Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/olam-international-ltd" target="_blank" data-smartkarma-citation="entities:765:1" rel="noopener">Olam International (OLAM SP)</a> has been a poor stock price performer on the SGX ever since it was attacked by short-seller Muddy Waters in 2012. Olam was essentially rescued by Temasek while peer Noble went bust. The 10-year stock chart says it all. Olam recently closed at 1.76 SGD, far below its peak of 2.64 SGD last reached in February 2012!<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/967/original/image_58873528221633585900666.png?1633585903" class="editor-image img-responsive" data-smartkarma-image-id="233967"></figure>Fast forward almost ten years and Olam is set to go into a period of heightened corporate activity to get Temasek (53% shareholder) its required exit. As well-telegraphed OFI (Olam Food Ingredients) will list on the LSE in 1H22. The OGA (Olam Global Agri) business could get a listing in the US by late 2022 or early 2023.Both listings could unlock significant value for Temasek and Olam minorities. We expect full-on press coverage, analyst, and corporate banking awareness of the OFI deal come 1H22. Olam is a small company in a global context but at 6.7 billion SGD (18 billion SGD Enterprise Value) it is a big deal for the SGX.Back-of-the-envelope calculations and comments to Reuters and The Times make us conclude that Olam could be worth well over 3 SGD/share depending on the eventual OFI valuation and debt assigned to the unit. In a blue-sky scenario, we even get a valuation as high as 4 SGD. That is 70% to 124% upside from Olam's last traded price on SGX. In this scenario, we assign 0 value to OGA which is unrealistic. Major wild card: what % of Olam's 15 billion SGD debt gets assigned to OFI.Given Temasek's ($400 billion AUM and Singapore's key SWF) importance to global investment banks, we are betting that the players involved will pull out all stops to make OFI's listing a success. Minority investors looking to ride the coattails of "the great Temasek unlock" would be wise to position themselves in Olam stock during 4Q21. The downside is protected by a 4% dividend yield which should be safe in case capital markets make an IPO impossible in 1H22.

Olam International (OLAM SP) has been a poor stock price performer on the SGX ever since it was attacked by short-seller Muddy Waters in 2012. Olam was essentially rescued by Temasek while peer Noble went bust. The 10-year stock chart says it all. Olam recently closed at 1.76 SGD, far below its peak of 2.64 SGD last reached in February 2012!Fast forward almost ten years and Olam is set to go into a period of heightened corporate activity to get Temasek (53% shareholder) its required exit. As well-telegraphed OFI (Olam Food Ingredients) will list on the LSE in 1H22. The OGA (Olam Global Agri) business could get a listing in the US by late 2022 or early 2023.Both listings could unlock significant value for Temasek and Olam minorities. We expect full-on press coverage, analyst, and corporate banking awareness of the OFI deal come 1H22. Olam is a small company in a global context but at 6.7 billion SGD (18 billion SGD Enterprise Value) it is a big deal for the SGX.Back-of-the-envelope calculations and comments to Reuters and The Times make us conclude that Olam could be worth well over 3 SGD/share depending on the eventual OFI valuation and debt assigned to the unit. In a blue-sky scenario, we even get a valuation as high as 4 SGD. That is 70% to 124% upside from Olam's last traded price on SGX. In this scenario, we assign 0 value to OGA which is unrealistic. Major wild card: what % of Olam's 15 billion SGD debt gets assigned to OFI.Given Temasek's ($400 billion AUM and Singapore's key SWF) importance to global investment banks, we are betting that the players involved will pull out all stops to make OFI's listing a success. Minority investors looking to ride the coattails of "the great Temasek unlock" would be wise to position themselves in Olam stock during 4Q21. The downside is protected by a 4% dividend yield which should be safe in case capital markets make an IPO impossible in 1H22.

Olam: Lots of Corporate Activity in '22/'23 to Unlock Significant Value for Temasek and Minorities

Forensic Analyst

Jason Yap, CFA

Crude Palm Oil (CPO) plantation stocks have lagged the rally in CPO prices, as well as other commodity stocks.  Investors have been generally cautious of chasing the CPO rally via plantation stocks even as CPO prices breach new record highs. Market concerns derive from the probability that CPO prices may be in bubble territory and could reverse when supply-side disruptions rebalance. Further, high CPO prices and increased availability of substitute edible oils (such as soybean and sunflower oil) as the latter enters production season could weigh on CPO demand, which has otherwise remained resilient due to strong demand in key markets such as India and China.  The Bursa Malaysia plantation index, which tracks the performance of 43 listed planters on Bursa Malaysia, has lost 6.3% year to date, while CPO benchmark prices surged more than 46% over the same period.  Malaysian plantation stocks trade at 18 times price to earnings while regional ones trade at around 11 times price to earnings, which approximates historical lows.On a brighter note, Indonesia recently announced the downward revision in palm oil export levies, which encourages exports and should be viewed positively by investors. Could this be the catalyst that the overlooked palm plantation sector needs? In this Insight, we examine the following key factors: <ul>
<li>CPO sector overview</li>
<li>supply and demand equation </li>
<li>Investment Catalyst - Indonesia's Export Levies  </li>
<li>historical and current correlation between share price and CPO benchmark price  </li>
<li>comparables and valuation</li>
</ul>We conclude the article with recommendations for investment opportunities in the sector.

Crude Palm Oil (CPO) plantation stocks have lagged the rally in CPO prices, as well as other commodity stocks.  Investors have been generally cautious of chasing the CPO rally via plantation stocks even as CPO prices breach new record highs. Market concerns derive from the probability that CPO prices may be in bubble territory and could reverse when supply-side disruptions rebalance. Further, high CPO prices and increased availability of substitute edible oils (such as soybean and sunflower oil) as the latter enters production season could weigh on CPO demand, which has otherwise remained resilient due to strong demand in key markets such as India and China.  The Bursa Malaysia plantation index, which tracks the performance of 43 listed planters on Bursa Malaysia, has lost 6.3% year to date, while CPO benchmark prices surged more than 46% over the same period.  Malaysian plantation stocks trade at 18 times price to earnings while regional ones trade at around 11 times price to earnings, which approximates historical lows.On a brighter note, Indonesia recently announced the downward revision in palm oil export levies, which encourages exports and should be viewed positively by investors. Could this be the catalyst that the overlooked palm plantation sector needs? In this Insight, we examine the following key factors: 
CPO sector overview
supply and demand equation 
Investment Catalyst - Indonesia's Export Levies  
historical and current correlation between share price and CPO benchmark price  
comparables and valuation
We conclude the article with recommendations for investment opportunities in the sector.

Crude Palm Oil (CPO) - Which Plantation Stock Could Crush Its Competition?

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

Thematic (Sector/Industry)

The remarkable political pact (MoU) signed between PM Ismail Sabri Yaakob and 4 leaders of the constituent parties of the PH opposition alliance ensures political and economic-policy stability until the end of July 2022. PH gained an assurance of political reforms (an anti-defection law, lowering the voting age to 18, greater representation in parliamentary committees and equal funding for opposition and ruling-party MPs) in exchange for its conditional pledge not to dislodge the government for nearly 11 months, and support the Budget for 2022. The pact does not contain any steps to counter the gerrymandering of constituencies that UMNO and BN have effected over the past five decades. And it says nothing about policies other than purely budgetary matters. The UMNO-PAS-Bersatu alliance (a pure Malay-Muslim ruling group) has since moved swiftly to exploit those loopholes -- by advancing a series of discriminatory steps that deepen the racist underpinnings of Malaysia's constitution (negotiated by the departing British in 1948-57). A key policy being advanced requires all freight-forwarding and logistics companies to be 51% Bumiputera owned by end-2021; this will have a severely negative impact on non-Muslim-owned companies big and small (with most conglomerates having a freight-forwarding unit, and numerous small-businesses being based on trucking and logistics).The 12th Malaysia Plan (tabled last month) includes a policy requiring that all Bumiputera companies only be sold to Bumiputeras. And the infamous RUU 355 legislation (enhancing the powers of Shariah Courts over criminal cases, and allowing them to use traditional Islamic punishments) is progressing rapidly under this government.  These 3 legislations may endear the UMNO-PAS alliance to Malays nationally. They are aimed at putting PH's leader Anwar Ibrahim on the spot, as (despite founding the Islamic students' movement ABIM in the 1970s) Anwar leads an explicitly multi-racial party (at the head of a genuinely multi-racial alliance) and has eloquently advocated a race-neutral Malaysia over the past decade. More enduringly, these policies (unless reversed by a future PH government) risk permanently alienating much of Malaysia's business community (who will then choose to invest outside Malaysia rather than within it, turning Malaysia increasingly into an economy of generally-inefficient GLCs and foreign-owned MNCs). Despite the appearance of policy stability from this pact, the policies of this government are permanently handicapping Malaysia and threaten its longer-term economic viability.

The remarkable political pact (MoU) signed between PM Ismail Sabri Yaakob and 4 leaders of the constituent parties of the PH opposition alliance ensures political and economic-policy stability until the end of July 2022. PH gained an assurance of political reforms (an anti-defection law, lowering the voting age to 18, greater representation in parliamentary committees and equal funding for opposition and ruling-party MPs) in exchange for its conditional pledge not to dislodge the government for nearly 11 months, and support the Budget for 2022. The pact does not contain any steps to counter the gerrymandering of constituencies that UMNO and BN have effected over the past five decades. And it says nothing about policies other than purely budgetary matters. The UMNO-PAS-Bersatu alliance (a pure Malay-Muslim ruling group) has since moved swiftly to exploit those loopholes -- by advancing a series of discriminatory steps that deepen the racist underpinnings of Malaysia's constitution (negotiated by the departing British in 1948-57). A key policy being advanced requires all freight-forwarding and logistics companies to be 51% Bumiputera owned by end-2021; this will have a severely negative impact on non-Muslim-owned companies big and small (with most conglomerates having a freight-forwarding unit, and numerous small-businesses being based on trucking and logistics).The 12th Malaysia Plan (tabled last month) includes a policy requiring that all Bumiputera companies only be sold to Bumiputeras. And the infamous RUU 355 legislation (enhancing the powers of Shariah Courts over criminal cases, and allowing them to use traditional Islamic punishments) is progressing rapidly under this government.  These 3 legislations may endear the UMNO-PAS alliance to Malays nationally. They are aimed at putting PH's leader Anwar Ibrahim on the spot, as (despite founding the Islamic students' movement ABIM in the 1970s) Anwar leads an explicitly multi-racial party (at the head of a genuinely multi-racial alliance) and has eloquently advocated a race-neutral Malaysia over the past decade. More enduringly, these policies (unless reversed by a future PH government) risk permanently alienating much of Malaysia's business community (who will then choose to invest outside Malaysia rather than within it, turning Malaysia increasingly into an economy of generally-inefficient GLCs and foreign-owned MNCs). Despite the appearance of policy stability from this pact, the policies of this government are permanently handicapping Malaysia and threaten its longer-term economic viability.          

Malaysia: Stability Paves Way for Better Policy; UMNO-PAS Long-Term Challenge

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

<a href="https://www.smartkarma.com/entities/my-eg-services-bhd" target="_blank" data-smartkarma-citation="entities:19765:1" rel="noopener">My E.G. Services (MYEG MK)</a> , unlike other companies, has the luxury to pivot its business model depending on what the Malaysian government requires. It was providing a permit e-renewal and now it has evolved to providing COVID-19 related service offerings. The public's concern on MyEG has always been whether it has ties to a specific government's regime. It does not have a tie to a particular government regime due to its unique business model that the company offers free help for the governments and only asks for traffic and the company will make an effort to upsell certain products through the provided traffic.<div class="content-highlight">It has survived two governments so far, and I would think they would survive the upcoming government too due to the unique business model. </div>

My E.G. Services (MYEG MK) , unlike other companies, has the luxury to pivot its business model depending on what the Malaysian government requires. It was providing a permit e-renewal and now it has evolved to providing COVID-19 related service offerings. The public's concern on MyEG has always been whether it has ties to a specific government's regime. It does not have a tie to a particular government regime due to its unique business model that the company offers free help for the governments and only asks for traffic and the company will make an effort to upsell certain products through the provided traffic.It has survived two governments so far, and I would think they would survive the upcoming government too due to the unique business model. 

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

Singapore

Wilmar International Ltd. is an agribusiness company. The Company is involved in oil palm cultivation, edible oils refining, oilseeds crushing, consumer pack edible oils processing and merchandising, specialty fats, oleochemicals and biodiesel manufacturing, and grains processing and merchandising. Wilmar also manufactures and distributes fertilizers and owns a fleet of vessels.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Wilmar International (WIL SP)

Olam: Lots of Corporate Activity in '22/'23 to Unlock Significant Value for Temasek and Minorities

Olam is set to see a significant increase in corporate activity in 1H22. Investors would be wise to position in the stock before the newsflow hits...

Nicolas Van Broekhoven

Crude Palm Oil (CPO) - Which Plantation Stock Could Crush Its Competition?

CPO plantation stocks have lagged the rally in CPO prices and investors have stayed on the sidelines. However, we believe investor concerns are...

Jason Yap, CFA

Malaysia: Stability Paves Way for Better Policy; UMNO-PAS Long-Term Challenge

MoU between PM and opposition PH (13 Sept) provides stability in exchange for political reform. But UMNO-PAS are using it to advance Malay...

Prasenjit K. Basu

MYEG: Providing Help for Malaysia

It has survived two governments so far, and I would think they would survive the upcoming government too due to the unique business model. Buy MyEG...

Henry Soediarko

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

KLK MK made an offer to acquire IJMC’s entire stake in IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. If the SPA...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)