Information paper Ricegrowers Ltd (SunRice) Quality Income from Branded Products FMCG/Agriculture Ricegrowers (ASX: SGLLV) trades as SunRice – the company’s main brand, which is ubiquitous in supermarkets. SunRice is a global fast-moving consumer 26th November 2019 goods (FMCG) business and one of Australia’s largest branded food exporters with more than 30 brands across 50 countries. Built by Australian rice growers, Share details SunRice today generates almost $1.2bn in sales and owns operations and ASX Code SGLLV assets spanning Australia, the Middle East, the US, Papua New Guinea, the Share price $3.80 Pacific and Asia. SunRice is a diversified business, responsible for the sale of Market Capitalisation $219.25M more than 90% of Australia’s crop; sourcing rice from its international supply chains to service a growing portfolio of brands, products and customers; and Shares on issue 59.7M adding value through rice-based branded products including rice cakes, pre- Net debt at 30/4/19 $109.55M packed rice meals, premium rice brands, microwave meals and flour. SunRice Free float 98% also has business segments focused on gourmet Mediterranean foods and food service supply and stockfeed production and companion animal feed nutrition. Share price performance (12 mths) SunRice has a track record of delivering on its strategic plan with intended expansion into adjacent food businesses being a key reason for its April 2019 ASX listing. A compco-derived sum of the parts valuation generates a through the cycle valuation of $11.44/share, notwithstanding the subdued outlook outlined at the August AGM. Note that this is not a target price but a valuation. Scope Upside Case This report has been commissioned by Ricegrowers Ltd (SunRice) to present an explanation Significant opportunity in Asian rice markets of the business model and to explore the value created by the company for its Proven ability to develop and expand brands, stakeholders. The views expressed in this report are RaaS’s and should not be construed as deliver new product initiatives through cycles an endorsement by the company. Significant growth opportunities in healthy Business model snacks, low GI and sushi rice SunRice is a market leader in both core rice and value-added rice products such as Downside Case microwave rice meals, rice cakes, rice flour and a growing presence in the healthy snacking Complicated corporate structure category which we believe holds significant opportunity for further growth. SunRice has had a consistent focus on increasing organisational quality and sustainability - both Poor harvests limit Rice Pool’s ability to absorb economically and in ESG terms. The company is currently executing a second five-year fixed costs & overheads strategic plan aimed at expanding its presence in the fast-growing healthy snacking Competing with other crops for water allocation category, capitalising on growing global demand for sushi rice, expanding the footprint for its branded low GI rice products and developing new markets for new rice-based value- Board of Directors added ingredients. This plan implies further acquisitions of complementary food brands Laurie Arthur Chairman and products, particularly in the “entertaining and snacking” and animal feed categories. Rob Gordon CEO Sum of the Parts Valuation John Bradford Grower director We have undertaken a sum of the parts valuation of the business based on the company’s Luisa Catanzaro Non-Executive Director past performance, using a considered group of domestic and international peers. It should be noted that past performance is not a guarantee or indication of future performance and Andrew Crane Non-Executive Director that the share price will not necessarily trade to our valuation. Our comparable company Ian Glasson Non-Executive Director valuation range of between $8.94 and $13.94 per share (mid-point $11.44) is derived from Gillian Kirkup Grower director an analysis of domestic and international companies with comparable dependence on agricultural and food products and based on SunRice’s historical earnings through the Ian Mason Grower director cycle. This valuation does not give any guarantee regarding SunRice’s future financial Jeremy Morton Grower director performance, its outlook or its share price performance. SunRice is trading at a PER discount of ~60% to a broad list of agricultural and food companies (median 12-mth trailing Leigh Vial Grower director PER of 22.1x), a discount, which in our view is unjustified given its superior NTA and yield. Julian Zanatta Grower director Historical earnings and ratios Company contacts Year Revenue EBITDA NPAT Adj.* NPAT EPS Rep. P/E DPS Yield NTA Dimitri Courtelis (CFO) Ben Walsh (IR) end (A$m) Adj.* (A$m) (A$m) Rep. (c) (x) (c) (%) ($) 04/15a 1,238.1 111.1 52.5 43.4 77.9 4.9 31.0 8.2% 6.37 [email protected] +61 452 077 042 04/16a 1,265.9 110.4 52.0 49.1 87.9 4.3 33.0 8.7% 6.84 RaaS Advisory contact 04/17a 1,109.3 75.3 37.5 34.2 61.3 6.2 33.0 8.7% 7.10 Finola Burke +61 414 354 712 [email protected] 04/18a 1,174.0 94.3 43.6 42.7 75.9 5.0 33.0 8.7% 7.49 04//19a 1,189.5 85.8 40.1 31.5 54.5 7.0 33.0 8.7% 7.64 Source: Company data *EBITDA and NPAT adjusted for one-time, non-cash items inc forex costs This report has been prepared by RaaS Advisory Pty Ltd (A.C.N. 614 783 363) on behalf of Ricegrowers Ltd and should be read in conjunction with the disclaimer and FSG on pages 39-41. Table of contents Scope ............................................................................................................................... 1 Business model .................................................................................................................... 1 Sum of the Parts Valuation .................................................................................................... 1 Ricegrowers Limited ............................................................................................................. 3 Investment case ................................................................................................................... 3 Sum of the Parts CompCo Valuation ....................................................................................... 4 Capital Structure .................................................................................................................. 6 Industry Dynamics ................................................................................................................ 7 SunRice Strategy ............................................................................................................................. 13 Historical Performance Discussion .................................................................................................. 15 Rice Pool ................................................................................................................................ 17 International Rice ................................................................................................................... 19 Rice Food ............................................................................................................................... 20 Riviana ................................................................................................................................ 21 CopRice ................................................................................................................................ 22 Expenses ................................................................................................................................ 23 Balance Sheet ........................................................................................................................ 24 SWOT analysis ................................................................................................................................. 25 Sensitivities ..................................................................................................................................... 25 Share Register ................................................................................................................................. 26 Board and management ................................................................................................................. 26 Directors ................................................................................................................................ 26 Executive Team ...................................................................................................................... 27 Peer Comparison ............................................................................................................................ 29 Sum Of The Parts Valuation ............................................................................................................ 31 Appendix ................................................................................................................................ 35 Ricegrowers Ltd (SunRice) | 26th November 2019 2 Ricegrowers Limited Ricegrowers Ltd, trading as SunRice, listed on the ASX in April 2019 following twelve years as an NSX-listed entity. The company is executing a strategic plan centred on maintaining excellence in NSW rice production and flexing a global supply chain, while diversifying revenue through growth in related food businesses, organically and through acquisition. To support this plan, the business is focussed on maintaining strong brands, optimising domestic