3 September, 2016

Beyond Standard of Financial Advantage

Module 3 CFO and Corporate Financial Management

1

Thailand and Southeast Asia’s largest retailer of home improvement products which includes

home improvement product (hardware, plumbing, painting, tools, outdoor living & garden),

bathroom, kitchen, lighting, home appliances and household accessories, furniture and

decorative products with full service support under HomePro format.

With Mega Home business, there are more merchandise categories than above: construction

materials, daily use products, office supplies, leisure goods and more household products are

added.

What dose HomePro do?

HomePro is the leading home improvement retailer in Thailand.

Our product range covers 40,000-80,000 items.

We operate nationwide, providing complete services as

One Stop Shopping to attain highest customer satisfaction.

The HomePro’s stock is traded on the Stock Exchange of Thailand

(SET - hmpro, BB - hmpro:tb).

2

Major Shareholder

3

Management&Employee

3%

1. Land and Houses Plc. 30.2

2. Quality Houses Plc. 19.9

3. Mr. Niti Osathanuklor 4.7

4. Thai NVDR Co., Ltd. 2.6

5. Mr. Manit Udomkunnatum 2.6

6. Social Security Office 2.3

7. AIA Co., Ltd. 2.1

8. Sarasin Co., Ltd. 1.3

9. Chase Nominees Limited 1.3

10. State Street Bank Europe Limited 1.2

11. Others 31.8

Niti Osathanuklor4.7%

Land & House

30.2%

QualityHouse

19.9%

Others

39.6%

Top 10 Shareholders %Share

Manit Udomkunnatum2.6%

as at April 20, 2016

Market Capitalization : 144,663.18 MB (as at 18 August 2016)

Paid-up Capital : 13,151,198,025 shares

Background

1996 2001 2006 2010 2013 2014March

2016

Formation by

Land & House group

Listed

in SET

Selected

as one of

SET 100

Selected

as one of

SET 50

Introducing

“Mega Home”

Opened

the first store

In Malaysia

Operating

77 stores of HP,

7 stores of MH

and 1 store in

Malaysia

4

Corporate Group Structure

Holds 99.99% of total

shares

Objective to manage

rental space and

provide utilities

services to tenants.

Market Village Co., Ltd.

Holds 100% of total

shares

Objective to operate

a retail business in

Malaysia.

Home Product Center (Malaysia) Sdn. Bhd.

Holds 99.99% of total

shares

Objective to operate

retail business under

trade name “Mega

Home”.

Mega Home Center Co., Ltd.

DC Service Center Co., Ltd.

Holds 99.99% of total

shares

Objective to operate

the warehousing and

distribution.

Home Product Center Plc. : Operating HomePro in Thailand

5

Footprint in Thailand as at Aug 31, 2016

Greater Bangkok : 22 stores

Upcountry : 55 stores

Greater Bangkok : 2 stores

Upcountry : 7 stores

Malaysia : 1 store

6

1,463 1,725 3,208 3,372 4,24410,943 9,509

5,956

16,964

38,306

64,204

88,722 89,662

101,717

89,428

142,032

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Market Cap.

(RO) Capital

Increase (RO) Capital

Increase

ESOP (W1)

ESOP (W2)

ESOP (W3)

ESOP (W4)

Stock Dividend 2009 – 2015

EJIP

Bond

Debt. Market

Bond

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bank Loan

Warrant 2:1 @ 3 Baht

Hmpro’s Market Capitalization Evolution VS Financing tools

7

Company at initial stage’s fund raising

� Before IPO Equity + Conventional bank loan + supplier financing

� Oct 2001 IPO 375x3.6 Bht/ share MKT cap 1350

� May 2002

- First Right Offering at par 1 Bht 375 million Bht

- Warrant 2 existing shares to 1 Warrant /1 new share

- Exercise price 3 Bht / share during 2002-2005

Register cap up from 375 to 987.5 mBht

� Oct 2006 Second Right Offering at 1 :1 at par 1 Bht

- Registered cap up from 961 to 1938 MBht

- Rational Share liquidity issues and Future Gearing concern8

What Key Factors Need to Be Considered When a Company

Wants to Issue Bonds to Finance Growth

9

TRIS Rating History

2003 2005 2007 2009 2010 2011

BBB BBB+ A-

AStable

Outlook

APositive

Outlook

A+Stable

Outlook

MAR 2005First Bond Issuing

10

Why stock dividend?

� High Capex needed during aggressive expansion

�Increase the share liquidity

�Save cash for CAPEX and working cap.

CON

�Share price dilution effect. ( Hence earning growth

outlook > dilution effect to sustain share price)

11

PRO

REIT as Hybrid Financing and Why REIT?

REIT can be utilized as a tool to monetize assets through capital markets while still presents an opportunity to the sponsor (as a REIT manager) to keep control over such assets

1 2 3Opportunity to monetize

tangible assets with stable income at high price

With modest cost of funding

and low financial obligation compared to debt

And present an opportunity

to the sponsor to invest in

high return assets and improve efficiency

Example of low-risk assets that investors are willing to get low return

REIT will be listed on

the Stock Exchange of Thailand

Key Observations:

- REIT investors usually require ~8%-10%

IRR and no principle repayment

obligation

- REIT sponsor’s undertaking is only

perceived as the commercial points to

comport investors

- Positive accounting impact due to non-

debt financing

After monetizing tangible assets

through REIT, sponsor could allocate

new capital to value added investment

i.e. branding, R&D

Finally, enhancing return and

company’s valuation

Asset Turnover

+

Profit Margin

Out Balance Sheet

Warehouse Office Building

Retail Hotel

10 Yr Gov’t

Bond

Corp

Bond

MLR REIT Cost of

Equity

~4% 4%-5%~ 5%-6%

8%-10%

10.5%-14.5%

Low Return High Return

ROE

12

Value creation by investing in Human capital with Employee Benefit

ESOP , EJIP

13

14

หลักการ ESOP

บริษทั พนกังาน

จดัประชมุผู้ ถือหุ้น

ไม่มผีู้คดัค้าน 5-10% ของผู้ถือหุ้นที�เข้าประชุม

ใบสําคญัแสดงสิทธิWarrant

บันทกึค่าใช้จ่ายของบริษทัตามมาตรฐานบัญชีใหม่

หลกัทรัพย์HMPRO

ใช้สิทธิ ตามราคา และ อตัราใช้สิทธิ(ราคาตลาด

ณ. วนัออก Warrant)

พนักงานเสียภาษี จากผลต่าง ราคาตลาด

กบั ราคาใช้สิทธิNew

หลกัการ EJIP

บริษทั พนกังาน

กาํหนดรายละเอยีดโครงการ EJIP

บริษทัหลกัทรัพย์

เงนิสบทบส่วนบริษัท เงนิสบทบส่วนบริษัทเงนิสําหรับซืHอหลกัทรัพย์ตามโครงการ EJIP

หลกัทรัพย์HMPRO

บันทึกค่าใช้จ่ายของบริษัท

เงนิภาษี

หลกัทรัพย์HMPROหมด silent Period

15

HomePro’s Value Chain

16

HomePro’s Organization Chart

MerchandisingTeam 1

MerchandisingTeam 2

MerchandisingTeam3

MerchandisingTeam4

Direct Sourcing &

International Merchandising

Non-Trade Procurement,

Commercial Support and

Merchandising

Supply Chain Management

Operation

Business Development

International Business

DC

Marketing

ICT

HR & Loss Prevention

IR &Accounting & Finance

17

HomePro’s Financial Dept. Organization Chart

CFO

Financial Accounting Treasury Corporate Planning / IR

Legal / Compliance

-

18

Fro

nt-

en

d

Ba

ck-e

nd

Ma

na

ge

me

nt

POS

CRM(Customer Relation

Management)

VRM(Vendor Relation

Management)

HRM(Human Resource

Management)

SAP IS Retail(Module : FI/CO, SD,

MM, Etc.)

PM(Property

Management)

Delivery & Fleet Management

SAP Data Warehouse

Business Dashboard

BI Report(Business Intelligent

report)

SAP Report

19

Homepro’s system landscape and Information management

HOMEPRO ‘s Risk Management Process

State of ObjectiveState of Objective Identify RiskIdentify Risk Risk AssessmentRisk Assessment

Consider the

response of risk and

internal control

exists.

Consider the

response of risk and

internal control

exists.

MonitoringMonitoring

Key Business Risk

Analyze

Impact & Likehood

Address Risk ReponseRisk Management

ReviewVision & Strategy

&