Morning Matters · Col Settapong said the panel will then submit their solution to the committee for a final decision.In June, the NBTC granted a licence for Thaicom 7, which is expected

See important disclosures at the end of this report Powered by Enhanced Datasystems’ EFATM

Platform

30-Oct-2013

Morning Matters

EFATxtMacro|

EFATxtRisks|

EFATxtGrowth|

EFATxtValue|

WHAT’S INSIDE

On The Platter

DTAC (DTAC TB;FVTHB130-Buy): 3Q13 Calls In Weak

DTAC’s 9M13 core earnings (+1.4% y-o-y) were below expectations due to higher than expected depreciation and amortization expenses. This prompts us to cut our FY13-FY15 core earnings estimates by 3-4% and lower the stock’s FV to THB130 (from THB133), based on FCFF valuation (WACC: 10.7%, TG: 1%). We continue to like the company’s significant earnings upside over the longer term. Maintain BUY.

PTT Exploration & Production (PTTEP TB;FVTHB162-Neutral): 3Q13 Earnings Soar 67%

PTT Exploration & Production (PTTEP)’s 3Q13 earnings surged 67% q-o-q to THB17.8bn on the back of lower tax expenses and a forex gain (compared to a forex loss in 2Q13). Its operating profit fell 5% q-o-q to THB27bn, in line with our expectations. With the upside to our THB162 TP being limited, we maintain our NEUTRAL recommendation on this stock. Sino Thai Engineering & Construction PCL (STEC TB;FVTHB32-Buy): Upgrade To BUY On Strong Performance

We expect STEC’s orderbook to continue hitting record highs, supported by the Government’s THB2trn infrastructure fund, while its sales and earnings are poised to grow at an impressive annual average growth rate of 17-20% over the next two years. Our THB32 TP is premised on 5.9x P/BV, offering an upside of 33% from its current price. As such, we upgrade STEC from Trading Buy to BUY.

MEDIA HIGHLIGHTS

Exports to rebound in Q4 but miss target

K-Leasing likely to normalise reserves

PTTEP seeks Hess assets

Esco targets large buildings

NBTC defers Thaicom ruling

AoT told to explain increased service charge plan

ECONOMIC HIGHLIGHTS

Stevens Record Shows Market Bet RBA on Hold Due for Surprise

Retail Sales in U.S. Climb Excluding Auto Dealers

Poloz Says He Dropped Rates Rise Bias on Inflation Risks

Housing Prices in U.S. Cities Rise by Most Since Early 2006

Japan Industrial Output Rises Less Than Forecast in September

Consumer Confidence in U.S. Slumps by Most Since August 2011

SET Intra-Day Graph

Source: Bloomberg

Key Market Indices (29 October 2013)

Value Chg % Chg % YTD

SET 1455.86 6.24 0.4% 4.6%

SET50 992.83 4.26 0.4% 5.0%

SET100 2188.66 9.65 0.4% 5.3%

Dow Jones 15680.35 111.42 0.7% 19.7%

S&P500 1771.95 9.84 0.6% 24.2%

Nasdaq 3952.34 12.21 0.3% 30.9%

FTSE 6774.73 48.91 0.7% 14.9%

FSSTI 3208.82 0.97 0.0% 1.3%

Hang Seng 22846.54 39.96 0.2% 0.8%

Nikkei 14466.49 190.28 1.3% 39.1%

KLCI 1815.65 -2.74 -0.2% 7.5%

SHANGHAI SE 2128.86 -5.01 -0.2% -6.2%

JCI 4562.77 -27.77 -0.6% 5.7%

SET 5-yr avg 2012 2013F

PE (x) 14.1 15.9 14.7

P/BV (x) 1.8 2.3 2.2

Yield (%) 4.1 3.0 3.2

Key Statistics

SET Value by investor Type: Daily

Buy (THBm) Sell (THBm) Net (THBm)

Institution 1,709.75 1,978.29 -268.54

Proprietary 3,797.48 3,910.92 -113.45

Foreign 6,062.08 6,096.53 -34.45

Retail 12,394.57 11,978.13 416.44

SET Value by investor Type

MTD (THBm) YTD (THBm) Institution -1,001.30 82,485.16

Proprietary 3,060.08 -960.53

Foreign 2,731.84 -103,687.47

Retail -4,790.62 22,162.84

SET50 Index Future

Long Short Net MTD YTD

Institution 3,816 3,354 462 -2,407 10,015

Foreign 2,208 1,456 752 2,266 -9,504

Local 4,898 6,112 -1,214 141 -511

Foreign Fund Flows (USDm) Last MTD YTD YTD(%) -1.1 87.9 -3,379.1 -316.7

See important disclosures at the end of this report 2

Media Highlights

Exports to rebound in Q4 but miss target

Thailand is poised to end the year with export growth of only 1.3%, the lowest since 2010, as it is highly unlikely that shipments will reach US$22 billion a month on average for the remaining three months, says the University of the Thai Chamber of Commerce (UTCC). "Exports grew marginally in the first nine months of this year," said Aat Pisanwanich, director of the Center for International Trade Studies at UTCC. "Even though shipments are expected to rebound in the fourth quarter, driven by economic recovery in the US, EU and Asean, the growth is unlikely to be enough to meet the Commerce Ministry's target of 4%." Mr Aat said fourth-quarter exports are estimated at $60 billion, up by 5.1% year-on-year. Commerce Ministry data show exports in the first nine months totalled $172 billion, up by 0.05%. But in local currency, shipments fell by 3.4% to 5.16 trillion baht. Nonetheless, Mr Aat said exports are set to grow by 5.5% next year to $245 billion on the global economic recovery and renewed demand for industrial goods. (Bangkok Post) K-Leasing likely to normalise reserves

Kasikorn Leasing, a subsidiary of Kasikornbank, could normalise its loan-loss reserve settings in the fourth quarter of the year thanks to the country's improving economic outlook and the company's steady non-performing loans (NPLs). The auto leasing firm set aside loan-loss provisions higher than were required by the Bank of Thailand in the second quarter because of negative economic trends at that time. Stringent risk management has allowed the firm to control bad debts in the auto sector at 0.83%, with total outstanding loans of 86.81 billion baht. Executive chairman Isara Wongrung said the company would book better net profit in the fourth quarter if it set loan-loss provisions more in line with the central bank's guidelines. That means it would convert the existing excessive reserve to profit. However, the matter has not been finalised yet, said Mr Isara.For the first nine months of the year, K-Leasing posted a net profit of 115 million baht. It booked new loan expansion of 55.73 billion, resulting in total outstanding loans of 86.81 billion, or 89.7% of its full-year target of 96.79 billion. (Bangkok Post) PTTEP seeks Hess assets

PTT Exploration and Production Plc (PTTEP), Thailand's sole publicly listed oil and gas explorer, is keen to acquire Hess Corporation's assets here and in Indonesia in a bid to boost production and petroleum reserves."We are interested in Hess's assets because we're already partners in the two Thai fields," PTTEP's chief executive Tevin Vongvanich said yesterday. In separate auctions, Hess and Newfield Exploration Co, both based in the US, obtained stakes in two fields in Indonesia and two in Thailand worth a combined US$3 billion, say sources familiar with the matter."As for the assets in Indonesia, this is a good opportunity for us to expand our investment in the country, where we already have operations," Mr Tevin said without providing details. In a related development, PTTEP's third-quarter net profit edged up 1.6% year-on-year to 17.8 billion baht, with earnings per share of 4.47 baht.Total revenue of PTTEP and its subsidiaries was 57.9 billion baht, also up by 1.6% from 57 billion in the same period last year.For the first nine months of this year, revenue was 168 billion baht for a net profit of 48.7 billion, up from 43.6 billion in the same period last year, Mr Tevin said in a statement. (Bangkok Post) Esco targets large buildings

The government's energy service company (Esco) venture capital fund will play a bigger role in enhancing energy efficiency in medium-sized and large buildings. The 1-billion-baht Esco fund, which is under the Environmental Conservation Fund, will help building owners to identify areas in need of improvement, Danai Egkamol, the Alternative Energy Development and Efficiency Department's director of energy regulation and conservation, said yesterday."Medium-sized and large buildings have the capacity to be more energy-efficient but lack capital and the confidence to invest in improvements," he told a seminar co-hosted yesterday by the department and the German-Thai Chamber of Commerce. With low-interest credit, companies can see a return on their investment within seven years, (Bangkok Post) NBTC defers Thaicom ruling

The telecom committee of the National Broadcasting and Telecommunications Commission (NBTC) has declined to approve a proposal by Thaicom Plc, the country's sole satellite service provider.The company wants to expand the scope of its licence for the Thaicom 8 broadcasting satellite to include the 78.5 degrees East orbital slot.Committee chairman Col Settapong Malisuwan instead yesterday agreed to pass the issue to the satellite-licensing panel. It will consider whether Thaicom can operate Thaicom 8 under the same 15-year licence of its planned Thaicom 7 or must obtain a new licence. The panel will discuss the issue with representatives from the Information and Communication Technology (ICT) Ministry and Thaicom next month. Col Settapong said the panel will then submit their solution to the committee for a final decision.In June, the NBTC granted a licence for Thaicom 7, which is expected to be launched in mid-2014 in the 120 degrees East orbital slot. (Bangkok Post) AoT told to explain increased service charge plan

Airports of Thailand Plc (AoT) must explain details of its operating costs if it wants to raise passenger service charges by 100 baht per person, Transport Minister Chatchart Sitthipan has warned. "The AoT will need to have an acceptable reason if it says it's facing losses from collecting the charge," Mr Chatchart said on Tuesday. "The AoT is still making profit and it's necessary for us to look at the big picture." The minister said officials will have to consider whether the proposed service charge is sustainable, given that budget carriers are now selling airfares for as little as 1,500 baht return. If passengers have to pay 200 baht service charges, it could reduce passenger traffic, he said. According to sources, the AoT earns about 16 billion baht of revenue from current passenger service charges annually. If the charge were increased as proposed, the AoT would earn 38 billion baht. Last week, AoT Chairman Sita Divari said the AoT board of directors had agreed on the need to raise airport departure taxes for both domestic and international passengers by 100 baht. (Bangkok Post)


Economic Highlights

Stevens Record Shows Market Bet RBA on Hold Due for Surprise

Money markets predict central bank Governor Glenn Stevens will hold Australia’s cash rate steady for at least a year. History suggests he’ll spring a surprise. Stevens, 55, has either raised or cut the benchmark rate 26 times since his tenure began in September 2006, the most among major developed-world peers, according to data compiled by Bloomberg. His activism puts him closer to central bankers in commodity-rich developing nations like Brazil than wealthier countries in Europe and North America.Traders are pricing in no chance of an increase in the Reserve Bank of Australia’s cash rate in the next 12 months, according to a Credit Suisse Group AG index, as a waning mining-investment boom, forecast rise in unemployment and renewed currency strength prompted the authority to keep its easing bias intact after cutting the benchmark to a record-low 2.5 percent. Working against that bet are accelerating home price gains in one of the developed-world’s costliest property markets. (Bloomberg) Retail Sales in U.S. Climb Excluding Auto Dealers

Sales at most types of retailers, from electronics stores to restaurants, climbed in September, indicating households were sustaining the U.S. economic expansion before the government shutdown shook confidence. Purchases (RSTAXMOM) excluding auto dealers rose 0.4 percent following a 0.1 percent gain the prior month, matching the median forecast of economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. Total sales dropped 0.1 percent because car purchases over the Labor Day holiday weekend were counted in the figures for August. Americans snapped up the newest mobile phones and video games in October, buoyed by low borrowing costs and rising household wealth backed by improving home and stock prices. Another report today showed consumer confidence sank this month by the most in two years on concern the world’s largest economy will be set back by the fiscal gridlock in Washington. Sales “ended the third quarter on a pretty solid note,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, and the top-ranked forecaster of consumer confidence. “That may not be sustained going into the fourth quarter.” (Bloomberg) Poloz Says He Dropped Rates Rise Bias on Inflation Risks

Bank of Canada Governor Stephen Poloz said he dropped the central bank’s language about raising interest rates last week because there is a higher risk of inflation (CACPIYOY) lagging the 2 percent target.“Inflation has persistently been below target,” Poloz, 58, told lawmakers today during a House of Commons Finance Committee session in Ottawa. “Any negative inflation shock would bring us even further away from target, as opposed to getting closer, and in that context we decided that we should no longer have an explicit bias towards higher interest rates.” Canada’s dollar reached a seven-week low after his testimony. The currency dropped the most in four months after Poloz’s Oct. 23 decision, when he removed language about higher rates that had been in place for more than a year. Poloz today reiterated that stimulus provided by the 1 percent policy interest rate is “appropriate” given “significant slack” in the world’s 11th-largest economy. Concern about the pace of global demand is delaying growth in exports and investment, and Canada’s economic output is less than policy makers had expected, Poloz said. Inflation will accelerate to the bank’s 2 percent target by the end of 2015, he said, reiterating a forecast he gave at the Oct. 23 decision. (Bloomberg) Housing Prices in U.S. Cities Rise by Most Since Early 2006

Home prices in 20 U.S. cities rose in August from a year ago by the most since February 2006 as stronger demand boosted values. The S&P/Case-Shiller index of property prices in 20 cities increased 12.8 percent from August 2012, more than forecast, after a 12.3 percent gain in the year ended in July, a report from the group showed today in New York. The median projection of 28 economists surveyed by Bloomberg called for a 12.5 percent advance. As of August, average home prices in the U.S. were back to mid-2004 levels, and the 20-city index was up 22.7 percent from its March 2012 low. Another report today showed retail sales excluding motor vehicles rose 0.4 percent in September after a 0.1 percent gain, indicating households were sustaining the economic expansion before the government shutdown this month shook confidence. The Commerce Department’s figures showed total sales dropped 0.1 percent, restrained by the biggest decrease at auto dealers since October 2012, as purchases early in the month were included in the August data. (Bloomberg) Japan Industrial Output Rises Less Than Forecast in September

Japan’s industrial output rose less than forecast in September, underlining the challenge for Prime Minister Shinzo Abe as he tries to stoke a sustained expansion in the world’s third-biggest economy. Production increased 1.5 percent from the previous month, the trade ministry said in Tokyo today, below the median estimate for a gain of 1.8 percent in a Bloomberg News survey of 30 economists. Output increased 5.4 percent from a year earlier. Abe needs the economy to maintain momentum through April, when a sales-tax increase will likely cause a contraction. The challenge is to push through regulatory reforms in the current parliament session to improve the business environment and encourage companies to boost wages, as export growth shows signs of slowing. (Bloomberg) Consumer Confidence in U.S. Slumps by Most Since August 2011

Confidence among U.S. consumers declined in October by the most since August 2011 as the budget impasse and debt-ceiling negotiations in Washington took a toll on outlooks.The Conference Board’s index slumped to 71.2 from a revised 80.2 last month, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists called for a decrease this month to 75. The October reading was the weakest in six months.The partial shutdown of federal agencies for half the month pushed consumer expectations to a seven-month low as the economy shows signs of cooling. Limited employment and wage gains, along with the prospect of another budget battle early next year, raise the risk of restrained holiday sales. (Bloomberg)


Outperform

Current Target Upside/

Rec. Price Price Downside PE (x) Yield (%) Remarks

(Bt) (Bt) (%) 2013F 2013F

BH Buy 87.50 107.00 22.3 26.5 1.9

CPN Buy 48.25 66.00 36.8 17.2 1.3

NOK Buy 25.00 37.60 50.4 11.1 4.5

TOP Buy 63.50 74.90 18.0 10.4 3.9 .

Underperform

Current Target Upside/

Rec. Price Price Downside PE (x) Yield (%) Remarks

(Bt) (Bt) (%) 2013F 2013F

AP Sell 5.75 4.75 -17.4 6.9 3.1

BCH Neutral 6.60 7.00 6.1 21.7 2.4

29 28 25 24 22 29 28 25 24 22

1 ADVANC 195.8 126.1 -31.6 216.9 88.4 BAY -235.5 -35.3 -149.7 -7.1 -181.4 DTAC 1,640.4 SCC -1,587.2 INTUCH 49,875.3 SCC -11,472.1

2 BTS 186.0 32.0 21.5 10.5 9.6 TRUE -143.4 -0.4 1.8 69.2 120.4 KBANK 1,521.4 BAY -1,256.6 BAY 18,648.3 LH -2,074.2

3 KBANK 100.0 218.0 163.1 221.0 -151.5 SCC -76.6 44.1 0.7 -71.3 -521.5 INTUCH 1,168.9 KTB -337.5 ADVANC 17,234.0 SIRI -907.4

4 EGCO 63.7 84.8 41.3 50.6 22.2 IRPC -55.9 10.7 7.5 28.4 21.1 PTT 1,082.7 SIRI -227.5 PTT 14,283.6 CK -701.1

5 PTTGC 56.6 -72.4 -149.8 60.4 -140.5 TPIPL -48.4 0.8 1.2 33.0 -1.0 PTTEP 1,056.3 BGH -209.5 DTAC 13,846.3 DEMCO -644.5

6 CPF 49.9 28.4 79.4 28.8 -8.5 AOT -48.3 14.6 37.5 -14.0 151.2 ADVANC 944.5 AIT -207.4 PTTEP 12,222.7 UV -416.9

7 PTTEP 42.5 25.3 37.9 71.9 24.1 PTT -42.3 -7.5 -34.7 49.1 7.8 STEC 869.4 JAS -168.4 PTTGC 11,764.8 NOBLE -331.1

8 LPN 41.2 21.3 -2.6 -12.7 -10.3 STEC -37.0 12.3 25.7 8.0 30.3 BANPU 730.4 MINT -144.8 AOT 5,205.0 ASP -309.9

9 CPALL 39.0 -1.8 71.3 45.7 -10.4 BBL -35.0 145.8 127.4 -85.1 -17.7 TOP 721.1 THCOM -105.7 STEC 5,152.7 RML -278.3

10 TMB 35.7 28.8 0.8 -9.8 -40.6 JAS -33.5 -19.1 1.4 -12.5 -10.4 EGCO 715.5 SCCC -97.3 CPF 4,813.2 MINT-W4 -238.0

11 CPN 35.6 0.8 -6.3 17.8 -0.6 LH -12.8 13.0 11.3 36.0 -52.1 SCB 696.6 SPCG -90.4 CPALL 4,479.7 TRC -215.8

12 DTAC 34.1 38.3 4.8 -12.1 -7.2 DELTA -12.2 -5.2 0.5 11.8 10.0 PS 589.7 BJC -89.1 TOP 4,458.5 EARTH -214.7

13 INTUCH 33.6 116.0 227.7 63.4 119.9 MAKRO -11.1 -3.8 -3.0 4.8 -1.7 AOT 523.7 BCH -88.6 CPN 4,337.6 MCOT -202.4

14 TUF 19.8 53.6 108.6 11.5 -72.2 BCP -11.1 -2.6 -1.7 0.4 9.6 BBL 475.6 AP -87.1 BIGC 4,194.5 LRH -189.2

15 THCOM 19.2 0.5 2.8 5.6 3.1 SIRI -9.0 1.5 -21.0 -2.2 -42.5 IVL 462.3 AMATA -85.3 MAKRO 4,167.6 GUNKUL -187.2

16 BECL 18.8 4.1 10.5 -2.3 0.1 CK -8.7 2.2 -6.8 7.2 -3.2 BTS 422.9 MCOT -82.3 MINT 3,354.0 GLOBAL -171.6

17 IVL 17.7 19.7 73.2 19.7 -44.7 MINT -7.7 -27.8 -10.4 -62.6 -68.3 TMB 367.3 TICON -79.6 THAI 3,253.6 TWFP -148.4

18 TCAP 16.3 16.8 -2.7 25.2 -1.5 IFEC -7.4 -2.0 -0.1 0.1 -0.0 DELTA 341.5 RATCH -68.5 DELTA 3,139.7 IRPC -140.4

19 BIGC 14.7 -4.6 20.8 -19.2 -11.1 AMATA -6.1 -4.1 -24.2 -31.7 -25.2 CPF 334.6 THRE -62.0 TCAP 3,129.5 SINGER -137.6

20 SCB 14.6 -27.1 56.9 360.6 -0.7 TASCO -6.1 0.8 -0.3 -0.4 4.4 TCAP 308.4 GJS -39.1 BEC 3,029.1 VNT -120.3

% % of % of

Turn. paidup paidup

1 TRUE 8.47 1 TISCO-P 66.16 65.86

2 BTS 27.16 2 BBL 30.28 29.99

3 IRPC 27.13 3 KBANK 27.39 28.50

4 BAY 61.89 4 INTUCH 23.49 5.41

5 TMB 6.53 5 SPALI 21.82 17.94

6 LH 55.29 6 E-W1 21.62 22.27

7 GJS 14.49 7 GOLD-W1 20.03 14.87

8 JAS 4.02 8 THRE 17.72 15.50

9 WAT-W2 8.67 9 LH 17.61 21.18

10 AIM 5.86 10 LPN 16.97 21.73

11 IEC 1.76 11 DTAC 16.11 13.33

12 TRT-W2 18.45 12 TWFP 15.62 24.77

13 CPF 26.30 13 TCAP 15.31 12.60

14 SIRI 7.69 14 THIP 14.50 12.64

15 NMG-W3 3.52 15 AP 14.10 12.92

16 TPIPL 25.45 16 LALIN 13.71 13.53

17 KTB 8.51 17 STEC 13.60 7.26

18 QH 4.02 18 EGCO 13.57 10.17

19 CPALL 10.07 19 BAY 13.45 13.89

20 INTUCH 26.53 20 PRANDA 12.80 14.59

Source : SET.OR.TH

-171,600

2,000,000

159,800

2,000,000

3,900,700 4,060,500

-3,908,600

6,665,2003,246,800

1,878,407 1,995,300

4,620,600

2,207,500

356,000 4,264,600

4,232,8002,232,800

4,207,500 6,415,000

200,200 8,004,000 8,204,200 -7,803,800

1,075,000 7,033,000 8,108,000

2,859,920,138 -232,800

-5,958,000

3,418,400

195,633,041 161,065,653 1,277,816,397

8,000,000 1,160,000 1,011,300

-1,787,900

86,117,327

403,296,028 367,964,647

113,087,800 -3,740,900

59,270,000 409,144,800

3,873,707 -116,893

71,464,565 53,541,225

816,898,959

52,365,000 394,100

1,015,4001,169,500 3,354,400

3,237,700

924,000 2,711,900

1,815,900 1,421,800

2,184,900

3,635,900

6,074,143,747

526,465,000

825,000,000

207,400,599

843,803,210

111,592,900

1,525,106,540

315,525,949 2,367,811,000 381,567,122

14,849,060 2,354,634 95,060,550

10,025,921,523

1,475,698,768

1,765,702,742 2,123,251,472

250,412,640 320,609,239

370,342,718

3,512,494,860

74,187,298 74,970,598

622,268,181 544,461,149

75,018,228 77,281,246

-

3,663,800 7,251,500

7,141,100 8,309,900

16,503,800 12,752,600

10,915,300 -3,587,700

15,451,000 -1,168,800 347,000,000

14,628,200 1,875,600

9,600,000 9,600,000

- 11,000,000 11,000,000 -11,000,000

9,600,000

3,206,420,305

-15,777,700

1,716,553,249

2,393,260,193

753,288,755

307,949,569 374,625,050

-6,159,600 173,363,101 5,897,400 12,057,000 17,954,400

572,486,791 20,859,100

655,486,064 682,155,834

578,050,191 741,200 22,341,500

2,702,800 18,480,500 21,183,300

NetBuy Sell Total

1,908,842,894

11,290,700 26,870,100 22,400 22,300 38,160,800 -15,579,400

21,600,300

33,858

Net Buy Net Sell Net Buy Net Sell

2 Jan- 29 Oct 13Oct13

(Last)

NVDR Shrs. Paid up CapitalNVDR Shrs.

29-Oct-13 2-Jan-13

Most Active Values (Btmn)

30 October 2013

Oct 13 Oct13

Total Volume Shares

NVDR Trading Data by Stock (Volume) NVDR Shares to Total Paid-up Shares(%)

NET BUY NET SELL Month to Date Year to Date

THAI NVDR : Top Ranking

See important disclosures at the end of this report Powered by EFATM

Platform 1

Results Review, 30 October 2013

DTAC (DTAC TB) Buy (Maintained) Communications - Telecommunications Target Price: THB130.0

Market Cap: USD8,727m Price: THB114.5

3Q13 Calls In Weak

Macro

2.00

Risks

2.00

Growth

2.00

Value

2.00

69

81

92

104

116

127

139

76

86

96

106

116

126

136

Total Access Communication (DTAC TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

5

10

15

20

25

30

35

Oct-

12

De

c-1

2

Ma

r-1

3

Ma

y-1

3

Jul-1

3

Se

p-1

3

Vo

l m

Source: Bloomberg

Avg Turnover (THB/USD) 341m/10.8m

Cons. Upside (%) -8.7

Upside (%) 13.9

52-wk Price low/high (THB) 81.3 - 128

Free float (%) 13

Shareholders (%)

Telenor Asia 42.6

Thai Telco Holdings 22.4

TOT Public Company 5.6

Shariah compliant

Thailand Research Team 662 862 9999 ext.2030

Forecasts and Valuations Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F

Total turnover (THBm) 79,298 89,497 94,890 94,920 99,296

Reported net profit (THBm) 11,813 11,278 12,079 14,062 17,006

Recurring net profit (THBm) 12,270 11,235 12,079 14,062 17,006

Recurring net profit growth (%) 12.4 (8.4) 7.5 16.4 20.9

Core EPS (THB) 5.18 4.74 5.10 5.94 7.18

DPS (THB) 17.6 5.1 5.1 5.6 6.8

Dividend Yield (%) 15.4 4.4 4.5 4.9 6.0

Core P/E (x) 22.1 24.1 22.4 19.3 15.9

Return on average equity (%) 22.8 32.3 37.8 47.4 54.1

P/B (x) 7.77 7.76 9.35 8.94 8.32

P/CF (x) 10.3 12.4 15.6 11.7 9.4

EV/EBITDA (x) 9.2 10.9 10.6 9.3 8.2

Net debt to equity (%) net cash 73.2 145.9 152.3 143.1

Our vs consensus EPS (%) (1.1) (5.1) (7.2)

Source: Company data, RHB estimates

DTAC’s 9M13 core earnings (+1.4% y-o-y) were below expectations due to higher than expected depreciation and amortization expenses. This prompts us to cut our FY13-FY15 core earnings estimates by 3-4% and lower the stock’s FV to THB130 (from THB133), based on FCFF valuation (WACC: 10.7%, TG: 1%). We continue to like the company’s significant earnings upside over the longer term. Maintain BUY.

Below expectations. DTAC’s 3Q13 core earnings (+0.2% y-o-y, +9.8%

q-o-q) came in below expectations, with its 9M13 figures (+1.4% y-o-y) representing only 70% and 71% of our and consensus’ full year estimates. This is attributed to the higher-than-expected depreciation and amortization (D&A) charged during the quarter.

3Q13 key highlights. i) Two months after launching its 3G-2.1GHz

service under the TriNet brand, DTAC roped in 3.7m subs for this network, ii) market competition has intensified, iii) the revision of the interconnect (IC) rate to THB0.45/min (from THB1.0/min), effective 1 July, dragged down its IC figures, iv) it started to amortise its 2.1GHz licence, and v) it has declared a third interim dividend of THB1.32/share, at a payout ratio of 114%.

Forecasts and risks. We are cutting our FY13, FY14 and FY15 core

earnings estimates by 4%, 3% and 3% respectively to incorporate lower IC revenue and higher D&A expenses. The key risks to our forecasts are: i) slower 3G-2.1GHz migration, ii) weaker APRU going forward, and iii) stronger than expected competition.

Investment case. Following the downward revision in core earnings, we

cut DTAC’s FV to THB130 (from THB133), based on FCFF valuation (WACC: 10.7%, TG: 1%). Our FV’s implied FY14 P/E is 22x. We deem this valuation fair as it is supported by the stock’s decent dividend yield of 4-5%. We continue to like DTAC’s significant longer term earnings upside potential from regulatory cost savings via the rollout of its 3G-2.1GHz services. We advise investors to accumulate DTAC shares in the event its share price pulls back in reaction to its weak results. Maintain BUY.

DTAC (DTAC TB) 30 October 2013


Figure 1: Results review

FYE Dec (THBm) 3QFY12 2QFY13 3QFY13 q-o-q (%) y-o-y (%) 9MFY12 9MFY13 y-o-y (%) Comments

Revenue 21,176.8 24,549.0 21,372.9 (12.9) 0.9 65,334.5 69,826.6 6.9 Refer to Figure 2.

EBITDA 6,650.6 7,467.3 7,151.1 (4.2) 7.5 20,052.8 22,096.3 10.2 Refer to Figure 2.

EBITDA Margin (%) 31.4 30.4 33.5 30.7 31.6

Depreciation (2,821.0) (3,459.9) (3,501.5) 1.2 24.1 (8,223.0) (9,889.0) 20.3 Due to network modernisation & amortization of

2.1GHz license.

EBIT 3,829.6 4,007.4 3,649.6 (8.9) (4.7) 11,829.8 12,207.2 3.2

EBIT Margin (%) 18.1 16.3 17.1 18.1 17.5

Interest expense (242.4) (341.5) (212.3) (37.8) (12.4) (791.5) (915.8) 15.7 Drawdown of loans to pay special dividend & 3G

auction fee last year.

Interest income 105.2 53.8 47.3 (12.2) (55.1) 277.2 128.2 (53.8)

Associates - - - nm nm - - nm

EI/Others 84.6 62.8 (54.1) nm nm 89.3 (398.3) nm IT investment write-off in 1Q coupled with forex

losses.

Pretax profit 3,776.9 3,782.4 3,430.5 (9.3) (9.2) 11,404.8 11,021.3 (3.4)

Pretax Margin (%) 17.8 15.4 16.1 17.5 15.8

Tax (896.0) (846.0) (683.9) (19.2) (23.7) (2,700.2) (2,311.1) (14.4) Lower corporate tax rate.

Effective tax rate (%) (23.7) (22.4) (19.9) (23.7) (21.0)

Minority Interest 0.1 0.7 0.7 (4.4) nm 1.9 2.0 6.6

Net Profit 2,881.0 2,937.2 2,747.2 (6.5) (4.6) 8,706.4 8,712.3 0.1

Core Profit 2,796.4 2,550.4 2,801.3 9.8 0.2 8,687.2 8,809.3 1.4 Slightly below expectations.

Net Margin (%) 13.2 10.4 13.1 13.3 12.6


Key Conference Call Takeaways

Competition heats up. DTAC launched its 3G-2.1GHz service on 23 July under the TriNet brandname. As of 3Q13, it has 3.7m subs (13.4% of existing subscriber base) on the new network. Management is confident of meeting its earlier guidance of 10m subs to be converted from 2G by end-2013, which would imply 2.1m subs to be converted per month in 4Q13. The company is targeting for 50% population coverage by end-FY13 on the 2.1GHz network, with 700 more 3G sites to 5,500.

Also, DTAC is looking to convert more prepaid subs to postpaid subs as the latter commands an ARPU uplift of ~60-70%. Furthermore, we gather that when a feature phone user switches to a smartphone, management sees an incremental ARPU of ~30%.

However, we think realising the above may be slightly difficult given that competition is heating up as telcos fight to defend market share. In 3Q13, we saw DTAC’s APRU decline by 0.9% y-o-y (-2.3% q-o-q) as we understand that pricing promotion is now more rampant. That said, all telcos still shy away from the handset subsidy model.

Regulatory development. Management reiterated its preference to put up for

auction the unused 25MHz bandwidth on the 1.8GHz spectrum (for 4G services) in September 2014, along with ADVANC’s and TRUE’s combined 25MHz bandwidth. DTAC’s 1.8GHz build-transfer-operate (BTO) concession ends in 2018 while ADVANC’s and TRUE’s expired in September this year but both were given a grace period of one year by the National Broadcasting and Telecommunications Commission (NBTC) to migrate their subs to another network. Currently, only half of the 50MHz bandwidth assigned to DTAC is utilised for 2G.



Figure 2: Breakdown of revenue and expenses

FYE Dec (THBm) 3QFY12 2QFY13 3QFY13 q-o-q (%) y-o-y (%) 9MFY12 9MFY13 y-o-y (%) Comments

Revenue

Voice revenue 10,625.0 10,956.0 10,162.0 (7.2) (4.4) 32,466.0 31,895.0 (1.8)

- Postpaid (voice) 2,702.0 3,046.0 2,791.0 (8.4) 3.3 8,056.0 8,795.0 9.2 Switch over from higher spending prepaid subs.

- Prepaid (voice) 7,923.0 7,910.0 7,371.0 (6.8) (7.0) 24,410.0 23,100.0 (5.4)

Value added services 3,835.0 5,374.0 5,926.0 10.3 54.5 10,743.0 16,300.0 51.7

- Mobile internet 2,377.7 3,923.0 4,444.5 13.3 86.9 6,353.2 11,817.5 86.0 In tandem with the wider adoption of

smartphones.

- Messaging 690.3 591.1 533.3 (9.8) (22.7) 2,172.2 1,824.5 (16.0)

- Others 767.0 859.8 948.2 10.3 23.6 2,217.7 2,658.0 19.9

International roaming 589.0 520.0 472.0 (9.2) (19.9) 1,636.0 1,677.0 2.5

IDD + other fees 737.0 868.0 830.0 (4.4) 12.6 1,964.0 2,571.0 30.9

Interconnect 3,602.0 3,509.0 1,719.0 (51.0) (52.3) 10,990.0 8,870.0 (19.3) IC rate cut to THB0.45 from THB1 per min,

effective 1 July 2013.

Handset sales 1,722.2 3,282.5 2,242.5 (31.7) 30.2 7,328.1 8,427.5 15.0 Drop q-o-q in anticipation of the launch of iPhone

5s & 5c in 4Q.

Other income 66.6 39.6 22.6 (42.9) (66.0) 207.3 87.7 (57.7)

Total revenue 21,176.8 24,549.0 21,372.9 (12.9) 0.9 65,334.5 69,826.6 6.9

Service rev. ex-IC 15,786.0 17,718.0 17,390.0 (1.9) 10.2 46,809.0 52,443.0 12.0

Expense

Cost of services

- Regulatory 5,214.0 5,696.0 5,574.0 (2.1) 6.9 15,260.0 16,686.0 9.3 Q-o-q savings from 3G-2.1GHz licensing

framework.

- Network 984.0 986.0 1,045.0 6.0 6.2 2,764.0 2,984.0 8.0

- Interconnect 3,417.0 3,359.0 1,620.0 (51.8) (52.6) 10,426.0 8,464.0 (18.8) In tandem with the fall in IC revenue.

- Others 966.0 1,123.0 868.0 (22.7) (10.1) 2,852.0 3,045.0 6.8

Handset costs 1,658.0 3,215.0 2,114.0 (34.2) 27.5 6,901.0 8,134.0 17.9

SG&A

- Marketing 606.0 1,006.0 1,311.0 30.3 nm 2,057.0 3,093.0 50.4 Promotion of TriNet services.

- General admin 1,649.0 1,372.0 1,595.0 16.3 (3.3) 4,953.0 5,061.0 2.2

- Provisions 54.0 181.0 136.0 (24.9) nm 148.0 708.0 nm

Subtotal 14,548.0 16,938.0 14,263.0 (15.8) (2.0) 45,361.0 48,175.0 6.2

Disposal of assets - 197.0 (1.0) (100.5) nm - (308.0) nm

Other income (21.0) (53.0) (38.0) (28.3) 81.0 (102.0) (134.0) 31.4

Restatement 0.0 0.0 0.0 23.5 0.0

Total 14,527.0 17,082.0 14,224.0 (16.7) (2.1) 45,282.5 47,733.0 5.4

EBITDA 6,649.8 7,467.0 7,148.9 (4.3) 7.5 20,052.0 22,093.6 10.2




Figure 3: Key operating statistics

FYE Dec (THBm) 3QFY12 2QFY13 3QFY13 q-o-q (%) y-o-y (%) Comments

Subscribers ('000) 24,568.2 27,231.5 27,470.9 0.9 11.8

- Postpaid 2,586.2 3,222.3 3,333.9 3.5 28.9

- Prepaid 21,981.9 24,009.2 24,137.0 0.5 9.8

Net adds ('000) 258.1 622.9 239.4 (61.6) (7.2) Slowdown q-o-q due to softer macroeconomic environment.

- Postpaid 83.8 200.6 111.6 (44.4) 33.1

- Prepaid 174.3 422.3 127.8 (69.7) (26.6)

Data subs 7,200.0 9,400.0 10,500.0 11.7 45.8

Smartphone subs 4,889.1 7,080.2 7,994.0 12.9 63.5 More affordable smartphones in the market.

3G subs 1,600.0 3,400.0 4,200.0 23.5 nm 88% is on 2.1GHz network.

Blended ARPU (THB) 211.0 214.0 209.0 (2.3) (0.9) Launching of more competitive mobile packages into the market.

- Postpaid ARPU 589.0 605.0 603.0 (0.3) 2.4

- Prepaid ARPU 168.0 164.0 157.0 (4.3) (6.5)

Blended MOUs

(mins/sub/mth) (ex IC)

223.0 217.0 220.0 1.4 (1.3) Voice-data substitution effect.

- Postpaid MOU 371.0 312.0 311.0 (0.3) (16.2)

- Prepaid MOU 207.0 205.0 208.0 1.5 0.5

No. of base stations 14,147.0 15,938.0 15,945.0 0.0 12.7

- 2G 1800MHz 10,676.0 10,755.0 10,755.0 0.0 0.7

- 3G 850MHz 3,471.0 5,183.0 5,190.0 0.1 49.5

- 3G 2100MHz - - 4,765.0 nm nm Aggressive 3G rollout, targeting 5,500 sites by end of the year (implies 50%

population coverage).


Guidance. DTAC moderated its FY13 guidance from a high single digit growth to 5-

7% while maintaining its EBITDA margin guidance at 30-31% and capex at THB14.5bn. As we understand the investments will be financed mainly by debt (target net debt/EBITDA ratio of 2x), we had factored this into our model earlier. Management also reiterated its 10m 3G-2.1GHz subs target for FY13 and expects meaningful regulatory cost savings only from 1Q14 onwards.

Forecasts & risks. We are cutting our FY13, FY14 and FY15 revenue forecasts by

2%, 6% and 6% respectively after revising lower our IC revenue assumption to meet the new IC rate of THB0.45/min. Also, we reduce our core earnings estimates for the corresponding three years by 4%, 3% and 3% respectively to incorporate higher D&A expenses.

We also revise up our FY13, FY14 and FY15 dividend payout ratios (DPR) to 100%, 95%, 95% (from 90% respectively), since DTAC’s DPR for 9M13 was 101%. The company has a policy of paying a dividend of no less than 80% of its net profit.

Key risks to our forecasts: i) slower 3G-2.1GHz migration, ii) weaker APRU going forward, and iii) stronger than expected competition.

Figure 4: Management guidance and RHB’s forecast for FY13

FY13 core assumptions Management guidance RHB forecast

Revenue growth (% y-o-y) 5.0 - 7.0 6.0

EBITDA margin (%) 30.0 - 31.0 30.8

Capex (THBbn) 34 within 3 years 42 within 3 years

3G-2.1GHz subscribers (m) 10.0 8.0




Investment case. Following the downward revision in our core earnings forecasts,

we lower DTAC’s FV to THB130 (from THB133), based on FCFF valuation (WACC: 10.7%, TG: 1%). At our FV, the implied FY14 P/E is 22x. We think the valuation is fair, supported by its decent dividend yield of 4-5%. We continue to like the stock’s significant earnings upside over the longer term from regulatory cost savings via rollout of its 3G-2.1GHz services. As such, we advise investors to accumulate DTAC shares in the event its share price pulls back in reaction to the company’s weak results. Maintain BUY.

Figure 5: Sector comparison

Company Bloomberg Currency Ratings FV Price Mkt Cap

Ticker (USDm) FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14

Malaysia

Axiata AXIATA MK MYR Neutral 6.55 6.89 18,694.2 22.7 21.2 9.2 8.5 2.8 2.7 3.3 3.5 12.6 13.0

DiGi DIGI MK MYR Sell 4.10 5.06 12,501.3 25.4 22.0 12.7 11.9 nm nm 3.9 4.5 nm nm

Maxis MAXIS MK MYR Sell 5.90 7.20 17,166.3 25.8 25.6 13.4 13.2 8.8 10.3 5.6 5.6 31.7 37.0

TM T MK MYR Neutral 5.30 5.26 5,979.4 21.2 24.3 7.3 6.8 3.1 3.0 4.3 3.7 13.7 12.6

Time dotCom TDC MK MYR Neutral 3.95 4.01 730.3 13.7 14.7 11.6 10.6 0.9 0.8 0.0 0.0 6.4 5.8

Singapore

SingTel ST SP SGD Neutral 3.80 3.76 48,259.4 15.1 14.2 12.9 12.5 2.4 2.2 4.5 4.5 16.1 15.8

StarHub STH SP SGD Neutral 4.18 4.47 6,187.2 23.5 20.6 11.2 10.2 nm nm 4.5 4.5 nm nm

M1 M1 SP SGD Neutral 3.25 3.41 2,533.7 19.2 16.1 10.7 9.4 8.2 7.0 4.3 4.2 44.4 47.0

Indonesia

Telkom TLKM IJ IDR Buy 2,500 2,300 20,877.1 16.0 13.7 5.6 4.8 4.0 3.6 3.5 4.4 26.4 27.6

XL Axiata EXCL IJ IDR Neutral 4,100 4,475 3,439.2 18.4 15.6 5.8 5.6 2.3 2.1 2.2 2.6 13.1 14.2

Indosat ISAT IJ IDR Neutral 4,600 4,500 2,202.0 36.4 22.8 4.1 3.7 1.2 1.1 1.4 2.2 -3.7 1.8

Tower Bersama TBIG IJ IDR Buy 7,250 5,550 2,397.2 20.9 16.6 15.6 13.1 5.8 4.9 2.4 3.0 29.1 31.9

Sarana Menara TOWR IJ IDR Buy 3,370 2,700 2,480.7 28.5 23.5 14.2 12.4 6.3 5.0 0.0 0.0 24.1 23.2

Thailand

ADVANC ADVANC TB THB Buy 319.00 257.00 24,613.5 20.3 18.2 11.9 10.7 16.1 15.4 4.9 5.5 83.2 86.8

DTAC DTAC TB THB Buy 130.00 114.50 8,733.4 21.6 18.7 10.2 8.7 9.1 8.4 4.2 4.8 38.7 46.7

Simple Avg. - Malaysia Telcos 21.7 21.6 10.8 10.2 3.9 4.2 3.4 3.5 16.1 17.1

Simple Avg. - Singapore Telcos 19.3 17.0 11.6 10.7 5.3 4.6 4.4 4.4 30.2 31.4

Simple Avg. - Indonesia Telcos 24.1 18.5 9.1 7.9 3.9 3.4 1.9 2.4 17.8 19.7

Simple Avg. - Thailand Telcos 20.9 18.5 11.0 9.7 12.6 11.9 4.6 5.2 60.9 66.7

Simple Avg. - Regional Telcos 21.9 19.2 10.4 9.5 5.5 5.1 3.2 3.5 25.8 27.9

Note: Share prices as at 29 Oct 2013

P/E (x) EV/EBITDA (x) P/BV (x) DY (%) ROE (%)

Source: Bloomberg, RHB estimates



Financial Exhibits

Profit & Loss (THBm) Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F

Total turnover 79,298 89,497 94,890 94,920 99,296

Cost of sales (42,390) (53,198) (53,829) (48,767) (47,934)

Gross profit 36,908 36,299 41,061 46,153 51,362

Other operating costs (20,091) (20,879) (24,592) (27,062) (28,587)

Operating profit 16,817 15,420 16,469 19,091 22,775

Operating EBITDA 27,333 26,885 29,261 33,853 38,562

Depreciation of fixed assets (10,515) (11,465) (12,792) (14,762) (15,787)

Operating EBIT 16,817 15,420 16,469 19,091 22,775

Interest expense (431) (1,119) (1,378) (1,522) (1,527)

Other non-recurring income 692 498 - - -

Pre-tax profit 17,078 14,800 15,091 17,569 21,247

Taxation (5,266) (3,524) (3,018) (3,514) (4,249)

Minority interests 1 2 6 7 8

Profit after tax & minorities 11,813 11,278 12,079 14,062 17,006

Reported net profit 11,813 11,278 12,079 14,062 17,006

Recurring net profit 12,270 11,235 12,079 14,062 17,006


Cash flow (THBm) Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F


Depreciation & amortisation 10,515 11,465 12,792 14,762 15,787

Change in working capital 3,836 (140) (7,437) (5,585) (3,889)

Other operating cash flow 454 403 - - -

Operating cash flow 31,623 27,148 21,824 28,268 34,673

Interest paid (453) (956) (1,378) (1,522) (1,527)

Dividends received 68 86 - - -

Tax paid (4,874) (4,456) (3,018) (3,514) (4,249)

Cash flow from operations 26,363 21,821 17,428 23,233 28,896

Capex (4,976) (7,779) (14,950) (13,450) (13,450)

Other investing cash flow (306) (7,395) (1,195) (950) (1,124)

Cash flow from investing activities (5,282) (15,174) (16,145) (14,400) (14,574)

Dividends paid (7,434) (49,590) (18,021) (12,719) (14,758)

Increase in debt (4,321) 25,679 24,840 (4,386) (3,728)

Other financing cash flow (0) (55) 0 0 (0)

Cash flow from financing activities (11,755) (23,966) 6,819 (17,105) (18,486)

Cash at beginning of period 12,548 21,873 4,555 12,656 4,384

Total cash generated 9,326 (17,318) 8,101 (8,273) (4,164)

Implied cash at end of period 21,873 4,555 12,656 4,384 220




Financial Exhibits

Balance Sheet (THBm) Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F

Total cash and equivalents 21,973 4,705 12,806 4,534 370

Inventories 384 904 1,898 2,373 2,979

Accounts receivable 6,575 8,386 11,387 12,340 13,901

Other current assets 2,193 2,975 4,744 5,695 6,951

Total current assets 31,125 16,969 30,835 24,941 24,201

Total investments 358 346 346 346 346

Tangible fixed assets 68,234 66,567 69,658 69,282 67,884

Intangible assets 19 15,128 14,196 13,259 12,320

Total other assets 4,111 2,008 3,203 4,153 5,277

Total non-current assets 72,722 84,049 87,403 87,040 85,827

Total assets 103,847 101,018 118,238 111,981 110,028

Short-term debt 1,321 8,808 12,228 10,035 8,171

Accounts payable 19,480 23,592 24,939 23,205 23,079

Other current liabilities 44,049 5,400 3,813 3,325 3,010

Total current liabilities 64,850 37,800 40,980 36,565 34,259

Total long-term debt 3,269 21,460 42,880 40,687 38,823

Other liabilities 840 6,814 5,382 4,397 4,373

Total non-current liabilities 4,109 28,274 48,262 45,084 43,196

Total liabilities 68,959 66,074 89,242 81,649 77,455

Share capital 4,736 4,736 4,736 4,736 4,736

Retained earnings reserve 4,944 5,003 (939) 404 2,653

Other reserves 25,191 25,191 25,191 25,191 25,191

Shareholders' equity 34,871 34,929 28,988 30,331 32,580

Minority interests 17 15 8 1 (7)

Other equity 0 (0) (0) 0 0

Total equity 34,888 34,944 28,996 30,332 32,573

Total liabilities & equity 103,847 101,018 118,238 111,981 110,028


Key Ratios (THB) Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F

Revenue growth (%) 9.6 12.9 6.0 0.0 4.6

Operating profit growth (%) 9.3 (8.3) 6.8 15.9 19.3

Net profit growth (%) 8.5 (4.5) 7.1 16.4 20.9

EPS growth (%) 8.5 (4.5) 7.1 16.4 20.9

Bv per share growth (%) (49.4) 0.2 (17.0) 4.6 7.4

Operating margin (%) 21.2 17.2 17.4 20.1 22.9

Net profit margin (%) 14.9 12.6 12.7 14.8 17.1

Return on average assets (%) 11.6 11.0 11.0 12.2 15.3


Net debt to equity (%) (49.8) 73.2 145.9 152.3 143.1

DPS 17.6 5.1 5.1 5.6 6.8

Recurrent cash flow per share 11.1 9.2 7.4 9.8 12.2




SWOT Analysis

Extensive network coverage

Strong major shareholder in Telenor

Regulatory uncertainties

Competitive market environment

Potential ARPU uplift from higher data take-up

Low smartphone penetration in Thailand

Declining price-points of smartphones and tablets

Moderate penetration in the upcountry market

High fixed costs arising from recent 850MHz capex commitments

Past network issues resulted in brand dilution

-10%

3%

17%

30%

43%

57%

70%

0

5

10

15

20

25

30

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

0%

6%

12%

18%

24%

30%

36%

42%

48%

54%

60%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

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

Company Profile DTAC is the second largest mobile operator in Thailand with a GSM850 and GSM1800 network under a Build Transfer Operate (BTO) concession with Communications Authority of Thailand (CAT).



Recommendation Chart

14

34

54

74

94

114

134

Oct-08 Feb-10 May-11 Aug-12

Price Close

NR 72

78

115

103

116

122

133 Recommendations & Target Price

Buy Neutral Sell Trading Buy Take Profit Not Rated

Source: RHB estimates, Bloomberg

Date Recommendation Target Price Price

2013-07-23 Buy 133 126

2013-04-25 Buy 122 111

2013-04-10 Buy 116 96

2013-02-11 Buy 103 88

2012-10-17 Buy 115 89

2012-05-04 Neutral 78 80

2012-02-02 Neutral 72 67

Source : RHB estimates, Bloomberg


Platform 1

Company Update, 30 October 2013

PTT Exploration & Production (PTTEP TB) Neutral (Maintained) Energy - Oil & Gas Target Price: THB162

Market Cap: USD21,598m Price: THB169

3Q13 Earnings Soar 67%

Macro

1.00

Risks

2.00

Growth

2.00

Value

2.00

61

66

70

75

79

84

88

93

97

102

106

130

135

140

145

150

155

160

165

170

175

180

PTT Exploration & Production (PTTEP TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

5

10

15

20

25

Oct-

12

De

c-1

2

Ma

r-1

3

Ma

y-1

3

Jul-1

3

Se

p-1

3

Vo

l m

Source: Bloomberg


Cons. Upside (%) 7.1

Upside (%) -4.3

52-wk Price low/high (THB) 141 - 174

Free float (%) 35

Shareholders (%)

PTT Plc. 65.3

Thai NVDR 3.2

HSBC (Singapore) Nominee PTE LTD.

2.3

Shariah compliant

Kannika Siamwalla, CFA 66 2862 9744

Licence No.23517 [email protected]

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F


Reported net profit (THBm) 41,739 44,748 57,316 60,598 65,598

Recurring net profit (THBm) 41,739 44,748 60,985 60,598 65,598

Recurring net profit growth (%) 53.8 7.2 36.3 (0.6) 8.3

Core EPS (THB) 12.6 13.5 18.4 15.3 16.5

DPS (THB) 5.04 5.41 6.92 6.12 6.63

Dividend Yield (%) 3.0 3.2 4.1 3.6 3.9

Core P/E (x) 13.4 12.5 9.2 11.1 10.2


P/B (x) 3.25 2.80 1.71 1.74 1.58

P/CF (x) 6.46 6.93 5.79 6.65 6.06

EV/EBITDA (x) 5.72 5.48 4.03 4.33 3.96

Net debt to equity (%) 10.6 40.0 13.8 7.2 2.5

Our vs consensus EPS (%) 0.0 0.0


PTT Exploration & Production (PTTEP)’s 3Q13 earnings surged 67% q-o-q to THB17.8bn on the back of lower tax expenses and a forex gain (compared to a forex loss in 2Q13). Its operating profit fell 5% q-o-q to THB27bn, in line with our expectations. With the upside to our THB162 TP being limited, we maintain our NEUTRAL recommendation on this stock.

3Q13 earnings surge 67% q-o-q to THB17.8bn. This is mainly from a

forex gain of THB123m (vs a THB2bn forex loss in 2Q13) and a much lower tax expense of THB8.8bn (compared to THB15.1bn in 2Q13). PTTEP’s operating profit for the quarter declined by 5% q-o-q to THB27bn, in line with our expectations, while its 9M13 earnings of THB48.7bn made up 80% of our THB60.9bn full-year FY13 forecast. We are maintaining our earnings estimates for the company.

Relatively stable operations. PTTEP’s ASP was relatively stable at

USD65.71 per barrel of oil equivalent (boe) (+0.8% q-o-q). The price of petroleum liquids improved to USD100.33/bbl (+5.5% q-o-q), while natural gas prices declined to USD7.95/boe (-2.6% q-o-q). Sales volume dipped by 2% q-o-q to 286,578 boe per day (bpd), mainly due to the lower sales volume from its Vietnam 16-1 project (3Q13 average: 35,000 bpd vs 2Q13 average: 50,000 bpd). The Bongkot field also went through a planned shutdown during this time. In the meantime, following its planned 2Q13 shutdown, the Arthit field came back online while the Montara field commenced operations – both factors helped to alleviate the lower production levels from the company’s other fields.

Major activities in 4Q13F. The Yadana and Yetagun fields in Myanmar

are slated for a planned shutdown for seven days in end-Dec and for seven days at the beginning of Jan 2014. The Zawtika field, also in Myanmar, is on schedule to see first gas by end-2013, whereupon sales should roll in by 2Q14, as the field ramps up production to 300 mmscfd (million standard cubic feet per day).

PTT Exploration & Production (PTTEP TB) 30 October 2013


Figure 1: Operating variables

FYE Dec. (THB m) 3Q13 2Q13 q-o-q

chg YTD

2013F YTD 2012 y-o-y

chg

Revenue 57,100 54,396 5% 166,182 154,880 7%

EBIT 27,613 29,139 -5% 85,490 81,707 5%

Net interest exp. (1,172) (1,196) -2% (3,436) (3,653) -6%

PBT 26,564 25,782 3% 81,256 77,383 5%

Tax (8,828)

(15,160) -42% (32,688) (30,510) 7%

Net profit 17,805 10,664 67% 48,727 43,548 12%

EPS (THB) 4.47 2.67 67% 12.22 10.92 12%

EBITDA margin 73% 72% 2% 73% 72% 1%


Figure 2: Operating variables

3Q13F 2Q13 3Q12 q-o-q

(%) y-o-y

(%)

Sales volume (boepd) 286,578 292,721 292,228 -2.1% -1.9%

ASP (USD/boe) 65.71 65.16 64.00 0.8% 2.7%

Natural gas price (USD/mmbtu) 7.95 8.16 7.68 -2.6% 3.5%

Liquids (USD/bbl) 100.33 95.14 99.35 5.5% 1.0%

Source: PTTEP, RHB estimates



Financial Exhibits

Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total turnover 141,978 169,646 212,537 216,075 234,023

Cost of sales (72,424) (79,422) (95,711) (94,195) (103,866)

Gross profit 69,555 90,224 116,826 121,880 130,158

Gen & admin expenses (6,157) (8,022) (9,827) (8,146) (8,146)


Operating EBITDA 100,223 116,256 149,691 160,605 171,342

Depreciation of fixed assets (36,825) (34,055) (42,692) (46,871) (49,330)

Operating EBIT 63,397 82,201 106,999 113,734 122,011

Net income from investments (45) 75 145 145 145

Other recurring income 2,001 3,068 4,704 - -

Interest income 374 157 494 839 1,181

Interest expense (2,541) (3,771) (5,812) (4,658) (4,187)

Exchange gains 2,763 (1,938) (728) - -

Exceptional income - net - - (6,366) - -

Pre-tax profit 65,950 79,793 99,436 110,059 119,151

Taxation (24,211) (35,045) (42,120) (49,462) (53,553)

Profit after tax & minorities 41,739 44,748 57,316 60,598 65,598

Reported net profit 41,739 44,748 57,316 60,598 65,598

Recurring net profit 41,739 44,748 60,985 60,598 65,598


Cash flow (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F


Depreciation & amortisation 36,825 34,055 42,692 46,871 49,330

Change in working capital 10,863 183 (9,993) (6,501) (4,147)

Other operating cash flow 2,001 3,068 4,704 - -

Operating cash flow 113,087 119,508 144,402 154,104 167,195

Interest received 374 157 494 839 1,181

Interest paid (2,541) (3,771) (5,812) (4,658) (4,187)

Tax paid (24,211) (35,045) (42,120) (49,462) (53,553)

Cash flow from operations 86,709 80,849 96,963 100,824 110,637

Capex (56,414) (145,007) (164,338) (79,474) (67,182)

Other investing cash flow (9,233) 21,380 27,594 21,768 145

Cash flow from investing activities (65,647) (123,627) (136,744) (57,706) (67,037)

Dividends paid (16,695) (17,944) (22,984) (24,300) (26,305)

Proceeds from issue of shares 403 231 96,633 - -

Increase in debt 6,068 44,907 (7,173) (4,053) 17,092

Other financing cash flow - - (0) - -

Cash flow from financing activities (10,225) 27,195 66,476 (28,353) (9,212)


Total cash generated 10,837 (15,584) 26,695 14,765 34,387

Implied cash at end of period 59,515 43,930 69,495 84,970 118,265




Financial Exhibits

Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total cash and equivalents 59,514 42,800 70,205 83,878 118,139

Inventories 8,548 9,143 9,916 10,804 11,701

Accounts receivable 11,728 27,371 36,985 34,572 37,444



Total investments 1,468 1,439 1,574 1,574 1,574


Total other assets 25,404 18,415 13,585 13,585 13,585


Total assets 342,220 448,711 601,513 650,483 707,246

Short-term debt 7,945 31,796 5,010 11,694 39,863




Total long-term debt 69,893 90,949 110,562 99,825 88,749

Other liabilities 41,836 57,365 90,098 90,098 90,098

Total non-current liabilities 111,729 148,314 200,660 189,923 178,846


Share capital 3,317 3,320 3,970 3,970 3,970

Retained earnings reserve 154,794 182,292 213,740 271,662 310,955

Other reserves 14,183 14,412 110,394 110,394 110,394


Total equity 172,294 200,024 328,104 386,026 425,319



Key Ratios (THB) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Revenue growth (%) 19.0 19.5 25.3 1.7 8.3

Operating profit growth (%) 24.6 29.7 30.2 6.3 7.3

Net profit growth (%) 88.4 7.2 28.1 5.7 8.3

EPS growth (%) 88.1 7.1 28.0 (11.6) 8.3

Bv per share growth (%) 20.3 15.9 63.9 (1.6) 10.2





Net debt to equity (%) 10.6 40.0 13.8 7.2 2.5

DPS 5.04 5.41 6.92 6.12 6.63

Recurrent cash flow per share 26.2 24.4 29.2 25.4 27.9




SWOT Analysis

The Government’s arm in the exploration and production business

Stable management team

Changes in the landscape of the oil & gas industry can have huge implications on the company’s investments in alternative energy

Countries where it is invested in can implement changes in rules and regulations, which can adversely affect ROI

Growth is in the global arena, where the company is open to investment opportunities in conventional and alternative energy

A relatively small company (compared to the global players) with high ambitions

-60%

-28%

4%

36%

68%

100%

0

5

10

15

20

25

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14



0%

3%

7%

10%

13%

17%

20%

23%

27%

30%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/BV (x) vs ROAE



Company Profile PTT Exploration & Production (PTTEP) is the Thai Government’s arm involved in the exploration and production of oil & gas. Many of the company’s projects are in the production, development and exploration phases. While most of its assets are in Asia, it has also diversified into Australia, Canada and Africa.




72

92

112

132

152

172

192

212


Price Close

NR 71

157

158

159

162

162

Recommendations & Target Price




2013-10-11 Neutral 162 170

2013-10-03 Neutral 162 170

2013-08-01 Neutral 159 159

2013-05-20 Neutral 158 164

2012-11-02 Neutral 157 169

2012-08-06 Sell 71 152

Source : RHB estimates, Bloomberg


Platform 1

Company Update, 30 October 2013

Sino Thai Engineering & Construction PCL (STEC

TB) Buy (from Trading Buy)

Industrial - Engineering & Construction Target Price: THB32.0

Market Cap: USD1,188m Price: THB24.2

Upgrade To BUY On Strong Performance

Macro

2.00

Risks

2.00

Growth

2.00

Value

3.00

Source: Bloomberg


Cons. Upside (%) 13.6

Upside (%) 32.2

52-wk Price low/high (THB) 16.3 - 32.3

Free float (%) 69

Shareholders (%)

Charnvirakul family 24.0

NVDR 6.2

UBS AG Singapore 4.9

Shariah compliant

Kowit Pongwinyoo +662 862 9743 License No. 18348

[email protected]


We expect STEC’s orderbook to continue hitting record highs, supported by the Government’s THB2trn infrastructure fund, while its sales and earnings are poised to grow at an impressive annual average growth rate of 17-20% over the next two years. Our THB32 TP is premised on 5.9x P/BV, offering an upside of 33% from its current price. As such, we upgrade STEC from Trading Buy to BUY.

No impact from backing out of Red Line. Due to complications in co-

building the THB18bn Red Line rapid transit, Sino Thai Engineering & Construction (STEC) decided to let its partner, Unique Engineering and Construction (UNIQ, NR), develop the project alone. Nonetheless, as its orderbook continues to hit new highs - reaching THB63bn as of September - we do not see the company’s not being involved in the Red Line project as having any negative impact on its performance.

Strong orderbook. STEC’s THB63bn orderbook is considered as

healthy, as it accounts for 3.2 years of the company’s annual turnover or 0.6x of its market cap to orderbook. As many projects will be up for bids under the annual budget and the THB2trn infrastructure bill, we expect STEC’s orderbook to continue to hit record highs.

Impressive earnings growth. As the Government’s THB2trn

infrastructure bill has been delayed until next year, we revise down our 2013 and 2014 sales and earnings forecasts by 9-15%. Despite that, our numbers still imply sales growth of 12% and 17% for 2013 and 2014 respectively. Meanwhile, its 2013 and 2014 earnings outlook remains strong, growing at 23% and 17% respectively.

Upgrade to BUY, with THB32 TP. Despite decreasing our earnings

forecasts, we still expect STEC’s performance to be impressive, supported by its record-high orderbook, strong financials and net cash. We view STEC as a solid construction play and upgrade the stock to a BUY, at 5.9x P/BV which is +2SD above its average 10-year mean. This was also the company’s multiple back in 2004, when its orderbook rose substantially and hit a record high the following year. Based on this valuation, our 2014 TP is THB32, offering a 33% upside.

83

93

103

113

123

133

143

153

163

173

183

14

16

18

20

22

24

26

28

30

32

34

Sino Thai Engineering & Construction Plc (STEC TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

10

20

30

40

50

60

Oct-

12

De

c-1

2

Fe

b-1

3

Ma

y-1

3

Jul-1

3

Se

p-1

3

Vo

l m

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F


Reported net profit (THBm) 444 904 1,165 1,430 1,680

Recurring net profit (THBm) 444 904 1,165 1,430 1,680

Recurring net profit growth (%) 74.8 103.6 28.9 22.7 17.5

Core EPS (THB) 0.37 0.76 0.98 1.05 1.10

DPS (THB) 0.22 0.55 0.49 0.47 0.55

Dividend Yield (%) 0.9 2.3 2.0 1.9 2.3

Core P/E (x) 64.7 31.8 24.6 22.9 22.0


P/B (x) 6.41 5.09 4.84 5.19 4.57

P/CF (x) na na 7.4 42.5 53.4

EV/EBITDA (x) 32.2 12.6 7.9 8.3 8.1

Net debt to equity (%) net cash net cash net cash net cash net cash

Our vs consensus EPS (%) 7.6 (4.2)

Sino Thai Engineering & Construction PCL (STEC TB)

30 October 2013


No impact from withdrawing from Red Line project. In 3Q13, STEC decided to let

its joint venture partner UNIQ work on the first contract of the Red Line rapid transit project (worth THB18bn) alone. This was due to complications arising from having two contractors work on the same job. As STEC was only responsible for the technical works valued at THB500m, this will have no impact on its financial performance as it had a huge orderbook of THB54bn at the time of transferring the project to UNIQ. Since the spare resources could be used for other jobs, its estimated sales and earnings will not be affected. STEC’s management also believes it can garner new contracts that can offer better margins than the public mass transit project, such as building private power plants.

Healthy orderbook continues to hit record highs. Even after transferring out of the

THB18bn Red Line project in 3Q13, STEC was able to secure other three new jobs worth a combined THB12bn. Among these is a THB4bn private power plant project called the Kanom Power Plant, which definitely offers a higher yield compared to the Red Line job. As at end-Sept, its orderbook was in healthy shape, remaining at a record high of THB63bn and equivalent to 3.2 years of annual turnover or 0.6x of its market cap to orderbook. With the disbursement of the annual budget and the spending of THB2trn infrastructure bill next year, we expect a lot of major projects to be up for bids from now onwards and for the next few years. Thus, we expect STEC’s orderbook to continue reaching new highs for several years to come.

Downward revision to our forecasts. Due to political conflicts and legal

procedures, it is likely that projects related to the Government’s THB2trn infrastructure bill will be rolled out in 1H14 instead of 2013. As this will result in the delay of several major projects, which STEC should have won, we are paring the company’s 2013 and 2014 sales and earnings forecasts. We revise down its sales forecasts for 2013 and 2014 by 15% and 9% to THB22bn and THB26bn respectively, and trim its 2013 and 2014 earnings forecasts by 14% and 10% to THB1.4bn and THB1.7bn respectively.

Healthy earnings growth. Despite the downward revision, STEC’s performance

remains impressive, supported by its strong orderbook. We expect the company’s y-o-y sales to rise by 12% and 17% in 2013 and 2014 respectively. Meanwhile, its 2013-2014 earnings are expected to expand by 23% and 17% respectively on the back of its strong financials and net cash of almost THB8bn.

Expect good 3Q13 results. We expect STEC to deliver good 3Q13 results on the

back of its strong orderbook, and anticipate its sales for the quarter to tick up 1% to THB5.8bn. With good cost management and a better mix of higher-margin projects, we expect its gross and EBITDA margins to be 1-2% higher than the same period last year. This would lead to a 14% y-o-y increase in 3Q13 net profit to THB351m.

Upgrade to BUY, with THB32 TP. As we expect STEC’s orderbook to continue

reaching new heights, we decided to value the stock using P/BV to derive its TP. We assigned 5.9x P/BV, which is +2SD above its average 10-year mean. This was the multiple achieved back in 2004, when its orderbook rose substantially and hit a record high in the following years. Based on this valuation, our 2014 TP for STEC is THB32. As its sales and earnings are expected to grow impressively, supported by a healthy orderbook and strong financials, we upgrade the stock from Trading Buy to BUY. At the current price, it offers an upside of 33%.


30 October 2013


Figure 1: 3Q13 results forecasts

Consolidated 3Q13F y-o-y q-o-q 9M13F y-o-y

Year to 31 Dec (THBm) % chg % chg (THBm) % chg

Sales

5,840

1.1

25.8

15,989

10.8

Gross Profit

538

22.8

8.2

1,542

24.5

EBITDA

488

25.4

22.9

1,344

21.1

Pre-tax Profit

471

26.6

21.7

1,352

32.4

Tax

(108)

31.7

13.7

(288)

68.4

Net Profit

351

14.0

26.7

1,031

16.9

Net Profit (Ex EI)

351

14.0

26.7

1,031

16.9

EPS (THB)

0.23

(11.5)

27.8

0.67

4.7

Gross margin (%) 9.2%

1.6

(1.5) 9.6%

1.1

EBITDA margin (%) 8.4%

1.6

(0.2) 8.4%

0.7

Net margin (%) 6.0%

0.7

0.0 6.4%

0.3

Source: RHB estimates

Figure 2: Revisions to forecasts

2013F 2014F

(THBm) Old New %chg Old New %chg

Sales

26,296

22,266 -15%

28,652

26,147 -9%

Net profits

1,661

1,430 -14%

1,858

1,680 -10% Source: RHB estimates

Figure 3: Healthy orderbook

11

27 29

25

14 12

17 21

49

38

63

-

10

20

30

40

50

60

70

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sept 13

THB bn

Source: RHB estimates

Figure 4: STEC’s historical P/BV

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12

PBV

+2SD: 5.9x

+1SD: 4.3x

Mean: 2.8x

-1SD: 1.2x

-2SD: -0.3x

Oct-

Source: SETSMART


30 October 2013


Financial Exhibits



Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total turnover 9,291 14,854 19,872 22,266 26,147

Cost of sales (8,431) (13,622) (18,198) (20,151) (23,661)

Gross profit 860 1,232 1,674 2,115 2,487

Other operating costs (441) (482) (561) (630) (706)

Operating profit 419 750 1,113 1,485 1,781

Operating EBITDA 831 1,125 1,483 1,893 2,201

Depreciation of fixed assets (412) (375) (370) (408) (420)

Operating EBIT 419 750 1,113 1,485 1,781

Net income from investments (33) 23 27 (45) (47)

Other recurring income 71 169 296 395 415

Interest expense (11) (12) (18) (37) (37)

Pre-tax profit 446 930 1,418 1,798 2,111

Taxation (3) (23) (253) (369) (432)

Minority interests 1 (3) - - -

Profit after tax & minorities 444 904 1,165 1,430 1,680

Reported net profit 444 904 1,165 1,430 1,680

Recurring net profit 444 904 1,165 1,430 1,680

Cash flow (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Operating profit 419 750 1,113 1,485 1,781

Depreciation & amortisation 412 375 370 408 420

Change in working capital (1,179) (1,480) 2,360 (1,110) (1,457)

Operating cash flow (348) (355) 3,843 782 744

Interest paid (11) (12) (18) (37) (37)

Dividends received 71 169 296 395 415

Tax paid (3) (23) (253) (369) (432)

Cash flow from operations (291) (221) 3,868 772 691

Capex 80 (637) (148) (634) (295)

Cash flow from investing activities 80 (637) (148) (634) (295)

Dividends paid (154) (261) (652) (583) (715)

Proceeds from issue of shares - - - 339 -

Increase in debt (47) 62 115 280 2

Other financing cash flow 1,408 2,507 499 840 1,106

Cash flow from financing activities 1,207 2,308 (38) 877 393


Total cash generated 996 1,450 3,682 1,014 788

Implied cash at end of period 2,057 3,507 7,189 8,203 8,992


30 October 2013


Financial Exhibits



Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total cash and equivalents 2,057 3,507 7,189 8,203 8,992

Inventories 1,043 845 322 363 429

Accounts receivable 959 2,184 1,824 3,157 5,015



Total investments 108 2,276 2,162 2,277 2,399


Total other assets 185 36 49 51 54


Total assets 10,208 16,074 20,296 23,547 27,296

Short-term debt 77 115 192 480 481




Total long-term debt 91 115 153 145 146

Other liabilities 5 115 367 392 419

Total non-current liabilities 96 230 520 537 564


Share capital 1,186 1,186 1,186 1,525 1,525

Retained earnings reserve 753 2,351 2,646 3,494 4,459

Other reserves 2,542 2,097 2,097 2,097 2,097


Minority interests 97 203 182 182 182

Other equity 0 0 0 (0) 0

Total equity 4,579 5,838 6,112 7,298 8,263


Key Ratios (THB) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Revenue growth (%) (22.5) 59.9 33.8 12.0 17.4

Operating profit growth (%) 93.1 79.0 48.4 33.4 19.9

Net profit growth (%) 45.6 103.6 28.9 22.7 17.5

EPS growth (%) 45.6 103.6 28.9 7.4 4.4

Bv per share growth (%) 2.6 25.7 5.2 (6.7) 13.6





Net debt to equity (%) (41.3) (56.1) (112.0) (103.8) (101.2)

DPS 0.22 0.55 0.49 0.47 0.55

Recurrent cash flow per share (0.25) (0.19) 3.26 0.57 0.45


30 October 2013


SWOT Analysis

Healthy orderbook.

Strong and solid balance sheet with net cash position

Volatility in prices of construction materials

Delays in the implementation of Government-backed infrastructure projects

Massive infrastructure projects by the Government

A lot of power plants are needed

Contracts are long-term in nature

Labour intensive


Company Profile Sino-Thai Engineering is one of the leading engineers and contractors in Thailand, with over 40 years of experience in private and public projects. Its competitive advantage lies in its extensive experience in the construction of power and petrochemical plants.

0%

12%

24%

36%

48%

60%

72%

84%

96%

108%

120%

0

10

20

30

40

50

60

70

80

90

100

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14



0%

4%

7%

11%

14%

18%

21%

25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/BV (x) vs ROAE



30 October 2013




0

5

10

15

20

25

30

35


Price Close

NR

Recommendations & Target Price




2013-05-13 Trading Buy 33.0 27.5

2013-04-17 Trading Buy 30.8 27.5

2013-02-14 Trading Buy 36.6 26.3

2012-11-07 Buy 27.3 17.9

2012-08-09 Buy 16.5 12.1

8

RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or financial advice to independently evaluate the particular investments and strategies. RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 28 October 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the securities covered in this report, except for: a) - As of 28 October 2013, none of the analysts who covered the securities in this report has an interest in such securities, except for: a) - Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd. Hong Kong This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company.

9

Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 28 October 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 28 October 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

Kuala Lumpur Hong Kong Singapore

Malaysia Research Office

RHB Research Institute Sdn Bhd Level 11, Tower One, RHB Centre

Jalan Tun Razak Kuala Lumpur

Malaysia Tel : +(60) 3 9280 2185 Fax : +(60) 3 9284 8693

RHB OSK Securities Hong Kong Ltd.

(formerly known as OSK Securities Hong Kong Ltd.) 12th Floor

World-Wide House 19 Des Voeux Road Central, Hong Kong

Tel : +(852) 2525 1118 Fax : +(852) 2810 0908

DMG & Partners

Securities Pte. Ltd. 10 Collyer Quay

#09-08 Ocean Financial Centre Singapore 049315

Tel : +(65) 6533 1818 Fax : +(65) 6532 6211

Jakarta Shanghai Phnom Penh

PT RHB OSK Securities Indonesia

(formerly known as PT OSK Nusadana Securities Indonesia)

Plaza CIMB Niaga 14th Floor

Jl. Jend. Sudirman Kav.25 Jakarta Selatan 12920, Indonesia

Tel : +(6221) 2598 6888 Fax : +(6221) 2598 6777

RHB OSK (China) Investment Advisory Co. Ltd.

(formerly known as OSK (China) Investment Advisory Co. Ltd.)

Suite 4005, CITIC Square 1168 Nanjing West Road

Shanghai 20041 China

Tel : +(8621) 6288 9611 Fax : +(8621) 6288 9633

RHB OSK Indochina Securities Limited

(formerly known as OSK Indochina Securities Limited) No. 1-3, Street 271

Sangkat Toeuk Thla, Khan Sen Sok Phnom Penh

Cambodia Tel: +(855) 23 969 161 Fax: +(855) 23 969 171

Bangkok

RHB OSK Securities (Thailand) PCL

(formerly known as OSK Securities (Thailand) PCL) 10th Floor, Sathorn Square Office Tower

98, North Sathorn Road,Silom Bangrak, Bangkok 10500

Thailand Tel: +(66) 862 9999 Fax : +(66) 108 0999

Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2012

ADVANC BCP DRT IRPC NOBLE QH SC SYMC TOP AOT BECL EASTW KBANK PHOL RATCH SCB THAI TSTE ASIMAR BKI EGCO KK PS ROBINS SCC TIP TTA BAFS BMCL ERW KTB PSL RS SE-ED TIPCO

BANPU BTS GRAMMY LPN PTT SAMART SIM TISCO BAY CPN HEMRAJ MCOT PTTEP SAMTEL SIS TKT BBL CSL ICC NKI PTTGC SAT SNC TMB

2S BROOK DTAC HMPRO MACO OFM S&J SSSC THRE TSC ACAP BWG DTC HTC MAKRO OGC S&P STANLY TIC TSTH AF CENTEL ECL IFEC MBK OSIHI SABINA STEC TICON TTW AIT CFRESH EE INTUCH MBKET PAP SAMCO SUC TIW TUF AKR CGS EIC ITD MFC PDI SCCC SUSCO TK TVO AMATA CHOW ESSO IVL MFEC PE SCG SVI TLUXE UAC AP CIMBT FE JAS MINT PG SCSMG SYNTEC TMT UMI ASK CK FORTH KCE MODERN PHATRA*** SFP TASCO TNITY UP ASP CM GBX KGI MTI PJW SITHAI TCAP TNL UPOIC AYUD CPALL GC KSL NBC PM SMT TCP TOG UV BEC CPF GFPT L&E NCH PR SPALI TFD TPC VIBHA BFIT CSC GL LANNA NINE PRANDA SPCG TFI TRC VNT BH DCC GLOW LH NMG PRG SPI THANA TRT WACOAL BIGC DELTA GUNKUL LRH NSI PT SPPT THCOM TRU YUASA BJC DEMCO HANA LST OCC PYLON SSF THIP TRUE ZMICO *** PHATRA was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25, 2012.

AEONTS BGT CMO GENCO JTS LHBANK NC PTL SGP SWC TPAC UT AFC BLA CNS GFM JUBILE LHK NNCL Q-CON SIAM SYNEX TPCORP VARO AGE BNC CNT GLOBAL JUTHA LIVE NTV QLT SIMAT TBSP TPIPL WAVE AH BOL CPL GOLD KASET LOXLEY OSK QTC SINGER TCB TPP WG AHC BROCK CRANE HFT KBS MAJOR PAE RASA SIRI TEAM TR WIN AI BSBM CSP HTECH KC MATCH PATO RCL SKR TF TTCL WORK AJ BTNC CSR HYDRO KDH MATI PB RICH SMIT TGCI TWFP

ALUCON BUI CTW IFS KIAT MBAX PICO ROJNA SMK THANI TYCN AMANAH CCET DRACO IHL KKC M-CHAI PL RPC SOLAR TKS UBIS APCO CEN EASON ILINK KTC MDX POST SAM SPC TMD UEC APCS CHUO EMC INET KWC MJD PPM SCBLIF SPG TMI UIC APRINT CI EPCO IRC KWH MK PREB SCP SSC TNH UMS ARIP CIG FNS IRCP KYE MOONG PRECHA SEAFCO SST TNPC UOBKH AS CIMBI*** FOCUS IT LALIN MPIC PRIN SENA STA TOPP UPF ASIA CITY FSS JMART LEE MSC PSAAP SF SVOA TPA US

*** CIMBI was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25, 2012.

IOD (IOD Disclaimer)

การเปิดเผลผลการส ารวจของสมาคมส่งเสริมสถาบันกรรมการบรษิัทไทย (IOD) ในเรื่องการก ากับดูแลกิจการ (Corporate Governance) นี้เป็นการด าเนินการตามนโยบายของส านักงานคณะกรรมการก ากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการส ารวจของ IOD เป็นการส ารวจและประเมินจากข้อมูลของบรษัทจดทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลกัทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผูล้งทุนทั่วไปสามารถเข้าถงึได้ ดังนั้นผลส ารวจดังกล่าวจึงเป็นการน าเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน

อนึ่ง ผลการส ารวจดังกล่าว เป็นผลการส ารวจ ณ วนัที่ปรากฎในรายงานการก ากับดแูละกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการส ารวจจึงอาจเปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทัง้นี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จ ากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการส ารวจดงักล่าวแต่อย่างใด

Documents

Morning Matters · Col Settapong said the panel will then submit their solution to the committee for a final decision.In June, the NBTC granted a licence for Thaicom 7, which is expected