indocafe market singapore

Important disclosures can be found in the Disclosures Appendix All rights reserved. Standard Chartered Bank 2014 http://research.standardchartered.com

l Equity Research l ASEAN l Food & Beverage l 13 June 2014

ASEAN food and beverage

Singapore aisle checks show intense competition for 3-in-1 coffee

We visited four supermarkets in Singapore to assess the competitive environment for 3-in-1 coffee. Our key

takeaways: (1) Super’s brands occupy a leading share of supermarket shelf space, (2) a price war is underway

among 3-in-1 coffee brands in Singapore, with several brands offering major discounts, (3) regional competition is

heating up, with Mayora Indah from Indonesia and Power Root from Malaysia competing aggressively in Singapore.

We view Super as a leading brand, but expect strong competition to pressure its sales and margins. In 2013, we

estimate Super’s branded consumer segment generated one of the highest EBIT margins among ASEAN food and

beverage companies, which could attract aggressive competition.

Super’s share price has corrected 27% YTD, so we maintain our In-Line rating but trim our price target to SGD 1.34

(previously SGD 2.09).

We await signs of moderating competition before turning more positive on the stock.

Shelf space leader, but not yet premium We visited Giant, Cold Storage, NTUC Fairprice, and Sheng

Siong stores and found that Super’s brands collectively occupy

a leading 41.5% share of their shelf space, while Nestle holds

22%. Analysing 3-in-1 coffee prices on a per-gram basis, we

found that Super’s two main brands – Super and OWL – are

priced at an 8-27% discount to Nestle, and close to the

average. Super has been investing in branding, but our pricing

analysis shows that its brands are still a work-in-progress and

are not yet premium products. We fear that their middle-market

pricing may make them vulnerable to competition.

Price war reflects regional competition Our supermarket visits revealed an aggressive price war

among 3-in-1 coffee brands in Singapore with Super, Kopiko,

and Nestle offering discounts up to 37%, 33%, and 13%,

respectively. Kopiko is a leading 3-in-1 coffee brand from

Indonesia, and it has been promoting its products aggressively

with discounts and TV commercials. Other foreign brands

offering discounts include Indocafe (Indonesia), Ah Huat

(Malaysia), and OldTown (Malaysia). We believe this price war

reflects strong regional expansion by formerly domestic

brands, suggesting intensifying competition for Super not only

in Singapore, but also in its other markets.

The bottom line We maintain our In-Line rating for Super, with a new price

target of SGD 1.34. We would await a better entry point for the

stock. Click here to get The Scoop, an audiovisual summary of

the report.

Product discounts of 3-in-1 coffee brands*

*Product with highest discount has been selected. Source: Standard Chartered Research

Singapore supermarket shelf space share of 3-in-1 coffee brands

Others include Aik Cheong, Alicafe, Café 21, Café Nova, Capparoma, Chek Hub, Coffee King, Fair Price, Giant, Gold Kili, In-Comix, Kopiko, Meet U, Morning Sun, Mr.Cafe, Nanyang, Perl Café, and UCC. Source: Standard Chartered Research

37% 33%

26%

22% 18% 17%

15% 15% 13% 13% 12%

8% 8% 6%

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Sup

er

Kop

iko

Ye

Ye

Indo

cafe

Aik

Che

ong

Gol

d K

ili

UC

C

Caf

é N

ova

Nes

cafe

Ah

Hua

t

Gol

d R

oast

OW

L

Old

Tow

n

Nan

yang

Che

k H

ub

22%

19%

18%

8%

5%

5%

3%

3%

15%

Nescafe OWL Super OldTown Ah Huat Gold Roast Indocafe Ye Ye Others

Super and Kopiko have been discounting up to

37% and 33%, respectively

Super’s brands collectively occupy 41.5% of shelf space, while Super and OWL hold a combined 37%

Munchuga Khajornkowit +65 6596 8504

Equity Research

Standard Chartered Bank, Singapore Branch

Did you know… A study from Finland and Sweden showed that coffee drinkers have up to a 65% lower risk of getting Alzheimer’s disease than nondrinkers

This document is being provided for the exclusive use of KENNETH LOW at DMG & PARTNERS SECURITIES PTE LTD

http://www.brainshark.com/standardcharter/vu?pi=zH1zAYLUvzIn2Pz0

http://www.brainshark.com/standardcharter/vu?pi=zH1zAYLUvzIn2Pz0

mailto:[email protected]

Equity Research l ASEAN food and beverage

13 June 2014 2

Contents

Super dominates shelf space 3

Pricing analysis 5

Price war in Singapore 10

Regional competition may intensify 12

Earnings sensitivity 14

What is actionable? 18

Companies

Super Group 20

Universal Robina Corp 29

Mayora Indah 31



13 June 2014 3

Super dominates shelf space Over the week of 26 May, we visited four supermarkets in Singapore: a Giant and a

Sheng Siong in Ghim Moh, an NTUC Fairprice in Tanjong Pagar, and a Cold Storage

in Great World City. Our aisle checks revealed the following:

Super occupies a dominant share of the 3-in-1 coffee aisle: Super brand and OWL

hold 18% and 19% shares of the shelf space, respectively, in the four

supermarkets. Nestle has the highest share of aisle space by brand at 22%.

However, Super’s brands (Super brand, OWL, Ye Ye, Cafe Nova, and Coffee

King) hold a combined 41.5% share of shelf space at the four supermarkets.

Figure 1: Singapore 3-in-1 coffee shelf space share by brand

Source: Standard Chartered Research

Differences in aisle space shares by supermarket reflect positioning: We noticed

that Nestle holds a top-three share of shelf space in Cold Storage (no. 1, 24%),

NTUC (no. 3, 22%), and Giant (no. 1, 35%), while in Sheng Siong, Nestle’s ranking

fell to number four with a 13% share. We believe this is because Sheng Siong has

a lower-end positioning, and Nescafe is a premium brand, leading the retailer to

place less emphasis on its products.

Figure 2: Cold Storage – Shelf space

share of 3-in-1 coffee brands

Figure 3: NTUC Fair Price – Shelf

space share of 3-in-1 coffee brands

Source: Standard Chartered Research Source: Standard Chartered Research

22%

19%

18%

8%

5%

5%

3%

3%

Nescafe OWL Super

OldTown Ah Huat Gold Roast

Indocafe Ye Ye Gold Kili

Alicafe Chek Hub Morning Sun

Aik Cheong Capparoma Café 21

Fair Price Kopiko Café Nova

Mr.Cafe Nanyang Coffee King

Giant UCC In-Comix

Meet U Perl Café

Nescafe 24%

OWL 20%

Super 13%

OldTown 9%

Gold Roast

6%

Indocafe 5%

OWL 24%

Super 23%

Nescafe 22%

Gold Roast

5%

Ah Huat 4%

OldTown 4%

Super brand and OWL occupy 18% and 19% of shelf space, respectively, at the four supermarkets

Nestle was no. 1 and no. 3 in terms of shelf space share at Cold Storage and NTUC

Super’s brands collectively hold a combined 42% share of the aisle

space in the four supermarkets



13 June 2014 4

Figure 4: Giant – Shelf space share of

3-in-1 coffee brands

Figure 5: Sheng Siong – Shelf space

share of 3-in-1 coffee brands


Super enjoys prime shelf space positioning: We observed that leading brands like

Nescafe, Super, and OWL are usually placed on shelves around eye level and

within easy reach of customers, while smaller brands are often positioned on the

top or bottom shelves. In NTUC Fair Price, Super products occupied a full shelf.

Super also had a promotion stand positioned near the store entrance to attract

consumer attention.

Figure 6: Full shelf of Super products

at NTUC Fairprice

Figure 7: Super’s promotion stand

near the entrance at Fairprice


Nescafe 35%

Super 14%

OWL 11%

OldTown 10%

Ah Huat 7%

Indocafe 4%

OldTown 16%

OWL 16%

Super 16% Nescafe

13%

Ah Huat 9%

Gold Roast

7%



13 June 2014 5

Pricing analysis We compared the prices of 3-in-1 coffee products on the shelves in the supermarkets

we visited and calculated the original price per gram for comparable products – i.e.

white coffee classic and 3-in-1 classic – and took the average across all four

supermarkets. We found that for both white coffee and 3-in-1 classic, Nestle’s

Nescafe has one of the highest original price per gram. For white coffee classic, OWL

and Super are priced at discounts of 8% and 13% to Nestle, respectively. For 3-in-1

classic, OWL and Super are priced at discounts of 21% and 27% to Nestle,

respectively.

Super rebranded OWL in 2011 and Super in 2013, but our pricing analysis shows it is

still a work-in-progress for Super and OWL to match the brand premium of Nestle.

With our belief that competition will intensify, we are concerned that Super and

OWL’s price position could make them susceptible to competition.

Figure 8: White coffee classic

Average original price/g from four supermarkets (SG¢)

Figure 9: 3-in-1 classic

Average original price/g from four supermarkets (SG¢)



Ranked from highest to lowest average original price/g (SGD)

Brand Company Average original price/g Packaging

Ah Huat Power Root 0.0124 15x30g

UCC UCC 0.0123 15x35g

Nescafe Nestle 0.0119 15x36g

Gold Roast Viz Branz 0.0114 15x40g

OldTown OldTown 0.0114 15x40g

Alicafe Power root 0.0110 30x20g

OWL Super 0.0109 15x40g

Indocafe Pt Sari Indofood 0.0108 30x12g

Chek Hub Chek Hub 0.0106 15x40g

Alicafe Power Root 0.0105 15x40g

Super Super 0.0104 15x40g

Fair Price Fair Price 0.0101 30x12g

Aik Cheong Aik Cheong 0.0101 15x40g

Giant Giant 0.0092 15x40g

Morning Sun Morning Sun 0.0065 40x20g

Average

0.0106

OWL vs. average 3%

Super vs. average -2%

OWL vs. Nestle -8%

Super vs. Nestle -13%


1.2

4

1.2

3

1.1

9

1.1

4

1.1

4

1.1

0

1.0

9

1.0

8

1.0

6

1.0

5

1.0

4

1.0

1

1.0

1

0.9

2

0.6

5

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Ah

Hua

t

UC

C

Nes

cafe

Gol

d R

oast

Old

Tow

n

Alic

afe

OW

L

Indo

cafe

Che

k H

ub

Alic

afe

Sup

er

Fai

r P

rice

Aik

Che

ong

Gia

nt

Mor

ning

Sun

1.1

8

0.9

0

0.8

7

0.7

7

0.7

1

0.6

9

0.6

8

0.6

6

0.6

5

0.6

1

0.6

1

0.6

0

0.5

9

0.5

6

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40 C

appa

rom

a

Nes

cafe

Kop

iko

Mr.

Caf

e

OW

L

Gol

d R

oast

Gol

d K

ili

Sup

er

In-C

omix

Mor

ning

Sun

Indo

cafe

Cof

fee

Kin

g

Indo

cafe

Ye

Ye

Super and Owl are priced at 8-27% discounts to Nestle



13 June 2014 6

Figure 11: 3-in-1 coffee

Ranked from highest to lowest average original price/g (SGD)

Brand Company Average original price/g Packaging

Capparoma Viz branz 0.0118 25x18g

Nescafe Nestle 0.0090 35x19g

Kopiko Mayora Indah 0.0087 30x20g

Mr.Cafe Tastyfood Industries 0.0077 40x20g

OWL Super 0.0071 40x20g

Gold Roast Viz branz 0.0069 40x20g

Gold Kili Gold Kili 0.0068 20x20g

Super Super 0.0066 40x20g

In-Comix In-comix Food Industries 0.0065 10x20g

Morning Sun Morning sun 0.0061 40x20g


Coffee King Super 0.0060 40x20g


Ye Ye Super 0.0056 45x20g

Average

0.0072

OWL vs. average -2%

Super vs. average -9%

OWL vs. Nestle -21%

Super vs. Nestle -27%


Supermarket comparison We found the heaviest discounting in NTUC FairPrice (NTUC), the largest

supermarket chain in Singapore. Comparing selling price per gram for white coffee in

NTUC, we found that OWL and Super were sold at discounts of 13% and 42%,

respectively, to Nestle. Based on original price, Super and OWL were at discounts of

10% and 14% to Nestle, respectively. With the heavy discounting for Super’s white

coffee product, Super’s white coffee is by far the cheapest on a per gram basis for

sale at NTUC.

For 3-in-1 classic at NTUC, the selling price per gram for OWL and Super are 11%

and 17% below that for Nestle, respectively, and the two brands are ranked number

two and three after Nestle by highest selling price per gram.



13 June 2014 7

Figure 12: White Coffee Classic from NTUC Fair Price

Ranked from highest to lowest selling price/g (SGD)

Brand Company Original

price Total weight

(g) Original price/g

Discounted price/g

Selling price/g Packaging %discount

Ah Huat Power Root 5.60 450 0.0124 NA 0.0124 15x30g NA

Nescafe Nestle 6.50 540 0.0120 0.0113 0.0113 15x36g 6%

Alicafe Power Root 6.60 600 0.0110 NA 0.0110 15x40g NA

Chek Hub Chek Hub 6.50 600 0.0108 NA 0.0108 15x40g NA

OldTown OldTown 6.80 600 0.0113 0.0104 0.0104 15x40g 8%

Fair Price Fair Price 3.65 360 0.0101 NA 0.0101 30x12g NA

OWL Super 6.50 600 0.0108 0.0099 0.0099 15x40g 8%

Indocafe Pt Sari Indofood 3.77 360 0.0105 0.0092 0.0092 30x12g 12%

Gold Roast Viz Branz 5.50 600 0.0092 NA 0.0092 15x40g NA

Aik Cheong Aik Cheong 6.05 600 0.0101 0.0083 0.0083 15x40g 18%

Super Super 6.20 600 0.0103 0.0065 0.0065 15x40g 37%

Average

0.0108

0.0099

OWL vs. Average

0%

-0%

Super va. Average

-4%

-34%

OWL vs. Nestle

-10%

-13%

Super vs. Nestle

-14%

-42%

OWL vs. Super

5%

52%


Figure 13: 3-in-1 Classic from NTUC Fair Price


Brand Company

Original

price

Total weight

(g)

Original

price/g

Discounted

price/g

Selling

price/g Packaging % discount


OWL Super 6.20 800 0.0078 0.0066 0.0066 40x20g 15%

Super Super 5.20 800 0.0065 0.0062 0.0062 40x20g 5%

Coffee King Super 4.70 800 0.0059 NA 0.0059 40x20g NA

Kopiko Mayora Indah 5.20 600 0.0087 0.0058 0.0058 30x20g 33%

Gold Roast Viz Branz 5.25 800 0.0066 0.0058 0.0058 40x20g 12%

Average

0.0073

0.0063

OWL vs. Average

6%

5%

Super vs. Average

-11%

-2%

OWL vs. Nescafe

-10%

-11%

Super vs. Nescafe

-25%

-17%

OWL vs. Super

19%

7%




13 June 2014 8

Figure 14: White Coffee Classic from NTUC Fair Price

Ranked from highest to lowest selling price/g (SG¢))

Figure 15: 3-in-1 Classic from NTUC Fair Price

Ranked from highest to lowest selling price/g (SG¢))


Figure 16: 3-in-1 Classic from Cold Storage



price Total weight

(g) Original

price/g Discounted

price/g Selling price/g Packaging % discount

Capparoma Viz Branz 5.30 450 0.0118 NA 0.0118 25x18g NA


Mr.Cafe Tastyfood 6.15 800 0.0077 NA 0.0077 40x20g NA


OWL Super 5.50 800 0.0069 NA 0.0069 40x20g NA

Super Super 5.40 800 0.0068 NA 0.0068 40x20g NA

Indocafe Pt Sari Indofood 3.80 600 0.0063 NA 0.0063 30x20g NA

Coffee King Super 4.95 800 0.0062 NA 0.0062 40x20g NA

Ye Ye Super 5.35 900 0.0059 NA 0.0059 45x20g NA

Average

0.0076

0.0075

OWL vs. Average

-9%

-8%

Super vs. Average

-11%

-9%

OWL vs. Nescafe

-20% -8%

Super vs. Nescafe

-22% -10%

OWL vs. Super

2%

2%


1.24 1.13 1.10 1.08 1.04 1.01 0.99

0.92 0.92 0.83

0.65

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Ah

Hua

t

Nes

cafe

Alic

afe

Che

k H

ub

Old

Tow

n

Fai

r P

rice

OW

L

Indo

cafe

Gol

d R

oast

Aik

Che

ong

Sup

er

0.75

0.66 0.62

0.59 0.58 0.58

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Nescafe OWL Super Coffee King Kopiko Gold Roast



13 June 2014 9

Figure 17: 3-in-1 Classic from Giant



price Total weight

(g) Original

price/g Discounted


OldTown OldTown 6.70 540 0.0124 NA 0.0124 15x36g NA

Nescafe Nestle 6.15 665 0.0092 NA 0.0092 35x19g NA

Kopiko Mayora Indah 5.20 600 0.0087 NA 0.0087 30x20g NA


OWL Super 5.25 800 0.0066 NA 0.0066 40x20g NA

Super Super 5.20 800 0.0065 0.0063 0.0063 40x20g 3%


Ye Ye Super 4.70 900 0.0052 NA 0.0052 45x20g NA

Average

0.0076

0.0076

OWL vs. Average

-14%

-14%

Super vs. Average

-15%

-17%

OWL vs. Nescafe

-29% -29%

Super vs. Nescafe

-30% -32%

OWL vs. Super

1%

4%


Figure 18: 3-in-1 Classic from Sheng Siong



price Total weight

(g) Original

price/g Discounted


OldTown OldTown 6.80 540 0.0126 NA 0.0126 15x36g NA


OWL Super 5.70 800 0.0071 NA 0.0071 40x20g NA

In-Comix In-Comix Food

Industries 1.30 200 0.0065 NA 0.0065 10x20g NA

Morning sun Morning sun 4.90 800 0.0061 NA 0.0061 40x20g NA


Super Super 5.20 800 0.0065 0.0058 0.0058 40x20g 11%

Gold Roast Viz Branz 5.25 800 0.0066 0.0058 0.0058 40x20g 12%

Ye Ye Super 4.95 900 0.0055

0.0055 45x20g NA

Average

0.0074

0.0072

OWL vs. Average

-3%

-1%

Super vs. Average

-12%

-19%

OWL vs. Nescafe

-24% -23%

Super vs. Nescafe

-31% -37%

OWL vs. Super

10%

23%




13 June 2014 10

Price war in Singapore Our visits to the four supermarkets revealed an intense price war between 3-in-1

coffee brands, with Super, Kopiko (of Mayora Indah, MYOR IJ, OP) and Nescafe

offering discounts up to 37%, 33%, and 13%, respectively. This is one reason why

Super’s revenue declined 11% YoY in Singapore in 1Q14, and we believe aggressive

discounting may continue to pressure its local sales and margin results.

Figure 19: Percentage discount by product of each brand

Ranked from highest to lowest

Company Brand Product % discount

Super Super White coffee 37%

Mayora Indah Kopiko 3-in-1 brown coffee 33%

Super Ye Ye 3-in-1 rich 26%

Pt Sari Indofood Indocafe Cappuccino 22%

Aik Cheong Aik Cheong White coffee 18%

Gold Kili Gold Kili White coffee espresso 17%

UCC UCC Colombia coffee 15%

Super Café Nova 3-in-1 classic 15%

Nestle Nescafe 3-in-1 classic 13%

Power Root Ah Huat White coffee hazelnut 13%

Viz Branz Gold Roast 3-in-1 classic 12%

Super OWL White coffee 2-in-1 w/creamer 8%

OldTown OldTown White coffee hazelnut 8%

OldTown Nanyang White coffee 2-in-1 6%

Chek Hub Chek Hub White coffee 2-in-1 2%

Note: Product with the highest discount has been selected


Figure 20: Super White Coffee

promotion

Three for SGD 11.75

Figure 21: Kopiko Brown Coffee

promotion

Buy 2 get 1 free


A price war is underway, with Super, Kopiko and Nescafe

discounting up to 37%, 33%, and 13%, respectively



13 June 2014 11

When analysing the prices of 3-in-1 classic coffee products after the discount (on a

per-gram basis), we found the following:

For classic 3-in-1 products, Capparoma is highest priced, while OWL and Super

are close to the average (4% and 12% respective discounts). The lowest priced

was Super’s Ye Ye brand.

Among white coffee original products, Ah Huat has the highest price. OWL is

priced close to the average (a 2% premium), while Super has the second-lowest

price, at a 17% discount to the average.

Figure 22: 3-in-1 classic coffee

Ranked from highest to lowest average discount price/g (SGD)

Brand Company

Average original

price/g

Average discount

price/g Packaging

Capparoma Viz Branz 0.0118 0.0118 25x18g

Kopiko Mayora Indah 0.0087 0.0087 30x20g

Nescafe Nestle 0.0090 0.0084 35x19g

Mr.Cafe Tastyfood Industries 0.0077 0.0077 40x20g

OWL Super 0.0071 0.0068 40x20g

Gold Kili Gold Kili 0.0068 0.0068 20x20g

Gold Roast Viz Branz 0.0069 0.0065 40x20g

In-Comix In-Comix Food 0.0065 0.0065 10x20g

Super Super 0.0066 0.0063 40x20g

Morning sun Morning Sun 0.0061 0.0061 40x20g

Indocafe Pt Sari Indofood 0.0061 0.0061 30x20g

Coffee King Super 0.0060 0.0060 40x20g


Ye Ye Super 0.0056 0.0056 45x20g

Average

0.0072 0.0071

OWL vs. Average

-4%

Super vs. Average

-12%



Ranked from highest to lowest average discount price/g (SGD)

Brand Company Average original

price/g

Average discount

price/g Packaging

Ah Huat Power Root 0.0124 0.0124 15x30g

Gold Roast Viz Branz 0.0114 0.0114 15x40g

Nescafe Nestle 0.0119 0.0113 15x36g

Alicafe Power Root 0.0110 0.0110 30x20g

UCC UCC 0.0123 0.0110 15x35g

OldTown OldTown 0.0114 0.0109 15x40g

Chek Hub Chek Hub 0.0106 0.0106 15x40g

Alicafe Power Root 0.0105 0.0105 15x40g

OWL Super 0.0109 0.0105 15x40g

Fair Price Fair Price 0.0101 0.0101 30x12g


Aik Cheong Aik Cheong 0.0101 0.0092 15x40g

Giant Giant 0.0092 0.0092 15x40g

Super Super 0.0104 0.0085 15x40g

Morning Sun Morning Sun 0.0065 0.0065 40x20g

Average

0.0106 0.0102

OWL vs. average

2%

Super vs. average

-17%




13 June 2014 12

Regional competition may intensify Foreign brands offering discounts in Singapore include Kopiko (Indonesia), Indocafe

(Indonesia), Ah Huat (Malaysia) and Old Town (Malaysia). We believe the price war

reflects aggressive regional expansion by brands that previously focussed primarily

on their domestic markets. This suggests that Super may face intensifying

competition not only in Singapore, but also in its other markets.

Intensifying competition in Singapore and the region During our Singapore store visits, we found the following foreign brands competing

with Super:

Kopiko: Kopiko comes from Mayora Indah (MYOR IJ, OP), a leading food and

beverage company in Indonesia. Mayora has been expanding strongly outside of

its home market. Exports as a percentage of group sales have increased from 9%

in 2003 to 37% in 2013. Markets where Mayora Indah has performed well include

the Philippines, where it was the number two 3-in-1 coffee brand in 2013. We

believe the aggressive discounting of its 3-in-1 coffee product in Singapore

(accompanied by a TV advertising campaign) shows that the company aims to

gain market share in Singapore. Our aisle checks showed that Mayora held only

1% of the shelf space in the four supermarkets we visited.

Figure 24: International revenue – Mayora Indah Figure 25: Philippines instant coffee market share, 2013

Source: Mayora Indah Source: Companies

OldTown: OldTown (OTB MK, NR, ASEAN F&B: Specialty instant coffee is a

differentiator, released 13 June 2013) is the leading 3-in-1 white coffee brand in

Malaysia. Management estimates that the company held a 42% share of the white

coffee market in Malaysia in June 2011. Our aisle checks showed that OldTown

occupied 9% of the shelf space, ranking it number three after Super and Nestle.

OldTown’s management has clearly articulated the company’s plans for regional

expansion. OldTown opened its first OldTown Cafe in Singapore in 2008, and it

operates similar cafes in Indonesia and China.

Ah Huat: Ah Huat was established in 2012 by Power Root (PWRT MK, NR, Power

Root, published 27 February 2014) of Malaysia. Management said they

established the brand to target the ethnic Chinese communities in Malaysia and

Singapore, as its other brand, Alicafe, primarily targets ethnic Malays. Our store

visits showed that despite Ah Huat being a young brand, it held a respectable 5%

63%

37%

Domestic

International

49%

9%

36%

49%

24% 21%

0%

10%

20%

30%

40%

50%

60%

Nestle URC Mayora

% m

arke

t sh

are

Nov-12 Sep-13

Previously primarily domestic brands are expanding regionally


https://research.standardchartered.com/configuration/ROW%20Documents/ASEAN_F_B__Specialty_instant_coffee_is_a_differentiator_12_06_13_22_42.pdf

https://research.standardchartered.com/configuration/ROW%20Documents/ASEAN_F_B__Specialty_instant_coffee_is_a_differentiator_12_06_13_22_42.pdf

https://research.standardchartered.com/configuration/ROW%20Documents/Power_Root_(Not_rated)__NON-COVERED_COMPANY_VISIT_NOTE_27_02_14_12_43.pdf

https://research.standardchartered.com/configuration/ROW%20Documents/Power_Root_(Not_rated)__NON-COVERED_COMPANY_VISIT_NOTE_27_02_14_12_43.pdf


13 June 2014 13

share of the shelf space. In our view, this indicates the threat posed to Super by

new entrants in Singapore and the region.

Indocafe: Sari Indofood is one of the leading producers of instant 3-in-1 coffee and

instant cappuccino in Indonesia, sold under the Indocafe brand. It also produces

the Max-Brand of coffee creamers. Sari Indofood is owned by Sumatra Tobacco

Trading Company Group (STTC), which is based in Indonesia. Our aisle check

showed that Indocafe had a 3% share of the shelf space at the four supermarkets

we visited.



13 June 2014 14

Earnings sensitivity We estimate that after allocating SG&A expenses, Super could be generating an

EBIT loss of SGD 0.74 per pack of 15x25-40g, 3-in-1 coffee product sold. We expect

strong competition in Singapore to reduce Super’s branded consumer EBIT margin

by 1.3ppt in 2014, but the impact could be greater if competition spreads to other

markets.

Super is likely generating an EBIT loss Super says it generates a gross profit margin of 40-45% from its branded consumer

segment, and we estimate the branded consumer segment generated an EBIT

margin of 19% in 2013. For its promotion in Singapore, Super is offering a discount of

up to 37% on its charcoal-roasted white coffee product. Given Super’s white coffee

product is a premium product, for our sensitivity analysis we assume it generates a

gross profit margin of 50% and an EBIT margin of 25% prior to discounting.

Assuming that COGS and SG&A/unit remain the same, any discount beyond 25%

would result in an EBIT loss. At a 37% discount (which is what Super’s promotion

offers), we estimate that its products are generating an EBIT loss of SGD 0.74/pack

(-19% EBIT margin).

Figure 26: Super – Estimated profit per pack

Pre-discount Post-discount

ASP 6.20 3.91

COGS (3.10) (3.10)

Gross profit 3.10 0.81

Gross profit margin 50% 21%

SG&A (1.55) (1.55)

EBIT 1.55 (0.74)

EBIT margin 25% -19%

Discount

37%

Source: Company, Standard Chartered Research estimates

Figure 27: Sensitivity to discount percentage

Discount 37% 35% 30% 25% 19% 14% 9%

ASP 3.91 4.03 4.34 4.65 4.65 4.96 5.27

Gross profit 0.81 0.93 1.24 1.55 1.55 1.86 2.17

Gross profit margin 21% 23% 29% 33% 33% 38% 41%

EBIT (0.74) (0.62) (0.31) - - 0.31 0.62

EBIT margin -19% -15% -7% 0% 0% 6% 12%

Source: Standard Chartered Research estimates

Manageable impact from Singapore competition On our estimates, the price war in Singapore should reduce Super’s branded

consumer EBIT margin by 1.3ppt to 17.7% in 2014. We assumed the following:

Singapore accounted for 9% of Super’s branded consumer sales (6% of group

sales) in 2013. We assume that 85% of Singapore branded consumer sales come

from coffee and 15% from cereal. We believe the OWL and Super brands each

accounted for half of Super’s Singapore coffee sales.

We assume flat cereal sales growth in 2014, generating an EBIT margin of 19%.

This results in a blended Singapore branded consumer EBIT margin of 3.6%.

We estimate that Super is generating an EBIT loss from its

promotions in Singapore



13 June 2014 15

Figure 28: Super – Singapore branded consumer sales

2013 2014E

Coffee 27.6 25.50

Cereal 4.9 4.9

Total 32.4 30.4

Sales growth

Coffee

-8%

Cereal

0%

Total

-6%

EBIT

Coffee 5.24 0.16

Cereal 0.92 0.92

Total 6.16 1.08

EBIT margin

Coffee 19% 0.6%

Cereal 19% 19%

Total 19% 3.6%


We assume that Super is sold at a discount, while OWL is not. We model flat

Singapore coffee sales for Super (increased volumes, but reduced revenue per

pack from the discount), and OWL’s sales declining by 15% YoY, based on market

share losses due to no discount (management said that OWL’s sales declined

c.20% YoY in 1Q14).

We model an EBIT margin of 19% for OWL and -15% for Super after the discount.

Our sensitivity analysis shows that if Super is discounted by 37% (which is what

their promotion offers), EBIT margin should be -19%. However, not all Super

products are being sold at a discount, and we assume these products generate

some sales. This results in a blended coffee EBIT margin of 0.6%.

Figure 29: Singapore coffee sales

2013 2014E

Super 13.8 13.78

OWL 13.8 11.71

Total 27.6 25.50

Sales growth

Super

0%

OWL

-15%

Total

-8%

EBIT

Super 2.6 (2.1)

OWL 2.6 2.2

Total 5.2 0.2

EBIT margin

Super 19% -15%

OWL 19% 19%

Total 19% 0.6%


We estimate that Super’s branded consumer business generated a blended EBIT

margin of 19% in 2013. We assume all markets generated this EBIT margin in

2013, and expect this to continue in 2014, with the exception of Singapore. For

Singapore, we apply an EBIT margin of 3.6%, which assumes that Super’s

branded consumer EBIT margin declines to 17.7% in 2014, from 19% in 2013.



13 June 2014 16

Figure 30: Revenue by geography – Branded consumer

SGD mn 2013 2014E

Thailand 113.3 107.6

Myanmar 73.1 73.1

Malaysia 53.7 58.0

Singapore 32.4 32.4

Philippines 25.9 27.2

Others 66.1 76.0

Group 364.5 374.3

Growth (%)

Thailand

-5.0%

Myanmar

0.0%

Malaysia

8.0%

Singapore

0.0%

Philippines

5.0%

Others

15.0%

Group

2.7%

EBIT (SGD mn)

Thailand 21.5 20.4

Myanmar 13.9 13.9

Malaysia 10.2 11.0

Singapore 6.2 1.2

Philippines 4.9 5.2

Others 12.6 14.4

Group 69.3 66.1

EBIT margin (%)

Thailand 19.0% 19.0%

Myanmar 19.0% 19.0%

Malaysia 19.0% 19.0%

Singapore 19.0% 3.6%

Philippines 19.0% 19.0%

Others 19.0% 19.0%

Group 19.0% 17.7%

Change in EBIT margin YoY (ppt)

-1.3




13 June 2014 17

Regional competition may pressure margins We estimate that Super’s branded consumer business generated an EBIT margin of

19% in 2013, one of the highest among ASEAN food and beverage companies. We

believe Super’s attractive margins may encourage intensifying competition in the

region. While the price war in Singapore should have manageable impact on Super’s

overall profitability, if major price competition spreads to other markets, the impact on

Super could be significant, in our view.

Figure 31: EBIT margin, 2013 Figure 32: Super’s EBIT margin, 2012-18

Source: Company, Bloomberg, Standard Chartered Research estimates Source: Standard Chartered Research estimates

19% 18% 18%

17%

14% 13% 13%

10%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Sup

er

Pet

ra S

P

Rot

i IJ

OT

B

Pow

er r

oot

Ultr

ajay

a

UR

C

May

ora

EB

IT m

arg

in

20% 19%

18% 18% 17% 17% 16%

0%

5%

10%

15%

20%

25%

2012 2013 2014 2015 2016 2017 2018

EBIT margin - Branded Consumer



13 June 2014 18

What is actionable? Our store visits showed intensifying competition among 3-in-1 coffee brands in the

region, but with Super’s share price already down 27% YTD, we maintain our In-Line

rating but trim our price target to SGD 1.34 (previously SGD 2.09). We maintain our

Outperform ratings on URC, and our In-Line rating on Mayora Indah. Our top pick in

the ASEAN food and beverage sector is URC.

Figure 33: Stock ratings

Price

target Price

Upside/

downside Last PER (x) 2Y EPS

Name Ticker Rating (LCY) (LCY) (%) FYE 2013 2014 2015 CAGR

Super Group SUPER SP IL 1.34 1.39 -3% 12/13 22.5 18.6 17.2 14%

Mayora Indah Tbk PT MYOR IJ IL 30,363 29,250 4% 12/13 32.6 28.5 22.3 21%

Universal Robina Corp URC PM OP 182.60 155.00 18% 09/13 36.8 28.5 24.3 23%

Above data as of 11 June 2014. Source: Companies, Bloomberg, Standard Chartered Research estimates

Super: Competitive pressures ahead We view Super as a leading brand, but expect strong competition to pressure its

sales and margins. We believe this has already been reflected in the share price, and

maintain our In-Line rating:

Price war in Singapore: In 1Q14, Super’s sales in Singapore declined 11%. We

believe the ongoing price war was part of the reason. We expect this factor to

pressure Super’s sales and margins in Singapore, which accounted for 9% of its

branded consumer sales in 2013.

Competition could intensify regionally: Beyond Singapore, we are concerned

that competition may intensify among 3-in-1 coffee brands. Mayora Indah

(Indonesia), OldTown (Malaysia), and Power Root (Malaysia) all have aggressive

regional expansion plans. One potential competitor is Universal Robina, which is

currently selling its 3-in-1 coffee solely in the Philippines. However, given the

company’s regional presence in other products and strong brand, we believe it has

the potential to quickly enter other 3-in-1 coffee markets.

Await better entry point: Super trades at 17.2x 2015E PER, similar to 3-in-1

coffee peer OldTown (OTB MK, NR). We await signs of moderating competition

before turning more positive on the stock.

Universal Robina: Our ASEAN F&B top pick We maintain our Outperform recommendation on URC, despite the stock’s strong

performance, for the following reasons:

Strong multi-product portfolio: Unlike Super, which is primarily a 3-in-1 coffee

product company, URC has a solid multi-product portfolio with over 350 SKUs. We

believe this provides it significant potential to innovate and drive growth.

Robust growth: In 1Q14, URC’s branded consumer sales grew by 20%, while

Super’s branded consumer segment sales declined 6%.

Reasonable valuation for growth: URC is trading at 24.3x 2015E PER, but we

believe this valuation is reasonable given the company’s strong regional brand,

multi-product portfolio, and solid growth. On a five-year view, assuming an exit



13 June 2014 19

multiple of 22x 2019E PER, we estimate that URC could deliver a total return of

9.8% p.a.

Mayora Indah: Aggressive growth We maintain our In-Line rating on Mayora due to its recent poor margin performance:

Rising raw materials costs hurt margins: Mayora reported a gross profit margin

of 20.1% in 1Q14, compared to 24.6% in 1Q13. Food processing and instant

coffee gross profit margins both fell to 18-20% in 1Q14, from 19-26% in 1Q13. We

think this was largely due to rising raw material costs, including coffee (+13%

YoY), while packaging expenses tend to rise during periods of USD/IDR

depreciation.

Potential for more margin pressure in 2H14: Mayora spent only 5.4% of its

revenue on marketing in 1Q14, compared to its usual c.8%. We think this could

lead to further EBIT margin pressures in the next three-to-six months, as it may

need to catch up on its marketing efforts prior to the Lebaran holiday in July. In

addition, the Indonesian government has announced plans to increase electricity

tariffs by 37-64% YoY for industrial users. We estimate that factory overheads and

utilities accounted for around 7% of revenue in 2013.

Fairly valued for now: Given our expectation of further margin pressure, we

consider Mayora fairly valued. We will be watching for signs of improving margins

in the next two quarters.



13 June 2014 20

Super Group

Competitive pressures ahead

Super Group’s 1Q14 results were below our expectations,

with core net profit representing 18% of our full-year

forecast, compared with 25% in 2013.

We cut our 2014E and 2015E EPS by 9% and 14%,

respectively, to reflect Super’s weak sales, and revise our

price target to SGD 1.34 (previously SGD 2.09).

With Super’s share price down 27% YTD, we maintain our

In-Line rating. Our 12-month price target implies 3%

potential downside. We will look out for stronger earnings

growth before becoming more positive.

IN-LINE (unchanged)

Weak sales. Super’s 1Q14 sales and core net profit fell 6% and

14% YoY, respectively, with sales of both branded consumer (71%

of 1Q14 sales) and food ingredients (29% of 1Q14 sales) declining

6% YoY. We were disappointed by the fall in branded consumer

sales in Thailand (-10% YoY), Myanmar (-6% YoY) and Singapore

(-11% YoY) – we estimate that these markets constituted c.60% of

Super’s branded consumer sales in 2013. The fall in food

ingredients’ sales was primarily due to a 30% sales decline in

Indonesia, as Super’s Indonesian clients had overstocked in 4Q13.

Price war in Singapore. Our supermarket visits in Singapore

revealed that an aggressive price war is brewing, with many 3-in-1

coffee brands offering significant discounts. Brands such as

Nestle, Kopiko (or Mayora Indah) and Super are offering discounts

of up to 37%. We think the price war may last 6-9 months, and we

expect this to pressurise Super’s sales and margins in Singapore.

Hurt by exposure to southern Thailand. We note that Super’s

sales declined 10% YoY in Thailand in 1Q14; Universal Robina’s

(URC) sales, on the other hand, grew 16% during the period. We

believe Super’s sales in Thailand were adversely affected, due

primarily to its large exposure to southern Thailand (65% of

Thailand sales, according to management estimates). Consumer

demand in the southern provinces has been affected by an acute

insurgency problem.

Maintain In-Line. Super trades at 17.2x 2015E PER, similar to 3-

in-1 coffee peer Oldtown Bhd (OTB MK, NR). We await signs of

moderating competition before becoming more positive on the

stock. We transfer coverage to Munchuga Khajornkowit.


Share price performance

Source: Company, FactSet

PRICE as of 11 Jun 2014

SGD 1.39

PRICE TARGET

SGD 1.34

Bloomberg code Reuters code

SUPER SP SPGP.SI

Market cap 12-month range

SGD 1,544.5mn (USD 1,235.5mn) SGD 1.38 - 2.53

EPS adj. est. change 2014E -9.2% 2015E -13.9%

Year-end: December 2013 2014E 2015E 2016E

Sales (SGD mn) 557.0 589.1 649.8 719.2

EBITDA (SGD mn) 78.2 79.7 86.0 92.9

EBIT (SGD mn) 93.0 93.1 100.4 108.7

Pre-tax profit (SGD mn) 114.7 95.8 104.1 112.9

Net profit adj. (SGD mn) 100.1 83.2 89.8 96.8

FCF (SGD mn) 14.5 57.1 53.5 53.9

EPS adj. (SGD) 0.09 0.07 0.08 0.09

DPS (SGD) 0.04 0.04 0.04 0.04

Book value/share (SGD) 0.42 0.49 0.57 0.66

EPS growth adj. (%) 27.9 -16.9 8.0 7.8

DPS growth (%) 26.2 -16.8 8.0 7.8

EBITDA margin (%) 14.0 13.5 13.2 12.9

EBIT margin (%) 16.7 15.8 15.5 15.1

Net margin adj. (%) 18.0 14.1 13.8 13.5

Div. payout (%) 49.9 50.0 50.0 50.0

Net gearing (%) -20.2 -27.1 -31.3 -34.2

ROE (%) 23.1 16.4 15.1 14.1

ROCE (%) 20.3 17.4 16.0 15.1

EV/sales (x) 3.9 2.4 2.1 1.8

EV/EBITDA (x) 27.5 17.4 15.6 13.8

PBR (x) 4.5 2.8 2.4 2.1

PER adj. (x) 22.5 18.6 17.2 16.0

Dividend yield (%) 2.2 2.7 2.9 3.1

1.2

1.9

2.6

Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

Super Group STRAITS TIMES INDEX (rebased)

Share price (%) -1 mth -3 mth -12 mth

Ordinary shares -18 -21 -37

Relative to index -19 -25 -40

Relative to sector - - -

Major shareholder Lay Hoon Te (12.2%)

Free float 45%

Average turnover (USD) 2,227,811

Munchuga Khajornkowit +65 6596 8504

Equity Research


SUPER SP

SGD 1.39 SGD 1.34



13 June 2014 21

1Q14 results highlights Super’s 1Q14 results were below our expectations, with core net profit representing

18% of our full-year forecast, compared with 25% in 2013. Sales and core net profit

declined 6% and 14% YoY, respectively, during the quarter. The following are the key

results highlights:

Figure 34: Results summary

SGD mn 1Q13 1Q14

YoY

growth 2013 Old 2014E

2014

consensus

1Q13

as % of 2013

1Q14

as % of 2014E old

1Q14

as % of 2014 consensus

Revenue 132.4 124.6 -6% 557.0 616.4 618.9 24% 20% 20%

Gross profit 49.1 46.7 -5% 209.5 229.3 225.4 23% 20% 21%

GP margin 37.1% 37.5% NA 37.6% 37.2% 36.4% NA NA NA

EBIT 23.9 19.9 -16% 93.0 106.6 103.9 26% 19% 19%

EBIT margin 18.0% 16.0% NA 16.7% 17.3% 16.8% NA NA NA

Net profit 22.1 17.8 -19% 100.1 91.6 91.6 22% 19% 19%

Net margin 16.7% 14.3% NA 18.0% 14.9% 14.8% NA NA NA

Net profit – core 19.6 16.9 -14% 78.7 91.6 90.8 25% 18% 19%

Net margin – core 14.8% 13.5% NA 14.1% 14.9% 14.7% NA NA NA

EPS diluted (SG¢) 3.97 3.20 -19% 8.98 16.42 16.40 44% 19% 19%

EPS diluted – core (SG¢) 3.52 3.03 -14% 7.06 16.42 16.30 50% 18% 19%

BPS (SGD) 76.50 86.23 13% 83.74 91.93 90.80 91% 94% 95%

Source: Company, Bloomberg and Standard Chartered Research estimates

Figure 35: Changes in our 2014 estimates

SGD mn

Old

estimates

New

estimates Consensus

Changes in

our estimates

Revenue 616.4 589.0 618.9 -4%

Net profit 91.6 83.0 91.6 -9%

Core net profit 91.6 80.0 90.8 -13%

EPS diluted (SG¢) 8.2 7.4 8.2 -9%

Source: Bloomberg, Standard Chartered Research estimates

Weak sales across both segments: Sales of branded consumer (71% of sales)

and food ingredients (29% of sales) declined 6% YoY each in 1Q14.

Branded consumer – weak sales in key markets: Management said that sales

in 1Q14 grew YoY in the Philippines, Indonesia, Vietnam and Cambodia and was

flat in Malaysia. However, this was offset by weakness in Thailand (-10% YoY),

Myanmar (-6% YoY) and Singapore (-11% YoY). Thailand, Myanmar and

Singapore were Super’s largest, second-largest and fourth-largest branded

consumer markets in 2013 – we estimate these three markets constituted c.60% of

Super’s branded consumer sales in 2013.

1Q14 sales and core net profit declined 6% and 14% YoY,

respectively



13 June 2014 22

Figure 36: 1Q14 branded consumer sales growth, by

country

Figure 37: 1Q14 branded consumer sales growth, by

region

Source: Company Source: Company

Branded consumer – Thailand: Super’s 1Q14 branded consumer sales in

Thailand declined 10% YoY; during the same period, URC’s sales grew 16%. We

believe Super’s sales in Thailand was adversely impacted, due primarily to its

significant exposure to southern Thailand. According to management estimates,

65% of Super’s Thailand sales are from the southern provinces, where consumer

demand has been impacted by an acute insurgency problem. Management also

stated the company had shortened its credit terms to distributors, from 90 days to

60 days, to manage credit risk, thus hurting sales in the quarter. It expects the

stimulus programs from Thailand’s recent military-led government to help revive

consumer demand in 2H14.

Branded consumer – Myanmar: Super’s 1Q14 branded consumer sales in

Myanmar declined 6% YoY. The company offers two brands in Myanmar: Super,

their flagship, premium brand; and Coffee King, which targets the lower-income

segment. According to management, Super’s distributors raised prices of both

brands by about 6-8% in November 2013. While volumes of the Super brand

continued to grow in 1Q14, Coffee King volumes fell in the quarter.

Branded consumer – Singapore: Super’s branded consumer sales in Singapore

declined 11% YoY in 1Q14. Management said the sales decline was because of:

(1) rebranding of Super’s instant cereal products under Nutremill in December

2013. It believes that it would take time to build brand awareness for rebranding;

and (2) an aggressive price war in the 3-in-1 coffee market in Singapore. While the

Super brand participated in the price war, the OWL brand is yet to do so, resulting

in sales of the OWL brand declining c.20%.

China coffee-in-a-cup not growing: Sales growth in China was flat during the

quarter, despite the low base and the product being launched only last year.

Management said it was not concerned about the flat sales, because the product is

seasonal with higher sales in winter. It also attributed the weakness in China to

disruption caused by moving Super’s factory; as a result, the factory did not

produce for two weeks.

Food ingredients recovering: Sales of food ingredients in Southeast Asia (41%

of food ingredient sales) declined 20% YoY in 1Q14, while sales in East Asia grew

6% YoY. Sales rose in the Philippines, Singapore and Vietnam but declined in

Indonesia and Thailand.

20%

3%

-6% -6%

-10% -11% -15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Vietnam Philippines Branded consumer

Myanmar Thailand Singapore

Yo

Y %

2%

-6%

-8%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

BCF - East Asia Branded consumer BCF - Southeast Asia

Yo

Y %



13 June 2014 23

Figure 38: Revenue breakdown, by segment products Figure 39: 1Q14 revenue, by geographical region

Source: Company, Standard Chartered Research estimates Source: Company

Still guiding for growth: Despite the sales decline in 1Q14, management has

guided for a full-year single-digit sales growth for branded consumer and low

double-digit sales growth for food ingredients.

Balance sheet and cash flow: Super’s balance sheet remains strong, with net

cash of SGD 94mn as of end-1Q14. The company spent capex of SGD 11mn in

the quarter. Management has guided for a full-year capex of SGD 40mn, with

maintenance capex of c.SGD 4-5mn and the remaining for moving the company’s

headquarters in Singapore to Tuas and for coffee plant expansion.

Bonus issue: On 24 February 2014, management announced issuance of bonus

shares (one bonus share for every existing ordinary share held by shareholders).

This issue will be effective on 26 May 2014. As of 24 February 2014, the company

had 557,738,980 shares outstanding, including 152,000 treasury shares.

71% 64% 63% 62% 62% 62% 62%

29% 36% 37% 38% 38% 38% 38%

0%

20%

40%

60%

80%

100%

1Q14 2014E 2015E 2016E 2017E 2018E 2019E

Branded consumer Food ingredients

70%

24%

6%

Southeast Asia

East Asia

Other Markets



13 June 2014 24

Maintain In-Line We maintain our In-Line rating and our price target implies 3% potential downside.

Our price target is based on SOTP, comprising separate DCF valuations for its

branded consumer and food ingredients businesses. Our price target translates into

17.3x 2015E PER.

SOTP We value Super based on our SOTP valuation methodology, separately valuing its

branded consumer and food ingredients businesses. Our DCF-based fair value for

the branded consumer business implies 19.8x 2015E PER. We also value the food

ingredients segment on DCF.

Figure 40: Our SOTP valuation

Segment Valuation (SGD mn)

Per share value

(SGD)

EBITDA 2015E

(SGD mn) EV/EBITDA

2015E (x)

Net income 2015E

(SGD mn) PER 2015E

(x) % of EV Valuation

methodology

Value of operations – Branded consumer segment 1,172 1.05 81 14.5x 59 19.8x 83% DCF

Value of operations – Food ingredients segment 243 0.22 34 7.1x 24 10.1x 17% DCF

Total value of operations 1,415 1.27 115 12.3x 83 17.0x 100%

Add: net cash / less: net debt 98 0.09

Less: Minority interests (20) (0.02)

Equity value 1,493 1.34

Shares outstanding (mn) 1,115

Fair value per share (SGD) 1.34

Current price (SGD)* 1.39

Upside/(downside) -3%

EPS adj. 2015E (SG¢) 0.08

Target PER 2015E 17.3x

EBITDA - 2015E 115

Target EV/EBITDA 2015E 13.0x

Note: Share price data as of 11 June 2014


Relative valuation Super trades at 17.2x 2015E PER, a 15% discount to the ASEAN consumer staples

average of 20.1x 2015E PER.

Figure 41: Peer comparison

Name Ticker Rating

Price

Target

(LCY)

Price

(LCY)

Market

cap

(USDm)

3M avg

value traded

(USDm)

Last

FYE

PER (x) 2-yrs

EPS

CAGR

2-yrs

PEG

Price/

sales

2014

EV/EBITDA (x) Div.

yield (%)

2014E

ROCE

(%)

2014E 2013 2014E 2015E 2013 2014E 2015E

Super Group SUPER SP IL 1.34 1.39 1,235 2.19 12/13 22.5 18.6 17.2 14% 3.5 2.6 12.6 17.4 15.6 2.7 17.4

ASEAN consumer staples Indofood Sukses Makmur Tbk PT

INDF IJ OP 8,521 6,900 5,130 6.87 12/13 24.2 13.3 9.9 56% 0.2 0.9 10.3 6.1 5.5 3.8 17.4

Mayora Indah MYOR IJ IL 30,363 29,250 2,215 0.08 12/13 32.6 28.5 22.3 21% 1.1 1.8 17.9 15.3 12.8 0.5 19.6

Petra Foods PETRA SP OP 4.00 3.90 1,906 1.15 12/13 40.2 27.8 24.4 28% 0.9 3.4 19.2 15.4 13.7 0.8 31.6

Universal Robina URC PM OP 182.60 155.00 7,718 7.71 09/13 36.8 28.5 24.3 23% 1.1 3.6 24.0 18.7 16.0 2.3 24.9

Average Asean consumer staples 33.5 24.5 20.2 0.8 2.4 17.9 13.9 12.0 1.8 23.4


Source: Company, FactSet, Bloomberg, Standard Chartered Research estimates

We value Super based on SOTP with separate DCF valuations for its

branded consumer and food ingredients businesses



13 June 2014 25

DCF valuation – Branded consumer We value Super’s branded consumer business using a three-stage DCF model. Our

explicit forecasts for 2013-23E translate into a free cash flow CAGR of 5.8%. We

assume second-stage and terminal growth rates of 6% and 3%, respectively, and use

a WACC of 8.3%.

Figure 42: DCF valuation – Branded consumer foods

SGD mn

2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Stage 1: Explicit 2013-23E

EBIT

71 69 67 71 76 81 87 94 101 109 117 126

Change YoY

-2.5% -2.7% 5.9% 6.5% 6.5% 8.1% 7.6% 7.6% 7.6% 7.7% 7.7%

EBIT margin

20% 19.0% 18.0% 17.5% 17.0% 16.5% 16.3% 16.0% 15.8% 15.5% 15.3% 15.0%

EBIT (1-tax)

59 57 60 64 67 71 77 82 88 94 101 108

(+) Depreciation and amortisation 7 6 7 9 8 9 10 11 13 15 16 17

(-) Change in working capital (11) (2) (9) (9) (10) (12) (13) (11) (12) (13) (15) (16)

(-) Capital expenditure (22) (22) (19) (20) (22) (23) (26) (28) (31) (32) (35) (38)

Capex/Sales

-5.9% -5.0% -5.0% -5.0% -4.8% -4.8% -4.8% -4.8% -4.5% -4.5% -4.5%

Unlevered free cash flow 33 41 40 44 43 46 48 54 58 64 68 71

Discount factor

0.96 0.88 0.81 0.75 0.70 0.64 0.59 0.55 0.51 0.47

Present value of FCF

38 39 35 34 33 35 35 35 34 33

Stage 2: 2024-33E

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E

Unlevered free cash flow

75 80 85 90 95 101 107 113 120 127

Discount factor

0.43 0.40 0.37 0.34 0.31 0.29 0.27 0.25 0.23 0.21


32 32 31 30 30 29 29 28 27 27

Stage 3: Terminal

Terminal value

2,479

Discount factor

0.21

Present value of terminal value

524

Equity value

Growth rate assumptions

WACC assumptions

DCF of operations: Stage 1 352

Stage 1: 2013-23E 5.8%

Risk-free rate

2.7%


Stage 2: 2024-33E 6.0%

Cost of debt

6.0%

NPV of the terminal value 524

Stage 3: Terminal 3.0%

Equity risk premium 6.2%

Enterprise value (SGD mn) 1,172

Tax rate

17.0%

Number of diluted shares 1,115

Target debt-to-firm-value 0.00%

Enterprise value per share (SGD) 1.05

Equity beta 0.90

Net profit 2015E

59

Cost of debt (after tax) 5.0%

PER 2015E

19.8

Cost of equity

8.3%

WACC

8.3%


Source: Company, Bloomberg, Standard Chartered Research estimates



13 June 2014 26

Figure 43: Sensitivity for branded consumer

Terminal growth rate

WA

CC

0.0% 1.0% 3.0% 5.0% 7.0%

6.3% 1.25 1.36 1.79 3.54 (4.45)

7.3% 1.03 1.10 1.33 1.96 11.67

8.3% 0.87 0.92 1.05 1.35 2.59

9.3% 0.75 0.78 0.86 1.03 1.48

10.3% 0.66 0.67 0.73 0.83 1.04

Note: Data as of 11 June 2014


DCF valuation – Food ingredients We value Super’s food ingredients business using a three-stage DCF model. Our

explicit forecasts for 2014-23E translate into a free cash flow CAGR of 13.1%. We

assume second-stage and terminal growth rates of 5% and 3%, respectively, and use

a WACC of 9.5%.

Figure 44: DCF valuation – Food ingredients segment

SGD mn

2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Stage 1: Explicit 2013-23E

EBIT

24 26 29 33 36 39 42 44 47 49 52

Change YoY

38% 8% 13% 12% 11% 8% 7% 6% 6% 6% 6%

EBIT margin

12% 12% 12% 12% 12% 12% 12% 11% 11% 11% 11%

EBIT (1-tax)

21 23 26 29 32 34 36 38 40 42 44

(+) Depreciation and amortisation 5 5 5 6 7 8 9 9 10 10 10

(-) Change in working capital (47) (8) (10) (11) (11) (10) (9) (9) (8) (8) (8)

(-) Capital expenditure (15) (13) (15) (16) (17) (19) (21) (22) (23) (24) (25)

Capex/Sales

-8% -6% -6% -6% -6% -6% -6% -6% -6% -6% -6%

Unlevered free cash flow (36) 7 7 7 10 13 15 16 20 20 21

Discount factor

0.95 0.87 0.79 0.72 0.66 0.60 0.55 0.50 0.46 0.42


7 6 6 7 9 9 9 10 9 9

Stage 2: 2023-33E

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E

Unlevered free cash flow

22 23 24 26 27 28 30 31 33 34

Discount factor

0.38 0.35 0.32 0.29 0.27 0.24 0.22 0.20 0.18 0.17


8 8 8 7 7 7 7 6 6 6

Stage 3: Terminal

Terminal value

543

Discount factor

0.17


92

Equity value

Growth rate assumptions

WACC assumptions


Stage 1: 2014-23E 13.1%

Risk-free rate

2.7%


Stage 2: 2024-33E 5.0%

Cost of debt

6.0%

NPV of the terminal value 92

Stage 3: Terminal 3.0%

Equity risk premium

6.2%

Enterprise value (SGD mn) 243

Tax rate

17.0%

Number of diluted shares 1,115

Target debt-to-firm-value 0.00%

Enterprise value per share (SGD) 0.22

Equity beta

1.10

Net profit 2015E

24


PER 2015E

10.1

Cost of equity

9.5%

WACC

9.5%


Source: Company, Bloomberg, Standard Chartered Research estimates



13 June 2014 27

Figure 45: Sensitivity for food ingredients

Terminal growth rate

WA

CC

0.0% 1.0% 3.0% 5.0% 7.0%

7.5% 0.26 0.28 0.33 0.47 1.70

8.5% 0.22 0.23 0.26 0.33 0.59

9.5% 0.19 0.20 0.22 0.26 0.36

10.5% 0.17 0.17 0.18 0.21 0.26

11.5% 0.15 0.15 0.16 0.17 0.20

Note: Data above as of 11 June 2014


Historical valuation Super currently trades at 17.9x PER, based on 12-month forward earnings. Its five-

year average 12-month forward PER is 13.5x.

Figure 46: Super – PER band

Super has been trading in the 4-31x PER range, based on 12-month

forward earnings

Share price data as of 11 June 2014

Source: Company, Bloomberg and Standard Chartered Research estimates

0.0

0.5

1.0

1.5

2.0

2.5

3.0

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

LC

Y

4.0x

9.0x

14.0x

30.9x

24.0x

19.0x



13 June 2014 28


Income statement (SGD mn) Cash flow statement (SGD mn)

Year-end: Dec 2012 2013 2014E 2015E 2016E Year-end: Dec 2012 2013 2014E 2015E 2016E

Sales 519.3 557.0 589.1 649.8 719.2 EBIT 88.3 93.0 93.1 100.4 108.7

Gross profit 181.4 209.5 218.4 239.9 261.2 Depreciation & amortisation (11.6) (14.8) (13.5) (14.4) (15.8)

SG&A (93.2) (116.4) (125.2) (139.5) (152.5) Net interest (0.5) (0.4) (0.5) (1.0) (1.0)

Other income 0.0 0.0 0.0 0.0 0.0 Tax paid (8.7) (9.7) (9.8) (11.2) (12.7)

Other expenses 0.0 0.0 0.0 0.0 0.0 Changes in working capital (17.4) (35.7) (17.5) (18.4) (21.7)

EBIT 88.3 93.0 93.1 100.4 108.7 Others 123.9 123.5 123.3 134.0 145.4

Net interest 0.5 0.4 0.5 1.0 1.0 Cash flow from operations 85.7 62.8 82.0 89.0 94.3

Associates 0.2 (2.4) (1.5) (1.0) (0.5)

Other non-operational 1.6 23.6 3.7 3.7 3.7 Capex (63.3) (48.3) (24.9) (35.4) (40.5)

Exceptional items 0.0 0.0 0.0 0.0 0.0 Acquisitions & Investments 0.3 8.3 0.0 0.0 0.0

Pre-tax profit 90.5 114.7 95.8 104.1 112.9 Disposals 0.2 2.3 0.0 0.0 0.0

Taxation (8.7) (11.1) (9.8) (11.2) (12.7) Others 4.8 0.1 0.0 0.0 0.0

Minority interests (3.5) (3.4) (2.9) (3.1) (3.4) Cash flow from investing (58.0) (37.6) (24.9) (35.4) (40.5)

Exceptional items after tax 0.0 0.0 0.0 0.0 0.0

Net profit 78.3 100.1 83.2 89.8 96.8 Dividends (32.3) (39.6) (0.4) (0.4) (0.5)

Issue of shares 0.0 0.0 0.0 0.0 0.0

Net profit adj. 78.3 100.1 83.2 89.8 96.8 Change in debt 0.0 0.0 0.0 0.0 0.0

EBITDA 76.6 78.2 79.7 86.0 92.9 Other financing cash flow (1.1) (2.3) 0.0 0.0 0.0

Cash flow from financing (33.5) (41.9) (0.4) (0.4) (0.5)

EPS (SGD) 0.07 0.09 0.07 0.08 0.09

EPS adj. (SGD) 0.07 0.09 0.07 0.08 0.09 Change in cash (10.4) (13.0) 56.7 53.1 53.4

DPS (SGD) 0.04 0.04 0.04 0.04 0.04 Exchange rate effect 0.0 0.0 0.0 0.0 0.0

Avg fully diluted shares (mn) 1,115 1,115 1,115 1,115 1,115 Free cash flow 22.4 14.5 57.1 53.5 53.9

Balance sheet (SGD mn) Financial ratios and otherYear-end: Dec 2012 2013 2014E 2015E 2016E Year-end: Dec 2012 2013 2014E 2015E 2016E

Cash 112.2 98.5 155.2 208.2 261.6 Operating ratios

Short-term investments 3.0 2.4 2.4 2.4 2.4 Gross margin (%) 34.9 37.6 37.1 36.9 36.3

Accounts receivable 95.6 94.6 109.3 120.5 133.4 EBITDA margin (%) 14.8 14.0 13.5 13.2 12.9

Inventory 82.7 101.6 111.7 123.5 138.0 EBIT margin (%) 17.0 16.7 15.8 15.5 15.1

Other current assets 8.8 28.9 28.9 28.9 28.9 Net margin adj. (%) 15.1 18.0 14.1 13.8 13.5

Total current assets 302.3 326.0 407.4 483.6 564.3 Effective tax rate (%) 9.6 9.7 10.2 10.7 11.2

Sales growth (%) 17.8 7.3 5.8 10.3 10.7

PP&E 211.7 250.6 262.1 283.1 307.8 Net income growth (%) 24.9 27.9 -16.9 8.0 7.8

Intangible assets 0.0 0.0 0.0 0.0 0.0 EPS growth (%) 24.8 27.9 -16.9 8.0 7.8

Associates and JVs 0.0 0.0 0.0 0.0 0.0 EPS growth adj. (%) 21.6 27.9 -16.9 8.0 7.8

Other long-term assets 28.8 22.5 22.5 22.5 22.5 DPS growth (%) 22.4 26.2 -16.8 8.0 7.8

Total long-term assets 240.5 273.1 284.6 305.6 330.2

Efficiency ratios

Total assets 542.9 599.1 692.0 789.1 894.6 ROE (%) 20.4 23.1 16.4 15.1 14.1

ROCE (%) 21.7 20.3 17.4 16.0 15.1

Short-term debt 0.9 0.0 0.0 0.0 0.0 Asset turnover (x) 1.0 1.0 0.9 0.9 0.9

Accounts payable 40.1 36.9 44.1 48.8 54.5 Op. cash/EBIT (x) 1.0 0.7 0.9 0.9 0.9

Other current liabilities 79.9 68.5 68.5 68.5 68.5 Depreciation/capex (x) -0.2 -0.3 -0.5 -0.4 -0.4

Total current liabilities 120.8 105.4 112.6 117.3 123.0 Inventory days 94.9 96.8 105.0 104.7 104.2

Accounts receivable days 61.1 62.3 63.2 64.6 64.4

Long-term debt 0.4 0.2 0.2 0.2 0.2 Accounts payable days 40.9 40.4 39.9 41.4 41.2

Convertible bonds 0.0 0.0 0.0 0.0 0.0

Deferred tax 0.0 0.0 0.0 0.0 0.0 Leverage ratios

Other long-term liabilities 5.0 7.0 7.0 7.0 7.0 Net gearing (%) -26.6 -20.2 -27.1 -31.3 -34.2

Total long-term liabilities 5.4 7.1 7.1 7.1 7.1 Debt/capital (%) 0.3 0.0 0.0 0.0 0.0

Interest cover (x) 1,961.2 2,819.2 12,774.2 13,768.3 14,901.0

Total liabilities 126.2 112.5 119.8 124.4 130.2 Debt/EBITDA (x) 0.0 0.0 0.0 0.0 0.0

Current ratio (x) 2.5 3.1 3.6 4.1 4.6

Shareholders’ funds 398.9 466.9 549.7 639.0 735.4

Minority interests 17.8 19.7 22.5 25.7 29.1 Valuation

EV/sales (x) 2.1 3.9 2.4 2.1 1.8

Total equity 416.7 486.6 572.2 664.7 764.4 EV/EBITDA (x) 13.9 27.5 17.4 15.6 13.8

EV/EBIT (x) 12.1 23.1 14.9 13.3 11.8

Total liabilities and equity 542.9 599.1 692.0 789.1 894.6 PER (x) 15.1 22.5 18.6 17.2 16.0

PER adj. (x) 15.1 22.5 18.6 17.2 16.0

Net debt (cash) (110.9) (98.3) (155.0) (208.1) (261.5) PBR (x) 4.5 4.5 2.8 2.4 2.1

Year-end shares (mn) 1,115 1,115 1,115 1,115 1,115 Dividend yield (%) 3.4 2.2 2.7 2.9 3.1



13 June 2014 29

Universal Robina Corp

‘Great Taste’ driving growth

We reiterate our Outperform rating on URC, with a revised

price target of PHP 182.60 (previously PHP 195.60).

We expect robust growth for URC in the Philippines,

especially its 3-in-1 coffee brand, Great Taste.

We continue to like URC for its strong regional brand,

multi-product portfolio, and top-class management.

We value URC based on SOTP valuation methodology, and

our price target translates into 28.6x 2015E PER.

OUTPERFORM (unchanged)

Robust growth. In 2QFY14 (end-March 2014), sales of URC’s

domestic branded consumer business grew 24% YoY, driven

primarily by the success of Great Taste. Moreover, sales of URC’s

beverage segment in the Philippines grew 41% YoY during the

quarter, compared with 16% YoY for the snack segment. We

expect Great Taste to sustain its robust growth – the company

undersupplied the market earlier because its manufacturing

capacity had been fully utilised. URC opened a new plant in

Vietnam in May 2014, thereby increasing its coffee product

manufacturing capacity by 30%.

Gaining market share. Great Taste’s market share of 3-in-1

coffee increased to 22% in December 2013, from only 5% in June

2012. Great Taste’s momentum remains strong: its market share

rose to 23% in February 2014, according to management. In

contrast, Nestle’s market share of 3-in-1 coffee declined to 42% in

February 2014, from 53% in June 2012. Great Taste’s strong

market share gain and Nestle’s market share decline suggest

market leadership could change quickly, which could be a

negative read-across for Super in its core markets.

Potential to expand 3-in-1 coffee regionally. Currently, URC

sells 3-in-1 coffee only in the Philippines. As its manufacturing

capacity is limited, we expect the company to focus on the

Philippines’ 3-in-1 coffee market this year. However, over the next

2-3 years, we think URC may launch new 3-in-1 coffee products.

This would intensify competition for other 3-in-1 coffee brands,

such as Super and Mayora Indah, in our view.





PHP 155.00

PRICE TARGET

PHP 182.60


URC PM URC-PH


PHP 338,133mn (USD 7,743mn) PHP 102.90 - 157.00

EPS adj. est. change 2014E - 2015E 2.9%

Year-end: September 2013 2014E 2015E 2016E

Sales (PHP mn) 80,995 93,357 107,659 124,209

EBITDA (PHP mn) 13,897 17,662 20,617 23,885

EBIT (PHP mn) 10,279 13,429 15,902 18,759

Pre-tax profit (PHP mn) 11,550 14,122 16,551 19,416

Net profit adj. (PHP mn) 9,179 11,863 13,907 16,218

FCF (PHP mn) 6,073 6,353 8,315 10,935

EPS adj. (PHP) 4.21 5.44 6.37 7.43

DPS (PHP) 3.00 3.55 4.16 4.85

Book value/share (PHP) 23.28 25.19 27.43 30.04

EPS growth adj. (%) 25.1 29.2 17.2 16.6

DPS growth (%) 57.9 18.2 17.2 16.6

EBITDA margin (%) 17.2 18.9 19.2 19.2

EBIT margin (%) 12.7 14.4 14.8 15.1

Net margin adj. (%) 11.3 12.7 12.9 13.1

Div. payout (%) 65.2 65.0 65.0 65.0

Net gearing (%) -19.8 -15.8 -13.2 -12.6

ROE (%) 20.6 22.5 24.3 26.0

ROCE (%) 20.2 24.9 27.1 29.3

EV/sales (x) 2.7 3.5 3.1 2.7

EV/EBITDA (x) 16.0 18.7 16.0 13.8

PBR (x) 5.3 6.2 5.7 5.2

PER adj. (x) 24.4 28.5 24.3 20.8

Dividend yield (%) 2.9 2.3 2.7 3.1

100

130

160


Universal Robina Corp PSEi - PHILIPPINE SE IDX (rebased)


Ordinary shares 5 10 35

Relative to index 5 5 30


Major shareholder JG Summit Holding (64.0%)

Free float 23%

Average turnover (USD) 7,684,102

Stephen Hui +65 6596 8514

Equity Research


URC PM

PHP 155.00 PHP 182.60




13 June 2014 30


Income statement (PHP mn) Cash flow statement (PHP mn)

Year-end: Sep 2012 2013 2014E 2015E 2016E Year-end: Sep 2012 2013 2014E 2015E 2016E

Sales 71,202 80,995 93,357 107,659 124,209 EBIT 7,801 10,279 13,429 15,902 18,759

Gross profit 18,471 23,219 26,140 30,144 34,778 Depreciation & amortisation 3,415 3,618 4,233 4,715 5,125

SG&A (10,671) (12,940) (12,711) (14,242) (16,019) Net interest (547) (264) (604) (540) (528)

Other income - - - - - Tax paid (899) (1,182) (2,118) (2,516) (3,048)

Other expenses - - - - - Changes in working capital 2,256 (1,443) (1,542) (1,767) (2,045)

EBIT 7,801 10,279 13,429 15,902 18,759 Others 962 610 1,255 1,133 1,118

Net interest 547 264 604 540 528 Cash flow from operations 12,989 11,619 14,653 16,927 19,381

Associates 31 19 42 55 66

Other non-operational 53 (35) 47 54 62 Capex (5,129) (5,546) (8,300) (8,613) (8,446)

Exceptional items 716 1,023 0 0 0 Acquisitions & Investments (9,177) 0 0 0 0

Pre-tax profit 9,147 11,550 14,122 16,551 19,416 Disposals 3,695 15,432 0 0 0

Taxation (989) (1,432) (2,118) (2,516) (3,048) Others 3 59 0 0 0

Minority interests (422) (73) (102) (83) (97) Cash flow from investing (10,608) 9,945 (8,300) (8,613) (8,446)

Net profit 7,736 10,045 11,902 13,952 16,270 Dividends (3,917) (5,236) (7,737) (9,069) (10,576)

Issue of shares 5,601 0 0 0 0

Net profit adj. 7,050 9,179 11,863 13,907 16,218 Change in debt 2,839 (6,643) 0 0 0

EBITDA 11,216 13,897 17,662 20,617 23,885 Other financing cash flow (6,105) (2,998) 0 0 0

Cash flow from financing (1,582) (14,877) (7,737) (9,069) (10,576)

EPS (PHP) 3.69 4.60 5.46 6.40 7.46

EPS adj. (PHP) 3.36 4.21 5.44 6.37 7.43 Change in cash 799 6,687 (1,384) (754) 359

DPS (PHP) 1.90 3.00 3.55 4.16 4.85 Exchange rate effect - - - - -

Avg fully diluted shares (mn) 2,097 2,182 2,182 2,182 2,182 Free cash flow 7,860 6,073 6,353 8,315 10,935

Balance sheet (PHP mn) Financial ratios and otherYear-end: Sep 2012 2013 2014E 2015E 2016E Year-end: Sep 2012 2013 2014E 2015E 2016E

Cash 5,346 12,033 10,650 9,895 10,254 Operating ratios

Short-term investments - - - - - Gross margin (%) 25.9 28.7 28.0 28.0 28.0

Accounts receivable 7,461 8,522 9,823 11,328 13,069 EBITDA margin (%) 15.8 17.2 18.9 19.2 19.2

Inventory 9,759 10,987 12,783 14,741 17,007 EBIT margin (%) 11.0 12.7 14.4 14.8 15.1

Other current assets 17,121 1,885 1,885 1,885 1,885 Net margin adj. (%) 9.9 11.3 12.7 12.9 13.1

Total current assets 39,688 33,428 35,140 37,849 42,215 Effective tax rate (%) 10.8 12.4 15.0 15.2 15.7

Sales growth (%) 6.0 13.8 15.3 15.3 15.4

PP&E 27,919 30,180 34,248 38,146 41,467 Net income growth (%) 66.9 29.8 18.5 17.2 16.6

Intangible assets 1,274 1,274 1,274 1,274 1,274 EPS growth (%) 64.2 24.8 18.5 17.2 16.6

Associates and JVs 96 85 128 183 249 EPS growth adj. (%) 16.5 25.1 29.2 17.2 16.6

Other long-term assets 1,011 1,578 1,578 1,578 1,578 DPS growth (%) 0.0 57.9 18.2 17.2 16.6

Total long-term assets 30,300 33,117 37,227 41,180 44,567

Efficiency ratios

Total assets 69,987 66,545 72,367 79,029 86,782 ROE (%) 17.7 20.6 22.5 24.3 26.0

ROCE (%) 16.4 20.2 24.9 27.1 29.3

Short-term debt 8,589 1,945 1,945 1,945 1,945 Asset turnover (x) 1.0 1.2 1.3 1.4 1.5

Accounts payable 7,587 9,514 11,068 12,764 14,726 Op. cash/EBIT (x) 1.7 1.1 1.1 1.1 1.0

Other current liabilities 3,893 3,260 3,260 3,260 3,260 Depreciation/capex (x) 0.7 0.7 0.5 0.5 0.6

Total current liabilities 20,068 14,719 16,274 17,969 19,931 Inventory days 67.4 65.5 64.5 64.8 64.8


Long-term debt 2,990 0 0 0 0 Accounts payable days 51.4 54.0 55.9 56.1 56.1

Convertible bonds 0 0 0 0 0

Deferred tax - - - - - Leverage ratios

Other long-term liabilities 312 996 996 996 996 Net gearing (%) 13.4 -19.8 -15.8 -13.2 -12.6

Total long-term liabilities 3,303 996 996 996 996 Debt/capital (%) 23.2 3.8 3.5 3.2 2.9

Interest cover (x) 11.4 38.6 175.5 207.8 245.1

Total liabilities 23,371 15,715 17,270 18,965 20,927 Debt/EBITDA (x) 1.3 0.5 0.1 0.1 0.1

Current ratio (x) 2.0 2.3 2.2 2.1 2.1

Shareholders’ funds 46,580 50,779 54,945 59,828 65,523

Minority interests 37 51 152 235 332 Valuation

EV/sales (x) 1.8 2.7 3.5 3.1 2.7

Total equity 46,617 50,830 55,097 60,064 65,855 EV/EBITDA (x) 11.5 16.0 18.7 16.0 13.8

EV/EBIT (x) 16.5 21.6 24.5 20.8 17.6

Total liabilities and equity 69,987 66,545 72,367 79,029 86,782 PER (x) 15.4 22.3 28.4 24.2 20.8

PER adj. (x) 16.9 24.4 28.5 24.3 20.8

Net debt (cash) 6,233 (10,088) (8,704) (7,950) (8,309) PBR (x) 3.1 5.3 6.2 5.7 5.2

Year-end shares (mn) 2,097 2,182 2,182 2,182 2,182 Dividend yield (%) 3.3 2.9 2.3 2.7 3.1

Other

Branded Consumer food 56,257 65,401 77,576 91,636 107,940

Agro-Industrial 7,370 7,393 7,416 7,490 7,565

Commodity Food 7,575 8,201 8,365 8,533 8,703



13 June 2014 31

Mayora Indah

Watching margins closely

Mayora Indah (Mayora) missed our and consensus

earnings estimates in 1Q14 due to a weak gross profit

margin following a rise in raw material prices. We expect

gross profit margin to remain under pressure from: (1)

rising raw material costs; and (2) a volatile USD-IDR

exchange rate.

We maintain our In-Line rating as we see few further

catalysts for the share price. We roll forward DCF and raise

our 12-month price target to IDR 30,363 (from IDR 27,895).

Despite a weak 1Q14 performance, Mayora’s share price is

up 10% YTD. The stock is trading at an unattractive 22x

2015E PER and our price target implies 23x 2015E PER.

IN-LINE (unchanged)

Rising raw material costs hurt margins. Mayora reported a

weak 1Q14 gross profit margin of 20.1%, compared with 24.6% in

1Q13 and 22.6% in 4Q13. Management attributed this to rising

prices of palm oil, sugar, creamer and milk for its snack and

coffee-mix products. We expect gross profit margin to improve to

22.8% in 2014, close to management guidance of 22.4%.

Competition in instant coffee remains intense. Management

indicated Mayora was the second-largest player by sales in instant

coffee in Indonesia in 2013, but noted competitor Wings Food has

been aggressive in advertising spend and its ‘buy two, get one

free’ promotion. Against the fierce competition, we expect Mayora

to raise marketing spend back to 7-8% of revenue for the

remainder of 2014, from just 5.4% of revenue in 1Q14.

Conservative profit target. Management guides a net profit of

IDR 807bn in 2014, implying a decline of 20% YoY on an

unadjusted basis, or 10% YoY growth on an adjusted basis

(excluding FX gains of IDR 308bn in 2013). We see upside risk to

management’s target, as palm oil and sugar price trends have

moderated since 1Q14.

Fairly valued for now. While Mayora has underperformed the

Jakarta Composite Index, the stock is still up 10% YTD and is

trading at 22x 2015E PER. As we expect further margin pressure,

we view Mayora’s current valuation as fairly valued. We will be on

the lookout for signs of improving margins in the next two quarters.





IDR 29,250

PRICE TARGET

IDR 30,363


MYOR IJ MYOR.JK


IDR 26.2bn (USD 2mn) IDR 22,500 - 31,000

EPS adj. est. change 2014E -4.7% 2015E -0.5%

Year-end: December 2013 2014E 2015E 2016E

Sales (IDR bn) 12,018 14,421 17,306 20,584

EBITDA (IDR bn) 1,669 1,822 2,158 2,622

EBIT (IDR bn) 1,305 1,469 1,806 2,199

Pre-tax profit (IDR bn) 1,356 1,207 1,541 1,929

Net profit adj. (IDR bn) 801 918 1,172 1,466

FCF (IDR bn) 535 354 524 140

EPS adj. (IDR) 896 1,026 1,310 1,639

DPS (IDR) 159 140 179 224

Book value/share (IDR) 4,307 5,193 6,325 7,740

EPS growth adj. (%) 14.1 14.5 27.7 25.1

DPS growth (%) 42.8 -11.9 27.7 25.1

EBITDA margin (%) 13.9 12.6 12.5 12.7

EBIT margin (%) 10.9 10.2 10.4 10.7

Net margin adj. (%) 6.7 6.4 6.8 7.1

Div. payout (%) 13.7 13.7 13.7 13.7

Net gearing (%) 51.1 37.5 24.5 20.9

ROE (%) 30.4 21.6 22.7 23.3

ROCE (%) 19.4 19.6 21.5 23.0

EV/sales (x) 2.1 1.9 1.6 1.3

EV/EBITDA (x) 14.9 15.3 12.8 10.5

PBR (x) 6.0 5.6 4.6 3.8

PER adj. (x) 28.2 28.5 22.3 17.8

Dividend yield (%) 0.6 0.5 0.6 0.8

22,000

27,000

32,000


Mayora Indah JAKARTA COMPOSITE INDEX (rebased)


Ordinary shares 3 -3 9

Relative to index 1 -8 1


Major shareholder Unita Branindo (32.9%)

Free float 64%

Average turnover (USD) 100,373

Alvin Witirto +65 6596 8530

Equity Research


MYOR IJ

IDR 29,2 50 IDR 30,3 63




13 June 2014 32

DCF valuation Our DCF assumes a risk-free rate of 8.5%, cost of debt of 7.0%, equity risk premium

of 6.0%, tax rate of 25.0%, target debt to firm value of 12.5% and an implied

weighted average cost of 12.3%.

Figure 47: DCF valuation (IDR bn)

Stage 1: Explicit 2014-23E 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

EBIT 1,157 1,305 1,469 1,806 2,199 2,656 3,174 3,792 4,529 5,272 6,003 6,833

Change YoY

12.8% 12.6% 22.9% 21.8% 20.8% 19.5% 19.5% 19.5% 16.4% 13.9% 13.8%

EBIT margin 11.0% 10.9% 10.2% 10.4% 10.7% 10.9% 11.1% 11.2% 11.3% 11.5% 11.6% 11.8%

EBIT (1-tax) 867 979 1,102 1,355 1,650 1,992 2,380 2,844 3,397 3,954 4,502 5,125

(+) Depr and amortisation 271 364 353 352 422 429 444 468 626 656 695 744

(-) Ch. in working capital (740) (471) (646) (677) (749) (823) (951) (1,098) (1,266) (1,183) (1,211) (1,470)

(-) Capital expenditure (619) (477) (288) (346) (1,029) (486) (573) (676) (1,995) (918) (1,033) (1,162)

Capex to sales -6% -4% -2% -2% -5% -2% -2% -2% -5% -2% -2% -2%

Unlevered free cash flow (221) 395 520 683 293 1,112 1,299 1,538 762 2,509 2,954 3,237

Discount factor

0.94 0.83 0.74 0.66 0.59 0.53 0.47 0.42 0.37 0.33

Present Value of FCF's

487 570 218 736 766 807 356 1,045 1,096 1,069

Stage 2: 2024-33E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E

Unlevered free cash flow 3,560 3,916 4,308 4,739 5,213 5,734 6,308 6,938 7,632 8,395

Discount factor

0.29 0.26 0.23 0.21 0.19 0.16 0.15 0.13 0.12 0.10

Present Value of FCF's 1,048 1,026 1,005 985 965 945 926 907 889 871

Stage 3: Terminal

Terminal value

120,858

Discount factor

0.10


12,534

Equity value

Growth rates assumptions

WACC assumptions

DCF of operations: Stage 1 7,152

Stage 1: 2014-23E 23%

Risk-free rate 8.5%

DCF of operations: Stage 2 9,567

Stage 2: 2024-34E 10%

Cost of debt 7.0%

NPV of the terminal value 12,534

Stage 3: Terminal 5%

Equity risk premium 6.0%

Enterprise value (IDR bn) 29,254

Tax rate 25.0%

Add. Net cash (2,012)

Target debt to firm value 12.5%

Less. Minority interest (86)

Equity beta 0.80

Equity value (IDR bn) 27,155


Shares outstanding (bn) 0.894

Cost of equity 13.3%

Price target (IDR) 30,363

WACC 12.3%

Current price (IDR) 29,250

Upside/downside 3.8%

PER 2015E 23.2

EPS 2015E 1,310




13 June 2014 33

Relative valuation Mayora is trading at 22x 2015E PER and our price target implies 23x 2015E PER.

Figure 48: Peer comparison

Price

target Price

Market cap

3M avg.

value traded

Last PER (x) 2Y

EPS 2Y

Price/ sales

EV/EBITDA (x) Div. yield (%)

ROCE (%)

Name Ticker Rating (LCY) (LCY) (USD

mn) (USD

mn) FYE 2013 2014 2015 CAGR PEG 2014 2013 2014 2015 2014 2014

Mayora Indah MYOR IJ IL 30,363 29,250 2,215 0.08 12/13 32.6 28.5 22.3 21% 1.1 1.8 17.9 15.3 12.8 0.5 19.6

Indonesia

Indofood CBP ICBP IJ OP 12,300 10,200 5,025 3.71 12/13 20.3 17.7 14.7 18% 0.8 2.0 15.5 11.6 9.2 2.1 25.7

Indofood Sukses INDF IJ OP 8,521 6,900 5,094 6.83 12/13 24.2 13.3 9.9 56% 0.2 0.9 10.3 6.1 5.5 3.8 17.4

Ultrajaya ULTJ IJ NR 4,000 978 0.10 12/13 35.5 23.4 18.0 40% 0.4 2.6 17.7 14.3 11.3 NA 19.1

Tiga Pilar AISA IJ NR 2,435 602 1.16 12/13 23.0 17.4 13.5 31% 0.4 1.3 12.2 9.2 7.2 0.6 18.0

Siantar Top STTP IJ NR 2,890 321 0.00 12/13 33.1 NA NA NA NA NA NA NA NA NA 18.7

Average 27.2 18.0 14.0 36% 0.5 1.7 13.9 10.3 8.3 2.2 19.8

Regional peers

Universal Robina URC PM OP 182.60 155.00 7,718 7.71 09/13 36.8 28.5 24.3 23% 1.1 3.6 24.0 18.7 16.0 2.3 24.9

RFM Corp RFM PM NR 6.17 493 0.12 12/13 24.8 22.4 20.2 11% 1.9 2.0 15.3 13.1 11.3 1.1 11.1

Super Group SUPER SP IL 1.34 1.39 1,235 2.19 12/13 22.5 18.6 17.2 14% 3.5 2.6 12.6 17.4 15.6 2.7 17.4

Petra Foods Ltd PETRA SP OP 4.00 3.90 1,906 1.15 12/13 40.2 27.8 24.4 28% 0.9 3.4 19.2 15.4 13.7 0.8 31.6

Oldtown Bhd OTB MK NR 2.24 313 0.51 12/12 NA 19.1 16.9 NA NA 2.5 NA 10.6 9.1 2.7 28.6

Average 31.1 23.3 20.6 17% 1.8 3.0 19.3 16.3 14.0 1.9 22.6

Share price as of 11 June 2014

Source: Bloomberg, Standard Chartered Research estimates



13 June 2014 34

Income statement (IDR bn) Cash flow statement (IDR bn)

Year-end: Dec 2012 2013 2014E 2015E 2016E Year-end: Dec 2012 2013 2014E 2015E 2016E

Sales 10,511 12,018 14,421 17,306 20,584 EBIT 1,157 1,305 1,469 1,806 2,199

Gross profit 2,346 2,922 3,200 3,883 4,670 Depreciation & amortisation 271 364 353 352 422

SG&A (1,189) (1,617) (1,731) (2,077) (2,470) Net interest 205 232 224 219 217

Other income 0 0 0 0 0 Tax paid (133) (346) (271) (346) (433)

Other expenses 0 0 0 0 0 Changes in working capital (740) (471) (646) (677) (749)

EBIT 1,157 1,305 1,469 1,806 2,199 Others 89 (72) (486) (484) (488)

Net interest (205) (232) (224) (219) (217) Cash flow from operations 849 1,012 643 870 1,169

Associates 0 0 0 0 0

Other non-operational (28) (27) (38) (45) (54) Capex (619) (477) (288) (346) (1,029)

Exceptional items 36 310 0 0 0 Acquisitions & Investments 0 0 0 0 0

Pre-tax profit 960 1,356 1,207 1,541 1,929 Disposals 28 4 0 0 0

Taxation (215) (298) (271) (346) (433) Others (127) (162) 0 0 0

Minority interests (15) (17) (19) (24) (30) Cash flow from investing (718) (635) (288) (346) (1,029)

Exceptional items after tax 0 0 0 0 0

Net profit 730 1,042 918 1,172 1,466 Dividends (100) (183) (125) (160) (200)

Issue of shares 0 0 0 0 0

Net profit adj. 702 801 918 1,172 1,466 Change in debt 231 203 0 0 0

EBITDA 1,428 1,669 1,822 2,158 2,622 Other financing cash flow 748 (84) 0 0 0

Cash flow from financing 879 (64) (125) (160) (200)

EPS (IDR) 816 1,165 1,026 1,310 1,639

EPS adj. (IDR) 785 896 1,026 1,310 1,639 Change in cash 1,010 313 229 364 (61)

DPS (IDR) 111 159 140 179 224 Exchange rate effect 0 0 0 0 0

Avg fully diluted shares (mn) 894 894 894 894 894 Free cash flow 230 535 354 524 140

Balance sheet (IDR bn) Financial ratios and otherYear-end: Dec 2012 2013 2014E 2015E 2016E Year-end: Dec 2012 2013 2014E 2015E 2016E

Cash 1,340 1,860 2,089 2,454 2,393 Operating ratios

Short-term investments 0 0 0 0 0 Gross margin (%) 22.3 24.3 22.2 22.4 22.7

Accounts receivable 2,051 2,796 3,355 3,979 4,677 EBITDA margin (%) 13.6 13.9 12.6 12.5 12.7

Inventory 1,499 1,456 1,797 2,112 2,461 EBIT margin (%) 11.0 10.9 10.2 10.4 10.7

Other current assets 424 317 317 317 317 Net margin adj. (%) 6.7 6.7 6.4 6.8 7.1

Total current assets 5,314 6,430 7,559 8,862 9,848 Effective tax rate (%) 22.4 21.9 22.4 22.4 22.4

Sales growth (%) 11.2 14.3 20.0 20.0 18.9

PP&E 2,858 3,114 3,050 3,044 3,651 Net income growth (%) 54.9 42.8 -11.9 27.7 25.1

Intangible assets 0 0 0 0 0 EPS growth (%) 54.9 42.8 -11.9 27.7 25.1

Associates and JVs 0 0 0 0 0 EPS growth adj. (%) 47.3 14.1 14.5 27.7 25.1

Other long-term assets 131 165 165 165 165 DPS growth (%) 0.0 42.8 -11.9 27.7 25.1

Total long-term assets 2,989 3,280 3,216 3,210 3,817

Efficiency ratios

Total assets 8,303 9,710 10,774 12,072 13,664 ROE (%) 27.3 30.4 21.6 22.7 23.3

ROCE (%) 20.8 19.4 19.6 21.5 23.0

Short-term debt 915 1,119 1,119 1,119 1,119 Asset turnover (x) 1.4 1.3 1.4 1.5 1.6

Accounts payable 853 1,084 1,337 1,599 1,896 Op. cash/EBIT (x) 0.7 0.8 0.4 0.5 0.5

Other current liabilities 157 429 429 429 429 Depreciation/capex (x) 0.4 0.8 1.2 1.0 0.4

Total current liabilities 1,924 2,632 2,885 3,147 3,444 Inventory days 63.4 59.3 52.9 53.2 52.4


Long-term debt 3,017 2,754 2,754 2,754 2,754 Accounts payable days 43.3 38.9 39.4 39.9 40.1

Convertible bonds 0 0 0 0 0

Deferred tax 0 0 0 0 0 Leverage ratios

Other long-term liabilities 293 385 385 385 385 Net gearing (%) 84.5 51.1 37.5 24.5 20.9

Total long-term liabilities 3,310 3,139 3,139 3,139 3,139 Debt/capital (%) 61.6 54.7 49.1 43.4 37.9

Interest cover (x) 5.2 5.1 5.8 7.1 8.6

Total liabilities 5,235 5,771 6,024 6,287 6,584 Debt/EBITDA (x) 2.4 2.3 2.1 1.8 1.5

Current ratio (x) 2.8 2.4 2.6 2.8 2.9

Shareholders’ funds 2,992 3,852 4,645 5,656 6,922

Minority interests 76 86 105 129 158 Valuation

EV/sales (x) 1.7 2.1 1.9 1.6 1.3

Total equity 3,068 3,939 4,750 5,785 7,081 EV/EBITDA (x) 12.5 14.9 15.3 12.8 10.5

EV/EBIT (x) 15.4 19.1 19.0 15.3 12.6

Total liabilities and equity 8,303 9,710 10,774 12,072 13,664 PER (x) 20.9 21.7 28.5 22.3 17.8

PER adj. (x) 21.7 28.2 28.5 22.3 17.8

Net debt (cash) 2,592 2,012 1,783 1,419 1,480 PBR (x) 5.1 6.0 5.6 4.6 3.8

Year-end shares (mn) 894 894 894 894 894 Dividend yield (%) 0.7 0.6 0.5 0.6 0.8

Other

Food Processing 5,773 7,642 9,629 0 0

Coffee Powder/Instant & Chocolate Proces5,773 7,642 9,629 0 0



13 June 2014 35

Disclosures appendix The information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank Singapore Branch, Standard Chartered Securities (India) Limited, Standard Chartered Securities Korea Limited and/or one or more of its affiliates (together with its group of companies, ”SCB”) and the research analyst(s) named in this report. THIS RESEARCH HAS NOT BEEN PRODUCED IN THE UNITED STATES. Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.

Where “disclosure date” appears below, this means the day prior to the report date. All share prices quoted are the closing price for the business day prior to the date of the report, unless otherwise stated.

0.64

1.03

1.41

1.80

2.18

2.57

Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14

SGD Recommendation and price target history for Super Group

1 2 3

4 5

6 7

8 9

10 11

Date Recommendation Price target Date Recommendation Price target Date Recommendation Price target

1 12 Aug 11 OUTPERFORM 0.89 5 17 Aug 12 OUTPERFORM 1.25 9 13 Aug 13 IN-LINE 2.57

2 11 Nov 11 OUTPERFORM 0.88 6 15 Jan 13 OUTPERFORM 1.82 10 13 Nov 13 IN-LINE 1.97

3 27 Feb 12 OUTPERFORM 0.93 7 6 Feb 13 OUTPERFORM 1.99 11 25 Feb 14 IN-LINE 2.09

4 11 May 12 OUTPERFORM 1.12 8 14 May 13 IN-LINE 2.53 Source: FactSet prices, SCB recommendations and price targets

10,286

14,451

18,617

22,783

26,949


IDR Recommendation and price target history for Mayora Indah

1 2

3

4 5


1 15 Sep 11 OUTPERFORM 15,000 3 17 Aug 12 OUTPERFORM 19,714 5 20 Sep 13 IN-LINE 27,895

2 12 Mar 12 OUTPERFORM 16,286 4 6 Feb 13 OUTPERFORM 23,491 Source: FactSet prices, SCB recommendations and price targets

37.00

68.72

100.44

132.16

163.88

195.60


PHP Recommendation and price target history for Universal Robina Corp

1 2

3 4 5

6 7

8


1 17 Apr 12 OUTPERFORM 78.00 4 6 Feb 13 OUTPERFORM 99.74 7 14 Feb 14 OUTPERFORM 154.44

2 17 Aug 12 OUTPERFORM 73.00 5 13 Feb 13 OUTPERFORM 107.54 8 21 May 14 OUTPERFORM 195.60

3 15 Jan 13 OUTPERFORM 94.58 6 20 Sep 13 OUTPERFORM 144.20 Source: FactSet prices, SCB recommendations and price targets



13 June 2014 36

Recommendation Distribution and Investment Banking Relationships

% of covered companies

currently assigned this rating % of companies assigned this rating with which SCB has provided

investment banking services over the past 12 months

OUTPERFORM 54.4% 12.7%

IN-LINE 35.4% 11.5%

UNDERPERFORM 10.2% 7.7%

As of 31 March 2014 Research Recommendation

Terminology Definitions

OUTPERFORM (OP) The total return on the security is expected to outperform the relevant market index by 5% or more over the next 12 months

IN-LINE (IL) The total return on the security is not expected to outperform or underperform the relevant market index by 5% or more over the next 12 months

UNDERPERFORM (UP) The total return on the security is expected to underperform the relevant market index by 5% or more over the next 12 months

SCB uses an investment horizon of 12 months for its price targets. Additional information, including disclosures, with respect to any securities referred to herein will be available upon request. Requests should be sent to [email protected].

Global Disclaimer: Standard Chartered Bank and/or its affiliates ("SCB”) makes no representation or warranty of any kind, express, implied or statutory regarding

this document or any information contained or referred to in the document. The information in this document is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or represent that any such future movements will not exceed those shown in any illustration. The stated price of the securities mentioned herein, if any, is as of the date indicated and is not any representation that any transaction can be effected at this price. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. The contents of this document may not be suitable for all investors as it has not been prepared with regard to the specific investment objectives or financial situation of any particular person. Any investments discussed may not be suitable for all investors. Users of this document should seek professional advice regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to in this document and should understand that statements regarding future prospects may not be realised. Opinions, forecasts, assumptions, estimates, derived valuations, projections, and price target(s), if any, contained in this document are as of the date indicated and are subject to change at any time without prior notice. Our recommendations are under constant review. The value and income of any of the securities or financial instruments mentioned in this document can fall as well as rise and an investor may get back less than invested.

Future returns are not guaranteed, and a loss of original capital may be incurred. Foreign-currency denominated securities and financial instruments are subject to fluctuation in exchange rates that could have a positive or adverse effect on the value, price or income of such securities and financial instruments. Past performance is not indicative of comparable future results and no representation or warranty is made regarding future performance. While we endeavour to update on a reasonable basis the information and opinions contained herein, there may be regulatory, compliance or other reasons that prevent us from doing so. Accordingly, information may be available to us which is not reflected in this material, and we may have acted upon or used the information prior to or immediately following its publication. SCB is not a legal or tax adviser, and is not purporting to provide legal or tax advice. Independent legal and/or tax advice should be sought for any queries relating to the legal or tax implications of any investment. SCB, and/or a connected company, may have a position in any of the securities, instruments or currencies mentioned in this document. SCB and/or any member of the SCB group of companies or its respective officers, directors, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments referred to in this document and on the website or have a material interest in any such securities or related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice, investment banking or other

services, to issuers of such investments. SCB has in place policies and procedures and physical information walls between its Research Department and differing public and private business functions to help ensure confidential information, including ‘inside’ information is not disclosed unless in line with its policies and procedures and the rules of its regulators. Data, opinions and other information appearing herein may have been obtained from public sources. SCB makes no representation or warranty as to the accuracy or completeness of such information obtained from public sources. You are advised to make your own independent judgment (with the advice of your professional advisers as necessary) with respect to any matter contained herein and not rel y on this document as the basis for making any trading, hedging or investment decision. SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental, consequential, punitive or exemplary damages) from use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services. This material is for the use of intended recipients only and in any jurisdiction in which distribution to private/retail customers would require registration or licensing of the distributor which the distributor does not currently have, this document is intended solely for distribution to professional and institutional investors.

Country-Specific Disclosures - If you are receiving this document in any of the countries listed below, please note the following: United Kingdom and European Economic Area: SCB is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This communication is not directed at Retail Clients in the European Economic Area as defined by Directive 2004/39/EC. Nothing in this document constitutes a personal recommendation or investment advice as defined by Directive 2004/39/EC. Australia: The Australian Financial Services Licence for Standard Chartered Bank is Licence No: 246833 with the following Australian Registered Business Number

(ARBN: 097571778). Australian investors should note that this document was prepared for “wholesale clients” only within the meaning of section 761G of the Australian Corporations Act 2001 (Act) and the Corporations Regulations. This document is not directed at persons who are “retail clients” as defined in the Australian Corporations Act 2001. Brazil: SCB disclosures pursuant to the Securities and Exchange Commission of Brazil (“CVM”) Instruction 483/10: This research has not been produced in Brazil. The report has been prepared by the research analyst(s) in an autonomous and independent way, including in relation to SCB. THE SECURITIES MENTIONED IN THIS DOCUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL AND MAY NOT BE OFFERED OR SOLD IN BRAZIL EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS AND IN COMPLIANCE WITH THE SECURITIES LAWS OF BRAZIL. Germany: In Germany, this

document is being distributed by Standard Chartered Bank Germany Branch which is also regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Hong Kong: This document, except for any portion advising on or facilitating any decision on futures contracts trading, is being distributed in Hong Kong by, and is attributable to, Standard Chartered Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority. India: This document is being distributed in India by Standard Chartered Securities (India) Limited which is a SEBI registered broker and a member of the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. Korea: This document is being distributed in Korea by, and is attributable to, Standard Chartered Securities Korea Limited which is regulated by the Financial Supervisory Service. Malaysia: This document is being distributed in Malaysia by Standard Chartered Bank Malaysia Berhad only to

institutional investors or corporate customers. Recipients in Malaysia should contact Standard Chartered Bank Malaysia Berhad in relation to any matters arising from, or in connection with, this document. Singapore: This document is being distributed in Singapore by Standard Chartered Bank Singapore Branch only to

accredited investors, expert investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in Singapore should contact Standard Chartered Bank Singapore Branch in relation to any matters arising from, or in connection with, this document. South Africa: SCB is

licensed as a Financial Services Provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act 37 of 2002. SCB is a Registered Credit Provider in terms of the National Credit Act 34 of 2005 under registration number NCRCP4. United States: Except for any documents relating to foreign exchange,

FX or global FX, Rates or Commodities, distribution of this document in the United States or to US persons is intended to be solely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any US recipient of this document wanting additional



13 June 2014 37

information or to effect any transaction in any security or financial instrument mentioned herein, must do so by contacting a registered representative of Standard Chartered Securities (North America) Inc., 1095 Avenue of the Americas, New York, N.Y. 10036, US, tel + 1 212 667 0700. WE DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES ARE REGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL APPROPRIATE U.S. STATE AUTHORITIES; OR (B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY FOR AN

EXEMPTION UNDER THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS (i) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL ARE PROPERLY REGISTERED OR LICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S. FEDERAL AND STATE LAWS. © Copyright 2014 Standard Chartered Bank and its affiliates. All rights reserved. All copyrights subsisting and arising out of all materials, text, articles and information contained herein is the property of Standard Chartered Bank and/or its affiliates, and may not be reproduced, redistributed, amended, modified, adapted, transmitted in any form, or translated in any way without the prior written permission of Standard Chartered Bank.
