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20-Jun-2013
Morning Matters
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WHAT’S INSIDE
On The Platter
Better World Green (BWG TB; FV THB3.10-Buy) initiation coverage: From Trash To Cash
We initiation coverage on Better World Green (BWG), a leading waste management service provider in Thailand, with a BUY call. We like BWG for its high growth potential on the back of a new renewable energy project as well as on Thailand’s increasing industrial waste. We expect its sales to grow by 26% in 2013 and 40% in 2014. Our THB3.10 TP provides a 38% upside potential. MEDIA HIGHLIGHTS
Exports to advance as pledging prices are cut.
Traffic eases at Suvarnabhumi Explosive growth at Don Mueang.
TrueVisions allots B2.1bn for HD.
Loxley-AGT already at work.
NBTC nods to plan for True, Digital Phone clients after concessions.
BAY extending yellow points programme. ECONOMIC HIGHLIGHTS
Malaysia: May inflation rate up 1.8% y-o-y.
China: Financial system must support economy as rates rise.
Asia: Asian businesses optimistic, sentiment index highest in five quarters
Euro: EU parliament chief negotiator backs 7-year budget cut for bloc.
US: Bernanke says Fed on course to end asset buying in mid-2014.
US: Fed sees unemployment as low as 6.5% threshold by end-2014.
SET Intra-Day Graph
Source: Bloomberg
Key Market Indices (19 June 2013)
Value Chg % Chg % YTD
SET 1437.70 10.28 0.7% 3.3%
SET50 960.32 9.79 1.0% 1.6%
SET100 2129.11 18.54 0.9% 2.4%
Dow Jones 15112.19 -206.04 -1.3% 15.3%
S&P500 1628.93 -22.88 -1.4% 14.2%
Nasdaq 3443.20 -38.98 -1.1% 14.0%
FTSE 6348.82 -25.39 -0.4% 7.6%
FSSTI 3213.79 -15.76 -0.5% 1.5%
Hang Seng 20986.89 -238.99 -1.1% -7.4%
Nikkei 13245.22 9.14 0.1% 27.4%
KLCI 1772.88 -1.17 -0.1% 5.0%
SHANGHAI SE 2143.45 -15.84 -0.7% -5.5%
JCI 4806.66 -33.80 -0.7% 11.4%
SET 5-yr avg 2012 2013F
PE (x) 14.2 16.5 13.2
P/BV (x) 1.8 2.3 2.2
Yield (%) 4.1 3.0 3.4
Key Statistics
SET Value by investor Type: Daily
Buy (THBm) Sell (THBm) Net (THBm)
Institution 3,974.21 4,289.31 -315.10
Proprietary 9,758.01 9,311.92 446.08
Foreign 10,989.80 12,215.64 -1,225.85
Retail 24,203.42 23,108.56 1,094.86
SET Value by investor Type
MTD (THBm) YTD (THBm) Institution 21,554.22 63,159.08
Proprietary -8,482.26 -12,869.44
Foreign -35,081.35 -56,173.61
Retail 22,009.39 5,883.97
SET50 Index Future
Long Short Net MTD YTD
Institution 16,780 15,990 790 8,622 16,475
Foreign 6,797 7,224 -427 -4,152 -18,571
Local 20,717 21,080 -363 -4,470 2,096
Foreign Fund Flows (USDm)
Last MTD YTD YTD(%) -40.0 -1,143.4 -1,868.7 -194.6
See important disclosures at the end of this report 2
Media Highlights
Exports to advance as pledging prices are cut.
Rice shipments from Thailand, the second-biggest exporter, are set to increase as the government reduces the price paid to farmers to rein in spending, according to the Thai Rice Exporters Association. Sales could total 7 million tonnes this year and 8 million tonnes in 2014, said honorary president Chookiat Ophaswongse. His previous forecast for 2013 was 6-6.5 million tonnes. The National Rice Policy Committee Wednesday approved a 20% reduction to 12,000 baht ($388) a ton from 15,000 baht in support prices for the unmilled white variety, said Commerce Minister Boonsong Teriyapirom. The decision needs to be endorsed by the cabinet. Thailand has paid farmers as much as 50% above the domestic market rates since October 2011 to boost incomes. Around 588.7 billion baht has been spent on 27 million tonnes of milled rice, equivalent to 70% of annual global imports. The programme may have lost 136.9 billion baht in 2011-2012, the government estimates. Moody's said on June 3 that losses hamper the goal of achieving a balanced budget by 2017 and are negative for sovereign ratings. (Bangkok Post)
Traffic eases at Suvarnabhumi Explosive growth at Don Mueang.
Passenger traffic through Suvarnabhumi airport dropped by nearly 7% in the first five months of 2013, and yet congestion
persists at Thailand's main air gateway albeit slightly less critical. Rawewan: There is still congestion Combined passenger
volumes at Suvarnabhumi in the January-May period fell by 6.83% year-on-year to 21.8 million, with the number of flights
down by 14.8% to 120,900, Airports of Thailand Plc data show. Rawewan Netrakavesna, Suvarnabhumi's general manager,
credited the reduction mainly to the diversion of low-cost carrier (LCC) traffic to Bangkok's old Don Mueang airport, which was
reactivated as a fully functional facility last October, as well as to other major airports upcountry. More flights are bypassing
Suvarnabhumi including a new direct service between Chiang Mai and Phuket, she said.(Bangkok Post)
TrueVisions allots B2.1bn for HD.
TrueVisions, the country's leading pay-TV operator, has earmarked a 2.1-billion-baht investment budget to migrate its channels to high-definition (HD) quality over the next three years.The investment will be divided into two phases, with the first 1 billion baht used this year for technology and software development excluding transponder rental cost. The remaining 1.1 billion baht will be spent during the next two years. This move will double the number of HD channels to 48 for the satellite TV system after the Thaicom 6 satellite is launched in September. Its cable TV platform will boast 50 HD channels early next year from the current 23. The increase in HD channels will be automatically upgraded for subscribers in every package except the True Knowledge package.(Bangkok Post)
Loxley-AGT already at work.
The Loxley-AGT consortium, which was chosen to build and operate a centre for water and flood information, is now working intently on the IT infrastructure plan. "At least in the first year of the project, we will be able to set up a system that can simulate the flood situation in the Chao Phraya River basin, as the database related to water and floods in this river basin is available now," Vasant Chatikavanij, senior executive vice president of Loxley, said yesterday. According to the terms and conditions of the government's Bt350-billion water- and flood-management programme, all projects must be completed within five years. Loxley-AGT won the bidding for modules A6 and B4 worth Bt3.9 billion. There are nine modules and the winning bid for each module was disclosed on Tuesday.(The Nation)
NBTC nods to plan for True, Digital Phone clients after concessions.
The National Broadcasting and Telecommunications Commission (NBTC) yesterday approved the draft measures to protect the 1800MHz subscribers of TrueMove and Digital Phone Co after their concessions end on September 15. Two commissioners voted against the draft - Prawit Leesatapornwongsa and Supinya Klangnarong. The NBTC has 11 members but two were absent. Both Supinya and Prawit have been concerned that the draft might face a legal challenge as there is no law giving the NBTC the authority to allow any party to take care of the 17 million subscribers of these two cellular operators after their concessions expire. According to the draft, the NBTC will award a one-year licence to a party to look after all these 17 million users. This party will have to pay a licence fee. (The Nation)
BAY extending yellow points programme.
Bank of Ayudhya is broadening its Yellow Points programme from transactions via ATM and debit cards to lending products at
the bank and its subsidiaries, in order to boost active usage. BAY introduced the points-accumulation programme four years
ago, but it has not been used extensively because of its limitation to ATM and debit cards, chief marketing officer Dan
Harsono said yesterday. Until now, points have been collected automatically from ATM and electronic transactions such as
bill payments. An average of just three or four points are gained per customer per month. Now, apart from expanding the
number of channels, the bank is offering 30 Yellow Points to customers who transfer funds via ATM, and 25 points for those
who pay a bill by the same means. Just one point was earned previously from each of these transactions.BAY has about 8
million retail customers, of which some 3 million participate in Yellow Points, accounting for more than 10 million points each
month.(The Nation)
See important disclosures at the end of this report 3
Economic Highlights
Malaysia: May inflation rate up 1.8% y-o-y.
Malaysia's inflation rate in May rose 1.8% from a year ago due to higher costs of food and non-alcoholic beverages and also non-food, exceeding consensus estimate of 1.7%. The Statistics Department said on Wednesday the inflation rate, measured by the consumer price index (CPI), rose from 104.7 to 106.6. "The index for food & non-alcoholic beverages and non-food for the month of May 2013 showed increases of 3.5% and 1.1% respectively as compared to the same month in 2012," it said. (The Star) China: Financial system must support economy as rates rise.
China’s government said the financial system must better support the economy, after a surge in credit failed to ignite growth and interbank borrowing costs jumped to a two-year high. Authorities will boost credit support for industries the government has defined as strategic and those that are labor- intensive, the State Council, or Cabinet, said yesterday after a meeting led by Premier Li Keqiang. The nation must more firmly guard against financial risks, according to a statement on the central government’s website. (Bloomberg) Asia: Asian businesses optimistic, sentiment index highest in five quarters
Optimism among Asia's top companies gathered momentum in the 2Q despite lingering concerns about the global economy and rising costs, the latest Thomson Reuters/INSEAD Asia Business Sentiment survey showed. The Thomson Reuters/INSEAD Asia Business Sentiment Index climbed six points to 71 in June, its highest level in five quarters and the third consecutive quarterly rise, suggesting the rebound from a drop in the three months ended last June and September was here to stay. Of the 91 companies that participated in the poll, 43.9% were positive about their outlook, while 53.8% were neutral. (The Star) Euro: EU parliament chief negotiator backs 7-year budget cut for bloc.
The European Parliament’s chief budget negotiator accepted a lower seven-year spending ceiling demanded by government leaders in return for a mid-term review, setting the stage for a push to win the full assembly’s support. Alain Lamassoure, a French member of the European Union legislature, accepted a proposal by national leaders in February to fix the EU’s budget for 2014-2020 at EUR960bn. The sum, down from an original proposal of EUR1.047trn and less than the EUR994bn committed in the current budget cycle, would mark the first shrinking of the EU’s “Multiannual Financial Framework.”. (Bloomberg) US: Bernanke says Fed on course to end asset buying in mid-2014.
Federal Reserve Chairman Ben S. Bernanke said the central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy finally achieves the sustainable growth the Fed has sought since the recession ended in 2009. The Federal Open Market Committee yesterday left the monthly pace of bond purchases unchanged at USD85bn, while saying that “downside risks to the outlook for the economy and the labor market” have diminished. Policy makers raised their growth forecasts for next year to a range of 3% to 3.5%. (Bloomberg) US: Fed sees unemployment as low as 6.5% threshold by end-2014.
Federal Reserve officials forecast the U.S. unemployment rate will fall to 6.5% to 6.8% by the end of 2014, possibly reaching its stated threshold to raise the benchmark lending rate. At the same time, 15 of 19 participants on the Federal Open Market Committee expect the first rise in the federal funds rate to occur in 2015 or later, forecasts released yesterday in Washington showed. That exceeds the 14 of 19 who projected in March the first rate increase would happen after 2014.. (Bloomberg)
See important disclosures at the end of this report 4
Outperform
Current Target Upside/
Recc. Price Price Downside PE (x) Yield (%) Remarks
(Bt) (Bt) (%) 2013f 2013f
ADVANC Buy 264.00 293.00 11.0 21.1 4.7
CPN Buy 44.00 73.00 65.9 15.7 1.5
DTAC Buy 113.50 122.00 7.5 20.3 3.1
INTUCH Trading Buy 81.00 104.00 28.4 17.2 5.3
THAI Buy 26.00 42.60 63.8 12.2 3.0
CPF Buy 25.25 38.00 50.5 30.8 2.2 .
Underperform
Current Target Upside/
Recc. Price Price Downside PE (x) Yield (%) Remarks
(Bt) (Bt) (%) 2013f 2013f
BJC Sell 52.00 57.00 9.6 26.5 1.2
TVO Buy 17.90 28.00 56.4 7.2 9.6
OISHI Sell 130.00 130.00 0.0 38.4 2.7
BIGC Neutral 186.00 198.00 6.5 24.4 1.2
MAJOR Sell 21.50 18.50 -14.0 20.4 4.4
19 18 17 14 13 19 18 17 14 13
1 INTUCH 511.2 332.5 167.8 67.4 397.2 KTB -304.3 -91.8 65.2 153.0 51.4 INTUCH 3,683.7 KBANK -2,126.5 INTUCH 38,984.4 SCC -7,560.9
2 MAKRO 210.0 -82.4 120.4 256.2 136.0 PTTGC -259.6 -382.5 4.9 -292.7 -10.0 ADVANC 1,748.8 PTTGC -1,267.1 DTAC 11,390.4 BANPU -3,453.0
3 SCB 175.9 -228.3 45.8 338.6 -82.0 BAY -196.6 -128.0 -45.8 -292.2 359.8 DTAC 1,228.0 PTT -893.1 ADVANC 10,144.1 LH -2,511.9
4 ADVANC 159.0 -176.0 203.9 535.6 728.1 TRUE -143.5 -15.1 -7.0 -66.7 5.2 MAKRO 1,029.1 KTB -861.4 PTTEP 8,091.6 SIRI -1,449.5
5 PTT 131.5 -369.0 -13.4 90.8 174.3 BBL -104.1 60.1 -45.2 117.0 615.1 SCB 510.2 SCC -833.3 BAY 7,525.0 DEMCO -704.8
6 TUF 75.1 33.3 8.3 44.4 -1.4 BGH -80.7 -31.5 -2.6 -36.2 -103.0 MINT 496.4 BGH -666.7 PTT 7,293.5 CK -571.2
7 SIRI 65.7 152.2 6.5 6.0 3.9 THCOM -49.7 -47.6 -16.2 -64.5 -3.8 LH 217.1 BAY -512.9 PTTGC 7,138.4 UV -489.3
8 MINT 57.8 14.2 9.3 33.8 61.6 LPN -44.4 -28.4 3.8 -32.2 -77.1 THAI 215.4 LPN -509.3 MAKRO 4,157.0 BLA -418.8
9 AOT 51.8 41.0 23.0 -16.1 -424.4 TISCO -37.6 -58.6 -3.9 -13.1 9.2 GLOW 215.3 QH -489.8 TMB 3,814.5 RML -338.6
10 LH 45.4 8.3 14.5 -17.7 219.9 KK -36.9 -19.5 -5.8 12.9 23.0 SPALI 192.7 BBL -426.5 TOP 3,448.4 IRPC -318.3
11 BEC 42.4 -85.2 15.0 23.5 25.2 SCC -24.0 -111.9 -51.5 98.0 177.3 SPCG 178.6 AOT -408.1 BIGC 3,087.8 ASP -275.7
12 IVL 34.1 -33.5 -4.1 -9.9 10.8 STEC -23.9 -9.3 -0.1 -11.1 -17.9 THRE 173.7 BANPU -408.0 CPALL 3,011.4 QH -268.3
13 ROBINS 30.5 18.9 15.1 3.1 9.6 PS -19.6 -0.4 -4.1 1.9 20.8 TUF 172.9 BLA -342.5 BBL 2,832.6 MINT-W4 -238.0
14 PLE 28.7 -0.1 0.0 -0.0 0.0 TICON -15.8 -34.3 -22.9 -9.8 1.2 BEC 170.7 JAS -338.8 THAI 2,636.2 AMATA -224.0
15 KBANK 26.0 -60.3 239.1 1,196.7 658.4 TOP -13.8 -34.3 5.8 -15.6 21.8 RATCH 116.2 PTTEP -331.9 TCAP 2,505.5 KTB -212.5
16 CK 25.7 15.4 -7.8 -6.0 11.1 BIGC -13.7 6.9 27.6 14.4 37.9 DELTA 109.0 CPF -323.7 KBANK 2,343.7 TRC -197.0
17 SPALI 24.4 53.4 36.7 35.6 66.6 THAI -12.9 -1.4 -6.7 12.5 24.2 ASP 100.6 TISCO -320.2 SPALI 2,323.8 LRH -197.0
18 ITD 21.9 0.2 8.8 19.2 -1.6 BANPU -10.7 -34.5 -32.8 30.6 -12.0 GFPT 90.9 TCAP -283.4 MINT 2,306.8 STPI -186.7
19 BTS 17.7 5.1 -8.5 -18.5 -4.0 GLOBAL -9.8 -12.7 -1.7 5.9 3.3 ITD 82.2 CPALL -225.6 TUF 2,253.9 GUNKUL -184.0
20 AAV 17.3 23.3 -0.1 -28.2 -30.1 AMATA -8.3 10.4 -4.0 -7.4 19.6 BLAND 76.9 THCOM -185.5 CPN 2,109.5 NOBLE -154.6
% % of % of
Turn. paidup paidup
1 GJS 6.64 1 TISCO-P 66.16 65.86
2 TRUE 11.23 2 BBL 30.81 29.99
3 JAS 4.86 3 KBANK 28.38 28.50
4 LH 41.06 4 SPALI 22.59 17.94
5 KTB 14.35 5 GOLD-W1 21.50 14.87
6 SIRI 11.60 6 E-W1 21.12 22.27
7 BLAND 1.75 7 THRE 20.32 15.50
8 TMB 6.44 8 LPN 19.73 21.73
9 INTUCH 17.18 9 INTUCH 19.58 5.41
10 BAY 33.22 10 SPCG-W1 18.47 13.31
11 PLE 36.69 11 LH 17.68 21.18
12 PTTGC 23.65 12 TWFP 16.35 24.77
13 GJS-W3 37.79 13 DTAC 15.76 13.33
14 BBL 39.89 14 BAY 14.99 13.89
15 CPALL 4.44 15 TCAP 14.87 12.60
16 IRPC 12.41 16 THIP 14.50 12.64
17 MINT 26.43 17 AP 14.25 12.92
18 AP 18.94 18 SIRI-W1 14.18 11.05
19 CPF 12.99 19 LALIN 13.80 13.53
20 ITD 2.68 20 TISCO 13.79 13.69
Source : SET.OR.TH
20 June 2013
Jun13 Jun 13
Total Volume Shares
(Last)
NVDR Shrs. Paid up CapitalNVDR Shrs.
19-Jun-13 2-Jan-13
Net Buy Net Sell Net Buy Net Sell
2 Jan- 19 Jun 133-19 Jun 13
1,908,842,894
49,648,000 20,461,500 22,400 22,300 70,109,500 29,186,500
14,789,400
33,858
12,576,600 13,486,300 26,062,900
NetBuy Sell Total
13,145,464 8,965,924 22,111,388
572,486,791 -20,263,900
679,109,075 682,155,834
588,131,891 35,053,300 49,842,700
1,716,553,249
-909,700
418,421,323
2,393,260,193
387,836,492
74,970,598 89,953,203
4,179,540 307,949,569
347,000,000
3,024,601 18,651,370
11,911,610 6,377,790
13,378,200 4,247,200 17,625,400 9,131,000
9,144,700
21,675,971 -15,626,769
11,938,300 -1,282,500
21,572,100 19,933,700 73,282,042 77,281,246
2,766,910
5,327,900 6,610,400
20,752,900 819,200
3,512,494,860
1,475,698,768
713,908,665 544,461,149
291,221,836 320,609,239
3,206,420,305
279,999,581
627,773,928 173,363,101
51,714,000 37,278,800
2,123,251,472 10,025,921,523 1,772,456,819
1,554,316 2,354,634 9,506,055
825,000,000
1,435,297,002
8,000,000
407,480,879
111,592,900
1,011,300
2,859,920,138
2,478,730 5,614,250
5,232,000
3,620,200 2,386,100
4,512,400 719,600
3,135,520
6,006,300
99,645,251 727,878,228
6,214,500 2,383,700
203,496,504 268,936,368
113,839,000
100,385,384 3,792,800
656,790
1,234,100
367,964,647
189,966,280 161,065,653
1,159,700 727,100
1,277,816,397 295,979
9,908,600
5,629,677
373,084,844 315,525,949 2,367,811,000
6,074,143,747 910,332,002 843,803,210
2,086,900 8,291,741 10,378,641 -6,204,841
10,080,000 171,400 10,251,400
4,299,100 1,915,400
6,565,031
7,023,200
3,012,700 3,552,331
6,325,6253,014,823
- 7,023,200
-3,721,577
-7,023,200
3,481,500
3,310,802
2,754,400 6,235,900
-539,631
7,537,7771,908,100
Most Active Volume (shares) NVDR Shares to Total Paid-up Shares(%)
NET BUY NET SELL Month to Date Year to Date
Most Active Values (Btmn)
THAI NVDR : Top Ranking
See important disclosures at the end of this report Powered by Enhanced Datasystems’ EFATM
Platform 1
Company Update, 19 June 2013
Better World Green (BWG TB) Buy Industrial - Environment Control Target Price: THB3.10
Market Cap: USD49.1m Price: THB2.12
From Trash To Cash
Macro
3.00
Risks
2.00
Growth
3.00
Value
3.00
Source: Bloomberg
Avg Turnover (THB/USD) 141m/4.81m
Cons. Upside (%) 74.5
Upside (%) 46.2
52-wk Price low/high (THB) 1.60 - 2.70
Free float (%) 92
Shareholders (%)
Suwat Luengviriya 5.7
Sippakorn Kaosa-ard 3.6
Charassri Pongpirodom 2.9
Shariah compliant
Kowit Pongwinyoo +662 862 9743
Chun Phokaisawan +66 2862 2029
Source: Company data, RHB estimates
We initiation coverage on Better World Green (BWG), a leading waste management service provider in Thailand, with a BUY call. We like BWG for its high growth potential on the back of a new renewable energy project as well as on Thailand’s increasing industrial waste. We expect its sales to grow by 26% in 2013 and 40% in 2014. Our THB3.10 TP provides a 38% upside potential.
Growing demand for waste management. Given that the Thai
economy is growing at the rate of 4.5%-5.0% in 2013, we expect Thai manufacturers to produce around 34m tonnes of industrial waste this year. However, BWG, which is the biggest player in the industry, processed only around 0.4m tonnes of industrial waste in 2012. Therefore, there is room aplenty for BWG to grow its business in the future. Moreover, the Government is now more focused on the issue of illegal dumping of industrial waste and plans to enforce more severe punishment. Consequently, we believe the company will benefit from the growing economy and stricter Government environmental policies.
RDF project. BWG is starting a new renewable energy project to
produce refused-derived fuel (RDF), an alternative fuel, by shredding and dehydrating industrial waste. RDF produced from this project can be used as substitute source of fuel in coal power plants and will be sold at THB1,000-THB1,500 per tonne. The RDF project is expected to account for around 16% of BWG’s total FY14 revenue. As around 80% of new incoming waste will be used to produce RDF, this project will also reduce the amount of waste going into the landfill and free up landfill space.
Expanding into electric power plant. BWG is planning to create a JV
with a foreign company to build 10 electrical power plants (10MW per plant) in Thailand within the next three to five years. The new power plants will use RDF as fuel and have the capacity to operate 24 hours a day. We believe this project will provide additional value of around THB0.30/share. However, as the project is only expected to start in 2015, we treat it as a potential upside to our TP and have not included it in our model.
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83
91
100
108
117
125
134
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Better World Green PCL (BWG TB)
Price Close Relative to Stock Exchange of Thailand Index (RHS)
50
100
150
200
250
300
350
400
450
Ju
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2
Au
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Oct-
12
De
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Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F
Total turnover (THBm) 713 1,051 1,057 1,333 1,934
Reported net profit (THBm) 41 97 76 110 168
Recurring net profit (THBm) 41 97 76 110 168
Recurring net profit growth (%) na 137.4 (22.1) 45.3 52.2
Core EPS (THB) 0.13 0.19 0.11 0.15 0.22
DPS (THB) 0.02 0.04 0.04 0.03 0.04
Dividend Yield (%) 0.9 1.7 1.9 1.5 2.0
Core P/E (x) 16.5 11.0 19.6 13.7 9.6
Return on average equity (%) 6.1 10.2 6.1 8.4 11.4
P/B (x) 0.98 1.19 1.19 1.12 1.08
P/CF (x) 6.1 10.6 4.3 4.2 4.3
EV/EBITDA (x) 5.81 4.47 5.40 4.72 3.31
Net debt to equity (%) 24.7 8.7 4.4 7.9 net cash
Our vs consensus EPS (%) 0.0 0.0
Better World Green (BWG TB)
19 June 2013
See important disclosures at the end of this report 2
From Trash To Cash Target customers. BWG’s target customers are mid- to large-size manufacturers,
which are located in central and eastern regions of Thailand. In 2012, 70% of its customers are manufacturers of electronic appliance and automobile parts located in the industrial estates such as Rojana industrial estate, Hi-tech industrial estate, and Bang-pa-in industrial estate. Going forward, the company plans to further expand its customer base by providing its service to communities in the suburban areas. Specifically, the company plans to either build waste management center for the community or provide consultation services only.
Competition in the industry. Since an industrial waste management company
needs to have approvals from both the Environmental Impact Assessments (EIA) and Health Impact Assessments (HIA), the industry has a high barrier to entry and a limited number of players. BWG only has two major rivals in the industry –Professional Waste Technology (PRO) and The General Environmental Conservation (GENCO). BWG is the biggest player in the market with a share of around 50%. According to Thailand’s Ministry of Industry, Thai manufacturers produced around 27m tonnes of waste in 2011, while the three major players in the waste management industry processed a combined total of around 0.8m tonnes of waste in the same year. Furthermore, the three players’ processing plants are located in different regions of the country. Therefore, the competition in the industry is still low and there is enough room for all of the players in the industry to grow their businesses. We believe there will not be many new players in the industry as it requires a significant amount of initial investment and a high level of expertise.
Robust 1Q13 result. 1Q13 sales rose 10% y-o-y to THB289m while gross margin
improved to 33% (from 31% in 1Q12). We project FY13 sales to grow by 26 % y-o-y, driven mainly by the RDF project in 2H13 and the increasing amount of industrial waste. We expect gross margin to improve slightly to 30% in FY13 from 28.5% in FY12 as: i) the RDF project generates a higher margin than its existing renewable energy projects, and ii) the company is expected to resume its normal operations this year, after operations were disrupted by the massive floods in 2011.
Strong balance sheet. At end-1Q13, BWG had a debt-to-equity ratio of 0.32x while
interest coverage ratio was 8.9x. This provides the company a war chest for its expansion plans this year. As the RDF project requires an investment of around THB500m, we believe BWG will be able to expand its business this year without needing to raise capital. Thus, there is minimal financial risk for BWG.
Initiate with BUY Recommendation. Based on DCF valuation with discount rate of
10.8%, BWG’s TP is THB3.10, which represents a 39% upside and 1.4% dividend yield. As its stock is currently trading at 14x FY13F P/E, a 20% discount to its regional peers, we initiate coverage on the company with a BUY recommendation.
Figure 1: 1Q13 results
Consolidated 1Q13 1Q12 yoy 4Q12 qoq
year to 31 Dec (Btm) (Btm) %chg (Btm) % chg
Sale 289.13 262.6 10.1 276.4 4.6
Gross Profit 96.1 81.0 18.6 85.4 12.5
Pre-tax Profit 46.73 28.7 62.7 37.5 24.5
Tax (6.62) (3.85) 71.77 (6.87) (3.58)
Net Profit 40.11 24.9 61.3 30.7 30.8
Net Profit (Ex EI) 33.31 24.9 34.0 30.7 8.7
EPS(Bt) 0.05 0.03 55.5 0.04 29.5
Gross margin(%) 33.2 30.9 7.7 30.9 7.5
Net margin(%) 11.5 9.5 21.7 11.1 3.9
Source: RHB estimates
Better World Green (BWG TB)
19 June 2013
See important disclosures at the end of this report 3
Figure 2: Revenue breakdown Figure 3: GDP growth and Thailand’s industrial waste growth
18%
20%
2%17%
43%
Sanitary Landfill Secure Landfill Waste water
Quality Improvement Subsidiaries
0%
5%
10%
15%
20%
25%
30%
010 011 01 2013F
Industrial waste GDP
Source: Company data Source: Bank of Thailand (BOT), Ministry of Industry
Figure 4: Customers by region Figure 5: Sales and sales growth
75%
2%
5%3% 10% 5%
Eastern Western Central Southern Northeastern Northern
0%
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500
1,000
1,500
2,000
2,500
010 011 01 2013F 2014F
% Bt million
sale sale growth
Source: Company data Source: Bank of Thailand (BOT), Ministry of Industry
Figure 6: Peer comparison
Company 2013F 2014F 2013F 2014F 2013F 2014F 2013F 2014F 2013F 2014F 2013F 2014F
WASTE MANAGEMENT INC 18.7 17.1 2.8 2.6 8.5 8.0 3.6 3.7 16.4 16.9 2.2 2.4
PROGRESSIVE WASTE SOLUTIONS 21.6 18.8 2.0 1.9 7.6 7.2 2.5 2.5 9.4 10.4 1.0 1.2
CLEAN HARBORS INC 20.4 16.7 2.1 1.9 7.5 6.7 n.a. n.a. 11.0 n.a. 2.7 3.3
TAKEEI CORP 13.3 12.0 1.7 1.5 n.a. n.a. 0.8 0.8 13.1 12.6 289.9 321.2
BETTER WORLD GREEN PCL 14.3 10.2 1.2 1.1 4.7 3.3 1.4 1.9 9.5 11.8 0.15 0.22
EPSP/E P/BV EV/EBITDA Div yield (%) ROE (%)
Source: Bloomberg
Better World Green (BWG TB)
19 June 2013
See important disclosures at the end of this report 4
Financial Exhibits
Source: Company data, RHB estimates
Source: Company data, RHB estimates
Profit & Loss (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F
Total turnover 713 1,051 1,057 1,333 1,934
Cost of sales (505) (734) (756) (926) (1,341)
Gross profit 208 317 301 407 593
Gen & admin expenses (81) (92) (105) (133) (193)
Selling expenses (45) (67) (33) (57) (83)
Other operating costs (21) (27) (34) (43) (62)
Operating profit 60 131 129 173 254
Operating EBITDA 134 251 287 353 471
Depreciation of fixed assets (74) (120) (158) (180) (217)
Operating EBIT 60 131 129 173 254
Other recurring income 4 6 3 4 6
Interest expense (16) (18) (19) (25) (32)
Pre-tax profit 48 119 114 153 228
Taxation (6) (9) (21) (15) (26)
Minority interests (1) (13) (17) (27) (34)
Profit after tax & minorities 41 97 76 110 168
Reported net profit 41 97 76 110 168
Recurring net profit 41 97 76 110 168
Cash flow (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F
Operating profit 60 131 129 173 254
Depreciation & amortisation 74 120 158 180 217
Change in working capital (11) (134) 75 37 (53)
Other operating cash flow 15 19 24 13 15
Operating cash flow 138 136 385 402 433
Interest paid (16) (18) (19) (25) (32)
Tax paid (10) (17) (21) (15) (26)
Cash flow from operations 112 101 345 362 375
Capex (47) (476) (145) (400) (200)
Other investing cash flow 0 38 20 4 11
Cash flow from investing activities (47) (438) (125) (396) (189)
Dividends paid - (6) (36) (22) (34)
Proceeds from issue of shares - 410 0 - 86
Increase in debt (28) 39 (39) 60 114
Other financing cash flow (22) 5 (43) 34 74
Cash flow from financing activities (50) 448 (118) 72 240
Cash at beginning of period 35 50 160 264 303
Total cash generated 15 111 103 39 426
Implied cash at end of period 50 160 263 303 729
Better World Green (BWG TB)
19 June 2013
See important disclosures at the end of this report 5
Financial Exhibits
Source: Company data, RHB estimates
Source: Company data, RHB estimates
Balance Sheet (THBm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F
Total cash and equivalents 50 160 264 303 729
Inventories 35 - - - -
Accounts receivable 160 253 290 360 522
Other current assets 77 223 21 28 41
Total current assets 322 637 574 690 1,292
Total investments 72 84 66 66 66
Tangible fixed assets 717 1,138 1,223 1,444 1,427
Total non-current assets 789 1,223 1,289 1,509 1,492
Total assets 1,110 1,860 1,863 2,200 2,784
Short-term debt 188 198 218 276 400
Accounts payable 89 107 118 200 290
Other current liabilities 99 150 39 71 103
Total current liabilities 376 455 375 546 793
Total long-term debt 33 74 105 141 205
Other liabilities 8 50 45 58 78
Total non-current liabilities 41 123 150 199 283
Total liabilities 416 578 525 746 1,076
Share capital 320 688 714 714 800
Retained earnings reserve 212 296 336 424 558
Other reserves 159 245 219 218 218
Shareholders' equity 690 1,229 1,269 1,357 1,577
Minority interests 4 53 70 97 131
Other equity (0) (0) - - -
Total equity 694 1,281 1,338 1,454 1,708
Total liabilities & equity 1,110 1,860 1,863 2,200 2,784
Key Ratios (THB) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F
Revenue growth (%) 21.3 47.4 0.6 26.1 45.1
Operating profit growth (%) 0.0 118.4 (1.6) 34.1 46.8
Net profit growth (%) 0.0 137.4 (22.1) 45.3 52.2
EPS growth (%) 0.0 50.7 (44.0) 42.7 43.6
Bv per share growth (%) 6.3 (17.2) (0.5) 7.0 3.8
Operating margin (%) 8.4 12.5 12.2 13.0 13.1
Net profit margin (%) 5.8 9.3 7.2 8.3 8.7
Return on average assets (%) 3.8 6.6 4.1 5.4 6.7
Return on average equity (%) 6.1 10.2 6.1 8.4 11.4
Net debt to equity (%) 24.7 8.7 4.4 7.9 (7.2)
DPS 0.02 0.04 0.04 0.03 0.04
Recurrent cash flow per share 0.35 0.20 0.49 0.51 0.50
Better World Green (BWG TB)
19 June 2013
See important disclosures at the end of this report 6
SWOT Analysis
The largest industrial waste management company in Thailand.
A new renewable energy project, refuse-derived fuel (RDF), will account for 16% of its sale in 2014.
Legal issues brought up by the community surrounding the site.
Dilutive effect from BWG-W1.
To expand to electric power plant business.
Diversify into community waste management business.
Limited landfill space
The Government’s inability to enforce its regulation
Source: Company data, RHB estimates Source: Company data, RHB estimates
Company Profile Better World Green provides non-hazardous and hazardous industrial waste management services.
-100%
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P/E (x) vs EPS growth
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P/B (x) (lhs) Return on average equity (rhs)
7
RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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