Plantations│Malaysia July 7, 2014 A Tanah Makmur Berhad Prosperous land THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR OTHER JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION. THIS DOCUMENT HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Plantations│Malaysia July 7, 2014 THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR OTHER JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION. CIMB INVESTMENT BANK BERHAD IS THE PRINCIPAL ADVISER, SOLE PLACEMENT AGENT, MANAGING UNDERWRITER AND A JOINT UNDERWRITER IN THE INITIAL PUBLIC OFFERING (“IPO”) OF THE SHARES OF TANAH MAKMUR BERHAD (“COMPANY”). HOWEVER, THIS DOCUMENT IS FOR INFORMATION ONLY AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR RECOMMENDATION TO SUBSCRIBE FOR OR PURCHASE, OR SOLICITATION OF AN OFFER OR INVITATION TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES, AND NEITHER THIS DOCUMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS OF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER. ANY DECISION TO SUBSCRIBE FOR OR PURCHASE SECURITIES TO BE OFFERED IN THE IPO SHOULD BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS ISSUED BY THE COMPANY IN CONNECTION WITH THE IPO AND NO RELIANCE SHOULD BE PLACED ON ANY REPRESENTATION OR INFORMATION WHICH IS NOT CONTAINED IN THE SAID PROSPECTUS. THE INFORMATION CONTAINED HEREIN IS DERIVED FROM PUBLICLY AVAILABLE SOURCES, AND ANY FORWARD-LOOKING STATEMENT, OPINION AND PROJECTION CONTAINED IN THIS DOCUMENT ARE ENTIRELY THOSE OF THE AUTHORS. ANY OPINION, ESTIMATE OR PROJECTION HEREIN CONSTITUTES A JUDGMENT AS OF THE DATE OF THIS REPORT, AND THERE CAN BE NO ASSURANCE THAT FUTURE RESULTS OR EVENTS WILL BE CONSISTENT WITH ANY SUCH OPINION, ESTIMATE OR PROJECTION. THE INFORMATION IN THIS DOCUMENT IS SUBJECT TO CHANGE WITHOUT NOTICE, ITS ACCURACY IS NOT GUARANTEED, IT MAY BE INCOMPLETE OR CONDENSED AND IT MAY NOT CONTAIN ALL MATERIAL INFORMATION CONCERNING THE COMPANY OR ITS SUBSIDIARIES. CIMB INVESTMENT BANK BERHAD HAS NOT INDEPENDENTLY VERIFIED ALL THE INFORMATION GIVEN IN THIS DOCUMENT. ACCORDINGLY, NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE AS TO THE ACCURACY, COMPLETENESS OR FAIRNESS OF THE INFORMATION, OPINIONS ESTIMATES, FORECASTS AND PROJECTIONS CONTAINED IN THIS DOCUMENT. NEITHER CIMB INVESTMENT BANK BERHAD, THE COMPANY, THEIR RESPECTIVE DIRECTORS, OFFICERS, AFFILIATES NOR ANY OTHER PERSON ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION THEREWITH. THIS DOCUMENT IS CONFIDENTIAL AND HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION, AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. BY ACCEPTING THIS DOCUMENT YOU AGREE TO BE BOUND BY THE FOREGOING RESTRICTIONS AND LIMITATIONS. THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR OTHER JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION. THIS DOCUMENT HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. 2 Plantations│Malaysia July 7, 2014 This page was intentionally left blank. THIS RESEARCH REPORT IS NOT DIRECTED TO, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY WHO IS A CITIZEN OR RESIDENT OF OR LOCATED IN ANY LOCALITY, STATE, COUNTRY OR OTHER JURISDICTION WHERE SUCH DISTRIBUTION, PUBLICATION, AVAILABILITY OR USE WOULD BE CONTRARY TO LAW OR REGULATION. THIS DOCUMENT HAS BEEN FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. 3 Plantations│Malaysia July 7, 2014 TABLE OF CONTENTS 1. BACKGROUND .................................................................................................................................................. 6 1.1 Most assets formerly listed under Kurnia Setia ................................................................................................ 6 1.2 What has changed since the company was taken private ................................................................................. 6 1.3 A palm oil and property player in Pahang .......................................................................................................... 7 1.4 The Crown Prince of Pahang is the largest shareholder ................................................................................... 8 1.5 Shareholding structure post IPO ....................................................................................................................... 8 2. BUSINESS OPERATIONS ................................................................................................................................ 10 2.1 Pahang oil palm player with 13,530ha of planted area .................................................................................... 10 2.2 Its mill processes 34% of its FFB output .......................................................................................................... 11 2.3 Major palm oil customers and sales strategy ................................................................................................... 12 2.4 Property development activities ....................................................................................................................... 13 2.5 Bauxite mining activities ................................................................................................................................... 14 3. OUTLOOK ......................................................................................................................................................... 15 3.1 Beneficiary of strong demand for CPO ............................................................................................................. 15 3.2 Positive on CPO price due to tighter supplies, El Nino.................................................................................... 15 3.3 New planting and new mature areas to drive future growth ........................................................................... 16 3.4 Oil yields achievement above Pahang state's average ...................................................................................... 17 3.5 Leveraging on its strong relationship with LKPP ............................................................................................ 18 3.6 Plans to raise its palm oil landbank to 25,000 ha by 2017/18 ........................................................................ 18 3.7 Plans to launch RM245m worth of properties in 2014 .................................................................................... 19 3.8 Relocation of state administrative complex to KotaSAS could boost its GDV by 67% to RM3bn ................. 19 3.9 Earnings boost from mining business for FY14-16 .......................................................................................... 19 4. SWOT ANALYSIS ............................................................................................................................................. 20 5. RISKS ................................................................................................................................................................. 21 5.1 CPO prices ......................................................................................................................................................... 21 5.2 Unfavourable weather conditions..................................................................................................................... 21 5.3 Dependence on foreign workers ....................................................................................................................... 21 5.4 High palm oil taxes in Malaysia ........................................................................................................................ 21 5.5 Forex fluctuations............................................................................................................................................. 22 5.6 Measures to curb property speculation ........................................................................................................... 22 6. FINANCIALS .................................................................................................................................................... 23 6.1 Plantation and property are the key revenue contributors............................................................................. 23 6.2 FY12 earnings hit by lower selling price and higher costs .............................................................................. 23 6.3 Lower CPO prices hurt FY13 earnings ............................................................................................................. 23 7. FORECASTS ....................................................................................................................................................