17 june 2019 strategy | strategy-thailand thailand thematic · 2019-06-17 · own online platforms....

Thailand Thematic Research

See important disclosures at the end of this report 1

17 June 2019 January 2019

Strategy | Strategy-Thailand

Thailand Thematic

Reforms: Servicing Goes Digital keep OVERWEIGHT

Next era for services sector. Given its stronger economy, government

efficiency, and infrastructure, Thailand recently moved up to the 25th

position, from 30th

, in the Global Competitiveness Index. To improve competitiveness and attract new investments, it will continue to make economic, legislative, and infrastructure reforms. With recent reforms in the consumer, banking and telecommunications sectors, related industries should improve business infrastructure, upgrade worker skills, and build ecosystems to stay relevant. Consumers stand to benefit the most from such reforms by receiving better services, fair treatment, and reasonable prices.

Retail without boundaries. To cope with the continued shift in consumer

preferences towards e-commerce, Thai modern retailers’ omni-channel business model development has progressed further. Major players should fulfil and integrate their supply chains via acquisitions and setting up specific business units. Meanwhile, smaller retailers and small & medium enterprises (SMEs) are gearing towards consumer-to-consumer (C2C) sales and social media marketing. We believe there is sizeable room for growth opportunities in Thai online trade, due to early stages of urbanisation in the upcountry, and nascent development in sales platforms and ecosystems. Consumers should benefit the most from e-commerce reforms, as they are able to access more products and services globally, while retailers and manufacturers are able to penetrate new markets. Online taxes and regulations will also be implemented in stricter and clearer ways. Companies under leading conglomerates – Berli Jucker and Central Pattana – are our picks for the retail sector.

Edge of disruption for banking. Banks play an important supportive role in

this economic transition: facilitating growth and making it sustainable. New regulations have been imposed to strengthen fundamentals, while IT infrastructure development is needed to improve digital banking services. Despite stricter regulations and additional capex weighing on short-term profitability, banks will likely see improving competitiveness in the longer term, to stay relevant in the new economic paradigm. With banking reforms, we believe customers stand to benefit the most – on improved consumer protection, easier access to financial services, and reasonable prices. Bangkok Bank and Kasikornbank are our preferred banks.

From past to present, and into the future. Thailand’s telecommunications

sector completed its long-awaited business structure reform after the last operator exited the concession model to become part of a pure licence regime this year. The industry has begun preparing for the next reform – 5G telecom services, expected to be the new S-curve in this growth-challenged field. We like Advance Info Service and True Corp for their capabilities in dealing with industry service reforms and progression of 5G technologies – their strengths lie in the readiness of their convergence services portfolios, tangible 5G business roadmaps, and solid ecosystems.

Contents Consumer Sector Beyond the frontier 2 Development of the e-commerce platform 4 Developing the e-commerce ecosystem 6

Banking Sector Essential part of the transition economy 8 Increasing efficiency through digital transformation

9

Improving business competitiveness 11 Consumer protection 12 Greater financial access 14 Decent risk management 15

Telecommunications Sector From concession to a licence regime 16 The next service reformation 18 Is the networking-sharing model an option for the next 5G investment cycle?

20

Not just communication services anymore 22 5G, a marketing gimmick that will become future

24

Analysts

Tanadech Rungsrithananon

+66 2088 9745 [email protected]

Vatcharut Vacharawongsith

+ 66 208 9736

[email protected]

Pakorn Khaoeian

Company Rating TP

(THB) % Upside

(Downside) P/E (x)

Dec-19F P/B (x)

Dec-19F Yield (%) Dec-19F

Advanced Info Service BUY 210.00 7.1 18.8 8.6 3.9

Bangkok Bank BUY 241.00 20.5 10.0 0.9 3.6

Berli Jucker BUY 65.00 36.1 26.6 1.6 1.7

Central Pattana BUY 93.00 24.0 25.9 4.1 1.5

Kasikornbank BUY 222.00 15.6 11.2 1.1 2.6

Source: Company data, RHB

mailto:[email protected]

mailto:[email protected]


17 June 2019 Strategy | Strategy-Thailand


Figure 1: Service sector reformation landscape

Reformation1. Regulation

2. Digitalisation

E-Commerce

FinancialTelco

Ecosystems

Platform Development

1. Offline & online 2. Omni-channels 3. Tax

1. Payment

2. Supplier logistics

3. Customerdelivery

Warehouse management

Regulatory Changes

New Services (5G)

Smart Mobility

Smart Homes

Smart Logistics

Smart City

Smart Health

Mobile Financial Services

Online Entertainment

Services

Digitalisation, Efficiency

Consumer protection (Licenses, non-bank, fees,

market conduct

Risk management� Measures, LTV, IFRS9,

single statement, )

Financial accessibility (SME, law, nano & pico

finance)

Regional connectivity (QR Code)

Source: RHB

Consumer Sector

Beyond the frontier

Thai retailers expanded their store networks substantially throughout the 2010s. They capitalised on rising urbanisation in the upcountry provinces – which led to a 10-year CAGR (2008-2018) of 9.5% in aggregated new outlets for the retailers under our coverage. However, the rapid growth in smartphone sales and development of featured apps also led to consumer behaviour changing significantly, as they shifted towards online purchases – thereby making brick-and-mortar stores less popular. The CAGRs on the number of internet users and e-commerce transaction values over the past 10 years (2008-2018) stand at 11.3% and 19.6%, which point to growing popularity. The national smartphone usage average is 10 hours a day – another key factor supporting the growth of online channels.

On the supply side, e-commerce in Thailand is dominated by C2C activities on social media platforms run by individuals and SMEs (40% of total online transactions), eg Facebook and Instagram. This is followed by international commercial platforms (35%) like Lazada, Shopee, and Central JD.com – as e-commerce players compete fiercely to gain market share. The remaining 25% are retailers and associated websites, ie from companies like Central, Robinson, Big C Supercenter, Tesco Lotus, and weloveshopping.com. We note that weloveshopping.com is a Thai e-commerce firm. Local retailers competing in this format have made major moves towards transforming into omni-channel format operators. Some key retailers are also strengthening their online presence, with major investments in core and supportive functions of their businesses. We are concerned that small e-commerce website operators may be facing a challenging environment.




As such, we believe Thailand’s e-commerce sector is still at a growth stage and has room to expand further. This will be driven by the continued shift in consumer preference to online stores from offline variants, as well as the further development of the e-commerce ecosystem – as it introduces advances in e-payment, logistics, supportive mobile apps, and operational activities.

Figure 2: Store network sizes of listed retailers under our coverage

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F

Berli Jucker (Big C Supercenter) 66 67 77 93 171 256 427 484 571 655 866 1,016 1,325

CP All (7-Eleven) 4,778 5,270 5,790 6,276 6,822 7,429 8,127 8,832 9,542 10,268 10,988 11,688 12,388

Siam Global House 7 8 11 12 19 26 31 38 46 55 62 69 76

Home Product Center 33 35 40 45 53 65 76 84 93 102 108 116 124

Siam Makro 41 44 48 52 57 64 77 93 110 119 130 140 147

Robinson 19 21 22 25 30 34 41 44 46 48 50 52 54

Total 4,944 5,445 5,988 6,503 7,152 7,874 8,779 9,575 10,408 11,247 12,204 13,081 14,114

% Growth 10% 10% 9% 10% 10% 11% 9% 9% 8% 9% 7% 8%


Figure 3: Number of internet users in Thailand (m) Figure 4: E-commerce value in Thailand (includes e-auction)

9.911.4

13.416.1

18.3 19.321.2

23.1

26.127.7

39.5

43.945.2

47.0

�

�

�

�

�

�

�

� �

�

�

�

�

�

�

143 178 237 291 344 272 291 283 239

1,234 1,3351,542 1,675 1,712

6346 68 85 100 121 182

412510

703813 865

6680

127 191217 252

393 340 347

388

400

315

325

572

0

500

1,000

1,500

2,000

2,500

3,000

3,500

�

�

�

�

�

�

�

� �

�

�

�

�

�

�

B2B B2C B2G(THBbn)

Source: NBTC Source: *Surveyed by National Statistical Office, **Surveyed by Electronic

Transactions Development Agency (ETDA)

Figure 5: Thailand’s e-commerce value by industry excluding e-auction (THBbn)

Figure 6: Thailand’s e-commerce value for retailing and wholesaling, excluding e-auction

252.6

630.2

440.6

264.9

49.7

9.4

3.7

2.5

536.7

559.7

428.7

232.7

64.1

9.5

19.1

2.1

713.7

607.9

428.1

384.4

83.9

15.5

9.6

2.4

660.6

614.3

457.8

390.6

108.3

23.4

8.9

3.0

820.8

633.7

538.6

416.2

126.1

29.2

10.2

3.2

Retailing & wholesaling

Hospitality

Production & manufacturing

Information & telecommunication

Transportation & logistics

Arts, entertainment & leisure

Other services

Insurance

�

�

�

�

�

Online department

store37%

Health & beauty

products14%

Food & beverages

21%

Electronics, IT, and telecom

devices8%

Fashion7%

Sports, toys & souvenirs

5%

Furniture5%

Automobiles & parts2%

Source: ETDA Source: ETDA




Figure 7: Thailand’s e-commerce landscape

Source: ecommerceIQ

Development of the e-commerce platform

Where we are. The advent of e-commerce activities over the past couple of years has led

modern retailers (which can be considered as traditional retailers now) to establish their own online platforms. This was done as an initial solution to establish a presence online. That said, integrating this with their offline stores (ie having an omni-channel model) sets them apart from retailers and marketplaces that only operate online. Doing this also gives their customers more options and improves their SSSG. According to Home Product Center (HMPRO TB, TAKE PROFIT, TP: THB15.00), home improvement retailers in the US have successfully established their own omni-channels – and up to 45-50% of online clients pick up their goods at physical stores. In our view, the Thais – especially those in the upcountry – are still apt to visit brick-and-mortar stores, as they are still in an earlier stage of urbanisation.

The fast-growing e-commerce market has attracted individuals, small vendors and SMEs in getting involved with this medium, carrying out business-to-consumer (B2C) and C2C transactions here (Facebook, Instagram, and eBay) to enhance their customer bases. It points to a progressive move from just operating their own websites that feature product catalogues – a platform that does not encourage customers to interact with vendors directly. As such, the majority of Thailand’s e-commerce sales are generated from social media channels, according to industry experts. The country is among the top three nations with the most Facebook accounts, and first in terms of holding live product sales on Facebook.

According to Facebook survey, 93% of Thai SMEs on the social network said it helps them attract customers, while 78% of Thai SME owners believe it allows them to sell to other cities, states or countries.




Nonetheless, some issues prevail. Thailand may still need more time to develop major e-commerce operators representing the national platform, in order to compete with foreign players like Amazon and Alibaba. Also, online tax regulations still lag behind the rapid growth of transaction forms.

What needs to happen. Over the next 3-5 years, e-commerce in Thailand may enter its

second stage – and we could see more decent growth in sales vs the past decade.

We expect most major Thai retailers to have 100%-active omni-channels, which could boost their online sales contributions to c.3-5% of their total revenues, compared with <1% currently. This should also create synergies with many of their business units. The platform may help improve their sales per sqm, create cross-selling activities and promotions between business units and, ultimately, lower costs. The physical platform will remain the retailers’ key sales channel – albeit with a smaller sales mix. Such physical shops may also become places where customers can pick up orders, as well physically see and experience new products and services before making a purchase. Spending time in shopping malls and retail stores could still be a favourite activity of Thais.

Smaller businesses may focus on supply chain management by strengthening their products and brands to achieve economies of scale, before shifting from having their own online websites to becoming a vendor in managed marketplaces, or even collaborating with other companies to establish a national platform.

For global players, their online marketplaces may remain leaders in e-commerce, with more developed functions. We expect JD Central – a JV between the biggest Thai retail conglomerate, Central Group, and the biggest Chinese online retailer, JD.com – to represent the competitive Thai e-marketplace. That said, shifting to a decentralised e-commerce system may cause operators to invest in more solutions to ensure transactions are secure. Tech knowledge, ie product information, customer behaviour, and other big data, should be as important as customer traffic – and this could speed up the conversion rate of e-commerce visitors in making a purchase decision.

Manufacturers, distributors and SMEs are set to play more important roles in integrating e-commerce channels as supply chain management tools, instead of focusing only on offline platforms. They may participate more in online marketplaces and their own-developed e-networks in Thailand and overseas – as only up to 35% of distributors globally have e-commerce capability so far, according to Industrial Supply Magazine.

There may be a few major Thai online players with capability to launch exports with their own-developed cross-border platform – which may help promote Thailand as an e-commerce distribution hub in the Cambodia, Laos, Myanmar and Vietnam (CLMV) region.

To collect taxes from vendors operating via unmonitored social media and foreign marketplaces, Thailand needs to step up, and implement stricter, clearer regulations. The Government, back in mid-March, took the first step and mandated commercial banks to report any bank accounts with financial transactions of over 3,000 money transfers a year, regardless of total value, or accounts that recorded over 400 money transfers a year totalling at least THB2m, to the Revenue Department for possible tax collection.

Who could benefit? Consumers should stand to gain the most from rapid reforms in e-

commerce, as they are able to have access to more overseas products and enjoy better facilities. At the same time, manufacturers would be able to access new markets, too.

Thai conglomerates with comprehensive business models like Central Group, Charoen Pokphand (CP) Group, and Thai Charoen Corporation (TCC) Group may achieve online synergies with their business units – which should greatly benefit their retailing subsidiaries like Berli Jucker, Central Pattana, CP All, and COL. We remain concerned over discretionary retailers like Home Product Center, Robinson Department Store (ROBINS TB, BUY, TP: THB73.50) and Siam Global House – as these companies may continue to face challenges from online competitors abroad, and may need a more dynamic strategy to defend or grow market share.




Figure 8: Thai individuals’ and SMEs’ live product selling on Facebook

Figure 9: Thai modern retailers are shifting to an omni-channel business platform

Source: Facebook, RHB Source: Company data

Developing the e-commerce ecosystem

Where we are. Apart from a sales platform (the heart of e-commerce), the infrastructure

also comprises major payment and logistics systems, as well as back office operations. As Thailand’s e-commerce infrastructure is not that developed, there is significant room for growth.

E-payment. Cash transfers via mobile banking apps are now highly popular, and this

encouraged the boom in C2C transactions on social networks. App downloads have skyrocketed at a 116% CAGR (2015-2018), after Thai banks waived fees on mobile transactions in Mar 2018.

The Government launched the PromptPay app in Oct 2016, as the national e-payment platform. The app now has 46.5m users, but is not the first choice for commercial transactions (it is more widely used for government-related payments, ie transfers of monetary social aid and personal income tax refunds).

As such, credit cards have become less commonly used for online payments, compared with mobile banking.

Local e-wallet apps include True Money (under True Corp, mainly used in convenience stores and for other services under CP Group) and Rabbit Line Pay (collaboration between BTS Group, AIS and LINE – widely used at mass transit stations operated by BTS and at a wide range of retail and restaurant chains). Central JD Fintech has collaborated with Bangkok Bank and Kasikornbank to launch Dolfin e-wallet (targeted for this year). These apps are still in their early stage of development, but have much potential for growth in the next 3-5 years.

Logistics. The boom of e-commerce has changed suppliers’ logistics activities, ie from

large shipments sent to retail stores, to having riders take hundreds of trips to deliver the product to end-consumers. According to Kerry Express (Thailand), its B2B shipments have decreased to 5% currently (2013: 99%), while 70% of customers are now the general public (C2C), vs in 2013, when Lazada deliveries accounted for 70% of transactions.

As such, management of inventory, warehousing and shipments must be effective, ie improving same-day delivery services in the Bangkok metro area, and next-day delivery for the upcountry. This is to meet demand as well as the dynamic growth of the supply chains. Some retailers like Central Group and its subsidiaries have set up their own e-commerce warehouses to cope with this trend.

The growing online market also benefits the parcel delivery business. Market value of third-party delivery services in Thailand grew by 5.2% YoY in 2016 to 8.7% in 2017, and by c.10% YoY in 2018 to THB31bn. State enterprise Thailand Post is still the dominant player in the parcel delivery field, with a 55% market share. However, fast-growing foreign-based providers such as Kerry Express, DHL, Lazada Express, SCG Yamato Express, Lalamove and Grab Express are rapidly penetrating the market as well. Industry experts said the e-commerce logistics supply chain in Thailand remains in its infancy, when compared to China. As such, there is great scope for this industry to grow.




Supportive operational functions. There are hardly any local companies with their own

fully-integrated e-commerce business functions (ie marketing, payment and logistics systems). Major modern retailers like Central Group and TCC Group are setting up teams to develop or to acquire subsidiaries to oversee these operations. Central Group has set up a JV with JD.com to improve the group’s online platform and gain operational know-how. It is also buying a stake in Grab (Thailand) – the all-in-one transport booking application – and collaborating with Kerry Express (Thailand), to build its logistics services.

What needs to happen

E-Payment. Online payment platforms will become more popular, and the rural population

may become more educated about this medium. E-payments are set to be widely accepted by more vendors, which may partner service providers, to offer this service. Synergies between modern retailers and payment platforms should become more evident. Meanwhile, financial institutions may also develop e-credit cards to support this, going forward. More payment innovations may be adopted in Thailand such as face payments, etc. Nonetheless, recently-announced tax regulations affecting online traders may dampen the growth of C2C transactions.

Logistics. Delivery coverage among logistics operators may be extended throughout the

country, and possibly to border cities in neighbouring countries. Same-day delivery services are expected to ramp up by 43%, and contribute 22% of total business by 2025. We may see more modern retailers investing in such logistics companies in order to build a complete online eco-system infrastructure. Meanwhile, small vendors may join hands to share and pool their delivery services altogether. More e-logistics systems could be put in place to track local and international shipments, while smart logistics services may enhance efficiency and reduce manpower costs, ie automatic delivery vans and drones for last-mile delivery to clients.

Supportive operational functions. To add value to their online businesses, companies

have to focus on a customer-centric approach, when they interact with related parties in the e-commerce supply chain. Big data will become more important, in tracking consumer behaviour and changing needs. This will eventually improve the conversion rate of e-commerce visitors making a purchase.

Also, instead of advertisements, blogger reviews may become more popular among consumers. As such, companies may need to cater to such a trend. Also, due to the increasing importance of know-how in organisational technology, retailers should shift their focus to e-commerce and the online ecosystem, by employing sufficient qualified personnel to man these platforms, while coming up with innovations to enhance the customers’ experience.

Who could benefit? Consumers stand to gain the most from the reform in e-commerce,

followed by vendors and retailers. Borderless markets also enable them to access supply from overseas, and there should be more service facilities to serve such demand. Also, ecosystem operators stand to benefit from this trend, and we expect to see more e-commerce firms undergoing IPOs ahead.

Figure 10: JD.COM’s last-mile delivery service which will be used at its Thai marketplace, JD Central

Figure 11: Central JD Fintech and its projects, Dolfin E-Wallet and face payment service

Source: Bloomberg, RHB Source: Bloomberg, RHB




Figure 12: Potential reforms – outcomes and risks affecting the consumer sector

Blue-sky outcomes Challenges & pitfalls

1. Increasing demand for e-commerce transactions 1. Foreign operators gaining major share, which may be tough for domestic companies to penetrate the market

2. Vast opportunities for new players to develop their e-commerce platforms and ecosystem services

2. Intense competition among e-commerce operators may lead to operating losses

3. Modern retailers' omni-channel platforms should achieve synergies with many of their business units and smart ecosystem service providers, to improve sales and cost efficiency in the long run

3. Online sales contributions may be equivalent to sales generated from a handful number of physical stores, but retailers need to put in great effort to boost online activities

4. More advanced technology for e-payments, supply chain operations, logistics, and customer big data management

4. Dynamic changes in consumer preferences and ecosystem evolutions

5. Extensive logistics coverage may support Thailand to become the centre of e-commerce trade in the CLMV region

5. Potential regulations may curb online trade activities


Banking Sector

Essential part of the transition economy

Commercial banks have been crucial in supporting economic growth. There are 29 commercial banks – 19 banks registered in Thailand and 10 foreign banks – currently operating in the country. Total assets amounted to THB18.95trn in Dec 2018, 16% higher than Thailand’s GDP of THB . �trn at current market prices. Commercial banks’ total assets CAGR was at 6.5% for the last 10 years (2009-2018) vs the 5.3% rise in real GDP growth at current market prices during the same period.

Thailand’s commercial banks are relatively sturdy, given their higher Tier-1 capital being at % in Dec � (vs . % in Dec � ). This is higher than the Bank of Thailand’s Tier-1 minimum ratio of 9.5% after conservation and domestic systemically important bank (D-SIB) buffers in 2020-2022. Moreover, the loan loss coverage (LLC ratio) was at a record high of 149% in Dec 2018. Given the strong balance sheets, we think the sector is largely prepared to withstand potential economic risks from global uncertainties, and should be buffered against the impact of the change in accounting standards.

However, given a more open, connected, and integrated economy going forward, related parties in the financial sector – including regulators, commercial banks and non-banking financial institutions – are in a transition. In recent years, we have seen regulations undergoing reforms, while infrastructure, technology and human skills have been impacted by various factors, ie a new economic environment, changing customer behaviour, social interaction and political intervention. We think regulators will likely focus more on financial stability and efficiency as well as economic growth.

Meanwhile, companies would rather concentrate on their competitiveness, profitability, and growth potential. Consumers should pay attention to the benefits gained from using business services, eg reasonable fees charged by businesses, fair treatment when purchasing products and services, as well as after-sales services.

As regulators and related parties have modified policies in recent years, giving rise to a wide range of effects, we focus on what has already occurred over the short term. We also examine how commercial banks and non-bank financial institutions will be affected by changes in regulations.




Figure 13: Commercial banks vs GDP at current prices Figure 14: Growth in GDP, loans, and NPLs

0%

20%

40%

60%

80%

100%

120%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Commercial banks' loans (THBm) Commercial banks' assets (THBm)

GDP at current prices (THBm) GDP/Commercial banks' assets

(80%)

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

GDP growth Loan growth

NPLs growth (RHS)

Source: BoT, RHB Source: Company data, RHB

Given the importance of commercial banks in an economy in transition, the Bank of Thailand (BoT) developed the policy framework to guide the development of Thailand’s financial infrastructure. The Financial Sector Master Plan Phrase III (FSMP III) is a guide to keep the development of the Thai financial system on the path previously set out by the FSMP I (2004-2008) and FSMP II (2010-2014). The FSMP III (2016-2020) aims to enhance sector strength and efficiency, with capability to serve the needs of the real sector and the general public, and to serve as a driver of Thailand’s economic development.

The Government would rather focus on fiscal policies via tax schemes, stimulus packages, and public investments to restore confidence and sustain economic growth. That said, it also realises that a new economic environment may revive or disrupt growth. As new technology becomes increasingly important for the economy and business ecosystem, the Government is working harder to promote the Thailand 4.0 model, which sets the country on the road to becoming a digital economy.

As the Government, BoT and private sector have cooperated to achieve Thailand 4.0, regulations, consumer behaviour and indeed, the business environment, have changed. Some of these changes may have a material impact on the financial sector, as categorised below:

i. Financial efficiency;

ii. Business competitiveness;

iii. Consumer protection;

iv. Access to financial services;

v. Risk management.

Increased efficiency through digital transformation

Where we are. Thailand is paying more attention to the digital transformation, as it could

change the way business is operated in the future. The Government, BoT and private sector also realise that new technology will be a pillar of the Thailand 4.0 economic model, which aims to prepare the country to become a digital economy. Thailand initiated the National e-Payment Master Plan in 2015. The plan aimed to create an environment supporting integrated e-payment infrastructure fund transfers, as well as an integrated tax and social security disbursement system for consumers, businesses and the Government. The national e-payment programme is expected to facilitate the country’s transition towards becoming a cashless society.

Given their larger online user bases, large banks are relatively more proactive when it comes to investing in technology and utilising the digital banking platform, compared with their smaller peers. Kasikornbank (KBANK) and Siam Commercial Bank (SCB) are the leaders focusing on new digital innovations.

Since then, the industry has developed in various aspects.




The BoT issued a consultation paper on Fintech Regulatory Sandbox Guidelines in 2016. The purpose of the regulatory sandbox is to allow business operators (banks and non-bank players) to test and conduct trails of new financial products or services without incurring all the normal regulatory consequences, while still ensuring consumer protection and financial system stability;

i. The PromptPay scheme was the first project under the national e-payment programme that was officially initiated in 2017. It would facilitate financial transactions and reduce the cost of fund transfers;

ii. The Payment System Act, BE 2017 was announced in the Government Gazette in Apr 2016. The new law promotes electronic banking and payment services in the Government, business, and retail sectors under the concept of “Banking anywhere, anytime;

iii. Since its implementation of the PromptPay scheme, there have been over 44.5m accounts registered in Aug 2018, vs ~20m in the first year of the scheme;

iv. Commercial banks announced the cancellation of online transaction fees for interbank money transfers, cross-clearing zone money transfers, bill payments, top-up services, and cardless withdrawals from ATMs in Apr 2018.

What needs to happen. Given the lower fees charged when using financial services via

the digital platform, consumers will increasingly make financial transactions via online channels going forward. The total value of financial transactions made through the internet and mobile banking rose to THB30.2trn in 9M18 (Jan-Sep 2018), marking a 28% increase from THB23.6trn in 9M17, and accounting for 82.6% of total financial transactions in the banking sector. We expect higher competition in the banking sector, as banks will need to improve financial services to meet customer needs. Moreover, new players like the non-banking financial companies and the non-financial operators from the retail and telecom businesses will enter the market and provide new financial services. We believe that commercial banks should be more proactive about investing in IT infrastructure and cyber-security.

To reflect these new digital services, the cost-to-income (CIR) ratio is likely to increase in the next few years, as fees related to electronic services decrease and operating expenses related to IT investments go up. After IT infrastructure development, the sector’s operating efficiency should improve – since banks can reduce expenses related to physical branches and new customer acquisitions via a new digital platform. We expect the eight banks under our coverage (TH Banks) to have CIRs higher than 45% in 2019-2021, from 44.9% in 2018. This is partly due to higher expenses related to IT investments and the impact of online fee waivers. The CIR is expected to decrease to below 45% in 2022.

Who could benefit? Consumers are real winners as they would likely pay lower fees and

receive better financial services from financial operations. For commercial banks, they can improve operating efficiency by reducing expenses related to physical branches, new customer acquisitions and higher investment returns. Moreover, an improved IT infrastructure and big data analytics will likely facilitate banks in better analysing customer information.

These factors should enable banks to better offer the right products, at the right prices, to the right customers as well as improve their risk management systems. The large banks are more proactive in investing, developing and offering new innovations via digital banking channels. Although there are no clear winners among the banks at the moment, we think KBANK and SCB stand to benefit the most from the digital transformation in the long term – as both make the most effort to develop innovative products and respond to customer needs, compared to their peers.

Figure 15: Reforming financial efficiency – potential outcomes and risks

Blue sky outcomes Challenges & pitfalls

1. More efficient payment system 1. Lacklustre fee income given the online fee waiver

2. A reduction in new customer acquisition costs 2. Additional capital expenditures to push up CIRs

3. More capability to reach new customer groups 3. Lack of a clear digital and transformation strategy

Source: RHB




Figure 16: TH Banks’ fee income, non- II trends (quarterly) Figure 17: TH Bank’s CIR trends

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Non-II ratio (RHS) Fee income (THBm) Non-II (THBm)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

41.5%

42.0%

42.5%

43.0%

43.5%

44.0%

44.5%

45.0%

45.5%

46.0%

46.5%

2016 2017 2018 2019F 2020F 2021F 2022F

CIR (LHS) Non-II growth (RHS)

Opex growth (RHS)

Source: BOT, RHB Source: Company data, RHB

Figure 18: Thailand’s standardised QR Code Figure 19: The value of e-payment trends

(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2011 2012 2013 2014 2015 2016 2017 9M17 9M18

Non-banks (THBtrn) Banks (THBtrn) YoY Growth (RHS)

Source: Google Source: BoT, RHB

Improving business competitiveness

Where we are. Despite their strong financial position, the commercial banks are smaller

vs their regional counterparts. Bangkok Bank, Thailand’s largest bank, had assets worth USD102bn in 2018 – which makes it smaller than Maybank (USD189bn) and DBS (USD404bn). That said, it beats Bank Mandiri’s USD .�bn (Mandiri is Indonesia’s largest bank by asset size). The Government believes that, if Thai banks are larger, they would be stronger, ie better able to compete with foreign banks when expanding overseas. Moreover, larger banks have higher capability to fund public investments, when the country is developing its infrastructure.

The Cabinet approved tax measures to encourage mergers in the sector in 2018. Merged entities can file for corporate income tax deductions and receive a waiver on value-added tax, specific business taxes and revenue stamps. Banks with total assets of >THB4trn will be allowed to deduct double their expenditures, while those with total assets at THB3-4trn can deduct up to 1.75 times. Meanwhile, banks with total assets worth THB2-3trn can deduct up to 1.5 times, and those with total assets at THB1-2trn will fall under a deduction rate of 1.25 times.

Note that in the past 10 years, the sector saw only one merger – when Thanachart Bank purchased Siam City Bank in Apr 2010.




What needs to happen. The Ministry of Finance mentioned that it will not compel

Krungthai Bank (55% held by The Financial Institutions Development Fund (FIDF)) and TMB Bank (25.9% stake held by the Finance Ministry) to merge. Recently, TMB Bank entered into a non-binding MoU with Thanachart Bank (TBANK), ING Groep NV, Thanachart Capital (TCAP), and The Bank of Nova Scotia (BNS) to set out the non-binding agreement in principle of the parties and form the basis for further discussions on transactions by parties, with the objecting of merging TMB and TBANK. The merger is in the due diligence process, which is estimated to be completed in the next few months. Further details of the rights offer and new shareholder structure will be released if the deal is completed.

Who could benefit? The merger is expected to cost THB130-140bn. If the deal is inked,

the combined entity will likely have total assets of THB1.8-2trn – making it the country’s sixth largest bank by assets. This merger is expected to create business synergy and result in a stronger bank, with a larger customer base and improved operational efficiency. We agree that the new bank will likely have better loan diversification as TBANK concentrates on retail banking, particularly auto hire-purchase loans, while TMB Bank focuses on business banking (corporate and SME loans). A larger bank would be more competitive in bidding for large investment projects to boost its corporate loans. With a larger branch network, a new bank will likely have better operating cost management when investing in additional IT, as it can provide a variety of products to meet customer needs.

Figure 20: Reform potential outcome & risks – business competitiveness


1. Merger partners with complementary operations that will enhance earnings bases

1. Earnings dilution due to unfavourable pricing or capital-raising exercise

2. A merger provides business synergies to increase profitability 2. Challenges in cultural fit from business integration

3. Similar corporate culture allowing for easier integration of operations

3. Massive overlap of operations, resulting in the need to rationalise functions and redundancy

4. Improved fundamentals and profitability to boost valuations 4. Appropriate communication to improve customer perception

Source: RHB

Figure 21: Thai banks ranked by total assets Figure 22: Thai banks’ net profit and ROE

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

SCB KBANK BBL KTB BAY TCAP TMB KKP TISCO LHFG

Loans (THBm) Assets (THBm)

0%

5%

10%

15%

20%

25%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

SCB KBANK BBL KTB BAY TMB TCAP TISCO KKP LHFG

Net profit (THBm) ROE (RHS)

Source: Company data, RHB Source: BoT, RHB

Consumer protection

Where we are. Some consumers have been treated unfairly with regards to fees and

interest rates (ie overcharging) and debt collection. The Government is trying to resolve the problems and protect consumer rights. It has imposed new regulations for businesses, including commercial banks and microfinance companies, mandating that they charge fees and interest rates fairly.

Moreover, there have been consumer complaints against unfair market conduct, aggressive marketing campaigns, misleading information from commercial banks and the non-banking financial companies. To counter this:




i. The Bank of Thailand and the Finance Ministry have approved the regulations for offering nano-finance in 2015. Nano-finance is a loan that can be extended to an individual seeking to borrow <THB100,000 per applicant without collateral to use for business operations, with an effective lending rate of ≤36% pa, including interest, fees and penalties;

ii. The Ministry of Finance drafted the regulations for offering pico-finance in 2016. Pico-finance is for smaller cases and with loans amounting to THB50,000 per applicant (recently amended to <THB100,000 per applicant in March) for households and individuals. It has an effective lending rate of ≤36% pa, inclusive of interest, fees and penalties;

iii. “The Act Prohibiting the Collection of Interest at an Excessive Rate BE � (� )” on 15 Jan 2017. The new law took effect the following day, replacing the 1932 version;

iv. New regulations on market conduct took effect in Jan 2018 to ensure appropriate and fair services and fees, as well as to protect consumer rights;

v. Regulators required finance operators to apply for new licenses for auto titled loans in Feb 2019. With the pico-finance licenses supervised by the Finance Ministry, operators can run businesses in specific provinces. They are limited to extending loans of <THB50,000 per applicant. Meanwhile, finance operators that give personal loans have licenses under the purview of the BoT. Operators can run their business in any province – and there is no maximum requirement on amounts lent out to borrowers taking auto title loans.

What needs to happen. The Government initiated the nano-finance and the pico-finance

segments to solve the underground debt problem and eliminate illegal loan sharks. It expects low-income groups to have alternative sources to borrow money, with fair treatment. Nano-finance and pico-finance are expected to strengthen communities, reduce inequality, and improve the grassroots economy. To resolve debt problems and eliminate loan sharks, more operators should apply for nano-finance and pico-finance licenses.

Moreover, names of illegal financial operators should be published if they violate regulations. On BoT data, we note that nano-finance accounts significantly increased to 2m in Dec 2018, from 7,464 in Dec 2015. The number of nano-finance providers rose to 32 in Dec 2018, from just eight in Dec 2015. Outstanding nano-finance loans increased to THB35.6bn in Dec 2018, from THB153m in Dec 2015.

On market conduct. Commercial banks will be penalised (with a fine or revocation of

license) if they fail to comply with measures. Bank staff should undergo training to update product knowledge and improve their services. Since the initiation, banks have cautiously offered financial products to customers to avoid customer complaints. The growth of fee income related to cross-selling products from banks’ subsidiaries and partners (bancassurance and mutual funds) slowed down in 2018.

Who could benefit? We believe that consumers should be major beneficiaries, as they

will have access to alternative sources of funds, with fair treatment. Also, consumers will likely have greater financial knowledge and receive enough information before applying for loans and purchase new products. In the microfinance segment, we think Muangthai Capital (MTC TB, NEUTRAL, TP: THB50.00) and Srisawad Corp (SAWAD TB, NEUTRAL, TP: THB51.00) could reap moderate gains from the advent of nano-finance. Both companies have strong fundamentals and long-term experience compared with non-listed companies that have less capital and a smaller branch network. Both companies also have large nationwide networks (>2,800 branches for both) that can offer loans to the untapped low-income groups. Both Muangthai and Srisawad’s operations largely comply with regulations.

Figure 23: Reform potential outcome & risks table – Consumer protection


1. Fair treatment of customers 1. Strict regulations reducing corporate earnings bases

2. Good governance and transparency among financial operators

3. Lower consumer costs when receiving financial services

Source: RHB




Greater financial access

Where we are. Most low-income households and some SMEs have difficulty getting

loans. While the Government has encouraged banks and specialised financial institutions (SFIs) to provide lending to those underserved segments, financial institutions are concerned on the deterioration in asset quality, which may lead to an increase in NPL.

Moreover, banks are reluctant to establish branches and install ATM machines to service those living in remote areas, given the low profitability. The BoT and the Ministry of Finance, together with related parties, are promoting financial access for the general public. The developments from the Government and related parties to gain more access to financial services include:

i. Thailand’s Business Security Act, which was published in the Government Gazette in Nov 2015. It makes significant changes to the regime for creating security in Thailand by, among other things, expanding the types of assets that Thai entities can use as security for their financing. This will provide Thai SMEs greater opportunities to access financing and thereby develop their businesses;

ii. The Ministry of Finance and the BoT approved regulations on nano-finance and pico-finance offerings in 2015 and 2016 respectively to encourage new financial services to low-income groups and small SME businesses;

iii. Banking agent regulations were published in the Royal Gazette in early 2018, allowing financial institutions to appoint agents to offer financial transaction services – money deposits, transfers and withdrawals, and payments. These would help reduce operating costs for financial operators, and enable them to better respond to fast-changing technology and facilitate money transactions;

iv. The Government is promoting the role of Thai Credit Guarantee Corporation (TCG) in guaranteeing loans for SMEs;

v. Collaborating with relevant agencies to promote market-based financing for large corporations.

What needs to happen. New financial operators are expected to have licenses for nano-

finance and pico-finance, as Thailand resolves to cut down illegal loans and help alleviate financial stress on the underserved segments. As of Dec 218, the BoT counted 32 nano-finance operators in the country.

TCG should offer multiple products to support high-risk SMEs and offer products to innovations and start-up business. Since it was established, banks have become more eager to lend to SMEs and new start-ups in the past few years. However, SME lending was relatively stagnant in 2018 as commercial banks were largely concerned over the economic slowdown – which may case NPLs to spike, going forward.

Capital markets are essential to support the larger and more diverse demands to fund long-term investments to help restructure the economy. Only 20% of >600 companies listed on the Stock Exchange of Thailand have issued corporate bonds. As such, the relevant agencies need to educate businesses on the rules and regulations for issuing corporate bonds.

Who could benefit? Consumers should largely benefit from the lower transaction fees,

while having alternative sources of loans. Although there have been some banking agents appointed, we do not expect this to have a significant impact on commercial banks and the non-banking financial companies. However, we think the appointment of the banking agents is to help facilitate consumers in financial transactions. Mid-sized banks, ie TMB and large banks like Kasikornbank, which have a focus on the SME segment, may benefit from the loan guarantee programme, in shoring up new lending when economic growth picks up. Also, banks can charge more fees (finance advisory and underwriting fees) when underwriting corporate debt and distributing to institutional and retail customers.

Figure 24: Reform – potential outcomes and risks related to financial access


1. Consumers and businesses having more access to financial services. 1. Strict regulations reduce corporate earnings bases.

2. Lower costs among consumers and businesses. 2. Weak credit discipline erodes loan quality and leads to failure in the financial system.

3. Improved financial literacy.

Source: RHB




Figure 25: Nano-finance account trends Figure 26: Auto title loan regulations

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Number of Accounts (RHS) Outstanding Loans (THBm)

Source: BoT, RHB Source: BoT

Decent risk management

Where we are. After the 1997 financial crisis, the BoT set out the Financial Sector Master

Plan (FSMP). The FSMP I (2004-2008) focused on the post-1997 financial crisis –restructuring and reorganising efforts, as well as expanding the scope of activities of commercial banks to achieve “universal banking” services. This was done to enable the financial sector to efficiently act as financial intermediaries and support economic growth.

Although Thailand’s financial sector has structurally improved, financial institutions under the BoT have to comply with new regulations and accounting standards to improve internal risk management, strengthen fundamentals, and sustain growth potential. The developments from the BoT and related parties to financial services include:

i. As high household debt could threaten financial and economic stability, the BoT introduced rules on credit cards and personal loans in Jul 2017 to limit new credit card spending and personal borrowing;

ii. The Central Bank also announced macro-prudential measures on new mortgage lending to tackle speculation in the property market in Oct 2018, which took effect on 1 Apr. These measures would not affect those who signed sale contracts prior to 15 Oct 2018. A new loan-to-value (LTV) ratio for second homes will be reduced to 80-90% (from 80-95%) and that for third homes to 70% (from 80-95%). The LTV for residential properties that are priced >THB10m/unit will be cut down to 70-80% (from 80%). The LTV ratios for first homes remain at 90% and 95% for condominiums and landed properties;

iii. Under the single account scheme, the Central Bank requires banks to consider only financial statements submitted to the Revenue Department when considering SME loans, from Jan 2019 onwards;

iv. IFRS 9 will be adopted in Jan 2020 after being postponed for a year to give commercial banks and the non-banking financial institutions more time to prepare for implementation and to decrease any potentially negative impact of implementation.

What needs to happen. Commercial banks should continue to develop risk management

systems. They cautiously lend to retail customers and some SMEs that have weak financials and are more sensitive to economic uncertainties. This is to prevent NPL growth, while setting aside additional provisions. To take in new loans, SMEs on their part should also improve their accounting and financial reporting to comply with the new single account scheme.

To prepare for IFRS 9, commercial banks will likely focus more on asset quality rather than aggressively grow loans, to avoid NPL levels spiking up. Potential loan growth might slow down, but the asset quality will be relatively more stable. Despite TH Banks’ high LLC ratio of 149% as at Dec 2018, banks are likely to continue to set aside high provisions to strengthen balance sheets. This is due to the fact that new NPLs might continue to increase from relapsed loans in the SME and consumer segments.




Who could benefit? Given the tighter regulations to restrict new lending, banks have well

prepared and strengthened their balance sheets to cope with potential economic risks. Banks with high reserves could ease credit costs and sustain long-term growth. Among TH Banks, Bangkok Bank (BBL), KBANK, and Tisco Financial Group (TISCO) are well-prepared to set aside high reserves on the BoT’s requirement.

KBANK had the highest reserves compared with the BoT’s requirement, at � % in Dec 2018, followed by BBL (239%) and TISCO (230%). In comparison, the average of TH Banks’ reserves ratio was at 203%. To reflect the strong fundamentals, BBL, KBANK and TISCO could ease provisioning policies to sustain earnings growth in 2019 prior to IFRS 9 implementation in 2020. Earnings growth for BBL, KBANK, and TISCO is expected to increase by 8%, 6% and 5% YoY in 2019, vs TH Banks’ expected growth of %.

Figure 27: Reform potential outcome & risks table – Risk management


1. Strong reserves and capital base among banks increases confidence among consumers and investors

1. Stricter regulations would pressure banks to set aside high provisions and erode future growth and profitability

2. Efficient risk management reduces potential new NPLs and strengthens the financial system

2. Tightening credit criteria reduces potential loan growth

3. Banks and businesses prepare ahead to prevent too much speculation that might lead to a system failure

3. Banks incur additional expenses to upgrade their risk management systems

Source: RHB

Figure 28: TH Banks’ earnings growth outlook Figure 29: TH Banks’ reserves-to-required reserves ratio

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

BBL KBANK TISCO KKP TCAP SCB KTB TMB THbanks

2019F 2020F

0%

50%

100%

150%

200%

250%

300%

KBANK BBL TISCO THBanks

KKP KTB TMB SCB TCAP

Source: Company data, RHB Source: Company data, RHB

Telecommunications Sector

From concessions to a licence regime

In the early 1990s, Thailand’s telecom business was characterised by a concession

regime, where operators were required to partner two state-owned telecom enterprises – Communications Authority of Thailand (CAT) and Telephone Organization of Thailand (TOT) under a build, transfer and operate (BTO) agreement.

In short, this regime permitted operators to build and operate telecommunication networks to service the public without a spectrum licence. However, they were required to pay revenue-based fees as concession payments to the state-owned telecom enterprise, in exchange. This also required the operator to transfer the ownership of infrastructure (network & equipment) they build during its operation to the state-owned telecom enterprises once the concession period expired.

However, as part of the Government’s roadmap to liberalise the sector, the National Broadcasting and Telecommunications Commission (NBTC) established the Telecommunications Business Act, B.E. 2554 (2010). This mandated any company that intends to operate a telecommunication business in Thailand to obtain a licence from the NBTC (issued via auction only) – to encourage competition and pare down the competitive advantage of state-own telecom enterprises.




The start of this regulatory transformation resulted in the first spectrum auction in Thailand, where each operator (Advanced Info Service (AIS), True Corp, and Total Access Communication (DTAC) acquired their first (2.1GHz) spectrum licences (15MHz) in 2012. At the same time, some of existing concession agreements with both state-owned enterprises began to expire.

Since the start of the reformation period until end-2018, when the last concession

agreement (between DTAC and CAT) finally expired, the Thai Government has issued 11 spectrum licences that were granted to three private operators. The licenses carry a total value of THB350bn.

Figure 30: Current spectrum portfolios of each telecom operator

MHz 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

900 10

15

5

2100 15

TOT - 2100 15

MHz 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

850 15

10

15

2100 15

MHz 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

900 5

1800 5

2100 15

TOT-2300 60 8 yrs (60% usage)

15 yrs

180018 yrs

15 yrs

8 yrs (80% usage)

ADVANC

TRUE

DTAC

900

15 yrs

15 yrs

15 yrs

14 yrs

15 yrs

18 yrs

15 yrs

15 yrs

Source: RHB

What happened. The transformation of this concession regime to a licensing system did

not only impact the regulatory structure, but the financial outlook of each company as well. This resulted in:

i. The rebalancing of operating assets (balance sheet adjustment) after transferring back ownership of infrastructure equipment to state-owned enterprises;

ii. Lower regulatory fees due to the absence of a concession payment;

iii. The rise of upfront fee and depreciation expenses from the licence auction – which resulted in telecom operators restructuring costs.

We note that most of the balance sheet adjustments from the concession asset transfer and P/L impact from cost restructuration were reflected in all the operators’ � financial statements – save DTAC, as its cost restructuring will start to fully kick in this year.

To support this transition, the NBTC reduced regulatory fees – to encourage newcomers and decrease operating costs of telcos that transitioned from a concession. The latest update on regulatory fees, which are divided into three categories, are detailed below.




Figure 31: New progressive rates on licence fees

Service revenue (THBm) New progressive licence fee rates

0-100 0.125%

101-500 0.25%

501-1,000 0.50%

1,001-10,000 0.75%

10,001-25,000 1%

25,001-50,000 1.25%

>50,000 1.50%


Licence fees. The latest operating fee structure enables the Government to impose

licence fees to telecom operators on a step-rate basis. Operators that earn revenue up to THB100m per year will be subjected to a fee of 0.125% of total service revenue (down from 0.25%), as illustrated in Figure 29. Currently, all key players are subjected to the new licence fee rate of 1.5%, as they generate over THB50bn in revenue per year.

Figure 32: AIS’s mobile internet package

USO

Previous New USO fee

3.75% 2.50%


Universal service obligation fee (USO). The NBTC reduced the USO fee to 2.5% of

service revenue, from 3.75% previously.

Numbering fee. Telcos are subject to numbering fees of THB2 per month per mobile

number under its operations. Conclusion. These regulatory changes imply that total regulatory fees for the licence

holders should decline to about 4% of their respective service revenues (from 5.25%). What next? While these changes have impacted operators’ � balance sheets and

income statements, key overhang issues remain. These include legal disputes still pending between each operator and both state-owned enterprises during the concession period, eg over the asset ownership (tower and equipment), interconnection charges, revenue sharing and tax-related issues. We think these legal disputes remain key risks for all telecom operators in Thailand, as it could lead to extraordinary expenses if the operators settle out of court – like what DTAC did in 4Q18, over the concession period. The THB9.5bn settlement excluded some disputes over excise tax and interconnection charges. Meanwhile, True and AIS still have various outstanding disputes with CAT and TOT that have not been settled yet. Even if regulatory reforms have been done (and are reflected in company finances), the legal ramifications are still an overhang on the sector’s outlook. We still expect to

see uncertainty over regulatory changes, as the new Parliament will announce a new NBTC board in 2020. This could result in a change in spectrum allocation or regulation-related prospects. However, we don’t expect significant action from the new spectrum auction or regulatory related change in the short run until the new government is formed in 2H19.

The next reformation: Service reformation on 5G

Where we are – not officially started yet. While there is no global industry standard on

5G technology (nor are there mass commercialisation plans or a supportive ecosystem in Thailand), the NBTC has decided to hold the auction for the 700MHz bandwidth spectrum – which is expected to be allocated for 5G this year.




We think this is a hasty decision – and one partly based on the effect of the digital TV subsidy scheme which the NBTC initiated last year. The NBTC may use the money gained from the auction to fund the subsidy on the fee waiver programme for digital TV operators.

Telco operators have indicated that they are not interested in bidding in this auction, if it happens this year – given the various uncertainties and unknown feasibility of such a venture. The technical details such as spectrum allocation standard, network deployment density and investment cycle outlook are not yet firmed up (the global standard and commercial specification will be announced in 2019F). Also, final allocation methods are not yet known, nor the terms of payment finalised. We think the previous spectrum cost was relatively high vs the global average – which made operators hesitate on investing in what could be the new industry S-curve. What needs to happen for the 5G auction. There are several requests/offers from the

telco operators and the NBTC in the talks to push out the 5G spectrum auction this year. These are premised on the following:

i. Request for more lenient payment terms on the existing 4G licenses (900MHz).

Thailand’s military-led government recently approved the request for more lenient payment terms for the existing 4G licenses (900MHz) – on the condition that the extension of the payments will apply only to operators willing to participate in the 700MHz spectrum allocation in 3Q19.

The new payment schedule will split the total payment for the 900MHz license to ten equal instalments (payouts to start in 2020). This is expected to ease the cash flow burdens of license holders, while offering their balance sheets some relief.

That said, the relatively high allocation cost on the 700MHz spectrum (THB25bn) – a clause under this new payment scheme – may not truly benefit telecom operators, in our view.

Figure 33: New payment schedule of 900MHz if operators decide to join 700MHz spectrum allocation

2016 2017 2018 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Total

AIS 8,603 4,301 4,301 63,744 80,949

TRUE 8,603 4,301 4,301 64,433 81,639

DTAC 4,301 2,151 2,151 32,126 40,729

2016 2017 2018 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Total

AIS 8,603 4,301 4,301 23,269 8,095 8,095 8,095 8,095 8,095 80,949

TRUE 8,603 4,301 4,301 23,614 8,164 8,164 8,164 8,164 8,164 81,639

DTAC 4,301 7,917 4,073 4,073 4,073 4,073 4,073 4,073 4,073 40,729

Previous - Payment schedule of 900MHz licenses

New payment schedule after Military government invoked Section 44 on relaxation requested

Source: RHB

ii. Low-interest rate loan. The NBTC is considering offering low-interest rate (1.5%)

loans under the Broadcasting and Telecommunications Research and Development Fund (BTRDF) as an alternative source of funding for telco operators, with regards to this auction or other 5G-related investments.

However, we think the current BTRDF fund – which has c.THB40bn – will not be enough to support the whole allocation.

iii. Multiband auction. The NBTC is also considering putting together different license

bandwidths (700MHz/2.6GHz, 3.5GHz/26GHz, 28GHz) into a single package for the auction, to reduce the average cost of spectrum per MHz for operators.

iv. Subdividing the spectrum license into specific areas (vs nationwide). The NBTC

is considering splitting up the spectrum license from nationwide coverage into specific areas (eg by region, EEC area) in order to reduce cost per spectrum – and to be more flexible to fit each operator’s strategy

Although the spectrum allocation or details of the auction are not finalised yet, we have seen positive signals from the Government – as it tends to meet operators halfway, and is prepared to hold discussions with telecom companies to hold the auction this year.




The National Council for Peace and Order’s (NCPO) recent move to approve payment extensions for operators willing to participate in the 5G auction is the first step towards creating a good momentum of interest in the auction itself. That said, we expect to see more than one request or offer to be included in the final bundling deal, by the time discussions end.

We believe the relaxation of payment terms for the 900MHz band, and the low-interest loan has a bigger possibility of being included in the final offer, compared to other options (when there were less technical changes or less legal issues). We do still expect to see significantly lower bidding prices in the impending 700MHz auction, given the readiness of 5G services – which are not ready to be commercialised – and the cash flow of each operator.

Is the network-sharing model an option for the next 5G investment cycle?

Where we are. While the regulatory reforms affecting Thailand’s telecom industry may

have several overhangs (ie legal issues between operators and the state-owned enterprises), we note that cooperation between various partners on network-sharing is ongoing. As such, activities between these two pillars (ie operators and state-owned units) are still very much interlinked.

Figure 34: Partnership agreements between operators and state-owned enterprises

Source: RHB

True and CAT on the 850MHz spectrum

The first mover in network-sharing has been True. In 2011, it was granted a 14-year contract for wholesales and a reseller partnership by CAT, to use % of the latter’s 850MHz network capacity to operate 3G services across the country under the brand True Move H. This W-CDMA/HSPA-based 850MHz later become part of its key network infrastructure, covering 97% of the population with more than 14,000 base transceiver stations in all provinces.

In return, True is required to pay the annual rental fee of THB4.1bn, with a barter deal of THB5.2bn for CAT to use its 4G network on the 1,800MHz and 2,100MHz within the next 10 years. This agreement will expire in 2025, in accordance with the duration of CAT’s Type 3 license.




Figure 35: Partnership agreement between TRUE and CAT

Source: Yozzo

AIS and TOT on the 2,100MHz spectrum

Despite the legal dispute between AIS and TOT during the past concession period, AIS finally met its 8-year partnership agreement to rent % of TOT’s �, MHz network capacity after 18 months of trial service since 2016. In return, AIS was required to add , base transceiver stations to TOT’s portfolio, with an annual payment of THB . bn for the duration of the agreement. The agreement, inked in early 2018, includes a tower rental agreement and TOT’s �G equipment – which should help AIS ride out its remedy period when the concession ends. This agreement will expire in 2025, in accordance with the duration of the TOT license.

Figure 36: Partnership agreement between AIS and TOT

Source: Yozzo




DTAC and TOT on the 2,300MHz spectrum

In 2018, DTAC also signed an agreement with TOT to use 60% of the state-owned agency’s �, MHz spectrum, on which it has agreed to build a network. DTAC will also provide operations and maintenance services on network equipment to TOT. This partnership also includes the tower service agreement in which DTAC will build and operate a network infrastructure for TOT, while retaining the right to 60% of its network capacity for its services, and fibre and other facilities.

In the agreement, DTAC will rent equipment from CAT for the next eight years. This agreement will be valid until � � (just like DTAC’s agreement with CAT, and AIS’ with TOT).

Figure 37: Partnership agreement between DTAC and TOT

Source: Yozzo

What might happen. With huge capex spending and high licence costs ahead, telecom

operators may need to reform their cost structures or seek an alternative source of funding to support the incoming investment cycle. We do see more opportunities for infrastructure funds cropping up, and believe the network-sharing model could become a viable alternative to support the reduction of costs in the next investment cycle.

We believe the key difference between the existing network-sharing model and what might happen in the next investment cycle is a shift to sharing between operators (instead of between the operator and state-owned enterprise).

The previous mode of partnership, limited by a concession, is expected to change and focus more on capex reduction and the utilisation of network infrastructure ahead.

Not just communication services anymore

The transformation of Thailand’s telecom services actually began well ahead of the sector leveraging on 5G technology. Telco operators began moving towards convergence services, delimiting themselves from offering just communications services over 10 years ago. The early years of reform was led by True (which expanded services to include entertainment, ie with cable TV services badged under “TRUE Vision” – which is now one of its core pillars). Presently, we note that other telecom companies are also offering convergent services, offering entertainment packages as well. This is on top of vertically integrating other offerings like financial services, IT services, and other business solutions.




Figure 38: Telecom services reformation

Source: RHB

One of the most prominent services we have seen telecom companies offer in recent years is mobile financial services (MFS), which aims to capitalise on the change in consumer behaviour, as they leverage on their large mobile customer bases.

We take note of telecom companies’ efforts to become financial service providers, with facilities for e-payment, digital banking or being an insurance brokerage as they try to add value for customers. Also, the number of users and transactions using such services has grown each year. For example, Rabbit Line Pay (the biggest mobile payment platform, owned by Advanced Info Service, Bangkok Train System and LINE) users have increased to 4.5m in 2018, from 3m in 2017. This shows that the reform of telecom services is on the right track, and such offerings can form a new revenue centre for the companies over the long term.

That said, the revenue from such new services is still insignificant. We think it will take more time before such services scale up to contribute significantly to the companies’ respective core profits.




Figure 39: Telecom services reformation


We expect more vertical integration services from the telecom sector. These will not be limited to just the banking industry – increasing internet penetration, the rise of digitalisation and growth of brick-and-mortar outlets should support this transformation ahead. New technology like 5G should also open up more opportunities for the sector.

5G, a marketing gimmick that will become the future

No tangible uses at the moment. Despite various optimistic discussions towards 5G

technologies that could create change, digital disruption or business transformation across the countries, we don’t see any tangible plan yet from telecom operators in Thailand that could utilise 5G services for mass commercialisation. The assorted services trial implemented in many industries in Thailand is still mostly in the sandbox programme (permitted by regulators), while actual use, with a revenue generation plan, is still far from being realised.

That said, some digital transformations or new e-services do not involve 5G usage at the moment – so we believe there is still much confusion amongst the public on what could be 5G marketing gimmicks that have been employed by several parties across the country.

We classify the services and products that are under development into three groups, in terms of 5G relevance:

i. Strictly requires 5G technology for implementation (green)

ii. Will require 5G technology if it becomes scalable (yellow)

iii. Does not need 5G technology (red)




Figure 40: 5G requirements for future services

Services that required 5G technology

Need 5G technology for implementation

Need 5G technology if its become scalable

No need

Listed company related Telco partner

Autonomous vehicle (IoV : Self-driving car) n.a. n.a.

Remote devices (Healthcare surgery, heavy machinery) n.a. n.a.

Critical services and infrastructure control n.a. n.a.

Personal AI assistance n.a. n.a.

High-performance edge analytics n.a. n.a.

Cloud computing n.a. n.a.

Internet of things (IoT)

Smart home Property perfect (PF TB) AIS

Ananda development (ANAN TB) TRUE

Sansiri (SIRI TB) n.a.

Siam cement group (SCG TB) n.a.

Smart city, w arehouse Amata corp (AMATA TB) AIS

WHA corp (WHA TB) n.a.

Smart health BDMS (BDMS TB) n.a.

Bumrungrad (BH TB) n.a.

Smart farm n.a. DTAC

Digital services (Mobile)

E-payment BTS Group (BTS TB) AIS

CPALL (CPALL TB) TRUE

E-Commerce Retail Players n.a.

Kasikorn bank (KBANK TB) n.a.

Financial related digital services Banking, Insurance Players AIS, TRUE

Entertainment service/Video streaming Media Players AIS, TRUE

Medical assistance :E- consultation Samitivej (SVH TB) AIS

Blockchain n.a. n.a.

Cloud services n.a. Both

Source: RHB

Things are set to change, however. While we see that there are no services that would

strictly require 5G technology in Thailand yet, there are positive signs. This is seen in the various collaborations between listed companies and telecom players, made to implement new services that will leverage on 5G technologies in the future. Conclusion. We do believe that these new services will create upside, thereby bringing more opportunities to telecom operators and various companies across different sectors. We are OVERWEIGHT on the sector, and are upbeat on the outlook for AIS (ADVANC, BUY, TP: THB210) and TRUE (TRUE TB, NR), on the readiness of its services portfolios and their developing of services (via entertainment or financial services) – which may gear up to result in new revenue streams ahead. DTAC’s reformation of services lags behind in comparison, given the dearth of its convergence services (fixed broadband, online entertainment). This has been a key disadvantage for the company over the past few years.

26

RHB Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however

longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next

12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Investment Research Disclaimers RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments. This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such information and accordingly investors should make their own informed decisions before relying on the same. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the applicable laws or regulations. By accepting this report, the recipient hereof (i) represents and warrants that it is lawfully able to receive this document under the laws and regulations of the jurisdiction in which it is located or other applicable laws and (ii) acknowledges and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of applicable laws. All the information contained herein is based upon publicly available information and has been obtained from sources that RHB believes to be reliable and correct at the time of issue of this report. However, such sources have not been independently verified by RHB and/or its affiliates and this report does not purport to contain all information that a prospective investor may require. The opinions expressed herein are RHB’s present opinions only and are subject to change without prior notice. RHB is not under any obligation to update or keep current the information and opinions expressed herein or to provide the recipient with access to any additional information. Consequently, RHB does not guarantee, represent or warrant, expressly or impliedly, as to the adequacy, accuracy, reliability, fairness or completeness of the information and opinion contained in this report. Neither RHB (including its officers, directors, associates, connected parties, and/or employees) nor does any of its agents accept any liability for any direct, indirect or consequential losses, loss of profits and/or damages that may arise from the use or reliance of this research report and/or further communications given in relation to this report. Any such responsibility or liability is hereby expressly disclaimed. Whilst every effort is made to ensure that statement of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable and must not be construed as a representation that the matters referred to therein will occur. Different assumptions by RHB or any other source may yield substantially different results and recommendations contained on one type of research product may differ from recommendations contained in other types of research. The performance of currencies may affect the value of, or income from, the securities or any other financial instruments referenced in this report. Holders of depositary receipts backed by the securities discussed in this report assume currency risk. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. This report does not purport to be comprehensive or to contain all the information that a prospective investor may need in order to make an investment decision. The recipient of this report is making its own independent assessment and decisions regarding any securities or financial instruments referenced herein. Any investment discussed or recommended in this report may be unsuitable for an investor depending on the investor’s specific investment objectives and financial position. The material in this report is general information intended for recipients who understand the risks of investing in financial instruments. This report does not take into account whether an investment or course of action and any associated risks are suitable for the recipient. Any recommendations contained in this report must therefore not be relied upon as investment advice based on the recipient's personal circumstances. Investors should make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to

known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. The use of any website to access this report electronically is done at the recipient’s own risk, and it is the recipient’s sole responsibility to take precautions to ensure that it is free from viruses or other items of a destructive nature. This report may also provide the addresses of, or contain hyperlinks to, websites. RHB takes no responsibility for the content contained therein. Such addresses or hyperlinks (including addresses or hyperlinks to RHB own website material) are provided solely for the recipient’s convenience. The information and the content of the linked site do not in any way form part of this report. Accessing such website or following such link through the report or RHB website shall be at the recipient’s own risk. This report may contain information obtained from third parties. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content. The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. The research analysts that authored this report are precluded by RHB in all circumstances from trading in the securities or other financial instruments referenced in the report, or from having an interest in the company(ies) that they cover. The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in whole or in part, to any other person without the prior express written consent of RHB and/or its affiliates. This report has been delivered to RHB and its affiliates’ clients for information purposes only and upon the express understanding that such parties will use it only for the purposes set forth above. By electing to view or accepting a copy of this report, the recipients have agreed that they will not print, copy, videotape, record, hyperlink, download, or otherwise attempt to reproduce or re-transmit (in any form including hard copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no liability whatsoever for the actions of third parties in this respect. The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the distributors of this report. Recipients must not reproduce or disseminate any content or findings of this report without the express permission of RHB and the distributors. The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors. The recipient of this report should have regard to the laws of the recipient’s place of domicile when contemplating transactions in the securities or other financial instruments referred to herein. The securities discussed in this report may not have been registered in such jurisdiction. Without prejudice to the foregoing, the recipient is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. The term “RHB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, RHB Investment Bank Berhad and its affiliates, subsidiaries and related companies. RESTRICTIONS ON DISTRIBUTION Malaysia

This report is issued and distributed in Malaysia by RHB Investment Bank Berhad(“RHBIB”). The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHBIB has no obligation to update its opinion or the information in this report. Thailand This report is issued and distributed in the Kingdom of Thailand by RHB Securities (Thailand) PCL, a licensed securities company that is authorised by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of the Stock Exchange of Thailand. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. RHB Securities (Thailand) PCL does not endorse, confirm nor certify the result of the Corporate Governance Report of Thai Listed Companies.

27

Indonesia This report is issued and distributed in Indonesia by PT RHB Sekuritas Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations. Singapore This report is issued and distributed in Singapore by RHB Securities Singapore Pte Ltd which is a holder of a capital markets services licence and an exempt financial adviser regulated by the Monetary Authority of Singapore. RHB Securities Singapore Pte Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, RHB Securities Singapore Pte Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact RHB Securities Singapore Pte Ltd in respect of any matter arising from or in connection with the report. Hong Kong This report is issued and distributed in Hong Kong by RHB Securities Hong Kong Limited (興業僑豐證券有限公司) (CE No.: ADU�� ) (“RHBSHK”) which is licensed in

Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHBSHK. RHBSHK is a wholly owned subsidiary of RHB Hong Kong Limited; for the purposes of disclosure under the Hong Kong jurisdiction herein, please note that RHB Hong Kong Limited with its affiliates (including but not limited to RHBSHK) will collectively be referred to as “RHBHK.” RHBHK conducts a full-service, integrated investment banking, asset management, and brokerage business. RHBHK does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this research report. Investors should consider this report as only a single factor in making their investment decision. Importantly, please see the company-specific regulatory disclosures below for compliance with specific rules and regulations under the Hong Kong jurisdiction. Other than company-specific disclosures relating to RHBHK, this research report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. United States This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, access to this report via Bursa Marketplace or any other Electronic Services Provider is not intended for any party other than “major” US institutional investors, nor shall be deemed as solicitation by

RHB in any manner. RHB is not registered as a broker-dealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States. DISCLOSURE OF CONFLICTS OF INTEREST RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and associated companies, (“RHBIB Group”) form a diversified financial group, undertaking various investment banking activities which include, amongst others, underwriting, securities trading, market making and corporate finance advisory. As a result of the same, in the ordinary course of its business, any member of the RHBIB Group, may, from time to time, have business relationships with or hold positions in the securities (including capital market products) or perform and/or solicit investment, advisory or other services from any of the subject company(ies) covered in this research report.

While the RHBIB Group will ensure that there are sufficient information barriers and internal controls in place where necessary, to prevent/manage any conflicts of interest to ensure the independence of this report, investors should also be aware that such conflict of interest may exist in view of the investment banking activities undertaken by the RHBIB Group as mentioned above and should exercise their own judgement before making any investment decisions.

Malaysia Save as disclosed below and to the best of our knowledge, RHBIB hereby declares that: 1. RHBIB does not have a financial interest in the securities or other capital

market products of the subject company(ies) covered in this report, save and except for the following: (a) -

2. RHBIB is not a market maker in the securities or capital market products of the

subject company(ies) covered in this report, save and except for the following: (a) -

3. None of RHBIB’s staff or associated person serve as a director or board

member* of the subject company(ies) covered in this report, save and except for the following: (a) - *For the avoidance of doubt, the confirmation is only limited to the staff of research department

4. Save as disclosed below, RHBIB did not receive compensation for investment

banking or corporate finance services from the subject company in the past 12 months, save and except for the following: (a) -

5. RHBIB did not receive compensation or benefit (including gift and special cost

arrangement e.g.company/issuer-sponsored and paid trip) in relation to the production of this report, except for the following: (a) -

Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions. Indonesia PT RHB Sekuritas Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1. Familial relationship due to marriage or blood up to the second degree, both

horizontally or vertically; 2. Affiliation between parties to the employees, Directors or Commissioners of the

parties concerned; 3. Affiliation between 2 companies whereby one or more member of the Board of

Directors or the Commissioners are the same; 4. Affiliation between the Company and the parties, both directly or indirectly,

controlling or being controlled by the Company; 5. Affiliation between 2 companies which are controlled, directly or indirectly, by

the same party; or 6. Affiliation between the Company and the main Shareholders. PT RHB Sekuritas Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a

business relationship with an Issuer or Public Company, has access to inside information; and

d. an individual who within the last six months was a Person defined in letters a, b or c, above.

Singapore

RHB Securities Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) - The staff of RHB Securities Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) - RHB Securities Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) -

28

Hong Kong The following disclosures relate to relationships between RHBHK and companies covered by Research Department of RHBSHK and referred to in this research report: RHBSHK hereby certifies that no part of RHBSHK analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. RHBHK had an investment banking services client relationships during the past 12 months with: -. RHBHK has received compensation for investment banking services, during the past 12 months from: -. RHBHK managed/co-managed public offerings, in the past 12 months for: -. On a principal basis. RHBHK has a position of over 1% market capitalization of: -. Additionally, please note the following: Ownership and material conflicts of interest: RHBSHK policy prohibits its analysts and associates reporting to analysts from owning securities of any company covered by the analyst. Analyst as officer or director: RHBSHK policy prohibits its analysts, and

associates reporting to analysts from serving as an officer, director, advisory board member or employee of any company covered by the analyst. RHBHK salespeople, traders, and other non-research professionals may provide oral or written market commentary or trading strategies to RHB clients that reflect opinions that are contrary to the opinions expressed in this research report.

KUALA LUMPUR

RHB Investment Bank Bhd Level 3A, Tower One, RHB Centre Jalan Tun Razak Kuala Lumpur 50400 Malaysia Tel : +603 9280 8888 Fax : +603 9200 2216

JAKARTA

PT RHB Sekuritas Indonesia Wisma Mulia, 20th Floor Jl. Jenderal Gatot Subroto No. 42 Jakarta 12710 Indonesia Tel : +6221 2783 0888 Fax :+6221 2783 0777

HONG KONG

RHB Securities Hong Kong Ltd. 12

th Floor, World-Wide House

19 Des Voeux Road Central Hong Kong Tel : +852 2525 1118 Fax : +852 2810 0908

BANGKOK

RHB Securities (Thailand) PCL 10th Floor, Sathorn Square Office Tower 98, North Sathorn Road, Silom Bangrak, Bangkok 10500 Thailand Tel: +66 2088 9999 Fax :+66 2088 9799

SINGAPORE

RHB Securities Singapore Pte Ltd. 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315 Tel : +65 6533 1818 Fax : +65 6532 6211

Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2017

Website: www.thai-iod.com

IOD (IOD Disclaimer)

ผลสาํรวจการกํากบัดแูลกิจการบริษัทจดทะเบียนที่แสดงไว้นี ้ เป็นผลที่ได้จากการสํารวจและประเมินข้อมลูทีบ่ริษัทจดทะเบยีนในตลาดหลกัทรัพย์แหง่ประเทศไทย และ

ตลาดหลกัทรัพย์ เอ็ม เอ ไอ (“บริษัทจดทะเบียน”) เปิดเผยตอ่สาธารณะและเป็นข้อมลูที่ผู้ลงทนุทัว่ไปสามารถเข้าถึงได้ ผลสํารวจดงักลา่วจงึเป็นการนําเสอนข้อมลูในมมุมอง

ของบคุคลภายนอกตอ่มาตรฐานการกํากบัดแูลกิจการของบริษัทจดทะเบยีน โดยไมไ่ด้เป็นการประเมินผลการปฏิบตัิงานหรือการดาํเนินกิจการของบริษัทจดทะเบียนอีกทัง้มิได้

ใช้ข้อมลูภายในของบริษัทจดทะเบยีนในการประเมิน ดงันัน้ผลสํารวจทีแ่สดงนีจ้งึไมไ่ด้เป็นการรับรองถึงผลการปฏิบตัิงานหรือการดาํเนินการของบริษัทจดทะเบียนและไมถื่อ

เป็นการให้คําแนะนําในการลงทนุในหลกัทรัพย์ของบริษัทจดทะเบียนหรือคาํแนะนําใดๆ ผู้ใช้ข้อมลูจงึควรใช้วจิารณญาณของตนเองในการวิเคราะห์และตดัสินใจในการใช้

ข้อมลูใดๆที่เก่ียวกบับริษัทจดทะเบียนที่แสดงในผลสาํรวจนี ้

ทัง้นีบ้ริษัทหลักทรัพย์ อาร์เอชบี (ประเทศไทย) จาํกัด (มหาชน) มิได้ยืนยันหรือรับรองถงึความครบถ้วนและถูกต้องของผลสาํรวจดังกล่าวแต่อย่างใด

http://www.thai-iod.com/

ขอ้มลู Anti-Corruption Progress Indicator 2560 ประกาศเจตนารมณ์ CAC

ได้รับการรับรอง CAC

N/A

Source: Thai Institute of Directors

ขอ้มลูบรษิทัทีเ่ขา้ร่วมโครงการแนวร่วมปฏบิตัขิองภาคเอกชนไทยในการต่อตา้นทุจรติ (Thai CAC) ของสมาคมส่งเสรมิสถาบนักรรมการบรษิทัไทย (ขอ้มลู ณ วนัที ่17 ต.ค.)

• ไดป้ระกาศเจตนารมณ์เขา้ร่วม CAC

• ไดร้บัการรบัรอง CAC

การเปิดเผยการประเมนิดชันีชีว้ดัความคบืหน้าการป้องกนัการมสี่วนเกีย่วขอ้งกบัการทุจรติคอรร์ปัชนั (Anti-Corruption Progress Indicators) ของบรษิทัจดทะเบยีนในตลาดหลกัทรพัย์แห่งประเทศไทยที่

จดัทาํโดยสถาบนัทีเ่กีย่วขอ้งซึง่มกีารเปิดเผยโดยสาํนกังานคณะกรรมการกาํกบัหลกัทรพัยแ์ละตลาดหลกัทรพัยน้ี์เป็นการดาํเนินการตามนโยบายและตามแผนพฒันาความยัง่ยนืสําหรบับรษิทัจดทะเบยีนโดย

ผลการประเมนิดงักล่าว สถาบนัทีเ่กีย่วขอ้งอาศยัขอ้มลูทีไ่ดร้บัจากบรษิทัจดทะเบยีนตามทีบ่รษิทัจดทะเบยีนไดร้ะบุในแบบแสดงขอ้มลูเพื่อการประเมนิ Anti-Corruption ซึง่อา้งองิขอ้มลูมาจากแบบแสดง

รายงานขอ้มลูประจาํปี แบบ (56-1) รายงานประจาํปีแบบ (56-2) หรอืในเอกสารหรอืรายงานอื่นทีเ่กีย่วขอ้งซึง่เป็นบุคคลภายนอก โดยมไิดเ้ป็นการประเมนิการปฏบิตัขิองบรษิทัจดทะเบยีนในตลาดหลกัทรพัย์

แห่งประเทศไทยและมไิดใ้ชข้อ้มูลภายในเพื่อการประเมนิ เนื่องจากผลการประเมนิดงักล่าวเป็นเพยีงผลการประเมนิ ณ วนัที่ ปรากฏในผลการประเมนิเท่านัน้ ดงันัน้ผลการประเมนิจงึอาจเปลีย่นแปลงได้

ภายหลงัวนัดงักล่าว หรอืรบัรองความถกูตอ้งครบถว้นของผลประเมนิดงักล่าวแต่อย่างใด

17 june 2019 strategy | strategy-thailand thailand thematic · 2019-06-17 · own online platforms....

Documents