Abo Yeos Assignment Essay Example

of SSW. Balance sheet is solid with zero borrowing and cash of Airmail (Essen/share) as at 1 JIFFY 2.

Assuming FYI IF-OFF cape of Airmail is artsy financed by debt, net gearing is still manageable at 5%-6%. Our DIPS forecast with a 3%-4% yield p. A. Is premised on a dividend payout ratio of 50%- close to its historical payout of 55%. Valuation is attractive, at a 16% discount to peers' average of xx and a wider 35% to closest competitor Fraser & Nave Bad (FAN Ms Equity, Hold). As it is, YES is trading at a discount to Coolant Holdings (COLA Ms Equity, Buy), despite the formers larger market capitalization and higher PEPS growth.

Catalysts for re-rating and upside potential include:

1) synergistic M within core F industry ND;

2) unlocking of value through divestment/development of untilled landmark.

YES is very under-owned by the institutional funds (10 SSW. New PET lines a strategic first mover advantages Having re-aligned its operations to leverage on its popular SAD, YES has put in place a solid strategy to accelerate growth and market share. Expansion is already underway in Malaysia where it plans to ramp up annual capacity - we estimate a 200% boost to circa 200 million lilitter

More importantly, YHYes'sew PET production lines in Shah AlLamlant are expected to spearhead market share growth arising roroom first-mover advantage in pushing out a broader range of ASSADCurrently, ASSADn PET is limited to few tea-based variants. Earnings from Indonesia more than tripled in FYI 1 on back of 20% sales volume growth The group recorded a 20% YOYOUales volume surge in FYI 1 . In the same year, turnover

from Indonesia more than tripled from RMAirmailn the preceding year to RMAirmailConsequently, earnings from Indonesia returned to the black with a pre-tax profit of RMI mil.

ASSADn PET format is an unundeservedarket Upon completion in mid-FYI 3FIFthis plant will enable YHYESo tap into the unundeservedET sub-segment. Needless to say, one of the greatest benefits of PET bottles is the screw cap design which allows consumption at consumers' discretion. In other Asian markets such as Taiwan and Hong Kong where demand for ASSADorms the bulk of the beverage industry, the apapparentrend is ASSADackaging in PET bottles. Setback in 2009 due to cancellation of product lilicensesHYESas been growing its presence in Indonesia since as early as 2006.

It exports finished goods from its Malaysian plant at present. In 2009, the group suffered a setback when 15 out of its 31 registered product lilicensesere cancelled by InIndonesianood and medicine authority (BPBOOMdue to compliance issues. AmMarchersdSDhBad YeYeiHipeSeenM) BhBadisputed legal suit ruled in fafavorf YHYESccording to management, the cancellation arose as a consequence of a legal suit brought by PTPIThCharismanAntiePersonaKIP) against the group's wholly-owned subsidiary YHYESndonesia. KIP is a distributor of VHPHs'sroducts in Indonesia.

As at 1 QFJIFFYthe legal suit in relation to an alleged breach of an alleged agreement and an alleged distributor's agreement has since been ruled in fafavorf YHYESCountry Malaysia Singapore Indonesia Most popular flflavoroya bean milk Chrysanthemum Grass Jelly Source: Company, AmMarchersough love with Indonesia soon to be requited... This underscores our confidence that things have turned around, with the group back on track to accelerate expansion plans in Indonesia after an almost 2-year delay.

The group is confident of attaining new lilicensesor those products which

were affected. Management remains positive on the market outlook in Indonesia as buoyed by its huge population of 248 million. VHPHs'sstimated market share in Indonesia is only a small 1%-2% at present. Other beverages contribute circa 10%-12% of group revenue The group also has market representations in other beverage categories - isotonic drinks through proprietary 'H-Two-O' brand which is popular in Singapore, yogurt, juices and 'Hidden Valley mineral water (See Chart 4).

YHYEStarted from humble beginnings back in the 19sassith a production shop in Singapore producing soSoyaauce before quickly expanding into Malaysia a few years ateaterThe group then ventured into beverages producing soSoyaean milk, becoming the first globally to package the drink using tetra-brbrickseptic containers using UHOUTrocess. From there, the group diversified into food products and other beverages.

Source:

Company website, AmMarchersxtensive range of ASSADeverages - 5 different categories The group offers five different categories of ASSADeverages - soSoyatea, cooling, JuJustasnd SoCherisho cater to the diverse consumer preferences (See Chart 6). Product range is extensive. For example, VHPHs'sriginal soSoyaean milk is available in different lalovers corn, rose and black sesame. 'CiCantinanoodles to underscore growth under food division Beverage businesses aside, YHYESlso produces food products namely noodles, canned food and sauces (See Chart 7).

Despite razor-thin margins and a highly competitive business environment for noodle food segment, the group had built a ststrongrand equity through the 'CiCantinalabel. CiCantinarand commands a market share of approximately 13% in the instant noodle soup-base category in Malaysia. YHYes'sanned food comprises a selection of meat, seafood and vegetable products such as curry chicken and baked bebearsIts sauces manufacturing arm is principally involved in production of soSoyaauce, tateacupchchilltomato and vinegar.

Soya bean

milk - the preferred choice by consumers in Malaysia Soya bean milk is also the most popular flflavorn Malaysia, while chrysanthemum is the preferred choice in Singapore. Over in Indonesia, grass Jelly holds the top spot, although we expect other flflavorsn the pipeline to perform equally well once they are launched (see Table 1). 4 FIFINANCIAL RISKS Robust 3-year earnings CACARRf 24% We forecast earnings to grow by 28% from RMARMYil in FYFYIo RMAirmailafter djadjustingor seasonal factors due to festive sales in IQSPIFFY

First quarter earnings are historically the ststrongestaccounting for 25%-30% of fuflayerarnings. The group posted a net profit of RMAirmailor 1 Q. Our earnings forecast model reveals a 3-year earnings CACARRf 24%, underpinned by an expanded production capacity assumption. We expect the current ututilizationate of circa 78%-80% to dip once new PET lines come on board. To be conservative, we have only factored in slight margin improvement of 1 to 2ppetsrom operational efficiencies. The group is on track to conclude its rarationalizationxercise from 5 plants to 3 by end-FYI 2FIF

So far, it has closed its manufacturing facility in KuChuckingSaKarakasnd is in the midst of consolidating its PeFettlingaJaylant into Shah AlLamThe group is maintaining its sauces & canned food production in JoJuroraBarrand noodles production in IpIIOPPeOperaInitiate coverage with a BUY, fair value of RMARM90/share We initiate coverage on YHYESith a fair value of RMARM90/share based on a PEPEEf 17.  Our valuation is at ?ISKIDSbove its mean of 15xxiven that the group is embarking on a new era of higher growth from market share gains and eogeographicalxpansion into Indonesia.

Our fair value is also supported by our DCDOCvalue of RMARM20/share (WAWAC8. 9%). Historical PER

band ranges from 12xxo 19xxwith valuation taking a hit during loss-making periods (See Chart 5). Valuation is attractive, at a 16% discount to peers' average of 20xxnd a wider 35% to closest competitor Fraser & NeNavehBadFNFANkMsquity, Hold). As it is, YHYESs trading at a discount to CoCoolantoldings (COLA MkMsquity, Buy) despite the foformersarger market cacapitalizationnd higher EPPEPSrowth (See Table 2). YHYESs very under-owned by the institutional funds.