Kce Electronics AWS
Kce Electronics Outperform (17E TP Bt113.00)
Company Update
Close Bt103.50
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
August 10, 2016
Earnings hit a new high in 2Q16 Price Performance (%)
Short‐term catalysts towards the high season in 3Q16 As anticipated, KCE’s earnings hit a new high in 2Q16. We have revised up our DCF‐based 2016E target price to Bt113. We believe the plant expansion in phase III and the renovation of the plant in Ayutthaya from 3Q16 onwards will help boost earnings growth again in 2017. Our Outperform rating is maintained with the likelihood that earnings will continue to hit new highs until the high season in 3Q16 as the short‐term share price catalyst.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
5.489
6.402
KT ZMICO vs. consensus Share data
‐0.3%
4.5%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.01
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
61.00/1,735.00
Foreign limit / actual (%)
49.00/29.08
52 week High / Low (Bt)
104.50/50.25
Avg. daily T/O (shares 000)
1,672.00
NVDR (%)
6.44
Estimated free float (%)
58.3
Beta
0.71
URL
www.kcethai.in.th
CGR
2Q16 net profit hit a new high KCE reported a 2Q16 net profit of Bt812mn, up by 8.1%QoQ and 66%YoY. Excluding expected FX gain of Bt43mn, its core profit amounted to Bt768mn, up 53%YoY and 5.6%QoQ, on the back of economies of scale from phase one of the new plant, for which the utilization rate accelerated to 100% vs. 85% in 1Q16. Hence, the gross profit margin hit a new high at 35.5% vs. 34% in 1Q16 and 29.8% in 2Q15. Meanwhile, the revenue amounted to Bt3,579mn, up 17.4%YoY and 1.4%QoQ thanks to larger orders for products used in the automotive sector. Finally, SG&A to sales rose to 12.7% vs. 12.2% in 2Q15 due to increases in sales and personnel expenses as well as expenses from the old plant after closing the operation. The third phase of the new plant to commence operations in 2H16 From 3Q16 onwards, KCE will commence operations at the third phase of the new plant, with capacity of 700,000 square feet/month, after the first and second phases reached 100% utilization in 2Q16. We expect KCE’s utilization at 200,000 square feet/month, or equivalent to a utilization rate of 28‐30% in 2H16 before accelerating to 70% in 2017 alongside the growing demand for electronic products used in the automotive sector as well as demand from new clients. Renovated an old plant and expanded capacity KCET (Ayuthaya plant), which is KCE’s subsidiary, is now in the process of upgrading its existing production line and increasing capacity. Once completed, KCET’s full capacity is expected to rise by 10% from the current level. The production equipment will be installed during Jul‐Dec 16 and commercial production is expected to commence from 1Q17 onwards. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273 Ruchanon Chiemkarnkit Assistant analyst
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) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014 11,284 2,110 3.67 58% 1,798 71.0% 1.10 11.25 2014 28.2 26.5 9.2 1.1% 37.5% 85%
2015 12,449 2,240 3.81 4% 2,192 21.9% 1.14 13.74 2015 27.1 20.9 7.5 1.1% 31.4% 70%
2016E 15,029 3,215 5.47 44% 3,215 46.7% 1.64 17.64 2016E 18.9 15.4 5.9 1.6% 35.9% 41%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 17,657 3,932 6.69 22% 3,932 22.3% 2.01 22.68 2017E 15.5 13.3 4.6 1.9% 34.2% 18%
2018E 19,448 4,482 7.63 14% 4,482 14.0% 2.29 28.71 2018E 13.6 12.0 3.6 2.2% 30.6% ‐2%
Figure 1: KCE’s 2Q59 earning results Profit and Loss (Btmn) Year‐end 31 Dec
2Q15
1Q16
2Q16E
% YoY
% QoQ
1H16
%YoY
2016E
% YoY
YTD(%2016E)
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn (Ls) from affiliates 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 (%)
3,047 937 727 (35) 8 (40) (12) 0 6 490 502 0.86 30.76 23.86 16.09 1.08 16.18 0.85 12.41 7.19
3,529 1,198 986 (46) 9 (10) 23 0 6 751 728 1.31 33.95 27.94 21.28 1.52 16.68 0.54 15.52 8.60
3,579 1,270 1,035 (46) 17 (20) 43 0 7 812 768 1.41 35.49 28.91 22.68 n.m. 17.84 n.m. 0.00 17.37
17.4 35.5 42.3 30.5 108.2 (48.9) (460.8) n.m. 17.7 65.6 53.0 63.4
1.4 6.0 4.9 (1.6) 86.6 104.4 87.9 n.m. 19.9 8.1 5.6 7.8
7,108 2,468 2,021 (92) 26 (30) 67 0 13 1,563 1,496 2.71 34.72 28.43 21.99 n.m. 17.25 n.m. 0.00 17.37
19.9 39.5 48.8 63.2 54.1 (46.9) 59.6 n.m. 47.8 56.1 55.9 53.8
15,029 5,267 4,231 (180) 68 (99) 0 0 30 3,215 3,215 5.47 35.05 28.15 21.40 1.28 18.86 0.41 17.64 34.88
20.7 34.6 36.1 17.5 96.0 8.3 n.m. n.m. n.m. 43.5 46.7 39.5
47.3 46.9 47.8 51.2 38.6 30.6 n.m. n.m. n.m. 48.6 46.5 49.6
Source: KT ZMICO Research Interim DPS of Bt1 KCE announced an interim dividend at Bt1/share for its 1H16 performance. The firm will go XD on 19 Aug‐16 and pay dividends on 9 Sep‐16. Renovated an old plant and expanded capacity KCE commercially runs three PCB plants, i.e., three new phases of KCE, KCET and KCEI. The firm has closed one plant (KCEL). At present, KCET and KCEI see utilization rates at 96‐97%. The firm has a plan to upgrade its first plant, i.e., KCET, which is expected to raise the total capacity by 10%. The production equipment will be installed during Jul‐Dec 16, with commercial operations expected from 1Q17 onwards. Moreover, we expect the firm to continue to upgrade its KCEI plant, which will help to raise the full capacity by 5% from 2018E onwards. Figure 2: KCE’s Plants and KCE’s Full capacity 4.5
Figure 3: Expected Utilization rate KCE plant
Full Capacity by plant (Million sq.ft./month)
4.0 3.5 3.0 2.5
2.00
2.00
1.20
1.30
0.45
0.45
2.00
2.00
2.00
2.00
1.30
1.30
1.30
1.30
2.0 1.5 1.0 0.5 ‐
2016 2017E KCE New
0.60
0.60
0.60
0.60
2018E KCET
2019E
2020E KCEI
2021E
KCEI KCET KCE Phase 1 KCE Phase 2 KCE Phase 3
2016E 2017E 2018E 2019E 2020E 2021E 95% 95% 90% 96% 30%
95% 96% 97% 97% 70%
97% 97% 97% 97% 97%
97% 97% 97% 97% 97%
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
97% 97% 97% 97% 97%
97% 97% 97% 97% 97%
Figure 4: PER (average 13.0x) and PBV band (average 1.60x) PBV(X)
PER(X)
60
6.0
2008 earnings is loss
50
0.0
-1.0 S.D.
-1.0
-2.0 S.D.
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Jan-16
Jan-15
Jan-14
Jan-13
-2.0
Jan-12
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
-20
Jan-07
Avg.
1.0
Jan-11
0 -10
2.0
Jan-10
10
+1.0 S.D.
3.0
Jan-09
20
+2.0 S.D.
4.0
Jan-08
30
5.0
+2.0 S.D. +1.5.0 S.D. +1.0 S.D. +0.5 S.D. Avg. -0.5 S.D. -1.0 S.D. -1.5.0 S.D. -2.0 S.D.
Jan-07
40
+3.0 S.D.
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
2016E
2017E
2018E
9,294 (6,843) 2,451 (1,275) 1,705 529 1,177 (171) 57 1,063 (16) 13 33 (8) 1,174 2.53 1,052 2.08 0.75
11,284 (7,718) 3,567 (1,683) 2,459 575 1,884 (119) 58 1,824 (46) 34 216 (13) 2,110 3.89 1,798 3.13 1.10
12,449 (8,535) 3,914 (1,520) 3,109 716 2,393 (153) 35 2,274 (91) 21 ‐ (12) 2,240 3.92 2,192 3.73 1.14
15,029 (9,762) 5,267 (1,871) 4,231 835 3,396 (180) 68 3,284 (99) 30 ‐ ‐ 3,215 5.47 3,215 5.47 1.64
17,657 (11,387) 6,270 (2,193) 4,878 801 4,077 (141) 81 4,017 (121) 35 ‐ ‐ 3,932 6.69 3,932 6.69 2.01
19,448 (12,430) 7,019 (2,411) 5,435 828 4,607 (113) 89 4,584 (138) 35 ‐ ‐ 4,482 7.63 4,482 7.63 2.29
2013
2014
2015
2016E
2017E
2018E
405 3,216 1,345 99 5,619 600 11,284 4,069 783 7,174 480 4,110 11,284
467 3,632 1,470 77 9,291 224 15,160 3,061 2,849 8,772 566 6,388 15,160
676 4,540 1,684 105 9,688 137 16,830 2,758 3,554 8,730 575 8,100 16,830
1,764 4,818 2,006 105 11,001 137 19,831 3,604 2,400 9,308 587 10,390 19,698
2,280 5,805 2,496 105 11,280 137 22,104 3,104 1,600 8,619 587 13,352 21,971
3,839 6,447 2,724 105 11,553 137 24,805 2,224 1,300 7,778 587 16,894 24,672
2013
2014
2015
2016E
2017E
2018E
1,182 823 529 (403) 2,131 (1,617) 1 (1,616) (349) 118 (278) ‐ (509) 5 514 1.07
2,123 273 575 (1) 2,971 (3,778) (149) (3,928) 928 593 (509) 7 1,018 61 (957) (1.69)
2,253 408 716 (786) 2,590 (1,818) 10 (1,808) 0 110 (695) ‐ (584) 198 782 1.36
3,215 ‐ 835 287 4,338 (2,148) ‐ (2,148) (309) ‐ (793) ‐ (1,102) 1,088 2,190 3.73
3,932 ‐ 801 (867) 3,865 (1,080) ‐ (1,080) (1,300) ‐ (969) ‐ (2,269) 516 2,785 4.74
4,482 ‐ 828 (531) 4,778 (1,100) ‐ (1,100) (1,180) ‐ (940) ‐ (2,120) 1,559 3,678 6.26
2013
2014 21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
2015 10.3% 26.4% 0.8% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016E 20.7% 36.1% 39.5% 35.0% 28.2% 22.6% 21.4% 21.4% 3.0%
2017E 17.5% 15.3% 22.3% 35.5% 27.6% 23.1% 22.3% 22.3% 3.0%
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 10.1% 11.4% 14.0% 36.1% 27.9% 23.7% 23.0% 23.0% 3.0%
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, PLE, TPOLY, M‐CHAI, CI. KT ZMICO is a co‐underwriter of ALT, EKH, RJH.
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 5 of 5
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt103.50
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
August 10, 2016
Earnings hit a new high in 2Q16 Price Performance (%)
Short‐term catalysts towards the high season in 3Q16 As anticipated, KCE’s earnings hit a new high in 2Q16. We have revised up our DCF‐based 2016E target price to Bt113. We believe the plant expansion in phase III and the renovation of the plant in Ayutthaya from 3Q16 onwards will help boost earnings growth again in 2017. Our Outperform rating is maintained with the likelihood that earnings will continue to hit new highs until the high season in 3Q16 as the short‐term share price catalyst.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
5.489
6.402
KT ZMICO vs. consensus Share data
‐0.3%
4.5%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.01
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
61.00/1,735.00
Foreign limit / actual (%)
49.00/29.08
52 week High / Low (Bt)
104.50/50.25
Avg. daily T/O (shares 000)
1,672.00
NVDR (%)
6.44
Estimated free float (%)
58.3
Beta
0.71
URL
www.kcethai.in.th
CGR
2Q16 net profit hit a new high KCE reported a 2Q16 net profit of Bt812mn, up by 8.1%QoQ and 66%YoY. Excluding expected FX gain of Bt43mn, its core profit amounted to Bt768mn, up 53%YoY and 5.6%QoQ, on the back of economies of scale from phase one of the new plant, for which the utilization rate accelerated to 100% vs. 85% in 1Q16. Hence, the gross profit margin hit a new high at 35.5% vs. 34% in 1Q16 and 29.8% in 2Q15. Meanwhile, the revenue amounted to Bt3,579mn, up 17.4%YoY and 1.4%QoQ thanks to larger orders for products used in the automotive sector. Finally, SG&A to sales rose to 12.7% vs. 12.2% in 2Q15 due to increases in sales and personnel expenses as well as expenses from the old plant after closing the operation. The third phase of the new plant to commence operations in 2H16 From 3Q16 onwards, KCE will commence operations at the third phase of the new plant, with capacity of 700,000 square feet/month, after the first and second phases reached 100% utilization in 2Q16. We expect KCE’s utilization at 200,000 square feet/month, or equivalent to a utilization rate of 28‐30% in 2H16 before accelerating to 70% in 2017 alongside the growing demand for electronic products used in the automotive sector as well as demand from new clients. Renovated an old plant and expanded capacity KCET (Ayuthaya plant), which is KCE’s subsidiary, is now in the process of upgrading its existing production line and increasing capacity. Once completed, KCET’s full capacity is expected to rise by 10% from the current level. The production equipment will be installed during Jul‐Dec 16 and commercial production is expected to commence from 1Q17 onwards. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273 Ruchanon Chiemkarnkit Assistant analyst
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) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014 11,284 2,110 3.67 58% 1,798 71.0% 1.10 11.25 2014 28.2 26.5 9.2 1.1% 37.5% 85%
2015 12,449 2,240 3.81 4% 2,192 21.9% 1.14 13.74 2015 27.1 20.9 7.5 1.1% 31.4% 70%
2016E 15,029 3,215 5.47 44% 3,215 46.7% 1.64 17.64 2016E 18.9 15.4 5.9 1.6% 35.9% 41%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 17,657 3,932 6.69 22% 3,932 22.3% 2.01 22.68 2017E 15.5 13.3 4.6 1.9% 34.2% 18%
2018E 19,448 4,482 7.63 14% 4,482 14.0% 2.29 28.71 2018E 13.6 12.0 3.6 2.2% 30.6% ‐2%
Figure 1: KCE’s 2Q59 earning results Profit and Loss (Btmn) Year‐end 31 Dec
2Q15
1Q16
2Q16E
% YoY
% QoQ
1H16
%YoY
2016E
% YoY
YTD(%2016E)
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn (Ls) from affiliates 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 (%)
3,047 937 727 (35) 8 (40) (12) 0 6 490 502 0.86 30.76 23.86 16.09 1.08 16.18 0.85 12.41 7.19
3,529 1,198 986 (46) 9 (10) 23 0 6 751 728 1.31 33.95 27.94 21.28 1.52 16.68 0.54 15.52 8.60
3,579 1,270 1,035 (46) 17 (20) 43 0 7 812 768 1.41 35.49 28.91 22.68 n.m. 17.84 n.m. 0.00 17.37
17.4 35.5 42.3 30.5 108.2 (48.9) (460.8) n.m. 17.7 65.6 53.0 63.4
1.4 6.0 4.9 (1.6) 86.6 104.4 87.9 n.m. 19.9 8.1 5.6 7.8
7,108 2,468 2,021 (92) 26 (30) 67 0 13 1,563 1,496 2.71 34.72 28.43 21.99 n.m. 17.25 n.m. 0.00 17.37
19.9 39.5 48.8 63.2 54.1 (46.9) 59.6 n.m. 47.8 56.1 55.9 53.8
15,029 5,267 4,231 (180) 68 (99) 0 0 30 3,215 3,215 5.47 35.05 28.15 21.40 1.28 18.86 0.41 17.64 34.88
20.7 34.6 36.1 17.5 96.0 8.3 n.m. n.m. n.m. 43.5 46.7 39.5
47.3 46.9 47.8 51.2 38.6 30.6 n.m. n.m. n.m. 48.6 46.5 49.6
Source: KT ZMICO Research Interim DPS of Bt1 KCE announced an interim dividend at Bt1/share for its 1H16 performance. The firm will go XD on 19 Aug‐16 and pay dividends on 9 Sep‐16. Renovated an old plant and expanded capacity KCE commercially runs three PCB plants, i.e., three new phases of KCE, KCET and KCEI. The firm has closed one plant (KCEL). At present, KCET and KCEI see utilization rates at 96‐97%. The firm has a plan to upgrade its first plant, i.e., KCET, which is expected to raise the total capacity by 10%. The production equipment will be installed during Jul‐Dec 16, with commercial operations expected from 1Q17 onwards. Moreover, we expect the firm to continue to upgrade its KCEI plant, which will help to raise the full capacity by 5% from 2018E onwards. Figure 2: KCE’s Plants and KCE’s Full capacity 4.5
Figure 3: Expected Utilization rate KCE plant
Full Capacity by plant (Million sq.ft./month)
4.0 3.5 3.0 2.5
2.00
2.00
1.20
1.30
0.45
0.45
2.00
2.00
2.00
2.00
1.30
1.30
1.30
1.30
2.0 1.5 1.0 0.5 ‐
2016 2017E KCE New
0.60
0.60
0.60
0.60
2018E KCET
2019E
2020E KCEI
2021E
KCEI KCET KCE Phase 1 KCE Phase 2 KCE Phase 3
2016E 2017E 2018E 2019E 2020E 2021E 95% 95% 90% 96% 30%
95% 96% 97% 97% 70%
97% 97% 97% 97% 97%
97% 97% 97% 97% 97%
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
97% 97% 97% 97% 97%
97% 97% 97% 97% 97%
Figure 4: PER (average 13.0x) and PBV band (average 1.60x) PBV(X)
PER(X)
60
6.0
2008 earnings is loss
50
0.0
-1.0 S.D.
-1.0
-2.0 S.D.
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Jan-16
Jan-15
Jan-14
Jan-13
-2.0
Jan-12
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
-20
Jan-07
Avg.
1.0
Jan-11
0 -10
2.0
Jan-10
10
+1.0 S.D.
3.0
Jan-09
20
+2.0 S.D.
4.0
Jan-08
30
5.0
+2.0 S.D. +1.5.0 S.D. +1.0 S.D. +0.5 S.D. Avg. -0.5 S.D. -1.0 S.D. -1.5.0 S.D. -2.0 S.D.
Jan-07
40
+3.0 S.D.
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
2016E
2017E
2018E
9,294 (6,843) 2,451 (1,275) 1,705 529 1,177 (171) 57 1,063 (16) 13 33 (8) 1,174 2.53 1,052 2.08 0.75
11,284 (7,718) 3,567 (1,683) 2,459 575 1,884 (119) 58 1,824 (46) 34 216 (13) 2,110 3.89 1,798 3.13 1.10
12,449 (8,535) 3,914 (1,520) 3,109 716 2,393 (153) 35 2,274 (91) 21 ‐ (12) 2,240 3.92 2,192 3.73 1.14
15,029 (9,762) 5,267 (1,871) 4,231 835 3,396 (180) 68 3,284 (99) 30 ‐ ‐ 3,215 5.47 3,215 5.47 1.64
17,657 (11,387) 6,270 (2,193) 4,878 801 4,077 (141) 81 4,017 (121) 35 ‐ ‐ 3,932 6.69 3,932 6.69 2.01
19,448 (12,430) 7,019 (2,411) 5,435 828 4,607 (113) 89 4,584 (138) 35 ‐ ‐ 4,482 7.63 4,482 7.63 2.29
2013
2014
2015
2016E
2017E
2018E
405 3,216 1,345 99 5,619 600 11,284 4,069 783 7,174 480 4,110 11,284
467 3,632 1,470 77 9,291 224 15,160 3,061 2,849 8,772 566 6,388 15,160
676 4,540 1,684 105 9,688 137 16,830 2,758 3,554 8,730 575 8,100 16,830
1,764 4,818 2,006 105 11,001 137 19,831 3,604 2,400 9,308 587 10,390 19,698
2,280 5,805 2,496 105 11,280 137 22,104 3,104 1,600 8,619 587 13,352 21,971
3,839 6,447 2,724 105 11,553 137 24,805 2,224 1,300 7,778 587 16,894 24,672
2013
2014
2015
2016E
2017E
2018E
1,182 823 529 (403) 2,131 (1,617) 1 (1,616) (349) 118 (278) ‐ (509) 5 514 1.07
2,123 273 575 (1) 2,971 (3,778) (149) (3,928) 928 593 (509) 7 1,018 61 (957) (1.69)
2,253 408 716 (786) 2,590 (1,818) 10 (1,808) 0 110 (695) ‐ (584) 198 782 1.36
3,215 ‐ 835 287 4,338 (2,148) ‐ (2,148) (309) ‐ (793) ‐ (1,102) 1,088 2,190 3.73
3,932 ‐ 801 (867) 3,865 (1,080) ‐ (1,080) (1,300) ‐ (969) ‐ (2,269) 516 2,785 4.74
4,482 ‐ 828 (531) 4,778 (1,100) ‐ (1,100) (1,180) ‐ (940) ‐ (2,120) 1,559 3,678 6.26
2013
2014 21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
2015 10.3% 26.4% 0.8% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016E 20.7% 36.1% 39.5% 35.0% 28.2% 22.6% 21.4% 21.4% 3.0%
2017E 17.5% 15.3% 22.3% 35.5% 27.6% 23.1% 22.3% 22.3% 3.0%
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 10.1% 11.4% 14.0% 36.1% 27.9% 23.7% 23.0% 23.0% 3.0%
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, PLE, TPOLY, M‐CHAI, CI. KT ZMICO is a co‐underwriter of ALT, EKH, RJH.
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 5 of 5
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th
th
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
