Thailand Market Focus Investment Strategy Thailand Market Focus Investment Strategy Refer to...

ed: CK / sa: CT

SETSETSETSET :::: 1,379.531,379.531,379.531,379.53

Analyst Chanpen SIRITHANARATTANAKUL +662 657 7824 [email protected]

+662 658 1222 [email protected]

Key Indices

CurrentCurrentCurrentCurrent % Chng% Chng% Chng% Chng

SET Index 1379.33 1.03%

SET 100 Index 1973.70 1.08%

SET 50 Index 890.96 1.25%

Bt/US$ Exchange Rate 35.41 -0.32%

Daily Volume (m shrs) 1,147

Daily Turnover (US$m) 1,749

Source: DBS Vickers Market Key Data

(%)(%)(%)(%) EPS GthEPS GthEPS GthEPS Gth Div YieldDiv YieldDiv YieldDiv Yield

2015A (8.9) 3.3

2016F 29.6 3.3

2017F 10.9 3.6

(x)(x)(x)(x) PERPERPERPER EV/EBITDAEV/EBITDAEV/EBITDAEV/EBITDA

2015A 18.9 7.8

2016F 14.6 7.6

2017F 13.1 7.1

Source: DBS Vickers STOCK PICKS

Source: DBS Vickers

DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity

7 Mar 2016

Thailand Market Focus

Investment Strategy Refer to important disclosures at the end of this report

Cautiously optimistic

• Aggregate net profit of SET listed companies eased 1.5% in 2015

• Expect 2016F SET EPS growth at 30%, led by energy sector; our SET Index target is now 1,480 (based on 15.6x FY16F PE, +0.5SD of 10yr average)

• Prefer tourism, finance, and PFPO/REIT sectors as they are resilient to the slowing economy

• Top picks: BA, ERW, GL, MTLS, PTT, EPG, IRPC, CPN and DIF

Aggregate net pr ofit of SET listed companies eased 1.5% in 2015

Market EPS growth to surge 30Market EPS growth to surge 30Market EPS growth to surge 30Market EPS growth to surge 30% this year.% this year.% this year.% this year. Growth would be boosted mainly by energy (led by PTTEP and PTT, given large impairment losses from falling oil prices last year). Other than energy, sectors that should see strong growth are transportation, tourism and finance. Three key theThree key theThree key theThree key themes for the market.mes for the market.mes for the market.mes for the market. (i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals. Tourist arrivals into Thailand surged 20% in 2015, led by visitors from China. We expect the momentum to continue this year. Key beneficiaries are airports (e.g. AOT, SPF), airlines (BA, AAV) and hotels (ERW, CENTEL and MINT).

(ii) High growth plays.(ii) High growth plays.(ii) High growth plays.(ii) High growth plays. Despite the slowing economy, some companies are still growing nicely. Among these are microfinance players who target the underpenetrated grassroots segment by offering asset-backed loans like MTLS and SAWAD. Some companies e.g. GL are very successful in expanding into high-growth CLMV countries.

(iii) High yield plays. (iii) High yield plays. (iii) High yield plays. (iii) High yield plays. We like property funds/REITs sectors, which offer a safe bet amid the current high market volatility. The Thai 10-year government bond yield has dropped steadily from 2.6% a year ago to 1.95% currently. Compared with the average sector yield of 6.6%, the current yield spread is as high as 460bps vs the historical average spread of 340bps. In the space, we like DIF, CPNRF, SPF, CPTGF and LHHOTEL.

Our stock picksOur stock picksOur stock picksOur stock picks:::: Bangkok Airways (BA), Erawan Hotel (ERW), Group Lease (GL), Muangthai Leasing (MTLS), Eastern Polymer Group (EPG), PTT (PTT), Central Pattana (CPN) and Digital Infrastructure (DIF).

Price Price Price Price Mkt CapMkt CapMkt CapMkt Cap Target PriceTarget PriceTarget PriceTarget Price Performance (%)Performance (%)Performance (%)Performance (%)

BtBtBtBt US$mUS$mUS$mUS$m BtBtBtBt 3 mth3 mth3 mth3 mth 12 mth12 mth12 mth12 mth RatingRatingRatingRating

Bangkok Airways 24.30 1,440 27.60 12.0 23.4 BUY The Erawan Group 4.10 289 5.30 (1.9) (13.9) BUY Muangthai Leasing 20.50 1,227 32.00 0.0 4.6 BUY Group Lease 21.40 921 28.00 20.2 132.6 BUY Eastern Polymer 12.90 1,020 17.00 19.4 58.3 BUY PTT 272.00 21,930 320.00 5.8 (20.0) BUY IRPC PCL 4.48 2,584 4.30 6.7 3.2 HOLD Central Pattana 50.00 6,334 58.00 11.1 14.9 BUY Digital Infra Fund 13.50 2,213 14.80 8.9 10.7 BUY

Market Focus

Cautiously Optimistic

Page 2

EconomyEconomyEconomyEconomy Domestic consumption remains weak Domestic consumption remains weak Domestic consumption remains weak Domestic consumption remains weak

Private consumption decelerated in January 2016 after

temporary factors waned, particularly the acceleration in car

purchases and household expenditure at the end of last

year. Concerns over the drought situation and global

economic slowdown have dampened consumption further.

Private Consumption IndexPrivate Consumption IndexPrivate Consumption IndexPrivate Consumption Index

-5%

0%

5%

10%

15%

20%

80

85

90

95

100

105

110

115

120

125

130

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

PCI PCI Growth (yoy)

Source: BOT, DBS Vickers

Index of car sales for consumption purposeIndex of car sales for consumption purposeIndex of car sales for consumption purposeIndex of car sales for consumption purpose

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

0

50

100

150

200

250

Jan

-11

Ma

y-1

1

Se

p-1

1

Jan

-12

Ma

y-1

2

Se

p-1

2

Jan

-13

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Car Sales Index

YoY Growth


CoCoCoConsumer Confidence Index nsumer Confidence Index nsumer Confidence Index nsumer Confidence Index

40

50

60

70

80

90

100

110

120

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

CCI of Overall economy

CCI of future employment

CCI of future income

Source: UTCC, DBS Vickers

Private investment Private investment Private investment Private investment remains slowremains slowremains slowremains slow

Private investment shows signs of slowing from previous

months in January 2016. Cement sales contracted 0.3% y-o-

y. The Construction Material Price Index dropped 6.2% y-o-

y, due to the declining prices of steel and steel products in

line with the global market.

Private Investment IndexPrivate Investment IndexPrivate Investment IndexPrivate Investment Index

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

80

90

100

110

120

130

140

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

Private Investment Index YoY Growth (RHS)


No support from export growth

Thailand’s total export plunged 9.3% y-o-y in January 2016,

worse than our and market expectations. Exports dropped at

most destinations except for CLMV (+1.2%), Australia (+13.6%),

and the Philippines (+7.9%). In terms of products, manufacturing

products (accounting for 88.7% of total exports) fell 8.0% y-o-y,

agriculture (7.5% of total) dropped 4.6%, and fishery (0.8% of

total) plunged 11.5%.

Export growth is likely to disappoint again this year. While we

have previously pencilled in total export growth of 3% this year,

it is now likely to be closer to 1%. Indeed, the government has

also revised down its forecast to 1.2% from 3% previously.

After recording -0.3%, -0.4% and -5.7% in 2013, 2014 and

2015 respectively, an export growth of 1% this year may not be

that bad after all. But it does not hide the fact that there has not

been any support from export growth to the overall GDP growth

outlook for four years running now. And export growth may

continue to remain lacklustre for now. Imports of

intermediate/raw materials have continued to fall at a double-

digit annual pace. Certainly, this does not bode well for the

outlook for export growth ahead.

Market Focus


Page 3

Tourism is a clear bright spot

The number of tourist arrivals into Thailand grew impressively by

20.4% in 2015, led by visitors from China and Asean countries.

In January 2016, such momentum continued, with tourist arrivals

growing 15.0% y-o-y amid a continued increase in Chinese

tourists and a pickup in tourist arrivals from Europe.

Tourist arrivals to ThailandTourist arrivals to ThailandTourist arrivals to ThailandTourist arrivals to Thailand

-10%

-5%

0%

5%

10%

15%

20%

25%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

Tourist Arrivals ('000 people)

y-o-y (RHS)


Government expenditure expanded 20.5% in Jan

Total government expenditure expanded by 20.5% y-o-y to

Bt259.9bn in January 2016. The annual budgetary expenditure

was disbursed at Bt214bn in January, up 21.8% y-o-y. For the

first four months of FY2016, total annual budgetary expenditure

was disbursed at Bt1,048.6bn, or 38.6% of expenditure

framework at Bt2,720bn. Net government revenue collection

contracted by 2.6% y-o-y to Bt156.4bn. The budget balance

therefore showed a deficit of Bt109.7bn in January 2016.

Inflation remains subdued

Inflation remains subdued. CPI and core inflation came in at -

0.5% (y-o-y) and 0.7% respectively in February, well below the

medium-term targets of Bank of Thailand (BOT). The BOT revised

its forecast for 2016 to 0-1% from 1-2% previously. We

currently target CPI to inch up to 0.6% for 2016.

Inflation subduedInflation subduedInflation subduedInflation subdued

Source: CEIC, Bloomberg Finance L.P , and DBS Group Research

Risks of another rate cut persist

Given that inflation remains subdued, there is presumably room

for the BOT to go with another rate cut. After all, private sector

demand remains weak. Interestingly, the decision to keep rates

unchanged last month was unanimous.

At the current 1.5%, the key policy rate is just 25bps higher than

where it was during the 2008-09 crisis.

Thailand’s policy rateThailand’s policy rateThailand’s policy rateThailand’s policy rate

5.5

5.7

5.9

6.1

6.3

6.5

6.7

6.9

7.1

7.3

7.5

Jan/08

Jul/08

Jan/09

Jul/09

Jan/10

Jul/10

Jan/11

Jul/11

Jan/12

Jul/12

Jan/13

Jul/13

Jan/14

Jul/14

Jan/15

Jul/15

Jan/16

%

Source: BoT

GDP growth target at 3.4% this year

Our economist has forecasted Thai GDP to grow 3.4% this year,

up from 2.8% last year. Growth will be driven by gross fixed

capital formation which is expected to surge 6.1% and

government consumption +4.4%.

Market Focus


Page 4

ThailThailThailThailand Economic Indicatorsand Economic Indicatorsand Economic Indicatorsand Economic Indicators

2015201520152015 2016f2016f2016f2016f 2017f2017f2017f2017f

4Q154Q154Q154Q15 1Q16f1Q16f1Q16f1Q16f 2Q16f2Q16f2Q16f2Q16f 3Q16f3Q16f3Q16f3Q16f 4Q16f4Q16f4Q16f4Q16f 1Q17f1Q17f1Q17f1Q17f

Real output and demandReal output and demandReal output and demandReal output and demand

GDP growth (88P) 2.8 3.4 3.7 2.8 3.1 3.7 3.8 3.4 3.3

Private consumption 2.1 2.2 2.8 2.5 2.0 2.0 2.3 2.6 2.9

Government consumption 2.2 4.4 4.5 4.8 4.2 5.8 5.5 2.2 4.9

Gross fixed capital formation 4.7 6.1 5.7 9.4 3.7 9.6 8.2 2.9 3.8

Net exports (THBbn) 706 653 595 215 174 100 172 208 179

Exports 0.1 0.9 1.9 -3.5 -1.2 0.5 2.5 1.9 1.4

Imports -0.4 1.9 3.1 -1.3 -0.7 3.0 2.5 2.7 1.2

ExternalExternalExternalExternal

Merch exports (USDbn) 214 216 226 53 51 53 57 56 53

- % y-o-y -6 1 4 -7 -4 -1 4 6 4

Merch imports (USDbn) 203 207 216 49 47 51 55 55 52

- % y-o-y -11 2 4 -13 -10 -1 9 12 11

Trade balance (USD bn) 12 9 9

4 4 2 2 1 1

Current account balance (USD bn) 35 25 20 13 9 6 6 4 4

% of GDP 8.8 6.3 4.9 n.a. n.a. n.a. n.a. n.a. n.a.

InflationInflationInflationInflation

CPI inflation -0.9 0.6 2.0 -0.9 -0.6 0.1 1 1.7 2.3

OtherOtherOtherOther

Nominal GDP (USDbn) 396 398 410 n.a. n.a. n.a. n.a. n.a. n.a.

Unemployment rate, % 0.8 0.9 0.9 n.a. n.a. n.a. n.a. n.a. n.a. Fiscal balance (% of GDP)** -1.9 -3.0 -2.8

n.a. n.a. n.a. n.a. n.a. n.a.

*% change, year-on-year, unless otherwise specified

**Central government net lending/borrowing for fiscal year ending September of the calendar year

Source: CEIC, Bloomberg Finance L.P, and DBS Group Research

Market Focus


Page 5

Review of 2015 resultsReview of 2015 resultsReview of 2015 resultsReview of 2015 results

Aggregate net profit of SET listed companies Aggregate net profit of SET listed companies Aggregate net profit of SET listed companies Aggregate net profit of SET listed companies eased 1.5eased 1.5eased 1.5eased 1.5% y% y% y% y----oooo----y to y to y to y to

Bt6Bt6Bt6Bt697979797bn in 2015. bn in 2015. bn in 2015. bn in 2015. This was the second consecutive year of

negative growth for SET-listed companies. In 2014, overall net

profit plunged by 11%.

Higher margins helped offset falling revenueHigher margins helped offset falling revenueHigher margins helped offset falling revenueHigher margins helped offset falling revenue. . . . Revenue of listed

companies fell 9.35% y-o-y to Bt10.3trn due mainly to the sharp

drop in commodity prices e.g. oil and steel products.

Nonetheless, the lower oil prices also resulted in lower cost of

goods sold, and thus improving margins. Net profit therefore

eased only 1.5%.

Aggregate net profit growthAggregate net profit growthAggregate net profit growthAggregate net profit growth of SETof SETof SETof SET----listed companieslisted companieslisted companieslisted companies

-40%

-20%

0%

20%

40%

60%

0

200,000

400,000

600,000

800,000

1,000,000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

F

Net profit (Btm) Net profit growth - RHS

Source: SET and DBS Vickers

4Q15 showed a significant improvement both y4Q15 showed a significant improvement both y4Q15 showed a significant improvement both y4Q15 showed a significant improvement both y----oooo----y and qy and qy and qy and q----oooo----q. q. q. q.

The following chart shows the quarterly net profit of listed

companies on the SET. We can see that 4Q15 net profit has

surged 157% y-o-y and 420% q-o-q. This was due mainly to the

huge impairment losses in the energy sector in 4Q14 and 3Q15.

Aggregate net profit growthAggregate net profit growthAggregate net profit growthAggregate net profit growth of SETof SETof SETof SET----listed companieslisted companieslisted companieslisted companies

(100,000)

(50,000)

0

50,000

100,000

150,000

200,000

250,000

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Btm

Non-Energy Energy

Source: SET and DBS Vickers

Earnings growth/contraction by sectorEarnings growth/contraction by sectorEarnings growth/contraction by sectorEarnings growth/contraction by sector

Growth.Growth.Growth.Growth. Major sectors that saw y-o-y earnings growth were

petrochemicals led by IVL and PTTGC, insurance led by BLA, and

THRE, construction materials led by SCC and TASCO, and

electronic components led by SVI.

Contraction.Contraction.Contraction.Contraction. Major sectors that saw earnings contraction

included energy led by PTTEP and PTT, agribusiness led by GFPT,

and construction services led by PLE and SRICHA.

Aggregate 2015 SET net profitAggregate 2015 SET net profitAggregate 2015 SET net profitAggregate 2015 SET net profit

SectorSectorSectorSector Net profit (Btm)Net profit (Btm)Net profit (Btm)Net profit (Btm) GrowthGrowthGrowthGrowth

2014201420142014 2015201520152015

Financial 229,712 221,425 -4%

Property & Construction 134,072 150,368 12%

Technology 103,286 111,772 8%

Services 68,190 74,700 10%

Resources 94,526 54,363 -42%

Agro-business 43,805 42,245 -4%

Industry 29,006 35,306 22%

Consumption 4,097 6,800 66%

OthersOthersOthersOthers 706,694706,694706,694706,694 696,979696,979696,979696,979 ----1%1%1%1%

Source: SET, DBS Vickers

Earnings outlookEarnings outlookEarnings outlookEarnings outlook

2016F universe EPS growth estimat2016F universe EPS growth estimat2016F universe EPS growth estimat2016F universe EPS growth estimated at 30%. ed at 30%. ed at 30%. ed at 30%. This will be

boosted largely by the energy sector, mainly by PTTEP (from

heavy losses of Bt31.6bn in 2015 to Bt5.9bn in 2016) and PTT

(from net profit of Bt19.9bn in 2015 to Bt80.9bn in 2016).

The strong earnings growth, however, will be seen in 3Q16 given

the low base in 3Q15. Excluding PTT and PTTEP, market EPS

growth would be +9.3% this year and +11.2% next year.

Showing strong EPS growth in 2016 areShowing strong EPS growth in 2016 areShowing strong EPS growth in 2016 areShowing strong EPS growth in 2016 are Transportation (+126%)

led by strong earnings jump at the three airlines (BA, AAV and

THAI), finance (+52%) led by GL and MTLS amid aggressive

branch expansion, commerce (+22%) led by CPALL as it has

embarked on continued store expansion, and tourism (+20%) led

by ERW and CENTEL amid strong tourist arrivals.

Sectors with EPS decline in 2014Sectors with EPS decline in 2014Sectors with EPS decline in 2014Sectors with EPS decline in 2014 are contractors (-17%) led by

CK because it booked a huge one-off gain from the divestment

of affiliates in 2013, and industrial estate developers (-16%) led

by HEMRAJ as it booked a large asset divestment gain at its

property fund in 2013.

Market Focus


Page 6

Earnings growtEarnings growtEarnings growtEarnings growth by sectorh by sectorh by sectorh by sector****

YE Dec (Btm)YE Dec (Btm)YE Dec (Btm)YE Dec (Btm) FY15AFY15AFY15AFY15A FY16FFY16FFY16FFY16F FY17FFY17FFY17FFY17F FY16FGwtFY16FGwtFY16FGwtFY16FGwt FY17FGwtFY17FGwtFY17FGwtFY17FGwt

Banking 167,464 175,167 194,213 5% 11%

Finance 3,738 4,605 5,384 23% 17%

Con. Mat. 50,478 53,188 54,242 5% 2%

Chemicals 34,118 38,363 43,916 12% 14%

Contractors 8,025 6,262 7,424 -22% 19%

Property 41,516 40,942 45,687 -1% 12%

- Commercial 7,880 8,749 10,065 11% 15%

- Residential 31,285 30,782 33,887 -2% 10%

- Industrial 2,350 1,411 1,735 -40% 23%

Property Fund 14,901 16,937 18,695 14% 10%

Energy 21,868 126,327 134,468 478% 6%

Commerce 24,875 30,256 35,876 22% 19%

Transport 14,949 33,721 41,938 126% 24%

Tourism 1,966 2,362 2,776 20% 18%

Telecom 46,722 41,331 46,133 -12% 12%

Electronics 13,019 15,428 15,362 18% 0%

Food 22,671 21,550 25,568 -5% 19%

Health Care 11,717 12,916 15,009 10% 16%

TotalTotalTotalTotal 478,028478,028478,028478,028 619,354619,354619,354619,354 686,692686,692686,692686,692 30303030%%%% 11111111%%%% Source: Companies and DBS Vickers * Companies under DBSV coverage

ValuationValuationValuationValuation

The Thai market is now trading at 2016F PE of 1The Thai market is now trading at 2016F PE of 1The Thai market is now trading at 2016F PE of 1The Thai market is now trading at 2016F PE of 14.6x4.6x4.6x4.6x. . . . This is

slightly higher than 10-year average PE of 14.3x. Nonetheless, the

market PE has come off from its peak of 18.9x in 2014.

SET: PE BandSET: PE BandSET: PE BandSET: PE Band

5

7

9

11

13

15

17

19

21

0

200

400

600

800

1,000

1,200

1,400

1,600

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016F

SET Index (LHS)P/E (x)Median (14.3x)Median+0.5SD (15.7x)Median-0.5SD (13x)

SET P/E Ratio


Valuation by SectorValuation by SectorValuation by SectorValuation by Sector****

PE (x)PE (x)PE (x)PE (x)

YE DecYE DecYE DecYE Dec FY15AFY15AFY15AFY15A FY16FFY16FFY16FFY16F FY17FFY17FFY17FFY17F

Banking 10.1 9.6 8.7

Finance 25.9 21.0 18.0

Con. Mat. 11.6 11.0 10.8

Chemicals 10.7 9.5 8.3

Contractors 17.0 21.8 18.4

Property 12.5 12.8 11.5

- Commercial 27.8 25.0 21.7

- Residential 8.9 9.1 8.4

- Industrial 10.3 17.1 13.9

Property Fund 15.4 14.4 13.0

Energy 70.3 12.2 11.5

Commerce 30.5 25.1 21.1

Transport 52.3 23.2 18.7

Tourism 31.8 26.5 22.6

Telecom 14.6 16.5 14.8

Electronics 14.4 12.1 12.2

Food 20.3 21.4 18.0

Health Care Services 44.8 40.7 35.0

TotalTotalTotalTotal 18.18.18.18.9999 14.14.14.14.6666 11113.13.13.13.1 Source: SET, DBS Vickers * Companies under DBSV coverage

Regional comparison: PE vs. EPS growthRegional comparison: PE vs. EPS growthRegional comparison: PE vs. EPS growthRegional comparison: PE vs. EPS growth

EPS Gth (%)EPS Gth (%)EPS Gth (%)EPS Gth (%) PE (xPE (xPE (xPE (x))))

16161616FFFF 11117777FFFF 16F16F16F16F 17F17F17F17F

Singapore* 6.7 7.4 13.2 12.3

Malaysia 10.0 8.2 16.2 14.9

HK HSI -14.1 11.5 16.5 9.4

HK HSCCI (Red) -16.8 25.2 10.8 8.7

HK HSCEI (H) -5.6 9.7 6.8 6.2

Thailand*Thailand*Thailand*Thailand* 29.629.629.629.6 10.910.910.910.9 14.614.614.614.6 13.113.113.113.1

Indonesia 67.8 15.3 16.8 14.6

Simple AverageSimple AverageSimple AverageSimple Average 11.11.11.11.1111 12.612.612.612.6 13.613.613.613.6 11.211.211.211.2

* FY16 & FY17 Forecast

Source: DBS Bank, DBS Vickers

Market Focus


Page 7

Market PerformanceMarket PerformanceMarket PerformanceMarket Performance

An outperformer YTDAn outperformer YTDAn outperformer YTDAn outperformer YTD. . . . The Thai market has risen 7.1% YTD,

outperforming regional peers’ 3.9% loss. We believe this was

mainly on the back of the superior earnings growth of 30% at

the Thai market this year.

Regional: Index Performance Regional: Index Performance Regional: Index Performance Regional: Index Performance

YTDYTDYTDYTD FY2015FY2015FY2015FY2015

FTSE -1.5% -4.9%

S&P 500 -2.8% -0.7%

Dow Jones -3.0% -2.2%

NASDAQ -6.1% 5.7%

Dax -9.0% 9.6%

Nikkei -10.9% 9.1%

SETSETSETSET 7.1%7.1%7.1%7.1% ----14.0%14.0%14.0%14.0%

Indo 5.5% -12.1%

Taiwan 3.3% -10.4%

Phil 0.2% -3.9%

Korea -0.2% 2.4%

Malay -0.3% -3.9%

Sing -3.3% -14.3%

MXFEJMXFEJMXFEJMXFEJ ----3.9%3.9%3.9%3.9% ----11.7%11.7%11.7%11.7%

India -5.9% -4.9%

HK -9.0% -7.2%

H-shares -13.1% -19.4%

Shanghai -19.2% 9.4%

Source: Bloomberg, DBS Vickers

Foreigners turned net buyers Foreigners turned net buyers Foreigners turned net buyers Foreigners turned net buyers of Thai equof Thai equof Thai equof Thai equity ity ity ity inininin FebruaryFebruaryFebruaryFebruary 2016201620162016. . . . The

following chart shows foreign investors have turned net buyers of

Thai equity since February 2016.

SET: Foreign net buy (sell) positionSET: Foreign net buy (sell) positionSET: Foreign net buy (sell) positionSET: Foreign net buy (sell) position

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

Jan/08

Jul/08

Jan/09

Jul/09

Jan/10

Jul/10

Jan/11

Jul/11

Jan/12

Jul/12

Jan/13

Jul/13

Jan/14

Jul/14

Jan/15

Jul/15

Jan/16

BtmBtm Foreign net buy (sell)

Avg Daily Turnover (RHS)

As of 3 Mar 16

Source: SET , DBS Vickers

Foreigner ownership in Thai equityForeigner ownership in Thai equityForeigner ownership in Thai equityForeigner ownership in Thai equity picked up slightly recentlpicked up slightly recentlpicked up slightly recentlpicked up slightly recentlyyyy....

The following table shows foreign ownership in Thai equity has

fallen steadily during the past few years, before picking up

slightly this year to close to 30% currently.

SET: Foreign holdings + NVDR in Thai equitySET: Foreign holdings + NVDR in Thai equitySET: Foreign holdings + NVDR in Thai equitySET: Foreign holdings + NVDR in Thai equity

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

3Q02

2Q03

1Q04

4Q04

3Q05

2Q06

1Q07

4Q07

3Q08

2Q09

1Q10

4Q10

3Q11

2Q12

1Q13

4Q13

04-Jun

Aug-14

Nov-14

Feb-15

May-15

Aug-15

Nov-15

Feb-16

Foreign Holding Foreign Holding+NVDR


RegionRegionRegionRegional: Foreign net buy (sell) positional: Foreign net buy (sell) positional: Foreign net buy (sell) positional: Foreign net buy (sell) position of Thai equityof Thai equityof Thai equityof Thai equity

US$m IndiaIndiaIndiaIndia IndonesiaIndonesiaIndonesiaIndonesia JapanJapanJapanJapan PhilippinesPhilippinesPhilippinesPhilippines S. KoreaS. KoreaS. KoreaS. Korea TaiwanTaiwanTaiwanTaiwan ThailandThailandThailandThailand VietnamVietnamVietnamVietnam PakistanPakistanPakistanPakistan

2005 10,901 -1,737 113,338 354 -3,549 23,990 2,947 - -

2006 8,338 1,996 68,885 720 -12,659 16,962 2,135 210 -

2007 18,518 3,141 32,759 1,354 -29,095 477 1,853 1,430 -

2008 -12,918 1,801 -66,817 -1,135 -36,742 -16,364 -4,942 340 -1,464

2009 17,639 1,384 -6,513 420 24,446 15,617 1,137 71 20

2010 29,321 2,345 22,926 1,232 19,657 9,577 2,687 617 532

2011 -396 2,853 -1,069 1,329 -8,584 -9,076 -167 95 -119

2012 24,548 1,703 27,733 2,548 15,069 4,907 2,504 154 126

2013 19,986 -1,804 149,920 678 4,855 9,178 -6,211 263 401

2014 16,162 3,766 22,545 1,287 5,967 13,551 -974 140 378

2015 3,274 -1,580 3,485 -1,194 -3,626 3,322 -4,372 100 -310

2016 YTD2016 YTD2016 YTD2016 YTD ----2,8722,8722,8722,872 138138138138 ----27,01227,01227,01227,012 ----128128128128 ----2,3702,3702,3702,370 ----141141141141 ----206206206206 ----69696969 ----89898989

Jan-16 -1,702 -165 -12,903 -43 -2,327 -1,703 -219 -58 -50

Feb-16 -1,170 303 -14,109 -85 -43 1,563 13 -11 -40

Source: Bloomberg Finance L.P., DBS Vickers

Market Focus


Page 8

RecommendationRecommendationRecommendationRecommendation

Our SET InOur SET InOur SET InOur SET Index target is 1dex target is 1dex target is 1dex target is 1,,,,480480480480. This is based on 15.6x 2016 PE,

which represents +0.5SD of its 10-year average PE. The slight

premium to historical average PE of 14.3x reflects the market

strong earnings recovery this year (+30%).

Our preferred sectors.Our preferred sectors.Our preferred sectors.Our preferred sectors. We prefer tourism, diversified financials,

chemicals, and PFPO/REIT sectors as they are resilient to the

slowing economy

SET: Our SET: Our SET: Our SET: Our sector weightingsector weightingsector weightingsector weighting

OverweightOverweightOverweightOverweight NeutralNeutralNeutralNeutral UnderweightUnderweightUnderweightUnderweight

Finance Banks Property

Tourism Building Materials Entertainment

Chemicals Commerce

PFPO/REITs Energy

Electronics

Hospitals

Telecom

Source: DBS Vickers

Three key themes for the market. Three key themes for the market. Three key themes for the market. Three key themes for the market. We have three key themes

for the market. They are:

(i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals.(i) Beneficiaries of strong tourist arrivals. Tourist arrivals into

Thailand surged 21% in 2015, led by visitors from China. We

expect the momentum to continue this year. Key beneficiaries

are airports (e.g. AOT, SPF), airlines (BA, AAV) and hotels (ERW,

CENTEL and MINT).

(ii) High growth plays.(ii) High growth plays.(ii) High growth plays.(ii) High growth plays. Despite the slowing economy, some

companies and industries are still growing nicely. Among these

are microfinance players who target the underpenetrated

grassroots segment by offering asset-backed loans like MTLS

and SAWAD. They are seeing strong loan growth, thanks to

their aggressive branch expansion. Some companies e.g. GL

are very successful in expanding into high-growth CLMV

countries.

(iii) High yield plays.(iii) High yield plays.(iii) High yield plays.(iii) High yield plays. Here we like property funds/REITs sectors,

which offer a safe bet amid the current high market volatility.

The Thai 10-year government bond yield has dropped steadily

from about 2.6% a year ago to 1.95% currently. Compared

with the average sector yield of 6.6%, the current yield spread

is as high as 460bps vs the historical average spread of 340bps.

In the space, we like DIF, CPNRF, SPF, CPTGF and LHHOTEL.

Top picks:Top picks:Top picks:Top picks: Bangkok Airways (BA), Erawan Hotel (CENTEL),

Group Lease (GL), Muangthai Leasing (MTLS), Eastern Polymer

Group (EPG), PTT (PTT), IRPC (IRPC), Central Pattana (CPN) and

Digital Infrastructure (DIF).

Top picksTop picksTop picksTop picks

MktMktMktMkt PPPPricericericerice TargetTargetTargetTarget %%%% PEPEPEPE PBVPBVPBVPBV Div YieldDiv YieldDiv YieldDiv Yield ROEROEROEROE

BloombergBloombergBloombergBloomberg CapCapCapCap 03030303----MarMarMarMar PricePricePricePrice UpsideUpsideUpsideUpside (x)(x)(x)(x) (x)(x)(x)(x) (%)(%)(%)(%) (x)(x)(x)(x)

CodeCodeCodeCode (US$m)(US$m)(US$m)(US$m) (Bt)(Bt)(Bt)(Bt) (Bt)(Bt)(Bt)(Bt) 16F16F16F16F 17F17F17F17F 16F16F16F16F 17F17F17F17F 16F16F16F16F 17F17F17F17F 16F16F16F16F RcmdRcmdRcmdRcmd

BA TB 1,441 24.30 26.90 11% 18.0 15.2 1.6 1.5 2.8 3.3 8.9 BUY

ERW TB 289 4.10 5.30 29% 34.4 24.3 2.1 2.0 1.2 1.6 6.2 BUY

MTLS TB 1,227 20.50 27.00 32% 37.4 26.9 6.8 5.8 1.2 1.5 19.3 BUY

GL TB 922 21.40 28.00 31% 32.0 23.0 3.7 3.4 1.3 1.6 12.1 BUY

EPG TB 1,020 12.90 17.00 32% 24.9 19.2 3.8 3.3 1.3 1.6 17.7 BUY

PTT TB 21,941 272.00 320.00 18% 9.6 9.3 1.0 1.0 4.4 4.4 11.2 BUY

IRPC TB 2,585 4.48 4.30* -4% 12.0 10.9 1.1 1.1 3.3 3.6 9.7 HOLD

CPN TB 6,337 50.00 58.00 16% 25.6 22.3 4.4 3.9 1.6 1.8 18.0 BUY

DIF TB 2,214 13.50 14.80 10% 13.8 12.7 1.1 1.1 7.2 7.7 7.9 BUY

*Under review

Source: DBS Vickers

Market Focus


Page 9

Our Sector ViewOur Sector ViewOur Sector ViewOur Sector View Chart/TableChart/TableChart/TableChart/Table Sector: Tourism Sector: Tourism Sector: Tourism Sector: Tourism Overweight Overweight Overweight Overweight

Top BUY(S): AOT, ERW, BA, AAVTop BUY(S): AOT, ERW, BA, AAVTop BUY(S): AOT, ERW, BA, AAVTop BUY(S): AOT, ERW, BA, AAV Least preferred: THAILeast preferred: THAILeast preferred: THAILeast preferred: THAI

Thailand’s visitor arrivals in 2015 grew 21% y-o-y to 109.8m and

Thailand is still one of the world’s best value-for-money tourist

destinations with unique culture. Also, the visitor arrival in Jan 16

rose to 11m, up 15% y-o-y. Hence, we are still optimistic on the

country's tourism industry. The number of tourists is expected to

continue to grow at least 10% in FY16F, which should be mainly

driven by Chinese tourists. The solid demand outlook is also

positive for the airlines. In addition, with a benign fuel price

environment, we also expect airlines’ earnings to continue

growing this year.

We like i) AOT, as it has the largest exposure to improving visitor

traffic to Thailand, ii) ERW, due to its strong 2016 y-o-y earnings

growth of 51% from its expansion as well as the catalyst of extra

gains from potential asset divestments to a new REIT in 2016,

and iii) AAV and BA, whose earnings are expected to continue

growing strong in this year by 54% and 58%, respectively,

driven by the two key factors of Thailand tourism growth and

cheap jet fuel environment going into 2016. Nevertheless, we

still maintain our HOLD call on Thai Airways, as a sustained

turnaround remains uncertain.

Thailand: Visitor arrivals

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

m passengers

2011 2012 2013 2014 2015 2016

Source: BOT, DBS Vickers,

Sector: Petrochemicals Sector: Petrochemicals Sector: Petrochemicals Sector: Petrochemicals OverweightOverweightOverweightOverweight

Top BUY: SCCTop BUY: SCCTop BUY: SCCTop BUY: SCC Least preferred stocks: Least preferred stocks: Least preferred stocks: Least preferred stocks: ----

Petrochemical spreads have recovered steadily over the past

two years, with the margin for high-density polyethylene

spreads (HDPE) rising to US$656/t this month, the highest since

mid-2009.

We expect the sector to continue to outperform due to limited

new capacity. We forecast spreads of HDPE and LLDPE will hit

US$580/t and US$590/t this year vs. US$550 average for both

last year, while LLDPE spreads will hit US$670/t vs. US$600

average last year. Hence, based on current spreads, we see

upside risks to our forecasts.

HDPE spreads over naphtha

Source: Datastream

Market Focus


Page 10

Sector: Property Fund/REIT Sector: Property Fund/REIT Sector: Property Fund/REIT Sector: Property Fund/REIT Weighting: OverweightWeighting: OverweightWeighting: OverweightWeighting: Overweight

Top BUY(S):Top BUY(S):Top BUY(S):Top BUY(S): CPNRF, SPFCPNRF, SPFCPNRF, SPFCPNRF, SPF Least prLeast prLeast prLeast preferred stocks: eferred stocks: eferred stocks: eferred stocks: ----

The PFPO/REIT sector has strongly outperformed the SET last year

and YTD, thanks to its strong recurring income base which helps

provide an earnings cushion during economic downturns. The

sector also provides a relatively generous distribution yield of

6.6%.

Thai 10-year government bond yield has come off steadily during

the past year, from 2.6% to as low as 1.95% currently.

Compared with the average sector yield of 6.6%, the current

yield spread is as high as 460bps vs the historical average spread

of 340bps.

Among the space, we like CPNRF, SPF, CPTGF, and LHHOTEL.

These funds/REITs should perform this year, despite a slowing

economy, while offering decent dividend yields.

PFPO/REIT: Yield-spread over 10-yr govt bond is widening

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

F

%

Dividend YieldBond 10Y (GTTHB10Y Govt)

Source: DBS Vickers

Sector: Electronics Sector: Electronics Sector: Electronics Sector: Electronics Weighting: Weighting: Weighting: Weighting: NeutralNeutralNeutralNeutral

Top BUY: KCETop BUY: KCETop BUY: KCETop BUY: KCE Least preferred stocks: Least preferred stocks: Least preferred stocks: Least preferred stocks: ----

Despite the weak global economy in 2015, we expect recovery in

main economies in 2016, leading to stronger demand for

electronics products, especially automotive and smartphones,

tablets and wearable devices. Most of electronics companies are

during expansion both in domestic and regional areas to support

the expected increase in demand, diversify risks and stay

competitive in term of production costs. Recently, SVI has

acquired an Austrian company to expand its market base in

Europe. This indicates that the sector is still growing. Also, we

expect the baht to remain weak during this year; as a result, the

high gross margin should sustain and may even go higher.

Furthermore, as most electronics sales are exports, the sector is

then shielded from the domestic political turmoil and sluggish

economy. Thus, we believe that the sector will be able to

continue to perform well despite the unstable domestic economy

(the electronics sector has outperformed the SET Index since Jul

13).

We choose KCE as our top pick in the sector for these reasons: i)

sustainable high margin of above 30% which is higher than

peers' 13-27%, ii) strong earnings growth of 45%/20% in

FY16/FY17, and iii) its solid expansion plan to increase capacity

by 24% in FY18 vs FY15. In terms of valuation, our TP is Bt84,

pegged to 15x FY16F PE (or +1SD of its historical mean).

KCE: Growing both top line and margins

6.5

9.3

11.3 12.4

14.9

17.5

19.4 20.5 21.0

19.2

26.4

31.6 31.4

33.9 34.4 34.8 35.0 35.0

0

5

10

15

20

25

30

35

0

5

10

15

20

25

2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F 2020F

Revenue (Bt/bn) Gross margin (%)

Source: Company data, DBS Vickers

Market Focus


Page 11

Sector: Financials Sector: Financials Sector: Financials Sector: Financials Overweight Overweight Overweight Overweight

Top BUY: GL, MTLSTop BUY: GL, MTLSTop BUY: GL, MTLSTop BUY: GL, MTLS Least preferred: Least preferred: Least preferred: Least preferred: ----

Hopes over the start of the government’s infrastructure

investments have lifted the overall confidence in the economy.

This should then spur private consumption and, as such, raise

consumers’ propensity to spend. However, some 18-20m people

do not have access to traditional loans from banks; thus, their

needs will be serviced by finance companies.

While the need for money is always there, regardless of the stage

which the economy is at, the difference is that a stronger

economy should lead to better asset quality, as consumers have

more money to service their debts. We believe the economy in

2016 will be better than 2015’s, which implies better asset

quality for finance companies in general.

Asset-backed loans are growing more popular; MTLS is our top

pick in this category. Meanwhile, motorcycle hire purchase (HP),

though maturing in Thailand, is in an exponential growth stage

in Cambodia; making GL our top buy in this category.

Thailand Financials: portfolio breakdown, GL vs. MTLS

Thaila

nd,

71%

Camb

odia,

29%

Motor

cycle,

64.3

Car,

25.3

Farm

vehicle

, 5.0

Person

al

loans

GL MTLS Source: Companies, DBS Vickers

Sector: EnergySector: EnergySector: EnergySector: Energy NeutralNeutralNeutralNeutral

Top BUY: BCPTop BUY: BCPTop BUY: BCPTop BUY: BCP LeLeLeLeast preferred stocks: BANPUast preferred stocks: BANPUast preferred stocks: BANPUast preferred stocks: BANPU

The economic recovery in the US and EU should lift oil demand.

The IEA, EIA, and OPEC forecast demand will grow by 1.10-

1.14m bpd this year, slower than supply growth of 1.2-1.8m

bpd. Much of the new supply will come from US shale.

Fundamentally, oil prices should soften but any supply disruption

could push up oil prices, like in 2013 when Brent crude prices

rose by an average of US$3-4/bbl during periods of rising

tension. Our Brent crude price forecasts are intact at US$109

(FY14) and US$106 (FY15). We prefer smaller refiner BCP to

upstream PTT and PTTEP, due to our expectation of delays in

new supply that will help to hold up GRM in 2014.

New refinery capacity vs. additional demand in Asia Pacific

and Middle East

Source: FACTS Spring 2013

Market Focus


Page 12

Sector: Banks Sector: Banks Sector: Banks Sector: Banks NeutralNeutralNeutralNeutral

Top BUY: KBANKTop BUY: KBANKTop BUY: KBANKTop BUY: KBANK Least preferred: KTBLeast preferred: KTBLeast preferred: KTBLeast preferred: KTB

While the macro environment looks relatively more supportive to

Thailand banks in 2016, increasing external uncertainties and still

no near-term major economic activity in the public/private sector

make the economic recovery look fragile.

Earnings-wise, after a bleak 2015, Thai banks are poised to see

their earnings momentum turn around in 2016. While NIM is

likely to ease off, fee income should also recover. However, the

absence of, or fewer, asset disposal gains by some banks would

lead to overall lower non-interest income for the sector.

Provisions will nevertheless be lower in 2016, given the hefty

amount set aside in 2015. All in all, we expect only 4% growth

in EPS for 2016, compared with a 9% contraction in 2015.

KBANK remains our favourite bank for its balanced growth and

asset quality. TCAP is our second pick for its relatively less

vulnerable earnings, while there are upside risks from both auto

market recovery and investment resumption. Also, valuation-

wise, TCAP is the cheapest among Thai banks.

Thailand banks: earnings poised to recover in 2016

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2010 2011 2012 2013 2014 2015 2016F

%Bt

EPS EPS growth

Sector: Telecom Sector: Telecom Sector: Telecom Sector: Telecom Weighting: NeutralWeighting: NeutralWeighting: NeutralWeighting: Neutral

Top BUY: DIFTop BUY: DIFTop BUY: DIFTop BUY: DIF Least preferred stocks: TRUELeast preferred stocks: TRUELeast preferred stocks: TRUELeast preferred stocks: TRUE

We are of the view that JAS’s subsidiary, Jas Mobile Broadband,

would not be able to enter the mobile market due to its lack of

necessary collateral to obtain the letters of guarantee from

banks. Based on JAS’s non-entry, we recommend BUY calls for

both ADVANC (Bt185 TP) and DTAC (Bt40 TP). However, the

overall profit outlook in 2016 for the sector is dim. ADVANC’s

bottom line (-18% y-o-y) will be hampered by i) TOT’s network

rent (Bt10bn), ii) DTAC’s 2G roaming (Bt2bn), and iii) handset

subsidy (Bt6bn). DTAC’s profit (-16% y-o-y) will be pushed down

by i) low growth of service income (+1%), ii) no regulatory cost

savings, and iii) higher amortisation expenses from concessionary

assets. TRUE’s (Non Rated) normalised profit will be depressed

mainly by additional amortisation expenses (Bt7.2bn p.a.) of the

two new licences, resulting in an FY16F normalised loss of

Bt6bn, a deterioration from FY15’s normalised loss of Bt300m.

As a result, our top pick for the sector is DIF (BUY, Bt14.80 TP).

The company has an attractive yield of 7% and earnings growth

of 12% this year. Note that FY16/17F revenue streams are

already 99%/94% secured by TRUE and its subsidiaries. Potential

upsides can come from i) more asset injection from TRUE, and ii)

future leases from DTAC.

DIF: Net investment income

Source: Company data, DBS Vickers

Market Focus


Page 13

Sector: Sector: Sector: Sector: FoodFoodFoodFood NeutralNeutralNeutralNeutral

Top BUY(S): TU, CPFTop BUY(S): TU, CPFTop BUY(S): TU, CPFTop BUY(S): TU, CPF

We expect food producers like CPF and TU to perform better and

report stronger earnings driven by wider margins. Meat prices

should improve y-o-y as broiler supply in Thailand is easing and

there is also limited import of grandparent chickens from the US.

Swine demand looks healthy especially from China who is facing

supply shock. Raw material costs like corn and soybean remain

low given abundant supply. A big improvement in shrimp

production should be seen this year following a pick-up in shrimp

survival rates given efforts of new farming techniques. The

operating environment for Thailand’s fishing industry has been

improving, thanks to the positive progress in addressing the IUU

(illegal, unreported and unregulated) fishing issue – as the EU

was satisfied with Thailand’s efforts over the last three quarters.

The government has given its best efforts to resolve this nagging

issue and expects Thailand to be promoted to Tier 2 (watch list)

from Tier 3. We are maintaining our BUY calls on: i) TU – we like TU on its

strong fundamentals with its effort for margin expansion

(organic growth initiatives including innovations), beneficiary of

weaker Thai Baht, and an upside potential from future M&As,

and ii) CPF – meat margins will improve with higher selling prices

and lower raw material costs while solid operations in China and

Vietnam should continue.

Least preferred: Least preferred: Least preferred: Least preferred: ----

Swine, broiler and shrimp product prices

0

50

100

150

200

250

300

25

35

45

55

65

75

Jan/08

May/08

Sep/08

Jan/09

May/09

Sep/09

Jan/10

May/10

Sep/10

Jan/11

May/11

Sep/11

Jan/12

May/12

Sep/12

Jan/13

May/13

Sep/13

Jan/14

Bt/kg

Swine Broiler Shrimp (RHS)

Source: CPF, DBS Vickers

Sector: Sector: Sector: Sector: CommerceCommerceCommerceCommerce NeutralNeutralNeutralNeutral

Top BUY(S): CPALLTop BUY(S): CPALLTop BUY(S): CPALLTop BUY(S): CPALL Least preferred: HMPROLeast preferred: HMPROLeast preferred: HMPROLeast preferred: HMPRO

Private sector demand has remained weak, blamed on high household debt, low crop prices, a contraction in exports,

and no concrete factors to lift the economy. The cabinet

approved a couple of stimuli which are expected to support the

economy in the short term. These include stimulus measures

worth Bt136bn to increase purchasing power of farmers and

low-income earners and the second package to help small- and

medium-sized enterprises (SME) such as low

interest rate loans for SMEs, a cut in corporate income tax,

and a five-year corporate income tax exemption for SME

start-ups. Positive spillover from private stimulus packages and a

ramp-up public spending should gain traction in 2016.

We expect food staple retailers like CPALL to continue to

perform well, outperforming other commerce stocks as food

products are its major revenue source and consumers tend to

spend on small ticket items amid slowing consumption. CPALL

will continue to aggressively expand the number of outlets,

rolling out at least 600 stores p.a. while same-store-sales-growth

(SSSG) should be resilient as c.72% of its product mix is

generated from staple food products.

Thailand: Consumer Confidence Index (CCI)

40

50

60

70

80

90

100

110

120

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

CCI of Overall economy

CCI of future employment

CCI of future income

Source: UTCC, DBS Vickers

Market Focus


Page 14

Sector: Property Development Sector: Property Development Sector: Property Development Sector: Property Development ---- Residential Residential Residential Residential Weighting: UnderweightWeighting: UnderweightWeighting: UnderweightWeighting: Underweight

Top BUY(S):Top BUY(S):Top BUY(S):Top BUY(S): CPNCPNCPNCPN Least preferred stocks: ROJNALeast preferred stocks: ROJNALeast preferred stocks: ROJNALeast preferred stocks: ROJNA

Residential:Residential:Residential:Residential: Sentiment remains weak. Most developers are

targeting only 5-10% growth in presales this year, except for SIRI

which is still targeting almost 50% growth. The take-up rates for

new condo launches recently have been disappointing,

suggesting demand is still weak. Overall, the sector should see

earnings drop 2% this year, before rising 12% next year.

Companies that would see strong 2017 earnings are AP and LH,

with rising contribution from condominiums.

Commercial:Commercial:Commercial:Commercial: This property sub-sector should be the most

resilient (within the sector) to the slowing economy, thanks to

the strong recurring rental income base. Most rents for

commercial space in Thailand are fixed with a small percentage

being variable rents. This, they are quite resilient to the slowing

economy. Our top pick is Central Pattana (CPN).

Industrial:Industrial:Industrial:Industrial: Foreign direct investment has been lacklustre.

Industrial land sales have been weak for the last two years, and

have yet to show signs of significant improvement. Backlogs are

therefore depleting and this suggests a potential drop in earnings

for most industrial estate developers this year. For ready-built

factories and logistic warehouses, occupancy rates have shown

some improvement, but the recovery is still gradual.

Property Sector – Earnings growth

BloombergBloombergBloombergBloomberg Net profit (Btm)Net profit (Btm)Net profit (Btm)Net profit (Btm) Net profit Growth Net profit Growth Net profit Growth Net profit Growth

(%)(%)(%)(%) CodeCodeCodeCode 15151515EEEE 16161616FFFF 17171717FFFF 16161616FFFF 17171717FFFF

ResidentialResidentialResidentialResidential

Large & MidLarge & MidLarge & MidLarge & Mid----capcapcapcap

AP TB 2,623 2,791 3,686 6% 32%

LH TB 7,920 7,621 8,809 -4% 16%

LPN TB 2,413 2,628 2,669 9% 2%

PS TB 7,680 7,515 7,717 -2% 3%

QH TB 3,106 3,374 3,652 9% 8%

SIRI TB 3,193 2,641 2,805 -17% 6%

SPALI TB 4,349 4,211 4,549 -3% 8%

SmallSmallSmallSmall----capcapcapcap

NOBLE TB (139) (107) 773 -23% n.m.

PF TB 729 220 179 -70% -19%

LALIN TB 277 355 365 28% 3%

SC TB 1,638 1,835 1,896 12% 3%

PRIN TB 22 46 43 112% -7%

RML TB 765 675 554 -12% -18%

Simple averageSimple averageSimple averageSimple average 34,57734,57734,57734,577 33,33,33,33,807807807807 37,69737,69737,69737,697 ----2%2%2%2% 12%12%12%12%

IndustrialIndustrialIndustrialIndustrial

AMATA TB 1,110 994 1,132 -10% 14%

ROJNA TB 1,240 417 604 -66% 45%

Simple averageSimple averageSimple averageSimple average 2,3502,3502,3502,350 1,4111,4111,4111,411 1,7351,7351,7351,735 ----40%40%40%40% 23%23%23%23%

CommercialCommercialCommercialCommercial

CPN TB 7,880 8,749 10,065 11% 15%

Simple averageSimple averageSimple averageSimple average 7,8807,8807,8807,880 8,7498,7498,7498,749 10,06510,06510,06510,065 11%11%11%11% 15%15%15%15%

Source: Company, DBS Vickers

Market Focus


Page 15

Stock PicksStock PicksStock PicksStock Picks

BUY Bt2BUY Bt2BUY Bt2BUY Bt24.304.304.304.30

Forecasts and Valuation

Bangkok Airways (BA TB, TP: Bt2Bangkok Airways (BA TB, TP: Bt2Bangkok Airways (BA TB, TP: Bt2Bangkok Airways (BA TB, TP: Bt27.607.607.607.60))))

Still going strongStill going strongStill going strongStill going strong

FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF

Revenue 21,033 23,113 25,064 28,382

EBITDA 2,666 4,284 6,047 6,710

Pre-tax Profit 386 2,099 3,398 4,014

Net Profit 351 1,797 2,831 3,349

Net Pft (Pre Ex.) 351 1,797 2,831 3,349

EPS (Bt) 0.17 0.86 1.35 1.59

EPS Pre Ex. (Bt) 0.17 0.86 1.35 1.59

EPS Gth (%) (72) 412 58 18

EPS Gth Pre Ex (%) (72) 412 58 18

Diluted EPS (Bt) 0.17 0.86 1.35 1.59

Net DPS (Bt) 0.20 0.70 0.67 0.80

BV Per Share (Bt) 12.1 14.7 15.4 16.2

PE (X) 145.3 28.4 18.0 15.2

PE Pre Ex. (X) 145.3 28.4 18.0 15.2

P/Cash Flow (X) nm 28.5 13.4 12.6

EV/EBITDA (X) 19.1 12.2 9.1 8.4

Net Div Yield (%) 0.8 2.9 2.8 3.3

P/Book Value (X) 2.0 1.6 1.6 1.5

Net Debt/Equity (X) CASH 0.0 0.1 0.1

ROAE (%) 2.2 6.4 8.9 10.1

§ BA is a beneficiary of Thailand’s growing tourism sector and it positions itself at the higher end of the segment. Thanks to its Samui Airport dominance (accounting for c.50% of total revenue), BA has enjoyed a unique competitive advantage that it expects to maintain in the future

§ Tourist arrivals into Thailand grew an impressive 21% in 2015, led by visitors from China (+71%), and good growth is expected this year. The Jan 16 number is already up 15% y-o-y, with a 45% surge in China tourists.

§ In the meantime, jet fuel prices have fallen to below US$45/bbl, tracking crude oil prices, after seeing a 42% plunge in 2015. Given these positive factors, BA’s earnings are expected to improve further by 58%/18% in 2016/2017.

§ We like BA for its strong earnings growth as well as its competitive advantage derived from its dominance in Samui Airport. In terms of valuation, we have a TP of Bt27.6 for BA. Our sum-of-parts valuation consists of i) 5x FY17FF EV/EBITDAR for core airline and airport businesses, and ii) DBS’s target prices for its stakes in BDMS and SPF.

BUY Bt4.10BUY Bt4.10BUY Bt4.10BUY Bt4.10


The Erawan Group (ERW TB, TP: Bt5.30)The Erawan Group (ERW TB, TP: Bt5.30)The Erawan Group (ERW TB, TP: Bt5.30)The Erawan Group (ERW TB, TP: Bt5.30)

Expansion is the right track to takeExpansion is the right track to takeExpansion is the right track to takeExpansion is the right track to take


Revenue 4,285 5,255 6,006 6,503

EBITDA 916 1,416 1,615 1,778

Pre-tax Profit (91.5) 331 440 622

Net Profit (112) 198 300 423

Net Pft (Pre Ex.) (115) 198 300 423

EPS (Bt) 0.0 0.08 0.12 0.17

EPS Pre Ex. (Bt) 0.0 0.08 0.12 0.17

EPS Gth (%) nm nm 51 41

EPS Gth Pre Ex (%) nm nm 51 41

Diluted EPS (Bt) 0.0 0.08 0.12 0.17

Net DPS (Bt) 0.04 0.04 0.05 0.07

BV Per Share (Bt) 1.84 1.88 1.96 2.08

PE (X) nm 52.0 34.4 24.3

PE Pre Ex. (X) nm 52.0 34.4 24.3

P/Cash Flow (X) 11.0 7.9 10.3 9.0

EV/EBITDA (X) 19.8 12.8 11.7 11.2

Net Div Yield (%) 1.0 1.0 1.2 1.6

P/Book Value (X) 2.2 2.2 2.1 2.0

Net Debt/Equity (X) 1.6 1.5 1.6 1.7

ROAE (%) (2.3) 4.3 6.2 8.4

§ ERW’s hotel operations will be driven by the rising international tourist arrivals to Thailand, as it has the highest exposure to Thailand's tourism sector.

§ In 2016, ERW will set up another six Hop Inns across the country and one in the Philippines, with a total of 634 keys. For the five-year master plan, the group targets to have 95 hotels (c.10,000 rooms) by 2020.

§ Also, there are potential asset divestments to a new REIT in 2016, with the extraordinary gain from the divestments acting as a key catalyst in the short term. The proceeds will be used to repay debts, support business expansion and pay dividends.

§ We like ERW for its strong earnings growth on the back of strong growth in Thailand’s tourism and hotel expansion plan, and the key potential share-price rerating catalyst arising from potential asset divestments. Its earnings are now more resilient given its diversification into lower-hotel segments. Our Bt5.30 TP is based on DCF valuation (WACC 8.8%, terminal growth 2.5%).

Market Focus


Page 16

BUY Bt20.50BUY Bt20.50BUY Bt20.50BUY Bt20.50


Muangthai Leasing (MTLS TB, TP: BtMuangthai Leasing (MTLS TB, TP: BtMuangthai Leasing (MTLS TB, TP: BtMuangthai Leasing (MTLS TB, TP: Bt32.0032.0032.0032.00))))

Stellar growth prospectsStellar growth prospectsStellar growth prospectsStellar growth prospects


Pre-prov. Profit 694 1,056 1,599 2,242

Net Profit 544 825 1,161 1,618

Net Pft (Pre Ex.) 544 825 1,161 1,618

EPS (Bt) 0.32 0.39 0.55 0.76

EPS Pre Ex. (Bt) 0.32 0.39 0.55 0.76

EPS Gth (%) 39 21 41 39

EPS Gth Pre Ex (%) 39 21 41 39

Diluted EPS (Bt) 0.32 0.39 0.55 0.76

PE Pre Ex. (X) 63.8 52.7 37.4 26.9

Net DPS (Bt) 0.13 0.20 0.25 0.30

Net Div Yield (%) 0.6 1.0 1.2 1.5

ROAE Pre Ex. (%) 15.5 15.3 19.3 23.3

ROAE (%) 15.5 15.3 19.3 23.3

ROA (%) 7.4 7.5 7.2 6.9

BV Per Share (Bt) 3.02 2.67 3.01 3.53

P/Book Value (X) 6.8 7.7 6.8 5.8

§ Aggressive branch expansion = exponential growth in Aggressive branch expansion = exponential growth in Aggressive branch expansion = exponential growth in Aggressive branch expansion = exponential growth in loans. loans. loans. loans. At present, MTLS has 940 branches across the country, compared with 506 branches at the end of 2014. MTLS aims to continue growing its new lending, as well as loan portfolio, by 50% p.a. over the next two years (2016-17), driven by new branch openings (+400 new branches/year in 2016-17) and new product offerings (i.e. land title loans and auto-backed loans).

§ Robust earnings growth. Robust earnings growth. Robust earnings growth. Robust earnings growth. Branch expansion and lower funding costs should continue to drive revenues and earnings in the next two years. Meanwhile, thanks to the company’s effective funding management, its funding costs should decline further, and this will bolster its earnings. We forecast its earnings to grow 41%/39% in FY16/17F, after seeing 52% growth in FY15.

§ Strong balance sheet: low NPL, high coverage ratio, and Strong balance sheet: low NPL, high coverage ratio, and Strong balance sheet: low NPL, high coverage ratio, and Strong balance sheet: low NPL, high coverage ratio, and low D/E. low D/E. low D/E. low D/E. As at end-2015, NPL was low at 0.9%, coverage ratio remained high at above 280%, and D/E ratio stayed below 1.3x.



Group Lease (GL TB, TP: Bt2Group Lease (GL TB, TP: Bt2Group Lease (GL TB, TP: Bt2Group Lease (GL TB, TP: Bt28.008.008.008.00))))

Riding the Riding the Riding the Riding the digital finance digital finance digital finance digital finance platform platform platform platform


Pre-prov. Profit 630 1,010 1,562 2,135

Net Profit 116 583 957 1,333

Net Pft (Pre Ex.) 116 583 957 1,333

EPS (Bt) 0.11 0.41 0.67 0.93

EPS Pre Ex. (Bt) 0.11 0.41 0.67 0.93

EPS Gth (%) (56) 269 64 39

EPS Gth Pre Ex (%) (56) 269 64 39

Diluted EPS (Bt) 0.11 0.41 0.67 0.93

PE Pre Ex. (X) 194.1 52.6 32.0 23.0

Net DPS (Bt) 0.06 0.09 0.28 0.34

Div Yield (%) 0.3 0.4 1.3 1.6

ROAE Pre Ex. (%) 4.9 11.5 12.1 15.4

ROAE (%) 4.9 11.5 12.1 15.4

ROA (%) 1.8 6.5 8.0 9.2

BV Per Share (Bt) 2.39 5.29 5.74 6.36

P/Book Value (x) 9.0 4.0 3.7 3.4

§ Cambodia remains the key growth engine.Cambodia remains the key growth engine.Cambodia remains the key growth engine.Cambodia remains the key growth engine. GL has grown its operations very rapidly in Cambodia, thanks to i) its exclusive rights with Honda to provide hire purchase (HP) loans for Honda motorcycles at Honda showrooms; and ii) its unique business model (P.O.S. and E-Finance system).

§ Going beyond a leasing company. Going beyond a leasing company. Going beyond a leasing company. Going beyond a leasing company. Other than new motorcycle HP loans, GL also provides retail finance for Kubota and solar panel buyers, as well as working capital loans to SMEs. Besides, it also earns consulting fees from some suppliers on services rendered to enable their products to reach potential customers. Non-HP businesses are more profitable and will soon form a substantial part of GL’s income.

§ Indonesia: the next key growth driver.Indonesia: the next key growth driver.Indonesia: the next key growth driver.Indonesia: the next key growth driver. Following Cambodia, Laos operations had started in May 15 and been profitable since Oct 15. GL is now expanding into Indonesia – operations have yet to start, as it is awaiting the licence from the government.

§ To become a leading ASEAN finance company by 2020. To become a leading ASEAN finance company by 2020. To become a leading ASEAN finance company by 2020. To become a leading ASEAN finance company by 2020. GL will continue to expand its retail finance business into other ASEAN countries; Myanmar and Vietnam are next in line. GL targets to have a portfolio mix of 95% overseas loans and 5% Thailand loans in 3-5-years.

Market Focus


Page 17



Eastern Polymer Group (EPG TB, TP: Bt1Eastern Polymer Group (EPG TB, TP: Bt1Eastern Polymer Group (EPG TB, TP: Bt1Eastern Polymer Group (EPG TB, TP: Bt17.007.007.007.00))))

Premium play on polymer converter Premium play on polymer converter Premium play on polymer converter Premium play on polymer converter

FY FY FY FY MarMarMarMar ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2012012012015555AAAA 2016201620162016FFFF 2017201720172017FFFF

Revenue 6,594 6,916 8,839 10,854

EBITDA 1,385 1,408 2,253 2,626

Pre-tax Profit 685 656 1,653 1,981

Net Profit 631 629 1,570 1,882

Net Pft (Pre Ex.) 534 671 1,450 1,882

EPS (Bt) 0.30 0.27 0.56 0.67

EPS Pre Ex. (Bt) 0.25 0.29 0.52 0.67

EPS Gth (%) (20) (8) 104 20

EPS Gth Pre Ex (%) (24) 15 77 30

Diluted EPS (Bt) 0.30 0.27 0.56 0.67

Net DPS (Bt) 0.0 0.07 0.17 0.21

BV Per Share (Bt) 1.80 2.93 3.42 3.92

PE (X) 43.0 46.9 23.0 19.2

PE Pre Ex. (X) 50.7 44.0 24.9 19.2

P/Cash Flow (X) 30.0 36.8 19.1 20.4

EV/EBITDA (X) 24.0 22.7 16.7 14.2

Net Div Yield (%) 0.0 0.6 1.3 1.6

P/Book Value (X) 7.2 4.4 3.8 3.3


ROAE (%) 18.3 10.5 17.7 18.3

§ We are positive on EPG’s earnings outlook that is underpinned by a 3-year EPS CAGR of 25% and its ability to leverage its expertise in innovative polymerisation and flexible production processes.

§ Among its three business segments, we expect automotive plastics to be the key driver of sales revenue growth due to higher sales volume for premium products that have been co-developed with major automakers in the US and Japan. We expect a revenue CAGR of 22% for FY2016-18F, with automotive plastics contributing nearly half of this.

§ We expect EPG’s gross margins to remain higher than 33% over the next three years, given the higher number of premium quality products in its portfolio and lower cost of raw materials. Net margins could stay at 16-17%.

§ The current share price weakness offers an opportunity for buying into the stock which remains under-covered by the market. We rate the stock a BUY with a TP of Bt17/sh, pegged to 25x P/E.

BUY BtBUY BtBUY BtBUY Bt272.00272.00272.00272.00


PTT (PTT TB, TP: BtPTT (PTT TB, TP: BtPTT (PTT TB, TP: BtPTT (PTT TB, TP: Bt320320320320))))

Diversified energy play amid volatile oil priceDiversified energy play amid volatile oil priceDiversified energy play amid volatile oil priceDiversified energy play amid volatile oil pricessss


Revenue 2,583,484 2,011,701 1,515,246 1,718,531

EBITDA 295,299 303,280 289,131 285,958

Pre-tax Profit 105,833 55,574 126,499 124,739

Net Profit 58,678 19,936 80,959 83,762

Net Pft (Pre Ex.) 85,153 100,084 80,959 83,762

EPS (Bt) 20.5 6.98 28.3 29.3

EPS Pre Ex. (Bt) 29.8 35.0 28.3 29.3

EPS Gth (%) (37) (66) 306 3

EPS Gth Pre Ex (%) (9) 18 (19) 3

Diluted EPS (Bt) 20.5 6.98 28.3 29.3

Net DPS (Bt) 13.0 10.0 12.0 12.0

BV Per Share (Bt) 239 244 264 281

PE (X) 13.2 39.0 9.6 9.3

PE Pre Ex. (X) 9.1 7.8 9.6 9.3

P/Cash Flow (X) 2.2 2.6 3.5 3.4

EV/EBITDA (X) 5.0 4.8 4.8 4.7

Net Div Yield (%) 4.8 3.7 4.4 4.4

P/Book Value (X) 1.1 1.1 1.0 1.0


ROAE (%) 8.6 2.9 11.2 10.8

§ We like PTT for its business diversification amid the uncertain oil price outlook. The downstream business should benefit from low oil prices and cushion it against the downside risks of even lower oil prices for its upstream business.

§ PTT’s key cash contributor is its gas business (including E&P), accounting for 63% of PTT’s EBITDA in 2015. This segment will continue to generate strong cash flows for the company in 2016, especially from its gas separation plant due to smoother operations. We believe its gas business is more resilient compared to pure oil plays.

§ We expect 2016 earnings to be supported partly by smoother operations at the gas processing unit, and stable earnings from gas transmission and power.

§ Losses from the NGV business could narrow further in 2016F, in our view, given the lower cost of gas feedstock as well as the deregulation of energy prices in the domestic market. This will be a boon for PTT, after having to bear the huge burden of subsidising LPG and NGV prices.

Market Focus


Page 18

HOLD Bt4.4HOLD Bt4.4HOLD Bt4.4HOLD Bt4.48888 Forecasts and Valuation

IRPC (IRPC TB, TP: IRPC (IRPC TB, TP: IRPC (IRPC TB, TP: IRPC (IRPC TB, TP: under reviewunder reviewunder reviewunder review))))

UHV startup could be nearUHV startup could be nearUHV startup could be nearUHV startup could be near----term catalyst term catalyst term catalyst term catalyst


Revenue 281,589 214,172 131,604 162,742

EBITDA (6,110) 15,803 16,465 17,423

Pre-tax Profit (7,611) 11,769 8,998 9,940

Net Profit (5,235) 9,402 7,620 8,421

Net Pft (Pre Ex.) (10,397) 7,010 7,620 8,421

EPS (Bt) (0.3) 0.46 0.37 0.41

EPS Pre Ex. (Bt) (0.5) 0.34 0.37 0.41

EPS Gth (%) nm nm (19) 11

EPS Gth Pre Ex (%) (488) nm 9 11

Diluted EPS (Bt) (0.3) 0.46 0.37 0.41

Net DPS (Bt) 0.08 0.12 0.15 0.16

BV Per Share (Bt) 3.32 3.71 3.95 4.20

PE (X) nm 9.7 12.0 10.9

PE Pre Ex. (X) nm 13.1 12.0 10.9

P/Cash Flow (X) 19.9 3.3 8.2 6.0

EV/EBITDA (X) nm 9.0 8.5 7.6

Net Div Yield (%) 1.8 2.7 3.3 3.6

P/Book Value (X) 1.3 1.2 1.1 1.1


ROAE (%) (7.3) 13.1 9.7 10.1

§ Although we maintain our HOLD rating on IRPC with a TP of Bt4.2, the successful startup of the UHV project (Upstream Project for Hygiene and Value Added Product) could be a near-term catalyst for its share price. The startup was delayed from late-2015 due to problems with equipment.

§ We expect IRPC’s normalised net profit to improve y-o-y in 2016F, as the UHV project commences operations in 2Q16. Management has guided that this project will increase GIM by US$2/bbl and enable IRPC to operate its refinery at 93% utilisation rate, up from 83% currently. We estimate a net profit benefit of Bt2bn p.a. arising from the UHV project’s full-year operations.

§ In addition to UHV, IRPC could also gain from lower operating costs as the weaker crude oil prices will reduce energy costs in the refinery and petrochemical complex. The integrated production process of its refinery and petrochemical complex usually causes fuel used and loss in refining process coming in at 6% of crude intake, higher than its refinery peers (3-4%).

BUYBUYBUYBUY Bt50.00Bt50.00Bt50.00Bt50.00 Forecasts and Valuation

Central Pattana (CPNCentral Pattana (CPNCentral Pattana (CPNCentral Pattana (CPN TB, TP: BtTB, TP: BtTB, TP: BtTB, TP: Bt58.0058.0058.0058.00))))

SSSScaling new heightscaling new heightscaling new heightscaling new heights


Revenue 22,308 24,283 27,211 30,569

EBITDA 13,441 14,370 16,347 18,711

Pre-tax Profit 8,807 9,448 10,946 12,566

Net Profit 7,307 7,880 8,749 10,065

Net Pft (Pre Ex.) 7,307 7,880 8,749 10,065

EPS (Bt) 1.63 1.76 1.95 2.24

EPS Pre Ex. (Bt) 1.63 1.76 1.95 2.24

EPS Gth (%) 16 8 11 15

EPS Gth Pre Ex (%) 24 8 11 15

Diluted EPS (Bt) 1.63 1.76 1.95 2.24

Net DPS (Bt) 0.65 0.70 0.78 0.90

BV Per Share (Bt) 9.14 10.2 11.5 12.9

PE (X) 30.7 28.5 25.6 22.3

PE Pre Ex. (X) 30.7 28.5 25.6 22.3

P/Cash Flow (X) 10.3 16.4 22.5 16.3

EV/EBITDA (X) 17.7 16.9 15.4 13.8

Net Div Yield (%) 1.3 1.4 1.6 1.8

P/Book Value (X) 5.5 4.9 4.4 3.9


ROAE (%) 18.9 18.1 18.0 18.4

§ Maintain BUY with SOPMaintain BUY with SOPMaintain BUY with SOPMaintain BUY with SOP----based TP of Bt58based TP of Bt58based TP of Bt58based TP of Bt58. We like the company for its dominant position in the shopping mall industry, its strong recurring income base from 29 successful shopping malls that can cushion it against a slowing Thai economy, its clear expansion plan, competent management team, and steady earnings growth outlook.

§ Strong recurring income base from 29 successful shopping Strong recurring income base from 29 successful shopping Strong recurring income base from 29 successful shopping Strong recurring income base from 29 successful shopping malls in Thailandmalls in Thailandmalls in Thailandmalls in Thailand. These malls have always enjoyed high occupancy rates of over 90% during the past decade. Going forward, CPN plans to open 15 new malls (12 in Thailand and three overseas) from 2016-2020. The first overseas mall, to be located in Selangor, Malaysia, will be opened in 2018.

§ Recent condo launches werRecent condo launches werRecent condo launches werRecent condo launches were quite successfule quite successfule quite successfule quite successful. CPN has recently launched three condominium projects on the land adjacent to its malls in Chiangmai, Rayong and Khon Kaen. Each project comprises about 200 units with an average selling price of about Bt2m. The take-up rates were 80%, 50% and 60% of total units available respectively. This is quite impressive considering the currently weak condominium demand in the provinces, thanks to their superb locations. Revenue will be realised in 2018 upon title transfer.

Market Focus


Page 19



Digital Telecommunications Infrastructure Fund Digital Telecommunications Infrastructure Fund Digital Telecommunications Infrastructure Fund Digital Telecommunications Infrastructure Fund (DIFTB, TP: Bt14.80)(DIFTB, TP: Bt14.80)(DIFTB, TP: Bt14.80)(DIFTB, TP: Bt14.80)

Strong yields with potential upsidesStrong yields with potential upsidesStrong yields with potential upsidesStrong yields with potential upsides


Gross Revenue 4,318 5,890 6,697 7,191

Net Property Inc 4,203 5,725 6,534 7,038

Total Return 0.06 0.06 0.07 0.07

Distribution Inc 5450 5,494 5,625 6,052

EPU (Bt) 3.09 0.84 0.98 1.06

EPU Gth (%) nm (73) 17 9

DPU (Bt) 0.94 0.95 0.97 1.04

DPU Gth (%) nm 1 2 8

NAV per shr (Bt) 12.4 12.4 12.4 12.4

PE (X) 4.4 16.2 13.8 12.7

Distribution Yield (%) 7.0 7.0 7.2 7.7

P/NAV (x) 1.1 1.1 1.1 1.1

Aggregate Leverage (%) 0.0 15.1 15.1 15.1

ROAE (%) N/A 6.7 7.9 8.6

§ DIF has secured long-term lease agreements (that will expire in 2025) for its existing asset portfolio with TRUE and its subsidiaries. This should provide good visibility for its future earnings and cash flows. Further, the regulatory minimum of 90% dividend payout for infrastructure funds will ensure consistent dividends.

§ With a higher asset base, the company is on track to achieve 12% growth of net investment income in FY16F. New assets that will generate revenue for the full year for the first time include 3,000 towers that have been gradually transferred throughout 2015 and a new asset injection (Bt13bn) in Mar 15, comprising 338 telecom towers and 7,981km of fibre optic cable.

§ Potential rerating catalysts include TRUE’s additional asset injections and third-party lessee like DTAC. The management of DTAC mentioned earlier in Feb that the company plans to conclude a tower deal with DIF soon.

§ We like DIF for its i) high FY16F yield of 7.2%, ii) strong IRR of 9.1%, iii) highly secure revenue streams, and iv) low D/E ratio of 0.2x (vs regulatory ceiling of 3.0x). Our TP of Bt14.8 is based on DCF valuation with a WACC of 8.5% and TG of 2%.

Market Focus


Page 20

DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUYSTRONG BUYSTRONG BUYSTRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY BUY BUY BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLDHOLDHOLDHOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUEDFULLY VALUEDFULLY VALUEDFULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL SELL SELL SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

GENERAL DIGENERAL DIGENERAL DIGENERAL DISCLOSURE/DISCLAIMER SCLOSURE/DISCLAIMER SCLOSURE/DISCLAIMER SCLOSURE/DISCLAIMER

This report is prepared by This report is prepared by This report is prepared by This report is prepared by DBS Vickers Securities (Thailand) Co, LtdDBS Vickers Securities (Thailand) Co, LtdDBS Vickers Securities (Thailand) Co, LtdDBS Vickers Securities (Thailand) Co, Ltd. . . . This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers

Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and

no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written

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The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS

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the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to

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The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the

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the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities

recommended in this report (“interest” includes direct or indirect ownership of securities).

COMPANYCOMPANYCOMPANYCOMPANY----SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES

1.1.1.1. DBS Vickers Securities (Thailand) Co, Ltd and its subsidiaries do not have a proprietary position in the securities recommended in this report

as of 4 Mar 2016

Market Focus


Page 21

2.2.2.2. Compensation for investment banking services:Compensation for investment banking services:Compensation for investment banking services:Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a

manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION

GeneralGeneralGeneralGeneral This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

AustraliaAustraliaAustraliaAustralia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong KongHong KongHong KongHong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

IndonesiaIndonesiaIndonesiaIndonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

MalaysiaMalaysiaMalaysiaMalaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

SingaporeSingaporeSingaporeSingapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

ThailandThailandThailandThailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United KingdomUnited KingdomUnited KingdomUnited Kingdom This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

DubaiDubaiDubaiDubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3

rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC),

Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United StatesUnited StatesUnited StatesUnited States This report was prepared by DBS Vickers Securities (Thailand) Co, Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictionsOther jurisdictionsOther jurisdictionsOther jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Vickers SecuritieDBS Vickers SecuritieDBS Vickers SecuritieDBS Vickers Securities (Thailand) Co, Ltds (Thailand) Co, Ltds (Thailand) Co, Ltds (Thailand) Co, Ltd

989 Siam Tower, 9th, 14th-15th Floor,

Rama 1 Road, Pathumwan, Bangkok Thailand 10330

Tel. 66 2 657 7831, Fax: 66 2 658 1269

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