MALEESAMPRANPLC(MALEE)：SLEEPINGGIANTISAWAKENING1213

1、mar-12 dec-11jan-12may-12jul-12sep-12 nov-12 % 25.49 18.05 9.27 700 600 500 400 thailand initiating coverage buy (initiation) 13 december 2012 malee sampran plc (malee) sleeping giant is awakening share price: target price: thb101.50 thb156.50 (initiation) initiate at buy; thb156.5 target (11.7x per

2、, +1x sd ltm): malee is an under-researched turnaround play offering earnings visibility at a prospective 7.7x per with a 6.6% yield. it is now the leader in the thai fruit juice market. the earnings recovery started in 2011 and 2012 trends imply the trajectory remains strong and could extend to 201

3、4 pongrat ratanatavanananda pongrat.rmaybank-ke.co.th (662) 658 6300 ext 1398 stock information description: malee is a leading manufacturer of fruit juice and canned fruit mainly under the brand name malee. it markets its product via modern retailer outfits, through agents and direct to food compan

4、ies. chain of malee brands are 1) canned fruit - malee, first choice, chao suan and malee food service, 2) fruit juice malee, malee healthy plus, malee veggies, malee juice mix and many others and 3) corn milk malee i-corn and 4) drinking water malee. malee also packages and distributes uht pasteuri

5、zed milk of farm chokchai and ready to drink coffee under nescafe and birdy. malee was listed on the set in march 1992. driven by capacity expansion. we forecast a 3-yr earnings cagr of 69% pa. the market is recognizing the turnaround, but with the stock trading at 7.7x vs. 12x for the thai food sec

6、tor and 14x for the set, we see another leg in the rally. growth returns: poor historic profitability rested on three key components: capacity, opex and interest expense. a restructuring of operations took several years and was completed in 2009, allowing for product differentiation. average gm in 2

7、009-2011 improved to 27.4% from 19.6% covering opex that was averaging at 24.3% of sales. in addition debt servicing fell to 1.1% of sales from 5.2%, mainly on falling leverage. malee expects to hit thb6bn sales in 2012 with capacity rising 2.6x through 2014. we expect sales of th9bn. the sustained

8、profit growth in the next three years will be mainly volume-driven. ticker: shares issued (m): market cap (us$ m): 3-mth avg daily turnover (us$ m): set index: free float (%): major shareholders: abico holdings plc jungrungruangkit family chirathivat family key indicators roe 2013 (%) net gearing (%

9、): nta/shr (bt): interest cover (x): historical chart malee tb 70.0 236.7 4.06 1,334.95 26.14 61.9 39.5 21.6 119.0 products popular: malees canned and fruit juice product portfolio is enjoying strong demand riding on health consciousness and the proliferation of modern retailing outlets including co

10、nvenience stores. its distribution contract with farm chokchai (milk) and ready-to-drink coffee in cans (birdy and nescafe = top two in the market) compliments its portfolio enhancing its attractiveness as a supplier to modern retailing chains. cost management is essential: malees business has a hig

11、h opex base, even as the mgt continues to find ways to lower cost. reducing head count has helped raised productivity but selling expenses remains generally high. wages and distribution costs are the key components that malee must maintain strict control. for now, malee will benefit from the increas

12、ing automation in processing and volume increases. other risks: malee is potentially vulnerable to spikes in fruit prices, 55-60% of cogs. adverse weather is a risk. government intervention in agriculture does not currently impact malee but could in the future. malee summary earnings table 300 200 1

13、00 0 fy ends dec 31 (thb m) revenue ebitda recurring earnings recurring basic eps 2010a 2,889 185 106 0.3 2011a 3,721 311 228 0.7 2012f 6,398 901 711 10.2 2013f 8,030 1,257 937 13.4 2014f 8,928 1,456 1,096 15.7 eps growth (%)(18.7)113.8 1,463.731.717.0 dps (thb)0.00.0 maleeset per (x) ev/eb

14、itda (x) 5.2 10.3 20.8 8.5 10.0 9.6 7.6 6.6 6.5 5.6 performance: 52-week high/low 1-mth thb111.00/thb14.30 3-mth 6-mth 1-yrytd div yield (%) p/bv (x) net gearing (%) roe (%) 0.0 1.4 81.5 27.2 0.0 8.6 74.7 41.7 5.0 6.2 56.1 62.2 6.6 4.7 39.5 61.9 7.7 3.5 28.7 53.4 absolute (%) 7.9 relative (%) 4.0 cl

15、osing price: december 7 26.8 18.1 48.2 28.5 511.5 370.0 370.0 259.0 roa (%) 4.8 10.1 26.3 32.6 consensus net profit na na closing price: december 11. source: institutional research, mbket 31.9 na see appendix i for important disclosures and analyst certifications malee sampran (malee) investment the

16、sis malee is a play on the growing demand for manufactured fruit juices facilitated by increasing convenience via expansion of modern retailing outlets especially the growing penetration into the provincial areas. malee is a turnaround story and is just starting to see benefits from the business res

17、tructuring that took quite some time to implement. earnings growth going forward will be underpinned by capacity expansion and product diversification both in variety, price points as well as exports earnings are projected to grow by 69% pa over the next three years. although the share price has ris

18、en 370% ytd, outperforming the set by 259%, the stock still trades on 7.7x 2013 pe, discount to the thai food sectors 12x pe and discount relative to the markets 14x. relative to its own history, the current share price has clawed back nearly to the ipo level in 1992 where its multiples then were fa

19、ctoring in strong growth expectations that did not pan out. based on its historical price pattern, we can count on malee as being one of the poorest performing ipos in the thai market. we think that this is the reason why the nascent recovery in earnings was missed by the general investing community

20、 including by us. the business restructuring on malee took a long time to complete partly because the company did not recapitalize the operations and went the way of the long approach of product improvement, streamlining operations including capacity and headcount reduction, and raising operating ef

21、ficiency. the nadir was 2008 when retained earnings turned to a negative thb243mn. the business restructuring started to bear fruit in 2009. with a shrunk capital base, malees roe leverage has become high that from a 27% level achieved in 2010 it rose further to 41.7% in 2011. our forecast profit st

22、ream could translate into an roe of 62% in 2012-2013. maintaining a 50% dpr will cause ballooning of equity base and could penalize roe that is projected as falling to 53% in 2014, based on our forecast. with leverage at a low 30% we can reasonably anticipate malee to start raising dpr, thus enhanci

23、ng its already strong yield attraction. we think this would be another attractive feature of malee that would support further share price re-rating. note that malee is now trading at fy12-14 dividend yield of 5%, 6.6% and 7.7%, respectivelyimplies its cheap valuation. share price analysis and valuat

24、ion the share price recovery the 370% ytd spike in malees share price has been underpinned by the 328% yoy earnings growth in 9m12. nevertheless, we believe that that all the positives on malee have not yet been priced-in. malees share price could go higher as the stock remains attractively valued a

25、t 7.7x 2013 pe vs the 12x multiple of the thai food sector and 14x of the set. the new earnings high anticipated for 4q12 will attract investors interest on the stock, we think. currently, malee is not well known for foreign investors as evidenced by the absence of foreign brokers coverage. moreover

26、, there are not any domestic brokers to cover it before. 13 december 2012page 2 of 17 malee sampran (malee) chart 1: strong share price rally . source: bisnews 13 december 2012 table 1:. driven by strong profit growth source: company data, mbket calculations 4q12 earnings will be a record high: we e

27、xpect malee to post 4q12 earnings of thb191m, up 79.7% yoy and 9.7% qoq driven by 38.4% yoy and 8% qoq growth in sales supported by volume growth yoy and positive seasonality qoq. valuation malee share price responds to profitability thus we use pe-based valuation metric to arrive at our 12mth price

28、 target. thus, we peg the per multiple at 11.69x, +1sd above its long-term mean. the metric gives us a fair value of thb156.51we rounded off to thb156.50 for our 12-mth price target. there is 51.2% upside to our share price target and this can be justified by the 69% pa earnings cagr during 2011-201

29、4, putting malees peg below 1.0 x. chart 2: malees per band source: institutional research, mbket risks malees earnings depend on the price of fruits raw material cost which accounts for 55-60% of production costs, we estimate. malee is vulnerable to the upward price swings driven supply shortages t

30、hat could be caused by prolonged adverse weather conditions for example long heavy rains, typhoons, prolonged inundation. the agricultural sector in thailand is one area that tends to see heavy government intervention that, in our observation, tends to contribute to the volatility is farm supply. fo

31、rtunately for malee the government is page 3 of 17 malee sampran (malee) focused on cash crops and not on fruits but there is no guarantee that this will not change. closest peer comparison p/e (x)p/bv (x)roe (x)yield(%) namecountrybeta2012 2013 2012 2013 2012 2013 2012 2013 oishi group pcl tipco fo

32、ods pcl malee sampran public co ltd thai union frozen prod pub charoen pokphand foods pub gfpt public co ltd uni-president enterprises co fraser and neave ltd dole food co inc san miguel pure foods co avereage - bloomberg consensus th th th th th th ta si us ph 0.88 1.06 1.19 0.71 0.90 0.74 0.75 0.9

33、7 0.76 0.75 0.87 36.0 na 10.3 13.8 17.0 na 22.0 17.9 12.4 na 18.5 20.2 na 9.8 11.7 14.1 14.6 20.3 15.9 8.9 na 14.4 8.7 na 5.8 2.2 2.6 1.8 na 1.8 na na 3.8 6.9 na 4.4 2.0 2.4 1.6 na 1.7 na na 3.2 27.5 na 45.2 17.9 19.9 0.0 15.9 10.3 na na 19.5 38.3 na 40.0 17.0 17.1 11.0 na 11.5 na na 22.5 1.4 na 4.8

34、 3.2 3.0 0.6 2.0 2.3 0.0 na 2.2 2.5 na 5.1 4.1 3.6 2.3 2.3 2.5 0.0 na 2.8 sources: bloomberg and institutional research, mbket financial analysis revenue outlook the malee brand has been in the market for nearly 20 years, and there are only a handful of fruit juice producers in thailand that have vo

35、lume and variety such as thai pineapple (tipco brand), ufc, etc. malee stands out as having the widest product variety. there are also fruit juices offered by manufacturers of non alcoholic beverages but these tend to be very narrow in terms of variety, for example nestle has orange-based pasteurize

36、d fruit juice line. generally, the revenue of many fruit juice companies is volatile and earnings power weak. malees own performance record speaks of these characteristics. however, the trend has been improving over time in part because of its own business restructuring and opening of markets. chart

37、 3: malee revenue profile (thb million) sources: company data, bloomberg 13 december 2012 chart 4: net profit profile (reported basis thb million) sources: company data, bloomberg consumption of manufactured fruit juice is an urban phenomenon. the thai consumers, in general, prefer fresh fruits and

38、tend to purchase fruit juices from the many fruit stands sold on the street sides and food markets. the price tags at these outlets are significantly lower than those offered by the fruit juice manufacturers. more importantly the fruits and juices can be purchased for single serving. page 4 of 17 ma

39、lee sampran (malee) the gradual rise in the preference towards manufactured fruit juices has been driven by lifestyle change prompted partly by advertising, widespread availability and affordability smaller sizing. per fruit concentrate content, manufactured fruit juice is still more expensive than

40、those available from traditional outlets but this fact is not readily evident to the consumers as before. malees product line offers “exotic” flavors from fruits that are not easily obtainable in thailand eg many types of berries. based on its own survey ac nielsen estimated that thailands fruit jui

41、ce market had been growing at 11% pa in the last four years. in 2011 the total value was thb10b that ac nielsen calculated to be equivalent to 284m liters based on an average price of thb35.85/liter. however, there is now a wide range of prices to create affordability and opening a market. the 2011

42、value can be grouped into five categories, and the price is translated into per liter basis: 1) premium market (100% fruit juice) (uht and pasteurized forms) worth thb3.8b equivalent to 56m liters and selling at an average of thb67.86/liter. the main form is uht (78%). the segments growth was about

43、6%. 2) medium market (40% fruit juice) worth thb580m or 12m liters and average selling at thb48.33/liter. 3) economy market (25% fruit juice) worth thb3b or 117m liters and average selling at thb25.64/liter. malee is mainly positioned in this segment. 4) super economy market (lower-than-25% fruit ju

44、ice) worth thb1.8b or 63m liters and selling at thb28.57/liter. 5) others worth thb1b or 28m liters selling at thb35.71/liter chart 5: fruit juice market by form and price pointschart 6: market share of premium juice market economy, 29.5% others, 9.8% uht, 29.5% unif, others, 17% tipco, 45% 15% supe

45、r economy, 17.7% source: company medium, 5.7% pasteuriz ed, 7.9% source: company malee, 23% malee sales to accelerate malee does not provide capacity data before 2007. from 2007-2011, sales cagr was -2.2% pa and this was partly due to the closing of capacities in the canned and bottled segment. cumu

46、lative 9m12 sales reached thb4.6b, rising 90% yoy driven by higher sales of canned, boxed and bottled beverages where some capacity has been added. the addition of the capacity was customer-driven, indirectly confirming brand improvement following efforts to improve product quality. with the higher

47、sales profitability rose significantly as gm hit 27-29% in 2009- 9m12 readily accommodating opex resulting in positive opm. 13 december 2012page 5 of 17 malee sampran (malee) malees management is confident that fy12 sales can exceed thb6b, probably closer to thb6.3b-thb6.5b as 4qs is the seasonal hi

48、gh for the business especially during christmas and new year holidays as fruit juices are a major feature in many gift baskets. malees management further advises that most orders in fy13 have already been secured and to some extent 2014 as well. this drives the decision to add new capacity of canned

49、, boxed and bottled beverage by 130m liters/year bringing the total to 344m liters by 2014. the new capacity will be in commercial run starting 2q13 and will support growth for fy13 through fy14. the additional capacity will also allow malee to launch new flavors (two is planned for january 2013) fo

50、r aimed at the competitive segment of the market and expand exports. table 2: malees historical capacity sources: company, institutional research, mbket 13 december 2012 table 3: malees capacity plan sources: company and institutional research, mbket variety of products: malee offers more variety of

51、 products (see appendix 3) to capture a wide customer preference. canned fruit is another part of its product portfolio that is quite small in terms of revenue contribution but very important in building brand image especially among the food services sector. the total value of canned fruit market in

52、 2011 was thb800m, flat yoy. like the fruit juice segment, canned fruit is also grouped according to affordability. 1) premium market has two makers, malee and ufc. 2) medium market has 7-8 brands including pigeon, first choice, thai ad. this segment is highly price competitive. 3) economy market ha

53、s several brandssuch as rod thang, chao suan, chao doi and even lower that the medium market. page 6 of 17 malee sampran (malee) chart 7: market share in canned fruit market source: company rtd coffee remains attractive: complementing its fruit juice offering is the distributorship of pasteurized mi

54、lk (farm chokchai) and ready to drink coffee under the brand of nescafe and birdy. nestle (thailand) co., ltd. reported that 3-yr (2007-2010) cagr of instant coffee market was 14% pa. in 2009, market share of rtd coffee was 32% or thb8.3b. the market leader is birdy and nescafe whose market share is

55、 65% and 30%, respectively. the markets sale of rtd coffee in 2011 reached thb8.5b and birdy and nescafe remained the market leaders. chart 8: market value of instant coffee source: nestle (thailand) co., ltd. 13 december 2012 chart 9: instant coffee market in 2009 source: nestle (thailand) co., ltd

56、. chart 10: capacity driven sales growth sources: company and institutional research, mbket page 7 of 17 malee sampran (malee) cost management gm has improved to near 30% on from higher volumes, better plant efficiency and raw material management. although raw material fruitcost accounts for 55-60%

57、of production cost, the government is focused on cash crops, particularly rice, palm, tapioca, rubber, corn, sugar cane and soybean oil. but the government does not focus on fruit. malee uses many types of fruit such as lychee, rambutan, orange (valencia, mandarin and tangerine), berries (cranberry,

58、 strawberry and raspberry), grape, apple, guava, prune, coconut and tomato. chart 11: government intervention on agricultural products agricultural products governm ent intervention yesno rice palm soybean oil coconut tapioca rubber corn sugar cane lychee rambutan orange tomato guava grape and berri

59、es source: press the cost variable for malee that has remained high is the operating expense. malee has been through headcount reduction. in 2005- 2006, it had 2,513-2,674 employees and this has shrunk to 1,897 in 2007 and 1,491 in 2008. the drastic reduction affected 2008 profitability but subseque

60、nt gains in efficiency (economies of scale) and automation started bearing benefits in 2009 restoring profitability as gm recovered to 23.8% vs 16-18% in 2005-2008. by 2010-9m12 gm reached 27.4- 29.8%. we are confident that malee can maintain the current margin levels but it still has to keep a tigh