Dongfang Modern Agriculture Holding Group

Annual General Meeting 27 May 2019

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No representation or warranty, express or implied, is made as to the fairness, accuracy,

completeness or correctness of the information, opinions and conclusions contained in the

presentation. To the maximum extent permitted by law, none of Dongfang Modern Agriculture

Holding Group Limited, its directors, employees or agents, nor any other person accepts any

liability, including, without limitation, any liability arising out of fault. In particular, no

representation or warranty, express or implied is given as to the accuracy, completeness or

correctness, likelihood of achievement or reasonableness of any forecasts, prospects or

returns contained in this presentation nor is any obligation assumed to update such

information. Such forecasts, prospects or returns are by their nature subject to significant

uncertainties and contingencies.

Before making an investment decision, you should consider, with or without the assistance of a

financial adviser, whether an investment is appropriate in light of your particular investment needs,

objectives and financial circumstances. Past performance is no guarantee of future performance.

All references to dollars, cents or $ in this presentation are to Australian (AUD) currency,

unless otherwise stated.

Disclaimer

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Company Snapshot

Summary

ASX code DFM

Last close price $0.84

Market cap. $370m

P/E Ratio 4.3x

*as at 24 May 2019

FY2017 FY2018

Revenue (A$m) 221.8 244.9

NPAT (A$m) 97.5 84.4

EPS (A$) 0.24 0.21

NTA/share (A$) 1.20 1.36

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Leading manufacturer

of health supplements in

Australia through Bio

Health Pharmaceuticals

TGA and ACO licensed,

GMP manufacturer with

strong customer base

Market leading fruit

harvester within the

world’s largest agricultural

market

Spanning 11,641

hectares of orchards

all located within China’s

premier Ganzhou fruit-

growing region

Highly profitable with

seventh consecutive year

of record harvest production

and revenue growth

Apply modern agricultural

technologies to newly

acquired under performing

assets to achieve 20% to

40% yield improvements

Capitalising on Chinese

consumers’ preference

for healthy fruit products

China’s middle class

increasing from 12% to

22% of the population by

2030

New manufacturing

facility located at

Huntingwood, Sydney

New plant expected to

more than treble

manufacturing capacity

to meet strong customer

demand

Growth strategy through acquisition of orchardsand increased yield, andexpansion of health supplement business.

Benefiting from long term Chinese Government tax incentives

Key Facts

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Agriculture Business

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Enjoys all the advantages of being

located within China’s best fruit growing

region

• 23 orchards spanning 11,641 hectares

located in Ganzhou, Jiangxi

• Ganzhou City is a Special Citrus Zone

• “Gannan Navel Orange” is a national top

brand

• High average rain falls ~1500mm p.a.

• Orchards equipped with dripping system

and water tanks

• Long frost-free growing season

• Ganzhou population >9m provides ample

labour force

23orchards

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Health Supplement Business

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Australian based manufacturer of health

supplements

• Founded 2010 with year on year growth

• TGA and ACO licensed, GMP

Manufacturer

• Specialises in manufacture of

complementary medicines, health and skin

care products

• Located in Sydney with existing plant at

Silverwater

• New 4,800 square metre facility located at

Huntingwood, approximately 36 kms from

the Sydney CBD

• Track record for excellence in manufacture

• Strong customer base, including export to

Asia

Insert photo

of outside of

new plant

5 Healey Circuit, Huntingwood, NSW, 2148

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Revenue and NPAT

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Revenue NPAT• Seventh consecutive

record harvest;

includes harvest from

526-hectare camellia

plantation and 354-

hectare navel orange

plantation acquired in

July 2018

• Lower NPAT reflects

lower than expected

productivity of newly-

acquired orchards and

financing costs

associated with

acquisition strategy,

including Bio Health

• Gross margins of 42%

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Reported EPS and Dividend

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Reported earnings per share Dividend*• Lower earnings per

share reflects reduced

NPAT

• In light of the

company’s growth

focus, the board has

decided to reinvest in

the business

• This allows Dongfang

to take advantage of

opportunities in both

the Chinese orchards

and health supplements

markets

• Dividend policy remains

a board focus

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Timeline

19 OCT 2015

✭Quotation on ASX

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31 Dec 2015

✭ Acquisition of 853-ha camellia

plantations ~A$42m

11 MAR 2016

✭ Included in ASX/S&P All Ordinaries Index

31 MAR 2016

✭ Record NPAT of A$90m, beat prospectus

forecast

30 JUN 2016

✭ Acquisition of 400-ha tangerine

and 800-ha camellia for ~A$81m

31 MAR 2017

✭ Record revenue

of A$206m

31 AUG 2017

✭ Announced 2017 interim result

6 JULY 2017

✭ Acquisition of 380-ha camellia plantation and

544-ha navel orange plantation for ~A$94m

3 JAN 2018

✭ Announced A$50m debt facility

28 FEB 2018

✭ Record NPAT of $97.5 million

29 MAR 2019

✭ NPAT of $84.4 million

23 APR 2018

✭ Acquisition of 70% of

Bio Health Pharmaceuticals

2 JUL 2018

✭ Acquisition of 526-ha camellia plantation

and 354-ha navel orange plantation

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Revenue Analysis and Production

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• Total production up from

nearly 240,000 tonnes in

2015 to 284,000 tonnes in

2018

• Further benefits expected

through yield improvements

on newly-acquired orchards

• Tangerines provide about

50% of revenue; due to

acquisitions, camellia and

orange production has

increased and their

revenues now exceed

pomelo revenue

• Health supplement

business expected to grow

after move to new premises

Production by Categories FY2018 Total Revenue Breakdown

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Camellia Harvest

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• Production increase follows acquisition of

526 hectare camellia plantation in

Xingguo County in Ganzhou city region

• Production of 45,550 tonnes in 2018, up

nearly 20% from 37,893 tonnes in 2017;

camellia revenue increased 20% year-

on-year

• Production is mostly processed into

‘heart healthy’ cooking oil which has a

high smoke point

• Dongfang continues to assess

opportunities to expand through

downstream processing of camellia

products for tier-1 markets

Annual production

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Tangerine Harvest

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• Tangerine production of 149.6 million

tonnes in 2018, up from 147.8 million

tonnes in 2017

• Dongfang’s tangerines are known for thin

skin, bright colour and sweet flavour, and

sourced primarily from Xunwu County

• Although Chinese production is

increasing, Dongfang’s high-quality

products maintain good prices

• Unit prices up about 1% compared to

2017

Annual production

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Navel Orange Harvest

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• Record navel orange production of

42,544 tonnes, including production from

the 354-hectare orchard acquired in July

2018, was up 27% on 2017

• Dongfang’s “Gannan” navel oranges are

high-quality, sweet fruit with high juice

content, primarily for eating

• Orchards located in Ganzhou City

Special Citrus Zone

• Smaller orange crops after last year’s

bumper production although unit prices

were stable at RMB 4.99/kg, similar to

last year

• Demand for high-quality branded

oranges continues to grow with the rapid

development of cold storage and cold

chain infrastructure in China

Annual production

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Pomelo Harvest

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• Pomelos are similar to grapefruit, with

white, pink or red flesh

• 2018 harvest of 46,000 tonnes was

about 2% lower than 47,000 tonnes in

2017 due to unseasonable weather

(similar to 2017)

• Unit prices maintained of RMB3.1/kg, on

par with 2017 prices

• The pomelo harvest takes place in

September, October and November

Annual production

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Growth Plan – Primary Drivers

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• Reinvest profit in upstream grower

business, 6% - 9% p.a. plantation area

increase every year through acquisitions

• Improve productivity and yield of orchard

acquisitions 20% - 40% in first three

years by professional management

• Continued focus on achieving efficiencies

and cost reductions; advantages from

larger scale

• Benefit from FTA between China and

Australia

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Bio Health Update

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• Dongfang acquired 70% of Bio Health

Pharmaceuticals Pty Limited in 2018; key

management retained

• Dongfang’s connections and sales network in

China open up export opportunities to

capitalise on the US$41 billion Chinese

health supplements market

• Bio Health is a TGA licence holding health

supplement (and softgel capsule)

manufacturer and Australian Certified

Organic licensed business

• Strong established customer base with

positive reputation for manufacturing high-

quality products

• Strategic move into high margin, high growth

health supplement market broadens

Dongfang’s revenue base

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Bio Health Update

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• Production in 2018 constrained by size

of manufacturing facility

• Dongfang is investing in state-of-the art

equipment and Bio Health’s move to

new site at Huntingwood, Sydney

• New facility will enable tripling of current

production levels; production expected

to begin in second half of 2019

• Unit costs expected to reduce by 5%

due to economies of scale

• Plan allows diversification into health

food pharmaceuticals and development

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Summary

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• Seven consecutive years of record

harvest production

• Track record of growth and profitability

including 2018 net profit after tax of $84.4

million

• Australian acquisition of Bio Health

provides opportunities to build own brand

in high-margin, high-growth health food

supplements market

• Bio Health is moving to new premises

enabling tripling of production;

manufacturing at Huntingwood, Sydney

expected to begin in second half of 2019

• 35% growth in orchard area over past

three years, reflecting reinvestment in the

business and clear growth strategy

• Continued focus on yield improvement in

Chinese orchards expected to increase

productivity

• Ongoing focus on both organic growth

and acquisition opportunities

• Further revenue growth and profitability

expected in 2019

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Contact Us

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International

Mr Charles So

Chief Executive Officer

Tel: +61 4 4989 5835

c.so@dfm.net.au

Australia

Mr Ashley Rambukwella

Financial & Corporate Relations

Tel: +61 4 0723 1282

a.rambukwella@fcr.com.au

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Appendices

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Board of Directors / Management

Hongwei Cai

Executive Chairman

Founder and major

shareholder (major

underlying shareholder since

2008)

Extensive experience in

management, marketing

and business development

of agricultural enterprises

Chiu (Charles) So

Chief Executive

Officer

Previously Executive

Director of a Hong Kong

listed Company

18 years’ experience in

accounting and finance

Barton Tso

Executive Director

Previously Executive

Director / Chief Financial

Officer of a Hong Kong listed

Company

28 years’ experience in

enterprise management and

banking business investment

Dan Lin

Non-Executive

Director

PRC government relations

and Australian business

development experience

Significant Chinese

telecommunications industry

experience including as a

council member

Michael Choi

Non-Executive

Director

Former member of

Queensland Parliament

Held various ministerial

portfolios including Mines,

Energy, Natural Resources,

Trade and Multicultural

Affairs

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Land Title

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• Dongfang controls 23 plantations spanning

11,641 hectares, located in China’s premier

citrus growing region, the Ganzhou City

district, Jiangxi Province

• Private land ownership is not possible in the

PRC, but individual farmers historically have

been given a right to use the land.

Government has allowed aggregation of

these land usage rights to permit large-scale

intensive farming

• Dongfang has aggregated several

plantations, implementing better operating

practices which increase yield and

productivity

• Lease-hold operation rights purchased from

village committees (co-operatives):

o Lease: right to manage the orchards and

sell the fruit produced, but do not own the

land nor plantations on that land;

o Acquired: own the land and plantations

on that land

o Lease: 15 years; Acquired: 30 years

o Average life remaining for Dongfang

plantations: ~14 years

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2018 Financial Results

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Sound financial

performance

2018 2017

RMB ’000 AUD ’000 RMB ’000 AUD ’000

Revenue 1,173,387 244,887 1,062,767 221,800

Cost of sales (683,975) (142,756) (582,387) (121,545)

Gross profit 489,412 102,141 480,380 100,255

Other income (26,445) (5,519) 1,253 262

Administrative expenses (37,959) (7,922) (14,482) (3,022)

425,008 88,700 467,151 97,495

Finance costs (22,788) (4,756) (12) (3)

Profit before income tax 402,220 83,944 467,139 97,492

Income tax credit 2,203 460 - -

Profit for the year 404,423 84,404 467,139 97,492

Other comprehensive income:

Items that may be subsequently reclassified to profit or loss

Exchange differences on translating foreign operations 16,074 3,355 (10,961) (2,288)

Other comprehensive income for the year, net of tax 16,074 3,355 (10,961) (2,288)

Total comprehensive income for the period 420,497 87,759 456,178 95,204

Profit attributable to:

Owners of the Company 405,176 84,561 467,139 97,492

Non-controlling interest (753) (157) - -

404,423 84,404 467,139 97,492

Earnings per share

Basic RMB0.96 AUD0.21 RMB1.16 AUD0.24

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Statement of Financial Position

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Strong balance sheet

AUD1 = RMB4.791545

As of 31 December 2018

31 Dec 2018

AUD ’000

31 Dec 2017

AUD ’000

Assets

Current

Cash and cash equivalents 82,211 79,719

Trade and other receivables 127,601 112,890

Amount due from shareholder 708 -

Inventory 792 -

Deferred expenses 26,730 21,606

Total current assets 238,043 214,214

Non-current

Goodwill 7,240 -

Intangible assets 18,947 -

Property, plant and equipment 1,392 252

Bearer plant 416,178 340,447

Deposits for capital expenditure 7,510 -

Deferred expenses 10,796 21,592

Total non-current assets 462,063 362,291

Total assets 700,107 576,505

Liabilities

Current

Trade and other payables 39,000 54,723

Amount due to a shareholder - 14,303

Current portion of bank borrowings 5,490 -

Current portion of obligation under finance lease 191 17

Income tax payable 2,129 2,129

Total current liabilities 46,809 71,172

Non-current

Non-current portion of bank borrowings 49,407 -

Non-current portion of obligation under finance lease 507 70

Deferred tax liabilities 5,521 -

Total non-current liabilities 55,435 70

Total liabilities 102,244 71,242

Net assets 597,863 505,263

Equity

Share capital 64,636 64,636

Reserves 17,289 13,679

Retained earnings 511,508 426,948

Equity attributable to owners of the Company 593,433 505,263

Non-controlling interest 4,429 -

Total equity 597,862 505,263

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Shareholding

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Analysis of Holdings as at 28 March 2019

Dongfang Modern Agriculture Holding Group Limited

Securities: Fully Paid ordinary Shares

Holdings Ranges Holders Total Units %

1–1,000 157 62,166 0.015

1,001–5,000 315 758,334 0.180

5,001–10,000 75 558,403 0.133

10,001–100,000 119 3,506,483 0.834

100,000–99,999,999,999 34 415,471,644 98.838

Totals 700 420,356,644 100.000

Holder (as at 15 May 2019) Number of Shares % of CSO Description

Cai, Hongwei (Executive Chairman) 280,751,628 66.8% Founder, Chairman

Citicorp Nominees 46,301,327 11.0% High net worth investors

Monex Boom Securities 45,010,003 10.7% High net worth investors

Fortune Fancy Limited 11,771,260 2.8% High net worth investor

HSBC Custody Nominees 8,543,723 2.0% High net worth investors

Other Shareholders 27,978,703 6.7% Retail Investors

TOTAL 420,356,644 100.0%

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