Morning Matters - RHB TradeSmart€¦ · Thai bourse announces SET indices semi-annual review. The...

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19-Jun-2013

Morning Matters

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WHAT’S INSIDE

On The Platter

Pranda Jewelry (PRANDA TB; FV THB9.50-Buy) Company Update: A

High-Yield, Great Value Buy

We believe the market’s over-reaction to fluctuations in gold price and its

impact on the local currency has led to the 15% drop in Pranda’s share

price. Now that as the baht is back on an uptrend and the decline in gold

price may stoke demand for the commodity, this may be a good

opportunity to invest in what we deem a high-yield, cheaply-valued

company with firm long term growth as an added bonus. Maintain BUY.

Siam Cement (SCC TB; FV THB550.00-Buy) Company Update:

Chasing The Growing Elephant

We resume coverage on SCC with a BUY and THB550 TP, which implies 17.0x FY13F P/E and 13x FY13F EV/EBITDA. Despite a 12% y-o-y drop in net profit in 2012, we expect its EBITDA and earnings to rise at a three-year CAGR of 15.4% and 27.5% respectively, supported by robust demand for cement and building materials. We are neutral on its petrochemical and paper businesses but expect their y-o-y earnings growth to improve.

MEDIA HIGHLIGHTS

IMF foresees downside risks for Thai economy.

Egat chief looks to start of coal-fired power plant in Dawei by year-end.

NBTC board mull joint panel for debate on 700MHz.

Flood panel seeks nod for Bt314-bn loan.

DTAC focuses on 3G, northern expansion.

Thai bourse announces SET indices semi-annual review. ECONOMIC HIGHLIGHTS

Thailand: BoT signals a pause after cut.

Japan: Exports surge by most since 2010.

China: Home-price gains add to dilemma on cash crunch.

UK: Inflation accelerates on record air-fare increase for May.

US: Housing shores up expansion with little inflation.

US: Surprising slowdown in nonresidential building.

SET Intra-Day Graph

Source: Bloomberg

Key Market Indices (18 June 2013)

Value Chg % Chg % YTD

SET 1427.42 -43.62 -3.0% 5.3%

SET50 950.53 -31.63 -3.2% 3.5%

SET100 2110.57 -70.41 -3.2% 4.6%

Dow Jones 15318.23 138.38 0.9% 15.0%

S&P500 1651.81 12.77 0.8% 14.1%

Nasdaq 3482.18 30.05 0.9% 13.4%

FTSE 6374.21 43.72 0.7% 7.0%

FSSTI 3229.55 46.11 1.4% -0.2%

Hang Seng 21225.88 -0.02 0.0% -7.4%

Nikkei 13236.08 202.96 1.6% 22.0%

KLCI 1774.05 1.88 0.1% 4.3%

SHANGHAI SE 2159.29 3.08 0.1% -4.7%

JCI 4840.45 65.95 1.4% 10.3%

SET 5-yr avg 2012 2013F

PE (x) 14.1 16.4 13.1

P/BV (x) 1.8 2.3 2.2

Yield (%) 4.1 3.0 3.4

Key Statistics

SET Value by investor Type: Daily

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

Institution 5,866.70 4,547.71 1,318.99

Proprietary 9,940.67 10,564.51 -623.84

Foreign 11,339.56 13,176.06 -1,836.50

Retail 34,498.89 33,357.53 1,141.36

SET Value by investor Type

MTD (THBm) YTD (THBm) Institution 21,869.32 63,474.17

Proprietary -8,928.35 -13,315.52

Foreign -33,855.50 -54,947.76

Retail 20,914.53 4,789.11

SET50 Index Future

Long Short Net MTD YTD

Institution 18,980 18,779 201 7,832 15,685

Foreign 8,583 7,672 911 -3,725 -18,144

Local 23,945 25,057 -1,112 -4,107 2,459

Foreign Fund Flows (US Millions) Last MTD YTD YTD(%) -59.5 -1,103.5 -1,828.8 -192.6

See important disclosures at the end of this report 2

Media Highlights

IMF foresees downside risks for Thai economy.

Thailand's gross domestic product (GDP) should expand by 4.75 per cent in 2013 and 5.25 per cent in 2014, thanks to strong private demand and an acceleration of public spending, according to the International Monetary Fund (IMF). IMF noted that risks to the outlook are tilted to the downside, mainly due to external factors. Political stability has strengthened in Thailand, and markedly improved market sentiment, although downside risks remain. The volatility of capital flows has added uncertainty to the outlook. The IMF’s mission welcomed the authorities' commitment to fiscal discipline, including their objectives of keeping the public debt ratio under 50 percent of GDP and balancing the central government budget by 2017. The authorities are taking actions to improve tax compliance and expand the tax base, reduce tax incentives for consumption, and revamp excises, while confirming their strict control over current spending. (The Nation)

Egat chief looks to start of coal-fired power plant in Dawei by year-end.

The governor of the Electricity Generating Authority of Thailand yesterday said he hoped plans for the Dawei power-

generation plant, which had been submitted to the Myanmar government, would be approved in time for construction of the

1,800-megawatt coal-fired facility to commence by year-end. Sutat Patmasiriwat said the Thai government had submitted the

plans for the power plant to the Myanmar government, which had previously approved the project in principle. The Bt100-

billion project will be split into three phases, each of 600MW. However, should the demand for power prove to be particularly

high, the investment could be undertaken in a single outlay. The expected construction period for the power plant is five

years, with four years needed to lay power transmission cables. (The Nation)

NBTC board mull joint panel for debate on 700MHz.

The National Broadcasting and Telecommunications Commission will consider at today's board meeting the appointment of a joint panel from its telecom and broadcasting committees to address the future of the 700MHz band, watchdog chairman Thares Punsri said yesterday. The NBTC's broadcasting committee has allocated the 510-790MHz range for digital TV, but the NBTC's telecom road map subcommittee has proposed that 698-806MHz be reserved for the future provisioning of mobile broadband in line with the standards of the ITU and the APT. The subcommittee suggested that the broadcasting committee use 470-694MHz for digital TV broadcasts instead. (The Nation)

Flood panel seeks nod for Bt314-bn loan.

The Water and Flood Management Commission is seeking the Cabinet's nod for a Bt314.34 billion loan after completing the selection of four firms to develop the country's water and flood management projects. The four winners are ITD-Powerchina JV, Korea Water Resources Corporation, Loxley-AGT and Summit SUT. Out of the Bt314.34-billion budget, Bt291 billion will be spent on design and construction of the water and flood management system as a long-term solution to future potential flood disaster risk and Bt10 billion for reforestation and the preservation of forests and soil as approved by the Cabinet on April 9. (The Nation)

DTAC focuses on 3G, northern expansion.

Total Access Communication (DTAC) is gearing up to focus on promoting its third-generation (3G) mobile broadband service, scheduled for commercial launch next month. The country's second-largest mobile operator has revealed an ambitious target of reaching 10 million 3G subscribers using its TriNet 3G service on the 2.1-gigahertz spectrum this year. Chief executive Jon Eddy Abdullah confirmed DTAC will roll out its 3G commercial service on July 23. "We have accumulated 2 million 3G subscribers over the last two quarters," he said. Speaking at the recently set-up DTAC call centre in Chiang Mai, Mr Abdullah said the company plans to spur economic growth in the North with the recent launched of its TriNet network and selection of TriNet smartphones. The moves are the company's latest bid to accelerate subscriber migration to 3G from 2G. (Bangkok Post)

Thai bourse announces SET indices semi-annual review.

The Stock Exchange of Thailand's (SET) announces the result of the semi-annual index review for SET50, SET100, and

SETHD indices for the second half of 2013 (July 1 - December 31, 2013), SET Executive Vice President and Head of

Markets Division, Kesara Manchusree said. SET50 index (SET50): 3 companies; - CENTRAL PLAZA HOTEL PCL.

(CENTEL), CH. KARNCHANG PCL. (CK), SIAM GLOBAL HOUSE PCL. (GLOBAL) - will be added into its index constituents.

There are also 11 additions in the SET100 index (SET100): DEMCO PCL (DEMCO), GOLDEN LAND PROPERTY

DEVELOPMENT PCL (GOLD), KCE ELECTRONICS PCL (KCE), MBK PCL (MBK), MCOT PCL (MCOT), M.D.X. PCL

(MDX), RS PCL (RS), SRIRACHA CONSTRUCTION PCL (SRICHA), UNIVENTURES PCL (UV), VGI GLOBAL MEDIA PCL

(VGI), WHA CORPORATION PCL (WHA). For the SET High Dividend Index (SETHD), it will be added by 7 companies;

DELTA ELECTRONICS (THAILAND) PCL (DELTA), KCE ELECTRONICS PCL (KCE), KRUNG THAI BANK PCL (KTB),

MBK PCL (MBK), QUALITY HOUSES PCL (QH), THE SIAM COMMERCIAL BANK PCL (SCB), THAI UNION FROZEN

PRODUCTS PCL (TUF) (SET)


Economic Highlights

Thailand: BoT signals a pause after cut.

The Bank of Thailand says it will maintain balance on growth and financial stability risks, implying that it could stand pat at the upcoming policy rate call on July 10 after a 25-basis-point cut for the first time this year at the May 29 meeting. Risks to financial stability incurred from the double-digit percentage growth in credit and rising household debt along with downside growth are chief concerns for the central bank, governor Prasarn Trairatvorakul said yesterday. (Bangkok Post) Japan: Exports surge by most since 2010.

Japan’s exports surged by the most since 2010 as the yen weakened and shipments to the US jumped, boosting Prime Minister Shinzo Abe’s campaign to revive the world’s third-largest economy. Overseas shipments increased 10.1% y-o-y, the Finance Ministry today. The nation’s 11th straight monthly trade deficit was JPY993.9bn (USD10.4bn). The data may help to sustain confidence in Abe’s efforts to jump-start the economy with fiscal and monetary stimulus and a rolling back of regulations restricting business. (Bloomberg) China: Home-price gains add to dilemma on cash crunch.

Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth. New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics yesterday. The property gains limit the ability of Premier Li Keqiang to counter an economic slowdown that showed signs of deepening in May. (Bloomberg)

UK: Inflation accelerates on record air-fare increase for May.

UK inflation accelerated more than economists forecast in May as a record jump in air fares for the month helped extend its persistence above the Bank of England’s 2% target. Consumer prices rose 2.7 percent from a year earlier, compared with 2.4% in April, the Office for National Statistics said. On the month, prices increased 0.2%. Britons face a persisting squeeze in living costs as they endure inflation triple the rate of basic pay growth, which was 0.9% in the three months through April. (Bloomberg) US: Housing shores up expansion with little inflation.

Builders began work on more US houses in May and permits for new single-family homes rose to a five-year high as residential real estate underpins an economy that’s generating little inflation. Housing starts climbed 6.8%, less than forecast, to a 914,000 annualized rate from a revised 856,000 in April, Commerce Department figures showed yesterday. Applications for one-family home construction increased to a 622,000 pace, the fastest since May 2008. Data from the Labor Department showed May consumer prices rose less than projected. (Bloomberg) US: Surprising slowdown in nonresidential building.

Private nonresidential construction is losing steam in the US, a sign that commercial real estate may be a drag on the economy as business leaders are reluctant to make large property investments. Spending on lodging, office, commercial and manufacturing buildings grew 5.6% in April to about USD11bn from a year ago on a non-seasonally-adjusted basis, the slowest pace in almost two years, data from the Census Bureau show. Investment in private nonresidential structures subtracted 0.11 percentage point from GDP in the first quarter, while homebuilding added 0.3 percentage point. (Bloomberg)


Outperform

Current Target Upside/

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

(Bt) (Bt) (%) 2013f 2013f

ADVANC Buy 252.00 293.00 16.3 20.1 5.0

CPN Buy 44.25 73.00 65.0 15.8 1.4

DTAC Buy 111.00 122.00 9.9 19.9 3.2

INTUCH Trading Buy 79.00 104.00 31.6 16.7 5.4

THAI Buy 26.50 42.60 60.8 12.5 2.9

CPF Buy 25.75 38.00 47.6 31.4 2.2 .

Underperform

Current Target Upside/

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

(Bt) (Bt) (%) 2013f 2013f

BJC Sell 52.00 57.00 9.6 26.5 1.2

TVO Buy 18.00 28.00 55.6 7.2 9.5

OISHI Sell 125.00 130.00 4.0 36.9 2.8

BIGC Neutral 191.00 198.00 3.7 25.1 1.2

MAJOR Sell 21.40 18.50 -13.6 20.3 4.4

18 17 14 13 12 18 17 14 13 12

1 INTUCH 332.5 167.8 67.4 397.2 268.4 PTTGC -382.5 4.9 -292.7 -10.0 -186.7 INTUCH 3,172.5 KBANK -2,152.5 INTUCH 38,473.2 SCC -7,536.9

2 SIRI 152.2 6.5 6.0 3.9 35.9 PTT -369.0 -13.4 90.8 174.3 -132.9 ADVANC 1,589.7 PTT -1,024.6 DTAC 11,388.3 BANPU -3,442.3

3 BBL 60.1 -45.2 117.0 615.1 -222.3 CPALL -259.7 -2.3 122.4 63.3 -52.0 DTAC 1,225.9 PTTGC -1,007.6 ADVANC 9,985.0 LH -2,557.3

4 SPALI 53.4 36.7 35.6 66.6 13.0 PTTEP -246.7 58.6 204.3 137.6 -63.0 MAKRO 819.1 SCC -809.3 PTTEP 8,082.9 SIRI -1,515.2

5 AOT 41.0 23.0 -16.1 -424.4 -4.1 SCB -228.3 45.8 338.6 -82.0 -73.6 MINT 438.6 BGH -586.0 BAY 7,721.7 DEMCO -713.7

6 TUF 33.3 8.3 44.4 -1.4 -16.7 ADVANC -176.0 203.9 535.6 728.1 -11.2 SCB 334.2 KTB -557.1 PTTGC 7,398.0 CK -597.0

7 JAS 32.6 -48.5 -14.5 43.2 31.8 BAY -128.0 -45.8 -292.2 359.8 -88.9 THAI 228.3 QH -492.8 PTT 7,162.0 UV -489.3

8 BLAND 23.6 10.3 -2.2 9.1 0.1 SCC -111.9 -51.5 98.0 177.3 -291.8 GLOW 199.5 LPN -464.8 MAKRO 3,947.0 BLA -421.2

9 AAV 23.3 -0.1 -28.2 -30.1 -9.0 CPN -97.7 -10.4 -24.0 -10.6 36.5 SPCG 176.9 AOT -459.9 TMB 3,817.4 RML -338.7

10 EGCO 21.9 2.7 0.1 -1.4 -1.6 KTB -91.8 65.2 153.0 51.4 -34.2 THRE 173.3 BANPU -397.3 TOP 3,462.2 IRPC -320.7

11 ROBINS 18.9 15.1 3.1 9.6 15.5 BEC -85.2 15.0 23.5 25.2 65.2 LH 171.7 BLA -344.9 BIGC 3,101.6 ASP -273.4

12 BJC 17.2 0.5 -13.4 33.5 -1.3 MAKRO -82.4 120.4 256.2 136.0 27.5 SPALI 168.3 PTTEP -340.7 CPALL 3,000.1 QH -271.3

13 AP 16.0 3.1 -28.5 9.0 -6.6 CPF -64.1 25.7 105.4 -43.8 -32.4 BEC 128.3 CPF -340.4 BBL 2,936.7 MINT-W4 -238.0

14 CK 15.4 -7.8 -6.0 11.1 -1.8 KBANK -60.3 239.1 1,196.7 658.4 -1,250.6 RATCH 120.0 JAS -331.8 THAI 2,649.1 AMATA -215.7

15 MINT 14.2 9.3 33.8 61.6 11.6 TISCO -58.6 -3.9 -13.1 9.2 -83.9 ASP 102.8 BBL -322.4 TCAP 2,500.8 LRH -197.0

16 HEMRAJ 13.3 -26.1 11.3 4.5 -6.8 GLOW -57.3 3.6 73.9 88.2 15.3 TUF 97.9 BAY -316.3 KBANK 2,317.6 TRC -196.8

17 RATCH 11.4 6.2 16.1 49.3 19.3 THCOM -47.6 -16.2 -64.5 -3.8 7.7 DELTA 95.6 TCAP -288.0 SPALI 2,299.4 STPI -186.3

18 AMATA 10.4 -4.0 -7.4 19.6 -55.2 IRPC -39.7 -5.3 -6.7 4.2 -14.1 GFPT 88.2 TISCO -282.6 MINT 2,248.9 GUNKUL -183.3

19 LH 8.3 14.5 -17.7 219.9 180.8 BANPU -34.5 -32.8 30.6 -12.0 -31.5 BIGC 79.7 CPALL -237.0 TUF 2,178.9 NOBLE -154.4

20 BIGC 6.9 27.6 14.4 37.9 -3.4 TICON -34.3 -22.9 -9.8 1.2 -2.6 EGCO 76.2 AAV -179.6 CPN 2,092.5 AAV -139.6

% % of % of

Turn. paidup paidup

1 SIRI 13.36 1 TISCO-P 66.16 65.86

2 N-PARK 0.85 2 BBL 30.78 29.99

3 BLAND 1.45 3 KBANK 28.11 28.50

4 TRUE 5.81 4 SPALI 22.57 17.94

5 GJS 2.72 5 GOLD-W1 21.50 14.87

6 KTB 9.67 6 E-W1 21.12 22.27

7 IRPC 21.99 7 THRE 20.18 15.50

8 JAS 1.91 8 LPN 19.82 21.73

9 LH 22.58 9 INTUCH 19.57 5.41

10 HEMRAJ 24.71 10 SPCG-W1 18.47 13.31

11 BAY 22.49 11 LH 17.70 21.18

12 CPALL 9.05 12 TWFP 16.35 24.77

13 CPF 21.84 13 DTAC 15.65 13.33

14 GSTEL 2.99 14 BAY 15.14 13.89

15 AIM 2.06 15 TCAP 14.97 12.60

16 BBL 47.26 16 THIP 14.50 12.64

17 KBANK 26.75 17 AP 14.40 12.92

18 PTTGC 16.90 18 SIRI-W1 14.03 11.05

19 HMPRO 12.10 19 TISCO 13.83 13.69

20 INTUCH 7.86 20 LALIN 13.80 13.53

Source : SET.OR.TH

-6,702,700

-2,464,196

4,082,629

8,214,400

3,802,820 7,885,449

5,030,900

9,023,1001,160,200

3,494,200 3,852,800

8,789,700

5,648,600

6,910,300 1,879,400

8,704,400490,000

3,184,404 8,833,004

7,693,600 3,876,400 11,570,000 3,817,200

2,511,000 6,543,300 9,054,300

1,277,816,397 7,724,400

-4,032,300

7,862,900

370,469,013 315,525,949 2,367,811,000

6,074,143,747 919,874,802 843,803,210

-5,393,158

367,964,647

191,315,280 161,065,653

1,159,700 279,809

111,592,900 825,000,000

7,347,000 -358,600

201,363,604 268,936,368

100,660,784

113,839,000 4,019,100

-433,5653,305,665 6,177,765

6,081,100

877,100 6,270,258

5,050,100 1,031,000

2,872,100

7,147,358

727,878,228

1,435,297,002

8,000,000

411,717,079

99,645,251

1,011,300

2,859,920,138

2,123,251,472 10,025,921,523 1,774,363,524

1,554,316 2,354,634 9,506,055

3,206,420,305

279,999,581

627,493,479 173,363,101

51,714,000 37,278,800

3,512,494,860

1,475,698,768

708,939,065 544,461,149

292,540,236 320,609,239

73,282,042 77,281,246

5,797,600

8,209,700 4,141,600

5,126,800 9,769,839

16,809,400 -16,809,400

12,351,300 4,068,100

14,896,639 -4,643,039 347,000,000

- 16,809,400

12,168,100 572,900

1,315,200 13,449,900 14,765,100 -12,134,700

6,370,500

1,716,553,249

14,431,100

418,421,323

2,393,260,193

387,459,092

74,970,598 89,953,203

-2,246,900 307,949,569 7,733,400 9,980,300 17,713,700

572,486,791 6,822,000

672,785,175 682,155,834

587,542,977 6,178,000 19,178,000

16,564,400 2,133,300 18,697,700

NetBuy Sell Total

1,908,842,894

45,387,300 1,102,000 22,400 22,300 46,489,300 44,285,300

13,000,000

33,858

2-Jan-13

Net Buy Net Sell Net Buy Net Sell

2 Jan- 18 Jun 133-18 Jun 13

19 June 2013

Jun13 Jun 13

Total Volume Shares

(Last)

NVDR Shrs. Paid up CapitalNVDR Shrs.

18-Jun-13

Most Active Volume (shares) NVDR Shares to Total Paid-up Shares(%)

NET BUY NET SELL Month to Date Year to Date

Most Active Values (Btmn)

THAI NVDR : Top Ranking


Platform 1

Company Update, 17 June 2013

Pranda Jewelry (PRANDA TB) Buy (Maintained)

Consumer Cyclical - Retail Target Price: THB9.50

Market Cap: USD110m Price: THB8.25

A High-Yield, Great Value Buy

Macro

1.00

Risks

1.00

Growth

1.00

Value

1.00

Source: Bloomberg

Avg Turnover (THB/USD) 10.1m/0.34||m

Cons. Upside (%) 15.2

Upside (%) 15.2

52-wk Price low/high (THB) 6.50 - 11.9

Free float (%) 56

Shareholders (%)

Tiusuwan family 22.8

Thai NVDR 13.0

Citibank Nominees 3.4

Shariah compliant

Kowit Pongwinyoo +662 862 9743

[email protected]

Source: Company data, RHB Estimates

We believe the market’s over-reaction to fluctuations in gold price and its impact on the local currency has led to the 15% drop in Pranda’s share price. Now that as the baht is back on an uptrend and the decline in gold price may stoke demand for the commodity, this may be a good opportunity to invest in what we deem a high-yield, cheaply-valued company with firm long term growth as an added bonus. Maintain BUY.

The worst is behind us. PRANDA’s disappointing 1Q13 performance

was due to the sharp appreciation of baht vs USD and EURO currencies. This resulted in lower sales in baht term. Gross margin also dropped on discount promotions to clear out its old inventory. Now the baht has been on a weakening trend in line with the improved US economy, we expect PRANDA’s sales in baht term will be normalised. In addition the unrealized forex loss in 1Q13 may be fully offset by gain in 2Q13. The trend of declining prices of gold will also encourage people to buy more gold products. We therefore expect the weak 1Q13 results are behind us. We expect PRANDA to show growing sales and earnings from 2Q13 onwards.

No impact on inventory loss. PRANDA do not required to book

inventory loss on declining prices of gold due to two factors. First, the company has a policy of fast roll over from gold to products within 30-60 days. Therefore, there is only 100 kilogramme of gold left in the inventory each month. This is equal to only 12% of the company’s total inventory. Second, PRANDA has a policy of aggressively set- up provision of 16% each year against inventory. The accumulated provisions have now sufficient to cushion the declining prices of gold unless the prices come down below USD950-1000/ounce.

Sales to recover. With the company’s well diversified sales into three

continents, Europe (35%), Asia (35%) and the US (30%), and its customers who are in mid-high income earners, sales of PRANDA were flat during the financial crisis in the US and Europe. Good sales in Asia have been sufficient to offset the slowing down of sales in the US and Europe. We are now looking for its sales to recover in line with better prospect in the US while the European countries may need more time.

The worst is now behind. Pranda’s disappointing 1Q13 performance

was due to the sharp appreciation in the Thai baht vs the US dollar and Euro, as this led to lower sales in baht terms. Gross margin also narrowed as the company offered discounts to clear off old inventory. As the baht has been on a weakening trend in line with an improving US economy, we expect Pranda’s sales in baht terms to normalise. Elsewhere, the company’s unrealized forex loss in 1Q13 may be fully offset by gains in 2Q13. In the meantime, the downtrend in gold price will encourage people to buy more gold products. Based on these factors, we believe worst may be over for Pranda, for which we expect to see sales and earnings grow from 2Q13 onwards.

No impact on inventory loss. Pranda will not need to book an inventory

loss from declining gold prices due to: i) its policy of quickly rolling out products within 30 to 60 days. This leaves the company with only 100kg of gold inventory each month, which is equal to only 12% of its total inventory, and ii) it has an aggressive policy of setting aside provisions equivalent to 16% of inventory every year. The accumulated provisions are sufficient to cushion the decline in gold price, unless the metal falls below USD1,000 an ounce.

Sales to recover. With the company’s diversification in sales to Europe

(35%), Asia (35%) and the US (30%), and having customers who are mid- to high-income earners, Pranda’s sales remained flat during the financial crisis in US and Europe. This was because its robust sales in Asia have been sufficient to offset the slower sales in the two continents. We expect the company’s sales to recover as economic prospects in the US recover, although the European countries may need more time to get back on the growth track.

75

86

98

109

121

132

144

155

5.9

6.9

7.9

8.9

9.9

10.9

11.9

12.9

Pranda Jewelry (Pranda TB)

Price Close Relative to Stock Exchange of Thailand Index (RHS)

2

4

6

8

10

12

14

Ju

n-1

2

Au

g-1

2

Oct-

12

De

c-1

2

Fe

b-1

3

Ap

r-1

3

Vo

l m

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

Total turnover (THBm) 4,056 4,122 4,177 4,405 4,670

Reported net profit (THBm) 243 456 449 426 521

Recurring net profit (THBm) 362 380 470 426 521

Recurring net profit growth (%) 32.4 5.0 23.5 (9.2) 22.3

Core EPS (THB) 0.91 0.95 1.16 1.05 1.28

DPS (THB) 0.60 0.60 0.60 0.57 0.69

Dividend Yield (%) 7.3 7.3 7.2 6.9 8.4

Core P/E (x) 9.10 8.72 7.11 7.87 6.43

Return on average equity (%) 9.5 18.1 16.7 14.6 16.6

P/B (x) 1.33 1.30 1.19 1.11 1.02

P/CF (x) 25.0 10.7 5.7 6.3 7.6

EV/EBITDA (x) 6.14 6.61 5.57 5.96 4.82

Net debt to equity (%) 5.7 3.1 net cash net cash net cash

Our vs consensus EPS (%) (0.1) (99.0)

Pranda Jewelry (PRANDA TB)

17 June 2013


A Yield Play Minimal operating impact on the normal fluctuations of gold prices and currency. As 70% of its sales are derived from Original Design Manufacturing

(ODM), the company is able to pass on rising costs to its customers. As such, these costs will only minimally affect its operations. The company is also partly protected from natural hedging as 50% of its raw materials are imported and are on forward contract basis.

Margins to expand. With the company’s strategy to increase the proportion of high

margin or Own Brand Manufacturing (OBM) products from 30% to 50% in the next three years, we expect Pranda’s margin to gradually expand. Although the company has guided for an aggressive gross margin of 35% to 40%, we conservatively expect its gross margin to increase from 32% to 35%. It is also in the process of scaling down operations at its unprofitable overseas subsidiary in an attempt to reduce costs.

Go for this stock’s solid financials and 9%-12% yield. The company has net cash

and a free cash flow per share (FCF/share) of THB0.63, as well as a low debt-to-equity ratio of 0.24x. This will enable it to pay a high dividend, for an annual yield of 8%-10%. Its accumulated cash amounting to THB600m-THB700m will allow the company to pay a special dividend, probably next year.

Earnings growth has to wait until 2014. Despite expectations of better

performance in the following quarters, Pranda’s poor 1Q13 results will have an impact on its 2013 performance. We expect 2013 sales to grow 5% y-o-y to THB4.4bn but its core earnings are set to decline 10% y-o-y to THB426m. As we see the US economy continuing to improve while the European economy may start to stabilize, we envisage Pranda’s 2014 sales and earnings to rise 6% and 22% respectively.

BUY for the high 8%-10%. Our DCF-based TP for Pranda is THB9.50. Although this

only offers a 16% potential price upside, the stock offers a good annual yield of 8%-10% over the next two years. Given its high-yield nature, investors can also hold the stock for the long-term and wait for the company’s to return to a high earnings growth trajectory once the US and the European economies recover. Its P/E valuation, at 8x 2013F, is also cheap compared with its peers’ 16x-24x. These attributes make Pranda a BUY.

Figure 1: A peer comparison

Peer comparison Company Ticker

Price (USD)

Market Cap

(US$)

PE 2013F

(x)

PB 2013F

(x)

Jubile Enterprise JUBILE TB 0.83 144.5 19,6 7.4

Chow Tai Fook 1929 HK 1.14 11,351.1 15.9 2.6

Tiffany & Co TIF US 75.30 9,611.8 23.5 3.8

Pranda Jewelry PRANDA TB 0.27 110.4 7.9 1.1

Source: Bloomberg, RHB estimates


17 June 2013


Financial Exhibits



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

Total turnover 4,056 4,122 4,177 4,405 4,670

Cost of sales (2,719) (2,743) (2,760) (2,982) (3,077)

Gross profit 1,337 1,379 1,417 1,423 1,592

Other operating costs (867) (971) (946) (1,004) (1,074)

Operating profit 470 408 471 418 518

Operating EBITDA 546 493 552 516 620

Depreciation of fixed assets (76) (85) (81) (97) (102)

Operating EBIT 470 408 471 418 518

Net income from investments (10) (3) (16) (10) (10)

Other recurring income 32 39 42 43 44

Interest expense (35) (38) (46) (50) (50)

Exceptional income - net (150) 90 (22) - -

Pre-tax profit 307 496 429 401 502

Taxation (63) (79) (27) (23) (28)

Minority interests (1) 39 47 47 48

Profit after tax & minorities 243 456 449 426 521

Reported net profit 243 456 449 426 521

Recurring net profit 362 380 470 426 521

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

Operating profit 470 408 471 418 518

Depreciation & amortisation 76 85 81 97 102

Change in working capital (348) (105) 61 49 (147)

Other operating cash flow 32 39 42 43 44

Operating cash flow 230 427 655 607 518

Interest paid (35) (38) (46) (50) (50)

Tax paid (63) (79) (27) (23) (28)

Cash flow from operations 132 310 582 535 439

Capex 199 (138) (172) (282) (90)

Cash flow from investing activities 199 (138) (172) (282) (90)

Dividends paid (411) (241) (242) (242) (256)

Proceeds from issue of shares 8 8 10 0 -

Increase in debt (1) (12) 55 131 (109)

Other financing cash flow (1) 125 (32) (38) (38)

Cash flow from financing activities (405) (120) (209) (149) (403)

Cash at beginning of period 460 386 438 639 742

Total cash generated (74) 52 201 103 (54)

Implied cash at end of period 386 438 639 742 688


17 June 2013


Financial Exhibits



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

Total cash and equivalents 386 438 639 742 688

Inventories 1,616 1,817 1,901 2,005 2,126

Accounts receivable 935 879 708 747 792

Other current assets 70 84 70 72 73

Total current assets 3,007 3,218 3,318 3,566 3,680

Total investments 75 77 90 91 91

Tangible fixed assets 854 945 1,003 1,102 1,132

Total other assets 86 80 138 145 152

Total non-current assets 1,015 1,102 1,231 1,337 1,375

Total assets 4,022 4,320 4,549 4,903 5,054

Short-term debt 411 430 275 314 289

Accounts payable 895 1,002 935 1,011 1,043

Other current liabilities 92 95 98 99 100

Total current liabilities 1,398 1,527 1,308 1,424 1,432

Total long-term debt 117 86 296 388 304

Other liabilities 2 166 182 191 201

Total non-current liabilities 119 252 478 579 504

Total liabilities 1,517 1,779 1,786 2,003 1,937

Share capital 401 403 406 407 407

Retained earnings reserve 1,310 1,374 1,640 1,824 2,089

Other reserves 769 775 781 782 781

Shareholders' equity 2,480 2,552 2,827 3,012 3,277

Minority interests 11 (28) (76) (123) (171)

Other equity 14 17 12 12 12

Total equity 2,505 2,541 2,763 2,901 3,118

Total liabilities & equity 4,022 4,320 4,549 4,903 5,054

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

Revenue growth (%) 10.7 1.6 1.3 5.5 6.0

Operating profit growth (%) 42.4 (13.2) 15.4 (11.2) 23.9

Net profit growth (%) (5.1) 87.7 (1.5) (5.1) 22.3

EPS growth (%) (6.0) 86.4 (2.2) (5.5) 22.3

Bv per share growth (%) (6.8) 2.3 10.0 6.5 8.8

Operating margin (%) 11.6 9.9 11.3 9.5 11.1

Net profit margin (%) 6.0 11.1 10.7 9.7 11.2

Return on average assets (%) 5.9 10.9 10.1 9.0 10.5


Net debt to equity (%) 5.7 3.1 (2.5) (1.4) (3.0)

DPS 0.60 0.60 0.60 0.57 0.69

Recurrent cash flow per share 0.33 0.77 1.44 1.32 1.08


17 June 2013


SWOT Analysis

One of the country’s largest manufacturers and exporters of fine jewelry.

Well-diversified sales in US, Europe and Asia.

May incur gold inventory loss if gold prices fall below USD1,000 an ounce.

Stiff competition in the market place.

Margins to increase on focusing more on own brand manufacturers.

To tap more Asian markets under AEC framework.

European markets may need time to recover.

Higher market expenses to create its owned brand.

Source: Company data, RHB Estimates Source: Company data, RHB Estimates

Company Profile Pranda, found in 1973, is one of the major producers and exporters of fine jewelry exporters to North America, Europe and Asia. The group has eight production bases (three in Thailand and five overseas), and five distribution centres in the US, UK, France, Germany and India. Its annual capacity is 6m pieces of jewelry.

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Platform 1

Company Update, 19 June 2013

Siam Cement (SCC TB) Buy (Maintained) Diversified - Holding Companies Diverse Target Price: THB550

Market Cap: USD17,216m Price: THB440

Chasing The Growing Elephant

Macro

3.00

Risks

2.00

Growth

3.00

Value

3.00

89

95

101

107

113

119

290

340

390

440

490

540

Siam Cement (SCC TB)

Price Close Relative to Stock Exchange of Thailand Index (RHS)

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7

Jun-1

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12

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Vol m

Source: Bloomberg

Avg Turnover (THB/USD) 560m/18.9m

Cons. Upside (%) 19.8

Upside (%) 25.0

52-wk Price low/high (THB) 312 - 500

Free float (%) 68

Shareholders (%)

The Crown Property Bureau 30.0

Thai NVDR 12.6

Chase Nominee Limited 42 3.9

Sittichai Duangrattanachaya

+66 2862 9999 ext 2028

[email protected]

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

Total turnover (THBm) 301,323 368,579 407,601 433,280 458,410

Reported net profit (THBm) 37,382 27,281 23,580 31,966 34,210

Recurring net profit (THBm) 37,382 27,281 23,580 31,966 34,210

Recurring net profit growth (%) 53.3 (27.0) (13.6) 35.6 7.0

Core EPS (THB) 31.2 22.7 19.7 26.6 28.5

DPS (THB) 12.5 12.5 11.0 16.5 17.6

Dividend Yield (%) 2.8 2.8 2.5 3.7 4.0

Core P/E (x) 14.1 19.4 22.4 16.5 15.4


P/B (x) 3.97 3.77 3.69 3.38 3.10

P/CF (x) 18.8 23.0 na 26.0 15.5

EV/EBITDA (x) 14.0 13.0 14.0 11.0 10.9

Net debt to equity (%) 56.0 85.7 93.4 97.9 93.0

Our vs consensus EPS (%) (5.2) (14.3)


We resume coverage on SCC with a BUY and THB550 TP, which implies a 17.0x FY13F P/E and 13x FY13F EV/EBITDA. Despite a 12% y-o-y drop in net profit in 2012, we expect its EBITDA and earnings to go up at a 3-year CAGR of 15.4% and 27.5% respectively, supported by robust demand for cement and building materials. We are neutral on SCC’s petrochemical and paper businesses but see their y-o-y earnings growth improving.

Capturing Asean’s growth wave. According to International Monetary

Fund (IMF) and Asian Development Bank (ADB) projections, Asean’s GDP will grow by 5.4% to 5.9% from 2013 to 2015 while the investment-to-GDP ratio will inch up from 21% to 22% in 2014. Siam Cement (SCC) is in a good position to reap great benefits from the region’s economic growth as 18% of its sales and 38% of exports are to Asean countries. We like the Group’s position to fully capture the growth in this region.

Solid outlook with aggressive capacity expansion. We are bullish on

its cement and building material businesses but retain a neutral outlook for its chemical and paper divisions. Note that cement will continue to be the main growth driver due to the huge infrastructure projects and growth momentum in the property sector and SCC plans to boost capacity for its cement and paper businesses by 15% and 12% in 2015.

Impressive earnings growth. SCC’s FY13 earnings are expected to

grow by 35.6% y-o-y, above the industry average of 19%, on the back of a 6.3% y-o-y sales growth mainly driven by: i) strong domestic demand (+10%), ii) high demand for building materials as property sales are expected to jump 15%-20% this year, iii) higher margins and stronger seasonal demand for paper, and iv) an improved petrochemicals spread. We expect its EBITDA to assets ratio to tick up from 10% to 11% this year with its overall EBITDA margin at 13% (+2.7% y-o-y).

Maintain BUY. We have a BUY recommendation on the stock with our

SOP-based TP at THB550, offering a 29% upside from the current share price and a 3.7% dividend yield. The stock’s current valuations are attractive at a 15.4x FY13F P/E and 11.0x EV/EBITDA.


18 June 2013


Chasing The Growing Elephant Asean set to soar. Asean is the fastest-growing region in Asia. According to the IMF

and the World Bank, Asean’s GDP is expected to grow by 5.5%-6.5% y-o-y in 2013 before adjusting to 5.0%-6.0% in 2014-2015, driven by substantial government investments, rising income levels and strong domestic demand. In addition, the investments to GDP ratio will reach 21% and 22% in 2013 and 2014 respectively. Come end-2015, the Asian Economic Community (AEC) will also reduce trade barriers and spur new demand in the region. Due to this, we are positive on SCC as it is well-positioned to capture high growth with its clear strategies in Indonesia, Vietnam, Myanmar and even in Thailand. Currently, its Asean investments comprise 15% of its total assets and are worth USD2bn. As its businesses in Asean contribute to 18% of total sales and 38% of total exports, we think the region’s swiftly growing investments and high growth rate will benefit the group over the next five years.

Cement demand on the rise. Across the region, massive infrastructure projects are

being planned and implemented. The ADB has estimated that Asean nations will require c.USD583bn in infrastructure investments in 2015. In Thailand, the Government plans to invest USD68bn in key infrastructure projects. Meanwhile, the Indonesian government has allocated a budget for infrastructure projects of up to USD20bn for 2013-2014. Cement demand in Thailand and Indonesia is expected to increase by 10% y-o-y due to: i) the robust growth in construction activities for residential properties (which takes up 50% of cement demand), and ii) substantial investments made by the government to improve infrastructure (which take up 30% of cement demand). In addition, developers’ presales are estimated to grow by 15%-20% in 2013. We are bullish on the cement industry’s outlook and expect SCC’s cement sales and EBITDA to increase 7.7% and 12.6% y-o-y on lower coal prices and higher average selling prices. It also plans to increase its cement production capacity by 19% by 2016, with the first phase expected to be completed come late-2015. The second phase of expansion for its Indonesia and Myanmar factories would require an additional USD600m in capex.

Building materials business remains strong. We are positive on SCC’s building

materials business due to strong demand from the property sector. Demand for houses and condominiums remains healthy in Bangkok and the upcountry. Thus, the boom in provincial housing demand, particularly for detached houses, together with the company’s increasing new investments in Asean should support its strong sales growth outlook. We are forecasting a softer revenue growth of 7% for 2013 at an EBITDA margin of 14.9% due to higher labour and electricity costs.

As a result, the combined EBITDA contributions from its cement and building materials businesses remain solid at THB23.3bn (+9.3% y-o-y) for FY13. The two divisions jointly contributed THB13.9bn (+10.1% y-o-y) to earnings.

Flat growth for paper business. We think earnings growth at its paper business will

remain flat in 2013-2014, as its mills are running at full capacity despite demand not being as strong as it should be. The demand for packaging in Asean is outpacing that of supply in the past three years, even as there is an oversupply of printing and writing paper arising from the growing popularity of electronic reading devices. SCC expects the demand for packaging in Asean to rise by 5% in 2013, thereby outpacing the growth in supply by 3%-4%. We expect SCC’s paper sales to increase by 5.5% in 2013 and EBITDA to climb by 9.0%.

Turnaround of petrochemical business. SCC’s chemical business is set to see

strong EBITDA growth and a turnaround from its loss of THB3.3bn in 2012 to a net profit of THB11.1bn this year due to a temporary shortage in ethylene supply and the steady global economic recovery. Management expects chemical spreads to gradually improve and potentially drive growth moving forward. We expect the polyethylene (HDPE)-Naptha spread to increase from USD437/tonne in 2012 to USD500/tonne this year and the Propylene-Naptha spread to rise 9.5% y-o-y to USD550/tonne this year. We also expect the EBITDA for its chemical business to double in 2013 to THB17.6bn.


18 June 2013


Strong balance sheet. SCC has a strong balance sheet with net debt-to-EBITDA

maintained at 2.7x and net debt-to-equity at 0.9x. Its healthy balance sheet and cash position will enable the Group to invest c.THB80bn-THB100bn in new M&A deals and expand capacity by 15% in 2013-2014.

Maintain BUY. Despite SCC’s operations weakening in 2Q13, we continue to hold a

positive view on the growing demand for cement owing to the ramping up of infrastructure and water management projects. In addition, its building materials and paper businesses will continue to outperform from 2013 to 2015. Our SOP-based TP is at THB550. This valuation is set out in the table below.

Table 1: Details of SCC’s SOP valuation

EBITDA Value Methodology (THBm) (THBm) Chemical 17,569 122,986 7.0x EV/EBITDA Paper 9,634 150,105 DCF@WACC 10.0%, G=1% Cement 16,689 221,913 DCF@WACC 10.9%, G=1% Building materials 6,591 157,922 DCF@WACC 7.0%, G=0.5% Distribution 1,672 46,859 DCF@WACC 6.8%, G=0.5%

Total Enterprise value 699,786

Investment

205,109 2.5x P/B

(-) Net debt

(223,657)

(-) Minorities Interest

(18,937)

Equity value (THBm) 662,301

Number of shares outstanding (m)

1,200

Share value (THB) 550

Source: RHB Estimates

Earnings revision and changes to our TP. As we lift our TP from THB549 to

THB550 due to a change in our valuation methodology, we also raise our EBITDA and net profit estimates for FY13 by 40% and 3% respectively. Our TP implies a 29% upside from its current share price and a dividend yield of 3.7%.

---------------2013F--------------- ---------------2014F--------------- Revised Previous %Chg Revised Previous %Chg

Sales 433,280 434,195 0% 458,410 450,763 2% EBITDA 56,237 40,258 40% 59,957 43,992 36% Net profit 32,966 32,121 3% 35,210 34,309 3%

Source: RHB Estimates

Attractive valuation. Compared with its domestic and regional industrial peers, SCC

is trading at discounts of 4% and 8% to the average 2013F P/E and EV/EBITDA but has the lowest 2x PEG. We expect its FY13 earnings to surge 35.6% y-o-y and overshadow the industry’s average 19%.

Figure 1: GDP growth in Asean Figure 2: Asean countries import 38% of SCC’s products

Source: International Monetary Fund, Asian Development Bank Source: Siam Cement (Annual Report’ 2012)


18 June 2013


Figure 3: The Thai Government’s infrastructure development plan

Figure 4: Domestic cement sales

Source: Ministry of Transport, Ministry of Finance Source: Bank of Thailand

Figure 4: Quarterly presales Figure 5: Demand and supply in the paper and packaging industry

Source: Company data, RHB Estimates Source: RISI, Siam Cement

Figure 6: HDPA and propylene-naphtha spreads

Figure 7: Five-year forward P/E bands

Source: Bloomberg, Datastream Source: Bloomberg, RHB Estimates

Figure 8: Peer comparisons P/E P/BV EV/EBITDA Div yield (%) ROE (%)

Company 2013F 2014F 2013F 2014F 2013F 2014F 2013F 2014F 2013F 2014F Siam Cement 15.17 12.81 3.07 2.81 12.70 11.27 3.35 3.86 21.56 22.55 Siam City Cement 20.47 17.54 4.87 4.55 14.24 12.43 3.94 4.56 24.38 26.57 TPIPL 18.03 12.23 0.38 0.37 7.36 6.88 1.46 2.03 2.08 2.59 Regional Cement Average 16.47 12.72 1.77 1.59 14.26 12.59 6.26 7.34 12.18 13.42 Thai Cement Sector Average 17.89 14.20 2.77 2.58 11.43 10.19 2.92 3.48 16.01 17.23

Premium/(discount) to regional (%) 8.6% 11.6% 56.6% 61.8% -19.8% -19.0% -3.34 -3.86 3.82 3.82 Chemical Business PTT Chemical 8.62 8.26 1.28 1.18 6.41 6.11 5.10 5.37 15.41 14.80 Indorama Venture 14.22 10.10 1.35 1.23 9.74 8.23 2.49 3.24 9.93 12.78 Thai Plastic & Chemicals 9.42 9.72 1.54 n.a. 6.06 6.38 6.63 6.68 17.12 15.30

Industry Average 16.33 11.97 1.13 1.04 19.10 17.44 2.60 3.00 5.68 9.20 Regional Chemical Average 17.85 12.53 1.06 1.00 23.00 20.96 2.11 2.48 3.73 7.93

Source: Bloomberg, RHB estimates


18 June 2013


Financial Exhibits

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

Total turnover 301,323 368,579 407,601 433,280 458,410

Cost of sales (247,915) (315,811) (353,696) (367,331) (388,654)

Gross profit 53,408 52,768 53,905 65,948 69,756

Gen & admin expenses (30,326) (33,138) (36,518) (38,562) (40,340)

Operating profit 23,082 19,630 17,387 27,387 29,416

Operating EBITDA 35,559 32,838 31,434 44,127 47,144

Depreciation of fixed assets (12,477) (13,208) (14,047) (16,740) (17,729)

Operating EBIT 23,082 19,630 17,387 27,387 29,416

Net income from investments 8,390 6,774 1,561 6,140 6,477

Other recurring income 24,416 10,894 10,737 12,110 12,812

Interest expense (4,670) (6,048) (6,321) (5,964) (6,312)

Pre-tax profit 51,218 31,250 23,364 39,672 42,393

Taxation (13,959) (7,504) (4,742) (6,707) (7,183)

Minority interests 123 3,535 4,958 (1,000) (1,000)

Profit after tax & minorities 37,382 27,281 23,580 31,966 34,210

Reported net profit 37,382 27,281 23,580 31,966 34,210

Recurring net profit 37,382 27,281 23,580 31,966 34,210


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

Operating profit 23,082 19,630 17,387 27,387 29,416

Depreciation & amortisation 12,477 13,208 14,047 16,740 17,729

Change in working capital 211 7,945 (17,840) (12,645) (1,044)

Other operating cash flow 8,753 (4,166) (6,176) 628 1,323

Operating cash flow 44,523 36,617 7,418 32,110 47,423

Interest paid (4,670) (6,048) (6,321) (5,964) (6,312)

Tax paid (11,723) (7,616) (4,781) (5,826) (6,945)

Cash flow from operations 28,130 22,953 (3,684) 20,320 34,166

Capex (16,152) (18,388) (9,468) (22,984) (16,651)

Other investing cash flow 38,048 (27,705) 1,135 (628) (614)

Cash flow from investing activities 21,896 (46,093) (8,332) (23,611) (17,265)

Dividends paid (12,190) (18,068) (11,169) (19,771) (21,117)

Increase in debt 3,867 5,067 28,575 12,671 8,095

Other financing cash flow (6,812) (5,007) (3,006) 1,703 1,615

Cash flow from financing activities (15,135) (18,007) 14,400 (5,397) (11,407)

Cash at beginning of period 28,937 63,827 22,680 25,064 16,376

Total cash generated 34,890 (41,147) 2,384 (8,688) 5,494

Implied cash at end of period 63,827 22,680 25,064 16,376 21,870



18 June 2013


Financial Exhibits

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

Total cash and equivalents 63,827 22,680 25,064 16,376 21,870

Inventories 36,544 41,838 48,890 54,774 57,951

Accounts receivable 26,766 35,657 43,181 40,850 43,219

Other current assets 13,885 16,588 12,131 13,432 14,211

Total current assets 141,022 116,764 129,266 125,432 137,251

Total investments 56,441 86,610 82,383 82,383 82,383

Tangible fixed assets 154,006 160,694 170,162 193,145 209,797

Intangible assets 1,170 2,511 3,801 3,801 3,801

Total other assets 6,580 8,159 9,961 10,588 11,202

Total non-current assets 218,197 257,974 266,307 289,918 307,183

Total assets 359,219 374,738 395,573 415,350 444,434

Short-term debt 40,755 64,273 49,005 48,735 51,568

Accounts payable 22,969 25,403 45,471 31,372 33,191

Other current liabilities 19,358 16,775 4,254 10,832 11,460

Total current liabilities 83,082 106,452 98,731 90,938 96,220

Total long-term debt 112,497 97,995 126,570 139,242 147,337

Other liabilities 4,069 7,323 9,149 9,852 10,468

Total non-current liabilities 116,566 105,318 135,720 149,094 157,805

Total liabilities 199,649 211,770 234,450 240,033 254,025

Share capital 1,200 1,200 1,200 1,200 1,200

Retained earnings reserve 131,917 138,999 141,986 155,180 169,273

Shareholders' equity 133,117 140,199 143,186 156,380 170,473

Minority interests 26,453 22,770 17,937 18,937 19,937

Total equity 159,570 162,969 161,123 175,317 190,409

Total liabilities & equity 359,219 374,738 395,573 415,350 444,434


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

Revenue growth (%) 26.3 22.3 10.6 6.3 5.8

Operating profit growth (%) (16.2) (15.0) (11.4) 57.5 7.4

Net profit growth (%) 53.5 (27.0) (13.6) 35.6 7.0

EPS growth (%) 53.5 (27.0) (13.6) 35.6 7.0

Bv per share growth (%) 27.4 5.3 2.1 9.2 9.0

Operating margin (%) 7.7 5.3 4.3 6.3 6.4

Net profit margin (%) 12.4 7.4 5.8 7.4 7.5

Return on average assets (%) 11.1 7.4 6.1 7.9 8.0


Net debt to equity (%) 56.0 85.7 93.4 97.9 93.0

DPS 12.5 12.5 11.0 16.5 17.6

Recurrent cash flow per share 23.4 19.1 (3.1) 16.9 28.5



18 June 2013


SWOT Analysis

A leading conglomerate in the Asean region

SCC has grown and diversified into five core businesses: chemicals, cement, paper, building materials and distribution

The largest cement manufacturer in Thailand with a 45% market share

Risks from global crises or major incidents in countries where SCC owns investments

Fluctuating prices of fuel, waste paper and major raw materials like coal, Naphtha and HDPE

Exchange rate volatility

Changes in consumer behavior

High potential for growth in Asean market

Opening of Asean Economic Community (AEC) in late 2015

Benefits from the Government’s infrastructure and water management projects

More mergers and acquisitions in the next few years

Earnings highly sensitive to petrochemical spread

High capex plan implies high levels of debt

High degree of Government intervention

Intense competition in paper, chemical businesses

-40%

-20%

0%

20%

40%

60%

0

5

10

15

20

25

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/E (x) vs EPS growth

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

0%

6%

12%

18%

23%

29%

35%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/BV (x) vs ROAE

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

Source: Company data, RHB Estimates Source: Company data, RHB Estimates

Company Profile Siam Cement is a diversified industrial conglomerate which operates as a holding company engaged in the industrial supplies and construction industries. Its six main business units are petrochemicals, paper, cement, building materials, distribution and investment. The Group has more than 200 subsidiaries and affiliate companies offering more than 64,000 products. Its two-pronged growth strategy comprises the following: i) expanding its business in the Asean region, and ii) developing high-value products and services. The Crown Property Bureau Group, which owns approximately 30% of Siam Cement shares, manages its investment for the Thai royal family.


18 June 2013


Recommendation Chart

47

97

147

197

247

297

347

397

447

497

547

Jun-08 Sep-09 Dec-10 Apr-12

Price Close

NR

Recommendations & Target Price

Buy Neutral Sell Trading Buy Take Profit Not Rated

Source: RHB Estimates, Bloomberg

Date Recommendation Target Price Price

2013-05-20 Buy 549 472

Source : RHB Estimates, Bloomberg

9

RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 17 June 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietary positions in the securities covered in this report, except for: a) - As of 17 June 2013, none of the analysts who covered the securities in this report has an interest in such securities, except for: a) Siam Cement PCL Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd. Hong Kong This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company.

10

Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 17 June 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 17 June 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) Siam Cement PCL DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

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