11 september 2015 overweight thailand hotel...

THAILAND Sector Note 11 SEPTEMBER 2015

Sector Weighting Overweight

Thailand Hotel Sector Staying strong

Sector Valuation Current Target Market Norm EPS grw Norm PE EV/EBITDA

BBG price price Cap 2015F 2016F 2015F 2016F 2015F 2016F Company Code Rec. (Bt) (Bt) (US$ m) (%) (%) (x) (x) (x) (x)

Minor Int'l MINT TB BUY 28.00 37.00 3,411 1.8 26.4 27.4 21.7 22.8 20.0

Central Plaza Hotel CENTEL TB BUY 35.50 48.00 1,326 59.3 11.6 27.7 24.8 13.9 12.9

The Erawan Group ERW TB HOLD 3.88 4.20 266 na 57.0 62.0 39.5 14.1 12.7 Source: Thanachart estimates, Based on 10 September 2015 closing prices

Despite a hiccup from the bomb blast in Bangkok last month, we still view the hotel sector’s fundamentals as solid with sector earnings growth of 19-23% in 2015-17F. CENTEL, our top pick, also offers solid EPS growth of 12-59% in 2015-17F, driven by a strong recovery of its hotel and food businesses despite the bombing.

KALVALEE THONGSOMAUNG 662 – 617 4900

[email protected]

Sector Earnings And Growth

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Growth And Valuation Matrix

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2015-19F EPS CAGR (%)

EV/EBITDA 2016F (x)

CENTEL MINT

ERW


YTD Index And Share Price Change

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ERW

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MINT

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CENTEL

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Source: Bloomberg

Our top hotel pick: CENTEL We expect the Bangkok bomb blast on 17 August to deal only a short-term blow to the Thai tourism industry, so we maintain our OVERWEIGHT stance on the hotel sector. We are also confident in our top sector pick CENTEL. Despite factoring in the bombing impact, CENTEL offers solid EPS growth y-y of 12-59% in 2015-17F, driven by a recovery story for its food and hotel businesses. MINT remains a BUY for its good acquisition execution, our view that its earnings bottomed out in 1H15 and clear earnings catalysts in 4Q15F. Despite upgrading ERW to HOLD on valuation, we like it the least in our hotel stock coverage given its more volatile earnings profile (100% domestic play, heavy Bangkok exposure) despite our expectation for earnings to turn around in 2016F.

How do we now look at Thailand’s hotel sector? We have tracked tourist arrival numbers and the hotel sector’s occupancy rate during major crises affecting Thailand such as political turmoil and disease outbreaks going back to 2011. The statistics confirm our belief in the resiliency of the country’s tourism industry with hotel performances rebounding three months after being hit by each event (Exhibits 3-4). Having said that, the Fiscal Policy Office (FPO) still expects 2H15 tourist arrivals of 14.9m, a slight increase of 1.4% from 1H15, bringing 2015 tourist arrivals at 29.6m visitors (+19% y-y).

Increasing Chinese visitor numbers We expect rising Chinese visitor numbers to remain a solid growth driver for Thai tourism. Chinese visitors to global destinations reached 107m in 2014, growing by an 18% CAGR in 2010-14. Despite this strong growth in Chinese outbound visitors, they represent only 7% of China’s 1.3bn total population (vs. 17% in aggregate for the total world population). We thus expect Thailand, now the third most favorite destination of the Chinese, to benefit from even more visitors from China.

Expecting higher-quality earnings growth The hotel sector’s valuation at 15x EV/EBITDA in 2015-16F is not too excessive, in our view, supported by sector earnings growth of 19-23% and improving ROE at 11-12% versus 8-11% in the past. We see sector earnings being less cyclical given healthier growth strategies among hotel operators. Our top pick CENTEL sports an EV/EBITDA of 13x in 2016F, supported by solid earnings growth of 12-59% in 2015-16F and its ROE improving to 15% in 2016F, outperforming the sector which is capital intensive in nature and where ROE tends to be low.

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Please see the important notice on the back page

THANACHART

SECTOR NOTE KALVALEE THONGSOMAUNG

Our top hotel pick: CENTEL

We maintain our OVERWEIGHT stance on the hotel sector as we see it offering solid fundamentals with sector earnings growth of 19-23% in 2015-17F. We expect the bomb blast at the Erawan shrine in Bangkok on 17 August to only have a short-term impact on the Thai tourism industry. We go into more detail in the next section on how we look at Thailand’s hotel sector.

Ex 1: Sector Earnings And Growth Ex 2: Hotel Stocks’ Earnings Growth vs Valuation Matrix

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Sources: Company data, Thanachart estimates Sources: Company data, Thanachart estimates

Our top hotel sector pick remains Central Plaza Hotel Pcl (CENTEL TB, Bt35.5, BUY) as we are confident in its solid earnings delivery and growth strategy. We also like Minor International Pcl (MINT TB, Bt28.0, BUY), on which we reaffirm our BUY call. We upgrade our rating on the Erawan Group Pcl (ERW TB, Bt3.88, HOLD) to HOLD (from Sell) as we believe its valuation is now fair after its recent share-price plunge. For all stocks in our universe, we roll over the valuation basis of our DCF model to 2016. We summarize the short-term catalysts and strategies for our hotel stock coverage as follows;

CENTEL TB (BUY, TP: Bt48.0)

Despite factoring in the bomb blast toll, we still see CENTEL offering solid EPS growth of 12-59% in 2015-17F, driven by a recovery story for its food and hotel businesses.

Short-term catalysts:

− We expect CENTEL’s food margin enhancement to be seen clearly in 2015 after implementing its new strategy from early this year. CENTEL has focused more on operational efficiency rather than aggressive outlet expansion. The closing down of 40 loss-making food outlets in 2015 has been one of its strategies.

− We see CENTEL’s hotel business enjoying the high-tourism season in the fourth quarter.

Strategies:

− Operating margin improvement is crucial to the performance of the food business.

− Hotel expansion in the Maldives and room renovation and extension of existing hotels are scheduled for 2018. CENTEL has also studied potential acquisitions and joint ventures for hotels overseas. An asset-light strategy has been implemented with new managed hotels taken on every year.

OVERWEIGHT the sector for solid fundamentals and resilience

Top pick still CENTEL, maintain BUY on MINT, upgrade ERW to HOLD

Offers solid 2015-17F EPS growth, on an earnings recovery story

Expansion & acquisition and boosting margins are CENTEL’s key strategies

THANACHART SECURITIES | DAIWA CAPITAL MARKETS 2


MINT TB (BUY, TP: Bt37.0)

We maintain our BUY call on MINT for its ability to execute acquisitions, what we view as its earnings having bottomed out in 1H15 and clear earnings catalysts in 4Q15F.


− We expect a turnaround of its food business in Singapore given the completion of renovations of the “Thai Express” and “Xin Wang” restaurants with new menus and concepts due to be launched in 4Q15.

− We foresee MINT’s hotel business enjoying the high-tourism season in the fourth quarter together with the new 200-room Avani Riverside Bangkok and room renovations at the Anantara Siam Bangkok, the Anantara Hua Hin (Thailand) and the Anantara Dhigu Maldives scheduled for 4Q15.

− We project additional revenue from a new real estate project, the Anantara Residences, Layan, Phuket, in 4Q15.

Strategies:

− Operating margin improvement is crucial for the performance of its food business.

− Acquisitions are a key strategy. MINT is very active in seeking overseas investments, particularly in hotel and mixed-use projects which could provide further upside to earnings.

− Strengthening its company-owned hospitality brands such as Anantara, Oaks and Avani through investment, an asset-light model and diversification.

− Focusing on recurring income from real-estate projects.

ERW TB (HOLD, TP: Bt4.2)

Despite our upgrade to HOLD, we like ERW the least among our hotel stock coverage for its more volatile earnings profile (pure domestic play, heavy Bangkok exposure, see Exhibit 5) despite our expectation for its earnings to turn around nicely next year, albeit off a small base.


− We foresee ERW’s hotel business turning around in the high-tourism season in the fourth quarter.

Strategy:

− Building up its company-owned hotel brand, HOP Inn, through expansion in Thailand and overseas.

We see clear earnings catalysts for MINT in 4Q15

Acquisition and diversification, improving margin are key strategies

ERW offers less diversification and earnings are cyclical



How do we look at Thailand’s hotel sector?

We have tracked tourist arrival numbers and the hotel sector’s occupancy rate during major crises affecting Thailand such as political turmoil and disease outbreaks since 2011. The statistics confirm our belief in the resiliency of the country’s tourism industry with hotel performances rebounding three months after being hit by each event. Moreover, we tracked the occupancy rates of Bangkok hotels via the hotel stocks under our coverage, and we have seen rebounds in occupancy rates in the quarter following negative events.

Ex 3: Resilient Tourist Arrivals

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Source: Tourism Authority of Thailand

Ex 4: Volatile Occupancy Rates For Bangkok Hotels

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Sources: Company data, Thanachart compilation

Fast tourist and hotel occupancy rebounds = Thai tourism resiliency



Ex 5: 1H15 Bangkok Revenue Portion To Total Revenue

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Given the bomb blast in Bangkok in the middle of August, the Fiscal Policy Office (FPO) has lowered its 2015 tourist arrivals forecast by only 1% from its previous prediction to 29.6m visitors, or 19% y-y growth in 2015. The new FPO’s estimate implies 2H15 tourist arrivals reach 14.9m, up slightly by 1.4% from 1H15.

The latest tourist arrival projection from the Tourism Council of Thailand (TCT) as of 11 September 2015), TCT expects 30.2m international tourist arrivals in 2015, up 22%y-y. TCT expects 3Q15 and 4Q15 tourist arrivals to reach 7.4m and 8.1m, compared with 7.8m visitors in 1Q15 and 6.9m in 2Q15. Having said that, the TCT is confident in the international visitors’ flow in the coming high season in 4Q15.

Ex 6: International Tourist Arrival To Thailand Is Forecasted To Grow Strongly

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Sources: Tourism Authority of Thailand, the Fiscal Policy Office, the Tourism Council of Thailand

FPO still expects tourist arrival growth at 19% y-y in 2015

TCT foresees a strong tourist arrival flow in 4Q15F



Increasing Chinese visitor numbers

Chinese visitors have become a tremendous growth driver for the Thai tourism industry since 2012 with their number jumping to 4.6m in 2013 from 2.7m in 2012 and 1.7m in 2011. As a result, Chinese travelers comprised the largest portion of total tourist arrivals to Thailand at 19% in 2014 (versus 12% in 2012), followed by Malaysians and Russians at 11% and 6% (unchanged from 2012 levels).

Ex 7: Tourist Arrivals By Nationality And Region Over The Past Five Years

Portion of total tourist arrivals (%)

Tourist arrivals by nationality 2010 2011 2012 2013 2014 Chinese 7 9 12 17 19 Malaysian 13 13 11 11 11 Russian 4 5 6 7 6 Japanese 6 6 6 6 5 South Korean 5 5 5 5 5 Tourist arrivals by region 2010 2011 2012 2013 2014 Asia 57 60 62 65 64 Europe 28 26 25 24 25 Americas 5 5 5 4 4 Oceania 5 5 5 4 4 Middle East 4 3 3 2 2 Africa 1 1 1 1 1


Based on information from the Tourism Authority of Thailand on spending per visitor by nationality, Chinese visitor spending per head increased by 6-8% p.a. to Bt5,497 per person in 2014, or 15% higher than the average spending for visitors to Thailand at Bt4,808 per person. The upsurge in Chinese tourists has also generated much higher income for hotel operators and the retail business in Thailand.

Ex 8: Rising Chinese Visitors To Thailand With Higher Spending Per Head

4,424 4,470 4,826

5,097 5,497

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Chinese visitors have been the major growth driver for Thai tourism

Rising Chinese visitor numbers with higher spending per head



Chinese visitors to global destinations reached 107m in 2014, growing at an 18% CAGR over 2010-14. Despite this strong growth in Chinese outbound visitors, they represent only 7% of its 1.3bn total population versus an aggregate 17% portion of global outbound visitors relative to the total world population. We thus see Thailand, now the third most favorite destination among the Chinese, benefiting from more Chinese visitors in the future.

Ex 9: Chinese Outbound Visitors And Thailand’s Ranking As An Outbound Destination

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Sources: China National Tourism Administration, China Travel Guide

Based on our estimates, the 2014 revenue contributions from Chinese visitors in Thailand to total revenue for each company are as follows. ERW’s 2014 revenue from Chinese visitors to total revenue was higher than peers given its 100% hotel revenue exposure in Thailand. CENTEL and MINT have other hotel revenue sources overseas and in other business segments such as food, real estate and retail.

Ex 10: 2014 Revenue Portion From Chinese Visitors In Thailand To Total Revenue

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Thailand is the No.3 most favorite destination for Chinese visitors



Expecting higher-quality earnings growth

The hotel sector’s valuation at 15x EV/EBITDA in 2016F is not too excessive, in our view, supported by our forecasts for sector earnings growth of 19-23% in 2016-17 and improving ROE at 12-13% versus 8-11% in 2011-13. We see sector earnings being less cyclical given healthier growth strategies among hotel operators. Our top pick CENTEL’s EV/EBITDA falls to 13x in 2016F (14x in 2015F), supported by solid earnings growth of 12-59% in 2015-16F and ROE improving to 15% in 2016F, outperforming the sector which is capital intensive in nature and where ROE tends to be low

Ex 11: Hotel Sector’s EV/EBITDA Band Ex 12: Hotel Stocks’ ROE

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We don’t view the sector as expensive…

…while we forecast higher-quality earnings growth



Ex 13: Sector Valuation Comparison

CENTEL TB ERW TB MINT TB Industry Rating BUY HOLD BUY Overweight Market cap (US$ m) 1,326 266 3,411 Target price (Bt) Thanachart 48.00 4.20 37.00 Consensus 41.41 5.07 32.34 Consensus rec. BUY 17.0 12.0 15.0 HOLD 2.0 1.0 4.0 SELL 3.0 2.0 1.0 Sales (Bt m) 2014 17,992 4,285 36,989 59,266 2015F 19,308 5,173 39,778 64,260 2016F 20,364 5,504 44,445 70,313 2017F 21,770 6,421 47,568 75,758 Norm profits 2014 1,085 (173) 4,402 5,314 (Bt m) 2015F 1,729 156 4,488 6,373 2016F 1,930 246 5,679 7,855 2017F 2,159 411 6,753 9,323 Sales growth (%) 2014 5.2 (8.9) 6.7 5.0 2015F 7.3 20.7 7.5 8.4 2016F 5.5 6.4 11.7 9.4 2017F 6.9 16.6 7.0 7.7 Norm EPS 2014 (19.4) na 13.9 (1.2) growth (%) 2015F 59.3 na 1.8 19.7 2016F 11.6 57.0 26.4 23.1 2017F 11.8 67.3 18.9 18.7 Operating 2014 9.3 4.2 8.8 8.6 margin (%) 2015F 12.2 10.7 9.7 10.5 2016F 12.6 12.5 10.7 11.4 2017F 12.8 14.5 11.8 12.3 ROE (%) 2014 10.2 na 16.6 13.4 2015F 15.1 3.4 14.9 11.1 2016F 15.3 5.1 16.6 12.3 2017F 15.5 8.2 17.3 13.7 Dividend yield 2014 1.1 1.0 0.8 1.0 (%) 2015F 1.4 0.6 1.0 1.0 2016F 1.6 0.9 1.2 1.2 2017F 1.8 1.6 1.4 1.6 P/BV (x) 2014 4.4 2.1 4.4 4.2 2015F 4.0 2.1 3.8 3.7 2016F 3.6 2.0 3.4 3.3 2017F 3.3 1.9 3.0 3.0 Norm PE (x) 2014 44.2 na 27.9 34.0 2015F 27.7 62.0 27.4 28.4 2016F 24.8 39.5 21.7 23.0 2017F 22.2 23.6 18.3 19.4 EV/EBITDA (x) 2014 17.0 20.5 24.8 20.8 2015F 13.9 14.1 22.8 16.9 2016F 12.9 12.7 20.0 15.2 2017F 11.8 11.0 17.7 13.5 Net D/E (x) 2014 0.8 1.6 1.0 1.1 2015F 0.6 1.8 0.8 1.1 2016F 0.6 1.8 0.7 1.0 2017F 0.5 1.8 0.5 1.0

Sources: Company data, Thanachart estimates Based on 10 Sep 2015 closing prices


APPENDIX KALVALEE THONGSOMAUNG

STOCK PERFORMANCE

Absolute (%) Rel SET (%)

1M 3M 12M YTD 1M 3M 12M YTD

SET Index (1.7) (7.2) (11.8) (6.8) — — — —

HOTEL (4.4) (6.3) (7.9) 3.9 (2.8) 0.8 3.9 10.6 CENTEL (6.0) (5.3) (11.8) 14.5 (4.3) 1.8 (0.0) 21.3 ERW (3.5) (11.4) (22.4) (16.4) (1.8) (4.2) (10.6) (9.6) MINT 3.7 (6.7) (10.7) (5.2) 5.4 0.5 1.0 1.5

Source: Bloomberg

SECTOR - SWOT ANALYSIS

S — Strength W — Weakness

Tourist attractions offer potential growth for the hotel industry.

Geographical center of Southeast Asia.

Good infrastructure and public transport.

Lower cost of living.

Seasonal impacts.

Thailand’s upscale hotel oversupply.

High investment requirements.

O — Opportunity T — Threat

The launch of the ASEAN Economic Community in 2015.

High growth potential and resilient sector in our view.

Weakening baht.

Pick-up in global economic performance.

Natural disasters and disease outbreaks.

Political turmoil.

Rising cost of labor and skilled-labor shortages.

REGIONAL COMPARISON

EPS growth — PE — — P/BV — – EV/EBITDA – — Div. Yield — Name 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F Australia (26.7) 7.4 14.3 13.3 1.0 0.9 14.8 14.0 5.4 5.7 China 48.1 25.7 54.8 40.2 2.4 2.3 13.4 12.0 1.7 1.7 Hong Kong (44.7) 27.3 24.8 19.3 0.5 0.5 12.5 11.7 1.9 2.1 India na 36.3 na na 2.3 2.6 19.8 20.0 0.8 0.7 Singapore 435.5 10.5 22.0 20.1 0.0 0.0 11.8 10.8 3.7 3.7 South Korea 36.9 112.3 45.8 21.6 5.7 4.6 21.7 13.9 0.3 0.5 Taiwan 4.5 (1.7) 23.8 24.2 1.1 1.1 11.8 11.5 2.6 2.7 Malaysia 11.5 11.5 16.4 14.7 1.1 1.0 8.5 7.7 2.2 2.3 Japan 2.7 10.5 23.8 21.5 3.5 2.9 16.6 13.7 1.4 1.6 Thailand 19.7 23.1 28.4 23.0 3.7 3.3 16.9 15.2 1.0 1.2 Average 54.2 26.3 28.2 22.0 2.1 1.9 14.8 13.1 2.1 2.2 CENTEL TB 59.3 11.6 27.7 24.8 4.0 3.6 13.9 12.9 1.4 1.6 ERW TB na 57.0 62.0 39.5 2.1 2.0 14.1 12.7 0.6 0.9 MINT TB 1.8 26.4 27.4 21.7 3.8 3.4 22.8 20.0 1.0 1.2 Average *- Thailand 19.7 23.1 28.4 23.0 3.7 3.3 16.9 15.2 1.0 1.2

Sources: Bloomberg Consensus Note: * Thanachart estimate – using normalized EPS


BUY (Unchanged) TP: Bt 48.00 (From : Bt 44.00)

Change in Numbers Upside : 35.2% 11 SEPTEMBER 2015

Central Plaza Hotel (CENTEL TB)


[email protected]

Rock solid

Despite factoring in the Bangkok bomb blast impact, we still forecast CENTEL’s earnings to grow by 12-59% in 2015-17, on better margins at its hotel and food businesses. CENTEL remains our top sector pick on its solid operating performance. We fine-tune 2015-16F earnings and raise our DCF TP to Bt48 as we roll over our valuation to 2016.

Reaffirm BUY call We remain impressed with CENTEL’s hotel and food businesses which saw stronger-than-expected EBITDA margins in 1H15. This was driven by a sharp recovery in its core businesses, resulting in EBITDA margins rising to 24% in 1H15 (vs. 18% in 1H14). We do not expect the Bangkok bomb blast on 17 August to impact CENTEL severely. Management indicates the company has seen just ~Bt12m worth of cancellations of rooms and events after the bomb up until November this year while its overall occupancy rate remains high (> 80%) as at end August. Despite factoring in the impact from the blast, we feel we need to lift 2015-16F earnings by 1-2% to reflect the solid operating performance. We also raise our DCF-based 12-month TP to Bt48 (from Bt44) as we roll over our valuation basis to 2016F. CENTEL remains our top hotel play.

Short-term impact on one hotel Regarding the bomb impact, CENTEL foresees only one of its hotels, “Centara Grand at CentralWorld”, (7% contribution to 2015F total revenues) being hit by a drop in occupancy to 77% in late August from 85% before the bomb. Meanwhile, the company has not yet suffered a major impact at its other locations, resulting in a high occupancy rate at 80%+ for its overall portfolio as at end August. Having said that, CENTEL is maintaining its occupancy-rate target at 80% for 2015 versus our forecast of 78%.

New food strategy working well We expect CENTEL’s food margin enhancement to be seen clearly this year after implementing its new strategy. CENTEL has been focusing more on operational efficiency rather than on aggressive outlet expansion. The closing down of 40 loss-making food outlets in 2015 is one of its strategies. We thus expect CENTEL to maintain is food EBITDA margin at 13.5% in 2H15 with net openings of 10 food outlets in 2015 (versus a 9% EBITDA margin and 38 stores opened in 2014).

Expansion plans and acquisition Yum Restaurants International (Thailand), which manages KFC restaurants in Thailand, is seeking to award an additional franchise license to help it to speed up its KFC outlet expansion. In our view, CENTEL is a strong candidate given that it has run the local KFC franchise for over 30 years with 202 outlets. In the process, CENTEL has amassed a deep knowledge of the cost-return structure, which we see as being a big advantage if it successfully acquires the additional license at a reasonable price. We expect a conclusion to be reached by early 2016. For the hotel side, we believe expansion plans are on track with 4 new hotels and room additions at existing hotels scheduled for completion within 2018, which is already factored into our model.

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COMPANY VALUATION

Y/E Dec (Bt m) 2014A 2015F 2016F 2017F

Sales 17,992 19,308 20,364 21,770

Net profit 1,188 1,729 1,930 2,159

Consensus NP 1,702 1,968 2,290

Diff frm cons (%) 1.6 (1.9) (5.7)

Norm profit 1,085 1,729 1,930 2,159

Prev. Norm profit 1,692 1,907 2,210

Chg frm prev (%) 2.2 1.2 (2.3)

Norm EPS (Bt) 0.8 1.3 1.4 1.6

Norm EPS grw (%) (19.4) 59.3 11.6 11.8

Norm PE (x) 44.2 27.7 24.8 22.2

EV/EBITDA (x) 17.0 13.9 12.9 11.8

P/BV (x) 4.4 4.0 3.6 3.3

Div yield (%) 1.1 1.4 1.6 1.8

ROE (%) 10.2 15.1 15.3 15.5

Net D/E (%) 83.6 63.6 56.4 50.1

PRICE PERFORMANCE

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Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

(%)(Bt/shr) CENTELRel to SET Index

COMPANY INFORMATION

Price as of 10-Sep-15 (Bt) 35.50

Market cap (US$ m) 1,326.1

Listed shares (m shares) 1,350.0

Free float (%) 46.6

Avg daily turnover (US$ m) 3.0

12M price H/L (Bt) 40.75/29.00

Sector Tourism

Major shareholder Chirathivat family 50%

Sources: Bloomberg, Company data, Thanachart estimates

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COMPANY NOTE CENTEL KALVALEE THONGSOMAUNG

Ex 1: Solid Normalized Earnings Ex 2: Revenue And Profit Breakdown

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Ex 3: 1H15 Hotel Revenue Breakdown By Destination Ex 4: Food EBITDA Margin Enhancement

Upcountry52%Bangkok

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Ex 5: CENTEL’s Occupancy Rate For Its Bangkok Hotels

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Ex 6: Key Assumptions And Earnings Revisions

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Hotel occupancy (%)

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Old 78.0 79.0 79.0

Hotel RevPar growth (%)

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Old 11.0 6.0 6.1

Food SSSG (%)

New 0.6 2.3 4.2

Old 0.8 2.5 4.2

Food TSSG (%)

New 5.3 6.7 9.4

Old 6.0 7.1 10.2

EBITDA margin (%)

New 20.9 21.3 21.7

Old 20.6 21.1 21.6

Normalized profit (Bt m)

New 1,729 1,930 2,159

Old 1,692 1,907 2,210

Change (%) 2.2 1.2 (2.3)

Sources: Company data, Thanachart estimates Note: SSSG = Same Store Sales growth, TSSG = Total System Sales growth

Ex 7: 12-month DCF-based TP Calculation

(Bt m) 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F

Terminal

Value

EBITDA 4,043 4,346 4,719 5,201 6,534 7,854 8,889 9,439 9,970 10,527 11,107 11,707 —

Free cash flow 2,035 812 760 1,593 3,405 4,366 5,759 6,811 7,254 7,826 8,416 9,218 124,402

PV of free cash flow — 812 634 1,211 2,363 2,765 3,329 3,594 3,494 3,440 3,376 3,375 45,553

Risk-free rate (%) 4.5

Market risk premium (%) 7.5

Beta 1.1

Wacc (%) 9.6

Terminal growth (%) 2.0

Enterprise value - add investments 73,948

Net debt (end 2015F) 8,233

Minority interest 918

Equity value 64,796

# of shares 1,350

Equity value/share 48.0




Valuation Comparison

Ex 8: Valuation Comparison With Regional Peers

EPS growth —— PE —— — P/BV — EV/EBITDA Div Yield

Name BBG Code Country 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F

(%) (%) (x) (x) (x) (x) (x) (x) (%) (%)

Mirvac Group MGR AU Australia (26.7) 7.4 14.3 13.3 1.0 0.9 14.8 14.0 5.4 5.7

Huatian Hotel Group 000428 CH China na 50.0 na na 3.1 3.0 na na na na

Emei Shan Tourism 000888 CH China 20.7 20.0 23.7 19.8 2.7 2.4 12.3 10.8 1.1 1.4

Shanghai Jin Jiang Int’l 2006 HK China 12.9 7.9 20.6 19.0 1.6 1.5 10.2 9.2 2.3 2.0

Jinling Hotel Corp 601007 CH China 110.8 25.0 40.9 32.7 2.4 2.2 17.7 16.0 na na

Hongkong & Shanghai 45 HK Hong Kong (46.3) 6.2 19.3 18.2 na na 10.7 9.9 2.5 2.6

Shangri-La Asia 69 HK Hong Kong 23.4 48.4 30.2 20.4 0.5 0.5 14.4 13.6 1.4 1.6

IGB Corp Bhd IGB MK Malaysia 12.3 10.9 14.5 13.1 0.8 0.7 7.3 6.8 2.8 2.9

Genting Malaysia Bhd GENM MK Malaysia 10.7 12.1 18.3 16.3 1.4 1.4 9.6 8.6 1.6 1.7

Indian Hotels IH IN India na 36.3 na na 2.3 2.6 19.8 20.0 0.8 0.7

Mandarin Oriental Int’l MAND SP Singapore (26.5) 10.4 21.9 19.9 na na 11.8 10.9 3.7 3.7

Hotel Shilla 008770 KS South Korea 10.7 112.3 45.8 21.6 5.7 4.6 21.7 13.9 0.3 0.5

Ambassador Hotel 2704 TT Taiwan 4.5 (1.7) 23.8 24.2 1.1 1.1 11.8 11.5 2.6 2.7

Resorttrust Inc 4681 JP Japan 2.7 10.5 23.8 21.5 3.5 2.9 16.6 13.7 1.4 1.6

Central Plaza Hotel CENTEL TB* Thailand 59.3 11.6 27.7 24.8 4.0 3.6 13.9 12.9 1.4 1.6

Erawan Group ERW TB* Thailand na 57.0 62.0 39.5 2.1 2.0 14.1 12.7 0.6 0.9

Minor International MINT TB* Thailand 1.8 26.4 27.4 21.7 3.8 3.4 22.8 20.0 1.0 1.2

Average 12.2 26.5 27.6 21.7 2.4 2.2 14.3 12.8 1.9 2.1 Sources: Company data, Thanachart estimates Note: * Thanachart estimates, using normalized EPS Based on 10-Sep-15 closing prices


APPENDIX CENTEL KALVALEE THONGSOMAUNG

COMPANY DESCRIPTION COMPANY RATING

Central Plaza Hotel Plc (CENTEL) owns and operates hotels in Thailand and abroad with its owned brands – Centara Grand, Centara and Centra. CENTEL also manages hotels across Thailand and abroad. The company operates restaurant franchises including key brands such as KFC, Mister Donut, Auntie Anne’s and Ootoya. 0

12345

Riskmanage

ment

Management

Financial management

Liquidity *Corp.governance

Rating Scale

Very Strong 5

Strong 4

Good 3

Fair 2

Weak 1

None 0

Source: Thanachart Source: Thanachart; *CG Awards

THANACHART’S SWOT ANALYSIS


Well-received owned hotel brands in Thailand such as

Centara Grand, Centara and Centra.

CENTEL’s food businesses are quick service restaurants

which are affordable and the brand leaders in each category.

Well-balanced risk profile of hotel and food businesses.

Strong financial position with a net D/E lower than 1x.

Highly exposed to Thailand’s tourism industry.


Dependent on domestic consumption.


Strategic investments and acquisitions locally and globally.

Strong growth in booming tourism and consumption,

particularly in Thailand and some high-growth tourist

destinations globally.

Moving to capture high growth of economy hotel segment.

Fiercer competition among hotel operators leading to

obstacles to unlocking its profitability.

Competition among restaurant operators.

CONSENSUS COMPARISON RISKS TO OUR INVESTMENT CASE

Consensus Thanachart Diff Thailand’s political situation and natural disasters.

Slower tourism growth to Thailand and global touristdestinations.

Slower domestic and global economic and consumptiongrowth.

Slower expansion of hotels and food outlets.

Target price (Bt) 41.41 48.00 16%

Net profit 15F (Bt m) 1,702 1,729 2%

Net profit 16F (Bt m) 1,968 1,930 -2%

Consensus REC BUY: 17 HOLD: 2 SELL: 3

HOW ARE WE DIFFERENT FROM THE STREET?

Our 2015F earnings are in line with the Street’s which weattribute to our expectations for CENTEL enjoying a strongturnaround momentum.

Our TP is 16% above consensus, which we attribute to theinclusion of new projects and room expansion slated for 2018.We also roll over the valuation base in our DCF to 2016.

Sources: Bloomberg consensus, Thanachart estimates Source: Thanachart


FINANCIAL SUMMARY CENTEL KALVALEE THONGSOMAUNG

INCOME STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FSales 17,096 17,992 19,308 20,364 21,770Cost of sales 10,222 10,772 11,376 11,880 12,643 Gross profit 6,874 7,220 7,933 8,485 9,127% gross margin 40.2% 40.1% 41.1% 41.7% 41.9%Selling & administration expenses 5,024 5,552 5,580 5,926 6,335 Operating profit 1,850 1,668 2,352 2,559 2,792% operating margin 10.8% 9.3% 12.2% 12.6% 12.8%Depreciation & amortization 1,578 1,735 1,691 1,787 1,928 EBITDA 3,428 3,403 4,043 4,346 4,719% EBITDA margin 20.1% 18.9% 20.9% 21.3% 21.7%Non-operating income 461 391 384 445 494Non-operating expenses 0 0 0 0 0Interest expense (507) (455) (408) (402) (394) Pre-tax profit 1,805 1,604 2,329 2,601 2,892Income tax 426 366 503 572 636 After-tax profit 1,379 1,238 1,826 2,029 2,256% net margin 8.1% 6.9% 9.5% 10.0% 10.4%Shares in aff iliates' Earnings 22 (43) 20 25 35Minority interests (54) (109) (117) (123) (132)Extraordinary items 0 103 0 0 0NET PROFIT 1,346 1,188 1,729 1,930 2,159Normalized profit 1,346 1,085 1,729 1,930 2,159EPS (Bt) 1.0 0.9 1.3 1.4 1.6Normalized EPS (Bt) 1.0 0.8 1.3 1.4 1.6

BALANCE SHEETFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FASSETS:Current assets: 2,463 2,473 3,477 3,972 4,103 Cash & cash equivalent 742 646 1,600 2,000 2,000 Account receivables 936 1,031 1,082 1,141 1,220 Inventories 615 635 623 651 693 Others 171 161 171 179 190Investments & loans 940 726 726 726 726Net f ixed assets 22,945 22,760 22,669 23,882 25,354Other assets 2,876 2,750 2,951 3,112 3,327Total assets 29,224 28,709 29,823 31,692 33,510

LIABILITIES:Current liabilities: 6,418 5,344 6,711 6,902 7,058 Account payables 2,305 2,485 2,625 2,741 2,917 Bank overdraft & ST loans 2,262 1,407 1,967 2,010 1,977 Current LT debt 1,460 1,139 1,731 1,769 1,740 Others current liabilities 392 313 389 383 424Total LT debt 7,969 7,894 6,136 6,272 6,169Others LT liabilities 3,620 3,755 4,029 4,250 4,543Total liabilities 18,007 16,993 16,876 17,423 17,769Minority interest 803 801 918 1,041 1,173Preferreds shares 0 0 0 0 0Paid-up capital 1,350 1,350 1,350 1,350 1,350Share premium 970 970 970 970 970Warrants 0 0 0 0 0Surplus 3,117 2,969 2,969 2,969 2,969Retained earnings 4,978 5,626 6,739 7,938 9,279Shareholders' equity 10,415 10,915 12,028 13,227 14,568Liabilities & equity 29,224 28,709 29,823 31,692 33,510




CASH FLOW STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FEarnings before tax 1,805 1,604 2,329 2,601 2,892Tax paid (462) (358) (500) (566) (631)Depreciation & amortization 1,578 1,735 1,691 1,787 1,928Chg In w orking capital 87 65 100 29 56Chg In other CA & CL / minorities (421) (540) (92) (168) (108)Cash flow from operations 2,587 2,506 3,528 3,683 4,135

Capex (2,245) (1,550) (1,600) (3,000) (3,400)ST loans & investments 113 17 0 0 0LT loans & investments 141 214 0 0 0Adj for asset revaluation 463 (148) 0 0 0Chg In other assets & liabilities 194 655 248 231 247Cash flow from investments (1,335) (812) (1,352) (2,769) (3,153)Debt f inancing (507) (1,250) (606) 217 (165)Capital increase 0 0 0 0 0Dividends paid (405) (540) (616) (732) (818)Warrants & other surplus 46 0 0 0 0Cash flow from financing (866) (1,790) (1,222) (515) (983)

Free cash flow 342 956 1,928 683 735

VALUATIONFY ending Dec 2013A 2014A 2015F 2016F 2017FNormalized PE (x) 35.6 44.2 27.7 24.8 22.2Normalized PE - at target price (x) 48.1 59.7 37.5 33.6 30.0PE (x) 35.6 40.3 27.7 24.8 22.2PE - at target price (x) 48.1 54.5 37.5 33.6 30.0EV/EBITDA (x) 17.2 17.0 13.9 12.9 11.8EV/EBITDA - at target price (x) 22.1 21.9 18.1 16.8 15.4P/BV (x) 4.6 4.4 4.0 3.6 3.3P/BV - at target price (x) 6.2 5.9 5.4 4.9 4.4P/CFO (x) 18.5 19.1 13.6 13.0 11.6Price/sales (x) 2.8 2.7 2.5 2.4 2.2Dividend yield (%) 1.1 1.1 1.4 1.6 1.8FCF Yield (%) 0.7 2.0 4.0 1.4 1.5

(Bt)Normalized EPS 1.0 0.8 1.3 1.4 1.6EPS 1.0 0.9 1.3 1.4 1.6DPS 0.4 0.4 0.5 0.6 0.6BV/share 7.7 8.1 8.9 9.8 10.8 CFO/share 1.9 1.9 2.6 2.7 3.1 FCF/share 0.3 0.7 1.4 0.5 0.5




FINANCIAL RATIOSFY ending Dec 2013A 2014A 2015F 2016F 2017FGrowth RateSales (%) 17.9 5.2 7.3 5.5 6.9Net profit (%) (15.6) (11.7) 45.5 11.6 11.8EPS (%) (15.6) (11.7) 45.5 11.6 11.8Normalized profit (%) 31.9 (19.4) 59.3 11.6 11.8Normalized EPS (%) 31.9 (19.4) 59.3 11.6 11.8Dividend payout ratio (%) 40.1 45.4 40.0 40.0 40.0

Operating performanceGross margin (%) 40.2 40.1 41.1 41.7 41.9Operating margin (%) 10.8 9.3 12.2 12.6 12.8EBITDA margin (%) 20.1 18.9 20.9 21.3 21.7Net margin (%) 8.1 6.9 9.5 10.0 10.4D/E (incl. minor) (x) 1.0 0.9 0.8 0.7 0.6Net D/E (incl. minor) (x) 1.0 0.8 0.6 0.6 0.5Interest coverage - EBIT (x) 3.7 3.7 5.8 6.4 7.1Interest coverage - EBITDA (x) 6.8 7.5 9.9 10.8 12.0ROA - using norm profit (%) 4.7 3.7 5.9 6.3 6.6ROE - using norm profit (%) 13.9 10.2 15.1 15.3 15.5

DuPontROE - using after tax profit (%) 14.2 11.6 15.9 16.1 16.2 - asset turnover (x) 0.6 0.6 0.7 0.7 0.7 - operating margin (%) 13.5 11.4 14.2 14.7 15.1 - leverage (x) 3.0 2.7 2.6 2.4 2.3 - interest burden (%) 78.1 77.9 85.1 86.6 88.0 - tax burden (%) 76.4 77.2 78.4 78.0 78.0WACC (%) 9.6 9.6 9.6 9.6 9.6ROIC (%) 6.8 6.0 8.9 9.8 10.2 NOPAT (Bt m) 1,413 1,287 1,844 1,996 2,177



HOLD (From SELL) TP: Bt 4.20 (Unchanged)

Change in Recommendation Downside : 8.2% 11 SEPTEMBER 2015

The Erawan Group Pcl (ERW TB)


[email protected]

Unexciting storyUnder our hotel stock coverage ERW was worst hit by the bomb blast in Bangkok given its hotel portfolio is heavily concentrated in the city. Despite cutting earnings, we maintain our DCF-based TP of Bt4.20 as we roll over valuation base to 2016. As ERW’s share price plunged and we now see its valuation as fair, we upgrade to HOLD (from Sell).

Worst hit by blast Though we expect the August 17 Bangkok bomb blast to only have a short-term impact on the Thai tourism industry, we believe the situation for ERW is more severe. This is because ERW’s performance relies heavily on its Bangkok hotels, with a 62% contribution to total 2015F operating income. Despite the 13-30% cuts to our 2015-17F earnings, we maintain our DCF-based 12-month TP of Bt4.20 as we roll over the valuation base to 2016. Following a 14% drop in ERW’s share price after the bomb, reflecting the operator’s heavy exposure to Bangkok, we now see ERW’s valuation as fair and upgrade our call to HOLD (from Sell).

Major hiccup ERW’s “Grand Hyatt Erawan Bangkok Hotel” (GHEB) saw actual property damage and lost revenues due to the bomb blast. ERW reported that GHEB’s occupancy rate was at 78% before the bombing and it went down to 55% post-bombing. In addition, there have been some postponements and cancellations of events for the rest of this year. We thus expect GHEB’s loss contribution to turn ERW’s overall performance to a loss of Bt20m in 3Q15F versus our previous forecast of Bt20m profit.

HOP Inn expansion After ERW opened its two mid-scale “Holiday Inn” and “Mercure” hotels in Pattaya last year, the next expansion phase is planned to be its company-owned “HOP Inn” budget hotel brand. ERW plans to open five HOP Inn hotels in 2015 and another 10 in 2016 in Thailand. ERW’s is also expanding overseas for the first time. ERW’s HOP Inn in the Philippines is under construction and is due to open at the end of 2016. Next, ERW plans to announce one to two more locations in the Philippines and Indonesia which are scheduled to open in 2017-18. Despite the planned series of HOP Inn expansions, we forecast the revenue contribution to be small at only 4% in 2017.

Upgrading to HOLD on valuation Though we forecast ERW’s earnings to turn around nicely in 2016, albeit off a small base, resulting in lower valuations versus peers with EV/EBITDA of 12.7x in 2016F, and upgrade the stock to HOLD, for long-term investors we still suggest BUYing its peers Central Plaza Hotel (CENTEL TB, Bt35.5, BUY) and Minor International (MINT TB, Bt28.0, BUY). This is because we prefer their growth strategies via domestic and overseas expansion and acquisitions, prudent financial status, strengthening of their company-owned hotel brands, and greater diversification in terms of their geography and business type, ie, food, retail and real estate which offer more recurring and less cyclical earnings.

Than

acha

rtSe

curit

ies

COMPANY VALUATION

Y/E Dec (Bt m) 2014A 2015F 2016F 2017F

Sales 4,285 5,173 5,504 6,421

Net profit (112) 156 246 411

Consensus NP 231 338 412

Diff frm cons (%) (32.3) (27.4) (0.4)

Norm profit (173) 156 246 411

Prev. Norm profit 226 334 471

Chg frm prev (%) (31.0) (26.5) (12.8)

Norm EPS (Bt) (0.07) 0.06 0.10 0.16

Norm EPS grw (%) na na 57.0 67.3

Norm PE (x) na 62.0 39.5 23.6

EV/EBITDA (x) 20.5 14.1 12.7 11.0

P/BV (x) 2.1 2.1 2.0 1.9

Div yield (%) 1.0 0.6 0.9 1.6

ROE (%) na 3.4 5.1 8.2

Net D/E (%) 164.1 176.9 182.9 182.6

PRICE PERFORMANCE

(20)

(15)

(10)

(5)

0

5

3.0

3.5

4.0

4.5

5.0

5.5


(%)(Bt/shr) ERW Rel to SET Index

COMPANY INFORMATION


Market cap (US$ m) 266.5


Free float (%) 44.5


12M price H/L (Bt) 5.20/3.58

Sector Tourism

Major shareholder

Vongkusolkit & Wattanavekin

Group 60%


Than

acha

rtSe

curit

ies


COMPANY NOTE ERW KALVALEE THONGSOMAUNG

Ex 1: Normalized Earnings On The Rise Ex 2: 1H15 Operating Income By Destination

(300)

(200)

(100)

0

100

200

300

400

500

2013 2014 2015F 2016F 2017F

(Bt m)

Bangkok67%

Pattaya16%

Phuket7%

Samui5%

Hua Hin2%

Krabi2% Others

1%


Ex 3: Impact On Luxury Bangkok Hotels’ Occupancy Rate Of ERW

0

10

20

30

40

50

60

70

80

90

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

(%) Tsunamiin Japan


Bangkok shutdown

Coup

MERS

Thaifloods



2015F 2016F 2017F

Hotel occupancy (%)

New 69.0 67.0 67.0

Old 70.0 68.0 na


New 0.0 (2.0) 8.0

Old 5.0 0.0 na


New 156 246 411

Old 226 334 na

Change (%) (31.0) (26.5) na

Source: Thanachart estimates


COMPANY NOTE ERW KALVALEE THONGSOMAUNG


(Bt m) 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F Terminal

Value

EBITDA 1,294 1,486 1,766 1,903 1,931 2,028 2,141 2,258 2,374 2,499 2,629 2,765

Free cash flow (536) (432) (110) 389 931 1,056 1,213 1,362 1,516 1,614 1,775 1,946 43,320

PV of free cash flow (432) (101) 324 708 733 768 787 799 777 779 780 13,361



Beta 1.6

WACC (%) 9.6



Net debt (2015F) 8,607

Minority interest 181

Equity value 10,494

# of shares (m) 2,501

Target price/share (Bt) 4.20 Sources: Company data, Thanachart estimates


Ex 6: Valuation Comparison With Regional Peers EPS growth —— PE —— — P/BV — EV/EBITDA Div Yield

Name BBG Code Country 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F (%) (%) (x) (x) (x) (x) (x) (x) (%) (%)


Huatian Hotel Group 000428 CH China na 50.0 na na 3.1 3.0 na na na na Emei Shan Tourism 000888 CH China 20.7 20.0 23.7 19.8 2.7 2.4 12.3 10.8 1.1 1.4 Shanghai Jin Jiang Int’l 2006 HK China 12.9 7.9 20.6 19.0 1.6 1.5 10.2 9.2 2.3 2.0 Jinling Hotel Corp 601007 CH China 110.8 25.0 40.9 32.7 2.4 2.2 17.7 16.0 na na

Hongkong & Shanghai 45 HK Hong Kong (46.3) 6.2 19.3 18.2 na na 10.7 9.9 2.5 2.6 Shangri-La Asia 69 HK Hong Kong 23.4 48.4 30.2 20.4 0.5 0.5 14.4 13.6 1.4 1.6

IGB Corp Bhd IGB MK Malaysia 12.3 10.9 14.5 13.1 0.8 0.7 7.3 6.8 2.8 2.9 Genting Malaysia Bhd GENM MK Malaysia 10.7 12.1 18.3 16.3 1.4 1.4 9.6 8.6 1.6 1.7

Indian Hotels IH IN India na 36.3 na na 2.3 2.6 19.8 20.0 0.8 0.7 Mandarin Oriental Int’l MAND SP Singapore (26.5) 10.4 21.9 19.9 na na 11.8 10.9 3.7 3.7 Hotel Shilla 008770 KS South Korea 10.7 112.3 45.8 21.6 5.7 4.6 21.7 13.9 0.3 0.5 Ambassador Hotel 2704 TT Taiwan 4.5 (1.7) 23.8 24.2 1.1 1.1 11.8 11.5 2.6 2.7 Resorttrust Inc 4681 JP Japan 2.7 10.5 23.8 21.5 3.5 2.9 16.6 13.7 1.4 1.6

Central Plaza Hotel CENTEL TB* Thailand 59.3 11.6 27.7 24.8 4.0 3.6 13.9 12.9 1.4 1.6 Erawan Group ERW TB* Thailand na 57.0 62.0 39.5 2.1 2.0 14.1 12.7 0.6 0.9 Minor International MINT TB* Thailand 1.8 26.4 27.4 21.7 3.8 3.4 22.8 20.0 1.0 1.2



APPENDIX ERW KALVALEE THONGSOMAUNG


The Erawan Group Public Co., Ltd. (ERW) was established 34 years ago on 29 December 1982. ERW’s core businesses are investment, development and management of diversified hotel properties and segments (luxury, mid-scale, economy and budget) across Thailand’s key destinations. Currently, ERW owns 33 hotels and operates other business including retail space rental, and management of office buildings.

012345

Riskmanage

ment

Management


Riskmanage

ment

Management


Liquidity*Corp.

governance

Rating Scale

Very Strong 5

Strong 4

Good 3

Fair 2

Weak 1

None 0




Well connected with strong hotel chains, i.e. Hyatt, Marriott,

Accor and IHG as ERW’s business allies in Thailand.

Assets are strategically located in popular Thai tourist

destinations.

Geographical diversification of its hotel footprint is an issue

as all its assets are located in Thailand.

Seasonal impact from Thailand’s tourism industry.

Thailand’s luxury hotel oversupply.


Focuses on high-growth segments: mid-scale and economy

and budget hotels.

We see additional gains from its assets-to-fund story.

Resilient in Thailand’s tourism industry.

Fierce competition among hotel operators.

ERW requires significant capital expenditure and financing to

support its hotel investments and developments.


Consensus Thanachart Diff Thailand’s political situation, natural disasters and disease

outbreaks.

Faster-than-expected growth in the domestic and globaleconomies and consumption.

Target price (Bt) 5.07 4.20 -17%

Net profit 15F (Bt m) 231 156 -32%

Net profit 16F (Bt m) 338 246 -27%



Our 2015-16F earnings are 23-32% below consensus whichwe attribute to the lower base for our average room rateassumption this year providing a low base for later years too

We estimate only small earnings contributions from newhotels due to open in 2015-17.

As such, our TP is below the Bloomberg consensus.



FINANCIAL SUMMARY ERW KALVALEE THONGSOMAUNG

INCOME STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FSales 4,702 4,285 5,173 5,504 6,421Cost of sales 2,215 2,230 2,525 2,633 3,039 Gross profit 2,487 2,055 2,649 2,872 3,382% gross margin 52.9% 48.0% 51.2% 52.2% 52.7%Selling & administration expenses 1,913 1,877 2,093 2,181 2,453 Operating profit 574 178 555 690 929% operating margin 12.2% 4.2% 10.7% 12.5% 14.5%Depreciation & amortization 665 672 739 795 838 EBITDA 1,239 850 1,294 1,486 1,766% EBITDA margin 26.4% 19.8% 25.0% 27.0% 27.5%Non-operating income 26 8 27 18 52Non-operating expenses 0 0 0 0 0Interest expense (368) (360) (378) (399) (465) Pre-tax profit 231 (174) 205 309 516Income tax 91 19 47 62 103 After-tax profit 141 (193) 158 247 413% net margin 3.0% -4.5% 3.0% 4.5% 6.4%Shares in aff iliates' Earnings 16 21 0 0 0Minority interests (30) (1) (1) (1) (2)Extraordinary items 810 62 0 0 0NET PROFIT 937 (112) 156 246 411Normalized profit 127 (173) 156 246 411EPS (Bt) 0.4 (0.0) 0.1 0.1 0.2Normalized EPS (Bt) 0.1 (0.1) 0.1 0.1 0.2

BALANCE SHEETFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FASSETS:Current assets: 1,227 1,047 812 637 709 Cash & cash equivalent 827 676 400 200 200 Account receivables 209 212 226 241 281 Inventories 52 55 61 63 73 Others 139 103 125 133 155Investments & loans 165 163 163 163 163Net f ixed assets 10,558 11,603 12,465 13,170 13,832Other assets 1,766 1,704 2,057 2,189 2,553Total assets 13,715 14,517 15,496 16,158 17,256

LIABILITIES:Current liabilities: 2,116 2,716 3,044 3,182 3,503 Account payables 244 254 283 295 340 Bank overdraft & ST loans 0 689 735 768 810 Current LT debt 1,004 1,032 1,101 1,151 1,214 Others current liabilities 868 741 925 968 1,138Total LT debt 6,030 6,722 7,171 7,495 7,907Others LT liabilities 340 344 416 442 516Total liabilities 8,486 9,783 10,630 11,119 11,926Minority interest 194 180 181 183 184Preferreds shares 0 0 0 0 0Paid-up capital 2,475 2,479 2,501 2,501 2,501Share premium 776 787 818 818 818Warrants 0 0 0 0 0Surplus 12 3 3 3 3Retained earnings 1,773 1,286 1,364 1,535 1,825Shareholders' equity 5,035 4,554 4,685 4,856 5,146Liabilities & equity 13,715 14,517 15,496 16,158 17,256




CASH FLOW STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FEarnings before tax 231 (174) 205 309 516Tax paid (91) (19) (47) (62) (103)Depreciation & amortization 665 672 739 795 838Chg In w orking capital (1) 3 9 (5) (4)Chg In other CA & CL / minorities 161 (112) 159 31 144Cash flow from operations 966 370 1,064 1,068 1,390

Capex (1,101) (1,717) (1,600) (1,500) (1,500)ST loans & investments 0 0 0 0 0LT loans & investments (163) 2 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 947 151 (278) (101) (286)Cash flow from investments (316) (1,564) (1,878) (1,601) (1,786)Debt f inancing (837) 1,413 563 407 518Capital increase 646 15 53 0 0Dividends paid (42) (375) (79) (74) (121)Warrants & other surplus 2 (9) 0 0 0Cash flow from financing (232) 1,043 538 333 396

Free cash flow (135) (1,348) (536) (432) (110)

VALUATIONFY ending Dec 2013A 2014A 2015F 2016F 2017FNormalized PE (x) 74.3 na 62.0 39.5 23.6Normalized PE - at target price (x) 80.4 na 67.1 42.8 25.6PE (x) 10.1 na 62.0 39.5 23.6PE - at target price (x) 10.9 na 67.1 42.8 25.6EV/EBITDA (x) 12.6 20.5 14.1 12.7 11.0EV/EBITDA - at target price (x) 13.2 21.4 14.8 13.3 11.5P/BV (x) 1.9 2.1 2.1 2.0 1.9P/BV - at target price (x) 2.1 2.3 2.2 2.2 2.0P/CFO (x) 9.8 26.1 9.1 9.1 7.0Price/sales (x) 2.0 2.2 1.9 1.7 1.5Dividend yield (%) 3.9 1.0 0.6 0.9 1.6FCF Yield (%) (1.4) (14.0) (5.5) (4.4) (1.1)

(Bt)Normalized EPS 0.1 (0.1) 0.1 0.1 0.2EPS 0.4 (0.0) 0.1 0.1 0.2DPS 0.2 0.0 0.0 0.0 0.1BV/share 2.0 1.8 1.9 1.9 2.1 CFO/share 0.4 0.1 0.4 0.4 0.6 FCF/share (0.1) (0.5) (0.2) (0.2) (0.0)




FINANCIAL RATIOSFY ending Dec 2013A 2014A 2015F 2016F 2017FGrowth RateSales (%) 9.3 (8.9) 20.7 6.4 16.6Net profit (%) 1,522.3 na na 57.3 67.3EPS (%) 1,482.4 na na 57.0 67.3Normalized profit (%) 140.0 na na 57.3 67.3Normalized EPS (%) 134.1 na na 57.0 67.3Dividend payout ratio (%) 40.0 (89.1) 37.0 37.0 37.0

Operating performanceGross margin (%) 52.9 48.0 51.2 52.2 52.7Operating margin (%) 12.2 4.2 10.7 12.5 14.5EBITDA margin (%) 26.4 19.8 25.0 27.0 27.5Net margin (%) 3.0 (4.5) 3.0 4.5 6.4D/E (incl. minor) (x) 1.3 1.8 1.9 1.9 1.9Net D/E (incl. minor) (x) 1.2 1.6 1.8 1.8 1.8Interest coverage - EBIT (x) 1.6 0.5 1.5 1.7 2.0Interest coverage - EBITDA (x) 3.4 2.4 3.4 3.7 3.8ROA - using norm profit (%) 1.0 na 1.0 1.6 2.5ROE - using norm profit (%) 3.0 na 3.4 5.1 8.2

DuPontROE - using after tax profit (%) 3.3 na 3.4 5.2 8.3 - asset turnover (x) 0.4 0.3 0.3 0.3 0.4 - operating margin (%) 12.8 na 11.3 12.9 15.3 - leverage (x) 3.1 2.9 3.2 3.3 3.3 - interest burden (%) 38.6 (93.5) 35.1 43.6 52.6 - tax burden (%) 60.8 na 77.0 80.0 80.0WACC (%) 9.6 9.6 9.6 9.6 9.6ROIC (%) 3.2 1.6 3.5 4.2 5.3 NOPAT (Bt m) 349 178 428 552 743



BUY (Unchanged) TP: Bt 37.00 (From: Bt 41.00 ) 11 SEPTEMBER 2015

Change in Numbers Upside : 32.1%

Minor International Pcl (MINT TB)


[email protected]

Turning the cornerWe believe MINT turned the corner in 2Q15 and expect a strong rebound in 4Q15, boosted by the high tourism season, an improving restaurant business and additional income from real estate. We reaffirm our BUY call on MINT, but lower our TP to Bt37 to reflect cuts to our earnings due to weak performance at its food business in 1H15.

Strong catalysts in 4Q15F Though we cut MINT’s 2015-16F earnings by 9-19% on the weak performance at its food and hotel businesses in 1H15, we reaffirm our BUY rating for 2 key reasons. First, we see clear catalysts for MINT in 4Q15, namely, the high tourism season, a potential turnaround of its food business in Singapore, planned new hotels and scheduled completion of hotel renovations in Bangkok and the Maldives, and additional real estate project revenue. Second, the shares have fallen 18% from this year’s peak reflecting weak 1H15 earnings, which we see as the bottom for this cycle. Our DCF-based 12-month TP goes to Bt37 (from Bt41) to reflect our earnings cuts and the 9% dilution from its stock dividend (10 old shares: 1 dividend share), offset by rolling our valuation to 2016.

Revamping its food business Revenue from its restaurant business in Thailand and Singapore, two weakening markets for MINT, make up 83% of its total food revenue. This has resulted in a lower food EBITDA margins at 15.6% in 2Q15 (normal level of 17-18%). The underperforming food business in Thailand has been due to the consumption slowdown with negative same-store sales growth (SSSG) of 0.4% in 2Q15. We also believe the 14.1% SSSG contraction in Singapore in 2Q15 was mainly due to fierce competition. Having said that, MINT has closed loss-making outlets and revamped food brands in Singapore while it plans to re-launch them in 4Q15, so this should improve its food business performance.

Hotel impact We don’t see the Bangkok bomb blast heavily impacting MINT’s performance as its Bangkok hotels account for only 7% of 2015F total revenues. Looking forward, we expect room additions and scheduled completion of renovation in 4Q15 to enhance MINT’s hotel portfolio. These include the Anantara Siam Bangkok, the Avani Riverside Bangkok, the Anantara Hua Hin (Thailand) and the Anantara Dhigu Maldives. That being said, we expect MINT’s hotel revenue to grow by 11-15% y-y in 2015-16.

Key strategic acquisitions We like MINT’s strategic acquisition plans, particularly for its hotel business. We expect recent acquisitions from early this year to contribute up to ~8% to MINT’s 2015F revenues. Those include new hotel acquisitions in South Africa, Brazil, Portugal, Kenya and Australia. We thus expect further acquisition opportunities to arise in the future. Also, we see MINT’s real estate business being a newer source of income as MINT tends to launch new real estate projects every year. With three new projects in Thailand and abroad due for completion at the end of 2015, we forecast real estate revenue to rise by 31% y-y in 2016.

Than

acha

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ies COMPANY VALUATION

Y/E Dec (Bt m) 2014A 2015F 2016F 2017F

Sales 36,989 39,778 44,445 47,568

Net profit 4,402 5,138 5,679 6,753

Consensus NP 5,270 6,007 6,736

Diff frm cons (%) (2.5) (5.5) 0.3

Norm profit 4,402 4,488 5,679 6,753

Prev. Norm profit 5,479 6,213 7,285

Chg frm prev (%) (18.1) (8.6) n.a.

Norm EPS (Bt) 1.0 1.0 1.3 1.5

Norm EPS grw (%) 13.9 1.8 26.4 18.9

Norm PE (x) 27.9 27.4 21.7 18.3

EV/EBITDA (x) 24.8 22.8 20.0 17.7

P/BV (x) 4.4 3.8 3.4 3.0

Div yield (%) 0.8 1.0 1.2 1.4

ROE (%) 16.6 14.9 16.6 17.3

Net D/E (%) 95.8 83.2 69.5 53.6

PRICE PERFORMANCE

(20)(15)(10)(5)051015

15

20

25

30

3540


(%)(Bt/shr) MINT Rel to SET Index

COMPANY INFORMATION


Market cap (US$ m) 3,410.8


Free float (%) 50.9


12M price H/L (Bt) 34.55/23.70

Sector Food & Beverage

Major shareholder

Group of Mr. William Heinecke

28%


Than

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COMPANY NOTE MINT KALVALEE THONGSOMAUNG

Ex 1: MINT’s Normalized Earnings Ex 2: MINT’s Revenue And Profit Breakdown

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2013 2014 2015F 2016F 2017F

(Bt m)

48 5061 61

43 4236 36

9 8 3 3

0102030405060708090

100

1H14 1H15 1H14 1H15

(%) Retail trading Restaurant Hotel & mixed-use

Revenue Net profit


Ex 3: MINT’s Occupancy Rate For Bangkok Hotels

0

10

20

30

40

50

60

70

80

90

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

(%)Tsunamiin Japan


Bangkok shutdown

Coup

MERS

Thaifloods


Ex 4: MINT’s Food Revenue Breakdown By Destination In 1H15

Food hub 1H15 revenue portion to total food revenue (%) 1H15 SSSG (%) 1H15 TSSG (%)

Thailand 69 1.6 9.9

China 15 (6.0) 24.9

Singapore 14 (12.8) (8.9)

Australia 1 0.8 22.2

Total 100 (0.5) 12.2 Source: Company data Note: SSSG = Same Store Sales growth, TSSG = Total System Sales growth



Ex 5: MINT’s New Real Estate Projects

New projects Development Pricing Completion date

The Residences by

Anantara, Layan, Phuket

15 pool villas ~US$ 10m per unit 4Q15

Anantara Chiang Mai

Serviced Suites (50% JV)

48 units ~Bt7-12m per unit Mid-2016

Torres Rani Maputo,

Mozambique

- 187-key serviced

apartments

- 6 penthouses

- 20,926 sq m office

tower

- Managed by

Radisson Blu

- US$1.3-1.5m per unit

- rental office

End-2015



2015F 2016F 2017F

Hotel occupancy (%)

New 66.0 67.0 67.0

Old 69.0 69.0 na


New (5.0) 2.0 6.0

Old 6.0 3.0 na

Food SSSG (%)

New (1.5) 1.5 2.0

Old 3.5 4.0 na

Food TSSG (%)

New 7.0 9.0 9.0

Old 10.0 10.0 na

EBITDA margin (%)

New 16.7 16.9 17.4

Old 19.1 18.5 na


New 4,488 5,679 6,753

Old 5,479 6,213 na

Change (%) (18.1) (8.6) na

Source: Thanachart estimates




(Bt m) 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F

Terminal

Value

EBITDA 6,648 7,509 8,286 9,288 9,870 11,371 12,040 12,692 13,434 14,202 15,012 15,850 —

Free cash flow 1,939 4,919 5,666 6,469 7,184 8,546 9,199 9,828 10,561 11,298 12,168 12,967 240,315

PV of free cash flow — 4,919 4,903 5,207 5,379 5,951 5,958 5,921 5,919 5,889 5,899 5,848 118,485



Beta 0.7

WACC (%) 7.5



Net debt (2015F) 28,369

Minority interest 2,033

Equity value 162,887

# of shares (m) 4,402

Equity value/share (Bt) 37.00 Sources: Company data, Thanachart estimates


Ex 8: Valuation Comparison With Regional Peers EPS growth —— PE —— — P/BV — EV/EBITDA Div Yield

Name BBG Code Country 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F (%) (%) (x) (x) (x) (x) (x) (x) (%) (%)


Huatian Hotel Group 000428 CH China na 50.0 na na 3.1 3.0 na na na na Emei Shan Tourism 000888 CH China 20.7 20.0 23.7 19.8 2.7 2.4 12.3 10.8 1.1 1.4 Shanghai Jin Jiang Int’l 2006 HK China 12.9 7.9 20.6 19.0 1.6 1.5 10.2 9.2 2.3 2.0 Jinling Hotel Corp 601007 CH China 110.8 25.0 40.9 32.7 2.4 2.2 17.7 16.0 na na

Hongkong & Shanghai 45 HK Hong Kong (46.3) 6.2 19.3 18.2 na na 10.7 9.9 2.5 2.6 Shangri-La Asia 69 HK Hong Kong 23.4 48.4 30.2 20.4 0.5 0.5 14.4 13.6 1.4 1.6

IGB Corp Bhd IGB MK Malaysia 12.3 10.9 14.5 13.1 0.8 0.7 7.3 6.8 2.8 2.9 Genting Malaysia Bhd GENM MK Malaysia 10.7 12.1 18.3 16.3 1.4 1.4 9.6 8.6 1.6 1.7

Indian Hotels IH IN India na 36.3 na na 2.3 2.6 19.8 20.0 0.8 0.7 Mandarin Oriental Int’l MAND SP Singapore (26.5) 10.4 21.9 19.9 na na 11.8 10.9 3.7 3.7 Hotel Shilla 008770 KS South Korea 10.7 112.3 45.8 21.6 5.7 4.6 21.7 13.9 0.3 0.5 Ambassador Hotel 2704 TT Taiwan 4.5 (1.7) 23.8 24.2 1.1 1.1 11.8 11.5 2.6 2.7 Resorttrust Inc 4681 JP Japan 2.7 10.5 23.8 21.5 3.5 2.9 16.6 13.7 1.4 1.6

Central Plaza Hotel CENTEL TB* Thailand 59.3 11.6 27.7 24.8 4.0 3.6 13.9 12.9 1.4 1.6 Erawan Group ERW TB* Thailand na 57.0 62.0 39.5 2.1 2.0 14.1 12.7 0.6 0.9 Minor International MINT TB* Thailand 1.8 26.4 27.4 21.7 3.8 3.4 22.8 20.0 1.0 1.2



APPENDIX MINT KALVALEE THONGSOMAUNG


Minor International Pcl (MINT) owns and operates hotels & mixed-use and restaurants in Thailand and abroad. The company engages in the international hospitality business including hotels and resorts, spas, restaurant franchises, residence, mixed-use projects and lifestyle brand distributors and contract manufacturers. 0

12345

*Corp.governa

nce

Riskmanage

ment

Management


Liquidity

Rating Scale

Very Strong 5

Strong 4

Good 3

Fair 2

Weak 1

None 0




Well-received own hotel brands, i.e. Anantara, Oaks, Avani,

Per AQUUM, etc.

MINT’s restaurant brands are the leaders in each category.

Geographical diversification of its hotel footprint.

Strong financial position with a low net D/E ratio.

Highly exposed to Thailand’s tourism industry.



Strategic investments and acquisitions around the world.

Strong growth in global consumption.

Development of residential projects to maximize profitability.

Fiercer competition among hotel operators leading to

obstacles to unlocking its profitability.

Competition among restaurant operators both at home and

abroad.


Consensus Thanachart Diff Thailand’s political situation and natural disasters.

Slower domestic and global economic and consumptiongrowth.

Target price (Bt) 32.34 37.00 14%

Net profit 15F (Bt m) 5,270 5,138 -3%

Net profit 16F (Bt m) 6,007 5,679 -5%



Our 2015-16F earnings are lower than the consensus as weonly expect MINT’s food business to turn around from 4Q15onwards. We expect its revenue contribution from new realestate projects to be spread out through 2016-19.

Our TP is 14% higher than the consensus, which we attributeto our more positive view on MINT’s long-term earningsgrowth and rolling over our DCF-valuation base to 2016.



FINANCIAL SUMMARY MINT KALVALEE THONGSOMAUNG

INCOME STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FSales 34,669 36,989 39,778 44,445 47,568Cost of sales 14,549 15,321 16,840 18,581 19,589 Gross profit 20,120 21,668 22,939 25,864 27,979% gross margin 58.0% 58.6% 57.7% 58.2% 58.8%Selling & administration expenses 16,504 18,422 19,094 21,111 22,357 Operating profit 3,616 3,246 3,845 4,752 5,622% operating margin 10.4% 8.8% 9.7% 10.7% 11.8%Depreciation & amortization 2,465 2,860 2,803 2,757 2,664 EBITDA 6,081 6,105 6,648 7,509 8,286% EBITDA margin 17.5% 16.5% 16.7% 16.9% 17.4%Non-operating income 1,501 1,975 1,777 2,018 2,222Non-operating expenses 0 0 0 0 0Interest expense (1,027) (1,145) (1,366) (1,215) (1,112) Pre-tax profit 4,090 4,076 4,256 5,555 6,732Income tax 675 397 468 722 875 After-tax profit 3,415 3,679 3,788 4,833 5,857% net margin 9.9% 9.9% 9.5% 10.9% 12.3%Shares in aff iliates' Earnings 530 823 766 919 974Minority interests (80) (100) (65) (73) (78)Extraordinary items 236 0 650 0 0NET PROFIT 4,101 4,402 5,138 5,679 6,753Normalized profit 3,865 4,402 4,488 5,679 6,753EPS (Bt) 0.9 1.0 1.2 1.3 1.5Normalized EPS (Bt) 0.9 1.0 1.0 1.3 1.5

BALANCE SHEETFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FASSETS:Current assets: 10,684 13,006 9,424 9,777 10,428 Cash & cash equivalent 3,370 5,372 1,900 1,400 1,500 Account receivables 3,383 3,326 2,834 3,166 3,388 Inventories 1,675 1,942 2,145 2,367 2,496 Others 2,255 2,367 2,545 2,844 3,044Investments & loans 6,941 11,553 11,553 11,553 11,553Net f ixed assets 21,745 24,107 24,584 24,207 24,123Other assets 20,754 25,613 27,545 30,776 32,938Total assets 60,124 74,279 73,105 76,312 79,042

LIABILITIES:Current liabilities: 11,146 13,573 10,281 10,463 10,291 Account payables 4,998 5,589 3,829 4,225 4,454 Bank overdraft & ST loans 1,158 2,333 1,574 1,463 1,298 Current LT debt 3,696 4,363 3,443 3,200 2,839 Others current liabilities 1,293 1,287 1,434 1,575 1,700Total LT debt 18,591 27,439 25,252 23,468 20,819Others LT liabilities 3,512 3,243 3,487 3,896 4,170Total liabilities 33,249 44,255 39,020 37,827 35,280Minority interest 1,784 1,968 2,033 2,105 2,183Preferreds shares 0 0 0 0 0Paid-up capital 4,001 4,002 4,402 4,402 4,402Share premium 7,332 7,333 7,333 7,333 7,333Warrants 0 0 0 0 0Surplus (207) (243) (243) (243) (243)Retained earnings 13,964 16,965 20,561 24,888 30,087Shareholders' equity 25,090 28,057 32,053 36,380 41,579Liabilities & equity 60,124 74,279 73,105 76,312 79,042




CASH FLOW STATEMENTFY ending Dec (Bt m) 2013A 2014A 2015F 2016F 2017FEarnings before tax 4,090 4,076 4,256 5,555 6,732Tax paid (473) (530) (364) (728) (825)Depreciation & amortization 2,465 2,860 2,803 2,757 2,664Chg In w orking capital (129) 382 (1,471) (158) (122)Chg In other CA & CL / minorities 829 915 630 767 849Cash flow from operations 6,783 7,703 5,853 8,193 9,298

Capex (6,012) (5,222) (3,280) (2,380) (2,580)ST loans & investments 0 0 0 0 0LT loans & investments (1,645) (4,611) 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (1,832) (5,122) (1,037) (2,822) (1,889)Cash flow from investments (9,489) (14,956) (4,317) (5,202) (4,469)Debt f inancing (751) 10,690 (3,867) (2,138) (3,176)Capital increase 3,651 1 401 0 0Dividends paid (1,185) (1,401) (1,142) (1,352) (1,554)Warrants & other surplus 660 (36) (400) 0 0Cash flow from financing 2,374 9,255 (5,008) (3,490) (4,730)

Free cash flow 771 2,481 2,573 5,813 6,718

VALUATIONFY ending Dec 2013A 2014A 2015F 2016F 2017FNormalized PE (x) 31.8 27.9 27.4 21.7 18.3Normalized PE - at target price (x) 42.0 36.9 36.2 28.7 24.1PE (x) 30.0 27.9 24.0 21.7 18.3PE - at target price (x) 39.6 36.9 31.7 28.7 24.1EV/EBITDA (x) 23.5 24.8 22.8 20.0 17.7EV/EBITDA - at target price (x) 30.0 31.3 28.7 25.2 22.5P/BV (x) 4.9 4.4 3.8 3.4 3.0P/BV - at target price (x) 6.5 5.8 5.1 4.5 3.9P/CFO (x) 18.1 16.0 21.0 15.0 13.3Price/sales (x) 3.6 3.3 3.1 2.8 2.6Dividend yield (%) 1.1 0.8 1.0 1.2 1.4FCF Yield (%) 0.6 2.0 2.1 4.7 5.5

(Bt)Normalized EPS 0.9 1.0 1.0 1.3 1.5EPS 0.9 1.0 1.2 1.3 1.5DPS 0.3 0.2 0.3 0.3 0.4BV/share 5.7 6.4 7.3 8.3 9.4 CFO/share 1.5 1.8 1.3 1.9 2.1 FCF/share 0.2 0.6 0.6 1.3 1.5




FINANCIAL RATIOSFY ending Dec 2013A 2014A 2015F 2016F 2017FGrowth RateSales (%) 10.7 6.7 7.5 11.7 7.0Net profit (%) 26.5 7.3 16.7 10.5 18.9EPS (%) 26.5 7.3 16.6 10.4 18.9Normalized profit (%) 19.2 13.9 2.0 26.5 18.9Normalized EPS (%) 19.2 13.9 1.8 26.4 18.9Dividend payout ratio (%) 34.2 22.7 25.0 25.0 25.0

Operating performanceGross margin (%) 58.0 58.6 57.7 58.2 58.8Operating margin (%) 10.4 8.8 9.7 10.7 11.8EBITDA margin (%) 17.5 16.5 16.7 16.9 17.4Net margin (%) 9.9 9.9 9.5 10.9 12.3D/E (incl. minor) (x) 0.9 1.1 0.9 0.7 0.6Net D/E (incl. minor) (x) 0.7 1.0 0.8 0.7 0.5Interest coverage - EBIT (x) 3.5 2.8 2.8 3.9 5.1Interest coverage - EBITDA (x) 5.9 5.3 4.9 6.2 7.5ROA - using norm profit (%) 6.9 6.6 6.1 7.6 8.7ROE - using norm profit (%) 18.0 16.6 14.9 16.6 17.3

DuPontROE - using after tax profit (%) 15.9 13.8 12.6 14.1 15.0 - asset turnover (x) 0.6 0.6 0.5 0.6 0.6 - operating margin (%) 14.8 14.1 14.1 15.2 16.5 - leverage (x) 2.6 2.5 2.5 2.2 2.0 - interest burden (%) 79.9 78.1 75.7 82.1 85.8 - tax burden (%) 83.5 90.3 89.0 87.0 87.0WACC (%) 7.5 7.5 7.5 7.5 7.5ROIC (%) 7.9 6.5 6.0 6.8 7.7 NOPAT (Bt m) 3,019 2,930 3,422 4,135 4,891



DISCLAIMER KALVALEE THONGSOMAUNG

Important Disclosures and Disclaimers: This publication is prepared by Thanachart Securities Public Company Limited and distributed outside Thailand by Daiwa Securities Group Inc. and/or its non-U.S. affiliates except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Thanachart Securities Public Company Limited (“Thanachart Securities”), Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication constitutes the views of the analyst(s) named herein and does not necessarily reflect those of Thanachart Securities, Daiwa Securities Group Inc. and/or their respective affiliates nor any of their respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

Thanachart Securities, Daiwa Securities Group Inc., their respective subsidiaries or affiliates, or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including market making activities, derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.

Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationship For “Investment Banking Relationship”, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Japan Disclosure of Interest of Daiwa Securities Group Inc. Investment Banking Relationship Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Modern Land (China) Co., Limited (1107 HK), econtext Asia Ltd (1390 HK), ACCORDIA GOLF TRUST (AGT_SP), Hua Hong Semiconductor Ltd (1347 HK), GF Securities Co Ltd (1776 HK); MIRAE ASSET LIFE INSURANCE CO LTD (085620 KS).

*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong KongLimited (大和資本市場香港有限公司), Daiwa Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.

This research may only be distributed in Japan to “qualified institutional investors”, as defined in the Financial Instruments and Exchange Act (Article 2 (3) (i)), as amended from time to time.

Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Securities and Futures Act, Chapter 289 of Singapore, as amended from time to time and is not for, nor intended for, distribution to any other persons in Singapore. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore should contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.

Australia This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.


https://daiwa3.bluematrix.com/sellside/Disclosures.action



India This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates may have received compensation for any products other than Investment Banking (as disclosed) or brokerage services from the subject company in this report during the past 12 months. Unless otherwise stated in BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action, Daiwa India and its associates do not hold more than 1% of any companies covered in this research report.

There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report.

Taiwan This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.

Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.

United Kingdom This research report is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange, Eurex and NYSE Liffe.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.

Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.

Germany This document is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.

Bahrain This research material is distributed in Bahrain by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113.

United States This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect Thanachart Securities’ or DCMA’s views at any time. Neither Thanachart Securities, DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of Thanachart Securities’ or DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (Tel no.212-612-7000).


http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf

http://www.pse.com.ph/

http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory


Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions. Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

For stocks in Thailand covered by Thanachart Securities, the following rating system is in effect: Ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the rating is BUY. If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word “Positive”, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word “Negative”, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word “Unchanged”, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart’s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An “Overweight” sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by market cap. “Underweight” is used when Thanachart has SELLs on majority of the stocks it covers by market cap. “Neutral” is used when there are relatively equal weightings of BUYs and SELLs]. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. TNS market making

TNS may from time to time make a market in securities covered by this research.









Additional information may be available upon request. Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)

If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.

In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.

In some cases, we may also charge a maximum of ¥2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan.

For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements.

There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements.

There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us. Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with

such experts as certified public accountants.

* The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc. When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Investment Advisers Association Type II Financial Instruments Firms Association Thanachart Securities Pcl. Research Team 28 Floor, Siam Tower Unit A1 989 Rama 1, Pathumwan Road, Bangkok 10330 Tel: 662 - 617 4900 Email: [email protected]

Pimpaka Nichgaroon, CFA Head of Research Economics & Strategy [email protected]

Siriporn Arunothai Small Cap Research, Healthcare [email protected]

Sarachada Sornsong Bank, Financial, Telecom [email protected]

Saksid Phadthananarak Construction, Transportation [email protected]

Chak Reungsinpinya Energy, Electronics, Petrochemical [email protected]

Supanna Suwankird Energy, Utilities [email protected]

Kalvalee Thongsomaung Food, Hotel, Media [email protected]

Phannarai Tiyapittayarut Property, Retail [email protected]

Rata Limsuthiwanpoom Industrial Estate, Property Fund, REITs [email protected]

Adisak Phupiphathirungul, CFA Retail Market Strategy [email protected]

Pattarawan Wangmingmat Senior Technical Analyst [email protected]

Witchanan Tambamroong Technical Analyst [email protected]

Wichaya Wongpanuwich, CFA, FRM Analyst, Retail Market [email protected]

Chalida Tantriyanont Assistant Analyst [email protected]

Chatchawin Lertapiruk Assistant Analyst [email protected]


11 september 2015 overweight thailand hotel...

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