Stars Microelectronics (Thailand)
Stars Microelectronics (Thailand) Buy (17E TP Bt9.20)
Company Update
Close Bt6.95
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
February 24, 2017
4Q16 and 2016E earnings impacted by ceased businesses Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.513
0.665
KT ZMICO vs. consensus Share data
5.3%
9.8%
Reuters / Bloomberg
SMT.BK/SMT TB
Paid‐up Shares (m)
836.48
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
6.00/166.00
Foreign limit / actual (%)
100.00/14.94
52 week High / Low (Bt)
8.50/4.96
Avg. daily T/O (shares 000) NVDR (%)
7,915.00 2.10
Estimated free float (%)
61.92
Beta
1.31
URL
www.starsmicro.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain BUY SMT’s 4Q16 and 2016 net profit fell short of our projections due to the booking of an allowance for doubtful receivables from the old business and higher costs following the cease of HDD production. We view that the extra items will not have an impact on the firm’s core business in the future as we expect that in 2017‐19E its core business will grow strongly thanks to higher exposure of IC packaging and wafer dicing segments that earn wide margins and continue to receive orders from both existing and potential clients. We maintain “Buy” for SMT and the 2017E target price of Bt9.20/share. 4Q16 earnings dragged down by loss from ceased businesses In 4Q16, SMT reported a loss of Bt89mn due to the booking of an allowance for doubtful receivables from ceased businesses amounting to Bt55.7mn. Excluding this extra item, the firm reported a loss of Bt54mn, below our estimate of Bt55mn because over 39% of revenue was contributed by the low‐margin HDD business (‐44% margin). Hence, the average gross profit margin was down to 4% vs. 13.7% in 3Q16. Downbeat 2016 earnings SMT reported 2016 net profit of Bt11.5mn. The firm turned profitable for the first time in four years. Nonetheless, the profit still fell short of our projection of Bt121mn as fixed costs increased after the firm creased its HDD production line in Dec‐16. Consequently, the gross profit margin improved to 8%, which is below our estimate of 10%. The firm reported total revenue of Bt3,533mn, down 54%YoY due to the lower capacity of HDD production. 2017E earnings forecast maintained We maintain our 2017E earnings projection at Bt448mn. Drivers include a better gross profit margin to 19% vs. 8% in 2016 following higher exposure to wide‐margin IC packaging and wafer dicing to replace HDDs. About 59% of revenue will be contributed by the IC packaging and wafer dicing segment, which is expected to grow 52%YoY thanks to orders from existing clients and a few new ones. 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
2016
2017E
2018E
2019E
7,617 (55) (0.13) ‐50.2% (89) ‐67.09% ‐ 4.17 2015 ‐34.6 29.2 1.8 0.0% ‐3.4% 67%
3,554 156 0.19 40.7% 121 35.69% ‐ 2.23 2016 51.0 14.1 3.3 0.0% 4.5% 50%
3,630 448 0.54 188.3% 448 271.97% 0.21 2.55 2017E 13.7 8.4 2.9 2.9% 22.4% 32%
4,580 612 0.73 36.5% 612 36.51% 0.29 2.99 2018E 10.0 7.0 2.5 4.0% 26.4% 11%
5,520 813 0.97 32.8% 813 32.79% 0.39 3.57 2019E 7.6 5.8 2.1 5.3% 29.6% ‐9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: SMT’s 4Q16 and 2016 earnings results Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
2015
2016
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary 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 (%)
1,642 56 73 (8) 7 (0) 23 (4) 14.3 (4.4) 0.0 3.4 4.4 0.9 1.0 (1.0) 0.7 4.2 0.8
661 90 121 (13) 2 (0) 8 3 32.3 21.1 0.0 13.7 18.3 4.9 1.6 2.4 0.7 2.2 1.8
711 31 57 (13) 3 (6) 14 (49) (89.2) (54.2) (0.1) 4.4 8.0 (12.6) 1.1 (2.7) 0.7 2.1 (4.9)
(56.7) (44.6) (22.1) 70.8 (57.1) 2,469.6 (37.0) 1,082.4 (722.2) 1,121.7 (411.1)
7.5 (65.6) (53.0) (1.3) 46.9 9,031.7 77.5 (1,716.9) (376.1) (356.9) (376.1)
7,617 147 253 (22) 9 0 25 8 (55) (89) (0) 2 3 (1) 1 (4) 1 4 (5)
3,533 293 406 (45) 8 (9) 41 (40) 13.0 11.5 0.0 8.3 11.5 0.4 1.6 1.3 0.6 2.1 0.7
(53.6) 98.9 60.5 104.3 (8.7) (3,577.2) 62.1 (587.9) (123.4) (112.9) (111.7)
Source: KT ZMICO Research
Figure 2: PER (average 16x)
Figure 3: PER multiple
(X)
2017E
19 +2 S.D.
18
+2.0SD
+1.5 S.D. +1 S.D.
17
+0.5 S.D.
16
Avg.
15
-0.5 S.D. -1 S.D.
14
PER (x)
Implied market
Upside/ Downside
price (Bt)
to current price (%)
18.0
9.72
32.2%
+1.5SD
17.5
9.45
28.6%
+1.0SD
17.0
9.2
25.2%
+0.5SD
16.5
8.91
21.2%
-1.5 S.D.
Average
16.0
8.64
17.6%
-2 S.D.
-0.5SD
15.5
8.37
13.9%
-1.0SD
15.0
8.10
10.2%
-1.5SD
14.5
7.83
6.5%
-2.0SD
14.0
7.56
2.9%
Source: Bloomberg, KT ZMICO Research
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Mar-16
Feb-16
Jan-16
12
Apr-16
13
Source: 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 (%)
2013
7,652 (7,741) (89) (229) (2) 316 (318) (33) 14 (337) 9 ‐ 453 8 144 0.34 (319) (0.76) ‐
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
2018E
3,630 (2,931) 699 (216) 884 401 483 (30) 4 458 (9) ‐ ‐ ‐ 448 0.54 448 0.54 0.21
4,580 (3,596) 984 (341) 1,058 415 643 (24) 5 625 (12) ‐ ‐ ‐ 612 0.73 612 0.73 0.29
2013
40 549 474 ‐ 2,423 32 3,517 863 134 1,602 836 1,915 3,517
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
2018E
258 598 442 ‐ 2,107 48 3,453 450 620 1,447 836 2,026 3,473
439 755 542 ‐ 1,892 56 3,683 450 400 1,310 836 2,394 3,703
2013
2014
2015
2016
2017E
2018E
127 (417) 316 786 813 (231) (441) (672) (108) 6 ‐ 0 (103) 38 141 0.34
(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
448 ‐ 401 (14) 836 (400) ‐ (400) (257) ‐ ‐ ‐ (257) (1) 436 0.52
612 ‐ 415 (182) 845 (200) ‐ (200) (220) ‐ (179) ‐ (399) 180 645 0.77
2013
2014
2015
2016
2017E
2018E
116.2% ‐99.5% ‐80.4% ‐1.2% 0.0% ‐4.2% 1.9% ‐4.2% 2.8%
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%
2.7% 117.9% 3362.6% 19.3% 24.4% 13.3% 12.4% 12.4% 2.0%
26.2% 19.7% 36.5% 21.5% 23.1% 14.0% 13.4% 13.4% 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. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt6.95
Electronic Components
Earnings upgrade/Earnings downgrade/Overview unchanged
February 24, 2017
4Q16 and 2016E earnings impacted by ceased businesses Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.513
0.665
KT ZMICO vs. consensus Share data
5.3%
9.8%
Reuters / Bloomberg
SMT.BK/SMT TB
Paid‐up Shares (m)
836.48
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
6.00/166.00
Foreign limit / actual (%)
100.00/14.94
52 week High / Low (Bt)
8.50/4.96
Avg. daily T/O (shares 000) NVDR (%)
7,915.00 2.10
Estimated free float (%)
61.92
Beta
1.31
URL
www.starsmicro.com
CGR
Anti‐corruption
n.a.
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Maintain BUY SMT’s 4Q16 and 2016 net profit fell short of our projections due to the booking of an allowance for doubtful receivables from the old business and higher costs following the cease of HDD production. We view that the extra items will not have an impact on the firm’s core business in the future as we expect that in 2017‐19E its core business will grow strongly thanks to higher exposure of IC packaging and wafer dicing segments that earn wide margins and continue to receive orders from both existing and potential clients. We maintain “Buy” for SMT and the 2017E target price of Bt9.20/share. 4Q16 earnings dragged down by loss from ceased businesses In 4Q16, SMT reported a loss of Bt89mn due to the booking of an allowance for doubtful receivables from ceased businesses amounting to Bt55.7mn. Excluding this extra item, the firm reported a loss of Bt54mn, below our estimate of Bt55mn because over 39% of revenue was contributed by the low‐margin HDD business (‐44% margin). Hence, the average gross profit margin was down to 4% vs. 13.7% in 3Q16. Downbeat 2016 earnings SMT reported 2016 net profit of Bt11.5mn. The firm turned profitable for the first time in four years. Nonetheless, the profit still fell short of our projection of Bt121mn as fixed costs increased after the firm creased its HDD production line in Dec‐16. Consequently, the gross profit margin improved to 8%, which is below our estimate of 10%. The firm reported total revenue of Bt3,533mn, down 54%YoY due to the lower capacity of HDD production. 2017E earnings forecast maintained We maintain our 2017E earnings projection at Bt448mn. Drivers include a better gross profit margin to 19% vs. 8% in 2016 following higher exposure to wide‐margin IC packaging and wafer dicing to replace HDDs. About 59% of revenue will be contributed by the IC packaging and wafer dicing segment, which is expected to grow 52%YoY thanks to orders from existing clients and a few new ones. 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
2016
2017E
2018E
2019E
7,617 (55) (0.13) ‐50.2% (89) ‐67.09% ‐ 4.17 2015 ‐34.6 29.2 1.8 0.0% ‐3.4% 67%
3,554 156 0.19 40.7% 121 35.69% ‐ 2.23 2016 51.0 14.1 3.3 0.0% 4.5% 50%
3,630 448 0.54 188.3% 448 271.97% 0.21 2.55 2017E 13.7 8.4 2.9 2.9% 22.4% 32%
4,580 612 0.73 36.5% 612 36.51% 0.29 2.99 2018E 10.0 7.0 2.5 4.0% 26.4% 11%
5,520 813 0.97 32.8% 813 32.79% 0.39 3.57 2019E 7.6 5.8 2.1 5.3% 29.6% ‐9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: SMT’s 4Q16 and 2016 earnings results Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
2015
2016
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary 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 (%)
1,642 56 73 (8) 7 (0) 23 (4) 14.3 (4.4) 0.0 3.4 4.4 0.9 1.0 (1.0) 0.7 4.2 0.8
661 90 121 (13) 2 (0) 8 3 32.3 21.1 0.0 13.7 18.3 4.9 1.6 2.4 0.7 2.2 1.8
711 31 57 (13) 3 (6) 14 (49) (89.2) (54.2) (0.1) 4.4 8.0 (12.6) 1.1 (2.7) 0.7 2.1 (4.9)
(56.7) (44.6) (22.1) 70.8 (57.1) 2,469.6 (37.0) 1,082.4 (722.2) 1,121.7 (411.1)
7.5 (65.6) (53.0) (1.3) 46.9 9,031.7 77.5 (1,716.9) (376.1) (356.9) (376.1)
7,617 147 253 (22) 9 0 25 8 (55) (89) (0) 2 3 (1) 1 (4) 1 4 (5)
3,533 293 406 (45) 8 (9) 41 (40) 13.0 11.5 0.0 8.3 11.5 0.4 1.6 1.3 0.6 2.1 0.7
(53.6) 98.9 60.5 104.3 (8.7) (3,577.2) 62.1 (587.9) (123.4) (112.9) (111.7)
Source: KT ZMICO Research
Figure 2: PER (average 16x)
Figure 3: PER multiple
(X)
2017E
19 +2 S.D.
18
+2.0SD
+1.5 S.D. +1 S.D.
17
+0.5 S.D.
16
Avg.
15
-0.5 S.D. -1 S.D.
14
PER (x)
Implied market
Upside/ Downside
price (Bt)
to current price (%)
18.0
9.72
32.2%
+1.5SD
17.5
9.45
28.6%
+1.0SD
17.0
9.2
25.2%
+0.5SD
16.5
8.91
21.2%
-1.5 S.D.
Average
16.0
8.64
17.6%
-2 S.D.
-0.5SD
15.5
8.37
13.9%
-1.0SD
15.0
8.10
10.2%
-1.5SD
14.5
7.83
6.5%
-2.0SD
14.0
7.56
2.9%
Source: Bloomberg, KT ZMICO Research
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Mar-16
Feb-16
Jan-16
12
Apr-16
13
Source: 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 (%)
2013
7,652 (7,741) (89) (229) (2) 316 (318) (33) 14 (337) 9 ‐ 453 8 144 0.34 (319) (0.76) ‐
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
2018E
3,630 (2,931) 699 (216) 884 401 483 (30) 4 458 (9) ‐ ‐ ‐ 448 0.54 448 0.54 0.21
4,580 (3,596) 984 (341) 1,058 415 643 (24) 5 625 (12) ‐ ‐ ‐ 612 0.73 612 0.73 0.29
2013
40 549 474 ‐ 2,423 32 3,517 863 134 1,602 836 1,915 3,517
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
2018E
258 598 442 ‐ 2,107 48 3,453 450 620 1,447 836 2,026 3,473
439 755 542 ‐ 1,892 56 3,683 450 400 1,310 836 2,394 3,703
2013
2014
2015
2016
2017E
2018E
127 (417) 316 786 813 (231) (441) (672) (108) 6 ‐ 0 (103) 38 141 0.34
(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
448 ‐ 401 (14) 836 (400) ‐ (400) (257) ‐ ‐ ‐ (257) (1) 436 0.52
612 ‐ 415 (182) 845 (200) ‐ (200) (220) ‐ (179) ‐ (399) 180 645 0.77
2013
2014
2015
2016
2017E
2018E
116.2% ‐99.5% ‐80.4% ‐1.2% 0.0% ‐4.2% 1.9% ‐4.2% 2.8%
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%
2.7% 117.9% 3362.6% 19.3% 24.4% 13.3% 12.4% 12.4% 2.0%
26.2% 19.7% 36.5% 21.5% 23.1% 14.0% 13.4% 13.4% 2.0%
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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. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
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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
