Stars Microelectronics (Thailand) AWS
Stars Microelectronics (Thailand) Underperform (18E TP Bt4.20)
Company Update
Close Bt4.00
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
August 21, 2017
Looking forward to another round of recovery Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.405
0.600
KT ZMICO vs. consensus Share data
‐142%
‐58.3%
Reuters / Bloomberg
SMT.BK/SMT TB
Paid‐up Shares (m)
836.48
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
3.00/101.00
Foreign limit / actual (%)
100.00/14.86
52 week High / Low (Bt)
8.50/3.80
Avg. daily T/O (shares 000) NVDR (%)
6,379.00 2.37
Estimated free float (%)
60.57
Beta
1.68
URL
www.starsmicro.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain “Underperform” while waiting to see developments in 2H Coming back from the analyst meeting last Friday with a negative view, we have revised down our 2017‐19E earnings forecasts by 67%, 54% and 40%, respectively, to reflect the downward revision made to the solar panel sales assumptions due to a US client’s ceasing of operations and order delays for IC packaging products, which may be prolonged to end‐2018. We have rolled over our target price to the 2018E target price at Bt4.2/share. We maintain an “Underperform” rating. Loss from sales and narrower gross profit margin SMT’s 2Q17 earnings were in the red at ‐Bt6.5mn, with a narrower gross profit margin to 16.6% vs. 21.2% in 1Q17 on the back of the appreciation of the baht and a sharp contraction of sales. Total sales dropped by 12%QoQ on the back of slower demand in IC packaging products, the cancellation of solar panels as a client decided to cease operations following intense competition, and continued declines in solar panel prices. Full provision for receivables linked to set‐top boxes As for the progress on the default on receivables in the form of set‐top boxes, the case is a civil case and the defaulter has agreed to pay compensation of around Bt160mn, accounting for 60% of total liabilities. However, SMT has not accepted this offer and will pursue a criminal case. Therefore, the firm set aside a full provision from such trade receivables in the total amount of Bt167mn in 2Q17 and a provision from inventory amounting to Bt30mn. Note that such provisions will not impact the firm’s cash flow. New sales target set by management The management set a new sales target for 2017E at Bt2,041mn, down from Bt3,407mn. In 2018E, the management anticipates sales at around Bt1,835‐ 3,000mn and a gross profit margin in a range of 15‐25%. The major growth drivers will be sales of optical products (+160‐200%YoY) and box build products, for which orders have increased. Note that our revenue forecasts for 2017‐18E are more conservative than management’s as we factored in the slowdown in IC and wafer dicing businesses. Unclear outlook for solar business in late 4Q17 After the client for solar panels ceased operations, SMT has opted for development of low‐cost solar panels sold in Southeast Asia and will refocus on its subsidiary, Star Green Energy, offering solar installation service. However, we have not yet factored this into our current projections, as we will wait for clearer marketing strategies in late 4Q17. Downgrade our 2017‐18E projections…“Underperform” rating maintained We have revised down our 2017‐19E earnings forecasts by 67%, 54% and 40%, respectively, to reflect the loss in solar panels and slowdown in IC packaging products. We have rolled over to the 2018E target price at Bt4.20/share, based on 2018E PER of 17x. We maintain “Underperform” as we are still concerned over a decrease in inventory for wafer dicing products in 4Q17. 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) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2015 7,617 (55) (0.13) ‐50.2% (89) ‐67.09% ‐ 4.17 2015 ‐18.8 18.1 1.0 0.0% ‐3.4% 67%
2016 3,533 13 0.02 ‐88.3% 11 ‐87.06% ‐ 2.10 2016 291.0 11.3 1.9 0.0% 0.4% 61%
2017E 1,959 (138) (0.17) ‐1167.7% 86 646.38% 0.04 2.16 2017E 39.0 8.9 1.9 1.0% 4.8% 40%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 2,425 207 0.25 ‐249.7% 207 141.25% 0.10 2.31 2018E 16.2 7.1 1.7 2.5% 11.1% 25%
2019E 2,980 322 0.38 55.5% 322 55.54% 0.15 2.54 2019E 10.4 6.0 1.6 3.8% 15.9% 8%
Figure 1: 2Q17 earnings results
Profit and Loss (Btmn) Year‐end 31 Dec 2Q16
1Q17
2Q17
% YoY
% QoQ
1H17
%YoY
2017E
%YoY
YTD
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Gn (Ls) from Net profit (loss) Core profit Reported EPS Gross margin EBITDA margin Net margin (%) Current ratio (x) Interest Debt / equity (x) BVPS (Bt) ROE (%)
523 114 142 (13) 10 (3) 1 (3) 0 39 42 0.05 21.85 27.18 7.47 1.12 3.92 0.76 2.16 2.19
462 76 96 (15) 10 (2) 0 (224) 0 (230) (7) (0.28) 16.56 20.71 (49.84) 0.96 0.03 n.m. 1.89 (13.60)
(50.6) (10.4) (16.9) 55.2 316.2 n.m. (100.0) n.m. n.m. (818.7) (131.7) (818.7)
(11.7) (33.1) (32.7) 20.1 4.1 (41.4) (100.0) 6,774.5 n.m. (689.3) (115.6) (689.3)
985 191 238 (28) 20 (5) 1 (227) 0 (191) 35 (0.23) 19.37 24.15 (19.40) 0.96 1.80 n.m. 1.89 (13.60)
(54.4) 11.4 4.3 48.0 451.8 n.m. (96.4) (3,496.1) n.m. (373.6) (21.2) (373.6)
1,959 386 516 (30) 2 (2) 0 (224) 0 (138) 86 (0.17) 19.70 26.35 (7.06) 1.44 3.84 0.40 2.16 4.82
(44.5) 31.8 27.2 (33.5) (71.9) (79.7) (100.0) 464.1 n.m. (1,167.7) 646.4 (1,167.7)
50.3 49.4 46.1 93.0 855.3 260.8 n.m. n.m. n.m. 138.2 40.9 138.2
936 85 115 (10) 2 (2) 8 4 0 32 21 0.04 9.12 12.30 3.42 1.49 3.10 0.70 2.17 1.78
Source: KT ZMICO Research
Figure 2: Key Assumption Changes List Revenue GPM % SG&A to sales (%)
Core Net profit (Btmn) NPM (%)
New 1,959
2017E Old New 2,610 ‐24.9%
2,425
4,310
‐43.7%
2,980
4,450
‐33%
19.7%
20.4%
20.2%
20.4%
21.25%
22.1%
13.8%
9%
10.6% 207 8.5%
9.5% 445 10.3%
‐53.5%
9.8% 322 10.8%
9.5% 532 11.95%
‐39.5%
86 4.4%
263 10.1%
‐67.3%
New
2018E Old %Change
New
2019E Old %Change
Source: KT ZMICO Research
Figure 3: PER (average 16x)
Figure 4: PER multiple 2017E
PER (x)
+2.0SD
18.0
+1.5SD
17.5
4.33
8.3%
+1.0SD
17.0
4.21
5.2%
+0.5SD
16.5
4.08
2.1%
Average
16.0
3.96
-1.0%
-0.5SD
15.5
3.84
-4.1%
13
-1.0SD
15.0
3.71
-7.2%
12
-1.5SD
14.5
3.59
-10.3%
-2.0SD
14.0
3.46
-13.4%
(X) 19 +2 S.D.
18
+1.5 S.D. +1 S.D.
17
+0.5 S.D.
16
Avg.
15
-0.5 S.D. -1 S.D.
14
-1.5 S.D.
ที่มา: Bloomberg, KT ZMICO Research
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
-2 S.D.
Implied market
Upside/ Downside
price (Bt)
to current price (%)
4.45
11.4%
ที่มา: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
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 (%)
2014
8,993 (9,053) (61) (200) 81 342 (260) (21) 6 (275) (1) ‐ 91 6 (111) (0.27) (270) (0.65) ‐
2015
7,617 (7,470) 147 (231) 253 337 (84) (22) 9 (97) 0 ‐ 8 8 (55) (0.13) (89) (0.21) ‐
2016
3,533 (3,240) 293 (233) 406 346 60 (45) 8 23 (9) ‐ (40) (3) 13 0.02 11 0.01 ‐
2017E
1,959 (1,573) 386 (271) 516 401 115 (30) 2 88 (2) ‐ (224) ‐ (138) (0.17) 86 0.10 0.04
2018E
2,425 (1,935) 490 (258) 647 415 232 (24) 3 211 (4) ‐ ‐ ‐ 207 0.25 207 0.25 0.10
2019E
2,980 (2,347) 633 (293) 770 429 340 (15) 4 329 (7) ‐ ‐ ‐ 322 0.38 322 0.38 0.15
2014
84 643 570 ‐ 2,176 39 3,513 664 29 1,714 836 1,799 3,513
2015
15 734 508 ‐ 2,115 65 3,436 815 378 1,691 836 1,746 3,436
2016
259 582 488 ‐ 2,108 42 3,479 450 877 1,742 836 1,757 3,500
2017E
351 323 237 ‐ 2,107 48 3,066 450 620 1,277 836 1,809 3,086
2018E
376 399 292 ‐ 1,892 56 3,015 450 400 1,103 836 1,933 3,036
2019E
389 491 354 ‐ 1,662 64 2,960 450 100 854 836 2,126 2,980
2014
2015
2016
2017E
2018E
2019E
(116) (48) 342 335 513 (74) (83) (157) (311) 0 ‐ ‐ (311) 44 356 0.85
(63) 13 337 (629) (342) (178) (23) (201) 474 ‐ ‐ 0 474 (69) (543) (1.30)
11 ‐ 346 112 470 (360) ‐ (360) 134 ‐ ‐ ‐ 134 244 110 0.13
86 ‐ 401 297 783 (400) ‐ (400) (257) ‐ (34) ‐ (291) 92 383 0.46
207 ‐ 415 (94) 528 (200) ‐ (200) (220) ‐ (83) ‐ (303) 25 328 0.39
322 ‐ 429 (110) 641 (200) ‐ (200) (300) ‐ (129) ‐ (429) 13 441 0.53
2014
2015
2016
2017E
2018E
2019E
17.5% ‐5505.9% ‐176.9% ‐0.7% 0.9% ‐2.9% ‐1.2% ‐3.0% ‐0.2%
‐15.3% 211.5% ‐50.2% 1.9% 3.3% ‐1.1% ‐0.7% ‐1.2% 0.3%
‐53.6% 60.5% ‐111.7% 8.3% 11.5% 1.7% 0.4% 0.3% 37.8%
‐44.5% 27.2% ‐1167.7% 19.7% 26.3% 5.9% ‐7.1% 4.4% 2.0%
23.8% 25.4% ‐249.7% 20.2% 26.7% 9.6% 8.5% 8.5% 2.0%
22.9% 19.0% 55.5% 21.3% 25.8% 11.4% 10.8% 10.8% 2.0%
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, POMPUI, TTL, NMG, SAWAD.
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 Bt4.00
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
August 21, 2017
Looking forward to another round of recovery Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.405
0.600
KT ZMICO vs. consensus Share data
‐142%
‐58.3%
Reuters / Bloomberg
SMT.BK/SMT TB
Paid‐up Shares (m)
836.48
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
3.00/101.00
Foreign limit / actual (%)
100.00/14.86
52 week High / Low (Bt)
8.50/3.80
Avg. daily T/O (shares 000) NVDR (%)
6,379.00 2.37
Estimated free float (%)
60.57
Beta
1.68
URL
www.starsmicro.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain “Underperform” while waiting to see developments in 2H Coming back from the analyst meeting last Friday with a negative view, we have revised down our 2017‐19E earnings forecasts by 67%, 54% and 40%, respectively, to reflect the downward revision made to the solar panel sales assumptions due to a US client’s ceasing of operations and order delays for IC packaging products, which may be prolonged to end‐2018. We have rolled over our target price to the 2018E target price at Bt4.2/share. We maintain an “Underperform” rating. Loss from sales and narrower gross profit margin SMT’s 2Q17 earnings were in the red at ‐Bt6.5mn, with a narrower gross profit margin to 16.6% vs. 21.2% in 1Q17 on the back of the appreciation of the baht and a sharp contraction of sales. Total sales dropped by 12%QoQ on the back of slower demand in IC packaging products, the cancellation of solar panels as a client decided to cease operations following intense competition, and continued declines in solar panel prices. Full provision for receivables linked to set‐top boxes As for the progress on the default on receivables in the form of set‐top boxes, the case is a civil case and the defaulter has agreed to pay compensation of around Bt160mn, accounting for 60% of total liabilities. However, SMT has not accepted this offer and will pursue a criminal case. Therefore, the firm set aside a full provision from such trade receivables in the total amount of Bt167mn in 2Q17 and a provision from inventory amounting to Bt30mn. Note that such provisions will not impact the firm’s cash flow. New sales target set by management The management set a new sales target for 2017E at Bt2,041mn, down from Bt3,407mn. In 2018E, the management anticipates sales at around Bt1,835‐ 3,000mn and a gross profit margin in a range of 15‐25%. The major growth drivers will be sales of optical products (+160‐200%YoY) and box build products, for which orders have increased. Note that our revenue forecasts for 2017‐18E are more conservative than management’s as we factored in the slowdown in IC and wafer dicing businesses. Unclear outlook for solar business in late 4Q17 After the client for solar panels ceased operations, SMT has opted for development of low‐cost solar panels sold in Southeast Asia and will refocus on its subsidiary, Star Green Energy, offering solar installation service. However, we have not yet factored this into our current projections, as we will wait for clearer marketing strategies in late 4Q17. Downgrade our 2017‐18E projections…“Underperform” rating maintained We have revised down our 2017‐19E earnings forecasts by 67%, 54% and 40%, respectively, to reflect the loss in solar panels and slowdown in IC packaging products. We have rolled over to the 2018E target price at Bt4.20/share, based on 2018E PER of 17x. We maintain “Underperform” as we are still concerned over a decrease in inventory for wafer dicing products in 4Q17. 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) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2015 7,617 (55) (0.13) ‐50.2% (89) ‐67.09% ‐ 4.17 2015 ‐18.8 18.1 1.0 0.0% ‐3.4% 67%
2016 3,533 13 0.02 ‐88.3% 11 ‐87.06% ‐ 2.10 2016 291.0 11.3 1.9 0.0% 0.4% 61%
2017E 1,959 (138) (0.17) ‐1167.7% 86 646.38% 0.04 2.16 2017E 39.0 8.9 1.9 1.0% 4.8% 40%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2018E 2,425 207 0.25 ‐249.7% 207 141.25% 0.10 2.31 2018E 16.2 7.1 1.7 2.5% 11.1% 25%
2019E 2,980 322 0.38 55.5% 322 55.54% 0.15 2.54 2019E 10.4 6.0 1.6 3.8% 15.9% 8%
Figure 1: 2Q17 earnings results
Profit and Loss (Btmn) Year‐end 31 Dec 2Q16
1Q17
2Q17
% YoY
% QoQ
1H17
%YoY
2017E
%YoY
YTD
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Gn (Ls) from Net profit (loss) Core profit Reported EPS Gross margin EBITDA margin Net margin (%) Current ratio (x) Interest Debt / equity (x) BVPS (Bt) ROE (%)
523 114 142 (13) 10 (3) 1 (3) 0 39 42 0.05 21.85 27.18 7.47 1.12 3.92 0.76 2.16 2.19
462 76 96 (15) 10 (2) 0 (224) 0 (230) (7) (0.28) 16.56 20.71 (49.84) 0.96 0.03 n.m. 1.89 (13.60)
(50.6) (10.4) (16.9) 55.2 316.2 n.m. (100.0) n.m. n.m. (818.7) (131.7) (818.7)
(11.7) (33.1) (32.7) 20.1 4.1 (41.4) (100.0) 6,774.5 n.m. (689.3) (115.6) (689.3)
985 191 238 (28) 20 (5) 1 (227) 0 (191) 35 (0.23) 19.37 24.15 (19.40) 0.96 1.80 n.m. 1.89 (13.60)
(54.4) 11.4 4.3 48.0 451.8 n.m. (96.4) (3,496.1) n.m. (373.6) (21.2) (373.6)
1,959 386 516 (30) 2 (2) 0 (224) 0 (138) 86 (0.17) 19.70 26.35 (7.06) 1.44 3.84 0.40 2.16 4.82
(44.5) 31.8 27.2 (33.5) (71.9) (79.7) (100.0) 464.1 n.m. (1,167.7) 646.4 (1,167.7)
50.3 49.4 46.1 93.0 855.3 260.8 n.m. n.m. n.m. 138.2 40.9 138.2
936 85 115 (10) 2 (2) 8 4 0 32 21 0.04 9.12 12.30 3.42 1.49 3.10 0.70 2.17 1.78
Source: KT ZMICO Research
Figure 2: Key Assumption Changes List Revenue GPM % SG&A to sales (%)
Core Net profit (Btmn) NPM (%)
New 1,959
2017E Old New 2,610 ‐24.9%
2,425
4,310
‐43.7%
2,980
4,450
‐33%
19.7%
20.4%
20.2%
20.4%
21.25%
22.1%
13.8%
9%
10.6% 207 8.5%
9.5% 445 10.3%
‐53.5%
9.8% 322 10.8%
9.5% 532 11.95%
‐39.5%
86 4.4%
263 10.1%
‐67.3%
New
2018E Old %Change
New
2019E Old %Change
Source: KT ZMICO Research
Figure 3: PER (average 16x)
Figure 4: PER multiple 2017E
PER (x)
+2.0SD
18.0
+1.5SD
17.5
4.33
8.3%
+1.0SD
17.0
4.21
5.2%
+0.5SD
16.5
4.08
2.1%
Average
16.0
3.96
-1.0%
-0.5SD
15.5
3.84
-4.1%
13
-1.0SD
15.0
3.71
-7.2%
12
-1.5SD
14.5
3.59
-10.3%
-2.0SD
14.0
3.46
-13.4%
(X) 19 +2 S.D.
18
+1.5 S.D. +1 S.D.
17
+0.5 S.D.
16
Avg.
15
-0.5 S.D. -1 S.D.
14
-1.5 S.D.
ที่มา: Bloomberg, KT ZMICO Research
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
-2 S.D.
Implied market
Upside/ Downside
price (Bt)
to current price (%)
4.45
11.4%
ที่มา: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
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 (%)
2014
8,993 (9,053) (61) (200) 81 342 (260) (21) 6 (275) (1) ‐ 91 6 (111) (0.27) (270) (0.65) ‐
2015
7,617 (7,470) 147 (231) 253 337 (84) (22) 9 (97) 0 ‐ 8 8 (55) (0.13) (89) (0.21) ‐
2016
3,533 (3,240) 293 (233) 406 346 60 (45) 8 23 (9) ‐ (40) (3) 13 0.02 11 0.01 ‐
2017E
1,959 (1,573) 386 (271) 516 401 115 (30) 2 88 (2) ‐ (224) ‐ (138) (0.17) 86 0.10 0.04
2018E
2,425 (1,935) 490 (258) 647 415 232 (24) 3 211 (4) ‐ ‐ ‐ 207 0.25 207 0.25 0.10
2019E
2,980 (2,347) 633 (293) 770 429 340 (15) 4 329 (7) ‐ ‐ ‐ 322 0.38 322 0.38 0.15
2014
84 643 570 ‐ 2,176 39 3,513 664 29 1,714 836 1,799 3,513
2015
15 734 508 ‐ 2,115 65 3,436 815 378 1,691 836 1,746 3,436
2016
259 582 488 ‐ 2,108 42 3,479 450 877 1,742 836 1,757 3,500
2017E
351 323 237 ‐ 2,107 48 3,066 450 620 1,277 836 1,809 3,086
2018E
376 399 292 ‐ 1,892 56 3,015 450 400 1,103 836 1,933 3,036
2019E
389 491 354 ‐ 1,662 64 2,960 450 100 854 836 2,126 2,980
2014
2015
2016
2017E
2018E
2019E
(116) (48) 342 335 513 (74) (83) (157) (311) 0 ‐ ‐ (311) 44 356 0.85
(63) 13 337 (629) (342) (178) (23) (201) 474 ‐ ‐ 0 474 (69) (543) (1.30)
11 ‐ 346 112 470 (360) ‐ (360) 134 ‐ ‐ ‐ 134 244 110 0.13
86 ‐ 401 297 783 (400) ‐ (400) (257) ‐ (34) ‐ (291) 92 383 0.46
207 ‐ 415 (94) 528 (200) ‐ (200) (220) ‐ (83) ‐ (303) 25 328 0.39
322 ‐ 429 (110) 641 (200) ‐ (200) (300) ‐ (129) ‐ (429) 13 441 0.53
2014
2015
2016
2017E
2018E
2019E
17.5% ‐5505.9% ‐176.9% ‐0.7% 0.9% ‐2.9% ‐1.2% ‐3.0% ‐0.2%
‐15.3% 211.5% ‐50.2% 1.9% 3.3% ‐1.1% ‐0.7% ‐1.2% 0.3%
‐53.6% 60.5% ‐111.7% 8.3% 11.5% 1.7% 0.4% 0.3% 37.8%
‐44.5% 27.2% ‐1167.7% 19.7% 26.3% 5.9% ‐7.1% 4.4% 2.0%
23.8% 25.4% ‐249.7% 20.2% 26.7% 9.6% 8.5% 8.5% 2.0%
22.9% 19.0% 55.5% 21.3% 25.8% 11.4% 10.8% 10.8% 2.0%
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, POMPUI, TTL, NMG, SAWAD.
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
