THAILAND EQUITY RESEARCH
Page | 1 | PHILLIP SECURITIES (THAILAND)
Italian‐Thai Development 3QFY15 net profit down 41% y‐y
THAILAND | SET | CONS | COMPANY RESULTS BLOOMBERG ITD TB l REUTERS ITD.BK
3QFY15 net profit of Bt190mn, down 41% y‐y ITD posted a 41% y‐y drop in 3QFY15 net profit to Bt190mn hit by operating expense escalation and mounting tax expenses. In this period, construction revenue edged up only 6% y‐y to Bt13.5bn in the face of sluggishness in domestic construction activity as the pipeline of new government projects were scheduled to be put up for bids by year‐end. Margin picked up to 10% in this period from 8% in the same period last year but SG&A expenses shot up 16% y‐y due probably to increased staff levels in preparation for future investment projects. For the quarter, administrative expenses jumped to Bt531mn in this period from Bt450mn a year earlier. Lower tax shield also pushed effective tax rates in this period dramatically higher to 44% from 8% in the same year‐ago period. In sum, soaring operating and tax expenses were largely blamed on the profit decline in this period despite improved revenue and margin. Hopes pinned on new projects to catapult ITD back to profitability Its latest backlog totaled Bt264mn, of which Bt149bn came from two concession projects, namely (i) the Bt37.8bn elevated expressway project in Bangladesh and (ii) the Bt111bn coal export railway and port terminal project in central Mozambique and the rest Bt115bn from other construction projects. As ITD is currently seeking financing and partners for the above concession projects with construction expected to get off the ground in FY18, we reckon that the Bt115bn portion of the above backlog, which is two times greater than revenue it is expected to earn in FY15 will be a major source of revenue for ITD over the next two years. However, ITD still needs more new projects to catapult it back to profitability in FY16. The prospects look brighter for new domestic project opportunities as the next Bt27bn, 185‐km Jira Road‐Khon Kaen double‐track rail route is scheduled to be up for bids on Dec 8, 2015 after the e‐auction for the first Bt9.5bn, 97‐km Khlong 19‐Kaeng Khoi double‐track rail route took place on Nov 19. In addition, there will also be a growing pipeline of government projects lining up for bidding in FY16 including (i) the Bt90bn orange‐line electric train project, (ii) the Bt26bn pink‐line electric train project, (iii) the Bt31bn yellow‐line electric train project, (iv) 10 double‐track railway projects worth a combined total value of Bt235bn, (v) the Bt49bn second phase expansion of Suvarnabhumi Airport, and (vi) three motorway projects worth a combined total value of Bt154bn. As things stand, the value of new contract awards is likely to be on an uptrend in FY16. We estimate ITD’s FY15 core profit will double from the Bt253mn it achieved in FY14 to Bt515mn on expectations that full‐year revenue will go up 7% y‐y, driven largely by current backlog despite slight margin pressure. Its core profit growth is also expected to accelerate sharply to 71% in FY16. The forecast is based on assumptions that (i) FY16 revenue growth will quicken to 12%, (ii) margin will pick up and (iii) there will be no exceptional losses from subsidiaries as recorded in 1QFY15. Valuation too rich Despite improved operating perofrmance, we still reiterate a ‘SELL’ call on ITD shares with a Bt7.40/share target price. Our ‘SELL’ rating reflects (i) its overstretched valuation, (ii) its big debt load and (iii) its huge investment burden for Dawei project, potash mining project, aluminum mining project in Lao PDR, elevated expressway project in Bangladesh and coal export rail‐port project in central Mozambique, which has led it to scout for new partners and in turn keep capital call risk alive.
Ref. No.: CO2015_00880
Closing Price(Bt) 8.00
Target Price(Bt) 7.40 (‐7.5%)
COMPANY DATA
O/S Shares (mn) : 5,280
Market Cap. (Btmn) :
Market Cap. (USDmn) :
52‐WK Hi/Lo (Bt) : 9.6/5.65
3M Average Daily T/O (mn) : 105.84
Par Value (Bt) : 1.00
MAJOR SHAREHOLDERS (%)
1. Premchai Kannasutr 16.6
1. Nitjaporn Jaranajitr 7.3
3. Vichai Watchirapong 3.8
PRICE PERFORMANCE (%)
1MTH 3MTH 1YR
ABS ‐9% 14% 3%
REL TO SET INDEX ‐8% 7% 17%
PRICE VS SET INDEX
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Dec FY13 FY14 FY15E FY16E
Sales(Btmn) 44,493 48,697 51,779 57,958
Net Profit(Btmn) 907 522 ‐173 883
EPS (Bt) 0.22 0.10 ‐0.03 0.17
P/E (X) 37.0 80.9 n.m. 47.8
BVPS (Bt) 2.55 2.92 2.87 2.94
P/B (X) 3.1 2.7 2.8 2.7
DPS (Bt) 0.00 0.00 0.00 0.07
Dividend Yield (%) 0.0 0.0 0.0 0.8
ROE (%) 8.94 4.08 n.m. 6.24
Debt/Equity (X) 7.63 6.89 7.67 7.44
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
P/B'16 (2.5x)
Danai Tunyaphisitchai, CFA
Capital Market Investment Analyst # 2375
Tel: 66 2 635 1700 # 481
42,239
1,178
14 May 2015
Sell (Maintain)
24 November 2015
0
5
10
15
Nov‐12 Nov‐13 Nov‐14 Nov‐15
ITD TB EQUITY SETI (rebased)
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 2 | P a g e
Italian-Thai Development COMPANY RESULTS
Income Statement
Btmn 3Q15 2Q15 3Q14 q‐q+/‐ y‐y+/‐ 9M15 9M14 y‐y+/‐
Sa le s and s e rvi ce s 13,545 12,124 12,799 12% 6% 37,414 35,446 6%
Cos ts of s a le s 12,133 11,218 11,767 8% 3% 34,161 32,315 6%
Gross profit 1,412 906 1,032 56% 37% 3,253 3,131 4%
SG&A expens es 542 539 468 1% 16% 1,664 1,576 6%
Operating profit 870 367 565 137% 54% 1,589 1,554 2%
Other i ncome 45 89 111 ‐50% ‐60% 250 443 ‐44%
Inte re s t i ncome 14 20 31 ‐28% ‐55% 48 72 ‐33%
Divi dend rece ipt and JV 4 45 0 ‐91% n.m. 49 56 ‐13%
Ga in/los s from a ffi l i a te s 28 16 116 72% ‐76% 35 139 ‐75%
Other expens e 0 0 0 n.m. n.m. 0 0 n.m.
EBIT 961 537 823 79% 17% 1,970 2,265 ‐13%
Inte re s t expens e 660 650 616 2% 7% 1,947 1,824 7%
EBT 301 ‐113 206 365% 46% 23 441 ‐95%
Taxa ti on 135 ‐97 17 240% 686% ‐59 148 ‐140%
EAT 165 ‐17 189 n.m. ‐13% 82 293 ‐72%
Minori ty ‐18 21 ‐57 ‐186% 69% ‐236 ‐42 ‐463%
Net profit before extra 183 ‐38 246 588% ‐26% 318 335 ‐5%
Extraordina ry i tems 7 ‐14 78 149% ‐91% ‐689 256 ‐369%
Net profit 190 ‐51 324 471% ‐41% ‐371 591 ‐163%
EPS (Bt) 0.04 ‐0.01 0.07 471% ‐46% ‐0.07 0.12 ‐158%
Key Financial Ratio
% 3Q15 2Q15 3Q14 q‐q+/‐ y‐y+/‐ 9M15 9M14 y‐y+/‐
Cos t of s a le s /s a l e s 89.58% 92.53% 91.93% ‐3% ‐3% 91.31% 91.17% 0%
SG&A exp/s a le s 4.00% 4.45% 3.65% ‐10% 10% 4.45% 4.45% 0%
Gros s margin 10.42% 7.47% 8.07% 40% 29% 8.69% 8.83% ‐2%
Opera ting profi t margin 6.42% 3.02% 4.41% 112% 45% 4.25% 4.39% ‐3%
Net profi t margin 1.40% ‐0.42% 2.53% 432% ‐45% ‐0.99% 1.67% ‐159%
Balance Sheet
Btmn 3Q15 2Q15 3Q14 q‐q+/‐ y‐y+/‐ 9M15 9M14 y‐y+/‐
As s e ts 78,049 75,859 74,201 3% 5% 78,049 74,201 5%
Liabi l i ti e s 63,111 60,159 60,578 5% 4% 63,111 60,578 4%
Pa id ‐up (mn s hrs ) ‐ Pa r Bt1 5,280 5,280 4,860 0% 9% 5,280 4,860 9%
Equi ti e s 14,938 14,700 13,623 2% 10% 14,938 13,623 10%
BVPS (Bt) 2.83 2.78 2.80 2% 1% 2.83 2.80 1%
Debt/equi ty (x) 4.2 4.1 4.4 3% ‐5% 4.2 4.4 ‐5%
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 3 | P a g e
Corporate Governance ‐2014
BAFS BCP BTS CPN EGCO GRAMMY HANA INTUCH IRPC TOP
KBANK KKP KTB MINT PSL PTT PTTEP PTTGC SAMART IVL
SAT SC SCB SE‐ED SIM SPALI TISCO TMB THCOM SAMTEL
AAV ACAP ADVANC ANAN AOT ASIMAR ASK ASP BANPU BAY
BBL BECL BIGC BKI BLA BMCL BROOK CENTEL CFRESH CIMBT
CK CNT CPF CSL DELTA DRT DTAC DTC EASTW EE
ERW GBX GC GFPT GUNKUL HEMRAJ HMPRO ICC KCE KSL
LANNA LH LHBANK LOXLEY LPN MACO MC MCOT NBC NCH
NINE NKI NMG NSI OCC OFM PAP PE PG PHOL
PJW PM PPS PR PRANDA PS PT QH RATCH ROBINS
RS S & J SAMCO SCC SINGER SIS SITHAI SNC SNP SPI
SSF SSI SSSC STA SVI TCAP TF THAI THANI TSTE
TIP TIPCO TK TKT TNITY TNL TOG TRC TRUE
TSTH TTA TTW TVO UAC VGI VNT WACOAL
2S AF AH AHC AIT AJ AKP AKR AMANAH AMARIN
AMATA AP APCO APCS AQUA ARIP AS ASIA AYUD BEAUTY
BEC BFIT BH BJC BJCHI BOL BTNC BWG CCET CGD
CGS CHOW CI CKP CM CMR CSC CSP CSS DCC
DEMCO DNA EA ESSO FE FORTH FPI GENCO GL GLOBAL
GLOW GOLD HOTPOT HTC HTECH HYDRO IFS IHL INET IRC
IRCP ITD KBS KGI KKC KTC L&E LRH LST MAJOR
MAKRO MATCH MBK MBKET MEGA MFC MFEC MJD MODERN MONO
MOONG MPG MTI NC NTV NUSA NWR NYT OGC OISHI
PACE PATO PB PDI PICO PPM PPP PREB PRG PRIN
PTG QLT QTC RCL SABINA SALEE SCBLIF SCCC SCG SEAFCO
SEAOIL SFP SIAM SIRI SKR SMG SMK SMPC SMT SOLAR
SPC SPCG SPPT SST STANLY STEC STPI SUC SWC SYMC
SYNEX SYNTEC TASCO TBSP TEAM TFD TFI THANA THIP THREL
TIC TICON TIW TKS TLUXE TMI TMT TNDT TPC TPCORP
TRT TRU TSC TTCL TUF TVD TWFP UMI UP UPF
UPOIC UT UV UWC VIH WAVE WHA WIN WINNER YUASA
ZMICO
Score Range
< 50%
50‐59%
60‐60%
70‐79%
80‐89%
90‐100%
The disclosure of the survey result of the Thai Institute of Directors Association (IOD)
regarding corporate governance is made pursuant to the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company
l isted on the Stock Exchange of Thai land and the Market for Alternative disclosure to the
public and able to be accessed by a general public investor. The results, therefore, is from
the perspective of a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai
Listed Companies. As a result, the survey result may be changed after that data. Phil l ip
Securities (Thai land) of securities company does not confirm nor certify the accuracy of
such survey result.
No logo given
Number of Logo
Results Presentation
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 4 | P a g e
Industry Group Name Sector Name Sector Index
Agro & Food Industry[AGRO] Agribusiness AGRI
Food & Beverage FOOD
Consumer Products[CONSUMP] Fashion FASHION
Home & Office Products HOME
Personal Products & Pharmaceuticals PERSON
Financials [FINCIAL] Banking BANK
Finance & Securities FIN
Insurance INSUR
Industrials [INDUS] Automotive AUTO
Industrial Materials & Machinery IMM
Packaging PKG
Paper & Printing Materials PAPER
Petrochemicals & Chemicals PETRO
Steel STEEL
Property & Construction[PROPCON] Construction Materials CONMAT
Construction Services CONS
Property Development PROP
Property Fund & REITs PF&REIT
Resources [RESOURC] Energy & Utilities ENERG
Mining MINE
Services [SERVICE] Commerce COMM
Media & Publishing MEDIA
Health Care Services HELTH
Tourism & Leisure TOURISM
Professional Services PROF
Transportation & Logistics TRANS
Technology [TECH] Electronic Components ETRON
Information & Communication Technology ICT
PSR Rating SystemCapital Gain Recommendation
> +10% Buy
0% to + 10% Neutral
< 0% Sell
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a
stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative
undertones surrounding the stock, before making our final recommendation
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