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
Source: BOT, DBS Vickers
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)
Source: BOT, DBS Vickers
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
Cautiously Optimistic
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)
Source: BOT, DBS Vickers
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Source: SET, DBS Vickers
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
Cautiously Optimistic
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
Source: SET, DBS Vickers
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Cautiously Optimistic
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
Forecasts and Valuation
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Cautiously Optimistic
Page 16
BUY Bt20.50BUY Bt20.50BUY Bt20.50BUY Bt20.50
Forecasts and Valuation
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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.
BUY Bt2BUY Bt2BUY Bt2BUY Bt21.401.401.401.40
Forecasts and Valuation
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Cautiously Optimistic
Page 17
BUY Bt1BUY Bt1BUY Bt1BUY Bt12.902.902.902.90
Forecasts and Valuation
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
Net Debt/Equity (X) 1.6 0.3 0.2 0.1
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
Forecasts and Valuation
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Net Debt/Equity (X) 0.3 0.3 0.2 0.1
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
Cautiously Optimistic
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Net Debt/Equity (X) 0.9 0.7 0.6 0.5
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Net Debt/Equity (X) 0.3 0.4 0.5 0.5
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
Cautiously Optimistic
Page 19
BUY Bt1BUY Bt1BUY Bt1BUY Bt13.503.503.503.50
Forecasts and Valuation
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
FY FY FY FY DecDecDecDec ((((BtBtBtBtmmmm) ) ) ) 2014201420142014AAAA 2015201520152015AAAA 2016201620162016FFFF 2017201720172017FFFF
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
Cautiously Optimistic
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
consent of DBS Vickers Securities (Thailand) Co, Ltd.
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
Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to
change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard
to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of
addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal
or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of
profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This
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persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have
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The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it
may not contain all material information concerning the company (or companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
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UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
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assessments stated therein.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
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DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research
department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction
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ANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
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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
Cautiously Optimistic
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.
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Wong Ming Tek, Executive Director, ADBSR
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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.
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