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1、Mar-12,Dec-11,Jan-12,May-12,Jul-12,Sep-12,Nov-12,%,25.49,18.05,9.27,700,600,500,400,Thailand,Initiating CoverageBuy(initiation),13 December 2012Malee Sampran Plc(MALEE)Sleeping giant is awakening,Share price:Target price:,THB101.50THB156.50(initiation),Initiate at BUY;THB156.5 target(11.7x PER,+1x S
2、D LTM):MALEEis an under-researched turnaround play offering earnings visibility at aprospective 7.7x PER with a 6.6%yield.It is now the leader in the Thaifruit juice market.The earnings recovery started in 2011 and 2012trends imply the trajectory remains strong and could extend to 2014,Pongrat Ratan
3、atavananandaPongrat.Rmaybank-ke.co.th(662)658 6300 ext 1398Stock InformationDescription:MALEE is a leading manufacturer of fruit juiceand canned fruit mainly under the brand name Malee.Itmarkets its product via modern retailer outfits,through agentsand direct to food companies.Chain of Malee brands
4、are 1)canned fruit-Malee,First Choice,Chao Suan and MaleeFood 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.Maleealso packages and distributes UHT pasteurized milk of FarmChokchai and ready to drin
5、k 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 of69%pa.The market is recognizing the turnaround,but with the stocktrading at 7.7x vs.12x for the Thai food sector and 14x for the SET,wesee another leg in the ra
6、lly.Growth returns:Poor historic profitability rested on three keycomponents:capacity,opex and interest expense.A restructuring ofoperations took several years and was completed in 2009,allowing forproduct differentiation.Average GM in 2009-2011 improved to 27.4%from 19.6%covering opex that was aver
7、aging at 24.3%of sales.Inaddition debt servicing fell to 1.1%of sales from 5.2%,mainly on fallingleverage.MALEE expects to hit THB6bn sales in 2012 with capacityrising 2.6x through 2014.We expect sales of TH9bn.The sustainedprofit growth in the next three years will be mainly volume-driven.,Ticker:S
8、hares Issued(m):Market Cap(US$m):3-mth Avg Daily Turnover(US$m):SET Index:Free float(%):Major Shareholders:Abico Holdings PlcJungrungruangkit FamilyChirathivat FamilyKey IndicatorsROE 2013(%)Net Gearing(%):NTA/shr(Bt):Interest cover(x):Historical Chart,MALEE TB70.0236.74.061,334.9526.1461.939.521.61
9、19.0,Products popular:MALEEs canned and fruit juice product portfolio isenjoying strong demand riding on health consciousness and theproliferation of modern retailing outlets including convenience stores.Itsdistribution contract with Farm Chokchai(milk)and ready-to-drinkcoffee in cans(Birdy and Nesc
10、afe=top two in the market)complimentsits portfolio enhancing its attractiveness as a supplier to modernretailing chains.Cost management is essential:MALEEs business has a high opexbase,even as the mgt continues to find ways to lower cost.Reducinghead count has helped raised productivity but selling
11、expenses remainsgenerally high.Wages and distribution costs are the key componentsthat MALEE must maintain strict control.For now,MALEE will benefitfrom the increasing automation in processing and volume increases.Other Risks:MALEE is potentially vulnerable to spikes in fruit prices,55-60%of COGS.Ad
12、verse weather is a risk.Government interventionin agriculture does not currently impact MALEE but could in the future.MALEE Summary Earnings Table,3002001000,FY ends Dec 31(THB m)RevenueEBITDARecurring earningsRecurring Basic EPS,2010A2,8891851060.3,2011A3,7213112280.7,2012F6,39890171110.2,2013F8,03
13、01,25793713.4,2014F8,9281,4561,09615.7,EPS Growth(%),(18.7),113.8 1,463.7,31.7,17.0,DPS(THB),0.0,0.0,5.1,6.7,7.8,MALEE,SET,PER(x)EV/EBITDA(x),5.210.3,20.88.5,10.09.6,7.66.6,6.55.6,Performance:52-week High/Low1-mth,THB111.00/THB14.303-mth 6-mth 1-yr,YTD,Div Yield(%)P/BV(x)Net Gearing(%)ROE(%),0.01.48
14、1.527.2,0.08.674.741.7,5.06.256.162.2,6.64.739.561.9,7.73.528.753.4,Absolute(%)7.9Relative(%)4.0Closing price:December 7,26.818.1,48.228.5,511.5370.0,370.0259.0,ROA(%)4.8 10.1 26.3 32.6Consensus Net Profit Na NaClosing price:December 11.Source:Institutional Research,MBKET,31.9Na,SEE APPENDIX I FOR I
15、MPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS,Malee Sampran(MALEE)Investment ThesisMALEE is a play on the growing demand for manufactured fruit juicesfacilitated by increasing convenience via expansion of modern retailingoutlets especially the growing penetration into the provincial areas.MALEE is
16、 a turnaround story and is just starting to see benefits fromthe business restructuring that took quite some time to implement.Earnings growth going forward will be underpinned by capacityexpansion and product diversification both in variety,price points aswell as exportsEarnings are projected to gr
17、ow by 69%pa over the next three years.Although the share price has risen 370%YTD,outperforming the SETby 259%,the stock still trades on 7.7x 2013 PE,discount to the Thaifood sectors 12x PE and discount relative to the markets 14x.Relativeto its own history,the current share price has clawed back nea
18、rly to theIPO level in 1992 where its multiples then were factoring in stronggrowth expectations that did not pan out.Based on its historical price pattern,we can count on MALEE as beingone of the poorest performing IPOs in the Thai market.We think thatthis is the reason why the nascent recovery in
19、earnings was missed bythe general investing community including by us.The business restructuring on MALEE took a long time to completepartly because the company did not recapitalize the operations andwent the way of the long approach of product improvement,streamlining operations including capacity
20、and headcount reduction,and raising operating efficiency.The nadir was 2008 when retainedearnings turned to a negative THB243mn.The business restructuring started to bear fruit in 2009.With a shrunkcapital base,MALEEs ROE leverage has become high that from a 27%level achieved in 2010 it rose further
21、 to 41.7%in 2011.Our forecastprofit stream could translate into an ROE of 62%in 2012-2013.Maintaining a 50%DPR will cause ballooning of equity base and couldpenalize ROE that is projected as falling to 53%in 2014,based on ourforecast.With leverage at a low 30%we can reasonably anticipateMALEE to sta
22、rt raising DPR,thus enhancing its already strong yieldattraction.We think this would be another attractive feature of MALEEthat 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
23、Analysis and ValuationThe Share price recoveryThe 370%YTD spike in MALEEs share price has been underpinned bythe 328%YoY earnings growth in 9M12.Nevertheless,we believe thatthat all the positives on MALEE have not yet been priced-in.MALEEsshare price could go higher as the stock remains attractively
24、 valued at7.7x 2013 PE vs the 12x multiple of the Thai food sector and 14x of theSET.The new earnings high anticipated for 4Q12 will attract investorsinterest on the stock,we think.Currently,MALEE is not well known for foreign investors as evidencedby the absence of foreign brokers coverage.Moreover
25、,there are notany domestic brokers to cover it before.,13 December 2012,Page 2 of 17,Malee Sampran(MALEE),Chart 1:Strong share price rally.Source:Bisnews13 December 2012,Table 1:.driven by strong profit growthSource:Company data,MBKET calculations4Q12 earnings will be a record high:We expect MALEE t
26、o post4Q12 earnings of THB191m,up 79.7%YoY and 9.7%QoQ driven by38.4%YoY and 8%QoQ growth in sales supported by volume growthYoY and positive seasonality QoQ.ValuationMALEE share price responds to profitability thus we use PE-basedvaluation metric to arrive at our 12mth price target.Thus,we peg theP
27、ER multiple at 11.69x,+1SD above its long-term mean.The metricgives us a fair value of THB156.51we rounded off to THB156.50 forour 12-mth price target.There is 51.2%upside to our share price target and this can be justifiedby the 69%pa earnings CAGR during 2011-2014,putting MALEEsPEG below 1.0 x.Cha
28、rt 2:MALEEs PER bandSource:Institutional Research,MBKETRisksMALEEs earnings depend on the price of fruits raw material costwhich accounts for 55-60%of production costs,we estimate.MALEE isvulnerable to the upward price swings driven supply shortages thatcould be caused by prolonged adverse weather c
29、onditions for examplelong heavy rains,typhoons,prolonged inundation.The agricultural sector in Thailand is one area that tends to see heavygovernment intervention that,in our observation,tends to contribute tothe volatility is farm supply.Fortunately for MALEE the government isPage 3 of 17,Malee Sam
30、pran(MALEE)focused on cash crops and not on fruits but there is no guarantee thatthis will not change.Closest Peer Comparison,P/E(x),P/BV(x),ROE(x),Yield(%),Name,Country,Beta,2012,2013,2012,2013,2012,2013,2012 2013,OISHI GROUP PCLTIPCO FOODS PCLMALEE SAMPRAN PUBLIC CO LTDTHAI UNION FROZEN PROD PUBCH
31、AROEN POKPHAND FOODS PUBGFPT PUBLIC CO LTDUNI-PRESIDENT ENTERPRISES COFRASER AND NEAVE LTDDOLE FOOD CO INCSAN MIGUEL PURE FOODS COAvereage-Bloomberg consensus,THTHTHTHTHTHTASIUSPH,0.881.061.190.710.900.740.750.970.760.750.87,36.0NA10.313.817.0NA22.017.912.4NA18.5,20.2NA9.811.714.114.620.315.98.9NA14
32、.4,8.7NA5.82.22.61.8NA1.8NANA3.8,6.9NA4.42.02.41.6NA1.7NANA3.2,27.5NA45.217.919.90.015.910.3NANA19.5,38.3NA40.017.017.111.0NA11.5NANA22.5,1.4NA4.83.23.00.62.02.30.0NA2.2,2.5NA5.14.13.62.32.32.50.0NA2.8,Sources:Bloomberg and Institutional Research,MBKETFinancial AnalysisRevenue OutlookThe Malee brand
33、 has been in the market for nearly 20 years,and thereare only a handful of fruit juice producers in Thailand that have volumeand variety such as Thai Pineapple(TIPCO brand),UFC,etc.MALEEstands out as having the widest product variety.There are also fruitjuices offered by manufacturers of non alcohol
34、ic beverages but thesetend to be very narrow in terms of variety,for example Nestle hasorange-based pasteurized fruit juice line.Generally,the revenue of many fruit juice companies is volatile andearnings power weak.MALEEs own performance record speaks ofthese characteristics.However,the trend has b
35、een improving over timein part because of its own business restructuring and opening ofmarkets.,Chart 3:MALEE revenue profile(THB million)Sources:Company data,Bloomberg13 December 2012,Chart 4:Net Profit Profile(reported basis THB million)Sources:Company data,BloombergConsumption of manufactured fru
36、it juice is an urban phenomenon.TheThai consumers,in general,prefer fresh fruits and tend to purchase fruitjuices from the many fruit stands sold on the street sides and foodmarkets.The price tags at these outlets are significantly lower thanthose offered by the fruit juice manufacturers.More import
37、antly thefruits and juices can be purchased for single serving.Page 4 of 17,Malee Sampran(MALEE)The gradual rise in the preference towards manufactured fruit juiceshas been driven by lifestyle change prompted partly by advertising,widespread availability and affordability smaller sizing.Per fruitcon
38、centrate content,manufactured fruit juice is still more expensivethan those available from traditional outlets but this fact is not readilyevident to the consumers as before.MALEEs product line offers“exotic”flavors from fruits that are not easily obtainable in Thailand egmany types of berries.Based
39、 on its own survey AC Nielsen estimated that Thailands fruit juicemarket had been growing at 11%pa in the last four years.In 2011 thetotal value was THB10b that AC Nielsen calculated to be equivalent to284m liters based on an average price of THB35.85/liter.However,there is now a wide range of price
40、s to create affordability and opening amarket.The 2011 value can be grouped into five categories,and theprice 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 ofTHB67.86/liter.The main form
41、 is UHT(78%).The segments growthwas about 6%.2)Medium market(40%fruit juice)worth THB580m or 12m liters andaverage selling at THB48.33/liter.3)Economy market(25%fruit juice)worth THB3b or 117m liters andaverage selling at THB25.64/liter.MALEE is mainly positioned in thissegment.4)Super economy marke
42、t(lower-than-25%fruit juice)worthTHB1.8b 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 points,Chart 6:Market share of premium juice market,Economy,29.5%,Others,9.8%,UHT,29.5%,UNIF,Others,17%,TIPCO
43、,45%,15%,Supereconomy,17.7%Source:Company,Medium,5.7%,Pasteurized,7.9%,Source:Company,MALEE,23%,MALEE sales to accelerateMALEE does not provide capacity data before 2007.From 2007-2011,sales CAGR was-2.2%pa and this was partly due to the closing ofcapacities in the canned and bottled segment.Cumulat
44、ive 9M12 salesreached 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 confirmingbrand improvement following efforts to improve product quality.With thehigher sales profit
45、ability rose significantly as GM hit 27-29%in 2009-9M12 readily accommodating opex resulting in positive OPM.,13 December 2012,Page 5 of 17,Malee Sampran(MALEE)MALEEs management is confident that FY12 sales can exceedTHB6b,probably closer to THB6.3b-THB6.5b as 4Qs is the seasonalhigh for the busines
46、s especially during Christmas and New YearHolidays as fruit juices are a major feature in many Gift Baskets.MALEEs management further advises that most orders in FY13 havealready been secured and to some extent 2014 as well.This drives thedecision to add new capacity of canned,boxed and bottled beve
47、rage by130m liters/year bringing the total to 344m liters by 2014.The newcapacity will be in commercial run starting 2Q13 and will support growthfor FY13 through FY14.The additional capacity will also allow MALEE to launch new flavors(two is planned for January 2013)for aimed at the competitive segm
48、entof the market and expand exports.,Table 2:MALEEs historical capacitySources:Company,Institutional Research,MBKET13 December 2012,Table 3:MALEEs capacity planSources:Company and Institutional Research,MBKETVariety of products:MALEE offers more variety of products(seeAppendix 3)to capture a wide cu
49、stomer preference.Canned fruit isanother part of its product portfolio that is quite small in terms ofrevenue contribution but very important in building brand imageespecially among the food services sector.The total value of canned fruit market in 2011 was THB800m,flat YoY.Like the fruit juice segm
50、ent,canned fruit is also grouped according toaffordability.1)Premium market has two makers,MALEE and UFC.2)Medium market has 7-8 brands including Pigeon,First Choice,ThaiAD.This segment is highly price competitive.3)Economy market has several brandssuch as Rod Thang,ChaoSuan,Chao Doi and even lower
