real estate underweight (from neutral) · of their investment properties (ie offices,...

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Platform 1

Sector Update, 8 January 2014

Real Estate Underweight (from Neutral)

The Going Gets Tough

Macro

3

Risks

3

Growth

1

Value

2

Wanida Geisler 66 2862 9748

License No.17602

[email protected]

P/E (x) P/B (x) Yield (%)

Dec-14F Dec-14F Dec-14F

Asian Property Development THB4.2 THB4.0 5.8 0.8 3.8 SELL

Land and Houses THB8.4 THB10.3 11.2 2.5 7.6 BUY

LPN Development THB15.2 THB12.1 7.5 2.0 6.7 TAKE PROFIT

Pruksa Real Estate THB17.1 THB22.0 6.1 1.3 4.9 BUY

Quality Houses THB2.4 THB3.2 7.3 1.2 7.4 TRADING BUY

Sansiri PCL THB1.7 THB1.4 5.9 0.9 9.0 SELL

SC Asset Corp PCL THB2.7 THB1.4 6.2 0.8 6.4 SELL

Supalai PCL THB14.2 THB12.0 6.5 1.5 6.2 SELL

Company Name Price Target Rating

Source: Company data, RHB estimates

Political risks and weaker-than-expected economic conditions are adding pressure to a sector already facing a cyclical slowdown. We expect a further cut in consensus estimates and downgrade our call to UNDERWEIGHT (from Neutral), with our new price targets pegged to the -1SD level on the poor short- to medium-term outlook. LH’s and PS’ valuations look interesting after the recent massive selloff.

Valuations de-rate. Earlier, our price targets were pegged to the property

sector’s long-term mean P/E. However, as the political turbulence is adding more pressure to the current cyclical downturn, we cut out TP estimates to a conservative -1SD to long-term mean P/E. Nevertheless, large developers with a resilient earnings outlook, strong brand names, low gearing levels and high yields will be better off. The residential property index is now trading at a near 8x P/E, ie the same level as that during the 4Q11 floods and mid-2010’s “red shirts” protest.

Bargain hunting. Large developers, except for LPN Development (LPN

TB, TAKE PROFIT, TP: THB12.10), are seeing their P/Es dipping below the -1SD level. We note that the current prices of Land and Houses (LH TB, BUY, TP: THB10.30) and Quality Houses (QH TB, TRADING BUY, TP: THB3.20) reflect their earnings prospects only, leaving out the value of their investment properties (ie offices, hotels/shopping centres) and investment portfolios. Also, the current 6x P/E of Pruksa Real Estate (PS TB, BUY, TP: THB22) – the market leader by revenue and presales – looks unjustified, as this is equivalent to 2011 levels when it was hit hard by floods. There is a chance that all mid-sized developers may slip further as they are trading well above -1SD.

A rough ride ahead. The political deadlock is adding pressure on a

sector that is already being bashed by: i) a slowing local economy, ii) tighter lending, iii) delay in passing of the THB2trn Infrastructure Bill, iv) cost pressures, and v) potential delays in the completion of condominium (condo) projects, as well as income recognition due to a shortage of labour/construction companies and the longer duration to obtain an environmental impact assessment (EIA) licence. The currently low interest rates seem to be the only positive factor.

Unexciting 2014 outlook. While combined 2013 presales of the top

eight developers (see table below) are likely to grow ~15% y-o-y, 2014 presales growth is set to dip to a single-digit, if not flatten, on the back of: i) weak GDP growth of 3-3.5% (2013F: 2.8%), ii) a pullback in new launches, iii) weak demand upcountry, and iv) tighter lending amid high household debt and lower affordability. Meanwhile, 2014’s sectorial net profit growth is set to slip to 13% y-o-y from 23% in 2013F.

Real Estate 8 January 2014

See important disclosures at the end of this report 2

Table Of Contents

Renewed Political Unrest Spirals Into More Negative Developments 3

Residential Property Index Nose-diving To -1SD To Long-term Mean P/E 4

Historical Valuation 5

Downgrade To Underweight 6

Table: Property Sector’s Developments Since The Asian Financial Crisis 7

Chart: P/Es And SDs 8

Individual Stocks

- AP – Aggressive Targets For 2014 Presales 9

- LH – Attractive Amid The Turmoil 12

- LPN – Room For Share Price To Decline Further 15

- PS – Trading At Trough Valuation 18

- QH – Good Bargain 21

- SIRI – Outlook Turns Murky 24

- SC – Prospects Clouded By Political Risk 27

- SPALI – More Challenges Ahead 30



Renewed political unrest spirals into more negative developments

Weak macroeconomic outlook and softer home loan targets to impact presales and new launches. According to the three residential mortgage lending banks, ie

Siam Commercial Bank (SCB TB, NEUTRAL, TP: THB145), Kasikorn Bank (KBANK TB, NEUTRAL, TP: THB163) and Krung Thai Bank (KTB TB, SELL, TP: THB15.80), home loans growth will decelerate to a single-digit rate in 2014 from a double-digit growth over the past few years. This will probably spill over into 2015 too, given the slowdown in demand both in Bangkok and upcountry, as well as a drop in new launches. This year, SCB and KTB expect a 6% growth in home loans only, while KBANK sees an 8% rise. This implies that the three banks will continue to tighten lending measures and set lower internal loan-to-value (LTV) ratios of 70-75% (from 80-90%) for the condo segment. Sales of residential units are estimated at 110,000 in 2014 (-8% y-o-y). Of this

figure, 70,000 will be from condo projects (2013: 80,000). After the floods of 2011, buyers’ interest shifted to the condo market, which resulted in strong sales in this segment. However, starting from mid-2013, we have seen signs of consolidation, with the average take-up rate of new Bangkok condos declining to ~50% in 3Q13. We are also beginning to see an oversupply in upcountry condos, as the take-up rate of several new projects launched by listed developers in such provinces stands at around 30-50%. Meanwhile, landed properties (ie single detached homes and townhouses) are in better shape, vis-à-vis condos, as seen from well-balanced supply and demand over the past three years. Backlog at risk. The backlog for the major developers, as at end-3Q13, stood at

THB232.5bn. Of this, ~20% will be realised in 4Q13 and 35% in 2014. We note that if this backlog is to be realised as sales this year, this will account for ~40% of 2014 revenue. The risks facing developers that are unable to realise their backlog as sales in a timely manner are: i) delays in project completion, ii) late ownership transfer, and iii) rising rejection/cancellation rates. These problems were witnessed throughout 2013 and will remain negative factors going forward. Major listed developers admit that ownership transfers have been below expectations in 4Q13, as a result of the street protests in Bangkok’s central business district (CBD), as well as in other provinces and cities like Phuket and Chiang Mai.

Figure 1: Backlog at end-3Q13 Backlog To be realised as sales Backlog as %

(THB bn) end 3Q13 4Q13 2014F 2014F revenue

AP 29.7 6.1 10.2 49%

LH 15.4 3.8 5.1 16%

LPN 21.4 4.2 8.2 46%

PS 44 12 16 41%

QH 10 2.5 3.5 19%

SIRI 61 10 20 58%

SPALI 39 7.2 14.7 65%

SC 12 0.96 4 32%


Expect unexciting 2014 guidance. In 4Q13, mid-sized developers such as AP

Thailand (AP TB, SELL, TP: THB4), Supalai (SPALI TB, SELL, TP: THB12), Sansiri (SIRI TB, SELL, TP: THB1.40) and SC Asset Corp (SC TB, SELL, TP: THB1.40) started to cut their 2013 presale targets by 10-30%. Large developers such as LH and QH, on the other hand, were able to meet their full-year targets, while the actual presales of PS and LPN were much higher than their earlier targets.

Amid the economic and political uncertainties, most listed developers are reluctant to announce their official 2014 guidance, although SIRI did announce its THB38bn 2014 presales target (-15% y-o-y). Other developers under our coverage are cautious, with presales growth targets of no more than 10%. We note that such targets are based on a GDP forecast of 4% (base case), but there is still a downside risk if the forecast comes in at or under 3% (worst case).

Bleak 2014 outlook. The combined 2013 presales of the top 8 developers are likely

to grow c.15% y-o-y, but 2014 presales growth is set to decline to a single-digit rate – if not flat – on the back of a: i) weak GDP growth of 3-3.5% (2013F: 2.8%), ii) a reduction in new launches, iii) weak upcountry demand, and iv) tightening lending measures amid high household debt and lower affordability. 2014 sectorial net profit growth, on the other hand, is set to slip to 13% y-o-y in 2014 from 23% in 2013. Growth drivers for 2014 will be the condo backlog, which will be recognised as sales upon project completion and ownership transfers.

Banks turn cautious, with a single-digit home loans growth on lower LTV

Clear signs of a slowdown in the residential market, particularly condos

Backlog is likely to take a longer time to realise as sales

Presales growth to decelerate to a single-digit rate, or even flatten

Many downside risks to 2014 earnings forecasts



Asset monetisation delay. LH and QH are two developers that plan to inject assets

into a new REIT or property fund. However, with an increase in future global bond yields, investors’ required annual rate of returns has already crept up to 8-9% from around 6%. Both companies, which are under the same shareholding group, have now opted for a wait-and-see approach. Therefore, we do not expect any upside potential from asset divestments in the near term.

The only positive is the low interest rate environment. At end-2013, the Bank of

Thailand (BOT) surprisingly reduced the policy rate by 25 bps to 2.25% to ease pressure of the economic downturn.

A deep decline in core inflation – approaching the lower range of the BOT’s 0.9-3% benchmark – and a downward GDP trend makes room for further policy rate cuts at the next central bank meeting in early 2014.

Thereafter, it is the residential property index nose-diving to -1SD to long-term mean P/E. The biggest correction in the index took place at end-2008 to mid-2009

when the sector’s P/E plunged to -2SD to its long-term mean due to the: i) US financial crisis, and ii) political unrest in Thailand after the closure of the international airport by “yellow shirt” protesters at end-2008. The poor economic conditions and political instability resulted in a negative GDP of 2.3% in 2009.

Another two meaningful corrections of -1SD to its long-term mean P/E were seen in mid-2010: i) the “red shirt” violent street protest of 2010, and ii) the massive floods in 2011 that affected large parts of the country, including Bangkok and its vicinity. During these two periods, although Thailand faced a hard time, GDP growth remained in positive territory (2010: 7.8%; 2011: 0.1%). Therefore, the -1SD to long-term mean P/E has proven to be a good support level.

In 2013, we saw the residential property index surging over +2SD to its long-term mean P/E around April 2013 before plunging on the back of a cyclical slowdown. Negative factors that have hit the sector in 2H 2013 include: i) a slowdown in the economy, ii) a tightening of lending measures, iii) a delay in the approval of the THB2trn Infrastructure Bill, iv) cost pressures, and v) potential delays in the completion of condo projects, as well as income recognition from a shortage of labour/construction companies and the longer process in obtaining an EIA license.

A new round of political unrest, which started at end-Dec 2013, has continued until now and it remains unclear if the upcoming election will provide a resolution. This political turmoil has worsened the economic conditions, as well as the sector’s outlook. GDP growth in 2014 is likely to slip to 3-3.5% from the current estimates of 4-4.5% on weak private investment/spending amid poor consumer confidence and delays in public spending. Thai banks have also turned more cautious, with only single-digit loans growth targets set, which implies that they will continue to tighten lending measures and set lower internal LTV ratios of 70-75% (from 80-90%) for the condo segment.

However, we still view the -1SD level as a strong support level, on: i) 2014F positive GDP growth, ii) a modest sectorial net profit growth of 13% this year, iii) the sector’s healthy financial status – with a double-digit ROE, and iv) well-controlled total liabilities-to-equity ratio of 1.5x.

Figure 2: Residential property index P/E movement

Note: Residential index comprises AP, LH, LPN, PS, QH, SC, SIRI and SPALI Source: Bloomberg, RHB estimates

Political unrest, capital outflow and negative GDP caused the sector index to plunge to -2SD in 2009

Sector index dipped to -1SD during the “red shirts” protest of 2010 and the massive floods in 2011

Despite a new round of political unrest, -1SD remains a strong support level given the positive 2014 GDP forecasted and modest sectorial profit growth



Figure 3: Share prices and P/E levels

-----------------------P/E (x)------------- EPS

2014F ----Implied share price (THB)- Curr. price --Current price vs implied price---

-2SD -1SD Mean (THB) -2SD -1SD Mean (THB) -2SD

From -1SD From mean

AP 1.7 5.5 9.3 0.72 1.2 4.0 6.7 4.26 248% 8% -36%

LH 7.8 11.7 15.6 0.74 5.8 8.7 11.5 8.35 45% -4% -28%

LPN 1.5 6.0 10.5 2.01 3.0 12.1 21.1 14.6 384% 21% -31%

PS 4.4 7.9 11.4 2.80 12.3 22.1 31.9 16.6 35% -25% -48%

QH 3.4 7.1 10.8 0.36 1.2 2.6 3.9 2.5 104% -2% -36%

SC n.a. 3.3 8.3 0.43 n.a. 1.4 3.6 2.76 n.a. 95% -23%

SIRI n.a. 3.5 7.9 0.25 n.a. 0.9 2.0 1.69 n.a. 93% -14%

SPALI n.a. 3.4 7.5 2.20 n.a. 7.5 16.5 13.8 n.a. 84% -16%

Source: Bloomberg, RHB estimates

Figure 4: Share prices and P/BV levels

---------------P/BV (x)--------------- BV

2014F --Implied share price (THB)- Curr price ----Current price vs implied price----

-2SD -1SD Mean (THB) -2SD -1SD Mean (THB) -2SD From -1SD From mean

AP 0.7 1.3 1.9 5.30 3.7 6.9 10.1 4.26 15% -38% -58%

LH 1.4 2.0 2.6 3.36 4.7 6.7 8.7 8.4 79% 25% -4%

LPN 0.7 1.6 2.5 7.80 5.5 12.5 19.5 14.6 167% 17% -25%

PS 0.9 1.6 2.3 13.00 11.7 20.8 29.9 16.6 42% -20% -44%

QH 0.5 0.9 1.3 2.10 1.1 1.9 2.7 2.5 138% 32% -8%

SC n.a. 0.5 0.9 3.20 n.a. 1.4 2.9 2.76 n.a. 92% -4%

SIRI 0.4 0.7 0.9 1.90 0.8 1.3 1.7 1.69 122% 27% -1%

SPALI 0.2 1.0 1.7 8.20 1.6 8.2 13.9 13.8 741% 68% -1%


Mid-sized developers have room to slip further. Share prices of most mid-sized

developers such as SIRI, SPALI and SC are still far from the -1SD level, or the threshold achieved during the US subprime crisis at end-2008 and early 2009. Given the high risk profile of subpar brand names, high gearing, and lower bargaining power with contractors, suppliers and financial institutions, we see room for their share prices to decline further.

Large developers have dipped below the -1SD level. Despite their strong brands,

solid balance sheets, experienced management and resilient earnings outlook, LH’s and QH’s share prices have nose-dived to -1SD to their long-term mean P/Es, while PS saw its valuations dipping to around -1.5SD to its long-term mean P/E. Only LPN sees a 21% downside to the -1SD level. In the previous two crisis period (ie the 2010 “red shirts” and the 2011 floods), the -1SD level proved to be a strong support level, with P/Es hitting the -2SD bottom to long-term mean P/E during the US subprime crisis.



Downgrade to UNDERWEIGHT

Earlier, our TPs were pegged to the sector’s long-term mean P/E. However, as the political turbulence is adding more pressure to the current cyclical downturn, we have cut our price targets of the stocks under our coverage to a valuation of -1SD to their long-term mean P/E level.

Large developers, such as LH, QH and PS, whose share prices have already dipped below -1SD, are good bargains. We note that the current prices for LH and QH reflect only their earnings prospects, leaving out the value of their investment properties and investment portfolios. Also, the current 6x P/E of PS – the market leader by revenue and presales – looks unjustified, as it is equivalent to 2011 levels when the company was hit hard by the floods. Hence, we maintain our BUY call on LH and PS.

As for QH, we downgrade its rating to TRADING BUY (from Buy). Although 2014 net profit is expected to grow at a single-digit rate due to the completion of only a few condo projects, the company’s solid balance sheet and cash flow will allow it to continue paying a high dividend of 6-7%. Meanwhile, we downgrade LPN to TAKE PROFIT (from Buy), as we see a potential slip in its P/E to the -1SD level. The low-end condo segment is likely to hit the hardest amid the current challenging scenario.

As for the mid-sized developers, we maintain a SELL rating for AP on its disappointing performance so far. We also downgrade SC (from Take Profit), SPALI (from Neutral) and SIRI (from Neutral) to SELL. The former, whose major shareholder is the Shinawatra family, is likely to return to trade at a big discount to its peers again amid the current political turbulence. SIRI, with a >2x net debt-to-equity ratio and overly aggressive expansion, will continue to struggle amid the tough operating environment. SPALI, a second-tier developer with subpar brands, does have a huge backlog ready to be realised as sales this year. However, a delay in ownership transfers amid the weak macroeconomic outlook and low consumer confidence will result in below-than-expected performance.

Figure 5: Valuations summary and recommendations

--------------2014----------------- --- Implied

Share Price (THB) ----------

- Curr. VS

-1SD

EPS

chg% P/E (x)

P/BV (x)

Yield (%) -2SD -1SD Mean

TP (THB) Rec.

price (THB)

mean P/E Remarks

AP 12.0 6.0 0.8 5.0 1.2 4.0 6.7 4.0 SELL

4.26

Above Disappointing 2013, subpar brands, rising D/E. 2014 will continue to be unexciting

LH 17 11 2.5 7.6 5.8 8.7 11.5 8.7 BUY

8.35 Below

Upside from asset monetisation, high dividend yield, strong brand name, experienced management

LPN 16 7.6 2.0 6.6 3.0 12.1 21.1 12.1 Take Profit

14.60

20% Above

Low-end condo segment is likely to be hit hard amid the cyclical downturn

PS 18 5.9 1.3 5.1 12.3 22.1 31.9 22.1 BUY

16.60 25 %

Below

Market leader by presales and revenue. Trading at -1.5SD to long-term mean P/E, P/BV

QH 8.5 6.6 1.1 7.6 1.2 2.6 3.9 3.2 Trading BUY

2.50 Below

Upside from asset monetisation, high dividend yield, strong brand name, experienced management

SC 34 6.1 0.8 6.5 n.a. 1.4 3.6 1.4 SELL

2.76 Above -0.5SD

Political stock with the Shinawatra family as major shareholder. Backlog at risk of late ownership transfers and rising rejection/cancellation rate

SIRI 16.5 6.7 0.9 8.9 n.a. 0.9 2.0 1.4 SELL

1.69 Above -0.5SD

Too aggressive, high D/E of >2x and tight liquidity. Backlog at risk of late ownership transfers and rising rejection/cancellation rate

SPALI 27 6.5 1.5 6.1 n.a. 7.5 16.5 12.0 SELL

13.80 Above -0.5SD

Disappointing 2013, subpar brand name, rising D/E. Backlog at risk for late ownership transfers and rising rejection/cancellation rate


BUY for LH and PS

TRADING BUY for QH and TAKE PROFIT for LPN

SELL for AP, SC, SPALI and SIRI



Figure 6: Property sector’s developments since the Asian financial crisis

Asian

financial crisis Post crisis

US subprime crisis

Floods

Avg 1995-1997

Avg 1998-2003

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Favourable supply outlook

Total new completed houses (unit)

168,033 42,734 68,300 70,408 78,581 75,110 83,065 90,971 106,893 81,856 111,875 120,000

New completed built by developers -Detached houses and townhouses (units)

72,061 13,385 40,752 35,935 32,201 32,757 27,513 23,486 24,476 26,994 23,662 24,000

-Condo (units) 66,774 10,648 7,689 9,229 17,431 17,012 31,535 51,259 59,919 34,734 64,716 80,000

Pre-crisis

Post crisis

1996 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Demand-side (Bangkok)

Population per household 3.28 3.05 2.75 2.71 2.65 2.59 2.52 2.44 2.38 2.31 2.25 n.a. Average income per household (THB/month)

21,550 26,054 29,843

36,658 39,020

42,380

48,951

n.a.

Pre-crisis

Post crisis

1996

1997-2001

2004 2005 2006 2007 2008 2009 2010 2011 2012 9m13

SETPROP-Solid balance sheet and healthy performance

Net margins 4.00% n.a.* 12.15 9.88 16.42 8.11 6.86 8.48 10.91 7.90 11.56 12.47 ROE 1.70% n.a.* 14.02 12.30 22.25 10.15 7.95 10.09 12.55 8.98 14.76 10.44 ROA 3.40% n.a.* 8.25 7.56 6.58 6.93 6.32 7.51 8.52 6.31 8.56 4.00 D/E ratio 1.7x 4.32x 1.45 1.32 1.38 1.27 1.40 1.29 1.36 1.58 1.54 1.56 *The sector incurred loss 5 years in a row between 1997-2001

Pre-crisis

Post crisis

1996 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Strong macroeconomic environment GDP growth average 5.90% -10.50% 6.00 4.50 5.20 4.90 2.50 -2.3 7.80 0.10 6.50 2.8

Average policy rate 10.50% 3.55-

21.86% 1.44 2.84 4.81 3.72 3.00 1.4 1.45 3.00 2.94 2.58

Average headline inflation 5.90% 8.10% 2.70 4.50 4.70 2.30 5.40 -0.9 3.30 3.80 3.00 2.3-3.3 MLR rate 13-14% 12-15.5% 5.63 6.63 7.75 6.99 6.88 6.1 6.31 7.44 7.19 7.2 SETPROP-Valuations

P/E (x)-avg 22.8 9.2 12.4 14.2 15.7 10.8 12.9 12.9 13.7 14.6 19.9 20.3 PB (x)-avg 1.9 0.35 2.3 1.8 1.8 2.0 1.6 1.1 1.5 1.6 2.0 2.8

Source: NESDB, SETSMART, IMF, Real Estate Information Centre, RHB estimates



Source: Company data, RHB estimates Source: Company data, RHB estimates






AP (Thailand) (AP TB) Sell (Maintained) Property - Real Estate Target Price: THB4.00

Market Cap: USD36 Price: THB4.18

Aggressive Targets For 2014 Presales

Macro

3.00

Risks

2.00

Growth

1.00

Value

2.00

51

60

69

77

86

95

104

112

121

4

5

6

7

8

9

10

11

12

Asian Property Dev (AP TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

20

40

60

80

100

120

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg

Avg Turnover (THB/USD) 56.3m/1.78m

Cons. Upside (%) 53.6

Upside (%) -4.3

52-wk Price low/high (THB) 4.18 - 10.5

Free float (%) 61

Shareholders (%)

Anuphong Assavabhokhin 23.2

Thai NVDR 15.3

Pichet Vipavasuphakorn 7.9

Shariah compliant


License No.17602

[email protected]

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total turnover (THBm) 13,840 13,638 17,309 18,922 21,049

Reported net profit (THBm) 2,228 1,551 2,329 1,838 2,058

Recurring net profit (THBm) 2,154 1,548 2,234 1,838 2,058

Recurring net profit growth (%) 11.8 (28.1) 44.3 (17.7) 12.0

Recurring EPS (THB) 0.92 0.60 0.79 0.65 0.72

DPS (THB) 0.32 0.15 0.18 0.14 0.16

Recurring P/E (x) 4.54 6.96 5.29 6.48 5.78

P/B (x) 1.03 1.10 0.95 0.87 0.78

P/CF (x) na na 4 354 11

Dividend Yield (%) 7.6 3.6 4.3 3.4 3.8

EV/EBITDA (x) 6.11 8.66 7.64 8.90 7.93

Return on average equity (%) 25.4 15.4 20.1 14.0 14.3

Net debt to equity (%) 108.4 129.3 92.2 91.1 80.7

Our vs consensus EPS (%) (13.7) (16.7)


AP had a poor 2013 as it continued to miss targets. However, its share price picked up recently after P/E fell to -1SD below its long-term mean. Its rebound seems unsustainable given its unexciting 2014 profit growth estimate, while its 38% presales growth target seems unrealistically high amid the weak economic and political scenario. Maintain SELL with our THB4.00 TP pegged to -1SD from its long-term mean P/E.

2013 actual presales at THB15.2bn (-25% y-o-y). 2013 presales were

15.5% below its revised target of THB18bn (original target: THB22bn). At THB3.14bn (-13% q-o-q and -19% y-o-y), 4Q13 presales fell far below expectations amid the political unrest. AP’s full-year landed property presales stood at THB8.48bn (-13% y-o-y), while condominium (condo) presales came in at THB6.7bn (-36% y-o-y).

THB21bn 2014 presales target (+38% y-o-y) is overly aggressive, given the weak economic and political outlook. Of the total, THB10bn

(+49% y-o-y) will come from condo sales, while THB11bn (+30% y-o-y) from landed property sales. AP seems to have high hopes on three new condo projects that will be launched by its new joint venture (JV) company with global Japanese developer Mitsubishi Estate group.

2013 revenue is likely to be in line. AP’s 2013 revenue is expected to

be in line with its THB19bn target (+10% y-o-y). In 4Q13, realised condo sales were better than expected – 12%, or THB1bn – due to swift transfers of ownership. This will help to offset its weak landed property sales. All in, AP should be able to book revenue of almost THB8bn in 4Q13.

THB21bn 2014 revenue target (+10% y-o-y). This should be

achievable given its current backlog of THB23-24bn. AP expects its gross margin to stay flat (at around 34%), with sales, general and administrative (SG&A) expenses-to-sales ratio at 18%. Hence, we maintain our 2014 profit growth at 12%, which will bring earnings to THB2.1bn. The downside risk will come from slower-than-expected ownership transfers arising from longer customer inspection and borrowing processes, as well as higher rejection rates on housing sales.



Financial Exhibits

Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total turnover 13,840 13,638 17,309 18,922 21,049

Cost of sales (8,602) (8,434) (11,273) (12,556) (14,068)

Gross profit 5,238 5,204 6,036 6,366 6,981

Other operating costs (2,133) (2,697) (3,139) (3,841) (4,153)

Operating profit 3,105 2,507 2,897 2,525 2,828

Operating EBITDA 3,283 2,702 3,049 2,735 3,046

Depreciation of fixed assets (27) (41) (49) (50) (55)

Amortisation of intangible assets (151) (154) (103) (160) (163)

Operating EBIT 3,105 2,507 2,897 2,525 2,828

Net income from investments 9 - - - -

Other recurring income 90 74 76 84 92

Interest expense (103) (190) (213) (311) (347)

Exceptional income - net 106 4 117 - -

Pre-tax profit 3,207 2,395 2,877 2,297 2,573

Taxation (977) (844) (548) (459) (515)

Minority interests (2) - - - -

Profit after tax & minorities 2,228 1,551 2,329 1,838 2,058

Reported net profit 2,228 1,551 2,329 1,838 2,058

Recurring net profit 2,154 1,548 2,234 1,838 2,058


Cash flow (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F


Depreciation & amortisation 178 195 152 210 218

Change in working capital (5,552) (4,961) 172 (2,124) (1,402)

Other operating cash flow 347 316 629 194 276

Operating cash flow (1,922) (1,943) 3,850 804 1,919

Interest paid (103) (190) (213) (311) (347)

Tax paid (977) (844) (548) (459) (515)

Cash flow from operations (3,002) (2,977) 3,089 34 1,058

Capex (540) (63) (150) (234) (316)

Cash flow from investing activities (540) (63) (150) (234) (316)

Dividends paid (747) (918) (509) (699) (551)

Proceeds from issue of shares 211 484 75 - -

Increase in debt 2,725 3,557 (2,199) 341 -

Cash flow from financing activities 2,189 3,123 (2,633) (358) (551)

Cash at beginning of period 1,708 355 438 744 186

Total cash generated (1,353) 83 306 (558) 190

Implied cash at end of period 355 438 744 186 376




Financial Exhibits

Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Total cash and equivalents 355 438 744 186 376

Inventories 21,347 26,616 26,490 28,191 29,509

Accounts receivable 9 69 108 5 5

Other current assets 1,510 1,476 1,411 1,446 1,482

Total current assets 23,221 28,599 28,753 29,828 31,373

Tangible fixed assets 132 143 126 126 126

Intangible assets 353 210 225 249 347

Total other assets 408 423 208 480 505

Total non-current assets 893 776 559 855 978

Total assets 24,114 29,375 29,312 30,683 32,351

Short-term debt 3,860 5,922 4,209 4,550 4,550

Accounts payable 711 575 777 816 857

Other current liabilities 2,938 3,569 3,410 3,235 3,330

Total current liabilities 7,509 10,066 8,396 8,601 8,736

Total long-term debt 6,807 8,302 8,073 8,073 8,073

Other liabilities 285 346 323 350 375

Total non-current liabilities 7,092 8,648 8,396 8,423 8,448

Total liabilities 14,601 18,714 16,792 17,024 17,184

Share capital 2,343 2,812 2,848 2,848 2,848

Retained earnings reserve 7,142 7,789 9,600 10,739 12,246

Other reserves 28 60 72 72 72

Shareholders' equity 9,513 10,661 12,520 13,659 15,166

Total equity 9,513 10,661 12,520 13,659 15,166

Total liabilities & equity 24,114 29,375 29,312 30,683 32,351


Key Ratios (THB) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Revenue growth (%) 9.6 (1.5) 26.9 9.3 11.2

Operating profit growth (%) 9.3 (19.3) 15.6 (12.8) 12.0

Net profit growth (%) 15.6 (30.4) 50.2 (21.1) 12.0

EPS growth (%) 15.4 (36.8) 36.8 (21.6) 12.0

Bv per share growth (%) 18.1 (6.6) 16.0 9.1 11.0

Operating margin (%) 22.4 18.4 16.7 13.3 13.4

Net profit margin (%) 16.1 11.4 13.5 9.7 9.8

Return on average assets (%) 10.3 5.8 7.9 6.1 6.5



DPS 0.32 0.15 0.18 0.14 0.16

Recurrent cash flow per share (1.28) (1.15) 1.09 0.01 0.37


Company Profile AP (Thailand) is a property developer specialising in townhouses and condominiums.



Land and Houses (LH TB) Buy (Maintained) Property - Real Estate Target Price: THB10.3

Market Cap: USD2,606m Price: THB8.60

Attractive Amid The Turmoil

Macro

3.00

Risks

2.00

Growth

2.00

Value

2.00

84

89

94

99

104

109

114

119

7.7

8.7

9.7

10.7

11.7

12.7

13.7

14.7

Land and Houses (LH TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

20

40

60

80

100

120

140

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg

Avg Turnover (THB/USD) 197m/6.18m


Upside (%) 19.8


Free float (%) 52

Shareholders (%)

Mr Anant Asavabhokin 23.8

Thai NVDR 18.2

Government of Singapore Investment Corp

16.1

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) (5.2) (2.5) 55.1 12.9 17.0


DPS (THB) 0.35 0.48 0.48 0.54 0.63

Recurring P/E (x) 23.1 23.7 15.3 13.5 11.6

P/B (x) 3.13 2.93 2.80 2.69 2.56

P/CF (x) na na 14.4 45.7 21.1

Dividend Yield (%) 4.1 5.5 5.6 6.3 7.3

EV/EBITDA (x) 18.7 20.8 12.9 11.6 10.1



Our vs consensus EPS (%) (1.1) 3.1


Amid toughening operating environment, LH – with its: i) strong brand name, ii) resilient earnings, iii) solid balance sheet, and iv) experienced management – will stand out. The company’s share price looks attractive now that its P/E has dipped below -1SD from its long-term mean, while its dividend yield stands at an appealing 6-7%.

2013 numbers on track. LH posted record-high 3Q13 presales of

THB10bn that boosted its 10M13 presales to THB27bn. Hence, its full year presales are likely to come in above the company’s THB30bn target (+20% y-o-y), while its realised sales may be slightly lower than the THB25bn (+12% y-o-y) it guided earlier due to delays in the completion of construction and ownership transfer. Gross margin, on the other hand, improved encouragingly while the SG&A to sales ratio can be maintained at 13-14% per quarter. We maintain our 2013 profit forecast at THB6.36bn (+13% y-o-y).

2014 growth to get boost from condos. The company has yet to

release its official guidance but LH expects a modest 10% growth in presales. Revenue is set to pick up owing to recognition of its condo backlog worth THB5bn (2013F: THB3bn). The mid to high-end segment is generally less sensitive to the economic downturn compared with the low-end segment, which has a riskier customer profile.

Delay in asset monetization. Earlier, LH had planned to inject its asset,

Terminal 21 shopping complex, into a new property fund. However, due to a jump in future global bond yields, investors’ required annual rate of returns has crept up to 8-9% from around 6%. LH has instead opted to adopt a wait-and-see approach for the time being. Thus, we do not expect any upside potential from asset divestments in the near term.

Cutting TP to THB10.30. This comprises THB8.70 from LH’s property

business, pegged to -1SD from the stock’s long-term mean P/E and THB1.60 from potential divestment gains from the proposed sale of its investment portfolio and properties. LH’s share price looks attractive now that its P/E has dipped below -1SD of its long-term mean.



Financial Exhibits


Total turnover 16,896 19,229 24,103 26,393 31,619

Cost of sales (11,284) (12,981) (15,792) (17,073) (20,516)

Gross profit 5,612 6,248 8,310 9,319 11,103





Operating EBIT 3,319 3,185 4,793 5,545 6,506

Net income from investments 1,469 1,292 2,282 2,242 2,690



Exceptional income - net 318 2,474 - - -

Pre-tax profit 5,072 6,926 6,834 7,586 9,026

Taxation (1,196) (1,399) (1,150) (1,069) (1,267)

Minority interests 95 82 (48) (153) (314)








Change in working capital (3,974) (5,137) 722 (2,835) (1,330)

Other operating cash flow (1,388) (2,380) 1,636 175 48

Operating cash flow (1,726) (3,982) 7,645 3,428 5,821

Interest paid (258) (310) (488) (473) (473)

Tax paid (1,196) (1,399) (1,150) (1,069) (1,267)

Cash flow from operations (3,180) (5,690) 6,007 1,887 4,081

Capex (1,734) (2,330) 335 (174) (247)

Other new investments (77) 2,765 931 1,809 2,247

Cash flow from investing activities (1,811) 436 1,266 1,635 1,999

Dividends paid (2,585) (3,487) (5,266) (5,100) (5,869)

Proceeds from issue of shares (65) (235) - - -

Increase in debt 7,604 6,965 (665) 1,181 -

Other financing cash flow - - 0 - -

Cash flow from financing activities 4,954 3,242 (5,931) (3,919) (5,869)

Cash at beginning of period 2,168 2,131 119 1,462 1,065

Total cash generated (37) (2,012) 1,343 (397) 212

Implied cash at end of period 2,131 119 1,462 1,065 1,277




Financial Exhibits


Total cash and equivalents 2,131 119 1,462 1,065 1,277

Inventories 27,054 31,472 32,537 35,394 36,772




Total investments 13,633 14,835 17,313 17,746 18,190

Tangible fixed assets 5,836 7,896 7,385 7,016 6,665

Total other assets 4,795 4,842 4,541 4,553 4,564

Total non-current assets 24,264 27,573 29,239 29,314 29,419

Total assets 54,604 60,833 64,401 67,071 68,880

Short-term debt 6,182 8,762 7,319 8,500 8,500

Accounts payable 1,253 1,862 2,146 2,189 2,233







Share capital 10,026 10,026 10,026 10,026 10,026


Other reserves 10,844 10,822 11,949 11,949 11,949


Minority interests 1,047 1,076 1,123 1,179 1,238

Other equity (0) - - (0) -

Total equity 28,551 30,472 31,964 33,284 34,919




Revenue growth (%) (4.3) 13.8 25.3 9.5 19.8

Operating profit growth (%) (16.1) (4.0) 50.5 15.7 17.3

Net profit growth (%) 1.6 41.2 0.5 12.9 17.0

EPS growth (%) 1.6 41.2 0.5 12.9 17.0

Bv per share growth (%) 5.0 6.9 4.9 4.1 4.9






DPS 0.35 0.48 0.48 0.54 0.63

Recurrent cash flow per share (0.32) (0.57) 0.60 0.19 0.41


Company Profile Land and Houses (LH) used to be the market leader in property development in Thailand, but lost its position five years ago when homebuyers’ preferences shifted to condominiums. It is among the few Thai developers that have rental assets, a huge investment portfolio and a sizeable landbank.



LPN Dev (LPN TB) Take Profit (from Buy) Property - Real Estate Target Price: THB12.1

Market Cap: USD674m Price: THB15.1

Room For Share Price To Decline Further

Macro

3.00

Risks

3.00

Growth

2.00

Value

2.00

82

88

95

101

107

113

120

126

132

13

15

17

19

21

23

25

27

29

L.P.N Dev (LPN TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

2

4

6

8

10

12

14

16

18

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) -19.9


Free float (%) 77

Shareholders (%)

Thai NVDR 22.2

Chase nominees 6.1

Mr Sumeth Thechakraisri 4.6

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) 7.8 19.5 13.9 17.6 16.0


DPS (THB) 0.56 0.65 0.76 0.88 1.02

Recurring P/E (x) 13.9 11.7 10.2 8.7 7.5

P/B (x) 3.66 3.12 2.66 2.27 1.94

Dividend Yield (%) 3.7 4.3 5.0 5.8 6.7






Stricter laws and a weak macro outlook have derailed LPN’s prospects. EIA licences are taking longer to process while banks are tightening on lending and requiring higher down payments. We see room for LPN’s share price to slip further, while the sector’s valuation decline to -1SD from its long-term mean P/E. Our new THB12.10 TP (from THB26) is at a trough valuation of -1SD from the counter’s long-term mean P/E.

2013 presales exceed target. The successful launch of LPN’s THB3bn

luxurious condominium project in the Sukhumvit 24 area in Nov 2013 boosted full-year presales to THB24bn, or 20% above its original target of THB20bn. Its official guidance for 2014 has yet to be released, but we expect unexciting growth – if any – amid the weak economic and political conditions. Note that LPN earlier gave a rough estimate for 2014 presales and realised sales growth of 10% y-o-y.

Stricter regulations and weak macro outlook start to pinch. As the

leading low-end condominium (condo) developer, LPN has been grappling with issues arising from stricter regulations since last year. Several condo projects have been delayed, as their environmental impact assessment (EIA) licenses now taking longer to obtain. We have already cut our earnings forecast to reflect such problems. Also, banks are imposing stricter lending measures and requiring high down payments, which adversely impacts LPN’s customers’ risk profiles. Hence, its THB20bn backlog is at risk, given the potential increase in rejection/cancellation rates.

Modest profit growth for 2014. Of LPN’s total backlog, THB8.2bn will

be realised in 2014 and THB9bn in 2015 (ie 50% of our full-year realised sales forecasts). This will help sustain double-digit earnings growth for 2014-15, as well as a healthy annual dividend yield of 6-7%.

TP cut to THB12.10 (from THB26). Although we like LPN’s strong

brands, resilient earnings growth, solid balance sheet with net cash and experienced management, we see room for its share price to drop further as the sector’s valuation falls to -1SD from its long-term mean P/E. Thus, we downgrade our call to TAKE PROFIT, with our THB12.10 TP pegged to -1SD of the stock’s long-term mean P/E, which is its trough valuation.



Financial Exhibits


Total turnover 9,941 12,335 13,325 14,912 17,760

Cost of sales (6,547) (8,237) (9,007) (10,077) (12,092)

Gross profit 3,394 4,098 4,318 4,834 5,667





Operating EBIT 2,257 2,641 2,771 3,178 3,684

Net income from investments 29 73 68 - -



Exceptional income - net 54 8 52 - -

Pre-tax profit 2,359 2,747 2,917 3,201 3,714

Taxation (722) (830) (700) (640) (743)








Change in working capital (1,634) (715) (2,685) (471) (1,969)

Other operating cash flow 41 (199) 66 342 52

Operating cash flow 696 1,760 187 3,086 1,806

Interest paid (4) (3) (10) (22) (22)

Tax paid (722) (830) (700) (640) (743)

Cash flow from operations (30) 927 (523) 2,423 1,041

Capex (144) 276 (99) (155) (39)

Other investing cash flow 12 (45) 247 (252) 75

Cash flow from investing activities (132) 231 148 (407) 36

Dividends paid (767) (871) (981) (1,120) (1,293)

Proceeds from issue of shares - 39 - - -

Increase in debt 732 (1,153) 2,228 (1,336) -

Cash flow from financing activities (35) (1,985) 1,247 (2,456) (1,293)

Cash at beginning of period 1,319 1,122 295 1,167 728

Total cash generated (197) (827) 872 (439) (216)

Implied cash at end of period 1,122 295 1,167 728 511




Financial Exhibits


Total cash and equivalents 1,122 295 1,167 728 511







Total assets 10,380 9,593 13,904 14,091 15,876

Short-term debt 890 600 1,836 500 500

Accounts payable 896 1,334 2,093 2,093 2,000

Other current liabilities 1,552 401 471 500 600


Total long-term debt 863 - 992 992 992


Total non-current liabilities 962 129 1,139 1,192 1,292


Share capital 1,475 1,475 1,475 1,475 1,475


Other reserves 442 481 481 481 481


Total equity 6,080 7,129 8,365 9,806 11,484




Revenue growth (%) 10.8 24.1 8.0 11.9 19.1

Operating profit growth (%) 11.6 17.0 4.9 14.7 15.9

Net profit growth (%) 9.0 17.1 15.6 15.5 16.0

EPS growth (%) 9.0 17.1 15.6 15.5 16.0







DPS 0.56 0.65 0.76 0.88 1.02

Recurrent cash flow per share (0.02) 0.63 (0.35) 1.64 0.71


Company Profile LPN Development (LPN) specialises in low-end condominiums in Bangkok and the major provinces. Its condominiums are mostly located in densely-populated areas, rather than along the mass transit network.



Pruksa Real Estate (PS TB) Buy (Maintained) Property - Real Estate Target Price: THB22.0

Market Cap: USD1,149m Price: THB17.1

Trading At Trough Valuation

Macro

3.00

Risks

3.00

Growth

2.00

Value

2.00

65

79

93

107

121

135

13

18

23

28

33

38

Pruksa Real Estate (PS TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

5

10

15

20

25

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Sep-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) 28.7


Free float (%) 26

Shareholders (%)

Vijitpongpun family 73.8

Thai NVDR 2.9

Chase nominees 2.8

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) (3.7) (18.7) 37.5 35.3 17.6


DPS (THB) 0.50 0.40 0.50 0.71 0.84

Recurring P/E (x) 10.8 13.3 9.7 7.2 6.1

P/B (x) 2.47 2.22 1.88 1.56 1.31

Dividend Yield (%) 2.9 2.3 2.9 4.2 4.9






We maintain a BUY on PS, which now trades at its trough valuation of nearly -1.5SD from its long-term mean P/E and P/BV. 2013 was a record year in terms of presales, revenue and profit growth, and we expect PS to be the top developer by revenue and presales this year. The stock remains attractive, as we expect a 2014 net profit growth of 18% y-o-y, 23% ROE and almost 5% dividend yield.

Disappointing 4Q13 presales of THB7.5bn. Political unrest and a

seasonally weak month dampened PS’ Dec 2013 presales, which were at just THB847m (2013 average monthly presales: THB3.5bn). 4Q13’s THB7.5bn presales were a 32% q-o-q and 14% y-o-y decline. However, 2013 full-year presales came in at THB41.3bn (+40% y-o-y), in line with its targets and is only second to Sansiri (SIRI TB, SELL, TP: THB1.40), which booked 2013 presales of THB42bn.

Market leader by revenue. Although PS failed to be the leading

developer by presales in 2013, we expect its revenue to reach THB36bn (+33% y-o-y) – the highest in the industry. This year, the company should be able to maintain this position as revenue leader, with turnover estimated at almost THB40bn (+11% y-o-y). If PS is able to achieve 2014 presales above THB35bn, the company will definitely become the market leader, as rival SIRI has targeted only THB30bn in presales, while Land and Houses (LH TB, BUY, TP: THB10.30) expects presales to grow by just c.10-15%, or no more than THB35bn.

Trading at unjustified P/E levels, trading at -1.5SD to its long-term mean. Despite PS’ remarkable 2013 performance – with 40% y-o-y

presales growth, 33% y-o-y revenue growth and 35% y-o-y net profit growth – the company’s stock has already had a massive sell-off over the past several months. PS’ P/E has already declined to almost -1.5SD to its long-term mean (ie P/E in 4Q11 when it was hard hit by floods). We see this as a good opportunity to pick up this stock. Our new THB22 TP is pegged to -1SD to its long-term mean P/E. Note that our previous TP of THB26 was pegged to -0.5SD to its long-term mean P/E.



Financial Exhibits


Total turnover 23,307 23,263 27,024 35,973 39,988

Cost of sales (14,561) (14,724) (17,890) (23,652) (25,993)

Gross profit 8,746 8,539 9,134 12,321 13,996





Amortisation of intangible assets (15) (22) (24) (26) (30)

Operating EBIT 4,503 3,885 5,209 6,817 7,978



Pre-tax profit 4,536 3,907 5,021 6,593 7,756

Taxation (1,048) (1,072) (1,123) (1,319) (1,551)








Change in working capital (13,946) (8,633) (1,015) (9,808) (6,017)

Other operating cash flow (100) 418 87 (157) 17

Operating cash flow (9,297) (3,991) 4,672 (2,718) 2,451

Interest paid (67) (137) (305) (344) (344)

Tax paid (1,048) (1,072) (1,123) (1,319) (1,551)

Cash flow from operations (10,412) (5,200) 3,244 (4,381) 556

Capex (1,146) (684) (147) (300) (300)

Other investing cash flow 250 164 25 128 105


Dividends paid (1,214) (1,104) (884) (1,112) (1,582)

Proceeds from issue of shares - 37 77 - -

Increase in debt 11,001 7,187 (2,779) 9,991 -

Other financing cash flow - - - 0 -

Cash flow from financing activities 9,787 6,120 (3,586) 8,879 (1,582)

Cash at beginning of period 3,151 1,630 2,030 1,566 5,892

Total cash generated (1,521) 400 (464) 4,326 (1,221)

Implied cash at end of period 1,630 2,030 1,566 5,892 4,671




Financial Exhibits


Total cash and equivalents 1,630 2,030 1,566 5,892 4,670







Total assets 34,091 41,982 43,821 56,934 61,679

Short-term debt 4,001 9,326 9,259 12,500 12,500








Share capital 2,207 2,209 2,213 2,213 2,213


Other reserves 1,361 1,396 1,469 1,469 1,469


Total equity 15,263 16,996 20,082 24,244 28,866




Revenue growth (%) 22.9 (0.2) 16.2 33.1 11.2

Operating profit growth (%) (5.8) (13.7) 34.1 30.9 17.0

Net profit growth (%) (3.7) (18.7) 37.5 35.3 17.6

EPS growth (%) (4.0) (18.8) 37.3 35.2 17.6







DPS 0.50 0.40 0.50 0.71 0.84

Recurrent cash flow per share (4.72) (2.36) 1.47 (1.98) 0.25


Company Profile Pruksa Real Estate (PS) has recently become the top developer by realised sales again. It focuses on the low-end market, with average residential prices at <THB2m/unit. The majority of its products are developed using prefabricated/precast technology. PS also owns five prefabrication factories, which will be expanded to seven by 3Q14.



Quality Houses (QH TB) Trading Buy (from Buy) Property - Real Estate Target Price: THB3.20


Good Bargain

Macro

3.00

Risks

2.00

Growth

2.00

Value

2.00

91

111

131

151

171

191

2.1

2.6

3.1

3.6

4.1

4.6

5.1

Quality Houses (QH TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

100

200

300

400

500

600

700

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) 26.0


Free float (%) 63

Shareholders (%)

Land and Houses 24.9

Government of Singapore Investment Corp

10.8

Thai NVDR 7.9

Shariah compliant


License No.17602 [email protected]



Reported net profit (THBm) 2,003 853 2,386 3,036 3,295

Recurring net profit (THBm) 1,758 850 1,497 2,917 3,077

Recurring net profit growth (%) 5.8 (51.6) 76.0 94.9 5.5


DPS (THB) 0.12 0.01 0.11 0.17 0.18

Recurring P/E (x) 12.2 25.3 15.0 8.0 7.6

P/B (x) 1.61 1.64 1.51 1.33 1.21

P/CF (x) 19.2 na na na na

Dividend Yield (%) 4.7 0.4 4.3 6.5 7.1

EV/EBITDA (x) 5.7 22.9 13.9 9.7 11.0



Our vs consensus EPS (%) 0.2 3.7


QH is the only developer which has shown meaningful improvements in presales, revenue and margins over the past few years. Despite a healthy 2013 performance, a slowdown is likely this year given its small backlog and weak macroeconomic outlook. However, share price has dipped to an attractive level below -1SD to its long-term mean P/E, against a dividend yield of 6-7%.

2013 guidance is met. QH’s full-year presales came in at THB20.6bn

(+22% y-o-y), in line with its target of THB20bn. Housing’s gross margin stayed above 30% for six quarters in a row, while condo’s gross margin reached 35.4% in 3Q13, the highest since 2Q11. Also, we saw a meaningful improvement in the company’s efficiency given a sharp reduction in its SG&A-to-sale ratio to 17% from 23%. We expect recurring net profit to almost double y-o-y to THB2.9bn.

2014 earnings to slow before rebounding sharply in 2015. Earlier,

QH targeted presales and realised sales growth of around 10-15% y-o-y. Amid the current slowdown, they are likely to grow at a single-digit rate. We foresee its 2014 net profit growth softening to a single-digit rate as there will only be three condo projects (worth THB5bn in total) due for completion this year, vs four condo projects (worth THB6bn in total) completed in 2013. However, QH’s solid balance sheet and cash flow will allow it to consistently pay a high dividend yield of 6-7%. 2015 will be the next “golden year”, when many condos (totalling THB10bn) are due for completion.

New THB3.20 TP. Our new THB3.20 TP comprises THB2.30 from the

property business, pegged to -1SD to long-term mean P/E, and THB0.90 from potential divestment gains from sales of its investment portfolio and properties. Its share price has dipped below -1SD to long-term mean P/E, reflecting a likely slowdown in 2014. The current price seems to reflect only its earnings prospects, leaving out values of its investment properties (ie hotels and offices) and investment portfolio.



Financial Exhibits


Total turnover 13,241 9,849 13,077 18,700 18,269

Cost of sales (9,359) (6,981) (9,028) (12,585) (12,366)

Gross profit 3,882 2,868 4,049 6,115 5,903


Operating profit 1,939 522 1,334 2,662 2,629

Operating EBITDA 2,224 766 1,555 2,885 2,852


Operating EBIT 1,939 522 1,334 2,662 2,629

Net income from investments 543 721 804 965 1,110



Other non-recurring income 319 3 1,184 140 250

Pre-tax profit 2,614 1,035 3,176 3,581 3,779

Taxation (611) (182) (790) (545) (484)

Profit after tax & minorities 2,003 853 2,386 3,036 3,295

Reported net profit 2,003 853 2,386 3,036 3,295

Recurring net profit 1,758 850 1,497 2,917 3,077



Operating profit 1,939 522 1,334 2,662 2,629


Change in working capital (625) (5,815) (4,436) (4,154) (3,687)

Other operating cash flow 391 14 2,129 155 272

Operating cash flow 1,989 (5,035) (752) (1,114) (563)

Interest paid (259) (309) (295) (343) (374)

Tax paid (611) (182) (790) (545) (484)

Cash flow from operations 1,119 (5,526) (1,837) (2,001) (1,421)

Capex (1,001) (39) 2,116 3,320 1,353

Other new investments (80) (972) (152) 614 741

Other investing cash flow (848) (156) 524 (79) (79)

Cash flow from investing activities (1,929) (1,168) 2,489 3,856 2,015

Dividends paid (1,017) (1,017) (785) (992) (1,518)

Proceeds from issue of shares - - 706 - -

Increase in debt 1,754 7,710 (36) 300 -

Other financing cash flow - 0 - - -

Cash flow from financing activities 737 6,693 (115) (692) (1,518)

Cash at beginning of period 1,187 1,114 1,113 1,650 2,811

Total cash generated (73) (1) 537 1,162 (924)

Implied cash at end of period 1,114 1,113 1,650 2,812 1,887




Financial Exhibits


Total cash and equivalents 1,114 1,113 1,650 2,811 1,887

Inventories 10,856 16,427 21,697 25,841 29,555


Other current assets 184 568 1,062 531 265






Total assets 30,549 37,966 41,565 43,380 44,932

Short-term debt 3,200 9,677 7,352 7,352 7,352








Share capital 8,477 8,477 9,184 9,184 9,184


Other reserves 383 435 462 462 462


Total equity 13,373 13,168 15,489 17,532 19,309




Revenue growth (%) 16.6 (25.6) 32.8 43.0 (2.3)

Operating profit growth (%) (1.4) (73.1) 155.5 99.5 (1.2)

Net profit growth (%) 16.7 (57.4) 179.7 27.3 8.5

EPS growth (%) 16.7 (57.4) 168.5 22.4 8.5

Bv per share growth (%) 7.0 (1.5) 8.6 13.2 10.1






DPS 0.12 0.01 0.11 0.17 0.18

Recurrent cash flow per share 0.13 (0.65) (0.21) (0.22) (0.15)


Company Profile Quality Houses (QH) is a property developer and operator of serviced apartments/offices for rent.



Sansiri PCL (SIRI TB) Sell (from Neutral) Property - Real Estate Target Price: THB1.40


Outlook Turns Murky

Macro

3.00

Risks

3.00

Growth

1.00

Value

2.00

43

54

65

76

87

99

110

121

132

143

1.3

1.8

2.3

2.8

3.3

3.8

4.3

4.8

5.3

5.8

Sansiri Plc (SIRI TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

100

200

300

400

500

600

700

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) -16.2


Free float (%) 75

Shareholders (%)

TS Star 9.2

Thai NVDR 6.8

Viriyah Insurance 5.2

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) 74.8 2.7 47.7 (20.6) 16.5


DPS (THB) 0.12 0.14 0.17 0.14 0.15

Recurring P/E (x) 1.27 3.55 4.21 6.02 5.89

P/B (x) 0.26 1.04 0.89 0.89 0.87

Dividend Yield (%) 7.1 8.4 10.2 8.4 9.0




Our vs consensus EPS (%) 1.7 (11.5)


SIRI was unable to achieve its 2013 targets, which it subsequently modified in early Nov 2013. At a recent analyst meeting, management had turned very cautious and slashed its 2014 targets. Despite its conservative stance and currently low 6x P/E, downside risks persist given SIRI’s tight cash flow and high gearing. Our new THB1.40 TP (from THB2) is pegged to -0.5 SD of the counter’s long-term mean P/E.

Unable to achieve 2013 targets. In early Nov 2013, SIRI officially cut its

2013 presales target to THB45bn (from THB48bn) and revenue target to THB31bn (from THB35bn). Actual presales came in at THB42bn (7% lower than its target; flat y-o-y) while realised sales are likely to be lower than expected, due to late ownership transfers resulting from the ongoing political unrest and weak consumer confidence. Hence, there is a downside risk to our THB2.35bn profit forecast (-21% y-o-y).

Cutting 2014 guidance again. SIRI’s 2014 presales target was also

trimmed to THB30bn from the THB38bn set in early Nov 2013 (-30% y-o-y). It expects new launches to be conservative at THB33bn (-50% y-o-y). Realised sales, on the other hand, are set at THB34.3bn, in line with our forecasts. While SIRI is aiming for a 2014 net margin of 10% – assuming a gross margin of 33% and sales, general and administration expenses (SG&A) to sales ratio of 18-19% – we opt for a more conservative 9.2% net margin to derive a 2014F net profit of THB2.74bn (+16.5% y-o-y).

More downside risks in store. Despite SIRI’s ultra-conservative stance

and the fact that the company’s P/E has already declined to around 6x (below its long-term mean P/E of 8x), we still see more downside risks. Cash flow is extremely tight, with a committed capex of THB32bn and a fragile balance sheet. SIRI’s net gearing is also above 2x, while its THB62bn backlog – the highest in the industry – is also at risk given a potential increase in rejection/cancellation rates amid the weak economic conditions and low consumer confidence.

New THB1.40 TP (vs THB2) pegged to -0.5 SD of the counter’s long-term mean P/E. We note that SIRI’s P/E fell to this level during the 2010

“red shirt” protest and 2011 floods. Our previous TP of THB2 was pegged to its long-term mean P/E.



Financial Exhibits


Total turnover 18,596 20,541 29,820 31,781 34,401

Cost of sales (12,541) (13,509) (19,876) (21,153) (23,272)

Gross profit 6,055 7,032 9,944 10,628 11,129





Amortisation of intangible assets (59) (53) - - -

Operating EBIT 2,764 2,866 3,884 3,160 3,819



Exceptional income - net (76) 11 70 - -

Pre-tax profit 2,601 2,794 3,893 2,942 3,428

Taxation (702) (779) (874) (588) (686)









Other operating cash flow 12,737 13,295 585 250 290

Operating cash flow (1,681) (2,083) (2,538) (3,038) 246

Interest paid (245) (222) (328) (517) (720)

Tax paid (951) (643) (810) (559) (647)

Cash flow from operations (2,877) (2,948) (3,676) (4,114) (1,120)

Capex (201) (459) (620) (384) (448)

Other investing cash flow 38 31 (593) - -

Cash flow from investing activities (163) (428) (1,213) (384) (448)

Dividends paid (766) (178) (1,001) (1,441) (1,355)

Proceeds from issue of shares 89 102 921 1,324 1,387

Increase in debt 5,002 3,872 5,514 1,858 2,920

Other financing cash flow (1,393) (888) - - 0

Cash flow from financing activities 2,932 2,908 5,434 1,741 2,952

Cash at beginning of period 3,439 3,331 2,863 3,408 651

Total cash generated (108) (468) 545 (2,757) 1,384

Implied cash at end of period 3,331 2,863 3,408 651 2,035




Financial Exhibits


Total cash and equivalents 3,472 2,968 3,459 702 2,086




Total investments 317 677 636 635 614





Total assets 31,190 36,238 46,105 50,480 56,550

Short-term debt 5,670 10,077 11,586 11,863 12,233

Accounts payable 805 975 1,800 1,918 2,076







Share capital 6,380 7,547 8,434 9,706 11,010


Other reserves (16) 533 1,086 1,138 1,221


Minority interests - - (0) (0) (0)

Other equity - - (0) (0) (0)

Total equity 9,447 11,378 14,835 17,071 19,846




Revenue growth (%) 17.5 10.5 45.2 6.6 8.2

Operating profit growth (%) 26.1 3.7 35.5 (18.6) 20.8

Net profit growth (%) 95.8 6.1 49.8 (22.1) 16.5

EPS growth (%) 94.6 (63.2) (14.3) (31.3) 2.0

Bv per share growth (%) 13.1 (74.5) 16.7 (0.0) 2.5






DPS 0.12 0.14 0.17 0.14 0.15

Recurrent cash flow per share (1.94) (0.69) (0.49) (0.49) (0.12)


Company Profile Sansiri (SIRI) is one of Thailand's top residential developers with a well-diversified product portfolio including single detached houses, townhouses and condominiums. The company targets every market except for the low-end segment.



SC Asset Corp (SC TB) Sell (from Take Profit) Property - Real Estate Target Price: THB1.40


Prospects Clouded By Political Risk

Macro

3.00

Risks

3.00

Growth

3.00

Value

2.00

59

71

82

94

106

117

129

2.2

3.2

4.2

5.2

6.2

7.2

8.2

SC Asset Corp (SC TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

10

20

30

40

50

60

70

80

90

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) -50.0


Free float (%) 35

Shareholders (%)

Shinawatra family 65.0

Thai NVDR 3.8

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) 45.6 (7.7) (0.9) 12.3 33.9


DPS (THB) 0.14 0.13 0.16 0.13 0.17

Recurring P/E (x) 7.71 8.46 8.63 8.19 6.48

P/B (x) 1.03 0.98 0.92 0.96 0.87

Dividend Yield (%) 5.0 4.6 5.8 4.6 6.2






Earlier, we expect SC’s net profit this year to rebound sharply, given its substantial THB4bn backlog to be realised as revenue. However, the renewed political conflict dampens its prospects. Hence, it is likely that SC – for whom Shinawatra family is a major shareholder – will return to trade at a big discount to its peers again. Our new THB1.40 TP is pegged to its trough valuation of -1SD to its long-term mean P/E.

Unexciting 2013. SC is set to miss its presales target of THB15bn

(2012: THB12bn) due to weak sentiment in 4Q13. Net profit, on the other hand, is estimated to grow 8% y-o-y to THB1.2bn based on revenue of THB10bn. We note that its profit growth had been sluggish at a single digit rate over the past three years due to delays in project completion and high SG&A expenses.

Downside risk to 2014 outlook. Earlier, we expect net profit this year to

rebound sharply by 35% or more given the potential realised revenue of THB4bn (+120% y-o-y) on completion of four condo projects in 1H14. Some of these condo projects delayed their completion from 2013. While one-third of 2014F revenue is secured with sales backlog, the remainder is housing sales, which are highly dependent on political issues and the weak economic outlook.

Return to trade at big discount on political risk. Since SC is majority-

owned by the Shinawatra family, it is highly sensitive to political issues. During the last round of political conflict from 2006-2010, the company used to trade in the -0.5SD to -1SD range to its long-term mean P/E. Given the current severe political conflict, we expect SC to return to trade at a big discount to its peers again. Our new THB1.40 TP is pegged to its trough valuation of -1SD to its long-term mean P/E.



Financial Exhibits


Total turnover 6,652 7,353 8,358 10,198 12,486

Cost of sales (3,972) (4,553) (5,338) (6,425) (7,957)

Gross profit 2,680 2,800 3,020 3,773 4,529

Gen & admin expenses (1,051) (1,287) (1,635) (2,192) (2,426)




Operating EBIT 1,629 1,513 1,385 1,581 2,103



Other non-recurring income (1) 3 52

Pre-tax profit 1,579 1,496 1,398 1,498 2,006

Taxation (413) (417) (290) (300) (401)









Other operating cash flow 13 39 (141) 25 15

Operating cash flow (350) (2,295) (2,620) (2,022) 936

Interest paid (63) (38) (56) (98) (111)

Tax paid (413) (417) (290) (300) (401)

Cash flow from operations (826) (2,750) (2,966) (2,419) 423

Capex (1,476) (57) (108) (40) (40)

Other investing cash flow (368) (107) (45) (129) (165)

Cash flow from investing activities (1,844) (164) (154) (169) (205)

Dividends paid (289) (454) (427) (443) (479)

Proceeds from issue of shares 1,668 23 3 - -

Increase in debt 1,081 3,818 3,094 3,361 1,138

Other financing cash flow 39 6 29 85 74

Cash flow from financing activities 2,499 3,393 2,698 3,003 732

Cash at beginning of period 865 694 1,173 750 1,165

Total cash generated (171) 479 (422) 415 950

Implied cash at end of period 694 1,173 751 1,165 2,115




Financial Exhibits


Total cash and equivalents 694 1,173 960 1,375 2,325

Inventories 7,116 10,567 14,641 18,980 20,586


Other current assets 22 187 532 243 297





Total assets 14,183 18,420 22,751 27,381 30,187

Short-term debt 2,984 5,061 6,735 10,111 9,689


Other current liabilities 821 822 1,267 1,288 1,577


Total long-term debt 732 2,510 3,923 3,900 5,460




Share capital 3,219 3,285 3,292 3,714 3,714


Other reserves 295 316 319 319 319


Total equity 8,718 9,387 10,071 10,835 11,961




Revenue growth (%) 40.6 10.5 13.7 22.0 22.4

Operating profit growth (%) 43.0 (7.1) (8.4) 14.1 33.0


EPS growth (%) 52.4 (8.5) 1.6 1.5 26.3

Bv per share growth (%) 40.8 5.5 7.1 (4.6) 10.4






DPS 0.14 0.13 0.16 0.13 0.17

Recurrent cash flow per share (0.26) (0.85) (0.90) (0.69) 0.11


Company Profile SC Asset Corporation PCL develops real estate properties for sale and rental. The company and its subsidiaries own and manage the Shinawatra 1, 2 and 3 office buildings, provide management consultant services, and develop single houses, condominiums and office building projects. Its subsidiaries are OAI Asset, Up Country Land and V Land Property.



Supalai PCL (SPALI TB) Sell (from Neutral) Property - Real Estate Target Price: THB12.0


More Challenges Ahead

Macro

3.00

Risks

3.00

Growth

2.00

Value

2.00

63

69

74

80

86

92

97

103

10

12

14

16

18

20

22

24

Supalai (SPALI TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

5

10

15

20

25

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Sep-1

3

No

v-1

3

Vo

l m

Source: Bloomberg



Upside (%) -17.8


Free float (%) 66

Shareholders (%)

Prateep Tangmatitham 22.9

Thai NVDR 22.2

Shariah compliant


License No.17602

[email protected]





Recurring net profit growth (%) 4.2 (0.5) 6.8 8.1 27.1


DPS (THB) 0.60 0.65 0.65 0.69 0.88

Recurring P/E (x) 9.71 9.76 9.14 8.45 6.65

P/B (x) 2.70 2.33 2.01 1.76 1.50

Dividend Yield (%) 4.1 4.5 4.5 4.7 6.0






SPALI, a second-tier developer with subpar brands, does have a huge backlog ready to be realised as sales this year. However, a delay in ownership transfer amid the weak macroeconomic outlook, as well as low consumer confidence may lead to a below-than-expected performance. We downgrade to SELL, with its new THB12 TP pegged at -0.5 SD to the stock’s long-term mean P/E – its trough valuation.

A disappointing 2013. Given its weak 9M13 presales of THB12.7bn, or

50% of its original THB26bn target, SPALI has cut its full-year presales target to THB20bn (-15% y-o-y). However, owing to the weak sentiment in 4Q13, it is highly likely that the company will miss its target, like other mid-sized developers. That said, we still keep our realised revenue forecast of THB13.5bn – in line with SPALI’s guidance – and net profit of THB3bn, up 8% y-o-y.

2014 outlook. As next year’s new launches will mainly be landed

properties rather than condominiums (condos), SPALI’s presales are likely to be flat – or even lower – than in 2013. However, realised sales and net profit will shoot up upon completion of six condo projects worth a combined THB15bn (average 85% sold). Note that the completion of some of these projects will be delayed to 2014 from 2013.

Key challenges. We estimate 65% of 2014F revenue will be derived

from SPALI’s backlog. Risks will come from late ownership transfers and rising rejection/cancellation rates amid the weak economic and political conditions. Amid the tough operating environment, SPALI – with its subpar brand name – will be hard hit, particularly upcountry. We note that the company is keen to raise its portion of country sales to 25% of total sales (from 22%) in 2014 and 30% in 2015. A shortage of labour and construction companies will make a greater impact on SPALI, which is still using conventional construction techniques rather than adopting the pre-cast model.

New TP of THB12. We downgrade the stock to SELL, with our new TP

pegged at -0.5SD to SPALI’s long-term mean P/E – its trough valuation.



Financial Exhibits


Total turnover 11,083 12,686 11,512 13,629 18,546

Cost of sales (6,330) (7,319) (6,461) (7,967) (10,953)

Gross profit 4,753 5,368 5,051 5,661 7,593

Other operating costs (991) (1,353) (1,405) (1,667) (2,547)




Operating EBIT 3,762 4,015 3,646 3,995 5,046



Pre-tax profit 3,791 3,991 3,652 3,844 4,888

Taxation (1,153) (1,319) (831) (769) (978)

Minority interests (57) (105) (78) (110) (140)








Change in working capital (2,627) (1,946) (509) (3,479) (2,589)

Other operating cash flow 38 124 67 388 313

Operating cash flow 1,256 2,276 3,281 993 2,863

Interest paid (72) (147) (130) (288) (336)

Tax paid (1,153) (1,319) (831) (769) (978)

Cash flow from operations 31 811 2,320 (64) 1,549

Capex (24) (40) (45) (49) (54)


Dividends paid (1,130) (1,164) (1,029) (1,194) (1,347)

Increase in debt 1,152 575 251 502 505

Other financing cash flow - (0) - 0 (0)

Cash flow from financing activities 22 (589) (778) (692) (842)

Cash at beginning of period 461 490 673 2,170 1,365

Total cash generated 29 182 1,498 (805) 652

Implied cash at end of period 490 672 2,170 1,365 2,017




Financial Exhibits


Total cash and equivalents 490 673 2,170 1,365 2,017





Total other assets 1,244 1,138 1,206 1,190 1,167


Total assets 18,586 20,495 23,636 26,880 31,976

Short-term debt 154 960 2,410 2,412 2,417








Share capital 1,717 1,717 1,717 1,717 1,717


Other reserves 673 673 656 674 674


Minority interests 326 383 423 455 485

Other equity 0 0 - - -

Total equity 9,624 11,132 12,871 14,692 17,145




Revenue growth (%) 15.2 14.5 (9.3) 18.4 36.1

Operating profit growth (%) 4.4 6.7 (9.2) 9.6 26.3


EPS growth (%) 4.2 (0.5) 6.8 8.1 27.1







DPS 0.60 0.65 0.65 0.69 0.88

Recurrent cash flow per share 0.02 0.47 1.35 (0.04) 0.90


Company Profile Supalai (SPALI) is a residential developer focusing on the mid- to low-end segment in Bangkok and upcountry. It also has office buildings for rent and a small hotel business.

33

RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company.

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Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 6 January 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 6 January 2014, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

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Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2013

ADVANC BCP CPF ERW IVL NKI PS ROBINS SCB SNC TCAP TMB UV AOT BECL CPN GRAMMY KBANK NOBLE PSL RS SCC SPALI THAI TNITY VGI ASIMAR BKI CSL HANA KKP PAP PTT S&J SCSMG SPI THCOM TOP WACOAL BAFS BROOK DRT HEMRAJ KTB PG PTTEP SAMART SE-ED SSI THRE TRC BANPU BTS DTAC ICC LPN PHOL PTTGC SAMTEL SIM SSSC TIP TRUE BAY CIMB EASTW INTUCH MCOT PR QH SAT SIS SVI TASCO TTW BBL CK EGCO IRPC MINT PRANDA RATCH SC SITHAI SYMC TKT TVO

2S AYUD CNT GL KKC MBK OISHI SABINA STANLY TK TTCL zZMICO ACAP BEC CPALL GLOW KSL MBKET PB SAMCO STEC TLUXE TUF AF BFIT CSC GOLD KWC MFC PDI SCCC SUC TMILL TWFP AHC BH DCC GSTEL L&E MFEC PE SCG SUSCO TMT TYM AIT BIGC DELTA GUNKUL LANNA MODERN PF SEAFCO SYNTEC TNL UAC AKP BJC DTC HMPRO LH MTI PJW SFP TASCO TOG UMI AMANAH BLA ECL HTC LHBANK NBC PM SIAM TCP TPC UMS AMARIN BMCL EE IFEC LHK NCH PPM SINGER TF TPCORP UP AMATA BWG EIC INET LIVE NINE PPP SIRI TFD TPIPL UPOIC AP CCET ESSO ITD LOXLEY NMG PREB SKR TFI TRT UT APCO CENTEL FE JAS LRH NSI PRG SMT THANA TRU VIBHA APCS CFRESH FORTH JUBILE LST NWR PT SNP THANI TSC VIH ASIA CGS GBX KBS MACO OCC PYLON SPCG THIP TSTE VNG ASK CHOW GC KCE MAJOR OFM QTC SPPT TICON TSTH VNT ASP CM GFPT KGI MAKRO OGC RASA SSF TIPCO TTA YUASA *** PHATRA was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25,2012

A BCH CRANE FPI IT MBAX PICO SGP TBSP TPP WIN AAV BEAUTY CSP FSS JMART MDX PL SIMAT TCCC TR WORK AEC BGI CSR GENCO JMT PRINC POST SLC TEAM TTI AEONTS BLAND CTW GFM JTS MJD PRECHA SMIT TGCI TVD AFC BOL DEMCO GJS JUTHA MK PRIN SMK TIC TVI AGE BROCK DNA GLOBAL KASET MOONG Q-CON SOLAR TIES TWZ AH BSBM DRACO HFT KC MPIC QLT SPC TIW UBIS AI CHARAN EA HTECH KCAR MSC RCI SPG TKS UEC AJ CHUO EARTH HYDRO KDH NC RCL SRICHA TMC UOBKH AKR CI EASON IFS KTC NIPPON ROJNA SSC TMD UPF ALUCON CIG EMC IHL KWH NNCL RPC STA TMI UWC ANAN CITY EPCO ILINK LALIN NTV SCBLIF SUPER TNDT VARO ARIP CMR F&D INOX LEE OSK SCP SVOA TNPC VTE AS CNS FNS IRC MATCH PAE SENA SWC TOPP WAVE BAT-3K CPL FOCUS IRPC MATI PATO SF SYNEX TPA WG *** CIMBI was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25, 2012.

IOD (IOD Disclaimer)

การเปิดเผลผลการส ารวจของสมาคมส่งเสริมสถาบันกรรมการบรษิัทไทย (IOD) ในเรื่องการก ากับดูแลกิจการ (Corporate Governance) นี้เป็นการด าเนินการตามนโยบายของส านักงานคณะกรรมการก ากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการส ารวจของ IOD เป็นการส ารวจและประเมินจากข้อมูลของบรษัทจดทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลกัทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผูล้งทุนทั่วไปสามารถเข้าถงึได้ ดังนั้นผลส ารวจดังกล่าวจึงเป็นการน าเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน

อนึ่ง ผลการส ารวจดังกล่าว เป็นผลการส ารวจ ณ วนัที่ปรากฎในรายงานการก ากับดแูละกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการส ารวจจึงอาจเปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทัง้นี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จ ากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการส ารวจดงักล่าวแต่อย่างใด

real estate underweight (from neutral) · of their investment properties (ie offices,...

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