In-line 3Q15 core profit; expansion to Indonesia and Vietnam
Tipco Asphalt
Under review (16E TP Bt37.49)
Earnings Review
Close Bt37.00
Beat forecast/Below forecast/In line
Construction Materials November 16, 2015
In‐line 3Q15 core profit; expansion to Indonesia and Vietnam Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
3.313
3.263
KT ZMICO vs. consensus Share data
‐0.4%
‐7.4%
Reuters / Bloomberg
TASCO.BK/TASCO TB
Paid‐up Shares (m)
1,543.85
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
57.00/1,591.00
Foreign limit / actual (%)
39.00/38.99
52 week High / Low (Bt)
43.50/5.98
Avg. daily T/O (shares 000)
21,178.00
NVDR (%)
12.98
Estimated free float (%)
36.14
Beta
1.15
URL
www.tipcoasphalt.com
CGR
Anti‐corruption
Level 2 (Declared)
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
Positive view toward business outlook and inorganic growth We maintain our positive view toward TASCO’s business outlook, outstanding gross profit margin growth and growth potential to be brought on by investment in three asphalt companies and two shipping companies as part of its determination to become the world’s leading asphalt operator. However, the share price has risen by 68% to peak at 43.25/share since mid Sep‐15 and it has thus been fully valued vs. our target price of Bt37.49/share. Hence, the share price may experience the sell‐on‐fact phenomenon in the short term. However, we still like TASCO for its medium‐ to long‐term outlook. We are waiting for more information from the analyst meeting today. Good 3Q15 net profit as expected TASCO reported 3Q15 net profit of Bt1.45bn, up 242%YoY and 10%QoQ. This result was 4% above our estimate because of the booking of extra items amounting to Bt43mn (i.e., FX gain of Bt93mn and an allowance for doubtful debt of Bt50mn), which was in line with the market estimate. Strong 3Q15 core profit as anticipated The core profit amounted to Bt1.41bn (in line with our estimate of Bt1.40bn), up 286%YoY and 6%QoQ. The sales declined in line with the product price trend; however, the gross profit margin improved to 22.1% (vs. 6% in 3Q14 and 18% in 2Q15). EBITDA remained very solid at over Bt1.9bn (+220%YoY, +7%QoQ), with an EBITDA margin of 20% vs. 5% in 3Q14 and 17% in 2Q15. US$62mn investment in expansion to Indonesia and Vietnam TASCO purchased common shares in five companies from Colas, with a total investment cost US$61.8mn or Bt2,224.8mn, equivalent to 14% of the total asset value as of Sep‐15 and 43% of the EBITDA in 9M15. This proves that TASCO has high investment potential. The acquisitions in three asphalt companies and two shipping companies should help boost its core business, enabling it to expand the asphalt‐related operation to Indonesia and Vietnam as well as enlarging its shipping business portfolio. The transactions should be completed by 1Q16. Preliminarily, we expect upside of 4% to our 2016E earnings projection. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS grw (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 33,935 831 0.54 0.51 798% 0.10 3.44 2013 67.90 6.51 10.77 0.3% 13.0% 2.27
2014 45,727 1,200 0.78 0.63 23% 0.20 3.89 2014 47.24 6.29 9.52 0.5% 11.8% 1.17
2015E 41,542 5,081 3.30 3.30 424% 0.66 7.03 2015E 11.22 5.68 5.26 1.8% 50.7% 0.11
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 42,570 4,668 3.02 3.02 ‐8% 0.60 9.35 2016E 12.24 5.07 3.96 1.6% 33.8% (0.02)
2017E 42,598 4,669 3.01 3.01 0% 0.60 11.71 2017E 12.28 4.85 3.16 1.6% 26.5% (0.10)
Good 3Q15 net profit as expected TASCO reported 3Q15 net profit of Bt1.45bn, up 242%YoY and 10%QoQ. This result was 4% above our estimate because of the booking of extra items amounting to Bt43mn (i.e., an FX gain of Bt93mn and an allowance for doubtful debt of Bt50mn), which was in line with the market estimate. Strong 3Q15 core profit as anticipated The core profit amounted to Bt1.41bn (in line with our estimate of Bt1.40bn), up 286%YoY and 6%QoQ. 1. While sales dropped by 18%YoY and 11%QoQ to Bt9.3bn due to the falls in product prices, sales volume increased by 20%YoY to 0.6mn tons (‐9%QoQ) thanks to growing demand from both the export and domestic markets. 2. The gross profit margin improved to 22.1% vs. 5.9% in 3Q14 and 18.2% in 2Q15, owing to efficient management in terms of refinery production, transportation, and customer service, which resulted in a gross profit at Bt2.06bn. The firm booked hedging gain of Bt825mn or 8.8% of the sales value; this was a result of the decline in the Ice Brent price from US$63.65/barrel to US$50.5/barrel. The firm’s effective price hedging strategy was its key tool to cope with the fluctuation in the commodity markets, yielding a positive outcome with regard to its overall operation performance. 3. SG&A to sales increased to 3.4% in 3Q15 (vs. 1.8% in 3Q14 and 2.7% in 2Q15), up by Bt30mn from the figure booked in 2Q15. The increase was blamed on the remaining expense of Bt24mn used for maintenance of ships as well as higher personnel expenses following business expansion. 4. EBITDA remained very strong at Bt1.9bn, growing by 220%YoY and 7%QoQ, with an EBITDA margin of 20% vs. 5% in 3Q14 and 17% in 2Q15, the highest level in many quarters. Figure 1: 3Q15 earnings review Consolidated Profit and Loss FY Dec (Btm) Revenues Cost of sales Gross profit SG&A Operating profit Interest income Other income Interest Expense EBT Tax expense Recurring profit Extra items Net profit EPS (Bt) Gross margin Operating margin Norm. profit margin Net profit margin Effective tax rate
3Q14 2Q15 3Q15 11,386 10,488 9,290 (10,718) (8,579) (7,235) 668 1,908 2,055 (205) (286) (317) 463 1,622 1,738 0 0 0 18 22 24 (53) (40) (49) 428 1,603 1,713 (85) (298) (338) 366 1,327 1,410 59 (9) 43 425 1,317 1,453 0.28 0.86 0.93 5.9% 4.1% 3.2% 3.7% 19.9%
18.2% 15.5% 12.6% 12.6% 18.6%
22.1% 18.7% 15.2% 15.6% 19.7%
%YoY %QoQ 9M14 9M15 ‐18% ‐11% 34,754 28,041 ‐32% ‐16% (33,603) (22,506) 207% 8% 1,150 5,535 54% 11% (583) (795) 275% 7% 567 4,740 nm nm 0 0 34% 13% 53 67 ‐8% 21% (163) (143) 300% 7% 457 4,663 296% 14% (108) (893) 286% 6% 397 3,888 nm nm 283 9 242% 10% 680 3,896 236% 9% 0.44 2.50 3.3% 1.6% 1.1% 2.0% 23.6%
19.7% 16.9% 13.9% 13.9% 19.1%
%YoY 2014 2015E ‐19% 45,727 41,542 ‐33% (43,723) (34,321) 381% 2,005 7,221 36% (797) (1,039) 736% 1,207 6,182 nm 0 0 27% 63 63 ‐12% (222) (176) 920% 1,049 6,070 727% (176) (1,111) 879% 965 5,081 nm 236 0 473% 1,200 5,081 463% 0.79 3.30 4.4% 2.6% 2.1% 2.6% 16.8%
YTD %YoY (% of 2015E) ‐9% 68% ‐22% 71% 260% 76% 30% 77% 412% 76% nm nm 0% 105% ‐21% 65% 479% 77% 530% 79% 427% 76% nm nm 323% 76% 319% 76%
17.4% 14.9% 12.2% 12.2% 18.3%
Source: TASCO and KT ZMICO Research
9M15 core profit accounted for 76% of 2015E earnings forecast 9M15 core profit amounted to Bt3.88bn, soaring by 879% YoY. While the sales declined by 19%, the gross profit margin widened to 19.7% (vs. 3.3% in 9M14), with EBITDA of Bt5.2bn (+459%YoY). In 9M15, the EBITDA margin stood at 18% (up from 3% in 9M14). The core profit in 9M15 accounts for 76% of our full‐year projection at Bt5.08bn. We thus leave our current projection unchanged. Strong financial position with high investment and dividend payment potential The D/E ratio fell to 0.4x, as of end‐3Q15, from 1.2x as of 2014 yearend, with interest bearing debt of merely Bt3.8bn. Meanwhile, the operating cash flow remained strong at Bt5.3bn as of Sep‐15. With solid shareholders’equity at Bt9.5nm and high retained earnings at Bt6.9bn (as of the end of 3Q15), the firm has high potential to offer dividends and expand its investment. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Second interim dividend payment for 2015 announced TASCO announced to pay 2015 interim dividends for the second time at Bt0.20/share on a payout ratio of 22% of 3Q15 net profit. The firm will go XD on 26 Nov‐15 and pay dividends on 9 Dec‐15. US$62mn investment in expansion to Indonesia and Vietnam TASCO approved the purchases of common shares in five companies from Colas (holding 31% share in TASCO), with a total investment cost at US$61.8mn or Bt2,224.8mn, equivalent to 14% of the total asset value as of Sep‐15 and 43% of the EBITDA in 9M15. This proves that TASCO has high investment potential. These acquisitions in three asphalt companies and two shipping companies should help boost TASCO’s core business as the firm can expand its asphalt operation to Indonesia and Vietnam as well as enlarge its shipping business portfolio. The acquisition transactions are expected to be completed by 1Q16 (after getting approval in the shareholder’s meeting on 5 Jan‐16). Figure 2: TASCO’s overview of the targets
Source: TASCO, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Providing 4% upside to our 2016E earnings forecast for TASCO Based on the financial statement in the past 12 months of the five acquired companies, we have preliminarily found that the firms would contribute profit for TASCO at Bt190mn/year, translating into upside potential of 4.1% to our current 2016E earnings forecast at Bt4.7bn or equivalent to an implied investment return of 8.5% p.a. While this figure does not look significant, we believe the firm will see greater profitability once all five companies’ operations are consolidated and its market base and fleet capacity are expanded.
Figure 3: Key financial figures
Source: TASCO, KT ZMICO Research
Positive view towards business outlook, profitability and inorganic growth We hold a positive view towards the asphalt business as well as TASCO’s outstanding profitability outlook and its inorganic growth to be brought on by the recent acquisitions of three asphalt companies and two shipping companies as part of its determination to become the world’s leading asphalt operator in five years (by 2020). We are looking forward to obtaining further information regarding the firm’s business strategies in the analyst meeting today (16 Nov‐15) before making any adjustments to our earnings forecasts and target price valuation. Selling on fact can be expected in the short term. The share price has risen by 68% to peak at 43.25/share since mid Sep‐15 and it has thus been fully valued vs. our target price of Bt37.49/share. Hence, the share price may experience the sell‐on‐fact phenomenon in the short term. However, we still like TASCO for its efficient business management as well as its vision with respect to gearing up for sustainable growth in the long term.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG, BRR. KT ZMICO is a co‐underwriter of SCI, SR, J, TKN.
Anti‐corruption Progress Indicator
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
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KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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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.
Under review (16E TP Bt37.49)
Earnings Review
Close Bt37.00
Beat forecast/Below forecast/In line
Construction Materials November 16, 2015
In‐line 3Q15 core profit; expansion to Indonesia and Vietnam Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
3.313
3.263
KT ZMICO vs. consensus Share data
‐0.4%
‐7.4%
Reuters / Bloomberg
TASCO.BK/TASCO TB
Paid‐up Shares (m)
1,543.85
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
57.00/1,591.00
Foreign limit / actual (%)
39.00/38.99
52 week High / Low (Bt)
43.50/5.98
Avg. daily T/O (shares 000)
21,178.00
NVDR (%)
12.98
Estimated free float (%)
36.14
Beta
1.15
URL
www.tipcoasphalt.com
CGR
Anti‐corruption
Level 2 (Declared)
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
Positive view toward business outlook and inorganic growth We maintain our positive view toward TASCO’s business outlook, outstanding gross profit margin growth and growth potential to be brought on by investment in three asphalt companies and two shipping companies as part of its determination to become the world’s leading asphalt operator. However, the share price has risen by 68% to peak at 43.25/share since mid Sep‐15 and it has thus been fully valued vs. our target price of Bt37.49/share. Hence, the share price may experience the sell‐on‐fact phenomenon in the short term. However, we still like TASCO for its medium‐ to long‐term outlook. We are waiting for more information from the analyst meeting today. Good 3Q15 net profit as expected TASCO reported 3Q15 net profit of Bt1.45bn, up 242%YoY and 10%QoQ. This result was 4% above our estimate because of the booking of extra items amounting to Bt43mn (i.e., FX gain of Bt93mn and an allowance for doubtful debt of Bt50mn), which was in line with the market estimate. Strong 3Q15 core profit as anticipated The core profit amounted to Bt1.41bn (in line with our estimate of Bt1.40bn), up 286%YoY and 6%QoQ. The sales declined in line with the product price trend; however, the gross profit margin improved to 22.1% (vs. 6% in 3Q14 and 18% in 2Q15). EBITDA remained very solid at over Bt1.9bn (+220%YoY, +7%QoQ), with an EBITDA margin of 20% vs. 5% in 3Q14 and 17% in 2Q15. US$62mn investment in expansion to Indonesia and Vietnam TASCO purchased common shares in five companies from Colas, with a total investment cost US$61.8mn or Bt2,224.8mn, equivalent to 14% of the total asset value as of Sep‐15 and 43% of the EBITDA in 9M15. This proves that TASCO has high investment potential. The acquisitions in three asphalt companies and two shipping companies should help boost its core business, enabling it to expand the asphalt‐related operation to Indonesia and Vietnam as well as enlarging its shipping business portfolio. The transactions should be completed by 1Q16. Preliminarily, we expect upside of 4% to our 2016E earnings projection. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS grw (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 33,935 831 0.54 0.51 798% 0.10 3.44 2013 67.90 6.51 10.77 0.3% 13.0% 2.27
2014 45,727 1,200 0.78 0.63 23% 0.20 3.89 2014 47.24 6.29 9.52 0.5% 11.8% 1.17
2015E 41,542 5,081 3.30 3.30 424% 0.66 7.03 2015E 11.22 5.68 5.26 1.8% 50.7% 0.11
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 42,570 4,668 3.02 3.02 ‐8% 0.60 9.35 2016E 12.24 5.07 3.96 1.6% 33.8% (0.02)
2017E 42,598 4,669 3.01 3.01 0% 0.60 11.71 2017E 12.28 4.85 3.16 1.6% 26.5% (0.10)
Good 3Q15 net profit as expected TASCO reported 3Q15 net profit of Bt1.45bn, up 242%YoY and 10%QoQ. This result was 4% above our estimate because of the booking of extra items amounting to Bt43mn (i.e., an FX gain of Bt93mn and an allowance for doubtful debt of Bt50mn), which was in line with the market estimate. Strong 3Q15 core profit as anticipated The core profit amounted to Bt1.41bn (in line with our estimate of Bt1.40bn), up 286%YoY and 6%QoQ. 1. While sales dropped by 18%YoY and 11%QoQ to Bt9.3bn due to the falls in product prices, sales volume increased by 20%YoY to 0.6mn tons (‐9%QoQ) thanks to growing demand from both the export and domestic markets. 2. The gross profit margin improved to 22.1% vs. 5.9% in 3Q14 and 18.2% in 2Q15, owing to efficient management in terms of refinery production, transportation, and customer service, which resulted in a gross profit at Bt2.06bn. The firm booked hedging gain of Bt825mn or 8.8% of the sales value; this was a result of the decline in the Ice Brent price from US$63.65/barrel to US$50.5/barrel. The firm’s effective price hedging strategy was its key tool to cope with the fluctuation in the commodity markets, yielding a positive outcome with regard to its overall operation performance. 3. SG&A to sales increased to 3.4% in 3Q15 (vs. 1.8% in 3Q14 and 2.7% in 2Q15), up by Bt30mn from the figure booked in 2Q15. The increase was blamed on the remaining expense of Bt24mn used for maintenance of ships as well as higher personnel expenses following business expansion. 4. EBITDA remained very strong at Bt1.9bn, growing by 220%YoY and 7%QoQ, with an EBITDA margin of 20% vs. 5% in 3Q14 and 17% in 2Q15, the highest level in many quarters. Figure 1: 3Q15 earnings review Consolidated Profit and Loss FY Dec (Btm) Revenues Cost of sales Gross profit SG&A Operating profit Interest income Other income Interest Expense EBT Tax expense Recurring profit Extra items Net profit EPS (Bt) Gross margin Operating margin Norm. profit margin Net profit margin Effective tax rate
3Q14 2Q15 3Q15 11,386 10,488 9,290 (10,718) (8,579) (7,235) 668 1,908 2,055 (205) (286) (317) 463 1,622 1,738 0 0 0 18 22 24 (53) (40) (49) 428 1,603 1,713 (85) (298) (338) 366 1,327 1,410 59 (9) 43 425 1,317 1,453 0.28 0.86 0.93 5.9% 4.1% 3.2% 3.7% 19.9%
18.2% 15.5% 12.6% 12.6% 18.6%
22.1% 18.7% 15.2% 15.6% 19.7%
%YoY %QoQ 9M14 9M15 ‐18% ‐11% 34,754 28,041 ‐32% ‐16% (33,603) (22,506) 207% 8% 1,150 5,535 54% 11% (583) (795) 275% 7% 567 4,740 nm nm 0 0 34% 13% 53 67 ‐8% 21% (163) (143) 300% 7% 457 4,663 296% 14% (108) (893) 286% 6% 397 3,888 nm nm 283 9 242% 10% 680 3,896 236% 9% 0.44 2.50 3.3% 1.6% 1.1% 2.0% 23.6%
19.7% 16.9% 13.9% 13.9% 19.1%
%YoY 2014 2015E ‐19% 45,727 41,542 ‐33% (43,723) (34,321) 381% 2,005 7,221 36% (797) (1,039) 736% 1,207 6,182 nm 0 0 27% 63 63 ‐12% (222) (176) 920% 1,049 6,070 727% (176) (1,111) 879% 965 5,081 nm 236 0 473% 1,200 5,081 463% 0.79 3.30 4.4% 2.6% 2.1% 2.6% 16.8%
YTD %YoY (% of 2015E) ‐9% 68% ‐22% 71% 260% 76% 30% 77% 412% 76% nm nm 0% 105% ‐21% 65% 479% 77% 530% 79% 427% 76% nm nm 323% 76% 319% 76%
17.4% 14.9% 12.2% 12.2% 18.3%
Source: TASCO and KT ZMICO Research
9M15 core profit accounted for 76% of 2015E earnings forecast 9M15 core profit amounted to Bt3.88bn, soaring by 879% YoY. While the sales declined by 19%, the gross profit margin widened to 19.7% (vs. 3.3% in 9M14), with EBITDA of Bt5.2bn (+459%YoY). In 9M15, the EBITDA margin stood at 18% (up from 3% in 9M14). The core profit in 9M15 accounts for 76% of our full‐year projection at Bt5.08bn. We thus leave our current projection unchanged. Strong financial position with high investment and dividend payment potential The D/E ratio fell to 0.4x, as of end‐3Q15, from 1.2x as of 2014 yearend, with interest bearing debt of merely Bt3.8bn. Meanwhile, the operating cash flow remained strong at Bt5.3bn as of Sep‐15. With solid shareholders’equity at Bt9.5nm and high retained earnings at Bt6.9bn (as of the end of 3Q15), the firm has high potential to offer dividends and expand its investment. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Second interim dividend payment for 2015 announced TASCO announced to pay 2015 interim dividends for the second time at Bt0.20/share on a payout ratio of 22% of 3Q15 net profit. The firm will go XD on 26 Nov‐15 and pay dividends on 9 Dec‐15. US$62mn investment in expansion to Indonesia and Vietnam TASCO approved the purchases of common shares in five companies from Colas (holding 31% share in TASCO), with a total investment cost at US$61.8mn or Bt2,224.8mn, equivalent to 14% of the total asset value as of Sep‐15 and 43% of the EBITDA in 9M15. This proves that TASCO has high investment potential. These acquisitions in three asphalt companies and two shipping companies should help boost TASCO’s core business as the firm can expand its asphalt operation to Indonesia and Vietnam as well as enlarge its shipping business portfolio. The acquisition transactions are expected to be completed by 1Q16 (after getting approval in the shareholder’s meeting on 5 Jan‐16). Figure 2: TASCO’s overview of the targets
Source: TASCO, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Providing 4% upside to our 2016E earnings forecast for TASCO Based on the financial statement in the past 12 months of the five acquired companies, we have preliminarily found that the firms would contribute profit for TASCO at Bt190mn/year, translating into upside potential of 4.1% to our current 2016E earnings forecast at Bt4.7bn or equivalent to an implied investment return of 8.5% p.a. While this figure does not look significant, we believe the firm will see greater profitability once all five companies’ operations are consolidated and its market base and fleet capacity are expanded.
Figure 3: Key financial figures
Source: TASCO, KT ZMICO Research
Positive view towards business outlook, profitability and inorganic growth We hold a positive view towards the asphalt business as well as TASCO’s outstanding profitability outlook and its inorganic growth to be brought on by the recent acquisitions of three asphalt companies and two shipping companies as part of its determination to become the world’s leading asphalt operator in five years (by 2020). We are looking forward to obtaining further information regarding the firm’s business strategies in the analyst meeting today (16 Nov‐15) before making any adjustments to our earnings forecasts and target price valuation. Selling on fact can be expected in the short term. The share price has risen by 68% to peak at 43.25/share since mid Sep‐15 and it has thus been fully valued vs. our target price of Bt37.49/share. Hence, the share price may experience the sell‐on‐fact phenomenon in the short term. However, we still like TASCO for its efficient business management as well as its vision with respect to gearing up for sustainable growth in the long term.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG, BRR. KT ZMICO is a co‐underwriter of SCI, SR, J, TKN.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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KT•ZMICO Securities Company Limited
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8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
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Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
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T.Namuang, A.Muang,
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Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
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Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
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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
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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.
