Refer to important disclosures at the end of this report Version 14 Bloomberg: FGV MK Reuters: FGVH.KL AllianceDBS Research, Malaysia Equity 24 Nov 2017 HOLD Last Traded Price ( 23 Nov 2017): RM1.84 (KLCI : 1,721.27) Price Target 12-mth: RM1.85 (1% upside) (Prev RM1.50) Shariah Compliant: Yes Analyst Marvin KHOR +60 32604 3911 marvinkhor@alliancedbs.com What s New 3Q/9M17 core earnings beat expectations, turning around y-o-y and q-o-q Sugar segment turned around on lower raw material costs; Plantations lifted by volume rebound Growth outlook for FFB improved as yields start to normalise, expect more earnings stability Raise FY17/18/19F earnings by 77%/20%/9% for better Sugar margins and improved FFB yields, TP raised to RM1.85 maintain HOLD Back to shipshape? Earnings start to stabilise. FGV produced a strong 3Q performance to maintain its 9M17 core earnings turnaround, in part due to its Sugar arm swinging back into the black as raw sugar prices ease. Plantations operations also benefited from continuingly firm CPO prices, while FFB yields began to normalise as labour issues were worked through. We think the rebound in bottomline and improved corporate and management stability will also improve investor sentiment on the stock. Following our earnings revisions, our TP rises to RM1.85 maintain HOLD. Where we differ. Plantations segment has room to improve. Consensus views are quite diverged on FGV. Our forward year (FY18 onwards) forecasts are higher than the market average as we pencil in the normalisation of margins, vs some forecasts of continued loss-making or minimal profits. Price Relative 5.1 4.6 4.1 3.6 3.1 2.6 2.1 1.6 RM 1.1 27 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 (LHS) Relative KLCI (RHS) Relative Index Forecasts and Valuation FY Dec (RM m) 2016A 2017F 2018F 2019F Revenue 17,241 17,423 17,917 18,503 EBITDA 985 1,154 1,388 1,534 Pre-tax Profit 260 295 472 562 Net Profit 31.5 196 278 347 Net Pft (Pre Ex.) (156) 196 278 347 Net Pft Gth (Pre-ex) (%) (38.0) nm 41.6 24.8 EPS (sen) 0.86 5.38 7.62 9.51 EPS Pre Ex. (sen) (4.3) 5.38 7.62 9.51 EPS Gth Pre Ex (%) 38 (226) 42 25 Diluted EPS (sen) 0.86 5.38 7.62 9.51 Net DPS (sen) 2.00 5.00 5.38 6.15 BV Per Share (sen) 159 159 162 167 PE (X) 213.3 34.2 24.1 19.4 PE Pre Ex. (X) nm 34.2 24.1 19.4 P/Cash Flow (X) 6.0 6.8 6.8 6.2 EV/EBITDA (X) 12.8 11.3 9.7 9.0 Net Div Yield (%) 1.1 2.7 2.9 3.3 P/Book Value (X) 1.2 1.2 1.1 1.1 Net Debt/Equity (X) 0.6 0.7 0.7 0.7 ROAE (%) 0.5 3.4 4.7 5.8 Earnings Rev (%): 77 20 9 Consensus EPS (sen): 2.70 4.20 6.20 Other Broker Recs: B: 1 S: 2 H: 9 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P 207 187 167 147 127 107 87 67 47 Potential catalyst. Bottomline improvement. The key barrier to FGV s re-rating is the persistence of weak profitability and/or losses. Improvements on this front in the near term via stronger Sugar segment earnings or effective cost measures will help buoy its share price. Valuation: Our DCF-based TP is raised to RM1.85, which takes into account our revised CY17/18/19F CPO price forecasts of RM2,760/2,620/2,600 per MT. Maintain HOLD. Key Risks to Our View: A consistent delivery of profitability above our forecasted levels may enhance the stock s fundamentals, which will bode well for its share price performance. At A Glance Issued Capital (m shrs) 3,648 Mkt. Cap (RMm/US$m) 6,713 / 1,633 Major Shareholders (%) Lembaga Kemajuan Tanah Persekutuan 20.0 Federal Land Development Authority 12.4 Lembaga Tabung Haji 7.9 Free Float (%) 42.1 3m Avg. Daily Val (US$m) 2.7 ICB Industry : Consumer Goods / Food Producers Refer to important disclosures at the end of this report ed: CK / sa:bc, PY
WHAT S NEW Sugar and volume uplift helped sequential rebound Comfortably in the black. FGV announced a 3Q17 headline profit of RM38.8m (turned around y-o-y, +50% q-o-q), which after stripping out net LLA charges and impairments reveals core earnings of RM78.2m, turning around both y-o-y and q- o-q. Thus, 9M17 core earnings came to RM124.5m, which was ahead of expectations. An interim dividend of 5 sen was also announced with an ex-date of 7 Dec (vs none last year). Plantations were lifted by better yields and prices. 3Q17 Plantations EBIT (pre-lla charges) was also firmly stronger at RM206.4m (+35% y-o-y, +15% q-o-q), driven by higher CPO production of 844.7k MT (+8% y-o-y, +18% q-o-q). This in turn was supported by FFB volume recovery to 1.23m MT (+10% y-o-y, +18% q-o-q) as FFB yields leapt to 4.44 MT/ha (+7% y-o-y, +17% q-o-q). The other key contributor was CPO ASPs of RM2,665/MT (+7.5% y-o-y, -4.5% q-o-q). 9M17 Plantations EBIT thus came to RM490m, or 78% higher y-o-y. Much needed Sugar segment turnaround. The Sugar segment returned to positive EBIT in 3Q17 to the tune of RM23.3m, though still 32% lower y-o-y which represents a swifter breakeven than we had expected. This recovery was spurred by the lower raw sugar prices (-11% q-o-q), which helped restore margins. This reduced 9M17 Sugar LBIT to RM17.9m (vs EBIT of RM137.6m in 9M16). Group projecting higher optimism, especially on output. In its earnings call, management retained its FFB output target of 4.3m MT in FY17 (+10% y-o-y), supported by improving yields from both rising young palm contributions and progress towards getting its optimal number of workers. This implies a potential 31% rise for 4Q17 output given the small base in 4Q16. Further, the group expects FFB growth in FY18 to rebound to 13%, given a full year of yield normalisation and assuming no weather anomalies. Core earnings on a good path. The group is expecting CPO prices to be stable around the RM2,600-2,800/MT level in the coming months, which together with its volume trajectory, imply strong Plantations earnings ahead. On its Sugar arm, raw sugar prices are also expected to stay around the current levels, thus giving rise to more profitable margins. All in, the outlook for core earnings is strong though 4Q17 may be marred by some one-off items as financial housekeeping activities are carried out, including some impairments and the likely sale of its stake in AXA Affin. With regard to cost measures, the group is also carrying a VSS exercise plus plans to apply more stringent controls to its capex going forward. More comfort in improved stability. We raise FY17/18/19F earnings by 77%/20%/9%, mainly on increasing FFB output assumptions by +7%/+9%/+9% for normalising yields (implying FFB growth of +8%/6%/2%); plus lifted margins for FY17F Sugar operations plus rising ASP for Plantations. The large swings are due to FGV s presently thin margins the implied net margins are still <2%. We think that the resumption of earnings consistency plus corporate and management stability will help ensure operational efficiency. After the earnings adjustments, our DCF-based TP is also raised to RM1.85. That said, even after revisions, we find that prospects are well baked in at the current share price maintain HOLD. Page 2
Quarterly / Interim Income Statement (RMm) FY Dec 3Q2016 2Q2017 3Q2017 % chg yoy % chg qoq Revenue 4,192 4,224 4,149 (1.0) (1.8) Cost of Goods Sold (3,733) (3,825) (3,552) (4.9) (7.1) Gross Profit 459 398 597 30.2 49.9 Other Oper. (Exp)/Inc (438) (240) (497) 13.6 107.5 Operating Profit 20.9 159 99.8 376.5 (37.1) Other Non Opg (Exp)/Inc 0.0 0.0 0.0 nm nm Associates & JV Inc (58.5) 9.54 5.35 nm (43.9) Net Interest (Exp)/Inc (23.2) (33.8) (30.2) (30.1) 10.5 Exceptional Gain/(Loss) 63.0 (47.2) 39.4 (37.5) (183.5) Pre-tax Profit 2.19 87.2 114 5,115.8 31.1 Tax (23.2) (58.4) (60.3) 159.6 3.3 Minority Interest (52.6) (2.9) (15.3) 71.0 423.9 Net Profit (73.6) 25.9 38.8 nm 49.6 Net profit bef Except. (10.6) (21.2) 78.2 nm (468.0) EBITDA (37.6) 168 105 nm (37.5) Margins (%) Gross Margins 10.9 9.4 14.4 Opg Profit Margins 0.5 3.8 2.4 Net Profit Margins (1.8) 0.6 0.9 Source of all data: Company, AllianceDBS Page 3
CRITICAL DATA POINTS TO WATCH Critical Factors Vast, but relatively old hectarage. FGV has c.338k ha of oil palm planted land in Peninsular Malaysia, the bulk of which (c.300k ha) is held under the Land Lease Agreement (LLA) it has with the Federal Land Development Authority (FELDA). It also has c.13k ha of plantations in Sabah from its acquisition of Pontian United Plantations in 2013, 13.5k ha in Sarawak from Asian Plantations Ltd in 2014, and 8.5k ha from Golden Land in 2015. Its overall age profile is old/mature as 40% of trees are 20 years or older. To remedy the age issue, FGV had earlier committed to a replanting scheme of 15k ha per year. We otherwise do not expect much new planting to commence as replanting is a higher priority. Expect a dip in production. We expect FGV to process c.13.7m MT of FFB in FY17 from its own plantations, FELDA settlers and third parties. FY17F CPO production expectation of c.2.9m MT (+8% y-o-y) relies on the sustainability of FFB yields from these sources. We view this as an indicator to focus on, as production in 2016 had been severely impacted by the lack of rainfall in 2015. CPO prices. Over 50% FGV s top-line comes from the sale of CPO and RBD (refined, bleached & deodorised) products. Growth in the ASP of CPO and the RBD products will be reflected in its revenue. Sugar arm contributions. FGV has a 51% stake in listed sugar manufacturer MSM Malaysia. It is the most profitable division as pretax contribution has been larger than group PBT, despite making up c.15% of revenues. However, PBT had come down 59% in 2016 due to higher raw sugar costs, which resulted in the group falling into the red. However, a hike in the retail sugar price came in March 2017 came as a relief to help ease margin pressures. Furthermore, following a fall in raw sugar costs in 3Q17, the unit managed to return to the black. Rubber plantation exposure. FGV derives c.5% of revenue from the sale of rubber products, comprising latex concentrate, Standard Malaysian Rubber (SMR), Standard Indonesian Rubber (SIR) and Cambodian Standard Rubber (CSR). Over 110k MT of rubber products are processed per year at its seven assets across the region, though management estimates its total capacity at around 258k MT. FGV also owns 12.4k ha of planted rubber land in Malaysia, with 3.5k ha unplanted. 2787.6 2389.4 1991.1 1592.9 1194.7 796.5 398.2 0.0 293264.3 234611.4 175958.6 117305.7 58652.9 0.0 3197.05 2557.64 1918.23 1278.82 639.41 0.00 2821.3 2257.0 1692.8 1128.5 564.3 0.0 4.3 3.5 CPO price (RM/MT) 2652 2760 2620 2600 2168 Mature palm oil hectarage 272805 282553 287514 286923 281993 CPO produced (k MT) 3101 3009 3134 2826 2664 Sugar revenue (RM m) 2657 2712 2758 2793 2307 Average USD/MYR 4.28 4.25 4.28 4.08 4.1 2.6 1.7 0.9 0.0 Source: Company, AllianceDBS Page 4
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Company Guide Appendix 1: FGV price correlation with critical factors Graph 1: Share price vs key benchmarks Indexed: Jun12 = 100 150 FGV MK FBMKLCI KLPLN Index Spot CPO price (RM/mt) 125 100 75 50 Expectations of weaker earnings Entrance of new CEO 25 0 First instance of headline losses in 3Q14; acquisition of Asian Plantations Ltd Proposed acquisition of Eagle High Plantations stake Weaker than expected 2Q16 announcement Source: Company, Bloomberg L.P., AllianceDBS FGV share price vs operating margins and core profit Remarks Indexed: Jun12 = 100 250 200 150 100 50 0-50 FGV MK Operating margin Core profit FGV s share price tracks the performance of its operating margins and core earnings. Negative share price movements were seen as FGV sunk into core losses since 4Q14. -100 Source: Company, Bloomberg L.P., AllianceDBS FGV share price vs CPO prices Remarks Indexed: Jun12 = 100 160 140 120 100 80 60 40 20 FGV MK Spot CPO price (RM/mt) FGV CPO production Over a prolonged timeframe, FGV s share price appears to be not heavily influenced by CPO prices. The relationship only held from its listing to end-2014 (correlation coefficient of >0.7), following which FGV s valuation became more impacted by its profitability (or lack thereof). 0 Source: Company, MPOB, Bloomberg L.P., AllianceDBS Page 5
Balance Sheet: Borrowings manageable for now but cash flows are pressured. FGV has is maintaining a net debt-to-equity of about 0.6x due to a cash pile of c.rm2.5bn at end-dec 2016. However, due to a thin free cash flow base, we forecast negative net cash flow which will cut into its liquidity. Thus, any deterioration in performance may require more debt to be taken on. 1.00 0.80 0.60 0.40 0.20 Leverage & Asset Turnover (x) 0.9 0.9 0.8 0.8 Share Price Drivers: Sustainably improving profitability. FGV s fundamental performance is limited by its low margins relative to its peers despite its sizeable turnover. Management intends to look at various initiatives to manage its cost base, including staff-related measures. If these efforts are successful, FGV may re-rate. Key Risks: Volatility in commodity prices and exchange rates. Continued depressed CPO prices would hurt earnings, especially for primarily upstream planters. Additionally, low crude oil prices may affect CPO demand for biofuel. Finally, CPO prices in ringgit terms are also directly affected by the currency s strength relative to the US dollar. Regulatory changes. Any further increase in Indian import duty of refined oils or changes in the structure of Indonesian/Malaysian export taxes would impact the demand for CPO/refined oils. 0.00 Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure RMm 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 Capital Expenditure (-) 5.0% 4.0% 3.0% ROE (%) 0.7 Extreme changes in the weather. Sudden and significant changes in rainfall and humidity can affect FFB yields in the later quarters. Weather. Changes in rainfall patterns (caused by either El Nino or La Nina) will affect FFB yields with some time lag. 2.0% 1.0% 0.0% (x) PB Band (x) Company Background FGV is an integrated agri-business player with significant palm oil hectarage in Peninsular Malaysia, involved in upstream and downstream palm oil operations, including harvesting, milling, processing, refining and distribution. It also has rubber plantations, and a 49% stake in major sugar manufacturer MSM Malaysia. 2.7 +2sd: 2.68x 2.2 +1sd: 2.08x 1.7 Avg: 1.48x 1.2-1sd: 0.88x 0.7 0.2-2sd: 0.28x Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Source: Company, AllianceDBS Page 6
Key Assumptions FY Dec CPO price (RM/MT) 2,168 2,652 2,760 2,620 2,600 Mature palm oil hectarage 272,805 282,553 287,514 286,923 281,993 CPO produced (k MT) 3,101 2,664 2,826 3,009 3,134 Sugar revenue (RM m) 2,307 2,657 2,712 2,758 2,793 Average USD/MYR 4.08 4.10 4.28 4.25 4.28 Segmental Breakdown FY Dec Revenues (RMm) Plantations 5,983 7,771 7,087 7,223 7,521 Sugar 2,307 2,664 2,712 2,758 2,793 Downstream 5,499 6,625 6,094 6,361 6,566 Others 1,770 181 1,530 1,575 1,623 Total 15,559 17,241 17,423 17,917 18,503 Income Statement (RMm) FY Dec Revenue 15,559 17,241 17,423 17,917 18,503 Cost of Goods Sold (13,613) (15,671) (15,680) (15,965) (16,430) Gross Profit 1,946 1,570 1,743 1,952 2,074 Other Opng (Exp)/Inc (1,645) (1,382) (1,371) (1,398) (1,427) Operating Profit 301 188 372 554 647 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 59.1 10.3 55.4 57.1 58.8 Net Interest (Exp)/Inc (128) (125) (132) (139) (143) Exceptional Gain/(Loss) 295 187 0.0 0.0 0.0 Pre-tax Profit 527 260 295 472 562 Tax (160) (194) (83.0) (127) (151) Minority Interest (185) (35.0) (15.7) (66.6) (64.4) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 182 31.5 196 278 347 Net Profit before Except. (113) (156) 196 278 347 EBITDA 1,211 985 1,154 1,388 1,534 Growth Revenue Gth (%) 2.0 10.8 1.1 2.8 3.3 EBITDA Gth (%) (0.3) (18.6) 17.2 20.3 10.5 Opg Profit Gth (%) (53.7) (37.5) 97.6 49.1 16.7 Net Profit Gth (Pre-ex) (%) nm (38.0) nm 41.6 24.8 Margins & Ratio Gross Margins (%) 12.5 9.1 10.0 10.9 11.2 Opg Profit Margin (%) 1.9 1.1 2.1 3.1 3.5 Net Profit Margin (%) 1.2 0.2 1.1 1.6 1.9 ROAE (%) 3.2 0.5 3.4 4.7 5.8 ROA (%) 0.9 0.2 0.9 1.3 1.7 ROCE (%) 1.2 0.3 1.4 2.2 2.6 Div Payout Ratio (%) 80.0 231.9 92.9 70.6 64.7 Net Interest Cover (x) 2.4 1.5 2.8 4.0 4.5 Source: Company, AllianceDBS Page 7
Quarterly / Interim Income Statement (RMm) FY Dec 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 Revenue 4,192 5,196 4,323 4,224 4,149 Cost of Goods Sold (3,733) (4,704) (3,947) (3,825) (3,552) Gross Profit 459 491 376 398 597 Other Oper. (Exp)/Inc (438) (80.2) (450) (240) (497) Operating Profit 20.9 411 (73.3) 159 99.8 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (58.5) 30.8 10.2 9.54 5.35 Net Interest (Exp)/Inc (23.2) (16.1) (33.3) (33.8) (30.2) Exceptional Gain/(Loss) 63.0 (206) 65.1 (47.2) 39.4 Pre-tax Profit 2.19 220 (31.3) 87.2 114 Tax (23.2) (114) 0.23 (58.4) (60.3) Minority Interest (52.6) 5.22 33.5 (2.9) (15.3) Net Profit (73.6) 111 2.47 25.9 38.8 Net profit bef Except. (10.6) (95.4) 67.6 (21.2) 78.2 EBITDA (37.6) 442 (63.1) 168 105 Growth Revenue Gth (%) 1.3 23.9 (16.8) (2.3) (1.8) EBITDA Gth (%) nm nm nm nm (37.5) Opg Profit Gth (%) (92.1) 1,862.7 (117.8) (316.4) (37.1) Net Profit Gth (Pre-ex) (%) (143.0) 799.5 (170.8) (131.4) (468.0) Margins Gross Margins (%) 10.9 9.5 8.7 9.4 14.4 Opg Profit Margins (%) 0.5 7.9 (1.7) 3.8 2.4 Net Profit Margins (%) (1.8) 2.1 0.1 0.6 0.9 Balance Sheet (RMm) FY Dec Net Fixed Assets 9,238 10,074 10,271 10,441 10,582 Invts in Associates & JVs 901 889 914 940 966 Other LT Assets 3,442 2,925 2,925 2,925 2,925 Cash & ST Invts 2,503 1,854 1,505 1,135 844 Inventory 2,078 2,189 2,111 2,149 2,212 Debtors 1,894 1,755 1,843 1,895 1,957 Other Current Assets 685 1,341 1,131 1,150 1,173 Total Assets 20,741 21,027 20,699 20,636 20,658 ST Debt 3,143 3,692 3,692 3,692 3,692 Creditor 1,282 1,460 1,357 1,382 1,422 Other Current Liab 770 940 938 944 948 LT Debt 2,092 1,675 1,675 1,675 1,675 Other LT Liabilities 5,115 5,062 4,811 4,554 4,294 Shareholder s Equity 5,827 5,794 5,808 5,904 6,077 Minority Interests 2,512 2,403 2,419 2,485 2,550 Total Cap. & Liab. 20,741 21,027 20,699 20,636 20,658 Non-Cash Wkg. Capital 2,606 2,885 2,790 2,869 2,972 Net Cash/(Debt) (2,732) (3,513) (3,862) (4,232) (4,523) Debtors Turn (avg days) 35.0 38.6 37.7 38.1 38.0 Creditors Turn (avg days) 38.1 33.5 34.5 33.0 32.9 Inventory Turn (avg days) 54.2 52.1 52.7 51.4 51.2 Asset Turnover (x) 0.8 0.8 0.8 0.9 0.9 Current Ratio (x) 1.4 1.2 1.1 1.1 1.0 Quick Ratio (x) 0.8 0.6 0.6 0.5 0.5 Net Debt/Equity (X) 0.5 0.6 0.7 0.7 0.7 Net Debt/Equity ex MI (X) 0.5 0.6 0.7 0.7 0.7 Capex to Debt (%) 22.2 17.7 18.1 18.6 19.0 Z-Score (X) 1.5 1.4 1.5 1.5 1.6 Source: Company, AllianceDBS Page 8
Cash Flow Statement (RMm) FY Dec Pre-Tax Profit 453 263 295 472 562 Dep. & Amort. 620 678 730 780 831 Tax Paid (136) (176) (59.1) (103) (126) Assoc. & JV Inc/(loss) (59.1) (10.3) (55.4) (57.1) (58.8) Chg in Wkg.Cap. (1,313) 140 98.0 (84.2) (106) Other Operating CF 182 223 (23.9) (23.9) (25.1) Net Operating CF (253) 1,118 985 983 1,078 Capital Exp.(net) (1,161) (951) (974) (998) (1,021) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 92.4 13.8 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF (430) 206 76.7 79.3 81.9 Net Investing CF (1,499) (731) (897) (918) (939) Div Paid (219) (73.0) (182) (182) (173) Chg in Gross Debt 1,050 341 0.0 0.0 0.0 Capital Issues (23.6) (5.7) 0.0 0.0 0.0 Other Financing CF (625) (820) (254) (252) (256) Net Financing CF 183 (558) (437) (434) (430) Currency Adjustments 16.0 17.7 0.0 0.0 0.0 Chg in Cash (1,553) (154) (349) (369) (291) Opg CFPS (sen) 29.0 26.8 24.3 29.3 32.4 Free CFPS (sen) (38.8) 4.56 0.29 (0.4) 1.55 Source: Company, AllianceDBS Target Price & Ratings History 2.16 2.06 RM 8 10 4 1: 23 Nov 16 1.55 1.50 FULLY VALUED 1.96 9 11 12 2: 14 Dec 16 1.71 1.50 FULLY VALUED 6 22 3: 10 Jan 17 1.76 1.50 FULLY VALUED 1.86 4: 10 Feb 17 1.95 1.50 FULLY VALUED 2 5 14 1.76 7 20 5: 17 Feb 17 1.85 1.65 FULLY VALUED 3 13 16 21 6: 01 Mar 17 1.87 1.65 FULLY VALUED 1.66 7: 10 Mar 17 1.83 1.65 FULLY VALUED 1718 15 1.56 8: 05 Apr 17 2.13 1.65 FULLY VALUED 19 9: 10 Apr 17 2.03 1.65 FULLY VALUED 1 1.46 10: 17 Apr 17 2.02 1.65 FULLY VALUED 11: 24 Apr 17 2.02 1.65 FULLY VALUED 1.36 12: 11 May 17 1.90 1.65 FULLY VALUED Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 13: 01 Jun 17 1.77 1.65 HOLD 14: 14 Jun 17 1.74 1.65 HOLD Note : Share price and Target price are adjusted for corporate actions. 15: 10 Jul 17 1.65 1.65 HOLD 16: 20 Jul 17 1.66 1.60 HOLD 17: 10 Aug 17 1.55 1.60 HOLD 18: 14 Aug 17 1.55 1.60 HOLD 19: 05 Sep 17 1.58 1.50 HOLD 20: 13 Sep 17 1.70 1.50 HOLD 21: 10 Oct 17 1.76 1.50 HOLD 22: 10 Nov 17 1.86 1.50 HOLD S.No. Date of Report Closing Price 12-mth T arget Price Rating Source: AllianceDBS Analyst: Marvin KHOR Page 9
DISCLOSURE Stock rating definitions STRONG BUY - > 20% total return over the next 3 months, with identifiable share price catalysts within this time frame BUY - > 15% total return over the next 12 months for small caps, >10% for large caps HOLD - -10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps FULLY VALUED - negative total return > -10% over the next 12 months SELL - negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date Page 10
DISCLAIMER This report has been prepared for information purposes only by AllianceDBS Research Sdn Bhd ( ADBSR ), a subsidiary of Alliance Investment Bank Berhad ( AIBB ) and an associate of DBS Vickers Securities Holdings Pte Ltd ( DBSVH ). DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. This report is strictly confidential and is meant for circulation to clients of ADBSR, AIBB and DBSVH only or such persons as may be deemed eligible to receive such research report, information or opinion contained herein. Receipt and review of this report indicate your agreement not to distribute, reproduce or disclose in any other form or medium (whether electronic or otherwise) the contents, views, information or opinions contained herein without the prior written consent of ADBSR. This report is based on data and information obtained from various sources believed to be reliable at the time of issuance of this report and any opinion expressed herein is subject to change without prior notice and may differ or be contrary to opinions expressed by ADBSR s affiliates and/or related parties. ADBSR does not make any guarantee, representation or warranty (whether express or implied) as to the accuracy, completeness, reliability or fairness of the data and information obtained from such sources as may be contained in this report. As such, neither ADBSR nor its affiliates and/or related parties shall be held liable or responsible in any manner whatsoever arising out of or in connection with the reliance and usage of such data and information or third party references as may be made in this report (including, but not limited to any direct, indirect or consequential losses, loss of profits and damages). The views expressed in this report reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendation(s) or view(s) in this report. ADBSR prohibits the analyst(s) who prepared this report from receiving any compensation, incentive or bonus based on specific investment banking transactions or providing a specific recommendation for, or view of, a particular company. This research report provides general information only and is not to be construed as an offer to sell or a solicitation to buy or sell any securities or other investments or any options, futures, derivatives or other instruments related to such securities or investments. In particular, it is highlighted that this report is not intended for nor does it have regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive this report. Investors are therefore advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situations and particular needs and consult their own professional advisers (including but not limited to financial, legal and tax advisers) regarding the appropriateness of investing in any securities or investments that may be featured in this report. ADBSR, AIBB, DBSVH and DBS Bank Ltd, their directors, representatives and employees or any of their affiliates or their related parties may, from time to time, have an interest in the securities mentioned in this report. AIBB, DBSVH and DBS Bank Ltd, their affiliates and/or their related persons may do and/or seek to do business with the company(ies) covered in this report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell or buy such securities from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. AIBB, DBSVH, DBS Bank Ltd (which carries on, inter alia, corporate finance activities) and their activities are separate from ADBSR. AIBB, DBSVH and DBS Bank Ltd may have no input into company-specific coverage decisions (i.e. whether or not to initiate or terminate coverage of a particular company or securities in reports produced by ADBSR) and ADBSR does not take into account investment banking revenues or potential revenues when making company-specific coverage decisions. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ( DBSVUSA ), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the subject company mentioned in this report. ADBSR, AIBB, DBSVH, DBS Bank Ltd and/or other affiliates of DBSVUSA may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this report should contact DBSVUSA exclusively. DBS Vickers Securities (UK) Ltd is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the overriding issue of confidentiality, available upon request to enable an investor to make their own independent evaluation of the information contained herein. Wong Ming Tek, Executive Director Published by AllianceDBS Research Sdn Bhd (128540 U) 19th Floor, Menara Multi-Purpose, Capital Square, 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia. Tel.: +603 2604 3333 Fax: +603 2604 3921 email : general@alliancedbs.com Page 11