CPO - cif (US$ tonne) Hit by several speed bumps...2014/10/28 · Hit by several speed bumps We are cutting our average CPO price forecasts by 5-11% for 2014-16 to reflect larger-than-expected

Commodities│Plantations

October 27, 2014

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

ASEAN PLANTATIONS

SECTOR NOTE

Hit by several speed bumps We are cutting our average CPO price forecasts by 5-11% for 2014-16 to reflect larger-than-expected global edible oil supplies as well as weaker demand for biodiesel usage in Indonesia. The CPO price declines in 3Q14 were sharper than what we had previously expected, no thanks to stronger soybean supplies and weaker Chinese demand.

Figure 1: Changes to our CPO price forecasts

2013 2014 2014 2015 2015 2016 2016

Actual Old New Old New Old New

CPO - cif (US$ tonne) 857 930 840 960 850 960 910

CPO - fob (US$ tonne) 780 855 765 885 775 885 835

Ex-rate (RM/US$) 3.15 3.33 3.25 3.30 3.30 3.30 3.30

CPO - fob (RM/tonne) 2,456 2,847 2,487 2,921 2,558 2,921 2,756

Transport cost 77 75 75 75 75 75 75

Malaysia CPO export tax 4% 5.0% 3.9% 4.0% 3.8% 4.0% 3.8%

Malaysia local CPO price (RM/tonne) 2,367 2,700 2,390 2,800 2,460 2,870 2,650

Indonesia CPO export tax 9.5% 10.0% 8.5% 11.0% 7.0% 11.0% 8.0%

Indonesian CPO price (US$/tonne) 705 770 700 788 721 788 768

IDR rate 10,433 12,150 11,800 12,150 11,600 12,150 11,600

Indonesian CPO price (IDR/kg) 7,359 9,349 8,254 9,570 8,361 9,570 8,911 SOURCES: CIMB, COMPANY REPORTS

These factors, coupled with the recent sharp drop in crude oil prices, are likely to put a lid on near-term CPO prices. We cut our EPS forecasts for regional planters by up to 41% to reflect our CPO price downgrade. This lowers our target prices by up to 23% across the board. But we have upgraded six stocks as their valuations have improved. Our sector rating remains Neutral, with First Resources as our key pick.

CPO price downgrade 3Q14's CPO price correction was steeper than expected due to stronger edible oils supplies prospects, weaker demand from China and lower crude oil prices. Following a review of the latest fundamentals for edible oils and fats, we have lowered our average international CPO price forecast by 5-11% for 2014-16 to US$840-910 per tonne (RM2,390-2,650).

Better CPO prices in 2015... We project CPO prices to remain range-bound in the near term at RM1,900-2,300 per tonne, as the market digests the record US soybean supplies, higher palm oil

supplies and lower crude oil prices. For 2015, we expect CPO prices to trend higher due to slower edible oils output growth and restocking activities by customers. We are more bullish on 2016 price prospects, as we expect stronger biodiesel demand and potential biological tree stress.

...to offset higher cost We expect planters to face tougher challenges of reining in a steeper rise in operating costs in 2015 compared to 2014. The cost increases will be driven by higher minimum wages and lower fuel subsidies.

Maintain Neutral call The steep share price corrections of selected regional planters have improved the valuations of this sector. We upgrade the ratings on six stocks to Hold/Add to reflect their more attractive valuations as well as downgrade Ta Ann to a Hold. However, we remain Neutral on the sector due to the lack of near-term catalysts. We would turn more positive when CPO prices can sustainably trend above RM2,500 per tonne.

ources: CIMB. COMPANY REPORTS

Notes from the Field

—————————————————————————————————————————

Ivy NG Lee Fang, CFA T (60) 3 2261 9073 E [email protected]

Maureen NATASHA T (62) 21 3006 1721 E [email protected]

SAW Xiao Jun T (60) 3 2261 9089 E [email protected]

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Contents

REVIEW CPO PRICE IN 2014 ............................................. 3 OUTLOOK ............................................................................ 7 RISKS ................................................................................. 12 FINANCIALS ...................................................................... 14 VALUATION AND RECOMMENDATION ........................... 15

Highlighted Companies

Astra Agro Lestari

We upgrade the stock to an Add from a Hold as its share price has corrected by 20% since we downgraded the stock.

Kuala Lumpur Kepong

We upgrade the stock to a Hold from a Reduce as its share price has fallen 16% from its peak in the current year, making its valuations more compelling.

Felda Global Ventures

We upgrade the stock to a Hold from a Reduce as its

share price has fallen 15% since we downgraded the stock, pricing in our concerns over its acquisition of Asian Plantations Ltd.

Jaya Tiasa Holdings

We upgrade the stock to a Hold from a Reduce as its share price has fallen 22% since we downgraded the stock, pricing in our worries over its weak FFB yields.

London Sumatra

We upgrade the stock to a Hold from a Reduce as its share price has fallen since we downgraded our rating due to concerns over weaker prices.

Sampoerna Agro

We upgrade the stock to a Hold from a Reduce as its share price has fallen 11% since we downgraded our rating due to concerns over weaker CPO prices.

Ta Ann Holdings

We downgrade the stock to a Hold from an Add due to its less exciting earnings prospects, following our CPO price downgrades.

http://www.efasoftware.com/

Plantations│Indonesia

October 27, 2014

2

Figure 2: Sector Comparisons

Price Target Price

(local curr) (local curr) CY2014 CY2015 CY2014 CY2015 CY2014 CY2015 CY2014 CY2015 CY2014 CY2015

Sime Darby Bhd SIME MK Hold 9.48 9.58 17,537 18.4 18.2 1.0% 1.92 1.81 10.8% 10.4% 10.8 9.9 2.8% 2.8%

IOI Corporation IOI MK Reduce 4.73 4.32 9,180 22.3 23.6 -4.6% 4.70 4.19 16.8% 18.9% 15.5 16.5 2.2% 2.1%

Kuala Lumpur Kepong KLK MK Hold 21.08 22.10 6,849 21.2 19.4 10.5% 2.85 2.72 13.9% 14.4% 13.0 12.0 3.5% 3.5%

Felda Global Ventures FGV MK Hold 3.25 3.47 3,617 27.4 24.7 0.2% 1.75 1.69 6.5% 7.0% 10.6 10.0 1.8% 2.0%

Genting Plantations GENP MK Hold 10.18 10.80 2,390 22.7 21.1 13.0% 2.00 1.87 9.3% 9.2% 16.6 15.4 1.0% 1.2%

Hap Seng Plantations HAPL MK Hold 2.53 2.46 617 14.7 14.4 16.8% 1.02 0.99 7.1% 7.0% 8.6 8.1 4.1% 4.2%

Jaya Tiasa Holdings JT MK Hold 2.10 2.10 620 31.4 21.1 55.5% 1.14 1.08 3.7% 5.3% 13.2 10.9 0.7% 0.9%

Ta Ann TAH MK Hold 3.89 4.05 440 16.0 18.2 39.0% 1.33 1.30 8.6% 7.3% 7.6 7.6 3.6% 1.7%

Oriental Holdings ORH MK Hold 7.39 7.38 1,399 21.8 21.2 5.9% 0.93 0.90 4.4% 4.3% 8.2 7.8 0.9% 0.9%

Malaysia Average 21.8 20.2 15.2% 2.0 1.8 9.0% 9.3% 11.6 10.9 2.3% 2.1%

Wilmar International WIL SP Hold 3.13 3.38 15,688 14.4 12.9 0.9% 0.99 0.93 7.1% 7.5% 13.5 12.1 1.4% 1.6%

Golden Agri-Resources GGR SP Hold 0.49 0.53 4,879 15.9 14.4 8.8% 0.55 0.53 3.6% 3.9% 9.6 9.1 2.0% 2.2%

First Resources Ltd FR SP Add 1.91 2.32 2,365 15.5 12.9 2.4% 2.15 1.92 14.6% 15.8% 10.1 8.7 1.9% 2.3%

Indofood Agri Resources IFAR SP Hold 0.81 0.82 900 13.1 14.3 9.9% 0.75 0.71 5.8% 5.1% 7.7 9.4 0.0% 0.0%

Singapore Average 14.7 13.6 5.5% 1.1 1.0 7.8% 8.1% 10.2 9.8 1.3% 1.5%

Astra Agro Lestari AALI IJ Add 20,300 25,000 2,649 14.1 13.9 5.2% 2.81 2.55 21.3% 19.2% 7.9 7.9 1.9% 2.7%

Salim Invomas Pratama SIMP IJ Add 745 910 976 13.7 15.4 3.8% 0.82 0.78 6.1% 5.2% 6.4 8.0 1.1% 1.0%

London Sumatra LSIP IJ Hold 1,845 1,960 1,043 14.3 13.2 10.4% 1.73 1.59 12.7% 12.6% 7.2 6.0 2.5% 3.1%

Sampoerna Agro SGRO IJ Hold 1,930 2,050 302 11.8 11.7 50.1% 1.23 1.13 11.0% 10.1% 7.2 6.9 0.6% 1.7%

Indonesia Average 13.5 13.6 17.4% 1.6 1.5 12.8% 11.8% 7.2 7.2 1.5% 2.1%

Average (all) 18.2 17.1 13.5% 1.7 1.6 9.6% 9.6% 10.2 9.8 1.9% 2.0%

P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%)Company

Bloomberg

TickerRecom.

Market Cap

(US$ m)

Core P/E (x) 3-year EPS

CAGR (%)

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG


October 27, 2014

3

Hit by several speed bumps REVIEW OF CPO PRICE IN 2014

Bullish price outlook at the start of 2014

CPO prices started on a positive note in 2014 due to concerns over:

(1) the potential impact of droughts in Peninsular Malaysia, North Sumatra and Riau in Feb-Mar 2014, which may lead to weaker palm oil yields.

(2) the potential impact of the widely-predicted El Nino event in 2014, which may result in lower rainfall in key palm oil producing countries, leading to a potential shortfall in palm oil supplies.

(3) rising usage of CPO as biodiesel in Indonesia and Malaysia due to the planned implementation of higher biodiesel-mandate blends, which will reduce the availabilities of CPO exports from Indonesia.

(4) unfavourable weather conditions in South America.

As a result of all the above factors and the seasonally lower CPO output in 1Q, CPO prices rallied 13% to a high of RM2,917 per tonne on 11 Mar 2014. In 1Q14, CPO prices averaged RM2,671 per tonne.

Figure 3: Malaysia CPO prices Figure 4: Malaysia PK prices

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SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

CPO prices weaken in 2Q...

CPO prices started to decline in 2Q14 when the drought concerns in Malaysia eased after the key palm oil areas started to receive timely rainfall. On top of this, CPO production in Malaysia came in above expectations, due to the delayed ripening of fruits from 1Q onwards. As a result, the average CPO price fell 4% qoq to RM2,572 per tonne in 2Q14 but remains broadly in line with our previous average CPO price projection of RM2,700 per tonne for 2014.

...and corrected to below RM2,000 per tonne level in 3Q

The unexpected downturn came in 3Q14, where a confluence of bearish factors caused CPO prices to break below the RM2,000 per tonne mark for the first time in more than five years. The price decline was steeper than expected and we have identified the following as the key reasons for this steep price correction:

‘‘‘‘ Crude palm oil export prices in Indonesia could rise to US$730-750 per tonne in Jan-Mar 2015 due to a slowdown in production growth.

Thomas Mielke, editor of Oil World


October 27, 2014

4

(1) Bumper US soybean supplies. US soybean production is expected to rise by 13% to reach a record 103.85m tonnes (vs. 92m tonnes in the last season). This, coupled with concerns over a potential upgrade to crop estimates by the market, has caused soybean and soya oil prices to fall by 16% and 17% YTD, respectively.

Figure 5: Soybean and soybean oil futures prices Figure 6: US soybean production, consumption and exports

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SOURCES: CIMB, BLOOMBERG SOURCES: CIMB, USDA

(2) Large rapeseed and sunflower oil supplies. Besides that, the EU is enjoying a good harvest from its rapeseeds plantings, and Russia and Ukraine are expected to produce higher sunflower oil supplies. This has resulted in a sharp drop in the prices of sunflower oils and rapeseed oils, making these edible oil products more price competitive against palm oil. As a result, CPO's price advantage relative to these major edible oils was eroded.

Figure 7: Monthly prices of palm oil and soybean oil, and discount gap

Figure 8: Monthly prices of palm oil and sunflower oil, and discount gap

Figure 9: Monthly prices of palm oil and rapeseed oil, and discount gap

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Soybean Oil (LHS)

CPO (LHS)

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SOURCES: CIMB, OIL WORLD, MPOB SOURCES: CIMB, OIL WORLD, MPOB SOURCES: CIMB, OIL WORLD, MPOB

(3) Concerns over rising palm oil stocks. There are also concerns over a build-up in palm oil stocks in 3Q due to seasonally higher production, while exports remain poor. Palm oil exports from Malaysia declined 6% in 9M14, due to weaker demand from China, Pakistan and the US.


October 27, 2014

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Figure 10: Malaysia's monthly CPO production Figure 11: Monthly CPO stocks in Malaysia

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SOURCES: CIMB, MPOB SOURCES: CIMB, MPOB

(4) Chinese buyers affected by funding issues. Some buyers from China are reportedly facing difficulties in obtaining letters of credit, as banks have turned cautious following the Qingdao port investigation. This, coupled with relatively elevated palm oil stocks at China ports, has led to slowing demand from the second largest importer of palm oil.

Figure 12: Total palm oil stocks in China domestic ports drop as traders drawdown stocks due to difficulties in raising financing

Figure 13: Malaysia's palm oil exports to China fell in August following reports of Qingdao port investigations

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SOURCES: CIMB, COFEED SOURCES: CIMB, MPOB

(5) Downgrade of El Nino event risk. Last but not least, the weather experts have downgraded the probability of El Nino to 50-67% from 70-80% earlier. This has led to the removal of the weather risk premium on CPO prices.


October 27, 2014

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Figure 14: El Nino probability during the year by NOAA Figure 15: Predictions on El Nino probability in 2014

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SOURCES: CIMB, NOAA SOURCES: CIMB

The combination of the above factors, coupled with speculative selling and a more cautious buying stance by consumers, caused CPO prices to decline 21% from the end-Jun price level of RM2,463 per tonne to a low of RM1,934 per tonne on 2 Sep 2014. The price correction appears to be overdone as CPO prices were trading below the floor price, based on the CPO-biodiesel breakeven price of RM2,256 per tonne at the crude oil price of US$100 per barrel in Sep.

Figure 16: Brent crude oil futures price Figure 17: CPO-biodiesel breakeven price vs. CPO price

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CPO (LHS) Breakeven price (w/o subsidy) (LHS)(US$/tonne)

SOURCES: CIMB, BLOOMBERG SOURCES: CIMB, BLOOMBERG

CPO prices have rebounded off its lows

Since then, CPO prices have recovered 12% to the current level of RM2,155 per tonne. We think that one of the turning points for CPO prices was when the Malaysian government announced its plans to scrap the export tax on CPO for Sep and Oct, as part of the government's efforts to mitigate price declines. The government had earlier set the export tax at 4.5% for Sep.

This provides the Malaysian producers with savings of RM106 per tonne and a slight edge relative to the Indonesia planters, which were subject to 9% export tax on CPO in Sep.

This helped to boost Malaysian palm oil exports by 13% mom in Sept 14 and reined in the rise in palm oil stocks. However, we see new potential headwinds for CPO prices, due to recent steep correction of crude oil prices to US$86 per barrel which erodes the appeal of converting CPO into biodiesel.


October 27, 2014

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Figure 18: Malaysia's monthly CPO export tax rate and value Figure 19: Indonesia's monthly CPO export tax rate and value

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SOURCES: CIMB, MINISTRY OF TRADE OF INDONESIA SOURCES: CIMB, MPOB, MINISTRY OF TRADE OF INDONESIA

OUTLOOK

Cutting our CPO price projections

We are cutting our average CPO price forecasts by 10% and 11% to US$840 per tonne in 2014 and US$850 per tonne in 2015.

In line with this, we have lowered our Malaysian CPO price projections to RM2,390 for 2014 and RM2,460 per tonne for 2015. Our Indonesian CPO price forecasts also witnessed similar downgrades to Rp8,254 per kg for 2014 and Rp8,361 per kg for 2015. For 2016, we have lowered our CPO price forecasts by only 5% to US$910 per tonne (RM2,650 per tonne).

The new CPO price forecasts take into consideration the larger-than-expected global edible oil supplies and slower edible oils demand growth. We are raising our 2014 CPO projections for Malaysia to 20m tonnes (from 19.5m tonnes) in view of better FFB yields recorded by the Malaysian estates in 9M14.

The larger edible oil supplies came mainly from competing edible oils. We are also projecting slower demand growth, following the International Monetary Fund's (IMF) decision to cut its outlook for global growth for 2015 due to persistent weakness in the euro zone and a broad slowdown in several major emerging markets. On top of these factors, we are also anticipating slower growth in biodiesel demand, following the recent decline in global crude oil prices.

Figure 20: Changes to our CPO price forecasts

2013 2014 2014 % chge 2015 2015 % chge 2016 2016 %chge

Actual Old New Old New Old New

CPO - cif (US$ tonne) 857 930 840 (10%) 960 850 (11%) 960 910 (5%)

CPO - fob (US$ tonne) 780 855 765 (11%) 885 775 (12%) 885 835 (6%)

Ex-rate (RM/US$) 3.15 3.33 3.25 (2%) 3.30 3.30 0% 3.30 3.30 0%

CPO - fob (RM/tonne) 2,456 2,847 2,487 (13%) 2,921 2,558 (12%) 2,921 2,756 (6%)

Transport cost 77 75 75 0% 75 75 0% 75 75 0%

Malaysia CPO export tax 4% 5.0% 3.9% nm 4.0% 3.8% (5%) 4.0% 3.8% (5%)

Malaysia local CPO price (RM/tonne) 2,367 2,700 2,390 (11%) 2,800 2,460 (12%) 2,870 2,650 (8%)

Indonesia CPO export tax 9.5% 10.0% 8.5% 11.0% 7.0% (36%) 11.0% 8.0% (27%)

Indonesian local CPO price (US$ tonne) 705 770 700 (9%) 788 721 (8%) 788 768 (2%)

IDR rate 10,433 12,150 11,800 (3%) 12,150 11,600 (5%) 12,150 11,600 (5%)

Indonesian CPO - fob (IDR/kg) 7,359 9,349 8,254 (12%) 9,570 8,361 (13%) 9,570 8,911 (7%)

Full pageTwo thirdsHalf pageOne third

SOURCES: CIMB, COMPANY REPORTS

Outlook for rest of 2014

We project CPO prices to remain range-bound at RM1,900-2,300 per tonne for the rest of Oct and Nov 2014, as the market absorbs the seasonally higher palm


October 27, 2014

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oil output as well as other edible oil supplies. Our revised price forecasts assumes 4Q14 CPO prices to average RM2,200 per tonne. We believe that it will be difficult for CPO prices to break above the RM2,300 per tonne price level convincingly given the current crude oil price level of US$86 per barrel. This is because our estimate shows that the CPO-biodiesel breakeven price to be only RM2,080 per tonne, given the current crude oil price level, which is below the current CPO price of RM2,155 per tonne.

Figure 21: Malaysia CPO prices Figure 22: International CPO prices (Rotterdam)

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Source:


2,315 2,317 2,338

2,500

2,672

2,572

2,210

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(US$ per tonne)

SOURCES: CIMB, MPOB, OIL WORLD SOURCES: CIMB, MPOB, OIL WORLD

There is potential for CPO prices to see a minor rally towards the end of 2014, if (1) CPO output from Peninsular Malaysia is severely impacted by the drought experienced in 1Q14; and (2) there are production downgrades by analysts on soybean crops from South America due to poor weather. However, this could be offset by weaker demand for voluntary blending of edible oils due to lower crude oil prices.

Some parts of Malaysia were impacted by severe droughts that lasted close to two months in Feb-Mar 2014. We expect this to affect yields from palm oil trees in the later part of 2014 and the early part of 2015. Based on the feedback from planters that were affected, the potential impact on FFB yield could be 5-15%. (see Figure 23)

Figure 23: Average rainfall in West Malaysia (% of deviation

from normal)

Figure 24: Average rainfall in Indonesia (% of deviation from

normal)

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October 27, 2014

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Recently, Oil World recently cut its forecasts for global soybean output by 3m tonnes as production prospects have deteriorated in South America, primarily in Brazil (due to severe drought) and Argentina (lower than expected plantings) (see Figure 25).

We project food demand to remain fairly stable and CPO to retain its market share in the global edible oils market. However, we expect voluntary biodiesel demand to decline as it is not economically viable to convert CPO to biodiesel at the moment.

Figure 25: Soybean plantation progress in Mato Grosso, Brazil Figure 26: Global soybean production

(in m ha) 21-Oct-11 18-Oct-12 17-Oct-13 16-Oct-145-year avg

(2009-13)

Total area 6.78 7.89 8.3 8.8 7.03

Planted area 2.71 2.59 2.27 0.82 1.98

% 39.90% 32.80% 27.40% 9.30% 28.20%

(in m tonnes) 11/12 12/13 13/14 14/15F

Opening stocks 75.7 54.6 60.0 69.2

Production 241.0 266.6 284.9 307.8

N. Hemisphere 123.4 121.6 127.9 146.9

EU-28 1.4 1.0 1.3 1.6

Russia & Ukraine 4.0 4.2 4.3 5.8

Canada 4.5 5.1 5.2 6.0

US 84.2 82.5 91.4 106.9

China 14.1 13.0 12.2 11.7

India 10.6 11.0 8.8 10.3

Other N. Hem. 4.6 4.6 4.7 4.7

S. Hemisphere 117.6 145.0 157.0 160.8

Argentina 39.7 48.0 54.0 54.0

Brazil 67.9 81.5 86.1 89.0

Paraguay 4.0 8.5 9.0 9.5

Other S. Hem. 5.9 7.0 7.8 8.3

Total supply 316.6 321.2 344.8 377.0 SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, OIL WORLD

We project 2015 to be a consolidation year

For 2015, we expect average CPO prices to rise by 3% to RM2,460 per tonne, driven by slower edible oils supply growth. We do not expect 2015 to be an exciting year for CPO prices as the market will take some time to absorb the higher soybean supply from the US and we do not expect major hiccups in palm oil output. This is fairly similar to the situation in 2012, where it took the market around six months in 2013 to absorb the excess CPO supply held as stocks. We project moderate edible oils demand growth in view of the slowing global economic growth and weaker crude oil prices. We expect India to be the key growth market for palm oil exports due to weaker domestic oilseeds supplies.

We project global CPO supplies to grow by 5%, driven mainly by better FFB yields and larger mature areas in Indonesia and Malaysia. Indonesia will be the key growth driver for global CPO supply. We expect CPO production from Indonesia to increase by 7% (or 2m tonnes) t0 33.1m tonnes, due to rising new mature areas and better FFB yields. We believe that Indonesia's CPO output will remain fairly strong, driven by the recovery in FFB yields in North Sumatra and new mature areas from Kalimantan. To recap, our analysis revealed that the new planting rates for palm oil estates in Indonesia peaked in 2008-09. Most of these estates are expected to reach their prime FFB yield potential in 2015-16.

For Malaysia, we project a 3% rise in production to 20.7m tonnes. This will be driven by new mature areas coming onstream, either from replanted areas or new plantings in Sarawak.


October 27, 2014

10

Figure 27: Malaysia CPO production Figure 28: Indonesia CPO production

Title:

Source:

Please fill in the values above to have them entered in your report17,734 17,565

16,994

18,912 18,785 19,216 20,033

20,700

-

5,000

10,000

15,000

20,000

25,000

2008 2009 2010 2011 2012 2013 2014E 2015E

('000 tonnes)

Title:

Source:


19,400

21,200 22,400

24,300

26,900 28,400

31,078

33,117

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2008 2009 2010 2011 2012 2013 2014E 2015E

('000 tonnes)

SOURCES: CIMB, MPOB, OIL WORLD SOURCES: CIMB, MPOB, OIL WORLD

We project consumption for global edible oils to grow by around 3-4%, driven by an expanding population and income growth. Biodiesel demand growth is projected to be driven by higher mandates in Malaysia, Indonesia and Brazil. Malaysia is expected to complete the implementation of its 5% biodiesel blend in Dec 2014. We project Indonesia to continue with its plan of implementing a 10% blend in the country and Brazil to step up biodiesel usage in the country, following the country's plan to raise the mandatory biodiesel mix to 6% and 7% in Nov 2014.

Figure 29: Biodiesel production in Brazil Figure 30: Supply and demand of soya oil (SBO) in Brazil

('000 tonnes) 2010 2011 2012 2013 2014F

Production 2,096 2,347 2,386 2,562 3,000

Feedstock used

Soya oil 1,738 1,906 1,795 1,890 2,150

Tallow 266 315 410 515 650

Cotton oil 50 86 109 59 90

Other oils 42 40 72 98 110

('000 tonnes) 2010 2011 2012 2013 2014F

Opening stocks 313 382 422 316 288

Production 6,928 7,341 7,010 7,077 7,340

Imports 16 - 1 5 2

Exports 1,564 1,741 1,757 1,362 1,300

Consumption of which for:

Total 5,311 5,560 5,360 5,748 6,050

Biodiesel 1,738 1,906 1,795 1,890 2,150

Other uses (mainly food) 3,573 3,654 3,565 3,858 3,900

Ending stocks 382 422 316 288 280 SOURCES: CIMB, OIL WORLD SOURCES: CIMB, OIL WORLD

Why we are more bullish on 2016 CPO price prospects

We are more bullish on CPO price prospects in 2016 because we expect slower CPO supply growth due to weaker FFB yields, that are led by biological tree stress and lower fertilisers inputs. Also, we expect smaller new mature areas to come onstream much due to lower new plantings in 2012/13. We also expect Indonesia to make better progress on their biodiesel mandates in 2016, as we expect most of the infrastructure issues relating to the biodiesel implementation to be addressed by 2016.

In 2013, Indonesian estates posted lower-than-expected FFB yields due partly to biological tree stress. Our projections assume that after two good years of production in 2014/15, the estates could be affected by biological tree stress, which will lead to lower FFB yields in 2016 (see Figures 31 and 32).


October 27, 2014

11

Figure 31: FFB yield trend of Golden Agri-Resources revealed the group were impacted by tree stress in 2013

Figure 32: FFB yield trend of Astra Agro Lestari revealed the group were impacted by tree stress in 2013

Title:

Source:


23.1

22.4

23.1

20.8

21.8

23.3

21.0

19.5

20.0

20.5

21.0

21.5

22.0

22.5

23.0

23.5

2007 2008 2009 2010 2011 2012 2013

(tonnes per ha)

Title:

Source:


20.3

20.9

21.8

20.4

22.1

23.6

20.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0

2007 2008 2009 2010 2011 2012 2013

(tonnes per ha)

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

At current CPO prices, smaller and less efficient palm oil producers will be impacted by lower cashflows. This may prompt some planters to cut their fertilisers inputs in 4Q and 2015, which could negatively impact FFB yields by estates in 2016.

Thirdly, we expect the impact of slower new plantings in Indonesia since 2010 to lead to slower output growth starting from 2016. Our studies of seed sales of selected planters and new plantings from listed CPO players have confirmed this trend. Overall, we project CPO prices to rise by 8% to RM2,650 per tonne in 2016.

Figure 33: Indonesia's germinated seed sales against CPO price

0

200

400

600

800

1,000

0

40

80

120

160

200

1988 1992 1996 2000 2004 2008 2012

Indonesian CPO price, U

S$/tonne

Mill

ions

of g

erm

inat

ed se

eds

Seed supply in Indonesia CPO price

(Seed supply – in m) (CPO price – US$)

0

200

400

600

800

1,000

0

40

80

120

160

200

1988 1992 1996 2000 2004 2008 2012

Indonesian CPO price, U

S$/tonne

Mill

ions

of g

erm

inat

ed se

eds

Seed supply in Indonesia CPO price

SOURCES: CIMB, LMC, BWPT’S ABDRIGED PROSPECTUS


October 27, 2014

12

Figure 34: FFB yield of palm oil trees at various ages

Title:

Source:


0

5

10

15

20

25

30

35

40

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Low Medium High(tonnes per ha)

Age

SOURCES: CIMB, MPOB

RISKS

Weather impact

Our revised CPO price forecasts assume that weather conditions will remain normal. If an El Nino/La Nina condition returns and leads to poor weather in major planting areas, there could be upside potential to our CPO price forecasts. The past three consecutive years of poor weather started with an El Nino in 2009/10 as well as two back-to-back La Nina events in 2010/11 and 2011/12. The last El Nino event occurred in 4Q09-1Q10. The National Oceanic and Atmospheric Administration (NOAA) has recently indicated that an El Nino Pacific Ocean warming event is favoured to begin in the next two months and could last into the Northern Hemisphere spring of 2015, though it will be rather weak.

Figure 35: Price changes during ENSO cycle Figure 36: Malaysian CPO output and FFB yield changes during

ENSO cycle

CPO Soybean oil

El Nino May 82 - Jun 83 Strong 12.8% 17.9%

El Nino Aug 86 - Feb 88 Moderate 33.1% -3.8%

El Nino May 91- Jun 92 Moderate 16.9% 1.6%

El Nino Sep 94 - Mar 95 Moderate 39.7% 28.1%

El Nino May 97 - Apr 98 Strong 22.9% 10.8%

El Nino May 02 - Feb 03 Moderate 16.2% -5.5%

El Nino Jul 04 - Jan 05 Weak 6.3% 11.2%

El Nino Sep 06 - Jan 07 Weak 13.3% 9.9%

El Nino Jul 09 - Apr 10 Moderate 31.9% 18.4%

* Calculated using average prices in the impacted calendar years

Type Period Intensityyoy chg*

CPO output FFB yield

El Nino May 82 - Jun 83 Strong -14.1% n/a

El Nino Aug 86 - Feb 88 Moderate -0.2% n/a

El Nino May 91- Jun 92 Moderate 0.8% -3.7%

El Nino Sep 94 - Mar 95 Moderate -2.5% -9.1%

El Nino May 97 - Apr 98 Strong -8.3% -16.3%

El Nino May 02 - Feb 03 Moderate 3.8% -0.1%

El Nino Jul 04 - Jan 05 Weak 4.7% -2.1%

El Nino Sep 06 - Jan 07 Weak 6.1% 3.8%

El Nino Jul 09 - Apr 10 Moderate -3.3% -6.1%

* Calculated using calendar year output and yield

Type Period Intensityyoy chg*

SOURCES: CIMB, NOAA, BLOOMBERG SOURCES: CIMB, NOAA, BLOOMBERG

Crude oil price and biodiesel policies

Our current forecasts are based broadly on our average Brent crude oil prices of US$95 per barrel for 2015 and US$100 per barrel for 2016. If oil prices race towards new highs due to geopolitical risks, supply disruptions or stronger demand, such an increase could boost edible oils demand for biodiesel usage. Also, should the governments in Indonesia, Malaysia, Argentina, Brazil, the US and EU boost their incentives or mandates for biodiesel, the demand prospects for edible oils and its selling prices could improve significantly.


October 27, 2014

13

Figure 37: CPO-biodiesel breakeven table

Crude oil

(Brent)

CPO breakeven

without subsidy

CPO breakeven

with subsidyEx-rate

CPO breakeven

without subsidy

CPO breakeven

with subsidy

US$ barrel US$ per tonne US$ per tonne US$/RM RM per tonne RM per tonne

30 196 346 3.25 637 1,125

50 344 494 3.25 1,118 1,606

70 492 642 3.25 1,599 2,087

90 640 790 3.25 2,080 2,568

100 714 864 3.25 2,321 2,808

110 788 938 3.25 2,561 3,049

115 825 975 3.25 2,681 3,169

120 862 1012 3.25 2,802 3,289 SOURCES: CIMB, COMPANY REPORTS

Government policies on edible oils

Palm oil exports from Malaysia and Indonesia are subject to export taxes at RM2,250 per tonne or US$751 per tonne. India has also been revising its edible oil import duties to help its domestic refining sector. As such, any changes to the palm oil export tax structure could impact the CPO prices achieved by the CPO producers as well as the demand for their products.

Figure 38: Malaysia's CPO export tax structure Figure 39: Indonesia tax structure for selected palm products

CPO price (RM per tonne) CPO export tax rate

2,250-2,400 4.5%

2,400-2,550 5.0%

2,550-2,700 5.5%

2,700-2,850 6.0%

2,850-3,000 6.5%

3,000-3150 7.0%

3,150-3,300 7.5%

3,300-3,450 8.0%

3,400-3,600 8.5%

Base price

(US$ per tonne)CPO

RBD Palm

Olein

RBD Palm

Oil

RBD Palm

StearinBiodiesel

≤750 0.0% 0.0% 0.0% 0.0% 0.0%

>750-800 7.5% 2.0% 0.0% 0.0% 0.0%

>800-850 9.0% 3.0% 0.0% 0.0% 0.0%

>850-900 10.5% 4.0% 2.0% 2.0% 0.0%

>900-950 12.0% 5.0% 3.0% 3.0% 0.0%

>950-1000 13.5% 6.0% 4.0% 4.0% 2.0%

>1000-1050 15.0% 7.0% 5.0% 5.0% 2.0%

>1050-1100 16.5% 8.0% 6.0% 6.0% 2.0%

>1100-1150 18.0% 9.0% 7.0% 7.0% 2.0%

>1150-1200 19.5% 10.0% 8.0% 8.0% 5.0%

>1200-1250 21.0% 11.5% 9.0% 9.0% 5.0%

>1250 22.5% 13.0% 10.0% 10.0% 7.5% SOURCES: CIMB, MPOB SOURCES: CIMB, COMPANY REPORTS

Prospects for the global economy

Weaker economic prospects have a negative impact on CPO prices as subpar economic growth is likely to dampen the demand for edible oils and weigh on crude oil prices. This could indirectly lower the support level for CPO prices and lead to an outflow of investments in the commodity markets.

Anti-palm oil lobby

Palm oil continues to face challenges that could negatively impact the global perception of palm oil products. If the negative campaign against palm oil gains momentum, the long-term demand for CPO could be negatively impacted, hence widening its price discount to other edible oils. The Roundtable on Sustainable Palm Oil (RSPO), a non-profit organisation, was formed in 2004 to help palm oil producers deal with environmental charges levied against palm oil by getting their palm oil certified. Since then, Indonesian and Malaysian governments have come out with their own sustainable certifications, such as the Indonesia Sustainable Palm Oil (ISPO) and Malaysian Sustainable Palm Oil (MSPO) standards.


October 27, 2014

14

Figure 40: Rising supply of Certified Sustainable Palm Oil (CSPO)

Title:

Source:


163

1,358

2,774

4,799

6,725

4,852

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010 2011 2012 7M13

('000 tonnes)

SOURCES: CIMB, RSPO

FINANCIALS

Earnings revision for planters

We lower our FY14-16 earnings forecasts for all the plantation companies under our coverage by 41% to reflect our new CPO price forecasts. Our earnings adjustments are more significant for pure upstream and smaller palm oil players, and less for integrated or diversified planters as the earnings from other businesses help cushion the impact of weaker plantation earnings. We have also imputed a 8-10% rise in cost assumptions for Indonesian planters in 2015 due to expectations of a hike of 10-15% in the minimum wage as well as flattish to higher fertiliser prices (see Fig 42). For Malaysian palm oil operators, we are assuming a 5-8% rise in costs as we expect some wage adjustments to reflect the country's Goods and Services Tax (GST), which will come into effect in Apr 2014, as well as a higher inflation rate due to recent cut in fuel subsidies by the government.

Figure 41: Changes in EPS Forecast

Company Year end FY14 FY15 FY16

Malaysia

Sime Darby June 0% -16% -11%

IOI Corp June -1% -14% -8%

KL Kepong Sept -6% -13% -6%

Felda Global Ventures Dec -17% -37% -22%

Genting Plantations Dec -11% -15% -6%

Hap Seng Plantations Dec -12% -17% -7%

Jaya Tiasa June 0% -36% -40%

Ta Ann Dec -19% -41% -17%

Oriental Holdings Dec -2% -11% -13%

Singapore

Wilmar International Dec -1% -4% -7%

Golden Agri Dec -11% -19% -9%

First Resources Dec -10% -29% -25%

Indofood Agri Dec -8% -17% -5%

Indonesia

Astra Agro Dec -21% -29% -24%

SIMP Dec -10% -21% -8%

London Sumatra Dec -25% -28% -22%

Sampoerna Agro Dec -11% -27% -20% SOURCES: CIMB, COMPANY REPORTS


October 27, 2014

15

Figure 42: Historical minimum wage increase at selected provinces in Indonesia

Province 2009 2010 2011 2012 2013 2014 % chg 2009-2014

2014 CAGR

North Sumatra 905 965 1,036 1,200 1,375 1,506 9.5% 10.7%

West Sumatra 880 940 1,055 1,150 1,350 1,490 10.4% 11.1%

South Sumatra 825 928 1,048 1,195 1,630 1,826 12.0% 17.2%

Riau 902 1,016 1,120 1,238 1,400 1,700 21.4% 13.5%

Jambi 800 900 1,028 1,143 1,300 1,502 15.6% 13.4%

Bengkulu 735 780 815 930 1,200 1,350 12.5% 12.9%

Bangka Belitung 850 910 1,024 1,110 1,265 1,640 29.6% 14.0%

Riau Islands 892 925 975 1,015 1,365 1,665 22.0% 13.3%

Jakarta 1,070 1,118 1,290 1,529 2,200 2,441 11.0% 17.9%

Banten 918 955 1,000 1,042 1,170 1,325 13.2% 7.6%

West Kalimantan 705 741 803 900 1,060 1,380 30.2% 14.4%

Central Kalimantan 873 987 1,135 1,327 1,553 1,724 11.0% 14.6%

South Kalimantan 930 1,025 1,126 1,225 1,338 1,620 21.1% 11.7%

East Kalimantan 955 1,002 1,084 1,177 1,752 1,886 7.7% 14.6%

South Sulawesi 905 1,000 1,100 1,200 1,440 1,800 25.0% 14.7%

Central Sulawesi 720 778 828 885 995 1,250 25.6% 11.7%

Southeast Sulawesi 770 860 930 1,032 1,125 1,400 24.4% 12.7%

North Sulawesi 930 1,000 1,050 1,250 1,550 1,900 22.6% 15.4%

Gorontalo 675 710 763 838 1,175 1,325 12.8% 14.4%

West Sulawesi 909 944 1,006 1,127 1,165 1,400 20.2% 9.0%

West Nusa Tenggara 833 891 950 1,000 1,100 1,210 10.0% 7.8%

East Nusa Tenggara 725 800 850 925 1,010 1,150 13.9% 9.7%

Maluku 775 840 900 975 1,275 1,415 11.0% 12.8%

North Maluku 770 847 889 960 1,201 1,441 20.0% 13.3%

West Papua 1,180 1,210 1,410 1,450 1,720 1,870 8.7% 9.6%

Papua 1,216 1,317 1,403 1,585 1,710 1,900 11.1% 9.3%

Rp '000

SOURCES: CIMB, CEIC

VALUATION AND RECOMMENDATION

Changes to our target prices

We are downgrading our target prices for almost all regional planters in our coverage (except for two players) by up to 23% to take into account earnings revisions and the rollover of our target prices to end-2015. Two plantation counters witnessed an upgrade in their target prices due to the rollover effect. We have kept most of our valuations methodology broadly intact, which is based on historical average P/Es.


October 27, 2014

16

Figure 43: Changes to target prices

Company Currency Current price Old TP New TP %chg Upside/downside

Malaysia

Sime Darby RM 9.48 9.85 9.58 -3% 1%

IOI Corp RM 4.73 4.49 4.32 -4% -9%

KL Kepong RM 21.08 22.50 22.10 -2% 5%

FGV RM 3.25 3.69 3.47 -6% 7%

Genting Plantations RM 10.18 11.10 10.80 -3% 6%

Hap Seng Plantations RM 2.53 2.56 2.46 -4% -3%

Jaya Tiasa RM 2.10 1.95 2.10 8% 0%

Ta Ann RM 3.89 4.41 4.05 -8% 4%

Oriental Holdings RM 7.39 7.60 7.38 -3% 0%

Singapore

Wilmar International S$ 3.13 3.47 3.38 -3% 8%

Golden Agri S$ 0.49 0.58 0.53 -8% 9%

First Resources S$ 1.91 2.50 2.32 -7% 22%

Indofood Agri S$ 0.81 1.02 0.82 -20% 1%

Indonesia

Astra Agro Rp 20,300 26,000 25,000 -4% 23%

SIMP Rp 745 1,180 910 -23% 22%

London Sumatra Rp 1,845 1,850 1,960 6% 6%

Sampoerna Agro Rp 1,930 2,150 2,050 -5% 6% SOURCES: CIMB, COMPANY REPORTS

Rating changes

We upgrade our ratings for six regional planters, namely KL Kepong, FGV, Jaya Tiasa, London Sumatra and Sampoerna Agro, to Hold from Reduce and Astra Agro to Add from Hold, as the valuations for these stocks have turned more attractive, following the recent sharp correction of their share prices. We downgrade Ta Ann to a Hold from an Add due to its less exciting earnings prospects following our CPO price downgrade.

Figure 44: Changes in recommendation

Company Previous recommendation Current recommendation

Malaysia

Sime Darby Hold Hold

IOI Corp Reduce Reduce

KL Kepong Reduce Hold

FGV Reduce Hold

Genting Plantations Hold Hold

Hap Seng Plantations Hold Hold

Jaya Tiasa Reduce Hold

Ta Ann Add Hold

Oriental Holdings Hold Hold

Singapore

Wilmar International Hold Hold

Golden Agri Hold Hold

First Resources Add Add

Indofood Agri Hold Hold

Indonesia

Astra Agro Hold Add

SIMP Add Add

London Sumatra Reduce Hold

Sampoerna Agro Reduce Hold SOURCES: CIMB, COMPANY REPORTS


October 27, 2014

17

Maintain Neutral rating

We are keeping to our Neutral stance on the sector for the following reasons:

(1) Regional sector P/Es are turning more attractive following the recent share price correction, as we think that the market has already priced in the recent CPO price weakness. The regional plantation sector is now trading closer to 1 s.d. below its 3-year average P/E of 18.5x, following our earnings adjustments. The sector was trading at 1 s.d. above its 3-year average P/E at the start of the year, as the market was then overly exuberant that a potential El Nino event could help drive CPO prices higher.

Figure 45: Regional plantation sector’s 3-year forward P/E

Avg: 18.5x

+1 sd: 21.4x

-1 sd: 15.6x

Avg: 18.5x

+1 sd: 21.4x

-1 sd: 15.6x

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

P/E Avg +1 s.d. -1 s.d.(x)

SOURCES: CIMB, COMPANY REPORTS

(2) Plantation stocks across the regions have generally performed in line with or underperformed its respective markets for the past four years. On top of this, market sentiment on the sector has generally been neutral to bearish since 2012, with the spurts of bullishness in 2014 being driven mainly by weather events or biodiesel policies.

Figure 46: Absolute performance of plantations sector and market index in

Malaysia


Singapore


Indonesia

Title:

Source:


-15%

-10%

-5%

0%

5%

10%

15%

2011 2012 2013 YTD 2014

Plantations sector KLCI

Title:

Source:


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2011 2012 2013 YTD 2014

Plantations sector FSSTI

Title:

Source:


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2011 2012 2013 YTD 2014

Plantations sector JCI

SOURCES: CIMB, BLOOMBERG SOURCES: CIMB, BLOOMBERG SOURCES: CIMB, BLOOMBERG

(3) Even though the sector's valuations are not expensive, we could not find any compelling reasons to re-rate the stocks significantly in light of their unexciting near-term earnings prospects.


October 27, 2014

18

We are of the view that a better time to get into the sector will arise when all the bad news relating to cost increases have been priced into the plantation stocks and that such an opportunity could appear in 1H2015. Indonesia is due to set its minimum wage in Nov and Malaysia is currently preparing to roll out GST on 1 Apr 2015.

Preferred picks in the sector

We continue to like First Resources for its strong output growth prospects, young estates and integrated business model. We view its recent share price weakness, arising from its poor 1H earnings performance, as a good opportunity to nibble on the stock and hence, take advantage of its long-term growth prospects. Our other top pick is Astra Agro in Indonesia for its strong corporate governance and attractive valuations. We project strong growth to come from its Kalimantan estates, while its venture into downstream businesses will partially cushion the group's earnings against CPO price volatility.

We also like SIMP in Indonesia due mainly to its cheap assets proposition. The stock is trading below its NBV and the market is pricing the group's estates at an EV/ha of US$7k, which is below replacement costs and the market's pricing for estates in Indonesia – even though it is the second-largest planter by market cap in Indonesia. We also see potential improvement in yield prospects for its young estates in the coming years.


October 27, 2014


Standing still Astra Agro remains our top pick for its strong corporate governance and undemanding valuations. Production growth from its Kalimantan estates and its downstream venture may support earnings in light of CPO price volatility and rising minimum wages.

We cut our earnings forecasts by 21-29% for FY14-16 to incorporate: 1) our lower CPO price assumptions, 2) higher labour cost, and 3) slightly higher production in FY15-16. This lowers our target price to Rp25,000, now based on 15x CY16 P/E (prev. 16x), in line with its 5-year average. Upgrade from Hold to Add.

CPO price downgrade 3Q14’s CPO price correction was stronger than expected due to greater edible oils supply prospects, weaker demand from China and lower crude oil prices. Following a review of the latest fundamentals for edible oils and fats, we lower our average international CPO price forecasts by 5-11% for 2014-16 to US$840-910 per tonne (RM2,390-2,650). For 2015, we expect CPO prices to trend higher due to slower edible oils output growth and restocking activities by customers. We are more bullish about 2016 price prospects as we anticipate stronger biodiesel demand and potential biological tree stress.

Production recovery 8M14 production grew 20% yoy and recorded a new high for FFB yield of

14.8tonnes/ha. This was due to the increased new plantings in 2007-08 reaching their prime FFB yield this year before peaking next year. This, coupled with higher CPO price expectations in 2015, should offset the labour cost increase.

Downstream to cushion earnings AALI is now the only Indonesia-listed planter that has ventured downstream. This will shield AALI from the weak performance of pure upstream players. The buoyant CPO supply in the market following CPO peak production may also be enough to feed the current massive installed refinery capacity.

Proxy for the sector AALI usually leads sector movements as it has the highest market cap among all Indonesia-listed palm oil companies, strong fundamentals and sufficient liquidity to drive multiple re-rating. The stock has plunged 32% from its peak following the steep CPO price correction. This provides an opportunity to accumulate the stock and take advantage of its long-term growth prospects.

CIMB Analyst(s)


Laura TASLIM T (62) 21 3006 1723 E [email protected]

Share price info

Share price perf. (%) 1M 3M 12M

Relative -10.4 -23.1 -13.3

Absolute -12.4 -23.6 -2.9

Major shareholders % held

Astra International 79.7


Astra Agro Lestari

AALI IJ / AALI.JK Current Rp20,300

Market Cap Avg Daily Turnover Free Float Target Rp25,000

US$2,649m US$3.22m 20.3% Prev. Target Rp26,000

Rp31,967,324m Rp38,383m 1,575 m shares Up/Downside 23.2%

Conviction| |

Sources: CIMB. COMPANY REPORTS

78.0

88.0

98.0

108.0

118.0

128.0

138.0

148.0

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

Price Close Relative to JCI (RHS)

Source: Bloomberg

2

4

6

Oct-13 Jan-14 Apr-14 Jul-14

Vol m

Financial Summary

Dec-12A Dec-13A Dec-14F Dec-15F Dec-16F

Revenue (Rpb) 11,564 12,675 15,717 16,787 18,382

Operating EBITDA (Rpb) 3,932 3,420 4,215 4,206 4,838

Net Profit (Rpb) 2,410 1,801 2,294 2,314 2,661

Core EPS (Rp) 1,495 1,304 1,437 1,459 1,690

Core EPS Growth (0.6%) (12.8%) 10.2% 1.5% 15.8%

FD Core P/E (x) 13.58 15.57 14.13 13.91 12.01

DPS (Rp) 721.2 492.3 386.1 546.2 606.2

Dividend Yield 3.55% 2.43% 1.90% 2.69% 2.99%

EV/EBITDA (x) 8.41 10.04 8.12 8.21 7.03

P/FCFE (x) 31.40 15.86 NA 37.29 21.62

Net Gearing 7.9% 19.6% 14.7% 14.7% 8.4%

P/BV (x) 3.54 3.23 2.81 2.55 2.29

ROE 27.4% 21.7% 21.3% 19.2% 20.1%

% Change In Core EPS Estimates (21.1%) (29.1%) (24.3%)

CIMB/consensus EPS (x) 0.85 0.78 0.83

20,300

25,000

18,600 29,675

Target

52-week share price range

Current

SOURCE: CIMB, COMPANY REPORTS


Astra Agro Lestari│Indonesia

October 27, 2014

20

Profit & Loss

(Rpb) Dec-13A Dec-14F Dec-15F Dec-16F

Total Net Revenues 12,675 15,717 16,787 18,382

Gross Profit 4,082 4,617 4,773 5,406

Operating EBITDA 3,420 4,215 4,206 4,838

Depreciation And Amortisation (416) (884) (801) (921)

Operating EBIT 3,005 3,332 3,405 3,917

Financial Income/(Expense) (54) (61) (75) (72)

Pretax Income/(Loss) from Assoc. 0 0 0 0

Non-Operating Income/(Expense) (345) 42 22 (1)

Profit Before Tax (pre-EI) 2,605 3,312 3,352 3,845

Exceptional Items 0 0 0 0

Pre-tax Profit 2,605 3,312 3,352 3,845

Taxation (702) (893) (903) (1,036)

Exceptional Income - post-tax 0 0 0 0

Profit After Tax 1,903 2,420 2,449 2,809

Minority Interests (102) (126) (135) (147)

Preferred Dividends 0 0 0 0

FX Gain/(Loss) - post tax 0 0 0 0

Other Adjustments - post-tax 0 0 0 0

Net Profit 1,801 2,294 2,314 2,661

Recurring Net Profit 2,053 2,263 2,298 2,661

Fully Diluted Recurring Net Profit 2,053 2,263 2,298 2,661

Balance Sheet


Total Cash And Equivalents 709 625 258 382

Total Debtors 21 30 34 39

Inventories 803 1,037 1,123 1,213

Total Other Current Assets 159 203 213 236

Total Current Assets 1,692 1,895 1,628 1,870

Fixed Assets 6,494 7,898 8,921 9,425

Total Investments 0 0 0 0

Intangible Assets 56 46 46 45

Total Other Non-Current Assets 6,722 6,776 7,284 7,716

Total Non-current Assets 13,271 14,721 16,251 17,186

Short-term Debt 2,152 1,345 1,323 1,323

Current Portion of Long-Term Debt 0 0 0 0

Total Creditors 749 980 1,065 1,155

Other Current Liabilities 819 1,028 1,077 1,199

Total Current Liabilities 3,719 3,353 3,464 3,677

Total Long-term Debt 571 1,021 871 300

Hybrid Debt - Debt Component 0 0 0 0

Total Other Non-Current Liabilities 329 329 329 329

Total Non-current Liabilities 900 1,350 1,200 629

Total Provisions 36 36 36 36

Total Liabilities 4,655 4,739 4,700 4,341

Shareholders' Equity 9,895 11,378 12,545 13,933

Minority Interests 373 499 634 782

Total Equity 10,268 11,877 13,179 14,715

Cash Flow


EBITDA 3,420 4,215 4,206 4,838

Cash Flow from Invt. & Assoc. 0 0 0 0

Change In Working Capital 4,871 4,817 4,305 4,965

(Incr)/Decr in Total Provisions 0 0 0 0

Other Non-Cash (Income)/Expense 0 0 0 0

Other Operating Cashflow (4,405) (4,855) (4,102) (4,710)

Net Interest (Paid)/Received (64) (61) (75) (72)

Tax Paid (702) (893) (903) (1,036)

Cashflow From Operations 3,120 3,224 3,430 3,986

Capex (2,856) (2,964) (2,400) (1,936)

Disposals Of FAs/subsidiaries 0 0 0 0

Acq. Of Subsidiaries/investments 0 0 0 0

Other Investing Cashflow 0 0 0 0

Cash Flow From Investing (2,856) (2,964) (2,400) (1,936)

Debt Raised/(repaid) 1,751 (356) (173) (571)

Proceeds From Issue Of Shares 0 0 0 0

Shares Repurchased 0 0 0 0

Dividends Paid (1,034) (811) (1,147) (1,273)

Preferred Dividends

Other Financing Cashflow (539) 822 (77) (82)

Cash Flow From Financing 179 (345) (1,397) (1,926)

Total Cash Generated 443 (84) (367) 124

Free Cashflow To Equity 2,015 (96) 857 1,479

Free Cashflow To Firm 339 350 1,130 2,132

Key Ratios

Dec-13A Dec-14F Dec-15F Dec-16F

Revenue Growth 9.6% 24.0% 6.8% 9.5%

Operating EBITDA Growth (13.0%) 23.3% (0.2%) 15.0%

Operating EBITDA Margin 27.0% 26.8% 25.1% 26.3%

Net Cash Per Share (Rp) (1,279) (1,106) (1,229) (788)

BVPS (Rp) 6,283 7,225 7,966 8,848

Gross Interest Cover 41.5 37.2 34.0 47.7

Effective Tax Rate 26.9% 26.9% 26.9% 26.9%

Net Dividend Payout Ratio 43.0% 26.5% 37.2% 35.9%

Accounts Receivables Days 0.64 0.10 0.11 0.11

Inventory Days 43.58 30.26 32.81 32.93

Accounts Payables Days 27.29 27.11 29.40 29.52

ROIC (%) 21.3% 19.7% 18.3% 19.0%

ROCE (%) 25.8% 24.6% 23.1% 24.7%

Key Drivers


Planted Estates (ha) 281,378 291,269 299,002 304,235

Mature Estates (ha) 247,487 254,444 261,023 267,311

FFB Yield (tonnes/ha) 20.7 20.9 21.5 21.6

FFB Output Growth (%) -6.8% 4.0% 5.2% 2.9%

CPO Price (US$/tonne) 857 840 850 910


0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

12-month Forward Rolling FD P/E (x)

Astra Agro Lestari London Sumatra

Salim Invomas Pratama Sampoerna Agro

Plantations│Malaysia

October 27, 2014


Upgrade to Hold We are raising our rating for FGV to Hold from Reduce as we believe the 16% decline in its share price since our ratings downgrade has sufficiently priced in our concerns over the acquisition of Asian Plantations and the weaker CPO price prospects.

Factoring in our CPO price downgrade, we cut our FY14-16 EPS forecasts by 17-37%. This, coupled with the rollover of our SOP-based valuation to end-2015, leads to a 6% decline in our target price (which is based on a 20% discount to SOP) to RM3.47. The stock is a Hold due to its unexciting near-term prospects.

CPO price downgrades We lower our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015 to reflect the higher edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to RM2,650 per tonne. This is negative for FGV as the group derives most of its earnings from its estates business. Our estimates reveal that every RM100 per tonne change in CPO price lowers the group's pretax profit by RM100m.

Acquisition of APL FGV has recently acquired the London-listed Asian Plantations Ltd (APL), through a voluntary cash offer,

based on the price of £2.20 per share. This would value the APL group at £120m (RM628m). We are negative on this acquisition as the pricing appears expensive on an EV/ha of RM75k, which is significantly higher than the EV/ha of comparable listed peers in Sarawak. In addition, APL is loss- making and highly geared (2.9x), and we estimate the acquisition to be 7% earnings dilutive for FGV. We are also concerned that the acquisition would weaken FGV's financial position, especially at times when CPO prices are low. Since we highlighted this risk, the share price of FGV has fallen by 16% to reflect these concerns.

Unexciting earnings FGV posted a 1% drop in its 9M14 FFB output despite the additional contribution from Pontian United Plantation estates. The weaker output and lower CPO selling prices are likely to dampen near-term earnings of the group. We expect the group to post weaker earnings in FY14 due to lower CPO prices, but earnings should recover in FY15 on higher FFB output growth.

CIMB Analyst(s)


Share price info


Relative -6 -17.6 -28.6

Absolute -7.2 -20.7 -28.6


Federal Land Development Authority 38.7

EPF 8.4

Lembaga Tabung Haji 7.8


Felda Global Ventures

FGV MK / FGVH.KL Current RM3.25

Market Cap Avg Daily Turnover Free Float Target RM3.47

US$3,617m US$1.55m 45.2% Prev. Target RM3.69

RM11,856m RM4.99m 3,648 m shares Up/Downside 6.8%

Conviction| |


65.0

76.3

87.5

98.8

110.0

2.80

3.30

3.80

4.30

4.80

Price Close Relative to FBMKLCI (RHS)

Source: Bloomberg

2

4

6

8


Vol m

Financial Summary


Revenue (RMm) 12,886 12,568 13,025 12,452 13,296

Operating EBITDA (RMm) 1,080 1,196 1,205 1,267 1,506

Net Profit (RMm) 806.0 982.4 431.9 480.3 647.3

Core EPS (RM) 0.25 0.17 0.12 0.13 0.18

Core EPS Growth (49.1%) (33.0%) (30.2%) 11.2% 34.8%

FD Core P/E (x) 14.83 19.16 27.45 24.68 18.32

DPS (RM) 0.05 0.16 0.06 0.07 0.09

Dividend Yield 1.69% 4.92% 1.82% 2.03% 2.73%

EV/EBITDA (x) 4.87 10.69 10.65 10.04 8.47

P/FCFE (x) 169.9 17.4 41.3 24.4 27.4

Net Gearing (49.9%) (12.1%) (14.7%) (18.7%) (20.9%)

P/BV (x) 1.94 1.80 1.75 1.69 1.61

ROE 13.7% 9.8% 6.5% 7.0% 9.0%



3.25

3.47

3.00 4.70

Target


Current



Felda Global Ventures│Malaysia

October 27, 2014

22

Profit & Loss

(RMm) Dec-13A Dec-14F Dec-15F Dec-16F


Gross Profit 850 1,847 1,942 2,217



Operating EBIT 1,086 1,085 1,137 1,363

Financial Income/(Expense) 61 (109) (103) (93)

Pretax Income/(Loss) from Assoc. (2) (60) (50) (50)

Non-Operating Income/(Expense) 0 0 0 0

Profit Before Tax (pre-EI) 1,144 916 984 1,220


Pre-tax Profit 1,508 916 984 1,220

Taxation (399) (244) (253) (318)


Profit After Tax 1,108 672 730 903



FX Gain/(Loss) - post tax


Net Profit 982 432 480 647

Recurring Net Profit 619 432 480 647

Fully Diluted Recurring Net Profit 619 432 480 647

Balance Sheet


Total Cash And Equivalents 5,202 5,273 5,519 5,628

Total Debtors 1,352 1,401 1,339 1,430

Inventories 1,740 1,803 1,724 1,841



Fixed Assets 5,683 5,913 6,132 6,339

Total Investments 1,344 1,177 1,014 845

Intangible Assets 3,324 3,324 3,324 3,324



Short-term Debt 1,638 1,638 1,638 1,638

Current Portion of Long-Term Debt

Total Creditors 1,988 2,037 1,975 2,066

Other Current Liabilities 518 518 518 518


Total Long-term Debt 2,486 2,257 2,028 1,799

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 4,526 4,496 4,457 4,372

Total Non-current Liabilities 7,011 6,752 6,485 6,171




Minority Interests 2,375 2,615 2,865 3,120

Total Equity 8,946 9,402 9,892 10,471

Cash Flow


EBITDA 1,196 1,205 1,267 1,506


Change In Working Capital 60 (63) 79 (117)

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow (360) 329 329 329

Net Interest (Paid)/Received 48 (109) (103) (93)

Tax Paid (294) (244) (253) (318)

Cashflow From Operations 726 1,226 1,433 1,427

Capex (252) (350) (350) (350)


Acq. Of Subsidiaries/investments (1,541) (1,541) (1,541) (1,541)

Other Investing Cashflow (38) 1,181 1,173 1,126

Cash Flow From Investing (1,280) (710) (718) (765)

Debt Raised/(repaid) 1,234 (229) (229) (229)



Dividends Paid (266) (216) (240) (324)

Preferred Dividends

Other Financing Cashflow (1,093) 0 0 0

Cash Flow From Financing (125) (445) (469) (553)

Total Cash Generated (679) 71 246 109

Free Cashflow To Equity 680 287 486 433

Free Cashflow To Firm (458) 717 906 842

Key Ratios


Revenue Growth (2.5%) 3.6% (4.4%) 6.8%

Operating EBITDA Growth 10.7% 0.8% 5.2% 18.8%


Net Cash Per Share (RM) 0.30 0.38 0.51 0.60

BVPS (RM) 1.80 1.86 1.93 2.01





Inventory Days 36.41 57.85 61.25 58.88


ROIC (%) 18.1% 9.3% 9.5% 11.3%

ROCE (%) 10.9% 8.5% 8.7% 10.1%

Key Drivers





FFB Output Growth (%) 2.1% -2.0% 3.2% 2.7%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0



Felda Global Ventures Genting Plantations IOI Corporation

Plantations│Singapore

October 27, 2014


Opportunity knocks The group's weaker-than-expected 1H14 results, coupled with concerns over the dry weather in Riau and lower CPO prices, have led to sharp corrections in its share price in recent months. We view this as a good opportunity to accumulate the stock at an attractive level.

The group boasts superior operating efficiency over peers, strong FFB output growth prospects due to its young estates, and good management. Factoring in our CPO price revisions and lower FFB yields, we cut our FY14-16 EPS forecasts by 10-29%. This, coupled with the rollover of our valuations to end-2015, has led to a 7% decline in our target price, based on 12.3x CY16 P/E (1 sd above its 4- year mean). The stock remains an Add and our top pick in the regional space.

CPO price downgrades We scale back our average CPO price forecasts by 10-11% to US$840 per tonne for 2014 and US$850 per tonne for 2015 to reflect larger-than- expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to RM910 per tonne. This is negative for First Resources as the group derives 87% of its earnings from its plantations division and every US$10 per tonne change in CPO price would lower its pretax profit forecasts by US$5.2m.

Improving FFB yields First Resources recorded a 14% yoy rise in FFB production from its nucleus estates in Sep 2014, thanks to higher FFB yields (+5% yoy) and newly mature areas. For 9M14, the group posted an 11% increase in FFB production from its nucleus estates, broadly in line with our projections. We are positive on this as it signals that the group's estates in Riau are recovering from the poor weather, and we could see higher production from these estates in 2015. To recap, monthly FFB yields at its estates began to trend lower yoy since Sep 12, due to tree stress.

Integrated palm oil player The group added a new 600k-tonne refinery in 2H13. This raises its refining capacity to 850k tonnes, allowing the group to refine all of its CPO in-house and extract better profit margins for its palm products. Its biodiesel plant in Indonesia also stands to benefit from the higher demand in the country, in line with the government's move to raise its biodiesel mandates.

CIMB Analyst(s)


Share price info


Relative -2.2 -15 1.8

Absolute -4.3 -18.9 1.9


Eight Capital Inc 63.2

FMR 6.3

DB Intl Trust Singapore 5.6


First Resources Ltd

FR SP / FRLD.SI Current S$1.91

Market Cap Avg Daily Turnover Free Float Target S$2.32

US$2,365m US$3.40m 31.3% Prev. Target S$2.50

S$3,018m S$4.27m 1,584 m shares Up/Downside 21.8%

Conviction| |


93.0

102.0

111.0

120.0

129.0

138.0

1.70

1.90

2.10

2.30

2.50

2.70

Price Close Relative to FSSTI (RHS)

Source: Bloomberg

2

4

6

8

10


Vol m

Financial Summary


Revenue (US$m) 603.4 626.5 488.8 595.2 711.8

Operating EBITDA (US$m) 370.8 359.5 260.6 303.9 375.2

Net Profit (US$m) 237.1 238.2 152.7 183.4 233.3

Core EPS (US$) 0.14 0.14 0.10 0.12 0.15

Core EPS Growth 20.5% (0.4%) (29.7%) 20.2% 27.2%

FD Core P/E (x) 11.25 10.89 15.49 12.89 10.14

DPS (US$) 0.030 0.032 0.029 0.035 0.044

Dividend Yield 2.01% 2.16% 1.94% 2.33% 2.96%

EV/EBITDA (x) 6.65 7.31 10.10 8.68 6.95

P/FCFE (x) 9.40 NA 44.33 39.81 20.76

Net Gearing 11.5% 20.9% 18.2% 15.9% 11.0%

P/BV (x) 2.14 2.38 2.15 1.92 1.70

ROE 21.1% 20.7% 14.6% 15.8% 17.8%



1.91

2.32

1.83 2.58

Target


Current



First Resources Ltd│Singapore

October 27, 2014

24

Profit & Loss

(US$m) Dec-13A Dec-14F Dec-15F Dec-16F

Total Net Revenues 626.5 488.8 595.2 711.8

Gross Profit 381.7 297.8 362.7 433.7

Operating EBITDA 359.5 260.6 303.9 375.2

Depreciation And Amortisation (27.6) (24.4) (27.3) (29.9)

Operating EBIT 331.9 236.2 276.6 345.3

Financial Income/(Expense) (18.3) (19.6) (19.6) (19.6)

Pretax Income/(Loss) from Assoc. 0.0 0.0 0.0 0.0

Non-Operating Income/(Expense) 0.0 0.0 0.0 0.0

Profit Before Tax (pre-EI) 313.6 216.6 257.0 325.7

Exceptional Items

Pre-tax Profit 313.6 216.6 257.0 325.7

Taxation (67.5) (54.1) (61.7) (78.2)

Exceptional Income - post-tax

Profit After Tax 246.1 162.4 195.3 247.5

Minority Interests (7.9) (9.8) (11.9) (14.2)

Preferred Dividends


Other Adjustments - post-tax

Net Profit 238.2 152.7 183.4 233.3

Recurring Net Profit 217.2 152.7 183.4 233.3

Fully Diluted Recurring Net Profit 217.2 152.7 183.4 233.3

Balance Sheet




Inventories 59 34 42 50


Total Current Assets 410 385 404 465

Fixed Assets 303 339 371 402



Total Other Non-Current Assets 965 1,065 1,165 1,265


Short-term Debt 3 3 3 3


Total Creditors 60 54 65 78


Total Current Liabilities 80 74 86 99

Total Long-term Debt 3 3 3 3



Total Non-current Liabilities 660 660 660 660


Total Liabilities 740 734 746 758

Shareholders' Equity 993 1,100 1,229 1,392


Total Equity 1,040 1,157 1,297 1,475

Cash Flow


EBITDA 359.5 260.6 303.9 375.2

Cash Flow from Invt. & Assoc.

Change In Working Capital (34.6) 26.5 (3.2) (3.5)



Other Operating Cashflow (41.9) 0.0 0.0 0.0

Net Interest (Paid)/Received (17.8) (19.6) (19.6) (19.6)

Tax Paid (65.3) (54.1) (61.7) (78.2)

Cashflow From Operations 200.0 213.3 219.4 273.9

Capex (181.0) (160.0) (160.0) (160.0)

Disposals Of FAs/subsidiaries

Acq. Of Subsidiaries/investments

Other Investing Cashflow (54.5) 0.0 0.0 0.0

Cash Flow From Investing (235.5) (160.0) (160.0) (160.0)

Debt Raised/(repaid) (55.3) 0.0 0.0 0.0

Proceeds From Issue Of Shares 0.2 0.0 0.0 0.0

Shares Repurchased

Dividends Paid (51.0) (45.8) (55.0) (70.0)

Preferred Dividends

Other Financing Cashflow 16.4 0.0 0.0 0.0

Cash Flow From Financing (89.7) (45.8) (55.0) (70.0)

Total Cash Generated (125.2) 7.5 4.4 43.9

Free Cashflow To Equity (90.8) 53.3 59.4 113.9

Free Cashflow To Firm (14.3) 72.9 79.0 133.5

Key Ratios


Revenue Growth 3.8% (22.0%) 21.8% 19.6%

Operating EBITDA Growth (3.0%) (27.5%) 16.6% 23.5%


Net Cash Per Share (US$) (0.14) (0.13) (0.13) (0.10)

BVPS (US$) 0.63 0.69 0.78 0.88





Inventory Days 87.34 89.29 59.55 60.21


ROIC (%) 19.2% 13.7% 14.9% 17.1%

ROCE (%) 20.6% 14.9% 16.1% 18.4%

Key Drivers





FFB Output Growth (%) 6.5% 10.0% 14.2% 15.9%



0.0

5.0

10.0

15.0

20.0

25.0

30.0



First Resources Ltd Golden Agri-Resources Indofood Agri Resources


October 27, 2014


Growing Indonesian exposure We are positive on the group's aggressive expansion into Indonesia, which has started to bear fruits. However, this is offset by concerns that the Indonesian government may impose a foreign ownership limit on its Indonesian estates.

We cut our FY14-16 EPS forecasts by 6-15% to account for our downgrade in CPO price forecasts. In line with our earnings downgrades, we lower our SOP-based target price (which has been rolled forward to end-2015) to RM10.80. The stock remains a Hold as it is fairly valued at the current level.

CPO price downgrades We scale back our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth and weaker crude oil prices. For 2016, we lower our CPO price forecasts by 5% to RM2,650 per tonne. This is negative for Genting Plantations as the group derives 98% of its earnings from its plantations division, and every RM100 per tonne change in the CPO price would lower its pretax profit forecasts by RM43.8m.

Strong production growth The group is expected to deliver strong output growth in the coming years as its new plantings in

Indonesia are coming into maturity. Currently, 49% of the group's planted oil palm estates are located in Indonesia and only 30% of the planted areas in Indonesia are mature. We expect improving yields from its young estates and new mature areas to drive the future output growth of its estates. In 2014, the group is expected to register a 10-12% increase in FFB output, mostly from its Indonesian estates.

Potential foreign limit rule The recent draft proposal to impose a 30% foreign limit on Indonesian estates could be negative for Genting Plantations as this would require it to pare down its stakes in its Indonesian estates. The good news is that the government has decided not to carry out the proposal, but it could revisit this issue in the future.

Downstream strategy The group has recently expanded its downstream and is expected to launch its biorefinery project in Lahad Datu soon, which may complement its biodiesel plants.

CIMB Analyst(s)


Share price info


Relative 3.2 -8.1 2.4

Absolute 2 -11.2 2.4


Genting 53.6

Employees Provident Fund 15.4


Genting Plantations

GENP MK / GENP.KL Current RM10.18



RM7,834m RM4.76m 756.8 m shares Up/Downside 6.1%

Conviction| |


94.0

100.0

106.0

112.0

118.0

124.0

9.50

10.00

10.50

11.00

11.50

12.00


Source: Bloomberg

1

2

3

4


Vol m

Financial Summary


Revenue (RMm) 1,233 1,384 1,965 2,168 2,615

Operating EBITDA (RMm) 422.6 429.3 472.2 507.7 598.8

Net Profit (RMm) 327.1 227.8 339.9 365.2 434.0

Core EPS (RM) 0.44 0.38 0.45 0.48 0.57

Core EPS Growth (24.7%) (12.4%) 17.5% 7.4% 18.8%

FD Core P/E (x) 23.34 26.64 22.66 21.10 17.75

DPS (RM) 0.13 0.09 0.10 0.12 0.12

Dividend Yield 1.23% 0.89% 0.98% 1.16% 1.16%

EV/EBITDA (x) 17.90 18.16 16.57 15.39 12.61

P/FCFE (x) 244.1 380.2 NA 74.6 21.8

Net Gearing (9.53%) (1.75%) (1.47%) (1.80%) (7.34%)

P/BV (x) 2.25 2.25 2.00 1.87 1.72

ROE 9.9% 8.4% 9.3% 9.2% 10.1%



10.18

10.80

9.70 11.70

Target


Current



Genting Plantations│Malaysia

October 27, 2014

26

Profit & Loss



Gross Profit 526 747 825 995

Operating EBITDA 429 472 508 599


Operating EBIT 361 434 468 558

Financial Income/(Expense) 23 18 17 17



Profit Before Tax (pre-EI) 402 456 490 581

Exceptional Items (102) 0 0 0

Pre-tax Profit 300 456 490 581

Taxation (80) (110) (118) (139)


Profit After Tax 220 347 373 441

Minority Interests 8 (7) (7) (7)




Net Profit 228 340 365 434



Balance Sheet


Total Cash And Equivalents 931 763 781 1,049





Fixed Assets 1,110 1,535 1,796 1,855


















Total Equity 3,604 4,079 4,364 4,718

Cash Flow


EBITDA 429.3 472.2 507.7 598.8


Change In Working Capital 13.6 (213.4) (5.8) (26.2)




Net Interest (Paid)/Received 10.2 19.6 19.0 19.5

Tax Paid (76.2) (109.5) (117.7) (139.4)


Capex (423.3) (300.0) (300.0) (100.0)

Disposals Of FAs/subsidiaries 0.0 0.0 0.0 0.0

Acq. Of Subsidiaries/investments 0.0 0.0 0.0 0.0



Debt Raised/(repaid) 106.2 0.0 0.0 0.0


Shares Repurchased 0.0 0.0 0.0 0.0

Dividends Paid (318.7) (68.4) (75.5) (89.6)

Preferred Dividends


Cash Flow From Financing (34.8) 51.4 (75.3) (84.6)

Total Cash Generated (120.8) (79.7) 27.9 268.0

Free Cashflow To Equity 20.3 (131.2) 103.2 352.6

Free Cashflow To Firm (68.3) (131.2) 103.2 352.6

Key Ratios


Revenue Growth 12.2% 42.0% 10.3% 20.6%

Operating EBITDA Growth 1.6% 10.0% 7.5% 17.9%



BVPS (RM) 4.53 5.09 5.46 5.91





Inventory Days 46.13 48.33 65.49 61.62


ROIC (%) 11.1% 12.6% 12.1% 13.5%

ROCE (%) 8.7% 9.7% 9.8% 10.9%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0



Genting Plantations Hap Seng Plantations IOI Corporation


October 27, 2014


Growing downstream exposure Golden Agri stands out among the regional planters as a proxy to CPO prices for its liquidity (the highest) and palm oil estate size (second largest planted area). As such, its share price has been one of the worst hit by the recent decline in CPO prices.

On top of this, there are concerns over the 1H14 losses registered by its China oilseeds division and slowing output growth. Factoring in our CPO price revisions, we cut our FY14-16 EPS forecasts by 9-19%. This, coupled with the rollover of our valuation (based on 13x forward P/E) to end-2015, has led to a 8.6% decline in its target price. The stock remains a Hold as it is trading close to our target price and lacks near-term catalysts.

CPO price revisions We scale back our average CPO price forecasts for Malaysia by 10-11% to US$840 per tonne for 2014 and US$850 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to US$910 per tonne. This is negative for Golden Agri, which derives 80% of its earnings from its palm oil estates and mill. We estimate every US$10 per tonne change in CPO price would lower its pretax profit forecasts by US$16m.

1H14 losses in oilseeds

The group posted a wider loss of US$40m from its oilseeds business in China against a US$3.3m loss in 1Q14 due to negative crush margins and a challenging operating environment. This is negative but the group is evaluating various ways to improve its performance.

Expanding downstream The group has been putting a lot more emphasis on its downstream business over the past year. This is evident from its hiring of the Cargill trading team from Singapore and senior personnel from Louis Dreyfus at the end of 2012. Golden Agri has also beefed up its investments in downstream assets.

M&A to drive growth Golden Agri revealed that the slowdown in new plantings in recent years was due to tighter new regulations and a slower land compensation process. It is targeting new plantings of around 10k per ha for this year and hopes to supplement this with M&As at reasonable prices. Overall, it aims to grow its oil palm plantations by 20k-30k ha in 2014 through organic growth and acquisitions.

CIMB Analyst(s)


Share price info


Relative -1.9 -7.9 -11.1

Absolute -4 -11.8 -11


The Widjaja Family Master Trust 50.0


Golden Agri-Resources

GGR SP / GAGR.SI Current S$0.49




Conviction| |


81.0

88.0

95.0

102.0

109.0

116.0

0.400

0.450

0.500

0.550

0.600

0.650


Source: Bloomberg

50

100

150

200


Vol m

Financial Summary


Revenue (US$m) 6,052 6,585 6,708 7,041 7,711

Operating EBITDA (US$m) 744.9 617.3 721.8 780.8 877.1

Net Profit (US$m) 409.6 311.3 319.8 354.6 413.2

Core EPS (US$) 0.035 0.024 0.024 0.026 0.031

Core EPS Growth (24.7%) (32.3%) (0.4%) 10.9% 16.5%

FD Core P/E (x) 10.73 15.86 15.56 14.07 12.10

DPS (US$) 0.009 0.007 0.007 0.008 0.010

Dividend Yield 2.30% 1.91% 1.97% 2.18% 2.54%

EV/EBITDA (x) 8.20 11.60 9.85 9.41 8.70

P/FCFE (x) NA 18.30 33.96 28.26 36.30

Net Gearing 13.6% 22.7% 21.5% 23.3% 25.6%

P/BV (x) 0.57 0.56 0.55 0.53 0.51

ROE 5.46% 3.72% 3.62% 3.91% 4.43%



0.49

0.53

0.47 0.62

Target


Current



Golden Agri-Resources│Singapore

October 27, 2014

28

Profit & Loss



Gross Profit 1,363 1,389 1,458 1,596





Pretax Income/(Loss) from Assoc. (1) 2 2 2





Taxation (114) (109) (134) (156)







Net Profit 311 320 355 413



Balance Sheet



Total Debtors 1,180 1,018 1,124 1,261




Fixed Assets 2,351 2,744 3,138 3,531





Short-term Debt 1,060 1,060 1,360 1,660









Total Provisions 1,884 1,884 1,884 1,884




Total Equity 8,803 9,034 9,289 9,587

Cash Flow


EBITDA 617 722 781 877


Change In Working Capital (385) 219 (86) (186)



Other Operating Cashflow 0 0 0 0


Tax Paid (114) (109) (134) (156)

Cashflow From Operations 30 700 430 390

Capex (478) (550) (550) (550)




Cash Flow From Investing (478) (550) (550) (550)

Debt Raised/(repaid) 726 (0) 300 300



Dividends Paid (93) (96) (106) (124)

Preferred Dividends

Other Financing Cashflow (417) 0 0 0

Cash Flow From Financing 216 (96) 194 176


Free Cashflow To Equity 278 150 180 140

Free Cashflow To Firm (342) 292 22 (1)

Key Ratios


Revenue Growth 8.81% 1.86% 4.97% 9.51%

Operating EBITDA Growth (17.1%) 16.9% 8.2% 12.3%



BVPS (US$) 0.68 0.70 0.72 0.74





Inventory Days 56.34 53.47 52.68 51.76


ROIC (%) 3.46% 3.77% 4.11% 4.57%

ROCE (%) 3.90% 4.30% 4.61% 5.11%

Key Drivers








0.0

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October 27, 2014


Supported by dividend yields We retain our Hold call on Hap Seng Plantations, following our CPO price downgrades as we think that its share price will be supported by its 4-5% dividend yield in FY14-16 and undemanding EV/ha of RM51k for planted area, which is well below the recent market transactions for estates.

We prune our FY14-16 EPS forecasts by 7-17% to account for our lower CPO price assumptions. We lowered our target price to RM2.46 (based on 10% discount to historical average of 13.5x FY15 P/E) following our earnings adjustments and after rolling over our valuations to end-2015.

CPO price downgrades We lowered our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne in 2014 and RM2,460 per tonne in 2015 to reflect the larger-than-expected global edible oil supplies, slower edible oils demand growth and weaker crude oil prices. For 2016, we have lowered our CPO price forecast by 5% to RM2,650 per tonne. This is negative for Hap Seng Plantations as the group derives 100% of its earnings from its plantations division. We estimate that every RM100 per tonne change in CPO price would lower its pretax profit by RM17m.

Higher production in FY14

The group posted a 7% jump in FFB output in 9M14 due to the improvement in yields from its estates. This is positive as it is above our expectations. We believe that the improved yields were due to better weather conditions at its estates. We believe that future output growth for this group would have to come from M&A or further improvement in FFB yields from its replanting efforts. This is because the majority of its estates are already at prime yielding age. The weighted average age of the group's estates is 15 years.

Attractive EV/ha of RM51k The stock’s key attractions are its low P/BV of 1.1x and undemanding EV/ha of RM51k, which is below the reported prices for transacted estates in Sabah of up to RM80k. This suggests that the stock is undervalued from an assets point of view. As such, we see good share price support. However, we maintain our Hold call due to its dimmer earnings prospects.

CIMB Analyst(s)


Share price info


Relative 0.8 -1.1 -3.8

Absolute -0.4 -4.2 -3.8


Hap Seng Consolidated Berhad 52.4

Innoprise Corporation 15.0



Hap Seng Plantations

HAPL MK / HAPP.KL Current RM2.53


US$617.2m US$0.04m 24.9% Prev. Target RM2.56

RM2,023m RM0.12m 800.0 m shares Up/Downside -2.8%

Conviction| |


91.0

94.0

97.0

100.0

103.0

106.0

109.0

2.400

2.500

2.600

2.700

2.800

2.900

3.000


Source: Bloomberg

1

2

3

4

5


Vol m

Financial Summary


Revenue (RMm) 526.5 443.3 519.5 532.4 573.3


Net Profit (RMm) 140.3 97.5 137.7 140.7 161.9

Core EPS (RM) 0.18 0.12 0.17 0.18 0.20

Core EPS Growth (44.5%) (30.5%) 41.2% 2.2% 15.0%

FD Core P/E (x) 14.42 20.76 14.70 14.38 12.50

DPS (RM) 0.11 0.10 0.10 0.11 0.12

Dividend Yield 4.16% 3.95% 4.08% 4.17% 4.80%

EV/EBITDA (x) 8.82 11.32 8.59 8.14 7.13

P/FCFE (x) 19.29 17.72 18.33 18.16 11.20

Net Gearing (6.9%) (9.8%) (11.0%) (12.0%) (13.2%)

P/BV (x) 1.07 1.05 1.02 0.99 0.96

ROE 7.45% 5.11% 7.06% 7.01% 7.83%



2.53

2.46

2.45 2.88

Target


Current



Hap Seng Plantations│Malaysia

October 27, 2014

30

Profit & Loss


Total Net Revenues 443.3 519.5 532.4 573.3

Gross Profit 186.4 239.6 244.2 272.2

Operating EBITDA 162.1 210.3 218.7 244.9

Depreciation And Amortisation (28.2) (29.0) (34.9) (37.0)

Operating EBIT 133.9 181.4 183.9 208.0

Financial Income/(Expense) 3.8 3.8 3.8 5.0

Pretax Income/(Loss) from Assoc. 0.0 0.0 0.0 0.0

Non-Operating Income/(Expense) 0.0 0.0 0.0 0.0

Profit Before Tax (pre-EI) 137.7 185.1 187.6 213.0

Exceptional Items 0.0 0.0 0.0 0.0

Pre-tax Profit 137.7 185.1 187.6 213.0

Taxation (40.2) (47.4) (46.9) (51.1)


Profit After Tax 97.5 137.7 140.7 161.9

Minority Interests 0.0 0.0 0.0 0.0

Preferred Dividends 0.0 0.0 0.0 0.0



Net Profit 97.5 137.7 140.7 161.9

Recurring Net Profit 97.5 137.7 140.7 161.9

Fully Diluted Recurring Net Profit 97.5 137.7 140.7 161.9

Balance Sheet







Fixed Assets 577 589 617 645


















Total Equity 1,924 1,979 2,035 2,100

Cash Flow


EBITDA 162.1 210.3 218.7 244.9


Change In Working Capital 16.8 (32.0) (1.3) 46.9



Other Operating Cashflow 0.1 (0.0) (0.0) (0.0)


Tax Paid (24.0) (47.4) (46.9) (51.1)


Capex (39.4) (40.0) (62.9) (65.0)


Acq. Of Subsidiaries/investments (7.5) 15.7 0.0 0.0

Other Investing Cashflow 0.0 0.0 0.0 0.0




Shares Repurchased (0.0) 0.0 (7.0) (7.0)

Dividends Paid (64.0) (82.6) (84.4) (97.1)

Preferred Dividends

Other Financing Cashflow (10.5) 7.0 7.0


Total Cash Generated 50.2 17.3 27.0 83.7

Free Cashflow To Equity 114.2 110.4 111.5 180.8

Free Cashflow To Firm 114.2 110.4 111.5 180.8

Key Ratios


Revenue Growth (15.8%) 17.2% 2.5% 7.7%




BVPS (RM) 2.40 2.47 2.54 2.63

Gross Interest Cover N/A N/A N/A N/A




Inventory Days 54.01 54.50 57.38 57.89


ROIC (%) 6.9% 9.4% 9.4% 10.5%

ROCE (%) 6.55% 8.62% 8.52% 9.31%

Key Drivers








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Genting Plantations Hap Seng Plantations IOI Corporation


October 27, 2014


Going for a thicker sugar coating Indofood Agri has expanded its sugar businesses beyond Indonesia through its investment in sugar assets via CMAA and Roxas Holdings. We take a positive long-term view of this as it will help to expand its earnings base and reduce its earnings reliance on SIMP.

We lower our FY14-16 EPS forecasts by 5-17% to reflect our weaker CPO price assumptions. The earnings cuts and the downgrade in our target price for its plantation unit, SIMP reduce our SOP-based target price for Indofood Agri to S$0.82. We maintain our Hold call on the stock and prefer SIMP for direct exposure to the group's plantation business.

CPO price downgrades We lower our average CPO price forecasts by 10% to US$840 per tonne for 2014 and 11% to US$850 for 2015 to reflect larger-than-expected global edible oil supplies, slower demand growth for edible oils and weaker crude oil prices. For 2016, we cut our CPO price forecast by 5% to US$910 per tonne. This is negative for Indofood Agri, which derives the bulk of its earnings from its 72.6%-owned plantation arm, SIMP.

Recovering FFB yields SIMP posted a 23% yoy rise in FFB output in 2Q14, suggesting continued ebbing of social issues at its estates. Reduced social issues, improved weather and the absence of biological

tree stress have raised yields in its estates in south Sumatera and Kalimantan. Overall, SIMP's 1H14 FFB production growth of 18% from its nucleus estates was above expectations. We are positive on this as it will help the group rein in the production costs at its estates which have been on the rise.

Stronger cooking oil profit The lower CPO price will be positive for its edible oils and fats division as there is a lag in passing on the lower raw material costs to consumers. This will partially buffer the impact of lower plantation earnings.

Expanding sugar exposure Last year, the group started making acquisitions outside Indonesia. It bought a 50% stake in CMAA, a sugar and ethanol producer in Brazil for approximately US$67m, to boost its earnings base and access CMAA's sugar cultivation practice. The group has also taken an effective stake of 10.2% in Roxas Holdings Inc, the largest integrated sugar business in the Philippines for US$17.4m.

CIMB Analyst(s)


Share price info


Relative -1.5 -13.9 -7.5

Absolute -3.6 -17.8 -7.4


Indofood Singapore Holdings 69.6


Indofood Agri Resources

IFAR SP / IFAR.SI Current S$0.81


US$899.7m US$1.04m 30.4% Prev. Target S$1.02


Conviction| |


89.0

97.9

106.8

115.7

124.6

0.700

0.800

0.900

1.000

1.100


Source: Bloomberg

5

10

15

20

25


Vol m

Financial Summary


Revenue (Rpb) 13,845 13,280 14,917 15,923 17,817


Net Profit (Rpb) 1,082 550 844 778 997

Normalised EPS (Rp) 708.9 476.2 582.7 537.1 688.7

Normalised EPS Growth (3.7%) (32.8%) 22.4% (7.8%) 28.2%

FD Normalised P/E (x) 10.81 16.09 13.15 14.26 11.13

DPS (Rp) 0.066 - - - -

Dividend Yield 0.001% 0.000% 0.000% 0.000% 0.000%

EV/EBITDA (x) 6.56 9.36 7.64 9.42 8.13

P/FCFE (x) NA NA NA NA NA

Net Gearing 7.5% 21.9% 23.1% 23.7% 22.9%

P/BV (x) 0.81 0.79 0.75 0.71 0.67

ROE 7.80% 4.99% 5.85% 5.11% 6.19%

% Change In Normalised EPS Estimates (7.9%) (16.7%) (5.1%)

Normalised EPS/consensus EPS (x) 0.90 0.75 0.78

0.81

0.82

0.76 1.09

Target


Current



Indofood Agri Resources│Singapore

October 27, 2014

32

Profit & Loss



Gross Profit 3,204 3,599 3,841 4,298


Depreciation And Amortisation (783) (1,036) (610) (610)

Operating EBIT 1,837 2,331 2,229 2,786


Pretax Income/(Loss) from Assoc. (6) 5 5 5




Pre-tax Profit 1,338 1,949 1,796 2,303

Taxation (380) (507) (467) (599)


Profit After Tax 959 1,442 1,329 1,704





Preference Dividends (Australia) 0 0 0 0

Net Profit 550 844 778 997

Normalised Net Profit 1,098 1,442 1,329 1,704

Fully Diluted Normalised Profit 689 844 778 997

Balance Sheet



Total Debtors 1,433 1,610 1,718 1,922

Inventories 1,568 1,985 2,119 2,371



Fixed Assets 9,781 11,245 13,135 15,025

Total Investments 1,263 1,268 1,273 1,278




Short-term Debt 4,490 4,490 4,490 4,490


Total Creditors 1,937 1,723 1,871 2,087







Total Provisions 3,508 3,663 3,834 4,023




Total Equity 22,833 24,275 25,605 27,309

Cash Flow


EBITDA 2,620 3,367 2,839 3,396


Change In Working Capital 298 (825) (105) (259)





Tax Paid (749) (507) (467) (599)


Capex (3,091) (2,500) (2,500) (2,500)



Other Investing Cashflow (1,754) 0 0 0


Debt Raised/(repaid) 1,719 224 0 0


Shares Repurchased (212) 0 0 0

Dividends Paid (387) 0 0 0


Other Financing Cashflow 0 213 268

Cash Flow From Financing 1,119 224 213 268

Total Cash Generated (1,545) (622) (452) (176)

Free Cashflow To Equity (946) (622) (665) (445)

Free Cashflow To Firm (2,146) (273) (42) 228

Key Ratios


Revenue Growth (4.1%) 12.3% 6.7% 11.9%



Net Cash Per Share (Rp) (3,448) (3,878) (4,190) (4,312)

BVPS (Rp) 9,667 10,250 10,787 11,476



Net Dividend Payout Ratio NA NA NA NA


Inventory Days 62.62 57.30 62.00 60.78


ROIC (%) 6.6% 7.6% 6.8% 8.0%

ROCE (%) 5.99% 7.00% 6.44% 7.58%

Key Drivers








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October 27, 2014


Pricey valuations We are keeping to our Reduce call on this stock due to its rich valuations. We like its management and expect its manufacturing earnings to provide a cushion against lower CPO prices but this is overshadowed by the group's high valuations.

Factoring in our CPO price downgrades, we lower our FY6/15-17 EPS forecasts by 5-14% and trim our SOP-based target price to RM4.32, after rolling it over to end-2015. The successful demerger of its property division this year allowed the group to unlock its property assets and focus on expanding its palm oil businesses.

CPO price downgrades We scale back our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to RM2,650 per tonne. This is negative for IOI Corp as we estimate that the group derives around 65% of its earnings from its plantations division, and every RM100 per tonne change in CPO price would lower its pretax profit forecast by RM74m.

Expanding its estates IOI Corp raised its total oil palm planted area by 8% in FY6/14 to 174,061ha, mainly through the

acquisition of Unico-Desa Plantations for RM1bn. We are positive on the acquisition, as we feel that the purchase price for the estates is fair and see room for FFB yields to improve in the estates as Unico-Desa has replanted 28% of its planted area since 2008. Future expansion in the group will come from its plans to enlarge its planted area in Indonesia through new planting activities of 6,000ha per annum over the next three years. Currently, the group has planted 15,320ha of estates in Indonesia.

Downstream prospects We expect a more challenging operating environment for its refining business due to the aggressive expansion of its refining capacity in Indonesia. The group's oleochemical division is also expected to face stiffer competition from new capacities and higher biodiesel production in Malaysia and Indonesia. The speciality fats division is expected to be less impacted by overcapacity issues, and the group plans to focus on improving its plants' revenue and efficiency.

CIMB Analyst(s)


Share price info


Relative -0.3 -3.8 2.3

Absolute -1.5 -6.9 2.3


Progressive Holdings Sdn Bhd 44.7



IOI Corporation

IOI MK / IOIB.KL Current RM4.73



RM30,090m RM28.20m 6,450 m shares Up/Downside -8.7%

Conviction| |


86.0

95.4

104.8

114.1

3.90

4.40

4.90

5.40


Source: Bloomberg

5

10

15

20

25


Vol m

Financial Summary

Jun-13A Jun-14A Jun-15F Jun-16F Jun-17F

Revenue (RMm) 13,517 12,664 14,250 15,876 17,553


Net Profit (RMm) 1,974 3,373 1,219 1,373 1,494

Core EPS (RM) 0.26 0.24 0.19 0.21 0.23

Core EPS Growth (13.8%) (9.6%) (19.8%) 12.6% 8.8%

FD Core P/E (x) 18.12 20.01 24.97 22.16 20.37

DPS (RM) 0.16 0.12 0.09 0.11 0.12

Dividend Yield 3.28% 2.49% 2.00% 2.25% 2.45%

EV/EBITDA (x) 13.98 14.03 17.56 15.65 14.13

P/FCFE (x) 258.2 17.3 36.0 35.9 21.2

Net Gearing 31.3% 56.7% 47.3% 38.5% 24.7%

P/BV (x) 2.23 5.05 4.40 4.00 3.64

ROE 12.8% 15.4% 18.8% 18.9% 18.7%



4.73

4.32

4.10 5.30

Target


Current



IOI Corporation│Malaysia

October 27, 2014

34

Profit & Loss

(RMm) Jun-14A Jun-15F Jun-16F Jun-17F


Gross Profit 2,850 635 1,386 2,259



Operating EBIT 2,152 1,684 1,874 2,018





Exceptional Items 1,853 0 0 0

Pre-tax Profit 3,924 1,668 1,878 2,044

Taxation (534) (434) (488) (532)


Profit After Tax 3,390 1,234 1,390 1,513





Net Profit 3,373 1,219 1,373 1,494



Balance Sheet



Total Debtors 1,102 1,085 1,198 1,327

Inventories 2,155 2,291 2,530 2,801



Fixed Assets 6,410 6,729 7,019 7,302

Total Investments 928 1,022 1,165 1,314


Total Other Non-Current Assets 149 504 504 504


Short-term Debt 2,454 2,621 2,621 2,621



Other Current Liabilities 102 133 498 1,366










Total Equity 6,233 7,161 7,865 8,630

Cash Flow


EBITDA 2,378 1,886 2,084 2,236


Change In Working Capital (151) 9 90 557





Tax Paid (451) (434) (488) (532)


Capex (828) (500) (500) (500)

Disposals Of FAs/subsidiaries 2,207 0 0 0

Acq. Of Subsidiaries/investments (1,066) 0 0 0

Other Investing Cashflow (54) 0 0 0

Cash Flow From Investing 260 (500) (500) (500)

Debt Raised/(repaid) 107 37 (200) (200)



Dividends Paid (1,063) (610) (687) (747)

Preferred Dividends

Other Financing Cashflow (1,182) 1,566 2 2

Cash Flow From Financing (2,287) 998 (885) (945)

Total Cash Generated (637) 1,807 163 693

Free Cashflow To Equity 1,757 846 847 1,438

Free Cashflow To Firm 1,945 1,042 1,274 1,859

Key Ratios

Jun-14A Jun-15F Jun-16F Jun-17F

Revenue Growth (6.3%) 12.5% 11.4% 10.6%

Operating EBITDA Growth (3.0%) (20.7%) 10.5% 7.3%


Net Cash Per Share (RM) (0.55) (0.53) (0.47) (0.33)

BVPS (RM) 0.94 1.08 1.18 1.30





Inventory Days 72.68 59.59 60.88 63.61


ROIC (%) 11.2% 18.0% 18.8% 19.8%

ROCE (%) 12.2% 12.1% 12.8% 13.3%

Key Drivers








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30.0



Genting Plantations IOI Corporation Kuala Lumpur Kepong


October 27, 2014


Productivity concerns priced in While the productivity of Jaya Tiasa’s estates remains below potential, the steep fall in Jaya Tiasa’s share price has placed its EV/ha at a deep discount to the sector. We upgrade the stock to Hold from Reduce as its assets should provide support to the share price.

We cut Jaya Tiasa’s FY6/15-17 earnings by 4-40% to reflect our new CPO price forecast. But our SOP- based target price is raised to RM2.10 as we roll it forward to end-2015. We would turn more positive on Jaya Tiasa if it manages to raise its estates’ productivity above our expectations.

Lower CPO price forecast We are lowering our Malaysian CPO price forecast by 12% to RM2,460 for 2015 and 9% to RM2,650 for 2016 to account for the larger-than-expected edible oil supplies and weaker demand for biodiesel usage in Indonesia. This is negative for Jaya Tiasa as it derived 46% of its FY6/14 earnings from its plantation division.

Better performance in FY15 Despite the cut in CPO price forecast, we still project a higher net profit (+4%) in FY15, driven largely by higher FFB production as new mature areas come on stream. Jaya Tiasa’s mature areas will grow by 6% yoy in FY15. Likewise, the percentage of prime mature areas (those above 7 years old) will jump from 22.7% at end-FY14 to 37.4% at end-FY15. We project that these will boost its FFB production by 16% in FY15.

Key earnings risks Every 1% drop in FFB yield will lower our FY15 EPS forecast by 4%. We had projected flattish timber earnings in the new financial year. Lower log production, the stronger RM, or weaker timber prices are key earnings risks. Log production hinges on weather conditions in its concession area while others are driven mainly by the economic conditions in Malaysia, India, and Japan.

Upgrade to Hold We are upgrading our rating to Hold as its share price has fallen by 22% since we downgraded the stock to Reduce in May 14. However, the underperformance does not alleviate the concern that the productivity of its estates may still be lower than its peers. In FY14, its FFB yield was 13.8 tonnes per ha even though the average age of its mature area was already close to the prime age bracket of 7 years. Nonetheless, its current discounted EV/ha of RM42,000 should lend support to its valuations given that a recent transaction for oil palm estates in Sarawak fetched a price of nearly twice of Jaya Tiasa’s current EV/ha.

CIMB Analyst(s)


Share price info


Relative -0.2 -12.6 -2.3

Absolute -1.4 -15.7 -2.3


Tiong Toh Siong Holdings Sdn Bhd 21.5

Genine Chain Limited 19.0

Asanas Sdn Bhd 9.0


Jaya Tiasa Holdings

JT MK / JTIA.KL Current RM2.10




Conviction| |


89.0

98.0

107.0

116.0

125.0

134.0

1.90

2.10

2.30

2.50

2.70

2.90


Source: Bloomberg

2

4

6

8

10


Vol m

Financial Summary


Revenue (RMm) 1,054 1,035 1,324 1,432 1,600


Net Profit (RMm) 21.1 57.1 66.4 127.0 203.9

Core EPS (RM) 0.02 0.07 0.07 0.13 0.21

Core EPS Growth (87%) 202% 4% 91% 61%

FD Core P/E (x) 96.74 32.02 30.78 16.10 10.03

DPS (RM) 0.010 0.015 0.014 0.026 0.042

Dividend Yield 0.48% 0.71% 0.65% 1.24% 1.99%

EV/EBITDA (x) 23.86 13.52 13.09 9.39 6.23

P/FCFE (x) NA NA 24.02 14.61 9.04

Net Gearing 38.4% 42.1% 32.9% 24.5% 13.1%

P/BV (x) 1.20 1.16 1.12 1.05 0.96

ROE 1.4% 3.7% 3.7% 6.7% 10.0%



2.10

2.10

1.98 2.76

Target


Current



Jaya Tiasa Holdings│Malaysia

October 27, 2014

36

Profit & Loss



Gross Profit 269 312 396 509










Taxation (27) (25) (45) (71)







Net Profit 57 66 127 204



Balance Sheet






Total Current Assets 414 669 819 1,059

Fixed Assets 2,452 2,395 2,372 2,332


















Total Equity 1,759 1,845 1,961 2,142

Cash Flow


EBITDA 206.3 203.9 271.0 376.6




Other Non-Cash (Income)/Expense 0.0 34.5 34.9 36.5

Other Operating Cashflow 5.0 11.4 11.5 12.0


Tax Paid (6.5) (20.1) (41.4) (68.7)


Capex (271.7) (92.0) (82.8) (69.0)







Shares Repurchased (0.0) 0.0 0.0 0.0

Dividends Paid (20.9) (14.4) (13.3) (25.4)

Preferred Dividends


Cash Flow From Financing (63.5) 39.5 (13.3) (25.4)

Total Cash Generated (49.2) 124.6 126.7 200.9

Free Cashflow To Equity (50.8) 85.1 140.0 226.3


Key Ratios


Revenue Growth (1.9%) 27.9% 8.2% 11.7%

Operating EBITDA Growth 81.0% (1.1%) 32.9% 38.9%



BVPS (RM) 1.80 1.88 1.99 2.18





Inventory Days 75.40 61.40 61.03 60.06


ROIC (%) 4.8% 3.2% 6.5% 10.5%

ROCE (%) 4.44% 3.07% 5.75% 8.84%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0



Hap Seng Plantations Jaya Tiasa Holdings Ta Ann


October 27, 2014


Seeding in new markets In light of stricter rulings on expansion in Indonesia, KL Kepong has ventured into PNG and Liberia in pursuit of growth. There were some hiccups in the early phases of its expansion into these markets, which carry higher risks but offer huge potential for growth.

We cut our FY14-16 EPS by 6-13% to reflect our CPO price downgrades. This, coupled with the rollover of our SOP-based valuation to end-2015, leads to a 2% decline in our target price. However, we upgrade the stock to Hold from Reduce, as valuations of the stock have become more reasonable following the 15% decline in its YTD share price.

CPO price revisions We scale back our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to RM2,650 per tonne. This is negative for KL Kepong as the group derives 72% of its earnings from its plantations division, and every RM100 per tonne change in CPO price would lower its pretax profit forecasts by RM77m

Growth drivers for KLK We expect KL Kepong to deliver higher earnings in FY9/14 due to

better palm product prices and production. Output growth for the group will be supported by new mature areas and young estates averaging 11 years. On top of these, 45% of the group's planted area is young and immature. The group is also adding new refining and oleochemical capacities to drive future growth from this business. We are long-term positive on this as it will help the group achieve better pricing for its palm products.

Venturing into new markets KL Kepong ventured into PNG via the acquisition of a 51% stake in Collingwood Plantations (CP) for US$8.67m (RM27.7m) in 2012. It also ventured into Liberia through the acquisition of an effective stake of 50% in Liberian Palm Developments and a 20.1% stake in Equatorial Palm Oil for US$20.6m. LPD's subsidiaries hold two 50-year concessions awarded by the Liberian government to rehabilitate and develop 25,547 ha of oil palm plantations, of which 3,750 ha has been planted. The acquisition values the assets on EV/planted ha at US$9,178.

CIMB Analyst(s)


Share price info


Relative 1 -8 -8.9

Absolute -0.2 -11.1 -8.9


Batu Kawan 45.7


Lembaga Kemajuan Tanah Persekutuan 4.4


Kuala Lumpur Kepong

KLK MK / KLKK.KL Current RM21.08




Conviction| |


85.0

88.6

92.1

95.7

99.3

102.9

106.4

110.0

19.0

20.0

21.0

22.0

23.0

24.0

25.0

26.0


Source: Bloomberg

1

1

2

2

3


Vol m

Financial Summary

Sep-12A Sep-13A Sep-14F Sep-15F Sep-16F

Revenue (RMm) 10,570 9,147 10,001 10,870 11,925


Net Profit (RMm) 1,211 918 1,040 1,123 1,280

Core EPS (RM) 1.01 0.83 0.97 1.05 1.20

Core EPS Growth (19.0%) (17.1%) 16.7% 7.9% 14.1%

FD Core P/E (x) 20.92 25.25 21.63 20.05 17.57

DPS (RM) 0.65 0.50 0.73 0.73 0.73

Dividend Yield 3.08% 2.37% 3.45% 3.45% 3.45%

EV/EBITDA (x) 12.33 15.34 13.40 12.33 10.96

P/FCFE (x) 21.5 129.2 17.8 25.7 22.2

Net Gearing 1.60% 7.27% 9.88% 8.30% 5.24%

P/BV (x) 3.17 2.99 2.89 2.76 2.60

ROE 15.2% 12.2% 13.6% 14.1% 15.3%



21.08

22.10

19.98 25.02

Target


Current



Kuala Lumpur Kepong│Malaysia

October 27, 2014

38

Profit & Loss

(RMm) Sep-13A Sep-14F Sep-15F Sep-16F


Gross Profit 2,302 2,523 2,694 2,938



Operating EBIT 1,238 1,409 1,542 1,749






Pre-tax Profit 1,200 1,370 1,507 1,719

Taxation (233) (288) (339) (387)


Profit After Tax 967 1,082 1,168 1,332





Net Profit 918 1,040 1,123 1,280

Recurring Net Profit 891 1,040 1,123 1,280

Fully Diluted Recurring Net Profit 891 1,040 1,123 1,280

Balance Sheet



Total Debtors 1,217 1,133 1,209 1,339

Inventories 1,062 1,371 1,491 1,635



Fixed Assets 3,729 3,917 4,091 4,251





Short-term Debt 777 1,500 1,500 1,500













Total Equity 7,953 8,258 8,648 9,203

Cash Flow


EBITDA 1,525 1,766 1,913 2,135







Tax Paid (298) (288) (339) (387)


Capex (987) (500) (500) (500)




Cash Flow From Investing (914) (500) (500) (500)

Debt Raised/(repaid) (155) 723 0 0



Dividends Paid (716) (777) (777) (777)

Preferred Dividends

Other Financing Cashflow (49) 0 0 0



Free Cashflow To Equity 174 1,263 875 1,013

Free Cashflow To Firm 411 625 960 1,098

Key Ratios

Sep-13A Sep-14F Sep-15F Sep-16F

Revenue Growth (13.5%) 9.3% 8.7% 9.7%




BVPS (RM) 7.06 7.30 7.63 8.10





Inventory Days 60.82 59.37 63.88 63.66


ROIC (%) 23.1% 23.8% 24.1% 26.0%

ROCE (%) 12.2% 13.0% 13.4% 14.6%

Key Drivers

Sep-13A Sep-14F Sep-15F Sep-16F







0.0

5.0

10.0

15.0

20.0

25.0

30.0



Genting Plantations IOI Corporation Kuala Lumpur Kepong


October 27, 2014


Double whammy Unexciting CPO and rubber prices coupled with an increase in minimum wages could be a threat to LSIP’s earnings performance. The drought in 1Q14 in the northern part of Sumatra may also hamper early-2015 production.

We cut our earnings forecasts by 23-29% for FY14-16. However, our target price rises as we roll forward valuations and apply a higher CY16 P/E target of 13.4x (prev. 9.5x), a 10% discount to industry leader AALI’s target multiple. We upgrade from Reduce to Hold due to recent share price corrections.


Production set to recover but offset by weaker CPO price LSIP booked strong production in 1H14 (+24% yoy), still above the company’s higher revised production

growth target for 2014 of 10-15% as the company expects the 1Q14 drought to affect production in 4Q14/1Q15. We believe that increased production should lower LSIP’s cost of production and boost its earnings. However, this has been offset by a weak CPO price in the later part of 2014.

Other business suffered too The rubber business posted a weak selling price in 1H14 (-11% yoy) given surplus in the global market due to higher supply from Thailand. The 1H14 seed sales volume plunged 79% yoy to 2.2m seeds, or only 30% of company’s full-year target. The decline in sales came on the back of delayed expansion in the industry (land compensation and licence issues). We believe these conditions will persist for the rest of the year as we expect CPO prices to moderate.

Fairly valued, lack catalysts Despite LSIP’s debt-free balance sheet, the share price has fallen 25% from its peak following the steep CPO price correction. We think LSIP’s current valuation is justified in the absence of reasons to re-rate the stock significantly given its unexciting near-term earnings prospects.

CIMB Analyst(s)



Share price info


Relative -0.1 -10.6 5.6

Absolute -2.1 -11.1 16


Salim Ivomas Pratama 59.5


London Sumatra

LSIP IJ / LSIP.JK Current Rp1,845


US$1,043m US$3.95m 40.5% Prev. Target Rp1,850


Conviction| |


91.0

101.0

111.0

121.0

131.0

141.0

151.0

161.0

1,300

1,500

1,700

1,900

2,100

2,300

2,500

2,700


Source: Bloomberg

50

100

150


Vol m

Financial Summary


Revenue (Rpb) 4,212 4,134 4,629 5,005 5,359


Net Profit (Rpb) 1,116 769 955 1,031 1,074

Core EPS (Rp) 162.2 97.6 128.7 139.7 146.1

Core EPS Growth (60.8%) (39.9%) 31.9% 8.6% 4.5%

FD Core P/E (x) 11.37 18.91 14.33 13.20 12.63

DPS (Rp) 66.00 66.00 45.50 56.49 60.94

Dividend Yield 3.58% 3.58% 2.47% 3.06% 3.30%

EV/EBITDA (x) 6.96 9.75 7.42 6.33 5.50

P/FCFE (x) 30.2 226.0 32.4 18.8 11.8

Net Gearing (28.6%) (21.2%) (20.4%) (22.3%) (28.2%)

P/BV (x) 2.00 1.90 1.73 1.59 1.47

ROE 18.3% 10.3% 12.7% 12.6% 12.1%



1,845

1,960

1,490 2,450

Target


Current



London Sumatra│Indonesia

October 27, 2014

40

Profit & Loss



Gross Profit 1,253 1,569 1,698 1,778



Operating EBIT 818 1,102 1,198 1,246




Profit Before Tax (pre-EI) 997 1,239 1,337 1,393

Exceptional Items

Pre-tax Profit 997 1,239 1,337 1,393

Taxation (228) (284) (306) (319)


Profit After Tax 769 955 1,031 1,074





Net Profit 769 955 1,031 1,074



Balance Sheet







Fixed Assets 2,777 2,799 2,808 2,615


















Total Equity 6,614 7,259 7,904 8,562

Cash Flow


EBITDA 1,111 1,450 1,654 1,786






Net Interest (Paid)/Received 44 37 39 46

Tax Paid (228) (284) (306) (319)


Capex (1,094) (911) (813) (543)




Cash Flow From Investing (1,350) (911) (813) (543)

Debt Raised/(repaid) (5) 0 0 0



Dividends Paid (450) (310) (385) (416)


Other Financing Cashflow 0 0 0 0



Free Cashflow To Equity 56 388 671 1,067

Free Cashflow To Firm 63 388 671 1,067

Key Ratios


Revenue Growth (1.8%) 12.0% 8.1% 7.1%



Net Cash Per Share (Rp) 205.4 216.8 258.7 354.2

BVPS (Rp) 969 1,064 1,158 1,255

Gross Interest Cover 269.5 N/A N/A N/A




Inventory Days 64.66 46.06 45.68 45.77


ROIC (%) 17.0% 20.3% 20.0% 19.6%

ROCE (%) 12.4% 15.2% 15.2% 14.7%

Key Drivers






CPO Price (US$/tonne) N/A N/A N/A N/A


0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0





Conglomerate│Malaysia

October 27, 2014


Lacking re-rating catalysts The prospect of lower CPO prices removes palm oil earnings as a re-rating catalyst for Oriental. In our view, the stock will continue to trade below the fair value of its assets in the near future due to the unexciting earnings growth outlook.

We cut FY14-16 EPS by 2-13% to incorporate our lower CPO price forecasts. This leads to a lower end-FY15 target price of RM7.38, based on its 5-year historical average P/BV of 0.9x. Although Oriental Holdings (Oriental) appears undervalued, we maintain our Hold call as the stock lacks visible re-rating catalysts.

Lower CPO price forecast We lower our Malaysian CPO price forecasts by 11% to RM2,390 for 2014 and 12% to RM2,460 for 2015 to account for the bumper edible oil supplies and weaker demand for biodiesel usage in Indonesia. This leads to a 2-13% drop in our EPS forecasts for FY14-16. Despite the cut, we still project 14% EPS growth this year, driven by improvement in auto performance.

Underutilised balance sheet At end-Jun 2014, Oriental had net cash of RM2.8bn on its balance sheet. This represented half of its net assets and 60% of its market cap. Low interest rates, weak plantations earnings and assets in other divisions that are idle or unprofitable have resulted in low return on equity (ROE). We project that Oriental will

post ROE of 4.3-4.4% in FY14-16. This is barely above the 3.8% yield of 10-year Malaysian government securities (MGS). The company’s dividend payout ratio of around 20% translates into long-term EPS growth rate of only 3.4-3.5%.

Undervalued but missing re-rating catalysts We expect the stock to continue trading below the fair value of its assets, given its low ROE and unexciting earning growth prospects. We believe that a major corporate exercise or significant acquisition is needed to provide re-rating catalysts in the near term. Our checks revealed that the company is changing the expansion strategy for its Indonesian plantations business from greenfield expansion to brownfield acquisition because brownfield acquisitions face fewer social challenges and regulatory hurdles. We understand that it is evaluating several brownfield plantations acquisitions. A prolonged period of weak CPO prices may provide Oriental with opportunities to scoop up distressed plantations assets. For now, we maintain our Hold call due to the lack of visible re-rating catalysts.

CIMB Analyst(s)



Share price info


Relative -3.5 -2 -17.4

Absolute -4.7 -5.1 -17.4


Boon Siew Sdn Bhd 54.8

Employees Provident Fund Board 9.9

Aberdeen Asset Management 11.0


Oriental Holdings

ORH MK / OTLS.KL Current RM7.39



RM4,584m RM0.28m 620.4 m shares Up/Downside -0.1%

Conviction| |


74.0

80.0

86.0

92.0

98.0

104.0

6.70

7.20

7.70

8.20

8.70

9.20


Source: Bloomberg

1

1

2

2


Vol m

Financial Summary


Revenue (RMm) 2,807 2,754 3,118 3,168 3,249


Net Profit (RMm) 200.6 185.4 210.7 215.9 229.1

Core EPS (RM) 0.32 0.30 0.34 0.35 0.37

Core EPS Growth (25.7%) (7.6%) 13.7% 2.5% 6.1%

FD Core P/E (x) 22.85 24.73 21.76 21.23 20.01

DPS (RM) 0.080 0.070 0.070 0.070 0.070

Dividend Yield 1.08% 0.95% 0.95% 0.95% 0.95%

EV/EBITDA (x) 7.99 10.29 8.21 7.79 6.70

P/FCFE (x) NA 149 1,325 41 33

Net Gearing (40.3%) (41.2%) (38.9%) (38.5%) (38.5%)

P/BV (x) 1.00 0.97 0.93 0.90 0.87

ROE 4.46% 3.97% 4.36% 4.32% 4.42%



7.39

7.38

6.95 8.91

Target


Current



Oriental Holdings│Malaysia

October 27, 2014

42

Profit & Loss



Gross Profit 531 634 650 695








Exceptional Items


Taxation (65) (86) (89) (102)




Preferred Dividends



Net Profit 185 211 216 229



Balance Sheet







Fixed Assets 1,630 1,779 1,857 1,936


















Total Equity 5,493 5,716 5,947 6,206

Cash Flow


EBITDA 255.8 322.2 328.4 366.7







Tax Paid (63.4) (85.6) (89.2) (101.8)


Capex (197.1) (250.0) (180.0) (180.0)

Disposals Of FAs/subsidiaries

Acq. Of Subsidiaries/investments




Proceeds From Issue Of Shares

Shares Repurchased

Dividends Paid (61.5) (43.4) (43.4) (43.4)

Preferred Dividends


Cash Flow From Financing 47.8 (43.4) (43.4) (43.4)

Total Cash Generated 184.4 (40.0) 67.7 94.5



Key Ratios


Revenue Growth (1.9%) 13.2% 1.6% 2.6%




BVPS (RM) 7.65 7.92 8.20 8.50





Inventory Days 41.25 35.82 37.55 37.64


ROIC (%) 5.47% 7.80% 7.53% 8.57%

ROCE (%) 3.63% 4.58% 4.59% 5.03%

Key Drivers


Rev. growth (%, main biz.) 8.2% 23.5% 2.5% 2.5%

EBITDA mgns (%, main biz.) N/A N/A N/A N/A

Rev. as % of total (main biz.) 50.7% 55.3% 55.7% 55.7%

EBITDA as % of total (main biz.) N/A N/A N/A N/A

Rev. growth (%, 2ndary biz.) -15.5% 0.0% 0.0% 0.0%

EBITDA mgns (%, 2ndary biz.) 10.5% 10.5% 10.5% 11.4%

Rev. as % of total (2ndary biz.) N/A N/A N/A N/A

EBITDA as % of total (2ndary biz.) N/A N/A N/A N/A

Rev. growth (%, tertiary biz.) N/A N/A N/A N/A

EBITDA mgns (%, tertiary biz.) N/A N/A N/A N/A

Rev.as % of total (tertiary biz.) N/A N/A N/A N/A

EBITDA as % of total (tertiary biz.) N/A N/A N/A N/A


0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0



DRB-Hicom Oriental Holdings Sime Darby Bhd


October 27, 2014


Cheap plantation assets We expect SIMP’s earnings to be negatively impacted by the lower CPO prices. However, we are sticking to our Add rating on this stock as it is trading at only 0.9x P/BV and the implied market valuation for its planted estates works out to be only US$7k per ha, below market price.

We lower our FY14-16 EPS forecasts by 8-21% to reflect our weaker CPO price assumptions. The earnings cuts plus the downgrade in the group's target P/BV to 1x from 1.3x has led us to reduce our target price for the stock to Rp910. We see potential for the group to improve the FFB yields of its estates and like its sugar assets. These, coupled with its attractive valuations, have led us to retain our Add rating.

CPO price downgrades We lower our average CPO price forecasts by 10% to US$840 per tonne for 2014 and 11% to US$850 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we cut our CPO price forecasts by 5% to US$910 per tonne. This is negative for SIMP, which derives 97% of its earnings from its plantation business.

Recovering FFB yields The group posted a 23% yoy rise in FFB output in 2Q14, suggesting that social issues at its estates have continued to subside. This, together

with improved weather and absence of biological tree stress, have raised yields in its estates in south Sumatera and Kalimantan. Overall, the group's 1H14 FFB production growth of 18% from its nucleus estates was above expectations. We are positive on this as it will help the group rein in the production costs at its estates which have been on the rise.

Better earnings from its cooking oil division We expect the lower CPO price to be positive for its edible oils and fats division as there is a lagged effect of passing on the lower raw material costs to consumers. This will help to partially buffer the impact of lower plantation earnings. The edible oils and fats division make up around 3% of the group's earnings.

Cheap valuations The current market implied EV/ha valuation for its planted estates work out to be only US$7k, which is at or below current replacement costs for estates and the recent market transaction for estates in Indonesia of US$9k-12k per ha.

CIMB Analyst(s)


Share price info


Relative -10.4 -15.8 -16.1

Absolute -12.4 -16.3 -5.7


Indofood Agri Resources 72.0

Indofood Sukses Makmur 6.7


Salim Invomas Pratama

SIMP IJ / SIMP.JK Current Rp745.0

Market Cap Avg Daily Turnover Free Float Target Rp910.0

US$976.3m US$0.48m 20.0% Prev. Target Rp1,180


Conviction| |


76.0

89.3

102.7

116.0

129.3

630

730

830

930

1,030


Source: Bloomberg

20

40

60

80

100


Vol m

Financial Summary


Revenue (Rpb) 13,845 13,280 14,917 15,923 17,817


Net Profit (Rpb) 1,157 524 859 764 1,006

Core EPS (Rp) 78.79 49.31 54.30 48.34 63.63

Core EPS Growth (31.2%) (37.4%) 10.1% (11.0%) 31.6%

FD Core P/E (x) 8.98 15.11 13.72 15.41 11.71

DPS (Rp) 22.00 9.80 8.15 7.25 9.54

Dividend Yield 2.95% 1.32% 1.09% 0.97% 1.28%

EV/EBITDA (x) 5.29 7.10 6.39 8.03 7.41

P/FCFE (x) NA NA NA 135.8 NA

Net Gearing 20.7% 35.8% 46.0% 49.4% 54.0%

P/BV (x) 0.87 0.86 0.82 0.78 0.74

ROE 9.47% 5.72% 6.12% 5.19% 6.50%



745.0

910.0

670.0 1,050

Target


Current



Salim Invomas Pratama│Indonesia

October 27, 2014

44

Profit & Loss



Gross Profit 2,947 3,310 3,533 3,954


Depreciation And Amortisation (1,019) (1,036) (610) (610)

Operating EBIT 1,771 2,441 2,314 2,803


Pretax Income/(Loss) from Assoc. (70) (75) (75) (75)


Profit Before Tax (pre-EI) 934 1,569 1,396 1,838


Pre-tax Profit 934 1,569 1,396 1,838

Taxation (299) (424) (377) (496)


Profit After Tax 635 1,145 1,019 1,342





Net Profit 524 859 764 1,006

Recurring Net Profit 780 859 764 1,006

Fully Diluted Recurring Net Profit 780 859 764 1,006

Balance Sheet


Total Cash And Equivalents 2,113 1,001 973 515

Total Debtors 1,158 1,301 1,388 1,554

Inventories 1,568 1,762 1,881 2,104



Fixed Assets 9,074 11,038 12,428 13,818





Short-term Debt 4,490 5,490 6,490 7,490


Total Creditors 1,142 1,134 1,230 1,317





Total Other Non-Current Liabilities 1,591 1,692 1,803 1,925






Total Equity 16,108 17,124 18,029 19,220

Cash Flow


EBITDA 2,790 3,477 2,924 3,413







Tax Paid (706) (424) (377) (496)


Capex (3,312) (3,936) (2,575) (3,083)





Debt Raised/(repaid) 499 1,101 1,111 1,122



Dividends Paid (155) (129) (115) (151)

Preferred Dividends

Other Financing Cashflow 0 0 0 0

Cash Flow From Financing 344 972 996 971

Total Cash Generated (1,495) (1,112) (28) (458)

Free Cashflow To Equity (1,340) (983) 87 (307)

Free Cashflow To Firm (1,365) (1,181) (76) (433)

Key Ratios


Revenue Growth (4.1%) 12.3% 6.7% 11.9%



Net Cash Per Share (Rp) (365.0) (498.5) (563.5) (655.7)

BVPS (Rp) 864 910 951 1,006





Inventory Days 61.07 52.36 53.66 52.60


ROIC (%) 12.4% 14.9% 12.4% 13.9%

ROCE (%) 7.8% 10.0% 8.8% 9.9%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0



Astra Agro Lestari London Sumatra Salim Invomas Pratama


October 27, 2014


Production volatility Despite SGRO’s production recovery this year, we believe the large contribution from plasma estates will keep its EBITDA margin below its peers and increase production volatility. We also believe SGRO’s share price already reflects the positive surprises from production.

We cut our earnings forecasts by 11-27% for FY14-16. This results in a lower target price of Rp2,050, now based on 11x CY16 P/E, a 25% discount to industry leader AALI’s target multiple. However, we upgrade our rating to Hold from Reduce due to the recent share price corrections.


High plasma contribution SGRO posted strong CPO production growth in 1H14 of 43% yoy after a sharp decline last year. The company targets 20% growth for this year.

Despite its declining plasma portion from year to year, SGRO still has the highest plasma portion among its peers, which has resulted in a relatively lower margin. This is exacerbated by increasing labour costs while production volatility may lead to downside risk for earnings.

Seed business suffered too The 1H14 seed sales volume plunged 30% yoy to 3.9m seeds. As such, seed revenues dropped 21% yoy. The decline in sales came on the back of delayed expansion in the industry (land compensation and licence issues). We believe these conditions will persist for the rest of the year as we expect CPO prices to moderate.

Fully valued, lack catalysts SGRO exhibits the lowest daily trading value among all Indonesia- listed planters under our coverage. The stock has fallen 21% from its peak following the steep CPO price correction. We believe SGRO’s low daily trading value may not provide sufficient liquidity to re-rate its trading multiple further. SGRO trades at US$5,560/ha, slightly higher than the replacement cost of US$5.5k/ha, which may be its support level.

CIMB Analyst(s)



Share price info


Relative -5.9 -7.6 -3.2

Absolute -7.9 -8.1 7.2


Venture Max Resources 71.8

PT Nitiagro Lestari 3.8

Public 24.4


Sampoerna Agro

SGRO IJ / SGRO.JK Current Rp1,930


US$302.2m US$0.11m 24.4% Prev. Target Rp2,150


Conviction| |


86.0

97.1

108.2

119.3

130.4

1,600

1,800

2,000

2,200

2,400


Source: Bloomberg

2

4

6

8


Vol m

Financial Summary


Revenue (Rpb) 2,986 2,561 3,148 3,369 3,777

Operating EBITDA (Rpb) 658.0 404.8 691.7 725.1 815.4

Net Profit (Rpb) 329.2 119.1 334.2 335.8 380.2

Core EPS (Rp) 168.6 50.0 163.8 164.6 188.2

Core EPS Growth (38%) (70%) 228% 1% 14%

FD Core P/E (x) 11.44 38.59 11.78 11.72 10.26

DPS (Rp) 61.11 31.50 11.40 31.98 32.13

Dividend Yield 3.17% 1.63% 0.59% 1.66% 1.66%

EV/EBITDA (x) 6.68 11.89 7.33 7.12 6.48

P/FCFE (x) 34.90 29.24 35.32 NA 29.16

Net Gearing 26.8% 42.0% 46.3% 45.5% 44.9%

P/BV (x) 1.39 1.37 1.23 1.13 1.04

ROE 12.5% 3.6% 11.0% 10.1% 10.6%



1,930

2,050

1,760 2,445

Target


Current



Sampoerna Agro│Indonesia

October 27, 2014

46

Profit & Loss



Gross Profit 498 870 907 1,012










Taxation (53) (149) (150) (170)







Net Profit 119 334 336 380



Balance Sheet






Total Current Assets 728 963 905 1,035

Fixed Assets 3,004 3,433 3,757 4,129


















Total Equity 2,699 3,004 3,255 3,550

Cash Flow


EBITDA 404.8 691.7 725.1 815.4

Cash Flow from Invt. & Assoc. 0.0 0.0 0.0 0.0

Change In Working Capital (11.8) (131.8) (17.8) (38.1)

(Incr)/Decr in Total Provisions 0.0 0.0 0.0 0.0

Other Non-Cash (Income)/Expense 0.0 0.0 0.0 0.0



Tax Paid (53.4) (149.0) (149.8) (169.6)


Capex (443.0) (675.5) (596.2) (671.1)

Disposals Of FAs/subsidiaries 0.0 0.0 0.0




Debt Raised/(repaid) 355.9 330.9 (12.2) 151.8


Shares Repurchased 0.0 0.0 0.0 0.0

Dividends Paid (85.1) (30.8) (86.3) (86.7)

Preferred Dividends 0.0 0.0 0.0 0.0

Other Financing Cashflow (105.3) (83.9) (104.5) (117.7)

Cash Flow From Financing 165.5 216.2 (203.1) (52.6)

Total Cash Generated (65.7) (11.4) (204.0) (79.3)

Free Cashflow To Equity 124.7 103.3 (13.2) 125.1

Free Cashflow To Firm (119.5) (143.7) 103.6 91.0

Key Ratios


Revenue Growth (14.2%) 23.0% 7.0% 12.1%



Net Cash Per Share (Rp) (600.3) (735.6) (783.3) (844.1)

BVPS (Rp) 1,410 1,571 1,703 1,858





Inventory Days 56.30 45.81 46.31 45.58


ROIC (%) 4.0% 9.4% 8.6% 9.1%

ROCE (%) 5.3% 12.4% 11.7% 12.4%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0





Conglomerate│Malaysia

October 27, 2014


Cheapest Malaysian CPO exposure among the big-caps Sime Darby offers the cheapest exposure, based on P/E, among the large-cap Malaysian planters. However, the stock lacks near-term catalysts due to unexciting earnings prospects. We are neutral on its recent conditional offer to acquire NBPOL.

Factoring our CPO price revisions, we cut our FY15-17 EPS forecasts by 4-16%. This, coupled with the rollover of our SOP-based valuation to end-2015, leads to a 3% decline in our target price. The stock remains a Hold as it is trading close to our target price, while the share price is supported by dividend yields of 3%.

CPO price revisions We scale back our average CPO price forecasts for Malaysia by 10-11% to RM2,390 per tonne for 2014 and RM2,460 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to RM2,650 per tonne. This is negative for Sime Darby as the group derives 45% of its earnings from its plantations division, and every RM100 per tonne change in CPO price would lower its pretax profit forecasts by around RM220m.

Conditional offer for NBPOL Sime Darby recently made a conditional cash offer for New Britain

Palm Oil Ltd (NBPOL) at £7.15 a share. At this price tag, we estimate Sime Darby is valuing the planted oil palm estates at US$25.9k (or RM84.2k). The acquisition will allow the group to expand its planted area by 15% and expand its access to the UK consumer markets. We are overall neutral on this deal as the premium valuation for the assets is offset by the group's plans to derive synergies following the acquisition, explore a future listing of the assets in Malaysia or Singapore, and explore new growth opportunities in PNG. We estimate the acquisition could add around 2% to Sime's FY6/15 earnings, and raises its gearing ratio from 21% to 39% (assuming it buys a 100% stake).

Weaker earnings in FY15 We project that the group will post weaker earnings in FY15 due to a higher effective tax rate. The group's plantation earnings will be impacted by lower CPO selling prices, while its industrial division in Australia will be affected by weak coal prices and the squeeze in profit margins experienced by equipment suppliers.

CIMB Analyst(s)


Share price info


Relative 4.9 1.3 -0.6

Absolute 3.7 -1.8 -0.6


Permodalan Nasional Berhad 52.8



Sime Darby Bhd

SIME MK / SIME.KL Current RM9.48




Conviction| |


91.0

93.3

95.7

98.0

100.3

102.7

105.0

8.70

8.90

9.10

9.30

9.50

9.70

9.90


Source: Bloomberg

10

20

30


Vol m

Financial Summary


Revenue (RMm) 47,186 44,568 48,012 50,853 53,638


Net Profit (RMm) 3,701 3,364 2,987 3,309 3,683

Core EPS (RM) 0.56 0.53 0.50 0.55 0.61

Core EPS Growth (18.4%) (4.5%) (7.2%) 10.8% 11.3%

FD Core P/E (x) 16.98 17.71 19.07 17.21 15.47

DPS (RM) 0.34 0.28 0.25 0.28 0.31

Dividend Yield 3.59% 2.95% 2.62% 2.90% 3.23%

EV/EBITDA (x) 10.57 11.62 10.44 9.51 8.62

P/FCFE (x) 35.1 29.1 203.4 73.6 37.3

Net Gearing 19.4% 21.3% 22.6% 24.0% 23.9%

P/BV (x) 2.10 1.99 1.86 1.76 1.67

ROE 12.6% 11.6% 10.1% 10.5% 11.1%



9.48

9.58

8.82 9.75

Target


Current



Sime Darby Bhd│Malaysia

October 27, 2014

48

Profit & Loss



Gross Profit 5,404 6,125 6,824 7,584


Depreciation And Amortisation (1,198) (1,737) (1,949) (2,160)

Operating EBIT 4,206 4,388 4,875 5,424






Pre-tax Profit 4,228 4,193 4,645 5,169

Taxation (708) (1,048) (1,161) (1,292)


Profit After Tax 3,521 3,144 3,483 3,877





Net Profit 3,364 2,987 3,309 3,683



Balance Sheet



Total Debtors 6,559 6,888 7,296 7,695

Inventories 9,470 9,432 9,990 10,537

Total Other Current Assets 3,681 3,675 3,778 3,880


Fixed Assets 14,061 21,427 23,478 25,318





Short-term Debt 3,045 5,873 5,873 5,873


Total Creditors 268 9,707 10,282 10,845

Other Current Liabilities 8,708 1,000 1,000 1,000




Total Other Non-Current Liabilities 1,004 445 445 445





Minority Interests 849 1,342 1,516 1,710

Total Equity 29,437 31,970 33,799 35,834

Cash Flow


EBITDA 5,404 6,125 6,824 7,584


Change In Working Capital (2,082) (469) (519) (509)





Tax Paid (722) (1,048) (1,161) (1,292)


Capex (1,574) (4,000) (4,000) (4,000)





Debt Raised/(repaid) 842 0 0 0


Shares Repurchased

Dividends Paid (1,565) (1,494) (1,655) (1,842)

Preferred Dividends

Other Financing Cashflow (34) (1,142) 28 (148)

Cash Flow From Financing (758) (2,635) (1,627) (1,990)

Total Cash Generated 360 (2,355) (853) (461)

Free Cashflow To Equity 1,959 280 774 1,528

Free Cashflow To Firm 1,537 721 1,215 1,969

Key Ratios


Revenue Growth (5.55%) 7.73% 5.92% 5.48%




BVPS (RM) 4.76 5.10 5.37 5.68





Inventory Days 84.74 82.35 80.72 81.34


ROIC (%) 13.5% 13.2% 13.2% 13.8%

ROCE (%) 11.0% 10.8% 11.4% 12.1%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0



Felda Global Ventures Genting Plantations Sime Darby Bhd


October 27, 2014


Less lucrative harvest We downgrade Ta Ann from Add to Hold as its earnings outlook has turned less exciting with the revision in our CPO price assumptions. Higher FFB production growth may not be sufficient to offset the earnings impact of an expected decline in log production in FY15.

We cut our FY14-16 EPS forecasts by 17-41% to reflect our new CPO price forecasts. This lowers our SOP-based target price to RM4.05. We would turn more positive on Ta Ann if its FFB production growth exceeds our expectations.

Revising EPS forecast We are lowering our Malaysian CPO price forecast by 11% to RM2,390 for 2014 and 12% to RM2,460 for 2015 to account for bumper edible oil supplies and weaker demand for biodiesel usage in Indonesia. This is negative for Ta Ann as it derived 85% of its core earnings from its plantation division in 2013. Despite the cut in CPO price forecast, we still project a higher core net profit of RM90.3 (+115%) in FY14, driven largely by better timber earnings and higher FFB production. Timber is set to become a bigger earnings contributor than plantations for the first time this year since 2009 due to weak CPO prices and higher log production.

Outlook for 2015 The group’s earnings could drop in FY15 as a result of less favourable weather. Ta Ann’s log production in this year was unexpectedly strong as a

result of good weather at its concession area. Its log production in 9M14 was already 95% of 2013’s full year volume. We assume that the weather in Ta Ann’s concession area would normalise in 2015, which should lead to lower production.

Key earnings risks Lower-than-expected FFB yield and CPO prices are the key risks to Ta Ann’s plantations earnings. Every 1% drop in FFB yield will lower our FY14-15 EPS by 2%, while a RM100 per tonne fall in CPO prices will cut earnings by 9-11%. Its timber performance is also dependent on log production, exchange rates, and timber prices. Log production hinges on weather conditions, while others are driven mainly by the economic conditions in Malaysia, India, and Japan. We expect neither a significant improvement nor a severe downturn in these economies from their current conditions.

Supported by low EV/ha While the group’s earnings may be unexciting in the near-term, its relatively cheap EV/ha of RM46,000 should lend support to its share price.

CIMB Analyst(s)



Share price info


Relative -1.1 -6 6

Absolute -2.3 -9.1 6


Mountex Sdn Bhd 20.6

Employees Provident Fund Board 9.1


Ta Ann

TAH MK / TAAN.KL Current RM3.89




Conviction| |


97.0

102.0

107.0

112.0

117.0

122.0

127.0

3.50

3.70

3.90

4.10

4.30

4.50

4.70


Source: Bloomberg

1

2

3


Vol m

Financial Summary


Revenue (RMm) 790 770 1,026 900 1,046


Net Profit (RMm) 57.5 92.5 90.3 79.4 117.2

Core EPS (RM) 0.16 0.11 0.24 0.21 0.32

Core EPS Growth (63%) (27%) 115% (12%) 48%

FD Core P/E (x) 25.08 34.33 15.97 18.16 12.30

DPS (RM) 0.05 0.05 0.14 0.06 0.09

Dividend Yield 1.29% 1.29% 3.63% 1.65% 2.44%

EV/EBITDA (x) 11.32 12.66 7.59 7.58 5.26

P/FCFE (x) 309.2 7.9 18.7 13.9 10.4

Net Gearing 34.6% 24.8% 17.8% 12.8% 2.5%

P/BV (x) 1.50 1.43 1.33 1.30 1.20

ROE 6.0% 4.3% 8.6% 7.3% 10.2%



3.89

4.05

3.65 4.49

Target


Current



Ta Ann│Malaysia

October 27, 2014

50

Profit & Loss


Total Net Revenues 784 1,052 912 1,059

Gross Profit 190 393 251 331










Taxation (20) (34) (32) (49)




Preferred Dividends



Net Profit 93 90 79 117



Balance Sheet







Fixed Assets 887 858 826 793


















Total Equity 1,039 1,116 1,151 1,269

Cash Flow


EBITDA 136.6 221.0 215.5 293.2


Change In Working Capital 82.4 (19.7) 9.1 (11.8)





Tax Paid (18.0) (34.2) (31.6) (49.4)


Capex (127.2) (71.4) (71.4) (71.4)


Acq. Of Subsidiaries/investments (0.3) 0.0 0.0 0.0




Proceeds From Issue Of Shares

Shares Repurchased

Dividends Paid (37.5) (18.5) (52.4) (23.8)

Preferred Dividends

Other Financing Cashflow (15.1) 0.0 0.0 0.0


Total Cash Generated 130.7 58.6 51.4 115.3



Key Ratios


Revenue Growth (2.5%) 33.2% (12.3%) 16.3%




BVPS (RM) 2.72 2.92 2.99 3.24





Inventory Days 97.4 71.2 74.9 71.8


ROIC (%) 4.4% 10.5% 9.6% 15.0%

ROCE (%) 4.3% 9.0% 8.1% 11.8%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0



Hap Seng Plantations Jaya Tiasa Holdings Ta Ann


October 27, 2014


Rising to the occasion Wilmar's oilseeds and grains profitability in China has been severely impacted by overcapacity issues and the entry of financial traders into the market over the past few years. However, the situation appears to be improving, which will be positive in the medium term.

However, these improvements will be tempered by lower refining margins due to rising refining capacities in Indonesia. We prune our FY14-15 EPS forecasts by 1 -7% to reflect our lower CPO price forecasts. This, coupled with the rollover of our SOP-based valuation to end-2015, leads to a 3% decline in our target price. The stock remains a Hold as we see good support at 1.05x P/BV CY14, though this is offset by the group's unexciting near-term earnings prospects.

CPO price downgrades We scale back our average CPO price forecasts for Malaysia by 10-11% to US$840 per tonne for 2014 and US$850 per tonne for 2015 to reflect larger-than-expected global edible oil supplies, slower edible oils demand growth, and weaker crude oil prices. For 2016, we have lowered our CPO price forecasts by 5% to US$910 per tonne.

Impact of lower CPO price This is negative for Wilmar's plantation and palm oil mills division, which contributed 15% of its pretax profit, as every US$10 per tonne change in CPO price would

lower its pretax profit forecasts by US$8.3m. However, the lower CPO feedstock costs are positive for its downstream business, as the group will benefit from higher sales volumes and lower working capital. This is captured under the group's palm and laurics division, which make up 47% of the group's PBT. Every US$1 per tonne rise in PBT margin for the palm and laurics division will boost its PBT by US$25m

Better crush margins? We gather that the operating environment for the its soybeans crushing business in China has improved due to (1) lower global soybean prices, (2) less excessive imports of soybean as financial traders are finding it more difficult to obtain letters of credit as banks turn cautious following the Qingdao port investigation, and (3) seasonally-higher demand for animal feeds in 2H due to more festive events. The oilseeds and grain division accounted for 13% of the group's FY13 PBT. We estimate every US$1 per tonne rise in crush margin will boost the group's PBT by US$21m.

CIMB Analyst(s)


Share price info


Relative 2.4 -1.5 -9.4

Absolute 0.3 -5.4 -9.3


PPB Group 18.3

Archer Daniels Midland 16.4

Kuok Khoon Hong 11.9


Wilmar International

WIL SP / WLIL.SI Current S$3.13




Conviction| |


84.0

90.3

96.5

102.8

109.0

2.90

3.10

3.30

3.50

3.70


Source: Bloomberg

10

20

30

40


Vol m

Financial Summary


Revenue (US$m) 45,463 44,085 50,594 55,399 59,462

Operating EBITDA (US$m) 2,253 2,285 2,142 2,430 2,647

Net Profit (US$m) 1,255 1,319 1,090 1,222 1,339

Core EPS (US$) 0.18 0.20 0.17 0.19 0.21

Core EPS Growth (23.1%) 11.7% (16.3%) 12.1% 9.5%

FD Core P/E (x) 13.62 12.35 14.76 13.16 12.01

DPS (US$) 0.050 0.063 0.034 0.038 0.042

Dividend Yield 2.04% 2.57% 1.39% 1.56% 1.70%

EV/EBITDA (x) 12.55 12.59 13.46 12.08 11.25

P/FCFE (x) 23.5 16.3 163.6 NA NA

Net Gearing 88.0% 89.4% 85.2% 83.2% 80.7%

P/BV (x) 1.09 1.05 0.99 0.93 0.88

ROE 8.42% 8.88% 7.06% 7.47% 7.70%



3.11

3.38

3.00 3.62

Target


Current



Wilmar International│Singapore

October 27, 2014

52

Profit & Loss



Gross Profit 3,725 4,380 4,796 5,148



Operating EBIT 1,676 1,555 1,810 1,986






Pre-tax Profit 1,775 1,518 1,773 1,929

Taxation (385) (372) (488) (521)


Profit After Tax 1,391 1,146 1,285 1,408





Net Profit 1,319 1,090 1,222 1,339



Balance Sheet



Total Debtors 7,066 7,170 7,718 8,401

Inventories 7,221 8,287 9,074 9,740

Total Other Current Assets 1,562 1,562 1,562 1,562


Fixed Assets 9,337 9,750 10,130 10,469





Short-term Debt 19,392 19,392 19,392 19,392


Total Creditors 2,705 3,331 3,558 3,736

Other Current Liabilities 1,095 1,095 1,095 1,095









Minority Interests 882 938 1,002 1,071

Total Equity 15,887 16,815 17,856 18,997

Cash Flow


EBITDA 2,285 2,142 2,430 2,647


Change In Working Capital (288) (545) (1,108) (1,170)





Tax Paid (460) (372) (488) (521)

Cashflow From Operations 1,590 1,098 702 800

Capex (1,376) (1,000) (1,000) (1,000)

Disposals Of FAs/subsidiaries 174 0 (0) 0

Acq. Of Subsidiaries/investments (310) 0 (0) 0



Debt Raised/(repaid) 859 0 0 0



Dividends Paid (312) (218) (244) (268)

Preferred Dividends 0 0 0

Other Financing Cashflow 2,248 0 0 0

Cash Flow From Financing 2,816 (218) (244) (268)

Total Cash Generated 2,946 (120) (542) (468)

Free Cashflow To Equity 990 98 (298) (200)

Free Cashflow To Firm 649 753 357 455

Key Ratios


Revenue Growth (3.0%) 14.8% 9.5% 7.3%

Operating EBITDA Growth 1.4% (6.2%) 13.4% 8.9%



BVPS (US$) 2.34 2.48 2.63 2.80





Inventory Days 42.32 61.24 62.61 63.39


ROIC (%) 6.05% 5.40% 6.08% 6.36%

ROCE (%) 5.44% 4.83% 5.28% 5.49%

Key Drivers








0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0



Golden Agri-Resources Indofood Agri Resources Wilmar International


October 27, 2014

53

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The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.

Reports relating to a specific geographical area are produced by the corresponding CIMB entity as listed in the table below. The term “CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, CIMB Group Holdings Berhad ("CIMBGH") and its affiliates, subsidiaries and related companies.

Country CIMB Entity Regulated by

Australia CIMB Securities (Australia) Limited Australian Securities & Investments Commission Hong Kong CIMB Securities Limited Securities and Futures Commission Hong Kong

Indonesia PT CIMB Securities Indonesia Financial Services Authority of Indonesia India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI) Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia Singapore CIMB Research Pte. Ltd. Monetary Authority of Singapore South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service Taiwan CIMB Securities Limited, Taiwan Branch Financial Supervisory Commission Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand

(i) As of October 26, 2014, CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:

(a) Felda Global Ventures, First Resources Ltd, Golden Agri-Resources, Indofood Agri Resources, IOI Corporation, Kuala Lumpur Kepong, Sime Darby Bhd, Wilmar International

(ii) As of October 27, 2014, the analyst(s) who prepared this report, has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:


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(a) Hap Seng Plantations, Wilmar International

The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. CIMB is under no obligation to update this report in the event of a material change to the information contained in this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof.

Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.

Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Australia) Limited (“CSAL”) (ABN 84 002 768 701, AFS Licence number 240 530). CSAL is a Market Participant of ASX Ltd, a Clearing Participant of ASX Clear Pty Ltd, a Settlement Participant of ASX Settlement Pty Ltd, and, a participant of Chi X Australia Pty Ltd. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient.

France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument.

Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong).

India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (“CIMB India”) which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser.

The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.

Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations.

Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update


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its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.

New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.

Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR.

As of October 26, 2014, CIMBR does not have a proprietary position in the recommended securities in this report.

South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch ("CIMB Korea") which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea.

The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument.

This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China.

Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS.

CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.

AAV, ADVANC, AMATA, ANAN, AOT, AP, ASP, BANPU, BAY, BBL, BCH, BCP, BEC, BECL, BGH, BH, BIGC, BJC, BJCHI, BLA, BLAND, BMCL, BTS, CENTEL, CK, CPALL, CPF, CPN, DCC, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, ESSO, GFPT, GLOBAL, GLOW, GUNKUL, HEMRAJ, HMPRO, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LOXLEY, LPN, M, MAJOR, MC, MCOT, MEGA, MINT, NOK, NYT, PS, PSL, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, RS, SAMART, SCB, SCC, SCCC, SIRI, SPALI, SPCG, SRICHA, STA, STEC, STPI, SVI, TASCO, TCAP, TFD, THAI, THCOM, THRE, THREL, TICON, TISCO, TMB, TOP, TPIPL, TTA, TTCL, TTW, TUF, UMI, UV, VGI, TRUE, WHA.

Corporate Governance Report:

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 result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.


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Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawful ly be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.

Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Rating Distribution (%) Investment Banking clients (%)

Add 54.9% 5.0%

Hold 29.5% 2.3%

Reduce 15.6% 1.0%

Distribution of stock ratings and investment banking clients for quarter ended on 30 September 2014

1552 companies under coverage for quarter ended on 30 September 2014

CustomSpitzerKR_KRSpitzer

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2013. AAV - Good, ADVANC - Excellent, AMATA - Very Good, ANAN – Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH – Good, BCP - Excellent, BEAUTY – Good, BEC - Very Good, BECL - Excellent, BGH - not available, BH - Very Good, BIGC - Very Good, BJC – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Very Good, CENTEL – Very Good, CHG – not available, CK - Excellent, CPALL - Very Good, CPF - Excellent, CPN - Excellent, DELTA - Very Good, DTAC - Excellent, EA - Good, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Very Good, GRAMMY - Excellent, HANA - Excellent, HEMRAJ - Excellent, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Very Good, IVL - Excellent, JAS – Very Good, KAMART – not available, KBANK - Excellent, KCE - Very Good, KKP – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, M - not available, MAJOR - Very Good, MAKRO – Very Good, MC - not available, MCOT - Excellent, MEGA – not available, MINT - Excellent, OFM – Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS - Excellent, SAMART - Excellent, SAPPE - not available, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIM - Excellent, SIRI - Very Good, SPALI - Excellent, STA - Good, STEC - Very Good, SVI – Excellent, TASCO – Very Good, TCAP - Excellent, THAI - Excellent, THCOM – Excellent, TICON – Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Excellent, TTW - Excellent, TUF - Very Good, VGI – Excellent, WORK – Good.


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CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected negative total returns of 10% or more over the next 3 months.

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