1Q FY2018 Results Presentation 15 May 2018 IR Adviser 1QFY18 - - PowerPoint PPT Presentation

IR Adviser

1Q FY2018 Results Presentation

15 May 2018

1QFY18 OPERATIONS REVIEW

Exports 55.0% RM57.6m 1QFY18

RM104.7m

Exports 54.5% +12.2% yoy

3

1QFY18 CORE REVENUE (YOY CHANGE) Higher 1QFY18 revenue from new Myanmar plant contributions and stronger domestic sales at the Malaysia plant…

1QFY18 total exports rose 12.2% yoy on new contribution of RM10.7 mil from the Myanmar plant; the Malaysia plant saw 3.5% lower exports on customer’s portfolio realignment 1QFY17

RM94.1m

46 43 38 38 42 40 43 42 43 40 46 47 47 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly Domestic Revenue (RM ‘mil) 1QFY18 domestic sales rose 10.2% yoy on larger orders from existing customers Domestic RM47.1m 45.0% +10.2% yoy Domestic 45.5%

41 47 48 45 48 57 51 48 51 47 49 52 50

6.5 6.8 8.1

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly Export Revenue (RM ‘mil)

Myanmar plant Exports (excl. Myanmar plant)

4

DAIBOCHI MALAYSIA UPDATE ANZ exports onstream from FMCG brand… new flexographic printer to heighten value proposition to customers

Commenced new export orders to FMCG MNC in ANZ in 1QFY18 Shipments likely to increase since delivery in April 2018 Noted higher key raw material costs in 1QFY18 Led to compressed profit margins Cost-pass-through system with predominantly MNC clientele to eventually temper effects of resin price uptrend To continue wastage reduction programme to enhance productivity to

• ffset higher raw materials cost

Acquired new flexographic printer in 1QFY18 Installation estimated to complete in May 2018 Malaysia plant to offer more efficient and better quality prints Lower ink usage and wastage Reduced setup time between jobs

1.7 1.5 20.2% 14.1% 4Q17 1Q18

Quarterly PBT & PBT Margin Myanmar Plant (RM ‘mil)

PBT PBT Margin 5

DAIBOCHI MYANMAR UPDATE Daibochi Myanmar sales report double-digit climb… expansion works to keep momentum

8.5 10.7 4Q17 1Q18

Quarterly Revenue Myanmar Plant (RM ‘mil)

+26.7%

• 11.7%

Revenue rose qoq from increased exports to cost- sensitive customers PBT dipped qoq on: Higher key raw material costs Stronger Malaysia Ringgit against the Myanmar Kyat Margins compressed from increased exports to cost-sensitive customers Currently undertaking capacity and capabilities expansion Acquired extrusion machine in 1QFY18 Planning to acquire printing machine and rewinding machine in FY18 Factory expansion expected to complete in end 2018, which would provide additional space for future use

GROWTH STRATEGIES

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GROWTH STRATEGIES Malaysia plant to extend regional reach… Daibochi Myanmar on client expansion drive

Targeting new MNC business Exploring new product lines of existing MNC clients and contracts from new MNCs CAPEX Investing RM7.7 mil for the rest of FY18 for new machinery comprising: High-speed slitter and supporting machinery

MALAYSIA PLANT MYANMAR PLANT

Aiming to increase customers from Myanmar and South East Asia (SEA) Actively tendering for sales contracts with major domestic consumer brands To leverage low-cost and geographical advantage to secure export contracts from cost-sensitive customers in the SEA region On track to reach RM100 mil revenue in FY19 CAPEX Planned CAPEX of USD2.0 mil in FY18 for new machinery

1QFY18 FINANCIAL REVIEW

INCOME STATEMENT Double-digit expansion in 1Q18 puts Daibochi on track for strong performance in FY18…

RM'mil 1Q18 to 31.03.18 4Q17 to 31.12.17 % chg qoq 1Q18 to 31.03.18 1Q17 to 31.03.17 % chg yoy Revenue 104.7 105.7 (0.9%) 104.7 94.1 11.3% EBITDA 12.8 14.8 (13.6%) 12.8 11.1 14.9% Operating Profit 9.4 11.3 (16.9%) 9.4 7.8 20.7% Share of Associate Results 0.0 0.8 (97.0%) 0.0 0.4 (93.4%) Profit Before Tax 8.5 11.2 (23.5%) 8.5 7.4 14.9% Net Profit to Shareholders 6.5 7.9 (18.3%) 6.5 5.8 12.3% Basic EPS (sen)* 1.98 2.42 (18.2%) 1.98 1.76 12.5% EBITDA margin 12.2% 14.0% (1.8 pt) 12.2% 11.8% 0.4 pt PBT margin 8.2% 10.6% (2.4 pt) 8.2% 7.9% 0.3 pt Net margin 6.2% 7.5% (1.3 pt) 6.2% 6.1% 0.1 pt

*Adjusted to reflect the bonus issue of 2 for every 10 ordinary shares held by the entitled shareholders, completed on June 28, 2017

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1QFY18 Review (yoy comparison) Revenue increased

• n

new contributions from Daibochi Myanmar and higher domestic sales since 3QFY17 PBT rose in line with revenue, also enhanced by contribution from Daibochi Myanmar; which offset rising raw material costs due to higher crude oil price Net profit increased in line with higher PBT

50 100

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly Revenue (RM ‘m)

5 10

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly PATMI (RM ‘m)

5 10 15

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly PBT (RM ‘m)

BALANCE SHEET Net gearing maintained at a conservative level… continues to sustain healthy returns

* The Group carried RM34.2 mil and RM35.1 mil in intangible assets in 31 March 2018 and 31 December 2017 associated with the acquisition of its 60% interest in Daibochi Myanmar ** Based on net profit for the trailing twelve months

10 As at 31.03.2018 As at 31.12.2017 (Unaudited) (Audited) Fixed Assets (excl associate investment & deferred tax)* 169.34 173.23 Associate Investment 19.39 19.36 Current Assets 177.84 173.42 Due to increase in inventories, and trade and other receivables Current Liabilities 108.05 110.42 Due to decrease in trade and other payables Shareholders’ Equity 202.14 200.85 Due to higher retained earnings Total Borrowings 72.50 69.88 Due to purchase of new machinery Cash & Bank Balances 17.11 18.31 Net Gearing 0.27 x 0.26 x Return on Average Shareholders’ Equity** 13.4% 13.3% Return on Average Total Assets** 7.8% 7.7% Remarks

DIVIDENDS First interim single-tier dividend of 1.05 sen per share payable on 28 June 2018 (ex-date

• n 28 May 2018)…

4.52 4.90 4.52 4.55 1.05 FY14 FY15 FY16 FY17 1Q18 14.8 16.0 14.8 14.9 3.4 62% 60% 60% 62% 62% FY14 FY15 FY16 FY17 1Q18 Total Dividend Payout Ratio^

Payment History Dividend Payout RM’m Dividend Per Share* sen Dividend policy revised to pay out at least 60% of net profit attributable to shareholders, excluding net profit contributions from Daibochi Myanmar

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FY2017 FY2018 FY2017 FY2018 1st Interim (single tier) 1.10* 1.05 3.61 3.44 2nd Interim (single tier) 1.00 3.28 3rd interim (single tier) 1.15 3.76 4th interim (single tier) 1.30 4.26 Total 4.55 14.91 Dividend per share (sen) Dividend Payout (RM 'm)

* Adjusted to reflect the bonus issue of 2 for every 10 ordinary shares held by the entitled shareholders, which was completed on June 28, 2017 ^Excludes net profit contribution from Daibochi Myanmar

INVESTMENT MERITS

VALUATIONS AND MERITS (as at 14 May 2018) Led by innovation and efficiency… a market leader in supplying top quality consumer flexible packaging to MNCs in the region

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MNCs make up almost 80% of total revenue

(benefitting from steady and large orders, strong creditworthiness)

Exports to SEA & ANZ exceed 50% of revenue Supplier to renowned F&B and FMCG brands

(supporting highly-resilient sectors)

Contribution from Myanmar to see earnings boost

Industry-leading R&D and product innovation Highly-experienced management team KEY MERITS

15.2x 4.4x 2.0%

Price Market Cap P/E (ttm) EV/EBITDA (ttm) FY17 Div. Yield P/B

RM2.23 RM731m 27.4x

Contact Information

Investor Relations Low Jin Wei, Executive Director Daibochi Plastic and Packaging Industry Berhad +606-231 9779 jinwei@daibochi.com Julia Pong, Manager Aquilas Advisory (M) Sdn Bhd +6012-390 9258 julia@aquilas.com.my

APPENDIX

CORPORATE PROFILE

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OVERVIEW Leading consumer flexible packaging player in Malaysia and South East Asia with 45-year track record… serving leading MNC brands in the F&B and FMCG sectors

Daibochi established since 1972

A leading provider of consumer flexible packaging to major international brands in the F&B and FMCG industries

Focused on quality and innovation

Experienced R&D team supported by well-equipped laboratory testing facilities

Increasing exports prowess

Growing exports across South East Asia, Australia and New Zealand markets; exports make up >50% of group revenue

Daibochi’s Malaysia plant certifications

Attained ISO:9001 and ISO:14001 certifications Hazard Analysis Critical Control Points (HACCP) compliant to ensure adherence to food safety requirements Obtained Food Safety System Certification (FSSC:22000)

Daibochi’s Myanmar plant certifications

ISO 9001:2015 accreditation HACCP FSMS certification

18

PRODUCTION FACILITIES Internationally-certified production facilities that comply with all factory audits by MNC clientele… strength in innovation

19

PRODUCTION FACILITIES (CONT’D) Strategically located production facilities… sizable floor space allows Daibochi to cater for increasing orders from MNCs

Daibochi Plastic Plant 1

Located in Ayer Keroh, Melaka, Malaysia Production floor space of 385,000 sq ft

Daibochi Plastic Plant 2

Located in Jasin, Melaka, Malaysia Commenced operations in 2Q14 Production floor space of 135,000 sq ft

20

PRODUCTION FACILITIES (CONT’D) Addition of Myanmar operations since July 2017 represents the Group’s first expansion of its manufacturing facilities outside of Malaysia…

Yangon, Myanmar Plant

Daibochi and Myanmar Smart Pack Industrial Company Limited (MSP) incorporated Daibochi Myanmar MSP is a leading flexible consumer packaging manufacturer in Myanmar focusing on Home Personal Care products Consumer packaging plant located 30 minutes from Yangon, with built-up of 6,000 sq m and land area of 36,000 sq m Quick Facts on Myanmar

Population of >50 mil Low flexible packaging consumption of <USD1 per capita (Indonesia USD13, Vietnam USD9, India <USD5)1

1PCI Wood Mackenzie, 2015

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OPERATIONAL SYNERGIES Leveraging strengths & synergies to accelerate expansion in high-growth markets…

WIDER PRODUCT RANGE

• Daibochi Myanmar to

benefit from technology transfer from Daibochi Malaysia (CPP & metalliser)

• Daibochi Malaysia to

fulfil product line gap in the interim

• Expand F&B

packaging line leveraging on Daibochi Malaysia’s strengths and long-term relationships with MNCs

SIGNIFICANT LOW-COST ADVANTAGE

• Capitalise on

low manufacturing cost advantage to export to cost-sensitive customers in SEA

• Benefit from bulk

purchases of raw materials (e.g. resin)

• Enjoy cost savings

from production of in- house film

HUMAN CAPITAL DEVELOPMENT

• Access to ample

workforce pool;

• pportunities for

skillset upgrading and

• ptimisation
• To tap into Daibochi’s

R&D and specialty films, develop sales team, & enhance production efficiency

• To attain international

certifications in food safety, quality & environment management

STRONG CASHFLOW & DIVIDENDS

• Able to fund future

growth, without requiring additional capital injection from shareholders

• Targeting dividend

payment from Year 3

• nwards
• 5-year tax exempt

status

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PRODUCTION PROCESS Integrated end-to-end packaging process… equipped with specialized in-house capabilities

Prepress Cylinder Making Gravure Printing Lamination (Extrusion / Dry) Slitting / Bagging

CPP Film Metallizer

Up to 9-colour 2-sided printing In-house capabilities Solvent-based/free Capabilities incl Standing Pouch

The only player with in-house cylinder-making, and one of the few with metallizing and sealing films capabilities for quality assurance and constant improvement at key stages

To build high barriers Polypropylene sealing films

23

PRODUCT APPLICATIONS Wide range of packaging solutions for various product functions… constantly innovating for changing requirements

Film Type Applications / Use High Permeability Barrier / Performance Coffee, Nuts, Potato Chips Cost Effective Barrier Snacks, Biscuits, Wafer, Chocolate, Cakes General Packaging Outer Pack, Noodles, Biscuits, Wafers Specialty Application Labelling, Retort Packaging, Ice-cream, Frozen Food, Cereal Peel Seal, Seasoning Oil, Powder/Liquid Detergent, Shower Foam, Tobacco, Pet food

24

REGIONAL PRESENCE Commendable track record in serving a wide number of MNC clientele in the F&B industry with stringent quality control…

Supplier to leading global brands

The Largest Supplier of Milo packaging in S.E.A The Sole Supplier to Nestle’s Chembong confectionery factory in Malaysia Daibochi is also the ONLY S.E.A company on Nestle’s Regional Food Safety Committee Supplier

• f

>90%

• f

Cadbury’s flexible packaging in Malaysia The Major Supplier of Mondelez International’s (formerly known as Kraft) biscuits and snacks packaging in Malaysia Major Supplier of flexible packaging to PepsiCo’s Chiang Mai plant for potato chips manufacturing

25

INDUSTRIES SERVED Diversified clientele of leading brands across various industries…

Food Beverage FMCG Specialty

• Confectionary
• Biscuits
• Snack Foods
• Dairy
• Frozen Food
• Cereal
• Shampoo
• Detergent
• Personal Care
• Sanitary
• Coffee/Tea
• Dairy
• Soft Drink
• Tobacco
• Medical Packaging
• ESD / Anti-Static
• Pet Food

Worldwide consumer flexible packaging market worth $92 bil in 2015

Estimated to grow 4% p.a. to reach $114 bil in 2020 Growth to be led by Asia Pacific & other emerging regions (e.g. South & Central America)

Growth catalysts for Asia’s flexible packaging market

Higher demand for cheaper and smaller pack sizes in line with affordability of general population (especially post economic slowdown) Increase in working mothers / dual-income households leading to preference for convenience packaging Development of multinational food retailers and manufacturers in the region; indicating the long-term growth potential in Asia

26

INDUSTRY INSIGHT Growth in flexible packaging to be led by the Asian region… penetration into new product categories to bring next wave

Source: Smithers’ Pira – The Global Flexible Packaging Market – Trends and Forecasts Source: The Asia Pacific Flexible Packaging Market to 2016 by PCI Consulting Films Ltd

27

CORPORATE INFORMATION Market cap of more than RM700 million…

DAIBOCHI PLASTIC & PACKAGING INDUSTRY BERHAD

Exchange Main Market, Bursa Malaysia since 1990 (transferred from Second Board in 2003) Sector Industrial Products Codes Bursa: 8125 / DAIBOCI Bloomberg: DPP:MK Reuters: DPPM.KL Share Capital RM164.2 mil (327.9 mil shares) Market Capitalization RM731.2 mil (RM2.23 as at 14 May 2018)

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MANAGEMENT TEAM Experienced management with industry expertise…

Thomas Lim Soo Koon, Managing Director

Holds a degree in Bachelor of Science Industrial Engineering and Management from Oklahoma State University, & Master of Business Administration degree from Oklahoma State University. Joined Daibochi in 1995, and was appointed as Managing Director in February 2005. Played a key role in building Group’s MNC clientele.

Low Jin Wei, Executive Director

Holds a degree in Bachelor of Commerce (Major in Finance & Marketing) from University of Sydney, NSW, Australia. Prior to this, Mr. Low was the Managing Director / Project Director of GlassKote (Malaysia) Sdn Bhd from 2005 to September 2010.

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MAJOR SHAREHOLDERS Institutional investors holding approximately 33%...

• No. of shares (‘mil)

(31.3.2018)

Percentage Low Chan Tian 33.8 10.3% Apollo Asia Fund Ltd 30.7 9.4% Lim Koy Peng 27.7 8.5% Halley Sicav – Halley Asian Prosperity 19.3 5.9% Datuk Wong Soon Lim 19.1 5.8%