Downbeat 4Q16 and 2016 earnings
Carabao Group Underperform (17E TP Bt77.00)
Company Update
Close Bt69.50
Food & Beverage
Earnings upgrade/Earnings downgrade/Overview unchanged
23 February 2017
Downbeat 4Q16 and 2016 earnings Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.842
2.229
KT ZMICO vs. consensus Share data
12.9%
10.4%
Reuters / Bloomberg
CBG.BK/CBG TB
Paid‐up Shares (m)
1,000.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
70.00/1,984.00
Foreign limit / actual (%)
49.00/8.43
52 week High / Low (Bt)
80.75/35.75
Avg. daily T/O (shares 000)
4,601.00
NVDR (%)
4.16
Estimated free float (%)
24.68
Beta
1.30
URL
www.carabaogroup.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain “Underperform” CBG’s 4Q16 net profit fell short of our projection by 28%. The weak earnings resulted from the booking of a loss from Intercarabao business and larger marketing expenses. We maintain an Underperform rating with the DCF‐ based target price of Bt60/share. However, there is upside to our 2017 earnings from being a sponsor for the Flamingo Football Team in Brazil in a bid to market its energy drinks there; on the contrary, there is downside risk from higher SG&A expenses. We will revise out projections after attending the analyst meeting today. 4Q16 earnings fell short of expectation by 28% due to loss from an affiliate CBG reported a 4Q16 net profit of Bt280mn. The result weakened by 36%QoQ and 2%YoY due to the booking of a larger‐than‐expected loss from its affiliate, i.e., at Bt88mn, and greater SG&A to sales to 24% because of the sponsorship payment of around Bt45mn for Chelsea. The firm’s overall sales expanded by 6%QoQ and 38%YoY due to: i) larger sales volume of energy drinks, canned coffee and drinking water through its cash van sales channel and ii) higher exports to Cambodia. 2016 revenue grew well from both domestic and overseas markets CBG’s 2016 core profit stood at Bt1,516mn, up 18%. This result fell short of our projection by 9% because the gross profit margin (GPM) narrowed to 36% from 37% in 2015 as the company had to outsource the production of bottles. Meanwhile, SG&A to sales also rose to 20% vs. 19% in 2015. Overall revenue increased by 29% thanks to the firm’s successful expansion of its sales channel through its cash vans, resulting in a 12.4% increase in the domestic sales of energy drinks (accounting for 62% of Carabao’s new products). Meanwhile, the sales of products from other producers that were sold at CBG’s cash vans also increased to Bt444mn vs. Bt2mn seen last year. Finally, export sales showed the biggest growth of 48% thanks to its aggressive strategy for CLMV markets and larger orders placed by clients in Afghanistan. There are both upside and downside risks to 2017E earnings The source of upside risks to our 2017E earnings projection is that CBG’s distributors will provide sponsorship for the Flamingo Football Team in Brazil in a bid to market its drinks there. We have yet to incorporate this plan in our projections. On the other hand, the downside risk is that the firm’s SG&A expenses may rise on the back of its aggressive marketing in England. We will fine‐tune our projections after the analyst meeting today. Financials and Valuation FY Ended 31 Dec Revenues (Bt mn) Net profit (Bt mn) EPS (Bt) EPS growth (%) Norm. profit (Bt mn) Norm. profit growth (%) Dividend (Bt) BV (Bt)
2014 7,448 913 1.22 2.1% 873 60.2% 0.60 6.03
2015 7,753 1,256 1.26 3.1% 1,287 47.4% 0.54 6.33
2016 9,965 1,490 1.49 18.7% 1,516 17.8% 0.91 6.94
2017E 13,901 2,082 2.08 39.8% 2,082 37.3% 1.25 7.77
2018E 17,068 2,459 2.46 18.1% 2,459 18.1% 1.48 8.76
FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014 57.1 48.4 11.5 0.9% 24.2% ‐23%
2015 55.4 42.2 11.0 0.8% 20.3% ‐28%
2016 46.7 37.7 10.0 1.3% 22.4% ‐37%
2017E 33.4 26.6 8.9 1.8% 28.3% ‐28%
2018E 28.3 22.5 7.9 2.1% 30% ‐22%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: 2016 Earnings result Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
2015
2016
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2,076 764 396 (1) (0) (42) 288 293 0.29 36.8 19.1 13.9 2.7 597.2 0.0 6.3 4.7
2,689 962 523 (1) 49 (78) 439 437 0.44 35.8 19.5 16.3 2.1 520.2 0.0 6.6 6.6
2,859 969 333 (1) (15) (64) 282 282 0.3 33.9 11.7 9.8 1.1 201.9 0.2 6.9 4.2
37.7 26.9 (15.9) 144.1 3,385.8 51.1 (2.3) (3.8) (2.3)
6.3 0.8 (36.3) 52.9 (131.7) (18.8) (35.9) (35.5) (35.9)
7,753 2,860 1,616 (2) 117 (209) 1,256 1,287 1.3 36.9 20.8 16.2 2.7 841.9 0.0 6.3 20.8
9,965 3,577 1,808 (4) 131 (278) 1,490 1,516 1.49 35.9 18.1 14.9 2.0 430.1 0.0 6.9 22.8
28.5 25.1 11.9 124.4 11.8 33.0 18.7 17.8 18.7
Source: KT ZMICO Research Figure 2: Revenue by country in 4Q14‐4Q16 m.n. 3,000
71
2,500 2,000 1,500
‐ 34 397
29 81
37 40 420
59 ‐ 441
482
42 44
22 94
523
577
41 93
1,197
500
160
600
765
583
1,000 1,467
68 134
1,393 1,435 1,453 1,386 1,546
1,850 1,821
‐ 4Q14
1Q15
Others
2Q15
3Q15
Yemen
4Q15
Afghanistan
1Q16 CLMV
2Q16
3Q16
4Q16
Thailand
Source: KT ZMICO Research
Figure 3: PER (average 29.2x) and PBV band (average 5.4x) (X) 7.5 7.0
+3.0 S.D.
6.5
+2.0 S.D. +1.0 S.D.
6.0
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Jul-15
Jun-15
Apr-15
May-15
Mar-15
4.0
Jan-15
-2.0 S.D. Feb-15
4.5 Dec-14
-1.0 S.D.
Nov-14
5.0
Aug-15
Avg.
5.5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital 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 (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013
2014
2015
2016
2017E
2018E
6,863 (4,793) 2,070 (1,182) 995 107 888 (136) 66 818 (159) ‐ ‐ (114) 512 1.19 545 1.27 ‐
7,448 (4,939) 2,510 (1,275) 1,409 174 1,235 (112) 86 1,210 (238) ‐ 8 (99) 913 1.22 873 1.16 0.60
7,753 (4,893) 2,860 (1,480) 1,616 236 1,380 (2) 117 1,496 (209) ‐ 4 ‐ 1,256 1.26 1,287 1.29 0.54
9,965 (6,388) 3,577 (1,995) 1,808 226 1,582 (4) 131 1,710 (278) ‐ 16 85 1,490 1.49 1,516 1.52 0.91
13,901 (8,783) 5,118 (2,830) 2,561 273 2,288 (1) 133 2,421 (338) ‐ ‐ ‐ 2,082 2.08 2,082 2.08 1.25
17,068 (10,804) 6,264 (3,559) 3,033 328 2,706 (1) 154 2,859 (400) ‐ ‐ ‐ 2,459 2.46 2,459 2.46 1.48
2013
2014
2015
2016
2017E
2018E
486 251 206 139 3,810 419 5,310 838 2,121 4,162 620 1,148 5,310
1,428 308 318 136 4,771 102 7,064 ‐ 53 1,035 1,000 6,029 7,064
1,851 425 249 108 4,683 46 7,361 ‐ 66 1,028 1,000 6,333 7,361
2,645 382 469 100 5,121 46 8,762 ‐ 53 1,771 1,000 6,991 8,762
2,278 539 580 100 6,404 46 9,947 ‐ 53 2,123 1,000 7,824 9,947
2,043 662 638 100 7,632 46 11,122 ‐ 53 2,314 1,000 8,808 11,122
2013
2014
2015
2016
2017E
2018E
626 18 107 239 990 (928) (321) (1,249) 379 385 (520) ‐ 244 (15) (259) (0.42)
1,012 (20) 174 (372) 793 (1,116) (570) (1,686) (2,913) 4,231 (383) ‐ 935 43 (892) (0.89)
1,256 10 236 119 1,620 (195) 434 240 ‐ ‐ (950) (60) (1,010) 849 1,860 1.86
1,490 ‐ 218 579 2,442 (656) 8 (648) (13) ‐ (987) ‐ (1,000) 794 1,794 1.79
2,082 ‐ 273 84 2,438 (1,556) ‐ (1,556) 0 ‐ (1,249) ‐ (1,249) (367) 882 0.88
2,459 ‐ 328 10 2,797 (1,556) ‐ (1,556) (0) ‐ (1,476) ‐ (1,476) (235) 1,241 1.24
2013
2014
2015
2016
2017E
2018E
38.3% 207.0% 83.6% 30.2% 14.5% 12.9% 7.5% 7.9% 19.4%
8.5% 41.6% 2.1% 33.7% 18.9% 16.6% 12.3% 11.7% 19.7%
4.1% 14.7% 3.1% 36.9% 20.8% 17.8% 16.2% 16.6% 14.0%
28.5% 11.9% 18.7% 35.9% 18.1% 15.9% 14.9% 15.2% 16.3%
39.5% 41.6% 39.8% 36.8% 18.4% 16.5% 15.0% 15.0% 14.0%
22.8% 18.5% 18.1% 36.7% 17.8% 15.9% 14.4% 14.4% 14.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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, TFD. KT ZMICO is a co underwriter of RPH.
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 Bt69.50
Food & Beverage
Earnings upgrade/Earnings downgrade/Overview unchanged
23 February 2017
Downbeat 4Q16 and 2016 earnings Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.842
2.229
KT ZMICO vs. consensus Share data
12.9%
10.4%
Reuters / Bloomberg
CBG.BK/CBG TB
Paid‐up Shares (m)
1,000.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
70.00/1,984.00
Foreign limit / actual (%)
49.00/8.43
52 week High / Low (Bt)
80.75/35.75
Avg. daily T/O (shares 000)
4,601.00
NVDR (%)
4.16
Estimated free float (%)
24.68
Beta
1.30
URL
www.carabaogroup.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain “Underperform” CBG’s 4Q16 net profit fell short of our projection by 28%. The weak earnings resulted from the booking of a loss from Intercarabao business and larger marketing expenses. We maintain an Underperform rating with the DCF‐ based target price of Bt60/share. However, there is upside to our 2017 earnings from being a sponsor for the Flamingo Football Team in Brazil in a bid to market its energy drinks there; on the contrary, there is downside risk from higher SG&A expenses. We will revise out projections after attending the analyst meeting today. 4Q16 earnings fell short of expectation by 28% due to loss from an affiliate CBG reported a 4Q16 net profit of Bt280mn. The result weakened by 36%QoQ and 2%YoY due to the booking of a larger‐than‐expected loss from its affiliate, i.e., at Bt88mn, and greater SG&A to sales to 24% because of the sponsorship payment of around Bt45mn for Chelsea. The firm’s overall sales expanded by 6%QoQ and 38%YoY due to: i) larger sales volume of energy drinks, canned coffee and drinking water through its cash van sales channel and ii) higher exports to Cambodia. 2016 revenue grew well from both domestic and overseas markets CBG’s 2016 core profit stood at Bt1,516mn, up 18%. This result fell short of our projection by 9% because the gross profit margin (GPM) narrowed to 36% from 37% in 2015 as the company had to outsource the production of bottles. Meanwhile, SG&A to sales also rose to 20% vs. 19% in 2015. Overall revenue increased by 29% thanks to the firm’s successful expansion of its sales channel through its cash vans, resulting in a 12.4% increase in the domestic sales of energy drinks (accounting for 62% of Carabao’s new products). Meanwhile, the sales of products from other producers that were sold at CBG’s cash vans also increased to Bt444mn vs. Bt2mn seen last year. Finally, export sales showed the biggest growth of 48% thanks to its aggressive strategy for CLMV markets and larger orders placed by clients in Afghanistan. There are both upside and downside risks to 2017E earnings The source of upside risks to our 2017E earnings projection is that CBG’s distributors will provide sponsorship for the Flamingo Football Team in Brazil in a bid to market its drinks there. We have yet to incorporate this plan in our projections. On the other hand, the downside risk is that the firm’s SG&A expenses may rise on the back of its aggressive marketing in England. We will fine‐tune our projections after the analyst meeting today. Financials and Valuation FY Ended 31 Dec Revenues (Bt mn) Net profit (Bt mn) EPS (Bt) EPS growth (%) Norm. profit (Bt mn) Norm. profit growth (%) Dividend (Bt) BV (Bt)
2014 7,448 913 1.22 2.1% 873 60.2% 0.60 6.03
2015 7,753 1,256 1.26 3.1% 1,287 47.4% 0.54 6.33
2016 9,965 1,490 1.49 18.7% 1,516 17.8% 0.91 6.94
2017E 13,901 2,082 2.08 39.8% 2,082 37.3% 1.25 7.77
2018E 17,068 2,459 2.46 18.1% 2,459 18.1% 1.48 8.76
FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014 57.1 48.4 11.5 0.9% 24.2% ‐23%
2015 55.4 42.2 11.0 0.8% 20.3% ‐28%
2016 46.7 37.7 10.0 1.3% 22.4% ‐37%
2017E 33.4 26.6 8.9 1.8% 28.3% ‐28%
2018E 28.3 22.5 7.9 2.1% 30% ‐22%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: 2016 Earnings result Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
2015
2016
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2,076 764 396 (1) (0) (42) 288 293 0.29 36.8 19.1 13.9 2.7 597.2 0.0 6.3 4.7
2,689 962 523 (1) 49 (78) 439 437 0.44 35.8 19.5 16.3 2.1 520.2 0.0 6.6 6.6
2,859 969 333 (1) (15) (64) 282 282 0.3 33.9 11.7 9.8 1.1 201.9 0.2 6.9 4.2
37.7 26.9 (15.9) 144.1 3,385.8 51.1 (2.3) (3.8) (2.3)
6.3 0.8 (36.3) 52.9 (131.7) (18.8) (35.9) (35.5) (35.9)
7,753 2,860 1,616 (2) 117 (209) 1,256 1,287 1.3 36.9 20.8 16.2 2.7 841.9 0.0 6.3 20.8
9,965 3,577 1,808 (4) 131 (278) 1,490 1,516 1.49 35.9 18.1 14.9 2.0 430.1 0.0 6.9 22.8
28.5 25.1 11.9 124.4 11.8 33.0 18.7 17.8 18.7
Source: KT ZMICO Research Figure 2: Revenue by country in 4Q14‐4Q16 m.n. 3,000
71
2,500 2,000 1,500
‐ 34 397
29 81
37 40 420
59 ‐ 441
482
42 44
22 94
523
577
41 93
1,197
500
160
600
765
583
1,000 1,467
68 134
1,393 1,435 1,453 1,386 1,546
1,850 1,821
‐ 4Q14
1Q15
Others
2Q15
3Q15
Yemen
4Q15
Afghanistan
1Q16 CLMV
2Q16
3Q16
4Q16
Thailand
Source: KT ZMICO Research
Figure 3: PER (average 29.2x) and PBV band (average 5.4x) (X) 7.5 7.0
+3.0 S.D.
6.5
+2.0 S.D. +1.0 S.D.
6.0
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Jul-15
Jun-15
Apr-15
May-15
Mar-15
4.0
Jan-15
-2.0 S.D. Feb-15
4.5 Dec-14
-1.0 S.D.
Nov-14
5.0
Aug-15
Avg.
5.5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital 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 (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013
2014
2015
2016
2017E
2018E
6,863 (4,793) 2,070 (1,182) 995 107 888 (136) 66 818 (159) ‐ ‐ (114) 512 1.19 545 1.27 ‐
7,448 (4,939) 2,510 (1,275) 1,409 174 1,235 (112) 86 1,210 (238) ‐ 8 (99) 913 1.22 873 1.16 0.60
7,753 (4,893) 2,860 (1,480) 1,616 236 1,380 (2) 117 1,496 (209) ‐ 4 ‐ 1,256 1.26 1,287 1.29 0.54
9,965 (6,388) 3,577 (1,995) 1,808 226 1,582 (4) 131 1,710 (278) ‐ 16 85 1,490 1.49 1,516 1.52 0.91
13,901 (8,783) 5,118 (2,830) 2,561 273 2,288 (1) 133 2,421 (338) ‐ ‐ ‐ 2,082 2.08 2,082 2.08 1.25
17,068 (10,804) 6,264 (3,559) 3,033 328 2,706 (1) 154 2,859 (400) ‐ ‐ ‐ 2,459 2.46 2,459 2.46 1.48
2013
2014
2015
2016
2017E
2018E
486 251 206 139 3,810 419 5,310 838 2,121 4,162 620 1,148 5,310
1,428 308 318 136 4,771 102 7,064 ‐ 53 1,035 1,000 6,029 7,064
1,851 425 249 108 4,683 46 7,361 ‐ 66 1,028 1,000 6,333 7,361
2,645 382 469 100 5,121 46 8,762 ‐ 53 1,771 1,000 6,991 8,762
2,278 539 580 100 6,404 46 9,947 ‐ 53 2,123 1,000 7,824 9,947
2,043 662 638 100 7,632 46 11,122 ‐ 53 2,314 1,000 8,808 11,122
2013
2014
2015
2016
2017E
2018E
626 18 107 239 990 (928) (321) (1,249) 379 385 (520) ‐ 244 (15) (259) (0.42)
1,012 (20) 174 (372) 793 (1,116) (570) (1,686) (2,913) 4,231 (383) ‐ 935 43 (892) (0.89)
1,256 10 236 119 1,620 (195) 434 240 ‐ ‐ (950) (60) (1,010) 849 1,860 1.86
1,490 ‐ 218 579 2,442 (656) 8 (648) (13) ‐ (987) ‐ (1,000) 794 1,794 1.79
2,082 ‐ 273 84 2,438 (1,556) ‐ (1,556) 0 ‐ (1,249) ‐ (1,249) (367) 882 0.88
2,459 ‐ 328 10 2,797 (1,556) ‐ (1,556) (0) ‐ (1,476) ‐ (1,476) (235) 1,241 1.24
2013
2014
2015
2016
2017E
2018E
38.3% 207.0% 83.6% 30.2% 14.5% 12.9% 7.5% 7.9% 19.4%
8.5% 41.6% 2.1% 33.7% 18.9% 16.6% 12.3% 11.7% 19.7%
4.1% 14.7% 3.1% 36.9% 20.8% 17.8% 16.2% 16.6% 14.0%
28.5% 11.9% 18.7% 35.9% 18.1% 15.9% 14.9% 15.2% 16.3%
39.5% 41.6% 39.8% 36.8% 18.4% 16.5% 15.0% 15.0% 14.0%
22.8% 18.5% 18.1% 36.7% 17.8% 15.9% 14.4% 14.4% 14.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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, TFD. KT ZMICO is a co underwriter of RPH.
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
