Asia Aviation
Asia Aviation Buy (17E TP Bt9.00)
Company Update
Close Bt6.90
Transport & Logistics November 15, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Impact from zero‐dollar tour crackdown should be short term Price Performance (%)
Reiterate BUY We lower AAV’s earnings in 2016E given the impact from the crackdown on zero‐dollar tours, which has negative implications for AAV’s Chinese passengers and average ticket fare. However, we believe this will only be a short‐term impact. AAV is still our favorite in the airline sector owing to earnings visibility, its highest market share in the LCC industry, and a high fuel hedging level in 2017E. We maintain our BUY rating for AAV with a PER‐based TP of Bt9.00 (based on 20x PER). Weaker‐than‐expected ticket fares in 3Q16 AAV delivered net profit of Bt397mn, 22% and 18% below our estimate and the consensus expectation owing to a lower‐than‐expected average ticket fare to Bt1,574/pax (‐8% YoY), vs. our forecast of Bt1,625/pax (‐5% YoY). This was due to the negative impact from the zero‐dollar tour crackdown and ticket promotions to support Chinese FIT tourists. Net profit jumped by 332% YoY owing to passenger volume growth (+21% to 4.33mn) and lower fuel expenses.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.476
0.526
KT ZMICO vs. consensus Share data
‐9.7%
‐14.4%
Reuters / Bloomberg
AAV.BK/AAV TB
Paid‐up Shares (m)
4,850.00
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
33.00/944.00
Foreign limit / actual (%)
0.10/0.10
52 week High / Low (Bt)
7.80/4.34
Avg. daily T/O (shares 000)
60,550.00
NVDR (%)
9.65
Estimated free float (%)
54.61
Beta
0.71
URL
www.aavplc.co.th
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Zero‐dollar tour crackdown to impact 4Q16E performance In 4Q16E, ticket fares are likely to continue declining owing to both the negative impact from Chinese passengers and the mourning period. However, the situation looks to be improving currently and AAV believes that Chinese passengers will return after next Chinese New Year. Over 70% of fuel usage in 2017 was hedged In 2017E, AAV’s fuel hedging position was high at 71‐74% of fuel usage with an average cost of US$60 (vs. US$56 in 2016), owing to management’s view that the global oil price will increase next year. This will protect AAV’s performance in 2017E from oil price fluctuations. Revise down 2016E net profit estimate by 5%; 2017E maintained We revise down AAV’s net profit estimate in 2016E by 5% to Bt2.1bn, owing to a lower ticket fare assumption to Bt1,617/pax (‐3.0%), vs. Bt1,642/pax (‐1.5%) previously. However, we maintain our net profit projection of Bt2.2bn in 2017E, as we believe ticket fares are likely to resume growth. We maintain our conservative passenger volume growth of +10% in 2017E, vs. +15% in AAV’s target. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) DPS (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 25,981 183 0.04 120 0.02 (86.85) 0.00 4.03 2014 278.49 33.65 1.71 0.00 0.62 29.58
2015 30,345 1,078 0.22 1,181 0.24 882.68 0.10 4.15 2015 28.34 10.57 1.66 1.45 5.95 32.00
2016E 34,358 2,063 0.43 2,030 0.42 71.90 0.19 4.39 2016E 16.49 7.67 1.57 2.73 9.80 30.53
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 38,453 2,168 0.45 2,168 0.45 6.79 0.20 4.63 2017E 15.44 6.75 1.49 2.91 9.91 24.31
2018E 40,442 2,260 0.47 2,260 0.47 4.26 0.21 4.89 2018E 14.81 6.29 1.41 3.04 9.79 21.10
Figure 1: AAV’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45 40 35 +1.0 S.D.
30 25
Avg.
20 -0.50S.D. 15
Jul-16
Oct-16
Jan-16
Apr-16
Jul-15
Oct-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Sep-12
-1 .0S.D. May-12
10
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 30.1 26.7 23.3 19.9 16.5 13.1 9.7 6.3
Implied market price (Bt) 13.56 12.03 10.49 8.96 7.43 5.90 4.37 2.83
Upside/Downside vs. current market price (%) 95.1 73.0 51.0 28.9 6.9 (15.1) (37.2) (59.2)
Source: Bloomberg, KT ZMICO Research
Figure 2: 3Q16 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Minority interests Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
3Q15 7,431 1,077 (592) 763 (88) 24 (21) (116) (192) 92 208 0.02
2Q16 7,914 1,359 (613) 1,033 (109) 25 76 14 (330) 423 408 0.09
3Q16 8,299 1,355 (659) 990 (160) 9 139 20 (307) 397 377 0.08
% YoY 11.7 25.7 11.3 29.8 81.6 (60.6) n.m. n.m. 59.6 331.5 81.6 331.5
% QoQ 4.9 (0.3) 7.6 (4.2) 46.7 (62.1) 81.9 38.7 (6.9) (6.1) (7.7) (6.1)
9M16 25,384 5,417 (1,935) 4,348 (396) 46 125 33 (1,461) 1,828 1,796 0.377
14.5 10.3 1.2 1.1 5.5 0.7 4.1 1.8
17.2 13.1 5.3 1.2 6.8 0.6 4.4 7.9
16.3 11.9 4.8 1.2 4.3 0.6 4.5 7.3
21.3 17.1 7.2 1.2 8.8 0.6 4.5 11.6
% YoY 13.4 41.4 16.0 45.3 16.6 (42.2) (188.4) (121.7) 81.2 127.3 88.1 127.3
2016E 34,358 6,770 (2,737) 5,212 (490) 75 72 33 (1,661) 2,063 2,030 0.425
YTD (% of 16E) 73.9 80.0 70.7 83.4 80.9 61.7 172.2 98.9 88.0 88.6 88.5 88.6
19.7 15.2 6.0 1.0 8.2 0.5 4.4 10.0
Source: AAV, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Core EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
2013 23,994 (19,928) 4,066 (1,756) 2,712 (402) 2,310 (171) 0 291 2,430 (651) (736) 1,043 0.22 0.22 914 0.19 0.00
2014 25,981 (23,708) 2,273 (1,925) 1,166 (818) 348 (313) 0 231 267 1 (85) 183 0.04 0.04 120 0.02 0.00
2015 30,345 (25,315) 5,030 (2,377) 3,775 (1,122) 2,653 (457) 0 16 2,212 (151) (982) 1,078 0.22 0.22 1,181 0.24 0.10
2016E 34,358 (27,588) 6,770 (2,737) 5,212 (1,179) 4,033 (490) 0 108 3,651 72 (1,661) 2,063 0.43 0.43 2,030 0.42 0.19
2013 6,453 90 10,956 27,436 44,935 615 7,546 18,260 7,329 19,346 44,935
2014 6,298 97 16,033 27,073 49,502 959 11,118 22,486 7,482 19,534 49,502
2015 7,591 94 18,216 26,926 52,827 1,261 12,775 24,743 7,941 20,142 52,827
2016E 7,456 142 21,437 27,225 56,260 1,079 12,875 25,381 9,602 21,278 56,260
2013 1,043 402 2,445 131 4,020 (2,082) (3,483) (5,565) (348) 0 0 0 (348) (1,894) (1,545) (0.32)
2014 183 818 654 194 1,848 (980) 3,004 2,025 (1,043) 0 0 0 (1,043) 2,830 3,873 0.80
2015 1,078 1,122 (345) 1,152 3,007 615 268 883 (2,556) 0 0 0 (2,556) 1,334 3,890 0.80
2016E 2,063 1,179 (1,203) (33) 2,006 (1,573) 0 (1,573) (83) 0 (485) 0 (568) (135) 433 0.09
2013 46.2 64.6 13.7 16.9 11.3 9.6 4.3 3.8 26.8
2014 8.3 (57.0) (86.9) 8.7 4.5 1.3 0.7 0.5 (0.5)
2015 16.8 223.7 882.7 16.6 12.4 8.7 3.6 3.9 6.8
2016E 13.2 38.1 71.9 19.7 15.2 11.7 6.0 5.9 (2.0)
2013 0.30 0.09
2014 0.38 0.30
2015 0.41 0.32
2016E 0.40 0.31
2017E 38,453 (30,903) 7,549 (3,076) 5,770 (1,297) 4,473 (490) 0 80 4,063 (122) (1,774) 2,168 0.45 0.45 2,168 0.45 0.20
2017E 8,591 159 24,092 27,412 60,255 1,232 12,821 26,409 11,375 22,470 60,255
2018E 9,585 168 27,065 27,531 64,349 1,385 13,204 27,410 13,224 23,714 64,348
2017E 2,168 1,297 57 0 3,522 (1,573) 0 (1,573) 99 0 (913) 0 (814) 1,135 1,949 0.40
2018E 40,442 (32,511) 7,931 (3,285) 6,117 (1,470) 4,647 (501) 0 91 4,236 (127) (1,849) 2,260 0.47 0.47 2,260 0.47 0.21
2018E 2,260 1,470 13 0 3,743 (2,310) 0 (2,310) 536 0 (975) 0 (439) 994 1,433 0.30
2017E 11.9 10.7 6.8 19.6 15.0 11.6 5.6 5.6 3.0
2018E 5.2 6.0 4.3 19.6 15.1 11.5 5.6 5.6 3.0
2017E 0.38 0.24
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2018E 0.38 0.21
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA, CI. Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt6.90
Transport & Logistics November 15, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Impact from zero‐dollar tour crackdown should be short term Price Performance (%)
Reiterate BUY We lower AAV’s earnings in 2016E given the impact from the crackdown on zero‐dollar tours, which has negative implications for AAV’s Chinese passengers and average ticket fare. However, we believe this will only be a short‐term impact. AAV is still our favorite in the airline sector owing to earnings visibility, its highest market share in the LCC industry, and a high fuel hedging level in 2017E. We maintain our BUY rating for AAV with a PER‐based TP of Bt9.00 (based on 20x PER). Weaker‐than‐expected ticket fares in 3Q16 AAV delivered net profit of Bt397mn, 22% and 18% below our estimate and the consensus expectation owing to a lower‐than‐expected average ticket fare to Bt1,574/pax (‐8% YoY), vs. our forecast of Bt1,625/pax (‐5% YoY). This was due to the negative impact from the zero‐dollar tour crackdown and ticket promotions to support Chinese FIT tourists. Net profit jumped by 332% YoY owing to passenger volume growth (+21% to 4.33mn) and lower fuel expenses.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.476
0.526
KT ZMICO vs. consensus Share data
‐9.7%
‐14.4%
Reuters / Bloomberg
AAV.BK/AAV TB
Paid‐up Shares (m)
4,850.00
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
33.00/944.00
Foreign limit / actual (%)
0.10/0.10
52 week High / Low (Bt)
7.80/4.34
Avg. daily T/O (shares 000)
60,550.00
NVDR (%)
9.65
Estimated free float (%)
54.61
Beta
0.71
URL
www.aavplc.co.th
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Zero‐dollar tour crackdown to impact 4Q16E performance In 4Q16E, ticket fares are likely to continue declining owing to both the negative impact from Chinese passengers and the mourning period. However, the situation looks to be improving currently and AAV believes that Chinese passengers will return after next Chinese New Year. Over 70% of fuel usage in 2017 was hedged In 2017E, AAV’s fuel hedging position was high at 71‐74% of fuel usage with an average cost of US$60 (vs. US$56 in 2016), owing to management’s view that the global oil price will increase next year. This will protect AAV’s performance in 2017E from oil price fluctuations. Revise down 2016E net profit estimate by 5%; 2017E maintained We revise down AAV’s net profit estimate in 2016E by 5% to Bt2.1bn, owing to a lower ticket fare assumption to Bt1,617/pax (‐3.0%), vs. Bt1,642/pax (‐1.5%) previously. However, we maintain our net profit projection of Bt2.2bn in 2017E, as we believe ticket fares are likely to resume growth. We maintain our conservative passenger volume growth of +10% in 2017E, vs. +15% in AAV’s target. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) DPS (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 25,981 183 0.04 120 0.02 (86.85) 0.00 4.03 2014 278.49 33.65 1.71 0.00 0.62 29.58
2015 30,345 1,078 0.22 1,181 0.24 882.68 0.10 4.15 2015 28.34 10.57 1.66 1.45 5.95 32.00
2016E 34,358 2,063 0.43 2,030 0.42 71.90 0.19 4.39 2016E 16.49 7.67 1.57 2.73 9.80 30.53
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 38,453 2,168 0.45 2,168 0.45 6.79 0.20 4.63 2017E 15.44 6.75 1.49 2.91 9.91 24.31
2018E 40,442 2,260 0.47 2,260 0.47 4.26 0.21 4.89 2018E 14.81 6.29 1.41 3.04 9.79 21.10
Figure 1: AAV’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45 40 35 +1.0 S.D.
30 25
Avg.
20 -0.50S.D. 15
Jul-16
Oct-16
Jan-16
Apr-16
Jul-15
Oct-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Sep-12
-1 .0S.D. May-12
10
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 30.1 26.7 23.3 19.9 16.5 13.1 9.7 6.3
Implied market price (Bt) 13.56 12.03 10.49 8.96 7.43 5.90 4.37 2.83
Upside/Downside vs. current market price (%) 95.1 73.0 51.0 28.9 6.9 (15.1) (37.2) (59.2)
Source: Bloomberg, KT ZMICO Research
Figure 2: 3Q16 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Minority interests Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
3Q15 7,431 1,077 (592) 763 (88) 24 (21) (116) (192) 92 208 0.02
2Q16 7,914 1,359 (613) 1,033 (109) 25 76 14 (330) 423 408 0.09
3Q16 8,299 1,355 (659) 990 (160) 9 139 20 (307) 397 377 0.08
% YoY 11.7 25.7 11.3 29.8 81.6 (60.6) n.m. n.m. 59.6 331.5 81.6 331.5
% QoQ 4.9 (0.3) 7.6 (4.2) 46.7 (62.1) 81.9 38.7 (6.9) (6.1) (7.7) (6.1)
9M16 25,384 5,417 (1,935) 4,348 (396) 46 125 33 (1,461) 1,828 1,796 0.377
14.5 10.3 1.2 1.1 5.5 0.7 4.1 1.8
17.2 13.1 5.3 1.2 6.8 0.6 4.4 7.9
16.3 11.9 4.8 1.2 4.3 0.6 4.5 7.3
21.3 17.1 7.2 1.2 8.8 0.6 4.5 11.6
% YoY 13.4 41.4 16.0 45.3 16.6 (42.2) (188.4) (121.7) 81.2 127.3 88.1 127.3
2016E 34,358 6,770 (2,737) 5,212 (490) 75 72 33 (1,661) 2,063 2,030 0.425
YTD (% of 16E) 73.9 80.0 70.7 83.4 80.9 61.7 172.2 98.9 88.0 88.6 88.5 88.6
19.7 15.2 6.0 1.0 8.2 0.5 4.4 10.0
Source: AAV, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Core EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
2013 23,994 (19,928) 4,066 (1,756) 2,712 (402) 2,310 (171) 0 291 2,430 (651) (736) 1,043 0.22 0.22 914 0.19 0.00
2014 25,981 (23,708) 2,273 (1,925) 1,166 (818) 348 (313) 0 231 267 1 (85) 183 0.04 0.04 120 0.02 0.00
2015 30,345 (25,315) 5,030 (2,377) 3,775 (1,122) 2,653 (457) 0 16 2,212 (151) (982) 1,078 0.22 0.22 1,181 0.24 0.10
2016E 34,358 (27,588) 6,770 (2,737) 5,212 (1,179) 4,033 (490) 0 108 3,651 72 (1,661) 2,063 0.43 0.43 2,030 0.42 0.19
2013 6,453 90 10,956 27,436 44,935 615 7,546 18,260 7,329 19,346 44,935
2014 6,298 97 16,033 27,073 49,502 959 11,118 22,486 7,482 19,534 49,502
2015 7,591 94 18,216 26,926 52,827 1,261 12,775 24,743 7,941 20,142 52,827
2016E 7,456 142 21,437 27,225 56,260 1,079 12,875 25,381 9,602 21,278 56,260
2013 1,043 402 2,445 131 4,020 (2,082) (3,483) (5,565) (348) 0 0 0 (348) (1,894) (1,545) (0.32)
2014 183 818 654 194 1,848 (980) 3,004 2,025 (1,043) 0 0 0 (1,043) 2,830 3,873 0.80
2015 1,078 1,122 (345) 1,152 3,007 615 268 883 (2,556) 0 0 0 (2,556) 1,334 3,890 0.80
2016E 2,063 1,179 (1,203) (33) 2,006 (1,573) 0 (1,573) (83) 0 (485) 0 (568) (135) 433 0.09
2013 46.2 64.6 13.7 16.9 11.3 9.6 4.3 3.8 26.8
2014 8.3 (57.0) (86.9) 8.7 4.5 1.3 0.7 0.5 (0.5)
2015 16.8 223.7 882.7 16.6 12.4 8.7 3.6 3.9 6.8
2016E 13.2 38.1 71.9 19.7 15.2 11.7 6.0 5.9 (2.0)
2013 0.30 0.09
2014 0.38 0.30
2015 0.41 0.32
2016E 0.40 0.31
2017E 38,453 (30,903) 7,549 (3,076) 5,770 (1,297) 4,473 (490) 0 80 4,063 (122) (1,774) 2,168 0.45 0.45 2,168 0.45 0.20
2017E 8,591 159 24,092 27,412 60,255 1,232 12,821 26,409 11,375 22,470 60,255
2018E 9,585 168 27,065 27,531 64,349 1,385 13,204 27,410 13,224 23,714 64,348
2017E 2,168 1,297 57 0 3,522 (1,573) 0 (1,573) 99 0 (913) 0 (814) 1,135 1,949 0.40
2018E 40,442 (32,511) 7,931 (3,285) 6,117 (1,470) 4,647 (501) 0 91 4,236 (127) (1,849) 2,260 0.47 0.47 2,260 0.47 0.21
2018E 2,260 1,470 13 0 3,743 (2,310) 0 (2,310) 536 0 (975) 0 (439) 994 1,433 0.30
2017E 11.9 10.7 6.8 19.6 15.0 11.6 5.6 5.6 3.0
2018E 5.2 6.0 4.3 19.6 15.1 11.5 5.6 5.6 3.0
2017E 0.38 0.24
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2018E 0.38 0.21
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA, CI. Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
