THAILAND EQUITY RESEARCH
Page | 1 | PHILLIP SECURITIES (THAILAND)
Khon Kaen Sugar Industry
FX loss drags 4QFY15 earnings into the red
THAILAND | SET | FOOD | COMPANY RESULTS BLOOMBERG KSL TB l REUTERS KSL.BK
4QFY15 loss of Bt273mn hit by FX loss and longer‐than‐usual power plant maintenance shutdown KSL slipped into a loss of Bt273mn in 4QFY15 hit by FX loss and longer‐than‐usual power plant maintenance shutdown. Quarterly sales came in at Bt6,138mn, down 12% y‐y but up 27% q‐q as (i) sugar sales volumes surged 54% q‐q on rising exports while ASPs dropped 11% q‐q, (ii) ethanol sales volumes rose 15% q‐q while ASPs declined 1% q‐q and (iii) electricity sales volumes plunged 52% q‐q but ASPs rose 5% q‐q. Margins shrank to a mere 8.7% in this period due to a longer‐than‐usual shutdown of the Bo Ploy power plant for major overhaul for two months. Normally both power and ethanol plants were shut down for annual maintenance in 4Q. In this period, KSL also suffered a huge FX loss of up to Bt128mn due chiefly to (i) a sharp depreciation of the baht, (ii) a substantial rise in sugar exports and (iii) a difference between delivery prices and prices locked in forward sales contracts.
For the whole of FY15, its profit plummeted 50% y‐y to Bt815mn from Bt1,626mn in FY14 as profits from sugar, ethanol and power businesses tumbled 18%, 10% and 21% y‐y as a result of lower ASPs in sugar business, higher unit production costs in the wake of rising molasses prices in ethanol business and falling ASPs and longer‐than‐usual maintenance shutdown in power business respectively. Full‐year sales dipped 2% y‐y to Bt18,866mn as (i) sugar ASPs dropped 11% y‐y but sales volumes rose 10% y‐y, (ii) ethanol ASPs declined 1% y‐y but sales volumes grew 6% y‐y and (iii) electricity sales volumes and ASPs decreased 7% and 4% y‐y respectively. For the year, margins narrowed to 21.4% from 25.2% a year earlier. Tax expenses also shot up after the expiry of tax breaks for its Nam Pong plant in Khon Kaen Province. Upgrade to ‘ACCUMULATE’ with FY16 target price of Bt4.32/share Despite forecast‐lagging 4QFY15 results, it seems to us that much of the big earnings miss was largely blamed on exceptional events which are unlikely to deal a further blow to FY16 earnings. FX loss is also unlikely to be as high as in 4QFY15 as up to 50% of its sugar sales in FY16 have already been locked in forward sale contracts and FX hedges covers only 10% of sales contracts. For this reason, we leave our FY16 earnings outlook for KSL unchanged until the upcoming analyst meeting in Jan 2016. However, we have a more bullish view on KSL on expectations that its earnings will recover in FY16 on the prospect of higher sugar prices. At current trading levels, we raise our rating on KSL shares to ‘ACCUMULATE’ with a FY16 target price of Bt4.32/share due to some but little upside from current trading levels following a recent share price retreat after huge earnings miss in 4QFY15.
Ref. No.: CO2015_0955
Closing Price(Bt) 4.10
Target Price(Bt) 4.32 (+8.2%)
COMPANY DATA
O/S Shares (mn) : 4,009
Market Cap. (Btmn) :
Market Cap. (USDmn) :
52‐WK Hi/Lo (Bt) : 5.63/3.44
3M Average Daily T/O (mn) : 2.37
Par Value (Bt) : 0.50
MAJOR SHAREHOLDERS (%)
1. KSL Sugar Holding Co., Ltd. 33.2
2. Mr. Chanachai Chutimaworaphan 2.6
3. Thai NVDR 2.5
PRICE PERFORMANCE (%)
1MTH 3MTH 1YR
ABS ‐6% 16% ‐17%
REL TO SET INDEX ‐1% 22% ‐3%
PRICE VS SET INDEX
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Oct FY14 FY15 FY16E FY17E
Sales(Btmn) 19,185 18,866 20,707 21,426
Net Profit(Btmn) 1,612 815 1,331 1,378
EPS (Bt) 0.48 0.20 0.33 0.34
P/E (X) 8.5 20.2 12.3 11.9
BVPS (Bt) 4.35 3.87 4.13 4.36
P/B (X) 0.9 1.1 1.0 0.9
DPS (Bt) 0.08 0.07 0.12 0.12
Dividend Yield (%) 2.0 1.7 2.8 2.9
ROE (%) 13.12 6.22 9.52 9.16
Debt/Equity (X) 1.97 1.84 1.71 1.49
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
P/E'16 (13x)
Naree Apisawaittakan
Securities Investment Analyst # 17971
Tel: 66 2 635 1700 # 484
29 December 2015
16,438
455
17 March 2015
Accumulate (Upgraded from Sell)
0
2
4
6
8
10
Dec‐12 Dec‐13 Dec‐14 Dec‐15
KSL TB EQUITY SETI (rebased)
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 2 | P a g e
Khon Kaen Sugar Industry COMPANY RESULTS
Income Statement
Btmn 4Q15 3Q15 4Q14 q‐q+/‐ y‐y+/‐ 2015 2014 y‐y+/‐
Sales and services 6,138 4,822 6,985 27% ‐12% 18,866 19,185 ‐2%
Costs of sales 5,606 3,736 5,870 50% ‐4% 14,837 14,358 3%
Gross profit 531 1,087 1,115 ‐51% ‐52% 4,029 4,827 ‐17%
Sell ing expenses 193 168 255 15% ‐24% 595 623 ‐4%
Administrative expenses 183 164 249 12% ‐27% 723 693 4%
Operating profit 156 755 611 ‐79% ‐75% 2,712 3,512 ‐23%
Fee payable to Cane and Sugar 277 284 254 ‐2% 9% 1,157 992 17%
Other income 433 41 249 955% 74% 661 447 48%
Gain/loss from affi l iates 0 0 ‐5 144% 105% 14 ‐11 226%
Other expense 49 41 47 18% 4% 197 193 2%
EBIT 263 471 554 ‐44% ‐53% 2,032 2,763 ‐26%
Interest expense 218 216 216 1% 1% 849 834 2%
EBT 45 255 338 ‐82% ‐87% 1,183 1,928 ‐39%
Taxation ‐23 26 25 ‐186% ‐191% 93 109 ‐15%
EAT 67 229 313 ‐71% ‐79% 1,090 1,819 ‐40%
Minority ‐26 ‐48 ‐42 45% 37% ‐134 ‐159 16%
Net profit before extra 41 181 272 ‐77% ‐85% 956 1,660 ‐42%
Extraordinary items ‐314 47 ‐59 ‐771% ‐436% ‐141 ‐34 ‐318%
Net profit ‐273 228 213 ‐220% ‐228% 815 1,626 ‐50%
EPS (Bt) ‐0.07 0.06 0.06 ‐220% ‐209% 0.20 0.48 ‐57%
Key Financial Ratio
% 4Q15 3Q15 4Q14 q‐q+/‐ y‐y+/‐ 2015 2014 y‐y+/‐
Cost of sales/sales 91.34% 77.47% 84.04% 18% 9% 78.64% 74.84% 5%
SG&A exp/sales 6.12% 6.88% 7.21% ‐11% ‐15% 6.99% 6.86% 2%
Gross margin 8.66% 22.53% 15.96% ‐62% ‐46% 21.36% 25.16% ‐15%
Operating profit margin 2.53% 15.66% 8.74% ‐84% ‐71% 14.37% 18.30% ‐21%
Net profit margin ‐4.44% 4.73% 3.05% ‐194% ‐246% 4.32% 8.48% ‐49%
Balance Sheet
Btmn 4Q15 3Q15 4Q14 q‐q+/‐ y‐y+/‐ 2015 2014 y‐y+/‐
Assets 40,176 44,985 40,134 ‐11% 0% 40,176 40,134 0%
Liabi l ities 24,688 29,226 25,301 ‐16% ‐2% 24,688 25,301 ‐2%
Paid‐up (mn shrs) ‐ Par Bt0.5 4,009 4,009 3,409 0% 18% 4,009 3,409 18%
Equities 15,488 15,759 14,833 ‐2% 4% 15,488 14,833 4%
BVPS (Bt) 3.86 3.93 4.35 ‐2% ‐11% 3.86 4.35 ‐11%
Debt/equity (x) 1.6 1.9 1.7 ‐14% ‐7% 1.6 1.7 ‐7%
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 3 | P a g e
Corporate Governance ‐2015
ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC
EASTW EGCO GRAMMY HANA HMPRO INTUCH IRPC IVL KBANK KCE
KKP KTB LHBANK LPN MCOT MINT MONO NKI PHOL PPS
PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMART SAMTEL
SAT SC SCB SCC SE‐ED SIM SNC SPALI THCOM TISCO
TKT TMB TOP VGI WACOAL
AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP
ASIMAR ASK ASP BANPU BAY BBL BDMS BECL BKI BLA
BMCL BOL BROOK BWG CENTEL CFRESH CHO CIMBT CM CNT
COL CPF CPI CSL DCC DELTA DEMCO ECF EE ERW
GBX GC GFPT GLOBAL GUNKUL HEMRAJ HOTPOT HYDRO ICC ICHI
INET IRC KSL KTC LANNA LH LOXLEY LRH MACO MBK
MC MEGA MFEC NBC NCH NINE NSI NTV OCC OGC
OISHI OTO PAP PDI PE PG PJW PM PPP PR
PRANDA PREB PT PTG Q‐CON QH RS S & J SABINA SAMCO
SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT
SNP SPI SSF SSI SSSC SST STA STEC SVI SWC
SYMC SYNTEC TASCO TBSP TCAP TF TGCI THAI THANA THANI
THIP THRE THREL TICON TIP TIPCO TK TKS TMI TMILL
TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUE
TSC TSTE TSTH TTA TTCL TTW TU TVD TVO TWFP
TWS UAC UT UV VNT WAVE WINNER YUASA ZMICO
2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH
AMARIN AP APCO AQUA AS ASIA AUCT AYUD BA BEAUTY
BEC BFIT BH BIG BJC BJCHI BKD BTNC CBG CGD
CHG CHOW CI CITY CKP CNS CPALL CPL CSC CSP
CSS CTW DNA EARTH EASON ECL EFORL ESSO FE FIRE
FOCUS FORTH FPI FSMART FSS FVC GCAP GENCO GL GLAND
GLOW GOLD GYT HTC HTECH IEC IFEC IFS IHL IRCP
ITD JSP JTS JUBILE KASET KBS KCAR KGI KKC KTIS
KWC KYE L&E LALIN LHK LIT LIVE LST M MAJOR
MAKRO MATCH MATI MBKET M‐CHAI MFC MILL MJD MK MODERN
MOONG MPG MSC MTI MTLS NC NOK NUSA NWR NYT
OCEAN PACE PATO PB PCA PCSGH PDG PF PICO PL
PLANB PLAT PPM PRG PRIN PSTC PTL PYLON QLT RCI
RCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN
SCP SEAOIL SIRI SKR SMG SOLAR SORKON SPA SPC SPCG
SPPT SPVI SRICHA SSC STANLY STPI SUC SUSCO SUTHA SYNEX
TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TIC TIW
TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR UMI
UP UPF UPOIC UREKA UWC VIBHA VIH VPO WHA WIN
XO
Score Range
< 50%
50‐59%
60‐69%
70‐79%
80‐89%
90‐100%
The disclosure of the survey result of the Thai Institute of Directors Association (IOD)
regarding corporate governance is made pursuant to the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company
l isted on the Stock Exchange of Thailand and the Market for Alternative disclosure to the
public and able to be accessed by a general public investor. The results, therefore, is from
the perspective of a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai
Listed Companies. As a result, the survey result may be changed after that data. Phil l ip
Securities (Thailand) of securities company does not confirm nor certify the accuracy of
such survey result.
No logo given
Number of Logo
Results Presentation
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 4 | P a g e
Industry Group Name Sector Name Sector Index
Agro & Food Industry[AGRO] Agribusiness AGRI
Food & Beverage FOOD
Consumer Products[CONSUMP] Fashion FASHION
Home & Office Products HOME
Personal Products & Pharmaceuticals PERSON
Financials [FINCIAL] Banking BANK
Finance & Securities FIN
Insurance INSUR
Industrials [INDUS] Automotive AUTO
Industrial Materials & Machinery IMM
Packaging PKG
Paper & Printing Materials PAPER
Petrochemicals & Chemicals PETRO
Steel STEEL
Property & Construction[PROPCON] Construction Materials CONMAT
Construction Services CONS
Property Development PROP
Property Fund & REITs PF&REIT
Resources [RESOURC] Energy & Util ities ENERG
Mining MINE
Services [SERVICE] Commerce COMM
Media & Publishing MEDIA
Health Care Services HELTH
Tourism & Leisure TOURISM
Professional Services PROF
Transportation & Logistics TRANS
Technology [TECH] Electronic Components ETRON
Information & Communication Technology ICT
PSR Rating SystemCapital Gain Recommendation
> 15% BUY
> 5% ‐ 15% ACCUMULATE / TRADING BUY
> 0% ‐ 5% NEUTRAL
0 <= SELL
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors l ike (but
not l imited to) a stock's risk reward profi le, market sentiment, recent rate of share price appreciation, presence or absence of
stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
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