Tanah Makmur Berhad

Transcription

Tanah Makmur Berhad

Plantations│Malaysia
July 7, 2014
A
Tanah Makmur Berhad
Prosperous land
THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF
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July 7, 2014
THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY
PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY
OR OTHER JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE
CONTRARY TO LAW OR REGULATION.
CIMB INVESTMENT BANK BERHAD IS THE PRINCIPAL ADVISER, SOLE PLACEMENT AGENT, MANAGING
UNDERWRITER AND A JOINT UNDERWRITER IN THE INITIAL PUBLIC OFFERING (“IPO”) OF THE SHARES
OF TANAH MAKMUR BERHAD (“COMPANY”). HOWEVER, THIS DOCUMENT IS FOR INFORMATION ONLY
AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR RECOMMENDATION TO SUBSCRIBE FOR OR
PURCHASE, OR SOLICITATION OF AN OFFER OR INVITATION TO SUBSCRIBE FOR OR PURCHASE ANY
SECURITIES, AND NEITHER THIS DOCUMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE
BASIS OF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER.
ANY DECISION TO SUBSCRIBE FOR OR PURCHASE SECURITIES TO BE OFFERED IN THE IPO SHOULD BE
MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS ISSUED BY THE
COMPANY IN CONNECTION WITH THE IPO AND NO RELIANCE SHOULD BE PLACED ON ANY
REPRESENTATION OR INFORMATION WHICH IS NOT CONTAINED IN THE SAID PROSPECTUS. THE
INFORMATION CONTAINED HEREIN IS DERIVED FROM PUBLICLY AVAILABLE SOURCES, AND ANY
FORWARD-LOOKING STATEMENT, OPINION AND PROJECTION CONTAINED IN THIS DOCUMENT ARE
ENTIRELY THOSE OF THE AUTHORS. ANY OPINION, ESTIMATE OR PROJECTION HEREIN CONSTITUTES A
JUDGMENT AS OF THE DATE OF THIS REPORT, AND THERE CAN BE NO ASSURANCE THAT FUTURE
RESULTS OR EVENTS WILL BE CONSISTENT WITH ANY SUCH OPINION, ESTIMATE OR PROJECTION. THE
INFORMATION IN THIS DOCUMENT IS SUBJECT TO CHANGE WITHOUT NOTICE, ITS ACCURACY IS NOT
GUARANTEED, IT MAY BE INCOMPLETE OR CONDENSED AND IT MAY NOT CONTAIN ALL MATERIAL
INFORMATION CONCERNING THE COMPANY OR ITS SUBSIDIARIES.
CIMB INVESTMENT BANK BERHAD HAS NOT INDEPENDENTLY VERIFIED ALL THE INFORMATION GIVEN
IN THIS DOCUMENT. ACCORDINGLY, NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS
MADE AS TO THE ACCURACY, COMPLETENESS OR FAIRNESS OF THE INFORMATION, OPINIONS
ESTIMATES, FORECASTS AND PROJECTIONS CONTAINED IN THIS DOCUMENT.
NEITHER CIMB INVESTMENT BANK BERHAD, THE COMPANY, THEIR RESPECTIVE DIRECTORS, OFFICERS,
AFFILIATES NOR ANY OTHER PERSON ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER
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July 7, 2014
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July 7, 2014
TABLE OF CONTENTS
1.
1.1
1.2
1.3
1.4
1.5
BACKGROUND .................................................................................................................................................. 6
Most assets formerly listed under Kurnia Setia ................................................................................................ 6
What has changed since the company was taken private ................................................................................. 6
A palm oil and property player in Pahang ..........................................................................................................7
The Crown Prince of Pahang is the largest shareholder ................................................................................... 8
Shareholding structure post IPO ....................................................................................................................... 8
2.
2.1
2.2
2.3
2.4
2.5
BUSINESS OPERATIONS ................................................................................................................................10
Pahang oil palm player with 13,530ha of planted area ....................................................................................10
Its mill processes 34% of its FFB output .......................................................................................................... 11
Major palm oil customers and sales strategy ................................................................................................... 12
Property development activities ....................................................................................................................... 13
Bauxite mining activities................................................................................................................................... 14
3.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
OUTLOOK ......................................................................................................................................................... 15
Beneficiary of strong demand for CPO ............................................................................................................. 15
Positive on CPO price due to tighter supplies, El Nino.................................................................................... 15
New planting and new mature areas to drive future growth ........................................................................... 16
Oil yields achievement above Pahang state's average...................................................................................... 17
Leveraging on its strong relationship with LKPP ............................................................................................ 18
Plans to raise its palm oil landbank to 25,000 ha by 2017/18 ........................................................................ 18
Plans to launch RM245m worth of properties in 2014 .................................................................................... 19
Relocation of state administrative complex to KotaSAS could boost its GDV by 67% to RM3bn ................. 19
Earnings boost from mining business for FY14-16 .......................................................................................... 19
4.
SWOT ANALYSIS ............................................................................................................................................. 20
5.
5.1
5.2
5.3
5.4
5.5
5.6
RISKS ................................................................................................................................................................. 21
CPO prices ......................................................................................................................................................... 21
Unfavourable weather conditions..................................................................................................................... 21
Dependence on foreign workers ....................................................................................................................... 21
High palm oil taxes in Malaysia ........................................................................................................................ 21
Forex fluctuations............................................................................................................................................. 22
Measures to curb property speculation ........................................................................................................... 22
6.
6.1
6.2
6.3
FINANCIALS .................................................................................................................................................... 23
Plantation and property are the key revenue contributors............................................................................. 23
FY12 earnings hit by lower selling price and higher costs .............................................................................. 23
Lower CPO prices hurt FY13 earnings............................................................................................................. 23
7.
7.1
7.2
7.3
7.4
FORECASTS ..................................................................................................................................................... 24
Sales driven by higher CPO prices and property sales .................................................................................... 24
Strong core net profit growth in FY14 and FY15 ............................................................................................. 24
Capex plan ........................................................................................................................................................ 24
Low net gearing level as at end-Dec 2013 ....................................................................................................... 25
8.
8.1
8.2
8.3
VALUATION AND RECOMMENDATION ..................................................................................................... 30
SOP valuation ................................................................................................................................................... 30
Offers 50% upside to our target price of RM1.88 ........................................................................................... 30
We expect a dividend payout of 50% ............................................................................................................... 30
9.
9.1
9.2
APPENDICES ................................................................................................................................................... 32
Board of Directors and key management ........................................................................................................ 32
Photos from our visit to Tanah Makmur’s estates, property project and mining site ................................... 36
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July 7, 2014
IPO NOTE
TANAH MAKMUR BERHAD
TMK MK
IPO price
RM1.25
Conviction|
Target
————————————————————————————————————————
T (60) 3 2261 9073
E [email protected]
Show Style "View Doc Map"
A planter with royal links
Tanah Makmur is a Pahang-based
palm oil player, with 13,530 ha of
planted oil palm estates and a palm
oil mill in Malaysia. It is also involved
in property development in Kuantan,
mainly through its KotaSAS project,
to unlock the value of its landbank. It
also recently commenced mining and
extraction of bauxite, after it
discovered 1.4m bauxite reserves
while clearing land for its property
project. The Crown Prince of Pahang
and his family are the largest
shareholders, while one of Pahang’s
state agriculture arms, LKPP, is the
second-largest
shareholder.
The
plantation assets have a long history
and were previously listed under
Kurnia Setia Berhad.
IPO SUMMARY
Issue price
CIMB's target price
Par value
Mkt. cap. (based on issue price)
Free float
Trading commencement date
Target
Tanah Makmur, the soon-to-be listed plantation vehicle of the Pahang royal
family, offers strong earnings growth prospects, driven by rising CPO prices,
stronger property sales and a new earnings stream from its bauxite mining
business. Property earnings could get a boost if it secures the contract to build
the state administration complex in its KotaSAS property project.
The contract could potentially boost
the GDV of its property project by
67% to RM3bn. We view the
company’s strong shareholders and
the strategic location of some of its
estates as its key strong points. The
key disadvantages are the lack of scale
and the older age profile of its estates,
but it has plans to improve on these
areas. We arrive at a SOP-based
target price of RM1.88, which implies
an upside of 50% from its IPO price.
Ivy NG Lee Fang CFA
Institutional offering (m)
Retail offering (m)
RM1.88
|
Prosperous land
CIMB Analyst(s)
Issue size (m)
Enlarged no of shares (m)
Offer for sale (m)
Public issue (m)
Target price
"Three arrows" for growth
Plantation earnings are set to benefit
from better CPO prices. On top of this,
the group plans to rejuvenate the
average age profile of its estates
(15-16 years) through replanting and
new planting programmes. There is
scope for growth as it has 3,527 ha of
landbank reserves. The group is also
expanding its milling capacity by 50%
and is open to future M&As, targeting
to raise its landbank by 39% to
25,000 ha by 2017/18. Property
earnings are set to rise as it is
stepping up the launches of
higher-end property products. The
property earnings could get a boost if
it is able to secure the project to build
the state administrative complex in its
township. On top of these, TMB is set
to enjoy a new stream of earnings in
FY14-16 from bauxite mining.
Potential upside of 50%
We used the SOP valuation and
arrived at a target price of RM1.88,
which implies an upside of 50% to its
IPO price. At our target price, the
implied FY14 and FY15 P/Es are 11x
and 9x, respectively. The implied
dividend yield at our target price is
4.5-5.5%, which is higher than the
average of its Malaysian peers.
Financial summary
101.6m new shares
398.2m shares
49.5m shares
52.1m shares
75.2m shares
26.4m shares
RM1.25
RM1.88
RM0.50
RM498m
25%
17 July 2014
FYE Dec (RM m)
2014F
2015F
2016F
207.7
2012
243.5
337.3
388.6
386.3
Operating profit (RM m)
87.4
66.3
109.2
132.4
127.1
Operating profit margin
42.1%
27.2%
32.4%
34.1%
32.9%
Core Net Profit (RM m)
58.8
42.9
67.1
81.9
81.3
Core EPS (sen)
14.8
10.8
16.8
20.6
20.4
Core Net Profit Growth
-26%
-27%
56%
22%
-1%
0%
2%
-13%
-15%
-16%
19.2%
13.3%
16.0%
17.8%
16.2%
8.5
11.6
7.4
6.1
6.1
DPS (sen)
na
na
8.4
10.3
10.2
Div yield
na
na
6.7%
8.2%
8.2%
Revenue (RM m)
Net Gearing
Recurring ROE
P/E (x)
2013
SOURCE: CIMB, COMPANY REPORTS
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July 7, 2014
Prosperous land
1. BACKGROUND
Due to the anticipated
continued growth in the oil-palm
based industry, we have put in place
plans to expand our group's
landbank and milling capacity as
well as to improve our crude palm
oil and palm kernel yields over the
next five years.”
– Tengku Datuk Zubir Tengku Datuk
Ubaidillah, TMB’s MD
1.1 Most assets formerly listed under Kurnia Setia
Tanah Makmur Berhad (TMB) was incorporated on 18 Dec 2008 under the
name of Kreatif Selaras Sdn Bhd. It subsequently changed its name to Tanah
Makmur Berhad on 29 Nov 2013.
A large majority of its current plantation businesses were previously held by
Kurnia Setia Berhad (KSB). KSB was previously listed by Lembaga Kemajuan
Perusahaan Pertanian Negeri Pahang (LKPP) on the Malaysian Stock Exchange
on 2 Dec 1984. The current management team took over the operations in 2005
when the major shareholder raised its equity stake in the company (Fig 1).
Kurnia Setia was delisted from Bursa Malaysia on 21 Dec 2010 following a
takeover offer by the major shareholders of TMB to acquire the shares and
warrants they did not already own for RM2.70 per share and RM1.20 per
warrant. The offer price valued the stock at a historical P/E of 6.27x and P/BV
of 0.82x. The market capitalisation of Kurnia Setia was approximately
RM286.4m at that time.
Figure 1: Key milestones
Year Key milestones
The TAS group had increased its equity interest to approximately 26% in Kurnia Setia. It was at this point that the TAS group took over the helm of Kurnia Setia, in
2005 order to unlock the potential value of Kurnia Setia. This led to the expansion of Kurnia Setia’s plantation lands and the improvement of their plantation yield, as well as
Kurnia Setia’s venture into property development in subsequent years.
Kurnia Setia ventured into property development by converting Ladang Bukit Goh into building for the purposes of residential and commercial development. The
2008
property development business was initiated by KotaSAS to design, develop and construct the KotaSAS Township.
Tanah Makmur completed the Privatisation.
2010
KotaSAS executed a joint venture agreement with OMNI Holdings Sdn Bhd on 14 January 2010 for the development of Precinct 1 and Precinct 2 of the KotaSAS
Township through KotaSAS OMNI.
Launched Precinct 1 of the KotaSAS Township.
TMB began construction of our palm oil mill and compost plant.
2011 Launched Precinct 2 (Phases 1 and 2) of the KotaSAS Township.
Commenced operations of our palm oil mill and compost plant in July 2012.
2012
2013
2014
Launched Precinct 2 (Phase 3) and Precinct 3 (Phase 1) of the KotaSAS Township.
KotaSAS entered into a shareholders’ agreement with Tanah Makmur Perkasa Sdn Bhd for the combination of effort of the shareholders to develop the remainder
portion of land located in Ladang Bukit Goh that has yet to be developed.
Launched Precinct 3 (Phase 2 and Phase 3) and Precinct Lakeside 1 of the KotaSAS Township.
KotaSAS and Tanah Makmur KotaSAS executed the development agreement dated 8 January 2014 which was subsequently substituted by the amended restated
development agreement dated 12 May 2014, to develop and complete the development of the remaining land under the KotaSAS Township.
SOURCES: CIMB, COMPANY REPORTS
1.2 What has changed since the company was taken private
Since the company was taken private, the group has concentrated its efforts and
resources on building its reputation in township property development in
Kuantan, expand its plantation operations to include a palm oil mill since Jul
2012, and increase its landbank by 24.55% to 17,969 ha from 14,428 ha. On the
property front, it has successfully launched and completed various phases of its
township (Fig 2).
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July 7, 2014
Figure 2: Key achievements of the group after it was taken private
Prior to Privatisation
Plantation landbank 14,427.54 ha
As at the LPD
17,969.06 ha (an increase of 3,541.52 ha or 24.55%)
Milling
Nil
Ventured into downstream activities with the completion of a palm oil mill
which has a 30 tph capacity and a compost plant.
Property
development
Both have commenced operations since July 2012.
Potential venture into property development business in Bukit Goh. Successfully launched and completed certain phases of the KotaSAS
Clearing and infrastructure works, and sample residential units had Township, which comprises the development of approximately 1,500
commenced for Precinct 1 (Phase 1) of the property development project. acres (607.04 ha) of land over 15 years.
Completed the sale of properties in Precinct 1 and Precinct 2 (Phases 1
and 2) of KotaSAS Township.
Launched Precinct 2 (Phase 3), Precinct 3 (Phases 1, 2, and 3) and
Precinct Lakeside 1 (LS1) of KotaSAS Township.
The development sizes of Precinct 1, Precinct 2, Precinct 3 and Lakeside
1 are approximately 44.70 acres, 46.00 acres, 38.00 acres and 16.40
acres, respectively, bringing it to a total development size of
approximately 145.10 acres.
Successfully delivered 555 units out of 1,045 residential units launched
and sold within the KotaSAS Township, between the time of the Offer in
June 2009 until as at the LPD.
1.3 A palm oil and property player in Pahang
Today, TMB is an upstream plantation player and property developer in
Malaysia. Through its subsidiaries, it owns or leases 17,969 ha of plantation
land. Of this, 13,530 ha (or 75%) of the landbank is planted with oil palm. All of
the group's estates and assets are located in Pahang. It operates a palm oil mill
with a maximum production capacity of 30 tonnes of FFB per hour. Seven of
the group's estates currently supply FFBs to the group's mill, while the
remaining estates sell their fruits to third party traders. The palm products
from its mills are mainly crude palm oil (CPO) and palm kernel (PK) and are
sold to third party refiners and PK crushing plants in the country.
The group ventured into property development in 2010 when it launched the
Kota Sultan Ahmad Shah Township (KotaSAS) mainly to maximise the
potential value of its land in Ladang Bukit Goh.
It is also involved in the mining of bauxite, after it discovered bauxite while
clearing land at its property development project. The group is expected to
complete mining activities over the next three years.
The plantation division is the largest contributor, and accounted for 83% of the
gross profit in FY13. Property segment accounted for the rest.
Figure 3: Key assets of the group
Plantation business
Property development
Plantation land
-Operates 13 plantation
estates in the Pahang
-Aggregate of 17,969ha of
plantation land (11,634ha
owned, 6,336ha leased)
Palm oil mill
-Operate one palm oil mill
with capacity of 30 tonnes
of FFB per hour
-7 of TMB's estates supply
FFB to its palm oil mill
KotaSAS Township
-Measures approximately
1,500 acres expected to
be developed over the next
15 years
Mining
-Discovered bauxite during
the clearing of land within
Ladang Bukit Goh
-Estimated 1.4m tonnes of
bauxite deposits
7
July 7, 2014
Figure 4: 2013 revenue breakdown
Figure 5: 2013 gross profit breakdown
Property,
RM15.8m, 17%Title:
Source:
Property,
RM64.0m, 26%
Please fill in the values above to have them entered in your rep
Plantations,
RM179.5m, 74%
Plantations,
RM76.0m, 83%
1.4 The Crown Prince of Pahang is the largest shareholder
HRH Tengku Abdullah Ibni Sultan Haji Ahmad Shah, the Crown Prince of
Pahang, who currently holds a 43.17% stake in TMB, through direct and
indirect interests, is the largest shareholder of the group. He currently has a
direct stake of 15.77% and an indirect stake of 27.4% (held through Tastu Bina
(8.61%), TAS Industries (16.75%) and Aminvesco (2.04%)). TMB will be the
main listed vehicle of the Pahang royal family, post its listing.
The second-largest shareholder is LKPP, which was established in 1969 by the
Pahang state government to be a leader in Pahang agriculture development and
other fields. LKPP started Kurnia Setia or most of the plantation assets that
TMB currently owns. However, the management of these assets was passed on
to the current management team in 2005. Nevertheless, LKPP remains a major
shareholder with a 30% stake.
LKPP is also directly or through LKPP Corporation (LCSB) involved in the
plantation business. LKPP owns approximately 36,931 ha of planted oil palm
estates of the group. It also holds stakes in other listed plantation companies,
mainly a 26.91% stake in Astral Asia (AAB MK) and 31.14% stake in Far East
Holdings (FEH MK).
1.5 Shareholding structure post IPO
TMB is offering to sell 101.59m shares of 50 sen each, priced at RM1.25 per
share under its IPO exercise. Its IPO comprises an offer for sale of 49.45m
shares and a public issue of 52.14m shares. The institutional tranche of the
offering will be 75.18m and the retail offering will have 26.40m shares. After the
IPO, the public float will be 25%. (Fig. 6)
Post the IPO offering, HRH Tengku Abdullah Ibni Sultan Haji Ahmad Shah will
remain the largest shareholder with a stake of 34.5%, while LKPP will be the
second-largest shareholder with a 20% stake. The third largest shareholder is
YM Tengku Dato' Uzir bin Tengku Dato' Ubaidillah with a stake of 17.6%
through direct and indirect holdings. YM Tengku Dato' Uzir bin Tengku Dato’
Ubaidillah is the brother of the MD of TMB, YM Tengku Dato' Zubir bin Tengku
Dato' Ubaidillah. (Fig 7)
8
July 7, 2014
Figure 6: IPO Offering
Categories
Offer for sale
No of shares
% of enlarged
(in m)
share capital
Retail offering
Malaysian Public (via balloting)
Eligible Directors, employees and persons who have
contributed to the success of the Group
Sub- total
Public issue
No of shares
% of enlarged
(in m)
share capital
Total
No of shares
(in m)
% of enlarged
share capital
-
-
20.0
5.02
20.0
5.02
-
-
6.4
1.61
6.4
1.61
-
-
26.4
6.63
26.4
6.63
Malaysian institutional and selected investors
49.5
12.42
25.7
6.46
75.2
18.88
Sub-total
49.5
12.42
25.7
6.46
75.2
18.88
Total
49.5
12.42
52.1
13.09
101.6
25.51
Institutional Offering:
Figure 7: Pre- and post-IPO shareholding structure
Name
Tastu Bina
Pre-IPO
Direct
No. of Shares
held (m)
29.8
Post-IPO
Indirect
No. of Shares held
%
(m)
8.6
7.1*
2.0*
49.7
12.5
6.1*
-
-
6.1
1.5
-
-
%
%
Indirect
No. of Shares
held (m)
%
6.8
TAS Industries
58.0
Aimvesco
7.1
HRH Tengku Abdullah Ibni Sultan Haji Ahmad Shah
54.6
15.8
94.8**
27.4**
54.6
13.7
82.8**
20.8**
YM Tengku Dato’ Uzir bin Tengku Dato’ Ubaidillah
50.2
14.5
YM Tengku Dato’ Zubir bin Tengku Dato’ Ubaidillah
3.3
LKPP
Focus Edge Indices Corp
YM Tengku Dato’ Ahmad Faisal bin Tengku Ibrahim
16.7
-
Direct
No. of Shares held
(m)
27.1
2.0
1.5*
29.8#
8.61#
43.2
10.8
27.1#
6.8#
1.0
-
-
3.1
0.8
-
-
103.8
30.0
-
-
79.6
20.0
-
-
21.0
6.1
-
18.0
4.5
-
-
0.0
18.0^
4.5^
-
Others
18.3
Public
-
Total
346.0
-
21.0^
6.1^
0.2
5.3
-
-
17.0
4.3
-
-
-
-
-
99.6
25.0
-
-
-
-
398.2
100.0
-
-
100
*Deemed to have interest in Tanah Makmur by virture of its shareholdings in Aimvesco
**Deemed to have interest in Tanah Makmur by virtue of his shareholdings in TAS Industries, Tastu Bina and Aimvesco
#Deemed to have interest in Tanah Makmur by virtue of his shareholdings in Tastu Bina
^Deemed to have interest in Tanah Makmur by virtue of his interest in Focus Edge Indices Corp
9
July 7, 2014
2. BUSINESS OPERATIONS
Tanah Makmur Berhad (TMB) is a Pahang-based oil palm and property player.
Its key palm oil business spans from estate operations to milling activities. The
group is also involved in property development since 2010 through its KotaSAS
project and has recently entered in the business of bauxite mining. The group’s
operations are all located in the state of Pahang. It currently owns 14
subsidiaries. (Please see Fig 8 for more details).
Figure 8: Corporate structure of TMB
Tanah Makmur
Property
development
100%
Plantation
100%
100%
100%
100%
Kurnia Setia
Kurnia Setia
Engineering
KotaSAS
100%
Alur Cemerlang
100%
100%
100%
Kreatif Selaras
Land
Kurnia Setia
Trading
70%
SJ Palm Oil Mill
Alur Lestari
65%
65%
60%
KotaSAS OMNI
Kreatif Sinar
Gabungan
Alur Gemilang
60%
60%
60%
1
Kreatif Selaras
Mining
Tanah Makmur
KotaSas
Alur Seri
The TAS group refers to TAS Industries Sdn Bhd and individuals/corporations that are related to theSOURCES:
shareholders CIMB,
of TAS Industries
SdnREPORTS
Bhd
COMPANY
2.1 Pahang oil palm player with 13,530ha of planted area
The group owns 13 plantation estates with a total land area of 17,969ha. It owns
11,633 ha or 65% of the landbank and leases 6,336ha or 35% from LKPP.
Currently, 75% or 13,530 ha of its total landbank is planted with oil palms,
while 5% is not fit for planting and is reserved for infrastructure, nurseries,
buffer zones and other uses. This leaves the group with 3,527 ha (20%) of
plantable reserves. The group plans to plant the remaining landbank, and the
new land it acquires over the next few years. It bought Ladang Alur Seri (2,023
ha) in 2011 and Ladang Ulu Lepar (1069.7 ha) in 2013. We understand that
most of the group’s estates are on mineral soil. Relative to the big-cap
plantation players, the group’s estate size is small, measuring only 3% of Sime
Darby’s and 4% of Felda Global Venture’s (FGV) total planted areas. Tanah
Makmur’s planted oil palm estates make up 2% and 0.3% of the planted oil
palm area in Pahang and Malaysia respectively.
Figure 9: Performance metrics of comparable companies with Tanah Makmur
Planted area (ha)
Company
Mature
Immature
Total
FFB output
FFB yield
tonnes
tonnes/ha
OER
KER
Tanah Makmur
11,388
2,142
13,530
232,605
20.4
20.0%
6.0%
Far East Holdings
16,926
3,143
20,069
339,502
20.1
18.7%
4.9%
Harn Len
11,156
1,327
12,483
189,242
14.1
19.9%
4.7%
Hap Seng Plantations
30,670
4,881
35,551
704,241
23.0
21.3%
4.7%
Kim Loong Resources
12,827
1,523
14,350
280,365
21.8
22.1%
5.1%
Kretam Holdings
16,523
3,319
19,842
367,258
22.2
20.9%
4.7%
Sarawak Plantation
26,728
4,918
31,646
309,218
12.4
20.9%
4.5%
United Malacca
15,614
6,047
21,661
336,734
21.6
20.7%
4.9%
SOURCES: CIMB, INFOBUSINESS RESEARCH
10
July 7, 2014
Figure 10: Breakdown of landbank (17,969 ha)
Figure 11: Breakdown of age profile of estates (13,530 ha)
Unplantable area,
912ha, 5%
Title:
>25 yr,
Source:
0-3 yr,
1,281ha, 9% 1,801ha, 13%
Plantable reserve,
3,527ha, 20%
Please fill in the values above to have them entered in your rep
19-25 yr,
2,235ha, 17%
4-8 yr,
2,718ha, 20%
14-18 yr,
2,183ha, 16%
9-13 yr,
3,312ha, 25%
Planted area,
13,530ha, 75%
2.2 Its mill processes 34% of its FFB output
The group is a newcomer in the palm oil milling business. It set out to build the
mill soon after the company was taken private to achieve higher pricing for its
palm products and reduce its dependence on external traders and millers.
Its palm oil mill was completed on Jul 2012, with a milling capacity of 30 FFB
tonnes per hour. The mill processes FFB output from its estates as well as FFB
purchased from third parties.
TMB channeled FFB production from seven of its estates or 34% of its total FFB
production to the mill in 2013. It sells around 66% of total production from its
estates to third parties, as it is not economical to transport to its own mill.
The average utilisation rate of its mill was 84% in 2013, which is below the
industry average in Pahang. In FY13, its mill produced 31,676 tonnes of crude
palm oil (CPO) and 9,465 tonnes of palm kernel (PK).
The group also operates a compost plant which recycles waste such as shredded
Empty Fruit Bunches (EFB) and slurry generated from the mill into compost
fertilisers by using microbes. The compost plant, which is situated next to its
mill, was commissioned in 2012 and has the capacity to produce 40,000 tonnes
of compost per annum. The operation of the plant is carried out by its
70%-owned subsidiary, Alur Lestari, and the compost is sold to My Agri
Nutribio.
11
July 7, 2014
Figure 12: Operational
flow chart of the plantation business
Plantation business
External millers
and traders
FFB
Plantation
Division
External
plantation
owner & trader
CPO
Refineries
Milling
Division
FFB
PK
Kernel crushing
plant operators
Compost
fertiliser
Farmers and
plantation owners
SOURCES: CIMB, COMPANY REPORTS, MPOB
Property development business
Residential
property
Property
development
division
Property owners and
investors plant
Figure 13: Capacity and utilisation
rates of its mill and compost
Commercial
property
Maximum
capacity*
Actual production
Utilisation rate (%)
CPO production
37,440
31,676
84.60
PK production
11,232
9,465
84.27
Compost fertiliser production
22,770
22,607
99.28
*30 tonnes of FFB per hour
Figure 14: Historical FFB intakes and output from its mill
Jul 12 to Dec 12
FYE 2013
Own estates
58,019.7
77,965.3
Third party purchase
11,801.3
80,567.8
Total
69,821.0
158,533.0
14,243.4
31,676.2
3,564.3
9,465.3
Intake of FFB (tonnes)
Output of CPO and PK (tonnes)
Production of CPO
Production of PK
2.3 Major palm oil customers and sales strategy
The group sells its CPO and PK directly to local refiners and palm kernel
crushing operators. The FFBs that are not processed by its mill are sold to other
millers in the vicinity. The group sells its FFB through a yearly tendering
process. Yearly FFB contracts are entered into with those third party traders
and millers that are selected, based on their respective bids. Its key customers
are Kilang Sawit and Sern Lee Enterprise. In FY13, Kilang Sawit accounted for
12.6% of its total FFB sales while Sern Lee Enterprise accounted for 4.8%.
Figure 15: Major customers of the group
Major customers
2011
2012
2013
Type of
product RM m % of revenue RM m % of revenue RM m % of revenue
Kilang Sawit C.P Sdn Bhd
FFB
-
-
1.8
0.88
30.7
12.61
Sern Lee Enterprise Sdn Bhd
FFB
82.3
29.14
75.4
36.31
11.7
4.81
TT Max Enterprise Sdn Bhd
FFB
61.5
21.79
11.6
5.61
-
-
12
July 7, 2014
2.4 Property development activities
The group ventured into property development in 2010, mainly to unlock the
potential value of one of its estates (Ladang Bukit Goh) which is strategically
located. The property development project was initiated by its property arm,
KOTASAS, and is named the Kota Sultan Ahmad Shah Township (KotaSAS).
The township is strategically located near some of the main government offices
and is accessible through the East Coast Expressway and Kuantan Bypass (see
Fig 16).
Figure 16: Location of KotaSAS project in Kuantan, Pahang
The township involves the development of 1,500 acres (607 ha) of land over 15
years and focuses on the development of residential, commercial, institutional
and government properties. The estimated GDV of this project is RM1.8bn and
we estimate that the group has launched around RM300m worth of properties
to date. It has completed the launch and sale of properties in three precincts
with a total development area of 145.1 acres.
Under the township plan, it will be allocating around 228.5 acres of the land for
the development of commercial centres, which include government and private
offices, retail malls and office suites. To date, it has launched 1,074 units and
sold 97% or 1,045 units (Fig 17). The group is also still generating income from
314 ha of the land from plantation activities.
The land ownership of the property project is held by 100%-owned KotaSAS.
However, the development for the early phases of the project (up to precinct 2,
Phase 3), with a total development size of 90.7 acres, was carried out by the
65% JV KotaSAS OMNI. The group intends to terminate the JV upon the
completion of the developments under precinct 2 and the expiry of the two year
defect liability period in 2016.
It has subsequently entered into a JV agreement with 60%-owned subsidiary
Tanah Makmur KotaSAS to become the developer for the remaining
developments of the project. The group, through its 65%-owned subsidiary,
Kreatif Sinar Gabungan, has also proposed to the state government of Pahang
for the new state administrative complex of the state government of Pahang to
be included in the KotaSAS township. In Sep 2013, the Prime Minister of
Malaysia, Dato' Sri Najib bin Tun Haji Abdul Razak, launched the development
of the state administrative complex in the KotaSAS township. However, the
group has yet to receive the award for the development of the project.
13
July 7, 2014
Its wholly-owned subsidiary Kurnia Setia Engineering also carries out
construction activities and is mainly involved in the construction and building
of main infrastructure in the KotaSAS township. The group is also involved in
the trading of construction materials and leasing of machines to external
contractors to construct, build and develop properties in the township. The
trading activities are carried out by Kreatif Selaras Trading. These operations
will complement its property development activities.
Figure 17: Property launches and take-up rates
Name
Type
No. of units No. of units
developed
sold
Date of sales
launch
% of units
sold
Precint 1 (44.7 acres)
Sinaran
Single Storey semi-detached
54
54
Jan-10
100%
Embun
Double storey semi-detached
24
24
Jan-10
100%
Bayu
74
74
Jan-10
100%
Senja
Double storey link
34
34
Jan-10
100%
Suria 1
Double storey link
132
132
Jan-10
100%
Suria 2
Double storey link
7
7
Jan-10
100%
325
325
Total
100%
Fajar 1
Single storey link
87
87
Apr-11
Fajar 2
Single storey link
94
92
Jun-11
98%
Bintang
Single storey super-link
36
36
Jun-11
100%
Cahaya
Single storey link
70
70 Jun-11 & Apr-12
100%
Pancaran
16
16 Jun-11 & Apr-12
100%
Senja 2
Double storey link
16
16
100%
319
317
Total
Apr-12
100%
99%
Ceria
Double storey link
68
68
Jun-12
100%
Pancaran
40
40 Jun-12 & Feb-13
100%
Rembulan
Double storey link
94
94
Feb-13
100%
Ceria 2
Double storey link
45
42
Sep-13
93%
Pancaran 2
16
16
Sep-13
100%
Sinaran 2
2.5 storey semi-detached
Sep-13
89%
Total
18
16
281
276
98%
Lakeside 1 (16.4 acres)
Ceria 2
Double storey link
105
96
Nov-13
91%
Pancaran 2
22
18
Nov-13
82%
Sinaran 2
2.5 storey semi-detached
22
13
Nov-13
59%
149
127
85%
1,074
1,045
97%
Total
Grand total
2.5 Bauxite mining activities
The group discovered the presence of bauxite while clearing parts of the land at
Ladang Bukit Goh for its property development activities. It commissioned
Aycel Geoservices to conduct an evaluation of the potential bauxite reserves.
The survey revealed that the land holds bauxite deposits of around 1,426,500
tonnes.
Given that the mining activity will not interfere with its property development
activities, the group commenced mining and extraction of bauxite in Apr 2014,
after receiving the Proprietary Mining Licence and the Operational Mining
Licence. The mining business is carried out by 60%-owned Kreatif Selaras
Mining which in turn has entered into an agreement with SE Satu as the
exclusive operator to mine and extract the bauxite on the said land for a fixed
cost of US$13.75 per tonne for a period of 36 months.
14
July 7, 2014
3. OUTLOOK
3.1 Beneficiary of strong demand for CPO
As an upstream palm oil operator in Malaysia, we believe that TMB is
well-placed to benefit from the bullish long-term demand prospects for palm oil.
We are long-term positive on the use of palm oil for food and non-food
purposes due to its attractive pricing relative to other edible oils, rising per
capita consumption in India, China and Indonesia, as well as higher usage of
palm oil for biodiesel purposes in Indonesia and Malaysia due to biodiesel
mandates. Indonesia’s plan to raise its biodiesel mandate to 10% in 2014 could
potentially boost the country's usage of palm-based biodiesel from
approximately 1m tonnes in 2013 to around 1.5m-2m tonnes in 2014. Malaysia
is also in the midst of implementing its B5 programme which would boost the
palm oil consumption for biodiesel usage in the country to 500,000 tonnes p.a.
Figure 18: Per capita edible oil consumption of India and China is below the global
average
(kg)
70
60
50
40
Global average = 27kg
30
20
10
0
EU-27
USA
Hong Kong
Indonesia
Taiwan
China
Pakistan
India
Nigeria
SOURCES: CIMB, OIL WORLD
3.2 Positive on CPO price due to tighter supplies, El Nino
CPO prices started on a positive note this year due to concerns over the impact
of the drought in Peninsular Malaysia, North Sumatra and Riau from Feb-Mar,
rising biodiesel mandates in Indonesia and Malaysia, as well as the
unfavourable weather conditions in some soybean planting areas in South
America. Spot CPO prices climbed to RM2,917 per tonne in Mar 2014, but gave
up most of the gains in May and Jun and are currently at RM2,453 per tonne.
We project CPO prices to remain range-bound for now and to rise towards the
later part of the year due to weaker supplies caused by the drought in parts of
key palm oil region in 1Q and the potential impact of the widely-predicted El
Nino event (possible in 3Q14) which could result in lower rainfall in key palm
oil producing areas, leading to a potential shortfall in supply.
We project the average CPO prices to rise 14% to RM2,700 per tonne in FY14
and 4% to RM2,800 per tonne in FY15. If an El Nino develops, resulting in
lower rainfall in key palm oil producing regions, there could be upside to our
current price forecasts and TMB's earnings projections. In 1H14, the average
CPO price was RM2,605 per tonne.
We estimate that every RM100 per tonne change in the CPO price could impact
our FY14 net profit forecast by 6%, and FY15 net profit forecast by 5%.
15
July 7, 2014
Figure 19: CPO and PK spot prices since 2011
(RM/tonne)
CPO spot (LHS)
(RM/tonne)
PK spot (RHS)
4,000
3,500
3,500
3,000
3,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
-
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
SOURCES: CIMB, BLOOMBERG
Figure 20: Average CPO selling prices in Malaysia - Actual and forecasts
(RM per tonne)
3,500
3,300
3,219
3,100
2,900
2,800
2,764
2,700
2,700
2,500
2,371
2,300
2,100
1,900
1,700
1,500
2011
2012
2013
2014F
2015F
SOURCES: CIMB, MPOB
3.3 New planting and new mature areas to drive future
growth
TMB's planted mature areas have risen by 13% over the past two years due to
new mature areas coming onstream. However, FFB production during the same
period fell 3% due to weaker FFB yields from its newly-matured estates as well
as older estates.
The group's estates are not young. We estimate that the average age of TMB's
estates is 15-16 years. Approximately 87% of its planted estates are mature and
yielding – 41% are considered prime mature (9-18 years), 17% are old (19-25
years) and 9% are due for replanting (over 25 years). The good news is that 20%
are young (4-8 years) and 13% are immature. These estates will help to partially
offset the declining yields from its older estates.
The group plans to improve the age profile and output growth prospects by
planting its landbank reserves as well as replanting its old estates. It plans to
replant 2,061 ha of estates between 2014 and 2018, but we expect the new
plantings programme of 3,093 ha for 2014-16 to more than offset its replanting
plan. TMB has 3,527 ha of plantable reserves (Ladang Alur Seri and Ladang Ulu
Lepar) which when fully planted will raise the group's planted area by 26%.
16
July 7, 2014
Figure 21: Oil palm age profile
>25 yr, 1,281ha, 9%
0-3 yr, 1,801ha,
13%
19-25 yr, 2,235ha,
17%
4-8 yr, 2,718ha,
20%
14-18 yr, 2,183ha,
16%
9-13 yr, 3,312ha,
25%
We do not expect the near-term FFB output growth to be strong due to the
ongoing replanting programme, and the FFB yields of oil palms from its mature
estates may decline as they approach the replanting age of 25 years. However,
we project stronger output growth from 2017 when some of its new planting
initiatives are expected to start to bear fruit. Overall, we estimate the group will
raise its FFB output by 1-5% per annum over the next three years through larger
mature areas.
Figure 22: New planting and replanting programmes
Plantation Estate
Size (ha)
Average age of old palms
Year planned for
replanting/new planting
Replanting programmes
Ladang Charuk Puting
808.7
40
Ladang Sungai Sering
145.0
33
2014
Ladang Lembah Klau
974.0
24
2017 and 2018
133.3
33
2014
Ladang Empang Jaleh
Sub-total
2014 and 2015
2,061.0
New planting programmes
Ladang Alur Seri
2,023.0
-
2014 and 2015
Ladang Ulu Lepar
1,069.7
-
2015 and 2016
Sub-total
3,092.7
Grand total
5,153.6
3.4 Oil yields achievement above Pahang state's average
TMB's average FFB yield achievement in 2013 of 20.4 tonnes/ha was above the
Pahang's state average of 20.2 tonnes/ha and Malaysia's average of 19
tonnes/ha. We believe that this was due to the good agricultural practices
employed by the group at its estates. The OER rate of 19.98% achieved by its
mill in 2013 was lower than the country's average of 20.25%, but this was
compensated by the higher PK recovery rate of 5.97% against the country's
average of 5.12%.
We expect its mill, which is strategically located and employs the latest
technology, to register better OER rates over time and lower milling costs due
to better economies of scale. Average utilisation rate of the mill was 84% in
2013 and the group plans to expand its palm oil mill capacity by 50% to 45
tonnes of FFB per hour within the next two years.
17
July 7, 2014
Figure 23: Comparing TMB's FFB yield, OER and KER against the Pahang state and
the country in 2013
FFB yield
OER
tonnes per ha
%
KER
%
TMB
20.43
19.98
5.97
Pahang
20.21
20.02
5.44
Malaysia
19.02
20.25
5.12
3.5 Leveraging on its strong relationship with LKPP
One of the key advantages that TMB has is its strong relationship with LKPP,
which is expected to continue to support the group to acquire and lease
plantation lands at competitive prices in Pahang.
The relevant state authority of Pahang has informed TMB that it had decided on
10 Oct 2010 that the state will only approve state land for oil palm plantation
purposes to state-linked agencies, such as LKPP. As such, having LKPP as a
major shareholder provides TMB access to new plantation projects in Pahang.
As and when TMB discovers plantation potential on certain land in Pahang, it
can initiate the process of transferring the land to itself by entering into a sale
and purchase or a lease agreement with LKPP. Currently 35% of the group's
plantation land is leased from LKPP.
Figure 24: TMB's land lease from LKPP
Figure 25: Current landbank and potential land identified
(ha)
25,000
LKPP-leased
land, 6,336 ha,
35%
20,000
Title:
Source:
20,619
2,650 above to have them
Please fill in the values
entered in your report
17,969
15,000
10,000
Ow ned by TMB,
11,633 ha, 65%
5,000
Existing land bank
Potential land bank
Total landbank after
acquisition
3.6 Plans to raise its palm oil landbank to 25,000 ha by
2017/18
Over the next three years, TMB plans to raise its plantation landbank to at least
25,000 ha or 39% from its current landbank of 17,969 ha. The group intends to
achieve this by acquiring suitable planted or unplanted land in Malaysia or
overseas, though the primary concentration will be on expanding its landbank
within Pahang.
Currently, it has identified two potential land plots in Kampong Bongsu (1,214
ha) and Ulu Lepar (1,436 ha). It is working with LKPP to secure the acquisitions
from the state government. If these plots are successfully secured, it could boost
the group's landbank by 15% to 20,619 ha. The group has estimated that the
acquisition of these two land plots will cost it approximately RM10m (RM3,878
per ha). We are of the view that the group would have no issues funding the
potential acquisitions as it will be in a net cash position after the IPO.
18
July 7, 2014
3.7 Plans to launch RM245m worth of properties in 2014
Previous launches at its KotaSAS project comprised mainly of residential
properties. Going forward, the group plans to launch commercial properties,
which will include government and private offices, retail malls and office suites.
In 2014, the group plans to launch 478 residential properties, which include the
first introduction of bungalows and 40 units of commercial shop lots valued at
approx. RM245m in gross development value (GDV). This is significantly
higher than the total property sales of around RM172m recognised over the past
three years. If successfully executed, this will significantly boost the group’s
future property earnings.
3.8 Relocation of state administrative complex to KotaSAS
could boost its GDV by 67% to RM3bn
The group, through 65%-owned Kreatif Sinar Gabungan, is currently waiting to
be awarded the project to develop and construct a new state administrative
complex and a state assembly hall in Kuantan, which will be located in the
KotaSAS township.
In the proposal to the government, the group has estimated the value of the
project to be around RM399m, but the value cannot be relied upon until it is
able to secure the project. If the contract is awarded, the group expects to start
construction of the buildings in 2014. We are positive on this as it could raise
the future value and demand for properties in the township, if the project is
awarded to the company.
TMB estimated that the future GDV of the project could potentially rise to
RM3bn from the current estimated value of RM1.8bn, after taking into
consideration the improved property development plans that it has made on the
relocation of the new state administrative complex and state assembly hall to
the KotaSAS township. The improvements in the proposed plan have been
submitted and are pending approval.
3.9 Earnings boost from mining business for FY14-16
We project the group's venture into the mining of bauxite will raise its earnings
during FY14-16. According to the bauxite mining works agreement between its
60%-owned mining subsidiary, Kreatif Selaras Mining and SE Satu (the
appointed exclusive operator for the mining and extraction of bauxite at its
land), the contractor will extract 50,000 tonnes (minimum) of bauxite ore per
annum for the duration of three years and will receive US$13.75 per tonne on
the actual tonnage of washed bauxite that has been successful sold and paid for
in full by the buyers. We estimate that the group could potentially fetch a selling
price of US$46 per tonne for the bauxite. Based on this and the estimated
reserves of 1,426,500 tonnes, we project the group could derive a pretax profit
of RM86.9m from this ancillary business over the next three years.
19
July 7, 2014
4. SWOT ANALYSIS
The group’s main strength is its strong relationship with LKPP, which will allow
it to secure more landbank at attractive prices in Pahang to grow and attain
better economies of scale for its estates operations. On top of this, the group has
been able to maximise the value of its strategically-located land in Ladang Bukit
Goh, through the development of KotaSAS township and the mining of bauxite,
following the discovery of bauxite in part of its land. The group’s expansion into
milling activities allows the group to extract higher value for its palm products
and reduce its dependence on third party millers.
The group's landbank of around 18,000 ha is scattered over 13 locations in
Pahang. Its largest estate, Ladang Sri Telang, measures only 2,871 ha, which is
small compared to the estates of some of its peers, resulting in higher operating
costs. Also, some of the group's estates are in hilly terrain which has resulted in
lower FFB yields per ha. The estimated average age of its estates is 15-16 years
which is higher compared to its peers. The group will need to replant some of
its estates which may result in lower output in the near term.
The various measures that the group could undertake to improve its earnings
are expanding its planted areas, improving efficiency at its estates, expanding
its mill capacities and unlocking the value of its strategic land plots which are
ripe for development. If the group is awarded the project to develop and
construct the new state administrative complex and state assembly hall in
KotaSAS, it will boost the GDV of its property project.
The main threats to the group are weaker CPO prices and external factors that
could affect the plantation operations, for instance, weather patterns, a change
in labour regulations or taxes, and duties for palm oil.
Figure 26: SWOT Analysis
Strengths
Opportunities
Strong relationship with LKPP
Cut cost of production by raising yields
Focus on upstream operations
Improve its land bank through acquisitions
Ventured into property development to unlock land value
Boost GDV of its property project
Maximising value of its land
Expanding its milling capacity
Weaknesses
Threats
Lacks economies of scale
Heavy reliance on foreign workers
Some estates are on hilly terrain
Higher minimum wage in Malaysia
Age profile of estates at 15-16 years
Unable to pass on GST to property buyers
Limited track record in property venture
Lower selling prices for its bauxite
20
July 7, 2014
5. RISKS
5.1 CPO prices
Tanah Makmur derives 83% of its gross profit from the plantation division. As
such, the group’s earnings are highly sensitive to changes in CPO prices. Every
RM100 per tonne deviation in CPO price from our current assumptions would
have an impact of about 6% on our FY14 and 5% on FY15 net profit forecasts.
Our current average CPO price assumption for the group is RM2,700 per tonne
for 2014 and RM2,800 per tonne for 2015.
5.2 Unfavourable weather conditions
Rainfall deficits or excessive rainfall at the group’s estates may adversely impact
FFB yields and production. These may affect its plantation earnings if the
decline in production is not fully compensated by higher selling prices. We
estimate that every 1% change in FFB production will lead to a 1-2% impact on
our earnings forecasts for FY14-15.
5.3 Dependence on foreign workers
The plantation business is labour intensive. In Malaysia, the industry is heavily
dependent on foreign workers to remain cost competitive. In Tanah Makmur's
case, foreign workers form 74.39% of its total workforce of 1,101 employees.
Any shortage of labour due to new immigration rules or labour policies may
affect the productivity of its estates.
5.4 High palm oil taxes in Malaysia
The group is subject to a windfall tax on CPO, a cess tax of RM13 per tonne of
CPO and an export tax on CPO in Malaysia. Any changes in these taxes could
impact the group’s profitability.
Figure 27: Taxation on the palm oil sector
Tax, Cess, Duty
Rates
Corporate tax
25% of corporate profit
Cess for MPOB
RM13 per tonne of CPO
15% above RM2,500 (Peninsular)
7.5% above RM3,000 (Sabah)
SOURCES:
CIMB, COMPANY REPORTS, THESTAR
7.5% for CPO RM1,000 per tonne
and above
2.5% for RM1,000-1,500 per tonne
5.0% for above RM1,500 per tonne
Windfall profit levy
Sabah Sales tax
Sarawak Sales tax
Figure 28: Malaysia's export tax structure
Figure 29: Malaysia CPO export duty
(RM per tonne)
160
140
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%
3,450-3,600
8.5%
120
100
80
60
40
20
Jan-13
SOURCES: CIMB
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
SOURCES: CIMB, MPOB
21
July 7, 2014
5.5 Forex fluctuations
Local CPO prices are sensitive to the RM/US$ exchange rate as the
international CPO price is quoted in US$. A stronger ringgit would be negative
for local CPO prices, though the impact would be mitigated by lower fertiliser
costs and reduced capex. Our house view is that the ringgit will weaken to
RM3.30/US$1 by end-2014. This will be positive for the local spot CPO price.
Figure 30: Ringgit/US$1 since 2009
(RM/US$)
3.80
3.70
3.60
3.50
3.40
3.30
3.20
3.10
3.00
2.90
2.80
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
SOURCES: CIMB, BLOOMBERG
5.6 Measures to curb property speculation
The government has taken a series of measures since last year to curb rising
household debt and property speculation. This has resulted in a dampening of
sentiment on properties. We continue to believe that the measures to curb
speculation will only have a relatively short-term impact on property demand
and the buying will normalise by mid-2014, before picking up strongly in 2H as
potential buyers realise that the residential property prices may rise ahead of
the implementation of 6% GST in Apr 2015.
22
July 7, 2014
6. FINANCIALS
6.1 Plantation and property are the key revenue
contributors
The group's principal activities can be divided into two key segments – oil palm
plantation and property development.
In FY11-13, it derived 65-74% of its total revenue from the sale of palm products.
The property division accounted for 26 -35% of its FY11-13's total revenue.
Its plantation sales are dependent on its estates’ output and the average selling
price (ASP) achieved for its palm products. Its FFB production hinges on the
size of its mature estates and FFB yields. Its CPO and PK output depends on the
oil extraction rate (OER) and kernel oil extraction (KER) achieved by the mills.
ASP for its palm products depends largely on the global supply and demand of
edible oils. Property sales are dependent on new launches and the take-up rate
of its property products as well as the progress of construction of its properties.
6.2 FY12 earnings hit by lower selling price and higher
costs
FY12’s core net profit (excluding a gain on disposal of land of RM3.67m)
declined 26% due to lower ASP, weak FFB output, higher estates costs and
lower property earnings. ASP achieved for FFB fell 21% to RM603 per tonne in
FY12. FFB output fell 4% to 229,890 tonnes due to lower FFB yields.
6.3 Lower CPO prices hurt FY13 earnings
Its core net profit fell by 27% in FY13 due mainly to weaker ASPs achieved for
its palm products, but this was partially compensated by the higher FFB output
(+3%). The group’s achieved ASP dropped 14% to RM2,376 per tonne for CPO
in FY13.
23
July 7, 2014
7. FORECASTS
7.1 Sales driven by higher CPO prices and property sales
We expect the group to record revenue increases in FY14-15 due to higher palm
product prices, property sales and maiden revenue contribution from its mining
business. We project the group’s FFB production to rise 1% in FY14 to 235,796
tonnes, driven by improving yields and new mature areas. For FY15, we
estimate the group's FFB output to increase by 4% to due to higher yields from
its existing estates and larger mature areas.
In line with our bullish take on CPO prices, we project TMB to achieve a 14%
surge in ASP for CPO to RM2,700/tonne in FY14, followed by a 4% rise to
RM2,800 in FY15. Our CPO price assumptions have not factored in the
potential development of El Nino due to the unpredictable nature of the
severity of the weather conditions, even if one does develop. We expect its
property revenue to jump by 14-23% for FY14-15, driven mainly by stronger
property sales as the group accelerates its new launches. The group will also
receive a new stream of revenue from the bauxite mining unit in FY14-16.
Overall, we project the group to record a 39% sales increase in FY14, followed
by a 15% increase in FY15.
7.2 Strong core net profit growth in FY14 and FY15
Overall, we project TMB to post a 56% jump in its core net profit for FY14,
driven mainly by higher CPO prices, stronger property earnings and the
additional income stream from its bauxite mining business. The core earnings
growth will moderate to 22% in FY15 due partly to the higher earnings base that
we expect it to achieve in FY14. Furthermore, we expect CPO prices to increase
at a slower rate of 4% in FY15.
7.3 Capex plan
We expect TMB’s capex to be at around RM35m in FY14 and FY15, which will
be utilised for its new planting programme, expansion of its palm oil mill
capacity from 30 tonnes/hr to 45 tonnes/hr by 2016, as well as working capital
and infrastructure works at its property project.
The group indicated that its planned capex for estates development (replanting
and new planting) is approximately RM61.27m for FY14-15. It plans to utilise
RM28.5m of the IPO proceeds to partly fund the plantation development capex.
The expansion cost for its palm oil mill is expected to be around RM5m, which
will also be funded through the IPO proceeds. Apart from these, around
RM13m of the proceeds will be utilised to fund infrastructure works at the
KotaSAS township and another RM13m to repay the bank borrowings.
24
July 7, 2014
Figure 31: Historical and projected capex spend
(RM m)
50
45
40
35
30
25
20
15
10
5
2011
2012
2013
2014F
2015F
Figure 32: Planned utilisation of IPO proceeds
Details
Timeframe
Estate development
Within 24 months
28.5
Expansion of palm oil mill
Within 24 months
5.0
7.7%
Infrastructure work of KotaSAS Township
Within 24 months
13.0
20.0%
Repayment of bank borrowings
Within 6 months
13.1
20.1%
Listing expenses
Within 6 months
5.6
8.6%
65.2
100.0%
Total gross proceeds
Amount (RM m)
% of total proceeds
43.7%
7.4 Low net gearing level as at end-Dec 2013
TMB's net gearing level as at end-Dec 2013 of 0.015x was lower than its
plantation peers. This was partly due to the strong cashflow from its plantation
business over the past few years. The group will raise RM65.2m from its listing
exercise. Following this, the group will be in a net cash position of around
RM5.6m.
25
July 7, 2014
Figure 33: Income Statement
2011
2012
2013
2014F
2015F
282.4
207.7
243.5
337.3
388.6
386.3
(136.1)
(103.2)
(151.6)
(201.2)
(228.0)
(229.5)
146.3
104.5
91.8
136.1
160.7
156.8
2.5
5.5
1.8
1.8
1.8
1.8
(30.8)
(22.6)
(27.4)
(28.7)
(30.1)
(31.5)
Estate general expenses
(3.0)
(2.7)
(2.2)
(2.3)
(2.3)
(2.4)
Employee benefits expenses
(8.7)
(9.0)
(10.2)
(10.7)
(11.2)
(11.8)
Depreciation
(1.9)
(3.0)
(3.4)
(3.5)
(3.7)
(3.9)
0.0
(0.7)
(1.4)
(1.5)
(1.5)
(1.6)
(17.2)
(7.3)
(10.2)
(10.7)
(11.3)
(11.9)
127.1
FY End Dec (RM m)
Revenue
Cost of sales
Gross profit
Other operating income
Other expenses
Selling and distribution expenses
Miscellaneous expenses
2016F
Operating profit
117.9
87.4
66.3
109.2
132.4
Finance costs
(6.0)
(4.3)
(4.6)
(2.3)
(1.3)
(0.9)
Profit before tax
112.0
83.1
61.7
106.9
131.1
126.2
Income tax
(31.5)
(26.6)
(17.3)
(17.0)
(26.7)
(32.8)
Profit after tax
85.4
65.7
44.7
80.2
98.3
94.6
Minority interests
(4.8)
(3.2)
(1.8)
(13.1)
(16.5)
(13.4)
PATMI
80.6
62.5
42.9
67.1
81.9
81.3
Core net profit
79.6
58.8
42.9
67.1
81.9
81.3
Revenue
-
-26%
17%
39%
15%
-1%
Cost of sales
-
-24%
47%
33%
13%
1%
Gross profit
-
-29%
-12%
48%
18%
-2%
Profit before tax
-
-26%
-26%
73%
23%
-4%
Income tax
-
-35%
-2%
57%
23%
-4%
PAT
-
-23%
-32%
79%
23%
-4%
PATMI
-
-22%
-31%
56%
22%
-1%
Core net profit
-
-26%
-27%
56%
22%
-1%
Gross profit margin
-
50%
38%
40%
41%
41%
PBT margin
-
40%
25%
32%
34%
33%
PAT margin
-
32%
18%
24%
25%
25%
Effective tax rate
-
21%
28%
25%
25%
25%
PATMI margin
-
30%
18%
20%
21%
21%
yoy growth
Others
Figure 34: Valuation statistics
2011
2012
2013
2014F
2015F
2016F
398.2
398.2
398.2
398.2
398.2
398.2
EPS per share (sen)
20.2
15.7
10.8
16.8
20.6
20.4
Core EPS per share (sen)
20.0
14.8
10.8
16.8
20.6
20.4
na
na
na
8.4
10.3
10.2
50.7
66.7
77.1
81.2
105.4
115.7
IPO price (sen)
125
125
125
125
125
125
P/E (x) @ IPO price
6.2
8.0
11.6
7.4
6.1
6.1
Core P/E (x)
6.3
8.5
11.6
7.4
6.1
6.1
Dividend yield
na
na
na
6.7%
8.2%
8.2%
2.5
1.9
1.6
1.5
1.2
1.1
FY End Dec (RM m)
No of shares (m)
DPS per share (sen)
Net asset value per share (sen)
P/NAV (x)
26
July 7, 2014
Figure 35: Breakdown of revenue, gross profit and gross profit margin
FYE Dec (RM m)
Breakdown of revenue
Plantation
Property
Mining
Total
2011
2012
2013
2014F
2015F
2016F
183.5
144.2
179.5
193.1
209.0
219.6
99.0
63.4
64.0
76.9
89.9
105.4
-
-
-
67.3
89.7
61.3
282.4
207.7
243.5
337.3
388.6
386.3
2011
2012
2013
2014F
2015F
2016F
127.9
90.3
76.0
86.8
96.1
99.5
18.5
14.2
15.8
17.9
22.7
28.6
-
-
-
31.4
41.9
28.6
146.3
104.5
91.8
136.1
160.7
156.8
Gross profit margin
2011
2012
2013
2014F
2015F
2016F
Plantation
70%
63%
42%
45%
46%
45%
Property
19%
22%
25%
23%
25%
27%
-
-
-
47%
47%
47%
52%
50%
38%
40%
41%
41%
Breakdown of gross profit
Plantation
Property
Mining
Total
Mining
Total
Figure 36: Key assumptions
FYE Dec (RM m)
Avg mature area (ha)
FFB yield per ha (tonnes)
Oil extraction rate
2011
2012
2013
2014F
2015F
2016F
10,109
10,416
11,385
11,446
11,697
12,409
23.8
22.1
20.4
20.6
21.0
20.8
na
20.6%
20.0%
20.0%
20.0%
20.0%
na
5.1%
6.0%
6.0%
6.0%
6.0%
FFB production (tonnes)
240,184
229,890
232,605
235,796
245,644
258,102
FFB processed (tonnes)
na
69,821
158,533
164,767
172,345
181,022
CPO production (tonnes)
na
14,243
31,676
32,920
34,435
36,168
PK production (tonnes)
na
3,564
9,465
9,837
10,289
10,807
FFB selling price (RM per tonne)
764
603
520
567
588
588
CPO selling price (RM per tonne)
3,230
2,777
2,376
2,700
2,800
2,800
PK selling price (RM per tonne)
Kernel extraction rate
2,194
1,539
1,353
1,620
1,680
1,680
FFB output growth
na
-4%
1%
1%
4%
5%
Change in FFB selling price
na
-14%
-14%
14%
4%
0%
Change in CPO selling price
na
-14%
-14%
14%
4%
0%
Change in PK selling price
na
-30%
-12%
20%
4%
0%
27
July 7, 2014
Figure 37: Balance sheet
FYE Dec (RM m)
2011
2012
2013
2014F
2015F
2016F
Assets
Non-current assets
117.1
140.9
149.0
157.5
165.5
173.0
57.6
69.8
79.1
96.2
113.2
130.3
-
-
-
-
-
-
Land use rights
41.0
40.5
39.9
39.3
38.7
38.2
Land held for property development
29.7
29.2
28.6
28.6
28.6
28.6
Other investments
0.0
245.5
0.0
280.3
0.0
296.6
0.0
321.6
0.0
346.1
0.0
370.1
63.7
67.8
73.2
88.0
102.9
120.6
3.0
10.5
12.9
17.8
20.5
20.4
Trade and other receivables
38.3
28.5
32.8
45.5
52.4
52.1
Other current assets
15.3
5.9
6.4
6.4
6.4
6.4
Investment securities
0.0
4.6
4.6
5.2
5.9
6.6
Tax recoverable
-
0.4
0.6
0.6
91.5
0.6
93.2
280.2
299.9
Property, plant and equipment
Biological assets
Goodwill
Total
Current assets
Property development costs
Inventories
61.4
69.0
46.9
0.6
86.6
Total
181.6
186.7
177.4
250.2
Total assets
427.2
467.0
473.9
Loans and borrowings
23.1
29.1
12.4
12.4
12.4
12.4
Trade and other payables
27.2
33.4
33.6
46.6
53.7
53.3
Other current liabilities
0.9
4.5
7.5
7.5
7.5
7.5
Income tax payable
1.5
2.5
2.7
52.8
69.6
56.2
2.7
69.1
2.7
76.2
2.7
75.9
128.9
117.1
121.2
65.3
43.8
44.5
20.0
10.0
-
2.5
3.9
4.1
4.1
4.1
4.1
Cash and bank balances
571.8
626.3
670.0
Liabilities
Current liabilities
Total
Net current assets
181.1
204.0
224.0
Non-current liabilities
Loans and borrowings
Retirement benefit obligations
34.3
28.8
29.5
29.5
29.5
29.5
Total
102.1
76.5
78.1
53.6
43.6
33.6
Total liabilities
154.9
146.0
134.3
122.8
119.9
109.6
Net assets
272.3
320.9
339.6
449.0
506.4
560.4
Deferred tax liabilities
Equity
Share capital
170.0
173.0
173.0
199.1
199.1
199.1
Share premium
-
-
-
36.6
36.6
36.6
Other reserve
3.5
3.5
3.5
3.5
3.5
3.5
Capital redemption reserve
0.4
0.7
1.1
91.5
129.5
145.9
1.1
179.4
1.1
220.4
1.1
261.0
265.4
306.8
323.5
419.7
460.7
501.3
6.9
14.2
16.2
29.3
45.7
59.1
Total equity
272.3
320.9
339.6
449.0
506.4
560.4
Total equity and liabilities
427.2
467.0
473.9
Retained earnings
Total shareholders' funds
Non-controlling interests
571.8
626.3
670.0
28
July 7, 2014
Figure 38: Cashflow statement
FYE Dec (RM m)
2011
2012
2013
2014F
2015F
2016F
Profit before tax
112.0
83.0
61.7
106.9
131.1
126.2
Depreciation of property, plant and equipment
2.3
4.2
5.8
6.4
7.0
7.5
Amortisation of plantation development expenditure
2.1
2.6
2.9
2.9
2.9
2.9
Amortisation of land use rights
0.6
0.6
0.6
0.6
0.6
0.6
Property. plant and equipment written off
0.0
0.3
0.0
-
-
-
-
0.9
0.2
-
-
-
Loss on sale of livestocks
0.1
-
0.0
-
-
-
Gain on sale of livestocks
-
(0.1)
-
-
-
-
Bad debts written off
0.5
0.6
-
-
-
-
Pension costs - defined benefit plan
0.3
0.3
0.5
-
-
-
(0.0)
(3.7)
-
-
-
-
6.0
4.3
3.1
-
-
-
Profit on investments in Islamic funds
(1.3)
(0.9)
(0.7)
(0.7)
(0.7)
(0.7)
Interest income
(0.6)
(0.4)
(0.5)
-
-
-
-
-
-
-
-
-
8.9
-
(0.1)
-
-
-
-
-
1.5
-
-
-
Operating cash flows before changes in working capital carried forward
130.8
91.8
75.1
116.2
140.9
136.5
-
-
-
Decrease/(increase) in trade and other receivables
(26.6)
18.7
(4.8)
(12.6)
(6.9)
0.3
Increase in property development costs
(1.2)
(3.5)
(4.7)
(14.8)
(14.9)
(17.7)
Decrease/(increase) in inventories
(0.9)
(8.3)
(2.5)
(5.0)
(2.7)
0.1
Increasel(decrease) in trade and other payables
(8.1)
9.3
2.9
12.9
7.1
(0.3)
Cash flows from operations
93.9
108.0
66.0
96.7
123.5
119.0
-
-
0.2
-
-
-
(28.8)
(22.2)
(16.4)
(26.7)
(32.8)
(31.5)
65.2
85.7
49.7
70.0
90.7
87.4
Proceeds from sales of livestock
0.3
0.3
0.3
-
-
-
Proceeds from disposal of property, plant and equipment
0.0
4.0
-
-
-
-
(25.8)
(27.6)
(13.9)
(25.0)
(25.0)
(25.0)
Purchase of biological assets
(8.9)
(11.1)
(12.3)
(10.0)
(10.0)
(10.0)
Purchase of livestock
(0.3)
(0.2)
(0.2)
-
-
-
Purchase of investment in marketable securities
-
(4.6)
-
-
-
-
Net cash outflow on acquisition of an estate
-
(4.0)
-
-
-
-
Profit on investments in Islamic funds
1.3
0.9
0.7
-
-
-
Interest received
0.6
0.4
0.5
-
-
-
(32.7)
(41.8)
(25.0)
(35.0)
(35.0)
(35.0)
Adjustments for
Inventories written down
Gain on disposal of property, plant and equipment
Interest expense
Negative goodwill on acquisition recognised in profit or loss
Impairment of goodwill
Unwinding discounts of the RPS
Income taxes refund
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Net cash flows used in investing activities
Financing activities
Repayment of hire purchase financing
Repayment of term loans
(0.3)
(0.4)
(0.5)
-
-
-
(60.9)
(18.1)
(22.8)
(24.5)
(10.0)
(10.0)
-
Drawdown of term loans
26.5
8.8
9.2
-
-
Cost of financing paid
(6.0)
(4.3)
(3.1)
-
-
-
(17.0)
(17.3)
(26.0)
(33.5)
(40.9)
(40.6)
(4.0)
(1.9)
(1.0)
-
-
-
0.0
0.5
0.9
-
-
-
-
-
-
62.7
-
-
(3.5)
(3.5)
(3.5)
-
-
-
0.4
-
-
-
-
-
Net cash flows (used in)/from financing activities
(64.8)
(36.3)
(46.8)
4.7
(50.9)
(50.6)
Net (decrease)/increase in cash and cash equivalents
Dividends paid to equity holders of the Company
Dividend paid to non-controlling interests
Proceeds from issuance of ordinary shares by subsidiaries to non-controlling interests
Proceeds from issuance of ordinary shares
Repayment of RPS
Release/(placement) of restricted cash
(32.3)
7.6
(22.1)
39.7
4.8
1.8
Cash and cash equivalents at 1 January
90.9
58.5
66.1
44.1
83.8
88.6
Cash and cash equivalents at 31 December
58.5
66.1
44.1
83.8
88.6
90.4
29
July 7, 2014
8. VALUATION AND RECOMMENDATION
8.1 SOP valuation
We have used the sum of parts (SOP) valuation methodology to arrive at our
target price for Tanah Makmur Berhad, as we believe that this method allows us
to apply the appropriate valuation methods to its various business segments.
8.2 Offers 50% upside to our target price of RM1.88
The group's plantation assets are the most valuable assets for the group and will
benefit from higher CPO prices. We value these assets at 12.6x forward P/E,
which represents a 30% discount to the 18x P/E we apply to large-cap
Malaysian planters that own more than 100,000 ha of planted estates. Based on
this, we arrived at a market valuation of RM505m for its plantation division.
For the property business, we assigned market value estimates to its 1,355 acres
of property landbank. We value its Kuantan landbank at RM7 per sq ft, which is
similar to the price that IJM Land had proposed to pay for the residential land
near Kuantan Port in a transaction announced in Dec 2013. We arrived at a
RNAV value of RM413m for the property assets. After applying a 50% discount
to its RNAV given that it is relatively new in the property market, we arrived at
a market valuation of RM207m for its property assets.
We used the discounted cashflow method to value the mining business as it
allows us to capture the short-term cashflow of this project. We discounted our
estimated cashflow from this at a discount rate of 13% and arrived at RM30m
as its share of the profit. In our mining cashflow projections, we have assumed
that the group will be able to sell its bauxite at US$46 per tonne.
We stripped out the group's net debt following the IPO from the total value of
the group's assets to arrive at its target price of RM1.88 per share. This
represents a 50% upside from its IPO price of RM1.25 per share. At our target
price, the implied forward P/E of the stock is 11.1x for FY14 and 9.1x for FY15.
This is at a discount to the average P/E of 17x for the Malaysian planters under
coverage, mainly to reflect the smaller market cap base of the stock. At our
target price, the implied EV/planted ha of TMB works out to be RM54.8k per
ha, which is conservative but takes into consideration the older age profile of its
estates.
Figure 39: SOP Valuation
Segments
Stake
Valuation method
Plantations
100%
FY15 P/E of 12.6x
Value (RMm)
504.8
Property
100%
50% discount to RNAV
206.6
Mining business
60%
DCF @ 13% discount rate
29.8
Cash
44.5
Debt
(38.8)
Sum of parts
746.8
No of shares (m)
398.2
Sum of parts (RM per share)
1.88
IPO price (RM per share)
1.25
Upside to our SOP valuation
50%
8.3 We expect a dividend payout of 50%
TMB plans to pay at least 30% of its net profit, excluding non-recurring income,
as dividends. We are projecting a higher dividend payout ratio of 50%, in view
of its strong cashflow from operations and balance sheet. This suggests a net
dividend yield of 4.5-5.5% at our target price.
30
July 7, 2014
Figure 40: Sector Comparisons
Price
Target Price
(local curr)
(local curr)
Market Cap
(US$ m)
CY2014
CY2015
3-year EPS
CAGR (%)
CY2014
CY2015
CY2014
CY2015
CY2014
CY2015
CY2014
CY2015
Hold
9.66
9.85
18,280
18.0
16.0
5.9%
1.93
1.82
11.1%
11.8%
10.3
9.1
2.8%
3.1%
IOI MK
Reduce
5.23
4.49
10,372
22.3
23.2
-3.8%
5.02
4.53
18.1%
20.5%
16.4
16.9
2.2%
2.2%
Kuala Lumpur Kepong
KLK MK
Reduce
24.26
22.50
8,062
22.4
19.8
7.1%
3.24
3.04
14.7%
15.9%
14.0
12.4
3.0%
3.0%
Felda Global Ventures
FGV MK
Hold
4.21
4.72
4,793
22.3
18.7
11.0%
2.22
2.10
10.1%
11.5%
10.8
9.5
2.2%
2.7%
Genting Plantations
GENP MK
Hold
11.62
11.10
2,775
23.0
20.6
16.1%
2.26
2.08
10.4%
10.6%
17.0
15.0
1.0%
1.0%
Hap Seng Plantations
HAPL MK
Hold
2.74
2.85
684
14.0
12.9
20.1%
1.09
1.05
7.8%
8.3%
8.5
7.5
4.3%
4.6%
JT MK
Reduce
2.64
2.40
797
17.8
12.6
33.3%
1.36
1.25
8.0%
10.3%
10.1
7.7
1.1%
1.6%
TAH MK
Add
4.34
4.68
502
14.3
11.5
52.2%
1.47
1.38
10.6%
12.4%
7.2
5.6
3.7%
2.4%
19.3
16.9
17.7%
2.3
2.2
11.4%
12.6%
11.8
10.5
2.5%
2.6%
7.1%
7.7%
13.7
12.0
1.3%
1.5%
Company
Sime Darby Bhd
IOI Corporation
Jaya Tiasa Holdings
Ta Ann
Bloomberg
Ticker
Recom.
SIME MK
Malaysia Average
Wilmar International
Golden Agri-Resources
First Resources Ltd
Indofood Agri Resources
Salim Invomas Pratama
P/BV (x)
Recurring ROE (%)
EV/EBITDA (x)
Dividend Yield (%)
WIL SP
Hold
3.20
3.47
16,422
14.9
12.9
3.4%
1.03
0.97
GGR SP
Hold
0.55
0.60
5,663
15.2
13.0
14.7%
0.63
0.61
4.4%
5.0%
9.3
8.6
2.1%
2.4%
FR SP
Add
2.36
2.75
2,998
14.7
10.6
14.5%
2.64
2.25
19.1%
22.9%
10.0
7.3
2.0%
2.8%
IFAR SP
Hold
1.00
1.15
1,131
16.1
15.0
13.5%
0.93
0.87
5.8%
6.0%
8.3
8.6
0.0%
0.0%
16.0
13.9
11.5%
1.2
1.1
8.2%
9.3%
10.6
9.6
1.3%
1.6%
6.0%
3.51
3.09
29.6%
24.0%
8.1
8.5
1.4%
2.6%
Singapore Average
Astra Agro Lestari
Core P/E (x)
AALI IJ
Add
27,600
32,300
3,648
13.2
13.7
SIMP IJ
Add
930
1,180
1,235
17.3
15.8
8.6%
1.03
0.97
5.9%
6.3%
7.5
8.2
1.2%
1.3%
London Sumatra
LSIP IJ
Hold
2,250
2,530
1,289
12.0
11.4
20.6%
2.00
1.80
18.5%
14.4%
7.0
5.9
2.0%
3.6%
Sampoerna Agro
SGRO IJ
Add
2,265
2,680
359
13.9
10.9
44.3%
1.44
1.30
10.9%
12.5%
7.0
5.8
0.5%
1.4%
BW Plantation
BWPT IJ
Add
1,205
1,520
456
13.6
9.9
54.7%
2.09
1.74
16.1%
19.1%
10.9
7.9
0.1%
0.3%
Indonesia Average
14.0
12.3
26.9%
2.0
1.8
16.2%
15.3%
8.1
7.3
1.0%
1.8%
Average (all)
16.9
14.8
18.5%
1.9
1.8
11.8%
12.4%
10.4
9.3
1.8%
2.1%
SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG
THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR OTHER JURISDICTION
WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION. THIS DOCUMENT HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR
31
July 7, 2014
9. APPENDICES
9.1 Board of Directors and key management
Figure 41: Director profiles
Name
YAM Tengku Tan Sri (Dr)
Hajjah Meriam binti Sultan
Haji Ahmad Shah
Designation
Chairman and NonIndependent NonExecutive Director
Age
59
YM Tengku Dato’ Zubir bin Managing Director
Tengku Dato’ Ubaidillah
52
YM Tengku Dato’ Ahmad Non-Independent NonFaisal bin Tengku Ibrahim Executive Director
48
YH Dato’ Wan Bakri bin
Wan Ismail
Non-Independent NonExecutive Director
60
YBhg Tan Sri Dato’ Sri
Abdul Aziz bin Abdul
Rahman
Independent NonExecutive Director
68
YH Dato’ Cheong Keap Tai Independent NonExecutive Director
66
Profile
She was conferred a honorary doctorate in social development from Lim Kok Wing University in 2013. She
started her career as the executive vice chairman of TAS Industries on 1 September 1990. She then joined
Kurnia Setia on 27 June 2005 when she was appointed as a director of Kurnia Setia. Subsequent to the
Privatisation, YAM Tengku Tan Sri (Dr) Hajjah Meriam binti Sultan Haji Ahmad Shah assumed the positions of
Deputy Chairman of Tanah Makmur on 31 January 2011 and thereafter as the Chairman on 24 September 2013.
Currently, she also sits on the board of directors of various private limited companies.
He graduated with a Bachelor of Science (Computer Science) from California State University, Chico, USA in
1986. He started his career with Petroliam Nasional Berhad (“PETRONAS”) as an information system executive
in 1986. He was then promoted to the position of head of computer operation in PETRONAS. In 1988, he joined
the Road Builder (M) Holdings Berhad’s group of companies as the corporate affairs manager and was
appointed as their group general manager, property division in 1994. He subsequently resigned in 1998. From
1998 to 2004, he was involved in his own private businesses which include the construction of East Coast
Expressway, trading in construction materials and quarrying. He joined Kurnia Setia in 2005 as the general
manager of corporate development and on 1 January 2006 he was appointed as the chief operating officer. On 8
November 2008, he was promoted to the position of managing director of Kurnia Setia. Subsequent to the
Privatisation, YM Tengku Dato’ Zubir bin Tengku Dato' Ubaidillah was transferred to our Company and assumed
the current position of Managing Director of Tanah Makmur. Currently, he also sits on the board of directors of
various private limited companies.
He graduated with a Bachelor of Science (Hons) Degree from the London School of Economics, United
Kingdom in 1988. He began his career in 1988 as a dealers’ representative with RHB Securities Berhad until
1990 and thereafter with PB Securities Berhad from 1991 to 1995. He assumed the position of the chief
executive officer in Kitaran Ventures Sdn Bhd from 1997 to 2000. He also held directorships in ING Bhd from
1994 to 2012, Ekovest Berhad from 1995 to 1998, Nanyang Press Holdings Berhad from 1996 to 2001,
Putrajaya Perdana Berhad from 2008 to 2009, and EON Capital Bhd from 2010 to 2011. On 31 January 2011,
he joined Tanah Makmur as a Non-Independent Non-Executive Director. Currently, he also sits on the board of
directors of various private limited companies
He graduated with a Bachelor of Social Science from Universiti Sains Malaysia in 1994. He started his career
as the supervisor of LKPP in 1980 and was promoted to the position of executive officer of administration of
LKPP in 1994. He was appointed as manager of administration in 2002 and as manager of finance in 2010. He
assumed the position of deputy general manager of LKPP in 2011 until his promotion to the position of general
manager in 2014. Currently, he also sits on the board of directors of various subsidiaries of LKPP.
He graduated with a Bachelor of Commerce in Accountancy from University of New South Wales Sydney,
Australia in 1970. He holds a professional certificate from the Malaysian Institute of Certified Public
Accountants and is a member of the Malaysian Institute of Accountants. He was a consultant with Price
Waterhouse & Co (Sydney) Australia from 1969 and 1972. He then joined Malaysian Airlines System Berhad
as manager of finance from 1972 to 1981. Soon after that, he assumed the position of managing director of
Bank Kerjasama Rakyat Malaysia Berhad from 1981 to 1982. He sat on the board of directors of various private
and public listed companies such as Federal Land Development Authority (FELDA) from 1986 to 1991. He was
also the chairman of Mentiga Corporation Berhad from 1989 to 1993, and the chairman of Far East Holdings
Berhad from 1991 to 1994. Currently, he sits on the board of directors of various private and public listed
companies.
He graduated with a Bachelor of Accountancy from the National University of Singapore in 1973. He is a
Chartered Accountant of Malaysian Institute of Accountants and a member of the Malaysian Institute of
Certified Public Accountants, a member of the Malaysian Institute of Taxation and Licensed Tax Agent and
also a member of the Institute of Chartered Secretaries and Administrators. He was also the executive director
and partner of Coopers & Lybrand, and upon its merger with Price Waterhouse, he was the executive director,
partner and chairman of the governance board of PricewaterhouseCoopers until his retirement in 2003. He
assumed the position of non-independent non-executive director of Cement Industries of Malaysia Berhad from
2001 to 2009, Opus Group Berhad from 2007 to 2009, Opus International Group Plc from 2001 to 2007, and
was formerly the non-executive director of Kualiti Alam Sdn Bhd from 2001 to 2010 and Commerce Assets
Venture Sdn Bhd from 2005 to 2011. Currently, he is a partner of Ash’ari Cheong and he sits on the board of
directors of various public listed companies.
32
July 7, 2014
Figure 42: Director profiles (continued)
Name
Designation
YH Dato’ Thavalingam A/L Independent NonC. Thavarajah
Executive Director
Age
49
Profile
He graduated with a Bachelor of Law from Liverpool Polytechnic United Kingdom in 1988. He was admitted as a
Barrister-at-Law, Gray’s Inn United Kingdom in 1989. He was then called to the Malaysian Bar in 1990. He
commenced his legal practice in Messrs Shearn Delamore & Co after he was called to the Malaysian Bar. He
became a partner at Messrs Zaid Ibrahim & Co from 2000 to 2010. He is currently a partner with Messrs Lee
Hishammuddin Allen & Gledhill. He also assumed the position of director of Gading Sari Aviation Services Sdn
Bhd from 2010 to 2013. YH Dato’ Thavalingam had been appointed in 2008 by the Government to serve on the
National Labour Advisory Council for a two-year term. He was also the honorary secretary of the Malaysian
Employers Federation from 2006 to 2011. He currently sits on the editorial advisory board of the Industrial Law
Reports.
She obtained her Bachelor of Accounting and Finance from the Leeds Metropolitan University, United Kingdom
in 1984 and a Master of Business Administration from the University of Hull, United Kingdom in 1991. She also
obtained a Doctorate in Business Administration in 2002, focusing on capital markets research and
specialising in derivatives. She started her career as a finance executive in Sri Communication Engineering Sdn
Bhd between 1984 and 1987. From 1987 to 1988, she joined Sri Communication Turnkey Sdn Bhd as a
financial controller. She then assumed the position of director of finance and administration in Sri
Communication Group, which is inclusive of Sri Communications Sdn Bhd, Sri Communication Travel Sdn Bhd,
Sri Communications Options and Futures Sdn Bhd and Sri Communication Engineering Sdn Bhd from 1988 to
2000. She also has previous board appointments at the Commodity and Monetary Exchange of Malaysia, from
1993 to 1996 and subsequently assumed the position of chief operating officer of Kuala Lumpur and Financial
Exchange and Malaysian Derivatives Exchange (“MDEX”) in 2001. She was then appointed as the head of
exchanges, managing the operations of KLSE (now known as Bursa Securities), Malaysian Exchange of
Securities Dealings and Automated Quotation (MESDAQ), MDEX and Labuan International Financial
Exchanges in September 2003, prior to KLSE’s demutualisation. In 2004 until 2006, she assumed the position
of chief executive officer of RHB Securities Sdn Bhd. She was the consultant for the RHB Group in Singapore
from 2007 to 2008. She was also the consultant to Financial Technologies Middle East in the setting up of
Bahrain Financial Exchange which was launched in January 2009. She joined MAA Takaful Bhd as an
independent director and chairman of the audit and risk committee from 2007 to 2012, and was appointed as an
independent director and member of the audit committee of EON Capital Bhd and EON Bank Bhd from 2010 to
2011. She also assumed the positions of independent director and member of the audit committee of MIMB
Investment Bank Berhad from 2011 to 2013. She was also an independent director of Zurich Insurance
Malaysia Berhad from 2012 to 2013. Currently, she sits on the board of directors of various private and public
listed companies.
YH Dato’ Dr Zaha Rina
binti Zahari
53
Darawati Hussain binti
Dato’ Seri Abdul Latiff
45
She graduated with a Bachelors’ Degree in Economics and Accountancy from Durham University, United
Kingdom in 1991 and a Masters in Business Administration from London Business School, United Kingdom in
1998. She had also obtained the Chartered Financial Analyst (CFA) qualification in 2001. She started her
career in 1991 as an executive of corporate finance/advisory with Commerce International Merchant Bankers
Berhad and subsequently left as a manager in 1996. She then spent five years from 1997 to 2001 in London
where she was a European equities portfolio manager in Mondrian Investment Partners Limited, a fund
management company. In September 2001, she re-joined CIMB group to set up and develop the private equity
arm, where she was the head of Private Equity and Venture Capital of CIMB until August 2012, overseeing a
private equity portfolio of more than 50 companies that operate in different sectors and in various stages of
business maturity. Subsequently, she was made head of Co-investor and Fund Relations of CIMB Group
Strategy and Strategic Investments (CIMB GSSI) until April 2014. In April 2014, she left CIMB group to become
the executive director of Syalin Sdn Bhd, a family run company involved in property investment and investment
holding activities. Currently, she also sits on the board of directors of various private companies.
YM Tengku Dato’ Uzir bin
(Alternate Director to
Tengku Dato’ Ahmad
Faisal bin Tengku Ibrahim)
Alternate Director to YM
Tengku Dato’ Ahmad
Faisal bin Tengku
Ibrahim
55
He graduated with a Bachelor of Science (Hons) Degree in Civil Engineering from the University of London,
United Kingdom in 1983. He started his career in Jabatan Kerja Raya as the design and research section
geotechnical engineer in 1983. He was then promoted to the position of assistant resident engineer under Felda
Unit of Jabatan Kerja Raya in 1984 until 1985. He joined Road Builder (M) Sdn Bhd as a director from 1988 to
1999 and he also held the position of director of Road Builder (M) Holdings Berhad between 1992 and 2005. He
was also the director cum group chief executive officer of Malaysian Investment Corporation Berhad from 1990
to 1993. Currently, he is a director of Kumpulan Unik BBP Sdn Bhd, a position he holds since 1997. He joined
Kurnia Setia on 19 November 2004 as a non-executive director as a nominee of HRH Tengku Abdullah Ibni
Sultan Haji Ahmad Shah. Subsequent to the Privatisation, YM Tengku Dato’ Uzir bin Tengku Dato' Ubaidillah
was transferred to our Company and assumed the position of Executive Director of Tanah Makmur on 1 January
2011. He resigned on 3 December 2013 from his position of Executive Director of Tanah Makmur and on the
same day was appointed as the Alternate Director to YM Tengku Dato’ Ahmad Faisal bin Tengku Ibrahim.
Currently, he is the executive chairman of WZ Satu Berhad and he also sits on the board of directors of various
private limited companies.
33
July 7, 2014
Figure 43: Key Management
Name
Designation
YM Tengku Dato’ Zubir bin Managing Director
Age
52
Profile
Refer to Board of Directors' profile
Teh Foo Hock
Chief Financial Officer
49
He is a member of the Malaysian Institute of Certified Public Accountants and a chartered accountant with the
Malaysian Institute of Accountants since 1996. He is also an associate member of the Malaysian Institute of
Taxation since 1997 and the Institute of Internal Auditors of Malaysia since 1999. He began his career with
Messrs. Coopers & Lybrand (now known as PricewaterhouseCoopers) (“PwC”) in 1985 as an article clerk. He
held a few positions in PwC, including audit senior and audit supervisor. In 1996, he was then promoted to audit
and assurance manager. He left PwC in April 1997 to join Kinsteel Berhad (a public listed company on the Main
Market of Bursa Securities) in May 1997 as group accountant. In 2002, his job responsibility was expanded to
include head of treasury. He had held the position of group accountant/head of treasury in Kinsteel Berhad until
his resignation in April 2014. He also held the role as joint company secretary of Kinsteel Berhad from August
2012 to September 2013. During his tenure in Kinsteel Berhad group, he was responsible for the preparation of
various financial projections, budgets, product costing reports and monthly management reports. He also
managed Kinsteel Berhad group’s financial and accounting policies and monitored foreign exchange exposure.
Suzilah binti Haji Wahid
Company Secretary
53
She pursued the professional course of Institute of Chartered Secretaries and Administrators (ICSA) in
University Teknologi MARA and later furthered the said professional course in London School of Accountancy,
United Kingdom from 1985 to 1987. She started her career in 1987 with LKPP as the group company secretary
until 1995. She was the company secretary of Kurnia Setia since 7 November 1995 when it was still listed.
Subsequent to the Privatisation, she was transferred to TMB and assumed the same position until present.
Abdul Razak bin Md Yusof General Manager,
Finance and Accounts
56
He graduated with a Diploma in Accountancy from University Teknologi Mara in 1991. He subsequently obtained
a Bachelor of Accountancy (Honours) from the same university in 2000. He is a member of the Malaysian
Institute of Accountants since April 2001. He started his career in 1978 with Syarikat Ladang LKPP Sdn Bhd
until 1984. He later joined Kurnia Setia in 1984 as a special grade accounts clerk and in 1992 he was promoted
to account executive. In 1995, he was appointed as assistant account manager and subsequently as finance
manager in 2005. In 2008, he was then promoted to senior finance manager. Subsequent to the Privatisation,
Abdul Razak bin Md Yusof was transferred to the Company and assumed the position of General Manager,
Finance and Accounts of Tanah Makmur on 1 July 2011.
Alias bin Awang
52
He graduated with a Master of Business Administration from University Utara Malaysia in 2012. He started his
career in 1990 with Golden Hope Berhad as cadet assistant manager until 1991. From 1991 to 1999, he was the
assistant manager of Austral Enterprises Berhad. After that, he held the post of manager of Kosma Plantation
Berhad from 1999 to 2002. Soon after that, he assumed the position of manager of IOI Corporation Berhad from
2002 to 2006 and he joined Kurnia Setia as the head of plantation development in 2006. Subsequent to the
Privatisation, Alias bin Awang was transferred to the Company and assumed the position of General Manager,
Plantation of Tanah Makmur on 1 July 2011.
Azlan Shah bin Haji Mohd Senior Project Manager
Yusoh
40
He graduated with a Bachelor of Science in Land Surveying and Mapping Science from University of Newcastleupon-Tyne, United Kingdom in 1997. He started his career in 1997 in Highway Development Corporation Sdn
Bhd. In 2002 he joined Tastu Bina as administration and safety manager. From 2002 to 2005, he was the head
of plant, machinery and equipment of BBP Bina Sdn Bhd. He joined Kurnia Setia as the project manager in
2006 and was promoted to the position of senior project manager on 1 April 2010. Subsequent to the
Privatisation, Azlan Shah bin Haji Mohd Yusoh was transferred to the Company and assumed the same position
until present.
Tumaran bin Wongso
54
He graduated with Bachelor of Applied Science from University Sains Malaysia in 1984. He started his career on
1 June 1985 with LKPP as plant operating officer until 1993. He was the manager, human resources and
administration of Kurnia Setia since 1 January 1993. Subsequent to the Privatisation, he was transferred to the
group and assumed the current position.
General Manager,
Plantation
Head of Human
Resources and
Administration
34
July 7, 2014
Figure 44: Key Management (continued)
Name
Ashraf bin Abbas
Designation
Head of Corporate
Development
Age
51
Mohd Farizan bin Md
Dalimi
Head of KotaSAS (in
charge of technical
aspects and projects)
34
YM Tengku Amir Nasser
Ibni Tengku Ibrahim
Head of KotaSAS (in
charge of administration
and finance)
28
Hishamuddin bin Mohd
Yunus
Head of Palm Oil Mill
Operations
36
Mohamed Azmaili bin
Ismail
Head of Internal Audit
57
Profile
He graduated with a Bachelor of Science in Business Administration from California State University,
Sacramento, USA in 1987. He started his career in 1991 with Kewangan Usaha Bersatu Berhad as credit and
marketing officer until 1993. From 1993 to 2002, he was the branch manager of Malaysia Building Society
Berhad. Soon after that, he assumed the position of audit executive of Kurnia Setia from 2002 to 2005. From
2006 to 2009, he was the assistant manager of corporate development and was promoted to corporate
development manager on 1 April 2010. Subsequent to the Privatisation, Ashraf bin Abbas was transferred to the
Company and assumed the current position of Head of Corporate Development.
He graduated with a Bachelor of Civil Engineering from Universiti Teknologi Malaysia in 2002. He started his
career in 2002 with Kumpulan Unik BBP Sdn Bhd as a project engineer until 2010. During his employment with
Kumpulan Unik BBP Sdn Bhd, he was involved in several projects in relation to PLUS expressways, East
Coast expressway and project work under Jabatan Kerja Raya Malaysia. In July 2011, he joined Tanah Makmur
as the Project Manager and was subsequently promoted to the position of Head of KotaSAS (in charge of
technical aspects and projects) in August 2011.
He graduated with a Bachelor in Business and Marketing Management from Oxford Brookes University, United
Kingdom in 2008. He interned with ING Funds in 2007 and was involved in promoting financial products. He was
a trainee in a private equity firm, Parish Capital Advisors Europe LLP in 2010. In January 2012, he joined Tanah
Makmur as the Project Manager. He was subsequently promoted as the Head of KotaSAS (in charge of
administration and finance) in January 2013.
He graduated with a Diploma in Mechanical Manufacturing from Universiti Teknologi MARA in 1998 and a
Diploma in Palm Oil Milling Technology and Management from Malaysia Palm Oil Board in 2003. He also
obtained a professional certificate of second grade Steam Engineer Certification from the Department of Safety
and Health of Malaysia in 2005. He started his career in 2002 with Kumpulan Guthrie Berhad as an assistant
manager until 2006 and was promoted to the position of mill manager in 2006 under the same company. He
was also the mill manager of Prosper Group of Companies between 2012 and 2013. In May 2013, he joined
Tanah Makmur to head the palm oil operations of TMB.
He graduated with a Bachelor of Management (Honours) from Open University, Kuala Lumpur in 2006. He
started his career in 1984 until 1992 with Syarikat Ladang LKPP Sdn Bhd. He joined Kurnia Setia in 1992 as a
special grade accounts clerk and was appointed as an internal audit executive in 1995. In 2004, he was
promoted to assistant manager, internal audit. Subsequent to the Privatisation, Mohd Azmaili bin Ismail was
transferred to the Company and promoted to the post of Head of Internal Audit of Tanah Makmur in July 2011.
He is also an associate member of the Institute of Internal Auditors Malaysia since September 1994.
35
July 7, 2014
9.2 Photos from our visit to Tanah Makmur’s estates,
property project and mining site
Figure 45: Entrance to Tanah Makmur’s estate
Figure 46: Inter-planting at estates due for replanting
Figure 47: Tanah Makmur’s CPO mill
Figure 48: Tanah Makmur’s property project
Figure 49: Bauxite mining site
Figure 50: Bauxite extracted
36
July 7, 2014
Notes:
37
July 7, 2014
Notes:
38
July 7, 2014
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39
July 7, 2014
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
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owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.
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Corporate Governance Report:
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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.
Score Range:
90 – 100
80 – 89
70 – 79
Below 70 or
No Survey Result
Description:
Excellent
Very Good
Good
N/A
40
July 7, 2014
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
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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
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Distribution of stock ratings and investment banking clients for quarter ended on 31 March 2014
1416 companies under coverage for quarter ended on 31 March 2014
Rating Distribution (%)
Investment Banking clients (%)
Outperform/Buy/Trading Buy/Add
56.2%
4.6%
Neutral/Hold
28.0%
2.7%
Underperform/Sell/Trading Sell/Reduce
15.8%
1.0%
As at the time of publishing this report CIMB is phasing in an absolute recommendation structure for stocks (Framework #1). Please refer to all frameworks for a definition of any
recommendations stated in this report.
CIMB Recommendation Framework #1
Stock Ratings
Add
Hold
Reduce
Definition
The stock’s total return is expected to exceed 10% over the next 12 months.
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
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
Overweight
Neutral
Underweight
Definition
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
CIMB Stock Recommendation Framework #2 *
Outperform
Neutral
Underperform
Trading Buy
Trading Sell
The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.
The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.
The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.
The stock's total return is expected to exceed a relevant benchmark's total return by 3% or more over the next 3 months.
The stock's total return is expected to be below a relevant benchmark's total return by 3% or more over the next 3 months.
* This framework only applies to 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. Occasionally, it is permitted for the total expected returns to be temporarily
outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
41
July 7, 2014
CIMB Stock Recommendation Framework #3 **
Outperform
Neutral
Underperform
Trading Buy
Trading Sell
Expected positive total returns of 10% or more over the next 12 months.
Expected total returns of between -10% and +10% over the next 12 months.
Expected negative total returns of 10% or more over the next 12 months.
Expected positive total returns of 10% or more over the next 3 months.
Expected negative total returns of 10% or more over the next 3 months.
** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is
permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
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, BEC - Very Good, BGH - not available, BJC – Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET – Very Good, CENTEL – Very Good, CK Excellent, CPALL - Very Good, CPF – Excellent, CPN - Excellent, DELTA - Very Good, DTAC - Excellent, EGCO – Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY –
Excellent, HANA - Excellent, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Excellent, ITD – Very Good, IVL - Excellent, JAS – Very Good, KAMART – not available,
KBANK - Excellent, KKP – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR – Very Good, MAKRO – Very Good, MCOT - Excellent, MEGA – not available,
MINT - Excellent, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent,
SAMART – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI – Very Good, SPALI - Excellent, STA - Good, STEC - 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.
42
July 7, 2014
Asia
Malaysia
Level 17, Menara CIMB
Jalan Stesen Sentral 2
Kuala Lumpur Sentral
50470 Kuala Lumpur.
T: +60 (3) 2261 8888
F: +60 (3) 2261 8899
Singapore
50 Raffles Place
#19-00
Singapore Land Tower (S048623)
T: +65 6225-1228
F: +65 6224-6906
Indonesia
The Indonesia Stock Exchange Building
Tower II, 20th Floor
Jl. Jend. Sudirman, Kav. 52-53
Jakarta 12190
T: +62 (21) 515-1330
F: +62 (21) 515-1335
Thailand
132 Sindhorn Tower 3, 12th Floor
Wireless Road, Lumpini, Pathumwan
Bangkok 10330
T: +66 (2) 841-9000
F: +66 (2) 657-9240
Hong Kong
Units 7706-08, Level 77
International Commerce Centre
1 Austin Road West Kowloon
T: +852 2868-0380
F: +852 2537-1928
China
Unit 802 AZIA Center
1233 Lujiazui Ring Road
Pudong New District
Shanghai 200120
T: +86 (21) 6194-0212 / +86 (21) 6194-0218
Sri Lanka
Level 33, West Tower
World Trade Center
Echelon Square
Colombo 01
Sri Lanka
John Keells Stock Brokers (Pvt) Ltd
(a strategic partner with CIMB Securities)
130 Glennie Street
Colombo 00200
T: +94 (0) 11 230 6271
F: +94 (0) 11 234 2068
Philippines
SB Equities, Inc.
(a strategic partner with CIMB Securities)
18F Security Bank Centre
6776 Ayala Ave.
Makati 0719
T: +63 (2) 891-1243 / +63 (2) 891-1258
F: +63 (2) 813-3349
Taiwan
CIMB Securities Limited, Taiwan Branch
76F, No. 7, Xin-Yi Road Sec. 5
Taipei City
T: +886 (2) 8729-8388
F: +886 (2) 8729-8391
South Korea
CIMB Securities Limited, Korea Branch
15F, S-Tower, 116 Shinmun-ro 1-ga
Jongro-gu, Seoul 110-700
T: +82 (2) 6730-6000
F: +82 (2) 6730-6183
India
CIMB Securities (India) Pvt. Ltd.
Equinox Business Park, Tower III
LBS Marq, Off BKC, Kurla (W)
Mumbai 400070
T: +91 (22) 4263-0203
Vietnam
CIMB Securities International Ltd.
90 Pasteur Street
District 1, HCMC
Vietnam
T: +84 839146925
F: +84 839 146924
Europe
Americas
United Kingdom
(2719607)
27 Knightsbridge
London, SW1X 7YB
T: +44 (20) 7201-2199
F: +44 (20) 7201-2191
USA
(52-1971703)
540 Madison Avenue
11th Floor, New York, N.Y. 10022
T: +1 (212) 616 8600
F: +1 (212) 616 8639
Australia
Sydney
Level 29, Aurora Place
88 Phillip Street
Sydney, NSW 2000
+61 2 9694 5000
Melbourne
Level 32, 101 Collins St
Melbourne, VIC 3000
+61 3 9631 1000
43
July 7, 2014
44

Tanah Makmur Berhad

Transcription

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