Underperform (17E TP Bt11.10) Earnings Review - Global Alliance
TTW Underperform (17E TP Bt11.10)
Earnings Review
Close Bt10.90
Energy & Utilities February 23, 2017
Beat forecast/Below forecast/In line
4Q16 NP dragged by weak CKP results Results date: February 22, 2017
Price Performance (%)
Stable outlook Our UNDERPERFORM rating reflects the stable operating performance outlook for TTW, which will keep its share price trading in a narrow range. Its yield of 5% will be secured by strong operating cash flow as the catalyst. 4Q16 earnings below view TTW reported a net profit of Bt568mn (EPS: Bt0.14) in 4Q16, decreasing 8.4%YoY and 11.7%QoQ. This was below the market consensus by 7% due to the unexpected shared loss from CKP, which reversed to a net loss of Bt177mn in 4Q16, largely blamed on a one‐off Bt378mn write‐off expense linked to Nam Bak. Flattish core operation in 4Q16 Stripping out shared profit from its associate, core NP increased 6%YoY (flat QoQ) to Bt613mn. This was attributed to GPM expansion to 73.6% from 71.8% in 4Q15 and 71.3% in 3Q16 thanks to effective production cost control. Its SG&A to sales also dropped to 4.6% from 5.7% last year. Loan repayments together with a declining average cost of debt reduced interest expenses by 32%YoY and 9%QoQ.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.698
0.710
KT ZMICO vs. consensus Share data
‐9.7%
‐7.0%
Reuters / Bloomberg
TTW.BK/TTW TB
Paid‐up Shares (m)
3,990.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
43.00/1,242.00
Foreign limit / actual (%)
49.00/8.61
52 week High / Low (Bt)
11.80/9.90
Avg. daily T/O (shares 000) NVDR (%)
3,451.00 4.05
Estimated free float (%)
34.9
Beta
0.39
URL
www.ttwplc.com
CGR
Anti‐corruption
n.a.
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273
2016 NP fell 8%YoY For 2016, TTW delivered a net profit of Bt2.48bn, falling 7.6%YoY, mainly due to the negative effect from effective tax rate normalization. If excluding this, its EBT remained flat YoY at Bt3.1bn. Its revenue fell 1%YoY on the combination of lower sales volume (‐0.5%YoY) and selling prices, which were linked to the negative Consumer Price Index (CPI) of 2015. The flat GPM together with declining SG&A to sales were offset by lower shared profit from CKP, which retreated 86.5%YoY to Bt14mn. DPS of Bt0.30, goes XD on March 13 TTW announced to pay a DPS of Bt0.30 for its 2H16 operating performance. This represents a 2.8% yield for the period. The XD sign will be posted on March 13, with the payment to be made on May 4, 2017. Earnings forecasts maintained We reiterate our view on the slow recovery of tap water sales (approximately 1‐2%). Our 2017E‐2018E earnings estimates are maintained. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 5,430 2,681 0.67 0.68 ‐7% 0.65 2.85 2014 15.78 11.33 3.71 6.1% 23.6% 67.4%
2016 5,379 2,476 0.62 0.62 ‐9% 0.60 2.88 2015 17.25 11.62 3.71 5.6% 21.6% 75.0%
2017E 5,441 2,509 0.63 0.63 1% 0.57 2.91 2016E 17.33 11.57 3.75 5.2% 21.7% 65.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 5,586 2,652 0.66 0.66 6% 0.60 3.01 2017E 16.40 11.03 3.62 5.5% 22.5% 52.1%
2019E 5,787 2,913 0.73 0.73 10% 0.66 3.14 2018E 14.93 10.53 3.47 6.0% 23.7% 47.1%
Figure 1: Earnings review Profit and Loss Statement (Btmn) Fiscal Year‐Ended Dec. Revenue Gross profit SG&A EBITDA Interest expense Other income Income tax Gain (Loss) from affiliate Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin EBITDA margin Net margin Current ratio (x) Interest coverage (x) Debt to equity (x) BVPS ROE Sales Volume (cu.m./day) ‐ TTW ‐ PTW ‐ BIE Effective water tariff (Bt/cu.m.)
4Q15 1,341 962 (76) 1,086 (139) 39 (142) 41 620 620 0.16 71.8% 81.0% 46.3% 2.24 6.21 1.34 2.85 24.5%
1Q16 1,330 959 (66) 1,103 (127) 48 (144) 12 619 619 0.16 72.1% 83.0% 46.6% 4.02 6.97 1.16 3.01 23.0%
2Q16 1,364 978 (58) 1,105 (107) 26 (147) 16 644 644 0.16 71.7% 81.0% 47.2% 3.58 8.29 1.19 2.87 22.0%
3Q16 1,356 967 (60) 1,088 (105) 27 (151) 30 643 643 0.16 71.3% 80.3% 47.5% 2.94 8.34 1.21 2.73 22.1%
4Q16 1,329 978 (60) 1,119 (95) 20 (164) (45) 568 568 0.14 73.6% 84.2% 42.8% 2.85 9.22 1.24 2.88 21.6%
%QoQ ‐2.0% 1.1% 0.6% 2.8% ‐9.0% ‐25.9% 9.1% ‐247.3% ‐11.7% ‐11.7% ‐11.7% 2.2% 3.9% ‐4.7%
360,728 378,836 394,666 381,144 366,326 360,559 358,238 367,740 363,150 354,905 21,906 19,126 21,075 22,184 21,851 19.34 18.98 18.83 18.99 19.20
‐3.9% ‐2.3% ‐1.5% 1.1%
5.4%
%YoY ‐0.9% 1.6% ‐20.8% 3.0% ‐31.7% ‐50.0% 15.8% ‐210.3% ‐8.4% ‐8.4% ‐8.4% 1.8% 3.2% ‐3.5%
2015 5,430 3,920 (305) 4,411 (550) 145 (378) 103 2,681 2,714 0.67 72.2% 81.2% 49.4% 2.24 6.41 1.34 0.9% 2.85 23.6%
1.6% ‐1.6% ‐0.2% ‐0.7%
376,791 366,191 21,219 19.47
Source: TTW and KT Zmico Research
2016 5,379 3,881 (244) 4,415 (433) 120 (607) 14 2,476 2,476 0.62 72.2% 82.1% 46.0% 2.85 8.12 1.24 2.88 21.6% 378,165 359,036 20,944 19.39
Figure 2: Summary of sum‐of‐the‐parts (SoTP) valuation for TTW Company
TTW's stake (%)
Tap water business TTW's investment stake '‐ CKP Minus: Net debt used for associate SOTP ‐ based TP
25.31%
Valuation Method DCF SOTP
Value to TTW (Bt) 10.71 WACC 7.0%
Note
1.36 KT ZMICO's TP estimate of Bt3.3 (1.04) 11.10
Source: KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 3: Operating summary
Source: TTW and KT Zmico Research
5.0
4.0
3.0
+2 S.D.
PBV (x)
+1 S.D. Average
2.0 ‐1 S.D. 1.0
0.0 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 Jun‐11 Oct‐11 Feb‐12 Jun‐12 Oct‐12 Feb‐13 Jun‐13 Oct‐13 Feb‐14 Jun‐14 Oct‐14 Feb‐15 Jun‐15 Oct‐15 Feb‐16 Jun‐16 Oct‐16 Feb‐17
May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 Jun‐11 Oct‐11 Feb‐12 Jun‐12 Oct‐12 Feb‐13 Jun‐13 Oct‐13 Feb‐14 Jun‐14 Oct‐14 Feb‐15 Jun‐15 Oct‐15 Feb‐16 Jun‐16 Oct‐16 Feb‐17
Figure 4: PER and PBV band PER (x) +2 S.D. 20 18 +1 S.D. 16 Average 14 12 10 ‐1 S.D. 8 6 4 2 0 Source: TTW and KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial Summary PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest 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 (%) FINANCIAL QUALITY Total debt (Btm) Total debt to capital employed (x) Net debt (Cash) (Btm) Net debt to equity (x) Interest coverage (x)
2014 5,383 (1,535) 3,848 (304) 4,435 (652) 3,783 (566) 111 239 3,566 (156) (16) 2,972 0.74 0.74 2,916 0.73 0.65
2015 5,430 (1,510) 3,920 (305) 4,411 (651) 3,760 (550) 103 145 3,459 (378) (17) 2,681 0.67 0.67 2,714 0.68 0.65
2016 5,379 (1,497) 3,881 (244) 4,415 (658) 3,757 (433) 14 120 3,458 (607) (17) 2,476 0.62 0.62 2,476 0.62 0.60
2017E 5,441 (1,607) 3,833 (251) 4,416 (713) 3,703 (411) 111 120 3,522 (632) (17) 2,509 0.63 0.63 2,509 0.63 0.57
2018E 5,586 (1,641) 3,945 (278) 4,510 (725) 3,786 (330) 126 118 3,700 (667) (17) 2,652 0.66 0.66 2,652 0.66 0.60
2019E 5,787 (1,686) 4,101 (274) 4,691 (743) 3,947 (247) 210 120 4,031 (733) (18) 2,913 0.73 0.73 2,913 0.73 0.66
2014 1,198 21 678 22,730 24,627 0 6,215 13,238 38 11,352 24,627
2015 785 22 691 25,146 26,644 1,800 5,445 15,214 40 11,389 26,644
2016 246 22 916 24,581 25,765 0 5,855 14,229 42 11,493 25,765
2017E 4,643 25 904 19,147 24,718 1,000 4,745 13,072 38 11,609 24,718
2018E 3,886 23 892 18,357 23,157 1,500 3,795 11,114 42 12,002 23,157
2019E 1,788 26 878 18,431 21,123 1,000 515 8,548 46 12,528 21,123
2014 3,145 652 482 (640) 3,639 (468) (1,306) (915) 0 (2,593) 226 (3,283) (950) 3,171 0.79
2015 3,076 651 (181) 181 3,727 (2,002) (3,678) 1,030 0 (2,593) 1,100 (463) (413) 1,725 0.43
2016 3,099 658 74 (559) 3,272 (1,574) (332) (1,390) 0 (2,394) 305 (3,479) (538) 1,698 0.43
2017E 3,158 713 (135) (405) 3,330 0 4,555 (110) 0 (2,394) (985) (3,489) 4,396 3,330 0.83
2018E 3,336 725 193 (441) 3,812 0 (204) (450) 0 (2,259) (1,656) (4,365) (757) 3,812 0.96
2019E 3,663 743 (203) (508) 3,696 0 (963) (3,780) 0 (2,387) 1,335 (4,832) (2,098) 3,696 0.93
2014 3.9 8.3 15.5 71.5 82.4 61.4 55.2 54.5 5.1
2015 0.9 (0.5) (9.8) 72.2 81.2 62.2 49.4 49.7 12.3
2016 (0.9) 0.1 (7.6) 72.2 82.1 63.2 46.0 46.3 19.6
2017E 1.2 0.0 1.4 70.5 81.2 61.3 46.1 46.4 20.0
2018E 2.7 2.1 5.7 70.6 80.7 61.3 47.5 47.8 20.0
2019E 3.6 4.0 9.8 70.9 81.1 61.9 50.3 50.6 20.0
6,215 0.27 5,785 0.51 6.26
7,245 0.31 7,680 0.67 6.41
5,855 0.24 8,614 0.75 8.12
5,745 0.26 7,605 0.66 8.41
5,295 0.27 6,251 0.52 10.74
1,515 0.09 5,900 0.47 14.97
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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
Earnings Review
Close Bt10.90
Energy & Utilities February 23, 2017
Beat forecast/Below forecast/In line
4Q16 NP dragged by weak CKP results Results date: February 22, 2017
Price Performance (%)
Stable outlook Our UNDERPERFORM rating reflects the stable operating performance outlook for TTW, which will keep its share price trading in a narrow range. Its yield of 5% will be secured by strong operating cash flow as the catalyst. 4Q16 earnings below view TTW reported a net profit of Bt568mn (EPS: Bt0.14) in 4Q16, decreasing 8.4%YoY and 11.7%QoQ. This was below the market consensus by 7% due to the unexpected shared loss from CKP, which reversed to a net loss of Bt177mn in 4Q16, largely blamed on a one‐off Bt378mn write‐off expense linked to Nam Bak. Flattish core operation in 4Q16 Stripping out shared profit from its associate, core NP increased 6%YoY (flat QoQ) to Bt613mn. This was attributed to GPM expansion to 73.6% from 71.8% in 4Q15 and 71.3% in 3Q16 thanks to effective production cost control. Its SG&A to sales also dropped to 4.6% from 5.7% last year. Loan repayments together with a declining average cost of debt reduced interest expenses by 32%YoY and 9%QoQ.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.698
0.710
KT ZMICO vs. consensus Share data
‐9.7%
‐7.0%
Reuters / Bloomberg
TTW.BK/TTW TB
Paid‐up Shares (m)
3,990.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
43.00/1,242.00
Foreign limit / actual (%)
49.00/8.61
52 week High / Low (Bt)
11.80/9.90
Avg. daily T/O (shares 000) NVDR (%)
3,451.00 4.05
Estimated free float (%)
34.9
Beta
0.39
URL
www.ttwplc.com
CGR
Anti‐corruption
n.a.
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273
2016 NP fell 8%YoY For 2016, TTW delivered a net profit of Bt2.48bn, falling 7.6%YoY, mainly due to the negative effect from effective tax rate normalization. If excluding this, its EBT remained flat YoY at Bt3.1bn. Its revenue fell 1%YoY on the combination of lower sales volume (‐0.5%YoY) and selling prices, which were linked to the negative Consumer Price Index (CPI) of 2015. The flat GPM together with declining SG&A to sales were offset by lower shared profit from CKP, which retreated 86.5%YoY to Bt14mn. DPS of Bt0.30, goes XD on March 13 TTW announced to pay a DPS of Bt0.30 for its 2H16 operating performance. This represents a 2.8% yield for the period. The XD sign will be posted on March 13, with the payment to be made on May 4, 2017. Earnings forecasts maintained We reiterate our view on the slow recovery of tap water sales (approximately 1‐2%). Our 2017E‐2018E earnings estimates are maintained. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 5,430 2,681 0.67 0.68 ‐7% 0.65 2.85 2014 15.78 11.33 3.71 6.1% 23.6% 67.4%
2016 5,379 2,476 0.62 0.62 ‐9% 0.60 2.88 2015 17.25 11.62 3.71 5.6% 21.6% 75.0%
2017E 5,441 2,509 0.63 0.63 1% 0.57 2.91 2016E 17.33 11.57 3.75 5.2% 21.7% 65.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 5,586 2,652 0.66 0.66 6% 0.60 3.01 2017E 16.40 11.03 3.62 5.5% 22.5% 52.1%
2019E 5,787 2,913 0.73 0.73 10% 0.66 3.14 2018E 14.93 10.53 3.47 6.0% 23.7% 47.1%
Figure 1: Earnings review Profit and Loss Statement (Btmn) Fiscal Year‐Ended Dec. Revenue Gross profit SG&A EBITDA Interest expense Other income Income tax Gain (Loss) from affiliate Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin EBITDA margin Net margin Current ratio (x) Interest coverage (x) Debt to equity (x) BVPS ROE Sales Volume (cu.m./day) ‐ TTW ‐ PTW ‐ BIE Effective water tariff (Bt/cu.m.)
4Q15 1,341 962 (76) 1,086 (139) 39 (142) 41 620 620 0.16 71.8% 81.0% 46.3% 2.24 6.21 1.34 2.85 24.5%
1Q16 1,330 959 (66) 1,103 (127) 48 (144) 12 619 619 0.16 72.1% 83.0% 46.6% 4.02 6.97 1.16 3.01 23.0%
2Q16 1,364 978 (58) 1,105 (107) 26 (147) 16 644 644 0.16 71.7% 81.0% 47.2% 3.58 8.29 1.19 2.87 22.0%
3Q16 1,356 967 (60) 1,088 (105) 27 (151) 30 643 643 0.16 71.3% 80.3% 47.5% 2.94 8.34 1.21 2.73 22.1%
4Q16 1,329 978 (60) 1,119 (95) 20 (164) (45) 568 568 0.14 73.6% 84.2% 42.8% 2.85 9.22 1.24 2.88 21.6%
%QoQ ‐2.0% 1.1% 0.6% 2.8% ‐9.0% ‐25.9% 9.1% ‐247.3% ‐11.7% ‐11.7% ‐11.7% 2.2% 3.9% ‐4.7%
360,728 378,836 394,666 381,144 366,326 360,559 358,238 367,740 363,150 354,905 21,906 19,126 21,075 22,184 21,851 19.34 18.98 18.83 18.99 19.20
‐3.9% ‐2.3% ‐1.5% 1.1%
5.4%
%YoY ‐0.9% 1.6% ‐20.8% 3.0% ‐31.7% ‐50.0% 15.8% ‐210.3% ‐8.4% ‐8.4% ‐8.4% 1.8% 3.2% ‐3.5%
2015 5,430 3,920 (305) 4,411 (550) 145 (378) 103 2,681 2,714 0.67 72.2% 81.2% 49.4% 2.24 6.41 1.34 0.9% 2.85 23.6%
1.6% ‐1.6% ‐0.2% ‐0.7%
376,791 366,191 21,219 19.47
Source: TTW and KT Zmico Research
2016 5,379 3,881 (244) 4,415 (433) 120 (607) 14 2,476 2,476 0.62 72.2% 82.1% 46.0% 2.85 8.12 1.24 2.88 21.6% 378,165 359,036 20,944 19.39
Figure 2: Summary of sum‐of‐the‐parts (SoTP) valuation for TTW Company
TTW's stake (%)
Tap water business TTW's investment stake '‐ CKP Minus: Net debt used for associate SOTP ‐ based TP
25.31%
Valuation Method DCF SOTP
Value to TTW (Bt) 10.71 WACC 7.0%
Note
1.36 KT ZMICO's TP estimate of Bt3.3 (1.04) 11.10
Source: KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 3: Operating summary
Source: TTW and KT Zmico Research
5.0
4.0
3.0
+2 S.D.
PBV (x)
+1 S.D. Average
2.0 ‐1 S.D. 1.0
0.0 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 Jun‐11 Oct‐11 Feb‐12 Jun‐12 Oct‐12 Feb‐13 Jun‐13 Oct‐13 Feb‐14 Jun‐14 Oct‐14 Feb‐15 Jun‐15 Oct‐15 Feb‐16 Jun‐16 Oct‐16 Feb‐17
May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 Jun‐11 Oct‐11 Feb‐12 Jun‐12 Oct‐12 Feb‐13 Jun‐13 Oct‐13 Feb‐14 Jun‐14 Oct‐14 Feb‐15 Jun‐15 Oct‐15 Feb‐16 Jun‐16 Oct‐16 Feb‐17
Figure 4: PER and PBV band PER (x) +2 S.D. 20 18 +1 S.D. 16 Average 14 12 10 ‐1 S.D. 8 6 4 2 0 Source: TTW and KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial Summary PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest 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 (%) FINANCIAL QUALITY Total debt (Btm) Total debt to capital employed (x) Net debt (Cash) (Btm) Net debt to equity (x) Interest coverage (x)
2014 5,383 (1,535) 3,848 (304) 4,435 (652) 3,783 (566) 111 239 3,566 (156) (16) 2,972 0.74 0.74 2,916 0.73 0.65
2015 5,430 (1,510) 3,920 (305) 4,411 (651) 3,760 (550) 103 145 3,459 (378) (17) 2,681 0.67 0.67 2,714 0.68 0.65
2016 5,379 (1,497) 3,881 (244) 4,415 (658) 3,757 (433) 14 120 3,458 (607) (17) 2,476 0.62 0.62 2,476 0.62 0.60
2017E 5,441 (1,607) 3,833 (251) 4,416 (713) 3,703 (411) 111 120 3,522 (632) (17) 2,509 0.63 0.63 2,509 0.63 0.57
2018E 5,586 (1,641) 3,945 (278) 4,510 (725) 3,786 (330) 126 118 3,700 (667) (17) 2,652 0.66 0.66 2,652 0.66 0.60
2019E 5,787 (1,686) 4,101 (274) 4,691 (743) 3,947 (247) 210 120 4,031 (733) (18) 2,913 0.73 0.73 2,913 0.73 0.66
2014 1,198 21 678 22,730 24,627 0 6,215 13,238 38 11,352 24,627
2015 785 22 691 25,146 26,644 1,800 5,445 15,214 40 11,389 26,644
2016 246 22 916 24,581 25,765 0 5,855 14,229 42 11,493 25,765
2017E 4,643 25 904 19,147 24,718 1,000 4,745 13,072 38 11,609 24,718
2018E 3,886 23 892 18,357 23,157 1,500 3,795 11,114 42 12,002 23,157
2019E 1,788 26 878 18,431 21,123 1,000 515 8,548 46 12,528 21,123
2014 3,145 652 482 (640) 3,639 (468) (1,306) (915) 0 (2,593) 226 (3,283) (950) 3,171 0.79
2015 3,076 651 (181) 181 3,727 (2,002) (3,678) 1,030 0 (2,593) 1,100 (463) (413) 1,725 0.43
2016 3,099 658 74 (559) 3,272 (1,574) (332) (1,390) 0 (2,394) 305 (3,479) (538) 1,698 0.43
2017E 3,158 713 (135) (405) 3,330 0 4,555 (110) 0 (2,394) (985) (3,489) 4,396 3,330 0.83
2018E 3,336 725 193 (441) 3,812 0 (204) (450) 0 (2,259) (1,656) (4,365) (757) 3,812 0.96
2019E 3,663 743 (203) (508) 3,696 0 (963) (3,780) 0 (2,387) 1,335 (4,832) (2,098) 3,696 0.93
2014 3.9 8.3 15.5 71.5 82.4 61.4 55.2 54.5 5.1
2015 0.9 (0.5) (9.8) 72.2 81.2 62.2 49.4 49.7 12.3
2016 (0.9) 0.1 (7.6) 72.2 82.1 63.2 46.0 46.3 19.6
2017E 1.2 0.0 1.4 70.5 81.2 61.3 46.1 46.4 20.0
2018E 2.7 2.1 5.7 70.6 80.7 61.3 47.5 47.8 20.0
2019E 3.6 4.0 9.8 70.9 81.1 61.9 50.3 50.6 20.0
6,215 0.27 5,785 0.51 6.26
7,245 0.31 7,680 0.67 6.41
5,855 0.24 8,614 0.75 8.12
5,745 0.26 7,605 0.66 8.41
5,295 0.27 6,251 0.52 10.74
1,515 0.09 5,900 0.47 14.97
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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
