Regional Daily, 12 November 2014 5 Regional Daily Ideas Troika Top Stories Goldpac Group (3315 HK) Technology BUY HKD7.70 TP: HKD9.50 Mkt Cap : USD824m Pg3 We initiate coverage on Goldpac, China's largest supplier of financial cards. We believe the company is a key beneficiary of the country's migration towards smart cards. We expect Goldpac to experience strong earnings growth in FY13-16. Analyst: Jackson Yu ([email protected]) GD Express Courier (GDX MK) Transport - Logistics BUY MYR2.01 TP: MYR2.42 Mkt Cap : USD505m Pg4 We initiate coverage on GDEX with a BUY recommendation and DCF derived TP of MYR 2.42. We believe GDEX will continue its strong earnings growth trend and opportunity in AEC is a key catalyst to drive GDEX's earnings higher. Analyst: Jerry Lee ([email protected]) Nam Cheong (NCL SP) Energy & Petrochemicals - Oil & Gas Services BUY SGD0.41 TP: SGD0.61 Mkt Cap : USD667m Pg5 Nam Cheong’s 9M14 PATMI met 93/99% of our/street full-year FY14 estimates as shipbuilding margin surged to 24% from 17-20%. Raise estimates by 11-13% for FY14-16F. Shallow water operations are unaffected by oil price fall. Analyst: Lee Yue Jer, CFA ([email protected]) Pg6 Reaching a Pinnacle Other Key Stories Indonesia Tower Bersama Infrastructure (TBIG IJ) Communications NEUTRAL IDR9,000 TP: IDR8,600 Malaysia Tambun Indah Land (TILB MK) Property- Real Estate BUY MYR2.18 TP: MYR2.50 Tune Ins (TIH MK) Financial Services – Insurance BUY MYR2.12 TP: MYR3.00 Singapore Ezion Holdings (EZI SP) Energy & Petrochemicals - Oil & Gas Services BUY SGD1.48 TP: SGD2.65 Analyst: Jeffrey Tan ([email protected]) Pg7 Analyst: Loong Kok Wen, CFA ([email protected]) Pg8 Rejuvenating Its Multi-Channel Growth Analyst: Kong Ho Meng ([email protected]) Pg9 New Strategy Takes Shape Analyst: Lee Yue Jer, CFA ([email protected]) Genting Singapore (GENS SP) Consumer Cyclical – Gaming NEUTRAL SGD1.04 TP: SGD1.14 Pg10 Silverlake Axis (SILV SP) Technology - Software & Services SELL SGD1.35 TP: SGD1.03 Pg11 See important disclosures at the end of this report Land Deal Terminated Just Plain Unlucky Analyst: Kong Heng Siong ([email protected]) Valuations a Tad Too Rich Analyst: Jarick Seet ([email protected]) Powered by EFATM Platform 1 Regional Daily, 12 November 2014 Thailand BEC World (BEC TB) Communications – Media SELL THB49.3 TP: THB36.4 Pg12 Analyst: Wanida Geisler ([email protected]) Indorama Ventures PCL (IVL TB) Energy & Petrochemicals BUY THB22.50 TP: THB29.90 Pg13 Jay Mart (JMART TB) Consumer Cyclical - Distribution & Wholesale BUY THB12.20 TP: THB15.70 Pg14 Land and Houses (LH TB) Property - Real Estate BUY THB9.85 TP: THB12.50 Pg15 Quality Houses (QH TB) Property - Real Estate BUY THB4.18 TP: THB5.50 Pg16 Thai Oil (TOP TB) Energy & Petrochemicals - Oil & Gas Services BUY THB45.30 TP: THB53.50 Pg17 See important disclosures at the end of this report Results Continue To Be Sluggish Better Prospects In 2015 Analyst: Kannika Siamwalla, CFA ([email protected]) 9M14 Core Earnings Decline 16.6% YoY Analyst: Veena Naidu ([email protected]) Unexciting 3Q14 Results Analyst: Wanida Geisler ([email protected]) 3Q14 Should Be This Year’s Best Quarter Analyst: Wanida Geisler ([email protected]) Getting Stronger After The Worst Is Over Analyst: Kannika Siamwalla, CFA ([email protected]) Powered by EFATM Platform 2 Initiating Coverage, 12 November 2014 Goldpac Group (3315 HK) Buy Technology - Technology Market Cap: USD824m Target Price: Price: HKD9.50 HKD7.70 Macro Risks Unique Play On China's Smart Card Migration Growth Value Goldpac (3315 HK) Relative to Hang Seng Index (RHS) 9.90 191 9.40 181 8.90 171 8.40 161 7.90 151 7.40 141 6.90 131 6.40 121 5.90 111 Source: Bloomberg Avg Turnover (HKD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (HKD) Free float (%) Share outstanding (m) Shareholders (%) 4.50m/0.59m 23.6 23.4 5.39 - 9.50 25 830 Mr. Lu Run Ting Gemalto BOCI 43.4 18.4 10.9 Share Performance (%) Absolute Relative Technology leader. As a fully-integrated financial card supplier in China, Goldpac is one of few providers in the country capable of delivering international EuroPay, Mastercard and Visa (EMV)-standard integrated solutions, the first personalisation services provider in China and the only domestic manufacturer certified by all six leading payment card organisations. Explosive growth of smart card industry. We foresee explosive shipment volume growth in smart cards in FY14-16F, driven by the rapid migration of chip-based banking cards in China. We forecast that 2015 could be the strongest ever year for Goldpac, given that all new financial cards issued in China will be smart cards. Additionally, Goldpac is wellpositioned to capture this robust growth in demand. As the ASP for a smart card is about 10 times that of a magnetic one, we expect a 40% turnover CAGR in FY13-16F, mainly driven by the enhanced profit mix from the smart cards segment. New products to drive long-term growth. We believe Goldpac is wellpositioned to develop new revenue streams beyond banking cards. New products like social security cards and smart city cards are in the pipeline. Following its IPO, increasing research & development (R&D) will be the key to standing out from traditional card manufacturers and becoming a full-services solution provider and the leader in smart payment, similarly to its strategic shareholder, Gemalto (GTO NA, NR). Initiate coverage with a BUY and TP of HKD9.50 We set our TP at 17x FY15F P/E, on par with its post IPO 1-year forward P/E average. Goldpac currently trades at 14x FY15F P/E, substantially below its A-share peers' 30x and Gemalto's 15x FY15F P/Es. Risks: i) ASP dropping faster than expected, ii) fluctuations in market prices for IC chips, and iii) new payment technologies. See page 22 for more details on risks. YTD 1m 3m 6m 2.7 7.2 3.5 25.6 Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F 17.9 Total turnover (CNYm) 677 1,112 1,546 2,478 3,082 Reported net profit (CNYm) 115 141 227 362 471 Recurring net profit (CNYm) 103 168 257 379 481 Recurring net profit growth (%) 67.8 63.6 53.0 47.1 27.0 1.7 5.2 8.0 12m Shariah compliant Recurring EPS (CNY) 0.20 0.30 0.30 0.44 0.56 Jackson Yu +852 2103 9424 DPS (CNY) 0.10 0.17 0.07 0.11 0.14 [email protected] Recurring P/E (x) 30.1 20.6 20.5 13.9 10.9 P/B (x) 14.5 2.3 3.2 2.7 2.3 P/CF (x) 13.4 32.8 15.3 11.3 8.5 1.6 2.8 1.1 1.8 2.3 EV/EBITDA (x) 20.1 9.0 12.6 7.8 5.4 Return on average equity (%) 63.9 17.5 15.3 21.2 23.4 Dividend Yield (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 2 0 . 3 0 0 . 1 0 0 We initiate coverage on Goldpac, China's largest supplier of financial . 0 cards by value and volume, with a BUY and HKD9.50 TP (17x FY15F 0 P/E), implying a 23% upside. We believe the company is a key 0 beneficiary of the country's migration towards smart cards, which enjoy higher ASP vs traditional magnetic ones. For FY13-16, we forecast Goldpac to deliver CAGRs of 40% in turnover and 42% in recurring net profit. Sep-14 May-14 Jul-14 91 Mar-14 101 4.90 160 140 120 100 80 60 40 20 Jan-14 5.40 Dec-13 Vol m Price Close Source: Company data, OSK-DMG net cash net cash net cash net cash net cash (2.0) 2.4 Powered by EFATM Platform (2.6) 3 Initiating Coverage, 12 November 2014 GD Express Courier (GDX MK) Buy Transport - Logistics Market Cap: USD505m Target Price: Price: MYR2.42 MYR2.01 Macro Risks Poised For a New Quantum Leap Growth Value GD Express Courier (GDX MK) Relative to FTSE Bursa Malaysia KLCI Index (RHS) 2.20 219 2.00 199 1.80 179 1.60 159 1.40 139 1.20 119 1.00 99 0.80 8 7 6 5 4 3 2 1 79 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) GD Express (M) SB Singapore Post GD Holdings International 0.62m/0.19m 20.4 20.4 0.93 - 2.22 27 841 31.1 25.8 9.7 Share Performance (%) About GD Express Courier (GDEX). GDEX is a leading express delivery service provider in Malaysia that is growing strongly. It is currently expanding aggressively on the back of increased business volume and is embarking into the logistics solutions segment. FY15 (Jun) is an investment year for GDEX and we opine that the company is poised for stronger growth in FY16 and FY17. Strong earnings growth track record. GDEX has posted 5-year revenue and net profit CAGRs of 18% and 39% respectively, with steady improvement in its operating margins. Growing its business through quality deliveries, prudent cost management and high staff productivity are the key competitive components to the company’s success. Growth potential. GDEX has more room to grow, as it believes that ecommerce has changed the way business is done and that it is in the sweet spot to ride on this bandwagon. Street thinks improvements in regional internet infrastructure will facilitate transaction volumes and allow the company to grow its business. Note that GDEX not only focuses on Malaysia’s 30m population, but the ASEAN region’s 600m inhabitants as well. We believe this gives it huge growth potential. Risks. The industry is very compeititve and pricing power has not been great. Any economic slowdown may result in lower business volumes, which should directly impact GDEX’s profitability. Initiate at BUY with a MYR2.42 TP. We derived our MYR2.42 TP using a 5-year DCF on its free cash flow to firm (FCFF) with a WACC of 4.5% and a 1% terminal growth rate. With a 20.4% upside from its last closing price, we initiate coverage on GDEX with a BUY call. The stock may be trading at very high P/E valuations, but we believe its high potential growth could justify the high valuations. YTD 1m 3m 6m 12m Absolute 74.8 6.9 (5.2) 12.9 97.6 Forecasts and Valuations Relative 76.9 5.8 (4.0) 15.0 96.3 Total turnover (MYRm) Shariah compliant Jerry Lee 603 9207 7622 [email protected] Jun-13 Jun-14 Jun-15F Jun-16F 135 159 182 208 238 Reported net profit (MYRm) 13.6 23.4 27.6 34.8 44.6 Recurring net profit (MYRm) 14.5 23.2 27.6 34.8 44.6 Recurring net profit growth (%) 65.7 59.8 19.2 25.9 28.2 Recurring EPS (MYR) 0.02 0.02 0.03 0.04 0.05 DPS (MYR) 0.02 0.03 0.04 0.05 0.06 129 81 68 54 42 28.8 19.3 16.3 13.6 11.2 Recurring P/E (x) P/B (x) Jun-17F P/CF (x) 110 70 62 47 37 Dividend Yield (%) 0.9 1.6 1.9 2.4 3.0 EV/EBITDA (x) 69.8 59.5 41.8 33.5 26.4 Return on average equity (%) 23.2 28.8 26.0 27.5 Net debt to equity (%) 12.7 net cash Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 3 . 2 0 . 3 0 0 . 3 0 0 We initiate coverage on GDEX with a BUY call and DCF-derived . 0 MYR2.42 TP (a 20.4% upside), valuing the stock at an implied 81x FY15F 0 P/E. It has seen 10 years of strong earnings growth, which is expected 0 to remain resilient in the coming years on the capacity expansion of its express delivery service and logistics arm as the drivers. Opportunity in the AEC is a key catalyst to drive GDEX’s earnings higher. Sep-14 Jul-14 Mar-14 May-14 239 Jan-14 2.40 Nov-13 Vol m Price Close Source: Company data, OSK-DMG net cash 0.0 net cash 0.0 Powered by EFATM Platform 29.3 net cash 0.0 4 Results Review, 12 November 2014 Nam Cheong (NCL SP) Buy (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD667m Target Price: Price: SGD0.61 SGD0.41 Macro Risks Citius, Altius, Fortius Growth Value 2 . 2 0 . 3 0.51 180 0.46 162 0.41 144 0 0 . 3 0 0 Nam Cheong delivered such a stellar 3QFY14 PATMI of MYR126m that . 0 its 9M14 PATMI has met 93%/99% of our/street FY14 forecasts, as 0 shipbuilding margins surged to 24% from the 17-20% range. Maintain 0 BUY. We raise our TP to SGD0.61 from SGD0.58 (49% upside) as we roll over to a higher weight on FY15F earnings, offset by a lower 9x (from 10x) multiple as a concession to market sentiment. We also raise FY1416 forecasts by 11-13% as we increase margin assumptions. 0.36 126 0.31 108 0.26 70 90 Nam Cheong (NCL SP) Price Close Relative to Straits Times Index (RHS) 60 50 40 30 20 Sep-14 Jul-14 May-14 Mar-14 Jan-14 10 Nov-13 Vol m Source: Bloomberg Avg Turnover (SGD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (SGD) Free float (%) Share outstanding (m) Shareholders (%) 3.41m/2.69m -7.3 48.8 0.29 - 0.50 42 2,098 SK Tiong Enterprise Sdn Bhd Hung Yung Enterprise Sdn Bhd Su Kouk Tiong 27.3 15.2 7.8 Share Performance (%) Home run quarter. Nam Cheong’s 3QFY14 PATMI is nearly as high as FY12’s bottomline, in a sign of how far the company has come within two years. Revenue this quarter was particularly high as a record 16 vessels were sold, compounded by a margin surge to 24% from 17-20% in the previous four quarters. Net gearing stood at a healthy 44.6%. Shallow-water developments to surge according to IHS-Petrodata. The number of shallow-water developments could grow steadily to 593 in 2020 from 76 in FY15 (See Figure 2), according to IHS-Petrodata, requiring shallow-water vessels which are Nam Cheong’s specialisation. This is in line with our view that the lower oil prices are unlikely to have a significant impact on shallow-water operations, or future sales. Raise FY14-16 estimates by 11%/11%/13%. Nam Cheong’s prospects look bright with a net orderbook of MYR1.4bn (a figure which has remained stable over the last three quarters even after MYR1.4bn in revenue recognitions), with strong sales prices combining with improved yard efficiencies resulting in margin boosts. We raise margin assumptions in each year by up to 1.5ppts, resulting in our FY14-16 forecasts rising by 11-13%. Our FY14F PATMI implies a conservative MYR50m bottomline. Citius, Altius, Fortius (Faster, Higher, Stronger). Like an Olympic competitor pushing his performance limits, we believe Nam Cheong has yet to hit peak earnings, with the 20 diesel-electric vessels to begin contributions next year and margins still holding strong. The stock trades at compelling valuations of 5.7/4.9x FY15/16F P/E and with ROEs improving towards 30%. We raise our TP to SGD0.61 (from SGD0.58) as we roll over to a heavier weightage on FY15F earnings, but make a concession to the weaker market sentiment by adjusting our P/E multiple to 9x from 10x. Maintain BUY. Nam Cheong remains one of our Top Picks in the sector. YTD 1m 3m 6m 12m Absolute 30.2 (2.4) (11.8) 12.3 41.4 Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F Relative 26.4 (4.3) (11.7) 11.2 38.0 Total turnover (MYRm) 877 1,257 1,866 2,455 2,969 Reported net profit (MYRm) 137 206 311 391 452 Recurring net profit (MYRm) 137 193 311 391 452 Recurring net profit growth (%) 46.6 41.6 60.6 25.9 15.6 Recurring EPS (MYR) 0.07 0.09 0.15 0.19 0.22 DPS (MYR) 0.01 0.03 0.04 0.05 0.06 Recurring P/E (x) 14.8 11.5 7.2 5.7 4.9 P/B (x) 3.42 2.38 1.90 1.50 1.21 Jesalyn Wong +65 6232 3872 P/CF (x) 27.6 [email protected] Dividend Yield (%) Shariah compliant Lee Yue Jer, CFA +65 6232 3898 [email protected] 9.1 15.4 1.2 2.5 3.5 4.4 6.1 EV/EBITDA (x) 15.7 12.8 8.7 6.4 5.5 Return on average equity (%) 25.6 26.9 29.5 29.5 27.2 Net debt to equity (%) 39.4 52.1 55.5 34.6 27.1 17.6 29.1 40.4 Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report Source: Company data, OSK-DMG na na Powered by EFATM Platform 5 Results Review, 12 November 2014 Tower Bersama Infrastructure (TBIG IJ) Communications - Telecommunications Infrastructure Market Cap: USD3,548m Neutral (Maintained) Target Price: Price: IDR8,600 IDR9,000 Macro Risks Reaching a Pinnacle Growth Value Tower Bersama Infrastructure (TBIG IJ) Price Close Relative to Jakarta Composite Index (RHS) 9,300 142 8,800 135 8,300 127 7,800 120 7,300 112 6,800 105 6,300 97 5,800 90 5,300 120 82 80 60 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Nov-13 Vol m 40 Source: Bloomberg Avg Turnover (IDR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (IDR) Free float (%) Share outstanding (m) Shareholders (%) 41,499m/3.47m -16.4 -4.4 5,650 - 9,050 41 4,797 30.2 28.7 Wahana Anugerah Sejahtera PT Provident Capital Indonesia PT Share Performance (%) Broadly in line. Tower Bersama Infrastructure’s (TBI) 9M14 EBITDA of IDR1.99trn (+25% YoY) made up 72-73% of our and consensus’ fullyear estimates. XL and ISAT contributed less in 3Q14. Rental revenues from both XL Axiata (XL) (EXCL IJ, BUY, TP: IDR6,280) and Indosat (ISAT) (ISAT IJ, BUY, TP: IDR4,590) fell 0.3-3% QoQ, as the telcos were busy integrating and modernising their networks respectively. The slack was, however, taken up by Telkomsel (TBI’s largest customer), which continued to aggressively roll out its 3G network. Telkomsel’s rental revenue grew 18% QoQ (9M14: +34%). 2,430 additional tenancies to-date. TBI added 818 new tenants and completed 464 tower builds in 3Q14, translating into a stable tenancy ratio of 1.67. The impending consolidation of Mitratel will see its tower portfolio expanding to over 13k but at the expense of its tenancy ratio, given Mitratel’s significantly lower tenancy ratio of 1.1x. Net debt/EBITDA remains high. TBI’s net debt/last quarter annualised (LQA) EBITDA remains high albeit down slightly QoQ to 4.6x vs 4.9x in 2Q14. This could limit opportunities to further grow inorganically given its debt covenant of 5x. We note that the recent acquisition of a 49% stake in Mitratel entails a share swap. We believe TBI is keen to procure the remaining towers owned by ISAT, which the latter had said would be put up for sale in 2015. Forecasts and risks. We maintain our FY14 forecast but lower our FY15 core EPS forecast by 6% to factor in new shares to be issued for the purchase of Mitratel, which is slated for completion by year-end. Key earnings risks: i) pressure on lease rentals, ii) slower-than-expected tenancy growth, and iii) lower-than-expected capex spending from telcos. YTD 1m 3m 6m 12m Absolute 55.2 8.4 10.1 39.5 46.3 Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Relative 38.5 7.9 11.4 37.7 34.9 Total turnover (IDRbn) 970 1,715 2,691 3,432 4,006 Reported net profit (IDRbn) 474 842 1,248 1,405 1,798 Recurring net profit (IDRbn) 389 667 1,266 1,405 1,798 188.7 71.7 89.7 11.0 28.0 92 145 268 293 375 DPS (IDR) 25.0 0.0 60.0 67.4 86.2 Recurring P/E (x) 97.9 62.1 33.6 30.7 24.0 P/B (x) 16.3 10.5 10.8 8.5 6.7 P/CF (x) 73.6 32.5 23.4 23.7 17.8 Shariah compliant Recurring net profit growth (%) Jeffrey Tan +603 9207 7633 [email protected] Recurring EPS (IDR) Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 3 . 1 0 . 3 0 0 . 3 0 0 TBI’s 9M14 results were within our and consensus expectations. It is . 0 set to become the largest tower infrastructure company post the 0 consolidation with Mitratel in 4Q14. We remain NEUTRAL on the stock 0 as its valuations at 18x CY15 EV/EBITDA are fair (vs 17-19x of global peers) on the back of its visibly-stretched balance sheet. Our TP of IDR8,600 (<10% downside) is premised on target 17x FY15 EV/EBITDA. 100 20 Source: Company data, OSK-DMG 0.3 0.0 0.7 0.7 1.0 57.1 37.1 25.3 20.9 18.2 20.4 25.9 31.3 31.0 31.2 105.7 188.7 294.5 245.9 197.7 (6.7) (3.9) Powered by EFATM Platform 6 Company Update, 12 November 2014 Tambun Indah Land (TILB MK) Buy (Maintained) Property- Real Estate Market Cap: USD270m Target Price: Price: MYR2.50 MYR2.18 Macro Risks Land Deal Terminated Growth Value Tambun Indah Land (TILB MK) Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS) 2.80 207 2.60 192 2.40 177 2.20 162 2.00 147 1.80 132 1.60 117 1.40 102 1.20 7 87 5 4 2 Sep-14 Jul-14 May-14 Mar-14 Jan-14 1 Nov-13 Vol m 3 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) 2.24m/0.70m 30.7 14.7 1.37 - 2.62 50 412 39.0 Ir. Teh Kiak Seng Share Performance (%) YTD 1m 3m 6m 12m Absolute 44.4 (0.5) (8.4) 11.8 54.6 Relative 46.7 (1.3) (7.0) 14.1 53.5 The deal is off. Tambun Indah Land (Tambun) has terminated the deal to acquire 209.5 acres of land from TPPT Sdn Bhd. The land, which is adjacent to the southern side of Tambun’s Pearl City, costs MYR150m (MYR16.50 psf). As certain conditions cannot be met, and given that expensive charges could be incurred if the period is extended, management has decided to call off the deal. The MYR15m deposit paid earlier will be refunded. Other opportunities still aplenty. While the market could be disappointed with the news, we think Tambun’s solid management team and its over 500 acres of landbank in Seberang Perai are still the company’s key selling points. Management’s execution track record is proven and the strategically-located Pearl City is still the key township in Seberang Perai Selatan to capture the rising housing demand there. Meanwhile, we also do not rule out the possibility that the deal could happen again, given that only Tambun has access to the land. Moving ahead, the company can still embark on other landbanking opportunities which should be RNAV-accretive. 3Q14 earnings likely on track. Tambun is scheduled to release its 3Q14 results in two weeks’ time. Underpinned by the MYR493m unbilled sales, earnings should be largely on track to reach our full-year forecast. In view of better earnings this year, we also expect the interim dividend to be higher than 2 sen declared last year. New sales, however, will likely be slightly weaker due to the lack of new launches during the quarter. Maintain BUY. Our forecasts are unchanged as the land is not planned to be developed over the next 2-3 years. Nevertheless, we expect the latest news to bring some weakness to share price, but we continue to like Tambun as an affordable housing player. For now, without the new land, our TP is lowered to MYR2.50 (from MYR3.00). We maintain our BUY rating. Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F 297 376 466 580 673 Reported net profit (MYRm) 41 65 98 117 134 Recurring net profit (MYRm) 41 65 98 117 134 Recurring net profit growth (%) 74.6 59.2 51.1 18.9 14.7 Recurring EPS (MYR) 0.13 0.16 0.24 0.28 0.31 DPS (MYR) 0.05 0.06 0.09 0.10 0.11 Recurring P/E (x) 16.6 13.2 9.0 7.8 7.0 P/B (x) 3.04 2.77 2.32 1.96 1.67 Total turnover (MYRm) Shariah compliant Loong Kok Wen, CFA +603 9207 7614 [email protected] Dividend Yield (%) Return on average equity (%) 2.1 2.8 4.0 4.7 5.2 21.6 24.4 28.4 27.6 26.2 Return on average assets (%) 10.7 13.8 16.4 15.3 15.2 Net debt to equity (%) (4.6) (8.9) 17.6 6.5 (4.0) 3.4 (0.1) 4.4 Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 3 . 2 0 . 3 0 0 . 3 0 0 Tambun has terminated the deal to acquire 209.5 acres of land, as . 0 certain terms were not met. Although this could disappoint the market, 0 we still like Tambun for its solid management team and >500-acre land 0 at Seberang Perai. Moving forward, management can still embark on other landbanking opportunities. For now, without the new land, we lower our TP to MYR2.50 (14.7% upside). Maintain BUY. 6 Source: Company data, OSK-DMG Powered by EFATM Platform 7 Results Preview, 12 November 2014 Tune Ins (TIH MK) Buy (Maintained) Financial Services - Insurance Market Cap: USD479m Target Price: Price: MYR3.00 MYR2.12 Macro Risks Rejuvenating Its Multi-Channel Growth Growth Value Tune Insurance Holdings (TIH MK) Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS) 2.60 137 2.50 132 2.40 127 2.30 122 2.20 117 2.10 112 2.00 107 1.90 102 1.80 97 1.70 14 92 10 8 Sep-14 Jul-14 May-14 Mar-14 Jan-14 2 Nov-13 Vol m 4 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) AirAsia Group CIMB SI II SB Capital Research Global 2.03m/0.63m 27.4 41.6 1.80 - 2.53 41 752 13.7 9.4 6.6 Share Performance (%) YTD 1m 3m 6m 12m Absolute 8.7 (0.5) (14.2) (4.1) 15.2 Relative 11.0 (1.3) (12.8) (1.8) 14.1 We expect Tune Ins to report 3Q14 travel premiums of ~MYR23m (3Q13: MYR26m), assuming a 26-32% take-up rate. AirAsia’s (AIRA MK, BUY, TP: MYR2.73) passenger numbers expanded by 1%: i) AirAsia Indonesia (-10%), ii) AirAsia Thailand (12%), iii) AirAsia Malaysia (0.5%), iv) AirAsia Philippines (-15%), and v) AirAsia X (AAX MK, SELL, TP: MYR0.68) (24%). AirAsia India reported passenger numbers for 3Q14 as well. All in, passengers carried by the AirAsia group and Cebu Pacific (CEB PM, NR) dropped 4%, reflecting weaker regional travel demand. Nevertheless, YTD total passengers made up 75% of our 50m passenger assumption, as we had expected this short-term trend. Undergoing a leadership transition. In the first week of November, Tune Ins conducted a briefing for investors. It announced that Mr Junior N Cho will replace Mr Peter Miller as the CEO of the group, while Mr AlIshsal bin Ishak is designated as digital director. Both were former staff at AirAsia. We see this transition to be positive as we believe Cho’s credentials are the right fit to the group’s business model and could enhance its customer acquisition strategies. His experience working in aviation groups and insurance groups (MetLife and Allianz), and his hands-on knowledge of digital/technology solutions, would help the company’s long-term aspirations to be a global leader in travel insurance, and direct business-to-customer (B2C) e-consumer products. Forecast retained. Tune Ins is expected to report results on 18 Nov. Despite a lack of signs for recovery in the travel industry, we expect 2H to be robust due to full contributions from the Middle East joint venture and its Thailand associate. A sensitivity analysis suggests that every 1% change in the take-up rate could impact its profit by 2%. Maintain BUY with a MYR3.00 TP (24x FY15F P/E), a premium to sector valuations of 14-20x, implying a 16% 3-year forward earnings CAGR vs the sector’s 13%. Tune Ins is a growth stock with valuations supported by a swift global expansion, as well as partnerships with airlines, travel providers and e-commerce players. Diversification away from AirAsia is pivotal to support our BUY call. Other risks may include an uptick in expenses as Tune Ins realigns its B2C focus and sharpens its multiplatform capabilities. Shariah compliant Forecasts and Valuations Kong Ho Meng +603 9207 7620 [email protected] Net premium revenue (MYRm) Reported net profit (MYRm) Net profit growth (%) Recurring net profit (MYRm) Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F 217 241 268 309 354 41 68 80 96 110 (15.9) 64.4 17.5 19.9 14.8 50 70 80 96 110 Recurring EPS (MYR) 0.07 0.09 0.11 0.13 0.15 DPS (MYR) 0.00 0.04 0.04 0.05 0.06 Recurring P/E (x) 32.1 22.8 19.9 16.6 14.5 P/B (x) 13.1 4.4 3.8 3.4 2.9 0.0 1.8 2.0 2.4 2.8 1.2 (1.9) (2.4) Dividend Yield (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 3 . 2 0 . 3 0 0 . 1 0 0 We expect no major surprises from Tune Ins’ 3Q14 results, as . 0 passengers carried by its airline partners are on track to meet our full- 0 year forecast, which had factored in lower travel demand. Reiterate BUY 0 and MYR3.00 TP (24x FY15F P/E, 41.6% upside). We see a long-term transformation in this growth stock, buoyed by its new leadership, a swift global expansion and sharpening of its multichannel capabilities. 12 6 Source: Company data, OSK-DMG Powered by EFATM Platform 8 Corporate News Flash, 11 November 2014 Ezion Holdings (EZI SP) Buy (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD1,806m Target Price: Price: SGD2.65 SGD1.48 Macro Risks New Strategy Takes Shape Growth Value Ezion Holdings (EZI SP) Relative to Straits Times Index (RHS) 2.10 122 2.00 116 1.90 111 1.80 105 1.70 100 1.60 94 1.50 88 1.40 83 1.30 40 35 30 25 20 15 10 5 77 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Source: Bloomberg Avg Turnover (SGD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (SGD) Free float (%) Share outstanding (m) Shareholders (%) Chew Thiam Keng GuoLine Capital Franklin Resources 13.9m/11.0m 48.0 79.1 1.42 - 2.03 70 1,578 14.2 7.6 7.0 Share Performance (%) YTD 1m 3m 6m 12m Absolute (20.3) (16.7) (17.7) (21.3) (8.9) Relative (24.1) (17.7) (16.4) (22.7) (11.4) Shariah compliant Up to 8.33% stake in well-qualified Triyards (ETL SP, NR). Ezion has subscribed for 29.5m Triyards warrants for USD1 consideration in total at an exercise price of USD0.563 per share, exercisable on condition (see below) over a period of three years. The USD16.6m exercise quantum represents 8.33% of the enlarged share capital in the vessel builder. Triyards is well-qualified for Ezion’s work, having built Ezra’s (EZRA SP, NEUTRAL, TP: SGD0.85) Lewek Constellation, one of the most technologically sophisticated offshore vessels in the world today, as well as its own liftboat and drilling rig designs. Read-through: Ezion is confident of signing three new contracts in the next 120 days. The exercise conditions stipulate the introduction of shipbuilding contracts worth at least USD150m to Triyards within the next 120 days. This indicates that Ezion is confident of securing at least three new service rig contracts during this period, assuming each rig costs USD60m. This should assuage investor concerns that the lower oil price may affect future contract flows. 6-month implied payback. From the start of this year, we have gradually trimmed our FY14/FY15 core PATMI forecast to USD190m/USD296m from USD228m/USD307m respectively due to delays in deliveries. This implies that the opportunity cost of such delays is actually USD38m/USD11m in FY14/FY15 respectively. We view this USD16.6m as a small price to pay to avoid such losses, with a payback period under six months if Triyards can help Ezion save USD38m a year. Still one of our Top Picks for strong locked-in growth. Ezion remains one of our Top Picks for its 35%/56% growth with strong contract coverage over the next three years (See Figure 1). Maintain BUY and SGD2.65 TP based on 12x blended FY14F/15F P/E. Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F 159 282 410 612 684 Reported net profit (USDm) 79 160 230 296 339 Recurring net profit (USDm) 65 141 190 296 339 38.4 115.0 35.2 55.9 14.5 Total turnover (USDm) Recurring net profit growth (%) 0.08 0.11 0.13 0.19 0.21 0.001 0.001 0.001 0.001 0.001 Recurring P/E (x) 15.1 10.1 9.1 6.1 5.3 P/B (x) 3.29 1.93 1.55 1.23 1.00 Jesalyn Wong +65 6232 3872 P/CF (x) 11.4 9.9 5.2 4.4 3.7 [email protected] Dividend Yield (%) 0.1 0.1 0.1 0.1 0.1 EV/EBITDA (x) 16.0 13.2 9.0 5.9 4.3 Return on average equity (%) 21.8 27.7 24.6 22.5 20.7 Net debt to equity (%) 75.5 115.0 92.6 70.4 32.5 (8.2) 3.1 (0.6) Lee Yue Jer, CFA +65 6232 3898 [email protected] Recurring EPS (USD) DPS (USD) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 2 0 . 3 0 0 . 3 0 0 Ezion has entered into a subscription agreement for 29.5m Triyards . 0 warrants, on condition it directs at least USD150m of newbuild 0 contracts to the vessel builder. Maintain BUY and SGD2.65 TP (79.1% 0 upside). This is the execution of a long-term strategy to manage its rigs delivery schedule, which should avoid future rig delay opportunity costs. The USD16.6m investment in Triyards has an implied payback of under six months. Nov-13 Vol m Price Close Source: Company data, OSK-DMG Powered by EFATM Platform 9 Results Review, 12 November 2014 Genting Singapore (GENS SP) Neutral (Maintained) Consumer Cyclical - Gaming Market Cap: USD9,881m Target Price: Price: SGD1.14 SGD1.04 Macro Risks Just Plain Unlucky Growth Value Genting Singapore (GENS SP) Price Close Relative to Straits Times Index (RHS) 1.60 110 1.50 104 1.40 97 1.30 91 1.20 84 1.10 78 1.00 71 0.90 70 65 0 0 . 1 0 Genting Singapore’s 9M14 core earnings of SGD535.7m fell below 0 . expectations as 3Q14 VIP luck factor closed below 2.0% (vs theoretical 0 0 hold of 2.85%), while volume shed 5.0% YoY on tighter credit control. 0 Management reaffirmed its cautious medium-term outlook in view of a potential slowdown in China’s GDP growth. We revise our TP to SGD1.14 (9.6% upside) as we peg a lower FY15 EV/EBITDA of 8.5x (from 10.0x) and following our earnings revision. Maintain NEUTRAL. 60 50 40 30 Sep-14 Jul-14 May-14 Mar-14 Jan-14 10 Nov-13 Vol m 20 Source: Bloomberg Avg Turnover (SGD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (SGD) Free float (%) Share outstanding (m) Shareholders (%) 25.4m/20.2m 26.9 9.6 1.04 - 1.51 48 12,237.8 Genting Bhd 51.9 Share Performance (%) Absolute Relative Bad luck. Genting Singapore’s 9M14 revenue grew 3.3% YoY to SGD2.22bn, lifted by both its VIP and mass market gaming segments. However, its core earnings of SGD535.7m (+7.7% YoY) fell below our projection but exceeded consensus estimate at 64.6% and 80.0% of the respective full-year forecasts, as 3Q14 numbers were dragged down by the subpar VIP luck factor of below 2.0%. We estimate that 9M14 core earnings would have amounted to SGD640m-650m (at 77-78% of our previous forecast) at the theoretical VIP hold rate of 2.85%. Key highlights. 3Q14 VIP rolling volume shed 5.0% YoY, marking its first decline over the past two years, as management turned more cautious on credit extension in anticipation of a potential slowdown in China’s GDP growth. The move, in our view, would help to contain further pressure on its impairment on receivables, which registered at SGD39.7m in 3Q14 (vs SGD81.6m in 2Q14). Forecasts and risks. We cut our FY14F EPS by 12.1%, taking into account the subpar VIP luck factor YTD. We also lower our FY15-16 net profit forecasts by 8-9%, factoring in slower VIP growth as we believe management’s more selective approach on credit offerings, coupled with the lack of independent junkets’ presence in Singapore, would likely impede medium-term growth. Key risks include volatility in VIP win rates and further weakness in Singapore’s tourist arrivals. Maintain NEUTRAL. We are now pegging a revised FY15 EV/EBITDA of 8.5x (from 10.0x) to Genting Singapore’s valuation. This is premised on an unchanged 25% discount to its Macau gaming peers, that witnessed recent share price retracements, which we deem justified given the more stringent regulatory control in Singapore’s gaming industry. With that, our new TP now stands at SGD1.14 (from SGD1.39). Maintain NEUTRAL. YTD 1m 3m 6m 12m (30.4) (5.5) (19.1) (21.8) (27.3) Forecasts and Valuations (30.4) Total turnover (SGDm) (34.2) (7.4) (18.5) (22.9) Shariah compliant Kong Heng Siong +603 9207 7666 [email protected] Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F 2,948 2,847 3,023 3,076 3,175 Reported net profit (SGDm) 680 707 729 777 802 Recurring net profit (SGDm) 624 620 729 777 802 (39.1) (0.8) 17.7 6.6 3.2 Recurring EPS (SGD) 0.05 0.05 0.06 0.06 0.07 DPS (SGD) 0.01 0.01 0.01 0.01 0.01 Recurring P/E (x) 20.3 20.5 17.5 16.4 15.9 P/B (x) 1.92 1.73 1.60 1.48 1.37 P/CF (x) 13.1 17.2 12.4 11.0 10.5 1.0 1.0 1.0 1.0 1.0 EV/EBITDA (x) 10.2 10.8 9.2 8.6 7.9 Return on average equity (%) 10.7 10.1 9.5 9.4 7.4 10.4 7.1 2.6 8.8 7.4 Recurring net profit growth (%) Dividend Yield (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 2 0 . 2 Source: Company data, OSK-DMG Powered by EFATM Platform 9.0 net cash 1.8 10 Results Review, 12 November 2014 Silverlake Axis (SILV SP) Sell (from Neutral) Technology - Software & Services Market Cap: USD2,352m Target Price: Price: SGD1.03 SGD1.35 Macro Risks Valuations a Tad Too Rich Growth Value Silverlake Axis (SILV SP) Price Close Relative to Straits Times Index (RHS) 1.40 173 1.30 162 1.20 150 1.10 139 1.00 127 0.90 116 0.80 104 0.70 30 93 0 0 . 2 0 0 Silverlake’s 1QFY15 (Jun) revenue rose 15% YoY to MYR116.3m while . 0 NPAT grew 17% YoY to MYR59.7m, in line with our estimates. However, 0 we find the current price level resulting in a valuation of 27x FY15 P/E a 0 tad too rich, especially when its NPAT growth has slowed to around 1315% per year from 20-40%. Also, its peers are trading at a much lower 21x CY14 P/E average. Downgrade to SELL with a lower SGD1.03 TP (23.7% downside), pegged to a peer average of 21x CY14 P/E. 25 20 15 Sep-14 Jul-14 May-14 Mar-14 Jan-14 5 Nov-13 Vol m 10 Source: Bloomberg Avg Turnover (SGD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (SGD) Free float (%) Share outstanding (m) Shareholders (%) 2.12m/1.67m -8.9 -23.7 0.84 - 1.36 24 2,245 Peng Ooi Goh 67.6 2 . 1 0 . 2 Bigger peers are trading at much lower valuations. In our peer comparison table (see Figure 1), Silverlake Axis’ (Silverlake) peers which are much larger in size, average 21x CY14 P/E and 1.4x CY14 PEG, vs Silverlake which is trading at a premium of 27.5x and 1.9x respectively. NPAT growth momentum slowing. Previously, Silverlake grew at an average 29.2% NPAT CAGR from FY11 to FY14. Going forward, management is only guiding stable growth of about 15% per year, which is at a much slower pace. We feel that Silverlake’s current valuations may be too rich, especially when it is not growing as fast as it was in the past. Execution risks and unclear orderbook. Despite having a good track record on its execution, the execution risks still persist for Silverlake, especially in the North Asian segment, which could be key to its future growth. In addition, there is uncertainty regarding its orderbook as the company has not announced any new contract wins for quite some time, despite management saying it has a 15-month backlog of contracts to tap on. Downgrade to SELL with a lower SGD1.03 TP. We expect the financial impact of the massive deals from potential mergers such as OCBC-Wing Hang and CIMB-RHB-MBSB to only come through from FY16 onwards. Given: i) its future growth likely slowing to about 15% a year, ii) its rich valuations at current levels vs its peers, and iii) potential execution risks, we downgrade our call to SELL (from Neutral), with a lower TP of SGD1.03 (from SGD1.12), pegged to a peer average of 21x CY14 P/E. Share Performance (%) Jun-12 Jun-13 Jun-14 Jun-15F Jun-16F Total turnover (MYRm) 400 399 501 537 598 Reported net profit (MYRm) 162 196 249 285 318 Recurring net profit (MYRm) 162 196 249 285 318 Recurring net profit growth (%) 40.8 20.8 27.0 14.5 11.5 Recurring EPS (MYR) 0.08 0.09 0.11 0.13 0.14 DPS (MYR) 0.05 0.08 0.10 0.11 0.11 Jarick Seet +65 6232 3891 Recurring P/E (x) 45.1 37.7 31.4 27.5 24.6 [email protected] P/B (x) 24.6 12.6 12.7 12.0 10.8 P/CF (x) 51.7 40.0 27.9 36.2 25.7 1.4 2.2 2.9 3.2 3.2 29.9 28.4 23.3 20.8 18.6 63.6 44.3 41.3 44.9 46.1 YTD 1m 3m 6m 12m Absolute 53.4 3.8 19.5 50.0 57.0 Relative 49.6 1.9 19.6 48.9 53.6 Shariah compliant Forecasts and Valuations Terence Wong CFA +65 6232 3896 Dividend Yield (%) [email protected] EV/EBITDA (x) Return on average equity (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) net cash net cash net cash net cash net cash 5.8 18.0 Source: Company data, OSK-DMG See important disclosures at the end of this report Powered by EFATM Platform 11 Results Review, 12 November 2014 BEC World (BEC TB) Sell (Maintained) Communications - Media Market Cap: USD2,998m Target Price: Price: THB36.4 THB49.3 Macro Risks Results Continue To Be Sluggish Growth Value BEC World (BEC TB) Relative to Stock Exchange of Thailand Index (RHS) 99 55.0 94 53.0 89 51.0 84 49.0 79 47.0 74 45.0 69 43.0 8 7 6 5 4 3 2 1 64 Jul-14 Mar-14 Sep-14 57.0 May-14 104 Jan-14 59.0 Nov-13 Vol m Price Close 99.4m/3.08m -1.8 -26.1 44.5 - 56.8 47 2,000 Maleenont Family Chase Nominees 47.0 9.4 Airtime revenue still grew at 3.4% YoY and 3.9% QoQ to THB3.96bn. This was a surprise amid weak TV adex and poor sentiments during the transitional of analog TV into digital platform. Other revenue from concerts, shows, copyrights, and other rebounded QoQ by 65.5% after the political turmoil subsided. Gross margins plunged. 3Q14 gross margin collapsed to 43.8% from 48.3% in 2Q14 and 51.9% in 3Q13. This was mainly due to higher costs (licenses fee, and network rental fee) from the start-up of three digital TV channels. However, BEC was able to tighten its SG&A expenses causing SG&A expenses to sales ratio to decline to 11.7%, from 12.3% in 2Q14. Earnings slipped to THB1.08bn (-22% YoY, -8% QoQ). We note that 3Q14 actual earnings were slightly above the consensus estimate of THB1.05bn. 9M14 earnings came in at THB3.4bn (-19% YoY), representing 76% of our full year forecast. Maintain our conservative earnings forecast for 2014-15. This year we forecasted its earnings to slip by 20% YoY to THB4.5bn assuming a 3% YoY drop in average airtime revenue per minute and 30% net margin. Next year we expect its earnings to decline further by 12% YoY to THB3.9bn assuming another 10% YoY decline in average airtime revenue per minute and 25% net margin. We note that our 2015 earnings forecast is on the low-range of consensus estimates. Share Performance (%) Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Total turnover (THBm) 12,804 14,886 16,429 14,834 16,049 Reported net profit (THBm) 3,530 4,777 5,589 4,494 3,939 Recurring net profit (THBm) 3,530 4,777 5,589 4,494 3,939 6.6 35.3 17.0 (19.6) (12.4) Recurring EPS (THB) 1.77 2.39 2.79 2.25 1.97 DPS (THB) 1.80 2.27 2.66 2.13 0.95 Wanida Geisler 66 2862 9748 Recurring P/E (x) 27.9 20.6 17.6 21.9 25.0 [email protected] P/B (x) 13.6 12.2 11.2 11.7 11.7 P/CF (x) 17.2 15.3 13.8 16.0 14.9 3.7 4.6 5.4 4.3 1.9 13.7 11.5 10.4 12.1 12.5 47.4 62.3 66.1 52.0 46.8 YTD 1m 3m 6m 12m Absolute (2.5) 4.2 8.2 (1.0) (12.1) Relative (23.2) 3.3 5.1 (14.8) (23.6) Recurring net profit growth (%) Shariah compliant Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) net cash net cash net cash net cash net cash (7.1) (22.5) Source: Company data, OSK-DMG See important disclosures at the end of this report 2 . 3 0 . 1 0 0 . 1 0 0 BEC’s 9M14 earnings came in at THB3.4bn (-19% YoY), representing . 0 76% of our full year forecast. We are downbeat on BEC’s outlook amid 0 changes in technology and industry structure. Although BEC can still 0 maintain its number two ranking during the initial start-up of digital TV platform, we see more challenges ahead which should dampen its performance in the medium term. Maintain SELL with TP of THB36.4, pegged to 18.5x P/E (-0.5SD to its long-term mean PE). Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) Powered by EFATM Platform 12 Results Review, 11 November 2014 Indorama Ventures PCL (IVL TB) Buy (Maintained) Energy & Petrochemicals - Downstream Products Market Cap: USD3,294m Target Price: Price: THB29.90 THB22.50 Macro Risks Better Prospects In 2015 Growth Value Indorama Ventures (IVL TB) Relative to Stock Exchange of Thailand Index (RHS) 28.0 110 26.0 104 24.0 97 22.0 90 20.0 84 18.0 100 90 80 70 60 50 40 30 20 10 77 Sep-14 Jul-14 Mar-14 May-14 117 Jan-14 30.0 Nov-13 Vol m Price Close 194m/6.01m 2.2 33.0 19.5 - 29.3 34 4,814 63.7 4.8 3.2 Share Performance (%) YTD 1m 3m 6m 12m Absolute 12.5 (8.5) (17.4) (8.5) (10.0) Relative (9.2) (11.2) (21.2) (21.2) (20.9) 9M14 net profit was at THB2.4bn (+35.9% YoY). Indorama Ventures’ (IVL) 9M14 revenue grew 10% YoY to THB189.2bn, as it recorded higher sales volume and value as a result of acquisitions, debottlenecking activities, better utilization rates and a higher proportion of contributions from high value-added (HVA) businesses which accounted for 21% of total volume in 9M14. Core EBITDA increased to THB14.4bn in 9M14 (+32% YoY), while core EBITDA per ton grew to USD94/tonne in 9M14 from USD83/tonne in 9M13. IVL’s inventory loss totaled THB1.1bn for 9M14, compared with an inventory loss of THB552mn in 9M13. Other items include acquisition costs of THB37m, a THB403m gain on a bargain purchase and other extraordinary expenses valued at THB435m. 2015 volumes to grow from acquisitions. Next year, the company expects to fully benefit from its acquisitions and debottlenecking efforts that are completed in 2014, which comprise Adana in Turkey (a 139 thousand ton per annum (ktpa) polyethylene terephthalate (PET) plant), the debottlenecking of its Poland PET polymers facility, Polychem (Indonesia) and PHP Fibers. Inventory markdowns expected in 4Q14, but IVL should book improvements in 2015. In terms of prices, IVL expects a markdown in industry inventory in 4Q14, which would imply lower product prices. This would lead to destocking across the value chain. Next year, it also expects to reap the benefits of restocking as well as lower absolute raw material prices. IT also expects purified terephthalic acid (PTA) and PET margins in the US and Europe to remain stable over time, due to the more steady demand from both regions. IVL also expects its monoethylene glycol (MEG) business to benefit from the tight supply situation and the softening of ethylene prices. Note that Asia’s PTA margins are still weak and are now close to regional variable operating cost levels. Forecasts and Valuations Dec-11 Dec-12 Dec-13F Dec-14F Dec-15F 186,096 210,729 229,120 253,500 265,200 Reported net profit (THBm) 15,568 2,740 1,326 4,461 4,673 Recurring net profit (THBm) 10,695 1,560 414 4,461 4,673 8.3 (85.4) (73.5) 978.8 4.7 Recurring EPS (THB) 2.22 0.32 0.09 0.93 0.97 DPS (THB) 1.00 0.29 0.14 0.47 0.50 10 69 262 24 23 1.85 1.93 1.79 1.72 1.65 40 9 562 8 8 4.4 1.3 0.6 2.1 2.2 Total turnover (THBm) Shariah compliant Kannika Siamwalla, CFA 66 2862 9744 [email protected] Recurring net profit growth (%) Recurring P/E (x) P/B (x) P/CF (x) Dividend Yield (%) EV/EBITDA (x) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 2 0 . 3 0 0 . 3 0 0 9M14 earnings rose 35.9% YoY to THB2.4bn, as sales and volume rose . 0 from acquisitions, debottlenecks, better utilization rates and larger 0 contributions from its HVA business. BUY, with our TP at THB29.90 0 (2.2x 2015 P/BV, 33% upside). We expect an inventory markdown in 4Q as absolute prices fall further, in line with crude oil prices, which may lead to destocking across the value chain. We expect a better 2015, as it reaps the full-year benefits from acquisitions/debottlenecking efforts. Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) Indorama Resources Co Ltd Bangkok Bank Pcl Thai NVDR Source: Company data, OSK-DMG 9.3 14.4 16.0 9.7 9.5 74.2 134.4 131.4 119.0 108.1 0.0 0.0 0.0 Powered by EFATM Platform 13 Results Review, 11 November 2014 Jay Mart (JMART TB) Buy (Maintained) Consumer Cyclical - Distribution & Wholesale Market Cap: USD195m Target Price: Price: THB15.70 THB12.20 Macro Risks 9M14 Core Earnings Decline 16.6% YoY Growth Value Jay Mart (JMART TB) Relative to Stock Exchange of Thailand Index (RHS) 16.0 104 15.0 95 14.0 87 13.0 79 12.0 70 11.0 16 14 12 10 8 6 4 2 62 Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) Mr. Adisak Sukumvitaya Miss Yuvadee Pong-acha Miss Juthamas Sukumvitaya 24.2m/0.75m 50.8 28.3 12.2 - 16.6 47 524 18.9 17.9 7.8 Share Performance (%) Below expectations. Jay Mart’s 9M14 core earnings fell 16.6% YoY and accounted only 54%/48% of our previous/consensus FY forecasts. The sharp drop in earnings was caused mainly by lower-than-expected mobile sales. 9M14 core earnings from its debt management business JMT Network Services (JMT TB, NR) surged 23.8% YoY to THB76.76m, accounting for 24.9% of total group net profit as its amortisation declined. Key highlights. 3Q14 revenue declined to THB2.22bn (-0.2% QoQ, 10.9% YoY) accounting for 58.6% of our previous full-year estimate. Mobile business revenue fell to THB1.91bn (-0.6 QoQ, -13.2% YoY) due to lower selling prices of Chinese-branded smartphones and the wait for flagship models scheduled to be launched in 4Q14. Its rental business’ revenue climbed to THB103.1m (+4.0 QoQ, +19.2% YoY) as rental rates and areas increased, while its debt collection and management business revenue surged to THB126.9m (+10.9% QoQ, 35% YoY) on lower amortisation. Cost of sales dropped by 11.4% YoY due to slower sales. As a result, EBITDA and net profit fell 17.7%/36.5% YoY, and net margin declined 1.6ppts to 2.5% (from 4.1% in 2Q14) on the back of weak sales volumes. Forecasts and risks. Management trimmed its 2014 revenue growth guidance for the second time to <15% (from 15% previously). The key risks to our earnings forecasts are: i) rising competition among smartphones retailers, ii) lower-than-expected ASPs, and iii) continuously weak consumer sentiment going forward. Valuation. We cut our FY14/FY15 revenue forecasts by 14.7%/14.3% to reflect the slower sales, and trim our unit sales assumption to 1.33m units (from 1.5m). We also pare our FY14/FY15 earnings estimates by 10.5%/10% to THB403m and THB444m respectively (from THB450 and THB496m). Maintain BUY, as we believe that its revenue bottomed out in 3Q14. Our THB15.70 TP is premised on a FY15 P/E of 14.4x. YTD 1m 3m 6m 12m Absolute (24.1) (9.6) (9.0) (13.5) (24.1) Forecasts and Valuations Relative (45.6) (11.3) (12.8) (28.1) (36.4) Total turnover (THBm) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F 5,922 7,944 9,665 9,509 10,972 Reported net profit (THBm) 171 363 400 403 444 Recurring net profit (THBm) 171 311 400 403 444 Recurring net profit growth (%) 80.4 81.1 28.9 0.6 10.2 Recurring EPS (THB) 0.57 0.87 0.96 0.85 0.85 DPS (THB) 0.34 0.39 0.69 0.67 0.74 Recurring P/E (x) 21.3 14.0 12.7 14.3 14.4 P/B (x) 5.39 3.27 2.95 3.38 3.28 Vikran Lumyai +66 2862 9999 Ext 2028 P/CF (x) 32.0 50.2 38.6 [email protected] Dividend Yield (%) 6.1 Shariah compliant Veena Naidu License No. 24418, 66 2862 9752 [email protected] na na 2.8 3.2 5.7 5.5 EV/EBITDA (x) 13.5 10.7 13.1 9.6 8.5 Return on average equity (%) 26.4 32.6 24.4 22.2 23.1 Net debt to equity (%) 96.5 68.4 97.7 Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 3 . 2 0 . 3 0 0 . 2 0 0 9M14 core earnings fell 16.6% YoY to THB230.7m from weak consumer . 0 sentiment and intensified competition. Maintain BUY, with lower 0 THB15.70 TP (28.3% upside, 14.4x FY15F P/E) as revenue has bottomed 0 out. 9M14 mobile sales revenue fell 10% YoY, mainly from a lower ASP and a drop in sales volume. While its rental and debt management units grew robustly by 19.2%/35% YoY, we trim our FY14/FY15 earnings estimates by 10.5%/10% due to stronger-than-expected competition. Sep-14 Jul-14 Mar-14 May-14 112 Jan-14 17.0 Nov-13 Vol m Price Close Source: Company data, OSK-DMG 124.1 161.6 (12.1) (20.2) Powered by EFATM Platform 14 Results Review, 12 November 2014 Land and Houses (LH TB) Buy (Maintained) Property - Real Estate Market Cap: USD3,300m Target Price: Price: THB12.50 THB9.85 Macro Risks Unexciting 3Q14 Results Growth Value Land and Houses (LH TB) Price Close Relative to Stock Exchange of Thailand Index (RHS) 11.5 113 11.0 109 10.5 104 10.0 100 9.5 96 9.0 92 8.5 87 8.0 140 83 100 60 Sep-14 Jul-14 May-14 Mar-14 Jan-14 20 Nov-13 Vol m 40 Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) Mr. Anant Asavabhokin Thai NVDR Government of Singapore Investment Corp 204m/6.40m 16.8 26.9 8.30 - 11.3 52 10,986 23.8 17.9 16.1 Share Performance (%) 3Q14 residential sales slipped to THB5.96bn (-5% YoY, -16% QoQ). 9M14 residential sales of THB18.6bn (+8.5% YoY) accounted for 74% of the company’s full-year forecast of THB25bn (+9% YoY). Rental income, on the other hand, rebounded 9% YoY and 13% QoQ to THB603m in 3Q14, after the political turmoil subsided. We note that 9M14 rental income of THB1.6bn (+5.3% YoY) represented 64% of the company’s full-year forecast of THB2.5bn, weaker than expected due to poor sentiment during 1H14. Residential gross margin weakened with rising SG&A expense-tosales ratio. Residential gross margin slipped to 36.3% in 3Q14, down slightly QoQ from 37.2% in 2Q14, but still higher than 35.4% in 9M13. Selling, general and administrative (SG&A) expense-to-sales ratio rose to 14.4%, up 1ppt YoY and QoQ, as the company spent more to boost 3Q14 presales to its record high of THB11bn. However, financing costs declined meaningfully to THB98m (-35% YoY and -25% QoQ). 3Q14 profit contribution from associates was flat QoQ at THB584m. 9M14 numbers were THB1.64bn (+6% YoY). The company forecasted share of profit from associates at THB2.3bn (+13% YoY). 3Q14 net profit came in at THB1.73bn (-6% YoY, -13% QoQ), slightly below consensus estimate of THB1.77bn. 9M14 earnings of THB5.14bn (+4.5% YoY) represented 76% of our full-year forecast. Record high presales in 3Q14 at THB11bn (+10% YoY, +24% QoQ). Land and Houses’ 9M14 presales grew 12% YoY. We note that among the seven major listed developers, only three, including Land and Houses, saw positive 9M14 presales growth. Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F YTD 1m 3m 6m 12m Total turnover (THBm) 19,229 24,103 25,075 28,234 35,186 Absolute 10.1 (0.5) 0.5 2.1 (2.5) Reported net profit (THBm) 5,609 5,636 6,478 6,717 7,975 Relative (11.4) (2.2) (3.3) (12.5) (14.8) Recurring net profit (THBm) 3,634 5,636 6,447 6,717 7,975 Recurring net profit growth (%) (2.5) 55.1 14.4 4.2 18.7 Recurring EPS (THB) 0.36 0.56 0.64 0.65 0.72 DPS (THB) 0.40 0.45 0.40 0.55 0.61 Recurring P/E (x) 27.2 17.5 15.3 15.3 13.8 P/B (x) 3.36 3.14 2.94 2.80 2.70 31.9 18.7 Shariah compliant Wanida Geisler +66 2862 9748 [email protected] P/CF (x) Dividend Yield (%) na 15.9 na 4.1 4.6 4.1 5.6 6.2 EV/EBITDA (x) 22.8 14.3 13.4 13.4 11.4 Return on average equity (%) 19.7 18.5 19.9 18.8 19.9 Net debt to equity (%) 87.2 79.8 94.7 76.6 60.5 7.5 8.4 Our vs consensus EPS (adjusted) (%) Source: Company data, OSK-DMG See important disclosures at the end of this report 3 . 2 0 . 1 0 0 . 2 0 0 Despite a healthy YTD presales growth, Land and Houses posted . 0 unexciting 3Q14 results with revenue, margins and net profit down both 0 QoQ and YoY. Its 9M14 earnings of THB5.14bn (+4.5% YoY) represented 0 76% of our 2014 forecast. Early conversion of its warrants (LH-W3) still pressures the stock price. Keep BUY on this laggard stock with a TP of THB12.50 (27% upside) (core business is worth THB11.10 on its longterm mean P/E of 15.5x and its investment portfolio is worth THB1.40). 120 80 Powered by EFATM Platform 15 Results Review, 10 November 2014 Quality Houses (QH TB) Buy (Maintained) Property - Real Estate Market Cap: USD1,167m Target Price: Price: THB5.50 THB4.18 Macro Risks 3Q14 Should Be This Year’s Best Quarter Growth Value Quality Houses (QH TB) Relative to Stock Exchange of Thailand Index (RHS) 4.60 152 4.10 140 3.60 128 3.10 116 2.60 104 2.10 160 140 120 100 80 60 40 20 92 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) Land and Houses Government of Singapore Investment Corp 136m/4.24m 12.4 31.6 2.38 - 4.46 63 9,184 24.9 10.8 Thai NVDR Revenue grew 13.3% QoQ to THB6.43bn. Residential sales continued to increase by 13.5% QoQ while rental income growth rebounded to 10.4% QoQ after the political turmoil subsided. 9M14 revenue increased 10% YoY to THB16.2bn. Residential gross margin weakened. Residential gross margin slipped below 32% for the first time in over five quarters, but 9M14 gross margin remained healthy at 32.6%, up from 9M13’s 32%. Well-controlled sales, general and administrative (SG&A) expenses to sales ratio but financing costs surged. SG&A expenses to sales ratio slid to 15.4% in 3Q14, down from over 16% in 1H14. We note that Quality Houses has so far launched fewer new projects when compared to last year and its 9M14 presales are estimated to fall 7% YoY to THB15.7bn. Financing costs, on the other hand, surged 53% YoY and 33% QoQ on higher borrowings. Better profit contribution from associates. Equity accounted profit rose 30% YoY and 3.5% QoQ thanks to higher profit contributions from Home Product Center (HMPRO TB, BUY, TP: THB11.00) and LH Financial (LHBANK TB, NR). Net profit grew 9.2% QoQ to THB1.07bn. This was in line with consensus estimates. 9M14 earnings of THB2.68bn (+4% YoY) accounted for 88% of our full-year forecast. Another round of earnings forecast adjustments are likely after attending today’s analyst meeting. 6.7 Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F 9,849 13,077 19,699 18,057 22,282 Reported net profit (THBm) 853 2,450 3,307 3,051 3,808 Recurring net profit (THBm) 850 1,536 3,190 3,051 3,808 (51.6) 80.7 107.6 (4.4) 24.8 Recurring EPS (THB) 0.10 0.17 0.35 0.33 0.41 DPS (THB) 0.01 0.11 0.16 0.17 0.21 Recurring P/E (x) 41.7 24.0 12.0 12.6 10.1 Wanida Geisler 66 2862 9748 P/B (x) 2.69 2.43 2.22 2.04 1.82 [email protected] P/CF (x) Share Performance (%) YTD 1m 3m 6m 12m Absolute 58.3 2.5 2.5 37.5 50.4 Relative 36.8 0.8 (1.3) 22.9 38.1 Shariah compliant Total turnover (THBm) Recurring net profit growth (%) Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) na na 0.2 2.7 21.3 6.4 161.7 18.4 na na 3.9 4.0 5.0 15.6 8.8 11.7 10.2 16.9 20.0 16.9 19.1 131.1 108.2 96.7 93.0 (5.1) 3.7 Source: Company data, OSK-DMG See important disclosures at the end of this report 3 . 3 0 . 2 0 0 . 2 0 0 3Q14 should be Quality Houses’ best quarter this year in terms of . 0 revenue and earnings. Maintain BUY and THB5.50 TP (31.6% upside), ie 0 core property business worth THB4.50 pegged at 11x long-term mean 0 P/E and valuing its investment portfolio at THB1.00. We expect results to soften in 4Q14 on fewer condominium sales. As its THB2.68bn 9M14 earnings were still better than our estimates, another round of net profit forecast adjustments are likely. Nov-13 Vol m Price Close Powered by EFATM Platform 16 Company Update, 11 November 2014 Thai Oil (TOP TB) Buy (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD2,807m Target Price: Price: THB53.50 THB45.30 Macro Risks Getting Stronger After The Worst Is Over Growth Value Thai Oil (TOP TB) Relative to Stock Exchange of Thailand Index (RHS) 65.0 103 60.0 93 55.0 83 50.0 73 45.0 63 40.0 20 18 16 14 12 10 8 6 4 2 53 0 0 . 2 0 0 We expect Thai Oil to record a stronger 4Q14, with product spreads . 0 from its major business being either stable or having improved. Thus, 0 we maintain BUY, with a THB53.50 TP (1.1x 2015 P/BV) offering an 0 upside of 18.2%. However, should the price of crude oil remain at c.USD85/barrel (bbl), we anticipate further losses in 4Q14. We believe that after its refinery has recognised the bottom of crude oil prices, its earnings and share price would start improving again. Sep-14 Jul-14 Mar-14 May-14 113 Jan-14 70.0 Nov-13 Vol m Price Close Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) PTT Pcl. Thai NVDR State Street Bank Europe Limited 167m/5.15m 75.7 18.2 42.5 - 64.5 50 2,040 49.1 7.1 3.7 Share Performance (%) Potential investments in Myanmar. The Myanmar Petrochemical Enterprise (MPE) issued an invitation for parties to tender for various projects. The deadline for proposals to be submitted was in Oct 2014, and it will make the announcement of the results by 1Q15. There are two projects: i) revamping the existing Thanlyin Refinery (c.USD60m), and ii) building a greenfield refinery. The refinery upgrade is scheduled for 2016 with an initial capacity of 15,000 barrels per day (bpd). Thai Oil is in alliance with PTT (PTT TB, BUY, TP: THB374.00) for this project. Apart from this, Thai Oil and PTT Group are looking at a long-term plan to develop refining and petrochemical capacity in Myanmar. Myanmar consumes c.70,000bpd of petroleum compared with Thailand’s c.950,000bpd, even though the population sizes of both countries are similar. Mitigation plans in place. Management presented short-term mitigation plans for a lower crude oil price environment. These are: i) to minimise crude oil and inventory stocks, ii) optimise its company-wide benefit recovery program, iii) push its plants to full operations after maintenance, and iv) optimise the margin improvement programs it has completed in order to attain higher margins. The company also plans to lower its cost of fuel and fuel loss in the refining process. Capex plans are on track. Thai Oil’s capex investment plans have not been compromised by the current environment of lower crude oil prices. All committed capex remains as planned, and its total capex over 20142019 is valued at USD1.1bn. Its capex plans cover improvements made to upgrade plant reliability, efficiency, flexibility, environmental- and fuelefficiency as well as to enhance its value chain. Forecasts and Valuations YTD 1m 3m 6m 12m Absolute (19.6) (8.1) (12.1) (13.4) (27.9) Relative (41.3) (10.8) (15.9) (26.1) (38.8) Shariah compliant Kannika Siamwalla, CFA 66 2862 9744 [email protected] 2 . 2 0 . 2 Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F 446,241 447,432 414,599 394,008 412,003 Reported net profit (THBm) 14,853 12,320 10,394 5,117 10,198 Recurring net profit (THBm) 14,853 12,320 10,394 5,117 10,198 Recurring net profit growth (%) 65.8 (17.1) (15.6) (50.8) 99.3 Recurring EPS (THB) 7.28 6.04 5.09 2.51 5.00 DPS (THB) 3.30 2.70 2.30 1.13 2.26 6.2 7.5 8.9 18.0 9.1 1.16 1.07 1.02 0.99 0.93 P/CF (x) 5.9 4.3 29.6 7.4 5.8 Dividend Yield (%) 7.3 6.0 5.1 2.5 5.0 EV/EBITDA (x) 4.50 5.90 5.60 6.77 5.97 Return on average equity (%) 19.9 14.8 11.7 5.5 10.6 Net debt to equity (%) 31.0 20.3 32.7 44.5 39.4 0.0 0.0 Total turnover (THBm) Recurring P/E (x) P/B (x) Our vs consensus EPS (adjusted) (%) Source: Company data, OSK-DMG See important disclosures at the end of this report Powered by EFATM Platform 17 RHB Guide to Investment Ratings DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share may10% exceed over 12 themonths next 3 months, however longer-term outlook remains uncertain Buy: Share price mayprice exceed over15% the next Neutral: Buy: ShareShare price price may fall within the 15% rangeover of +/the next 12 months Trading may exceed the10% nextover 3 months, however longer-term outlook remains uncertain Take Profit: Target been attained. accumulate lower Neutral: Share priceprice may has fall within the rangeLook of +/-to10% over theatnext 12 levels months Sell: Share may fall has by more 10% over next 12 months Take Profit:price Target price beenthan attained. 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