Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products Buy Taokaenoi Food & Marketing Target Price: THB18.00 Price: THB15.90 Strong Rebound Prospects Market Cap: USD663m Bloomberg Ticker: TKN TB
We initiate coverage with a BUY and THB18 TP, 13% upside, derived from Share Data FY18F P/E of 29.5x or -1SD of its historical average. We like Taokaenoi’s Avg Daily Turnover (THB/USD) 117m/3.63m long-term outlook after its second plant’s utilisation rate ramps up. Its 52-wk Price low/high (THB) 14.0 - 26.5 doubled production capacity would be sufficient to support a 5-year growth without any additional significant capex. We expect GPM to Free Float (%) 34 rebound in 2Q18 after engaging in new forward contracts, which should Shares outstanding (m) 1,380 lower its raw material costs. Given a conservative pace of its international Estimated Return 13% expansion, we expect earnings to grow 37.8% and 21.8% in 2018-2019. Shareholders (%) We estimate Taokaenoi’s production capacity to double after its new Peeradechapan group 26.1 Rojana factory goes fully operational in 2019. This should unlock its existing Mr. Itthipat Peeradechapan 24.0 production capacity (near full utilisation) and support its long-term international Mr. Pongsak Thammatacharee 5.8 expansion. We expect the utilisation rate increase to escalate GPMs in tandem with its expansion. We expect economies of scale – which come in tandem with Share Performance (%) the dilution in fixed cost/unit of production – to start widening GPMs in the short YTD 1m 3m 6m 12m term. Absolute (23.9) 8.2 1.9 (26.1) (23.9) Taokaenoi’s effective tax rate to be lowered to c.12% from 20% during the Relative (22.1) 1.1 5.8 (20.3) (32.9) next seven years on a promotional tax privilege from the Board of Investment. Source: Bloomberg In turn, we expect NPM to widen by 240bps to 14% in FY18 from 11.6%.
Taokaenoi Food & Marketing (TKN TB) The firm entered new 12-month forward contracts in 2Q18, which should Price Close Relative to Stock Exchange of Thailand Index (RHS) decrease its seaweed purchasing costs by 10% and raise full-year GPMs to 27 119
32.3% (1Q18: 28.2%). We estimate earnings growing 37.8% in 2018. 22 97 A sales focus shift towards exports is likely to expand EBITDA margins 17 75 further, partly on the absence of marketing expenses abroad – these should be 5012 53 45 absorbed by local distributors in each country – and higher prices that can be 40 35 set for export markets. We expect Taokaenoi to increase its share of exports to 30 25 20 70% of total sales by 2022 from 60% currently, and forecast the decrease in 15 10 marketing expenses to widen overall long-term margins. 5 Vol m The company is currently trading at -1.5SD below its historical level, Oct-17 Apr-18 Jun-18 Feb-18 Dec-17 Aug-17 mainly due to its 1Q18 GPM decline. We believe the valuation multiple we used – FY18F P/E at 29.5x or -1SD of its mean historical valuation and slightly lower Source: Bloomberg than the average multiple for its global peers – is reasonable, given the expected rebound in Taokaenoi’s GPM, its net cash position, significant increase in production capacity and earnings that are likely to grow at a 3-year CAGR of 24% during 2018-2020. We recommend BUY with THB18 TP, 13% Table Of Contents upside. Financial Exhibits 2 Investment Thesis 3 Key risks. Taokaenoi is highly-reliant on the Chinese market, which is set to Valuation 3 contribute >60% of its FY18-20 growth: this constitutes a major risk for its Risk 5 Company Description 6 outlook. The firm also orders >90% of its raw materials from a small number of Peers Analysis 14 South Korean suppliers: without a proper diversification, its GPM remains Industry Analysis 17 highly-reliant on the annual contracts it signs with these suppliers. Lastly, the SWOT Analysis 20 bulk of its product line is still seaweed-focused.
Forecasts and Valuations Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F Total turnover (THBm) 4,705 5,263 6,000 7,292 8,453 Reported net profit (THBm) 781 608 838 1,020 1,164 Recurring net profit (THBm) 781 608 838 1,020 1,164 Recurring net profit growth (%) 96.8 (22.2) 37.8 21.8 14.1 Recurring EPS (THB) 0.57 0.44 0.61 0.74 0.84 Analysts DPS (THB) 0.49 0.34 0.24 0.30 0.34 Vatcharut Vacharawongsith Recurring P/E (x) 28.1 36.1 26.2 21.5 18.8 +662 2088 9736 P/B (x) 9.48 9.65 8.30 6.59 5.37 P/CF (x) 64.7 na 28.2 28.4 23.0 [email protected] Dividend Yield (%) 3.1 2.1 1.5 1.9 2.1 EV/EBITDA (x) 20.3 23.6 20.1 16.2 13.7 Pakorn Khaoeian Return on average equity (%) 37.6 26.5 34.1 34.2 31.4 Net debt to equity net cash net cash net cash net cash net cash Our vs consensus EPS (adjusted)
Source: Company data, RHB
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Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Financial Exhibits
Financial model updated on: 2018-07-27. Asia Financial summary Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F Thailand Recurring EPS (THB) 0.57 0.44 0.61 0.74 0.84 Consumer Non-cyclical EPS (THB) 0.57 0.44 0.61 0.74 0.84 Taokaenoi Food & Marketing DPS (THB) 0.49 0.34 0.24 0.30 0.34 Bloomberg TKN TB BVPS (THB) 1.68 1.65 1.91 2.41 2.96 Buy Weighted avg adjusted shares (m) 1,380 1,380 1,380 1,380 1,380
Valuation basis Valuation metrics Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F Earnings multiples. Recurring P/E (x) 28.1 36.1 26.2 21.5 18.8 P/E (x) 28.1 36.1 26.2 21.5 18.8 Key drivers P/B (x) 9.48 9.65 8.30 6.59 5.37 i. Expanding to huge untapped market - China FCF Yield (%) (0.0) (2.5) 3.2 3.2 4.0 and the US; Dividend Yield (%) 3.1 2.1 1.5 1.9 2.1 ii. Increase manufacturing production capacity; iii. Rebounding of GPMs rebound. EV/EBITDA (x) 20.3 23.6 20.1 16.2 13.7 EV/EBIT (x) 21.8 26.2 22.3 17.8 15.0
Key risks i. Failure to expanding overseas, as consumer Income statement (THBm) Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F behaviour may vastly differ from those in Total turnover 4,705 5,263 6,000 7,292 8,453 Thailand ; Gross profit 1,686 1,693 1,938 2,359 2,714 ii. Reliance on few major producers and EBITDA 1,031 923 1,073 1,296 1,475 customers; Depreciation and amortisation (70) (92) (102) (114) (125) iii. Risk of new entry by potential competitors. Operating profit 961 831 970 1,183 1,350 Company Profile Net interest (7) (16) (16) (16) (16) Taokaenoi Food & Marketing Public Company Limited Pre-tax profit 979 834 974 1,186 1,354 is a Thailand-based manufacturer and distributor of Taxation (197) (226) (136) (166) (190) edible seaweed snacks under the brand of Taokaenoi. Recurring net profit 781 608 838 1,020 1,164
Company's main market is Thailand and China while they also exports its products to other countries, such as Malaysia Indonesia, Singapore, Vietnam, Australia Cash flow (THBm) Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F and United States. Change in working capital (284) (512) (169) (297) (287) Cash flow from operations 339 (306) 779 772 955 Capex (349) (244) (78) (75) (73) Cash flow from investing activities (855) 47 (1) 381 (446) Proceeds from issue of shares 0 (3) 0 0 0 Dividends paid (316) (311) (648) (469) (335) Cash flow from financing activities (652) 253 (645) (643) 107 Cash at beginning of period 1,476 308 302 435 939 Net change in cash (1,168) (6) 133 509 616
Ending balance cash 308 302 435 944 1,555
Balance sheet (THBm) Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F Total cash and equivalents 1,064 563 696 1,250 1,916 Tangible fixed assets 882 1,094 1,172 1,247 1,320 Intangible assets 10 66 116 166 216 Total investments 40 40 90 140 190 Total other assets 45 51 51 43 43 Total assets 3,084 3,323 3,884 5,026 6,275 Short-term debt 112 426 426 426 426 Total long-term debt 0 17 17 17 17 Other liabilities 9 13 13 13 13 Total liabilities 863 1,147 1,246 1,396 1,539 Shareholders' equity 2,314 2,274 2,642 3,328 4,084 Total equity 2,221 2,176 2,638 3,630 4,736 Net debt (952) (120) (253) (807) (1,473) Total liabilities & equity 3,084 3,323 3,884 5,026 6,275
Key metrics Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F Revenue growth (%) 34.4 11.9 14.0 21.5 15.9 Recurrent EPS growth (%) 50.0 (22.2) 37.8 21.8 14.1 Gross margin (%) 35.8 32.2 32.3 32.4 32.1 Operating EBITDA margin (%) 21.9 17.5 17.9 17.8 17.5 Net profit margin (%) 16.6 11.5 14.0 14.0 13.8 Dividend payout ratio (%) 40.4 51.2 77.4 46.0 28.8 Capex/sales (%) 7.4 4.6 1.3 1.0 0.9 Interest cover (x) 148 52 61 74 85
Source: Company data, RHB
See important disclosures at the end of this report 2
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Investment Thesis We initiate coverage with a BUY and THB18 TP, 13% upside, derived from a FY18F P/E of 29.5x, or -1SD of its historical valuation mean. Our earnings multiple is slightly lower than the industry average of 29.7x. We expect the company’s FY18F earnings to grow by 37.8% YoY, based on: i. Its production capacity increasing with a utilisation rate ramp-up; ii. Prospects of lower raw material costs; iii. Continued growth in export volumes; iv. Strong balance sheet with a net cash position; v. Compelling valuations. We note that Taokaenoi has been able to manage its positive cash flows during its capacity expansion phase. While there was a decline in 2017 – mainly from additional expenses from the early stages of setting up its new factory (coupled with the increase in raw material prices last year) – the company should be able to realise its new raw materials prices in 2Q18. Consequently, we expect Taokaenoi’s operating cash flow and FCF to start rebounding this year, in tandem with the rebound in its GPMs.
Valuation
We believe the multiple we chose – FY18F P/E at 29.5x or -1SD of its mean historical valuation – is reasonable, given the rebound in Taokaenoi’s GPM and its significant increase in production capacity. We believe this can reflect both short- and long-term catalysts, especially after the stock was under pressure from squeezed margins last year. We think the reason Taokaenoi has been trading at a premium, vis-à-vis Thailand’s food industry multiple of 22x, is mainly on expectations related to its business operations – namely its outstanding growth story – and higher GPMs and ROEs, coupled with its net cash position. These factors should allow the company to expand into untapped markets going forward.
Conservative valuation level We assigned a conservative valuation level for Taokaenoi when compared with its global peers – despite its outstanding growth, which has outpaced the industry. This is to buffer its dependency risk in growth prospects towards the China market, supply chain structure, and product demand sustainability – given that it is quite new to the market. Consequently, we have opted for a careful stance and set aside the premium in our valuation until recurring demand has proven to be successful in its new market.
Figure 1: Taokaenoi’s historical forward P/E
Source: Company data, RHB
See important disclosures at the end of this report 3
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
We believe Taokaenoi will incur less capex in the near future: the company just spent around THB730m (equal to its 1-year earnings) only to double its production capacity. We see this move as allowing it to unlock its existing production capacity – which was previously running at near full-utilisation before Phase 1 at Rojana began in 1Q18 – while supporting its international expansion in the long term. This has left Taokaenoi with huge room for further expansion without interfering with its net cash position.
Figure 2: P/E ratios of the SET food sector vs Taokaenoi
Valuation Criteria Unit Earnings Prospective (-0.75SD) on its 3-year average P/E 29.5 x multiple FY18F earnings 0.61 Per share Earnings multiple - valuation 18.00 THB per share
Source: RHB
Given its outstanding growth story and net cash position, we assigned a conservative valuation level of 29.5x FY18F P/E, which is in line with its global peers’ average multiple of 29.7x.
Figure 3: Global peers’ P/E ratios (FY18F-19F) 45 Lotte 40 35 Average J&J Snack Foods 30 Taokaenoi 25 Calbee FY18F
- Ezaki Glico 20 Delfi
P/E 15 10 5 0 0 5 10 15 20 25 30 35 40 P/E - FY19F Note: Price data as at 3 Jul 2018 Note 2: Figures in red are from RHB. Consensus valuations are in black Note 3: *Average excluding Taokaenoi Source: Bloomberg, RHB
Figure 4: Global peers comparison 3-years 3-years Earning growth % P/E Dividend Yield % average average Current Market GPM NPM Name Ticker ROE ROA sales EPS Cap (USD Million) 2018F 2018F 2018F 2019F 2018F 2019F 2018F 2019F growth growth % % Taokaenoi TKN tb equity 663 38% 22% 29.5 21.8 32% 14% 1.5% 1.8% 34.1 21.5 17% 25% Lotte 004990 ks equity 3,577 6% 28% 42.0 33.4 38% 3% 0.7% 1.4% 2.4 4.0 3% 4% J&J Snack Foods jjsf us equity 2,553 21% 4% 31.9 28.4 31% 7% - - 8.0 12.1 6% 3% Calbee 2229 jp equity 4,426 13% 5% 27.5 25.7 43% 7% 1.1% 1.2% 13.5 9.3 4% 8% Delfi delfi sp equity 686 12% 17% 22.7 19.4 34% 6% 2.4% 2.6% 11.5 6.8 -9% 5% Ezaki Glico 2206 jp equity 3,450 4% 4% 24.1 19.7 47% 4% 0.8% 1.0% 7.5 4.5 3% -7% Average 11% 12% 29.7 25.3 39% 5% 1.2% 1.6% 8.6 7.3 4% 3% Source: Company data, RHB
See important disclosures at the end of this report 4
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Risks Reliance on major raw material suppliers Taokaenoi imports over 90% of its major raw material (seaweed) from a small number of producers in South Korea. We see risk exposure to the company in terms of its reliance on these few suppliers, in case that they are not able to supply seaweed to the company. This risk, as well as price and quality requirements, can directly impact its operations. However, we see Taokaenoi attempting to solve this problem by engaging in contract farming. With pre-order contracts, the company is able to lock up its raw material supplies for at least a year. At the same time, it should be able to stock-up on its tangible raw material to ensure sufficient production for a minimum short run of 60 days.
Competition in the industry Thailand’s snack food market comprises more than 2,000 competing brands, with different product types and high turnover rates. We believe Taokaenoi’s products – which are mainly seaweed-related – are quite new to the market and long-term demand sustainability remains an unknown factor. The unpopularity of seaweed consumption or changes in consumer taste may cause the company to significantly lose revenue. With regards to risk management, Taokaenoi has been trying to diversify its income sources by creating non-seaweed products such as popcorn, coming up with supplementary foods, and undertaking a retailer business. While these productions and businesses currently contribute a low proportion to total revenue (6%), we are of the view that non-seaweed product contributions are increasing every year. We expect revenue from this division to contribute 10% to total revenue by 2022. On top of this diversification attempt, Taokaenoi has also set aside an additional annual budget for marketing and research – this is to evaluate trends and continuously promote its products to enhance their competitiveness. We think the company still has first-mover advantage in terms of brand loyalty, which should provide support in terms of maintaining seaweed-related products’ market shares over the long term.
Force majeure or operational disruptions Taokaenoi’s business operations might be interrupted due to problems during the production process or damages to the main asset used in the operating of its business. Other negative impacts include severe natural disasters, political unrest, serious operational accidents, or a drop in tourism numbers. The company has prepared some guidelines to prevent and/or decrease the impact of disruptions caused by incidences of force majeure, with risk analyses in both production control and quality management. In addition, Taokaenoi just added its second production facility based at the Rojana Industrial Park. This is to increase manufacturing capacity and diversify its production risks by not solely relying on the Noppawong plant. Furthermore, the company has set up casualty insurance policies, which include special property insurance to cover the loss or damages to its properties, natural disasters or other force majeure incidences.
FX fluctuations Taokaenoi is exposed to FX risks because the company orders its seaweed raw material from South Korea and sells its finished products overseas. Its international sales account for around 60% of total sales, which makes its topline susceptible to fluctuations in currency volatility. With regards to risk management, Taokaenoi is trying to undertake a natural hedge in its business operations by setting export prices of some of its overseas product in USD. This is to be in line with the raw material expenses it has to pay in the US currency. We think this could support the stabilisation in its GPM, which might be hurt from currency fluctuations during its operations throughout the year. The company also uses financial instruments to prevent FX risks by entering into advanced foreign currency contracts with domestic financial institutions.
See important disclosures at the end of this report 5
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Company Description Taokaenoi has two main divisions: seaweed and non-seaweed products. Seaweed products (90% of total revenue) include crispy, grilled, roasted and tempura batter seaweed snacks under Tao Kae Noi brand. These snacks are distributed through various channels, eg convenience stores, supermarkets, distributors and Taokaenoi’s own retail store, Tao Kae Noi Land. In terms of revenue structure, the company has become export heavy from its significant international sales, which have outpaced domestic sales. Currently, export sales account for 60% of total sales. Figures 5 & 6 below show the breakdown.
Figure 5: Revenue structure by key markets Figure 6: Revenue contribution by key markets 60% China Thailand International 45% 47% 42% 42% 40% 40% 33% 37% 35%
20% 16%
6%
0% 2014 2015 2016 2017 2018F 2019F 2020F Source: Company data Source: Company data, RHB
China has become Taokaenoi’s biggest market with the highest growth for the company. We expect the revenue from this market to grow at a 3-year CAGR of 23% during 2018- 2020. This is followed by other international markets and the local market at 16% and 10%. Due to the fact that the existing outstanding growth in the China market comes from only two distributors with low market penetration rates, we have a positive outlook for the upcoming year. This was after Taokaenoi decided to set up one sales office and engage two more distributors in the East Asian nation, which we think will allow it to capture more market share from other untapped areas in China. In addition to this market, the company also sells its products to 50 countries around the world. Its major overseas markets include Malaysia, Indonesia, Hong Kong, the US, and the cluster of Cambodia, Laos, Myanmar and Vietnam. We expect sales from these markets to outpace domestic sales in the long term.
Figure 7: Revenue growth by market (YoY %) 200% China Thailand International 150%
100%
50% 29% 21% 24% 20% 10% 17% 0% 2015 2016 2017 2018F 2019F 2020F Source: Company data, RHB
We believe international sales will be one of the key factors that drive Taokaenoi’s future growth along with its goal to become a global snack food company. Non-seaweed products (6% of total revenue) comprise popcorn, supplementary foods and its retail store business. This is part of the company’s strategy aimed at diversifying its income sources towards non-seaweed-related items. While we have observed revenue contributions to total topline slowly increasing to 8% from 4% during the past three years, we think this part of Taokaenoi’s business is still at an early stage of expansion. It will need more time to gain momentum.
See important disclosures at the end of this report 6
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Figure 8: Revenue contribution percentage by product type
120% Seaweed products Non-seaweed products
96% 97% 100% 94% 92% 92% 92%
80%
60%
40%
20% 8% 8% 8% 4% 3% 6% 0% 2015 2016 2017 2018 2019F 2020F
Source: Company data, RHB
Non-seaweed products can be separated into two main business units: i. Edible items: a) Popcorn products under the Tob Corn brand, a premium local offering whose sales are at a discount when compare to export brands in the market, and b) Supplementary foods such as whey protein under the My Whey brand, which is aimed at capturing the healthy food trend in Thailand; ii. Retailer business under the Tao Kae Noi Land brand, which targets to be one of Taokaenoi’s in-house distribution channels – allowing it to increase the visibility of its new products. The company also plans to set up “one-stop souvenir” outlets that also sell consignment products from third-parties such as other Thai snacks or local cosmetics brand in future. This is in order to capture the expansion of the tourism sector. Taokaenoi currently has 13 stores in tourist locations nationwide and plans to increase this number to 20 stores by end-2018. Figure 9: My Whey products and Tao Kae Noi Land
Source: Company
However, we are of the view that the company is still at the early stages of increasing its distribution channels to gain sales volume. We believe it is still far from being able to create significant impact to its overall performance. Taokaenoi’s retailer business also needs to collect more third-party partners in order to become a well-known souvenir shop chain – this is so that it can attract customers to boost significant sales revenue for its existing products.
See important disclosures at the end of this report 7
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Increasing production capacity with the utilisation rate ramp-up The company will be able to double its production capacity to 12,000 tonnes pa from 6,000 tonnes after its second factory goes fully-operational in 2019 – this facility started Phase 1 of operations in 1Q18. This production capacity increase should be enough to support its 5-year growth plan, which is set to generate THB10bn in sales by 2024. We see one of the key factors dragging down GPM in 1Q18 as partially coming from the additional expenses from its new factory during the early stages of set up. This is mainly on recognition of full depreciation expenses and waste per unit of production, which has outpaced its initial output during the first stage of operations. However, we expect the automated production line from the new factory to allow Taokaenoi to standardise its products, increase production quality consistency, and reduce processing times going forward. Figure 10: Taokaenoi’s factory at the Rojana Industrial Park
Source: Company
We expect Taokaenoi’s utilisation rate to start ramping up this year, along with the opening of the last phase of this new factory at Rojana Industrial Park. We think this could bring back its full-year GPM to 31.8% before gradually increase to 32.5% in 2019. We believe the increase in production quantity will slowly dilute the company’s fixed costs per unit of production while bringing down average costs to profitable levels going forward. In addition, we expect the utilisation rate at its first factory to reach the 88% mark after some production processes are transferred to the Rojana facility for tax benefit purposes. On the flip side, we expect the utilisation rate of its second factory to increase to 70% with the 2,900 tonnes pa rise in production capacity to 3,850 tonnes pa in 2018. This conservatively results in an average utilisation rate of 80% from a total capacity of 8,000 tonnes pa in FY18. Figure 11: Production capacity and utilisation rate 2559 2560 2561 2562 2563 2016 2017 2018F 2019F 2020F Nopawong Production capacity (Ton/Yr) 5800 6400 4500 4950 5445 Utilization rate (%) 93.0% 81.0% 88.0% 90.0% 90.0% Rojana Production capacity (Ton/Yr) 3500 3850 4427.5 Utilization rate (%) 70.0% 75.0% 80.0% Source: Company data
We believe this should ease the bottleneck situation with Taokaenoi’s production capacity while boosting total revenue to THB6bn (+14%) and THB7.2bn (+21.5%) in 2018-2019. Moreover, the company is to receive a promotional tax privilege from the Board of Investment, which we believe can decrease its overall effective tax rate to around 12% from 20% for the next seven years. We expect this to widen NPMs by 240bps to 14% in FY18 from 11.6% currently.
Lower raw material cost prospects Taokaenoi now fully-imports its seaweed raw materials from major South Korean suppliers under forward contracts that is renewed annually. These contracts – effective during the April-March production cycle – allow the company to lock-up exchange rates, quantity, quality, and seaweed prices. We see this as one of the key indicators that can determine average raw material costs and GPM, which will directly impact earnings.
See important disclosures at the end of this report 8
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
In addition to the production cycle, we expect new forward contracts – Apr 2018-Mar 2019 – to start rolling over in 2Q18. Management expects its new contracts to reduce seaweed purchasing costs by roughly 10% while pushing up GPM by 2-5% throughout the year.
Figure 12: Taokaenoi’s GPM 38.0%
36.0% 35.0% 34.0% 34.0% 32.0% 32.0%
30.0% Realize lower cost of raw material 28.0% from new forward contract 26.0% GPM = 28.2% with utilization Additional cost rate ramp up 24.0% during early stage 22.0% of setting up new factory in Rojana 20.0% 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18F 4Q18F
Source: Company data, RHB
We adopt a more conservative view: expecting: full-year GPM to slightly increase to 31.8% from the 32.2% average last year. This is mainly due to its low base GPM in 1Q18 at 28.2%, which could soften its rebound from a full-year perspective. Notwithstanding, we still expect the rise in sales volume to lower Taokaenoi’s raw material costs going forward, in tandem with its expansion. We also remain positive on the company’s GPM uptrend from the new automation systems at its production lines.
Export growth brightens future outlook One of the main reasons why this counter trades at such high valuation levels is the outstanding growth in Taokaenoi’s export segment, with future upsides from untapped markets. Its proportion of export revenue to total topline has been growing significantly to THB3bn from THB1bn, or a 3-year CAGR of 40% during 2014-2017. This was mainly due to the company’s strategy, which prioritised international expansion by increasing distribution channels and sales to more than 50 countries. This has been done via network partners over the past few years. In terms of contributions, export sales value has been increasing continuously and has become the core revenue-generating business unit for Taokaenoi. Its export revenue has even surpassed domestic sales since 2015, while the significant increase in international sales has turned the company export-heavy. The key international market with the highest contribution to export sales is China, at 42% of total revenue. This is followed by Malaysia and Indonesia at 3%. The Chinese market alone has become the Taokaenoi’s become biggest and generates higher revenues when compared to Thailand. We expect the China market to generate THB2.5bn in 2018 vs THB 2.2bn in 2017.
See important disclosures at the end of this report 9
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Figure 13: Taokaenoi’s sales by key markets 5,000 Thailand China International 3,941 4,000 3,284
3,000 2,546 2,104 2,770 2,519 2,000 2,249 2,063 1,742 1,000 1,489 1,096 1,206
0 2014 2015 2016 2017 2018F 2019F 2020F Source: Company data, RHB
We remain positive on the future outlook of the China market for Taokaenoi. We think the company still has more room for future expansion, as its previous growth only came from just two distributors in Shanghai and Guangzhou. We believe there are many more untapped areas in China that the company can penetrate into. To this extent, Taokaenoi already has plans in place to shift more sales focus towards the Chinese market this year. It plans to set up its first representative office while adding at least two distributors in Western China – an area not yet covered by its existing distributors. We are of the view that this will be one of the key factors that helps the company to extend its outstanding growth rate over the short term.
Figure 14: Sales growth by key markets 180% Thailand China International 160%
140%
120%
100%
80%
60%
40% 29% 21% 20% 20% 24% 17% 12% 0% 10% 10% 2015 2016 2017 2018F 2019F 2020F
Source: Company data, RHB
In addition, we believe this increased focus towards international market could expand GPMs going forward. This is partly due an absence of marketing expenses – as these are commonly absorbed by its trading partners in each particular country – and higher price Taokaenoi can set vis-à-vis the domestic market. The increase in export sales also provides indirect benefit to the company in terms of FX exposure. It has been setting export prices of some overseas product in USD in order to match with the bulk of its seaweed costs, for which it has to pay in the US currency. The increase in USD inflows allows Taokaenoi to do a natural hedge while reducing the impact of FX fluctuations with regards to the THB’s movements.
Non-seaweed & retailer businesses need more time to gain momentum In order to achieve its long-term strategy of becoming a global snack food player, Taokaenoi has been trying to expand horizontally by diversifying its source of income towards non-seaweed products such as popcorn and supplementary foods – these currently account for c.6% of total revenue.
See important disclosures at the end of this report 10
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
The company has launched premium popcorn shops – Tob Corn – with Taokaepop branded popcorn in order to capture an undeveloped market in Thailand: mass-market popcorn. Taokaenoi plans to distribute its products through supermarkets, convenience stores and its retailer outlets at tourist locations. While the market size for popcorn products is still relatively low (THB400m) compared to Thailand’s total snack food market (THB30,000m), we still think the former still has much more room for growth. However, we believe Taokaenoi needs more time to gain additional distribution channels to generate significant sales. Figure 15: Tob Corn stores and products
Source: Company
In addition to non-seaweed snack foods, the company is also trying to move outside the snack food industry by capturing the health-conscious target segment. It launched its first whey protein brand called My Whey last year by distributing it via online channels, pharmacy chains, and supermarkets. However, we believe this segment is still at an early stage of expansion, and that Taokaenoi will need more time to gain brand awareness or significant repeat purchasers.
Figure 16: Current distribution channels for My Whey
Source: Company
My Whey products currently contribute THB50m to the company. Management expects sales to increase to THB100m (+100%) within 2018, in tandem with an increase in its distribution channels. In addition to creating more distribution channels for its new products and capturing the growing of tourism market domestically, Taokaenoi has launched its own snack food retail store – Tao Kae Noi Land – to stimulate local sales aimed at international travellers visiting the kingdom. The company’s 13 Tao Kae Noi Land stores are located at tourist destinations nationwide, with plans in place to increase store numbers to 20 by the end of the year. Apart from being the main channel for Taokaenoi to distribute its products to the tourism sector domestically, the company is also using these stores to conduct market research on new products and marketing activities for research & development purposes. Taokaenoi also plans to expand its retail business going forward by develop a new souvenir store called Tao Kae Noi Land Plus, with capex per store at THB5-10m. The main difference between this new store type and the old concept is the aim of selling more non-food items such as cosmetics products within a consignment structure. This is in line with the company’s latest strategy in wanting to shift more focus towards the domestic tourism sector, which is growing significantly every year.
See important disclosures at the end of this report 11
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Management stated that the souvenir market in Thailand has a current estimated value of THB18bn, with the prospect of an 8% growth in FY18.
Figure 17: Domestic sales YoY (%) and number of tourist arrivals YoY (%) 40% TKN - Domestic Sales YOY% Number of Tourist arrivals (YOY%)
30%
20% 15% 16%
10% 14% 15%
0%
-10% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18F
Source: Tourism Authority of Thailand, RHB
Management said more than 50% of its domestic sales growth in FY17 came from foreign tourist sales. This has been partially proven by the positive correlation between the growth in Taokaenoi’s domestics sales and the number of visitor arrivals to Thailand. We are of the view that the increase in the number of tourist arrivals to the kingdom can boost the company’s domestic sales, as its seaweed snack food products have been voted as one of the most popular souvenirs bought by tourists – this is based on research conducted by online news portal Post Today.
A doubling of capacity and still in a net cash position We have observed Taokaenoi using capex of only around THB730m – spread over 2014- 2017 – in order to increase annual capacity to 12,000 tonnes from 6,000 tonnes. This increase in capacity is expected to be enough to support its 5-year plan to generate THB10bn in sales by 2024. We believe the capex requirement – being relatively small – is one of the company’s competitive advantages, given it the ability to scale up its business in a defensive way (low capital requirements) when compared to a capital-intensive firm.
Relatively small capex Taokaenoi is able to manage its positive cash flow during its capacity expansion phase. We see the cash flow decline in 2017 mainly coming from additional expenses incurred from an early stage of setting up its new factory, coupled with the increase in raw material prices last year. However, as mentioned earlier, Taokaenoi should be able to start realising its new raw material prices in 2Q18 after it entered into its new forward contracts. Consequently, we expect operational cash flows and FCFs to start rebounding in 2018 in tandem with the rebound in its GPM.
See important disclosures at the end of this report 12
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Figure 18: Taokaenoi’s operational cash flow & capex
THB million OCF FCF 1,400 1,292
1,200 1,087 961 1,000 Spent in CAPEX to Doubling capacity 800 669
600
400 313 148 200
0 -45 (200) 2014 2015 2016 2017 2018F 2019F 2020F
Source: Company data, RHB
We expect a maintenance capex of THB180m on average over the next three years – in line with management’s guidance. We believe the small capex spending in the short term should help the company to uplift its net profits in future.
Figure 19: Taokaenoi’s capex, net profit and depreciation & amortisation THB million Capital Expenditures 1,400 Net Profit Depreciation & Amortization 1,186 1,200 1,020 1,000 838
800
600
400 250 263 276
200 106 122 138
0 2014 2015 2016 2017 2018F 2019F 2020F
Source: Company data, RHB
Strong balance sheet with a net cash position We expect Taokaenoi to continue being in a net cash position over the long term. The company’s net debt percentage of equity has been decreasing significantly, and it entered into a net cash position after its 2015 IPO. This was mainly from its high operating margins, low capex requirements and elevated cash flow generation.
See important disclosures at the end of this report 13
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Figure 20: Taokaenoi’s net debt percentage of equity
Net Debt % Equity
Invested in new factory to double production capacity
IPO
89% -6% -7% -19% -28% -43% -62%
2014 2015 2016 2017 2018F 2019F 2020F
Source: RHB
This creates huge room for future investments, in case Taokaenoi plans to diversify itself into other related businesses while reassuring shareholders that dividend could possibly be paid out consistently.
See important disclosures at the end of this report 14
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Peers Analysis High competitive advantage with outstanding growth performance
Taokaenoi has been delivering impressive growth in both revenue and earnings since listing. Its average sales growth during the past three years stands at 17% when compared to its global peers, which have grown at an average of 4%. The company’s EPS has been growing at a rate of 25% vs global peers’ 3% during the same time period.
Figure 21: Global peers’ avg sales and EPS growth during the last three years
20% Taokaenoi
15%
10% J&J Snack Foods 5% Ezaki Glico Average Calbee Lotte 0% years years average sales growth %
- -5%
3 Delfi
-10% -10% -5% 0% 5% 10% 15% 20% 25% 30%
3-years average EPS growth %
Note: Price data as at 03 Jul 2018 Note 2: Figures in red are from RHB. Consensus valuations are in black Source: Bloomberg, RHB
However, we believe this is just the nature of a firm that has merely entered into the early stage of its business cycle. Taokaenoi’s outstanding growth rate is just a matter of a low base when compared to other industry players. Yet we see the company as one of the fastest-growing in the industry and expect its growth to continue in the coming term. Earnings growth FY18F-19F. In terms of future earnings prospects, Taokaenoi is still operating at the growth stage of its business cycle when compared to other global players. Its low-base earnings make the company’s short-term prospects growth look outstanding when compared to its peers.
Figure 22: Global peers’ earnings growth percentage in FY18F-19F 40% Taokaenoi 35%
30% FY18F
- J&J Snack 25% Foods
20% Calbee 15% Average Delfi
10% Lotte
Earnings Earnings growth % Ezaki Glico 5%
0% 0% 5% 10% 15% 20% 25% 30% Earnings growth % - FY19F Note: Price data as at 03 Jul 2018 Note 2: Figures in red are from RHB. Consensus valuations are in black Note 3: *Average excludes Taokaenoi Source: Bloomberg, RHB
See important disclosures at the end of this report 15
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
We believe the rebound of its GPM from lower raw material costs is one of the reasons that will uplift Taokaenoi’s earnings, allowing it to grow 37.8% and 21.8% in FY18F-19F when compared to the industry averages of 16% and 7%. We have a positive view: the company will continue to deliver impressive growth rates, supported by its exports, as it continues to penetrate into more untapped markets in the mid-term. Margins. From our observations, snack food players’ margins vary according to the raw material(s) structure mix from each product within their portfolios. They can also vary based on business cycles, economies of scale, as well as the capital structure of each individual company.
Figure 23: Global peers’ GPMs & NPMs (FY18F) 50% Ezaki Glico Calbee 45%
Lotte 40% Average Taokaenoi FY18F 35%
- Delfi J&J Snack 30% Foods 25%
20%
15%
Gross profit margin profit Gross 10%
5%
0% 0% 2% 4% 6% 8% 10% 12% 14% 16% Net profit margin - FY18F Note: Price data as at 03 Jul 2018 Note 2: Figures in red are from RHB. Consensus valuations are in black Note 3: *Average excludes Taokaenoi Source: Bloomberg, RHB
Despite the rebound in GPM, we still expect it to stand at 31.8%, or slightly lower than the industry average: 39%. We think this might be partially due to its seaweed costs, which are typically higher than potatoes or other related raw materials. This can include additional transportation expenses incurred during the import process from South Korea. However, if we look at Taokaenoi’s NPM, we see that it still has a relatively high NPM of 14% when compared to its global peers’ 5%. We see this mainly coming from the typically low selling and administrative expenses of smaller-sized companies when compared to a multi-national company structure. This includes Taokaenoi’s interest expenses, which are relatively small due to its lean capital structure. Consequently, this has allowed its NPM to stand at a high level vis-à-vis its peers despite the lower GPM.
See important disclosures at the end of this report 16
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
ROEs and ROAs are two of the most important financial ratios used to measure corporate performance. ROE is use to gauge how effectively a company uses investors’ funds to generate additional income while ROA measures the same effectiveness in the use of its assets.
Figure 24: Global peers’ ROEs & ROAs 40 Taokaenoi 35
30
25 ROE
- 20
Calbee FY18F 15 Delfi
10 Ezaki Glico J&J Snack Foods Average 5 Lotte
0 0 5 10 15 20 25 FY18F - ROA
Note: Price data as at 03 Jul 2018 Note 2: Figures in red are from RHB. Consensus valuations are in black Note 3: *Average excluding Taokaenoi Source: Bloomberg, RHB
When compared to other global snack food manufacturers, we see that Taokaenoi has relatively low capex/capital investments towards earnings generation. Its FY18F ROE is expected to stand at 34.1, which is above its global peers’ average of 8.6. This is followed by its FY18F ROA, which is expected to stand at 21.5, ie relatively higher than its global peers’ 7.3 average. In our opinion, we see this partially coming from a firm that is still at the growth stage of its business cycle. Taokaenoi’s factory has been run at an above-utilisation rate that – in turn – generates relatively-high earnings when compared with its assets and equity, which are relatively small. This is coupled with the nature of seaweed snack food production, which uses uncomplicated machines and equipment that have low capital-intensive levels.
See important disclosures at the end of this report 17
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Industry Analysis Characteristics Thailand’s snack food market is one of the largest and most diverse in the Asia-Pacific region, with an estimated total value of THB27bn and more than 2,000 competing brands as at 2017. The western food section of this market (25% of the total) can be divided into five main segments (plus total sales value): i. Extruded snacks and others (52%) – flour-based snack foods such as Cornae, Snackjack, Paprika, Tawan and Jax. ii. Potato-based chips and snacks (30%) – eg Lay’s, Tasto and Pringles. iii. Nuts (10%) – eg Koh Kae, Tong Garden and Marucho. iv. Seasoned seaweed (7%) – eg Taokaenoi, Masita and Seleco. v. Popcorn (1%) – eg Toro, Taokaepop and Garrett.
On the flip side are Asian-style snacks, which account for 75% of the market. We note that Western-style snacks are becoming increasingly popular. In terms of growth, demand for snack foods in Thailand has continued to increase – this is in line with other emerging markets, which are ranked top in terms of sales growth vis-à- vis the rest of the world, according to Nielsen. The aforementioned increase is partly due to aggressive advertising and marketing activities, keeping in mind the nature of a market that has less health concerns when compared to those within a developed country. Among the Asia-Pacific nations, Thailand’s snack food market is expected to grow at 4.4%, falling behind top-ranked Vietnam (19.1%), the Philippines (11.6%) and Indonesia (9.5%).
Figure 25: Snack food industry – top sales growth percentage in 2017 by country
Thailand 4% Snack Industry - Top sales growth % by country Greece 6% Costarica 8% Indonesia 10% South Africa 10% Bulgaria 11% Hungary 11% Philippines 12% Mexico 13% Lithuania 13% Latvia 15% Vietnam 19% Slovakia 20% Argentina 26%
0% 5% 10% 15% 20% 25% 30% Source: Nielsen
We see Thailand’s snack food market having strong potential for growth. The estimated per capita consumption of snack foods remains at a low level compared to other developed countries in Asia, eg South Korea and Japan, which have per capita consumption more than double that of Thailand’s. We conservatively expect the domestic snack food market to continue posting average growth of 4-5% pa during 2018-2020 on the increase in population numbers, inflation and GDP growth. However, we believe Thai consumers – in general – are very price sensitive. A slight increase in price can cause sales to decrease, as consumers switch to other competing brands and offerings. Due to this price sensitivity by the majority of Thai consumers, high- end products make up a very small percentage of the overall market. The main consumer groups for such products are primarily expatriates, wealthy Thais, and tourists.
See important disclosures at the end of this report 18
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
See important disclosures at the end of this report 19
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
Health consciousness trend helping Taokaenoi gain momentum The fast-growing health and nutrition consciousness by many Thai consumers is one of the key factors that allow Taokaenoi to capture the high-end snack market. The willingness to eat healthier snacks with lower fat content has become an important part of this trend. Many health-conscious consumers are walking away from traditional snack foods on the common perception that such items are unhealthy. Many are starting to purchase seaweed-related snack foods on the belief that they are less fatty. We are of the view that this is why it has been able to partially gain market share, albeit sluggishly.
Figure 26: Snack food industry – top sales growth percentage in 2017 by country
Source: Company data
In terms of the seaweed segment – which accounts for c.7% of the total snack food market – Taokaenoi is a pioneer player. It holds a significant market share (62%), followed by Masita and Seleco at 14% and 7%. This is thanks to brand recognition, as one of the earliest players. Such brand awareness is what allows the company to be representative of a new generation of small & medium enterprises, partially allowing it to gain customer loyalty while maintaining market share in the long term.
Chinese tourists and domestic consumption As mentioned earlier, seaweed snacks have been voted by tourists – especially Chinese visitors – as one of the most popular souvenir products from Thailand. This is in line with management comment that more than 50% of domestic sales growth came from foreign tourists and that local sales was not purely from Thai citizens.
Figure 27: Taokaenoi’s domestic sales YoY (%) & number of tourist arrivals YoY (%)
25% TKN - Domestic Sales YOY% 160% 140% 20% 16% 120% 15% 100% 80% 10% 60% 5% 26% 40% 0% 20% 0% -5% -20% -10% -40% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18F
Source: Tourism Authority of Thailand, RHB
See important disclosures at the end of this report 20
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
During on the ground checks, we witnessed that Taokaenoi’s products are among the most popular souvenir with Chinese visitors. Its retail stores – Tao Kae Noi Land – and sales desk at duty-free shops are always full of Chinese people buying its products as keepsakes or gifts. In conversation with Taokaenoi’s sales people confirms that more than 80% of their customers are Chinese visitor with only a few local customers. We believe this popularity is in tandem with Taokaenoi’s growth in the China market at a 3-year CAGR of 44% during 2015-2018F.
Figure 28: Taokaenoi’s domestic sales YoY (%) and Thailand’s GDP
25% TKN - Domestic Sales YOY% Real GDP (RHS) 5.0% 20% 16.0% 4.5% 15% 4.2% 4.0% 10% 3.5% 5% 3.0% 0%
-5% 2.5%
-10% 2.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18F
Source: Company data, RHB
We believe Taokaenoi’s local sales are also reliant on Thailand’s domestic consumption levels. The rise or fall in GDP – as well as the dips and jumps in tourist numbers – can partially affect the company sales in the kingdom. We are of the view that sluggish domestic consumption in Thailand can drag down sales growth here. Meanwhile, we think the company’s recent rebound is expected to boost domestic sales in the short term only.
See important disclosures at the end of this report 21
Taokaenoi Food & Marketing Thailand Initiating Coverage
3 August 2018 Consumer Non-cyclical | Food Products
SWOT Analysis
• Leader in seaweed-related snacks with strong brand • Change in consumer loyalty in Thailand behaviour or a dip in the popularity of • Net cash position with high production capacities seaweed consumption • Demand hinges on domestic consumption and purchasing power • Penetration to other untapped market, ie tier-2 cities in China or the US • Growing external snack food market geared towards dietary foods that are capturing the health- consciousness trend • Low diversification in term of products and suppliers • Low barriers to entry • Not a necessity product with high-price sensitivities
Recommendation Chart
Date Recommendation Target Price Price Price Close 2018-08-02 34 Source: RHB, Bloomberg 29
24
19
14
9
4 Dec-15 Aug-16 Apr-17 Dec-17
Source: RHB, Bloomberg
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Taokaenoi Food & Marketing Thailand Initiating Coverage
Consumer Non-cyclical | Food Products
RHB Guide to Investment Ratings
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Taokaenoi Food & Marketing Thailand Initiating Coverage
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Consumer Non-cyclical | Food Products
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United States This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, access to this report via Bursa Marketplace or any other Electronic Services Provider is not intended for any party other than “major” US institutional investors, nor shall be deemed as solicitation by RHB in any manner. RHB is not registered as a broker-dealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.
OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) - RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) -
Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions.
Indonesia PT RHB Sekuritas Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically; 2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned; 3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same; 4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company; 5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or
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Taokaenoi Food & Marketing Thailand Initiating Coverage
Consumer Non-cyclical | Food Products
6. Affiliation between the Company and the main Shareholders. PT RHB Sekuritas Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and d. an individual who within the last six months was a Person defined in letters a, b or c, above.
Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) - The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) - RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) -
Hong Kong The following disclosures relate to relationships between RHBHK and companies covered by Research Department of RHBSHK and referred to in this research report: RHBSHK hereby certifies that no part of RHBSHK analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. RHBHK had an investment banking services client relationships during the past 12 months with: -. RHBHK has received compensation for investment banking services, during the past 12 months from: -. RHBHK managed/co-managed public offerings, in the past 12 months for: -. On a principal basis. RHBHK has a position of over 1% market capitalization of: -.
Additionally, please note the following: Ownership and material conflicts of interest: RHBSHK policy prohibits its analysts and associates reporting to analysts from owning securities of any company covered by the analyst. Analyst as officer or director: RHBSHK policy prohibits its analysts, and associates reporting to analysts from serving as an officer, director, advisory board member or employee of any company covered by the analyst. RHBHK salespeople, traders, and other non-research professionals may provide oral or written market commentary or trading strategies to RHB clients that reflect opinions that are contrary to the opinions expressed in this research report. This research report is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.
Kuala Lumpur Hong Kong Singapore
RHB Research Institute Sdn Bhd RHB Securities Hong Kong Ltd. RHB Research Institute Singapore Level 3A, Tower One, RHB Centre 12th Floor Pte Ltd. Jalan Tun Razak World-Wide House 10 Collyer Quay Kuala Lumpur 50400 19 Des Voeux Road #09-08 Ocean Financial Centre Malaysia Central, Hong Kong Singapore 049315 Tel : +(60) 3 9280 8888 Tel : +(852) 2525 1118 Tel : +(65) 6533 1818 Fax : +(60) 3 9200 2216 Fax : +(852) 2810 0908 Fax : +(65) 6532 6211 Jakarta Shanghai Bangkok
PT RHB Sekuritas Indonesia RHB (China) Investment Advisory Co. Ltd. RHB Securities (Thailand) PCL Wisma Mulia, 20th Floor Suite 4005, CITIC Square 10th Floor, Sathorn Square Office Tower Jl. Jenderal Gatot Subroto No. 42 1168 Nanjing West Road 98, North Sathorn Road, Silom Jakarta 12710, Indonesia Shanghai 20041 Bangrak, Bangkok 10500 Tel : +(6221) 2783 0888 China Thailand Fax : +(6221) 2783 0777 Tel : +(8621) 6288 9611 Tel: +(66) 2 088 9999 Fax : +(8621) 6288 9633 Fax : +(66) 2 088 9799
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