (x) 11.5 9.4 13.4 12.5 11.3

Net debt/equity (%) 20.4 33.4 48.8 49.4 47.9

Adhi Tasmin

(62) 21 2557 1136

[email protected]

Isnaputra Iskandar, CFA

(62) 21 2557 1129

[email protected]


Astra Agro Lestari

FYE 31 Dec FY13A FY14A FY15E FY16E FY17E

Key Metrics

P/E (reported) (x) 14.8 10.6 36.4 21.6 19.0

Core P/E (x) 14.8 10.6 36.4 21.6 19.0

P/BV (x) 2.7 2.3 2.2 2.1 2.0

P/NTA (x) 2.7 2.3 2.2 2.1 2.0


FCF yield (%) nm nm nm nm nm

EV/EBITDA (x) 11.5 9.4 13.4 12.5 11.3

EV/EBIT (x) 13.8 11.4 19.9 19.1 16.9

INCOME STATEMENT (IDR b)

Revenue 12,675.0 16,305.8 14,569.8 15,914.1 17,229.2

Gross profit 4,120.4 4,951.8 3,015.5 3,283.5 3,736.4

EBITDA 3,646.1 4,506.0 2,459.0 2,659.1 2,976.0

Depreciation (598.8) (776.6) (800.0) (910.0) (980.0)

Amortisation (7.0) (7.0) (7.0) (7.0) (7.0)

EBIT 3,040.3 3,722.4 1,652.0 1,742.1 1,989.0

Net interest income /(exp) (54.4) (73.1) (82.9) (101.5) (101.5)

Associates & JV 0.0 0.0 0.0 0.0 0.0

Exceptionals 0.0 0.0 0.0 0.0 0.0

Other pretax income (345.1) 40.7 (498.8) 167.4 167.4

Pretax profit 2,640.8 3,690.0 1,070.2 1,808.0 2,054.8

Income tax (737.8) (1,068.7) (307.7) (521.6) (593.2)

Minorities (101.7) (117.6) (32.1) (54.2) (61.6)

Discontinued operations 0.0 0.0 0.0 0.0 0.0

Reported net profit 1,801.3 2,503.7 730.5 1,232.1 1,400.0

Core net profit 1,801.3 2,503.7 730.5 1,232.1 1,400.0

BALANCE SHEET (IDR b)

Cash & Short Term Investments 709.1 611.2 193.0 348.4 139.1

Accounts receivable 3.9 33.2 29.7 32.4 35.1

Inventory 803.0 1,278.1 1,300.7 1,421.8 1,518.9

Property, Plant & Equip (net) 11,467.6 14,341.9 16,541.9 17,631.9 18,651.9

Intangible assets 0.0 0.0 0.0 0.0 0.0

Investment in Associates & JVs 0.0 0.0 0.0 0.0 0.0

Other assets 1,979.6 2,294.0 2,274.7 2,486.2 2,662.7

Total assets 14,963.2 18,558.3 20,339.9 21,920.7 23,007.6

ST interest bearing debt 2,151.6 2,299.2 3,105.0 3,415.5 3,415.3

Accounts payable 719.6 922.9 827.2 903.5 978.2

LT interest bearing debt 571.4 2,127.8 2,873.5 3,160.8 3,160.8

Other liabilities 1,253.0 1,371.0 1,226.0 1,339.0 1,450.0

Total Liabilities 4,695.3 6,720.8 8,032.0 8,819.3 9,004.6

Shareholders Equity 9,894.6 11,419.4 11,857.7 12,597.0 13,436.9

Minority Interest 373.3 418.1 450.2 504.4 566.1

Total shareholder equity 10,267.9 11,837.5 12,307.9 13,101.4 14,003.0

Total liabilities and equity 14,963.2 18,558.3 20,339.9 21,920.7 23,007.6

CASH FLOW (IDR b)

Pretax profit 2,640.8 3,690.0 1,070.2 1,808.0 2,054.8

Depreciation & amortisation 605.8 783.6 807.0 917.0 987.0

Adj net interest (income)/exp 54.4 73.1 82.9 101.5 101.5

Change in working capital 646.4 (301.1) (114.7) (47.6) (25.1)

Cash taxes paid (737.8) (1,068.7) (307.7) (521.6) (593.2)

Other operating cash flow 0.0 0.0 0.0 0.0 0.0

Cash flow from operations 1,848.5 1,832.4 1,179.8 1,644.7 1,881.7

Capex (2,674.9) (3,650.9) (3,000.0) (2,000.0) (2,000.0)

Free cash flow (826.4) (1,818.5) (1,820.2) (355.3) (118.3)

Dividends paid (1,033.8) (1,015.0) (292.2) (492.9) (560.0)

Equity raised / (purchased) 97.9 36.1 0.0 0.0 0.0

Change in Debt 1,751.0 1,704.0 1,551.5 597.8 (0.1)

Other invest/financing cash flow (766.9) (231.4) (183.2) (152.6) (112.7)

Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0

Net cash flow (778.1) (1,324.8) (744.0) (402.9) (791.1)


Astra Agro Lestari


Key Ratios

Growth ratios (%)

Revenue growth 9.6 28.6 (10.6) 9.2 8.3

EBITDA growth (8.4) 23.6 (45.4) 8.1 11.9

EBIT growth (12.0) 22.4 (55.6) 5.5 14.2

Pretax growth (25.1) 39.7 (71.0) 68.9 13.7

Reported net profit growth (25.3) 39.0 (70.8) 68.7 13.6

Core net profit growth (25.3) 39.0 (70.8) 68.7 13.6

Profitability ratios (%)

EBITDA margin 28.8 27.6 16.9 16.7 17.3

EBIT margin 24.0 22.8 11.3 10.9 11.5

Pretax profit margin 20.8 22.6 7.3 11.4 11.9

Payout ratio 48.8 34.5 34.0 34.0 34.0

DuPont analysis

Net profit margin (%) 14.2 15.4 5.0 7.7 8.1

Revenue/Assets (x) 0.8 0.9 0.7 0.7 0.7

Assets/Equity (x) 1.5 1.6 1.7 1.7 1.7

ROAE (%) 19.0 23.5 6.3 10.1 10.8

ROAA (%) 13.2 14.9 3.8 5.8 6.2

Liquidity & Efficiency

Cash conversion cycle 16.9 7.4 13.7 14.8 14.8

Days receivable outstanding 0.8 0.4 0.8 0.7 0.7

Days inventory outstanding 43.2 33.0 40.2 38.8 39.2

Days payables outstanding 27.0 26.0 27.3 24.7 25.1

Dividend cover (x) 2.0 2.9 2.9 2.9 2.9

Current ratio (x) 0.5 0.6 0.4 0.4 0.4

Leverage & Expense Analysis

Asset/Liability (x) 3.2 2.8 2.5 2.5 2.6

Net debt/equity (%) 20.4 33.4 48.8 49.4 47.9

Net interest cover (x) 55.9 50.9 19.9 17.2 19.6

Debt/EBITDA (x) 0.7 1.0 2.4 2.5 2.2

Capex/revenue (%) 21.1 22.4 20.6 12.6 11.6

Net debt/ (net cash) 2,013.9 3,815.8 5,785.5 6,227.9 6,437.1

Source: Company; Maybank

September 2, 2015

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Boustead Plantations (BPLANT MK)

~0.6x P/RNAV; Deep in value Revising down our industry wide 2015-17 CPO ASP by 8-13%.

Despite cutting our 2015-17 core net profit forecasts by 19%-

58%, we raised our 2015 headline profit by 68% incorporating a

land disposal gain recognition in 4Q15.

Rich land value offers attractive value proposition. Maintain

BUY with lower RNAV-TP of MYR1.56 following our EPS cuts.

What’s New We revise down our 2015/16/17 CPO ASP forecasts to

MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%) – see our sector report issued today. As the current El Nino has

failed to have any immediate impact on FFB output, the market

has shifted its focus to several near-term headwinds that have

pressured CPO price. Among the headwinds is record US soybean

planting amid ample soybean supply, relatively high palm oil

stockpile, and low crude oil prices affecting discretionary biofuel

demand.

What’s Our View Consequently, our 2015/16/17 core net profit forecasts are

lowered by -58/-22/-19%. The higher earnings sensitivity is due to

its older trees (averaging 14 years) with relatively higher cost of

production amid relatively lower FFB yield.

But in terms of reported net profit, we raise 2015’s headline profit

by 68% to MYR143m. In our revised 2015 earnings, we incorporated

a second land disposal worth MYR94m with an after-tax gain of

MYR84m, targeted for completion in 4Q15.

Following our CPO revisions, we lowered our TP to MYR1.56 (-5%,

from MYR1.65) based on unchanged RNAV-TP (see overleaf).

Maintain BUY as the share price has corrected sharply. It is trading

at ~0.6x P/RNAV and below 1x P/BV.

Key Data


Maybank vs Market

Share Price: MYR1.30 MCap (USD): 499M Malaysia

Target Price: MYR1.56 (+20%) ADTV (USD): 0.1M Plantations (Unchanged)BUY

Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-Boustead Holdings Bhd. 55.0%

-Lembaga Tabung Angkatan Tentera 11.3%

-Lembaga Tabung Haji 5.1%

1.60/1.17

42.9

Yes

0.1

MYR2.1B

1,600

80

85

90

95

100

105

110

115

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

Boustead Plantations - (LHS, MYR)

Boustead Plantations / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (5.8) (5.1) (18.8)

Relative to index (%) 0.9 2.8 (5.8)


Market Recs 1 0 0


Target Price (MYR) 1.56 1.65 (5.5)

'15 PATMI (MYRm) 143 85 68.1

'16 PATMI (MYRm) 65 84 (22.3)


FYE Dec (MYR m) FY13A FY14A FY15E FY16E FY17E

Revenue 770.3 717.3 604.3 689.7 731.9

EBITDA 174.0 169.8 85.5 144.2 171.2

Core net profit 63.2 62.8 19.5 64.9 83.5

Core EPS (sen) 6.2 3.9 1.2 4.1 5.2

Core EPS growth (%) (52.1) (36.7) (68.9) 233.1 28.6

Net DPS (sen) 8.8 6.0 7.0 2.4 3.1

Core P/E (x) 21.0 33.1 106.7 32.0 24.9

P/BV (x) 1.0 0.9 0.9 0.9 0.9


ROAE (%) 4.5 3.4 0.8 2.8 3.5

ROAA (%) 2.3 1.9 0.6 1.9 2.4

EV/EBITDA (x) na 16.7 28.7 17.4 14.5

Net debt/equity (%) 68.0 17.9 11.4 13.5 11.5

Ong Chee Ting, CA

(603) 2297 8678

[email protected]



RNAV table Estates Owner

-ship

Status Size NBV BV Market

price

Market

Value

(MV)

MV

(based on

equity stake)

SOP on 45%-

disc on

estates

SOP/sh

Hectare MYR ‘m MYR psf MYR psf MYR’m MYR’m MYR’m MYR

Balau 100% FH 247 27.5 1.04 11.00 292.1 292.1 292.1 0.18

Kulai Young 100% FH 869 72.3 0.77 8.00 747.6 747.6 747.6 0.47

Bukit Mertajam 100% FH 2,165 140.2 0.60 2.50 582.3 582.3 582.3 0.36

Kuala Muda 50% FH 1,520 34.2 0.21 1.50 245.2 122.6 122.6 0.08

Malakoff 100% FH 1,341 127.7 0.89 4.00 577.1 577.1 577.1 0.36

Telok Sengat 100% FH 3,699 282.9 0.71 1.00 397.9 397.9 397.9 0.25

Batu Pekaka 100% FH 969 55.7 0.53 1.00 104.2 104.2 104.2 0.07

Taiping Rubber 100% FH 1,379 81.8 0.55 1.00 148.4 148.4 148.4 0.09

**11,428 822.3 3,095.0 2,972.4 2,972.4 1.86

Less: 45% discount - (1,337.6) (0.84)

Value of estates with property development potential 2,972.4 1, 634.8 1.02

* Adj EBIT

2016

Adj

EBIT-tax

Target

multiple

Plantation (MYR ‘m) 91.6 68.7 16.0 1,099.8 1,099.8 0.69

JV company at book value 33.5 33.5 0.02

Add: Cash 576.1 576.1 0.36

Less: Debt (840.9) (840.9) (0.53)

RNAV 3,840.8 2,503.2 1.56

No of shares issued (‘m) 1,600.0 1,600.0

RNAV (MYR per share) 2.40 1.56

Implied 2016 PER (x) 59.1x 38.5x

* excludes estimated EBIT of estates with property development potential; ** effective stake; FH= Freehold





Key Metrics

P/E (reported) (x) 4.0 36.4 14.6 32.0 24.9

Core P/E (x) 21.0 33.1 106.7 32.0 24.9

P/BV (x) 1.0 0.9 0.9 0.9 0.9

P/NTA (x) 1.0 0.9 0.9 0.9 0.9


FCF yield (%) nm 3.6 13.7 0.5 5.7

EV/EBITDA (x) na 16.7 28.7 17.4 14.5

EV/EBIT (x) na 22.1 48.3 23.0 18.2

INCOME STATEMENT (MYR m)

Revenue 770.3 717.3 604.3 689.7 731.9

Gross profit 143.0 128.6 50.8 109.4 136.3

EBITDA 174.0 169.8 85.5 144.2 171.2

EBIT 143.1 128.6 50.8 109.4 136.3


Associates & JV 5.2 3.7 4.1 4.5 4.7

Exceptionals 229.7 0.0 123.1 0.0 0.0

Other pretax income 0.0 0.0 0.0 0.0 0.0

Pretax profit 359.3 89.8 149.3 89.5 115.1

Income tax (27.9) (37.4) (5.2) (19.7) (25.3)

Minorities 1.8 4.7 (1.5) (4.9) (6.3)


Reported net profit 333.2 57.2 142.6 64.9 83.5

Core net profit 63.2 62.8 19.5 64.9 83.5

BALANCE SHEET (MYR m)



Inventory 43.0 32.7 42.5 44.5 45.7




Other assets 473.9 104.4 104.7 104.9 105.1

Total assets 3,259.0 3,302.7 3,474.6 3,438.4 3,495.1

ST interest bearing debt 737.4 690.9 690.9 690.9 690.9


LT interest bearing debt 240.0 150.0 150.0 150.0 150.0

Other liabilities 808.0 99.0 206.0 134.0 145.0

Total Liabilities 1,810.1 954.3 1,095.3 1,025.3 1,038.5





CASH FLOW (MYR m)

Pretax profit 359.3 89.8 149.3 89.5 115.1



Change in working capital (353.0) 3.1 124.5 (78.1) 8.7

Cash taxes paid (15.9) (33.0) (5.2) (19.7) (25.3)


Cash flow from operations 40.0 143.6 331.9 51.0 159.4

Capex (248.3) (68.0) (46.0) (40.0) (40.0)

Free cash flow (208.3) 75.6 285.9 11.0 119.4

Dividends paid 0.0 (64.0) (112.0) (39.0) (50.1)


Change in Debt 77.1 (138.0) 0.0 0.0 0.0

Other invest/financing cash flow 20.1 (384.1) (28.7) (24.3) (25.9)


Net cash flow 27.1 399.8 145.2 (52.3) 43.4




Key Ratios

Growth ratios (%)

Revenue growth (7.9) (6.9) (15.8) 14.1 6.1

EBITDA growth (19.3) (2.4) (49.7) 68.6 18.7

EBIT growth (24.1) (10.1) (60.5) 115.3 24.6

Pretax growth 79.2 (75.0) 66.3 (40.0) 28.6

Reported net profit growth 134.1 (82.8) 149.4 (54.4) 28.6

Core net profit growth (52.1) (0.6) (68.9) 233.1 28.6


EBITDA margin 22.6 23.7 14.1 20.9 23.4

EBIT margin 18.6 17.9 8.4 15.9 18.6


Payout ratio 27.0 nm 78.6 60.0 60.0

DuPont analysis


Revenue/Assets (x) 0.2 0.2 0.2 0.2 0.2

Assets/Equity (x) 2.3 1.4 1.5 1.5 1.5

ROAE (%) 4.5 3.4 0.8 2.8 3.5

ROAA (%) 2.3 1.9 0.6 1.9 2.4






Dividend cover (x) 3.7 0.6 1.3 1.7 1.7

Current ratio (x) 0.3 0.7 0.7 0.7 0.8



Net debt/equity (%) 68.0 17.9 11.4 13.5 11.5


Debt/EBITDA (x) 5.6 5.0 9.8 5.8 4.9

Capex/revenue (%) 32.2 9.5 7.6 5.8 5.5

Net debt/ (net cash) 945.1 410.0 264.8 317.2 273.8


September 2, 2015

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Bumitama Agri (BAL SP)

BUY for its long-term growth 2015-17 net profits cut by 23-28% on lower CPO (Rupiah) ASP

(down 10 to 13%), and lower FFB output.

Our revised earnings also incorporated FRS16 impact with

higher depreciation charges from 2016 onwards.

Following earnings revision, we lower our TP to SGD0.85 (-25%)

on unchanged 13x 2016 PER. Maintain BUY.


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%) – see our sector report issued today. Our revised CPO price

forecasts have also considered the weaker Ringgit against Rupiah

at 3,513-3,546 (previously 3,571). With the weaker Ringgit, the

implied revision in CPO ASP for 2015/16/17 in Rupiah terms is

marginal at -13/-10/-11% to IDR7,447/8,079/8,291/kg.

Effective 1 Jan 2016, Singapore-listed companies will adopt FRS16

in its 2016 reporting that effectively treats the oil palm trees as

property, plant and equipment under the cost or revaluation

method. It also requires BAL to start depreciating the trees which

was not required in the past under the fair valuation method.

What’s Our View While BAL has yet to provide any guidance on its financial impact,

we have imputed our estimated depreciation charges based on the

cost method into our 2016 forecast and beyond. We also adjusted

our 2015 balance sheet forecast but left the 2014 financial

statements unchanged. Besides adjusting for CPO ASP and FRS16,

we have also trimmed our 2015/16/17 FFB nucleus growth forecast

to 16%/17%/11% (from 18%/16%/12%). This follows a weak 1H15

FFB growth of 2% YoY.

Incorporating the above changes, we cut our 2016/17/18 net

profits by 28/25/23%. Following our earnings revision, we lower

BAL’s TP to SGD0.85 (-25%) on unchanged 13x 2016 PER. Still a BUY.

Key Data


Maybank vs Market

Share Price: SGD0.74 MCap (USD): 915M Singapore

Target Price: SGD0.85 (+16%) ADTV (USD): 0.4M Plantations (Unchanged)BUY

52w high/low (SGD)


Free float (%)

Issued shares (m)


Major shareholders:

-Fortune Corp. Ltd. /SG/ 52.6%

-IOI Corp. Bhd. 31.4%

-Affin Hwang Asset Management Bhd. 0.8%

1.15/0.70

15.8

0.4

SGD1.3B

1,758

75

85

95

105

115

125

135

0.70

0.80

0.90

1.00

1.10

1.20

1.30


Bumitama Agri - (LHS, SGD) Bumitama Agri / Straits Times Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (20.5) (25.0) (33.5)



Market Recs 5 0 0


Target Price (SGD) 0.85 1.33 (36.0)

'15 PATMI (IDRb) 899 1,274 (29.4)

'16 PATMI (IDRb) 1,141 1,485 (23.2)


FYE Dec (IDR b) FY13A FY14A FY15E FY16E FY17E

Revenue 4,062.7 5,757.3 5,356.5 6,585.2 7,521.6

EBITDA 1,468.4 2,118.5 1,711.7 2,287.2 2,889.5

Core net profit 859.4 1,243.1 936.4 1,140.8 1,476.3

Core EPS (IDR) 489 707 533 649 840

Core EPS growth (%) 15.0 44.6 (24.7) 21.8 29.4

Net DPS (IDR) 104 148 107 130 168

Core P/E (x) 15.0 10.4 13.8 11.3 8.7

P/BV (x) 2.3 2.0 2.2 1.9 1.6


ROAE (%) 16.3 20.5 15.2 18.1 20.1

ROAA (%) 8.2 9.7 6.8 7.9 9.1

EV/EBITDA (x) 13.7 10.3 10.9 8.4 6.8

Net debt/equity (%) 65.0 61.2 84.6 80.0 69.3

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Bumitama Agri


Key Metrics

P/E (reported) (x) 15.1 11.2 14.3 11.3 8.7

Core P/E (x) 15.0 10.4 13.8 11.3 8.7

P/BV (x) 2.3 2.0 2.2 1.9 1.6

P/NTA (x) 2.4 2.0 2.3 2.0 1.7


FCF yield (%) nm 2.9 nm nm 2.6

EV/EBITDA (x) 13.7 10.3 10.9 8.4 6.8

EV/EBIT (x) 15.1 11.2 12.2 10.3 8.2

INCOME STATEMENT (IDR b)

Revenue 4,062.7 5,757.3 5,356.5 6,585.2 7,521.6

Gross profit 1,599.8 2,341.7 1,929.8 2,323.4 2,862.9

EBITDA 1,468.4 2,118.5 1,711.7 2,287.2 2,889.5

Depreciation (133.7) (183.9) (186.3) (412.7) (491.5)

EBIT 1,334.7 1,934.7 1,525.5 1,874.5 2,398.0

Net interest income /(exp) (34.4) 1.3 (27.1) (79.2) (87.5)

Associates & JV (15.8) (17.1) (12.0) (8.4) 2.0

Exceptionals 28.8 (38.3) 0.0 0.0 0.0

Other pretax income (45.2) (75.7) (50.0) 0.0 0.0

Pretax profit 1,268.1 1,804.9 1,436.4 1,786.9 2,312.5

Income tax (286.4) (433.1) (356.7) (428.9) (555.0)

Minorities (126.3) (218.8) (180.7) (217.3) (281.2)


Reported net profit 855.5 1,153.0 898.9 1,140.8 1,476.3

Core net profit 859.4 1,243.1 936.4 1,140.8 1,476.3

BALANCE SHEET (IDR b)



Inventory 378.6 526.8 516.3 642.2 702.0




Other assets 1,742.3 2,186.8 2,266.8 2,316.8 2,366.8

Total assets 11,843.8 13,803.3 13,551.0 15,289.6 17,298.3



LT interest bearing debt 3,584.9 3,691.1 4,491.1 4,891.1 5,291.1




Minority Interest 510.8 625.5 806.2 1,023.5 1,304.7



CASH FLOW (IDR b)

Pretax profit 1,268.1 1,804.9 1,436.4 1,786.9 2,312.5


Adj net interest (income)/exp 34.4 (1.3) 27.1 79.2 87.5

Change in working capital 158.8 427.5 (577.8) 49.2 61.0

Cash taxes paid (322.0) (291.2) (356.7) (428.9) (555.0)


Cash flow from operations 1,273.0 2,123.8 715.2 1,899.2 2,397.5

Capex (1,387.6) (1,751.6) (1,850.8) (2,010.4) (2,064.6)

Free cash flow (114.6) 372.2 (1,135.5) (111.2) 332.8

Dividends paid (183.3) (290.4) (187.3) (228.2) (295.3)


Change in Debt 855.5 140.7 800.0 400.0 400.0

Other invest/financing cash flow (974.2) (373.4) 359.5 (120.8) (139.5)

Effect of exch rate changes 12.0 (20.4) 0.0 0.0 0.0

Net cash flow (404.6) (171.3) (163.4) (60.1) 298.1


Bumitama Agri


Key Ratios

Growth ratios (%)

Revenue growth 15.2 41.7 (7.0) 22.9 14.2

EBITDA growth 13.5 44.3 (19.2) 33.6 26.3

EBIT growth 10.9 44.9 (21.2) 22.9 27.9

Pretax growth 9.0 42.3 (20.4) 24.4 29.4

Reported net profit growth 8.6 34.8 (22.0) 26.9 29.4

Core net profit growth 15.0 44.6 (24.7) 21.8 29.4


EBITDA margin 36.1 36.8 32.0 34.7 38.4

EBIT margin 32.9 33.6 28.5 28.5 31.9


Payout ratio 21.4 22.5 20.8 20.0 20.0

DuPont analysis


Revenue/Assets (x) 0.3 0.4 0.4 0.4 0.4

Assets/Equity (x) 2.1 2.1 2.3 2.3 2.2

ROAE (%) 16.3 20.5 15.2 18.1 20.1

ROAA (%) 8.2 9.7 6.8 7.9 9.1


Cash conversion cycle (13.4) (13.3) (14.2) (8.9) (9.6)




Dividend cover (x) 4.7 4.4 4.8 5.0 5.0

Current ratio (x) 0.9 0.7 0.7 0.6 0.8



Net debt/equity (%) 65.0 61.2 84.6 80.0 69.3

Net interest cover (x) 38.8 na 56.3 23.7 27.4

Debt/EBITDA (x) 2.8 2.0 3.0 2.4 2.0

Capex/revenue (%) 34.2 30.4 34.6 30.5 27.4

Net debt/ (net cash) 3,661.7 3,969.2 4,932.6 5,392.7 5,494.6


September 2, 2015

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Felda Global Ventures (FGV MK)

A tough call Revise down our industry wide 2015-17 CPO ASP assumptions by

8-13%. Our net profit forecasts cut by 30-60%.

Re-rating catalysts: abandoning the proposed acquisition of

37%- stake in PT Eagle High, or rumoured privatisation offer.

Until then, maintain HOLD with a revised TP of MYR1.30

(-33%) based on unchanged 16x FY16F PER.


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%). As the current El Nino has failed to have an immediate impact

on FFB output, the market shifted its focus to several headwinds

that have pressured CPO price. Among them is record US soybean

planting amid ample soybean supply, relatively high palm oil


demand.

Consequently, our 2015/16/17 core net profit forecasts are

lowered by -60/-33/-30%. The higher earnings sensitivity is due to

its older trees (averaging 16 years) with relatively higher cost of

production amid relatively lower FFB yield.

What’s Our View Even though the stock has corrected sharply, it lacks re-rating

catalyst. FGV’s proposed acquisition of a 37%-non controlling

equity stake in PT Eagle High at a hefty premium has not been well

received by investors. However, there has been market rumour

about potential privatisation offer by its major shareholder –

Lembaga Felda. Until it happens, the stock lacks re-rating catalyst.

Our EPS has yet to factor in the MYR87m estimated disposal gain

following the proposed sale of its Canadian assets for CAD190m (or

MYR608m) cash, targeted for completion by end-2015. Following

our CPO price revisions, we cut our TP to MYR1.30 (from MYR1.94)

based on unchanged 16x FY16F PER.

Key Data


Maybank vs Market

Share Price: MYR1.22 MCap (USD): 1.1B Malaysia

Target Price: MYR1.30 (+7%) ADTV (USD): 1.0M Plantations (Unchanged)HOLD

Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-Government of Malaysia 20.0%

-Felda Asset Holdings Co. Sdn. Bhd. 13.7%


3.86/1.19

47.3

Yes

1.0

MYR4.5B

3,648

30

40

50

60

70

80

90

100

110

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00


Felda Global Ventures - (LHS, MYR)

Felda Global Ventures / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (27.4) (37.4) (68.1)



Market Recs 1 5 7


Target Price (MYR) 1.30 1.28 2.0

'15 PATMI (MYRm) 179 163 10.1

'16 PATMI (MYRm) 296 264 12.0



Revenue 12,568.0 16,434.3 14,969.4 15,935.8 16,543.8

EBITDA 1,593.3 1,293.9 824.2 1,075.7 1,202.8

Core net profit 14.8 95.7 138.0 295.8 390.9

Core EPS (sen) 0.4 2.6 3.8 8.1 10.7

Core EPS growth (%) (97.9) 545.6 44.2 114.3 32.1

Net DPS (sen) 16.0 10.0 2.5 4.1 5.4

Core P/E (x) 300.1 46.5 32.2 15.0 11.4

P/BV (x) 0.7 0.7 0.7 0.7 0.7


ROAE (%) 0.2 1.5 2.2 4.5 5.8

ROAA (%) 0.1 0.5 0.7 1.4 1.8

EV/EBITDA (x) 11.6 9.0 10.4 7.8 6.8

Net debt/equity (%) net cash 18.8 24.2 19.3 12.6

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Felda Global Ventures


Key Metrics

P/E (reported) (x) 4.5 13.3 24.9 15.0 11.4

Core P/E (x) 300.1 46.5 32.2 15.0 11.4

P/BV (x) 0.7 0.7 0.7 0.7 0.7

P/NTA (x) 0.8 0.9 0.9 0.9 0.8


FCF yield (%) nm 1.3 1.6 17.7 21.8

EV/EBITDA (x) 11.6 9.0 10.4 7.8 6.8

EV/EBIT (x) 12.6 13.5 21.9 13.0 10.4


Revenue 12,568.0 16,434.3 14,969.4 15,935.8 16,543.8

Gross profit 878.3 2,144.1 1,700.4 1,989.1 2,158.7

EBITDA 1,593.3 1,293.9 824.2 1,075.7 1,202.8

Depreciation (118.9) (422.1) (422.1) (416.2) (405.6)

Amortisation (11.2) (11.2) (11.2) (11.2) (11.2)

EBIT 1,463.2 860.7 390.9 648.3 786.0

Net interest income /(exp) 60.7 (68.7) (121.3) (128.7) (122.9)

Associates & JV 11.4 34.4 77.5 49.2 60.5

Exceptionals na 0.0 0.0 0.0 0.0


Pretax profit 1,535.4 826.4 347.1 568.9 723.5

Income tax (399.6) (275.3) (67.4) (129.9) (165.8)

Minorities (126.0) (215.5) (100.8) (143.1) (166.9)

Discontinued operations (28.8) 0.0 0.0 0.0 0.0


Core net profit 14.8 95.7 138.0 295.8 390.9


Cash & Short Term Investments 5,021.2 3,673.8 3,304.1 3,591.7 4,014.6

Accounts receivable 1,378.5 1,078.8 1,640.5 1,746.4 1,813.0

Inventory 1,742.9 1,763.7 1,817.7 1,910.5 1,970.6


Intangible assets 3,323.5 4,266.4 4,266.4 4,266.4 4,266.4

Investment in Associates & JVs 918.6 968.3 1,030.8 1,065.0 1,110.5

Other assets 2,668.9 2,780.0 2,780.0 2,780.0 2,780.0

Total assets 20,734.4 20,719.4 20,941.8 21,307.2 21,717.5


Accounts payable 1,361.1 1,422.0 1,454.1 1,528.4 1,576.5





Minority Interest 2,374.8 2,446.2 2,547.0 2,690.2 2,857.0



CASH FLOW (MYR m)

Pretax profit 1,535.4 826.4 347.1 568.9 723.5



Change in working capital 8.3 179.4 (583.5) (124.5) (78.7)

Cash taxes paid (294.1) (295.4) (67.4) (129.9) (165.8)

Other operating cash flow (795.4) 28.7 84.2 112.5 101.2

Cash flow from operations 687.8 1,366.7 408.4 1,049.1 1,191.9

Capex (1,844.0) (1,230.1) (336.0) (261.0) (221.0)

Free cash flow (1,156.3) 56.5 72.4 788.1 970.9

Dividends paid (529.0) (583.7) (89.4) (147.9) (195.5)


Change in Debt 476.1 (592.6) (172.8) (172.8) (172.8)

Other invest/financing cash flow 540.6 (466.5) (179.7) (179.7) (179.7)


Net cash flow (651.8) (1,492.4) (369.6) 287.6 422.8


Felda Global Ventures


Key Ratios

Growth ratios (%)

Revenue growth (2.5) 30.8 (8.9) 6.5 3.8

EBITDA growth 50.4 (18.8) (36.3) 30.5 11.8

EBIT growth 50.1 (41.2) (54.6) 65.9 21.2

Pretax growth 36.4 (46.2) (58.0) 63.9 27.2

Reported net profit growth 21.7 (65.8) (46.7) 65.4 32.1

Core net profit growth (97.9) 545.6 44.2 114.3 32.1


EBITDA margin 12.7 7.9 5.5 6.8 7.3

EBIT margin 11.6 5.2 2.6 4.1 4.8


Payout ratio 59.5 nm 50.0 50.0 50.0

DuPont analysis


Revenue/Assets (x) 0.6 0.8 0.7 0.7 0.8

Assets/Equity (x) 3.2 3.3 3.2 3.2 3.2

ROAE (%) 0.2 1.5 2.2 4.5 5.8

ROAA (%) 0.1 0.5 0.7 1.4 1.8






Dividend cover (x) 1.7 0.9 2.0 2.0 2.0

Current ratio (x) 2.2 1.7 1.7 1.8 1.9



Net debt/equity (%) net cash 18.8 24.2 19.3 12.6

Net interest cover (x) na 12.5 3.2 5.0 6.4

Debt/EBITDA (x) 3.0 3.8 5.9 4.5 4.0

Capex/revenue (%) 14.7 7.5 2.2 1.6 1.3

Net debt/ (net cash) (286.5) 1,194.6 1,564.2 1,276.6 853.8


September 2, 2015

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First Resources (FR SP)

Downgrade to HOLD Cut 2015-17 net profits by 27-32% on lower CPO (USD) ASP

(down 16 to 19%), mitigated by higher FFB output.

Our revised earnings also incorporate FRS16 impact with higher

depreciation charges from 2016 onwards.

Downgrade to HOLD (from BUY). Limited upside following our

lower TP of SGD1.60 (-28%) on unchanged 13x 2016 PER.


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%) - see our sector report issued today. Our revised CPO price

forecasts have also considered the weaker Ringgit against US Dollar

at 3.80-3.90 (previously 3.50). With the weaker Ringgit, the

implied revision in CPO ASP for 2015/16/17 in US Dollar terms is

even larger at -19/-17/-16% to USD553/590/623/t.

Effective 1 Jan 2016, Singapore-listed companies will adopt FRS16

in its 2016 reporting that effectively treats the oil palm trees as

property, plant and equipment under the cost method (preferred

by FR). It also requires FR to start depreciating the trees, which

was not required in the past under the fair valuation method.

What’s Our View While FR has yet to provide any guidance on its financial impact,

we have imputed our estimated depreciation charges into our 2016

forecast and beyond. We also adjusted our 2015 balance sheet

forecast but left the 2014 financial statements unchanged. Besides

adjusting for CPO ASP and FRS16, we have also tweaked our

2015/16/17 FFB nucleus growth forecast to 15/12/9% (from

13/11/10%). This follows its revised 2015 FFB growth guidance of

10-15% after an impressive 18% YoY growth in 1H15.

Incorporating the above changes, we cut our 2016/17/18 net

profits by 27/31/32%. Following our earnings revision, we cut FR to

HOLD (from BUY) with a lower TP of SGD1.60 on 13x 2016 PER.

Key Data


Maybank vs Market

Share Price: SGD1.54 MCap (USD): 1.7B Singapore

Target Price: SGD1.60 (+4%) ADTV (USD): 2M Plantations (Downgrade)HOLD

52w high/low (SGD)


Free float (%)

Issued shares (m)


Major shareholders:

-Eight Capital Trust 63.2%

-King Fortune Trust 5.6%

-Fidelity Management & Research Co. 2.6%

2.19/1.47

30.5

2.5

SGD2.4B

1,584

85

95

105

115

125

135

145

1.40

1.60

1.80

2.00

2.20

2.40

2.60


First Resources - (LHS, SGD) First Resources / Straits Times Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (19.2) (24.4) (23.3)



Market Recs 13 0 0


Target Price (SGD) 1.60 2.33 (31.4)

'15 PATMI (USDm) 126 139 (9.5)

'16 PATMI (USDm) 141 182 (22.5)


FYE Dec (USD m) FY13A FY14A FY15E FY16E FY17E

Revenue 626.5 615.5 532.6 614.4 688.2

EBITDA 331.9 288.6 213.3 232.5 257.6

Core net profit 217.0 172.0 126.0 141.0 153.6

Core EPS (cts) 13.7 10.9 8.0 8.9 9.7

Core EPS growth (%) (1.0) (20.7) (26.7) 11.9 9.0

Net DPS (cts) 3.3 2.6 2.4 2.7 2.9

Core P/E (x) 7.9 10.0 13.7 12.2 11.2

P/BV (x) 1.7 1.6 1.9 1.7 1.6


ROAE (%) 20.7 16.7 12.8 14.8 14.6

ROAA (%) 11.7 9.1 6.7 7.7 7.9

EV/EBITDA (x) 8.8 8.7 9.0 8.2 7.3

Net debt/equity (%) 21.9 21.8 16.2 12.4 7.9

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


First Resources


Key Metrics

P/E (reported) (x) 7.2 9.9 13.7 12.2 11.2

Core P/E (x) 7.9 10.0 13.7 12.2 11.2

P/BV (x) 1.7 1.6 1.9 1.7 1.6

P/NTA (x) 1.9 1.8 2.1 1.9 1.7


FCF yield (%) 1.1 1.1 7.2 3.7 4.8

EV/EBITDA (x) 8.8 8.7 9.0 8.2 7.3

EV/EBIT (x) 9.4 9.4 9.9 8.9 7.9

INCOME STATEMENT (USD m)

Revenue 626.5 615.5 532.6 614.4 688.2

Gross profit 381.7 323.4 249.4 272.1 300.7

EBITDA 331.9 288.6 213.3 232.5 257.6

Depreciation (20.6) (19.5) (19.2) (18.9) (18.7)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 311.3 269.1 194.1 213.5 239.0


Associates & JV 0.0 0.0 0.0 0.0 0.0

Exceptionals 29.6 1.9 0.0 0.0 0.0

Other pretax income (8.9) (4.0) 0.0 0.0 0.0

Pretax profit 313.6 251.9 175.0 195.8 218.7

Income tax (67.5) (71.2) (43.8) (48.9) (54.7)

Minorities (7.9) (7.4) (5.3) (5.9) (10.4)



Core net profit 217.0 172.0 126.0 141.0 153.6

BALANCE SHEET (USD m)



Inventory 59.2 48.6 62.1 75.0 84.9

Property, Plant & Equip (net) 1,172.4 1,299.5 973.5 1,055.3 1,133.9



Other assets 132.3 173.9 173.9 173.9 173.9

Total assets 1,780.3 1,997.9 1,766.7 1,888.0 2,018.1





Total Liabilities 740.1 882.1 807.2 825.8 841.0

Shareholders Equity 993.5 1,063.2 903.2 1,001.9 1,109.5


Total shareholder equity 1,040.1 1,115.8 959.5 1,062.3 1,177.1


CASH FLOW (USD m)

Pretax profit 313.6 251.9 175.0 195.8 218.7



Change in working capital (60.3) 12.3 84.4 10.1 9.8

Cash taxes paid (65.3) (76.7) (43.8) (48.9) (54.7)



Capex (181.0) (204.2) (130.0) (130.0) (130.0)

Free cash flow 19.0 18.7 123.9 63.7 82.8

Dividends paid (51.0) (57.6) (37.8) (42.3) (46.1)


Change in Debt (58.6) 100.4 0.0 0.0 0.0

Other invest/financing cash flow (54.5) (10.3) 0.0 0.0 0.0

Effect of exch rate changes (7.4) 0.6 0.0 0.0 0.0

Net cash flow (152.3) 52.0 86.1 21.4 36.7


First Resources


Key Ratios

Growth ratios (%)

Revenue growth 3.8 (1.8) (13.5) 15.4 12.0

EBITDA growth 4.5 (13.1) (26.1) 9.0 10.8

EBIT growth 4.5 (13.6) (27.9) 10.0 11.9

Pretax growth (3.9) (19.7) (30.5) 11.9 11.7


Core net profit growth 2.7 (20.7) (26.7) 11.9 9.0


EBITDA margin 53.0 46.9 40.0 37.8 37.4

EBIT margin 49.7 43.7 36.4 34.8 34.7


Payout ratio 21.7 23.5 30.0 30.0 30.0

DuPont analysis


Revenue/Assets (x) 0.4 0.3 0.3 0.3 0.3

Assets/Equity (x) 1.8 1.9 2.0 1.9 1.8

ROAE (%) 20.7 16.7 12.8 14.8 14.6

ROAA (%) 11.7 9.1 6.7 7.7 7.9






Dividend cover (x) 4.6 4.3 3.3 3.3 3.3

Current ratio (x) 5.1 5.4 5.1 4.7 4.6



Net debt/equity (%) 21.9 21.8 16.2 12.4 7.9


Debt/EBITDA (x) 1.5 2.0 2.7 2.5 2.3

Capex/revenue (%) 28.9 33.2 24.4 21.2 18.9

Net debt/ (net cash) 217.6 232.2 146.1 124.7 88.0


September 2, 2015

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Genting Plantations (GENP MK)

A preferred planter We revise down our 2015-17 CPO ASPs by 13/8/8% amidst near-

term headwinds and as El Nino has been weak thus far.

Our 2015-17 net profits are lowered by 28/22/17%.

Deep in value, backed by our revised RNAV of MYR13.37/sh.

Maintain BUY with a revised SOP-TP of MYR10.55 (-7%).


MYR2,100/2,300/2,450/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%) - see our sector report issued today. As the current El Nino has

failed to have any immediate impact on FFB output, the market

shifted its focus over to several near-term headwinds, which have

pressured CPO price. Among the concerns is the record US soybean

planting amidst ample soybean supply, relatively high palm oil


demand.

2Q15 FFB output recovery (+8% YoY, +15% QoQ) has been slow,

hampered by dry weather in Sabah. 1H15 FFB output (+1% YoY) has

only met 42% of our full-year forecast. Hence, we conservatively

cut our 2015-16 FFB output by 5%/2%.

What’s Our View Consequently, our 2015/16/17 net profit forecasts were lowered by

28/22/17%. Despite short-term CPO price weakness, we continue

to like GENP for its (i) long-term FFB growth with an average age

of 10 years as we expect 3-year 2014-17 FFB CAGR of 10%, and (ii)

valuable strategic landbanks in Iskandar Malaysia and Sepang that

could be monetised for property developments.

Maintain BUY on GENP with a revised SOP-based TP of MYR10.55

(-7%) by conservatively applying a 45% discount to our revalued

plantation estates with property development potential. Without

the discounts, GENP’s RNAV would have been MYR13.37/sh.

Key Data


Maybank vs Market



52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-Genting Bhd. 53.4%

-Employees Provident Fund 14.5%

-Kumpulan Wang Persaraan 5.3%

10.84/8.91

46.3

0.7

MYR7.5B

776

95

100

105

110

115

120

125

130

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0


Genting Plantations - (LHS, MYR)

Genting Plantations / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (7.0) (1.8) (3.9)

Relative to index (%) (0.4) 6.4 11.5


Market Recs 9 6 1



'15 PATMI (MYRm) 267 283 (5.9)

'16 PATMI (MYRm) 369 361 2.3



Revenue 1,384.0 1,642.9 1,413.7 1,623.1 1,785.8

EBITDA 431.4 562.4 377.0 504.0 614.2

Core net profit 305.1 379.9 266.7 369.4 449.8

Core EPS (sen) 40.2 49.3 34.6 47.9 58.4

Core EPS growth (%) (6.7) 22.6 (29.8) 38.5 21.8

Net DPS (sen) 47.8 10.0 6.9 9.6 11.7

Core P/E (x) 24.0 19.6 27.9 20.2 16.6

P/BV (x) 2.1 1.9 1.8 1.7 1.6


ROAE (%) 8.9 10.4 6.7 8.7 9.8

ROAA (%) 6.4 7.3 4.6 6.0 6.7

EV/EBITDA (x) 19.7 14.1 20.8 15.8 13.0

Net debt/equity (%) net cash net cash 3.3 6.1 6.2

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Genting Plantations

Genting Plantations RNAV estimates and Sum-of-Parts TP

Location Property

Type

Remaining

land to be

developed

(acres)

BV

MYR psf

MV

MYR psf

RNAV

MYR ‘m

RNAV on

45% disc

on estates

MYR ‘m

Remarks

Genting Indahpura Freehold 5,553 1.08 14.00 3,386 3,386 In Zone E of Iskandar region

Sepang Land Freehold 1,062 0.21 14.00 648 648 Next to KL International Airport

Property RNAV 4,034 4,034

(1,815) 45%-discount on estates

4,034 2,219

Plantations 6,405 6,405 Based on 21x 2015 PER, pegged to its

5-year historical mean

Net Cash/ (Debt) (136) (136) As at 31 Dec 2015

Total RNAV 10,302 8,487

Add: Cash from conversion of Warrants 989 989 Remaining warrants conversion @

MYR7.75/sh exercise price

Enlarged RNAV (post Warrants conversion) 11,291 9,476

Existing No of shares (‘ m) 770 770

Add: No of warrants issued (‘ m) 128 128 Remaining warrants

Enlarged share base (‘ m) 898 898

RNAV per share 13.37 11.02

Diluted RNAV per share 12.57 10.55 GENP TP (MYR)



Genting Plantations


Key Metrics

P/E (reported) (x) 32.2 19.8 27.9 20.2 16.6

Core P/E (x) 24.0 19.6 27.9 20.2 16.6

P/BV (x) 2.1 1.9 1.8 1.7 1.6

P/NTA (x) 2.2 2.0 1.9 1.8 1.6


FCF yield (%) nm 1.3 nm nm 0.9

EV/EBITDA (x) 19.7 14.1 20.8 15.8 13.0

EV/EBIT (x) 23.4 16.3 26.3 18.8 15.0


Revenue 1,384.0 1,642.9 1,413.7 1,623.1 1,785.8

Gross profit 630.4 730.5 584.4 718.8 836.6

EBITDA 431.4 562.4 377.0 504.0 614.2

Depreciation (67.8) (77.5) (79.2) (81.0) (82.8)

EBIT 363.6 484.9 297.8 423.0 531.4

Net interest income /(exp) 22.8 20.7 23.6 20.6 19.4

Associates & JV 17.9 17.7 17.7 28.7 28.7

Exceptionals (104.0) (3.7) 0.0 0.0 0.0

Pretax profit 300.3 519.6 339.1 472.3 579.5

Income tax (80.5) (136.0) (80.4) (110.9) (137.7)

Minorities 7.9 (6.5) 8.0 8.0 8.0


Core net profit 305.1 379.9 266.7 369.4 449.8


Cash & Short Term Investments 931.0 1,076.6 1,050.3 1,075.0 1,210.7


Inventory 89.4 105.1 113.6 123.9 130.0




Other assets 339.0 422.0 422.0 422.0 422.0

Total assets 4,854.4 5,590.4 5,926.6 6,400.0 6,926.9



LT interest bearing debt 861.5 999.8 1,079.3 1,158.9 1,238.5







CASH FLOW (MYR m)

Pretax profit 300.3 519.6 339.1 472.3 579.5



Change in working capital 94.8 36.1 (4.0) (18.0) (16.9)

Cash taxes paid (76.2) (107.0) (80.4) (110.9) (137.7)

Other operating cash flow (36.4) (0.2) 0.0 0.0 0.0


Capex (422.1) (409.9) (448.4) (456.3) (412.5)

Free cash flow (89.8) 98.3 (132.1) (60.6) 66.5

Dividends paid (321.7) (23.1) (53.3) (73.9) (90.0)

Change in Debt 106.9 85.8 159.2 159.2 159.2

Other invest/financing cash flow 183.8 0.0 0.0 0.0 0.0

Net cash flow (120.8) 161.0 (26.3) 24.7 135.7


Genting Plantations


Key Ratios

Growth ratios (%)

Revenue growth 12.2 18.7 (13.9) 14.8 10.0

EBITDA growth 2.8 30.4 (33.0) 33.7 21.9

EBIT growth 0.1 33.4 (38.6) 42.0 25.6

Pretax growth (25.6) 73.0 (34.7) 39.3 22.7




EBITDA margin 31.2 34.2 26.7 31.1 34.4

EBIT margin 26.3 29.5 21.1 26.1 29.8


Payout ratio nm 20.4 20.0 20.0 20.0

DuPont analysis


Revenue/Assets (x) 0.3 0.3 0.2 0.3 0.3

Assets/Equity (x) 1.4 1.4 1.4 1.5 1.5

ROAE (%) 8.9 10.4 6.7 8.7 9.8

ROAA (%) 6.4 7.3 4.6 6.0 6.7






Dividend cover (x) 0.6 4.9 5.0 5.0 5.0

Current ratio (x) 4.2 4.5 3.8 3.2 3.0



Net debt/equity (%) net cash net cash 3.3 6.1 6.2

Net interest cover (x) na na na na na

Debt/EBITDA (x) 2.0 1.8 3.1 2.7 2.4

Capex/revenue (%) 30.5 25.0 31.7 28.1 23.1

Net debt/ (net cash) (63.0) (49.4) 136.1 270.6 294.0


September 2, 2015

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IOI Corporation (IOI MK)

Weak Ringgit a concern We revise down our 2015-17 CPO ASPs by 13/8/8% amidst near-


Weak Ringgit continues to be a negative drag on headline

profits with mounting unrealised translation forex losses.

Maintain HOLD with a revised TP of MYR3.97 based on 24x FY16

PER (previously MYR3.85 on 20x 2016 PER) as we roll forward

our valuation.

What’s New We lower our 2015/16/17 CPO ASP forecasts to MYR2,100/ 2,300/

2,400/t from MYR2,400/ 2,500/ 2,600/t (-13/-8/-8%) – see our

sector report issued today. As the current El Nino has failed to have

any immediate impact on FFB output, the market shifted its focus

over to several near-term headwinds, which have pressured CPO

price. Market is worried about the record US soybean planting

amidst ample soybean supply, relatively high palm oil stockpile,

and low crude oil prices affecting discretionary biofuel demand.

Following the release of its FY15 results, we did some

housekeeping and introduced our FY18 net profit forecast.

What’s Our View Consequently, our FY16/17 core net profit forecasts were lowered

by 22%/18%. As the MYR continues to weaken against the USD (-10%

since 30 Jun 2015), there is significant pressure on IOI’s headline

numbers for FY16 which we have yet to incorporate into our

forecast. IOI’s net gearing as at 30 Jun 2015 stood at 92%. It has

MYR6.2b equivalent of USD debt exposure, representing 94% of its

total debt. Every 10% fall in MYR against USD translates to

MYR433m in unrealised forex translation losses.

With limited catalysts, IOI remains a HOLD. We roll forward our

valuation and revise our TP to MYR3.97 on 24x FY16 PER

(previously MYR3.85 on 20x 2016 PER) as we peg IOI to its 5-year

historical mean PER.

Key Data


Maybank vs Market


Target Price: MYR3.97 (+1%) ADTV (USD): 5M Plantations (Unchanged)HOLD

Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-LEE SHIN CHENG FAMILY 45.5%


-Permodalan Nasional Bhd. 6.6%

4.90/3.93

44.2

Yes

4.7

MYR25.5B

6,460

70

80

90

100

110

120

130

3.50

4.00

4.50

5.00

5.50

6.00

6.50


IOI Corp - (LHS, MYR) IOI Corp / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (7.1) (1.7) (17.6)

Relative to index (%) (0.5) 6.4 (4.4)


Market Recs 1 9 10



'16 PATMI (MYRm) 928 1,139 (18.6)

'17 PATMI (MYRm) 1,069 1,261 (15.2)


FYE Jun (MYR m) FY14A FY15A FY16E FY17E FY18E

Revenue 12,664.1 11,621.0 11,577.3 12,211.1 12,707.3

EBITDA 2,376.3 847.4 1,579.3 1,762.0 1,868.0

Core net profit 1,549.4 860.1 927.6 1,069.3 1,142.0

Core FDEPS (sen) 24.0 13.3 14.4 16.6 17.7

Core FDEPS growth(%) (6.9) (44.6) 7.8 15.3 6.8

Net DPS (sen) 20.0 9.0 7.2 8.3 8.8

Core FD P/E (x) 16.4 29.6 27.4 23.8 22.3

P/BV (x) 4.2 5.0 4.6 4.2 3.8


ROAE (%) 15.7 15.5 17.5 18.5 18.0

ROAA (%) 7.9 6.0 6.9 7.7 8.0

EV/EBITDA (x) 15.8 36.9 19.1 17.0 15.9

Net debt/equity (%) 58.6 96.1 82.5 70.9 59.6

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


IOI Corporation

FYE 30 Jun FY14A FY15A FY16E FY17E FY18E

Key Metrics

P/E (reported) (x) 7.5 nm 27.4 23.8 22.3

Core P/E (x) 16.4 29.6 27.4 23.8 22.3

Core FD P/E (x) 16.4 29.6 27.4 23.8 22.3

P/BV (x) 4.2 5.0 4.6 4.2 3.8

P/NTA (x) 4.6 5.5 5.0 4.5 4.1


FCF yield (%) nm 3.5 3.7 3.7 4.1

EV/EBITDA (x) 15.8 36.9 19.1 17.0 15.9

EV/EBIT (x) 17.5 51.1 22.6 19.9 18.5


Revenue 12,664.1 11,621.0 11,577.3 12,211.1 12,707.3

Gross profit 2,078.9 446.7 1,165.2 1,396.2 1,538.0

EBITDA 2,376.3 847.4 1,579.3 1,762.0 1,868.0

Depreciation (226.7) (235.5) (244.9) (254.1) (263.3)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 2,149.6 611.9 1,334.4 1,507.9 1,604.7


Associates & JV 127.0 113.3 129.3 147.0 155.1

Exceptionals 1,887.2 0.0 0.0 0.0 0.0


Pretax profit 3,923.5 457.0 1,214.6 1,417.5 1,533.4

Income tax (533.8) (284.6) (260.5) (304.9) (330.8)

Minorities (16.7) (4.3) (26.5) (43.3) (60.6)


Reported net profit 3,373.0 168.1 927.6 1,069.3 1,142.0

Core net profit 1,549.4 860.1 927.6 1,069.3 1,142.0




Inventory 2,154.6 2,083.1 2,075.3 2,188.9 2,277.8



Investment in Associates & JVs 928.2 982.0 1,046.6 1,120.1 1,197.7

Other assets 291.1 365.9 365.9 365.9 365.9

Total assets 15,331.6 13,433.9 13,638.6 13,999.7 14,417.5

ST interest bearing debt 2,454.2 812.5 812.5 812.5 812.5

Accounts payable 940.5 924.5 921.0 971.4 1,010.9








CASH FLOW (MYR m)

Pretax profit 3,923.5 457.0 1,214.6 1,417.5 1,533.4



Change in working capital (151.1) 143.1 8.5 (123.5) (96.7)

Cash taxes paid (451.0) (384.6) (260.5) (304.9) (330.8)

Other operating cash flow (1,887.2) 0.0 0.0 0.0 0.0


Capex (1,955.8) (456.7) (400.0) (400.0) (400.0)

Free cash flow (293.2) 901.0 942.3 948.6 1,055.6

Dividends paid (1,051.1) (1,059.1) (463.8) (534.7) (571.0)

Equity raised / (purchased) (149.1) (150.0) 0.0 0.0 0.0

Change in Debt 106.9 (1,732.9) (558.8) (532.5) (507.6)

Other invest/financing cash flow 783.8 (160.7) 92.2 101.4 105.5


Net cash flow (602.7) (2,201.7) 12.0 (17.3) 82.4


IOI Corporation


Key Ratios

Growth ratios (%)

Revenue growth (6.3) (8.2) (0.4) 5.5 4.1

EBITDA growth (14.9) (64.3) 86.4 11.6 6.0

EBIT growth (15.4) (71.5) 118.1 13.0 6.4

Pretax growth 56.5 (88.4) 165.8 16.7 8.2

Reported net profit growth 71.2 (95.0) 451.8 15.3 6.8

Core net profit growth (6.6) (44.5) 7.8 15.3 6.8


EBITDA margin 18.8 7.3 13.6 14.4 14.7

EBIT margin 17.0 5.3 11.5 12.3 12.6


Payout ratio 38.2 nm 50.0 50.0 50.0

DuPont analysis


Revenue/Assets (x) 0.8 0.9 0.8 0.9 0.9

Assets/Equity (x) 2.5 2.7 2.5 2.3 2.2

ROAE (%) 15.7 15.5 17.5 18.5 18.0

ROAA (%) 7.9 6.0 6.9 7.7 8.0






Dividend cover (x) 2.6 0.3 2.0 2.0 2.0

Current ratio (x) 2.1 2.7 2.8 2.8 2.8



Net debt/equity (%) 58.6 96.1 82.5 70.9 59.6


Debt/EBITDA (x) 3.2 7.8 4.0 3.5 3.1

Capex/revenue (%) 15.4 3.9 3.5 3.3 3.1

Net debt/ (net cash) 3,535.8 4,859.9 4,556.1 4,296.2 3,950.4


September 2, 2015

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Kuala Lumpur Kepong (KLK MK)

Lacks near-term catalyst We revise down our 2015-17 CPO ASPs by 13/8/8% amidst near-

term headwinds while El Nino has been weak thus far.

Our FY15-17 net profits are lowered by 7/12/18%.

Maintain HOLD with a revised TP of MYR22.24 (+4%) on 23x FY17

PER as we rolled forward our valuation.

What’s New We revise down our 2015/16/17 CPO ASP forecasts to MYR2,100/

2,300/ 2,400/t from MYR2,400/ 2,500/ 2,600/t (-13/-8/-8%) – see

our sector report issued today. As the current El Nino has failed to

have any immediate impact on FFB output, the market shifted its

focus over to several near-term headwinds which have pressured

CPO price. The market is worried about the record US soybean

planting amidst ample soybean supply, relatively high palm oil


demand.

What’s Our View Following our CPO ASP cut, our FY15/16/17 core net profit

forecasts were lowered by 7/12/18%. The stock has limited

catalysts except for a one-off disposal gain of MYR817m (or

MYR0.77/sh) expected to be recognised in FY16 (which we have

yet to incorporate into our model). This follows two Iskandar land

swaps between KLK and UEM Sunrise (UEMS MK) announced in early

2014.

That aside, KLK remains a HOLD even after we rolled forward our

valuation. Our revised TP is MYR22.24 on 23x FY17 PER (previously

MYR21.40 on 23x FY16 PER).

Key Data


Maybank vs Market


Target Price: MYR22.24 (+9%) ADTV (USD): 3M Plantations (Unchanged)HOLD

Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-Batu Kawan Bhd. 46.5%



23.66/19.90

48.3

Yes

3.2

MYR21.8B

1,068

85

90

95

100

105

110

115

120

19.0

20.0

21.0

22.0

23.0

24.0

25.0

26.0


Kuala Lumpur Kepong - (LHS, MYR)

Kuala Lumpur Kepong / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (7.3) (2.9) (7.4)

Relative to index (%) (0.7) 5.2 7.3


Market Recs 3 14 3



'15 PATMI (MYRm) 841 898 (6.3)

'16 PATMI (MYRm) 868 1,025 (15.3)


FYE Sep (MYR m) FY13A FY14A FY15E FY16E FY17E

Revenue 9,147.3 11,130.0 11,001.9 12,074.6 13,595.1

EBITDA 1,528.1 1,728.1 1,501.2 1,618.3 1,849.4

Core net profit 891.7 984.8 805.3 868.5 1,032.2

Core EPS (sen) 83.5 92.3 75.4 81.4 96.7

Core EPS growth (%) (17.1) 10.4 (18.2) 7.8 18.9

Net DPS (sen) 50.0 55.0 47.3 48.8 58.0

Core P/E (x) 24.4 22.1 27.0 25.1 21.1

P/BV (x) 2.9 2.8 2.7 2.6 2.5


ROAE (%) 12.2 12.9 10.2 10.5 11.9

ROAA (%) 7.7 8.0 6.2 6.5 7.4

EV/EBITDA (x) 16.4 14.2 16.0 14.8 12.9

Net debt/equity (%) 7.7 20.8 22.1 19.5 16.9

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Kuala Lumpur Kepong

FYE 30 Sep FY13A FY14A FY15E FY16E FY17E

Key Metrics

P/E (reported) (x) 23.7 22.0 25.9 25.1 21.1

Core P/E (x) 24.4 22.1 27.0 25.1 21.1

P/BV (x) 2.9 2.8 2.7 2.6 2.5

P/NTA (x) 3.0 2.9 2.8 2.7 2.5


FCF yield (%) 2.9 nm 1.7 3.2 3.7

EV/EBITDA (x) 16.4 14.2 16.0 14.8 12.9

EV/EBIT (x) 20.2 17.6 20.8 19.4 16.4


Revenue 9,147.3 11,130.0 11,001.9 12,074.6 13,595.1

Gross profit 1,923.7 2,115.2 1,868.7 2,026.6 2,349.0

EBITDA 1,528.1 1,728.1 1,501.2 1,618.3 1,849.4

Depreciation (286.9) (335.8) (346.3) (382.0) (399.3)

EBIT 1,241.2 1,392.3 1,154.9 1,236.2 1,450.1


Associates & JV 13.4 5.9 6.2 6.3 6.4

Exceptionals 26.0 6.9 36.0 0.0 0.0

Pretax profit 1,199.8 1,317.7 1,097.2 1,144.4 1,360.1

Income tax (232.8) (285.0) (222.8) (240.3) (285.6)

Minorities (49.2) (41.0) (33.0) (35.6) (42.3)

Reported net profit 917.7 991.7 841.3 868.5 1,032.2

Core net profit 891.7 984.8 805.3 868.5 1,032.2




Inventory 1,080.0 1,468.7 1,451.8 1,593.4 1,794.0




Other assets 1,382.4 1,480.8 1,419.7 1,361.7 1,306.5

Total assets 11,747.9 12,887.6 13,190.9 13,618.3 14,160.6

ST interest bearing debt 777.1 1,094.2 1,039.5 987.5 938.1

Accounts payable 822.1 999.5 988.0 1,084.3 1,220.8








CASH FLOW (MYR m)

Pretax profit 1,199.8 1,317.7 1,097.2 1,144.4 1,360.1


Adj net interest (income)/exp (81.1) (87.7) 99.9 98.1 96.4

Change in working capital 139.8 (598.5) 24.0 (200.9) (284.7)

Cash taxes paid (298.2) (256.7) (222.8) (240.3) (285.6)


Cash flow from operations 1,220.0 704.8 1,338.3 1,177.1 1,279.1

Capex (586.5) (1,152.8) (970.0) (470.0) (470.0)

Free cash flow 633.5 (448.0) 368.3 707.1 809.1

Dividends paid (716.2) (614.8) (504.8) (521.1) (619.3)

Change in Debt (161.4) 550.4 (54.7) (52.0) (49.4)


Effect of exch rate changes (10.9) na na na na

Net cash flow (572.2) (521.8) (230.0) 93.9 99.1


Kuala Lumpur Kepong

FYE 30 Sep FY13A FY14A FY15E FY16E FY17E

Key Ratios

Growth ratios (%)

Revenue growth (13.5) 21.7 (1.2) 9.8 12.6

EBITDA growth (12.7) 13.1 (13.1) 7.8 14.3

EBIT growth (16.1) 12.2 (17.0) 7.0 17.3

Pretax growth (23.1) 9.8 (16.7) 4.3 18.9




EBITDA margin 16.7 15.5 13.6 13.4 13.6

EBIT margin 13.6 12.5 10.5 10.2 10.7


Payout ratio 58.2 59.2 60.0 60.0 60.0

DuPont analysis


Revenue/Assets (x) 0.8 0.9 0.8 0.9 1.0

Assets/Equity (x) 1.6 1.7 1.6 1.6 1.6

ROAE (%) 12.2 12.9 10.2 10.5 11.9

ROAA (%) 7.7 8.0 6.2 6.5 7.4






Dividend cover (x) 1.7 1.7 1.7 1.7 1.7

Current ratio (x) 2.5 2.0 1.9 2.1 2.2



Net debt/equity (%) 7.7 20.8 22.1 19.5 16.9


Debt/EBITDA (x) 1.5 1.7 1.9 1.7 1.5

Capex/revenue (%) 6.4 10.4 8.8 3.9 3.5

Net debt/ (net cash) 578.4 1,614.6 1,789.9 1,644.0 1,495.5


September 2, 2015

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Sarawak Oil Palms (SOP MK)

Good for the long run Revising down our industry wide 2015-17 CPO ASPs by 8-13%.

Our net profit forecasts are cut by 14-40%.

Maintain BUY with lower TP of MYR5.23 (-22%) on unchanged

15x 2016 PER. Catalysts are FFB output growth and value being

unlocked via property development.


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13/-8/-

8%). As the current El Nino has failed to have any immediate

impact on FFB output, the market shifted its focus over to several

headwinds that have pressured CPO price. These headwinds

include the record US soybean planting amidst ample soybean

supply, relatively high palm oil stockpile, and low crude oil prices

affecting discretionary biofuel demand.

Following its 2Q15 results and fresh FFB growth guidance, we have

also cut our 2015 FFB growth assumption to 8% (from 11%). This

results in a 3%/2% cut in absolute FFB output assumptions for

2015/16.

What’s Our View Consequently, we cut our 2015/16/17 core net profit forecasts by

40/22/14%. Following our EPS revision, we lower our TP to

MYR5.23 (previously MYR6.72) based on unchanged 15x 2016 PER.

We continue to like SOP for its long-term FFB growth expecting 3-

year 2014-17 CAGR of 11%, backed by its trees averaging 10 years

old.

Trading at just EV of MYR31k per mature ha, the stock is

undervalued and current valuation ignores the property

development potential of ~12,000 acres of estates located at the

fringe of Miri city. BUY for its long-term prospects.

Key Data


Maybank vs Market



Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-State of Sarawak 27.2%

-Affin Hwang Asset Management Bhd. 1.0%

-Dimensional Fund Advisors LP 0.4%

6.40/3.68

72.8

Yes

0.0

MYR1.6B

440

70

80

90

100

110

120

130

140

150

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50


Sarawak Oil Palms - (LHS, MYR)

Sarawak Oil Palms / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (12.6) (14.6) (38.7)



Market Recs 2 1 0



'15 PATMI (MYRm) 80 103 (22.9)

'16 PATMI (MYRm) 153 173 (11.1)



Revenue 1,711.4 2,852.8 2,923.5 3,124.9 3,288.7

EBITDA 246.1 290.1 239.9 345.7 442.9

Core net profit 93.9 112.8 79.6 153.3 216.5

Core EPS (sen) 21.4 25.7 18.1 34.9 49.3

Core EPS growth (%) (40.3) 19.7 (29.4) 92.7 41.3

Net DPS (sen) 4.5 5.0 2.4 3.8 4.9

Core P/E (x) 17.4 14.6 20.7 10.7 7.6

P/BV (x) 1.3 1.2 1.2 1.1 1.0


ROAE (%) 7.2 8.8 5.9 10.5 13.3

ROAA (%) 3.8 4.3 2.9 5.3 7.0

EV/EBITDA (x) 13.4 9.7 9.3 6.4 4.9

Net debt/equity (%) 27.8 33.5 34.8 30.1 21.2

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Sarawak Oil Palms


Key Metrics

P/E (reported) (x) 17.4 14.6 20.7 10.7 7.6

Core P/E (x) 17.4 14.6 20.7 10.7 7.6

P/BV (x) 1.3 1.2 1.2 1.1 1.0

P/NTA (x) 1.3 1.2 1.2 1.1 1.0


FCF yield (%) nm nm nm 2.5 7.1

EV/EBITDA (x) 13.4 9.7 9.3 6.4 4.9

EV/EBIT (x) 19.7 14.3 14.9 8.7 6.1


Revenue 1,711.4 2,852.8 2,923.5 3,124.9 3,288.7

Gross profit 255.5 289.3 246.6 356.3 455.7

EBITDA 246.1 290.1 239.9 345.7 442.9

Depreciation (78.7) (93.7) (89.3) (89.8) (90.4)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 167.4 196.3 150.6 255.9 352.6


Associates & JV 0.6 (1.2) 1.1 1.1 1.1

Exceptionals 0.0 0.0 0.0 0.0 0.0


Pretax profit 142.1 160.3 112.5 217.7 314.4

Income tax (39.4) (39.4) (27.2) (52.9) (76.5)

Minorities (8.8) (8.1) (5.7) (11.5) (21.4)



Core net profit 93.9 112.8 79.6 153.3 216.5




Inventory 168.0 234.0 244.4 252.8 258.6




Other assets 32.4 49.1 49.1 49.1 49.1

Total assets 2,467.1 2,733.4 2,819.3 2,976.2 3,198.9










CASH FLOW (MYR m)

Pretax profit 142.1 160.3 112.5 217.7 314.4



Change in working capital 20.5 (68.1) (4.0) (12.6) (10.3)

Cash taxes paid (49.8) (52.8) (27.2) (52.9) (76.5)



Capex (159.7) (182.8) (200.0) (200.0) (200.0)

Free cash flow (211.3) (48.4) (30.5) 40.9 116.9

Dividends paid (27.2) (26.3) (10.4) (16.9) (21.5)


Change in Debt 171.7 (109.7) 0.0 0.0 0.0

Other invest/financing cash flow (268.0) 0.0 0.0 0.0 0.0


Net cash flow (87.9) (180.0) (40.9) 24.1 95.4


Sarawak Oil Palms


Key Ratios

Growth ratios (%)

Revenue growth 30.2 66.7 2.5 6.9 5.2

EBITDA growth (15.3) 17.9 (17.3) 44.1 28.1

EBIT growth (26.3) 17.3 (23.3) 69.9 37.8

Pretax growth (33.6) 12.8 (29.8) 93.6 44.4




EBITDA margin 14.4 10.2 8.2 11.1 13.5

EBIT margin 9.8 6.9 5.2 8.2 10.7


Payout ratio 21.0 19.5 13.1 11.0 9.9

DuPont analysis


Revenue/Assets (x) 0.7 1.0 1.0 1.0 1.0

Assets/Equity (x) 2.0 2.1 2.0 1.9 1.9

ROAE (%) 7.2 8.8 5.9 10.5 13.3

ROAA (%) 3.8 4.3 2.9 5.3 7.0






Dividend cover (x) 4.8 5.1 7.7 9.1 10.1

Current ratio (x) 1.5 1.4 1.4 1.4 1.6



Net debt/equity (%) 27.8 33.5 34.8 30.1 21.2


Debt/EBITDA (x) 3.4 3.2 3.9 2.7 2.1

Capex/revenue (%) 9.3 6.4 6.8 6.4 6.1

Net debt/ (net cash) 343.0 443.8 484.7 460.7 365.3


September 2, 2015

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Sime Darby (SIME MK)

A challenging FY16 outlook We revise down our 2015-17 CPO ASPs by 8-13% amidst near-


In addition to plantation, we revised downwards industrial,

property and motor earnings on tough business outlook and cut

our FY16-17 by 27%/20%.

Maintain HOLD with a lower TP of MYR7.98 (-10%) based on

rolled forward valuation of 18x FY17 PER.

What’s New We revise down our 2015/16/17 CPO ASP forecasts to MYR2,100/

2,300/ 2,400/t from MYR2,400/ 2,500/ 2,600/t (-13%/-8%/-8%) –

see our sector report issued today. As the current El Nino has failed

to have any immediate impact on FFB output, the market focused

instead on several near-term headwinds which have pressured CPO

price. The market is worried about the record US soybean planting

amidst ample soybean supply, relatively high palm oil stockpile,

and low crude oil prices affecting discretionary biofuel demand.

We expect FY6/16 to be a challenging year for Sime with the

present weak CPO price, still weak industrial activities, and

slowing property sales in Malaysia. Looking forward, FY6/17 will be

better with lumpy Batterseas Power Station earnings contribution.

What’s Our View Consequently, our FY16/17 core net profit forecasts were lowered

by 27%/20%. Besides lowering FY16/17 plantation EBIT by 45/38%,

we have also made cuts to industrial (-15/-16%), property (-12/0%)

and motor (-13/-13%). Following the release of FY15 results, we

did some housekeeping and introduced our FY18 profit forecast.

The weak MYR against the USD is not negative for Sime as ~46% of

its FY14 non-current assets are located outside Malaysia, which

generated ~54% of PBIT. Still, amidst tough business environment,

Sime remains a HOLD with lower TP of MYR7.98 as we roll forward

our valuation basis to 18x FY17 PER (from 18x 2016 PER).

Key Data


Maybank vs Market


Target Price: MYR7.98 (+7%) ADTV (USD): 7M Consumer Disc. (Unchanged)HOLD

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:



-Bumiputra Investment Foundation 8.5%

9.75/7.02

90.6

7.1

MYR46.4B

6,211

82

86

90

94

98

102

106

7.0

7.5

8.0

8.5

9.0

9.5

10.0


Sime Darby - (LHS, MYR) Sime Darby / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (14.3) (10.0) (21.0)



Market Recs 1 16 5



'16 PATMI (MYRm) 1,937 2,340 (17.2)

'17 PATMI (MYRm) 2,755 2,790 (1.2)


FYE Jun (MYR m) FY14A FY15A FY16E FY17E FY18E

Revenue 43,908.0 43,729.0 46,251.7 49,320.1 52,360.3

EBITDA 5,270.9 4,567.6 4,226.0 4,973.7 5,551.1

Core net profit 3,089.3 2,313.8 1,937.1 2,755.2 3,143.4

Core EPS (sen) 50.9 37.3 31.2 44.4 50.6

Core EPS growth (%) (5.2) (26.9) (16.3) 42.2 14.1

Net DPS (sen) 36.0 25.0 20.3 28.8 32.9

Core P/E (x) 14.7 20.1 24.0 16.8 14.8

P/BV (x) 1.6 1.5 1.5 1.5 1.4


ROAE (%) 11.1 7.9 6.3 8.7 9.7

ROAA (%) 6.2 4.1 3.1 4.2 4.7

EV/EBITDA (x) 12.5 14.9 14.7 12.7 11.6

Net debt/equity (%) 22.0 46.1 46.6 49.1 50.9

Ong Chee Ting, CA

(603) 2297 8678

[email protected]


Sime Darby


Key Metrics

P/E (reported) (x) 13.5 20.1 24.0 16.8 14.8

Core P/E (x) 14.7 20.1 24.0 16.8 14.8

P/BV (x) 1.6 1.5 1.5 1.5 1.4

P/NTA (x) 1.7 1.8 1.7 1.7 1.6


FCF yield (%) 2.6 nm 2.6 2.0 2.9

EV/EBITDA (x) 12.5 14.9 14.7 12.7 11.6

EV/EBIT (x) 16.0 20.0 20.8 17.0 15.0


Revenue 43,908.0 43,729.0 46,251.7 49,320.1 52,360.3

Gross profit 2,744.9 2,026.3 1,606.0 2,353.1 2,929.9

EBITDA 5,270.9 4,567.6 4,226.0 4,973.7 5,551.1

Depreciation (1,152.3) (1,167.6) (1,246.3) (1,246.9) (1,247.5)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 4,118.6 3,400.0 2,979.7 3,726.8 4,303.6


Associates & JV 100.2 (122.0) 113.0 376.2 363.7

Exceptionals 0.0 0.0 0.0 0.0 0.0


Pretax profit 3,964.6 3,003.7 2,678.1 3,674.7 4,192.8

Income tax (707.5) (567.0) (615.6) (791.6) (919.0)

Minorities (167.8) (122.9) (125.4) (127.9) (130.4)


Reported net profit 3,352.7 2,313.8 1,937.1 2,755.2 3,143.4

Core net profit 3,089.3 2,313.8 1,937.1 2,755.2 3,143.4




Inventory 9,469.6 9,663.1 10,467.3 11,140.2 11,860.0


Intangible assets 1,184.4 3,992.7 3,992.7 3,992.7 3,992.7

Investment in Associates & JVs 3,122.8 3,845.6 3,921.4 4,260.4 4,586.9

Other assets 4,712.4 7,728.0 7,728.0 7,728.0 7,728.0

Total assets 50,860.7 61,593.6 64,264.0 66,365.0 68,635.5


Accounts payable 8,286.3 8,418.3 9,785.4 10,294.1 10,834.1





Minority Interest 848.5 1,012.0 1,137.4 1,265.2 1,395.6



CASH FLOW (MYR m)

Pretax profit 3,964.6 3,003.7 2,678.1 3,674.7 4,192.8

Depreciation & amortisation 1,152.3 1,167.6 1,246.3 1,246.9 1,247.5


Change in working capital (1,421.8) (477.7) 531.8 (28.4) (22.2)

Cash taxes paid (722.3) (957.6) (615.6) (791.6) (919.0)

Other operating cash flow (454.6) (30.3) (640.6) (1,180.8) (1,201.9)


Capex (1,615.7) (7,343.1) (2,420.8) (2,420.8) (2,420.8)

Free cash flow 1,156.7 (4,363.1) 1,193.8 928.3 1,350.9

Dividends paid (1,565.0) (973.9) (1,259.1) (1,790.9) (2,043.2)

Equity raised / (purchased) (78.0) 0.0 0.0 0.0 0.0

Change in Debt 841.8 4,912.0 500.0 500.0 500.0



Net cash flow 316.4 (902.7) 57.2 (753.7) (629.6)


Sime Darby


Key Ratios

Growth ratios (%)

Revenue growth (4.8) (0.4) 5.8 6.6 6.2

EBITDA growth (8.9) (13.3) (7.5) 17.7 11.6

EBIT growth (8.3) (17.4) (12.4) 25.1 15.5

Pretax growth (8.1) (24.2) (10.8) 37.2 14.1

Reported net profit growth (9.4) (31.0) (16.3) 42.2 14.1



EBITDA margin 12.0 10.4 9.1 10.1 10.6

EBIT margin 9.4 7.8 6.4 7.6 8.2


Payout ratio 65.1 67.1 65.0 65.0 65.0

DuPont analysis


Revenue/Assets (x) 0.9 0.7 0.7 0.7 0.8

Assets/Equity (x) 1.8 2.0 2.1 2.1 2.1

ROAE (%) 11.1 7.9 6.3 8.7 9.7

ROAA (%) 6.2 4.1 3.1 4.2 4.7






Dividend cover (x) 1.5 1.5 1.5 1.5 1.5

Current ratio (x) 2.1 1.7 1.6 1.5 1.5



Net debt/equity (%) 22.0 46.1 46.6 49.1 50.9


Debt/EBITDA (x) 2.1 4.0 4.4 3.9 3.6

Capex/revenue (%) 3.7 16.8 5.2 4.9 4.6

Net debt/ (net cash) 6,278.9 14,008.0 14,450.8 15,704.5 16,834.1


September 2, 2015

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Ta Ann (TAH MK)

Potential beneficiary of USD Revise 2015/16/17 net profit forecasts by +24%/ -5%/ -7%.

Upside to timber earnings from weakening MYR against USD to

mitigate lower CPO earnings.

Maintain BUY despite lower TP of MYR5.55 (-6%) as there is 64%

upside to new TP.

What’s New

We revise down our industry wide 2015/16/17 CPO ASP forecasts to

MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13%/-

8%/-8%) – see our sector report issued today. Meanwhile, Ta Ann’s

2Q15 FFB production posted a strong seasonal growth of 35% QoQ

(+27% YoY). 1H15 FFB production met 37% of our full-year forecast

which is slightly lower than its 4-year historical average 1H:2H

ratio of 40:60. As for its timber division, logs harvested in 2Q15

also improved 46% QoQ (-19% YoY) but logs harvested in 1H15

accounted for 44% of our full-year forecast which is also a tad

below its historical average 1H:2H ratio of 48:52.

What’s Our View

We raise our timber earnings forecast after imputing the following:

i) 13% higher 2015 logs ASP, ii) higher USDMYR exchange rate (+17-

18%) but partly offset by lower 2015/16/17 logs production by -

13%/-9%/-4%. The enhanced timber earnings forecasts were also

offset by lower plantation earnings forecast after we revise our

FFB production lower by 4-7% and CPO ASP. Consequently, we raise

our 2015 EPS forecast by 24% but lower our 2016/17 EPS forecasts

5%/7%. Following that, we cut our TP to MYR5.55 (-6%, from

MYR5.90) based on unchanged 15x 2016 PER.

There is still upside to our earnings forecasts and TP emanating

from its timber division due to higher timber products ASP and

further weakening of MYR. Despite its strong FFB production

growth and improving timber earnings, it trades at undemanding

valuation of MYR37,400/ha. Reiterate BUY at lower TP of MYR5.55.

Key Data


Maybank vs Market


Target Price: MYR5.55 (+64%) ADTV (USD): 0.1M Materials (Unchanged)BUY

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-Mountex Sdn. Bhd. 22.3%

-BIN DOLAH WAHAB 10.3%


4.00/3.25

54.4

0.1

MYR1.3B

371

85

90

95

100

105

110

115

120

3.20

3.40

3.60

3.80

4.00

4.20

4.40

4.60


Ta Ann - (LHS, MYR) Ta Ann / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (5.8) (12.4) (12.6)

Relative to index (%) 0.8 (5.1) 1.3


Market Recs 5 2 0



'15 PATMI (MYRm) 124 109 13.4

'16 PATMI (MYRm) 137 127 7.6



Revenue 769.9 1,020.7 965.2 1,073.9 1,168.8

EBITDA 128.5 243.2 265.1 291.5 348.9

Core net profit 60.6 110.6 124.1 136.7 169.1

Core EPS (sen) 16.3 29.8 33.5 36.9 45.6

Core EPS growth (%) 5.2 82.6 12.2 10.1 23.7

Net DPS (sen) 5.0 20.0 15.1 16.6 20.5

Core P/E (x) 20.8 11.4 10.1 9.2 7.4

P/BV (x) 1.2 1.2 1.1 1.0 1.0


ROAE (%) 6.1 10.7 11.4 11.8 13.6

ROAA (%) 3.5 6.0 6.5 6.9 8.2

EV/EBITDA (x) 14.3 6.9 5.4 4.9 3.9

Net debt/equity (%) 25.5 18.7 12.6 10.1 5.5

Chai Li Shin, CFA

(603) 2297 8684

[email protected]


Ta Ann


Key Metrics

P/E (reported) (x) 13.5 10.3 10.1 9.2 7.4

Core P/E (x) 20.8 11.4 10.1 9.2 7.4

P/BV (x) 1.2 1.2 1.1 1.0 1.0

P/NTA (x) 1.3 1.2 1.1 1.1 1.0


FCF yield (%) 11.9 9.3 8.0 7.9 10.9

EV/EBITDA (x) 14.3 6.9 5.4 4.9 3.9

EV/EBIT (x) 28.5 10.1 7.5 6.8 5.3


Revenue 769.9 1,020.7 965.2 1,073.9 1,168.8

Gross profit 176.3 278.1 321.0 355.1 417.9

EBITDA 128.5 243.2 265.1 291.5 348.9

Depreciation (64.2) (77.8) (74.0) (82.4) (91.2)

EBIT 64.3 165.4 191.1 209.0 257.7


Exceptionals 61.6 17.1 0.0 0.0 0.0

Pretax profit 113.1 168.5 177.3 191.4 238.0

Income tax (20.3) (44.0) (50.5) (52.6) (65.4)

Minorities 0.2 (2.0) (2.7) (2.1) (3.5)


Core net profit 60.6 110.6 124.1 136.7 169.1




Inventory 123.4 122.0 105.8 118.0 123.3




Other assets 1.3 3.8 3.8 3.8 3.8

Total assets 1,799.2 1,885.0 1,938.4 2,018.3 2,110.3





Total Liabilities 759.9 796.7 779.2 781.9 777.3





CASH FLOW (MYR m)

Pretax profit 113.1 168.5 177.3 191.4 238.0


Adj net interest (income)/exp (0.6) 4.3 (13.8) (17.7) (19.7)

Change in working capital 82.4 12.9 12.0 (6.0) (5.5)

Cash taxes paid (18.0) (32.3) (50.5) (52.6) (65.4)

Other operating cash flow 193.9 (21.4) 13.8 17.7 19.7


Capex (126.7) (93.1) (112.8) (116.1) (121.2)

Free cash flow 149.0 116.7 99.9 99.0 137.1

Dividends paid (37.1) (74.1) (55.8) (61.5) (76.1)


Change in Debt 34.5 (22.1) (10.0) (10.0) (10.0)

Other invest/financing cash flow (15.5) (16.7) 0.0 0.0 0.0

Net cash flow 131.0 3.8 34.1 27.5 51.0


Ta Ann


Key Ratios

Growth ratios (%)

Revenue growth (2.5) 32.6 (5.4) 11.3 8.8

EBITDA growth (17.0) 89.3 9.0 9.9 19.7

EBIT growth (29.0) 157.1 15.6 9.4 23.3

Pretax growth 45.2 49.0 5.2 7.9 24.4

Reported net profit growth 61.4 31.8 1.3 10.1 23.7

Core net profit growth 5.2 82.6 12.2 10.1 23.7


EBITDA margin 16.7 23.8 27.5 27.1 29.9

EBIT margin 8.4 16.2 19.8 19.5 22.0


Payout ratio 19.9 60.5 45.0 45.0 45.0

DuPont analysis


Revenue/Assets (x) 0.4 0.5 0.5 0.5 0.6

Assets/Equity (x) 1.8 1.8 1.7 1.7 1.6

ROAE (%) 6.1 10.7 11.4 11.8 13.6

ROAA (%) 3.5 6.0 6.5 6.9 8.2






Dividend cover (x) 5.0 1.7 2.2 2.2 2.2

Current ratio (x) 1.3 1.9 2.1 2.2 2.5



Net debt/equity (%) 25.5 18.7 12.6 10.1 5.5


Debt/EBITDA (x) 4.0 2.1 1.9 1.7 1.4

Capex/revenue (%) 16.5 9.1 11.7 10.8 10.4

Net debt/ (net cash) 257.6 197.4 141.5 121.7 71.1


September 2, 2015

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TH Plantations (THP MK)

Plagued by dry weather Revise CPO ASP, FFB output and cost estimates. Subsequently,

cut 2015/16/17 net profit by 33%/37%/27%.

Potential downside to output estimates.

Maintain HOLD at lower TP of MYR1.30 (1x 2014 P/NTA).

What’s New


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13%/-

8%/-8%) – see our sector report issued today. As the current El Nino

has failed to cause any immediate impact on FFB output, the

market has largely ignored the weather risk at the moment.

Instead, the market shifted its focus over to several key

headwinds, namely 1) record US soybean planting (and potentially

in South America too) amidst ample soybean supply; 2) relatively

high palm oil stockpile; and 3) low crude oil prices discouraging

discretionary biodiesel demand. Elsewhere, THP’s FFB production

recovered strongly in 2Q15 (+37% QoQ, +2% YoY) after the weak

1Q15 production (-29% QoQ, -20% YoY) which was affected by dry

weather in 2014. However, its 1H15 production was below

expectations as it consisted of 40% of our full-year forecast.

What’s Our View

Management’s 2015 FFB production target has been revised to 5%

YoY from 15-20% YoY. Nevertheless, we conservatively nudge down

our 2015-17 FFB production forecast by 4-5% and now expect 2015

FFB output to be 4% YoY lower. We however lower our cost of

production estimates as management plans to implement austerity

measures including reviewing its fertilizer recommendation and

also alter its replanting and new planting plans. After we adjust

the CPO ASP forecasts, our 2015/16/17 net profit forecasts were

cut by 33%/37%/27%. We also lower our TP to MYR1.30 (-5%, from

MYR1.37) after we change our valuation basis to 1x 2014 P/NTA

(from 1x 2014 P/BV) as a better reflection of its fair value.

Maintain HOLD.

Key Data


Maybank vs Market



52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:



-Dimensional Fund Advisors LP 0.4%

1.89/1.14

0.0

0.0

MYR1.1B

884

70

80

90

100

110

120

130

1.00

1.20

1.40

1.60

1.80

2.00

2.20


TH Plantations - (LHS, MYR)

TH Plantations / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (16.4) (21.3) (31.8)



Market Recs 1 1 3



'15 PATMI (MYRm) 24 22 7.0

'16 PATMI (MYRm) 43 54 (20.1)



Revenue 470.0 488.9 423.4 543.2 650.1

EBITDA 176.6 156.8 138.6 197.6 256.8

Core net profit 63.1 34.4 24.0 43.4 75.0

Core EPS (sen) 7.2 3.9 2.7 4.9 8.5

Core EPS growth (%) (38.3) (45.7) (30.3) 81.0 73.0

Net DPS (sen) 3.6 2.0 1.4 2.5 4.2

Core P/E (x) 17.0 31.3 45.0 24.9 14.4

P/BV (x) 0.9 0.9 0.9 0.9 0.8


ROAE (%) 5.5 2.9 2.0 3.5 5.9

ROAA (%) 2.2 1.0 0.7 1.3 2.2

EV/EBITDA (x) 16.5 16.8 18.0 12.5 9.6

Net debt/equity (%) 72.5 60.7 82.7 78.6 72.9

Chai Li Shin, CFA

(603) 2297 8684

[email protected]


TH Plantations


Key Metrics

P/E (reported) (x) 17.0 22.3 45.0 24.9 14.4

Core P/E (x) 17.0 31.3 45.0 24.9 14.4

P/BV (x) 0.9 0.9 0.9 0.9 0.8

P/NTA (x) 0.9 0.9 0.9 0.9 0.8


FCF yield (%) nm 17.6 nm 5.3 7.7

EV/EBITDA (x) 16.5 16.8 18.0 12.5 9.6

EV/EBIT (x) 31.5 37.1 49.4 23.2 15.0


Revenue 470.0 488.9 423.4 543.2 650.1

Gross profit 116.2 89.7 66.3 123.3 180.4

EBITDA 176.6 156.8 138.6 197.6 256.8

Depreciation (84.2) (85.5) (88.1) (90.7) (93.5)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 92.4 71.3 50.5 106.8 163.3


Associates & JV 0.0 0.0 0.0 0.0 0.0

Exceptionals 0.0 13.9 0.0 0.0 0.0


Pretax profit 71.0 58.2 26.8 78.2 135.3

Income tax 5.5 1.4 (0.2) (18.8) (32.5)

Minorities (13.4) (11.3) (2.7) (16.0) (27.8)



Core net profit 63.1 34.4 24.0 43.4 75.0




Inventory 39.2 40.1 56.7 66.7 74.6




Other assets 48.8 32.6 32.6 32.6 32.6

Total assets 3,177.3 3,574.4 3,330.3 3,418.2 3,522.7



LT interest bearing debt 997.5 1,089.1 1,089.1 1,089.1 1,089.1







CASH FLOW (MYR m)

Pretax profit 71.0 58.2 26.8 78.2 135.3


Adj net interest (income)/exp (36.8) (37.9) (23.7) (28.6) (28.0)

Change in working capital 22.5 341.2 (272.6) 18.4 12.2

Cash taxes paid (24.4) (24.8) (0.2) (18.8) (32.5)


Cash flow from operations 131.2 442.7 (157.9) 168.6 208.5

Capex (275.2) (253.1) (104.8) (111.0) (125.9)

Free cash flow (144.0) 189.6 (262.7) 57.5 82.6

Dividends paid (45.7) (55.5) (12.0) (21.7) (37.5)


Change in Debt 465.3 113.7 0.0 0.0 0.0

Other invest/financing cash flow (266.5) 2.2 0.0 0.0 0.0


Net cash flow 17.5 254.4 (274.7) 35.8 45.0


TH Plantations


Key Ratios

Growth ratios (%)

Revenue growth 25.0 4.0 (13.4) 28.3 19.7

EBITDA growth 7.6 (11.2) (11.6) 42.6 30.0

EBIT growth (23.8) (22.9) (29.1) 111.6 52.9

Pretax growth (61.8) (18.1) (53.9) 191.4 73.0

Reported net profit growth (59.7) (23.4) (50.4) 81.0 73.0



EBITDA margin 37.6 32.1 32.7 36.4 39.5

EBIT margin 19.7 14.6 11.9 19.7 25.1


Payout ratio 50.5 36.6 50.0 50.0 50.0

DuPont analysis


Revenue/Assets (x) 0.1 0.1 0.1 0.2 0.2

Assets/Equity (x) 2.7 3.0 2.7 2.7 2.7

ROAE (%) 5.5 2.9 2.0 3.5 5.9

ROAA (%) 2.2 1.0 0.7 1.3 2.2






Dividend cover (x) 2.0 2.7 2.0 2.0 2.0

Current ratio (x) 1.1 0.9 0.8 0.9 0.9



Net debt/equity (%) 72.5 60.7 82.7 78.6 72.9


Debt/EBITDA (x) 5.7 7.0 7.9 5.6 4.3

Capex/revenue (%) 58.6 51.8 24.8 20.4 19.4

Net debt/ (net cash) 862.3 734.8 1,011.1 976.9 933.5


September 2, 2015

TP R

evis

ion

CO

MPA

NY

RESEA

RC

H |


TSH Resources (TSH MK)

Temporary blip in 2015 Revise CPO ASP and FFB output forecasts and cut 2015/16/17

net profit by 35%/23%/14%.

Positive long-term prospects remain intact despite near-term

blip in production but it is fairly valued for now.

Maintain HOLD at lower TP of MYR1.80 (-22%).

What’s New


MYR2,100/2,300/2,400/t from MYR2,400/2,500/2,600/t (-13%/-

8%/-8%) – see our sector report issued today. As the current El Nino

has failed to have any immediate impact on FFB output, the

market shifted its focus over to several headwinds that have

pressured CPO price. The market is concerned over the record US

soybean planting amidst ample soybean supply, relatively high

palm oil stockpile, and low crude oil prices affecting discretionary

biofuel demand. Meanwhile, TSH’s FFB output recovery in 2Q15

after the weak production in 1Q15 caused by the dry weather in

2H14 was weaker than expected. Therefore, we also lower our

2015/16/17 FFB production estimates by 10%/8%/6%.

What’s Our View

Consequently, our 2015/16/17 net profit forecasts were lowered by

35%/23%/14%. Following that, we cut our TP to MYR1.80 (-22%,

from MYR2.32) based on unchanged 19x 2016 PER. TSH’s FY15

earnings would be weighed down by both weak CPO ASP and slower

FFB production growth. We estimate 2015 FFB output to be flattish

(-1% YoY) while it has charted strong double-digit FFB production

growth of 23% (5-year CAGR over 2009-2014). Looking ahead, TSH’s

long-term prospects remain positive as its FFB output growth

would be supported by its young average age tree profile of 7

years, huge unplanted landbank and higher yielding Wakuba tree

variant. Nevertheless we maintain HOLD on TSH with lower TP of

MYR1.80 as it is fairly valued for now.

Key Data


Maybank vs Market



Shariah status

52w high/low (MYR)


Free float (%)

Issued shares (m)


Major shareholders:

-TAN AIK PEN 12.1%

-Tunas Lestari Sdn. Bhd. 6.3%

-Embun Yakin Sdn. Bhd. 5.6%

2.38/1.52

63.9

Yes

0.2

MYR2.4B

1,352

90

100

110

120

130

140

150

160

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80


TSH Resources - (LHS, MYR)

TSH Resources / Kuala Lumpur Composite Index - (RHS, %)

1 Mth 3 Mth 12 Mth

Absolute(%) (21.0) (21.7) (21.9)



Market Recs 2 4 1



'15 PATMI (MYRm) 87 113 (23.5)

'16 PATMI (MYRm) 127 140 (9.4)



Revenue 1,017.8 1,079.9 1,069.1 1,176.0 1,292.3

EBITDA 179.5 229.4 185.6 219.8 292.0

Core net profit 111.5 137.4 86.6 126.8 182.1

Core EPS (sen) 8.2 10.2 6.4 9.4 13.5

Core EPS growth (%) 44.8 23.7 (36.7) 46.4 43.6

Net DPS (sen) 3.5 2.5 1.9 2.8 4.1

Core P/E (x) 21.5 17.4 27.5 18.8 13.1

P/BV (x) 2.3 2.0 1.9 1.8 1.6


ROAE (%) 11.5 12.2 7.1 9.7 12.9

ROAA (%) 4.8 5.5 3.3 4.9 7.0

EV/EBITDA (x) 20.1 18.4 18.8 16.0 12.1

Net debt/equity (%) 73.6 81.5 78.8 74.9 66.8

Chai Li Shin, CFA

(603) 2297 8684

[email protected]


TSH Resources


Key Metrics

P/E (reported) (x) 15.9 19.0 27.5 18.8 13.1

Core P/E (x) 21.5 17.4 27.5 18.8 13.1

P/BV (x) 2.3 2.0 1.9 1.8 1.6

P/NTA (x) 2.4 2.1 2.0 1.8 1.7


FCF yield (%) nm nm 0.5 0.9 3.4

EV/EBITDA (x) 20.1 18.4 18.8 16.0 12.1

EV/EBIT (x) 26.8 22.4 24.3 19.8 14.1


Revenue 1,017.8 1,079.9 1,069.1 1,176.0 1,292.3

Gross profit 303.0 373.6 258.0 307.4 396.0

EBITDA 179.5 229.4 185.6 219.8 292.0

Depreciation (45.2) (41.9) (42.0) (42.1) (42.3)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 134.3 187.5 143.6 177.7 249.7


Associates & JV 24.1 8.3 12.6 31.7 37.8

Exceptionals 22.6 (9.9) 0.0 0.0 0.0

Pretax profit 164.5 170.8 121.4 175.4 254.3

Income tax (7.9) (32.7) (26.1) (34.5) (51.9)

Minorities (5.6) (12.6) (8.7) (14.1) (20.2)


Core net profit 111.5 137.4 86.6 126.8 182.1


Cash & Short Term Investments 143.3 59.1 (55.5) (187.8) (294.0)


Inventory 207.3 202.8 232.9 249.4 257.4




Other assets 35.6 31.1 31.1 31.1 31.1

Total assets 2,368.4 2,597.4 2,581.4 2,576.9 2,597.8





Total Liabilities 1,207.1 1,286.6 1,202.1 1,095.7 969.8





CASH FLOW (MYR m)

Pretax profit 164.5 170.8 121.4 175.4 254.3


Adj net interest (income)/exp (35.9) (34.7) (34.8) (34.1) (33.2)

Change in working capital (72.1) (48.1) (12.3) (29.7) (27.5)

Cash taxes paid (14.8) (23.3) (26.1) (34.5) (51.9)

Other operating cash flow (23.6) 26.4 22.2 2.3 (2.6)


Capex (318.2) (280.6) (100.0) (100.0) (100.0)

Free cash flow (254.8) (147.6) 12.3 21.6 81.2

Dividends paid (20.9) (31.4) (26.0) (38.0) (54.6)


Change in Debt (49.9) 98.5 (100.0) (115.0) (130.0)

Other invest/financing cash flow 168.8 89.1 (0.9) (0.9) 0.1

Net cash flow (15.3) 8.6 (114.6) (132.3) (103.3)


TSH Resources


Key Ratios

Growth ratios (%)

Revenue growth 3.4 6.1 (1.0) 10.0 9.9

EBITDA growth 32.7 27.8 (19.1) 18.5 32.8

EBIT growth 38.1 39.7 (23.4) 23.8 40.5

Pretax growth 64.5 3.8 (28.9) 44.5 45.0


Core net profit growth 44.8 23.2 (37.0) 46.4 43.6


EBITDA margin 17.6 21.2 17.4 18.7 22.6

EBIT margin 13.2 17.4 13.4 15.1 19.3


Payout ratio 31.4 26.9 30.0 30.0 30.0

DuPont analysis


Revenue/Assets (x) 0.4 0.4 0.4 0.5 0.5

Assets/Equity (x) 2.2 2.2 2.1 1.9 1.8

ROAE (%) 11.5 12.2 7.1 9.7 12.9

ROAA (%) 4.8 5.5 3.3 4.9 7.0






Dividend cover (x) 3.2 3.7 3.3 3.3 3.3

Current ratio (x) 1.0 0.7 0.6 0.5 0.4



Net debt/equity (%) 73.6 81.5 78.8 74.9 66.8


Debt/EBITDA (x) 5.2 4.5 5.0 3.7 2.4

Capex/revenue (%) 31.3 26.0 9.4 8.5 7.7

Net debt/ (net cash) 781.1 976.3 990.9 1,008.2 984.5



Regional Plantation

Research Offices

REGIONAL

Sadiq CURRIMBHOY

Regional Head, Research & Economics

(65) 6231 5836 [email protected]

WONG Chew Hann, CA

Regional Head of Institutional Research


ONG Seng Yeow

Regional Head of Retail Research


TAN Sin Mui

Director of Research


ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Philippines (63) 2 849 8836 [email protected]

Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682

[email protected]

STRATEGY

Sadiq CURRIMBHOY

Global Strategist


Willie CHAN

Hong Kong / Regional


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping

CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology

Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary

LIEW Wei Han

(603) 2297 8676 [email protected] • Consumer Staples

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

Cheah Chong Ling (603) 2297 8767 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research

(91) 22 6623 2632 [email protected]

• Oil & Gas • Automobile • Cement

Anubhav GUPTA


• Metal & Mining • Capital Goods • Property

Vishal MODI


• Banking & Financials

Abhijeet KUNDU


• Consumer

Neerav DALAL


• Software Technology • Telcos

SINGAPORE

Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial)

WEI Bin (65) 6231 5844 [email protected] • Commodity • Logistics • S-chips

John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 2557 1129 [email protected] • Strategy • Metals & Mining • Cement

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations

PHILIPPINES

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining

Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates

Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer

Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind. Estates

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

VIETNAM

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas

NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas


Regional Plantation

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

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Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.


Regional Plantation

Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 2 September 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 2 September 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.


Regional Plantation

Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

5th Floor, Aldermary House

10-15 Queen Street

London EC4N 1TX, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Plaza Bapindo

Citibank Tower 17th Floor

Jl Jend. Sudirman Kav. 54-55

Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,

Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6336-5157

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

New York Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam Tien Nguyen [email protected]

Tel: (84) 44 555 888 x8079

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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