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Equity research│April 11, 2018

Asia Pacific Daily - 11 April 2018 Equity Research Reports…

▌IDEA OF THE DAY | Malaysia UMW Oil & Gas (ADD▲, tp:RM0.33▲) - Significant earnings turnaround in FY18F | P2 We upgrade UMW-OG from Hold to Add on the back of a recent sharp sell-off in its share price, which we believe is unwarranted in view of its improving fundamentals. Our DCF-based target price has been raised to 33 sen (unchanged cost of equity of 13%), as we back-loaded our dry docking assumptions, based on company guidance. Re-rating catalysts include a continuing recovery in utilisation rates, with Petronas preferring local owners to provide for its drilling needs, and a return to profitability. Downside risks include oil price decline which could lead to a reduction in Petronas' capex spending. —————————————————————————————————————————————————————————————————————————————————————— ▌REGIONAL / ASEAN / APAC Agribusiness (NEUTRAL) - Still no let-up in production growth in March! | P3 ——————————————————————————————————————————————————————————————————————————————————————— ▌Australia Cooper Energy (ADD- Initiation, tp:A$0.44) - One last hurdle to go | P4 Frontier Digital Ventures (ADD, tp:A$0.92) - Cash generation update | P5 Macquarie Atlas Roads (ADD, tp:A$6.81▲) - MQA internalisation agreement | P6 ——————————————————————————————————————————————————————————————————————————————————————— ▌China/Hong Kong Property - Overall (NEUTRAL) - We estimate EPS growth of 21-36% p.a. in 2018-20F | P7 ——————————————————————————————————————————————————————————————————————————————————————— ▌India Shriram Transport Finance (ADD, tp:Rs1,750.00▲) - Improving fundamentals; attractive… | P8 Financial Services - Overall (OVERWEIGHT) - 4QFY18F results preview | P9 ——————————————————————————————————————————————————————————————————————————————————————— ▌Indonesia Waskita Karya (ADD, tp:Rp4,100.00) - Net positive impact from first RDPT issuance | P10 Cement (UNDERWEIGHT) - Mar 18: Decent volume growth from bulk, diverging volume and… | P11 ——————————————————————————————————————————————————————————————————————————————————————— ▌Malaysia Bursa Malaysia (HOLD, tp:RM6.90▼) - Adjusting EPS forecasts for the bonus issue | P12 ——————————————————————————————————————————————————————————————————————————————————————— ▌Singapore Excelpoint Technology Ltd (NR, ctp:S$0.70) - More than 30 years of experience | P13 ——————————————————————————————————————————————————————————————————————————————————————— ▌Thailand Land And Houses (ADD, tp:THB13.00) - Smooth and steady | P14 Robinson (ADD, tp:THB86.00) - SSSG likely turned positive | P15 Auto & Parts - Overall (OVERWEIGHT) - Auto sales beat target in latest motor show | P16

Showcasing CIMB Research Ideas

INA: Commodities - Overall 9/4 Zinc: Good times do not last forever

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MAL: Oil & Gas - Equipment & Svs 6/4 Tender rig market still soft; is recovery imminent?

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SIN: Genting Singapore 5/4 Better casino odds now

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KRW: S-Oil Corporation 2/4 Not concerned about soft 1Q18F earnings

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KRW: Banks 30/3 Do not pin hopes on NIM expansion

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Regional Equity Research Contact

Michael GREENALL, CFP Regional Head of Research T: (60) 3 2261 9088 E: [email protected]

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IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Company Note │ Alpha series Oil & Gas - Equipment & Svs│Malaysia│April 10, 2018 Shariah Compliant



UMW Oil & Gas Significant earnings turnaround in FY18F ■ We upgrade UMW-OG from Hold to Add on the back of a recent sharp sell-off in its

share price, which we believe is unwarranted in view of its improving fundamentals. ■ Our DCF-based target price has been raised to 33 sen (unchanged cost of equity of

13%), as we back-loaded our dry docking assumptions, based on company guidance. ■ Re-rating catalysts include a continuing recovery in utilisation rates, with Petronas

preferring local owners to provide for its drilling needs, and a return to profitability. ■ Downside risks include oil price decline which could lead to a reduction in Petronas’

capex spending.

Three bad years have passed… UMW-OG suffered net losses for the past three years, due to the sharp drop in charter rates and utilisation rates in the aftermath of the oil price rout in mid-2014. UMW-OG’s worst year, operationally, was in FY16, when its utilisation rate fell to only 20%. Average charter rates fell from US$153k/day in FY14 to just US$71k/day in FY17. In addition, UMW-OG also had to make substantial asset impairments of RM2.1bn over the past three years, significantly affecting its net profit report card. …with the outlook significantly better from FY18F However, utilisation rates rebounded sharply to 68% in FY17, which helped UMW-OG narrow its losses substantially. Losses were also reduced by way of UMW-OG implementing wage cuts for its expensive rig-based crew, in line with a fall in global crew wages, and other measures to reduce costs. Management has planned more cost cuts for FY18F and expects average utilisation rates to rebound to a sustainable level of 80% for FY18-20F. As a result, we expect UMW-OG to report FY18F net profit of RM49m. Depreciation and interest expense savings added to the mix In addition to topline and operating cost savings in FY18F, we expect UMW-OG to also see lower depreciation costs in FY18F after asset impairments made last year, as well as savings in interest expense from the reduction in borrowing levels after it successfully raised RM1.82bn via a rights-cum-redeemable-convertible-preference-share issue, of which RM1.5bn was used to repay existing borrowings. Bank borrowings successfully restructured The remaining RM1.9bn in debt was refinanced into two bullets – one in five years (US$145m) and another in 10 years (US$220m) – with the remaining in revolving credits and trade facilities that can typically be rolled over. As such, the immediate pressure on UMW-OG has eased in our view, and the company has the next four years to accumulate cash for its first bullet debt repayment. Global jack-up (JU) rig utilisation rates recovering… Global JU utilisation rates have recovered from a low of 63% in February 2017 to 67% in February 2018, although the charter rates have not budged from their lows given the still-large oversupply. Utilisation rates in Southeast Asia have jumped from a low of 35% in November 2016 to a high of 62% in August 2017, before weakening to 55% in February 2018, probably due to the monsoon season, in our view. …and is expected to recover further Clarksons is forecasting global utilisation rates to rise from 66% at end-2017, to 71% at end-2018F and 74% at end-2019F. This is on the back of expected higher levels of offshore oil and gas production. Meanwhile, the outstanding JU orderbook of 85 units as at end-December 2017 represents 15.3% of the 555-strong fleet of JUs, which is a substantial drop from the peak of 27% in mid-2014. We believe this is positive for the JU market balance, as most of these units should be delivered in the next three years.

[Add FP Header] [Add FP BodyText]

SOURCES: CIMB RESEARCH, COMPANY REPORTS

Malaysia

ADD (previously HOLD) Consensus ratings*: Buy 4 Hold 4 Sell 0

Current price: RM0.25 Target price: RM0.33 Previous target: RM0.31

Up/downside: 32.8% CIMB / Consensus: -8.9%

Reuters: UMOG.KL Bloomberg: UMWOG MK Market cap: US$520.0m RM2,013m Average daily turnover: US$7.01m RM27.63m Current shares o/s: 6,999m Free float: 35.2% *Source: Bloomberg Key changes in this note

FY18-20F Core EPS increased by 98-169% from a low base, due to reduction in depreciation estimates.

Source: Bloomberg Price performance 1M 3M 12M

Absolute (%) -19.7 -42.4 -62.3 Relative (%) -20 -43.6 -68.5 Major shareholders % held Permodalan Nasional Bhd 64.8 Lembaga Tabung Haji 4.6 EPF 3.8 Insert

Analyst(s)

Raymond YAP, CFA

T (60) 3 2261 9072 E [email protected]

Financial Summary Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Revenue (RMm) 320.8 586.5 678.7 680.6 745.5Operating EBITDA (RMm) (40.5) 214.9 329.4 336.3 369.4Net Profit (RMm) (1,186) (1,132) 49 48 61Core EPS (RM) (0.20) (0.05) 0.01 0.01 0.01Core EPS Growth 5043% (77%) (3%) 28%FD Core P/E (x) NA NA 34.71 35.91 27.98DPS (RM) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA 8.97 8.28 7.62 6.61P/FCFE (x) NA NA 10.38 10.32 14.43Net Gearing 129% 44% 37% 30% 25%P/BV (x) 0.24 0.63 0.62 0.61 0.60ROE (15.3%) (5.7%) 1.8% 1.7% 2.2%% Change In Core EPS Estimates 124% 169% 98%CIMB/consensus EPS (x) (2.35) 3.41 1.09

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53

83

113

0.180

0.380

0.580

0.780Price Close Relative to FBMKLCI (RHS)

200

400

600

Apr-17 Jul-17 Oct-17 Jan-18

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Sector Note Commodities│ASEAN│April 10, 2018



Agribusiness Still no let-up in production growth in March! ■ Malaysian palm oil stocks fell 6% mom to 2.32m tonnes at end-Mar 2018. This was

6% and 2% above our and consensus estimates due to higher production. ■ Palm oil output surged 17% mom and 8% yoy to 1.57m tonnes, the highest monthly

output recorded for the country for the month of Mar. ■ However, palm oil exports rose by a higher rate of 19% mom due to stronger demand

from China and India. ■ We project palm oil stocks to fall 3% mom to 2.25m tonnes in Apr 2018F. ■ Planters are likely to report weaker qoq and yoy earnings for 1Q18F due to lower

CPO prices. Maintain Neutral rating on the sector and GENP as top Malaysian pick.

Palm oil stocks above expectations due to higher output Malaysia’s palm oil stocks fell 6% mom (+50% yoy) to a five-month low of 2.32m tonnes at end-Mar 2018. This was 6% above our forecast and 2% above Bloomberg and Reuters poll estimates. The higher stockpile against our forecast was mainly due to higher-than-expected production, which is negative for CPO price in the short-term.

Highest production achievement for the month of Mar CPO production rose 17% mom and 8% yoy in Mar 2018 to 1.57m tonnes due to seasonal effects and improving FFB yields. This monthly production was the highest ever Mar output recorded by the country, signaling that the palm trees are recovering from the El Nino effect and new areas are coming on-stream. 1Q18 production of 4.5m tonnes (+13% yoy) was broadly in line with our 2018 production estimate of 20.6m tonnes (+3.3%) for Malaysia as we project lower output growth in 2H18 due to higher base effect.

Highest monthly exports since Oct 2015 Palm oil exports grew 19% mom to a 29-month high of 1.57m tonnes in Mar 2018. This was due mainly to stronger demand from China and India, exports to which rose 28% and 26% mom respectively in Mar as traders stocked up ahead of Ramadan. We believe the stronger exports could be partly due to the rush to export CPO ahead of the reinstatement of the CPO export tax. The export tax on CPO was initially scheduled to end on 7 Apr but was extended by the government to end-Apr 2018.

Stocks to fall 3% mom in Apr 2018F We estimate palm oil stocks will fall 3% mom in Apr 2018F to 2.25m tonnes (Fig 17). We project Apr production to rise 2% mom due to seasonal factors, and exports to fall 3% mom due to the shorter working month in Apr and high export base in Mar. According to SGS estimates, Malaysian palm oil exports rose 32.6% in the first 10 days of Apr vs. the same period in Mar.

Sneak peek into 1Q18F results season We expect planters to deliver weaker qoq earnings in 1Q18F due to lower CPO price (-7.5% qoq) and production (-22% qoq). We also expect weaker yoy earnings in 1Q18F, as the higher production (+12.6% yoy) will not be sufficient to offset lower prices for CPO (-22% to RM2,462 per tonne) and PK (-31.3% to RM2,164 per tonne). We maintain our Neutral sector rating. Upside risks: higher CPO price and output. Downside risks: weaker demand for palm oil, lower CPO prices and slower new plantings.

Figure 1: Historical relationship between CPO prices and stocks

SOURCES: CIMB RESEARCH, MPOB

ASEAN

Neutral (no change)

Highlighted companies

Genting Plantations ADD, TP RM11.90, RM10.18 close

We like Genting Plantations for its rich land bank and young estates. The group has one of the youngest age profiles among the Malaysian planters under our coverage. IOI Corporation HOLD, TP RM4.74, RM4.69 close

IOI Corp’s rich assets and special dividend of 11.5sen/share from the sale of its 70% stake in Loders should support its share price. Kuala Lumpur Kepong HOLD, TP RM27.15, RM25.58 close

We expect the share price to be supported by the group’s strategic estate land bank in Malaysia. The implied CY18F P/E for KLK at our SOP valuation is 23.1x, which is in line with its historical 5-year average forward P/E.

Summary valuation metrics

Insert

Analyst(s)

Ivy NG Lee Fang, CFA


P/E (x) Dec-18F Dec-19F Dec-20F

Genting Plantations 22.43 22.30 19.66 IOI Corporation 26.18 26.04 Kuala Lumpur Kepong 23.05 21.98

P/BV (x) Dec-18F Dec-19F Dec-20F

Genting Plantations 1.77 1.71 1.65 IOI Corporation 3.57 3.36 Kuala Lumpur Kepong 2.62 2.47

Dividend Yield Dec-18F Dec-19F Dec-20F

Genting Plantations 2.42% 2.57% 2.81%IOI Corporation 1.91% 1.92%Kuala Lumpur Kepong 2.54% 2.53%

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1,100

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Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Stock (LHS) CPO price (RHS)('000 tonnes) (US$ /tonne)

3

Oil & Gas Exp & Prodn│Australia│Equity research│April 10, 2018

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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Cooper Energy

One last hurdle to go

We initiate research coverage on Cooper Energy (COE) with an Add ■recommendation and A$0.44 price target.

COE faces the largest share price catalyst it has arguably ever seen, with ■development of production wells Sole-3 and Sole-4 the last major de-risking event for the company’s flagship asset.

COE has more growth in its portfolio beyond Sole, which could ultimately carry it ■beyond our valuation.

We see COE as well placed to benefit from the strongly supportive domestic gas ■price fundamentals.

With an attractive risk-reward spread, we believe COE offers an attractive profile ■for value investors.

Drilling underway The drilling of production wells, Sole-3 and Sole-4, is arguably the largest share price catalyst in COE’s history. Already underway, drilling is scheduled to be completed during April to June. While there is some technical uncertainty, the simple structure combined with the size of the gas column (up to 71.5m), good reservoir quality (high permeability and porosity) and previous drill results (particularly from Sole-2) give us confidence. If these wells are delivered successfully we would expect COE to be re-rated to reflect greater certainty around FY19 and FY20 earnings.

Rising production and earnings base We initiate research coverage on COE at the end of a long-term transition from oil to gas focused, with the company having accurately predicted the positive forward fundamentals of the east coast gas market. As a result COE presents a value/growth leveraged investment proposition, where group production is set to triple to 6mmboe on the ramp up of COE’s wholly owned Sole gas project. The ramp up of Sole would also transform COE’s earnings base, with FY20F EV/EBITDA of 1.9x.

Long-term growth beyond Sole COE has been busy adding multiple avenues for growth in recent years. In particular, we see potential for the commercialisation of the Manta gas field (smaller than Sole but still significant), and several opportunities for COE to expand its Otway Basin operations given high exploration prospectivity and COE’s minority interest in Minerva infrastructure. De-risking these growth options could see COE trade closer to our unrisked valuation of A$0.67.

Start with an Add recommendation We initiate research coverage on COE with an Add recommendation and A$0.44 price target. We view the technical risk of executing on the Sole production wells as manageable relative to the implied value on offer in COE’s current share price. Longer term, successful appraisal drilling and sanctioning of Manta and exploration in Otway Basin creates significant further upside potential to our base case. The key risk to our Add rating is execution risk at Sole and the east coast gas price.

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

ADD Current price: A$0.31 Target price: A$0.44 Previous target: A$ Up/downside: 45.3% Reuters: COE.AX Bloomberg: COE AU Market cap: US$374.7m A$488.3m Average daily turnover: US$0.62m A$0.79m Current shares o/s 1,141m Free float: 100.0%

Price performance 1M 3M 12M

Absolute (%) -1.6 -1.6 -11.3 Relative (%) 1 3.7 -10.4

Adrian PRENDERGAST

T (61) 3 9947 4134

E [email protected]

Financial Summary Jun-16A Jun-17A Jun-18F Jun-19F Jun-20F

Revenue (A$m) 20.3 34.6 70.7 139.0 368.3Operating EBITDA (A$m) (38.7) 1.9 30.4 86.6 259.1Net Profit (A$m) (2.8) (8.7) 11.8 41.2 127.8Normalised EPS (A$) (0.080) (0.011) 0.005 0.026 0.080Normalised EPS Growth (87%) 425% 211%FD Normalised P/E (x) NA 53.31 11.86 3.82DPS (A$) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA 108.4 15.3 6.7 1.9P/FCFE (x) NA NA 13.57 5.83Net Gearing 20.6% (50.7%) (5.2%) 18.7% 1.2%P/BV (x) 1.45 1.22 1.10 1.01 0.80ROE (6.5%) 2.2% 8.8% 23.3%% Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)

76.0

90.1

104.1

118.2

0.240

0.290

0.340

0.390

Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

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IT Services│Australia│Equity research│April 10, 2018


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Frontier Digital Ventures

Cash generation update

FDV’s portfolio of online marketplaces is nearing cash flow break-even at a faster ■rate than we had anticipated.

Transaction revenues from property sales are the main cause of the revenue out-■performance.

FDV also reported that Propzy.vn, its Vietnam property portal investment, had ■secured an additional US$2m in equity funding.

Our sum-of-parts valuation is unchanged at A$0.92/share. ■ We maintain an ADD recommendation (high risk). ■

Market update on cash flow timelines FDV has provided a market update, forecasting that three of its portfolio companies are expected to be cash flow positive this year, following by another six companies in 2019. The update shows FDV’s online marketplace companies are monetising their leading market positions rapidly, mostly through transaction-related fees. Separately, FDV reported that one of its portfolio investments, Vietnam property portal Propzy.vn, has raised US$2m from a new investor. The update followed a strong first quarter performance from most of the companies in the FDV group. On the current trajectory, FDV will reach cash flow break-even at the group level in the second half of 2019.

No change to forecasts, valuation We are not upgrading our forecasts or valuation at this stage. The time-line for companies reaching cash flow break-even is ahead of our forecast for FY18 and in line with our forecasts for FY19. We will review our forecasts after the company’s quarterly cash flow statement is released.

Risks and catalysts Risks to FDV’s revenues and share price include: 1) key investee companies failing to grow audience and revenues at the expected rate; 2) operating costs of investee companies being higher than forecast; 3) significant changes in the political, economic or regulatory landscape in countries where FDV invests; and 4) significant changes in competitor behaviour. Potential re-rating catalysts for FDV include: 1) stronger-than-expected performance from FDV portfolio companies; 2) more rapid monetisation from early-stage companies in the portfolio; and 3) realisation through IPO or sale of one of the portfolio companies.

Investment view We retain a positive view on FDV. FDV offers investors exposure to the growth in online advertising marketplaces in newly emerging economies with large populations, a rapidly growing middle class, and growing smart phone usage. FDV has created significant value since investing in most of its portfolio companies and we expect that it will continue to do so. FDV invests in early-stage ventures in high-risk economies and therefore its shares are high risk. Investors with a low risk profile should not invest in FDV.


▎Australia

ADD (no change) Current price: A$0.64 Target price: A$0.92 Previous target: A$0.92 Up/downside: 43.9% Reuters: FDV.AX Bloomberg: FDV AU Market cap: US$108.8m A$141.8m Average daily turnover: US$0.03m A$0.04m Current shares o/s 220.4m Free float: 42.2%


Absolute (%) -14.7 -17.4 28 Relative (%) -12.1 -12.1 28.9

Ivor RIES

T (61) 3 9947 4182

E [email protected]


Revenue (A$m) 2.14 10.04 15.51 21.73 30.34Operating EBITDA (A$m) -4.33 -6.33 -4.56 -1.23 3.93Net Profit (A$m) -3.87 -13.49 -8.76 -6.09 -1.85Normalised EPS (A$) (0.036) (0.044) (0.029) (0.016) (0.001)Normalised EPS Growth 205% 21% (35%) (43%) (92%)FD Normalised P/E (x) NA NA NA NA NADPS (A$) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA NA NA NA 27.05P/FCFE (x) NA NA NA NA 77.11Net Gearing (44.6%) (28.3%) (36.9%) (30.5%) (31.3%)P/BV (x) 2.68 3.48 2.53 2.57 2.38ROE (13.4%) (20.8%) (13.1%) (6.5%) (0.5%)% Change In Normalised EPS Estimates 0% 0% 0%Normalised EPS/consensus EPS (x) 0.95 0.82 0.13

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142

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0.800


Source: Bloomberg

11223


Vol m

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Toll Roads│Australia│Equity research│April 9, 2018


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Macquarie Atlas Roads

MQA internalisation agreement

MQA has agreed with Macquarie the details of its internalisation. Costs are less ■than we expected (albeit run into FY19) with no obvious need for a capital raising.

FY18 DPS guidance is unchanged at 24 cps. After factoring in the agreement, our ■FY19F DPS declines while our forecast DPS from FY20F onwards increases.

Our 12 month target price increases 9 cps to $6.81 per share. ADD retained. ■

Agreement on management internalisation at the MQA level… Macquarie will remain MQA’s external manager until 15 May 2019. During this time, MQA will incur one-off internalisation-related costs (~$12m) as well as continue to pay base fees to Macquarie (say $33-34m pa at current market cap and fee structure). From the termination date, management fees to Macquarie cease but MQA will pay Macquarie $750k per month until end-CY19 for transition services. Performance fees payable to Macquarie cease after 30 June 2018. MQA estimates ongoing running costs on an internalised basis at $15-20m pa, compared to ~$4m currently.

…but still tied to Macquarie via the APRR/MAF2 structure No change has yet been made to the APRR/MAF2 management arrangements with Macquarie. Macquarie will start to receive fees for the ongoing management of MQA’s interest in the APRR from termination of the MQA management agreement. This includes a fixed base fee of €7.4m pa (~$11.9m pa). It also includes a performance fee equal to 15% of actual cashflows when MQA’s IRR exceeds 8% pa; the calculation starts on 16 May 2019 and is based on an agreed APRR valuation as at that date. The agreed valuation would need to be ~10% below our APRR valuation for MQA to accrue a performance fee by the end of the current concession term. MQA has promised to “actively work with Macquarie and other parties to see if mutually acceptable alternative arrangements can be achieved.”

Modelling impact We had assumed internalisation would be completed in 1H18, with MQA paying Macquarie $111m for advisory and support costs funded by a capital raising. The agreement announced today means internalisation costs are only ~$18m spread across FY18-19 (thus no capital raising required), but MQA base fees are paid for 12 months more than we’d anticipated. Based on MQA’s agreement with Macquarie, we assume ~$78m of performance fees are paid in 2H18 via scrip issue as per historical precedent (vs $45m previously but depends on stock performance against the XKIAI). The MAF2 base fees and increase in fund running costs are in-line with our existing forecasts. The outcome is detrimental to FY19F MQA cashflows by 3.7 cps (costs run into FY19), but positive to FY20+ per share metrics by >1.0 cps (no capital raising required).

Investment view With clarity on MQA internalisation, fundamental factors (eg. APRR toll revenue growth, legislated French company tax rate cuts, substantial debt service savings due to expiry of the Eiffarie interest rate swaps in June 2018, declining AUDEUR) should drive the share price higher. However, we also watch cautiously for capital requirements related to the final exit of MEIF2 from the APRR (MQA will be involved in the pre-emptive sale process) and the potential MAF2 internalisation (the PV of future MAF2 base fees at a 7% pa discount rate is €116m).


▎Australia

ADD (no change) Current price: A$5.91 Target price: A$6.81 Previous target: A$6.72 Up/downside: 15.3% Reuters: MQA.AX Bloomberg: MQA AU Market cap: US$3,044m A$3,958m Average daily turnover: US$18.01m A$23.08m Current shares o/s 669.8m Free float: 84.0%


Absolute (%) 4.4 -5.1 15 Relative (%) 7 0.2 15.9

Nathan LEAD

T (61) 7 3334 4548

E [email protected]

Financial Summary Dec-16A Dec-17A Dec-18E Dec-19E Dec-20E Dec-21E

Distribution (A$ cps) 18.0 20.00 24.0 36.2 43.1 64.0 - growth 13% 11% 20% 51% 19% 48%

Distribution yield 3.0% 3.4% 4.1% 6.1% 7.3% 10.8%APRR EBITDA (100%, €m) 1,685 1,775 1,891 1,979 2,050 2,125 - growth 6% 5% 7% 5% 4% 4%

D/Greenway EBITDA (100%, US$m) 70 74 72 74 78 82 - growth 6% 5% -2% 2% 6% 4%

APRR distribution to MQA (A$m) 125 147 225 307 323 362DG distribution to MQA (A$m) - - - - - 105MQA corporate costs (A$m) (35) (37) (51) (49) (30) (30)MQA cash balance (A$m) 223 40 46 46 46 46

97.0

106.4

115.8

125.1

5.00

5.50

6.00

6.50


Source: Bloomberg

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Sector Note │ Alpha series Property│China│April 10, 2018



Property - Overall We estimate EPS growth of 21-36% p.a. in 2018-20F ■ We expect Chinese developers to register EPS growth of 21-36% over 2018-20F. ■ Developers on average target sales of 33% for 2018, with the small- and mid-caps

even aiming for a faster 40-67% growth rate. ■ We assess that Times, Logan, Aoyuan and Agile are the biggest beneficiaries from

proposed the big bay area plan which will likely be announced soon. ■ Valuations for China property stocks especially small- and mid-caps are attractive,

trading at about 40% discount to NAV and 7x 2018F P/E, and 5% yield. ■ Times, Aoyuan and Yuzhou are our preferred names among small-caps while we like

RF, CIFI and Agile for mid-caps. For large-cap, we like Longfor

Developers' 2017 core earnings rose 52% Chinese developers posted impressive 2017 results, with core earnings rising 52% yoy, mainly driven by significant gross margin improvement and strong revenue growth. Of the 20 Chinese developers in our universe, nine (about 45%) reported earnings that beat our estimates, seven (35%) missed our estimates, and the remaining four (20%) wear in line.

Gross margin to edge down over 2018-20F Thanks to strong property prices in the past 12-18 months, developers' gross margin improved 3.4% pts to 31.1% in 2017. For 2018F, we expect gross margin to remain largely intact at 31%, and gradually soften to 30.7% in 2019F and 30% in 2020F when more projects with high land cost kick in.

Developers target average sales growth of 33% for 2018 On average, developers achieved strong sales growth 50% yoy in 2017, well above their original targets of 20-25%. For 2018, developers target sales growth of 33%, with small- and mid-cap developers (CIFI, RF, KWG, Yuzhou, Logan, etc) aiming for a faster growth rate of 40%-67%. EPS to see growth of 36%/28%/21% over 2018/19/20F On the back of strong sales growth and relatively stable margin, we expect that Chinese developers can continue to deliver strong earnings growth for the next few years. Specifically, we estimate core earnings growth of 36%/28%/21% over 2018/19/20F, making the property sector one of the highest earnings growth sectors in China. Chinese developers offer yield of 5.2-7.5% over 2018-20F Despite their strong share price performance in the past 12 months, developers still offered dividend yield of 3.8% for 2017. Given their strong earnings growth and decent payout (25-50%), we estimate that Chinese developers will offer attractive dividend yield of 5.2-7.5% over 2018-20F.

Buy Times, Logan, Aoyuan and Agile on the big bay area theme We reiterate our strong conviction that investors should invest into developers that have high exposure to the big bay area (BBA), as we believe the property markets of BBA cities will benefit from upcoming favourable policies to be announced by governments. Our top buys for the BBA theme include Times, Logan, Aoyuan and Agile which have about 30-80% of their land bank in the BBA cities.

Valuation still attractive We prefer small- and mid-cap developers as we think they can achieve faster earnings growth ahead. Moreover, their valuations are still attractive – about 40% discount to NAV, 7x 2018F PE and 5.2% yield. Times, Aoyuan and Yuzhou are our preferred names among small caps while we like RF, CIFI and Agile for mid caps. For large caps, we like Longfor. Key risks to our positive call include tighter measures imposed by the governments which may cause developers to miss their high 2018 sales growth targets.

Figure 1: Developers offer EPS growth of 21-36% and yield of 5.2-7.5% over FY18-20F

SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS

China

Neutral (no change)


Guangzhou R&F ADD, TP HK$25.90, HK$19.86 close

We assess the market as too pessimistic of this company; this could hinder it from achieving its ambitious sales targets for FY18-20F. We believe the concern is priced in as the stock is trading at only 5x 2018F P/E for 8% yield. This makes it appealing, in our view. Longfor Properties ADD, TP HK$30.60, HK$24.60 close

Longfor has benefited significantly from its proactive land banking in top-tier cities and we expect its rental income to record strong growth of 20-30% p.a. over the next few years. The stock offers a decent yield of 4.3% in 2018F. Times Property Holdings Ltd ADD, TP HK$14.00, HK$12.24 close

Based in Guangzhou, Times has about 60% of its land reserve in the BBA. We estimate its EPS could increase 35% over FY18-20F. It is trading at an attractive valuation of 39% discount to NAV, 5x 2018F P/E and 5.5% yield. Summary valuation metrics

Insert

Analyst(s)

Raymond CHENG, CFA

T (852) 2539 1324 E [email protected] Siu Fung LUNG, CFA T (852) 2539 1327 E [email protected]


Guangzhou R&F 5.18 3.85 2.85 Longfor Properties 9.43 7.82 6.79 Times Property Holdings Ltd 5.08 3.67 2.71


Guangzhou R&F 0.76 0.67 0.58 Longfor Properties 1.48 1.33 1.19 Times Property Holdings Ltd 0.93 0.73 0.57


Guangzhou R&F 8.06% 9.44% 11.08%Longfor Properties 4.24% 5.12% 5.89%Times Property Holdings Ltd 5.46% 7.10% 9.30%

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Company Note Finance Companies│India│April 10, 2018



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Shriram Transport Finance Improving fundamentals; attractive valuations ■ Our recent interaction with management suggests that overall fundamentals are

improving with acceleration in AUM growth and improving asset quality. ■ We expect AUM growth to remain strong at +15% in the near term. In the longer term,

we expect AUM growth of ~17-18% due to a pick-up in economic activity. ■ The transition to 90-day recognition could impact asset quality by 100-120bp, in line

with its earlier guidance. Overall asset quality is expected to improve from hereon. ■ Margins likely to remain stable in the near term. The incremental borrowing cost

(negligible incremental borrowing) is ~100-120bp lower than average borrowing cost. ■ Maintain Add with a revised TP of Rs1,750 (Rs1,425 previously).

AUM growth expected to remain strong in the near term AUM growth is expected to remain strong at ~14-15% in the near term as underlying demand remains robust. Management expects growth to pick up in the medium term if the outlook on monsoon is positive. Growth could accelerate to 17-18% in the longer term as demand for HCV improves with a pick-up in economic activity with higher LTVs. We expect overall AUM CAGR of 18% over FY18-20F. We adjust FY19-20F EPS due to higher revenue growth. FY18 EPS reduced due to higher credit costs.

Margins likely to remain stable in the near term (excl one-offs) We expect margins to remain stable in the near term (excl impact of 90 day provisioning); the recent decline in wholesale rates will aid margins. The incremental cost of borrowing is ~100-120bp lower than the average borrowing cost; hence overall borrowing cost is not expected to rise meaningfully. Management expects the transition to 90-day provisioning in 4QFY3/18 to impact margins by ~15bp due to higher interest reversals. Overall margins are expected to be in the range of 7.35-7.6% in the near term.

Transition to 90 day provisioning in 4QFY18 The company will move to 90-day recognition in 4QFY18 vs. 120-day recognition currently. Management expects that the transition to 90-day recognition will impact asset quality by 100-120bp, which is in line with its earlier guidance. Management highlighted that the worst is over in terms of asset quality and it should remain stable in the near term. Annualised credit costs on AUM declined 17bp and stood at 2.61% in 3QFY18. We expect overall credit costs to improve significantly from 1.7% in FY18 to 1.2% in FY20F.

Fundamentals improving as reflected in 3QFY18 results Over the last six years, fundamentals were impacted by a weak CV cycle with deterioration in asset quality which was reflected in PPOP growth of 10.5% over FY12-17. In 3QFY18, the company reported strong all-round performance, with improvements in asset quality and acceleration in AUM growth. We expect fundamentals to improve further, with a strong 4QFY18F performance. We expect AUM growth to remain solid at 18.8% in FY19-20F, with an improvement in asset quality and stable margins.

Maintain Add with a higher target price of Rs1,750 per share We expect strong AUM growth in the next 2-3 years and stable asset quality as the worst seems to be over. We expect 27% FY18-20F earnings CAGR. We expect ROE to improve by 290bp to 17.6% in FY20F vs. 14.7% in FY18, given continued strong revenue momentum, stable margins and decline in credit costs. Our TP rises to Rs1,750 at 2.7x FY19 P/BV as we roll it over (previously Rs1,425), based on ~17.6% sustainable ROE. Key risks: prolonged low AUM growth and significant rise in rates.


India

ADD (no change) Consensus ratings*: Buy 27 Hold 6 Sell 5

Current price: Rs1,559 Target price: Rs1,750 Previous target: Rs1,425

Up/downside: 12.2% CGS-CIMB / Consensus: 12.2%

Reuters: SRTR.NS Bloomberg: SHTF IN Market cap: US$5,440m Rs353,756m Average daily turnover: US$16.39m Rs1,058m Current shares o/s: 226.9m Free float: 73.9% *Source: Bloomberg Key changes in this note

FY18F EPS reduced by 4%. FY19F EPS increased by 2%. FY20F EPS increased by 3%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 16.5 2.9 43.3 Relative (%) 15.1 4.8 29.6

Major shareholders % held Shriram Capital ltd 26.1 PIRAMAL ENTERPRISES 10.0 Sanlam Life Insurance Ltd. 3.0 Insert

Analyst(s)

Siddharth TELI

T (91) 22 4880 5158 E [email protected] Dhiren SHAH T (91) 22 4880 5170 E [email protected]

Financial Summary Mar-16A Mar-17A Mar-18F Mar-19F Mar-20F

Net Interest Income (Rsm) 41,732 45,060 52,248 60,486 69,363Total Non-Interest Income (Rsm) 10,141 11,372 14,122 16,790 19,817Operating Revenue (Rsm) 51,873 56,432 66,370 77,275 89,180Total Provision Charges (Rsm) (20,586) (24,443) (24,921) (23,350) (25,861)Net Profit (Rsm) 11,782 12,574 17,716 24,302 28,531Core EPS (Rs) 51.9 55.4 78.1 107.1 125.7Core EPS Growth (4.8%) 6.7% 40.9% 37.2% 17.4%FD Core P/E (x) 30.03 28.14 19.97 14.56 12.40DPS (Rs) 10.00 10.00 11.00 11.00 11.00Dividend Yield 0.64% 0.64% 0.71% 0.71% 0.71%BVPS (Rs) 447.5 498.1 563.3 657.5 770.4P/BV (x) 3.48 3.13 2.77 2.37 2.02ROE 12.2% 11.7% 14.7% 17.5% 17.6%% Change In Core EPS Estimates (4.44%) 1.94% 3.11%CIMB/consensus EPS (x) 0.99 1.03 1.00

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Sector Note Financial Services│India│April 10, 2018



Financial Services - Overall 4QFY18F results preview ■ Accelerated NPL recognition and high credit costs are the key themes in 4QFY18F. ■ We expect corporate banks to post weak earnings, and losses from PSU banks. ■ Private retail banks and NBFCs will benefit as they gain market share in their

respective segments while maintaining stable NIMs. ■ We see PAT decline of 6.8% for private banks, and losses for PSU banks in

4QFY18F. ■ Maintain sector Overweight. Top picks: Axis, SBI, HDFCB and SHTF.

Corporate banks' topline growth likely to remain weak in 4QFY18F 4QFY18F topline growth for corporate banks is likely to remain weak as they push through NPLs, resulting in higher interest reversals. Retail banks will likely see robust fee income in 4Q but overall treasury gains to remain lacklustre, as per our estimate. The Reserve Bank of India (RBI) allowed amortisation of bond losses over four quarters, giving some relief—PSU banks may see write-backs for their huge mark-to-market (MTM) losses in 3QFY18.

High impairments/credit costs on account of new RBI guidelines In 4Q, corporate banks (private as well as PSUs) will accelerate the recognition of stressed corporate loans, i.e. accounts under dispensation schemes like Scheme for Sustainable Structuring of Stressed Assets (S4A), Corporate Debt Restructuring (CDR) and Strategic Debt Restructuring (SDR) which account for +3% of the system and could be recognised in the next few quarters. As such, we expect very high delinquencies and credit costs for corporate lenders, more so as no Insolvency and Bankruptcy Code (IBC)-related resolutions have come through yet.

Growth revival benefiting retail banks Loan growth has revived to 11% yoy in Mar-18 and deposits growth was 3.3% yoy. Overall growth continued to be driven by retail loans (20% yoy growth). Given a large proportion of banks now under RBI's Prompt Corrective Action (PCA), coupled with NPL-related issues, we expect private sector banks to accelerate their market share gain from public sector undertaking (PSU) banks.

RBI guideline on amortising bond losses to provide some respite RBI has allowed bond losses (including those incurred in 3QFY18) to be amortised over a period of four quarters—we note that banks (particularly PSUs) had incurred huge MTM losses following a spike in yields in 3QFY18. We expect banks to reverse a meaningful portion of the same on account of the new guidelines coupled with the fact that yields corrected meaningfully towards end-Mar (10-year G-Sec yields rose 7bp qoq).

NBFCs to be the biggest beneficiaries of current environment We expect earnings to remain stable qoq in 4QFY18F. Disbursements should remain strong due to improving sentiment in rural areas and underlying demand; this should aid loan growth in 4QFY18F for MMFS and SHTF. We expect the asset quality of non-banking financial companies (NBFCs) to be stay stable qoq—migration to 90 days provisioning to cause one-off provisions for SHTF. Margins likely to remain stable for SHTF and MMFS. Overall, we think 4QFY18F to be stable quarter for NBFCs.

Maintain sector Overweight Asset quality remains the key theme in 4QFY18F and we expect that chunky recognition is behind us. That said, the IBC-related resolutions will likely happen in FY19F; this will aid recoveries for corporate banks. Margins should look up from 1QFY19F, driven by lower interest reversals and higher MCLR. We keep our sector Overweight call. Our top picks are Axis, ICICI, SBI and HDFCB. SHTF and Yes Bank are key mid-cap picks.

Figure 1: Valuation matrix

SOURCES: CGS-CIMB RESEARCH, COMPANY

India

Overweight (no change)


Axis Bank ADD, TP Rs700.0, Rs519.3 close

Pressure on its asset quality is likely to persist throughout FY18F, but we think its provisioning coverage ratio (PCR) of ~66% offers comfort. Operating profit could bounce back in FY18F. In our view, Axis’s strong retail franchise, robust current account and savings account (CASA) accruals are likely to continue. HDFC Bank ADD, TP Rs2,400, Rs1,939 close

We expect steady earnings for the bank over the next two years, driven by strong loan growth and stable margins. Its deposit franchise continues to remain robust, with stable asset quality. ICICI Bank ADD, TP Rs390.0, Rs280.9 close

We estimate ICICI to deliver a strong 23% earnings CAGR over FY18-20F. Key potential catalyst is the resolution of some of its chunky assets. Its CASA franchise remains strong and its tier 1 cap is at a comfortable level


Insert

Analyst(s)

Siddharth TELI

T (91) 22 4880 5158 E [email protected] Dhiren SHAH T (91) 22 4880 5170 E [email protected]


Axis Bank 32.34 18.14 11.94 HDFC Bank 29.43 22.84 18.74 ICICI Bank 19.15 15.15 12.66


Axis Bank 2.04 1.85 1.63 HDFC Bank 4.98 4.23 3.56 ICICI Bank 1.69 1.60 1.46


Axis Bank 1.11% 1.16% 1.15%HDFC Bank 0.59% 0.61% 0.62%ICICI Bank 1.29% 1.69% 1.78%

FY18F FY19F FY18F FY19F FY18F FY19FPublic Banks

BANK OF BARODA ADD 153 220 44% 26.2 8.8 0.9 0.9 3.6% 10.1%CANARA ADD 286 475 66% 13.4 6.6 0.6 0.5 4.4% 8.5%SBI ADD 261 400 53% 93.5 14.2 1.1 1.1 1.2% 7.7%Private Banks

AXIS ADD 519 700 35% 33.0 15.9 2.0 1.8 6.6% 11.9%HDFC BANK ADD 1,939 2,400 24% 28.4 21.6 4.8 4.1 18.3% 20.5%ICICI (ex-subs) ADD 281 390 39% 29.5 18.5 1.4 1.3 9.4% 7.3%INDUSIND ADD 1,860 1,925 3% 30.1 23.5 4.8 4.0 17.0% 18.7%YES ADD 316 365 15% 17.6 14.2 2.9 2.5 17.4% 18.8%NBFCs

HDFC (ex subs) HOLD 1,837 2,004 9% 18.1 15.9 4.0 3.5 22.0% 21.8%SHTF ADD 1,559 1,750 12% 20.0 14.6 2.8 2.4 14.7% 17.5%

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Company Flash Note Construction│Indonesia│April 11, 2018



Insert Insert

Waskita Karya Net positive impact from first RDPT issuance ■ WSKT, through Waskita Toll Road, issued its first closed-end fund (RDPT) of Rp5tr,

with underlying asset of Waskita Transjawa Toll Road, implying 3.1x P/BV pricing. ■ We think the RDPT issuance will have a net positive impact on WSKT, and should

allow the company to move forward as a toll road developer. ■ Maintain Add with an unchanged TP of Rp4,100, still based on SOP.

Issuance of first closed-end fund (RDPT) on 10 Apr 2018 ● On 10 Apr 2018, WSKT, through its subsidiary Waskita Toll Road (WTR) issued its

first closed-end fund (RDPT) with underlying shares of PT Waskita Transjawa Toll Road (WTTR). Total proceeds from RDPT were Rp5tr, with a five-year tenor.

● WTTR is a subsidiary of WTR and owns three toll road concessions in Java, including Kanci-Pejagan (35km), Pejagan-Pemalang (57.5km) and Pasuruan-Probolinggo (31.3km). Previously, WTR owned a 99.99% stake in WTTR.

● RDPT’s new investors include four local pension funds, including PT Taspen, PT Asabri, PT Jasa Raharja, and Perum Jamkrindo.

The RDPT scheme ● The issuance of the Rp5tr RDPT includes Rp2.85tr for 57.1% of WTTR’s old shares

and Rp2.15tr for 30% of the new shares issued. Post-issuance, RDPT would own a 70% stake in WTTR. WTR’s ownership would be diluted to 30%.

● WTR’s implied selling price was at 3.1x the book value of c.Rp930bn. Net capital gains after tax to be booked by WSKT are estimated to be Rp1.44tr. This should boost our headline NP in FY18F to Rp5.5tr, based on our estimate.

● RDPT offers 10% IRR p.a. net to its investors. The company clarified that the 10% promised IRR should reflect the increase in the market value of underlying assets, and not interest rates.

● WTR has the call option of partial or full ownership in RDPT that can be exercised anytime during the tenor. On the other hand, RDPT will have limited put options to sell a 4.75% stake p.a. in the first four years to WTR. In this case, if WTR is unable to exercise the call option, RDPT has the ability to sell its ownership to a third party.

Net positive for WSKT ● If put options are fully exercised by RDPT investors and absorbed by WTR, WTR

would have a 49% of stake at most (maintaining minority ownership) in WTTR. Hence, WSKT does not need to consolidate WTTR in its book.

● Fully exercised put options by RDPT investors would cost Rp1.7tr for WTR to buy back, based on our estimate. Overall, WSKT should still enjoy a net gain of Rp2.8tr. (Fig 1).

Maintain an Add call ● We maintain our Add call on WSKT with an unchanged TP of Rp4,100, implying 13.5x

FY18F P/E (slightly above its three-year mean P/E of 12.3x). Our valuation remains based on SOP.

● WSKT remains attractively priced at 8.4x FY18F P/E. Additionally, it would have greater ability to move forward with its strategy as a toll road developer given its success in capital recycling. We maintain WSKT as our key sector pick.

● Downside risks to our Add call are failure to secure funding and slower-than-expected revenue realisation. Catalysts are better-than-expected earnings delivery.

Figure 1: WTTR RDPT issuance calculation (CIMBe)


In Rp tr, unless otherwise stated

Total gross proceeds received by WSKT 5.0

Selling 57.1% stake in WTTR 2.9 Rights issue of 30% new shares 21.5

BV of 3 toll roads in WTTR 0.9 Gross proceeds from selling 57.1% stake in WTTR 2.9 Estimated gain on stake selling 1.9 Estimated tax on gain (25% of gain) 0.5 Net gain to be booked in WSKT's P/L 1.4

If put options are fully exercised (in Rp tr) Yr-0 Yr-1 Yr-2 Yr-3 Yr-4 Total

Cash inflow 5.0 5.0 Cash outflow

Tax on gain (0.5) (0.5) Buyback price (0.4) (0.4) (0.5) (0.5) (1.7)

Net gain for WSKT after put options are fully exercised 2.8

Indonesia

April 11, 2018 - 12:22 AM


Current price: Rp2,540 Target price: Rp4,100 Previous target: Rp4,100


Reuters: WSKT.JK Bloomberg: WSKT IJ Market cap: US$2,507m Rp34,477,712m Average daily turnover: US$6.43m Rp87,490m Current shares o/s 13,574m Free float: 34.0% *Source: Bloomberg Key financial forecasts


Absolute (%) -5.2 1.2 11.9 Relative (%) -3.5 1.9 -0.2

Major shareholders % held Government of Indonesia 66.0

Insert

Analyst(s)

Aurelia BARUS

T (62) 21 3006 1721 E [email protected] Namira LAHUDDIN


Dec-18F Dec-19F Dec-20F

Net Profit (Rpb) 4,123 4,051 4,291Core EPS (Rp) 303.9 298.5 316.3Core EPS Growth 6.23% (1.77%) 5.95%FD Core P/E (x) 8.36 8.51 8.03Recurring ROE 26.6% 22.0% 20.1%P/BV (x) 2.03 1.74 1.51DPS (Rp) 85.83 91.18 89.56Dividend Yield 3.38% 3.59% 3.53%

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Sector Note Construction and Materials│Indonesia│April 10, 2018



Cement Mar 18: Decent volume growth from bulk, diverging volume and ASP trends among incumbents ■ National cement sales volume rose by 3.5% yoy (+9% mom) in Mar 2018, which

brought cumulative growth to 6% yoy in 1Q18. ■ Decent 1Q18 sales volume growth was due to exceptional bulk growth (+19% yoy),

while bag was weaker (+3% yoy). Incumbents outpaced new players in bulk in 1Q. ■ SMGR’s Mar volumes were flat yoy (+1% in 1Q18), while INTP’s grew 7% yoy (+10%

in 1Q18). We think the growth divergence was due to their different pricing strategies. ■ Market leader SMGR increased its pricing in Jan-Mar (increased every month), while

others did not. This resulted in SMGR’s market share loss in 1Q18. ■ We stay Underweight amid poor fundamentals and sector’s outperformance.

Decent sales volume in Mar, especially from Sumatera, Kalimantan National cement sales volume rose 3.5% yoy (+9% mom) in Mar 18, which brought the 1Q18 volume growth to 6% yoy. Bulk was the key driver in 1Q18 (+19% yoy), while bag was slower (+3% yoy). In terms of area, Java and ex-Java growth were relatively similar in 1Q18 (+6% and +7% yoy, respectively) especially in West (+8% yoy) and Central Java (+14% yoy), as well as Sumatra (+12% yoy) and Kalimantan (+12% yoy) in ex-Java area. Incumbents were strong in bulk, but losing in bag to new players While growth was primarily driven by bulk cement, there were stark differences between incumbents’ and new players’ growth. Incumbents still grew faster than new players in bulk (+20% yoy vs. +14% yoy in 1Q18) but new players outpaced incumbents in bag (+14% vs. flat yoy in 1Q18). We think this is structurally negative for listed incumbents’ ASP as: 1) bulk pricing is 15-20% lower than bag, and 2) losing brand equity in bag makes it harder to recoup lost market share. Stabilising market share for INTP and SMCB, but not for SMGR SMGR’s Mar volume growth was flat yoy (+1% yoy in 1Q18). Meanwhile, INTP and SMCB grew 7% yoy and 8% yoy (+10% yoy and +6% yoy in 1Q18), respectively. SMGR was the only incumbent that lost market share on a yoy basis (39% in 1Q18 vs. 41% in 1Q17) while INTP’s and SMCB’s market shares were stable yoy at 26% and 15%, respectively. We think this was due to different pricing strategy for each incumbent.

Different pricing strategy Based on our checks, SMGR raised its overall ASP by 3-4% since Dec 17. In contrast, INTP and SMCB have not increased their prices but were aggressive in promotions (for INTP, through its fighting brand). Our retail price survey (Jabodetabek area) also confirms this (SMGR’s retail pricing is flat since Dec 2017 but INTP’s and SMCB’s have dropped by 1-2%). Raising prices may work if demand picks up, but with the fasting month in May and Lebaran in Jun, we think it is too early to raise prices now.

Maintain Underweight We stay sector Underweight amid poor fundamentals, recent sector outperformance (up 7% vs. JCI over the past 12 months), as well as steep valuations of 28.5x FY18F P/E (vs. historical 10-year average of 16.6x) and 15.1x FY18F EV/EBITDA (vs. historical 10-year average of 12.1x). Possible de-rating catalysts are weaker-than-expected sales volume growth and further decline in ASP. Key upside risks are stabilising prices due to better demand or consolidation and normalising costs.

Figure 1: National cement sales volume growth 3-month moving average (3MMA), still

driven by bulk cement sales

SOURCES: CGS-CIMB RESEARCH, INDONESIA CEMENT ASSOCIATION

Indonesia

Underweight (no change)


Indocement REDUCE, TP Rp14,500, Rp18,900 close

INTP is the second-largest cement player in Indonesia, with total installed capacity of 24.9mt p.a. at end-FY17. It focuses on the Java market, where it faces intense competition. Semen Indonesia

REDUCE, TP Rp8,400, Rp10,250 close

SMGR is the largest cement company in Indonesia (c.35mt p.a. capacity at end-FY17), with sales roughly equally split between Java and ex-Java. This helps the company offset pricing pressure in Java.


Insert

Analyst(s)

Jovent GIOVANNY

T (62) 21 3006 1727 E [email protected] Timothy HANDERSON T (62) 21 3006 1724 E [email protected]


Indocement 26.75 22.50 Semen Indonesia 33.89 23.14


Indocement 2.63 2.47 Semen Indonesia 2.05 1.94


Indocement 1.57% 1.87%Semen Indonesia 1.61% 1.45%

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Company Note Stockbroking & Exchanges│Malaysia│April 10, 2018



Insert Insert

Bursa Malaysia Adjusting EPS forecasts for the bonus issue ■ Bursa’s proposed 1-for-2 bonus issue went ex on 10 Apr 18. ■ To factor in the bonus issue, we cut our FY18-20F EPS forecasts by circa 33% and

lower our target price from RM10.40 to RM6.90. ■ We are projecting weaker net profit growth of 7.6% in FY18F vs. 15% in FY17, as we

expect a smaller increase in equity income in FY18F. ■ For the topline, we are projecting a 7.3% rise in Bursa’s FY18F operating revenue. ■ Retain Hold on Bursa due to expected slowdown in equity income growth in FY18F.

Bonus issue went ex on 10 Apr 18 On 27 Nov 17, Bursa proposed a 1-for-2 bonus issue to issue up to a total of 269.8m new shares. The bonus issue went ex on 10 Apr 18. Bursa stated that the rationale for the bonus issue is to increase the liquidity of its shares in the market and provide opportunities for greater participation by investors.

Cutting EPS forecasts and target price to factor in the bonus issue We cut our FY18-20F EPS forecasts by circa 33% as we increase our assumed share base from 536.2m to 806m to factor in the 269.8m new shares to be issued under the bonus issue. This also lowers our target price from RM10.40 to RM6.90, which is still pegged to a target FY19F P/E of 21.5x, derived from one standard deviation above the 5-year average.

Projecting 7.6% net profit growth in FY18F Our net profit forecasts remain unchanged. We are forecasting net profit growth of 7.6% in FY18F. This is below the net profit growth of 15.2% in FY17, as we expect a narrower expansion in equity income. FY18F net profit could be underpinned by the projected 7.3% rise in total operating revenue (vs. +9.9% in FY17). We are forecasting a slower 5.3% increase in FY18F equity income (+21.9% in FY17), as we do not expect FY17’s robust performance of the equity market to repeat in FY18F.

Bursa’s expectations for 2018 In 2018, Bursa expects the equity market to remain resilient, given the strong economic data and strengthening of Ringgit. However, the trading volatility may be influenced by domestic and external factors, including the geopolitical developments and the tightening of monetary policies in major economies. For the derivative market, the volatility in commodity prices and the underlying equity market could continue to affect the hedging and trading activities of the CPO and index futures contracts, as stated by Bursa.

Key strategic focuses In 2018, we believe that Bursa will continue to focus on the following strategic focuses for the development of the capital markets – (1) creating a more facilitative trading environment, (2) facilitating tradable alternatives, (3) reshaping market structure and framework, and (4) achieving the status of regional market place with global access.

Retain Hold The bonus issue does not alter the valuations of Bursa and our rating for the stock. We retain our Hold call on Bursa due to the expected slowdown in equity income growth in FY18F. Potential upside/downside risks to our call are a pick-up/decline in the trading values of the equity and derivatives markets. We prefer RHB Bank for exposure to Malaysia’s equity market.

SOURCES: CIMB RESEARCH, COMPANY REPORTS

Malaysia

HOLD (no change) Consensus ratings*: Buy 6 Hold 7 Sell 1

Current price: RM6.99 Target price: RM6.90 Previous target: RM10.40

Up/downside: -1.2% CGS-CIMB / Consensus: -38.2%

Reuters: BMYS.KL Bloomberg: BURSA MK Market cap: US$1,455m RM5,633m Average daily turnover: US$2.31m RM9.04m Current shares o/s: 804.3m Free float: 67.8% *Source: Bloomberg Key changes in this note

FY18-20F EPS forecasts cut by circa 33%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -5.8 -1.7 10 Relative (%) -6.1 -2.9 3.8

Major shareholders % held Capital Market Development Fund 18.6 Kumpulan Wang Persaraan 13.6 EPF 7.1 Insert

Analyst(s)

Winson NG, CFA



Revenue (RMm) 472.6 522.0 560.2 596.4 637.4Operating EBITDA (RMm) 294.7 330.2 357.6 382.3 411.1Net Profit (RMm) 193.6 223.0 239.9 258.0 279.0Core EPS (RM) 0.24 0.28 0.30 0.32 0.35Core EPS Growth (2.9%) 14.7% 7.5% 7.5% 8.1%FD Core P/E (x) 28.91 25.20 23.45 21.83 20.19DPS (RM) 0.23 0.36 0.28 0.30 0.31Dividend Yield 3.24% 5.10% 4.05% 4.35% 4.46%EV/EBITDA (x) 12.90 12.30 11.52 10.91 10.22P/FCFE (x) 38.87 17.20 13.56 18.55 15.21Net Gearing (204%) (182%) (172%) (163%) (153%)P/BV (x) 6.47 6.61 6.47 6.30 6.05ROE 23.2% 25.9% 27.9% 29.2% 30.6%% Change In Core EPS Estimates (33.4%) (33.5%) (33.5%)CIMB/consensus EPS (x) 0.68 0.71 0.75

95.0

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106.3

111.9

6.10

6.60

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7.60

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Eyes on the Ground Technology Components│Singapore│April 10, 2018 Shariah Compliant



Excelpoint Technology Ltd More than 30 years of experience ■ EBN recognised Excelpoint as one of the top 25 global electronics distributors in

2017. ■ None of Excelpoint’s customers accounted for more than 10% of its FY17 revenue. ■ FY17 revenue grew 16%, while net profit growth was 14.8% yoy. ■ The company is positive on its earnings outlook, given the growth potential for the

Internet of Things. ■ Excelpoint trades at FY17 P/E of 7.7x, P.BV of 0.85x. FY17 dividend yield is 6.47%.

Top 25 global electronics distributor from Singapore Excelpoint Technology Ltd (Excelpoint) is an electronic components distributor that also offers engineering design services and supply chain management to its customers. Established in 1987 and headquartered in Singapore, Excelpoint has presence in more than 10 countries across Asia Pacific. EBN, a premier online community for global supply chain professionals, recognised Excelpoint as one of its top 25 global electronics distributors in 2017. Excelpoint celebrated its 30th anniversary in 2017. Low single customer risk Excelpoint’s customers are original equipment manufacturers, original design manufacturers and electronics manufacturing services companies in the Asia Pacific region. For both FY16 and FY17, no customer accounted for more than 10% of revenue. Of its FY17 trade receivables, 19% came from two customers in the Hong Kong/People’s Republic of China (PRC) region. Major principals Excelpoint divides its business into five segments: 1) mobile and computing; 2) consumer, 3) lighting, 4) industrial and instrumentation, 5) e-government. Excelpoint represents more than 50 principals, including Analog Devices (ADI US, Not Rated), NXP (NXPI US, Not Rated), Qorvo (QRVO US, Not Rated), Qualcomm (QCOM US, Not Rated) and Samsung (005930 KS, Add, TP: W3,300,000). FY17 performance The company’s FY17 revenue was US$1.1bn, an increase of 16.0% yoy, while net profit rose 14.8% yoy to reach US$7.1m. FY17 revenue growth was driven by demand from Asia’s electronic manufacturing supply chain. New product lines signed in FY17 included Paratech (for 3D force pressure touch sensing solution) and Sensitron (for power electronics). A final DPS of 3.0 Scts and a special DPS of 1.5 Scts were declared for FY17. Outlook Moving forward, Excelpoint believes that the electronics industry will continue to see a proliferation of growth opportunities, especially in the Internet of Things (IoT) era. Excelpoint has invested in an IoT demonstration facility with cutting-edge technologies from its suppliers. This is a platform that gives Excelpoint’s customers access to applications that showcase its technological capabilities. Historical valuations Excelpoint is trading at FY17 P/E of 7.7x and P/BV of 0.85x, with a dividend yield of 6.47%. The local technology components sector average FY17 P/E, P/BV and dividend yield are 20.2x, 0.76x and 6.3%, respectively. Excelpoint’s net gearing at end Dec-17 was 1.8x.


Singapore

NON RATED Current price: S$0.70 Consensus Tgt Price: N/A Up/downside: N/A Reuters: EXCE.SI Bloomberg: EXLP SP Market cap: US$63.22m S$82.95m Average daily turnover: US$0.02m S$0.02m Current shares o/s: 118.5m Free float: 38.1%


Absolute (%) 6.1 6.1 5.3 Relative (%) 7.1 8.2 -3.3

Major shareholders % held Phuay Yong Hen 42.6 Alonim Investments Inc 12.7 Kwan Wai Loen 5.3

This Eyes On the Ground report represents a preliminary assessment of the subject company, and does not represent initiation into CGS-CIMB's coverage universe. It does not carry investment ratings and CGS-CIMB does not commit to regular updates on an ongoing basis.

Insert

Analyst(s)

William TNG, CFA

T (65) 6210 8676 E [email protected]

80.085.090.095.0100.0105.0

0.5000.5500.6000.6500.7000.750

Price Close Relative to FSSTI (RHS)

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Vol t

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Financial Summary Dec-13A Dec-14A Dec-15A Dec-16A Dec-17A

(US$, m)Revenue 651.9 729.0 828.3 988.2 1,146.4Gross profit 47.0 44.3 48.2 55.1 60.9Gross profit margin 7.2% 6.1% 5.8% 5.6% 5.3%Pretax profit 7.5 7.5 5.5 8.5 10.2Net profit 6.2 7.1 4.4 7.1 81.0EPS (S cts) 1.6 9.1 5.6 8.7 9.0EPS growth na 466.7% -38.9% 56.1% 3.3%P/E (x) 43.1 7.6 12.4 8.0 7.7DPS (S cts) 4.00 4.00 2.50 4.00 4.50Dividend yield (%) 5.76% 5.76% 3.60% 5.76% 6.47%P/BV (x) 5.19 0.96 0.95 0.91 0.85ROE 12.0% 12.6% 7.6% 11.5% 11.0%Net gearing (x) 0.94 1.23 1.55 1.57 1.80

13

Company Note Property Development│Thailand│April 10, 2018



Insert Insert

Land And Houses Smooth and steady ■ We estimate LH’s presales in 1Q18 came to THB6.98bn, driven by strong low-rise

housing presales, to make up 22.5% of our full-year forecast of THB31bn. ■ Impressive low-rise housing presales were ahead of our expectations while condo

presales momentum is expected to pick up strongly in 2Q18. ■ LH will step up new launches to 6 projects, with total value of THB14.1bn, in 2Q18. ■ LH’s backlog as at end-4Q17 of THB11.6bn secures 28.7% and 6.1% of our revenue

forecasts for FY18F and FY19F, respectively. ■ We maintain our Add call on resilient earnings profile and high sustainable yields.

Solid presales from low-rise housing in 1Q18 We estimate LH’s presales increased 11.3% qoq and 0.2% yoy to THB6.98bn in 1Q18, boosted by strong low-rise housing presales while condo presales likely plummeted 53.4% yoy to THB700m given a lack of new condo launches. Low-rise housing presales likely rose 10.5% qoq and 15% yoy to THB6.28bn, mainly due to good sales for existing projects under Nantawan, Laddawan and Chaiyapruk brands in the mid- to high-end segments. 1Q18 presales should account for 22.5% of our full-year forecast.

Condo presales momentum to pick up in 2Q18 LH is planning to step up new launches for both low-rise housing and condos to six projects worth a total THB14.1bn in 2Q18, an increase from two projects worth a total THB1.86bn in 1Q18. We believe condo presales momentum will recover strongly qoq, driven by three condo projects scheduled to be launched in Jun 18, namely The Room Sukhumvit 38, The Room Phayathai and The Ease 2 Rama 2, with a combined value of THB7.86bn. LH targets a take-up rate of 20-25% from its new condo projects.

Expect 1Q18 core net profit to increase 12.9% yoy We expect LH to report 1Q18 core net profit of THB2.08bn, up 2.9% qoq and 12.9% yoy, due to higher transfers and rental income. We believe residential revenue increased 8.1% qoq and 18.2% yoy to THB7.53bn in 1Q18 from impressive sales of low-rise housing while condo transfers were likely to be driven by unit transfers of condo projects completed in 2017. The gross margin from residential sales was likely stable yoy at 35% in 1Q18. LH will release its 1Q18 results on 11 May 18.

Potential upside to dividend and earnings forecasts in 2018 LH’s 1Q18 presales and residential revenue are likely on track to meet our full-year forecasts at THB31bn and THB33.05bn, respectively. We expect core net profit to jump 4.5% yoy to THB9.57bn in 2018F, supported by an increase in transfers of low-rise housing projects, stronger rental income and higher share of profit from investments in associates. LH plans to divest of Domain, an apartment building in the US, in 1H18. We project potential upside to our FY18 earnings forecast from gains on the asset sale.

Retain Add on resilient earnings profile and high yields We maintain our FY18-19F core EPS forecasts and Add call for its resilient earnings profile and high sustainable dividend yields of 6.7-6.9% in FY18-19F. Our SOP-based target price stays at THB13.0. Downside risks are delays in new project launches. Potential catalysts include higher-than-expected presales and gains from the divestment of an apartment building in the US.


Thailand


Current price: THB10.90 Target price: THB13.00 Previous target: THB13.00


Reuters: LH.BK Bloomberg: LH TB Market cap: US$4,165m THB130,252m Average daily turnover: US$15.55m THB490.1m Current shares o/s: 11,787m Free float: 52.1% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 0 1.9 12.4 Relative (%) 1.4 4.4 1.8

Major shareholders % held Thai NVDR 22.4 Mr. Anant Asavabhokhin 21.7 GIC Private Limited 14.7 Insert

Analyst(s)

Pornthipa RAYABSANGDUAN



Total Net Revenues (THBm) 29,909 34,922 36,844 37,461 37,741Operating EBITDA (THBm) 6,677 8,265 8,781 8,725 8,571Net Profit (THBm) 8,618 10,463 9,567 9,875 10,225Core EPS (THB) 0.68 0.77 0.80 0.83 0.86Core EPS Growth 16.9% 12.7% 4.3% 3.2% 3.6%FD Core P/E (x) 16.23 14.24 13.63 13.20 12.74DPS (THB) 0.65 0.75 0.72 0.74 0.76Dividend Yield 5.96% 6.88% 6.61% 6.75% 6.99%EV/EBITDA (x) 25.52 21.18 20.57 20.83 21.30P/FCFE (x) 81.06 12.19 28.31 16.19 17.27Net Gearing 85.7% 87.0% 96.0% 95.7% 94.6%P/BV (x) 2.74 2.60 2.56 2.50 2.44ROE 17.3% 18.9% 19.0% 19.2% 19.4%CIMB/consensus EPS (x) 1.03 1.02 0.95

91.0

96.3

101.7

107.0

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11.20

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Company Note Retail│Thailand│April 10, 2018



Insert Insert

Robinson SSSG likely turned positive ■ ROBINS’s same-store-sales growth (SSSG) likely picked up to 2% in 1Q18F due to a

low base in 1Q17 and better spending sentiment in Bangkok. ■ Introduction of new home line products under ROBINS’s private brand likely

supported 1Q18F sales improvement. ■ Additional rental space from two new lifestyle malls and the high-margin product mix

strategy should lead to 13% earnings growth this year, based on our estimates. ■ Reiterate Add with THB86 TP. ROBINS trades at 21.7x FY18F P/E, which is lower

than retail peers’ average of 31.9x. We recommend ROBINS as a laggard play.

1Q18F preview We expect ROBINS to report sales of THB6.56bn (+4.6% yoy, -10.2% qoq) and net profit of THB775m (+9.1% yoy, -5.6% qoq) for 1Q18F. Our estimated 1Q18F net profit would form 25.1% of our FY18F forecast (vs. 26.1-27.5% in FY16-17). The success of private label sales and better spending sentiment in Bangkok and the vicinity likely supported 1Q18F sales growth even though upcountry sales were likely flat.

First positive SSSG reading since 1Q16 We believe ROBINS saw 1Q18F SSSG of 2% yoy, the first positive reading since 1Q16 (vs. -4.4% in 1Q17 and -3.4% in 4Q17). The SSSG improvement likely came due to a low base last year and increased sales of private label products. In 4Q17, ROBINS adjusted its private label product mix to include more home line products, which received positive feedback from customers. Note that ROBINS aims to increase its high-margin private label product sales to 20% of total sales by FY22F, from 11.3% in FY17.

Stable GPM We estimate GPM remained high in 1Q18F at 25.3% (25.3% in 1Q17 and 25.2% in 4Q17) due to fewer clearance sales and increased sales of high-margin private label products. We estimate ROBINS’s 1Q18F net profit margin increased to 11.8% from 11.3% in 1Q17 and 11.2% in 4Q17 due to gradual rental income growth, which generated higher margin than its retail business.

Higher rental income from two new lifestyle malls ROBINS opened two new lifestyle malls in FY17, resulting in an 8% increase in its rental space and 14% rental income growth in FY17. We expect rental income grew 13% in 1Q18F from the additional space at these two lifestyle malls. ROBINS plans to open two new lifestyle malls in FY18F – 1) in Chonburi in Jul 18 and 2) in Chiyaphum in Dec 18. We expect the rental area to grow 7.5% in FY18F with 48 total stores.

Recovery is coming We believe the consumer spending sentiment will start to recover in Bangkok in FY18F but remain subdued upcountry. We expect FY18-20F SSSG to rebound to +3% p.a. from -3.2% in FY17. Moreover, we have confidence in ROBINS’s ability to achieve its expansion plan as it is in a strong financial position with a low net debt-to-equity of 0.1x as at end-FY17. It is well positioned to buy land and be more aggressive in its store expansion to take advantage of any recovery in consumer sentiment, in our view.

Reiterate Add We reiterate our Add call with an unchanged THB86 DCF-based target price (WACC at 7.3%). We project revenue and net profit CAGR of 7% and 12%, respectively, in FY18-20F, driven by new stores and better gross margins from its various margin improvement initiatives. Downside/upside risks are weaker-/stronger-than-expected consumption recovery.


Thailand


Current price: THB62.50 Target price: THB86.00 Previous target: THB86.00


Reuters: ROBI.BK Bloomberg: ROBINS TB Market cap: US$2,220m THB69,416m Average daily turnover: US$5.61m THB176.6m Current shares o/s: 1,111m Free float: 38.0% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 2.9 -14.7 -1.2 Relative (%) 4.3 -12.2 -11.8

Major shareholders % held Central Group & Chirathivat Family 62.0 Credit Suisse AG, Singapore Branch 3.9 Thai NDVDR 3.2 Insert

Analyst(s)

Uraiwan TANTISUWANNAKUL



Revenue (THBm) 30,165 30,332 32,496 34,600 36,827Operating EBITDA (THBm) 5,097 5,047 5,598 6,224 6,898Net Profit (THBm) 2,815 2,740 3,091 3,432 3,832Core EPS (THB) 2.51 2.47 2.78 3.09 3.45Core EPS Growth 29.7% (1.8%) 12.8% 11.0% 11.7%FD Core P/E (x) 24.87 25.33 22.46 20.23 18.12DPS (THB) 1.00 1.25 1.41 1.56 1.75Dividend Yield 1.60% 2.00% 2.25% 2.50% 2.80%EV/EBITDA (x) 13.49 13.31 12.03 10.74 9.59P/FCFE (x) 50.30 61.59 54.12 33.14 27.94Net Gearing 6.47% (0.21%) 2.22% 1.19% (0.84%)P/BV (x) 4.58 4.21 3.85 3.52 3.21ROE 19.5% 17.3% 17.9% 18.2% 18.6%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 0.98 0.97 0.98

82.0

95.3

108.7

122.0

51.0

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Sector Flash Note Automobiles and Parts│Thailand



Auto & Parts - Overall Auto sales beat target in latest motor show ■ The latest Bangkok International Motor Show saw strong auto bookings. ■ We think this phenomenon is a positive sign for the auto industry and hire-purchase

lenders as it reflects consumption recovery and higher consumer confidence. ■ Maintain Overweight on the auto sector, with SAT as our top pick.

Motor Show 2018 auto booking numbers exceeded target ● Grand Prix International (GPI TB, Not Rated) organised the Bangkok International

Motor Show # 39 over 28 Mar to 8 Apr 2018 (12 days). Total car bookings in this year's event reached 42,499 units, up 18% vs. last year's show.

● This figure is above the organiser’s target of 40,000 units. The brand that booked the highest orders was Toyota, with 5,689 units sold, driven by its new C-HR. This was followed by Honda (5,133 units), Mazda (5,021 units), Isuzu (3,920 units) and Mercedes-Benz (2,297 units).

● The number of cars booked in this year's event rose 18% yoy to 36,587 cars. In addition, positive momentum was also seen in Thailand's motorcycle market. According to a 10 Apr Bangkok Post article, 5,912 motorcycles were sold at the auto show, a sharp rise of 104% from last year, led by Honda, Yamaha and Kawasaki.

Strong growth momentum continued ● The ‘Motor Expo’ held during Nov-Dec 2017 also showed high auto bookings, at

47,543 units (+18% yoy). ● We believe the stronger auto sales is a positive sign for auto spare parts

manufacturers such as Somboon Advance Technology (SAT TB, Add, TP THB24.5), Aapico Hitech (AH TB, Add, TP THB40.25) and Thai Stanley Electric (STANLY TB, Not Rated) as they manufacturer spare parts for car producers like Toyota, Isuzu, Honda, Mitsubishi etc.

● We think SAT and AH should report good 1Q18F performance on the back of strong auto sales in 2M18 and continuing cost control efforts amid intensified competition in Thailand's auto parts manufacturing market.

Signs of domestic consumption recovery ● In our view, the strong auto bookings growth in the recent motor show can be

attributed to: ● 1) Car buyers who had bought cars in 2012 under tax breaks (expired in 2017) for first-

time buyers looking for a replacement unit. 2) Pick-up in consumer confidence in anticipation that the general elections taking place in early-2019 will lead to better economic growth. 3) New models launched with attractive sales campaigns and hire-purchase packages for car buyers i.e. low down payment, low borrowing rates, free car insurance for the first year and gift vouchers for petrol etc.

Our 2018F auto production forecast of 2.04m units achievable ● Thailand's total auto production by volume in 2M18 was 344,433 units (+12% yoy),

which accounted for 17% of our 2018 forecast of 2.04m units. As such, we maintain our forecast.

● Federation of Thai Industries (FTI) projected Thailand's total auto production by volume for 2018F at 2.0m units, with 1.1m of that for export. FTI said it will need to see stronger signs of a recovery in auto sales in the next two months before revising its 2018 forecast.

Maintain Overweight on auto sector; top pick is SAT ● We keep our Overweight call on the Thai auto sector. SAT is our top pick due to the

following: 1) it benefits from the auto industry recovery, 2) it enjoys higher gross profit margin than AH, 3) advantages from its JV with Mubea Engineering AG (unlisted), and 4) we expect SAT to deliver higher dividend yield than its peers in 2018-19F.

● Key risks to our call are 1) weaker-than-expected auto demand, 2) higher interest rates for car loans, and 3) deteriorated in auto exports.

Figure 1: Thailand: Auto sales in two big events


Year Year

Unit sold % yoy (RHS) Unit sold % yoy (RHS)

(unit) (unit)

2014 39,415 -4% 2014 47,690 16%2015 37,027 -6% 2015 50,623 6%2016 32,571 -12% 2016 40,364 -20%2017 36,093 11% 2017 47,543 18%2018 42,499 18% 2018* - -

Note: * Expected event during Nov-Dec 2018

Bangkok International Motor Show Motor Expo

Thailand April 10, 2018 - 7:33 PM

Overweight (no change)


Somboon Advance Technology Add, TP THB24.5, THB20.10 close

SAT engages in the manufacturing of spare parts for motor vehicles, such as passenger cars, pick-up trucks and agricultural vehicles. It had the highest rear axle shaft market share (by sales) in Thailand in 2017, at 70%. The company’s major shareholders are Somboon Holdings (29.9%) and Thai NVDR (13.9%). Aapico Hitech Add, TP THB40.25, THB34.25 close

AH manufactures car assembly jigs and stamping dies used for auto manufacturing in assembly plants, manufactures OEM auto parts and operates an auto dealership business. The company’s major shareholders are Yeap family (38%) and Thai NVDR (15%)


Insert

Analyst(s)

Praphan YUKHUNTHORNTHAM


P/E (x) Dec-17 Dec-18F Dec-19F

Aapico Hitech 9.36 10.04 8.78 Somboon Advance Technology 12.26 10.32 8.90

P/BV (x) Dec-17 Dec-18F Dec-19F

Aapico Hitech 1.79 1.58 1.40 Somboon Advance Technology 1.33 1.25 1.16

Div Yeild (%) Dec-17 Dec-18F Dec-19F

Aapico Hitech 2.7% 3.9% 4.3%Somboon Advance Technology 4.5% 4.7% 4.9%

16

Asia Pacific Daily Equity research│April 11, 2018

REGIONAL HEAD

Michael William GREENALL Regional Head of Research +60 (3) 2261 9088 [email protected]

COUNTRY HEADS OF RESEARCH

Ivy NG, CFA Siew Khee. LIM Erwan TEGUH Kasem PRUNRATANAMALA, CFA Ben BEI Malaysia Singapore Indonesia Thailand Hong Kong/China +60 (3) 2261-9073 +65 6210-8664 +62 (21) 3006-1720 +66 (2) 657-9221 +852 2532-1116 [email protected] [email protected] [email protected] [email protected] [email protected] Dohoon LEE Satish KUMAR South Korea India +82 (2) 6730-6121 +91 (22) 6602-5185 [email protected] [email protected] Yolan SEIMON Anirban LAHIRI Sri Lanka Vietnam +94 (11) 230-6273 +8428 7300-0688 (ext: 21242) [email protected] [email protected] Coverage via partnership arrangement with ohn Keells Stock Brokers

Coverage via partnership arrangement with VNDirect Securities Corporation

J SB Equities

REGIONAL SECTOR HEADS

KJ KWANG Ivy NG, CFA Raymond YAP, CFA Offshore & Marine Plantations Transportation +82 (2) 6730-6123 +60 (3) 2261-9073 +60 (3) 2261-9072 [email protected] [email protected] [email protected]

7

17


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None of CGS-CIMB, CIMB, John Keells, SBE or Morgans has any and none of them will accept any, obligation to (i) check or ensure that the contents of this report remain current, reliable or relevant, (ii) ensure that the content of this report constitutes all the information a prospective investor may require, (iii) ensure the adequacy, accuracy, completeness, reliability or fairness of any views, opinions and information, and accordingly, CGS-CIMB, CIMB, John Keells, SBE and Morgans and their respective affiliates and related persons including China Galaxy International Financial Holdings Limited (“CGIFHL”) and CIMB Group Sdn. Bhd. (“CIMBG”) and their respective related corporations (and their respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. In particular, CGS-CIMB, CIMB, John Keells, SBE and Morgans disclaim all responsibility and liability for the views and opinions set out in this report. Unless otherwise specified, this report is based upon reasonable sources. Such sources will, unless otherwise specified, for market data, be market data and prices available from the main stock exchange or market where the relevant security is listed, or, where appropriate, any other market. Information on the accounts and business of company(ies) will generally be based on published statements of the company(ies), information disseminated by regulatory information services, other publicly available information and information resulting from our research. Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are contained and must not be construed as a representation that the matters referred to therein will occur. Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and those investing may, depending on the investments in question, lose more than the initial investment. No report shall constitute an offer or an invitation by or on behalf of CGS-CIMB, CIMB, John Keells, SBE or Morgans or their respective affiliates (including CGIFHL, CIMBG and their respective related corporations) to any person to buy or sell any investments. CGS-CIMB, CIMB, John Keells, SBE and/or Morgans and/or their respective affiliates and related corporations (including CGIFHL, CIMBG and their respective related corporations), their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. 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CGS-CIMB, CIMB, John Keells, SBE and/or Morgans may disclose the contents of this report to the company(ies) covered by it and may have amended the contents of this report following such disclosure. The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. The analyst(s) who prepared this research report are prohibited from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. The term “John Keells Stock Brokers” shall, unless the context otherwise requires, mean each of John Keells Stock Brokers and its affiliates, subsidiaries and related corporations. The term “SB Equities Inc.” shall, unless the context otherwise requires, mean each of SB Equities Inc. and its

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affiliates, subsidiaries and related corporations. The term “Morgans Financial Limited” shall, unless the context otherwise requires, mean each of Morgans Financial Limited and its affiliates, subsidiaries and related corporations. The term “CIMB” shall denote CIMB Investment Bank Berhad, being the entity distributing or disseminating the report in Malaysia, or, in every other case, CIMBG and its affiliates, subsidiaries and related corporations. The term “CGS-CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case except as otherwise stated herein, CGS-CIMB Securities International Pte. Ltd. and its affiliates, subsidiaries and related corporations.

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CIMB

Country CIMB Entity Regulated by Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia

Information in this report is a summary derived from individual research reports. As such, readers are directed to the individual research report or note to review the individual Research Analyst’s full analysis of the subject company. Important disclosures relating to the companies that are the subject of research reports published by CGS-CIMB, CIMB, John Keells, SBE or Morgans, as the case may be, and the proprietary position by each of them and shareholdings of its Research Analysts’ who prepared the report in the securities of the company(s) are available in the individual research report. This report does not purport to contain all the information that a prospective investor may require. 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Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. Australia : The distribution of this report is not an offer to buy or sell to any person within or outside Australia or a solicitation to any person within or outside of Australia to buy or sell any instrument described herein. 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Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CGS-CIMB Securities (Hong Kong) Limited. The views and opinions in this research report are of CGS-CIMB, CIMB, John Keells, SBE or Morgans, as the case may be, as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of

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the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CHK. India: This report is issued and distributed in India by CGS-CIMB Securities (India) Private Limited (”CGS-CIMB India") which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, the Securities and Exchange Board of India (Research Analyst) Regulations, 2014 (SEBI Registration Number INH000000669) and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CGS-CIMB India is not required to seek registration with SEBI as an Investment Adviser. The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from equity stock broking and merchant banking of CGS-CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CGS-CIMB India or its affiliates.” Indonesia: This report is issued and distributed by PT CGS-CIMB Sekuritas Indonesia (“CGS-CIMB Indonesia”). The views and opinions in this research report are our own as of the date hereof and are subject to change. CGS-CIMB Indonesia has no obligation to update its opinion or the information in this research report. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable Indonesian capital market laws and regulations. This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within the meaning of the Indonesian capital market law and regulations. 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In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CGS-CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA. South Korea: This report is issued and distributed in South Korea by CGS-CIMB Securities (Hong Kong) Limited, Korea Branch (“CGS-CIMB Korea”) which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”). Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities. CGS-CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

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Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research). Thailand: This report is issued and distributed by CGS-CIMB Securities (Thailand) Co., Ltd. (“CGS-CIMB Thailand”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CGS-CIMB Thailand has no obligation to update its opinion or the information in this research report. CGS-CIMB Thailand may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DTAC, EA, EGCO, EPG, ESSO, GGC, GFPT, GLOBAL, GPSC, GUNKUL, HANA, HMPRO, INTUCH, IRPC, ITD, IVL, JMART, JWD, KBANK, KCE, KKP, KTB, KTC, LH, LPN, MAJOR, MC, MEGA, MINT, MONO, MTLS, ORI, PSH, PSL, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, SAWAD, SCB, SCC, SGP, SIRI, SPALI, SPRC, STA, STEC, SUPER, TASCO, TCAP, THAI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TPIPP, TRUE, TTA, TU, TVO, UNIQ, UV, WHA, WHAUP, WORK. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, 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 date. CGS-CIMB Thailand does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2017, Anti-Corruption 2017 AAV – Very Good, n/a, ADVANC – Excellent, Certified, AEONTS – Good, n/a, AMATA – Very Good, n/a, ANAN – Excellent, n/a, AOT – Excellent, Declared, AP – Excellent, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Excellent, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – Good, Declared, BCP - Excellent, Certified, BCPG – Very Good, n/a, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, n/a, BEC – Very Good, n/a, , BGRIM – not available, n/a, BH - Good, n/a, BJC – Very Good, Declared, BJCHI – Very Good, Declared, BLA – Very Good, Certified, BPP – Good, n/a, BR - Good, Declared, BTS - Excellent, Certified, CBG – Good, n/a, CCET – Good, n/a, CENTEL – Very Good, Certified, CHG – Very Good, Declared, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, n/a, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, n/a, ECL – Very Good, Certified, EGCO - Excellent, Certified, EPG – Very Good, n/a, GFPT - Excellent, Declared, GGC – not available, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Excellent, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Certified, ICHI – Excellent, n/a, III – not available, n/a, INTUCH - Excellent, Certified, IRPC – Excellent, Certified, ITD – Very Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Very Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Certified, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Certified, M – Very Good, n/a, MACO – Very Good, n/a, MAJOR – Very Good, n/a, MAKRO – Very Good, Declared, MALEE – Very Good, n/a, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Certified, MEGA – Very Good, n/a, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Excellent, Declared, PLAT – Very Good, Certified, PSH – Excellent, Certified, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Certified, RATCH – Excellent, Certified, ROBINS – Excellent, Certified, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Very Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Very Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI – Very Good, Declared, SPA - Good, n/a, SPALI - Excellent, n/a, SPRC – Excellent, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, n/a, TCAP – Excellent, Certified, THAI – Very Good, n/a, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Excellent, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Very Good, Declared, TMB - Excellent, Certified, TNR – Good, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Excellent, Declared, TTW – Very Good, n/a, TU – Excellent, Declared, TVO – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a. Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into: - Companies that have declared their intention to join CAC, and - Companies certified by CAC

Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

WJV#05

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showcasing cimb research ideas asia pacific daily · singapore. excelpoint technology ltd (nr,...

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