Regional Daily Ideas Troika Top Stories

Transcription

Regional Daily, 10 November 2014
5
Regional Daily
Ideas Troika
Top Stories
Westports Holdings (WPRTS MK)
Transport - Logistics
BUY MYR2.93 TP: MYR3.44
Mkt Cap : USD2,986m
Pg3
Management guided for a 5-10% growth in container throughput in FY15. It
is also pushing for the upside tariff revision as well as the extension on
investment tax allowance – the status of which remains unknown – to go
through. Maintain BUY, with a higher DCF-based TP of MYR3.44
Analyst: Ahmad Maghfur Usman (ahmad.maghfur.usman@rhbgroup.com)
Yangzijiang (YZJSGD SP)
Industrial - Shipbuilding
BUY SGD1.16 TP: SGD1.68
Mkt Cap : USD3,426m
Pg4
Yangzijiang’s 9M14 core PATMI met 75% of our FY14F forecast. It is now on
the central government’s “White List” of shipyards, giving it policy support
and making it easier to secure financing and new orders.
Analyst: Lee Yue Jer, CFA (yuejer.lee@sg.oskgroup.com)
Upstream Oil & Gas
Oil & Gas
NEUTRAL
Pg5
IMA’s Oct statistics points to stable FPSO demand and anticipation of 13-16
awards per year. Nevertheless, we maintain NEUTRAL on this subsegment
given the downside risk, with Bumi Armada as our preferred pick.
Analyst: Kong Ho Meng (kong.ho.meng@rhbgroup.com)
Other Key Stories
Indonesia
Sarana Menara Nusantara (TOWR IJ)
Communications-Telecommunications
Infrastructure
BUY IDR4,145 TP: IDR5,000
HongKong
AAC Technologies Holdings (2018 HK)
Technology - Handset Components
SELL HKD46.20 TP: HKD40.30
China Railway & Construction Sector
OVERWEIGHT
Pg6
Scaling New Heights
Analyst: Jeffrey Tan (jeffrey.tan@rhbgroup.com)
Pg7
Another Disappointing Quarter
Analyst: Kong Yong Ng (ng.kong.yong@rhbgroup.com)
Pg8
Mexico Cancels HSR Tender: Good Entry Point
Analyst: Winston Cao (winston.cao@rhbgroup.com)
Malaysia
Supermax (SUCB MK)
Consumer Non-cyclical - Rubber Products
NEUTRAL MYR2.33 TP: MYR2.16
Pg9
Analyst: Jerry Lee (jerry.lee@rhbgroup.com)
Ta Ann Holdings (TAH MK)
Agriculture - Timber
BUY MYR3.80 TP: MYR3.80
Pg10
Hektar REIT (HEKT MK)
Property - REITS
NEUTRAL MYR1.53 TP: MYR1.43
Pg11
Singapore
Trek 2000 (TREK SP)
Technology - Technology
See important disclosures at the end of this report
A Disappointing Quarter
Strategies Revealed
Analyst: Hoe Lee Leng (hoe.lee.leng@rhbgroup.com)
Flattish Short-Term Prospects
Analyst: Alia Arwina (alia.arwina@rhbgroup.com)
Pg12
Back On Trek!
Analyst: Jarick Seet (jarick.seet@sg.oskgroup.com)
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1
Regional Daily, 10 November 2014
Neratel (NERT SP)
Communications-Telecommunications
Infrastructure
NEUTRAL SGD0.81 TP: SGD0.83
Pg13
CWT Limited (CWT SP)
Transport – Logistics
Pg14
Venture Corp (VMS SP)
Technology - Electronics
NEUTRAL SGD7.55 TP: SGD7.50
Pg15
CapitaLand (CAPL SP)
Property - Real Estate
Pg16
Thailand
Advanced Information Tech (AIT TB)
Communications - Telecommunications
NEUTRAL THB38.50 TP: THB39.50
Bangkok Aviation Fuel Services (BAFS TB)
Transport - Aviation
Supported By Dividend Yield
Commodity Trading Business Margins Improve
Analyst: Shekhar Jaiswal (shekhar.jaiswal@sg.oskgroup.com)
Weakness Persists
Housekeeping In Progress
Analyst: Ivan Looi (ivan.looi@sg.oskgroup.com)
Pg17
3Q14 Earnings Down 18.7% YoY
Analyst: Veena Naidu License No. 24418, (veena.na@rhbgroup.com)
Pg18
9M14 Net Profit Down 28% YoY
Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)
PTT Global Chemical (PTTGC TB)
Pg19
Energy & Petrochemicals - Downstream Products
BUY THB59.80 TP: THB70.70
3Q14 Net Profit Rises 25% QoQ
Symphony Communication (SYMC TB)
Earnings Drop On Network Depreciation
Pg20
Analyst: Kannika Siamwalla, CFA (kannika.si@rhbgroup.com)
Analyst: Veena Naidu License No. 24418, (veena.na@rhbgroup.com)
2
Company Update, 10 November 2014
Buy (Maintained)
Market Cap: USD2,986m
Target Price:
Price:
MYR3.44
MYR2.93
Macro
Risks
Throughput To Grow 5-10% Next Year
Growth
Value
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.20
122
3.10
118
3.00
115
2.90
111
2.80
107
2.70
103
2.60
100
2.50
96
2.40
25
92
0
0
.
2
0
0
At a recent conference call, Westports’ management guided for a 5-10% .
0
growth in container throughput in FY15. It is also pushing for the 0
upside tariff revision as well as the extension on investment tax 0
allowance – the status of which remains unknown – to go through.
Maintain BUY, with a higher DCF-based TP of MYR3.44 (from MYR3.29)
offering a 17.3% upside, premised on a 6.6% WACC (from 6.7%).

20

15

Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-13
Vol m
10
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Pembinaan Redzai SB
Hutchison Whompoa Ltd
Lankayan Ventures SB
8.32m/2.57m
-1.0
17.3
2.49 - 3.10
12
3,410


42.4
23.6
4.7
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
15.8
(3.0)
2.1
10.6
14.5
Relative
17.7
(2.9)
4.0
12.1
13.1

Investment tax allowance extension is still uncertain. The likelihood
of Westports obtaining an extension on its investment tax – which
expires this year – remains uncertain. If the extension is approved,
management said that the effective tax rate for FY15 could hover slightly
below 20%. Otherwise, a 24% effective tax rate would be more likely.
We have been conservative in our earnings estimate and imputed an
investment tax allowance for 2015, reflected in the low single-digit
earnings growth for FY15F. Management currently has the next 12
months to make a case to obtain the extension.
Throughput guidance. Management expects to book single-digit growth
in throughput for 4Q14, which would bring FY14 container throughput
growth to 9-13%. It also projected FY15 throughput to grow 5-10% YoY.
Update on tariff revision. We understand that the tariff hike proposal
has been given the green light by the Port Klang Authority, and is
pending the final approval from the Ministry of Transport. Note that we
have not factored in a tariff hike in our throughput forecasts.
Update on Ocean Three alliance. The Ocean Three alliance is
expected to commence in Jan 2015, which could bring in more box
contribution to Westports. This would be offset by the box outflow from
the M2 alliance (between Maersk and Mediterranean Shipping
Company). We expect a net addition of 450k boxes from the impact of
these two alliances in FY15. Ocean Three members contributed 4m
twenty-foot equivalent units (TEUs) in FY13, according to management.
Forecasts. Our box volume forecasts for FY14/FY15/FY16 lift by 1.8%/
5.4%/5.3% after we impute a 450k-500k throughput net addition from the
impact of the alliances, bringing our FY14/FY15/FY16 throughput growth
estimates to 9.0%/8.4%/6.7% respectively. This, however, would be
offset by higher staff costs. The impact of these factors on FY14-15
bottomlines would be negligible, but cuts our FY16F earnings by 4%.
BUY, at a higher TP of MYR3.44 (from MYR3.29) premised at a WACC
of 6.6% (from 6.7%) after factoring in lower market returns. We have
also raised our FY15 capex projection to MYR440m.
Forecasts and Valuations
Shariah compliant


2

.
2
0
.
2




Dec-12
Dec-13
1,227
1,348
1,501
1,664
1,816
Reported net profit (MYRm)
303
428
509
511
568
Recurring net profit (MYRm)
361
435
509
511
568
Total turnover (MYRm)
Dec-14F
Dec-15F
Dec-16F
Ahmad Maghfur Usman 603 9207 7654
Recurring net profit growth (%)
(1.7)
20.4
17.0
0.4
11.2
ahmad.maghfur.usman@rhbgroup.com
Recurring EPS (MYR)
0.31
0.13
0.15
0.15
0.17
DPS (MYR)
1.70
0.10
0.11
0.11
0.12
9.5
23.0
19.6
19.6
17.6
2.30
6.23
5.59
5.22
4.76
5.8
15.2
14.0
13.5
12.4
58.0
3.3
3.8
3.8
4.3
6.4
15.3
13.5
12.3
11.2
Return on average equity (%)
21.5
27.7
30.0
27.6
28.3
Net debt to equity (%)
24.8
34.8
34.6
39.0
35.6
8.2
4.8
16.5
Recurring P/E (x)
P/B (x)
P/CF (x)
Dividend Yield (%)
EV/EBITDA (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
3
Results Review, 10 November 2014
Yangzijiang (YZJSGD SP)
Buy (Maintained)
Industrial - Shipbuilding
Target Price:
Price:
SGD1.68
SGD1.16
Macro
Risks
Enjoys Government White List Support
Growth
Value
Yangzijiang Shipbuilding (YZJSGD SP)
Relative to Straits Times Index (RHS)
108
1.25
104
1.20
101
1.15
97
1.10
93
1.05
89
1.00
86
0.95
82
0.90
100
90
80
70
60
50
40
30
20
10
78

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Shareholders (%)
10.3m/8.13m
18.1
44.8
1.01 - 1.24
64
3,832
Ren Yuanlin
Lido Point Investments
Hong Kong Hengyuan Invt
26.0
10.3
8.7

Margins and PATMI remain strong. YZJ has again proved skeptics
wrong by delivering a healthy 3Q14 with gross shipbuilding margins
maintained at 20%, translating into a healthy PATMI of CNY811m. The
QoQ fall in PATMI was largely due to a small spike in shipbuilding
revenue in 2Q14 combined with a tax writeback which elevated the
bottomline. YZJ is solidly on track to deliver FY14F core PATMI of
CNY3.1bn, with 9M14 figure at c.CNY2.3bn.
Held-to-maturity (HTM) assets under control. YZJ has reduced its
HTM assets slightly QoQ, with the quantum now standing at CNY12.6bn
from CNY13.0bn. We expect a slow decline in this figure in inverse
relation with the overall health of the shipbuilding industry, as funds are
gradually redirected towards YZJ’s core shipbuilding business.
One of 51 yards on China’s “White List”. YZJ is one of only 51 (out of
>1,500) yards in China which have made it to the Central Government’s
“White List”, having met requirements in environmental protection and
production efficiency. These yards will receive policy support, making it
easier for them to secure financing, and therefore new orders. We
expect YZJ to make full use of this new status to remain at the forefront
of Chinese shipbuilding. Recall that YZJ was the first shipyard in China
to secure orders for 10,000 containerships – we expect the company to
move towards 14,000 twenty-foot equivalent unit (TEU) vessels and
liquid petroleum gas (LPG) carriers next.
Still the most profitable yard in China. YZJ stands out as the single
most profitable shipyard company in China, on top of being one of the
most technologically-advanced. Maintain BUY with a SOP-based TP of
SGD1.68, which values the shipbuilding business at 8x FY14F trough
earnings.
YTD
1m
3m
6m
12m
Absolute
(2.5)
0.4
5.5
0.9
(4.2)
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
(6.3)
(0.7)
6.5
(0.4)
(6.8)
Total turnover (CNYm)
15,706
14,799
14,339
14,532
16,988
Reported net profit (CNYm)
3,977
3,581
3,096
3,452
3,466
Recurring net profit (CNYm)
3,977
3,581
3,096
3,103
3,466
34.6
(10.0)
(13.5)
0.2
11.7
Recurring EPS (CNY)
1.04
0.93
0.81
0.81
0.90
DPS (CNY)
0.28
0.24
0.24
0.24
0.24
Recurring P/E (x)
5.27
5.86
6.77
6.76
6.05
P/B (x)
1.62
1.35
1.18
1.03
0.92
6.9
6.9
Shariah compliant
Lee Yue Jer, CFA +65 6232 3898
yuejer.lee@sg.oskgroup.com
Jesalyn Wong +65 6232 3872
P/CF (x)
jesalyn.wong@sg.oskgroup.com
Dividend Yield (%)
na
11.3
na
5.2
4.4
4.4
4.4
4.4
EV/EBITDA (x)
3.68
3.56
3.52
4.06
3.26
34.7
25.1
18.6
18.1
8.3
7.0
19.3
8.7


2

.
1
0
.
2
0
0
.
3
0
0
Yangzijiang’s (YZJ) 3Q14 PATMI was healthy at CNY811m (-1% YoY, - .
0
34% QoQ), with 9M14 core PATMI meeting 75% of our FY14 forecast. Its 0
orderbook stands strong at USD4.6bn. YZJ has been included in the 0
Chinese Government’s White List of shipyards, which avails it policy
support, making it easier to secure financing and therefore orders. We
still find YZJ the strongest shipbuilder in China in a recovering
industry. Maintain BUY with a SOP-based TP of SGD1.68 (45% upside).

Nov-13
Vol m
Price Close
1.30




18.1
16.1
net cash
27.9
4
Sector Update, 10 November 2014
Upstream Oil & Gas
NEUTRAL (Maintained)
Macro
Risks
Oct 2014 FPSO Commentary
Growth
Value
FPSO peer valuations (P/E)
Peers
Ticker
1-year
forward P/E
Bumi Armada
Yinson
SBM Offshore
Modec
BW Offshore
Teekay
BAB MK
YNS MK
SBMO NA
6269 JP
BWO NO
TK US
18.2
22.7
7.2
11.4
8.5
38.0
Weighted avg
Weighted avg
Ex-M’sia
21.5
22.5
Source: Bloomberg, RHB
IMA’s global floating production contracts and planned projects’
October statistics point to stable FPSO demand. Nevertheless, we
maintain NEUTRAL on this sub-segment with Bumi Armada as our
preferred pick. While FPSOs are classified under production capex and
are relatively sheltered from oil price movement vs exploration assets,
we remain cautious on the downside risks, given the current sentiment.


FPSO peer valuations (EV/EBITDA)
Peers
Ticker
1-year
forward
EV/EBITDA
Bumi Armada
Yinson
SBM Offshore
Modec
BW Offshore
Teekay
BAB MK
YNS MK
SBMO NA
6269 JP
BWO NO
TK US
8.5
15.1
8.8
10.2
5.2
11.5
Weighted avg
Weighted avg
Ex-M’sia
9.9
9.9

Source: Bloomberg, RHB


Kong Ho Meng +603 9207 7620
kong.ho.meng@rhbgroup.com
The Research Team +603 9207 7680
research2@rhbgroup.com
Stable floating production system (FPS) statistics. This floating,
production, offloading and storage (FPSO) update is our second view of
International Maritime Associates’ (IMA) October FPS data. Active
FPSOs rose 3% YoY to 163 units (FPS: +2% to 256 units). Four fewer
FPSOs were on order (to 36 units) on new deliveries. Five more were off
field. All in, active FPSOs are unchanged at 75% of total inventory.
Leading IMA indicators. 233 FPS projects were in various stages of
planning (+6 units YoY, +4 units MoM), 58% of them FPSOs. 15% of
FPS projects may advance to the engineering, procurement and
construction (EPC) stage within the next 18 months (September: 13%).
48% of them were in development stages and may require 18-48 months
to advance to EPC (September: 50%). The 37% balance may require 410 years to reach EPC (September: 37%).
Risks. Namely: i) project planning and final investment decision (FID)
delays (IMA estimates ~65% of projects could reach FID in the next five
years while ~15% may not proceed to development), ii) exploration and
production players cutting capex/realigning investments to shale/tight oil
& gas projects, iii) ~10% of projects have alternative production
solutions, iv) cost overruns on supply chain constraints and deepwater
project challenges, and v) a drilling market downturn causing sizable rig
stacking may delay production projects in the planning pipeline.
Maintain NEUTRAL view. We expect 13-16 worldwide FPSO awards
annually (average) in the next five years (past 10-year average: 13-14
contracts), based on IMA data. While we are cautious on the risks, we
believe most projects will see through to production, even at current oil
price levels (USD80-USD85/barrel), as leading indicators show some
projects are close to EPC and a few oil majors may prioritise production
targets more importantly. Utilisation rebound for deepwater drilling and
crude oil supply disruption, leading to more demand for production/new
sources of supply, could hasten FPSO project planning.
Reaffirm BUY on Bumi Armada and NEUTRAL on Yinson. Bumi
Armada’s market capitalisation is 0.3x of its MYR25bn firm orderbook
(trading at FY15F 18x P/E, 9x EV/EBITDA) while Yinson’s market
capitalisation is 1x of its MYR2.8bn firm orderbook (trading at FY16F 23x
P/E, 15x EV/EBITDA). These are compared to the global average
forward EV/EBITDA of 10x, ie unchanged from two months ago.
Assuming no new contract awards, this will not alter 2-year earnings
visibility but may de-rate DCF valuations, ie MYR1.89 for Bumi (33%
upside) and MYR2.25 for Yinson (19% downside).
Company Name




P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
Rating
-
BUY
Price
Target
Bumi Armada
MYR1.42
MYR2.24
18.5
0.7
Yinson Holdings
MYR2.75
MYR2.60
22.7
2.2
- NEUTRAL
5


3

3

2
2
a
Communications - Telecommunications Infrastructure
Buy (Maintained)
Target Price:
Price:
IDR5,000
IDR4,145
Macro
Risks
Scaling New Heights
Growth
Value
Price Close
Relative to Jakarta Composite Index (RHS)
4,400
164
4,200
157
4,000
150
3,800
143
3,600
136
3,400
129
3,200
122
3,000
115
2,800
108
2,600
101
2,400
6
94


4
3
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2
Source: Bloomberg
186m/0.02m
-3.6
20.6
2,575 - 4,200
62
10,203
Tricipta Mandhala Gumilang PT
Caturguwiratna Sumapala PT
T Rowe Price International
16.7
16.0
7.0
YTD
1m
3m
6m
12m
Absolute
50.7
1.1
4.0
9.1
59.4
Relative
32.2
(0.2)
3.8
4.3
45.5


Above expectations. Sarana Menara Nusantara’s (SMN) 9MFY14
EBITDA of IDR2.54trn (+33.1% YoY) made up 82% of our and 78% of
consensus’ full-year EBITDA estimates, mainly due to the stronger-thanexpected sequential revenue growth arising from the improvement in
revenue momentum of its key customers.
Strong demand from Tier-1 customers. Tower rental revenue growth
from SMN’s top 3 customers (76% of revenue), Telkomsel, Hutchison
and XL Axiata (XL) (EXCL IJ, BUY, TP: IDR6,280) accelerated QoQ to
43.3% from 12.1% in 2Q14. While Telkomsel’s revenue contribution is
the smallest among the top-tier customers (19%), its tower rental
revenue grew the fastest, at 86% QoQ (+220% YoY), a reflection of the
aggressive 3G rollout across Java and ex-Java. SMN’s tenancy
additions fell 35% QoQ to 732 from a high base of 1,122 in 2Q14.
Coupled with the 50% lower tower builds during the quarter (3Q14: 417
vs 2Q14: 821), overall tenancy ratio was maintained at 1.85.
Tracking in line with guidance. With tower builds of 1,578 in 9MFY14,
SMN is very much on track to meet the guidance of 1,500-2,000 tower
builds for 2014, supported by the still robust 3G network expansion by
the mobile operators. While the company recently lost the bid for XL’s
towers to Solusi Tunas Pertama (SUPR IJ, NR), we see scope for more
inorganic expansion given SMN’s relatively more healthy balance sheet,
with 3QFY14 net debt/annualised quarter (LTA) EBITDA falling to 1.8x
from 2.2x in 2Q14 and 2.9x in 3Q13.
Forecasts and risks. We raise our FY14 and FY15 earnings forecasts
by 12% and 6% respectively after factoring in lower tax rate, lower opex
and higher tenancies. Key risks to our forecasts are: i) weaker-thanexpected tower/tenancy growth and ii) faster-than-anticipated
consolidation within the telco industry.
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
1,651
2,265
3,197
3,771
4,195
Reported net profit (IDRbn)
284
347
205
1,166
1,280
Recurring net profit (IDRbn)
332
630
1,056
1,016
1,180
89.4
67.8
(3.8)
16.1
33
62
104
100
116
127
67
40
42
36
P/B (x)
27.8
12.4
11.9
9.3
7.4
P/CF (x)
26.8
20.7
22.1
20.0
18.0
EV/EBITDA (x)
34.1
26.1
18.9
16.0
14.4
20.7
14.1
5.9
28.7
24.9
345.6
202.4
219.0
178.3
136.8
(14.2)
(20.8)
Total turnover (IDRbn)
Shariah compliant
Jeffrey Tan +603 9207 7633
jeffrey.tan@rhbgroup.com
Recurring EPS (IDR)
Recurring P/E (x)
na


3

.
1
0
.
3
0
0
.
3
0
0
SMN’s results surprised on the upside from stronger-than-expected .
0
revenue growth in 3QFY14. We keep our BUY rating with TP lifted to 0
IDR5,000 (+21% upside) from IDR4,800 based on unchanged 17x FY15 0
EV/EBITDA. This follows the 6-12% upgrade in our FY14/15 earnings
forecasts. We expect the strong growth in tower builds/tenancies to
continue on the back of the aggressive 3G site rollouts by the telcos.
5
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Shareholders (%)




6
AAC Technologies Holdings (2018 HK)
Technology - Handset Components
Sell (Maintained)
Target Price:
Price:
HKD40.30
HKD46.20
Macro
Risks
Another Disappointing Quarter
Growth
Value
AAC Technology (2018 HK)
Relative to Hang Seng Index (RHS)
47.0
150
42.0
135
37.0
120
32.0
105
27.0
50
45
40
35
30
25
20
15
10
5
90
May-14
0
0
.
1
0
0
AAC announced a second consecutive set of disappointing quarterly .
0
results. 3Q14 recurring net profit fell 8.9% YoY, missing consensus by 0
16% mainly due to the drag by Samsung. We forecast 4Q14 revenue to 0
grow 43% QoQ and 36% YoY, on the back of strong demand for iPhone
6. However, we reduce our FY14-16 earnings forecasts by 12%/9%/6%
and TP to HKD40.30 (13% downside, 14x FY15F P/E). Keep SELL given
its still expensive valuations.

Sep-14
165
Jul-14
52.0
Mar-14
180
Jan-14
57.0
Nov-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Shareholders (%)
Management
Capital Group
JPMorgan Chase & Co.
78.8m/10.2m
2.4
-12.8
30.0 - 53.2
23
1,228
40.3
19.1
17.4
YTD
1m
3m
6m
12m
Absolute
22.7
3.8
(5.1)
4.9
45.7
Relative
21.2
2.8
(2.1)
(3.9)
42.3


2

.
2
0
.
2






Hiccup in speakerbox sales. AAC Technologies Holdings’ (AAC) 3Q14
revenue and recurring earnings both missed our forecast by 30% and
street estimate by 16%. Its 2Q14 results also missed expectations.
Behind the 11% QoQ topline growth, acoustics products revenue fell
11% QoQ and 25% YoY (in particular, speakerbox sales mix fell to just
31% from a peak of 50% in 3Q13), as Samsung’s (005930 KS, NR)
market share is under pressure, while we believe the adoption of the
speakerbox by Chinese customers has yet to pick up substantially as the
mass rollout of 4G products is shifting to 4Q14 or 1Q15. Non-acoustic
products revenue jumped 260% QoQ and its sales mix reached 26%
(2Q14: 8%). Its mix in 9M14 reached 14%, close to management’s FY14
target of 15-20%. 3Q14 GPM slightly improved to 42.3% (2Q14: 42.1%)
on further automation, and non-acoustics products GPM should be close
to 40%. Opex eased to 13.6% of revenue (2Q14: 14.7%), but still slightly
above our 13.2% forecast and 3Q13’s 12.6%.
Strong 4Q guidance but could be another letdown. At its conference
call, management guided for a “very strong percentage double-digit QoQ
growth” in 4Q14 revenue, on the back of strong demand for iPhone 6.
However, we still cut both our 4Q14 revenue forecast by 10% to
CNY2,961m (+43% QoQ, +36% YoY) and that for recurring NP to
CNY809m (+47% QoQ, +37% YoY). For FY15, management believes
adoption of speaker boxes by new Chinese customers will be its key
growth driver and anticipates its sales mix to return to the 45-50% levels,
but we are concerned about speakerbox ASPs, especially for Chinese
clients, as brand competition intensifies. The adoption of haptic solutions
in new devices (eg smartwatches) will likely drive non-acoustic sales.
Maintain SELL with a lower TP of HKD40.30 (from HKD41.40). We
cut our FY14-16 earnings estimates by 12%/9%/6%, mainly on lower
revenues. Our new TP is based on a 14x FY15F P/E (from 13x), still set
at its 3-year mean forward P/E, implying a 13% downside.
Dec-12
Dec-13
Total turnover (CNYm)
6,283
8,096
8,741
10,254
11,782
Reported net profit (CNYm)
1,763
2,578
2,338
2,786
3,194
Recurring net profit (CNYm)
1,691
2,244
2,338
2,787
3,194
55.7
32.7
4.2
19.2
14.6
Kong Yong Ng +852 2103 5844
Recurring EPS (CNY)
1.38
1.83
1.90
2.27
2.60
ng.kong.yong@rhbgroup.com
DPS (CNY)
0.41
1.05
0.77
0.92
1.05
Recurring P/E (x)
26.5
20.0
19.2
16.1
14.0
P/B (x)
7.37
5.69
4.90
4.10
3.47
P/CF (x)
33.6
17.9
15.4
14.4
12.3
1.1
2.9
2.1
2.5
2.9
EV/EBITDA (x)
19.2
15.0
14.0
11.4
9.6
32.6
36.9
27.5
27.8
26.8
Shariah compliant
Christopher Tse +852 2103 9415
christopher.tse@rhbgroup.com
Dividend Yield (%)
Dec-14F Dec-15F Dec-16F
net cash net cash net cash net cash net cash
(6.4)
(11.5)
(14.3)
7
Sector News Flash, 10 November 2014
China Railway & Construction Sector
Overweight
Macro
Risks
Mexico Cancels HSR Tender: Good Entry Point
Growth
Value






3

1

3
3
China Railway Group (390 HK)
What’s new
Price Close
Recommendations & Target Price
6.55
na
7.00

6.00
5.00
4.00
3.00

2.00
Buy
1.00
Nov-09
Neutral
Sell
Feb-11
Trading Buy
May-12
Take Prof it
Not Rated
Aug-13
Source: Bloomberg
Mexico axes Chinese-led consortium’s HSR tender. According to
AFP, Mexican President Enrique Pena Nieto has cancelled a Chineseled consortium’s high-speed railway (HSR) tender to build a route
between two major cities in the country, ie Mexico City and Queretaro.
Mexico will restart the tendering process in the near term.
Share prices of China Railway Group (CRG) (390 HK, BUY, TP:
HKD6.55) and China Railway Construction Corp (CRCC) (1186 HK,
BUY, TP HKD10.97) dropped 5.4% and 5.8% respectively during last
Friday’s afternoon trading session.
Our view
China Railway Construction Corp (1186 HK)

Price Close
11.0
na
12.5 Recommendations & Target Price
11.5
10.5
9.5
8.5
7.5
6.5
5.5
4.5
3.5
Buy
Neutral
2.5
Nov-09
Feb-11

Sell
Trading Buy
May-12
Take Prof it
Aug-13
Source: Bloomberg


winston.cao@rhbgroup.com
Minor impact on China firms’ business outlook. The contract size for
the project’s construction and equipment portions only accounted for 2%
(CRCC’s) and 1.8% (CSR’s) total 2013 new contract wins.
Not Rated

Winston Cao +852 2103 9414
Unconventional tender cancellation. We do not see any reason
behind the cancellation. The consortium, which included CRCC and CSR
Corp (1766 HK, NEUTRAL, TP: HKD7.47), was the only bidder for
Mexico’s first HSR project. Other global competitors withdrew due to the
short preparation period.
Nothing to do with CRG. CRG was not one of the joint bidders. Hence,
the cancellation will not affect its orderbook and business outlook.
Will only strengthen China’s overseas strategy. Volatility over a
single overseas project will not pull back China’s commitment to expand
into the overseas market. To the contrary, it will likely inspire the Chinese
Government to put more effort and support into domestic companies’
overseas exploration, in our view.
Good entry point for all railway-related names. We believe the
market’s negative reaction to this news will not last long on the back of
the aforementioned reasons, and we see a good entry point for all
railway stocks. We reiterate our positive outlook on China’s railway and
construction sector on the back of huge demand potential domestically
and globally. We also maintain CRG as our Top Pick with HKD6.55 TP
derived from 8x FY15F P/E, representing a 35% upside. We also believe
CRCC will rebound after the market stabilises and we maintain our BUY
call on the stock with a HKD10.97 TP, based on 7.5x FY15F P/E, ie a
37% upside. CSR and China CNR (CNR) (6199 HK, BUY, TP: HKD8.47)
are both in trading suspension due to the potential merger.
Company Name
Ticker
Price
(HKD)
Target P/E (x)
(HKD) Dec-14F
P/E (x)
Dec-15F
Rating
China Railway Group
390 HK
4.85
6.55
7.3
5.9
BUY
China Railway Construction
1186 HK
8.02
10.97
6.6
5.4
BUY
China State Construction Int'l
3311 HK
11.78
14.63
12.6
8.8
BUY
China CNR
6199 HK
7.66
8.47
11.6
10.9
BUY
CSR Corp
1766 HK
7.89
7.47
14.5
12.7
NEUTRAL
China Communications Construction
1800 HK
6.84
5.82
6.9
6.4
NEUTRAL
8
Supermax (SUCB MK)
Neutral (Maintained)
Consumer Non-cyclical - Rubber Products
Market Cap: USD472m
Target Price:
Price:
MYR2.16
MYR2.33
Macro
Risks
A Disappointing Quarter
Growth
Value
Supermax (SUCB MK)
114
2.70
105
2.50
97
2.30
89
2.10
80
1.90
18
16
14
12
10
8
6
4
2
72
Jul-14
Mar-14
Sep-14
2.90
May-14
122
Jan-14
3.10
Nov-13
Vol m
Price Close
0
0
.
2
0
0
Supermax’s 9M14 earnings came in below expectations, which we .
0
believe was mainly due to lower production capacity and a challenging 0
operating environment. We revise our earnings forecasts as we believe 0
the company may need more time to fully commission its production
lines. We maintain our NEUTRAL stance on Supermax with a revised TP
of MYR2.16 from MYR2.31 (12x FY15F P/E, 7.3% downside).


Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
4.13m/1.27m
35.2
-7.3
2.07 - 3.04
53
677
Dato' Seri Stanley Thai
Datin Seri Cheryl Tan
20.4
15.1


2

.
2
0
.
2





Below expectations. Supermax’s 9M14 net profit of MYR81.2m (-21%
YoY) fell short of expectations, meeting only 63%/65% of our/consensus
full-year estimates. This was partly attributed to the output loss at one of
its plants in Alor Gajah, Melaka, which faced a production issue in 4Q13.
The problem was only fully resolved in stages towards end-2Q14.
Besides, some capacity was temporarily lost at its other factories as
Supermax resumed its scheduled automation programme. Also, we
believe the average selling prices (ASPs) have continued to trend down
across the company’s range of products, in tandem with lower raw
material prices coupled with price competition in the market. Supermax
declared a 2.0 sen interim dividend for the quarter under review
(cumulative 5.0 sen for 9M14).
Earnings revision. We lower our key assumptions on Supermax’s
utilisation rate and ASPs, which lead to a 17%/23% cut in our earnings
forecasts for FY14/FY15 respectively. We expect FY14 earnings to be
dragged by its 1H14 results. It takes time for the company to fully
commission its production lines, and it continues to face a challenging
operating environment with declining raw material costs (resulting in a
downward revision in our ASP assumptions), a rise in other operating
expenses (other than raw materials), and intensified competition within
the glove industry.
Maintain NEUTRAL. Following the downward revision in our FY14-15
earnings forecasts, we lower our TP to MYR2.16 (from MYR2.31),
implying a 7.3% downside. Our TP is pegged to a 12x FY15F P/E (rolled
over from FY14F P/E), which is the mean of its historical trading band.
We understand that management is organising an analyst briefing soon.
YTD
1m
3m
6m
12m
Absolute
(15.9)
1.7
1.7
0.9
(8.3)
Relative
(14.0)
1.8
3.6
2.4
(9.7)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
997
1,127
1,032
1,074
1,187
121
129
110
121
130
121
129
110
121
130
16.5
6.1
(14.3)
9.6
7.4
Recurring EPS (MYR)
0.18
0.19
0.17
0.18
0.20
DPS (MYR)
0.05
0.05
0.05
0.05
0.06
Jerry Lee +603 9207 7622
Recurring P/E (x)
12.7
12.0
14.0
12.8
11.9
jerry.lee@rhbgroup.com
P/B (x)
1.85
1.72
1.59
1.46
1.34
P/CF (x)
9.5
6.9
6.6
12.5
13.6
Dividend Yield (%)
2.1
2.1
2.2
2.3
2.5
EV/EBITDA (x)
9.46
7.81
9.33
8.87
8.61
15.1
14.9
11.8
11.9
11.8
18.6
24.0
12.4
13.2
15.0
(11.5)
(17.8)
(22.9)
9
Agriculture - Timber
Market Cap: USD422m
Target Price:
Price:
MYR3.80
MYR3.80
Macro
Risks
Strategies Revealed
Growth
Value
Price Close
4.70
121
4.50
117
4.30
113
4.10
109
3.90
104
3.70
100
3.50
3
96
0
0
.
1
0
0
Ta Ann’s analyst briefing hosted by its CEO was informative, touching .
0
on the new timber licencing policy in Sarawak, its strategy to address 0
its loss-making venture in Tasmania, as well as its plans to expand its 0
palm oil landbank. We make no changes to our forecasts and maintain
our SOP-based TP of MYR3.80, as we believe lower CPO prices will
likely offset stronger timber earnings.

3
2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
1.00m/0.31m
26.1
0.0
3.65 - 4.49
34
371
Mountex SB
Datuk Wahab b Hj Dollah
EPF
21.0
11.0
9.7
YTD
1m
3m
6m
Absolute
(8.9)
(3.8)
(9.5)
(9.5)
12m
1.6
Relative
(7.4)
(3.7)
(7.9)
(8.4)
(0.4)
Shariah compliant
Hoe Lee Leng +603 9207 7605
hoe.lee.leng@rhbgroup.com

Key highlights from Ta Ann’s analyst briefing hosted by its CEO, Dato
Wong Kuo Hea include:
i) As a result of the Sarawak government’s new timber licencing
policy, Ta Ann is proposing to amalgamate its four timber licences to
form a new Forest Management Unit (FMU), which will have a
tenure of 60 years (from 5-15 years currently). Timber companies
would then have to get their FMUs re-certified under the Malaysian
Timber Certification Scheme (MTCS) and certified by the Forest
Stewardship Council (FSC) in New Zealand, which would alleviate
pressures from non-governmental organisations (NGOs). Ta Ann
does not expect any changes to its logging quota from this new
ruling. We are positive, given the longer licence tenure and the more
environmentally-friendly policies.
ii) Ta Ann’s converted 48,000 cu m/year plywood (from veneer) mill in
Tasmania is nearing completion and will commence operations in
early 2015. As a condition of the agreement reached between Ta
Ann and the Tasmanian government in 2013, Ta Ann is required to
keep its operations running for the next five years. With the new
plywood mill, Ta Ann will save on transport costs and sell its
plywood domestically (as Australia currently imports 35,000 cu m of
tropical plywood per month). We understand that margins are about
10-15% for this product. We are not imputing any contributions from
this plant into our forecast yet, although we estimate this could add
8-12% to our forecasts, assuming a 100% take-up.
iii) Ta Ann will finish planting up all its plantable palm oil land by 2015
and is looking to expand its landbank, preferably in Sarawak.
Maintain NEUTRAL. While we are positive on the latest developments
and continue to like Ta Ann’s strong FFB production growth of 10-20%
p.a. over the next few years, this would not be enough to offset the
impact of lower CPO prices, given its sensitivity to CPO price
movements, where every MYR100/tonne could impact earnings by
7-9%. Our SOP-based TP is maintained at MYR3.80.
Dec-11
Dec-12
Dec-13
926
790
774
973
1,184
158
57
58
99
99
163
67
64
99
99
119.6
(59.2)
(4.2)
55.3
(0.4)
Recurring EPS (MYR)
0.53
0.18
0.17
0.27
0.27
DPS (MYR)
0.20
0.05
0.05
0.06
0.06
7.2
21.2
22.1
14.2
14.3
1.25
1.46
1.40
1.30
1.21
P/CF (x)
4.5
15.0
6.3
13.8
9.8
Dividend Yield (%)
5.3
1.3
1.3
1.4
1.4
EV/EBITDA (x)
4.9
10.1
9.6
7.5
6.9
18.0
6.0
5.9
9.5
8.8
27.7
34.3
24.8
20.8
17.5
(7.9)
(28.3)
Recurring P/E (x)
P/B (x)


2

.
2
0
.
2




Dec-14F
Dec-15F
10
Property - REITS
Market Cap: USD183m
Target Price:
Price:
MYR1.43
MYR1.53
Macro
Risks
Flattish Short-Term Prospects
Growth
Value
Price Close
104
1.56
102
1.54
101
1.52
99
1.50
98
1.48
96
1.46
95
1.44
93
1.42
92
1.40
2
1
1
1
1
1
90
0
0
.
2
0
0
Hektar REIT’s 9M14 net profit came in line at 72%/74% of our/consensus .
0
estimates. Earnings growth stayed flattish as it continued to be affected 0
by Central Square’s ongoing refurbishments. Nonetheless, we believe 0
that earnings should come in stronger in FY15. Management has
reaffirmed its commitment to a 10.5 sen dividend payout for FY14.
Maintain NEUTRAL and DDM-based TP of MYR1.43 (6.6% downside).


Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
1.58
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.12m/0.04m
-2.0
-6.6
1.45 - 1.57
28
401
Hektar Group
Frasers Centrepoint Trust
40.1
31.2
Absolute
Relative


Results in line. Hektar REIT’s 3Q14 net profit of MYR10.9m (-2.1%
YoY, -5.2% QoQ) brought 9M14 net profit to MYR32.8m (flat YoY),
coming in at 72%/74% of our/consensus estimates. 9M14 revenue
growth was flattish as it continued to be affected by disruptions from
Central Square’s (CS) ongoing asset enhancement initiatives (AEI).
9M14 net property income (NPI) was still stable at 59.7% (9M13: 60.2%),
although earnings were slightly affected by the electricity tariff hike.
Meanwhile, it has announced a DPU of 2.60 sen for 3Q14, on track to
meet our full-year forecast. Its overall portfolio occupancy is still stable at
94.5%, and the average rental reversion is about 7% YTD.
No surprises expected going into 4Q14. Hektar REIT continues to
make good progress on the AEI front. The AEI for CS is almost
completed, with only the cinema yet to complete its fit-out. The positive
impact from the AEI has started to show, as it recently managed to
secure a new tenant at double the rental rate of the previous tenant. We
reiterate our view that the full impact from this refurbishment should only
be seen from 1Q15 onwards. Mahkota Parade’s AEI, which will see the
expansion of its cinema to 10 screens (from four currently), is well
underway. Management expects the cinema extension works to be
completed in January. Overall, although earnings will likely remain
flattish going into 4Q14, management reaffirms its commitment to a DPU
of at least 10.5 sen for FY14.
Earnings forecasts. We make no changes to our FY14/FY15 earnings
forecasts. We have also introduced our FY16 forecasts.
Maintain NEUTRAL. Our DDM-based TP is unchanged at MYR1.43.
Given Hektar REIT’s past track record, we are still confident with its DPU
delivery.
YTD
1m
3m
6m
12m
2.0
1.3
1.3
1.3
(1.3)
(2.7)
3.9
1.4
3.2
2.8
Shariah compliant
Alia Arwina +603 9207 7608
alia.arwina@rhbgroup.com


2

.
2
0
.
2




Dec-12
Dec-13
Dec-14F
Dec-15F
103
120
123
130
Dec-16F
134
Net property income (MYRm)
63.8
74.1
73.0
76.7
77.7
39.8
46.1
45.9
48.4
48.7
Total distributable income (MYRm)
39.8
46.1
45.9
48.4
48.7
DPS (MYR)
0.11
0.11
0.11
0.11
0.11
DPS growth (%)
0.0
0.0
0.4
2.0
0.5
Recurring P/E (x)
13.8
13.3
13.4
12.7
12.6
P/B (x)
1.03
1.00
0.99
0.98
0.98
Dividend Yield (%)
6.9
6.9
6.9
7.0
7.1
7.4
7.6
7.5
7.8
7.8
Return on average assets (%)
4.1
4.3
4.2
4.4
4.4
3.48
3.39
3.38
3.51
3.45
(2.4)
(1.0)
(0.5)
Interest coverage ratio (x)
11
Trek 2000 (TREK SP)
Buy (Maintained)
Technology - Technology
Market Cap: USD89.5m
Target Price:
Price:
SGD0.61
SGD0.39
Macro
Risks
Back On Trek!
Growth
Value
Trek 2000 International (TREK SP)
0.36
168
0.31
145
0.26
122
0.21
98
0.16
4
4
3
3
2
2
1
1
75
Jul-14
Mar-14

Toy deal kicking in. Trek 2000 International’s (Trek) initial USD25m
deal to supply its signature wireless Flucards to Rely/Mattel (MAT US,
NR) commenced in 3Q14. This has led to 3Q14 revenue surging 119%
YoY to USD35.6m from USD16.3m, and NPAT leaping 144.5% to
USD0.76m from USD0.31m. Licencing revenue in 3Q14 grew 23% to
USD0.6m, and may continue to increase going forward as sales
increase.

Exciting new projects in the pipeline – Cloud Stringers and
consumer solid-state drives (SSDs). We expect the ramp-up of Cloud
Stringers, a digital (cloud-based) marketplace that transmits and
transacts online content globally, to commence by the end of the year.
Furthermore, its partnership with Panasonic (6752 JP, NR) as well as
multiple news agencies and freelance journalists could boost the content
and number of users of this site. In addition, its latest joint venture with
Unimicron Technology Corp, a subsidiary of United Microelectronics
Corp (UMC) (2303 TT, NR) to produce portable consumer electronics,
may potentially contribute to its FY15 earnings.
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.30m/0.24m
56.4
56.4
0.19 - 0.43
55
298
Henn Tan
Toshiba Finance
Creative Technology
35.2
17.7
9.2
YTD
1m
3m
6m
12m
Absolute
95.0
2.6
77.3
99.0
90.2
Relative
91.1
1.2
78.0
97.3
87.4
Shariah compliant

Poised for a great leap in FY15; maintain BUY. As the deal with
Rely/Mattel just commenced in 3Q, we expect orders to pick up at a fast
pace, especially in FY15. We estimate OEM Flucard sales to double to
USD100m in FY15 from USD50m in FY14, with Rely/Mattel contributing
a significant portion as it looks to launch an educational toy into the US
market by the end of FY14. Going forward, with a number of exciting
new projects lining up, coupled with its strong and successful research
and development team, we are very positive on Trek’s outlook and a
potential strong comeback in FY15. Maintain BUY with a SGD0.61 TP,
pegged to a 16x FY15 P/E, implying a 56% upside from current levels.
Dec-13
Dec-14F
Dec-15F
Dec-16F
74
100
151
203
233
Reported net profit (USDm)
0.3
2.1
9.2
14.1
17.3
Recurring net profit (USDm)
0.3
2.1
9.2
14.1
17.3
0.0
632.7
339.1
54.0
22.4
0.00
0.01
0.03
0.05
0.06
0.002
0.008
0.008
0.008
0.008
Total turnover (USDm)
Recurring EPS (USD)
DPS (USD)
Dec-17F
Jarick Seet +65 6232 3891
Recurring P/E (x)
313
43
10
6
5
jarick.seet@sg.oskgroup.com
P/B (x)
2.25
2.27
1.93
1.54
1.22
P/CF (x)
42.7
21.7
8.1
5.4
4.5
0.7
2.5
2.5
2.5
2.5
24.6
17.4
7.3
4.8
3.5
0.0
5.3
21.4
27.0
26.3
net cash
2.1
4.4
0.0
0.0
Terence Wong CFA +65 6232 3896
Dividend Yield (%)
terence.wong@sg.oskgroup.com
EV/EBITDA (x)
net cash net cash
0.0
0.0


2

.
2
0
.
3
0
0
.
2
0
0
Trek’s 3Q14 revenue surged 119% YoY to USD35.6m from USD16.3m .
0
while its NPAT jumped 144.5% YoY to USD0.76m, driven partially by 0
increased sales to a number of new MNC customers, as well as its toy 0
deal with Rely/Mattel which commenced in 3Q14. 9M14 NPAT to
shareholders of SGD1.7m made up 81% of our estimate, well on track.
We expect its wireless Flucard orders from Rely/Mattel to surge,
especially in FY15. Maintain BUY and SGD0.61 TP (56% upside).
Sep-14
192
May-14
0.41
Jan-14
215
Nov-13
Vol m
Price Close
0.46




12
Neratel (NERT SP)
Communications - Telecommunications Infrastructure
Market Cap: USD227m
Target Price:
Price:
SGD0.83
SGD0.81
Macro
Risks
Supported By Dividend Yield
Growth
Value
Neratel (NERT SP)
Price Close
0.85
108
0.80
104
0.75
100
0.70
96
0.65
92
0.60
2
1
1
1
1
1
88
0
0
.
2
0
0
Neratel’s 9M14 NPAT of SGD11.6m only makes up 56% of our FY14 .
0
NPAT estimates. As a result, we slash our FY14 revenue and NPAT 0
estimates by 7.7% and 17% to SGD191m and SGD17m respectively. We 0
change our valuation methodology to a DCF valuation as well to reflect
the cash-generative value of the business. As Neratel is supported by
an attractive 7.4% dividend yield, we maintain NEUTRAL with a slightly
higher DCF-based TP of SGD0.83 (from SGD0.72) a 2.5% upside.

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m


Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.11m/0.09m
2.5
2.5
0.68 - 0.82
47
362
Northstar
53.0


2

.
1
0
.
2





Telecom segment affected by revenue recognition date. Neratel’s
3Q14 revenue dipped slightly by 1% YoY to SGD49.7m as a 29.6%
decline from the telecom segment due to revenue recognition was
partially offset by higher turnover from the infocom segment, which grew
29.2% YoY. However, gross profit margin shrank to 30.2% from 30.5%
partially due to a change in sales mix in product, project and services.
3Q14 NPAT inched up slightly by 7.5% YoY to SGD3.54m from
SGD3.3m.
Dividend yield to maintain around 7.4%. We expect management to
still be able and reward shareholders with at least an annual dividend of
SGD0.06 in FY14&15, which constitutes an attractive dividend yield of
around 7.4% in both years, unless they suffer a plunge in its earnings.
Future key drivers - network infrastructure & payment solutions.
Going forward, we expect these two business segments to continue to
deliver strong blended growth of above 20%, offsetting any decline in
revenue from the telecom segment.
Maintain NEUTRAL with a DCF-backed revised TP of SGD0.83.
Jarick Seet will assume coverage of Neratel. As Neratel’s 9M14 NPAT of
SGD11.6m makes up only 56% of our FY14 NPAT estimates, partly due
to higher operating expenses and lower-than-expected turnover, we
slash our FY14 revenue and NPAT estimates by 7.7% and 17%
respectively to SGD191m and SGD17m. In addition, we switch to a DCF
based TP (WACC 8.5%, TG=0%) of SGD0.83 from a historical P/E
valuation of SGD0.72 to fully reflect the cash-generative nature of this
business. As the company still has a healthy balance sheet with a net
cash position supported by an attractive dividend yield of around 7.4%,
we maintain NEUTRAL.
Dec-11
Dec-12
Dec-13
Dec-14F
156
179
178
191
212
Reported net profit (SGDm)
13.5
19.4
23.5
17.0
19.2
Recurring net profit (SGDm)
13.5
19.4
17.5
17.0
19.2
23.8
43.6
(10.0)
(2.5)
13.0
Recurring EPS (SGD)
0.04
0.05
0.05
0.05
0.05
DPS (SGD)
0.00
0.08
0.06
0.06
0.06
Recurring P/E (x)
21.7
15.1
16.8
17.2
15.3
P/B (x)
4.79
4.45
4.43
4.77
4.97
P/CF (x)
11.1
18.6
12.1
13.0
14.8
0.0
9.9
7.4
7.4
7.4
12.5
9.0
10.0
10.5
10.1
21.9
30.5
35.5
26.6
31.9
YTD
1m
3m
6m
12m
Absolute
14.9
0.6
3.2
11.0
8.7
Relative
11.1
(0.5)
4.2
9.7
6.1
Shariah compliant
Total turnover (SGDm)
Dividend Yield (%)
EV/EBITDA (x)
Dec-15F
0.0
0.0
13
CWT Limited (CWT SP)
Buy (Maintained)
Market Cap: USD769m
Target Price:
Price:
SGD2.00
SGD1.66
Macro
Risks
Commodity Trading Business Margins Improve
Growth
Value
CWT (CWT SP)
1.90
141
1.80
135
1.70
129
1.60
122
1.50
116
1.40
110
1.30
104
1.20
97
1.10
5
5
4
4
3
3
2
2
1
1
91

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
1.04m/0.82m
19.3
20.5
1.24 - 1.83
39
600
Sr. management & related
Transamerica Investment
Fidelity International
60.7
0.7
0.7


Strong revenue growth. CWT’s 9M14 revenue jumped 121% YoY, with
all segments reporting higher revenues. Revenue from financial services
surged the most by 428% YoY to SGD169m, aided by rising trade
services. Commodity marketing revenue soared 134% YoY to
SGD11,045m due to higher trading volume. Logistics revenue continued
to rise sequentially in 3Q14, with 9M14 revenue growing 12% YoY,
driven by the addition of new warehouse space in 1Q14.
Commodity marketing margins expand. 3Q14 commodity marketing
revenue grew 3% QoQ and we expect the segment revenue to keep
growing in 4Q14 amid a seasonal pickup in naphtha trading volume.
Segment gross margins also expanded sequentially over the last two
quarters to 0.94% in 3Q14 from 0.77% in 1Q14. As CWT builds
confidence among its customers to move larger commodity trading
volumes, we believe its margins should improve gradually over 20152016.
New warehouses may boost margin. Among the two new warehouses
that will be added by end-2014, the space at Singapore Wine Vault has
been fully taken up and customers have committed to taking up 80% of
the Pandan Logistics Centre. Warehouse space is the key growth driver
in the high-margin logistics business segment and these new
warehouses will boost CWT’s Singapore warehouse space by 40%. The
logistics segment made up 45% of its 9M14 gross profit (GP) and
fetched a higher GP margin of 17.6% vs a dismal 0.85% GP margin for
the commodity marketing business, which only accounted for 35% of
GP.
Maintain BUY. We introduce 2016 EPS and roll forward our SGD2.00
TP to Sep 2015, offering a 20.5% upside. We apply a 9x P/E (vs 10x
earlier) to rolling four-quarter EPS to account for the company’s potential
slower growth over 2015-2016F.
YTD
1m
3m
6m
12m
Absolute
22.5
0.0
(0.3)
6.1
24.8
Relative
18.6
(1.4)
0.4
4.4
22.0
Shekhar Jaiswal +65 6232 3894
shekhar.jaiswal@sg.oskgroup.com
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
5,397
9,097
16,291
17,782
18,877
108
106
135
145
158
87
96
134
145
158
57.0
10.3
40.3
8.1
8.6
Recurring EPS (SGD)
0.14
0.16
0.22
0.24
0.26
DPS (SGD)
0.03
0.03
0.04
0.05
0.05
Recurring P/E (x)
11.5
10.4
7.4
6.9
6.3
P/B (x)
1.71
1.51
1.29
1.12
0.98
P/CF (x)
Dividend Yield (%)
na
na
4.49
na
6.94
1.5
1.8
2.1
2.7
EV/EBITDA (x)
11.7
18.3
11.2
10.3
9.1
20.4
17.1
18.9
17.5
16.5
60.4
159.5
134.0
127.1
103.9
17.6
5.0
19.3


3

.
2
0
.
2
0
0
.
3
0
0
CWT’s 9M14 net profit made up 81% of our estimate. While margins .
0
declined YoY due to higher contribution from low-margin commodity 0
trading business, 9M14 profit grew 66% YoY on strong revenue growth. 0
Despite concerns over slower trading volume growth amid an
oversupplied copper market, we expect its new warehouses to provide
stable growth and higher margins. We adjust EPS accordingly and roll
forward our unchanged SGD2.00 TP (20.5% upside) to Sep 2015. BUY.

Nov-13
Vol m
Price Close




2.9
14
Venture Corp (VMS SP)
Technology - Electronics
Target Price:
Price:
SGD7.50
SGD7.55
Macro
Risks
Weakness Persists
Growth
Value
Venture Corporation (VMS SP)
Price Close
8.20
105
8.00
102
7.80
99
7.60
96
7.40
93
7.20
90
7.00
2
2
2
1
1
1
1
1
87
0
0
.
1
0
0
Ventures’ 3Q14 revenue inched up 1.7% YoY to SGD599m while NPAT .
0
rose 3.2% YoY to SGD36.1m. However, its 9M14 NPAT of SGD100.5m 0
only made up 70% of our FY14 estimate of SGD143m. This prompted us 0
to trim our FY14 NPAT estimate by 2.8% to SGD139m, resulting in a
lower TP of SGD7.50 from SGD7.71 (0.7% downside, 14.8x FY14 P/E).
Going forward, we still expect management to keep up with the
SGD0.50 annual dividend. Maintain NEUTRAL.

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
2.04m/1.61m
9.3
-0.7
7.16 - 8.13
90
275
Aberdeen Asset Mgmt
Sprucegrove Investment
Ngit Liong Wong
26.0
8.0
7.0


1

.
1
0
.
1






Underperforming our NPAT estimate. Venture’s 3Q14 topline
increased slightly by 1.7% YoY to SGD599m from SGD588m, while its
bottomline inched up 3.2% to SGD36.1m from SGD35m. Typically, we
expect the second half of the year to be stronger than the first, but we
did not see much improvement during 3Q14. As a result, 9M14 NPAT of
SGD100.5m only made up 70% of our FY14 NPAT estimate of
SGD143m.
Weakness still persists from M&A activities. Computer peripherals
and data storage sales slipped 17.7% to SGD167.8m for 9M14 from
SGD204m in 9M13. This was mainly due to a drop in orders from its key
customers, who have recently undergone merger and acquisition (M&A)
activities. We expect weakness to persist in the next few quarters, with a
slow recovery in orders. Going forward, growth will be likely driven by its
test and measurement business segment.
3D printing contribution to come in only from FY16 onwards.
Management highlighted that its 3D printing is still in the initial R&D
stages and do not expect significant earnings contribution from this
segment in the near future.
Maintain NEUTRAL with a lower TP of SGD7.50. We expect FY15
earnings to grow at a tepid rate of below 8%, as the company’s capex
spending show no signs of increasing, while weakness may persist due
to its clients’ M&A activities. However, we expect Venture to still be able
to pay at least SGD0.50 of dividends annually. Coupled with a strong
balance sheet, we expect its share price to be supported by an attractive
dividend yield of about 6-7%. Maintain NEUTRAL, with a lower TP of
SGD7.50 from SGD 7.71 (0.7% downside, 14.8x FY14 P/E)
YTD
1m
3m
6m
12m
Absolute
(1.7)
(0.7)
(6.7)
4.3
(3.8)
Relative
(5.6)
(2.1)
(6.0)
2.6
(6.6)
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
2,432
2,388
2,330
2,401
2,498
157
140
131
139
150
157
140
131
139
150
(17.1)
(10.8)
(6.1)
6.1
7.7
Recurring EPS (SGD)
0.57
0.51
0.48
0.51
0.54
Shariah compliant
DPS (SGD)
0.55
0.50
0.50
0.50
0.55
Recurring P/E (x)
13.2
14.8
15.8
14.9
13.9
P/B (x)
1.11
1.15
1.14
1.14
1.14
P/CF (x)
8.2
15.6
19.4
12.3
12.1
Dividend Yield (%)
7.3
6.6
6.6
6.6
7.3
EV/EBITDA (x)
7.74
9.18
9.82
9.06
8.47
8.4
7.6
7.2
7.6
8.2
0.0
0.0
15
Buy
Property - Real Estate
Target Price:
Price:
SGD3.54
SGD3.15
Macro
Risks
Housekeeping In Progress
Growth
Value
Price Close
3.50
110
3.40
108
3.30
106
3.20
103
3.10
101
3.00
99
2.90
97
2.80
94
2.70
92
2.60
60
90
0
0
.
2
0
0
CapitaLand’s 3Q14/9M14 results were largely in line with our .
0
expectations. Assume coverage with BUY and a RNAV-derived TP of 0
SGD3.54 (12% upside). The company sold 3,288 homes in China in 0
9M14 (3Q14:1,057 units) vs 5,786 units (3Q13: 1,646 units) a year ago.
We see sustained demand from upgraders and first-timers for the rest
of the year, bolstered by the recent relaxation of mortgage rules and
easing credit in China.


50
40
30
Sep-14
Jul-14
May-14
Mar-14
Jan-14
10
Nov-13
Vol m
20
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
26.3m/20.8m
22.9
12.4
2.72 - 3.45
60
4,258
Temasek Holdings Pte Ltd
Blackrock
Vanguard PLC

39.5
6.0
1.0
YTD
1m
3m
6m
12m
Absolute
4.0
2.3
(6.8)
1.6
2.9
Relative
0.1
0.9
(6.1)
(0.1)
0.1
3Q14/9M14 results in line. CapitaLand recorded 3Q14/9M14 operating
PATMI of SGD129.5m/SGD421.8m (+37.0%/+32.4% YoY) respectively,
primarily driven by higher contribution from the shopping mall business,
development projects in China and Vietnam, and lower finance costs.
Sky Habitat and Sky Vue are 68% and 73% sold respectively. YTD,
CapitaLand sold about 237 residential units in Singapore (YTD Sep
2013: ~1,151 units), with a total sales value of SGD444m, compared
with SGD2.2bn a year ago. According to the Urban Redevelopment
Authority (URA), ASPs for Sky Vue and Sky Habitat are
SGD1,426/SGD1,482 psf respectively (see Figures 2-5), with smaller
units on average being sold at the former. In China, the company sold
3,288 residential units, compared with 5,786 units a year ago. Sales
were mostly from the following projects: La Botanica in Xi’an, The Loft in
Chengdu, The Metropolis in Kunshan, Vista Garden in Guangzhou and
The Paragon in Shanghai. In 4Q14, another 4,000 units are expected to
be ready for launch. For projects that have been launched, CapitaLand
expects to complete about 1,000 residential units in 4Q14. They are
mainly from Central Park City in Wuxi and International Trade Centre in
Tianjin.
Our view. CapitaLand remains long-term positive on Singapore and
China. The Raffles City portfolio is set to be another growth segment,
with another four Raffles Cities under construction (~75% of the
combined floor area) to be progressively completed in 2016-2019. We
are keeping our eyes on further cost-cutting ahead, with management
focusing on improving ROEs to 8-12% on a sustainable basis via longterm capital allocation. At a 0.58x P/RNAV, we maintain that the stock’s
valuation is undemanding. We assume coverage on CapitaLand with a
BUY recommendation and a RNAV-derived TP of SGD3.54, implying a
12% upside.

Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,301
3,977
3,196
3,839
4,137
Recurring P/E (x)
14.4
15.8
14.0
18.2
14.5
P/B (x)
0.89
0.83
0.80
0.78
0.76
6.2
5.4
5.8
4.3
5.3
Return on average assets (%)
2.5
2.1
2.2
1.7
2.1
44.7
39.4
56.1
54.1
50.0
0.0
0.0
0.0

Shariah compliant
Ivan Looi +65 6232 3841
ivan.looi@sg.oskgroup.com
Singapore Research +65 6533 0781
research@sg.oskgroup.com


2

.
2
0
.
2




We are keeping our eyes on further cost-cutting ahead, with
960
736
926
management focus on improving 930
ROEs to850
8-12% on
a sustainable
basis
Recurring
net profit (SGDm)
736 that926
via long-term
capital allocation. At930
a 0.65x850
P/RNAV,960
we maintain
the
Recurring
net profit
growth (%)
(12.0)
(8.7)
13.0
(23.3)
25.7
stock’s
valuation
is undemanding.
We assume
coverage
of CapitaLand
Recurring
(SGD)
0.22
0.20
0.23
0.17
0.22
withEPS
a RNAV-derived
TP of SGD3.15.
16
Market Cap: USD242m
Neutral (from Buy)
Target Price:
Price:
THB39.50
THB38.50
Macro
Risks
3Q14 Earnings Down 18.7% YoY
Growth
Value
Relative to Stock Exchange of Thailand Index (RHS)
130
39.0
126
37.0
121
35.0
117
33.0
112
31.0
108
29.0
103
27.0
99
25.0
94
23.0
90
21.0
10
9
8
7
6
5
4
3
2
1
85
0
0
.
3
0
0
AIT’s 3Q14 earnings fell 69.1% QoQ to THB87.9m on the political unrest .
0
and the completion of several large projects in 2Q14. Downgrade to 0
NEUTRAL (from Buy) on AIT’s 34% YoY orderbook decline, with a 0
THB39.50 TP (2.6% upside). While 9M14 earnings made up 81.3% of our
FY14 estimates, we keep our forecasts, as we expect the company to
recognise only c.THB1.0bn of its THB1.98bn orderbook in 4Q14.

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close
41.0
Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Shareholders (%)
39.7m/1.23m
-14.3
2.6
22.8 - 39.5
65
206
Siripong Oontornpan
Thai NVDR
Chotiwat Duntanasarn
8.9
8.8
4.5


2

.
2
0
.
3





Booked 3Q14 earnings of THB87.9m, down 18.7% YoY and 69.1%
QoQ. Advanced Information Tech’s (AIT) 3Q14 earnings declined
significantly QoQ on lower sales volume and a drop in GPM. Sales
dropped 69.1% QoQ to THB1.22bn, post completion of several largescale state enterprise projects in 2Q14 and delays in new ICT projects
due to the recent political unrest. 3Q14 EBIT margin declined to 8.1%
from 2Q14’s 13.4%, as projects in the quarter under review yielded lower
GPM. Hence, AIT’s net margin contracted QoQ to 7.2% in 3Q14 (2Q14:
11.5).
Orderbook declines. AIT’s orderbook declined to THB1.98bn as at end3Q14 (3Q13: THB3.50bn). This was mainly due to the company
recognising the bulk of its orderbook revenue in 1H14 as well as the
slowdown in government projects. Although 9M14 earnings accounted
for 81.3% of our full-year earnings forecast, we still maintain our FY14
numbers as we expect AIT to only recognise around THB1bn from its
current THB1.98bn orderbook in 4Q14. However, we expect the
company’s earnings to grow by at least 5% YoY in FY15. This is
because we anticipate its orderbook picking up substantially in 3Q14 as
Thailand’s 2015 Fiscal Budget has already been approved.
Downgrade to NEUTRAL (from Buy). We downgrade AIT to NEUTRAL
due to the 43% YoY deterioration in its orderbook and the limited upside
to our current TP of only 2.6%. We believe that the share price has
already factored in most of the positive news flow about the
Government’s digital economy investment plan, given that the price has
surged 52.4% YTD. AIT is now trading at 10.7x FY15F P/E, ie +2SD
from its 8-year mean. Moreover, the company’s low orderbook should
limit its earnings growth in FY15.
YTD
1m
3m
6m
12m
Absolute
52.5
11.6
25.2
31.6
29.0
Relative
31.0
9.4
21.6
19.3
19.1
Shariah compliant
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
4,801
4,139
5,965
6,382
6,702
Reported net profit (THBm)
439
366
568
704
741
Recurring net profit (THBm)
439
366
568
704
741
13.0
(16.5)
54.9
24.1
5.2
Recurring EPS (THB)
6.57
5.38
4.13
3.41
3.59
DPS (THB)
4.44
4.68
1.50
2.39
2.51
5.9
7.2
9.3
11.3
10.7
1.88
1.83
3.30
3.04
2.80
7
108
Dividend Yield (%)
11.5
12.1
EV/EBITDA (x)
3.58
33.2
net cash
13.2
Total turnover (THBm)
Veena Naidu License No. 24418, 66 2862 9752
Recurring P/E (x)
veena.na@rhbgroup.com
P/B (x)
P/CF (x)
Chun Phokaisawan
na
17
12
3.9
6.2
6.5
5.33
6.73
8.50
7.97
25.9
29.5
28.1
27.2
net cash
5.0
3.1
14.6
32.5
17
Transport - Aviation
Market Cap: USD571m
Target Price:
Price:
THB39.80
THB36.80
Macro
Risks
9M14 Net Profit Down 28% YoY
Growth
Value
Price Close
41.0
144
39.0
138
37.0
133
35.0
127
33.0
122
31.0
116
29.0
111
27.0
105
25.0
100
23.0
1
94
9M14 net profit was down 28% YoY at THB614m as BAFS
recognised THB217.2m of extraordinary income in 9M13
(none in 9M14). BAFS is moving ahead with the
Suvarnabhumi Airport Phase 2. It is also awaiting the
awards announcement for the Myanmar airport project and
its domestic multiproduct pipeline project. Maintain
NEUTRAL and TP of THB39.80 (based on DCF valuation,
 9M14 net profit was THB614m (-28% YoY), accounting for 73% of our
WACC
9%),
an upside
8.3%.increased to THB2.1bn (+11% YoY),
full-year
forecast.
Total of
revenues
as Bangkok Aviation Fuel Services (BAFS) had not yet consolidated Fuel
Pipeline Transportation (FPT) into its financial statements in the first six
months of 2013. Total jet fuel volume declined 2.2% YoY to 3,644.4m
litres and total flights increased by 5.2% YoY to 158,484 flights for 9M14.
Note that for 9M13, there was a reversal of allowance of THB123.8m
for doubtful accounts, due to the THB76.1m gains on the acquisition of
FPT and compensation for flood damages in 2011, which amounted to
THB17.3m.
1
1
1
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Thai Airways Pcl.
Esso (Thailand) Pcl.
PTT Pcl
3.26m/0.10m
8.2
8.3
25.0 - 39.5
48
510





Growth remains on track. Although the Suvanhabhumi Phase 2 has
been scaled down for the moment, BAFS informs us that it is moving
ahead with its expansion plans. The company has already signed a
MOU with the AOT, in which there is a clause that indemnifies BAFS
should there be any major delays in the expansion of Phase 2.
Still awaiting approval for pipeline. BAFS is still awaiting government
approval for its proposed 550km multi-product crude oil pipeline. BAFS
expects approval should come in 1H15, if it is going to be approved. The
company has been short-listed for a contract to build and operate the
depot, refueling, hydrant transportation system at five airports in
Myanmar (Yangon, Mandalay, Hongsawadee, Tachelek and Haho).
Awards are expected to be announced by this November.
22.6
7.1
7.1
YTD
1m
3m
6m
12m
Absolute
33.6
2.1
2.1
15.7
45.5
Relative
12.1
(0.1)
(1.5)
3.4
35.6
Shariah compliant
Kannika Siamwalla, CFA 66 2862 9744
kannika.si@rhbgroup.com
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
2,409
2,537
2,916
3,126
3,241
527
797
1,054
927
983
527
695
878
927
983
(1.7)
31.8
26.3
5.6
6.1
Recurring EPS (THB)
1.03
1.36
1.72
1.82
1.93
DPS (THB)
0.65
0.72
0.81
1.00
0.91
Recurring P/E (x)
35.5
27.0
21.3
20.2
19.1
P/B (x)
5.14
4.57
3.94
3.59
3.28
P/CF (x)
20.1
19.7
16.4
14.2
13.5
1.8
2.0
2.2
2.7
2.5
EV/EBITDA (x)
13.1
12.6
12.5
11.6
11.0
14.6
20.6
23.8
18.6
48.5
29.9
11.8
3.5
net cash
0.0
0.0
Dividend Yield (%)
18.0
18


2

.
1
0
.
2
0
0
.
3
0
0
.
0
0
0
Buy (Maintained)
Energy & Petrochemicals - Downstream Products
Target Price:
Price:
THB70.70
THB59.80
Macro
Risks
3Q14 Net Profit Rises 25% QoQ
Growth
Value
84.0
118
79.0
108
74.0
98
69.0
88
64.0
78
59.0
68
54.0
50
45
40
35
30
25
20
15
10
5
58

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
PTT Plc.
Thai NVDR
HSBC (Singapore) Nominees
PTE LTD
612m/19.0m
27.1
18.4
56.8 - 80.0
51
4,509
48.9
7.2
2.8
Absolute
Relative
YTD
1m
3m
6m
12m
(24.4)
3.0
(8.8)
(14.3)
(24.6)
(34.5)
(45.9)

Major commodity prices and spreads moved in line with our
expectations. Refined product spreads were mixed, as fuel oil and jet
spreads improved, while all refineries under our coverage recorded stock
losses as crude oil prices dipped in 3Q14. Olefins and polymer spreads
improved on higher product prices and lower feedstock costs.
Meanwhile, aromatics spreads also improved over the past quarter with
paraxylene (PX) prices having bottomed out in 2Q14.
3Q14 net profit came in at THB7.5bn (+25% QoQ, -21% YoY), in line
with our expectations. PTT Global Chemical’s (PTTGC) refinery ran at a
102% utilization rate. It booked a stock loss of USD2.92/barrel (bbl), with
hedging gains of USD0.70/bbl and a gross refining margin of
USD3.83/bbl. Its polyethylene plants ran at a 104% utilization rate, while
olefins spreads improved over the past quarter. Meanwhile, the
company’s aromatics plants ran at a 83% utilization rate, with PX
spreads rebounding from their lows in 2Q14 and benzene spreads
remaining strong. Note that in 2Q14, PTTGC recognized an impairment
loss of THB2.2bn as a result of business restructuring.
4Q14F outlook: olefins spreads at 2-year high. We expect its core
earnings to be healthy in 4Q14. However, whether PTTGC will report
further stock losses/gains will depend on the closing price of crude oil at
the end of the year. We expect its plants to run at full capacity in the final
quarter of the year. The latest commodity prices indicate that polymer
spreads are now at 2-year highs. This is a result of lower feedstock
prices – crude oil (USD83.99/bbl, -17% QoQ), condensate (USD724/ton,
-17% QoQ) and naphtha (-21% QoQ) – while product prices have so far
remained stable and strong.
0.8
(12.4)
(26.6)
Shariah compliant
Kannika Siamwalla, CFA 66 2862 9744
kannika.si@rhbgroup.com
Dec-11
Dec-12
Dec-13F
Dec-14F
Dec-15F
500,305
565,617
552,881
527,437
539,554
30,033
34,001
33,277
27,304
36,191
30,033
34,001
33,277
29,242
36,191
84.0
13.2
(2.1)
(12.1)
23.8
Recurring EPS (THB)
6.65
7.54
7.38
6.49
8.03
DPS (THB)
2.33
3.40
3.33
2.73
3.62
Recurring P/E (x)
8.98
7.93
8.10
9.21
7.44
P/B (x)
1.36
1.21
1.13
1.13
1.04
P/CF (x)
9.76
5.33
7.29
4.95
4.79
3.9
5.7
5.6
4.6
6.1
EV/EBITDA (x)
7.23
6.59
6.20
6.01
5.03
14.3
16.2
14.4
11.4
14.5
46.8
32.3
32.2
37.5
27.1
0.0
0.0
0.0
Dividend Yield (%)


2

.
3
0
.
1
0
0
.
2
0
0
PTTGC booked 3Q14 earnings of THB7.5bn (+25% QoQ, -21% YoY), and .
0
a THB2.8bn stock loss. Major commodity spreads moved in line with 0
our expectations, and olefins and aromatics spreads improved in 3Q. 0
PTTGC is now trading at distressed levels (-2SD from its forward 1.1x
P/BV) but is still attractive vis-a-vis the regional peer average, as it has
a much lower P/E, and higher ROE and ROA – even though its P/BV is
slightly higher. BUY, with a THB70.70 TP (1.2x 2015 P/BV,18.4% upside).

Nov-13
Vol m
Price Close




19
Market Cap: USD160m
Neutral (from Buy)
Target Price:
Price:
THB16.90
THB17.50
Macro
Risks
Earnings Drop On Network Depreciation
Growth
Value
Price Close
21.0
173
20.0
165
19.0
157
18.0
149
17.0
141
16.0
133
15.0
125
14.0
117
13.0
109
12.0
101
11.0
12
93

Below expectations. Symphony Communication’s (Symphony) 3Q14
core earnings fell 26.2% QoQ and 36.7% YoY to THB38.1m, only
58%/54% of our/consensus FY14 forecasts. The disappointing earnings
were mainly on higher depreciation, ie 14.2% QoQ and 55.7% YoY.

Key highlights. Symphony’s 3Q14 revenue grew 2.6% QoQ and 20.1%
YoY to THB329.6m, which represented 70% of our FY14 forecast. This
was contributed by 3% QoQ and 120.9% YoY growth in international
private leased circuit (IPLC), and an 11.3% QoQ and 19.6% YoY rise in
private network services. Due to increasing demand for international
connectivity, IPLC now contributed over 25% of its service income. By
contrast, digital broadcast revenue dropped 11.6% QoQ as some
customers suspended their contracts. Domestic network rental costs
continued to decline (down 0.3% QoQ) on a network switch while
international network rental fees shed 3.1% QoQ. Hence, EBITDA and
net margins fell 5.4ppts and 10.4ppts YoY to 40.3% and 11.5%
respectively.
8
6
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m
4
Source: Bloomberg
4.97m/0.15m
5.1
-3.4
12.7 - 19.8
49
300
16.3
15.6
8.1



Forecasts and risks. Symphony reaffirmed its FY14 YoY revenue
growth guidance of 30% but revised digital broadcast to 20% (from 38%)
and private networks to 25% YoY (from 30%) while IPLC will still grow
200% YoY. Key risks are higher-than-expected depreciation and
extraordinary services expenses.
Submarine cable. This investment is currently under final discussion
with its partners and it expects to sign the contract in December.
Valuation. We lowered our DCF-based TP to THB16.90 (WACC: 11.3%,
TG: 3%) from THB19.60 previously, implying 26.6x FY15F P/E. We
reduced
our
FY14F/FY15F
earnings
by
24.6%/26%
to
THB181m/THB197m (from THB240m/THB267m) respectively on
unexpected high depreciation expenses from its new domestic network.
YTD
1m
3m
6m
12m
28.7
2.9
4.8
0.0
38.9
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
29.0
693
808
1,017
1,332
1,566
212
237
249
181
197
212
238
246
181
197
7.1
12.1
3.5
(26.6)
9.2
Recurring EPS (THB)
0.71
0.79
0.82
0.60
0.66
DPS (THB)
0.68
0.53
0.58
0.42
0.46
Recurring P/E (x)
24.7
22.1
21.3
29.0
26.6
P/B (x)
4.71
4.40
4.13
3.96
3.79
Vikran Lumyai +66 2862 9999 Ext 2028
P/CF (x)
16.8
11.5
9.6
6.6
7.1
vikran.lu@rhbgroup.com
Dividend Yield (%)
3.9
3.0
3.3
2.4
2.6
EV/EBITDA (x)
11.8
10.8
11.5
10.3
8.6
19.1
20.5
20.2
13.9
14.6
Absolute
Relative
7.2
0.7
1.2
(12.3)
Shariah compliant
Veena Naidu License No. 24418, 66 2862 9752
veena.na@rhbgroup.com


3

.
2
0
.
3
0
0
.
2
0
0
Core 9M14 earnings declined 28.1% YoY on a 335% YoY surge in .
0
international network rental fees and higher depreciation (56.5% YoY) 0
from a domestic network expansion. Downgrade to NEUTRAL and lower 0
our DCF-based TP to THB16.90 (WACC: 11.16%, TG: 3%, 3.4%
downside) from THB19.60. We lower our FY14/FY15F earnings
24.6%/26%, anticipating higher-than-expected depreciation expenses.
10
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Kranphol Asawasuwan
Teerarat Pantarasutra
Pongthep Thanakijsuntorn




net cash
net cash
30.8
46.5
62.0
(29.9)
(40.2)
20
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
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