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India

INITIATION

BUY
Share price: Target price: Rs131/sh Rs175/sh

Tata Global Beverages (TGBL)


A Good Strong Cuppa

25 September 2012

Ganesh Ram ganeshram@maybank-ke.co.in (91) 22 66232607

TGBL transformed into a global beverage company from a pure tea producer over the past decade. Its strategy of acquiring brands and entering new geographies through a series of acquisitions is beginning to pay off. For FY13, we expect TGBLs earnings to increase 26% to Rs4.2bn supported by 19% increase rd in earnings in its highly profitable India business which contributes 2/3 of net profit. We expect further 29% earnings growth for FY14. We believe TGBL will benefit from rising beverage consumption in India and improving free CF. We initiate with a BUY and a TP of Rs175/sh based on a sum-of-the-parts (India tea business:Rs92/sh; Coffee:Rs12/sh; Overseas business:Rs65/sh; Others:Rs6/sh). India beverage business is 1/3 of revenue but 2/3 of earnings. With a leading 21% share of the branded tea market, TGBLs India business is highly profitable. We forecast FY13 India revenue of Rs30bn, +18% (volume and price +9% each). In Q1, volume and selling price rose 9% each. Our FY13F EPS growth of 19% for the India business is modest because we assume a 50bp cut in gross margin to 30.8% due to increase in raw material cost (TGBL expects margin to rise). Overseas business is 2/3rd of revenue but 1/3rd of earnings. In the last decade, TGBL acquired 7 beverage companies to increase its presence to 40 countries. While gross margin of 43% of the overseas business is better than that of the India business, its net margin is low due to investment on brand building and introduction of new products. We are upbeat on the overseas business for FY13 due to rebound in earnings of Eight OClock Coffee (3x increase). Major investment phase behind; Free cash generation to begin. TGBL spent Rs48bn over the past decade to acquire tea and coffee brands to enter into new geographies. The payback time starts now because revenue and margin of TGBLs brands in the US, Australia, Russia, and Africa are improving. Our FY13F free CF is Rs1.6bn as against the negative free CF up to FY12. TGBL confirmed decline in CAPEX and moderation in SG&A expenses. Joint ventures to be a catalyst for future growth. To leverage its distribution network in India, TGBL established Nourishco, a JV with PepsiCo, to sell water and other health drinks. TGBL has established another JV with Starbucks to launch a coffee chain by Dec12, adding a new dimension to its growth. Core ROE of 28%; Market undervaluing branded sales. TGBLs consolidated ROE is overshadowed by low returns from its tea and coffee businesses that are in mature markets, and by start-up losses in new businesses. However, based on P/S of 1.1x FY13F, its portfolio of beverage brands with leading market share is undervalued. Our sum-of-the-parts valuation of TGBL works out to Rs175/sh and discounted CF is Rs161/sh.
TGBL Summary Earnings Table FY Mar 31 (Rs bn) Revenue EBITDA Recurring Net Profit Recurring Basic EPS (Rs) EPS growth (%) DPS (Rs) PER (x) EV/EBITDA (x) Div Yield (%) P/BV(x) 1-yr 44.7 41.1 YTD 51.6 37.2 FY10 57.8 6.8 3.7 6.1 nm 2.0 21.6 13.9 1.5 2.2 FY11 59.8 5.9 2.4 4.0 -34.8 2.0 33.1 16.3 1.5 2.0 1.1 6.4 6.1 FY12 66.3 6.2 3.3 5.4 36.3 2.2 24.3 15.3 1.6 1.8 8.1 7.8 6.6 FY13F 74.7 7.1 4.2 6.8 26.2 2.3 19.2 13.4 1.8 1.7 6.8 8.7 7.2 3.9 FY14F 81.2 8.6 5.3 8.6 25.9 2.5 15.3 11.1 1.9 1.6 2.6 10.3 8.7 4.6
rd rd

Stock Information
Description: Ticker: Shares Issued (m): Market Cap (US$ bn): 6-mth Avg Daily Volume (US$m): SENSEX: Free float (%): Major Shareholders: Tata Group TGBL IN 618 1.5 4.6 18,753 64.8 % 35.2

Key Indicators (FY13F) ROE annualised (%) Net debt (Rs bn): NTA (Rs/sh): Interest cover (x): 8.7 3.5 77.9 12.2

Historical Chart
50 25 0 -25 Sep-11 Jan-12 TGBL May -12 SENSEX Sep-12 (%)

Performance: 52-week High/Low 1-mth 5.2 4.7

Rs138/80 3-mth 25.1 18.9 6-mth 17.7 14.5

Absolute (%) Relative (%)

Net Debt/Equity (%) -2.9 ROE (%) 9.3 ROA (%) 6.8 Consensus net profit (Rs bn) Source: Company data, Bloomberg, KESI estimates

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Tata Global Beverages (TGBL)

Globally diversified beverage company


TGBL is a beverage company promoted by the Tata Group. In the past decade, TGBL transformed into a global beverage company by acquiring several companies including Tetley (U.K.) and Eight Oclock coffee (U.S.). To leverage its distribution and consumer loyalty in various countries, TGBL has added 11 new products to its portfolio over the past 3 years.

TGBL: FY12 Revenue break-up by Segment

Source: Company data, KESI estimates

Tea business will dominate overall revenue share for the next 3 years. While TGBL has entered water and coffee retailing business, tea business would continue to contribute 60% of total revenue by 2015 from 74% now. TGBL: Revenue contribution by business (%)
Yr To March Tea Coffee Others FY08 78.3 20.2 1.5 FY10 75.8 22.5 1.7 FY12 74.2 23.8 2.0 FY14F 68.7 26.8 4.5 FY16F 60.5 30.0 9.5

Source: Company data, KESI estimates

Balanced revenue contribution from different geographies. Multiple acquisitions in the past decade have led to significant revenue contribution from markets including the US, the UK and Russia. However, the major driver of revenue growth is the increasing consumption in India and geographic expansion in the Middle-East and African countries contributing 51% of total revenue. Low-volume but premium products are driving growth in the mature markets whereas high-volume and low-priced products are driving growth in the emerging markets. TGBL: Revenue by geography (%)
Yr To March India UK US & Canada Others Source: Company data, KESI estimates FY08 26.6 32.3 29.8 11.4 FY09 31.1 25.6 29.8 13.5 FY10 29.4 23.9 30.6 16.1 FY11 29.7 22.7 27.7 20.0 FY12 30.2 22.4 26.7 20.6

Revenue India tea business


TGBLs leading brands include Tata Tea, Chakra Gold, Gemini, and Kannan Devan. The tea business contributes 80% of total India revenue. [Refer annexure 1 for list of major brands of TGBL].

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Tata Global Beverages (TGBL)

The India tea market is Rs95bn p.a. with a large unorganized sector. Although Indians consume 850m kgs of tea every year, the countrys per capita consumption is low at about 0.7kg. Demand growth for tea has ranged 23% for the past 10 years. For large organized companies like TGBL, growth comes from increase in consumption and changing preference to branded tea from loose tea in the rural markets (unbranded loose tea sales comprise half of sales of the Indian tea market). [Refer annexure 2 for data on household monthly spending on various beverages] Per capita consumption of tea (kg)
2.1

1.3

1.2 1.0 0.8 0.7

UK

Russia

Sri Lanka

Pakistan

China

India

Source: Company data, KESI estimates

Expect stable market share. Over the past 3 years, TGBLs, market share of the tea business was 2022%. We believe that TGBL would be able to maintain its market share due to aggressive campaigns and expansion into rural areas. In FY12, TGBL expanded its distribution network in the rural areas in eight states through the Gaon Chalo campaign (Uttar Pradesh, Madhya Pradesh, Bihar, Jharkhand, Orissa, Rajasthan, Uttarakhand and Chhattisgarh). TGBL: Market share (%)

21.6 21.4 21.3 21.3 21.3

FY10

FY11

FY12

FY13F

FY14F

Source: Company data, KESI estimates

TGBL is focusing on premiumization. TGBL is gaining from a distinct pattern shift of tea buyers from packaged to loose tea. Consumer preference is also evident in the green and flavored tea which is sold at 23x price of the traditional tea. Last year, TGBL launched premium green tea with 3 flavored variants positioned as good-for-you drink. In addition, it launched luxury tea Tea Veda in 6 flavored variants, which is being retailed only thru premium food stores. The increased sale of premium products would support our FY13F average selling price increase of 9%.

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Tata Global Beverages (TGBL) In the past 5 years, TGBLs revenue increased by an average 15% pa. Of this, on an average, a 3% growth came from volume and 12% from increase in average selling price. TGBL: India Business Revenue Forecast
Yr To March Tea (Rs bn) Growth (%) Coffee (Rs bn) Growth (%) Total India Revenue (Rs bn) Growth (%) Source: Company data, KESI estimates FY10 17.2 24.4 3.4 5.2 20.5 20.8 FY11 18.1 5.6 4.0 19.4 22.1 7.8 FY12 20.4 12.4 5.1 26.9 25.4 15.0 FY13F 24.0 18.0 6.1 19.0 30.1 18.5 FY14F 27.1 13.0 7.1 18.0 34.2 13.6

For FY12, TGBLs India tea revenue grew 12%. This is mainly due to volume growth across its brands supported by new product launches and promotional campaigns. TGBLs 2 major brands, Tata Tea Gold and Tata Tea Agni grew 18% and 15%. All other tea brands in India registered an average 7% growth. [Refer annexure 3 for brand-wise revenue growth] FY13F India tea revenue growth of 18%. In Q1FY13, TGBL increased its selling price by 9% to pass on increase in raw material cost. Moreover, volume growth is 10% in Q1 and the company is confident that this trend will continue due to increasing rural penetration and shift to branded tea from loose tea in rural India. For FY13, we assume 9% increase each in volume and selling price. TGBL has an edge over peers due to scale, product innovation, and brand investment. In India, among several home grown tea brands, TGBLs main competitor is Hindustan Unilever (HUVR). However, we believe TGBL is well placed because of its ability to offer a variety of beverage blends leveraging its presence in various other markets. It also heavily invests in each of the brands and their distribution to gain one-upmanship (SG&A of 21% of revenue). TGBL: Peer comparison
Company Tata Global Beverages Hindustan Unilever Duncan Wagh Bakri Goodricke Market share (%) 21.3 20.1 8.6 3.5 2.0 FY12 Beverage segment revenue (Rs bn) 25.4 24.2 na na na (as % of total India revenue) 100.0 11.2 na na na

Source: Company data, KESI estimates

India Coffee Business


In India, TGBL is not focused on retail coffee sales unlike Bru of HUVR and Nescafe of Nestle India. TGBL is focused on serving the institutional and export market. TGBL sells its coffee in India under the brands Mr. Bean, Tata Caf, and Tata Kaapi. The coffee business contributes 20% of the total India revenue. [Refer annexure 1 for list of major brands of TGBL] Over the past 3 years, TGBLs revenue from India coffee business increased by an average 20% pa on 5% growth in volume and 15% increase in average selling price. TGBL: India Business Revenue Forecast
Yr To March Tea (Rs bn) Growth (%) Coffee (Rs bn) Growth (%) Total India Revenue (Rs bn) Growth (%) Source: Company data, KESI estimates FY10 17.2 24.4 3.4 5.2 20.5 20.8 FY11 18.1 5.6 4.0 19.4 22.1 7.8 FY12 20.4 12.4 5.1 26.9 25.4 15.0 FY13F 24.0 18.0 6.1 19.0 30.1 18.5 FY14F 27.1 13.0 7.1 18.0 34.2 13.6

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Tata Global Beverages (TGBL)

Apart from selling traditional coffee beans, TGBL continues to focus on instant coffee and frozen dried coffee segments due to the shift in consumption pattern. To broaden the sales mix, it also started selling coffee brands to cafes and commercial establishments. As a result, for FY12, its instant coffee segment volume grew 28% and frozen dried coffee segment volume grew 14%. For FY13, we forecast a 5% increase in volume and a 14% increase in average selling price, leading to revenue growth of 19% to Rs6.1bn.

Revenue Overseas Tea Business


TGBL sells branded tea products in 40 countries under multiple brands including Tetley, Good Earth, Jemca, Vitax, and Laager. [Refer annexure 1 for list of major brands of TGBL] Expect FY13 overseas business revenue growth of 6%. Over the past 5 years, TGBLs revenue from its overseas business increased by an average 8% p.a. In FY12, TGBL launched new flavored tea products that are gaining consumer interest. For FY13, we forecast revenue growth of 10% to Rs45bn on 6% increase in sales volume and 4% increase in average selling price. TGBL: Overseas Business Revenue Forecast
Yr To March Tea (Rs bn) Growth (%) Coffee (Rs bn) Growth (%) Total Overseas Revenue (Rs bn) Growth (%) Source: Company data, KESI estimates FY10 27.7 18.1 9.6 19.8 37.3 18.5 FY11 28.7 3.6 9.0 -6.3 37.7 1.0 FY12 30.5 6.2 10.4 15.6 40.9 8.4 FY13F 33.6 10.4 11.3 9.0 44.9 9.8 FY14F 35.5 5.5 12.5 10.0 48.0 7.0

TGBLs Tetley, is the 2 largest tea brand in the UK with leadership in decaffeinated, redbush, and green tea segments. Tetley has 31% market share in in the redbush segment and 35% in the decaf segment. New products to support FY13F revenue growth. TGBL witnessed a shift in consumer demand internationally towards premium specialty and infusion tea brands, while the volume of black tea brands declined. In FY12, TGBL launched new tea brands blended with new herbal and fruit flavors in Canada and Australia. Moreover, TGBL also launched instant flavored tea Tetley Chai Latte in Australia. The initial consumer response was above its expectations, prompting TGBL to launch this brand in other countries in H213. Increasing revenue contribution from emerging markets. TGBLs geographic expansion in Africa and south-east Asia has reduced its dependence on the UK, the US, and Canada markets to 49% in FY12 from 55% in FY10. TGBL was able to maintain its 30% contribution from India on rising consumption and launch of new premium products.

nd

Overseas Coffee Business


TGBL sells coffee brands Eight oclock coffee and Grand in the US and Russia. Over the past 4 years, TGBLs revenue from overseas coffee business grew by an average led by a 10% increase in price in the US and volume growth from Russia. For FY13, we forecast revenue growth of 10% on volume growth in Russia and revenue contribution from new geographies (the Middle-East).

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Tata Global Beverages (TGBL)

TGBL: Overseas Business Revenue Forecast


Yr To March Tea (Rs bn) Growth (%) Coffee (Rs bn) Growth (%) Total Overseas Revenue (Rs bn) Growth (%) Source: Company data, KESI estimates FY10 27.7 18.1 9.6 19.8 37.3 18.5 FY11 28.7 3.6 9.0 -6.3 37.7 1.0 FY12 30.5 6.2 10.4 15.6 40.9 8.4 FY13F 33.6 10.4 11.3 9.0 44.9 9.8 FY14F 35.5 5.5 12.5 10.0 48.0 7.0

New distribution channel to improve reach. In the US, FY12 revenue from its coffee business grew 6% due to increase in selling price. Last year, TGBL entered into an agreement with Green Mountain Coffee Roasters that will make TGBLs products available through the Keurig Single Cup Brewing systems. This will increase the reach of TGBLs products and support our FY13F revenue growth of 9% for the coffee business. (TGBL witnessed strong, double-digit growth in single serve coffee consumption vs. mere 2% growth in overall coffee consumption in the US and Europe). In Russia, TGBLs FY12 coffee volume grew 22%, supported by geographic expansion. Moreover, in FY12, TGBL started distributing the Grand brand in the Middle East.

New business/Joint ventures


New products/JV to reduce TGBLs dependence from its tea business. TGBL sells packaged water under the brand Himalaya since 2001. It now plans to enter the energy drink market and launch retail outlets. In the long term, it will reduce concentration of its tea business (70% of total revenue). TGBL has invested Rs2.5bn in the water business as of now. The contribution is negligible as full-scale distribution will begin from next year. NourishCo, the JV with PepsiCo India has launched Tata Water Plus, the packaged water brand and Tata GLUCO+, the energy drinks brand in 2 South Indian states. It plans to expand presence to the rest of India by Mar 13. In FY14, TGBL plans to launch packaged water fortified with extra zinc, iron, and calcium. TGBL owns 44% in Rising Beverages LLC, which manufactures and markets a range of vitamin and flavor enhanced water under the Activate brand in the US. This helps TGBL to gain access to the fast-growing enhanced water category in the US. Tata Starbucks, the JV with Starbucks will launch retail outlets by end-FY13. The JV will sell the products and brands of TGBL and also sell grocery products. Further, the JV will source roast coffee from TGBL for Tata Starbucks. TGBL to develop ayurvedic beverages. In FY12, TGBL has signed an agreement with Kerala Ayurveda Ltd for development of a range of beverage and food products based on proven Ayurvedic recipes. Contribution from new business would improve. In the next 5 years, TGBL expects revenue contribution from its water and energy drink businesses to reach Rs7bn from Rs0.8bn currently. This will increase contribution from this business to 10% of TGBLs total revenue from 2% presently.

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Tata Global Beverages (TGBL)

Branded sales improves ability to pass on increased cost


The major cost for TGBL is raw material cost (tea leaves and coffee beans) and SG&A expenses that form 87% of total cost. TGBL: Cost structure
(As % of total cost) RM cost Employee cost SG&A Depreciation Interest FY10 44.2 11.7 41.6 2.0 0.5 FY11 45.4 11.0 40.8 1.8 1.0 FY12 53.8 10.9 32.6 1.6 1.1 FY13F 54.6 10.4 32.6 1.6 0.8 FY14F 55.3 9.9 32.7 1.6 0.5

Source: Company data, KESI estimates

Long-term contracts ensure availability. TGBL procures tea leaves from India (70% of total requirements) and Kenya (30%). Over the past 6 months, dry weather in Africa (one of the major producers of tea) has led to reduced supply of tea leaves internationally. However, the tea plantations, where TGBL has long-term agreements for supply of tea leaves, have received adequate rainfall, which would reduce the risk of raw material availability. TGBL passes on increase in raw material cost to consumers. The adverse weather conditions in Africa has increased the average price of tea leaves in India to Rs135/kg in Aug 12 vs. Rs107/kg in Aug 11. However, TGBL has managed to pass on 9% of the price increase to consumers in Q1. It is confident of further price increase in Q2 and thereafter. Though there is a lag effect, historically, TGBL has been able to pass on complete impact of the rise in tea price to consumers.

TGBL: India Tea leaves price (Rs/ kg)


150

130

110

90

70

50 Jan-08

Mar-09

May-10

Jun-11

Aug-12

Source: Tea Board of India

Sharp fall in price of coffee bean to benefit TGBL. The company sources Arabica variety coffee bean from India for its Eight oclock brand coffee in US. The unusual heavy rain in Oct 11 had led to sharp increase Arabica coffee bean price in India to Rs286/kg vs. Rs194/kg in Oct 10. But favorable weather conditions in 4QFY12 have reduced Arabica coffee bean price to Rs212/kg in Jun 12. However, TGBL did not pass on the benefit of the reduced cost to its consumers.

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Tata Global Beverages (TGBL)

TGBL: Arabica Coffee Bean price in India (Rs/ kg)


350 300 250 200 150 100 50 Jan-08

Feb-09

Mar-10

May-11

Jun-12

Source: Coffee Board of India

Do not expect increase in investment in brands. In the past 4 years, SG&A cost was at 3040% of revenue. Absolute SG&A cost increased an average 10% p.a. due to introduction of new brands and products and promotion of existing brands to improve sales volume. Advertising and promotion of Tetley brand of tea in the overseas markets accounts for 60% of SG&A costs. With increasing revenue contribution from the overseas markets, we do not expect any major increase in SG&A cost as a % revenue. For FY13, we forecast SG&A cost to remain at 30% of revenue.

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Tata Global Beverages (TGBL)

FY13F EPS +26% on stable gross margin


Recent increase in selling price to restrict fall in gross margin. During 2005-09, TGBLs gross margin was 50-55%. But, over the past 3 years, increase in raw material cost led to decline in gross margin. Over the past 6 months, TGBL increased selling price of its Eight o clock coffee and Tata Tea brands by 10%. This, in addition to the benefit from declining coffee bean price, would lead to stable FY13F gross margin. TGBL: Gross Margin (%)
50.5 47.7 46.0

38.3

38.2

39.0

FY09

FY10

FY11

FY12

FY13F

FY14F

Source: Company data, KESI estimates

Leveraged acquisitions and investments in brands led to low earnings contribution from overseas business. We expect earnings contribution to improve gradually due to end of the investment phase. For FY13, we forecast the earnings from overseas business to improve marginally due to the impact of increase in raw material cost (tea leaves) and brand promotion expenses. Expect earnings recovery for Eight oclock coffee. TGBLs US-based subsidiary Eight oclock coffees FY12 net profit fell to Rs47m vs. Rs756m in FY11 as TGBL passed on only a part of the steep increase in coffee bean price. However, over the past 6 months, Arabica coffee bean prices declined by a, steep 26% to US$1.7/lb, which would lead to recovery in net profit. We forecast net profit of Rs200m for Eight o clock coffee for FY13. TGBL: Earnings contribution by segments (Rs bn)
Yr To March India Tea business Tata Coffee Overseas business Source: Company data, KESI estimates FY10 1.5 0.4 1.2 FY11 1.6 0.7 -0.1 FY12 2.2 0.8 0.6 FY13F 2.6 0.9 0.7 FY14F 3.3 1.2 0.8

Q1FY13 EPS was +15% YoY. This is due to an increase in the selling price in India to pass on the increase in raw material cost and favorable change in INR vs. USD. Nearly 40% the Q1 revenue growth (18% YoY) was due to INR depreciation vs. USD. Q1 forms 20% of our FY13F EPS of Rs6.8. With Q1 being seasonally lean (usually forms 2022% of full year), we believe that our FY13F EPS is achievable. Earnings contribution from new products to be insignificant. TGBL has launched its packaged water brand Tata Water Plus and energy drink brand Tata Gluco+ in 2 Indian states. It would launch these new products across India by 4Q13. It has invested Rs2.5bn in the non-tea and coffee beverages segment that incurred a net loss of Rs16m in FY12. We do not expect any significant earnings contribution from these products and brands in FY13/14F.

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Tata Global Beverages (TGBL)

Sensitivity Analysis. According to our sensitivity analysis, a 100bp change in gross margin impacts the EPS by 13%. TGBL: Sensitivity Analysis
Sensitivity matrix (FY13F) Gross Margin (base case of 38.2%) Impact of every 100bp change Exchange rate INR vs. USD (base case of Rs53) Impact of every Re1 change Exchange rate INR vs. GBP (base case of Rs85) Impact of every Re1 change Source: Company data, KESI estimates Change in EPS (%) 12.7

2.0

6.2

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Tata Global Beverages (TGBL)

Contribution from acquisitions to improve ROE


Invested Rs48bn on leveraged acquisitions, new brands and products. In the past 12 years, TGBL has invested Rs14bn in Coffee business and Rs34bn in overseas business for acquiring tea brands. TGBLs India tea business earns an ROE of 28% on strong distribution and brands. However, ROE of its overseas business is low at 2% due to investments in brands, new product launches, and geographic expansion. We believe that the ROE would improve gradually as these investments start contributing to earnings. [Refer annexure 4 for major overseas acquisitions] We expect the improvement in ROE to come from Tetley tea and Eight oclock coffee brands on increasing sales volume of premium products, declining raw coffee price and moderating SG&A cost. The major investments phase is behind. In FY13, TGBL would invest Rs500m to increase capacity of its coffee processing plant in India. Alternatively, TGBL is also considering options to acquire a coffee processing plant which would save time. However, FY13F CAPEX would decline to Rs2.5bn vs. average Rs4bn p.a. in the past 5 years. TGBL: CFs
CASHFLOW (Rs bn) EBITDA Accounts receivables Inventories Other working capital Operating cash flow Interest Tax Residual cash flow Fixed Assets Free Cash flow FY10 7.6 -0.7 -1.8 15.9 21.0 -0.3 -2.5 18.3 0.9 19.1 FY11 6.4 -0.5 -1.5 -0.5 3.8 -0.5 -2.0 1.3 -1.9 -0.7 FY12 7.2 -0.8 -0.9 -1.5 3.9 -0.7 -1.4 1.8 -6.5 -4.7 FY13F 8.1 -0.4 -1.5 0.5 6.7 -0.6 -1.7 4.4 -2.5 1.9 FY14F 9.5 -0.2 -1.0 0.1 8.5 -0.4 -2.2 5.9 -2.5 3.4

Source: Company data, KESI estimates

Risks/ concerns
Increase in raw material cost. Significant increase in raw material cost will have a negative impact on TGBLs earnings. However, a strong brand presence would enable TGBL to increase selling prices and pass on the increase in cost partly or fully. Downtrading due to economic conditions. Consumers may shift to cheaper products due to weak economic conditions. However, TGBL has products in both economy and premium categories that would protect its volume market share. Further, differences in blend and taste among various tea brands would help TGBL to retain its consumers. Adverse change in currency. TGBL operates in 40 countries, which would lead to gain/ loss from FX fluctuations. However, it hedges net foreign currency receivables through currency forward and options contracts. TGBLs net unhedged position as on 31 March 2012 was only Rs307m.

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Tata Global Beverages (TGBL)

Valuation Prefer Sum-of-the-parts valuation


We value TGBL based using sum-of-the-parts, and discounted CF, methodologies.

Sum-of-the-parts valuation
Under this method, we separately value the India tea business, overseas tea business, investment in Tata Coffee, and other investments using sum-of-theparts approach. Our computation values: India Tea business using PER method Overseas Tea business using P/S method Tata Coffee at 30% discount to CMP Other investments at book value

TGBL: Sum-of-the-parts valuation


Particulars India Tea business Overseas Tea business Tata Coffee Investments TGBLs value Source: Company data, KESI estimates Method PER of 20x FY13F P/S of 1.2x FY13F 30% discount to CMP Book value Value (Rs/sh) 92 12 65 6 175

Discounted CF valuation
Discounted CF value is Rs161/sh. We assume WACC of 11.7% and terminal growth of 4%. TGBL: Discounted CF valuation
Yr to Mar (Rs bn) WACC (%) Terminal growth rate (%) Free cash flows PV of free cash flows PV of forecasted period PV of terminal value Enterprise value Net (debt)/ cash Equity value No of shares (bn) Value per share (Rs) FY13F 11.7 4.0 1.9 1.7 19.9 83.6 103.5 -3.7 99.8 0.6 161 FY14F FY15F FY16F FY17F Terminal Value

3.4 2.8

5.2 3.8

7.8 5.1

10.9 6.4

141.3 83.6

Source: Company data, KESI estimates

Relative valuation
TGBL is undervalued on both PER and P/S basis compared with other major consumer companies in India. TGBL: Relative valuation
Company Tata Global Beverages Hindustan Unilever Nestle India Godrej Consumer Dabur Average Ticker TGBL HUVR NEST GCPL DABUR Price (Rs) 131 530 4,350 658 125 Mcap (US$m) 1,500 21,218 7,766 4,147 4,034 PER (x) FY12 FY13F 24.3 19.2 41.1 36.6 43.6 37.0 29.5 29.8 33.8 28.4 34.5 30.2 P/S (x) FY12 FY13F 1.3 1.1 5.3 4.6 5.9 5.1 4.9 3.8 4.4 3.7 4.3 3.7

Source: Company data, Bloomberg, KESI estimates

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Tata Global Beverages (TGBL) Prefer sum-of-the-parts valuation. TGBL is still in the investment phase of creating new brands and entering new geographies. This leads to low profitability from overseas markets and new businesses. We find sum-of-theparts valuation most appropriate to reflect the value of different brands of TGBL and set a TP of Rs175/sh.

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Tata Global Beverages (TGBL)

Recommendation BUY
Facts supporting our BUY recommendation: Market leader with 21% market share in the India tea market, growing at avg. 12% p.a FY13F EPS growth of 26% on contribution from increasing consumption in India and new brands and products Strong B/S with negligible debt to support growth.

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Tata Global Beverages (TGBL)

Annexure
Annexure 1: TGBLs Major brands

Tea

Coffee

Others
Source: Company data, KESI estimates

Annexure 2: Average household spending on beverages (Rs/month)


105 88 87

83

50

Tea

Coffee

Malted food

Mineral water

Soft drinks

Source: Company data, KESI estimates

Annexure 3: FY12 brand-wise revenue growth


Brand Tetley favoured tea Bags Tetley tea bags Tata Tea Premium Chakra Gold Tata Tea Gold Tata Tea Agni Kanan Devan Gemini Category Premium Premium Premium Premium Regular Economy Economy Economy Price (Rs/kg) 1,550 515 340 342 290 190 222 180 FY12 Revenue growth (%) NA NA 7 7 18 15 7 7

Source: Company data, KESI estimates

Annexure 4: TGBLs Major acquisitions


Year 2000 2005 2006 2006 2006 2007 2009 Acquired company Tetley Group (UK) Good Earth (US) Joekels Tea (South Africa) Jemca (Czech Republic) Eight oclock coffee (US) Vitax (Poland) Grand Coffee (Russia) Cost US$450m NA NA US$12.5m US$220m NA US$220m

Source: Company data, KESI estimates

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Summary Results Table FY Mar (Rs bn) Revenue Cost of sales, ex depr Selling, admn. & R&D exp. EBITDA Depreciation Operating profit Other income / expense Interest expensed Pretax Profit Tax Minority interest Recurring profit Exceptional items Net profit Recurring EPS (Rs) Gross Margin (%) EBITDA Margin (%) Tax rate (%) Source: Company data 1Q13 17.3 -10.4 -5.1 1.8 -0.2 1.6 0.2 -0.2 1.5 -0.5 -0.2 0.8 -0.1 0.8 1.3 38.3 10.5 32.1 1Q12 14.7 -8.3 -5.2 1.2 -0.2 0.9 0.1 0.0 1.0 -0.1 -0.1 0.7 0.9 1.6 1.2 42.0 8.0 13.8

Quarterly % YoY 18 26 -3 54 3 67 222 3975 55 261 60 15 n.a. -52 15.4 -3.7 2.4 18.3

4Q12 17.3 -10.2 -5.3 1.9 -0.3 1.6 0.2 -0.1 1.7 -0.3 -0.4 0.9 -0.4 0.5 1.5 39.7 10.8 17.4

% QoQ -1 2 -4 -3 -1 -4 -2 n.a. -8 70 -52 -11 n.a. 43 -11.4 -1.4 -0.3 14.8

FY12 66.3 -37.9 -22.2 6.2 -1.0 5.3 0.7 -0.4 5.5 -1.4 -0.8 3.3 0.2 3.6 5.4 41.4 9.4 25.7

Cumulative FY11 60.0 -32.5 -21.5 6.1 -1.0 5.1 0.5 -0.7 4.8 -2.0 -0.4 2.4 0.1 2.5 4.0 44.2 10.1 41.7

% YoY 10 17 3 2 -3 4 27 -45 14 -30 101 36 n.a. 40 36 -3 -1 -16

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INCOME STATEMENT (Rs bn) FY March Revenue Cost of Sales Selling & Admin Expenses Other income EBITDA Depreciation & Amortisation Operating Profit (EBIT) Interest (Exp)/Inc Associates One-offs Pre-Tax Profit Tax Minority Interest Net Profit Recurring Profit Revenue Growth % EBITDA Growth (%) EBIT Growth (%) Net Profit Growth (%) Recurring Profit Growth (%) Tax Rate % CASH FLOW (Rs bn) FY March EBITDA Accounts Receivables Inventory Working Capital Operating cash flow Interest Tax Residual Cash flow Fixed Assets Investments Free Cash flow Capital Increase Dividend Payments Others/Minority Interest Net Change in Cash flow Net (debt)/ cash Beg Net (debt)/ cash End DU PONT ANALYSIS FY March Profit Margin (x) Total Asset Turnover (x) Equity Multiplier (x) ROE (%) BALANCE SHEET (Rs bn) FY March Fixed Assets Other LT Assets/Investments Cash and equivalents Receivables Inventories Other Current Assets Total Assets Unsecured Debt Other Current Liabilities Secured Debt Other LT Liabilities Minority Interest Shareholders' Equity Total Liabilities-Capital Share Capital (Rs bn) Gross Debt/(Cash) Net Debt/(Cash) Working Capital

FY11 59.8 -31.3 -22.7 0.5 6.4 -1.0 5.4 -0.5 0.2 0.1 5.1 -2.0 -0.6 2.5 2.4 3.4 -14.4 -16.3 -34.9 -34.7 39.4

FY12 66.3 -40.0 -20.1 0.9 7.2 -1.0 6.2 -0.7 -0.2 0.2 5.6 -1.4 -0.6 3.6 3.3 10.9 12.6 15.6 40.3 36.5 25.4

FY13F 74.7 -45.0 -22.6 1.0 8.1 -1.1 7.0 -0.6 0.2 0.0 6.6 -1.7 -0.7 4.2 4.2 12.6 12.3 11.9 18.2 26.2 25.9

FY14F 81.2 -48.3 -24.3 1.0 9.5 -1.2 8.4 -0.4 0.2 0.0 8.2 -2.2 -0.7 5.3 5.3 8.7 18.5 20.6 25.9 25.9 26.6

FY11 38.0 6.0 10.0 5.7 10.7 7.2 77.6 0.1 15.9 10.3 0.6 11.1 39.6 77.6 0.6 10.4 0.4 7.7

FY12 43.6 6.2 6.7 6.5 11.6 8.2 82.8 0.0 15.4 10.4 0.7 10.7 45.7 82.8 0.9 10.4 3.7 11.0

FY13F 45.0 6.3 3.2 6.9 13.1 9.2 83.6 0.0 16.8 6.4 0.8 11.3 48.2 83.6 0.9 6.4 3.3 12.4

FY14F 46.3 6.4 3.1 7.1 14.1 10.3 87.2 0.0 18.0 4.4 1.0 12.1 51.7 87.2 0.9 4.4 1.4 13.4

FY11 6.4 -0.5 -1.5 -0.5 3.8 -0.5 -2.0 1.3 -1.9 -0.7 -1.3 -0.3 -1.4 1.7 -1.4 1.1 -0.3

FY12 7.2 -0.8 -0.9 -1.5 3.9 -0.7 -1.4 1.8 -6.5 -0.1 -4.9 0.0 -1.6 3.3 -3.1 -0.4 -3.6

FY13F 8.1 -0.4 -1.5 0.5 6.7 -0.6 -1.7 4.4 -2.5 -0.1 1.8 0.0 -1.7 0.1 0.2 -3.7 -3.5

FY14F 9.5 -0.2 -1.0 0.1 8.5 -0.4 -2.2 5.9 -2.5 -0.1 3.3 0.0 -1.8 -0.2 1.4 -3.3 -1.9

RATES & RATIOS FY March Gross Margin % EBITDA Margin % Op. Profit Margin % Net Profit Margin % ROE % ROA % Dividend Cover (x) Interest Cover (x) Asset Turnover (x) Asset/Debt (x) Debtors Turn (days) Creditors Turn (days) Inventory Turn (days) Net Debt/Equity (%) Debt/ EBITDA (x) Debt/ Market Cap (x)

FY11 46.0 10.6 9.0 4.1 6.4 6.1 0.5 10.1 0.8 7.5 35.0 185.4 124.7 0.8 1.6 0.1

FY12 38.3 10.8 9.4 5.0 7.8 6.6 0.4 8.8 0.8 7.9 35.9 140.4 106.0 7.8 1.5 0.1

FY13F 38.2 10.8 9.3 5.6 8.7 7.2 0.3 12.2 0.9 13.0 33.9 136.5 106.2 7.2 0.8 0.1

FY14F 39.0 11.8 10.3 6.5 10.3 8.7 0.3 22.8 0.9 19.6 31.9 136.1 106.4 3.7 0.5 0.1

FY11 0.0 0.8 2.0 6.4

FY12 0.1 0.8 1.8 7.8

FY13F 0.1 0.9 1.7 8.7

FY14F 0.1 0.9 1.7 10.3

KEY ASSUMPTIONS FY March India tea business revenue (Rs bn) Overseas tea business (Rs bn) Total Tea revenue (Rs bn) Growth (%) Coffee products revenue (Rs bn) Growth (%) Others revenue (Rs bn) Growth (%) RM cost as % of revenue S, G & A expense as % of revenue

FY11 18.1 26.7 44.8 2.2 14.2 9.5 0.8 -18.2 42.1 37.9

FY12 20.4 27.6 48.0 7.2 17.7 24.0 0.7 -22.2 50.1 30.3

FY13F 24.0 29.8 53.8 12.1 20.0 13.3 0.9 37.6 50.6 30.2

FY14F 27.1 31.0 58.1 8.0 22.0 10.0 1.1 22.2 50.5 29.9

Source: Company data, KESI estimates

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Tata Global Beverages (TGBL) RESEARCH OFFICES


REGIONAL
P K BASU Regional Head, Research & Economics (65) 6432 1821 pk.basu@maybank-ke.com.sg WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 wchewh@maybank-ib.com THAM Mun Hon Regional Strategist (852) 2268 0630 thammunhon@kimeng.com.hk ONG Seng Yeow Regional Products & Planning (852) 2268 0644 ongsengyeow@maybank-ke.com.sg

ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 suhaimi_ilias@maybank-ib.com Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 luz_lorenzo@maybank-atrke.com

MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 wchewh@maybank-ib.com Strategy Construction & Infrastructure Desmond CHNG, ACA (603) 2297 8680 desmond.chng@maybank-ib.com Banking - Regional LIAW Thong Jung (603) 2297 8688 tjliaw@maybank-ib.com Oil & Gas Automotive Shipping ONG Chee Ting (603) 2297 8678 ct.ong@maybank-ib.com Plantations Mohshin AZIZ (603) 2297 8692 mohshin.aziz@maybank-ib.com Aviation Petrochem Power YIN Shao Yang, CPA (603) 2297 8916 samuel.y@maybank-ib.com Gaming Regional Media Power WONG Wei Sum, CFA (603) 2297 8679 weisum@maybank-ib.com Property & REITs LEE Yen Ling (603) 2297 8691 lee.yl@maybank-ib.com Building Materials Manufacturing Technology LEE Cheng Hooi Head of Retail chenghooi.lee@maybank-ib.com Technicals

SINGAPORE
Stephanie WONG Head of Research (65) 6432 1451 swong@maybank-ke.com.sg Strategy Small & Mid Caps Gregory YAP (65) 6432 1450 gyap@maybank-ke.com.sg Technology & Manufacturing Telcos - Regional Wilson LIEW (65) 6432 1454 wilsonliew@maybank-ke.com.sg Hotel & Resort Property & Construction James KOH (65) 6432 1431 jameskoh@maybank-ke.com.sg Logistics Resources Consumer Small & Mid Caps YEAK Chee Keong, CFA (65) 6433 5730 yeakcheekeong@maybank-ke.com.sg Healthcare Offshore & Marine Alison FOK (65) 6433 5745 alisonfok@maybank-ke.com.sg Services S-chips Bernard CHIN (65) 6433 5726 bernardchin@maybank-ke.com.sg Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 ongkianlin@maybank-ke.com.sg REITs / Property WeiBin (65) 6432 1455 weibin@maybank-ke.com.sg S-chips Small & Mid Caps

THAILAND
Mayuree CHOWVIKRAN Head of Research (66) 2658 6300 ext 1440 mayuree.c@maybank-ke.co.th Strategy Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 Maria.L@maybank-ke.co.th Andrew STOTZ Strategist (66) 2658 6300 ext 5091 Andrew@maybank-ke.co.th Suttatip PEERASUB (66) 2658 6300 ext 1430 suttatip.p@maybank-ke.co.th Media Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 sutthichai.k@maybank-ke.co.th Energy Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 termporn.t@maybank-ke.co.th Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 woraphon.w@maybank-ke.co.th Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 jaroonpan.w@maybank-ke.co.th Transportation Small cap. Suchot THIRAWANNARAT (66) 2658 6300 ext 1550 suchot.t@maybank-ke.co.th Automotive Construction Materials Soft commodity

VIETNAM
Michael KOKALARI, CFA Head of Research +84 838 38 66 47 michael.kokalari@kimeng.com.vn Strategy Nguyen Thi Ngan Tuyen +84 844 55 58 88 x 8081 tuyen.nguyen@kimeng.com.vn Food and Beverage Oil and Gas Ngo Bich Van +84 844 55 58 88 x 8084 van.ngo@kimeng.com.vn Banking Nguyen Quang Duy +84 844 55 58 88 x 8082 duy.nguyenquang@kimeng.com.vn Rubber Dang Thi Kim Thoa +84 844 55 58 88 x 8083 thoa.dang@kimeng.com.vn Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 hoa.nguyen@kimeng.com.vn Steel Sugar Macro

HONG KONG / CHINA


Edward FUNG Head of Research (852) 2268 0632 edwardfung@kimeng.com.hk Construction Ivan CHEUNG (852) 2268 0634 ivancheung@kimeng.com.hk Property Industrial Ivan LI (852) 2268 0641 ivanli@kimeng.com.hk Banking & Finance Jacqueline KO (852) 2268 0633 jacquelineko@kimeng.com.hk Consumer Staples Andy POON (852) 2268 0645 andypoon@kimeng.com.hk Telecom & equipment Samantha KWONG (852) 2268 0640 samanthakwong@kimeng.com.hk Consumer Discretionaries Alex YEUNG (852) 2268 0636 alexyeung@kimeng.com.hk Industrial Catherine CHAN (852) 2268 0631 catherinechan@kimeng.com.hk Cement Anita HWANG, CFA | Jacky WONG, CFA anitahwang@kimeng.com.hk | jackywong@kimeng.com.hk (852) 2268 0142 | (852) 2268 0107 Special Situations Quants

INDONESIA
Katarina SETIAWAN Head of Research (62) 21 2557 1125 ksetiawan@kimeng.co.id Consumer Strategy Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 lariesandi@kimeng.co.id Base metals Coal Oil & Gas Rahmi MARINA (62) 21 2557 1128 rmarina@kimeng.co.id Banking Multifinance Pandu ANUGRAH (62) 21 2557 1137 panugrah@kimeng.co.id Auto Heavy equipment Plantation Toll road Adi N. WICAKSONO (62) 21 2557 1130 anwicaksono@kimeng.co.id Generalist Anthony YUNUS (62) 21 2557 1134 ayunus@kimeng.co.id Cement Infrastructure Property Arwani PRANADJAYA (62) 21 2557 1129 apranadjaya@kimeng.co.id Technicals

INDIA
Jigar SHAH Head of Research (91) 22 6623 2601 jigar@maybank-ke.co.in Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 anubhav@maybank-ke.co.in Metal & Mining Capital goods Property Ganesh RAM (91) 226623 2607 ganeshram@maybank-ke.co.in Telecom Contractor

PHILIPPINES
Luz LORENZO Head of Research +63 2 849 8836 luz_lorenzo@maybank-atrke.com Strategy Laura DY-LIACCO (63) 2 849 8840 laura_dyliacco@maybank-atrke.com Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 lovell_sarreal@maybank-atrke.com Consumer Media Cement Mining Kenneth NERECINA (63) 2 849 8839 kenneth_nerecina@maybank-atrke.com Conglomerates Property Ports/ Logistics Katherine TAN (63) 2 849 8843 kat_tan@maybank-atrke.com Banks Construction Ramon ADVIENTO (63) 2 849 8842 ramon_adviento@maybank-atrke.com Mining

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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, MKE) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, Representatives) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKEs clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (Maybank KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (MBKET) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (Maybank KESL) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

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DISCLOSURES
Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (PTKES) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission.Philippines:MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (KEVS) (License Number: 71/UBCK-GP) is licensed under the StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (KESI) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 25 September 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 25 September 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment.

OTHERS
Analyst Certification of Independence The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analysts compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings
Maybank Kim Eng Research uses the following rating system: BUY HOLD SELL Total return is expected to be above 15% in the next 12 months Total return is expected to be between -15% to +15% in the next 12 months Total return is expected to be below -15% in the next 12 months

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):


Adex = Advertising Expenditure BV = Book Value CAGR = Compounded Annual Growth Rate Capex = Capital Expenditure CY = Calendar Year DCF = Discounted Cashflow DPS = Dividend Per Share EBIT = Earnings Before Interest And Tax EBITDA = EBIT, Depreciation And Amortisation EPS = Earnings Per Share EV = Enterprise Value FCF = Free Cashflow FV = Fair Value FY = Financial Year FYE = Financial Year End MoM = Month-On-Month NAV = Net Asset Value NTA = Net Tangible Asset P = Price P.A. = Per Annum PAT = Profit After Tax PBT = Profit Before Tax PE = Price Earnings PEG = PE Ratio To Growth PER = PE Ratio QoQ = Quarter-On-Quarter ROA = Return On Asset ROE = Return On Equity ROSF = Return On Shareholders Funds WACC = Weighted Average Cost Of Capital YoY = Year-On-Year YTD = Year-To-Date

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Malaysia

Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

Singapore

Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003

London

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New York

Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

Hong Kong

Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queens Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104

PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

Indonesia

India

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Philippines

Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

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Thailand

Vietnam

In association with

Saudi Arabia
In association with

Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36 Fax : (84) 838 38 66 39

Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

South Asia Sales Trading

Connie TAN connie@maybank-ke.com.sg Tel: (65) 6333 5775 US Toll Free: 1 866 406 7447

North Asia Sales Trading

Eddie LAU eddielau@kimeng.com.hk Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267

www.maybank-ke.com | www.kimengresearch.com.sg

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