LEONG HUP INTERNATIONAL BERHAD RESULTS PRESENTATION FOR 3 rd QUARTER - - PowerPoint PPT Presentation

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PRESENTATION DECK

LEONG HUP INTERNATIONAL BERHAD

RESULTS PRESENTATION FOR 3rd QUARTER 2019 (3Q19) 27 November 2019

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PRESENTATION DECK

This presentation is for information purposes only. The past performance of Leong Hup International Berhad (“LHI” or the “Company”) and its subsidiaries (the “Group”) is not indicative of the future performance of LHI and/or the Group. Reliance should not be placed on the information and opinion contained herein or on its completeness. Such information may be subject to change without prior notice, its accuracy is not guaranteed and it may not contain all material information concerning the Group. This presentation may contain projections and “forward-looking statements” relating to the Group’s business and the sectors in which the Group

• perates. These forward-looking statements include statements relating to the Group’s performance. These statements reflect the current views of

the Group with respect to future events and are subject to certain risks, uncertainties and assumptions. It is important to note that actual results could differ materially from those anticipated in these forward-looking statements. Actual results may differ materially from those projected and there can be no assurance on the occurrence of certain events, achievability of projections or accuracy of assumptions made by the Group. Accordingly, neither the Group nor its directors or officers make any representation regarding, and assume no responsibility or liability for, the accuracy or completeness of, any errors or omissions in, any information contained herein.

DISCLAIMER

Issued by: Leong Hup International Berhad (Investor Relations Office) Address: 3rd Floor, Wisma Westcourt, No.126, Jalan Klang Lama, 58000 Kuala Lumpur, Malaysia. Tel: +603-7980 8086 / +603-7980 3817 Email: ir@lhhb.com Website: https://www.leonghupinternational.com

Note: Unless otherwise stated, all figures stated herein are for the third (3rd) quarter ended 30 September 2019, i.e. between 1 July 2019 and 30 September 2019 (“3Q19”) and the third (3rd) quarter ended 30 September 2018, i.e. between 1 July 2018 and 30 September 2018 (“3Q18”), as extracted from LHI's unaudited consolidated financial results for the financial period ended 30 September 2019.

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Market Outlook

• Healthy economic growth expected, supported by resiliency in private consumption growth
• Medium term outlook for LHI’s markets remain broadly positive, but may moderate arising from headwinds fueled by

global uncertainties, as well as persistent downside risks of trade tension and seasonally-weaker livestock prices in Q4 Real GDP growth rate % 2018 2019e 2020f

Malaysia 4.7 4.6 4.6 Singapore ^3.1 ^0.5 ^1.0 Vietnam 7.1 6.6 6.5 Indonesia 5.2 5.0 5.1 Philippines 6.2 5.8 6.1

Private consumption growth rate % 2018 2019e 2020f

8.0 7.1 6.6 *3.1 N/A N/A 7.3 7.3 7.3 5.1 5.2 5.1 5.6 5.9 5.9

Note: N/A means not available. Sources: (unless otherwise stated) World Bank East Asia and Pacific Economic Update, October 2019 by The World Bank; ^ Regional Economic Outlook: Asia and Pacific, October 2019 by the International Monetary Fund; ^ Department of Statistics Singapore.

Robust growth in private consumption in 4 out of 5 markets augers well for LHI Group and will continue to underpin the group’s volume growth.

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PRESENTATION DECK

Financial Highlights: Revenue

16.2 19.4 495.3 532.1 288.1 344.4 230.0 201.8 390.6 426.3 3Q18 3Q19

Revenue(1) by Country (RM million)

Philippines Indonesia Vietnam Singapore Malaysia

Note: 1) Excluding revenue from other sources.

• Overall group revenue increased during 3Q19
• Malaysia, Vietnam and Indonesia recorded higher revenue whilst revenue fell in Singapore

1,420.2 1,524.0

1.1% 34.9% 16.2% 20.3% 1.3% 34.9% 13.2% 22.6% 27.5% 28.0% Revenue(1) by Country 3Q18 (RM million) 3Q19 (RM million) Variance Malaysia 390.6 426.3 +9.1% Singapore 230.0 201.8

• 12.3%

Vietnam 288.1 344.4 +19.5% Indonesia 495.3 532.1 +7.4% Philippines 16.2 19.4 +19.6% LHI Group 1,420.2 1,524.0 +7.3% 814.9 858.2 605.3 665.8 3Q18 3Q19

Revenue(1) by Segment (RM million)

Livestock and poultry related Feedmill 57.4% 42.6% 56.3% 43.7%

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PRESENTATION DECK

780.9 882.4

Group Production Capacity (‘000 MT)

3Q18 3Q19 71% 67%

Avg. Utilisation Rate

Operating Highlights: Feedmill

548.0 588.5

Group Feed Sales(1) (‘000 MT)

3Q18 3Q19 44% 41% 56% 59% 3Q18 3Q19

Sales Split

Internal Sales External Sales

Note: 1) Feed sales include both internal and external sales.

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Operating Highlights: Livestock

119.8 123.1

Group Broiler DOC Sales(1) (million chicks)

3Q18 3Q19 32.0 33.6

Group Broiler Sales(1) (million birds)

3Q18 3Q19 420.7 429.6

Group Eggs Sales(2) (million eggs)

3Q18 3Q19

Note: 1) Broiler DOC and broiler chickens sales include both internal and external sales. 2) All eggs are sold to third parties.

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PRESENTATION DECK

105.8 41.8 66.7 133.5 ‐17.3 ‐1.5 3Q18 3Q19

EBITDA(1) by Segment(RM million)

Livestock and poultry related Feedmill Inter‐segment elimination 76.2% 23.8%

Financial Highlights: EBITDA

• EBITDA improved by 11.9% year-on-year, as feedmill’s contribution came in higher, which more than offset weakness

in livestock

• Malaysia led the increase in EBITDA, due to improved prices of broiler chickens and eggs in 3Q19
• Stronger feedmill contribution in VN and ID, supported by favourable pricing and continued volume growth.

61.4% 38.6%

Note: 1) EBITDA contribution by segment (in percentages) are computed based on gross EBITDA only.

1.6 3.7 70.0 47.0 25.2 30.2 28.9 22.3 29.4 70.6 3Q18 3Q19

EBITDA by Country (RM million)

Philippines Indonesia Vietnam Singapore Malaysia

155.2 173.7

1.0% 45.1% 18.6% 16.3% 19.9% 2.1% 27.0% 12.8% 17.4% 40.6%

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Financial Highlights: Earnings

55.7 62.3 3.9% 4.1% 3Q18 3Q19

Profit After Tax (RM million)

PAT PAT Margin 35.2 44.4 2.5% 2.9% 3Q18 3Q19

Profit After Tax and Minority Interest (PATMI) (RM million)

PATMI PATMI Margin 77.9 83.8 5.5% 5.5% 3Q18 3Q19

Profit Before Tax (RM million)

PBT PBT Margin

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Operating Expenses

• Group operating costs (“OPEX”) remain relatively stable group-wide
• Continuous focus on cost optimization allowed the Group to maintain fairly stable OPEX in 3Q19

73.0% 73.9% 9.7% 9.5% 3.7% 3.9% 13.7% 12.7% 3Q18 3Q19 (RM million) COGS Staff Benefit Depreciation & Amortisation Others

1,419.2 1,322.2 (1) COGS refer to cost of goods sold which is inclusive of purchases and net changes of inventories and biological assets. (2) Others inclusive of below components: (a)Gain/(loss) on disposal of assets & liabilities (b)Utilities costs (c) Repair and maintenance (d)Transportation expenses (e)Other operating expenses (f) Upkeep of motor vehicle (g)Packaging material (h)Foreign worker levy

(2) (1)

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Income Statement: Summary

3Q19 3Q18 Financial quarter ended (RM million) (RM million) Variance Revenue 1,527.1 1,422.5 +7.4% EBITDA 173.7 155.2 +12.0% Depreciation and amortisation 55.4 48.8 +13.6% Finance cost 34.6 28.7 +20.7% Profit before tax 83.8 77.9 +7.6% Profit after tax and minority interest 44.4 35.2 +26.1% Earnings per share (sen) 1.22 1.04 +0.18 sen EBITDA margin 11.4% 10.9% +50 bps

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Balance Sheet: Summary

Note: (1) Including finance lease and lease liabilities for MFRS 16.

As at 30 September 2019 As at 31 December 2018 (RM million) (RM million) Assets Non-current assets 2,834.2 2,576.1 Biological assets and inventories 1,026.5 925.2 Trade receivables 597.7 649.2 Other receivables 244.0 224.6 Cash and bank balances 567.8 458.9 Total Assets 5,270.2 4,834.0 Equity and Liabilities Total equity 2,159.7 1,765.5 Trade payables 240.9 248.9 Other payables and liabilities 426.3 448.7 Short term borrowings (including leases(1)) 1,455.7 1,326.6 Long term borrowings (including leases (1)) 987.6 1,044.3 Total Equity and Liabilities 5,270.2 4,834.0

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Working Capital Management

37.3 36.0

• 18.3
• 17.0

67.3 74.0 86.3 93.0 FPE 30 Sep 2018 FPE 30 Sep 2019

Cash Conversion Cycle

Average biological assets / inventory turnover Average trade payable turnover Average trade receivable turnover Cash conversion cycle (days) 2.8x 1.3x 1.1x 1.2x 2.6x 1.1x 0.8x 1.2x Net debt / EBITDA Gross Gearing Net Gearing Current ratio

Key Ratios

FPE 30 Sep 2018 FPE 30 Sep 2019

(4) (4) (3)

• Stable cash conversion cycle and gearing levels through effective working capital management..

Notes: (1) For the 9-month financial period ended 30 September 2018, included for comparison purposes. (2) For the 9-month financial period ended 30 September 2019 (3) EBITDA annualized based on 9-month financial period ended 30 September 2018 and 30 September 2019’s results (4) Computed based on group borrowings excluding the effect of MFRS 16 on lease liabilities

(2) (1) (2)

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Snapshot of Liquidity Position

2,384 43% 3,147 57% Fixed Asset Equity + LT Loan

FPE 30 Sep 2019(2) (RM million)

2,239 44% 2,810 56% Fixed Asset Equity + LT Loan FYE 2018(1) (RM million) 1,327 37% 2,258 63% Short Term Loan Current Asset FYE 2018(1) (RM million) 1,456 37% 2,436 63% Short Term Loan Current Asset

FPE 30 Sep 2019(2) (RM million)

Notes: (1) For the financial year ended 31 December 2018 (2) For the 9-month financial period ended 30 September 2019 (3) Fixed assets inclusive of investment properties.

(3) (3)

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PRESENTATION DECK

Purposes Proposed utilization Actual utilization (as at 30 September 2019) %(1) Balance unutilized Intended timeframe for utilization from the date of listing(2) (RM million) (RM million) (RM million) (timeframe) Capital expenditure 207.7 (39.8) 19.2 167.9 within 24 months Working capital 33.0 (21.0) 63.6 16.3(3) within 6 months Defray fees and expenses for IPO and Listing 34.3 (30.0) 87.4 Total 275.0 (90.8) 33.0 184.2

• A total of RM275 million of primary proceeds were raised from the IPO, out of which RM207.7 million was earmarked for

capex purposes in Malaysia, Vietnam and Philippines

• Status of the company’s utilization of IPO proceeds as at 30 September 2019 as follows:

Utilization of IPO Proceeds

Notes: (1) As a proportion of the proposed utilization, details of which are set out in the Company’s Prospectus dated 25 April 2019. (2) LHI was listed on Main Market of Bursa Malaysia Securities Berhad on 16 May 2019. (3) The unutilized balance of RM4.3 million allocated for estimated IPO and listing expenses has been transferred to working capital during 3Q19.

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Capex Updates

• Capex for FY2019 are being executed as per planned using a combination of internal funds, bank borrowings and IPO

proceeds

• Capex projects due for completion in FY2019 are on track and commissioning of the same expected thereafter

Location Segment Project Commencement date Target completion date Total investment Philippines General Purchase of new ERP system 1Q2019 4Q2019 RM6.4 million Malaysia Livestock Expansion of closed-house broiler farms 1Q2019 4Q2020 RM86.8 million Vietnam Livestock Construction of additional 3 parent stock (“PS”) closed-house farms and machinery at Dong Nai farm 3Q2019 4Q2019 RM0.9 million Vietnam Feedmill Third pelleting line at Dong Nai feedmill 3Q2019 1Q2020 RM2.6 million Vietnam Feedmill Installation of automatic bagging & robotic pelletiser at Tien Giang feedmill 4Q2019 4Q2019 RM4.6 million Location Segment Project Commencement date Completion date Total investment Philippines Livestock Construction of new hatchery 1Q2020 3Q2019 RM8.5 million Vietnam Feedmill Construction of a spent grain drying facility at Dong Nai feedmill

• 3Q2019

RM1.6 million

(1) Completed projects: (2) On-going projects:

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Capex Updates (Cont’d)

• Construction of new hatchery in Central Luzon, Philippines completed in September 2019
• Target commencement in 1Q2020
• Currently test runs are being conducted section by section

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Capex Updates (Cont’d)

• Feedmill and Livestock in Vietnam undergoing capacity expansion…

Feedmill: Dong Nai Feedmill’s Third Pelleting Line

• Construction cost: RM2.6 million
• Status: In the midst of finalizing the construction contract
• Production lines:

i) Current capacity: 285,120 MT per annum (2 production lines) ii) Upcoming third pelleting line’s capacity: 142,560 MT per annum

• Target completion by first quarter of FY2020

Livestock: 3 Parent Stock Closed-House Farms

• 3 new closed-house farms with an expected additional output of 2.7 million broiler DOC

per annum

• Construction cost: RM0.6 mil
• Status: Progressing with piling works prior to construction
• Target completion by end of FY2019

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Capex Updates (Cont’d)

• Construction of closed-house broiler farm in Tapah, Perak, Malaysia
• Construction completed in July 2019

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Country Focus: Myanmar

• Leong Hup Myanmar Co., Ltd was incorporated in Myanmar on 16 October 2019
• Registration of a wholly-owned subsidiary represents LHI’s first step to tap into the growing economy and meat

consumption in Myanmar

Notes: (1) World Bank East Asia and Pacific Economic Update, October 2019 by The World Bank. (2) The Future of Global Meat Demand – Implications for the Grain Market by Yukiko Nozaki, Mitsui Global Strategic Studies (September 2016). (3) “Chickens rule the roost in Myanmar’s farmyards, cows are second: census”, The Myanmar Times (published 15 January 2019).

• In 2018, Myanmar’s real GDP grew 6.5% and is expected to

pick up gradually in the medium term – increasing to 6.8% in 2021/22, driven primarily by the agriculture sector1

• Annual per capita meat consumption2 stood at 39 kg

(Vietnam: 57 kg; Malaysia: 53 kg)

• Chickens are the most widely-farmed animal protein in the

country, followed by cows and swine3

• Meat consumption in Myanmar grew at a CAGR2 of 10.2%

between 2006 and 2011 (Vietnam = 8.4%)

• Studies have shown that growth rate of meat consumption in

Myanmar is higher than that of income; and this positive correlation is more pronounced than in Vietnam2

• Penetration via the livestock market, with the aim of

subsequently establishing feedmill.

Myanmar Myanmar

(Source: The World Bank)

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Strategic Focus

LHI’s long term outlook remains positive, backed by robust volume growth and rising consumption of meat protein in ASEAN

Our Strategies

Cost control Volume growth Diversified geographical exposure Increasing market share Moving further downstream (RTE & RTC) Livestock

• Execution of capex plan remains on track for FY2019
• Growth in group capacity for DOC, broiler and eggs in tandem

with the rise in demand for poultry products

• Greater benefit of efficiencies through economies of scale
• Supported by upgrade / modernisation of farms with

automation features to drive cost savings agenda

• Further exploration towards downstream capabilities by

capitalizing on Singapore’s expertise in RTE and RTC sectors.

Feedmill

• Further enhancement of facilities and additional line in Dong

Nai feedmill to boost capacity, target to achieve capacity of 1,496,000 MT/annum in Vietnam by 2020.

• Feed production ramp up in Indonesia and Vietnam to

satisfy uptake in demand from external customers

• Group capacity to expand further by end FY2020 / early

FY2021, supported by new feedmills in:

• Lampung, Indonesia; and
• Central Luzon, Philippines.

Outlook and strategies

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3rd Floor, Wisma Westcourt, 126, Jalan Klang Lama, 58000 Kuala Lumpur, Malaysia.

Address For enquiries, please contact:

Stay in touch with us

THANK YOU

Leong Hup International Berhad

• Mr. Victor Geh, Investor Relations

Tel: +603-7980 8086 Email: ir@lhhb.com Esente Communications (M) Sdn Bhd

• Ms. Ashley Chew
• Mr. Cassidy Tan

Tel: +603-6201 4110 Email: ashley@esente.com.my cassidy@esente.com.my

Website

https://www.leonghupinternational.com