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l Equity Research l ASEAN l Food & Beverage l 13 June 2014 ASEAN food and beverage Singapore aisle checks show intense competition for 3-in-1 coffee We visited four supermarkets in Singapore to assess the competitive environment for 3-in-1 coffee. Our key takeaways: (1) Super’s brands occupy a leading share of supermarket shelf space, (2) a price war is underway among 3-in-1 coffee brands in Singapore, with several brands offering major discounts, (3) regional competition is heating up, with Mayora Indah from Indonesia and Power Root from Malaysia competing aggressively in Singapore. We view Super as a leading brand, but expect strong competition to pressure its sales and margins. In 2013, we estimate Super’s branded consumer segment generated one of the highest EBIT margins among ASEAN food and beverage companies, which could attract aggressive competition. Super’s share price has corrected 27% YTD, so we maintain our In-Line rating but trim our price target to SGD 1.34 (previously SGD 2.09). We await signs of moderating competition before turning more positive on the stock. Product discounts of 3-in-1 coffee brands* Price war reflects regional competition Our supermarket visits revealed an aggressive price war among 3-in-1 coffee brands in Singapore with Super, Kopiko, and Nestle offering discounts up to 37%, 33%, and 13%, respectively. Kopiko is a leading 3-in-1 coffee brand from Indonesia, and it has been promoting its products aggressively with discounts and TV commercials. Other foreign brands offering discounts include Indocafe (Indonesia), Ah Huat (Malaysia), and OldTown (Malaysia). We believe this price war reflects strong regional expansion by formerly domestic brands, suggesting intensifying competition for Super not only in Singapore, but also in its other markets. The bottom line We maintain our In-Line rating for Super, with a new price target of SGD 1.34. We would await a better entry point for the stock. Click here to get The Scoop, an audiovisual summary of the report. 37% Super and Kopiko have been discounting up to 37% and 33%, respectively 33% 26% 22% 18% 17% 15% 15% 13% 13% 12% 8% 8% 6% Chek Hub OldTown Nanyang OWL Gold Roast Ah Huat Nescafe Café Nova UCC Gold Kili Aik Cheong Ye Ye Indocafe 2% Kopiko We visited Giant, Cold Storage, NTUC Fairprice, and Sheng Siong stores and found that Super’s brands collectively occupy a leading 41.5% share of their shelf space, while Nestle holds 22%. Analysing 3-in-1 coffee prices on a per-gram basis, we found that Super’s two main brands – Super and OWL – are priced at an 8-27% discount to Nestle, and close to the average. Super has been investing in branding, but our pricing analysis shows that its brands are still a work-in-progress and are not yet premium products. We fear that their middle-market pricing may make them vulnerable to competition. 40% 35% 30% 25% 20% 15% 10% 5% 0% Super Shelf space leader, but not yet premium *Product with highest discount has been selected. Source: Standard Chartered Research Singapore supermarket shelf space share of 3-in-1 coffee brands 15% 22% 3% 3% Nescafe Super Ah Huat Indocafe Others OWL OldTown Gold Roast Ye Ye 5% 5% 19% 8% 18% Super’s brands collectively occupy 41.5% of shelf space, while Super and OWL hold a combined 37% Others include Aik Cheong, Alicafe, Café 21, Café Nova, Capparoma, Chek Hub, Coffee King, Fair Price, Giant, Gold Kili, In-Comix, Kopiko, Meet U, Morning Sun, Mr.Cafe, Nanyang, Perl Café, and UCC. Source: Standard Chartered Research Did you know… A study from Finland and Sweden showed that coffee drinkers have up to a 65% lower risk of getting Alzheimer’s disease than nondrinkers Munchuga Khajornkowit +65 6596 8504 Equity Research Standard Chartered Bank, Singapore Branch Important disclosures can be found in the Disclosures Appendix All rights reserved. Standard Chartered Bank 2014 http://research.standardchartered.com This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Contents Super dominates shelf space 3 Pricing analysis 5 Price war in Singapore 10 Regional competition may intensify 12 Earnings sensitivity 14 What is actionable? 18 Companies Super Group 20 Universal Robina Corp 29 Mayora Indah 31 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 2 Equity Research l ASEAN food and beverage Super dominates shelf space Super’s brands collectively hold a combined 42% share of the aisle space in the four supermarkets Over the week of 26 May, we visited four supermarkets in Singapore: a Giant and a Sheng Siong in Ghim Moh, an NTUC Fairprice in Tanjong Pagar, and a Cold Storage in Great World City. Our aisle checks revealed the following: Super occupies a dominant share of the 3-in-1 coffee aisle: Super brand and OWL hold 18% and 19% shares of the shelf space, respectively, in the four supermarkets. Nestle has the highest share of aisle space by brand at 22%. However, Super’s brands (Super brand, OWL, Ye Ye, Cafe Nova, and Coffee King) hold a combined 41.5% share of shelf space at the four supermarkets. Figure 1: Singapore 3-in-1 coffee shelf space share by brand 22% 3% 3% Super brand and OWL occupy 18% and 19% of shelf space, respectively, at the four supermarkets 5% 5% 19% 8% 18% Nescafe OWL Super OldTown Ah Huat Gold Roast Indocafe Ye Ye Gold Kili Alicafe Chek Hub Morning Sun Aik Cheong Capparoma Café 21 Fair Price Kopiko Café Nova Mr.Cafe Nanyang Coffee King Giant UCC In-Comix Meet U Perl Café Source: Standard Chartered Research Differences in aisle space shares by supermarket reflect positioning: We noticed that Nestle holds a top-three share of shelf space in Cold Storage (no. 1, 24%), NTUC (no. 3, 22%), and Giant (no. 1, 35%), while in Sheng Siong, Nestle’s ranking fell to number four with a 13% share. We believe this is because Sheng Siong has a lower-end positioning, and Nescafe is a premium brand, leading the retailer to place less emphasis on its products. Figure 2: Cold Storage – Shelf space share of 3-in-1 coffee brands Nescafe 24% Nestle was no. 1 and no. 3 in terms of shelf space share at Cold Storage and NTUC Indocafe 5% Gold Roast 6% OldTown 9% OWL 20% Super 13% Source: Standard Chartered Research Figure 3: NTUC Fair Price – Shelf space share of 3-in-1 coffee brands OldTown 4% Ah Huat 4% Gold Roast 5% Nescafe 22% OWL 24% Super 23% Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 3 Equity Research l ASEAN food and beverage Figure 4: Giant – Shelf space share of 3-in-1 coffee brands Figure 5: Sheng Siong – Shelf space share of 3-in-1 coffee brands OldTown 16% Nescafe 35% Indocafe 4% Ah Huat 7% OWL 16% Gold Roast 7% OldTown 10% OWL 11% Super 14% Source: Standard Chartered Research Ah Huat 9% Nescafe 13% Super 16% Source: Standard Chartered Research Super enjoys prime shelf space positioning: We observed that leading brands like Nescafe, Super, and OWL are usually placed on shelves around eye level and within easy reach of customers, while smaller brands are often positioned on the top or bottom shelves. In NTUC Fair Price, Super products occupied a full shelf. Super also had a promotion stand positioned near the store entrance to attract consumer attention. Figure 6: Full shelf of Super products at NTUC Fairprice Figure 7: Super’s promotion stand near the entrance at Fairprice Source: Standard Chartered Research Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 4 Equity Research l ASEAN food and beverage Pricing analysis Super and Owl are priced at 8-27% discounts to Nestle We compared the prices of 3-in-1 coffee products on the shelves in the supermarkets we visited and calculated the original price per gram for comparable products – i.e. white coffee classic and 3-in-1 classic – and took the average across all four supermarkets. We found that for both white coffee and 3-in-1 classic, Nestle’s Nescafe has one of the highest original price per gram. For white coffee classic, OWL and Super are priced at discounts of 8% and 13% to Nestle, respectively. For 3-in-1 classic, OWL and Super are priced at discounts of 21% and 27% to Nestle, respectively. Super rebranded OWL in 2011 and Super in 2013, but our pricing analysis shows it is still a work-in-progress for Super and OWL to match the brand premium of Nestle. With our belief that competition will intensify, we are concerned that Super and OWL’s price position could make them susceptible to competition. Figure 8: White coffee classic Average original price/g from four supermarkets (SG¢) 1.40 0.59 0.56 Ye Ye 0.60 Coffee King Indocafe 0.61 In-Comix 0.61 0.65 Super Indocafe 0.66 Gold Kili Morning Sun 0.69 0.68 Gold Roast 0.71 OWL 0.40 0.77 0.90 0.87 Kopiko 0.65 0.60 Nescafe 1.18 0.80 0.92 1.01 1.01 1.05 1.00 1.04 1.06 1.09 1.08 1.14 1.10 1.14 1.23 1.19 1.24 1.20 Source: Standard Chartered Research Capparoma Mr.Cafe - Morning Sun Giant Fair Price Aik Cheong Super Alicafe Chek Hub OWL Indocafe Alicafe OldTown Gold Roast UCC Nescafe 0.20 Ah Huat 1.40 1.20 1.00 0.80 0.60 0.40 0.20 - Figure 9: 3-in-1 classic Average original price/g from four supermarkets (SG¢) Source: Standard Chartered Research Figure 10: White coffee classic Ranked from highest to lowest average original price/g (SGD) Brand Ah Huat UCC Nescafe Gold Roast OldTown Alicafe OWL Indocafe Chek Hub Alicafe Super Fair Price Aik Cheong Giant Morning Sun Average OWL vs. average Super vs. average OWL vs. Nestle Super vs. Nestle Company Power Root UCC Nestle Viz Branz OldTown Power root Super Pt Sari Indofood Chek Hub Power Root Super Fair Price Aik Cheong Giant Morning Sun Average original price/g 0.0124 0.0123 0.0119 0.0114 0.0114 0.0110 0.0109 0.0108 0.0106 0.0105 0.0104 0.0101 0.0101 0.0092 0.0065 0.0106 3% -2% -8% -13% Packaging 15x30g 15x35g 15x36g 15x40g 15x40g 30x20g 15x40g 30x12g 15x40g 15x40g 15x40g 30x12g 15x40g 15x40g 40x20g Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 5 Equity Research l ASEAN food and beverage Figure 11: 3-in-1 coffee Ranked from highest to lowest average original price/g (SGD) Brand Company Average original price/g Packaging Capparoma Viz branz 0.0118 25x18g Nescafe Nestle 0.0090 35x19g Kopiko Mayora Indah 0.0087 30x20g Mr.Cafe Tastyfood Industries 0.0077 40x20g OWL Super 0.0071 40x20g Gold Roast Viz branz 0.0069 40x20g Gold Kili Gold Kili 0.0068 20x20g Super Super 0.0066 40x20g In-Comix In-comix Food Industries 0.0065 10x20g Morning Sun Morning sun 0.0061 40x20g Indocafe Pt Sari Indofood 0.0061 30x20g Coffee King Super 0.0060 40x20g Indocafe Pt Sari Indofood 0.0059 45x20g Ye Ye Super 0.0056 45x20g Average OWL vs. average Super vs. average 0.0072 -2% -9% OWL vs. Nestle -21% Super vs. Nestle -27% Source: Standard Chartered Research Supermarket comparison We found the heaviest discounting in NTUC FairPrice (NTUC), the largest supermarket chain in Singapore. Comparing selling price per gram for white coffee in NTUC, we found that OWL and Super were sold at discounts of 13% and 42%, respectively, to Nestle. Based on original price, Super and OWL were at discounts of 10% and 14% to Nestle, respectively. With the heavy discounting for Super’s white coffee product, Super’s white coffee is by far the cheapest on a per gram basis for sale at NTUC. For 3-in-1 classic at NTUC, the selling price per gram for OWL and Super are 11% and 17% below that for Nestle, respectively, and the two brands are ranked number two and three after Nestle by highest selling price per gram. 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 6 Equity Research l ASEAN food and beverage Figure 12: White Coffee Classic from NTUC Fair Price Ranked from highest to lowest selling price/g (SGD) Original Total weight price (g) 5.60 450 Original Discounted price/g price/g 0.0124 NA Selling price/g 0.0124 Packaging 15x30g %discount NA 0.0113 0.0113 15x36g 6% NA 0.0110 15x40g NA 0.0108 NA 0.0108 15x40g NA 600 0.0113 0.0104 0.0104 15x40g 8% 3.65 360 0.0101 NA 0.0101 30x12g NA 6.50 600 0.0108 0.0099 0.0099 15x40g 8% Pt Sari Indofood 3.77 360 0.0105 0.0092 0.0092 30x12g 12% Viz Branz 5.50 600 0.0092 NA 0.0092 15x40g NA Aik Cheong Aik Cheong 6.05 600 0.0101 0.0083 0.0083 15x40g 18% Super Super 6.20 600 0.0103 0.0065 0.0065 15x40g 37% Brand Ah Huat Company Power Root Nescafe Nestle 6.50 540 0.0120 Alicafe Power Root 6.60 600 0.0110 Chek Hub Chek Hub 6.50 600 OldTown OldTown 6.80 Fair Price Fair Price OWL Super Indocafe Gold Roast Average 0.0108 0.0099 OWL vs. Average 0% -0% Super va. Average -4% -34% OWL vs. Nestle -10% -13% Super vs. Nestle -14% -42% 5% 52% OWL vs. Super Source: Standard Chartered Research Figure 13: 3-in-1 Classic from NTUC Fair Price Ranked from highest to lowest selling price/g (SGD) Original Total weight price (g) Original Discounted price/g price/g Selling price/g Packaging % discount 0.0075 0.0075 35x19g 13% 0.0078 0.0066 0.0066 40x20g 15% 800 0.0065 0.0062 0.0062 40x20g 5% 4.70 800 0.0059 NA 0.0059 40x20g NA 5.20 600 0.0087 0.0058 0.0058 30x20g 33% 5.25 800 0.0066 0.0058 0.0058 40x20g 12% Brand Company Nescafe Nestle 5.75 665 0.0086 OWL Super 6.20 800 Super Super 5.20 Coffee King Super Kopiko Mayora Indah Gold Roast Viz Branz Average OWL vs. Average 0.0073 0.0063 6% 5% Super vs. Average -11% -2% OWL vs. Nescafe -10% -11% Super vs. Nescafe -25% -17% 19% 7% OWL vs. Super Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 7 Equity Research l ASEAN food and beverage Figure 14: White Coffee Classic from NTUC Fair Price Ranked from highest to lowest selling price/g (SG¢)) 1.40 1.24 1.20 1.00 1.13 1.10 1.08 1.04 1.01 0.99 Figure 15: 3-in-1 Classic from NTUC Fair Price Ranked from highest to lowest selling price/g (SG¢)) 0.92 0.92 Super 0.10 Aik Cheong Gold Roast 0.20 Indocafe 0.20 OWL 0.30 Fair Price 0.40 OldTown 0.40 Chek Hub 0.59 Source: Standard Chartered Research 0.58 0.58 0.50 0.60 Alicafe 0.62 0.60 0.83 0.65 Nescafe 0.66 0.70 0.80 Ah Huat 0.75 0.80 Nescafe OWL Super Coffee King Kopiko Gold Roast Source: Standard Chartered Research Figure 16: 3-in-1 Classic from Cold Storage Ranked from highest to lowest selling price/g (SGD) Original Total weight price (g) Original Discounted price/g price/g Selling price/g Packaging % discount NA 0.0118 25x18g NA NA 0.0081 40x20g NA 0.0077 NA 0.0077 40x20g NA 0.0086 0.0075 0.0075 35x19g 13% 800 0.0069 NA 0.0069 40x20g NA 5.40 800 0.0068 NA 0.0068 40x20g NA Pt Sari Indofood 3.80 600 0.0063 NA 0.0063 30x20g NA Super 4.95 800 0.0062 NA 0.0062 40x20g NA Super 5.35 900 0.0059 NA 0.0059 45x20g NA Brand Company Capparoma Viz Branz 5.30 450 0.0118 Gold Roast Viz Branz 6.45 800 0.0081 Mr.Cafe Tastyfood 6.15 800 Nescafe Nestle 5.75 665 OWL Super 5.50 Super Super Indocafe Coffee King Ye Ye Average 0.0076 0.0075 OWL vs. Average -9% -8% Super vs. Average -11% -9% OWL vs. Nescafe -20% -8% Super vs. Nescafe -22% -10% 2% 2% OWL vs. Super Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 8 Equity Research l ASEAN food and beverage Figure 17: 3-in-1 Classic from Giant Ranked from highest to lowest selling price/g (SGD) Original Total weight price (g) Original Discounted price/g price/g Selling price/g Packaging % discount NA 0.0124 15x36g NA 0.0092 NA 0.0092 35x19g NA 0.0087 NA 0.0087 30x20g NA 800 0.0066 NA 0.0066 40x20g NA 5.25 800 0.0066 NA 0.0066 40x20g NA Super 5.20 800 0.0065 0.0063 0.0063 40x20g 3% Pt Sari Indofood 3.60 600 0.0060 NA 0.0060 30x20g NA Super 4.70 900 0.0052 NA 0.0052 45x20g NA Selling price/g Brand Company OldTown OldTown 6.70 540 0.0124 Nescafe Nestle 6.15 665 Kopiko Mayora Indah 5.20 600 Gold Roast Viz Branz 5.25 OWL Super Super Indocafe Ye Ye Average 0.0076 0.0076 OWL vs. Average -14% -14% Super vs. Average -15% -17% OWL vs. Nescafe -29% -29% Super vs. Nescafe -30% -32% 1% 4% OWL vs. Super Source: Standard Chartered Research Figure 18: 3-in-1 Classic from Sheng Siong Ranked from highest to lowest selling price/g (SGD) Brand Company Original Total weight price (g) Original Discounted price/g price/g Packaging % discount OldTown OldTown 6.80 540 0.0126 NA 0.0126 15x36g NA Nescafe Nestle 6.25 665 0.0094 0.0092 0.0092 35x19g 2% OWL Super 5.70 800 0.0071 NA 0.0071 40x20g NA In-Comix In-Comix Food Industries 1.30 200 0.0065 NA 0.0065 10x20g NA Morning sun Morning sun 4.90 800 0.0061 NA 0.0061 40x20g NA Indocafe Pt Sari Indofood 3.60 600 0.0060 NA 0.0060 30x20g NA Super Super 5.20 800 0.0065 0.0058 0.0058 40x20g 11% Gold Roast Viz Branz 5.25 800 0.0066 0.0058 0.0058 40x20g 12% Ye Ye Super 4.95 900 0.0055 0.0055 45x20g NA 0.0074 0.0072 OWL vs. Average -3% -1% Super vs. Average -12% -19% OWL vs. Nescafe -24% -23% Super vs. Nescafe -31% -37% 10% 23% Average OWL vs. Super Source: Standard Chartered Research 13 June 2014 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD 9 Equity Research l ASEAN food and beverage Price war in Singapore A price war is underway, with Super, Kopiko and Nescafe discounting up to 37%, 33%, and 13%, respectively Our visits to the four supermarkets revealed an intense price war between 3-in-1 coffee brands, with Super, Kopiko (of Mayora Indah, MYOR IJ, OP) and Nescafe offering discounts up to 37%, 33%, and 13%, respectively. This is one reason why Super’s revenue declined 11% YoY in Singapore in 1Q14, and we believe aggressive discounting may continue to pressure its local sales and margin results. Figure 19: Percentage discount by product of each brand Ranked from highest to lowest Company Super Brand Super Product White coffee % discount 37% Mayora Indah Kopiko 3-in-1 brown coffee 33% Super Ye Ye 3-in-1 rich 26% Pt Sari Indofood Indocafe Cappuccino 22% Aik Cheong Aik Cheong White coffee 18% Gold Kili Gold Kili White coffee espresso 17% UCC UCC Colombia coffee 15% Super Café Nova 3-in-1 classic 15% Nestle Nescafe 3-in-1 classic 13% Power Root Ah Huat White coffee hazelnut 13% Viz Branz Gold Roast 3-in-1 classic 12% Super OWL White coffee 2-in-1 w/creamer 8% OldTown OldTown White coffee hazelnut 8% OldTown Nanyang White coffee 2-in-1 6% Chek Hub Chek Hub White coffee 2-in-1 2% Note: Product with the highest discount has been selected Source: Standard Chartered Research 13 June 2014 Figure 20: Super White Coffee promotion Three for SGD 11.75 Figure 21: Kopiko Brown Coffee promotion Buy 2 get 1 free Source: Standard Chartered Research Source: Standard Chartered Research 10 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage When analysing the prices of 3-in-1 classic coffee products after the discount (on a per-gram basis), we found the following: For classic 3-in-1 products, Capparoma is highest priced, while OWL and Super are close to the average (4% and 12% respective discounts). The lowest priced was Super’s Ye Ye brand. Among white coffee original products, Ah Huat has the highest price. OWL is priced close to the average (a 2% premium), while Super has the second-lowest price, at a 17% discount to the average. Figure 22: 3-in-1 classic coffee Ranked from highest to lowest average discount price/g (SGD) Brand Company Capparoma Viz Branz Kopiko Mayora Indah Nescafe Nestle Mr.Cafe Tastyfood Industries OWL Super Gold Kili Gold Kili Gold Roast Viz Branz In-Comix In-Comix Food Super Super Morning sun Morning Sun Indocafe Pt Sari Indofood Coffee King Super Indocafe Pt Sari Indofood Ye Ye Super Average OWL vs. Average Super vs. Average Average original price/g 0.0118 0.0087 0.0090 0.0077 0.0071 0.0068 0.0069 0.0065 0.0066 0.0061 0.0061 0.0060 0.0059 0.0056 0.0072 Average discount price/g 0.0118 0.0087 0.0084 0.0077 0.0068 0.0068 0.0065 0.0065 0.0063 0.0061 0.0061 0.0060 0.0059 0.0056 0.0071 -4% -12% Packaging 25x18g 30x20g 35x19g 40x20g 40x20g 20x20g 40x20g 10x20g 40x20g 40x20g 30x20g 40x20g 45x20g 45x20g Source: Standard Chartered Research Figure 23: White coffee classic Ranked from highest to lowest average discount price/g (SGD) Brand Company Ah Huat Power Root Gold Roast Viz Branz Nescafe Nestle Alicafe Power Root UCC UCC OldTown OldTown Chek Hub Chek Hub Alicafe Power Root OWL Super Fair Price Fair Price Indocafe Pt Sari Indofood Aik Cheong Aik Cheong Giant Giant Super Super Morning Sun Morning Sun Average OWL vs. average Super vs. average Average original price/g 0.0124 0.0114 0.0119 0.0110 0.0123 0.0114 0.0106 0.0105 0.0109 0.0101 0.0108 0.0101 0.0092 0.0104 0.0065 0.0106 Average discount price/g 0.0124 0.0114 0.0113 0.0110 0.0110 0.0109 0.0106 0.0105 0.0105 0.0101 0.0101 0.0092 0.0092 0.0085 0.0065 0.0102 2% -17% Packaging 15x30g 15x40g 15x36g 30x20g 15x35g 15x40g 15x40g 15x40g 15x40g 30x12g 30x12g 15x40g 15x40g 15x40g 40x20g Source: Standard Chartered Research 13 June 2014 11 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Regional competition may intensify Previously primarily domestic brands are expanding regionally Foreign brands offering discounts in Singapore include Kopiko (Indonesia), Indocafe (Indonesia), Ah Huat (Malaysia) and Old Town (Malaysia). We believe the price war reflects aggressive regional expansion by brands that previously focussed primarily on their domestic markets. This suggests that Super may face intensifying competition not only in Singapore, but also in its other markets. Intensifying competition in Singapore and the region During our Singapore store visits, we found the following foreign brands competing with Super: Kopiko: Kopiko comes from Mayora Indah (MYOR IJ, OP), a leading food and beverage company in Indonesia. Mayora has been expanding strongly outside of its home market. Exports as a percentage of group sales have increased from 9% in 2003 to 37% in 2013. Markets where Mayora Indah has performed well include the Philippines, where it was the number two 3-in-1 coffee brand in 2013. We believe the aggressive discounting of its 3-in-1 coffee product in Singapore (accompanied by a TV advertising campaign) shows that the company aims to gain market share in Singapore. Our aisle checks showed that Mayora held only 1% of the shelf space in the four supermarkets we visited. Figure 24: International revenue – Mayora Indah Figure 25: Philippines instant coffee market share, 2013 Nov-12 60% 37% Domestic International 63% % market share 50% Sep-13 49% 49% 36% 40% 30% 24% 21% 20% 9% 10% 0% Nestle Source: Mayora Indah URC Mayora Source: Companies OldTown: OldTown (OTB MK, NR, ASEAN F&B: Specialty instant coffee is a differentiator, released 13 June 2013) is the leading 3-in-1 white coffee brand in Malaysia. Management estimates that the company held a 42% share of the white coffee market in Malaysia in June 2011. Our aisle checks showed that OldTown occupied 9% of the shelf space, ranking it number three after Super and Nestle. OldTown’s management has clearly articulated the company’s plans for regional expansion. OldTown opened its first OldTown Cafe in Singapore in 2008, and it operates similar cafes in Indonesia and China. Ah Huat: Ah Huat was established in 2012 by Power Root (PWRT MK, NR, Power Root, published 27 February 2014) of Malaysia. Management said they established the brand to target the ethnic Chinese communities in Malaysia and Singapore, as its other brand, Alicafe, primarily targets ethnic Malays. Our store visits showed that despite Ah Huat being a young brand, it held a respectable 5% 13 June 2014 12 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage share of the shelf space. In our view, this indicates the threat posed to Super by new entrants in Singapore and the region. Indocafe: Sari Indofood is one of the leading producers of instant 3-in-1 coffee and instant cappuccino in Indonesia, sold under the Indocafe brand. It also produces the Max-Brand of coffee creamers. Sari Indofood is owned by Sumatra Tobacco Trading Company Group (STTC), which is based in Indonesia. Our aisle check showed that Indocafe had a 3% share of the shelf space at the four supermarkets we visited. 13 June 2014 13 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Earnings sensitivity We estimate that Super is generating an EBIT loss from its promotions in Singapore We estimate that after allocating SG&A expenses, Super could be generating an EBIT loss of SGD 0.74 per pack of 15x25-40g, 3-in-1 coffee product sold. We expect strong competition in Singapore to reduce Super’s branded consumer EBIT margin by 1.3ppt in 2014, but the impact could be greater if competition spreads to other markets. Super is likely generating an EBIT loss Super says it generates a gross profit margin of 40-45% from its branded consumer segment, and we estimate the branded consumer segment generated an EBIT margin of 19% in 2013. For its promotion in Singapore, Super is offering a discount of up to 37% on its charcoal-roasted white coffee product. Given Super’s white coffee product is a premium product, for our sensitivity analysis we assume it generates a gross profit margin of 50% and an EBIT margin of 25% prior to discounting. Assuming that COGS and SG&A/unit remain the same, any discount beyond 25% would result in an EBIT loss. At a 37% discount (which is what Super’s promotion offers), we estimate that its products are generating an EBIT loss of SGD 0.74/pack (-19% EBIT margin). Figure 26: Super – Estimated profit per pack ASP Pre-discount 6.20 Post-discount 3.91 (3.10) (3.10) COGS Gross profit 3.10 0.81 Gross profit margin 50% 21% SG&A (1.55) (1.55) EBIT 1.55 (0.74) EBIT margin 25% -19% Discount 37% Source: Company, Standard Chartered Research estimates Figure 27: Sensitivity to discount percentage Discount ASP 37% 3.91 35% 4.03 30% 4.34 25% 4.65 19% 4.65 14% 4.96 9% 5.27 Gross profit 0.81 0.93 1.24 1.55 1.55 1.86 2.17 Gross profit margin 21% 23% 29% 33% 33% 38% 41% EBIT (0.74) (0.62) (0.31) - - 0.31 0.62 EBIT margin -19% -15% -7% 0% 0% 6% 12% Source: Standard Chartered Research estimates Manageable impact from Singapore competition On our estimates, the price war in Singapore should reduce Super’s branded consumer EBIT margin by 1.3ppt to 17.7% in 2014. We assumed the following: Singapore accounted for 9% of Super’s branded consumer sales (6% of group sales) in 2013. We assume that 85% of Singapore branded consumer sales come from coffee and 15% from cereal. We believe the OWL and Super brands each accounted for half of Super’s Singapore coffee sales. We assume flat cereal sales growth in 2014, generating an EBIT margin of 19%. This results in a blended Singapore branded consumer EBIT margin of 3.6%. 13 June 2014 14 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 28: Super – Singapore branded consumer sales Coffee 2013 27.6 2014E 25.50 Cereal 4.9 4.9 32.4 30.4 Total Sales growth Coffee -8% Cereal 0% Total -6% EBIT Coffee 5.24 0.16 Cereal 0.92 0.92 Total 6.16 1.08 Coffee 19% 0.6% Cereal 19% 19% Total 19% 3.6% EBIT margin Source: Company, Standard Chartered Research estimates We assume that Super is sold at a discount, while OWL is not. We model flat Singapore coffee sales for Super (increased volumes, but reduced revenue per pack from the discount), and OWL’s sales declining by 15% YoY, based on market share losses due to no discount (management said that OWL’s sales declined c.20% YoY in 1Q14). We model an EBIT margin of 19% for OWL and -15% for Super after the discount. Our sensitivity analysis shows that if Super is discounted by 37% (which is what their promotion offers), EBIT margin should be -19%. However, not all Super products are being sold at a discount, and we assume these products generate some sales. This results in a blended coffee EBIT margin of 0.6%. Figure 29: Singapore coffee sales Super 2013 13.8 2014E 13.78 OWL 13.8 11.71 Total 27.6 25.50 Sales growth Super 0% OWL -15% Total -8% EBIT Super 2.6 (2.1) OWL 2.6 2.2 Total 5.2 0.2 Super 19% -15% OWL 19% 19% Total 19% 0.6% EBIT margin Source: Company, Standard Chartered Research estimates We estimate that Super’s branded consumer business generated a blended EBIT margin of 19% in 2013. We assume all markets generated this EBIT margin in 2013, and expect this to continue in 2014, with the exception of Singapore. For Singapore, we apply an EBIT margin of 3.6%, which assumes that Super’s branded consumer EBIT margin declines to 17.7% in 2014, from 19% in 2013. 13 June 2014 15 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 30: Revenue by geography – Branded consumer SGD mn Thailand 2013 113.3 2014E 107.6 Myanmar 73.1 73.1 Malaysia 53.7 58.0 Singapore 32.4 32.4 Philippines 25.9 27.2 Others 66.1 76.0 Group 364.5 374.3 Growth (%) Thailand -5.0% Myanmar 0.0% Malaysia 8.0% Singapore 0.0% Philippines 5.0% Others 15.0% Group 2.7% EBIT (SGD mn) Thailand 21.5 20.4 Myanmar 13.9 13.9 Malaysia 10.2 11.0 Singapore 6.2 1.2 Philippines 4.9 5.2 Others 12.6 14.4 Group 69.3 66.1 Thailand 19.0% 19.0% Myanmar 19.0% 19.0% Malaysia 19.0% 19.0% Singapore 19.0% 3.6% Philippines 19.0% 19.0% Others 19.0% 19.0% Group 19.0% 17.7% EBIT margin (%) Change in EBIT margin YoY (ppt) -1.3 Source: Company, Standard Chartered Research estimates 13 June 2014 16 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Regional competition may pressure margins We estimate that Super’s branded consumer business generated an EBIT margin of 19% in 2013, one of the highest among ASEAN food and beverage companies. We believe Super’s attractive margins may encourage intensifying competition in the region. While the price war in Singapore should have manageable impact on Super’s overall profitability, if major price competition spreads to other markets, the impact on Super could be significant, in our view. 19% 18% 18% Figure 32: Super’s EBIT margin, 2012-18 20% 13% 20% 13% 10% 19% 18% 18% 17% 17% 16% 2015 2016 2017 2018 15% 10% Mayora URC Ultrajaya Power root OTB Roti IJ 5% Source: Company, Bloomberg, Standard Chartered Research estimates 13 June 2014 EBIT margin - Branded Consumer 25% 17% 14% Petra SP 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Super EBIT margin Figure 31: EBIT margin, 2013 0% 2012 2013 2014 Source: Standard Chartered Research estimates 17 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage What is actionable? Our store visits showed intensifying competition among 3-in-1 coffee brands in the region, but with Super’s share price already down 27% YTD, we maintain our In-Line rating but trim our price target to SGD 1.34 (previously SGD 2.09). We maintain our Outperform ratings on URC, and our In-Line rating on Mayora Indah. Our top pick in the ASEAN food and beverage sector is URC. Figure 33: Stock ratings Price target Price Upside/ downside Last Rating (LCY) (LCY) (%) FYE 2013 2014 2015 CAGR IL 1.34 1.39 -3% 12/13 22.5 18.6 17.2 14% PER (x) 2Y EPS Name Ticker Super Group SUPER SP Mayora Indah Tbk PT MYOR IJ IL 30,363 29,250 4% 12/13 32.6 28.5 22.3 21% Universal Robina Corp URC PM OP 182.60 155.00 18% 09/13 36.8 28.5 24.3 23% Above data as of 11 June 2014. Source: Companies, Bloomberg, Standard Chartered Research estimates Super: Competitive pressures ahead We view Super as a leading brand, but expect strong competition to pressure its sales and margins. We believe this has already been reflected in the share price, and maintain our In-Line rating: Price war in Singapore: In 1Q14, Super’s sales in Singapore declined 11%. We believe the ongoing price war was part of the reason. We expect this factor to pressure Super’s sales and margins in Singapore, which accounted for 9% of its branded consumer sales in 2013. Competition could intensify regionally: Beyond Singapore, we are concerned that competition may intensify among 3-in-1 coffee brands. Mayora Indah (Indonesia), OldTown (Malaysia), and Power Root (Malaysia) all have aggressive regional expansion plans. One potential competitor is Universal Robina, which is currently selling its 3-in-1 coffee solely in the Philippines. However, given the company’s regional presence in other products and strong brand, we believe it has the potential to quickly enter other 3-in-1 coffee markets. Await better entry point: Super trades at 17.2x 2015E PER, similar to 3-in-1 coffee peer OldTown (OTB MK, NR). We await signs of moderating competition before turning more positive on the stock. Universal Robina: Our ASEAN F&B top pick We maintain our Outperform recommendation on URC, despite the stock’s strong performance, for the following reasons: Strong multi-product portfolio: Unlike Super, which is primarily a 3-in-1 coffee product company, URC has a solid multi-product portfolio with over 350 SKUs. We believe this provides it significant potential to innovate and drive growth. Robust growth: In 1Q14, URC’s branded consumer sales grew by 20%, while Super’s branded consumer segment sales declined 6%. Reasonable valuation for growth: URC is trading at 24.3x 2015E PER, but we believe this valuation is reasonable given the company’s strong regional brand, multi-product portfolio, and solid growth. On a five-year view, assuming an exit 13 June 2014 18 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage multiple of 22x 2019E PER, we estimate that URC could deliver a total return of 9.8% p.a. Mayora Indah: Aggressive growth We maintain our In-Line rating on Mayora due to its recent poor margin performance: Rising raw materials costs hurt margins: Mayora reported a gross profit margin of 20.1% in 1Q14, compared to 24.6% in 1Q13. Food processing and instant coffee gross profit margins both fell to 18-20% in 1Q14, from 19-26% in 1Q13. We think this was largely due to rising raw material costs, including coffee (+13% YoY), while packaging expenses tend to rise during periods of USD/IDR depreciation. Potential for more margin pressure in 2H14: Mayora spent only 5.4% of its revenue on marketing in 1Q14, compared to its usual c.8%. We think this could lead to further EBIT margin pressures in the next three-to-six months, as it may need to catch up on its marketing efforts prior to the Lebaran holiday in July. In addition, the Indonesian government has announced plans to increase electricity tariffs by 37-64% YoY for industrial users. We estimate that factory overheads and utilities accounted for around 7% of revenue in 2013. Fairly valued for now: Given our expectation of further margin pressure, we consider Mayora fairly valued. We will be watching for signs of improving margins in the next two quarters. 13 June 2014 19 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Super Group Competitive pressures ahead Super Group’s 1Q14 results were below our expectations, IN-LINE (unchanged) with core net profit representing 18% of our full-year PRICE as of 11 Jun 2014 forecast, compared with 25% in 2013. We cut our 2014E and 2015E EPS by 9% and 14%, respectively, to reflect Super’s weak sales, and revise our price target to SGD 1.34 (previously SGD 2.09). With Super’s share price down 27% YTD, we maintain our In-Line rating. Our 12-month price target implies 3% potential downside. We will look out for stronger earnings growth before becoming more positive. Weak sales. Super’s 1Q14 sales and core net profit fell 6% and 14% YoY, respectively, with sales of both branded consumer (71% of 1Q14 sales) and food ingredients (29% of 1Q14 sales) declining 6% YoY. We were disappointed by the fall in branded consumer sales in Thailand (-10% YoY), Myanmar (-6% YoY) and Singapore (-11% YoY) – we estimate that these markets constituted c.60% of Super’s branded consumer sales in 2013. The fall in food ingredients’ sales was primarily due to a 30% sales decline in Indonesia, as Super’s Indonesian clients had overstocked in 4Q13. Price war in Singapore. Our supermarket visits in Singapore revealed that an aggressive price war is brewing, with many 3-in-1 coffee brands offering significant discounts. Brands such as Nestle, Kopiko (or Mayora Indah) and Super are offering discounts of up to 37%. We think the price war may last 6-9 months, and we expect this to pressurise Super’s sales and margins in Singapore. Hurt by exposure to southern Thailand. We note that Super’s sales declined 10% YoY in Thailand in 1Q14; Universal Robina’s (URC) sales, on the other hand, grew 16% during the period. We believe Super’s sales in Thailand were adversely affected, due primarily to its large exposure to southern Thailand (65% of Thailand sales, according to management estimates). Consumer demand in the southern provinces has been affected by an acute insurgency problem. Maintain In-Line. Super trades at 17.2x 2015E PER, similar to 3in-1 coffee peer Oldtown Bhd (OTB MK, NR). We await signs of moderating competition before becoming more positive on the stock. We transfer coverage to Munchuga Khajornkowit. PRICE TARGET SGD 1.39 SGD 1.34 Bloomberg code Reuters code SUPER SP SPGP.SI Market cap 12-month range SGD 1,544.5mn (USD 1,235.5mn) SGD 1.38 - 2.53 EPS adj. est. change 2014E Year-end: December Sales (SGD mn) EBITDA (SGD mn) EBIT (SGD mn) Pre-tax profit (SGD mn) Net profit adj. (SGD mn) FCF (SGD mn) EPS adj. (SGD) DPS (SGD) Book value/share (SGD) EPS growth adj. (%) DPS growth (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Div. payout (%) Net gearing (%) ROE (%) ROCE (%) EV/sales (x) EV/EBITDA (x) PBR (x) PER adj. (x) Dividend yield (%) -9.2% 2013 557.0 78.2 93.0 114.7 100.1 14.5 0.09 0.04 0.42 27.9 26.2 14.0 16.7 18.0 49.9 -20.2 23.1 20.3 3.9 27.5 4.5 22.5 2.2 2015E 2014E 589.1 79.7 93.1 95.8 83.2 57.1 0.07 0.04 0.49 -16.9 -16.8 13.5 15.8 14.1 50.0 -27.1 16.4 17.4 2.4 17.4 2.8 18.6 2.7 -13.9% 2015E 649.8 86.0 100.4 104.1 89.8 53.5 0.08 0.04 0.57 8.0 8.0 13.2 15.5 13.8 50.0 -31.3 15.1 16.0 2.1 15.6 2.4 17.2 2.9 2016E 719.2 92.9 108.7 112.9 96.8 53.9 0.09 0.04 0.66 7.8 7.8 12.9 15.1 13.5 50.0 -34.2 14.1 15.1 1.8 13.8 2.1 16.0 3.1 Source: Company, Standard Chartered Research estimates Share price performance Super Group STRAITS TIMES INDEX (rebased) 2.6 1.9 1.2 Jun-13 Sep-13 Share price (%) Ordinary shares Relative to index Relative to sector Major shareholder Free float Average turnover (USD) Dec-13 Mar-14 -1 mth -18 -19 - Jun-14 -3 mth -12 mth -21 -37 -25 -40 Lay Hoon Te (12.2%) 45% 2,227,811 Source: Company, FactSet Munchuga Khajornkowit +65 6596 8504 Equity Research Standard Chartered Bank, Singapore Branch 13 June 2014 20 SUPER SP SGD 1.39 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD SGD 1.34 Equity Research l ASEAN food and beverage 1Q14 results highlights 1Q14 sales and core net profit declined 6% and 14% YoY, respectively Super’s 1Q14 results were below our expectations, with core net profit representing 18% of our full-year forecast, compared with 25% in 2013. Sales and core net profit declined 6% and 14% YoY, respectively, during the quarter. The following are the key results highlights: Figure 34: Results summary SGD mn 1Q13 1Q14 YoY growth Revenue 132.4 124.6 -6% Gross profit 2014 consensu 2013 Old 2014E s 557.0 616.4 1Q13 1Q14 1Q14 as % of as % of as % of 2014 2013 2014E old consensus 618.9 24% 20% 20% 49.1 46.7 -5% 209.5 229.3 225.4 23% 20% 21% 37.1% 37.5% NA 37.6% 37.2% 36.4% NA NA NA 23.9 19.9 -16% 93.0 106.6 103.9 26% 19% 19% 18.0% 16.0% NA 16.7% 17.3% 16.8% NA NA NA 22.1 17.8 -19% 100.1 91.6 91.6 22% 19% 19% 16.7% 14.3% NA 18.0% 14.9% 14.8% NA NA NA 19.6 16.9 -14% 78.7 91.6 90.8 25% 18% 19% Net margin – core 14.8% 13.5% NA 14.1% 14.9% 14.7% NA NA NA EPS diluted (SG¢) 3.97 3.20 -19% 8.98 16.42 16.40 44% 19% 19% 3.52 3.03 -14% 7.06 16.42 16.30 50% 18% 19% 76.50 86.23 13% 83.74 91.93 90.80 91% 94% 95% GP margin EBIT EBIT margin Net profit Net margin Net profit – core EPS diluted – core (SG¢) BPS (SGD) Source: Company, Bloomberg and Standard Chartered Research estimates Figure 35: Changes in our 2014 estimates SGD mn Old estimates New estimates Revenue 616.4 589.0 618.9 -4% Net profit 91.6 83.0 91.6 -9% Core net profit 91.6 80.0 90.8 -13% 8.2 7.4 8.2 -9% EPS diluted (SG¢) Changes in Consensus our estimates Source: Bloomberg, Standard Chartered Research estimates Weak sales across both segments: Sales of branded consumer (71% of sales) and food ingredients (29% of sales) declined 6% YoY each in 1Q14. Branded consumer – weak sales in key markets: Management said that sales in 1Q14 grew YoY in the Philippines, Indonesia, Vietnam and Cambodia and was flat in Malaysia. However, this was offset by weakness in Thailand (-10% YoY), Myanmar (-6% YoY) and Singapore (-11% YoY). Thailand, Myanmar and Singapore were Super’s largest, second-largest and fourth-largest branded consumer markets in 2013 – we estimate these three markets constituted c.60% of Super’s branded consumer sales in 2013. 13 June 2014 21 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 36: 1Q14 branded consumer sales growth, by country 25% 20% Figure 37: 1Q14 branded consumer sales growth, by region 4% 20% 15% 0% 10% 3% 5% YoY % YoY % 2% 2% 0% -5% -2% -4% -6% -6% -10% -6% -10% -15% Vietnam Philippines Branded Myanmar consumer Source: Company -11% Thailand Singapore -6% -8% -8% -10% BCF - East Asia Branded consumer BCF - Southeast Asia Source: Company Branded consumer – Thailand: Super’s 1Q14 branded consumer sales in Thailand declined 10% YoY; during the same period, URC’s sales grew 16%. We believe Super’s sales in Thailand was adversely impacted, due primarily to its significant exposure to southern Thailand. According to management estimates, 65% of Super’s Thailand sales are from the southern provinces, where consumer demand has been impacted by an acute insurgency problem. Management also stated the company had shortened its credit terms to distributors, from 90 days to 60 days, to manage credit risk, thus hurting sales in the quarter. It expects the stimulus programs from Thailand’s recent military-led government to help revive consumer demand in 2H14. Branded consumer – Myanmar: Super’s 1Q14 branded consumer sales in Myanmar declined 6% YoY. The company offers two brands in Myanmar: Super, their flagship, premium brand; and Coffee King, which targets the lower-income segment. According to management, Super’s distributors raised prices of both brands by about 6-8% in November 2013. While volumes of the Super brand continued to grow in 1Q14, Coffee King volumes fell in the quarter. Branded consumer – Singapore: Super’s branded consumer sales in Singapore declined 11% YoY in 1Q14. Management said the sales decline was because of: (1) rebranding of Super’s instant cereal products under Nutremill in December 2013. It believes that it would take time to build brand awareness for rebranding; and (2) an aggressive price war in the 3-in-1 coffee market in Singapore. While the Super brand participated in the price war, the OWL brand is yet to do so, resulting in sales of the OWL brand declining c.20%. China coffee-in-a-cup not growing: Sales growth in China was flat during the quarter, despite the low base and the product being launched only last year. Management said it was not concerned about the flat sales, because the product is seasonal with higher sales in winter. It also attributed the weakness in China to disruption caused by moving Super’s factory; as a result, the factory did not produce for two weeks. Food ingredients recovering: Sales of food ingredients in Southeast Asia (41% of food ingredient sales) declined 20% YoY in 1Q14, while sales in East Asia grew 6% YoY. Sales rose in the Philippines, Singapore and Vietnam but declined in Indonesia and Thailand. 13 June 2014 22 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 38: Revenue breakdown, by segment products Branded consumer Figure 39: 1Q14 revenue, by geographical region Food ingredients 100% 80% 6% 29% 36% 37% 38% 38% 38% 38% 24% Southeast Asia 60% 40% East Asia 71% Other Markets 64% 63% 62% 62% 62% 62% 2014E 2015E 2016E 2017E 2018E 2019E 70% 20% 0% 1Q14 Source: Company, Standard Chartered Research estimates Source: Company Still guiding for growth: Despite the sales decline in 1Q14, management has guided for a full-year single-digit sales growth for branded consumer and low double-digit sales growth for food ingredients. Balance sheet and cash flow: Super’s balance sheet remains strong, with net cash of SGD 94mn as of end-1Q14. The company spent capex of SGD 11mn in the quarter. Management has guided for a full-year capex of SGD 40mn, with maintenance capex of c.SGD 4-5mn and the remaining for moving the company’s headquarters in Singapore to Tuas and for coffee plant expansion. Bonus issue: On 24 February 2014, management announced issuance of bonus shares (one bonus share for every existing ordinary share held by shareholders). This issue will be effective on 26 May 2014. As of 24 February 2014, the company had 557,738,980 shares outstanding, including 152,000 treasury shares. 13 June 2014 23 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Maintain In-Line We value Super based on SOTP with separate DCF valuations for its branded consumer and food ingredients businesses We maintain our In-Line rating and our price target implies 3% potential downside. Our price target is based on SOTP, comprising separate DCF valuations for its branded consumer and food ingredients businesses. Our price target translates into 17.3x 2015E PER. SOTP We value Super based on our SOTP valuation methodology, separately valuing its branded consumer and food ingredients businesses. Our DCF-based fair value for the branded consumer business implies 19.8x 2015E PER. We also value the food ingredients segment on DCF. Figure 40: Our SOTP valuation Valuation (SGD mn) Segment Value of operations – Branded consumer segment Value of operations – Food ingredients segment Total value of operations Add: net cash / less: net debt Per share EBITDA Net income value 2015E EV/EBITDA 2015E PER 2015E (SGD) (SGD mn) 2015E (x) (SGD mn) (x) 1,172 1.05 243 0.22 1,415 1.27 98 0.09 (20) (0.02) Equity value 1,493 1.34 Shares outstanding (mn) 1,115 Less: Minority interests Fair value per share (SGD) 1.34 Current price (SGD)* 1.39 Upside/(downside) -3% EPS adj. 2015E (SG¢) 0.08 Target PER 2015E 81 14.5x 59 34 7.1x 24 115 12.3x 83 Valuation % of EV methodology 19.8x 83% DCF 10.1x 17% DCF 17.0x 100% 17.3x EBITDA - 2015E 115 Target EV/EBITDA 2015E 13.0x Note: Share price data as of 11 June 2014 Source: Company, Standard Chartered Research estimates Relative valuation Super trades at 17.2x 2015E PER, a 15% discount to the ASEAN consumer staples average of 20.1x 2015E PER. Figure 41: Peer comparison Name Super Group Ticker Rating 3M avg Price Market value Target Price cap traded (LCY) (LCY) (USDm) (USDm) PER (x) Last FYE EV/EBITDA (x) 2-yrs EPS 2015E CAGR 2-yrs PEG Price/ sales 2014 Div. yield (%) 2015E 2014E ROCE (%) 2014E 2013 2014E 2013 2014E 1.34 1.39 1,235 2.19 12/13 22.5 18.6 17.2 14% 3.5 2.6 12.6 17.4 15.6 2.7 17.4 8,521 6,900 5,130 6.87 12/13 24.2 13.3 9.9 56% 0.2 0.9 10.3 6.1 5.5 3.8 17.4 30,363 29,250 SUPER SP IL ASEAN consumer staples Indofood Sukses INDF IJ Makmur Tbk PT Mayora Indah Petra Foods MYOR IJ OP IL 2,215 0.08 12/13 32.6 28.5 22.3 21% 1.1 1.8 17.9 15.3 12.8 0.5 19.6 3.90 1,906 1.15 12/13 40.2 27.8 24.4 28% 0.9 3.4 19.2 15.4 13.7 0.8 31.6 182.60 155.00 7,718 7.71 09/13 36.8 28.5 24.3 23% 1.1 3.6 24.0 18.7 16.0 2.3 24.9 33.5 24.5 20.2 0.8 2.4 17.9 13.9 12.0 1.8 23.4 PETRA SP OP Universal Robina URC PM OP 4.00 Average Asean consumer staples Note: Share price data as of 11 June 2014 Source: Company, FactSet, Bloomberg, Standard Chartered Research estimates 13 June 2014 24 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage DCF valuation – Branded consumer We value Super’s branded consumer business using a three-stage DCF model. Our explicit forecasts for 2013-23E translate into a free cash flow CAGR of 5.8%. We assume second-stage and terminal growth rates of 6% and 3%, respectively, and use a WACC of 8.3%. Figure 42: DCF valuation – Branded consumer foods SGD mn 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 71 69 67 71 76 81 87 94 101 109 117 126 -2.5% -2.7% 5.9% 6.5% 6.5% 8.1% 7.6% 7.6% 7.6% 7.7% 7.7% Stage 1: Explicit 2013-23E EBIT Change YoY EBIT margin 20% 19.0% 18.0% 17.5% 17.0% 16.5% 16.3% 16.0% 15.8% 15.5% 15.3% 15.0% EBIT (1-tax) 59 57 60 64 67 71 77 82 88 94 101 108 7 6 7 9 8 9 10 11 13 15 16 17 (-) Change in working capital (11) (2) (9) (9) (10) (12) (13) (11) (12) (13) (15) (16) (-) Capital expenditure (22) (22) (19) (20) (22) (23) (26) (28) (31) (32) (35) (38) -5.9% -5.0% -5.0% -5.0% -4.8% -4.8% -4.8% -4.8% -4.5% -4.5% -4.5% 41 40 44 43 46 48 54 58 64 68 71 0.96 0.88 0.81 0.75 0.70 0.64 0.59 0.55 0.51 0.47 38 39 35 34 33 35 35 35 34 33 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E (+) Depreciation and amortisation Capex/Sales Unlevered free cash flow 33 Discount factor Present value of FCF Stage 2: 2024-33E Unlevered free cash flow Discount factor Present value of FCF 75 80 85 90 95 101 107 113 120 127 0.43 0.40 0.37 0.34 0.31 0.29 0.27 0.25 0.23 0.21 32 32 31 30 30 29 29 28 27 27 Stage 3: Terminal Terminal value 2,479 Discount factor 0.21 Present value of terminal value 524 Equity value Growth rate assumptions WACC assumptions DCF of operations: Stage 1 352 Stage 1: 2013-23E 5.8% Risk-free rate 2.7% DCF of operations: Stage 2 296 Stage 2: 2024-33E 6.0% Cost of debt 6.0% NPV of the terminal value 524 Stage 3: Terminal 3.0% Equity risk premium 6.2% Enterprise value (SGD mn) 1,172 Tax rate 17.0% Number of diluted shares 1,115 Target debt-to-firm-value 0.00% Enterprise value per share (SGD) Net profit 2015E PER 2015E 1.05 59 19.8 Equity beta 0.90 Cost of debt (after tax) 5.0% Cost of equity 8.3% WACC 8.3% Note: Share price data as of 11 June 2014 Source: Company, Bloomberg, Standard Chartered Research estimates 13 June 2014 25 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 43: Sensitivity for branded consumer Terminal growth rate 1.0% 3.0% 5.0% 7.0% 6.3% 1.25 1.36 1.79 3.54 (4.45) 7.3% 1.03 1.10 1.33 1.96 11.67 8.3% 0.87 0.92 1.05 1.35 2.59 9.3% 0.75 0.78 0.86 1.03 1.48 10.3% 0.66 0.67 0.73 0.83 1.04 WACC 0.0% Note: Data as of 11 June 2014 Source: Standard Chartered Research estimates DCF valuation – Food ingredients We value Super’s food ingredients business using a three-stage DCF model. Our explicit forecasts for 2014-23E translate into a free cash flow CAGR of 13.1%. We assume second-stage and terminal growth rates of 5% and 3%, respectively, and use a WACC of 9.5%. Figure 44: DCF valuation – Food ingredients segment SGD mn 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Stage 1: Explicit 2013-23E EBIT 24 26 29 33 36 39 42 44 47 49 52 Change YoY 38% 8% 13% 12% 11% 8% 7% 6% 6% 6% 6% EBIT margin 12% 12% 12% 12% 12% 12% 12% 11% 11% 11% 11% EBIT (1-tax) 21 23 26 29 32 34 36 38 40 42 44 5 5 5 6 7 8 9 9 10 10 10 (-) Change in working capital (47) (8) (10) (11) (11) (10) (9) (9) (8) (8) (8) (-) Capital expenditure (15) (13) (15) (16) (17) (19) (21) (22) (23) (24) (25) Capex/Sales -8% -6% -6% -6% -6% -6% -6% -6% -6% -6% -6% Unlevered free cash flow (36) 7 7 7 10 13 15 16 20 20 21 0.95 0.87 0.79 0.72 0.66 0.60 0.55 0.50 0.46 0.42 7 6 6 7 9 9 9 10 9 9 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 22 23 24 26 27 28 30 31 33 34 0.38 0.35 0.32 0.29 0.27 0.24 0.22 0.20 0.18 0.17 8 8 8 7 7 7 7 6 6 6 (+) Depreciation and amortisation Discount factor Present value of FCF Stage 2: 2023-33E Unlevered free cash flow Discount factor Present value of FCF Stage 3: Terminal Terminal value 543 Discount factor 0.17 Present value of terminal value 92 Equity value Growth rate assumptions WACC assumptions DCF of operations: Stage 1 80 Stage 1: 2014-23E 13.1% Risk-free rate 2.7% DCF of operations: Stage 2 71 Stage 2: 2024-33E 5.0% Cost of debt 6.0% NPV of the terminal value 92 Stage 3: Terminal 3.0% Equity risk premium Enterprise value (SGD mn) Number of diluted shares Enterprise value per share (SGD) Net profit 2015E PER 2015E 243 1,115 0.22 24 10.1 6.2% Tax rate 17.0% Target debt-to-firm-value 0.00% Equity beta 1.10 Cost of debt (after tax) 5.0% Cost of equity 9.5% WACC 9.5% Note: Share price data as of 11 June 2014 Source: Company, Bloomberg, Standard Chartered Research estimates 13 June 2014 26 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Figure 45: Sensitivity for food ingredients WACC Terminal growth rate 0.0% 1.0% 3.0% 5.0% 7.0% 7.5% 0.26 0.28 0.33 0.47 1.70 8.5% 0.22 0.23 0.26 0.33 0.59 9.5% 0.19 0.20 0.22 0.26 0.36 10.5% 0.17 0.17 0.18 0.21 0.26 11.5% 0.15 0.15 0.16 0.17 0.20 Note: Data above as of 11 June 2014 Source: Standard Chartered Research estimates Historical valuation Super currently trades at 17.9x PER, based on 12-month forward earnings. Its fiveyear average 12-month forward PER is 13.5x. Figure 46: Super – PER band Super has been trading in the 4-31x PER range, based on 12-month forward earnings 3.0 LCY 2.5 30.9x 2.0 24.0x 1.5 19.0x 1.0 0.5 14.0x 9.0x 4.0x 0.0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Share price data as of 11 June 2014 Source: Company, Bloomberg and Standard Chartered Research estimates 13 June 2014 27 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Income statement (SGD mn) Year-end: Dec Sales Gross profit SG&A Other income Other expenses EBIT Net interest Associates Other non-operational Exceptional items Pre-tax profit Taxation Minority interests Exceptional items after tax Net profit Cash flow statement (SGD mn) 2012 519.3 181.4 (93.2) 0.0 0.0 88.3 0.5 0.2 1.6 0.0 90.5 (8.7) (3.5) 0.0 78.3 2013 557.0 209.5 (116.4) 0.0 0.0 93.0 0.4 (2.4) 23.6 0.0 114.7 (11.1) (3.4) 0.0 100.1 2014E 589.1 218.4 (125.2) 0.0 0.0 93.1 0.5 (1.5) 3.7 0.0 95.8 (9.8) (2.9) 0.0 83.2 2015E 649.8 239.9 (139.5) 0.0 0.0 100.4 1.0 (1.0) 3.7 0.0 104.1 (11.2) (3.1) 0.0 89.8 2016E 719.2 261.2 (152.5) 0.0 0.0 108.7 1.0 (0.5) 3.7 0.0 112.9 (12.7) (3.4) 0.0 96.8 78.3 76.6 100.1 78.2 83.2 79.7 89.8 86.0 96.8 92.9 0.07 0.07 0.04 1,115 0.09 0.09 0.04 1,115 0.07 0.07 0.04 1,115 0.08 0.08 0.04 1,115 0.09 0.09 0.04 1,115 Year-end: Dec Cash Short-term investments Accounts receivable Inventory Other current assets Total current assets 2012 112.2 3.0 95.6 82.7 8.8 302.3 2013 98.5 2.4 94.6 101.6 28.9 326.0 2014E 155.2 2.4 109.3 111.7 28.9 407.4 2015E 208.2 2.4 120.5 123.5 28.9 483.6 2016E 261.6 2.4 133.4 138.0 28.9 564.3 PP&E Intangible assets Associates and JVs Other long-term assets Total long-term assets 211.7 0.0 0.0 28.8 240.5 250.6 0.0 0.0 22.5 273.1 262.1 0.0 0.0 22.5 284.6 283.1 0.0 0.0 22.5 305.6 307.8 0.0 0.0 22.5 330.2 Total assets 542.9 599.1 692.0 789.1 894.6 Short-term debt Accounts payable Other current liabilities Total current liabilities 0.9 40.1 79.9 120.8 0.0 36.9 68.5 105.4 0.0 44.1 68.5 112.6 0.0 48.8 68.5 117.3 0.0 54.5 68.5 123.0 0.4 0.0 0.0 5.0 5.4 0.2 0.0 0.0 7.0 7.1 0.2 0.0 0.0 7.0 7.1 0.2 0.0 0.0 7.0 7.1 0.2 0.0 0.0 7.0 7.1 Total liabilities 126.2 112.5 119.8 124.4 130.2 Shareholders’ funds Minority interests 398.9 17.8 466.9 19.7 549.7 22.5 639.0 25.7 735.4 29.1 Total equity 416.7 486.6 572.2 664.7 764.4 Total liabilities and equity 542.9 599.1 692.0 789.1 894.6 (110.9) 1,115 (98.3) 1,115 (155.0) 1,115 (208.1) 1,115 (261.5) 1,115 Net profit adj. EBITDA EPS (SGD) EPS adj. (SGD) DPS (SGD) Avg fully diluted shares (mn) Balance sheet (SGD mn) Long-term debt Convertible bonds Deferred tax Other long-term liabilities Total long-term liabilities Net debt (cash) Year-end shares (mn) Year-end: Dec EBIT Depreciation & amortisation Net interest Tax paid Changes in working capital Others Cash flow from operations 2012 88.3 (11.6) (0.5) (8.7) (17.4) 123.9 85.7 2013 93.0 (14.8) (0.4) (9.7) (35.7) 123.5 62.8 2014E 93.1 (13.5) (0.5) (9.8) (17.5) 123.3 82.0 2015E 100.4 (14.4) (1.0) (11.2) (18.4) 134.0 89.0 2016E 108.7 (15.8) (1.0) (12.7) (21.7) 145.4 94.3 Capex Acquisitions & Investments Disposals Others Cash flow from investing (63.3) 0.3 0.2 4.8 (58.0) (48.3) 8.3 2.3 0.1 (37.6) (24.9) 0.0 0.0 0.0 (24.9) (35.4) 0.0 0.0 0.0 (35.4) (40.5) 0.0 0.0 0.0 (40.5) Dividends Issue of shares Change in debt Other financing cash flow Cash flow from financing (32.3) 0.0 0.0 (1.1) (33.5) (39.6) 0.0 0.0 (2.3) (41.9) (0.4) 0.0 0.0 0.0 (0.4) (0.4) 0.0 0.0 0.0 (0.4) (0.5) 0.0 0.0 0.0 (0.5) Change in cash Exchange rate effect Free cash flow (10.4) 0.0 22.4 (13.0) 0.0 14.5 56.7 0.0 57.1 53.1 0.0 53.5 53.4 0.0 53.9 2012 2013 2014E 2015E 2016E 34.9 14.8 17.0 15.1 9.6 17.8 24.9 24.8 21.6 22.4 37.6 14.0 16.7 18.0 9.7 7.3 27.9 27.9 27.9 26.2 37.1 13.5 15.8 14.1 10.2 5.8 -16.9 -16.9 -16.9 -16.8 36.9 13.2 15.5 13.8 10.7 10.3 8.0 8.0 8.0 8.0 36.3 12.9 15.1 13.5 11.2 10.7 7.8 7.8 7.8 7.8 20.4 21.7 1.0 1.0 -0.2 94.9 61.1 40.9 23.1 20.3 1.0 0.7 -0.3 96.8 62.3 40.4 16.4 17.4 0.9 0.9 -0.5 105.0 63.2 39.9 15.1 16.0 0.9 0.9 -0.4 104.7 64.6 41.4 14.1 15.1 0.9 0.9 -0.4 104.2 64.4 41.2 Financial ratios and other Year-end: Dec Operating ratios Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Effective tax rate (%) Sales growth (%) Net income growth (%) EPS growth (%) EPS growth adj. (%) DPS growth (%) Efficiency ratios ROE (%) ROCE (%) Asset turnover (x) Op. cash/EBIT (x) Depreciation/capex (x) Inventory days Accounts receivable days Accounts payable days Leverage ratios Net gearing (%) Debt/capital (%) Interest cover (x) Debt/EBITDA (x) Current ratio (x) Valuation EV/sales (x) EV/EBITDA (x) EV/EBIT (x) PER (x) PER adj. (x) PBR (x) Dividend yield (%) -26.6 0.3 1,961.2 0.0 2.5 2.1 13.9 12.1 15.1 15.1 4.5 3.4 -20.2 -27.1 -31.3 -34.2 0.0 0.0 0.0 0.0 2,819.2 12,774.2 13,768.3 14,901.0 0.0 0.0 0.0 0.0 3.1 3.6 4.1 4.6 3.9 27.5 23.1 22.5 22.5 4.5 2.2 2.4 17.4 14.9 18.6 18.6 2.8 2.7 2.1 15.6 13.3 17.2 17.2 2.4 2.9 1.8 13.8 11.8 16.0 16.0 2.1 3.1 Source: Company, Standard Chartered Research estimates 13 June 2014 28 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Universal Robina Corp ‘Great Taste’ driving growth We reiterate our Outperform rating on URC, with a revised price target of PHP 182.60 (previously PHP 195.60). OUTPERFORM (unchanged) PRICE as of 11 Jun 2014 PRICE TARGET We expect robust growth for URC in the Philippines, especially its 3-in-1 coffee brand, Great Taste. PHP 155.00 PHP 182.60 We continue to like URC for its strong regional brand, multi-product portfolio, and top-class management. Bloomberg code We value URC based on SOTP valuation methodology, and our price target translates into 28.6x 2015E PER. Robust growth. In 2QFY14 (end-March 2014), sales of URC’s domestic branded consumer business grew 24% YoY, driven primarily by the success of Great Taste. Moreover, sales of URC’s beverage segment in the Philippines grew 41% YoY during the quarter, compared with 16% YoY for the snack segment. We expect Great Taste to sustain its robust growth – the company undersupplied the market earlier because its manufacturing capacity had been fully utilised. URC opened a new plant in Vietnam in May 2014, thereby increasing its coffee product manufacturing capacity by 30%. Gaining market share. Great Taste’s market share of 3-in-1 coffee increased to 22% in December 2013, from only 5% in June 2012. Great Taste’s momentum remains strong: its market share rose to 23% in February 2014, according to management. In contrast, Nestle’s market share of 3-in-1 coffee declined to 42% in February 2014, from 53% in June 2012. Great Taste’s strong market share gain and Nestle’s market share decline suggest market leadership could change quickly, which could be a negative read-across for Super in its core markets. Reuters code URC PM URC-PH Market cap 12-month range PHP 338,133mn (USD 7,743mn) PHP 102.90 - 157.00 EPS adj. est. change 2014E Year-end: September Sales (PHP mn) EBITDA (PHP mn) EBIT (PHP mn) Pre-tax profit (PHP mn) Net profit adj. (PHP mn) FCF (PHP mn) EPS adj. (PHP) DPS (PHP) Book value/share (PHP) EPS growth adj. (%) DPS growth (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Div. payout (%) Net gearing (%) ROE (%) ROCE (%) EV/sales (x) EV/EBITDA (x) PBR (x) PER adj. (x) Dividend yield (%) - 2013 80,995 13,897 10,279 11,550 9,179 6,073 4.21 3.00 23.28 25.1 57.9 17.2 12.7 11.3 65.2 -19.8 20.6 20.2 2.7 16.0 5.3 24.4 2.9 2015E 2014E 93,357 17,662 13,429 14,122 11,863 6,353 5.44 3.55 25.19 29.2 18.2 18.9 14.4 12.7 65.0 -15.8 22.5 24.9 3.5 18.7 6.2 28.5 2.3 2.9% 2015E 107,659 20,617 15,902 16,551 13,907 8,315 6.37 4.16 27.43 17.2 17.2 19.2 14.8 12.9 65.0 -13.2 24.3 27.1 3.1 16.0 5.7 24.3 2.7 2016E 124,209 23,885 18,759 19,416 16,218 10,935 7.43 4.85 30.04 16.6 16.6 19.2 15.1 13.1 65.0 -12.6 26.0 29.3 2.7 13.8 5.2 20.8 3.1 Source: Company, Standard Chartered Research estimates Share price performance Universal Robina Corp PSEi - PHILIPPINE SE IDX (rebased) 160 130 Potential to expand 3-in-1 coffee regionally. Currently, URC sells 3-in-1 coffee only in the Philippines. As its manufacturing capacity is limited, we expect the company to focus on the Philippines’ 3-in-1 coffee market this year. However, over the next 2-3 years, we think URC may launch new 3-in-1 coffee products. This would intensify competition for other 3-in-1 coffee brands, such as Super and Mayora Indah, in our view. 100 Jun-13 Sep-13 Share price (%) Ordinary shares Relative to index Relative to sector Major shareholder Free float Average turnover (USD) Dec-13 Mar-14 Jun-14 -1 mth -3 mth -12 mth 5 10 35 5 5 30 JG Summit Holding (64.0%) 23% 7,684,102 Source: Company, FactSet Stephen Hui +65 6596 8514 Equity Research Standard Chartered Bank, Singapore Branch 13 June 2014 29 URC PM PHP 155.00 PHP 182.60 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Income statement (PHP mn) Cash flow statement (PHP mn) Year-end: Sep Sales Gross profit SG&A Other income Other expenses EBIT Net interest Associates Other non-operational Exceptional items Pre-tax profit Taxation Minority interests Year-end: Sep EBIT Depreciation & amortisation Net interest Tax paid Changes in working capital Others Cash flow from operations Net profit 2012 2013 2014E 2015E 2016E 71,202 80,995 93,357 107,659 124,209 18,471 23,219 26,140 30,144 34,778 (10,671) (12,940) (12,711) (14,242) (16,019) 7,801 10,279 13,429 15,902 18,759 547 264 604 540 528 31 19 42 55 66 53 (35) 47 54 62 716 1,023 0 0 0 9,147 11,550 14,122 16,551 19,416 (989) (1,432) (2,118) (2,516) (3,048) (422) (73) (102) (83) (97) 7,736 10,045 11,902 13,952 16,270 7,050 11,216 9,179 13,897 11,863 17,662 13,907 20,617 16,218 23,885 3.69 3.36 1.90 2,097 4.60 4.21 3.00 2,182 5.46 5.44 3.55 2,182 6.40 6.37 4.16 2,182 7.46 7.43 4.85 2,182 Year-end: Sep Cash Short-term investments Accounts receivable Inventory Other current assets Total current assets 2012 5,346 7,461 9,759 17,121 39,688 2013 12,033 8,522 10,987 1,885 33,428 2014E 10,650 9,823 12,783 1,885 35,140 2015E 9,895 11,328 14,741 1,885 37,849 2016E 10,254 13,069 17,007 1,885 42,215 PP&E Intangible assets Associates and JVs Other long-term assets Total long-term assets 27,919 1,274 96 1,011 30,300 30,180 1,274 85 1,578 33,117 34,248 1,274 128 1,578 37,227 38,146 1,274 183 1,578 41,180 41,467 1,274 249 1,578 44,567 Total assets 69,987 66,545 72,367 79,029 86,782 Short-term debt Accounts payable Other current liabilities Total current liabilities 8,589 7,587 3,893 20,068 1,945 9,514 3,260 14,719 1,945 11,068 3,260 16,274 1,945 12,764 3,260 17,969 1,945 14,726 3,260 19,931 2,990 0 312 3,303 0 0 996 996 0 0 996 996 0 0 996 996 0 0 996 996 Total liabilities 23,371 15,715 17,270 18,965 20,927 Shareholders’ funds Minority interests 46,580 37 50,779 51 54,945 152 59,828 235 65,523 332 Total equity 46,617 50,830 55,097 60,064 65,855 Total liabilities and equity 69,987 66,545 72,367 79,029 86,782 6,233 (10,088) 2,097 2,182 (8,704) 2,182 (7,950) 2,182 (8,309) 2,182 Net profit adj. EBITDA EPS (PHP) EPS adj. (PHP) DPS (PHP) Avg fully diluted shares (mn) Balance sheet (PHP mn) Long-term debt Convertible bonds Deferred tax Other long-term liabilities Total long-term liabilities Net debt (cash) Year-end shares (mn) Capex Acquisitions & Investments Disposals Others Cash flow from investing 2012 7,801 3,415 (547) (899) 2,256 962 12,989 2013 10,279 3,618 (264) (1,182) (1,443) 610 11,619 2014E 13,429 4,233 (604) (2,118) (1,542) 1,255 14,653 2015E 15,902 4,715 (540) (2,516) (1,767) 1,133 16,927 2016E 18,759 5,125 (528) (3,048) (2,045) 1,118 19,381 (5,129) (9,177) 3,695 3 (10,608) (5,546) 0 15,432 59 9,945 (8,300) 0 0 0 (8,300) (8,613) 0 0 0 (8,613) (8,446) 0 0 0 (8,446) (3,917) (5,236) 5,601 0 2,839 (6,643) (6,105) (2,998) (1,582) (14,877) (7,737) 0 0 0 (7,737) (9,069) (10,576) 0 0 0 0 0 0 (9,069) (10,576) Dividends Issue of shares Change in debt Other financing cash flow Cash flow from financing Change in cash Exchange rate effect Free cash flow 799 7,860 6,687 6,073 (1,384) 6,353 (754) 8,315 359 10,935 2012 2013 2014E 2015E 2016E 25.9 15.8 11.0 9.9 10.8 6.0 66.9 64.2 16.5 0.0 28.7 17.2 12.7 11.3 12.4 13.8 29.8 24.8 25.1 57.9 28.0 18.9 14.4 12.7 15.0 15.3 18.5 18.5 29.2 18.2 28.0 19.2 14.8 12.9 15.2 15.3 17.2 17.2 17.2 17.2 28.0 19.2 15.1 13.1 15.7 15.4 16.6 16.6 16.6 16.6 Efficiency ratios ROE (%) ROCE (%) Asset turnover (x) Op. cash/EBIT (x) Depreciation/capex (x) Inventory days Accounts receivable days Accounts payable days 17.7 16.4 1.0 1.7 0.7 67.4 38.1 51.4 20.6 20.2 1.2 1.1 0.7 65.5 36.0 54.0 22.5 24.9 1.3 1.1 0.5 64.5 35.9 55.9 24.3 27.1 1.4 1.1 0.5 64.8 35.9 56.1 26.0 29.3 1.5 1.0 0.6 64.8 35.8 56.1 Leverage ratios Net gearing (%) Debt/capital (%) Interest cover (x) Debt/EBITDA (x) Current ratio (x) 13.4 23.2 11.4 1.3 2.0 -19.8 3.8 38.6 0.5 2.3 -15.8 3.5 175.5 0.1 2.2 -13.2 3.2 207.8 0.1 2.1 -12.6 2.9 245.1 0.1 2.1 Valuation EV/sales (x) EV/EBITDA (x) EV/EBIT (x) PER (x) PER adj. (x) PBR (x) Dividend yield (%) 1.8 11.5 16.5 15.4 16.9 3.1 3.3 2.7 16.0 21.6 22.3 24.4 5.3 2.9 3.5 18.7 24.5 28.4 28.5 6.2 2.3 3.1 16.0 20.8 24.2 24.3 5.7 2.7 2.7 13.8 17.6 20.8 20.8 5.2 3.1 56,257 7,370 7,575 65,401 7,393 8,201 77,576 7,416 8,365 Financial ratios and other Year-end: Sep Operating ratios Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Effective tax rate (%) Sales growth (%) Net income growth (%) EPS growth (%) EPS growth adj. (%) DPS growth (%) Other Branded Consumer food Agro-Industrial Commodity Food 91,636 107,940 7,490 7,565 8,533 8,703 Source: Company, Standard Chartered Research estimates 13 June 2014 30 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Mayora Indah Watching margins closely Mayora Indah (Mayora) missed our and consensus IN-LINE (unchanged) earnings estimates in 1Q14 due to a weak gross profit PRICE as of 11 Jun 2014 margin following a rise in raw material prices. We expect IDR 29,250 gross profit margin to remain under pressure from: (1) rising raw material costs; and (2) a volatile USD-IDR Bloomberg code exchange rate. We maintain our In-Line rating as we see few further catalysts for the share price. We roll forward DCF and raise our 12-month price target to IDR 30,363 (from IDR 27,895). PRICE TARGET IDR 30,363 Reuters code MYOR IJ MYOR.JK Market cap 12-month range IDR 26.2bn (USD 2mn) IDR 22,500 - 31,000 EPS adj. est. change 2014E -4.7% 2015E -0.5% Despite a weak 1Q14 performance, Mayora’s share price is up 10% YTD. The stock is trading at an unattractive 22x 2015E PER and our price target implies 23x 2015E PER. Rising raw material costs hurt margins. Mayora reported a weak 1Q14 gross profit margin of 20.1%, compared with 24.6% in 1Q13 and 22.6% in 4Q13. Management attributed this to rising prices of palm oil, sugar, creamer and milk for its snack and coffee-mix products. We expect gross profit margin to improve to 22.8% in 2014, close to management guidance of 22.4%. Competition in instant coffee remains intense. Management indicated Mayora was the second-largest player by sales in instant coffee in Indonesia in 2013, but noted competitor Wings Food has been aggressive in advertising spend and its ‘buy two, get one free’ promotion. Against the fierce competition, we expect Mayora to raise marketing spend back to 7-8% of revenue for the remainder of 2014, from just 5.4% of revenue in 1Q14. Conservative profit target. Management guides a net profit of IDR 807bn in 2014, implying a decline of 20% YoY on an unadjusted basis, or 10% YoY growth on an adjusted basis (excluding FX gains of IDR 308bn in 2013). We see upside risk to management’s target, as palm oil and sugar price trends have moderated since 1Q14. Fairly valued for now. While Mayora has underperformed the Jakarta Composite Index, the stock is still up 10% YTD and is trading at 22x 2015E PER. As we expect further margin pressure, we view Mayora’s current valuation as fairly valued. We will be on the lookout for signs of improving margins in the next two quarters. Year-end: December Sales (IDR bn) EBITDA (IDR bn) EBIT (IDR bn) Pre-tax profit (IDR bn) Net profit adj. (IDR bn) FCF (IDR bn) EPS adj. (IDR) DPS (IDR) Book value/share (IDR) EPS growth adj. (%) DPS growth (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Div. payout (%) Net gearing (%) ROE (%) ROCE (%) EV/sales (x) EV/EBITDA (x) PBR (x) PER adj. (x) Dividend yield (%) 2013 12,018 1,669 1,305 1,356 801 535 896 159 4,307 14.1 42.8 13.9 10.9 6.7 13.7 51.1 30.4 19.4 2.1 14.9 6.0 28.2 0.6 2014E 14,421 1,822 1,469 1,207 918 354 1,026 140 5,193 14.5 -11.9 12.6 10.2 6.4 13.7 37.5 21.6 19.6 1.9 15.3 5.6 28.5 0.5 2015E 17,306 2,158 1,806 1,541 1,172 524 1,310 179 6,325 27.7 27.7 12.5 10.4 6.8 13.7 24.5 22.7 21.5 1.6 12.8 4.6 22.3 0.6 2016E 20,584 2,622 2,199 1,929 1,466 140 1,639 224 7,740 25.1 25.1 12.7 10.7 7.1 13.7 20.9 23.3 23.0 1.3 10.5 3.8 17.8 0.8 Source: Company, Standard Chartered Research estimates Share price performance Mayora Indah JAKARTA COMPOSITE INDEX (rebased) 32,000 27,000 22,000 Jun-13 Sep-13 Share price (%) Ordinary shares Relative to index Relative to sector Major shareholder Free float Average turnover (USD) Dec-13 Mar-14 Jun-14 -1 mth -3 mth -12 mth 3 -3 9 1 -8 1 Unita Branindo (32.9%) 64% 100,373 Source: Company, FactSet Alvin Witirto +65 6596 8530 Equity Research Standard Chartered Bank, Singapore Branch 13 June 2014 31 MYOR IJ IDR 29,2 50 IDR 30,3 63 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage DCF valuation Our DCF assumes a risk-free rate of 8.5%, cost of debt of 7.0%, equity risk premium of 6.0%, tax rate of 25.0%, target debt to firm value of 12.5% and an implied weighted average cost of 12.3%. Figure 47: DCF valuation (IDR bn) Stage 1: Explicit 2014-23E 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E EBIT 1,157 1,305 1,469 1,806 2,199 2,656 3,174 3,792 4,529 5,272 6,003 6,833 12.8% 12.6% 22.9% 21.8% 20.8% 19.5% 19.5% 19.5% 16.4% 13.9% 13.8% Change YoY EBIT margin 2023E 11.0% 10.9% 10.2% 10.4% 10.7% 10.9% 11.1% 11.2% 11.3% 11.5% 11.6% 11.8% EBIT (1-tax) 867 979 1,102 1,355 1,650 1,992 2,380 2,844 3,397 3,954 4,502 5,125 (+) Depr and amortisation 271 364 353 352 422 429 444 468 626 656 695 744 (-) Ch. in working capital (740) (471) (646) (677) (749) (823) (951) (1,098) (1,266) (1,183) (1,211) (1,470) (-) Capital expenditure (619) (477) (288) (346) (1,029) (486) (573) (676) (1,995) (918) (1,033) (1,162) -6% -4% -2% -2% -5% -2% -2% -2% -5% -2% -2% -2% (221) 395 520 683 293 1,112 1,299 1,538 762 2,509 2,954 3,237 Discount factor 0.94 0.83 0.74 0.66 0.59 0.53 0.47 0.42 0.37 0.33 Present Value of FCF's 487 570 218 736 766 807 356 1,045 1,096 1,069 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 3,560 3,916 4,308 4,739 5,213 5,734 6,308 6,938 7,632 8,395 0.29 0.26 0.23 0.21 0.19 0.16 0.15 0.13 0.12 0.10 1,048 1,026 1,005 985 965 945 926 907 889 871 Capex to sales Unlevered free cash flow Stage 2: 2024-33E Unlevered free cash flow Discount factor Present Value of FCF's Stage 3: Terminal Terminal value 120,858 0.10 Discount factor Present value of terminal value 12,534 Equity value Growth rates assumptions WACC assumptions DCF of operations: Stage 1 7,152 Stage 1: 2014-23E 23% Risk-free rate 8.5% DCF of operations: Stage 2 9,567 Stage 2: 2024-34E 10% Cost of debt 7.0% NPV of the terminal value 12,534 Stage 3: Terminal 5% Enterprise value (IDR bn) 29,254 Tax rate 25.0% Add. Net cash (2,012) Target debt to firm value 12.5% Less. Minority interest Equity value (IDR bn) Shares outstanding (bn) (86) 27,155 0.894 Price target (IDR) 30,363 Current price (IDR) 29,250 Upside/downside Equity risk premium Equity beta Cost of debt (after tax) 6.0% 0.80 5.3% Cost of equity 13.3% WACC 12.3% 3.8% PER 2015E 23.2 EPS 2015E 1,310 Source: Company, Standard Chartered Research estimates 13 June 2014 32 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Relative valuation Mayora is trading at 22x 2015E PER and our price target implies 23x 2015E PER. Figure 48: Peer comparison Name Ticker Mayora Indah MYOR IJ Market cap 3M avg. value traded (LCY) (USD mn) (USD mn) FYE 2013 2014 2015 CAGR PEG 2014 2013 2014 2015 2014 2014 IL 30,363 29,250 2,215 0.08 12/13 32.6 28.5 22.3 21% 1.1 1.8 17.9 15.3 12.8 0.5 19.6 Rating Price target Price (LCY) Last 2Y EPS PER (x) 2Y Price/ sales EV/EBITDA (x) Div. ROCE yield (%) (%) Indonesia Indofood CBP OP 12,300 10,200 5,025 3.71 12/13 20.3 17.7 14.7 18% 0.8 2.0 15.5 11.6 9.2 2.1 25.7 Indofood Sukses INDF IJ ICBP IJ OP 6,900 5,094 6.83 12/13 24.2 13.3 9.9 56% 0.2 0.9 10.3 6.1 5.5 3.8 17.4 Ultrajaya ULTJ IJ NR 4,000 978 0.10 12/13 35.5 23.4 18.0 40% 0.4 2.6 17.7 14.3 11.3 NA 19.1 Tiga Pilar AISA IJ NR 2,435 602 1.16 12/13 23.0 17.4 13.5 31% 0.4 1.3 12.2 9.2 7.2 0.6 18.0 Siantar Top STTP IJ NR 2,890 321 0.00 12/13 33.1 NA NA NA NA NA NA NA NA NA 18.7 27.2 18.0 14.0 36% 0.5 1.7 13.9 10.3 8.3 2.2 19.8 8,521 Average Regional peers Universal Robina URC PM OP 182.60 155.00 RFM Corp RFM PM NR 7,718 7.71 09/13 36.8 28.5 24.3 23% 1.1 3.6 24.0 18.7 16.0 2.3 24.9 6.17 493 0.12 12/13 24.8 22.4 20.2 11% 1.9 2.0 15.3 13.1 11.3 1.1 Super Group SUPER SP IL 11.1 1.34 1.39 1,235 2.19 12/13 22.5 18.6 17.2 14% 3.5 2.6 12.6 17.4 15.6 2.7 Petra Foods Ltd PETRA SP OP 17.4 4.00 3.90 1,906 1.15 12/13 40.2 27.8 24.4 28% 0.9 3.4 19.2 15.4 13.7 0.8 Oldtown Bhd OTB MK NR 31.6 2.24 313 0.51 12/12 NA 19.1 16.9 NA NA 2.5 NA 10.6 9.1 2.7 28.6 31.1 23.3 20.6 17% 1.8 3.0 19.3 16.3 14.0 1.9 22.6 Average Share price as of 11 June 2014 Source: Bloomberg, Standard Chartered Research estimates 13 June 2014 33 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Income statement (IDR bn) Year-end: Dec Sales Gross profit SG&A Other income Other expenses EBIT Net interest Associates Other non-operational Exceptional items Pre-tax profit Taxation Minority interests Exceptional items after tax Net profit Cash flow statement (IDR bn) 2012 10,511 2,346 (1,189) 0 0 1,157 (205) 0 (28) 36 960 (215) (15) 0 730 2013 12,018 2,922 (1,617) 0 0 1,305 (232) 0 (27) 310 1,356 (298) (17) 0 1,042 2014E 14,421 3,200 (1,731) 0 0 1,469 (224) 0 (38) 0 1,207 (271) (19) 0 918 2015E 17,306 3,883 (2,077) 0 0 1,806 (219) 0 (45) 0 1,541 (346) (24) 0 1,172 2016E 20,584 4,670 (2,470) 0 0 2,199 (217) 0 (54) 0 1,929 (433) (30) 0 1,466 702 1,428 801 1,669 918 1,822 1,172 2,158 1,466 2,622 816 785 111 894 1,165 896 159 894 1,026 1,026 140 894 1,310 1,310 179 894 1,639 1,639 224 894 Year-end: Dec Cash Short-term investments Accounts receivable Inventory Other current assets Total current assets 2012 1,340 0 2,051 1,499 424 5,314 2013 1,860 0 2,796 1,456 317 6,430 2014E 2,089 0 3,355 1,797 317 7,559 2015E 2,454 0 3,979 2,112 317 8,862 2016E 2,393 0 4,677 2,461 317 9,848 PP&E Intangible assets Associates and JVs Other long-term assets Total long-term assets 2,858 0 0 131 2,989 3,114 0 0 165 3,280 3,050 0 0 165 3,216 3,044 0 0 165 3,210 3,651 0 0 165 3,817 Total assets 8,303 9,710 10,774 12,072 13,664 Short-term debt Accounts payable Other current liabilities Total current liabilities 915 853 157 1,924 1,119 1,084 429 2,632 1,119 1,337 429 2,885 1,119 1,599 429 3,147 1,119 1,896 429 3,444 Long-term debt Convertible bonds Deferred tax Other long-term liabilities Total long-term liabilities 3,017 0 0 293 3,310 2,754 0 0 385 3,139 2,754 0 0 385 3,139 2,754 0 0 385 3,139 2,754 0 0 385 3,139 Total liabilities 5,235 5,771 6,024 6,287 6,584 Shareholders’ funds Minority interests 2,992 76 3,852 86 4,645 105 5,656 129 6,922 158 Total equity 3,068 3,939 4,750 5,785 7,081 Total liabilities and equity 8,303 9,710 10,774 12,072 13,664 Net debt (cash) Year-end shares (mn) 2,592 894 2,012 894 1,783 894 1,419 894 1,480 894 Net profit adj. EBITDA EPS (IDR) EPS adj. (IDR) DPS (IDR) Avg fully diluted shares (mn) Balance sheet (IDR bn) 13 June 2014 Year-end: Dec EBIT Depreciation & amortisation Net interest Tax paid Changes in working capital Others Cash flow from operations 2012 1,157 271 205 (133) (740) 89 849 2013 1,305 364 232 (346) (471) (72) 1,012 2014E 1,469 353 224 (271) (646) (486) 643 2015E 1,806 352 219 (346) (677) (484) 870 2016E 2,199 422 217 (433) (749) (488) 1,169 Capex Acquisitions & Investments Disposals Others Cash flow from investing (619) 0 28 (127) (718) (477) 0 4 (162) (635) (288) 0 0 0 (288) (346) 0 0 0 (346) (1,029) 0 0 0 (1,029) Dividends Issue of shares Change in debt Other financing cash flow Cash flow from financing (100) 0 231 748 879 (183) 0 203 (84) (64) (125) 0 0 0 (125) (160) 0 0 0 (160) (200) 0 0 0 (200) Change in cash Exchange rate effect Free cash flow 1,010 0 230 313 0 535 229 0 354 364 0 524 (61) 0 140 2012 2013 2014E 2015E 2016E 22.3 13.6 11.0 6.7 22.4 11.2 54.9 54.9 47.3 0.0 24.3 13.9 10.9 6.7 21.9 14.3 42.8 42.8 14.1 42.8 22.2 12.6 10.2 6.4 22.4 20.0 -11.9 -11.9 14.5 -11.9 22.4 12.5 10.4 6.8 22.4 20.0 27.7 27.7 27.7 27.7 22.7 12.7 10.7 7.1 22.4 18.9 25.1 25.1 25.1 25.1 Efficiency ratios ROE (%) ROCE (%) Asset turnover (x) Op. cash/EBIT (x) Depreciation/capex (x) Inventory days Accounts receivable days Accounts payable days 27.3 20.8 1.4 0.7 0.4 63.4 65.3 43.3 30.4 19.4 1.3 0.8 0.8 59.3 73.6 38.9 21.6 19.6 1.4 0.4 1.2 52.9 77.8 39.4 22.7 21.5 1.5 0.5 1.0 53.2 77.3 39.9 23.3 23.0 1.6 0.5 0.4 52.4 76.7 40.1 Leverage ratios Net gearing (%) Debt/capital (%) Interest cover (x) Debt/EBITDA (x) Current ratio (x) 84.5 61.6 5.2 2.4 2.8 51.1 54.7 5.1 2.3 2.4 37.5 49.1 5.8 2.1 2.6 24.5 43.4 7.1 1.8 2.8 20.9 37.9 8.6 1.5 2.9 Valuation EV/sales (x) EV/EBITDA (x) EV/EBIT (x) PER (x) PER adj. (x) PBR (x) Dividend yield (%) 1.7 12.5 15.4 20.9 21.7 5.1 0.7 2.1 14.9 19.1 21.7 28.2 6.0 0.6 1.9 15.3 19.0 28.5 28.5 5.6 0.5 1.6 12.8 15.3 22.3 22.3 4.6 0.6 1.3 10.5 12.6 17.8 17.8 3.8 0.8 Other Food Processing 5,773 7,642 Coffee Powder/Instant & Chocolate 5,773 Proces 7,642 9,629 9,629 0 0 0 0 Financial ratios and other Year-end: Dec Operating ratios Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin adj. (%) Effective tax rate (%) Sales growth (%) Net income growth (%) EPS growth (%) EPS growth adj. (%) DPS growth (%) 34 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Disclosures appendix The information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank Singapore Branch, Standard Chartered Securities (India) Limited, Standard Chartered Securities Korea Limited and/or one or more of its affiliates (together with its group of companies, ”SCB”) and the research analyst(s) named in this report. THIS RESEARCH HAS NOT BEEN PRODUCED IN THE UNITED STATES. Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts. Where “disclosure date” appears below, this means the day prior to the report date. All share prices quoted are the closing price for the business day prior to the date of the report, unless otherwise stated. Recommendation and price target history for Super Group SGD 2.57 7 11 10 6 1.80 1.41 5 4 1.03 1 0.64 Jul-11 Date 9 8 2.18 3 2 Oct-11 Jan-12 Apr-12 Recommendation Jul-12 Price target Date Oct-12 Jan-13 Apr-13 Recommendation Jul-13 Price target Oct-13 Date Jan-14 Apr-14 Recommendation Jul-14 Price target 1 12 Aug 11 OUTPERFORM 0.89 5 17 Aug 12 OUTPERFORM 1.25 9 13 Aug 13 IN-LINE 2.57 2 11 Nov 11 OUTPERFORM 0.88 6 15 Jan 13 OUTPERFORM 1.82 10 13 Nov 13 IN-LINE 1.97 3 27 Feb 12 OUTPERFORM 0.93 7 6 Feb 13 1.99 11 25 Feb 14 IN-LINE 2.09 OUTPERFORM 4 11 May 12 OUTPERFORM 1.12 8 14 May 13 IN-LINE Source: FactSet prices, SCB recommendations and price targets 2.53 Recommendation and price target history for Mayora Indah IDR 26,949 5 4 22,783 3 18,617 2 1 14,451 10,286 Jul-11 Date Oct-11 Jan-12 Recommendation Apr-12 Price target 1 15 Sep 11 OUTPERFORM 15,000 Jul-12 Date Oct-12 Jan-13 Apr-13 Recommendation Price target 3 17 Aug 12 OUTPERFORM 2 12 Mar 12 OUTPERFORM 16,286 4 6 Feb 13 Source: FactSet prices, SCB recommendations and price targets Jul-13 19,714 OUTPERFORM Oct-13 Date Jan-14 Apr-14 Recommendation Jul-14 Price target 5 20 Sep 13 IN-LINE 27,895 23,491 Recommendation and price target history for Universal Robina Corp PHP 195.60 163.88 7 6 132.16 3 4 100.44 1 8 5 2 68.72 37.00 Jul-11 Date 1 17 Apr 12 Oct-11 Recommendation Jan-12 Apr-12 Jul-12 Price target Date Oct-12 Jan-13 Recommendation Apr-13 Jul-13 Price target Oct-13 Date Jan-14 Recommendation Apr-14 Jul-14 Price target OUTPERFORM 78.00 4 6 Feb 13 OUTPERFORM 99.74 7 14 Feb 14 OUTPERFORM 154.44 2 17 Aug 12 OUTPERFORM 73.00 5 13 Feb 13 OUTPERFORM 107.54 8 21 May 14 OUTPERFORM 195.60 3 15 Jan 13 OUTPERFORM 94.58 6 20 Sep 13 OUTPERFORM Source: FactSet prices, SCB recommendations and price targets 144.20 13 June 2014 35 This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD Equity Research l ASEAN food and beverage Recommendation Distribution and Investment Banking Relationships % of covered companies currently assigned this rating % of companies assigned this rating with which SCB has provided investment banking services over the past 12 months OUTPERFORM 54.4% 12.7% IN-LINE 35.4% 11.5% UNDERPERFORM As of 31 March 2014 10.2% 7.7% Research Recommendation Terminology OUTPERFORM (OP) IN-LINE (IL) UNDERPERFORM (UP) Definitions The total return on the security is expected to outperform the relevant market index by 5% or more over the next 12 months The total return on the security is not expected to outperform or underperform the relevant market index by 5% or more over the next 12 months The total return on the security is expected to underperform the relevant market index by 5% or more over the next 12 months SCB uses an investment horizon of 12 months for its price targets. 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