` 31 July 2017 Yield appeal Company Update Boustead Plantations is one of the well-established upstream plantation companies in Malaysia. 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, Sabah and Sarawak, 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 Penang 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 Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com Page 1 of 15 ` 31 July 2017 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 Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com Page 2 of 15 ` 31 July 2017 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 Perak Pulau Pinang 2.8% 1.7% Kelantan Kedah 2.5% 6.2% Terengganu 2.7% Saraw ak 32.1% Pahang 6.1% Selangor Johor 0.3% 9.9% Sabah 35.7% Source: Boustead Plantations Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com Page 3 of 15 ` 31 July 2017 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 Tangkak, Johor 1,226.1 Freehold 71.1 Eldred Bekok, Johor 1,799.7 Freehold 39.7 Kulai Young Kulai, Johor 670.6 Freehold 53.8 Chamek Kluang, Johor 814.6 Freehold 57.5 Telok Sengat Kota Tinggi, 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 Kanowit 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.