0926 DBS Vickers Japfa

Singapore Company Focus
Japfa Ltd
Refer to important disclosures at the end of this report
Bloomberg: JAP SP | Reuters: JAPF.SI
DBS Group Research . Equity
25 Sep 2014
BUY S$0.855 STI : 3,292.81
A meaty proposition
(Initiating Coverage)
Price Target : 12-Month S$ 1.16
Reason for Report : Initiating coverage
Potential Catalyst: Sequential recovery in 2H14 earnings
An integrated Dairy, Animal Protein, and Consumer

Foods producer with presence in Asias fastgrowing markets
First-mover advantage with premium pricing in
Dairy to drive 53% earnings CAGR in FY13-16F and
offer core ROE of 9.2-11.8% in FY14F-16F
Japfa is a fully integrated player in a high entry
barrier industry within rising middle-class markets
Initiating with BUY for 36% upside to S$1.16 TP
Analyst
Ben SANTOSO +65 6682 3707
bensantoso@dbs.com
Indonesian Research Team
Price Relative
An integrated Dairy, Animal Protein, and Consumer Foods producer with presence in Asias fast-growing markets
S$
The right segment at the right place. Japfa Limited

(Japfa) has been actively expanding in all of its business
segments not only in Indonesia, but also in China, India,
Vietnam and Myanmar where per capita demand for dairy,
animal protein and branded consumer foods is still rising.
With over 40 years of track record and significant market
shares in most of its businesses, we expect Japfa to continue
capitalising on Asias demographic dividend. We expect the
group to deliver FY13-16F bottom line CAGR of 53% and
core ROE of 9.2% -11.8% in FY14F-16F.
Relative Index
1.0
209
1.0
189
0.9
169
0.9
149
0.8
129
0.8
109
0.7
Aug-14
89
Japfa Ltd (LHS)
Relative STI INDEX (RHS)
Forecasts and Valuation

FY Dec (US$ m)
Turnover
EBITDA
EBITDA (ex. BA gains)
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
Net Pft (ex. BA gains)
EPS (S cts)
EPS Pre Ex. (S cts)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (S cts)
Net DPS (S cts)
BV Per Share (S cts)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
2013A
2014F
2015F
2016F
2,697
233
257
115
42
42
50
25.3
25.3
(58)
(58)
25.3
0.0
246.1
3.4
3.4
1.6
4.9
0.0
0.3
1.0
6.4
3,021
345
330
214
97
97
86
7.0
7.0
(72)
(72)
7.0
0.0
58.0
12.2
12.2
7.9
6.3
0.0
1.5
0.6
10.5
3,524
430
430
290
132
132
132
9.5
9.5
36
36
9.5
0.0
67.5
9.0
9.0
7.2
5.5
0.0
1.3
0.5
10.4
3,956
543
543
397
180
180
180
13.0
13.0
37
37
13.0
0.0
80.4
6.6
6.6
4.3
4.6
0.0
1.1
0.5
11.8
ICB Industry : Consumer Goods

ICB Sector: Food Producers
Principal Business: Japfa Limited is a leading industrialised producer
of multiple animal proteins, dairy and consumer food products in
Asia.
Source of all data: Company, DBS Bank, DBS Vickers, Bloomberg

Finance L.P.
www.dbsvickers.com
ed: TH / sa: JC
Structural opportunity. We value Japfa at US$1,651m (or

S$2,039m), based on sum-of-parts valuation, employing
comparative EV/EBITDA multiples. Our TP implies FY15F PER
of 12.5x and PEG ratio of 0.24. Japfas growth will primarily
be driven by capacity expansions in China and Indonesia,
where strong dairy and animal protein demand continues to
drive both volume and prices.
Strong relative positioning. Japfas prospective earnings
growth rate is superior to its peers in Indonesia, thanks to its
fast-growing dairy segment, significant market shares and
brand recognition. Japfas competitive advantage lies in its
bio-security measures, high milk yield, full integration model
(now being replicated across its market presence) and widely
recognised So Good and Greenfields brands.
Initiating with BUY. As the second largest poultry player
and an established branded dairy producer in Indonesia, as
well as a fast-growing dairy farmer in China; Japfa is a
beneficiary of Asias growing requirement for animal
protein. We believe the counter remains undervalued at the
current level.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (S$m/US$m)
Major Shareholders
Rangi Management (%)
Morze International (%)
Tasburgh Ltd (%)
Free Float (%)
Avg. Daily Vol.(000)
1,765
1,507 / 1,189
52.6
16.0
7.2
16.2
8,017
Company Focus
Japfa Ltd
Investment summary
A brief history. Japfa Limiteds (Japfa) heritage began
over 40 years ago when PT Java Pelletizing Factory was
established in 1971 as a copra pellet producer. In 1975, the
group commenced its first poultry feedmill in Surabaya.
Following its listings on the Jakarta and Surabaya Stock
exchanges in 1989 and the acquisition of four poultry feed
producers in 1990, its name was changed to PT Japfa
Comfeed Indonesia. Through internal reorganisations of
founder shares, PT Japfa Comfeed Indonesia became a
subsidiary of Japfa in 2009. Between 2011 and 2014, Japfa
consolidated the founders other businesses in India, Vietnam,
China and Myanmar; as well as its Consumer Foods business
in Indonesia, through a series of internal acquisitions (charts
illustrating the groups historical restructuring are presented in
Appendix B of this report). Today, Japfa is a verticallyintegrated food producer; and based on 2013 data, has
weekly output of 5.5m broilers, 2,900 MT of raw milk, 4,700
heads of beef cattle, 1,400 piglets and 1,600 MT of prepared
food. Japfa also sold 60k MT of poultry feed per week in 2013
both internally and externally.
Significant growth potential. Historically, the group

had booked EBITDA (excluding biological asset gains/loss and
FX gains/losses) CAGR of 23% between 2011 and 2013, and
is projected to accelerate towards 28% CAGR between 2013
and 2016. This is largely driven by the Dairy and Animal
Protein segments. In Dairy, Japfa intends to expand its current
operations in Indonesia (due for completion in 4Q14) and is
building a second dairy farm there (due for completion in
1H16). The group also plans to double its dairy farm
production capacity in China by constructing another fivefarm hub in Inner Mongolia. Construction is scheduled to
commence before the year-end and it is due to be completed
by end-2018. In the Animal Protein segment, we expect
Japfas combined DOC output regionally to expand by 17%
CAGR between 2013 and 2016. Demand will be driven by
rising income per capita, affordability relative to beef and
religious/dietary restrictions. As adverse impacts from Rupiah
depreciation and fuel subsidy removal (possibly by early 2015)
wear off, we believe pent-up demand in Indonesia will
continue to fuel growth.
A leading Dairy, Animal Protein, and Consumer

Foods producer. By volume, in 2013, Japfa commanded
25% market share in Day Old Chicks (DOC), 22% in poultry
feed, 25% in fresh milk, and 31% in frozen food in Indonesia.
Japfa Dairy segments milk output is the largest in Indonesia
and it is one of the first to undertake an industrialised
approach to dairy farming in China where it currently
operates a five-farm hub (four currently in the operational
stage) in Shandong Province. The group also commands a
significant price premium for its raw milk in China and fresh
milk in Indonesia mainly due to superior safety and
nutritional standards. For this reason, Japfas fresh milk
products in Indonesia command a more significant 38% share
by value.
Key investment risks. Outbreak of diseases affecting

livestock at the groups poultry, dairy, swine, beef cattle and
aquaculture farms would have material effect on Japfas
business and financial status. The group is also exposed to
volatile movements in raw material costs and currencies across
key markets. For example, the recent drop in Rupiah and
weakness in consumer purchasing power in Indonesia caused
delays in passing-on raw material cost pressures. Japfa needs
constant supply of superior livestock genetics, for which there
are limited suppliers. Changes in government regulations,
licensing, as well as other interventions, and price/volume
controls across various jurisdictions may also adversely affect
Japfas profitability. The group may require further funding to
expand, and is hence vulnerable to liquidity and credit risks.
Capitalising on structural opportunity in Asias

emerging markets. A majority (approximately 65%) of
Japfas 2013 revenue came from its Poultry segment (Feed,
DOC and broilers) in Indonesia, where chicken meat remains
the most consumed and has the highest potential for growth
when compared to neighbouring countries consumption
per capita. We expect Japfas broiler sales volume in Indonesia
to expand by 15% CAGR between 2013 and 2016. The group
is also a key beneficiary of undersupply in premium-quality
milk in both Indonesia and China, thanks to its early-mover
advantage, proven capability, and superior quality (as attested
by its price premiums in both markets).
Page 2
Company Focus
Japfa Ltd
Valuation methodology
We employ sum-of-parts valuation based on peers EV/EBITDA
multiples to arrive at our TP for the counter.
Using this methodology, FY15F EBITDA from Japfas three
segments: Dairy, Animal Protein and Consumer Foods are
compared to their respective peers using in-house/consensus
FY15F EV/EBITDA multiples. Each segments FY15F Enterprise
Value (having taken into account any hold co discount) is
subsequently subtracted by their respective net debts (based
on their 2013 proportionate liabilities) to arrive at their equity
values. Each segments equity value is then multiplied by
Japfas effective ownership interest to arrive at net equity
value for the group.
In the Dairy segment, we compared the groups operations
with mostly upstream Dairy producers operating in China;
namely Yuan Sheng Tai Dairy Farm (1431 HK), China Modern
Dairy (1117 HK), China Huishan Dairy (6863 HK) and Inner
Mongolia Yili (600887 CH). Using 24 Sep14 closing prices, the
average FY15F EV/EBITDA for Dairy peers was 8.1x. Based on
this, we peg this segments multiple at 8.0x
In the Animal Protein segment, the groups operations are
comparable to Charoen Pokhpand Indonesia (CPIN IJ),
Malindo Feedmill (MAIN IJ), Thai Union Frozen (TUF TB), and
Japfas own subsidiary, PT Japfa Comfeed Indonesia (JPFA IJ).

Based on 24 Sep14 closing prices, the average FY15F
EV/EBITDA for the Animal Protein peers was 8.4x (excluding
Charoen Pokhpand Indonesia being an outlier). However,
for this segment we peg the EV/EBITDA target to implied
consensus EV/EBITDA of PT Japfa Comfeed Indonesia and
applied a 10% holding company discount (as the groups
Animal Protein contribution is primarily derived from its
Indonesian subsidiary). Hence, the target EV/EBITDA employed
is 8.5x (less 10% holdco discount).
In the Consumer Foods segment, we compared Japfas
operations with Indofood CBP Sukses Makmur (ICBP IJ),
Mayora Indah (MYOR IJ), and Tiga Pillar Sejahtera Food (AISA
IJ). Based on 24 Sep14 closing prices, the average FY15F
EV/EBITDA for the Consumer Foods peers was 11.7x. Based
on this, we peg this segments target EV/EBITDA multiple at
12.0x.
In aggregate, we obtained a net Enterprise Value of
US$3,400m. Subtracting forecast net debt and multiplying by
each segments effective ownership, Japfas net equity value is
hence estimated at US$1,651m or S$2,039m implying a TP
of S$1.16/share.
Page 3
Company
FocusFocus
Company
JapfaJapfa
Ltd Ltd
Peer comparison
Dairy
YuanShengTai Dairy Farm
China Modern Dairy Holdings
China Huishan Dairy Holdings*
Inner Mongolia Yili Industrial
Simple average
Bloomberg code
1431 HK Equity
1117 HK Equity
6863 HK Equity
600887 CH Equity
FYE
12/2013
12/2013
03/2014
12/2013
Mkt Cap
(US$ mn)
685.8
2,466.0
3,382.7
13,054.7
Curncy
HKD
HKD
HKD
CNY
Price
(LCY)
1.4
4.0
1.8
26.2
EPS (LCY)
14F
15F
0.15
0.19
0.27
0.33
0.12
0.16
1.29
1.59
Animal Proteins
Charoen Pokphand Indonesia
Malindo Feedmill
Japfa Comfeed Indonesia
Thai Union Frozen Products
Simple average
Bloomberg code
CPIN IJ Equity
MAIN IJ Equity
JPFA IJ Equity
TUF TB Equity
FYE
12/2013
12/2013
12/2013
12/2013
Mkt Cap
(US$ mn)
5,619.0
512.7
1,158.3
2,544.0
Curncy
IDR
IDR
IDR
THB
Price
(LCY)
4,100
3,425
1,300
71.5
EPS (LCY)
14F
15F
189
236
182
265
81
108
4.4
5.4
Consumer Foods
Indofood CBP Sukses Makmur
Mayora Indah
Tiga Pillar Sejahtera Food
Simple average
Bloomberg code
FYE
ICBP IJ Equity
12/2013
MYOR IJ Equity
12/2013
AISA IJ Equity
12/2013
Mkt Cap
(US$ mn)
5,360.7
2,208.8
563.7
Curncy
IDR
IDR
IDR
Price
(LCY)
11,000
29,550
2,305
EPS (LCY)
14F
15F
442
512
939
1,198
134
169
Integrated Food Producers

Charoen Pokphand Foods
Indofood Sukses Makmur
Simple average
Bloomberg code
FYE
CPF TB Equity
12/2013
CPIN IJ Equity
12/2013
INDF IJ Equity
12/2013
Mkt Cap
(US$ mn)
7,442.1
5,619.0
5,173.6
Curncy
THB
IDR
IDR
Price
(LCY)
31.0
4,100
7,050
EPS (LCY)
14F
15F
1.43
1.95
189
236
478
551
* FY15 & 16 forecast
Source: DBS Bank, DBS Vickers, Bloomberg finance LP

Based on closing prices as at 24 Sep14
Page 4
PE (x)
14F
9.1
14.7
15.3
20.2
14.8
15F
7.2
12.1
11.5
16.4
11.8
PE (x)
14F
21.7
18.8
16.1
16.2
17.0
15F
17.3
12.9
12.1
13.2
12.7
PE (x)
14F
24.9
31.5
17.2
24.5
15F
21.5
24.7
13.7
19.9
PE (x)
14F
21.7
21.7
14.7
19.4
15F
15.9
17.3
12.8
15.3
P/BV (x)
14F
15F
0.9
0.8
2.3
2.0
1.8
1.5
4.0
3.6
2.3
2.0
EV/EBITDA (x)
14F
15F
4.6
3.5
12.3
10.6
9.4
7.2
13.5
10.9
10.0
8.1
Div Yield (%)

14F
15F
0.0%
0.0%
0.0%
0.0%
1.4%
1.8%
2.2%
2.4%
0.9%
1.0%
13-15 EPS
CAGR (%)
30.6
63.5
25.7
20.3
35.0
P/BV (x)
14F
15F
5.5
4.5
4.3
3.3
2.4
2.0
1.9
1.8
2.9
2.4
EV/EBITDA (x)
14F
15F
15.7
13.0
14.8
9.1
9.1
6.4
11.3
9.7
11.7
8.4
Div Yield (%)

14F
15F
1.2%
1.5%
0.9%
1.2%
1.3%
1.6%
3.1%
3.8%
1.8%
2.2%
13-15 EPS
CAGR (%)
23.7
36.6
38.8
47.3
40.9
P/BV (x)
14F
15F
4.5
4.0
5.8
4.9
2.5
2.2
4.3
3.7
EV/EBITDA (x)
14F
15F
15.9
13.6
18.3
14.4
9.0
7.1
14.4
11.7
Div Yield (%)

14F
15F
1.7%
2.0%
0.8%
0.8%
0.6%
0.7%
1.1%
1.1%
13-15 EPS
CAGR (%)
15.8
1.4
26.0
14.4
P/BV (x)
14F
15F
1.9
1.8
5.5
4.5
2.3
2.1
3.2
2.8
EV/EBITDA (x)
14F
15F
16.2
13.4
15.7
13.0
7.9
6.9
13.3
11.1
Div Yield (%)

14F
15F
2.5%
3.3%
1.2%
1.5%
2.3%
3.3%
2.0%
2.7%
13-15 EPS
CAGR (%)
NM
23.7
39.1
31.4
Company Focus
Japfa Ltd
Valuation summary
Dairy peer comparison
YuanShengTai Dairy Farm
China Modern Dairy Holdings
China Huishan Dairy Holdings*
Inner Mongolia Yili Industrial
Peer average
EV/EBITDA
CY15F
3.5
10.6
7.2
10.9
8.1
Animal Protein peer comparison

Malindo Feedmill
Japfa Comfeed Indonesia
Thai Union Frozen Products
Peer average
EV/EBITDA
CY15F
13.0
9.1
6.4
9.7
8.4
Consumer Foods peer comparison

Indofood CBP Sukses Makmur
Mayora Indah
Tiga Pillar Sejahtera Food
Peer average
EV/EBITDA
CY15F
13.6
14.4
7.1
11.7
CY15F
Target CY15 Holdco CY15F Net CY15F Net CY15F Net Proportion Ownership
Equity
Japfa Limited
EBITDA (US$ m) EV/EBITDA discount EV/EBITDA EV (US$ m) debt (US$ m) of net debt
value (US$ m)
Dairy
115.7
8.0
0%
8.0
925
74.8
10%
61.9%
526.4
Animal Protein (JPFA)
278.5
8.5
10%
7.7
2,131
538.9
57.5%
915.2
78%
Animal Protein (ex JPFA)
24.0
8.5
0%
8.5
204
44.9
100.0%
159.3
Consumer Foods
11.7
12.0
0%
12.0
140
89.8
12%
100.0%
50.5
Aggregate value
429.9
7.9
3,400
748
100%
1,651.4
(+) Cash
(-) Borrowings
Net debt
Number of shares (m)
Equity value/share (US$)
Equity value/share (S$)
FY15F earnings (US$ m)
Implied FY15F PER basd on TP
FY13-16F earnings CAGR
PEG
203
951
748
1,765
0.94
1.16
132.0
12.5
53%
0.24
Source: Bloomberg Finance LP, DBS Bank estimates
Page 5
Company Focus
Japfa Ltd
SWOT analysis
Strengths
High industry barriers to entry: Capital and extensive
know-how
Leading market positions in multiple protein segments
Weakness
Volatility of raw material costs and exchange rates may
adversely affect profitability, if unable to pass on cost
pressures
Full integration enables the group to capture value across

the chain
Imports of cattle are subject to Indonesian

governments approvals and regulations, including quotas.
The industry is also subject to government interference to
control supply and prices of DOC in Indonesia and milk in
China. However these are transient; and in our view, prices
should eventually reflect fundamental supply and demand
High milk yields and consistently superior milk quality

standard
Required cost efficiency, since the margin in this

industry is thin
Extensive bio-security measures and vaccine production

capabilities
The industry is subject to outbreak of diseases that

would adversely affect the group, operationally and
financially
Opportunities
Undersupply in quality liquid dairy products in Indonesia
and China offers opportunity to expand capacity rapidly
through proven business model. We expect prices to remain
relatively steady
Threats
New Dairy entrants in China may compete against Japfa
after 2018
Strong and experienced management team with over 40

years of experience
Attractive macroeconomics that could drive growth

(increasing populations, income per capita, and food
expenditure)
Leading downstream consumer brands support growth
and margin expansion
Source: DBS Bank, DBS Vickers
Page 6
Faster expansion by competitors in Animal Protein

segment may erode market share or cause oversupply
Economic and political conditions in the countries
where Japfa operates could also affect its financial and
operating status
Company Focus
Japfa Ltd
Company background
Background. Japfa Limited (Japfa) is a leading
industrialised producer of multiple animal proteins, dairy and
consumer food products in Asia. Headquartered in Singapore,
the group operates within Indonesia, China, Vietnam, India
and Myanmar. The groups business is divided into three
operating segments, namely Dairy, Animal Protein (consisting
of Poultry, Beef Cattle, Swine, and Aquaculture), and
Consumer Foods. Approximately 87% of the groups FY13
revenue came from the Animal Protein segment, mostly
generated through its IDX-listed subsidiary, PT Japfa Comfeed
Indonesia. The Consumer Foods segment generated 8% of
FY13 revenue, and is the second largest. The Dairy segment
accounted for the remaining 5% of FY13 revenue, but offers
the highest growth potential. Japfas heritage began over 40
years ago and is now run by the second generation of the
Santosa family.
Business operating segments

Business
Segment
Business Activities
Dairy
Dairy product
Locations
Dairy farming
China (raw milk and distribution)
Milk processing
Indonesia (dairy products and distribution)
Branded milk distribution Southeast Asia and Hongkong (distribution)
Animal Protein
Poultry
Animal feed
Swine
Breeding
Beef
Commercial farming
Indonesia (poultry, beef, and aquaculture)

Vietnam (poultry and swine)
Myanmar (poultry)
Aquaculture
India (poultry)
Consumer Food
Chicken
Ambient
Beef
Chilled/frozen
Indonesia
Vietnam
Seafood
UHT milk
Source: Company
Sales Trend
Profitability Trend
US$ m
US$ m
30.0%
4,000
491
441
3,500
25.0%
3,000
391
341
2,500
20.0%
2,000
291
241
1,500
15.0%
1,000
191
141
500
0
10.0%
2012A
2013A
Total Revenue
2014F
2015F
2016F
Revenue Growth (%) (YoY)
91
41
2012A
2013A
Operating EBIT
2014F
Pre tax Profit
2015F
2016F
Net Profit
Source: Company, DBS Bank, DBS Vickers
Group milestones
Source. Company
Page 7
Company Focus
Japfa Ltd
Standardised farm development model
2013 revenue by business segment

Dairy
5%
Consumer food
8%
Feedmill
Commercial
Primaryprocessing
Breeding
Source: Company
Animal protein
87%
Source. Company
Leading positions across all market segments. In

Indonesia, Japfa commands the second highest share in DOC
(Day Old Chicks) market, has the largest beef feedlot
operation, and is the leading producer of fresh milk by
volume. In Vietnam, Japfa occupies the second largest share in
DOC and is one of the largest producers of swine.
Japfas 2013 market shares
Ja p fa
Co mfe e d
DOC**
25%
Animal feed**
22%
Dairy (fresh milk)*
25%
Frozen consumer food*
31%
Ambient-temp. food*
13%
CP M a l i n d o Si e ra d I n d o
I 's i a
Fe e d .
Pro d . fo o d He i n z
31%
8%
6%
33%
6%
5%
12%
37%
17%
16%
Extensive regional presence. Japfa operates breeding

and commercial chicken farms in Indonesia, Vietnam, India,
and Myanmar. As at end-Dec13, the group operated 16
poultry feedmills in nine locations throughout Indonesia, five
poultry feedmils in Vietnam and five poultry feedmills in India.
In addition, the group also constructed a feedmill in Myanmar
which was fully operational in Jun14. Japfa also operates 57
DOC breeding farms and 24 hatcheries throughout Indonesia.
In Vietnam, the group operates 12 DOC farms and four
hatcheries, and in Myanmar Japfa operates one DOC farm
and one hatchery. In India, Japfa operates two DOC farms and
three hatcheries.
The group enforces strict bio-security measures.
Japfas poultry breeding facilities are enclosed, climate
controlled and are typically located in isolated areas, which
help to increase their bio-security levels. Most of the groups
grandparent stocks in Indonesia are sourced from Aviagen.
* by volume, Indonesia only

** by capacity, Indonesia poultry only
Source: Company, Frost & Sullivan
Animal Protein
A vertically integrated poultry producer. Japfa has
over 40 years of experience in the poultry business and has
developed fully integrated and industrialised business model
across the entire value chain of poultry production, from feed
production, to breeding and commercial farming, to
slaughtering and food processing. The group is hence able to
capture value at different points in the chain. This model also
provides Japfa with greater food security and traceability,
which are important requisites to expand the branded
Consumer Foods segment.
Page 8
Largest beef feedlot operation in Indonesia. Japfa

owns and operates beef feedlot operations in Indonesia and
China. Japfa is considered one of the largest beef cattle
feedlot operators in Indonesia and the largest importer of live
cattle by import permits. As at Dec13, the group owned four
beef feedlots in Lampung and East Java; as well as one
slaughterhouse located in Serang, West Java. As at endDec13, the combined capacity of the groups operations in
Indonesia was 165,000 heads of cattle per annum. In addition
to the groups operations in Indonesia, Japfa is also
developing a 10,000-head feedlot in the Hekou district of
Shandong province in China.
A vertically integrated beef producer. Similar to
poultry, Japfas beef feedlot operation is fully integrated, from
breeding, fattening, and processing. The breeding operation
was added in Oct13, when Japfa acquired Australian cattlebreeding stations, encompassing c.555k ha of cattle-breeding
grounds at the Riveren and Interway stations. Both sites are
located in the Victorians River Downs in the Northern
Territories.
Company Focus
Japfa Ltd
Indonesia. As at end-Dec13, the group owned five aqua-feed

mills located in Gresik, Banyuwangi, Cirebon, Lampung and
Medan.
Standardised farm development model
Establishfreestall
Dairy
Importheifers
Feeding
Insemination
Wastemanagement
Milking
Calving
Femalecalves
Malecalves
A premium dairy producer. Japfa commenced its dairy

farm operations in Indonesia in 1997 and launched the
Greenfields brand in 2000. The group replicated its dairy farm
operations in China in 2009 and established a dairy
distribution there in 2013. Japfa is considered one of a small
group of leading industrialised premium milk producers in
China with superior milk quality thus commanding premium
prices. Japfas milk has consistently surpassed local and
International nutrition and safety standards, including the EU
raw milk standard, which is among the most stringent
industrial standards for raw milk and other dairy products in
the world.
Culledorsold
Japfas milk test results

Source: Company
A vertically integrated swine business in Vietnam. The

group diversified into swine breeding in Vietnam in 2012
when it entered into a JV with Hypor, one of the worlds
leading suppliers of swine genetics. This would enable Japfa
to operate the entire chain of swine breeding farms in
Vietnam. In 2013, the group sold 72.7k piglets, and we
expect this number to expand rapidly over the next three
years. We also expect Japfa to further expand into commercial
pig fattening farms this year.
Supported by feedmills. Augmenting its breeding

operations, Japfa operates three swine feedmills in northern
Vietnam and two feedmills in southern Vietnam. For the year
ended Dec13, the groups combined swine feedmill capacity
was approximately 245,000 MT per annum. The group has
over five formulations of swine feed marketed under the
brands Comfeed, Profeed, Bonafeed, Corefeed, and BigBang.
Aquaculture. Japfas aquaculture division is managed by PT

Suri Tani Pemuka a subsidiary of PT Japfa Comfeed
Indonesia. The group is a leading producer of aqua-feed in
Indonesia with minor interests in fish and shrimp ponds. Japfa
offers two premium aqua-feed brands, Comfeed and
Benefeed. Most of the aqua-feed produced is sold directly to
local farmers and independent distributors located throughout
Farm at
Farms in China
Malang, East (Farm 1, Farm 2,
Java, Indonesia
Farm 3)
Safety standard
Microbe count
SCC
Nutritional standard
Protein
Fat
Source: Company
EU
Standard
10.0K/ml
200.0K/ml
11.0K/ml
152.7K/ml
<100K/ml
<400K/ml
3.3%
3.8%
3.3%
4.1%
>3.1%
>3.5%
Dairy value creation. In China, Japfa focuses on producing

premium raw milk, which is sold to leading dairies in China at
a premium. The Chinese governments policies to reduce
reliance on small farms (to have better accountability of dairy
companies sources after the 2008 melamine-tainting
incident) has created a structural undersupply of premium
quality milk, which we expect to continue for the next three
years.
In Indonesia, Japfa fully captures its raw milk production as
raw materials for its consumer dairy products (including fresh
milk, UHT milk, and premium cheese) under the Greenfields
brand. Due to undersupply of dairy cows, most of the dairy
products consumed in Indonesia are mostly imported. This
creates a structural opportunity for Japfa to expand its
capacity.
Page 9
Company Focus
Japfa Ltd
Japfas consumer food products
Japfas 1Q14 raw milk price in China

5.25
Bra nd
4.24
Indus try ca te gory
So Good and
So Good
Branded chilled/frozen
Sozzis
Ambient temperature
So Nice
Branded chilled/frozen
Ambient temperature
So Fresh
Japfa
Source. Company, Frost & Sullivan
China average
Chilled
Products
M a rk e t
s ha re
Chicken nuggets,
beef/chicken/fish/shrimp
balls,
12%
Shelf table sausages

Chicken nuggets,
beef/chicken/fish/shrimp
balls,
34%
Shelf table sausages

Dressed and cut-up
chicken, fresh beef/meat
balls
<1%
Source: Company
Expanding Dairy amidst supply shortage. Japfa

currently operates a five-farm hub of dairy farms in China with
four of the farms in the operational stage. Construction of the
fifth farms is due to be completed in 4Q14 and first milking is
expected in early 2015. Japfas dairy farms in China are
located in Shandong province. A second five-farm hub in
Inner Mongolia is planned for construction at the end of this
year and is expected to be completed by end-2018. As at endDec13, the group had over 40,600 heads of dairy cattle in
China, with approximately 14,500 milking cows. In 2013,
Japfa produced over 130k MT of raw milk in China. In
Indonesia, Japfa operates one dairy farm located in Malang,
East Java with over 5,700 heads of dairy cattle of which
roughly 3,000 are milking. An expansion is currently
underway and is scheduled for completion in 4Q14. The
group is also constructing a second dairy farm in Blitar, East
Java with holding capacity of 8,000 heads and milking
capacity of 3,800 heads. Completion is expected in 2Q16.
So Good as their leading brands. Japfas consumer

products brands are So Good, So Good Sozzis, Real Good,
and So Nice. These are recognised brands in Indonesia, and in
our view have the potential for growth in tandem with rising
income per capita. Japfas value-added chilled/frozen meat
products include breaded chicken meat, chicken on bone,
chicken and beef meatballs, as well as seafood products. For
ambient temperature products, Japfa manufactures chicken
and beef sausages. The groups UHT milk is marketed under
the Real Good brand. In Vietnam, the group manufactures
and markets branded shelf stable sausages under the So
Yumm brand. Japfas meat processing and packaging facility
is located at Binh Duong.
Consumer Foods
Consumer brand shares
Large major customers. Japfas Consumer Foods

products are distributed through hypermarket chains,
supermarket chains, minimarket chains, wholesalers, semiwholesalers, as well as retail shops.
40.00%
Downstream segment to Japfas integrated model.

Japfas Consumer Foods segment produces ambient
temperature and chilled/frozen food products from chicken,
beef and seafood for the Indonesian and Vietnamese markets.
This segment also produces UHT milk the raw milk for which
is mostly procured from local dairy farmers in Indonesia. For
the most part, raw materials for the Consumer Foods segment
are sourced from the groups upstream protein businesses.
35.00%
30.00%
25.00%
Fiesta
20.00%
So Good
Belfoods
15.00%
10.00%
5.00%
0.00%
2008
2009
Source: Frost & Sullivan
Page 10
2010
2011
2012
2013
Company Focus
Japfa Ltd
Map of Japfa Ltds operations
Source: Company
Segmental contribution
Dairy (US$'000)
Indonesia revenue
Indonesia gross profit
Indonesia gross margin
China revenue
China gross profit
China gross margin
Dairy EBITDA
2011
2012
2013
2014F
2015F
2016F
2017F
2018F
52,700
11,383
22%
13,200
3,258
25%
8,283
58,200
15,830
27%
43,100
14,477
34%
18,119
54,600
15,725
29%
93,400
35,871
38%
39,195
64,960
22,323
34%
178,447
80,044
45%
78,980
75,944
27,034
36%
265,128
116,489
44%
115,651
128,317
53,102
41%
374,943
182,002
49%
196,646
179,602
75,164
42%
446,463
234,503
53%
256,906
224,587
97,044
43%
473,141
264,095
56%
298,695
Animal protein (US$'000)

Indonesia revenue
Vietnam revenue
Myanmar revenue
India revenue
Cow feedlot rev. (I'sia + China)
1,555,800
62,500
90,100
1,720,390
71,200
72,700
115,400
1,907,800
287,300
75,900
83,200
1,984,130
364,809
66,423
69,720
83,123
2,247,739
416,032
117,634
79,159
91,977
2,398,933
477,636
128,802
86,662
105,075
2,565,268
544,613
129,687
94,751
116,055
2,760,485
598,400
130,416
104,019
127,590
Total animal protein revenue

Total animal protein GP
Total animal protein GPM
Total animal protein EBITDA
1,708,400
217,500
12%
152,248
1,979,690
324,690
16%
209,630
2,354,200
387,600
17%
183,350
2,568,204
448,614
17%
255,850
2,952,542
541,569
18%
302,519
3,197,108
589,571
18%
333,669
3,450,374
647,174
19%
377,980
3,720,910
729,543
20%
441,904
228,800
66,600
29%
28,213
239,424
41,324
17%
15,044
227,599
53,099
23%
10,981
209,058
46,988
22%
10,619
230,589
52,105
23%
11,695
255,533
58,072
23%
12,772
283,176
64,704
23%
13,966
313,809
72,075
23%
15,245
Consumer foods (US$'000)

Consumer food revenue
Consumer food GP
Consumer food GPM
Consumer food EBITDA
Source: DBS Bank estimates
Page 11
Company Focus
Japfa Ltd
Management
Strong and experienced management team. Japfas
senior management team consists of experienced industry
executives with a long history in the Japfa Group. They have
extensive relevant experience in managing Dairy, Animal
Protein, and Consumer Foods businesses. Japfa is currently
headed by Mr. Handojo Santosa, who serves as Executive

Deputy Chairman.
A summary of key management roles are presented below.
Key Management Team

Na me
De s i g n a ti o n
R o l e , c re d e n ti a l s
M r. Ha n d o j o Sa n to s a
Exe c u ti ve De p u ty Ch a i rma n
Mr. Santosa is in charge of the overall management of the business and operations
of the group and any major corporate decisions. He oversees the formulation of the
group's corporate planning, strategic direction, business and corporate policies
Mr. Santosa joined Japfa in 1986 as manager in edible oil division. From 1989 to
1997 he served as Vice-President Director of PT Japfa Comfeed Indonesia and in 1997
was appointed as President Director of PT Japfa Comfeed Indonesia and has oversight
of Japfa's operations
M r. Ta n Yo n g Na n g
Exe c u ti ve Di re c to r a n d CEO Mr. Tan is in charge of leading the development and execution of Japfa's long term
strategy. He is also responsible for day-to-day management decisions and for
implementing Japfa's long and short term plans
Mr. Tan joined Japfa in 2007 as Assistant to CEO and COO of corporate services
before taking on the position of CEO in 2011. Previously he worked as Project
Director and COO in Li and Fung Group in 2005.
M r. Ke vi n M o n te i ro
Exe c u ti ve Di re c to r a n d CFO
Mr. Monteiro is Executive Director and Chief Financial Officer of Japfa. His key roles
are to develop a balanced capital structure and to source adequate funding for the
the group and to ensure integrity of financial data
Mr Monteiro has over 14 years experience of working in the agri food industry,
having joined PT Japfa Comfeed Indonesia in 1999. Prior to joining Japfa, he was a
financial advisor to PT. Trafindo Perkasa between between 1995 and 1999.
M r. B a mb a n g B u d i
He n d a rto
He a d o f Po u l try
Mr. Hendarto is Head of Japfa's Poultry. He oversees the entire poultry operations of
the group, including feed, breeding and commercial aspects and is responsible for
establishing corporate objectives, strategies and plans for Japfa's poultry operations
Mr Hendarto joined the company in 1978 as Nutrition Manager in the production
planning control department. He was promoted several times and in 1997 became
the Head of Poultry in Indonesia until now.
M r. Ed g a r Do ws e Co l l i n s He a d o f Da i ry
Mr. Collins is responsible for the day-to-day operations of the group's Dairy segment
and is in charge of formulating, developing and implementing strategic and long
term business plans for the Dairy operations.
Mr. Collins has been with AustAsia since 1999 and is currently its Managing
Director. Mr Collins, has been involved in beef and cattle operations throughout his
career and has accumulated many years of experience in the industry.
M r. Pe te r Ch i n Ch i Ke e
He a d o f Co n s u me r Fo o d s
Mr. Chin heads Hjapfa's Consumer Foods segment. He has oversight of the
performance of existing business in Indonesia and its expansion in Vietnam, Myanmar
and India.
Mr Chin has over 30 years experience in the food industry. Prior to joining Japfa, he
worked for several national and multi national corporations, including Eta Foods,
Fonterra Cooperatives, and Goodman Fielder Wattie, where he engaged in
different roles including sales, marketing, quality assurance and general
management.
Source: Company
Page 12
Company Focus
Japfa Ltd
Competitive strengths
Significant market share in Indonesia. Indonesias
poultry industry is relatively oligopolistic with the top three
companies, Charoen Pokphand Indonesia (CPIN IJ), Malindo
Feedmill (MAIN IJ), and Japfa Comfeed Indonesia (JPFA IJ),
commanding more than 60% market share.
Tremendeous growth potential. Japfa operates in five

high-growth emerging Asian markets (Indonesia, China,
Vietnam, Myanmar and India). Relatively low protein
consumption offers tremendous growth potential, given its
sheer size (with population of ~3bn people) and potential
growth in disposable income per capita.
Japfa is one of the leaders across multiple classes of

proteins including feed, cattle, DOC, fresh milk, and
consumer food products. Based on Frost & Sullivans data,
Japfa has significant market shares across its business
segments.
Premium pricing of dairy in Indonesia and China.

Japfas milk is considered as being the highest quality in both
the Chinese and Indonesian markets. The levels of proteins
and fats of the companys milk exceed the standards of
Chinese and International industry by substantial margins.
This premium quality of raw mik leads to the premium pricing
in Indonesia and China.
Japfas 2013 market shares

Ja p fa
Co mfe e d
DOC**
25%
Animal feed**
22%
Dairy (fresh milk)*
25%
Frozen consumer food*
31%
Ambient-temp. food*
13%
CP M a l i n d o Si e ra d I n d o
I 's i a
Fe e d .
Pro d . fo o d He i n z
31%
8%
6%
33%
6%
5%
12%
37%
17%
16%
* by volume, Indonesia only

** by capacity, Indonesia poultry only
Source: Company, Frost & Sullivan
Recognisable brands. Japfa has established itself with

leading and reputable brands for the Consumer Foods
product. Japfas widely recognised brands include So Good,
So Nice and Best Chicken. In Indonesia, Japfas consumer
food has the second largest market share in the frozen
consumer food category. Meanwhile, Greenfields, the
groups dairy brand is a recognisable brand in Indonesia,
Singapore and Hong Kong.
Strict bio-security measures. In order to increase the

operational efficiency and higher productivity of grandparent
and parent stock, Japfa applies strict bio-security measures.
Japfa further strengthened its bio-security by acquiring PT
Vaksindo Satwa Nusantara one of only three Indonesian
companies with research capabilities on the H5N1 (avian flu)
virus in 2008. This acquisition has enabled Japfa to develop
vaccines internally to protect its livestock.
Strategic alliances with genetic suppliers. In Vietnam,

Japfa has strengthened its vertical integration by partnering
with Hypor, one of the worlds leading suppliers of swine
genetics. This acquisition has enabled the group to have its
own high-performance supply of swine genetics. Japfa is also
the sole importer of high grade Indian River broiler from
Aviagen (one of the worlds leading poultry genetics
companies) into Indonesia. These strategic alliances enables
Japfa to have premium quality DOC and swine.
Page 13
Company Focus
Japfa Ltd
Growth strategies
Expanding China dairy farms. The group intends to
expand its dairy business in China through continued
replication of its successful business model. The fifth farm of
the first five-farm hub in Shandong province is scheduled for
completion by the end of this year. A second five-farm hub is
planned for construction between the end of this year and
2018 in Inner Mongolia. When completed, the new hub
would increase the groups herd size in China to 120k heads
of cattle by end-2018 from 42k as at end-1Q14.
Expansion of Indonesia Dairy operations. The group is

currently expanding its dairy capacity in Malang, East Java by
an additional 9,000-head holding capacity. Completion is
expected by the end of this year. In addition, a second dairy
farm is also under construction in Blitar, East Java with total
holding capacity of 8,000 heads. Completion of the second
farm is expected in 2Q16.
Continued investment in the groups Animal protein

operations in Vietnam, India and Myanmar. We expect the
groups swine operations in Vietnam to commence pig
fattening and selling this year. The group has also acquired
poultry operations in Myanmar this year.
Construction of new feedmill in Medan, Indonesia.

The planned feedmill will produce fish and shrimp feeds
catering to farms in the surrounding areas. Construction
began in 2012 and is scheduled for completion in the last
quarter of 2015. The additional capacity is 164,000 MT p.a.
Continued expansion in Poultry business in

Indonesia, in line with growing population and per capita
income. The groups DOC capacity is scheduled to expand by
50% by 2015; supported by poultry feed operations, which in
2013 underwent significant expansion.
Japfas Dairy segment capacity
China
Farm 1
Farm 2
Farm 3
Farm 4
Farm 5
Development
status
Milking since 2009
Milking since 2011
Milking since 2013
First milk in 2H14
First milk in 1H15
Development
Indonesia
status
Malang farm 1 Milking since 2H98
Blitar farm 2
First milk in 1H16
Source: Company
Page 14
Size
(ha)
50.7
109.1
110.2
100.8
113.3
Cattle
population
(heads)
11,956
12,933
9,855
5,947
NA
40, 691
Holding
capacity
(heads)
10,000
13,000
13,000
17,000
13,000
66, 000
Milking
capacity
(heads)
6,000
6,000
6,000
6,000
6,000
30, 000
Cattle
Holding Milking
Size population capacity capacity
(heads) (heads)
(heads)
(ha)
50
5,758
6,000
2,800
60
NA
8,000
3,800
5,758
14, 000 6, 600
Construction of new beef cattle feedlot in China.

Currently, a new beef cattle feedlot is being constructed in
Shandong province with production capacity of 10,000 heads
per annum. Completion is scheduled for 3Q14. The bull
calves produced by Japfas five dairy farms in Shandong will
be the livestock input for the new beef cattle feedlot in
China.
Further investment in high-growth Consumer Food

brands. The group intends to expand its manufacturing and
processing capacities in Indonesia and Vietnam as it seeks to
expand the reputation and market reach of its brands,
including Real Good for UHT milk and So Good, So Nice and
Best Chicken for processed meats.
Company Focus
Japfa Ltd
Key risks
Outbreak of diseases affecting livestock at the groups
poultry, dairy, swine, beef cattle and aquaculture farms
would have material effect on the groups business and
financial status. While the group has instituted strict biosecurity measures (including obtaining superior genetics,
integration with own vaccine production company and
constant monitoring) to reduce the risk of these events
happening, there can be no assurance that Japfa would be
immune to them.
The group is also exposed to volatile movements in

raw material costs and currencies across key markets. For
example, the recent drop in Rupiah and weakness in
consumer purchasing power in Indonesia caused delays in
passing on raw material cost pressures.
Changes in government regulations, licensing, as well

as other interventions, and price/volume controls across
various jurisdictions may adversely affect Japfas profitability.
For example, required reduction in DOC supply to control
post-Eid oversupply would temporarily affect the groups
financial performance. Also, a reduction in quota and/or
restrictions in importation of live cattle would adversely affect
the groups beef feedlot operations.
The group may require further funding to expand;

and is hence vulnerable to liquidity and credit risks. Any plans
for more equity funding would dilute the shareholdings of
the groups existing shareholders.
Japfa needs a constant supply of superior livestock

genetics, for which there are limited suppliers. Although Japfa
has forged good working relations with its suppliers, there
can be no guarantee of continuous supply of superior
genetics. As such, a disruption in supply would adversely
affect the groups operational and financial standing.
Page 15
Company Focus
Japfa Ltd
Key assumptions
Corn (US$/bushel)
Soybean meal (US$/kg)
GDP growth
Inflation
USD/IDR avg. exchange rate
Indonesia
Poultry feed capacity (MT)
Poultry feed sales (MT)
Poultry feed ASP (US$/MT)
DOC sales ('000 birds) - net of internal
DOC ASP (US$/bird)
Broiler sales (MT live)
Broiler ASP (US$/MT)
Aquafeed volume (MT)
Aquafeed ASP (US$/MT)
2011
6.64
0.37
6.5%
5.3%
8,799
2,951,400
2,185,600
533
277,818
0.54
278,100
1.63
187,900
674
2012
6.85
0.48
6.2%
4.0%
9,440
3,115,800
2,426,800
526
282,677
0.41
371,700
1.37
194,800
665
Vietnam
Poultry feed sales ('000 MT)
DOC ASP (US$/bird)
Piglets (heads)
Piglets ASP (US$/kg)
Pigs (heads)
Pigs ASP (US$/kg)
India
DOC ASP (US$/bird)
160
0.412
10,001
0.44
170
0.430
7,546
0.26
2013
5.85
0.39
5.8%
6.4%
10,849
2014F
5.72
0.38
6.0%
7.3%
11,695
2015F
5.97
0.37
6.0%
6.0%
11,750
2016F
5.96
0.39
6.0%
6.0%
11,750
2017F
5.94
0.41
6.0%
6.0%
11,750
2018F
5.93
0.41
6.0%
6.0%
11,750
3,732,600
2,642,100
548
257,275
0.42
467,800
1.40
204,800
736
4,092,600
2,858,842
516
299,994
0.42
539,989
1.33
223,544
725
4,362,600
3,118,712
514
377,995
0.44
680,391
1.36
234,721
724
4,542,600
3,305,834
519
390,971
0.46
703,748
1.40
246,457
731
4,722,600
3,504,185
522
411,159
0.47
740,087
1.44
258,780
736
4,902,600
3,714,436
523
435,829
0.48
784,492
1.49
271,719
740
296
475
1,256
0.38
72,700
1.95
155,204
1.95
338
516
13,523
0.46
161,691
1.97
218,802
1.97
389
514
12,871
0.47
161,691
1.99
218,111
1.99
447
519
14,159
0.49
161,691
2.01
218,111
2.01
514
522
15,573
0.50
161,691
2.03
218,111
2.03
565
523
16,092
0.52
161,691
2.05
218,111
2.05
172
0.434
1,016
0.28
139
0.413
1,357
0.32
152
0.411
1,751
0.33
165
0.416
1,837
0.34
180
0.417
1,935
0.34
196
0.418
2,041
0.35
120
0.516
13,227
0.42
211
0.514
23,287
0.44
229
0.519
25,199
0.46
229
0.522
25,199
0.47
229
0.523
25,199
0.48
Myanmar
DOC ASP (US$/bird)
Dairy - China
Number of farms
Total cattle population
Number of milking cows
Avg. milk yield/cow (MT)
Raw milk sold (MT)
Raw milk ASP (CNY/kg)
2
12,774
3,777
7.9
20,225
4.06
3
24,345
9,534
10.5
62,487
4.22
4
40,691
14,498
11.5
124,408
4.51
5
55,300
20,726
11.1
196,255
5.19
6
64,547
30,424
11.4
292,788
5.08
7
66,711
38,794
11.7
403,201
5.13
7
73,267
42,156
11.7
474,392
5.19
10
83,124
41,098
11.9
493,653
5.22
Dairy - Indonesia
Number of farms
Total cattle population
Number of milking cows
Avg. milk yield/cow (MT)
Raw milk sold (MT)
Fresh milk ASP (US$/kg)
1
5,532
2,604
9.0
20,315
2.52
1
5,647
2,687
9.4
24,111
2.34
1
5,758
2,959
9.1
26,676
1.97
2
11,019
3,316
10.1
31,731
1.99
2
11,634
3,713
10.4
36,506
2.01
2
15,794
7,991
10.4
60,571
2.05
2
15,968
7,708
10.6
83,105
2.09
2
18,274
11,124
10.8
101,757
2.14
Consumer foods
Chilled & frozen foods sales (MT)
Chilled & frozen foods ASP (Rp/kg)
Ambient temp. food sales (MT)
Ambient temp. food ASP (Rp/kg)
5,017
53,323
36,871
37,749
5,187
52,579
36,893
34,077
8,550
46,866
44,268
30,918
9,199
48,576
47,628
32,047
9,897
50,033
51,243
33,008
10,648
51,534
55,132
33,998
11,457
53,080
59,317
35,018
12,326
54,673
63,819
36,069
Source: DBS Bank estimates
Page 16
Company Focus
Japfa Ltd
Animal protein industry overview

Industry definition. Animal protein is a complete protein,
meaning it contains all of the amino acids necessary for the
human body. Hence, it is sometimes also called high quality
proteins. Animal protein is derived from red meat (such as
beef, pork, and lamb), poultry, eggs, fish, as well as dairy
products. Other protein sources include plant protein, which
is derived from fruits, vegetables, grains, and nuts. These
proteins are incomplete, as they contain fewer calories and
less fat.
Food expenditure share of income (2013-16F CAGR)

12.0%
10.0%
11.0%
9.0%
8.4%
7.6%
8.0%
6.0%
4.0%
Structural growth story . We believe that the poultry

industry is still on a structural growth path as rising disposal
income should continue to drive poultry consumption. Socioeconomic factors such as changing food habits, rising
purchasing power, and increasing urbanisation are important
contributors to the growth of the poultry industry.
Income growth is a driver for demand per capita. The

driving factors contributing to the demand on poultry
products are income, price, lifestyle, population, trade and
communication. There is a linear relationship between per
capita income and broiler consumption, especially on the
lower income countries. Chicken consumption is income
elastic in countries with low per capita income. As in the case
of China, poultry consumption has expanded nearly 10-fold
over the last 20 years, as per capita income increased.
2.0%
0.0%
China
Vietnam
India
Urbanisation as a catalyst. Urbanisation is another

reason for a shift in lifestyle, by having more people seeking
convenient sources of protein. As part of this, the fast food
industry also promotes the consumption of beef, poultry
meat and eggs, which are widely accepted worldwide.
However, compared to developed economies, populous
countries such as China, India and Indonesia still consume
significantly less meat per capita.
Urban populations 2010 vs. 2030F
80.0%
68.7%
2013 disposable income per capita vs. 2013-18F CAGR

(%)
Indonesia
Source: Frost and Sullivan
60.0%
49.2%
63.1%
49.9%
43.3%
5,000
40.0%
30.4%
4,130
44.1%
32.1%
39.8%
30.9%
4,000
20.0%
3,000
0.0%
China
2,057
2,000
Indonesia
2010
Vietnam
2030F
Nyanmar
India

1,253
1,250
1,000
10.1%
China
5.6%
Indonesia
10.5%
Vietnam
6.9%
India
Asia plays a major part. According to Frost & Sullivan

research, Southeast Asian countries play an important role in
livestock production and are considered as having the
potential for the largest livestock development in the world.
More than 500m people live in this region with per capita
income of less than US$5,000 per annum (except Singapore).
Developing countries with large populations such as
Indonesia, Philippines and Vietnam still have relatively lower
Page 17
Company Focus
Japfa Ltd
purchasing power and as a result, chicken meat and egg

consumption is relatively low. Malaysia has the highest
purchasing power parity among other SEA countries and
hence, has higher consumption of broiler and egg because its
per capita income has already reached the medium level.
2012 consumption of major protein in Indonesia

Beef
8% Pork
5%
Others
1%
2013 population vs. 2013-18F CAGR (%)

1,500
1,386
1,252
Poultry
87%
1,000

500
250
0.5%
China
1.1%
Indonesia
92
0.9%
Vietnam
53
0.8%
Myanmar
1.1%
India
Different preferences across countries. Among the

types of meat consumed in Asia, chicken, beef, and pork are
the most dominant. However, there are variations between
countries. Vietnamese consume more pork than chicken
meat; while Indonesians consume more chicken meat than
pork (c.90% of the population are Muslims) and beef (due to
higher price). In China, demand for beef has been rising in
recent years due to the outbreak of Avian Influenza, while in
India beef and pork consumption is neglible due to cultural
and religious beliefs.
Indonesia
Chicken meat as a primary source of animal protein.
According to Frost & Sullivan research, poultry meat is a
leading source of protein in Indonesia, accounting for
approximately 87% of total meat consumption. Affordability
and dietary restrictions (88% of the population are Muslims)
explain the significant share. Beef is not as popular, as it is
more expensive, but is commonly consumed in major
religious festivals, such as the Eid. In 2012, beef consumption
accounted for aproximately 8% of overall meat consumption
in Indonesia. A minority of the population also consume pork
as their major protein, due to its taste and affordability.
Relatively low disposable income per capita.

Compared to other Southeast Asian countries, Indonesia has
one of the lowest disposable incomes per capita. As in 2013,
Indonesias annual disposable income has shown an
improvement over the years, with a high of USD 2,057. (Frost
& Sullivan).
Demand and growth potential in Indonesia. Frost &

Sullivan research revealed that Indonesia still has a relatively
lower meat consumption per capita compared to other
Southeast Asian countries. In 2012, Indonesias per capita
consumption of chicken was 8kg; vis--vis 46kg in Malaysia
and 14kg in Thailand. However, demand is rapidly increasing.
Between 2009 and 2012, per capita chicken consumption in
Indonesia grew from 4.8kg to 8kg, representing a CAGR of
18.6%. Frost & Sullivans forecast also indicate strong
expansion in total demand for chicken consumption over the
next three years (i.e. from 2.22m MT in 2013 to 3.35m MT in
2016, representing a 14.7% CAGR).
Poultry consumption in Indonesia 2011-2018F
2,800
2,699
4.50
2,400
Annual income per capita (USD)
(LHS)
2,200
2,000
5.00
2,519
2,600
2,100
2,070
2,057
2,349
2,156
4.22
1,993
3.50
3.35
1,800
3.00
2.93
1,600
Consumption (mn MT)
2.52
(RHS)
1,400
4.00
3.79
2.50
2.22
1,200
2.00
1.97
1,000
1.67
1.50
800
2011
2012
2013E
Page 18
2014F
2015F
2016F
2017F
2018F
Company Focus
Japfa Ltd
Drivers for demand growth. Higher disposable income

per capita, expanding urban population, modernisation of
sales/distribution channels, as well as rising health awareness
all contribute to rising poultry consumption in Indonesia. A
majority of high income earners come from urban rather than
rural areas. As the urban population increases, so too would
poultry consumption. According to Frost & Sullivan research,
Indonesians living in the western parts of the country (Java
and Sumatra) consume more poultry and beef, while people
living in the eastern parts of the country (Sulawesi and
Kalimantan) tend to consume more fish. However
consumption in the Eastern part of the country may shift, as
more people are mobilised. Increased health awareness is
also pushing for higher standards in the quality of protein
intake hence driving further growth in demand for poultry.
growth by 18.7% CAGR, although in volume terms the

industry has been expanding by 10.1% CAGR since 2009.
Approximately 13.3% of beef consumption is met by direct
imports. However, domestic beef production is also
dominated by imports of live cattle.
Beef production in Indonesia from 2009-2013 (k MT)
560
546
540
520
509
500
485
480
460
437
440
Poultry breeding farms competitive landscape.

Indonesias poultry industry is dominated by commercial
farms, mostly operated by integrated companies such as
Charoen Pokphand Indonesia, Japfa, Sierad Produce and CJ
feed. Commercial poultry farms are concentrated in Java
(especially East and West Java) and North Sumatra.
Poultry feed industrys competitive landscape.

Indonesias feed business is very competitive and are
dominated by a few large producers, namely Charoen
Pokphand Indonesia, Japfa, Cheil Jedang, Malindo and
Sierad; which have a combined market share of c.75% in
2012 (based on research by Frost & Sullivan). However, to
produce quality feeds, raw materials such as corn and
soybean meal are mostly imported. Hence, the import cost of
raw materials (based on international prices) and the value of
the Rupiah would affect feed prices in Indonesia.
420
409
400
2009
2010
2011
2012
2013
Cattle imports competitive landscape. There are 16

importers of live beef cattle into Indonesia. These include PT
Great Giant Livestock, PT Tipindo, PT Hayuni Mas Lestari and
PT Kariyana Gita Utama. According to Frost & Sullivan, the
beef feed sector contributed less than 3% of the whole
animal feed industry in 2010. The major feed ingredients are
cassava, rice rean, wheat polar, wheat brand, molasses,
coconut cake and soybean meal. The majorities of raw
materials are imported and hence make up 85% of feed cost.
This in turn drives the beef feed price.
China
Poultry feed raw material procurements. Indonesia
does not have the right climate for large acreages of
soybeans, nor does it have a meaningful crushing industry
that can produce soybean meal as key ingredients for poultry
feed. Hence, all soybean meal required for animal feed
production is imported. However, Indonesia produces
another key ingredient: corn. Approximately 30-60% of
Indonesias local corn output is consumed by the animal feed
industry.
Indonesias beef industry. The Indonesian beef

industrys size by sales value was estimated by Frost &
Sullivan at Rp56.2 tn in 2013. Since 2009, sales value has
Beef industry in China. Meat is an important source of

protein in China. Frost & Sullivan research revealed that the
Chinese consumed 84.3m MT of meat in 2012. Pork meat
accounted for approximately 64% of total consumption in
2012 given the popularity of pork as a source of protein
and fat. Poultry and beef consumption in the same year
accounted for approximately 23% and 8% respectively. It is
correlated with improving living standards and better health
awareness in China. In recent years, Chinese dietary habits
have been gradually shifting away from pork in favour of
higher and better protein and low fat choices such as beef,
fish and chicken. The chart below shows the market shares of
major protein products in China in 2012.
Page 19
Company Focus
Japfa Ltd
beef industry. From a supply perspective, the beef market is

highly fragmented. Over half of beef cattle output comes
from small-scale farms or individual farmers, which make up
90% of all beef cattle farms (Frost & Sullivan). Hence, faced
with rising input cost and likewise rising beef price, largescale farms stand out in terms of cost advantages due to
economies of scale, strong bargaining power with
downstream players, and supportive policies.
2012 consumption of major protein in China

Others
5%
Poultry
23%
Beef
8%
Pork
64%
Growing demand for beef in China. Beef consumption per

capita in China has increased to 5.1kg in 2013 from 4.6kg in
2008. Frost & Sullivan expects this to further increase to
5.4kg in 2018. Different regional traditions and cultures also
cause the beef consumption pattern to vary significantly
across China. In the Muslim provinces, beef has traditionally
been considered one of the most popular choices of animal
proteins. The chart below shows per capita consumption of
beef in China from 2008 to 2018F.
China beef consumption per capita (kg p.a.)
5.6
5.4
5.4
5.3
5.3
5.2
5.2
5.1
5.0
5.0
4.9
4.8
4.8
4.9
4.8
There are four major cattle production areas in China,

namely the Northeast, the Central, the Southwest and the
Northwest regions. Each of these regions has its own unique
geographical features that are advantageous for cattle
breeding, such as natural grassland, feed resources and breed
supply. The Northwest and Central regions are known for
their vast natural grassland, fine feed, and sufficient supply of
Xinjiang Brown and Qinchuan cattle breeds. The Northeast
region is known for its fine natural grassland and sufficient
supply of Yanbian cattle breeds. The Central region is known
for its long history as a cattle producing area and sufficient
supply of high quality yellow cattle breeds such as Luxi
Yellow Cattle, Jinnan Cattle and Nanyang Cattle.
Per capita consumption remains relatively low.

Despite rapid economic growth, 5.0kg beef consumption per
capita in China in 2013 remains significantly lower compared
to other countries that have similar dietary cultures, such as
Japan (10.0kg in 2012), Taiwan (9.6kg in 2011), South Korea
(12.9kg in 2011) and Hong Kong (32.3kg in 2011). For this
reason, the beef industry in China has strong growth
potential in the coming years.
4.6
4.6
India
4.4
4.2
2008 2009 2010 2011 2012 2013E 2014F 2015F 2016F 2017F 2018F
Key drivers for Chinas poultry growth. Over the past

few years, China's economy has grown rapidly. The
significant growth has made an impact on living standards
and consumption of foods. The demand for higher proteins
such as beef has been increasing in recent years due to
higher disposable incomes, urbanisation and changing dietary
habits, as well as supportive government policies towards the
Page 20
Poultry industry in India. In India, the major sources of

animal protein are from poultry, lamb, beef and pork. Based
on Frost & Sullivan research, beef accounts for 41% of Indias
meat production. However, consumption of beef and pork in
India remains insignificant due to cultural and religious
beliefs. Hence, a majority of beef production in India are
largely for export markets. Poultry has an advantage, having
a wider acceptance of Indian consumers. The following chart
highlights the split between animal protein productions in
India.
Company Focus
Japfa Ltd
2012 consumption of major protein in India

Pork
5%
Others
3%
Goat and
Sheep
14%
Beef
41%
Poultry
37%
Source: Company, Frost and Sullivan
Infrastructure could be a problem. Lack of

infrastucture in India (encompassing collection, storage, and
processing of poultry eggs and meat in the rural areas) still
hampers Indias production growth. Poultry traders and
commission agents in metropolitan cities set prices based on
supply-demand dynamics, which are often not matched by
rural farmers.
Decent long-term growth prospects. Frost & Sullivan

expects the Indian poultry industry to expand 10.5% CAGR
until 2018. Over the years, independent poultry farmers have
evolved and become contract manufacturers for larger parent
companies. In effect, the Indian poultry industry has evolved
into an organised, vertically-integrated oligopoly, with good
scope for volume and value growth. Although international
players represent only a minor share of the market, players
such as Japfa and Charoen Popkhand Group have established
themselves in India and strengthened their market positions
over the last decade. The higher capital inflows are likely to
translate into better managed facilities and induction of
faster-growing breeds of poultry. The improved genetic stock
is also expected to lead to faster turnaround times and lower
incidences of disease. Growth in this industry still leaves the
field open for new players and improved technology.
Per capita poultry consumption trend in India
5.00
2,000
1,869
4.50
4.00
1,547
1,501
3.50
India as the next growth market. Socio-economic

factors such as changing food habits, rising purchasing
power, and increasing urbanisation are important
contributors to the growth of the poultry industry in India.
The preference for poultry meat over other meats is expected
to persist, even as urbanisation and rising disposable incomes
influence consumers palates.
1,800
1,741
Annual income per capita (USD)
(RHS)
1,611
1,600
1,494
1,414
1,389
1,400
3.00
2.50
2.37
2.48
2.52
2.56
2.00
2.69
2.83
2.97
3.13
1,200
Consumption per capita (kg p.a.)

(LHS)
1.50
1,000
800
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
Processed poultry demand to maintain momentum.

The government is promoting processed poultry. Hence, the
growth of efficient distribution systems, cold storage
infrastructure and technology are expected to drive future
growth. Rising urbanisation and the proliferation of malls are
also expected to fuel the momentum. Products such as readyto-eat and snack items could spearhead the growth of the
poultry industry.
Religious restrictions. Poultry is also the meat of choice

as it is a neutral meat with no religious restrictions like beef
or pork. People not affected by religious beliefs choose
poultry on the grounds that it is leaner and healthier than
beef and pork. Frost & Sullivan expects this preference for
poultry to persist in the Indian market and thereby drive the
consumption of poultry over beef and pork.
Competitive landscape in India. Poultry farms in India

are mainly concentrated in the southern states such as
Andhra Pradesh and Tamil Nadu, which are home to many
organised, large-scale poultry farms. The western and
northern states of India follow in descending order of
industry organisation. A majority of independent farmers are
concentrated in the eastern and northeastern states, as these
states are relatively less developed. Yet, Frost & Sullivan noted
the emergence of vertically integrated players like Amrit
Poultry Group in the east.
Page 21
Company Focus
Japfa Ltd
Vietnam
Vietnam chicken/pork consumption per capita (kg p.a.)

40
35
Poultry industry in Vietnam. The major animal protein

sources for the Vietnamese are pork, poultry and beef.
According to Frost & Sullivan, in 2011, pork accounted for
approximately 74% of total production, followed by poultry
at 17%. In Vietnam, pork meat is widely consumed for its
rich proteins and fat, and also for its affordability. Chicken
meat comes second.
2011 consumption of major proteins in Vietnam
Others, 9%
34.8
34.5
34.1
33.2
31.7
30
25
20
15
10
5.7
6.1
8.4
7.4
8.5
5
0
2008
2009
2010
per capita chicken consumption
2011
2012
per capita pork consumption
Poultry, 17%
Pork, 74%
Competitive landscape in Vietnam. The animal protein

industry in Vietnam has long been depicted as highly
fragmented, with a majority of the growers being small
household farmers. The industry started developing
commercially in the early 1990s, when the country embarked
on opening up its economy to foreign investors. Industry
players who have established their presence in Vietnams
animal protein industry include:
1. Charoen Pokphand CP Vietnam (Thailand-based; entered
Vietnam in 1990)
Supported by huge population. Vietnams population
reached 90.8m in 2012 from 87.4m in 2008. The working
population has also expanded to 52.9m from 49.1m over the
same period. According to Vietnam General Office for
Population and Family Planning, Vietnams employed
population is projected to grow by 1.43% CAGR between
2011 and 2020. Growth in the working population and
higher levels of income and wealth are expected to drive pork
and poultry consumption in Vietnam.
Substantial growth consumption per capita. Based

on Frost & Sullivan research, Vietnams per capita pork and
chicken consumption has been growing briskly in the last few
years. Per capita pork consumption expanded to 23.8kg in
2012 from 21.6kg in 2008 (CAGR of 1.96%). At the same
time, per capita chicken consumption increased to 8.5kg in
2012 from 5.7kg in 2008 (CAGR of 8.32%). Demand is
expected to continue to grow in tandem with population
growth.
2. Proconco (a joint venture between France and Vietnam;
first feed mill in Vietnam in 1991)

3. Cargill (US-based feed maker, entered Vietnam in 1995)
4. Japfa (Indonesia-based, entered Vietnam in 1995)
5. CJ (Korea-based feed maker, entered Vietnam in 1996)
Myanmar
Myanmars rapid economic growth. Myanmar has
been growing rapidly after the government opened up the
countrys economy in 2011. According to Frost & Sullivan,
Myanmars GDP is expected to grow by 9.3% in 2014. The
growth will be supported by strong FDI, higher commodity
exports and strong growth in service and construction
sectors. This rapid growth is expected to boost demand and
hence the prospects of poultry industry in Myanmar.
Historically low poultry consumption. In Myanmar,

the people prefer fish as the main source of protein
accounting for 53% of total protein produced 2012. Poultry
contributed 15% (second largest protein source).
Page 22
Company Focus
Japfa Ltd
Competitive landscape in Myanmar. Most poultry

industry players are within the five major townships of Yangon,
Mandalay, Mawlamyaing, Bago and Pathein, which have strong
pools of customers. Currently, there are 155 registered poultry
feed producers and 33 registered businesses in the livestock
segment. Most of the players are small-scale ones. The whole

industry is structured closely to an oligopoly model, where Japfa
has 28% share in DOC; while Myanmar C.P. Livestock (Charoen
Pokphand Group) controls 45% of the DOC market.
Regulatory framework in poultry industry

No
Na tion
Re gula tion
1 Indonesia Aimed at developing the domestic livestock industry by ensuring the survival
of smaller family-owned farms by creating a partnership scheme
2 Indonesia This regulation provides financial incentives, mostly in tax reduction, to create a
conducive farm business climate in order to increase productivity of meat producers
3 Indonesia These regulations prohibit the import of carcass, meat, offal, and processed meat
and also limit the import of fresh beef and beef cattle into the country
4 Indonesia This regulation provides authority to provincial and district governments to manage
their livestock industry, as well as provide guidelines and approval for all players
operating in their area
5 Indonesia For all animal farms in Indonesia to meet an acceptable standard of farm practices
pertaining to raw materials, waste management, and environmental standard
6 Indonesia The Indonesia Clergy Council ensures a strict Halal assurance system for all animal
products, as the majority of Indonesian population are Muslims and have religious
restrictions over non-halal food.
7
China
This regulation provides tax preference to agribusinesses in China. The enterprises
income derived from raising of livestock and poultry, and preliminary processing of
agricultural products can be exempted from income tax
8
China
Companies that self-produce agriculture products are exempted from
value added tax. Thus, beef producers are able to increase their profits and promote
the development of beef cattle industry
9
China
standardizes the management of feed and feed additives, to improve the quality of
feed and feed additives and promote the development of feed industry and
aquaculture industry
10
China
the hygiene standards of food production, transportation, equipment, etc
11
China
Ensure the quality and safety of agricultural products; Maintain the health of
general public; Promote development of agriculture and rural economy
12
China
Give aid to selective breeding, feeding, trading and transportation, production
and operation, as well as quality and safety of livestock and poultry
13 Vietnam Focuses on incentive policy for enterprises to invest in agriculture and rural area
14 Vietnam Focus on credit policies for agriculture and rural development, an important
policy that gives financial support to organizations and individuals involved in
livestock production
15 Myanmar A relatively limited number of activities require a local partner and investments with
100% foreign ownership is permitted for the vast majority of business activities
16 Myanmar Foreign ownership of land and immovable property is expressly prohibited
under the Transfer of Immovable Property Restriction Law 1987
17 Myanmar The Myanmar government has recently enacted a Special Economic Zone Law that
includes several tax incentives for investors. Businesses that operate in promotion
zones are also allowed tax exemptions to varying degrees
Re fe re nc e
Minister of Agriculture regulation no.19/Permentan/OT/140/2/2010
Ministry of Finance regulation no.176/PMK.011/2009
Minister of Agriculture Regulation No. 84 and 85/Permentan/PD.410/8/2013
Government Regulation No. 404/kpts/OT.210/6/2002
Ministry of Agriculture Regulation No. 55 and No.49/Permentan/OT.140/10/2006

Food Law No. 7/1996
Regulation on the Implementation of the Enterprise Income Tax Law of the PRC
Regulations of the Peoples Republic of China on Value-Added Tax
Administration rules of feed and feed additive
Food Hygiene Law of the Peoples Republic of China

Law of the People's Republic of China on Agricultural Product Quality Safety
Animal Husbandry Law of the People's Republic of China
Decree No. 61/2010
Decision No. 41/2010
Myanmar Foreign Investment Law (FIL)

Foreign Ownership of Land
Special Economic Zones
Page 23
Company Focus
Japfa Ltd
Dairy industry overview
Indonesia raw milk production volume (MT)

900,000
Promising growth in upstream dairy business.

Population growth, rising income, urbanisation and dietary
shifts in developing countries such as China and Indonesia
are major demand drivers of dairy products. In recent years,
structural undersupply in Chinas fresh milk is a major factor
in boosting growth. The structural undersupply in China is
primarily due to government policies to reduce reliance on
small farms and to have better accountability from large dairy
companies sources since the 2008 melamine-tainting
incident. Some dairy giants have invested heavily on
upstream quality control and/or to secure their upstream
sources (e.g. China Mengniu bought stakes in upstream
industrialised farms such as Yuan Sheng Tai and China
Modern Dairy). Yet, a limited number of dairy companies
have focused on establishing grass-growing and feedprocessing.
Economic development of a country leads its level of

dairy consumption. Therefore, according to Frost & Sullivan,
growth drivers for the dairy industry in China and Indonesia
are typically based on a combination of social and economic
factors leading to strong purchasing power, growing
population and rising urbanisation. Better health awareness
and improved distribution networks are also the key driving
forces in the dairy industrys overall development.
Improving dairy demand in Indonesia. Based on Frost

& Sullivan, Indonesias per capita consumption of dairy
products in 2013 was 14.6kg, expanding from 12kg in 2010
(i.e. CAGR of 6.9%). This has likewise translated into higher
demand for raw milk. Yet, domestic supply of raw milk
continues to struggle to meet demand. In 2013, only 17% of
the demand for dairy products was met by domestic supply.
Indonesias total raw milk production was estimated at
817,360 MT in 2010. In 2011, production dropped due to
loss of dairy cows for beef supply. Although it subsequently
recovered to 652,649 MT in 2012, it has remained below the
2010 level.
817,360
800,000
700,000
715,809
694,756
652,649
600,000
578,963
500,000
400,000
2010
2011
2012
2013
2014F
Demand for quality milk. The dairy industry demands

quality raw milk from its suppliers. The 2008 intentional
adulteration post-farm gate with melamine in China
prompted customers to demand for quality dairy products.
Heavily import-dependent. Indonesia depends heavily

on imports, mainly from Australia and New Zealand, to meet
its domestic demand for dairy products. In 2013,
approximately 83% of its demand (in volume consumed) for
dairy products was met by imports. Expanding its domestic
milk output to replace imports has therefore become one of
the national objectives.
Indonesian dairy production and consumption (k MT)
4,500
Total consumption (k MT)
4,000
3,968
3,648
3,500
3,133
3,000
3,325
2,876
2,500
2,000
1,500
1,000
500
Domestic production (k MT)

794
675
562
634
695
2010
2011
2012
2013E
2014F
Types of products from dairy segment. According to

Frost & Sullivan, dairy production in Indonesia mainly consists
of four major categories, namely drinking-milk products,
yoghurt and sour milk products, cheese, as well as other dairy
Page 24
Company Focus
Japfa Ltd
products. The market shares of key dairy products in

Indonesia 2008 are presented below.
2008 consumption of dairy products in Indonesia
Yoghurt and
Sour Milk
Products
16%
Others
43%
Chese
1%
Drinking Milk
Products
40%
1. Drinking-Milk Products: Drinking-Milk Products mainly

include fresh milk (also known as pasteurised milk), UHT milk
(also known as long-life milk), and flavoured milk drinks. In
volume terms, this category had the largest share (44.6%) in
2013. This category is also the main growth driver in the
dairy industry.
2. Yogurt and Sour Milk Products: In 2013, this category
accounted for 21.1% share in volume terms. The segment is
expected to grow further to 24% in 2018.
3. Cheese: Processed and unprocessed cheese and other
similar products fall into this category. Cheese is not popular
in Indonesia compared to western countries. In 2013, cheese
accounted for only 1.5% share by volume.
4. Other dairy products include chilled and shelf stable
desserts, chilled snacks, coffee whiteners,
condensed/evaporated milk, cream, fromage frais and quark.
The share of this segment has been stable throughout the
years. According to Frost & Sullivan, Frisian Flag is the market
leader in this segment and controlled 38.4% market share in
2013.
Modern retail channels facilitate development of

Indonesias dairy market. In Indonesia, the dairy retail
market is dominated by traditional/general trade channels.
However, in the past years, modern retail channels have been
catching up through rapid expansion. Based on Frost &
Sullivan research, between 2003 and 2008,
traditional/general trade channels expanded by 9.2% while

supermarkets expanded by 75.3%. Continuous growth in
Indonesias middle/upper income segment, urbanisation and
infrastructure improvements are expected to sustain growth
in modern retail distribution. Hypermarkets, minimarkets and
supermarket are better equipped with refrigeration, which
increases the shelf-life of fresh milk. This, combined with
increased health awareness, is expected to fuel demand for
fresh milk.
Greenfields brand dominates. Based on the groups

data, in 2013, Greenfields was the leading brand in the fresh
milk segment, commanding 24.5% market share calculated
based on production volume, and 38.4% market share in
terms of production value. Greenfields significant market
share in terms of production value is attributed to the higher
retail price charged for its premium quality.
Greenfields market share in Indonesia
45.0%
38.4%
40.0%
35.0%
30.0%
25.0%
24.5%
20.0%
15.0%
10.0%
5.0%
0.0%
By volume
By value
Source: Company
The main breeds of dairy cows in China include Holstein,

Jersey, Dairy Simmental, Brown cattle and Sanhe cattle.
1. Holstein is the most common dairy cow breed in China,
known for its highest milk yield compared to other breeds.
Holsteins have strong adaptability to nearly all kinds of
conditions. In China, Holstein accounts for c.80% of the total
dairy cow breeds in 2012.
2. Jersey is known for its high protein content of raw milk,
mainly for the production of cheese and high quality
premium dairy products. Jerseys are adaptable to a wide
range of climatic and geographical conditions and also show
more tolerance to heat compared to other dairy cow breeds.
Page 25
Company Focus
Japfa Ltd
3. Other minority dairy cow breeds also have their unique

characteristics. Dairy Simmentals colour varies from gold to
red with white, and provides the second highest milk yield
after Holstein.
The importance of weather. Generally, dairy cows
prefer the cool and dry climate over the warm and humid
climate. In Indonesia, Java is suitable for dairy farming. In
2013, almost 99% of dairy cows in Indonesia were located in
Java, with over 50% in East Java. In China, the Central
Page 26
Northern Region is suitable for dairy farming, not only for its
climate but also for its vast natural resources such as
grasslands, fresh water, and feed. Shandong Province also has
a number of advantages, including better infrastructure and
strong support from the local government. Shandong Province
is situated in the eastern part of China on the lower reaches
of the Yellow River, which offers a good environment for the
local dairy industry.
Company Focus
Japfa Ltd
Consumer Foods industry overview

Shift in lifestyle positive outlook for Consumer
Foods. Urban developments in many major cities have
changed the lifestyles of its dwellers and are a driver for
increased demand for processed/packaged food. According to
Frost & Sullivan, this food segment was the largest of the
consumer food industry in Indonesia, accounting for 67%
share. Ambient temperature food and frozen consumer food
account for the remaining 33% share.
Ambient temperature food segment. Based on Frost &

Sullivan research, the ambient temperature food market in
Indonesia is led by Heinz ABC, which commands 16.3%
share. Maya Muncar and So Good Food are close second and
third positions with 15.6% and 13.2% shares respectively.
Ambient temp. food market share in Indonesia - 2012
Jakarana
7.1%
Others
32.0%
Denis Freres
7.1%
Canning
Foods
Indonesia
8.7%
So Good
Food
13.2%
Heinz ABC
Indonesia
16.3%
Maya Muncar
15.6%
Frozen consumer food market share in Indonesia - 2012

Others
15.4%
Primafood
International
36.5%
Sierad
Produce
16.9%
So Good
Food
31.2%
Pros and cons of ambient temperature food

products. Ambient temperature foods have the advantage of
longer shelf life, and are easier to transport and store. Yet,
given their low cost of distribution, barriers to entry are lower
and this causes the market to be saturated with many brands
of similar products. Increased competition and competitive
pricing hence limit the margins such products can command.
Pros and cons of frozen/chilled food products. Frozen

food products appear as higher-quality packaged and
processed food hence the higher pricing and higher entry
barrier. However, a higher cost of distribution and limited
customer base are its drawbacks.
Frozen/chilled consumer food segment. The top three

players of frozen consumer food segment in Indonesia
account for 85% share. Dominating the scene are Primafood
Internationals Fiesta, So Good Foods So Good and Sierad
Produces Belfood and Delfarm.
Page 27
Company Focus
Japfa Ltd
Key Assumptions
FY Dec
Raw & fresh milk

output (k MT)
Broiler sales (mn birds)
Consumer foods
volume (k MT)
China raw milk price
(CNY/kg)
Average USD/IDR rate
2011A
2012A
2013A
2014F
2015F
2016F
40.5
86.6
151.1
228.0
329.3
463.8
182.4
228.0
287.9
344.6
430.9
448.3
69.7
73.2
85.6
78.2
84.1
90.5
4.1
4.2
4.5
5.2
5.1
5.1
8,799.3
9,439.8 10,848.5 11,695.0 11,750.0 11,750.0
Segmental Breakdown
FY Dec
2011A
2012A
2013A
2014F
2015F
2016F
38
72
122
243
341
503
1,763
2,010
2,347
2,568
2,953
3,197
229
239
228
209
231
256
2,030
2,322
2,697
3,021
3,524
3,956
Revenues (US$ m)
Dairy
Animal protein
Consumer foods
Total
EBITDA (US$ m)
Dairy
Animal protein
Consumer foods
Total
18
39
79
116
197
152
210
183
256
303
334
28
15
11
11
12
13
189
243
234
345
430
543
21.5
25.1
32.0
32.4
33.9
39.1
8.6
10.4
7.8
10.0
10.2
10.4
12.3
6.3
4.8
5.1
5.1
5.0
9.3
10.5
8.7
11.4
12.2
13.7
EBITDA Margins (%)

Dairy
Animal protein
Consumer foods
Total
Page 28
Reduced DOC volume (due to government

intervention), higher A&P in Greenfields,
weaker sales in Ambient Temperature
Consumer Foods segment contributed to
reduction in EBITDA from Japfas initial
expectations earlier this year offset by
recovery in DOC ASP, broiler ASP and drop
in feed raw material costs
Company Focus
Japfa Ltd
Margins Trend
Income Statement (US$ m)

FY Dec
2011A
2012A
2013A
2014F
2015F
2016F
2,030
2,322
2,697
3,021
3,524
3,956
11.0%
(1,663)
(1,874)
(2,198)
(2,423)
(2,787)
(3,073)
9.0%
367
448
499
598
737
883
7.0%
(231)
(257)
(297)
(328)
(368)
(405)
5.0%
135
191
202
270
369
478
3.0%
18
(23)
17
(3)
(3)
1.0%
(39)
(51)
(64)
(73)
(76)
(78)
Pre-tax Profit
114
149
115
214
290
397
Tax
(35)
(38)
(33)
(43)
(58)
(79)
Minority Interest
(35)
(57)
(40)
(74)
(100)
(137)
13.0%
Revenue
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Preference Dividend
Net Profit
44
53
42
97
132
180
Net Profit before Except.
44
53
42
97
132
180
Net Pft (ex. BA gains)
40
51
50
86
132
180
EBITDA
208
252
233
345
430
543
EBITDA (ex. BA gains)
177
238
257
330
430
543
Growth
Revenue Gth (%)
nm
14.4
16.2
12.0
16.7
12.2
EBITDA Gth (%)
nm
21.0
(7.6)
48.6
24.4
26.3
Opg Profit Gth (%)
nm
41.6
5.4
33.7
36.8
29.5
Net Profit Gth (%)
nm
19.7
(21.5)
133.1
35.5
36.7
2012A
2013A
Operating Margin %
2014F
2015F
2016F
Net Income Margin %
Including US$9.6m gains from sale of

fixed assets and US$5m IPO expense
Growth mainly driven by higher feed,

DOC, and dairy sales on the back of
capacity expansions, higher-cost passthrough, as well as margin expansion
Margins & Ratio

Gross Margins (%)
18.1
19.3
18.5
19.8
20.9
22.3
Opg Profit Margin (%)
6.7
8.2
7.5
8.9
10.5
12.1
Net Profit Margin (%)
2.2
2.3
1.5
3.2
3.7
4.6
ROAE (%)
9.0
9.7
6.4
10.5
10.4
11.8
ROA (%)
3.6
3.6
2.3
4.5
5.2
6.4
ROCE (%)
9.0
11.5
9.1
11.0
12.8
14.9
Div Payout Ratio (%)
0.0
3.5
0.0
0.0
0.0
0.0
0.0
3.8
3.2
3.7
4.9
6.1
Net Interest Cover (x)
No dividend payout policy, but the

management had indicated redistribution of dividends received from
PT Japfa Comfeed Indonesia
Page 29
Company Focus
Japfa Ltd
Asset Breakdown
Balance Sheet (US$ m)

FY Dec
Net Fixed Assets
2011A
2012A
2013A
2014F
2015F
2016F
404
600
653
855
978
Other LT Assets
122
200
275
380
462
543
Cash & ST Invts
150
157
225
319
203
180
Inventory
332
487
543
527
606
668
Debtors
113
134
135
150
175
197
99
124
133
173
223
275
1,220
1,701
1,964
2,404
2,647
2,972
ST Debt
309
425
457
476
469
597
Creditor
88
133
195
181
208
229
Other Current Liab
86
141
65
17
22
29
356
Invts in Associates & JVs
Other Current Assets

Total Assets
LT Debt
1,108
162
302
469
484
484
Other LT Liabilities
80
100
81
81
80
79
Shareholders Equity
263
330
406
808
940
1,120
Minority Interests
233
270
291
358
445
562
Total Cap. & Liab.
1,220
1,701
1,964
2,404
2,647
2,972
Non-Cash Wkg. Capital
370
470
550
652
774
882
(320)
(570)
(701)
(641)
(749)
(772)
Debtors Turn (avg days)
20.3
21.0
18.1
17.2
16.8
17.1
Creditors Turn (avg days)
19.9
26.6
27.9
29.0
26.1
26.6
Inventory Turn (avg days)
75.4
97.5
87.7
82.6
75.9
77.4
Asset Turnover (x)
1.7
1.4
1.5
1.4
1.4
1.4
Current Ratio (x)
1.4
1.3
1.4
1.7
1.7
1.5
Quick Ratio (x)
0.5
0.4
0.5
0.7
0.5
0.4
Net Debt/Equity (X)
0.6
1.0
1.0
0.6
0.5
0.5
Net Debt/Equity ex MI (X)
1.2
1.7
1.7
0.8
0.8
0.7
32.3
33.8
22.2
34.6
27.0
28.7
Net Cash/(Debt)
Capex to Debt (%)
Page 30
Debtors 9.5%
Net Fixed
Assets 53.4%
Assocs'/JVs 0.0%
Inventory 36.1%
Drop in net gearing ratio due to

additional equity raising from IPO
Bank, Cash
and Liquid
Assets 1.0%
Company Focus
Japfa Ltd
Capital Expenditure
Cash Flow Statement (US$ m)

2011A
2012A
2013A
2014F
2015F
2016F
Pre-Tax Profit
114
149
115
214
290
397
350
Dep. & Amort.
36
43
55
58
64
68
300
(35)
(38)
(33)
(43)
(58)
(79)
200
150
(144)
(163)
(80)
(92)
(149)
(134)
50
Net Operating CF
(23)
27
89
150
166
275
Capital Exp.(net)
(152)
(246)
(206)
(333)
(257)
(274)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
(2)
(2)
(148)
(242)
(205)
(333)
(260)
(276)
FY Dec
400
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Investing CF
Div Paid
(34)
(7)
(9)
(8)
(13)
(20)
Chg in Gross Debt
250
250
125
(18)
(7)
45
39
131
304
Other Financing CF
(44)
(61)
(63)
(2)
(2)
(2)
Net Financing CF
217
222
183
277
(22)
(22)
45
68
94
(116)
(23)
108.6
(157.3)
171.1
80.8
13.7
17.8
23.2
(197.0)
(55.7)
(10.3)
(5.2)
0.1
Capital Issues
Currency Adjustments
Chg in Cash
Opg CFPS (US cts.)
Free CFPS (US cts.)
250
100
2012A
2013A
2014F
2015F
2016F
Capital Expenditure (-)
Capex will remain elevated on

sustained capacity expansion in all
segments; but dairy occupies larger
capex share
Page 31
Company Focus
Japfa Ltd
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

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Page 32
Company Focus
Japfa Ltd
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Singapore Company Focus

Bloomberg: JAP SP | Reuters: JAPF.SI

DBS Group Research . Equity

BUY S$0.855 STI : 3,292.81

An integrated Dairy, Animal Protein, and Consumer

The right segment at the right place. Japfa Limited

Japfa Ltd (LHS)

Relative STI INDEX (RHS)

Forecasts and Valuation

ICB Industry : Consumer Goods

Source of all data: Company, DBS Bank, DBS Vickers, Bloomberg

Structural opportunity. We value Japfa at US$1,651m (or

Significant growth potential. Historically, the group

A leading Dairy, Animal Protein, and Consumer

Key investment risks. Outbreak of diseases affecting

Capitalising on structural opportunity in Asias

Japfas own subsidiary, PT Japfa Comfeed Indonesia (JPFA IJ).

Integrated Food Producers

* FY15 & 16 forecast

Source: DBS Bank, DBS Vickers, Bloomberg finance LP

Div Yield (%)

Div Yield (%)

Div Yield (%)

Div Yield (%)

Animal Protein peer comparison

Consumer Foods peer comparison

Source: Bloomberg Finance LP, DBS Bank estimates

Leading market positions in multiple protein segments

Full integration enables the group to capture value across

Imports of cattle are subject to Indonesian

High milk yields and consistently superior milk quality

Required cost efficiency, since the margin in this

Extensive bio-security measures and vaccine production

The industry is subject to outbreak of diseases that

Strong and experienced management team with over 40

Attractive macroeconomics that could drive growth

Faster expansion by competitors in Animal Protein

Business operating segments

Indonesia (poultry, beef, and aquaculture)

Revenue Growth (%) (YoY)

Source: Company, DBS Bank, DBS Vickers

Standardised farm development model

2013 revenue by business segment

Leading positions across all market segments. In

Extensive regional presence. Japfa operates breeding

* by volume, Indonesia only

Source: Company, Frost & Sullivan

Largest beef feedlot operation in Indonesia. Japfa

Indonesia. As at end-Dec13, the group owned five aqua-feed

Standardised farm development model

A premium dairy producer. Japfa commenced its dairy

Japfas milk test results

A vertically integrated swine business in Vietnam. The

Supported by feedmills. Augmenting its breeding

Aquaculture. Japfas aquaculture division is managed by PT

Dairy value creation. In China, Japfa focuses on producing

Japfas consumer food products

Japfas 1Q14 raw milk price in China

Indus try ca te gory

Source. Company, Frost & Sullivan

Shelf table sausages

Shelf table sausages

Expanding Dairy amidst supply shortage. Japfa