What matters this weekasiaresearch.daiwacm.com/eg/cgi-bin/files/ASEAN... · 2014-08-01 · See important disclosures, including any required research certifications, beginning on

See important disclosures, including any required research certifications, beginning on page 95.

■ Asean rising In this report, we feature the week’s top stories among the 310 stocks and 5 markets that Daiwa and its alliance partners cover in ASEAN. Our goal is to provide on-the-ground colour from our team of local experts: Bahana Securities (Indonesia), Thanachart Securities (Thailand), and Affin Investment Bank (Malaysia), and Daiwa’s own team (Singapore and the Philippines). ■ Thailand (page 3) Underlining Thanachart’s view that the coup is investor friendly and good for the economy, Phannarai Tiyapittayarut cited the return of consumer confidence as one reason for her upgrade of the property sector to Overweight, from Neutral. June presales rebounded strongly, driven by pent-up demand. Although Phannarai expects presales to decline for full-year 2014, she forecasts better presales and earnings momentum in 2H14 and

into 2015, backed by healthy industry fundamentals. She sees the sector as attractively valued, at a 2015F PER of 10.2x. Her top sector picks are L.P.N Development (LPN TB, THB22, BUY) and Quality Houses (QH TB, THB3.94, BUY). ■ Thailand’s Consumer Confidence Index

Source: University of Thai Chamber of Commerce

Meanwhile, Supanna Suwankird reiterated her Overweight stance on the utilities sector. She believes the sector is entering a new earnings cycle, backed by legacy capacity. Moreover, she sees upside to capacity from domestic renewable sources and notes the junta seems to be sticking with the existing target for renewables to account for 25% of final energy demand by 2021. While sector stocks are up by an average of 64% YTD, Supanna sees the sector’s valuation as undemanding (0.8x PEG based on her 2013-16E EPS CAGR) and forecasts its ROE to rise to 24% in 2017 (from 14% in 2013).

Her top picks are Energy Absolute (EA TB, THB21.90, BUY), Gunkul (GUNKUL TB, THB15.60, BUY) and Ratchaburi (RATCH TB, THB54.25, BUY). ■ Malaysia (page 90) Affin’s Isaac Chow upgraded his rating on Sunway (SWB MK, MYR3.21) to ADD, from REDUCE. The company reported solid 1H14 new property sales of MYR620m (up 26% YoY), driven by the stronger-than-expected take-up of new launches and established projects. In turn, Isaac revised up his forecasts for Sunway’s 2014-15 property sales by 15-18% and 2014-16 EPS by 5-6%. Factoring in higher margins and shorter development periods for some projects, he also raised his RNAV estimate by 4.7% to MYR4.72 and his RNAV-based target price to MYR3.30 (from MYR3.15). Affin likes Sunway’s integrated real-estate model, extensive experience in the construction sector, and established footprint in Singapore. ■ Indonesia With the presidential election now behind it and Ramadan having ended, Indonesia took a breather and the market was closed for the week.

ASEAN: performance of major stock markets

Index (as at 31 Jul) WoW chg (%) YTD chg (%) End-2014 index target Upside to target (%)

MSCI Indonesia 6,043 -0.4% 23.1% 6,143 1.7%MSCI Singapore 1,804 0.7% 5.8% 1,869 3.6%MSCI Malaysia 661 -0.3% -0.9% 715 8.3%MSCI Thailand 519 -3.1% 12.7% 550 5.9%

Source: Bloomberg, Daiwa, Bahana, Thanachart and Affin

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1 August 2014

What matters this week

• Highlighting the top ASEAN stories from Daiwa and its alliance partners, which together cover 300-plus stocks

• Rebounding consumer confidence in Thailand underpins an upgrade to Overweight (from Neutral) for the property sector

• Also featured are Thailand utilities (Overweight) and a recommendation upgrade for Malaysia property play Sunway

ASEAN Intelligence

Rohan Dalziell (852) 852 2848 4938 [email protected]

Strategy / ASEAN

No Capital Markets and Services Licence has been issued by the Malaysian Securities Commission to any member of Daiwa Capital Markets and accordingly this report and any part of its content may not be distributed or made available by any means within Malaysia.

ASEAN Intelligence | 1

ASEAN Intelligence 1 August 2014

- 2 -

ASEAN: stocks under coverage by Daiwa, Bahana, Thanachart and Affin

Source: Daiwa

ASEAN: top stock picks for 2H14

Price (loc curr) Target Upside/ Mkt. cap PER (x) PBR (x) Dividend yields (%) BBG code Company Rating 31-Jul-14 price (LC) downside (%) (USDm) 2014E 2015E 2014E 2015E 2014E 2015EAFG MK AFG BUY 4.89 5.4 10.4% 2,358 13.1 12.5 1.8 1.8 6.0% 4.6%TNB MK Tenaga Nasional BUY 12.42 14.7 18.4% 21,831 14.4 13.3 1.7 1.5 2.2% 2.4%INRI MK Inari BUY 3.2 4.26 33.1% 548 14.5 10.8 4.4 3.2 2.9% 3.7%AOT TB Airports of Thailand Pcl BUY 214 260 21.5% 9,497 25.3 21.3 3.1 2.8 1.6% 1.9%BBL TB Bangkok Bank Pcl BUY 195 255 30.8% 11,563 10.0 8.8 1.2 1.1 3.6% 3.8%BTS TB BTS Group Holdings Pcl BUY 8.55 9.5 11.1% 3,165 50.6 43.4 1.8 1.9 7.0% 7.4%BBRI IJ Bank Rakyat Indonesia BUY 11,200 13,100 17.0% 23,864 11.5 10.0 2.9 2.4 2.2% 2.5%TLKM IJ Telekomunikasi Indonesia BUY 2,650 2,900 9.4% 23,071 17.1 16.0 3.8 3.5 2.9% 3.2%GGRM IJ Gudang Garam BUY 54,200 62,750 15.8% 9,007 20.8 18.0 3.2 2.9 2.0% 2.0%KPLD SP Keppel Land Buy 3.64 4.08 12.1% 4,514 11.7 13.7 0.8 0.7 2.7% 2.5%FCT SP Frasers Centrepoint Trust Outperform 1.94 2.20 13.4% 1,425 9.5 13.1 1.0 1.0 5.7% 6.0%KEP SP Keppel Corp Buy 10.96 13.70 25.0% 15,973 11.8 11.0 1.8 1.7 3.4% 3.7%

Source: Bloomberg, Daiwa, Bahana, Thanachart and Affin forecasts

Note: prices for Indonesia-listed companies are as of 25 July 2014

When a report covers six or more subject companies please access important disclosures for Daiwa Capital Markets Hong Kong Limited at http://www.daiwacm.com/hk/research_disclaimer.html or contact your investment representative or Daiwa Capital Markets Hong Kong Limited at Level 26, One Pacific Place, 88 Queensway, Hong Kong.


Please see the important notice on the back page

THAILAND Sector Note 30 JULY 2014

Sector Outlook Sector Weighting Overweight

Thailand Property Sector Clear signs of a recovery

Sector Valuation Current Target Norm EPS grw ⎯ Norm PE ⎯ ⎯ P/BV ⎯ ⎯ Div yield ⎯

BBG price price 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F Company Code Rec. (Bt) (Bt) (%) (%) (x) (x) (x) (x) (%) (%) Asian Property Dev AP TB SELL 6.85 6.00 1.1 9.2 9.5 8.7 1.3 1.2 3.1 3.4 Land And Houses LH TB BUY 10.00 12.00 0.9 12.4 17.4 15.5 2.8 2.6 3.8 4.8 L.P.N. Development LPN TB BUY 22.20 28.00 (9.9) 54.8 15.6 10.1 3.1 2.6 3.2 5.0 Pruksa Real Estate PS TB HOLD 34.50 34.00 6.1 11.9 12.5 11.1 2.6 2.2 2.4 2.7 Quality Houses QH TB BUY 3.90 5.00 (0.9) 20.4 11.1 9.2 1.9 1.7 4.1 4.9 Sansiri SIRI TB BUY 1.89 2.40 4.6 22.6 10.4 8.5 1.1 0.9 4.8 4.7 Supalai SPALI TB BUY 24.40 30.00 49.5 22.0 9.7 8.0 2.4 2.0 4.1 5.0

Source: Thanachart estimates, Based on 29 July 2014 closing prices, Note : SIRI's current price and TP are adjusted to be post-XA

June property presales showed clear signs of recovery and we see stronger pre-sales and earnings from 2H14F continuing into 2015F, spurred by consumers regaining confidence, more launches, and improved backlog quality. Thus, we upgrade the sector to Overweight, with LPN and QH our top picks.

PHANNARAI TIYAPITTAYARUT 662 – 617 4900

[email protected]

Trading At Below Historical PE

579

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2011

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2013

2014

F20

15F

(x)

10.2x

12yr average = 10.7x

Sources: Company data, Thanachart estimates

Presales Recovery In 2015F

(20)(10)

01020304050

2006

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F20

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F

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-15% -11% -12%

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Backlog As % Of Property Sales

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020406080

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AP LH LPN PS QH

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(%) 2014F 2015F


Upgrade to Overweight We believe the property sector has seen the worst. We upgrade the sector to Overweight (from Neutral) for three reasons. 1) We see signs of a full presales recovery, while industry fundamentals remain healthy, and the market seems unconcerned about housing oversupply or falling prices. 2) We expect better presales and earnings momentum in 2H14F and into 2015F. 3) Sector valuation looks attractive, at a 2015F PE of 10.2x, and we forecast normalized EPS growth of 22% y-y in 2015F.

Remains healthy, with a clear recovery signal June presales rebounded strongly and exceeded their normal monthly levels, driven by pent-up demand boosting 2Q14 presales growth to 57% q-q, with low-rise housing presales resuming growth of 16% y-y. We raise our 2014F presales by 14%, but expect a 12% y-y decline. Our 2014 forecast indicates 2H14F presales growth of 29% h-h and 17% y-y, backed by more launches. While demand eased in 1H14, the demand-supply balance looks healthy, with housing inventory relatively stable at less than 1.5 years of sales. Continued house-price appreciation should benefit developers with old-cost inventory when demand returns.

Strong earnings and attractive valuation Though we expect negative 2014 presales y-y, strong condo presales in 2012-13 led to a strong condo backlog, which should drive sector-average normalized EPS growth of 7% y-y in 2014F. Together with a presales recovery in 2H14F, we estimate average sector 22% y-y EPS growth in 2015F. Sector valuation looks attractive, at a 2015F PE of 10.2x (a 3.3x discount to the SET) and a dividend yield of 4.4%.

Top picks are LPN and QH QH is still among our top picks for its best-in-sector business model. We expect market-share gains in the mid- to low-end segment to drive EPS growth of 15-20% y-y in 2015-16F. We replace SPALI with LPN as we expect LPN to post the strongest EPS growth of 55% y-y in 2015F. We upgrade SIRI to BUY (from Sell) as its capital call has eased gearing concerns. Its largest backlog in the industry, recovering presales and cost-cutting measures should drive up normalized EPS growth by 23% y-y for 2015F, assuming full dilution.

Than

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SECTOR NOTE PHANNARAI TIYAPITTAYARUT

THANACHART SECURITIES | DAIWA CAPITAL MARKETS 2

Upgrade to Overweight

Since 4Q13, the Thai property market was hit hard by the unstable political situation in Thailand. Following the coup on 22 May this year, however, property presales recovered stronger than we and the market expected in June. Though this was driven partly by pent-up demand as people delayed home-buying decisions, a fast demand recovery, particularly for low-rise houses, reflects the high level of real housing demand in Thailand. This indicates to us that the residential sector has good long-term prospects, underpinned by population growth, urbanization and mass transit extensions.

We believe the property sector has passed its trough level reached in 1Q14, when it experienced very weak presales and abnormally high cancellations on condominiums by customers who had bought at the presales stage. With a presales recovery in June that we expect to continue, we upgrade the sector to Overweight (from Neutral) for three reasons.

1) We see a clear sign of a full presales recovery, while fundamentals for the property sector remain healthy, and there are no concerns in the market of a housing oversupply and prices are not declining.

2) We see better presales and earnings momentum in 2H14F continuing into 2015F, supported by a substantial property backlog amid fewer concerns about backlog cancellations and a return in consumer confidence.

3) The sector’s valuation looks attractive now, at an average 2015F PE of 10.2x, and we forecast sector-average normalized EPS growth of 22% y-y in 2015F.

To reflect the sector’s improving outlook, we have made the following upward revisions to our key assumptions and forecasts in this report:

We have lifted our presales assumptions (in terms of value) for the seven developers under our coverage by 14% for 2014F and 19% each year for 2015-16F, to a presales decline of 12% y-y for this year, and a resumption of growth to 25% y-y in 2015F due to this year’s low base, and more organic growth of 7% y-y in 2016F.

We have raised our normalized profit forecasts by 6.7%, 7.7% and 16.7% for 2014F, 2015F and 2016F, respectively, and now forecast sector-average normalized profit growth of 8% y-y, 22% y-y and 13% y-y for these respective years. As we take into account the full dilution from warrants for Land And Houses (LH) and Sansiri (SIRI)’s rights issue and warrants exercise, our new sector-average normalized EPS growth forecasts are 7% y-y for 2014F, 22% y-y for 2015F and 9% y-y for 2016F (previously 1%, 18% and 4% y-y, respectively).

As our upward presales and earnings revisions lead to higher earnings growth prospects, we raise our target prices (shown in the table further on). Thus, we upgrade our sector call to Overweight (from Neutral). While L.P.N. Development (LPN), Quality Houses (QH) and Supalai (SPALI) are kept on our BUY lists, we add two more stocks to our BUY list: LH (upgraded from Hold) and SIRI (upgraded from Sell). Our top picks are now LPN and QH (previously SPALI, QH). We upgrade Pruksa Real Estate (PS) to Hold (from Sell). Asian Property Development (AP) remains a Sell.

We upgrade the sector to Overweight on:

- clear presales recovery

- better presales and earnings momentum in 2H14F and 2015F

- strong earnings growth and attractive valuation

Our presales are lifted to -12%, +25% and +7% in 2014-16F, respectively

Our normalized profit forecasts are raised by 7-17%

Now we have five BUYs, one HOLD and one SELL




Ex 1: Revisions To Presales Forecasts

Presales ——————— Old —————— ——————— New ——————— —————— Change ————— 2014F 2015F 2016F 2014F 2015F 2016F 2014F 2015F 2016F

(Bt m) (Bt m) (Bt m) (Bt m) (Bt m) (Bt m) (%) (%) (%) AP 13,666 15,061 16,276 19,360 21,336 22,843 42 42 40 LH 24,023 26,426 29,124 30,207 33,228 36,621 26 26 26 LPN 17,077 25,017 26,268 15,003 26,255 27,568 (12) 5 5 PS 36,437 39,779 41,532 44,097 49,867 53,366 21 25 28 QH 18,420 21,362 22,857 20,058 23,164 24,785 9 8 8 SIRI 20,314 28,664 30,569 20,314 35,535 37,619 0 24 23 SPALI 19,127 20,638 22,246 20,351 21,582 22,632 6 5 2 Total presales 149,062 176,947 188,872 169,389 210,968 225,434 14 19 19

Source: Thanachart estimates Note: AP = Asian Property Development, LH = Land And Houses, LPN = L.P.N. Development, PS = Pruksa Real Estate, QH = Quality Houses, SIRI = Sansiri, SPALI = Supalai

Ex 2: Presales Trend And New Assumptions

AP LH LPN PS QH SIRI SPALI Total Presales (Bt m) 2009 18,341 17,273 10,841 22,774 10,597 13,964 13,567 107,357 2010 17,541 20,003 15,008 38,756 9,640 24,996 15,436 141,380 2011 14,353 19,200 14,247 25,554 12,160 21,792 18,768 126,074 2012 20,237 25,074 18,741 29,397 16,600 42,593 23,456 176,098 2013 15,184 30,190 24,395 41,282 20,400 42,168 19,091 192,710 2014F 19,360 30,207 15,003 44,097 20,058 20,314 20,351 169,389 2015F 21,336 33,228 26,255 49,867 23,164 35,535 21,582 210,968 2016F 22,843 36,621 27,568 53,366 24,785 37,619 22,632 225,434 Growth (%) 2009 118 12 18 41 11 34 31 35 2010 (4) 16 38 70 (9) 79 14 32 2011 (18) (4) (5) (34) 26 (13) 22 (11) 2012 41 31 32 15 37 95 25 40 2013 (25) 20 30 40 23 (1) (19) 9 2014F 28 0 (39) 7 (2) (52) 7 (12) 2015F 10 10 75 13 15 75 6 25 2016F 7 10 5 7 7 6 5 7





Ex 3: Changes To Normalized Profit Forecasts, Target Prices And Recommendations

Normalized ——— 2014F ——— ——— 2015F ——— ——— 2016F ——— ——— TP ——— —— Rating ——

profit New Old Change New Old Change New Old Change New Old Change New Old

(Bt m) (Bt m) (%) (Bt m) (Bt m) (%) (Bt m) (Bt m) (%) (Bt) (Bt) (%)

Sector 26,609 24,933 6.7 32,476 30,152 7.7 36,651 31,419 16.7 Overweight Neutral

AP 2,030 1,881 8.0 2,217 1,855 19.5 2,254 2,030 11.0 6.00 5.10 17.6 SELL SELL

LH 6,584 6,235 5.6 7,757 7,174 8.1 8,706 7,816 11.4 12.00 10.90 10.1 BUY HOLD

LPN 2,099 2,049 2.5 3,250 3,096 4.9 3,603 3,247 11.0 28.00 23.00 21.7 BUY BUY

PS 6,154 5,393 14.1 6,884 6,354 8.3 7,535 6,440 17.0 34.00 23.00 47.8 HOLD SELL

QH 3,230 3,184 1.4 3,889 3,844 1.2 4,487 4,185 7.2 5.00 4.70 6.4 BUY BUY

SIRI 2,204 2,143 2.8 3,225 2,748 17.4 4,336 2,263 91.6 2.40 1.70 41.2 BUY SELL

SPALI 4,308 4,047 6.5 5,255 5,081 3.4 5,730 5,439 5.4 30.00 26.00 15.4 BUY BUY

Source: Thanachart estimates

Remains healthy, with a clear recovery signal

The drop that we expect in this year’s presales should be just a short-term hiccup and should not affect adversely the industry’s long-term fundamentals. Developers have been adjusting to the sluggish housing demand by launching a lower value of new projects in 1H14, which has prevented an excess supply of housing stock. We are not currently seeing developers cutting house prices across the industry to stimulate presales. Rather, developers are offering special price discounts on promotional units as a marketing scheme to draw customers to visit projects during the climate of still-subdued consumer spending sentiment. In contrast to a fall in prices, we expect to see continuous house price appreciation in 2H14F and into 2015F, which should benefit developers with old-cost inventory, as they should be able to sell their inventory at higher prices when demand returns. In addition, we started to witness a clear recovery sign for the property market in June, as we go on to discuss.

Full presales recovery seen in June

The top-seven developers saw a sharp rebound in their presales in June, the first month post the coup. This recovery was fast and stronger than we and the market expected for all developers and led to aggregate presales for June of Bt20bn, up 27% m-m and 24% above average monthly presales last year (the industry saw record presales last year). We believe the strong presales for June were driven partly by pent-up demand owing to delays in home purchases since when the political protests began in 4Q13. This boosted 2Q14 presales growth to 57% q-q, indicating that presales reached a bottom in 1Q14.

Ex 4: Strong Presales Recovery In June 2014

Jan Feb Mar Apr May Jun Chg. Avg monthly presales

(2013)

1Q14 2Q14F Chg. 1H14F presales as a

% of our 2014F (m-m) (q-q)

(Bt m) (Bt m) (Bt m) (Bt m) (Bt m) (Bt m) (%) (Bt m) (Bt m) (%)

AP 590 837 737 850 4,470 1,799 (60) 1,265 2,164 7,119 229 48

LH 1,640 1,840 3,084 1,900 2,200 4,500 105 2,516 6,564 8,600 31 50

LPN 666 1,120 1,402 1,031 1,741 4,173 140 2,033 3,188 6,945 118 68

PS 1,257 2,297 4,640 2,082 3,365 4,296 28 3,440 8,194 9,743 19 41

QH 1,070 1,230 2,000 1,000 1,700 2,400 41 1,700 4,300 5,100 19 47

SIRI (15) 22 381 1,028 1,170 1,676 43 3,514 388 3,874 899 21

SPALI 774 1,105 2,121 1,704 1,081 1,088 1 1,591 4,000 3,873 (3) 39

Total 5,982 8,451 14,365 9,595 15,727 19,932 27 16,059 28,798 45,254 57 44


Healthy industry fundamentals

- Lower new supply, in line with falling demand

- No housing stock oversupply

- No property price collapse

Full presales recovery in June




Ex 5: Presales Bottomed In 1Q14 Ex 6: 1H14F Presales Declined By 33% y-y

0

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Sources: Company data, Thanachart estimates Sources: Company data, Thanachart estimates

Looking at the June presales mix, the recovery was across all products and segments from the real demand segment; the recovery spanned low-rise houses and low-end condominiums, to more investment and rental-property mid-to-high-end condominiums. This is a good sign to us as it implies that, despite a high ratio of household debt to GDP, Thai people still have purchasing power, though a lack of confidence since 4Q13 has deterred them from spending on big-ticket items like homes. The Consumer Confidence Index (CCI) hit its lowest level for 12 years in April this year, when there was a political deadlock, overdue delays in rice payments to farmers, uncertainty about the country’s economic direction, and concerns about future incomes; all these factors affect directly people’s decisions to buy homes, given this is a long-term commitment. In June, however, the CCI rose to its highest level for eight months (ie, since last November when political issues started).

Ex 7: Looking Inside June 2014 Presales; Trends At The Companies

(Bt m) June Change Avg monthly Explanations

2014 (m-m%) presales (2013) AP 1,799 -60 1,265 Lower presales m-m, due to a high presales base in May on the back of three

condominium launches by its JV with Mitsubishi Estate Group. LH 4,500 105 2,516 It carried out a soft launch of its first condominium launch of 2014, 333 Riverside (Bt6.5bn),

in June. 30% launched and all sold. LPN 4,173 140 2,033 Its Lumpini Place Borommaratchachonnani condominium project (Bt1.7bn), launched in

June, was 100% sold. PS 4,296 28 3,440 Its low-end townhouse (TH) products doubled its monthly average presales from Bt1.3bn in

5M14 to Bt2.6bn in June, and represented 61% of its total June presales. QH 2,400 41 1,700 Its low-rise (TH & SDH) presales mostly mid-to-low-end brands of Bt1.95bn in June were

up almost 2x compared to monthly average sales of Bt1.05bn in 5M14. SIRI 1,676 43 3,514 The company’s "It's prime time" campaign for its ready-to-move-in housing inventory drove

very strong presales growth in June, which was 3x its monthly average presales of Bt517m in 5M14.

SPALI 1,088 1 1,591 It had moderate June presales, with 35% from condominiums given no new condominium launches during the month, and a few new low-rise housing projects.

Total 19,932 27 16,059 June presales beat its 2013 monthly average level by 24%, boosted by pent-up demand and a recovery for all its products.


June’s presales recovery was driven partly by pent-up demand and across all products




Ex 8: Thailand’s Household Debt As A % Of GDP Ex 9: Thailand’s Consumer Confidence Index

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Source: BoT Source: University of Thai Chamber of Commerce

Total 1H14 presales contracted by 33% y-y. This compares with a fall of 54% y-y in 1Q14, during which there was the seven-week (13 January to 3 March) “Bangkok Shutdown”, which blocked many major roads. We estimate that presales declined by a much milder 5% y-y in 2Q14F. By product, condominiums dragged down overall 1H presales, whereas, to our and the market’s surprise, low-rise housing presales fell by only 8% y-y in 1Q14 and resumed quite robust growth of 16% y-y in 2Q14.

Both low-rise houses and condominiums have seen positive presales momentum since 2Q14, particularly condominiums (where we have seen fewer cancellations at the presales stage), good take-up of condominium inventory, and an improved customer response to new condominium launches). We expect this momentum to continue in 2H14F on the back of a rise in the value of project launches of 21% h-h in 2H14F to Bt126bn vs. Bt103bn in 1H14, which was equivalent to 55% of this year’s new launches. We raise our presales assumptions by 14% this year and 19% for each year over 2015-16F to negative presales growth of 12% in 2014F, indicating 2H14F presales growth of 29% h-h and 17% y-y. We do not expect monthly momentum to be maintained at the June level, as some pent-up demand should disappear, but due to the low base of comparison this year we expect presales to resume strong growth of 25% in 2015F and more organic growth of 7% in 2016F.

Ex 10: 1Q14 Presales Ex 11: 2Q14F Presales

——— Presales ——— ——— Growth (y-y) ——

Total Low-rise Condos Total Low-rise Condos

(Bt m) (Bt m) (Bt m) (%) (%) (%)

AP 2,164 2,415 (251) (43) 9 na

LH 6,564 5,458 1,106 (16) (6) (45)

LPN 3,188 0 3,188 (53) na (53)

PS 8,194 6,161 2,033 (34) (17) (58)

QH 4,300 3,300 1,000 (41) 8 (76)

SIRI 388 2,173 (1,785) (98) (29) na

SPALI 4,000 2,160 1,840 (7) 5 (18)

Total 28,798 21,666 7,132 (54) (8) (82)

——— Presales ——— ——— Growth (y-y) ——

Total Low-rise Condos Total Low-rise Condos

(Bt m) (Bt m) (Bt m) (%) (%) (%)

AP 7,119 2,930 4,189 55 38 na

LH 8,600 5,600 3,000 19 16 27

LPN 6,945 0 6,945 (21) na (21)

PS 9,743 8,188 1,555 (6) 16 (52)

QH 5,100 3,900 1,200 (2) 28 (44)

SIRI 3,874 3,223 651 (50) (1) na

SPALI 3,873 1,934 1,939 (2) 7 (9)

Total 45,254 25,775 19,479 (5) 16 (24)


1H14 presales contracted 33% y-y, dragged down by condominiums

Positive presales momentum from June, resumed confidence and more launches should drive stronger presales in 2H14F and 2015F




Ex 12: 1H14F Presales

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1Q14 2Q14F 1H14F

(Bt m) Low-rise CD Total

-8%y-y

-82%y-y

-54%y-y +16%y-y

-24%y-y

-5%y-y +4%y-y

-59%y-y

-33%y-y


Ex 13: Presales Recovery In 2015F, But Not As Strong As In 2009 And 2012

(20)

(10)

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F

(%)

-15% -11% -12%

Global crisis

Property tax incentives(Cuts in special business tax, transfer

fee, mortgage fee)

Floods

1st home scheme

Negative consumptionPolitical protests

No property stimulus


Ex 14: 2014F New Launches

(Bt m) AP LH LPN PS QH SIRI SPALI Total 2013 27,635 38,740 18,000 50,193 19,941 61,201 17,680 233,390 2014F 23,700 35,000 14,543 70,000 22,309 33,445 30,020 229,017 % Change (14) (10) (19) 39 12 (45) 70 (2) 1H14 67% 53% 82% 44% 34% 27% 31% 45% 2H14F 33% 47% 18% 56% 66% 73% 69% 55%





Ex 15: Growing 2H14F Presales Along With Rising Launches

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Presales New launches

(Bt m) 1H14 2H14F

+29% h-h

+21% h-h


Ex 16: 2H14F Presales Growth By Developer

0

5,000

10,000

15,000

20,000

25,000

30,000

AP LH LPN PS QH SIRI SPALI

(Bt m) 1H14 2H14F

+9%h-h

-1%h-h

-52%h-h

+46%h-h

+13%h-h

+277%h-h

+58%h-h


Housing supply not a concern

As demand eased in 1H14, the industry remains healthy with a good demand-supply balance. According to Agency for Real Estate Affairs (AREA) data, the number of new housing units launched in 1H14 fell by 21% y-y to 44,142 units, with the launch value dropping by 21% y-y to Bt123bn. The biggest falls were for condominiums, which saw drops of about 40% y-y both in terms of units and values. Developers have been cautious given the political situation in the country and have slowed new launches, while small and amateur developers have forced out of the market. This has resulted in housing inventory being relatively stable since the end of 2013, at 144,098 units currently, equivalent to one year and three months of sales. Condominiums account for the biggest proportion, at 36% or 51,260 units, slightly above the 32% for SDHs (45,894 units) and 31% for THs (44,639 units).

Housing inventory is stable at the equivalent of one year and three months of sales




Ex 17: Housing Inventory (Units)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

SDH TH Condo Others Total

(units) 2009 2010 2011 2012 2013

Source: AREA

Ex 18: Falling New Launches In 1H14 (Value) Ex 19: Falling New Launches In 1H14 (Units)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 1H13 1H14

(Bt m) SDH TH CD Others

-21%y-y

0

10,000

20,000

30,000

40,000

50,000

60,000

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 1H13 1H14

(units) SDH TH CD Others-21%y-y

Source: AREA Source: AREA

Continued house-price appreciation

As the cost of building a home has been increasing over the past six years on the back of rising land prices (caused by urbanization, especially in Bangkok, where residential areas are expanding out to the city suburbs and surrounding provinces), raw-material prices and labor costs (the minimum wage was raised to Bt300 per day two years ago), and as there is not an oversupply of houses for sale in the market, prices of low-rise houses (SDH and TH) in Thailand rose by 3-4% per annum over 2008-13.

The average price of condominiums has appreciated faster than other products, at a 7.4% CAGR over 2008-13, equivalent to a 53% jump in prices over the period. This has been on the back of a sharp increase in land prices in the Bangkok CBD, along the mass transit lines pushing up the selling prices of newly launched condominiums while holding up those of old ones. Speculative and investment demand for condominiums (20% of condominium purchases) also supports price appreciation. In 1H14, we did not see developers cut prices to boost sales. We expect house-price appreciation to continue and benefit developers with old-cost inventory, as when demand returns they can sell at higher prices than presales prices, which provides a cushion against a falling gross margin when they undertake promotional campaigns such as free furniture, free electrical appliances, and waivers on

Price of low-rise houses rose by 3-4% CAGR over 2008-13

Condominium prices have appreciated rapidly and should benefit those with old-cost inventory




maintenance and transfer fees. In some cases, developers can even see increases in the gross margin from price adjustments.

Ex 20: Housing Price Index

90

100

110

120

130

140

150

1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13

(Index) SDH Town Houses Condo

3.4% six-year CAGR

4.1% six-year CAGR

7.4% six-year CAGR

Source: BoT

Ex 21: Top Seven Firms’ Inventory

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000


(Bt m) SDH TH Condo


Strong earnings and attractive valuation

There are several reasons we believe the sector now deserves to trade close to its all-time high PE of 13x, and should not trade at a large discount to the SET.

1) We now forecast presales to recover in 2H14F, rising by 29% h-h, and strong growth of 25% in 2015F, on the back of an improving economy. Thanachart forecasts 2014F GDP growth of 1.4% y-y from -0.6% y-y in 1Q14, with GDP resuming a normal growth rate of 4.0% in 2015F.

2) Greater revenue visibility. Backlog quality is improving as cancellations at the presales level stabilized and presales also recovered in 2Q14. The existing backlog is equivalent to 84% of our property sales forecast for 2014F and 45% of that for 2015F.

3) While we expect presales to fall y-y for this year, strong presales over 2012-13 (mainly of condominiums) lead us to forecast the sector to see normalized EPS growth of 7% for 2014F. Together with the recovery we expect in presales in 2H14F, we forecast 22% y-y EPS growth for 2015F.

Upgrade to Overweight on…

1) Strong presales recovery

2) Strong revenues visibility

3) Strong normalized EPS growth of 22% in 2015F

4) Enticing valuation, at 2015F PE of 10x




4) In addition to the better growth than we forecast for the SET of 14.7% y-y in 2015F, the property sector’s PE is lower at 10.2x in 2015F, representing a 3.3x discount to that of the SET. The average dividend yield we forecast for the sector is 4.4%.

Ex 22: SETPROP’s Historical PE

0

2

4

6

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12

14

16

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

(x)

10.2x

12yr average = 10.7x


Ex 23: 2015F Growth By Sector Ex 24: 2015F PE By Sector

05

101520253035404550

Tran

spor

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Med

ia

Hot

el

Food

Ret

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Con

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ls

Bank

Hea

lthca

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Ener

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Indu

stria

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Tele

com

(%)127

05

10152025303540

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lthca

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SET

Mat

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Prop

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Ener

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(x)





Ex 25: Backlog As A % Of Our Property Sales Revenue Forecasts

87 80

96 86

70 79

93 84

37

12

94

34

21

65 68

45

0

10

20

30

40

50

60

70

80

90

100

AP LH LPN PS QH SIRI SPALI Total

(%) 2014F 2015F


Top picks are LPN and QH

Following the revisions to our earnings forecasts and TP upgrades, we have two more BUYs in the sector – LH (from Hold) and SIRI (from Sell) – in addition to LPN, QH, and SPALI. We upgrade PS to HOLD (from Sell). AP is the stock in the sector on which we have a SELL recommendation. Among the five BUY-rated stocks, our top picks are LPN and QH (our previous top picks were QH and SPALI).

Our top sector picks stand out in two particular areas. QH remains one of our top picks as we believe it has the best business model in the sector. We see the company as a quality developer that has had considerable success in entering new market segments, from the mid-range to the low end, in just a few years under the brands Casa, Trust, and Gusto. We forecast QH to achieve consistent EPS growth of 15-20% a year over 2015-16F, with an increasing proportion of sales from the mid-range and low-end segments, and expect its new products to generate higher gross margins than its high-end products in the past.

We replace SPALI with LPN as a top pick, as we expect the latter to have the most secure and strongest EPS growth next year. SPALI’s share price has performed very well YTD (up by 67%) on the back of the company having the highest forecast EPS growth in the sector of 49% in 2014F, with the backlog at the start of this year accounting for 80% of our full-year 2014F revenue forecast (it rose to 93% as at the end of 2Q14). We expect LPN to repeat SPALI’s story as it looks set to deliver the strongest sector EPS growth of 55% y-y in 2015F. It also has the highest sales visibility, given that the current backlog accounts for 94% of our property sales forecast in 2015F. We therefore expect shares of LPN, with 26% upside potential to our target price, to be among the top performers in our universe in the next 12 months. Besides, LPN has been the most sold-off property stock by foreign investors since the beginning of the political turmoil in 4Q13, with its foreign holding falling from 38% to 31% at present.

Our biggest upgrade is for SIRI, which we upgrade to BUY from Sell. Although SIRI has the highest net gearing in the sector (over 2x currently), we see the stock’s risk-reward as justified as we believe 1Q14 will have been the company’s worst quarter this year. The recent capital call announcement eased our concern over gearing, as it will enlarge the capital base. We project SIRI to see the best increase in presales, of 277% h-h in 2H14F and another 75% y-y in 2015F, on the back of a fall in condominium backlog cancellations and an improved ability to sell inventory. In our view, SIRI’s backlog (the largest in the

Our sector picks stand out in two particular areas

We see QH as having the best business model

LPN should see the strongest EPS growth in 2015F

SIRI is our pick for a turnaround story




industry), recovering presales, and cost-cutting initiatives should drive 23% y-y normalized EPS growth in 2015F, assuming full dilution.

Ex 26: Foreign Shareholding

21.8

30.0

38.3

14.8

26.2

20.9

29.0

21.7

30.0 31.3

16.5

25.3 22.0 22.1

0

5

10

15

20

25

30

35

40

45


(%) 1-Oct-13 25-Jul-14

Source: SET




Risks

We view the biggest risks to our Overweight sector rating as coming from backlog cancellations, presales from new launches coming in weaker than we expect and a higher-than-expected level of market competition. While the political situation in Thailand appears to have stabilized, if it were to worsen, this would likely have an impact on consumer confidence, and negatively affect homebuyer behavior.

Ex 27: Valuation Table - LPN Ex 28: LPN – BUY, Price Bt22.20, TP Bt28.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 14,347 13,230 17,575 20,589

Net profit 2,329 2,099 3,250 3,603

Norm profit 2,329 2,099 3,250 3,603

Norm EPS (Bt) 1.6 1.4 2.2 2.4

Norm EPS grw (%) 6.8 (9.9) 54.8 10.9

Norm PE (x) 14.1 15.6 10.1 9.1

EV/EBITDA (x) 12.5 13.3 8.7 7.9

P/BV (x) 3.4 3.1 2.6 2.2

Div yield (%) 3.8 3.2 5.0 5.5

ROE (%) 25.7 20.9 28.1 26.3

Net D/E (%) 42.6 25.8 22.4 20.0

LPN is one of our top picks, as we see it as having the most secure and strongest EPS growth in 2015F.

This year will be a challenging one, in our view, with presales down by 39% (mostly from new condo launches being delayed from 2H14F to 2015F) and EPS falling by 10%.

Next year’, we forecast it to see the highest EPS growth in the sector, of 55%, driven by a condominium backlog that accounts for 94% of our 2015F property-sales forecast. This year, the backlog accounts for 96% of our forecast.

The condominium segment has been most adversely affected so far this year, but demand for LPN’s low-end condominiums with a focus on real end-user demand should recover soon.

While the first two projects launched in 1Q14 – Lumpini Ville Onnut 46 and Lumpini Ville Onnut-Pattanakarn – had lower-than-normal take-up rates of 27-30% (during the political protests), rising to 34-35% at the end of 2Q14, demand is returning, as the Lumpini Place Borommaratchachonnani project that launched in June was sold out.

In 2Q14 alone, LPN was able to sell finished inventory worth Bt2.1bn, or as much as 42% of the total outstanding.

One reason for the delays to new launches in 2H14F is that the company has more than enough to achieve strong growth next year.

The stock is trading in line with the average sector PEs of 10.2x for 2015F and 9.3x for 2016F, but its EPS growth is higher. Dividend yields based on a 50% payout ratio are at 5.0% for 2015F and 5.5% for 2016F, above the sector average.

Sources: LPN, Thanachart estimates

We see key risks as backlog cancellations and weak presales




Ex 29: Valuation Table - QH Ex 30: QH – BUY, Price Bt3.90, TP Bt5.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 19,699 19,056 22,416 25,566

Net profit 3,307 3,230 3,889 4,487

Norm profit 3,261 3,230 3,889 4,487

Norm EPS (Bt) 0.4 0.4 0.4 0.5

Norm EPS grw (%) 83.1 (0.9) 20.4 15.4

Norm PE (x) 11.0 11.1 9.2 8.0

EV/EBITDA (x) 17.2 18.7 15.2 13.3

P/BV (x) 2.1 1.9 1.7 1.5

Div yield (%) 4.1 4.1 4.9 5.6

ROE (%) 19.7 17.8 19.2 19.6

Net D/E (%) 108.2 110.4 91.0 81.9

QH is our top pick in the sector for its best-in-class business model, in our view.

Previously a quality high-end developer with a low sales base, QH’s penetration of the mid-to-low-end segment, where real demand lies, has been an earnings-growth driver for the past few years.

New products under its Casa, Trust and Gusto brands are gaining stronger brand recognition, leading to higher market share. Its gross margin is on an upward trend as its new mid-to-low end brands generate higher gross margins than its high-end brands.

Its proactive product and land-acquisition strategy should put it in a better position when demand turns. Its land capex for this year is Bt7.5bn, 2.5x higher than what it spent in 2012-13.

Diversified business: it owns three office buildings and one serviced apartment, and invests in four associates (two property funds – QHPF and QHHR — as well as HMPRO and LHBANK).

We forecast EPS growth of 20% y-y for 2015 and 15% y-y for 2016. Its valuation is more attractive than the sector average, in terms of both PE and dividend yield.

Sources: QH, Thanachart estimates




Ex 31: Valuation Table - SIRI Ex 32: SIRI – BUY, Price Bt2.08 (implies Bt1.89 post-XA), TP Bt2.40 (post-XA)

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 28,597 30,898 36,483 39,861

Net profit 1,930 3,076 3,225 4,336

Norm profit 1,912 2,204 3,225 4,336

Norm EPS (Bt) 0.2 0.2 0.2 0.2

Norm EPS grw (%) (37.7) 4.6 22.6 7.3

Norm PE (x) 10.9 10.4 8.5 7.9

EV/EBITDA (x) 19.0 17.6 10.9 9.2

P/BV (x) 1.2 1.1 0.9 0.9

Div yield (%) 4.5 4.8 4.7 6.3

ROE (%) 11.8 10.4 10.4 11.4

Net D/E (%) 190.7 137.5 61.1 46.8

Our biggest recommendation upgrade: Sell to BUY.

The rights issue call has eased our concern over SIRI’s 2x gearing, which limits its growth potential and is a risk to its dividend payments.

We believe 1Q14 marked the worst of the year in terms of presales and normalized profit.

With demand rebounding, we are less concerned about SIRI’s inventory. As condos account for 44% of its stock, it should benefit from the recovery in presales and price appreciation.

2Q14 should show a recovery, as we saw lower condo backlog cancellations and improving presales in June, including inventory sales, and we look for higher quarterly profit until year-end.

We forecast the best presales turnaround to take place in 2H14F, at 277% h-h, and 75% y-y for 2015F, given the low base for 1H14 (as its presales were hit the hardest) and more launches in 2H14F, at 73% of the full-year number.

As it has the highest backlog in the industry, at Bt54bn, and its backlog accounts for 79% and 65% of our property sales forecast for 2014 and 2015, respectively, we forecast normalized EPS growth of 5% for 2014 and 23% for 2015, assuming full dilution from capital increase and warrants exercise.

Cheap in terms of PE, and offers a good dividend yield. Sources: SIRI, Thanachart estimates




Ex 33: Valuation Table - SPALI Ex 34: SPALI – BUY, Price Bt24.40, TP Bt30.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 12,615 19,740 23,277 25,218

Net profit 2,882 4,308 5,255 5,730

Norm profit 2,882 4,308 5,255 5,730

Norm EPS (Bt) 1.7 2.5 3.1 3.3

Norm EPS grw (%) 5.1 49.5 22.0 9.1

Norm PE (x) 14.5 9.7 8.0 7.3

EV/EBITDA (x) 13.3 9.0 7.2 6.3

P/BV (x) 2.9 2.4 2.0 1.7

Div yield (%) 2.9 4.1 5.0 5.5

ROE (%) 21.6 27.3 27.5 25.2

Net D/E (%) 51.5 53.9 37.4 20.7

We reiterate our BUY on SPALI given its strong presales and earnings in 2H14F and solid EPS growth of 22% y-y in 2015F. Its backlog accounts for 68% of our 2015F property sales forecast, and the stock has an appealing valuation, of 8.0x 2015F PE, with a 5.0% dividend yield.

As consumer confidence is returning and given its aggressive launches in 2H14F, worth Bt21bn vs. Bt9bn for 1H14, we expect solid 2H14F presales of Bt12.5bn (growth of 58% h-h). Of the seven new condos scheduled to be launched in 2H14, we expect high take-up rates for two: City Resort @ Baring Station (Bt780m, 334 units, Bt60,000/sqm) in August and Elite @ Phayathai (Bt1,890m, 258 units, Bt110,000/sqm) in September.

We forecast 2H14F net profit to grow by 260% h-h and 48% y-y, to Bt3.1bn, accounting for 72% of our 2014F net profit forecast, backed by a strong condo backlog for six projects.

The strong net profit growth will not just be a result of its strong condo backlog – we expect its low-rise housing presales to be at a record Bt8bn-plus for 2014F.

Sources: SPALI, Thanachart estimates




Ex 35: Valuation Table - LH Ex 36: LH – BUY, Price Bt10.00, TP Bt12.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 25,075 25,984 29,986 33,339

Net profit 6,478 6,584 7,757 8,706

Norm profit 6,442 6,584 7,757 8,706

Norm EPS (Bt) 0.6 0.6 0.6 0.7

Norm EPS grw (%) 23.2 0.9 12.4 12.2

Norm PE (x) 17.6 17.4 15.5 13.8

EV/EBITDA (x) 23.9 23.2 20.7 18.7

P/BV (x) 3.4 2.8 2.6 2.4

Div yield (%) 3.5 3.8 4.8 5.8

ROE (%) 19.8 17.2 17.3 18.2

Net D/E (%) 96.8 71.5 68.5 65.5

We upgrade our call on LH to BUY (from Hold) on its impressive June presales, which should enable it to maintain presales at the level it recorded last year, for which there was an already large base. Assuming full EPS dilution from the LH-W3 warrant exercise, we project flat EPS y-y for this year and moderate growth of 12% y-y next.

Presales for June, of Bt4.5bn, were up 105% y-y, beat our expectation, and were significantly higher than the company’s average monthly presales of Bt2.5bn for last year, mainly from the soft launch of presales for its first condo project of this year in June, namely the “333 Riverside”. A strong take-up rate for this project surprised us as the project is large, worth Bt6.5bn, and the average price is high at Bt110k/sqm given that the project is not in the Bangkok CBD but is near to a future mass transit stop.

Low-rise housing presales held up well in 1H14, growing by 4% y-y.

However, LH’s presales growth momentum in 2H14F will likely be less exciting than that of its peers, in line with the lower value of its new launches in 2H14F vs 1H14.

Sources: LH, Thanachart estimates

Ex 37: Valuation Table – PS Ex 38: PS – HOLD, Price Bt34.50, TP Bt34.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 38,848 41,200 45,218 49,531

Net profit 5,802 6,154 6,884 7,535

Norm profit 5,802 6,154 6,884 7,535

Norm EPS (Bt) 2.6 2.8 3.1 3.4

Norm EPS grw (%) 48.8 6.1 11.9 9.5

Norm PE (x) 13.2 12.5 11.1 10.2

EV/EBITDA (x) 12.3 12.0 10.6 9.5

P/BV (x) 3.1 2.6 2.2 1.9

Div yield (%) 2.5 2.4 2.7 2.9

ROE (%) 25.8 22.7 21.7 20.4

Net D/E (%) 76.8 78.7 60.7 46.7

We raise our earnings and TPs for PS significantly, given its strong recovery in presales since June and plan to increase new launches in 2H14F in response to the better industry outlook. However, we believe the good news is priced in and the company’s current valuation is at a premium to that of its sector peers, at 2015F PE of 11.1x. It has the lowest dividend yield among peers, at 2.7% for 2015F.

We have a HOLD rating on the stock, as we expect its quarterly earnings to improve towards year-end, with 12% y-y EPS growth for 2015F and a solid presales turnaround in 2H14F, at 46% h-h and 41% y-y, from negative presales of 21% y-y in 1H14.

The strong presales recovery was driven by PS’s core product in June, which led to low-rise housing presales growing by 16% y-y in 2Q14.

As it plans to increase its new launches for this year to 70 projects worth Bt70bn, from its earlier plan of 50-60 projects worth Bt55bn, we forecast 2H14F presales of Bt26.2bn, rising from Bt17.9bn in 1H14.

Its backlog is equivalent to 86% and 34% of our 2014-15F sales forecasts.

Sources: PS, Thanachart estimates




Ex 39: Valuation Table - AP Ex 40: AP – SELL, Price Bt6.85, TP Bt6.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 19,989 19,653 21,481 21,592

Net profit 2,013 2,030 2,217 2,254

Norm profit 2,009 2,030 2,217 2,254

Norm EPS (Bt) 0.7 0.7 0.8 0.8

Norm EPS grw (%) (2.9) 1.1 9.2 1.6

Norm PE (x) 9.6 9.5 8.7 8.6

EV/EBITDA (x) 11.6 12.3 11.0 10.0

P/BV (x) 1.4 1.3 1.2 1.1

Div yield (%) 3.6 3.1 3.4 3.5

ROE (%) 15.1 14.1 14.2 13.1

Net D/E (%) 103.8 119.9 101.2 73.7

Although we raise our presales and earnings forecasts to incorporate better-than-expected 1H14 presales, we reiterate our SELL rating on AP due to a lower growth outlook than peers, particularly in 2016F, when we expect falling condo revenues.

AP saw impressive total presales in 2Q14, particularly in May, mainly from Bt3.5bn worth of presales for three condos through its JV with Mitsubishi Estate Group. Note that AP holds 51% of this JV and will book the earnings contribution from the venture under equity income – presales from JV projects will not be booked at the top-line level.

Excluding presales from the JV, total presales for 1H14 were down 31% y-y. Due to fewer launches in 2H14F, presales momentum is unlikely to be exciting and should be driven by demand for low-rise houses.

While the outlook for the property industry is improving, we expect AP to deliver lower EPS growth than its peers, at 1% y-y in 2014F, 9% y-y in 2015F and 2% y-y in 2016F. This is due to its condos sales accounting for a high percentage of its revenue mix, at 50%. We currently assume flat sales y-y in 2016F. To achieve this, AP needs to either launch new condos that can be transferred in 2016 or boost its sales of low-rise houses. Assuming it sells off all of its existing condos, the maximum condo revenue would be Bt13.8bn for 2015F, falling to Bt8.9bn in 2016F.

Sources: AP, Thanachart estimates




Ex 41: Sector Valuation Comparison

AP LH LPN PS QH SIRI SPALI Average

Rating SELL BUY BUY HOLD BUY BUY BUY

Target price (Bt) Thanachart 6.00 12.00 28.00 34.00 5.00 2.40 30.00 Consensus 7.00 11.15 22.00 35.15 4.20 1.94 27.00

Consensus rec. Buy 20 15 16 19 20 6 22

Hold 5 11 3 6 3 5 5

Sell 4 1 7 3 3 9 0

Sales (Bt m) 2013 19,989 25,075 14,347 38,848 19,699 28,597 12,615 159,170

2014F 19,653 25,984 13,230 41,200 19,056 30,898 19,740 169,761

2015F 21,481 29,986 17,575 45,218 22,416 36,483 23,277 196,435

2016F 21,592 33,339 20,589 49,531 25,566 39,861 25,218 215,695

Norm profits (Bt m) 2013 2,009 6,442 2,329 5,802 3,261 1,912 2,882 24,636

2014F 2,030 6,584 2,099 6,154 3,230 2,204 4,308 26,609

2015F 2,217 7,757 3,250 6,884 3,889 3,225 5,255 32,476

2016F 2,254 8,706 3,603 7,535 4,487 4,336 5,730 36,651

Sales growth (%) 2013 15.5 4.0 7.7 43.8 50.6 (4.1) 9.6 16.9

2014F (1.7) 3.6 (7.8) 6.1 (3.3) 8.0 56.5 6.7

2015F 9.3 15.4 32.8 9.8 17.6 18.1 17.9 15.7

2016F 0.5 11.2 17.1 9.5 14.1 9.3 8.3 9.8

Norm profit growth (%) 2013 (2.9) 23.2 6.8 48.8 86.0 (33.3) 5.1 18.8

2014F 1.1 2.2 (9.9) 6.1 (0.9) 15.3 49.5 8.0

2015F 9.2 17.8 54.8 11.9 20.4 46.3 22.0 22.1

2016F 1.6 12.2 10.9 9.5 15.4 34.5 9.1 12.9

Norm EPS growth (%) 2013 (2.9) 23.2 6.8 48.8 83.1 (37.7) 5.1 18.1

2014F 1.1 0.9 (9.9) 6.1 (0.9) 4.6 49.5 7.3

2015F 9.2 12.4 54.8 11.9 20.4 22.6 22.0 21.9

2016F 1.6 12.2 10.9 9.5 15.4 7.3 9.1 9.4

Gross margin (%) 2013 33.8 36.2 32.7 34.7 32.4 32.6 40.6 34.7

2014F 33.5 35.7 31.8 35.2 32.5 32.1 40.3 34.5

2015F 33.5 36.2 34.5 35.0 32.9 32.2 40.9 35.0

2016F 33.3 36.2 33.3 34.9 33.2 32.7 40.7 34.9

SG&A/sales (%) 2013 19.9 13.7 12.4 15.6 17.2 23.8 11.8 16.4

2014F 19.0 13.5 12.0 16.0 17.5 22.3 12.0 16.0

2015F 19.0 13.5 11.5 15.5 17.5 20.5 11.6 15.6

2016F 19.0 13.5 11.5 15.5 17.5 19.0 11.4 15.3

Sources: Company data, Thanachart estimates Note : SIRI's current price and TP are adjusted to be post-XA




Ex 41: Sector Valuation Comparison (Con’t)

AP LH LPN PS QH SIRI SPALI Average

Rating SELL BUY BUY HOLD BUY BUY BUY Target price (Bt) Thanachart 6.00 12.00 28.00 34.00 5.00 2.40 30.00 Consensus 7.00 11.15 22.00 35.15 4.20 1.94 27.00 Consensus rec. Buy 20 15 16 19 20 6 22 Hold 5 11 3 6 3 5 5 Sell 4 1 7 3 3 9 0

Net margin (%) 2013 10.1 17.7 16.2 14.9 11.8 6.7 23.4 14.4

2014F 10.4 17.2 15.9 14.9 11.5 7.1 22.3 14.2

2015F 10.3 17.7 18.5 15.2 12.0 8.8 23.0 15.1

2016F 10.2 17.7 17.5 15.2 12.3 10.9 23.2 15.3

ROE (%) 2013 15.1 19.8 25.7 25.8 19.7 11.8 21.6 19.9

2014F 14.1 17.2 20.9 22.7 17.8 10.4 27.3 18.6

2015F 14.2 17.3 28.1 21.7 19.2 10.4 27.5 19.8

2016F 13.1 18.2 26.3 20.4 19.6 11.4 25.2 19.2

ROIC (%) 2013 9.0 7.8 21.6 16.6 6.5 5.3 18.6 12.2

2014F 8.0 6.9 15.1 14.5 6.3 5.1 20.5 10.9

2015F 7.6 7.3 24.6 13.7 6.8 5.5 20.2 12.2

2016F 7.5 7.7 23.1 14.2 7.7 7.2 20.4 12.5

Norm PE (x) 2013 9.6 17.6 14.1 13.2 11.0 10.9 14.5 13.0

2014F 9.5 17.4 15.6 12.5 11.1 10.4 9.7 12.3

2015F 8.7 15.5 10.1 11.1 9.2 8.5 8.0 10.2

2016F 8.6 13.8 9.1 10.2 8.0 7.9 7.3 9.3

Dividend yield (%) 2013 3.6 3.5 3.8 2.5 4.1 4.5 2.9 3.6

2014F 3.1 3.8 3.2 2.4 4.1 4.8 4.1 3.7

2015F 3.4 4.8 5.0 2.7 4.9 4.7 5.0 4.4

2016F 3.5 5.8 5.5 2.9 5.6 6.3 5.5 5.0

Net D/E (x) 2013 1.0 1.0 0.4 0.8 1.1 1.9 0.5 1.0

2014F 1.2 0.7 0.3 0.8 1.1 1.4 0.5 0.9

2015F 1.0 0.7 0.2 0.6 0.9 0.6 0.4 0.6

2016F 0.7 0.7 0.2 0.5 0.8 0.5 0.2 0.5

Sources: Company data, Thanachart estimates Note : SIRI's current price and TP are adjusted to be post-XA




Valuation Comparison

Ex 42: Valuation Comparison With Regional Peers

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

Name BBG Code Country 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F

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

Poly Real Estate Group 600048 CH China 24.4 21.5 5.0 4.1 1.0 0.8 7.5 6.0 4.0 4.7

Agile Property Holdings 3383 HK China (12.5) 8.9 5.1 4.7 0.7 0.6 5.8 5.3 5.7 6.1

Country Garden Holdings 2007 HK China 17.7 16.0 7.1 6.1 1.4 1.2 6.1 5.2 4.9 5.7

China Overseas Land & Invest 688 HK Hong Kong 0.0 16.3 8.2 7.1 1.5 1.3 6.8 5.9 2.4 2.7

China Resources Land 1109 HK Hong Kong (20.9) 19.3 8.7 7.3 1.0 0.9 7.1 6.1 2.9 3.4

Hang Lung Properties 101 HK Hong Kong (22.0) 15.0 18.8 16.4 0.8 0.8 15.4 13.6 3.2 3.3

Henderson Land Development 12 HK Hong Kong (45.4) 1.7 16.2 15.9 0.6 0.6 27.6 27.3 2.1 2.1

Shimao Property Holdings 813 HK Hong Kong 18.0 17.2 7.0 5.9 1.3 1.1 6.0 5.0 4.4 5.1

Sun Hung Kai Properties 16 HK Hong Kong (47.3) (6.1) 13.9 14.8 0.8 0.7 13.2 13.6 3.0 3.0

Sino Land 83 HK Hong Kong (58.4) 3.8 16.3 15.7 0.7 0.7 19.5 22.0 3.7 3.7

Bakrieland Development ELTY IJ Indonesia na na na na na na na na na na

Ciputra Property CTRP IJ Indonesia (17.7) 3.6 13.1 12.6 0.9 na 10.3 7.8 2.8 2.7

Intiland Development DILD IJ Indonesia 25.7 36.4 12.1 8.9 1.1 1.1 8.8 7.6 1.3 1.6

CapitaLand CAPL SP Singapore (19.0) 11.1 20.3 18.3 0.9 0.8 21.2 19.4 2.4 2.4

City Developments CIT SP Singapore (5.4) 9.0 15.1 13.8 1.2 1.1 14.1 13.1 1.3 1.3

Guocoland GUOL SP Singapore 292.2 35.7 15.1 11.1 na na na na na na

Keppel Land KPLD SP Singapore (54.3) 9.9 13.5 12.3 0.8 0.7 21.8 20.5 2.9 3.0

Asian Property Devt * AP TB Thailand 1.1 9.2 9.5 8.7 1.3 1.2 12.3 11.0 3.1 3.4

Land and Houses * LH TB Thailand 0.9 12.4 17.4 15.5 2.8 2.6 23.2 20.7 3.8 4.8

LPN Development * LPN TB Thailand (9.9) 54.8 15.6 10.1 3.1 2.6 13.3 8.7 3.2 5.0

Pruksa Real Estate * PS TB Thailand 6.1 11.9 12.5 11.1 2.6 2.2 12.0 10.6 2.4 2.7

Quality Houses * QH TB Thailand (0.9) 20.4 11.1 9.2 1.9 1.7 18.7 15.2 4.1 4.9

Sansiri * SIRI TB Thailand 4.6 22.6 10.4 8.5 1.1 0.9 17.6 10.9 4.8 4.7

Supalai * SPALI TB Thailand 49.5 22.0 9.7 8.0 2.4 2.0 9.0 7.2 4.1 5.0

Average 5.5 16.2 12.3 10.7 1.4 1.2 13.5 11.9 3.3 3.7 Sources: Bloomberg consensus, *Thanachart estimates Based on 29 July 2014 closing prices Note : SIRI's current price and TP are adjusted to be post-XA

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APPENDIX PHANNARAI TIYAPITTAYARUT


STOCK PERFORMANCE

Absolute (%) Rel SET (%) 1M 3M 12M YTD 1M 3M 12M YTD

SET INDEX 2.5 7.7 4.6 17.1 — — — —

Property Sector 5.3 15.8 10.0 31.1 2.8 8.1 5.4 14.1

AP 5.5 17.5 13.6 52.3 3.0 9.9 9.0 35.2

LH 1.0 1.5 (5.7) 11.7 (1.5) (6.1) (10.2) (5.3)

LPN 11.0 29.1 0.0 43.2 8.5 21.4 (4.6) 26.1

PS 16.9 56.1 80.6 89.6 14.4 48.4 76.1 72.5

QH 19.0 27.0 41.8 56.8 16.5 19.3 37.2 39.7

SIRI 3.0 8.9 (26.2) 16.2 0.5 1.2 (30.8) (0.9)

SPALI 10.9 25.8 45.2 67.1 8.4 18.1 40.7 50.0

Source: Bloomberg

SECTOR - SWOT ANALYSIS

S — Strength W — Weakness

Market consolidation with leading developers having advantages

– easy access to project financing, brand reputation, economies

of scale.

Strong financials with low net D/E.

Low barriers to entry.

Higher land prices.

Rising raw material prices and labor cost.

O — Opportunity T — Threat

Interest rate remains low.

Opportunities in the provinces.

Overseas expansion.

Small players normally come back during a market boom.

Natural disasters.

REGIONAL COMPARISON

EPS growth — PE — — P/BV — – EV/EBITDA – — Div. Yield — Name 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F China 9.9 15.5 5.7 5.0 1.0 0.9 6.5 5.5 4.9 5.5 Hong Kong (19.6) 9.6 12.7 11.9 1.0 0.9 13.7 13.3 3.1 3.3 Indonesia 4.0 20.0 12.6 10.7 1.0 1.1 9.5 7.7 2.1 2.2 Singapore 89.2 16.4 16.0 13.9 0.9 0.9 19.0 17.7 2.2 2.3 Thailand 7.3 21.9 12.3 10.2 2.2 1.9 15.2 12.0 3.7 4.4

Average 18.2 16.7 11.9 10.3 1.2 1.1 12.8 11.2 3.2 3.5 AP 1.1 9.2 9.5 8.7 1.3 1.2 12.3 11.0 3.1 3.4 LH 0.9 12.4 17.4 15.5 2.8 2.6 23.2 20.7 3.8 4.8 LPN (9.9) 54.8 15.6 10.1 3.1 2.6 13.3 8.7 3.2 5.0 PS 6.1 11.9 12.5 11.1 2.6 2.2 12.0 10.6 2.4 2.7 QH (0.9) 20.4 11.1 9.2 1.9 1.7 18.7 15.2 4.1 4.9 SIRI 4.6 22.6 10.4 8.5 1.1 0.9 17.6 10.9 4.8 4.7 SPALI 49.5 22.0 9.7 8.0 2.4 2.0 9.0 7.2 4.1 5.0

Average *- Thailand 7.3 21.9 12.3 10.2 2.2 1.9 15.2 12.0 3.7 4.4

Source: Bloomberg Consensus Note: * Thanachart estimates – using normalized EPS


FINANCIAL SUMMARY PHANNARAI TIYAPITTAYARUT


Asian Property Development

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 17,310 19,989 19,653 21,481 21,592Cost of sales 11,273 13,238 13,069 14,284 14,400 Gross profit 6,036 6,750 6,584 7,198 7,192% gross margin 34.9% 33.8% 33.5% 33.5% 33.3%Selling & administration expenses 3,128 3,976 3,734 4,081 4,102 Operating profit 2,908 2,774 2,850 3,116 3,089% operating margin 16.8% 13.9% 14.5% 14.5% 14.3%Depreciation & amortization 152 159 166 170 173 EBITDA 3,061 2,933 3,017 3,286 3,262% EBITDA margin 17.7% 14.7% 15.3% 15.3% 15.1%Non-operating income 76 67 65 70 72Non-operating expenses (11) 0 0 0 0Interest expense (213) (293) (353) (414) (409) Pre-tax profit 2,760 2,549 2,563 2,772 2,752Income tax 691 539 513 554 550 After-tax profit 2,068 2,010 2,050 2,217 2,202% net margin 11.9% 10.1% 10.4% 10.3% 10.2%Shares in affi liates' Earnings 0 (1) (20) 0 52Minority interests (0) (0) 0 0 0Extraordinary items 117 5 0 0 0NET PROFIT 2,186 2,013 2,030 2,217 2,254Normalized profit 2,068 2,009 2,030 2,217 2,254EPS (Bt) 0.8 0.7 0.7 0.8 0.8Normalized EPS (Bt) 0.7 0.7 0.7 0.8 0.8

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 28,753 33,158 36,753 37,567 36,123 Cash & cash equivalent 744 889 564 752 985 Account receivables 108 110 108 118 118 Inventories 26,490 30,784 34,730 35,220 33,535 Others 1,411 1,375 1,352 1,478 1,485Investments & loans 0 306 306 306 306Net fixed assets 284 220 259 295 329Other assets 435 727 714 781 785Total assets 29,472 34,410 38,033 38,949 37,542

LIABILITIES:Current liabilities: 8,396 9,667 10,372 10,297 9,421 Account payables 725 1,290 895 978 986 Bank overdraft & ST loans 1,659 2,699 2,752 2,609 2,141 Current LT debt 2,550 2,360 3,119 2,956 2,426 Others current liabilities 3,461 3,318 3,606 3,754 3,868Total LT debt 8,073 10,371 12,475 11,825 9,704Others LT liabilities 323 364 358 391 393Total liabilities 16,792 20,402 23,205 22,513 19,518Minority interest 0 0 0 0 0Preferreds shares 0 0 0 0 0Paid-up capital 2,848 2,860 2,825 2,825 2,825Share premium 72 89 89 89 89Warrants 0 0 0 0 0Surplus 0 0 0 0 0Retained earnings 9,759 11,058 11,912 13,521 15,109Shareholders' equity 12,679 14,007 14,827 16,435 18,024Liabilities & equity 29,472 34,410 38,033 38,949 37,542

Sources: Company data; Thanachart estimates





CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 2,760 2,549 2,563 2,772 2,752Tax paid (843) (578) (477) (551) (538)Depreciation & amortization 152 159 166 170 173Chg In working capital 237 (3,731) (4,339) (417) 1,693Chg In other CA & CL / minorities 126 (255) (97) (396) (263)Cash flow from operations 2,432 (1,856) (2,183) 1,578 3,816

Capex 42 12 (100) (100) (100)ST loans & investments 0 0 0 0 0LT loans & investments 135 (306) 0 0 0Adj for asset revaluation (27) 0 0 0 0Chg In other assets & liabilities (195) (167) 253 275 301Cash flow from investments (45) (461) 153 175 201Debt financing (1,941) 3,147 2,916 (956) (3,119)Capital increase 66 29 (35) 0 0Dividends paid (509) (715) (706) (609) (665)Warrants & other surplus 303 0 (469) 0 0Cash flow from financing (2,081) 2,462 1,705 (1,565) (3,784)

Free cash flow 2,474 (1,844) (2,283) 1,478 3,716

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 9.4 9.6 9.5 8.7 8.6Normalized PE - at target price (x) 8.2 8.4 8.3 7.6 7.5PE (x) 8.9 9.6 9.5 8.7 8.6PE - at target price (x) 7.8 8.4 8.3 7.6 7.5EV/EBITDA (x) 10.1 11.6 12.3 11.0 10.0EV/EBITDA - at target price (x) 9.3 10.7 11.5 10.2 9.3P/BV (x) 1.5 1.4 1.3 1.2 1.1P/BV - at target price (x) 1.3 1.2 1.1 1.0 0.9P/CFO (x) 8.0 (10.4) (8.9) 12.3 5.1Price/sales (x) 1.1 1.0 1.0 0.9 0.9Dividend yield (%) 3.6 3.6 3.1 3.4 3.5FCF Yield (%) 12.8 (9.5) (11.8) 7.6 19.2

(Bt)Normalized EPS 0.7 0.7 0.7 0.8 0.8EPS 0.8 0.7 0.7 0.8 0.8DPS 0.3 0.3 0.2 0.2 0.2BV/share 4.5 5.0 5.2 5.8 6.4 CFO/share 0.9 (0.7) (0.8) 0.6 1.4 FCF/share 0.9 (0.7) (0.8) 0.5 1.3






FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 26.9 15.5 (1.7) 9.3 0.5Net profit (%) 40.9 (7.9) 0.8 9.2 1.6EPS (%) 40.7 (7.9) 0.8 9.2 1.6Normalized profit (%) 33.7 (2.9) 1.1 9.2 1.6Normalized EPS (%) 33.5 (2.9) 1.1 9.2 1.6Dividend payout ratio (%) 32.3 35.1 30.0 30.0 30.0

Operating performanceGross margin (%) 34.9 33.8 33.5 33.5 33.3Operating margin (%) 16.8 13.9 14.5 14.5 14.3EBITDA margin (%) 17.7 14.7 15.3 15.3 15.1Net margin (%) 11.9 10.1 10.4 10.3 10.2D/E (incl. minor) (x) 1.0 1.1 1.2 1.1 0.8Net D/E (incl. minor) (x) 0.9 1.0 1.2 1.0 0.7Interest coverage - EBIT (x) 13.7 9.5 8.1 7.5 7.5Interest coverage - EBITDA (x) 14.4 10.0 8.6 7.9 8.0ROA - using norm profit (%) 7.0 6.3 5.6 5.8 5.9ROE - using norm profit (%) 17.7 15.1 14.1 14.2 13.1

DuPontROE - using after tax profit (%) 17.7 15.1 14.2 14.2 12.8 - asset turnover (x) 0.6 0.6 0.5 0.6 0.6 - operating margin (%) 17.2 14.2 14.8 14.8 14.6 - leverage (x) 2.5 2.4 2.5 2.5 2.2 - interest burden (%) 92.8 89.7 87.9 87.0 87.1 - tax burden (%) 74.9 78.9 80.0 80.0 80.0WACC (%) 11.0 11.0 11.0 11.0 11.0ROIC (%) 8.9 9.0 8.0 7.6 7.5 NOPAT (Bt m) 2,180 2,188 2,280 2,493 2,471





Land & Houses

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 24,103 25,075 25,984 29,986 33,339Cost of sales 15,792 15,990 16,699 19,125 21,273 Gross profit 8,310 9,085 9,285 10,860 12,066% gross margin 34.5% 36.2% 35.7% 36.2% 36.2%Selling & administration expenses 3,518 3,436 3,508 4,048 4,501 Operating profit 4,793 5,650 5,778 6,812 7,565% operating margin 19.9% 22.5% 22.2% 22.7% 22.7%Depreciation & amortization 494 509 535 568 640 EBITDA 5,287 6,159 6,313 7,380 8,205% EBITDA margin 21.9% 24.6% 24.3% 24.6% 24.6%Non-operating income 309 464 434 471 522Non-operating expenses 0 0 0 0 0Interest expense (488) (570) (623) (656) (715) Pre-tax profit 4,613 5,544 5,589 6,627 7,371Income tax 1,119 1,102 1,118 1,325 1,474 After-tax profit 3,494 4,442 4,471 5,301 5,897% net margin 14.5% 17.7% 17.2% 17.7% 17.7%Shares in affi liates' Earnings 1,770 2,109 2,226 2,586 2,954Minority interests (35) (109) (113) (131) (145)Extraordinary items 453 37 0 0 0NET PROFIT 5,682 6,478 6,584 7,757 8,706Normalized profit 5,229 6,442 6,584 7,757 8,706EPS (Bt) 0.5 0.6 0.6 0.6 0.7Normalized EPS (Bt) 0.5 0.6 0.6 0.6 0.7

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 35,162 41,205 46,352 49,428 51,949 Cash & cash equivalent 1,462 1,216 1,342 1,532 1,589 Account receivables 120 136 141 163 181 Inventories 32,537 38,496 43,463 46,111 48,374 Others 1,043 1,357 1,406 1,623 1,804Investments & loans 17,413 18,628 20,728 20,728 20,728Net fixed assets 4,816 4,743 4,707 5,139 5,500Other assets 7,650 10,794 11,185 12,907 14,351Total assets 65,040 75,369 82,972 88,203 92,527

LIABILITIES:Current liabilities: 11,480 13,656 16,422 17,555 18,331 Account payables 2,146 2,806 2,516 2,882 3,206 Bank overdraft & ST loans 2,087 3,565 6,635 6,853 6,982 Current LT debt 5,545 5,270 5,308 5,483 5,586 Others current liabilities 1,703 2,015 1,962 2,337 2,557Total LT debt 20,163 26,104 21,233 21,931 22,343Others LT liabilities 795 766 793 915 1,018Total liabilities 32,438 40,526 38,449 40,401 41,691Minority interest 1,161 1,270 1,383 1,514 1,659Preferreds shares 0 0 0 0 0Paid-up capital 10,026 10,026 12,024 12,024 12,024Share premium 11,953 11,589 16,585 16,585 16,585Warrants 0 0 0 0 0Surplus 0 0 0 0 0Retained earnings 9,462 11,957 14,531 17,680 20,567Shareholders' equity 31,441 33,573 43,140 46,289 49,176Liabilities & equity 65,040 75,369 82,972 88,203 92,527





Land & Houses

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 4,613 5,544 5,589 6,627 7,371Tax paid (580) (1,229) (1,022) (1,283) (1,380)Depreciation & amortization 494 509 535 568 640Chg In working capital (796) (5,315) (5,261) (2,304) (1,958)Chg In other CA & CL / minorities 788 1,550 1,160 1,789 1,905Cash flow from operations 4,519 1,058 1,002 5,397 6,578

Capex (188) (436) (500) (1,000) (1,000)ST loans & investments 0 0 0 0 0LT loans & investments (2,578) (1,215) (2,100) 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 1,134 (2,452) 504 (687) (347)Cash flow from investments (1,632) (4,103) (2,096) (1,687) (1,347)Debt financing 1,012 7,146 (1,763) 1,089 644Capital increase 1,131 (364) 6,994 0 0Dividends paid (5,266) (3,977) (4,010) (4,609) (5,818)Warrants & other surplus 498 (7) 0 0 0Cash flow from financing (2,625) 2,799 1,221 (3,520) (5,174)

Free cash flow 4,331 622 502 4,397 5,578

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 21.7 17.6 17.4 15.5 13.8Normalized PE - at target price (x) 26.0 21.1 20.9 18.6 16.6PE (x) 19.9 17.5 17.4 15.5 13.8PE - at target price (x) 23.9 21.0 20.9 18.6 16.6EV/EBITDA (x) 26.4 23.9 23.2 20.7 18.7EV/EBITDA - at target price (x) 30.7 27.5 26.8 24.0 21.6P/BV (x) 3.6 3.4 2.8 2.6 2.4P/BV - at target price (x) 4.3 4.0 3.3 3.1 2.9P/CFO (x) 25.1 107.0 114.5 22.3 18.3Price/sales (x) 4.5 4.3 4.2 3.6 3.2Dividend yield (%) 4.0 3.5 3.8 4.8 5.8FCF Yield (%) 3.8 0.5 0.4 3.7 4.6

(Bt)Normalized EPS 0.5 0.6 0.6 0.6 0.7EPS 0.5 0.6 0.6 0.6 0.7DPS 0.4 0.4 0.4 0.5 0.6BV/share 2.8 3.0 3.6 3.8 4.1 CFO/share 0.4 0.1 0.1 0.4 0.5 FCF/share 0.4 0.1 0.0 0.4 0.5





Land & Houses

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 25.3 4.0 3.6 15.4 11.2Net profit (%) 1.3 14.0 1.6 17.8 12.2EPS (%) 1.3 14.0 0.3 12.4 12.2Normalized profit (%) 39.7 23.2 2.2 17.8 12.2Normalized EPS (%) 39.7 23.2 0.9 12.4 12.2Dividend payout ratio (%) 79.4 61.9 70.0 75.0 80.0







L.P.N. Development

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 13,325 14,347 13,230 17,575 20,589Cost of sales 9,008 9,657 9,018 11,505 13,731 Gross profit 4,317 4,690 4,212 6,071 6,858% gross margin 32.4% 32.7% 31.8% 34.5% 33.3%Selling & administration expenses 1,547 1,779 1,588 2,021 2,368 Operating profit 2,770 2,912 2,625 4,049 4,490% operating margin 20.8% 20.3% 19.8% 23.0% 21.8%Depreciation & amortization 35 37 37 38 40 EBITDA 2,805 2,948 2,661 4,088 4,530% EBITDA margin 21.1% 20.6% 20.1% 23.3% 22.0%Non-operating income 41 54 44 57 67Non-operating expenses 0 0 0 0 0Interest expense (10) (12) (45) (44) (53) Pre-tax profit 2,801 2,954 2,624 4,062 4,504Income tax 688 625 525 812 901 After-tax profit 2,113 2,329 2,099 3,250 3,603% net margin 15.9% 16.2% 15.9% 18.5% 17.5%Shares in affi liates' Earnings 68 0 0 0 0Minority interests (0) (0) (0) (0) (0)Extraordinary items 49 0 0 0 0NET PROFIT 2,229 2,329 2,099 3,250 3,603Normalized profit 2,181 2,329 2,099 3,250 3,603EPS (Bt) 1.5 1.6 1.4 2.2 2.4Normalized EPS (Bt) 1.5 1.6 1.4 2.2 2.4

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 12,289 16,025 14,980 17,795 20,485 Cash & cash equivalent 1,168 1,192 1,024 1,245 1,489 Account receivables 222 130 120 159 187 Inventories 10,899 14,703 13,836 16,390 18,810 Others 0 0 0 0 0Investments & loans 0 0 0 0 0Net fixed assets 1,541 1,203 1,516 1,828 2,037Other assets 192 193 178 236 277Total assets 14,021 17,420 16,674 19,859 22,800

LIABILITIES:Current liabilities: 4,401 7,480 5,929 6,851 7,769 Account payables 2,093 2,101 1,962 2,503 2,987 Bank overdraft & ST loans 1,113 4,234 2,983 3,274 3,538 Current LT debt 723 914 644 707 764 Others current liabilities 471 231 340 367 480Total LT debt 1,008 140 99 109 117Others LT liabilities 131 174 161 213 250Total liabilities 5,539 7,794 6,189 7,173 8,136Minority interest 0 0 0 0 0Preferreds shares 0 0 0 0 0Paid-up capital 1,476 1,476 1,476 1,476 1,476Share premium 442 442 442 442 442Warrants 0 0 0 0 0Surplus 39 39 39 39 39Retained earnings 6,525 7,669 8,528 10,728 12,706Shareholders' equity 8,482 9,626 10,485 12,685 14,663Liabilities & equity 14,021 17,420 16,674 19,859 22,800





L.P.N. Development

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 2,801 2,954 2,624 4,062 4,504Tax paid (688) (625) (525) (812) (901)Depreciation & amortization 35 37 37 38 40Chg In working capital (2,758) (3,704) 738 (2,053) (1,962)Chg In other CA & CL / minorities 81 (391) (26) (105) (47)Cash flow from operations (529) (1,730) 2,848 1,131 1,634

Capex (153) 302 (350) (350) (250)ST loans & investments 0 0 0 0 0LT loans & investments 211 0 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (15) 193 137 126 156Cash flow from investments 44 495 (213) (224) (94)Debt financing 2,234 2,444 (1,562) 363 329Capital increase 0 0 0 0 0Dividends paid (981) (1,165) (1,240) (1,049) (1,625)Warrants & other surplus 105 (20) (20) (20) (20)Cash flow from financing 1,358 1,259 (2,822) (706) (1,315)

Free cash flow (682) (1,429) 2,498 781 1,384

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 15.0 14.1 15.6 10.1 9.1Normalized PE - at target price (x) 18.9 17.7 19.7 12.7 11.5PE (x) 14.7 14.1 15.6 10.1 9.1PE - at target price (x) 18.5 17.7 19.7 12.7 11.5EV/EBITDA (x) 12.3 12.5 13.3 8.7 7.9EV/EBITDA - at target price (x) 15.3 15.4 16.5 10.8 9.8P/BV (x) 3.9 3.4 3.1 2.6 2.2P/BV - at target price (x) 4.9 4.3 3.9 3.3 2.8P/CFO (x) (61.9) (18.9) 11.5 29.0 20.1Price/sales (x) 2.5 2.3 2.5 1.9 1.6Dividend yield (%) 3.4 3.8 3.2 5.0 5.5FCF Yield (%) (2.1) (4.4) 7.6 2.4 4.2

(Bt)Normalized EPS 1.5 1.6 1.4 2.2 2.4EPS 1.5 1.6 1.4 2.2 2.4DPS 0.8 0.8 0.7 1.1 1.2BV/share 5.7 6.5 7.1 8.6 9.9 CFO/share (0.4) (1.2) 1.9 0.8 1.1 FCF/share (0.5) (1.0) 1.7 0.5 0.9





L.P.N. Development

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 8.0 7.7 (7.8) 32.8 17.1Net profit (%) 16.3 4.5 (9.9) 54.8 10.9EPS (%) 16.3 4.5 (9.9) 54.8 10.9Normalized profit (%) 14.2 6.8 (9.9) 54.8 10.9Normalized EPS (%) 14.2 6.8 (9.9) 54.8 10.9Dividend payout ratio (%) 50.3 53.2 50.0 50.0 50.0







Pruksa Real Estate

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 27,023 38,848 41,200 45,218 49,531Cost of sales 17,890 25,350 26,711 29,386 32,226 Gross profit 9,133 13,498 14,489 15,831 17,306% gross margin 33.8% 34.7% 35.2% 35.0% 34.9%Selling & administration expenses 3,925 6,077 6,592 7,009 7,677 Operating profit 5,208 7,421 7,897 8,822 9,628% operating margin 19.3% 19.1% 19.2% 19.5% 19.4%Depreciation & amortization 369 374 395 412 429 EBITDA 5,577 7,795 8,292 9,234 10,057% EBITDA margin 20.6% 20.1% 20.1% 20.4% 20.3%Non-operating income 117 193 203 213 224Non-operating expenses 0 0 0 0 0Interest expense (305) (415) (504) (539) (551) Pre-tax profit 5,021 7,199 7,596 8,497 9,301Income tax 1,123 1,399 1,443 1,614 1,767 After-tax profit 3,898 5,801 6,153 6,882 7,534% net margin 14.4% 14.9% 14.9% 15.2% 15.2%Shares in affi liates' Earnings 0 0 0 0 0Minority interests 0 1 1 1 1Extraordinary items 0 0 0 0 0NET PROFIT 3,898 5,802 6,154 6,884 7,535Normalized profit 3,898 5,802 6,154 6,884 7,535EPS (Bt) 1.8 2.6 2.8 3.1 3.4Normalized EPS (Bt) 1.8 2.6 2.8 3.1 3.4

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 40,989 52,291 61,281 65,165 69,708 Cash & cash equivalent 1,566 1,815 1,890 2,246 2,478 Account receivables 0 0 113 124 136 Inventories 37,818 48,687 57,080 60,383 64,452 Others 1,605 1,789 2,198 2,412 2,642Investments & loans 0 0 0 0 0Net fixed assets 2,220 2,702 2,807 2,896 2,967Other assets 612 1,201 1,274 1,398 1,531Total assets 43,821 56,194 65,362 69,458 74,206

LIABILITIES:Current liabilities: 15,281 16,997 22,841 22,834 23,138 Account payables 1,527 2,090 2,195 2,415 2,649 Bank overdraft & ST loans 1,529 6,698 7,458 6,910 6,308 Current LT debt 7,740 257 4,351 4,031 3,679 Others current liabilities 4,486 7,952 8,836 9,477 10,502Total LT debt 8,258 14,008 13,052 12,093 11,038Others LT liabilities 0 0 0 0 0Total liabilities 23,739 31,261 36,166 35,226 34,504Minority interest 0 2 1 (1) (2)Preferreds shares 0 0 0 0 0Paid-up capital 2,213 2,223 2,224 2,224 2,224Share premium 1,452 1,594 1,594 1,594 1,594Warrants 17 18 18 18 18Surplus (74) (70) (70) (70) (70)Retained earnings 16,474 21,165 25,428 30,466 35,936Shareholders' equity 20,081 24,931 29,195 34,233 39,703Liabilities & equity 43,821 56,194 65,362 69,458 74,206





Pruksa Real Estate

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 5,021 7,199 7,596 8,497 9,301Tax paid (960) (1,273) (1,348) (1,572) (1,675)Depreciation & amortization 369 374 395 412 429Chg In working capital (1,214) (10,306) (8,402) (3,094) (3,847)Chg In other CA & CL / minorities (419) 2,805 (32) (155) 152Cash flow from operations 2,797 (1,201) (1,791) 4,088 4,360

Capex (120) (856) (500) (500) (500)ST loans & investments 0 0 0 0 0LT loans & investments 0 0 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 451 (177) 355 441 446Cash flow from investments 331 (1,033) (145) (59) (54)Debt financing (2,780) 3,436 3,899 (1,827) (2,009)Capital increase 59 152 1 0 0Dividends paid (884) (1,110) (1,891) (1,846) (2,065)Warrants & other surplus 12 6 0 0 0Cash flow from financing (3,593) 2,483 2,010 (3,673) (4,074)

Free cash flow 2,677 (2,057) (2,291) 3,588 3,860







Pruksa Real Estate

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 16.2 43.8 6.1 9.8 9.5Net profit (%) 37.5 48.8 6.1 11.9 9.5EPS (%) 37.5 48.8 6.1 11.9 9.5Normalized profit (%) 37.5 48.8 6.1 11.9 9.5Normalized EPS (%) 37.5 48.8 6.1 11.9 9.5Dividend payout ratio (%) 28.5 32.6 30.0 30.0 30.0







Quality Houses

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 13,077 19,699 19,056 22,416 25,566Cost of sales 9,028 13,312 12,854 15,038 17,083 Gross profit 4,049 6,387 6,202 7,378 8,483% gross margin 31.0% 32.4% 32.5% 32.9% 33.2%Selling & administration expenses 2,639 3,394 3,335 3,923 4,474 Operating profit 1,411 2,993 2,867 3,455 4,009% operating margin 10.8% 15.2% 15.0% 15.4% 15.7%Depreciation & amortization 221 176 181 182 183 EBITDA 1,632 3,169 3,048 3,637 4,192% EBITDA margin 12.5% 16.1% 16.0% 16.2% 16.4%Non-operating income 149 160 153 178 203Non-operating expenses 0 0 0 0 0Interest expense (295) (228) (258) (246) (263) Pre-tax profit 1,265 2,925 2,762 3,387 3,948Income tax 313 608 580 696 814 After-tax profit 951 2,317 2,182 2,691 3,134% net margin 7.3% 11.8% 11.5% 12.0% 12.3%Shares in affi liates' Earnings 802 943 1,048 1,198 1,353Minority interests 0 0 0 0 0Extraordinary items 697 47 0 0 0NET PROFIT 2,450 3,307 3,230 3,889 4,487Normalized profit 1,753 3,261 3,230 3,889 4,487EPS (Bt) 0.3 0.4 0.4 0.4 0.5Normalized EPS (Bt) 0.2 0.4 0.4 0.4 0.5

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 24,496 24,901 28,956 30,487 34,230 Cash & cash equivalent 1,650 1,630 1,150 1,247 1,478 Account receivables 88 91 88 104 118 Inventories 21,697 22,558 27,116 28,428 31,826 Others 1,062 622 602 708 807Investments & loans 7,063 7,705 7,705 7,705 7,705Net fixed assets 9,349 7,768 7,837 7,905 7,971Other assets 962 1,277 1,236 1,453 1,658Total assets 41,871 41,652 45,734 47,550 51,563

LIABILITIES:Current liabilities: 10,186 7,481 11,630 11,748 12,543 Account payables 805 882 1,056 1,236 1,404 Bank overdraft & ST loans 5,272 323 4,437 4,160 4,266 Current LT debt 2,080 3,985 3,550 3,328 3,413 Others current liabilities 2,030 2,290 2,586 3,024 3,460Total LT debt 15,012 16,012 14,199 13,311 13,651Others LT liabilities 878 882 853 1,003 1,144Total liabilities 26,076 24,374 26,681 26,062 27,338Minority interest 0 0 0 0 0Preferreds shares 0 0 0 0 0Paid-up capital 9,184 9,184 9,184 9,184 9,184Share premium 379 379 379 379 379Warrants 0 0 0 0 0Surplus 66 (15) 0 0 0Retained earnings 6,166 7,729 9,489 11,925 14,662Shareholders' equity 15,795 17,277 19,052 21,488 24,225Liabilities & equity 41,871 41,652 45,734 47,550 51,563





Quality Houses

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 1,265 2,925 2,762 3,387 3,948Tax paid 203 (833) (352) (743) (666)Depreciation & amortization 221 176 181 182 183Chg In working capital (5,032) (786) (4,381) (1,148) (3,244)Chg In other CA & CL / minorities 174 1,243 534 839 751Cash flow from operations (3,168) 2,724 (1,256) 2,518 972

Capex 3,524 1,505 (150) (150) (150)ST loans & investments 0 0 0 0 0LT loans & investments (978) (642) 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 1,017 262 515 570 627Cash flow from investments 3,563 1,125 365 420 477Debt financing (36) (2,044) 1,865 (1,387) 532Capital increase 706 0 0 0 0Dividends paid (78) (1,745) (1,469) (1,453) (1,750)Warrants & other surplus (450) (80) 15 0 0Cash flow from financing 141 (3,869) 410 (2,840) (1,218)

Free cash flow 356 4,229 (1,406) 2,368 822

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 20.1 11.0 11.1 9.2 8.0Normalized PE - at target price (x) 25.8 14.1 14.2 11.8 10.2PE (x) 14.4 10.8 11.1 9.2 8.0PE - at target price (x) 18.5 13.9 14.2 11.8 10.2EV/EBITDA (x) 34.3 17.2 18.7 15.2 13.3EV/EBITDA - at target price (x) 40.4 20.4 22.0 18.0 15.7P/BV (x) 2.3 2.1 1.9 1.7 1.5P/BV - at target price (x) 2.9 2.7 2.4 2.1 1.9P/CFO (x) (11.1) 13.1 (28.5) 14.2 36.8Price/sales (x) 2.7 1.8 1.9 1.6 1.4Dividend yield (%) 3.1 4.1 4.1 4.9 5.6FCF Yield (%) 1.0 11.8 (3.9) 6.6 2.3

(Bt)Normalized EPS 0.2 0.4 0.4 0.4 0.5EPS 0.3 0.4 0.4 0.4 0.5DPS 0.1 0.2 0.2 0.2 0.2BV/share 1.7 1.9 2.1 2.3 2.6 CFO/share (0.4) 0.3 (0.1) 0.3 0.1 FCF/share 0.0 0.5 (0.2) 0.3 0.1





Quality Houses

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 32.8 50.6 (3.3) 17.6 14.1Net profit (%) 187.3 35.0 (2.4) 20.4 15.4EPS (%) 179.0 32.9 (2.4) 20.4 15.4Normalized profit (%) 128.3 86.0 (0.9) 20.4 15.4Normalized EPS (%) 121.7 83.1 (0.9) 20.4 15.4Dividend payout ratio (%) 45.0 44.4 45.0 45.0 45.0







Sansiri Pcl

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 29,821 28,597 30,898 36,483 39,861Cost of sales 19,877 19,268 20,986 24,738 26,838 Gross profit 9,944 9,329 9,911 11,745 13,023% gross margin 33.3% 32.6% 32.1% 32.2% 32.7%Selling & administration expenses 6,060 6,808 6,890 7,479 7,574 Operating profit 3,885 2,522 3,021 4,266 5,450% operating margin 13.0% 8.8% 9.8% 11.7% 13.7%Depreciation & amortization 324 281 271 276 289 EBITDA 4,209 2,803 3,293 4,542 5,739% EBITDA margin 14.1% 9.8% 10.7% 12.4% 14.4%Non-operating income 265 390 445 481 585Non-operating expenses 0 0 0 0 0Interest expense (328) (616) (641) (614) (476) Pre-tax profit 3,822 2,295 2,825 4,133 5,558Income tax 954 384 621 909 1,223 After-tax profit 2,868 1,911 2,203 3,224 4,335% net margin 9.6% 6.7% 7.1% 8.8% 10.9%Shares in affi liates' Earnings 0 0 0 0 0Minority interests (0) 1 1 1 1Extraordinary items 71 18 872 0 0NET PROFIT 2,938 1,930 3,076 3,225 4,336Normalized profit 2,867 1,912 2,204 3,225 4,336EPS (Bt) 0.3 0.2 0.3 0.2 0.2Normalized EPS (Bt) 0.3 0.2 0.2 0.2 0.2

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 41,073 52,957 63,874 64,333 63,666 Cash & cash equivalent 3,408 2,120 2,500 3,500 3,500 Account receivables 41 45 48 57 62 Inventories 34,267 45,621 55,772 54,220 52,940 Others 3,357 5,172 5,554 6,557 7,163Investments & loans 9 7 7 7 7Net fixed assets 3,346 3,665 3,335 3,401 3,453Other assets 2,066 3,410 3,685 4,351 4,754Total assets 46,495 60,040 70,901 72,092 71,879

LIABILITIES:Current liabilities: 18,173 19,388 20,799 18,168 17,462 Account payables 1,800 2,251 2,012 2,372 2,573 Bank overdraft & ST loans 4,212 6,033 7,474 5,153 4,381 Current LT debt 7,375 5,820 5,979 4,123 3,505 Others current liabilities 4,787 5,284 5,334 6,520 7,003Total LT debt 12,419 22,816 23,916 16,490 14,020Others LT liabilities 678 768 830 980 1,071Total liabilities 31,270 42,972 45,545 35,639 32,553Minority interest 1 0 (0) (1) (2)Preferreds shares 0 0 0 0 0Paid-up capital 8,434 10,201 15,482 19,414 19,478Share premium 584 657 1,545 6,799 6,885Warrants 0 0 0 0 0Surplus 501 37 37 37 37Retained earnings 5,704 6,173 8,293 10,206 12,929Shareholders' equity 15,224 17,067 25,356 36,455 39,329Liabilities & equity 46,495 60,040 70,901 72,092 71,879





Sansiri Pcl

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 3,822 2,295 2,825 4,133 5,558Tax paid (890) (645) (475) (927) (1,151)Depreciation & amortization 324 281 271 276 289Chg In working capital (7,819) (10,908) (10,392) 1,903 1,476Chg In other CA & CL / minorities 554 (1,846) (1,601) (844) (1,006)Cash flow from operations (4,009) (10,822) (9,373) 4,541 5,166

Capex (687) (558) 100 (300) (300)ST loans & investments 54 15 31 0 0LT loans & investments 42 2 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (419) (503) 1,710 487 457Cash flow from investments (1,010) (1,044) 1,841 187 157Debt financing 4,655 10,664 2,699 (11,602) (3,861)Capital increase 921 1,839 6,169 9,186 150Dividends paid (1,001) (1,425) (956) (1,312) (1,612)Warrants & other surplus 988 (500) 0 0 0Cash flow from financing 5,563 10,578 7,912 (3,728) (5,323)

Free cash flow (4,695) (11,381) (9,273) 4,241 4,866

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 6.8 10.9 10.4 8.5 7.9Normalized PE - at target price (x) 8.6 13.8 13.2 10.8 10.1PE (x) 6.6 10.8 7.5 8.5 7.9PE - at target price (x) 8.4 13.7 9.5 10.8 10.1EV/EBITDA (x) 9.5 19.0 17.6 10.9 9.2EV/EBITDA - at target price (x) 10.8 21.1 19.5 12.6 10.8P/BV (x) 1.3 1.2 1.1 0.9 0.9P/BV - at target price (x) 1.7 1.6 1.4 1.2 1.1P/CFO (x) (4.8) (1.9) (2.4) 6.0 6.6Price/sales (x) 0.6 0.6 0.6 0.5 0.5Dividend yield (%) 6.7 4.5 4.8 4.7 6.3FCF Yield (%) (24.2) (54.7) (40.5) 15.5 14.2

(Bt)Normalized EPS 0.3 0.2 0.2 0.2 0.2EPS 0.3 0.2 0.3 0.2 0.2DPS 0.1 0.1 0.1 0.1 0.1BV/share 1.4 1.5 1.8 2.0 2.2 CFO/share (0.4) (1.0) (0.8) 0.3 0.3 FCF/share (0.5) (1.0) (0.8) 0.3 0.3





Sansiri Pcl

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 45.2 (4.1) 8.0 18.1 9.3Net profit (%) 45.8 (34.3) 59.4 4.8 34.5EPS (%) 43.4 (38.7) 44.6 (12.2) 7.3Normalized profit (%) 43.2 (33.3) 15.3 46.3 34.5Normalized EPS (%) 40.8 (37.7) 4.6 22.6 7.3Dividend payout ratio (%) 45.6 49.6 42.7 50.0 50.0







Supalai Pcl

INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 11,513 12,615 19,740 23,277 25,218Cost of sales 6,461 7,490 11,784 13,755 14,956 Gross profit 5,052 5,125 7,956 9,523 10,262% gross margin 43.9% 40.6% 40.3% 40.9% 40.7%Selling & administration expenses 1,406 1,490 2,369 2,700 2,875 Operating profit 3,646 3,635 5,587 6,822 7,387% operating margin 31.7% 28.8% 28.3% 29.3% 29.3%Depreciation & amortization 77 94 118 126 134 EBITDA 3,724 3,729 5,705 6,948 7,521% EBITDA margin 32.3% 29.6% 28.9% 29.9% 29.8%Non-operating income 136 127 118 110 102Non-operating expenses 0 0 0 0 0Interest expense (130) (85) (212) (236) (188) Pre-tax profit 3,653 3,676 5,493 6,696 7,301Income tax 831 726 1,099 1,339 1,460 After-tax profit 2,822 2,950 4,395 5,357 5,841% net margin 24.5% 23.4% 22.3% 23.0% 23.2%Shares in affi liates' Earnings 0 0 0 0 0Minority interests (78) (68) (87) (102) (111)Extraordinary items 0 0 0 0 0NET PROFIT 2,744 2,882 4,308 5,255 5,730Normalized profit 2,744 2,882 4,308 5,255 5,730EPS (Bt) 1.6 1.7 2.5 3.1 3.3Normalized EPS (Bt) 1.6 1.7 2.5 3.1 3.3

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 22,062 28,080 34,428 38,323 39,779 Cash & cash equivalent 2,170 792 850 1,000 1,250 Account receivables 14 10 16 19 20 Inventories 19,005 26,463 32,286 35,800 36,878 Others 873 816 1,276 1,505 1,630Investments & loans 7 2 2 2 2Net fixed assets 1,216 2,102 2,184 2,258 2,324Other assets 368 491 769 907 982Total assets 23,653 30,675 37,382 41,490 43,087

LIABILITIES:Current liabilities: 7,777 12,164 11,812 13,308 13,008 Account payables 1,023 1,977 2,099 2,449 2,459 Bank overdraft & ST loans 11 700 2,100 1,811 1,296 Current LT debt 2,399 3,926 840 724 518 Others current liabilities 4,344 5,560 6,774 8,323 8,735Total LT debt 2,942 3,734 7,560 6,519 4,665Others LT liabilities 47 69 108 127 138Total liabilities 10,766 15,967 19,480 19,954 17,812Minority interest 423 457 544 646 757Preferreds shares 0 0 0 0 0Paid-up capital 1,717 1,717 1,717 1,717 1,717Share premium 219 219 219 219 219Warrants 0 0 0 0 0Surplus 455 474 474 474 474Retained earnings 10,075 11,841 14,948 18,479 22,108Shareholders' equity 12,465 14,252 17,358 20,890 24,518Liabilities & equity 23,653 30,675 37,382 41,490 43,087





Supalai Pcl

CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 3,653 3,676 5,493 6,696 7,301Tax paid (713) (834) (692) (1,255) (1,337)Depreciation & amortization 77 94 118 126 134Chg In working capital (1,314) (6,500) (5,707) (3,166) (1,071)Chg In other CA & CL / minorities 767 1,240 151 1,044 10Cash flow from operations 2,471 (2,323) (637) 3,445 5,038

Capex (46) (980) (200) (200) (200)ST loans & investments 0 0 0 0 0LT loans & investments (1) 5 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (151) 7 (43) 75 89Cash flow from investments (198) (968) (243) (125) (111)Debt financing 252 3,008 2,140 (1,446) (2,574)Capital increase 0 0 0 0 0Dividends paid (1,029) (1,116) (1,202) (1,723) (2,102)Warrants & other surplus 1 20 0 0 0Cash flow from financing (776) 1,913 938 (3,169) (4,676)

Free cash flow 2,425 (3,303) (837) 3,245 4,838







Supalai Pcl

FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) (9.2) 9.6 56.5 17.9 8.3Net profit (%) 6.8 5.1 49.5 22.0 9.1EPS (%) 6.8 5.1 49.5 22.0 9.1Normalized profit (%) 6.8 5.1 49.5 22.0 9.1Normalized EPS (%) 6.8 5.1 49.5 22.0 9.1Dividend payout ratio (%) 40.7 41.7 40.0 40.0 40.0





This report is prepared by Thanachart Securities. Please contact our salesperson for authorisation. Please see the important notice on the back page

THAILAND Sector Note 31 JULY 2014

Sector Outlook Sector Weighting Overweight

Thailand Utilities Sector Into a new earnings cycle

Sector Valuation Current Target Norm EPS grw ⎯ Norm PE ⎯ ⎯⎯ P/BV ⎯⎯ ⎯ Div yield ⎯ BBG price price 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015FCompany Code Rec. (Bt) (Bt) (%) (%) (x) (x) (x) (x) (%) (%)Demco Pcl DEMCO TB BUY 9.95 12.30 21.5 24.4 15.7 12.6 2.0 1.8 2.9 3.6 Energy Absolute Pcl EA TB BUY 22.70 27.00 562.6 92.9 53.1 27.5 14.9 10.5 0.6 1.1 Electricity Gen. Pcl EGCO TB BUY 146.00 175.00 3.8 (1.3) 9.6 9.7 1.0 1.0 4.1 4.3 Glow Energy Pcl GLOW TB HOLD 89.00 87.00 9.4 (2.5) 14.7 15.0 2.9 2.7 4.1 4.1 Gunkul Eng. Pcl GUNKUL TB BUY 15.90 22.00 116.0 15.6 24.2 21.0 4.0 3.6 1.7 1.9 Ratchaburi Elec. RATCH TB BUY 54.00 65.00 12.6 17.1 12.9 11.0 1.2 1.2 4.8 5.0 SPGC Pcl SPCG TB BUY 25.75 32.50 290.2 55.7 14.1 9.1 4.1 3.1 2.0 3.9

Source: Thanachart estimates, Based on 30 July 2014 closing prices

The utilities sector is likely entering a new earnings cycle, driven by secured legacy capacity to 2018. We believe new IPP bidding will be delayed until after 2016, and a new batch of solar-farm capacity will be up for grabs, with EA the main beneficiary. Our top sector picks are now EA and GUNKUL, on strong earnings growth and low PEGs.

SUPANNA SUWANKIRD 662 – 617 4900

[email protected]

Earnings and target price changes

Target price (Bt) 14F-16F earning change New Old

DEMCO 12.30 12.30 0%

EA 27.00 22.70 0%

EGCO 175.0 170.0 8-12%

GLOW 87.00 82.00 6-8%

GUNKUL 22.00 18.00 (4%)-3%

RATCH 65.00 65.00 0%

SPCG 32.50 32.50 0%


Valuations by PEG (2013-16F)

0.1 0.1 0.3 0.7 0.7

1.8

0.00.51.01.52.0

SPC

G EA

GU

NK

UL

RA

TCH

DE

MC

O

EGC

O

GLO

W

(x) 5.1


Renewable stocks rel. to SET

(50)0

50100150200250

Jan-13 Jul-13 Jan-14 Jul-14

(%) DEMCO EAGUNKUL SPCG

Source: Bloomberg

A change of earnings cycle We retain our positive view on the utility sector as we expect a new earnings-growth cycle, with total annual earnings of Bt23-40bn over 2013-17 (from Bt15-20bn prior to 2013), driven by secured legacy capacity. We see upside to the new capacity from domestic renewable sources and M&A overseas. Although sector share prices have risen by 64% YTD on average, the sector’s valuation is undemanding. It is trading at a 0.8x PEG, based on our 2013-16F EPS CAGR, while we expect its ROE to rise to 24% in 2017 (from 14% in 2013).

Renewable power: extended boom period Despite a lack of clarity on power policy, the outlook for Thailand’s renewable power industry remains bright, in our view. Seen by the Junta as an important source of energy, the target for renewables to account for 25% of total final energy demand by 2021 appears unchanged. We believe the solar schemes will be supported by any government given that this is free-fuel-cost energy while domestic gas reserves are being depleted. We expect a new solar-farm scheme to be implemented, with a capacity of up to 1.5GW by 2015. Even if feed-in-tariffs replace the current high-margin tariff, we would expect the return to be 13-15%.

New round of IPP bidding likely to be delayed We now expect the fourth round of IPP bidding to be delayed until after 2016 (2015 previously) given that the reserve margin is likely rise to above 30% on the back of huge capacity due to come online over 2015-16, while power demand in 2014 (the base year for power demand projections) has been slower than official forecasts. However, some big-caps have huge legacy capacity to operate over that period, which should boost their earnings over 2015-16.

Our preferences: GUNKUL, EA, and RATCH Given EA’s better capabilities, we expect EA to be awarded 300MW of new solar-farm capacity and lift our TP to Bt27.0. GUNKUL is now another top pick, with a new TP of Bt22.0, as we now include a combined 70MW of new wind-power potential. EA and GUNKUL have earnings CAGRs of 187% and 63% (2013-16F) vs. 0.3x and 0.4x PEGs, respectively. RATCH is a laggard conventional power play with higher earnings growth than its peers since 2014. We have not made any ratings changes in this report.

Than

acha

rtSe

curit

ies

Than

acha

rtSe

curit

ies


SECTOR NOTE SUPANNA SUWANKIRD


Into a new earnings cycle, driven by legacy capacity coming on stream

We reaffirm our positive view on Thailand’s utility sector, which we believe is now in a new earnings-growth cycle. We forecast the sector’s annual normalized earnings to rise to Bt23-40bn over 2013-17 (from Bt15-20bn pre-2013) and the sector’s average ROE to rise to 24% in 2017 (from 14% in 2013), driven by legacy capacity. The seven utility companies under our coverage have in total 2.5GW of secured (net of EGCO’s expired capacity) power-purchase agreement (PPA) legacy capacity, with scheduled commercial operation dates (COD) due over 2014-16.

Renewable power companies have seen strong growth momentum in capacity and earnings since 2013, and we expect this to continue over 2014-16. On our forecasts, GUNKUL should see the highest capacity growth over 2013-16, followed by EA, SPCG, and DEMCO. However, we forecast EA to post the highest normalized earnings growth over 2013-16 with a CAGR of 187%, followed by SPCG, GUNKUL, and DEMCO. The key reason why we forecast higher earnings growth for EA despite lower new capacity growth than GUNKUL is that one of GUNKUL’s two new projects is scheduled to come on stream at year-end 2016. Also, GUNKUL’s two new projects are wind farms, which obtain lower adders (ie, subsidy for their first ten years of operation) than solar farms, whereas the majority of EA’s new capacity will be solar power.

Ex 1: GUNKUL Should Have The Highest Capacity Growth Over 2013-16F

2013A 2014F 2015F 2016F 2017F 2013-16F CAGR (MW) (MW) (MW) (MW) (MW) (%)

DEMCO 35 42 45 45 45 8 EA 98 98 289 379 421 57 GUNKUL 27 40 118 178 178 87 SPCG 171 221 221 221 221 9 EGCO 4,518 4,779 4,892 5,296 5,527 5 GLOW 3,213 3,213 3,213 3,213 3,213 - RATCH 5,169 5,523 5,890 6,440 6,440 8 Total 7,929 8,253 8,444 8,908 9,139 4


Ex 2: Yet, EA Should See The Highest Normalized Earnings Over 2013-16F

2013 2014F 2015F 2016F 2017F 2013-16F CAGR (Bt m) (Bt m) (Bt m) (Bt m) (Bt m) (%)

DEMCO 349 440 547 560 512 17 EA 239 1,595 3,076 5,683 7,208 187 GUNKUL 267 577 667 1,161 1,357 63 SPCG 499 1,619 2,622 2,688 2,934 75 EGCO 7,721 8,017 7,916 9,045 10,074 5 GLOW 8,117 8,877 8,654 8,856 9,088 3 RATCH 5,393 6,070 7,111 8,208 9,771 15 Total 16,844 20,685 22,936 27,433 30,662 18


The sector should see a new earnings cycle due to a combined 2.5GW of legacy capacity coming on stream during 2014-16

We expect GUNKUL to see the highest capacity growth and EA to have the greatest earnings growth over 2014-16

Among conventional power stocks, RATCH should see the greatest growth in capacity and earnings




Conventional large-cap power companies, with the exception of GLOW, should see decent growth in both capacity and earnings over 2013-16 on our forecasts. Over the period, RATCH should see the highest new capacity of 1.2GW, accounting for almost half of the total new capacity that we forecast the sector. Unlike renewable power companies, most of RATCH’s new capacity will come from conventional power, which receives no adder (ie, subsidy for first ten operating years) at all. Without the adder, the tariff revenues (net of the energy payment) of convention power projects are more than 10x smaller than those of solar and wind farms while the investment cost is 2-3x smaller. Also, RATCH already has high base capacity, thus we forecast only an 8% for its new capacity over 2013-16. Yet, RATCH’s new capacity growth for the period should be higher compared with conventional power peer EGCO, while GLOW should see no new major capacity over 2013-16, on our forecasts. We forecast RATCH to post a decent 2013-16 normalized earnings CAGR of 15%.

Ex 3: Tariff (+Adder) Formulae… Ex 4: … Are 10x-plus Higher Than Conventional Power

Tariff (Bt/kwh) = Based tariff + Adder + Ft

= 3.85 + (3.50 or 6.50 or 8.00) + 0.69

= 8.04 - 12.54

Base tariff (Bt/kwh) = 3.85

Adder * = 6.50 or 8.00/kwh for solar power and

3.50/kwh/kwh for wind power

Ft = 0.69/kwh

* For the first 10 years of operation.

Base tariff (Bt/kwh) = 3.85

AP (Bt/kwh) approximately = 0.80-1.20

EP (Bt/kwh) approximately = 2.60- 2.65

Sources: Company data, Thanachart estimates Sources: Thanachart estimates

Ex 5: Sector Share-price Performances YTD in 2014 Ex 6: Renewable Stocks’ Share-price Performances Relative To SET Since January 2013

196.7

80.7

37.2

35.5

26.2

19.2

16.9

10.2

0 50 100 150 200 250

EA

GUNKUL

DEMCO

SPCG

GLOW

EGCO

SET

RATCH

(%)

(50)

0

50

100

150

200

250

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

(%)DEMCO EA GUNKUL SPCG

Source: Bloomberg Source: Bloomberg




Our preferences: GUNKUL, EA and RATCH

We retain our Overweight stance on the Thailand utility sector. Despite the strong rally in the sector’s share prices of 64% YTD on average and their 46% YTD outperformance vs. the SET, the sector’s valuation still looks appealing, trading at a 0.8x PER based on our 2013-16 EPS CAGR forecast of 18%, vs. our respective forecasts for the SET trading at a 1.1x PEG based on our 2013-16 earnings CAGR forecast of 13%. We project the utility sector on average to see a strong ROE increase to 24% in 2017 (from 14% in 2013), led by the renewable power stocks.

In addition, we believe the sector has capacity-expansion potential driven by renewable power. Despite a lack of clarity on Thailand’s national power policy at present, we take the view that the solar-farm scheme will be revived, while the proposed solar-rooftop scheme will be supported by the next government.

We believe there will be at least 1.5GW of new solar-farm capacity put up for tender for private companies to take up over the next few years. In our model, we assign 300MW (ie, 20%) of this new solar-farm capacity potential to EA. This assumed 20% proportion is close to the share that EA obtained previously in the first batch of solar-farm capacity allocated in 2012. We believe EA has the ability to acquire more land to benefit from the new solar-capacity expansion ahead of its peers, given that under the solar-farm scheme capacity is generally allocated on a first-come first-served basis.

Also, in our view, EA is able to acquire big plots of land more easily than its peers given that the company has an arrangement with landowners in the provinces to buy or rent plots of land at a specific time for its combined unused 420MW wind-power capacity (EA recently withdrew its proposal for this wind-power capacity), that we believe can be replaced with new solar-farm capacity potential. By contrast, in our models we assign no potential new solar-farm capacity to EA’s peers, as there is no clarity over how they will be able to acquire the necessary land.

Thus, we raise our DCF-based target price for EA to Bt27.0 (from Bt22.7) and maintain our BUY call on the stock. Note that we incorporate the potential new solar-farm capacity for EA into our valuation but not in yet in our P&L forecasts for the company. We continue to like EA’s ongoing strong earnings-growth story (2013-16F earnings CAGR of 187%), and pick it and GUNKUL as our top picks, followed by RATCH. We raise our DCF-based TP for GUNKUL by 22% to Bt22.0 (from Bt18.0), as in our valuation, we now assume that it will obtain 75MW of new wind-power capacity within the next 12 months (vs. the company’s target for 100-150MW of new capacity). Our new target price for GUNKUL implies 38% share price upside potential (vs. 19% upside potential to our new target price for EA). We forecast GUNKUL to post normalized earnings growth of 63% pa. over 2013-16, translating into a 0.4x PEG at its current share price vs. EA’s 0.3x.

We maintain our Overweight stance on the sector, for its undemanding 0.8x PEG with expansion potential vs. the 1.1x PEG for the SET




Ex 7: Earnings and Target Price Revisions

2014F 2015F 2016F Target price Rating

(Bt m) (Bt m) (Bt m) (Bt)

Sector

New 27,195 30,594 36,201 Overweight

Old 26,072 29,066 34,650 Overweight

Change (%) 4.3 5.3 4.5

DEMCO

New 440 547 560 12.30 BUY

Old 440 547 560 12.30 BUY

Change (%) 0.0 0.0 0.0 0.0

EA

New 1,595 3,076 5,683 27.00 BUY

Old 1,595 3,076 5,683 22.70 BUY

Change (%) 0.0 0.0 0.0 18.9

EGCO

New 8,017 7,916 9,045 175.00 BUY

Old 7,421 7,067 8,221 170.00 BUY

Change (%) 8.0 12.0 10.0 2.9

GLOW

New 8,877 8,654 8,856 87.00 HOLD

Old 8,322 7,989 8,165 82.00 HOLD

Change (%) 6.7 8.3 8.5 6.1

GUNKUL

New 577 667 1,161 22.00 BUY

Old 607 653 1,126 18.00 BUY

Change (%) (4.8) 2.2 3.1 22.2

RATCH

New 6,070 7,111 8,208 65.00 BUY

Old 6,070 7,111 8,208 65.00 BUY

Change (%) 0.0 0.0 0.0 0.0

SPCG

New 1,619 2,622 2,688 32.50 BUY

Old 1,619 2,622 2,688 32.50 BUY

Change (%) 0.0 0.0 0.0 0.0


Renewable power: boom period should continue

The release of Thailand’s new power development plan (PDP) has been delayed due to the political uncertainty (we and the market had expected that it would arrive in early 2014, and that the IPP bidding would follow in 2015). Currently, the draft of the new PDP is being reviewed, as there have been some changes in key assumptions that will affect Thailand’s demand and supply forecasts for power. Although we are still unclear as to when we will see the new policy, we expect some downward adjustments in overall demand for power from our previous view, given the slowdown that Thanachart forecasts for GDP growth for 2014 (1.4% y-y GDP growth forecast by TNS vs. 5.7% y-y by 2010 PDP version 3), and the




smaller government budget for mass-transit projects as some high-speed trains are likely to be taken out of action.

However, we believe there will be no change in Thailand’s renewable capacity procurement plan. The Alternative Energy Development Plan (AEDP) has set a target, whereby renewable energy accounts for 14GW or 25% of the country’s total energy consumption by 2021 (11.4% as at end-May 2014). The NCPO has seen the importance of renewable power as it could help reduce the need for imported fuel, while Thailand also has started to see increasing imports of high-priced LNG. In fact, we would not be surprised if Thailand’s renewable capacity target is adjusted up over 2014-21. Recently, the Ministry of Energy said it was considering increasing the renewable-energy capacity mix to 30%.

Ex 8: GDP and Peak Power Demand Forecasts In 2010-PDP Version 3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0

10,000

20,000

30,000

40,000

50,000

60,000

2011

2012

2013

2014

F

2015

F

2016

F

2017

F

2018

F

2019

F

2020

F

2021

F

2022

F

2023

F

2024

F

2025

F

2026

F

2027

F

2028

F

2029

F

2030

F

(%)(MW) Peak demand (LHS) GDP (RHS)

Sources: 2010-PDP Version 3, EGAT

Ex 9: Renewable Accounts For 11.4% Of Total Energy (Jan-May 2014)

Fossil Fuel76%

Renewable11%

Traditional Renewable

11%Larg Hydro1%

Imported Hydro

1%

Final Energy Consumption (Jan-May 2014)Renewable

Power Plants1.72%

Small Hydro0.03%

Solar, Biomass, Waste, Biogas7.48%

Bio-fuel2.18%

Renewable (Jan- May 2014)

Sources: www.dede.go.th




Ex 10: Renewable Capacity Target - Old Ex 11: Renewable Capacity Target - New

Solar 11%

Biogas3%

Biomass20%

Waste1%

Hydro9%Wind

6%Geothermal

0%

Total50%

9,201MW Solar

11%

Biogas13%

Biomass17%

Waste1%

Hydro1%Wind

7%

Geothermal0%

Total50%

13,927MW

Source: www.dede.go.th Source: www.dede.go.th

We believe the outlook for Thailand’s renewable power industry remains bright for the next few years, especially the solar-power segment. By geography, Thailand appears to have strong solar-power generating potential. Fifty per cent of Thailand’s total land area sees solar radiation, of 18-19 MJ/m2 on average per day, with the northeastern part of Thailand getting stronger solar radiation, at 19-20 Mj/m2 on average a day (or 14.3% of the total land area). The radiation during the summer (April-May) yields 20-24 Mj/m2 on average a day.

Three solar-power schemes were endorsed by the previous government. The NCPO likes solar power, as it is a “free fuel”, and General Prayuth Chan-ocha has repeatedly stated the importance of renewable energy to the nation. We believe the schemes will continue to be supported by any government.

The three solar schemes are:

Solar farms (2011)

Solar rooftops (2013)

1) for residential use

2) for commercial use

3) for government buildings (recently scrapped due to transparency issues)

Solar communities – (under review for terms and conditions)

The AEDP originally came up with a solar-power target of 2,000MW of capacity by 2021. In July 2013, the AEDP raised the target to 3,000MW. The additional 1,000MW will come from solar-rooftop (200MW) and solar-community (800MW), but these two have not yet been implemented.

The outlook for Thailand’s renewable-power remains bright, as we think new solar-farm capacity will be put up for tender in 2015.




Ex 12: Solar Radiation Potential

9.0 10.0 12.4 13.0

16.5 18.2 19.0 19.6 20.3

21.6

0

5

10

15

20

25

Engl

and

Irela

nd

Ger

man

y

Japa

n

Chi

na

Thai

land

USA

Aust

ralia

Indi

a

Sout

hAf

rica

(MJ/m2/day)

Sources: AEDP

Solar-farm scheme

Although the Electricity Generating Authority of Thailand (EGAT) and the Provincial Energy Authority of Thailand (PEA) have granted power purchase agreements (PPA) for 2,000MW plus to applicants, only 1,344MW of capacity is commercially viable. We see a high possibility of the NCPO reigniting solar-farm capacity. Hence, we believe the NCPO (or the new interim government expected to be appointed in September 2014) will offer up for tender around 1,500MW in new solar-farm capacity to the private sector for the following reasons:

1) With only 1,344MW of solar-farm capacity being viable currently, 650MW plus of capacity will need to be added to meet the AEDP’s target.

2) Given what we see as unrealistic capacity set aside for biomass power, especially for the napier-grass-fired power plants (elephant grass), which account for 83% of total biomass capacity (3,600MW).

3) If the terms and conditions of the 800MW solar-community scheme are not approved by the NCPO, the solar-community scheme could be replaced by the solar-farm capacity.

However, new solar-power projects will be run under a new Feed-in-Tariff (FIT) scheme, and we expect the electricity price to be around Bt6.00/kwh (US$190/mwh) compared to the current subsidy-based tariff of Bt11.04/kwh for the first year of a power plant’s operation (US$340/mwh). We estimate that the project IRR for new solar-power projects is likely to drop to 13% plus (from 28% plus), although we think the return still looks decent. Note that the FIT will be applied to new solar-farm projects and will not affect existing projects that have already been granted PPAs or letter of acceptance (LOAs) under the current subsidy-tariff scheme.

We expect 1.5GW in new solar-power capacity to be put out to tender.

We expect new solar farms to be run under a FIT scheme, which should yield lower project returns




Ex 13: Thailand’s Renewable Energy Plans

Types of energy Previous target New target Types of energy Total awarded COD PPA LOA -

as at July 2014 Yet COD granted

(MW) (MW) (MW) (MW) (MW) (MW)

Biogas 600 3,600 Biogas 303 175 87 41

Biomass 3,630 4,800 Biomass 1,913 882 964 68

Hydro 1,608 324 Hydro 15 0 14 0

Solar 2,000 3,000 Solar 1,344 1,029 311 4

Wind 1,200 1,800 Wind 1,183 189 608 386

Waste 160 400 Waste 172 43 111 18

Total 9,198 13,924 Total 4,931 2,318 2,096 517 Sources: Company data, Thanachart estimates

Solar rooftop scheme

Given Thailand’s good solar radiation and that there are some concerns among academic groups about using agricultural land for solar-power farms, the solar-power rooftop scheme was introduced late last year. The pilot capacity was set at 200MW, split between residential and commercial buildings at 100MW each. While interest from the commercial side was very strong, at 4-5x the available capacity, interest from the residential side amounted to less than 40% of the available 100MW capacity.

We believe the scheme will continue to be promoted, with a new capacity target set for each year for commercial buildings, while the capacity for residential buildings is likely to open with no timeframe given that most residential rooftops have not yet been prepared for the installation of solar panels. Currently, the solar rooftop scheme has a FIT of Bt6.16-6.96/kwh (US$193-223/mwh), according to capacity.

GUNKUL, DEMCO and SPCG have participated in the scheme with their JV partners. They have not only benefitted as operators but also because they have engineering, procurement and construction (EPC) businesses, so that they can do construction for the JV and service others who have obtained licenses. For the first batch (pilot capacity) of commercial rooftops, GUNKUL and DEMCO, with their JVs, received PPA contracts. The GUNKUL JV acts as the operator of 7.8MW (3.6MW net owned) of capacity and it has also won construction contracts for a combined 11MW, which includes the JV capacity. The DEMCO JV has a combined 3MW (2MW net owned) of capacity to operate. However, in early 2014, SPCG terminated its JV with WHA Corporation (WHA.TB) as the parties could not agree on certain issues.

We expect the scheme to be promoted, with a new capacity target set for each year for commercial buildings.




Ex 14: FIT scheme for Solar-Power Rooftop Scheme Ex 15: Current Tariff (Assumed Flat Fuel Transfer) VS.

Feed-In-Tariff

Residences Small Medium &buildings Large buildings

(1-10 kWh) (>10-250 kWh) (>250-1,000 kWh)

COD: Dec 2013

100 MW 100 MW

FIT/kWhBt6.96

FIT/kWhBt6.16

FIT/kWhBt6.55

0

2

4

6

8

10

12

14

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

Y11

Y12

Y13

Y14

Y15

Y16

Y17

Y18

Y19

Y20

Y21

Y22

Y23

Y24

Y25

(Bt/kwh) Solar (8.00) Solar (6.50)Wind (3.50) FITSolar Rooftop

Sources: AEDP Sources: Company data, Thanachart estimates

Solar community

The 800MW solar community scheme (1MW per 1 village) was originally aimed at decentralizing solar sites across the nation and distributing income to the people in the village. The scheme, which was due to be launched in early-2014, has been suspended by the NPCO, as there is still a lot of uncertainty over certain issues, ie, the shareholding structure, given that the villages do not have sufficient capital to inject into the sites to gain a stake (the capital structure would be 25% equity/75% debt, with villagers paying for the equity portion and the state bank injecting the remainder).

In this case, private investors would be allowed to sign up to lend money to, or take a stake in, the projects, but the government would have to decide on the criteria for fair selection and, for example, how many years would be required before the village fund could buy back the solar-power farm from the private investor. Also, there are concerns over how the private investors and/or operators would operate the power plant for the next 25 years.

We would not be surprised if the solar-power community scheme were scrapped. However, we believe there will be a new scheme to replace it if this capacity of 800MW is shifted to the solar-power farm scheme.

Wind power

We also expect to see no change in the country’s wind-power capacity, which has been set at 1,800MW. Thailand mostly has a low wind speed, although speeds are good in many of the country’s national parks (7-10meters/second). Good speeds can also be found in the northeastern areas, in some provinces alongside Nakorn Ratchasrima and Mukdahan.

In May 2014, EGAT and PEA granted PPAs for 797MW of wind-power capacity and a LOA for PPAs within two years, for 950MW capacity, bringing the total to 1,747MW, close to the target of 1,800MW.

Currently, the adder for the wind power project is Bt3.50/kwh for the first ten years, which would bring total tariff revenues to Bt7.8/kwh (US$249/mwh). There is no talk of replacing the subsidy tariff with a FIT, given there has been no big change in the capital investment for wind power projects. The major players in wind power include EA, GUNKUL, RATCH and non-listed Wind Energy Holding.

There is some uncertainty over the solar-power community scheme.

Limited potential for wind-power capacity.




Call for new IPP bids now unlikely before 2016

We expect the reserve margin in 2015-16 to increase to 30%-plus, supported by the following factors:

1) A lower GDP for 2014, which will be the base year for the next 20-year forecasts.

2) Contrary to earlier expectations, there will be no additional demand by default as we believe the ex-government’s proposal to revise the reserve margin to 20% (from currently 15%) will be scrapped.

3) There will be huge new capacity combined due for commercial operation in 2015-16. They are such as a 1.8GW Hongsa Power in 2015/16, Khanom expansion in mid-2016, 1.8GW Gulf JG Nongsaeng in 2015 and 1.8GW Gulf JP U-Thai in 2016.

Despite the likely lack of an IPP bid as a share-price catalyst for the conventional big-cap utilities, we believe EGCO’s and RATCH’s share prices will be well supported by their own earnings growth. RATCH has a 40% stake in Hongsa Power while EGCO has 100% ownership of the Khanom expansion.

Also, both RATCH and EGCO are still looking for new capacity via M&A in Asean countries. Nonetheless, if there were to be a call for a fourth-round IPP bid in 2017, this would likely be a positive share-price catalyst for the big-cap utility stocks.

GUNKUL: On track to become a power operator

Ex 16: Valuation Table – GUNKUL Ex 17: GUNKUL – BUY, Price Bt15.9, TP Bt22.0

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 2,045 3,248 3,886 5,697

Net profit 883 577 667 1,161

Norm profit 267 577 667 1,161

Norm EPS (Bt) 0.3 0.7 0.8 1.3

Norm EPS grw (%) (39.9) 116.0 15.6 74.0

Norm PE (x) 52.3 24.2 21.0 12.1

EV/EBITDA (x) 95.2 36.3 32.4 16.7

P/BV (x) 4.9 4.0 3.6 3.0

Div yield (%) 0.2 1.7 1.9 3.3

ROE (%) 11.0 18.3 18.1 27.0

Net D/E (%) 10.8 102.1 220.2 285.2

While we fine-tune our earnings forecasts for 2014-16, we lift our TP by 22% to Bt22.0, as we now incorporate 100MW of potential new wind projects (formerly 30MW).

Offering a wide range of services, from electrical parts manufacturer to EPC and power operator, GUNKUL should grow in step with the renewable power boom (we estimate the market for solar and wind power could potentially total Bt200bn).

We expect stable, high-quality earnings from renewable power to contribute 80% of GUNKUL’s earnings in 2016 (from 50% in 2013), with the 2x60MW secured wind power projects due to commence in 4Q15 and 4Q16.

We forecast a 3-year earnings CAGR of 63%, which translates into 0.3x PEG, which we see as justified given a 21x PE (2015F) and our forecast for ROE to rise to 27% by 2016F (from 11% in 2013). Offering 38% upside to our TP, GUNKUL is our top pick.

We believe the call for fourth-round IPP bids won’t take place until 2016.




Ex 18: GUNKUL’s Capacity Profile

Projects Capacity Location Power type Owner ship Net capacity Status COD Life

(MW) (%) (MW)

Gunkul Power Gen (GPG)

- Chondan 7.4 Petchaboon Solar 51 3.8 In operation 3 Jan 11,1 Oct 11 25

- Vichienburi 8.0 Petchaboon Solar 51 4.1 In operation 29 Mar 2013 25

- Srichula 8.0 Nakornayok Solar 51 4.1 In operation 21 Jun 2013 25

- Noen Poe 4.5 Pichit Solar 51 2.3 In operation 7 Mar 2013 25

- Bungsampan, Nakornayok 3.0 Petchaboon Solar 51 1.5 In operation 23 May 2013 25

SUM 30.9 15.8

G- Power Sources (GPS)

- Tasang 6.5 Nakornsawan Solar 40 2.6 In operation 2 Mar 2012 25

- Takeed 6.5 Nakornsawan Solar 40 2.6 In operation 1 Mar 2012 25

- Dong-korn 6.5 Chainart Solar 40 2.6 In operation 5 Mar 2012 25

- Bangsapan 6.5 Petchaboon Solar 40 2.6 In operation 1 Feb 2013 25

SUM 26.0 10.4

NK Power 1.0 Wind 100 1.0 Operating 2,013 25

Wind Energy development (WED)

- 2MW 2.0 Wind 100 2.0 Under dev. 4Q15 25

- 8MW 8.0 Wind 100 8.0 Under dev. 4Q15

- 50MW 50.0 Wind 100 50.0 Under dev. 4Q15

SUM 60.0 100 60.0

Greenovation Power (GNP) 60.0 Wind 100 60 4Q16 25

Myanmar gas engine

- Phase 1 25.0 Gas engine 51 13 Completion Nov 2013 20

- Phase 2 25.0 Gas engine 51 13 Under dev. 4Q14 20

SUM 50.0 51 26

WHA and GUNKUL Green Solar Roof

- JV with WHA 4.28 1.07

- GUNKUL Solar Roof 3.55 3.5

SUM 7.83 4.62

Potentials Domestic

- Wind 100.0 100 100.0 Under study 2016 25

- Solar rooftop 40.0 100 40.0 Under study

Overseas

- Wind (Myanmar) 1,000.0 100 1,000.0 MOU to study

- Gas engine (Myanmar) 25.0 100 25.0 Under study

- Solar (Japan) 130.0 25 32.5 Under study

SUM 1,295.0 1,197.5

Total 1,526.4 1,376.0 Sources: Company data, Thanachart estimates




EA: Beneficiary of new solar farm potential

Ex 19: Valuation Table - EA Ex 20: EA – BUY, Price Bt22.7, TP Bt27.0

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 3,936 8,614 11,001 15,379

Net profit 268 1,595 3,076 5,683

Norm profit 239 1,595 3,076 5,683

Norm EPS (Bt) 0.1 0.4 0.8 1.5

Norm EPS grw (%) 88.2 562.6 92.9 84.7

Norm PE (x) 351.8 53.1 27.5 14.9

EV/EBITDA (x) 217.5 45.1 24.7 14.0

P/BV (x) 19.4 14.9 10.5 6.8

Div yield (%) 0.1 0.6 1.1 2.0

ROE (%) 8.7 31.8 44.8 55.5

Net D/E (%) 103.3 206.8 280.3 219.3

We lift our SoTP TP for EA to Bt27.0, reflecting an additional 300MW of potential solar farm capacity.

EA should enjoy a long earnings growth cycle, given secured new capacity in hand of 639MW with a COD of 2018 (from 98MW currently). We forecast a 3-year earnings CAGR of 187%.

The risks to EA include power plant execution and power generation falling short of expectations. We are not concerned about the possibility of a capital call, as Thai banks allow gearing of up to 4.0x.

Although the share price is up 197% YTD, we believe EA’s 28x 2015F PE is justified (0.3x PEG for 2013-16F) and we continue to rate the stock a BUY.

Sources: EA, Thanachart estimates

Ex 21: EA’s Capacity Profile

Projects in hand Power plant type Capacity Ownership Net EA’s TNS’s Status

owned scheduled target

(MW) (%) (MW) COD

Solar projects with secured PPAs

Lop Buri Solar 8 100 8 17-Oct-12 17-Oct-12 In operation

Nakornsawan Solar 90 100 90 23-Dec-13 23-Dec-13 In operation

Lampang Solar 90 100 90 1-Dec-14 1-Apr-15 Under development

Phitsanulok Solar 90 100 90 1-Dec-15 1-Apr-16 Land preparation

Haad turbine 1 Wind 36 80 29 1-Mar-15 1-Oct-15 Letter of acceptance

Haad turbine 2 Wind 45 80 36 1-Mar-15 1-Oct-15 Letter of acceptance

Haad turbine 3 Wind 45 80 36 1-Sep-15 1-Oct-15 Letter of acceptance

Hanuman 1 Wind 45 100 45 1-Mar-17 1-Mar-17 Letter of acceptance

Hanuman 5 Wind 48 100 48 1-Mar-17 1-Mar-17 Letter of acceptance

Hanuman 8 Wind 45 100 45 1-Aug-17 1-Aug-17 Letter of acceptance

Hanuman 9 Wind 42 100 42 1-Aug-18 1-Aug-18 Letter of acceptance

Hanuman 10 Wind 80 100 80 1-Dec-17 1-Dec-17 Letter of acceptance

Subtotal 664 639

Potentials

Potentials Solar 300 100 300 n.a. n.a.

Total 964 939 Sources: Company data, Thanachart estimates




RATCH – Big earnings stream to start in mid-2015

Ex 22: Valuation Table – RATCH Ex 23: RATCH – BUY, Price Bt54.00, TP Bt65.0

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 50,612 39,987 38,622 37,635

Net profit 6,187 6,890 7,111 8,208

Norm profit 5,393 6,070 7,111 8,208

Norm EPS (Bt) 3.7 4.2 4.9 5.7

Norm EPS grw (%) 2.6 12.6 17.1 15.4

Norm PE (x) 14.5 12.9 11.0 9.5

EV/EBITDA (x) 10.0 10.7 11.4 13.3

P/BV (x) 1.4 1.2 1.2 1.1

Div yield (%) 4.2 4.8 5.0 5.8

ROE (%) 10.0 10.3 10.9 11.9

Net D/E (%) 27.1 27.5 26.2 24.0

We believe RATCH has strong earnings visibility, as its secured capacity is scheduled to increase from 5.5GW currently to 6.5GW by 2018.

2015 should mark a new earnings cycle, with its new 40%-owned 1,878MW Hongsa Power, 40%-owned 210MWRW Cogen, and 55%-owned 60MW Koa Koer wind farm all having CODs in 2015.

Despite being in a heavy capex cycle, RATCH’s balance sheet remains strong (gearing below 0.3x), which should give it scope to borrow for new project expansion or M&A. The stock looks at inexpensive at 11x 2015F PE, given a three-year earnings CAGR of 15% and dividend yield of 4.8%-plus.

Sources: RATCH, Thanachart estimates

Ex 24: RATCH’s Capacity

Effective Total Capacity COD Expiry Date

Location Shareholding Capacity Stake

(%) (MW) (MW)

Projects under construction and development

Thailand

Songkla Biomass Songkhla Biomass 40.00 10 3.96 2014 Under construction

Ratchaburi World

Cogeneration (SPP)

Ratchaburi

Province

Gas 40.00 210 84.00 1Q15 Under construction

Khao Kor Wind Farm Phetchabun

Province

Wind 55.18 60 33.11 2015 Under construction

Nava Nakhon (SPP ) Pathumthani

Province

Gas 40.00 122 48.80 2016 PPA signed

Laos

Hongsa Power Power Plant Xayaburi Coal 40.00 1,878 751.20 2015 Under construction

Xe-Pian Xe-Namnoy Power

Plant

Champasak and

Attapeu

Hydro 25.00 410 102.50 2018 PPA signed

Sub-total 1,024

Total capacity in hands 6,543

Potentials projects

Laos

Nam Bak Hydroelectric

Power Plant

Vientiane Hydro 25 160 40 2,018

Australia

Collector Wind Farm New Southwales Wind 100 165 165 2,016

Solar PV (at collinsville) Queensland Solar 100 20 20 2,016

Myanmar

A project Chiengtung Coal mine-mouth 60-70% 300 180-210 after 2018

A project Mei-Tong Coal mine-mouth 10-25% 7,000 700-1750 after 2020

Total potential capacity 1,105-2,185 Sources: Company data, Thanachart estimates




EGCO – Big earnings stream likely to come through in mid-2016

Ex 25: Valuation Table – EGCO Ex 26: EGCO – BUY, Price Bt146.0, TP Bt175.0

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 18,686 18,355 16,281 30,705

Net profit 6,914 8,017 7,916 9,045

Norm profit 7,721 8,017 7,916 9,045

Norm EPS (Bt) 14.7 15.2 15.0 17.2

Norm EPS grw (%) 19.7 3.8 (1.3) 14.3

Norm PE (x) 10.0 9.6 9.7 8.5

EV/EBITDA (x) 16.7 21.1 22.2 16.7

P/BV (x) 1.1 1.0 1.0 0.9

Div yield (%) 4.1 4.1 4.3 4.3

ROE (%) 11.6 11.2 10.3 11.1

Net D/E (%) 60.1 75.1 88.6 100.3

We lift 2014-16F earnings for EGCO by 8-12% and our DCF-based SoTP TP to Bt175 (from Bt170) following its acquisition of a 40% stake in the Philippines-based 2x315MW Masinloc coal-fired power project.

While we believe there will no IPP bid call until after 2016, which would serve as a share-price catalyst, EGCO’s policy is to secure short-term earnings growth via M&A. Its earnings growth should get a boost in mid-2016 when the Khanom expansion is due to come on stream.

There could be a one-off gain in 2015 from the demolition of the Rayong power plant, if the plant cannot get extension approval from EGAT.

Trading at 10x 2015F PE; dividend yield of 4%-plus. Sources: EGCO, Thanachart estimates

Ex 27: EGCO’s Capacity

Contracted capacity Att. Power Plant Fuel type Capacity Holding capacity COD Expiry date (MW) (%) (MW) Project under operation Thailand Rayong (REGCO) Natural gas 1,175 100.00% 1,175 07-Dec-94 2014 Khanom (KEGCO) Natural gas 748 100.00% 748 19-Jun-96 2011, 2016 BLCP Coal 1,347 50.00% 673 1 Oct 06/1 Feb 07 2031, 2032 GEC-GPG (KK2) Natural gas 1,468 50.00% 734 5 May 07/27 Feb 08 2031, 2032 EGCO Cogen Natural gas 112 80.00% 90 28-Jan-03 2024 Roi-Et Green Rice husks 9 70.30% 6 29-May-03 2024 GEC-GCC Natural gas 109 50.00% 54 03-Sep-98 2019 GEC-NKCC Natural gas 121 50.00% 61 12-Oct-00 2021 GEC-SCC Natural gas 114 50.00% 57 23-Aug-99 2020

3,598 Thailand - Renewable Assum 10 yrs GEC-GYG Parawood 20 50.00% 10 28-Nov-06 2031 NED Solar 63 33.33% 21 22 Dec-11, May-13 2036 GPS - phase 1,2,3 Solar 26 60.00% 16 1,2 Mar/5 Mar 12,

Feb -13 2022

SPP2 Solar 8 100.00% 8 2-May 12 2022 SPP3 Solar 8 100.00% 8 21-Feb-12 2022 SPP4 Solar 6 100.00% 6 24-Jan-12 2022 SPP5 Solar 8 100.00% 8 22-Jun-12 2022 Theppana (TWF) Wind 7 90.00% 6 18-Jul-13 2023 Solarco (Yanhee solar power -51%) Solar 57 49.00% 28 17-Dec-13 2023

111 The Philippines CONAL-WMPC Diesel 110 0.00% 0 01-Jan-98 2016 CONAL-SPPC Diesel 55 0.00% 0 28-Apr-98 2034 Quezon Coal 460 98.00% 451 30-May-00 2025 Masinloc Coal 630 40.95% 258 3Q14 2037





Ex 27: EGCO’s Capacity (Con’t)

Contracted capacity Att. Power Plant Fuel type Capacity Holding capacity COD Expiry date (MW) (%) (MW)

Laos People's Democratic Republic NTPC - Nam Theun 2 Hydro 1,023 35.00% 358 30-Apr-10 2035

1,067 Sub-total 4,776

Projects under construction/development Gidec (Hadd Yai) Waste (adder Bt3.50, 7 yrs) 7 50.00% 3 Jun-14 2023 BRWF Wind, NSW- Australia 113 100.00% 113 Feb-15 2030 New Khanom (KN 4) Natural gas 930 100.00% 930 Jun-16 2041 Chaiyaphum Wind Farm (CWF) wind 90 90.00% 81 Dec-16 2041 TP Cogen Natural gas 113 100.00% 113 Feb-17 2043 SK Cogen Natural gas 107 100.00% 107 Feb-17 2044 TJ Cogen Natural gas 106 100.00% 106 Jun-17 2042 Quezon expansion Philis 455 49.00% 223 1Q18 XPCL Hydro, Laos 1,280 12.50% 160 Oct-19 2048 Sum 1,836

Total 6,612


SPCG – Fundamentally stronger

Ex 28: Valuation Table - SPCG Ex 29: SPCG – BUY, Price Bt25.75, TP Bt32.50

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 2,473 4,096 5,967 6,019

Net profit 499 1,619 2,622 2,688

Norm profit 499 1,619 2,622 2,688

Norm EPS (Bt) 0.5 1.8 2.8 2.9

Norm EPS grw (%) 614.6 290.2 55.7 2.5

Norm PE (x) 55.1 14.1 9.1 8.9

EV/EBITDA (x) 23.7 11.1 7.9 7.5

P/BV (x) 8.3 4.1 3.1 2.5

Div yield (%) 0.0 2.0 3.9 4.5

ROE (%) 22.2 38.1 38.5 31.2

Net D/E (%) 465.6 206.2 123.1 73.7

SPCG’s fundamentals look to be strengthening, with all 36 of its solar projects having CODs in 1H14. Its recent completion of Bt4.0bn bond and 10% new share issuances to strategic partners gives it scope to make new investments and a first-time dividend payment.

We forecast 56% earnings growth in 2015, on the heels of 290% for 2014E. Trading at 9x 2015F PE, with ROE forecast at 38.5% for 2015 (22% in 2013).

A new JV investment in solar power in Japan, with up to 150MW potential, could provide upside potential; a deal could be concluded by early 2015.

SPCG could see further capacity upside from a domestic solar farm scheme, which we expect to go through. However, we consider this to be potential upside as most of SPCG’s resources are currently geared to projects overseas.

Sources: SPCG, Thanachart estimates




Ex 30: SPCG’s Capacity Profile

NO. Project Solar Share Holding Capacity Net equity owned Sum capacity Life COD Previous

(%) (MW) (MW) (MW) (years)

1 Korat 1 (KR 1) 51.07 6.12 3 6.12 25 21-Apr-10

2 Sakon Nakhon 1 (SN 1) 51.00 6.12 3 6.12 25 9-Feb-11

3 Nakhon Phanom 1 (NP 1) 51.00 6.12 3 6.12 25 22-Apr-11

4 Korat 2 (KR 2) 56.00 6.12 3 6.12 25 13-Sep-11

5 Loei 1 (LO 1) 56.00 6.12 3 6.12 25 15-Sep-11

6 Khon Kaen 1 (KK 1) 70.00 6.12 4 6.12 25 15 Feb 12

7 Korat 3 (KR 3) 60.00 6.12 4 6.12 25 9-Mar-12

8 Korat 4 (KR 4) 60.00 6.12 4 6.12 25 14-May-12

9 Korat 7 (KR 7) 60.00 6.12 4 6.12 25 30-May-12

10-16 100.00 7.46 52 52.22 25 End 3Q12 2Q12

17-20 100.00 7.46 30 29.84 25 End 4Q12 4Q12

21-25 100.00 7.46 37 37.30 25 1Q13 4Q12

26-34 100.00 7.46 67 67.14 25 2Q13 end 3Q13

35-36 100.00 3.00 6 6.00

Total 224 248 Sources: Company data, Thanachart estimates

DEMCO: WEH listing would be a catalyst

Ex 31: Valuation Table – DEMCO Ex 32: DEMCO – BUY, Price Bt9.95, TP Bt12.30

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 5,541 6,177 8,260 8,771

Net profit 358 440 547 560

Norm profit 349 440 547 560

Norm EPS (Bt) 0.5 0.6 0.8 0.8

Norm EPS grw (%) (19.4) 21.5 24.4 2.4

Norm PE (x) 19.0 15.7 12.6 12.3

EV/EBITDA (x) 21.6 17.5 13.8 13.6

P/BV (x) 2.1 2.0 1.8 1.7

Div yield (%) 1.5 2.9 3.6 3.7

ROE (%) 14.1 13.0 14.8 14.0

Net D/E (%) 24.1 26.4 36.8 40.4

We expect DEMCO’s new earnings source of wind power investment is likely to create a lower-risk income model and account for 40%-plus of earnings from 2014.

Our positive renewable outlook would bode well for DEMCO, being a renewable power contractor.

DEMCO looks cheap, at 13x PE for 2015F, for which we forecast 24.4% earnings growth.

The planned listing next year of Wind Energy Holding (WEH), in which DEMCO has a 4% stake, would likely be a share-price catalyst.

Sources: DEMCO, Thanachart estimates




Ex 33: DEMCO’s Capacity

WEH’s capacity —DEMCO's ownership — Status

Projects (MW) (%) (MW) 1. West Houy Bong 2 90 16 15 COD 2. West Houy Bong 3 90 16 15 COD 3. Khao Kor 60 10 6 COD Sum 240 35

Received letters of acceptance 4. Watabak 60 Under construction 5. Korat 02/01 90 Letter of acceptance 6. Korat 02/02 90 Letter of acceptance 7. Korat 02/03 90 Letter of acceptance 8. North Krissana 90 Letter of acceptance Sum 420

Awaiting approval 9. Korat 02/04 90 Awaiting approval 10. TS1 60 Awaiting approval 11. Roi Et 60 Awaiting approval 12. Mukdahan 60 Awaiting approval Sum 270

Total – ALL 930 35 Sources: Company data, Thanachart estimates

GLOW : No exciting expansion story

Ex 34: Valuation Table - GLOW Ex 35: GLOW – BUY, Price Bt89.0, TP Bt87.00

Y/E Dec (Bt m) 2013A 2014F 2015F 2016F

Sales 69,207 72,810 72,219 73,306

Net profit 7,214 8,877 8,654 8,856

Norm profit 8,117 8,877 8,654 8,856

Norm EPS (Bt) 5.5 6.1 5.9 6.1

Norm EPS grw (%) 67.9 9.4 (2.5) 2.3

Norm PE (x) 16.0 14.7 15.0 14.7

EV/EBITDA (x) 10.8 9.7 9.6 9.1

P/BV (x) 3.2 2.9 2.7 2.5

Div yield (%) 3.1 4.1 4.1 4.4

ROE (%) 21.1 20.7 18.4 17.6

Net D/E (%) 127.8 100.8 84.7 69.4

Since GHECO-1 began operating in 2013, GLOW has not had an exciting expansion story.

We fine-tune our earnings forecasts for 2014-16 as the coal price remains in the doldrums.

There is no major expansion in sight given the call for fourth-round IPP bids seems some way off, and hence GLOW may consider increasing its dividend payout.

As GLOW is a foreign company (70%-owned by Suez), it cannot fully own renewable power projects (land rights are limited to those with Thai nationality).

Sources: GLOW, Thanachart estimates




Ex 36: GLOW’s Capacity

Type Fule Shareholding Capacity

Net owned equity

COD Expiry date

(%) (MW) (MW) Projects in operation Thailand IPP - EGAT IPP Ng 95% 713 677 2003 2028 Cogen - power SPP NG/Coal 100% 995 995 1993-2000 2014-2025 Cogen - steam SPP NG 100% 258 258 1993-2001 2014-2026 CFB 3 Co-gen Coal 100% 115 115 COD- 3Q10 SPP 11 +12 (formerly TNP 1 and RNP)

SPP/Co-Gen NG 100% 153 153

Phase 5 Co-gen NG 100% 382 382 4Q11-2014 2031-34 GHECO-1 IPP coal 65% 660 429 2Q12 2037

Renewable Solar AIE VSPP Solar 100% 2 2 3Q12 3Q22

Laos Houay Ho IPP Hydro 67% 152 102 2Q09 na. Sub total 3,429 3,113





Ex 37: Sector Valuation Comparison DEMCO EA EGCO GLOW GUNKUL RATCH SPCG Average Rating BUY BUY BUY HOLD BUY BUY BUY Target price Thanachart 12.30 27.00 175.00 87.00 22.00 65.00 32.50 Consensus 12.30 14.69 157.00 85.00 18.00 58.50 28.40 Consensus rec. Buy 6.0 6.0 15.0 8.0 8.0 8.0 3.0

Hold 1.0 3.0 2.0 6.0 2.0 3.0 4.0 Sell 1.0 3.0 0.0 3.0 1.0 4.0 1.0

Sales (Bt m) 2013 5,541 3,936 18,686 69,207 2,045 50,612 2,473 152,501 2014F 6,177 8,614 18,355 72,810 3,248 39,987 4,096 153,288 2015F 8,260 11,001 16,281 72,219 3,886 38,622 5,967 156,236 2016F 8,771 15,379 30,705 73,306 5,697 37,635 6,019 177,512

Norm profits (Bt m) 2013 349 239 7,721 8,117 267 5,393 499 22,586 2014F 440 1,595 8,017 8,877 577 6,070 1,619 27,195 2015F 547 3,076 7,916 8,654 667 7,111 2,622 30,594 2016F 560 5,683 9,045 8,856 1,161 8,208 2,688 36,201

Sales growth (%) 2013 (7.8) (11.8) 36.1 21.0 (52.5) (8.6) 103.6 7.2 2014F 11.5 118.8 (1.8) 5.2 58.8 (21.0) 65.6 0.5 2015F 33.7 27.7 (11.3) (0.8) 19.7 (3.4) 45.7 1.9 2016F 6.2 39.8 88.6 1.5 46.6 (2.6) 0.9 13.6

Norm EPS growth (%) 2013 (19.4) 88.2 19.7 67.9 (39.9) 2.6 614.6 28.7 2014F 21.5 562.6 3.8 9.4 116.0 12.6 290.2 20.4 2015F 24.4 92.9 (1.3) (2.5) 15.6 17.1 55.7 12.5 2016F 2.4 84.7 14.3 2.3 74.0 15.4 2.5 18.3

Operating margin (%) 2013 5.8 7.2 20.1 18.4 6.5 11.6 51.1 17.2 2014F 6.9 20.8 21.7 19.4 13.4 14.8 68.2 23.6 2015F 7.0 33.2 24.1 18.6 16.0 14.1 61.9 25.0 2016F 6.9 43.8 20.2 18.7 24.5 11.7 58.9 26.4

ROE (%) 2013 14.1 8.7 11.6 21.1 11.0 10.0 22.2 14.1 2014F 13.0 31.8 11.2 20.7 18.3 10.3 38.1 20.5 2015F 14.8 44.8 10.3 18.4 18.1 10.9 38.5 22.3 2016F 14.0 55.5 11.1 17.6 27.0 11.9 31.2 24.0

Dividend yield (%) 2013 1.5 0.1 4.1 3.1 0.2 4.2 0.0 1.9 2014F 2.9 0.6 4.1 4.1 1.7 4.8 2.0 2.9 2015F 3.6 1.1 4.3 4.1 1.9 5.0 3.9 3.4 2016F 3.7 2.0 4.3 4.4 3.3 5.8 4.5 4.0

P/BV (x) 2013 2.1 19.4 1.1 3.2 4.9 1.4 8.3 5.8 2014F 2.0 14.9 1.0 2.9 4.0 1.2 4.1 4.3 2015F 1.8 10.5 1.0 2.7 3.6 1.2 3.1 3.4 2016F 1.7 6.8 0.9 2.5 3.0 1.1 2.5 2.6

Norm PE (x) 2013 19.0 351.8 10.0 16.0 52.3 14.5 55.1 18.4 2014F 15.7 53.1 9.6 14.7 24.2 12.9 14.1 15.2 2015F 12.6 27.5 9.7 15.0 21.0 11.0 9.1 13.6 2016F 12.3 14.9 8.5 14.7 12.1 9.5 8.9 11.5

EV/EBITDA (x) 2013 21.6 217.5 16.7 10.8 95.2 10.0 23.7 56.5 2014F 17.5 45.1 21.1 9.7 36.3 10.7 11.1 21.6 2015F 13.8 24.7 22.2 9.6 32.4 11.4 7.9 17.4 2016F 13.6 14.0 16.7 9.1 16.7 13.3 7.5 13.0

Net D/E (x) 2013 0.2 1.0 0.6 1.3 0.1 0.3 4.7 1.2 2014F 0.3 2.1 0.8 1.0 1.0 0.3 2.1 1.1 2015F 0.4 2.8 0.9 0.8 2.2 0.3 1.2 1.2 2016F 0.4 2.2 1.0 0.7 2.9 0.2 0.7 1.2


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Valuation Comparison

Ex 38: Comparison With Regional Peers

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

Name BBG code Country 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F

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

Datang International Power 991 HK China 20.4 20.0 11.8 9.8 1.1 1.0 8.9 8.2 3.3 3.9

Huadian Power 1071 HK China 4.5 (3.8) 8.3 8.6 1.4 1.2 6.1 5.8 4.4 4.4

Huaneng Power 600011 CH China 12.8 1.9 7.1 6.9 1.2 1.1 6.4 6.2 7.1 6.0

Cheung Kong Infrastructure 1038 HK Hong Kong (16.8) 5.4 13.8 13.1 1.4 1.3 95.1 84.0 3.6 3.7

China Power Int'l 2380 HK Hong Kong (3.5) 3.4 8.3 8.0 1.0 1.0 8.2 7.6 4.8 5.1

China Resources Power 836 HK Hong Kong 7.3 10.2 8.7 7.9 1.4 1.3 7.4 6.7 3.6 4.1

CLP Holdings 2 HK Hong Kong 72.0 1.9 15.6 15.3 1.7 1.7 10.6 10.3 4.0 4.1

Hongkong Electric Holdings 6 HK Hong Kong (19.8) (2.3) 16.5 16.9 1.2 1.2 91.7 50.5 3.7 3.8

Huaneng Power 902 HK Hong Kong 12.7 0.4 10.5 10.4 1.8 1.6 6.3 6.2 4.8 4.9

KSK Energy Ventures 532997 IN India 1.2 (61.5) (20.9) (54.3) 1.1 1.1 28.9 12.4 0.0 0.0

Reliance Infrastructure RELI IN India (11.6) 12.5 11.7 10.4 0.7 0.7 13.5 10.6 1.0 1.0

Reliance Power RPWR IN India (2.5) 5.8 26.4 24.9 1.4 1.3 26.8 17.3 0.0 0.0

Tata Power TPWR IN India (345.2) 67.2 25.2 15.1 1.9 1.7 8.9 7.8 1.1 1.3

Torrent Power 532779 IN India (180.7) (766.7) (79.1) 11.9 1.1 1.0 13.6 6.4 1.6 3.3

Tenaga Nasional TNB MK Malaysia 7.5 7.1 14.0 13.1 1.8 1.6 7.8 7.1 2.4 2.5

YTL Corp YTL MK Malaysia 17.1 1.4 11.0 10.8 1.2 1.1 9.4 9.3 2.8 2.9

YTL Power YTLP MK Malaysia (0.3) 3.6 10.6 10.3 1.0 0.9 7.9 7.6 1.1 1.1

First Philippine Holdings Corp. FPH PM Philippines 61.7 57.2 11.0 7.0 0.6 0.5 7.6 5.8 2.8 2.8

Manila Electric MER PM Philippines 9.1 (2.4) 15.4 15.8 3.4 3.1 7.1 7.3 4.0 4.2

Demco Pcl * DEMCO TB Thailand 21.5 24.4 15.7 12.6 2.0 1.8 17.5 13.8 2.9 3.6

EA Pcl* EA TB Thailand 562.6 92.9 53.1 27.5 14.9 10.5 45.1 24.7 0.6 1.1

Electricity Generating * EGCO TB Thailand 3.8 (1.3) 9.6 9.7 1.0 1.0 21.1 22.2 4.1 4.3

Glow Energy * GLOW TB Thailand 9.4 (2.5) 14.7 15.0 2.9 2.7 9.7 9.6 4.1 4.1

Gunkul Engineering * GUNKUL TB Thailand 116.0 15.6 24.2 21.0 4.0 3.6 36.3 32.4 1.7 1.9

Ratchaburi Electricity * RATCH TB Thailand 12.6 17.1 12.9 11.0 1.2 1.2 10.7 11.4 4.8 5.0

SPCG Pcl* SPCG TB Thailand 290.2 55.7 14.1 9.1 4.1 3.1 11.4 7.9 2.0 3.9

Average 14.9 (19.7) 10.2 10.4 2.1 1.8 20.5 15.7 3.0 3.2

Sources: Bloomberg, * Thanachart estimates Based on 30 July 2014 closing prices


APPENDIX SUPANNA SUWANKIRD


STOCK PERFORMANCE

Absolute (%) Rel SET (%) 1M 3M 12M YTD 1M 3M 12M YTD SET INDEX 2.2 7.3 6.7 16.9 — — — —

Energy Sector 2.0 4.5 3.5 8.6 (0.3) (2.8) (3.2) (8.3) DEMCO (1.5) 9.3 14.4 37.2 (3.7) 2.0 7.6 20.3 EA 24.0 94.0 238.8 196.7 21.8 86.7 232.1 179.8 EGCO 5.4 11.0 7.4 19.2 3.2 3.7 0.6 2.2 GLOW 6.9 14.5 29.9 26.2 4.7 7.1 23.2 9.3 GUNKUL (5.4) 17.8 20.2 80.7 (7.6) 10.4 13.5 63.7 RATCH (0.5) 1.4 5.9 10.2 (2.7) (5.9) (0.8) (6.7) SPCG (3.7) 21.5 17.6 35.5 (6.0) 14.1 10.9 18.6

Source: Bloomberg

SECTOR - SWOT ANALYSIS

S — Strength W — Weakness

Defensive as agreed revenues on PPAs are predetermined.

Changes in fuel prices are passed through via PPAs for IPPs and mostly by formulae adjustments for SPPs.

Most IPPs set their tariff as front end loaded, so tariffs for

ageing plants, especially ones approaching expiry, are set

to fall drastically.

There is sometimes intervention in the Ft adjustment.

O — Opportunity T — Threat

Huge investment potential in neighboring countries.

Government supports and subsidizes renewable energy.

Local communities may protest against new projects.

Increased regulatory risk on environmental concerns.

REGIONAL COMPARISON

EPS growth — PE — — P/BV — – EV/EBITDA – — Div. Yield — Name 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F China 12.6 6.0 9.0 8.5 1.2 1.1 7.1 6.7 5.0 4.8 Hong Kong 8.6 3.2 12.2 11.9 1.4 1.3 36.6 27.6 4.1 4.3 India (107.7) (148.5) (7.4) 1.6 1.2 1.2 18.3 10.9 0.7 1.1 Malaysia 8.1 4.0 11.9 11.4 1.3 1.2 8.4 8.0 2.1 2.2 Philippines 35.4 27.4 13.2 11.4 2.0 1.8 7.3 6.5 3.4 3.5 Thailand 20.4 12.5 15.2 13.6 4.3 3.4 21.6 17.4 2.9 3.4

Average (3.8) (15.9) 9.0 9.7 1.9 1.7 16.6 12.9 3.0 3.2 DEMCO 21.5 24.4 15.7 12.6 2.0 1.8 17.5 13.8 2.9 3.6 EA 562.6 92.9 53.1 27.5 14.9 10.5 45.1 24.7 0.6 1.1 EGCO 3.8 (1.3) 9.6 9.7 1.0 1.0 21.1 22.2 4.1 4.3 GLOW 9.4 (2.5) 14.7 15.0 2.9 2.7 9.7 9.6 4.1 4.1 GUNKUL 116.0 15.6 24.2 21.0 4.0 3.6 36.3 32.4 1.7 1.9 RATCH 12.6 17.1 12.9 11.0 1.2 1.2 10.7 11.4 4.8 5.0 SPCG 290.2 55.7 14.1 9.1 4.1 3.1 11.1 7.9 2.0 3.9

Average *- Thailand 20.4 12.5 15.2 13.6 4.3 3.4 21.6 17.4 2.9 3.4

Sources: Bloomberg Consensus Note: * Thanachart estimate – using normalized EPS


FINANCIAL SUMMARY SUPANNA SUWANKIRD


DEMCO Pcl INCOME STATEMENTFY ending Dec 2012A 2013A 2014F 2015F 2016FSales 6,010 5,541 6,177 8,260 8,771Cost of sales 5,068 4,831 5,381 7,202 7,654 Gross profit 941 710 797 1,058 1,118% gross margin 15.7% 12.8% 12.9% 12.8% 12.7%Selling & administration expenses 327 389 371 479 509 Operating profit 615 322 426 579 609% operating margin 10.2% 5.8% 6.9% 7.0% 6.9%Depreciation & amortization 23 22 21 23 24 EBITDA 638 344 447 602 633% EBITDA margin 10.6% 6.2% 7.2% 7.3% 7.2%Non-operating income 0 0 8 57 70Non-operating expenses (1) (13) (15) (20) (21)Interest expense (108) (78) (93) (137) (174) Pre-tax profit 506 231 326 479 484Income tax 86 53 64 95 96 After-tax profit 420 178 261 384 388% net margin 7.0% 3.2% 4.2% 4.7% 4.4%Shares in affi liates' Earnings (12) 169 184 188 198Minority interests (15) 3 (5) (25) (27)Extraordinary items 0 9 0 0 0NET PROFIT 393 358 440 547 560Normalized profit 393 349 440 547 560EPS (Bt) 0.6 0.5 0.6 0.8 0.8Normalized EPS (Bt) 0.6 0.5 0.6 0.8 0.8

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 2,803 3,213 4,141 5,433 5,677 Cash & cash equivalent 204 370 1,200 1,500 1,500 Account receivables 1,178 928 846 1,132 1,202 Inventories 205 252 295 395 419 Others 1,216 1,664 1,800 2,407 2,556Investments & loans 1,174 1,546 1,768 1,768 2,173Net fixed assets 315 267 308 318 326Other assets 168 954 1,064 1,423 1,511Total assets 4,460 5,981 7,281 8,941 9,686

LIABILITIES:Current liabilities: 2,629 2,689 3,594 4,872 5,262 Account payables 628 1,003 958 1,283 1,363 Bank overdraft & ST loans 1,530 838 2,026 2,774 3,033 Current LT debt 28 302 0 0 0 Others current liabilities 442 547 610 815 866Total LT debt 22 10 107 146 160Others LT liabilities 41 45 50 67 71Total liabilities 2,691 2,744 3,750 5,085 5,493Minority interest 40 1 6 6 32Preferreds shares 0 0 0 0 0Paid-up capital 553 693 693 693 693Share premium 655 1,502 1,502 1,502 1,502Warrants 0 0 0 0 0Surplus (51) 158 158 158 158Retained earnings 572 883 1,172 1,497 1,808Shareholders' equity 1,729 3,236 3,525 3,850 4,161Liabilities & equity 4,460 5,981 7,281 8,941 9,686





DEMCO Pcl CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 506 231 326 479 484Tax paid (86) (53) (64) (95) (96)Depreciation & amortization 23 22 21 23 24Chg In working capital (844) 578 (6) (61) (14)Chg In other CA & CL / minorities (2) (210) 110 (246) 100Cash flow from operations (403) 568 386 101 498

Capex (29) 28 (60) (30) (30)ST loans & investments (0) (0) 0 0 0LT loans & investments (494) (372) (222) 0 (405)Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (103) (775) (106) (336) (86)Cash flow from investments (626) (1,120) (388) (366) (521)Debt financing 754 (431) 983 788 272Capital increase 289 986 0 0 0Dividends paid (129) (148) (151) (222) (249)Warrants & other surplus 119 310 0 0 0Cash flow from financing 1,032 718 832 566 23

Free cash flow (432) 596 326 71 468

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 15.4 19.0 15.7 12.6 12.3Normalized PE - at target price (x) 19.0 23.5 19.4 15.6 15.2PE (x) 15.4 18.6 15.7 12.6 12.3PE - at target price (x) 19.0 23.0 19.4 15.6 15.2EV/EBITDA (x) 11.6 21.6 17.5 13.8 13.6EV/EBITDA - at target price (x) 13.8 26.2 21.2 16.5 16.1P/BV (x) 3.5 2.1 2.0 1.8 1.7P/BV - at target price (x) 4.4 2.6 2.4 2.2 2.0P/CFO (x) (14.9) 11.7 17.9 68.6 13.9Price/sales (x) 1.1 1.2 1.1 0.8 0.8Dividend yield (%) 3.2 1.5 2.9 3.6 3.7FCF Yield (%) (7.2) 9.0 4.7 1.0 6.8

(Bt)Normalized EPS 0.6 0.5 0.6 0.8 0.8EPS 0.6 0.5 0.6 0.8 0.8DPS 0.3 0.2 0.3 0.4 0.4BV/share 2.8 4.7 5.1 5.6 6.0 CFO/share (0.7) 0.8 0.6 0.1 0.7 FCF/share (0.7) 0.9 0.5 0.1 0.7





DEMCO Pcl FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 80.6 (7.8) 11.5 33.7 6.2Net profit (%) 230.5 (8.8) 22.8 24.4 2.4EPS (%) 208.2 (17.4) 18.5 24.4 2.4Normalized profit (%) 230.5 (11.0) 25.9 24.4 2.4Normalized EPS (%) 208.2 (19.4) 21.5 24.4 2.4Dividend payout ratio (%) 49.5 29.0 45.0 45.0 45.0


DuPontROE - using after tax profit (%) 30.1 7.2 7.7 10.4 9.7 - asset turnover (x) 1.5 1.1 0.9 1.0 0.9 - operating margin (%) 10.2 5.6 6.8 7.5 7.5 - leverage (x) 2.9 2.1 2.0 2.2 2.3 - interest burden (%) 82.5 74.9 77.7 77.8 73.6 - tax burden (%) 83.1 76.9 80.2 80.2 80.2WACC (%) 9.2 9.2 9.2 9.2 9.2ROIC (%) 30.3 8.0 8.5 10.4 9.3 NOPAT (Bt m) 511 247 342 464 488





Energy Absolute INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 4,464 3,936 8,614 11,001 15,379Cost of sales 4,206 3,458 6,453 6,884 7,967 Gross profit 258 479 2,161 4,117 7,412% gross margin 5.8% 12.2% 25.1% 37.4% 48.2%Selling & administration expenses 137 196 367 463 681 Operating profit 122 283 1,793 3,654 6,731% operating margin 2.7% 7.2% 20.8% 33.2% 43.8%Depreciation & amortization 61 125 347 688 1,287 EBITDA 183 408 2,140 4,342 8,018% EBITDA margin 4.1% 10.4% 24.8% 39.5% 52.1%Non-operating income 15 27 61 75 107Non-operating expenses 0 0 0 0 0Interest expense (29) (62) (254) (653) (1,124) Pre-tax profit 107 248 1,600 3,076 5,714Income tax 0 8 6 15 29 After-tax profit 107 240 1,595 3,061 5,685% net margin 2.4% 6.1% 18.5% 27.8% 37.0%Shares in affi liates' Earnings 0 0 0 0 0Minority interests (0) (1) 0 16 (2)Extraordinary items 0 29 0 0 0NET PROFIT 107 268 1,595 3,076 5,683Normalized profit 107 239 1,595 3,076 5,683EPS (Bt) 0.0 0.1 0.4 0.8 1.5Normalized EPS (Bt) 0.0 0.1 0.4 0.8 1.5

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 467 2,402 704 1,366 3,395 Cash & cash equivalent 67 1,572 0 0 1,500 Account receivables 166 526 354 904 1,264 Inventories 161 220 265 377 546 Others 72 83 85 85 85Investments & loans 0 0 0 0 0Net fixed assets 1,896 8,093 17,800 31,134 39,974Other assets 182 971 190 243 339Total assets 2,545 11,466 18,694 32,743 43,708

LIABILITIES:Current liabilities: 767 1,877 9,577 13,847 18,055 Account payables 66 151 177 189 218 Bank overdraft & ST loans 445 580 8,222 11,291 14,375 Current LT debt 116 272 88 452 1,150 Others current liabilities 140 873 1,090 1,916 2,312Total LT debt 635 5,225 3,436 10,839 13,225Others LT liabilities 0 0 0 0 0Total liabilities 1,403 7,103 13,013 24,687 31,280Minority interest 2 3 3 3 5Preferreds shares 0 0 0 0 0Paid-up capital 317 373 373 373 373Share premium 746 3,681 3,681 3,681 3,681Warrants 0 0 0 0 0Surplus (47) (47) (47) (47) (47)Retained earnings 123 353 1,671 4,047 8,416Shareholders' equity 1,140 4,360 5,678 8,053 12,422Liabilities & equity 2,545 11,466 18,694 32,743 43,708





Energy Absolute CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 107 248 1,600 3,076 5,714Tax paid (0) (8) (6) (15) (29)Depreciation & amortization 61 125 347 688 1,287Chg In working capital 4 (334) 153 (650) (499)Chg In other CA & CL / minorities (56) 691 110 807 396Cash flow from operations 116 722 2,204 3,905 6,870

Capex (1,030) (6,321) (10,054) (14,022) (10,127)ST loans & investments 6 (17) 21 0 0LT loans & investments 64 0 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (70) (712) 864 (18) (97)Cash flow from investments (1,030) (7,050) (9,169) (14,040) (10,224)Debt financing 752 4,881 5,669 10,836 6,167Capital increase 180 2,991 0 0 0Dividends paid (85) (37) (277) (701) (1,314)Warrants & other surplus (47) (1) 0 0 0Cash flow from financing 800 7,833 5,393 10,135 4,854

Free cash flow (914) (5,600) (7,850) (10,117) (3,257)

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 661.9 351.8 53.1 27.5 14.9Normalized PE - at target price (x) 787.3 418.4 63.2 32.7 17.7PE (x) 661.9 314.1 53.1 27.5 14.9PE - at target price (x) 787.3 373.6 63.2 32.7 17.7EV/EBITDA (x) 393.7 217.5 45.1 24.7 14.0EV/EBITDA - at target price (x) 467.1 256.6 52.5 28.4 16.0P/BV (x) 63.1 19.4 14.9 10.5 6.8P/BV - at target price (x) 75.1 23.1 17.7 12.5 8.1P/CFO (x) 611.3 116.6 38.4 21.7 12.3Price/sales (x) 19.0 21.5 9.8 7.7 5.5Dividend yield (%) (0.1) 0.1 0.6 1.1 2.0FCF Yield (%) (1.3) (6.7) (9.3) (11.9) (3.8)

(Bt)Normalized EPS 0.0 0.1 0.4 0.8 1.5EPS 0.0 0.1 0.4 0.8 1.5DPS (0.0) 0.0 0.1 0.2 0.5BV/share 0.4 1.2 1.5 2.2 3.3 CFO/share 0.0 0.2 0.6 1.0 1.8 FCF/share (0.3) (1.5) (2.1) (2.7) (0.9)





Energy Absolute FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) (17.7) (11.8) 118.8 27.7 39.8Net profit (%) 69.9 150.3 495.2 92.9 84.7EPS (%) 59.1 110.7 491.6 92.9 84.7Normalized profit (%) 69.9 123.5 566.6 92.9 84.7Normalized EPS (%) 59.1 88.2 562.6 92.9 84.7Dividend payout ratio (%) (86.5) 27.8 30.0 30.0 30.0


DuPontROE - using after tax profit (%) 10.1 8.7 31.8 44.6 55.5 - asset turnover (x) 2.1 0.6 0.6 0.4 0.4 - operating margin (%) 3.1 7.9 21.5 33.9 44.5 - leverage (x) 2.0 2.5 3.0 3.7 3.7 - interest burden (%) 78.4 80.1 86.3 82.5 83.6 - tax burden (%) 100.0 96.9 99.6 99.5 99.5WACC (%) 6.7 6.7 6.7 6.7 6.7ROIC (%) 9.7 12.1 20.2 20.9 21.9 NOPAT (Bt m) 121 274 1,787 3,636 6,698





Electricity Generating INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 13,734 18,686 18,355 16,281 30,705Cost of sales 9,673 12,060 11,723 10,342 21,631 Gross profit 4,061 6,627 6,632 5,939 9,074% gross margin 29.6% 35.5% 36.1% 36.5% 29.6%Selling & administration expenses 2,362 2,865 2,645 2,021 2,875 Operating profit 1,699 3,761 3,987 3,918 6,200% operating margin 12.4% 20.1% 21.7% 24.1% 20.2%Depreciation & amortization 2,811 3,387 2,338 2,751 3,608 EBITDA 4,510 7,148 6,325 6,669 9,808% EBITDA margin 32.8% 38.3% 34.5% 41.0% 31.9%Non-operating income 737 983 772 599 960Non-operating expenses 0 0 0 0 0Interest expense (1,095) (1,645) (2,004) (2,887) (3,517) Pre-tax profit 1,341 3,099 2,755 1,630 3,642Income tax 401 1,457 827 326 364 After-tax profit 941 1,643 1,929 1,304 3,278% net margin 6.8% 8.8% 10.5% 8.0% 10.7%Shares in affi liates' Earnings 5,541 6,252 6,259 6,763 6,109Minority interests (29) (173) (170) (151) (342)Extraordinary items 4,788 (807) 0 0 0NET PROFIT 11,240 6,914 8,017 7,916 9,045Normalized profit 6,452 7,721 8,017 7,916 9,045EPS (Bt) 21.4 13.1 15.2 15.0 17.2Normalized EPS (Bt) 12.3 14.7 15.2 15.0 17.2

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 19,553 24,038 19,800 18,112 30,310 Cash & cash equivalent 4,147 6,984 5,000 5,000 5,000 Account receivables 2,414 2,496 3,017 2,676 5,047 Inventories 3,212 3,017 3,212 2,834 5,926 Others 9,779 11,541 8,570 7,602 14,337Investments & loans 35,948 37,863 53,407 54,780 57,129Net fixed assets 38,556 44,521 55,590 72,495 86,876Other assets 16,332 24,699 19,530 20,920 22,920Total assets 110,389 131,120 148,327 166,307 197,236

LIABILITIES:Current liabilities: 14,772 10,788 24,855 16,719 18,242 Account payables 1,226 1,260 1,349 1,190 2,489 Bank overdraft & ST loans 10,674 1,800 18,459 11,394 9,151 Current LT debt 1,051 5,191 2,584 1,937 2,471 Others current liabilities 1,821 2,536 2,463 2,197 4,131Total LT debt 24,165 42,238 40,487 62,631 79,887Others LT liabilities 6,451 7,842 7,703 6,833 12,886Total liabilities 45,388 60,868 73,046 86,183 111,015Minority interest 841 910 1,080 1,231 1,573Preferreds shares 0 0 0 0 0Paid-up capital 5,265 5,265 5,265 5,265 5,265Share premium 8,601 8,601 8,601 8,601 8,601Warrants 0 0 0 0 0Surplus 473 1,840 1,840 1,840 1,840Retained earnings 49,821 53,637 58,496 63,187 68,942Shareholders' equity 64,160 69,343 74,201 78,893 84,647Liabilities & equity 110,389 131,120 148,327 166,307 197,236





Electricity Generating CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 1,341 3,099 2,755 1,630 3,642Tax paid (479) (1,457) (827) (326) (364)Depreciation & amortization 2,811 3,387 2,338 2,751 3,608Chg In working capital (1,880) 148 (627) 560 (4,165)Chg In other CA & CL / minorities 4,100 6,186 5,353 6,229 (199)Cash flow from operations 5,893 11,363 8,992 10,844 2,523

Capex (28,344) (9,352) (13,408) (19,656) (17,990)ST loans & investments 1,462 (1,994) 2,816 0 0LT loans & investments 2,434 (1,915) (15,544) (1,373) (2,349)Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (3,979) (6,038) 6,017 (1,022) 5,560Cash flow from investments (28,427) (19,298) (20,119) (22,051) (14,779)Debt financing 23,337 12,503 12,302 14,432 15,546Capital increase (47) 0 0 0 0Dividends paid (3,000) (3,288) (3,159) (3,225) (3,290)Warrants & other surplus (2,011) 1,557 0 0 0Cash flow from financing 18,279 10,772 9,143 11,207 12,256

Free cash flow (22,450) 2,011 (4,415) (8,811) (15,467)

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 11.9 10.0 9.6 9.7 8.5Normalized PE - at target price (x) 14.3 11.9 11.5 11.6 10.2PE (x) 6.8 11.1 9.6 9.7 8.5PE - at target price (x) 8.2 13.3 11.5 11.6 10.2EV/EBITDA (x) 24.1 16.7 21.1 22.2 16.7EV/EBITDA - at target price (x) 27.5 18.8 23.5 24.5 18.2P/BV (x) 1.2 1.1 1.0 1.0 0.9P/BV - at target price (x) 1.4 1.3 1.2 1.2 1.1P/CFO (x) 13.0 6.8 8.5 7.1 30.5Price/sales (x) 5.6 4.1 4.2 4.7 2.5Dividend yield (%) 4.1 4.1 4.1 4.3 4.3FCF Yield (%) (29.2) 2.6 (5.7) (11.5) (20.1)

(Bt)Normalized EPS 12.3 14.7 15.2 15.0 17.2EPS 21.4 13.1 15.2 15.0 17.2DPS 6.0 6.0 6.0 6.3 6.3BV/share 121.9 131.7 140.9 149.9 160.8 CFO/share 11.2 21.6 17.1 20.6 4.8 FCF/share (42.6) 3.8 (8.4) (16.7) (29.4)





Electricity Generating FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 79.3 36.1 (1.8) (11.3) 88.6Net profit (%) 125.3 (38.5) 16.0 (1.3) 14.3EPS (%) 125.3 (38.5) 16.0 (1.3) 14.3Normalized profit (%) 29.9 19.7 3.8 (1.3) 14.3Normalized EPS (%) 29.9 19.7 3.8 (1.3) 14.3Dividend payout ratio (%) 28.1 45.7 39.4 41.6 36.4







Glow Energy INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 57,204 69,207 72,810 72,219 73,306Cost of sales 48,303 55,693 57,873 58,085 58,872 Gross profit 8,901 13,514 14,937 14,134 14,435% gross margin 15.6% 19.5% 20.5% 19.6% 19.7%Selling & administration expenses 676 769 801 722 733 Operating profit 8,225 12,745 14,136 13,412 13,702% operating margin 14.4% 18.4% 19.4% 18.6% 18.7%Depreciation & amortization 4,247 4,869 4,915 5,200 5,460 EBITDA 12,472 17,614 19,051 18,612 19,162% EBITDA margin 21.8% 25.5% 26.2% 25.8% 26.1%Non-operating income 152 268 245 284 348Non-operating expenses 422 297 0 0 0Interest expense (2,354) (3,389) (2,859) (2,439) (2,571) Pre-tax profit 6,445 9,921 11,521 11,257 11,479Income tax 786 1,132 1,244 1,126 1,148 After-tax profit 5,659 8,789 10,277 10,131 10,331% net margin 9.9% 12.7% 14.1% 14.0% 14.1%Shares in affi liates' Earnings (0) (0) 0 0 0Minority interests (823) (672) (1,400) (1,478) (1,475)Extraordinary items 582 (902) 0 0 0NET PROFIT 5,418 7,214 8,877 8,654 8,856Normalized profit 4,836 8,117 8,877 8,654 8,856EPS (Bt) 3.7 4.9 6.1 5.9 6.1Normalized EPS (Bt) 3.3 5.5 6.1 5.9 6.1

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 27,415 25,446 25,819 35,854 41,146 Cash & cash equivalent 11,861 4,871 4,871 15,000 20,000 Account receivables 8,781 12,999 12,966 12,861 13,055 Inventories 4,880 5,522 5,867 5,888 5,968 Others 1,893 2,055 2,115 2,105 2,124Investments & loans 2 2 2 2 2Net fixed assets 100,770 97,301 97,686 98,086 97,126Other assets 1,852 2,257 2,374 2,355 2,390Total assets 130,039 125,006 125,881 136,298 140,665

LIABILITIES:Current liabilities: 23,875 21,548 18,169 17,681 17,858 Account payables 10,389 9,858 11,099 11,140 11,290 Bank overdraft & ST loans 3,933 1,433 0 0 0 Current LT debt 8,680 9,278 6,000 5,500 5,500 Others current liabilities 872 979 1,070 1,041 1,067Total LT debt 62,187 54,573 52,639 58,772 58,167Others LT liabilities 1,435 1,625 1,709 1,696 1,721Total liabilities 87,496 77,746 72,518 78,148 77,745Minority interest 6,105 6,683 8,083 9,561 11,036Preferreds shares 0 0 0 0 0Paid-up capital 14,629 14,629 14,629 14,629 14,629Share premium 2,935 2,935 2,935 2,935 2,935Warrants 0 0 0 0 0Surplus (574) (501) 0 0 0Retained earnings 19,447 23,514 27,716 31,024 34,319Shareholders' equity 36,438 40,576 45,280 48,588 51,883Liabilities & equity 130,039 125,006 125,881 136,298 140,665





Glow Energy CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 6,445 9,921 11,521 11,257 11,479Tax paid (836) (1,121) (1,207) (1,140) (1,138)Depreciation & amortization 4,247 4,869 4,915 5,200 5,460Chg In working capital 1,294 (5,391) 929 124 (122)Chg In other CA & CL / minorities 681 (413) (6) (5) (3)Cash flow from operations 11,830 7,865 16,151 15,437 15,676

Capex (6,786) (1,401) (5,300) (5,600) (4,500)ST loans & investments 2,661 245 0 0 0LT loans & investments 0 0 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 800 (206) (33) 5 (10)Cash flow from investments (3,325) (1,362) (5,333) (5,595) (4,510)Debt financing 1,699 (10,418) (6,645) 5,633 (605)Capital increase 0 0 0 0 0Dividends paid (2,996) (3,148) (4,675) (5,346) (5,561)Warrants & other surplus (236) 72 501 0 0Cash flow from financing (1,532) (13,494) (10,818) 287 (6,166)

Free cash flow 5,044 6,464 10,851 9,837 11,176

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 26.9 16.0 14.7 15.0 14.7Normalized PE - at target price (x) 26.3 15.7 14.3 14.7 14.4PE (x) 24.0 18.0 14.7 15.0 14.7PE - at target price (x) 23.5 17.6 14.3 14.7 14.4EV/EBITDA (x) 15.5 10.8 9.7 9.6 9.1EV/EBITDA - at target price (x) 15.3 10.7 9.5 9.5 8.9P/BV (x) 3.6 3.2 2.9 2.7 2.5P/BV - at target price (x) 3.5 3.1 2.8 2.6 2.5P/CFO (x) 11.0 16.6 8.1 8.4 8.3Price/sales (x) 2.3 1.9 1.8 1.8 1.8Dividend yield (%) 2.5 3.1 4.1 4.1 4.4FCF Yield (%) 3.9 5.0 8.3 7.6 8.6

(Bt)Normalized EPS 3.3 5.5 6.1 5.9 6.1EPS 3.7 4.9 6.1 5.9 6.1DPS 2.2 2.8 3.6 3.7 3.9BV/share 24.9 27.7 31.0 33.2 35.5 CFO/share 8.1 5.4 11.0 10.6 10.7 FCF/share 3.4 4.4 7.4 6.7 7.6





Glow Energy FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 41.7 21.0 5.2 (0.8) 1.5Net profit (%) 55.0 33.2 23.0 (2.5) 2.3EPS (%) 55.0 33.2 23.0 (2.5) 2.3Normalized profit (%) 16.2 67.9 9.4 (2.5) 2.3Normalized EPS (%) 16.2 67.9 9.4 (2.5) 2.3Dividend payout ratio (%) 59.7 55.8 60.0 62.0 65.0







Gunkul Engineering INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 4,306 2,045 3,248 3,886 5,697Cost of sales 3,236 1,586 2,422 2,755 3,795 Gross profit 1,070 458 826 1,131 1,902% gross margin 24.8% 22.4% 25.4% 29.1% 33.4%Selling & administration expenses 378 325 392 511 508 Operating profit 692 133 434 620 1,394% operating margin 16.1% 6.5% 13.4% 16.0% 24.5%Depreciation & amortization 48 18 57 93 289 EBITDA 740 150 491 714 1,683% EBITDA margin 17.2% 7.4% 15.1% 18.4% 29.5%Non-operating income 29 36 58 70 68Non-operating expenses 0 0 0 0 0Interest expense (104) (47) (125) (259) (552) Pre-tax profit 617 122 368 431 911Income tax 133 19 64 36 36 After-tax profit 483 102 304 395 875% net margin 11.2% 5.0% 9.4% 10.2% 15.4%Shares in affi liates' Earnings (49) 150 258 272 286Minority interests 10 15 15 0 0Extraordinary items 334 616 0 0 0NET PROFIT 778 883 577 667 1,161Normalized profit 445 267 577 667 1,161EPS (Bt) 0.9 1.0 0.7 0.8 1.3Normalized EPS (Bt) 0.5 0.3 0.7 0.8 1.3

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 2,545 1,323 1,954 2,024 2,813 Cash & cash equivalent 582 225 400 200 200 Account receivables 1,253 497 756 905 1,327 Inventories 468 448 597 679 936 Others 242 154 200 239 351Investments & loans 353 1,078 1,401 1,807 2,376Net fixed assets 2,748 658 4,093 9,122 13,172Other assets 1,551 1,521 1,800 2,154 3,157Total assets 7,197 4,580 9,248 15,108 21,518

LIABILITIES:Current liabilities: 3,181 1,069 2,877 4,410 6,241 Account payables 878 270 431 491 676 Bank overdraft & ST loans 1,686 242 1,685 2,337 2,863 Current LT debt 127 164 263 911 1,775 Others current liabilities 490 393 497 671 928Total LT debt 1,364 157 2,265 6,099 9,676Others LT liabilities 439 234 371 444 652Total liabilities 4,984 1,459 5,513 10,954 16,569Minority interest 221 272 257 257 257Preferreds shares 0 0 0 0 0Paid-up capital 440 660 880 880 880Share premium 519 519 519 519 519Warrants 0 0 0 0 0Surplus 0 0 0 0 0Retained earnings 1,033 1,670 2,079 2,498 3,293Shareholders' equity 1,992 2,849 3,478 3,897 4,692Liabilities & equity 7,197 4,580 9,248 15,108 21,518





Gunkul Engineering CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 617 122 368 431 911Tax paid (73) (124) (23) (47) (2)Depreciation & amortization 48 18 57 93 289Chg In working capital (128) 169 (248) (172) (493)Chg In other CA & CL / minorities 269 301 261 353 214Cash flow from operations 733 486 415 659 918

Capex 447 2,073 (3,492) (5,123) (4,338)ST loans & investments 0 0 0 0 0LT loans & investments (353) (725) (323) (406) (569)Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (220) 455 (127) (216) (612)Cash flow from investments (126) 1,803 (3,943) (5,745) (5,519)Debt financing (370) (2,619) 3,651 5,135 4,966Capital increase 40 220 220 0 0Dividends paid (49) (26) (128) (249) (366)Warrants & other surplus 39 (220) (40) 0 0Cash flow from financing (340) (2,646) 3,703 4,886 4,601

Free cash flow 1,180 2,559 (3,078) (4,463) (3,420)

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 31.5 52.3 24.2 21.0 12.1Normalized PE - at target price (x) 43.5 72.4 33.5 29.0 16.7PE (x) 18.0 15.8 24.2 21.0 12.1PE - at target price (x) 24.9 21.9 33.5 29.0 16.7EV/EBITDA (x) 22.4 95.2 36.3 32.4 16.7EV/EBITDA - at target price (x) 29.7 130.9 47.2 39.9 19.9P/BV (x) 7.0 4.9 4.0 3.6 3.0P/BV - at target price (x) 9.7 6.8 5.6 5.0 4.1P/CFO (x) 19.1 28.8 33.7 21.2 15.2Price/sales (x) 3.2 6.8 4.3 3.6 2.5Dividend yield (%) 0.2 0.2 1.7 1.9 3.3FCF Yield (%) 8.4 18.3 (22.0) (31.9) (24.4)

(Bt)Normalized EPS 0.5 0.3 0.7 0.8 1.3EPS 0.9 1.0 0.7 0.8 1.3DPS 0.0 0.0 0.3 0.3 0.5BV/share 2.3 3.2 4.0 4.4 5.3 CFO/share 0.8 0.6 0.5 0.7 1.0 FCF/share 1.3 2.9 (3.5) (5.1) (3.9)





Gunkul Engineering FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 62.4 (52.5) 58.8 19.7 46.6Net profit (%) 769.4 13.5 (34.6) 15.6 74.0EPS (%) 769.4 13.5 (34.6) 15.6 74.0Normalized profit (%) 189.2 (39.9) 116.0 15.6 74.0Normalized EPS (%) 189.2 (39.9) 116.0 15.6 74.0Dividend payout ratio (%) 3.4 2.8 40.0 40.0 40.0


DuPontROE - using after tax profit (%) 30.4 4.2 9.6 10.7 20.4 - asset turnover (x) 0.7 0.3 0.5 0.3 0.3 - operating margin (%) 16.7 8.3 15.2 17.8 25.7 - leverage (x) 4.0 2.4 2.2 3.3 4.3 - interest burden (%) 85.6 72.0 74.7 62.5 62.3 - tax burden (%) 78.4 84.1 82.7 91.6 96.1WACC (%) 7.5 7.5 7.5 7.5 7.5ROIC (%) 12.2 2.4 11.3 7.8 10.3 NOPAT (Bt m) 542 112 359 568 1,339





Ratchaburi Electricity Generating INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 55,365 50,612 39,987 38,622 37,635Cost of sales 47,269 43,327 32,482 31,630 31,733 Gross profit 8,096 7,285 7,506 6,991 5,902% gross margin 14.6% 14.4% 18.8% 18.1% 15.7%Selling & administration expenses 1,518 1,404 1,599 1,545 1,505 Operating profit 6,578 5,881 5,906 5,447 4,397% operating margin 11.9% 11.6% 14.8% 14.1% 11.7%Depreciation & amortization 3,499 3,416 3,046 2,969 2,809 EBITDA 10,076 9,298 8,952 8,415 7,206% EBITDA margin 18.2% 18.4% 22.4% 21.8% 19.1%Non-operating income 1,017 869 838 624 629Non-operating expenses 227 408 408 428 449Interest expense (2,400) (1,633) (1,264) (947) (1,076) Pre-tax profit 5,422 5,525 5,888 5,551 4,400Income tax 704 1,095 1,178 722 440 After-tax profit 4,718 4,430 4,710 4,830 3,960% net margin 8.5% 8.8% 11.8% 12.5% 10.5%Shares in affi liates' Earnings 751 958 1,370 2,391 4,355Minority interests (210) 5 (10) (110) (107)Extraordinary items 2,468 794 820 0 0NET PROFIT 7,726 6,187 6,890 7,111 8,208Normalized profit 5,259 5,393 6,070 7,111 8,208EPS (Bt) 5.3 4.3 4.8 4.9 5.7Normalized EPS (Bt) 3.6 3.7 4.2 4.9 5.7

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 21,035 20,900 18,188 17,725 17,456 Cash & cash equivalent 8,261 7,438 2,000 2,000 2,000 Account receivables 4,213 8,501 8,764 8,465 8,249 Inventories 2,174 2,541 2,937 2,860 2,869 Others 6,387 2,420 4,487 4,401 4,338Investments & loans 20,658 18,245 20,212 21,769 24,307Net fixed assets 46,228 41,846 22,312 27,857 28,682Other assets 8,890 7,913 39,500 38,151 37,177Total assets 96,811 88,903 100,212 105,503 107,622

LIABILITIES:Current liabilities: 15,238 22,951 21,710 18,385 16,597 Account payables 7,071 6,969 5,784 5,633 5,651 Bank overdraft & ST loans 2,700 9,774 2,953 2,965 2,883 Current LT debt 4,224 4,962 7,531 2,184 1,797 Others current liabilities 1,243 1,246 5,441 7,603 6,265Total LT debt 24,878 7,725 9,204 14,616 14,542Others LT liabilities 2,963 2,688 4,900 4,733 4,612Total liabilities 43,079 33,364 35,814 37,734 35,750Minority interest 766 838 848 958 1,065Preferreds shares 0 0 0 0 0Paid-up capital 14,500 14,500 14,500 14,500 14,500Share premium 1,532 1,532 1,532 1,532 1,532Warrants 0 0 0 0 0Surplus 350 (810) (810) (810) (810)Retained earnings 36,584 39,479 48,329 51,590 55,585Shareholders' equity 52,966 54,701 63,551 66,811 70,807Liabilities & equity 96,811 88,903 100,212 105,503 107,622





Ratchaburi Electricity Generating CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 5,422 5,525 5,888 5,551 4,400Tax paid (886) (1,186) (1,200) (741) (439)Depreciation & amortization 3,499 3,416 3,046 2,969 2,809Chg In working capital 880 (4,756) (1,844) 225 225Chg In other CA & CL / minorities 683 1,234 3,521 4,422 2,985Cash flow from operations 9,597 4,233 9,411 12,426 9,980

Capex 117 966 (9,579) (6,740) (2,097)ST loans & investments (2,761) 3,868 0 0 0LT loans & investments (3,003) 2,414 (1,968) (1,557) (2,538)Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 3,206 926 (2,338) (355) (590)Cash flow from investments (2,441) 8,173 (13,885) (8,652) (5,225)Debt financing (6,907) (8,777) (2,923) 77 (543)Capital increase 0 0 0 0 0Dividends paid (3,262) (3,291) (3,541) (3,850) (4,213)Warrants & other surplus 575 (1,161) 5,500 0 0Cash flow from financing (9,594) (13,229) (964) (3,773) (4,756)

Free cash flow 9,714 5,198 (168) 5,685 7,883

VALUATIONFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 14.9 14.5 12.9 11.0 9.5Normalized PE - at target price (x) 17.9 17.5 15.5 13.3 11.5PE (x) 10.1 12.7 11.4 11.0 9.5PE - at target price (x) 12.2 15.2 13.7 13.3 11.5EV/EBITDA (x) 10.1 10.0 10.7 11.4 13.3EV/EBITDA - at target price (x) 11.7 11.8 12.5 13.3 15.5P/BV (x) 1.5 1.4 1.2 1.2 1.1P/BV - at target price (x) 1.8 1.7 1.5 1.4 1.3P/CFO (x) 8.2 18.5 8.3 6.3 7.8Price/sales (x) 1.4 1.5 2.0 2.0 2.1Dividend yield (%) 4.2 4.2 4.8 5.0 5.8FCF Yield (%) 12.4 6.6 (0.2) 7.3 10.1

(Bt)Normalized EPS 3.6 3.7 4.2 4.9 5.7EPS 5.3 4.3 4.8 4.9 5.7DPS 2.3 2.3 2.6 2.7 3.1BV/share 36.5 37.7 43.8 46.1 48.8 CFO/share 6.6 2.9 6.5 8.6 6.9 FCF/share 6.7 3.6 (0.1) 3.9 5.4





Ratchaburi Electricity Generating FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 27.4 (8.6) (21.0) (3.4) (2.6)Net profit (%) 59.3 (19.9) 11.4 3.2 15.4EPS (%) 59.3 (19.9) 11.4 3.2 15.4Normalized profit (%) 7.7 2.6 12.6 17.1 15.4Normalized EPS (%) 7.7 2.6 12.6 17.1 15.4Dividend payout ratio (%) 42.6 53.2 55.0 55.0 55.0







SPCG INCOME STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FSales 1,214 2,473 4,096 5,967 6,019Cost of sales 568 806 892 1,802 1,989 Gross profit 647 1,667 3,204 4,165 4,030% gross margin 53.3% 67.4% 78.2% 69.8% 67.0%Selling & administration expenses 267 403 412 473 487 Operating profit 379 1,263 2,792 3,692 3,543% operating margin 31.2% 51.1% 68.2% 61.9% 58.9%Depreciation & amortization 162 346 557 725 725 EBITDA 542 1,609 3,350 4,417 4,268% EBITDA margin 44.6% 65.1% 81.8% 74.0% 70.9%Non-operating income 61 32 56 80 80Non-operating expenses 0 0 0 0 0Interest expense (230) (605) (1,008) (920) (704) Pre-tax profit 211 690 1,840 2,852 2,919Income tax 28 64 0 0 0 After-tax profit 183 625 1,840 2,852 2,919% net margin 15.0% 25.3% 44.9% 47.8% 48.5%Shares in affi liates' Earnings (2) 19 24 53 62Minority interests (127) (145) (245) (283) (294)Extraordinary items 0 0 0 0 0NET PROFIT 54 499 1,619 2,622 2,688Normalized profit 54 499 1,619 2,622 2,688EPS (Bt) 0.1 0.5 1.8 2.8 2.9Normalized EPS (Bt) 0.1 0.5 1.8 2.8 2.9

BALANCE SHEETFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FASSETS:Current assets: 1,295 2,188 2,465 3,502 3,546 Cash & cash equivalent 72 289 300 300 300 Account receivables 584 621 1,066 1,553 1,566 Inventories 55 667 85 173 191 Others 584 612 1,013 1,476 1,489Investments & loans 108 8 8 8 8Net fixed assets 11,148 18,937 20,409 19,694 18,979Other assets 500 1,368 1,600 2,331 2,351Total assets 13,052 22,501 24,481 25,535 24,884

LIABILITIES:Current liabilities: 4,046 3,658 4,197 5,757 5,939 Account payables 2,034 2,104 2,443 4,195 4,632 Bank overdraft & ST loans 1,198 0 734 580 426 Current LT debt 728 1,485 921 826 729 Others current liabilities 87 68 100 155 152Total LT debt 6,245 15,161 13,028 10,191 7,370Others LT liabilities 172 169 280 408 411Total liabilities 10,463 18,988 17,505 16,355 13,720Minority interest 724 874 1,119 1,402 1,695Preferreds shares 0 0 0 0 0Paid-up capital 560 840 924 924 924Share premium 1,252 1,252 3,010 3,010 3,010Warrants 0 0 0 0 0Surplus 0 0 0 0 0Retained earnings 53 548 1,923 3,844 5,535Shareholders' equity 1,865 2,639 5,857 7,778 9,469Liabilities & equity 13,052 22,501 24,481 25,535 24,884





SPCG CASH FLOW STATEMENTFY ending Dec (Bt m) 2012A 2013A 2014F 2015F 2016FEarnings before tax 211 690 1,840 2,852 2,919Tax paid (28) (64) 0 0 0Depreciation & amortization 162 346 557 725 725Chg In working capital 716 (578) 475 1,178 405Chg In other CA & CL / minorities (335) (211) (434) (355) 46Cash flow from operations 725 182 2,438 4,401 4,095

Capex (7,239) (8,135) (2,029) (10) (10)ST loans & investments (50) 50 0 0 0LT loans & investments (108) 100 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities (7) (731) (34) (603) (17)Cash flow from investments (7,405) (8,716) (2,063) (613) (27)Debt financing 5,201 8,475 (1,963) (3,086) (3,072)Capital increase 1,223 280 1,842 0 0Dividends paid 0 (105) (243) (702) (996)Warrants & other surplus 15 100 0 0 0Cash flow from financing 6,439 8,750 (364) (3,788) (4,068)

Free cash flow (6,514) (7,953) 409 4,391 4,085

VALUATIONFY ending Dec 2012A 2013A 2014F 2015F 2016FNormalized PE (x) 394.0 55.1 14.1 9.1 8.9Normalized PE - at target price (x) 497.2 69.6 17.8 11.5 11.2PE (x) 394.0 55.1 14.1 9.1 8.9PE - at target price (x) 497.2 69.6 17.8 11.5 11.2EV/EBITDA (x) 54.3 23.7 11.1 7.9 7.5EV/EBITDA - at target price (x) 64.6 27.2 12.9 9.4 9.0P/BV (x) 11.6 8.3 4.1 3.1 2.5P/BV - at target price (x) 14.6 10.5 5.1 3.9 3.2P/CFO (x) 29.4 119.8 9.4 5.4 5.8Price/sales (x) 19.6 9.6 5.8 4.0 4.0Dividend yield (%) 0.0 0.0 2.0 3.9 4.5FCF Yield (%) (30.6) (36.5) 1.8 18.5 17.2

(Bt)Normalized EPS 0.1 0.5 1.8 2.8 2.9EPS 0.1 0.5 1.8 2.8 2.9DPS 0.0 0.0 0.5 1.0 1.2BV/share 2.2 3.1 6.3 8.4 10.2 CFO/share 0.9 0.2 2.7 4.8 4.4 FCF/share (7.9) (9.4) 0.5 4.8 4.4





SPCG FINANCIAL RATIOSFY ending Dec 2012A 2013A 2014F 2015F 2016FGrowth RateSales (%) 109.9 103.6 65.6 45.7 0.9Net profit (%) na 823.5 224.1 62.0 2.5EPS (%) na 614.6 290.2 55.7 2.5Normalized profit (%) 482.7 823.5 224.1 62.0 2.5Normalized EPS (%) 422.9 614.6 290.2 55.7 2.5Dividend payout ratio (%) 0.0 0.0 30.0 35.0 40.0


DuPontROE - using after tax profit (%) 15.0 27.8 43.3 41.8 33.8 - asset turnover (x) 0.1 0.1 0.2 0.2 0.2 - operating margin (%) 36.3 52.4 69.5 63.2 60.2 - leverage (x) 7.5 7.9 5.5 3.7 2.9 - interest burden (%) 47.8 53.3 64.6 75.6 80.6 - tax burden (%) 86.6 90.7 100.0 100.0 100.0WACC (%) 6.6 6.6 6.6 6.6 6.6ROIC (%) 10.2 11.5 14.7 18.2 18.6 NOPAT (Bt m) 329 1,145 2,792 3,692 3,543



COMPANY UPDATE

29 July 2014

Important disclosures at the end of report Page 1

Solid property sales in 1H14

Solid 1H14 property sales of RM620m (+26% yoy) Sunway reported solid 1H14 new property sales of RM620m (+26% yoy) driven by strong take-up for both new launches (RM435m new launches in 1H14) and older projects. Notably, the group’s 2Q14 property sales were 56% higher qoq at RM378m (from RM242m in 1Q14). Broadly, Sunway’s 1H14 property sales were generated from various projects in different areas, in-line with management strategy to pursue multiple launches at high demand locations. Key projects that contributed to the strong sales performance include Sunway Velocity (RM156m), Geo Residences (RM68m), Sunway Montana (RM71m), Penang (RM70m), Johor (RM27m) and Singapore projects (RM77m).

Strong booking for Medini Citrine offices, 2014 sales likely to beat our expectations Sunway’s maiden Medini project, the 167 unit RM73m Citrine office was reportedly sold out. The Citrine offices (746 sf - 1,671 sf @ RM760 psf) were launched on 20 July 2014 and have since achieved 100% booking rate. In view of the strong take-up for Citrine offices, we believe that Sunway may soon launch Citrine service apartments (328 units, 618 sf – 1,571 sf @ RM800-900psf), followed by landed homes (all located within Medini’s Lakeview precinct) in 1H15. Meanwhile, in Klang Valley the group has received 70% booking for its RM210m Geo 2 Service Apartments (launched in 20 July 2014) and 62% take up (+16% booking) for its RM270m V Residence 2. Overall, the group’s Malaysia property projects have performed better-than-expected and we are optimistic that the group’s full year property sales will likely beat our expectations of RM1.1bn. We now expect actual sales to meet management’s target of RM1.3bn.

Construction segment – a slow start, but we expect contract awards to pick-up pace in 2H14 The group’s construction segment has had a slow start, securing only RM178m worth of internal contracts year-to-date. The weak 1H14 construction order-book replenishment was mainly due to a lack of major contract awards, especially the infrastructure and building construction jobs in Klang Valley. We expect the pace of contract awards to pick up in 2H14. In view of Sunway’s solid track record in both infrastructure works (MRT, LRT extension, Bus Rapid Transit) and building developments (KLCC car park, KLCC piling and substructure works), we believe the group is a strong contender to clinch some of the upcoming jobs. We maintain our 2014 contract wins at RM2bn, including both internal and external works (Sunway secured RM2.2bn worth of external contracts in 2013).

Earnings & Valuation Summary FYE 31 Dec 2012 2013 2014E 2015E 2016ERevenue (RMm) 3,849.2 4,527.6 5,395.2 5,429.0 5,727.5 EBITDA (RMm) 469.6 608.3 643.7 645.2 672.8 Pretax profit (RMm) 722.9 1,007.8 706.8 705.1 757.9 Net profit (RMm) 530.6 839.3 498.2 509.4 569.4 EPS (sen) 41.1 55.7 28.9 29.6 33.0 PER (x) 7.7 5.7 10.9 10.7 9.5 Core net profit (RMm) 350.6 482.7 498.2 509.4 569.4 Core EPS (sen) 27.1 32.0 28.9 29.6 33.0 Core EPS growth (%) 7.2 18.0 (9.7) 2.3 11.8 Core PER (x) 11.6 9.8 10.9 10.7 9.5 Net DPS (sen) 6.0 10.0 10.0 10.0 12.0 Dividend Yield (%) 1.9 3.2 3.2 3.2 3.8 EV/EBITDA (x) 12.1 11.0 11.1 10.7 10.0 Consensus profit (RMm) - - 490.4 532.6 550.1 Affin/Consensus (x) - - 1.0 1.0 1.0 Source: Affin estimates, Bloomberg

Sunway Sector: Property SWB MK

RM3.15 @ 25 July 2014 ADD (upgrade from REDUCE) Price Target: RM3.30 (↑)

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Aug-11 Aug-12 Aug-13

(RM)

Price Performance

1M 3M 12M Absolute +3.6% +1.6% -1.0% Rel to KLCI +2.9% -0.2% -8.3% Stock Data

Issued shares (m) 1,723.9 Mkt cap (RMm)/(US$m) 5,430/1,711 Avg daily vol - 6mth (m) 0.8 52-wk range (RM) 2.54-3.38 Est free float 36% BV per share (RM) 3.15 P/BV (x) 1.0 Net cash/ (debt) (RMm) (1Q14) (1,562.4) ROE (2014F) 9.1% Derivatives Warr 2016 (WP:RM0.78, SP:RM2.50) Shariah Compliant Yes Key Shareholders

Tan Sri Jeffrey Cheah 55.4% GIC 8.7% Earnings & Valuation Revisions

14E 15E 16E Prev EPS (sen) 27.3 28.0 31.5 Curr EPS (sen) 28.9 29.6 33.0 Chg (%) +6.0 +5.4 +4.9 Prev target price (RM) 3.15 Curr target price (RM) 3.30

Source: Affin estimates, Bloomberg

Isaac Chow (603) 2145 0412

[email protected]


COMPANY UPDATE

29 July 2014


Raising 2014-16E EPS by 5-6%, upgrade to ADD In view of the stronger-than-expected property sales year-to-date, we have raised our 2014-15 property sales projection by 15-18% to RM1.2bn-1.3bn and upgraded our 2014-16 EPS forecast by 5-6%. We also raise our RNAV estimate by 4.7% to RM4.72 (from RM4.50) after factoring in higher profit margins and shorter development period for selected projects (Iskandar Malaysia, Sunway Geo, Sunway Velocity and Sunway Penang) in view of the stronger-than-expected property demand. In tandem with upgrade to our earnings and RNAV forecasts, we upgrade our recommendation on Sunway to ADD (from REDUCE) with a higher TP of RM3.30 (from RM3.15) based on an unchanged 30% discount to its RNAV. We like Sunway for its integrated real estate model, extensive experience in the construction sector, established footprint in Singapore and undemanding valuation of 0.67x P/RNAV, 10.7x CY15E EPS. Key re-rating catalysts include stronger-than-expected take-up for its upcoming launches (Citrine service apartments, Singapore Mount Sophia, China Tianjin projects) and/or winning major construction contracts.

Key investment risks Key risks to our positive view on Sunway include: (i) sharper-than-expected slowdown in the domestic property market; (ii) lower-than-expected construction contract wins; and (iii) execution risks. Fig 1: Sunway’s quarterly property sales (RMm)

0

100

200

300

400

500

600

700

1Q 2Q 3Q 4Q

2012 2013 2014

Source: Company, Affin

Fig 2: Sunway’s historical P/RNAV ratio

-

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0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14

Source: Bloomberg, Affin

(x)

+1 SD = 0.74x

Avg = 0.64x

-1 SD = 0.54x

Curr P/ RNAV = 0.67x

(RMm)


COMPANY UPDATE

29 July 2014


Fig 3: Sunway’s GDV breakdown (RM49bn) Fig 4: Land bank breakdown (3,400 acres)

Klang Valley21%

Johor61%

Penang7%

China3%

Singapore4%

Others4%

Klang Valley23%

Johor54%

Penang6%

China1%

Singapore0%

Others16%

Source: Company Source: Company

Fig 5: 2014 property launches (RM2.3bn GDV) Fig 6: Property sales trend and 2014 sales target

Klang Valley26%

Johor24%

Singapore27%

China13%

Penang8%

Ipoh2%

1.7

2.1

1.8 1.8 1.8

1.0

1.8 1.6

1.4 1.3

-

0.5

1.0

1.5

2.0

2.5

2010 2011 2012 2013 2014E

Sales Effective sales

Source: Company Source: Company

Fig 7: Unbilled sales as at end-Mar 2014 Fig 8: Construction order-book outstanding (Mar-2014)

499

366

213 183127 106 79 66

155

0

200

400

600

Sin

gapo

re

So

uth

Qua

y

Ve

loci

ty

Mon

tana

Geo

Dam

ansa

ra

Joh

or

Pe

nang

Oth

ers

Contract Total Value (RMm)

Outstanding(RMm)

MRT Package V4 1,173 749

LRT KJ Line Extension (Package B) 569 251

BRT Sunway Line 452 313

Urban Wellness Centre 283 248

KLCC NEC 304 267

KLCC Package 2 222 188

Others 1,050 311

Internal 1,531 843

Singapore Precast 825 537

Total 6,409 3,707 Source: Company Source: Company Fig 9: Peers comparison Stock Rating Sh Pr TP Mkt Cap Year P/RNAV P/B

(RM) (RM) (RMm) End CY14 CY15 CY14 CY15 (x) (x) CY14 CY15 FY14 FY15IOIPG REDUCE 2.50 2.50 8,098 June 13.1 9.8 28.0 33.7 0.6 0.7 5.6 7.1 1.4 1.6SP Setia REDUCE 3.43 2.80 8,635 Oct 17.4 15.0 8.7 15.5 0.7 1.5 8.5 9.2 3.8 4.1Sunway ADD 3.15 3.30 5,430 Dec 10.9 10.7 -9.7 2.3 0.7 1.0 9.1 8.7 3.2 3.2IJMLand N.A 3.34 N.A 5,206 Mar 13.2 12.6 5.5 4.6 0.7 1.6 12.0 11.3 2.1 2.2UOA Dev ADD 2.09 2.22 2,800 Dec 8.6 8.4 -5.8 2.1 0.7 1.1 12.9 12.5 6.7 7.2Tropicana BUY 1.44 1.83 1,970 Dec 6.4 7.2 30.8 -10.7 0.4 0.8 11.7 10.0 4.9 4.9

ROE (%) Div Yield (%)Core PE (x) EPS growth (%)

Source: Affin estimates, Bloomberg

(RMbn)

(RMm)


COMPANY UPDATE

29 July 2014


Fig 10: Sunway’s RNAV per share

Source: Company, Affin estimates


COMPANY UPDATE

29 July 2014


Sunway Berhad – FINANCIAL SUMMARY Profit & Loss Statement Key Financial Ratios and MarginsFYE 31 Dec (RMm) 2012 2013 2014E 2015E 2016E FYE 31 Dec (RMm) 2012 2013 2014E 2015E 2016ERevenue 3,849 4,528 5,395 5,429 5,727 GrowthOperating expenses (3,380) (3,919) (4,751) (4,784) (5,055) Revenue (%) 4.3 17.6 19.2 0.6 5.5 EBITDA 470 608 644 645 673 EBITDA (%) 2.8 29.5 5.8 0.2 4.3 Depreciation (90) (137) (144) (151) (158) Core net profit (%) 7.2 37.7 3.2 2.3 11.8 EBIT 380 471 500 494 514 Net int inc/(exp) (77) (48) (39) (54) (52) ProfitabilityAssociates' contribution 296 297 246 265 295 EBITDA margin (%) 12.2 13.4 11.9 11.9 11.7 Exceptional items 124 287 - - - PBT margin (%) 18.8 22.3 13.1 13.0 13.2 Pretax profit 723 1,008 707 705 758 Net profit margin (%) 13.8 18.5 9.2 9.4 9.9 Tax (125) (111) (115) (110) (116) Effective tax rate (%) 17.3 11.0 16.3 15.6 15.3 Minority interest (67) (58) (93) (86) (73) ROA (%) 6.4 8.5 4.3 4.2 4.6 Net profit 531 839 498 509 569 Core ROE (%) 10.7 10.9 9.1 8.7 9.2 Core Net Profit 351 483 498 509 569 ROCE (%) 6.6 6.5 6.1 5.8 5.9

Dividend payout ratio (%) 14.6 18.0 34.6 33.8 36.3 Balance Sheet StatementFYE 31 Dec (RMm) 2012 2013 2014E 2015E 2016E LiquidityFixed assets 3,000 3,540 3,746 3,945 4,137 Current ratio (x) 1.6 1.2 1.3 1.3 1.3 Other long term assets 1,931 2,689 2,789 2,889 2,989 Op. cash flow (RMm) 386.1 1,093.6 (78.6) 613.5 513.4 Total non-curr assets 4,931 6,229 6,535 6,834 7,126 Free cashflow (RMm) (79.4) 435.7 (428.6) 263.5 163.4 Cash and equivalents 1,140 1,519 974 1,130 1,182 FCF/share (sen) (6.1) 28.9 (24.9) 15.3 9.5 Stocks 626 623 857 863 910 Debtors 1,400 1,403 1,671 1,682 1,774 Asset managementOther current assets 648 1,339 1,849 1,722 1,722 Debtors turnover (days) 132.8 113.1 113.1 113.1 113.1 Total current assets 3,814 4,883 5,352 5,397 5,588 Stock turnover (days) 59.4 50.2 58.0 58.0 58.0 Creditors 1,605 2,154 2,600 2,621 2,768 Creditors turnover (days) 168.9 193.8 193.8 193.8 193.8 Short term borrowings 783 1,805 1,500 1,500 1,400 Other current liabilities 31 24 24 24 24 Capital structureTotal current liab 2,419 3,983 4,124 4,145 4,193 Net gearing (%) 45.2 23.9 30.5 24.5 20.7 Long term borrowings 1,964 991 1,200 1,100 1,100 Interest cover (x) 6.1 12.6 16.5 11.9 13.0 Other long term liabilities 493 486 486 486 486 Total long term liab 2,458 1,477 1,686 1,586 1,586 Shareholders' Funds 3,558 5,335 5,666 6,003 6,366 Minority Interest 310 317 411 496 569

Quarterly Profit & LossCash Flow Statement FYE 31 Dec (RMm) 1Q13 2Q13 3Q13 4Q13 1Q14FYE 31 Dec (RMm) 2012 2013 2014E 2015E 2016E Revenue 1,021.0 1,118.0 1,066.1 1,322.4 1,025.7Profit before tax 723 1,008 707 705 758 Operating expenses (912) (979) (927) (1,147) (887) Depreciation & amortization 90 137 144 151 158 EBITDA 108.5 139.1 138.7 175.1 138.4 Working capital changes (573) (148) (568) 133 8 Depreciation (22.5) (22.5) (22.5) (22.5) (22.5) Associates' contribution (296) (297) (246) (265) (295) EBIT 86.1 116.6 116.2 152.6 115.9 Others 443 395 (115) (110) (116) Net int income/(expense) (11.7) (12.6) (6.3) (17.6) (7.8) Cashflow frm ops 386 1,094 (79) 614 513 Associates' contribution 47.9 48.9 49.4 91.6 40.4 Capex (465) (658) (350) (350) (350) Exceptional Items 0.3 59.6 (41.2) 328.0 (6.3) Disposal/(purchases) 317 - - - - Pretax profit 122.5 212.5 118.2 554.6 142.2 Others (210) (247) 146 165 195 Tax (26.3) (32.5) (16.6) (35.5) (30.4) Cash flow frm inv't (358) (905) (204) (185) (155) Minority interest (5.6) (9.7) (8.5) (33.9) (7.8) Debt raised/(repaid) 401 49 (95) (100) (100) Net profit 90.6 170.3 93.1 485.2 104.0 Equity raised/(repaid) - 732 - - - Core net profit 90.3 110.7 124.4 157.5 110.3 Dividends paid (39) (344) (172) (172) (207) Others (116) (301) - - - Margins (%)Cash flow frm fin. 247 135 (268) (272) (307) EBITDA 10.6 12.4 13.0 13.2 13.5

PBT 12.0 19.0 11.1 41.9 13.9 Free Cash Flow (79) 436 (429) 264 163 Net profit 8.9 15.2 8.7 36.7 10.1

Source: Company, Affin estimates



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Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Tosei Corporation (8923 JP); Modern Land (China) Co. Ltd (1107 HK); China Everbright Bank Company Limited (6818 HK); econtext Asia Ltd (1390 HK); Lotte Shopping Co (023530 KS); Rexlot Holdings Ltd (555 HK). *Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司), Daiwa Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd. Disclosure of Interest of Thanachart Securities Investment Banking Relationship



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This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. India

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

This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research. Philippines

This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE Link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively. United Kingdom

This research report is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange, Eurex and NYSE Liffe. Thanachart Securities, Daiwa Capital Markets Europe Limited and their respective affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Thanachart Securities, Daiwa Capital Markets Europe Limited and their respective affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Thanachart Securities and Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available. Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory. Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action.



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Germany

This document is distributed by Daiwa Capital Markets Europe Limited and is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany. Bahrain

This research material is distributed by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113 This material is provided as a reference for making investment decisions and is not intended to be a solicitation for investment. Investment decisions should be made at your own discretion and risk. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document, Content herein is based on information available at the time the research material was prepared and may be amended or otherwise changed in the future without notice. All information is intended for the private use of the person to whom it is provided without any liability whatsoever on the part of Daiwa Capital Markets Europe Limited, Bahrain Branch, any associated company or the employees thereof. If you are in doubt about the suitability of the product or the research material itself, please consult your own financial adviser. Daiwa Capital Markets Europe Limited, Bahrain Branch retains all rights related to the content of this material, which may not be redistributed or otherwise transmitted without prior consent. United States

This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect Thanachart Securities’ or DCMA’s views at any time. Neither Thanachart Securities, DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of Thanachart Securities’ or DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (telephone 212-612-7000). Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions. Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

For stocks and sectors in Malaysia covered by Affin, the following rating system is in effect:

Stocks: BUY: Total return is expected to exceed +15% over a 12-month period

TRADING BUY (TR BUY): Total return is expected to exceed +15% over a 3-month period due to short-term positive developments, but fundamentals are not strong enough to warrant a Buy call. This is to cater to investors who are willing to take on greater risk

ADD: Total return is expected to be between 0% and +15% over a 12-month period

REDUCE: Total return is expected to be between 0% and -15% over a 12-month period

TRADING SELL (TR SELL): Total return is expected to exceed -15% over a 3-month period due to short-term negative development, but the fundamentals are strong enough to avoid a Sell call. This is to cater to investors who are willing to take on greater risk

SELL: Total return is expected to be below -15% over a 12-month period

NOT RATED: Affin Investment Bank does not provide research coverage or a rating for this company. The report is provided for information purposes only

Sectors: OVERWEIGHT: Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL: Industry, as defined by the analyst’s coverage universe, is expected to perform in line with the KLCI benchmark over the next 12 months

UNDERWEIGHT: Industry, as defined by the analyst’s coverage universe is expected to underperform the KLCI benchmark over the next 12 months

Conflict of Interest Disclosure: Affin

Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Relevant Relationships Affin may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Affin market making Affin may from time to time make a market in securities covered by this research. For stocks and sectors in Indonesia covered by Bahana Securities, the following rating system is in effect: Stock ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. Unless otherwise specified, these ratings are set with a 12-month horizon. It is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. "Buy": the price of the security is expected to increase by 10% or more.

"Hold": the price of the security is expected to range from an increase of less than 10% to a decline of less than 5%.

"Reduce": the price of the security is expected to decline by 5% or more.

Sector ratings are based on fundamentals for the sector as a whole. Hence, a sector may be rated “Overweight” even though its constituent stocks are all rated “Reduce”; and a sector may be rated “Underweight” even though its constituent stocks are all rated “Buy”.

“Overweight”: positive fundamentals for the sector.

“Neutral”: neither positive nor negative fundamentals for the sector.

“Underweight”: negative fundamentals for the sector.





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Relevant Relationships (Bahana Securities) Bahana Securities may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Bahana Securities market making Bahana Securities may from time to time make a market in securities covered by this research. For stocks in Thailand covered by Thanachart Securities, the following rating system is in effect: Ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the rating is BUY. If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word “Positive”, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word “Negative”, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word “Unchanged”, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart’s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An “Overweight” sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by market cap. “Underweight” is used when Thanachart has SELLs on majority of the stocks it covers by market cap. “Neutral” is used when there are relatively equal weightings of BUYs and SELLs]. Conflict of Interest Disclosure: Thanachart



Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

TNS market making TNS may from time to time make a market in securities covered by this research. Additional information may be available upon request. Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.

In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.

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

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

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

There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.

Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants.

*The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.

When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us.

Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108

Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association


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