Ideas Troika - 15 May 2014

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TM
Platform 1

Regional Daily, 15 May 2014
5

Regional Daily

Ideas Troika

Top Stories

Samart Corp PCL [SAMART TB] Pg3 SAMARTs 1Q14F net profit came in at THB403m (+15% y-o-y), in line with
our and consensuss estimates, driven mainly by higher smartphone sales of
729,777 units (+91% y-o-y) and higher ASP of THB 2,926 (+16% y-o-y)
Communications - Telecommunications
BUY THB19.80 TP: THB24.00
Mkt Cap : USD611m
Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)

First Resources [FR SP] Pg4 First Resources 1Q results were in line, making up 19% of our full year
forecast. Earnings were down 31% yoy due to very strong FY13 and thinning
refining margin in Indonesia. Production growth at 13% was still sharply
better than our conservative 3%. Maintain Buy.
Agriculture - Plantation
BUY SGD2.53 TP: SGD2.86
Mkt Cap : USD3,201m
Analyst: Alvin Tai, CFA (alvin.tai@rhbgroup.com)

Airports of Thailand [AOT TB] Pg5 AOTs 1HFY14 core earnings, which grew by 33% y-o-y came in line with
ours but ahead of consensus. Revenue growth outpaced costs which came
in flattish. We raise earnings slightly by 3.2-3.3.% for FY14-FY16. Maintain
BUY at a higher FV of THB243.
Transport - Aviation
BUY THB192 TP: THB243
Mkt Cap : USD8,438m
Analyst: Ahmad Maghfur Usman (ahmad.maghfur.usman@rhbgroup.com)

Tencent [700 HK] Pg6 Tencents CNY5.2b 1Q14 non-GAAP earnings (+18% q-o-q, +29% y-o-y)
beat street consensus by 10%. We adjusted our FY14/15/16 non-GAAP
earnings by -1.7%/+6.6%/+10.2% on higher overall margins, offset by lower
revenue of ecommerce business.
Technology - Software & Services
BUY HKD514 TP: HKD694
Mkt Cap : USD1.2bn
Analyst: Yujie Li (li.yu.jie@rhbgroup.com)

Other Key Stories
Indonesia
Tower Bersama Infrastructure [TBIG IJ] Pg7 Good Growth Momentum
Communications
BUY IDR6,825 TP: IDR8,000 Analyst: Lim Tee Yang, CFA (lim.tee.yang@rhbgroup.com)

XL Axiata [EXCL IJ] Pg8 Pushing Through Merger Benefits
NEUTRAL IDR5,225 TP: IDR4,700 Analyst: Jeffrey Tan (jeffrey.tan@rhbgroup.com)

Malaysia
Axiata Group [AXIATA MK] Pg9 Short-Term Pain For XL
NEUTRAL MYR6.96 TP: MYR6.65 Analyst: Lim Tee Yang, CFA (lim.tee.yang@rhbgroup.com)

Tan Chong [TCM MK] Pg10 A Bumpy Ride Ahead
Consumer Cyclical - Auto & Autoparts
NEUTRAL MYR5.59 TP: MYR5.60 Analyst: Alexander Chia (alexander.chia@rhbgroup.com)

Singapore
Golden Agri [GGR SP] Pg11 Decent Showing Despite Weaker Downstream
Agriculture - Plantation
BUY SGD0.61 TP: SGD0.66 Analyst: Alvin Tai, CFA (alvin.tai@rhbgroup.com)

TM
Platform 2

Regional Daily, 15 May 2014
Mencast Holdings [MCAST SP] Pg12 Record Orderbook Promises Growth
Energy & Petrochemicals - Oil & Gas Services
BUY SGD0.60 TP: SGD0.76 Analyst: Lee Yue Jer (yuejer.lee@sg.oskgroup.com)
Thailand
Industrial Estate Pg13 Amata Showed Strongest Profit Growth In 1Q14
NEUTRAL
Analyst: Wanida Geisler (wanida.ge@rhbgroup.com)

Erawan Group [ERW TB] Pg14 Unexpected 1Q14 Profit
Consumer Cyclical - Leisure & Entertainment
TRADING BUY THB3.74 TP: THB4.20 Analyst: Chalie Kueyen (chalie.ku@rhbgroup.com)

Indorama Ventures PCL [IVL TB] Pg15 1Q14 Earnings In Line Expecting a Better 2H14
Energy & Petrochemicals - Downstream Products
BUY THB23.60 TP: THB24.10 Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)

Jay Mart [JMART TB] Pg16 A Reasonable Start In 1Q14
Consumer Cyclical
BUY THB13.90 TP: THB17.80 Analyst: Veena Naidu (veena.na@rhbgroup.com)

Premier Marketing [PM TB] Pg17 Better Margins Led To Better Earnings
Consumer Non-cyclical
BUY THB8.45 TP: THB11.60 Analyst: Chalie Kueyen (chalie.ku@rhbgroup.com)

PTT [PTT TB] Pg18 1Q14 Q-o-q Earnings Improved
Energy & Petrochemicals
NEUTRAL THB301 TP: THB318 Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)

Sriracha Construction [SRICHA TB] Pg19 Lacks Near-Term Catalysts
Construction & Engineering
NEUTRAL THB35.30 TP: THB36.00 Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)

TM
Platform 3

Results Review, 14 May 2014

Samart Corp PCL (SAMART TB) Buy (Maintained)
Communications - Telecommunications Target Price: THB24.00
Market Cap: USD611m Price: THB19.80

1Q14 Results In Line
Macro

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67
72
76
81
85
90
94
99
103
108
112
12
14
16
18
20
22
24
26
28
30
32
Samart Corp (SAMART TB)
Price Close Relative to Stock Exchange of Thailand Index (RHS)
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Source: Bloomberg

Avg Turnover (THB/USD) 202m/6.23m
Cons. Upside (%) 13.1
Upside (%) 21.2
52-wk Price low/high (THB) 14.0 - 30.0
Free float (%) 51
Share outstanding (m) 1,006
Shareholders (%)
Vilailuck International Holding
Co., Ltd.
17.4
Mr Watchai Vilailuck 12.0
Mr Charoenrath Vilailuck 11.9

Share Performance (%)
YTD 1m 3m 6m 12m
Absolute 33.8 4.2 18.6 2.1 (28.0)
Relative 27.9 5.2 14.0 4.8 (12.7)

Shariah compliant

Kannika Siamwalla, CFA +66 2862 9744
kannika.si@rhbgroup.com

Chun Phokaisawan +66 2862 2029
chun.ph@rhbgroup.com

Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F
Total turnover (THBm) 19,767 16,733 22,315 28,323 29,652
Reported net profit (THBm) 836 1,084 1,468 1,941 2,096
Recurring net profit (THBm) 836 1,084 1,468 1,941 2,096
Recurring net profit growth (%) 33.1 29.6 35.5 32.2 8.0
Recurring EPS (THB) 0.85 1.10 1.47 1.94 2.09
DPS (THB) 0.75 0.61 0.81 0.97 1.05
Recurring P/E (x) 23.3 18.1 13.4 10.2 9.5
P/B (x) 4.16 3.63 3.15 2.73 2.38
P/CF (x) na 4.4 9.5 19.3 11.3
Dividend Yield (%) 3.8 3.1 4.1 4.9 5.3
EV/EBITDA (x) 12.2 11.8 8.3 7.2 7.0
Return on average equity (%) 18.4 21.5 25.1 28.6 26.9
Net debt to equity (%) 124.8 120.9 94.9 91.4 82.2
Our vs consensus EPS (adjusted) (%) 0.0 0.0

Source: Company data, RHB estimates
Samarts 1Q14 earnings of THB403m (+9% q-o-q) made up 20% of our
full-year forecast, on the back of higher smartphone sales volume. Its
ICT solutions unit reported flat earnings growth due to a lack of mega
projects in the pipeline. However, we continue to like Samart given
rising popularity of smartphones, which currently have a low
penetration rate of c.40% in Thailand. BUY, with a TP of THB24.

1Q14F net profit improves. Samart Corp (Samart)s 1Q14F net profit
came in at THB403m (+15% y-o-y, +9% q-o-q), at 20% of our full-year
forecast. Sales improved to THB6.3bn (+20% y-o-y), driven mainly by
higher smartphone sales of 729,777 units (+91% y-o-y). Operating profit
increased at a slower pace to THB739m (+5% y-o-y), as the company
tried to reduce its inventory levels via promotional sales. Meanwhile,
interest expenses dropped significantly by 15% y-o-y to THB106m, as
the company repaid loan from its ICT solutions business unit.
Robust business for Samart I-Mobile (SIM TB, NR). Samarts 1Q14
total handset sales volume was around 1m units (+20% y-o-y), while its
ASP rose to THB2,926 in 1Q14 from THB2,515 in 1Q13, driven by
higher smartphone sales volume. Note that Samarts total handsets sold
increased 20% y-o-y in 1Q14, even as the industry sold 2% fewer
handsets annually. Meanwhile, its mobile virtual network operator
business incurred a loss of c.THB20m in 1Q14, which is an improvement
from a loss of THB100m in 2013.
ICT unit sees flat earnings growth. The company recorded flat
earnings growth for its information and communications technology (ICT)
unit, Samart Telcoms (SAMTEL TB, NR). Sales declined to THB2bn in
1Q14 (-10% q-o-q) as the company has already completed most of its
3G network installation projects in 2013. However, Samart Telcoms
reported a 1Q14 net income of THB210m (+5% q-o-q) on the back of
lower interest expenses. Its orderbook stood at THB6.6bn at end-1Q14
as it booked c.THB2bn revenue and signed new projects worth
c.THB1.1bn in 1Q14. Its management has guided that the results of the
THB3.4bn advanced passenger processing system (APPS) project and
the THB2.5bn common use terminal equipment system (CUTE II) project
will be announced in May-June this year.

TM
Platform 4


First Resources (FR SP) Buy (Maintained)
Agriculture - Plantation Target Price: SGD2.86
Market Cap: USD3,201m Price: SGD2.53

Weaker Due To a Superb FY13
Macro

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90
100
110
120
130
140
150
1.5
1.7
1.9
2.1
2.3
2.5
2.7
First Resources (FR SP)
Price Close Relative to Straits Times Index (RHS)
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Source: Bloomberg

Avg Turnover (SGD/USD) 6.69m/5.31m
Upside (%) 13.1
52-wk Price low/high (SGD) 1.67 - 2.57
Free float (%) 31
Shareholders (%)
Eight Capital 63.2

YTD 1m 3m 6m 12m
Absolute 19.3 5.4 21.1 17.7 36.4
Relative 17.6 5.2 15.1 16.7 42.5

Shariah compliant

Alvin Tai, CFA +603 9207 7628
alvin.tai@rhbgroup.com

Total turnover (USDm) 495 603 626 743 750
Reported net profit (USDm) 196 308 238 229 279
Recurring net profit (USDm) 169 271 222 229 279
Recurring net profit growth 59.8% 60.4% (18.2%) 2.9% 22.1%
Recurring EPS (USD) 0.12 0.18 0.14 0.14 0.18
DPS (USD) 0.04 0.04 0.05 0.05 0.05
Recurring P/E (x) 17.5 11.5 14.4 14.0 11.5
P/B (x) 3.35 2.83 3.22 2.78 2.35
P/CF (x) 16.8 11.7 12.7 12.7 9.7
Dividend Yield 1.7% 2.0% 2.2% 2.4% 2.6%
EV/EBITDA (x) 11.0 8.7 10.5 10.0 8.2
Return on average equity 24.6% 30.9% 22.7% 21.3% 22.2%
Net debt to equity 15.0% 11.5% 20.9% 14.9% 5.1%
Our vs consensus EPS (adjusted) (3.8%) 2.4%

We continue to like First Resources although we no longer have it as
our sector Top Pick. It should do only marginally better this year due to
last years fantastic performance. Although the company has more than
90% of production from Sumatra, which was hit by drought, we have
already factored in an ultra-conservative production growth number.
Based on this, it is still inexpensive and still warrants a BUY.

Results in line. First Resources 1Q14 core earnings came in at
USD43.9m, which made up 19.2% of our full-year forecast and 18.8% of
consensus. We deem the results in line.
Worse y-o-y performance. While most plantation companies reported
strong double-digit gain in 1Q earnings, First Resources was by a
massive 31.0%. This was due to two main factors: i) refining margin is
now much worse than in 1Q13 due to the new refining capacity in
Indonesia, and ii) it did unusually well last year due to having the benefits
of high-priced forward sale. Hence, this year, First Resources upstream
business experienced a 15.4% y-o-y decline in profit. We do, however,
expect its earnings to gradually catch up over the course of the year.
Drought concern. Sumatras prolonged drought last year is a cause for
concern as it should impact production this year and First Resources has
more than 90% of its production in Sumatra. Our FY14 earnings forecast
has factored in a very conservative production growth of just 3% vs
management guidance of 5-10% growth and 1Q production growth of
13.1%. Having factored in these conservatism, it is still trading at
inexpensive P/Es of 14.0x and 11.5x forward.
Maintain BUY. We are keeping our forecast unchanged as well as FV of
SGD2.86 based on 16x CY14 earnings. We maintain that First
Resources is still a must-have plantation stock despite it no longer
being our sector Top Pick.

TM
Platform 5


Airports of Thailand (AOT TB) Buy (Maintained)
Transport - Aviation Target Price: THB243
Market Cap: USD8,438m Price: THB192

Resilient Numbers As Costs Improves
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106
117
129
141
152
164
120
140
160
180
200
220
240
Airport of Thailand (AOT TB)
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Source: Bloomberg

Upside (%) 26.6
52-wk Price low/high (THB) 137 - 225
Free float (%) 23
Shareholders (%)
Finance Ministry 70.0
Thai NVDR 4.5
Social Security Force 1.3

YTD 1m 3m 6m 12m
Absolute 20.8 (1.8) 8.8 (8.8) 26.0
Relative 13.3 (2.3) 2.4 (7.4) 40.0

Shariah compliant

Ahmad Maghfur Usman 603 9207 7654
ahmad.magfur.usman@rhbgroup.com

Forecasts and Valuations Sep-12 Sep-13 Sep-14F Sep-15F Sep-16F
Reported net profit (THBm) 6,500 16,347 14,749 18,854 22,647
Recurring net profit (THBm) 6,889 10,386 14,749 18,854 22,647
DPS (THB) 1.80 2.91 4.13 5.28 6.34
Recurring P/E (x) 39.7 26.3 18.5 14.5 12.1
P/B (x) 3.52 2.99 2.72 2.45 2.18
P/CF (x) 17.0 13.3 14.6 11.9 10.0
Dividend Yield (%) 0.9 1.5 2.2 2.8 3.3
EV/EBITDA (x) 18.1 12.7 10.9 8.6 7.4
Net debt to equity (%) 31.9 2.7 net cash net cash net cash
Our vs consensus EPS (adjusted) (%) 21.5 30.0 30.7

AOTs commendable 1HFY14 core earnings, which grew by 33% y-o-y
came in line ours but ahead of consensus. Revenue growth outpaced
costs which came in flattish, thanks to its improved operating efficiency
and economies of scale achieved. We raise earnings slightly by 3.2-
3.3.% for FY14-FY16. This raises our FV to THB243 premised at 13x
EV/EBITDA. With 26% upside, we maintain our BUY call.

Within but ahead of consensus. Airports of Thailand (AOT)s 1HFY14
core earnings of THB7.4bn (YTD: +33%) were in line ours (at 51% of full
year forecast) but exceeded consensus (at 61% of full year forecast).
AOT only recorded a 2% YTD increase passenger service charge
revenue due to the slowdown in passenger growth of 5% YTD which was
caused by the political turmoil in Bangkok. However, thanks to the
aggressive expansion of low cost carriers and the lower discount on
aircraft landing charges at Don Mueang (where discounts were reduced
to 20% from 30% last year), its landing and parking revenue saw a
strong increase of 22.5% YTD, thus lifting total revenue by 8% YTD.
Costs remain flat. With its revenue growing 8% YTD, AOTs operational
costs came in marginally lower (YTD: -0.1%) as a result to economies of
scale and improved operational efficiencies and cost management,
which would have likely led to the drop in utilities expense (YTD: -2%).
The improved employee productivity, which is the biggest cost
component only increased by 2% YTD. As a result core net margin
expanded to 37.5% (from 30.4%).
Forecasts. As of 1HFY14, passenger only grew by 5% YTD, while
aircraft movement has grown by 15%. We reduce passenger growth
forecast to 7% (from 10.4%) but raise aircraft movement growth to
16.2% (from 11.3%) due to the ongoing expansion of low cost carriers.
We see the upcoming commencement of Thailands first long haul low
cost carrier, Thai AirAsia X, to give boost to passenger numbers moving
forward. We have also lowered personnel and utilities expenses as these
came below our forecast. All in, earnings for FY14-FY16 are raised by
3.2%-3.3%.
BUY maintained. We roll over earnings horizon 12 months forward and
raise our FV to THB243 (from THB226) which is slightly lower than our
DCF valuation of THB247 (based on a WACC of 9.2%). Our FV is
premised at 13x EV/EBITDA (from 14x earlier).

TM
Platform 6


Tencent (700 HK) Buy (Maintained)
Technology - Software & Services Target Price: HKD694.00
Market Cap: USD123,711m Price: HKD514.00

Strong 1Q14 Earnings Beat Street Consensus
Macro

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86
104
122
139
157
175
193
210
228
246
230
280
330
380
430
480
530
580
630
680
Tencent Holdings (700 HK)
Price Close Relative to Hang Seng Index (RHS)
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Source: Bloomberg

Avg Turnover (HKD/USD) 3,507m/452m
Cons. Upside (%) -16.3
Upside (%) 35.1
52-wk Price low/high (HKD) 274 - 635
Free float (%) 50
Shareholders (%)
MIH China (Naspers) 33.9
Ma Huateng 10.2
Zhang Zhidong 6.2

YTD 1m 3m 6m 12m
Absolute 3.9 (2.3) (6.3) 25.1 90.5
Relative 7.0 (0.3) (7.6) 25.4 92.0

Shariah compliant

Yujie Li +852 2103 5680
li.yu.jie@rhbgroup.com

Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F
Total turnover (CNYm) 43,894 60,437 80,929 100,442 120,769
Reported net profit (CNYm) 12,732 15,502 22,168 29,718 36,885
Recurring net profit (CNYm) 14,287 17,063 22,913 33,168 41,053
Recurring EPS (CNY) 7.8 9.3 12.5 18.1 22.4
DPS (CNY) 0.81 0.79 1.13 1.51 1.87
Recurring P/E (x) 52.8 44.4 33.1 22.9 18.5
P/B (x) 18.0 12.9 10.1 7.5 5.7
P/CF (x) 34.5 26.0 20.3 16.2 13.4
Dividend Yield (%) 0.2 0.2 0.3 0.4 0.5
EV/EBITDA (x) 19.0 13.8 12.3 10.5 9.0
Net debt to equity (%) net cash net cash net cash net cash net cash

Tencents CNY5.2bn 1Q14 non-GAAP earnings beat street consensus
by 10% with revenue in line. We adjust our FY14/15/16 non-GAAP
earnings by -1.7%/+6.6%/+10.2% on higher overall margins, offset by
lower revenue from its e-commerce business. Our new HKD694.00 TP
(from HKD638.50) comprises: i) Weixin at HKD135/share, ii) the rest of
its businesses at HKD539.00/share based on 1.0x PEG, and iii) net cash
of HKD20.00. Maintain BUY.

Earnings beat. 1Q14 revenue of CNY18.4bn (+8% q-o-q, +36% y-o-y)
was in line with street and our estimates. 1Q14 non-generally accepted
accounting principles (GAAP) profit of CNY5.2bn (+18% q-o-q; +29% y-
o-y vs our CNY5.3bn estimate) beat street consensus by 10% with non-
GAAP profit margin of 28.2% (+1.7ppts q-o-q) vs 26% (consensus).
Internet valued-added services (IVAS), advertising and e-commerce
revenue increased by 35%, 38% and 32% y-o-y respectively. Total game
revenue grew by 22.6% q-o-q with mobile game topline jumping by
200% q-o-q to CNY1.8bn. Weixin and WeChat saw robust growth in
combined monthly active users (MAU) of 396m (+11.5% q-o-q).
Revenue cut with higher margins. We cut our FY14F/15F/16F revenue
by 4.4%/11.1%/14.9% mainly on management guidance that e-
commerce revenue should decrease over time as its focus would be on
its cooperation with JD.com. We also revise upwards value-added
services (VAS) and others revenue but cut its advertising topline. Since
e-commerce has the lowest GPM of 4% vs overall GPM of 58% in 1Q14,
the lower revenue contribution from e-commerce should boost
FY14F/15F/16F GPM to 57.3%/60.6%/61.8% in our forecast. As a result,
the FY14F/15F/16F non-GAAP earnings are adjusted by -
1.7%/+6.6%/+10.2%.
Maintain BUY with higher HKD698TP (from HKD638.5). This is based
on the SOP methodology. We value: i) Weixin (based on Weixin
payment only) at the same HKD135.00/share (CNY195.5bn) based on
8x FY17F price/sales (a 27% premium to the transaction multiple of
eBays acquisition of PayPal in FY02) on FY17F revenue of CNY34.3bn,
ii) the rest of its business at HKD539.00/share (from HKD483/share),
based on the same 1.0x PEG (FY13-16 non-GAAP EPS CAGR of
34.2%) vs its peers 0.6x on its market-leading position, and iii) net cash
of HKD20.00/share. Our TP implies a 44x FY14F P/E. Maintain BUY.

TM
Platform 7


Tower Bersama Infrastructure (TBIG IJ) Buy (Maintained)
Communications - Telecommunications Infrastructure Target Price: IDR8,000
Market Cap: USD2,860m Price: IDR6,825

Good Growth Momentum
Macro

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86
94
101
109
116
124
131
4,200
4,700
5,200
5,700
6,200
6,700
7,200
Tower Bersama Infrastructure (TBIG IJ)
Price Close Relative to Jakarta Composite Index (RHS)
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Source: Bloomberg

Avg Turnover (IDR/USD) 11,723m/1.02m
Upside (%) 17.2
52-wk Price low/high (IDR) 4,525 - 6,825
Free float (%) 41
Shareholders (%)
Wahana Anugerah Sejahtera PT 30.2
Provident Capital Indonesia PT 28.7

YTD 1m 3m 6m 12m
Absolute 17.7 12.8 10.1 9.2 19.7
Relative 0.9 10.2 (0.6) (5.1) 21.5

Shariah compliant

Lim Tee Yang, CFA +603 9207 7607
lim.tee.yang@rhbgroup.com

Total turnover (IDRbn) 970 1,715 2,691 3,432 4,006
Reported net profit (IDRbn) 474 842 1,248 1,505 1,867
Recurring net profit (IDRbn) 389 667 1,266 1,505 1,867
Recurring EPS (IDR) 92 145 268 314 389
DPS (IDR) 25.0 0.0 60.0 72.2 89.5
Recurring P/E (x) 74.2 47.1 25.5 21.7 17.5
P/B (x) 12.4 8.0 8.2 6.4 5.0
P/CF (x) 55.8 24.6 17.8 17.1 13.1
Dividend Yield (%) 0.4 0.0 0.9 1.1 1.3
EV/EBITDA (x) 44.3 29.6 20.5 17.1 15.1

TBIGs 1Q14 results were generally in line with our and consensus
expectations. Sequential revenue growth saw continued momentum in
1Q, while EBITDA margin held steady. We maintain our view that there
is still upside for TBIG, given its now cheaper valuations compared to
its peer, Sarana Menara (TOWR, BUY, TP: IDR3,950), which has risen
sharply. Maintain BUY.

Within expectations. Tower Bersama Infrastructure (TBIG)s 1Q14
EBITDA of IDR640bn (+26.7% y-o-y) accounted for 23% and 24% of our
and consensus full-year estimates respectively. No dividends were
declared.
Growth momentum intact. Q-o-q, revenue grew 6.2%, which is still
relatively commendable despite 1Q typically being a slow quarter, given
that the average run rate of sequential revenue growth in FY13 was
6.2%. The relatively strong sequential revenue growth in 1Q comes on
the back of higher sequential tenancy growth of 723 (4Q: +420), which
we believe may have been due to a backlog of orders unfulfilled in 4Q13.
1Q EBITDA margin was steady at 82.0% (4Q13: 82.1%). But due to a
higher effective tax rate, 1Q core earnings fell 28.7% q-o-q to IDR205bn.
Forecasts. We make no change to our earnings forecasts.
Investment case. We maintain BUY on TBIG (our top pick in the tower
infrastructure sector), with a revised TP of IDR8,000 (previously
IDR7,250), based on an unchanged target EV/EBITDA multiple of 16x to
our FY15 EBITDA estimate of IDR3.21trn. We still like TBIG for its higher
revenue exposure to major telecom operators as well as a greater
proportion of its tower portfolio in densely-populated areas, which would
fuel earnings growth going forward. Our target EV/EBITDA multiple is
comparable to peers in developed markets that are trading at 15-17x,
which we believe is justified given the strong growth prospects for the
Indonesian tower market.

TM
Platform 8

1QFY14 Results Review, 15 May 20144

XL Axiata (EXCL IJ) Neutral (Maintained)
Communications - Telecommunications Target Price: IDR4,700
Market Cap: USD3,865m Price: IDR5,225

Pushing Through Merger Benefits
Macro

2
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0
0
Risks

2
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0
0
Growth

2
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0
0
Value

2
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0
0

81
86
91
96
101
106
111
116
121
3,800
4,000
4,200
4,400
4,600
4,800
5,000
5,200
5,400
XL Axiata PT (EXCL IJ)
Price Close Relative to Jakarta Composite Index (RHS)
5
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15
20
25
30
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Source: Bloomberg

Avg Turnover (IDR/USD) 11,567m/1.01m
Upside (%) -10.0
52-wk Price low/high (IDR) 4,000 - 5,275
Free float (%) 10

Shareholders (%)
Axiata Group 66.5

Shariah compliant

Jeffrey Tan +603 9207 7633
jeffrey.tan@rhbgroup.com

Total turnover (IDRbn) 18,263 20,970 21,267 23,421 25,153
Reported net profit (IDRbn) 2,833 2,767 1,034 717 1,396
Recurring net profit (IDRbn) 3,171 2,880 1,810 717 1,396
Recurring net profit growth (%) 4.3 (9.2) (37.2) (60.4) 94.5
Recurring EPS (IDR) 373 338 213 84 164
DPS (IDR) 130 135 64 35 61
Recurring P/E (x) 14.0 15.4 24.6 62.0 31.9
P/B (x) 3.25 2.89 2.91 2.87 2.68
P/CF (x) 5.19 4.70 6.07 5.80 5.36
Dividend Yield (%) 2.5 2.6 1.2 0.7 1.2
EV/EBITDA (x) 5.04 5.23 5.86 6.04 5.09
Our vs consensus EPS (adjusted) (%) (7.3) (5.2)

XLs results, factoring in the loss-making Axis, were broadly in line.
The price optimisation initiatives halted the decline in voice revenue
but data monetisation remains a key challenge. Its earnings prospect
hinges on the extent of revenue/cost synergies to be realised from the
merger, with EPS accretion seen only in FY16. FV is raised to IDR4,700
as we now model in lower capex for FY15. NEUTRAL maintained.
Broadly in line. XL Axiata (XL)s EBITDA accounted for 106% of
our/consensus estimates when annualised. Note the 12 days contribution
from loss-making Axis (IDR64bn loss) for the quarter (acquisition
completed on 19 March), which distorted below the line assessment. We
expect the bulk of integration-related costs to flow through from 2Q14.
Key highlights. Mobile revenue was up 8.4% y-o-y, driven by the 30%
increase in non-SMS data and the resumption of voice revenue growth
after four consecutive quarters of y-o-y declines. The positive voice
traction was the result of price optimisation efforts implemented since
2H13. The fact that non-voice revenue growth continued to lag usage
(+180% y-o-y) implies that data monetisation remains an uphill battle.
Outlook. XLs earnings prospects will be dictated by revenue/cost
synergies to be extracted from the merger. The guidance on revenue
growth (low teens), EBITDA margin (mid-30s) and capex (around
IDR7trn) for FY14 have been reaffirmed as with the two year window
(FY16) for merger to be EPS accretive. With additional 1.8GHz spectrum
and the improvement in network quality, there is room for XL to exercise
greater leverage on price-points, in our view.
Forecast and risks. We make no change to our FY14 forecast. FY15
EPS is increased by 15% as we now project capex to fall to IDR5trn from
IDR6trn, resulting in lower depreciation expense. The earnings risks are:
i) the pace of cost synergies realised and ii) higher-than-expected
competition.
NEUTRAL. Investors should take some profit from recent share price
gains. The earnings upgrade for FY15 bumps up our FV to IDR4,700
(from IDR4,400), premised on 5.2x EV/EBITDA and 16x FY15 EPS.

TM
Platform 9

Company Update, 15 May 2014

Axiata Group (AXIATA MK) Neutral (Maintained)
Communications - Telecommunications Target Price: MYR6.65
Market Cap: USD18,505m Price: MYR6.96

Short-Term Pain For XL
Macro

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Risks

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Growth

1
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Value

1
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89
91
93
94
96
98
100
101
103
6.3
6.4
6.5
6.6
6.7
6.8
6.9
7.0
7.1
Axiata (AXIATA MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
5
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15
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Source: Bloomberg

Avg Turnover (MYR/USD) 59.2m/18.1m
Upside (%) -4.5
52-wk Price low/high (MYR) 6.44 - 6.96
Free float (%) 39
Shareholders (%)
Khazanah Nasional 38.9
Employees Provident Fund 12.0
Permodalan Nasional Berhad 10.3

YTD 1m 3m 6m 12m
Absolute 0.9 5.6 6.3 1.8 (0.3)
Relative 0.2 4.1 3.0 (3.5) (5.4)

Shariah compliant

Lim Tee Yang, CFA +603 9207 7607
lim.tee.yang@rhbgroup.com

Total turnover (MYRm) 16,290 17,652 18,371 19,453 20,202
Reported net profit (MYRm) 2,346 2,513 2,550 2,695 2,932
Recurring net profit (MYRm) 2,539 2,784 2,761 2,695 2,932
Recurring net profit growth (%) (2.8) 9.7 (0.8) (2.4) 8.8
Recurring EPS (MYR) 0.30 0.33 0.32 0.31 0.34
DPS (MYR) 0.19 0.23 0.22 0.25 0.29
Recurring P/E (x) 23.2 21.3 21.6 22.1 20.2
P/B (x) 2.98 2.95 3.04 2.82 2.75
P/CF (x) 10.2 8.7 8.6 7.8 8.7
Dividend Yield (%) 2.7 3.3 3.1 3.6 4.2
EV/EBITDA (x) 6.97 6.83 6.73 6.87 6.40
Our vs consensus EPS (adjusted) (%) (3.4) (4.5)

XLs 1Q results were broadly in line. We raise Axiatas FY15F EPS by
1.4% following lower capex assumptions at XL, which results in lower
depreciation charges. We also tweak Axiatas FV marginally to MYR6.65
(previously MYR6.60) following a sight revision in XLs FV to IDR4,700
from IDR4,400. As Axiatas short-term earnings outlook remains
clouded by the XL-Axis merger, we maintain NEUTRAL on Axiata.
Tepid start for XL. Axiatas 67%-owned subsidiary, XL Axiata (EXCL IJ,
NEUTRAL, FV: IDR4,700), posted a 1Q14 core net loss of IDR15bn.
However, we note that its 1Q core earnings include an IDR232bn
realised forex loss from USD debt hedging. Excluding this forex loss,
XLs 1Q would have been broadly in line with expectations.
Revenue growth resumes momentum. XLs 1Q revenue increased
1.1% q-o-q (4Q13: -1.1%), as stronger data growth of 5.6% (4Q13:
+4.3%) mitigated a seasonally slower quarter for voice (-4.6%) and short
message service (SMS) (-2.1%). Q-o-q, while EBITDA fell only 1.2 ppts
to 39.9%, XL recorded a core net loss of IDR15bn due to an IDR232bn
realized forex loss from USD debt hedging.
Outlook. XLs 1Q14 only reflects 12 days of consolidated financials, with
losses from Axis estimated at IDR64bn over that period. The real extent
of losses at Axis (for a full quarter) is still uncertain. Still, management
reiterated its guidance that the XL-Axis merger will be earnings-accretive
by FY16. XL now has control of Axis spectrum, and has begun early
efforts to improve voice quality at congested areas, which should help
pricing power. Management maintained its EBITDA margin guidance in
the mid-30s, and expects some cost reduction in 2H upon fully
integrating both networks by year-end.
Forecasts. We increase Axiatas FY15F EPS by 1.4% following a 15%
upgrade in XLs FY15 EPS. We make no change to FY14F EPS.
Investment case. We maintain NEUTRAL on Axiata but tweak our SOP-
based FV to RM6.65. Axiatas FY14 earnings growth outlook remains
cloudy due to: i) XLs continued challenges in monetising data, and ii)
XLs earnings dilution following its acquisition of Axis. We expect to see
a meaningful earnings recovery for Axiata only in FY15.

TM
Platform 10


Tan Chong (TCM MK) Neutral (Maintained)
Consumer Cyclical - Auto & Autoparts Target Price: MYR5.60
Market Cap: USD1,128m Price: MYR5.59

A Bumpy Ride Ahead
Macro

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Risks

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Growth

3
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0
Value

3
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0
0

80
84
88
92
96
100
104
108
112
116
120
5.2
5.4
5.6
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
Tan Chong Motor (TCM MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
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Source: Bloomberg

Avg Turnover (MYR/USD) 0.55m/0.17m
Upside (%) 8.2
52-wk Price low/high (MYR) 5.45 - 7.01
Free float (%) 40
Share outstanding (m) 653
Shareholders (%)
Tan Chong Consolidated Sdn Bhd 46.2
Nissan Motor Co Ltd 5.7
Employees Provident Fund Board 7.6

YTD 1m 3m 6m 12m
Absolute (9.7) 1.5 (2.1) (12.7) (6.1)
Relative (9.6) 0.8 (4.3) (16.7) (11.4)

Shariah compliant

Alexander Chia +603 9207 7621
alexander.chia@rhbgroup.com

Total turnover (MYRm) 3,860 4,088 5,198 5,579 5,958
Reported net profit (MYRm) 216 166 251 303 353
Recurring net profit (MYRm) 216 166 251 303 353
Recurring net profit growth (%) (5.9) (23.3) 51.4 20.9 16.5
Recurring EPS (MYR) 0.33 0.25 0.38 0.46 0.54
DPS (MYR) 0.09 0.09 0.16 0.19 0.22
Recurring P/E (x) 16.9 22.0 14.5 12.0 10.3
P/B (x) 1.98 1.86 1.35 1.24 1.14
P/CF (x) 21 271 na 7 8
Dividend Yield (%) 1.6 1.6 2.8 3.4 3.9
EV/EBITDA (x) 10.6 13.6 10.1 8.3 7.3

1Q14 earnings disappointed on the back of weaker domestic sales
volumes, higher depreciation costs, unfavourable exchange rates and
start-up costs in regional markets combined with negative operating
leverage leading to margin erosion. We slash our 2014/15 earnings
forecasts by 14.1%/13.6% respectively and lower FV to MYR5.60. We
prefer Berjaya Auto (BAUTO MK, BUY, FV: MYR2.55). Stay NEUTRAL.
Tepid 1Q14. Tan Chong reported tepid 1Q14 earnings. Revenue fell
6.9% and 12.3% q-o-q and y-o-y respectively to MYR1.26bn. This was
on the back of weaker domestic Nissan and Renault volume sales that
declined 10.9% q-o-q and 18.7% y-o-y to 11,976 units. EBIT margin for
the quarter fell to 5.7% vs 7.9% in 4Q13 (1Q13: 8.9%). Net profit for the
quarter fell 38.9% q-o-q and 50.7% y-o-y to MYR41.5m. Earnings for the
quarter were below expectations, reaching just 14% of our previous
estimate and 13% of consensus forecast. Margin compression was due
to a combination of factors, including negative operating leverage
resulting from the decline in sales volume. Tan Chong also suffered from
higher depreciation costs arising from the Danang plant in Vietnam,
higher average JPY/MYR exchange rates and ongoing start-up losses in
Indo-China. Domestically, management also reports higher marketing
costs as a result of a more competitive trading environment.

Challenging outlook. Tan Chongs Indo-China business is not expected
to break even until 2015. Nissan sales should pick up in 2H14, helped by
the launch of the new C-segment Sylphy (April) and D-segment Teana
(June). Competition in the B-segment is increasingly fierce, with the
recent introduction of the Toyota Vios and Honda City. The completely
knocked down (CKD) Serena Hybrid is scheduled for launch later this
year, while the promising Note Hatchback will only arrive in 2015.

Risks and forecasts. The key risks are weaker-than-expected consumer
discretionary spending and continued losses in Indo-China. Our 2014
and 2015 forecasts are lowered by 14.1% and 13.6% respectively after
cutting our volume forecasts and margin assumptions.

Investment case. Macro conditions for consumer spending on big-ticket
items will remain difficult. Competition among the Big Three non-national
players will remain stiff.

TM
Platform 11


Golden Agri (GGR SP) Buy (Maintained)
Agriculture - Plantation Target Price: SGD0.66
Market Cap: USD6,255m Price: SGD0.61

Decent Showing Despite Weaker Downstream
Macro

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Risks

2
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2
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93
99
105
111
117
123
0.40
0.45
0.50
0.55
0.60
0.65
Golden Agri (GGR SP)
50
100
150
200
250
300
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Source: Bloomberg

Upside (%) 8.6
Free float (%) 50

Shareholders (%)
Widjaja family 50.0

Shariah compliant

Alvin Tai, CFA +603 9207 7628
alvin.tai@rhbgroup.com

Total turnover (USDm) 5,953 6,052 6,585 7,396 8,088
Reported net profit (USDm) 1,268 410 311 380 436
Recurring net profit (USDm) 586 404 317 380 436
Recurring net profit growth 46.8% (31.0%) (21.7%) 19.9% 14.8%
Recurring EPS (USD) 0.05 0.03 0.02 0.03 0.03
DPS (USD) 0.01 0.01 0.01 0.01 0.01
Recurring P/E (x) 10.1 15.1 19.8 16.5 14.4
P/B (x) 0.74 0.73 0.72 0.71 0.69
P/CF (x) 9 18 341 116 16
Dividend Yield 2.9% 2.0% 1.1% 1.4% 1.6%
EV/EBITDA (x) 7.1 8.9 12.0 12.3 11.3
Return on average equity 17.1% 4.9% 3.6% 4.3% 4.9%
Net debt to equity 9.0% 13.6% 22.7% 32.2% 35.4%
Our vs consensus EPS (adjusted) (13.0%) (8.3%)

Golden Agris 1Q core earnings beat expectations, making up 26.5% of
our full-year forecast and 23.7% of consensus. The stronger upstream
performance was offset by weaker downstream margin. We are
maintaining our BUY call on the stock as it is the sector proxy and a
proxy to Indonesias rising palm oil consumption.

Another good quarter. Following a strong 4QFY13, Golden Agri
delivered another set of commendable results, with core earnings
coming in at USD100.7m. This made up 26.5% of our forecast and
23.7% of consensus, which we deem better than expected. Against
1QFY13 which made up 35.6% of full-year earnings, 1QFY14 compared
poorly. This was due to sharply weaker refining margin with the onset of
massive new refining capacity in Indonesia.
The key forecast items. Realised CPO price of USD856/tonne was
higher than our assumption of USD844/tonne, while cash cost was lower
at USD290/tonne vs our assumption of USD320. The lower cost was due
to lower fertiliser price, lower fertiliser application and depreciation of the
IDR against the USD. The volume of fertiliser used was lower than
normal due to the extreme dryness from January to February, which
resulted in the holding back of fertiliser application.
Production. The companys nucleus production growth of 5.8% y-o-y
was slightly better than our assumption of 4.4%. Management is sticking
to its 5 10% guidance for now but admits that the outlook is not clear.
We believe our assumption is sufficiently conservative for now.
Forecast and FV. No change to our SGD0.66 FV as we are keeping our
forecast unchanged. Extreme negative weather notwithstanding, Golden
Agri should experience an improvement in yield given the larger
proportion of prime mature area this year (51% vs 47% last year).

TM
Platform 12


Mencast Holdings (MCAST SP) Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services Target Price: SGD0.76
Market Cap: USD143m Price: SGD0.60

Record Orderbook Promises Growth
Macro

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3
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3
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95
102
108
115
122
128
135
0.40
0.45
0.50
0.55
0.60
0.65
0.70
Mencast Holdings (MCAST SP)
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Source: Bloomberg

Upside (%) 26.5
Free float (%) 39
Shareholders (%)
Sim Soon Ngee Glenndle 21.6
Chua Kim Choo 9.5
Gay Chee Cheong 8.7

YTD 1m 3m 6m 12m
Absolute 15.4 0.8 6.2 17.6 18.1
Relative 13.7 0.0 0.0 16.3 24.5

Shariah compliant

Lee Yue Jer +65 6232 3898
yuejer.lee@sg.oskgroup.com

Total turnover (SGDm) 56 84 99 137 162
Reported net profit (SGDm) 10.2 13.2 15.7 20.5 25.7
Recurring net profit (SGDm) 10.2 10.6 10.4 18.6 24.0
Recurring net profit growth (%) 20.4 3.9 (2.6) 79.6 29.0
Recurring EPS (SGD) 0.05 0.04 0.04 0.06 0.08
DPS (SGD) 0.01 0.01 0.02 0.02 0.02
Recurring P/E (x) 13.0 14.8 16.7 9.5 7.4
P/B (x) 2.46 1.92 1.70 1.52 1.29
P/CF (x) 18.4 12.1 29.3 7.0 5.0
Dividend Yield (%) 1.6 1.6 4.0 2.5 3.3
EV/EBITDA (x) 12.2 13.4 15.4 9.8 7.5

1Q14 earnings were 9.6% of our FY14F forecast, but this was expected,
as new facilities will only begin production in 2Q14. Core margins
improved as higher utilisation of facilities offset increased depreciation;
we expect this to continue in the coming quarters. Its record orderbook
of SGD42.8m, up from SGD33.5m, should sustain these core
improvements. Maintain BUY with our SGD0.76 TP unchanged based on
12x FY14F P/E.

1Q14 only appears to be under expectations. Mencasts 1Q14
earnings met 9.6% of our FY14F forecast, which looks like a miss at first
glance. However, note that the facility at 42B Penjuru Road will only
begin operations in 2Q14, and should drive earnings growth to make up
the difference in the coming quarters.
Margins improve even as increased depreciation takes its toll. Even
as depreciation more than doubled to SGD2.8m in 1Q14 from SGD1.3m
in 1Q13 (due to the completion of new facilities and increased overheads
from its newly-acquired subsidiaries), Mencasts gross margin showed
an uptick to 27.5% from 25.0% in 4Q13. Its core net margin also jumped
to 6.4% from 3.3% over the same period.
Record orderbook promises growth. Mencasts orderbook of
SGD42.8m hit a new record, up 28% q-o-q. As more than half of the
companys business is orderbook-driven, this indicates managements
confidence in taking in new orders with its new facilities now ready,
implying potential growth ahead.
Keeping Big Hairy Audacious Goal (BHAG) in sight; maintain BUY.
At current growth rates, Mencast is well on track to hit its BHAG of
SGD50m bottomline by FY20. Although valuations are not as low as
some of the other companies under our coverage, and its balance sheet
is looking slightly stretched due to the rapid pace of growth and
acquisitions in recent years, we believe that management will continue to
deliver, making it a strong candidate for long-term investment. Maintain
BUY, with our SGD0.76 TP based on a 12x FY14F P/E, slightly higher
than the 10x we usually use, due to the strong recurring nature of
Mencasts income.

TM
Platform 13

Sector News Flash, 15 May 2014

Industrial Estate Neutral

Amata Showed Strongest Profit Growth In 1Q14
Macro

3
Risks

3
Growth

1
Value

2

Industrial estate developers
FYE Dec (THBm) 1Q13 4Q13 1Q14
y-o-y
(%)
q-o-q
(%)
Revenue
AMATA 1,131 1,794 2,024 79% 13%
HEMRAJ 2,045 2,449 2,829 38% 16%
Total 3,176 4,243 4,853 53% 14%
EBITDA
AMATA 309 538 782 153% 45%
HEMRAJ 826 1,096 1,189 44% 8%
Total 1,135 1,634 1,971 74% 21%
Net profit
AMATA 130 75 433 233% 477%
HEMRAJ 902 2,233 1,042 16% -53%
Total 1,032 2,308 1,475 43% -36%
EBITDA margin (%)
AMATA 27% 30% 39%
HEMRAJ 40% 45% 42%
Net margin (%)
AMATA 11% 4% 21%
HEMRAJ 44% 91% 37%


Developers of factories/warehouses for rent
FYE Dec (THBm) 1Q13 4Q13 1Q14
y-o-y
(%)
q-o-q
(%)
Revenue
TICON 286 4,834 721 152% -85%
WHA 2,142 4,697 116 -95% -98%
Total 2,428 9,531 837 -66% -91%
EBITDA
TICON 356 1,790 449 26% -75%
WHA 213 1,621 113 -47% -93%
Total 569 3,411 562 -1% -84%
Net profit
TICON 255 907 144 -44% -84%
WHA 122 1,289 32 -74% -98%
Total 377 2,196 176 -53% -92%
EBITDA margin (%)
TICON 124% 37% 62%
WHA 10% 35% 97%
Net margin (%)
TICON 89% 19% 20%
WHA 6% 27% 28%


Wanida Geisler +66 2862 9748
wanida.ge@rhbgroup.com

P/E(x) P/B (x) Yield (%)
Dec-15F Dec-15F Dec-15F
Amata Corporation THB14.6 THB18.5 12.1 1.6 2.9 BUY
Hemaraj Land & Dev THB3.5 THB3.5 10.1 2.1 4.9 TRADING BUY
Ticon Industrial Connection PCL THB15.3 THB19.5 10.5 1.3 6.5 NEUTRAL
WHA Corp PCL THB28.3 THB38.0 17.1 4.7 2.3 TRADING BUY
Company Name Price Target Rating

Industrial estate developers, Amata and Hemaraj, showed decent 1Q14
results from more land transfers but we expect their performance to
gradually weaken on poor YTD industrial land sales amid the political
turmoil. Meanwhile, WHA & Ticon, developers of factories/warehouses
for rent, will continue to show disappointing results for the next two
quarters, although they will book huge profit again at end-2014 on new
round of asset monetisation.

Amata Corp showed impressive 1Q14 results. The impressive results
were in terms of revenue, EBITDA and net profit as the company was
able to turn almost half of the THB5.2bn backlog at end-2013 into
realised revenue. Also, gross margin on industrial land sales remained
healthy at 51%, which was stable q-o-q but improved sharply from only
40% in 1Q13. Both EBITDA and net margins grew y-o-y and q-o-q. 1Q14
profit of THB433m (13.5% above Bloombergs consensus estimates)
accounted for 38% of our full-year forecast. Upsides for AMATA which
have yet to be included in our forecast are: i) divestment of assets worth
THB4.5bn into the new property fund, and ii) the listing of Amata
Vietnam, its subsidiary. Valuation wise, AMATA is cheap, trading at 40%
discount to its NAV of THB25 while its P/BV is hovering around -1SD
level.
Hemaraj Land and Developments results were modestly lower than
expected. Revenue and EBITDA grew healthily mainly due to more land
transfers. Gross margin also improved both y-o-y and q-o-q. However,
its bottomline growth was not that impressive due to no divestment gains
as in 4Q13. 1Q14 profit of THB1.04bn (12% below Bloombergs
consensus estimates) represented 33% of our full-year forecast.
Hemaraj sold 120 rai of land in 1Q14, 7.5% of 1,600 rai targeted in 2014.
Disappointing 1Q14 results from Ticon Industrial Connection.
Despite sale of rental assets worth THB500m in 1Q14, Ticon showed
disappointing net profit of THB144m, which was only half of Bloombergs
consensus estimates. This was due to soften rental income from only
66% occupancy rate, higher financing costs and no extra gains from
insurance claims. Our earnings estimates are under review.
Weak results from WHA Corp were in line. This was attributable to no
asset monetisation as in 1Q13 and 4Q13. Rental income, on the other
hand, grew 21% y-o-y to THB116m, while other income, which included
management fees, grew 50% y-o-y to THB33m. Net margin stood at
28%, which was stable q-o-q.

TM
Platform 14


Erawan Group (ERW TB) Trading Buy (Maintained)
Consumer Cyclical - Leisure & Entertainment Target Price: THB4.20

Unexpected 1Q14 Profit
Macro

2
.
0
0
Risks

2
.
0
0
Growth

2
.
0
0
Value

2
.
0
0

74
82
91
99
107
116
124
2.8
3.3
3.8
4.3
4.8
5.3
5.8
The Erawan Group (ERW TB)
5
10
15
20
25
30
35
40
45
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Source: Bloomberg

Avg Turnover (THB/USD) 31.6m/0.98m
Upside (%) 12.3
Free float (%) 30
Shareholders (%)
Vongkusolkit Group 36.3
Wattanavekin Group 33.0

YTD 1m 3m 6m 12m
Absolute 14.0 (3.6) 11.3 (16.2) (26.0)
Relative 7.9 (3.3) 5.1 (14.2) (11.0)

Shariah compliant

Chalie Kueyen +66 2862 9745
chalie.ku@rhbgroup.com

Forecasts and Valuations Dec-11 Dec-12 Dec-13F Dec-14F
Total turnover (THBm) 3,756 4,302 4,746 4,566
Reported net profit (THBm) 491 106 610 (78)
Recurring net profit (THBm) (112) 106 (22) (78)
Recurring net profit growth (%) (59.2) na (120.6) 256.5 0.0
Recurring EPS (THB) (0.05) 0.05 (0.01) (0.03)
Recurring P/E (x) na 79.3 na na
P/B (x) 2.34 2.39 2.24 2.26
Return on average equity (%) 14.6 3.0 16.0 (1.9) 0.0
Return on average assets (%) 3.9 0.8 4.8 (0.6) 0.0

Erawans weak 1Q14 earnings reflected its fragile growth profile. While
the company aims to grow the economy hotel segment, its earnings
continue to be volatile as luxury hotels remain its largest revenue
contributor. With the hotel industry entering a low season in 2Q, we
expect weak results to continue in 2Q14. Maintain TRADING BUY, as
Erawan is trading at 12.5x EV/EBITDA, at its long-term mean.

1Q14 profit unexpected. Erawan Group (Erawan) posted 1Q14
earnings of THB3m (-95% q-o-q, -98% y-o-y), better than our and
consensus estimates for losses. The q-o-q and y-o-y decline in earnings
growth reflected a drop in occupancy rate to 65% in 1Q14 (vs 78% in
4Q13 and 85% in 1Q13), which pushed revenue per available room
(RevPar) lower by 15% q-o-q and 22% y-o-y.
RevPar for luxury hotels in Bangkok slumps 38% q-o-q and 45% y-
o-y. Hit by the countrys political turmoil, Erawans luxury hotel
operations in Bangkok (at 40% of revenue and 26% of EBITDA) posted
the weakest performance with occupancy rate falling to only 47% in
1Q14 (vs 72% in 4Q13 and 82% in 1Q13), while its RevPar plummeted
by 45% y-o-y. These should imply a net loss for this hotel segment. Note
that the luxury hotel segment requires an occupancy rate of around 60-
62% to break even.
RevPar for midscale segment slips 24% q-o-q and 22% y-o-y. The
companys midscale hotel segment (two hotels out of three hotels) was
also hit by the political impasse, but to a lesser extent than the luxury
hotel segment. Occupancy rate fell to 58% in 1Q14, down from a
sustainable rate of 81% in 1Q13 and 4Q13, while Revpar declined by
24% q-o-q and 22% y-o-y. Note that the midscale segment represented
18% of revenue and 20% of EBITDA.
RevPar for economy segment climbs 9% q-o-q but dips 4% y-o-y.
While the economy hotel segment was also hit by the political unrest,
this was offset by its ability to adjust hotel room rates. All in, this segment
proved more resilient than others and bolstered the groups operations.
Plans to open new hotels. These include Hop Inn (200 rooms) in 3Q14,
Mercure Pattaya (210 rooms) in 4Q14, and Ibis Krabi (206 rooms) in
4Q14.

TM
Platform 15


Indorama Ventures PCL (IVL TB) Buy (Maintained)
Energy & Petrochemicals - Downstream Products Target Price: THB24.10
Market Cap: USD3,483m Price: THB23.60

1Q14 Earnings In Line Expecting a Better 2H14
Macro

2
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0
0
Risks

2
.
0
0
Growth

3
.
0
0
Value

3
.
0
0

81
89
98
106
114
123
131
15
17
19
21
23
25
27
Indorama Ventures (IVL TB)
20
40
60
80
100
120
M
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Source: Bloomberg

Upside (%) 2.0
Free float (%) 34
Shareholders (%)
Indorama Resources Co.Ltd. 63.7
Bangkok Bank Pcl. 4.8
Thai NVDR 3.2

YTD 1m 3m 6m 12m
Absolute 18.0 5.4 6.8 (2.9) 2.2
Relative 12.1 6.4 2.2 (0.2) 17.5

Shariah compliant


Reported net profit (THBm) 15,568 2,740 1,326 4,269 4,673
Recurring net profit (THBm) 10,695 1,560 414 4,269 4,673
Recurring net profit growth (%) 8.3 (85.4) (73.5) 932.5 9.4
DPS (THB) 1.00 0.29 0.14 0.45 0.50
Recurring P/E (x) 11 73 275 27 24
P/B (x) 1.94 2.02 1.88 1.81 1.74
P/CF (x) 42 9 590 9 8
Dividend Yield (%) 4.2 1.2 0.6 1.9 2.1
EV/EBITDA (x) 9.8 15.0 16.5 10.2 9.8

Indorama Ventures booked weak earnings again in 1Q14, mainly on a
THB1bn inventory loss recognised during the quarter. Its USD155m
EBITDA was strong, at 27% of our full-year forecast. Our current
earnings estimates do not include several M&As completed or set for
completion in 1H14, which should contribute positively and immediately
to 2H14 cash flow and net profit. Maintain BUY and THB24.10 TP.

1Q14 net profit down. Indorama Ventures 1Q14 net profit fell 25% y-o-
y to THB368m, slightly higher than our preliminary estimate of
THB300m. Sales increased 11% y-o-y to THB61.6bn, while operating
profit surged 44% y-o-y to THB1.7bn. Total volume grew 6% y-o-y to
1.5m tonnes, as its mono-ethylene glycol (MEG) business saw smooth
operations and higher production levels following a catalyst change in
2Q13. Although product prices were weaker, led by softer paraxylene
(PX) prices, the company saw improved margins from its polyethylene
terephthalate (PET) and fibre and yarns businesses.
Other items for 1Q14. Indorama Ventures received THB140m from
loss-of-profit insurance claims as a result of the Lopburi floods in 2011.
An inventory loss of USD33m, due to a steep fall in PX prices, was
recognised in 1Q14 vs inventory gains of USD11m in 1Q13.
2014 should be a better year. We expect total production to increase
10% y-o-y to 6.4m tonnes per annum (tpa). This should come from
Indorama Ventures MEG plant running at full capacity (+c.150,000
tonnes), the CP4 fibres plant in Indonesia (+c.200,000 tonnes), the
Poland plant (+c.50,000 tonnes), its China operations (+c.50,000 tonnes)
and existing assets (+c.200,000 tonnes). There are also no major
maintenance works planned. Thus, we expect EBITDA/tonne to improve
by c.USD5.00/tonne to USD90.00/tonne. Although there is little upside to
the spreads, cost efficiency should help margins. Indorama Ventures
1Q14 EBITDA came in at USD155m (+83% y-o-y), accounting for 27%
of our full-year expectation of USD570m.
EBITDA remains strong. Despite weak 1Q14 earnings (mainly due to
the THB1bn inventory loss), its EBITDA remains positive and strong. Our
current earnings estimates do not include several M&As completed or
set for completion in 1H14, which should contribute positively and
immediately to 2H14 cash flow and net profit. Maintain BUY and
THB24.10 TP.

TM
Platform 16


Jay Mart (JMART TB) Buy (Maintained)
Consumer Cyclical - Distribution & Wholesale Target Price: THB17.80

A Reasonable Start In 1Q14
Macro

3
.
0
0
Risks

2
.
0
0
Growth

3
.
0
0
Value

2
.
0
0

70
75
80
85
90
95
100
105
10
12
14
16
18
20
22
24
Jay Mart (JMART TB)
2
4
6
8
10
12
M
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Source: Bloomberg

Upside (%) 28.1
Free float (%) 47
Shareholders (%)
Adisak Sukumvitaya 18.9
Yuvadee Pong-acha 17.9
Juthamas Sukumvitaya 7.8

YTD 1m 3m 6m 12m
Absolute (13.6) (11.4) (10.4) (15.3) (40.6)
Relative (19.5) (10.4) (15.0) (12.6) (25.3)

Shariah compliant

Veena Naidu License No. 24418, 66 2862 9752
veena.na@rhbgroup.com

Vikran Lumyai +66 2862 2028
vikran.lu@rhbgroup.com

Reported net profit (THBm) 171 363 400 466 529
Recurring net profit (THBm) 171 311 400 466 529
DPS (THB) 0.34 0.39 0.69 0.55 0.63
Recurring P/E (x) 24.3 16.0 14.5 14.1 13.8
P/B (x) 6.14 3.73 3.36 3.61 3.29
P/CF (x) 36.4 na na na 43.7
Dividend Yield (%) 2.4 2.8 5.0 4.0 4.5
EV/EBITDA (x) 14.8 11.8 14.1 10.8 10.0
Our vs consensus EPS (adjusted) (%) 1.7 (4.8)

Jay Marts 1Q14 net profit grew 9.5% y-o-y to THB85m. While its mobile
sales revenue decreased 2.5% y-o-y due to a change in revenue
recognition methodology, while its debt collection and management
business dropped 5.6% y-o-y. Its rental business climbed 24% y-o-y,
though. We retain our FY14 earnings forecast at THB466m and maintain
BUY, as the share price is 28% below our THB17.80 TP.

In line. Despite the slow 1Q14 consumer consumption levels, Jay Marts
earnings still increased 9.5% q-o-q to THB85m, or 19% of our full-year
forecast. The higher earnings were primarily on higher sales promotional
income of THB79m (+56% y-o-y) and lower mobile sales costs.
Key highlights, Revenue decreased 1.8% y-o-y to THB2.26bn, ie 20%
of our full-year forecast. Mobile sales booked a 2.5% y-o-y decrease to
THB2.08bn due to the change in revenue recognition since July 2013. If
the company were to adjust this change, revenue from mobile sales
would have grown 7% y-o-y. Mobile phone and tablet units sales were
estimated at 0.3m, ie 20% of our full-year forecast (1.5m units). Jay
Marts rental business climbed 24% y-o-y to THB95m on an increase in
both rental rates and areas. Its debt collection and management
business booked a 5.6% y-o-y decrease to THB88m, ie the more cash
the company collects, the more amortisation occurs. Net margin
improved by 40bps to 3.8% (from 3.4%).
Outlook. We still have a very positive outlook on Jay Mart because of: i)
industry tailwind the smart phone and tablet markets are estimated to
grow by 30%, ii) management expects to sell 1.7m units (although our
forecast is on a very conservative 1.5m), and iii) JAS Assets IPO in
2015.
Forecasts and risks. We retain our earnings forecast at THB466m
(+16% y-o-y). The key risks to earnings are: i) intense competition in the
mobile retailer segment and ii) lower than expected consumer
confidence.
BUY on weakness. While market sentiment is still depressed from its
stock dividend last month, we do recommend accumulating this counter
on excessive pullback.

TM
Platform 17


Premier Marketing (PM TB) Buy (Maintained)
Consumer Non-cyclical - Food & Beverage Products Target Price: THB11.60

Better Margins Led To Better Earnings
Macro

2
.
0
0
Risks

2
.
0
0
Growth

2
.
0
0
Value

3
.
0
0

75
80
85
90
95
100
105
110
6.3
7.3
8.3
9.3
10.3
11.3
12.3
13.3
Premier Marketing (PM TB)
1
2
3
4
5
6
7
8
9
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Source: Bloomberg

Upside (%) 37.3
Free float (%) 40
Shareholders (%)
Premier Fishion Capital 46.0

YTD 1m 3m 6m 12m
Absolute 15.8 (5.1) 11.2 5.6 (31.3)
Relative 9.9 (4.1) 6.6 8.3 (16.0)

Shariah compliant

Chalie Kueyen 66 2862 9745
chalie.ku@rhbgroup.com

Reported net profit (THBm) 287 408 420 460 513
Recurring net profit (THBm) 287 407 420 460 513
DPS (THB) 0.24 0.37 0.50 0.58 0.64
Recurring P/E (x) 19.2 13.5 13.1 11.0 9.9
P/B (x) 5.05 4.16 3.63 2.90 2.64
P/CF (x) 19.1 22.2 15.6 8.6 7.7
Dividend Yield (%) 2.8 4.4 5.9 6.8 7.6
EV/EBITDA (x) 10.9 8.7 8.8 7.2 6.4

Despite weakening domestic consumption, Premier Marketing posted
strong results in 1Q14 with better-than-estimated earnings, thanks to
improved margins. As 1Q14 represented 28% of our full-year forecast,
earnings upside surprise is likely. Given consistently high profitability
(ROE >30% with huge cash pile on hand), it has the cheapest valuation
in the sector with P/E of only 11x. We maintain BUY at THB11.60 TP.

Better-than-estimated earnings. Premier Marketing (PM) posted 1Q14
earnings of THB130m (+14% q-o-q and +4% y-o-y), which came mainly
from the recovery of its exports of canned tuna to Japan and good
response to its new crispy fish snack Taro. Its 1Q14 earnings stood at
28% of our full-year forecast.
Missed topline but better margins. Given further weakening domestic
consumption, it missed its topline growth in 1Q14, falling 6% q-o-q and
1% y-o-y. However, better management of cost of goods sold (COGS)
(in particular canned tuna, which comprised 25% of the revenue), this
helped boost gross profit margin by 70bps q-o-q and 160bps y-o-y. In
addition, with better operating cost control, selling, general and
administrative expense (SG&A) fell to 13.8% in 1Q14 (down from 17.4%
in 4Q13 and slightly above 12.7% in 1Q13), which enabled the
companys EBIT margin to improve by 420bps q-o-q and 50bps y-o-y.
Superior outlook remains. We maintain a BUY call on Premier
Marketing and view the company as the cheapest consumer company.
Its core business in snack food is strong by itself, while its distribution
business has an edge in the traditional trade channel. Given that Premier
Marketing has a superior profile with sustainable high profitability and a
sustainable ROE of 28-30%, coupled with a huge cash pile (at around
15% of its market cap) as well as a high dividend yield of 6-8%, it is our
Top Pick among the consumer counters.
FY14/15 topline to increase 7%/11% and net profit to grow 9%/11%.
We expect domestic consumption to continue weakening in FY14, before
it begins to pick up in FY15. We estimate revenue to grow 7% in FY14 vs
3% in FY13 on the back of full-year sales contribution from a new
customer (Sappe) and an existing customer (Bigen), which is beginning
to distribute its products via modern trade channels.

TM
Platform 18


PTT (PTT TB) Neutral (Maintained)
Energy & Petrochemicals - Integrated Oil & Gas Target Price: THB318
Market Cap: USD26,353m Price: THB301

1Q14 Q-o-q Earnings Improved
Macro

2
.
0
0
Risks

2
.
0
0
Growth

2
.
0
0
Value

3
.
0
0

98
102
106
111
115
119
123
250
270
290
310
330
350
370
PTT (PTT TB)
2
4
6
8
10
12
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Source: Bloomberg

Upside (%) 5.6
52-wk Price low/high (THB) 264 - 351
Free float (%) 49
Shareholders (%)
Ministry of Finance 51.1
Vayupak Fund 15.3
Thai NVDR 4.3

YTD 1m 3m 6m 12m
Absolute 5.2 (2.0) 2.7 (2.3) (11.5)
Relative (0.7) (1.0) (1.9) 0.4 3.8

Shariah compliant

Kannika Siamwalla, CFA 66 2862 9744

Total turnover (THBbn) 2,428 2,794 2,843 2,771 2,929
Reported net profit (THBbn) 106 105 95 102 112
Recurring net profit (THBbn) 106 105 95 102 112
Recurring net profit growth (%) 23.7 (1.6) (9.5) 8.2 9.7
DPS (THB) 13.0 13.0 13.0 12.5 13.8
Recurring P/E (x) 8.08 8.22 9.08 8.40 7.65
P/B (x) 1.55 1.42 1.26 1.15 1.05
P/CF (x) 6.70 5.04 5.49 4.47 4.70
Dividend Yield (%) 4.3 4.3 4.3 4.2 4.6
EV/EBITDA (x) 4.69 4.81 4.68 4.24 3.55

PTT booked THB27.4bn in 1Q14 earnings, with forex gains/losses still
the major bottomline volatility. Stripping this away, earnings for its core
business and associate income stayed relatively stable. Spreads for the
major commodities are continuing on the same expected trend, with
stronger refining margins (although there was a slight stock loss in
1Q14), strong olefins and PE spreads, and softer PX spreads. Maintain
NEUTRAL.

1Q14 net profit came in at THB27.4bn (+74% q-o-q; -23% y-o-y). This
was in line with our expectations, accounting for 27% of our full-year
forecast. Forex gains/losses continue to have major impact on the
groups earnings, with a THB2.6bn forex gain recorded during the
quarter vs a forex loss of THB5.2bn in 4Q13 and a THB7bn forex gain in
1Q13. The share of associate income was THB4.5bn (-19%q-o-q; -52%
y-o-y). Again, associated companies also saw the same forex swing as
their parent with its USD-denominated debt. For 1Q14, there was a slight
stock loss but stronger gross refining margins (GRM) for the refineries.
PTTs olefins and polyethylene (PE) businesses should see strong
spreads, while the aromatics spreads continue to be pulled down with
the softening in paraxylene (PX) prices as more capacity enters the
market this year.
Natural gas business stable. PTTs natural gas transmission business
sales volume was relatively stable at 4,441m standard cu ft per day
(mmscfd) (0% q-o-q; -5% y-o-y). Natural gas for vehicle (NGV) sales
volume was 319mmscfd (6% q-o-q; 5% y-o-y) while EBIT loss was
THB5.2bn (-9% q-o-q; 11% y-o-y). Gas separation plants (GSPs) sales
were 1,502,000 tons (-1% q-o-q; -8% y-o-y), as a result of the shutdown
of GSP#5 following a lightening incident in Aug 2013. GSP#5 should
resume its full utilisation rate from 2Q14 onwards, as PTT has already
installed a temporary waste heat recovery unit.
Oil marketing and trading sales volume were mixed at 6,290m litres
(ml) (+4% q-o-q; +6% y-o-y) and 15,110ml (-10% q-o-q; -9% y-o-y)
respectively. Oil marketing margins improved to THB1.01 per litre (+33%
q-o-q; 3% y-o-y), while oil trading margins improved to THB0.13 per litre
(+44% q-o-q; +30%y-o-y).

TM
Platform 19


Sriracha Construction (SRICHA TB) Neutral (from Buy)
Construction & Engineering - Construction Target Price: THB36.00

Lacks Near-Term Catalysts
Macro

3
.
0
0
Risks

2
.
0
0
Growth

2
.
0
0
Value

3
.
0
0

70
76
81
87
93
99
104
110
26
31
36
41
46
51
56
61
Sriracha Construction (SRICHA TB)
1
2
3
4
5
6
7
8
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Source: Bloomberg

Upside (%) 16.3
Free float (%) 32
Shareholders (%)
Sriracha Holding Company
Limited
47.7
Mr. Boonkrua Khemapiratana 13.9
Mr. Gridsada Potisomporn 3.3

YTD 1m 3m 6m 12m
Absolute 9.3 (7.9) (7.2) (4.7) (39.2)
Relative 3.4 (6.9) (11.8) (2.0) (23.9)

Shariah compliant


Chun Phokaisawan +66 2862 2029
chun.ph@rhbgroup.com

Reported net profit (THBm) 1,108 1,028 918 1,064 1,168
Recurring net profit (THBm) 1,108 800 918 1,064 1,168
Recurring net profit growth (%) (6.9) (27.7) 14.7 15.9 9.8
DPS (THB) 0.00 0.00 2.65 2.44 2.68
Recurring P/E (x) 7.2 11.6 11.7 10.1 9.2
P/B (x) 7.39 4.88 4.53 4.00 3.54
P/CF (x) 10.6 24.1 26.5 6.6 7.5
Dividend Yield (%) 0.0 0.0 7.5 6.9 7.6
EV/EBITDA (x) 4.98 8.46 8.91 6.56 5.69

Srichas 1Q14 earnings came in at THB127m (+4% y-o-y), as the
company recognised revenue from TOPs project. There is still no
further progress on negotiations of its five new projects totaling
THB2.8bn. With no large projects on the horizon, we expect the stock to
trade within a narrow band. We downgrade Sricha to NEUTRAL, with a
lower THB36 TP (from THB41).

1Q14 net profit ticks up. Sriracha Construction (Sricha)s 1Q14 net
profit came in at THB127m (+4% y-o-y), while its 1Q14 revenue
increased to THB572m (+20% y-o-y), mainly due to revenue recognition
from TOPs projects. However, EBIT only inched up by 1% y-o-y to
THB157m, as the company is at the beginning of the construction phase
(which does not generate much profit). As a result, net profit margin
contracted to 22% in 1Q14 from 25% in 1Q13.
No progress on new projects. There is still no further progress relating
to negotiations of its five new projects: i) a power plant module in Mexico
(THB500m-800m), ii) a chemical plant in Rayong (THB500m), iii) a
waste incineration plant and a power plant in Myanmar (THB800m), iv)
an independent power producer (IPP) power plant in Myanmar
(THB700m), and v) a liquefied petroleum gas (LPG) facilities expansion
project in Khao Bo Ya (THB300m-400m). However, we expect the
bidding results of these projects to be announced within this year, and
these projects should support the companys earnings going forward. We
maintain our full-year revenue forecast of THB2.8bn as we expect Sricha
to recognise the bulk of revenue from TOP and Hyundai Linear Alkyl
Benzene projects in 2Q14-3Q14. We estimated Srichas orderbook at
c.THB1.8bn as at end-1Q14.
Downgrade to NEUTRAL, with lower THB36 TP. With no large
projects on the horizon, we expect Sricha to trade within a narrow band.
Hence, we downgrade the stock to NEUTRAL, with a lower TP of THB36
(from THB41). We value Sricha at THB36/share, based on a 10.5x P/E,
which is its 2-year average P/E.

20

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

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21

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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

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