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Abo Yeos Assignment

 Abo Yeos Assignment Article

YEO HIAP SENG (M) BHD

(YHS MK, YHMS. KL)

twenty one May 2012

Tantalising Asian still drinks to power growth

Firm report

Low Soo Fang [email protected] com +603 2036 2292

Selling price Fair Benefit 52-week High/Low Key Alterations Fair value EPS EN to Dec Revenue (RMmil) Core net profit (RMmil) EPS (Sen) EPS growth (%) Opinion EPS (Sen) DPS (Sen) PE (x) EV/EBITDA (x) Div yield (%) ROE (%) Net Gearing (%) Stock and Financial Data Shares Excellent (million) Marketplace Cap (RMmil) Book value (RM/share) P/BV (x) ROE (%) Net Gearing (%) Major Shareholders 152. 7 470. several 1 . 73 1 . 7 9. 6th Net cash YHS (Sg) Pte Limited (60. 8%) YHS (M'sia) Bhd (0. 6%) 38. 6 n/a 3mth thirty five. 8 34. 3 6mth 72. some 64. six 1, 684

BUY

(Initiation)

Rationale to get report: Initiation Coverage

Expense Highlights

RM3. 08 RM3. 90 RM3. 13/RM1. 66

•

Initiation Initiation FY11 533. 4 21. some 14. zero 248. a few n/a doze. 0 22. 0 14. 2 2 . 9 9. 6 Net cash FY12F 553. 0 27. a few 17. 9 27. 5 n/a doze. 0 17. 2 7. 2 2 . 9 15. 0 four. 2 FY13F FY14F

We all initiate coverage on Yeo Hiap Seng Bhd (YHS) with a good value of RM3. 90/share based on a PE of 17. 5x FY13F EPS. Our value is at ~1SD above it is mean of 15x, given that the group is getting into a new age of higher expansion from business gains and geographical enlargement into Dalam negri. Our DCF-value stands by RM4. 20/share (WACC: almost 8. 9%). YHS is a dominant F& M company, with ~80% of revenue coming from beverages sold predominantly underneath its famous Yeo's company, and the equilibrium 20% by food products. It commands an industry leadership of 38% in Malaysia and Singapore, and growing business in Dalam negri. Its key strengths lie in its larger concentration in mid-sized level of revenue for better pricing electrical power, where conditions of product sales are less challenging. Distribution insurance coverage is a solid 90% of target market. All of us forecast revenue to develop by 28% from RM21mil in FY11 to RM27mil, and rising by a powerful 24% to RM34mil in FY13F, prior to reaching RM40mil in FY14F (3-year EPS CAGR: 24%). Having re-aligned its operations to leverage on the popular Hard anodized cookware still drinks (ASD), YHS has put in place a solid strategy to accelerate expansion and market share. Expansion is underway in Malaysia wherever it ideas to ramp up annual capacity – we estimate a 20%-30% enhance to ~200 million lt. YHS's fresh PET creation lines are expected to spearhead market share growth from first-mover advantages in pushing out a wider range of ASD. Currently, ASD in FAMILY PET is limited to few teabased variants. Upon completion in mid-FY13F, YHS will be able to utilize the underserved PET sub-segment. YHS is setting up a new ASD production plant in Indonesia, possibly by end-FY13F. This may shorten supply chain time and cut logistic costs, although also displaying its determination to this probably huge client market. It has only launched five grass jelly-based SKUs thus far, but the response has been overwhelming with volume growth of 20% in FY11. Excellent portfolio of > 15 SKUs. "balance sheet" is stable with no borrowing and cash of RM25mil (16sen/share) as in 1QFY12. Supposing FY12F-14F capex of RM200mil is partly financed by debt, net gearing is still manageable for 5%-6%. Each of our DPS prediction with a 3%-4% yield l. a. is usually premised on the dividend pay out ratio of 50%– near to its famous payout of 55%. Value is attractive, at a 16% discount to peers' typical of 20x and a wider 35% to nearest competitor Fraser & Neave Bhd (FNH Mk Value, Hold). As it is, YHS can be trading for cheap to Cocoaland Holdings (COLA Mk Equity, Buy), despite the former's larger market capitalization and bigger EPS growth. Catalysts pertaining to re-rating and upside potential include: -- 1) synergistic M& A within main F& M industry and; 2) unlocking of value through divestment/development of unutilised landbank. YHS is very under-owned by the institutional cash (10 SKUs.

New FAMILY PET lines an organized first emocionar advantages

Having re-aligned its operations to leverage on its well-known ASD, YHS has put in place a solid technique to accelerate expansion and...

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