Bangkok Airways
Bangkok Airways Buy (17E TP Bt26.00)
Company Update
Close Bt20.60 Earnings upgrade/Earnings downgrade/Overview unchanged
Transport & Logistics May 4, 2017
Weak earnings in 1Q17E priced in Price Performance (%)
Expected improvement of tourist arrivals in 2H17E to be catalyst; BUY Although earnings in 1Q17E are likely to be impacted by weak tourist arrivals, we still believe that the tourism sector will improve in 2H17E, as will BA’s earnings performance accordingly. In fact, statistics in Apr‐17 from AOT (preliminary figures) continue to show signs of tourism improvement with international passengers at SBIA expanding by 4.4% YoY (vs. +1.3% YoY and +2.5% YoY in Jan‐Feb 17, respectively). We maintain our BUY call for BA with the SOTP‐based TP of Bt26. Expect passenger volume to expand slightly in 1Q17E Although tourist arrivals grew by 1.7% in 1Q17 based on data from the Department of Tourism, flat EU tourists (excluding Russia) are likely to negatively impact BA, especially at Samui Airport (normally accounting for around 50% of total passengers). Nevertheless, BA’s passengers will be partially supported by the strong growth of tourist arrivals from CLMV (+12% YoY) and domestic passengers at SBIA (+16% YoY). As a result, we estimate BA’s passenger volume in 1Q17E to expand slightly to 1.63mn, +3% YoY (compared with +8% YoY in 4Q16) and +17% QoQ (peak season), with the load factor likely to stand at 71%, down from 74% in 1Q16 owing to aggressive ASK expansion.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.229
1.316
KT ZMICO vs. consensus Share data
‐26.8%
‐26.3%
Reuters / Bloomberg
BA.BK/BA TB
Paid‐up Shares (m)
2,100.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
43.00/1,254.00
Foreign limit / actual (%)
49.00/7.31
52 week High / Low (Bt)
26.00/19.30
Avg. daily T/O (shares 000) NVDR (%)
7,836.00 1.66
Estimated free float (%)
32.53
Beta
1.15
URL
www.bangkokair.com
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Expect net profit in 1Q17E to soften YoY BA’s earnings in 1Q17E are expected to decline significantly YoY owing to flat revenue and higher operating costs. We estimate net profit of Bt765mn in 1Q17E, falling by 51% YoY. Although passenger volume is expected to expand slightly (+3% YoY), we estimate the average fare to continue declining (‐4% YoY) owing to ongoing competition in Indochina and domestic markets. Airport‐related revenue (Catering, Ground service, and Cargo) is also likely to be flat owing to flat aircraft movement at SBIA on weak tourist arrivals. On the cost side, operating costs are likely to jump (+13% YoY) owing to higher jet fuel (despite fuel hedging covering around 55% of fuel consumption, but with higher effective costs) and maintenance expenses. Maintain net profit projection in 2017E BA’s net profit in 1Q17E of Bt765mn is likely to contribute around 40% of our full‐year projection of Bt1.9bn. Due to the seasonal pattern (peak in Q1 and Q3), we maintain our earnings projection for the whole year. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 23,113 1,797 0.86 1,474 0.70 323.89 0.70 14.74 2015 29.35 8.25 1.40 3.40 5.24 3.32
2016 24,692 1,768 0.84 2,036 0.97 38.13 0.75 15.20 2016 21.25 7.87 1.36 3.64 6.48 15.02
2017E 26,908 1,895 0.90 1,895 0.90 (6.92) 0.80 15.30 2017E 22.82 8.21 1.35 3.90 5.92 17.58
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 28,943 2,041 0.97 2,041 0.97 7.69 0.87 15.40 2018E 21.19 8.02 1.34 4.20 6.33 17.04
2018E 31,134 2,242 1.07 2,242 1.07 9.84 0.95 15.52 2018E 19.30 7.54 1.33 4.62 6.91 16.46
Figure 1: Summary of sum‐of‐the‐parts (SOTP) valuation Company BA’s core business SPF BDMS
BA’s stake (%) 31.62 7.83
Valuation Method PER of 18x (average PER of AAV and AOT) DCF KT ZMICO research target price of Bt22
Total SOTP‐based valuation Source: KT ZMICO Research
Value to BA (Bt) 9.38 3.86 12.71
25.94
Figure 2: BA’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 35.0 33.0 31.0
+1.0 S.D.
29.0 27.0
Avg.
+0.5.0 S.D.
25.0
-0.5.S.D.
23.0
-1.0 S.D.
21.0 -2.0 S.D.
19.0 17.0
Apr-17
Mar-17
Jan-17
Feb-17
Dec-16
Oct-16
Nov-16
Sep-16
Jul-16
Aug-16
Jun-16
Apr-16
Mar-16
May-16
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
15.0
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 28.8 27.5 26.3 25.0 23.7 22.5 21.2 20.0
Implied market price (Bt) 25.91 24.78 23.64 22.50 21.37 20.23 19.09 17.96
Upside/Downside vs. current market price (%) 26.4 20.9 15.3 9.8 4.2 (1.3) (6.9) (12.4)
Source: Bloomberg, KT ZMICO Research
Figure 3: BA’s 1Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Gain (loss) from affiliates 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 (%)
1Q16 7,280 2,495 (901) 1,842 (444) 435 (242) 61 ‐ 170 1,553 1,492 0.74
4Q16 5,841 624 (1,088) (181) (440) 365 29 31 ‐ 172 (319) (351) (0.15)
1Q17E 7,254 1,767 (897) 1,156 (456) 389 (195) ‐ ‐ 173 765 765 0.36
% YoY (0.4) (29.2) (0.4) (37.3) 2.7 (10.7) (19.3) ‐ ‐ 2.0 (50.8) (48.8) (50.8)
% QoQ 24.2 183.1 (17.6) (737.8) 3.4 6.4 (771.3) ‐ ‐ 0.4 n.m. n.m. n.m.
2016 24,692 5,609 (3,838) 2,839 (1,754) 1,894 (492) 179 (447) 685 1,768 2,036 0.84
2017E 26,908 5,756 (4,183) 2,719 (1,797) 1,847 (458) ‐ ‐ 794 1,895 1,895 0.90
34.3 25.3 21.3 2.5 3.6 0.4 15.9 19.3
10.7 (3.1) (5.5) 1.9 (1.1) 0.5 15.2 (4.1)
24.4 15.9 10.5
22.7 11.5 7.2 1.9 1.0 0.5 15.2 5.6
21.4 10.1 7.0 1.8 0.9 0.5 15.3 5.9
% YoY 9.0 2.6 9.0 (4.2) 2.4 (2.5) (6.9) ‐ ‐ 15.8 7.2 (6.9) 7.2
Source: BA, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
YTD (% of 17E) 27.0 30.7 21.5 42.5 25.4 21.1 42.6 ‐ ‐ 21.8 40.3 40.3 40.3
Financial tables
PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra items Gain (loss) from affiliates 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 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) Interest coverage (x)
2014 21,033 (17,563) 3,470 (2,974) 2,887 (2,391) 496 (1,638) 1,087 (55) (1) 0 3 438 (35) 351 0.17 0.17 348 0.17 0.20
2015 23,113 (18,228) 4,885 (3,473) 4,069 (2,657) 1,412 (1,606) 1,467 1,272 (250) 323 0 504 (52) 1,797 0.86 0.86 1,474 0.70 0.70
2016 24,692 (19,083) 5,609 (3,838) 4,747 (2,977) 1,771 (1,754) 1,894 1,911 (492) 179 (447) 685 (69) 1,768 0.84 0.84 2,036 0.97 0.75
2017E 26,908 (21,151) 5,756 (4,183) 4,654 (3,080) 1,573 (1,797) 1,847 1,624 (458) 0 0 794 (64) 1,895 0.90 0.90 1,895 0.90 0.80
2014 13,700 272 7,034 27,573 48,579 1,119 12,235 23,147 123 25,309 48,579
2015 13,243 306 9,559 33,904 57,013 500 13,772 25,917 139 30,956 57,012
2016 10,670 369 12,793 36,457 60,289 465 14,996 28,300 76 31,913 60,289
2017E 9,281 476 13,974 36,526 60,257 25 14,902 27,997 140 32,120 60,257
2014 351 637 (597) (619) (228) (11,032) 0 (11,032) (1,453) 12,335 0 10,882 (378) (11,260) (5.36)
2015 1,797 834 1,886 (616) 3,901 2,225 0 2,225 (2,728) (0) (945) (3,673) 2,453 6,126 2.92
2016 1,768 1,068 1,686 (1,027) 3,495 (675) 0 (675) (2,246) 0 (1,470) (3,716) (895) 2,820 1.34
2017E 1,895 1,145 (180) (1,075) 1,786 (383) 0 (383) (1,897) 0 (1,575) (3,472) (2,070) 1,403 0.67
2014 5.8 (23.2) (70.5) 16.5 13.7 2.4 1.7 1.7 0.1
2015 9.9 40.9 323.9 21.1 17.6 6.1 7.8 6.4 14.1
2016 6.8 16.7 38.1 22.7 19.2 7.2 7.2 8.2 19.0
2017E 9.0 (2.0) (6.9) 21.4 17.3 5.8 7.0 7.0 19.0
2014 0.35 (0.01) 1.76
2015 0.32 0.03 2.26
2016 0.33 0.15 2.43
2017E 0.32 0.18 2.34
2018E 28,943 (22,840) 6,103 (4,499) 4,748 (3,145) 1,604 (1,881) 2,036 1,758 (494) 0 0 845 (69) 2,041 0.97 0.97 2,041 0.97 0.87
2018E 7,818 512 14,547 36,632 59,509 0 13,330 26,957 209 32,343 59,509
2019E 6,352 551 15,127 36,753 58,783 0 11,717 25,910 284 32,588 58,783
2018E 2,041 1,151 208 (1,195) 2,206 (383) 0 (383) (1,598) 0 (1,688) (3,286) (1,463) 1,822 0.87
2019E 31,134 (24,530) 6,604 (4,840) 5,025 (3,261) 1,764 (1,945) 2,158 1,977 (542) 0 0 882 (76) 2,242 1.07 1.07 2,242 1.07 0.95
2019E 2,242 1,208 198 (1,299) 2,348 (383) 0 (383) (1,613) 0 (1,818) (3,431) (1,466) 1,965 0.94
2018E 7.6 2.0 7.7 21.1 16.4 5.5 7.1 7.1 19.0
2019E 7.6 5.8 9.8 21.2 16.1 5.7 7.2 7.2 19.0
2018E 0.29 0.17 2.26
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2019E 0.26 0.16 2.30
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, M‐CHAI, POMPUI, TFD, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
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 Bt20.60 Earnings upgrade/Earnings downgrade/Overview unchanged
Transport & Logistics May 4, 2017
Weak earnings in 1Q17E priced in Price Performance (%)
Expected improvement of tourist arrivals in 2H17E to be catalyst; BUY Although earnings in 1Q17E are likely to be impacted by weak tourist arrivals, we still believe that the tourism sector will improve in 2H17E, as will BA’s earnings performance accordingly. In fact, statistics in Apr‐17 from AOT (preliminary figures) continue to show signs of tourism improvement with international passengers at SBIA expanding by 4.4% YoY (vs. +1.3% YoY and +2.5% YoY in Jan‐Feb 17, respectively). We maintain our BUY call for BA with the SOTP‐based TP of Bt26. Expect passenger volume to expand slightly in 1Q17E Although tourist arrivals grew by 1.7% in 1Q17 based on data from the Department of Tourism, flat EU tourists (excluding Russia) are likely to negatively impact BA, especially at Samui Airport (normally accounting for around 50% of total passengers). Nevertheless, BA’s passengers will be partially supported by the strong growth of tourist arrivals from CLMV (+12% YoY) and domestic passengers at SBIA (+16% YoY). As a result, we estimate BA’s passenger volume in 1Q17E to expand slightly to 1.63mn, +3% YoY (compared with +8% YoY in 4Q16) and +17% QoQ (peak season), with the load factor likely to stand at 71%, down from 74% in 1Q16 owing to aggressive ASK expansion.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.229
1.316
KT ZMICO vs. consensus Share data
‐26.8%
‐26.3%
Reuters / Bloomberg
BA.BK/BA TB
Paid‐up Shares (m)
2,100.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
43.00/1,254.00
Foreign limit / actual (%)
49.00/7.31
52 week High / Low (Bt)
26.00/19.30
Avg. daily T/O (shares 000) NVDR (%)
7,836.00 1.66
Estimated free float (%)
32.53
Beta
1.15
URL
www.bangkokair.com
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Expect net profit in 1Q17E to soften YoY BA’s earnings in 1Q17E are expected to decline significantly YoY owing to flat revenue and higher operating costs. We estimate net profit of Bt765mn in 1Q17E, falling by 51% YoY. Although passenger volume is expected to expand slightly (+3% YoY), we estimate the average fare to continue declining (‐4% YoY) owing to ongoing competition in Indochina and domestic markets. Airport‐related revenue (Catering, Ground service, and Cargo) is also likely to be flat owing to flat aircraft movement at SBIA on weak tourist arrivals. On the cost side, operating costs are likely to jump (+13% YoY) owing to higher jet fuel (despite fuel hedging covering around 55% of fuel consumption, but with higher effective costs) and maintenance expenses. Maintain net profit projection in 2017E BA’s net profit in 1Q17E of Bt765mn is likely to contribute around 40% of our full‐year projection of Bt1.9bn. Due to the seasonal pattern (peak in Q1 and Q3), we maintain our earnings projection for the whole year. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 23,113 1,797 0.86 1,474 0.70 323.89 0.70 14.74 2015 29.35 8.25 1.40 3.40 5.24 3.32
2016 24,692 1,768 0.84 2,036 0.97 38.13 0.75 15.20 2016 21.25 7.87 1.36 3.64 6.48 15.02
2017E 26,908 1,895 0.90 1,895 0.90 (6.92) 0.80 15.30 2017E 22.82 8.21 1.35 3.90 5.92 17.58
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 28,943 2,041 0.97 2,041 0.97 7.69 0.87 15.40 2018E 21.19 8.02 1.34 4.20 6.33 17.04
2018E 31,134 2,242 1.07 2,242 1.07 9.84 0.95 15.52 2018E 19.30 7.54 1.33 4.62 6.91 16.46
Figure 1: Summary of sum‐of‐the‐parts (SOTP) valuation Company BA’s core business SPF BDMS
BA’s stake (%) 31.62 7.83
Valuation Method PER of 18x (average PER of AAV and AOT) DCF KT ZMICO research target price of Bt22
Total SOTP‐based valuation Source: KT ZMICO Research
Value to BA (Bt) 9.38 3.86 12.71
25.94
Figure 2: BA’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 35.0 33.0 31.0
+1.0 S.D.
29.0 27.0
Avg.
+0.5.0 S.D.
25.0
-0.5.S.D.
23.0
-1.0 S.D.
21.0 -2.0 S.D.
19.0 17.0
Apr-17
Mar-17
Jan-17
Feb-17
Dec-16
Oct-16
Nov-16
Sep-16
Jul-16
Aug-16
Jun-16
Apr-16
Mar-16
May-16
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
15.0
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 28.8 27.5 26.3 25.0 23.7 22.5 21.2 20.0
Implied market price (Bt) 25.91 24.78 23.64 22.50 21.37 20.23 19.09 17.96
Upside/Downside vs. current market price (%) 26.4 20.9 15.3 9.8 4.2 (1.3) (6.9) (12.4)
Source: Bloomberg, KT ZMICO Research
Figure 3: BA’s 1Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Gain (loss) from affiliates 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 (%)
1Q16 7,280 2,495 (901) 1,842 (444) 435 (242) 61 ‐ 170 1,553 1,492 0.74
4Q16 5,841 624 (1,088) (181) (440) 365 29 31 ‐ 172 (319) (351) (0.15)
1Q17E 7,254 1,767 (897) 1,156 (456) 389 (195) ‐ ‐ 173 765 765 0.36
% YoY (0.4) (29.2) (0.4) (37.3) 2.7 (10.7) (19.3) ‐ ‐ 2.0 (50.8) (48.8) (50.8)
% QoQ 24.2 183.1 (17.6) (737.8) 3.4 6.4 (771.3) ‐ ‐ 0.4 n.m. n.m. n.m.
2016 24,692 5,609 (3,838) 2,839 (1,754) 1,894 (492) 179 (447) 685 1,768 2,036 0.84
2017E 26,908 5,756 (4,183) 2,719 (1,797) 1,847 (458) ‐ ‐ 794 1,895 1,895 0.90
34.3 25.3 21.3 2.5 3.6 0.4 15.9 19.3
10.7 (3.1) (5.5) 1.9 (1.1) 0.5 15.2 (4.1)
24.4 15.9 10.5
22.7 11.5 7.2 1.9 1.0 0.5 15.2 5.6
21.4 10.1 7.0 1.8 0.9 0.5 15.3 5.9
% YoY 9.0 2.6 9.0 (4.2) 2.4 (2.5) (6.9) ‐ ‐ 15.8 7.2 (6.9) 7.2
Source: BA, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
YTD (% of 17E) 27.0 30.7 21.5 42.5 25.4 21.1 42.6 ‐ ‐ 21.8 40.3 40.3 40.3
Financial tables
PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra items Gain (loss) from affiliates 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 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) Interest coverage (x)
2014 21,033 (17,563) 3,470 (2,974) 2,887 (2,391) 496 (1,638) 1,087 (55) (1) 0 3 438 (35) 351 0.17 0.17 348 0.17 0.20
2015 23,113 (18,228) 4,885 (3,473) 4,069 (2,657) 1,412 (1,606) 1,467 1,272 (250) 323 0 504 (52) 1,797 0.86 0.86 1,474 0.70 0.70
2016 24,692 (19,083) 5,609 (3,838) 4,747 (2,977) 1,771 (1,754) 1,894 1,911 (492) 179 (447) 685 (69) 1,768 0.84 0.84 2,036 0.97 0.75
2017E 26,908 (21,151) 5,756 (4,183) 4,654 (3,080) 1,573 (1,797) 1,847 1,624 (458) 0 0 794 (64) 1,895 0.90 0.90 1,895 0.90 0.80
2014 13,700 272 7,034 27,573 48,579 1,119 12,235 23,147 123 25,309 48,579
2015 13,243 306 9,559 33,904 57,013 500 13,772 25,917 139 30,956 57,012
2016 10,670 369 12,793 36,457 60,289 465 14,996 28,300 76 31,913 60,289
2017E 9,281 476 13,974 36,526 60,257 25 14,902 27,997 140 32,120 60,257
2014 351 637 (597) (619) (228) (11,032) 0 (11,032) (1,453) 12,335 0 10,882 (378) (11,260) (5.36)
2015 1,797 834 1,886 (616) 3,901 2,225 0 2,225 (2,728) (0) (945) (3,673) 2,453 6,126 2.92
2016 1,768 1,068 1,686 (1,027) 3,495 (675) 0 (675) (2,246) 0 (1,470) (3,716) (895) 2,820 1.34
2017E 1,895 1,145 (180) (1,075) 1,786 (383) 0 (383) (1,897) 0 (1,575) (3,472) (2,070) 1,403 0.67
2014 5.8 (23.2) (70.5) 16.5 13.7 2.4 1.7 1.7 0.1
2015 9.9 40.9 323.9 21.1 17.6 6.1 7.8 6.4 14.1
2016 6.8 16.7 38.1 22.7 19.2 7.2 7.2 8.2 19.0
2017E 9.0 (2.0) (6.9) 21.4 17.3 5.8 7.0 7.0 19.0
2014 0.35 (0.01) 1.76
2015 0.32 0.03 2.26
2016 0.33 0.15 2.43
2017E 0.32 0.18 2.34
2018E 28,943 (22,840) 6,103 (4,499) 4,748 (3,145) 1,604 (1,881) 2,036 1,758 (494) 0 0 845 (69) 2,041 0.97 0.97 2,041 0.97 0.87
2018E 7,818 512 14,547 36,632 59,509 0 13,330 26,957 209 32,343 59,509
2019E 6,352 551 15,127 36,753 58,783 0 11,717 25,910 284 32,588 58,783
2018E 2,041 1,151 208 (1,195) 2,206 (383) 0 (383) (1,598) 0 (1,688) (3,286) (1,463) 1,822 0.87
2019E 31,134 (24,530) 6,604 (4,840) 5,025 (3,261) 1,764 (1,945) 2,158 1,977 (542) 0 0 882 (76) 2,242 1.07 1.07 2,242 1.07 0.95
2019E 2,242 1,208 198 (1,299) 2,348 (383) 0 (383) (1,613) 0 (1,818) (3,431) (1,466) 1,965 0.94
2018E 7.6 2.0 7.7 21.1 16.4 5.5 7.1 7.1 19.0
2019E 7.6 5.8 9.8 21.2 16.1 5.7 7.2 7.2 19.0
2018E 0.29 0.17 2.26
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2019E 0.26 0.16 2.30
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, M‐CHAI, POMPUI, TFD, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
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
