Вы находитесь на странице: 1из 21

Asia Pacific Equity Research

17 March 2012

ASEAN Plantations
Malaysia's downstream 'dilemma' - We assess possible counter measures and risk to upstream
Indonesia tax cuts hurting Malaysian downstream players whose profits fell 25-81% Y/Y in 4Q11. As a recap, with the tax cuts last Oct-11, Indo refiners have a cost advantage of up to US$66/t vs. Malaysia currently. As a result, Indonesia plays with refining profits fared better in 4Q11 (Table 7). Indirect impact on upstream. Weaker downstream/refining demand could result in further build-up in inventory of the feedstock, CPO in Malaysia (Feb-12 inventory was higher than expected). But, under this scenario, we believe the government will consider increasing the tax-free export volume quota for CPO from the current 3.6MT pa (20% of total production) as a short-term measure, given that external CPO demand remains strong. Possible counter measures by Malaysia? In our view, one possible measure is to redirect existing windfall and sales taxes already collected from upstream of M$2.66B pa to subsidize downstream. This accounts for 74% of estimated subsidies of M$3.58B required to fully match the pricing advantage that Indo refiners now have. But, in the worst case, if upstream is required to fully absorb this amount as additional taxes/subsidy, we estimate that it would work out to 6% of CPO revenues for each player. This could cut EPS by 5-9% pa, and translate to share price downside of 10-15% for IOI and GENP (both UWs), and 4% for KLK (Neutral), but still a 13% upside for SIME (OW) to our revised fair values (see pages 7-9 for details). Overall sector implications. For now, we believe Indo players are likely to benefit more than Malaysia players from any short-term overshoot in CPO prices. This is in view of the current shift in profitability and market share to Indonesia, the overhang risk from potential counter measures in Malaysia, and continued better long-term land-banking growth prospects in Indonesia. Among the Indo plays, our top picks are FR (OW) and LSIP (OW), and we also like the fundamentals of AALI (Neutral) and GGR (Neutral). We remain positive on big-cap pick, SIME (OW) in Malaysia given its small exposure to refining, additional non-CPO drivers, and attractive valuations.
Table 1: JPM ASEAN Plantations universe
As at: 16 Mar-12 Ticker FYE Dec Dec Dec Jun Sep Jun Dec Dec Dec Dec Dec Mkt cap (US$mn) 3,681 2,110 2,277 11,016 8,124 19,171 2,220 7,164 1,806 621 25,051 Price (LC) 21,350 2,825 9.17 5.24 23.26 9.75 1.89 0.75 1.59 0.52 4.94 Rating N OW UW UW N OW OW N N N OW Target (LC) 22,500 2,900 8.60 5.00 24.00 11.60 2.10 0.75 1.80 0.52 6.00 Reporting crncy IDR IDR MYR MYR MYR MYR USD USD IDR USD USD EPS (RC) FY12E FY13E 1,624 1,624 231 220 0.63 0.68 0.32 0.36 1.33 1.53 0.69 0.78 0.10 0.10 0.05 0.05 990 1,047 0.03 0.04 0.27 0.29 PE FY12E 13.1 12.2 14.5 16.5 17.5 14.2 15.5 12.4 11.6 13.2 14.7 FY13E 13.1 12.8 13.5 14.6 15.2 12.5 15.6 12.3 10.9 10.3 13.5

Plantations Simone Yeoh


AC

(60-3) 2270-4710 simone.x.yeoh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Ying-Jian Chan, CFA

AC

(65) 6882-2378 ying.jian.yj.chan@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

Aditya Srinath, CFA

AC

(62-21) 5291-8573 aditya.s.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia

CPO price chart (M$/ton)

4500 4000 3500 3000 2500 2000 1500 1000 Jul-06


Source: Bloomberg.

Jul-08

Jul-10

Astra Agro Lestari AALI IJ London Sumatra Indon LSIP IJ Genting Plantations GENP MK IOI Corporation IOI MK Kuala Lumpur Kepong KLK MK Sime Darby SIME MK First Resources FR SP Golden Agri-Resources GGR SP Indofood Agri Resources IFAR SP Mewah International MII SP Wilmar International WIL SP
Source: Bloomberg, J.P. Morgan estimates.

See page 16 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.morganmarkets.com

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Table 2: ASEAN Plantations sector regional peer comparison


As at: 16 Mar-12 Ticker Price (LC) 21,350 300 1,650 2,825 1,340 3,475 9.17 3.06 3.30 5.24 23.26 4.27 3.01 9.75 1.89 0.75 1.59 0.36 0.52 4.94 Rating N NR NR OW NR NR UW NR NR UW N NR NR OW OW N N NR N OW Mkt cap (US$mn) 3,681 450 730 2,110 2,321 719 5,792 2,277 801 866 11,016 8,124 1,763 276 19,171 40,588 2,221 7,167 1,807 323 621 25,063 11,816 58,196 P/E CY12E 13.1 8.5 17.4 12.2 11.2 10.6 12.8 14.5 10.7 14.4 15.5 16.9 11.1 9.4 13.3 14.7 15.5 12.4 11.6 14.8 13.2 14.7 12.9 14.1 CY13E 13.1 6.4 12.8 12.8 9.6 9.7 13.0 13.5 9.9 13.6 14.1 14.8 10.3 7.9 12.0 13.2 15.6 12.3 11.0 10.0 10.4 13.5 12.6 13.1 EV/ha (US$) 2yr EPS CAGR FY12E 2012 - 2013E 20,831 NA NA 19,741 NA NA 20,434 35,583 NA NA 59,621 47,674 NA NA 26,742 40,351 26,839 23,032 17,207 NA NA NA 21,646 60,722 3.1% 8.9% 28.3% 0.4% 10.1% 5.7% 2.1% 8.1% -1.0% 5.2% 9.2% 4.4% -3.8% 13.7% 10.9% 9.0% 1.9% -7.2% 4.1% 18.3% 34.2% 10.7% -1.6% 6.1% P/B FY12E 3.7 0.4 3.8 3.0 1.4 2.2 3.5 1.9 1.2 1.9 2.5 3.2 1.2 NA 2.2 2.5 2.6 0.9 1.3 1.3 1.1 1.7 1.3 2.3 ROE FY12E 29.8 5.8 24.9 26.6 13.1 22.4 28.6 14.0 11.8 13.5 16.2 19.2 12.5 15.2 16.5 16.8 16.9 6.9 11.5 8.8 9.0 12.2 9.6 16.5 Div Yld FY12E 4.9% 0.7% 0.8% 3.3% 2.5% 2.9% 4.3% 1.7% 6.3% 2.7% 3.3% 3.3% 1.8% 5.3% 3.5% 3.3% 2.1% 1.4% 1.7% 0.7% 1.9% 1.4% 1.6% 3.1% Target (LC) 22,500 NR NR 2,900 NR NR 8.60 NR NR 5.00 24.00 NR NR 11.60 2.10 0.75 1.80 NR 0.52 6.00

Indonesia Astra Agro Lestari AALI IJ Bakrie Sumatera Plant UNSP IJ BW Plantation BWPT IJ London Sumatra Indon LSIP IJ Salim Ivomas Pratama SIMP IJ Sampoerna Agro SGRO IJ Weighted average* Malaysia Genting Plantations GENP MK Hap Seng Plantations HAPL MK IJM Plantations IJMP MK IOI Corporation IOI MK Kuala Lumpur Kepong KLK MK Kulim Malaysia KUL MK Sarawak Plantation SPLB MK Sime Darby SIME MK Weighted average* Singapore First Resources FR SP Golden Agri-Resources GGR SP Indofood Agri Resources IFAR SP Kencana Agri KAGR SP Mewah International MII SP Wilmar International WIL SP Weighted average* Sector weighted average*

Source: Bloomberg, J.P. Morgan estimates. NR=Not rated. Bloomberg estimates used for NR companies.

Table 3: Absolute stock performance


Astra Agro Lestari London Sumatra Indon Genting Plantations IOI Corporation Kuala Lumpur Kepong Sime Darby First Resources Golden Agri-Resources Indofood Agri Resources Mewah International Wilmar International
Source: Bloomberg.

1m -3.2% 2.7% -2.6% -3.1% -6.2% 2.2% 6.2% -2.6% -1.6% -16.1% -16.7%

3m 3.6% 31.4% 13.2% 3.8% 5.5% 8.8% 27.7% 5.7% 23.8% 7.2% -1.2%

6m -4.7% 27.0% 28.5% 13.4% 9.8% 21.9% 41.6% 8.8% 10.1% 11.8% -5.7%

12m -2.5% 22.8% 15.8% -5.8% 13.1% 8.2% 48.8% 14.6% -27.3% -42.2% -3.1%

Ytd -1.6% 25.6% 7.2% -2.6% 2.5% 6.0% 25.2% 4.2% 25.3% 11.8% -1.2%

Table 4: Stock performance relative to local indices


Astra Agro Lestari London Sumatra Indon Genting Plantations IOI Corporation Kuala Lumpur Kepong Sime Darby First Resources Golden Agri-Resources Indofood Agri Resources Mewah International Wilmar International
Source: Bloomberg.

1m -5.6% 0.2% -3.9% -4.4% -7.5% 0.8% 5.0% -3.7% -2.6% -17.1% -17.6%

3m -3.1% 22.9% 5.6% -3.2% -1.5% 1.5% 12.8% -6.7% 9.4% -5.3% -12.7%

6m -9.3% 20.9% 17.0% 3.3% 0.0% 11.0% 31.2% 0.8% 2.0% 3.6% -12.7%

12m -14.5% 7.7% 10.0% -10.5% 7.4% 2.8% 46.9% 13.1% -28.3% -43.0% -4.4%

Ytd -6.7% 19.1% 4.4% -5.1% -0.2% 3.2% 10.0% -8.4% 10.1% -1.7% -13.2%

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Figure 1: 1m absolute stock performance


FR SP LSIP IJ SIME MK IFAR SP GENP MK GGR SP IOI MK AALI IJ KLK MK MII SP WIL SP 6.2% 2.7% 2.2% -1.6% -2.6% -2.6% -3.1% -3.2% -6.2% -16.1% -16.7% 0.0% 2.5% 5.0% 7.5%

Figure 2: 6m absolute stock performance


FR SP GENP MK LSIP IJ SIME MK IOI MK MII SP IFAR SP KLK MK GGR SP AALI IJ WIL SP 41.6% 28.5% 27.0% 21.9% 13.4% 11.8% 10.1% 9.8% 8.8% -4.7% -5.7% 0.0% 10.0% 20.0% 30.0% 40.0%

-10.0% -7.5% -5.0% -2.5%

-20.0% -10.0%

Source: Bloomberg. Based on share prices as at 14 Feb-12.

Source: Bloomberg. Based on share prices as at 14 Feb-12.

Figure 3: Plantation sector FY12E earnings sensitivity to 10% rise in CPO prices (base case: M$3,200/t for 2012E)
18.0% GENP MK 16.0% 15.3% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Source: J.P. Morgan estimates.

KLK MK 10.4% SIME MK AALI IJ 9.4% 9.2%

FR SP 9.1%

IOI MK 8.7% LSIP IJ 6.9%

GGR SP 4.6% WIL SP IFAR SP 1.6% 1.5%

Table 5: Plantation sector correlation to CPO, soy-oil and crude oil prices
Golden Agri-Resources Genting Plantations Mewah International London Sumatra Indon First Resources Astra Agro Lestari Kuala Lumpur Kepong IOI Corporation Sime Darby Indofood Agri Resources Wilmar International Mean Median
Source: Bloomberg, J.P. Morgan estimates.

CPO 0.91 0.89 0.85 0.84 0.80 0.79 0.78 0.77 0.72 0.69 0.31 76% 79%

Soyoil 0.82 0.76 0.39 0.72 0.69 0.61 0.69 0.63 0.61 0.43 0.06 58% 63%

Crude oil 0.77 0.69 0.14 0.63 0.61 0.63 0.55 0.68 0.60 0.51 0.21 55% 61%

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Indonesia tax cuts hurting Malaysia downstream


Downstream/refining sector a major export earner for Malaysia

As a recap, the restructuring of export taxes in Indonesia in 4Q11 has given Indonesia refiners a cost advantage of up to US$66/t to Malaysian players at current CPO prices (for details, please refer to Appendix). The industry is a major export earner for Malaysia. Downstream/refined products accounted for 82% of total CPO exports of M$60.5B in 2011, with the remaining 16% exported in crude form. In Malaysia, there are currently no export taxes on refined/downstream products, but there is a 23% export tax on crude palm oil (excluding the tax free export volume quota of 3.6MT pa currently, which makes up just below 20% of Malaysia's total CPO production). Hence, the existing tax structure is clearly with the objective of promoting the downstream industry and ensuring adequate supply of feedstock or crude palm oil.

The downstream market & key players


Figure 4: Malaysia CPO exports
M$70,000 M$60,000 M$50,000 M$40,000 M$30,000 M$20,000 M$10,000 M$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Crude CPO (M$mn)
Source: CEIC.

100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% Refined CPO (M$mn) Refined as a % of total exports

Total refining capacity in Malaysia currently amounts to 24MT pa, of which 75% or 18MT pa was utilized as at 2011 before the export tax cuts came into place in Indonesia. The production capacity and profit exposure to the refining/downstream sector for major listed plays are in the table below.
Table 6: Major refiners/downstream players in Malaysia and Indonesia
Refining capacity pa (MT) 0.25 1.38 1.4 23.0 2.8 2.3 1.6 1.7 Location Indonesia Indonesia Indonesia Indonesia(8MT), Malaysia (5MT), China (10MT) Malaysia Malaysia Malaysia Malaysia FY11 contribution to Profit 9% 8% 7% 30% 65% 12% 16% 1%

First Resources Golden Agri-Resources Indofood Agri Resources Wilmar International Mewah International IOI Corporation* Kuala Lumpur Kepong (largely oleo-chemicals) Sime Darby*

Source: Company data, J.P. Morgan estimates. *Note, including overseas operations outside of Malaysia, refining capacity for IOI Corp and Sime Darby totals to 3.5MT and 2.8MT respectively largely in Europe.

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Recent report card for downstream players


To recap, the new Indo tax cuts hence is positive for Indo refiners and negative for Malaysian refiners/downstream players. We provide below the report card or profit performance of the key refiners/downstream players in Indonesia and Malaysia in 4Q11. This would capture some of the impact of the said export tax cuts, but we believe the fuller and clearer impact is likely to show mainly from 2012 onwards. From the table below, the Malaysian downstream/refiners i.e. Mewah, IOI, KLK and Sime saw profits contracting by 25-81% Y/Y in 4Q11. These listed players partly benefit from exposure to higher value-added products as well as presence in other overseas markets which will likely help mitigate the impact. However, some of the smaller players in Malaysia with higher exposure to the bulk or lower-end downstream products are already making losses or negative margins. The purer Indo refiners (i.e. First Resources, Golden Agri) however continued to show strong Q/Q and Y/Y growth in profits in 4Q11. Despite Wilmars large exposure to Indonesia, losses from its Malaysian operations however and reduced volumes overall for its refined products resulted in profits dropping by 32-36% Q/Q in 4Q11.
Table 7: Downstream (refining) profit trends since introduction of new Indonesian tax structure in 4Q11
Company First Resources Golden Agri-Resources Indofood Agri Resources Wilmar Interntational Mewah International IOI Corporation Kuala Lumpur Kepong Sime Darby
Source: Company data.

Reported currency for earnings US$MM Rp Billion US$MM US$MM M$MM M$MM M$MM

Profits 4QCY11 12 NA 92 109 24 126 17 2

Profits 3QCY11 11 NA 57 171 18 112 79 -38

Profits 4QCY10 -3 NA 44 159 37 168 75 8

Change % Q/Q 6% NA 61% -36% 30% 13% -79% 104%

Change % Y/Y 354% NA 109% -32% -35% -25% -77% -81%

Comments EBITDA. Contributes 8% to profits EBITDA. PBT Operating profit EBIT (including associates) Operating profit EBIT (including associates)

Figure 5: Malaysia daily palm oil refining margins (M$/t)


Refiners in Malaysia historically commanded margins of up to M$100-150/t (US$30-50/t)

with the export tax cuts in Indonesia, there are refiners of bulk products now incurring losses or with negative margins

Source: Palm & Lauric Oils Conference & Exhibition. Transgraph Consulting Pvt Ltd. Note: Refining margin is defined as (Sales realization of Olein, PFAD and Stearin) (CPO price + Cost of refining).

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Indirect impact on upstream segment


For upstream players, the implications of a struggling downstream market is that it would result in weak off-take or demand for CPO as feedstock. While external or global demand for CPO remains strong, upstream players are unable to or reluctant to export, given the existing 23% export taxes on crude palm oil unless the tax free export quota volume is increased. In view of this and its loss of competitiveness to Indonesia, inventory levels in Malaysia have not fallen as fast as expected. The recent Feb-12 inventory level of 2.06MT (up 39% Y/Y) is the highest level for the month since 2006, due to lower domestic usage and continued 13% M/M fall in exports despite the 8% M/M drop in production. However, the M/M fall in exports is partly seasonal, and improving trends since Mar is likely to result in some easing in inventory levels in the coming months. For the first 15 days of Mar-12, Malaysia's exports have recovered by 42% M/M according to cargo surveyors.
Figure 6: Malaysias monthly inventory data (MT)

2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2009 2012 Feb 2010 2007 2011

2008

Nov

Dec

Source: Malaysian Palm Oil Board.

Table 8: Indonesia CPO exports ('000 MT)


CPO Processed CPO Total
Source: Oil World.

Dec-11 780 945 1,725

Dec-10 1,011 632 1,643

Y/Y -22.8% 49.5% 5.0%

4Q11 2,276 2,902 5,178

4Q10 2,953 2,242 5,195

Y/Y -22.9% 29.4% 5,341

The market share gains or competitive edge which Indonesia now commands is already evident in the export trends of its CPO products in 4Q11 as shown in the table above. In 4Q11, Indonesia's processed palm oil exports rose substantially by 29% Y/Y, while exports of crude palm oil fell by 23% Y/Y with the rising feedstock requirements domestically for downstream.

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Possible counter measures by Malaysia?


We discuss the potential counter measures by the Malaysian government to resolve the current dilemma for its downstream/refining segment. Increase in the tax-free export volume quota for CPO short-term measure Malaysias current 23% export duty on crude palm oil is to protect the domestic refining industry to ensure adequate supply of feedstock. In recent years however, due to tight supplies, refiners in Malaysia do also rely on crude palm oil imports from Indonesia to supplement their stock. We estimate that the Malaysian downstream industry sources about 15MT of CPO from domestic upstream players as feedstock which represents just over 80% of its requirements, with the remaining 3MT largely imported from Indonesia. However, if there is an excess or build-up in inventory of CPO due to weak demand from refining/downstream, we believe that the government will consider increasing the tax free export volume quota for CPO (currently at just below 20% of total domestic production) to relieve the upstream players as a shorter term measure until finalization of a property holistic solution to this issue. Carbon copy of Indonesia's export tax structure not feasible in Malaysia We believe it is not likely to be feasible for Malaysia to simply follow or implement the same export tax structure in Indonesia as a solution given the different market dynamics. The cheaper CPO prices in Indonesia which refiners are benefiting from as a result of the new tax structure is largely due to the still developing or fast growing downstream market, which gives the refiners higher bargaining power when sourcing for CPO or feedstock (i.e., cheaper feedstock is facilitated by the new export tax structure and largely due to market forces rather than due to legislation). This is clearly evident from the fact that Indonesia produces 24-25MT of CPO pa, or larger than its refining capacity of 21MT pa. Malaysia's downstream/refining sector however is much more mature with the industry facing overcapacity or utilization rates at 75% even before the increased competition from Indonesia. Hence, downstream players do not have the bargaining power to command for cheaper feedstock even if the Indo tax structure is completely copied or followed. To recap, opposite to the situation in Indonesia, Malaysia's refining capacity of 24MT pa is larger than its CPO production of 19MT pa. Redirection of existing upstream taxes of M$2.66B as subsidies to downstream? Aside from corporate taxes, upstream players in Malaysia currently are also paying other forms of taxes to the government (i.e., windfall taxes, sales taxes in East Malaysia, as well as cess-tax to the Malaysian Palm Oil Board (MPOB)). The total amount collected from these taxes amount to an estimated M$2.66B pa (Table 9). One solution, in our view, may be to redirect these taxes as subsidies to the downstream segment. This may take time to implement due to the need to change legislations in the respective state governments for the consent to redirect the funds (i.e. namely for the sales taxes in Sabah and Sarawak). But, if approved, we estimate that the M$2.66B in taxes so far already collected from upstream players would be

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

able to fund the bulk or about 74% of subsidies of M$3.58B which we estimate is required for downstream to remain competitive (see details in following section).
Table 9: Malaysia - Estimated existing taxes collected from upstream CPO players in Malaysia (at CPO prices assumed at M$3,200/t)
Taxes Windfall tax Sabah (31% of CPO output of 19MT pa) Sarawak (14% of CPO output of 19MT pa) Peninsula (55% of CPO output of 19MT pa) Sub-total Sales tax Sabah Sarawak Sub-total MPOB cess tax (cess for R&D, replanting, biofuel subsidy) Total taxes already paid (excluding 25% corporate tax) Estimated subsidies required for downstream
Source: MPOB, J.P. Morgan estimates.

Amount pa (M$MM) 88 40 1,089 1,217 964 229 1,193 246 2,656 3,580

Comments At 7.5% above CPO price of M$3,200/t At 7.5% above CPO price of M$3,200/t At 15% above CPO price of M$2,500/t At 7.5% above CPO price of M$1,000/t At 5.0% above CPO price of M$1,500/t At M$13 per ton of CPO Accounts for 74% of estimated subsidies required for downstream Based on Indonesias cost advantage of US$66/T for refiners at current CPO price levels and based on 18MT of refining capacity utilized in Malaysia.

M$2.66B pa in windfall and sales taxes already collected by the government from upstream players in Malaysia one solution, in our view, may be to redirect these taxes to fund the estimated subsidies of M$3.58B required by downstream players to stay competitive

Risk for upstream Malaysia


Special funding from government and/or upstream players to downstream The long-term solution that has been proposed is potential provision of incentives or subsidies to downstream either by the government or upstream segment. We estimate that in order to match the pricing advantage of US$66/t that Indo refiners have, total subsidies required works out to M$3.58B (based on total utilized 18MT of refining capacity domestically). This accounts for 6% of total palm oil sales of M$60.8B pa (assuming prices at M$3,200/t and total 19MT pa production from Malaysia). We believe the above indirectly implies that should the Malaysian government tax the upstream players to subsidize downstream, the amount would work out to 6% of CPO revenue for each player, if equally shared. This could hurt the smaller players in the upstream segment, which the government we believe may be reluctant to do for now ahead of impending general elections in Malaysia possibly in the next 3-6 months. Hence, the political repercussions from here can be avoided if the government takes on the full burden of subsidizing the downstream players, but raising the funds may still be an issue given the existing budget deficit and various other ongoing subsidy obligations still in place domestically (i.e. food, diesel etc). In the worst case, if entirely subsidized by the upstream players, the estimated impact of the additional cost or tax from here on earnings and price targets is presented in the table below. The more diversified plays (e.g., Sime and IOI) would be less impacted compared to the purer plays (e.g., KLK and Genting Plant). We estimate the impact to be a reduction in earnings by 5% for both Sime and IOI, and by 6.5% and 8.7% for KLK and Genting Plant, respectively.

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

With the additional cost or subsidies as noted above, our revised PTs compared to current levels, still would translate to upside potential of 13% for Sime (OW), but downside of 15% for Genting Plantations (UW), 10% for IOI Corp (UW) and a smaller 4% downside for KLK (Neutral).
Table 10: Malaysian CPO plays - Risk to earnings if upstream were to subsidize downstream (assuming full impact from FY12 on)
Share price (M$) 9.17 5.24 23.26 9.75 EPS (sen) FY12E 63.2 31.7 132.9 68.6 Base case EPS (sen) FY13E 68.1 35.9 152.9 78.1 EPS (sen) FY12E 57.6 (-8.7%) 30.1 (-5.0%) 124.2 (-6.5%) 65.1 (-5.1%) With downstream subsidies EPS (sen) Price target (M$) FY13E (Downside)/Upside % 62.0 7.80 (-9.0%) (-15%) 34.1 4.70 (-5.0%) (-10%) 143.4 22.40 (-6.2%) (-4%) 74.1 11.00 (-5.1%) (+13%)

Genting Plantations IOI Corp KL Kepong Sime Darby

Price Target (M$) 8.60 5.00 24.00 11.60

Source: J.P. Morgan estimates. Prices as of March 15, 2012.

Overall implications for the ASEAN palm oil sector


Increased competition from the export tax cuts in Indonesia since 4Q11, and possible counter measures by Malaysia has the following key implications for the sector. Malaysian downstream players to face challenging prospects for now. To withstand competition, the bigger players, IOI, KLK, Sime are already or have indicated plans to focus on greater cost controls, and production of higher valueadded products in the downstream sector where margins are higher.
IOI, KLK and Sime are all setting up new refineries in Indonesia to take advantage of the cost advantage

Super-normal profitability and market share gains for pure Indonesia refiners until impact of the recent investment boom in refining capacity to capitalize on the cost advantage in the country is felt (likely in the next 12-18 months which is the lead time to set-up operations by new entrants). Indias potential retaliation should be closely watched. India refiners have also been hard hit by the Indo tax cuts, with proposals for the government to increase import duties on refined palm oil to protect domestic producers. Nevertheless, the threat of food inflation reduces this possibility for now. However, if the Indian government succumbs to the proposal, this could erode some of the competitive edge that Indonesian refiners now command, and also pose as a threat as well for Malaysian refiners in the absence of any government counter measures. Counter measures by Malaysia could in the worst case impact upstream players if they are required to subsidize downstream via higher taxes. We have already estimated the worst case impact on the Malaysian names as above. We believe the valuation gap between Malaysia and Indonesia CPO stocks could continue to narrow in favor of the Indo plays (Malaysia commands a PE premium of 20-30% to Indonesia) especially in any short-term overshoot in CPO prices, given tight supply currently. This is in view of the current shift in profitability and market share to Indonesia and the overhang risk from potential counter measures in Malaysia, coupled with continued better long-term landbanking growth prospects in Indonesia for plantations.

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Appendix Indonesia export tax revision


Ying-Jian ChanAC (65)-6882-2378 ying.jian.yj.chan@jpmorgan.com JPMorgan Securities Singapore Private Limited

Favorable to Indo refiners, negative for Malaysian refiners


Effective 1 Oct-11, Indonesia changed the previously uniform export tax rate for CPO and refined palm oil where steep reductions in tax rate for refined palm products were implemented to promote the development of downstream palm refining and to encourage the export of refined products so that the value addition may be captured locally. Key highlights of the changes are shown below.
RBD Palm Olein New 0.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.5% 13.0% CPO - RBD PO Differential 0.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 9.5% 9.5% Biodiesel Old 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0% 2.0% 5.0% 5.0% 7.5% 10.0% New 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0% 2.0% 5.0% 5.0% 7.5% Change 0.0% 0.0% 0.0% 0.0% 0.0% -2.0% 0.0% 0.0% -3.0% 0.0% -2.5% -2.5%

Table 11: Key changes to Indonesia palm oil export tax (effective 1st Oct-11)
CPO price (US$/MT) CIF ROTT > than 700 750 800 850 900 950 1,000 1,050 1,100 1,150 1,200 1,250 CPO Old 1.5% 3.0% 4.5% 6.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% 22.5% 25.0% New 0.0% 7.5% 9.0% 10.5% 12.0% 13.5% 15.0% 16.5% 18.0% 19.5% 21.0% 22.5% Change -1.5% 4.5% 4.5% 4.5% 4.5% 3.5% 2.5% 1.5% 0.5% -0.5% -1.5% -2.5% Old 1.5% 3.0% 4.5% 6.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% 22.5% 25.0% Change -1.5% -1.0% -1.5% -2.0% -2.5% -4.0% -5.5% -7.0% -8.5% -10.0% -11.0% -12.0%

Source: Indonesia Ministry of Finance, J.P. Morgan.

Essentially, we believe this change will make refined palm products exported out of Malaysia, significantly less competitive than its Indonesian equivalent. This is due to the unique case in Indonesia where refiners are able to procure their CPO feedstock at spot price less the CPO export tax rate from the upstream CPO producers, while the Malaysia refiners pay the full spot price. In the past, the uniform export tax rate between CPO and refined products in Indonesia meant that whatever the refiner deducts from its CPO purchase is subsequently paid out in the form of export tax to the government, leaving the refiner relatively indifferent. However, with now a differential between the CPO and refined products tax rate, the Indonesia refiner is able to profit from the difference, although over time, some of these margins may be shared with the upstream CPO producers as well when the refining industry gets more mature and competitive.

10

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

New heightened competition for Malaysian refiners We illustrate below the favorable impact that Indonesian refiners could get over their Malaysian counterparts at various price points above US$700/t. We estimate that Indonesian refiners will enjoy pricing or cost advantage of US$96/t at product prices of US$1,120/t c.i.f. (close to our CPO forecast for 2012/13E) assuming Indonesian upstream players absorb 100% of the export tax on CPO. But, we understand upstream players absorb about 85% of the CPO export tax currently, translating to a cost advantage of up to US$66/t for Indonesian over Malaysian refiners, which is still substantial.
Table 12: Comparison between Malaysia and Indonesia refiner under new Indonesia export tax regime over various price points (US$/t)
Refiner At purchase of CPO feedstock CPO spot price Less: Indo export tax deducted CPO feedstock cost to refiner At sale of refined product Refined palm product price Less: Indo export tax paid to govt Effective selling price Refining margin Pricing advantage of Indo refiner Refiner At purchase of CPO feedstock CPO spot price Less: Indo export tax deducted CPO feedstock cost to refiner At sale of refined product Refined palm product price Less: Indo export tax paid to govt Effective selling price Refining margin Pricing advantage of Indo refiner
Source: J.P. Morgan estimates.

Malay 700 700 730 730 30 Malay 1,000 1,000 1,030 1,030 30

Indo 700 0.0% 0 700 730 0.0% 0 730 30 0 Indo 1,000 15.0% 150 850 1,030 7.0% 72 958 108 78

Malay 750 750 780 780 30 Malay 1,050 1,050 1,080 1,080 30

Indo 750 7.5% 56 694 780 2.0% 16 764 71 41 Indo 1,050 16.5% 173 877 1,080 8.0% 86 994 117 87

Malay 800 800 830 830 30 Malay 1,100 1,100 1,130 1,130 30

Indo 800 9.0% 72 728 830 3.0% 25 805 77 47 Indo 1,100 18.0% 198 902 1,130 9.0% 102 1,028 126 96

Malay 850 850 880 880 30 Malay 1,150 1,150 1,180 1,180 30

Indo 850 10.5% 89 761 880 4.0% 35 845 84 54 Indo 1,150 19.5% 224 926 1,180 10.0% 118 1,062 136 106

Malay 900 900 930 930 30 Malay 1,200 1,200 1,230 1,230 30

Indo 900 12.0% 108 792 930 5.0% 47 884 92 62 Indo 1,200 21.0% 252 948 1,230 11.5% 141 1,089 141 111

Malay 950 950 980 980 30 Malay 1,250 1,250 1,280 1,280 30

Indo 950 13.5% 128 822 980 6.0% 59 921 99 69 Indo 1,250 22.5% 281 969 1,280 13.0% 166 1,114 145 115

11

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Genting Plantations
Company description Genting Plantations is a 55%-owned listed plantation entity of Genting Bhd. The group has 65,838ha of plantation land-bank in Malaysia, of which 70% is located in Sabah and 30% in Peninsula Malaysia. The group also has three separate ongoing JVs in Indonesia with a total land-bank of 67,635ha. P&L sensitivity metrics (FY12E)
Average CPO Price Impact of each 5% Plantation EBIT Margins Impact of each 5ppt CPO production growth Impact of each 5ppt Production cost Impact of each 5%
Source: J.P. Morgan estimates.

EBITDA impact (%) 3,200 7.20% 50.6% 11.40% 6% 7.10% 30% of cost 0.90%

EPS impact (%) 8.50% 9.70% 8.30% 1.40%

Price target and valuation analysis We forecast CPO prices at M$3,200/t for 2012-13E. Our Dec-12 PT is M$8.60 based on 14x FY12E P/E, in line with the stock's historical mean. Revenue breakdown (FY11)

7%

93%

FY12E EPS (M$) Target FY11E P/E (x) Price Target (M$)
Property

0.63 14.00 8.60

(1) (2) (1) X (2)

Plantations

Source: Company Data. EPS: J.P. Morgan vs. consensus


J. P. Morgan FY12E FY13E FY14E 0.63 0.68 0.72 Consensus 0.58 0.63 0.51

Key risks to our PT are higher-than-expected CPO prices versus our forecast and significantly stronger-than-expected contributions from the Johor premium outlets which commenced operations in Dec-11. Please refer to Table 2 for regional valuation comparison table

Source: Bloomberg, J.P. Morgan estimates

12

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Kuala Lumpur Kepong


Company Description KLK is the third-largest plantations company by market cap in Malaysia, with 251,196ha of plantation landbank in Peninsula Malaysia, Sabah and Indonesia, of which 200,375ha planted as at end-2010 (89% with oil palm and 11% with rubber). KLK also operates an oleo-chemical business, and is a property developer, as well as international retailer under the brand-name of Crabtree & Evelyn. FY11 operating profit breakdown P&L sensitivity metrics (FY12E)
Average CPO Price (M$/t) Impact of each 5% Plantation EBIT Margins Impact of each 5ppt CPO production growth Impact of each 5ppt Fertilizer Cost Impact of each 5%
Source: J.P. Morgan estimates.

EBITDA impact (%) 3,150 4.5% 32.4% 11.9% 10% 3.0% 30% of cost 1.0%

EPS impact (%) 5.2% 13.8% 3.5% 0.8%

Price target and valuation analysis We forecast CPO prices at M$3,200/t for 2012-13E. Our Dec-12 PT of M$24.00 for KLK is based on sum-of-the-parts analysis.

84% 13%

Sum-of-the-parts (SOTP) - CY12E Plantation Property, Manufacturing & Retail Total RNAV Total No. of shares

M$MM 23,527 2,000 25,527 1,065

Comment 18x CY12E PE 1x P/B

3% Plantations
Source: Company reports.

Manufacturing

Property

EPS: J.P. Morgan vs. consensus


J. P. Morgan FY12E FY13E FY14E 1.37 1.58 1.76 Consensus 1.38 1.42 1.47

Implied blended PE of Price target 24.00 17x At our PT, the implied CY12E P/E for KLK is 17x, a premium to the sector average of 16x, which we believe is fair, given the group's superior fundamentals versus peers. This is in view of its younger trees and effective expansion into Indonesia over the last few years. Key upside risk to our PT is stronger-than-expected CPO prices. Key downside risk is a much more challenging or competitive environment for the downstream manufacturing unit.

Source: Bloomberg, J.P. Morgan estimates.

13

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

IOI Corporation
Company Description IOI Corp is the second-largest plantations company by market cap in Malaysia, with 150,931ha of planted land-bank, 99% of which is in Malaysia. IOI has two new palm oil JVs in Indonesia (i.e. 33%-stake and 67%-stake for development of 100,000ha and 66,000 ha of land respectively). IOI is also involved in downstream manufacturing operations (i.e. refining, oleochemicals, specialty fats) as well as property development in Malaysia (Klang Valley & Johor) and Singapore. Operating profit breakdown (FY11) P&L sensitivity metrics (FY12E)
Average CPO Price (M$/t) Impact of each 5% Plantation EBIT Margins Impact of each 5% ppt CPO production growth Impact of each 5ppt Fertilizer cost Impact of each 5%
Source: J.P. Morgan estimates.

EBITDA impact (%) 3,075 4.0% 64.3% 4.50% 7% 2.60% 30% of cost 0.40%

EPS impact (%) 4.40% 4.80% 2.80%

0.50%

Price target and valuation analysis We forecast CPO prices at M$3,200/f for 2012-13E. Our Dec-12 PT is M$5.00 based on sum-of-the-parts (SoTP) valuation.

2%

14%

Sum-of-the-parts (CY12E) Plantation Property


62%

M$MM 22,979 4,513 4,722 32,215 5.02

22%

Manufacturing Total RNAV SOTP/share (M$)

Comment 17x PE on CY12E RNAV 10x PE on CY12E, implying 1.2x P/B 15x implied blended PE on CY12E

Plantation Property Inv.


Source: Company reports.

Property Dev. Manufacturing

At our PT, the implied CY11E blended P/E is 15x versus the sector's historical mean of 16x. Key risks to our PT are stronger-than-expected CPO prices, and also strong long-term contributions from the group's recent property acquisitions in Singapore.

EPS: J.P. Morgan vs consensus


J. P. Morgan FY12E FY13E FY14E 0.32 0.36 0.39 Consensus 0.33 0.35 0.37

Source: Bloomberg, J.P. Morgan estimates.

14

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Sime Darby
Company Description Sime Darby is the largest listed plantations company on Bursa after its merger with Golden Hope and Kumpulan Guthrie, completed in Nov-07. The group's six core businesses are plantations, property, heavy equipment, auto, energy & utilities, and healthcare. The plantations segment is the largest profit contributor, estimated at 58% of profits for FY12E. Simes FY11 profit breakdown
Motor 10% Energy 4%

P&L sensitivity metrics (FY12E)


Average CPO Price (M$/t) Impact of each 5% Plantation EBIT Margins Impact of each 5ppt CPO production growth Impact of each 5ppt Fertilizer cost Impact of each 5%
Source: J.P Morgan estimates.

EBITDA impact (%) 2,932 3.8% 25% 10.20% 7% 5.00% 30% of cost 0.70%

EPS impact (%) 4.7% 12.40% 6.10% 1.00%

Heav. Equip. 19%

Plant. 59%

Prop. 8%

Price target and valuation analysis We forecast CPO prices at M$3,200/t for 2012-13E. Our Dec-12 PT of M$11.60 is based on sum-of-the-parts valuation. Sum-of-the-parts (SoTP) M$ Comment Plantation 7.48 17x CY12E PE Property 1.39 30% RNAV discount Heavy equipment 1.70 11x CY12E PE Auto 0.76 10x CY12E PE Others 0.22 Implied CY12E PE of 9x Implied blended CY12E PE of SOTP 11.55 16x Price target 11.60
At our PT, the implied CY12E blended P/E for Sime is about 16x, in line with the stocks and sectors historical mean. Key downside risks to our PT are:

EPS: J.P. Morgan vs. consensus


J. P. Morgan FY12E FY13E FY14E 0.68 0.78 0.84 Consensus 0.68 0.71 0.74

1) The court rules in favor of the E&O minority and Sime is required to make a GO for the remaining E&O shares it does not own, especially if new evidence suggests that there was collusion in the takeover deal. We believe, however, that this is an unlikely outcome (see our Sime Note dated 2 Feb-12 for details). 2) Acquisitions and overseas expansion risk. a) Sime has palm oil concessions in Liberia. However, the group has been expanding here cautiously with no more than 5,000ha of total plantings in the next 1-2 years (of the total 220,000 ha concession), with total development cost of no more than M$100MM we estimate. b) The Star reports that Sime may be looking to buy a 70% stake in the 1,400MW Jimah IPP in Malaysia. This is a third-generation IPP where IRRs are estimated at about 10-12% versus a WACC of no more than 10%. Much is dependant on pricing which remains a key risk. 3) Lower-than-expected CPO prices versus our forecast and a challenging environment for the downstream segment.

Source: Bloomberg, J.P. Morgan estimates.

15

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Companies Recommended in This Report (all prices in this report as of market close on 16 March 2012) Astra Agro Lestari (AALI.JK/Rp21350/Neutral), First Resources Limited (FRLD.SI/S$1.89/Overweight), Golden AgriResources Ltd (GAGR.SI/S$0.75/Neutral), London Sumatra Indonesia (LSIP.JK/Rp2825/Overweight), Sime Darby Berhad (SIME.KL/M$9.76/Overweight)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Astra Agro Lestari within the past 12 months. Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Astra Agro Lestari, Sime Darby Berhad. Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Astra Agro Lestari. Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking Astra Agro Lestari. Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Astra Agro Lestari, Sime Darby Berhad. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or emailing research.disclosure.inquiries@jpmorgan.com with your request.
First Resources Limited (FRLD.SI, FR SP) Price Chart
3

OW S$1.9

OW S$2.1

OW S$1.65

OW S$1.75

OW S$1.7

Date 11-Jan-10 12-Nov-10 13-Jan-11 25-Oct-11 16-Feb-12

Rating Share Price (S$) OW OW OW OW OW 1.16 1.40 1.53 1.36 1.82

Price Target (S$) 1.65 1.75 1.90 1.70 2.10

Price(S$)

0 Dec 07 Sep 08 Jun 09 Mar 10 Dec 10 Sep 11

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Jan 11, 2010.

16

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Date 02-Oct-06 24-Nov-06 08-Jan-07


Astra Agro Lestari (AALI.JK, AALI IJ) Price Chart

Rating Share Price (Rp) OW OW OW OW OW OW OW OW OW OW OW N OW OW OW UW UW UW OW OW OW N N N 8900 10600 12250 12050 14250 16050 23000 32050 25100 23900 16100 8100 9800 15050 18700 22150 23850 24200 23250 18550 20050 20850 25450 23850 21700 19850 22550

Price Target (Rp) 10000 12700 16700 16200 17000 18500 30000 36300 33200 31500 22000 9000 9000 15000 21500 25000 26700 26000 19000 14500 17000 23500 28000 27600 20000 19000 22500

06-Mar-07 28-Aug-07 20-Sep-07 14-Nov-07


N Rp22,500

55,704OW Rp16,700 OW Rp30,000 OW Rp31,500 Rp9,000OW Rp25,000 N 46,420 Rp12,700 OW Rp18,500 Rp33,200 Rp9,000 Rp21,500 OW OW OW OW

UW Rp14,500 OW Rp28,000

UW Rp19,000 N Rp20,000 OW Rp23,500

01-Feb-08 24-Apr-08 12-Aug-08 12-Nov-08 23-Apr-09 12-Jun-09 12-Aug-09 16-Apr-10

37,136 Rp10,000 OW Rp17,000 OW OW Rp16,200 OW Rp36,300Rp22,000N Rp15,000 Rp26,700 Rp17,000 OW OW OW Rp26,000OW Rp27,600 N Rp19,000 UW Price(Rp)

06-May-08 OW

27,852

12-Dec-08 N

18,568

9,284

04-Dec-09 OW 28-Apr-10 16-Jul-10 13-Aug-10 21-Sep-10 29-Oct-10 13-Jan-11 25-Feb-11 25-Oct-11 16-Feb-12

0 Oct 06 Jul 07 Apr 08 Jan 09 Oct 09 Jul 10 Apr 11 Jan 12

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Oct 02, 2006.

London Sumatra Indonesia (LSIP.JK, LSIP IJ) Price Chart


4,932

Date
4,110 UW Rp430UW Rp760 OW Rp2,900

Rating Share Price (Rp) OW OW UW UW UW OW OW OW OW 1930 1250 570 680 895 1640 1840 2310 2400 2075 2750

Price Target (Rp) 2600 1800 430 580 760 1960 2140 2920 2950 2400 2900

23-Apr-08 12-Aug-08 11-Nov-08 26-Feb-09 23-Apr-09

3,288 Price(Rp)

OW Rp2,600 OW Rp1,800 UW Rp580

OW Rp1,960

OW Rp2,140 Rp2,920 Rp2,950 Rp2,400 OW OW OW

2,466

1,644

04-Dec-09 OW 13-Aug-10 13-Jan-11 25-Oct-11

822

31-May-11 OW 16-Feb-12

0 Feb 08 Nov 08 Aug 09 May 10 Feb 11 Nov 11

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Apr 23, 2008.

17

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Golden Agri-Resources Ltd (GAGR.SI, GGR SP) Price Chart


1

Date 24-Aug-09
Price(S$)0.5

Rating Share Price (S$) UW UW UW UW N N 0.48 0.60 0.57 0.78 0.66 0.62 0.77

Price Target (S$) 0.40 0.45 0.50 0.58 0.75 0.65 0.75

11-Jan-10 13-Aug-10 13-Jan-11 25-Oct-11 16-Feb-12

13-May-11 N

0 Oct 06 Jul 07 Apr 08 Jan 09 Oct 09 Jul 10 Apr 11 Jan 12

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Aug 24, 2009.

Date 01-Feb-08 27-Feb-08 03-Mar-08 13-Apr-08


Sime Darby Berhad (SIME.KL, SIME MK) Price Chart
24 OW M$13.4 M$10.3 OW N M$7.3 UW M$4.8 M$6.7 OW M$10.6 N N M$8 OW M$10.4 OW M$11.3

Rating Share Price (M$) N N OW OW OW OW OW OW N UW N UW N N UW N OW OW 11.80 11.90 11.10 8.85 8.85 8.05 6.90 6.60 6.60 6.40 5.50 5.75 6.40 6.85 6.85 8.31 8.25 8.98 8.60 8.25 7.60 7.60 7.88 8.74 9.30 8.55 8.88 9.64 9.57

Price Target (M$) 13.20 13.40 13.40 12.80 12.30 10.30 7.70 7.30 7.30 5.80 5.80 4.80 6.30 6.00 6.70 7.80 8.70 10.60 10.30 10.10 8.00 8.40 9.40 10.40 11.00 10.20 10.40 11.30 11.60

06-Jun-08 25-Jul-08 12-Aug-08 30-Sep-08 16-Oct-08


OW M$10.1 M$9.4 OW OW M$10.4

18 N M$13.4 M$12.3 M$7.3M$5.8 N M$6 M$8.7 OW OW N N

11-Nov-08 12-Jan-09

N OW M$12.8 M$7.7M$5.8 N M$6.3 M$7.8 M$13.2 OW UW UW Price(M$) 12

OW M$10.3 N M$8.4 OW M$11

OW M$10.2 OW M$11.6 26-Feb-09

22-Apr-09 22-Jun-09

26-May-09 N
6

07-Aug-09 28-Aug-09 26-Nov-09 26-Feb-10


Jan 08 Oct 08 Jul 09 Apr 10 Jan 11 Oct 11

13-May-10 OW 28-May-10 N 13-Aug-10 27-Aug-10 27-Nov-10 13-Jan-11 25-Oct-11 25-Nov-11 16-Feb-12 29-Feb-12 N OW OW OW OW OW OW OW

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Feb 01, 2008.

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N= Neutral, UW = Underweight

18

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] In our Asia (ex-Australia) and UK small- and mid-cap equity research, each stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research website, www.morganmarkets.com. Coverage Universe: Yeoh, Simone Xenia: CapitaMalls Malaysia Trust (CAMA.KL), Genting Plantations (GENP.KL), IGB Corporation (IGBS.KL), IJM Land (IJML.KL), IOI Corp. (IOIB.KL), KLCC Property Holdings (KCCP.KL), Kuala Lumpur Kepong (KLKK.KL), MISC Berhad (MISC.KL), SP Setia (SETI.KL), Sime Darby Berhad (SIME.KL), Sunway REIT (SUNW.KL), WTK Holdings Berhad (WTKH.KL) Chan, Ying-Jian: BreadTalk Group Limited (BRET.SI), China Agri-Industries (0606.HK), China Minzhong Food Corporation Limited (CMFC.SI), ComfortDelgro (CMDG.SI), First Resources Limited (FRLD.SI), Golden Agri-Resources Ltd (GAGR.SI), Hyflux Limited (HYFL.SI), Indofood Agri Resources Ltd (IFAR.SI), Mewah International Inc (MEWI.SI), SMRT (SMRT.SI), ST Engineering (STEG.SI), SingPost (SPOS.SI), Wilmar International Limited (WLIL.SI) Srinath, Aditya: Astra Agro Lestari (AALI.JK), Astra International (ASII.JK), Bank Central Asia (BCA) (BBCA.JK), Bank Danamon (BDMN.JK), Bank Niaga (BNGA.JK), Bank Pan Indonesia (Panin) (PNBN.JK), Bank Rakyat Indonesia (BBRI.JK), London Sumatra Indonesia (LSIP.JK), PT Bakrie & Brothers, Tbk (BNBR.JK), PT Bank Internasional Indonesia (BNII.JK), PT Bank Mandiri Tbk. (BMRI.JK), PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK), United Tractors (UNTR.JK) J.P. Morgan Equity Research Ratings Distribution, as of January 6, 2012
J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 47% 52% 45% 72% Neutral (hold) 42% 45% 47% 62% Underweight (sell) 12% 36% 8% 58%

*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.morganmarkets.com , contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in
19

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 032/01/2012 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies 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. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Securities Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the
20

Simone Yeoh (60-3) 2270-4710 simone.x.yeoh@jpmorgan.com

Asia Pacific Equity Research 17 March 2012

securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. "Other Disclosures" last revised January 6, 2012.

Copyright 2012 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

21

Вам также может понравиться