brokingrfs.cimb.com · Equity research│November 30, 2017 Asia Pacific Daily - 30 November 2017 ....

Equity research│November 30, 2017

Asia Pacific Daily - 30 November 2017

Equity Research Reports…

▌IDEA OF THE DAY | South Korea Samsung Biologics (ADD- Initiation, tp:W470,000.00) - A healthy dose of optimism | P2 We believe the rise of bio-products will fuel global demand for biologic manufacturing. Samsung Biologics is well placed to benefit from greater global demand for biologic manufacturing, in our view. Our utilisation rate scenario analysis indicates potential 54% upside (bull case) to latest closing share price of W364,500, greater than downside risk of -4% (bear case). Our EBITDA margin forecasts for FY19F onwards are more optimistic than Bloomberg consensus estimates as we assume higher margins from Plant 3. We initiate coverage with an Add rating and SOP-based target price of W470,000, implying potential upside of 29%. ——————————————————————————————————————————————————————————————————————————————————————— ▌Australia Healthscope (ADD, tp:A$2.44▼) - Good ol' operational grunt | P3 Livehire (ADD, tp:A$1.10) - First financial client win | P4 ——————————————————————————————————————————————————————————————————————————————————————— ▌China/Hong Kong Link REIT (HOLD, tp:HK$67.00▲) - Disposal price way higher than expected | P5 Q Technology (Group) Company Ltd (ADD, tp:HK$20.70) - Dual- and 3D-sensing cameras… | P6 ——————————————————————————————————————————————————————————————————————————————————————— ▌Indonesia Bumi Serpong Damai (ADD, tp:Rp2,200.00) - Same asset, but at a lower price | P7 ——————————————————————————————————————————————————————————————————————————————————————— ▌South Korea Amorepacific Corp (HOLD, tp:W310,000.00) - Valuation premium applicable? | P8 Hyundai Glovis Co Ltd (HOLD, tp:W156,000.00▼) - Straying from the script | P9 Korea Kolmar Co Ltd (ADD, tp:W97,000.00▲) - All growth cylinders to recover | P10 Woori Bank (ADD, tp:W18,000.00) - A cloud of short-term uncertainties | P11 ——————————————————————————————————————————————————————————————————————————————————————— ▌Malaysia 7-Eleven Malaysia Holdings Berhad (REDUCE, tp:RM1.14▲) - Puffed up valuations | P12 Bonia Corporation (ADD, tp:RM0.78▼) - Higher A&P costs clipped 1Q earnings | P13 Jaya Tiasa Holdings (HOLD, tp:RM1.15) - Higher plantation earnings lift 1QFY18 | P14 Magnum Bhd (HOLD, tp:RM1.77▲) - A stroke of luck | P15 Mah Sing Group (ADD, tp:RM1.85) - Ramping up launches | P16 Malaysian Resources Corp (ADD▲, tp:RM1.19▲) - Becoming the dark horse of the HSR… | P17 Media Chinese Int'l (REDUCE, tp:RM0.36) - Awaiting good news | P18 Media Prima Bhd (REDUCE, tp:RM0.62▼) - Dinghy in a perfect storm | P19 Muhibbah Engineering (ADD, tp:RM3.49▲) - Stronger foundation for concession earnings | P20 MY E.G. Services (ADD, tp:RM3.04) - 1QFY18: Driven by registration of illegals | P21 Protasco (ADD, tp:RM1.43) - No surprises in 9M17 results; turnaround in FY18F | P22 Sime Darby Bhd (ADD, tp:RM10.22▲) - What to do post "break-up"? | P23 UMW Holdings (HOLD, tp:RM5.50▼) - Back in the black | P24 Construction (OVERWEIGHT) - Gamuda-MRCB JV leads the HSR PDP tenders | P25 Rubber Gloves (OVERWEIGHT) - Higher than expected gas tariff hike but... | P26 ——————————————————————————————————————————————————————————————————————————————————————— ▌Thailand B. Grimm Power (ADD, tp:THB30.50) - A glimpse of visible growth | P27 Charoen Pokphand Foods (ADD, tp:THB31.00▲) - Focus on earnings turnaround in FY18F | P28 Tisco Financial Group (ADD, tp:THB92.00▼) - Struggling to grow new lending businesses in… | P29

Showcasing CIMB Research Ideas

KRW: Durable Products 24/11 Korea furnishing: Time to revisit sector

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INA: Hindustan Zinc 22/11 Likely downhill from here

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CHN: Technology - Handsets 21/11 How many cameras does your smartphone need?

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HKG: Sun Art Retail Group 20/11 Here comes the big brother

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INA: Voltas Ltd 17/11 Maintaining its growth momentum

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Regional Equity Research Contact

Michael GREENALL, CFP Regional Head of Research T: (60) 3 2261 9088 E: [email protected]

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CIMB Conference / Events |

China Education and Consumer Corporate Day 07 December 2017; HK/China; Hong Kong —————————————————————————————————————————

CIMB 10th Annual Malaysia Corporate Day 04 January 2018; Malaysia; Kuala Lumpur

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Pharmaceuticals│South Korea│November 29, 2017

Company Note │ Alpha series



Samsung Biologics A healthy dose of optimism ■ We believe the rise of bio-products will fuel global demand for biologic manufacturing. ■ Samsung Biologics is well placed to benefit from greater global demand for biologic

manufacturing, in our view. ■ Our utilisation rate scenario analysis indicates potential 54% upside (bull case) to

latest closing share price of W364,500, greater than downside risk of -4% (bear case). ■ Our EBITDA margin forecasts for FY19F onwards are more optimistic than Bloomberg

consensus estimates as we assume higher margins from Plant 3. ■ We initiate coverage with an Add rating and SOP-based target price of W470,000,

implying potential upside of 29%.

Biologic manufacturing is the backbone of the company Samsung Biologics is a pure biologics contract development and manufacturing organisation (CDMO), operating in all phases of drug development and manufacturing. The CDMO market is growing rapidly, benefiting from positive industry trends (changes in pharmaceutical dynamics, rising demand for lower-priced medicines, biopharma growth). The rise of bio-products (biosimilars and new biologics) is driving demand for biologic manufacturing capacity, and Samsung Biologics has large-scale production facilities.

Samsung Bioepis, wild card for earnings upside potential Samsung Bioepis’s product pipeline comprises biosimilars for seven of the top 10 best-selling biologics globally (2016) for treatment of autoimmune diseases, cancer and diabetes. Three biosimilars have been approved for use in the EU/South Korea and the rest are in the filing or regulatory approval stages. We believe greater clarity on Samsung Bioepsis’s biosimilar targets in collaboration with global R&D partners (AstraZeneca and Merck) have lowered development risks and enabled breakthrough in several projects.

Higher capacity utilisation is key to success Given CDMOs’ large fixed cost base, it is clear to us that any small change in utilisation rate would have a significant impact on Samsung Biologics’ profitability and thus valuation, especially ahead of its massive capacity expansion plans. Hence, we carried out a sensitivity analysis to estimate the impact of change in capacity utilisation rates on our target price. We conclude that there is greater upside risk than downside, with a potential increase of 54% (bull case) from latest closing share price.

Our sales estimates above consensus– acceleration in FY19F

Despite the recent share price run-up, Bloomberg consensus EPS estimates for FY18-19F still look low to us. We are more optimistic on EBITDA margin, projecting improvement from 10% in FY16 to 41% in FY19F. Given our confidence in long-term sales growth for CMOs, our end-FY18F valuation of its CMO business is 69% higher than consensus. Not only will Samsung Biologics benefit from pharmaceutical trends, we think its capacity expansion for higher yields/titer will lead to margin improvement in FY19-20F. Initiate with Add call and SOP-based target price of W470,000 We initiate with an Add rating. Our target price of W470,000 is derived from SOP valuation for the CMO business and the biosimilar pipeline. Our SOP valuation relies on long-term sales growth and launches of biosimilar products. Beyond 2020F, we project mid-teen EPS growth, with three biosimilar products launched (sales worth billions of dollars). Key risks are a sudden slowdown in contract orders and regulatory delays in biosimilar approvals.

SOURCE: COMPANY DATA, CIMB FORECASTS

South Korea

ADD Consensus ratings*: Buy 9 Hold 2 Sell 2

Current price: W364,500 Target price: W470,000 Previous target: W

Up/downside: 28.9% CIMB / Consensus: 31.8%

Reuters: 207940.KS Bloomberg: 207940 KS Market cap: US$22,243m W24,117,142m Average daily turnover: US$77.06m W86,243m Current shares o/s: 66.16m Free float: 21.8% *Source: Bloomberg Key changes in this note

N/A

Source: Bloomberg Price performance 1M 3M 12M

Absolute (%) -3.5 29.5 132.2 Relative (%) -4.2 23.2 105.2 Major shareholders % held Samsung C&T 43.4 Samsung Electronics 31.5 Insert

Analyst(s)

Kathy PARK

T (82) 2 6730 6124 E [email protected]

Financial Summary Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F

Revenue (Wb) 91.3 294.6 435.6 553.4 921.8Operating EBITDA (Wb) (162.0) 29.7 138.2 170.3 377.9Net Profit (Wb) 1,888 -178 -51 11 246Normalised EPS (W) 78,766 -3,798 -775 160 3,721Normalised EPS Growth (105%) (80%) 2233%FD Normalised P/E (x) 5 NA NA 2,285 98DPS (W) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA 626.9 189.9 155.3 69.0P/FCFE (x) NA NA 74.8 265.1 24.9Net Gearing 91.1% 37.9% 52.8% 57.9% 41.5%P/BV (x) 3.62 5.91 5.99 5.97 5.14ROE 111% (5%) (1%) 0% 6%% Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)

73

124

176

227

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310,000

410,000

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Nov-16 Mar-17 Jun-17 Sep-17

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Hospitals│Australia│Equity research│November 29, 2017

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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Healthscope

Good ol’ operational grunt

We came away from the HSO investor day with a slightly more optimistic view of ■the Northern Beaches Hospital (NBH) project and the company’s future prospects, with “operational grunt” underpinning initiatives to drive growth and op efficiencies.

Despite ongoing market volatility and cost pressures, FY18 guidance was ■reconfirmed (flat hospital division EBITDA growth), with 1Q trading in line with expectations and top line growth above industry trends.

Importantly, NBH remains on time/budget (opening 31 Oct-18), with a strong ramp ■in patients expected, allowing for first year profitability and >A$300m in revenue over 3-4 years, along with receipt of the A$435m state capital payment by YE18.

We have adjusted our FY18-20 earnings estimates modestly, with our DCF/SOTP ■target price declining to A$2.44. Add maintained.

1QFY18 tracking to expectations Management used its annual investor day to provide a trading update, reconfirming flat FY18 hospital division EBITDA growth (1H < 2H), but highlighted it was “pleased” with 1Q trading, with revenue tracking above market growth. It also highlighted its more “focused and rigorous” approach across its portfolio to drive growth and profitability and provided colour around its four previously flagged “Must Wins” imperatives, which include: accelerate profitable top line growth (highly confident in growing top line > market); greater operational efficiency (via benchmarking/best practice, targeting “tens of millions” in savings into FY19; optimising its portfolio (review complete, likely divestments/repurposing of some assets; more details on 1HFY18 call); and continued executing on brownfields (“strong and consistent”, ROIC >15% by end of year 3).

Northern Beaches Hospital update and P&L impact Importantly, the investor day showcased the Northern Beaches Hospital (NBH), an impressive A$840m state-of-the-art facility that will offer a broad range of services and is the company’s first private-public partnership (PPP), purposely built to cater to both public and private patients within a single integrated facility. Key takeaways include: construction/commissioning processes are on budget and ahead of schedule (68 contingency days), with the 450 bed (250 public, 200 private) facility slated to open 31 Oct-18; catchment metrics are strong (PHI >60%; c80% of PHI patients have elective surgery outside the area); doc/staff interest has been strong (“no shortage of takers”); confident its 250 public beds will ramp quickly and the hospital will be profitable in its first full year; targeting total revenue >A$300m upon full ramp (3-4 years), with operating margins similar to the broader group (c17.5%); expects a A$435m capital payment from the NSW government for the public portion of the hospital before the end of 2018.

Modest earnings changes We have lowered our FY18-20 Hospital margin expectations, essentially bringing FY18 operating income in-line with guidance. We also incorporated the FY19 A$435m state capital payment, lowered capex as well as D&A, with NPAT declining up to 3.9%.

Value remains…as does uncertainty…tread carefully While we came away from the investor day cautiously optimistic about the NBH and the company’s future prospects, there is still a lot of work to be done and execution remains a big known unknown, especially for an out-of-industry CEO only 6 months at the helm.

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

ADD (no change) Current price: A$1.97 Target price: A$2.44 Previous target: A$2.53 Up/downside: 24.1% Reuters: HSO.AX Bloomberg: HSO AU Market cap: US$2,599m A$3,415m Average daily turnover: US$18.83m A$24.04m Current shares o/s 1,735m Free float: 62.0%

Key changes in this note

FY18F revenue no change. FY18F EBITDA down by 3.7%. FY18F EPS down by 2.3%.

Price performance 1M 3M 12M

Absolute (%) -1.8 13.9 -14.6 Relative (%) -3.6 7.9 -24.7 Dr Derek JELLINEK

T (61) 2 9043 7904 E [email protected] Scott POWER


Financial Summary Jun-16A Jun-17A Jun-18F Jun-19F Jun-20F

Revenue (A$m) 2,291 2,318 2,419 2,607 2,849Operating EBITDA (A$m) 407.9 411.4 426.1 463.8 533.0Net Profit (A$m) 182.8 162.6 186.2 204.8 239.3Normalised EPS (A$) 0.12 0.10 0.11 0.12 0.14Normalised EPS Growth 25.0% (9.9%) 3.4% 10.0% 16.9%FD Normalised P/E (x) 17.07 18.94 18.32 16.65 14.25DPS (A$) 0.074 0.070 0.073 0.085 0.096Dividend Yield 3.77% 3.56% 3.72% 4.33% 4.89%EV/EBITDA (x) 11.29 12.20 11.79 10.02 8.83P/FCFE (x) 17.88 NA NA 44.69 36.21Net Gearing 54.1% 68.0% 66.5% 42.4% 43.3%P/BV (x) 1.44 1.44 1.40 1.17 1.14ROE 8.32% 7.59% 7.77% 7.66% 8.10%% Change In Normalised EPS Estimates (2.32%) (3.94%) (1.53%)Normalised EPS/consensus EPS (x) 1.05 1.05 1.09

62.0

70.0

78.0

86.0

94.0

102.0

1.50

1.70

1.90

2.10

2.30

2.50

Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

20406080

100


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Media - Integrated│Australia│Equity research│November 29, 2017

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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Livehire

First financial client win

LiveHire has signed up its first Australian financial institution as a client, a long-■established wealth manager.

The new client win underlines the importance of LiveHire’s partnership model with ■global recruitment processing organisations (RPOs).

There are no changes to our forecasts, which assume continuous new client wins. ■ Our valuation, which sets the price target, is unchanged. Our ADD ■

recommendation is maintained.

RPO partnerships paying off LiveHire announced that it had signed its first significant financial institutional client, a long-established wealth manager. The new signing marked the first new client win using LiveHire technology for a global RPO, one of the global top 10 players with more than US$1billion in revenues. Three of the world’s top 10 RPOs have now won major new recruitment clients using LiveHire in the past few months and we expect that the rate of new RPO-sourced clients will accelerate in 2018. The new client scrapped an existing applicant tracking system to implement LiveHire, which went live less than one month after the contract was signed.

No change to forecasts Our forecasts and valuation are unchanged. Our forecasting scenario assumes constant new client signings as the LiveHire system grows in popularity and existing Talent Communities grow membership numbers organically. The latest client win falls within our forecasting parameters. LiveHire retains a large forward work program with simultaneous multiple tender processes under way.

Risks and catalysts Near-term risks include: 1) slower-than-expected loading of new Talent Community members; 2) an absence of large new account wins; and 3) slow take-up by RPO (recruitment process outsourcing) companies. Potential near-term re-rating catalysts include: 1) strong growth in Talent Community member numbers; 2) major new account wins; 3) widespread success in RPO clients using the LiveHire system to win new contracts; and 4) significant new partnerships with other recruitment industry players.

Investment view LVH offers investors participation in the growth of a game-changing recruitment system. Should the company be successful in implementing its strategy, the rewards for shareholders could be substantial. However the company is an early-stage technology business and has yet to become self-sustaining from a cash-flow perspective. The stock is high risk. We maintain an ADD recommendation.

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

ADD (no change) Current price: A$1.02 Target price: A$1.10 Previous target: A$1.10 Up/downside: 8.2% Reuters: LVH.AX Bloomberg: LVH AU Market cap: US$181.7m A$238.8m Average daily turnover: US$0.47m A$0.61m Current shares o/s 232.0m Free float: 67.5%


Absolute (%) 0 46.8 229 Relative (%) -1.4 42 219.

5 Ivor RIES



Revenue (A$m) 0.86 1.30 2.86 6.82 14.96Operating EBITDA (A$m) -3.62 -4.30 -4.94 -3.11 1.51Net Profit (A$m) -3.67 -4.65 -5.45 -4.17 -0.07Normalised EPS (A$) (0.017) (0.021) (0.023) (0.018) (0.000)Normalised EPS Growth 88.6% 21.7% 12.3% (24.1%) (98.2%)FD Normalised P/E (x) NA NA NA NA NADPS (A$) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA NA NA NA 150.7P/FCFE (x) NA NA NA NA NANet Gearing (95.0%) (88.4%) (70.4%) (65.1%) (56.7%)P/BV (x) 19.85 11.79 14.27 11.15 10.32ROE (54.8%) (30.0%) (29.7%) (21.8%) (0.3%)% Change In Normalised EPS Estimates 0% 0% 0%Normalised EPS/consensus EPS (x) 1.02 0.99 -0.11

73

133

193

253

313

0.22

0.42

0.62

0.82

1.02

1.22Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

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REIT│Hong Kong│November 29, 2017

Company Note



Insert Insert

Link REIT Disposal price way higher than expected ■ Link REIT disposed of 17 malls for HK$23bn. The expected disposal gain is

HK$7.3bn, which will translate into 5% NAV accretion. ■ The price is 59% above the appraised value, way above market expectations of a

~30% premium. ■ We expect the rental loss to be ~9% p.a. but to be neutralised by share buybacks. ■ Management did not mention distributing special dividends and we believe it will likely

reinvest the proceeds in new projects or buy back shares. ■ We expect the share price to react positively in the near term but to be constrained by

narrowing yield spreads. Maintain Hold.

Disposal of 17 malls for HK$23bn, 5% NAV accretion Link REIT announced on 28 Nov after the market closed the completion of a strategic review and the disposal of 17 malls for HK$23bn to GAW Capital Partners. This is by far the biggest and most profitable disposal by Link REIT of its seven rounds of disposals since 2014. The consideration is 59% above the appraised value (HK$15bn). Management estimated the net disposal gain to be HK$7.3bn, which will translate into 5% NAV accretion, in our view.

Rental loss of ~9%; expect share buyback to neutralise impact The 17 malls have a total GFA of 1.2m sf and 8,249 carparks. They generated HK$877m turnover and HK$639m net property income (NPI) in FY17, accounting for around 9% of FY17 turnover and NPI. We expect the DPU loss to also be around 9% p.a. However, we expect Link REIT to buy back ~10% of its share base to neutralise the DPU loss. Hence, we revise up our FY19/20F DPU by 1%/2%.

Use of proceeds: new investment and share buyback According to the announcement, management intends to use the disposal proceeds for new investments that fit Link REIT’s growth trajectory and general corporate purposes, including, but not limited to, repayment of debts and share buyback. We understand that some investors are eyeing special dividends but we believe management’s first preference is new investment and second share buyback as special dividends only provide short-term support to share prices.

Divergence between equity and physical market The consideration exceeded market expectation by 15-30%. The market expected a narrower premium given the big sum of investment and the average premium in the past six rounds of disposals of only 23%. We believe the gap shows that the keen demand for HK properties in the physical market is underestimated by the equity market. Even a stock as well covered as Link REIT has seen the equity market penalise its valuation by 100-200% pts in cap rates or 50-60% in value terms.

Expect share price to react positively in near term; maintain Hold We expect the share price to react positively in the near term on the above-expectation disposal price and speculation of special dividends. However, we believe its share price may be constrained by the narrowing spread between dividend yields and the 10-year US Treasury. We raise our TP to HK$67 as we narrow the FY18F dividend yield from 3.8% to 3.7% to reflect the lower-than-expected cap rate realised via the disposal. Upside risk: distribution of special dividends. Downside risk: faster-than-expected rate hike in US.


Hong Kong

HOLD (no change) Consensus ratings*: Buy 8 Hold 8 Sell 2

Current price: HK$70.00 Target price: HK$67.00 Previous target: HK$65.00

Up/downside: -4.3% CIMB / Consensus: -3.8%

Reuters: 0823.HK Bloomberg: 823 HK Market cap: US$19,738m HK$153,991m Average daily turnover: US$31.24m HK$244.0m Current shares o/s: 2,213m Free float: 80.3% *Source: Bloomberg Key changes in this note

FY18F DPU decreased by 0.2%. FY19F DPU increased by 1.5%. FY20F DPU increased by 1.6%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 5.2 10.4 33 Relative (%) 0.8 3.9 3

Major shareholders % held BlackRock 7.1 Capital 7.0 State Street 5.6 Insert

Analyst(s)

Raymond CHENG, CFA

T (852) 2539 1324 E [email protected] Siu Fung LUNG, CFA T (852) 2539 1327 E [email protected]

Financial Summary Mar-16A Mar-17A Mar-18F Mar-19F Mar-20F

Gross Property Revenue (HK$m) 8,740 9,255 9,993 10,182 10,959Net Property Income (HK$m) 6,513 6,994 7,555 7,597 8,233Net Profit (HK$m) 16,295 17,711 5,477 5,353 5,650Distributable Profit (HK$m) (4,634) (5,075) (5,477) (5,353) (5,650)DPS (HK$) 2.06 2.28 2.49 2.70 2.85Dividend Yield 2.95% 3.26% 3.56% 3.85% 4.07%Asset Leverage 16.5% 15.7% 17.8% 17.7% 17.2%BVPS (HK$) 56.79 62.47 63.12 70.25 70.75P/BV (x) 1.23 1.12 1.11 1.00 0.99Recurring ROE 13.3% 13.3% 4.0% 3.8% 4.0%% Change In DPS Estimates (0.19%) 1.48% 1.58%CIMB/consensus DPS (x) 1.01 1.00 0.99

89.0

95.7

102.3

109.0

46.0

56.0

66.0

76.0Price Close Relative to HSI (RHS)

5

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Technology Components│Hong Kong│November 29, 2017

Company Note



Insert Insert

Q Technology (Group) Company Ltd Dual- and 3D-sensing cameras boost earnings ■ Q Tech’s reverse roadshow showcased its advanced packaging technology in MoC,

dual-cameras and 3D-sensing cameras. ■ Q Tech will start shipments of MoC and 3D-sensing products in FY18F. ■ It aims to increase automation to enhance production efficiency and product quality. ■ Leveraging on Newmax lens technologies to develop smartphone and vehicle lenses. ■ Maintain Add as we believe it will benefit from multi-camera and miniaturisation trend

among Chinese smartphone brands.

Q Tech showcases MOC, dual-camera and 3D-sensing We joined Q Technology's (Q Tech) reverse roadshow (27 Nov 2017) at its headquarters at Kunshan, Shanghai, where it showcased its camera module manufacturing technologies in Molding on Chip (MoC), dual-camera and 3D-sensing. The group said it is increasing its R&D expenses for 3D-sensing and automation. It also provided updates on its smartphone and automotive lens development.

MOC camera module shipments to start in 1H18F Q Tech should benefit from the popularity of full-screen designs and rising number of cameras in smartphones given it has completed its R&D on MoC camera modules focusing on smaller-sized front-facing cameras and thinner-sized rear-facing cameras. Q Tech revealed that its MoC packaging technology can reduce the width of the front-facing camera module by 0.6mm and the height of the rear-facing camera module by 0.2mm, which should significantly increase the available space in smartphones.

3D-sensing camera to be ready in 3Q18F Q Tech is partnering Qrbbec to provide a total 3D-sensing solution for its customers. It currently focuses on structured light (SL) 3D-sensing solutions in anticipation of huge demand from Chinese brands. The group said that it has sent samples to its customers and targets to start mass production in 3Q18F. Although we do not expect wide 3D-sensing adoption in Chinese brands in 2018F, we are positive on its leading market position in the domestic 3D-sensing supply chain.

Automation investment for the future Q Tech has an aggressive automation plan which aims to enhance its production efficiency and product quality. It targets to reduce its production workforce by 35% through increased automation in testing, packaging, logistics and welding. We are positive on its automation strategy given it is very important on the back of rising requirement for high precision in the production of sophisticated smartphone cameras, e.g. dual-camera, 3D-sensing and MOC products.

Smartphone and vehicle lens: future development Q Tech also said that it will fully leverage Newmax’s lens technology in high-megapixel smartphone products and 3D lens development. Meanwhile, the group is also developing vehicle lenses, such as 3D surround view module and system, and in-cabin camera and system. However, the group expects its vehicle lens business to generate revenue only from FY19F due to the long certification process of automakers.

Maintain Add with target price of HK$20.70 Stay invested. Q Tech is set to benefit from the multi-camera and miniaturisation trend among Chinese smartphone brands, leveraging its first-mover advantage in both dual-camera and 3D-sensing camera markets. Our target price of HK$20.70 is still based on 22x FY19F P/E (historical 12-month average). Potential re-rating catalysts are the start of a dual-camera project for Huawei and 3D-sensing camera launches. Slow 3D-sensing adoption rate among Chinese brands is a key risk.


Hong Kong

ADD (no change) Consensus ratings*: Buy 15 Hold 10 Sell 0

Current price: HK$16.38 Target price: HK$20.70 Previous target: HK$20.70


Reuters: 1478.HK Bloomberg: 1478 HK Market cap: US$2,300m HK$17,946m Average daily turnover: US$40.55m HK$316.7m Current shares o/s: 1,096m Free float: 31.4% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -2 -14.5 292.8 Relative (%) -6.4 -21 262.8

Major shareholders % held Mr HE Ningning 68.6 Insert

Analyst

Ray KWOK

T (852) 2532 1113 E [email protected]


Revenue (Rmbm) 2,202 4,991 8,408 10,790 13,389Net Profit (Rmbm) 102.0 190.8 499.7 674.4 893.4Normalised EPS (Rmb) 0.10 0.18 0.46 0.62 0.82Normalised EPS Growth (51%) 81% 148% 35% 32%FD Normalised P/E (x) 140.6 76.7 30.9 22.9 17.3Price To Sales (x) 6.38 2.88 1.81 1.41 1.13DPS (Rmb) 0.00 0.04 0.09 0.12 0.16Dividend Yield 0.00% 0.25% 0.66% 0.89% 1.18%EV/EBITDA (x) 78.68 46.85 21.81 16.31 12.54P/FCFE (x) NA NA 49.78 40.99 26.53Net Gearing (23.5%) 11.1% 8.4% 3.4% (4.5%)P/BV (x) 11.54 9.68 7.82 6.11 4.70ROE 8.8% 13.7% 28.5% 30.5% 31.3%Normalised EPS/consensus EPS (x) 1.01 0.91 0.94

54154254354454554

2.17.1

12.117.122.127.1

Price Close Relative to HSI (RHS)

20406080


Vol m

6

Property Devt & Invt│Indonesia│November 29, 2017

Company Note



Insert

Bumi Serpong Damai Same asset, but at a lower price ■ BSDE announced another related party transaction to acquire the remaining 36k sq m

of Sinar Mas MSIG Life Tower for Rp954bn (Rp27m/sq m). ■ This brings the overall acquisition price down to Rp32m/sq m (Sep transaction:

Rp38m/sq m), which we think is a relatively good price given the prime location. ■ Yield for this asset is also quite respectable at 7.5-9%, based on our estimates. ■ Separately, it has secured its FY17 presales target amid couple of big land plot sales

in 4Q and aggressive promotions (price lock). ■ We upgrade our FY17-19 EPS by 23-76% amid big land plot sales (c.Rp3.5tr) but

maintain our Add call and DCF-based TP. Risk is worsening property sentiment.

Same asset, but at a lower price On 28 Nov, BSDE announced another related party transaction to acquire 36k sq m (24 out of total 47 floors) of Sinar Mas MSIG Life Tower from PT Asuransi Jiwa Sinarmas MSIG. Total value of the transaction is c.Rp954bn, which implies an acquisition price of Rp27m/sq m. This is a follow up to the previous transaction in Sep, where it acquired 37k sq m of the same tower from Golden Agri Resources for Rp1.4tr. With this latest transaction, BSDE will have full ownership of Sinar Mas MSIG Tower.

Attractive acquisition price The acquisition price of Rp27m/sq m for the Nov transaction is lower than the Sep transaction’s price of Rp38m/sq m as BSDE was able to negotiate for a better price (two mutually exclusive negotiations). This brought the overall acquisition price down to Rp32m/sq m, an attractive price as it is at the lower end of the asking price for strata office in the Jakarta CBD of Rp30m-60m/sq m and well below the average asking price of Rp56m/sq m.

Decent yield for the asset Our discussion with the management suggests that current occupancy is at 40% but is expected to improve to 60% next year as it has secured another tenant. We think the occupancy will gradually improve given BSDE’s expertise and development of major infrastructure in the CBD area (i.e. MRT). Average monthly rental rate for the whole building is around Rp200k-250k/sq m (lower compared to Golden Agri’s average of Rp280k-300k), though it still implies a decent yield-to-cost of 7.5-9%.

FY17 presales target pretty much secured Based on our checks, BSDE has secured its FY17F presales target of Rp7.2tr as it was able to finalise 3 sizable land plot sales (c.Rp3.5tr total presales) and achieved a decent run-rate from the ongoing price lock promotion (Rp1.5tr target – Oct was at Rp400bn).

Upside to earnings 9M17 net profit of Rp2.3tr (+99% yoy/-77% qoq) beat expectations at 113%/87% of our/consensus FY17F estimates. The beat was mainly driven by strong revenues (+36% yoy/-34% qoq) despite having not recognised any big land plot sales that occurred in 2017. Our discussions suggest that it may recognise most of the land plot presales (c.Rp3tr) in 4Q17, which prompted us to raise our FY17F topline forecast by 28% and bottomline by 76%; our new FY17F net profit estimate is 27% above consensus.

Maintain Add We upgrade our FY17-19F earnings by 23-76% amid strong land plot sales, but keep our Add call and DCF-based TP unchanged (WACC: 11.9%, LTG: 5%). BSDE has underperformed the JCI by 20% YTD, and is currently trading at 11.1x FY18F P/E (10-year average of 14x P/E) and offering 64% discount-to-NAV (10-year average of 55%). Key risk is worsening sentiment due to politics or aggressive tax collection.


Indonesia


Current price: Rp1,670 Target price: Rp2,200 Previous target: Rp2,200

Up/downside: 31.7% CIMB / Consensus: -2.5%

Reuters: BSDE.JK Bloomberg: BSDE IJ Market cap: US$2,379m Rp32,141,982m Average daily turnover: US$1.76m Rp23,655m Current shares o/s: 19,247m Free float: 46.9% *Source: Bloomberg Key changes in this note

FY17F EPS increased by 76%. FY18F EPS increased by 33%. FY19F EPS increased by 23%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -3.2 -8.5 -0.6 Relative (%) -4.8 -11.3 -19.3

Major shareholders % held Paraga Artamida 36.7 Warner Investment 16.4 Insert

Analyst(s)

Jovent GIOVANNY

T (62) 21 3006 1727 E [email protected] Timothy HANDERSON T (62) 21 3006 1724 E [email protected]


Total Net Revenues (Rpb) 6,210 6,522 8,622 8,197 8,831Operating EBITDA (Rpb) 2,901 2,835 4,458 3,713 3,830Net Profit (Rpb) 2,139 1,796 3,565 2,887 3,072Core EPS (Rp) 106.4 99.4 183.7 151.0 159.6Core EPS Growth (49.7%) (6.6%) 84.9% (17.8%) 5.7%FD Core P/E (x) 15.70 16.81 9.09 11.06 10.46DPS (Rp) 15.35 11.12 9.33 18.52 15.00Dividend Yield 0.92% 0.67% 0.56% 1.11% 0.90%EV/EBITDA (x) 12.57 14.12 8.23 9.73 9.18P/FCFE (x) 5.78 NA 25.27 39.89 22.78Net Gearing 8.2% 16.9% 1.6% (1.3%) (5.0%)P/BV (x) 1.71 1.56 1.34 1.21 1.10ROE 11.7% 9.7% 15.9% 11.5% 11.0%% Change In Core EPS Estimates 75.7% 32.8% 23.1%CIMB/consensus EPS (x) 1.27 1.03 1.05

73.0

80.8

88.6

96.3

104.1

1,500

1,600

1,700

1,800

1,900

Price Close Relative to JCI (RHS)

20406080


Vol m

7

Personal Products│South Korea│November 29, 2017

Company Note



Insert Insert

Amorepacific Corp Valuation premium applicable? ■ Amorepacific‘s (AP) share price has rebounded by 31% from its recent bottom due to

expectations of easing geopolitical risks. ■ We expect AP’s operating profit to grow by 29% in FY18F due to increasing inbound

visitors from China and low base effect. ■ While the market sentiment could have more positive impact on China recovery

players, the current valuation reflects this potential, in our view. ■ Maintain Hold with a target price of W310k, based on 31x FY18 P/E (1.0 PEG and

valuation rollover). This note marks transfer of coverage from Hyun Ah to John Park.

Easing geopolitical risks reflected in the share price AP’s share price has recovered 32% from its recent bottom (25 Sep 2017) due to expectations of easing Chinese retaliatory action against Korea on the Terminal High Altitude Area Defense (THAAD) issue. Investors expect the agreement between Seoul and Beijing signed on 31 Oct to lead to a rise in the number of Chinese tourists. According to the Korean Tourist Statistics, inbound travel visitors have shown signs of recovery (yoy decline reduced to 27% in Oct vs. 29% in Sep and 34% in Aug).

Expect strong earnings recovery in FY18F… We forecast that a meaningful turnaround in earnings should begin to appear from 2Q18F with warming Korean and Chinese relations and low base effect. We expect AP’s OP to rise 29% in FY18F mainly due to strong duty free sales (+27% yoy) to inbound visitors from China. Also, China onshore business should recover given 1) normalising sales growth of brands such as Mamonde and Laneige in 3rd/4th-tier Chinese cities and 2) strong growth in online sales in China.

…but the growth could be slower than market expectations However, we think the earnings growth could be slower than market expectation given the duty free purchase limit strategy (less than 5 units per person for one brand) and AP’s weakening dominance amid competitive environment in China. In order to protect its brand value, AP should maintain its purchase limit regardless of Chinese inbound traffic trends. Also, as European, Japanese and other Korean cosmetics brands have marketed more fiercely in China, the sales growth could be lower than market expectations.

Weak sales in domestic business still a concern The weaker-than-expected growth in the domestic channels remains a concern. Sales of its premium brands (HERA, IOPE) are still weak, falling 20-30% yoy in 1Q-3Q17, due to intense competition amid rapid growth in other Health and Beauty (H&B) channels and lack of new successful products. Considering that 1-3Q17 domestic cosmetics retail sales rose 17% yoy (vs. AP’s domestic retail sales growth of 1.6% yoy), we think AP underperformed the market in the period.

Cut FY17-19F EPS, in line with market consensus Based on our conservative domestic retail sales recovery and duty free sales assumptions, we cut our FY17-19F revenue and EPS by 11-13% and 24-37% respectively, in line with consensus.

Maintain Hold with target price of W310,000 We think AP does not deserve a valuation premium vs. its global peers given its weakening position in the domestic and China markets. Upside risks to our Hold recommendation are 1) stronger-than-expected recovery in inbound travelers from China, and 2) market share recovery in the domestic business on successful brand rebuilding and channel restructuring. Downside risks include higher-than-expected marketing costs due to aggressive new product launches.


South Korea


Current price: W315,000 Target price: W310,000 Previous target: W310,000



FY17/18/19F Revenue cut by 13/11/12%. FY17/18/19F OP decreased by 36/26/25%. FY17/18/19F NP decreased by 37/26/24%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 0 7.1 -7.8 Relative (%) -0.7 0.8 -34.8

Major shareholders % held Amore Pacific Group 35.4 Kyungbae Suh 10.7 National Pension Service 8.2 Insert

Analyst(s)

John PK PARK



Revenue (Wb) 4,767 5,645 5,205 5,933 6,643Operating EBITDA (Wb) 920 1,029 795 986 1,187Net Profit (Wb) 577.5 639.2 450.0 590.9 699.6Normalised EPS (W) 9,878 10,934 7,697 10,108 11,968Normalised EPS Growth 52.4% 10.7% (29.6%) 31.3% 18.4%FD Normalised P/E (x) 31.89 28.81 40.92 31.16 26.32DPS (W) 1,350 1,350 1,500 1,700 1,900Dividend Yield 0.43% 0.43% 0.48% 0.54% 0.60%EV/EBITDA (x) 18.94 16.74 21.72 17.22 14.13P/FCFE (x) NA NA 1,743 59 79Net Gearing (30.5%) (31.0%) (27.4%) (30.6%) (31.1%)P/BV (x) 5.50 4.75 4.33 3.87 3.43ROE 18.6% 17.7% 11.1% 13.1% 13.8%% Change In Normalised EPS Estimates (36.7%) (25.8%) (24.4%)Normalised EPS/consensus EPS (x) 1.11 1.08 1.06

44.0

62.8

81.5

100.3

220,000

270,000

320,000

370,000


1

1

2


Vol m

8

Auto Parts│South Korea│November 29, 2017

Company Note



Insert Insert

Hyundai Glovis Co Ltd Straying from the script ■ 4Q17F: We see won-US$ risk emerging despite Glovis’s unscathed topline growth. ■ We expect Glovis to unveil an M&A agenda and/or asset disposal plans to enhance its

asset size and/or reduce its captive sales portion to cope with new FTC regulations. ■ These actions are likely a temporary gesture. Any drastic change in group ownership

structure, especially via the Chung family’s 30% stake in Glovis looks unlikely for now. ■ The stock to be a value trap until the market sees clarity on heritage, the potential

stake donation from the chairman, circular shareholdings, holdco transition, etc. ■ Maintain Hold. SOP-based target price lowered to W156,000. FY17 EPS cut by 9%.

Captive growth remains intact but... Following the expiry of a two-year contract with HMC Group, we expect Glovis to start to renegotiate terms in 4Q17F and increase its captive market share from the current 50% to 60% in 2018. As Glovis already expanded its presence in European markets to c.30% in 1H17 from nearly zero in FY15, revenue could continue to grow for its pure car carrier (PCC) operations. We expect the company to confirm the renewal of the HMC contract by the end of this year, leading to 8% topline growth in FY18F.

... currency bite apparent in 4Q17F On top of growing sales from emerging markets and the non-captive business, which already eroded 3Q17 OPM to 4.3% (vs. 4.6% in 1H17 / 9M17 OP fell 2.8%), won-US$ has appreciated 3% yoy QTD, adding downside pressure to Glovis's CKD/PCC operations. We project W178bn OP in 4Q17F (vs. consensus W184bn) while slowing shipment growth at HMC/Kia and growing non-Hyundai sales continue to weigh down the FY17-19 OPM outlook (4.1-4.3% vs. 4.4% in FY16). Our FY17 EPS is cut by 9%.

Emerging M&A expectations Even after de-rating 53% since Jan 15, its valuation multiple, currently decoupled from record-high revenue and EPS growth, looks trapped by regulatory push from the current administration (reinforcement of unfair intra-group transaction laws and reduction in chaebols’ controlling stakes from below 30% to below 20% incurring overhang risks). We expect Glovis to turn to asset disposal and M&A (US/EU logistics firm and/or domestic entity tied to HMC's business, etc.) to reduce its captive sales portion.

We see two sides to M&A agenda Reducing its captive sales portion and raising asset size (to avoid holdco restrictions) via M&A may be seen as positive but we deem it as only temporary. Glovis's acquisition of Kia's 17% stake in Mobis (to cut circular shareholding eventually) may be too costly even after 1) divesting part of its existing businesses, or 2) a ‘donation’ from the chairman's 5-7% stake in HMC/Mobis. The current de-rating shows the market no longer thinks the Chung family can enhance shareholder interests via growing Glovis’s value.

Fairly valued at 1.2x FY18 P/BV Stronger-than-expected captive market share (above 50%) and export volumes at HMC/Kia are upside risks. Any delays to changes in Hyundai’s ownership structure (Korean FTC’s demand to enhance the “transparency of governance structure”) remain the downside risk. Our SOP-based target price is lowered from W225,000 to W156,000, premised on: 1) an 8% EBITDA cut, and 2) target EV/EBITDA multiple adjustment to 8.0x for overseas logistics (2x premium over OEMs) and 5.0x for domestic/CKD.


South Korea





FY17F EPS cut by 9%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -4.1 -11.8 -12.6 Relative (%) -4.8 -17.9 -39.7

Major shareholders % held Chung, Eui-Sun 23.3 Chung, Mong-Koo 6.7 Den Norske Amerikalinje AS 12.0 Insert

Analyst(s)

KJ HWANG



Revenue (Wb) 14,671 15,341 16,652 17,562 18,237Operating EBITDA (Wb) 827 885 906 973 1,023Net Profit (Wb) 377.0 505.6 582.0 620.5 656.2Normalised EPS (W) 10,052 13,483 15,520 16,547 17,498Normalised EPS Growth (29.7%) 34.1% 15.1% 6.6% 5.7%FD Normalised P/E (x) 14.13 10.53 9.15 8.58 8.12DPS (W) 3,000 3,000 3,300 3,600 4,000Dividend Yield 2.11% 2.11% 2.32% 2.54% 2.82%EV/EBITDA (x) 8.40 7.93 7.50 7.25 6.87P/FCFE (x) 5,519 NA 20 NA 45Net Gearing 65.2% 61.1% 49.5% 50.9% 46.0%P/BV (x) 1.72 1.53 1.35 1.20 1.07ROE 12.8% 15.4% 15.7% 14.8% 13.9%% Change In Normalised EPS Estimates (8.86%)Normalised EPS/consensus EPS (x) 1.00 1.02 1.02

56.0

67.1

78.2

89.3

100.4

130,000

140,000

150,000

160,000

170,000


200

400

600


Vol t

h

9

x-apple-data-detectors://0/

Personal Products│South Korea│November 29, 2017

Company Note



Insert Insert

Korea Kolmar Co Ltd All growth cylinders to recover ■ We expect Korea Kolmar’s operating profit to grow by 31% yoy in FY18F. ■ The company’s domestic sales growth should accelerate due to 1) order recovery

from major brands and 2) stable client base in the domestic market. ■ Strong growth potential in FY18F is intact given capacity expansion at Chinese

cosmetics and pharmaceutical plants. ■ Maintain Add with a higher target price of W97,000, now based on FY18F P/E of 29x

(0.9 PEG and valuation rollover from FY17). ■ This note marks the transfer of coverage from Hyunah Jo to John Park

Easing Chinese regulatory risk helping share price Korea Kolmar’s share price has rebounded by 30% since early Sep 2017 thanks to expectations of easing Chinese regulatory risk on the Terminal High Altitude Area Defense (THAAD) issue. We expect the thawing relations between Korea and China to gradually improve the cosmetics business environment, leading to accelerated earnings growth for Korea Kolmar’s domestic and overseas businesses.

Strong domestic cosmetics sales growth to return Despite the challenging environment from slower growth in Chinese inbound tourists, domestic cosmetics sales rose 9.5% yoy in 1Q-3Q17. This was mainly due to successful client diversification (into Health & Beauty (H&B) stores, home shopping and private brands like Atomy and Carver Korea). We expect its domestic sales to rise 16% in FY18F thanks to new orders from major brands (Amore Pacific and LG H&H) as the number of inbound travelers from China picks up.

Sluggish overseas cosmetics business to recover Beijing Kolmar’s 3Q17 sales were below our estimates, falling 31% yoy mainly due to production disruptions with a decline in orders. Also, the company said the payroll costs increased due to increased staff and higher minimum wages. However, we expect its overseas sales to rebound from next year as the new Wuxi plant in China is scheduled to start in 2H18F. The capacity expansion (W200bn) in Shanghai will give it greater access to its major clients in China.

Pharmaceutical business to show stable growth As Korea Kolmar’s new pharmaceutical plant started operations in 3Q17, the pharmaceutical sales capacity increased from W150bn to W400bn. The order environment looks favourable and order receipts appear solid; as such, we expect pharmaceutical sales to grow 18-19% in FY18-19F.

FY17-18F OP trimmed but expect steady growth in FY18-19F As quarterly earnings have consistently fallen short of our earlier expectations (1Q17-3Q17), we lower our operating profit (OP) forecast for FY17F by 15% to W96bn and for FY18F by 7% to W116bn. However, we forecast OP/NP to expand 31%/32% yoy in FY18F and 21%/22% yoy in FY19F, supported by improving business environment in China.

Maintain Add; medium- to long-term growth story intact While we cut our EPS for FY17F and FY18F to reflect sluggish business from THAAD impact, we raise our target price to W97,000 from W88,000 as we roll forward our valuation to FY18F. We anticipate gradual improvement in profitability starting from FY18F, when the new plant stabilises and the number of inbound Chinese visitors rises. Downside risks include weaker-than-expected order growth in China.


South Korea





FY17/18F OP decreased by 15/7%. FY17/18F NP decreased by 18/9%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 1.5 25.8 25.3 Relative (%) 0.8 19.5 -1.7

Major shareholders % held Korea Kolmar Holdings 21.2 NIHON KOLMAR 13.2 National Pension Service 11.7 Insert

Analyst(s)

John PK PARK



Revenue (Wb) 536 667 818 966 1,114Operating EBITDA (Wb) 70.3 85.2 92.2 116.4 137.9Net Profit (Wb) 45.49 53.05 53.33 70.57 85.92Normalised EPS (W) 2,156 2,514 2,527 3,345 4,072Normalised EPS Growth 33.3% 16.6% 0.5% 32.3% 21.8%FD Normalised P/E (x) 39.80 34.13 33.95 25.65 21.07DPS (W) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) 25.45 21.61 19.59 14.86 11.97P/FCFE (x) NA 56.95 42.55 21.46 21.02Net Gearing (9.0%) 4.7% (6.8%) (24.5%) (36.3%)P/BV (x) 8.20 6.71 5.60 4.60 3.77ROE 22.7% 21.6% 18.0% 19.7% 19.7%% Change In Normalised EPS Estimates (18.2%) (9.1%)Normalised EPS/consensus EPS (x) 0.97 1.03 1.02

63.0

78.0

93.0

108.0

123.0

56,000

66,000

76,000

86,000

96,000Price Close Relative to KOSPI (RHS)

200400600800


Vol t

h

10

Banks│South Korea

Company Flash Note



Insert Insert

Woori Bank A cloud of short-term uncertainties ■ Woori Bank’s share price has been battered over the past three months; delayed

sales of government stakes and the resignation of CEO were seen as main issues. ■ Fundamentals, however, have been moving in the right direction as expected: staff

restructuring and consistent downward trend for NPLs. ■ With the current share price weakness, we see value emerging for Woori Bank but

significant re-rating is unlikely until the pending issues are cleared.

Fundamentals moving in the right direction ● Consistent reduction in NPL: After non-stop NPL reduction, Woori Bank posted a

0.73% NPL ratio, leading to credit costs of 30bp in 3Q17. We see this as a bottom for NPL and expect that Woori Bank’s credit cost will remain below 40bp in 2018-19F (we estimate it rises to 34bp and 39bp in 2018F and 2019F, respectively).

● Staff restructuring likely to lead to cost saving in 2018F and onwards: Spending W300bn, Woori Bank completed large-scale staff restructuring in 3Q17. This will lower its SG&A burden by W100bn every year from 2019F and onwards.

● Interim dividends: Woori Bank declared interim dividends of W100 per share (announced on 28 July 2017). This is a good, albeit small, sign that a shareholder-friendly policy is shaping up nicely.

Overhangs continue to weigh down share price ● Despite the announcement of decent earnings, Woori Bank’s share price has fallen

15% over the past three months on delayed government stake sales, resignation of its CEO (Mr. Lee KG) and ongoing uncertainties about holding company transition.

● New CEO appointment: The sudden resignation of its CEO brought up corporate governance issues at Woori Bank. After the successful sales of government stakes in Dec 2016, the newly-formed BOD appointed by major private (non-government) shareholders was warmly received by the market.

● Depending on the new CEO’s style, the corporate culture and shareholders’ policy may differ. The selection of a new CEO is in progress and he or she is expected to be appointed by BOD at a meeting tomorrow (E-today news daily, 28 Nov 2017).

● Sale of government’s remaining stakes: Whilst consensus expected the remaining shares (18.52%, as of Nov-2017), owned by the Korea Depository Insurance Corporation (KDIC), to be sold in 2017, the schedule seems to have been delayed into 2018F or further.

Maintain Add rating, with limited upside ● We retain our Add rating on the stock with an unchanged GGM-based target price of

W18,000, implying 0.59x FY18F P/BV. ● Despite value emerging at its current 0.50x 2018F P/BV with nearly 7% ROE, we

believe the ongoing uncertainties, such as CEO transition and the government’s stake sales, will likely drag the share price in the short term.

● Key risks to our call include the appointment of a new CEO, announcement of government stake sales, any sudden spikes in corporate NPL and regulation overhangs on further tightening in mortgage lending.

Figure 1: Proceeds from government stake sales and government ownership %

SOURCES: CIMB, COMPANY REPORTS

19%

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2002 2002 2004 2007 2009 2010 2014 2014 2014 2016 2017

Sales proceeds on gov't stakes Gov't ownership

(W bn)

South Korea

November 29, 2017 - 1:23 PM




Reuters: 000030.KS Bloomberg: 000030 KS Market cap: US$10,038m W10,883,600m Average daily turnover: US$21.97m W24,676m Current shares o/s 676.3m Free float: 60.4% *Source: Bloomberg Key financial forecasts


Absolute (%) -5.9 -15 32 Relative (%) -6.6 -21.1 4.9

Major shareholders % held KDIC 18.5 NPS 9.5 NOBIS1 6.0 Insert

Analyst(s)

Kathy PARK


Dec-17F Dec-18F Dec-19F

Net Profit (Wb) 1,673 1,440 1,496Normalised EPS (W) 2,474 2,129 2,212Normalised EPS Growth 38.1% (13.9%) 3.9%FD Normalised P/E (x) 6.51 7.56 7.28Recurring ROE 8.34% 6.82% 6.76%P/BV (x) 0.53 0.50 0.48DPS (W) 600.0 700.0 700.0Dividend Yield 3.73% 4.35% 4.35%

94.0

105.1

116.2

127.3

138.4

11,000

13,000

15,000

17,000

19,000


5

10


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11

Retail│Malaysia│November 29, 2017

Company Note



Insert Insert

7-Eleven Malaysia Holdings Berhad Puffed up valuations ■ 9M17 core net profit of RM34.2m came in line with our and market’s expectations. ■ Earnings contracted yoy as a result of mounting operating costs with respect to its

store expansion as well as higher inventory shrinkages. ■ Looking ahead, we remain cautious on the group’s earnings prospects as we think the

successful execution of its new strategy is still key for its recovery. ■ We make no changes to our earnings estimates pending an analyst briefing next

week. ■ Maintain Reduce with a higher target price of RM1.14 as we roll over to CY19F.

Valuations remain stretched at 41x/36x FY17/18F P/Es.

9M17 came in within expectations 7-Eleven’s 3Q17 revenue clocked in at RM563.1m (+2.8% yoy) while core earnings jumped 38.2% yoy to RM16.1m. 9M17 core earnings were at RM34.2m, coming in line with our and the market’s expectations at 72% and 75% of full-year estimates, respectively. As expected, no dividend was declared during the quarter.

Core earnings negatively impacted by higher costs Overall, 9M17 revenue ticked up 3.9% yoy to RM1.6bn but core net profit dropped 19.7% yoy to RM34.2m. Yoy sales growth was largely driven by new store openings (+85 net new stores in 9M17), improved merchandise mix as well as increased consumer promotional activities. Nonetheless, core earnings dropped yoy due to higher operating costs, particularly rental, depreciation and staff expenditures, owing to its store expansion plans. All in, 9M17 EBITDA margin contracted 0.6% pts yoy to 5.6%.

3Q17 earnings higher due to lower effective tax rates 7-Eleven’s 3Q17 revenue yoy growth was mainly due to a higher number of stores and improved product mix. In spite of the higher operating costs, core net profit expanded 38.2% yoy on the back of significantly lower effective tax rates of 16.2% (-8.8% pts yoy). This was due to a write-back of tax over provision for the previous year.

18-month cost savings programme still ongoing The group is currently implementing a cost savings programme, which will be rolled out over the next 18 months, and targets to have the lowest costs in the industry. It also hopes to lower its operating expenses for the entire end-to-end supply chain to boost cost efficiencies. Meanwhile, it has also implemented strategies at the store level where it targets to significantly improve conditions, operations and customer experience by implementing accountability on its stakeholders by utilising balanced scorecards.

Maintain Reduce; valuations still rich We are keeping our earnings forecasts for now pending an analyst briefing next week. However, we lift our target price to RM1.14 as we roll over our valuation base to CY19F EPS. Our target multiple remains unchanged at 24x CY19F P/E (in line with the regional peer average). Valuations for the stock remain expensive at 41x FY17F and 36x FY18F P/Es. Even though we commend management’s efforts in gradually reducing costs and improving efficiency, we recommend that investors wait for effective execution.

Key risks to our call Upside risks include quicker-than-expected recovery in domestic consumer spending and faster-than-expected execution of its cost savings programme.


Malaysia

REDUCE (no change) Consensus ratings*: Buy 1 Hold 1 Sell 4

Current price: RM1.51 Target price: RM1.14 Previous target: RM1.00


Reuters: SEM.KL Bloomberg: SEM MK Market cap: US$408.7m RM1,677m Average daily turnover: US$0.16m RM0.69m Current shares o/s: 1,233m Free float: 49.0% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -2.6 8.6 -10.1 Relative (%) -1.1 10.9 -15.8

Major shareholders % held Berjaya Retail 51.0 Genesis Investment 6.8 Smallcap world fund 6.2 Insert

Analyst(s)

Kristine WONG



Revenue (RMm) 2,006 2,103 2,286 2,512 2,752Operating EBITDA (RMm) 122.9 124.2 121.2 135.1 150.8Net Profit (RMm) 55.80 52.17 45.68 51.45 58.48Core EPS (RM) 0.045 0.042 0.037 0.042 0.047Core EPS Growth (2.1%) (6.5%) (12.4%) 12.6% 13.7%FD Core P/E (x) 33.38 35.70 40.77 36.20 31.85DPS (RM) 0.051 0.047 0.026 0.029 0.033Dividend Yield 3.38% 3.11% 1.72% 1.93% 2.20%EV/EBITDA (x) 14.14 15.53 15.56 13.78 12.10P/FCFE (x) 385.0 13.8 37.3 31.3 24.0Net Gearing (73%) 188% 31% (0%) (35%)P/BV (x) 10.94 52.93 25.17 20.83 17.41ROE 27.5% 50.8% 83.7% 63.0% 59.6%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 0.97 0.93 0.91

55.0

67.5

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Retail│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

Bonia Corporation Higher A&P costs clipped 1Q earnings ■ Bonia’s 1QFY6/18 core net profit of RM1.3m was a disappointment vs. our and the

market’s expectations. ■ Core earnings were negatively impacted yoy by the significantly lower revenue due to

the lack of festivities, as well as from the different timing of A&P expenses. ■ The group said it will continue shutting down loss-making boutiques and concentrate

on elevating brand perception as its key focus going forward. ■ It also targets to narrow the losses of its licensed brands in FY18F and is planning for

a potential break-even by FY19F. ■ We maintain our Add call with a lower end-2018 target price of RM0.78.

Below expectations Bonia’s 1QFY6/18’s turnover fell 13.3% yoy to RM118.9m but core net profit saw an even larger decline of 68% yoy to RM1.3m. The latter was well below our and the market’s expectations, making up just 4% of our and 3.3% of the market’s full-year forecasts respectively. The earnings miss was mainly due to softer-than-expected revenue from its mainstay markets and higher advertising and promotional (A&P) expenses.

Double-digit yoy decline at the topline due to store closures Bonia’s topline decline was not a total surprise as it came on the back of weaker contributions from its bread-and-butter markets of Malaysia and Singapore, which saw 1Q18 sales soften by 16.2% and 7.8% yoy, respectively. While this was due in part to the lack of festivities in 1Q18, we also note that the revenue decline was further aggravated by the ongoing closures of its loss-making boutiques and consignment counters across the entire group. This is a deliberate measure to rationalise its non-profitable stores.

1Q18 operating profit impacted by higher A&P costs Compared to 1Q17, Bonia’s 1Q18 operating profit plunged 75.6% to RM3.7m as a result of the timing of marketing expenses and seasonally-weaker sales due to the absence of Hari Raya in 1Q18 as compared to 1Q17. More notably, we understand that there was a large one-off A&P expense during the quarter in conjunction of Braun Buffel (BB)’s 130th Year Anniversary. If not for this exceptional expense, core earnings would have ticked up yoy.

Cutting FY18-20F EPS estimates by 6-8% In view of the weaker-than-expected results, we cut our FY18-20F EPS by 6-8% to account for weaker revenue growth in Malaysia and Singapore and higher A&P expenses for the group. Going forward, we think that Bonia will post better sequential earnings on the back of stronger demand due to the upcoming festive seasons (i.e. Christmas and year-end shopping in 2Q18, Chinese New Year in 3Q18 and Hari Raya in 4Q18).

Retain Add call; end-2018 target price lowered to RM0.78 As a result of our earnings cuts, our end-2018 target price is lowered to RM0.78 from RM0.84, based on an unchanged P/E of 16.8x (~10% discount to CY19F average peers’ P/E). Looking ahead, the paring down of its non-profitable licensed brands and loss-making boutiques as well as the strategy realignment for its in-house brands are potential rerating catalysts for the group. Bonia will also realise a full year’s contribution from its BB Indonesia unit in FY18F. As such, we maintain our Add call on the stock.

Key risks Key downside risks to our call include: i) tougher-than-expected retail competition in the region, ii) significant spike in raw material costs, and iii) overall aggravated slowdown in regional consumer spending.


Malaysia




Reuters: BONI.KL Bloomberg: BON MK Market cap: US$113.9m RM467.3m Average daily turnover: US$0.20m RM0.85m Current shares o/s: 806.3m Free float: 50.2% *Source: Bloomberg Key changes in this note

FY18-20F EPS decreased by 6-8%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -9.4 0.9 4.5 Relative (%) -7.6 4 -0.8

Major shareholders % held Bonia Holdings Sdn Bhd 24.9 Freeway Team Sdn Bhd 13.8 Milingtonia Limited 11.2 Insert

Analyst(s)

Kristine WONG



Revenue (RMm) 665.4 613.2 592.5 607.0 622.1Operating EBITDA (RMm) 80.90 90.09 93.59 97.83 98.48Net Profit (RMm) 24.37 31.73 33.89 36.42 38.90Normalised EPS (RM) 0.030 0.039 0.042 0.045 0.048Normalised EPS Growth (46.2%) 30.2% 6.8% 7.4% 6.8%FD Normalised P/E (x) 19.19 14.74 13.80 12.84 12.02DPS (RM) 0.013 0.013 0.013 0.013 0.013Dividend Yield 2.16% 2.16% 2.16% 2.16% 2.16%EV/EBITDA (x) 6.67 5.69 4.91 4.35 3.97P/FCFE (x) 13.56 8.05 6.30 9.07 9.04Net Gearing 12.1% 5.1% (7.5%) (15.0%) (21.5%)P/BV (x) 1.15 1.08 1.02 0.97 0.91ROE 6.14% 7.57% 7.62% 7.75% 7.82%% Change In Normalised EPS Estimates (7.88%) (7.08%) (5.96%)Normalised EPS/consensus EPS (x) 0.91 0.89 0.88

85.094.0103.0112.0121.0130.0

0.5000.5500.6000.6500.7000.750

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Agribusiness│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

Jaya Tiasa Holdings Higher plantation earnings lift 1QFY18 ■ 1QFY6/18 core net profit came in broadly in line with expectations, driven by strong

contribution from the plantation division. ■ Given the headwinds facing the timber division, we think a stronger plantation

performance will partly cushion the softer timber contribution. ■ Jaya Tiasa has reclassified its sector to Plantations on Bursa Malaysia – not a

surprise given that its plantation division is now its biggest earnings contributor. ■ Maintain Hold, with an unchanged SOP-based target price of RM1.15.

1QFY6/18 results broadly in line with expectations Jaya Tiasa (JT) achieved 1QFY6/18 core net profit of RM29m (excluding net loss on PPE as well as reversal of FV loss on derivatives), up 19.4% yoy thanks to stronger plantation earnings. Though this accounted for 31% of our and 38% of Bloomberg consensus full-year forecasts, we deem it to be broadly in line with expectations as we expect JT to continue to be negatively impacted by the changes that are affecting the timber industry. 1QFY6/18 results driven by the plantation division JT’s plantation division continued to be its biggest earnings contributor in 1QFY6/18, posting a pretax profit of RM45m (+4.8% yoy). The better performance was due to a combination of 7% yoy increase in CPO average selling prices and stronger FFB output. FFB production grew 3.4% yoy in 1QFY6/18, thanks to new mature areas and higher FFB yields. Pretax profit margin saw 1%-pt improvement to 27%, thanks to better utilisation rate for its mills coupled with a 18% yoy decline in cost of production. Weaker timber contribution due to lower sales volume JT no longer discloses the breakdown between its logs and wood processing businesses. Its timber division posted a pretax profit of RM1.6m in 1QFY6/18, a reversal from a pretax loss of RM7.8m in 1QFY6/17. However, we note that this has been the weakest quarter for the timber division since it managed to return to the black in 2QFY6/17. Sequentially, timber division plunged 83% qoq in 1QFY6/18; we suspect this was due to a combination of weaker sales volume and lower log production (-8% qoq). Reclassified its sector to Plantations on Bursa Malaysia Note that JT has reclassified its sector in Bursa Malaysia to Plantations from Industrial Products. This is not a surprise given the bigger contribution of the plantation division to group earnings. JT in its results announcement revealed that it expects FFB yield to improve as more estates are coming into maturity, and better operational efficiency from its mills. Moving forward, we think the plantation segment should be able to partly cushion the softer timber contribution.

Outlook remains bleak for its timber division We are still concerned about the prospects for JT's timber division, given the headwinds it faces. Production has been adversely impacted by the transitional period of certification audit while the reduction in export quota has lowered its log export volumes. Higher cess payments have also contributed to a higher cost of production. The recent strengthening of the ringgit against the US dollar will also reduce its income from exports.

Maintain Hold; share price supported by low P/BV All in, we see a dim outlook for its timber division and do not discount further impairments from the division moving forward. Recall that it recognised impairment totaling RM66m in FY6/17. We maintain our SOP-based target price and Hold call as its share price is supported by its low P/BV of 0.52x. Higher-than-expected improvement in yields is a key upside risk while lower timber sales are a key downside risk.


Malaysia




Reuters: JTIA.KL Bloomberg: JT MK Market cap: US$263.2m RM1,074m Average daily turnover: US$0.26m RM1.10m Current shares o/s: 973.7m Free float: 64.0% *Source: Bloomberg Key changes in this note

No changes.

Source: Bloomberg


Absolute (%) 0 4.7 -18.4 Relative (%) 1.5 7 -24.1

Major shareholders % held Tiong Toh Siong Holdings Sdn Bhd 21.4 Genine Chain Limited 9.4 Amanas Sdn Bhd 5.2 Insert

Analyst(s)

Ivy NG Lee Fang, CFA

T (60) 3 2261 9073 E [email protected] Liyana FUAD



Revenue (RMm) 1,023 977 1,199 1,310 1,357Operating EBITDA (RMm) 217.8 199.1 303.9 336.8 349.1Net Profit (RMm) 59.1 11.5 93.3 107.3 108.1Core EPS (RM) 0.08 0.09 0.10 0.11 0.11Core EPS Growth 107% 6% 7% 15% 1%FD Core P/E (x) 13.22 12.41 11.61 10.07 10.00DPS (RM) 0.013 0.013 0.010 0.010 0.010Dividend Yield 1.15% 1.16% 0.90% 0.90% 0.90%EV/EBITDA (x) 9.31 10.24 6.74 6.03 5.73P/FCFE (x) 15.2 63.7 183.4 37.0 25.1Net Gearing 55.6% 55.7% 51.5% 48.1% 44.4%P/BV (x) 0.60 0.60 0.54 0.52 0.50ROE 4.56% 4.82% 4.92% 5.27% 5.07%CIMB/consensus EPS (x) 1.17 1.22 1.17

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Gaming│Malaysia│November 29, 2017

Company Note



Insert Insert

Magnum Bhd A stroke of luck ■ 9M17’s core net profit of RM153.8m was above our and the market’s expectations,

representing 96% and 84% of respective full-year forecasts. ■ In spite of the weaker revenue growth, core earnings ticked up 5.6% yoy on the back

of a lower prize payout ratio. ■ An interim 3Q DPS of 4 sen was declared, coming in above our expectations. ■ We raise our FY17-19F EPS estimates by 23-27% for higher sales per draw and

lower prize payout ratio assumptions. ■ Maintain Hold call with a higher DDM-based target price of RM1.77. Estimated FY17-

19F dividend yields of 6.4-7% remain appealing.

9M17 results beat expectations Magnum registered a 3Q turnover of RM656.5m (+1.4% yoy) with core net profit increasing by 15% yoy to RM63.3m. This translated to a 9M17 core net profit of RM153.8m (+5.6% yoy), which beat our and the market’s expectations at 96% and 84% of respective full-year forecasts. The variance against our forecast was mostly attributed to lower prize payout ratio as well as higher-than-expected revenue.

Interim DPS of 4 sen, above expectations The group declared a 3Q interim DPS of 4 sen (vs. 3Q16’s 3 sen), bringing 9M17 DPS to 7 sen (vs. 9M16’s 10 sen). The dividend payout so far is slightly above expectations as we forecast a full-year DPS of 9 sen, based on a minimum payout ratio of 80%.

9M17 pre-tax profit grew 4.9% yoy 9M17’s number forecasting operating (NFO) turnover declined 2.5% yoy (better than our expected 3% yoy contraction) on the back of weaker consumer spending and tougher competition from the illegal market experienced in 1Q17. In spite of the tepid sales growth, pre-tax profit rose 4.9% yoy to RM220.3m as a result of lower estimated prize payout ratio of 70.4% (vs. 9M16’s estimated payout ratio of 71.1%).

3Q17’s ticket sales per draw increased by 1.4% yoy As compared to 3Q16, the group’s 3Q17’s revenue and pre-tax profit increased 1.4% yoy and 10.7% yoy, respectively. Turnover growth was mainly due to an additional two draws during the quarter and higher sales from its 4D Jackpot game due to its high 4D Jackpot prize, while its earnings jump was mainly due to a lower prize payout ratio of 68.5% (based on our estimates) vs. 3Q16’s estimated prize payout ratio of 69.5%.

Industry outlook remains murky Looking ahead, we expect the illegal market to continue to dampen the growth prospects of the legal number forecast operators (NFO) given the weak enforcement efforts. Punters will continue to be enticed by the higher prize payouts, betting discounts and provision of credit facilities offered by illegal syndicates. Maintain Hold; keep for the yields We raise our FY17-19F EPS by 23-27% for higher sales per draw and lower prize payout ratio assumptions. Following our EPS and DPS upgrades, our DDM-based target price is lifted to RM1.77. Despite the lukewarm growth outlook for the overall NFO sector which could limit share price appreciation, we recognise that yield-seeking investors may continue to look to Magnum for its yields. Estimated FY17-19F dividend yields of 6.4-7% remain appealing. Maintain Hold. Key risks Upside risks to our call include more effective clampdown on illegal betting, which could propel revenue growth, while downside risks are poorer-than-expected consumer sentiment and further increase in GST rates, which will drive punters to the illegal market.


Malaysia




Reuters: MAGM.KL Bloomberg: MAG MK Market cap: US$593.1m RM2,433m Average daily turnover: US$0.26m RM1.08m Current shares o/s: 1,438m Free float: 54.7% *Source: Bloomberg Key changes in this note

FY17-19F EPS increased by 23-27%.

Source: Bloomberg


Absolute (%) -2.9 -7.1 -25.3 Relative (%) -1.4 -4.8 -31

Major shareholders % held Tan Sri Dato' Surin Upatkoon 33.0 Asia 4D Holdings 11.2 Management 1.1 Insert

Analyst(s)

Kristine WONG



Revenue (RMm) 2,767 2,660 2,547 2,495 2,496Operating EBITDA (RMm) 391.6 344.8 318.5 330.0 323.6Net Profit (RMm) 226.9 190.6 198.5 207.3 215.5Core EPS (RM) 0.16 0.13 0.14 0.14 0.15Core EPS Growth (11.8%) (16.0%) 4.2% 4.4% 4.0%FD Core P/E (x) 10.84 12.90 12.39 11.86 11.41DPS (RM) 0.16 0.13 0.11 0.12 0.12Dividend Yield 9.36% 7.60% 6.43% 6.73% 7.02%EV/EBITDA (x) 7.77 8.85 9.49 9.06 9.11P/FCFE (x) 15.85 18.95 17.46 15.97 14.99Net Gearing 22.0% 22.4% 20.9% 19.3% 17.3%P/BV (x) 1.02 1.02 1.00 0.98 0.96ROE 9.33% 7.88% 8.13% 8.35% 8.53%% Change In Core EPS Estimates 23.4% 26.1% 26.5%CIMB/consensus EPS (x) 1.07 1.01 1.03

60.0

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Property Devt & Invt│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

Mah Sing Group Ramping up launches ■ 9M17’s core net profit came in within our expectations at 75% of our full-year forecast

but below Bloomberg consensus’ at 68% of theirs. ■ 9M17’s new property sales made up 69% of its RM1.8bn full-year sales target. We

expect the upcoming launches in 4Q17 to make up for the shortfall. ■ We maintain Add, EPS forecasts, and TP, still based on a 20% discount to its RNAV.

Stronger-than-expected sales and landbanking exercises are key re-rating catalysts.

Key results highlights The 9M17 core net profit of RM238m (excluding the accrued distribution to perpetual sukuk holders and disposal gain of subsidiary) made up 75% of our full-year forecast. The key reasons for the lower core net profit (-14% yoy) were higher sales and administrative (SG&A) expenses (+5% yoy) and lower revenue recognised (-3% yoy). We believe the group may incur more SG&A expenses as it plans to intensify its efforts in marketing and landbanking over the next few quarters.

9M17 new property sales at RM1.25bn Mah Sing achieved RM1.25bn in new property sales in 9M17. This represents 69% of its unchanged full-year target of RM1.8bn. The major contributors to 9M17’s sales were its Klang Valley-centric developments that made up 63% of total 9M17 sales. Key initiatives driving property sales include the “RM23m Celebration Rewards” in conjunction with the group’s 23-year anniversary. Southville City @ KL South (RM237m) and Lakeville Residence (RM299m) were the largest sales generators.

Three more launches in 4Q17 As of Sep 2017, the group had launched RM1.4bn gross development value (GDV) worth of new projects. We believe Mah Sing is on track to achieving its 2017 sales target of RM1.8bn as the group plans to ramp up more launches in the 4Q17. There will be three launches with a combined GDV of RM500m-600m in 4Q17, namely M Centura in Sentul, M Vista in Penang, and Phase 2 of Fern in Meridin East, Johor. We expect 2017’s launches to be worth c.RM2bn vs. RM1.1bn in 2016.

Titiwangsa land acquisition cancelled In Oct 2017, Mah Sing cancelled its proposed purchase of 3.56 acres of land near Taman Titiwangsa where it had earlier proposed to build affordable condominiums with a gross development value (GDV) of RM650m. The proposed acquisition was announced in May 2017 with a price tag of RM60m, after which the group received a competing claim on the rightful ownership of the land. We are not surprised by the termination of the land deal given the process to resolve the competing claim takes time and is rather complicated.

No changes to earnings We are neutral about the cancellation of the land deal as this has not been factored into our earnings forecasts and only made up less than 1% of our estimated RNAV. To recap, Mah Sing acquired three pieces of land in 2017 for a total consideration of RM436.4m, namely in Sentul, KL (9 acres, GDV RM1.3bn), Cheras, KL (11.2 acres, GDV RM2.2bn) and Permatang, Penang (17.3 acres, GDV RM150m).

Maintain Add We retain our Add call on Mah Sing. More land acquisitions would enhance its sales outlook and potentially improve investor sentiment about the stock, in our view. We maintain our FY17-19F EPS forecasts and target price, which is pegged to a 20% discount to RNAV. The key risk to our Add call is a sudden deterioration in property market sentiment and weaker-than-expected property sales.


Malaysia




Reuters: MAHS.KL Bloomberg: MSGB MK Market cap: US$904.5m RM3,711m Average daily turnover: US$0.32m RM1.35m Current shares o/s: 2,409m Free float: 65.0% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -1.9 -3.2 0 Relative (%) -0.1 -0.1 -5.3

Major shareholders % held Tan Sri Leong Hoy Kum 35.0 EPF 9.9 Lembaga Tabung Haji 5.8 Insert

Analyst(s)

NGO Siew Teng



Total Net Revenues (RMm) 3,109 2,958 2,998 2,396 2,804Operating EBITDA (RMm) 518.0 495.5 472.6 357.8 425.4Net Profit (RMm) 359.1 324.6 317.7 236.7 268.2Core EPS (RM) 0.14 0.14 0.13 0.10 0.11Core EPS Growth (41.9%) (0.0%) (8.4%) (25.5%) 13.3%FD Core P/E (x) 10.63 10.63 11.60 15.57 13.74DPS (RM) 0.065 0.065 0.065 0.050 0.060Dividend Yield 4.25% 4.25% 4.25% 3.27% 3.92%EV/EBITDA (x) 8.24 8.70 8.97 12.24 10.45P/FCFE (x) NA NA 13.84 69.75 40.54Net Gearing 3.68% 2.02% 0.12% 3.56% 5.01%P/BV (x) 1.18 1.12 1.07 1.05 1.00ROE 12.5% 10.8% 9.4% 6.8% 7.4%CIMB/consensus EPS (x) 0.96 0.71 0.77

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Construction│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

Malaysian Resources Corp Becoming the dark horse of the HSR project? ■ MRCB announced that it is forming a JV with Gamuda to bid for the KL-Singapore

HSR project’s PDP scope (RM25bn-40bn by our estimates). ■ This is a positive surprise, more so for MRCB. Partnering with Gamuda for the HSR

PDP is an added advantage given Gamuda’s PDP credentials for two MRT jobs. ■ Potential earnings impact from securing HSR’s PDP scope could be substantial; more

significant compared to the existing PDP earnings of MRCB-George Kent JV. ■ This news could revive sentiment on the stock. Upgrade to Add, with a higher TP.

Gamuda-MRCB JV to bid for the HSR’s PDP scope Gamuda (GAM MK, ADD) and Malaysian Resources Corp (MRC MK, ADD) yesterday revealed that they are collectively bidding for the Project Delivery Partner (PDP) role of the Kuala Lumpur-Singapore High-Speed Rail’s (HSR) infrastructure construction on the Malaysian side. The two groups would jointly bid under an unincorporated joint venture (JV), where Gamuda and MRCB have a 50% stake each.

Positive surprise, more so for MRCB This news is a positive surprise, more so for MRCB, as management has been fairly muted about potential upside to its rail tenders. However, we think that in terms of technical qualification and PDP track record, MRCB qualifies as a PDP contender given that the group is currently the PDP for the RM9bn LRT 3 (Bandar Utama-Klang) which has largely completed its civil works awards. Moreover, partnering with Gamuda for the HSR PDP is an added advantage given Gamuda PDP credentials for MRT 1 and 2.

What is the potential value of the PDP portion of HSR? The winning PDP will be responsible for developing the detailed design for the HSR's infrastructure works, which includes the station and the alignment structures (i.e. bridges, tunnels and embankments). As widely reported in the press, the total estimated value of the KL-Singapore HSR ranges from RM50bn to RM60bn. Based on our back-of-the-envelope calculation, and going by the 50-60% PDP portion for MRT 1 and 2, the PDP scope for HSR could be worth a minimum of RM25bn-40bn.

Potential impact to earnings based on 6% PDP fees For MRCB, if the Gamuda-MRCB JV succeeds in securing the PDP portion of the HSR contract, we roughly calculate that the potential earnings contribution p.a. based on RM25bn-40bn PDP scope (benchmarked to MRT’s PDP proportion) and a 6% PDP fees (seven-year construction period) would be RM107m-171m (based on MRCB’s 50% JV share). This is 1.6x more than MRCB’s existing RM68m p.a. PDP earnings share for the RM9bn LRT 3 contract undertaken by the MRCB-George Kent JV (50:50).

RM2.9bn total jobs in tender could be understated YTD, MRCB has secured RM498m worth of new contracts, which includes a RM369m package from Dash highway. This raises the group’s external outstanding order book to RM5.3bn. During MRCB's results briefing, management highlighted that with the current value of jobs in tender of RM2.9bn, it will focus on securing more civil engineering and long-term fee-based contracts. It did not disclose potential new job opportunities.

Upgrade to Add with higher TP of RM1.19 We believe this news could lift sentiment on the stock (down 7.4% YTD), as its infra outlook for rail contracts in 2018F could surprise on the upside. We upgrade our call to Add from Hold. In view of the likely positive construction newsflow in the months ahead, we narrow the discount on its RNAV from 20% to 10%, lifting our target price by 13% to RM1.19. We expect more details on the HSR PDP tenders in the next 2-3 months. Potential PDP award is likely by mid-2018F. Downside risk to our call is weak job wins.


Malaysia

ADD (previously HOLD) Consensus ratings*: Buy 6 Hold 4 Sell 0



Reuters: MYRS.KL Bloomberg: MRC MK Market cap: US$1,080m RM4,431m Average daily turnover: US$2.54m RM10.71m Current shares o/s: 4,346m Free float: 42.1% *Source: Bloomberg Key changes in this note

No change

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -2 -3.5 -7.4 Relative (%) -0.2 -0.4 -12.7

Major shareholders % held EPF 33.5 Gapurna Sdn Bhd 16.7 Lembaga Tabung Haji 7.8 Insert

Analyst(s)

Sharizan ROSELY



Revenue (RMm) 1,697 2,408 2,432 2,554 2,681Operating EBITDA (RMm) 159.9 313.3 259.8 316.2 333.6Net Profit (RMm) 330.4 267.4 100.1 131.3 142.1Core EPS (RM) 0.033 0.062 0.023 0.030 0.033Core EPS Growth 73.7% 84.1% (62.6%) 31.2% 8.2%FD Core P/E (x) 30.23 16.42 46.07 36.80 34.00DPS (RM) 0.013 0.015 0.015 0.015 0.015Dividend Yield 1.24% 1.49% 1.49% 1.49% 1.49%EV/EBITDA (x) 44.16 20.47 18.10 15.50 14.38P/FCFE (x) 5.00 NA NA 8.59 16.70Net Gearing 155% 73% 11% 16% 13%P/BV (x) 2.45 1.50 0.96 1.02 1.02ROE 8.6% 11.3% 2.7% 3.0% 3.3%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 0.89 0.92 0.65

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17

Media - Integrated│Malaysia Shariah Compliant

Company Flash Note



Insert Insert

Media Chinese Int'l Awaiting good news ■ Management reiterates its cautious outlook for 2HFY3/18 given the softer adex in

Malaysia, but expects improving adex in HK due to pick-up in consumer sentiment. ■ We like MCIL's efforts to expand its digital platform but the potential earnings impact

may be too small to offset the decline in its traditional print segment. ■ Maintain Reduce and target price. We prefer Astro for exposure to Malaysian media.

1HFY3/18 results briefing ● MCIL held its 1HFY3/18 results briefing this morning for approximately 10 analysts and

fund managers, hosted by group CEO Francis Tiong and Executive Director Patrick Leong. Management reiterated its cautious outlook for 2HFY3/18 citing soft advertising expenditure (adex) in Malaysia due to poor consumer sentiment on the back of higher cost of living. However, it expects better adex outlook in Hong Kong, driven by stabilised demand in big tickets items such as property and luxury goods.

Key highlights ● Nielsen reported that total newspaper adex in Malaysia fell 21.3% yoy in 1HFY3/18

due to weak consumer spending and structural shift to digital and social media. However, we learned that Chinese print adex was the most resilient of all segments, with 15.5% yoy decline vs. 27.8% drop in English and 17.9% drop in Malay adex. Overall, MCIL still expects adex to decline 15-20% yoy in FY18 due to weak advertisement in key verticals such as automotive, property and hypermarkets.

● Apart from weaker newsprint adex, we are also wary of rising newsprint prices. The average newsprint price rose 4% from the previous low of US$540/tonne in Jul 2017 to US$560/tonne at end-Nov. MCIL expects newsprint prices to continue rising near term mainly due to limited supply following the Chinese government's decision to close down smaller mill operators on environmental concerns. We understand MCIL still has about 6-7 months of newsprint inventory with an average cost of below US$550/tonne.

● Nevertheless, MCIL’s digital media initiative is gaining market traction in Hong Kong as the group now has a bigger digital readership base of 277k vs. 192k print readership base for its Ming Pao Daily News. Moreover, the growth is also being driven by higher video advertising on digital media. Overall, we understand digital adex now accounts for about 5% of group revenue vs. 3% a year ago.

● We expect adex growth in Hong Kong to continue to be driven by improving consumer sentiment. Hong Kong’s Index of Consumer Sentiment, meanwhile, has been on a steady uptrend since 2Q16’s 78.5 points, reaching 91.2 points in 3Q17.

● In addition, MCIL is also venturing into new initiative to diversify growth beyond adex. For example, it recently co-founded a social co-working and office space, under the CO3 brand, with the first flagship in Puchong. CO3 currently has over 300 tenants. We understand the group is looking to expand the co-working space and potentially replicate this in other neighborhood cities within Malaysia.

Maintain Reduce and target price ● We keep our Reduce rating and RM0.36 TP, based on 11.2x CY19F P/E, 30%

discount to our target media sector P/E of 16x. Potential de-rating catalysts are longer-than-expected gestation period for its digital assets and lower dividend payouts. Key upside risks to our call are stronger adex recovery and pick-up in travel sales.

● We prefer Astro for exposure to the media sector due to its relatively defensive earnings and less exposure to the volatility in adex.

Figure 1: Historical newsprint prices from Jan-13 – Nov -17


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Malaysia

November 29, 2017 - 7:40 PM




Reuters: MDCH.KL Bloomberg: MCIL MK Market cap: US$170.7m RM700.2m Average daily turnover: US$0.07m RM0.30m Current shares o/s 1,687m Free float: 45.1% *Source: Bloomberg Key financial forecasts


Absolute (%) -2.4 -17 -37.1 Relative (%) -0.9 -14.7 -42.8

Major shareholders % held Tan Sri Datuk Tiong Hiew King 50.0 EPF 4.9 Insert

Analyst(s)

Mohd Shanaz NOOR AZAM


Mar-18F Mar-19F Mar-20F

Net Profit (RMm) 52.34 50.78 52.81Core EPS (RM) 0.031 0.030 0.031Core EPS Growth (36.9%) (3.0%) 4.0%FD Core P/E (x) 13.38 13.79 13.26Recurring ROE 6.02% 5.67% 5.73%P/BV (x) 0.79 0.77 0.75DPS (RM) 0.016 0.015 0.016Dividend Yield 3.74% 3.63% 3.77%

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18

Media - Integrated│Malaysia│November 29, 2017

Company Note



Insert Insert

Media Prima Bhd Dinghy in a perfect storm ■ MPR posted a wider core net loss in 9M17 due to weaker adex in all segments and

higher operating costs; the results fell short of both our and consensus’ expectations. ■ The group posted a wider RM49.1m core net loss in 3Q17 (vs. RM2.3m in 3Q16),

after stripping out employee-related one-off costs of RM52m. ■ We increase our loss forecast for MPR in FY17F and cut our FY18-19F EPS by 57-

61% to account for lower adex and higher opex from the new initiatives. ■ We maintain Reduce with a lower RM0.62 TP, based on 0.6x CY19F P/BV as we

rollover valuation to end-2018. We prefer Astro for exposure to Malaysia media.

Sequentially-weaker adex Media Prima (MPR)’s 3Q17 revenue fell by 12.2% qoq to RM288.5m, as advertising expenditure (adex) across the board reversed direction following the seasonal rebound in 2Q17. The group also incurred higher opex from new digital initiatives. MPR booked in a RM52.3m termination expense as it carried out an “early-retirement” scheme for senior executives. Removing the one-off expense, Media Prima would report a core net loss of RM49.1m in 3Q17 against a RM9.7m core net profit in 2Q17.

Losses widen in 9M17 Media Prima’s 9M17 core net loss of RM81.9m was 7x bigger than our forecast. Revenue fell by 8.3% yoy due to lower circulation (-24%) and adex (-14%) on the back of a structural shift in consumer preference towards digital platforms. The TV networks segment swung into a net loss of RM47.7m. Blended discount factor for Media Prima’s TV adex rose by 4% pts yoy to 76% in 9M17, while gross revenue contracted by 5%. Print circulation revenue plummeted 23% yoy, negating the 13% cut in overheads. Downside risk from higher newsprint price We are wary of rising newsprint prices affecting print media players. MPR’s average newsprint price increased by 2% yoy to US$524/tonne in 9M17. We expect newsprint prices to continue rising in the near term mainly due to limited supply following the Chinese government's decision to close down smaller mill operators on environmental concerns. We also see MPR as being more exposed to newsprint price volatility following the group’s decision to impair its 21.4% stake in Malaysian Newsprint Services in Aug 17. Cutting FY18-19F EPS by 57-61% We increase our loss forecast for FY17F and cut FY18-19F EPS by 57-61% to account for larger adex declines across the key platforms of print, TV, radio and outdoor adex. The ongoing shift in consumer preference towards digital media is also negatively affecting the adex share for traditional platforms. While we like Media Prima’s initiatives to contain its exposure in the declining print segment, we are concerned the cost rationalisation measures may not be able to catch up with the decline in traditional adex. Looking to double its non-adex revenue in FY20 The group’s “Odyssey strategy” seemed to be on track. As at 9M17, non-advertising revenue stood at 22% of group revenue, 1% pt above its year-end target. It aims to raise the non-adex portion to 40% by FY20. Apart from home shopping, non-adex revenue would come from content production for both local and international media groups.

Maintain Reduce rating with a lower RM0.68 target price We maintain our Reduce rating with a lower RM0.62 TP, based on 0.6x CY19F P/BV, 2 s.d. below its historical mean of 0.9x in view of its challenging operating outlook. Potential de-rating catalysts are longer-than-expected gestation period for its digital assets, rising newsprint prices and lower dividend payouts. Key upside risks to our call are stronger adex recovery and stronger earnings from digital adex.


Malaysia




Reuters: MPRM.KL Bloomberg: MPR MK Market cap: US$187.9m RM770.9m Average daily turnover: US$0.71m RM2.98m Current shares o/s: 1,105m Free float: 67.0% *Source: Bloomberg Key changes in this note


Source: Bloomberg


Absolute (%) -18.7 1.5 -42.6 Relative (%) -17.2 3.8 -48.3

Major shareholders % held EPF 18.4 Gabungan Kesturi 14.4 Insert

Analyst(s)




Revenue (RMm) 1,428 1,289 1,184 1,216 1,231Operating EBITDA (RMm) 317.4 170.7 25.1 123.2 128.6Net Profit (RMm) 138.7 59.1 (67.9) 12.3 12.6Core EPS (RM) 0.13 0.05 (0.06) 0.01 0.01Core EPS Growth 0% (59%) (215%) 3%FD Core P/E (x) 5.41 13.05 NA 62.83 61.05DPS (RM) 0.10 0.06 0.00 0.01 0.01Dividend Yield 14.4% 8.6% 0.0% 1.3% 1.4%EV/EBITDA (x) 1.60 3.37 33.69 6.89 6.61P/FCFE (x) NA 8.39 NA 75.23 46.14Net Gearing (7.37%) (5.03%) 4.86% 4.98% 4.94%P/BV (x) 0.48 0.53 0.62 0.62 0.62ROE 8.87% 3.83% (5.01%) 0.98% 1.01%% Change In Core EPS Estimates (486%) (57%) (61%)CIMB/consensus EPS (x) (4.37) 0.36 0.26

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19


Company Note



Insert Insert

Muhibbah Engineering Stronger foundation for concession earnings ■ 9M17 core net profit was in line; it made up 74% of our full-year forecast and 81% of

consensus. Core net profit recorded strong 31% growth yoy due to higher margins. ■ Overall key driver was Cambodian airport concessions, with robust 95% pretax profit

growth, underpinned by a surge in passenger numbers ■ RM1.2bn total jobs wins YTD; RM1.9bn outstanding order book with upside to margin. ■ Domestic and regional earnings diversification for Favelle Favco is long-term positive. ■ Domestic and overseas contract wins as key catalyst; Add retained with higher TP.

9M17 results in line; driven by stronger margins 9M17 core net profit was in line, as it made up 74% of our full-year forecast and 81% of consensus. Core net profit recorded strong 31% yoy growth due to margin expansion (up 1.7% pts to 11.5%) vs. our full-year forecast of 11.2%. We expect margins to be sustained in 4Q17. Infrastructure revenue was down 21% yoy due to the timing of progress billings, though pretax margin was relatively steady at 7% in 9M17, with potential upside in the coming quarters due to new contracts. Concession segment’s robust 95% growth Concessions, which is largely comprised of the group’s three Cambodian airports, and a smaller contribution from Roadcare (road maintenance), grew by a robust 95% yoy in 9M17. This was due to strong 9M17 combined passenger growth of 26% yoy (all-time high) to 6.3m, which surpassed 9% yoy passenger growth in 2016. For other divisions, both revenue and pretax profit for cranes were relatively flat yoy, supported by an estimated outstanding order book of c.RM500m. RM1.9bn outstanding order book; upside from overseas jobs As at end-3Q17, Muhibbah's total outstanding order book (including cranes) stood at RM1.9bn, bumped up by two major wins YTD, namely Phase 2.1 of the infra job at the Um Alhoul Economic Zone (QEZ-3) in Qatar and a contract for the development of a supply base wharf at Bintulu Port, Sarawak. The group’s order book replenishment strategy will leverage its track record in Qatar, where the embargo by neighbouring states has opened up larger opportunities for foreign contractors. Domestic contract wins focused on MRT and LRT noise barriers On the domestic side, although the group is not positioning for large civil work rail tenders, it is targeting the higher-margin noise barrier scopes for the MRT 2 and LRT 3. Overall tender book including overseas contracts is between RM5bn-6bn. We retain our RM800m assumed contract wins for FY18-19F.

Earnings diversification potential from Favelle Favco’s M&A Recall that Muhibbah’s cash-rich global cranes manufacturing subsidiary, Favelle Favco (FFB MK, NR), had on 5 Oct proposed to acquire controlling stakes in four engineering firms with businesses in the oil and gas sector for an indicative price of RM87.4m. This move diversifies Favelle Favco’s earnings base from purely cranes to the industrial automation and specialised oil & gas equipment segment that is not limited to the oil & gas sector. We continue to view this as longer-tem positive.

Maintain Add with a slightly higher RM3.49 target price Our FY17-19 EPS forecasts are unchanged but we raise our target price to RM3.49 (from RM3.36) as we roll over to end-2018 (pegged to an unchanged 30% RNAV discount). Muhibbah trades at an undemanding 9-10x CY17-18F P/E vs. the construction sector's average of 14-15x. It remains our preferred small/mid-cap. Potential re-rating catalysts are job wins and new order book enhancing regional ventures. Key downside risks are delays in job awards.


Malaysia




Reuters: MUHI.KL Bloomberg: MUHI MK Market cap: US$334.2m RM1,364m Average daily turnover: US$0.41m RM1.74m Current shares o/s: 469.2m Free float: 72.5% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg


Absolute (%) -1.7 -0.4 34.6 Relative (%) -0.2 1.9 28.9

Major shareholders % held Mac Ngan Boon 17.0 Lembaga Tabung Haji 10.6 Insert

Analyst(s)

Sharizan ROSELY



Revenue (RMm) 1,599 1,919 1,889 2,040 2,203Operating EBITDA (RMm) 185.8 105.9 211.4 245.1 282.7Net Profit (RMm) 85.6 105.5 128.3 135.7 151.0Core EPS (RM) 0.18 0.22 0.27 0.29 0.32Core EPS Growth 4.9% 23.3% 21.6% 5.8% 11.3%FD Core P/E (x) 15.57 12.63 10.38 9.82 8.82DPS (RM) 0.050 0.055 0.060 0.060 0.060Dividend Yield 1.76% 1.94% 2.11% 2.11% 2.11%EV/EBITDA (x) 6.43 11.16 5.54 4.72 4.05P/FCFE (x) 4.51 7.42 3.32 2.82 2.73Net Gearing (13.4%) (8.5%) (9.0%) (9.4%) (9.8%)P/BV (x) 1.61 1.36 1.29 1.22 1.16ROE 11.6% 11.7% 12.7% 12.8% 13.5%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 1.08 1.03 1.05

93.0

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Vol m

20

Technology - Others│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

MY E.G. Services 1QFY18: Driven by registration of illegals ■ At 18% of our full-year forecast, MyEG’s 1QFY6/18 net profit was in line with our

expectations as 1Q is its seasonally weak quarter. ■ Registration of illegal foreign workers (IFWs) to finish by end-2017F. We project MyEG

to register IFWs in total 1m by then. ■ Started a new service in Sep: matching employers with still-unregistered IFWs. ■ GST Phase 1 nationwide installation completed this month. ■ Remains an Add. Successful nationwide launch of GST monitoring Phase 1 project a

potential re-rating catalyst.

1QFY18 net profit rose 30.4% yoy MyEG’s 1QFY18 revenue rose 24.7% yoy to RM8m, driven mainly by registration of illegal foreign workers (IFWs). 1QFY18 net profit expanded a higher 30.4% yoy to RM52.8m, also due to registration of IFWs, and greater economies of scale. 1QFY18 EBITDA margin was at 60.4% compare to 57.5% in 1QFY17. No interim DPS was declared, in line with our expectations. Registration of IFWs to finish by end-2017 The registration of IFW is slated to finish by end-2017. We estimate that at end-Jun, MyEG had registered around 0.5m IFWs and should reach the 1m mark by year-end. MyEG gets RM100 for every IFW registered. In addition, it also gets commissions from insurance companies selling the compulsory foreign workers insurance (FWI). MyEG gets around RM60-70 commission from each compulsory FWI policy it sells. Revenue from placing out the IFWs? MyEG last month started a new service matching employers with IFWs. This service allows employers to source for new foreign workers and MyEG gets RM1,000 for each IFW it matches with an employer. We also expect MyEG to benefit from selling compulsory FWI to the employers. We estimate MyEG places out 5,000 foreign workers monthly or 60,000 foreign workers annually, generating an average of RM60m revenue and RM30m PBT annually. GST Phase 1 completed In Nov, MyEG completed its GST Monitoring project (GSTM) Phase1, i.e. the installation of its monitoring system in all major F&B outlets nationwide. Most of the teething problems have been resolved and if there are no more problems in GSTM Phase1, the company is scheduled to start GSTM Phase 2 in mid-2018. Phase 2 involves the monitoring of sales in retail stores nationwide. The company estimates that there are around 500,000 retail outlets nationwide.

Capex for GSTM2 to be funded internally MyEG is looking to fund the GSTM Phase2 capex of RM400m-500m through internal funds. This should not be a problem given its FY18F net operational cashflow of around RM339m, based on our estimates. As at end-Sep, MyEG has RM47.6m net cash. MyEG gets RM1,000 per retail outlet annually, assuming the GSTM boost retail sales more than 10% in the next one year. The company could collect RM400m-500m annually when GSTM phase 2 starts, in our view.

Remains an Add We maintain our EPS forecasts and target price, based on an unchanged 25.2x 2019F P/E, a 20% premium to the technology sector. The premium is to reflect its large market capitalisation and 36% FY18-20F EPS CAGR. Successful nationwide launch of the GSTM Phase 1 is a potential re-rating catalyst. Risks are further delays in the GSTM project.


Malaysia




Reuters: MYEG.KL Bloomberg: MYEG MK Market cap: US$1,776m RM7,285m Average daily turnover: US$3.18m RM13.36m Current shares o/s: 3,600m Free float: 54.9% *Source: Bloomberg Key changes in this note

None.

Source: Bloomberg


Absolute (%) -1.5 0 37.1 Relative (%) 0 2.3 31.4

Major shareholders % held Wong Thean Soon 39.1 KWAP 6.0 Insert

Analyst(s)

Nigel FOO



Revenue (RMm) 282 372 593 859 1,115Operating EBITDA (RMm) 162.7 233.8 342.2 445.1 609.2Net Profit (RMm) 142.4 200.1 288.7 364.6 501.7Core EPS (RM) 0.04 0.06 0.08 0.10 0.14Core EPS Growth 109% 41% 44% 26% 38%FD Core P/E (x) 51.07 36.34 25.19 19.95 14.49DPS (RM) 0.013 0.020 0.030 0.040 0.040Dividend Yield 0.64% 0.99% 1.49% 1.98% 1.98%EV/EBITDA (x) 44.07 30.71 21.07 15.92 11.08P/FCFE (x) 92.3 57.3 184.2 30.0 14.4Net Gearing (25.6%) (17.3%) (8.3%) (18.5%) (38.6%)P/BV (x) 18.17 13.48 9.81 7.30 5.40ROE 45.6% 42.6% 45.1% 42.0% 42.8%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 1.13 1.14 1.22

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21


Company Note



Insert Insert

Protasco No surprises in 9M17 results; turnaround in FY18F ■ 9M17 core net profit account for 77% of our and 65% of Bloomberg consensus full-

year forecasts. The results were broadly in line as we expect a weak 4Q17F. ■ Road maintenance pretax margin steady at 10% in 9M17, driven by new periodic

contracts secured in Jul. ■ Over RM4bn worth of jobs in tender, with likely contract wins in the short term. Biggest

proxy for road maintenance contracts. ■ Election-driven road contracts are potential key re-rating catalysts. Add retained.

9M17 core net profit broadly in line At 77% of our and 65% of Bloomberg consensus full-year forecasts, 9M17 core net profit was broadly in line as we expect a weak 4Q17F. The 22.1% yoy decrease in revenue was unsurprising given the absence of new property launches and completion of PPA1M (housing scheme for government servants) phase 1. 9M17 EBITDA margin of 10.4% is unsustainable in 4Q17F, in our view, as we expect construction cost overrun to sustain in 4Q17F. 9M17 core net profit declined 48% yoy. The 3 sen first interim DPS was in line. Engineering services the best performer Road maintenance segment revenue grew 17% yoy in 9M17, driven by new periodic road maintenance jobs secured in Jul. Pretax margin slid 1% pt to 10% in 9M17; should be sustainable in 4Q17F, in our view. The sharp decline in construction and property development pretax profit was largely expected given the cost overruns and absence of new property launches in 9M17. Engineering services was the best performer, with a 196% surge in pretax profit thanks to new contracts with higher margins. Value of jobs in tender at all-time high Protasco’s total value of jobs in tender for the next 1-2 years amounts to RM4.6bn. This is an all-time high for the company. Key projects in tender are: 1) Phase 4 of PPA1M worth RM600m – phases 1, 2 and 3 are already in the bag; 2) a build-lease-transfer (BLT) housing project worth at least RM2bn, which could be one of the key highlights in Budget 2018; and 3) highways and infrastructure projects worth RM2bn. FY18-19F dividend yields of 6-7% Protasco’s dividend appeal is supported by stable earnings from its road maintenance concessions. We forecast a dividend payout ratio of 60% in FY17-19F (consistent with historical ratios) and excludes potential special dividends. Its FY18-19F dividend yields of 6-7% (our estimates) are the highest in the sector and among small-cap contractors.

Biggest proxy for government road maintenance contracts We remain upbeat on Protasco’s outlook in 2018F. The group is the biggest play on government road maintenance contracts, with a dominant 43% market share in the road maintenance space in 2016 (our estimates). It is the only listed company with direct exposure to this segment and stands to benefit from any uptrend in government expenditure on road construction and maintenance.

Add maintained; FY18F a turnaround year We retain our FY17-19F EPS forecasts. We project a strong 59% core EPS growth in FY18F (driven by a stronger order book) after a fallout year in FY17F. We keep our Add call and RM1.43 target price, based on a 40% discount to end-FY18F RNAV (implied end-CY18F target P/E of 14.3x). At 8-11x CY18-19F P/E, Protasco trades at a 14-18% discount to the P/E valuations of selected small/mid-cap contractors. Key downside risks to our call are weak earnings delivery, poor execution and job delays.


Malaysia




Reuters: PRTO.KL Bloomberg: PRTA MK Market cap: US$111.7m RM458.1m Average daily turnover: US$0.16m RM0.69m Current shares o/s: 424.2m Free float: 65.6% *Source: Bloomberg Key changes in this note

NA

Source: Bloomberg


Absolute (%) -7.7 5.9 -11.5 Relative (%) -5.9 9 -16.8

Major shareholders % held Dato' Sri Chong Ket Pen 15.4 Penmacorp Sdn Bhd 10.3 Employees Provident Fund (EPF) 8.7 Insert

Analyst(s)

Sharizan ROSELY



Revenue (RMm) 1,305 1,110 844 975 1,121Operating EBITDA (RMm) 121.5 74.6 50.6 68.2 89.7Net Profit (RMm) 66.76 42.40 26.75 42.59 56.74Core EPS (RM) 0.16 0.10 0.06 0.10 0.13Core EPS Growth (36.5%) (36.9%) 59.2% 33.2%FD Core P/E (x) 6.86 10.81 17.12 10.76 8.07DPS (RM) 0.13 0.08 0.04 0.06 0.08Dividend Yield 12.0% 7.4% 3.5% 5.6% 7.4%EV/EBITDA (x) 4.71 11.00 17.01 12.93 9.98P/FCFE (x) 4.52 13.39 NA 5.43 4.84Net Gearing 20% 85% 95% 104% 107%P/BV (x) 1.22 1.16 1.28 1.32 1.33ROE 18.8% 11.0% 7.1% 12.1% 16.4%CIMB/consensus EPS (x) 0.84 0.94 1.09

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22

Conglomerate│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

Sime Darby Bhd What to do post “break-up”? ■ SD Plantation and SD Property to make their debuts on Bursa Malaysia on 30 Nov. ■ We expect SD Plantation to trade at premium to peers’ P/E to reflect its strategically

located Malaysian estates and potential to improve yields via aggressive replanting. ■ SD Property has the highest upside to our target price and potential to surprise. ■ Sime Darby’s share price is supported by the upcoming 17sen dividend and improved

industrial earnings. ■ The combined sum-of-parts of the three Sime Darby entities works out to RM10.22.

Sime Darby and pure plays to list on 30 Nov Sime Darby (ex its plantation and property assets) will resume trading on 30 Nov 2017, while Sime Darby Plantation (SD Plantation) and Sime Darby Property (SD Property) will make their debuts on the main board of Bursa Malaysia. The listing reference prices of SD Plantation, SD Property and the adjusted reference price for Sime Darby (SD) are RM5.59, RM1.50 and RM1.85 per share, respectively. The group has allocated 62.5% and 16.8% of its last market cap value of RM60.8bn to SD Plant and SD Property.

Key facts on the new entities and their potential impact on KLCI All three companies are likely to meet the shariah-compliant status. There is also an outstanding 17sen dividend (9.2% yields) for SD shareholders, which will go ex-dividend at 12.30pm on 4 Dec 2017. Based on the reference prices, SD Plant and SD could potentially make the cut to stay in the KLCI index. SD Property may not be included in the KLCI index as its market cap at the reference price would place it as the lowest market cap stock among KLCI constituents.

SD Plant (RM6.42) + SD Prop (RM1.85) + SD (RM1.95) = RM10.22 We arrived at end-2018 target prices for SD Plant, SD Prop and SD of RM6.42, RM1.85 and RM1.95 per share, respectively. Based on this, our view is that SD Prop has the highest upside of 23%, followed by SD Plant with an upside of 15% to our target price. SD offers 5% upside to our target price (which is based on 20% disc to its SOP) but the share price is well-supported by the outstanding 17sen dividend from FY6/17.

SD Plant has huge potential to improve yields and lower costs In our view, the attraction of SD Plant is its position as the largest and sustainable palm oil producer in the world. Upside to shareholders will come from potential unlocking of value of its strategically-located estates in Malaysia and improved yields from the ongoing replanting initiatives. We use SOP to value the stock, where we value its estates on blended EV/ha of RM82k and its downstream assets and JV at 0.8x P/BV. At our target price, the implied FY17P/E and FY18 P/E work out to be 33x and 32x, respectively.

The weakest link, SD Prop, could see the most upside The property division, which was viewed by the market as the weakest in the group, has the highest potential to grow, in our view. We believe the revived management team can successfully execute its key strategy by focusing on what it does best and more actively managing its strategic land bank (beneficiary of High Speed Rail and Malaysian Vision Valley). It has the potential to outperform in terms of earnings delivery. Our target price implies FY18F P/E of 25x, FY18F P/BV of 1.3x and 50% discount to our RNAV.

Sime Darby’s share price supported by dividend yield Post demerger, Sime Darby will be a more-focused conglomerate with interests in trading and logistics. The key upside comes from the improvements in industrial earnings and order book but this is offset by weaker motor prospects. Our RM1.95 target price is based on a 20% discount to its SOP to reflect holding co risks. Our target price implies FY18F P/E of 15.6x, which is in line with our target P/E of 16x for the Malaysian market.


Malaysia




Reuters: SIME.KL Bloomberg: SIME MK Market cap: US$14,820m RM60,800m Average daily turnover: US$13.99m RM58.72m Current shares o/s: 6,801m Free float: 36.0% *Source: Bloomberg Key changes in this note

SOP raised to RM10.22 from RM10.00.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -1.9 -3.2 11.2 Relative (%) -0.6 0.3 5.6

Major shareholders % held Permodalan Nasional Berhad 53.2 Employees Provident Fund 10.8 Insert

Analyst(s)

Ivy NG Lee Fang, CFA

T (60) 3 2261 9073 E [email protected] NGO Siew Teng T (60) 3 2261 9089 E [email protected] Mohd Shanaz NOOR AZAM T (60) 3 2261 9078 E [email protected]


Revenue (RMm) 44,820 31,087 32,437 33,925 34,958Operating EBITDA (RMm) 3,901 991 3,750 4,110 4,288Net Profit (RMm) 2,443 2,361 2,247 2,482 2,584Core EPS (RM) 0.24 0.32 0.33 0.36 0.38Core EPS Growth (30.0%) 33.3% 2.6% 10.4% 4.1%FD Core P/E (x) 35.41 27.77 27.06 24.50 23.53DPS (RM) 0.25 0.23 0.25 0.27 0.28Dividend Yield 2.81% 2.56% 2.77% 3.06% 3.19%EV/EBITDA (x) 19.22 62.81 17.24 15.78 15.14P/FCFE (x) 39.7 NA 137.9 86.0 63.8Net Gearing 43.4% 2.8% 8.7% 8.7% 8.3%P/BV (x) 1.87 1.54 1.59 1.55 1.51ROE 5.23% 6.08% 5.78% 6.41% 6.50%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 1.00 1.01 1.04

97.099.8102.6105.4108.2111.0

7.708.208.709.209.70


10203040


Vol m

23

Autos│Malaysia│November 29, 2017 Shariah Compliant

Company Note



Insert Insert

UMW Holdings Back in the black ■ 9M17 core net profit was below expectations at 22%/35% of our/Bloomberg

consensus full-year forecasts due to weaker earnings across all divisions. ■ However, UMW posted RM31m core net profit in 3Q17, higher than the RM17m core

net loss in 2Q17 due to a sequential improvement in all business segments. ■ We cut our FY17-19F EPS by 8-55% to account for narrowing margins in automotive

due to rising opex from forex volatility, higher depreciation and tax expense. ■ We are cautiously optimistic of a stronger earnings delivery in 4Q17, driven by the

auto sector on the back of new model launches and year-end promotions. ■ Maintain Hold with a lower RM5.50 TP, based on 14x CY19F P/E. We prefer Bermaz

for exposure to the auto sector due to its stronger earnings delivery and higher yield.

Back in the black in 3Q17 UMW posted a higher core net profit of RM31m in 3Q17 against RM17m core net loss in 2Q17 due to improvements across all divisions – Automotive, Equipment, Manufacturing & Engineering (M&E) and unlisted oil & gas (O&G). Automotive and Equipment reported 7.2% and 21.9% pretax profit growth qoq, respectively, while M&E and unlisted O&G saw lower pretax losses qoq. As expected, there was no dividend declared in the quarter.

9M17 core net profit fell 19% yoy 9M17 revenue grew by 7.2% yoy, driven by higher sales contribution from Automotive (9.5%), Equipment (1.1%) and M&E (6.4%). In spite of the higher sales, the group posted a lower pretax profit of RM128m in 9M17 vs. RM210m in 9M16, partly due to narrowing margins in the automotive division from forex volatility which resulted in higher costs for completely knocked down (CKD) kits. Overall, 9M17 core net profit fell 18.7% yoy. Higher sales volume by Toyota and Perodua Toyota sales volume grew by 10.6% yoy in 9M17, driven by better sales from new model launches such as the Innova, Fortuner and Sienta, coupled with ongoing sales promotion activities. Meanwhile, its associate, Perusahaan Otomobil Kedua (Perodua), also posted marginal 0.5% volume growth to 151,664 units in 9M17, driven by the Axia and Bezza. Projecting a stronger earnings delivery in 4Q17 We expect the automotive segment to drive UMW’s earnings growth in 4Q17, with year-end promotions and new model launches from Perodua. We understand that Perodua received 6k bookings for its new Myvi model within less than a week of its official launch. Moreover, we expect UMW to benefit from the recent initiative to transfer its outlets to dealers in order to focus on product development, marketing and dealer network support. This should help to improve the group’s operating efficiency, in our view.

Unlisted O&G assets remain an overhang for the share price The unlisted O&G division posted wider pretax losses of RM121m in 9M17 vs. RM117m in 9M16 due to lower demand for drilling activities. In spite of the wider losses, we see a minimal impact on the group’s cashflow given that the majority of losses in 9M17 was related to a one-off RM55m write-off for the cessation of drilling operations in Oman. Nevertheless, the exposure to unlisted O&G division remains a drag on UMW’s earnings.

Cut FY17-19F EPS by 8-55%; Maintain Hold with a lower RM5.50 TP We cut our FY17-19F EPS forecasts by 8-55% to account for lower margins from the automotive division due to rising opex from foreign volatility. We keep our Hold rating on the stock with a lower RM5.50 TP, still based on 14x CY19F P/E, a 10% premium to its FY09-FY14 historical mean of 13x. Key upside risks are accelerated disposal of unlisted O&G assets and strengthening of the RM, while key downside risks are delayed disposal of unlisted O&G assets and depreciation of RM against US$.


Malaysia




Reuters: UMWS.KL Bloomberg: UMWH MK Market cap: US$1,509m RM6,192m Average daily turnover: US$0.32m RM1.33m Current shares o/s: 1,168m Free float: 37.8% *Source: Bloomberg Key changes in this note


Source: Bloomberg


Absolute (%) -2 -7.8 13.8 Relative (%) -0.2 -4.7 8.5

Major shareholders % held Permodalan Nasional Bhd 42.1 EPF 12.0 KWAP 8.0 Insert

Analyst(s)




Revenue (RMm) 14,442 10,965 10,366 11,129 12,007Operating EBITDA (RMm) 1,054 (359) 512 516 800Net Profit (RMm) 370.5 (401.8) 137.9 223.7 456.5Core EPS (RM) 0.32 (0.34) 0.12 0.19 0.39Core EPS Growth (52%) (208%) 62% 104%FD Core P/E (x) 16.50 NA 44.33 27.32 13.39DPS (RM) 0.20 0.00 0.10 0.20 0.20Dividend Yield 3.77% 0.00% 1.89% 3.77% 3.77%EV/EBITDA (x) 11.64 NA 21.05 21.20 14.14P/FCFE (x) 6.50 NA 30.58 NA NANet Gearing 35.0% 61.5% 47.9% 49.7% 52.7%P/BV (x) 0.94 1.31 2.34 2.35 2.16ROE 5.6% (7.1%) 3.7% 8.5% 16.6%% Change In Core EPS Estimates (55.3%) (43.3%) (7.8%)CIMB/consensus EPS (x) 0.63 0.60 1.06

24

Construction and Materials│Malaysia

Sector Flash Note



Construction Gamuda-MRCB JV leads the HSR PDP tenders ■ Gamuda and MRCB have announced that they are forming a JV to bid for the PDP

scope of the KL-Singapore High Speed Rail (HSR) project. ■ This is a positive surprise, more so for MRCB as the potential order book upside could

be substantial, if the JV succeeds. ■ Upgrade MRCB to an Add as rail infra outlook could surprise on the upside. Gamuda,

our top rail pick, forges ahead to revive its PDP track record in the HSR space.

Gamuda-MRCB JV (50:50) to bid for HSR PDP portion ● Gamuda (GAM MK, ADD) and Malaysian Resources Corp (MRC MK, ADD)

announced yesterday that they are collectively bidding for the Project Delivery Partner (PDP) role of the Kuala Lumpur-Singapore High-Speed Rail’s (HSR) infrastructure construction on the Malaysian side.

● The two groups will jointly bid under an unincorporated joint venture (JV), where Gamuda and MRCB have a 50% stake each. If the JV wins the PDP tender award, they will iron out a definitive agreement to set out the rights and obligations of each company under a formal JV.

Giving MRCB a potential major boost in the rail construction space ● This news is a positive surprise, more so for MRCB, which has been the “underdog” in

the rail construction space. MRCB’s sole PDP track record is via the 50:50 JV with George Kent (Malaysia) (GKEN MK, NR) as the PDP for the ongoing RM9bn LRT 3 project (Bandar Utama-Klang).

● For Gamuda, it appears that the group is now forging ahead to revive its PDP prospects. This comes after the change in the estimated RM40bn MRT 3 (Circle Line) project from a PDP-based to an Engineering, Procurement, Construction and Commissioning (EPCC) model that is more suited to foreign players.

Other players with PDP experience eyeing AssetsCo instead ● YTD, Gamuda, MRCB, George Kent, and MMC (MMC MK, NR) have emerged as the

only four local players with PDP experience in Malaysia. The latter two companies have expressed interest in bidding for the tender of the rail asset holder (AssetsCo), which would most likely eliminate them from being part of the PDP tender.

● George Kent has signed a pre-consortium agreement with the Siemens group of companies for the HSR AssetsCo scope. Based on press reports quoting MMC Group Managing Director Dato' Sri Che Khalib Mohamad Noh, MMC will be joining a Japanese consortium for the AssetsCo tender.

● Based on the latest developments, both the AssetsCo and PDP tenders will be called next month, and are likely to be awarded by mid-2018.

RM1.5bn to RM2.4bn of PDP profit over seven years ● As widely reported in the press, the total estimated value of the KL-Singapore HSR

ranges from RM50bn to RM60bn. Based on our back-of-the-envelope calculation and going by the 50-60% PDP portion for MRT 1 and 2, the PDP scope for HSR could be worth RM25bn-40bn.

● Working on the seven-year construction period for the HSR project and the benchmarked 6% PDP fee for HSR (similar to MRT and LRT), we roughly work out RM1.5bn to RM2.4bn of potential PDP profits over the construction period.

● Therefore, the estimated PDP profit p.a. for the Gamuda-MRCB JV, should it secure the contract, would be between RM107m to RM171m, representing a doubling of MRCB’s FY17-19F net profit and 16-21% of Gamuda’s FY19-20 net profit forecasts.

● At this juncture, no other contractors have revealed potential partnerships to tender for the HSR PDP scope.

Overweight; HSR newsflow to regain momentum ● PDP and AssetsCo tenders are now the two largest bids for the HSR project and will

kick off soon. Tender evaluation for both scopes will likely take six months and we expect the awards to occur in mid-2018.

● Sector Overweight retained, as we think there could be more positive sector newsflow in the months ahead. Key risks are project delays and funding. Gamuda remains our top big-cap rail pick for its exposure to both rail underground civil works and PDP scope.

● MRCB is upgraded to an Add, with a higher RM1.19 target price, based on a lower RNAV discount of 10% to reflect the likely improved sentiment on the stock.

Malaysia November 29, 2017 - 7:42 AM

Overweight (no change)

Highlighted companies

Gamuda ADD, TP RM6.15, RM4.62 close

Gamuda is a potential big beneficiary of the RM55bn East Coast Rail Link (ECRL), subcontract for the underground portion of the est. RM40bn MRT 3 (Circle Line), and the PDP scope of the KL-Singapore HSR. IJM Corp Bhd ADD, TP RM3.73, RM3.07 close

Under the PDP model, IJM Corp could have a stronger chance of winning the Malaysian civil works portion of the KL-Singapore HSR project, which may include station packages. Outstanding order book stood at RM9.4bn. YTL Corporation

ADD, TP RM1.48, RM1.18 close

We expect YTL Corp to emerge as one of the bidders of new rail contracts in 2018. We would not discount the group emerging as one of the potential contenders of the HSR’s AssetsCo, given its track record for the Express Rail Link (ERL) project.

Summary valuation metrics

Insert

Analyst(s)

Sharizan ROSELY


P/E (x) Dec-17F Dec-18F Dec-19F

Gamuda 16.84 14.01 12.14 IJM Corp Bhd 16.26 15.61 13.68 YTL Corporation 15.29 14.64 12.84

P/BV (x) Dec-17F Dec-18F Dec-19F

Gamuda 1.44 1.37 1.34 IJM Corp Bhd 1.49 1.45 1.42 YTL Corporation 0.91 0.91 0.91

Dividend Yield Dec-17F Dec-18F Dec-19F

Gamuda 2.50% 2.50% 2.50%IJM Corp Bhd 3.30% 3.71% 3.74%YTL Corporation 5.45% 6.83% 7.79%

25

Industrial Goods and Services│Malaysia

Sector Flash Note



Rubber Gloves Higher than expected gas tariff hike but… ■ Gas Malaysia announced that it will increase the average effective gas tariff for non-

power sectors to RM32.52/MMBtu for the period of 1 Jan to 30 June 2018. ■ Although the quantum of hike is higher than expected, we believe glove makers are

likely able to manage the additional cost given the early notice. ■ Minimal impact on sector earnings. Maintain Overweight.

Average gas tariff hike of 22.9% for non-power sectors ● Gas Malaysia announced that the effective average natural gas tariff for non-power

sectors will be increased to RM32.52MMbtu for the period of 1 Jan to 30 Jun 2018 (six months). As the average effective natural gas from 1 Jul to 31 Dec 2017 was set at RM26.4, this marks a 22.9% increase.

● On top of the based tariff (RM30.90/MMbtu) set for the period of 1 Jan to 30 Jun 2018 under the prescribed Incentive Based Regulation (IBR) framework, an extra surcharge of RM1.62/ MMBtu would be applied due to the recent spike in LNG prices.

Gas tariff hike foreseen, but quantum higher than expected ● Although the announcement of a tariff hike was not a surprise to us, the quantum of

increase is higher than expected due to the additional surcharge. ● Though the quantum of hike is now more than what was previously guided under the

IBR, we believe glove makers will still be able to manage the additional gas costs. This is due to the fact that this is an industry-wide phenomenon and there is a cost pass-through mechanism in place.

Higher ASPs on the cards to pass on increased costs ● Furthermore, the current robust demand for rubber gloves (due to lower supply of vinyl

gloves from China) has led to all glove makers under our coverage running at utilisation rates of above 85%, higher than their average rates.

● The current robust demand should allow glove makers to have more bargaining power when raising prices. As such, we believe glove makers are likely to adjust their average selling prices (ASPs) higher to pass on the bulk, if not all, of the cost increases.

● On the bright side, Gas Malaysia has provided a month's notice this time round vs. around two weeks, on average, for previous tariff hikes. This should give glove makers ample time to reflect the cost increases into their ASPs with minimal time lag, in our view.

Minimal earnings impact even if all additional costs are absorbed ● However, in the event that glove makers decide to fully absorb the additional cost,

which we believe would be highly unlikely, the impact on their earnings would be immaterial. As gas cost currently makes up around 8-10% of a glove maker's total operating cost, we estimate a net increase of 1.8-2.3% of total costs. Hence, the impact on sector earnings is minimal at -0.2 to -1%.

Maintain Overweight ● Our Overweight sector recommendation stays. Although the quantum of gas price is

higher than expected, we do not see glove makers facing much difficulty raising ASPs. ● Kossan remains our top pick for the sector as it is a laggard play vs. its peers such as

Top Glove and Hartalega. Moreover, we expect Kossan's earnings to improve from 4QFY17, on the back of substantial increase (13.6%) in its production capacity. Downsides risks to our view are a sharp decline in US$/RM and stronger pricing competition.

Figure 1: Increase in gas tariff for non-power sectors


Tariff Category

Annual Gas Consumption (MMBtu)

Current Base Tariff (RM/MMBtu)

Base Tariff for 1 Jan - 30 Jun 2018 (RM/MMBtu)

Effective Tariff (after Gas Cost Past Through mechanism) for 1 Jan - 30 Jun 2018 (RM/MMBtu)

A Residential 20.23 22.3 23.92B 0-600 26,11 28.78 30.4C 601-5000 26,25 28.93 30.55D 5001 - 50000 26.51 29.22 30.84E 50001 - 200000 27.66 30.48 32.1F 200001 - 750000 27.66 30.48 32.1L Above 750000 28.58 31.5 33.12Average 28.05 30.9 32.52

Malaysia November 30, 2017 - 9:59 PM

Overweight (no change)

Highlighted companies

Hartalega Holdings ADD, TP RM9.00, RM9.50 close

Hartalega is the world’s largest nitrile glove producer. It currently has a production capacity of 24.9bn gloves p.a., with nitrile gloves accounting for 90% of its product mix. Kossan Rubber Industries

ADD, TP RM9.80, RM7.85 close

Kossan plans to increase its production capacity from 22bn gloves p.a. now to 44bn by 2021. We expect higher margins due to improving operating efficiency via increased automation and better product mix. Top Glove Corporation ADD, TP RM6.90, RM6.78 close

Top Glove is the world’s largest rubber glove producer in terms of volume, with a capacity of 51.9bn pieces p.a. It aims to also be the world’s largest surgical glove maker post its proposed acquisition of Aspion.

Summary valuation metrics

Insert

Analyst(s)

Walter AW


P/E (x) Dec-17F Dec-18F Dec-19F

Hartalega Holdings 38.60 31.43 28.57 Kossan Rubber Industries 26.33 20.67 17.92 Top Glove Corporation 24.10 20.84 18.67

P/BV (x) Dec-17F Dec-18F Dec-19F

Hartalega Holdings 8.64 7.69 6.86 Kossan Rubber Industries 4.38 3.96 3.56 Top Glove Corporation 4.14 3.76 3.42

Dividend Yield Dec-17F Dec-18F Dec-19F

Hartalega Holdings 1.39% 1.75% 1.93%Kossan Rubber Industries 1.71% 2.42% 2.79%Top Glove Corporation 2.07% 2.40% 2.68%

26

Power│Thailand│November 29, 2017

Company Note



Insert Insert

B. Grimm Power A glimpse of visible growth ■ We think BGRIM’s earnings growth outlook remains solid, driven by capacity

expansion, upside from SPP-replacement PPAs and lower interest expense. ■ BGRIM’s three upcoming SPP-replacement PPAs in FY19-22F will significantly

enhance its net margin as efficiency rises, in our view. ■ Growth prospects for the company’s new projects appear high to us, mainly for the

SPP-replacement projects ABP1, ABP2 and BPLC1, in FY19-22F. ■ Maintain Add and our SOP-based target price of THB30.5. Potentialkey catalysts are

higher fuel tariff and successful renewal of SPP-replacement projects.

Earnings growth outlook remains solid We believe BGRIM’s earnings growth will remain strong in 4Q17F and into FY18-19F, driven by 1) highly efficient operations and utilisation rate, backed by lofty demand for electricity and steam from industrial users (IU), 2) the lower interest expense due to lower interest rates after refinancing and reduced debt, 3) the start-up of its three SPP power plants in FY18F (ABP 3, 4 and 5; total capacity 399MW), and 4) the three SPP power plants that have obtained SPP-replacement power purchase agreements (PPA).

SPP-replacement PPA progress Three of its projects (ABP1, ABP2, BLCP1) will receive new SPP-replacement PPAs beginning in FY19F, making BGRIM Thailand’s first company to do so. We believe it will benefit in three ways: 1) higher efficiency for the power generator via superior technology that will lower the heat rate required to generate electricity by 20% vs. the original technology, 2) the company’s higher stakes of 51% for ABP1 and ABP2 vs. 15% given the expiry of the infrastructure fund, and 3) higher electricity and steam sales to IU.

SPP hybrid bidding We believe BGRIM could see additional capacity growth from SPP hybrid projects. Bidding for two SPP hybrids (50MW) has passed the first technical round and is in the final winning round. Winners are scheduled to be announced in Dec 17. These projects will combine renewable energy with energy storage systems (ESS) as semi-firm PPA SPP power plants. BGRIM will use biomass and solar with ESS to meet the requirement and we think the company could win at least one project out of these two bids.

Major shareholder’s stake sales for higher liquidity We are neutral on major shareholder Mr. Harold Link’s recent share sales on 28 Nov 17 as the transaction aims to increase liquidity. The major shareholders and the group still own a 68% stake post the sale. Total shares sold were 106.25m (4.08% of shares outstanding of 2.6bn) at a 10% discount to the market closing price. 100m shares (3.84%) were sold at THB25 to local and foreign investors and 6.25m shares (0.24%) were sold at THB25 to Mrs. Preeyanart Soentornwatana, its president and director.

Thailand’s best IPP play While BGRIM’s share price has sharply re-rated since its IPO in 19 Jul, we think the company remains attractive as a growth and dividend play given its strong earnings growth outlook, improving ROEs and profitability in FY18-19F. BGRIM’s potential growth from SPP extension and SPP-replacement PPAs also remain promising, thanks to high demand from industrial estates. Downside risks are start-up delays for its SPP projects.


Thailand


Current price: THB26.00 Target price: THB30.50 Previous target: THB30.50


Reuters: BGRIM.BK Bloomberg: BGRIM TB Market cap: US$2,081m THB67,779m Average daily turnover: US$20.60m THB682.7m Current shares o/s: 2,607m Free float: 28.0% *Source: Bloomberg Key changes in this note

No change

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -6.3 36.1 Relative (%) -5.7 28.5

Major shareholders % held B Grimm Power (Singapore) 34.9 Mr. Harald Link 29.1 CIMB Securities (Singapore) 8.6 Insert

Analyst(s)

Suwat SINSADOK, CFA, FRM



Revenue (THBm) 23,943 27,747 34,118 40,538 43,003Operating EBITDA (THBm) 4,624 7,108 9,159 9,691 10,280Net Profit (THBm) 36 1,380 2,365 2,673 3,294Core EPS (THB) 0.23 0.73 0.91 1.03 1.26Core EPS Growth (92%) 218% 24% 13% 23%FD Core P/E (x) 86.89 19.29 24.72 25.36 20.58DPS (THB) 42.65 3.56 0.45 0.45 0.55Dividend Yield 164% 14% 2% 2% 2%EV/EBITDA (x) 11.30 14.61 12.87 12.85 12.45P/FCFE (x) 0.59 7.23 45.57 NA NANet Gearing 618% 426% 158% 155% 143%P/BV (x) 1.50 8.33 3.44 3.20 2.91ROE 1.2% 31.9% 18.5% 13.1% 14.8%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 1.13 1.07 1.07

92

120

148

176

14.0

19.0

24.0

29.0

Price Close Relative to SET (RHS)

100

200

300

Jul-17 Aug-17 Sep-17 Oct-17

Vol m

27

Food & Beverages│Thailand│November 29, 2017

Company Note



Insert Insert

Charoen Pokphand Foods Focus on earnings turnaround in FY18F ■ We expect FY18F earnings to increase by 15%, thanks to improving Vietnamese

swine prices, higher meat consumption and contribution from CPALL and Bellisio. ■ We believe CPF’s Vietnam business has passed its bottom given signs of a recovery

in swine prices in Vietnam during 3Q17. ■ We have a cautious outlook on domestic swine prices due to the recent oversupply

situation. As such, we cut our FY17-19F core EPS forecasts by 8-22.6%. ■ Higher equity value from CPALL more than offset the lower core EPS forecasts. ■ Reiterate Add for its attractive valuation with a higher SOP-based TP of THB31.

Better outlook in FY18F We expect core EPS growth to bounce back to 15% in FY18F, driven by 1) recovery in Vietnamese swine prices, 2) improving consumption supporting animal meat prices, and 3) better earnings contribution from CPALL and Bellisio. We expect Bellisio’s promotions and marketing to boost its earnings contribution to CPF in FY18F.

Vietnamese pork price recovery underway Management expects swine prices in Vietnam to gradually improve and break even in 1Q18 given that the price has fallen for a year while the cycle to raise a swine is normally around 10 months. As 60% of swine production in Vietnam is done by backyard farmers, CPF expects farmers to slow production due to the unprofitable swine prices. According to the company, swine prices in Vietnam rose in 3Q17 by 34% qoq to VND30,718/kg, thanks to the lower supply in the country.

Cautious outlook on domestic swine price CPF admits that the domestic swine business is the key challenge for FY18F given the current oversupply situation. In 3Q17, domestic swine prices plummeted by 13% yoy and 7% qoq to THB60/kg. We expect the price to further decline in 4Q17F as it is the typical low season. We, therefore, project 4Q17F earnings to remain weak. Management believes domestic swine prices will gradually improve in FY18F on the back of increasing consumption and slower production from major players.

Earnings revisions We trim our sales forecasts by 1-2% and revise down our GPM forecasts from 12.4-13.8% to 12.2-12.7% in FY17-19F to reflect weaker domestic swine operations. As such, our core EPS forecasts are lowered by 8-22.6% in FY17-19F.

Raise target price due to a higher equity value from CPALL Although we revise down our core EPS forecasts, our target price is lifted due to a higher equity value contributed from CPALL, one of CPF’s subsidiaries, from THB66/share to THB80.5/share as valuations were rolled forward to FY19F. We view CPF’s valuation as undemanding as its current share price of THB24.70 is lower than the estimated value of its stake in CPALL, based on our SOP valuation.

Maintain Add We maintain our Add rating with a higher SOP-based target price of THB31 on the back of a higher equity contribution from CPALL that more than offsets our downward core EPS revisions. We see limited downside from the current share price as it has depreciated 16.3% YTD. Potential re-rating catalysts are a faster-than-expected recovery in swine prices and higher-than-expected livestock prices. Downside risks are a further slump in livestock prices and a spike in feed costs.


Thailand




Reuters: CPF.BK Bloomberg: CPF TB Market cap: US$6,529m THB212,698m Average daily turnover: US$20.66m THB684.5m Current shares o/s: 7,743m Free float: 47.3% *Source: Bloomberg Key changes in this note

FY17F EPS decreased by 8.1%. FY18F EPS decreased by 17.8%. FY19F EPS decreased by 22.6%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -4.1 -5 -14.8 Relative (%) -3.5 -12.6 -28.5

Major shareholders % held Charoen Pokphand Group 27.0 Charoen Pokphand Foods Holding 9.7 Thai NVDR 6.1 Insert

Analyst(s)

Tanida JIRAPORNKASEMSUK



Revenue (THBm) 421,355 464,465 492,998 516,621 537,530Operating EBITDA (THBm) 22,686 40,418 26,663 28,686 30,814Net Profit (THBm) 11,059 14,703 13,712 8,533 10,806Core EPS (THB) 0.54 1.92 0.86 0.99 1.25Core EPS Growth (42%) 255% (55%) 15% 27%FD Core P/E (x) 45.63 12.86 28.63 24.93 19.68DPS (THB) 0.75 0.95 0.80 0.50 0.63Dividend Yield 3.04% 3.85% 3.23% 2.01% 2.54%EV/EBITDA (x) 17.49 11.04 16.36 15.77 14.69P/FCFE (x) NA NA NA NA NANet Gearing 126% 143% 116% 116% 113%P/BV (x) 1.64 1.43 1.31 1.27 1.23ROE 3.6% 11.9% 4.8% 5.2% 6.4%% Change In Core EPS Estimates (8.1%) (17.8%) (22.6%)CIMB/consensus EPS (x) 0.68 0.60 0.66

68.0

75.8

83.6

91.3

99.1

22.0

24.0

26.0

28.0

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Banks│Thailand│November 29, 2017

Company Note



Insert Insert

Tisco Financial Group Struggling to grow new lending businesses in FY18F ■ We expect TISCO’s loan growth to be sluggish in FY18F due to its conservative policy

regarding its new businesses and new auto loans. ■ However, non-interest income growth should stay decent in FY18F on the back of

more cross-selling opportunities. ■ We cut our FY18-19F EPS forecasts by 1.2-6.1% due to lower loan growth. ■ We reiterate our Add rating on TISCO but cut our target price to THB92 (based on

1.75x FY18F P/BV).

Expect loan growth to be sluggish in FY18F We expect TISCO’s loan growth to be sluggish in FY18F for two reasons: First, it will let personal loans and small SME loans that were acquired from Standard Chartered Bank (Thai) or SCBT to run down. Meanwhile, it will maintain the credit card business but at a conservative pace. These loans account for 5.3% of its total loans after the consolidation in Oct 17. Second, TISCO will not be aggressive in making new auto loans although domestic car sales are expected to show positive growth in FY18F.

More intense competition in auto loans compressing loan yield… The competitive landscape for new auto loans has changed over the past two years as captive leasing companies, which are supported by car manufacturers, have become more aggressive. They can offer lower interest rates and more attractive hire purchase installment programmes than commercial banks. As such, banks will have to lower their interest rates so as to maintain their market shares, resulting in a lower loan yield. We think TISCO does not want to enter a price war.

… but non-interest income growth should stay decent Nevertheless, we expect TISCO to be able to boost solid non-interest income growth in the next two years on the back of a bigger retail customer base acquired from SCBT. TISCO has also launched a new bancassurance platform that offers a wide variety of insurance products from leading insurers in Thailand. On top of that, we expect fee income from the brokerage and asset management businesses to stay resilient in FY18F, supported by our bullish SET index target of 1,875.

Revise down our FY18-19F EPS forecasts by 1.2-6.1% We cut our FY18-19F EPS forecasts by 1.2-6.1% because we downgrade our loan growth assumptions in FY18F and FY19F to -1.8% and 4.7% from 6.3% and 7.4%, respectively. This is to reflect our view that TISCO’s loan growth will be sluggish next year. However, we upgrade our non-interest income growth to 7.2-7.3% in FY18-19F from 5.4-6.4% to incorporate better cross-selling opportunities. Based on our new forecasts, FY18-19F pre-provision operating profit growth will be 0.1-5.6%.

Reiterate our Add rating but cut our target price to THB92 We reiterate our Add rating on TISCO but cut our GGM-based target price from THB94 to THB92, pegged to 1.75x FY18F P/BV (assuming LT ROE of 16% and COE of 10.4%). We believe positive auto loan growth in FY18F and higher-than-expected fee income growth from a bigger retail customer base can re-rate the stock. Downside risks to our call include strong competition in the credit card and housing loan businesses.


Thailand




Reuters: TISCO.BK Bloomberg: TISCO TB Market cap: US$2,101m THB68,455m Average daily turnover: US$10.72m THB355.0m Current shares o/s: 800.7m Free float: 75.0% *Source: Bloomberg Key changes in this note

FY18F EPS decreased by 1.2%. FY19F EPS decreased by 6.1%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -3.1 15.2 58.3 Relative (%) -2.5 7.6 44.6

Major shareholders % held CDIB & Partners Investment Holding Pte. Ltd. 10.0 Insert

Analyst(s)

Weerapat WONK-URAI



Net Interest Income (THBm) 10,130 10,920 10,736 11,307 11,292Total Non-Interest Income (THBm) 6,359 6,140 6,842 7,331 7,868Operating Revenue (THBm) 16,489 17,060 17,578 18,638 19,160Total Provision Charges (THBm) (5,277) (3,972) (2,537) (2,221) (2,321)Net Profit (THBm) 4,250 5,005 6,407 7,133 7,059Core EPS (THB) 5.84 6.88 8.80 9.80 9.70Core EPS Growth 2.6% 17.8% 28.0% 11.3% (1.0%)FD Core P/E (x) 14.64 12.43 9.71 8.72 8.82DPS (THB) 2.40 3.50 2.60 3.20 3.60Dividend Yield 2.81% 4.09% 3.04% 3.74% 4.21%BVPS (THB) 38.60 42.86 47.49 52.63 57.73P/BV (x) 2.21 1.99 1.80 1.62 1.48ROE 15.8% 16.9% 19.5% 19.6% 17.6%% Change In Core EPS Estimates 0.00% (1.22%) (6.08%)CIMB/consensus EPS (x) 1.13 1.15 1.05

90.0

105.6

121.1

136.7

152.2

48.0

58.0

68.0

78.0

88.0


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Asia Pacific Daily│Equity research│November 30, 2017

REGIONAL HEAD

Michael William GREENALL Regional Head of Research +60 (3) 2261 9088 [email protected]

COUNTRY HEADS OF RESEARCH

Ivy NG, CFA Siew Khee. LIM Erwan TEGUH Kasem PRUNRATANAMALA, CFA Ben BEI Malaysia Singapore Indonesia Thailand Hong Kong/China +60 (3) 2261-9073 +65 6210-8664 +62 (21) 3006-1720 +66 (2) 657-9221 +852 2532-1116 [email protected] [email protected] [email protected] [email protected] [email protected] Dohoon LEE Satish KUMAR South Korea India +82 (2) 6730-6121 +91 (22) 6602-5185 [email protected] [email protected] Yolan SEIMON Ralph Christian BODOLLO Sri Lanka Philippines +94 (11) 230-6273 +63 (2) 888-7118 [email protected] [email protected] Coverage via partnership arrangement with Coverage via partnership arrangement with John Keells Stock Brokers SB Equities

REGIONAL SECTOR HEADS

KJ KWANG Ivy NG, CFA Raymond YAP, CFA Offshore & Marine Plantations Transportation +82 (2) 6730-6123 +60 (3) 2261-9073 +60 (3) 2261-9072 [email protected] [email protected] [email protected]

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AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLA, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EA, EGCO, EPG, GFPT, GLOBAL, GLOW, GPSC, GUNKUL, HMPRO, INTUCH, IRPC, ITD, IVL, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MALEE, MEGA, MINT, MONO, MTLS, PLANB, PSH, PTL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, S, SAWAD, SCB, SCC, SCCC, SIRI, SPALI, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TU, TVO, UNIQ, VGI, WHA, WORK. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, 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 date. CIMBS does not confirm nor certify the accuracy of such survey result.

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

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2017, Anti-Corruption 2017 AAV – Very Good, n/a, ADVANC – Excellent, Certified, AEONTS – Good, n/a, AMATA – Very Good, n/a, ANAN – Excellent, n/a, AOT – Excellent, Declared, AP – Excellent, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Excellent, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – Good, Declared, BCP - Excellent, Certified, BCPG – Very Good, n/a, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, n/a, BEC – Very Good, n/a, , BGRIM – not available, n/a, BH - Good, n/a, BJC – Very Good, Declared, BJCHI – Very Good, Declared, BLA – Very Good, Certified, BPP – Good, n/a, BR - Good, Declared, BTS - Excellent, Certified, CBG – Good, n/a, CCET – Good, n/a, CENTEL – Very Good, Certified, CHG – Very Good, Declared, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, n/a, DEMCO – Excellent, Certified,

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DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, n/a, ECL – Very Good, Certified, EGCO - Excellent, Certified, EPG – Very Good, n/a, GFPT - Excellent, Declared, GGC – not available, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Excellent, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Certified, ICHI – Excellent, n/a, III – not available, n/a, INTUCH - Excellent, Certified, IRPC – Excellent, Certified, ITD – Very Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Very Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Certified, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Certified, M – Very Good, n/a, MACO – Very Good, n/a, MAJOR – Very Good, n/a, MAKRO – Very Good, Declared, MALEE – Very Good, n/a, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Certified, MEGA – Very Good, n/a, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Excellent, Declared, PLAT – Very Good, Certified, PSH – Excellent, Certified, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Certified, RATCH – Excellent, Certified, ROBINS – Excellent, Certified, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Very Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Very Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI – Very Good, Declared, SPA - Good, n/a, SPALI - Excellent, n/a, SPRC – Excellent, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, n/a, TCAP – Excellent, Certified, THAI – Very Good, n/a, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Excellent, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Very Good, Declared, TMB - Excellent, Certified, TNR – Good, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Excellent, Declared, TTW – Very Good, n/a, TU – Excellent, Declared, TVO – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a. Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into: - Companies that have declared their intention to join CAC, and - Companies certified by CAC

CIMB Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

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