thailand company focus trc...

www.dbsvickers.com ed: SGC / sa: NC

BUY Bt9.95 SET : 1,520.01 (Initiating Coverage) Price Target : 12-Month Bt 13.20 Reason for Report : Initiate coverage Potential Catalyst: Potash mining, high-speed railway, investments in other energy projects Analyst Worrapong TUNTIWUTTHIPONG +662 657 7827 [email protected]

Price Relative

Forecasts and Valuation FY Dec (Bt m) 2013A 2014A 2015F 2016FTurnover 2,481 3,095 3,954 9,515EBITDA 222 340 427 957Pre-tax Profit 176 283 351 873Net Profit 124 213 291 724Net Pft (Pre Ex.) 124 213 291 724EPS (Bt) 0.2 0.3 0.4 0.9EPS Pre Ex. (Bt) 0.2 0.3 0.4 0.9EPS Gth (%) (45) 71 37 149EPS Gth Pre Ex (%) (45) 71 37 149Diluted EPS (Bt) 0.2 0.3 0.4 0.9Net DPS (Bt) 0.0 0.1 0.2 0.4BV Per Share (Bt) 1.4 1.7 2.0 2.7PE (X) 66.1 38.5 28.2 11.3PE Pre Ex. (X) 66.1 38.5 28.2 11.3P/Cash Flow (X) 783.1 15.7 25.4 56.1EV/EBITDA (X) 36.5 22.5 17.1 7.6Net Div Yield (%) 0.0 1.3 1.8 4.4P/Book Value (X) 7.1 5.9 4.9 3.7Net Debt/Equity (X) CASH CASH CASH CASHROAE (%) 11.7 16.8 19.0 37.3 Consensus EPS (Bt): N/A 0.31Other Broker Recs: B: 1 S: - H: - ICB Industry : Industrials ICB Sector: Construction & Materials Principal Business: TRC Construction has been in the engineering, procurement and construction business since 1998. Its expertise is in pipeline construction and plant construction and installation for energy and petrochemical industries. Corporate Governance

CG Rating

Source of all data: Company, DBS Bank, Bloomberg Finance L.P

At A Glance

Issued Capital (m shrs) 826Mkt. Cap (Btm/US$m) 8,344 / 253Major Shareholders KPK 1999 Co.,Ltd (%) 25.0 Samlee Corporation (%) 12.1 Citibank Nominees Singapore 3.4Free Float (%) 61.9Avg. Daily Vol.(‘000) 43,534

DBS Group Research . Equity 24 Mar 2015

Thailand Company Focus

TRC Construction Bloomberg: TRC TB | Reuters: TRC.BK Refer to important disclosures at the end of this report

Potash mine a hidden gem

Expect earnings to triple to Bt0.88 EPS in FY16

May secure potash plant and rail projects, which would support FY15-20 revenues

Potash plant could add Bt0.31 EPS from FY20 onwards, based on 30% stake in APMC

Offers 60% earnings CAGR over FY14-17F; BUY for 33% return

Earnings to triple by FY16 led by potash plant construction project. We expect TRC’s earnings to jump 37% in FY15 and 149% in FY16, raising EPS to Bt0.35 and Bt0.88, respectively, led by the contract to construct a potash processing plant for APMC valued at Bt22bn over FY15-18. APMC has called for bids and we expect TRC to win the contract, given its 4.5% stake in APMC and its CEO would be APMC’s CEO effective Apr 15. TRC may also be awarded contracts for the high-speed and dual-track railways valued at Bt5-10bn. These would be upside risks to FY16-20 earnings. APMC, the hidden gem. APMC is a long-term, strategic, investment for TRC as the 25-year concession for the potash mine is worth US$6.0bn. If TRC raises its stake in APMC to 30%, it would book c.Bt300m (Bt0.31 EPS) equity income annually from FY20. This should be finalised in 3Q15, and could improve fundamentals with recurring income from FY20 onwards. BUY for 60% earnings growth and 33% upside. The stock offers 33% upside to our TP of Bt13.2, which is pegged to 15x FY16F PE, its +1SD 5-year historical average multiple. Currently, TRC is trading at 11.3x FY16F PE compared to contractor peers’ average of 18.1x. The high-speed rail project and recurring income from APMC would be upside risks for TRC. TRC has announced a 4:1 stock dividend with XD on 12 May 2015, and will increase capital by issuing 330.5m new shares for private placement.

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Relative IndexBt

TRC Construction (LHS) Relative SET INDEX (RHS)

Company Focus

TRC Construction

INVESTMENT THESIS

Profile Rationale

TRC Construction has been in the engineering, procurement and construction business since 1998. Its expertise is pipeline and plant construction, and installations for the energy and petrochemical industries. The company counts the PTT group of companies, Dow Chemical, SCC, AMATA, Total, and GLOW among its customers. Recently, TRC also invested in a potash mine concession, taking up 4.5% stake with plans to increase its investments in the near future.

Backlog to support earnings Earnings to grow at 60% 3-year CAGR. We expect TRC’s

earnings to jump by 37% to Bt291m (Bt0.35 EPS) in FY15 and 149% to Bt724m (Bt0.88 EPS), driven by the construction contract for APMC’s potash processing plant valued at Bt22bn over FY15-18.

Recurring income from APMC. In anticipation of TRC increasing its stake in APMC to 30%, TRC would book c.Bt300m (Bt0.31 EPS) a year in associated income from FY20 onwards.

High-speed and dual-track railways are next catalysts. We expect the JV between SKW and China’s railway group to win contracts or sub-contracts for 18 projects to be offered by the Thai government. We expect the total value to be Bt5-10bn over FY16-20.

Valuation Risks

Attractive valuation; Bt13.20 TP is based on PE valuation metric. We recommend to BUY the stock, premised on 33% upside to our TP and an attractive growth story to support long term earnings. Currently, TRC is trading at 11.3x FY16F PE compared to contractor peers’ average of 18.1x. This is an opportunity to increase exposure in TRC.

Potash mining will be key earnings growth driver for FY15-18F Heavy reliance on PTT group. Pipeline works account for

80% of total revenue, mostly from PTT PCL which is a major client.

FY15-FY18F earnings dependent on potash mining contract. Earnings growth may miss our forecasts if the company fails to secure the potash plant contract valued at c.Bt22bn. This could drag down the share price.

Low oil price could limit works for TRC. The low oil price

could delay investments by oil & gas companies. This could have a negative impact on TRC, which focuses on the energy sector.

Key man. TRC relies heavily on the founder, Mr. Samai

Leesakul, to drive the company. However, although he has resigned from the company, he would still have an interest in the company through his son Mr. Pasit Leesakul.

Source: DBS Vickers

Company Focus

TRC Construction

SWOT Analysis

Strengths Weakness Solid track record as PTT’s contractor Partnerships would benefit TRC by enabling the company to

gain know-how and to ramp up quality and standards to that required for both of civil and pipeline works

TRC plans to increase its stake in APMC from 4.5% to 30%.

APMC holds the sole potash mining concession in Thailand

It is difficult for a small contractor to bid for large government contracts

Limited capital means the company may not be able to capture all investment opportunities

Departure of Mr.Samai Leesakul in April 2015 could affect to operations temporarily

Opportunities Threats Market price of potash may recover along with the upturn in

the oil price, which would lift APMC’s value over the longer term

Only few competitors are qualified for pipeline works

PTT’s favoured contractor could get more work from the group

Being the holder of the sole potash mining concession in

Thailand, which effectively makes it a monopoly, there is opportunity to grow the business.

The growing population will increase demand for food,

which would require higher yields from a similar land space. This suggests higher demand for potash, which is a key fertiliser ingredient.

Lower oil price could limit work for TRC, which secures contracts mostly from the energy segment

Environmental concerns could derail APMC’s operation

Source: DBS Vickers

Company Focus

TRC Construction

Business Model

TRC Construction has been in the engineering, procurement and construction business since 1998. Its expertise is in pipeline construction and plant construction and installation for energy and petrochemical industries. The company counts the PTT group of companies, Dow Chemical, SCC, AMATA, Total, and GLOW among its customers. Currently, the company plans to increase its stake in the potash mining concession from 4.5% stake to 30% in the near future.

Currently, TRC operates four business units: (i) Pipeline System Construction Business This unit mainly focuses on the construction of natural gas transmission pipelines, especially companies in the energy and petrochemical industries. In the past, the Company mainly constructed natural gas distribution pipeline systems, but has since ventured into large scale cross-country natural gas pipeline projects, its maiden project being the Wangnoi-Kaengkhoi Natural Gas Pipeline Project under the CPP-TRC Joint Venture, a cooperation with the China Petroleum Pipeline Bureau. Now, TRC can bid for large scale natural gas pipeline projects on its own. TRC also specialises in other pipeline systems such as that for petrochemical raw materials and water. (ii) Engineering System Installation and Factory Construction for Energy and Petrochemical This unit is involved in providing both engineering systems installation and factory construction, especially to companies in the energy and petrochemical industries. The Company will seek international partner(s) that can provide technology support, if required, in order to bid for a larger range of projects. (iii) Project Development and Investment This unit was set up in 2007. Its focus is on developing energy, real estate, power plant, and petrochemical plant projects. This includes several projects under feasibility study and under joint development, such as the Stung Meteuk Hydropower Project in Cambodia, and overseas energy projects.

(iv) Other business units (JV partners) The company has expanded overseas through tie-ups with both domestic and international partners. TRC’s domestic partners include Sahakarn Wisavakorn Co., Ltd. (SKW), which subsequently became a subsidiary of TRC since the second quarter of 2007. SKW is a contractor for several public institutions such as Department of Highways, Royal Irrigation Department, Department of Rural Roads, Bangkok Metropolitan Administration, Provincial Waterworks Authority, and Ports Authority of Thailand. TRC’s international partners and subsidiaries are: (i) TRC Middle East LLC (70% stake) (ii) TRC Engineering LLC (70% stake) in the Sultanate of

Oman to provide construction services to the energy sector

(iii) Sinopec-TRC JV (30% stake), which is a tie-up with Sinopec International Petroleum Service Corporation of China to construct the gas transmission pipeline project that will run from Saraburi to Nakhon Ratchasima province.

(v) Potash mining concession a major catalyst

ASEAN Potash Mining PCL. TRC currently has 4.5% stakes in ASEAN Potash Mining PCL (APMC), making it the seventh largest shareholder. APMC owns a total area of approximately 9,700 rai in Chaiyaphum province. In 2011, the Ministry of Natural Resources and Environment declared that land to be a mining concession area. A survey estimates the concession holds 420m tons of potash reserve. Plans to increase stake in APMC. TRC plans to increase its stake in the potash mining operation to 25-30%, and list the operation on the SET. Currently, APMC’s shareholders include the Ministry of Finance, CP Group, AGC Group, PDI Group, TRC, five ASEAN countries, and several other local investors. The operation will commence in 2018 with a production capacity of 0.3m tons a year, and would increase to 0.8m tons by 2019 and 1.1m tons in 2020. This could increase revenue by up to Bt10bn per year. Has received EHIA, government and public (hearing) approvals. Aside from the fact that APMC is an Association of Southeast Asian Nations (ASEAN) initiative, it has also received the environmental and health impact assessment (EHIA) permit. And, on 16 Feb 2015, the government has granted a concession to APMC to operate a potash mine in Chaiyaphum.

Company Focus

TRC Construction

Huge project. We expect TRC may raise capital via a rights offering if they decide to increase their stake in the potash mining operation; we expect the deal to be finalised in 3Q15. Meanwhile, we also forecast TRC will secure the construction contract for the potash processing plant which is valued at Bt20-25bn over three years.

ASEAN Potash Mining PCL shareholders

Source: Company, DBS Vickers

Segmental revenue – FY15F (excluding potash)

Source: Company data

24%

12%

11%10%

10%

7%

4%

4%

18%

Ministry of Finance

Teparak International Co., Ltd.

The Bangchak Petroleum Plc.

PT Petrokimia Gresik (Persero)

Minister of Finance (Incorporation)

S Group AEC (Thailand Co., Ltd.

TRC International

Thai-German Mining Co., Ltd.

Others

82%

16%

2%

Pipeline Processing plant Civil work

Company Focus

TRC Construction

Company Background Corporate History. TRC Construction Public Company Limited was incorporated on 20 November 1998 with 1 million registered share capital to provide construction and engineering services for transmission pipeline systems and petrochemical and processing plants. The Company has since been expanding its investments and operations, and was listed on the Market for Alternative Investment on 22 December 2005. And on 23 April 2013, the company met the requirements to list on the SET. The Company subsequently increased registered capital to 106.67m shares, which lifted registered capital from Bt150m to Bt256.67m, to facilitate the share swap with Sahakarn Wisavakorn Co., Ltd., turning the latter into its subsidiary effective 2Q07. TRC’s major shareholders currently include KPK 1999 Co., Ltd. (owned by Mrs. Paichit Rattananon, Chairman of TRC) with 25% stake, followed by Samlee Corp. with 12%, foreign institutions 8%, and local investors 55%. The Leesakul family holds the CEO and management positions.

Resignation of CEO. The resignation of Mr. Samai Leesakul will be effective on 1 April 2015, but he will be appointed director and CEO of ASEAN Potash Mining PCL (APMC). He will be replaced by Mr. Pasith Leesakul. Major shareholders (May 2014)


Sales Trend Profitability Trend


KPK 1999 Co., Ltd.25%

Samlee Corporation

12%

Foriegn investors

8%

Local investors55%

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20.0%

40.0%

60.0%

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2012A 2013A 2014A 2015F 2016F

Bt m

Total Revenue Revenue Growth (%) (YoY)

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224

324

424

524

624

724

824

2012A 2013A 2014A 2015F 2016F

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Operating EBIT Pre tax Profit Net Profit

Company Focus

TRC Construction

Key Management Team

Name Age Current Position Term Education Stake (%)

Mrs. Paichit Rattananon 58 Chairman 2005 –Present

Master of Arts in Political Economy, Chulalongkorn University, Thailand.

25.13%

Assoc. Prof. Kamjorn Tatiyakavee 58 Independent Director & Audit committee

2005 –Present

Bechelor of Medicine, Chulalongkorn University, Thailand.

0.08%

Pol. Gen. Jarumporn Suramanee 60 Independent Director & Audit committee

2007 –Present

Master of Criminal Justice, Eastern Kentucky University, USA.

0.06%

Mr. Arun Chirachavala 60 Independent Director & Audit committee

2009 –Present

Master of Industrial Engineering, Stanford University, USA.

-

Assoc. Prof. Pises Sethsathira 57 Independent Director & Audit committee

2005 –Present

Master of Laws, Columbia University, USA. -

Assoc. Prof. Aekkachai Nittayagasetwat, PH.D., FRM.

48 Independent Director & Audit committee

2012 –Present

PH.D. in Finance, University of Mississippi, USA.

0.03%

Mr. Smai Leesakul 58 CEO 2007 –Present

Master of Management, SASIN Graduate Institute of Bussiness, Thailand.

0.06%

Mrs. Podchanee Phaosavasdi 52 Management Committee

2007 –Present

Master of Business Administration, Ramkamhaeng University, Thailand.

-

Mr. Pasit Leesakul 30 Authorized Director 2013 -Present

Master of Business Administration, McCollum Graduate School, Bentley University, USA.

-

Mr. Sakda Tantivathanakul 56 Management Committee

2005 –Present

Bachelor of Civil Engineering, Chiang Mai University, Thailand.

-

Source: Company Management Composition. Mr. Samai Leesakul is the father of Mr. Pasit Leesakul, and Mrs. Paichit Rattananon is the mother of Mr. Pasit Leesakul. The management team consists of ten executives with extensive experience in the industry to ensure business continuity for TRC.

Company Focus

TRC Construction

Industry Overview (i) Construction business PTT’s favorite contractor. PTT is a Thai state-owned SET-listed oil and gas company. TRC is high on their list because of its high quality work and specialisation in constructing pipeline and processing plants. TRC has few competitors in Thailand, which include TTCL, PAE, and ITD. Riding on PTT. PTT plans to invest heavily in natural gas over 2015-2019, with natural gas investments expected to account for 50% of total capex or Bt164,918m in the next five years. This could be a huge opportunity for TRC to win projects and secure a strong backlog to drive long-term growth. PTT: Five-year investment plan

Business (Btm) 2015 2016 2017 2018 2019 Total

Natural gas 34,885 19,398 33,876 40,008 36,751 164,918Oil & int. trading 9,629 5,767 9,217 12,891 11,283 48,787Office and others 5,472 3,970 1,882 959 1,219 13,502

Infrastructure 5,519 22 19 16 7 5,583Investment in JV 29,975 8,928 19,654 17,057 18,147 93,761

Total 87,495 40,101 66,665 72,949 69,426 326,551 Source: PTT, DBS Vickers PTTEP aims to invest 80% in Thailand and Southeast Asia. PTTEP, one of TRC’s major client, plans to invest 58% of its capex in Thailand and 21% in Southeast Asia over 2015-2019. This ties in with TRC’s aim to concentrate on Thailand and Southeast Asia where it can better control operations. Furthermore, PTTEP will use c.85% of their planned capex on their existing plants, which could be an opportunity for TRC to secure more projects. We expect TRC and its competition to be able to ride on the huge investments by PTT and PTTEP over the next five years. Five-year investment plan of PTTEP

Country (US$m) 2015 2016 2017 2018 2019 Total

Thailand 1,843 1,925 2,338 1,803 1,326 9,235

Southeast Asia 706 722 805 777 313 3,324

Others 522 791 690 529 772 3,303

Total 3,071 3,437 3,833 3,109 2,411 15,861 Source: PTT, DBS Vickers

Railway projects from the government. The JV between TRC Sahakarn (TRC’s subsidiary) and China Railway No.3 Engineering Group Co., Ltd. expects to win at least Bt10bn worth of new projects in FY15-16, including the following:

i) Four SRT Dual track 1.435-metre projects

No. Line Progress 1 Bangkok - Kaeng Khoi

(133km) Revising design within Oct 15

2 Kaeng Khoi - Map Ta Phut (246.5km)

Revising design within Oct 15

3 Kaeng Khoi - Nakhon Rachasima (138.5km)

Revising design within Dec 15

4 Nakhon Rachasima - Nong Khai (355km)

Revising design within Dec 15

Source: Ministry of Transport, DBS Vickers

ii) Six SRT Dual track 1.0-metre projects (1st phase)

No. Line Progress 1 Chachoengsao – Klong19 –

Kaeng Khoi (106km) Expected to bid in FY15

2 Thanon Jira Junction – Khonkaen (185km)

Expected to bid in FY15

3 Prachuap Khiri Khan – Chum Phon (167km) EIA approval process

4 Lop Buri – Paknampho (148km) EIA approval process

5 Map Kabao - Thanon Jira Junction (132km) EIA approval process

6 Nakhon Pathom - Hua Hin (165km) EIA approval process

Source: Ministry of Transport, DBS Vickers

iii) Eight SRT Dual track 1.0-metre projects (2nd phase)

No. Line Progress 1 Hua Hin - Prachuap (90km)

During preparation for engineering

design

2 Paknampo – Denchai (285km)

3 Jira junction – Ubon (309km)

4 Khonkaen – Nong Khai (174km)

5 Chumphon – Surat (167km)

6 Surat – Songkhla (339km)

7 Hat Yai - Padangbesar (45km)

8 Den Chai - Chiangmai (217km)

Source: Ministry of Transport, DBS Vickers Mega projects from Thai government. Positive newsflow on infrastructure investment has kept the sector active, but there has not been much concrete action. Since the military government took control in May 2014, the eight-year (2015-2022) infrastructure plan proposed by the Transport Ministry has been approved, but only the MRT Green Line (worth Bt29bn) has opened for bidding so far. However, this year could see the start of a series of government tenders.

Company Focus

TRC Construction

These could include i) three MRT lines (Pink Bt58.6bn, Orange Bt95.1, Yellow;48.6bn), ii) two dual-track railways (Jira-Khon Khaen Bt26bn, Prachuapkirikhan – Chumpon Bt17.3bn), and iii) road and highways Bt100bn.

High-speed rail. Additionally, the recent agreement with China to develop the high-speed rail (Bt400bn) could improve the outlook for the sector this year. This JV rail line will connect industrial zones in Eastern Thailand to Laos, and is expected to be built in September 2015. We maintain our positive view on the sector as the upcoming bids would increase the opportunities for contractors to secure more contracts, and revenues to flow in starting late 2015. The downside risk is the possibility of further delays in disbursing the budget. (ii) Potash mining

Why potash is important? The growing world population will increase demand for food and meat products, which would drive up demand for grain, resulting in farmers seeking higher yields. Using fertiliser is one of the most efficient ways to achieve higher yield, and potash is the main ingredient for fertliser. 90% of global potash output is used as ingredient for fertiliser. Worldwide potash output exceeds 40m tons per year, and c.90% of that is used in fertiliser. Potash is a raw material for potassium fertiliser. Potassium (K) is one of three main ingredients along with nitrogen (N) and phosphorus (P) that are used in the production of chemical fertiliser. Potassium-rich fertiliser can help to increase crop yields and protect plants against diseases. Potash can also be processed into potassium hydroxide for use in oil-well drilling fluid, melting snow and ice, and steel heat-treatment, and into potassium phosphate, other potash chemicals, and producing soap. Potassium carbonate is used to produce animal feed supplements, cement, fire extinguishers, food products, photography chemicals, and textiles. It is also used in brewing beer, pharmaceutical preparations, and as a catalyst to manufacture synthetic rubber. These non-fertiliser uses account for about 10% of annual potash consumption.

World’s top potash producers (2013)

No. Countries Output (million tonnes per

year)

1 Russia 15.3*

2 Canada 10.5

3 Belarus 4.9

4 China 4.3

5 Germany 3.0

6 Isarael 2.0

7 Jordan 1.2

8 Chile 1.1

9 United States 1.0

10 United Kingdom 0.4 *Russia produced about 15.3m tonnes. While USGS reported that in 2013 Russia produced 5.3m tonnes, that did not include Uralkali‘s production which was 10 million tonnes. Uralkali is the world’s largest potash producer. Source: Potash Investing News; U.S. Geological Survey World potash potential reserve

Source: PotashCorp Few countries can produce potash. Canada and Russia hold almost 80% of total global reserves and account for about 80% of global capacity. The reserves in Canadian potash mines are considered high quality, like that in Thailand.

World potash potential supply and demand balance

2014 2015F 2016F 2017F 2018F

Supply:

Capacity 50.53 54.69 56.7 60.26 60.72

Potential supply* 43.57 45.17 46.97 49.74 51.44

Demand:

Fertiliser 30.79 31.58 32.36 33.17 33.99

Non-fertiliser 2.84 2.92 3.01 3.10 3.19

Distribution losses 0.99 1.02 1.04 1.07 1.10

Total demand 34.62 35.52 36.41 37.34 38.28

Potential balance 8.95 9.65 10.56 12.4 13.16 Source: Fertiliser.org

Company Focus

TRC Construction

Excess supply of potash. North America and Europe is expected to account for 88% of global potash supply between 2014 and 2018. Global supply is forecast to increase to 51.4m tons in 2018, a total increment of 8.8m tons, or 4.2% CAGR over 2014-18. Meanwhile, IFA estimates world demand for potash will reach 38.3m tons, implying 2.5% CAGR over 2014-2018. Asia is largest importer. Asia’s potash imports account for more than 38% of global exports, because a large segment of the economy and workforce is in the agriculture sector. China is the largest potash producer in Asia with 4.3m tons output, but because of its large agricultural sector, China exports only about 0.1m tons of potash, which is low compared to Asia's demand for 14.5m tons a year of potash and Thailand’s c.700,000 tons annual potash imports. Excess surplus could cap potash price. We expect potassium price to be capped at US$300-350 per ton because of excess surplus, as supply is forecast to grow by 4.2% over 2014-18 while demand will grow by only 2.5%. Also, oil price could remain at c.US$60 per barrel, which could also pressure prices of other commodities. Potassium price (US$ per ton)

Source: Bloomberg Finance L.P Potash mining is important for Thai agriculture sector. Potash mining in Thailand could reduce production costs of fertilisers, which account for c.50% of the total costs of operating a plantation. Thailand could be an exporter of potash. Currently, there are seven potash mines in Thailand, all in Northeastern Thailand including Nakon Rachasima, Khonkaen, Mahasarakham, Sakolnakhon, Udonthani, and Chaiyaphum. Premised on the total capacity of the seven mines, Thailand could become an exporter once the government approves all the concessions for those mines. However, most currently trying to secure Environmental Health Impact Assessment (EHIA) and conducting the public hearing process, which is difficult to pass in the near term.

Lists of seven potash mines in Thailand

No. Province Area (rai)

Area (hectare) Permit

1 Nakon Rachasima 1 280,000 44,800 No

2 Nakon Rachasima 2 30,000 4,800 No

3 Khonkaen 100,000 16,000 No

4 Mahasarakam 20,000 3,200 No

5 Sakolnakorn 120,000 19,200 No

6 Udonthani (owned by ITD) 74,437 11,910 No

7 Chaiyaphum (owned by APMC) 9,708 1,553

Granted

Source: DBS Vickers

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Company Focus

TRC Construction

Competitive Strengths Granted concession of potash mine. EHIA and public hearings are the most difficult hurdles to overcome to secure a concession from the government, because the chemical process involved could affect public health and the environment. Fortunately, for APMC and TRC, the approval was granted because the concession and surrounding areas are not suitable for crops and animal farming due to high concentrations of salt in the soil. Furthermore, the mining operation would create jobs for those living in the area as they will not be able to farm. APMC’s concession is the first to be approved by the government, and we expect the government to approve a concession in Udonthani province owned by ITD in FY16; it is currently under the public hearing process. Small contractor with many partners. TRC would benefit from its JV strategy by gaining expertise and improving quality and standards to be able to secure both civil and pipeline works. Most recently, TRC has signed a joint venture agreement with China Railway NO.3 Engineering Group (The China Railway Engineering Corp.), which is a leader in developing large-scale infrastructure projects in China. The parties have agreed to set up a company called CR3 & Sahakarn Joint Venture Co., Ltd. (SKW) where SKW will have

51% stake and China Railway NO.3 Engineering Group 49%. JV is a successful strategy. This could allow the company to pursue the construction tender to be offered by the State Railway of Thailand. We expect TRC’s JV to focus on mass transit projects such as high-speed and dual-track railways which total value is estimated at over Bt1.4 trillion. We expect the JV to get some works directly or even a sub-contract, which would lift earnings substantially due to its small size. TRC also has a JV with Sinopec International Petroleum Service Corporation which could enable TRC to secure larger contracts from PTT. This could lead to another contract to recoat PTT’s existing pipeline in 1Q15 worth Bt3.7bn. Proven track-record. TRC’s has a proven track record with contracts from the PTT group, Siam Cement Group, IVL, DOW chemical, and Bangchak Petroleum PCL, given its expertise in pipeline work and constructing processing plants. The good record and high standards could help TRC to win projects in the future.

Company Focus

TRC Construction

Growth Strategies Expect growth to come from record high backlogs for both pipeline and civil works. In February, TRC won a contract from PTT PCL to recoat its transmission pipeline extension, valued at Bt3.7bn. This lifted TRC’s backlog to Bt7.3bn

which is a record for the company. This would help to support sustainable earnings growth of 60% CAGR over the next three years.

TRC: Backlog as of 28 Feb 2015

No. Project Client Uncompleted Value

(Bt m) Project period

1 Gas Transmission Pipeline to Nakhon Ratchasima

(Sinopec and TRC)

PTT PCL 1,160.84 Nov-13 Apr-16

2 New Incinerator project Trans Thai-Malaysia 894.17 Nov-14 Jul-16

3 Navanakorn-Rangsit Interconnecting Gas Pipeline PTT PCL 137.70 Jul-13 Apr-15

4 Natural gas pressure reduction station pipeline PTT PCL 65.26 Apr-14 Mar-15

5 Construction phase for remaining Gas PTT PCL 5.30 Jan-14 Mar-15

6 Design for UACJ & Delong Amata Natural Gas

Distribution

1.10 Nov-14 Mar-15

7 450 TPD Biodiesel (Processing Plant) Bangchak Biofuel 1,199.58 Dec-14 May-16

8 First transmission pipeline extension project PTT PCL 3,725.00 Feb-15 Oct-18

Source: Company, DBS Vickers SKW: Backlog as of 28 Feb 2015

No. Project Client Uncompleted Value

(Bt m) Project period 1 Construction of energy laboratory PTT PCL 96.25 Dec-13 Apr-152 Water resource conservation Dept. of water

resources 18.21 Dec-14 Jul-15

3 Landscape and infrastructure of regional pipeline operation center

PTT PCL 8.56 Jul-13 Apr-15

Source: Company, DBS Vickers High-speed and dual-track railways next. We expect the CR3 & Sahakarn JV to win some of the construction contracts for the 18 lines, including high-speed and dual-track railways, from the State Railway of Thailand. The market expects the mega infrastructure project to open for tender in 2H15. This JV could secure some sub-contract works valued at less than Bt10bn due to limited capacity, but it will lift revenues and earnings. We will include the contribution in our earnings forecasts when the JV wins the project, suggesting upside risk to FY16-20F earnings. Expect to win Bt22bn construction contract from APMC. The development of the potash mine is estimated to cost Bt35bn (mine Bt10bn and processing plant Bt25bn). Construction will start in 4Q15. We conservatively forecast TRC will secure a 3-year construction contract for the processing plant worth Bt22bn, with net margin at c.8%. Based on this, TRC could start to see Bt1.2bn revenue contribution from the potash plant construction in FY15, and Bt60m net profit (Bt0.07 EPS). For FY16F, contribution could rise to Bt6.1bn and Bt420m (Bt0.51 EPS), and in FY17F Bt8.5bn and Bt595m (Bt0.72 EPS), respectively.

Expected revenue and net profit from potash plant construction

(Btm) FY15F FY16F FY17F FY18F Total

Revenue

611

6,111

8,556

8,556 22,000

Net profit 30 420 595 471 1,516

EPS

0.04

0.51

0.72

0.57 1.84

Source: DBS Vickers

Increase stake in APMC to 30% from 4.5%. TRC may raise capital to increase its stake in APMC to 30%. The company will likely raise funds through a rights offer. The management claims TRC would buy the stake from Thai-German Mining (4%) and other local investors (25%). Expect to pay premium for additional stake in APMC. We expect TRC to spend c.Bt1.5bn to increase its stake in APMC to 30%, premised on the following: (i) Bt1.0bn for the additional stake, and (ii) Bt500m to raise registered capital to Bt2.4bn from Bt1.7bn currently, as its par value is Bt100 per share. Total funding would come from debentures (Bt2.5bn) and additional capital from private placement (Bt600m).

Company Focus

TRC Construction

Potash mine a hidden gem. The estimated reserve at the potash mine is 158m tons to be mined under a 25-year concession. We estimate the total value at US$47.4bn (US$300 per ton). And assuming 1.1m tons per year output, we expect APMC to book Bt10.7bn annual revenue and Bt1.0bn net profit. This is based on conservative 10% net profit margin; Russian potash miner Uralkali registered c.25% net profit margin in FY13. This would lift TRC’s earnings; we expect TRC to book c.Bt300m income per year from subsidiaries from FY20 onwards. However, we expect TRC to book loss from subsidiaries during FY18-19 from expenses of the AMPC during the start. Diversifying into other projects to sustain earnings. The company plans to invest in other projects to buffer against lumpy construction revenues and earnings. TRC has invested in the Compressed Bio-Methane Gas for NGV project which will supply to PTT’s NGV station. Although this project is small, costing only Bt74m in capex, it could contribute c.Bt200,000 per day to TRC (assuming it sells 9 tons of NGV per day to the station). We think this could be another step towards increasing recurring income. We have not included this project in our valuation. Investment in power is next catalyst. TRC also plans to take a stake in a power project in a neighboring country and bid for EPC contracts. These should be finalised in 3Q15, and could improve the fundamentals of the company by expanding its recurring income base from FY19 onwards.

Expect earnings to expand at 60% CAGR over FY14-17. We forecast earnings will jump by 37% in FY15 to Bt0.35 EPS and 149% in FY16 to Bt0.88 EPS, driven by the APMC potash plant construction contract that is valued at Bt22bn over FY15-18. APMC has called for tenders and we expect TRC to win the contract, supported by its 4.5% stake in APMC coupled with TRC’s CEO being appointed APMC’s CEO effective Apr 15. Key Risks

Heavy reliance on PTT group. Pipeline works account for 80% of total revenue, most of which is derived from PTT PCL, which is TRC’s major client. Lower oil price could limit works for TRC. The low oil price could limit investments by oil & gas companies. This could have negative impact on TRC because the company focuses on the energy sector. Key man. TRC relies heavily on the founder, Mr. Samai Leesakul, to drive the company. However, although he has resigned from the company, he would still have an interest in the company through his son Mr. Pasit Leesakul.

Company Focus

TRC Construction

Segmental Breakdown FY Dec 2011A 2012A 2013A 2014A 2015F 2016F

Revenues (Bt m) Pipeline and plant 2,144.8 3,969.6 2,258.1 2,538.2 3,220.3 3,244.2

Civil 13.3 345.2 223.3 557.2 123.0 160.0

Potash - - - - 611.1 6,111.1

Total 2,158 4,315 2,481 3,095 3,954 9,515

Revenues Breakdown

Pipeline and plant 99% 92% 91% 82% 81% 34%

Civil 1% 8% 9% 18% 3% 2%

Potash 0% 0% 0% 0% 15% 64%

Total 100% 100% 100% 100% 100% 100% Source: Company, DBS Vickers

Start to book revenues from 4Q15 onwards

Company Focus

TRC Construction

Income Statement (Bt m)

FY Dec 2011A 2012A 2013A 2014A 2015F 2016F

Revenue 2,225 4,315 2,481 3,095 3,954 9,515

Cost of Goods Sold (1,902) (3,849) (2,106) (2,538) (3,360) (8,287)

Gross Profit 323 465 375 557 595 1,228

Other Opng (Exp)/Inc (183) (198) (231) (303) (265) (409)

Operating Profit 140 267 144 254 330 819

Other Non Opg (Exp)/Inc 34 29 35 32 24 57

Associates & JV Inc 0 0 0 0 0 0

Net Interest (Exp)/Inc (4) (5) (3) (3) (2) (3)

Exceptional Gain/(Loss) 0 0 0 0 0 0

Pre-tax Profit 170 291 176 283 351 873

Tax (13) (67) (51) (69) (60) (148)

Minority Interest 0 0 0 0 0 0

Preference Dividend 0 0 0 0 0 0

Net Profit 157 224 124 213 291 724

Net Profit before Except. 157 224 124 213 291 724

EBITDA 208 345 222 340 427 957

Growth

Revenue Gth (%) 53.3 93.9 (42.5) 24.7 27.8 140.6

EBITDA Gth (%) (26.1) 66.2 (35.8) 53.1 25.6 124.2

Opg Profit Gth (%) (22.5) 90.9 (45.9) 75.7 30.0 148.3

Net Profit Gth (%) (20.8) 42.7 (44.6) 71.5 36.6 148.6

Margins & Ratio

Gross Margins (%) 14.5 10.8 15.1 18.0 15.0 12.9

Opg Profit Margin (%) 6.3 6.2 5.8 8.2 8.3 8.6

Net Profit Margin (%) 7.1 5.2 5.0 6.9 7.4 7.6

ROAE (%) 21.8 25.8 11.7 16.8 19.0 37.3

ROA (%) 9.1 9.2 5.6 9.3 10.6 19.6

ROCE (%) 16.8 21.4 8.7 14.0 17.0 33.5

Div Payout Ratio (%) 0.0 0.0 0.0 50.0 50.0 50.0

Net Interest Cover (x) 37.1 54.3 45.9 75.6 134.6 268.0 Source: Company, DBS Vickers

Margins Trend

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2012A 2013A 2014A 2015F 2016F

Operating Margin % Net Income Margin %

Pa

C

T

age 16

Company Fo

TRC Constr

Balance Sheet

FY Dec

Net Fixed Asset

Invts in Associa

Other LT Asse

Cash & ST Invts

Inventory

Debtors

Other Current A

Total Assets

ST Debt

Creditor

Other Current

LT Debt

Other LT Liab

Shareholder’s E

Minority Intere

Total Cap. & Li

Non-Cash Wkg

Net Cash/(Debt

Debtors Turn (a

Creditors Turn

Inventory Turn

Asset Turnover

Current Ratio (x

Quick Ratio (x)

Net Debt/Equity

Net Debt/Equity

Capex to Debt Source: Compa

ocus

ruction

t (Bt m) 2

ts

ates & JVs

ets

s

Assets

Liab

ilities

Equity

sts

ab.

g. Capital

t)

avg days)

(avg days)

(avg days)

r (x)

x)

y (X)

y ex MI (X)

(%) 1

any, DBS Vickers

2011A 2012

118 25

4

218 18

780 14

0 8

347 50

911 1,33

2,378 2,50

6 4

363 44

1,173 98

1

38 4

766 97

31 1

2,378 2,50

(278) 49

774 10

47.7 35

52.2 38

3.4 4

1.3 1

1.3 1

0.7 0

CASH CAS

CASH CAS

,304.2 449

s

2A 2013A

50 325

0 0

87 153

49 196

83 70

01 253

31 980

03 1,977

46 53

42 321

82 375

0 31

43 43

75 1,158

14 (4)

03 1,977

92 606

04 112

.9 55.5

8.7 67.5

4.0 13.5

.8 1.1

.4 2.0

0.4 0.6

SH CASH

SH CASH

.6 141.9

2014A 2

455

2

109

607

35

877

546

2,631 2

26

458

719

5

45

1,384 1

(6)

2,631 2

280

576

66.6

57.3

7.7

1.3

1.7

1.2

CASH C

CASH C

585.7 (29

015F 2016F

482 501

5 5

163 163

980 964

84 207

791 1,903

377 766

2,882 4,510

31 41

568 1,402

546 822

5 5

38 39

,691 2,198

3 3

2,882 4,510

138 652

944 918

77.0 51.7

57.0 43.8

6.6 6.5

1.4 2.6

1.9 1.7

1.5 1.3

CASH CASH

CASH CASH

94.9) 217.7

F

5

3

4

7

3

6

0

2

2

5

9

8

3

0

2

8

7

8

5

6

7

3

H

H

7

Asset Br

reakdown

Company Focus

TRC Construction

Cash Flow Statement (Bt m)

FY Dec 2011A 2012A 2013A 2014A 2015F 2016F

Pre-Tax Profit 170 291 176 283 351 873

Dep. & Amort. 34 49 43 54 73 81

Tax Paid (13) (67) (51) (69) (60) (148)

Assoc. & JV Inc/(loss) 0 0 0 0 0 0

Chg in Wkg.Cap. 416 (840) (173) 256 (41) (659)

Other Operating CF (11) 1 16 1 0 0

Net Operating CF 596 (565) 10 524 323 147

Capital Exp.(net) (88) (206) (118) (179) 106 (100)

Other Invts.(net) (56) 5 0 46 (41) 0

Invts in Assoc. & JV 0 0 0 0 0 0

Div from Assoc & JV 0 0 3 0 0 0

Other Investing CF 11 74 42 20 0 0

Net Investing CF (133) (127) (74) (112) 65 (100)

Div Paid (50) (40) (34) (41) (87) (217)

Chg in Gross Debt (12) 36 32 (37) 8 7

Capital Issues 6 4 77 29 0 0

Other Financing CF 5 0 0 (20) 0 0

Net Financing CF (52) 0 74 (69) (80) (210)

Currency Adjustments 0 0 0 0 0 0

Chg in Cash 411 (691) 11 342 308 (164)

Opg CFPS (Bt) 0.2 0.3 0.2 0.3 0.4 1.0

Free CFPS (Bt) 0.6 (0.9) (0.1) 0.4 0.5 0.1 Source: Company, DBS Vickers

Capital Expenditure

0

50

100

150

200

250

2012A 2013A 2014A 2015F 2016F

Capital Expenditure (-)

Company Focus

TRC Construction

Quarterly / Interim Income Statement (Bt m)

FY Dec 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014

Revenue 717 586 726 686 802 881

Cost of Goods Sold (607) (445) (608) (542) (613) (775)

Gross Profit 110 141 119 144 189 106

Other Oper. (Exp)/Inc (69) (62) (74) (84) (79) (67)

Operating Profit 42 79 45 60 110 39

Other Non Opg (Exp)/Inc 2 5 0 10 12 11

Associates & JV Inc 0 0 0 0 0 0

Net Interest (Exp)/Inc (1) 0 (1) (1) (1) 0

Exceptional Gain/(Loss) 0 0 0 0 0 0

Pre-tax Profit 42 83 43 69 121 49

Tax (16) (21) (10) (17) (27) (16)

Minority Interest 5 7 2 2 1 (3)

Net Profit 31 68 35 54 96 30

Net profit bef Except. 31 68 35 54 96 30

EBITDA 43 83 56 70 122 49

Growth

Revenue Gth (%) 23.1 (18.3) 24.0 (5.6) 16.9 9.8

EBITDA Gth (%) 117.3 92.4 (32.3) 23.7 74.9 (59.5)

Opg Profit Gth (%) 221.0 88.5 (42.9) 33.7 83.8 (64.8)

Net Profit Gth (%) 89.8 117.3 (48.9) 53.7 78.5 (68.3)

Margins

Gross Margins (%) 15.4 24.0 16.3 20.9 23.5 12.0

Opg Profit Margins (%) 5.8 13.4 6.2 8.7 13.7 4.4

Net Profit Margins (%) 4.4 11.7 4.8 7.8 12.0 3.4

Margins Trend


0%

2%

4%

6%

8%

10%

12%

14%

16%

3Q

20

12

4Q

20

12

1Q

20

13

2Q

20

13

3Q

20

13

4Q

20

13

1Q

20

14

2Q

20

14

3Q

20

14

4Q

20

14

Operating Margin % Net Income Margin %

Company Focus

TRC Construction

Valuation Attractive valuation; Bt13.20 TP is based on PE valuation metric. This metric is the most appropriate to capture construction earnings. Our model assumes 15x FY16F PE, or +1SD of its 5-year historical average multiple. A peer comparison based on FY16F data shows TRC is the cheapest on the metric. Although the share prices has surged 142% within three months, there is still 33% upside supported by an attractive growth story. BUY. Announced stock dividend and capital raising via private placement. TRC has declared a 4-for-1 stock dividend (i.e. one stock for every four existing stock) and Bt0.003472 cash dividend per share for withholding tax. The company also plans to split the stocks into Bt0.125 par value from Bt0.50 per share, and to increase capital via a private placement of 330.5m new shares at Bt0.125 par value (equivalent to 82.6m shares at Bt0.50 par value). Furthermore, the company would issue up to 675m warrants (TRC-W1) with the debentures. The warrant exercise ratio would be 1:1 and would expire within five years of the issuance date. Recommendation Initiate coverage: BUY We like TRC for three main reasons: (i) Rising of backlog of pipeline construction projects, potash mining venture, and high-speed railway. We expect total backlog to reach Bt7.3bn, and upside from additional contracts form PTT PCL which is forecast to invest Bt160bn in natural gas projects. These would sustain revenues and earnings over FY15-19, and we expect stable revenues from pipeline construction of Bt3.2bn from FY15 onwards. TRC may also win the processing plant construction contract from APMC values at c.Bt22bn, because of its stake in APMC and TRC’s CEO will be APMC’s ‘advisor’ for mine construction. We expect contribution from this project to be booked over FY15-18. For the high-speed railway, we expect the JV to win some projects or get sub-contracts for some of the 18 projects to be offered by the Thai government. Overall, we expect the JV secure Bt5-10bn worth of contracts over FY16-20. These projects could lift TRC’s revenues and earnings significantly over FY15-17. We expect revenue and earnings to increase to Bt3.9bn and Bt291m, respectively, in FY15,

and jump to Bt9.5bn and Bt724m (Bt0.88 EPS) in FY16 driven by the potash project. (ii) Hidden value at APMC and other investments. We expect the potash venture be able to produce c.20m tons over 25 years, estimated to be worth US$6.0bn in total. Assuming TRC owns 30% of APMC, TRC would book c.Bt300m (Bt0.31 EPS) a year in associate income from FY20 onwards. Apart from APMC and a small investment in an NGV project, there may also be hidden value in other investment projects. (iii) Attractive valuation. We recommend to BUY the stock, premised on 33% upside to our TP and an attractive growth story to support long term earnings. Currently, TRC is trading at 11.3x FY16F PE compared to contractor peers’ average of 18.1x. This is an opportunity to increase exposure in TRC. PE Band

Source: Company, DBS Vickers PBV Band


(5)

5

15

25

35

2009 2010 2011 2012 2013 2014 2015

PE (x)

-2 sd

-1 sd

Mean

+1 sd

+2 sd

(1.0)

1.0

3.0

5.0

2009 2010 2011 2012 2013 2014 2015

PBV (x)

-2 sd

-1 sd

Mean

+1 sd

+2 sd

Company Focus

TRC Construction

Peer Comparison

Market PE P/BV EV/EBITDA Div Yield ROE Share Price Performance

Cap (x) (x) (x) (%) (%) (%)

BB Ticker Name US$m 15F 16F 15F 16F 15F 16F 15F 15F 1M 3M YTD 1Y

CK TB Ch. Karnchang Public Co Ltd 1,249 27.1 23.0 2.1 2.0 21.8 19.9 1.6 8.7 (13.9) (4.6) (4.6) 46.2

ITD TB Italian-Thai Development Pcl 1,203 51.0 43.1 2.5 2.4 13.6 12.5 0.6 5.4 (19.0) - 16.4 102.4

PREB TB Pre-Built Pcl 136 14.4 9.0 3.1 2.5 7.3 4.9 2.8 22.9 7.5 26.3 29.7 111.8

NWR TB Nawarat Patanakarn Pub Co Lt 150 27.1 19.0 1.2 1.2 5.5 5.4 1.2 4.6 (4.0) 11.8 14.5 (4.5)

SYNTEC TB Syntec Construction Pcl 158 10.7 15.3 1.6 1.6 6.9 nm 2.5 12.9 (3.6) 12.6 20.1 149.6

STEC TB Sino Thai Engr & Constr Pcl 970 20.4 18.0 3.4 3.1 12.0 10.7 2.3 17.5 (17.6) (15.4) (10.7) 20.2

TRC TB Trc Construction Pcl 253 28.2 11.3 4.9 3.7 17.1 7.6 1.8 19.0 (5.7) 128.3 141.5 204.9

TTCL TB Toyo-Thai Corp Pcl 403 16.4 11.4 2.3 2.1 21.2 15.5 3.4 14.4 (10.5) (4.9) (0.4) (36.5)

6330 JP Toyo Engineering Corp 604 nm 15.8 1.0 0.9 52.8 1.1 1.7 0.0 6.2 (11.7) (14.9) (19.1)

6366 JP Chiyoda Corp 2,201 20.0 14.4 1.3 1.2 6.7 5.7 1.6 6.6 3.2 2.7 1.5 (23.9)

Average (simple) 23.5 18.1 2.3 2.1 16.3 9.3 2.0 11.5

Source: Bloomberg Finance L.P , Company, DBS Vickers

Score Range Number of Logo Description

90-100 Excellent

80-89 Very Good

70-79 Good

60-69 Satisfactory

50-59 Pass

<50 No logo given N/A

Company Focus

TRC Construction

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10 to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co., Ltd. (“DBSVT”), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVT and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVT accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVT, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVT and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or

risk assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Thailand) Co., Ltd. and its subsidiaries do not have a proprietary position in the mentioned company as of 23 Mar 2015.

2. DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA, may beneficially own a total of 1% or more of any class of common securities of the mentioned company as of 24 Mar 2015.

Company Focus

TRC Construction

3. Compensation for investment banking services:

(1) DBSVT, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months have receive or intends to seek compensation for investment banking services from the mentioned company

ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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