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Yield appeal Company Update

Boustead Plantations is one of the well-established upstream plantation companies in . Like most plantation companies in the region, its FFB production in 2016 was adversely affected by the Boustead Plant 2015-16 El Nino phenomenon. For 2017, assuming yield and OER BPLANT MK improve after El Nino, FFB and CPO production should be better yoy. Sector: Plantation Boustead Plantations has been paying good and consistent dividends to its shareholders. It has one of the highest dividend RM1.67 @ 28 July 2017 yields compared to the other plantation companies.

A well-established upstream plantation company Not rated Upside N.A Boustead Plantations is principally involved in the ownership and

management of oil palm plantations, cultivation of oil palms, harvesting of FFB as well as production of CPO and PK. Price Target: N.A Previous Target: N.A Prime land bank location The group’s land bank of 82,516 ha is well spread across Peninsular (RM) 1.80 Malaysia, and , of which some areas are in prime 1.70 locations. To unlock the value of its land bank, the group has been 1.60 disposing some of its land. At the moment, Boustead Plantations is in the 1.50 1.40 process of disposing 677.78 ha of its land in to SP Setia’s 1.30 subsidiary Setia Recreation for a total consideration of RM620.12m. Note 1.20 that Affin Hwang Investment Bank acted as the Principal Adviser for 1.10 1.00 Boustead Plantation for the transaction. 0.90

0.80 Recovery in FFB and CPO production after El Nino Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Boustead Plantations’ FFB yield has often fared below the MPOB’s average due to lower yields in Sabah and Sarawak, but its OER has Price Performance always been better than MPOB’s average due to better milling efficiency in 1M 3M 12M Peninsular Malaysia and Sabah. For 2017, FFB and CPO production Absolute 2.5% 1.8% 13.6% Rel to KLCI 2.7% 1.9% 6.6% should improve, assuming better yield and OER, after the effects of El Nino. Stock Data

Consistent dividend payout Issued shares (m) 1600.0 Since its listing in 2014, Boustead Plantations has consistently paid more Mkt cap (RMm)/(US$m) 26721,600.0/624.2 than 98% of its PAT as dividend (group’s DPR: 60%). For 2016, the group Avg daily vol - 6mth (m) 1.0 52-wk range (RM) 1.45-1.771.0 declared DPS of 14.5 sen, which implies a yield of 8.7% based on its Est free float 23.2% share price as at 28 July 2017. Among its peers, Boustead Plantations BV per share (RM) 1.36 provides the highest dividend yield. P/BV (x) 1.23 Net cash/ (debt) (RMm) (1Q17) (407.5) Boustead is a substantial shareholder of AHB ROE (FY17E) 3.9% Boustead Holdings (the holding company of Boustead Plantations Derivatives No Shariah Compliant Yes Berhad), has a 20.7% equity interest in Affin Holdings Berhad (AHB), the

ultimate holding company of Affin Hwang Investment Bank. Key Shareholders

Earnings & Valuation Summary Boustead Holdings Bhd 57.4% FYE 31 Dec 2013 2014 2015 2016 LTAT 12.1% Revenue (RMm) 770.3 717.3 615.2 707.9 KWAP 3.6% EBITDA (RMm) 174.0 169.8 112.9 188.7 Source: Affin Hwang, Bloomberg

Pretax profit (RMm) 359.3 89.8 95.1 276.1

Net profit (RMm) 333.2 57.2 78.6 227.8

EPS (sen) 32.7 4.3 4.9 14.2 Nadia Aquidah EPS growth (%) - (86.7) 13.5 189.8 (603) 2146 7528 PER (x) 5.1 38.6 34.0 11.7 [email protected] Core net profit (RMm) 103.5 57.2 31.6 72.8

Core EPS (sen) 10.1 4.3 2.0 4.6 Laila Razip Core EPS growth (%) - (57.3) (54.3) 130.2 (603) 2146 7476 Core PER (x) 16.5 38.6 84.5 36.7 [email protected] Net DPS (sen) 72.3 6.0 13.0 14.5 Dividend Yield (%) 43.3 3.6 7.8 8.7 EV/EBITDA (x) 15.2 15.4 28.0 16.7 Source: Company, Affin Hwang, Bloomberg

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Focus on being an upstream player

Background of Boustead Plantations Boustead Plantations is one of the well-established upstream oil palm plantation companies in Malaysia and it is a subsidiary of Boustead Holdings Berhad, which is one of the oldest diversified conglomerates in Malaysia. The company is principally involved in the ownership and management of oil palm plantations, cultivation of oil palms, harvesting of Fresh Fruit Bunches (FFB) as well as production of Crude Palm Oil (CPO) and Palm Kernel (PK). On top of that, Boustead Plantations also provides mill design, consultancy services and are actively involved in palm oil agricultural and agronomic research.

Currently, Boustead Plantations own, co-own or lease a total of 41 oil palm estates throughout Malaysia (19 in Peninsular Malaysia, 13 in Sabah and 9 in Sarawak) and 10 palm oil mills (4 mills in Peninsular Malaysia, 4 mills in Sabah and 2 mills in Sarawak). Their total land bank stood at 82,516 ha as at end-2016. Out of the total area, about 64,468 ha are planted with oil palms with 57,397 ha mature and 7,071 ha in stages of maturing. The group’s weighted average palm tree age is approximately 14 years (13 years in Peninsular Malaysia, 14 years in Sabah and 19 years in Sarawak).

Fig 1: Location of plantation estates

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Source: Boustead Plantations

Prime land bank locations Boustead Plantations land bank of 82,516 ha is well spread across Peninsular Malaysia (32.2%), Sabah (35.7%) and Sarawak (32.1%). Some of the group’s lands are in prime locations and have the potential for property development. Refer to Fig 3 for the list of land bank throughout Malaysia.

Fig 2: Land bank by states- 2016 Pulau Pinang 2.8% 1.7% 2.5% 6.2% 2.7%

Saraw ak 32.1% 6.1% 0.3% 9.9%

Sabah 35.7%

Source: Boustead Plantations

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Fig 3: Boustead Plantations land bank details Book value Estate Location Size (ha) Tenure (RMm) Batu Pekaka Kuala Ketil, Kedah 968.7 Freehold 55.3 Kuala Muda Sungai Petani, Kedah 759.8 Freehold 17.0 Stothard Kuala Ketil, Kedah 983.1 Freehold 24.2 Kedah Oil Palm Kulim, Kedah 243.0 Freehold 7.4 Bukit Mertajam Kulim, Kedah 2,164.8 Freehold 139.7 Malakoff Tasek Glugor, Pulau Pinang 1,379.0 Freehold 66.8 TRP Trong, Perak 1,379.3 Freehold 81.4 Malaya Selama, Perak 906.5 Freehold 49.0 Lepan Kabu Kuala Pahi, Kelantan 2,034.6 Freehold 101.4 Solandra Kemaman, Terengganu 395.9 Leasehold 3.7 LTT-Terengganu Kemaman, Terengganu 1,810.7 Leasehold 21.6 Sungai Jernih Pekan, Pahang 2,695.7 Leasehold 63.8 Bebar Muadzam Shah, Pahang 2,340.6 Leasehold 118.2 Balau Semenyih, Selangor 247.4 Freehold 27.3 Bekoh , Johor 1,226.1 Freehold 71.1 Eldred , Johor 1,799.7 Freehold 39.7 Young Kulai, Johor 670.6 Freehold 53.8 , Johor 814.6 Freehold 57.5 Telok Sengat , Johor 3,690.1 Freehold 281.2 Sungai 1, Sungai 2 & Sungai 3 Sugut, Sabah 6,096.4 Leasehold 162.2 Kawananan Sugut, Sabah 2,585.0 Leasehold 59.0 Lembah Paitan Sugut, Sabah 1,305.1 Leasehold 33.9 Resort Sandakan, Sabah 1,106.6 Leasehold 16.2 Nak Sandakan, Sabah 1,348.9 Leasehold 31.3 Sutera Sandakan, Sabah 2,200.7 Leasehold 143.5 LTT Sabah Lahad Datu, Sabah 2,023.0 Leasehold 37.4 Segaria Semporna, Sabah 4,746.2 Leasehold 92.4 Sungai Segamaha and Bukit Segamaha Lahad Datu, Sabah 5,659.6 Leasehold 110.3 G&G Lahad Datu, Sabah 2,409.8 Leasehold 182.4 Loagan Bunut Tinjar, Sarawak 3,982.9 Leasehold 42.5 Sungai Lelak Tinjar, Sarawak 3,726.0 Leasehold 34.9 Bukit Limau Tinjar, Sarawak 4,814.0 Leasehold 36.8 Pedai Sibu, Sarawak 3,412.8 Leasehold 56.3 Jih Sibu, Sarawak 2,891.1 Leasehold 48.4 Palm Oil Mill Sibu, Sarawak 45.3 Leasehold 6.2 Kelimut Sibu, Sarawak 2,169.9 Leasehold 32.0 Maong Sibu, Sarawak 1,274.6 Leasehold 8.7 Mapai Sibu, Sarawak 2,426.8 Leasehold 32.8 Bawan Sibu, Sarawak 1,781.1 Leasehold 32.4 TOTAL 82,516.0 2,479.7 Source: Boustead Plantations, Affin Hwang

Unlocking value of its land bank Over the past few years, Boustead Plantations has been disposing some of its land as part of its strategy to unlock the land value. Between 2013- 2016, Boustead Plantations has disposed about 505.15 ha of lands across Semenyih and Kulaijaya for a total consideration of RM311.2m. (Please refer to Fig 4). Currently, Boustead Plantations is in the process of disposing 677.78 ha of its land in Malakoff, Penang to SP Setia’s subsidiary Setia Recreation for a total consideration of RM620.1m. This deal is expected to complete in 3Q17. Note that Affin Hwang Investment Bank acted as the Principal Adviser to Boustead Plantations on the disposal of land to Setia Recreation.

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Fig 4: Land bank that has been disposed in 2013-2016 Total Date Location Purchaser Size (ha) consideration (RMm) Dec-13 Balau Estate Boustead Balau Sdn Bhd 15.58 10.90 Dec-13 Balau Estate UK Realty Sdn Bhd 137.85 96.45 Jun-15 Kulai, District of Kulaijaya Seng Hong Quarry Sdn Bhd (SHQ) 56.30 29.09 Jun-15 Mukim Kulai, District of Kulaijaya Bentara Gemilang Industries Sdn Bhs (BGI) 31.87 19.90 Sep-15 Mukim Kulai, District of Kulaijaya YTL Cement Berhad (YTL 1) 33.26 19.69 Mar-16 Mukim Kulai, District of Kulaijaya YTL Cement Berhad (YTL 2) 18.45 10.92 Mar-16 Mukim Kulai, District of Kulaijaya YTL Cement Berhad (YTL 3) 52.69 30.06 Jun-16 Mukim Kulai, District of Kulaijaya Sanggul Suria Sdn Bhd (SSSB) 57.03 12.28 Jun-16 Mukim Kulai, District of Kulaijaya Hanson Quarry Products () Sdn Bhd (HQP) 102.12 81.94 505.15 311.23

In process Mukim 6, Seberang Prai Utara, PenangSetia Recreation Sdn Bhd 677.78 620.12 Source: Boustead Plantations, Affin Hwang

Sarawak land disputes to resolve gradually with NCR owners Even before its listing on Bursa Malaysia in 2014, Boustead Plantations has been facing Native Customary Right (NCR) land issues in Sarawak. Boustead Plantations formed a joint venture with Pelita Holdings and NCR land owners in 1998 under the name Boustead Pelita Kanowit (BPK). BPK was formed for the development of oil palm plantations in Kanowit, Sarawak. However, due to the NCR land dispute, there were field blockades at the Kanowit estates and unauthorized harvesting by some of the natives. After winning the case in the Federal Courts in September 2015, management is still engaged in negotiating with the NCR land owners to surrender the lands to the company and to work with BPK to develop the land.

On the other issue, Boustead Plantation’s joint venture with Pelita Holdings through Boustead Pelita Tinjar has finally received the acceptance of the natives on the land dispute in Sungai Lelak. With the help of the authorities, Boustead Plantations was able to enter its estate in Sungai Lelak again. Regarding Bukit Limau estate, management is still engaging and negotiating with the natives for access to the estate.

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Room for improvement in production

Lower FFB yields in Sabah and Sarawak Boustead Plantations group’s FFB yield in 2016 was lower by 11.4% yoy to 15.6 MT/ha (2015: 17.6 MT/ha). Decline in FFB yields were seen across all the three regions (ie. Peninsular Malaysia, Sabah and Sarawak). This was largely due to the El Nino phenomenon that affected crops badly in 2015-16. For Peninsular Malaysia, Boustead Plantations’ FFB yield of 16.7 MT/ha was better than MPOB’s industry average of 15.8 MT/ha, while for Sabah and Sarawak, Boustead Plantation’s FFB yields were lower at 16.6 MT/ha and 11.5 MT/ha, respectively, compared with MPOB’s industry average of 17.1 MT/ha and 14.9 MT/ha.

Against the other plantation companies (please refer to Fig 6), Boustead Plantations group’s FFB yield in 2016 is among the lowest. This is partly attributable to the lower FFB yield than industry average in Sabah and Sarawak. For Sabah, the lower yields was attributed to shortage of skilled labour for the tall palm areas, while for Sarawak, the land dispute with the natives has negatively affected production as field blockades prevented its workers from entering its estates to harvest the fruits.

Fig 5: FFB yield and OER FFB yield (MT/ha) OER (%) 2014 2015 2016 2014 2015 2016 Peninsular Malaysia 18.7 19.8 16.7 21.9 22.1 22.0 Sabah 18.7 18.0 16.6 22.2 22.5 21.8 Sarawak 9.6 12.8 11.5 20.5 20.0 19.6 Group 16.2 17.6 15.6 21.8 21.9 21.5 MPOB -Peninsular 18.2 18.8 15.8 20.2 20.0 19.8 MPOB - Sabah 21.3 20.0 17.1 21.5 21.6 21.1 MPOB - Sarawak 16.1 16.2 14.9 20.4 20.2 20.0 MPOB - M'sia 18.6 18.5 15.9 20.6 20.5 20.2 Source: Company data, MPOB

Fig 6: Peer comparison for FFB yield (MT/ha) 22 20 18 16 14 12 10 8 6 4 2

0

KLK

FGV

IJMP

SIME

HAPL

GENP

BPlant

Wilmar IOI CorpIOI

Golden AgriGolden Source: Company data, Affin Hwang

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FFB production on the path to recovery after El Nino Boustead Plantation’s FFB production in 2016 declined by 12.4% yoy to 908,576 MT, which for the first time hit below the one million MT level since its listing in 2014. The shortfall in production was mainly due to the adverse effects of the El Nino phenomenon that has negatively affected production, land disputes in Sarawak and labour shortage for the harvesting of taller palms. Among the plantation companies that we cover, the decline in FFB production in 2016 ranged from 5%-17% with IOI Corp being the most affected (-16.9% yoy) and IJM Plantations being the least affected (-5.4% yoy). Compared to its peers, Boustead Plantation’s FFB production in 2016 was the 3rd lowest partly due to its smaller mature area, older palms and lower FFB yield.

Fig 7: Peer comparison for FFB production

(mn MT) 10 9

8 Millions 7 6 5 4 3 2 1

0

KLK

FGV

IJMP

SIME

Agri

HAPL

GENP

BPlant

Golden Wilmar IOI CorpIOI Source: Company data, Affin Hwang

For 2017, assuming FFB yield recovers and El Nino effect recedes, FFB production should improve. In 1H17, Boustead Plantations’ FFB production has increased by 10.5% yoy to 440,075 MT. Assuming the production trend sustains, the group’s FFB production should be at a higher level during the second half of the year.

Assuming mature plantation area of 57,500 ha and FFB yield of 16.7 MT/ha, FFB production for 2017 could increase by 5.7% yoy (Please refer to Fig 8). We estimate that FFB yield needs to improve to about 17.4 MT/ha for FFB production to rebound above the one million MT level.

Fig 8: FFB production based on different FFB yield assumptions Matured land (ha) 57,500 FFB yield (MT/ha) 15.0 16.7 17.0 18.0 2017 FFB production (MT) 862,500 960,250 977,500 1,035,000 YoY FFB production growth (%) (5.1) 5.7 7.6 13.9 Source: Company data, Affin Hwang

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Group’s OER better than MPOB The group’s average oil extraction rate (OER) has fared better against the MPOB’s industry average. For 2016, the group achieved OER of about 21.5% (2015 OER: 21.9%), higher than MPOB’s average of 20.2%. This is mainly because of higher OER for its Peninsular Malaysia and Sabah’s estates, offsetting the decline in Sarawak. Among its peers, Boustead Plantations OER ranked 5th.

Fig 9: Peer comparison for OER

25%

20%

15%

10%

5%

0%

KLK

FGV

IJMP

SIME

HAPL

GENP

BPlant

Wilmar IOI CorpIOI

GoldenAgri Source: Company data, Affin Hwang

CPO production to improve on higher FFB production and OER As palm trees recover and as it continues to focus on improving productivity, the group’s OER should also improve, leading to higher CPO production in 2017. For 2017, assuming FFB yield of 17.0 MT/ha, external FFB purchase of about 154,000 MT (similar to 2016) and OER of 21.5%, the group’s 2017 CPO production could grow by 11.6% yoy to 243,273 MT from 218,000 MT in 2016. Refer to Fig 10 below.

Fig 10: CPO production based on different OER assumptions FFB yield (MT/ha) 17.0 External FFB purchased (MT) 154,000 OER (%) 20.0 21.5 22.0 2017 CPO production (MT) 226,300 243,273 248,930 YoY CPO production growth (%) 3.8 11.6 14.2 Source: Company data, Affin Hwang

MSPO certified by end-2019 Similar to the other plantation companies, Boustead Plantation is also in the midst of applying for Malaysian Sustainable Palm Oil (MSPO) certification. The group targets to get all its oil palm estates MSPO certified by end-2019.

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Focus on improving productivity Boustead Plantations supports research and development (R&D) initiatives and has partnered with Kepong (KLK) in Agricultural Resources Sdn Bhd (AAR). The initiatives enable them to implement good agricultural practices throughout their operations. AAR produces superior oil palm planting materials. The dwarf variety enables High Density Planting (HDP). With HDP, about 160-164 palm trees can be planted per hectare as compared to 120-130 palm trees per hectare previously.

On top of that, Boustead Plantation is also implementing mechanization to increase productivity, efficiency and reduce the reliance on manual labour to address the labour shortage issue that is ongoing in the plantation industry.

Increasing land bank as part of long-term strategy As part of its long-term strategy, Boustead Plantation aims to increase its land bank hectarage by 20%. The preferred land bank location would be within Malaysia given its familiarity with how business is being done domestically. However, we note that, since its listing in 2014, Boustead Plantations has only acquired about 513 ha of leasehold lands in Sugut, Sabah. The acquisition was for a total cash consideration of RM30.5m.

Higher cost in 2016 on minimum wage hike and lower production The cost of palm oil production per MT in 2016 averaged at about RM1,626, up RM155/MT from 2015 (or 10.5% yoy). The higher cost of production was partly due to higher labour cost as minimum wage increased, coupled with lower CPO production in 2016. Assuming labour, fertilizer and FFB costs do not escalate substantially in 2017, coupled with improving production and OER after the El Nino phenomenon, the cost of palm oil production per MT in 2017 should remain stable or lower on a yoy basis.

Fig 11: Group’s yearly CPO ASP and cost of production (RM/MT) CPO ASP CPO cost of production 3,000

2,500

2,000

1,500

1,000

500

- 2013 2014 2015 2016 Source: Company data

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Revenue and profit are dependent partly on production and ASPs Boustead Plantation’s 1Q17 revenue and PBT increased by 38% and 28.7% yoy, respectively to RM189m (2016 revenue: RM707.9m) and RM57.1m (2016 PBT: RM44.4m), partly attributable to higher CPO and PK ASPs as well as increase in production. The CPO ASP increased by 40% to RM3,166/MT in 1Q17 (2016 CPO ASP: RM2,584/MT), while the PK ASP increased by 68% yoy to RM3,204/MT (2016 PK ASP: RM2,460). FFB production increased by 13% yoy to 209,526 MT in 1Q17 (2016 FFB production: 908,576 MT), as the palms recover from the effects of the El Nino phenomenon. After adjusting for one-off items, Boustead Plantations core net profit for 1Q17 increased >100% yoy to RM42.9m (this is excluding the gain on disposal of land of RM34.6m in 1Q16).

Fig 12: Quarterly earnings

Revenue PBT Net profit Core net profit 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 - (20.0) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17

Source: Company data

CPO prices to weaken as production improves The average MPOB locally-delivered CPO prices fell 4.2% mom to RM2,686/MT in June from RM2,803.50/MT in May (June 2016: RM2,541.50/MT; 1H17 CPO ASP: RM2,944.50/MT). The soybean oil premium over CPO widened in June to about US$150/MT, up US$50/MT mom (average soybean oil premium over CPO was US$120/MT over the past 2 years), as CPO prices weakened in June while soybean oil prices remained flat (please refer to Fig 20).

We expect the downward pressure on CPO prices to continue in 2H17 onwards with the expected higher CPO production, higher soybean production (especially in the USA and Brazil) and strengthening of the RM against the US$ towards the year-end. We maintain our CPO ASP assumption for 2017 at RM2,600/MT.

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Dividend appeal

Consistent dividend payout ratio Boustead Plantations has been consistent with their dividend payout to shareholders. Some of the factors that are taken into account when considering the level of dividend payments are: 1) level of cash, gearing, return on equity (ROE) and retained earnings; 2) expected financial performance; 3) projected capex and other investment plans; 4) working capital requirements; and 5) any contractual restrictions. After taking into account these factors, the Board intends to adopt a dividend payout ratio (DPR) of a least 60% of the audited profit after tax (PAT). Notably, since its listing in 2014, Boustead Plantations has consistently paid more than 98% of PAT as dividends.

Higher dividends For 2016, the group declared a higher dividend per share (DPS) of 14.5 sen (2015 DPS: 13 sen), which implies a yield of 8.8% based on its share price as at end-2016. Among its peers, as seen in Fig 13, Boustead Plantations provided the highest dividend yield.

Fig 13: Peer comparison for dividend yield- 2016 (%) 9 8 7 6 5 4 3 2 1

0

IOI

KLK

Corp

IJMP

SIME

Agri

HAPL

GENP

BPlant Golden Wilmar Source: Company data, Affin Hwang

Assuming Boustead Plantations declare the same amount of DPS as 2016 at 14.5 sen, the dividend yield would be at 8.7% (based on share price of RM1.67 as at 28-Jul-17). Refer to Fig 14 below.

Fig 14: Dividend yield sensitivity analysis DPS (sen) 13.0 14.5 15.0 16.0 20.0 Dividend yield (%) 7.8 8.7 9.0 9.6 12.0 Source: Company data, Affin Hwang

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Fig 15: Peer comparison

Stock Stock Rating Sh Pr # TP Mkt Cap Year Core PE (x) EPS growth (%) EV/EBITDA P/BV ROE (%) DY (%) code (RM) (RM) (RMm) end CY17E CY18E CY17E CY18E FY17E (x) FY17E (x) CY17E FY17E Sime Darby SIME.MK HOLD 9.50 9.03 63,113 June 26.4 22.8 19.1 16.1 15.9 1.9 6.6 3.2 IOI Corp IOI.MK HOLD 4.47 4.50 29,010 June 23.6 21.9 13.3 7.8 19.1 4.8 20.0 2.7 KL Kepong KLK.MK BUY 24.72 29.00 26,389 Sept 19.4 18.5 20.5 5.0 11.7 2.4 12.5 2.4 Felda Global FGV.MK HOLD 1.63 1.87 5,947 Dec 21.2 19.1 81.2 11.0 9.5 0.9 4.5 3.1 Genting Plant GENP.MK BUY 10.68 13.35 8,234 Dec 19.8 17.6 38.5 12.5 13.9 1.6 8.3 0.9 IJM Plant IJMP.MK BUY 2.95 3.73 2,598 Mar 18.7 15.2 52.6 22.9 10.7 1.5 6.4 3.4 Hap Seng Plant HAPL.MK HOLD 2.60 2.74 2,080 Dec 15.1 14.2 10.9 6.3 9.1 1.0 6.7 4.2 Boustead Plant** BPLANT.MK Not Rated 1.67 n.a 2,672 Dec 33.4 26.5 (64.8) 26.0 17.1 1.2 3.1 7.8 Wilmar * WIL.SP Not Rated 3.32 n.a 20,985 Dec 15.5 12.2 26.5 6.1 11.9 1.0 8.4 2.8 Golden Agri * GGR.SP Not Rated 0.39 n.a 5,476 Dec 9.7 16.6 (41.4) 11.8 9.1 0.1 17.44.9 2.4 Mkt Cap weighted average (excl Wilmar and Golden Agri) 23.7 21.1 20.8 12.0 15.2 2.5 10.4 2.9 * S$ # Share prices as at 28 July 2017 ** Based on Bloomberg estimates Source: Bloomberg, Affin Hwang estimates

Boustead is a substantial shareholder of AHB Boustead Holdings (the holding company of Boustead Plantations Berhad), has a 20.7% equity interest in Affin Holdings Berhad (AHB), the ultimate holding company of Affin Hwang Investment Bank.

Key risks Key downside risks include: (i) weaker-than-expected demand and higher- than-expected production lowering prices of vegetable oils; (ii) declines in CPO production that are not offset by higher CPO selling prices; (iii) delays in the implementation of biodiesel mandates in Indonesia and Malaysia; and (iv) unfavourable policies and taxes.

Meanwhile, key upside risks include a strong rebound in the global economy as well as demand for and prices of vegetable oils.

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Focus charts Fig 16: Palm age profile as at Dec 2016 Fig 17: FFB yield by region

Peninsular Malaysia (Boustead Plant) (MT/ha) Sabah (Boustead Plant) 11% Sarawak (Boustead Plant) 19% 25.0 Past prime (>20 Group (Boustead Plant) years) MPOB - M'sia 20.0 Prime (10-20 years) 19% 15.0 Young (4-9 years) 10.0 Immature 51% 5.0

- 2013 2014 2015 2016

Source: Company data Source: Company data, MPOB

Fig 18: Average age of plantations by region Fig 19: MPOB CPO spot price vs USD/MYR exchange rate

CPO price (LHS) MYR/US$ (RHS) Average age (RM/MT) (MYR/US$) Landbank (Ha) 2014 2015 2016 4,000 5.00 Peninsular Malaysia 13 13 13 3,500 Sabah 15 14 14 4.50 Sarawak 16 18 19 3,000 Group 14 14 14 4.00 2,500 3.50 2,000

3.00 1,500

1,000 2.50 Jun-06 Apr-08 Feb-10 Dec-11 Oct-13 Aug-15 Jun-17 Source: Company data Source: Bloomberg, MPOB

Fig 20: Soybean oil price, CPO price & soybean oil premium Fig 21: Monthly FFB Production

(US$/MT) CPO price SBO price SBO premium ('000 MT) 1,600 120 1,400 100 1,200 80 1,000 60 800 40 600 20 400 0 200

0

Apr-15 Oct-15 Apr-16 Oct-16 Apr-17

Jun-15 Jun-16 Jun-17

Feb-15 Feb-16 Feb-17

Aug-15 Dec-15 Aug-16 Dec-16 Jun-06 Apr-08 Feb-10 Dec-11 Oct-13 Aug-15 Jun-17 Dec-14 Source: Oil World, MPOB Source: Company data

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` 31 July 2017

Boustead Plantations – FINANCIAL SUMMARY

Profit & Loss Statement Key Financial Ratios and Margins FYE 31 Dec (RMm) 2013 2014 2015 2016 FYE 31 Dec (RMm) 2013 2014 2015 2016 Revenue 770.3 717.3 615.2 707.9 Grow th Operating expenses (596.3) (547.5) (502.3) (519.2) Revenue (%) - (6.9) (14.2) 15.1 EBITDA 174.0 169.8 112.9 188.7 EBITDA (%) - (2.4) (33.5) 67.2 Depreciation (30.9) (41.2) (42.5) (43.2) EBIT 143.0 128.6 70.4 145.6 Core net profit (%) Net int income/(expense) (18.6) (42.6) (24.0) (27.9) Associates' contribution 5.2 3.7 1.8 3.4 Profitability EI 229.7 - 47.0 155.0 EBITDA margin (%) 22.6 23.7 18.3 26.7 Pretax profit 359.3 89.8 95.1 276.1 PBT margin (%) 46.6 12.5 15.5 39.0 Tax (27.9) (37.4) (22.8) (59.7) Net profit margin (%) 43.3 8.0 12.8 32.2 Minority interest 1.8 4.7 6.4 11.4 Effective tax rate (%) 7.8 41.6 24.0 21.6 Core net profit 103.5 57.2 31.6 72.8 ROA (%) 10.2 1.7 2.4 7.0 Net profit 333.2 57.2 78.6 227.8 Core ROE (%) 7.4 2.5 1.4 3.3 Balance Sheet Statement FYE 31 Dec (RMm) 2013 2014 2015 2016 ROCE (%) 19.4 2.3 3.3 9.7 Fixed assets 2,642.2 2,670.0 2,642.9 2,573.0 Dividend payout ratio (%) 221.3 112.0 244.2 98.3 Other long term assets 126.6 118.5 110.6 84.9 Total non-current assets 2,768.8 2,788.5 2,753.5 2,657.9 Liquidity Current ratio (x) 0.3 0.7 0.6 0.7 Cash and equivalents 32.3 430.9 427.3 424.6 Op. cash flow (RMm) 40.0 143.6 98.6 139.4 Stocks 43.0 32.7 44.2 24.5 Free cashflow (RMm) (210.1) 75.6 64.2 74.7 Debtors 414.9 50.7 63.5 88.0 FCF/share (sen) (0.1) 0.0 0.0 0.0 Other current assets 0.1 - 11.0 62.5 Total current assets 490.2 514.3 546.0 599.6 Asset managenment Creditors 710.9 84.0 129.4 105.4 Debtors turnover (days) 196.6 25.8 37.7 45.4 Short term borrow ings 737.4 690.9 789.5 801.2 Stock turnover (days) 26.3 21.8 32.1 17.2 Other current liabilities 90.0 6.0 4.5 6.7 Creditors turnover (days) 2.5 3.2 3.5 3.8 Total current liabilities 1,538.2 781.0 923.4 913.3 Capital structure Long term borrow ings 240.0 150.0 125.0 100.0 Net gearing (%) 0.7 0.2 0.2 0.2 Other long term liabilities 31.8 23.3 23.0 29.5 Interest cover (x) 7.7 3.0 2.9 5.2 Total long term liabilities 271.8 173.3 148.0 129.5 Shareholders' Funds 1,389.9 2,294.9 2,181.6 2,185.7 FYE 31 Dec (RMm) 2Q16 3Q16 4Q16 1Q17 Minority interests 59.1 53.6 46.4 29.0 Revenue 174.9 199.3 196.7 189.0 Operating expenses (138.6) (131.2) (135.4) (116.9) Cash Flow Statement EBITDA 36.4 68.1 61.3 72.1 FYE 31 Dec (RMm) 2013 2014 2015 2016 Depreciation (10.7) (10.7) (11.0) (10.9) EBIT 143.0 128.6 70.4 145.6 EBIT 25.7 57.4 50.2 61.2 Depreciation & amortisation (30.9) (41.2) (42.5) (43.2) Working capital changes 253.0 (252.4) 21.1 (28.8) Net int income/(expense) (6.8) (7.0) (6.7) (5.8) Cash tax paid (15.9) (33.0) (23.7) (36.5) Associates' contribution (0.3) 1.5 2.0 0.9 Others (309.2) 341.6 73.4 102.3 Exceptional Items 81.9 (1.7) 35.5 0.8 Cashflow from operation 40.0 143.6 98.6 139.4 Pretax profit 100.5 50.2 81.1 57.1 Capex (250.1) (68.0) (34.4) (64.7) Tax (4.3) (12.3) (39.9) (12.9) Disposal/(purchases) 116.7 3.4 79.3 189.9 Minority interest 1.4 (0.6) 9.1 (0.5) Others 46.9 (597.8) 20.9 15.0 Net profit 97.5 37.4 50.3 43.7 Cash flow from investing (86.5) (662.4) 65.7 140.2 Core net profit 15.7 39.1 14.8 42.9 Debt raised/(repaid) 84.7 122.0 50.0 (5.0) Equity raised/(repaid) - 907.0 - - Net interest (expense) (33.0) (55.0) (38.7) (42.4) Margins (%) Dividends paid - (64.0) (192.8) (224.0) EBITDA 20.8 34.2 31.1 38.2 Others 22.0 8.6 - - PBT 57.4 25.2 41.2 30.2 Cash flow from financing 73.6 918.6 (181.5) (271.4) Net profit 55.8 18.7 25.6 23.1

Free Cash Flow (210.1) 75.6 64.2 74.7

Source: Company data, Affin Hwang

Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com Page 14 of 15

` 31 July 2017

Equity Rating Structure and Definitions

BUY Total return is expected to exceed +10% over a 12-month period

HOLD Total return is expected to be between -5% and +10% over a 12-month period

SELL Total return is expected to be below -5% over a 12-month period

NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation

The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.

OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months

UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months

This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (“the Company”) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the Company’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report.

Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or transactions discussed in this report.

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