morning matters - rhb tradesmart · be endorsed by the cabinet. thailand has paid farmers as much...

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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)


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)


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

[email protected]

Chun Phokaisawan +66 2862 2029

[email protected]

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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74

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)

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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


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


19 June 2013


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%

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Eastern Western Central Southern Northeastern Northern

0%

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500

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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


19 June 2013


Financial Exhibits



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


19 June 2013


Financial Exhibits



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


19 June 2013


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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800%

0

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P/E (x) vs EPS growth

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P/BV (x) vs ROAE

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. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or financial advice to independently evaluate the particular investments and strategies. RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 18 June 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietary positions in the securities covered in this report, except for: a) - As of 18 June 2013, none of the analysts who covered the securities in this report has an interest in such securities, except for: a) Better World Green PCL Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd. Hong Kong This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited “RHBSHK” formerly known as OSK Securities Hong Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” , which in turn is a wholly-owned subsidiary of RHB Capital Berhad. RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company.

8

Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 18 June 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 18 June 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) Better World Green PCL DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

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