thailand industry focus thailand construction sector...nakhon pathom - hua hin 19 0.5 hua hin -...

ed-CK / sa- CS, PY

Smooth flow of infrastructure spending

Consistent positive newsflow from various

infrastructure projects

Bt169bn infrastructure projects to be awarded in

1Q17

At least another Bt170bn to be open for bidding

by next year

Upgrade to OVERWEIGHT from NEUTRAL,

Maintain BUY for CK (TP of Bt40); Upgrade STEC

from HOLD to BUY (TP of Bt31)

Bt169bn infrastructure projects to be awarded in 1Q17 –

to act a short-term catalyst. Following concerns over the

potential delay of infrastructure spending, the government has

turned aggressive on the rollout of infrastructure projects in

the recent month. By 1Q17, projects worth at least Bt169bn,

including the MRT orange, pink and yellow lines as well as the

three routes of dual-track railway, will be awarded to the

winning contractors.

At least another Bt170bn to be open for bidding over

FY17. We have assigned a high probability that at least

another Bt170bn infrastructure projects, including the MRT red

and purple (Southern extension) lines and other two routes of

dual-track railway, will be open for bidding by FY17. This

implies a consistence newsflow in the sector as well as a bright

earning outlook for contractors.

Turning more bullish on contractor sector. The

government’s concrete action to accelerate infrastructure

spending will boost investor confidence in the sector, which

has been the main catalyst to drive up share prices. Following

this development, we upgrade our call on the sector to

OVERWEIGHT from NEUTRAL. We maintain our BUY call on CK

(TP of Bt40.0) and upgrade our call on STEC (TP of Bt31.0).

Note that CK is our top pick in our contractor space because of

its high level of backlog and top-notch competencies.

SET : 1,485.70

Analyst Apichaya KETRUTTANABORVORN +66 2657 7823 [email protected]

STOCKS

Source: DBS Vickers, Bloomberg Finance L.P.

Closing price as of 4 Nov 2016

Relative performance

Revenues and Backlogs

Source: DBS Vickers

60%

70%

80%

90%

100%

110%

120%

130%

Jan-16 Apr-16 Jul-16 Oct-16

SET Index CK TB STEC TB

DBS Group Research . Equity

7 Nov 2016

Thailand Industry Focus

Thailand Construction sector

Refer to important disclosures at the end of this report

Price Mkt Cap Target Price Performance (%)

Bt US$m Bt 3 mth 12 mth Rating

Ch. Karnchang 30.50 1,477 40.00 (3.2) 8.0 BUY Sino-Thai Engineering & Con. 26.25 1,145 31.00 5.0 2.9 BUY Unique Engineering and Construction

17.50 541 25.00 (3.9) (20.5) NR Italian-Thai Development

5.25 792 NR (19.2) (33.1) NR

Industry Focus

Thailand Construction

Updates on Thailand’s infrastructure projects

1) MRT projects

MRT projects to be open for bidding in 2016.

There are three MRT projects whose official bidding and

winning bidder(s) announcement dates have been

announced, as follows:

(i) MRT orange line, which links Thai Cultural Center with Minburi, has been done with the bid submission process on 31 October 2016. This Bt76bn (US$2.2bn) project will be funded by the government via public debt. The winning bidder(s) should be announced by February 2017

There are three underground contracts, worth c.Bt20bn (US$0.6bn) each, on the MRT orange line project. There are only two Thai contractors, i.e. CK and ITD, with a track record for underground works and, thus, they have a good chance of winning at least one contract.

MRT orange line construction contracts

Source: Ministry of Transport, CK, DBS Vickers

The participants for the MRT orange line bid are as follows: (i) a JV between CK and STEC, (ii) ITD, (iii) a JV between UNIQ and Ssangyong Engineering and Construction Co. Ltd, and (iv) Christiani & Nielsan (Thai) PCL (CNT) and China Railway Construction Co. Ltd (only for contract I, II, III, IV).

We have a positive view on the collaboration between CK and STEC to bid for the MRT orange line under their JV. Thus, they could combine the strengths of each other, which should result in a higher market share. As a result, we believe that this JV should secure the largest proportion of the MRT orange line works.

(ii) MRT pink line (monorail). This Bt23.1bn (US$0.7bn)

project is under the public-private partnership (PPP) fast track

scheme and will be open for bidding on 7 November 2016

with the winning bidder to be announced by March 2017.

Note that only the civil work portion is relevant to the sector.

The MRT pink line will connect Kaerai and Minburi, which is a

plus point for both existing MRT operators, i.e. Bangkok

Expressway and Metro PCL (BEM TB) and BTS Group Holdings

PCL (BTS). The two main reasons behind this decision are: (i) The area along this route is a residential area with a

high population density, which means a higher number of passengers and hence, a higher project IRR

(ii) The MRT pink line route will connect the MRT purple and orange lines, which is a plus point for BEM

MRT pink line contracts under PPP scheme

Contract Reference price

(Btbn) Reference price

(Btbn)

Civil works 23.1 0.7

System works 25.1 0.7

Total 48.2 1.4


Note that Bangkok Land PCL (BLAND TB) will collaborate with BTS Group Holdings PCL (BTS TB) to invest Bt1.25bn to support the pink line extension to Muang Thong Thani and the two train stations after Mass Rapid Transit Authority of Thailand (MRTA) awards the concession and approve the extension of the Pink line to BTS.

(iii) MRT yellow line (monorail), the Bt24.4bn (US$0.7bn)

project links Latproa with Samrong, will be open for bidding

on 7 November 2016 with the winning bidder to be

announced by March 2017. Like the MRT pink line, the MRT

yellow line project will be under the PPP fast track scheme.

Compared to the MRT pink line, the MRT yellow line project

seems to have attracted lower interest from the two current

MRT operators given its less attractive route. MRT yellow line contracts under PPP scheme

Contract Reference price

(Btbn) Reference price

(US$bn)

Civil works 24.4 0.7

System works 22.7 0.6

Total 47.1 1.3


Potential bidders for MRT pink and yellow lines. The PPP

scheme requires the bidder to have the capability to

construct, operate and supply the rolling stock. According to

our channel checks and media sources, the following are the

three potential candidates:

(i) JV between CK, BEM (both subsidiaries of CK) and

an undisclosed rolling stock producer

(ii) JV between STEC, BTS and an undisclosed rolling

stock producer

Contract Details

Reference

price (Btbn)

Reference

price

(US$bn)

Underground Civ il works IThailand Cultural center -

Ramkhamhaeng 12 19.8 0.6

Underground Civ il works II Ramkhamhaeng 12 - Hua Mak 20.7 0.6

Underground Civ il works III Hua Mak - Khlong Ban Ma 17.8 0.5

Elevated Civ il worksKhlong Ban Ma - Suwinthawong 9.6 0.3

Depot Park and Ride

Facilities 4.7 0.1

Track Work 3.6 0.1

Total 76.2 2.2

Industry Focus


(iii) JV between ITD, Transdev* Co., Ltd. and a Japanese

rolling stock producer

*Transdev Co., Ltd. is a French-based international

public transport operator.

MRT projects up for bidding in 2017.

We expect the MRT red line, worth Bt44bn, to be open for

bidding in 2Q17 and the MRT purple line, worth Bt72bn, in

4Q17. This should be a medium-term catalyst for the sector in

FY17, as the project size is as large as the MRT orange, pink

and yellow lines.

2) Double-track railway projects

First two double-track railway projects kicked off last

year (FY15). The government kicked off the first two double

track projects, worth Bt33.2bn (US$0.9bn), in December

2015. These two projects were awarded to CK and STEC.

Currently, the construction progress should ramp up in FY17,

given that the projects have passed the initial phase of

construction. This implies a bright earnings outlook for CK

and STEC. Currently, there are no significant cost overruns or

potential delays for these projects.

Dual-track railway project under construction

Source: Ministry of Transport, STEC, CK, DBS Vickers

Another three routes of double-track railway worth

Bt46bn (US$1.6bn) to be rolled out for bidding in FY17.

On 4 November 2016, the draft Term of References (TORs) of

dual-track railway in three routes, as shown below, have been

announced on the State Railway of Thailand (SRT) website.

We expect the bid submission date of these three projects to

be in February 2017, with the winning bidder(s) being

announced in March 2017.

Also, we have assigned a high probability that the remaining

two routes of double-track railway projects, including Map

Kabao – Thanon Chira and Lopburi – Paknampo routes, will

be rolled out and open for bidding by 2017. This was on the

back of the availability of a clear source of funding for these

projects – which will be funded by the government through

debt and have been already approved by the cabinet.

Dual-track railway projects to be open for bidding


Proje c t Route

Construc tion

Va lue (Btbn)

Construc tion

Va lue

(US$bn) Contra c tors

Klong 19 -

Kaeng Koy11 0.3

STEC secured Bt9.8bn contract,

Right Tunnelling Co., Ltd.

Secured Bt407m contract

Jira Junction -

Khonkaen22 0.6

JV between CK and Ch. Tawee

construction

Tota l 33 0.9

Dual track

railway

Pro je c t De sc ription

Construc tion

Va lue (Btbn)

Construc tion

Va lue

(US$bn) Progre ss

Sta te Ra i lwa y of Tha i la nd : SRT

Prachuab Khiri Khan - Chumpon 17 0.5

Nakhon Pathom - Hua Hin 19 0.5

Hua Hin - Prachuab Khiri Khan 10 0.3

Map Kabao - Thanon Chira 29 0.8

Lopburi - Paknampo 24 0.7

Total 99 2.8

Double-track

rail

Draft TORs announced on SRT website

Expect TORs to be announced in 4Q16

Industry Focus


3) High speed railway projects

The government is conducting a feasibility study on the first

two PPP schemes for the high speed railway projects,

including Bangkok – Huahin and Bangkok – Rayong routes

which are worth Bt247bn. The government expects to see

some progress on these two projects by November 2016

For the first route of Thai – Japan Railway (Bangkok –

Phisanulok), with a total distance of 382 km, the government

expects to receive the feasibility study by February 2017.

However, we have assigned only a low probability for the

high speed railway project to materialise at least for the next

few years, given its huge investment amount with low IRR

and the involvement of G-to-G negotiations.

High speed railway projects in the pipeline

Route Value* (Btbn)

Value* (US$bn)

Remarks Total distance (km)

Thai - China Railway (Nong Khai - Kaeng Koi - Map Ta Phut)

734 n/a n/a Pending

Thai - China Railway (Bangkok - Kaeng Koi - Nakhon Ratchasima)

133 170 4.9

Thai government will provide the funding

Thai - Japan Railway (Bangkok - Chiang Mai)

672 427 12.2 In the feasibility study phase

Bangkok - Huahin 180 152 4.3 To be included in PPP fast track scheme Bangkok - Rayong 194 98 2.8

Total 1046 847 24.2


4) Motorway projects

All three routes of motorway projects valued at Bt161bn

(US$4.6bn) in the master plan are now in the bidding process,

with the details outlined in the following table. The operating

concession of Bang Pa In – Nakhon Ratchasima and Bang Yai

– Karnchanaburi routes are included in the PPP fast track

scheme, while all the civil works of these three projects are

funded by the government.

The contracts for the motorway projects were awarded to

various contractors, given the simplicity of the civil project.

Motorway projects under construction


It is also worth noting that CK is likely to secure the remaining

contract for the toll collection system packages of the Pattaya

– Map Ta Phut route, worth c.Bt2.5bn (US$72m). This is

because there are only two qualified Thai contractors,

including CK and See Sang Karnyotha (1979) Co., Ltd., which

have the necessary track record in toll booth construction. We

expect the bidding of the toll collection system packages to

take place in 1Q17.

5) Airport expansion projects

Airport of Thailand PCL (AOT) has kicked off the bidding process

for the first two contracts, worth Bt14bn (US$0.4bn), with

regard to Suvarnabhumi Airport Phase II. We also expect the

bidding for other contracts worth Bt35bn (US$1bn) from this

project to follow in FY17.

AOT has awarded the first two contracts to the lowest bidders,

as follows:

(i) The first package for the ground and underground floors

of the structure was awarded to ITD, with a bid price of

Bt12bn (vs Bt13.4bn reference price)

(ii) The second package involving utility system works was

awarded to the JV between Interlink Communication

(ILINK TB) and Samprasit Construction Co., Ltd. with a bid

price of Bt1.9bn (vs Bt2.3bn reference price)

CK and STEC have commented that the reference prices for

these two projects do not match their GPM targets. Thus, they

have decided not to participate in the bidding process.

We think that the developments for the construction project of

Suvarnabhumi Phase II bode well for infrastructure spending,

thus alleviating investor concerns over potential delays in

infrastructure spending. However, the progress of the other

airport expansion projects outlined in the master plan is still

limited.

Motorway routes

Awarded

contract

(Btbn)

Contract to

be awarded

(Btbn)

Tota l

project

va lue

(Btbn)

Tota l

project

va lue

(US$bn) Remark

Pattaya - Map Ta Phut17.7 2.5 20 0.6

CK secured Bt785m

contract

Bang Pa In - Nakhon Ratchasima 10 75 85 2.4ITD secured Bt1.5bn

contract

Bang Yai - Karnchanaburi 7 49 56 1.6

Tota l 35 127 161 4.6

Industry Focus


Contractor sector: Projects open for bidding from 2016 onwards

Project Description Construction Value (Btbn)

Construction Value

(US$bn) Progress

Mass Rapid Transit Authority of Thailand : MRTA

Orange line Thailand Cultural Centre - Min Buri 76 2.2 Bid submitted on 31 October 2016

Pink line (Monorail)

Khae Rai - Min Buri 23 0.7

Bid submission on 7 November 2016 Yellow line (Monorail)

Lat Proa - Samrong 24 0.7

Red Line Hua Lum Pong - Bang Sue - PhayaThai - Huamak

44 1.3 Cabinet approved

Purple line (Southern extension)

Tao Poon - Ratboorana 72 2.1 Awaiting EIA process and under feasibility study

Total 240 6.8

State Railway of Thailand : SRT

Double-track rail

Prachuab Khiri Khan - Chumpon 17 0.5

Draft TORs announced on SRT website

Nakhon Pathom - Hua Hin 19 0.5

Hua Hin - Prachuab Khiri Khan 10 0.3

Map Kabao - Thanon Chira 29 0.8 Expect TORs to be announced in 4Q16

Lopburi - Paknampo 24 0.7

Total 99 2.8

Department of Highway : DOH

Motorway Pattaya - Map Ta Phut 2.5 0.1

In bidding process

Bang Pa In - Nakhon Ratchasima 75 2.1

Bang Yai - Karnchanaburi 49 1.4

Total 127 3.6

Airports of Thailand Public Company Limited : AOT

Suvarnabhumi Airport : Phase II Extension of building, terminal and utilities 35 1.0

Expect the remaining two contracts to be open for bidding in FY17F

Total 35 1.0

Total 500 14.3

Source: Ministry of Transport, CK, STEC, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES ed: CK / sa:CS, PY

BUY Last Traded Price ( 4 Nov 2016): Bt30.50 (SET : 1,485.70) Price Target 12-mth: Bt40.00 (31% upside) Potential Catalyst: Aggressive infrastructure spending Where we differ: We are in line with the consensus Analyst Apichaya KETRUTTANABORVORN +66 2657 7823 [email protected]

Price Relative

Forecasts and Valuation FY Dec (Bt m) 2014A 2015A 2016F 2017F Revenue 32,951 34,912 52,389 45,833 EBITDA 3,776 3,178 5,353 6,129 Pre-tax Profit 2,700 2,719 2,930 2,262 Net Profit 2,296 2,193 2,511 2,074 Net Pft (Pre Ex.) 992 182 2,511 2,074 Net Pft Gth (Pre-ex) (%) nm (81.7) 1,282.4 (17.4) EPS (Bt) 1.36 1.29 1.48 1.22 EPS Pre Ex. (Bt) 0.59 0.11 1.48 1.22 EPS Gth Pre Ex (%) nm (82) 1,282 (17) Diluted EPS (Bt) 1.39 1.33 1.52 1.26 Net DPS (Bt) 0.35 0.40 0.44 0.37 BV Per Share (Bt) 11.3 12.1 13.4 14.2 PE (X) 22.5 23.6 20.6 24.9 PE Pre Ex. (X) 52.1 284.4 20.6 24.9 P/Cash Flow (X) 47.6 nm nm 17.4 EV/EBITDA (X) 23.5 31.8 22.4 19.6 Net Div Yield (%) 1.1 1.3 1.5 1.2 P/Book Value (X) 2.7 2.5 2.3 2.2 Net Debt/Equity (X) 1.9 2.3 2.9 2.8 ROAE (%) 12.9 11.1 11.6 8.9 Earnings Rev (%): 0 0 Consensus EPS (Bt): 1.17 0.94 Other Broker Recs: B: 17 S: 1 H: 1

Source of all data on this page: Company, DBS Vickers, Bloomberg Finance L.P

King of infrastructure plays Maintain BUY with an unchanged TP of Bt40.00. We like CK for its rich expertise in construction, high potential to secure more infrastructure contracts, ability to benefit from the group amalgamation programme and attractive valuation of only 20.6x FY16F PE. Thus, CK is our top pick in the contractor space. MRT project rollout implies abundant opportunities for CK. We see abundant opportunities for CK, thanks to the rollout of infrastructure projects – especially for MRT works which CK has the strong competitive edge. The MRT projects, which will be submitted for bidding this year, include MRT orange, pink and yellow lines, worth THB123bn in total, excluding the Bt44bn MRT red line that was approved by the cabinet on 26 July 2016. Additionally, we expect CK to secure the M&E system and O&M service* contracts for the blue line extension project, worth Bt25bn, from Bangkok Expressway and Metro PCL (BEM TB), in FY17. * Operations Service and Maintenance (O&M); Mechanical and Electrical (M&E) Acquires 268k sqm land to get ready for a multitude of upcoming works. On 3 November 2016, CK acquired a 268k sqm plot of land in Samut Prakarn province, a neighbouring province of Bangkok, at a total price of Bt630m, implying 10% discount to the land’s appraisal value. Note that the land will be funded by CK’s internal cash. This land will be used for storing machinery and construction materials, housing workers and supporting infrastructure projects, i.e. high-speed rail and motorway construction projects. This reflects CK’s strong confidence in a rising backlog from infrastructure spending at least for the next five years. Its subsidiaries are beneficiaries CK’s subsidiaries, i.e. Bangkok Expressway and Metro PCL (BEM) and CK Power PCL (CKP), could supply the infrastructure works (expressway and MRT works) and dam construction works in Laos to CK respectively. Valuation: We value CK at Bt40.00, based on SOP method, comprising Bt15 for the construction business and Bt25 for its investment. Key Risks to Our View: i) Delay in bidding process by the government, ii) political instability, and iii) slower-than-expected economic recovery. At A Glance Issued Capital (m shrs) 1,694 Mkt. Cap (Btm/US$m) 51,664 / 1,477 Major Shareholders (%) Mahasiri Siam Co Ltd. 20.1 Ch Karnchang Holding 10.4 C K Office Tower Co Ltd 5.5

Free Float (%) 61.2 3m Avg. Daily Val (US$m) 15.4 ICB Industry : Industrials / Construction & Materials


7 Nov 2016

Thailand Company Guide

Ch. Karnchang Version 6 | Bloomberg: CK TB | Reuters: CK.BK Refer to important disclosures at the end of this report

90

140

190

240

290

340

7.7

12.7

17.7

22.7

27.7

32.7

37.7

Nov-12 Nov-13 Nov-14 Nov-15 Nov-16

Relative IndexBt

Ch. Karnchang (LHS) Relative SET (RHS)

ASIAN INSIGHTS VICKERS SECURITIES Page 2

Company Guide

Ch. Karnchang

CRITICAL DATA POINTS TO WATCH Earnings Drivers: Strong exposure to Laos. CK is constructing a run-off river hydropower dam or the Xayaburi project, worth Bt76bn, in Laos, excluding the additional work portion. The project accounts for more than 40% of the company’s total backlog. In addition, there are 13,000-MW hydro power plant and dam projects to bid for in Laos. We believe that this should present a huge opportunity to CK, given its strong track record in Laos. Bt19.4bn additional works from Xayaburi project; a key earnings driver in FY16F. The Xayaburi Power Co., Ltd, project owner of the Xayaburi project, has to invest an additional Bt19.4bn for environmental purposes, as requested by the Laos government. This Bt19.4bn additional works were awarded to CK in 2Q16, Bt14bn of which has been booked in 2Q16. The areas for the additional works include (i) navigation lock, (ii) design change for sediment management, (iii) dam safety, and (iv) fish-passing facilities. Management has guided that the GPM of the additional works should be c.5% (vs CK’s normal range GPM of 8-10%). The method of funding for this additional investment of Xayaburi Power Co., Ltd. is to get the financial support through loans from its shareholders. However, the Laos government will subsidise this additional investment in the form of tax privileges, lower revenue sharing, concession period extension, etc. Management has also guided that this additional work will have a mild effect on the IRR of the Xayaburi project. The IRR of this project is expected to be c.13% (vs. 12-15% target range previously). High potential to secure at least one contract from MRT orange line. At least three mass transit lines will be open for bidding this year. These include the orange, pink, and yellow lines. The MRT orange line will comprise three underground contracts, one aboveground works contract, one depo & parking building contract and one rail system contract. The MRT orange line project is worth Bt76bn in total. As there are three underground work contracts, there are only two Thai contractors, i.e. CK and ITD that have a track record for underground works, with a good chance of winning at least one such contract. Declining finance costs. In 4Q15, CK has refinanced its debt (with c.4.85% cost of debt) with Bt5.5bn worth of debentures that carry 2.19% to 3.36% interest rates. Thus, CK‘s current average cost of funds drops to 4.15%.

Details on CK’s loan to Xayaburi Power Company Limited Loan amount Bt13.5bn (including the

additional loan of Bt2bn) Interest rate during construction

Not more than the MLR plus 0.25 percent per annum

Interest rate after the project's Commercial Operation Date (COD), by 2019

Not more than the MLR

Estimated total interest until 2031 Bt10bn

Client breakdown by sector

Normal earnings vs extra gain (mainly from realising gains from investments)

SOP Valuation

Unit: Btm

Net profit

2,074

Associate income

Net profit of core business

749

Assigned PE at 33x

33

Value of CK's construction business

24,701

Bangkok Expressway and Metro PCL (27.47% stake)

35,300

TTW PCL (19.57% stake)

8,888

CK Power PCL (29.87% stake)

1,018

Value of CK's investments - 10% holding discount applied 40,686

Total 65,388

No. of shares (m) 1,653

Sum-of-parts per share (Bt) 40.0

Source: Company, DBS Vickers

25% 21% 16%31%

74% 79% 84%69%

0%

20%

40%

60%

80%

100%

120%

2012A 2013A 2014A 2015A

Public CK group

(2,000)

0

2,000

4,000

6,000

8,000

10,000

2011 2012 2013 2014 2015F

Btm

Extra gain Normal earnings


Company Guide

Ch. Karnchang

Balance Sheet: CK’s debt-to-equity ratio as at end-2Q16 was 2.4x. We expect this ratio to rise to 2.9x in end-FY16, given its potentially high backlog growth in FY16. Currently, c.57% of its debt is for financing the company’s investments while the remaining 43% is for its working capital. Share Price Drivers: Acceleration of public infrastructure projects. Thailand’s construction sector has been supported by positive newsflow on infrastructure investments. The government’s concrete actions for its eight-year (2015-2022) infrastructure plan, which kicked off in 4Q15, could be a share price catalyst for CK. Key Risks: Political instability

• Political instability could cause further delays in the government's infrastructure spending programme.

Further delays in mega infrastructure projects • This would cap new contract wins.

High earnings volatility • CK’s extraordinary earnings, mainly from gains on its

investments, have played a major role in boosting its bottomline in the past years. Realising gains from investments has probably become the norm or life-saver for CK’s earnings after all.

High exposure to Lao project • CK has done the additional work portion for the

Xayaburi project before clinching the official contract from Xayaburi Power Co., Ltd. We view this as a significant risk for CK, especially if the project owner is unable to pay for the completed works.

Company Background CH. Karnchang PCL (CK) is one of Thailand's leading general contractors and basic infrastructure developers. It is involved in the construction of large-scale infrastructure, building construction, and general civil works, and invests in government concession projects in order to expand operations and generate long-term recurring income.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)


0.3

0.4

0.4

0.5

0.5

0.6

0.6

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2013A 2014A 2015A 2016F 2017F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

2013A 2014A 2015A 2016F 2017F

Capital Expenditure (-)

Btm

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2013A 2014A 2015A 2016F 2017F

Avg: 33.2x

+1sd: 50.3x

+2sd: 67.3x

-1sd: 16.2x

-0.7

9.3

19.3

29.3

39.3

49.3

59.3

69.3

79.3

89.3

Nov-12 Nov-13 Nov-14 Nov-15

(x)

Avg: 2.36x

+1sd: 2.97x

+2sd: 3.58x

-1sd: 1.75x

-2sd: 1.14x1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Nov-12 Nov-13 Nov-14 Nov-15

(x)


Company Guide

Ch. Karnchang

Income Statement (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F Revenue 32,788 32,951 34,912 52,389 45,833 Cost of Goods Sold (29,233) (29,827) (31,986) (48,010) (41,694) Gross Profit 3,555 3,124 2,926 4,379 4,139 Other Opng (Exp)/Inc (609) (362) (710) (1,479) (1,000) Operating Profit 2,945 2,762 2,216 2,900 3,140 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc (489) 26.8 (19.4) 1,174 1,326 Net Interest (Exp)/Inc (958) (1,393) (1,488) (1,143) (2,204) Exceptional Gain/(Loss) 7,746 1,304 2,011 0.0 0.0 Pre-tax Profit 9,245 2,700 2,719 2,930 2,262 Tax (1,533) (342) (459) (351) (187) Minority Interest (38.1) (60.8) (67.8) (67.8) 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 7,674 2,296 2,193 2,511 2,074 Net Profit before Except. (72.4) 992 182 2,511 2,074 EBITDA 3,154 3,776 3,178 5,353 6,129 Growth Revenue Gth (%) 56.9 0.5 6.0 50.1 (12.5) EBITDA Gth (%) 68.9 19.7 (15.8) 68.4 14.5 Opg Profit Gth (%) 156.3 (6.2) (19.8) 30.9 8.3 Net Profit Gth (Pre-ex) (%) nm nm (81.7) 1,282.4 (17.4) Margins & Ratio Gross Margins (%) 10.8 9.5 8.4 8.4 9.0 Opg Profit Margin (%) 9.0 8.4 6.3 5.5 6.9 Net Profit Margin (%) 23.4 7.0 6.3 4.8 4.5 ROAE (%) 62.0 12.9 11.1 11.6 8.9 ROA (%) 12.5 3.0 2.5 2.3 1.7 ROCE (%) 6.0 4.6 2.9 3.2 3.1 Div Payout Ratio (%) 8.7 25.8 30.9 30.0 30.0 Net Interest Cover (x) 3.1 2.0 1.5 2.5 1.4



Company Guide

Ch. Karnchang

Quarterly / Interim Income Statement (Btm)

FY Dec 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 Revenue 8,511 8,752 9,105 9,003 20,695 Cost of Goods Sold (7,780) (8,014) (8,357) (8,204) (19,438) Gross Profit 731 738 749 799 1,257 Other Oper. (Exp)/Inc (68.8) 4.71 (555) (394) (92.0) Operating Profit 662 743 194 405 1,165 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 9.77 (27.2) (5.2) 149 41.8 Net Interest (Exp)/Inc (372) (395) (361) (230) (112) Exceptional Gain/(Loss) 1,657 38.9 0.0 53.5 0.0 Pre-tax Profit 1,957 359 (173) 377 1,095 Tax (281) (60.1) 1.93 (52.5) (64.9) Minority Interest (27.4) (15.3) (6.8) (20.2) (2.8) Net Profit 1,649 284 (178) 305 1,027 Net profit bef Except. 230 252 (178) 259 1,027 EBITDA 921 980 441 787 1,534 Growth Revenue Gth (%) (0.4) 2.8 4.0 (1.1) 129.9 EBITDA Gth (%) 5.7 6.5 (55.0) 78.4 95.0 Opg Profit Gth (%) 7.4 12.1 (73.9) 109.0 187.8 Net Profit Gth (Pre-ex) (%) 22.2 9.5 nm nm 297.2 Margins Gross Margins (%) 8.6 8.4 8.2 8.9 6.1 Opg Profit Margins (%) 7.8 8.5 2.1 4.5 5.6 Net Profit Margins (%) 19.4 3.2 (2.0) 3.4 5.0

Balance Sheet (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F Net Fixed Assets 7,518 6,962 7,330 8,211 9,047 Invts in Associates & JVs 19,177 21,205 25,267 26,441 27,766 Other LT Assets 4,204 8,726 15,429 15,429 15,429 Cash & ST Invts 3,913 5,265 4,667 245 1,091 Inventory 2,496 8,562 12,787 19,273 18,509 Debtors 4,288 5,337 6,174 8,793 11,085 Other Current Assets 30,438 24,815 21,413 45,337 39,664 Total Assets 72,034 80,872 93,066 123,728 122,591 ST Debt

13,353 12,844 15,291 22,945 22,074 Creditor 6,846 5,904 6,602 9,951 8,524 Other Current Liab 9,352 10,856 8,663 19,330 17,170 LT Debt 22,886 29,027 38,247 45,000 47,000 Other LT Liabilities 2,757 2,770 3,408 3,408 3,408 Shareholder’s Equity 16,551 19,125 20,457 22,696 24,017 Minority Interests 290 346 398 398 398 Total Cap. & Liab. 72,034 80,872 93,066 123,728 122,591 Non-Cash Wkg. Capital 21,025 21,953 25,109 44,122 43,563 Net Cash/(Debt) (32,326) (36,606) (48,871) (67,700) (67,983) Debtors Turn (avg days) 53.5 53.3 60.2 52.1 79.1 Creditors Turn (avg days) 77.1 79.7 72.0 62.7 82.2 Inventory Turn (avg days) 23.7 67.7 121.8 121.9 165.4 Asset Turnover (x) 0.5 0.4 0.4 0.5 0.4 Current Ratio (x) 1.4 1.5 1.5 1.4 1.5 Quick Ratio (x) 1.3 1.2 1.1 1.0 1.1 Net Debt/Equity (X) 1.9 1.9 2.3 2.9 2.8 Net Debt/Equity ex MI (X) 2.0 1.9 2.4 3.0 2.8 Capex to Debt (%) 9.7 1.0 2.5 3.2 3.6 Z-Score (X) 1.4 1.4 1.2 1.2 1.2



Company Guide

Ch. Karnchang

Cash Flow Statement (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F Pre-Tax Profit 9,245 2,700 2,719 2,930 2,262 Dep. & Amort. 697 988 981 1,279 1,664 Tax Paid (1,908) (772) (759) (583) (631) Assoc. & JV Inc/(loss) 489 (26.8) 19.4 (1,174) (1,326) Chg in Wkg.Cap. (13,143) (929) (12,175) (18,608) 558 Other Operating CF 374 (1,375) (1,711) 232 444 Net Operating CF (11,992) 1,085 (10,925) (15,924) 2,970 Capital Exp.(net) (3,514) (432) (1,349) (2,160) (2,500) Other Invts.(net) 7,121 1,218 2,011 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF 0.0 0.0 0.0 0.0 0.0 Net Investing CF 3,606 786 662 (2,160) (2,500) Div Paid (578) (666) (593) (678) (753) Chg in Gross Debt 8,285 5,631 11,667 14,407 1,129 Capital Issues 0.0 41.3 0.0 0.0 0.0 Other Financing CF 1,591 (1,662) 122 (67.8) 0.0 Net Financing CF 9,297 3,345 11,197 13,662 375 Currency Adjustments 233 35.6 0.0 0.0 0.0 Chg in Cash 1,144 5,252 934 (4,422) 846 Opg CFPS (Bt) 0.70 1.19 0.74 1.58 1.42 Free CFPS (Bt) (9.4) 0.39 (7.2) (10.7) 0.28


Target Price & Ratings History

Source: DBS Vickers

Analyst: Apichaya KETRUTTANABORVORN

Anti-corruption Progress Indicator n/a

Corporate Governance CG Rating 2015

THAI-CAC is Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of August 29, 2016) are categorised into:

Score Description Declared Companies that have declared their intention to join CAC

Certified Companies certified by CAC.

Corporate Governance CG Rating is based on Thai Institute of Directors (IOD)’s annual assessment of corporate governance practices of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure and transparency (20%), role of stakeholders (20%), equitable treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to each company based on their scoring as follows:

Score Range Number of Logo Description 90-100 Excellent

80-89 Very Good

70-79 Good

60-69 Satisfactory

50-59 Pass <50 No logo given N/A

S.No.Date of Report

Closing Price

12-mth Target Price

Rat ing

1: 16 Nov 15 27.75 33.00 BUY

2: 25 Nov 15 28.00 33.00 BUY

3: 29 Feb 16 22.60 33.00 BUY

4: 09 Mar 16 24.60 33.00 BUY

5: 29 Mar 16 25.25 33.00 BUY

6: 17 May 16 24.70 33.00 BUY

7: 23 May 16 24.20 35.00 BUY

8: 27 Jun 16 27.50 35.00 BUY

9: 04 Jul 16 29.25 35.00 BUY

10: 06 Jul 16 28.50 35.00 BUY

11: 11 Jul 16 31.00 35.00 BUY12: 29 Jul 16 33.75 40.00 BUY13: 05 Aug 16 31.50 40.00 BUY14: 15 Aug 16 32.75 40.00 BUY

Note : Share price and Target price are adjusted for corporate actions. 15: 30 Aug 16 31.00 40.00 BUY16: 18 Oct 16 29.25 40.00 BUY

1

2

3

4

5

6

7

891011

12

13

14

15 16

21.47

23.47

25.47

27.47

29.47

31.47

33.47

35.47

Nov-15 Mar-16 Jul-16 Nov-16

Bt

ASIAN INSIGHTS VICKERS SECURITIES ed: JS / sa:CS, PY

BUY (Upgrade from HOLD)

Last Traded Price ( 4 Nov 2016): Bt26.25 (SET : 1,485.70)

Price Target 12-mth: Bt31.00 (18% upside) (Prev Bt26.00)

Potential Catalyst: Upcycle of infrastructure spending

Where we differ: Our earnings forecasts are in line with consensus

Analyst Apichaya KETRUTTANABORVORN +66 2657 7823 [email protected]

Price Relative

Forecasts and Valuation FY Dec (Bt m) 2014A 2015A 2016F 2017F

Revenue 21,652 18,331 19,643 24,776 EBITDA 2,127 1,854 1,803 2,272 Pre-tax Profit 1,919 1,866 1,438 1,873 Net Profit 1,521 1,527 1,154 1,502 Net Pft (Pre Ex.) 1,521 1,079 1,154 1,502 Net Pft Gth (Pre-ex) (%) 1.4 (29.0) 7.0 30.2 EPS (Bt) 1.00 1.00 0.76 0.98 EPS Pre Ex. (Bt) 1.00 0.71 0.76 0.98 EPS Gth Pre Ex (%) 1 (29) 7 30 Diluted EPS (Bt) 1.00 1.00 0.76 0.98 Net DPS (Bt) 0.50 0.35 0.38 0.49 BV Per Share (Bt) 5.48 6.09 6.40 7.00 PE (X) 26.3 26.2 34.7 26.7 PE Pre Ex. (X) 26.3 37.1 34.7 26.7 P/Cash Flow (X) nm nm 25.1 14.4 EV/EBITDA (X) 16.3 20.6 20.0 15.2 Net Div Yield (%) 1.9 1.3 1.4 1.9 P/Book Value (X) 4.8 4.3 4.1 3.7 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 19.1 17.3 12.1 14.7 Earnings Rev (%): 5 8 Consensus EPS (Bt): 0.74 0.91 Other Broker Recs: B: 17 S: 0 H: 4

Source of all data on this page: Company, DBS Vickers, Bloomberg Finance L.P

Ready for the golden era Upgrade to BUY with a higher TP of Bt31.00. As one of Thailand’s four largest construction contractors as well as armed with a net cash position, Sino-Thai Engineering & Con. (STEC) stands a good chance of benefiting from the government’s infrastructure spending over the next few years. We revised up our assumption for new contracts signed in FY17 from Bt40bn to Bt50bn. Accordingly, our TP is raised to Bt31.00, pegged to 31x FY17 PE (+1 SD of mean). Thus, we upgrade STEC to BUY with a TP of Bt31. Prime beneficiary of rising construction activities in Thailand. Although FY16F may not be a good year for STEC in terms of new contracts signed (new contracts signed year-to-date stands at only Bt7.3bn vs its initial target of Bt30bn), we maintain our bullish view that STEC stands a good chance to clinch contracts worth at least Bt50bn in FY17F, given the majority of the upcoming projects for bidding will be awarded in FY17F. The official Term of References were announced for Bt169bn worth of projects, and included: (i) MRT orange line, worth Bt76bn, (ii) MRT pink line, worth Bt23bn, (iii) MRT yellow line, worth Bt24bn, and (iv) dual-track railway project in three routes, worth Bt46bn. Additionally, we also assign a high potential that the additional dual-track railway projects in two routes, worth Bt82bn in total, and the MRT red line and purple line (Southern extension) will be opened for bidding by FY17F. Note that STEC has a win rate of 20-25% Acquired 10% in Thai Solar Energy PCL (TSE TB). STEC acquired 181.5 m shares in TSE at a price of Bt4.85/share, which represents a 5% discount from the last traded price. Currently, TSE operates solar power plant in Thailand and Japan with a combined capacity of 135 MW. We have a positive view towards this investment because (i) STEC should benefit from recurring income from TSE’s dividends; and (ii) TSE could award the construction contract for power plants to STEC.

Valuation: We upgrade STEC from HOLD to BUY rating with a higher TP of Bt31, pegged to 31x FY17F PE(+1 SD of mean)

Key Risks to Our View: Further delays in government spending on mega infrastructure projects, cost overrun and higher steel/construction materials price. At A Glance

Issued Capital (m shrs) 1,525

Mkt. Cap (Btm/US$m) 40,034 / 1,145

Major Shareholders (%)

Chanweerakul's Family 21.7

Thai NVDR 10.6

UBS AG Singapore Branch 5.1

Free Float (%) 72.4

3m Avg. Daily Val (US$m) 5.7

ICB Industry : Industrials / Construction & Materials


7 Nov 2016

Thailand Company Guide

Sino-Thai Engineering & Con. Version 6 | Bloomberg: STEC TB | Reuters: STEC.BK Refer to important disclosures at the end of this report

ASIAN INSIGHTS VICKERS SECURITIES

Page 2

Company Guide

Sino-Thai Engineering & Con.

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

A prime beneficiary of rising infrastructure spending. We

reiterate our view that public investments will accelerate and

become a strong pillar of growth for the Thai economy. The

government is speeding up investment in infrastructure projects

to provide a key engine for Thai’s economic growth ahead. This

should be positive for STEC, as it is one of the top four

construction contractors in Thailand. STEC is in a net cash

position which allows the company to readily participate in the

bidding of new infrastructure projects from the government.

Note that STEC also owns two precast concrete factories and

has vast expertise in executing infrastructure works, thus

reinforcing its strong position in the infrastructure upcycle this

time around.

Backlog breakdown. Based on our estimated backlog of Bt49bn

as of end-2Q16, its backlog is equivalent to more than two

years’ worth of revenue. Thus, STEC should still be resilient

enough to cope with any further delay in the country’s

infrastructure spending.

Power plant project to maintain STEC’s GPM. Currently, STEC

has two power plant projects in its backlog, comprising 12 small

power plants and offsite works for power plant projects. Note

that the average GPM of power plant projects is much higher

than the 6-7% for government infrastructure projects. This

should help STEC achieve its target GPM of 8-9%.

Downside risk from new parliament project. As at end-2Q16,

construction progress for the Bt11.5bn new parliament project

has only reached 24% of completion because of delays in the

land expropriation process. As a result, STEC expects to extend

the completion period to 2019 (vs November 2016 currently).

We believe that it is reasonable to expect the project to be

completed in 2019, based on a progress rate of 20% per year

(base-case scenario). STEC has booked a Bt579m loss provision

for this project in 2Q15, which the company believes to be large

enough to cover the total potential losses from this project.

However, we believe that further provisions may be needed.

Expect Bt50bn projects to be secured in FY17. Based on STEC’s

history, its success ratio in winning projects is between 20%

and 25%. Assuming that the company submits bids for projects

worth Bt330bn in 2017 and achieves a 20% success ratio, the

value of projects to be awarded could be about Bt66bn, up

sharply from Bt21bn in 2015 and Bt10bn in FY16F. However,

we have conservatively imputed only Bt50bn for new contracts

signed in FY17F.

Revenue vs Backlog

Profitability

Backlog breakdown by client

Backlog breakdown by type of work


14,815

19,748 22,242 21,552

18,238

4,472 3,791

48,935

38,381

51,088 47,821

56,073 52,887

49,000

0

10,000

20,000

30,000

40,000

50,000

60,000

2011A 2012A 2013A 2014A 2015A 1Q16 2Q16

Btm

Revenue Ending backlog

9.3%

8.3% 8.4%

9.5%10.2%

9.4% 9.1% 9.3%

4.8%

6.1%5.5%

7.3%7.8%

7.3%

6.0%5.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2010A 2011A 2012A 2013A 2014A 2015A 1Q16 2Q16

Gross margin Net margin


Page 3

Company Guide


Balance Sheet:

STEC has the strongest balance sheet in the sector currently,

with a net cash position of Bt0.2/sh as at end-2Q16.

Share Price Drivers:

Benefiting hugely from mega infrastructure projects to be

opened for bidding from 2016 onwards. The concrete actions

on the bidding process of the MRT projects, dual-track railway,

motorway and Suvarnbhumi phase II projects fuel expectations

for more projects to kick off this year. The projects whose

official bidding dates were announced include: (i) MRT orange

line, worth Bt83bn, (ii) MRT pink line, worth Bt27bn, (iii) MRT

yellow line, worth Bt32bn and (iv) dual-track railway projects in

three routes, worth Bt55bn. Based on STEC’s history, its success

ratio in winning projects is between 20% and 25%. Assuming

that the company submits bids for projects worth Bt330bn in

2017 and achieves a 20% success ratio, the value of projects to

be awarded could be about Bt66bn, up sharply from Bt21bn in

2015 and Bt10bn in FY16F. However, we have conservatively

imputed only Bt50bn for new contracts signed in FY17F.

Key Risks:

Further delays in mega infrastructure projects. This will cap the

value of new contract wins.

Construction delays. This could result in cost overruns which

could subsequently crimp profit margins.

Increase building material cost. This could lead to lower profit

margins.

Company Background

Sino-Thai Engineering and Construction Public Company Ltd. is

a construction company that provides both civil and

mechanical works. Its services cover infrastructure, buildings,

energy and power generation plants, industrial and

environment.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)



Page 4

Company Guide


Project to be awarded in FY17F

Project Description ConstructionValue (Btbn)

ConstructionValue

(US$bn) Progress

Mass Rapid Transit Authority of Thailand : MRTA

Orange line Thailand Cultural Centre - Min Buri 76 2.2 Bid submitted on 31 October 2016

Pink line (Monorail)

Khae Rai - Min Buri 23 0.7

Bid submission on 7 November 2016 Yellow line (Monorail)

Lat proa - Samrong 24 0.7

Red Line Hua Lum Pong - Bang Sue - PhayaThai - Huamak

44 1.3 Cabinet has given approval

Purple line (Southern extension)

Tao Poon - Ratboorana 72 2.1 Awaiting EIA process and feasibility approval

Total 240 6.8

State Railway of Thailand : SRT

Double-track rail Prachuab Khiri Khan - Chumpon 17 0.5 Draft TORs announced on SRT website

Map Kabao - Thanon Chira 29 0.8

Nakhon Pathom - Hua Hin 19 0.5 Expect TORs to be announced in 4Q16 Lopburi - Paknampo 24 0.7

Total 89 2.5

Department of Highway : DOH

Motorway Pattaya - Map Ta Phut 2.5 0.1

In bidding process

Bang Pa In - Nakhon Ratchasima 75 2.1

Bang Yai - Karnchanaburi 49 1.4

Total 127 3.6

Airports of Thailand Public Company Limited : AOT

Suvarnabhumi Airport : Phase II Extension of building, terminal and utilities 35 1.0

Expect the remaining two contracts to open for bidding in FY17F

Total 35 1.0

Total 490 14.0



Page 5

Company Guide


Key Assumptions

FY Dec 2013A 2014A 2015A 2016F 2017F

Beginning backlog 39,152 51,088 47,821 50,603 41,060

New projects signed 34,178 18,285 21,020 10,000 50,000

Realized for the year 22,242 21,552 18,238 19,543 24,676

Ending backlog 51,088 47,821 50,603 41,060 66,385

Income Statement (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F

Revenue 22,294 21,652 18,331 19,643 24,776

Cost of Goods Sold (20,168) (19,435) (16,599) (17,923) (22,516)

Gross Profit 2,126 2,217 1,731 1,720 2,260

Other Opng (Exp)/Inc (490) (529) (389) (446) (573)

Operating Profit 1,636 1,688 1,342 1,274 1,687

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 10.9

Associates & JV Inc (21.5) 11.1 17.4 18.3 19.2

Net Interest (Exp)/Inc 281 220 58.8 145 155

Exceptional Gain/(Loss) 294 0.0 448 0.0 0.0

Pre-tax Profit 2,190 1,919 1,866 1,438 1,873

Tax (449) (389) (321) (284) (371)

Minority Interest (7.3) (9.5) (18.2) 0.0 0.0

Preference Dividend 0.0 0.0 0.0 0.0 0.0

Net Profit 1,733 1,521 1,527 1,154 1,502

Net Profit before Except. 1,500 1,521 1,079 1,154 1,502

EBITDA 1,983 2,127 1,854 1,803 2,272

Growth

Revenue Gth (%) 12.2 (2.9) (15.3) 7.2 26.1

EBITDA Gth (%) 22.5 7.3 (12.8) (2.8) 26.0

Opg Profit Gth (%) 34.3 3.2 (20.5) (5.1) 32.4

Net Profit Gth (Pre-ex) (%) 36.9 1.4 (29.0) 7.0 30.2

Margins & Ratio

Gross Margins (%) 9.5 10.2 9.4 8.8 9.1

Opg Profit Margin (%) 7.3 7.8 7.3 6.5 6.8

Net Profit Margin (%) 7.8 7.0 8.3 5.9 6.1

ROAE (%) 25.6 19.1 17.3 12.1 14.7

ROA (%) 7.7 6.1 6.4 4.8 5.3

ROCE (%) 18.7 16.5 12.3 10.5 13.0

Div Payout Ratio (%) 44.0 50.2 35.3 50.0 50.0

Net Interest Cover (x) NM NM NM NM NM



Page 6

Company Guide


Quarterly / Interim Income Statement (Btm)

FY Dec 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016

Revenue 4,993 4,690 4,427 4,486 3,805

Cost of Goods Sold (4,520) (4,235) (4,109) (4,079) (3,450)

Gross Profit 473 454 319 407 355

Other Oper. (Exp)/Inc (99.1) (144) (36.7) (100) (116)

Operating Profit 373 311 282 306 239

Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0

Associates & JV Inc 0.39 6.72 8.43 7.54 4.12

Net Interest (Exp)/Inc 15.9 14.4 4.76 10.1 9.80

Exceptional Gain/(Loss) 0.0 0.0 448 0.0 0.0

Pre-tax Profit 390 332 743 324 253

Tax (62.3) (60.1) (119) (53.8) (46.7)

Minority Interest (1.7) (1.5) (13.7) (2.1) (1.7)

Net Profit 326 270 611 268 204

Net profit bef Except. 326 270 163 268 204

EBITDA 451 452 368 454 383

Growth

Revenue Gth (%) 18.3 (6.1) (5.6) 1.3 (15.2)

EBITDA Gth (%) (12.0) 0.1 (18.6) 23.4 (15.6)

Opg Profit Gth (%) (0.7) (16.8) (9.2) 8.7 (22.0)

Net Profit Gth (Pre-ex) (%) 1.8 (17.1) (39.7) 64.6 (23.7)

Margins

Gross Margins (%) 9.5 9.7 7.2 9.1 9.3

Opg Profit Margins (%) 7.5 6.6 6.4 6.8 6.3

Net Profit Margins (%) 6.5 5.8 13.8 6.0 5.4

Balance Sheet (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F Net Fixed Assets 2,650 3,166 3,197 3,498 3,598

Invts in Associates & JVs 127 148 159 159 159

Other LT Assets 2,363 3,128 3,733 3,733 3,733

Cash & ST Invts 8,663 5,565 2,065 4,341 5,885

Inventory 1,118 1,187 2,300 2,487 3,136

Debtors 2,917 2,748 3,079 3,472 3,968

Other Current Assets 7,172 9,061 8,128 8,221 10,369

Total Assets 25,010 25,004 22,661 25,911 30,848

ST Debt

69.5 70.4 71.3 71.3 71.3

Creditor 2,966 3,727 4,023 4,350 5,486

Other Current Liab 13,659 12,129 8,554 11,015 13,890

LT Debt 0.0 0.0 0.0 0.0 0.0

Other LT Liabilities 539 528 505 505 505

Shareholder’s Equity 7,588 8,351 9,292 9,754 10,679

Minority Interests 189 198 216 216 216

Total Cap. & Liab. 25,010 25,004 22,661 25,911 30,848

Non-Cash Wkg. Capital (5,418) (2,860) 930 (1,186) (1,904)

Net Cash/(Debt) 8,594 5,495 1,993 4,270 5,813

Debtors Turn (avg days) 38.8 47.8 58.0 60.9 54.8

Creditors Turn (avg days) 54.5 62.5 85.8 85.6 79.7

Inventory Turn (avg days) 13.0 21.6 38.3 48.7 45.6

Asset Turnover (x) 1.0 0.9 0.8 0.8 0.9

Current Ratio (x) 1.2 1.2 1.2 1.2 1.2

Quick Ratio (x) 1.1 1.1 1.0 1.0 1.0

Net Debt/Equity (X) CASH CASH CASH CASH CASH

Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH

Capex to Debt (%) 1,233.5 1,341.0 736.4 1,139.1 917.9

Z-Score (X) 2.7 2.8 3.2 2.8 2.6



Page 7

Company Guide


Cash Flow Statement (Btm)

FY Dec 2013A 2014A 2015A 2016F 2017F

Pre-Tax Profit 2,190 1,919 1,866 1,438 1,873

Dep. & Amort. 368 427 494 510 554

Tax Paid (412) (359) (315) (265) (350)

Assoc. & JV Inc/(loss) 21.5 (11.1) (17.4) (18.3) (19.2)

Chg in Wkg.Cap. 666 (2,558) (1,619) (67.0) 719

Other Operating CF (104) (822) (618) (0.7) (1.3)

Net Operating CF 2,730 (1,404) (208) 1,597 2,775

Capital Exp.(net) (857) (944) (525) (812) (654)

Other Invts.(net) 0.0 0.0 0.0 0.0 0.0

Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0

Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0

Other Investing CF 0.0 0.0 0.0 0.0 0.0

Net Investing CF (857) (944) (525) (812) (654)

Div Paid (593) (763) (763) (539) (577)

Chg in Gross Debt (108) 0.87 0.87 0.0 0.0

Capital Issues 339 0.0 0.0 0.0 0.0

Other Financing CF (37.5) 11.8 24.3 0.0 0.0

Net Financing CF (399) (750) (737) (539) (577)

Currency Adjustments 0.0 0.0 0.0 0.0 0.0

Chg in Cash 1,473 (3,098) (1,470) 246 1,544

Opg CFPS (Bt) 1.35 0.76 0.92 1.09 1.35

Free CFPS (Bt) 1.23 (1.5) (0.5) 0.52 1.39


Target Price & Ratings History

Source: DBS Vickers

Analyst: Apichaya KETRUTTANABORVORN

Anti-corruption Progress Indicator n/a

Corporate Governance CG Rating 2015

THAI-CAC is Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of August 29, 2016) are categorised into:

Score Description

Declared Companies that have declared their intention to join CAC

Certified Companies certified by CAC.

Corporate Governance CG Rating is based on Thai Institute of

Directors (IOD)’s annual assessment of corporate governance practices of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure and transparency (20%), role of stakeholders (20%), equitable treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to each company based on their scoring as follows:

Score Range Number of Logo Description

90-100 Excellent

80-89 Very Good

70-79 Good

60-69 Satisfactory

50-59 Pass

<50 No logo given N/A


Company Guide


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

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

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

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

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

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

Share price appreciation + dividends

Completed Date: 7 Nov 2016 07:14:46 Dissemination Date: 7 Nov 2016 09:05:46

GENERAL DISCLOSURE/DISCLAIMER

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

Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates 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

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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

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

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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

positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and

other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can

be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.

The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it

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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned

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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and

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which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual

results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED

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

(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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

commodity referred to in this report.

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

in the past twelve months and does not engage in market-making.


Company Guide


ANALYST 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

compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in the report. The DBS Group has

procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of

research reports. As of 7 Nov 2016, 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). The research analyst(s)

responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and

procedures are in place to ensure that confidential information held by either the research or investment banking function is handled

appropriately.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

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 Nov 2016.

Compensation for investment banking services:

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manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further

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Company Guide


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

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