Equity Research Reports… - brokingrfs.cimb.com analysis implies 2H16-to-date SSS growth of 1.1%....

Equity research│July 1, 2016

Asia Pacific Daily - 1 July 2016

Equity Research Reports…

▌IDEA OF THE DAY | Malaysia Taliworks Corporation (ADD- Initiation, tp:RM1.75) - A switch for yield seekers | P2 Taliworks has morphed into an operator of sizeable infrastructure assets. Earnings stream is backed by mature and profitable concession-type model. Rising cash hoard suggests upside to domestic M&A, backed by the EPF. Cash flow accretive potential events in 2H16 include recovery of water receivables; upside to the sustainable 5.7% dividend yield with likely special DPS. We initiate coverage with an ADD rating and a RNAV-based target price of RM1.75 (10% discount). ——————————————————————————————————————————————————————————————————————————————————————— ▌Australia Kathmandu Holdings (HOLD, tp:A$1.64▼) - Better than expected | P3 Nanosonics (ADD▲, tp:A$2.46▲) - Off the fence | P4 Vocus Communications (HOLD, tp:A$8.88▲) - Number 4 becomes number 2 | P5 ——————————————————————————————————————————————————————————————————————————————————————— ▌China/Hong Kong EVA Precision Industrial (REDUCE▼, tp:HK$0.71▼) - No short-term catalyst in OA segment | P6 ——————————————————————————————————————————————————————————————————————————————————————— ▌Indonesia Strategy Note - CIMB Portfolio Tracker – Jun 2016 | P7 ——————————————————————————————————————————————————————————————————————————————————————— ▌South Korea Biotechnology (OVERWEIGHT) - US marketing feedback | P8 ——————————————————————————————————————————————————————————————————————————————————————— ▌Malaysia Cypark Resources Bhd (ADD, tp:RM2.30) - Still shining | P9 Gamuda (ADD, tp:RM5.92) - Transitioning to new MRT profits | P10 MY E.G. Services (ADD, tp:RM2.32▼) - Rehiring programme ended yesterday | P11 Banks (OVERWEIGHT) - May 16 tracker – light at the end of tunnel for loan growth? | P12 ——————————————————————————————————————————————————————————————————————————————————————— ▌Singapore UOL Group (ADD, tp:S$8.02▼) - Concerns overdone | P13 ——————————————————————————————————————————————————————————————————————————————————————— ▌Thailand Indorama Ventures (ADD, tp:THB50.00) - A wave, not grave tsunami on PET oversupply | P14 ——————————————————————————————————————————————————————————————————————————————————————— ▌Vietnam Ha Tien 1 Cement JSC (ADD, tp:VND33,900.00▲) - EUR depreciation boosts earnings… | P15 Vietnam Dairy Products JSC (ADD, tp:VND169,000.00▲) – Vinamilk’s FOL to be lifted… | P16

Showcasing CIMB Research Ideas

KRW: LG Chem 29/06 Softening our stance on the chemical cycle >PDF

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THB: Indorama Ventures 28/06 Brexit is good, not bad >PDF

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TWN: Technology - Handsets 27/06 Don’t expect too much from iPhone 7 >PDF

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THB: Minor International 22/06 Feedback from Taiwan NDR >PDF

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HKG: PAX Global Technology Ltd. 22/06 Momentum continuing overseas >PDF

Regional Equity Research Contacts

Michael GREENALL, CFP Regional Head of Research/Head of Research Msia T: (60) 3 2261 9088 E: [email protected]

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CIMB Conference / Events |

CIMB Malaysia REITs Corporate Access Day 26 July 2016, Kuala Lumpur - Malaysia

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CIMB 10th Annual Indonesia Conference 08-12 August 2016, Bali - Indonesia

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IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Water Treatment & Services│Malaysia│Equity research│July 1, 2016

Company Note │ Alpha series



Taliworks Corporation A switch for yield seekers

Taliworks has morphed into an operator of sizeable infrastructure assets. ■ Earnings stream is backed by mature and profitable concession-type model. ■ Rising cash hoard suggests upside to domestic M&A, backed by the EPF. ■ Cash flow accretive potential events in 2H16 include recovery of water receivables; ■upside to the sustainable 5.7% dividend yield with likely special DPS.

We initiate coverage with an ADD rating and a RNAV-based target price of RM1.75 ■(10% discount).

A result of transformative M&A track record Taliworks has made expansionary moves on the domestic front over the past decade, via acquisition of two highways which have been added to the group’s water supply and distribution businesses. The group has moved up the ranks among local concession-based companies by morphing into an operator of infrastructure assets specializing in water treatment and distribution, tolled highways, and waste management (the latest value-accretive jewel in its crown).

Purely a domestic water player after monetizing China operations We view the divestment of its China water and wastewater concessions as positive in view of the competitive landscape, regulatory risks and low returns there. The asset monetization should support potential new M&As domestically while beefing-up operating cashflow, in our view. With the China exit early this year, Taliworks becomes a pure domestic water operator generating up to 60% of recurring EBITDA from its operations in Langkawi Island and the O&M in the state of Selangor.

Realigning its focus on domestic highways Forgoing the much anticipated acquisition of SILK highway recently was largely due to valuation, in our view, consistent with the group’s “6% dividend yield, 12% equity IRR” M&A parameter. This does not mean that investors should discount potential new highways/roads buyout targets given the group’s long-term strategy of scouting at least one profitable infra asset p.a. Company guidance suggests that overseas asset targets would be less of a priority at this juncture. Our FY16-18 EPS forecasts do not impute new acquisitions.

Earnings delivery from new segments The focus now is for Taliworks to reap the benefits of new profit streams. Southern Waste Management (SWM) has emerged as the group’s new segment, chipping in a stable 20-25% share of recurring profit (35% associate stake) p.a. along with other recurring income segments that extend 14-29 years beyond our forecast period. New businesses underpin our three-year core EPS CAGR forecast of 16.6%. These factors support the company’s policy of a minimum 75% dividend payout ratio.

Initiate with an Add; RM1.75 FD RNAV-based target price With investors likely gravitating towards yield plays in 2H16, we believe Taliworks could fit the bill as a utilities/infra exposure backed by robust operating cash flow and stable recurring earnings. The c.RM400m recovery in water receivables pending the water deals in Selangor could translate to special dividends, which presents upside risk to our 5.7% dividend yield. We begin coverage with an Add and a FD RNAV-based target price of RM1.75. Downside risks include prolonged gestation for new M&A plays and delays in water deals.

▎Malaysia

ADD (previously NOT RATED) Consensus ratings*: Buy 1 Hold 0 Sell 0

Current price: RM1.42

Target price: RM1.75

Previous target: N/A

Up/downside: 23.1%

CIMB / Consensus: N/A

Reuters: TWRK.KL

Bloomberg: TWK MK

Market cap: US$426.3m

RM1,717m

Average daily turnover: US$0.22m

RM0.89m

Current shares o/s: 1,209m

Free float: 41.0% * Source: Bloomberg

Key changes in this note

NA

Source: Bloomberg

Price performance 1M 3M 12M

Absolute (%) 1.4 9.2 21.2

Relative (%) -0.1 12.9 24.3

Major shareholders % held L.G.B. Holding Sdn Bhd 50.0

Vijay Vijendra Sethu 9.0

Analyst(s)

Sharizan ROSELY

T (60) 3 2261 9077 E [email protected]

[ X ]

SOURCE: COMPANY DATA, CIMB FORECASTS

Financial Summary Dec-14A Dec-15A Dec-16F Dec-17F Dec-18F

Revenue (RMm) 353.9 410.9 315.9 333.0 344.3

Operating EBITDA (RMm) 40.78 39.41 60.15 74.19 78.19

Net Profit (RMm) 301.2 86.6 122.7 95.6 101.1

Core EPS (RM) 0.23 0.05 0.05 0.06 0.07

Core EPS Growth (80.0%) (0.1%) 36.5% 6.6%

FD Core P/E (x) 30.87 30.89 22.63 21.24

DPS (RM) 0.022 0.080 0.080 0.080 0.080

Dividend Yield 1.53% 5.63% 5.65% 5.62% 5.65%

EV/EBITDA (x) 64.98 61.24 35.26 28.37 26.78

P/FCFE (x) NA 28.97 8.88 15.46

Net Gearing 30.2% 29.1% 9.1% 9.6% 10.8%

P/BV (x) 2.02 1.50 1.55 1.43 1.44

ROE 5.57% 4.93% 6.57% 6.76%

% Change In Core EPS Estimates

CIMB/consensus EPS (x) 0.68 0.61

95.0

115.0

135.0

155.0

1.100

1.300

1.500

1.700

Price Close Relative to FBMKLCI (RHS)

5

10

15

Jul-15 Oct-15 Jan-16 Apr-16

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Retail│Australia│Equity research│June 30, 2016

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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Kathmandu Holdings

Better than expected

KMD has provided a trading update, reporting lfl sales growth for FY16-YTD of ■+2.6% (constant currency), vs -1.9% the pcp. This implies 2H16-YTD lfl sales of +1.1%, impacted by a later start to winter and subdued trading conditions.

FY16 NPAT guidance is now NZ$32-35m (+11% on prior guidance for NZ$30.2m), ■underpinned by a better GM outcome.

Given KMD’s seasonality and subdued sales growth, we maintain a Hold rating. ■However, we highlight a possibility of corporate activity.

Trading update – weaker than expected lfl sales off a low base… KMD issued a (net) positive FY16 YTD trading update to 26 June. KMD reported group SSS growth (constant currency) of +2.6%. Our analysis implies 2H16-to-date SSS growth of 1.1%. While this is a reasonable result given the late start to Winter (particularly in Australia), the group was cycling a very soft base (-6.5% in 2H15). As such, the 2H16 SSS performance is a little lackluster in our view.

However gross margin improvements offset a subdued top line Offsetting a softer top line performance was a stronger than expected gross profit margin outcome. This was achieved due to a better inventory position (less aged stock) and less clearance activity (also reflective of a better inventory position). This looks to be the key area of surprise vs previous guidance and our forecasts. The realisation of operating cost efficiencies has contributed as planned (previous guidance of NZ$7m comprised of NZ$3.5m of marketing/advertising efficiencies and NZ$3.5m on store labour and head office savings). From FY17, the GM should increase again as benefits from the new Australian DC (August 2016 opening) and manufacturing changes (de-weighting from China) flow through.

FY16 earnings guidance upgraded FY16 NPAT is now expected to be between NZ$32-35m. The mid-point of this range represents an 11% upgrade on previous guidance of NZ$30.2m and a 6% increase in 2H16 NPAT on the pcp (NZ$24.1m vs NZ$22.7m). FY16 EBIT is expected to be between NZ$49-53m (Morgans now forecasts NZ$51.8m).

It’s certainly cheap….but still carries heightened seasonal risk Following today’s trading update, our EPS forecasts lift by 8.3%/6.6%/5.7% FY16/17/18. The better than expected gross margin is pleasing and reflective of a much improved inventory position. KMD has stalled its store rollout and cut its marketing spend. We therefore see limited scope for meaningful top-line growth in coming years. While we accept there is further margin upside to come from manufacturing changes and the Australian DC, a lack of top-line growth leaves us cautious on this name (in addition to the continued heightened seasonal volatility that comes with this stock). We maintain a Hold rating and a A$1.64 price target (from A$1.66) as we lower our EV/EBIT multiple from 9x to 8.5x FY16F. Key risks to our forecasts and valuation include: unfavorable weather conditions, new competition in the ANZ market, softening consumer spending/sentiment, store closures and unfavourable FX movements.

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

HOLD (no change) Current price: A$1.47

Target price: A$1.64

Previous target: A$1.66

Up/downside: 11.7%

Reuters: KMD.AX

Bloomberg: KMD AU


A$295.2m


A$0.71m

Current shares o/s 200.0m

Free float: 100.0%


Absolute (%) 2.4 -2.3 -6.7

Relative (%) 5.6 -6.8 -2.6

Josephine LITTLE

T (61) 7 3334 4505

E [email protected]

Financial Summary Jul-14A Jul-15A Jul-16F Jul-17F Jul-18F

Revenue (NZDm) 392.9 409.4 444.7 474.7 502.5

Operating EBITDA (NZDm) 74.51 47.30 66.84 73.41 81.27

Net Profit (NZDm) 42.20 20.90 33.66 36.44 41.11

Normalised EPS (NZD) 0.21 0.10 0.16 0.18 0.21

Normalised EPS Growth 2.5% (52.6%) 63.3% 11.6% 12.8%

FD Normalised P/E (x) 7.26 15.33 9.39 8.41 7.46

DPS (NZD) 0.12 0.07 0.10 0.11 0.12

Dividend Yield 7.84% 4.26% 6.59% 7.13% 8.05%

EV/EBITDA (x) 4.86 7.87 5.45 4.84 4.22

P/FCFE (x) 5.06 22.32 13.77 10.53 8.74

Net Gearing 18.4% 22.1% 18.2% 14.8% 10.4%

P/BV (x) 1.01 1.03 0.97 0.92 0.87

ROE 14.2% 6.7% 10.6% 11.2% 12.0%

% Change In Normalised EPS Estimates 8.31% 6.62% 5.68%

Normalised EPS/consensus EPS (x) 1.11 1.10 1.16

86.0

92.0

98.0

104.0

110.0

116.0

1.200

1.300

1.400

1.500

1.600

1.700

Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

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2

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Medical Equipment & Svs│Australia│Equity research│June 30, 2016


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Nanosonics

Off the fence

We have moved our recommendation to Add from Hold after sitting on the fence ■for the last three months.

Europe is still a small part of NAN’s business, although we expect to see growth ■over the coming years. Guidelines for decontamination in England are expected to be released soon.

Our sales forecasts have been upgraded to reflect the strong momentum seen at ■the 3Q.

We are broadly in line with consensus for FY16. ■

We have upgraded FY17 and FY18 forecasts, which sees a lift to our valuation ■and price target.

UK exposure low, mainly US focused The impact on NAN’s business following the Brexit vote is minimal in our view. One of the key catalysts we expect is the release in England of ultrasound probe decontamination guidelines, similar to what has been released in Wales and Scotland. Once these guidelines are released, sales should accelerate from a low base in the region. By region revenue was split: US 89.2%, Australia/New Zealand 7.0%, and Europe 3.8% according to the 1HFY16 release.

Upcoming report to focus attention on sales growth NAN will release its 4QFY16 results in July (third week). We expect momentum will continue following the strong 3Q result which saw sales of A$12.3m, up 33% on the pcp. The installed base grew by 1,000 units to over 7,700 trophon EPR® units. NAN finished the quarter in a strong cash position of A$44.2m. We currently sit in line with consensus forecasts (FactSet) at the sales line of A$38.3m although slightly below at the NPAT line with consensus at a net loss of A$2.1m.

Changes to forecasts We have increased our FY16 sales forecasts to better reflect the growing momentum from the last quarter. As a result our sales forecast has increased 14% to A$38.8m. We have increased our expenses by 3.9% to A$32.1m (mainly staffing costs as NAN rolls out its direct sales push in the US), the net effect leaves our NLAT forecast slightly lower. We have increased our NPAT forecasts for FY17 and FY18 by 29% to A$4.1m and by 16% to A$14.1m, respectively. This is based on a higher installed base of 8,000 units which grows at 25% pa for the forecast period.

Investment view – upgrade to Add Following the forecast changes, our DCF-based valuation and price target have increased to A$2.46 (from A$2.15). We have upgraded our recommendation to Add (from Hold) with 14% upside to the new target. The risk key to our target price is a slower-than-expected US sales ramp.


▎Australia

ADD (previously HOLD) Current price: A$2.15



Up/downside: 14.5%

Reuters: NAN.AX

Bloomberg: NAN AU


A$636.3m


A$2.22m


Free float: 52.0%


FY16F revenue increased by 14%.

FY16F EBITDA increased by 5%.

FY16F NLAT decreased by 6%.


Absolute (%) -4.5 9.7 31.9

Relative (%) 0.4 6.9 37.1

Scott POWER

T (61) 7 3334 4884

E [email protected]

Dr Derek JELLINEK

T (61) 2 9043 7904

E [email protected]

Financial Summary Jun-14A Jun-15A Jun-16F Jun-17F Jun-18F

Revenue (A$m) 21.49 22.20 38.76 51.72 68.78

Operating EBITDA (A$m) -1.85 -4.73 -3.49 3.66 13.56

Net Profit (A$m) -2.62 -5.47 -3.18 4.11 14.09

Normalised EPS (A$) (0.010) (0.019) (0.011) 0.015 0.050

Normalised EPS Growth (54%) 95% (42%) 242%

FD Normalised P/E (x) NA NA NA 147.9 43.2

DPS (A$) - - - - -

Dividend Yield 0% 0% 0% 0% 0%

EV/EBITDA (x) NA NA NA 155.3 41.1

P/FCFE (x) NA NA 1,368 270 53

Net Gearing (74.3%) (82.8%) (90.3%) (87.1%) (85.9%)

P/BV (x) 19.88 13.62 14.67 13.34 10.19

ROE (12.6%) (16.9%) (7.4%) 9.4% 26.8%

% Change In Normalised EPS Estimates 5.2% 28.4% 16.6%


73

101

129

157

1.00

1.50

2.00

2.50


Source: Bloomberg

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15

20


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Telco - Others│Australia│Equity research│June 30, 2016


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Vocus Communications

Number 4 becomes number 2

VOC has announced it is raising capital to acquire one of its key suppliers ■NextGen for A$807m.

The key for VOC is NextGen’s inter-capital fibre connectivity which was the last ■piece of the puzzle for VOC to become a fully vertically integrated fixed line telecommunications operator.

The acquisition cements VOC’s fourth pillar status and it can now compete off the ■same fixed line infrastructure as Telstra. Combining Amcom’s West Coast fibre assets with NextGen has seen VOC’s fixed line network leapfrog those of Optus and TPG, in our view.

Following the acquisition and capital raising our valuation increases to A$8.88. We ■retain a Hold but we would look to accumulate if shares fall below A$8.00.

Vertically integrated and now the #2 fixed infrastructure provider NextGen is a key supplier of internet intercapital connectivity to VOC, and its acquisition allows VOC to become a fully vertically integrated fixed line telco. It adds 17,000 km of fibre to VOC’s assets, connecting Australia’s capital cities and regional centres together with the international submarine cables connecting Australia to the rest of world. This highly strategic deal puts VOC on a level playing field with Telstra in terms of business grade fixed line telecommunications offerings and, in our view, places them in a stronger position than Optus and TPG (after including the West Coast assets of the Amcom acquisition). VOC now has truly national network coverage and control of all the key assets required build its own national product range, control input prices, guarantee SLAs, and control provisioning.

Deal metrics look better as we delve into the rationale VOC is paying A$807m for the network and two development projects. This equates to 10.7x FY16F EV/EBITDA, or 7.3x if 100% of the targeted synergies are included. On face value this looks fully priced but it creates greater financial upside because it saves VOC from paying millions to purchase inter-capital capacity off NextGen over the coming years.

Most importantly organic growth looks good VOC’s Q4 trading update showed annualised EBITDA of A$380-A$400m on a pro-forma basis which is up 3-8% on FY16F PF EBITDA of $370m. We expect sales momentum and synergy realization to accelerate VOC’s earnings, but note that integration costs and continued growth investment will absorb some of this growth.

Changes to forecasts We have left our FY16F PF unchanged. VOC will issue around 85m new shares to fund the NextGen acquisition. The nine month contribution from NextGen in FY17 is neutralised by a ~16% dilution to shares on issue and our FY17 Cash EPS forecast is unchanged at 29cps. We expect the acquisition to be earnings accretive from FY18. Our equally weighted DCF and EV/EBITDA valuation increases from A$8.50 to A$8.88 per share and we retain our Hold rating. We would look to accumulate on any weakness.


▎Australia

HOLD (no change) Current price: A$8.52



Up/downside: 4.3%

Reuters: VOC.AX

Bloomberg: VOC AU

Market cap: US$3,374m

A$4,541m


A$22.01m


Free float: 97.5%


Small upgrade to our core VOC forecasts

We now include NextGen in our forecasts


Absolute (%) -9.4 4.3 46.6

Relative (%) -4.5 3.2 53.9

Nick Harris

T +61 7 3334 4557

E [email protected]


Revenue (A$m) 92 150 1,112 2,096 2,341

Operating EBITDA (A$m) 32.1 52.2 371.1 474.3 553.5

Net Profit (A$m) 12.9 19.9 161.0 205.4 250.2

Normalised EPS (A$) 0.17 0.21 0.34 0.36 0.43

Normalised EPS Growth 27.5% 59.2% 7.2% 19.6%

FD Normalised P/E (x) 51.46 40.37 25.38 22.04 19.78

DPS (A$) 0.02 0.07 0.17 0.17 0.18

Dividend Yield 0.21% 0.86% 2.02% 1.97% 2.11%

EV/EBITDA (x) 21.99 15.99 14.86 13.29 11.02

P/FCFE (x) NA NA NA NA 46.37

Net Gearing 3.9% 53.3% 27.3% 22.0% 16.8%

P/BV (x) 5.39 3.68 1.42 1.11 1.07

ROE 13.1% 10.9% 9.1% 5.2% 5.5%

% Change In Normalised EPS Estimates 1.78% (7.99%) 2.77%


85

103

121

139

157

175

4.90

5.90

6.90

7.90

8.90

9.90


Source: Bloomberg

10

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30

40


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Ind Goods & Services│Hong Kong│Equity research│June 30, 2016

Company Note



EVA Precision Industrial No short-term catalyst in OA segment

The company issued a profit warning to alert that 1H16 net profit will drop more than ■80% yoy.

EVA blamed this on the weak orders in the office automation and consumer ■electronics segments, with significant gross margin contraction.

Vietnam will commence production by end-2016, with FY16 startup costs of ~HK$10m. ■

EPS cut by 64-72% in FY16-18F due to lower revenue and GPM assumptions. ■

Downgrading to Reduce with lower TP of HK$0.71, based on trough FY16F P/BV of 0.5x. ■

Profit warning for 1H16 EVA issued a profit warning in which it stated 1H16 net profit would decrease by around 80% to approximately HK$20m driven by 1) a reduction in orders from office automation (OA) customers due to the weak global economy; 2) order cuts from Samsung due to poor Galaxy tablet sales; 3) a decrease in mould production as slowdowns in new product development activities by its customers caused significant GM contraction; and 4) startup costs for the group's new industrial park in Vietnam. The group reported net profit of HK$118m in 1H15.

No short-term catalyst in OA segment We expect OA revenue to drop c.15% in FY16 on the back of weak enterprise spending, especially in Euro and emerging markets Given the lacklustre global economy, the key OA manufacturers in Japan reported relative weak 1Q results and expressed a poor outlook in 2H16. We believe OA manufactures will be hesitant to launch new models in the short term until they see strong signs of global economic improvement. Therefore, we do not expect EVA’s OA segment will recover in the short term.

Vietnam plant to start contributing only in FY17 The group plans to build a new factory in Vietnam for its Japanese customers to expand into a new supply chain. The company estimates total capex of approximately HK$150m. Although management expects the new plant to bring approximately US$30m in new revenue per annum (~10% additional OA segment revenue), we estimate approximately HK$10m in startup costs in FY16. The new production base is scheduled for completion by end-2016 and is expected to start meaningful earnings contribution in FY17F.

EPS cut by 64-72% in FY16-18F We cut 64%-72% in our FY16-18F earnings forecast due to a c.15% sales drop in the OA segment, a c.5% decrease in the consumer electronic segment and our forecast of c.3% pts gross profit margin contraction over the next couple of years. We expect core net profit in FY16F to drop 70% to HK$83m. We also do not expect a strong earnings recovery in FY17F and FY18F on the back of a strengthened yen, and a poor global economic outlook.

Downgraded to Reduce We downgrade EVA from Add to Reduce due to weakening global OA industry. We cut our target price to HK$0.71, based on FY16F P/BV of 0.5x, its trough valuation in 2012. We suggest investors switch into Tongda Group (698 HK, Add), which in our view offers strong earnings growth and high earning visibility. A risk to our recommendation is a strong recovery of OA demand globally.

▎Hong Kong

REDUCE (previously ADD) Consensus ratings*: Buy 3 Hold 0 Sell 0

Current price: HK$0.81

Target price: HK$0.71

Previous target: HK$1.56

Up/downside: -12.3%

CIMB / Consensus: -58.3%

Reuters: 0838.HK

Bloomberg: 838 HK


HK$1,522m


HK$2.50m




FY16-18F revenue decreased by 20-33%.

FY16-18F GPM decreased by 1.9-3.0% pts.

FY16-18F EPS decreased by 64-72%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -13.8 -31.9 -63.5

Relative (%) -13.1 -32.2 -42.2

Major shareholders % held Zhang's family 41.9

Templeton Investment Counsel, LLC 5.9

Analyst

Ray KWOK

T (852) 2532 1113 E [email protected]

[ X ]



Revenue (HK$m) 3,455 3,533 3,054 3,273 3,554

Operating EBITDA (HK$m) 570.2 564.0 367.6 381.8 424.1

Net Profit (HK$m) 277.1 205.5 83.0 109.9 155.4

Core EPS (HK$) 0.17 0.15 0.04 0.06 0.08

Core EPS Growth 514% (9%) (70%) 32% 41%

FD Core P/E (x) 5.16 5.40 18.27 13.80 9.76

DPS (HK$) 0.049 0.033 0.011 0.018 0.025

Dividend Yield 6.05% 4.07% 1.37% 2.18% 3.09%

EV/EBITDA (x) 2.94 3.11 4.31 3.77 3.02

P/FCFE (x) 10.76 12.72 5.15 7.56 6.71

Net Gearing 10.6% 5.7% (1.5%) (6.6%) (11.7%)

P/BV (x) 0.58 0.58 0.57 0.55 0.53

ROE 12.5% 11.1% 3.2% 4.1% 5.6%

% Change In Core EPS Estimates (72.3%) (69.7%) (64.0%)

CIMB/consensus EPS (x) 0.28 0.33 0.40

48.0

65.5

83.0

100.5

118.0

0.50

1.00

1.50

2.00

2.50

Price Close Relative to HSI (RHS)

10

20

30


Vo

l m

6

Indonesia│Equity research│June 30, 2016

Strategy Note



Indonesia Strategy CIMB Portfolio Tracker – Jun 2016

CIMB Portfolio gained 6.4% mom in Jun, ahead of JCI’s 4.6%. Including dividends, ■gross gain was 6.4%, edging market by 1.4%. YTD return of 13.4% vs. JCI’s 9.2%.

Jun saw the tax amnesty bill pass; it appears to have trumped Brexit fears. ■

We believe growth outlook has taken a turn for the better, though 2Q results season ■in Jul may still disappoint with banks still challenged by NPLs.

Our portfolio stance hence hinges on two key views: 1) stay with good companies ■with re-rating potential; and 2) those benefiting from economic recovery.

A roaring month CIMB portfolio returned 6.4% mom in Jun against the benchmark JCI’s 4.6%. It has gained 13.4% YTD vs. JCI’s 9.2%. In Jun, the key outperforming sectors were coal, healthcare and auto. The key underperforming sectors in the JCI were shipping, O&G and toll roads. The key stocks that contributed to our stellar returns were ASII, BSDE and WIKA, while HMSP, JSMR and PGAS dragged down the overall portfolio.

Internal catalysts trumped external fears While the mood had been improving since end-May, following a risk-off Apr/May on FFR fears, the market was jolted by the Brexit on 23 May. However, the tax amnesty bill more than sufficiently offset the Brexit fears. Foreigners turned net buyers of US$664m in Jun, US$375m alone in the last week (YTD net buy of +US$985m vs. US$1.6bn net sales in FY15). Foreigners net bought GoI bonds worth c.US$1.4bn in Jun, with the YTD net buying amounting to US$6.0bn.

Improving growth outlook As outlined in our recent note, we believe growth outlook has improved after the passing of the tax amnesty bill as: 1) fiscal policy is likely to be more aggressive on infra spending and populist policies (relatively high multiplier effects); 2) consumption pattern should ‘normalise’, driving property and auto sales, and investment eventually; and 3) further reforms through regulation harmonization should expedite the 12 stimulus packs issued so far. With FFR increase probability fading, BI should be less hesitant to cut rates, in our view.

The stock picking challenge A strong Jun performance makes stock picking in Jul challenging as: 1) some share prices are near our target prices; 2) valuations are nearing peak levels, for some; and 3) 2Q results season may further disappoint. As such, we base our approach on: a) stocks that have re-rating potential; and b) those most likely to get earnings upgrades.

Key portfolio changes We replace WIKA with CTRA, to add more weight to property; PGAS (gas price cut risk in Jul) with INDF (cheap consumer); and SMGR with INTP (better pricing on P/CF). We trim TLKM and HMSP (both on valuations), and add PTPP (PMN play) and UNVR (still UW). Among small caps: add RANC and TOTL, and cut KAEF.

The new metrics After the adjustments, the weighted average valuation of CIMB’s portfolio is 18.6x forward P/E, above market’s valuation (including HMSP) of 17.6x forward P/E but well justified by the higher forward ROE of 31% vs. JCI’s 18%. The adjusted portfolio’s beta is relatively unchanged at 1.2, while the weighted average cost of equity is 19%.

[ X ]

Figure 1: CIMB Portfolio has outperformed JCI by 4.2% YTD

SOURCES: CIMB RESEARCH, COMPANY

▎Indonesia

CIMB portfolio outperformed JCI by 1.8% in Jun

Change in weighting

Analyst(s)

Erwan TEGUH

T (62) 21 3006 1720

E [email protected]

Peter P. SUTEDJA, CFA T (62) 21 3006 1726 E [email protected]

96

101

106

111

116

2-Jan-16 2-Feb-16 2-Mar-16 2-Apr-16 2-May-16 2-Jun-16

CIMB Portfolio JCI

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

31-May-16 14-Jun-16 28-Jun-16

Outperform (Underperform) - RHS

CIMB Portfolio

JCI

Old weight New weight Note

TLKM 8% 7%

HMSP 7% 7%

INTP 0% 6% Addition

UNVR 4% 5%

PTPP 3% 4%

INDF 0% 3% Addition

CTRA 0% 3% Addition

Small-mid cap basket 2% 3%

SMGR 6% 0% Dropped

PGAS 3% 0% Dropped

WIKA 3% 0% Dropped

7

https://brokingrfs.cimb.com/AWdX5H9yvAQPlRLl5ryD3KUCslwlZC-AypGqG00zabstOz-o0kWePXmWBtKqXAeh0yu9hPi3zIbLug2.pdf

Healthcare│South Korea│Equity research

Sector Flash Note



Biotechnology US marketing feedback

We recently conducted a marketing trip in the US for the Korean biotech sector. ■ Korean Botox players are attractive on secular growth potential and earnings ■expansion.

We maintain our Overweight stance on rapid top-line growth and clinical potential in ■penetrating global markets.

Seeking quality growth ● Investors that we met during our trip were divided into two camps when it comes to

Korean biotech companies. One claims valuations are demanding, but the other sees secular growth potential, especially from emerging markets. However, we believe the two Botox players are well positioned to benefit from healthy regional growth.

Woes on partnership overrated ● With a foreign broker pointing out the risks of global partnerships, we concluded that

teaming up with global partners would instead likely be strengthening given rising competition, especially in aesthetic Botox (in the US) and product-bundling strategies.

● The fact that Korean players are close to getting US FDA clinical approvals and Ipsen’s (IPN FP, Not rated) strategic partnership with Galderma (global No. 1 in dermal fillers) adds fuel to Korean players’ having strong tie-ups with global brands.

Korean Botox players’ earnings poised to expand further ● While both Korean Botox players’ earnings improved markedly in 2015, we believe

their earnings are poised for strong momentum again in 2016F due to the expanded export coverage. In our view, export growth should boost OPM as well as top line due to higher ASP for exports compared to domestic sales. For this reason, we expect earnings upside to be greater for Hugel in 2016F (over 57% growth in FY17F).

Hyper-growth likely to secure valuation premium ● Asia and emerging markets are going through a secular change in adopting anti-

ageing and healthcare services, in our view. As they are still at the infant stage of the Botox product lifecycle, we believe qualitative but economical Korean brands will likely gain market dominance rather quickly. We expect 42-47% of sales growth in 2016F-17F (on average) for Korean biotech companies under our coverage.

Maintain Overweight; Hugel and Medytox are our preferred picks ● Some investors are wary of rich valuation multiples. However, we think their lofty

operating profit margin (over 40%) and hyper top-line growth (47% on average) justify the valuation premium. We believe this trend will likely be sustained over the next 2-3 years. On average, our earnings estimates are 15% above consensus for 2016F and 22% above consensus for 2017F.

● Successful results in global clinical trials offer upside risk on the stocks. Downside risks include an unexpected slowdown in exports and fierce price competition.

Figure 1: Earnings comparison CIMB vs. Consensus (2016F)

SOURCES: CIMB, COMPANY REPORTS

0

10

20

30

40

50

60

70

Medy tox Hugel Inbody

Consensus CIMB

(Wbn)

10%

20%

15%

▎South Korea

June 30, 2016 - 6:08 PM

Overweight (no change)

Highlighted companies

Hugel Inc ADD, TP W427,000, W312,500 close

Hugel is No.2 in Korea’s BTX market and it has secured approval for BoNT phase III clinical trial from CFDA through its partner in China. Hugel is the first company to simultaneously initiate phase III in the US and China.

Inbody Co Ltd ADD, TP W72,000, W40,500 close

InBody is taking the lion’s share of the body composition analyser market both domestically and overseas. Its wearable BMI, InBody Band, is the world’s only wearable body composition analyser.

Medy-Tox ADD, TP W600,800, W431,000 close

Medy-Tox recently acquired MFDS’s approval for Coretox, which resembles pure botulinum toxin with less immune-response risks. We expect Coretox to gain sales momentum both in domestic and export markets.

Summary valuation metrics

Analyst(s)

Kathy PARK


P/E (x) Dec-16F Dec-17F Dec-18F

Hugel Inc 31.04 19.77 12.66

Inbody Co Ltd 21.08 14.92 10.73

Medy-Tox 37.28 30.45 23.88

P/BV (x) Dec-16F Dec-17F Dec-18F

Hugel Inc 4.32 3.63 2.95

Inbody Co Ltd 5.44 4.06 3.04

Medy-Tox 12.47 9.13 7.03

Dividend Yield Dec-16F Dec-17F Dec-18F

Hugel Inc 0.30% 0.72% 1.50%

Inbody Co Ltd 0.49% 0.99% 1.73%

Medy-Tox 0.42% 0.70% 0.92%

8

Power│Malaysia│Equity research│June 30, 2016

Company Note



Cypark Resources Bhd Still shining

Cypark’s 1HFY10/16 core net profit was broadly in line with our expectation at 48% ■of our full-year forecast.

As expected, the company did not declare any dividends in this quarter. ■

We maintain our EPS forecasts, Add recommendation and SOP-based target price. ■ The key downside risk to our recommendation and earnings forecasts is a delay in ■the completion of Cypark’s waste-to-energy (WTE) project in Negeri Sembilan.

Key highlights Excluding the unrealised foreign exchange gains, Cypark’s 2Q16 core net profit fell 10% yoy to RM13.6m (US$3m). The weaker earnings can be attributed mainly to the higher effective tax rate, as well as weaker earnings contributions from the Landscaping & Infrastructure (L&I) and Maintenance divisions. Both the Environmental Engineering and Renewable Energy (RE) divisions delivered stronger earnings on the back of higher revenue.

More details about the weaker performance Cypark’s effective tax rate rose to 17% in 2Q16, from 10% in 2Q15, as the group booked in additional tax provisions for non-tax-exempted projects. L&I’s pretax profit dropped 55% yoy to RM1.2m as certain projects in this division near their completion. As for the Maintenance division, its pretax profit fell 41% yoy to RM0.8m despite revenue rising 14%. We suspect that the division’s expenses were higher as start-up costs related to its landfill operation were recognised in the quarter.

Expect better earnings in coming quarters We expect Cypark to deliver stronger earnings in 2HFY16, driven by higher work activities in its non-RE divisions. Cypark has been appointed as the main contractor for a PR1MA project that consists of 562 units of apartments and shop lots. We expect the construction works to start in the coming quarters and boost FY16 earnings.

Longer-term outlook Beyond the near term, we think that Cypark’s earnings will benefit from its participation in more WTE projects in Malaysia. Cypark has an advantage in future WTE project bids as it is the only WTE concession owner in Malaysia. It is building a WTE plant in Negeri Sembilan, which is expected to commence operations in 2018.

Value underappreciated We believe that the market has failed to fully appreciate the potential of Cypark’s WTE project due to the lack of understanding of its earnings prospects. Management has shared scant details about the LTM project to safeguard its competitive edge in the tender exercises of future WTE projects. Our SOP values Cypark’s WTE project at close to book value. Yet, our TP suggests an upside of 18%.

News about WTE project could cause stock re-rating The latest WTE project tender is located in Kepong. The completion of this tender exercise could cause Cypark’s share price to re-rate, as the press has reported that many corporates are interested in the project. Newsflow about the involvement of these companies in the project would signal that WTE projects are lucrative. This could spark investor interest in Cypark as it is the only active WTE concession owner in Malaysia.

▎Malaysia

ADD (no change) Consensus ratings*: Buy 2 Hold 0 Sell 0



Previous target: RM2.30

Up/downside: 17.9%


Reuters: CYPR.KL

Bloomberg: CYP MK


RM493.2m


RM0.58m

Current shares o/s: 248.7m



No change

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -0.5 1.6 15.4

Relative (%) -1.3 6 19.2

Major shareholders % held Tan Sri Razali Bin Ismail 25.2

Dato' Daud bin Ahmad 7.8

Analyst(s)

SAW Xiao Jun, CFA


[ X ]


Financial Summary Oct-14A Oct-15A Oct-16F Oct-17F Oct-18F

Revenue (RMm) 237.0 251.9 245.5 254.2 347.6


Net Profit (RMm) 39.94 43.49 47.46 49.67 75.88

Core EPS (RM) 0.21 0.22 0.19 0.20 0.31

Core EPS Growth 0.8% 6.8% (14.3%) 4.7% 52.8%

FD Core P/E (x) 8.91 9.07 10.52 10.06 6.58

DPS (RM) 0.050 0.050 0.050 0.050 0.050

Dividend Yield 2.56% 2.56% 2.56% 2.56% 2.56%

EV/EBITDA (x) 9.56 8.27 12.27 11.68 6.00

P/FCFE (x) NA NA NA 8.48 3.92

Net Gearing 90% 55% 115% 98% 64%

P/BV (x) 1.31 1.04 1.35 1.22 1.06

ROE 15.8% 13.8% 12.6% 13.2% 17.7%


86.0

96.0

106.0

116.0

126.0

1.30

1.50

1.70

1.90

2.10


1

2

3


Vol m

9

Construction│Malaysia│Equity research│June 30, 2016

Company Note



Gamuda Transitioning to new MRT profits

Annualised 9M16 core net profit was 4-5% above our and consensus FY16 ■estimates.

We deem 9M16 results in line as we expect blended EBIT margin to trend lower in ■4Q due to timing of new orders and the soft domestic property market.

FY17 remains a turnaround year (+21% EPS growth) due to new MRT profits. ■ There is potential upside to all-time high order book of RM8.2bn (US$2.1bn) from ■likely Pan Borneo win.

Job flow and Splash deal are key catalysts in 2H16. Still our sector top big-cap pick. ■

9M16 results broadly in line Although annualised 9M16 core net profit was 4-5% above our and consensus full-year forecasts, we deem the results broadly in line as we expect 4Q16 core net profit to be flat qoq, at best. We think the blended 16.5% EBIT margin in 9M16 is not sustainable due to run-down in MRT 1 billings and completion of higher-margin property ventures. The concessions segment was the sole earnings growth driver in 9M16, while net profit decline of 10.3% yoy was not a surprise. 12 sen single-tier DPS was in line.

Transitioning to new MRT earnings flow in FY17 onwards We retain FY16-17 EPS and continue to expect earnings decline in FY16 before turnaround in FY17 (+21% EPS growth). Recovery in earnings flow is likely to be driven by the RM8.2bn all-time high order book from the recent MRT 2 underground win (50% JV share). We expect gradual recovery in construction pretax margin from the c.6-7% currently to 8-10% in FY17. New MRT PDP profit (RM450m-500m or US$113-125m over 5-6 years) and c.RM15bn (US$3.8bn) tunneling works are highlights for FY17.

Property sales outlook is mixed for domestic and overseas Guidance on the still-cautious domestic property market was within expectations and is reflected in our RM1.0bn-1.4bn (US$250-350m) p.a. property sales assumptions for FY17-18. Its RM1.4bn sales target for FY16 faces minimal downside risks, supported by encouraging sales for two blocks of condo units in Singapore (RM500m sales target in FY16). Overall sales outlook is rosier for overseas ventures, including those in Ho Chi Minh City (HCMC). New domestic township launches are still set for FY17.

Selective on new jobs; still sizeable Guidance on potential upside to all-time high order book of RM8.2bn is unchanged. Potential key driver is bagging the RM1.0bn-1.5bn (US$250-375m) Pan-Borneo Highway package in next 3-4 months. Other potential wins are LRT 3, likely in 4Q16, and certain packages for Gemas-Johor Baru double-tracking job. The Penang Transport Master Plan (TMP) outlook remains promising but a 6-month delay (in approval timeline from 2H17 to mid-2018) seems inevitable given timing of approval submissions.

Add retained; sector top pick Construction outlook remains solid for 2H16, which is a key potential re-rating catalyst. The divestment of 40%-owned water asset Splash would also be a positive catalyst, as the Selangor state government targets to resolve the valuation issue by end-2016. Our target price remains pegged to a 10% RNAV discount. We continue to favour Gamuda over other big caps for its earnings turnaround angle and MRT exposure. It remains our sector top pick. Downside risk is delay in job rollout.

▎Malaysia





Up/downside: 23.1%

CIMB / Consensus: 11.4%

Reuters: GAMU.KL

Bloomberg: GAM MK


RM11,624m


RM15.19m




No changes.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 0.8 -1.8 3

Relative (%) 0.5 2.5 5.9

Major shareholders % held EPF 10.6

Amanah Raya Trustees 8.2

Generasi Setia 5.5

Analyst(s)

Sharizan ROSELY


[ X ]


Financial Summary Jul-14A Jul-15A Jul-16F Jul-17F Jul-18F

Revenue (RMm) 2,230 2,400 2,657 2,952 3,243


Net Profit (RMm) 719.4 682.1 604.4 732.8 807.3

Core EPS (RM) 0.32 0.28 0.25 0.30 0.34

Core EPS Growth 3.4% (12.1%) (11.4%) 21.2% 10.2%

FD Core P/E (x) 14.91 16.97 19.15 15.79 14.34

DPS (RM) 0.12 0.12 0.12 0.12 0.12

Dividend Yield 2.41% 2.41% 2.41% 2.41% 2.41%

EV/EBITDA (x) 28.47 22.23 21.44 17.56 16.35

P/FCFE (x) 8.90 13.19 28.97 24.92 21.08

Net Gearing 30.0% 47.2% 46.5% 45.0% 42.7%

P/BV (x) 2.09 1.83 1.82 1.79 1.75

ROE 13.7% 11.5% 9.5% 11.4% 12.4%

% Change In Core EPS Estimates 0% 0% 0%


89.0

96.1

103.3

3.70

4.20

4.70


10

20

30


Vol m

10

Technology - Others│Malaysia│Equity research│June 30, 2016

Company Note



MY E.G. Services Rehiring programme ended yesterday

Registration of illegal foreign worker (IFW) ended yesterday (30-Jun). We estimate ■MyEG only registered 300,000, 70% below our 1m target.

The government is looking at much higher registration of IFWs. Rehiring programme ■should continue. We target MyEG to register 700,000 IFW in FY17.

We are hopeful government would lift the hiring freeze on legal foreign workers once ■the IFW registration target is met.

Remains an Add; technical share price consolidation likely over. ■

Rehiring programme ended yesterday The country’s registration of illegal foreign workers (IFW), which started in mid-Feb, ended yesterday (30 Jun). We were earlier looking at the government to register 1m illegal foreign workers (IFW), but registration was weaker than expected. We estimate as at yesterday, MyEG only registered around 300,000 IFW, 70% below our 1m target.

Registration of illegal foreign workers should continue The government is targeting higher registration of IFW. It is unlikely, in our view, that the government would stop the rehiring programme until it meets a certain target. We have assumed in our earnings forecast the government would reach registration of 1m IFW by FY17. This would mean MyEG would register an additional 700,000 IFW in FY17, which is possible.

GST monitoring project delayed to Jan? MyEG has indicated in the past its management would not be able to handle the registration of IFW and the launch of the GST monitoring project (GMP) at the same time. We expect the rehiring programme to continue for another few months and the launch of the GMP to be postponed from Jul-2016 to Jan-2017, a six- month delay.

GMP Phase 1 targets F&B sector The GMP Phase 1, which involves installation of its dongles at 50,000 F&B outlets nationwide, should start in Jan-2017. MyEG gets paid RM1,000 per F&B outlet annually. Phase2, which involves installation of its dongles at 500,000 retail outlets nationwide, should start one year after the start of Phase1. In Phase 2, MyEG also gets paid RM1,000 per retail outlet annually. In our earnings forecast, we have assumed GMP Phase 1 starts in Jan-2017 while GMP Phase 2 starts in Jan-2018.

Remains an Add We cut FY16-18F EPS by 20-27% to take into account the slower-than-expected IFW registration and the expected six-month launch delay of the GMP project. After the downward EPS revisions, our target price falls from RM2.83 to RM2.31, based on an unchanged 2017F P/E of 21x, in line with its peers. The stock remains an Add. Potential rerating catalysts include stronger-than-expected registration of IFW and successful launch of the GMP. Risks include further delays in the GMP launch.

▎Malaysia





Up/downside: 17.8%


Reuters: MYEG.KL

Bloomberg: MYEG MK


RM4,736m


RM10.78m




FY16F EPS cut by 27%.

FY17F EPS cut by 22.7%.

FY18F EPS cut by 19.6%

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -3.9 -6.6 41.7

Relative (%) -5.4 -2.9 44.8

Major shareholders % held Wong Thean Soon 39.1

KWAP 6.0

Analyst(s)

Nigel FOO


[ X ]



Revenue (RMm) 109.9 141.5 327.6 420.3 712.0


Net Profit (RMm) 50.1 68.0 141.8 195.2 334.7

Core EPS (RM) 0.02 0.03 0.06 0.08 0.14

Core EPS Growth 43% 36% 109% 38% 71%

FD Core P/E (x) 94.37 69.53 33.33 24.22 14.13

DPS (RM) 0.005 0.008 0.020 0.030 0.045

Dividend Yield 0.25% 0.41% 1.02% 1.52% 2.28%

EV/EBITDA (x) 75.10 55.71 29.79 22.01 12.90

P/FCFE (x) 231.3 66.7 62.2 43.0 18.9

Net Gearing (2.2%) (21.5%) 0.4% (9.7%) (24.9%)

P/BV (x) 26.77 21.09 14.62 10.28 6.81

ROE 31.7% 33.9% 51.8% 49.8% 58.0%

% Change In Core EPS Estimates (27.0%) (22.7%) (19.6%)


81

113

145

1.10

1.60

2.10


20

40

60


Vol m

11

Financial Services│Malaysia│Equity research│June 30, 2016

Sector Note



Banks May 16 tracker – light at the end of tunnel for loan growth?

May loan growth recovered on mom basis but yoy growth inched down to 6.2%. ■ The rising base-rate trend would help to catalyse banks’ earnings. ■ Loan applications and approvals turned to positive yoy growth in May 16. ■ Gross impaired loan ratio rose marginally from 1.6% in Apr 16 to 1.65% in May 16. ■ We retain our Overweight stance on banks, premised on the expected recovery in ■EPS growth in 2016, as well as compelling valuations. RHB Bank is our top pick.

Stable but still-weak loan growth After plateauing in Jan-Apr 16, the industry’s loan base grew by 0.7% mom in May 16. On yoy basis, loan growth inched down from 6.3% yoy in Apr 16 to 6.2% yoy in May 16. The growth in major loan segments eased – from 6.3% yoy in Apr 16 to 6.2% yoy in May 16 for household loans and from 5% yoy to 4.5% yoy for business loans. We see prospects for recovery in loan expansion in 2H16, given the better GDP growth projection of 5.2%. For now, we maintain our loan growth projection of 7-8% for 2016.

Higher base rate to catalyse earnings On 17 May 16, Public Bank raised its BR by 10bp but cut the housing loan (HL) spread to maintain its HL rate. As such, the industry’s BR increased by 2bp mom to 3.81% in May 16 but the average lending rate fell by 5bp mom to 4.55%. The BR hike would catalyse banks’ earnings, as it would lead to higher interest income earned from existing variable-rate loans, which accounted for more than 50% of total loans for most banks.

Loan growth to trough soon? We think that loan growth will trough soon given the improvement in leading loan indicators. The yoy growth leading loan indicators indicators turned positive in May 16, with 8.9% yoy for applications and 2.2% yoy for approvals, compared to declines of 6% yoy and 17.2% yoy respectively in Apr 16. These were underpinned by the 9-12% yoy rise in working capital loans and the growth in applications of residential mortgages rebounding to 7.1% yoy in May 16 versus the 3.1% yoy drop in Apr 16.

Marginal increase in gross impaired loan ratio Gross impaired loan (GIL) ratio rose marginally from 1.6% in Apr 16 to 1.65% in May 16 (vs. our projection of 1.8% at end-16). In May 16, GIL increased by RM766.5m (US$190.5m), mainly due to the rise of GIL for construction (+RM301.5m/+US$74.9m) and working capital (+RM344.2m/+US$85.6m) loans. The steeper increase in individual assessment makes us believe that the rise in GIL came primarily from the corporate loan segment. Meanwhile, loan loss coverage fell from 93.9% in Apr 16 to 91.2% in May 16.

Staying Overweight We retain our Overweight call on banks, premised on the potential re-rating catalyst of expected recovery in EPS growth in 2016 and attractive valuation/dividend yields for most banks. We believe that the expected slowdown in 2016 loan growth would be partly cushioned by the rise in BRs, which would help the banks to minimise margin contraction. RHB Bank remains our top pick.

[ X ]

Figure 1: Banking system’s total loans and yoy growth

SOURCES: BANK NEGARA MALAYSIA

▎Malaysia

Overweight (no change)

Highlighted companies

Malayan Banking Bhd ADD, TP RM10.60, RM8.12 close

We like Maybank for its extensive regional network and presence in underpenetrated markets like Indonesia and the Philippines. It is also ranked one of the top three in most market segments in Malaysia.

Public Bank Bhd HOLD, TP RM19.15, RM19.30 close

Public Bank raised its BR by 10bp to 4.1% on 17 May 16. We estimate that this would increase its FY17-18 net profit by circa 2.8%.

RHB Bank Bhd ADD, TP RM6.20, RM5.08 close

We see better prospects for RHB Bank’s earnings in the longer term, catalysed by: (1) the benefits from the IGNITE 17 transformation programme, and (2) the drive for regional expansion.

Summary valuation metrics

Analyst(s)

Winson NG, CFA


4%

5%

6%

7%

8%

9%

10%

11%

12%

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16

%RM m

Loans yoy growth

P/E (x) Dec-16F Dec-17F Dec-18F

Malayan Banking Bhd 11.32 9.97 9.18

Public Bank Bhd 14.47 13.20 12.02

RHB Bank Bhd 8.53 8.90 7.92

P/BV (x) Dec-16F Dec-17F Dec-18F

Malayan Banking Bhd 1.37 1.31 1.26

Public Bank Bhd 2.13 1.91 1.73

RHB Bank Bhd 0.87 0.81 0.75

Dividend Yield Dec-16F Dec-17F Dec-18F

Malayan Banking Bhd 6.45% 7.33% 7.95%

Public Bank Bhd 3.11% 3.41% 3.74%

RHB Bank Bhd 3.11% 3.37% 3.79%

12

Property Devt & Invt│Singapore│Equity research│June 30, 2016

Company Note



UOL Group Concerns overdone

■ Exposure to UK low at 3.5% of total assets and even less on earnings

■ Residential projects seeing higher take up, c.S$750m of attributable locked in sales

■ Large rental income base underpinned by high occupancies and slight positive rental reversion

■ UIC’s residential projects a potential dampener, but only slight

■ Maintain Add rating, with a revised target price of S$8.06 (20% discount to RNAV)

Only 3.5% of total assets exposed to UK, less on earnings Concerns over UOL’s UK exposure have been overstated. Currently, it has only £200m exposure to the country via a completed office property and a mixed hotel/residential project. Combined, the two make up only 3.5% of its total asset base. We reckon when the latter is fully completed, this exposure would rise to a still-small c.8% of total assets. As for earnings, rental income derived from its 10,900sm office building makes up <1% of group topline.

Estimated S$750m of presales yet to be recognised UOL’s Singapore residential projects have enjoyed continued buying interest over the past six months and sales are largely locked-in at Botanique at Bartley (95% sold) and Riverbank @ Fernvale (75% sold). Its latest launch, Principal Garden, is 35% taken up. In total, the group has secured attributable presales of S$750m, the bulk of which will be recognised in FY17/18. Income visibility will likely be further bolstered by new upcoming launches such as Clementi Ave 1, Park Eleven, Shanghai and Bishopsgate, UK.

Steady base from rental income High occupancies of 89-100% continue to underpin UOL’s rental income base. Some 35% of its office and 22% of retail leases are due to be re-contracted this year, and we expect small but positive rental reversions from them. This recurrent income base is further bolstered by the group’s hotel operations, which enjoyed 4% Revpar growth in 1Q16. While we expect the hotel industry to remain anaemic this year, due to large influx of new rooms, we think UOL’s hotel portfolio should deliver a steady performance.

Exposure to UIC's residential exposure a dampener, but slight Come 2017, we believe the three residential projects of 44.3%-owned UIC could be impacted by the Additional Buyer's Stamp Duty (ABSD) if they are not fully sold by then. The projects, Alex Residences, Pollen & Blue, and Mon Jervois, are currently 12-61% sold. We estimate c.S$57m in penalties could hit UIC’s bottomline due to these three projects, translating to an attributable S$21m knock-on impact on UOL’s earnings and RNAV. This could shave off 2.6 Scts or 0.25% of UOL's RNAV, based on our estimates.

Maintain Add We cur our FY16-18 earnings by 2.3-8.5% to factor in weaker £ translation impact and updated residential sales trend. We also cut our RNAV estimates by 4.4% to S$10.08 to reflect the potential impact of UIC’s penalty payments. This reduces our target price, pegged to 20% discount to RNAV. Given that the marginal impact from Brexit and potential ABSD payment, UOL's recent underperformance is unjustifiable, in our view. Potential re-rating catalysts are robust residential take up and cheap valuations.

▎ Singapore


Current price: S$5.46

Target price: S$8.02

Previous target: S$8.26

Up/downside: 46.9%


Reuters: UTOS.SI

Bloomberg: UOL SP


S$4,401m


S$8.32m

Current shares o/s: 796.2m



FY16F EPS lowered by 2.3%.

FY17F EPS lowered by 3.3%.

FY18F EPS increased by 8.5%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -4.1 -9.8 -21.1

Relative (%) -5.7 -8.7 -6.7

Major shareholders % held Wee related vehicles (incl Haw Par) 31.2

United Overseas Bank 9.8

Schroders 5.0

Analyst(s)

LOCK Mun Yee

T (65) 6210 8606 E [email protected]

YEO Zhi Bin T (65) 6210 8669 E [email protected]

[ X ]



Total Net Revenues (S$m) 1,361 1,279 1,382 1,421 1,312

Operating EBITDA (S$m) 675.9 344.5 436.9 464.5 451.1

Net Profit (S$m) 947.7 375.2 437.2 407.2 386.8

Core EPS (S$) 0.79 0.42 0.55 0.51 0.49

Core EPS Growth 75.3% (47.0%) 30.9% (6.9%) (5.0%)

FD Core P/E (x) 6.90 13.01 9.94 10.68 11.24

DPS (S$) 0.15 0.15 0.15 0.15 0.15

Dividend Yield 2.75% 2.75% 2.75% 2.75% 2.75%

EV/EBITDA (x) 10.97 20.48 17.26 16.66 16.90

P/FCFE (x) NA 109.5 287.2 55.6 11.2

Net Gearing 33.0% 26.5% 30.5% 31.5% 29.1%

P/BV (x) 0.56 0.55 0.53 0.51 0.50

ROE 8.54% 4.28% 5.43% 4.87% 4.48%

% Change In Core EPS Estimates (2.33%) (3.33%) 8.48%


91.0

94.6

98.2

101.8

105.4

109.0

5.00

5.50

6.00

6.50

7.00

7.50

Price Close Relative to FSSTI (RHS)

2

4

6


Vo

l m

13

Petrochemical│Thailand│Equity research│June 30, 2016

Company Note



Indorama Ventures A wave, not grave tsunami on PET oversupply

Market concern on PET margin outlook overdone to us: IVL’s share price fell 5%. ■

HVA & PTA, not PET, are IVL’s true key growth drivers post M&As in 2014-15. ■

We see limited downside for global PET and PTA margins as they are at 10-year ■historical lows and near industry cash cost levels.

We see low possibility for price war in North America PET market in 2017. ■

Maintain Add and target price of THB50, based on a mid-cycle valuation of 13x ■CY17 EV/EBITDA, given IVL’s superior growth and quality earnings.

PET concern is overdone IVL’s share price lost 5% yesterday on market concern on worsening PET margin outlook. We think this is excessive and believe IVL's earnings will grow a minimum 12% CAGR in 2015-18 driven by high-value added products (HVA), volume growth, and Purified Telephthalic Acid (PTA), that will more than offset any weakness in Polyethylene Telephthalate (PET) margin. We also expect earnings sustainability to improve due to the high portion of low-volatility HVA earnings.

HVA & PTA, not PET, are IVL’s true growth drivers HVA specialty and PTA, not PET, are IVL's key earnings growth drivers. We estimate that IVL's 1.6mtpa HVA volume alone generates THB7.2bn core net profit regardless of global economy and PET margin. Based on consensus earnings forecasts for 2016-18, consensus seems to expect IVL's PTA business to be loss-making and PET net margin of only US$13-28/t for 2016-18, which we think is highly conservative given IVL's cash cost is US$20-30/t below industry cash cost average.

Limited downside at current PET and PTA cash-cost margins Since the beginning of 2015, PET and PTA margins in the EU and North America have plunged 25-40% from their 5-year average, reflecting oversupply in the Asian market. At current levels, PET and PTA margins in the EU and North America are near industry cash costs and hence, further margin downside is limited despite the influx of new supply for PET globally.

A win-win, not zero sum game for oligopoly Western markets We see limited downside from the new 1.1mtpa PET and PTA plants in 2017, given the oligopoly in North America. We think it is unlikely that M&G and Alpek will trigger a price war given 1) they will lose much more than IVL given their post new plant start-up market share of 34% for M&G and 31% Alpek vs. IVL's 24%, 2) M&G's financial distress position will force M&G to maximise profitability, not market share, and 3) M&G and Alpek are highly likely to shut down or rationalise their old, inefficient PET plants.

Premiums on growth and superior earnings quality We believe IVL's valuation should at least command a mid-cycle valuation at 13x EV/EVITDA given: 1) 12-15% earnings CAGR for 2015-18, 2) superior earnings quality supported by HVA earnings, 3) PTA downcycle has reached five years and likely to improve gradually by 2017 given no new supply and rising demand, and 4) global PET margin has already sharply declined to nearly industry cash cost levels, particularly the PET margins in the EU and North America which dropped since 2015.

▎Thailand


Current price: THB28.75

Target price: THB50.00

Previous target: THB50.00

Up/downside: 73.9%


Reuters: IVL.BK

Bloomberg: IVL TB


THB138,410m


THB1,163m




No change.

Source: Bloomberg


Relative (%) -16.9 23.6 7.2

Major shareholders % held Indorama Resources 65.0

Public 35.0

Analyst(s)

Suwat SINSADOK, CFA, FRM


[ X ]



Revenue (THBm) 243,907 234,698 370,672 393,273 446,246

Operating EBITDA (THBm) 12,609 15,665 24,368 28,264 33,033

Net Profit (THBm) 1,675 6,609 9,210 11,261 15,534

Core EPS (THB) 0.14 0.78 1.78 2.34 3.23

Core EPS Growth 66% 448% 128% 31% 38%

FD Core P/E (x) 201.8 36.8 16.1 12.3 8.9

DPS (THB) 0.17 0.36 0.52 0.63 0.87

Dividend Yield 0.59% 1.25% 1.80% 2.20% 3.03%

EV/EBITDA (x) 16.52 13.98 10.27 8.53 6.84

P/FCFE (x) NA 14.40 7.96 38.96 57.96

Net Gearing 90% 93% 128% 107% 80%

P/BV (x) 1.88 1.73 1.59 1.45 1.28

ROE 1.0% 4.9% 10.3% 12.3% 15.3%

% Change In Core EPS Estimates 0% 0% 0%


76.0

92.7

109.3

126.0

17.0

22.0

27.0

32.0

Price Close Relative to SET (RHS)

50

100

150


Vol m

14

Cement│Vietnam│Equity research

Company Flash Note

THIS REPORT IS PREPARED IN ASSOCIATION WITH VNDIRECT SECURITIES CORPORATION. PLEASE SEE DISCLAIMER AND IMPORTANT NOTICES APPEARING AT THE

END OF THIS DOCUMENT. IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE ALSO PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED

RESEARCH.``


Ha Tien 1 Cement JSC

EUR depreciation boosts earnings outlook

HT1’s encouraging earnings outlook has been further boosted by the post-Brexit ■depreciation of the Euro, because ¼ of the company’s debt is EUR denominated

Vietnam’s new government reiterated its ambitious 2016-20 infrastructure ■development program at a conference earlier this month, which will benefit HT1

We except cement consumption in Vietnam to increase 15% in 2016; according to ■the Ministry of Construction, volume growth was up by more than 17% yoy in 4M16

HT1’s earnings would be boosted by a Euro depreciation ● HT1 took out EUR denominated loans under a EU sponsored ODA program before

the company was privatized, so the HT1’s earnings and share price were heavily influenced by swings in the EUR/VND exchange rate in the past. About ¼ of the company’s debt is EUR denominated, so we estimate that a 10% depreciation in the EUR would boost FY15 EPS by 50% ceteris paribus, but we note that the company has been paring down its debt because of the volatility it has generated in the company’s earnings. HT1’s D/E ratio fell from 5x to below 2x over the last three years.

New government continues aggressive infrastructure development ● The Ministry of Transport held a conference earlier this month, at which it reiterated

the government’s commitment to an aggressive ~US$40b transport infrastructure development program over 2016-20. The MoT had held a similar conference in the middle of last year, at which time a similar magnitude of expenditures on infrastructure development was discussed (in last year’s conference, the MoT also specified that about 2/3 of this spending would be on roads and highways).

● Most observers at the MoT’s conference were not surprised by the continuity of the new government’s policy, given Vietnam’s pressing need to develop its physical infrastructure, but the new government, which took office earlier this year, has placed additional emphasis on the need to develop and professionalize the country’s legal framework for PPP & BOT based financing of infrastructure development. Specific mention was made of the fact that the regulations governing PPP projects changed 4 times in recent years – making private sector/foreign investors uncomfortable.

● We view the continuity of the government’s policies and the likely further removal of potential impediments to the financing of infrastructure development as positive for HT1.

Vietnam’s robust cement consumption growth ● We expect cement consumption in Vietnam to grow 15% this year, given the

country’s continued, aggressive infrastructure development and its robust real estate market. According to the latest statistics available from the Ministry of Construction, cement volume sales grew by more than 17% yoy in 4M16, while prices are unchanged year-on-year. We also note that volume sales of construction steel are up about 34% this year, also driven by infrastructure and real estate construction.

Strong core earnings growth outlook ● We expect HT1’s core earnings (excluding FX gains & losses) to surge 52% this year,

driven by 20% cement volume sales growth. Note that in 2015, the company’s volume sales grew 17% yoy, while in Q1, HT1’s volume sales grew 20% yoy, outpacing industry-wide growth. Recall that Vietnam faces a shortage of cement production capacity in the south, which is one reason HT1 was able to grow its volume sales at a quicker pace than the rest of the industry.

● The company is also sitting on a potential windfall from the redevelopment of its factory outside HCMC (for residential use). The removal of equipment from that site should be completed by the end of this year, after which HT1 can redevelop the land.

Lifting our target price by 10%; Maintain Add ● HT1’s stock price initially jumped by ~10% after last week’s “Brexit” news, but it then

pulled back because: 1) the drop in the Euro has not yet been as severe as expected, and 2) when investors took a closer look at HT1, they realized that the company’s EUR exposure has shrunk compared to a few years ago, when EUR movements caused huge swings in HT1’s earnings. The post-Brext pop in HT1’s share price caused it to hit our target price, but we still view the stock as an “Add”, so we’ve raised our target price which is now based on 8x EV/EBITDA and DCF, by 10%.

▎Vietnam

June 30, 2016 - 2:37 PM


Current price: VND29,700

Target price: VND33,900

Previous target: VND30,700

Up/downside: 14.1%


Reuters: HT1.HM

Bloomberg: HT1 VN


VND9,443,174m


VND1,241m



Key financial forecasts

Source: Bloomberg


Absolute (%) 2.8 16.5 29.1

Relative (%) -0.8 5.6 22.6

Major shareholders % held VICEM 79.7

Ha Tien Transport JSC 0.3

Vietin Bank 0.3

Analyst(s)

NGUYEN Xuan Huy


Dec-16F Dec-17F Dec-18F

Net Profit (VNDb) 1,122 1,301 1,471

Core EPS (VND) 3,529 4,093 4,626

Core EPS Growth 51.9% 16.0% 13.0%

FD Core P/E (x) 8.42 7.26 6.42

Recurring ROE 22.5% 21.0% 19.4%

P/BV (x) 1.70 1.38 1.13

DPS (VND) - - -

Dividend Yield 0% 0% 0%

81.0

102.4

123.9

19,000

24,000

29,000

Price Close Relative to VNINDEX (RHS)

200

400

600

800


Vol th

15

Food & Beverages│Vietnam│Equity research│July 1, 2016

Company Note

THIS REPORT IS PREPARED IN ASSOCIATION WITH VNDIRECT SECURITIES CORPORATION. PLEASE SEE DISCLAIMER AND IMPORTANT NOTICES APPEARING AT THE END OF THIS DOCUMENT. IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE ALSO PROVIDED AT THE END OF THIS REPORT. THIRD-PARTY AFFILIATED RESEARCH.


Vietnam Dairy Products JSC Vinamilk’s FOL to be lifted within weeks

Vinamilk’s CEO sent an official letter to Vietnam’s SSC this week, informing the ■securities regulator that VNM wants to remove its Foreign Ownership Limit (FOL)

VNM’s FOL should be lifted within weeks, based on prior cases ■

The share prices of attractive companies that lifted their FOL’s more-or-less ■doubled, so we’re raising our target price by another 7%

VNM’s market microstructure will change dramatically – the full universe of foreign ■investors will now become marginal buyers that can determine VNM’s stock price

It’s official – Vinamilk is removing its Foreign Ownership Limit ! VNM’s CEO sent an official letter to the SSC this week, officially informing the regulator that Vinamilk’s Board approved the removal of VNM’s FOL. Based on prior cases, the SSC’s approval – which is a formality – will take a month, after which VNM will petition the Vietnam Securities Depository (VSD) to remove its operational FOL restrictions; it should take the VSD another 2-3 days to “flip the switch” and open the FOL to 100%.

Market microstructure factors to drive stock price in the mid-term Companies like EVE that had persistently full FOL’s, saw their share prices more-or-less double when they removed their FOL. VNM’s stock price rose 50% over the last year, but VNM still looks reasonable from a fundamental point of view; it’s trading at 20x FY16 P/E, vs 23% EPS growth, while generating a 35-40% ROE. Not all investors may agree that VNM is a “Buy”, but the fundamentals just described would probably pass the investment committees of most asset managers - so we expect the stock market microstructure dynamics described below to drive VNM’s share price over the mid-term.

Market dynamic 1: foreigners will now be the marginal buyers Vinamilk’s FOL has been full for years, so the stock trades between foreigners at a ~7-15% premium to its local stock price. Importantly: 1) VNM orders from foreign investors aren’t directly entered onto the stock market, and 2) the foreign premium system precludes a large universe of investors from buying the stock, for compliance/operational reasons. As a result, the price discovery mechanism is broken and foreigners only indirectly influence VNM’s stock price. Foreign investors will now be able to directly enter their VNM orders on the market at any price they wish.

Market dynamic 2: only 6% of shares immediately available When VNM’s FOL is lifted, the effective free float for foreign investors will only increase by 6%/outstanding shares, because foreigners already own 49% of VNM, and the SCIC holds 45%. Locals assume that this newly-available 6% block of shares will be snapped up by foreigners, and then trading on VNM will go quiet – which happened when a 3% block suddenly became available to foreigners a few years ago. However, local investors don’t realize that VNM’s market microstructure will change dramatically - with the full universe of investors now able to determine market-clearing prices.

Market dynamic 3: the SCIC’s 45% stake sale Vietnam’s SCIC needs to sell its 45% VNM stake, given government’s persistent ~6% budget deficits. There are signs the SCIC is already maneuvering to maximize the value of its VNM holdings, so we expect it to hold a series of auctions over the next year - which could prompt VNM’s share price to surge further.

▎Vietnam


Current price: VND141,000

Target price: VND169,000

Previous target: VND158,000

Up/downside: 19.9%


Reuters: VNM.HM

Bloomberg: VNM VN


VND169,219,648m


VND88,334m




N/A

Source: Bloomberg


Relative (%) -3.6 -7.2 43.1

Major shareholders % held SCIC 45.1

F&N 11.0

Deutsche Bank 10.9

Analyst(s)

Hang VU


Michael KOKALARI, CFA T (84) 90 797 4408 E [email protected]

[ X ]



Revenue (VNDb) 34,977 40,080 44,292 51,763 60,426

Operating EBITDA (VNDb) 7,850 9,869 12,084 12,822 14,007

Net Profit (VNDb) 5,461 6,989 8,600 9,151 10,010

Core EPS (VND) 4,547 5,820 7,173 7,632 8,346

Core EPS Growth (7.2%) 28.0% 23.2% 6.4% 9.4%

FD Core P/E (x) 31.01 24.23 19.66 18.48 16.89

DPS (VND) 3,331 4,999 6,000 6,098 6,669

Dividend Yield 2.36% 3.55% 4.26% 4.32% 4.73%

EV/EBITDA (x) 20.61 16.31 13.22 12.31 11.12

P/FCFE (x) 62.42 28.97 17.65 18.49 16.77

Net Gearing (37.2%) (39.1%) (42.3%) (46.7%) (50.7%)

P/BV (x) 8.60 8.18 7.67 7.06 6.46

ROE 29.3% 34.6% 40.3% 39.8% 39.9%

% Change In Core EPS Estimates 0.0% 17.8% 22.2%


91.0

111.0

131.0

151.0

89,000

109,000

129,000

149,000

Price Close Relative to VNINDEX (RHS)

1

2

3


Vol m

16

Asia Pacific Daily│Equity research│July 1, 2016

REGIONAL HEAD

Michael Greenall Regional Head of Research & HOR Malaysia +60 (3) 2261 9088 [email protected]

COUNTRY HEADS OF RESEARCH

Ivy NG, CFA Bertram LAI Eric LIN Erwan TEGUH Pramod AMTHE Malaysia (Deputy Head) Hong Kong/China Taiwan Indonesia India +60 (3) 2261 9073 +852 2532 1111 +886 (2) 8729 8380 +62 (21) 3006 1720 +91 (22) 6602-5167 [email protected] [email protected] [email protected] [email protected] [email protected] Dohoon LEE Kenneth NG, CFA Kasem PRUNRATANAMALA, CFA South Korea Singapore Thailand +82 (2) 6730 6121 +65 6210 8610 +66 (2) 657 9221 [email protected] [email protected] [email protected] Michael KOKALARI, CFA Jose Paolo Deogracias Fontanilla Yolan SEIMON Vietnam Philippines Sri Lanka +84 907 974408 +63 (2) 888 7118 +94 (11) 2306273 [email protected] [email protected] [email protected] Coverage via partnership arrangement with Coverage via partnership arrangement with SB Equities John Keells Stock Brokers

REGIONAL SECTOR HEADS

KJ KWANG Ivy NG, CFA Raymond YAP, CFA Offshore & Marine Plantations Transportation +82 (2) 6730 6123 +60 (3) 2261 9073 +60 (3) 2261 9072 [email protected] [email protected] [email protected]

7

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Berhad ("CIMBGH") and its affiliates, subsidiaries and related companies.

Country CIMB Entity Regulated by Hong Kong CIMB Securities Limited Securities and Futures Commission Hong Kong India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI) Indonesia PT CIMB Securities Indonesia Financial Services Authority of Indonesia Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia Singapore CIMB Research Pte. Ltd. Monetary Authority of Singapore South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service Taiwan CIMB Securities Limited, Taiwan Branch Financial Supervisory Commission Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand

Information in this report is a summary derived from individual research reports. As such, readers are directed to the individual research report or note to review the individual Research Analyst’s full analysis of the subject company. Important disclosures relating to the companies that are the subject of research reports published by CIMB, John Keells, SBE or Morgans, as the case may be, and the proprietary position by each of them and shareholdings of its Research Analysts’ who prepared the report in the securities of the company(s) are available in the individual research report. This report does not purport to contain all the information that a prospective investor may require. CIMB, John Keells, SBE and Morgans and their respective affiliates do not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. None of CIMB, John Keells, SBE, Morgans and their respective affiliates and related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally 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. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments or any derivative instrument, or any rights pertaining thereto. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.

Australia : The distribution of this report is not an offer to buy or sell to any person within or outside Australia or a solicitation to any person within or outside of Australia to buy or sell any instrument described herein. This report is being issued outside Australia to a limited number of institutional investors and may not be provided to any person other than the original recipient and may not be reproduced or used for any other purposes. Canada: This research report has not been prepared in accordance with the disclosure requirements of Dealer Member Rule 3400 – Research Restrictions and Disclosure Requirements of the Investment Industry Regulatory Organization of Canada. For any research report distributed by CIBC, further disclosures related to CIBC conflicts of interest can be found at https://researchcentral.cibcwm.com . China: For the purpose of this report, the People’s Republic of China (“PRC”) does not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan. The distributor of this report has not been approved or licensed by the China Securities Regulatory Commission or any other relevant regulatory authority or governmental agency in the PRC. This report contains only marketing information. The distribution of this report is not an offer to buy or sell to any person within or outside PRC or a solicitation to any person within or outside of PRC to buy or sell any instruments described herein. This report is being issued outside the PRC to a limited number of institutional investors and may not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument. Germany: This report is only directed at persons who are professional investors as defined in sec 31a(2) of the German Securities Trading Act (WpHG). This publication constitutes research of a non-binding nature on the market situation and the investment instruments cited here at the time of the publication of the information. The current prices/yields in this issue are based upon closing prices from Bloomberg as of the day preceding publication. Please note that neither the German Federal Financial Supervisory Agency (BaFin), nor any other supervisory authority exercises any control over the content of this report. Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are of CIMB, John Keells, SBE or Morgans, as the case may be, as of the date hereof and are 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. CHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CHK.

India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (”CIMB India") which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, the Securities and

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Exchange Board of India (Research Analyst) Regulations, 2014 (SEBI Registration Number INH000000669) and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser. The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from equity stock broking and merchant banking of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.”

Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are 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. CIMBI has no obligation to update its opinion or the information in this research report. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable Indonesian capital market laws and regulations. This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within the meaning of the Indonesian capital market law and regulations. Ireland: CIMB is not an investment firm authorised in the Republic of Ireland and no part of this document should be construed as CIMB acting as, or otherwise claiming or representing to be, an investment firm authorised in the Republic of Ireland. Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”) solely for the benefit of and for the exclusive use of our clients. 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. CIMB has no obligation to update, revise or reaffirm its opinion or the information in this research reports after the date of this report. New Zealand: In New Zealand, this report is for distribution only to persons who are wholesale clients pursuant to section 5C of the Financial Advisers Act 2008. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). CIMBR is a financial adviser licensed under the Financial Advisers Act, Cap 110 (“FAA”) for advising on investment products, by issuing or promulgating research analyses or research reports, whether in electronic, print or other form. Accordingly CIMBR is a subject to the applicable rules under the FAA unless it is able to avail itself to any prescribed exemptions. Recipients of this report are to contact CIMB Research Pte Ltd, 50 Raffles Place, #19-00 Singapore Land Tower, Singapore in respect of any matters arising from, or in connection with this report. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If you have not been sent this report by CIMBR directly, you may not rely, use or disclose to anyone else this report or its contents. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. If the recipient is an accredited investor, expert investor or institutional investor, the recipient is deemed to acknowledge that CIMBR is exempt from certain requirements under the FAA and its attendant regulations, and as such, is exempt from complying with the following : (a) Section 25 of the FAA (obligation to disclose product information); (b) Section 27 (duty not to make recommendation with respect to any investment product without having a reasonable basis where you may be reasonably expected to rely on the recommendation) of the FAA; (c) MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03]; (d) MAS Notice on Recommendation on Investment Products [Notice No. FAA-N16]; (e) Section 36 (obligation on disclosure of interest in securities), and (f) any other laws, regulations, notices, directive, guidelines, circulars and practice notes which are relates to the above, to the extent permitted by applicable laws, as may be amended from time to time, and any other laws, regulations, notices, directive, guidelines, circulars, and practice notes as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA. South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch (“CIMB Korea”) which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”). Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities. CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The

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distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research). Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (“CIMBS”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CIMBS has no obligation to update its opinion or the information in this research report. 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 are unaffected. CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCP, BDMS, BEAUTY, BEC, BEM, BH, BJCHI, BLA, BLAND, BTS, CBG, CENTEL, CHG, CK, CKP, CPALL, CPF, CPN, DELTA, DTAC, EARTH, EGCO, EPG, GL, GLOW, GPSC, GUNKUL, HANA, HMPRO, ICHI, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, M, MAJOR, MINT, PLANB, PLAT, PS, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, RS, S, SAMART, SAMTEL, SAWAD, SCB, SCC, SCCC, SCN, SGP, SIRI, SPALI, SPCG, STEC, STPI, SVI, TASCO, TCAP, THAI, THCOM, TICON, TISCO, TMB, TOP, TPIPL, TRUE, TTA, TTCL, TTW, TU, UNIQ, UV, VGI, VNG, WHA, WORK. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. Unless specified to the contrary, this report has been issued and approved for distribution in the U.K. and the EEA by CIMB UK. Investment research issued by CIMB UK has been prepared in accordance with CIMB Group’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jurisdiction, or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “investment research” under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. Any such non-independent report must be considered as a marketing communication. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional

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Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2015, Anti-Corruption Progress Indicator 2015. AAV – Very Good, 3B, ADVANC – Excellent, 3A, AEONTS – Good, 1, AMATA – Very Good, 2, ANAN – Very Good, 3A, AOT – Very Good, 2, AP - Good, 3A, ASK – Very Good, 3B, ASP – Very Good, 4, BANPU – Very Good, 4, BAY – Very Good, 4, BBL – Very Good, 4, BCH – not available, no progress, BCP - Excellent, 5, BEM – not available, no progress, BDMS – Very Good, 3B, BEAUTY – Good, 2, BEC - Good, 3B, BH - Good, 2, BIGC - Excellent, 3A, BJC – Good, 1, BLA – Very Good, 4, 1, BTS - Excellent, 3A, CBG – Good, 1, CCET – not available, 1, CENTEL – Very Good, 3A, CHG – Good, 3B, CK – Excellent, 3B, COL – Very Good, 3A, CPALL – Good, 3A, CPF – Very Good, 3A, CPN - Excellent, 5, DELTA - Very Good, 3A, DEMCO – Very Good, 3A, DTAC – Excellent, 3A, EA – not available, 3A, ECL – Good, 4, EGCO - Excellent, 4, EPG – not available, 3B, GFPT - Very Good, 3A, GLOBAL – Very Good, 2, GLOW - Good, 3A, GPSC – not available, 3B, GRAMMY - Excellent, 3B, GUNKUL – Very Good, 1, HANA - Excellent, 4, HMPRO - Excellent, 3A, ICHI – Very Good, 3A, INTUCH - Excellent, 4, ITD – Good, 1, IVL - Excellent, 4, JAS – not available, 3A, JASIF – not available, no progress, JUBILE – Good, 3A, KAMART – not available, no progress, KBANK - Excellent, 4, KCE - Excellent, 4, KGI – Good, 4, KKP – Excellent, 4, KSL – Very Good, 2, KTB - Excellent, 4, KTC – Very Good, 3A, LH - Very Good, 3B, LPN – Excellent, 3A, M - Good, 2, MAJOR - Good, 1, MAKRO – Good, 3A, MALEE – not available, 2, MBKET – Good, 2, MC – Very Good, 3A, MCOT – Excellent, 3A, MEGA – Very Good, 2, MINT - Excellent, 3A, MTLS – Good, 2, NYT – Good, no progress, OISHI – Very Good, 3B, PLANB – Good, 3B, PS – Excellent, 3A, PSL - Excellent, 4, PTT - Excellent, 5, PTTEP - Excellent, 4, PTTGC - Excellent, 5, QH – Very Good, 2, RATCH – Excellent, 3A, ROBINS – Excellent, 3A, RS – Very Good, 1, SAMART - Excellent, 3B, SAPPE - Good, 3B, SAT – Excellent, 5, SAWAD – Good, 1, SC – Excellent, 3B, SCB - Excellent, 4, SCBLIF – not available, no progress, SCC – Excellent, 5, SCN – Good, 1, SCCC - Good, 3A, SIM - Excellent, 3B, SIRI - Good, 1, SPALI - Excellent, 3A, SPRC – not available, no progress, STA – Very Good, 1, STEC – Very Good, 3B, SVI – Very Good, 3A, TASCO – Very Good, 3A, TCAP – Very Good, 4, THAI – Very Good, 3A, THANI – Very Good, 5, THCOM – Excellent, 4, THRE – Very Good, 3A, THREL – Very Good, 3A, TICON – Very Good, 3A, TISCO - Excellent, 4, TK – Very Good, 3B, TKN – not available, no progress, TMB - Excellent, 4, TPCH – Good, 3B, TOP - Excellent, 5, TRUE – Very Good, 2, TTW – Very Good, 2, TU – Very Good, 3A, UNIQ – not available, 2, VGI – Excellent, 3A, WHA – Good, 3A, WORK – not available, no progress.

Comprises level 1 to 5 as follows: Level 1: Committed Level 2: Declared Level 3: Established (3A: Established by Declaration of Intent, 3B: Established by Internal Commitment and Policy) Level 4: Certified Level 5: Extended.

CIMB Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute

recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute

recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute

recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to

benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to

benchmark.

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Transcript of Equity Research Reports… - brokingrfs.cimb.com analysis implies 2H16-to-date SSS growth of 1.1%....