key advantages of sbi vs mbt

Key Advantages of Sterling vs Mission Biofuels
Given that Sterling is similar in nature to Mission Biofuels (Mission), BBY lists some of the key
advantages which we see Sterling having over Mission. These include:
Strong management
It is BBY’s view that Sterling’s management team is strong, especially in the palm plantation
industry – this will help to manage the company’s RBD palm olein feedstock. Sterling’s MD,
CRS Paragash, has had considerable experience in dealing with financial, operational and
logistical issues while with the plantations division of Sime Darby Bhd (an international
conglomerate) in Sabah. Further to this, CRS Paragash and Andrew Phang (Group Executive
Director) also both owned and profitably operated a 32MW power plant in Sabah, Malaysia,
which was constructed on time and on budget. From BBY’s analysis, Mission’s management
team appears to have had limited experience in the key area of feedstock management.
An internationally renowned off-take partner
Sterling has signed an off-take agreement with well renowned international energy trader
Masefield AG, which turns over c.A$2bn in revenue each year. Masefield is a Swiss energy
trading business with 100 professionals and operations based in London. This is in
comparison to Mission, which has signed its off-take agreement with Austrian based Godiver.
Godiver is a much smaller business with just five employees.

Tighter capital structure
On a like-for-like basis, Sterling has a tighter capital structure than Mission Biofuels, i.e. 65m
shares vs 91m shares (both undiluted), with both companies scheduled to produce name-plate
capacity of 100,000t p.a. mid-way through CY07.
Tighter performance rights criteria
It is BBY’s view that the performance rights criteria set by Sterling are more beneficial to
shareholders compared to Mission’s performance rights criteria. For Sterling, performance
rights to the offtaker (6m rights which can be converted into shares) are dependent on the
company achieving forecast NPAT in FY08, FY09 and FY10 as well as the company achieving
120% of forecast revenues in those years. For key employees, performance rights (5.45m
rights which can be converted into shares) are dependent on the company achieving NPAT in
FY08 and FY09. For Mission, the performance rights will be triggered if the FY08 EBITDA is
c.A$18.6m, which is approximately 65% of the company’s forecast EBITDA contained in its
prospectus (dated 11 April 2006) of c.A$28.2m.

BBY initiates coverage on Sterling Biofuels
International Limited (‘Sterling’) with a BUY
recommendation and a base-case DCF valuation of
A$1.86/s. Our 12-month price target is A$1.45/s.
Sterling is establishing a plant in Sabah, Malaysia
capable of producing 100,000 tonnes p.a. of biodiesel.
It is anticipated that Sterling’s biodiesel plant will be
commissioned in May 2007 with production ramp-up
scheduled to start at the beginning of July 2007.
Sterling is led by a team with significant expertise and
experience in the palm plantation industry. The
company has also signed agreements with well
established parties including i) international energy
trader Masefield AG (biodiesel off-take), ii) Desmet
Ballestra (technology provider), iii) Lahad Datu Edible
Oils (LDEO) (supplier of RBD palm olein feedstock)
and iv) SMEC (Malaysia) Sdn Bhd (project manager).
BBY sees Sterling as an emerging Malaysian biodiesel
play with significant upside. BUY