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WHA

Growth and ComplementarityGrowth and ComplementarityGrowth and ComplementarityGrowth and Complementarity

Initiating CoverageInitiating CoverageInitiating CoverageInitiating Coverage: : : : BUYBUYBUYBUY | PO: | PO: | PO: | PO: 5.60 THB5.60 THB5.60 THB5.60 THB | Price: | Price: | Price: | Price: 3.70 THB3.70 THB3.70 THB3.70 THB Equity | Equity | Equity | Equity | 22 July 201522 July 201522 July 201522 July 2015

Initiate with a Buy rating, Bt5.Initiate with a Buy rating, Bt5.Initiate with a Buy rating, Bt5.Initiate with a Buy rating, Bt5.6666 POPOPOPO We initiate coverage on WHA with a Buy rating and a FY16E PO of Bt5.6/share (implying

51% potential upside). WHA is a dominant player in the built-to-suit warehouse market in

Thailand. We think the company is in a good position to take advantage of secular growth in

demand and is a good proxy for Thailand’s logistics growth potential; it trades at a very

attractive P/E multiple of 9.9x FY16E with an earnings CAGR of 17% in FY15-FY18E.

A deleveraging story set to booA deleveraging story set to booA deleveraging story set to booA deleveraging story set to boost st st st the the the the share priceshare priceshare priceshare price We expect WHA’s debt to decrease by Bt10.0bn in 2HFY15 and Bt7.7bn in FY16 with the

majority of funds for repayment coming from asset sales to its REITs. We estimate the D/E

ratio will fall from 3.54x at the end of 2QFY15 to 2.23x in 4QFY15 and 1.46x in 4QFY16.

Organic growthOrganic growthOrganic growthOrganic growth to to to to resume in 2017resume in 2017resume in 2017resume in 2017 Post its deleveraging exercise, we expect the group to increase its capex spending from

Bt5.9bn in FY15E and Bt6.2bn in FY16E to Bt9.0-9.5bn in FY17-19E. WHA’s asset sales to

its REITs are expected to resume growth at 7% CAGR during FY17-FY19E. Post-

deleveraging, we forecast earnings CAGR of 11% in FY17-FY19E on the back of 9% revenue

CAGR during the same period.

Valuation: PO of Bt5.6 implies P/E target of 14.9xValuation: PO of Bt5.6 implies P/E target of 14.9xValuation: PO of Bt5.6 implies P/E target of 14.9xValuation: PO of Bt5.6 implies P/E target of 14.9x WHA is trading at 9.9x FY16E P/E, which is lower than 1SD below the mean. The low P/E

multiple is largely due to the debt financing of the Hemraj deal. We expect the P/E multiple

to re-rate to a blended P/E of 14.9x on the back of its deleveraging exercise as well as an

improved organic growth profile post-deleveraging, with earnings CAGR of 17% during

FY15-FY18E. Key risks to our Buy rating are a delay in asset sales to its REITs and a rights

issue to finance interest expenses.

Estimates (Dec)

(Bt) 2013A 2014A 2015E 2016E 2017E

Net Income (Adjusted - mn) 1,463 979 4,248 5,362 5,993

EPS 0.152 0.102 0.297 0.375 0.419

EPS Change (YoY) 439.9% -33.1% 192.3% 26.2% 11.8%

Dividend / Share 0.080 0 0 0 0.182

Free Cash Flow / Share 0.261 0.040 0.498 0.465 0.517

Valuation (Dec)

2013A 2014A 2015E 2016E 2017E

P/E 24.37x 36.44x 12.47x 9.88x 8.84x

Dividend Yield 2.16% 0% 0% 0% 4.93%

EV / EBITDA* 46.37x 55.99x 14.03x 12.11x 11.42x

Free Cash Flow Yield* 5.17% 0.797% 14.66% 13.67% 15.22%

* For full definitions of iQiQiQiQmethod SM measures, see page 23.

Natchutha Na Pattaloong Natchutha Na Pattaloong Natchutha Na Pattaloong Natchutha Na Pattaloong Research Analyst Phatra Securities +66 2 305 9216 natchutha@phatrasecurities.com

Stock DataStock DataStock DataStock Data

Price 3.70 THB

Price Objective 5.60 THB

Date Established 22-Jul-2015

Investment Opinion B-1-9

52-Week Range 2.62 THB-4.34 THB

Mrkt Val / Shares Out (mn) 1,412 USD / 13,144.0

Market Value (mn) 48,633 THB

Average Daily Value (mn) 3.70 USD

Free Float 51.9%

BofAML Ticker / Exchange XWMJF / SET

Bloomberg / Reuters WHA TB / WHA.BK

ROE (2015E) 37.6%

Net Dbt to Eqty (Dec-2014A) 185.6%

WHA | 22 July 2015 2222

iQiQiQiQprofile SM

WHA

Company SectorCompany SectorCompany SectorCompany Sector

Real Estate/Property

Company DescriptionCompany DescriptionCompany DescriptionCompany Description

WHA is the leading built-to-suit warehouse,

distribution center, factory and office building

developer in Thailand. In April 2015, the company

acquired 92.88% of Hemraj with the total transaction

size of Bt40.8bn. WHA now has six main businesses-

rental and service, investment and property

management, land sales, utility, power and solar PV

rooftop.

Investment RationaleInvestment RationaleInvestment RationaleInvestment Rationale

As the market leader in the built-to-suit warehouse in

Thailand, WHA is poised to benefit from a structural

growth in modern warehouse. We view the Hemraj

deal as a positive and value-accretive for WHA and

believe its deleveraging story and an improved

organic growth profile post-deleveraging will boost

the stock price. The stock trades on very attractive

FY16E P/E of 9.9x with earnings CAGR of 17% during

FY15-FY18E.

Chart 1: Revenue breakdown-FY15

Source: Phatra Securities estimates

Stock DataStock DataStock DataStock Data

Price to Book Value 2.7x

Key Income Statement Data (Dec) 2013A 2014A 2015E 2016E 2017E

(Bt Millions)

Sales 7,085 4,888 18,315 17,346 18,514

Gross Profit 1,945 1,619 8,772 7,972 8,430

Sell General & Admin Expense (132) (283) (1,163) (1,347) (1,449)

Operating Profit 1,896 1,505 8,240 7,155 7,569

Net Interest & Other Income (183) (295) (2,513) (2,113) (1,921)

Associates (1) (8) 1,400 1,450 1,580

Pretax Income 1,712 1,203 7,128 6,492 7,228

Tax (expense) / Benefit (249) (224) (859) (756) (847)

Net Income (Adjusted) 1,463 979 4,248 5,362 5,993

Average Fully Diluted Shares Outstanding 9,639 9,639 14,312 14,312 14,312

Key Cash Flow Statement Data

Net Income 1,463 979 5,815 5,362 5,993

Depreciation & Amortization 137 179 724 633 687

Change in Working Capital 942 (734) 1,661 341 305

Deferred Taxation Charge NA NA NA NA NA

Other Adjustments, Net 0 0 (661) 748 777

Cash Flow from Operations 2,543 424 7,540 7,084 7,761

Capital Expenditure (26) (36) (410) (434) (360)

(Acquisition) / Disposal of Investments (3,870) (4,194) 6,277 1,070 (1,050)

Other Cash Inflow / (Outflow) 2 1 0 0 0

Cash Flow from Investing (3,894) (4,230) 5,868 636 (1,410)

Shares Issue / (Repurchase) 408 46 0 0 0

Cost of Dividends Paid (96) (652) 0 0 (2,397)

Cash Flow from Financing 798 3,860 (9,978) (7,674) (6,103)

Free Cash Flow 2,517 388 7,130 6,650 7,401

Net Debt 4,214 8,315 40,795 33,075 29,121

Change in Net Debt 1,447 4,458 (3,145) (7,720) (3,954)

Key Balance Sheet Data

Property, Plant & Equipment 43 67 2,028 2,291 2,466

Other Non-Current Assets 7,674 10,203 49,744 48,468 49,286

Trade Receivables 48 104 549 520 555

Cash & Equivalents 983 2,186 7,523 7,568 7,816

Other Current Assets 2,300 3,392 17,232 16,825 16,747

Total Assets 11,049 15,952 77,077 75,673 76,870

Long-Term Debt 4,197 8,366 45,322 39,008 35,982

Other Non-Current Liabilities 168 174 1,327 1,459 1,605

Short-Term Debt 1,000 2,134 2,996 1,635 955

Other Current Liabilities 1,530 797 5,741 5,770 6,155

Total Liabilities 6,895 11,472 55,385 47,872 44,697

Total Equity 4,154 4,480 21,691 27,801 32,173

Total Equity & Liabilities 11,049 15,952 77,077 75,673 76,870

iQmethod SM - Bus Performance*

Return On Capital Employed 19.0% 9.9% 12.2% 9.0% 9.5%

Return On Equity 41.6% 22.7% 37.6% 25.5% 23.2%

Operating Margin 26.8% 30.8% 45.0% 41.3% 40.9%

EBITDA Margin 28.7% 34.5% 36.7% 44.9% 44.6%

iQmethod SM - Quality of Earnings*

Cash Realization Ratio 1.7x 0.4x 1.8x 1.3x 1.3x

Asset Replacement Ratio 0.2x 0.2x 0.6x 0.7x 0.5x

Tax Rate (Reported) 14.5% 18.6% 12.1% 11.6% 11.7%

Net Debt-to-Equity Ratio 101.4% 185.6% 188.1% 119.0% 90.5%

Interest Cover 10.4x 5.1x 2.4x 3.4x 3.9x

Key Metrics

* For full definitions of iQiQiQiQmethod SM measures, see page 23.

Land sales

revenue, 18%

Rental, 4%

Service income, 16%

Asset sales to its REITs, 62%

iQprofile is a proprietary set of measures definitions of Merrill Lynch, which Phatra is permitted to use in this report pursuant to a Research Co-Operation Agreement with Merrill Lynch.

WHA | 22 July 2015 3333

Scenario Analysis Scenario Analysis Scenario Analysis Scenario Analysis –––– Skewed to the upsideSkewed to the upsideSkewed to the upsideSkewed to the upside We present a sensitivity analysis of five key drivers for WHA to determine the risk to our

FY15E EBITDA. Our scenario analysis highlights that the overall risks for WHA are skewed to

the upside.

Chart 2: FY15E EBITDA sensitivity on key assumptions

Source: BofA Merrill Lynch Global Research estimates

Our FY15E EBITDA is most sensitive to the following drivers:

Hemraj land transfer revenue Hemraj land transfer revenue Hemraj land transfer revenue Hemraj land transfer revenue

We believe the biggest source of potential downside to our EBITDA forecast is Hemraj land

transfer revenue. The backlog as of 1QFY15 of Bt1.1bn represents 33% of FY15E land

transfer revenue. With 1Q land sales running at 186 rai (1rai=1,600 sq m), there could be

downside risk to our land sales target of 1,000 rai, which would be determined by its land

sales momentum during 2Q-4QFY15. The company expects land sales momentum to

accelerate in 2HFY15 and guided for a shorter land transfer period going forward from one

year to less than six months. On the upside, our land transfer revenue forecast of Bt3.3bn is

well below management guidance of Bt4.5bn.

Hemraj asset sales Hemraj asset sales Hemraj asset sales Hemraj asset sales to its REITto its REITto its REITto its REIT

The determinants of value of asset sales to its REIT are i) total area (expected at 260,000 sq

m); ii) rental rates of the space to be selected; and iii) the cap rates. Therefore, the potential

upside/downside risk is +10%/-20% to our base case assumption of Bt6.5bn.

Cost of Hemraj asset salesCost of Hemraj asset salesCost of Hemraj asset salesCost of Hemraj asset sales

We forecast gross margins of 60% for Hemraj asset sales. While this is in line with

management guidance we believe the cost of asset sales could deviate by +/-15% based on

historical land development costs.

WHA asset sales WHA asset sales WHA asset sales WHA asset sales to WHAPF/WHARTto WHAPF/WHARTto WHAPF/WHARTto WHAPF/WHART

The determinants of value of asset sales to WHAPF/WHART are i) total area (expected at

187,000 sq m); ii) rental rates of the selected space; and iii) the cap rates. We do not expect

to see any change in the total space area which will be divested and in rental rates given

that these have already been pre-determined. The only downside risk could come from the

cap rates given the volatility of global markets. However, WHA noted that the volatility of cap

rates is low, as evidenced from past performance. We estimate the cap rates could swing by

+/- 110bps.

Cost of WHA’s asset salesCost of WHA’s asset salesCost of WHA’s asset salesCost of WHA’s asset sales

We forecast gross margins of 30% for WHA’s asset sales, per management guidance. A

large part of the cost is land and development cost, which has been booked. Therefore, we

see only a small upside/downside risk arising from this cost item.

-20% -10% 0% 10% 20%

Hemraj land transfer rev

Hemraj asset sales

Cost- Hemraj asset sales

WHA asset sales

Cost-WHA asset sales

Negative Scenario Positive Scenario

-25% 35%

-20% 10%

15% -15%

5% -5%

Key Driver Scenarios

-ve Scenario +ve Scenario

-20% 20%

FY15E EBITDA Scenario

WHA | 22 July 2015 4444

Executive summaryExecutive summaryExecutive summaryExecutive summary A structural growth story with an appealing business modelA structural growth story with an appealing business modelA structural growth story with an appealing business modelA structural growth story with an appealing business model

WHA is the market leader in built-to-suit warehouses in Thailand with a 60% share of this

segment of the market. The company is poised to benefit from structural growth with third-

party logistics, FMCG and pharmaceuticals being the key drivers. The penetration rate of

modern warehouses in Thailand is still low at 20-30%, which means there is plenty of room

for growth.

Hemraj Hemraj Hemraj Hemraj strengthensstrengthensstrengthensstrengthens WHAWHAWHAWHA

We view the Hemraj deal as a lift for WHA’s earnings outlook. Post-acquisition, we expect

WHA’s EBITDA to rise from Bt1.7bn in FY14 to Bt6.7bn in FY15E and Bt7.8bn in FY16E.

Hemraj will be the key driver of the group’s growth with its own EBITDA rising significantly

in the next two years (from Bt2.8bn in FY14 to Bt5.5bn in FY16E) as the company steps up

its asset sales to its REIT.

Deleveraging is necessary and beneficialDeleveraging is necessary and beneficialDeleveraging is necessary and beneficialDeleveraging is necessary and beneficial

We believe current debt to equity is too high and view WHA’s intention to deleverage as

beneficial to the company on a number of fronts. We expect upside in the equity valuation to

emerge from the deleveraging exercise. We forecast the proportion of equity in the

enterprise value (EV) to rise from 45% at the end of 2QFY15E to 50% in 4QFY15E and 54%

in 4QFY16E. We forecast total debt to decrease by Bt10.0bn in 2HFY15 and Bt7.7bn in

2016. Funds for repayment will mostly come from asset sales of Hemraj and WHA to the

REITs. Subsequently, the D/E ratio should fall from 3.54x at the end of 2QFY15E to 2.23x in

4QFY15 and 1.46x in 4QFY16.

Chart 3: D/E to fall significantly in the next two years

Source :Phatra Securities estimates

Chart 4: Deleveraging upside

Source: Phatra Securities estimates

Organic growth will resume Organic growth will resume Organic growth will resume Organic growth will resume inininin 2017201720172017

Following its deleveraging exercise, we expect WHA to increase its capex spending from

Bt5.9bn in FY15E and Bt6.2bn in FY16E to Bt9.0-9.5bn in FY17-19E. WHA’s asset sales to

its REITs are expected to resume growth at 7% CAGR during FY17-FY19E. We believe our

asset sales growth assumption is justified given the high anticipated growth rate of 44%

from FY14-FY16E which would be achieved from a low base. Post-deleveraging, we forecast

earnings CAGR of 11% in FY17-FY19E on the back of 9% revenue CAGR during the same

period.

2.34

3.54

2.23

1.46

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

FY14 2QFY15 4QFY15E 4QFY16E

73%

45% 50% 54%

27%

55% 50% 46%

30%

40%

50%

60%

70%

80%

90%

100%

FY14 2QFY15 4QFY15E 4QFY16E

Equity to EV Debt to EV

WHA | 22 July 2015 5555

Attractive valuationAttractive valuationAttractive valuationAttractive valuation

The stock currently trades at a reasonable FY16E P/E of 9.9x. Our FY16E price objective of

Bt5.6 (+51% potential upside) is derived from a blended P/E of 14.9x. Currently, our earnings

are 72% higher than consensus estimates for FY15E and 85% for FY16E. Over the next 1-3

months, we expect consensus earnings to be revised upward to take into account

contributions from Hemraj.

SurgeSurgeSurgeSurge in border trade will in border trade will in border trade will in border trade will drivedrivedrivedrive mediummediummediummedium----term growth term growth term growth term growth

Up until now, modern logistics has primarily served the domestic market. However, we

expect border trade to play a bigger role in the future as it is projected that growth in border

trade will rise significantly over the next five years. This, in large part, is due to the

government’s infrastructure projects and the launch of Special Economic Zones. We

estimate border trade to increase by 7-10% in the next three years which should act as a

medium-term growth driver of warehouse demand.

WHA | 22 July 2015 6666

ValuationValuationValuationValuation Currently WHA is trading at 9.9x FY16E P/E, which is lower than 1SD below the mean. This is

lower than its EV/EBITDA multiple which is trading below an average of 22.9x. The low P/E

multiple is largely due to the debt financing of the Hemraj deal, which in itself is value-

accretive (WHA's EPS is expected to increase from Bt0.10 in FY14 to Bt0.30 in FY15E and

Bt0.37 in FY16E). We expect the P/E multiple to re-rate to a blended P/E of 14.9x on the

back of its deleveraging exercise, as well as an improved organic growth profile with

earnings CAGR of 17% during FY15-FY18E.

Chart 5: WHA EV/EBITDA Band

Source: Phatra Securities estimates

Chart 6: WHA P/E Band

Source: Phatra Securities estimates

Hemraj is trading at 12.4x forward P/E, above its 10-year historical average

but below +1SD. The share price outperformed the SET Index in 2014 by 34%,

principally because its high proportion of recurring income had cushioned the

impact of last year’s economic slowdown.

Chart 7: HEMRAJ P/E Band

Source: Phatra Securities estimates

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Average = 22.9

+1 STDEV = 30.6

-1 STDEV = 15.2

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Dec-12

May-13

Sep-13

Jan-14

May-14

Sep-14

Feb-15

Jun-15

Average = 18.18

-1 Stdev = 10.93

+1 Stdev = 25.44

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Dec-05

Sep-06

Jun-07

Mar-08

Nov-08

Aug-09

May-10

Jan-11

Oct-11

Jul-12

Apr-13

Dec-13

Sep-14

Jun-15

Average = 10.93

-1 Stdev = 6.05

+1 Stdev = 15.81

WHA | 22 July 2015 7777

A A A A P/E target of 14.9xP/E target of 14.9xP/E target of 14.9xP/E target of 14.9x

We value the stock using a target P/E of 14.9x, which is equivalent to a PEG ratio of 0.88. We

believe a target P/E of 14.9x is justified given our earnings growth projection post-

deleveraging of 17% during FY15-FY18E. We arrived at a price objective of Bt5.6, which

offers 51% potential upside to the current share price.

FY16E PO of Bt5.6 gives 51% implied upside from the current price.

Table 1: Valuation

FY16E EPS 0.37

Target P/E 14.9

PPPPOOOO 5.65.65.65.6

Current share price 3.70

Upside 51%

Source: Phatra Securities estimates

Deleveraging upsideDeleveraging upsideDeleveraging upsideDeleveraging upside We expect a re-rating of WHA on the back of its deleveraging exercise. We forecast the

proportion of equity in the enterprise value (EV) to rise from 45% at the end of 2QFY15E to

50% in 4QFY15E and 54% in 4QFY16E. The company aims to reduce acquisition debt by

Bt12bn in 2015 and targets acquisition debt to decline by 80% within the next two years.

We forecast total debt to decrease by Bt10.0bn in 2HFY15 and Bt7.7bn in 2016.

Sources of cash flow will mostly come from asset sales of Hemraj and WHA (see Table 2).

We estimate the D/E ratio to fall from 3.54x at the end of 2QFY15E to 2.23x in 4QFY15 and

1.46x in 4QFY16.

Table 2: Source of repayment

Amount (Bt mn) Entity Net proceeds (Bt mn) Expected date

1. Net proceeds of Hemraj Non-core asset (completed) 3,003 HEMRAJ 2,789 Jul-15

2. Dividend from Hemraj's normal operations (2H14-1Q15) 1,296 HEMRAJ 1,204 Jul-15

3. Net proceeds of WHA office buildings 1,800 WHA 1,800 Sep-15

4. Net proceeds of Hemraj RBF & RBW #1 7,000 HEMRAJ 6,500 Nov-15

5. Dividend from Hemraj's normal operations (2Q15) TBD HEMRAJ TBD Nov-15

6. Dividend from Hemraj's normal operations (3Q-4Q15) TBD HEMRAJ TBD May-16

4. Net proceeds of Hemraj RBF & RBW #2 4,000 HEMRAJ 3,715 Nov-16

5. Net proceeds of WHA’s WH #1 4,000 WHA 4,000 Dec-15

6. Net proceeds of WHA’s WH #2 4,000 WHA 4,000 Dec-16

7. Listing of Hemraj’s utilities & power or finding strategic partners TBD HEMRAJ TBD 2016 – 2017

Total 25,099 24,008

Source: Company, Phatra Securities estimates

Sufficient interest coverageSufficient interest coverageSufficient interest coverageSufficient interest coverage

Total EBITDA is expected to rise from Bt1.7bn in FY14 to Bt6.7bn in FY15E and Bt7.8bn in

FY16E. The interest coverage ratio of 2-4x over the next three years suggests that the

company will be able to meet its interest expenses with ease.

WHA | 22 July 2015 8888

A potential A potential A potential A potential refinancing in 1QFY16refinancing in 1QFY16refinancing in 1QFY16refinancing in 1QFY16

Notwithstanding the possibility of a fourth-quarter US Fed tightening, we expect another

rate cut from the Bank of Thailand in 2015 as export recovery remains elusive while risk of

inflation stays low. With rates in Thailand expected to remain low for a long period, we

envisage WHA will make the most of the opportunity through debt refinancing. The company

is currently in talks with its creditors to refinance some of its existing bonds and we expect

it to refinance more debts in 1QFY16.

Consensus has not factored in acquisition growth Consensus has not factored in acquisition growth Consensus has not factored in acquisition growth Consensus has not factored in acquisition growth

During the past three months, FY15 consensus earnings increased from Bt1.8bn to Bt2.5bn.

The fact that consensus still forecasts revenue of Bt10bn for FY15 vs company guidance of

Bt19bn suggests that earnings contribution from Hemraj has not been fully factored in by

analysts. Our earnings forecasts are 72% higher than consensus for FY15E and 85% for

FY16E.

Chart 8: BoAML earnings forecast vs the street

Source: Bloomberg, Phatra Securities estimates

Chart 9: Consensus profit gradually revised upward

Source: Bloomberg

Chart 10: Consensus sales forecast

Source: Bloomberg

-

1,000

2,000

3,000

4,000

5,000

6,000

2015E 2016EConsensus Phatra

1,000

1,500

2,000

2,500

3,000

Jul-

14

Au

g-1

4

Se

p-1

4

Oct

-14

No

v-1

4

De

c-1

4

Jan

-15

Fe

b-1

5

Ma

r-1

5

Ap

r-1

5

Ma

y-1

5

Jun

-15

2015E 2016E

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

Jul-

14

Au

g-1

4

Se

p-1

4

Oct

-14

No

v-1

4

De

c-1

4

Jan

-15

Fe

b-1

5

Ma

r-1

5

Ap

r-1

5

Ma

y-1

5

Jun

-15

2015E 2016E

WHA | 22 July 2015 9999

Table 3: Peer comparison

Ticker PER (x) EPS Growth (%) PBV (x) ROE (%) EV/EBITDA (x)

NameNameNameName (Bloomberg)(Bloomberg)(Bloomberg)(Bloomberg) Market capMarket capMarket capMarket cap PricePricePricePrice 2014201420142014 2015E2015E2015E2015E 2016E2016E2016E2016E 2014201420142014 2015E2015E2015E2015E 2016E2016E2016E2016E 2014201420142014 2015E2015E2015E2015E 2016E2016E2016E2016E 2014201420142014 2015E2015E2015E2015E 2016E2016E2016E2016E 2014201420142014 2015E2015E2015E2015E 2016E2016E2016E2016E

Hemaraj HEMRAJ TB 45,226 4.66 10.36 15.28 13.31 88% -32% 15% 2.95 2.70 2.43 22.9% 19.0% 18.8% 16.25 18.13 16.34

Amata Corp AMATA TB 15,898 14.90 10.49 12.19 10.61 5% -14% 15% 1.61 1.40 1.26 15.1% 12.7% 12.7% 9.53 9.97 8.48

Rojana Indus Park ROJNA TB 14,164 7.20 17.56 12.20 14.55 -58% 44% -16% 1.21 1.16 1.08 11.5% 6.8% 7.9% 12.98 9.92 9.69

Ticon TICON TB 15,278 13.90 9.08 17.42 15.62 -4% -48% 12% 1.27 1.28 1.26 11.6% 9.1% 8.6% 12.79 18.48 17.27

WHA Corp WHA TB 50,473 3.96 39.00 13.36 10.58 -33% 192% 26% 8.52 2.61 2.04 21.3% 32.4% 21.7% 57.87 14.50 12.51

Thailand AverageThailand AverageThailand AverageThailand Average 17.3017.3017.3017.30 14.0914.0914.0914.09 12.9312.9312.9312.93 0%0%0%0% 28%28%28%28% 10%10%10%10% 3.113.113.113.11 1.831.831.831.83 1.611.611.611.61 16.5%16.5%16.5%16.5% 16.0%16.0%16.0%16.0% 13.9%13.9%13.9%13.9% 21.8821.8821.8821.88 14.2014.2014.2014.20 12.8612.8612.8612.86

Goodman Group GMG AU 11,307 6.45 67.19 16.41 16.17 -64% 309% 2% 2.01 1.82 1.73 10.7% 10.6% 10.9% 20.46 19.63 18.11

Sinotrans 598 HK 22,572 4.90 24.50 14.54 13.17 33% 69% 10% 1.91 1.55 1.43 10.0% 10.7% 11.1% 8.10 8.38 7.73

Kerry Logistics 636 HK 19,683 11.62 8.30 15.72 14.40 n.a. -47% 9% 1.43 1.23 1.15 7.4% 7.5% 7.6% 10.84 10.08 8.98

China South City 1668 HK 18,882 2.36 5.17 5.21 5.27 32% -1% -1% 0.90 0.75 0.73 14.3% 12.4% 10.7% 5.24 5.95 7.36

Global Logistic GLP SP 12,111 2.50 17.87 20.00 21.55 21% -11% -7% 1.42 1.35 1.33 3.0% 4.0% 4.2% 35.82 28.66 25.69

Mapletree Logistics MLT SP 2,823 1.14 13.65 14.43 14.25 n.a. -5% 1% 1.24 1.10 1.05 7.9% 8.1% 7.4% 18.87 18.03 17.79

Regional AverageRegional AverageRegional AverageRegional Average 22.7822.7822.7822.78 14.3914.3914.3914.39 14.1314.1314.1314.13 6%6%6%6% 52%52%52%52% 2%2%2%2% 1.481.481.481.48 1.301.301.301.30 1.241.241.241.24 8.9%8.9%8.9%8.9% 8.9%8.9%8.9%8.9% 8.6%8.6%8.6%8.6% 16.5516.5516.5516.55 15.1215.1215.1215.12 14.2814.2814.2814.28

AverageAverageAverageAverage 20.0420.0420.0420.04 14.2414.2414.2414.24 13.5313.5313.5313.53 3%3%3%3% 40%40%40%40% 6%6%6%6% 2.302.302.302.30 1.561.561.561.56 1.431.431.431.43 12.7%12.7%12.7%12.7% 12.5%12.5%12.5%12.5% 11.3%11.3%11.3%11.3% 16.2716.2716.2716.27 14.6514.6514.6514.65 13.4613.4613.4613.46

Source: Bloomberg, Phatra Securities estimates

AssumptionsAssumptionsAssumptionsAssumptions WHAWHAWHAWHA

• Rental income is estimated to grow by 20% in FY15E and FY16E. The key growth

drivers will be a combination of pricing and new space. We expect WHA to add 200,000

sq m new lease (YTD is 70,000 s qm) in FY15E and FY16E.

• Gross margin of the rental business is expected to increase from 60% in FY14 to 65%

in FY15E on the back of improved mix (higher proportion of high-value contracts). In

FY15, the company will record full-year recognition of new contracts (with higher

pricing) which were awarded towards the end of FY14 of c.100,000 sq m.

• We expect WHA to inject Bt4.8bn of assets into WHART in 2015 and another Bt5.0bn in

2016. We estimate total area of 187,000 sq m to be monetized in 2015 and 195,000 sq

m in 2016. Post-deleveraging we expect organic growth to resume and forecast asset

sales to increase by 12% from FY16-FY19E. We expect margins on asset sales to be

maintained at 30% in FY15-FY19E.

HemrajHemrajHemrajHemraj

• We forecast land sales to increase from 665 rai in FY14 to 1,000 rai in FY15. 1Q land

sales totaled 186 rai (1rai=1,600 sq m).

• Our forecasts assume land transfer revenue of Bt3.3bn, a decrease of 3% YoY. The

current backlog as of 1QFY15 is Bt1.1bn.The company expects land transfer to

accelerate in 2H15. Hemraj guided for a shorter land transfer period going forward from

one year to less than six months after land sales have been booked.

• Blended gross margin is expected to drop slightly from 49% in FY14 to 47% in FY15E

on the back of a drop in land margin. The land margin is expected to have peaked at

56.5% in 1QFY15 as the company was able to profit from low land cost.

• We forecast equity income (mainly from Gheco-One) of Bt1.4bn in FY15E and Bt1.45bn

in FY16E. The profit guidance from Gheco-One was recently revised upward from

Bt1.2bn to Bt1.3bn.

• In 2QFY15, Hemraj sold its non-core assets (Koh Lan and UM Tower) to the

Horungrueng Family for Bt3.0bn.

• We expect Hemraj to divest another Bt6.5bn of assets into the REIT in November 2015

and another Bt4.0bn in November 2016. This is equivalent to total space area of

260,000 sq m in 2015 and 160,000 in 2016. We forecast Hemraj’s asset sales to

normalize at Bt4bn during FY17-FY19E. We assume a gross margin of 60% for asset

sales in FY15-FY19E.

WHA | 22 July 2015 11110000

Balance sheet/ cash flow Balance sheet/ cash flow Balance sheet/ cash flow Balance sheet/ cash flow

• We expect interest expense to peak in FY15E at Bt2.5bn before decreasing to Bt2.1bn

in FY16E. We assume average interest cost of 5.2%, which is the same as the level at

1QFY15E.

• The group’s capex is estimated at Bt5.9bn in FY15E, of which Bt3.0bn will be used in

WHA’s operations and the remaining Bt2.9bn will be used to expand Hemraj’s

operations. Management set capex guidance for the group at Bt6bn per year for the

next two years. Post-deleveraging, we forecast capex to increase to Bt9.0-9.5bn in

FY17-19E.

• Dividend: WHA noted that there will be no cash dividend in 2015. However, the company

may issue a stock dividend in 2016. We expect the company to start paying dividend

again in 2017 with a dividend payout ratio of 40%.

Key risksKey risksKey risksKey risks

1. Equity issuance to fund interest expense. We believe this is unlikely given Hemraj is

generating a high enough profit (normalized net profit of Bt2.5bn in FY15E) to cover

interest expense on acquisition loans of Bt1.2bn.

2. Relocation of tenants if Thailand’s competitiveness worsens. But most of WHA’s

contracts are long-term (45% are contracts with a duration of more than nine years and

25% are between 5-8 years). The fact that 70% of its tenants are FMCG and healthcare

which mainly cater to the domestic market should also cap the downside risk of

relocation.

3. A slowdown in the regional economy will have a negative impact on the demand for

warehouses.

4. Lack of meaningful land sales recovery for Hemraj.

5. WHA’s overseas business demands high capex to sustain its operations, thus creating a

financial burden for the group.

CatalystsCatalystsCatalystsCatalysts

• Improving earnings momentum – we believe WHA earnings have bottomed in 1QFY15

(the company reported net loss of Bt4.5mn in 1QFY15). Based on the impact of

purchase price allocation on the balance sheet, WHA expects to realize 75% of Hemraj’s

profits in FY15E, the majority of which will be booked in 4QFY15.

• Improving balance sheet – the company targets a reduction in its D/E which is expected

to peak in 2QFY15E at 3.54x. We forecast the D/E ratio to fall to 2.23x at the end of

2015.

• A potential for refinancing – given an improved financial position, the company believes

it will be in a good position to refinance some of its bonds at the beginning of 2016.

• New contracts: WHA is close to finalizing a deal with the Central Group, which has

demand for 120,000-150,000 sq m of space.

WHA | 22 July 2015 11111111

Modern warehouse penetration: an ongoing structural growth storyModern warehouse penetration: an ongoing structural growth storyModern warehouse penetration: an ongoing structural growth storyModern warehouse penetration: an ongoing structural growth story

In the past three years, WHA saw its profit increase from Bt405mn in 2011 to Bt979mn in

2014, equivalent to a three-year CAGR of 34%. It was the replacement of old logistics

platforms with built-to-suit warehouse, the increase in third-party logistics (3PL), and the

expansion of FMCG and healthcare which fueled the growth in profit. The relatively low

capex requirements (yield on cost of 10-11%) also contributed to this growth.

Chart 11: Impressive track record (unit: sq m)

Source: Company

Chart 12: Pre-leased area (sq m)

Source: Company, Phatra Securities estimates

Modern Modern Modern Modern warehouse accounts for 20warehouse accounts for 20warehouse accounts for 20warehouse accounts for 20----30% of the market30% of the market30% of the market30% of the market

The logistics market in Thailand is divided into three segments: professional property

developers, modern trade retailers and old-style logistics. The old-style logistics are smaller

in size (100-300 sq m) and are mostly owned by occupiers. The modern logistics market, on

the other hand, consists of leased space with 3PL operators, FMCG and pharmaceuticals

being the major customers. The leased sizes are larger ranging from 3,000-70,000 sq m. The

modern (built-to-suit) warehouse market in Thailand is dominated by two companies – WHA

and Ticon, with 60% and 40% share, respectively.

152,532 258,330 256,434 294,261 255,462

63,159 101,531 207,043

233,030

39,809

39,809

147,086

389,982

557,089

782,320

88,913 141,619 141,619 169,433 192,341

298,139

505,051

891,286

1,108,740

1,909,291

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Land held for future development

Area sold to WHAPF/WHART

Area pre-leased

Area available for lease

Area completed

0

50,000

100,000

150,000

200,000

250,000

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

2017F

Pre-leased area

WHA | 22 July 2015 11112222

Total supply of warehouse reached 10mn sq m in 2014, of which modern warehouse

accounts for 20-30% of the market. The low penetration rate signifies good prospects for

growth given in mature markets like the US and Europe, modern warehouse accounts for

nearly all of total warehouse space. In terms of warehouse stock (total area per sq m) per

capita, it is very low at 0.15 vs 5.4 in the US.

In spite of a negative outlook In spite of a negative outlook In spite of a negative outlook In spite of a negative outlook ffffoooorrrr the economy in 2015, WHA is on track to meet the economy in 2015, WHA is on track to meet the economy in 2015, WHA is on track to meet the economy in 2015, WHA is on track to meet

its preits preits preits pre----leased target leased target leased target leased target

WHA noted that more than 50% of new demand this year will come from existing tenants,

which is to be expected given that the industry usually consolidates when the economy is

weak. And since 70% of WHA’s tenants are non-manufacturing and are in sunrise industries

such as 3PL (third-party logistics), FMCG and healthcare where the secular trend is intact, it

is confident of meeting its pre-leased target.

DeDeDeDemand driver #1: Thirdmand driver #1: Thirdmand driver #1: Thirdmand driver #1: Third----party logisticsparty logisticsparty logisticsparty logistics

During 2006-2010, the number of logistics service providers in Thailand rose from 13,234 to

16,273. The key end-users of 3PL are FMCG, pharmaceutical and auto with FMCG and

pharmaceutical accounting for 70% of total leased space.

Driven by potential cost reduction from 3PLDriven by potential cost reduction from 3PLDriven by potential cost reduction from 3PLDriven by potential cost reduction from 3PL

In the past, Thai companies preferred to buy the land, as they believed land value and the

cost of leasing would rise significantly over time. However, companies are shifting from

owning warehouses to leasing amid continued efforts to improve supply chain efficiency.

According to WHA, outsourcing would result in cost savings of 20-30%.

Demand driver #2: Modern trade retailers & Department storesDemand driver #2: Modern trade retailers & Department storesDemand driver #2: Modern trade retailers & Department storesDemand driver #2: Modern trade retailers & Department stores

During the past decade we saw the expansion of modern trade retailers in Thailand driven by

urbanization and the rise of farm income. The number of stores has increased from 6,559 to

8,483 between 2011-2014. We expect to see a slower pace of store expansion over the next

three years (from 9.0% to 7.7% CAGR) due to a slide in consumer spending brought on by

falling agricultural prices and high household debt (expected to reach 90% by the end of

2016). Although we envisage a slowdown in the store expansion plans in the short term, we

still expect ongoing modern retailing penetration would continue to drive growth in the

medium term. The penetration of modern retailing (grocery) in Thailand remains under 45%

vs around 80% in North America and Western Europe.

Chart 13: Modern trade retailers store expansion plans

Source: Phatra Securities estimates

-

2,000

4,000

6,000

8,000

10,000

12,000

2011 2012 2013 2014 2015E 2016E 2017E

WHA | 22 July 2015 11113333

Additionally, it is expected that the Central Group will soon become a

customer of WHA, taking up 120,000-150,000 sq m of space.

Chart 14: CPN’s retail space is expected to increase by 8% during FY14-FY16E.

Source: Phatra Securities estimates

New sources of demand will come from the surge in border trade.New sources of demand will come from the surge in border trade.New sources of demand will come from the surge in border trade.New sources of demand will come from the surge in border trade.

Thailand and Myanmar are aiming to double the value of their two-way border trade to

Bt120bn. Trade is expected to grow because Myanmar wants to import more food, beverage

and clothing from Thailand. And according to the Thai Commerce Minister, border trade

between the two countries accounts for up to 80% of all Thai-Myanmar trade. We therefore

expect to see strong growth from border trade in the next few years.

According to the Bank of Thailand, Thai-Laos trade also witnessed a similar trend, increasing

from Bt147.7bn in 2011 to Bt243.3bn in 2014, equivalent to a three-year CAGR of 18%.

Thai-Cambodia also saw a 21% growth during the same period.

Driver of border trade #1: Infrastructure spending has begunDriver of border trade #1: Infrastructure spending has begunDriver of border trade #1: Infrastructure spending has begunDriver of border trade #1: Infrastructure spending has begun

The NCPO has approved a Bt2.4trn infrastructure plan targeting five areas for development

between 2015-2023. The NCPO wants to revamp the provincial rail network, improve public

transport systems to ease traffic congestion in Bangkok, build highways connecting production

bases in Thai rural areas with neighboring countries and improve the efficiency of irrigation and

air transport systems. The aim is to reduce logistics cost per GDP to less than 15% from the

current level of 15-17% and to increase rail transport use to 5% of total transportation.

Efficient infrastructure is an important catalyst for attracting more logistics demand.

Driver of border Driver of border Driver of border Driver of border trade #2: Special Economic Zones to create new logistics hub trade #2: Special Economic Zones to create new logistics hub trade #2: Special Economic Zones to create new logistics hub trade #2: Special Economic Zones to create new logistics hub

The government has established six special economic zones (SEDZ) in the provinces of Tak,

Sa Kaeo, Trat, Mukdahan, Songkla and Nongkai. Top priority will be given to Mae Sot district

in Tak and Aranyaprathet district in Sa Kaeo. The first phase of construction will cover 700-

800 rai in Tak, 654 rai in Sa Kaeo and 1,097 rai and Songkhla. The IEAT believes construction

of the first phase could start in 2017. So far it has already seen interest from the CP group,

Central, Sahapat group, MBK and Amata. The government is expected to cut the land-leasing

rates to attract more private investment.

The thirteen promoted industries are agriculture, fishery, ceramics/textiles/clothes,

furniture/jewelry, medical appliances, automotive, machinery and parts, electrical appliance

and electronics, plastics, pharmaceuticals, logistics, industrial estates and tourism. They are

expected to receive maximum privileges that include corporate income tax exemption for

eight years and 50% tax reduction on net profit from investment over five years. For the

projects which did not receive BoI privilege, their corporate tax would be reduced from 20%

to 10%.

-

5

10

15

20

25

30

35

-

500,000

1,000,000

1,500,000

2,000,000

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

Retail space (sqm) No. of projects

(sq m)

WHA | 22 July 2015 11114444

The Hemraj deal made senseThe Hemraj deal made senseThe Hemraj deal made senseThe Hemraj deal made sense The deal was instigated by Sawasdi Horungrueng, the founder of Hemraj, as he wanted to

retire. On 24 December, WHA and Hemraj’s major shareholders (the Horungrueng family)

signed an agreement to purchase 22.5% of total shares at Bt4.5/sh. WHA made a tender

offer of not less than 50% of total issued shares of Hemraj.

In April 2015, WHA acquired 92.88% of Hemraj through voluntary tender offer at a price of

Bt4.5 per share. The total transaction size of Bt40,829mn was funded by i) capital increase

through rights offering of Bt8,938mn (350.5mn shares at Bt25.5/share) and ii) bank loans

from Siam Commercial Bank of Bt31,892mn.

QQQQuality assets at a fair valueuality assets at a fair valueuality assets at a fair valueuality assets at a fair value

Hemaraj is a market leader in Thai industrial estates with 19% market share in terms of land

sales as of 2014. It ranks first in terms of profitability with RoE of 23% thanks to strong

margins in all of its key businesses. It has three key competitive advantages:

1. Strategic location

One of the key competitive advantages that Hemaraj possesses is its prime location. Being

close to Map Ta Phut Deep Sea Port in Rayong and Laem Chabang Deep Sea Port in

Chonburi is important for exports and supplies as it means lower transport cost and shorter

delivery time.

2. Automobile industry cluster

The Eastern region is home to Ford, Mazda, Suzuki, General Motors, Auto Alliance, SAIC and

over 215 automotive manufacturers. The automobile industry cluster has become a magnet

for the Eastern region, attracting new research and development centers and other auto-

related industries into the area. With the strong presence of the automotive industry (35%)

in its industrial estates, the company is poised to benefit from the new BoI incentives, which

favours the creation of global supply chains for the automotive industry.

3. A strong diversified portfolio

Hemraj has a good mix of business which includes industrial land, utilities, ready built

factories for rent and warehouse for logistics, quality industrial services and an integrated

logistics and supply chain in its key seven industrial estates.

The offer price was fairThe offer price was fairThe offer price was fairThe offer price was fair

We believe the offer price of Bt4.5/share was fair. WHA paid a small premium to the market

price (Hemraj's three-month average stock price prior to the announcement of deal was

Bt4.47).

An accretive dealAn accretive dealAn accretive dealAn accretive deal

Given the forward P/E ratio of WHA (19.6x) was greater than Hemraj (11.7x) at the time of

acquisition, the group’s combined EPS is forecast to increase to Bt0.30 in FY15E against

WHA’s EPS of Bt0.10 in FY14. Post-acquisition, WHA will see a surge in growth with its

EBITDA rising from Bt1.7bn in FY14 to Bt6.7bn in FY15E and Bt7.8bn in FY16E. Hemraj is a

profitable company and is generating a high enough profit (FY15E normalized net profit of

Bt2.5bn) to cover interest expense on acquisition loans of Bt1.2bn.

A changed business profileA changed business profileA changed business profileA changed business profile

Hemraj has been raising its portion of recurring income for the past seven years. In 2014,

recurring income accounts for 70% of total profit. This is in line with the company’s strategy

to have a more balanced and predictable revenue mix.

WHA | 22 July 2015 11115555

Synergies provide upside potentialSynergies provide upside potentialSynergies provide upside potentialSynergies provide upside potential

1. Expanding customer base through cross-referral of customer base. In 2015, Hemraj is

looking to refer clients to WHA of approximately +150,000 sq m of BTS factory space

and WHA believes it can refer clients to Hemraj, which will generate 80-100 rai

additional land sale.

2. Cost reduction from economies of scale. The company expects total construction cost

of the group will decline by 10% starting in 2016.

3. Increased focus on energy business, particularly renewable energy. WHA targets to add

c.50MW capacity on ready-built factories and warehouses at Hemraj. The combined

capacity for solar roof top is up to 200 MW on the back of 2mn sq m of combined roof

areas. There is room for cost reduction from lower EPC cost by 10-15%.

4. Land bank flexibility: WHA’s five-year plan is to increase net lease by 200,000 sq m per

annum, which will take up approximately 1,000 rai in Hemraj’s industrial estates.

5. WHA believe its new entity will enable it to refinance its debt at lower costs. It targets

to lower financial cost of Hemraj by 0.5%.

WHA | 22 July 2015 11116666

Company descriptionCompany descriptionCompany descriptionCompany description WHA is a leading premium built-to-suit warehouse (BTS), distribution center, factory and

office building developer in Thailand. The group was co-founded by Dr. Somyos (CEO) and

his wife Jareeporn (MD) Anantaprayoon in 2003 and was listed in the Stock Exchange of

Thailand on 8 November 2012. In April 2015, the company acquired 92.88% of Hemraj. WHA

now has six main businesses – rental and service, investment and property management,

land sales, utility, power and solar PV rooftop.

Business overviewBusiness overviewBusiness overviewBusiness overview

1.1.1.1. Rental and service incomeRental and service incomeRental and service incomeRental and service income

i) Warehouse

WHA offers three warehouse products: i) built-to-suit (customized site location, design,); ii)

general warehouse (standard) and iii) warehouse farm which offers a combination of the two

on the same location. Warehouse farm projects are created to accommodate demand for

immediate storage space as well as to serve customers who are either testing the demand

or planning future expansion. WHA was able to increase its customer base from 10 to 45

following the launch of warehouse farms.

Portfolio breakdownPortfolio breakdownPortfolio breakdownPortfolio breakdown

Built-to-suit (BTS) represents 70% of its portfolio, while general warehouse and warehouse

farms account for 30%. The majority of BTS lease agreements are long-term leases of 10

years or over while general warehouse lease agreements are short-term leases of three

years. 45% of the group’s portfolio has lease terms of over nine years.

Chart 15: Contract terms

Source: Company

Table 4: WHA’s portfolio breakdown

BTS General warehouse farm % of total portfolio 70 30

Leasable area (sq m) 10,000-70,000 10,000-16,000 for BTS; 3,000-5,000 for general warehouse

Lease agreements 10 years 3 years

Yield on cost 10-11% 11-13%

Source: Company

The leasable area for BTS is 10,000-70,000 sq m per client, for general warehouse farm the

area is 10,000-16,000 sq m, and for general warehouse the leasable area is

3,000-5,000 sq m.

ii) Hemraj’s portion

Hemraj has 241 ready built factories or 538,179 sq m built to date with cumulative rent of

86 units (192,252sqm) and cumulative sold of 60 units (164,937 sq m). For warehouse its

cumulative rent is 82,435 sqm as of FY14.

45%

25%

21%

9%

Equal to or greater than 9 years 5-8 years 3-4 years Less than 3 years

WHA | 22 July 2015 11117777

iii) Office

In 2014, revenue from this segment totaled Bt7.4mn. WHA expanded into office rental

business by developing a built-to-suit office project in Bangna Trad and acquired an office

building (SJ Infinite I) for the purpose of creating an office farm. The first built-to-suit office

was leased to Hitachi with a 10-year contract with yield on cost of 10%.

2.2.2.2. Property for saProperty for saProperty for saProperty for salelelele

WHAPF/WHARTWHAPF/WHARTWHAPF/WHARTWHAPF/WHART

In 2010, WHA property fund (WHAPF) was established with a total fund size of Bt1,283mn

and a leasable area of 39,809 sq m (two warehouses and one factory). Asset sale is an

important constituent of WHA’s business plan for funding new projects. In 2012, it

monetized three warehouses and one factory to WHAPF with the value of Bt1,827mn

(107,277 sq m). In 2013, there was further monetization of the assets to WHAPF with

Bt2,046.5mm (69,529 sq m) of assets in 1Q and another Bt4,538.5mm of assets (173,367

sq m) in 4Q.

Property funds were scrapped by the SEC in 2014 and replaced by real estate investment

trusts (REIT). In 2014, WHA sold properties with leasable area of 167,107 sq m into REIT and

recognized revenue of Bt4,336.8mn.

The assets which are divested into WHAPF and WHART are considered to be more mature

than leased assets on the balance sheet. The proportion of BTS vs general warehouse in the

funds vs on the balance sheet, however, is similar.

WHA’s stakeWHA’s stakeWHA’s stakeWHA’s stake

WHA has a 15% stake in WHAPF and WHART with the remaining shareholders being mostly

institutional investors. For WHAPF, the gearing ratio is low (less than 5%) and the yield is

7.15%. The gearing of REIT is close to 30% vs the limit of not more than 35%, while the

yield is 7.75%.

In addition to dividend income, the company receives 0.15% management fees and 0.75%

acquisition fees (of total asset sales which are monetized each year).

HPFHPFHPFHPF

Hemraj has a 23% shareholding in Hemaraj Property Fund (HPF) which was launched at the

end of 2013. This has 104 units (150,117 sq m with rent of 76 units or 109,818 sq m).

3.3.3.3. Land sales Land sales Land sales Land sales

Hemraj has eight industrial estates with total land bank of 44,988 rai (72mn sq m), of which

11,245 rai (18mn sq m) is sellable land. The company has a diversified customer base. As of

FY14, auto represents 35% of the contracts while consumer, petrochemical and steel &

metal account for 14%, 10% and 9% respectively. In 2014, revenue from land sales

accounted for 54% of total revenue. In terms of breakdown of customers by country, Japan

remains their biggest account, accounting for 38% of total contracts.

4.4.4.4. UtilitiesUtilitiesUtilitiesUtilities

Hemraj provides raw material, potable water, clarified water, waste water treatment and

industrial estate maintenance services to its industrial estate customers. Revenue from

water sales accounts for 65% of revenue from service income in 2014.

5.5.5.5. PowerPowerPowerPower

Hemraj has a 35% stake in Gheco-One, a 660MW IPP project worth Bt42bn and a joint

venture with Glow (GDF Suez Energy International). In addition, the company has a 12.75%

stake in Houay Ho Laos hydro project and a 25% share in a Small Power Plant (SPP) joint

venture with Gulf JP (GJP NLL). It will also invest in six SPP projects on its industrial estates

(a joint venture with Gulf MP with 25% share) which are due to start operating in 2017.

WHA | 22 July 2015 11118888

6.6.6.6. Solar PV rooftop: JV with Gunkul Solar PV rooftop: JV with Gunkul Solar PV rooftop: JV with Gunkul Solar PV rooftop: JV with Gunkul

WHA formed a joint venture with Gunkul Engineering to invest in solar PV rooftop project.

Eleven subsidiaries were created and are 74.99%-owned by WHA and 25.01% by Gunkul.

Five JV companies were selected by the Metropolitan Electricity Authority and Provincial

Electricity Authority to produce electricity from rooftop solar 4 cell with capacity of 0.28

MW. Revenue recognition from energy sales started in May 2014 and the JV recorded a

profit of Bt1.8mn in FY14.

Overseas businessOverseas businessOverseas businessOverseas business

WHA plans to expand into the ASEAN region with a target of at least 100,000 sq m in the

next three years. Currently, it has a presence in Indonesia with total leased area of 25,000 sq

m (half of the area is sale and lease back). The company is currently in negotiation to build a

logistics facility in Vietnam.

Customer profileCustomer profileCustomer profileCustomer profile

FMCG & healthcare take up 55% of the group’s total leasable area as in 2014, while third-

party logistics (3PL) and manufacturing account for another 23% and 22% respectively. The

logistics parks are home to many multi-national manufacturers such as DKSH and Unilever.

There is great diversity in terms of its tenant’s geography with Europe representing 30%

while Japan and Thailand account for another 26% and 19% respectively.

Chart 16: Tenant breakdown by sector

Source: Company

Chart 17: Top 10 tenants by rental income

Source: Company

55%

23%

22%

FMCG & Healthcare 3PLs Manufacturing

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

WHA | 22 July 2015 11119999

Strategic locationStrategic locationStrategic locationStrategic location

WHA has a total land bank of 2,021 rai (1,297 rai belongs to WHA group and 724 rai belongs

to WHAPF/WHART). The company has positioned itself in five strategic locations: outer East

Bangkok; outer North Bangkok; industrial estate zone; outer South Bangkok and upcountry.

Over half of the land bank is in the East Bangkok Zone which is considered a prime location

for logistics given its close proximity to Suvarnabhumi Airport and Laemchabang Seaport.

Exhibit 1: Strategic location

Source: Company

WHA | 22 July 2015 22220000

Shareholding structureShareholding structureShareholding structureShareholding structure

Top 10 shareholders account for 75.3% of total shares outstanding and a good chunk

(50.1%) belongs to Mr. & Mrs. Anantaprayoon (also owners of WHA holdings). Chart 18

shows that foreign ownership has increased to 17.5% from 12.2% a year ago.

Table 5: Top 10 shareholders

Shareholder % holding WHA Holding Co, Ltd 25.1

Mrs. Jareeporn Anantaprayoon 12.9

Mr. Somyos Anantaprayoon 12.1

UBS AG Hong Kong Branch 7.6

STATE STREET BANK EUROPE LIMITED 7

Mr. Sompong Chonkadeedumrungkul 3.6

Mr. Sompong Chonkadeedumrungkul by Asset Plus 3.2

Mr. Wutt Jarukornsakul 1.4

Narate Ngamaichon 1.2

Thai NVDR 1.1

Source: Company

Chart 18: Foreign holdings on the rise

Source: SET

1.0

2.0

3.0

4.0

5.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Price (Bt)

% Foreign Holding

% Holdings Average WHA

WHA | 22 July 2015 22221111

Price objective basis & riskPrice objective basis & riskPrice objective basis & riskPrice objective basis & risk

WHA (XWMJF)WHA (XWMJF)WHA (XWMJF)WHA (XWMJF)

We value the stock using a target P/E of 14.9x, which is equivalent to a PEG ratio of 0.88. We

believe a target P/E of 14.9x is justified given our earnings growth projection post-

deleveraging of 17% during FY15-FY18E. The key risks to our price objective are i) a delay in

asset sales to its REITs and a rights issue to finance interest expense, ii) relocation of

tenants if Thailand's competitiveness worsens, iii) a slowdown in the regional economy,

which will have a negative impact on the demand for warehouses, iv) lack of meaningful land

sales recovery for Hemraj.

Analyst CertificationAnalyst CertificationAnalyst CertificationAnalyst Certification

I, Natchutha Na Pattaloong, hereby certify that the views expressed in this research report

accurately reflect my personal views about the subject securities and issuers. I also certify

that no part of my compensation was, is, or will be, directly or indirectly, related to the

specific recommendations or view expressed in this research report.

Special DisclosuresSpecial DisclosuresSpecial DisclosuresSpecial Disclosures

Phatra Securities does and seeks to do business with companies covered in its research

reports. As a result, investors should be aware that the firm may have a conflict of interest

that could affect the objectivity of this report.

Phatra Securities Public Company Limited ("Phatra") under its proprietary trading desk, may,

from time to time, issue derivative warrants that have underlying securities contained or

mentioned in this research report. Should Phatra be the issuer of the derivative warrants,

Phatra may act as the market maker for such derivative warrants. As a result, investors

should be aware that Phatra may have a conflict of interest that could affect the objectivity

of this research report.

WHA | 22 July 2015 22222222

ASEAN - Property Coverage Cluster

Investment rating Company

BofA Merrill Lynch

ticker Bloomberg symbol Analyst

BUYBUYBUYBUY

Alam Sutera Realty TBK PT XUSTF ASRI IJ Donald Chua

AMATA CORPORATION AMCXF AMATA TB Natchutha Na Pattaloong

AP (Thailand) XPPKF AP TB Jiraporn Linmaneechote

Ascendas REIT ACDSF AREIT SP Choon Keong Ong, CFA

Ayala Land, Inc. AYAAF ALI PM Crissa Bondad

Bumi Serpong Damai BSPDF BSDE IJ Donald Chua

CapitaLand Commercial Trust CMIAF CCT SP Donald Chua

CapitaLand Mall Trust CPAMF CT SP Choon Keong Ong, CFA

Central Pattana Public Co., Ltd. XENRF CPN TB Jiraporn Linmaneechote

Fraser Centrepoint Trust FRZCF FCT SP Choon Keong Ong, CFA

Frasers Centrepoint Limited XCFPF FCL SP Donald Chua

Global Logistic Properties GBTZF GLP SP Donald Chua

Land & Houses LDHXF LH TB Jiraporn Linmaneechote

Land & Houses -F LDHOF LH/F TB Jiraporn Linmaneechote

LPN Devp Pub Co LDVPF LPN TB Jiraporn Linmaneechote

Mapletree Commercial Trust XJTRF MCT SP Choon Keong Ong, CFA

Megaworld Corporation MGAWF MEG PM Crissa Bondad

Pruksa Real Est PKARF PS TB Jiraporn Linmaneechote

SM Prime Holdings, Inc. SPHXF SMPH PM Crissa Bondad

Summarecon Agung TBK PT PSAHF SMRA IJ Donald Chua

Supalai XPAYF SPALI TB Jiraporn Linmaneechote

Tesco Lotus Retail Growth Property Fund XXZLF TLGF TB Sirichai Chalokepunrat

UOL Group UOLGF UOL SP Donald Chua

WHA XWMJF WHA TB Natchutha Na Pattaloong

NEUTRALNEUTRALNEUTRALNEUTRAL

Capitaland CLLDF CAPL SP Donald Chua

CDL Hospitality Trusts CDHSF CDREIT SP Choon Keong Ong, CFA

Ciputra Development TBK PT PTCDF CTRA IJ Donald Chua

Mapletree Industrial Trust MAPIF MINT SP Choon Keong Ong, CFA

Mapletree Logistics Trust MAPGF MLT SP Choon Keong Ong, CFA

Quality Houses QHPSF QH TB Jiraporn Linmaneechote

Robinsons Land Corporation RBLAF RLC PM Crissa Bondad

UNDERPERFORMUNDERPERFORMUNDERPERFORMUNDERPERFORM

City Dev -A CDEVY CDEVY US Donald Chua

City Developments CDEVF CIT SP Donald Chua

Far East Hospitality Trust XYDNF FEHT SP Choon Keong Ong, CFA

Keppel REIT KREVF KREIT SP Choon Keong Ong, CFA

Lippo Karawaci TBK PT PTLKF LPKR IJ Choon Keong Ong, CFA

Siam City SAMUF SCCC TB Jiraporn Linmaneechote

Suntec REIT SURVF SUN SP Donald Chua

WHA | 22 July 2015 22223333

iQmethod

SM Measures Definitions

Business Performance Numerator Denominator

Return On Capital Employed NOPAT = (EBIT + Interest Income) * (1 - Tax Rate) + Goodwill

Amortization

Total Assets – Current Liabilities + ST Debt + Accumulated Goodwill

Amortization

Return On Equity Net Income Shareholders’ Equity

Operating Margin Operating Profit Sales

Earnings Growth Expected 5-Year CAGR From Latest Actual N/A

Free Cash Flow Cash Flow From Operations – Total Capex N/A

Quality of Earnings

Cash Realization Ratio Cash Flow From Operations Net Income

Asset Replacement Ratio Capex Depreciation

Tax Rate Tax Charge Pre-Tax Income

Net Debt-To-Equity Ratio Net Debt = Total Debt, Less Cash & Equivalents Total Equity

Interest Cover EBIT Interest Expense

Valuation Toolkit

Price / Earnings Ratio Current Share Price Diluted Earnings Per Share (Basis As Specified)

Price / Book Value Current Share Price Shareholders’ Equity / Current Basic Shares

Dividend Yield Annualised Declared Cash Dividend Current Share Price

Free Cash Flow Yield Cash Flow From Operations – Total Capex Market Cap. = Current Share Price * Current Basic Shares

Enterprise Value / Sales EV = Current Share Price * Current Shares + Minority Equity + Net

Debt + Other LT Liabilities Sales

EV / EBITDA Enterprise Value Basic EBIT + Depreciation + Amortization

iQiQiQiQmethod SMis the set of BofA Merrill Lynch standard measures that serve to maintain global consistency under three broad headings: Business Performance, Quality of Earnings, and validations. The key features of

iQmethod are: A consistently structured, detailed, and transparent methodology. Guidelines to maximize the effectiveness of the comparative valuation process, and to identify some common pitfalls.

iQiQiQiQdatabase ® is our real-time global research database that is sourced directly from our equity analysts’ earnings models and includes forecasted as well as historical data for income statements, balance sheets, and cash

flow statements for companies covered by BofA Merrill Lynch.

iQiQiQiQprofile SM, iQiQiQiQmethod SM are service marks of Merrill Lynch & Co., Inc.iQiQiQiQdatabase ®is a registered service mark of Merrill Lynch & Co., Inc.

WHA | 22 July 2015 22224444

DisclosuresDisclosuresDisclosuresDisclosures Important DisclosuresImportant DisclosuresImportant DisclosuresImportant Disclosures Investment Rating Distribution: Real Estate/Property Group (as of 30 Jun 2015)

Coverage Universe Count Percent Inv. Banking Relationships* Count Percent

Buy 77 58.33% Buy 38 49.35%

Neutral 27 20.45% Neutral 16 59.26%

Sell 28 21.21% Sell 11 39.29% Investment Rating Distribution: Global Group (as of 30 Jun 2015)

Coverage Universe Count Percent Inv. Banking Relationships* Count Percent

Buy 1724 52.07% Buy 1312 76.10%

Neutral 768 23.20% Neutral 561 73.05%

Sell 819 24.74% Sell 517 63.13%

* Companies that were investment banking clients of BofA Merrill Lynch or one of its affiliates within the past 12 months. For purposes of this distribution, a stock rated

Underperform is included as a Sell. FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential

price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation).

Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster*

Buy ≥ 10% ≤ 70% Neutral ≥ 0% ≤ 30%

Underperform N/A ≥ 20%

* Ratings dispersions may vary from time to time where BofA Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.

INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Merrill Lynch Comment referencing the stock.

For the report jointly responsible for covering the securities by ML analyst, ML analyst receives compensation based upon, among other factors, the overall profitability of Merrill Lynch, including profits derived from investment banking revenues.

Copyright 2015 Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). All rights reserved. Any unauthorized use or disclosure is prohibited. This report has been prepared and

issued by Phatra Securities Company Limited (“Phatra”) under the Research Co-Operation Agreement with Merrill Lynch. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness.

Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). Officers of Phatra or one of its affiliates may have a financial interest in securities of the issuer(s) or in related investments.

This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such

as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

Corporate Governance Report of Thai Listed Companies 2014 Disclaimer

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market of Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, 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 data appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. Phatra Securities Public Company Limited ("Phatra") does not confirm nor certify the accuracy of such survey result. In addition, the list only includes companies under Phatra’s coverage except those specified.

Companies with Excellent CG Scoring by alphabetical order under Phatra’s Coverage

BTS IRPC EGCO PTTGC CPN IVL TISCO PTT PSL KBANK

PTTEP TMB INTUCH KTB BCP THCOM SPALI MINT SCB TOP

Companies with Very Good CG Scoring by alphabetical order under Phatra’s Coverage

AAV BBL DTAC LH RATCH TRUE ERW BIGC ADVANC LPN

TVO GFPT CENTEL AOT MCOT ROBINS VGI BANPU CK HEMRAJ

PS CPF TCAP SCC BAY HMPRO QH THAI

Companies with Good CG Scoring by alphabetical order under Phatra’s Coverage

AMATA ESSO TUF MAJOR GLOBAL STPI BH GLOW BJC STEC

TICON AP BEC TTCL SCCC

N/A Companies without survey result available by alphabetical order under Phatra’s Coverage

M THBEV CPALL TRUEIF NOK BCH UNIQ TLGF BTSGIF BDMS

DW Disclosure:

Phatra Securities Public Company Limited ("Phatra") under its proprietary trading desk, may, from time to time, issue derivative warrants that have underlying securities contained in the table below. Should Phatra be the issuer of the derivative warrants, Phatra may act as the market maker for such derivative warrants. As a result, investors should be aware that Phatra may have a conflict of interest that could affect the objectivity of this research report.

AAV ADVANC AOT BANPU BBL BCP BDMS BH BJC BJCHI

BLAND BMCL BTS CBG CK CPALL CPF CPN DTAC GFPT

HANA HMPRO INTUCH ICHI IRPC ITD IVL JAS KBANK KTB

KTIS M MINT PS PTT PTTEP PTTGC SAMART SAWAD SCB

SCC SET S50 SIRI SPALI STA STEC STPI TCAP THAI

THCOM TICON TMB TOP TPIPL TRUE TTA TTCL TUF UV

VGI WHA