Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Palm oil prices are up 177% since May 2020 and 66% since June of last year. Palm oil touched a record high of RM5,700/mt the 31 January.</li>
<li>Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated.  </li>
<li>Valuations appear largely constrained by environmental, social, and governance concerns, resulting in plantation stocks trading below their historical averages.</li>
</ul>


Palm oil prices are up 177% since May 2020 and 66% since June of last year. Palm oil touched a record high of RM5,700/mt the 31 January.
Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated.  
Valuations appear largely constrained by environmental, social, and governance concerns, resulting in plantation stocks trading below their historical averages.


CPO Plays Lag Palm Oil Prices As ESG Issues Weigh

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/kuala-lumpur-kepong-bhd" target="_blank" data-smartkarma-citation="entities:17039:1" rel="noopener">Kuala Lumpur Kepong (KLK MK)</a> made an offer to acquire <a href="https://www.smartkarma.com/entities/ijm-corp-bhd" target="_blank" data-smartkarma-citation="entities:16784:1" rel="noopener">Ijm Corp Bhd (IJM MK)</a>/IJMC’s entire stake in <a href="https://www.smartkarma.com/entities/ijm-plantations-bhd" target="_blank" data-smartkarma-citation="entities:12967:1" rel="noopener">Ijm Plantations (IJMP MK)</a>/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  <div class="content-highlight">A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  </div>

Kuala Lumpur Kepong (KLK MK) made an offer to acquire Ijm Corp Bhd (IJM MK)/IJMC’s entire stake in Ijm Plantations (IJMP MK)/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Sri Trang Agro-Industry / Equity Bottom-Up

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<ul>
<li>
Among the 200 most traded stocks on SGX, there are seven stocks whose businesses include plantations, with products used for food. These stocks include Wilmar, Golden Agri-Res, First Resources, Sri-Trang, Agro Olam, Bumitama Agri and Del Monte Pacific.  The seven stocks averaged 25% gains in the 2021 YTD. 
	 </li>
	<li>
With its FY20 results Wilmar noted its oil palm plantation and sugar milling segment will benefit from higher palm oil and sugar prices. Since the lows in early May 2020, Crude Palm Oil prices have rallied 82%, whilst raw sugar prices have similarly rallied 83% from end of April 2020 lows. Wilmar reported 19% YoY gain in FY20 Net Profit. 
	 </li>
	<li>On Thurs, Golden Agri-Res is scheduled to report, while Olam is scheduled to report on Friday. The two strongest performing stocks of the seven over the past 12 months, Sri-Trang Agro and Del Monte Pacific reported turnaround profits for the respective periods of FY20 (ended 31 Dec) and 1HFY21 (ended 31 Oct). </li>
</ul>
 

Commodity Price Rally Fueled by US, Europe Stimulus &amp; Asia Growth 
Crude Palm Oil prices continue to trade end of 2020 levels, and follow a firmer start in early to mid-January, a retracement followed by close to two weeks of consolidation. Since the lows in early May 2020, Crude Palm Oil prices have rallied 82%, whilst raw sugar prices have similarly rallied 83% from end of April 2020 lows.  Commodities across the board have been subject to structural repricing on a lower US Dollar fueled by significant expansionary monetary stimulus measures by the Fed Reserve and ECB. At the same time global demand has been boosted with China and India estimated to generate the strongest GDP growth rates in 2021, after China was the only major economy to report growth in 2020.  Wilmar Signals Further Growth, while Paying Record Dividend 
Last night, Wilmar International (“Wilmar”) noted in its business outlook for FY21 that its oil palm plantation and sugar milling segment will benefit from higher palm oil and sugar prices. Wilmar reported a 19% year-on-year improvement in FY20 (ended 31 Dec) net profit to US$1.5 billion with FY20 revenue at US$50.5 billion, beating consensus estimates for US$48.0 billion (click <a href="https://links.sgx.com/1.0.0/corporate-announcements/VBTPQ8DR6ZWTSU7H/3d2aef03512148b52f4424f8291d69da3530acbcae6d1c5792f8a45f138f9590">here</a> for more). On the demand side, Wilmar noted strong volume growth was observed with consumer product sales volume up 22% for the year, medium pack and bulk was up 7%, whilst feed and industrial products was up 11%. This was attributed to increasing brand awareness and consumers’ confidence in the quality food staples which the Group produces. Recent years have seen Wilmar establish a comprehensive sales and distribution network reaching traditional retail outlets, supermarkets, convenience stores and hyper-marts, reaching about five billion consumers worldwide. 
Wilmar added that it was continuing to build, especially in China, more integrated plants in new locations and develop new high growth and complementary businesses like central kitchen, soy sauce, vinegar and yeast. This firstly widens its range of food product offerings and secondly helps to reduce manufacturing, distribution and marketing costs. While signaling the intention to grow the business in FY21, Wilmar proposed a record dividend of S$0.13 per share (including interim of S$0.04 per share paid in August 2020) and a special dividend of S$0.065 per share for its FY20. Wilmar the #5 Most Active Stock on SGX in 2021 YTD 
For the past seven weeks, Wilmar has led all of the STI stocks in it performance, with an 18% year to date gain, bringing its 12 month total return to 39% (click <a href="http://edm.sgx.com/a/hBgM4exB86%24MfB94OyyAAAAAA8l/link1?t_params=aD1RKkQv0ffVCclzUOsF0X7zRP2CsSCRkr1AJpLlKZPRqQgN%24SsnifgMWfIM2MIh1eAa97W-W7y065pnFQE">here</a> for more). The stock has been recipient to S$89 million in net institutional inflow over the seven weeks, while being the Exchange’s fifth most traded stock overall. Wilmar, also noted that in FY20, the company had bought back about S$190 million of Wilmar shares, the second highest buyback consideration on the Singapore Exchange during the year. 
As tabled below, the seven stocks among the 200 most traded stocks that have a plantation focus have averaged 25% gains in the 2021 year-to-date, bringing their average 12 month total return to 58%. 
The three strongest stocks of the seven over the 12 months were Sri Trang Agro-Industry, Del Monte Pacific and Wilmar. On 16 February, Sri Trang Agro-Industry reported a turnaround profit, with net profit at 9.5 billion baht (click <a href="https://links.sgx.com/1.0.0/corporate-announcements/GZ87BZ2DDAXZA1OI/a220ea5f94111847ceaf847150a56bbe05d1ccbbe67069b1c5076dc59fd6c02d">here</a> for more). Back on 10 December, Del Monte Pacific reported the Group’s 1HFY21 (ended 31 Oct) EBITDA quadrupled to US$136.8 million from US$29.4 million while net profit was US$18.6 million reversing a net loss of US$75.6 million (click <a href="https://links.sgx.com/1.0.0/corporate-announcements/TUHCA8YIXK0RIO55/451a3546102fa216869874eca2eac1acf274fb5b7de0adb20cd767740714b3df">here</a> for more).

<table class="table table-striped"><tbody>
<tr>
<td>
			Stocks with a Plantation Focus
			</td>
			<td>
			SGX Code
			</td>
			<td>
			Mkt Cap S$M
			</td>
			<td>
			2021 YTD Average Daily T/O S$M
			</td>
			<td>
			Turnover Ranking 2021 YTD
			</td>
			<td>
			Net Insti Flow S$M
			</td>
			<td>
			YTD Price Change %
			</td>
			<td>
			2020 Total Return %
			</td>
			<td>
			12M Total Return %
			</td>
			<td>
			12M Volatility %
			</td>
		</tr>
<tr>
<td>
			Wilmar Intl
			</td>
			<td>
			F34
			</td>
			<td>
			34,810
			</td>
			<td>
			49.7
			</td>
			<td>
			5
			</td>
			<td>
			89
			</td>
			<td>
			18
			</td>
			<td>
			17
			</td>
			<td>
			39
			</td>
			<td>
			38
			</td>
		</tr>
<tr>
<td>
			Golden Agri-Res
			</td>
			<td>
			E5H
			</td>
			<td>
			2,399
			</td>
			<td>
			3.5
			</td>
			<td>
			62
			</td>
			<td>
			2
			</td>
			<td>
			19
			</td>
			<td>
			-30
			</td>
			<td>
			-9
			</td>
			<td>
			37
			</td>
		</tr>
<tr>
<td>
			First Resources
			</td>
			<td>
			EB5
			</td>
			<td>
			2,541
			</td>
			<td>
			3.5
			</td>
			<td>
			63
			</td>
			<td>
			0
			</td>
			<td>
			26
			</td>
			<td>
			-31
			</td>
			<td>
			-4
			</td>
			<td>
			43
			</td>
		</tr>
<tr>
<td>
			Sri Trang Agro
			</td>
			<td>
			NC2
			</td>
			<td>
			3,164
			</td>
			<td>
			2.6
			</td>
			<td>
			72
			</td>
			<td>
			33
			</td>
			<td>
			78
			</td>
			<td>
			179
			</td>
			<td>
			289
			</td>
			<td>
			76
			</td>
		</tr>
<tr>
<td>
			Olam Intl
			</td>
			<td>
			O32
			</td>
			<td>
			5,049
			</td>
			<td>
			1.9
			</td>
			<td>
			87
			</td>
			<td>
			1
			</td>
			<td>
			3
			</td>
			<td>
			-11
			</td>
			<td>
			-7
			</td>
			<td>
			32
			</td>
		</tr>
<tr>
<td>
			Bumitama Agri
			</td>
			<td>
			P8Z
			</td>
			<td>
			928
			</td>
			<td>
			0.6
			</td>
			<td>
			131
			</td>
			<td>
			-3
			</td>
			<td>
			5
			</td>
			<td>
			-35
			</td>
			<td>
			-19
			</td>
			<td>
			43
			</td>
		</tr>
<tr>
<td>
			Del Monte Pac
			</td>
			<td>
			D03
			</td>
			<td>
			476
			</td>
			<td>
			0.4
			</td>
			<td>
			159
			</td>
			<td>
			0
			</td>
			<td>
			25
			</td>
			<td>
			69
			</td>
			<td>
			116
			</td>
			<td>
			71
			</td>
		</tr>
<tr>
<td>
			Total
			</td>
			<td> </td>
			<td>
			49,366
			</td>
			<td>
			62
			</td>
			<td>
			 
			</td>
			<td>
			123
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			25
			</td>
			<td>
			23
			</td>
			<td>
			58
			</td>
			<td>
			48
			</td>
		</tr>
</tbody></table>
Source: SGX, Refinitiv, Bloomberg (Data as of 22 February 2021)

 

Wilmar announced its debut in the Dow Jones Sustainability APAC Indices in mid-November last year, scoring above the 90th percentile for indicators related to raw material sourcing, human rights, labour practices, strategies for emerging markets, customer relationship management as well as risk and crisis management. Other STI companies that are a part of the Dow Jones Sustainability APAC Indices include CapitaLand, City Developments, DBS Group Holdings and ComfortDelGro Corporation.
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Among the 200 most traded stocks on SGX, there are seven stocks whose businesses include plantations, with products used for food. These stocks include Wilmar, Golden Agri-Res, First Resources, Sri-Trang, Agro Olam, Bumitama Agri and Del Monte Pacific.  The seven stocks averaged 25% gains in the 2021 YTD.  
	 
	
With its FY20 results Wilmar noted its oil palm plantation and sugar milling segment will benefit from higher palm oil and sugar prices. Since the lows in early May 2020, Crude Palm Oil prices have rallied 82%, whilst raw sugar prices have similarly rallied 83% from end of April 2020 lows. Wilmar reported 19% YoY gain in FY20 Net Profit. 
	 
	On Thurs, Golden Agri-Res is scheduled to report, while Olam is scheduled to report on Friday. The two strongest performing stocks of the seven over the past 12 months, Sri-Trang Agro and Del Monte Pacific reported turnaround profits for the respective periods of FY20 (ended 31 Dec) and 1HFY21 (ended 31 Oct). 

 

Commodity Price Rally Fueled by US, Europe Stimulus &amp; Asia Growth   
Crude Palm Oil prices continue to trade end of 2020 levels, and follow a firmer start in early to mid-January, a retracement followed by close to two weeks of consolidation. Since the lows in early May 2020, Crude Palm Oil prices have rallied 82%, whilst raw sugar prices have similarly rallied 83% from end of April 2020 lows.  Commodities across the board have been subject to structural repricing on a lower US Dollar fueled by significant expansionary monetary stimulus measures by the Fed Reserve and ECB. At the same time global demand has been boosted with China and India estimated to generate the strongest GDP growth rates in 2021, after China was the only major economy to report growth in 2020.   Wilmar Signals Further Growth, while Paying Record Dividend  
Last night, Wilmar International (“Wilmar”) noted in its business outlook for FY21 that its oil palm plantation and sugar milling segment will benefit from higher palm oil and sugar prices. Wilmar reported a 19% year-on-year improvement in FY20 (ended 31 Dec) net profit to US$1.5 billion with FY20 revenue at US$50.5 billion, beating consensus estimates for US$48.0 billion (click here for more). On the demand side, Wilmar noted strong volume growth was observed with consumer product sales volume up 22% for the year, medium pack and bulk was up 7%, whilst feed and industrial products was up 11%. This was attributed to increasing brand awareness and consumers’ confidence in the quality food staples which the Group produces. Recent years have seen Wilmar establish a comprehensive sales and distribution network reaching traditional retail outlets, supermarkets, convenience stores and hyper-marts, reaching about five billion consumers worldwide.  
Wilmar added that it was continuing to build, especially in China, more integrated plants in new locations and develop new high growth and complementary businesses like central kitchen, soy sauce, vinegar and yeast. This firstly widens its range of food product offerings and secondly helps to reduce manufacturing, distribution and marketing costs. While signaling the intention to grow the business in FY21, Wilmar proposed a record dividend of S$0.13 per share (including interim of S$0.04 per share paid in August 2020) and a special dividend of S$0.065 per share for its FY20.   Wilmar the #5 Most Active Stock on SGX in 2021 YTD  
For the past seven weeks, Wilmar has led all of the STI stocks in it performance, with an 18% year to date gain, bringing its 12 month total return to 39% (click here for more). The stock has been recipient to S$89 million in net institutional inflow over the seven weeks, while being the Exchange’s fifth most traded stock overall. Wilmar, also noted that in FY20, the company had bought back about S$190 million of Wilmar shares, the second highest buyback consideration on the Singapore Exchange during the year.  
As tabled below, the seven stocks among the 200 most traded stocks that have a plantation focus have averaged 25% gains in the 2021 year-to-date, bringing their average 12 month total return to 58%.  
The three strongest stocks of the seven over the 12 months were Sri Trang Agro-Industry, Del Monte Pacific and Wilmar. On 16 February, Sri Trang Agro-Industry reported a turnaround profit, with net profit at 9.5 billion baht (click here for more). Back on 10 December, Del Monte Pacific reported the Group’s 1HFY21 (ended 31 Oct) EBITDA quadrupled to US$136.8 million from US$29.4 million while net profit was US$18.6 million reversing a net loss of US$75.6 million (click here for more).




			Stocks with a Plantation Focus
			
			
			SGX Code
			
			
			Mkt Cap S$M
			
			
			2021 YTD Average Daily T/O S$M
			
			
			Turnover Ranking 2021 YTD
			
			
			Net Insti Flow S$M
			
			
			YTD Price Change %
			
			
			2020 Total Return %
			
			
			12M Total Return %
			
			
			12M Volatility %
			
		


			Wilmar Intl
			
			
			F34
			
			
			34,810
			
			
			49.7
			
			
			5
			
			
			89
			
			
			18
			
			
			17
			
			
			39
			
			
			38
			
		


			Golden Agri-Res
			
			
			E5H
			
			
			2,399
			
			
			3.5
			
			
			62
			
			
			2
			
			
			19
			
			
			-30
			
			
			-9
			
			
			37
			
		


			First Resources
			
			
			EB5
			
			
			2,541
			
			
			3.5
			
			
			63
			
			
			0
			
			
			26
			
			
			-31
			
			
			-4
			
			
			43
			
		


			Sri Trang Agro
			
			
			NC2
			
			
			3,164
			
			
			2.6
			
			
			72
			
			
			33
			
			
			78
			
			
			179
			
			
			289
			
			
			76
			
		


			Olam Intl
			
			
			O32
			
			
			5,049
			
			
			1.9
			
			
			87
			
			
			1
			
			
			3
			
			
			-11
			
			
			-7
			
			
			32
			
		


			Bumitama Agri
			
			
			P8Z
			
			
			928
			
			
			0.6
			
			
			131
			
			
			-3
			
			
			5
			
			
			-35
			
			
			-19
			
			
			43
			
		


			Del Monte Pac
			
			
			D03
			
			
			476
			
			
			0.4
			
			
			159
			
			
			0
			
			
			25
			
			
			69
			
			
			116
			
			
			71
			
		


			Total
			
			 
			
			49,366
			
			
			62
			
			
			 
			
			
			123
			
			
			 
			
			
			 
			
			
			 
			
			
			 
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			 
			
			
			 
			
			
			25
			
			
			23
			
			
			58
			
			
			48
			
		

Source: SGX, Refinitiv, Bloomberg (Data as of 22 February 2021)

 

Wilmar announced its debut in the Dow Jones Sustainability APAC Indices in mid-November last year, scoring above the 90th percentile for indicators related to raw material sourcing, human rights, labour practices, strategies for emerging markets, customer relationship management as well as risk and crisis management. Other STI companies that are a part of the Dow Jones Sustainability APAC Indices include CapitaLand, City Developments, DBS Group Holdings and ComfortDelGro Corporation.



Seven Stocks with a Plantation Focus Average 25% YTD Gains

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-11/DonAgro-CEO.jpg' alt='DonAgro-CEO' />
 </figure>
 <div class='content-caption'>DonAgro-CEO</div>
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With Russia emerging as one of the world’s largest bread baskets, Evgeny Tugolukov dreams of realising the country’s agribusiness potential in Southeast Asia’s developing markets.

“It’s remarkable for us to be able to participate in the renaissance of Russian agriculture,” said Tugolukov, the Executive Chairman of SGX-listed agrifood producer Don Agro International.

“Our listing in Singapore allows us to gain closer proximity to key high-growth markets in this region, and contributes to our country’s collective effort in reducing shortages in global food supply.”

From a net wheat importer at the turn of century, Russia has gradually transformed into a net wheat exporter since 2015, helped by the rouble’s depreciation and the government’s aim to prioritise self-sufficiency in agricultural output.

Southeast Asia, in comparison, is the world’s largest importer of wheat, as rising per capita incomes and robust population growth spur a shift in consumer tastes towards more wheat-based diets.

“With Southeast Asia’s tropical climate limiting wheat output, domestic production is almost non-existent, meeting less than 1% of demand,” said Tugolukov, who has spent more than two decades of his career holding top management positions in various financial and industrial groups.

“Imports are needed to meet increasing demand for both food and feed uses in the region.”

Don Agro, which listed on SGX Catalist in February 2020, is the first Russian company to trade on Singapore Exchange. It is one of the largest agricultural companies in Russia, principally engaged in the cultivation of crops such as winter wheat, sunflower and corn, as well as the production of raw milk.

The Group’s operations are located in the Rostov region, one of the country’s most fertile regions, situated close to the Azov Sea and Don River, which house major international ports.

Being one of the top farms in terms of milk output in Rostov, Don Agro owns more than 4,000 heads of dairy cattle, including approximately 2,000 milking cows. It has a controlled land bank of more than 50,000 hectares, of which more than 40,000 hectares are arable land, and approximately 14,000 hectares are owned by the Group.

Contrarian Choices

Tugolukov, a graduate of Russia’s Ural Federal University with a Diploma in Economics and Management, bills himself as “a long-term investor”.

In 2008, he founded Singapore-incorporated Strongbow Investments Pte Ltd, which invested in sectors ranging from technology and entertainment, to healthcare, real estate and agriculture, with a geographic focus on Southeast Asia, Russia and Eastern Europe.

In 2012, the former Member of Parliament of the State of Duma of the Russian Federation and former Chairman of the State Duma Committee on Natural Resources acquired Don Agro LLC, a Russian agricultural producer based in the Rostov region.

Don Agro International was then established in Singapore in 2018 by Tugolukov and Marat Kildeyev, Don Agro’s current Chief Executive Officer, as a holding company for the Group’s Russian agribusiness.

“When we took over Don Agro, we immediately noticed the potential for wheat and its exports. We strategically focused on this crop and benefitted from its growth, along with the rest of the industry in Russia,” Tugolukov recalled.

Back then, agriculture wasn’t profitable or as popular with investors. But Tugolukov took a contrarian stance, snapping up parcels to build the Group’s land bank. Today, this strategy has paid off – plot prices in Russia have tripled in recent years following huge capital flows into the industry, and as competition for arable land escalated.

Eight years ago, Don Agro’s dairy business was bleeding red ink and on the verge of shuttering. “Based on our visits to several farms in Europe and the US, we adopted industry best practices and identified the key issues that were preventing us from achieving good dairy yields,” Tugolukov said.

“Following changes in technology and processes, but without having to make significant investments, we managed to increase our yields by 2.5 times and turn around our operations.”

Another milestone in the Group’s history was its choice of farming technique.

“Seven years ago, we bet on a modern, eco-friendly, no-till method of growing our crops. This strategy allowed us to minimise the impact of negative weather conditions, as well as maximise revenue and income per hectare,” he noted. “The technique has now been applied to more than 6,000 hectares of our land bank.”

Agri Powerhouse

Today, Russia has morphed into an agricultural powerhouse, with bright prospects. In 2019, the country was the world’s largest exporter of wheat, the second-largest producer of sunflower seeds, and the fourth-largest producer of milk. The climate in Southern Russia, and Rostov in particular, has become milder, helping to increase crop yields.

Russia’s Agriculture Ministry has forecast the country will harvest an average 140 million tonnes of grain per year until 2035, up 24% from 2018. Some US$4 billion will also be invested to boost the logistics infrastructure of its grain and feed industries. The anticipated surge in grain production is projected to drive the overall value of Russian agriculture exports to US$45 billion in 2025, double that of 2018 levels.

“We expect Russia to further strengthen its position as the world’s bread basket. The state is committed to supporting the agricultural industry, and more land is slated to be converted to arable fields,” Tugolukov pointed out. “We believe Russia will continue to see a boom in agricultural output.”

And as the industry continues to flourish, land prices will appreciate further, benefitting many of the country’s agribusinesses, he added.

“Despite the current price appreciation, Russian land is still considered undervalued in comparison to many parts of Eastern Europe. This suggests there may be room for more price hikes over the next three to five years.”

Tugolukov remains committed to building Don Agro’s value, systematically over time. The Group will use acquisitions to boost its land bank, while increasing the share of land it owns, as it currently rents a significant number of sites it operates on.

Open to mergers and acquisitions, joint ventures and strategic alliances, the Group is seeking suitable opportunities to expand into high-growth segments in Russia. These include other districts within the Rostov region, as well as the Krasnodar region.

Vertical Integration 

In addition, vertical integration is on the cards, through the building of silos and/or venturing into Southeast Asian markets as a trader.

“Currently, the export-oriented crop processing segment looks very complementary to our operations. This segment will add value and minimise risks to our business,” Tugolukov noted. “In particular, we are exploring the production of sunflower oil, which looks to be a perfect fit.”

“Recent food security challenges – such as maintaining stable crop supplies to countries in Southeast Asia – have highlighted many growth opportunities for Don Agro, particularly in this part of the world,” he added.

Growth momentum, however, has been limited by Don Agro’s storage capacity, which previously stood at about 65,000 tonnes. The Group recently commissioned a total of 30,000 tonnes of new storage capacity across five of its facilities, and will continue to pursue other storage expansion opportunities. The increased capacity will also facilitate its plan to engage in the trading of crops and other commodities, he noted.

Other challenges the Group faces include Russia's shifting demographics, which has sparked labour shortages. “Rural-urban migration trends have resulted in a more competitive labour market in the areas where we operate, and it now costs more to attract and retain talent,” he said.

Changing weather conditions also keep him awake at night. “One of the most important indicators of success in agriculture is yield per hectare, which is significantly dependent on weather conditions,” he pointed out. “When we get unfavourable frosts in April or a lack of precipitation in May, this raises major concerns.”

Tugolukov’s vision is to grow Don Agro into a multi-billion dollar company in terms of revenue and market capitalisation. “Southeast Asia offers tremendous opportunities to realise Russia’s agribusiness ambitions, and I want to make this happen as quickly as possible,” he added.

According to the United States Department of Agriculture, Southeast Asia’s wheat imports in 2013/14 have increased by more than 60% to 26.7 million tonnes in 2018/19, and are forecast to rise to 27.5 million tonnes for 2019/20. Indonesia and the Philippines are the world’s second- and third-leading wheat importers, accounting for about two-thirds of the region’s wheat imports.

Work aside, the 50-year-old father of a boy, two girls, and one more on the way places a huge premium on family life. He considers himself a traditionalist when it comes to core values.

“Integrity and honesty are at the top of my list – I try to lead by example and require my employees to do the same, to keep their word in all things,” he said.

Staying positive is another mantra. “Maintaining a positive mindset helps me to make correct and optimal decisions when running the business,” Tugolukov added.

“I encourage my team to adopt this positivity regardless of circumstances, and to make the best of each and every situation that arises.”

 

Don Agro International Ltd

Don Agro is one of the largest agricultural companies in the Rostov region in Russia, principally engaged in the cultivation of agricultural crops and production of raw milk. The Group has a controlled land bank of more than 50,000 hectares, of which over 40,000 hectares are arable land. The Group also owns approximately 14,000 hectares of its controlled land bank. Don Agro’s operations are located in the Rostov region, one of the most fertile regions of Russia, situated close to the Azov Sea and Don River, which house major international ports. In its the crop production segment, the Group is primarily engaged in the farming of commercial crops such as winter wheat, sunflower and corn. It is also one of the top farms in terms of milk production in the Rostov region, and owns more than 4,000 heads of dairy cattle, including approximately 2,000 milking cows.

The company website is: <a href="http://donagroint.com/">donagroint.com</a> 
Click <a href="https://www.sgx.com/securities/equities/GRQ">here </a>for the company's StockFacts page. 
For the half year ended 30 June 2020 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/RK2HN4L93ESTOVVA/628439_DonAgroHY2020ResultsPressReleaseFINAL.pdf">here</a>.

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
</body></html>


      
    
    DonAgro-CEO


With Russia emerging as one of the world’s largest bread baskets, Evgeny Tugolukov dreams of realising the country’s agribusiness potential in Southeast Asia’s developing markets.

“It’s remarkable for us to be able to participate in the renaissance of Russian agriculture,” said Tugolukov, the Executive Chairman of SGX-listed agrifood producer Don Agro International.

“Our listing in Singapore allows us to gain closer proximity to key high-growth markets in this region, and contributes to our country’s collective effort in reducing shortages in global food supply.”

From a net wheat importer at the turn of century, Russia has gradually transformed into a net wheat exporter since 2015, helped by the rouble’s depreciation and the government’s aim to prioritise self-sufficiency in agricultural output.

Southeast Asia, in comparison, is the world’s largest importer of wheat, as rising per capita incomes and robust population growth spur a shift in consumer tastes towards more wheat-based diets.

“With Southeast Asia’s tropical climate limiting wheat output, domestic production is almost non-existent, meeting less than 1% of demand,” said Tugolukov, who has spent more than two decades of his career holding top management positions in various financial and industrial groups.

“Imports are needed to meet increasing demand for both food and feed uses in the region.”

Don Agro, which listed on SGX Catalist in February 2020, is the first Russian company to trade on Singapore Exchange. It is one of the largest agricultural companies in Russia, principally engaged in the cultivation of crops such as winter wheat, sunflower and corn, as well as the production of raw milk.

The Group’s operations are located in the Rostov region, one of the country’s most fertile regions, situated close to the Azov Sea and Don River, which house major international ports.

Being one of the top farms in terms of milk output in Rostov, Don Agro owns more than 4,000 heads of dairy cattle, including approximately 2,000 milking cows. It has a controlled land bank of more than 50,000 hectares, of which more than 40,000 hectares are arable land, and approximately 14,000 hectares are owned by the Group.

Contrarian Choices

Tugolukov, a graduate of Russia’s Ural Federal University with a Diploma in Economics and Management, bills himself as “a long-term investor”.

In 2008, he founded Singapore-incorporated Strongbow Investments Pte Ltd, which invested in sectors ranging from technology and entertainment, to healthcare, real estate and agriculture, with a geographic focus on Southeast Asia, Russia and Eastern Europe.

In 2012, the former Member of Parliament of the State of Duma of the Russian Federation and former Chairman of the State Duma Committee on Natural Resources acquired Don Agro LLC, a Russian agricultural producer based in the Rostov region.

Don Agro International was then established in Singapore in 2018 by Tugolukov and Marat Kildeyev, Don Agro’s current Chief Executive Officer, as a holding company for the Group’s Russian agribusiness.

“When we took over Don Agro, we immediately noticed the potential for wheat and its exports. We strategically focused on this crop and benefitted from its growth, along with the rest of the industry in Russia,” Tugolukov recalled.

Back then, agriculture wasn’t profitable or as popular with investors. But Tugolukov took a contrarian stance, snapping up parcels to build the Group’s land bank. Today, this strategy has paid off – plot prices in Russia have tripled in recent years following huge capital flows into the industry, and as competition for arable land escalated.

Eight years ago, Don Agro’s dairy business was bleeding red ink and on the verge of shuttering. “Based on our visits to several farms in Europe and the US, we adopted industry best practices and identified the key issues that were preventing us from achieving good dairy yields,” Tugolukov said.

“Following changes in technology and processes, but without having to make significant investments, we managed to increase our yields by 2.5 times and turn around our operations.”

Another milestone in the Group’s history was its choice of farming technique.

“Seven years ago, we bet on a modern, eco-friendly, no-till method of growing our crops. This strategy allowed us to minimise the impact of negative weather conditions, as well as maximise revenue and income per hectare,” he noted. “The technique has now been applied to more than 6,000 hectares of our land bank.”

Agri Powerhouse

Today, Russia has morphed into an agricultural powerhouse, with bright prospects. In 2019, the country was the world’s largest exporter of wheat, the second-largest producer of sunflower seeds, and the fourth-largest producer of milk. The climate in Southern Russia, and Rostov in particular, has become milder, helping to increase crop yields.

Russia’s Agriculture Ministry has forecast the country will harvest an average 140 million tonnes of grain per year until 2035, up 24% from 2018. Some US$4 billion will also be invested to boost the logistics infrastructure of its grain and feed industries. The anticipated surge in grain production is projected to drive the overall value of Russian agriculture exports to US$45 billion in 2025, double that of 2018 levels.

“We expect Russia to further strengthen its position as the world’s bread basket. The state is committed to supporting the agricultural industry, and more land is slated to be converted to arable fields,” Tugolukov pointed out. “We believe Russia will continue to see a boom in agricultural output.”

And as the industry continues to flourish, land prices will appreciate further, benefitting many of the country’s agribusinesses, he added.

“Despite the current price appreciation, Russian land is still considered undervalued in comparison to many parts of Eastern Europe. This suggests there may be room for more price hikes over the next three to five years.”

Tugolukov remains committed to building Don Agro’s value, systematically over time. The Group will use acquisitions to boost its land bank, while increasing the share of land it owns, as it currently rents a significant number of sites it operates on.

Open to mergers and acquisitions, joint ventures and strategic alliances, the Group is seeking suitable opportunities to expand into high-growth segments in Russia. These include other districts within the Rostov region, as well as the Krasnodar region.

Vertical Integration 

In addition, vertical integration is on the cards, through the building of silos and/or venturing into Southeast Asian markets as a trader.

“Currently, the export-oriented crop processing segment looks very complementary to our operations. This segment will add value and minimise risks to our business,” Tugolukov noted. “In particular, we are exploring the production of sunflower oil, which looks to be a perfect fit.”

“Recent food security challenges – such as maintaining stable crop supplies to countries in Southeast Asia – have highlighted many growth opportunities for Don Agro, particularly in this part of the world,” he added.

Growth momentum, however, has been limited by Don Agro’s storage capacity, which previously stood at about 65,000 tonnes. The Group recently commissioned a total of 30,000 tonnes of new storage capacity across five of its facilities, and will continue to pursue other storage expansion opportunities. The increased capacity will also facilitate its plan to engage in the trading of crops and other commodities, he noted.

Other challenges the Group faces include Russia's shifting demographics, which has sparked labour shortages. “Rural-urban migration trends have resulted in a more competitive labour market in the areas where we operate, and it now costs more to attract and retain talent,” he said.

Changing weather conditions also keep him awake at night. “One of the most important indicators of success in agriculture is yield per hectare, which is significantly dependent on weather conditions,” he pointed out. “When we get unfavourable frosts in April or a lack of precipitation in May, this raises major concerns.”

Tugolukov’s vision is to grow Don Agro into a multi-billion dollar company in terms of revenue and market capitalisation. “Southeast Asia offers tremendous opportunities to realise Russia’s agribusiness ambitions, and I want to make this happen as quickly as possible,” he added.

According to the United States Department of Agriculture, Southeast Asia’s wheat imports in 2013/14 have increased by more than 60% to 26.7 million tonnes in 2018/19, and are forecast to rise to 27.5 million tonnes for 2019/20. Indonesia and the Philippines are the world’s second- and third-leading wheat importers, accounting for about two-thirds of the region’s wheat imports.

Work aside, the 50-year-old father of a boy, two girls, and one more on the way places a huge premium on family life. He considers himself a traditionalist when it comes to core values.

“Integrity and honesty are at the top of my list – I try to lead by example and require my employees to do the same, to keep their word in all things,” he said.

Staying positive is another mantra. “Maintaining a positive mindset helps me to make correct and optimal decisions when running the business,” Tugolukov added.

“I encourage my team to adopt this positivity regardless of circumstances, and to make the best of each and every situation that arises.”

 

Don Agro International Ltd

Don Agro is one of the largest agricultural companies in the Rostov region in Russia, principally engaged in the cultivation of agricultural crops and production of raw milk. The Group has a controlled land bank of more than 50,000 hectares, of which over 40,000 hectares are arable land. The Group also owns approximately 14,000 hectares of its controlled land bank. Don Agro’s operations are located in the Rostov region, one of the most fertile regions of Russia, situated close to the Azov Sea and Don River, which house major international ports. In its the crop production segment, the Group is primarily engaged in the farming of commercial crops such as winter wheat, sunflower and corn. It is also one of the top farms in terms of milk production in the Rostov region, and owns more than 4,000 heads of dairy cattle, including approximately 2,000 milking cows.

The company website is: donagroint.com  
Click here for the company's StockFacts page.  
For the half year ended 30 June 2020 financial results, click here.

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Don Agro Cultivates Asian Agribusiness Ambitions 

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<ul>
<li>
Singapore’s largest non-cyclical consumer stocks by market cap focused on food production have averaged 5% defensive total returns since regional market highs on 9 June. This marginally outpaced global peers that generated a median 2% over the same period.   
	 </li>
	<li>
The strongest performers of this group of Singapore stocks over the period were Mewah International, Del Monte Pacific, ABR Holdings, QAF and Wilmar, with 27% average gains bringing their average 2020 YTD total return to 9%, compared to an 18% YTD decline of for the FTSE ASEAN All-Share Index. 
	 </li>
	<li>
Wilmar is the largest stock of the Singapore group, and plans to list its YKA China business on ChiNext this month, subject to market conditions. This is intended to unlock value for shareholders with food production stocks in China trading at 42x P/E, compared to global ex-China peers that trade at 16x P/E.   
	 </li>
	<li>Wilmar’s China business accounted for ~60% of its FY19 profit. With an indicative 31x P/E valuation for the YKA business, and overall Group P/E of 15x, current pricing is potentially valuing Wilmar’s Ex-China, but globally integrated business with multiple FY19 expansion highlights at a significant markdown.   </li>
</ul>
 

Singapore Food Producers Average 5% Gain Since 9 June 
Like most manufacturers, food processing and production companies seek to maximise profits, while continuing to improve throughput, control costs and maximise cashflow. Food production stocks are generally categorised as more defensive or non-cyclical, consumer goods or staples, due to the necessary demand for food. However, within the sector, businesses can also be subject to a number of cyclical, seasonal and competitive forces. Since regional market highs were formed on 9 June, Food Producer stocks listed in Singapore with a market value of more than S$100 million have averaged a 5.1% total return, which compares to the Straits Times Index decline of 9.1% and  FTSE ASEAN All-Share Index decline of 8.3%. As illustrated below, the 5.1% return marginally outpaced global stocks of the same genre, with seven of the 13 Singapore stocks generating gains over the period.
</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-10/Capture_0.PNG' alt='Total Returns' />
 </figure>
 <div class='content-caption'>Total Returns</div>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">
<html><body>Wilmar Scheduled Plans to List YKA on the Shenzhen Stock Exchange ChiNext Board in Oct 
Wilmar International (“Wilmar”) is Singapore’s  largest stock by market value that represents the non-cyclical consumer stocks. The stock has generated a 10.2% total return in the 2020 year to 2 October, with S$69.4 million of net institutional inflow, and has been Singapore Exchange’s eight most traded stock for the 40 weeks. Since the STI formed its June 9 high, Wilmar generated a total return of 13.7%. Wilmar’s proposed listing of Yihai Kerry Arawana Holdings Co., Ltd (“YKA”) on the Shenzhen Stock Exchange ChiNext Board is planned to take place by mid-October 2020, however there is no certainty that the proposed listing will proceed as it is still subject to prevailing market conditions. YKA will be 90% owned by Wilmar with a 10% Free Float on the SZSE ChiNext board. The most recent update on the scheduled listing can be found <a href="https://links.sgx.com/1.0.0/corporate-announcements/TZAEJVOICXSR9KO7/572d1d776e36f33ff5dc4c5ae2d21f42b3ab9a54f256603c67f253f6ff73de81">here</a>.  
Wilmar has long maintained the YKA listing is intended unlock value for shareholders as China with food production stocks in China trading near 40x their earnings. As illustrated below, the median P/E ratio of China food production stocks is 42.3x compared to 16.0x for global food production stocks ex-China. Over the past ten years, there has been some gradual convergence of the P/E valuations, however China remains a consumer powerhouse. In terms of scale, comparative populations indicate China is home to 250 times as many consumers as Singapore.</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-10/Capture_1.PNG' alt='Median' />
 </figure>
 <div class='content-caption'>Median</div>
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In the recent AGM, Wilmar’s management noted that Wilmar’s China business: (I) accounted for about 60% of Wilmar’s 2019 profit and (II), that the profit margins from the Food Product business were more stable than margins from the Feed Ingredients business. With an indicative 31x P/E valuation for the YKA business, and overall Group P/E of 15x, current pricing is potentially valuing Wilmar’s ex-China, but globally integrated business at a significant markdown. While the population of China is 1.4 billion, Wilmar maintain that its products now reach 5 billion consumers worldwide. 
Wilmar is branded as Asia’s leading agribusiness group, with its integrated agribusiness model encompassing the entire value chain of the agricultural commodity business, from cultivation, processing, merchandising to manufacturing of a wide range of branded agricultural products.  Aside from its expansion in its China operations, Wilmar’s FY19 Annual Report highlighted the following global business expansions: 
 

<ul>
<li>A presence in 16 countries across Africa, and is the largest edible oils refiner and a leading oil palm plantation owner on the continent;</li>
	<li>A 50:50 joint venture with Adani Wilmar Limited (“AWL”)  in India, which is the largest refiner and producer of consumer pack edible oils in the country. AWL has expanded into rice and rice milling, as well as enhanced its consumer product offering;</li>
	<li>In Indonesia, Wilmar is continuing to expand its flour and rice milling, oleochemicals,  biodiesel,  refining and packaging  capacities in existing and new sites.</li>
	<li>In Malaysia, 2019 saw Wilmar complete</li>
	<li>the purchase of two palm oil refineries in Kuantan and Kuching and start construction of a new refinery and a specialty fats plant in Port Klang.</li>
	<li>In Vietnam, Wilmar maintains its leadership position in its core businesses including edible oils and soybean crushing while its new businesses such as rice, grains value-added processing and sauces are growing in domestic sales volume. Wilmar is also expanding its flour and rice milling capacity in Vietnam.</li>
	<li>In Myanmar, the edible oils packing plant and flour  mill commenced operation in Thilawa  in October 2019. Concurrently Wilmar has also begun the construction of a rice milling complex which, when completed, will be the largest in Myanmar, and are in the  process of acquiring another rice mill.</li>
	<li>Completed the acquisition of the balance 50% interest in Goodman Fielder from First Pacific Company Limited in December 2019, looking to expand operations in Australia, New Zealand, Papua New Guinea and the Pacific Islands.
</li>
</ul>
 

Singapore lists 13 consumer non-cyclical stocks with a market capitalisation of more than S$100 million. The strongest performers of this group of 13 Singapore stocks since 9 June were Mewah International, Del Monte Pacific, ABR Holdings, QAF and Wilmar International. The five stocks averaged 27% total returns bringing their average 2020 year to 2 October total return to 9%.

<table class="table table-striped"><tbody>
<tr>
<td>
			Non-Cyclical Consumer Stocks with Food Production/Processing Focus
			</td>
			<td>
			Code
			</td>
			<td>
			Mkt Cap S$M
			</td>
			<td>
			Total Return % Since 9 June 
			</td>
			<td>
			YTD Total Return %
			</td>
			<td>
			180 Day 

			Volatility

			%
			</td>
			<td>
			P/E

			(x)
			</td>
		</tr>
<tr>
<td>
			Wilmar International
			</td>
			<td>
			F34
			</td>
			<td>
			27,919
			</td>
			<td>
			14
			</td>
			<td>
			10
			</td>
			<td>
			43
			</td>
			<td>
			15
			</td>
		</tr>
<tr>
<td>
			Olam International
			</td>
			<td>
			O32
			</td>
			<td>
			3,995
			</td>
			<td>
			-14
			</td>
			<td>
			-27
			</td>
			<td>
			32
			</td>
			<td>
			7
			</td>
		</tr>
<tr>
<td>
			First Resources
			</td>
			<td>
			EB5
			</td>
			<td>
			1,943
			</td>
			<td>
			-15
			</td>
			<td>
			-34
			</td>
			<td>
			41
			</td>
			<td>
			14
			</td>
		</tr>
<tr>
<td>
			Golden Agri-Resources
			</td>
			<td>
			E5H
			</td>
			<td>
			1,802
			</td>
			<td>
			-10
			</td>
			<td>
			-37
			</td>
			<td>
			36
			</td>
			<td>
			16
			</td>
		</tr>
<tr>
<td>
			Fraser And Neave
			</td>
			<td>
			F99
			</td>
			<td>
			1,769
			</td>
			<td>
			-19
			</td>
			<td>
			-27
			</td>
			<td>
			31
			</td>
			<td>
			12
			</td>
		</tr>
<tr>
<td>
			Japfa
			</td>
			<td>
			UD2
			</td>
			<td>
			1,260
			</td>
			<td>
			-8
			</td>
			<td>
			9
			</td>
			<td>
			55
			</td>
			<td>
			5
			</td>
		</tr>
<tr>
<td>
			Bumitama Agri
			</td>
			<td>
			P8Z
			</td>
			<td>
			841
			</td>
			<td>
			4
			</td>
			<td>
			-38
			</td>
			<td>
			47
			</td>
			<td>
			10
			</td>
		</tr>
<tr>
<td>
			QAF
			</td>
			<td>
			Q01
			</td>
			<td>
			529
			</td>
			<td>
			18
			</td>
			<td>
			21
			</td>
			<td>
			36
			</td>
			<td>
			10
			</td>
		</tr>
<tr>
<td>
			Delfi
			</td>
			<td>
			P34
			</td>
			<td>
			413
			</td>
			<td>
			-17
			</td>
			<td>
			-29
			</td>
			<td>
			41
			</td>
			<td>
			13
			</td>
		</tr>
<tr>
<td>
			Mewah International Inc
			</td>
			<td>
			MV4
			</td>
			<td>
			398
			</td>
			<td>
			40
			</td>
			<td>
			11
			</td>
			<td>
			71
			</td>
			<td>
			8
			</td>
		</tr>
<tr>
<td>
			Del Monte Pacific
			</td>
			<td>
			D03
			</td>
			<td>
			241
			</td>
			<td>
			39
			</td>
			<td>
			7
			</td>
			<td>
			69
			</td>
			<td>
			N/A
			</td>
		</tr>
<tr>
<td>
			JB Foods
			</td>
			<td>
			BEW
			</td>
			<td>
			174
			</td>
			<td>
			9
			</td>
			<td>
			-5
			</td>
			<td>
			62
			</td>
			<td>
			6
			</td>
		</tr>
<tr>
<td>
			ABR Holdings
			</td>
			<td>
			533
			</td>
			<td>
			141
			</td>
			<td>
			23
			</td>
			<td>
			-3
			</td>
			<td>
			105
			</td>
			<td>
			57
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			5
			</td>
			<td>
			-11
			</td>
			<td>
			52
			</td>
			<td>
			14
			</td>
		</tr>
<tr>
<td>
			Median
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			4
			</td>
			<td>
			-5
			</td>
			<td>
			43
			</td>
			<td>
			11
			</td>
		</tr>
</tbody></table>
 Source: SGX, Bloomberg, Refinitiv (Data as of 2 October 2020)
</body></html>





Singapore’s largest non-cyclical consumer stocks by market cap focused on food production have averaged 5% defensive total returns since regional market highs on 9 June. This marginally outpaced global peers that generated a median 2% over the same period.    
	 
	
The strongest performers of this group of Singapore stocks over the period were Mewah International, Del Monte Pacific, ABR Holdings, QAF and Wilmar, with 27% average gains bringing their average 2020 YTD total return to 9%, compared to an 18% YTD decline of for the FTSE ASEAN All-Share Index. 
	 
	
Wilmar is the largest stock of the Singapore group, and plans to list its YKA China business on ChiNext this month, subject to market conditions. This is intended to unlock value for shareholders with food production stocks in China trading at 42x P/E, compared to global ex-China peers that trade at 16x P/E.    
	 
	Wilmar’s China business accounted for ~60% of its FY19 profit. With an indicative 31x P/E valuation for the YKA business, and overall Group P/E of 15x, current pricing is potentially valuing Wilmar’s Ex-China, but globally integrated business with multiple FY19 expansion highlights at a significant markdown.   

 

Singapore Food Producers Average 5% Gain Since 9 June  
Like most manufacturers, food processing and production companies seek to maximise profits, while continuing to improve throughput, control costs and maximise cashflow. Food production stocks are generally categorised as more defensive or non-cyclical, consumer goods or staples, due to the necessary demand for food. However, within the sector, businesses can also be subject to a number of cyclical, seasonal and competitive forces.  Since regional market highs were formed on 9 June, Food Producer stocks listed in Singapore with a market value of more than S$100 million have averaged a 5.1% total return, which compares to the Straits Times Index decline of 9.1% and  FTSE ASEAN All-Share Index decline of 8.3%. As illustrated below, the 5.1% return marginally outpaced global stocks of the same genre, with seven of the 13 Singapore stocks generating gains over the period.



      
    
    Total Returns

Wilmar Scheduled Plans to List YKA on the Shenzhen Stock Exchange ChiNext Board in Oct  
Wilmar International (“Wilmar”) is Singapore’s  largest stock by market value that represents the non-cyclical consumer stocks. The stock has generated a 10.2% total return in the 2020 year to 2 October, with S$69.4 million of net institutional inflow, and has been Singapore Exchange’s eight most traded stock for the 40 weeks. Since the STI formed its June 9 high, Wilmar generated a total return of 13.7%.  Wilmar’s proposed listing of Yihai Kerry Arawana Holdings Co., Ltd (“YKA”) on the Shenzhen Stock Exchange ChiNext Board is planned to take place by mid-October 2020, however there is no certainty that the proposed listing will proceed as it is still subject to prevailing market conditions. YKA will be 90% owned by Wilmar with a 10% Free Float on the SZSE ChiNext board. The most recent update on the scheduled listing can be found here.   
Wilmar has long maintained the YKA listing is intended unlock value for shareholders as China with food production stocks in China trading near 40x their earnings. As illustrated below, the median P/E ratio of China food production stocks is 42.3x compared to 16.0x for global food production stocks ex-China. Over the past ten years, there has been some gradual convergence of the P/E valuations, however China remains a consumer powerhouse. In terms of scale, comparative populations indicate China is home to 250 times as many consumers as Singapore.


      
    
    Median


In the recent AGM, Wilmar’s management noted that Wilmar’s China business: (I) accounted for about 60% of Wilmar’s 2019 profit and (II), that the profit margins from the Food Product business were more stable than margins from the Feed Ingredients business.  With an indicative 31x P/E valuation for the YKA business, and overall Group P/E of 15x, current pricing is potentially valuing Wilmar’s ex-China, but globally integrated business at a significant markdown. While the population of China is 1.4 billion, Wilmar maintain that its products now reach 5 billion consumers worldwide.  
Wilmar is branded as Asia’s leading agribusiness group, with its integrated agribusiness model encompassing the entire value chain of the agricultural commodity business, from cultivation, processing, merchandising to manufacturing of a wide range of branded agricultural products.  Aside from its expansion in its China operations, Wilmar’s FY19 Annual Report highlighted the following global business expansions: 
 


A presence in 16 countries across Africa, and is the largest edible oils refiner and a leading oil palm plantation owner on the continent;
	A 50:50 joint venture with Adani Wilmar Limited (“AWL”)  in India, which is the largest refiner and producer of consumer pack edible oils in the country. AWL has expanded into rice and rice milling, as well as enhanced its consumer product offering;
	In Indonesia, Wilmar is continuing to expand its flour and rice milling, oleochemicals,  biodiesel,  refining and packaging  capacities in existing and new sites.
	In Malaysia, 2019 saw Wilmar complete
	the purchase of two palm oil refineries in Kuantan and Kuching and start construction of a new refinery and a specialty fats plant in Port Klang.
	In Vietnam, Wilmar maintains its leadership position in its core businesses including edible oils and soybean crushing while its new businesses such as rice, grains value-added processing and sauces are growing in domestic sales volume. Wilmar is also expanding its flour and rice milling capacity in Vietnam.
	In Myanmar, the edible oils packing plant and flour  mill commenced operation in Thilawa  in October 2019. Concurrently Wilmar has also begun the construction of a rice milling complex which, when completed, will be the largest in Myanmar, and are in the  process of acquiring another rice mill.
	Completed the acquisition of the balance 50% interest in Goodman Fielder from First Pacific Company Limited in December 2019, looking to expand operations in Australia, New Zealand, Papua New Guinea and the Pacific Islands.


 

Singapore lists 13 consumer non-cyclical stocks with a market capitalisation of more than S$100 million. The strongest performers of this group of 13 Singapore stocks since 9 June were Mewah International, Del Monte Pacific, ABR Holdings, QAF and Wilmar International. The five stocks averaged 27% total returns bringing their average 2020 year to 2 October total return to 9%.




			Non-Cyclical Consumer Stocks with Food Production/Processing Focus
			
			
			Code
			
			
			Mkt Cap S$M
			
			
			Total Return % Since 9 June 
			
			
			YTD Total Return %
			
			
			180 Day 

			Volatility

			%
			
			
			P/E

			(x)
			
		


			Wilmar International
			
			
			F34
			
			
			27,919
			
			
			14
			
			
			10
			
			
			43
			
			
			15
			
		


			Olam International
			
			
			O32
			
			
			3,995
			
			
			-14
			
			
			-27
			
			
			32
			
			
			7
			
		


			First Resources
			
			
			EB5
			
			
			1,943
			
			
			-15
			
			
			-34
			
			
			41
			
			
			14
			
		


			Golden Agri-Resources
			
			
			E5H
			
			
			1,802
			
			
			-10
			
			
			-37
			
			
			36
			
			
			16
			
		


			Fraser And Neave
			
			
			F99
			
			
			1,769
			
			
			-19
			
			
			-27
			
			
			31
			
			
			12
			
		


			Japfa
			
			
			UD2
			
			
			1,260
			
			
			-8
			
			
			9
			
			
			55
			
			
			5
			
		


			Bumitama Agri
			
			
			P8Z
			
			
			841
			
			
			4
			
			
			-38
			
			
			47
			
			
			10
			
		


			QAF
			
			
			Q01
			
			
			529
			
			
			18
			
			
			21
			
			
			36
			
			
			10
			
		


			Delfi
			
			
			P34
			
			
			413
			
			
			-17
			
			
			-29
			
			
			41
			
			
			13
			
		


			Mewah International Inc
			
			
			MV4
			
			
			398
			
			
			40
			
			
			11
			
			
			71
			
			
			8
			
		


			Del Monte Pacific
			
			
			D03
			
			
			241
			
			
			39
			
			
			7
			
			
			69
			
			
			N/A
			
		


			JB Foods
			
			
			BEW
			
			
			174
			
			
			9
			
			
			-5
			
			
			62
			
			
			6
			
		


			ABR Holdings
			
			
			533
			
			
			141
			
			
			23
			
			
			-3
			
			
			105
			
			
			57
			
		


			Average
			
			
			 
			
			
			 
			
			
			5
			
			
			-11
			
			
			52
			
			
			14
			
		


			Median
			
			
			 
			
			
			 
			
			
			4
			
			
			-5
			
			
			43
			
			
			11
			
		

 Source: SGX, Bloomberg, Refinitiv (Data as of 2 October 2020)



Food Producers Maintained Defensive Line From June Highs 

Indonesia

Bumitama Agri is a Singapore-based holding company primarily engaged in oil palm cultivation and the production of crude palm oil (CPO) and palm kernel (PK) in Indonesia. The company manages extensive oil palm plantations and operates multiple mills, selling its products to refineries within the country. Bumitama Agri Ltd. was founded in 1996 and is headquartered in Singapore.

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