first resources initiating coverage cimb

7/24/2019 First Resources Initiating Coverage CIMB

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PlantationsSINGAPOREMay 21, 2013

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.Designed by Eight, Powered by EFA

Elixir of youthFirst Resources' 1Q13 results cement our conviction of its superioroperating efficiency over peers. Its young estates offer strong FFBprospects, partially mitigating lower CPO prices. Low production costsrender it one of the most profitable planters under our coverage.

We initiate coverage with anOutperform and S$2.22 target price,

based on 12.3x CY14 P/E (1SD aboveits 4-year mean). Re-rating catalystsare expected from higher FFBproduction and potential dividenduplifts when free cash flowsstrengthen from 2014.

Strong FFB growth partiallyoffsets lower CPO pricesAmid our expectations of lower CPOprices this year, we advocate stocksthat offer strong FFB growthprospects to cushion lower ASPs and

higher production costs. FirstResources fares well in this regard.Its estates are nine years old onaverage, and are just entering theprime of their productivity cycle.FFB growth from these estates,coupled with its recent acquisition ofbrownfield estates, should jack up itsFFB output by 10% in FY13, weestimate, although group FFB yieldsmay be diluted by thenewly-acquired estates in the nearterm.

Additional income stream

from refineryWe expect additional income from itsrefinery expansion. First Resourcescurrently refines just half of its CPOoutput. With a new 600,000-tonnerefinery coming on stream in 2H13,it will be able to refine its entire CPOproduction. This will allow the groupto sell its palm products at higherprices as refined palm productsattract lower export taxes.Downstream expansion should alsohelp the group cope better with

excess supply or high inventoriesthan pure upstream planters.

Transforming into a cashcowFree cash flows should improvemarkedly in FY14 when capex scalesdown and operating cash flowsimprove. We think there is room forhigher dividend payouts if no M&Aopportunities surface.

Notes from the Field

LEE Wen ChingT(65) 6210 [email protected]

Ivy NG Lee Fang, CFA

T (60) 3 2084 9697E [email protected]

Company Visit Expert Opinion

Channel Check Customer Views

We anticipate palm oilprices to remain volatilethis year. However thesofter CPO price willencourage increasedusage of palm oil for foodand non-food uses.

First Resources

First Resources Ltd COMPANY NOTEFR SP / FRLD.SI

Current S$1.90 SHORT TERM(3 MTH) LONG TERM

Market Cap AvgDaily Turnover Free Float Target S$2.22

US$2,396m US$3.41m 31.3% Previous Target NAS$3,010m S$4.22m 1,584 m shares Up/downside 16.9%

Conviction| |

758288

95102108115122128135

1.4

1.6

1.8

2.0

2.2

Price Close Relative to FSSTI (RHS)

Source: Bloomberg

5

10

15

May-12 Aug-12 Nov-12 Feb-13

Volm

Financial Summary

Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Revenue (US$m) 494.6 603.4 556.6 669.8 806.1

Operating EBITDA (US$m) 333.0 370.8 319.7 374.1 447.0

Net Profit (US$m) 196.4 237.1 200.0 232.2 283.8

Core EPS (US$) 0.11 0.14 0.13 0.15 0.18

Core EPS Growth 53.3% 20.5% (8.3%) 16.1% 22.2%

FD Core P/E (x) 14.29 11.40 11.98 10.32 8.44

DPS (US$) 0.025 0.030 0.038 0.044 0.054

Dividend Yield 1.65% 1.98% 2.50% 2.91% 3.55%

EV/EBITDA (x) 6.92 6.73 8.12 6.85 5.58

P/FCFE (x) 253.7 9.5 43.1 20.7 14.0Net Gearing 5.3% 11.5% 10.5% 6.2% 0.3%

P/BV (x) 2.51 2.17 1.92 1.70 1.49

Recurring ROE 20.9% 21.1% 17.0% 17.5% 18.8%

% Change In Core EPS Estimates

CIMB/consensus EPS (x) 0.95 0.93 0.97

1.90

2.22

1.54 2.20

Target

52-week share price range

Current

SOURCE: CIMB, COMPANY REPORTS


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First Resources LtdMay 21, 2013

2

PEER COMPARISON

Research Coverage

Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside

Wilmar International WIL SP SG OUTPERFORM 17,266 3.39 3.74 10.3%

Indofood Agri Resources IFAR SP SG UNDERPERFORM 1,245 1.09 1.02 -6.4%

Golden Agri-Resources GGR SP SG NEUTRAL 5,826 0.57 0.56 -1.8%

First Resources Ltd FR SP SG OUTPERFORM 2,396 1.90 2.22 16.9%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling P/BV (x)

Wilmar International Indofood Agri Resources

Golden Agri-Resources First Resources Ltd

0

5

10

15

20

25

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling FD P/E (x)

Wilmar International Indofood Agri Resources

Golden Agri-Resources First Resources Ltd

0%

3%

6%

10%

13%

16%

0.0

0.5

1.0

1.5

2.0

2.5

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Peer Aggregate: P/BV vs Recurring ROE

Rolling P/BV (x) (lhs) Recurring ROE (rhs)

-30%

-21%

-13%

-4%

5%

14%

23%

31%

40%

0

2

4

6

8

10

12

14

16


Peer Aggregate: FD P/E vs FD EPS Growth

Rolling FD P/E (x) (lhs) Fully Diluted EPS Growth (rhs)

ValuationP/E (FD) (x) P/BV (x) EV/EBITDA (x)

Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14

Wilmar International 13.93 13.92 12.38 1.20 1.12 1.05 13.25 13.12 11.97

Indofood Agri Resources 11.68 18.13 16.07 0.89 0.85 0.80 6.86 8.27 8.57

Golden Agri-Resources 14.15 17.09 14.16 0.68 0.66 0.64 8.96 11.34 9.07

First Resources Ltd 10.11 11.98 10.32 2.17 1.92 1.70 6.73 8.12 6.85

Growth and ReturnsFully Diluted EPS Growth Recurring ROE Dividend Yield

Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14

Wilmar International -22.5% 0.1% 12.4% 8.4% 8.6% 9.0% 1.85% 1.47% 1.65%

Indofood Agri Resources -29.6% -35.6% 12.8% 7.8% 4.8% 5.1% 0.00% 0.00% 0.00%

Golden Agri-Resources -69.3% -17.2% 20.7% 4.9% 4.0% 4.7% 1.93% 1.20% 1.45%First Resources Ltd 20.1% -15.6% 16.1% 21.1% 17.0% 17.5% 1.98% 2.50% 2.91%


Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends


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3

Lower FY13 earnings onaccount of lower CPO prices,partially offset by highervolume

Higher operating cash inflowsand lower investing cashoutflows to boost free cashflows from FY14

Share price infoShare pxperf. (%) 1M 3M 12M

Relative 1.8 -7.7 -7.6

Absolute 6.7 -2.6 16.2

Major shareholders % held

Eight Capital Inc 63.2

FMR 6.3

DB Intl Trust Singapore 5.6 0.0%

4.2%

8.3%

12.5%

16.7%

20.8%

25.0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan-09 Jan-10 Jan -11 Jan -12 Jan-13 Jan-14

P/BV vs Recurring ROE

Rolling P/BV (x) (lhs) Recurring ROE (rhs)

-20%-12%-4%4%12%20%28%36%44%52%60%

02468

101214161820


FD Core P/E vs FD Core EPS Growth

Rolling FD Core P/E (x) (lhs) FD Core EPS Growth (rhs)

Profit & Loss(US$m) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Total Net Revenues 494.6 603.4 556.6 669.8 806.1

Gross Profit 345.9 382.2 389.6 468.9 564.3

Operating EBITDA 333.0 370.8 319.7 374.1 447.0

Depreciation And Amortisation (23.5) (25.3) (27.5) (33.7) (35.9)

Operating EBIT 309.5 345.5 292.2 340.4 411.0

Total Financial Income/(Expense) (27.8) (19.2) (21.5) (21.5) (21.5)

Total Pretax Income/(Loss) from Assoc. 0.0 0.0 0.0 0.0 0.0

Total Non-Operating Income/(Expense) 0.0 0.0 0.0 0.0 0.0

Profit Before Tax (pre-EI) 281.7 326.3 270.7 318.9 389.5

Exceptional Items

Pre-tax Profit 281.7 326.3 270.7 318.9 389.5

Taxation (75.8) (78.1) (59.5) (73.4) (89.6)

Exceptional Income - post-tax

Profit After Tax 205.9 248.2 211.1 245.6 299.9

Minority Interests (9.5) (11.1) (11.1) (13.4) (16.1)Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Net Profit 196.4 237.1 200.0 232.2 283.8

Recurring Net Profit 167.0 210.2 200.0 232.2 283.8

Fully Diluted Recurring Net Profit 167.0 210.2 200.0 232.2 283.8

Cash Flow

(US$m) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

EBITDA 333.0 370.8 319.7 374.1 447.0

Cash Flow from Invt. & Assoc.Change In Working Capital (35.6) (29.5) 17.0 (3.4) (4.1)

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow (40.2) (49.1) (0.0) (0.0) 0.0

Net Interest (Paid)/Received (29.1) (22.7) (21.5) (21.5) (21.5)

Tax Paid (51.9) (73.0) (59.5) (73.4) (89.6)

Cashflow From Operations 176.3 196.5 255.6 275.9 331.8

Capex (158.3) (174.8) (200.0) (160.0) (160.0)

Disposals Of FAs/subsidiaries

Acq. Of Subsidiaries/investments

Other Investing Cashflow (40.0) (55.3) 0.0 0.0 0.0

Cash Flow From Investing (198.3) (230.2) (200.0) (160.0) (160.0)

Debt Raised/(repaid) 31.5 285.2 0.0 0.0 0.0

Proceeds From Issue Of Shares 17.8 0.1 0.0 0.0 0.0

Shares Repurchased

Dividends Paid (36.7) (47.5) (60.0) (69.7) (85.1)

Preferred Dividends

Other Financing Cashflow 11.2 (10.1) 0.0 0.0 0.0

Cash Flow From Financing 23.8 227.7 (60.0) (69.7) (85.1)

BY THE NUMBERS



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4

Net gearing remainsconservative at 11%

Balance Sheet

(US$m) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Total Cash And Equivalents 210 405 400 447 533

Total Debtors 51 62 66 74 84

Inventories 39 58 39 47 56

Total Other Current Assets 17 36 36 36 36

Total Current Assets 317 561 541 603 709

Fixed Assets 275 321 394 420 444

Total Investments 0 0 0 0 0

Intangible Assets 65 107 107 107 107

Total Other Non-Current Assets 843 942 1,042 1,142 1,242

Total Non-current Assets 1,183 1,370 1,543 1,669 1,793

Short-term Debt 40 40 40 40 40

Current Portion of Long-Term Debt 48 0 0 0 0

Total Creditors 53 59 61 74 89

Other Current Liabilities 35 31 31 31 31

Total Current Liabilities 176 131 133 145 160Total Long-term Debt 171 174 174 174 174

Hybrid Debt - Debt Component 0 324 324 324 324

Total Other Non-Current Liabilities 224 145 145 145 145

Total Non-current Liabilities 395 643 643 643 643

Total Provisions 0 0 0 0 0

Total Liabilities 572 773 775 788 803

Shareholders' Equity 885 1,106 1,246 1,409 1,608

Minority Interests 44 51 62 76 92

Total Equity 928 1,158 1,309 1,485 1,699

Key Drivers


Planted Estates (ha) 132,251 146,403 173,003 191,003 209,003

Mature Estates (ha) 85,699 98,181 122,888 134,309 148,461

FFB Yield (tonnes/ha) 22.2 23.0 19.5 21.1 22.1

FFB Output Growth (%) 19.8% 14.2% 10.4% 18.2% 16.2%

CPO Price (US$/tonne) 919 882 822 815 838

BY THE NUMBERS

Key Ratios


Revenue Growth 49.9% 22.0% (7.8%) 20.3% 20.4%

Operating EBITDA Growth 28.3% 11.3% (13.8%) 17.0% 19.5%

Operating EBITDA Margin 67.3% 61.5% 57.4% 55.9% 55.4%

Net Cash Per Share (US$) (0.033) (0.084) (0.087) (0.058) (0.003)

BVPS (US$) 0.60 0.70 0.79 0.89 1.01

Gross Interest Cover 10.64 18.02 13.57 15.81 19.09

Effective Tax Rate 26.9% 23.9% 22.0% 23.0% 23.0%

Net Dividend Payout Ratio 18.7% 20.0% 30.0% 30.0% 30.0%

Accounts Receivables Days 17.48 20.85 24.26 23.39 23.39

Inventory Days 70.9 80.5 105.9 78.0 78.0

Accounts Payables Days 121.7 93.1 131.7 122.5 122.5

ROIC (%) 26.8% 23.9% 16.9% 17.8% 19.8%

ROCE (%) 28.9% 24.0% 16.5% 17.6% 19.3%



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5

Elixir of youth

1. COMPANY BACKGROUND

1.1 Integrated palm-oil producer in IndonesiaFirst Resources is an integrated palm-oil producer based in Indonesia, withoperations spanning from planting and milling to refining. It owns 137,476 haof nucleus estates and 12 CPO mills with an operating capacity of 4.05m tonnesper annum. On top of this, it owns 21,261 ha of plasma estates, which represent13% of its total estates.

First Resources ranks 10th in our plantations universe in terms of area ofplanted estates and mature estates, but is the fifth-largest of listedIndonesia-based planters. The size of its planted estates trails that ofbehemoths such as Sime Darby (552,805 ha) and Golden Agri-Resources

(366,914 ha).Besides upstream operations, First Resources has a 250,000-tonne p.a. refinerywhich processes about half its CPO production (total of 525,831 tonnes in FY12)into higher-value refined products such as olein and biodiesel.

CPO sales form the bulk of its revenue currently, but its sales mix shouldincreasingly shift towards refined palm oil as new refining capacity comes onstream. A new 600,000-tonne refinery will be commissioned in 2H13, allowingFirst Resources to processes its entire CPO production in-house. This facilitywill also give First Resources the flexibility to refine third-party CPO whenmargins are favourable.

Figure 1: First Resources participation in the palm-oil value chain (as at Dec 12)

SOURCES: CIMB, COMPANY REPORTS

1.2 BeginningsEstablished in 1992, First Resources started planting that year andcommissioned its first palm-oil mill in 1998. It has been expanding its estatesrapidly since. It was listed on the Singapore Exchange in 2007. Over the pastfive years, average new planting rate was over 11,000 ha p.a. The group nowmanages 158,737 ha of plantations, runs 12 mills and operates an integrated

value chain. It started refining in 2010 when it commissioned its refinery,fractionation and biodiesel plants. Although 70% of its planted mature oil-palmestates and downstream facilities are located in the Riau region, new plantingover the past five years had mostly concentrated in West and East Kalimantan.

Table of Contents1. COMPANY BACKGROUND p.5

2. OUTLOOK p.8

3. RISKS p.16

4. FINANCIALS p.17

5. VALUATION AND RECOMME NDATION p.21

Notes from the Field

At current prices, demandis expected to bewell-supported, backed byconsumption growth fromemerging markets.

First Resources


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Figure 6: Plantations in the Riau, East and West Kalimantan provinces of Indonesia


Figure 7: Corporate milestones

2012 Achieved more than 146,406 hectares plantation under management

Commissioned 10th and 11th palm oil mill

Acquired 4,027 hectares of plantation asset in Riau province

2011 Achieved more than 130,000 hectares plantation under management

Commissioned 9th palm oil mill

Acquired 100,000 hectares of landbank in East Kalimantan province

2010 Commissioned refinery, fractionation and biodiesel plants

Began processing activities to further add value to crude palm oil produced in-house

2009 Issued inaugural USD Convertible Bond (US$100 million), listed on Singapore Exchange

Commenced new plantings in West Kalimantan province

Achieved more than 100,000 hectares of plantation under management

Commissioned 8th palm oil mil

2008 Acquired 90,000 hectares of landbank in West Kalimantan province

2007 Listed on the Singapore Exchange

Issued second Rupiah bonds (Rp 500 billion), listed on the Jakarta Stock Exchange


2006 Obtained international credit ratings from Standard & Poors, Moody's and Fitch

Issued inaugural USD 144A-registered bonds (US$160 million), listed on the Singapore Exchange

2005 Commissioned 5th and 6th palm oil mills

2003 Achieved more than 50,000 hectares of plantation under managementIssued inaugural Rupiah bonds (Rp350 billion), listed on the Surabaya Exchange


Opened Research Centre and Training School

2002 Commissioned 3rd palm oil mill

2001 Commissioned 2nd palm oil mill

1998 Commissioned 1st palm oil mill

1992 Group was established and new plantings began SOURCES: CIMB, COMPANY REPORTS

First Resources is 63.2% owned by Eight Capital, an investment vehicle of theFangiono family. The group is managed by brothers Ciliandra Fangiono, CEO,and Cik Sigih Fangiono, Deputy CEO. Mr Ciliandra Fangiono overseesstrategies and funding while Mr Cik Sigih Fangiono oversees day-to-dayoperations.

The stocks trading liquidity has improved since its 2007 listing. Free float hasincreased from 17.5% during IPO to 31.3%, as major shareholders addressedthe investment communitys calls to improve free float by placing out treasuryshares and issuing convertible bonds. The group issued convertible bonds in


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2009 to raise US$100m, due in Sep 14 (5.625% p.a. payable semi-annually;conversion price of S$1.24735). It has since exercised its right to redeem alloutstanding CBs not converted into shares. There are no outstanding CBs.

2. OUTLOOK

2.1 Young estates behind production growthFirst Resources young estates are its biggest strength. An average plantationage of nine years renders it the planter with the second-youngest estates underour coverage, after BW Plantations. About 24% of its trees are immature (0-3years old), 32% young (4-7 years old), and 36% in the prime production age of8-17 years old. Oil-palm trees require three years or so to mature, and do notreach their peak production age for fresh fruit bunches until eight years after planting. Their production of fresh fruit bunches gradually declines after theage of 17.

First Resourcesyoung estates can support higher FFB production over the next

few years with manageable increases in production costs, in our view.We forecast 10% FFB output growth for FY13 from existing estates, led by newmature areas coming on stream. Higher volumes from nucleus estates shouldshield the group from the impact of lower CPO prices.

Figure 8: Some 56% of its oil-palm estates are below sevenyears old

Figure 9: Productivity of oil-palm trees is highest between ages8-17

Immature, 24%

4-7 years, 32%

8-17 years, 36%

18 years andabove, 9%

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS


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8

Figure 10: Planted estates and new plantings since 1990

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1990 1995 2000 2005 2010

haha

Total estate area (LHS) New planted area (RHS)


2.2 Acquisition growth an additional kickerIn addition to growth from the coming of age of its estates, First Resourcesproduction should be boosted by acquisitions. Some 12,600ha of additionalmature estates will be coming on stream in FY13 from its Riau and WestKalimantan acquisitions.

To recap, the group completed the acquisition of PT Gerbang Sawit in Oct 12 forUS$31.2m and Lynhurst Investment for US$103m in Feb 13. PT Gerbang Sawitowns 3,500 ha of mature palm-oil estates and 4,000 ha of unplanted land bankin Riau. Lynhurst owns 8,600 ha of oil-palm estates and 11,500 ha of unplanted

area. The group paid EV/ha of around US$12,000 for Lynhursts estates andUS$10,000 for Gerbang Sawitsplanted estates, which we deem fair and in linewith market prices.

Its newly-acquired estates produce lower FFB yields, estimated at 10 tonnes/havs. nucleus yields of 22.4 tonnes/ha. But management expects higher yieldstowards the groups average within 36 months through better agri practices.

We forecast a decline in FFB yields for the group, stemming purely from itsnewly-acquired estates, from 23tonnes/ha in FY12 to 19.5tonnes/ha in FY13.But the lower yields should be compensated by a larger area of mature estates,leading to higher FFB production.

Figure 11: Area of planted estates Figure 12: Area of mature estates

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

50,000

100,000

150,000

200,000

250,000

Dec-11A Dec-12A Dec-13E Dec-14E Dec-15E

Plan te d Estate s ( ha ) % g ro wth

0%

5%

10%

15%

20%

25%

30%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000


Ma tu re Esta tes (ha ) % g ro wth



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9

Figure 13: FFB production Figure 14: CPO production

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5


m tonnes

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0


'000 tonnes


2.3 Yielding more than its peersFirst Resources operating metrics tower above its peers. Its CPO extractionrate is the highest among planters under our coverage, at 23.3% vs. 21.6%, onaverage. We believe this could be due to the close proximity of its estates to itsmills, which ensures its fresh fruit bunches arrive at the mills with minimalspoilage. In addition, a large portion (86%) of its fruits processed in FY12 camefrom its own estates, allowing for better quality control (FFB harvested at thepoint of their maximum oil content).

Its FFB yield of 23 tonnes/ha is the second-highest and well above the

industrys average 19.8 tonnes/ha. We attribute this to: 1) the group's superiorage profile; 2) high mineral soil content plus rainfall of 2.1 metres per annum inRiau, where most of its estates are located, both ideal for oil-palm trees; and 3)superior seeds used for planting as well as the adoption of industry bestpractices.

Figure 15: Oil extraction rates Figure 16: FFB yields (tonnes/ha)

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%

23.0%

23.5%

15.0

17.0

19.0

21.0

23.0

25.0


2.4 Forward sales locked in higherCPO pricesSpot CPO prices are currently 24% lower than a year ago as higher palm-oilstocks and expectations of record soybean supplies dampen prices. The good


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10

news is that First Resources has sold forward part of its CPO for the year. As aresult, it was able to book higher CPO prices in 1Q13 against the previous year,defying the industrys downtrend. The group was also able to outperform itspeers in net-profit growth (+28%).

We are expecting Rotterdam CPO prices to trend lower to an average of US$910in 2013, before rising to US$950 in 2014 and US$980 in 2015.We expect CPOprices to weaken in 2013 from a higher palm-oil stockpile, lower biodieseldemand in Europe as governments scale back their mandates, strongerpalm-oil supply from Malaysia and expectations of soybean bumper harvests.There is potential for CPO prices to move up in 2Q as palm oil enters its lowproduction cycle. But this may not last as record soybean crops are expected toenter the market in 3Q. After which, there could be a price recovery in late 4Qfrom slower palm-oil output growth and potentially higher biodiesel mandatesin Malaysia and South America.

Figure 17: Rotterdam CPO prices Figure 18: Historical CPO ASP for First Resources

-

200

400

600

800

1,000

1,200

1,400

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

US$/tonne

706

540

756

919882

0

200

400

600

800

1000

2008 2009 2010 2011 2012

US$/tonne

SOURCES: CIMB, BLOOMBERG SOURCES: CIMB, COMPANY REPORTS

2.5 Sensitivity analysisAs a price-taker, First Resources profits are subject to international CPO pricemovements. We estimate that every 10% change in CPO prices could swing itscore net profit by 17%.

Figure 19: Earnings sensitivity to CPO prices

-20% -10% Base case +10% +20%

CPO price (US$) 760 855 950 1045 1140

FY14 core net profit (US$m) 153.2 192.7 232.2 271.7 311.2

% chg in net profit -34% -17% 0% 17% 34%

% chg in CPO price


The group's earnings are also sensitive to its FFB yields as these will affect itsoutput. We estimate that every 1 tonne/ha change in yields could add orsubtract 8% from the group's core net profits.


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Figure 20: Earnings sensitivity to FFB yields

-2 tonnes/ha -1 tonne/ha Base case +1 tonne/ha +2 tonne/ha

Overall FFB yield 19.1 20.1 21.1 22.1 23.1

FY14 core net profit (US$m) 194.8 213.5 232.2 250.8 269.5

% chg in net profit -16% -8% 0% 8% 16%

chg in FFB yield (tonnes/ha)


We regressed stock prices correlations to CPO prices since 2007 and found thatFirst Resources share price is relatively insulated from CPO price volatility,compared with its peers. Its correlation coefficient of 0.44 is the second-lowestin our universe, and is below the sectors average of 0.67. Thatsaid, there couldbe other explanations for the variance, including differences in the plantersbusiness models.

Figure 21: Correlation coefficients for planters' share prices and CPO prices

0.85 0.840.80

0.770.73 0.73

0.71

0.640.61

0.52

0.44 0.42

SOURCES: CIMB, BLOOMBERG

2.6 Higher yields boost operating efficiencyFirst Resources operating efficiency has allowed the group to produce CPO atlower costs per tonne than its peers. This is critical for planterscompetitiveness in times of lower CPO prices, such as today. As a result of thisand its better selling prices against peers, the group enjoys higher profitability

for its estates. First Resources generated the second-highest operating profitper mature ha among its listed peers in FY12, testifying to its strongmanagement and estatesyouthfulness.


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12

Figure 22: First Resources' EBITDA per mature ha (US$/ha) Figure 23: First Resources' cash costs per mature ha (US$/ha)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


US$/ha

-

200

400

600

800

1,000

1,200

1,400

1,600


US$/ha


Figure 24: First Resources has the second-highest profit per mature ha among peers(US$)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

IOI* FR KLK** BAL SIME* GGR HAPL WIL FGV IFAR KAGR

(FY12/12 - US$ per ha)

*FY6/12; FY9/12 SOURCES: CIMB, COMPANY REPORTS

2.7 Sizeable landbank for expansion

Indonesias plans to limit companies estate expansion to 100,000ha will notaffect First Resources growth plans as the group has more than sufficientlandbank to underwrite its future growth via new plantings. It owns 300,000ha: 158,737 ha planted and 141,263 ha unplanted.

It has a planting target of 15,000-20,000 ha of oil palms per year, and aims toexpand its planted area to 200,000 ha within five years. This should raise itsCPO production to 1m tonnes each year. When it reaches this milestone,management will take stock and decide whether to expand downstream orupstream via estate expansion.


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Figure 25: Distribution of planted estates as at Dec 12 (ha) Figure 26: Distribution of land bank (ha)

Riau, 103,128

East Kalimantan,30,000

West Kalimantan,13,275

Riau, 110,000

East Kalimantan,90,000

West Kalimantan,100,000


2.8 Now an integrated palm producer, from downstreamexpansionFirst Resources expansion downstream has transformed it into an integratedpalm-oil producer with structurally higher profit margins. Refining not onlyadds to margins but also integrates its operations.

First Resources forayed into refining by commissioning its 250,000-tonneprocessing plants in 2010. These refinery, fractionation and biodiesel plantshave enabled the group to refine part of its CPO production into higher-valueproducts such as RBDPO (refined bleached deodorised palm oil), PFAD (palm

fatty acid distillates), RBD olein, RBD stearin, biodiesel, crude glycerine, PKE(palm kernel expellers) and PKO (palm kernel oil).

As part of its downstream expansion, a new 600,000-tonne refinery will becommissioned in 2H13. This will lift its refining capacity to 850,000 tonnes,allowing First Resources to refine all of its CPO in-house and even refine thirdpartiesCPO when margins are favourable.

2.9 Becoming a cash cowFirst Resources is on the cusp of a transformation into a cash cow. Havingplanted the seeds of growth in recent years, it is quite ready to reap the fruits ofits labour. Earnings growth should be powered by higher FFB and palm-oilproduction as its young estates approach maturity. At the same time, capex will

taper off from FY14 once its refinery expansion is completed. Higher operatingcash inflows and lower investing outflows should strengthen its free cash flows.By our projections, the group will be able to continue funding its capex purelywith operating cash flows.

We forecast a build-up of cash from US$405m in FY12 to US$533m in FY15.Our forecasts assume 30% dividend payouts, though there could be room forhigher payouts in the absence of M&As. The group can improve its ROEs byreturning cash to shareholders.


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Figure 27: Operating cash inflows to accelerate while capexeases

Figure 28: strengthening free cash flows

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0


US$m

Operating cash flow Capex

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0


US$m


Figure 29: Cash to pile up to US$533m by FY15 Figure 30: Dividend payouts, now at 30%, could be higher in theabsence of M&As

-

100

200

300

400

500

600


US$m

-

1.0

2.0

3.0

4.0

5.0

6.0


US cts


Figure 31: SWOT analysis

Strengths Opportunities

Young es tates support organic growth Sufficient landbank for new plantings

FFB yields above industry average Increased profit pool from midstream expansion

Oi l extraction rate above industry average Operat ing leverage from ongoing expansion

Vertically integrated business model

Weaknesses Threats

Geographical concentration in Indonesia Lower CPO prices

Opex vulnerable to inflation in Indonesia, e.g. wage hikes Weather risk

Overcapacity of global refining industry

Competition from Malaysian planters and refiners SOURCES: CIMB, COMPANY REPORTS


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15

3. RISKS

3.1 CPO prices and production volumesOur 3-year EPS CAGR forecast assumes: 1) Rotterdam CPO prices of US$910 in2013, US$950 in 2014 and US$980 in 2015; 2) a 15% CAGR for FFB production

volumes; and 3) a 40% CAGR for refining volumes. Lower-than-expected CPOprices or softer production could result in lower profits. We estimate that every10% fall in CPO prices could dent its net profits by 17%.

3.2 Yield compressionOur volume CAGR hinges on sustainable CPO yields of 4.6-5.2 tonnes/ha forthe next three years, which appear reasonably conservative against its yield of5.4 tonnes/ha in FY12. CPO yields had receded from 1.5 tonnes/ha in 4M12 to1.2 tonnes/ha in 4M13 due to tree stress, but this was still within comfort.Volumes could be at risk if yields fall below our assumptions for reasons such asbiological tree stress and weather risks such as El Nino.

3.3 Wage inflation

First Resources cash costs should increase as a result of Indonesia s wageinflation. Wages constitute 42% of its cash costs. Fortunately, 70% of its estatesare located in Riau, where the wage hikes are more subdued at 13% vs. EastKalimantans +49%. Wages could play a role in its future expansion plans. Itsdiverse landbank across West and East Kalimantan provides options, in ourview.

Figure 32: First Resources cash costs

Fertilizer, 40%

Wages, 42%

Freight , 5%

Maintenance of fixedassets, 13%


Figure 33: Minimum wage revisions in Indonesia (Rp)

2012 2013 % chg

Riau 1,238,000 1,400,000 13%

East Kalimantan 1,177,000 1,752,073 49%

West Kalimantan 900,000 1,060,000 18% SOURCES: CIMB, WWW.WAGEINDICATOR.ORG

3.4 Global economiesWe expect major economies to grow at a moderate pace in 2013. In the shortterm, the euro zonesdebt woes and weaker economic prospects could continueto depress CPO prices through lower demand for edible oils and crude oil.

They could also lead to outflows of speculative investment funds fromcommodity markets.

3.5 Policy risksPlanters fortunes are closely bound to government policies, not just in theircountries of operations but in competitors and customers markets. Export


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taxes, quotas, price ceilings or any other form of market intervention couldalter the prospects of all industry players along the value chain.

The Malaysian government recently modified the country's palm-oil export taxto help its downstream sector in late 2012. India has also been revising itspalm-oil import duties to help its domestic refining sector. Any changes ingovernment export taxes for palm-oil products or import duty structures mayaffect trade flows for palm oil.

3.6 Anti-palm oil lobbyThe use of palm oil has increasingly run into public opposition in Westerncountries, from deforestation resistance and allegations that it can cause healthproblems. Palm-oil health warnings have gained much publicity in the US butare also being disproved by academic research.

The Round Table on Sustainable Palm Oil (RSPO), a non-profit organisation,was formed in 2004 to help palm-oil producers deal with environmentalcharges levied at palm oil by getting their palm oil certified. The initiativeinvolves developing a certification system for the production of sustainable

palm oil based on a set of principles and criteria to counter concerns overenvironmental damage caused by the development of palm oil. A senator inFrance recently proposed a tax of 300 per tonne on foods that use palm,coconut and palm-kernel products, on top of the 100 per tonne tax. This hasbeen dubbed the "Nutella tax" due to the presence of palm oil in chocolates andnut spreads. It has been met with protests from Malaysian, Indonesia and foodmanufacturers. We understand that France's national assembly has rejected theproposal.

Nevertheless, if the anti-palm oil campaign gains momentum, CPO demandcould be hurt, thereby widening its price discount to other edible oils.

3.7 Environmentalists and NGOsPlanters are expected to run their operations in a sustainable manner andcomply with environmental regulations. For instance, planters must be carefulnot to threaten orang utans and their habitats in the course of land clearing. Itis not uncommon for non-governmental organisations to petition againstplanters operations. These could result in legal recourse and disruptions totheir planting.

4. FINANCIALS

4.1 Biological assetsFirst Resources reports gains from changes in the fair value of its biological

assets typically in the fourth quarter of each year, in compliance with IFRS.Such gains accounted for 15-39% of its reported net profits in FY09-12, but theproportion has been steadily declining owing to a faster rate of profit growth.As these gains are non-operational, we strip them out to derive our core netprofits. First Resources assumes an average value of US$6,709/nucleus ha inderiving the value of its biological assets, which we find reasonable.


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Figure 34: Biological gains vs. net profits Figure 35: Reported vs. core net profits

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-

50

100

150

200

250

Dec-09A Dec-10A Dec-11A Dec-12A

US$m

Gain from biological assets

Reported net profit

Biological gains / reported net profit (%)

-

50

100

150

200

250

Dec-09A Dec-10A Dec-11A Dec-12A

US$m

Reported net profit Core net profit


4.2 Higher FFB production to compensate for lower CPOpricesFirst Resources net profit CAGR in the last three years was 42%, led by CPOprice inflation (+63% over the three years) and higher FFB production (12%CAGR). We expect its profit CAGR to moderate to 10% in the next three yearsas a result of lower CPO prices, partially buffered by higher FFB volumes.

Rotterdam CPO prices averaged US$998 in 2012. We expect prices to fall toUS$910 in 2013, US$950 in 2014 and US$980 in 2015. This will dampen First

ResourcesASPs from US$882 in 2012 to a projected US$822 in 2013, US$815in 2014 and US$838 in 2015. The groups 2013 ASP would have been lower hadit not locked in forward sales at favourable prices. Higher FFB production fromorganic and acquisition growth should help it cope with lower CPO prices.

Figure 36: First Resources' average CPO selling prices Figure 37: FFB production

700

750

800

850

900

950


US$/tonne

1.5

2.0

2.5

3.0

3.5


m tonnes



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Figure 38: Revenue forecasts Figure 39: Core net profit forecasts

400

450

500

550

600

650

700

750

800


US$m

100

150

200

250

300


US$m


4.3 Margin compression in FY13Margins are set to decline for both its plantations and refining operations.Plantation margins should be affected by lower CPO prices and higher estatecosts, in keeping with a larger mature area and higher labour costs. We projecta decline in EBITDA margins from US$659/tonne in FY12 to US$587/tonne inFY13, before improving to US$596/tonne in FY14, based on assumed lowerCPO prices and 6-7% p.a. increases in unit production costs.

Refining margins may decline from new capacity added from 2013. Indonesiasrefining industry is bracing for an influx of new capacity in response to the

governments revamped palm-oil export tax structure which incentivisesdomestic refining. First Resources believes that excess refining capacity couldsuppress its refining margins below US$50/tonne in the long run.

Figure 40: Plantations and palm-oil mills: EBITDA/tonne Figure 41: Refinery and processing: EBITDA/tonne

500

550

600

650

700


US$/tonne

0

50

100

150

200


US$/tonne


4.4 Low gearingNet gearing has been conservative at less than 20%. We do not foresee FirstResources taking on substantially higher debt since its capex should taper offafter 2013. Its strengthening cash position will lower its net gearing, in our


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estimation. We assume a decline in its net gearing from 11.5% in FY12 to 10.5%in FY13 and 6.2% in FY14.

Figure 42: Net debt Figure 43: Net gearing

0

20

40

60

80

100

120

140

160


US$m

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%



4.5 Strengthening cash flowsFirst Resources has guided for lower capex from FY14 onwards. It had spentUS$175m on biological assets and fixed assets in FY12. It expects to spendUS$200m in FY13 (US$40m for the construction of its new refinery), afterwhich capex should fall to US$160m in FY14.

Free cash flows should tick up in 2014, backed by improved operating cashflows (assuming higher CPO prices and FFB volumes) allied with lower capex.

Figure 44: Operating cash flow Figure 45: Investing cash flow

-

50

100

150

200

250

300

350


US$m

(250)

(200)

(150)

(100)

(50)

-Dec-11A Dec-12A Dec-13E Dec-14E Dec-15E

US$m



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Figure 46: Financing cash flow Figure 47: Free cash flow

(150)

(100)

(50)

-

50

100

150

200

250


US$m

-

50

100

150

200


US$m


4.6 Superior earnings growthFirst Resources stands out for its superior earnings-growth prospects in ourcoverage universe. In the last three years, its earnings had grown by a 28%CAGR vs. the industrys 14% average. We project 10.5% for the next three,which implies further outperformance over the industrys anticipated 0.8%earnings growth.

First Resources superior outlook can be attributed to: 1) its young estates andFFB growth, providing buffers to lower CPO prices; 2) additional incomestreams from its new refining capacity; and 3) operating metrics such as

above-average FFB and OER yields.

Figure 48: Last three years: EPS CAGR for First Resources vs.industry

Figure 49: Next three years: EPS CAGR for First Resources vs.industry

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Industry average First Resources

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Industry average First Resources


5. VALUATION AND RECOMMENDATION

5.1 Relative outperformerFirst Resources stock had outperformed its peers in the last 12 months. Theregional sector had shed an average of 8% due to declines in CPO prices.Singapore-listed planters had given up 6% on average, underperforming the


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STIs 19% gain. First Resources has defied this with a 12% gain: in poleposition.

Figure 50: Planters had underperformed the STI in the last 12 months, but FirstResources was a relative outperformer

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%


Figure 51: Rotterdam CPO prices had fallen 24% over the past 12 months

700

750

800

850

900

950

1,000

1,050

1,100

May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13


5.2 Strong FFB growth to back further outperformanceWe are not bullish on CPO prices, but for investors seeking exposure to thissector, we would advocate stocks with strong FFB growth prospects. FirstResources offers this. At 14.9% average FFB growth forecast for the next threeyears, First Resources should offer the second-highest growth rate in the sector.All else being equal, this implies its earnings should outperform the sectors, asshould its share price.


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Figure 52: FFB output growth (%), 2013-15 Figure 53: Average FFB output growth (%)

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

BWPT

FR

GENP

KLK

SIMP

LSIP

SGRO

IFAR

WIL

GGR

AALI

SIME

HAPL

IOI

FGV

Dec-15F Dec-14F

Dec-13F

30.6%

14.9%

12.5%

8.9%

8.2%

8.2%

7.6%

5.5%

5.0%

4.6%

4.4%

4.0%

3.4%

2.6%

2.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

BWPT

FR

GENP

KLK

SIMP

LSIP

SGRO

IFAR

WIL

GGR

AALI

SIME

HAPL

IOI

FGV


5.3 Cheap valuations, superior earningsFirst Resources is the cheapest planter in Singapore and among the cheapest inthe region. It trades at 10.3x CY14 P/E vs. its local peers 12.6x and regionalpeers 15.3x, on average. To us, its discounts are unjustified, in view of our3-year EPS CAGR of 10.5% vs. the industrys 0.8%.

First Resources also trades at 1.9x P/BV, a 17% ROE vs. the sectors 1.5x and 9%respectively. Its enterprise value per planted hectare (EV/ha) of US$19,160 isbelow the industrys US$21,709 average.

Figure 54: EV per planted ha

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

US$ per ha


5.4 Initiate coverage with OutperformWe initiate coverage with an Outperform rating and S$2.22 target price, basedon 12.3x CY14 P/E, 1 SD above its 4-year mean. Although this appears richrelative to its historical trading band, we note that the stocks short listinghistory skews its data. At our target, First Resources would be trading at a 19%discount to its peers. Re-rating catalysts could stem from higher FFBproduction and potential dividend uplifts when free cash flows increase fromFY14.


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Figure 55: 12M forward core P/E Figure 56: Current P/BV

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Dec-08 Sep-09 Jun-10 Mar-11 Dec-11 Sep-12

Avg: 9.3x

+1SD: 11.6x

-1SD: 7.0x

+2SD: 13.9x

-2SD: 4.7x

1.5

1.7

1.9

2.1

2.3

2.5

2.7

Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Avg: 2.1x

+1SD: 2.3x

-1SD: 1.9x

+2SD: 2.6x

-2SD: 1.6x


Figure 57: Peers Comparison

Bloomberg Price

Target

Price

Market

Cap Core P/E (x) 3-year EPS P/BV (x)

Recurring

ROE (%)

Dividend

Yield (%)

Company Ticker Recom. (lcl curr) (lcl curr) (US$ m) CY2013 CY2014 CAGR (%) CY2013 CY2013 CY2013

Singapore

First Resources Ltd FR SP Outperform 1.90 2.22 2,396 12.0 10.3 10.5% 1.92 17.0% 2.5%

Golden Agri-Resources GGR SP Neutral 0.57 0.56 5,826 17.5 14.4 2.7% 0.66 4.0% 1.2%

Indofood Agri Resources IFAR SP Underperform 1.09 1.02 1,245 18.1 16.1 -10.2% 0.85 4.8% 0.0%

Mewah International MII SP Underperform 0.46 0.46 552 24.8 19.9 13.4% 0.95 3.9% 0.8%

Wilmar International WIL SP Outperform 3.39 3.74 17,266 13.6 12.1 9.0% 1.12 8.6% 1.5%

Singapore average 14.4 12.6 7.3% 0.99 7.2% 1.4%

Malaysia

Felda Global Ventures FGV MK Neutral 4.62 4.32 5,592 29.5 22.6 -2.9% 2.64 9.1% 1.7%

Genting Plantations GENP MK Neutral 9.00 8.70 2,265 21.9 18.0 9.6% 1.85 8.8% 1.4%

Hap Seng Plantations HAPL MK Neutral 2.71 2.70 719 16.2 13.5 7.4% 1.09 6.9% 3.7%

IOI Corporation IOI MK Neutral 5.35 5.53 11,331 20.6 19.5 -2.3% 2.42 12.0% 2.4%

Jaya Tiasa Holdings JT MK Neutral 2.24 1.82 719 34.5 17.4 26.6% 1.24 3.8% 0.6%

Kuala Lumpur Kepong KLK MK Underperform 21.74 18.18 7,681 23.7 20.4 7.8% 3.14 13.5% 3.3%

Sime Darby Bhd SIME MK Neutral 9.50 9.50 18,940 16.9 16.4 -3.6% 2.00 12.1% 3.0%

Malaysia average 20.1 18.3 -4.4% 2.23 11.3% 2.6%

Indonesia

Astra Agro Lestari AALI IJ Neutral 17,700 19,000 2,856 13.8 12.7 -4.8% 2.94 21.8% 4.2%

BW Plantation BWPT IJ Neutral 1,010 950.0 419 14.1 8.8 34.3% 2.17 16.3% 1.4%

London Sumatra LSIP IJ Neutral 1,640 1,800 1,147 10.7 9.4 6.2% 1.63 15.9% 4.0%

Salim Invomas Pratama SIMP IJ Underperform 830.0 864.0 1,345 18.8 16.2 -13.9% 0.94 5.0% 2.1%

Sampoerna Agro SGRO IJ Neutral 1,940 2,000 376 11.2 9.7 7.7% 1.25 11.7% 1.9%Indonesia average 13.7 11.9 -0.6% 1.70 12.7% 3.4%

Average (all) 17.2 15.3 0.8% 1.54 9.2% 2.3% SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG


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This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBRaccepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on

he basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passedon, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR..

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Corporate Governance Report:

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 andExchange 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 disclosedto 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 oninside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS doesnot confirm nor certify the accuracy of such survey result.

ScoreRange 90100 8089 7079 Below 70 or No Survey Result

Description Excellent Very Good Good N/A

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authorised and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solelydirected at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience inmatters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Order); (c) are personsalling within Article 49 (2) (a) to (d) (high net worth companies, unincorporated associations etc) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitationor inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this reportrelates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons). This report is directed only at relevantpersons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevantpersons and will be engaged in only with relevant persons.

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Spitzer Chart for stock being researched ( 2 year data )

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13

Price Close

Rating Distribution (%) Investment Banking clients (%)

Outperform/Buy/Trading Buy 51.4% 7.8%

Neutral 35.1% 4.7%

Underperform/Sell/Trading Sell 13.5% 4.9%

Distribution of stock ratings and investment banking clients for quarter ended on 30 April 2013

1002 companies under coverage

Recommendation Framework #1 *Stock Sector

OUTPERFORM:The stock's total return is expected to exceed a relevant benchmark's t otal return

by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to

outperform the relevant primary market index over the next 12 months.

NEUTRAL:The stock's total return is expected to be within +/-5% of a relevant benchmark's total

return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in

line with the relevant primary market index over the next 12 months.

UNDERPERFORM:The stock's total return is expected to be below a relevant benchmark's total

return by 5% or more over the next 12 months.

UNDERWEIGHT:The industry, as defined by the analyst's coverage universe, is expected to

underperform the relevant primary market index over the next 12 months.

TRADING BUY:The stock's total return is expected to exceed a relevant benchmark's total return

by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to

outperform the relevant primary market index over the next 3 months.

TRADING SELL:The stock's total return is expected to be below a relevant benchmark's total

return by 5% or more over the next 3 months.

TRADING SELL:The industry, as defined by the analyst's coverage universe, is expected to

underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan

Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market

volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)


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Recommendation Framework #2 **

Stock SectorOUTPERFORM:Expected positive total returns of 10% or more over the next 12 months. OVERWEIGHT:The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of +10% or better over the next 12 months.

NEUTRAL:Expected total returns of between -10% and +10% over the next 12 months. NEUTRAL:The industry, as defined by the analyst's coverage universe, has either (i) an equal

number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or

(ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%;

both over the next 12 months.

UNDERPERFORM:Expected negative total returns of 10% or more over the next 12 months. UNDERWEIGHT:The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of -10% or worse over the next 12 months.

TRADING BUY:Expected positive total returns of 10% or more over the next 3 months. TRADING BUY:The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of +10% or better over the next 3 months.

TRADING SELL:Expected negative total returns of 10% or more over the next 3 months. TRADING SELL:The industry, as defined by the analyst's coverage universe, has a high number

of stocks that are expected to have total returns of -10% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily

outside the prescribed ranges due t o extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2012.

AAVnot available, ADVANC- Excellent, AEONTSGood, AMATA- Very Good, ANANnot available, AOT- Excellent, AP- Very Good, BANPU- Excellent , BAY-

Excellent , BBL- Excellent, BCHnot available, BCP- Excellent, BEC- Very Good, BGH- not available, BJCVery Good, BH- Very Good, BIGC- Very Good, BTS-

Excellent, CCET- Good, CENTELVery Good, CK- Very Good, CPALL- Very Good, CPF- Very Good, CPN- Excellent, DELTA- Very Good, DTAC- Very Good, EGCOExcellent, ERWExcellent, GLOBAL- Good, GLOW- Very Good, GRAMMYExcellent, HANA- Very Good, HEMRAJ- Excellent, HMPRO- Very Good, INTUCHVery

Good, ITDVery Good, IVL- Very Good, JASVery Good, KAMART not available, KBANK- Excellent, KKExcellent, KTB- Excellent, LH - Very Good, LPN-

Excellent, MAJOR- Good, MAKROVery Good, MCOT- Excellent, MINT- Very Good, PS- Excellent, PSL- Excellent, PTT- Excellent, PTTGC- Excellent, PTTEP-

Excellent, QH- Excellent, RATCH- Excellent, ROBINS- Excellent, RSExcellent, SAMARTExcellent, SCExcellent, SCB- Excellent, SCC- Excellent, SCCC- Very

Good, SIRI- Good, SPALI- Very Good, SRICHAnot available, SSInot available, STA- Good, STEC- Very Good, TCAP- Very Good, THAI- Excellent, THCOMVery

Good, TICONVery Good, TISCO- Excellent, TMB- Excellent, TOP- Excellent, TRUE- Very Good, TTWVery Good, TUF- Very Good, VGInot available, WORK

Good.

first resources initiating coverage cimb

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