thailand daily- friday, may 16, 2014

Fr iday , 16 May 2014

1 Refer to last page for important disclosures.

T h a i l a n d D a i l y

KEY INDICES Symbol Close Chg %Chg SET 1,395.21 (0.82) (0.06) SET50 946.88 0.10 0.01 Value (Btm) - SET 36,451,256 Top 5 Sector BANK 522.42 0.52 0.10 PETRO 947.93 4.14 0.44 PROP 256.03 (2.45) (0.95) ENERG 19,292.78 (15.43) (0.08) ICT 219.17 (2.99) (1.35)

Source: Bloomberg TOP VOLUME

Symbol Price (Bt) Chg (%)

Volume (‘000)

SAWAD 14.30 (2.72) 273,026.6 TRUE 6.75 (4.26) 242,732.9 IEC 0.03 - 166,469.8 N-PARK 0.05 (16.67) 164,762.7 ICHI 25.50 4.94 144,643.4

TOP GAINERS


Volume (‘000)

SITHAI 2.10 793.62 38,464.0 ABC 4.96 27.18 0.1 THIP 121.50 20.30 98.4 TOG 4.84 18.05 18,374.1 LTX 61.25 16.67 61.7

TOP LOSERS


Volume (‘000)

NSI 60.50 (19.33) 143.9 METCO 214.00 (19.25) 78.9 N-PARK 0.05 (16.67) 164,762.7 WAT 0.05 (16.67) 68,646.6 PT 7.25 (14.20) 2,199.9

KEY STATISTICS

-------------%Chg-------------- Commodity

Current Price 1m 3M YTD

Brent crude* 109.4 0.1 1.3 0.3 Dubai crude* 105.8 0.3 0.3 (2.0) Baltic Dry Index 1,021.0 5.3 (7.7) (55.2) Gold Spot*** 1,295.5 (0.5) (1.8) 7.5

*(US$/bbl), *** (US$/toz)

FOREIGN PORTFOLIO INVESTMENT IN EQUITIES (THAILAND)

Day (Mil US$)

MTD Net (Mil US$)

YTD Net (Mil US$)

YTD Net YoY%

18.6 (34.7) (171.8) (5,683.6)

Source: Bloomberg Foreign Exchange Rate - THB/US$ (onshore) = 32.49 Interest Rate (%) - TH 1-day RP = 2.00 Thai Lending Rate (%)* - MLR = 6.75

PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE.

KEY HIGHLIGHTS Results Aapico Hitech (AH TB/HOLD/Bt14.50/Target: Bt15.40) Page 2 1Q14: In-line results, positive long-term outlook. Upgrade to HOLD.

Bangkok Dusit Medical Services (BGH TB/BUY/Bt15.50/Target: Bt17.00) Page 5 1Q14: Better than expectation as cost control measures bear fruit. Earnings growth should continue into the next few years.

Central Plaza Hotel (CENTEL TB/BUY/Bt30.50/Target: Bt35.50) Page 8 1Q14: Results beat expectations by 10.3%.

Hana Microelectronics (HANA TB/HOLD/Bt35.00/Target: Bt33.00) 1 1Q14: Significant gains from flood claims.

Thai Union Frozen Products (TUF TB/BUY/Bt69.50/Target: Bt80.00) Page 14 1Q14: Earnings in line with our expectation.

Thai Vegetable Oil (TVO TB/BUY/Bt22.40/Target: Bt28.00) Page 17 1Q14: Earnings slightly lower than our expectation.

Vinythai (VNT TB/HOLD/Bt10.50/Target: Bt11.20) Page 20 1Q14: Weak results, as expected.

AT A GLANCE Corporate Page 23 BEC: 1Q14: Results earnings lower than our expectation. SPALI: 1Q14: Results in line with expectation. TICON: 1Q14: Earnings down 84.2% qoq.

Sector Page 25 Property: Sector set to suffer sales decline in 2014. Economics / Politics Page 25 Economy: Negative growth seen for 1Q14.

* Based on Bangkok Bank’s rate




COMPANY RESULTS

Aapico Hitech (AH TB) 1Q14: In-line, Positive Long-term Outlook AH’s 1Q14 earnings dropped by 45.2% yoy to Bt152.7m, due to high-base effect from the first-car scheme and a drop in domestic consumption. Even though the outlook for 2Q14 remains negative on seasonal effect, we have a positive long-term outlook on government support and the high average age of domestic vehicles. Upgrade to HOLD with a new target price of Bt15.40. Entry price is Bt13.50. 1Q14 RESULTS

Year to 31 Dec (Btm) 1Q13 4Q13 1Q14 yoy chg (%) qoq chg (%) Net turnover 4,542 3,370 3,574 -21.3 6.1 Gross profit 385 160 220 -42.9 37.5 EBIT 146 -46 46 -68.3 -199.5 EBITDA 327 183 224 -31.5 22.8 Net income 279 1 153 -45.2 12,626.3 EPS 0.86 0.00 0.47 -45.2 12,626.3 Ratio (%) bp yoy bp qoq Gross margin 8.5 4.7 6.1 -2.3 1.4 EBIT margin 3.2 -1.4 1.3 -1.9 2.7 EBITDA margin 7.2 5.4 6.3 -0.9 0.9 SGA % of sales 5.3 6.1 4.9 -0.4 -1.3 Net margin 6.1 0.0 4.3 -1.9 4.2

Source: AH

RESULTS

• Earnings dropped as expected. Aapico Hitech’s (AH) 1Q14 earnings dropped by 45.2% yoy to Bt152.7m, due to high-base effect from the first-car scheme and a drop in domestic consumption. Gross margin decreased by 2.3ppt yoy to 6.1% from lower utilisation rate. Revenue dropped by 21.3% yoy to Bt3.6b along with total car production, which also decreased by 28.3% yoy to 517,492 units relative to our expectation. AH’s 1Q14 net profit accounts for 30% of our 2014 full-year forecast.

• Weakest results to be in 2Q14. We expect 2Q14 to be the weakest quarter of the year for AH primarily due to the fewer number of production days. As such, its earnings might fall sharply qoq as lower utilisation could affect its gross margin.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F

Net turnover 16,120 15,627 13,949 14,723 15,566 EBITDA 1,004 982 767 780 771 Operating profit 240 216 86 128 155 Net profit (rep./act.) 921 1,463 496 601 677 Net profit (adj.) 921 1,463 496 601 677 EPS (Bt) 2.9 4.5 1.5 1.9 2.1 PE (x) 5.1 3.2 9.4 7.8 6.9 P/B (x) 1.4 1.5 1.3 1.1 1.0 EV/EBITDA (x) 9.7 9.9 12.7 12.5 12.6 Dividend yield (n.a.) n.a. n.a. n.a. n.a. n.a. Net margin (%) 5.7 9.4 3.6 4.1 4.4 Net debt/(cash) to equity (%) 105.8 82.7 85.1 69.8 56.6 Interest cover (x) 3.5 3.6 3.1 3.2 3.3 ROE (%) 20.8 28.8 9.0 10.0 10.3 Consensus net profit - - 535 631 707 UOBKH/Consensus (x) - - 0.93 0.95 0.96 Source: Aapico Hitech, Bloomberg, UOB Kay Hian

HOLD (Upgraded) Share Price Bt14.50 Target Price Bt15.40 Upside +6.2% (Previous TP Bt13.20)

COMPANY DESCRIPTION Auto parts manufacturer such as chassis, forged parts, pressed parts, jigs, dies, door check and fuel tanks. The company is also engaged in automobile dealership for Ford, and Mitsubishi in Thailand, Honda in Malaysia and car navigation businesses.

STOCK DATA GICS sector Consumer

Discretionary Bloomberg ticker: AH TB Shares issued (m): 322.6 Market cap (Btm): 4,677.5 Market cap (US$m): 144.1 3-mth avg daily t'over (US$m): 0.1

Price Performance (%) 52-week high/low Bt28.00/Bt12.80

1mth 3mth 6mth 1yr YTD 5.1 (4.0) (11.6) (46.8) (0.7)

Major Shareholders % Yeap family 33.0

Sojitz corporation 16.0

Jurangkool 7.0

FY14 NAV/Share (Bt) 11.14

FY14 Net Debt/Share (Bt) 15.19

PRICE CHART

40

50

60

70

80

90

100

110

10

15

20

25

30(%)(lcy) AAPICO HITECH PCL AAPICO HITECH PCL/SET INDEX

0

1

2

3

May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14

Volume (m)

Source: Bloomberg

ANALYST Arsit Pamaranont +662 659 8317 [email protected]



T h a i l a n d D a i l y STOCK IMPACT

• 2014 car production outlook. We still maintain our forecast that total car production could reach 2.15m units in 2014 - 0.96m units for domestic sales and 1.2m units for exports. We think domestic car sales should perform in line with our forecast. We still have a positive longer-term outlook for this industry, due to a tax exemption programme from the Thai government for stimulating relocation from car makers. We expect total car production could reach 3.0m units in 2019, or at a 6.9% 4-year CAGR.

• Average age of vehicles in Thailand. We expect domestic demand to increase in the next few years as the current vehicle age has reached an average of 8.9 years. We think that in the next 1-2 years, a surge in replacement demand could stimulate domestic car sales again as car owners tend to replace their vehicles after 11 years.

EARNINGS REVISION/RISK

• Key risks include: a) decrease in total car production, b) a larger-than-expected plunge in domestic sales, and c) the political turmoil being extended.

VALUATION/RECOMMENDATION

• We think 2Q14 could be the period for accumulating its shares as we expect weak 2Q14 earnings due to fewer working days (lower utilisation), which could have a negative impact on the share price.

• Upgrade to HOLD with a target price at Bt15.40 pegged at 10.0x 2014F PE, or +0.5 SD to its 4-year average. We believe that negative factors have been priced in. In the longer term, the automobile industry could see positive effects from manufacturers’ relocation to Thailand, which will become an ASEAN car manufacturing hub. Entry price is Bt13.50.

SHARE PRICE CATALYST

• Thailand International Motor Expo in Nov 14.

PE BAND

-

5.0

10.0

15.0

Jan-10 Sep-11 May-13

PE(x)+3SD: 13.8x

+2SD: 121x+1SD: 10.3x

Mean: 8.6x

-1SD: 6.8x-2SD: 5.1x

Source: Bloomberg, UOB Kay Hian

CCI & DOMESTIC CAR SALES

-20,00040,00060,00080,000

100,000120,000140,000160,000

Jan-11

Apr-11

Jul-1

1

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-1

3

Oct-13

Jan-14

65

70

75

80

85

90

Car Sales Consumer Con.

Source: UTCC, UOB Kay Hian

GROSS MARGIN

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14

Source: AH, UOB Kay Hian




PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 15,627 13,949 14,723 15,566 Fixed assets 6,674 6,428 6,076 5,760 EBITDA 982 767 780 771 Other LT assets 1,843 3,106 3,387 3,696 Deprec. & amort. 766 681 652 616 Cash/ST investment 238 117 450 761 EBIT 216 86 128 155 Other current assets 3,825 3,869 4,061 4,273 Total other non-operating income 1,371 497 517 538 Total assets 12,579 13,519 13,974 14,490 Associate contributions 246 234 281 309 ST debt 2,563 2,825 2,575 2,325 Net interest income/(expense) (273) (251) (241) (232) Other current liabilities 2,360 2,465 2,599 2,729 Pre-tax profit 1,560 567 685 770 LT debt 2,061 2,191 2,251 2,311 Tax (74) (64) (77) (86) Other LT liabilities 124 116 116 116 Minorities (24) (6.6) (6.6) (6.6) Shareholders' equity 5,307 5,759 6,270 6,845 Net profit 1,463 496 601 677 Minority interest 163 163 163 163 Net profit (adj.) 1,463 496 601 677

Total liabilities & equity 12,579 13,519 13,974 14,490 CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 1,961 265 1,161 1,142 Profitability Pre-tax profit 708 567 685 770 EBITDA margin 6.3 5.5 5.3 5.0 Tax (48) (64) (77) (86) Pre-tax margin 10.0 4.1 4.7 4.9 Deprec. & amort. 766 681 652 616 Net margin 9.4 3.6 4.1 4.4 Associates (246) (234) (281) (309) ROA 11.1 3.8 4.4 4.8 Working capital changes (395) 10 (59) (81) ROE 28.8 9.0 10.0 10.3 Non-cash items 0.0 0.0 0.0 0.0 Other operating cashflows 1,176 (694) 241 232 Growth Investing (744) (412) (300) (300) Turnover (3.1) (10.7) 5.5 5.7 Capex (growth) (734) (400) (300) (300) EBITDA (2.2) (21.9) 1.7 (1.3) Capex (maintenance) 0.0 0.0 0.0 0.0 Pre-tax profit 61.6 (63.7) 20.8 12.4 Investments (23) (14) 0.0 0.0 Net profit 58.8 (66.1) 21.1 12.7 Proceeds from sale of assets 12 0.0 0.0 0.0 Net profit (adj.) 58.8 (66.1) 21.1 12.7 Others 0.0 1.6 0.0 0.0 EPS 58.8 (66.1) 21.1 12.7 Financing (1,223) 33 (522) (524) Dividend payments (180) (99) (90) (102) Leverage Issue of shares 0.0 0.0 0.0 0.0 Debt to total capital 45.8 45.9 42.9 39.8 Proceeds from borrowings 922 280 210 210 Debt to equity 87.1 87.1 77.0 67.7 Loan repayment (1,732) 200 (400) (400) Net debt/(cash) to equity 82.7 85.1 69.8 56.6 Others/interest paid (232) (348) (241) (232) Interest cover (x) 3.6 3.1 3.2 3.3 Net cash inflow (outflow) (6.0) (114) 339 318 Beginning cash & cash equivalent 207 238 117 450 Changes due to forex impact 37 (6.6) (6.6) (6.6) Ending cash & cash equivalent 238 117 450 761




COMPANY RESULTS

Bangkok Dusit Medical Services (BGH TB) 1Q14: Better-than-expected Results; Maintain BUY BGH reported good 1Q14 results and beat our and consensus estimates. The group showed that it has found the right balance of cost control and earnings growth. This will be key for sustainable earnings growth going forward. It will also enable BGH to start looking for new M&A deals to fulfil its ambition of having 50 hospitals. Maintain BUY with target price at Bt17.00.

1Q14 RESULTS Year to 31 Dec 1Q14 1Q13 yoy 4Q13 qoq Remarks (Btm) % chg % chg

Sales 13,861 12,267 13.0 13,030 6.4

Increasing number of patients & focus on higher intensity cases

Gross Profit 5,078 4,397 15.5 4,268 19.0 EBITDA 3,299 2,897 13.9 2,528 30.5 Effective cost control Pre-tax Profit 2,379 2,115 12.5 1,626 46.3 Tax (453) (410) 10.5 (367) 23.4 Net Profit 2,075 1,948 6.5 1,417 46.4 Net Profit (Ex EI) 2,075 1,938 7.1 1,395 48.7 EPS (Bt) 0.13 0.13 0.0 0.09 44.4 Gross margin (%) 36.6 35.8 32.8 EBITDA margin (%) 23.8 23.6 19.4 Net margin (%) 15.0 15.9 10.9

Source: BH, UOB Kay Hian

RESULTS

• Satisfactory 1Q14 results. Bangkok Dusit Medical Services (BGH) reported better-than-expected 1Q14 results as the group’s cost controls bore fruit. 1Q14 earnings are 5-6% better than our and consensus forecasts. 1Q14 sales grew impressively by 13% to Bt14.9b on increasing number of patients and its focus on higher intensity cases. An expansion of two new hospitals in 2013 - Samitivej Thonburi Hospital and Bangkok Hospital Pitsanulok - also contributed to its revenue growth in this quarter. With the centralisation of job allocation, equipment sharing, scaling down of opening of new hospitals and tight cost control, 1Q14 EBITDA margin was restored to 24%, the same as in 1Q13. Including lower equity accounting in 1Q14 as there was no gain on sales of Ramkhamhaeng Hospital investment as in 1Q13, BGH reported 1Q14 net profit of Bt2.1b, an increase of 7% yoy. BGH’s 1Q14 performance was also better qoq as the hospital’s tight cost control started to bear fruit.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F Net turnover 45,305 50,461 57,000 66,272 77,263 EBITDA 10,009 10,148 12,286 14,349 16,962 Operating profit 7,097 6,935 8,834 10,724 13,301 Net profit (rep./act.) 7,849 6,261 7,687 9,521 11,841 Net profit (adj.) 6,037 6,076 7,687 9,521 11,841 EPS (Bt) 0.4 0.4 0.5 0.6 0.8 PE (x) 39.7 39.4 31.2 25.2 20.3 P/B (x) 6.5 5.9 5.3 4.7 4.1 EV/EBITDA (x) 25.9 25.5 21.1 18.1 15.3 Dividend yield (%) 1.2 1.3 1.6 2.0 2.5 Net margin (%) 17.3 12.4 13.5 14.4 15.3 Net debt/(cash) to equity (%) 43.6 45.8 37.4 26.0 11.2 Interest cover (x) 11.8 10.6 14.4 21.6 29.4 ROE (%) 22.8 16.2 17.9 19.7 21.7 Consensus net profit - - 6,949 8,148 9,918 UOBKH/Consensus (x) - - 1.11 1.17 1.19 Source: Bangkok Dusit Medical Services, Bloomberg, UOB Kay Hian

BUY (Maintained) Share Price Bt15.50 Target Price Bt17.00 Upside +9.7%

COMPANY DESCRIPTION A group of leading private hospitals with a nationwide network. Its proportion of local and foreign revenue is currently at 72:28. Growth drivers come from local and regional expansion via greenfield projects and mergers & acquisitions.

STOCK DATA GICS sector Health Care Bloomberg ticker: BGH TB Shares issued (m): 15,491.0 Market cap (Btm): 240,109.8 Market cap (US$m): 7,395.0 3-mth avg daily t'over (US$m): 11.9


1mth 3mth 6mth 1yr YTD 17.0 27.0 20.6 (10.7) 31.9

Major Shareholders % Prasarttong-osoth family 31.2

Tongtang family 15.2

Viriya Insurance 6.2



PRICE CHART

60

70

80

90

100

110

120

10

12

14

16

18

20(%)(lcy)

BANGKOK DUSIT MED SERVICE

BANGKOK DUSIT MED SERVICE/SET INDEX

0

50

100

150


Volume (m)

Source: Bloomberg

ANALYST Kowit Pongwinyoo +662 659 8304 [email protected]

STOCK IMPACT REVENUE BREAKDOWN



T h a i l a n d D a i l y • Earnings to continue to grow despite the low season in 2Q14. As BGH seemed to

find the right measures to control cost, we expect BGH’s earnings growth to continue in the following quarters despite its plans to open up to six new hospitals this year. However, the pace of growth may slow down slightly in 2Q14 as the hospital industry enters the low season. Earnings growth should come back strongly in 3Q14 as the industry enters the high season.

• Expect more acquisition of new hospitals soon. With cost control in place, we expect management may pay more attention on network expansion. In the pipeline is a schedule to open six new hospitals in 2014, two new hospitals in 2015 and one new hospital in 2016. This will enable BGH to have 40 hospitals under its umbrella. We expect more acquisitions soon to fulfil its target to have 50 hospitals under the group.


• Forecasts maintained. Despite better-than-expected earnings, we expect BGH’s earnings growth momentum should slow down in 2Q14 as the industry braces for the low season. We therefore maintain our forecasts for sales growth of 13% and 16% in 2014 and 2015, respectively. Its core profits are forecasted to grow by 27% and 24%, in 2014 and 2015, respectively.


• Maintain BUY. BGH is a good play on earnings recovery as evident in its good 1Q14 results. We expect its earnings growth should continue and gather momentum in 3Q14. We therefore maintain BUY on BGH. It also trades at 31x PE, on a par with the regional peers’ yet offers catalysts on potential M&A deals in the foreseeable future. Current share price still offers 10% upside to our Bt17.00 target price, based on DCF model at a discount rate of 8%.


• Announcement of M&A deals.

PEER COMPARISON

Company Ticker P/E (x) P/BV

(x) EV/EBITDA

(x) Div yield

(%) ROE (%)

Earnings Growth (%)

2014F 2014F 2014F 2014F 2014F 2014F Bangkok Dusit BGH TB 31.2 5.1 20.7 1.6 17.1 26.5* Bumrungrad BH TB 30.1 7.5 18.8 1.8 26.5 12.2* Bangkok Chain BCH TB 23.9 3.6 11.5 2.7 15.8 27.4* Raffles Medical RFMD SP 27.4 3.8 20.7 1.5 14.4 5.8 IHH Healthcare IHH MK 42.5 1.8 19.6 0.4 4.3 18.5 KPJ Healthcare KPJ MK 30.3 2.8 16.5 1.6 9.2 6.8 Ramsay RHC AU 28.3 5.6 14.8 1.8 20.1 19.6 Apollo APHS IN 38.3 4.4 19.5 0.6 11.8 7.7 Local aver. 28.4 5.4 17.0 2.0 19.8 22.0 Total aver. 31.5 4.3 17.8 1.5 14.9 7.3

*Core Earnings Source: Bloomberg, UOB Kay Hian

74% 72% 72% 70%

26% 28% 28% 30%

2011 2012 2013 1Q14F

Domestic Foreign

Source: BGH

SALES AND CORE PROFIT GROWTH

1316

2724

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2012 2013 2014F 2015F

(Btm)

0

10

20

30

40

50

60

70(%)

Sales Core profit Sales growth yoy Core profit growth

Source: BGH,UOB Kay Hian

QUARTERLY NET PROFIT

0

500

1000

1500

2000

2500

3000

3500

1Q 2Q 3Q 4Q

(Btm)

2012 2013 2014

Source: BGH

QUARTERLY MARGINS

0%

5%

10%

15%

20%

25%

30%

35%

40%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q13 3Q13 4Q13

Gross margin EBITDA margin Net margin

Source: BGH

P/B MEAN AND SD

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-06 Nov-06 Sep-07 Jul-08 May-09 Mar-10 Jan-11 Nov-11 Sep-12 Jul-13 May-1

BV (x)

+2SD: 6.0x

+1SD: 4.8x

BGH TB / Forward P/BV

Mean: 3.6x

-1SD: 2.3x

-2SD: 1.1x





PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 50,461 57,000 66,272 77,263 Fixed assets 38,875 41,978 44,069 44,502 EBITDA 10,148 12,286 14,349 16,962 Other LT assets 27,295 27,796 28,313 28,849 Deprec. & amort. 3,213 3,452 3,625 3,661 Cash/ST investment 4,181 1,696 1,782 6,399 EBIT 6,935 8,834 10,724 13,301 Other current assets 6,048 6,817 7,905 9,180 Total other non-operating income 761 777 788 815 Total assets 76,399 78,286 82,070 88,929 Associate contributions 988 1,036 1,203 1,408 ST debt 4,072 3,616 2,116 3,616 Net interest income/(expense) (957) (853) (664) (577) Other current liabilities 7,689 8,613 9,802 11,133 Pre-tax profit 7,727 9,794 12,052 14,946 LT debt 18,729 15,048 12,932 9,316 Tax (1,392) (1,752) (2,170) (2,708) Other LT liabilities 3,265 3,592 3,951 4,346 Minorities (259) (355) (361) (397) Shareholders' equity 40,681 45,356 51,106 58,246 Net profit 6,261 7,687 9,521 11,841 Minority interest 1,963 2,061 2,164 2,272 Net profit (adj.) 6,076 7,687 9,521 11,841

Total liabilities & equity 76,399 78,286 82,070 88,929 CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 8,913 10,210 11,236 12,288 Profitability Pre-tax profit 6,924 8,758 10,848 13,538 EBITDA margin 20.1 21.6 21.7 22.0 Tax (1,392) (1,752) (2,170) (2,708) Pre-tax margin 15.3 17.2 18.2 19.3 Deprec. & amort. 3,213 3,452 3,625 3,661 Net margin 12.4 13.5 14.4 15.3 Associates 988 1,036 1,203 1,408 ROA 8.6 9.9 11.9 13.8 Working capital changes 353 (249) (1,068) (2,204) ROE 16.2 17.9 19.7 21.7 Non-cash items (914) (681) (842) (1,011) Other operating cashflows (259) (355) (361) (397) Growth Investing (9,857) (5,884) (4,152) (1,299) Turnover 11.4 13.0 16.3 16.6 Capex (growth) (9,857) (5,884) (4,152) (1,299) EBITDA 1.4 21.1 16.8 18.2 Financing 1,267 (6,812) (6,998) (6,373) Pre-tax profit (2.9) 26.8 23.0 24.0 Dividend payments (2,782) (3,099) (3,844) (4,760) Net profit (20.2) 22.8 23.8 24.4 Issue of shares 463 0.0 0.0 0.0 Net profit (adj.) 0.6 26.5 23.8 24.4 Proceeds from borrowings 3,586 0.0 0.0 0.0 EPS 0.6 26.3 23.8 24.4 Loan repayment 0.0 (3,712) (3,154) (1,613) Others/interest paid 0.0 0.0 0.0 0.0 Leverage Net cash inflow (outflow) 323 (2,485) 87 4,616 Debt to total capital 34.8 28.2 22.0 17.6 Beginning cash & cash equivalent 3,858 4,181 1,696 1,782 Debt to equity 56.0 41.1 29.4 22.2

Ending cash & cash equivalent 4,181 1,696 1,782 6,399 Net debt/(cash) to equity 45.8 37.4 26.0 11.2

Interest cover (x) 10.6 14.4 21.6 29.4




COMPANY RESULTS

Central Plaza Hotel (CENTEL TB) 1Q14: Results Beat Expectations By 10.3% CENTEL reported a 1Q14 net profit of Bt501.9m, down 22.7% yoy owing to a) poor performance of its hotels in Bangkok from political demonstrations and b) increased SG&A expenses for food business. The results were better than our expectation by 10.3% due to better-than-expected hotel revenue and gross margin from hotel operations. Maintain BUY in view of CENTEL’s promising long-term earnings outlook and greater flexibility in restaurant portfolio management. Target price: Bt35.50.

1Q14 Results Year to 31 Dec (Btm) 1Q13 4Q13 1Q14 % qoq % yoy Revenue from hotel business 2,241.2 2,192.7 2,229.6 1.7 -0.5 Revenue from food business 2,150.4 2,327.1 2,286.4 -1.7 6.3 Other income 121.9 104.7 109.5 4.6 -10.2

Total revenue 4,513.5 4,624.5 4,625.5 0.0 2.5 Cost of sales - hotel business (746.5) (803.8) (719.1) -10.5 -3.7 Cost of sales - food business (1,043.8) (1,160.9) (1,141.1) -1.7 9.3

Total cost of sales (1,790.3) (1,964.7) (1,860.2) -5.3 3.9 Gross operating profit from hotel business 1,494.7 1,388.9 1,510.5 8.8 1.1 Gross operating profit from food business 1,106.6 1,166.2 1,145.3 -1.8 3.5

Total gross operating profit 2,601.3 2,555.1 2,655.8 3.9 2.1 EBITDA 1,279.6 913.4 1,171.3 28.2 -8.5 Net profit before extra items 649.0 290.3 501.9 72.9 -22.7 Net profit (loss) 649.0 290.3 501.9 72.9 -22.7 Gross operating profit margin from hotel 66.7% 63.3% 67.7% 4.4 1.1 Gross operating profit margin from food 51.5% 50.1% 50.1% 0.0 -1.4

Overall gross operating profit margin 59.2% 56.5% 58.8% 2.3 -0.4 EBITDA margin 28.4% 19.8% 25.3% 5.6 -3.0

Source: CENTEL, UOB Kay Hian

RESULTS

• 1Q14 net profit dropped 22.7% yoy due to political disturbances and consumption slowdown. Central Plaza Hotel (CENTEL) posted 1Q14 net profit of Bt501.9m, up 72.9% qoq but down 22.7% yoy. The yoy drop in net profit was owing to a) poor performance of its hotels in Bangkok as a result of political demonstrations and b) increased SG&A expenses for food business. The results were better than our expectation by 10.3% due to better-than-expected hotel revenue and gross margin from hotel operations. Its 1Q14 net profit accounted for 33% of our full-year forecast.

• Contribution from Maldives resorts partially offset poor performance of Bangkok hotels. CENTEL’s revenue from hotel business dropped slightly by 0.5% yoy to Bt2,229.6m in 1Q14 since the impressive performance of its resorts in Maldives partially offset the negative impact of political turmoil to its hotels in Bangkok and Pattaya.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F Net turnover 14,918 17,557 18,930 21,536 23,528 EBITDA 3,200 3,905 4,395 4,896 5,383 Operating profit 1,839 2,327 2,550 2,924 3,294 Net profit (rep./act.) 1,596 1,322 1,521 1,829 2,195 Net profit (adj.) 1,064 1,334 1,521 1,829 2,195 EPS (Bt) 0.8 1.0 1.1 1.4 1.6 PE (x) 38.7 30.9 27.1 22.5 18.8 P/B (x) 4.6 4.0 3.6 3.3 2.9 EV/EBITDA (x) 16.3 13.3 11.8 10.6 9.7 Dividend yield (%) 1.0 1.2 1.3 1.6 1.9 Net margin (%) 10.7 7.5 8.0 8.5 9.3 Net debt/(cash) to equity (%) 130.5 103.6 88.1 72.1 54.8 Interest cover (x) 6.6 7.7 8.5 9.5 11.8 ROE (%) 21.6 13.7 14.0 15.2 17.2 Consensus net profit - - 1,496 1,927 2,294 UOBKH/Consensus (x) - - 1.02 0.95 0.96 Source: Central Plaza Hotel, Bloomberg, UOB Kay Hian


COMPANY DESCRIPTION CENTEL is Thailand’s leading operator of hotels both in Thailand and overseas, as well as Quick Service Restaurant (QSR) in Thailand. CENTEL is part of Central Group of companies.

STOCK DATA GICS sector Consumer

Discretionary Bloomberg ticker: CENTEL TB Shares issued (m): 1,350.0 Market cap (Btm): 41,175.0 Market cap (US$m): 1,268.1 3-mth avg daily t'over (US$m): 2.8


1mth 3mth 6mth 1yr YTD 1.7 (0.8) (21.8) (19.2) 10.9

Major Shareholders % Chirathivat Family 64.0

Local Investors 26.0

Foreign Investors 10.0



PRICE CHART

50

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20

25

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35

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50(%)(lcy)

CENTRAL PLAZA HOTEL PCL

CENTRAL PLAZA HOTEL PCL/SET INDEX

0

5

10

15


Volume (m)

Source: Bloomberg

ANALYST Pornthipa Rayabsangduan +662 659 8302 [email protected]



T h a i l a n d D a i l y Note that Centara Grand Island Resort and Centara Ras Fushi Resort in Maldives reported strong RevPar growth of 17.5% in 1Q14. In addition, Centara Ras Fushi Resort & Spa Maldives, opened on 24 Mar 13, will have a full-year 2014 contribution. RevPar of its Bangkok hotels declined 44% yoy to Bt1,391 in 1Q14 as a result of a lower occupancy rate of 48% (vs 78% in 1Q13) and a 9% drop in average room rate (ARR). However, CENTEL’s hotels in upcountry were less affected as its RevPar managed to be flat yoy at Bt4,490 in 1Q14. In sum, its RevPar of CENTEL’s hotel portfolio, including resorts in Maldives, increased 6.7% yoy to Bt4,323 in 1Q14, driven by strong ARR growth while occupancy dropped to 75.3% (vs 84.3% in 1Q13). Its gross margin from hotel business rose to 67.7% in 1Q14 from 66.7% in 1Q13 due to solid ARR growth of 19% to Bt6,103 in 1Q14.

• Gross margin from food business decreased to 50.1% in 1Q14. CENTEL’s revenue from food business increased 6.3% yoy to Bt2,286.4m in 1Q14 driven by outlet expansion, new menu offerings, continued customer loyalty programme, as well as increased advertising and sales promotions. The number of food outlets as at end-1Q14 increased 10.4% yoy to 752. Meanwhile, the average SSS growth in 1Q14 was still negative 1.8% due to a slowdown in domestic consumption. Note that SSS growth of most food brands except KFC (+2.2%) and Ootoya (+5.7%) was negative. Its gross margin from food business declined to 50.1% in 1Q14 compared with 51.5% in 1Q13 but was flat qoq as a result of higher cost of certain raw food ingredients and packaging materials, as well as the increased sales promotions and new menu offerings.


• Keep our net profit forecasts for 2014-15 unchanged. Key risks include external risks, deterioration of Thailand’s economic outlook, and the political turmoil.


• Maintain BUY due to its promising long-term outlook and more flexibility in restaurant portfolio management. CENTEL’s normalised profit is expected to grow strongly at a CAGR of 19.8% for 2013-15. We maintain our target price for CENTEL at Bt35.50 based on sum-of-the-parts valuation. We value CENTEL’s hotel business at Bt22.55, pegged at 14.3x 2014F EV/EBITDA, and its restaurant business at Bt12.95, based on 21.9x 2014F PE.


• The addition of a new food brand.

• Acquisition of hotel properties abroad.

• Sale of hotel properties in Thailand and overseas to a REIT in 2014.

OCCUPANCY, ARR AND REVPAR IN 2008-15F

2,162 1,983 1,9792,340

2,617

3,486 3,639

4,16664.2%

60.5% 58.1%63.9%

69.9%

79.8%75.8%

81.9%

-

1,000

2,000

3,000

4,000

5,000

6,000

2008 2009 2010 2011 2012 2013 2014F 2015F

(Bt)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

RevPar ARR Occupancy rate Source: CENTEL, UOB Kay Hian REVPAR EXCLUDING MALDIVES RESORTS

2,162 1,983 1,979 2,340 2,617 3,486 3,639 4,166

5.7%

18.2%

11.8%

33.2%

4.4%

14.5%

-8.3%

-0.2%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2008 2009 2010 2011 2012 2013 2014F 2015F

(Bt)

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

RevPar RevPar growth Source: CENTEL, UOB Kay Hian HOTEL REVENUE CONTRIBUTION BY LOCATION IN1Q14

Bangkok17%

Hua Hin10%

Hat Yai 2%

Krabi 7%

Pattaya15%

Phuket19%

Samui8%

Mae Sot0.4%

Maldives23%


SSSG, TSS GROWTH & NUMBER OF OUTLETS

1.5%

-4.5%

14.8%

6.2%

1.0%23.7% 27.1%0.9%

14.0%

2.3% 11.5%9.7%9.1% 15.4%

511478

512

603677

795743

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2008 2009 2010 2011 2012 2013 2014F

-300

-150

0

150

300

450

600

750

900

(outlets)

SSS TSS No. of outlets




T h a i l a n d D a i l y PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 17,557 18,930 21,536 23,528 Fixed assets 22,945 21,446 22,334 22,911 EBITDA 3,905 4,395 4,896 5,383 Other LT assets 3,803 6,021 5,809 5,669 Deprec. & amort. 1,578 1,846 1,972 2,089 Cash/ST investment 742 220 749 408 EBIT 2,327 2,550 2,924 3,294 Other current assets 1,722 1,917 2,173 2,361 Total other non-operating income 0.0 0.0 0.0 0.0 Total assets 29,212 29,604 31,064 31,349 Associate contributions 22 12 12 12 ST debt 3,512 3,419 4,219 4,419 Net interest income/(expense) (507) (515) (515) (454) Other current liabilities 2,906 3,349 3,780 4,090 Pre-tax profit 1,842 2,047 2,420 2,851 LT debt 7,943 6,833 5,660 3,762 Tax (453) (464) (518) (568) Other LT liabilities 3,699 3,751 3,806 3,863 Minorities (55) (61) (74) (89) Shareholders' equity 10,344 11,383 12,657 14,184 Net profit 1,322 1,521 1,829 2,195 Minority interest 807 869 942 1,031 Net profit (adj.) 1,334 1,521 1,829 2,195

Total liabilities & equity 29,212 29,604 31,064 31,349 CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 3,140 3,664 4,039 4,483 Profitability Pre-tax profit 1,842 2,047 2,420 2,851 EBITDA margin 22.2 23.2 22.7 22.9 Tax (453) (464) (518) (568) Pre-tax margin 10.5 10.8 11.2 12.1 Deprec. & amort. 1,578 1,846 1,972 2,089 Net margin 7.5 8.0 8.5 9.3 Associates (22) (12) (12) (12) ROA 4.6 5.2 6.0 7.2 Working capital changes 195 248 176 122 ROE 13.7 14.0 15.2 17.2 Other operating cashflows 0.0 0.0 0.0 0.0 Investing (2,002) (2,500) (2,582) (2,458) Growth Capex (growth) (2,385) (2,517) (2,600) (2,400) Turnover 17.7 7.8 13.8 9.3 Investments 162 0.0 0.0 0.0 EBITDA 22.0 12.6 11.4 9.9 Others 221 17 18 (58) Pre-tax profit 29.9 11.1 18.3 17.8 Financing (753) (1,686) (928) (2,365) Net profit (17.2) 15.1 20.2 20.0 Dividend payments (405) (483) (555) (668) Net profit (adj.) 25.4 14.0 20.2 20.0 Issue of shares 0.0 0.0 0.0 0.0 EPS 25.4 14.0 20.2 20.0 Proceeds from borrowings (599) (1,203) (373) (1,698) Others/interest paid 251 0.0 0.0 0.0 Leverage Net cash inflow (outflow) 385 (521) 529 (341) Debt to total capital 50.7 45.6 42.1 35.0 Beginning cash & cash equivalent 356 742 220 749 Debt to equity 110.7 90.1 78.1 57.7 Ending cash & cash equivalent 742 220 749 408 Net debt/(cash) to equity 103.6 88.1 72.1 54.8

Interest cover (x) 7.7 8.5 9.5 11.8




COMPANY RESULTS

HANA Microelectronics (HANA TB) 1Q14: Significant Gain From Flood Claims HANA’s net profit excluding claims increased 60.1% qoq and 66.5% yoy to Bt240m, while normalised net profit soared to Bt1,590m due to flood claims. Although the new Lamphun plant 2 would increase IC production capacity by 25%, we think share price has reflected the growth catalysts. Maintain HOLD. Target price: Bt33.00. Entry price: Bt30.00.

1Q14 RESULTS Year to 31 Dec (Btm) 1Q13 4Q13 1Q14 qoq % chg yoy % chg Net turnover 3,622 4,818 4,670 3.2 28.9 Gross profit 174 595 581 2.5 233.1 EBIT -59 425 341 24.7 -680.5 EBITDA 245 703 630 11.7 156.7 Net income 144 614 1,590 -61.4 1,002.0 Net income (excl. claims) 144 385 240 60.1 66.5 EPS excl. claims (Bt) 0.18 0.48 0.30 60.1 66.5 Ratio (%) bp qoq bp yoy Gross margin 4.8 12.4 12.4 0.1 7.6 EBIT margin -1.6 8.8 7.3 -1.5 8.9 EBITDA margin 6.8 14.6 13.5 -1.1 6.7 SGA % of sales 6.3 4.4 5.0 0.7 -1.3 Net margin 4.0 12.7 34.1 21.3 30.1 Net margin (excl. claims) 4.0 8.0 5.1 -2.8 1.2

Source: Hana Microelectronics, UOB Kay Hian

RESULTS

• Gains from flood claims. HANA Microelectronics’ (HANA) net profit excluding claims increased 60.1% qoq and 66.5% yoy to Bt240m, while normalised net profit soared to Bt1,590m on flood claims (business interruption claims) of Bt1.3b from. Revenue increased 19% yoy in US$ terms from US$120m to US$143m, while the Thai baht depreciated 9% yoy to Bt32.66/US$, which led to sales rising 29% yoy. In addition, gross margin was maintained at 12.4% due to the weakening baht.

• Outstanding claims. HANA still has outstanding claims of around Bt81m, which will be recognised in 2014.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F Net turnover 17,233 17,667 20,857 21,449 22,515 EBITDA 1,811 2,108 2,767 2,931 3,215 Operating profit 582 923 1,511 1,593 1,797 Net profit (rep./act.) 1,661 2,337 3,471 2,136 2,357 Net profit (adj.) 1,261 1,396 2,040 2,136 2,357 EPS (Bt) 1.6 1.7 2.5 2.7 2.9 PE (x) 21.7 19.6 13.4 12.8 11.6 P/B (x) 1.8 1.6 1.5 1.5 1.4 EV/EBITDA (x) 11.6 10.0 7.6 7.2 6.5 Dividend yield (%) 4.4 4.4 6.3 4.7 5.2 Net margin (%) 9.6 13.2 16.6 10.0 10.5 Net debt/(cash) to equity (%) (20.7) (25.1) (35.5) (39.9) (44.2) Interest cover (x) 242.1 243.9 251.2 258.9 180.8 ROE (%) 11.3 14.8 20.1 11.6 12.2 Consensus net profit - - 1,898 2,168 2,514 UOBKH/Consensus (x) - - 1.08 0.99 0.94 Source: Hana Microelectronics, Bloomberg, UOB Kay Hian

HOLD (Maintained) Share Price Bt35.00 Target Price Bt33.00 Upside -2.9% (Previous TP Bt23.00)

COMPANY DESCRIPTION Electronics manufacturing service company. The major product groups are PCBA, IC, LED and LCE assembly

STOCK DATA GICS sector Information Technology Bloomberg ticker: HANA TB Shares issued (m): 804.9 Market cap (Btm): 27,365.9 Market cap (US$m): 844.0 3-mth avg daily t'over (US$m): 1.6


1mth 3mth 6mth 1yr YTD 13.3 36.0 45.9 40.5 34.7

Major Shareholders % OMAC (HK) Limited 21.0

OMAC (Thailand) Limited 5.0

Rainbow Joy Limited 5.0


FY14 Net Cash/Share (Bt) 7.90

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HANA MICROELECTRONICS PCL

HANA MICROELECTRONICS PCL/SET INDEX

02

4

6

8


Volume (m)

Source: Bloomberg

ANALYSTS Arsit Pamaranont +662 659 8317 [email protected] Thailand Research Team +662 659 8033 [email protected]




• Catalysts from new plants. We expect the Lamphun plant 2 to commence operations in 2Q14, which would increase IC production capacity by 25%. We also expect the plant in Koh Kong province, Cambodia, which focuses on low-end and labour-intensive products to serve CLMV (Cambodia, Laos, Myanmar, and Vietnam) markets, could start operations within 4Q14-1Q15. We think these two plants could increase overall capacity by 30% in 2015. We have not included the new plant in Cambodia into our valuation.


• We raise our assumptions for capacity from Lamphun Plant by 25%, utilisation rate, gross margin by 0.5ppt, and flood claims from Bt1,000m to Bt1,431m.

EARNINGS REVISION

Year to 31 Dec (Btm) 2014F

Old 2014F

New chg (%)

2015F Old

2015F New

chg (%)

Net turnover 19,394 20,857 7.5 20,624 21,449 4.0 Net profit 2,742 3,470 26.6 1,954 2,136 9.3 Net profit excl. claims 1,742 2,039 17.1 1,954 2,136 9.3 EPS (adj) (Bt) 3.4 4.3 26.6 2.4 2.7 9.3 EPS excl. claims (adj) (Bt) 2.2 2.5 17.1 2.4 2.7 9.3

Source: UOB Kay Hian

• Key risks include: a) low utilisation rate of new plants, b) the Cambodian plant may face bureaucratic problems, and c) fluctuations in the Thai baht.


• We think share price has reflected the growth catalysts from capacity expansion and new customers. But HANA is a good dividend stock, and we forecast a dividend yield 6.0% in 2014-15.

• Maintain HOLD with a new target price at Bt33.00, pegged at 13.0x 2014F PE, or +1.5SD to its 4-year mean of 9.1x, reflecting growth from the new plant and industry upturn, as seen in the book-to-bill ratio at above 1.0x. Entry price is Bt30.00.


• Capacity expansion from new plants.

PE BAND

-

3

6

9

12

15

18

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

PE(x)

+3SD: 16.5x

+2SD: 14.1x

+1SD: 11.6x

-1SD: 6.7x

-2SD: 4.3x

Mean: 9.1x


BOOK-TO-BILL RATIO

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

(x)

+3SD: 1.4x

+2SD: 1.2x+1SD: 1.1x

-1SD: 0.8x

-2SD:0.7x

Mean: 1.0x

Source: SEMI, UOB Kay Hian




PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 17,667 20,857 21,449 22,515 Fixed assets 6,691 6,534 6,195 5,778 EBITDA 2,108 2,767 2,931 3,215 Other LT assets 188 34 33 33 Deprec. & amort. 1,184 1,256 1,339 1,417 Cash/ST investment 4,186 6,413 7,537 8,768 EBIT 923 1,511 1,593 1,797 Other current assets 9,092 9,026 9,207 9,520 Total other non-operating income 1,485 2,057 643 675 Total assets 20,157 22,007 22,973 24,099 Associate contributions 0.0 0.0 0.0 0.0 ST debt 16 55 57 59 Net interest income/(expense) (8.6) (11) (11) (18) Other current liabilities 3,161 3,634 3,728 3,892 Pre-tax profit 2,399 3,556 2,225 2,455 LT debt 0.0 0.0 0.0 0.0 Tax (62) (85) (89) (98) Other LT liabilities 386 401 417 434 Minorities 0.0 0.0 0.0 0.0 Shareholders' equity 16,594 17,917 18,772 19,714 Net profit 2,337 3,471 2,136 2,357 Minority interest 0.0 0.0 0.0 0.0 Net profit (adj.) 1,396 2,040 2,136 2,357

Total liabilities & equity 20,157 22,007 22,973 24,099 CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 3,236 4,936 3,344 3,579 Profitability Pre-tax profit 2,399 3,556 2,225 2,455 EBITDA margin 11.9 13.3 13.7 14.3 Tax (108) (85) (89) (98) Pre-tax margin 13.6 17.1 10.4 10.9 Deprec. & amort. 1,184 1,256 1,339 1,417 Net margin 13.2 16.6 10.0 10.5 Associates 0.0 0.0 0.0 0.0 ROA 12.3 16.5 9.5 10.0 Working capital changes (165) 257 (103) (177) ROE 14.8 20.1 11.6 12.2 Non-cash items (11) (385) (101) (101) Other operating cashflows (64) 337 73 82 Growth Investing (1,606) (686) (997) (997) Turnover 2.5 18.1 2.8 5.0 Capex (growth) (1,427) (1,000) (1,000) (1,000) EBITDA 16.4 31.3 6.0 9.7 Capex (maintenance) 0.0 0.0 0.0 0.0 Pre-tax profit 38.7 48.2 (37.4) 10.3 Investments 105 6.2 1.9 2.0 Net profit 40.8 48.5 (38.5) 10.3 Proceeds from sale of assets 460 0.0 0.0 0.0 Net profit (adj.) 10.7 46.2 4.7 10.3 Others (744) 308 0.7 0.8 EPS 10.7 46.2 4.7 10.3 Financing (1,216) (1,696) (1,280) (1,411) Dividend payments (1,207) (1,736) (1,281) (1,414) Leverage Issue of shares 0.0 0.0 0.0 0.0 Debt to total capital 0.1 0.3 0.3 0.3 Proceeds from borrowings 0.0 0.0 0.0 0.0 Debt to equity 0.1 0.3 0.3 0.3 Loan repayment (8.5) 39 1.5 2.7 Net debt/(cash) to equity (25.1) (35.5) (39.9) (44.2) Others/interest paid (0.7) 0.0 0.0 0.0 Interest cover (x) 243.9 251.2 258.9 180.8 Net cash inflow (outflow) 414 2,553 1,066 1,170 Beginning cash & cash equivalent 3,111 4,186 6,413 7,537 Changes due to forex impact 661 (326) 58 61 Ending cash & cash equivalent 4,186 6,413 7,537 8,768




COMPANY RESULTS

Thai Union Frozen Products (TUF TB) 1Q14: Earnings In Line With Our Expectation TUF posted a net profit of Bt950m in 1Q14, which was in line with our expectation at Bt1,013m. 1Q14 earnings were up 41% yoy but down 18% qoq owing to out-of-sales seasonality. We maintain the view that 1Q14 earnings would be the bottom of this year as the shrimp business tends to gradually improve in the next quarter. Maintain BUY with a target price at Bt80.00.

1Q14 Results Year to 31 Dec 1Q13 4Q13 1Q14 yoy qoq Remarks (Btm) % chg % chg Sales 24,441 30,788 27,948 14 -9 Sales declined qoq

owing to out-of-sales seasonality

Gross profit 2,665 3,976 4,158 56 5 SG&A expense 2,242 2,627 2,715 21 3 Other income 348 792 163 -53 -79 EBT 520 1,479 1,151 121 -22 EBIT 883 2,000 1,625 84 -19 Net profit 674 1,151 950 41 -18 Ratio-% Gross margins 10.9 12.9 14.9 EBITDA margins 5.7 8.7 7.9 Net margins 2.8 3.7 3.4

Source: TUF, UOB Kay Hian

RESULTS

• 1Q14 earnings increased 41% yoy but decreased 18% qoq. Thai Union Frozen Products (TUF) posted a net profit of Bt950m in 1Q14, which was in line with our expectation. Sales grew 14% yoy due to baht depreciation and higher sales of tuna, shrimp & related business, pet food and value-added & other products. However, sales in 1Q14 dropped 9% qoq owing to the low selling season. Gross margin improved from 13% in 4Q13 to 15% in 1Q14 thanks to higher margin of branded tuna from declining raw material cost. In addition, a foreign exchange gain of Bt254m supported earnings in 1Q14. 1Q14 revenue comprised tuna at 48%, shrimp and related business at 23%, sardine & mackerel at 6%, salmon at 4%, pet food at 8% and value added and other products at 11%.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F Net turnover 106,698 112,813 127,313 147,516 171,212 EBITDA 8,772 6,311 9,609 11,407 13,060 Operating profit 6,869 3,988 7,340 9,176 10,829 Net profit (rep./act.) 4,694 3,189 5,098 6,776 8,309 Net profit (adj.) 4,694 3,189 5,098 6,776 8,309 EPS (Bt) 4.1 2.8 4.4 5.9 7.2 PE (x) 17.0 25.0 15.6 11.8 9.6 P/B (x) 2.1 2.0 1.9 1.7 1.7 EV/EBITDA (x) 13.9 19.4 12.7 10.7 9.4 Dividend yield (%) 3.0 2.1 3.2 4.2 5.2 Net margin (%) 4.4 2.8 4.0 4.6 4.9 Net debt/(cash) to equity (%) 89.0 104.8 89.2 87.8 88.6 Interest cover (x) 3.8 3.8 4.3 4.9 5.6 ROE (%) 15.2 8.3 12.4 15.2 18.2 Consensus net profit - - 5,140 6,273 7,201 UOBKH/Consensus (x) - - 0.99 1.08 1.15 Source: Thai Union Frozen Products Plc., Bloomberg, UOB Kay Hian


COMPANY DESCRIPTION Manufactures and exports frozen and canned seafood. Its comprehensive business covers canned food, frozen food and various types of snacks, especially seafood. Also, its businesses include packaging and publishing, animal feed, fishing fleet.

STOCK DATA GICS sector Consumer Staples Bloomberg ticker: TUF TB Shares issued (m): 1,147.6 Market cap (Btm): 79,757.8 Market cap (US$m): 2,456.4 3-mth avg daily t'over (US$m): 4.1


1mth 3mth 6mth 1yr YTD 1.5 4.9 9.4 8.6 (3.1)

Major Shareholders % Mr. KRAISORN CHANSIRI 9.0

Mr. THIRAPHONG CHANSIRI 5.2

Mr. CHENG NIRUTTINANON 4.9



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130140

150

160

40

50

60

70

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100(%)(lcy)

THAI UNION FROZEN PROD PUB

THAI UNION FROZEN PROD PUB/SET INDEX

0

5

10

15


Volume (m)

Source: Bloomberg

ANALYST Thunya Sutavepramochanon +662 659 8031 [email protected]




• Brighter outlook in the following quarters. TUF viewed that the tuna business would do well as there should be higher consumption and sales volume from more retailers’ promotional activities thanks to relatively lower tuna raw material prices in 2014. In addition, gross margin in OEM tuna may gradually improve qoq given more timely price adjustment when raw material price stabilises and orders pick up while gross margin of branded business should benefit from lower cost of raw material. For shrimp business, TUF still maintained the view of supply improvement in 2H14 and the whole year output would vary from 250,000 tons to 300,000 tons. However, we noticed shrimp price has dropped to Bt210 per kg from average price of Bt260 in Apr 14, which should be a positive sign of the EMS problem easing. In addition, TUF expected lower per unit overhead cost and improving production efficiency from the integration of PPC’s and TUF’s shrimp plant facilities in 1Q14, which should support cost control in the shrimp business going forward. Furthermore, TUF believed that US Pet Nutrition would breakeven in 2H14 as the market has grown with demand becoming inelastic and with margin improving.

• 1Q14 earnings should be the quarterly bottom of this year. Given the above-mentioned outlook and the high selling season for both tuna and shrimp in 2Q and 3Q, we believe that 1Q14 earnings would be the quarterly bottom of this year.


• No significant changes for earnings projection in 2014-15. We project revenue growth for 2014 at 13% and gross margin at 14.5%, which both are in line with management guidance.


• Maintain BUY with a target price of Bt80.00, pegged at 18.00x 2014F PE, +1.5SD to its 5-year mean at 13x.


• The EMS problem being resolved.

SHRIMP PRICES

050

100150200250300

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

shrimp price Bt/kg.

2011

2012

2013

2014

Source: CPF SALES BREAKDOWN BY COUNTRIES IN 1Q14

Source: TUF




PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 112,813 127,313 147,516 171,212 Fixed assets 21,473 18,250 18,842 19,259 EBITDA 6,311 9,609 11,407 13,060 Other LT assets 31,273 31,273 31,273 30,202 Deprec. & amort. 2,323 2,270 2,231 2,231 Cash/ST investment 1,621 1,913 1,659 1,286 EBIT 3,988 7,340 9,176 10,829 Other current assets 53,924 55,523 61,843 67,425 Total other non-operating income 1,465 681 700 734 Total assets 108,290 106,959 113,617 118,171 Associate contributions 176 (25) 0.0 0.0 ST debt 33,452 15,899 18,000 19,500 Net interest income/(expense) (1,655) (2,221) (2,329) (2,329) Other current liabilities 13,478 11,129 12,266 13,633 Pre-tax profit 4,309 6,180 7,547 9,234 LT debt 9,598 24,389 24,389 24,389 Tax (495) (765) (755) (923) Other LT liabilities 8,414 8,414 8,414 8,414 Minorities (626) (317) (16) (0.8) Shareholders' equity 39,536 43,000 46,412 48,098 Net profit 3,189 5,098 6,776 8,309 Minority interest 3,811 4,128 4,136 4,136 Net profit (adj.) 3,189 5,098 6,776 8,309

Total liabilities & equity 108,290 106,959 113,617 118,171 CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 3,871 11,008 6,854 6,363 Profitability Pre-tax profit 4,309 6,180 7,547 9,234 EBITDA margin 5.6 7.5 7.7 7.6 Tax (495) (765) (755) (923) Pre-tax margin 3.8 4.9 5.1 5.4 Deprec. & amort. 2,323 2,270 2,231 2,231 Net margin 2.8 4.0 4.6 4.9 Associates 0.0 25 0.0 0.0 ROA 3.1 4.7 6.1 7.4 Working capital changes (4,294) 3,654 (2,330) (4,530) ROE 8.3 12.4 15.2 18.2 Non-cash items 0.0 0.0 0.0 0.0 Other operating cashflows 2,027 (356) 161 352 Growth Investing (5,564) (3,500) (3,500) (3,500) Turnover 5.7 12.9 15.9 16.1 Capex (growth) (4,206) (3,500) (3,500) (3,500) EBITDA (28.1) 52.3 18.7 14.5 Investments (1,594) 0.0 0.0 0.0 Pre-tax profit (22.9) 43.4 22.1 22.3 Others 236 0.0 0.0 0.0 Net profit (32.1) 59.9 32.9 22.6 Financing 2,348 (7,216) (3,608) (3,236) Net profit (adj.) (32.1) 59.9 32.9 22.6 Dividend payments (1,836) (2,549) (3,388) (4,155) EPS (32.1) 59.9 32.9 22.6 Issue of shares 0.0 0.0 0.0 0.0 Proceeds from borrowings n.a. n.a. n.a. n.a. Leverage Loan repayment 5,763 (2,763) 2,101 1,500 Debt to total capital 49.8 46.1 45.6 45.7 Others/interest paid (1,579) (1,904) (2,321) (582) Debt to equity 108.9 93.7 91.3 91.2 Net cash inflow (outflow) 655 292 (254) (373) Net debt/(cash) to equity 104.8 89.2 87.8 88.6 Beginning cash & cash equivalent

1,400 1,621 1,913 1,659 Interest cover (x) 3.8 4.3 4.9 5.6

Changes due to forex impact (434) 0.0 0.0 0.0 Ending cash & cash equivalent 1,621 1,913 1,659 1,286




COMPANY RESULTS

Thai Vegetable Oil (TVO TB) 1Q14: Earnings Slightly Lower Than Our Expectation TVO posted net profit of Bt519m in 1Q14, slightly lower than our expectation of Bt570m. Earnings surged 692% yoy and 11% qoq, thanks to wider gross margins for both soybean meal and soybean oil. Although 1Q14 earnings could likely be the quarterly peak for this year, 3Q14 earnings may possibly be healthy, benefitting from rising soybean prices in the US as a result of the El Nino effect expected in Jun 14. Maintain BUY. Target price: Bt28.00.

1Q14 Results Year to 31 Dec 1Q13 4Q13 1Q14 yoy qoq Remarks (Btm) % chg % chg Sales 6,730 7,160 6,699 0 -6 Sales dropped slighlty

qoq from lower selling volume of soybean meal.

Gross profit 122 633 874 619 38 SG&A expense 144 186 227 58 22 Other income 138 -101 8 -94 -108 EBT 112 342 652 483 91 EBIT 116 345 655 468 90 Net profit 66 466 519 692 11 Ratio (%) Gross margin 1.81 8.84

13.05

EBITDA margin 2.99 5.94 11.11 Net margin 0.97 6.50 7.75

Source: TVO, UOB Kay Hian

RESULTS

• 1Q14 net profit surged 692% yoy and 11% qoq. Thai Vegetable Oil (TVO) posted a net profit of Bt519m in 1Q14, slightly lower than our expectation. The yoy earnings surge was due to a low base in 1Q13 which was impacted by high inventory cost carried over from 4Q12. Sales dropped 6% qoq because of lower selling volume of soybean meal. Gross margin improved from 9% in 4Q13 to 13% in 1Q14, thanks to better gross margins for both soybean meal and soybean oil as soybean meal prices increased in 1Q14 due to a drought in Brazil while the shortage of supply of domestic palm oil has resulted in a narrower price gap between soybean oil and palm oil in 1Q14, reducing the price competition between the two products. There was also a foreign exchange loss of Bt56m in 1Q14.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F Net turnover 27,350 25,762 27,258 27,371 27,948 EBITDA 2,550 1,584 2,074 1,963 1,608 Operating profit 2,219 1,258 1,679 1,550 1,608 Net profit (rep./act.) 1,775 959 1,421 1,310 1,415 Net profit (adj.) 1,775 959 1,421 1,310 1,415 EPS (Bt) 2.4 1.3 1.9 1.7 1.9 PE (x) 9.5 17.6 11.8 12.8 11.9 P/B (x) 2.5 2.5 2.3 2.2 2.0 EV/EBITDA (x) 7.5 12.1 9.3 9.8 12.0 Dividend yield (%) 8.0 3.7 5.5 5.1 5.5 Net margin (%) 6.5 3.7 5.2 4.8 5.1 Net debt/(cash) to equity (%) 62.3 47.2 12.5 14.4 14.2 Interest cover (x) 115.6 102.6 156.8 143.9 117.9 ROE (%) 28.6 14.2 20.0 17.2 18.0 Consensus net profit - - 1,471 1,432 1,478 UOBKH/Consensus (x) - - 0.97 0.92 0.96 Source: TVO., Bloomberg, UOB Kay Hian

BUY (Maintained) Share Price Bt22.40 Target Price Bt28.00 Upside +25.0% (Previous TP Bt29.00)

COMPANY DESCRIPTION Manufactures and distributes soy meal and soybean oil

STOCK DATA GICS sector Consumer Staples Bloomberg ticker: TVO TB Shares issued (m): 808.6 Market cap (Btm): 18,112.9 Market cap (US$m): 557.9 3-mth avg daily t'over (US$m): 0.9


1mth 3mth 6mth 1yr YTD (2.2) 9.8 22.4 6.7 21.1

Major Shareholders % Miss SUDARATH VITAYATANAGORN 7.2

MR. VICHAI VITAYATHANAGORN 6.6

MRS. RATTANA CHANPITAKSA 5.2



PRICE CHART

70

80

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100

110

120

130

140

150

15

20

25

30(%)(lcy)

THAI VEGETABLE OIL PCL

THAI VEGETABLE OIL PCL/SET INDEX

0

2

4

6


Volume (m)

Source: Bloomberg

ANALYST Thunya Sutavepramochanon +662 659 8031 [email protected]




• 2Q14 earnings may decline qoq on rising inventory cost while 3Q14 earnings could be strong if El Nino occurs. We view the upward trend in domestic soybean meal prices since Aug 13 on concerns over the drought in Brazil would turn down soon as the harvest season in Brazil would nearly be over in May 14 while The US Department of Agriculture’s (USDA) report in May has lowered its soybean price forecast for this year from US$13.10/bushel to US$9.75-11.75/bushel due to better yields and larger harvest area. Thus, we expect TVO’s 2Q14 earnings to drop qoq as inventory cost rise while the average price of soybean meal may decline slightly qoq and would result in a lower gross margin for soybean meal. In addition, gross margin of soybean oil in 2Q14 would also be pressured by rising palm oil output from seasonal effect. We are more positive on 3Q14 earnings if El Nino occurs in Jun 14 as TVO views soybean prices may surge to more than US$16/bushel and this should raise its earnings in 3Q14.


• We trim our net profit forecast for 2014 by 3% to reflect the slightly lower-than-expected 1Q14 earnings.


• Maintain BUY with a lower target price of Bt28.00, pegged at 16x 2014F PE, +0.75SD to its 5-year mean of 11.8x.


• An economic recovery.

• Rising palm oil prices, which should reduce pressure on soybean oil prices.

• The successful development of a new product, Eproxidize soybean oil, in 2015 should be a catalyst for TVO as the product may have the highest gross margin among TVO’s products

• Japan’s lifting of a ban on raw chicken from Thailand since end-13 may stimulate soybean meal demand from 2014 as this is animal feed.

• TVO is seeking for new businesses as it aims to be a more globalised company.

SOYBEAN MEAL PRICES

Source: CPF




PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Net turnover 25,762 27,258 27,371 27,948 Fixed assets 2,563 3,158 3,045 3,616 EBITDA 1,584 2,074 1,963 1,608 Other LT assets 232 232 632 632 Deprec. & amort. 326 395 412 0.0 Cash/ST investment 112 410 216 162 EBIT 1,258 1,679 1,550 1,608 Other current assets 8,004 7,314 7,383 7,531 Total other non-operating income 93 33 37 40 Total assets 10,911 11,114 11,277 11,941 Net interest income/(expense) (15) (13) (14) (14) ST debt 3,217 1,303 1,300 1,300 Pre-tax profit 1,335 1,699 1,573 1,635 Other current liabilities 677 2,036 1,855 1,989 Tax (127) (189) (181) (188) LT debt 66 40 40 40 Minorities (34) (33) (32) (32) Other LT liabilities 78 78 78 78 Net profit 959 1,421 1,310 1,415 Shareholders' equity 6,724 7,474 7,789 8,287 Net profit (adj.) 959 1,421 1,310 1,415 Minority interest 150 183 215 247

Total liabilities & equity 10,911 11,114 11,277 11,941

CASH FLOW KEY METRICS Year to 31 Dec (Btm) 2013 2014F 2015F 2016F Year to 31 Dec (%) 2013 2014F 2015F 2016F Operating 2,261 3,676 1,672 1,731 Profitability Pre-tax profit 1,335 1,699 1,573 1,635 EBITDA margin 6.2 7.6 7.2 5.8 Tax (127) (189) (181) (188) Pre-tax margin 5.2 6.2 5.7 5.8 Deprec. & amort. 326 395 412 0.0 Net margin 3.7 5.2 4.8 5.1 Working capital changes 1,143 1,859 (50) (113) ROA 8.4 12.9 11.7 12.3 Non-cash items (188) 0.0 0.0 0.0 ROE 14.2 20.0 17.2 18.0 Other operating cashflows (229) (89) (82) 397 Investing (120) (800) (900) (900) Growth Capex (growth) (125) 0.0 0.0 0.0 Turnover (5.8) 5.8 0.4 2.1 Investments (5,160) (800) (900) (900) EBITDA (37.9) 30.9 (5.4) (18.1) Others 5,166 0.0 0.0 0.0 Pre-tax profit (34.3) 27.3 (7.4) 3.9 Financing (2,143) (2,579) (966) (885) Net profit (46.0) 48.2 (7.8) 8.0 Dividend payments (1,050) (671) (995) (917) Net profit (adj.) (46.0) 48.2 (7.8) 8.0 Issue of shares 0.0 0.0 0.0 0.0 EPS (46.0) 48.2 (7.8) 8.0 Proceeds from borrowings n.a. n.a. n.a. n.a. Loan repayment 95 (105) (3.0) 0.0 Leverage Others/interest paid (1,188) (1,802) 32 32 Debt to total capital 32.3 14.9 14.3 13.6 Net cash inflow (outflow) (2.7) 297 (194) (54) Debt to equity 48.8 18.0 17.2 16.2 Beginning cash & cash equivalent 115 112 410 216 Net debt/(cash) to equity 47.2 12.5 14.4 14.2 Changes due to forex impact 0.0 0.0 0.0 0.0 Interest cover (x) 102.6 156.8 143.9 117.9 Ending cash & cash equivalent 112 410 216 162




COMPANY RESULTS

Vinythai (VNT TB) 1Q14: Weak Results, As Expected VNT reported 1Q14 net profit of Bt96m, down 30% yoy but a reversal from a loss of Bt13m in 4Q13, in line with our expectation. Going forward, we expect VNT to still deliver earnings of around Bt90m-100m in 2Q14. Maintain HOLD. Target price: Bt11.20. Entry price: Bt10.00.

1Q14 Results Year to 31 Dec 1Q14 1Q13 4Q13 yoy qoq (Btm) % chg % chg Revenue 4,583 4,516 4,415 1.5 3.8 Gross profit 373 498 260 (25.0) 43.7 Other income/(exp) 7 62 58 (88.6) (87.8) SG&A (271) (407) (325) (33.4) (16.7) Int. exp (39) (35) (48) 10.1 (19.0) Net profit 96 138 (13) (29.9) (869.2) EPS 0.08 0.12 (0.01)

Source: VNT, UOB Kay Hian

RESULTS

• Weak results, as expected. VNT reported 1Q14 net profit of Bt96m, down 30% yoy but a turnaround from a loss of Bt13m in 4Q13. The results were in line with our expectation but slighly above consensus forecast, representing 25% of our full-year forecast of Bt395m.

• Revenue growth continued, gross margin in line. Despite technical problems in the production line, revenue slightly increased 1.5% yoy and 3.8% qoq to Bt4.5b, thanks to higher PVC demand in this region. Gross margin was 8.1%, up from 5.9% in 4Q13 but down from 11% in 1Q13, close to our full-year estimation.

• Gradual improvement in ECH business. The 1Q14 results showed some improvement in the epichlorohydrin (ECH) production business. After its commercial operation in 3Q12, the segment had been performing poorly over the last two years, mainly due to weak ECH spread and huge set-up expense from the expansion phase in China. However, the segment posted a loss of only Bt94m in 1Q14, smaller than a loss of Bt213m in 1Q13, thanks to a delay of ECH construction in China and rising ECH price.

KEY FINANCIALS Year to 31 Dec (Btm) 2012 2013 2014F 2015F 2016FNet turnover 16,933 17,332 20,676 22,462 25,570EBITDA 1,657 116 389 472 573Operating profit 1,657 116 389 472 573Net profit (rep./act.) 1,562 198 395 488 565Net profit (adj.) 1,562 198 395 488 565EPS (Bt) 1.3 0.2 0.3 0.4 0.5PE (x) 8.0 62.8 31.5 25.5 22.0P/B (x) 0.7 0.8 0.8 0.8 0.8EV/EBITDA (x) 8.5 121.2 36.2 29.8 24.6Dividend yield (%) 8.2 1.9 2.9 3.3 3.3Net margin (%) 9.2 1.1 1.9 2.2 2.2Net debt/(cash) to equity (%) 6.0 11.9 10.6 7.2 6.3Interest cover (x) 13.3 0.7 2.3 3.0 3.3ROE (%) 9.4 1.2 2.5 3.1 3.6Consensus net profit - - 357 450 645UOBKH/Consensus (x) - - 1.11 1.08 0.88Source: VNT, Bloomberg, UOB Kay Hian

HOLD

(Maintained)

Share Price Bt10.50 Target Price Bt11.20 Upside +6.7%

COMPANY DESCRIPTION Petrochemical ( PVC producer).

STOCK DATA GICS sector MaterialsBloomberg ticker: VNT TBShares issued (m): 1,185.2Market cap (Btm): 12,444.5Market cap (US$m): 383.83-mth avg daily t'over (US$m): 0.0


1mth 3mth 6mth 1yr YTD(1.9) (4.5) (5.4) (36.0) 0.0

Major Shareholders %- -



PRICE CHART

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8

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18(%)(lcy)

VINYTHAI PUBLIC CO LIMITED

VINYTHAI PUBLIC CO LIMITED/SET INDEX

0

5

10


Volume (m)

Source: Bloomberg

ANALYST Arsit Pamaranont +662 659 8317 [email protected]




• Going forward, we expect VNT to still deliver earnings of around Bt90m-100m in 2Q14, a turnaround from a loss of Bt70m in 2Q13 and flat qoq. We expect price and spread for both PVC and ECH to remain stable in 2Q14 due to stability of its feedstock cost-Ethylene- at around US$1,400/tonne while PVC price will still be maintained at US$1,024/tonne.


• We keep our 2014-15 net profit forecasts unchanged. Note that 1Q14 net profit represents 25% of our full-year forecast of Bt395m.


• Maintain HOLD with target price of Bt11.20. pegged at 0.8x 2014F P/B, a discount from regional peers’ 1.7x, implying –1SD from 5-year historical average P/B. Although we believe VNT’s earnings can continue to rebound in 2H14, upside from the current level seems limited. Entry price: Bt10.00.


• 2H14: Improving China economy.

GROSS MARGIN 1Q14 1Q13 4Q13

Gross margin 8.1% 11.0% 5.9% Source: VNT




PROFIT & LOSS Year to 31 Dec (Btm) 2013 2014F 2015F 2016FNet turnover 17,332 20,676 22,462 25,570EBITDA 116 389 472 573Deprec. & amort. 0 0 0 0EBIT 116 389 472 573Total other non-operating income 180 195 195 195Associate contributions (1) 25 30 35Net interest income/(expense) (163) (170) (155) (175)Pre-tax profit 133 439 542 628Tax 66 (44) (54) (63)Net profit 198 395 488 565Net profit (adj.) 198 395 488 565

BALANCE SHEET Year to 31 Dec (Btm) 2013 2014F 2015F 2016FFixed assets 14,841 14,539 14,186 13,784Other LT assets 1,595 387 390 393Cash/ST investment 1,513 1,461 1,982 2,108Other current assets 3,835 4,308 4,482 5,101Total assets 21,783 20,694 21,041 21,386ST debt 333 0 0 0Other current liabilities 2,125 2,126 2,399 2,595LT debt 3,095 3,095 3,095 3,095Other LT liabilities 85 0 0 0Shareholders' equity 16,145 15,473 15,546 15,696Total liabilities & equity 21,783 20,694 21,041 21,386

CASH FLOW Year to 31 Dec (Btm) 2013 2014F 2015F 2016FOperating 1,336 2,348 1,937 1,540Pre-tax profit 198 395 488 565Tax n.a. n.a. n.a. n.a.Deprec. & amort. 1,398 1,302 1,352 1,402Working capital changes (149) (472) 100 (424)Other operating cashflows (112) 1,123 (3) (3)Investing (1,316) (1,000) (1,000) (1,000)Capex (growth) (815) (1,000) (1,000) (1,000)Others (501) 0 0 0Financing (499) (1,400) (415) (415)Dividend payments (1,056) (356) (415) (415)Proceeds from borrowings 428 (333) 0 0Others/interest paid 128 (711) 0 0Net cash inflow (outflow) (479) (52) 522 125Beginning cash & cash equivalent 1,991 1,513 1,461 1,982Ending cash & cash equivalent 1,513 1,461 1,982 2,108

KEY METRICS Year to 31 Dec (%) 2013 2014F 2015F 2016FProfitability EBITDA margin 0.7 1.9 2.1 2.2Pre-tax margin 0.8 2.1 2.4 2.5Net margin 1.1 1.9 2.2 2.2ROA 0.9 1.9 2.3 2.7ROE 1.2 2.5 3.1 3.6

Growth Turnover 2.4 19.3 8.6 13.8EBITDA (93.0) 234.8 21.3 21.3Pre-tax profit (92.2) 231.2 23.5 15.8Net profit (87.3) 99.4 23.5 15.8Net profit (adj.) (87.3) 99.4 23.5 15.8EPS (87.3) 99.4 23.5 15.8

Leverage Debt to total capital 17.5 16.7 16.6 16.5Debt to equity 21.2 20.0 19.9 19.7Net debt/(cash) to equity 11.9 10.6 7.2 6.3Interest cover (x) 0.7 2.3 3.0 3.3




CORPORATE BEC WORLD PUBLIC COMPANY (BEC TB/BUY/Bt52.00/Target:Bt67.50) 1Q14: Results Earnings Lower Than Our Expectation

Year to 31 Dec 1Q13 4Q13 1Q14 yoy qoq Remarks (Btm) (Btm) (Btm) %chg %chg

Sales 3,815 4,073 3,751 -2% -8% Sales dropped both yoy and qoq due to the impact from political turmoil

Gross profit 2,192 2,266 1,926 -12% -15% SG&A expense 421 547 474 13% -13% Other income 57 57 60 4% 4% EBT 1,780 1,726 1,459 -18% -15% EBIT 1,780 1,728 1,462 -18% -15% Net profit 1,381 1,341 1,149 -17% -14% Ratio-% Gross margins 57% 55% 51% EBITDA margins

59% 56% 54%

Net margins 36% 32% 30% DE-x - - -

Source: BEC, UOB Kay Hian

Result: BEC posted 1Q14 earnings at Bt1,149 m, down 17% yoy and 14% qoq. The results were lower than our expectation due to larger-than-expected impact from the political unrest. Impact: Sales declined 2% yoy and 8% qoq due to lower advertising revenue as a result of the sluggish economic as well as the political turmoil. Gross margin decreased from 55% in 4Q13 to 51% in 1Q14 following the economic downturn and more investment in both instruments and human resources. Recommendation: We still maintain our BUY recommendation with a target price at Bt 67.50 , pegged at 24x 2014F PE but plan to revise down our earnings forecast to reflect the lower-than-expected 1Q14 earnings after attending the analysts’ meeting today. Supalai (SPALI TB/BUY/Bt18.90/Target: Bt23.00) 1Q14: Results In Line With Expectation

Year to 31 Dec 1Q13 4Q13 1Q14 q-q y-y

(Btm) (Btm) (Btm) %chg %chg 2014F % of 14F

Sales & Services 2,105.8 6,713.8 3,215.8 -52.1% 52.7% 18,333.9 17.5%

Gross Profit 868.0 2,762.9 1,351.7 -51.1% 55.7% 7,362.3 18.4%

EBITDA 591.8 2,245.6 981.3 -56.3% 65.8% 5,294.3 18.5%

Interest Expense 21.8 12.0 48.2 301.2% 121.1% 179.0 26.9%

Corporate Tax 110.6 440.7 187.6 -57.4% 69.6% 1,034.4 18.1%

Forex Gain (Loss) - - - n.a. n.a. - n.a.

Other Extraordinary Items - - - n.a. n.a. - n.a.

Gn (Ls) from Affiliates - - - n.a. n.a. - n.a.

Net profit (Loss) 471.2 1,757.9 741.2 -57.8% 57.3% 4,007.1 18.5%

Normalized Profit (Loss) 471.2 1,757.9 741.2 -57.8% 57.3% 4,007.1 18.5%

Reported EPS (THB) 0.27 1.02 0.43 -57.8% 57.3% 2.33 18.5%

Gross Margin (%) 41.2% 41.2% 42.0% 40.2%

EBITDA Margin (%) 28.1% 33.4% 30.5% 28.9%

Net Margin (%) 22.4% 26.2% 23.0% 21.9%

Current Ratio (x) 2.8 2.3 2.7 2.9

Interest Coverage (x) 13.2 16.7 17.7 16.1

Debt to Equity (x) 0.3 0.6 0.6 0.6

BV (THB) 7.54 8.30 8.73 9.8

ROE (%) 14.8% 52.6% 20.3% 25.9%

Source: SPALI, UOB Kay Hian




Results: SPALI reported 1Q14 net profit of Bt741.2m, down 57.8% qoq but up 57.3% yoy. The results were in line with our expectations. Revenue from residential sales declined 52.9% qoq but increased 54.3% yoy to Bt3,126.8m in 1Q14, driven by the continued unit transfers at Supalai Premier Ratchathewi project. Condo contributed 54% of total revenue from residential sales in 1Q14 while the rest came from low-rise housing projects. Its gross margin from residential sales widened to 41.9% in 1Q14 compared with 40.6% in 1Q13 and 41.2% in 4Q13. Meanwhile, its SG&A expenses-to-revenue ratio in 1Q14 fell to 11.5% vs 14.0% in 1Q13 due to a larger revenue base.

Recommendation: We maintain our BUY rating on its strong growth prospects with high earnings visibility, solid balance sheet position, and cheap valuations. Our TP of Bt23.00 is based on 9.8x PE, which is in line with -0.5SD to its historical average PE since 2012.

Ticon Industrial Connection (TICON TB/BUY/Bt14.90/Target: Bt19.00) 1Q14: Earnings Down 84.2% qoq

Year to 31 Dec 1Q13 4Q13 1Q14 qoq yoy Remarks (Btm) (Btm) (Btm) % chg % chg

Rental income 269.5 247.1 202.0 -18.3% -25.0% Due to sale of factories and warehouses to TGROWTH in 4Q13.

Revenue from construction services 7.8 25.1 16.1 -35.8% 106.0%

Revenue from property sales - 4,558.2 498.2 -89.1% n.a.

Recorded the sale of properties to TGROWTH amounting to Bt414.2m and TFUND worth Bt84m.

Utility income 7.7 4.7 5.1 9.3% -33.2% Total revenue 285.0 4,835.1 721.4 -85.1% 153.2% EBITDA 417.0 1,296.8 287.1 -77.9% -31.1% EBIT 311.8 1,209.0 287.1 -76.3% -7.9%

Net profit 254.9 907.2 143.7 -84.2% -43.6%

Due to lower rental income, the absence of insurance claims for flooded properties and no gain on sales of investments in TFUND and TLOGIS in 1Q14, increased SG&A expenses, and higher interest expenses.

Gross margin% Rental 66.8% 77.2% 75.4% -1.8% 8.6% Construction services 20.2% 24.7% 8.4% -16.2% -11.8% Property sales n.a. 38.2% 62.4% 24.1% n.a. Overall gross margin% 63.7% 40.1% 64.4% 24.3% 0.7% EBITDA margin% 146.3% 26.8% 39.8% 13.0% -106.5% Net margin% 89.4% 18.8% 19.9% 1.2% -69.5%

Source: TICON, UOB Kay Hian Results: TICON reported a 1Q14 net profit of Bt143.7m, down 84.2% qoq and 43.6% yoy due to: a) lower rental income, b) the absence of insurance claims for flooded properties and no gain on sales of investments in TFUND and TLOGIS in 1Q14, c) a drop in realised additional gains on sales of properties to property funds, and d) higher SG&A expenses and interest expenses. TICON’s rental income declined 18.3% qoq and 25.0% yoy to Bt202m in 1Q14 due to the sale of factories and warehouses worth Bt5,514.5m to TICON Industrial Growth Leasehold Property Fund (TGROWTH) in Dec 13. Its gross margin from rental improved to 75.4% in 1Q14 from 66.8% in 1Q13 since the company reclassified properties transferred to TGROWTH as a non-current assets held-for-sale of Bt3,200.5m, and all these assets were not required to be depreciated. Meanwhile, the company recorded revenue from property sales of Bt498.2m to TGROWTH amounting to Bt414.2m and TFUND worth Bt84m in 1Q14. Overall gross margin improved to 64.4% in 1Q14 vs. 63.7% in 1Q13. Recommendation: We are revisiting our earnings forecasts for 2014-15F.




SECTOR Property: Sector set to suffer sales decline in 2014. Overall property sales are likely to fall by up to 10% this year, hit by weak domestic consumption over the political strife, which has been ongoing for more than six months now. The SET-listed property developers Pruksa Real Estate Plc (PS) and Quality Houses Plc (QH) both predict overall property sales will decline by 5-10% this year from a value of Bt650b last year. "If the political crisis drags on until year-end, the sector could see a contraction of as much as 10%," Rutt Phanijphand, president and chief executive of QH, said yesterday. He compared this with average annual growth of 10-20% in recent years. Thailand's real estate market has been suffering from weak domestic demand, while several developers have delayed project launches in the first quarter. On Wednesday, Pruksa chief operating officer Lersuk Chuladesa also projected the Thai property market would decline by 5-10% this year while predicting the economy would grow by only 2%. "The market's recovery will hinge largely on how soon the political stalemate can be settled," said Mr Rutt. (Source: Bangkok Post)

ECONOMICS / POLITICS Economy: Negative growth seen for 1Q14. The Bank of Thailand (BOT) has said the country's economic growth from 4Q13 to 1Q14 is likely to be negative while the Kingdom's credit-default swap (CDS) remains stable. Dr Roong Mallikamas, spokeswoman of the BOT, said the latest political developments continued to create high uncertainty for the economy and it was most likely that GDP growth from 4Q13 to 1Q14 would be negative. The National Economic and Social Development Board (NESDB) will announce the 1Q14 GDP figure on Monday. Roong said the economic slowdown would have only a small impact on the currency market, as the market was well aware of the situation and had absorbed some of the effects from the slump already. In terms of the country's CDS level, she said that the ratings of the surrounding countries such as Malaysia and Philippines had decreased but Thailand's rating had remained stable. While the spread had widened, it was considerably small and not related to the political uncertainty. (Source: The Nation)




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thailand daily- friday, may 16, 2014

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