Toyo-Thai Corporation Pcl (TTCL TB)asiaresearch.daiwacm.com/eg/cgi-bin/files/20140127th... · 2014....

27 JANUARY 2014

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BUY (Unchanged) TP: Bt 65.00 (Unchanged)

Company Update Upside: 98.5%

Toyo-Thai Corporation Pcl (TTCL TB)

SAKSID PHADTHANANARAK 662 – 617 4900

[email protected]

Singapore NDR feedback We brought TTCL to meet 13 funds in Singapore on 20-21 January. We think the share price has bottomed out with catalysts from the 22-43% EPS growth in 2014-15F, expected MOA signing for a 1,000MW power plant in late 1Q14, combined-cycle phase of the 120MW plant due to have COD in 3Q14 and planned mid-2015 listing of its subsidiary. BUY.

NDR in Singapore Thanachart and Daiwa Securities hosted TTCL for its NDR roadshow in Singapore from 20-21 January 2014. Thirteen leading funds signed up to meet Mr. Gobchai Thanasukarn, TTCL’s general manager – finance & investor relationship division. We regard TTCL as one of the best AEC plays in Thailand with exposure to Myanmar, and TTCL’s NDR received lots of interest from fund managers. Most were keen to get an update on its EPC business, the progress of the 1,000MW power plant project in Thilawa and the plan to list its subsidiary on the Singapore stock market.

80% of the forecast revenue for 2014 is secured Given that the company is not affected by the domestic political uncertainty due to its focus on overseas EPC projects, we forecast revenue growth of 33% y-y to Bt20.6bn in 2014 and 19% y-y to Bt24.4bn in 2015. Some 80% of the forecast revenue in 2014 are secured by its existing backlog value of Bt27bn at end 2013 while the rest should come from expected new work value of US$1bn (excluding the 1,000MW power plant project) this year. Potential new work comprises petrochemical projects in Malaysia and Vietnam and power plant projects in Thailand. We forecast a net margin of 5% this year to result in EPS growth of 21.7% y-y and we see higher earnings contribution from power plant investments driving its EPS to grow a further 42.7% y-y in 2015F.

MOA signing for Thilawa power plant due in late 1Q14 In March 2013, TTCL signed an exclusive MOU contract with Myanmar to study the feasibility of a 1,000MW power plant project to supply electricity to the Thilawa Special Economic Zone. TTCL says the talks are close to being concluded. Management plans to make the final presentation for the land acquisition and electricity tariff in February 2014. If the process goes smoothly, TTCL expects the MOU contract to turn into an MOA contract by end 1Q14. In Myanmar, the MOA is the major contract to determine the terms of agreement including the tariff and concession period. After signing the contract, TTCL expects financial closure to be achieved in three to five months and for construction to take around three and a half years.

Catalysts lining up After facing negative news from its capital increase and rising SG&A expenses, we believe TTCL’s share price has bottomed out and see catalysts lining up from: 1) strong EPS growth of 22-43% in 2014-15F, 2) the MOA signing for the Thilawa power project which TTCL expects in late 1Q14, 3) the Ahlone power plant due to have COD for its combined-cycle phase in 3Q14, and 4) the planned listing of its subsidiary in Singapore in mid-2015. The counter is now trading at 18x PE in 2014F and 12.6x in 2015F and we forecast a three-year EPS CAGR of 32% during 2013-15F.

COMPANY VALUATION

Y/E Dec (Bt m) 2012A 2013F 2014F 2015F

Sales 11,358 15,461 20,550 24,438

Net profit 546 698 1,034 1,476

Consensus NP ⎯ 767 1,005 1,488

Diff frm cons (%) ⎯ (9.0) 2.9 (0.8)

Norm profit 548 728 1,034 1,476

Prev. Norm profit ⎯ 728 1,034 1,476

Chg frm prev (%) ⎯ 0.0 0.0 0.0

Norm EPS (Bt) 1.1 1.5 1.8 2.6

Norm EPS grw (%) 37.1 33.0 21.7 42.7

Norm PE (x) 28.7 21.6 17.7 12.4

EV/EBITDA (x) 21.6 14.4 11.6 8.7

P/BV (x) 7.8 6.6 3.4 2.9

Div yield (%) 2.0 2.2 2.8 4.0

ROE (%) 29.7 33.1 26.6 25.4

Net D/E (%) (100.8) (44.6) (26.8) (41.3)

PRICE PERFORMANCE

(30)(20)(10)01020304050

10

20

30

40

50

60

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14

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

COMPANY INFORMATION

Price as of 27-Jan-14 (Bt) 32.75

Market cap (US$ m) 557.1

Listed shares (m shares) 560.0

Free float (%) 49.4

Avg daily turnover (US$ m) 1.1

12M price H/L (Bt) 57.3/24.0

Sector Construction

Major shareholder Toyo Engineering Corp 26%

Sources: Bloomberg, Company data, Thanachart estimates

Thanachart

Securities

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27 JANUARY 2014 Ad Hoc Research

THANACHART SECURITIES | DAIWA CAPITAL MARKETS 2

Questions & Answers

EPC business

1) How much revenue do you target this year? And how will you achieve it?

TTCL has set its revenue growth target at 33% y-y in 2014 for revenue to reach Bt20bn before further growth of 25% y-y in 2015 to Bt25bn. TTCL expects this revenue growth to be driven by two factors:

First, 80% of the 2014 revenue target (Bt16bn) and 30% of the 2015 target (Bt8bn) are secured by TTCL’s remaining backlog value of Bt27bn at end 2013.

Second, TTCL expects its new work value of around US$1bn this year to contribute to the remainder of the revenue target in 2014-15.

Ex 1: TTCL’s Backlog Value Ex 2: TTCL’s New Work Value

8,011

15,010 16,499

31,650

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2011 2012 9M13

(Bt m)

8,011

15,01016,499

26,838

0

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012 9M13

(Bt m)

Source: Company data Source: Company data

2) What kind of EPC work are you expecting to get this year?

High potential new work value of US$1bn this year is mainly from petrochemical projects in Malaysia and Vietnam and power plant projects in Thailand. Around 65-70% of the targeted new work value this year is from overseas projects while 30-35% is domestic. Despite the political uncertainty in Thailand, TTCL does not expect its power plant projects to be delayed as the power purchase agreements (PPAs) have already been awarded to the project owners and the deadlines for the projects’ CODs are in 2016-17.

Ex 3: Potential Projects In Malaysia

Source: MRPC

TTCL targets revenue growth of 25-33% in 2014-15F

TTCL expects new work value of US$1bn in 2014, mainly in Malaysia and Vietnam



Ex 4: Potential Projects In Vietnam

Ord Project name Owner Location Investment / chartered

cap. (US$ m)

I Downstream 12,076

I-1 Dung Quat Refinery (Refinery No.1) PVN Quang Ngai 3,053

I-2 Dung Quat Refinery Expansion PVN Quang Ngai 1,159

I-3 Long Son Refinery (Refinery No.3) PVN Ba Ria 6,000

I-4 Ca Mau Fertilizer Plant PVN Ca Mau 900

I-5 Dinh Vu Polyester Plant PVN/PVTEX Hai Phong 325

I-6 Dung Quat Underground Oil Storage Terminal PVN/PVOil/PVOS Quang Ngai 340

I-7 Nghi Son Underground Oil Storage Terminal PVN/PVOil/PVOS Thanh Hoa 300 Source: Vietnam National Oil and Gas Group

3) What are your competitive advantages?

First, the cost of TTCL’s engineers is one-third the cost of engineers in South Korea and one-sixth that in Japan.

Secondly, TTCL has already explored opportunities and had years of experience in EPC work in many countries. It has subsidiaries and branches in Vietnam, Malaysia, Myanmar, the Philippines, Qatar and the US.

Thirdly, after TTCL’s successful capital increase in November 2013, a strong financial status with Bt1.5bn in cash on hand at end-3Q13 and Bt2.6bn proceeds from the capital increase in November 2013 should allow the company to shift from being a small- to mid-tier EPC contractor to bidding for higher project values.

Fourthly, TTCL also enjoys strong support from its major shareholders which are Toyo Engineering, the third-largest EPC contractor in Japan with a specialization in power plant projects, and Chiyoda, the second-largest EPC contractor in Japan with a specialization in petrochemical projects.

4) If the 1,000MW power plant project is awarded to TTCL, will the company be capable of building this large-scale, advanced-technology plant?

First of all, please note that the targeted US$1bn in new work value does not include the EPC work value of the 1,000MW power plant project (see more details in the third section) as TTCL plans to invest in this power plant and most likely consolidate the plant. Out of the total project value of US$2bn, the portion of the EPC work value should be around US$1.5bn. However, TTCL believes it is capable of handling EPC work with a value of around US$1bn while the rest would be subcontracted to a specialist EPC contractor.

Ex 5: Potential Projects By Industry Ex 6: Potential Projects By Location

Industry Projects Remaining value (Bt m)

Petrochemical 12 57,319

Power 3 43,710

(Bt3bn from 1,000MW project)

Utility 2 6,200

Total 17 107,229

Domestic25%

Overseas75%

Source: Company data Source: Company data

Competitive advantages from 1) low engineer costs…

…2) experience in overseas EPC work…

…3) financial strength…

…4) strong support from shareholders and partners



Power plant investments

5) How many power plants are currently in TTCL’s power plant investment portfolio?

Currently, TTCL has three power plants with a total effective capacity of 132MW in its investment portfolio.

First, TTCL holds a 25% stake in the common shares of Siam Solar Power (SSP, unlisted), an 8MW solar power plant project in Thailand. SSP already started commercial operations on 1 April 2013.

Secondly, the company holds 42% of the preferred shares of Navanakorn Electric (unlisted), a 110MW power plant project in Thailand. This small power producer (SPP) also had its COD late last year.

Finally, it currently has an effective holding of 71.5% in a 120MW gas-fired power plant in Ahlone, Yangon. The project’s first and second phases with total simple-cycle capacity of 80MW already had COD in the middle of last year while TTCL expects the third phase with combined-cycle capacity of 40MW to have COD in 4Q14.

6) When will they start to contribute to earnings?

For Siam Solar Power, TTCL already received equity income of Bt3.6m in 3Q13.

For Navanakorn Electric, if the plant’s performance this year can meet all of its obligations, TTCL expects to get a fixed dividend payout rate of 10.5% of its total investment or around 67m a year starting from 2015 onward.

For the Ahlone power plant, given the 30-year PPA with Myanmar’s Ministry of Electric Power, TTCL expects an equity IRR of over 18% from this project. TTCL expects the plant with simple-cycle capacity to reach its break-even level this year but when the combined-cycle phase has its planned COD in 4Q14, this should contribute a significant amount of earnings to TTCL in 2015.

Ex 7: TTCL’s Current Power Plant Investment Portfolio

Project Project type Country Capacity (MW) COD % holding

Siam Solar Power Solar Thailand 8 3Q13 25%

Navanakorn Electric Gas fired Thailand 110 4Q13 42%

120MW power plant Gas fired Myanmar 120 2Q13/3Q13/3Q14 71.5%

Potential projects

Solar farm projects Solar Japan 30 Late 2014 100%

Solar rooftop projects Solar Thailand 30 Delayed 60%

1,000MW power plant Coal fired Myanmar 1,000 2018 N/A Sources: Company data, Thanachart estimates

7) How about solar power investments?

Currently, TTCL is negotiating for solar power projects in Japan and Thailand. TTCL believes the projects with the strongest potential are the solar farms in Japan with expected capacity of around 30MW and TTCL expects these projects to have COD by end 2014. In Japan, the tariff for solar farms is much higher than the tariff in Thailand but corporate income tax is also much higher at 40% in Japan versus 20% in Thailand.

Other solar power projects are solar rooftop systems in Thailand. TTCL plans joint ventures with partners to install solar photovoltaic (PV) rooftops at their plants with total capacity of around 30MW. Unfortunately, given the current domestic political uncertainty and the caretaker capacity of the government, TTCL expects these projects to face delays.

TTCL’s current power plant portfolio includes…

…1) 8MW Siam Solar Power…

…2) 110MW Navanakorn Electric…

…3) 120MW Ahlone project



The 1,000MW power plant project

8) What has been the progress with the 1,000MW power plant project?

In March 2013, TTCL signed an exclusive MOU contract with Myanmar’s Ministry of Electric Power No.2 to conduct a preliminary survey and feasibility study in order to develop a 1,000MW ultra-supercritical coal-fired power plant in the Thilawa Special Economic Zone, Yangon. TTCL now believes negotiations are very close to being finalized. TTCL’s management plans to make the final presentation for the land acquisition and electricity tariff in February this year. If the process goes smoothly, TTCL expects the MOU contract to turn into an MOA contract by end 1Q14. In Myanmar, the MOA is the major contract determining the terms of agreement including the tariff and concession period. After signing the contract, TTCL then expects it to take three to five months to achieve financial closure and related issues and for construction to take around three and a half years.

9) How can you be so confident of being able to implement this project?

First, there is no doubt about Myanmar’s electricity shortage. The country’s total electricity capacity is around 2,000MW versus 35,000MW in Thailand. Moreover, around 70% of the electricity in Myanmar comes from hydroelectric power plants. Without electricity, the Myanmar government will not be able to develop the country.

Secondly, TTCL expects to supply 50-60% of the plant’s capacity to the Thilawa Special Economic Zone, which is now being developed by a consortium comprising Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation which has Japanese government support. Their commitment to the Myanmar government is to start one-quarter of the Thilawa project by 2015 with small and self-generated electricity factories while construction of large factories should take a few more years to match the commissioning of TTCL’s 1,000MW plant.

Ex 8: Myanmar Special Economic Zones Ex 9: Thilawa Project Consortium

MitsubishiCorporation

MarubeniCorporation

SumitomoCorporation

Japan & Myanmar consortium MMS Thilawa

Myanmar Japan Thilawa Development

33.3% 33.3%

51% 49%

33.3%

Source: Control Risks Source: Mitsubishi Corporation

TTCL expects to turn a MOU for the 1,000MW project into an MOA by around end 1Q14

Myanmar has a severe electricity shortage

Thilawa Special Economic Zone is supported by the Japanese government



Thirdly, TTCL has already prepared for the project’s implementation. Besides negotiating with the Myanmar government, TTCL is in talks with financial institutions to fund the project and partners, e.g. coal suppliers, technology licensers, to co-invest in the project. TTCL also plans to list its holding company on the Singapore Stock Exchange in mid-2015 to fund this project.

10) What are the risks for this project?

There are many risks for this project but TTCL is aware of them and TTCL’s management is trying to minimize them. For example, TTCL is negotiating to settle major transactions offshore in US dollars. The company is also negotiating with financial institutions for insurance coverage for operational interruptions. To secure coal supply and maintenance for this high-technology plant, TTCL plans to ask coal suppliers and technology licensers to take stakes in the project.

Listing of TTCL’s subsidiary on Singapore stock market

11) Why do you plan to list your subsidiary, TTPHD, on the SGX?

First, Singapore has an agreement for the avoidance of double taxation with Myanmar while Thailand does not have such an agreement.

Secondly, as a listed company in one of the premier financial centers in Asia, TTCL expects TTPHD, which has major businesses in Myanmar, to enjoy international recognition with greater exposure to international investors.

Thirdly, the SGX allows listed companies to raise funds in US dollars. This would allow TTCL to avoid currency risk.

12) When do you plan to list TTPHD on the SGX?

TTCL expects TTPHD to receive more earnings contribution from the Ahlone power plant project after the third phase has its COD scheduled for 3Q14 along with solar power projects in Japan which are also due to have COD by end 2014. Therefore, TTCL believes this earnings base should allow TTPHD to list on the SGX in mid-2015 to get the proceeds to invest in the 1,000MW power project.

Ex 10: TTPHD’s Pre-IPO Structure

TTCL

TTSHD

TTPSG

TTPMC

TTCP

TTCPM

70%

5%

95%

100%

Partners

40%

TTSP

Solar 1

100%100%

Solar 2

100% 60% 60%

Ahlone 120MW Gas FireEquity No additional capital requiredDebt Bt3,000-3,500m

Solar Farm ProjectsEquity Bt2,000-2,500mDebt Bt4,000-5,000m

1,000 MW Coal FireEquity US$500mDebt US$1,500m

Source: Company data

TTCL believes preparations for the project are all set

TTCL expects to list its subsidiary on the SGX by mid-2015



Valuation Comparison

Ex 11: Valuation Comparison With Regional Peers

EPS growth —— PE —— EV/EBITDA — Div yield —

Name BBG code Country 13F 14F 13F 14F 13F 14F 13F 14F

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

Daewoo Eng & Con 047040 KS South Korea na na na 8.9 13.5 8.9 1.5 2.1

Toyo Engineering 6330 JP Japan 4.8 na 53.2 na 6.4 15.2 1.2 0.7

Chiyoda Corp. 6366 JP Japan 10.5 (0.8) 23.3 23.5 8.7 9.0 1.3 1.3

JGC Corp. 1963 JP Japan (0.9) 8.9 21.8 20.0 9.4 8.9 1.1 1.2

Sriracha Construc. SRICHA TB Thailand (11.5) 14.8 9.9 8.6 7.6 6.4 6.9 7.9

Italian-Thai Devel. ITD TB Thailand 262.0 63.5 34.4 21.1 9.3 8.7 0.7 1.3

Seafco SEAFCO TB Thailand 13.3 10.3 7.3 6.7 na na 5.6 na

Syntec Construc. SYNTEC TB Thailand (237.5) na 10.3 na na na 2.7 na

Nawarat Patanakarn NWR TB Thailand (63.4) 19.2 16.3 13.6 6.7 5.8 2.1 2.9

CH Karnchang * CK TB Thailand 1,489.9 16.4 26.3 22.6 17.8 14.5 2.9 2.2

Sino Thai* STEC TB Thailand 23.9 12.9 14.1 12.4 5.9 3.3 2.8 3.2

Toyo-Thai Corp* TTCL TB Thailand 33.0 21.7 21.6 17.7 14.4 11.6 2.2 2.8

Average 138.6 18.5 21.7 16.2 9.6 9.3 2.7 2.6 Source: Bloomberg Note: * Thanachart estimates using normalized EPS growth Based on 27 Jan 2014 closing prices



Ex 12: DCF-derived SOTP TP Calculation

(Bt m) 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023FTerminal

ValueEBITDA 1,010 1,434 1,763 1,974 2,276 2,385 2,498 2,506 2,514 2,522 2,530 —

Free cash flow (91) 29 274 506 838 1,476 1,554 1,863 1,871 1,879 1,887 18,330

PV of free cash flow — 29 217 355 523 819 767 817 729 651 581 5,643

Risk-free rate (%) 4.5

Market risk premium (%) 8.0

Beta 1.0

WACC (%) 12.5

Terminal growth (%) 2.0

Enterprise value 11,130

Net debt (2013F) (1,182)

Minority interest 264

Equity value 12,048

Capital increase 2,400

# of shares 560

Equity value/share (Bt) 26

Sum of the parts % holding (Bt m)

Enterprise value from construction business 11,130

Investment equity value 22,119

1,000MW power plant in Myanmar 24% 15,868

120MW power plant in Myanmar 43% 4,546

Siam Solar Power 25% 150

Navanakorn Electric 42% 819

Solar power projects In Thailand and Japan 735

Total enterprise value 33,249

(Less) Net debt (1,182)

(Less) Minority interest 264

(Plus) Capital increase 2,400

Total enterprise value 36,567

# of shares (fully diluted) (m shares) 560

Sum of the parts (Bt) 65

Sources: Company data, Thanachart estimates



COMPANY DESCRIPTION COMPANY RATING

Toyo-Thai Corporation Pcl (TTCL) was the first all-round engineering company in Thailand. It was incorporated in 1985 in JV between Italian-Thai Development Pcl, one of the biggest contractors in Thailand, and Toyo Engineering Corp, a leading international engineering firm in Japan. TTCL is an integrated contractor providing integrated design and engineering, procurement of equipment and materials, and construction (integrated EPC) services for turnkey projects, mainly to the petrochemical, chemical and petroleum industries.

012345

*Corp.governa

nceLiquidit

y

Riskmanage

mentManage

ment

Financial management

Rating Scale

Very Strong 5

Strong 4

Good 3

Fair 2

Weak 1

None 0

Source: Thanachart Source: Thanachart; *CG Awards

THANACHART’S SWOT ANALYSIS

S — Strength W — Weakness

Specialized EPC contractor in this high-barriers-to-

entry market.

Strong finances and in a net cash position.

Strong support from major shareholders, such as Toyo

Engineering and Chiyoda, which are international EPC

contractors.

TTCL is only qualified to bid for projects with a value of

below US$500m.

The engineering business is labor-intensive. Thus,

there are risks of higher engineer costs and shortages

of engineers.

O — Opportunity T — Threat

TTCL’s exposure to overseas work boosts its chances

of enjoying the AEC investment boom story.

The increasing need for infrastructure development to

fuel economic growth in Southeast Asian countries.

Political instability in foreign countries.

Global economic volatility and the down cycle of the

petrochemical industry could cause delays to new

investments.

CONSENSUS COMPARISON RISKS TO OUR INVESTMENT CASE

Consensus Thanachart Diff

Given that the petrochemical industry is cyclical and highly dependent on global economic fluctuations, delays to new investments in the sector would have a significant impact on TTCL’s future backlog.

TTCL’s core value is experienced engineers who can work on design and engineering work. Movement of these engineers with the AEC’s launch in 2015 could have an impact on its operation.

If the Myanmar project doesn’t materialize, then our TPwould fall to Bt37.0.

Target price (Bt) 45.00 65.00 44%

Net profit 13F (Bt m) 767 698 -9%

Net profit 14F (Bt m) 1,005 1,034 3%

Consensus REC BUY: 7 HOLD: 1 SELL: 1

HOW ARE WE DIFFERENT FROM THE STREET?

Our net profit forecast for 2014 is a bit higher than the consensus as we expect some earnings contribution from the power plant investment portfolio.

But our TP is 44% above the Street’s as we incorporate the 1,000MW power plant project.

Sources: Bloomberg consensus, Thanachart estimates Source: Thanachart



FINANCIAL SUMMARY

Incom e Statem ent Quarte rly Earnings (consolidated)

FY ending Dec (Bt m) 2011A 2012A 2013F 2014F 2015F 3Q12 4Q12 1Q13 2Q13 3Q13

Sales 8,896 11,358 15,461 20,550 24,438 Sales 3,752 3,160 3,131 3,551 4,082

Cost of sales 7,853 10,083 13,765 18,393 21,872 Cost of sales 3,387 2,727 2,805 3,129 3,642

Gro ss pro fit 1,043 1,276 1,696 2,158 2,566 Gro ss pro fit 365 433 327 423 440SG&A 577 677 773 925 1,075 SG&A 184 215 172 127 259

Operating pro fit 466 598 923 1,233 1,491 Operating pro fit 181 218 155 295 181Depre & amortization 22 24 87 213 312 Depre & amortization 6 6 6 6 38

EB IT DA 488 622 1,010 1,446 1,803 EB IT DA 186 224 161 302 219Other income 99 162 30 30 97 Other income 12 94 6 7 7

Other expenses 0 0 0 0 0 Other expenses 0 0 0 0 0

Interest expense 0 0 (20) (36) (24) Interest expense 0 0 0 (2) (12)

Pre-tax profit 565 760 932 1,227 1,564 Pre-tax profit 192 312 161 300 175

Income tax 160 214 196 245 313 Income tax 49 103 37 67 27

After-tax profit 405 546 737 982 1,251 After-tax profit 143 210 123 233 148

Equity income (1) 1 (8) 52 225 Equity income 7 (4) (1) 10 (1)

M inority interests (4) (0) (0) (0) (0) M inority interests 0 (2) 1 6 9

Extraordinary items 0 (2) (30) 0 0 Extraordinary items 1 (2) (4) 0 0

N ET P R OF IT 399 546 698 1,034 1,476 NET P ROF IT 152 201 119 249 157N o rmalized pro fit 399 548 728 1,034 1,476 No rmalized pro fit 151 203 124 249 157EPS (Bt) 0.8 1.1 1.5 1.8 2.6 EPS (Bt) 0.3 0.4 0.2 0.5 0.3

Normalized EPS (Bt) 0.8 1.1 1.5 1.8 2.6 Normalized EPS (Bt) 0.3 0.4 0.3 0.5 0.3

Balance Sheet (consolidated) Financial Ratios And Valuations

FY ending Dec (Bt m) 2011A 2012A 2013F 2014F 2015F 2011A 2012A 2013F 2014F 2015F

Cash & equivalent 3,098 2,295 2,000 2,000 3,000 Norm profit (y-y%) 18.5 37.1 33.0 41.9 42.8

A/C receivables 2,855 3,104 4,660 6,475 8,034 Normalized EPS (%) 18.5 37.1 33.0 21.7 42.7

Inventories 76 142 189 252 300 Net profit (y-y%) 18.5 36.6 28.0 48.0 42.8

Other current assets 68 148 202 268 319 EPS (%) 18.5 36.6 28.0 26.9 42.7

Investment 0 61 61 61 61 Dividend payout (%) 51.7 56.3 50.0 50.0 50.0Fixed assets 187 970 3,161 5,769 5,657

Other assets 619 896 1,220 1,621 1,928 Gross margin (%) 11.7 11.2 11.0 10.5 10.5

T o tal assets 6,904 7,615 11,491 16,446 19,299 Operating margin (%) 5.2 5.3 6.0 6.0 6.1

EBITDA margin (%) 5.5 5.5 6.5 7.0 7.4

S-T debt 0 0 818 485 316 Net margin (%) 4.5 4.8 4.8 4.8 5.1A/C payables 1,878 1,933 2,829 3,779 4,494

Other current liabilities 3,131 3,173 4,880 6,114 7,492 ROA (%) 7.5 7.5 7.6 7.4 8.3

L-T debt 0 0 0 0 0 ROE (%) 25.0 29.7 33.1 26.6 25.4

Other liabilities 212 232 316 420 499 Net D/E (x) (1.8) (1.0) (0.4) (0.3) (0.4)T o tal liabilit ies 5,221 5,338 8,843 10,798 12,802

Norm PE (x) 39.4 28.7 21.6 17.7 12.4

M inority interest 12 263 264 264 264 Norm PE at TP (x) 78.1 57.0 42.8 35.2 24.7

Shareho lders' equity 1,670 2,014 2,384 5,385 6,233 PE (x) 39.4 28.8 22.5 17.7 12.4

EV/EBITDA (x) 25.9 21.6 14.4 11.6 8.7

Working capital 1,053 1,312 2,020 2,947 3,840 P/BV (x) 9.4 7.8 6.6 3.4 2.9

Total debt 0 0 818 485 316 Dividend yield (%) 1.3 2.0 2.2 2.8 4.0Net debt (3,098) (2,295) (1,182) (1,515) (2,684)

Free cash flow 1,836 (282) (515) (1,336) 2,023 BV/share (Bt) 3.5 4.2 5.0 9.6 11.1

Year End Shares (m) 480 480 480 560 560 DPS (Bt) 0.4 0.6 0.7 0.9 1.3

(consolidated)

Sources: Company data, Thanachart estimates



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Any view, recommendation, opinion or advice expressed in this publication constitutes the views of the analyst(s) named herein and does not necessarily reflect those of Thanachart Securities, Daiwa Securities Group Inc. and/or their respective affiliates nor any of their respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person. Thanachart Securities, Daiwa Securities Group Inc., their respective subsidiaries or affiliates, or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures. Japan Disclosure of Interest of Daiwa Securities Group Inc. Investment Banking Relationship Within the preceding 12 months, The subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: China Precious Metal Resources Holdings Company Limited (1194 HK); Jiangnan Group Limited (1366 HK), Blackgold International Holdings Ltd (BGG_AU), TOSEI CORP (8923_JP), Modern Land (China) Co., Limited (1107 HK), China Everbright Bank Company Limited (6818_HK), econtext Asia Ltd (1390_HK) *Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: • Daiwa Capital Markets Hong Kong Limited • Daiwa Capital Markets Singapore Limited • Daiwa Capital Markets Australia Limited • Daiwa Capital Markets India Private Limited • Daiwa-Cathay Capital Markets Co., Ltd. • Daiwa Securities Capital Markets Korea Co., Ltd. Disclosure of Interest of Thanachart Securities Investment Banking Relationship Within the preceding 12 months, Thanachart Securities has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: OfficeMate Pcl (OFM TB); Asia Aviation Pcl (AAV TB), Chularat Hospital Pcl (CHG TB), Nok Airlines (NOK TB), MC GROUP Pcl (MC TB), MK Restaurants Group Pcl (M TB). This research may only be distributed in Japan to “qualified institutional investors”, as defined in the Financial Instruments and Exchange Act (Article 2 (3) (i)), as amended from time to time. Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Investment Banking Relationship For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. DHK market making DHK may from time to time make a market in securities covered by this research. Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Securities and Futures Act, Chapter 289 of Singapore, as amended from time to time and is not for, nor intended for, distribution to any other persons in Singapore. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore should contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research. THANACHART SECURITIES | DAIWA CAPITAL MARKETS



DISCLAIMER Ad Hoc Research Australia This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . India This research is distributed by Daiwa Capital Markets India Private Limited (DAIWA) which is an intermediary registered with Securities & Exchange Board of India. This report is not to be considered as an offer or solicitation for any dealings in securities. While the information in this report has been compiled by DAIWA in good faith from sources believed to be reliable, no representation or warranty, express of implied, is made or given as to its accuracy, completeness or correctness. Thanachart Securities, DAIWA, and their respective officers, employees, representatives and agents accept no liability whatsoever for any loss or damage whether direct, indirect, consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of or reliance on the contents of and/or omissions from this document. Consequently, Thanachart Securities and DAIWA expressly disclaim any and all liability for, or based on or relating to any such information contained in or errors in or omissions in this report. Accordingly, you are recommended to seek your own legal, tax or other advice and should rely solely on your own judgment, review and analysis, in evaluating the information in this document. The data contained in this document is subject to change without any prior notice DAIWA reserves its right to modify this report as maybe required from time to time. DAIWA is committed to providing independent recommendations to its Clients and would be happy to provide any information in response to any query from its Clients. This report is strictly confidential and is being furnished to you solely for your information. The information contained in this document should not be reproduced (in whole or in part) or redistributed in any form to any other person. Thanachart Securities, DAIWA and our group companies, affiliates, officers, directors and employees may from time to time, have long or short positions, in and buy sell the securities thereof, of company(ies) mentioned herein or be engaged in any other transactions involving such securities and earn brokerage or other compensation or act as advisor or have the potential conflict of interest with respect to any recommendation and related information or opinion. DAIWA prohibits its analyst and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analyst covers. This report is not intended or directed for distribution to, or use by any person, citizen or entity which is resident or located in any state or country or jurisdiction where such publication, distribution or use would be contrary to any statutory legislation, or regulation which would require Thanachart Securities, DAIWA and their affiliates/ group companies to any registration or licensing requirements. The views expressed in the report accurately reflect the analyst’s personal views about the securities and issuers that are subject of the Report, and that no part of the analyst’s compensation was, is or will be directly or indirectly, related to the recommendations or views expressed in the Report. This report does not recommend to US recipients the use of Daiwa Capital Markets India Private Limited or any of its non – US affiliates to effect trades in any securities and is not supplied with any understanding that US recipients will direct commission business to Daiwa Capital Markets India Private Limited.

Taiwan This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research. Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE Link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively. United Kingdom This research report is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange, Eurex and NYSE Liffe. Thanachart Securities, Daiwa Capital Markets Europe Limited and their respective affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Thanachart Securities, Daiwa Capital Markets Europe Limited and their respective affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Thanachart Securities and Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available. Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-and-regulatory . Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action . THANACHART SECURITIES | DAIWA CAPITAL MARKETS



DISCLAIMER Ad Hoc Research Germany This document has been approved by Daiwa Capital Markets Europe Limited and is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany. Bahrain This research material is issued/compiled by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113 This material is provided as a reference for making investment decisions and is not intended to be a solicitation for investment. Investment decisions should be made at your own discretion and risk. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document, Content herein is based on information available at the time the research material was prepared and may be amended or otherwise changed in the future without notice. All information is intended for the private use of the person to whom it is provided without any liability whatsoever on the part of Daiwa Capital Markets Europe Limited, Bahrain Branch, any associated company or the employees thereof. If you are in doubt about the suitability of the product or the research material itself, please consult your own financial adviser. Daiwa Capital Markets Europe Limited, Bahrain Branch retains all rights related to the content of this material, which may not be redistributed or otherwise transmitted without prior consent. United States This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect Thanachart Securities’ or DCMA’s views at any time. Neither Thanachart Securities, DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of Thanachart Securities’ or DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (telephone 212-612-7000). Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions. Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report. For stocks in Thailand covered by Thanachart Securities, the following rating system is in effect: Ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the rating is BUY. If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word “Positive”, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word “Negative”, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word “Unchanged”, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart’s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An “Overweight” sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by market cap. “Underweight” is used when Thanachart has SELLs on majority of the stocks it covers by market cap. “Neutral” is used when there are relatively equal weightings of BUYs and SELLs]. THANACHART SECURITIES | DAIWA CAPITAL MARKETS



DISCLAIMER Ad Hoc Research Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. TNS market making TNS may from time to time make a market in securities covered by this research. Additional information may be available upon request. Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this

document, we ask you to pay close attention to the following items. In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand

with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.

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

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

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

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

with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc. When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Investment Advisers Association Type II Financial Instruments Firms Association

Thanachart Securities Pcl. Research Team 28 Floor, Siam Tower Unit A1 989 Rama 1, Pathumwan Road, Bangkok 10330 Tel: 662 617-4900

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

Supanna Suwankird Energy, Utilities [email protected]

Siriporn Arunothai Ad Hoc Research, Healthcare [email protected]

Sarachada Sornsong Banks, Telecom [email protected]

Saksid Phadthananarak Construction, Transportation [email protected]

Noppadol Pririyawut Senior Technical Analyst [email protected]

Phannarai Tiyapittayarut Property, Retail [email protected]

Kalvalee Thongsomaung

Food, Hotel, Media [email protected]

Adisak Phupiphathirungul, CFA Retail Market Strategy [email protected]

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