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FNCE 221 - Project Sukhumvit Final Edition

The document outlines a proposal by J.P. Morgan for Fraser and Neave Limited's potential acquisition of Malee Sampran Public Company Limited, termed the 'Sukhumvit deal', aimed at enhancing F&N's position in the Asia Pacific soft drinks market. It highlights the need for strategic advice, the importance of valuation, and focuses on addressing challenges such as market saturation and evolving consumer trends. The analysis reveals opportunities for F&N to grow regionally by expanding its product portfolio and distribution networks, particularly in the Indochina market.

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Private & Confidential Project Sukhumvit Positioning for growth in the emerging markets Fraser and Neave, Limited 26 March 2012 PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION This materials may not be used or relied upon for any other purpose other than as specifically contemplated by a written agreement with J.P. Morgan. 1
Disclaimer JP Morgan does not provide any tax advice. Any tax statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. These materials have been provided to you by JP Morgan in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with JP Morgan. In addition, these materials may not be disclosed, in whole or in part, or summarized or otherwise referred to except as agreed in writing by JP Morgan. The information used in preparing these materials was obtained from or through you or your representatives or from public sources. JP Morgan assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed or discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and JP Morgan assumes no obligation to update or otherwise revise these materials. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed US federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed US federal income tax treatment of the transaction. JP Morgan has adopted policies and guidelines designed to preserve the independence of its research analysts. JP Morgan’ policies prohibit employees from directly or indirectly offering a favorable research rating or specific price target, or offering to change a research rating or price target, as consideration for or an inducement to obtain business or other compensation. JP Morgan’ policies prohibit research analysts from being compensated for their involvement in investment banking transactions. 2
Agenda 1. Client Profile – Fraser & Neave Ltd. 2. Motivation for Deal 3. Industry Analysis 4. Overview of Target – Malee Sampran PCL 5. The Sukhumvit Deal 6. Valuation 7. Transaction Structure 8. Credentials 9. Appendix 10. Financials 3
Executive Summary J.P. Morgan Chase & Co. Asia (also commonly referred to as “J.P. Morgan”) is grateful for the opportunity to present our views to Fraser and Neave Limited (also commonly referred to as “F&N”) regarding its potential acquisition of Malee Sampran Public Company Limited (also commonly referred to as “Malee”) in the deal described in this proposal collectively termed the “Sukhumvit Deal”. The proposed acquisition of Malee is instrumental for F&N in it’s stride towards enhancing its position within the Asia Pacific soft drinks arena and to enhance its capabilities of competing on the global stage. • The Sukhumvit Deal is transformational and will help both parties achieve its long term goals of diversifying revenue streams to enhance the quality of earnings and maximizing returns to shareholders. • Valuation is key and together with other critical factors that need to be addressed, will determine the success of the Sukhumvit Deal. • Fraser and Neave not only needs a world class advisor with a proven track record in M&A and the Consumer Products market, Fraser and Neave requires an advisor who intrinsically knows the Indochina soft drinks industry and can provide valuable strategic advice through the negotiation process. 4
1. Client Profile 5
1.1 Company Profile Overview Share Price Performance & Recent News • F&N is engaged in the production and sale of food and beverages (F&B), development and investment in real estate investment trusts (REIT) and in the printing & publishing business. • Headquartered in Singapore, F&N has a presence in over 30 countries across Asia Pacific, Europe, and the United States. • In its fiscal year ended Sept 2011, F&N’s revenue increased YoY by 10% to S$6,274mn and group’s profit increased YoY by 8% to $1,152mn. Key Financials 6 350 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 300 250 200 150 100 50 Volume Fraser & Neave Mar-12 Sep-11 Mar-11 Change +10.1% +7.5% +6.2% -17.8% +11.1% +5.5% +5.9% +11.4% -5.0% -10.8% -0.1% Sep-10 FY2010 5,696. 1,071 584.5 2,876 6,948 41.8 cents 17.0 cents $4.38 10.0% 41.4% 3.3% Mar-10 0 Sep-09 FY2011 6,274 1,151 620.6 2,363 7,721 44.1 cents 18.0 cents $4.88 9.5% 30.6% 3.2% ‘000 Mar-09 (S$ mil) Revenue EBIT Attributable Profit Net Debt Equity EPS (Basic) Dividend per Share NAV per Share Return on Equity Gearing Ratio Average Cost of Debt % Rebased STI Index Source: Bloomberg Feb 2011| Formation of F&N Creameries Oct 2011| Expiry of bottling agreement with The Coca-Cola Company (TCCC) Nov 2011| Opening of Changi City Point
1.2 Diversified Brand Portfolio Food & Beverage Property Printing & Publishing F&N is engaged in the production and sales of F&B products including soft drinks, dairies, and alcoholic beverages. It distributes products in the form of concentrates to bottlers, as well as finished products to mass retailers. The business is mainly operated via subsidiaries; Asia Pacific Breweries, F&N Foods, and F&N Creameries. Develops, invests in, and manages both commercial and residential properties via its subsidiary Frasers Centrepoint Ltd. The group also has two investment trusts (REIT), Frasers Commercial Trust and Frasers Centrepoint Trust with their respective portfolio of diversified real estate investments. Operates in the printing and publishing segment through its subsidiary, Times Publishing. It is engaged in publishing, printing, direct sales, distribution, retailing of books and in the provision of educational services through its brand Marshall Cavendish. Revenue by Segment Revenue by Geography S$ mil 4000 3000 2000 1000 0 2007 2008 2009 2010 2011 Food & Beverage Property Printing & Publishing 7 Singapore Rest of South East Asia South Pacific Malaysia Other Asia Europe and USA
1.3 Analysis of Business Food & Beverage Overview • F&N has extensive competencies in F&B given its 70year experience in the industry • F&B business represents the highest compound growth across the past 5 years • F&N has a leading market position in Singapore and Malaysia with well established brands e.g. 100Plus, Seasons Industry Outlook • Asia Pacific F&B is slated for strong growth • Breweries sub-segment dominates earnings with strong growth expected due to various brand acquisitions S$ mil CAGR = 13% 4000 3000 2000 1000 0 2007 2008 2009 Revenue S$ mil 400 2010 2011 EBIT 300 200 100 0 • Soft drink revenues threatened by the termination of bottling agreement with TCCC • F&N’s lack of a strong geographical foothold outside of Malaysia and Singapore represents potential for future expansion Country Off-Trade Value Share Ranking Asia Pacific 0.3% 27 Malaysia 26.9% 1 Singapore 8 2007 2008 2009 Softdrinks Dairies 24.5% 1 Source: Euromonitor 2010 2011 Breweries
1.3 Analysis of Business Property Overview S$ mil • Property business accounts for 34% of revenues and 49% of net profit • Well-established property development and investment network with over 50 domestic and 30 international projects • On top of property development and investment, the group also operates REITs and a hospitality business CAGR = 9% 2500 2000 1500 1000 500 0 2007 Industry Outlook Revenue • Sales progress remains firm for F&N’s existing developments despite the recent spate of property measures dampening demand • Positioned to capitalize on growing demand for property in China, with 77% of its Chinese land bank slated for launch in 2013 and beyond • Property revenues and profits are expected to decline in the short term with the adoption of IFRS 115 Planned Launches in FY 2012 Singapore No. of Units 2,088 Australia (Putney Hill) 116 China (Suzhou) 898 Source: Company Data 9 2008 2009 2010 2011 EBIT EBIT (S$mil) 450 400 350 300 250 200 150 100 50 0 2007 2008 Investment Property 2009 2010 2011 Development Property
1.3 Analysis of Business Printing & Publishing Overview Industry Outlook • Strong in education publishing business with Singapore Education products exported to Pakistan, U.S, Chile, and South Africa • Printing and publishing industry is in a state of decline with the rise of paperless and online publishing • Strong adoption of Marshall Cavendish textbooks in the US led to it being the first Asian content approved for use in U.S. schools • Slow growth of between 1-2% is expected in the Asia Pacific printing and publishing market • Restructuring initiatives have led to the divestment of several unprofitable business units • F&N Board remains open to strategic options for the printing and publishing business Asia-Pacific Publishing Market Value 90 80 70 60 50 40 30 20 10 0 100 0 -100 2007 2008 Revenue 2009 2010 EBIT 2011 1.05% 1.00% 0.95% Market Value (US$bn) Source: Datamonitor 10 2014F 200 1.10% 2013F 300 1.15% 2012F 400 1.20% 2011 500 2010 CAGR = - 6% 1.25% 2009 S$ mil 600 Y-o-Y Growth (%)
1.4 Investment Proposition Strong growth potential in Asia Pacific F&B industry Need to address pressing concerns Right time to explore potential investment opportunities within F&B 11
2. Motivation for Deal 12
2.1 Challenges for F&N • Saturation of soft drinks market in Singapore and Malaysia • Average annual market share growth of 0.4% • Product differentiation is key to boosting market share • Hard to compete with market leaders e.g. TCCC • Highly fragmented market with over 110 beverage companies in Asia Pacific Coca-Cola Co, The Source: Euromonitor Tingyi Holdings Corp Danone, Groupe 2014E F&N Brands 2013E 2012E TCCC Brands Market Share (%) 30.0 25.0 20.0 15.0 10.0 PepsiCo Inc 5.0 Suntory Holdings Ltd 0.0 Nestlé SA Kirin Holdings Co Ltd F&N 13 2011 Escalation in Competitive Landscape 2010 Coca-Cola and Sprite represent 35% of F&N’s revenues. Short to medium term pressure on revenues Estimated to cause a 25% fall in revenues Need to be mitigated by expanding product portfolio and growing market share in South East Asia 2009 • • • • 2008 End of Agreement with TCCC Revenue S$ mil 800 700 600 500 400 300 200 100 0 2007 Pressure on Revenues Others 2007 2008 2009 Malaysia 2010 Singapore 2011
2.1 Challenges for F&N Shift in Consumer Trends Key Consumer Trends F&N’s Strategic Position • Traditional categories such as carbonates are stagnating • Renewed focus on premium products that meet health needs. Soft drinks with health benefits poised for strongest growth • Increasingly important for F&N to offer innovative new products that target the health conscious • Juices constitute a majority (31%) of new product launches in recent years • Rising consumption levels in low to middle income markets increases demand for healthier products • F&N should position its core brands such as 100Plus and Fruit Tree to capitalize on shifting dynamics Global Carbonates Retail Value US$ bil 100 CAGR = 5% 80 60 40 20 0 Cola US$ bil Fruit-flavored carbonates Global Healthy Beverages Retail Value 250000 CAGR = 20% 200000 F&N Foods Brand Portfolio 150000 100000 Healthier Range 50000 Normal Products 0 Fortified Beverages Source: Euromonitor 14 Better for you (BFY) Beverages 2005 2010 Naturally Healthy Beverages 2015 Source: Company Data
2.1 Challenges for F&N Barriers to Regional Expansion F&N can overcome obstacles by acquiring distribution networks that are deeply rooted within these inaccessible communities • Key competitors such as TCCC, PepsiCo, Sime Darby, and Nestle are constantly vying for market share in a largely saturated market • Difficulty in sustaining organic growth without extensive distribution networks across region • Penetrating some of South East Asia’s most densely populated communities remain a considerable challenge given the intricacies of the market (transportation, infrastructural, legal, and regulatory barriers) • Government restrictions and protectionism towards domestic players may pose a hindrance for foreign distributors seeking to establish a strong foothold • Capturing the growth of emerging markets can be costly and complex if administered poorly 15
2.2 Strategic Review There is a need for Fraser & Neave to expand regionally via inorganic growth • Mitigate the impact of the termination of TCCC deal by expanding its product portfolio and growing its market share • Position itself to capitalize on the shift in consumption patterns towards healthier products • Target growth opportunities by expanding into developing markets within the region • Expand its distribution network to introduce existing brands into new markets 16
2.3 Recommendation Expansion into Indochina fruit/vegetable juice market F&N has identified Indochina as a potential region for future growth: • Expansion into Thailand dairy market (2012) • Launch of 100Plus in Thailand (2011) Fruit/Vegetable Juice Asian Specialty Drinks Bottled Water Carbonates RTD Tea & Coffee Singapore 0.2% -2.3% 0.3% 1.3% 0.8% Malaysia 2.3% 0.1% 4.4% 4.8% 2.1% Indochina 7.6% 0.1% 9.7% 10.1% 5.7% Indonesia 4.9% 5.4% 12% 11.1% 8.3% East Asia 3.9% 0.2% 4.5% 3.1% 3.2% South Asia 15.2% 5.4% 10.2% 19.1% 0% Middle East 5.2% 2.3% 3.35% 0.6% 0% Australasia 1.7% -1.5% 2.4% 2% 0% Regions Source: Global Market Information Database 17
3. Industry Analysis 18
3.1 Global Fruit/Vegetable Juice Industry Overview Total Volume Growth (2005-2015) • • • Asia Pacific Second largest soft drinks category globally by value and volume Strong growth driven by the shift in popularity towards healthier products North America Western Europe Latin America Middle East and Africa Asia-Pacific dominates juice consumption, accounting for more than half of global sales Eastern Europe Australasia -20 Source: Euromonitor 9% 19% 5% 21% 40 60 2005-2010 80 100 % Key Regions of Fruit Juice Consumption Soft Drinks Trade Value (US$mil) 8% 0 20 2010-2015 Bottled Water Western Europe Carbonates Concentrates Asia Pacific North America Fruit/Vegetable Juice 35% RTD Coffee RTD Tea 3% Sports & Energy Drinks Highest Consumption 19 Medium to High Consumption Low to Medium Consumption Low Consumption Zero to Low Consumption
3.1 Global Fruit/Vegetable Juice Industry Competitive Landscape Future Outlook • Global fruit/vegetable juice industry is highly fragmented with top 10 players accounting for only 19% of global market volume • Despite being the most competitive segment in the beverages industry, juices continue to gain momentum in line with rising awareness of maintaining healthy and nutritious eating habits • No global brand dominance categories as seen in other • Domestic markets are dominated by regional players with extensive knowledge of local customers and regional networks • Market leader, TCCC was able to expand Minute Maid internationally by acquiring regional players in emerging markets • Emerging markets in Asia and Latin America represent the strongest growth regions • Growth in Asia Pacific is led by China, India and Indochina Strong Growth in Asia Pacific and Latin America Juice Market Global Brand Share Others 81% TCCC 5% Asia Pacific PepsiCo Inc 3% Source: Euromonitor 20 Latin America Highest Consumption Medium to High Consumption Low to Medium Consumption Low Consumption Zero to Low Consumption
3.2 Indochinese Economic Landscape • Comprises of rapidly developing economies including Thailand, Vietnam, and Cambodia • Rising affluence causes shift in demand towards higher quality products • Indochinese markets continue to register strong soft drinks consumption growth amid rising disposable income and a large youth demographic • Larger size of F&B industry in Indochina relative to Singapore and Malaysia • Need to expand regionally - Stagnating growth in Singapore and Malaysian markets Forecasted GDP Growth Growth (%) 9 8 7 6 5 4 3 2 1 0 2011 2012F 2013F Thailand Laos 2014F Vietnam Myanmar 2015F 2016F Cambodia Singapore US$ mil 80,000 Consumer Expenditure in F&B 60,000 40,000 20,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Singapore 21 Malaysia Source: Economist Intelligence Unit Thailand Vietnam
3.3 Fruit/Vegetable Juice in Indochina Overview Strength of the Indochinese fruit/vegetable juice market is complementary to F&N’s regional expansion plans • • • • Health and wellness trend has driven the growth of natural and traditional produce, which are more culturally embedded within the market Ongoing maturity of carbonates, increasingly busy lifestyles, and rising health awareness have made consumers more receptive to the convenience and nutritional benefits of fruit/vegetable juice. Numerous fruit suppliers in the region facilitate growth of the fruit juice industry Growth in the industry is led by Vietnam and Thailand Litres Mil Fruit Juice Sales Volume 300 250 200 150 100 50 Thailand Source: Euromonitor 22 Vietnam 2015F 2014F 2013F 2012F 2011 2010 2009 2008 2007 2006 2005 0
3.3 Fruit/Vegetable Juice in Indochina Vietnam • Fruit/vegetable juice market in Vietnam has shown strong and stable growth, driven by a rise in income levels and the ongoing health and wellness trend • 100% juice is projected to register the fastest total sales growth • Despite the historical dominance of domestic firms in the market, they are facing competition from imported brands that are perceived to be of higher quality than homegrown alternatives Vietnam Retail Sales Volume VND Mil Market Share Amongst Top 10 Players (Vietnam) 1200 CAGR = 13% 1000 800 600 400 200 100% Juice 2015F 2014F 2013F 2012F 2011 2010 2009 Nectars (25-99%) Source: Euromonitor 23 2008 2007 2006 2005 0 Juice Drinks (up to 24%) Local Firms Foreign Firms
3.3 Fruit/Vegetable Juice in Indochina Thailand Best Strategic Option: Penetrate the Indochinese juice market by acquiring a domestic player • Fruit/vegetable juice is set to maintain a healthy growth trajectory over the forecast period, driven by new product innovation and preference for healthier products • Market share is led predominantly by domestic players who possess wide distribution networks, offering lower prices relative to foreign brands • Difficult for foreign players to penetrate the market without a strong local network Market Share Amongst Top 10 Players (Thailand) Thailand Retail Sales Value 8000 CAGR = 8% Tbt Million 7000 6000 5000 4000 3000 2000 1000 100% Juice 24 Nectars (25-99%) 2015F 2014F 2013F 2012F 2011 2010 2009 2008 2007 2006 2005 0 Juice Drinks (up to 24%) Local Firms Foreign Firms
3.4 Potential Strategic Acquisition Company Country Strengths Weaknesses Malee Sampran Thailand  Strong distribution network in Thailand and Vietnam  Growing presence outside Indochina  Contract farming network in Thailand  Strong R&D capabilities  Business restructuring in 2009 due to unfavourable financial position. Recovered well in 2011 with strong profits and streamlined cost and leverage structure.  Market leader in Thai Fruit Juice market  Strong in canned pineapple business  May be difficult to acquire due to company’s dominant position  Limited distribution network outside of home market  Existence of redundant smoothie retail business  Market leader in Vietnam Fruit Juice market  Strong in Dairies market  Potential clash of interests with F&N’s existing dairies business in Indochina  Strong brand presence in Vietnam  Distribution network across South East Asia  Private owners may not be willing to divest interests  Existence of unrelated cooking oil business  Market leader in Vietnam carbonated soft drinks market  Small but growing position in the fruit juice market  Carbonated drinks market subject to slowdown in growth  Lack of emphasis on healthier products  Fluctuation of earnings in recent years TIPCO Foods Thailand Vietnam Dairy Products Chia Kim Lee Food Ind. Singapore Saigon Beverages 25 Vietnam Vietnam Rank 1 2 3 4 5
4. Overview of Target 26
4.1 Target Profile Malee Sampran Public Company Limited • Established in 1978, Malee is a public listed company registered in the Kingdom of Thailand • Core business encompasses the manufacturing and distribution of beverages and canned fruit products • Over 40 years of expertise in packaged food and beverages • Significant presence throughout Thailand and other key markets • Strong brand equity with successful brands across sub-segments and tiers • Committed towards the highest standards of product quality through research and development (R&D) investments Head Office • Pathum Thani, 12130, Thailand Industry • Packaged Consumer Goods Ticker & Exchange • MALEE: Stock Exchange of Thailand (SET) Shares Outstanding • 99,999,000 shares Headcount • 1,340 Employees Key Ratios 2010 2011 % Change EBIT Margin 4.82% 7.02% +45.6% Net Profit Margin 3.68% 6.11% +66.0% ROE 27.2% 41.7% +53.3% EPS (THB) 0.11 0.23 +109.0% Millions Mn Baht ฿4,500 Total Revenues ฿4,000 ฿3,500 ฿3,000 ฿2,500 ฿2,000 2007A 27 2008A 2009A 2010A 2011A
4.1 Target Profile Key Business Segments Agro-Product & Export Canned Pineapple Canned Sweetcorn Canned Tropical Fruits Vegetable & Fruit Juices Milk Products Cereal Beverages Others Fruit Juices Plain Flavored Milk Farmer’s Corn Milk Fruitesia Fruit Bars Vegetable Juices Sweetened Flavored Milk First Choice Mineral Water Malee Food Service UHT Milk Malee Food Pasteurized Milk 28 Canned Fruits Malee Bottled Water
4.1 Target Profile Product Portfolio Canned Fruits UHT & Pasteurized Milk 29 Vegetable & Fruit Juices Cereal Beverages Sweet Corn Others
4.1 Target Profile Brand Portfolio • A comprehensive brand portfolio allows Malee to complement the diverse needs of consumers across all segments of the domestic market • With over 40 years of product development, the Malee brand is known to be deeply etched in the minds of consumers who associate excellence and quality with its distinct list of brands • Malee’s established brand equity will catalyze prospects for joint product roll-outs with F&N First Choice Farmer Malee I-Corn Malee Healti Plus Malee Malee Veggies Malee Juize Mix Chokchai Farm 30
4.1 Target Profile Business Operations Subsidiaries Agri Sol Company Ltd 100% Abico Dairy Farm Company Ltd PPO Farm Company Ltd Related Parties Abico Land Company Ltd Abico Holding Public Company Ltd Malee Sampran Public Company Limited Malee Enterprise Company Ltd 99.9% Chokchai Milk Company Ltd Central Food Retail Company Ltd Dhanamitr Factoring Company Ltd CG Broker Company Ltd Production Capacity • 180 million litres of beverages • 5.4 million cases of canned foods • 8,000 metric tons of concentrated pineapple 31 Production Facilities • Two manufacturing plants located in Nakorn Prathom Province, Thailand • Total plant area of 800 sq. meters Supply Chain Network • Distribution channels include supermarkets, convenience stores, hotels, wholesalers • 95% of raw material supplies are sourced domestically
4.1 Target Profile Geographic Footprint Existing Coverage • Strong presence within the domestic Thai market including the Northern and Southern provinces • Distribution agents located domestically and across Asia, including Laos, Vietnam, Myanmar, Singapore, Hong Kong and Pakistan • Products are exported directly to customers or through agents, spanning major markets within Europe, Middle East, U.S. and Asia Growth Opportunities • Immense opportunities to scale into neighboring Indochinese markets with dense populations, serving over 600 million consumers • Location serves as a gateway to Southern China and South Asia • Well positioned as a reliable brand amongst domestic consumers 32 Hong Kong Thailand Vietnam
4.1 Target Profile Shareholding Structure Holder Name % of Total 1 Abico Holdings PCL 17,840,700 25.49 2 Credit Suisse / Singapore 16,850,000 24.07 3 Chirathivat Pichai 4,583,700 6.55 4 Wittayanupong Siriluck 3,150,000 4.50 5 Wichitpan Piyaporn 2,581,900 3.69 6 DBS Vickers Securities Singapore 2,074,600 2.96 7 Quan Securities Co Ltd 2,000,000 2.86 8 Thai NVDR Co Ltd 1,935,500 2.77 9 Thailand Securities Depository 1,713,412 2.45 10 Chirathivat Sakchai 1,640,800 2.34 11 Sitthichaiwiset Somboon 1,329,000 1.90 12 Sitthichaiwiset Sirincha 1,205,900 1.72 13 Permpoonkij Areeya 963,000 1.38 14 Tanaka Kenji 896,900 1.28 15 33 Amount Held Pruksawan Wantana 765,200 1.09 Individual Holding Company Bank Investment Advisor Other Thailand Singapore Undisclosed
4.2 Financial Performance Share Price % 350 25,000 300 20,000 250 15,000 200 150 10,000 100 5,000 50 0 Sep-11 0 Oct-11 Nov-11 Volume 34 Dec-11 MALEE Jan-12 BANGKOK S.E.T. Feb-12 Volume ('000)
4.3 Potential Risks Through collaborative efforts with F&N, Malee will be better positioned to weather the uncertainties shaped by global economic forces, and realize its vision of capturing strategic growth Global Macro • Contagion effect from slowdown in global economy may dampen profitability within the short term • Volatility of commodity prices could inflate costs of raw materials, thereby impacting bottom-line sustenance • Management will need to adapt fast to technological changes in order to capitalize on innovative marketing channels • Unpredictable weather conditions may interrupt supply-chain operations and stifle nationwide sales Firm Specific • Inadequate management expertise for capital raising and strategic growth plans 35
5. The Sukhumvit Deal 36
5.1 The Sukhumvit Vision Penetrate into the booming F&B market in Indochina Leverage on Malee’s expertise to strengthen foothold in Indochina R&D capabilities to facilitate innovation of healthier products Capitalize on Malee’s distribution network to introduce F&N’s existing products into Indochinese markets Expanded product mix that includes canned fruits to cater to a wider customer base 37
5.2 The Sukhumvit Partnership Model Booming F&B Market in Thailand 7,000 6,500 6,000 2011 38 2012 2013 2014 Retail Value 2015 2016 ‘000 tonnes Animal or Vegetable Oil Wheat Products Fresh, Chilled or Frozen Fish Fresh and Frozen Shrimps Volume of Exports 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Rice • Mandatory measures to ensure quality and safety has alleviated ongoing food safety concerns 7,500 Sugar • More than 80% of raw materials can be found locally at low prices, potentially reducing costs for F&N 8,000 Tapioca Products • Thailand’s exports of food products will rise to US$2.1 billion in 2012 (14.3% growth Y-o-Y). In particular, the strong export market for processed fruits caters for future expansion opportunities Market Size of Canned/Preserved Food in Thailand Prepared Poultry • Market size of canned/preserved food is projected for stable growth in the short to medium term THB ‘000 Canned and Processed Fruits Thailand Food Industry
5.2 The Sukhumvit Partnership Model Strengthen Foothold in Indochina Market Share of Fruit/Vegetable Juice in Thailand • Market share of 6.3% in the fruit/vegetable juices market of Thailand • Ranked 5th largest in the country • Current customer base will serve as a viable entrance point for F&N to introduce existing products 21% 24% Readily Available Low Cost Supplies • Malee is able to produce at lower costs due to the availability of a steady supply of raw materials in Thailand. An acquisition will allow F&N to capitalize on Malee’s extensive supply network to further reduce production costs • Malee’s ‘contract farming’ program with its member farmers reduces its exposure to fluctuating commodity prices Regional Distribution Network 3% Product Type 9% 11% Thai Pure Drinks Ltd Tipco Foods Malee Sampran Green Spot 39 FoodStar Inc PepsiCo Inc Uni-President Others Fruit/Vegetable juice Thailand, Hong Kong, China, Pakistan, Vietnam Dairy Products 21% 6% Region of Distribution Thailand, Vietnam, Cambodia Ready-to-Drink Tea 5% Thailand Canned Fruit Thailand, Vietnam
5.2 The Sukhumvit Partnership Model Synergies F&N’s Strategy and Plans Malee’s Value Proposition Expanding its product portfolio and growing its market share • Differentiated products such as UHT corn milk and canned fruits • Existing consumer base and market share Position itself to capitalize on the shift in consumption patterns towards healthier products • Healthier product range • Complementary R&D Long term sustainable growth by penetrating into developing markets • Well positioned to capture growth in Indochina and beyond • Efficient raw materials management and increased R&D investment Synergistic Outcomes R&D Expertise and Facilities 40 Distribution Networks Expanded Product Mix
6. Valuation 41
6.1 Fair Value of Malee In comparison with its current share price, Malee is fair valued at THB 41.50 (THB mil) 2011A 2012F 2013F 2014F 2015F 2016F EBIT 261 368 466 571 684 803 Tax expense (78) (110) (140) (171) (205) (241) Depreciation + Amortization Less: Changes in working capital 50 58 66 73 80 86 163 147 140 130 124 114 Less: Capital expenditures (58) (60) (62) (64) (66) (68) Free cash flow 338 403 470 539, 618 694 PV of FCFF PV of Terminal Value Enterprise Value Net Cash /(Debt) Non-controlling Interests Equity value Shares Outstanding Fair value per share Share price as of 15/03/12 42 1,715 2,771 4,487 (337) 0 4,150 100 THB 41.50 THB 38.00 Assumptions WACC Terminal growth Effective tax rate 17.00% 5.00% 30.00%
6.2 Indicative Valuation Analysis Malee is currently fairly valued as its share price lies within our indicative valuation range Current market price DCF Indicative valuation range EV/EBITDA Price to Sales Valuation Analysis Fair value of THB 35.84 – THB 49.35 per Malee per share share THB 3.55 bil – THB 4.61 bil Equity valuation (S$148 mil – SS$203mil) Current market THB 3.80 bil capitalization (S$154 mil) EV/Sales Price to Book - 43 1 2 3 4 5 6 7 8 9 10 11 THB bil
6.3 Synergy Value Assumptions Expected Synergy Value of S$83m • Increased soft drink revenues attributed by higher market penetration in Thailand • Decreased operating expenses due to economies of scale and crosssharing of distribution networks SGD mil 11,600 83 11,500 11,400 Valuation Inputs Forecast Period 5 years WACC 8.50% Tax Rate 24.66% Terminal Growth Rate 2.0% 163 11,300 11,555 11,200 11,309 11,100 11,000 F&N Malee Synergy Equity Value 44 Sukhumvit
6.4 Scenario Analysis Premium to Offer Comparing Best & Worst Case Scenarios Initial Walk-Away SGD mil 160 S$163 mil THB 3.96 bil S$220 mil THB 5.33 bil 140 Offer price per share THB 40.00 THB 53.83 100 % premium of current price 5.26% 41.66% Offer value 120 80 145 60 83 40 Meeting F&N’s Internal Returns Requirements • Based on F&N’s asset allocation policy, any new investment should generate a return of 10% or more 20 - 22 Worst Base Best 45 Base Case Best Case Average Y-o-Y growth in soft drink revenues 9.80% 10.00% 10.20% Reduction in operating exp as a % of revenue 1.75% 1.80% 1.85% ROI for initial offer 13.50% 50.92% 88.96% ROI for walk-away offer • Depending on worst or best outcomes of the acquisition, F&N may stand to gain synergies between S$22 mil and S$145 mil Worst Case 10.00% 37.73% 65.91%
7. Transaction Structure 46
7.1 Transaction Structure Full takeover bid for Malee with a view of full ownership and subsequent delisting of Malee Offer Price Offer Period F&N Tender Offer Process Malee Tender Acceptance • Offer Price: THB 40.00 per share • Premium: 5.26% • 25 business days with option to extend by up to 30 business days Time Frame • Projected to take 20 weeks to complete Minimum Acceptance Level Malee’s Shareholders 47 Delisting • 75% of total shares outstanding according to Thai legislation • Intention to delist target from the SET
7.2 Proposed Considerations Deal Structure 100% Cash Offer Negotiation Strategy • Aim: To create a regional powerhouse in the soft drinks industry • F&N’s liquid balance sheet, due to availability of large cash reserves to facilitate acquisition • Existing undrawn credit facility of S$3.2 billion gives F&N flexibility in terms of payment mode • No dilution of F&N’s shares • Win-win situation: Convince Malee that it is in their interest to merge with a bigger player • Cooperative approach in order to create value and retain management expertise in running the fruit juice business • Provide shareholders with an opportunity to cash out at an attractive valuation S$ mil 1500 Decision to Delist 1000 • Retain sole control of Malee without shareholder dilution 500 • Reduce exposure to fluctuation in Thai equity markets 0 Malee's Market Cap 48 F&N Cash Balance • Cost savings from not having to adhere to Thai listing requirements
7.3 Transaction Timeline Event Information Provision & Due Diligence Process Organizational Meetings Preliminary Due Diligence Info Memorandum Preparation Confidentiality Agreement Marketing Meeting with Malee Management Indicative Offer Assessment of Malee’s Feedback Affirm Target’s Interest In-depth Due Diligence Negotiation & Closing Submission of Offer Structuring & Negotiations Finalization of Deal 49 Estimated 20 Weeks April May June July August
7.4 Deal Summary Synergies • R&D capabilities to facilitate innovation of healthier products Terms of Deal Target Company Malee Sampran Proposed Nature of Deal Full takeover bid with a view of full ownership and subsequent delisting • Expanded product mix that includes canned fruits, to cater to a wider customer base Current Share Price THB 38.00 Initial Offer Price THB 40.00 • Expected values of synergies = S$83mil Initial Offer Value THB 3.96 bil (S$163 mil) Initial Premium 5.26% Walk-Away Offer THB 53.83 Walk-Away Value THB 5.33 bil (S$220 mil) Walk-Away Premium 41.66% Expected Duration 20 Weeks • F&N can capitalize on Malee’s extensive distribution network to penetrate the Indochinese market Due to the potential synergies that can be derived from the acquisition of Malee, J.P. Morgan strongly recommends the Sukhumvit Deal 50
8. Credentials 51
8.1 Our M&A Deal Team Senior Advisors Timothy Zee Senior Managing Director Head of Asia Investment Banking M&A Advisory Team Calvin Zhang Executive Director Co-Head of Asia M&A Mathew Welch Executive Director Co-Head of Asia M&A Tan Cher Aik Director Head of Asia Corporate Finance Joshua Xie Director Head of S.E. Asia M&A Shaikh Ahmad Mattar Director Head of Thailand Coverage Jan Bucher Senior Vice President Asia-Pacific Equities Specialist Research Team Hafiz Hussin Director Co-Head of Consumer & Retail 52 Tan Fei Fan Director Co-Head of Consumer & Retail
8.2 Our Accolades Awards & Accolades Derivatives House of the Year Equity Derivatives House of the Year OTC Clearing Service of the Year Risk, January 2012 #1 All-America Research Team #1 Latin America Research Team Institutional Investor, October 2011 Best Global Commodities House Euromoney, July 2011 Securitization House of the Year, U.S. Dollar Bond House, and Asia-Pacific Structured Equity House IFR, January 2011 Bank of the Year, Equity-linked House, Australia and New Zealand Bond House IFR Asia, December 2010 Best Investment Bank Latin Finance, January 2010 53 League Tables Rank Bank Fees (US$ mil) 1 J.P. Morgan Chase 5198.36 2 Bank of America 4629.81 3 Morgan Stanley 3950.08 4 Goldman Sachs 3778.22 5 Credit Suisse 3174.94 6 Citi 3079.60 7 Deutsche Bank 3026.56 8 Barclays Capital 2671.00 9 UBS 2254.14 10 Wells Fargo 1363.46 Total 75104.73 Source: Financial Times With J.P. Morgan’s proven track record, we will be able to capitalize on our intrinsic knowledge and recommend unique business insights to our clients
9. Appendix 54
9.1 Supplementary Industry Analysis Porter’s Five Forces Analysis of Soft Drinks Industry in Singapore and Malaysia • Low buyer power due to the large ratio of buyers to industry players and their inclination towards more prominent brands in the market • Moderate threats of suppliers due to their limited numbers and exposure to volatile supplies of raw materials. Despite this, the availability of substitutes has significantly reduced these threats • The wide variety of other beverages such as coffee, tea or other homemade juices, along with relatively low switching costs, poses threats to the soft drink industry in terms of substitutability • • 55 Threat of new entrants is moderate due to the difficulties in competing with the incumbent players in terms of huge investments in manufacturing capacities A fairly concentrated market with few major players coupled with low ease of exit due to certain specialized equipment. This has created a moderate degree of rivalry in the market Degree of rivalry New entrants Buyer power 5 4 3 2 1 0 Supplier power Substitutes Singapore/Malaysia
9.2 Detailed Analysis of Potential Targets Company Malee Sampran Background • Publicly listed in the Stock Exchange of Thailand • Strong in fruit processing business Products & Services • Juice Concentrates • RTD Juice • Canned Fruits • Cereal Beverages • Bottled Water Market Share • Thailand Fruit Juice (6%) • Vietnam Fruit Juice (4%) • Pakistan Fruit Juice (1%) • Hong Kong Fruit Juice (0.3%) Key Financials (US$ mil) Value: 95.3 Market Cap: 85.5 Profit Margin: 6.2% PE: 19.4 Rating Score Market Share: 4 Geographical Presence: 5 Profitability: 3 Product Range: 4 Synergies: 3 Ease of Acquisition: 4 TOTAL SCORE : 23 Vietnam Dairy Products JSC • Publicly listed in Ho Chi Minh Stock Exchange • Strong in healthy dairy products • Fresh milk, yoghurt, ice-cream, cheese, milk powder • Fruit Juice, Smoothie, Aloe Vera, Soy bean milk • Vietnam Fruit Juice (23%) • Vietnam Overall Soft Drinks (2%) Enterprise Value: 2,220 Market Cap: 2,431 Profit Margin: 19.5% PE: 11.71 Market Share: 5 Geographical Presence: 3 Profitability: 5 Product Range: 2 Synergies: 2 Ease of Acquisition: 3 TOTAL SCORE : 20 Chia Kim Lee Food Industries • Private firm based in Singapore • Strong brand presence in Vietnam • Fruit Juice, Bottled Water, Non-alcoholic Beer, Energy Drinks • Cooking oil • Groceries • Vietnam Fruit Juice (4%) • Singapore Fruit Juice (0.8%) • Distribution network in Indochina, Australia, Middle East N/A Market Share: 3 Geographical Presence: 4 Profitability: Product Range: 3 Synergies: 3 Ease of Acquisition: 2 TOTAL SCORE: 15 56
9.2 Detailed Analysis of Potential Targets Company TIPCO Foods Background • Publicly listed in the Stock Exchange of Thailand • Very strong in Pineapple business Products & Services • Juice Concentrates • RTD Juice • Canned Fruits • Aloe Vera • Retail Juicebar Squeeze Market Share • Thailand Fruit Juice (10.5%) • Vietnam Fruit Juice (0.5%) Key Financials (US$ mil) Enterprise Value: 160.3 Market Cap: 76.2 Profit Margin: 3.12% PE: 12.42 Rating Score Market Share: 5 Geographical Presence: 4 Profitability: 4 Product Range: 4 Synergies: 3 Ease of Acquisition: 2 TOTAL SCORE : 22 Universal Robina Corp. • Publicly listed in the Philippines Stock Exchange • Strong brand portfolio • Snacks • RTD Tea, Coffee, Energy Drinks, Bottled Water • Commodities – Flour & Sugar • Farm products • Industrial packaging • Philippines RTD Tea (66%) • Vietnam Soft Drinks (12%) • Distribution networks in Singapore, Thailand, Malaysia Enterprise Value: 2,629 Market Cap: 2,770 Profit Margin: 6.9% PE: 21.12 Market Share: 3 Geographical Presence: 5 Profitability: 4 Product Range: 1 Synergies: 2 Ease of Acquisition: 2 TOTAL SCORE : 17 Saigon Beverages • Publicly listed in Vietnam Stock Exchange • Market leader in Vietnam carbonated drinks market • Soft drinks, soya milk, fruit juices, sparkling wine • Vietnam soft drinks (6%) • Vietnam carbonates (10%) Enterprise Value: 5.9 Market Cap: 2.4 Profit Margin: -11.69% PE: 0.07 Market Share: 2 Geographical Presence: 2 Profitability: 0 Product Range: 1 Synergies: 3 Ease of Acquisition: 4 TOTAL SCORE: 12 57
9.3 Synergies with Existing Operations Before Acquisition After Acquisition Fruit Tree Fresh in Thailand • Given the small number of products and low market share of Fruit Tree, F&N should phase out Fruit Tree in Thailand while growing Malee’s existing fruit juice business Fruit Tree Fresh outside of Thailand • Fruit Tree has gained brand presence in F&N’s major markets such as Singapore & Malaysia • F&N to tap on Malee’s expertise and R&D capabilities to further improve existing fruit juice products • Malee’s strong fruit supply network, and fruit processing capabilities can be used to reduce costs of production for F&N’s existing fruit-based business Malee Fruit Juices • Major player in Thailand and Vietnam fruit juice market • F&N’s brand management and marketing capabilities can be used to further improve Malee’s success in Indochina and beyond F&N Dairies (Thailand) • F&N Dairies (Thailand) markets mainly dairy products under both its in-house brands and external brands (Nestle) • Growth of subsidiary is led by the success of its canned milk business • Subsidiary faces strong competition from domestic players with stronger distribution network • F&N Dairies to focus on its core canned milk business with the option of introducing additional brands • F&N Dairies (Thailand) can continue to grow its existing product portfolio by taking advantage of Malee’s extensive distribution network in Indochina Other F&N Products 58 • Fruit Tree Fresh has only two existing products (both orange juice) in the Thai market which make up a 0.1% overall share • Difficult to penetrate overseas markets without local expertise and presence • F&N can capitalize on Malee’s presence in the Indochinese markets to push its existing brands into new markets. Brands that have seen regional success such as 100Plus can now be introduced with greater ease.
9.4 Potential Strategies for Acquisition Hostile Takeover (100% tender) Creeping Tender (<25% initially) Strategy • Tender for 100% of target’s shares • At least 90% of target’s shares must be tendered (to delist target), or the offer is void • Negotiate with major shareholders to buy close to 25% shares (threshold for mandatory tender offer) first • Tender for the remaining shares to get 90%+ at a later date Pros • A clear-cut strategy: either F&N gains 90%+ control of target or none at all • Cheaper alternative as there are no sunk costs incurred prior to the tender offer • Easier to buy the initial <25% than 100% tender, and the success will incentivize target’s remaining shareholders to sell their stakes • A significant stake (20 – 24.99%) will allow F&N to gain a board seat, hence a way to gradually obtain information necessary for detailed valuation Cons • May be difficult to buy 90%+ in one single tender offer • Little chance for F&N to conduct due diligence prior to launching the offer • May invite competing bids that drive up the price • Difficult for F&N to sell stake if tender offer for the remaining shares fall through • May be more expensive than 100% tender offer Creeping Tender is preferable for F&N due to the non-hostile takeover stance which is necessary to maintain a cooperative post-acquisition relationship. Accumulating shares pre-acquisition will also increase the F&N’s chances of obtaining full control of the firm 59
9.5 Modes of Payment Cash Offer Stock Offer Cash + Stock Offer Pros • Malee’s shareholders will most likely accept the offer due to greater liquidity • Lowest premium paid for the offer • Capital structure of F&N will be retained without any dilution of existing shares • A more proportionate allocation of risk due to the additional stake given to Malee’s shareholders. • Malee’s shareholders may be willing to hold on to F&N shareholder equity due to its strong and stable price performance. • Allows both parties to reap benefits from both payment types • Higher premium required relative to a cash offer Cons • Undrawn credit facility may need to be tapped resulting in a longer time taken for deal execution • Higher risk absorbed by F&N’s shareholders as Malee’s shareholders do not have a stake in the combined firm. • Least likelihood of offer acceptance as Malee’s shareholders are unable to cash out • Highest premium paid for the offer • Excessive dilution of F&N’s existing shares therefore not favorable from F&N’s shareholders’ perspective • Difficult to ascertain ideal weightage of cash to equity • Dilution of F&N’s shares still occurs Given F&N’s access to sufficient cash reserves & credit facility, cash offer is ideal as it avoids dilution of existing F&N shares. 60
9.6 Transaction Risks & Mitigating Factors Concerns Regulatory Issues Thai government might intervene to block the acquisition to protect domestic fruit processing companies. • Regulatory intervention is unlikely given the precedent transactions involving Thai fruit juice companies (e.g. Suntory’s 50% acquisition of Tipco) • F&N can work closely with Thai regulators to allay such concerns, portraying itself as a global partner which Malee can leverage on Stock Price Volatility Sharp changes in the stock price of Malee will affect the perceived premium given to shareholders, as well as the actual takeover amount. • Proposed transaction timeline of approximately 20 weeks suggests a shortened process which could mitigate fluctuations in share price • Make use of a collar agreement to mitigate the threat of stock price fluctuations during the process of the acquisition Unable to Achieve Full Control F&N might not be able to reach full control to pass special resolutions due to uncooperative Malee shareholder base. • Accumulating equity shares pre-acquisition • Get in touch with key shareholders during tender offer bid process to ascertain likely interests and reaffirm F&N’s intention for Malee Cultural Conflicts 61 Mitigating Factors F&N may find difficulty in integrating the company post-acquisition. It needs to integrate Malee into its existing business in a quick and timely fashion in order to reap the full synergistic value of the deal. • Concerns are mitigated with F&N’s diversified geographic presence throughout Asia Pacific. F&N’s existing Thai operations caters for seamless integration between the two firms
9.7 Critical Success Factors Issues Transaction Structure The transaction structure should not be too long and complex for shareholders, and at the same time, meeting F&N’s objectives to fully acquire and delist Malee JP Morgan proposes a triggered tender offer approach and will render its seasoned experience in such bids to achieve maximum satisfaction for both companies. Pricing The pricing offered to all shareholders would need to be sufficiently attractive to appropriately reflect Sakura’s fundamental value and takeover premium JP Morgan has conducted preliminary valuation analysis to provide insights into the economics of the deal and will continue to deliver value in this aspect to ensure optimal pricing Access to key institutional shareholders Gathering detailed intelligence and understanding the expectations of key institutional shareholders would be critical in achieving a successful outcome JP Morgan has one of the strongest equities and distribution platforms in Asia and can deliver access to the key institutional shareholders of Malee Communication to Retail Shareholders 62 Our Value Proposition Malee has a strong retail shareholder base comprising of over 30% of outstanding shares. Communicating key messages to these shareholders would be critical to securing their support. Mandatory newspaper notices may not be sufficient to reach out to entire retail shareholder base. JP Morgan has advised on takeovers with large retail shareholder bases and has successfully used various communication mechanisms (e.g. shareholder hotline, media campaigns) to deliver a successful outcome to its clients.
9.8 Statutory Requirements Applicable Legislation • The Public Companies Act (“PCA”) • Securities and Exchange Act (“SEA”) • SEC Notification No. GorJor.53/2545 (the “Takeover Code”) • Stock Exchange of Thailand (“SET”) listing requirements General Conditions • Amalgamation proposals require approval by way of special resolution (75% majority) passed at general meetings of each of the amalgamating companies. • Tender offer has to remain open for at least 25 business days after posting of the offer document to target shareholders. • Specific consent from the SEC is required to make any offer conditional. Common conditions for voluntary tender offers include a minimum number of shares being tendered in acceptance of the tender offer. However, for mandatory tender offers every condition must be negotiated with the SEC on a case-by-case basis. • Takeover Code does not entitle a successful bidder to compel the minority shareholders to sell their shares to the bidder. Means of Obtaining Control • Stakebuilding is permitted, subject to restrictions on insider dealing, disclosure obligations and mandatory bid thresholds. • Mandatory bid thresholds are 25%, 50% and 75% of voting rights. • For a tender offer, the offer price must be at least the highest price paid by the bidder in the 90 days preceding the date of application for tender offer Announcement of Tender Offer Other Disclosure Requirements •Acquisitions or disposals of shares in any company listed on the SET that result in a change of shareholding which reaches or crosses any multiple of 5% of the voting rights of the company must be disclosed within one business day to the SEC. • If a mandatory bid obligation is triggered, a form of declaration of intention for tender offer must be filed with the SEC within one (for mandatory offers) or three (for voluntary offers) business days. • The terms of any irrevocable undertaking must be disclosed in the announcement of a bidder’s offer and in the tender offer document. Delisting Requirements 63 • Before an approach is made to a target company, responsibility for making an announcement rests with the potential bidder. The bidder must report the total number of shares held by the bidder and file a form of declaration of intention for tender offer to the SEC by the end of the business day following the day of any acquisition that triggers a tender offer. The bidder must submit a tender offer form to the SEC within seven business days of reporting the trigger point. • Announcements should be made through advertisement in at least two Thai- language daily newspapers and one English-language newspaper for at least three consecutive days if the offer period and terms of the offer are finalised, or one day if the offer period and terms of the offer are not finalised. Approval for de-listing can be sought from the SET following approval in a general meeting by target shareholders holding at least 75% of the shares issued by the target, provided target shareholders that vote against the resolution do not hold more than 10% of the shares issued by the target. Source: Herbert Smith LLP
10. Financials 64
10.1 Merger Comparables Date 06/12/2011 16/09/2010 28/07/2010 17/12/2009 Target Name Coca-Cola Central Japan Co Ltd Pepsi-Cola Products Philippines Inc China Huiyuan Juice Group Ltd Coca-Cola West Co Ltd Acquirer Name Announced Target Revenue Total Value Enterprise Multiple (M) Value EBIT EBITDA Target Target Multiple Multiple P/B P/S Coca-Cola Co/The 267.4 291.6 0.4 17.0 5.3 0.5 0.2 Lotte Chilsung Beverage Co Ltd 100.2 187.6 0.8 13.0 6.0 1.7 0.6 SAIF Partners Ltd 260.8 1174.3 2.7 - 49.9 0.7 0.9 Nomura Holdings Inc 174.5 1895.6 0.5 17.7 5.8 0.6 0.4 20.3 352.0 0.8 3.9 - 0.9 1.0 181.0 296.5 22.6 - - 2.6 3.7 40.5 483.1 2.9 17.7 13.6 2.7 2.3 15.0 53.9 24.7 285.3 143.1 8.2 20.5 137.9 1771.4 1.0 22.8 13.4 1.8 0.9 Yantai North Andre Juice Uni-President China Co Holdings Ltd Shenzhen Shenbao Xinyi Technology 12/10/2007 Industrial Co Group Co Ltd Super Group 03/07/2007 Yeo Hiap Seng Ltd Ltd/Singapore Mount Everest Mineral Tata Global Beverages 01/06/2007 Water Ltd Ltd Asahi Group Holdings 06/02/2007 Kagome Co Ltd Ltd 12/12/2008 02/12/2005 NutriAsia Pacific Ltd 206.5 499.2 1.9 13.4 11.2 1.7 0.9 01/12/2005 Del Monte Pacific Ltd MCI Inc/Philippines 118.7 499.2 1.9 13.0 10.9 1.7 0.9 07/02/2005 AgriPure Holding PLC Private Investor 12.0 16.8 0.5 34.9 14.2 1.5 0.5 Mean 5.1 43.9 27.3 2.1 2.7 Median 65 Del Monte Pacific Ltd 1.4 17.3 12.3 1.7 0.9
10.2 Company Comparables Ticker Name Price to Book Price to Earnings Price to Sales EV/EBITDA T12M EV/Sales T12M EV (SGD) Market Cap (SGD) MALEE TB Malee Sampran Public Co Ltd 1.49 11.07 0.41 20.83 0.78 116.6 103.1 TIPCO TB Tipco Foods PCL 1.22 6.46 0.46 33.03 1.08 213.4 90.9 APURE TB Agripure Holding PLC 1.49 44.50 0.53 16.87 0.64 24.6 20.4 0.78 6.43 0.62 8.22 0.70 82.8 73.1 1.34 9.16 0.51 7.40 0.61 96.4 105.9 1.05 18.12 0.16 17.73 0.43 172.6 104.2 0.90 15.94 0.97 12.10 0.87 93.4 105.5 SFP TB CHOTI TB 1225 TT MABR IT Siam Food Products Public Co Kiang Huat Seagull Trading Formosa Oilseed Processing MAABAROT PRODUCTS LTD 1236 TT 1.67 16.93 1.06 11.40 1.33 131.8 106.3 079660 KS Sahohaepyo Corp 0.83 7.88 0.21 17.40 0.36 223.7 115.8 SNAK US Investure Foods Inc 1.63 27.69 0.42 9.45 0.66 141.3 107.1 SFGI SP 66 Hunya Foods Co Ltd Sino Grandness Food IndustryINO 1.23 3.22 0.49 2.44 0.55 125.3 109.2
10.3 F&N’s Financials Growth Forecasts Forecasted Growth Rates by Segment 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Soft drinks 9.73% 7.04% 23.49% 13.31% -25.00% 5.00% 8.00% 9.00% 10.00% Dairies 33.53% -5.98% 4.19% 4.86% 4.50% 4.90% 5.00% 5.00% 5.00% Breweries 10.91% 3.01% 21.86% 14.96% 12.00% 10.00% 10.00% 10.00% 10.00% Printing & Publishing -10.13% -12.36% -1.60% -3.25% -3.00% -3.00% -2.00% -2.00% -2.00% Commercial property & REIT 18.80% 13.43% -14.39% -8.43% 22.50% 8.00% 12.00% 10.00% 8.00% Development property -15.72% 27.50% 8.34% 14.60% -49.00% 6.00% 7.00% 8.00% 10.00% Others 60.13% 29.42% 18.11% 8.28% 4.00% 3.00% 2.00% 2.00% 2.00% Elimination 67 2008A 54.22% 10.56% 10.82% 11.88% -11.00% -11.00% -11.00% -11.00% -11.00%
10.3 F&N’s Financials Balance Sheet (S$ mil) NON-CURRENT ASSETS 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Fixed assets 1,157.64 1,231.83 1,239.72 1,104.22 1,187.05 1,233.77 1,322.67 1,427.64 1,543.08 1,672.83 Investment properties 3,224.39 3,558.92 3,444.23 2,139.03 2,476.74 2,653.61 2,844.82 3,070.59 3,318.87 3,597.94 Subsidiary companies 127.83 162.30 169.80 102.35 109.73 118.44 128.01 138.78 28.04 30.06 32.44 35.07 38.02 Joint venture companies Associated companies - - - - 89.84 60.10 1,355.25 1,382.20 1,266.98 1,358.28 1,466.07 1,584.61 1,717.86 96.46 60.64 877.74 1,233.39 1,597.95 1,101.83 1,168.46 1,174.13 1,175.59 1,177.32 1,179.22 1,181.36 5,484.06 Others 89.49 - 6,247.08 6,541.19 5,790.16 6,274.55 6,458.89 6,841.14 7,292.51 7,788.86 8,346.77 CURRENT ASSETS Inventories 480.06 468.50 423.51 391.92 373.41 354.80 380.36 410.55 443.75 481.06 Receivables 1,348.53 1,005.48 971.26 1,273.61 1,278.60 1,219.56 1,307.43 1,411.20 1,525.30 1,653.56 Joint venture companies 7.58 26.56 11.67 6.54 6.12 12.51 13.42 14.48 15.65 16.97 Associated companies 0.25 0.91 5.11 10.80 13.18 5.78 6.19 6.69 7.23 7.83 Short term investments 4,401.38 4,744.93 4,271.53 4,350.88 4,227.03 3,903.80 3,829.11 3,748.76 3,636.57 3,492.16 Bank fixed deposits Cash and bank balances Total Assets 845.21 305.59 7,388.59 629.88 403.06 7,279.32 1,269.50 373.81 7,326.38 1,274.63 424.29 7,732.66 1,180.94 418.67 7,497.94 1,065.72 576.60 7,091.79 1,142.51 646.65 7,280.29 1,233.18 679.35 7,462.23 1,332.89 706.53 7,611.29 1,444.97 720.29 7,751.76 1,166.75 1,245.07 1,441.98 1,488.95 1,421.91 1,398.41 1,499.17 1,618.15 1,748.98 1,896.05 2.15 4.07 3.06 6.35 14.26 5.81 6.23 6.72 7.26 7.87 16.79 17.55 1.04 0.95 3.04 8.76 9.39 10.13 10.95 11.87 2,685.75 2,326.99 1,990.87 2,224.78 1,103.49 948.37 1,016.70 1,097.39 1,186.12 1,285.85 3,871.44 3,593.67 3,436.94 3,721.03 2,542.70 2,361.34 2,531.48 2,732.39 2,953.32 3,201.65 2,495.21 3,365.30 3,617.63 2,737.58 2,212.11 CURRENT LIABILITIES Payables Joint venture companies Associated companies Short term liabilities NON-CURRENT LIABILITIES 2,669.90 3,312.11 2,638.39 2,527.82 2,386.37 18.81 18.76 19.30 25.04 20.41 21.17 22.69 24.49 26.47 28.70 105.15 130.15 110.24 158.38 176.24 138.95 148.96 160.78 173.78 188.39 2,619.17 3,514.21 3,747.18 2,853.33 3,508.76 2,897.69 2,810.04 2,713.09 2,586.62 2,429.20 Share capital 1,313.92 1,330.30 1,341.71 1,374.50 1,417.40 1,417.40 1,417.40 1,417.40 1,417.40 1,417.40 Reserves 3,906.68 3,952.98 4,243.02 4,768.30 5,464.81 5,857.63 6,267.66 6,703.09 7,169.20 7,673.26 Non-controlling interests 1,161.45 1,135.24 1,098.73 805.66 838.81 1,063.60 1,140.23 1,230.73 1,330.24 1,442.09 6,382.04 6,418.52 6,683.46 6,948.46 7,721.02 8,338.63 8,825.29 9,351.22 9,916.84 10,532.75 Borrowings Provision for employee benefits Deferred tax liabilities SHARE CAPITAL AND RESERVES 68
10.3 F&N’s Financials Income Statement 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Revenue 4,731.17 4,990.07 5,146.33 5,696.78 6,274.29 5,530.34 5,928.83 6,399.36 6,916.79 7,498.39 Cost of sales (3,197.97) (3,316.32) (3,438.01) (3,708.92) (4,162.15) (3,675.46) (3,940.29) (4,253.00) (4,596.89) (4,983.42) Gross profit 1,533.20 1,673.75 1,708.33 1,987.86 2,112.14 1,854.89 1,988.54 2,146.36 2,319.90 2,514.97 (S$ mil) Other income (net) 52.02 24.53 17.62 Operating Expenses (900.77) (968.35) (952.78) (1,012.30) (1,081.11) (1,017.13) (1,090.42) (1,176.96) (1,272.12) (1,379.09) 684.45 729.93 773.17 989.33 1,070.72 868.81 931.42 1,005.34 1,086.62 1,177.99 Share of joint venture companies' profits 14.16 11.71 12.73 15.28 17.34 14.67 15.72 16.97 18.34 19.89 Share of associated companies' profits 22.02 14.91 1.00 47.60 51.94 27.06 29.01 31.32 33.85 36.69 Trading Profit Gross income from investments 13.77 11.48 9.24 11.68 18.78 Profit before Interest and Taxation (PBIT) 732.10 765.78 798.58 1,070.99 Finance income (cost) (71.07) (64.59) (61.72) Profit before impairment, FV adj, taxation and exceptional items 661.03 701.19 736.87 Impairment on investments - (47.96) FV adjustments of investment properties - 71.85 Exceptional Items Profit before taxation Taxation Profit from continuing operations after taxation Profit from discontinued operations after taxation Profit after taxation 69 39.69 33.29 35.94 38.84 12.92 13.86 14.96 16.16 1,151.55 923.47 990.01 1,068.58 1,154.98 (62.33) (53.86) (65.79) (70.53) (76.13) 1,008.66 1,097.69 857.68 919.48 992.45 (7.29) (9.00) (122.60) 129.41 11.55 31.06 140.06 42.11 17.52 1,252.10 (82.29) (89.21) 1,072.69 1,162.89 - - - - - - - - - - 11.66 12.06 7.12 43.04 175.13 672.69 737.14 614.10 1,172.11 1,412.88 857.68 919.48 992.45 (174.36) (169.43) (179.19) (270.40) (298.53) (209.76) (224.87) (242.72) (262.34) (284.40) 498.33 567.71 434.91 901.71 1,114.35 647.92 694.60 749.73 810.35 878.49 498.33 567.71 7.47 159.80 442.38 1,061.52 1,114.35 - 647.92 - 694.60 - 749.73 1,072.69 810.35 1,162.89 878.49
10.3 F&N’s Financials Cash Flow Statement (S$ mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 661.03 725.08 614.39 1,127.41 1,237.75 857.68 919.48 992.45 1,072.69 1,162.89 145.52 149.40 161.69 147.57 132.83 150.29 159.83 171.10 183.48 197.40 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and exceptional items Adjustments for: Depreciation and amortization Other non-cash adjustments Other adjustments Working capital changes Cash generated from operations 9.90 9.93 (83.04) (127.47) 19.36 21.41 23.83 26.49 29.48 (291.67) (388.45) (403.85) (361.98) (367.97) (374.43) (381.42) (388.96) 366.26 34.03 (231.92) 37.58 11.08 26.59 43.65 62.42 83.07 982.09 734.34 571.56 876.84 676.42 759.34 856.59 963.67 1,083.89 (303.81) (268.58) (496.54) 16.10 215.90 Interest expenses and other payments (1,033.92) (685.45) 443.50 (156.63) 273.16 41.43 (138.93) (292.85) (423.92) (536.92) Net cash from operating activities (1,017.82) 296.64 1,177.84 414.93 1,150.00 717.85 620.41 563.74 539.75 546.96 CASH FLOW FROM INVESTING ACTIVITIES Dividends from joint venture and associated companies 14.52 19.13 41.87 43.98 71.77 38.26 38.26 38.26 38.26 38.26 Investment income 11.48 9.24 11.68 18.78 11.55 12.55 12.55 12.55 12.55 12.55 Proceeds from sale of assets and investments 54.62 (415.06) (191.65) 483.43 (151.46) 40.50 39.56 38.67 37.82 37.01 (318.36) (429.41) (225.68) (361.19) (338.76) (342.59) (342.59) (342.59) (342.59) (342.59) 0.66 0.60 0.60 0.60 0.60 0.60 Increase in investments Repayment of/(additional) trade advances Net cash (used in)/investment activities 4.65 (0.06) 1.66 (3.89) (233.10) (816.15) (362.11) 181.11 (406.24) (250.68) (251.62) (252.51) (253.36) (254.17) 854.94 676.46 38.42 (211.62) (709.94) (460.78) (460.78) (460.78) (460.78) (460.78) 0.73 (0.23) - - - - - - CASH FLOW FROM FINANCING ACTIVITIES Repayment of loans Other financing activities Proceeds from issue of bonds Proceeds from issue of shares 300.00 - - - - - - - - - - 983.45 20.00 10.87 29.76 55.75 51.83 62.79 76.49 93.61 115.02 Dividends paid (262.86) (272.56) (247.30) (316.43) (460.21) 48.27 77.75 107.47 137.42 167.60 Net cash used in financing activities 1,576.26 423.68 (198.02) (498.29) (814.40) (360.69) (320.25) (276.83) (229.75) (178.16) (95.84) 617.71 97.76 (70.64) 106.48 48.54 34.40 56.63 114.63 Net (decrease)/increase in cash and cash equivalents 70 325.33
10.3 F&N’s Financials Discounted Cash Flow Model (S$ bil) 2011A 2012F 2013F 2014F 2015F 2016F EBIT 1.15 0.92 0.99 1,07 1.15 1.25 Tax expense (0.30) (0.21) (0.22) (0.24) (0.26) (0.28) Depreciation + Amortization 0.14 0.15 0.16 0.17 0.18 0.20 Less: Changes in working capital 0.05 (0.05) 0.01 0.01 0.02 0.02 (0.33) (0.31) (0.31) (0.31) (0.31) (0.31) 0.71 0.50 0.63 0.70 0.78 0.87 Less: Capital expenditures Free cash flow PV of FCFF 3.18 PV of Terminal Value 9.76 Enterprise Value Net Cash /(Debt) (2,70) Non-controlling Interests 10.64 Equity value 11.31 Shares Outstanding 14.12 Forecasted value per share $8.01 Share price as of 09/03/12 71 12.94 $6.64 Assumptions WACC 8.17% Terminal growth 2.00% Effective tax rate 25.92%
10.3 F&N’s Financials Sensitivity Analysis Changes in Terminal Growth Rates Changes in WACC 13.31 9.87 10.53, 11.31 12.22 14.39 11.68 11.31 9,75 8.29 1.00% 1.50% 2.00% Equity Value (S$ bil) 72 2.50% 3.00% 7% 8% 8.17% Equity Value (S$ bil) 9% 10%
10.3 F&N’s Financials Sensitivity Analysis WACC 8.00% 8.17% 9.00% 10.00% 11.00% $9.72 $8.01 $6.76 $6.58 $5.80 $5.04 $4.42 1.00% $10.61 $8.62 $7.19 $6.99 $6.12 $5.29 $4.62 1.50% $11.70 $9.33 $7.69 $7.46 $6.49 $5.56 $4.83 2.00% $13.07 $10.19 $8.28 $8.01 $6.90 $5.87 $5.07 2.50% $14.82 $11.24 $8.97 $8.66 $7.39 $6.23 $5.34 3.00% $17.16 $12.56 $9.79 $9.43 $7.95 $6.63 $5.64 3.50% 73 7.00% 0.50% Terminal Growth Rates 6.00% $20.43 $14.25 $10.81 $10.37 $8.61 $7.10 $5.98
10.4 Malee’s Financials Growth Forecasts Forecasted Growth Rates by Segment 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Export sales -48.46% 1.08% -16.22% 24.47% 9.00% 7.50% 5.50% 4.50% 4.00% Local sales 12.81% -20.81% -5.94% 30.67% 10.50% 7.50% 5.50% 4.50% 4.00% Other income 74 2008A -29.97% 41.77% -5.62% 9.96% 10.50% 7.50% 5.50% 4.50% 4.00%
10.4 Malee’s Financials Income Statement (THB mil) Revenues Sales Other Income Total Revenues 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 4,004.25 3,703.65 3,082.85 2,828.67 3,660.38 4,033.90 4,336.44 4,574.94 4,780.81 4,972.05 63.90 44.75 63.45 59.88 65.85 72.76 78.22 82.52 86.24 89.68 4,068.15 3,748.40 3,146.30 2,888.55 3,726.22 4,106.66 4,414.66 4,657.46 4,867.05 5,061.73 Expenses Cost of sales Selling and adminstrative expenses 3,337.74 3,044.06 2,348.10 2,023.37 2,571.35 2,710.68 2,781.54 2,794.80 2,774.55 2,733.68 753.79 812.70 675.67 700.21 5.42 26.16 26.55 25.65 43.28 30.59 32.88 34.69 36.25 37.70 Loss on impairment of assets (reversal) - 30.75 3.33 - - - - - - - Other expenses - - - - 5.35 - - - - - Director and management benefit expenses Total expenses Profit (loss) before finance cost (EBIT) Finance cost Revision of estimated interest expense Net profit (loss) for the year 75 844.80 1,013.19 1,177.47 1,335.38 1,492.81 1,653.76 4,096.95 3,913.67 3,053.66 2,749.23 3,464.78 3,754.45 3,991.89 4,164.87 4,303.62 4,425.14 (28.79) (165.27) 92.64 139.32 261.44 352.21 422.77 492.60 563.43 636.59 63.73 129.38 35.83 32.96 33.71 37.15 39.94 42.14 44.03 45.79 - - (74.11) - - - - - - - (92.52) (294.65) 130.93 106.36 227.73 315.05 382.83 450.46 519.40 590.79
10.4 Malee’s Financials Balance Sheet (THB mil) ASSETS Current Assets Cash and cash equivlents Trade accounts and notes receivable Inventories, net Other receivables Others Total current assets 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 13.71 478.67 691.27 22.47 48.36 1,254.48 8.81 447.48 497.52 24.31 28.83 1,006.96 11.84 400.82 401.60 43.34 28.12 885.73 14.17 431.19 472.04 15.39 32.36 965.15 25.87 611.56 500.18 40.20 14.79 1,192.60 21.60 686.54 551.25 34.41 35.88 1,329.69 30.60 738.03 592.59 36.99 38.57 1,436.80 45.77 778.63 625.19 39.03 40.70 1,529.31 60.59 813.66 653.32 40.78 42.53 1,610.88 71.68 846.21 679.45 42.42 44.23 1,683.99 Non-current assets Restricted bank deposits Land not used in operation, net Property, plant and equipment, net Others Total non-current assets Total Assets 78.04 115.76 876.34 18.76 1,088.90 2,343.37 88.19 115.76 748.51 14.14 966.59 1,973.55 33.94 127.39 1,084.89 19.56 1,265.78 2,151.50 5.06 128.83 1,042.40 20.29 1,196.58 2,161.73 5.14 28.45 1,004.46 33.40 1,071.46 2,264.06 3.39 124.90 1,107.01 23.51 1,258.81 2,588.50 2.27 134.26 1,190.04 25.28 1,351.85 2,788.65 1.52 141.65 1,255.49 26.67 1,425.33 2,954.63 1.02 148.02 1,311.99 27.87 1,488.89 3,099.78 0.68 153.94 1,364.47 28.98 1,548.07 3,232.06 Liabilities Current Liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable and notes payable Trade account payable and accrued interest Factoring payable Current portion of loans and agreements Accrued expenses and accrued interest and other accounts payable Others Total current liabilities 490.96 1,005.50 242.55 149.76 121.81 192.96 27.79 2,231.33 479.83 972.62 276.93 145.78 72.43 191.19 24.46 2,163.24 355.23 924.01 100.49 76.06 167.36 9.88 1,633.04 314.88 949.64 153.52 23.14 162.01 16.97 1,620.15 250.71 977.66 47.62 6.15 233.93 46.64 1,562.71 225.64 1,162.34 47.62 67.73 257.81 28.53 1,789.67 203.08 1,249.19 47.62 72.81 277.14 30.64 1,880.49 182.77 1,317.66 47.62 76.82 292.39 32.31 1,949.56 164.49 1,376.76 47.62 80.27 305.54 33.75 2,008.44 148.04 1,431.66 47.62 83.48 317.77 35.08 2,063.66 Non-current Liabilities Loans and agreements, net of current portion Other payable, net of current portion Employee benefit obligation Total non-current liabilities Total Liabilities 60.27 60.27 2,291.60 53.19 53.19 2,216.43 24.57 167.26 191.83 1,824.87 10.08 139.82 149.90 1,770.06 7.52 112.19 34.98 154.68 1,717.39 13.76 123.64 137.40 1,927.08 11.89 132.91 144.80 2,025.29 10.95 140.22 151.17 2,100.73 10.47 146.53 157.01 2,165.44 10.24 152.39 162.63 2,226.29 999.99 700.00 347.50 171.01 (1,166.74) 51.77 2,343.37 999.99 700.00 347.50 171.01 (1,461.39) (242.88) 1,973.55 999.99 700.00 347.50 609.59 (1,330.46) 326.63 2,151.50 999.99 700.00 347.50 566.77 (1,222.59) 391.68 2,161.73 999.99 700.00 347.50 518.02 (1,018.85) 546.67 2,264.06 999.99 700.00 347.50 518.02 (904.09) 661.42 2,588.50 999.99 700.00 347.50 518.02 (802.15) 763.36 2,788.65 999.99 700.00 347.50 518.02 (711.61) 853.91 2,954.63 999.99 700.00 347.50 518.02 (631.18) 934.33 3,099.78 999.99 700.00 347.50 518.02 (559.74) 1,005.77 3,232.06 Shareholders' equity Share capital Registered Issued and fully paid Paid-in capital Share premium Revaluation surplus Retained earnings: Total shareholder's equity Total liabilities and shareholders' equity 76
10.4 Malee’s Financials Cash Flow Statement (THB mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F (92.52) (294.65) 130.93 106.36 227.73 315.05 382.83 450.46 519.40 590.79 139.51 124.43 94.59 45.78 50.05 55.90 59.93 63.11 65.85 68.40 22.11 58.78 29.54 33.95 18.65 28.09 28.90 29.54 30.09 30.60 Cash flows from (used in) operating activities Net profit (loss) Adjustments: Depreciation and amortisation Non cash adjustments (Gain) loss on sales of property, plant and equipment Others Income from operating activities before changes in operating assets and liabilities (0.62) 125.74 0.23 (8.47) 129.64 (38.19) (0.09) 33.61 (13.24) 42.12 (4.44) (4.44) (4.44) (4.44) (4.44) 31.45 29.03 26.79 24.74 22.85 194.21 18.43 208.40 219.61 325.31 426.05 496.25 565.46 635.65 708.21 (124.99) 216.76 88.55 (123.29) (204.18) (136.06) (120.93) (103.03) (94.14) (90.41) Operating liabilities increase (decrease) 121.09 (79.16) (100.85) 14.79 174.09 206.19 76.61 58.18 48.79 44.58 Cash flow from operating activities 190.31 156.03 196.11 111.10 295.22 496.19 451.93 520.61 590.30 662.38 Interest expense paid (5.27) (6.40) - - - - - - - - Income tax paid (0.22) (0.23) (0.85) (2.26) (2.74) (4.21) (5.05) (5.89) (6.73) (7.61) 184.82 149.41 195.26 108.85 292.48 491.98 446.88 514.73 583.57 654.77 (19.89) (10.15) 54.25 28.88 (0.08) (1.75) (1.12) (0.75) (0.50) (0.34) - - - - - - Operating assets (increase) decrease Net cash flows from operating activities Cash flows from (used in) investing activities Decrease (increase) in restricted bank deposits Proceeds from disolution of investment in associated company Acquisition of machinery and equipment Proceeds from sales of property, plant and equipment Interest income received Net cash flows from (used in) investing activities - - - - (63.87) (40.02) (10.10) (47.24) (60.93) (62.76) (64.64) (66.58) (68.58) (70.64) 10.79 16.17 15.97 0.42 2.84 2.84 2.84 2.84 2.84 2.84 2.07 0.12 0.58 0.28 0.06 0.62 0.62 0.62 0.62 0.62 (70.89) (33.88) 60.70 (17.66) (58.11) (61.05) (62.30) (63.87) (65.62) (67.51) (40.36) (11.13) (124.60) (40.35) (64.16) (25.07) (22.56) (20.31) (18.28) (16.45) (3.98) (45.29) 53.02 (105.89) (56.46) (45.23) (75.62) (22.99) Cash flows from (used in) financing activities Decrease in bank overdraft and short term loans from financial institutions Increase (decrease) in factoring payable Cash paid to agreements and other long term loans Cash paid to interest expense Net cash flows used in financing activities Net increase (decrease) in cash and cash equivalents 77 14.59 (23.77) (55.22) (58.11) (54.96) (57.20) (53.34) (58.64) (47.92) (37.24) (25.62) (29.62) (39.81) (36.04) (33.67) (32.95) (34.42) (108.17) (119.50) (252.35) (88.58) (222.67) (120.10) (116.72) (108.93) (108.43) (104.20) 3.61 2.61 11.70 310.83 267.86 341.93 409.52 483.06 5.75 (3.98)
10.4 Malee’s Financials Sensitivity Analysis Changes in Terminal Growth Rates Changes in WACC 4.78 3.71 3.00% 3.91 4.00% 4.59 4.43 4.15 4.15 3.78 5.00% 6.00% Equity Value (THB bil) 78 5.11 7.00% 15.00% 16.00% 17.00% 18.00% Equity Value (THB bil) 3.46 19.00%
10.4 Malee’s Financials Sensitivity Analysis WACC 16.00% 17.00% 18.00% 19.00% 20.00% $46.08 $41.94 $38.39 $35.32 $32.64 $30.28 $28.18 2.00% $49.19 $44.48 $40.50 $37.09 $34.13 $31.55 $29.27 3.00% $52.93 $47.49 $42.96 $39.13 $35.84 $32.99 $30.50 4.00% $57.50 $51.10 $45.87 $41.50 $37.81 $34.64 $31.90 5.00% $63.21 $55.51 $49.35 $44.31 $40.10 $36.54 $33.49 6.00% $70.55 $61.03 $53.62 $47.68 $42.82 $38.76 $35.33 7.00% 79 15.00% 1.00% Terminal Growth Rates 14.00% $80.34 $68.12 $58.94 $51.80 $46.07 $41.39 $37.48
10.5 Sukhumvit’s Financials Growth Forecasts Forecasted Growth Rates by Segment 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Soft drinks 9.73% 7.04% 23.49% 13.31% -25.00% 7.00% 10.00% 11.00% 12.00% Dairies 33.53% -5.98% 4.19% 4.86% 4.50% 4.90% 5.00% 5.00% 5.00% Breweries 10.91% 3.01% 21.86% 14.96% 12.00% 10.00% 10.00% 10.00% 10.00% Printing & Publishing -10.13% -12.36% -1.60% -3.25% -3.00% -3.00% -2.00% -2.00% -2.00% Commercial property & REIT 18.80% 13.43% -14.39% -8.43% 22.50% 8.00% 12.00% 10.00% 8.00% Development property -15.72% 27.50% 8.34% 14.60% -49.00% 6.00% 7.00% 8.00% 10.00% - - - - 10.50% 7.50% 5.50% 4.50% 4.00% Others 60.13% 29.42% 18.11% 8.28% 4.00% 3.00% 2.00% 2.00% 2.00% Elimination 54.22% 10.56% 10.82% 11.88% -11.00% -11.00% -11.00% -11.00% -11.00% Canned Fruit 80
10.5 Sukhumvit’s Financials Income Statement (S$ mil) Revenue 2007A 2008A 2009A 2010A 2011A 2012F 4,731.17 4,990.07 5,146.33 5,696.78 6,274.29 Cost of sales (3,197.97) (3,316.32) (3,438.01) (3,708.92) (4,162.15) Gross profit 1,533.20 1,673.75 1,708.33 1,987.86 2,112.14 Other income (net) 52.02 24.53 17.62 13.77 Operating Expenses (900.77) (968.35) (952.78) (1,012.30) (1,081.11) 684.45 729.93 773.17 989.33 1,070.72 Share of joint venture companies' profits 14.16 11.71 12.73 15.28 Share of associated companies' profits 22.02 14.91 1.00 47.60 Gross income from investments 11.48 9.24 11.68 18.78 732.10 765.78 798.58 26.92 31.55 21.98 Trading Profit Profit before Interest and Taxation (PBIT) Finance income Finance cost (97.99) (96.14) (83.70) Profit before impairment, FV adj, taxation and exceptional items 661.03 701.19 736.87 Impairment on investments FV adjustments of investment properties Profit before taxation and exceptional items Exceptional Items Profit before taxation Taxation Profit from continuing operations after taxation Profit from discontinued operations after taxation Profit after taxation 81 661.03 (47.96) (7.29) 71.85 (122.60) 725.08 606.98 11.66 12.06 7.12 672.69 737.14 614.10 (174.36) 498.33 498.33 (169.43) (179.19) 567.71 567.71 1,070.99 28.17 (90.50) 1,008.66 39.69 129.41 43.04 1,172.11 5,699.55 2014F 2015F 6,248.66 6,894.10 2016F 7,613.78 8,431.46 (3,893.86) (4,264.54) (4,696.41) (5,175.26) (5,717.86) 1,805.69 2,197.68 2,438.52 36.93 34.64 1,984.12 41.33 2,713.61 45.22 50.06 (1,113.27) (1,191.21) (1,273.49) (1,382.28) (1,552.46) 727.06 829.85 965.53 1,101.47 17.34 15.12 16.57 18.28 20.19 22.36 51.94 27.89 30.58 33.74 37.26 41.26 11.55 13.32 14.60 16.11 17.79 783.38 891.61 1,033.66 1,176.71 27.41 30.05 33.16 36.62 (96.61) (105.92) (116.82) 815.74 949.99 1,151.55 17.70 (71.56) 1,097.69 (9.00) 1,129.07 2013F 714.19 - - 140.06 1,237.75 175.13 1,412.88 (270.40) (298.53) 434.91 901.71 1,114.35 7.47 159.80 442.38 1,061.52 1,114.35 - 714.19 714.19 815.74 (174.67) (199.50) 539.52 539.52 616.23 616.23 949.99 (232.34) 717.66 717.66 40.55 (128.93) (142.67) 1,192.41 - 949.99 19.70 1,294.54 1,084.40 - 815.74 1,211.21 - 1,084.40 1,084.40 (265.21) 819.19 819.19 1,192.41 1,192.41 (291.62) 900.79 900.79
10.5 Sukhumvit’s Financials Balance Sheet (S$ mil) NON-CURRENT ASSETS Fixed assets Investment properties Subsidiary companies Joint venture companies Associated companies Others CURRENT ASSETS Assets held for sale Inventories Receivables Joint venture companies Associated companies Short term investments Bank fixed deposits Cash and bank balances CURRENT LIABILITIES Payables Joint venture companies Associated companies Short term liablities NON-CURRENT LIABILITIES Borrowings Provision for employee benefits Deferred tax liabilities SHARE CAPITAL AND RESERVES Share capital Reserves Non-controlling interests 82 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 1,157.64 3,224.39 127.83 96.46 877.74 5,484.06 1,231.83 3,558.92 162.30 60.64 1,233.39 6,247.08 1,239.72 3,444.23 169.80 89.49 1,597.95 6,541.19 1,104.22 2,139.03 89.84 1,355.25 1,101.83 5,790.16 1,187.05 2,476.74 60.10 1,382.20 1,168.46 6,274.55 1,317.13 2,734.80 105.49 28.90 1,305.75 1,181.00 6,673.07 1,443.06 2,998.28 115.65 31.68 1,431.55 1,183.43 7,203.65 1,589.74 3,307.98 127.59 34.95 1,579.41 1,186.14 7,825.82 1,752.63 3,653.30 140.91 38.60 1,744.29 1,189.07 8,518.80 1,937.21 4,045.65 156.05 42.75 1,931.62 1,192.35 9,305.62 4,079.33 480.06 1,348.53 7.58 0.25 322.05 845.21 305.59 7,388.59 4,603.82 468.50 1,005.48 26.56 0.91 141.11 629.88 403.06 7,279.32 4,016.84 423.51 971.26 11.67 5.11 254.70 1,269.50 373.81 7,326.38 4,347.45 391.92 1,273.61 6.54 10.80 3.43 1,274.63 424.29 7,732.66 4,223.42 373.41 1,278.60 6.12 13.18 3.60 1,180.94 418.67 7,497.94 4,019.62 388.37 1,288.06 12.90 5.95 3.52 1,098.32 332.70 7,309.43 4,031.96 425.30 1,411.49 14.14 6.53 3.52 1,204.14 157.49 7,673.04 4,034.79 468.05 1,555.66 15.60 7.20 3.52 1,328.52 -40.87 8,115.99 3,999.15 515.38 1,715.96 17.23 7.95 3.52 1,467.20 -237.71 8,591.80 3,922.76 568.91 1,897.75 19.08 8.81 3.52 1,624.77 -472.15 9,092.40 1,166.75 2.15 16.79 2,685.75 3,871.44 1,245.07 4.07 17.55 2,326.99 3,593.67 1,441.98 3.06 1.04 1,990.87 3,436.94 1,488.95 6.35 0.95 2,224.78 3,721.03 1,421.91 14.26 3.04 1,103.49 2,542.70 1,505.63 5.98 9.03 986.68 2,507.32 1,649.15 6.56 9.90 1,079.91 2,745.53 1,816.04 7.24 10.92 1,189.76 3,023.96 2,001.20 8.00 12.06 1,312.42 3,333.67 2,210.91 8.85 13.35 1,451.96 3,685.08 2,495.21 18.81 105.15 2,619.17 3,365.30 18.76 130.15 3,514.21 3,617.63 19.30 110.24 3,747.18 2,669.90 25.04 158.38 2,853.33 3,312.11 20.41 176.24 3,508.76 2,827.00 21.81 143.20 2,992.01 2,786.69 23.91 156.99 2,967.60 2,729.47 26.38 173.21 2,929.07 2,633.30 29.14 191.29 2,853.73 2,494.07 32.27 211.83 2,738.18 1,313.92 3,906.68 1,161.45 6,382.04 1,330.30 3,952.98 1,135.24 6,418.52 1,341.71 4,243.02 1,098.73 6,683.46 1,374.50 4,768.30 805.66 6,948.46 1,417.40 5,464.81 838.81 7,721.02 1,501.77 5,733.33 1,096.14 8,331.23 1,501.77 6,069.18 1,201.74 8,772.69 1,501.77 6,476.28 1,325.87 9,303.92 1,501.77 6,954.54 1,464.28 9,920.59 1,501.77 7,483.85 1,621.54 10,607.15
10.5 Sukhumvit’s Financials Cash Flow Statement (S$ mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and exceptional items 661.03 725.08 614.39 1,127.41 1,237.75 714.19 815.74 949.99 1,084.40 1,192.41 216.95 149.40 161.69 147.57 132.83 156.67 169.98 185.56 202.90 222.58 Adjustments for: Depreciation and amortization Other non-cash adjustments Other adjustments Working capital changes Cash generated from operations 9.68 10.24 217.87 (79.20) (110.83) 24.74 27.56 30.88 34.58 38.79 (375.02) (268.89) (293.64) (392.29) (420.50) (381.61) (387.66) (394.19) (401.24) (408.83) (496.54) 366.26 34.03 (231.92) 37.58 13.97 24.76 41.80 60.55 81.18 16.10 982.09 734.34 571.56 876.84 525.06 652.20 815.89 983.06 1,128.01 443.50 (156.63) 273.16 83.37 (108.69) (280.63) (427.63) (545.90) 1,150.00 608.43 543.51 535.26 555.43 582.11 Interest expense and other payments (1,033.92) (685.45) Net cash from operating activities (1,017.82) 296.64 1,177.84 414.93 CASH FLOW FROM INVESTING ACTIVITIES - - - - - - - - - - - - - - - - - - - Dividends from joint venture and associated companies 14.52 19.13 41.87 43.98 71.77 38.26 38.26 38.26 38.26 38.26 Investment income 11.48 9.24 11.68 18.78 11.55 12.57 12.57 12.57 12.57 12.57 Proceeds from sale of assets and investments Increase in investments Repayment of/(additional) trade advances Net cash (used in)/investment activities 319.59 38.35 176.45 670.04 197.31 364.90 368.68 373.22 378.68 385.22 (583.33) (882.81) (593.78) (547.80) (687.54) (661.64) (661.71) (661.79) (661.88) (661.96) 0.66 0.53 0.56 0.57 (406.24) (245.38) (241.65) (237.17) 4.65 (233.10) - CASH FLOW FROM FINANCING ACTIVITIES Repayment of loans Other financing activities Proceeds from issue of bonds Proceeds from issue of shares: Dividends paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents 83 854.94 (0.06) (816.15) 676.46 1.66 (362.11) 38.42 (3.89) 181.11 (211.62) 0.73 (0.23) - - - - - - (709.94) 300.00 - - (461.62) 0.58 (231.79) (461.54) 0.59 (225.32) - (461.82) (461.71) (461.46) (3.92) (3.88) (3.65) (3.71) (3.62) - - - - - 983.45 20.00 10.87 29.76 55.75 51.83 62.79 76.49 93.61 115.02 (262.86) (272.56) (247.30) (316.43) (460.21) 48.27 77.75 107.47 137.42 167.60 423.68 (198.02) (498.29) (814.40) (365.64) (325.05) (281.32) (234.22) (182.45) 617.71 97.76 (70.64) (2.59) (23.19) 16.77 89.42 174.33 1,576.26 325.33 (95.84)
10.5 Sukhumvit’s Financials Discounted Cash Flow Model (S$bil) EBIT 2011A 2012F 2013F 2014F 2015F 2016F 1.15 0.78 0.89 1.03 1.17 1.30 Tax expense (0.30) (0.17) (0.20) (0.23) (0.26) (0.29) Depreciation + Amortization 0.14 0.16 0.17 0.19 0.21 0.23 Less: Changes in working capital 0.05 (0.06) 0.02 0.02 0.02 0.03 Less: Capital expenditures (0.33) (0.31) (0.30) (0.30) (0.29) (0.29) Free cash flow 0.71 0.40 0.58 0.71 0.84 0.97 PV of FCFF 3.11 PV of Terminal Value 10.12 Enterprise Value 13.23 Net Cash /(Debt) (2.70) Non-controlling Interests 1.10 Equity value Shares Outstanding Forecasted value per share Share price as of 09/03/12 84 11.63 1.41 $8.24 $6.64 Assumptions WACC Terminal growth Effective tax rate 8.50% 2.00% 25.92%
10.6 Sukhumvit’s Sensitivity Analysis Changes in Terminal Growth Rates 10.20 10.86 11.63 12.53 Changes in WACC 13.59 17.77 14.14 11.63 9.79 1.00% 1.50% 2.00% 2.50% Equity Value (S$ bil) 85 3.00% 6.50% 7.50% 8.50% 9.50% Equity Value (S$ bil) 8.38 10.50%
10.6 Sukhumvit’s Sensitivity Analysis WACC 7.50% 8.50% 9.50% 10.50% 11.50% $11.87 $9.62 $8.02 $6.81 $5.87 $5.13 $4.51 1.00% $13.10 $10.43 $8.58 $7.22 $6.19 $5.37 $4.70 1.50% $14.64 $11.40 $9.24 $7.70 $6.54 $5.64 $4.92 2.00% $16.62 $12.59 $10.02 $8.24 $6.94 $5.94 $5.15 2.50% $19.26 $14.07 $10.96 $8.88 $7.39 $6.28 $5.41 3.00% $22.96 $15.98 $12.10 $9.63 $7.92 $6.66 $5.70 3.50% 86 6.50% 0.50% Terminal Growth Rates 5.50% $28.50 $18.52 $13.53 $10.53 $8.53 $7.10 $6.03

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FNCE 221 - Project Sukhumvit Final Edition

  • 1.
    Private & Confidential ProjectSukhumvit Positioning for growth in the emerging markets Fraser and Neave, Limited 26 March 2012 PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION This materials may not be used or relied upon for any other purpose other than as specifically contemplated by a written agreement with J.P. Morgan. 1
  • 2.
    Disclaimer JP Morgan doesnot provide any tax advice. Any tax statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. These materials have been provided to you by JP Morgan in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with JP Morgan. In addition, these materials may not be disclosed, in whole or in part, or summarized or otherwise referred to except as agreed in writing by JP Morgan. The information used in preparing these materials was obtained from or through you or your representatives or from public sources. JP Morgan assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed or discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and JP Morgan assumes no obligation to update or otherwise revise these materials. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed US federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed US federal income tax treatment of the transaction. JP Morgan has adopted policies and guidelines designed to preserve the independence of its research analysts. JP Morgan’ policies prohibit employees from directly or indirectly offering a favorable research rating or specific price target, or offering to change a research rating or price target, as consideration for or an inducement to obtain business or other compensation. JP Morgan’ policies prohibit research analysts from being compensated for their involvement in investment banking transactions. 2
  • 3.
    Agenda 1. Client Profile –Fraser & Neave Ltd. 2. Motivation for Deal 3. Industry Analysis 4. Overview of Target – Malee Sampran PCL 5. The Sukhumvit Deal 6. Valuation 7. Transaction Structure 8. Credentials 9. Appendix 10. Financials 3
  • 4.
    Executive Summary J.P. MorganChase & Co. Asia (also commonly referred to as “J.P. Morgan”) is grateful for the opportunity to present our views to Fraser and Neave Limited (also commonly referred to as “F&N”) regarding its potential acquisition of Malee Sampran Public Company Limited (also commonly referred to as “Malee”) in the deal described in this proposal collectively termed the “Sukhumvit Deal”. The proposed acquisition of Malee is instrumental for F&N in it’s stride towards enhancing its position within the Asia Pacific soft drinks arena and to enhance its capabilities of competing on the global stage. • The Sukhumvit Deal is transformational and will help both parties achieve its long term goals of diversifying revenue streams to enhance the quality of earnings and maximizing returns to shareholders. • Valuation is key and together with other critical factors that need to be addressed, will determine the success of the Sukhumvit Deal. • Fraser and Neave not only needs a world class advisor with a proven track record in M&A and the Consumer Products market, Fraser and Neave requires an advisor who intrinsically knows the Indochina soft drinks industry and can provide valuable strategic advice through the negotiation process. 4
  • 5.
  • 6.
    1.1 Company Profile Overview SharePrice Performance & Recent News • F&N is engaged in the production and sale of food and beverages (F&B), development and investment in real estate investment trusts (REIT) and in the printing & publishing business. • Headquartered in Singapore, F&N has a presence in over 30 countries across Asia Pacific, Europe, and the United States. • In its fiscal year ended Sept 2011, F&N’s revenue increased YoY by 10% to S$6,274mn and group’s profit increased YoY by 8% to $1,152mn. Key Financials 6 350 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 300 250 200 150 100 50 Volume Fraser & Neave Mar-12 Sep-11 Mar-11 Change +10.1% +7.5% +6.2% -17.8% +11.1% +5.5% +5.9% +11.4% -5.0% -10.8% -0.1% Sep-10 FY2010 5,696. 1,071 584.5 2,876 6,948 41.8 cents 17.0 cents $4.38 10.0% 41.4% 3.3% Mar-10 0 Sep-09 FY2011 6,274 1,151 620.6 2,363 7,721 44.1 cents 18.0 cents $4.88 9.5% 30.6% 3.2% ‘000 Mar-09 (S$ mil) Revenue EBIT Attributable Profit Net Debt Equity EPS (Basic) Dividend per Share NAV per Share Return on Equity Gearing Ratio Average Cost of Debt % Rebased STI Index Source: Bloomberg Feb 2011| Formation of F&N Creameries Oct 2011| Expiry of bottling agreement with The Coca-Cola Company (TCCC) Nov 2011| Opening of Changi City Point
  • 7.
    1.2 Diversified BrandPortfolio Food & Beverage Property Printing & Publishing F&N is engaged in the production and sales of F&B products including soft drinks, dairies, and alcoholic beverages. It distributes products in the form of concentrates to bottlers, as well as finished products to mass retailers. The business is mainly operated via subsidiaries; Asia Pacific Breweries, F&N Foods, and F&N Creameries. Develops, invests in, and manages both commercial and residential properties via its subsidiary Frasers Centrepoint Ltd. The group also has two investment trusts (REIT), Frasers Commercial Trust and Frasers Centrepoint Trust with their respective portfolio of diversified real estate investments. Operates in the printing and publishing segment through its subsidiary, Times Publishing. It is engaged in publishing, printing, direct sales, distribution, retailing of books and in the provision of educational services through its brand Marshall Cavendish. Revenue by Segment Revenue by Geography S$ mil 4000 3000 2000 1000 0 2007 2008 2009 2010 2011 Food & Beverage Property Printing & Publishing 7 Singapore Rest of South East Asia South Pacific Malaysia Other Asia Europe and USA
  • 8.
    1.3 Analysis ofBusiness Food & Beverage Overview • F&N has extensive competencies in F&B given its 70year experience in the industry • F&B business represents the highest compound growth across the past 5 years • F&N has a leading market position in Singapore and Malaysia with well established brands e.g. 100Plus, Seasons Industry Outlook • Asia Pacific F&B is slated for strong growth • Breweries sub-segment dominates earnings with strong growth expected due to various brand acquisitions S$ mil CAGR = 13% 4000 3000 2000 1000 0 2007 2008 2009 Revenue S$ mil 400 2010 2011 EBIT 300 200 100 0 • Soft drink revenues threatened by the termination of bottling agreement with TCCC • F&N’s lack of a strong geographical foothold outside of Malaysia and Singapore represents potential for future expansion Country Off-Trade Value Share Ranking Asia Pacific 0.3% 27 Malaysia 26.9% 1 Singapore 8 2007 2008 2009 Softdrinks Dairies 24.5% 1 Source: Euromonitor 2010 2011 Breweries
  • 9.
    1.3 Analysis ofBusiness Property Overview S$ mil • Property business accounts for 34% of revenues and 49% of net profit • Well-established property development and investment network with over 50 domestic and 30 international projects • On top of property development and investment, the group also operates REITs and a hospitality business CAGR = 9% 2500 2000 1500 1000 500 0 2007 Industry Outlook Revenue • Sales progress remains firm for F&N’s existing developments despite the recent spate of property measures dampening demand • Positioned to capitalize on growing demand for property in China, with 77% of its Chinese land bank slated for launch in 2013 and beyond • Property revenues and profits are expected to decline in the short term with the adoption of IFRS 115 Planned Launches in FY 2012 Singapore No. of Units 2,088 Australia (Putney Hill) 116 China (Suzhou) 898 Source: Company Data 9 2008 2009 2010 2011 EBIT EBIT (S$mil) 450 400 350 300 250 200 150 100 50 0 2007 2008 Investment Property 2009 2010 2011 Development Property
  • 10.
    1.3 Analysis ofBusiness Printing & Publishing Overview Industry Outlook • Strong in education publishing business with Singapore Education products exported to Pakistan, U.S, Chile, and South Africa • Printing and publishing industry is in a state of decline with the rise of paperless and online publishing • Strong adoption of Marshall Cavendish textbooks in the US led to it being the first Asian content approved for use in U.S. schools • Slow growth of between 1-2% is expected in the Asia Pacific printing and publishing market • Restructuring initiatives have led to the divestment of several unprofitable business units • F&N Board remains open to strategic options for the printing and publishing business Asia-Pacific Publishing Market Value 90 80 70 60 50 40 30 20 10 0 100 0 -100 2007 2008 Revenue 2009 2010 EBIT 2011 1.05% 1.00% 0.95% Market Value (US$bn) Source: Datamonitor 10 2014F 200 1.10% 2013F 300 1.15% 2012F 400 1.20% 2011 500 2010 CAGR = - 6% 1.25% 2009 S$ mil 600 Y-o-Y Growth (%)
  • 11.
    1.4 Investment Proposition Stronggrowth potential in Asia Pacific F&B industry Need to address pressing concerns Right time to explore potential investment opportunities within F&B 11
  • 12.
  • 13.
    2.1 Challenges forF&N • Saturation of soft drinks market in Singapore and Malaysia • Average annual market share growth of 0.4% • Product differentiation is key to boosting market share • Hard to compete with market leaders e.g. TCCC • Highly fragmented market with over 110 beverage companies in Asia Pacific Coca-Cola Co, The Source: Euromonitor Tingyi Holdings Corp Danone, Groupe 2014E F&N Brands 2013E 2012E TCCC Brands Market Share (%) 30.0 25.0 20.0 15.0 10.0 PepsiCo Inc 5.0 Suntory Holdings Ltd 0.0 Nestlé SA Kirin Holdings Co Ltd F&N 13 2011 Escalation in Competitive Landscape 2010 Coca-Cola and Sprite represent 35% of F&N’s revenues. Short to medium term pressure on revenues Estimated to cause a 25% fall in revenues Need to be mitigated by expanding product portfolio and growing market share in South East Asia 2009 • • • • 2008 End of Agreement with TCCC Revenue S$ mil 800 700 600 500 400 300 200 100 0 2007 Pressure on Revenues Others 2007 2008 2009 Malaysia 2010 Singapore 2011
  • 14.
    2.1 Challenges forF&N Shift in Consumer Trends Key Consumer Trends F&N’s Strategic Position • Traditional categories such as carbonates are stagnating • Renewed focus on premium products that meet health needs. Soft drinks with health benefits poised for strongest growth • Increasingly important for F&N to offer innovative new products that target the health conscious • Juices constitute a majority (31%) of new product launches in recent years • Rising consumption levels in low to middle income markets increases demand for healthier products • F&N should position its core brands such as 100Plus and Fruit Tree to capitalize on shifting dynamics Global Carbonates Retail Value US$ bil 100 CAGR = 5% 80 60 40 20 0 Cola US$ bil Fruit-flavored carbonates Global Healthy Beverages Retail Value 250000 CAGR = 20% 200000 F&N Foods Brand Portfolio 150000 100000 Healthier Range 50000 Normal Products 0 Fortified Beverages Source: Euromonitor 14 Better for you (BFY) Beverages 2005 2010 Naturally Healthy Beverages 2015 Source: Company Data
  • 15.
    2.1 Challenges forF&N Barriers to Regional Expansion F&N can overcome obstacles by acquiring distribution networks that are deeply rooted within these inaccessible communities • Key competitors such as TCCC, PepsiCo, Sime Darby, and Nestle are constantly vying for market share in a largely saturated market • Difficulty in sustaining organic growth without extensive distribution networks across region • Penetrating some of South East Asia’s most densely populated communities remain a considerable challenge given the intricacies of the market (transportation, infrastructural, legal, and regulatory barriers) • Government restrictions and protectionism towards domestic players may pose a hindrance for foreign distributors seeking to establish a strong foothold • Capturing the growth of emerging markets can be costly and complex if administered poorly 15
  • 16.
    2.2 Strategic Review Thereis a need for Fraser & Neave to expand regionally via inorganic growth • Mitigate the impact of the termination of TCCC deal by expanding its product portfolio and growing its market share • Position itself to capitalize on the shift in consumption patterns towards healthier products • Target growth opportunities by expanding into developing markets within the region • Expand its distribution network to introduce existing brands into new markets 16
  • 17.
    2.3 Recommendation Expansion intoIndochina fruit/vegetable juice market F&N has identified Indochina as a potential region for future growth: • Expansion into Thailand dairy market (2012) • Launch of 100Plus in Thailand (2011) Fruit/Vegetable Juice Asian Specialty Drinks Bottled Water Carbonates RTD Tea & Coffee Singapore 0.2% -2.3% 0.3% 1.3% 0.8% Malaysia 2.3% 0.1% 4.4% 4.8% 2.1% Indochina 7.6% 0.1% 9.7% 10.1% 5.7% Indonesia 4.9% 5.4% 12% 11.1% 8.3% East Asia 3.9% 0.2% 4.5% 3.1% 3.2% South Asia 15.2% 5.4% 10.2% 19.1% 0% Middle East 5.2% 2.3% 3.35% 0.6% 0% Australasia 1.7% -1.5% 2.4% 2% 0% Regions Source: Global Market Information Database 17
  • 18.
  • 19.
    3.1 Global Fruit/VegetableJuice Industry Overview Total Volume Growth (2005-2015) • • • Asia Pacific Second largest soft drinks category globally by value and volume Strong growth driven by the shift in popularity towards healthier products North America Western Europe Latin America Middle East and Africa Asia-Pacific dominates juice consumption, accounting for more than half of global sales Eastern Europe Australasia -20 Source: Euromonitor 9% 19% 5% 21% 40 60 2005-2010 80 100 % Key Regions of Fruit Juice Consumption Soft Drinks Trade Value (US$mil) 8% 0 20 2010-2015 Bottled Water Western Europe Carbonates Concentrates Asia Pacific North America Fruit/Vegetable Juice 35% RTD Coffee RTD Tea 3% Sports & Energy Drinks Highest Consumption 19 Medium to High Consumption Low to Medium Consumption Low Consumption Zero to Low Consumption
  • 20.
    3.1 Global Fruit/VegetableJuice Industry Competitive Landscape Future Outlook • Global fruit/vegetable juice industry is highly fragmented with top 10 players accounting for only 19% of global market volume • Despite being the most competitive segment in the beverages industry, juices continue to gain momentum in line with rising awareness of maintaining healthy and nutritious eating habits • No global brand dominance categories as seen in other • Domestic markets are dominated by regional players with extensive knowledge of local customers and regional networks • Market leader, TCCC was able to expand Minute Maid internationally by acquiring regional players in emerging markets • Emerging markets in Asia and Latin America represent the strongest growth regions • Growth in Asia Pacific is led by China, India and Indochina Strong Growth in Asia Pacific and Latin America Juice Market Global Brand Share Others 81% TCCC 5% Asia Pacific PepsiCo Inc 3% Source: Euromonitor 20 Latin America Highest Consumption Medium to High Consumption Low to Medium Consumption Low Consumption Zero to Low Consumption
  • 21.
    3.2 Indochinese EconomicLandscape • Comprises of rapidly developing economies including Thailand, Vietnam, and Cambodia • Rising affluence causes shift in demand towards higher quality products • Indochinese markets continue to register strong soft drinks consumption growth amid rising disposable income and a large youth demographic • Larger size of F&B industry in Indochina relative to Singapore and Malaysia • Need to expand regionally - Stagnating growth in Singapore and Malaysian markets Forecasted GDP Growth Growth (%) 9 8 7 6 5 4 3 2 1 0 2011 2012F 2013F Thailand Laos 2014F Vietnam Myanmar 2015F 2016F Cambodia Singapore US$ mil 80,000 Consumer Expenditure in F&B 60,000 40,000 20,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Singapore 21 Malaysia Source: Economist Intelligence Unit Thailand Vietnam
  • 22.
    3.3 Fruit/Vegetable Juicein Indochina Overview Strength of the Indochinese fruit/vegetable juice market is complementary to F&N’s regional expansion plans • • • • Health and wellness trend has driven the growth of natural and traditional produce, which are more culturally embedded within the market Ongoing maturity of carbonates, increasingly busy lifestyles, and rising health awareness have made consumers more receptive to the convenience and nutritional benefits of fruit/vegetable juice. Numerous fruit suppliers in the region facilitate growth of the fruit juice industry Growth in the industry is led by Vietnam and Thailand Litres Mil Fruit Juice Sales Volume 300 250 200 150 100 50 Thailand Source: Euromonitor 22 Vietnam 2015F 2014F 2013F 2012F 2011 2010 2009 2008 2007 2006 2005 0
  • 23.
    3.3 Fruit/Vegetable Juicein Indochina Vietnam • Fruit/vegetable juice market in Vietnam has shown strong and stable growth, driven by a rise in income levels and the ongoing health and wellness trend • 100% juice is projected to register the fastest total sales growth • Despite the historical dominance of domestic firms in the market, they are facing competition from imported brands that are perceived to be of higher quality than homegrown alternatives Vietnam Retail Sales Volume VND Mil Market Share Amongst Top 10 Players (Vietnam) 1200 CAGR = 13% 1000 800 600 400 200 100% Juice 2015F 2014F 2013F 2012F 2011 2010 2009 Nectars (25-99%) Source: Euromonitor 23 2008 2007 2006 2005 0 Juice Drinks (up to 24%) Local Firms Foreign Firms
  • 24.
    3.3 Fruit/Vegetable Juicein Indochina Thailand Best Strategic Option: Penetrate the Indochinese juice market by acquiring a domestic player • Fruit/vegetable juice is set to maintain a healthy growth trajectory over the forecast period, driven by new product innovation and preference for healthier products • Market share is led predominantly by domestic players who possess wide distribution networks, offering lower prices relative to foreign brands • Difficult for foreign players to penetrate the market without a strong local network Market Share Amongst Top 10 Players (Thailand) Thailand Retail Sales Value 8000 CAGR = 8% Tbt Million 7000 6000 5000 4000 3000 2000 1000 100% Juice 24 Nectars (25-99%) 2015F 2014F 2013F 2012F 2011 2010 2009 2008 2007 2006 2005 0 Juice Drinks (up to 24%) Local Firms Foreign Firms
  • 25.
    3.4 Potential StrategicAcquisition Company Country Strengths Weaknesses Malee Sampran Thailand  Strong distribution network in Thailand and Vietnam  Growing presence outside Indochina  Contract farming network in Thailand  Strong R&D capabilities  Business restructuring in 2009 due to unfavourable financial position. Recovered well in 2011 with strong profits and streamlined cost and leverage structure.  Market leader in Thai Fruit Juice market  Strong in canned pineapple business  May be difficult to acquire due to company’s dominant position  Limited distribution network outside of home market  Existence of redundant smoothie retail business  Market leader in Vietnam Fruit Juice market  Strong in Dairies market  Potential clash of interests with F&N’s existing dairies business in Indochina  Strong brand presence in Vietnam  Distribution network across South East Asia  Private owners may not be willing to divest interests  Existence of unrelated cooking oil business  Market leader in Vietnam carbonated soft drinks market  Small but growing position in the fruit juice market  Carbonated drinks market subject to slowdown in growth  Lack of emphasis on healthier products  Fluctuation of earnings in recent years TIPCO Foods Thailand Vietnam Dairy Products Chia Kim Lee Food Ind. Singapore Saigon Beverages 25 Vietnam Vietnam Rank 1 2 3 4 5
  • 26.
    4. Overview ofTarget 26
  • 27.
    4.1 Target Profile MaleeSampran Public Company Limited • Established in 1978, Malee is a public listed company registered in the Kingdom of Thailand • Core business encompasses the manufacturing and distribution of beverages and canned fruit products • Over 40 years of expertise in packaged food and beverages • Significant presence throughout Thailand and other key markets • Strong brand equity with successful brands across sub-segments and tiers • Committed towards the highest standards of product quality through research and development (R&D) investments Head Office • Pathum Thani, 12130, Thailand Industry • Packaged Consumer Goods Ticker & Exchange • MALEE: Stock Exchange of Thailand (SET) Shares Outstanding • 99,999,000 shares Headcount • 1,340 Employees Key Ratios 2010 2011 % Change EBIT Margin 4.82% 7.02% +45.6% Net Profit Margin 3.68% 6.11% +66.0% ROE 27.2% 41.7% +53.3% EPS (THB) 0.11 0.23 +109.0% Millions Mn Baht ฿4,500 Total Revenues ฿4,000 ฿3,500 ฿3,000 ฿2,500 ฿2,000 2007A 27 2008A 2009A 2010A 2011A
  • 28.
    4.1 Target Profile KeyBusiness Segments Agro-Product & Export Canned Pineapple Canned Sweetcorn Canned Tropical Fruits Vegetable & Fruit Juices Milk Products Cereal Beverages Others Fruit Juices Plain Flavored Milk Farmer’s Corn Milk Fruitesia Fruit Bars Vegetable Juices Sweetened Flavored Milk First Choice Mineral Water Malee Food Service UHT Milk Malee Food Pasteurized Milk 28 Canned Fruits Malee Bottled Water
  • 29.
    4.1 Target Profile ProductPortfolio Canned Fruits UHT & Pasteurized Milk 29 Vegetable & Fruit Juices Cereal Beverages Sweet Corn Others
  • 30.
    4.1 Target Profile BrandPortfolio • A comprehensive brand portfolio allows Malee to complement the diverse needs of consumers across all segments of the domestic market • With over 40 years of product development, the Malee brand is known to be deeply etched in the minds of consumers who associate excellence and quality with its distinct list of brands • Malee’s established brand equity will catalyze prospects for joint product roll-outs with F&N First Choice Farmer Malee I-Corn Malee Healti Plus Malee Malee Veggies Malee Juize Mix Chokchai Farm 30
  • 31.
    4.1 Target Profile BusinessOperations Subsidiaries Agri Sol Company Ltd 100% Abico Dairy Farm Company Ltd PPO Farm Company Ltd Related Parties Abico Land Company Ltd Abico Holding Public Company Ltd Malee Sampran Public Company Limited Malee Enterprise Company Ltd 99.9% Chokchai Milk Company Ltd Central Food Retail Company Ltd Dhanamitr Factoring Company Ltd CG Broker Company Ltd Production Capacity • 180 million litres of beverages • 5.4 million cases of canned foods • 8,000 metric tons of concentrated pineapple 31 Production Facilities • Two manufacturing plants located in Nakorn Prathom Province, Thailand • Total plant area of 800 sq. meters Supply Chain Network • Distribution channels include supermarkets, convenience stores, hotels, wholesalers • 95% of raw material supplies are sourced domestically
  • 32.
    4.1 Target Profile GeographicFootprint Existing Coverage • Strong presence within the domestic Thai market including the Northern and Southern provinces • Distribution agents located domestically and across Asia, including Laos, Vietnam, Myanmar, Singapore, Hong Kong and Pakistan • Products are exported directly to customers or through agents, spanning major markets within Europe, Middle East, U.S. and Asia Growth Opportunities • Immense opportunities to scale into neighboring Indochinese markets with dense populations, serving over 600 million consumers • Location serves as a gateway to Southern China and South Asia • Well positioned as a reliable brand amongst domestic consumers 32 Hong Kong Thailand Vietnam
  • 33.
    4.1 Target Profile ShareholdingStructure Holder Name % of Total 1 Abico Holdings PCL 17,840,700 25.49 2 Credit Suisse / Singapore 16,850,000 24.07 3 Chirathivat Pichai 4,583,700 6.55 4 Wittayanupong Siriluck 3,150,000 4.50 5 Wichitpan Piyaporn 2,581,900 3.69 6 DBS Vickers Securities Singapore 2,074,600 2.96 7 Quan Securities Co Ltd 2,000,000 2.86 8 Thai NVDR Co Ltd 1,935,500 2.77 9 Thailand Securities Depository 1,713,412 2.45 10 Chirathivat Sakchai 1,640,800 2.34 11 Sitthichaiwiset Somboon 1,329,000 1.90 12 Sitthichaiwiset Sirincha 1,205,900 1.72 13 Permpoonkij Areeya 963,000 1.38 14 Tanaka Kenji 896,900 1.28 15 33 Amount Held Pruksawan Wantana 765,200 1.09 Individual Holding Company Bank Investment Advisor Other Thailand Singapore Undisclosed
  • 34.
    4.2 Financial Performance SharePrice % 350 25,000 300 20,000 250 15,000 200 150 10,000 100 5,000 50 0 Sep-11 0 Oct-11 Nov-11 Volume 34 Dec-11 MALEE Jan-12 BANGKOK S.E.T. Feb-12 Volume ('000)
  • 35.
    4.3 Potential Risks Throughcollaborative efforts with F&N, Malee will be better positioned to weather the uncertainties shaped by global economic forces, and realize its vision of capturing strategic growth Global Macro • Contagion effect from slowdown in global economy may dampen profitability within the short term • Volatility of commodity prices could inflate costs of raw materials, thereby impacting bottom-line sustenance • Management will need to adapt fast to technological changes in order to capitalize on innovative marketing channels • Unpredictable weather conditions may interrupt supply-chain operations and stifle nationwide sales Firm Specific • Inadequate management expertise for capital raising and strategic growth plans 35
  • 36.
  • 37.
    5.1 The SukhumvitVision Penetrate into the booming F&B market in Indochina Leverage on Malee’s expertise to strengthen foothold in Indochina R&D capabilities to facilitate innovation of healthier products Capitalize on Malee’s distribution network to introduce F&N’s existing products into Indochinese markets Expanded product mix that includes canned fruits to cater to a wider customer base 37
  • 38.
    5.2 The SukhumvitPartnership Model Booming F&B Market in Thailand 7,000 6,500 6,000 2011 38 2012 2013 2014 Retail Value 2015 2016 ‘000 tonnes Animal or Vegetable Oil Wheat Products Fresh, Chilled or Frozen Fish Fresh and Frozen Shrimps Volume of Exports 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Rice • Mandatory measures to ensure quality and safety has alleviated ongoing food safety concerns 7,500 Sugar • More than 80% of raw materials can be found locally at low prices, potentially reducing costs for F&N 8,000 Tapioca Products • Thailand’s exports of food products will rise to US$2.1 billion in 2012 (14.3% growth Y-o-Y). In particular, the strong export market for processed fruits caters for future expansion opportunities Market Size of Canned/Preserved Food in Thailand Prepared Poultry • Market size of canned/preserved food is projected for stable growth in the short to medium term THB ‘000 Canned and Processed Fruits Thailand Food Industry
  • 39.
    5.2 The SukhumvitPartnership Model Strengthen Foothold in Indochina Market Share of Fruit/Vegetable Juice in Thailand • Market share of 6.3% in the fruit/vegetable juices market of Thailand • Ranked 5th largest in the country • Current customer base will serve as a viable entrance point for F&N to introduce existing products 21% 24% Readily Available Low Cost Supplies • Malee is able to produce at lower costs due to the availability of a steady supply of raw materials in Thailand. An acquisition will allow F&N to capitalize on Malee’s extensive supply network to further reduce production costs • Malee’s ‘contract farming’ program with its member farmers reduces its exposure to fluctuating commodity prices Regional Distribution Network 3% Product Type 9% 11% Thai Pure Drinks Ltd Tipco Foods Malee Sampran Green Spot 39 FoodStar Inc PepsiCo Inc Uni-President Others Fruit/Vegetable juice Thailand, Hong Kong, China, Pakistan, Vietnam Dairy Products 21% 6% Region of Distribution Thailand, Vietnam, Cambodia Ready-to-Drink Tea 5% Thailand Canned Fruit Thailand, Vietnam
  • 40.
    5.2 The SukhumvitPartnership Model Synergies F&N’s Strategy and Plans Malee’s Value Proposition Expanding its product portfolio and growing its market share • Differentiated products such as UHT corn milk and canned fruits • Existing consumer base and market share Position itself to capitalize on the shift in consumption patterns towards healthier products • Healthier product range • Complementary R&D Long term sustainable growth by penetrating into developing markets • Well positioned to capture growth in Indochina and beyond • Efficient raw materials management and increased R&D investment Synergistic Outcomes R&D Expertise and Facilities 40 Distribution Networks Expanded Product Mix
  • 41.
  • 42.
    6.1 Fair Valueof Malee In comparison with its current share price, Malee is fair valued at THB 41.50 (THB mil) 2011A 2012F 2013F 2014F 2015F 2016F EBIT 261 368 466 571 684 803 Tax expense (78) (110) (140) (171) (205) (241) Depreciation + Amortization Less: Changes in working capital 50 58 66 73 80 86 163 147 140 130 124 114 Less: Capital expenditures (58) (60) (62) (64) (66) (68) Free cash flow 338 403 470 539, 618 694 PV of FCFF PV of Terminal Value Enterprise Value Net Cash /(Debt) Non-controlling Interests Equity value Shares Outstanding Fair value per share Share price as of 15/03/12 42 1,715 2,771 4,487 (337) 0 4,150 100 THB 41.50 THB 38.00 Assumptions WACC Terminal growth Effective tax rate 17.00% 5.00% 30.00%
  • 43.
    6.2 Indicative ValuationAnalysis Malee is currently fairly valued as its share price lies within our indicative valuation range Current market price DCF Indicative valuation range EV/EBITDA Price to Sales Valuation Analysis Fair value of THB 35.84 – THB 49.35 per Malee per share share THB 3.55 bil – THB 4.61 bil Equity valuation (S$148 mil – SS$203mil) Current market THB 3.80 bil capitalization (S$154 mil) EV/Sales Price to Book - 43 1 2 3 4 5 6 7 8 9 10 11 THB bil
  • 44.
    6.3 Synergy Value Assumptions ExpectedSynergy Value of S$83m • Increased soft drink revenues attributed by higher market penetration in Thailand • Decreased operating expenses due to economies of scale and crosssharing of distribution networks SGD mil 11,600 83 11,500 11,400 Valuation Inputs Forecast Period 5 years WACC 8.50% Tax Rate 24.66% Terminal Growth Rate 2.0% 163 11,300 11,555 11,200 11,309 11,100 11,000 F&N Malee Synergy Equity Value 44 Sukhumvit
  • 45.
    6.4 Scenario Analysis Premiumto Offer Comparing Best & Worst Case Scenarios Initial Walk-Away SGD mil 160 S$163 mil THB 3.96 bil S$220 mil THB 5.33 bil 140 Offer price per share THB 40.00 THB 53.83 100 % premium of current price 5.26% 41.66% Offer value 120 80 145 60 83 40 Meeting F&N’s Internal Returns Requirements • Based on F&N’s asset allocation policy, any new investment should generate a return of 10% or more 20 - 22 Worst Base Best 45 Base Case Best Case Average Y-o-Y growth in soft drink revenues 9.80% 10.00% 10.20% Reduction in operating exp as a % of revenue 1.75% 1.80% 1.85% ROI for initial offer 13.50% 50.92% 88.96% ROI for walk-away offer • Depending on worst or best outcomes of the acquisition, F&N may stand to gain synergies between S$22 mil and S$145 mil Worst Case 10.00% 37.73% 65.91%
  • 46.
  • 47.
    7.1 Transaction Structure Fulltakeover bid for Malee with a view of full ownership and subsequent delisting of Malee Offer Price Offer Period F&N Tender Offer Process Malee Tender Acceptance • Offer Price: THB 40.00 per share • Premium: 5.26% • 25 business days with option to extend by up to 30 business days Time Frame • Projected to take 20 weeks to complete Minimum Acceptance Level Malee’s Shareholders 47 Delisting • 75% of total shares outstanding according to Thai legislation • Intention to delist target from the SET
  • 48.
    7.2 Proposed Considerations DealStructure 100% Cash Offer Negotiation Strategy • Aim: To create a regional powerhouse in the soft drinks industry • F&N’s liquid balance sheet, due to availability of large cash reserves to facilitate acquisition • Existing undrawn credit facility of S$3.2 billion gives F&N flexibility in terms of payment mode • No dilution of F&N’s shares • Win-win situation: Convince Malee that it is in their interest to merge with a bigger player • Cooperative approach in order to create value and retain management expertise in running the fruit juice business • Provide shareholders with an opportunity to cash out at an attractive valuation S$ mil 1500 Decision to Delist 1000 • Retain sole control of Malee without shareholder dilution 500 • Reduce exposure to fluctuation in Thai equity markets 0 Malee's Market Cap 48 F&N Cash Balance • Cost savings from not having to adhere to Thai listing requirements
  • 49.
    7.3 Transaction Timeline Event Information Provision& Due Diligence Process Organizational Meetings Preliminary Due Diligence Info Memorandum Preparation Confidentiality Agreement Marketing Meeting with Malee Management Indicative Offer Assessment of Malee’s Feedback Affirm Target’s Interest In-depth Due Diligence Negotiation & Closing Submission of Offer Structuring & Negotiations Finalization of Deal 49 Estimated 20 Weeks April May June July August
  • 50.
    7.4 Deal Summary Synergies •R&D capabilities to facilitate innovation of healthier products Terms of Deal Target Company Malee Sampran Proposed Nature of Deal Full takeover bid with a view of full ownership and subsequent delisting • Expanded product mix that includes canned fruits, to cater to a wider customer base Current Share Price THB 38.00 Initial Offer Price THB 40.00 • Expected values of synergies = S$83mil Initial Offer Value THB 3.96 bil (S$163 mil) Initial Premium 5.26% Walk-Away Offer THB 53.83 Walk-Away Value THB 5.33 bil (S$220 mil) Walk-Away Premium 41.66% Expected Duration 20 Weeks • F&N can capitalize on Malee’s extensive distribution network to penetrate the Indochinese market Due to the potential synergies that can be derived from the acquisition of Malee, J.P. Morgan strongly recommends the Sukhumvit Deal 50
  • 51.
  • 52.
    8.1 Our M&ADeal Team Senior Advisors Timothy Zee Senior Managing Director Head of Asia Investment Banking M&A Advisory Team Calvin Zhang Executive Director Co-Head of Asia M&A Mathew Welch Executive Director Co-Head of Asia M&A Tan Cher Aik Director Head of Asia Corporate Finance Joshua Xie Director Head of S.E. Asia M&A Shaikh Ahmad Mattar Director Head of Thailand Coverage Jan Bucher Senior Vice President Asia-Pacific Equities Specialist Research Team Hafiz Hussin Director Co-Head of Consumer & Retail 52 Tan Fei Fan Director Co-Head of Consumer & Retail
  • 53.
    8.2 Our Accolades Awards& Accolades Derivatives House of the Year Equity Derivatives House of the Year OTC Clearing Service of the Year Risk, January 2012 #1 All-America Research Team #1 Latin America Research Team Institutional Investor, October 2011 Best Global Commodities House Euromoney, July 2011 Securitization House of the Year, U.S. Dollar Bond House, and Asia-Pacific Structured Equity House IFR, January 2011 Bank of the Year, Equity-linked House, Australia and New Zealand Bond House IFR Asia, December 2010 Best Investment Bank Latin Finance, January 2010 53 League Tables Rank Bank Fees (US$ mil) 1 J.P. Morgan Chase 5198.36 2 Bank of America 4629.81 3 Morgan Stanley 3950.08 4 Goldman Sachs 3778.22 5 Credit Suisse 3174.94 6 Citi 3079.60 7 Deutsche Bank 3026.56 8 Barclays Capital 2671.00 9 UBS 2254.14 10 Wells Fargo 1363.46 Total 75104.73 Source: Financial Times With J.P. Morgan’s proven track record, we will be able to capitalize on our intrinsic knowledge and recommend unique business insights to our clients
  • 54.
  • 55.
    9.1 Supplementary IndustryAnalysis Porter’s Five Forces Analysis of Soft Drinks Industry in Singapore and Malaysia • Low buyer power due to the large ratio of buyers to industry players and their inclination towards more prominent brands in the market • Moderate threats of suppliers due to their limited numbers and exposure to volatile supplies of raw materials. Despite this, the availability of substitutes has significantly reduced these threats • The wide variety of other beverages such as coffee, tea or other homemade juices, along with relatively low switching costs, poses threats to the soft drink industry in terms of substitutability • • 55 Threat of new entrants is moderate due to the difficulties in competing with the incumbent players in terms of huge investments in manufacturing capacities A fairly concentrated market with few major players coupled with low ease of exit due to certain specialized equipment. This has created a moderate degree of rivalry in the market Degree of rivalry New entrants Buyer power 5 4 3 2 1 0 Supplier power Substitutes Singapore/Malaysia
  • 56.
    9.2 Detailed Analysisof Potential Targets Company Malee Sampran Background • Publicly listed in the Stock Exchange of Thailand • Strong in fruit processing business Products & Services • Juice Concentrates • RTD Juice • Canned Fruits • Cereal Beverages • Bottled Water Market Share • Thailand Fruit Juice (6%) • Vietnam Fruit Juice (4%) • Pakistan Fruit Juice (1%) • Hong Kong Fruit Juice (0.3%) Key Financials (US$ mil) Value: 95.3 Market Cap: 85.5 Profit Margin: 6.2% PE: 19.4 Rating Score Market Share: 4 Geographical Presence: 5 Profitability: 3 Product Range: 4 Synergies: 3 Ease of Acquisition: 4 TOTAL SCORE : 23 Vietnam Dairy Products JSC • Publicly listed in Ho Chi Minh Stock Exchange • Strong in healthy dairy products • Fresh milk, yoghurt, ice-cream, cheese, milk powder • Fruit Juice, Smoothie, Aloe Vera, Soy bean milk • Vietnam Fruit Juice (23%) • Vietnam Overall Soft Drinks (2%) Enterprise Value: 2,220 Market Cap: 2,431 Profit Margin: 19.5% PE: 11.71 Market Share: 5 Geographical Presence: 3 Profitability: 5 Product Range: 2 Synergies: 2 Ease of Acquisition: 3 TOTAL SCORE : 20 Chia Kim Lee Food Industries • Private firm based in Singapore • Strong brand presence in Vietnam • Fruit Juice, Bottled Water, Non-alcoholic Beer, Energy Drinks • Cooking oil • Groceries • Vietnam Fruit Juice (4%) • Singapore Fruit Juice (0.8%) • Distribution network in Indochina, Australia, Middle East N/A Market Share: 3 Geographical Presence: 4 Profitability: Product Range: 3 Synergies: 3 Ease of Acquisition: 2 TOTAL SCORE: 15 56
  • 57.
    9.2 Detailed Analysisof Potential Targets Company TIPCO Foods Background • Publicly listed in the Stock Exchange of Thailand • Very strong in Pineapple business Products & Services • Juice Concentrates • RTD Juice • Canned Fruits • Aloe Vera • Retail Juicebar Squeeze Market Share • Thailand Fruit Juice (10.5%) • Vietnam Fruit Juice (0.5%) Key Financials (US$ mil) Enterprise Value: 160.3 Market Cap: 76.2 Profit Margin: 3.12% PE: 12.42 Rating Score Market Share: 5 Geographical Presence: 4 Profitability: 4 Product Range: 4 Synergies: 3 Ease of Acquisition: 2 TOTAL SCORE : 22 Universal Robina Corp. • Publicly listed in the Philippines Stock Exchange • Strong brand portfolio • Snacks • RTD Tea, Coffee, Energy Drinks, Bottled Water • Commodities – Flour & Sugar • Farm products • Industrial packaging • Philippines RTD Tea (66%) • Vietnam Soft Drinks (12%) • Distribution networks in Singapore, Thailand, Malaysia Enterprise Value: 2,629 Market Cap: 2,770 Profit Margin: 6.9% PE: 21.12 Market Share: 3 Geographical Presence: 5 Profitability: 4 Product Range: 1 Synergies: 2 Ease of Acquisition: 2 TOTAL SCORE : 17 Saigon Beverages • Publicly listed in Vietnam Stock Exchange • Market leader in Vietnam carbonated drinks market • Soft drinks, soya milk, fruit juices, sparkling wine • Vietnam soft drinks (6%) • Vietnam carbonates (10%) Enterprise Value: 5.9 Market Cap: 2.4 Profit Margin: -11.69% PE: 0.07 Market Share: 2 Geographical Presence: 2 Profitability: 0 Product Range: 1 Synergies: 3 Ease of Acquisition: 4 TOTAL SCORE: 12 57
  • 58.
    9.3 Synergies withExisting Operations Before Acquisition After Acquisition Fruit Tree Fresh in Thailand • Given the small number of products and low market share of Fruit Tree, F&N should phase out Fruit Tree in Thailand while growing Malee’s existing fruit juice business Fruit Tree Fresh outside of Thailand • Fruit Tree has gained brand presence in F&N’s major markets such as Singapore & Malaysia • F&N to tap on Malee’s expertise and R&D capabilities to further improve existing fruit juice products • Malee’s strong fruit supply network, and fruit processing capabilities can be used to reduce costs of production for F&N’s existing fruit-based business Malee Fruit Juices • Major player in Thailand and Vietnam fruit juice market • F&N’s brand management and marketing capabilities can be used to further improve Malee’s success in Indochina and beyond F&N Dairies (Thailand) • F&N Dairies (Thailand) markets mainly dairy products under both its in-house brands and external brands (Nestle) • Growth of subsidiary is led by the success of its canned milk business • Subsidiary faces strong competition from domestic players with stronger distribution network • F&N Dairies to focus on its core canned milk business with the option of introducing additional brands • F&N Dairies (Thailand) can continue to grow its existing product portfolio by taking advantage of Malee’s extensive distribution network in Indochina Other F&N Products 58 • Fruit Tree Fresh has only two existing products (both orange juice) in the Thai market which make up a 0.1% overall share • Difficult to penetrate overseas markets without local expertise and presence • F&N can capitalize on Malee’s presence in the Indochinese markets to push its existing brands into new markets. Brands that have seen regional success such as 100Plus can now be introduced with greater ease.
  • 59.
    9.4 Potential Strategiesfor Acquisition Hostile Takeover (100% tender) Creeping Tender (<25% initially) Strategy • Tender for 100% of target’s shares • At least 90% of target’s shares must be tendered (to delist target), or the offer is void • Negotiate with major shareholders to buy close to 25% shares (threshold for mandatory tender offer) first • Tender for the remaining shares to get 90%+ at a later date Pros • A clear-cut strategy: either F&N gains 90%+ control of target or none at all • Cheaper alternative as there are no sunk costs incurred prior to the tender offer • Easier to buy the initial <25% than 100% tender, and the success will incentivize target’s remaining shareholders to sell their stakes • A significant stake (20 – 24.99%) will allow F&N to gain a board seat, hence a way to gradually obtain information necessary for detailed valuation Cons • May be difficult to buy 90%+ in one single tender offer • Little chance for F&N to conduct due diligence prior to launching the offer • May invite competing bids that drive up the price • Difficult for F&N to sell stake if tender offer for the remaining shares fall through • May be more expensive than 100% tender offer Creeping Tender is preferable for F&N due to the non-hostile takeover stance which is necessary to maintain a cooperative post-acquisition relationship. Accumulating shares pre-acquisition will also increase the F&N’s chances of obtaining full control of the firm 59
  • 60.
    9.5 Modes ofPayment Cash Offer Stock Offer Cash + Stock Offer Pros • Malee’s shareholders will most likely accept the offer due to greater liquidity • Lowest premium paid for the offer • Capital structure of F&N will be retained without any dilution of existing shares • A more proportionate allocation of risk due to the additional stake given to Malee’s shareholders. • Malee’s shareholders may be willing to hold on to F&N shareholder equity due to its strong and stable price performance. • Allows both parties to reap benefits from both payment types • Higher premium required relative to a cash offer Cons • Undrawn credit facility may need to be tapped resulting in a longer time taken for deal execution • Higher risk absorbed by F&N’s shareholders as Malee’s shareholders do not have a stake in the combined firm. • Least likelihood of offer acceptance as Malee’s shareholders are unable to cash out • Highest premium paid for the offer • Excessive dilution of F&N’s existing shares therefore not favorable from F&N’s shareholders’ perspective • Difficult to ascertain ideal weightage of cash to equity • Dilution of F&N’s shares still occurs Given F&N’s access to sufficient cash reserves & credit facility, cash offer is ideal as it avoids dilution of existing F&N shares. 60
  • 61.
    9.6 Transaction Risks& Mitigating Factors Concerns Regulatory Issues Thai government might intervene to block the acquisition to protect domestic fruit processing companies. • Regulatory intervention is unlikely given the precedent transactions involving Thai fruit juice companies (e.g. Suntory’s 50% acquisition of Tipco) • F&N can work closely with Thai regulators to allay such concerns, portraying itself as a global partner which Malee can leverage on Stock Price Volatility Sharp changes in the stock price of Malee will affect the perceived premium given to shareholders, as well as the actual takeover amount. • Proposed transaction timeline of approximately 20 weeks suggests a shortened process which could mitigate fluctuations in share price • Make use of a collar agreement to mitigate the threat of stock price fluctuations during the process of the acquisition Unable to Achieve Full Control F&N might not be able to reach full control to pass special resolutions due to uncooperative Malee shareholder base. • Accumulating equity shares pre-acquisition • Get in touch with key shareholders during tender offer bid process to ascertain likely interests and reaffirm F&N’s intention for Malee Cultural Conflicts 61 Mitigating Factors F&N may find difficulty in integrating the company post-acquisition. It needs to integrate Malee into its existing business in a quick and timely fashion in order to reap the full synergistic value of the deal. • Concerns are mitigated with F&N’s diversified geographic presence throughout Asia Pacific. F&N’s existing Thai operations caters for seamless integration between the two firms
  • 62.
    9.7 Critical SuccessFactors Issues Transaction Structure The transaction structure should not be too long and complex for shareholders, and at the same time, meeting F&N’s objectives to fully acquire and delist Malee JP Morgan proposes a triggered tender offer approach and will render its seasoned experience in such bids to achieve maximum satisfaction for both companies. Pricing The pricing offered to all shareholders would need to be sufficiently attractive to appropriately reflect Sakura’s fundamental value and takeover premium JP Morgan has conducted preliminary valuation analysis to provide insights into the economics of the deal and will continue to deliver value in this aspect to ensure optimal pricing Access to key institutional shareholders Gathering detailed intelligence and understanding the expectations of key institutional shareholders would be critical in achieving a successful outcome JP Morgan has one of the strongest equities and distribution platforms in Asia and can deliver access to the key institutional shareholders of Malee Communication to Retail Shareholders 62 Our Value Proposition Malee has a strong retail shareholder base comprising of over 30% of outstanding shares. Communicating key messages to these shareholders would be critical to securing their support. Mandatory newspaper notices may not be sufficient to reach out to entire retail shareholder base. JP Morgan has advised on takeovers with large retail shareholder bases and has successfully used various communication mechanisms (e.g. shareholder hotline, media campaigns) to deliver a successful outcome to its clients.
  • 63.
    9.8 Statutory Requirements Applicable Legislation •The Public Companies Act (“PCA”) • Securities and Exchange Act (“SEA”) • SEC Notification No. GorJor.53/2545 (the “Takeover Code”) • Stock Exchange of Thailand (“SET”) listing requirements General Conditions • Amalgamation proposals require approval by way of special resolution (75% majority) passed at general meetings of each of the amalgamating companies. • Tender offer has to remain open for at least 25 business days after posting of the offer document to target shareholders. • Specific consent from the SEC is required to make any offer conditional. Common conditions for voluntary tender offers include a minimum number of shares being tendered in acceptance of the tender offer. However, for mandatory tender offers every condition must be negotiated with the SEC on a case-by-case basis. • Takeover Code does not entitle a successful bidder to compel the minority shareholders to sell their shares to the bidder. Means of Obtaining Control • Stakebuilding is permitted, subject to restrictions on insider dealing, disclosure obligations and mandatory bid thresholds. • Mandatory bid thresholds are 25%, 50% and 75% of voting rights. • For a tender offer, the offer price must be at least the highest price paid by the bidder in the 90 days preceding the date of application for tender offer Announcement of Tender Offer Other Disclosure Requirements •Acquisitions or disposals of shares in any company listed on the SET that result in a change of shareholding which reaches or crosses any multiple of 5% of the voting rights of the company must be disclosed within one business day to the SEC. • If a mandatory bid obligation is triggered, a form of declaration of intention for tender offer must be filed with the SEC within one (for mandatory offers) or three (for voluntary offers) business days. • The terms of any irrevocable undertaking must be disclosed in the announcement of a bidder’s offer and in the tender offer document. Delisting Requirements 63 • Before an approach is made to a target company, responsibility for making an announcement rests with the potential bidder. The bidder must report the total number of shares held by the bidder and file a form of declaration of intention for tender offer to the SEC by the end of the business day following the day of any acquisition that triggers a tender offer. The bidder must submit a tender offer form to the SEC within seven business days of reporting the trigger point. • Announcements should be made through advertisement in at least two Thai- language daily newspapers and one English-language newspaper for at least three consecutive days if the offer period and terms of the offer are finalised, or one day if the offer period and terms of the offer are not finalised. Approval for de-listing can be sought from the SET following approval in a general meeting by target shareholders holding at least 75% of the shares issued by the target, provided target shareholders that vote against the resolution do not hold more than 10% of the shares issued by the target. Source: Herbert Smith LLP
  • 64.
  • 65.
    10.1 Merger Comparables Date 06/12/2011 16/09/2010 28/07/2010 17/12/2009 TargetName Coca-Cola Central Japan Co Ltd Pepsi-Cola Products Philippines Inc China Huiyuan Juice Group Ltd Coca-Cola West Co Ltd Acquirer Name Announced Target Revenue Total Value Enterprise Multiple (M) Value EBIT EBITDA Target Target Multiple Multiple P/B P/S Coca-Cola Co/The 267.4 291.6 0.4 17.0 5.3 0.5 0.2 Lotte Chilsung Beverage Co Ltd 100.2 187.6 0.8 13.0 6.0 1.7 0.6 SAIF Partners Ltd 260.8 1174.3 2.7 - 49.9 0.7 0.9 Nomura Holdings Inc 174.5 1895.6 0.5 17.7 5.8 0.6 0.4 20.3 352.0 0.8 3.9 - 0.9 1.0 181.0 296.5 22.6 - - 2.6 3.7 40.5 483.1 2.9 17.7 13.6 2.7 2.3 15.0 53.9 24.7 285.3 143.1 8.2 20.5 137.9 1771.4 1.0 22.8 13.4 1.8 0.9 Yantai North Andre Juice Uni-President China Co Holdings Ltd Shenzhen Shenbao Xinyi Technology 12/10/2007 Industrial Co Group Co Ltd Super Group 03/07/2007 Yeo Hiap Seng Ltd Ltd/Singapore Mount Everest Mineral Tata Global Beverages 01/06/2007 Water Ltd Ltd Asahi Group Holdings 06/02/2007 Kagome Co Ltd Ltd 12/12/2008 02/12/2005 NutriAsia Pacific Ltd 206.5 499.2 1.9 13.4 11.2 1.7 0.9 01/12/2005 Del Monte Pacific Ltd MCI Inc/Philippines 118.7 499.2 1.9 13.0 10.9 1.7 0.9 07/02/2005 AgriPure Holding PLC Private Investor 12.0 16.8 0.5 34.9 14.2 1.5 0.5 Mean 5.1 43.9 27.3 2.1 2.7 Median 65 Del Monte Pacific Ltd 1.4 17.3 12.3 1.7 0.9
  • 66.
    10.2 Company Comparables Ticker Name Priceto Book Price to Earnings Price to Sales EV/EBITDA T12M EV/Sales T12M EV (SGD) Market Cap (SGD) MALEE TB Malee Sampran Public Co Ltd 1.49 11.07 0.41 20.83 0.78 116.6 103.1 TIPCO TB Tipco Foods PCL 1.22 6.46 0.46 33.03 1.08 213.4 90.9 APURE TB Agripure Holding PLC 1.49 44.50 0.53 16.87 0.64 24.6 20.4 0.78 6.43 0.62 8.22 0.70 82.8 73.1 1.34 9.16 0.51 7.40 0.61 96.4 105.9 1.05 18.12 0.16 17.73 0.43 172.6 104.2 0.90 15.94 0.97 12.10 0.87 93.4 105.5 SFP TB CHOTI TB 1225 TT MABR IT Siam Food Products Public Co Kiang Huat Seagull Trading Formosa Oilseed Processing MAABAROT PRODUCTS LTD 1236 TT 1.67 16.93 1.06 11.40 1.33 131.8 106.3 079660 KS Sahohaepyo Corp 0.83 7.88 0.21 17.40 0.36 223.7 115.8 SNAK US Investure Foods Inc 1.63 27.69 0.42 9.45 0.66 141.3 107.1 SFGI SP 66 Hunya Foods Co Ltd Sino Grandness Food IndustryINO 1.23 3.22 0.49 2.44 0.55 125.3 109.2
  • 67.
    10.3 F&N’s Financials GrowthForecasts Forecasted Growth Rates by Segment 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Soft drinks 9.73% 7.04% 23.49% 13.31% -25.00% 5.00% 8.00% 9.00% 10.00% Dairies 33.53% -5.98% 4.19% 4.86% 4.50% 4.90% 5.00% 5.00% 5.00% Breweries 10.91% 3.01% 21.86% 14.96% 12.00% 10.00% 10.00% 10.00% 10.00% Printing & Publishing -10.13% -12.36% -1.60% -3.25% -3.00% -3.00% -2.00% -2.00% -2.00% Commercial property & REIT 18.80% 13.43% -14.39% -8.43% 22.50% 8.00% 12.00% 10.00% 8.00% Development property -15.72% 27.50% 8.34% 14.60% -49.00% 6.00% 7.00% 8.00% 10.00% Others 60.13% 29.42% 18.11% 8.28% 4.00% 3.00% 2.00% 2.00% 2.00% Elimination 67 2008A 54.22% 10.56% 10.82% 11.88% -11.00% -11.00% -11.00% -11.00% -11.00%
  • 68.
    10.3 F&N’s Financials BalanceSheet (S$ mil) NON-CURRENT ASSETS 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Fixed assets 1,157.64 1,231.83 1,239.72 1,104.22 1,187.05 1,233.77 1,322.67 1,427.64 1,543.08 1,672.83 Investment properties 3,224.39 3,558.92 3,444.23 2,139.03 2,476.74 2,653.61 2,844.82 3,070.59 3,318.87 3,597.94 Subsidiary companies 127.83 162.30 169.80 102.35 109.73 118.44 128.01 138.78 28.04 30.06 32.44 35.07 38.02 Joint venture companies Associated companies - - - - 89.84 60.10 1,355.25 1,382.20 1,266.98 1,358.28 1,466.07 1,584.61 1,717.86 96.46 60.64 877.74 1,233.39 1,597.95 1,101.83 1,168.46 1,174.13 1,175.59 1,177.32 1,179.22 1,181.36 5,484.06 Others 89.49 - 6,247.08 6,541.19 5,790.16 6,274.55 6,458.89 6,841.14 7,292.51 7,788.86 8,346.77 CURRENT ASSETS Inventories 480.06 468.50 423.51 391.92 373.41 354.80 380.36 410.55 443.75 481.06 Receivables 1,348.53 1,005.48 971.26 1,273.61 1,278.60 1,219.56 1,307.43 1,411.20 1,525.30 1,653.56 Joint venture companies 7.58 26.56 11.67 6.54 6.12 12.51 13.42 14.48 15.65 16.97 Associated companies 0.25 0.91 5.11 10.80 13.18 5.78 6.19 6.69 7.23 7.83 Short term investments 4,401.38 4,744.93 4,271.53 4,350.88 4,227.03 3,903.80 3,829.11 3,748.76 3,636.57 3,492.16 Bank fixed deposits Cash and bank balances Total Assets 845.21 305.59 7,388.59 629.88 403.06 7,279.32 1,269.50 373.81 7,326.38 1,274.63 424.29 7,732.66 1,180.94 418.67 7,497.94 1,065.72 576.60 7,091.79 1,142.51 646.65 7,280.29 1,233.18 679.35 7,462.23 1,332.89 706.53 7,611.29 1,444.97 720.29 7,751.76 1,166.75 1,245.07 1,441.98 1,488.95 1,421.91 1,398.41 1,499.17 1,618.15 1,748.98 1,896.05 2.15 4.07 3.06 6.35 14.26 5.81 6.23 6.72 7.26 7.87 16.79 17.55 1.04 0.95 3.04 8.76 9.39 10.13 10.95 11.87 2,685.75 2,326.99 1,990.87 2,224.78 1,103.49 948.37 1,016.70 1,097.39 1,186.12 1,285.85 3,871.44 3,593.67 3,436.94 3,721.03 2,542.70 2,361.34 2,531.48 2,732.39 2,953.32 3,201.65 2,495.21 3,365.30 3,617.63 2,737.58 2,212.11 CURRENT LIABILITIES Payables Joint venture companies Associated companies Short term liabilities NON-CURRENT LIABILITIES 2,669.90 3,312.11 2,638.39 2,527.82 2,386.37 18.81 18.76 19.30 25.04 20.41 21.17 22.69 24.49 26.47 28.70 105.15 130.15 110.24 158.38 176.24 138.95 148.96 160.78 173.78 188.39 2,619.17 3,514.21 3,747.18 2,853.33 3,508.76 2,897.69 2,810.04 2,713.09 2,586.62 2,429.20 Share capital 1,313.92 1,330.30 1,341.71 1,374.50 1,417.40 1,417.40 1,417.40 1,417.40 1,417.40 1,417.40 Reserves 3,906.68 3,952.98 4,243.02 4,768.30 5,464.81 5,857.63 6,267.66 6,703.09 7,169.20 7,673.26 Non-controlling interests 1,161.45 1,135.24 1,098.73 805.66 838.81 1,063.60 1,140.23 1,230.73 1,330.24 1,442.09 6,382.04 6,418.52 6,683.46 6,948.46 7,721.02 8,338.63 8,825.29 9,351.22 9,916.84 10,532.75 Borrowings Provision for employee benefits Deferred tax liabilities SHARE CAPITAL AND RESERVES 68
  • 69.
    10.3 F&N’s Financials IncomeStatement 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Revenue 4,731.17 4,990.07 5,146.33 5,696.78 6,274.29 5,530.34 5,928.83 6,399.36 6,916.79 7,498.39 Cost of sales (3,197.97) (3,316.32) (3,438.01) (3,708.92) (4,162.15) (3,675.46) (3,940.29) (4,253.00) (4,596.89) (4,983.42) Gross profit 1,533.20 1,673.75 1,708.33 1,987.86 2,112.14 1,854.89 1,988.54 2,146.36 2,319.90 2,514.97 (S$ mil) Other income (net) 52.02 24.53 17.62 Operating Expenses (900.77) (968.35) (952.78) (1,012.30) (1,081.11) (1,017.13) (1,090.42) (1,176.96) (1,272.12) (1,379.09) 684.45 729.93 773.17 989.33 1,070.72 868.81 931.42 1,005.34 1,086.62 1,177.99 Share of joint venture companies' profits 14.16 11.71 12.73 15.28 17.34 14.67 15.72 16.97 18.34 19.89 Share of associated companies' profits 22.02 14.91 1.00 47.60 51.94 27.06 29.01 31.32 33.85 36.69 Trading Profit Gross income from investments 13.77 11.48 9.24 11.68 18.78 Profit before Interest and Taxation (PBIT) 732.10 765.78 798.58 1,070.99 Finance income (cost) (71.07) (64.59) (61.72) Profit before impairment, FV adj, taxation and exceptional items 661.03 701.19 736.87 Impairment on investments - (47.96) FV adjustments of investment properties - 71.85 Exceptional Items Profit before taxation Taxation Profit from continuing operations after taxation Profit from discontinued operations after taxation Profit after taxation 69 39.69 33.29 35.94 38.84 12.92 13.86 14.96 16.16 1,151.55 923.47 990.01 1,068.58 1,154.98 (62.33) (53.86) (65.79) (70.53) (76.13) 1,008.66 1,097.69 857.68 919.48 992.45 (7.29) (9.00) (122.60) 129.41 11.55 31.06 140.06 42.11 17.52 1,252.10 (82.29) (89.21) 1,072.69 1,162.89 - - - - - - - - - - 11.66 12.06 7.12 43.04 175.13 672.69 737.14 614.10 1,172.11 1,412.88 857.68 919.48 992.45 (174.36) (169.43) (179.19) (270.40) (298.53) (209.76) (224.87) (242.72) (262.34) (284.40) 498.33 567.71 434.91 901.71 1,114.35 647.92 694.60 749.73 810.35 878.49 498.33 567.71 7.47 159.80 442.38 1,061.52 1,114.35 - 647.92 - 694.60 - 749.73 1,072.69 810.35 1,162.89 878.49
  • 70.
    10.3 F&N’s Financials CashFlow Statement (S$ mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 661.03 725.08 614.39 1,127.41 1,237.75 857.68 919.48 992.45 1,072.69 1,162.89 145.52 149.40 161.69 147.57 132.83 150.29 159.83 171.10 183.48 197.40 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and exceptional items Adjustments for: Depreciation and amortization Other non-cash adjustments Other adjustments Working capital changes Cash generated from operations 9.90 9.93 (83.04) (127.47) 19.36 21.41 23.83 26.49 29.48 (291.67) (388.45) (403.85) (361.98) (367.97) (374.43) (381.42) (388.96) 366.26 34.03 (231.92) 37.58 11.08 26.59 43.65 62.42 83.07 982.09 734.34 571.56 876.84 676.42 759.34 856.59 963.67 1,083.89 (303.81) (268.58) (496.54) 16.10 215.90 Interest expenses and other payments (1,033.92) (685.45) 443.50 (156.63) 273.16 41.43 (138.93) (292.85) (423.92) (536.92) Net cash from operating activities (1,017.82) 296.64 1,177.84 414.93 1,150.00 717.85 620.41 563.74 539.75 546.96 CASH FLOW FROM INVESTING ACTIVITIES Dividends from joint venture and associated companies 14.52 19.13 41.87 43.98 71.77 38.26 38.26 38.26 38.26 38.26 Investment income 11.48 9.24 11.68 18.78 11.55 12.55 12.55 12.55 12.55 12.55 Proceeds from sale of assets and investments 54.62 (415.06) (191.65) 483.43 (151.46) 40.50 39.56 38.67 37.82 37.01 (318.36) (429.41) (225.68) (361.19) (338.76) (342.59) (342.59) (342.59) (342.59) (342.59) 0.66 0.60 0.60 0.60 0.60 0.60 Increase in investments Repayment of/(additional) trade advances Net cash (used in)/investment activities 4.65 (0.06) 1.66 (3.89) (233.10) (816.15) (362.11) 181.11 (406.24) (250.68) (251.62) (252.51) (253.36) (254.17) 854.94 676.46 38.42 (211.62) (709.94) (460.78) (460.78) (460.78) (460.78) (460.78) 0.73 (0.23) - - - - - - CASH FLOW FROM FINANCING ACTIVITIES Repayment of loans Other financing activities Proceeds from issue of bonds Proceeds from issue of shares 300.00 - - - - - - - - - - 983.45 20.00 10.87 29.76 55.75 51.83 62.79 76.49 93.61 115.02 Dividends paid (262.86) (272.56) (247.30) (316.43) (460.21) 48.27 77.75 107.47 137.42 167.60 Net cash used in financing activities 1,576.26 423.68 (198.02) (498.29) (814.40) (360.69) (320.25) (276.83) (229.75) (178.16) (95.84) 617.71 97.76 (70.64) 106.48 48.54 34.40 56.63 114.63 Net (decrease)/increase in cash and cash equivalents 70 325.33
  • 71.
    10.3 F&N’s Financials DiscountedCash Flow Model (S$ bil) 2011A 2012F 2013F 2014F 2015F 2016F EBIT 1.15 0.92 0.99 1,07 1.15 1.25 Tax expense (0.30) (0.21) (0.22) (0.24) (0.26) (0.28) Depreciation + Amortization 0.14 0.15 0.16 0.17 0.18 0.20 Less: Changes in working capital 0.05 (0.05) 0.01 0.01 0.02 0.02 (0.33) (0.31) (0.31) (0.31) (0.31) (0.31) 0.71 0.50 0.63 0.70 0.78 0.87 Less: Capital expenditures Free cash flow PV of FCFF 3.18 PV of Terminal Value 9.76 Enterprise Value Net Cash /(Debt) (2,70) Non-controlling Interests 10.64 Equity value 11.31 Shares Outstanding 14.12 Forecasted value per share $8.01 Share price as of 09/03/12 71 12.94 $6.64 Assumptions WACC 8.17% Terminal growth 2.00% Effective tax rate 25.92%
  • 72.
    10.3 F&N’s Financials SensitivityAnalysis Changes in Terminal Growth Rates Changes in WACC 13.31 9.87 10.53, 11.31 12.22 14.39 11.68 11.31 9,75 8.29 1.00% 1.50% 2.00% Equity Value (S$ bil) 72 2.50% 3.00% 7% 8% 8.17% Equity Value (S$ bil) 9% 10%
  • 73.
    10.3 F&N’s Financials SensitivityAnalysis WACC 8.00% 8.17% 9.00% 10.00% 11.00% $9.72 $8.01 $6.76 $6.58 $5.80 $5.04 $4.42 1.00% $10.61 $8.62 $7.19 $6.99 $6.12 $5.29 $4.62 1.50% $11.70 $9.33 $7.69 $7.46 $6.49 $5.56 $4.83 2.00% $13.07 $10.19 $8.28 $8.01 $6.90 $5.87 $5.07 2.50% $14.82 $11.24 $8.97 $8.66 $7.39 $6.23 $5.34 3.00% $17.16 $12.56 $9.79 $9.43 $7.95 $6.63 $5.64 3.50% 73 7.00% 0.50% Terminal Growth Rates 6.00% $20.43 $14.25 $10.81 $10.37 $8.61 $7.10 $5.98
  • 74.
    10.4 Malee’s Financials GrowthForecasts Forecasted Growth Rates by Segment 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Export sales -48.46% 1.08% -16.22% 24.47% 9.00% 7.50% 5.50% 4.50% 4.00% Local sales 12.81% -20.81% -5.94% 30.67% 10.50% 7.50% 5.50% 4.50% 4.00% Other income 74 2008A -29.97% 41.77% -5.62% 9.96% 10.50% 7.50% 5.50% 4.50% 4.00%
  • 75.
    10.4 Malee’s Financials IncomeStatement (THB mil) Revenues Sales Other Income Total Revenues 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 4,004.25 3,703.65 3,082.85 2,828.67 3,660.38 4,033.90 4,336.44 4,574.94 4,780.81 4,972.05 63.90 44.75 63.45 59.88 65.85 72.76 78.22 82.52 86.24 89.68 4,068.15 3,748.40 3,146.30 2,888.55 3,726.22 4,106.66 4,414.66 4,657.46 4,867.05 5,061.73 Expenses Cost of sales Selling and adminstrative expenses 3,337.74 3,044.06 2,348.10 2,023.37 2,571.35 2,710.68 2,781.54 2,794.80 2,774.55 2,733.68 753.79 812.70 675.67 700.21 5.42 26.16 26.55 25.65 43.28 30.59 32.88 34.69 36.25 37.70 Loss on impairment of assets (reversal) - 30.75 3.33 - - - - - - - Other expenses - - - - 5.35 - - - - - Director and management benefit expenses Total expenses Profit (loss) before finance cost (EBIT) Finance cost Revision of estimated interest expense Net profit (loss) for the year 75 844.80 1,013.19 1,177.47 1,335.38 1,492.81 1,653.76 4,096.95 3,913.67 3,053.66 2,749.23 3,464.78 3,754.45 3,991.89 4,164.87 4,303.62 4,425.14 (28.79) (165.27) 92.64 139.32 261.44 352.21 422.77 492.60 563.43 636.59 63.73 129.38 35.83 32.96 33.71 37.15 39.94 42.14 44.03 45.79 - - (74.11) - - - - - - - (92.52) (294.65) 130.93 106.36 227.73 315.05 382.83 450.46 519.40 590.79
  • 76.
    10.4 Malee’s Financials BalanceSheet (THB mil) ASSETS Current Assets Cash and cash equivlents Trade accounts and notes receivable Inventories, net Other receivables Others Total current assets 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 13.71 478.67 691.27 22.47 48.36 1,254.48 8.81 447.48 497.52 24.31 28.83 1,006.96 11.84 400.82 401.60 43.34 28.12 885.73 14.17 431.19 472.04 15.39 32.36 965.15 25.87 611.56 500.18 40.20 14.79 1,192.60 21.60 686.54 551.25 34.41 35.88 1,329.69 30.60 738.03 592.59 36.99 38.57 1,436.80 45.77 778.63 625.19 39.03 40.70 1,529.31 60.59 813.66 653.32 40.78 42.53 1,610.88 71.68 846.21 679.45 42.42 44.23 1,683.99 Non-current assets Restricted bank deposits Land not used in operation, net Property, plant and equipment, net Others Total non-current assets Total Assets 78.04 115.76 876.34 18.76 1,088.90 2,343.37 88.19 115.76 748.51 14.14 966.59 1,973.55 33.94 127.39 1,084.89 19.56 1,265.78 2,151.50 5.06 128.83 1,042.40 20.29 1,196.58 2,161.73 5.14 28.45 1,004.46 33.40 1,071.46 2,264.06 3.39 124.90 1,107.01 23.51 1,258.81 2,588.50 2.27 134.26 1,190.04 25.28 1,351.85 2,788.65 1.52 141.65 1,255.49 26.67 1,425.33 2,954.63 1.02 148.02 1,311.99 27.87 1,488.89 3,099.78 0.68 153.94 1,364.47 28.98 1,548.07 3,232.06 Liabilities Current Liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable and notes payable Trade account payable and accrued interest Factoring payable Current portion of loans and agreements Accrued expenses and accrued interest and other accounts payable Others Total current liabilities 490.96 1,005.50 242.55 149.76 121.81 192.96 27.79 2,231.33 479.83 972.62 276.93 145.78 72.43 191.19 24.46 2,163.24 355.23 924.01 100.49 76.06 167.36 9.88 1,633.04 314.88 949.64 153.52 23.14 162.01 16.97 1,620.15 250.71 977.66 47.62 6.15 233.93 46.64 1,562.71 225.64 1,162.34 47.62 67.73 257.81 28.53 1,789.67 203.08 1,249.19 47.62 72.81 277.14 30.64 1,880.49 182.77 1,317.66 47.62 76.82 292.39 32.31 1,949.56 164.49 1,376.76 47.62 80.27 305.54 33.75 2,008.44 148.04 1,431.66 47.62 83.48 317.77 35.08 2,063.66 Non-current Liabilities Loans and agreements, net of current portion Other payable, net of current portion Employee benefit obligation Total non-current liabilities Total Liabilities 60.27 60.27 2,291.60 53.19 53.19 2,216.43 24.57 167.26 191.83 1,824.87 10.08 139.82 149.90 1,770.06 7.52 112.19 34.98 154.68 1,717.39 13.76 123.64 137.40 1,927.08 11.89 132.91 144.80 2,025.29 10.95 140.22 151.17 2,100.73 10.47 146.53 157.01 2,165.44 10.24 152.39 162.63 2,226.29 999.99 700.00 347.50 171.01 (1,166.74) 51.77 2,343.37 999.99 700.00 347.50 171.01 (1,461.39) (242.88) 1,973.55 999.99 700.00 347.50 609.59 (1,330.46) 326.63 2,151.50 999.99 700.00 347.50 566.77 (1,222.59) 391.68 2,161.73 999.99 700.00 347.50 518.02 (1,018.85) 546.67 2,264.06 999.99 700.00 347.50 518.02 (904.09) 661.42 2,588.50 999.99 700.00 347.50 518.02 (802.15) 763.36 2,788.65 999.99 700.00 347.50 518.02 (711.61) 853.91 2,954.63 999.99 700.00 347.50 518.02 (631.18) 934.33 3,099.78 999.99 700.00 347.50 518.02 (559.74) 1,005.77 3,232.06 Shareholders' equity Share capital Registered Issued and fully paid Paid-in capital Share premium Revaluation surplus Retained earnings: Total shareholder's equity Total liabilities and shareholders' equity 76
  • 77.
    10.4 Malee’s Financials CashFlow Statement (THB mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F (92.52) (294.65) 130.93 106.36 227.73 315.05 382.83 450.46 519.40 590.79 139.51 124.43 94.59 45.78 50.05 55.90 59.93 63.11 65.85 68.40 22.11 58.78 29.54 33.95 18.65 28.09 28.90 29.54 30.09 30.60 Cash flows from (used in) operating activities Net profit (loss) Adjustments: Depreciation and amortisation Non cash adjustments (Gain) loss on sales of property, plant and equipment Others Income from operating activities before changes in operating assets and liabilities (0.62) 125.74 0.23 (8.47) 129.64 (38.19) (0.09) 33.61 (13.24) 42.12 (4.44) (4.44) (4.44) (4.44) (4.44) 31.45 29.03 26.79 24.74 22.85 194.21 18.43 208.40 219.61 325.31 426.05 496.25 565.46 635.65 708.21 (124.99) 216.76 88.55 (123.29) (204.18) (136.06) (120.93) (103.03) (94.14) (90.41) Operating liabilities increase (decrease) 121.09 (79.16) (100.85) 14.79 174.09 206.19 76.61 58.18 48.79 44.58 Cash flow from operating activities 190.31 156.03 196.11 111.10 295.22 496.19 451.93 520.61 590.30 662.38 Interest expense paid (5.27) (6.40) - - - - - - - - Income tax paid (0.22) (0.23) (0.85) (2.26) (2.74) (4.21) (5.05) (5.89) (6.73) (7.61) 184.82 149.41 195.26 108.85 292.48 491.98 446.88 514.73 583.57 654.77 (19.89) (10.15) 54.25 28.88 (0.08) (1.75) (1.12) (0.75) (0.50) (0.34) - - - - - - Operating assets (increase) decrease Net cash flows from operating activities Cash flows from (used in) investing activities Decrease (increase) in restricted bank deposits Proceeds from disolution of investment in associated company Acquisition of machinery and equipment Proceeds from sales of property, plant and equipment Interest income received Net cash flows from (used in) investing activities - - - - (63.87) (40.02) (10.10) (47.24) (60.93) (62.76) (64.64) (66.58) (68.58) (70.64) 10.79 16.17 15.97 0.42 2.84 2.84 2.84 2.84 2.84 2.84 2.07 0.12 0.58 0.28 0.06 0.62 0.62 0.62 0.62 0.62 (70.89) (33.88) 60.70 (17.66) (58.11) (61.05) (62.30) (63.87) (65.62) (67.51) (40.36) (11.13) (124.60) (40.35) (64.16) (25.07) (22.56) (20.31) (18.28) (16.45) (3.98) (45.29) 53.02 (105.89) (56.46) (45.23) (75.62) (22.99) Cash flows from (used in) financing activities Decrease in bank overdraft and short term loans from financial institutions Increase (decrease) in factoring payable Cash paid to agreements and other long term loans Cash paid to interest expense Net cash flows used in financing activities Net increase (decrease) in cash and cash equivalents 77 14.59 (23.77) (55.22) (58.11) (54.96) (57.20) (53.34) (58.64) (47.92) (37.24) (25.62) (29.62) (39.81) (36.04) (33.67) (32.95) (34.42) (108.17) (119.50) (252.35) (88.58) (222.67) (120.10) (116.72) (108.93) (108.43) (104.20) 3.61 2.61 11.70 310.83 267.86 341.93 409.52 483.06 5.75 (3.98)
  • 78.
    10.4 Malee’s Financials SensitivityAnalysis Changes in Terminal Growth Rates Changes in WACC 4.78 3.71 3.00% 3.91 4.00% 4.59 4.43 4.15 4.15 3.78 5.00% 6.00% Equity Value (THB bil) 78 5.11 7.00% 15.00% 16.00% 17.00% 18.00% Equity Value (THB bil) 3.46 19.00%
  • 79.
    10.4 Malee’s Financials SensitivityAnalysis WACC 16.00% 17.00% 18.00% 19.00% 20.00% $46.08 $41.94 $38.39 $35.32 $32.64 $30.28 $28.18 2.00% $49.19 $44.48 $40.50 $37.09 $34.13 $31.55 $29.27 3.00% $52.93 $47.49 $42.96 $39.13 $35.84 $32.99 $30.50 4.00% $57.50 $51.10 $45.87 $41.50 $37.81 $34.64 $31.90 5.00% $63.21 $55.51 $49.35 $44.31 $40.10 $36.54 $33.49 6.00% $70.55 $61.03 $53.62 $47.68 $42.82 $38.76 $35.33 7.00% 79 15.00% 1.00% Terminal Growth Rates 14.00% $80.34 $68.12 $58.94 $51.80 $46.07 $41.39 $37.48
  • 80.
    10.5 Sukhumvit’s Financials GrowthForecasts Forecasted Growth Rates by Segment 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Soft drinks 9.73% 7.04% 23.49% 13.31% -25.00% 7.00% 10.00% 11.00% 12.00% Dairies 33.53% -5.98% 4.19% 4.86% 4.50% 4.90% 5.00% 5.00% 5.00% Breweries 10.91% 3.01% 21.86% 14.96% 12.00% 10.00% 10.00% 10.00% 10.00% Printing & Publishing -10.13% -12.36% -1.60% -3.25% -3.00% -3.00% -2.00% -2.00% -2.00% Commercial property & REIT 18.80% 13.43% -14.39% -8.43% 22.50% 8.00% 12.00% 10.00% 8.00% Development property -15.72% 27.50% 8.34% 14.60% -49.00% 6.00% 7.00% 8.00% 10.00% - - - - 10.50% 7.50% 5.50% 4.50% 4.00% Others 60.13% 29.42% 18.11% 8.28% 4.00% 3.00% 2.00% 2.00% 2.00% Elimination 54.22% 10.56% 10.82% 11.88% -11.00% -11.00% -11.00% -11.00% -11.00% Canned Fruit 80
  • 81.
    10.5 Sukhumvit’s Financials IncomeStatement (S$ mil) Revenue 2007A 2008A 2009A 2010A 2011A 2012F 4,731.17 4,990.07 5,146.33 5,696.78 6,274.29 Cost of sales (3,197.97) (3,316.32) (3,438.01) (3,708.92) (4,162.15) Gross profit 1,533.20 1,673.75 1,708.33 1,987.86 2,112.14 Other income (net) 52.02 24.53 17.62 13.77 Operating Expenses (900.77) (968.35) (952.78) (1,012.30) (1,081.11) 684.45 729.93 773.17 989.33 1,070.72 Share of joint venture companies' profits 14.16 11.71 12.73 15.28 Share of associated companies' profits 22.02 14.91 1.00 47.60 Gross income from investments 11.48 9.24 11.68 18.78 732.10 765.78 798.58 26.92 31.55 21.98 Trading Profit Profit before Interest and Taxation (PBIT) Finance income Finance cost (97.99) (96.14) (83.70) Profit before impairment, FV adj, taxation and exceptional items 661.03 701.19 736.87 Impairment on investments FV adjustments of investment properties Profit before taxation and exceptional items Exceptional Items Profit before taxation Taxation Profit from continuing operations after taxation Profit from discontinued operations after taxation Profit after taxation 81 661.03 (47.96) (7.29) 71.85 (122.60) 725.08 606.98 11.66 12.06 7.12 672.69 737.14 614.10 (174.36) 498.33 498.33 (169.43) (179.19) 567.71 567.71 1,070.99 28.17 (90.50) 1,008.66 39.69 129.41 43.04 1,172.11 5,699.55 2014F 2015F 6,248.66 6,894.10 2016F 7,613.78 8,431.46 (3,893.86) (4,264.54) (4,696.41) (5,175.26) (5,717.86) 1,805.69 2,197.68 2,438.52 36.93 34.64 1,984.12 41.33 2,713.61 45.22 50.06 (1,113.27) (1,191.21) (1,273.49) (1,382.28) (1,552.46) 727.06 829.85 965.53 1,101.47 17.34 15.12 16.57 18.28 20.19 22.36 51.94 27.89 30.58 33.74 37.26 41.26 11.55 13.32 14.60 16.11 17.79 783.38 891.61 1,033.66 1,176.71 27.41 30.05 33.16 36.62 (96.61) (105.92) (116.82) 815.74 949.99 1,151.55 17.70 (71.56) 1,097.69 (9.00) 1,129.07 2013F 714.19 - - 140.06 1,237.75 175.13 1,412.88 (270.40) (298.53) 434.91 901.71 1,114.35 7.47 159.80 442.38 1,061.52 1,114.35 - 714.19 714.19 815.74 (174.67) (199.50) 539.52 539.52 616.23 616.23 949.99 (232.34) 717.66 717.66 40.55 (128.93) (142.67) 1,192.41 - 949.99 19.70 1,294.54 1,084.40 - 815.74 1,211.21 - 1,084.40 1,084.40 (265.21) 819.19 819.19 1,192.41 1,192.41 (291.62) 900.79 900.79
  • 82.
    10.5 Sukhumvit’s Financials BalanceSheet (S$ mil) NON-CURRENT ASSETS Fixed assets Investment properties Subsidiary companies Joint venture companies Associated companies Others CURRENT ASSETS Assets held for sale Inventories Receivables Joint venture companies Associated companies Short term investments Bank fixed deposits Cash and bank balances CURRENT LIABILITIES Payables Joint venture companies Associated companies Short term liablities NON-CURRENT LIABILITIES Borrowings Provision for employee benefits Deferred tax liabilities SHARE CAPITAL AND RESERVES Share capital Reserves Non-controlling interests 82 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 1,157.64 3,224.39 127.83 96.46 877.74 5,484.06 1,231.83 3,558.92 162.30 60.64 1,233.39 6,247.08 1,239.72 3,444.23 169.80 89.49 1,597.95 6,541.19 1,104.22 2,139.03 89.84 1,355.25 1,101.83 5,790.16 1,187.05 2,476.74 60.10 1,382.20 1,168.46 6,274.55 1,317.13 2,734.80 105.49 28.90 1,305.75 1,181.00 6,673.07 1,443.06 2,998.28 115.65 31.68 1,431.55 1,183.43 7,203.65 1,589.74 3,307.98 127.59 34.95 1,579.41 1,186.14 7,825.82 1,752.63 3,653.30 140.91 38.60 1,744.29 1,189.07 8,518.80 1,937.21 4,045.65 156.05 42.75 1,931.62 1,192.35 9,305.62 4,079.33 480.06 1,348.53 7.58 0.25 322.05 845.21 305.59 7,388.59 4,603.82 468.50 1,005.48 26.56 0.91 141.11 629.88 403.06 7,279.32 4,016.84 423.51 971.26 11.67 5.11 254.70 1,269.50 373.81 7,326.38 4,347.45 391.92 1,273.61 6.54 10.80 3.43 1,274.63 424.29 7,732.66 4,223.42 373.41 1,278.60 6.12 13.18 3.60 1,180.94 418.67 7,497.94 4,019.62 388.37 1,288.06 12.90 5.95 3.52 1,098.32 332.70 7,309.43 4,031.96 425.30 1,411.49 14.14 6.53 3.52 1,204.14 157.49 7,673.04 4,034.79 468.05 1,555.66 15.60 7.20 3.52 1,328.52 -40.87 8,115.99 3,999.15 515.38 1,715.96 17.23 7.95 3.52 1,467.20 -237.71 8,591.80 3,922.76 568.91 1,897.75 19.08 8.81 3.52 1,624.77 -472.15 9,092.40 1,166.75 2.15 16.79 2,685.75 3,871.44 1,245.07 4.07 17.55 2,326.99 3,593.67 1,441.98 3.06 1.04 1,990.87 3,436.94 1,488.95 6.35 0.95 2,224.78 3,721.03 1,421.91 14.26 3.04 1,103.49 2,542.70 1,505.63 5.98 9.03 986.68 2,507.32 1,649.15 6.56 9.90 1,079.91 2,745.53 1,816.04 7.24 10.92 1,189.76 3,023.96 2,001.20 8.00 12.06 1,312.42 3,333.67 2,210.91 8.85 13.35 1,451.96 3,685.08 2,495.21 18.81 105.15 2,619.17 3,365.30 18.76 130.15 3,514.21 3,617.63 19.30 110.24 3,747.18 2,669.90 25.04 158.38 2,853.33 3,312.11 20.41 176.24 3,508.76 2,827.00 21.81 143.20 2,992.01 2,786.69 23.91 156.99 2,967.60 2,729.47 26.38 173.21 2,929.07 2,633.30 29.14 191.29 2,853.73 2,494.07 32.27 211.83 2,738.18 1,313.92 3,906.68 1,161.45 6,382.04 1,330.30 3,952.98 1,135.24 6,418.52 1,341.71 4,243.02 1,098.73 6,683.46 1,374.50 4,768.30 805.66 6,948.46 1,417.40 5,464.81 838.81 7,721.02 1,501.77 5,733.33 1,096.14 8,331.23 1,501.77 6,069.18 1,201.74 8,772.69 1,501.77 6,476.28 1,325.87 9,303.92 1,501.77 6,954.54 1,464.28 9,920.59 1,501.77 7,483.85 1,621.54 10,607.15
  • 83.
    10.5 Sukhumvit’s Financials CashFlow Statement (S$ mil) 2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and exceptional items 661.03 725.08 614.39 1,127.41 1,237.75 714.19 815.74 949.99 1,084.40 1,192.41 216.95 149.40 161.69 147.57 132.83 156.67 169.98 185.56 202.90 222.58 Adjustments for: Depreciation and amortization Other non-cash adjustments Other adjustments Working capital changes Cash generated from operations 9.68 10.24 217.87 (79.20) (110.83) 24.74 27.56 30.88 34.58 38.79 (375.02) (268.89) (293.64) (392.29) (420.50) (381.61) (387.66) (394.19) (401.24) (408.83) (496.54) 366.26 34.03 (231.92) 37.58 13.97 24.76 41.80 60.55 81.18 16.10 982.09 734.34 571.56 876.84 525.06 652.20 815.89 983.06 1,128.01 443.50 (156.63) 273.16 83.37 (108.69) (280.63) (427.63) (545.90) 1,150.00 608.43 543.51 535.26 555.43 582.11 Interest expense and other payments (1,033.92) (685.45) Net cash from operating activities (1,017.82) 296.64 1,177.84 414.93 CASH FLOW FROM INVESTING ACTIVITIES - - - - - - - - - - - - - - - - - - - Dividends from joint venture and associated companies 14.52 19.13 41.87 43.98 71.77 38.26 38.26 38.26 38.26 38.26 Investment income 11.48 9.24 11.68 18.78 11.55 12.57 12.57 12.57 12.57 12.57 Proceeds from sale of assets and investments Increase in investments Repayment of/(additional) trade advances Net cash (used in)/investment activities 319.59 38.35 176.45 670.04 197.31 364.90 368.68 373.22 378.68 385.22 (583.33) (882.81) (593.78) (547.80) (687.54) (661.64) (661.71) (661.79) (661.88) (661.96) 0.66 0.53 0.56 0.57 (406.24) (245.38) (241.65) (237.17) 4.65 (233.10) - CASH FLOW FROM FINANCING ACTIVITIES Repayment of loans Other financing activities Proceeds from issue of bonds Proceeds from issue of shares: Dividends paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents 83 854.94 (0.06) (816.15) 676.46 1.66 (362.11) 38.42 (3.89) 181.11 (211.62) 0.73 (0.23) - - - - - - (709.94) 300.00 - - (461.62) 0.58 (231.79) (461.54) 0.59 (225.32) - (461.82) (461.71) (461.46) (3.92) (3.88) (3.65) (3.71) (3.62) - - - - - 983.45 20.00 10.87 29.76 55.75 51.83 62.79 76.49 93.61 115.02 (262.86) (272.56) (247.30) (316.43) (460.21) 48.27 77.75 107.47 137.42 167.60 423.68 (198.02) (498.29) (814.40) (365.64) (325.05) (281.32) (234.22) (182.45) 617.71 97.76 (70.64) (2.59) (23.19) 16.77 89.42 174.33 1,576.26 325.33 (95.84)
  • 84.
    10.5 Sukhumvit’s Financials DiscountedCash Flow Model (S$bil) EBIT 2011A 2012F 2013F 2014F 2015F 2016F 1.15 0.78 0.89 1.03 1.17 1.30 Tax expense (0.30) (0.17) (0.20) (0.23) (0.26) (0.29) Depreciation + Amortization 0.14 0.16 0.17 0.19 0.21 0.23 Less: Changes in working capital 0.05 (0.06) 0.02 0.02 0.02 0.03 Less: Capital expenditures (0.33) (0.31) (0.30) (0.30) (0.29) (0.29) Free cash flow 0.71 0.40 0.58 0.71 0.84 0.97 PV of FCFF 3.11 PV of Terminal Value 10.12 Enterprise Value 13.23 Net Cash /(Debt) (2.70) Non-controlling Interests 1.10 Equity value Shares Outstanding Forecasted value per share Share price as of 09/03/12 84 11.63 1.41 $8.24 $6.64 Assumptions WACC Terminal growth Effective tax rate 8.50% 2.00% 25.92%
  • 85.
    10.6 Sukhumvit’s SensitivityAnalysis Changes in Terminal Growth Rates 10.20 10.86 11.63 12.53 Changes in WACC 13.59 17.77 14.14 11.63 9.79 1.00% 1.50% 2.00% 2.50% Equity Value (S$ bil) 85 3.00% 6.50% 7.50% 8.50% 9.50% Equity Value (S$ bil) 8.38 10.50%
  • 86.
    10.6 Sukhumvit’s SensitivityAnalysis WACC 7.50% 8.50% 9.50% 10.50% 11.50% $11.87 $9.62 $8.02 $6.81 $5.87 $5.13 $4.51 1.00% $13.10 $10.43 $8.58 $7.22 $6.19 $5.37 $4.70 1.50% $14.64 $11.40 $9.24 $7.70 $6.54 $5.64 $4.92 2.00% $16.62 $12.59 $10.02 $8.24 $6.94 $5.94 $5.15 2.50% $19.26 $14.07 $10.96 $8.88 $7.39 $6.28 $5.41 3.00% $22.96 $15.98 $12.10 $9.63 $7.92 $6.66 $5.70 3.50% 86 6.50% 0.50% Terminal Growth Rates 5.50% $28.50 $18.52 $13.53 $10.53 $8.53 $7.10 $6.03