Notes from the Field Source: Bloombergtclcom.tcl.com/admin/documents/research/1381729650... · TCL Communication October 3, 2013 27% 3 Turned profitable in 2Q13, due to a higher proportion

Telco - Others│HONG KONG

October 3, 2013

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Becomes key smartphone player The new facility in Huizhou, Guangdong Province, is well prepared for higher growth in smartphone shipments and producing best-in-class and timely-to-market smartphones to grab market share in a very competitive market.

We raise our EPS by 3-8% for FY13-15 due to the upgrade in our shipment forecast on smartphones and feature phones. As a result, we increase our target price to HK$6.50, based on 2.8x CY14 P/BV, on par with its upcycle valuation of the three-year average (previously 10% discount). We reiterate our Outperform call, with robust smartphone shipments as the share price catalyst.

New manufacturing base The investment cost is about HK$1.0bn, with a total designed capacity of 120m units. Phase 1 of the new facility started production on 28 Sep 2013. We think it is a great property for in-house production, allowing control over the smartphone’s launch and product quality.

Wave of new models TCLC launched Hero (Phablet) and the first LTE smartphone, One Touch Idol S, at the IFA 2013 in Sep. We believe the wave of new models will support strong smartphone shipments throughout the year.

Feature phone remains

resilient TCLC is the third-largest feature phone manufacturer, with about 9m handsets shipped in 2Q13. Although it fell significantly behind Nokia (54m units) and Samsung (36m units), we still see a great opportunity as we expect TCLC to take market share from Nokia given Microsoft may scale down its feature phone exposure.

Higher shipment forecast We raise our smartphone shipment forecast to 16.7m (+156% yoy) in FY13 and 24m (+45% yoy) in FY14 on the back of strong smartphone shipments in 8M13 due to the warm response to its new generation smartphone launched in 1H13.

Undemanding valuation Aided by the strong smartphone shipments, rising ASPs and gross profit margin, we expect a strong earnings recovery in FY14 to HK$444m. It is equivalent to 15.6x FD CY14 P/E or 2.4 P/BV. We think it is not demanding as we believe the TCLC is well positioned in the mid-range smartphone segment in emerging markets

TCL Communication COMPANY NOTE 2618 HK / 2618.HK Current HK$5.69 SHORT TERM (3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target HK$6.50 US$838.9m US$1.95m 49.2% Prev. Target HK$4.74 HK$6,505m HK$15.93m 1,143 m shares Up/Downside 14.2%

Conviction| |

Sources: CIMB. COMPANY REPORTS

Notes from the Field

————————————————————————————————————————

Ray KWOK T (852) 2532 1113 E [email protected]

Bertram LAI T (852) 2532 1111 E [email protected]

Company Visit Expert Opinion

Channel Check Customer Views

————————————————————————————————————————

‘‘‘‘ We have a long-term goal of becoming a top-three handset brand in the world by 2017, leveraging on our new world-class production facility.

– Dr. George Guo, CEO

59

95

130

166

201

1.8

2.8

3.8

4.8

5.8

Price Close Relative to HSI (RHS)

Source: Bloomberg

10

20

30

40

Oct-12 Jan-13 Apr-13 Jul-13

Vol m

Financial Summary

Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Revenue (HK$m) 10,653 12,031 18,717 23,750 27,108

Operating EBITDA (HK$m) 1,296 610 1,156 1,730 2,089

Operating EBITDA Margin 12.2% 5.1% 6.2% 7.3% 7.7%

Net Profit (HK$m) 799.9 (207.8) 86.7 444.3 651.1

Normalised EPS (HK$) 0.73 -0.23 0.08 0.39 0.57

Normalised EPS Growth 13% (132%) na 412% 47%

FD Normalised P/E (x) 8.08 NA 80.01 15.61 10.65

DPS (HK$) 0.29 0.03 0.00 0.12 0.23

Dividend Yield 5.06% 0.53% 0.00% 2.05% 4.00%

EV/EBITDA (x) 4.78 11.86 6.38 3.87 2.68

P/FCFE (x) NA NA 33.58 7.42 4.77

Net Gearing (2.1%) 36.4% 35.9% 7.3% (28.5%)

ROE 32.7% (10.6%) 3.6% 17.4% 22.2%

% Change In Normalised EPS Estimates 3.67% 8.35% 2.63%

Normalised EPS/consensus EPS (x) 0.81 1.07 0.76

5.69

6.50

2.18 5.69

Target

52-week share price range

Current

SOURCE: CIMB, COMPANY REPORTS

TCL Communication

October 3, 2013

2

PEER COMPARISON

Research Coverage

Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside

TCL Communication 2618 HK HK OUTPERFORM 839 5.69 6.50 14.2%

Lenovo Group 992 HK HK OUTPERFORM 10,921 8.15 9.50 16.6%

China Wireless Technologies 2369 HK HK OUTPERFORM 862 3.17 3.92 23.7%

0

1

2

3

4

5

6

7

8

9

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling P/BV (x)

TCL Communication Lenovo Group China Wireless Technologies

0

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15

20

25

30

35

40

45

50

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling FD P/E (x)

TCL Communication Lenovo Group China Wireless Technologies

-15%

-11%

-6%

-2%

3%

8%

12%

17%

21%

26%

30%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Peer Aggregate: P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs)

-500%

-50%

400%

850%

1,300%

1,750%

2,200%

2,650%

3,100%

3,550%

4,000%

0

5

10

15

20

25

30

35

40

45

50


Peer Aggregate: FD P/E vs FD EPS Growth

FD P/E (x) (See Footnote) (lhs) FD EPS Growth (See Footnote) (rhs)

Valuation

FD P/E (x) (See Footnote) P/BV (x) EV/EBITDA (x)

Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14

TCL Communication NA 80.01 15.61 2.77 2.67 2.43 11.86 6.38 3.87

Lenovo Group 15.80 14.17 13.01 4.19 3.51 2.93 7.93 7.44 7.52

China Wireless Technologies 22.19 15.15 11.95 2.76 2.43 2.10 10.11 7.58 5.51

Growth and Returns

FD EPS Growth (See Footnote) ROE (See Footnote) Dividend Yield

Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14

TCL Communication -132.6% na 412.5% -10.6% 3.6% 17.4% 0.53% 0.00% 2.05%

Lenovo Group 36.4% 11.5% 8.9% 28.5% 27.0% 24.6% 1.00% 1.61% 2.10%

China Wireless Technologies 53.1% 46.5% 26.8% 13.4% 17.4% 19.2% 0.95% 1.34% 1.70%


Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

TCL Communication

October 3, 2013

3

Turned profitable in 2Q13,

due to a higher proportion of

smartphone shipments.

We expect dividends to

resume in FY14 as it turns

profitable.

Share price info

Share px perf. (%) 1M 3M 12M

Relative 18.4 42.4 100.4

Absolute 22.1 57.6 111.5

Major shareholders % held

TCL Corporation 50.8

-20%

-12%

-4%

3%

11%

19%

27%

34%

42%

50%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5


P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs)

-5,000%

0%

5,000%

10,000%

15,000%

20,000%

25,000%

0

100

200

300

400

500

600


FD Normalised P/E vs FD Normalised EPS Growth

Rolling FD Normalised P/E (x) (lhs)

Diluted Normalised EPS Growth (rhs)

Profit & Loss

(HK$m) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Total Net Revenues 10,653 12,031 18,717 23,750 27,108

Gross Profit 2,328 2,097 3,381 4,426 5,119

Operating EBITDA 1,296 610 1,156 1,730 2,089

Depreciation And Amortisation -566 -900 -1,070 -1,225 -1,362

Operating EBIT 729 -290 86 505 727

Total Financial Income/(Expense) 55 47 29 47 89

Total Pretax Income/(Loss) from Assoc. -1 -2 3 8 8

Total Non-Operating Income/(Expense) 0 0 0 0 0

Profit Before Tax (pre-EI) 783 -245 118 560 824

Exceptional Items 0 56 0 0 0

Pre-tax Profit 783 -188 118 560 824

Taxation 17 -32 -30 -112 -165

Exceptional Income - post-tax

Profit After Tax 801 -220 89 448 659

Minority Interests -1 12 -2 -4 -8

Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Preference Dividends (Australia)

Net Profit 800 -208 87 444 651

Normalised Net Profit 801 -276 89 448 659

Fully Diluted Normalised Profit 800 -264 87 444 651

Cash Flow


EBITDA 1,296 610 1,156 1,730 2,089

Cash Flow from Invt. & Assoc. 1 2 -3 -8 -8

Change In Working Capital -722 -102 -784 -616 -410

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow -146 110 188 193 158

Net Interest (Paid)/Received -140 -166 -123 -123 -88

Tax Paid -36 -52 -30 -112 -165

Cashflow From Operations 253 402 404 1,064 1,577

Capex -399 -246 -350 -300 -300

Disposals Of FAs/subsidiaries 51 30 0 0 0

Acq. Of Subsidiaries/investments -876 -1,042 0 0 0

Other Investing Cashflow 136 206 152 170 176

Cash Flow From Investing -1,087 -1,053 -198 -130 -124

Debt Raised/(repaid) 735 -1,302 0 0 0

Proceeds From Issue Of Shares 44 26 0 0 0

Shares Repurchased 0 0 0 0 0

Dividends Paid -336 -202 0 -133 -260

Preferred Dividends

Other Financing Cashflow 75 71 256 107 409

Cash Flow From Financing 518 -1,407 256 -26 149

Total Cash Generated -316 -2,058 462 909 1,602

Free Cashflow To Equity -99 -1,953 206 935 1,453

Free Cashflow To Firm -694 -485 329 1,058 1,541

BY THE NUMBERS


TCL Communication

October 3, 2013

4

Net gearing is at about 39%

in FY13.

Balance Sheet


Total Cash And Equivalents 7,279 5,191 3,505 4,334 5,589

Total Debtors 3,819 4,560 7,095 9,002 10,275

Inventories 981 1,263 1,950 2,457 2,796

Total Other Current Assets 175 198 175 175 175

Total Current Assets 12,254 11,212 12,725 15,968 18,835

Fixed Assets 683 774 954 1,050 1,124

Total Investments 29 30 30 30 30

Intangible Assets 956 1,174 1,174 1,174 1,174

Total Other Non-Current Assets 106 131 131 131 131

Total Non-current Assets 1,773 2,109 2,289 2,384 2,459

Short-term Debt 7,222 5,726 3,980 4,130 4,280

Current Portion of Long-Term Debt

Total Creditors 3,693 4,481 6,918 8,717 9,919

Other Current Liabilities 400 398 1,191 2,339 3,421

Total Current Liabilities 11,315 10,606 12,089 15,185 17,620

Total Long-term Debt 0 310 400 400 400

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 4 6 9 11 13

Total Non-current Liabilities 4 316 409 411 413

Total Provisions 35 77 77 77 77

Total Liabilities 11,354 10,998 12,574 15,673 18,110

Shareholders' Equity 2,669 2,321 2,438 2,678 3,183

Minority Interests 4 2 2 2 2

Total Equity 2,673 2,323 2,439 2,679 3,184

BY THE NUMBERS

Key Ratios


Revenue Growth 22.4% 12.9% 55.6% 26.9% 14.1%

Operating EBITDA Growth 44.9% (52.9%) 89.5% 49.6% 20.7%

Operating EBITDA Margin 12.2% 5.1% 6.2% 7.3% 7.7%

Net Cash Per Share (HK$) 0.05 -0.75 -0.77 -0.17 0.79

BVPS (HK$) 2.40 2.06 2.13 2.34 2.78

Gross Interest Cover 5.21 -1.75 0.70 4.11 8.30

Effective Tax Rate 0.0% 0.0% 25.0% 20.0% 20.0%

Net Dividend Payout Ratio 40.1% (12.8%) 0.0% 30.0% 40.0%

Accounts Receivables Days 87.71 82.55 70.83 77.10 80.89

Inventory Days 38.61 41.34 38.23 41.62 43.59

Accounts Payables Days 83.21 80.70 73.52 80.02 83.82

ROIC (%) 47.4% (8.3%) 2.0% 11.2% 18.6%

ROCE (%) 9.9% (0.8%) 3.1% 9.5% 11.9%


TCL Communication

October 3, 2013

5

Becomes key smartphone player 1. BACKGROUND

1.1 On the right track to recovery

We believe TCLC became a key smartphone player after it successfully shifted its product portfolio from feature phones to smartphones. We stick to our positive view on TCLC as we believe the group is the key beneficiary of strong, mid-range smartphone demand globally, especially in emerging markets, thanks to its strong brand names (Alcatel and TCL) and well-established global distribution network.

We forecast TCLC will turn profitable in 2H13 with a net profit of HK$294m, from a loss of HK$207m in 1H13, due to the ramp-up of smartphone shipments and improved gross profit margin. We expect a strong earnings recovery in FY14 to HK$444m and revenue to grow 27% yoy to HK$24bn, driven by robust smartphone shipments, rising ASPs and gross profit margin.

Figure 1: Snapshot of consolidated income statement (quarterly)

FYE Dec (HK$m) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

Revenue 2,124 2,476 2,862 3,191 2,105 2,988 3,053 3,885 2,449 3,958

yoy% 44% 25% 33% 3% -1% 21% 7% 22% 16% 32%

Operating profit 171 202 196 161 (46) 91 (106) (230) (247) 9

Profit before taxation 183 193 224 183 30 82 (81) (220) (241) 14

Net profit 180 189 215 216 26 79 (87) (226) (246) 39

Recurring net profit 180 188 206 225 (37) 99 (100) (225) (246) 39

Ratio analysis (%)

Gross margin 22.3% 21.9% 20.9% 22.5% 19.9% 18.9% 16.7% 15.6% 16.4% 18.4%

Operating margin 8.0% 8.1% 6.8% 5.0% -2.2% 3.0% -3.5% -5.9% -10.1% 0.2%

Net profit margin 8.5% 7.6% 7.5% 6.8% 1.2% 2.7% -2.9% -5.8% -10.1% 1.0%

Recurring net profit margin 8.5% 7.6% 7.2% 7.1% -1.8% 3.3% -3.3% -5.8% -10.1% 1.0%

R&D to revenue ratio 4.2% 4.2% 3.0% 5.6% 6.6% 3.6% 5.9% 8.0% 9.1% 5.3%

SG&A cost to sales 17.6% 18.7% 14.6% 20.6% 25.4% 17.4% 22.4% 23.7% 28.8% 21.2% SOURCES: CIMB, COMPANY REPORTS

1.2 Raise our shipment forecast

We have become more bullish on our shipment forecast due to strong smartphone shipments in 8M13, based on the warm response to TCLC’s new generation smartphone launch in 1H13, and less bearish on the outlook of the feature phone shipment due to the buyout of Nokia. We believe there will be a continuous, strong smartphone shipment of close to 2m units in Sep (will be released next week) and sustained strong smartphone shipments throughout the year with around 7m units in 4Q13.

We now forecast its smartphone shipment to reach 16.7m (+156% yoy) in FY13, 24m (+45% yoy) in FY14 and 30m (+23% yoy) in FY15, driven by the Americas and China markets. We expect a moderate decline in unit shipments in the feature phone segment, given it faces cannibalisation by entry-level smartphones. We now forecast new feature phone shipments at 33m (-8% yoy) in FY13, 30m (-10% yoy) in FY14 and 25m (-16% yoy) in FY15 (Figure 2).

Table of Contents

1. BACKGROUND p.5

2. OUTLOOK p.7

3. FINANCIALS p.12

4. VALUATION AND RECOMMENDATION p.14

TCL Communication

October 3, 2013

6

Figure 2: Change in shipment assumption

FYE Dec Dec-13F Dec-14F Dec-15F Dec-13F Dec-14F Dec-15F Dec-13F Dec-14F Dec-15F

Total unit (million) 49.9 54.1 54.9 43.5 46.8 50.6 6.4 7.3 4.2

Smartphone 16.7 24.2 29.8 13.4 20.8 28.5 3.3 3.4 1.3

Feature phone 33.2 29.9 25.1 30.1 26.0 22.2 3.1 3.9 2.9

Blended ASP (US$) 48 56 63 48 58 64 1% -3% -1%

Smartphone 100 100 100 107 105 100 -7% -5% 0%

Feature phone 22 21 20 22 21 19 1% 1% 6%

Revenue (HK$m) 18,717 23,750 27,108 16,317 21,224 25,430 14.7% 11.9% 6.6%

Smartphone 13,020 18,879 23,221 11,184 17,011 22,195 16.4% 11.0% 4.6%

Feature phone 5,697 4,871 3,887 5,134 4,214 3,236 11.0% 15.6% 20.1%

Proportion of smartphone

to total unit shipments 33% 45% 54% 31% 44% 56% 2.6 ppt 0.3 ppt -1.9 ppt

to total revenue 70% 79% 86% 69% 80% 87% 1.0 ppt -0.7 ppt -1.6 ppt

Net profit (HK$m) 87 444 651 83 405 626 5.0% 9.8% 4.0%

New forecast Old forecast Forecast change

SOURCES: CIMB, COMPANY REPORTS

Figure 3: Unit shipment forecast breakdown by phone type (FY11 - FY15)

Figure 4: Revenue forecast breakdown by phone type (FY11 - FY15)

Title:

Source:

Please fill in the values above to have them entered in your report

1.4

6.5

16.7

24.2

29.8

42.2 36.1

33.2

29.9 25.1

0%

10%

20%

30%

40%

50%

60%

0

10

20

30

40

50

60


Unit

ship

ment (m

illio

n)

Smartphone Feature phone Proportion of smartphone (%) - RHS

Title:

Source:


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40%

50%

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70%

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100%

0

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30,000


HK

$ (

millio

n)

Feature phone Smartphone Contribution from smartphone products - RHS

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

Figure 5: Monthly unit shipments

YTD Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12

Total (unit shipments in million) 30.57 4.93 5.01 4.06 4.20 3.89 2.94 1.91 3.63 4.13 5.02 4.30 3.97 3.63 2.95 4.33 3.52

Smartphone 7.88 1.77 1.41 1.32 1.11 0.82 0.51 0.35 0.59 0.64 0.93 0.76 0.77 0.64 0.57 0.58 0.51

Feature phone 22.69 3.16 3.60 2.74 3.09 3.07 2.44 1.56 3.04 3.49 4.08 3.53 3.20 2.99 2.38 3.74 3.02

Smartphone to total unit shipments 25.8% 35.9% 28.1% 32.5% 26.4% 21.1% 17.2% 18.6% 16.3% 15.5% 18.6% 17.8% 19.3% 17.7% 19.3% 13.5% 14.4%

Total (yoy%) 21.3% 35.7% 69.6% -6.2% 19.3% 33.3% -14.7% -20.2% 81.3% -7.7% 8.2% 6.0% 4.7% 0.9% -18.3% 14.3% -1.5%

Smartphone 131% 175% 147% 126% 119% 123% 52% 30% 322% 134% 284% 274% 287% 348% 295% 495% 1791%

Feature phone 4.2% 5.7% 51.0% -26.9% 2.6% 20.3% -21.9% -26.7% 63.2% -16.9% -7.1% -8.2% -10.9% -13.6% -31.3% 1.5% -15.0%

Total (unit shipments by geographical area in million)

Overseas 27.32 4.49 4.66 3.56 3.75 3.46 2.55 1.77 3.09 3.58 4.54 3.97 3.36 3.12 2.48 3.75 2.95

China 3.25 0.44 0.35 0.50 0.46 0.43 0.39 0.14 0.54 0.55 0.48 0.32 0.61 0.52 0.47 0.58 0.58

Total (yoy%)

Overseas 27.8% 44.1% 87.9% -5.1% 27.2% 37.4% -9.7% -5.3% 64.4% 7.9% 14.2% 6.1% 2.5% -5.8% -20.6% 14.4% -8.3%

China -15.0% -15.1% -26.5% -13.6% -20.7% 7.8% -37.4% -72.9% 342.8% -52.4% -28.0% 4.9% 18.8% 76.5% -3.6% 14.0% 58.0% SOURCES: CIMB, COMPANY REPORTS

TCL Communication

October 3, 2013

7

2. OUTLOOK

2.1 New production facilities

In order to improve its production efficiency and capture the rapid growth in global smartphone demand, the group is building new facility (120,ooo sqm) in Huizhou, Guangdong Province. Upon completion of its three phases, the plant’s design capacity is expected to double from the current 60m units to 120m units. Total investment cost will be roughly HK$1.0bn. The first phase had commenced production on 28 Sep 13. The second phase is expected to start operations in the second half of 2014.

The new manufacturing base will become the largest single-location mobile-handset factory in China, with its production capacity (30 high-speed SMT production lines), technology, automation & product quality and other aspects expected to reach world-class standards.

We think it is a great property for in-house production, which guarantees its control over a timely smartphone launch and product quality.

Figure 6: Bird’s-eye view of new production plant in Huizhou, China

Figure 7: World-class facilities Figure 8: State-of-the-art manufacturing environment

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

2.2 Next wave of new models in 2H13

In 2013, TCLC plans to launch around 40 new smartphone models, a number which is significantly lower than its 80 or so models last year. The group has also increased its portion of mid-range smartphones with ASPs of above US$200.

In the first half of 2013, TCLC introduced One Touch Idol Ultra (the world’s slimmest smartphone) and One Touch Idol, both to warm response from end-users, especially in EMEA.

It has many more new models planned for launch in 2H13. In Jun, TCLC exclusively launched its new flagship smartphone TCL Idol X on JD.com in China (Figure 9). Thanks to its high performance but competitive price (around US$300 / Rmb1,699), the phone has been selling very well with overseas shipments started in Jul.

Its new models launched at IFA 2013 on 9 Sep included Hero (Phablet), three models of the IDOL series and four models of the POP series, which combine simplicity and style, and project a youthful and playful image.

One Touch Idol S (Figure 10) is the first LTE smartphone produced by TCLC. It will be a mid-range smartphone equipped with a 4.7” HD IPS display and dual core 1.2GHz processor. It sports a slim 7.4mm thin body and an 8m pixel camera.

TCL Communication

October 3, 2013

8

Figure 9: OneTouch Idol X

Retail price : ~US$300

Quad core 1.5GHz, Dual SIM

5” Full HD display

13m pixels camera

Ultra compact body – 6.9mm thin

Figure 10: One Touch Idol S

Retail price : ~US$250

Dual core 1.4 GHz

4.7” HD IPS display

8m pixels camera

Slim body design – 7.45mm thin

SOURCES: CIMB, COMPANY REPORTS SOURCES: phonescoop.com, CIMB, COMPANY REPORTS

Hero, which competes with Samsung’s Galaxy Note 3, is a phablet with a 6” full HD display, quad core 1.5GHz processor and 3400mAh battery. It is able to function as a projector and media hub by sharing a screen with a personal computer (Figure 11, 12). It also makes use of a novel e-ink cover which can be used for reading books.

Figure 11: Hero, with a retail price of around US$400

Figure 12: Hero (e-Ink cover)

SOURCES: CIMB, COMPANY REPORTS SOURCES: phonescoop.com, CIMB, COMPANY REPORTS

TCL Communication

October 3, 2013

9

2.3 Feature phones remain resilient, although demand is declining

Although overall feature-phone shipments have been sliding due to their replacement by entry-level smartphones, we still see a great opportunity in feature phones for TCLC, thanks to Nokia’s acquisition by Microsoft in Sep.

According to Gartner, TCLC was the third-largest feature-phone manufacturer in 2Q13 by volume shipment, although it fell significantly behind Nokia and Samsung. Nokia’s feature-phone shipments were still 6x the size of TCLC’s with 54m units in 2Q13, although Nokia has not been very successful in smartphones which are based on the Windows operating system. More importantly, Nokia’s feature-phone shipments and market share had dropped from 32% in 4Q12 to 25.5% in 2Q13, while Samsung and TCLC maintained their shares at around 17% and 4% respectively (Figure 14).

TCLC’s feature-phone shipments grew 4.2% yoy to 22.7m in 8M13, driven by emerging markets such as Latin America and Africa. We think the number is outstanding, given the global trend reversal for feature phones during the same period.

Figure 13: Global handset shipments in 2Q13

Brand Rank

Est market

share

QoQ

change

Est

shipment

(m) Rank

Est market

share

Est

shipment

(m) Rank

Est market

share

Est

shipment

(m)

Samsung 1 24.7% 1.1 ppt 107.5 1 23.6% 100.7 1 22.7% 107.0

Nokia 2 14.0% -0.8 ppt 61.0 2 14.8% 63.2 2 18.0% 85.1

Apple 3 7.3% -1.7 ppt 31.9 3 9.0% 38.3 3 9.2% 43.5

LG Electronics 4 3.9% 0.2 ppt 17.0 4 3.7% 15.6 5 3.2% 15.0

ZTE 5 3.5% 0.1 ppt 15.3 5 3.4% 14.6 4 3.4% 16.2

Huawei 6 2.6% 0.0 ppt 11.3 6 2.6% 11.1 6 2.9% 13.7

Lenovo 7 2.5% 0.7 ppt 11.0 9 1.8% 7.8 8 1.8% 8.3

TCL-Alcatel 8 2.3% 0.3 ppt 10.1 7 2.0% 8.5 7 2.4% 11.1

Sony 9 2.2% 0.3 ppt 9.5 8 1.9% 8.0 9 1.7% 7.9

Coolpad 10 1.8% 0.1 ppt 7.9 10 1.8% 7.5 n.a. n.a. n.a.

Others 35.1% n.a. 152.7 35.4% 150.6 33.2% 156.6

Total 435.2 425.8 472.1

2Q 2013 1Q 2013 4Q 2012

SOURCES: Gartner, CIMB

Figure 14: Global feature-phone shipments in 2Q13

Brand Rank

Est market

share

QoQ

change

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shipment

(m) Rank

Est market

share

Est

shipment

(m) Rank

Est market

share

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shipment

(m)

Nokia 1 25.5% -0.9 ppt 53.6 1 26.5% 57.1 1 32.1% 78.5

Samsung 2 17.2% 0.6 ppt 36.1 2 16.6% 35.9 2 16.7% 40.9

TCL-Alcatel 3 4.2% 1.0 ppt 8.9 3 3.3% 7.0 3 4.5% 11.1

ZTE 4 2.7% -0.5 ppt 5.6 4 3.1% 6.7 4 2.5% 6.2

others 50.3% -0.2 ppt 105.6 50.5% 109.0 44.0% 107.6

Total 209.8 215.8 244.3

2Q 2013 1Q 2013 4Q 2012

SOURCES: Gartner, CIMB

As we believe there will still be strong demand for feature phones in some emerging markets such as Africa and Latin America, we forecast decent profits for TCLC’s feature-phone segment for the next three years. Moreover, we expect TCLC to take market share from Nokia in the next 24 months as Microsoft may scale down its feature-phone exposure. Although we expect TCLC’s feature-phone shipments to decrease from 36m units in FY12 to 33m in FY13 (-8% yoy) and further to 30m in FY14 and 25m in FY15, we expect still-decent EBIT margins for its feature phones due to the phones’ low R&D costs and less competition (Figure 15,16).

TCL Communication

October 3, 2013

10

Figure 15: Estimated shipments of feature phones Figure 16: Estimated EBIT for feature phones

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2.4 Riding on global distribution network

TCLC’s handsets are sold in more 160 countries in diverse regions through key operators and distributors. We believe TCLC leads China’s domestic handset vendors in breaking into overseas markets, since it is not easy to establish a global network with sales offices, offering logistics, marketing and after-sales services.

In 1H13, more than half of its smartphones were shipped to EMEA, especially Russia (connected with its three key operators) while America, especially Brazil and Mexico, was its second-largest market contributing 24% to its smartphone sales. TCLC believes it will have more-balanced geographical sales in the next three years as it sees huge potential in the Americas and China by enhancing its supply-chain management and establishing more solid operator channels.

Figure 17: Geographical breakdown of feature-phone revenue (1H13)

Figure 18: Geographical breakdown of smartphone revenue (1H13)

Title:

Source:

Please fill in the values above to have them entered in your reportEMEA, 35%

Americas, 53%

China, 6%

APAC, 6%

Title:

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EMEA, 51%

Americas, 24%

China, 11%

APAC, 14%


TCL Communication

October 3, 2013

11

Figure 19: Global presence

SOURCES: COMPANY REPORTS, CIMB

Figure 20: Connected with global mainstream operators and distributors

SOURCES: COMPANY REPORTS, CIMB

TCL Communication

October 3, 2013

12

3. FINANCIALS

3.1 Rising blended ASPs

ASPs had climbed gradually from US$30 in 2Q11 to a record US$42 in 2H13, thanks to its migration from feature phones to smartphones as smartphone ASPs are normally about 4x those of feature phones. We expect blended ASPs to reach US$54 in 2H13, given growing smartphone shipments. Supported by increasing smartphone contributions along with a higher portion of mid-end products, we forecast that its blended ASP will hit US$56 in FY14 and US$63 in FY15 (Figure 23).

Figure 21: Estimated ASPs for smartphones and feature phones

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3.2 Improving gross profit margins

TCLC enjoyed about a 22% gross profit margin in FY11 with the help of its premium brand in the feature-phone segment. However, its gross margin touched a bottom of 15.6% in 4Q12 from a lack of economies of scale in smartphones and a significant drop in feature-phone margins. Gross margins turned north again in 1Q13 after it ramped up smartphone shipments. We believe the momentum will continue given our expectation of stronger smartphone shipments in 2H13, led by a new wave of mid-range smartphones. We forecast gross margins of 18.6% for FY14 and 18.9% for FY15 (Figure 24).

Figure 22: Estimated smartphone and feature-phone ASPs vs. gross margins

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TCL Communication

October 3, 2013

13

Figure 23: Revenue projections

FYE Dec Dec-10A Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Unit shipment by phone type (million)

Smartphone 0.1 1.4 6.5 16.7 24.2 29.8

Feature phone 36.2 42.2 36.1 33.2 29.9 25.1

Total 36.2 43.6 42.6 49.9 54.1 54.9

Unit shipment by phone type (yoy %)

Smartphone n.a. 2189.2% 374.6% 156.0% 45.0% 23.0%

Feature phone n.a. 16.8% -14.6% -8.0% -10.0% -16.0%

Total 124.7% 20.4% -2.3% 17.1% 8.4% 1.5%

Blend ASP (US$) 30.8 31.3 36.2 48.1 56.3 63.3

YoY (%) -11.2% 1.7% 15.6% 32.9% 17.1% 12.5%

Revneue (HK$m) 8,701 10,653 12,031 18,717 23,750 27,108

YoY (%) 99.5% 22.4% 12.9% 55.6% 26.9% 14.1% SOURCES: CIMB, COMPANY REPORTS

Figure 24: Consolidated Income Statement

FYE Dec (HK$m) Dec-10A Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Revenue 8,700.7 10,653.0 12,031.2 18,717.0 23,749.8 27,107.9

Cost of sales (6,752.3) (8,324.8) (9,934.6) (15,335.9) (19,323.8) (21,988.7)

Gross profit 1,948.4 2,328.2 2,096.6 3,381.0 4,426.0 5,119.2

Other income 193.6 312.7 273.3 325.5 364.6 392.6

R&D (357.2) (459.2) (739.7) (900.0) (1,021.0) (1,136.5)

Selling and marketing expenses (619.6) (866.3) (1,153.7) (1,781.9) (2,213.1) (2,494.8)

Administrative expenses (436.3) (558.1) (657.5) (840.2) (953.2) (1,020.6)

Other operating expenses (5.3) (28.1) (109.3) (98.4) (98.4) (132.8)

Operating profit 723.5 729.3 (290.2) 86.0 504.9 727.2

Net finance cost 19.7 55.5 47.4 29.2 47.4 88.7

Shares of associate co. (0.3) (1.4) (1.8) 3.0 8.0 8.0

Extraordinary items 1.9 0.0 56.1 0.0 0.0 0.0

Profit before taxation 744.9 783.3 (188.5) 118.2 560.4 823.9

Taxation (43.1) 17.3 (31.6) (29.6) (112.1) (164.8)

Minority interests 0.1 (0.7) 12.2 (2.0) (4.0) (8.0)

Net profit 701.9 799.9 (207.8) 86.7 444.3 651.1

Recurring net profit 700.0 799.9 (264.0) 86.7 444.3 651.1

Growth (yoy%)

Revenue 99.5% 22% 13% 56% 27% 14%

Gross profit 105.4% 14% -126% -142% 413% 47%

Operating profit 1203.2% 1% -140% -130% 487% 44%

Net profit 2951.0% 14% -126% -142% 413% 47%

Recurring net profit 1517.8% 14% -133% -133% 413% 47%

Ratio analysis (%)

Gross margin 22.4% 21.9% 17.4% 18.1% 18.6% 18.9%

Operating margin 8.3% 6.8% -2.4% 0.5% 2.1% 2.7%

Net profit margin 8.1% 7.5% -1.7% 0.5% 1.9% 2.4%

Recurring net profit margin 8.0% 7.5% -2.2% 0.5% 1.9% 2.4%

R&D to revenue ratio 4.1% 4.3% 6.1% 4.8% 4.3% 4.2%

Selling and marketing expenses to revenue ratio 7.1% 8.1% 9.6% 9.5% 9.3% 9.2%

Administrative expenses to revenue ratio 5.0% 5.2% 5.5% 4.5% 4.0% 3.8%

SG&A cost to sales 16.3% 17.9% 22.1% 19.3% 18.0% 17.7%

Taxation rate 5.8% -2.2% -16.7% 25.0% 20.0% 20.0%

+/- change %

Gross margin n.a. -0.5% -4.4% 0.6% 0.6% 0.2%

Operating margin n.a. -1.5% -9.3% 2.9% 1.7% 0.6%

Net profit margin n.a. -0.6% -9.2% 2.2% 1.4% 0.5%

Recurring net profit margin n.a. -0.5% -9.7% 2.7% 1.4% 0.5%

SG&A to sales n.a. 1.6% 4.2% -2.8% -1.3% -0.4% SOURCES: CIMB, COMPANY REPORTS

TCL Communication

October 3, 2013

14

4. VALUATION AND RECOMMENDATION

4.1 Undemanding valuations

TCLC has rallied 145% in the seven months since we initiated coverage with an Outperform rating in early Mar 13, outperforming the HSI by 142% as the group turned profitable from 2Q13 and continuously delivered stronger-than-expected smartphone shipments along with rising ASPs and gross margins. Still, current valuations of 2.4x CY14 P/BV (or 15.6x FD CY14 P/E) are about a ~13% discount to its upcycle valuations (3-year average) (Figure 25).

Figure 25: TCL Communication Price-to-book ratio

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TCL Communication Average -1SD +1SD


4.2 Raising target price to HK$6.50

We reiterate our Outperform call with a higher our target price of HK$6.50 as we remove our earlier 10% discount applied to its upcycle valuations, given our strong conviction that the group is now well-positioned in the mid-range smartphone segment in emerging markets. In line with our 8% EPS upgrade (to factor in higher smartphone shipment) and our rollover to its FY14 book value, we have a new target price of HK$6.50, now based on 2.8x CY14 P/BV, on par with its upcycle valuations (3-year average). Against our forecasts of a 17.4% RoE and net gearing of 12% for FY14, we think our target is not demanding.

TCL Communication

October 3, 2013

15

Figure 26: Sector comparison

Bloomberg Price Target Price Market Cap 3-year EPS P/BV (x) ROE (%) EV/EBITDA (x) Yield (%)

Company Ticker Recom. (local curr) (local curr) (US$ m) CY2013 CY2014 CAGR (%) CY2013 CY2013 CY2013 CY2013

Handset vendors - listed in Hong Kong

China Wireless 2369 HK OUTPERFORM 3.17 3.92 862 14.9 11.7 33.2% 2.43 17.4% 7.6 1.3%

Lenovo Group 992 HK OUTPERFORM 8.15 9.50 10,921 14.2 13.0 9.2% 3.51 27.0% 7.5 1.6%

TCL Communication 2618 HK OUTPERFORM 5.69 6.50 839 77.8 15.9 n.a. 2.70 3.6% 6.4 0.0%

ZTE Corp - H 763 HK NOT RATED 14.88 n.a. 6,600 21.8 15.5 n.a. 1.72 7.9% 16.8 1.7%

Average 32.2 14.0 21.2% 2.59 13.9% 11.2 1.2%

Handset vendors - listed overseas

Apple AAPL US NOT RATED 501.02 n.a. 455,175 12.6 11.6 1.0% 3.51 28.0% 5.9 2.6%

Blackberry BB CN NOT RATED 10.86 n.a. 5,413 n.a. n.a. n.a. 0.59 -3.9% 3.0 0.0%

HTC Corp 2498 TT UNDERPERFORM 133.00 101.00 3,835 1405.5 22.7 -31.0% 1.44 0.1% 60.7 1.5%

LG Electronics 066570 KS OUTPERFORM 68400 92000 10,422 16.9 8.7 183.6% 0.90 5.6% 4.0 0.4%

Nokia NOK1V FH NOT RATED 3.088 n.a. 15,462 118.8 24.3 n.a. 1.61 1.4% 6.2 0.6%

Samsung Electronic 005930 KS OUTPERFORM 1418000 1900000 194,472 7.8 7.0 19.3% 1.55 22.8% 3.5 0.7%

Average (not including Blackberry, HTC and Nokia) 12.4 9.1 68.0% 1.99 18.8% 4.5 1.2%

Handset components - listed in Hong Kong

AAC Technologies 2018 HK OUTPERFORM 36.05 44.4 5,709 14.8 12.7 24.5% 4.70 34.7% 11.2 3.4%

Sunny Optical Tech 2382 HK NOT RATED 8.28 n.a. 1,068 13.4 10.0 32.1% 2.80 20.9% 9.3 3.0%

Truly International 732 HK NOT RATED 4.74 n.a. 1,729 11.2 9.6 33.1% 1.80 16.0% 6.8 3.8%

Average 13.1 10.8 29.9% 3.10 23.9% 9.1 3.4%

Handset components - listed overseas

Largan Precision 3008 TT OUTPERFORM 1020 1200 4,630 14.4 11.9 31.9% 4.51 36.3% 9.8 1.7%

LG Innotek 011070 KS NEUTRAL 85000 95000 1,596 32.0 13.9 n.a. 1.30 4.2% 5.7 0.4%

Liteon Tech 2301 TT OUTPERFORM 50.90 61.00 4,000 12.4 10.8 15.8% 1.59 13.4% 5.0 4.6%

Partron 091700 KS OUTPERFORM 16950 29000 855 8.7 7.1 36.5% 3.17 42.5% 4.9 2.1%

Silicon Works 108320 KS OUTPERFORM 22850 28000 346 12.0 8.3 4.9% 1.40 12.1% 5.3 2.8%

Simplo Technology 6121 TT NEUTRAL 151.00 142.00 1,575 14.2 13.6 1.6% 2.50 18.5% 9.2 4.3%

Average 15.6 10.9 18.1% 2.41 21.2% 6.6 2.6%

Casings / EMS - listed in Hong Kong

BYD Electronic 285 HK NOT RATED 3.55 n.a. 1,031 10.9 8.8 28.8% 0.73 6.7% 2.9 1.5%

FIH Mobile Ltd 2038 HK NOT RATED 4.76 n.a. 4,582 87.7 27.9 n.a. 1.25 1.4% 7.9 n.a.

Ju Teng 3336 HK NOT RATED 4.75 n.a. 704 7.5 6.0 21.7% 0.91 12.1% 5.4 3.3%

Ka Shui Int'l 822 HK NOT RATED 2.73 n.a. 315 14.4 10.9 25.5% 2.80 19.5% 8.6 6.6%

Tongda Group 698 HK OUTPERFORM 0.46 0.87 285 6.3 4.8 23.7% 0.93 15.6% 4.0 4.7%

Average (not including FIH) 9.8 7.6 24.9% 1.34 13.5% 5.2 4.0%

Casings / EMS - listed overseas

Catcher Technology 2474 TT NEUTRAL 165.50 153.00 4,204 9.1 9.6 9.7% 1.77 21.1% 5.3 3.6%

Foxconn Technology 2354 TT UNDERPERFORM 77.10 60 3,408 12.8 11.0 1.3% 1.49 12.4% 4.5 1.3%

Hon Hai Precision 2317 TT OUTPERFORM 76.00 90.00 33,762 9.2 8.3 9.8% 1.27 14.8% 4.6 2.6%

Jabil JBL US NOT RATED 23.39 n.a. 4,740 9.8 8.5 14.3% 2.04 20.9% 4.4 1.4%

Janus Dongguan precision 300083 CH NOT RATED 20.15 n.a. 658 28.2 20.9 38.7% 2.81 9.9% 16.5 0.9%

Pagetron 4938 TT NEUTRAL 41.10 47.00 3,185 10.0 8.3 17.9% 0.92 9.6% 4.0 3.6%

Wistron Corporation 3231 TT OUTPERFORM 29.15 38.00 2,299 10.5 8.4 8.9% 1.04 10.2% 5.4 5.1%

Average 12.8 10.7 14.4% 1.62 14.1% 6.4 2.7%

Semiconductor

SMIC 981 HK NEUTRAL 0.55 0.65 2,276 18.6 22.1 88.1% 0.94 5.2% 4.4 0.0%

MediaTek Inc 2454 TT OUTPERFORM 376.00 450 17,168 19.6 14.3 37.7% 2.64 14.1% 12.4 3.9%

Average 19.1 18.2 62.9% 1.79 9.7% 8.4 1.9%

Telecom equipment - listed in Hong Kong

China Comm Services 552 HK NOT RATED 5.37 n.a. 4,796 10.8 9.4 13.3% 1.31 12.2% 5.9 4.2%

Comba Telecom 2342 HK NEUTRAL 2.67 2.57 526 63.9 21.0 n.a. 1.04 1.6% 16.0 0.4%

O-Net Communications 877 HK UNDERPERFORM 1.65 1.15 155 38.7 13.5 9.0% 0.91 2.3% 7.7 0.5%

Average 37.8 14.6 11.2% 1.09 5.4% 9.9 1.7%

Integrated telecom operators - China

China Mobile 941 HK NEUTRAL 86.50 76 224,231 10.7 10.7 -0.7% 1.72 16.8% 3.4 4.1%

China Telecom 728 HK OUTPERFORM 4.12 4.64 43,001 14.7 10.3 41.2% 0.95 6.5% 3.6 2.2%

China Unicom 762 HK OUTPERFORM 13.12 17.55 40,119 21.3 11.6 65.6% 1.12 5.3% 3.8 1.9%

Average 15.6 10.9 35.4% 1.26 9.5% 3.6 2.7%

Core P/E (x)

SOURCES: Bloomberg, CIMB

TCL Communication

October 3, 2013

16

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

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Spitzer Chart for stock being researched ( 2 year data )

1.1

1.6

2.1

2.6

3.1

3.6

4.1

4.6

5.1

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Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13

Price Close

NR

3.0

9

4.2

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Recommendations & Target Price

Outperform Neutral Underperform Trading Buy Trading sell Not Rated

Rating Distribution (%) Investment Banking clients (%)

Outperform/Buy/Trading Buy 50.5% 7.2%

Neutral 34.1% 4.8%

Underperform/Sell/Trading Sell 15.4% 4.9%

Distribution of stock ratings and investment banking clients for quarter ended on 31 August 2013

1211 companies under coverage

Recommendation Framework #1 *

Stock Sector OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months.

TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

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Recommendation Framework #2 **

Stock Sector OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months.

NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months.

UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months.

TRADING BUY: Expected positive total returns of 10% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months.

TRADING SELL: Expected negative total returns of 10% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.

** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2012.

AAV – not available, ADVANC - Excellent, AEONTS – Good, AMATA - Very Good, ANAN – not available, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH – not available, BCP - Excellent, BEC - Very Good, BGH - not available, BJC – Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET - Good, CENTEL – Very Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, EGCO – Excellent, ERW – Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY – Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Very Good, ITD – Very Good, IVL - Very Good, JAS – Very Good, KAMART – not available, KBANK - Excellent, KK – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Good, MAKRO – Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent, SAMART – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Good, SPALI - Very Good, SRICHA – not available, SSI – not available, STA - Good, STEC - Very Good, TCAP - Very Good, THAI - Excellent, THCOM – Very Good, TICON – Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TTW – Very Good, TUF - Very Good, VGI – not available, WORK – Good.

Documents

Notes from the Field Source: Bloombergtclcom.tcl.com/admin/documents/research/1381729650... · TCL Communication October 3, 2013 27% 3 Turned profitable in 2Q13, due to a higher proportion