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Presentation to AGM June 2012
This document and its contents are confidential and should not be copied, reproduced, distributed or passed on, directly or indirectly, to any other persons or published in whole or in part for any purpose. The presentation and any further confidential information made available to you is being supplied to you by Equatorial Palm Oil plc (the “Company”) solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any other purpose. This document and its contents have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 and do not conform to the rules and regulations of the U.S. Securities and Exchange Commission and other regulatory bodies in the United States. The securities mentioned herein have not been and will not be, registered under the Securities Act or under any U.S. State securities laws, and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act.
This presentation is being distributed on request in or from the United Kingdom and the United States (as such term is defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) only to and are directed at (1) (a) persons who have professional experience in matters relating to investments being investment professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”), (b) high net worth companies as defined in Article 49(2) of the FPO, (c) certified sophisticated investors as defined in Article 50(1) of the FPO or (d) persons to whom it may otherwise lawfully be communicated (together “Relevant Persons”) and (2) persons within the United States who are “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act who are also “qualified institutional buyers” (“QIBs”) as defined in Rule 144A under the Securities Act. In order to qualify as a certified sophisticated investor you must have a current certificate signed by a person authorised by the Financial Services Authority to the effect that you are sufficiently knowledgeable to understand the risks associated with this particular type of investment and you must have signed within the last 12 months a statement in the terms set out in Article 50(1)(b) of the FPO. The ordinary shares are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the ordinary shares will be engaged in only with, Relevant Persons or Accredited Investors. Any person who is not a Relevant Person or an Accredited Investor should not rely on this document nor take any action
upon it, but should return it immediately to the Company.
We urge you to review the presentation carefully before making any investment decision. This presentation shall not constitute an offer to sell, or the solicitations of an offer to buy, nor shall there be any sale of the securities mentioned herein in any State in which such offer, solicitation, or sale would be unlawful under the securities
laws of any such State. Neither the Securities and Exchange Commission, nor any state regulatory authority endorses this offering. This presentation must be read in conjunction with the Admission Document and it contains only a synopsis of more detailed information to be made available in relation to the matters described in this document and accordingly no reliance may be placed for any purpose whatsoever on the sufficiency or completeness of such information and to do so could potentially expose you to a significant risk of losing all of the property invested by you. The proposals in the presentation are preliminary and are subject to updating, completion, revision, amendment and verification, which may result in material changes. No reliance should be placed on any of the information and no representation or warranty, express or implied, is given by the Company as to the accuracy of the information or opinions contained in this document and, save in respect of fraud, no liability is accepted by the Company or any of its directors, members, officers, employees, agents or advisers for any such information or opinions.
This presentation contains certain forward-looking information about the Company which are statements, beliefs, opinions or projections that are not historical facts. By their nature, forward looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. Words such as “expect(s)”, “believe(s)”, “may”, “anticipate(s)”, “project(s)”, “forecast” and similar expressions are intended to identify forward-looking statements. Forward looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Accordingly, results could differ from those projected as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks.
By attending the presentation and/or retaining these presentation materials you agree to be bound by the foregoing restrictions.
Disclaimer
1
Overview
Large scale development of sustainable crude palm oil (CPO) production to supply the increasing world demand
Significant land position with planting target of over 100,000 hectares
Early cash flows from regenerated palms
High capital growth from new planting programme
Highly experienced management with proven track record in oil palm development
Liberia is a fast growing investment destination for multi-national corporations:
• Oil Palm – Golden Agri and Sime Darby
• Resources – Arcelor Mittal, BHP and Chevron
Strategic joint venture for capital funding
Highly favourable valuation compared to listed peer group
2
Palm Oil Uses Most consumed vegetable
oil in the world
Extracted from reddish palm fruit which is harvested and pressed into crude palm oil (‘CPO’)
A healthy alternative to hydrogenated oils such as soya and sunflower oil
Used in foods – margarine, instant noodles, chocolate and processed foods
43 of top 100 food brands in UK contain palm oil
Consumer goods including soap, detergents, cosmetics & pharmaceuticals
3
Mars Nestlé Unilever Young’s Unilever
Premier Foods Wrigley Mars Mars Birds Eye
Ginsters United Biscuits Unilever Northern Foods Kellogg’s
Sample of Top Selling UK Products
Cadbury Premier Foods ABF Warburtons McDonalds
Demand /Supply Mismatch
4
Demand
Palm oil demand expected to double by 2015, exceed 100 million tons (GIA Report, Feb 2010)
Demand is driven by increasing population and more importantly a growing middle class
Supply
Largest producers, Malaysia and Indonesia, have little scope to increase acreage under oil palm cultivation
Significant increase in supply is not possible by mere technological improvements
Projections of palm oil demand and
production (million tons)
Source: USDA, Global Industry Analysts Inc. (GIA)
Widening gap
2011 2012 2013 2014 2015 Palm oil production 50.0 53.0 56.0 60.9 63.0 Palm oil demand 55.5 64.3 74.5 86.3 100.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
More land has to be brought under cultivation
5
Africa –
The Future Oil
Palm Hub
Favorable land and climatic conditions for palm oil
production in Africa
Palm oil in Africa can be traced back 5,000 years –
Palm Oil grows naturally in most of Western Africa
60% of the world’s uncultivated arable land lies
in Africa (McKinsey and Company Report)
By 2040, African countries can increase collective value of
their agricultural output from $280 billion to $880 billion
(McKinsey and Company Report)
Cost of land in these regions is very low in comparison to
rest of the world
Growing middle class in Africa - 60% growth in the past
decade; implying increased domestic demand for palm oil (African Development Bank Study)
Why Invest in Palm Oil in Africa
Investment into Liberia
6
Oil palm and resource companies leading the growth - $19b in commitments
Overview of Operations Excellent access to road infrastructure & deepwater ports
7
Palm Bay Estate • 50 year concession enacted by parliament • Total area - 34,398 ha • 25 km from deepwater port of Buchanan • Mill commissioned • 1,110 ha of planting completed in 2011 • Annual planting increasing to 3,000+ Ha by 2013
Butaw Estate • 50 year concession enacted by parliament • Total area of 54,550 ha • 42 km from deepwater port of Greenville • Manager in place 20 years experience in SE Asia • 250,000 seedlings already in nursery and expanding • Annual planting increasing to 3,000+ Ha by 2013
River Cess • Working with small holders to develop concession • Expansion potential of 80,000 ha • Excellent position between two existing Estates
Board and Senior Management EPO has the right team in place to manage growth Board of Directors
Michael Frayne Executive Chairman Founder of EPO in 2006 who identified and successfully negotiated Liberian concessions. Over 20 years of experience in the resources sector, establishing several UK and Australian listed companies - founding director of Asia Energy plc
Geoff Brown Plantations Director A pioneer in the oil palm industry with over 40 years of experience in large scale plantation management, with 10+ in Malaysia and 20+ in Indonesia as Managing Director of P.T. London Sumatra Indonesia. Former Chairman of New Britain Palm Oil & Plantations Director of Harrisons & Crosfield plc
Joseph Jaoudi Non Executive Director A qualified engineer who owned and operated the Palm Bay Estate in Liberia for over 10 years. He also managed other significant businesses in Liberia and USA including biomass power generation
Anthony Samaha Non Executive Director Chartered accountant ex Ernst & Young, experience in due diligence, capital raising, valuations, and mergers and acquisitions. Anthony is the Finance director of AIM listed, Altona Energy plc
Shankar Varadharajan Non Executive Director Representative of SIVA Group, with over 13 years experience of global management including senior positions with Motorola and The Tata Group. Expertise in executing business strategy, organising project financing, capital raisings, mergers and valuations
Sandy Barblett General Manager – Commercial 20 years experience in senior management roles with public companies. He is a partner at boutique corporate finance firm Ironbridge Capital in London
Tim Daniel Chief Financial Officer Qualified chartered accountant and previously worked at KPMG, with clients who mostly in the natural resources and small-cap sectors
Allen Yancy Manager Corporate Affairs
30 years extensive experience of Liberian business and politics and held senior positions in the Liberian Sugar Corporation for 7 years
8
Declan Griffin Head of Country - Liberia Declan has 30 years experience working in West Africa , Middle East and Central Europe in similar type businesses with focus on finance and administration including Xerox International. He is responsible for all functions in Liberia
Senior Management
Liberia
Sashi Nambiar Head of Operations Involved in the management of large scale palm oil estates for more than thirty years, primarily in Malaysia and Indonesia
London
Palm Oil Processing Mill
The only palm oil processing mill operational in Liberia (5t of FFB* per hour)
Mill processing rehabilitated oil palms to be used for training & development of staff
Extraction rates over 18%
Good quality palm oil produced with low free fatty acid content
Future sized mills will be capable of processing up to 60t of FFB per hour
CPO sales to domestic market, Portugal & Cameroon
* FFB = Fresh Fruit Bunches
9
Palm Bay Estate
Outside of mill
Palm oil mill
Fresh fruit bunches on way to the mill
Large Scale Planting Programme Planting programme at Palm Bay & Butaw
Successful planting of 1,100 ha in 2011
Oil palm seeds are specific for West African conditions and sourced from Ghana, Cote D’Ivoire, DRC and Thailand
1.58 million seedlings and young palms in nursery
Existing stock in nursery will supply over 8,000 ha new planting in 2012 and 2013
2014 target planting rate of 8,000 hectares
Significant improvement in employee skills due to on the job training
Land preparation current focus
10
Nursery at Palm Bay
Sustainable Crude Palm Oil
Sustainable CPO is adhering to social and environmental principles developed by groups like the Roundtable on Sustainable Palm Oil (RSPO)
EPO a member of RSPO since July 2007
Major companies announced gradual shift to buying only certified sustainable CPO – Unilever, Nestlé, Burger King, Sainsbury, Tesco
In 2011 certified sustainable CPO made up 3 mt, which is 6.6% of the global palm oil production capacity of 45 mt
Increasing global demand for sustainable CPO
Expansion areas are located on previously logged land so no degradation to primary forested areas in Liberia
11
Seedlings being cared for in Palm Bay Estate pre-nursery Source: Reuters News, 12 v 2010, “RSPO asks palm oil buyers to plan green palm demand”
US $60 million Joint Venture
US$60m joint venture with BioPalm Energy (subsidiary of the SIVA Group) finalised
EPO the JV manager and Liberian assets held on 50:50 basis
Long-term funding enables accelerated development of project
Development finance in process ($30m-$60m) to fund major expansion
Bank guarantee from SIVA to sit behind debt funding
12
May 2011 at Palm Bay Estate: Madam Ellen Johnson Sirleaf President of Liberia and Nobel Peace Prize co-winner
Equatorial Palm Oil
13
Key share data
12.00 Share price
£15.4m Market
Capitalisation
128.3m Ordinary Shares
Market Ticker: AIM:PAL NOMAD: Strand Hanson Broker: Mirabaud Securities
Significant Shareholders Share Price
Other 47.1%
Directors 12.3%
JP Morgan 6.3%
Schweco Nominees Ltd 3.2%
Blackrock 2.4% Henderson 2.0%
Other Investors: Smith & Williamson; CQS; Brewin Dolphin; Killick
Listed Peer Comparables
14
Potential upside in re-rating, given current valuation relative to peer group Company Name Listing Ticker
Market Cap ($m) EV ($m)
Planted Hectares
EV/Planted Hectare ($/ha) Plantation Locations
Anglo Eastern Plantations London AEP 426 356 54,506 6,533 Indonesia, Malaysia
Asian Plantations London PALM 200 237 10,500 22,617 Malaysia
MP Evans London MPE 346 191 26,167 7,314 Indonesia, Malaysia
Narborough Plantations London NBP 16 13 555 23,497 Malaysia
New Britain Palm Oil London NBPO 1,779 1,783 77,000 23,158 PNG
R.E.A. Holdings London RE. 313 445 32,083 13,860 Indonesia
Golden Agri-Resources Singapore E5H 6,086 5,517 354,831 15,548 Indonesia, Liberia
Sime Darby Malaysia SIME 17,000 9,606 522,203 18,395 Malaysia, Indonesia, Liberia
Weighted Average
17,596
Equatorial Palm Oil London PAL 35 25 8,700 2,874 Liberia
Figures as at 27th October 2011
Investment Case Summary
Extensive land position
Enormous market opportunity Planting programme established
Huge interest in West African palm oil
sector - including significant investment from Sime Darby and Golden Agri
Experienced management team
Funding strategy in place
Strong share register
15
January 2011: Aerial Photo of Palm Bay Estate
16
Michael Frayne Executive Chairman
94 Jermyn Street London SW1Y 6JE Tel: +44 (0)20 7766 7555 Fax: +44 (0)20 7766 7599 Mobile: +44 (0)7788 724 010 mjf@epoil.co.uk
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