HAG – A NEW CYCLE OF GROWTH 1
BUSINESS OPERATION Business Segmentation Industrial Fruits Cow Property Crops Passion Rubber Myanmar Fruits Banana Palm Oil Vietnam Dragon Fruits Mango In harvest Chili Will harvest before 6 months Others: 12 other tropical Will harvest after 6 months fruits 2
PAST – LESSON LEARNS MAC = 14% DEBT UP- CASH DOWN TO DO: 48,000 HA RUBBER 30,000 HA PALM OIL WHICH DOES NOT CREATE CASH FLOW UNTIL 2017-18 30,000 Bil VND 27.300 25,000 Debt Cash 20,000 15,000 10,000 5.800 5,000 3.588 791 0 2010 2016 • Mistake in taking extensive debt to build up long term assets • Rubber price dropped from $6,000 to $1,000 (now $2000) • Planting industrial crops is risky as(1) small product differentiation (2) demand growth is low • Debt restructure is done in 2017 3
HOWEVER OUR EXECUTION ABILITY IS PROVEN MAC = 14% • We made mistakes, but no one can doubt our execution ability • Execution ability is important for the transformation we are telling you later. • We were in liquidity problem but our asset value is way over our liability EXECUTION ABILITY: 2010-17 LIQUIDATION VALUE LIQUIDATION VS. DEBT 18,000 ha Fruits Fruits: $595m 49,000 ha Rubber Rubber: $648m $1870m vs $947m (as of 3Q17) 29,000 ha Palm Oil Palm Oil: $128m Market Cap: $330m 150,000 m2 Myanmar: $500m Myanmar 4
LEGACY: RUBBER MAC = 14% PLANTATION AND EXPLOITED AREAS (HA) RUBBER: REVENUE AND GROSS PROFIT 50,000 VND bn 3,000,000 Accummulative Plantation (ha) 45,000 Total Revenue (Mil. VND) Exploited Area (ha) 40,000 2,500,000 Profit before interests (Mil. VND) 35,000 2,000,000 30,000 25,000 1,500,000 20,000 15,000 1,000,000 10,000 500,000 5,000 0 - 2017 2018 2019 2020 • Ramping up production in 2017-18 • Rubber price at $1900/ton, good for Cash flow but humble profit due to interest capitalization • However, rubber tree prices have skyrocketed 5
LEGACY: PALM OIL MAC = 14% PLANTATION AND EXPLOITED AREAS (HA) RUBBER: REVENUE AND GROSS PROFIT 30,000 Accummulative Plantation (ha) VND bn 2,500,000 Total Revenue (Mil. VND) Exploited Area (ha) 25,000 Profit before interests (Mil. VND) 2,000,000 20,000 1,500,000 15,000 1,000,000 10,000 500,000 5,000 - 0 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Harvest will start in 2018 • Untested commodity product by HAG, we expect modest cash flow but tiny profit from Palm Oil 6
LEGACY: COW MAC = 14% COW: IMPORTED AND SOLD REVENUE AND PROFIT BEFORE INTEREST 140,000 4,000,000 VND bn Total Revenue (Mil. VND) 120,000 Profit before interests (Mil. VND) 3,500,000 100,000 3,000,000 80,000 2,500,000 60,000 2,000,000 40,000 1,500,000 20,000 1,000,000 - 2015 2016 2017 2018 2019 2020 500,000 Số bò nhập trong kỳ Số bò bán trong kỳ Number of imported cows Number of cows for sale - 2015 2016 2017 2018 2019 2020 • Tight cash to raise cow in 2016 – hence low efficiency • But cow now is a key component in Global Gap standard for fruits 7
MYANMAR PROJECT: THE GEM OF YANGON MAC = 14% PHASE 1: 2013-15 PHASE 2: 2017-19 RETAIL: 38,300 m2 RETAIL: 29,300 m2 Rent: 100% OFFICE: 80,000 m2 OFFICE: 64,500 m2 Rent: 52% HOTEL: 430 Rooms HOTEL: NO Occupancy: 40% APARTMENT: 0 APARTMENT/ Sold: O SERVICED APT: 1034 8
MYANMAR: VALUE AT $500-600M UNDER NEGOTIATION FOR EXIT PHASE 2: APARTMENT / SERVICED APARTMENT WILL INCREASE PROFIT SIGNIFICANTLY 90 Total Revenue (USD) Millions 84 PHASE 2 EBITDA (USD) 80 Profit before tax (USD) 70 65 63 60 51 49 50 42 40 33 30 18 20 12 10 0 2017 2018 2019 • The best retail mall in Myanmar. All phase 2 retail areas have been reserved. • Apartment sold is going to create strong profit in 2018-19. • However, HAG is working with a few buyers to partially or fully exit this project to focus on fruits 9
TRANSFORMATION: FOCUS ON CONSUMER DEMAND MAC = 14% FOCUS: BECOMING ONE OF THE LARGEST TROPICAL FRUITS PRODUCERS GLOBALLY WHAT WE GOT WHAT WE’VE ACHIEVED UNTIL 3Q2017 • • 18,000ha plantation Change Our Way Of Doing Business : • We grow what markets needs. • 19 types of fruits & spices • We plant what clients urge • 2,000ha harvest • Absolute Advantages : • 25 big Partners • Good quality land bank • 50,000tons fruits sales • Large scale with low production cost • Revenue: $50mil • Nearest to China – The largest market • One of a few providing Global Gap Standard • EBITDA: $20mil 10
HAGL FRUIT - THE BIG PICTURE • 3bn population (CN, ID, JP, KO, ASEAN ) Addressable Market MARKET AND COMPETITOR • Booming Middle Income, Modern Trade Growing Market • 95% farmers with smaller than 5ha Weak Competitor • 100,000ha, cheap labor, and close to markets Ready Infrastructure ADVANTAGES HAG • Global Gap Standard High Quality • 83 cold storages in 4 countries, 25 big partners Initial Results 11
SUPPORT BY HUGE INCREASING MIDDLE INCOME CHINA IS A ON SPOTLIGHT • China middle class will be added by more than 300mil people (100 mil households) • 400 mil ton of fresh fruits consumed globally, China accounts for 40%. • Rising middle class, and urbanization will push development of modern supply chain, promoting high quality of fruits 12
VIETNAM FRESH FRUIT EXPORT: BOOMING MAC = 14% BUT NUMBERS LIKELY UNDERSTATED AS EXPORT FRUITS & VEGETABLES: BOOMING DRAGON FRUITS ACCOUNTS FOR 61% • Vietnam Fruits export grow 7 folds in 7 years, hitting $3.5bnVietnam’s vegetable and fruits growth 7 folds in 7 years, reaching 7 bil. USD in 2017 (fruits accounts for 85%) • China occupies 75% of total export owing to being close and strong demand; • The statistics may be understated due to a large export number was border transaction 13
SUPPLY CHAIN: SMALL PLAYERS IN TROUBLE 95% FARMERS A FEW COMPANIES & WITH LESS THAN 5HA LAND COLLECTIVES Collectors NO … Collector Big Collector MUCH IN VIETNAM HIGHER OR AT MARGIN BORDER Wholesalers NO (packing & Wholesalers grading) Local Large Distributors Distributors IN IMPORT COUNTRIES Traditional Modern Markets Markets MOSTLY LOW QUALITY FRUITS HIGHER QUALITY FRUITS 14
HAG’S POSITIONING MAC = 14% 60 Value added Organic PAN 40 Global GAP HAGL Hoang Hau Dragon fruit Fohla NAFood Viet Gap Viet GAP 20 Mass 95% of all farmers in Vietnam Product 0 20,000 ha 0 5000 5 ha 10000 100 ha 15000 20000 25000 30000 35000 Area 15
AREA OF PLANTATION MAC = 14% EXPLOITED PLANTATION AREAS AND PRODUCTION – 2018 VS. 2017: TURNING POINT IN 2018 tons ha 2017 2018 2017 2018 200,000 186,834 2500 2,137 2,000 1,962 160,000 2000 1,805 1,635 120,000 1500 1,159 971 80,000 1000 57,224 773 713 47,337 40,734 42,134 27,000 40,000 500 291 10,145 148 7,332 9,172 35 35 1,057 1,163 0 0 Passion fruit Dragon fruit Banana Mango Chilli Pepper Jack fruit Passion fruit Dragon fruit Banana Mango Chilli Pepper Jack fruit • Except passion fruit, the rest exploited areas in 2017 happens in 2018. • Hence 2018 will be a turning year for HAG in term of fruit revenue and profit contribution • However, the exploited areas in 2018 is only 9,000 ha out of 18,000 ha has been planting. 16
CASE STUDIES: PASSION FRUITS MAC = 14% Market Characteristics HAGL Achievements • • Market size is small : China import 100.000ton in 2016, 1.600ha planted and applying Global GAP, 1.000 ha mostly from Vietnam. harvested, export 30.000 ton, Revenue VND 700bil, EBITDA VND 328bil in 9mth 2017. • But growth quickly : China import up 50%/year since • 2014. Built own cold processing factory and storages. • • Fragmented market: Growers and traders are mostly Established direct supply chains to big importers in China. small. • Wholesalers pay 20% premium vs. farmer products. • Logistics is strict for post harvest. • Hold 30% of China import – The biggest passion fruit • Price volatility is big both seasonality and short-term. exporter. We consider Passion Fruit the first successful example of HAGL Fruit business model 17
CASE STUDIES: PASSION FRUITS MAC = 14% PRODUCTION WILL JUMP 35% BUT WITH MUCH EXPLAIN WHY REVENUE JUMPS 45% TO $63M HIGHER EXPORT QUALITY WITH ESTIMATED EBITDA OF $27M ASSUMTIONS • Productivity: 35 ton/ ha vs. average 40 ton /ha by farmers • Price: VND 24,000/kg similar to average 2017 expected price • Harvest area: discount 10% vs planted area 18
CASE STUDIES: BANANA MAC = 14% Market Characteristics HAGL Achievements • • Market size is huge : 15mil ton trade globally, China 2500ha planted and applying Global GAP, 400ha consume 14mil ton/year. harvested, export 15.000 ton, Revenue VND 230bil, EBITDA VND 90bil in 9mth 2017. • Well establish industry : Main Growers and Traders are • big and professional. Established direct supply chains to big wholesalers/retailers in China, Vietnam, Cambodia… • Product quality: very high standard for premium market. • Pricing equal to Philippine banana. • Price volatility: high for lower end segments and less for premium market. Banana is a big and competitive business. HAGL has advantages and initial achievements 19
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