asean intelligence -...

See important disclosures, including any required research certifications, beginning on page 25

ASEAN Strategy

Indonesia (page 5): Bahana’s Renaldy Effendy sees better margins for Sri

Rejeki Isman (SRIL IJ, IDR256, Buy) into 2017 after a better-than-expected set of 9M16 results, driven by an increased contribution from

high-margin products such as made-to-order products. Into 2017, he

believes margins will improve, supported by a gradual doubling of its

downstream capacity (finishing: +100%, garments: +114%). At 5x 2017F

PER, SRIL looks inexpensive, and Bahana maintains its 12-month target

price of IDR340, based on a 2017F PER of 6.4x, a 74% discount to

regional peers. Buy reiterated. Thailand (page 8): Thanachart’s Supanna Suwankird attended the “EV

and Thailand” seminar and believes that Energy Absolute Pcl (EA TB,

THB29.75, Buy) faces a crucial decision about entering the battery-storage

business. This could lead to a new earnings stream in the early cycle of the

EV industry backed by government policy. In Supanna’s view, EA’s

valuations looks attractive at a 2017F PEG of 0.7x for its existing business.

Buy call reaffirmed with a DCF-based 12-month TP of THB32. Malaysia (page 16): At Westports (WPRTS MK, MYR4.25, Buy), 3Q16

net profit grew by 21% YoY to MYR158m, as expected, on higher volume

growth and port charges. Into 2017, the commencement of “THE Alliance”

could boost traffic flow while the Ocean Alliance is unlikely to be

detrimental, according to Affin Hwang’s Aaron Kee. He likes Westports for

its strong free cash flow and high earnings visibility. Indeed, the stock

remains Affin Hwang’s top pick in the Transport and Logistics sector, with a

12-month DCF-based target price of MYR4.90. Buy reiterated. Singapore (page 19): According to Daiwa’s Shane Goh, Frasers

Centrepoint’s (FCL SP, SGD1.525, Buy [1]) FY16 results disappointed

due to lower-than-expected margins on residential sales in Australia and a

SGD47m impairment charge on its Perth residential project. Nonetheless,

Shane remains positive on FCT’s ability to crystallise value through asset

recycling or sales, and views the stock’s FY17F yield of 5.7% as attractive.

Buy (1) rating reaffirmed, but with a lower SOTP-based 12-month TP of

SGD1.87, based on a 30% discount to revised NAV of SGD2.68. ASEAN: major markets

Index (as at 10 Nov) Index (as at 3 Nov) WoW change (%) Index 2015-end YTD chg (%) End-2016 index target Upside to target (%)

Indonesia (JCI) 5,450 5,329 2.27% 4,593 18.67% 5,600 2.7%

Malaysia (KLCI) 1,652 1,648 0.28% 1,692 -2.35% 1,656 0.2%

Thailand (SET) 1,514 1,493 1.42% 1,288 17.56% 1,550 2.4%

Source: Daiwa, Bahana, Thanachart and Affin Hwang

11 November 2016

ASEAN Intelligence

What matters this week

Highlighting the week’s top ASEAN stories from Daiwa and its alliance partners, which together cover some 375 stocks

Affin Hwang recommends Westports for its strong free cash flow and high earnings visibility. Buy with a 12-month target price of MYR4.90

Despite disappointing FY16 results, Daiwa continues to recommend Frasers Centrepoint given its potential to sell assets and high yield

Rohan Dalziell (852) 2848 4938

[email protected]

ASEAN rising: In this report, we feature

the week’s top stories among the 375

stocks and 5 markets that Daiwa and its

alliance partners cover in ASEAN. Our

goal is to provide on-the-ground colour

from our team of local experts: Bahana

Securities (Indonesia), Thanachart

Securities (Thailand), Affin Hwang

Investment Bank (Malaysia), and

Daiwa’s own teams in Singapore and

the Philippines.

No Capital Markets and Services Licence has been issued by the Malaysian Securities Commission to any member of Daiwa Capital Markets and accordingly this report and any part of its content may not be distributed or made available by any means within Malaysia.

ASEAN Intelligence | 1

2

ASEAN Intelligence: 11 November 2016

ASEAN: stocks under coverage by Daiwa, Bahana, Thanachart and Affin Hwang

Source: Daiwa

ASEAN: top stock picks for 2016

Price (loc curr) Target Upside/ Mkt. cap PER (x) PBR (x) Dividend yields (%)

BBG code Company Rating 10-Nov-16 price (LC) downside (%) (USDm) 2016E 2017E 2016E 2017E 2016E 2017E

TLKM IJ TELEKOMUNIKASI Buy 4,190.00 5,000.00 19.3% 31,362 22.3 19.7 5.0 4.5 2.4% 3.3%

GGRM IJ GUDANG GARAM TBK Buy 67,950.00 72,300.00 6.4% 9,708 20.9 19.7 3.1 2.8 1.6% 1.6%

ICBP IJ INDOFOOD CBP SUK Buy 9,425.00 10,500.00 11.4% 8,162 30.1 26.9 6.1 5.4 1.4% 1.5%

DBS SP DBS GROUP HLDGS Buy 15.69 22.00 40.2% 28,268 9.0 8.5 0.9 0.9 4.3% 4.7%

CT SP CAPITALAND MALL Hold 2.00 2.27 13.5% 5,032 19.8 19.2 1.1 1.1 5.7% 5.7%

CD SP COMFORTDELGRO CO Buy 2.46 3.54 43.9% 3,767 16.3 14.7 2.2 2.1 4.0% 4.4%

GAM MK GAMUDA BHD* Buy 4.88 5.74 17.6% 2,722 19.5 18.1 1.7 1.6 2.5% 2.5%

GENT MK GENTING BHD Hold 7.86 9.00 14.5% 6,739 16.8 15.4 0.9 0.5 0.4% 0.4%

TNB MK TENAGA NASIONAL** Buy 14.28 16.50 15.5% 18,555 10.9 10.5 1.5 1.4 2.3% 2.5%

AOT TB AIRPORTS OF THAI*** Buy 374.00 475.00 27.0% 15,173 27.0 22.3 4.5 4.1 1.9% 2.2%

BDMS TB BANGKOK DUSIT MD Buy 23.10 28.00 21.2% 10,162 46.2 38.5 6.2 5.6 1.3% 1.3%

KCE TB KCE ELECTRONICS Buy 111.00 145.00 30.6% 1,848 20.6 16.3 6.3 5.1 2.0% 2.4%

Source: Daiwa, Bahana, Thanachart and Affin Hwang forecasts Note: Daiwa’s ASEAN top stock picks first highlighted at the start of the year *FY16E and FY17E (end-March) **FY15E and FY16E (end-August) ***FY15E and FY16E (end-September)

When a report covers six or more subject companies please access important disclosures for Daiwa Capital Markets Hong Kong Limited at http://www.hk.daiwacm.com/research_disclaimer.html or contact your investment representative or Daiwa Capital Markets Hong Kong Limited at Level 26, One Pacific Place, 88 Queensway, Hong Kong.


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3


ASEAN: key macro indicators

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E

Real GDP (%)

Singapore 9.1 1.8 -0.6 15.2 6.2 3.7 4.7 3.3 2.0 1.6 1.4

Indonesia 6.3 6.0 4.6 6.2 6.5 6.3 5.7 5.0 4.8 5.1 5.4

Malaysia 6.3 4.8 -1.5 7.4 5.2 5.6 4.7 6.0 5.0 4.2 4.4

Philippines 6.6 4.2 1.1 7.6 3.7 6.7 7.1 6.1 5.8 4.9 4.5

Thailand 5.0 2.5 -2.3 7.8 0.1 6.5 2.9 0.7 2.8 3.2 3.7

CPI (%)

Singapore 2.1 6.5 0.6 2.8 5.3 4.5 2.4 1.0 -0.5 -0.5 1.0

Indonesia 6.4 9.8 4.9 5.1 5.4 4.3 6.4 6.4 6.4 3.3 3.8

Malaysia 2.0 5.4 0.6 1.7 3.2 1.6 2.1 3.1 2.1 2.2 2.7

Philippines 2.8 9.3 3.2 3.8 4.7 3.1 2.9 4.2 1.4 1.5 2.0

Thailand 2.2 5.4 -0.9 3.3 3.8 3.0 2.2 1.9 -0.9 0.2 1.7

Export (% chg YoY)

Singapore 10.1 12.6 -20.2 30.6 16.5 -0.2 0.4 -0.2 -14.5 -8.5 -3.2

Indonesia 13.2 20.2 -15.0 35.5 28.9 -6.6 -3.9 -3.4 -14.6 -7.9 0.6

Malaysia 2.6 9.7 -16.7 15.6 9.2 0.7 2.5 6.4 1.9 0.1 2.5

Philippines 6.4 -2.8 -21.7 34.0 -6.2 7.9 8.8 9.0 -5.3 3.7 4.5

Thailand 17.2 15.9 -14.3 28.1 14.0 3.0 -0.3 -0.4 -5.8 -1.4 1.8

Import (% chg YoY)

Singapore 10.2 21.2 -23.1 26.8 17.7 3.9 -1.8 -1.9 -19.0 -9.1 -4.5

Indonesia 15.4 37.0 -24.9 40.1 30.8 8.0 -2.6 -4.5 -19.9 -8.3 3.8

Malaysia 5.0 3.5 -16.4 21.7 8.5 5.8 7.0 5.3 0.4 1.4 2.7

Philippines 7.2 2.2 -24.1 27.5 10.1 2.7 0.5 2.4 8.7 2.5 5.3

Thailand 9.0 25.8 -25.4 36.8 25.1 9.3 0.3 -9.0 -11.0 -10.0 5.0

Trade balance (USDbn)

Singapore 36.3 18.3 23.9 40.8 44.3 27.6 33.9 43.5 49.8 47.7 49.4

Indonesia 24.9 12.1 25.8 22.2 26.1 -1.7 -4.1 -1.9 7.1 7.5 3.4

Malaysia 29.7 43.0 33.4 34.1 40.6 31.1 22.6 25.4 24.1 20.3 20.8

Philippines -5.0 -7.7 -4.7 -3.4 -12.2 -10.0 -5.7 -2.1 -12.2 -12.0 -8.0

Thailand 13.9 -1.4 18.7 12.4 -6.2 -20.8 -22.2 -0.4 11.7 29.0 23.6

Policy rate (%)

Indonesia 8.00 9.25 6.50 6.50 6.00 5.75 7.50 7.75 7.50 4.50 4.25

Malaysia 3.50 3.25 2.00 2.75 3.00 3.00 3.00 3.25 3.25 3.00 3.00

Philippines 5.25 5.50 4.00 4.00 4.50 3.50 3.50 4.00 4.00 3.00 3.50

Thailand 3.25 2.75 1.25 2.00 3.25 2.75 2.25 2.00 1.50 1.50 1.50

Fiscal balance % of GDP

Singapore 3.0 1.4 -0.9 0.2 1.2 1.9 1.2 1.3 -1.2 -0.5 0.3

Indonesia -1.3 -0.1 -1.6 -0.7 -1.1 -1.9 -2.5 -2.3 -2.6 -2.7 -2.5

Malaysia -3.1 -4.6 -6.7 -5.3 -4.7 -4.3 -3.8 -3.4 -3.2 -3.1 -3.0

Philippines -0.2 -0.9 -3.7 -3.5 -2.0 -2.3 -1.4 -0.6 -0.9 -1.4 -1.5

Thailand -1.7 -1.1 -4.4 -2.6 -0.9 -4.1 -2.0 -1.8 -1.9 3.3 4.2

CA balance % of GDP

Singapore 26.0 14.4 16.8 23.7 22.0 17.2 18.0 17.4 19.7 19.5 20.3

Indonesia 2.4 0.0 2.0 0.7 0.2 -2.8 -3.4 -3.1 -2.1 -2.0 -2.1

Malaysia 15.4 17.1 15.5 10.9 11.6 5.8 4.0 4.6 2.9 1.2 0.9

Philippines 5.4 0.1 5.0 3.6 2.5 2.8 4.2 3.8 2.9 3.8 3.8

Thailand 6.4 0.8 8.3 3.1 1.2 -0.4 -0.7 3.8 8.8 12.3 8.0

Exchange rate vs. USD1

Singapore 1.44 1.44 1.40 1.29 1.30 1.22 1.27 1.33 1.42 1.43 1.5

Indonesia 9,419 10,950 9,400 8,991 9,068 9,670 12,189 12,385 13,788 12,800 12,500

Malaysia 3.31 3.46 3.42 3.08 3.18 3.06 3.28 3.50 4.29 3.95 3.90

Philippines 41.4 47.5 46.4 43.9 43.9 41.2 44.4 44.6 46.9 49.8 50.2

Thailand 33.7 34.9 33.3 30.2 31.7 30.6 30.7 33.0 36.0 35.5 35.9

Source: Daiwa, Bahana, Thanachart and Affin Hwang forecasts


4


Table of contents

Sri Rejeki Isman ........................................................................................................ 5

Energy Absolute Pcl ................................................................................................. 8

Westports .................................................................................................................16

Frasers Centrepoint ................................................................................................19


Asiamoney’s2013

Best DomesticEquity House

Spotlight 7 November 2016

Disclosure: Bahana Securities does and seeks to do business with companies covered in its research reports. Investors should consider this report as only a single factor in making their investment decision.

Please see the important disclaimer information on the back of this report *Based on consensus’ recent changes ↑ (up), ↓ (down), ↔ (unchanged)

Sri Rejeki Isman Sector: Consumer Discretionary (Neutral)

BUY (unchanged)

Rating momentum*:

Renaldy Effendy E-mail: [email protected] Phone: +6221 250 5081 ext. 3606

PX:IDR270–TP:IDR340 (unchanged) TP/consensus: 125%; TP momentum*:

JCI: 5,386

Promising long-term growth

9M16 net profit up 17.2% y-y on improving margins: Due to increased contribution from its high value made-to-order products (Finishing: 24% with 25% GPM and Garment: 24% with 32% GPM) to 48% of total sales, vs. 41% in 9M15, SRIL reported 3Q16 net profit of USD13mn (-20% q-q, +17.2% y-y), around 6% higher than our forecast as margin expanded more than 150bps at the GP level. This brought 9M16 net profit to USD45mn (+17.2% y-y), representing 73% of our forecast and 82% of consensus’ projection.

Weak revenue on seasonality post Lebaran: The management indicated that the weak quarterly performance was due to the 1-week holiday pre and post Lebaran where trucks were prohibited from being operational, causing the company to be unable to ship their products to customers.

Targeting 2016 revenue growth of c.8% y-y and c.15% y-y in net profit: Management is confident to achieve its 2016 revenue target growth of around 8% y-y since the production lines are fully booked until the end of the year. With margin expansion, management is targeting solid NP growth of around 15% y-y.

Outlook: 2017 – Maintain higher margin Supported by a gradual doubling of its downstream capacities (Finishing: +100%, Garment: +114%), we see improved margins in 2017. We believe management’s 2017 revenue growth target of 15% is achievable as SRIL has started to sell its new capacity production to its customers, particularly for export markets. In terms of geography, exports should dominate SRIL’s revenue reaching c.60% of sales.

Recommendation: Maintain BUY; TP unchanged at IDR340 Given continued margin improvement on better sales of higher-margin products and a cheap valuation of 5x 2017F PE, we maintain our BUY call on SRIL with an unchanged 12M TP of IDR340, based on a 2017F PE of 6.4x, 74% discount to the region. Risks include a further decline in polyester prices affecting ASPs of its ready-to-stock products and a strengthening IDR.

Exhibit 1. Company information Market cap (IDRb/USDm) : 5,131/393 3M avg.daily t.o.(IDRb/USDm) : 47.5/3.6 Bloomberg code : SRIL IJ Source: Bloomberg

Exhibit 2. Shareholders information Huddleston Indonesia (%) : 56.1 Free float (%) : 43.9 Source: Bloomberg

Exhibit 3. Key forecasts and valuations 2015 2016F 2017F 2018F Sales (USDmn) 622 672 757 852 Net profit (USDmn) 56 61 71 82 EPS (IDR) 42 46 53 62 EPS growth (%) 10.3 10.4 14.9 16.1 EPS momentum* - - EV/EBITDA (x) 6.6 6.6 5.7 24.5 P/E (x) 6.6 6.0 5.2 4.5 BVPS (IDR) 208 254 299 352 PBV (x)

1.3 1.1 0.9 0.8 DPS (IDR) 6.0 6.7 7.6 8.9 Yield (%) 2.2 2.4 2.8 3.2 Source: Company, Bloomberg, Bahana estimates Note: Pricing as of close on 6 November 2016

Exhibit 4. Relative share price performance

(46.3)

33.7

1.7

(14.7)(9.3)

(44.9)(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

30

40

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

30

40

ytd 1M 3M 6M 9M 12M

(%) (%)

SRIL IJ relative to JCI

Source: Bloomberg

Exhibit 5. 3Q16 results summary q-q y-y 3Q16/ y-y 9M16/ 9M16/

(USDmn) 3Q15 2Q16 3Q16 (%) (%) 3Q16F 9M16 (%) 2016F Cons. Sales 113 203 128 (37.1) 12.9 95 499 7.0 74 70 Gross profit 23 41 28 (32.3) 21.4 104 7.6 Operating expense (7) (26) (7) (73.6) 4.5 (25) 2.6 Operating profit 16 32 21 (33.3) 28.2 102 79 9.3 76 80 Finance income/(expense) (9) (12) (7) (47.0) (23.7) (28) 7.2 Forex gain /(expenses) 1 (1) (0) (93.7) (109.4) (0) (88.6) Pretax profit 9 19 14 (21.9) 65.8 52 19.5 Taxation (1) (2) (2) (23.7) 200.6 (7) 36.2 Net profit 8 16 13 (20.1) 58.8 106 45 17.2 73 82 BS & Ratio analysis 3Q15 2Q16 3Q16 9M15 9M16 2015 2016F 2017F Gross margin (%) 20.4 20.4 22.0 20.8 20.9 21.4 21.2 21.8 Operating margin (%) 14.6 15.6 16.6 15.6 15.9 15.7 15.5 16.0 Pretax margin (%) 7.7 9.1 11.3 9.3 10.4 10.4 10.6 11.1 Net margin (%) 7.3 8.0 10.2 8.2 9.0 8.9 9.1 9.3 Inventory Days 128 84 131 94 100 92 99 103 Receivable Days 108 63 99 79 76 68 63 70 Payable Days 17 9 11 12 8 11 14 19 Total cash 28 73 77 28 77 77 115 106 Total debt 428 498 542 428 542 452 513 513 Net gearing (%) 149.9 144.5 151.3 149.9 151.3 135.3 116.6 100.1

Source: Company, Bloomberg, Bahana forecasts


7 November 2016

Bahana Securities – Equity Research – SRIL IJ Spotlight

Sri Rejeki Isman Year to 31 December 2014 2015 2016F 2017F 2018F PROFIT & LOSS (USDmn) Sales 555 622 672 757 852 Gross profit 122 133 143 165 190 EBITDA 109 118 125 145 165 Depreciation 14 20 21 24 26 EBIT 95 98 104 121 139 Net interest inc./(expense) (28) (34) (39) (42) (45) Forex gain/(losses) (2) (1) 4 3 2 Other income/(expense) 1 1 2 2 1 Pre-tax profit 66 65 71 84 98 Taxes (15) (9) (10) (13) (16) Minority interest (0) (0) (0) (0) - Other comprehensive income/expense - - - - -

Net profit 50 56 61 71 82 BALANCE SHEET (USDmn) Cash and equivalents 82 77 72 40 48 S-T investments - - - - - Trade receivables 129 102 133 149 168 Inventories 110 136 155 173 194 Fixed assets 323 441 490 526 543 Other assets 56 27 43 40 40 Total assets 699 783 892 928 993 Interest bearing liabilities 412 452 495 465 457 Trade payables 19 11 29 32 36 Other liabilities 37 44 30 37 37 Total liabilities 467 507 555 535 530 Minority interest 0 0 0 0 0 Shareholders' equity 231 277 337 397 467 CASH FLOW (USDmn) EBIT 95 98 104 121 139 Depreciation 17 20 21 24 26 Working capital (101) 31 (67) (25) (35) Other operating items (15) (8) (8) (12) (14) Operating cash flow (4) 141 51 108 115 Net capital expenditure (90) (138) (70) (60) (43) Free cash flow (94) 3 (19) 48 72 Equity raised/(bought) (0) (0) - - - Net borrowings 212 40 44 (30) (8) Other financing (42) (47) (30) (51) (55) Net cash flow 75 (4) (5) (32) 9 Cash flow at beginning 6 82 77 72 40 Ending cash flow 82 77 72 40 48 RATIOS ROAE (%) 24.0 21.9 20.0 19.2 19.0 ROAA (%) 8.7 7.5 7.3 7.8 8.5 Gross margin (%) 22.1 21.4 21.2 21.8 22.3 EBITDA margin (%) 19.6 18.9 18.7 19.2 19.3 EBIT margin (%) 17.1 15.7 15.5 16.0 16.3 Net margin (%) 9.1 8.9 9.1 9.3 9.6 Payout ratio (%) 6.0 14.4 14.4 14.4 14.4 Current ratio (x) 5.1 4.8 4.8 4.4 3.3 Interest coverage (x) 0.3 0.3 0.4 0.3 0.3 Net gearing (%) 142.7 135.3 125.7 107.1 83.8 Debts to assets (%) 59.0 57.7 55.6 50.2 46.0 Debtor turnover (days) 63 72 72 72 72 Creditor turnover (days) 26 20 20 20 20 Inventory turnover (days) 97 107 107 107 107 MAJOR ASSUMPTIONS Finishing volume (yarn fabric) 110 106 120 140 170 Garment volume (piece) 13 17 18 20 22 Source: Company, Bahana forecasts

Stronger growth supported by sales volume on capacity expansion

Debt level should remain relatively stable as the company’s …

… expansion plans are mostly out of the way

Margins should improve on efficiency and increasing contributions from sales of high-margin products

Garment and finishing segment expected to be growth driver

Renaldy Effendy ([email protected]) +6221 2505081 ext. 3606


7 November 2016

Bahana Securities – Equity Research – SRIL IJ Spotlight

Exhibit 6. Peers comparison

Luthai Textile-A 1,446 12.4 7.2 1.4 11.0Hunan Mendale-A 860 31.2 21.8 3.5 11.2Xingye Leather-A 835 45.5 19.3 2.4 2.3China 3,141 26.3 14.4 2.2 8.7Welspun India 954 8.6 5.4 2.5 41.1Arvind Ltd 1,567 24.8 11.6 3.0 12.9Srf Ltd 1,479 18.9 10.6 3.2 17.0Vardhman Textile 1,042 9.8 6.4 1.5 16.0Indo Count Inds 464 9.9 6.6 3.2 49.1Raymond Ltd 562 25.7 10.2 2.1 5.8Himatsingka Seid 425 15.7 9.3 2.5 18.6India 6,494 17.1 9.0 2.7 20.8Sri Rejeki Isman 384 5.3 5.7 0.9 18.8Pan Brothers 221 1.1 9.0 1.0 7.4Indonesia 605 3.8 6.9 0.9 14.6Weighted Sector 24.5 11.8 2.6 15.0

2017F ROE (%)2017F EV/EBITDA (x)2017F PER (x)Market Cap (USDmn)Company 2017F

PBV (x)

Source: Bloomberg, Bahana estimates. Note: Based on 7 November 2016


BUY (Unchanged) TP: Bt 32.00 (Unchanged) 4 NOVEMBER 2016

Change in Numbers Upside : 11.3%

Energy Absolute Pcl (EA TB)

SUPANNA SUWANKIRD 662 – 617 4972

[email protected]

New business potential

We attended the “EV and Thailand” seminar and believe that EA faces a crucial decision about entering the battery-storage business. This could lead to a new earnings stream in the early cycle of the EV industry backed by government policy. EA’s valuation looks attractive at a 2017F PEG of 0.7x for its existing business. Reaffirm BUY call.

Reaffirm BUY despite recent share-price gains Despite EA’s share price having risen by 14% over the past month, we reaffirm our BUY call and DCF-based 12-month TP of Bt32.0, using a 2017F base year. Our TP hasn’t factored in the new business potential mentioned below. EA’s valuation, in our view, still looks attractive for its existing business at a 0.7x PEG ratio, based on our 2015-18F earnings CAGR of 36%. In this report we update our view on the delayed commercial-operating date (COD) at the company’s 126MW wind power plant and its study of the lithium-ion battery business.

Government pushes for EV The electrical vehicle (EV) is one of the Thai government’s 10 targeted high-valued-added industries. We recently attended the “EV and Thailand” seminar, and our take is that the government wants to speed up development of the industry. Our conviction was reinforced by the presence of many related authorities and state enterprises. In the seminar, there was mention that Prime Minister Prayut Chan-Ocha wanted to see progress as quickly as possible with planned promotional policies paving the way for commercial EV development. The Board of Investment (BOI) has also identified five key EV components, including batteries and battery-management control systems, that would receive BOI promotional privileges (ie, tax holidays). There was also mention of the government’s initial target of 200 E-public buses to be in operation over the next few years. We note that EA has been studying a battery-storage product that could serve both the renewable-power business and EVs. If EA were to enter the battery-storage business, this could be a business opportunity extending well beyond batteries, and it may require additional capital given future investment needs. If that were the case, there is a possibility of EA moving to the main board SET from the MAI.

More rain than usual in 2H16F We expect EA to post 3Q16F normalized earnings of Bt850m, up by 30% y-y due to the operation of 90MW Pitsanulok Solar (COD since April 2016) but down 13% q-q because of seasonal effects. With more rain than normal in 3Q16 which also extended into October, we expect EA’s 2H16F earnings performance to be softer than we had previously anticipated.

Limited impact from a delay

Apart from more rain, a combined 126MW of Had Kanghan wind power projects look set to have their CODs delayed to next month (from our previous assumption of mid-October). We, thus, cut our 2016F normalized earnings by 8% to Bt3.6bn while we fine-tune down our 2017-18F earnings. Nonetheless, this doesn’t impact our TP. Key risk: projects facing further delays to their CODs.

COMPANY VALUATION

Y/E end (Bt m) 2015A 2016F 2017F 2018F

Sales 9,197 11,128 14,437 18,655

Net profit 2,486 3,509 4,821 6,583

Consensus NP 4,195 5,304 7,110

Diff frm cons (%) (16.3) (9.1) (7.4)

Norm profit 2,631 3,639 5,121 6,583

Prev. Norm profit 3,944 5,132 6,596

Chg frm prev (%) (7.7) (0.2) (0.2)

Norm EPS (Bt) 0.7 1.0 1.4 1.8

Norm EPS grw (%) 63.7 38.3 40.7 28.5

Norm PE (x) 40.8 29.5 20.9 16.3

EV/EBITDA (x) 31.7 22.9 18.5 14.5

P/BV (x) 12.6 9.0 6.7 5.2

Div yield (%) 0.1 0.5 1.3 2.5

ROE (%) 36.5 35.7 36.8 36.0

Net D/E (%) 227.0 187.0 196.7 200.1

PRICE PERFORMANCE

(20)

(10)

0

10

20

15

20

25

30

Nov-15 Feb-16 May-16 Aug-16 Nov-16

(%)(Bt/shr)EA Rel to SET Index

COMPANY INFORMATION

Price as of 04-Nov-16 (Bt) 28.75

Market Cap (US$ m) 3,066.5

Listed Shares (m shares) 3,730.0

Free Float (%) 34.6

Avg Daily Turnover (US$ m) 6.4

12M Price H/L (Bt) 28.75/20.00

Sector MAI

Major Shareholder Ahunai family 44.3%

Sources: Bloomberg, Company data, Thanachart estimates

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ies


Government backing for EV

We recently attended a seminar entitled “The Electric Vehicle and Thailand”, held by the Faculty of Engineering of Chulalongkorn University. It is clear that it is part of government policy to promote electrical vehicles (EV) with many support programs following the cabinet resolution on the matter in mid-2016. Numerous measures with various timeframes have been undergoing drafting in the three development phases (2016-25). In summary, there are four key issues we would like to highlight:

First, it has been agreed in principle that five essential EV components will be entitled to receive Board of Investment (BOI) promotional privileges, ie, tax holidays (scheduled to be announced soon). They are: 1) battery storage and battery-control systems; 2) air-conditioning for passenger EV; 3) traction motors; 4) cooling fans; and 5) drive-control units. Also, the government plans to waive taxes on imported completely built units of EV cars for two years while EV assemblers would have to build EV assembly plants or parts with production commencing after the third year.

Second, infrastructure for EV, ie, charging stations with target of 690 stations by 2036. The government plans to give full subsidies to state companies and partial ones for private firms.

Third, strict criteria for EV equipment and for the safety for individual buyers of passenger EV are being drafted.

Lastly, the government has a set target of 1.2m EV by 2036 with 200 first E-public buses as pilot projects via the Public Transportation Department’s bid .

We envisage opportunities for EA if the company decides to invest in battery storage investment, which is now under study, from the development of EV in Thailand. In particular, we foresee opportunities with public buses. Here are our thoughts:

1) Apart from batter storage which now accounts 50% of total vehicle costs (EVs have no complicated combustion engines), most of the other bus parts are already built in Thailand.

2) If the initial 200 E-buses program is successful together with an improvement of battery storage efficiency, quality and production costs, we see large expansion opportunities as there are more than 8,000 public buses in Bangkok and its vicinity and over 3,000 private buses operating between the provinces.

Cutting 2016-18F earnings

Due to more rain in 3Q16 than usual, we expect EA to produce 15% less power than in 2Q16 vs. a normal 10% decline. Also, there was more rain than usual in October this year, so we don’t expect power generation in 4Q16F to shine as seen in 2Q16 when Pitsanulok Solar started to kick in with a full quarter’s operation. Yet, we still expect its 4Q16F output to improve y-y and q-q, albeit less strongly than we had anticipated earlier.

In addition, a combined 126MW of Had Kanghan wind power projects in the south of Thailand look set to have their commercial operation delayed to next month (from our previous assumption of mid-October). We therefore cut our 2016F normalized earnings estimate by 8% to Bt3.6bn while we fine-tune down our 2017-18F earnings.

We cut 2016F earnings by 7.7% to reflect lower solar generation and…

… a two-month delay to a combined 126MW of wind projects

EV looks set to have full government support


Ex 1: Earnings Revisions

2016F 2017F 2018F 2019F

Sales (Bt m) New 11,128 14,437 18,655 21,544 Old 11,428 14,437 18,655 21,544 Change (%) (2.6) — — —

Norm earnings (Bt m) New 3,639 5,121 6,583 7,561 Old 3,944 5,132 6,596 7,577 Change (%) (7.7) (0.2) (0.2) (0.2)

Net earnings (Bt m) New 3,509 4,821 6,583 7,561 Old 3,814 4,832 6,596 7,577 Change (%) (8.0) (0.2) (0.2) (0.2)

Sources: Company data, Thanachart estimates

Ex 2: 12-month DCF-based TP Calculation, Using A Base Year Of 2017F (Bt m) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F Terminal

value

EBITDA 5,644 7,489 10,237 12,258 12,627 12,698 12,771 12,745 11,591 10,234 7,789

Free cash flow (2,068) (7,311) (6,520) 11,648 12,420 12,459 12,322 12,101 11,071 9,712 7,534

PV of free cash flow (7,291) (5,870) 9,949 10,064 9,578 8,988 8,374 7,268 6,049 4,452 78,388

Risk-free rate (%) 4.5

Market risk premium (%) 7.5

Beta 1.0

WACC (%) 5.4

Terminal growth (%) 2.0%

Enterprise value - add investments 132,399

Net debt (2016F) 22,256

Minority interest 5

Equity value 110,138

No. of shares (fully diluted) (m) 3,730

Equity value/share (Bt) 29.53

Plus: impact from battery storage 1.10

Plus: Green diesel 0.91

Total (Bt/share) 32.00



Valuation Comparison

Ex 3: Comparison With Regional Peers

EPS growth —— PE —— — P/BV — —EV/EBITDA— — Div yield — Name BBG code Country 16F 17F 16F 17F 16F 17F 16F 17F 16F 17F

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

Datang International Power 991 HK China (5.7) 37.4 10.3 7.5 0.7 0.6 7.6 7.6 3.3 4.1

Huadian Power 1071 HK China (33.4) (16.9) 6.1 7.4 0.7 0.7 6.0 6.3 6.7 5.6

Huaneng Power 600011 CH China (29.9) (15.8) 10.8 12.8 1.2 1.2 6.9 7.2 4.9 4.1

Cheung Kong Infrastructure 1038 HK Hong Kong (5.7) (1.6) 15.6 15.9 1.5 1.4 68.8 71.0 3.5 3.6

China Power Int'l 2380 HK Hong Kong (23.8) (18.8) 6.4 7.8 0.7 0.7 6.8 7.4 6.8 5.6

China Resources Power 836 HK Hong Kong (2.6) (11.0) 6.4 7.2 0.8 0.8 5.6 5.8 6.3 6.2

CLP Holdings 2 HK Hong Kong (22.5) 3.9 16.3 15.7 2.0 1.9 11.0 10.8 3.6 3.7

Hongkong Electric Holdings 6 HK Hong Kong (2.0) 0.7 20.8 20.6 1.3 1.3 76.1 75.9 3.7 3.7

Huaneng Power 902 HK Hong Kong (27.9) (16.5) 7.0 8.4 0.8 0.8 6.7 7.1 7.2 5.9

KSK Energy Ventures 532997 IN India na na na 9.9 0.4 na 13.0 7.4 na na

Reliance Infrastructure RELI IN India (9.8) 25.1 7.3 5.8 0.5 0.4 11.1 8.8 1.6 2.1

Reliance Power RPWR IN India 4.7 0.5 8.7 8.6 0.6 0.6 9.0 8.4 1.2 1.8

Tata Power TPWR IN India 43.3 27.2 19.1 15.0 1.4 1.3 7.8 6.6 1.8 1.9

Torrent Power 532779 IN India 17.8 (50.1) 8.3 16.6 1.1 1.1 4.5 6.3 1.7 2.5

Tenaga Nasional TNB MK Malaysia (1.0) 2.7 11.1 10.8 1.5 1.4 7.1 6.6 2.6 2.9

YTL Corp YTL MK Malaysia 17.0 7.8 14.9 13.8 1.1 1.1 10.2 9.5 6.3 6.9

YTL Power YTLP MK Malaysia (23.2) (4.6) 13.4 14.1 0.9 0.9 8.9 9.6 5.7 6.3

First Philippine Holdings Corp. FPH PM Philippines 9.4 12.3 6.4 5.7 na na 6.6 6.2 na na

Manila Electric MER PM Philippines (0.4) (8.3) 16.6 18.2 4.2 4.2 9.3 10.3 7.3 5.6

CK Power Pcl * CKP TB Thailand 0.5 8.4 62.4 57.6 1.4 1.4 14.3 12.7 0.6 0.7

Demco Pcl * DEMCO TB Thailand 52.3 51.6 19.6 12.9 1.8 1.6 57.8 16.1 0.0 2.3

EA Pcl* EA TB Thailand 38.3 40.7 29.5 20.9 9.0 6.7 22.9 18.5 0.5 1.3

Electricity Generating * EGCO TB Thailand 15.2 7.8 12.4 11.5 1.3 1.2 30.0 24.6 3.4 3.6

Glow Energy * GLOW TB Thailand 2.4 (1.9) 13.4 13.6 2.2 2.1 8.5 8.3 5.5 5.5

Global Power Synergy * GPSC TB Thailand 26.4 19.5 21.7 18.2 1.4 1.4 20.8 15.6 3.4 4.1

Gunkul Engineering * GUNKUL TB Thailand (6.9) 119.3 49.8 22.7 2.1 2.0 32.0 14.5 0.1 0.4

Ratchaburi Electricity * RATCH TB Thailand 44.5 13.1 10.3 9.1 1.1 1.1 13.2 12.4 5.3 6.0

SPCG Pcl* SPCG TB Thailand 11.4 7.0 8.1 7.6 2.3 2.0 7.2 6.5 6.2 6.6

TPC Power Holding * TPCH TB Thailand 275.0 94.7 40.0 20.6 3.8 3.3 29.6 16.3 0.0 1.5

Thai Tap Water Supply * TTW TB Thailand 7.6 2.0 14.7 14.4 3.6 3.3 12.3 11.3 5.1 5.2

Average 13.0 11.9 16.9 14.4 1.7 1.6 17.9 14.6 3.7 3.9

Sources: Bloomberg, * Thanachart estimates Based on 4 November 2016 closing prices


COMPANY DESCRIPTION COMPANY RATING

Established in 2006 as a bio-diesel business operator, Energy Absolute Pcl (EA) plans to transform to become Thailand’s largest producer of renewable power with total capacity of 379MW (net) by this year. The company has an additional 260MW of wind capacity as future potential projects. EA has also set up a wholly owned subsidiary called Energy Solution Management (ESM) to provide an O&M service for the group’s renewable power plants.

012345

IndustryOutlook

Management

CGrating*

AnalystREC.

Business Outlook

Financials Operating

Rating Scale

Excellent 5

Good 4

Fair 3

Weak 2

Very Weak 1

None 0

Source: Thanachart Source: Thanachart; * CG Rating

THANACHART’S SWOT ANALYSIS

S — Strength W — Weakness

Management has a strong financial background with well

thought-out plans for expansion.

IPO proceeds should strengthen its equity base.

Expansion period occurring as equipment prices are falling

fast.

In a heavy capex cycle due to scheduled new capacity

expansion but gearing is still below its threshold.

No experience in wind power projects and large-sized

renewable projects.

O — Opportunity T — Threat

Electricity industry gearing toward renewable energy.

Huge potential capacity expansion is planned.

The government is introducing a “Feed-in-Tariff” to replace

the adder subsidy.

Its 635MW of wind potential may fall under the new subsidy.

CONSENSUS COMPARISON RISKS TO OUR INVESTMENT CASE

Consensus Thanachart Diff

If investment costs come in higher than we currently anticipate.

If projects are delayed from their COD schedules.

Target price (Bt) 27.21 32.00 18%

Net profit 16F (Bt m) 4,195 3,509 -16%

Net profit 17F (Bt m) 5,304 4,821 -9%

Consensus REC BUY: 4 HOLD: 3 SELL: 3

HOW ARE WE DIFFERENT FROM THE STREET?

Our TP is 18% higher than the Bloomberg consensus, which we attribute to our assumption of better efficiency for wind-power projects and inclusion of the perpetual value of all renewable energy projects in hand given that their PPAs state no end lives.

Our 2016F earnings are 16% lower than the Street’s, which we attribute to our assumptions of COD delays and provisions for dismantling.

Sources: Bloomberg consensus, Thanachart estimates

Source: Thanachart


INCOME STATEMENTFY ending Dec (Bt m) 2014A 2015A 2016F 2017F 2018FSales 7,583 9,197 11,128 14,437 18,655Cost of sales 5,346 5,461 5,727 7,030 8,738 Gross profit 2,237 3,736 5,401 7,407 9,917% gross margin 29.5% 40.6% 48.5% 51.3% 53.2%Selling & administration expenses 297 459 858 1,023 1,175 Operating profit 1,939 3,278 4,544 6,384 8,743% operating margin 25.6% 35.6% 40.8% 44.2% 46.9%Depreciation & amortization 404 718 1,101 1,105 1,494 EBITDA 2,343 3,996 5,644 7,489 10,237% EBITDA margin 30.9% 43.4% 50.7% 51.9% 54.9%Non-operating income 17 15 33 43 56Non-operating expenses 0 0 0 0 0Interest expense (328) (646) (918) (1,258) (2,165) Pre-tax profit 1,628 2,646 3,659 5,170 6,634Income tax 20 14 20 48 51 After-tax profit 1,608 2,632 3,639 5,121 6,583% net margin 21.2% 28.6% 32.7% 35.5% 35.3%Shares in aff iliates' Earnings 0 0 0 0 0Minority interests (1) (1) 0 0 0Extraordinary items 0 (145) (130) (300) 0NET PROFIT 1,607 2,486 3,509 4,821 6,583Normalized profit 1,607 2,631 3,639 5,121 6,583EPS (Bt) 0.4 0.7 0.9 1.3 1.8Normalized EPS (Bt) 0.4 0.7 1.0 1.4 1.8

BALANCE SHEETFY ending Dec (Bt m) 2014A 2015A 2016F 2017F 2018FASSETS:Current assets: 2,270 4,581 8,436 12,481 16,678 Cash & cash equivalent 1,268 2,912 6,500 10,000 13,500 Account receivables 836 1,449 1,677 2,175 2,811 Inventories 147 165 204 250 311 Others 19 55 55 55 55Investments & loans 0 0 0 0 0Net f ixed assets 16,184 27,415 33,760 46,919 61,506Other assets 873 1,061 1,215 1,576 2,037Total assets 19,327 33,057 43,411 60,976 80,221

LIABILITIES:Current liabilities: 2,621 4,964 5,780 9,218 12,659 Account payables 207 273 298 366 455 Bank overdraft & ST loans 716 1,690 1,717 3,145 5,488 Current LT debt 480 1,160 1,758 2,961 3,260 Others current liabilities 1,218 1,840 2,007 2,746 3,457Total LT debt 10,805 19,375 25,282 35,240 46,130Others LT liabilities 0 201 450 584 754Total liabilities 13,429 24,547 31,511 45,041 59,543Minority interest 4 5 5 5 5Preferreds shares 0 0 0 0 0Paid-up capital 373 373 373 373 373Share premium 3,681 3,681 3,681 3,681 3,681Warrants 0 0 0 0 0Surplus (47) (47) (47) (47) (47)Retained earnings 1,887 4,498 7,888 11,923 16,666Shareholders' equity 5,893 8,505 11,895 15,930 20,672Liabilities & equity 19,327 33,057 43,411 60,976 80,221


We forecast fixed assets and debt to rise accordingly

Revenue and earnings set to rise sharply as new capacity comes on line


CASH FLOW STATEMENTFY ending Dec (Bt m) 2014A 2015A 2016F 2017F 2018FEarnings before tax 1,628 2,646 3,659 5,170 6,634Tax paid (20) (14) (20) (48) (51)Depreciation & amortization 404 718 1,101 1,105 1,494Chg In w orking capital (181) (565) (242) (477) (608)Chg In other CA & CL / minorities 393 582 65 517 710Cash flow from operations 2,223 3,368 4,564 6,266 8,180

Capex (8,495) (11,949) (7,446) (14,263) (16,082)ST loans & investments 20 (0) 0 0 0LT loans & investments 0 0 0 0 0Adj for asset revaluation 0 0 0 0 0Chg In other assets & liabilities 95 (180) 60 (306) (290)Cash flow from investments (8,381) (12,129) (7,386) (14,569) (16,372)Debt f inancing 5,926 10,281 6,530 12,589 13,532Capital increase 0 0 0 0 0Dividends paid (75) (75) (319) (986) (2,040)Warrants & other surplus 2 200 200 200 200Cash flow from financing 5,853 10,406 6,410 11,803 11,692

Free cash flow (6,272) (8,581) (2,882) (7,997) (7,902)

VALUATIONFY ending Dec 2014A 2015A 2016F 2017F 2018FNormalized PE (x) 66.7 40.8 29.5 20.9 16.3Normalized PE - at target price (x) 74.3 45.4 32.8 23.3 18.1PE (x) 66.7 43.1 30.6 22.2 16.3PE - at target price (x) 74.3 48.0 34.0 24.8 18.1EV/EBITDA (x) 50.4 31.7 22.9 18.5 14.5EV/EBITDA - at target price (x) 55.5 34.7 25.1 20.1 15.7P/BV (x) 18.2 12.6 9.0 6.7 5.2P/BV - at target price (x) 20.3 14.0 10.0 7.5 5.8P/CFO (x) 48.2 31.8 23.5 17.1 13.1Price/sales (x) 14.1 11.7 9.6 7.4 5.7Dividend yield (%) 0.1 0.1 0.5 1.3 2.5FCF Yield (%) (5.8) (8.0) (2.7) (7.5) (7.4)

(Bt)Normalized EPS 0.4 0.7 1.0 1.4 1.8EPS 0.4 0.7 0.9 1.3 1.8DPS 0.0 0.0 0.1 0.4 0.7BV/share 1.6 2.3 3.2 4.3 5.5 CFO/share 0.6 0.9 1.2 1.7 2.2 FCF/share (1.7) (2.3) (0.8) (2.1) (2.1)


Given its heavy capex cycle, we project negative FCF through 2018F

A 21x 2017F PE vs. a 36% earnings CAGR in 2015-18F looks attractive to us


FINANCIAL RATIOSFY ending Dec 2014A 2015A 2016F 2017F 2018FGrowth RateSales (%) 92.6 21.3 21.0 29.7 29.2Net profit (%) 502.4 54.7 41.1 37.4 36.5EPS (%) 498.7 54.7 41.1 37.4 36.5Normalized profit (%) 576.4 63.7 38.3 40.7 28.5Normalized EPS (%) 572.3 63.7 38.3 40.7 28.5Dividend payout ratio (%) 4.6 4.5 15.0 30.0 40.0

Operating performanceGross margin (%) 29.5 40.6 48.5 51.3 53.2Operating margin (%) 25.6 35.6 40.8 44.2 46.9EBITDA margin (%) 30.9 43.4 50.7 51.9 54.9Net margin (%) 21.2 28.6 32.7 35.5 35.3D/E (incl. minor) (x) 2.0 2.6 2.4 2.6 2.7Net D/E (incl. minor) (x) 1.8 2.3 1.9 2.0 2.0Interest coverage - EBIT (x) 5.9 5.1 5.0 5.1 4.0Interest coverage - EBITDA (x) 7.1 6.2 6.2 6.0 4.7ROA - using norm profit (%) 10.4 10.0 9.5 9.8 9.3ROE - using norm profit (%) 31.3 36.5 35.7 36.8 36.0

DuPontROE - using after tax profit (%) 31.4 36.6 35.7 36.8 36.0 - asset turnover (x) 0.5 0.4 0.3 0.3 0.3 - operating margin (%) 25.8 35.8 41.1 44.5 47.2 - leverage (x) 3.0 3.6 3.7 3.8 3.9 - interest burden (%) 83.2 80.4 79.9 80.4 75.4 - tax burden (%) 98.7 99.5 99.5 99.1 99.2WACC (%) 5.4 5.4 5.4 5.4 5.4ROIC (%) 21.6 19.6 16.2 18.5 18.4 NOPAT (Bt m) 1,915 3,260 4,519 6,325 8,675


We expect 2017F ROE to rise as new capacity comes on stream [but then if falls in 2018F]


11 November 2016

Affin Hwang Investment Bank Bhd (14389-U) (Formerly known as HwangDBS Investment Bank Bhd)

Page 1 of 6

Inbound alliance traffic

Ad-hoc port calls and vessels upsizing propelled Westports’ transhipment volume amid subdued shipping trade activities. Gateway cargo rebounded surprisingly, with stronger export boxes in line with higher manufacturing activities. 3Q core net profit grew 21% yoy to RM158m on higher volume growth and a blended tariff on higher port charges. The commencement of the THE Alliance could boost traffic flow in 2017 while the Ocean Alliance is unlikely to be detrimental due to its ‘dual-hubbing’ strategy. Maintain BUY. Robust container traffic growth in 3Q16 Westports registered a strong 16% yoy improvement in operational revenue to RM450m, after excluding RM25m in construction revenue. The revenue growth was underpinned by robust container traffic flow, as transhipment boxes increased 11% yoy while gateway boxes surprisingly eked out 2% growth amid poor domestic sentiment. Volume growth continued to be supported by ad-hoc port calls and vessel upsizing, on top of the organic growth. Blended tariffs improved by 8% compared to the preceding quarter, in line with the higher port charges implemented in 4Q15. Conventional cargo rebounded strongly with a 74% yoy increase, but the revenue contribution was too negligible to make a difference. Yield improvements on higher tariff Westports booked core net profit of RM158m (-1.4% qoq; +21.2% yoy), bringing the 9M16 total to RM468m, which is in line with both our and consensus estimates, after excluding some RM6.6m worth of impairments. The 3Q unit profitability improved by 6%, largely due to the higher blended tariff but weighed down by higher container costs. Management guided that the higher container costs were due to larger rebates given to some of the bigger customers, but should normalise as they pass on the higher effective port charges gradually in 2017. That aside, effective tax rates also trended down in favour of Westports, declining by 5ppts yoy to 15%, as Westports had earlier secured the investment tax allowance (ITA) for the construction of CT8 & CT9 until 2018. Strong defensive qualities On the whole, there were no surprises in the 3Q earnings, underpinned by robust traffic flow and yield improvements on higher tariffs despite subdued shipping trade volume. We continue to like Westports for its defensive qualities, strong free cash flow generation and high earnings visibility. Westports is our TOP PICK in the Transport & Logistics sector. We maintain our BUY rating and make no changes to our 12M DCF-derived TP of RM4.90. Earnings & Valuation Summary FYE 31 Dec 2014 2015 2016E 2017E 2018E Revenue (RMm) 1,562.0 1,681.0 1,923.9 2,014.6 2,111.2 EBITDA (RMm) 796.9 871.4 1,005.4 1,056.4 1,110.8 Pretax profit (RMm) 578.7 649.3 787.8 841.5 899.5 Net profit (RMm) 512.1 504.0 646.0 690.0 737.6 EPS (sen) 15.0 14.8 18.9 20.2 21.6 PER (x) 28.3 28.8 22.4 21.0 19.6 Core net profit (RMm) 523.7 509.0 646.0 690.0 737.6 Core EPS (sen) 15.4 14.9 18.9 20.2 21.6 Core EPS growth (%) 14.6 (2.8) 26.9 6.8 6.9 Core PER (x) 27.7 28.5 22.4 21.0 19.6 Net DPS (sen) 10.3 11.5 14.2 15.2 16.2 Dividend Yield (%) 2.4 2.7 3.3 3.6 3.8 EV/EBITDA (x) 19.1 17.4 14.6 13.7 12.9 Chg in EPS (%) - - - Affin/Consensus (x) 1.0 1.1 1.1 Source: Company, Bloomberg, Affin Hwang forecasts

Results Note

Westports WPRTS MK Sector: Transport & Logistics RM4.25 @ 10 November 2016 BUY Upside: 15% Price Target: RM4.90 Previous Target: RM4.90

Price Performance 1M 3M 12M Absolute -2.1% -3.4% -1.2% Rel to KLCI -1.3% -2.2% +0.8% Stock Data Issued shares (m) 3,410.0 Mkt cap

14,493/3,399

Avg daily vol - 6mth

3.1 52-wk range (RM) 3.62-4.59 Est free float 42.9% BV per share (RM) 0.56 P/BV (x) 7.57 Net cash/ (debt)

(827.7)

ROE (2016E) 31.4% Derivatives Nil Shariah Compliant Yes Key Shareholders Pembinaan Redzai 42.4% EPF

5.4%

Source: Affin Hwang, Bloomberg

Aaron Kee (603) 2146 7612

[email protected]

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16

(RM)


11 November 2016


Page 2 of 6

No net gain/loss in boxes for now The current shifts in the multiple shipping alliances remain uncertain, with many schedules yet to be finalised. We understand that the Ocean Alliance has finalised the Asia-America East Coast route and the Mediterranean-East route to tranship in Westports, while the others are still pending final approval. There is no box loss/gain on a net basis thus far, which is a huge positive for Westports. The Ocean Alliance has guided that shipping schedules, and by extension the ports of call, should be finalised gradually, so as to not severely disrupt the existing shipping schedule. This is in line with our prior expectation laid out in our initiation note, where we expect any reconfiguration of the shipping schedule to be done in a more gradual and disciplined manner. Hence, Westports’ near-term volume growth should remain intact. On the same note, the CMA CGM is said to remain committed to the ‘dual-hub’ strategy, which should put the issue of losing Westports’ biggest customer to bed for now. THE Alliance boost Separately, THE Alliance - Hapag-Lloyd, K Line, MOL, NYK and Yang Ming – has announced its pro-forma east-west trade lane network for April next year. THE Alliance has indicated its intention to continue to hub in the SEA region, although details remain scant on any specific preferred port. UASC, which has been acquired into Hapag-Lloyd’s fleet, is Westports’ second-largest customer with an approximately 1m TEU contribution. We believe there is a strong case for THE Alliance to dual-hub as what the Ocean Alliance is doing, given that none of the existing regional ports could absorb the volume in its entirety due to capacity bottlenecks. Nonetheless, we expect Westports to be in the running for the dual-hub position alongside PSA of Singapore, as it already serves UASC, which is the alliance member. We have yet to account for THE Alliance into our estimates, but its superior productivity and tariff competitiveness should make it a compelling transhipment hub. Earlier-than-expected expansion The existing expansion of Container Terminal 8 (CT8) Phase 2 is on schedule, while Phase 1 has been completed. The complete CT8 is expected to be completed by 1H17, which would enhance the total container handling capacity to 12.5m TEUs per year. As part of the effort to ease existing port congestion due to sustained high container volume growth, Westports has commenced the expansion at Container Terminal 9 (Phase 1) which will entail the construction of a 600m wharf. The expansion is also timely, as it allows Westports to utilise the ITA, which will expire by 2018. Risks Risks to our call include a slowdown in global trading volume, any delay in the commissioning of new capacity, and customer concentration risks.


11 November 2016


Page 3 of 6

Fig 1: Results Comparison FYE Dec (RMm) 3QFY16 QoQ YoY 9M16 YoY Comments

% chg % chg % chg % chg

Revenue 474.4 (9.2) 18.4 1,461.8 21.3 Higher yoy revenue on 9% volume growth underpinned by ad-hoc port calls and vessel upsizing. The blended tariffs are also higher 8% yoy on tariff hikes implemented on 1 November.

Op costs (230.5) (16.0) 25.8 (724.0) 29.6

EBITDA 243.9 (1.7) 12.1 737.7 14.1

EBITDA margin (%) 51.4 3.9 (2.9) 50.5 (3.2) Margin decline because of higher unit costs as Westports gave more rebates in line with the higher port charges to retain transhipment volume. Manpower unit costs increased by 3% on higher headcount.

Depn and amort (43.3) 7.1 11.3 (123.1) 7.5 Higher depreciation charges due to the added gantry cranes and the commissioning of new wharfs in CT8.

EBIT 200.6 (3.4) 12.3 614.6 15.6

EBIT margin (%) 42.3 +2.5ppts -2.3ppts 42.0 -2.1ppts

Int expense (19.4) 0.6 (3.4) (58.0) (3.0)

Int and other inc 3.1 (13.4) (20.0) 10.2 (14.8)

EI (6.6) na na 13.8 na Mainly due to impairments on PPE and losses on receivables related to Hanjin collectibles.

Pretax profit 177.7 (7.5) 9.4 580.6 20.0

Tax (26.6) (17.1) (17.6) (98.7) (11.6)

Tax rate (%) 15.0 -1.7ppts -4.9ppts 17.0 -6.1ppts Lower effective tax rate due to the ITA granted until 2018 for the construction of CT8 and CT9.

Net profit to company 151.0 (5.5) 16.1 481.9 29.5

MI - na na - na

Net profit 151.0 (5.5) 16.1 481.9 29.5

EPS (sen) 4.4 (5.5) 16.1 14.1 29.5

Core net profit 157.6 (1.4) 21.2 468.1 25.8 3Q core net profit in line, expect 4Q to be sequentially stronger on seasonality.

Source: Affin Hwang, Company data


See important disclosures, including any required research certifications, beginning on page 5

Singapore Real Estate

What's new: Frasers Centrepoint (FCL) reported its 4Q FY16 results and held an analyst briefing on 9 November. Its FY16 net profit only formed 74% of our full-year forecast, due to lower-than-expected margins on residential sales in Australia. We remain positive on the company’s

potential to crystallise value through asset recycling or sales involving its investment properties and view the stock’s FY17E dividend yield of 5.7%,

the highest among the Singapore developers, as attractive. What's the impact: The 4Q FY16 revenue rose 14.5% YoY to SGD1.2bn, driven by higher handovers of residential units in Australia. However, its 4Q FY16 net profit fell 17.4% YoY to SGD291m, due to lower fair value gains. Excluding fair value gains and exceptional items, net profit would have risen 79.7% YoY, boosted by higher handovers in Australia. FCL recorded SGD47m in impairment charges in 4Q FY16 relating to a few residential projects in Perth, as the company re-assessed the potential sale price and cost of the developments. It does not see further impairments for now. Operationally, FCL sold about 100 residential units in Singapore in 4Q FY16, mainly in Parc Life (19% sold) and North Park Residences (73% sold). In China, the company sold about 188 units during the quarter, mainly from its Gemdale Megacity project in Songjiang. Management noted that sales at Logistics Hub in Chengdu were slow due to oversupply. In Australia, FCL sold 760 units in 4Q FY16, bringing full-year sales to 2,850 units. As of end-FY16, the company had unrecognised residential revenue of about SGD3.1bn (SGD0.7bn in Singapore, SGD0.5bn in China and SGD1.9bn in Australia). We note that FCL’s portfolio of industrial properties

in Australia had an occupancy rate of 71.2% as of end-FY16. Management shared that this was affected by some recently completed buildings, and is aiming to lift the occupancy rate towards 90%. The company declared a final dividend of SGD6.2 cents per share, in line with dividends declared in 4Q FY15. Net debt to equity ratio fell to 64.4% as of 30 September 2016, down from 70.8% in 30 June 2016. What we recommend: We lower our FY17-18E EPS by 4-16%, to reflect a more subdued sales environment for its Australia residential segment, and introduce our FY19 forecast. We reaffirm our Buy (1) rating with a lowered SOTP-based 12-month TP of SGD1.87 (from SGD1.98), based on a 30% discount to our NAV of SGD2.68 (from SGD2.82). Key risks are an inability to divest its assets, or a sale at a lower-than-expected price. How we differ: Our FY17E EPS is 7% above consensus, but FY18E EPS is 6% below consensus, likely due to the timing difference of sales and revenue recognition of the company’s residential segments.

9 November 2016

4Q FY16 results: Perth facing headwinds

FY16 net profit disappoints, likely due to lower-than-expected margins SGD47m in impairment charges related to its Perth residential project Reaffirming our Buy (1) call but lowering TP to SGD1.87

Source: Daiwa forecasts

Source: FactSet, Daiwa forecasts

Frasers Centrepoint (FCL SP)

Target price: SGD1.870 (from SGD1.980)

Share price (9 Nov): SGD1.505 | Up/downside: +24.2%

Shane Goh(65) 6499 6546

[email protected]

David Lum, CFA(65) 6329 2102

[email protected]

Forecast revisions (%)

Year to 30 Sep 17E 18E 19E

Revenue change 2.2 1.6 n.a.

Net profit change (4.4) (15.9) n.a.

Core EPS (FD) change (4.4) (15.9) n.a.

90

98

105

113

120

1.45

1.53

1.60

1.68

1.75

Nov-15 Feb-16 May-16 Aug-16 Nov-16

Share price performance

Frasers Ce (LHS) Relative to FSSTI (RHS)

(SGD) (%)

12-month range 1.470-1.720

Market cap (USDbn) 3.13

3m avg daily turnover (USDm) 0.53

Shares outstanding (m) 2,895

Major shareholder TCC (87.6%)

Financial summary (SGD)

Year to 30 Sep 17E 18E 19E

Revenue (m) 2,739 3,519 2,636

Operating profit (m) 920 1,043 856

Net profit (m) 537 560 403

Core EPS (fully-diluted) 0.186 0.194 0.140

EPS change (%) 9.3 4.4 (28.0)

Daiwa vs Cons. EPS (%) 7.4 (6.3) (61.2)

PER (x) 8.1 7.8 10.8

Dividend yield (%) 5.7 5.7 5.7

DPS 0.086 0.086 0.086

PBR (x) 0.6 0.6 0.5

EV/EBITDA (x) 16.7 14.6 18.1

ROE (%) 7.7 7.4 5.0


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Frasers Centrepoint (FCL SP): 9 November 2016

FCL: SOTP valuation

(SGDm) (SGD/share) % GAV

Commercial properties 9,108 3.15 40%

- Retail 5,229 1.81 23%

- Office 3,879 1.34 17%

Development properties 2,608 0.90 11%

- Singapore 1,792 0.62 8%

- China 816 0.28 4%

Hospitality 4,459 1.54 19%

Frasers Property Australia 5,734 1.98 25%

- Residential, commercial and industrial development 2,523 0.87 11%

- Investment properties 3,211 1.11 14%

Corporate and others 1,018 0.35 4%

Total GAV 22,928 7.92

Add: value of fund management business 1,024 0.35

Less: other liabilities (2,565) (0.89)

Less: net debt (8,287) (2.86)

Less: non-controlling interests and perpetual securities (5,352) (1.85)

Total NAV 7,747 2.68

Shares outstanding (m) 2,895 NAV per share 2.68

Discount to NAV/share 30%

Target price 1.87

Source: Daiwa estimates

FCL: 4Q FY16 results at a glance

(SGD m) 4Q16 4Q15 % change FY16 FY15 % change

Revenue 1,188.0 1,037.4 14.5% 3,439.6 3,561.5 -3.4%

EBIT 333.9 313.9 6.4% 938.2 1,104.8 -15.1%

Attributable profit (before fair value/exceptional items) 211.0 117.4 79.7% 479.9 543.8 -11.8%

Fair value change 8.0 151.6 n.m. 106.2 219.6 -51.6%

Exceptional items 2.2 -9.1 n.m. 11.1 7.8 42.3%

Attributable profit 221.3 259.9 -14.9% 597.2 771.2 -22.6%

Source: Company

FCL: FY16 EBIT breakdown by business segments

FY16 FY15 % change

Singapore 428.2 572.9 -25.3%

Australia 217.8 270 -19.3%

Hospitality 135 124.5 8.4%

International Business 185.7 212.7 -12.7%

Corporate and others -28.5 -75.3 -62.2%

Total 938.2 1,104.8 -15.1%

Source: Company


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Financial summary

Key assumptions

Profit and loss (SGDm)

Cash flow (SGDm)


Year to 30 Sep 2012 2013 2014 2015 2016 2017E 2018E 2019E

Development properties op profit (SGD

m)194.4 379.4 283.2 434.7 193.6 123.0 117.6 83.0

Commercial properties op profit (SGD

m)129.4 117.5 297.7 337.5 318.2 323.5 433.4 335.9

Hospitality op profit (SGD m) 40.1 69.7 85.0 124.5 150.8 169.5 177.1 185.2

Frasers Property Australia op profit

(SGD m)0.0 0.0 125.0 270.0 468.3 438.6 387.5 297.4

Year to 30 Sep 2012 2013 2014 2015 2016 2017E 2018E 2019E

Development properties 1,069 1,682 719 1,204 835 513 923 522

Frasers Property Australia 0 0 47 822 1,373 1,588 1,237 1,413

Other Revenue 343 370 1,437 1,536 1,232 639 1,359 702

Total Revenue 1,412 2,053 2,203 3,562 3,440 2,739 3,519 2,636

Other income 14 (3) (8) (8) (7) 0 0 0

COGS (785) (1,241) (1,432) (2,479) (2,407) (1,491) (2,063) (1,397)

SG&A (177) (153) (143) (248) (259) (328) (413) (384)

Other op.expenses (132) (145) 0 0 0 0 0 0

Operating profit 331 512 620 825 767 920 1,043 856

Net-interest inc./(exp.) (60) (61) (44) (149) (142) (135) (135) (135)

Assoc/forex/extraord./others 450 382 231 521 336 472 504 368

Pre-tax profit 721 832 807 1,197 960 1,257 1,412 1,088

Tax (93) (97) (128) (184) (194) (218) (259) (201)

Min. int./pref. div./others 14 (13) (179) (241) (169) (170) (174) (176)

Net profit (reported) 642 722 501 771 597 869 979 712

Net profit (adjusted) 306 447 329 552 491 537 560 403

EPS (reported)(SGD) 0.222 0.250 0.173 0.267 0.207 0.301 0.339 0.246

EPS (adjusted)(SGD) 0.106 0.155 0.114 0.191 0.170 0.186 0.194 0.140

EPS (adjusted fully-diluted)(SGD) 0.106 0.155 0.114 0.191 0.170 0.186 0.194 0.140

DPS (SGD) 0.052 0.069 0.086 0.086 0.086 0.086 0.086 0.086

EBIT 331 512 620 825 767 920 1,043 856

EBITDA 338 519 633 865 820 973 1,096 908

Year to 30 Sep 2012 2013 2014 2015 2016 2017E 2018E 2019E

Profit before tax 721 832 807 1,197 960 1,257 1,412 1,088

Depreciation and amortisation 7 8 12 40 53 53 54 54

Tax paid (141) (87) (66) (94) (134) (218) (259) (201)

Change in working capital (467) (319) (866) 135 344 (584) 234 (278)

Other operational CF items (678) (737) (379) (593) (126) (335) (368) (232)

Cash flow from operations (558) (303) (491) 684 1,097 173 1,072 431

Capex (102) (69) (2,012) (1,572) (780) (300) (300) (300)

Net (acquisitions)/disposals 61 (2,682) (3,140) (258) 488 0 0 0

Other investing CF items (100) 2,970 261 429 (430) 32 32 32

Cash flow from investing (142) 220 (4,892) (1,401) (722) (268) (268) (268)

Change in debt (462) 2,918 3,892 936 (419) 0 0 0

Net share issues/(repurchases) 0 0 1,000 0 0 0 0 0

Dividends paid (152) (151) (119) (249) (249) (249) (249) (249)

Other financing CF items 1,551 (3,380) 1,002 532 612 (231) (231) (231)

Cash flow from financing 937 (613) 5,775 1,219 (56) (480) (480) (480)

Forex effect/others 0 0 0 0 0 0 0 0

Change in cash 237 (696) 392 503 319 (575) 324 (317)

Free cash flow (660) (371) (2,504) (888) 317 (127) 772 131


4


Financial summary continued …

Balance sheet (SGDm)

Key ratios (%)


As at 30 Sep 2012 2013 2014 2015 2016 2017E 2018E 2019E

Cash & short-term investment 1,206 480 873 1,373 1,731 1,157 1,481 1,164

Inventory 4 3 4 7 6 6 6 6

Accounts receivable 328 270 812 844 678 685 880 659

Other current assets 4,539 4,143 4,730 4,116 4,557 4,557 4,557 4,557

Total current assets 6,077 4,897 6,419 6,340 6,972 6,405 6,924 6,386

Fixed assets 2,855 6,636 12,838 14,942 15,466 16,040 16,701 17,250

Goodwill & intangibles 64 0 503 721 682 680 678 677

Other non-current assets 1,361 1,314 1,530 1,063 1,084 1,229 1,319 1,383

Total assets 10,357 12,847 21,291 23,067 24,204 24,354 25,622 25,696

Short-term debt 168 806 1,538 1,020 1,470 1,470 1,470 1,470

Accounts payable 1,660 1,704 1,594 1,315 1,695 1,118 1,547 1,048

Other current liabilities 138 112 157 218 284 284 284 284

Total current liabilities 1,965 2,622 3,289 2,552 3,449 2,873 3,301 2,802

Long-term debt 1,425 1,769 7,824 9,255 8,325 8,325 8,325 8,325

Other non-current liabilities 2,011 1,377 555 608 586 586 586 586

Total liabilities 5,402 5,768 11,668 12,416 12,361 11,784 12,213 11,714

Share capital 1,084 1,084 2,352 3,053 3,159 3,159 3,159 3,159

Reserves/R.E./others 3,848 4,349 4,660 4,750 4,894 5,451 6,116 6,514

Shareholders' equity 4,932 5,433 7,012 7,803 8,053 8,609 9,274 9,672

Minority interests 23 1,646 2,612 2,848 3,791 3,961 4,134 4,310

Total equity & liabilities 10,357 12,847 21,291 23,067 24,204 24,354 25,622 25,696

EV 3,543 7,882 15,241 15,857 15,659 16,259 16,018 16,447

Net debt/(cash) 386 2,095 8,488 8,902 8,064 8,639 8,314 8,631

BVPS (SGD) 1.707 1.880 2.220 2.249 2.301 2.493 2.723 2.860

Year to 30 Sep 2012 2013 2014 2015 2016 2017E 2018E 2019E

Sales (YoY) (36.8) 45.4 7.3 61.7 (3.4) (20.4) 28.4 (25.1)

EBITDA (YoY) (37.0) 53.4 21.9 36.7 (5.3) 18.7 12.6 (17.1)

Operating profit (YoY) (37.5) 54.5 21.3 33.0 (7.1) 20.0 13.3 (18.0)

Net profit (YoY) (38.0) 46.1 (26.2) 67.5 (11.0) 9.3 4.4 (28.0)

Core EPS (fully-diluted) (YoY) (38.0) 46.1 (26.2) 67.5 (11.0) 9.3 4.4 (28.0)

Gross-profit margin 44.4 39.5 35.0 30.4 30.0 45.6 41.4 47.0

EBITDA margin 24.0 25.3 28.7 24.3 23.8 35.5 31.1 34.5

Operating-profit margin 23.5 24.9 28.2 23.2 22.3 33.6 29.6 32.5

Net profit margin 21.6 21.8 15.0 15.5 14.3 19.6 15.9 15.3

ROAE 6.6 8.6 5.6 8.5 7.5 7.7 7.4 5.0

ROAA 3.0 3.8 1.9 2.5 2.1 2.2 2.2 1.6

ROCE 5.3 6.3 4.3 4.1 3.6 4.2 4.6 3.6

ROIC 5.6 6.2 3.8 3.7 3.1 3.7 4.0 3.1

Net debt to equity 7.8 38.6 121.1 114.1 100.1 100.3 89.6 89.2

Effective tax rate 12.9 11.6 15.8 15.4 20.2 17.3 18.3 18.4

Accounts receivable (days) 130.0 53.1 89.6 84.8 80.7 90.8 81.1 106.5

Current ratio (x) 3.1 1.9 2.0 2.5 2.0 2.2 2.1 2.3

Net interest cover (x) 5.5 8.4 14.2 5.5 5.4 6.8 7.7 6.3

Net dividend payout 23.4 27.7 49.6 32.2 41.6 28.6 25.4 34.9

Free cash flow yield n.a. n.a. n.a. n.a. 7.3 n.a. 17.7 3.0

Company profile

Frasers Centrepoint Limited (FCL) is the former real-estate arm of Fraser and Neave Limited, and was spun off and listed on the Singapore Exchange in January 2014. Thailand's TCC Group is FCL’s

main shareholder and controls 87.9% of the company currently. As of 31 March 2016, FCL had over SGD23bn in total assets, mainly in Singapore (48% of assets) and Australia (31%). The company is diversified across various asset classes, with commercial properties making up the largest portion (38% of assets), followed by its Australian business (25%) and hospitality properties (20%).


5


Daiwa’s Asia Pacific Research Directory

HONG KONG

Takashi FUJIKURA (852) 2848 4051 [email protected] Regional Research Head

Jiro IOKIBE (852) 2773 8702 [email protected] Co-head of Asia Pacific Research

John HETHERINGTON (852) 2773 8787 [email protected] Co-head of Asia Pacific Research

Rohan DALZIELL (852) 2848 4938 [email protected] Regional Head of Asia Pacific Product Management

Kevin LAI (852) 2848 4926 [email protected] Chief Economist for Asia ex-Japan; Macro Economics (Regional) Olivia XIA (852) 2773 8736 [email protected] Macro Economics (Hong Kong/China)

Kelvin LAU (852) 2848 4467 [email protected] Head of Automobiles; Transportation and Industrial (Hong Kong/China) Brian LAM (852) 2532 4341 [email protected] Auto Components; Transportation – Railway; Construction and Engineering (China) Leon QI (852) 2532 4381 [email protected] Banking; Diversified financials; Insurance (Hong Kong/China)

Yan LI (852) 2773 8822 [email protected] Banking (China) Anson CHAN (852) 2532 4350 [email protected] Consumer (Hong Kong/China)

Adrian CHAN (852) 2848 4427 [email protected] Consumer (Hong Kong/China) Jamie SOO (852) 2773 8529 [email protected] Gaming and Leisure (Hong Kong/China)

John CHOI (852) 2773 8730 [email protected] Head of Hong Kong and China Internet; Regional Head of Small/Mid Cap

Carlton LAI (852) 2532 4349 [email protected] Small/Mid Cap (Hong Kong/China) Dennis IP (852) 2848 4068 [email protected] Power; Utilities; Renewables and Environment (Hong Kong/China)

Jonas KAN (852) 2848 4439 [email protected] Head of Hong Kong and China Property

Cynthia CHAN (852) 2773 8243 [email protected] Property (China)

Thomas HO (852) 2773 8716 [email protected] Custom Products Group

SOUTH KOREA

Sung Yop CHUNG (82) 2 787 9157 [email protected] Pan-Asia Co-head/Regional Head of Automobiles and Components; Automobiles; Shipbuilding; Steel

Mike OH (82) 2 787 9179 [email protected] Banking; Capital Goods (Construction and Machinery)

Iris PARK (82) 2 787 9165 [email protected] Consumer/Retail

SK KIM (82) 2 787 9173 [email protected] IT/Electronics – Semiconductor/Display and Tech Hardware

Thomas Y KWON (82) 2 787 9181 [email protected] Pan-Asia Head of Internet & Telecommunications; Software – Internet/On-line Games

Kevin JIN (82) 2 787 9168 [email protected] Small/Mid Cap TAIWAN

Rick HSU (886) 2 8758 6261 [email protected] Head of Regional Technology; Head of Taiwan Research; Semiconductor/IC Design (Regional)

Christie CHIEN (886) 2 8758 6257 [email protected] Banking; Insurance (Taiwan); Macro Economics (Regional) Steven TSENG (886) 2 8758 6252 [email protected] IT/Technology Hardware (PC Hardware)

Kylie HUANG (886) 2 8758 6248 [email protected] IT/Technology Hardware (Handsets and Components)

Helen CHIEN (886) 2 8758 6254 [email protected] Small/Mid Cap

INDIA

Punit SRIVASTAVA (91) 22 6622 1013 [email protected] Head of India Research; Strategy; Banking/Finance

Saurabh MEHTA (91) 22 6622 1009 [email protected] Capital Goods; Utilities

SINGAPORE

Ramakrishna MARUVADA (65) 6499 6543 [email protected] Head of Singapore Research; Telecommunications (China/ASEAN/India)

David LUM (65) 6329 2102 [email protected] Banking; Property and REITs Royston TAN (65) 6321 3086 [email protected] Oil and Gas; Capital Goods

Shane GOH (65) 64996546 [email protected] Property and REITs; Small/Mid Cap (Singapore)

Jame OSMAN (65) 6321 3092 [email protected] Transportation – Road and Rail; Pharmaceuticals and Healthcare; Consumer (Singapore)


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Portions of this publication are prepared by Affin Hwang Investment Bank Berhad (“Affin Hwang”) and reviewed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates (collectively, “Daiwa”), and is distributed and/or originated from outside Malaysia by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. The role of Daiwa Securities Group Inc. and/or its non-U.S. affiliates in connection with this publication is solely limited to the review and distribution of this publication ; and Daiwa Securities Group Inc. and/or its non-U.S. affiliates are not involved in the preparation of this publication in any other way. This research is for Daiwa clients only and the publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Other than disclosures relating to Daiwa, this research is based on current public information that Affin Hwang and Daiwa consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The analysts named in this report may have from time to time discussed with clients, including Daiwa’s salespersons and traders, or may discuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equity securities discussed in this report, which impact may be directionally counter to the analysts' published price target expectations for such stocks. Any such trading strategies are distinct from and do not affect the analysts' fundamental equity rating for such stocks, which rating reflects a stock's return potential relative to its coverage group as described herein. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Affin Hwang ,Daiwa Securities Group Inc. nor any of its or their respective parent, holding, subsidiaries or affiliates, nor any of its or their respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction where such an offer or solicitation would be illegal nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication constitutes the views of the analyst(s) named herein and does not necessarily reflect those of Affin Hwang, Daiwa Securities Group Inc. and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options disclosure documents in relation to such investments. All research reports are disseminated and available to our clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Daiwa and Affin Hwang responsible for the redistribution of our research by third party aggregators. Affin Hwang, Daiwa Securities Group Inc., its subsidiaries and affiliates, and its or their respective directors, officers and employees, from time to time may have trades as principals, or may have positions in, or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures. Portions of this publication are prepared by PT. Bahana Securities and reviewed by Daiwa Securities Group Inc. and/or its affiliates, and distributed outside Indonesia by Daiwa Securities Group Inc. and/or its affiliates, except to the extent expressly provided herein. Certain copies of this publication may be distributed inside and outside of Indonesia by PT. Bahana Securities in accordance with relevant laws and regulations. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Any review does not constitute a full verification of the publication and merely provides a minimum check. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication consti tutes the views of the analyst(s) named herein and does not necessarily reflect those of Daiwa Securities Group Inc. and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

Neither Daiwa Securities Group Inc. nor any of its affiliates is licensed to undertake any business within the Republic of Indonesia. Any display of any trade name or logo of the Daiwa Securities Group Inc. on this publication shall not be deemed to be an undertaking of any business within the Republic of Indonesia.

Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time may have trades as principals, or have positions in, or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.

Portions of this publication are prepared by Thanachart Securities Public Company Limited and distributed outside Thailand by Daiwa Securities Group Inc. and/or its non-U.S. affiliates except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Thanachart Securities Public Company Limited (“Thanachart Securities”), Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiar ies or affiliates, nor any of their respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication constitutes the views of the analyst(s) named herein and does not necessarily reflect those of Thanachart Securities, Daiwa Securities Group Inc. and/or their respective affiliates nor any of their respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

All research reports are disseminated and available to our clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Daiwa responsible for the redistribution of our research by third party aggregators. Japan Disclosure of Interest of Daiwa Securities Group Inc. Investment Banking Relationship Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Neo Solar Power Corp (3576 TT) *Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司), Daiwa Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.


https://daiwa3.bluematrix.com/sellside/Disclosures.action


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Disclosure of Interest of Thanachart Securities Investment Banking Relationship Within the preceding 12 months, Thanachart Securities has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Bangkok Airways Co Ltd (BA TB), Star Petroleum Refining Pcl (SPRC TB), Rajthanee Hospital Pcl (RJH TB). Disclosure of Interest of Bahana Securities Investment Banking Relationship Within the preceding 12 months, Bahana Securities has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: PT Telekomunikasi Indonesia (Persero) Tbk (TLKM IJ); PT Waskita Beton Precast Tbk (WSBP IJ). Disclosure of Interest of Affin Hwang Investment Bank Investment Banking Relationship - Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures

Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research.

Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Securities and Futures Act, Chapter 289 of Singapore, as amended from time to time and is not for, nor intended for, distribution to any other persons in Singapore. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore should contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research. Australia This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. India This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates, may have received compensation for any products other than Investment Banking (as disclosed)or brokerage services from the subject company in this report or from any third party during the past 12 months. Daiwa India and its associates may have debt holdings in the subject company. For information on ownership of equity, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report. Associates of Daiwa India, registered with Indian regulators, include Daiwa Capital Markets Singapore Limited and Daiwa Portfolio Advisory (India) Private Limited. Taiwan This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd. and it may only be distributed in Taiwan to specific customers who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd. and non-customers including (i) professional institutional investors, (ii) TWSE or TPEx listed companies, upstream and downstream vendors, and specialists that offer or seek advice, and (iii) potential customers with an actual need for business development in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Neither Daiwa-Cathay Capital Markets Co., Ltd. nor its personnel who writes or reviews the research report has any conflict of interest in this research. Since Daiwa-Cathay Capital Markets Co., Ltd. does not operate brokerage trading business in foreign markets, this research is “without recommendation” to any foreign securities and Daiwa-Cathay Capital Markets Co., Ltd. does not accept orders from customers to trade in such securities that are without recommendation. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd. in respect of any matter arising from or in connection with the research. Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Phil ippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively. United Kingdom This research report is produced by Daiwa Securities Co. Ltd. and/or its affiliates and is distributed in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange and Eurex. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available. Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.

Germany This document is distributed by Daiwa Capital Markets Europe Limited and is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany. Bahrain This research material is distributed in Bahrain by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113 United States This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect Thanachart Securities’ or DCMA’s views at any time. Neither Thanachart Securities, DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of Thanachart Securities’ or DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (Tel no. 212-612-7000).

Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.



http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf

http://www.pse.com.ph/

http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory


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Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions.

Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report. The following explains the rating system in the report as compared to relevant local indices, unless otherwise stated, based on the beliefs of the author of the report. "1": the security could outperform the local index by more than 15% over the next 12 months. "2": the security is expected to outperform the local index by 5-15% over the next 12 months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next 12 months. "4": the security is expected to underperform the local index by 5-15% over the next 12 months. "5": the security could underperform the local index by more than 15% over the next 12 months.

Disclosure of investment ratings

Rating Percentage of total

Buy* 64.0% Hold** 21.2% Sell*** 14.8%

Source: Daiwa

Notes: data is for single-branded Daiwa research in Asia (ex Japan) and correct as of 30 September 2016. * comprised of Daiwa’s Buy and Outperform ratings. ** comprised of Daiwa’s Hold ratings. *** comprised of Daiwa’s Underperform and Sell ratings.

For stocks and sectors in Malaysia covered by Affin Hwang, the following rating system is in effect:

Stocks: BUY: Total return is expected to exceed +10% over a 12-month period HOLD: Total return is expected to be between -5% and +10% over a 12-month period SELL: Total return is expected to be below -5% over a 12-month period NOT RATED: Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation Sectors: OVERWEIGHT: Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months NEUTRAL: Industry, as defined by the analyst’s coverage universe, is expected to perform in line with the KLCI benchmark over the next 12 months UNDERWEIGHT: Industry, as defined by the analyst’s coverage universe is expected to underperform the KLCI benchmark over the next 12 months

Conflict of Interest Disclosure

Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Relevant Relationships Affin Hwang may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Affin Hwang market making Affin Hwang may from time to time make a market in securities covered by this research. For stocks and sectors in Indonesia covered by Bahana Securities, the following rating system is in effect: Stock ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. Unless otherwise specified, these ratings are set with a 12-month horizon. It is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. "Buy": the price of the security is expected to increase by 10% or more. "Hold": the price of the security is expected to range from an increase of less than 10% to a decline of less than 5%. Reduce": the price of the security is expected to decline by 5% or more. Sector ratings are based on fundamentals for the sector as a whole. Hence, a sector may be rated “Overweight” even though its constituent stocks are all rated “Reduce”; and a sector may be rated “Underweight” even though its constituent stocks are all rated “Buy”. “Overweight”: positive fundamentals for the sector. “Neutral”: neither positive nor negative fundamentals for the sector. “Underweight”: negative fundamentals for the sector. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationships (Bahana Securities) Bahana Securities may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. Bahana Securities market making Bahana Securities may from time to time make a market in securities covered by this research. For stocks in Thailand covered by Thanachart Securities, the following rating system is in effect: Ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the rating is BUY. If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word “Positive”, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word “Negative”, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word “Unchanged”, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart’s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An “Overweight” sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by market cap. “Underweight” is used when Thanachart has SELLs on majority of the stocks it covers by market cap. “Neutral” is used when there are relatively equal weightings of BUYs and SELLs].









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Conflict of Interest Disclosure: Thanachart Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. TNS market making TNS may from time to time make a market in securities covered by this research. Additional information may be available upon request. Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.) If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items. In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction. In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan. For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements. There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements. There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us. Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc. When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association




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