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THAILAND EQUITY RESEARCH
Page | 1 | PHILLIP SECURITIES (THAILAND)
KCE Electronics 4QFY15 results to be highest of the year
THAILAND | SET | ETRON | COMPANY PREVIEW BLOOMBERG KCE TB l REUTERS KCE.BK
4QFY15 net profit to hit year’s high of Bt619mn, up 7% y‐y and 8% q‐q We expect 4QFY15 to be the best quarter of the year for KCE. Our forecast puts its 4QFY15 net profit at Bt619mn, up 7% y‐y and 8% q‐q on margin boost. In our forecast, we assume (i) margins expanded 2% q‐q as the closure of its aging plant in mid‐4QFY15 allowed it to see expense savings and brought the company‐wide scrap rate down to 4.2%‐4.3% from 4.6%‐4.7% in the prior quarter, (ii) quarterly sales came in at Bt3,237mn, up 20% y‐y on higher operating rates at its newfacility but down 2% q‐q due to the traditional low season for exports, (iii) SG&A expenses were little changed and (iv) the benefit of a weak baht led to a FX gain of around Bt18mn in 4QFY15. As 4QFY15 results are expected to come in much better than previously thought, we therefore raise our FY15 earnings forecast for KCE by 4%. Our new forecast shows a 4% y‐y rise in FY15 net profit to Bt2,194mn based on assumptions that (i) full‐year sales grew 10% y‐y to Bt12,467mn, (ii) margins widened 2% y‐y on the back of higher operating rates at its new facility and (iii) SG&A expenses rose at a slower pace after the new plant was in operation. Earnings growth set to accelerate in FY16 after new facility runs at full capacity We have a more bullish view on KCE’s earnings growth prospects after last Mon’s analyst briefing. Earnings growth is expected to be strong in FY16 driven by a combination of factors including: (1) full capacity run at its new facility, (2) lower scrap rates and (3) expense savings following the closure of its aging plant. These positive factors would push margins up 2% y‐y in FY16. Sales also tend to fare better on the back of additional orders from new clients. To reflect better‐than‐expected outlook for FY16, we ratchet up our FY16 net profit forecast for KCE by 9% to Bt2,880mn, which implies a growth of 31% y‐y. Our new forecast assumes (i) FY16 sales will grow 17% y‐y to Bt14,618mn and (ii) SG&A expenses will rise at a slower rate on expense savings. FY16 target price raised to Bt74/share but ‘SELL’ rating maintained Even if KCE is one of our top picks in the electronics space in view of its continued growth potential driven by new client additions to absorb new capacity and high production efficiency at its new facility, which would be the catalysts to bring it back to strong growth path, it seems to us that much of its upbeat earnings outlook for FY16 appears to have already been baked into the share price after a recent price run‐up. On balance, we maintain a ‘SELL’ stance on KCE shares but we nudge up our FY16 target price to Bt74/share to reflect the above earnings upgrades.
Ref. No.: CO2016_0073
Closing Price(Bt) 78.75
Target Price(Bt) 74.00 (‐4.25%)
COMPANY DATA
O/S Shares (mn) : 575
Market Cap. (Btmn) :
Market Cap. (USDmn) :
52‐WK Hi/Lo (Bt) : 81/42.75
3M Average Daily T/O (mn) : 1.57
Par Value (Bt) : 1.00
MAJOR SHAREHOLDERS (%)
1. Mr. Buncha Ongkosit 10.2
2. Mr. Pitan Ongkosit 6.3
3. Mr. Attasit Ongkosit 6.1
PRICE PERFORMANCE (%)
1MTH 3MTH 1YR
ABS 18% 27% 87%
REL TO SET INDEX 19% 43% 135%
PRICE VS SET INDEX
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Dec FY13 FY14 FY15E FY16E
Sales(Btmn) 9,294 11,284 12,467 14,618
Net Profit(Btmn) 1,174 2,110 2,194 2,880
EPS (Bt) 2.53 3.89 3.82 5.01
P/E (X) 31.1 20.2 20.6 15.7
BVPS (Bt) 8.55 11.29 13.73 17.59
P/B (X) 9.2 7.0 5.7 4.5
DPS (Bt) 0.75 1.10 1.10 1.40
Dividend Yield (%) 1.0 1.4 1.4 1.8
ROE (%) 32.78 40.37 30.71 31.87
Debt/Equity (X) 1.75 1.38 1.18 0.83
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
PE'16 (15x)
Naree Apisawaittakan
Securities Investment Analyst # 17971
Tel: 66 2 635 1700 # 484
27 January 2016
45,263
1,261
26 August 2015
Sell (Maintain)
0
20
40
60
80
Jan‐13 Jan‐14 Jan‐15 Jan‐16
KCE TB EQUITY SETI (rebased)
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 2 | P a g e
Corporate Governance ‐2015
ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC
EASTW EGCO GRAMMY HANA HMPRO INTUCH IRPC IVL KBANK KCE
KKP KTB LHBANK LPN MCOT MINT MONO NKI PHOL PPS
PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMART SAMTEL
SAT SC SCB SCC SE‐ED SIM SNC SPALI THCOM TISCO
TKT TMB TOP VGI WACOAL
AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP
ASIMAR ASK ASP BANPU BAY BBL BDMS BECL BKI BLA
BMCL BOL BROOK BWG CENTEL CFRESH CHO CIMBT CM CNT
COL CPF CPI CSL DCC DELTA DEMCO ECF EE ERW
GBX GC GFPT GLOBAL GUNKUL HEMRAJ HOTPOT HYDRO ICC ICHI
INET IRC KSL KTC LANNA LH LOXLEY LRH MACO MBK
MC MEGA MFEC NBC NCH NINE NSI NTV OCC OGC
OISHI OTO PAP PDI PE PG PJW PM PPP PR
PRANDA PREB PT PTG Q‐CON QH RS S & J SABINA SAMCO
SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT
SNP SPI SSF SSI SSSC SST STA STEC SVI SWC
SYMC SYNTEC TASCO TBSP TCAP TF TGCI THAI THANA THANI
THIP THRE THREL TICON TIP TIPCO TK TKS TMI TMILL
TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUE
TSC TSTE TSTH TTA TTCL TTW TU TVD TVO TWFP
TWS UAC UT UV VNT WAVE WINNER YUASA ZMICO
2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH
AMARIN AP APCO AQUA AS ASIA AUCT AYUD BA BEAUTY
BEC BFIT BH BIG BJC BJCHI BKD BTNC CBG CGD
CHG CHOW CI CITY CKP CNS CPALL CPL CSC CSP
CSS CTW DNA EARTH EASON ECL EFORL ESSO FE FIRE
FOCUS FORTH FPI FSMART FSS FVC GCAP GENCO GL GLAND
GLOW GOLD GYT HTC HTECH IEC IFEC IFS IHL IRCP
ITD JSP JTS JUBILE KASET KBS KCAR KGI KKC KTIS
KWC KYE L&E LALIN LHK LIT LIVE LST M MAJOR
MAKRO MATCH MATI MBKET M‐CHAI MFC MILL MJD MK MODERN
MOONG MPG MSC MTI MTLS NC NOK NUSA NWR NYT
OCEAN PACE PATO PB PCA PCSGH PDG PF PICO PL
PLANB PLAT PPM PRG PRIN PSTC PTL PYLON QLT RCI
RCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN
SCP SEAOIL SIRI SKR SMG SOLAR SORKON SPA SPC SPCG
SPPT SPVI SRICHA SSC STANLY STPI SUC SUSCO SUTHA SYNEX
TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TIC TIW
TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR UMI
UP UPF UPOIC UREKA UWC VIBHA VIH VPO WHA WIN
XO
Score Range
< 50%
50‐59%
60‐69%
70‐79%
80‐89%
90‐100%
The disclosure of the survey result of the Thai Institute of Directors Association (IOD)
regarding corporate governance is made pursuant to the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company
l isted on the Stock Exchange of Thailand and the Market for Alternative disclosure to the
public and able to be accessed by a general public investor. The results, therefore, is from
the perspective of a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai
Listed Companies. As a result, the survey result may be changed after that data. Phil l ip
Securities (Thailand) of securities company does not confirm nor certify the accuracy of
such survey result.
No logo given
Number of Logo
Results Presentation
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 3 | P a g e
Industry Group Name Sector Name Sector Index
Agro & Food Industry[AGRO] Agribusiness AGRI
Food & Beverage FOOD
Consumer Products[CONSUMP] Fashion FASHION
Home & Office Products HOME
Personal Products & Pharmaceuticals PERSON
Financials [FINCIAL] Banking BANK
Finance & Securities FIN
Insurance INSUR
Industrials [INDUS] Automotive AUTO
Industrial Materials & Machinery IMM
Packaging PKG
Paper & Printing Materials PAPER
Petrochemicals & Chemicals PETRO
Steel STEEL
Property & Construction[PROPCON] Construction Materials CONMAT
Construction Services CONS
Property Development PROP
Property Fund & REITs PF&REIT
Resources [RESOURC] Energy & Util ities ENERG
Mining MINE
Services [SERVICE] Commerce COMM
Media & Publishing MEDIA
Health Care Services HELTH
Tourism & Leisure TOURISM
Professional Services PROF
Transportation & Logistics TRANS
Technology [TECH] Electronic Components ETRON
Information & Communication Technology ICT
PSR Rating SystemCapital Gain Recommendation
> 15% BUY
> 5% ‐ 15% ACCUMULATE / TRADING BUY
> 0% ‐ 5% NEUTRAL
0 <= SELL
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors l ike (but
not l imited to) a stock's risk reward profi le, market sentiment, recent rate of share price appreciation, presence or absence of
stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
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