Download Takeover Offer for shares in New Britain Palm Oil Limited (NBPOL)

Takeover Offer for shares in New
Britain Palm Oil Limited (NBPOL)
Disclaimer
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current expectations, beliefs, intentions or strategies regarding the future and assumptions in light of currently
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related corporations (including without limitation, their respective shareholders, directors, officers, employees,
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2
Proposed General Offer to the Shareholders of New
Britain Palm Oil Limited (NBPOL)
GENERAL OFFER
(GO)
At £7.15 per share
(RM37.54 per share*)
•
GO to all shareholders of NBPOL under the PNG Takeover Code
•
Total purchase consideration of £1.07 billion
(RM5.63 billion*) for 100% shareholding
Conditions of
the GO:
1
Minimum acceptance of 51%
2
Assurance that the Offer will
not be contrary to national
interest
3
Meet regulatory requirements
The takeover allows Sime Darby to assume management control.
The Papua New Guinea (PNG) Law also provides the controlling
majority shareholder to have Board control.
*£1.00 = RM5.25
3
Support from Key Stakeholders
Government
The PNG Prime Minister has provided
written confirmation that Sime Darby’s
proposed acquisition will not be contrary
to PNG’s national interest
NBPOL Board
The Independent Board Committee
intends to unanimously recommend that
NBPOL shareholders accept the General
Offer
4
Why NBPOL ?
1
Rare opportunity to
acquire a quality
brownfield asset
2
Scarcity of
land bank
3
High cost and high risk of
greenfield development
UNIQUE & HIGH QUALITY BROWNFIELD ASSET
New Britain Palm Oil Limited
• One of the best performing palm oil companies
in the world
• Strong reputation and track record
• 100% RSPO certified including all smallholders
• Access to an experienced NBPOL management
team and skilled workforce
• Gateway to future expansion
RSPO – Roundtable on Sustainable Palm Oil
FFB – Fresh Fruit Bunch
OER – Oil Extraction Rate
Accretion
in Profit Earnings
10.8 years
Young Age Profile
23.5 MT/ha
FFB Yield (5-Year Average)
22.5 %
OER (5-Year Average)
5
Strategic Rationale
In line with SDP’s Strategy to Expand
its Land bank
Location of NBPOL’s
Plantation Assets
864,141 ha
134,611 ha
~ 1 million ha
Increase in land bank size
Opportunity to Leverage on NBPOL’s Strong
Operational Best Practices
• Well-managed estates and mills that
meet global sustainability standards
• Good working relationship with the local
government and the local communities
6
Strategic Rationale (cont’d)
A Catalyst for Expansion into New Markets
1
A Stepping Stone to Generate
New Income Streams in PNG
POSITIVE
Investment Climate
GDP
Steady Growth
(9-Year CAGR
of 14%*)
GREENFIELD
Future Expansion
2
Exposure to the UK/European &
Mediterranean Markets
SUSTAINABILITY
PREMIUM
Strong Premium from the
Sale of FSPO to the
UK/European Market
AGRICULTURE
Most Important Economic
Sector (32% of PNG’s GDP*)
STRATEGIC
Located within the
Equatorial Belt – suitable for
Oil Palm Cultivation
100% Sourcing
of CSPO
Over 110
Companies
in the UK and Ireland
are Buyers of
Sustainable-based
Palm Products from
NBPOL
UK’s Commitment by end of
2015, led by Companies such
as Unilever
*Source : IMF, World Bank
GDP – Gross Domestic Product
CAGR – Compound Annual Growth Rate
FSPO – Fully Segregated Palm Oil
CSPO – Certified Sustainable Palm Oil
7
Potential Synergies
Continuous Expansion of the
Upstream Business
Strengthen & Expand the
Downstream Business in Europe
Increased Combined R&D
capabilities
New Growth Opportunities for
Other Businesses in PNG
R&D – Research & Development
8
Significant Potential Synergies in Downstream
SIME DARBY UNIMILLS (SDU)
NEW BRITAIN PALM OIL LIMITED (NBPOL)
450,000 MT
Refining Capacity
Refinery in Zwijndrecht , Netherlands
300,000 MT
Refining Capacity
Refinery in Liverpool, UK
750,000 MT
Combined refining capacity of SDU & NBPOL
• Strong complementarity
• Positioning for new markets
• Aligned on sustainability
philosophy
9
Fair Price for High Quality & Rarely Available Asset
Offer Price
£5.50
• Kulim Berhad proposed a partial offer for 20% of
NBPOL last year but was not successful
Per Share
Fair Value
£6.50£7.00
Per Share
Offer Price
£7.15
Per Share
• In August 2013 when evaluating Kulim’s partial offer, the
Independent Board of NBPOL viewed the fair value of
NBPOL at between £6.50 and £7.00 per share
• This sets the expectation of the shareholders of NBPOL
• 30% premium to the original offer price of Kulim’s
proposed partial offer (£5.50)
• 2%-10% premium to the fair value of NBPOL (£6.50£7.00)
• Enterprise Value per Ha of RM84,200 (USD25,900*)
OUR OFFER PRICE IS A SLIGHT PREMIUM TO
NBPOL’S PREVIOUS INDEPENDENT VALUATION
*USD1.00 = RM3.25
10
The Quality of the Asset Justifies the Premium
CSPO
Certified
Refinery
(years)
5-Year
Average
Yield
(MT/ha)
PNG
10.8
23.5
100%
Liverpool
& PNG
75,000^
Malaysia
2.7
-
No
No
23,500
76,700
Malaysia
13.0
21.8
No
No
24,100
78,300
Malaysia
16.0
23.8
No
No
Company /
Acquirer
Transaction
EV/Ha
EV/Ha
Date
USD
RM
NBPOL by
Sime Darby
October
2014
25,900
84,200*
Asia Plantations
Ltd by FGV
September
2014
23,000
Unico
Plantations
Desa Berhad by
IOI Plantation
November
2013
Pontian United
by FGV
October
2013
Age
Location
Profile
* This is inclusive of the refineries, cattle and sugar businesses
^ Based on the CIMB’s research report dated 31 August 2014
NBPOL is a premium
plantation asset
Land bank of 135k ha with 80k
ha of planted oil palm area
FGV – Felda Global Ventures
NBPOL is also involved in
other businesses
•
•
•
Beef production
Sugar production
Seed production
11
Funding and Gearing Issues
The acquisition will be funded
through internally generated
funds and external borrowings
Any increase in gearing will be managed through :
Tight control of capex across the divisions i.e.
curtailment of capital expenditure for better
allocation of resources
Proceeds from potential IPO exercise
Cash savings from election of Dividend
Reinvestment Plan for FY2014 final dividend
IPO – Initial Public Offering
12
Thank You
13
Appendices
14
About NBPOL
Leading sustainable palm oil producer
• Incorporated in 1967 and began oil palm development in Nahavio, PNG
• Fully integrated producer of sustainable palm oil in PNG
• Involved in upstream, midstream and downstream operations
Shareholding Structure as at 30 June 2014
5%
• Listed on the main market of the PNG’s Port
Moresby Stock Exchange and London
22%
49%
Kulim Malaysia Berhad
Institutional & retail
investors
PNG government & other
interests
NBPOL management
Source: NBPOL website
Stock Exchange
24%
• A total market capitalisation of ~USD1.3bn
as at 4th August 2014
15
Good Oil Palm Operational Performances
Operational Statistics (FY2009 – FY2013)
FY2009
FY2010
FY2011
FY2012
FY2013
75,201
40,009
77,814
71,191
78,332
68,438
78,343
66,747
79,884
69,067
5-Year
Average
n/a
n/a
1,471
1,984
2,422
2,273
2,086
2,047
336
444
552
508
462
460
26.0
432
22.8
20.7
550
22.4
25.4
683
22.8
23.8
685
22.3
21.7^
590
22.2
23.5
588
22.5
Planted area (ha)
Mature planted area (ha)
Total FFB processed
('000 MT)
CPO production
('000 MT)
FFB yield (MT/ha)
Plasma FFB ('000 MT)
OER (%)
^Note: FFB yield in FY2013 is low at 21.7MT/ha compared to 23.8MT/ha in FY2012 due to adverse weather conditions affecting
crop recovery together with increasing area of young oil palm trees coming into production with lower yield
MT/ha
‘000 MT
3,000
26.0
2,500
25.4
20.7
30.0
23.8
21.7
25.0
2,000
20.0
1,500
15.0
1,000
500
1,471
1,984
2,422
2,273
2,086
10.0
5.0
0
0.0
FY2009
FY2010
FY2011
Total FFB production ('000 MT)
Source: NBPOL Annual Report 2013
FY2012
23.5MT/ha
5-Year Average FFB
Yield
22.5%
5-Year Average OER
FY2013
FFB yield (MT/ha) (RHS)
16
Young Estates with an Average Age of 10.8 years
~50% of trees are within
8-17 years
Age group (in ha)
13-17 years
18%
8-12 years
31%
Source: NBPOL Annual Report 2013
RAI
KPOL
Group
1,654 1,326
0
3,644
6,625
Mature : 18-22 years
4,002
880
0
2,325
7,206
Mature : 13-17 years
7,987
256
0
5,990
14,232
14,844
968
3,337
5,561
24,710
Mature : 3-7 years
5,543 2,100
6,474
2,178
16,295
Immature : 0-3 years
2,919
1,679
5,474
10,817
25,172
79,885
Total oil palm area
3-7 years
20%
GPP
Mature : >23 years
Mature : 8-12 years
>23
0-3 years
years 18-22
14%
8% years
9%
WNB
Grazing Pastures
745
36,949 6,275 11,490
394
0
8,888
0
9,282
Sugar Cane
0
0
7,718
0
7,718
Other Areas
2,887
445
2,152
2,059
7,544
3,714
12,069
30,183
Reserves & undeveloped
area
TOTAL
13,379 1,020
53,610 7,740 33,962
39,299 134,611
Note: WNB - West Britain, GPP – Guadalcanal, RAI – Ramu & Milne Bay , KPOL – Higaturu &
Poliamba
17
Five Operations with Comprehensive Infrastructure
NBPOL’s operations at a glance
FFB and milling processing capacity
A total of 12 mills with a combined processing
capacity of 630 MT of FFB per hour
Sugar production
The group is the largest sugar cane
producer with ~8,000 ha and processing
facilities in PNG
Seed production
Its Dami research facility is one of the world’s
leading seed producers and has an annual
capacity to produce 21 millions seeds
Refining
New Britain Oils in Liverpool, UK produces
premium food ingredients to customers in the EU
Also operates a small refinery and a bulking
terminal in West New Britain. Total refining
capacity of 300k MT.
Beef production
The group is the largest beef producer in
PNG with a combined herd of 20,375 heads
and ~9,000 ha pasture land
Infrastructure in PNG
Jetty
and
storage
The Kimbe Bulk Terminal port
facility is equipped with higher
capacity CPO pumps and 9 CPO
storage tanks with individual
heating coils
Source: NBPOL website
Two
Biogas
plants
2 biogas generating plants
to produce electricity at
Mora and Kumbango
Kernel
crushing
plants
Has 4 kernel crushing plants
at Kumbango, Poliamba, Milne
Bay and Higaturu
18
NBPOL’s Refinery in Liverpool and Sime Darby
Unimills
NBPOL’s refinery in Liverpool, UK
• A fully segregated refinery with a refining capacity of
300,000MT per annum
• Commands a 40% market share in UK & Ireland
• Currently, it sells about 200k MT of FSPO to its European
customers at a sustainability premium
• Also the largest supplier of segregated stearin in the UK
Sime Darby Unimills in Netherlands
• Sime Darby Unimills is a leading edge European
supplier of customized vegetable fats producing about
450,000 tonnes of products per year
• At present, only ~150k MT of specialty products are
being produced using FSPO
19
Valuation Methodology
DCF VALUATION
The key base case assumptions adopted are as follows:
•
Long-term CPO Price of USD900 to USD1,000 per MT
•
In line with historical CPO price range for the past 5 years of USD800USD1,100 per MT
•
High FFB yield
•
High OER
•
Young age profile
•
Sustainability premium from the sale of fully segregated palm oil
Meanwhile, the latest upgraded target price of the analyst* covering NBPOL stock
of £7.50 per share confirmed the valuation provided by Sime Darby is fair
• Besides, the target price excludes the potential synergies that could be extracted by
SDP via the partnership and control premium
*Note: Refers to Liberum research analyst’s target price on 31 July 2014 upon hearing the announcement on SDP-NBPOL
20
Sound Financial Position and Steady Cash Flow
NBPOL’s Financial Performance (FY2009 to FY2013)
FY2009
323,835
85,298
60,794
FY2010
461,175
131,243
94,648
FY2011
780,073
275,542
217,542
FY2012
677,014
81,637
55,716
FY2013
558,652
17,304^
12,485*
1,520
1,369
3,181
835
181
87,653
75,347
155,295
141,805
142,647
Average crude palm oil price
710
850
1,108
1,062
868
Average palm kernel oil price
821
1,202
1,748
1,337
965
124,879
343,942
728,820
66,763
124,879
567,041
1,435,750
338,354
124,954
822,696
1,705,809
315,318
180,333
792,487
1,697,073
326,721
180,333
669,947
1,480,529
272,632
in USD'000
Revenue
Profit before tax (PBT)
Profit after tax (PAT)
Profit after tax (USD) /
mature planted (ha)
Cash flow from operations
Share capital
Shareholders' equity
Total assets
Total borrowings
The Group adopted the International Accounting Standard IAS41 on the accounting
treatment and disclosures relevant to biological & agricultural assets
USD50.1mn
PAT after net gain arising from
changes in fair value of biological
assets gain (effects of IAS41)
USD12.5mn*
Restated PAT before net biological
assets gain but inclusive of net gains on
agricultural products
Source: NBPOL Annual Report 2013
^Note: Combined effects of lower palm oil prices and lower production has seen the Group’s PBT in 2013 to drop significantly
* Note: A non-GAAP profit measure excluding the effects of IAS41 and is stated before depreciation of biological assets
21
Overview of PNG: Macroeconomic Indicators
GDP
USD’bn
30
GDP
14.01%
25
GDP/ Capita
11.23%
9-Year CAGR (%)
20
15
3,333
1,932
2,217
3,000
2,473
2,500
2,000
1,495
1,279
26
10
5
2,283
8
10
2009
2010
13
15
2011
2012
0
GDP (current prices)
4%
USD
3,500
16
18
1,500
1,000
500
0
2014 2018
(F)
(F)
GDP/capita (current prices)
2013
5-Year Average GDP
3%
2% By Sector Agriculture
6%
32%
8%
9%
15%
21%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
8.4%
6.9%
6.0%
PGK/USD
 Stronger Kina: Lower prices for imported
items
 Government tariff reduction
programmes: Lower cost of production &
consumption
6.5%
Average:
5.6%
5.0%
4.0%
2.2%
2009
2010
2011
2012
2013
2014
(F)
2.50
Construction
2.00
Public administration
1.50
Trade
1.00
Manufacturing
0.50
Finance
0.00
2015
(F)
Exchange Rate Revolution
3.00
Mining
Transport & Communications
Inflation
%
Average:
2.42
2.75
2.71
2009
2010
2.34
2.08
2.24
2.42
2011
2012
2013
Todate Feb
2014
Electricity, Gas & Water
Source: IMF, Asian Development Bank, World Bank, Bank PNG
•
•
GDP has shown steady growth in the past with GDP per capita expected to
reach USD2,500 in 2014
Agriculture and mining remains the most important economic sector
contributing ~32% and 21% to PNG’s GDP respectively
22
Overview of PNG: Macroeconomic Indicators
Unemployment Rate
Population Rate
9-Year CAGR:
3.25%
6.3
6.5
6.7
7.9
6.8
7.0
7.2
%
2.5%
2.4%
2.4%
2.4%
2.4%
2.3%
2.3%
2.2%
2.3%
2.2%
2.2%
2.1%
2009
S&P
Fitch
B1/B+ - Highly uncertain repayment capacity
2011
2012
Net Inflow of FDI into PNG
Credit Risk
Moody’s
2010
B1
B+
B+
USD’mn
600
419
400
200
29
29
0
-200
-400
2009
2010
2011
2012
-309
Source: IMF, Country Economy, World Bank,
UNCTAD
•
Net inflow of FDI improved in 2012 on the back of strong FDI increase in
natural resources and recovery in tourism activity
23
Overview of PNG: Oil Palm harvested area has
doubled over the past 12 years, growing at a rate of
6% from 2000-2012
Land Use in PNG
Oil palm areas in Papua New Guinea
Area (ha)
% of Land Area
Land Area
45.3 mil ha
100%
Forest Area
28.6 mil ha
63%
Agricultural Land1
1.2 mil ha
3%
Arable Land2
0.3 mil ha
1%
Oil Palm Cultivated Area
0.1 mil ha
0.3%
As of 2011
Notes:
1) Agricultural land refers to the share of land area that is arable, under permanent crops
and under permanent pastures.
2) Arable land includes land under temporary crops or pasture.
145
140
135
119
117
96
92
88
85
83
79
75
72
Oil Palm Harvested Area ('000 Ha)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
• The largest source of land for Oil Palm expansion in PNG has been
secondary forest areas, which has more than doubled from ~28,000 ha in
1990 to 65,000 ha in 2010, while primary forest areas remain undisturbed
• Peat swamps are largely absent and no Oil Palm plantations were
documented for peat soil in PNG
• Oil Palm supports ~18,600 registered smallholder families and ~200,000
people in PNG
• NBPOL has ~46,000 ha under the smallholder programme
Source: Worldbank, Australian National University, RSPO, ITS Global, FAO
24