Airports of Thailand Pcl (AOT TB) Thanachart Securities. Not yet mature. BUY (Unchanged) TP: Bt (From: Bt ) 28 FEBRUARY 2019

Transcription

1 BUY (Unchanged) TP: Bt (From: Bt ) 28 FEBRUARY 2019 Change in Numbers Upside : 14.1% Airports of Thailand Pcl (AOT TB) Not yet mature Thanachart Securities Despite market concerns over tourist arrivals, we are of the view that the industry in Thailand is not yet mature, having been in a growth cycle for just eight years. We are now more conservative on pax. growth but boost our commercial revenue forecasts. This causes us to cut our earnings by 4-8% in FY19-21F and our TP to Bt77 from Bt80. Reaffirm BUY. Thai tourism isn t yet mature Though the market is worried about the slowdown in tourist arrivals to Thailand, our view is that the Thai tourism industry isn t yet mature as the boom only started in 2010 after the global financial crisis in and the completion of Suvarnabhumi Airport in Thailand s tourist arrival CAGR of 11.6% in (in line with AOT s total passenger CAGR of 11.7%) was almost double the Asian tourist arrival CAGR of 6.4% and its market share stood at 11.2% of the Asian tourist arrivals in 2018 but only 2.6% of the worldwide tourist arrivals. The World Tourism Organization (UNWTO) predicts Asia s long-term tourist arrival growth at 5% a year but delays in AOT s airport expansions force us to assign more conservative passenger growth assumptions of % (from % previously) in FY19-29F before coming down to near Asia s tourist arrival growth trend of 5.5% (from 7.5%) in FY30-35F and 2% from FY36F onward. A commercial revenue base lift However, we revise up our minimum guarantee assumption for the commercial business to increase 10% a year (vs % previously) as we expect the new contracts (scheduled to bid in 3Q19) to be similar to the latest contracts at Don Mueang Airport in This causes our long-term commercial revenue growth to increase to 9% (from 7.5-8% previously). In short term, we expect the growth of 8-9% in FY19-20 and 32% in FY21 due to 1) a 10% a year minimum guaranteed amount hike, 2) Suvarnabhumi Airport s commercial space capacity increasing by 22% in FY21F and 3) a 30% minimum guarantee base rise. As the above assumption changes, we cut our earnings forecast by 4-8% in FY19-21 and TP to Bt77 from Bt80. We reiterate our BUY rating on AOT. Airport City making progress AOT s plan to develop its raw land in Suvarnabhumi Airport is making progress. For 600 rai, AOT plans to sign a contract with the Treasury Department this month for the commercial use of this land while, for 723 rai, it expects the land zoning stipulation to be changed by this July. Subsequently, AOT could invite developers to bid for the projects. If we assume 25-75% of the land is developed, we estimate an additional Bt1.5-4 per share of potential upside to our current TP. Valuation justified in our view PE is the key pushback for AOT in our view. But we believe its high PEs of 28-36x in FY19-21F are justified on its resilient cash flow stream of EBITDA CAGR at 12% in FY19-25F, monopolistic power in a country with strong tourism growth potential, a jump in cash flows (22% EBITDA growth in FY21F), strong balance sheet, and potential upside from the Airport City project. COMPANY VALUATION SAKSID PHADTHANANARAK saksid.pha@thanachartsec.co.th Y/E Sep (Bt m) 2018A 2019F 2020F 2021F Sales 60,537 64,697 69,523 82,780 Net profit 25,171 25,802 29,098 34,781 Consensus NP 27,614 30,103 35,492 Diff frm cons (%) (6.6) (3.3) (2.0) Norm profit 25,194 26,802 29,098 34,781 Prev. Norm profit 28,749 31,530 36,362 Chg frm prev (%) (6.8) (7.7) (4.3) Norm EPS (Bt) Norm EPS grw (%) Norm PE (x) EV/EBITDA (x) P/BV (x) Div yield (%) ROE (%) Net D/E (%) (38.0) (25.2) (16.2) (13.0) PRICE PERFORMANCE (Bt/shr) AOT Rel to SET Index (%) (5) Feb-18 Jun-18 Oct-18 Feb-19 COMPANY INFORMATION Price as of 28-Feb-19 (Bt) Market Cap (US$ m) 30,594.7 Listed Shares (m shares) 14,285.7 Free Float (%) 30.0 Avg Daily Turnover (US$ m) M Price H/L (Bt) 72.00/61.00 Sector Transportation Major Shareholder Ministry of Finance 70% Sources: Bloomberg, Company data, Thanachart estimates This report is prepared by Thanachart Securities. Please contact our salesperson for authorisation. Please see the important notice on the back page

2 COMPANY NOTE AOT SAKSID PHADTHANANARAK Thai tourism isn t yet mature We expect Thailand s tourist arrival growth to slow down but we don t believe the industry is mature yet Given market concerns regarding a slowdown in tourist arrivals, we take the view that Thailand s tourist arrival growth will likely decelerate but that the industry isn t mature yet. We believe this view is supported by the following reasons: First, Thailand s tourism boom just started eight years ago in 2010 after the global financial crisis in and the opening of Suvarnabhumi Airport in Second, Thailand s tourist arrival CAGR of 11.6% in continued to outpace Asia s tourist arrival CAGR of 6.4% and the worldwide tourist arrival CAGR of 5% during the same period. Its market share accounted for 11.2% of Asia tourist arrivals in 2018 but only 2.6% of global tourist arrivals. AOT s total passenger growth is also in line with Thailand s tourist arrival growth at a CAGR of 11.7% in FY Ex 1: Thailand s Tourist Arrival Boom Just Started In 2010 Ex 2: And Thailand s Market Share Was Still Low In 2017 (m ppl) Suvarnabhumi Airport started operation in 2006 Tsunami Sars Global financial crisis Military coup Americas 16% Middle East 4% Africa 5% Thailand 3% Europe 51% Asia 21% Source: Tourism Authority of Thailand Source: UNWTO Ex 3: AOT s Resilient Passenger Growth (y-y %) Yellow shirts' second Passenger numbers (RHS) Passenger growth (LHS) Bangkok shutdown (m passengers) Boat tregedy in 40 Phuket (10) Curfew BKK Tsunami in Japan Thai floods Coup MERS Bangkok bomb South bomb (20) 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 (10) (20) Sources: Company data, Thanachart compilation THANACHART RESEARCH 2

3 COMPANY NOTE AOT SAKSID PHADTHANANARAK Third, the global tourist arrival growth trend looks to be stronger than the World Tourism Organization s (UNWTO) long-term forecast published in 2010 predicting Asia s tourist arrival CAGR at 5% and a worldwide tourist arrival CAGR of 3.3% in This robust growth trend should also support Thailand and AOT s long-term tourist growth. Ex 4: Actual Trends Vs. UNWTO s Tourism 2030 Forecast Source: UNWTO We assign more conservative passenger growth assumptions given our concerns about AOT s capacity constraints Despite the strong tourism outlook, we revise down our aeronautical revenue estimates by 6-8% in FY19-21F and 9-13% in FY22-35 for the following reasons: First, we cut our passenger growth assumption to 4.4% in FY19F (from 8.8% previously and 3.2% in 4MFY19) because of the impact of the Phuket boat capsize tragedy. Second, we assign more conservative passenger growth assumptions of % in FY20-29F (from % previously) given our concerns about AOT s capacity constraints especially when we take view that the opening of Suvarnabhumi Airport s Terminal 2 will be delayed to FY25 (from FY23 previously). Please also note that, over the long term, we forecast the growth to come down to near the Asia tourist arrival growth trend of 5.5% (from 7.5% previously) in FY30-35F while we maintain our terminal growth assumption of 2% from FY36F onward. Ex 5: Our Passenger Number Forecast Vs. Capacity Forecasts (m passengers) AOT's total passenger capacity 250 Our total passenger forecast SIA's phase SIA's pterminal 2 DMK's phase 3 HKT's phase 2 CNX's phase Sources: Company data, Thanachart estimates THANACHART RESEARCH 3

4 COMPANY NOTE AOT SAKSID PHADTHANANARAK A commercial revenue base lift But we boost our long-term commercial revenue forecast due to a potential 10% p.a. minimum guaranteed amount hike In contrast, we are more bullish on the commercial business s long-term growth prospects as we now expect the terms of the new concession bids to manage the existing and new commercial space at Suvarnabhumi Airport to be similar to the terms at Don Mueang Airport, whereby AOT will likely still receive either revenue sharing or a guaranteed minimum revenue amount depending on which is higher, though the minimum guaranteed amount will be raised by 10% a year. Factoring in the minimum guaranteed amount hike by 10% a year (from 8% previously) and a delay in the opening of Suvarnabhumi Airport s terminal 2 to FY25 (from FY23), our commercial revenue forecast is revised down by 5% a year in FY23-24 but increased by 8-16% in FY25-35 as shown in the Exhibit 6. Ex 6: Our Current Commercial Revenue Forecast Vs. Our Previous Forecast (Bt bn) 140 Our current commercial revenue forecast Our previous commercial revenue forecast Sources: Company data, Thanachart estimates A jump in the commercial revenue forecast by 32% in FY21 and 36% in FY25 is due to; 1) Commercial space at Suvarnabhumi Airport rising by 22% in FY21F and 26% in FY25F. 2) A 30% increase in the minimum guaranteed amount per sqm for commercial space at Suvarnabhumi Airport s existing terminal and Phase 2 in FY21F given the likely intense competition to win the new concession bids (scheduled for 3Q19). 3) An incremental increase in the minimum guaranteed amount of 10% a year. THANACHART RESEARCH 4

5 COMPANY NOTE AOT SAKSID PHADTHANANARAK Our TP is cut to Bt77 but we reaffirm our BUY rating As a result from the change in the above assumptions, we cut our earnings estimates for AOT by 4-8% and our DCF-based 12-month TP, using an FY19F base year, to Bt77/share (from Bt80 previously). We reaffirm our BUY rating on shares of AOT and it remains one of our country top picks. Ex 7: Changes In Our Key Assumptions FY19F FY20F FY21F Aeronautical revenues (Bt bn) New Old Change (%) (6.1) (7.6) (8.4) Total passenger growth (%) New Old Change (pp) (4.4) (1.3) (0.8) Commercial revenues (Bt bn) New Old Change (%) Gross margin (%) New Old Change (pp) (1.2) (1.3) (0.5) Source: Thanachart estimates THANACHART RESEARCH 5

6 COMPANY NOTE AOT SAKSID PHADTHANANARAK Airport City making progress Management expects to implement the Airport City project in 2H19 We have yet to factor in the Airport City project but it is now making good progress. To recap briefly, AOT is planning to develop two plots of land in and around Suvarnabhumi. For 600 rai (237 acres) of undeveloped land at Suvarnabhumi, as it belongs to the Treasury Department, AOT plans to sign a new agreement with the Treasury Department to develop this land in March. One of the potential projects involves certified air cargo warehouses and distribution centers. As all of the facilities are already in place, we expect AOT s investment in utilities and facilities to be small. For 723 rai (286 acres) next to Suvarnabhumi, the land belongs to AOT but it is zoned specifically for agricultural purposes. AOT is in the process of changing the zoning so it can develop the land for commercial use and we expect this process to be completed by July this year. The potential projects include hotels, logistic/business parks, shopping malls, recreation facilities, exhibition halls, residences, and sports and medical facilities. As the project requires Bt12bn of investment for unities and facilities, we believe it is likely to be implemented under the public-private partnership scheme. AOT expects the documentation processes to be completed by 2H19, after which it would invite operators and developers to bid for the projects. Based on our rough estimate, the project would add Bt1.5-4/share to our TP Exhibit 8 shows our rough sensitivity analysis for additional earnings and our TP for AOT if 25-75% of the total undeveloped land is used for the Airport City project. Based on our analysis, we estimate an additional Bt1.5-4 per share of potential upside to our current TP. Ex 8: Sensitivity Analysis Of Our TP For AOT To The Airport City Project Airport City Project Raw land Being Rent/month Total Rev. Rev. to After tax earnings Addition developed revenue sharing AOT to AOT to TP (sqm) (sqm) (Bt/sqm/month) (Bt m/year) (%) (Bt m/year) (Bt m/year) (Bt/share) Scenario 1: 25% being developed - Land rented from the Treasury Department 960, , Land owned by AOT 1,156, ,200 2,000 6, , Total 1, Scenario 2: 50% being developed - Land rented from the Treasury Department 960, , ,728-1,728 1,382 - Land owned by AOT 1,156, ,400 2,000 13, ,082 1,666 Total 3, Scenario 3: 75% being developed - Land rented from the Treasury Department 960, , ,592-2,592 2,074 - Land owned by AOT 1,156, ,600 2,000 20, ,123 2,499 Total 4, Sources: Company data, Thanachart estimates THANACHART RESEARCH 6

7 COMPANY NOTE AOT SAKSID PHADTHANANARAK Valuation is justified in our view We still believe AOT s high PE multiples are justified for a long-term core holding We believe the key pushback against investment in AOT are its high PE multiples of 36x in FY19F, 33x FY20F and 28x in FY21F. However, we believe AOT deserves a premium valuation because of: 1) Its monopolistic power in a country that has strong tourism growth potential. 2) Its robust balance sheet with Bt74bn of cash on hand. 3) Its resilient cash flow stream with an EBITDA CAGR of 12% in FY19-25F. 4) A jump in EBITDA by 22% in FY21F from commercial contract renewals. 5) Potential valuation upside from the Airport City project. Ex 9: 12-month DCF-based TP Calculation Using A Base Year Of FY19F (Bt m) FY19F FY20F FY21F FY22F FY23F FY24F FY25F FY26F FY27F FY28F FY29F FY30F FY31F Terminal value EBITDA 39,139 42,325 51,472 55,637 60,488 65,613 83,876 91, , , , , ,649 Free cash flow 5,235 6,092 19,384 8,608 5,559 26,167 58,178 68,874 76,684 84,792 93, , ,472 2,455,780 PV of free cash flow 5,221 5,142 15,030 6,132 3,638 15,728 32,126 34,940 35,739 36,297 36,815 37,259 37, ,502 Risk-free rate (%) 4.5 Market risk premium (% 7.5 Beta 0.9 WACC (%) 8.9 Terminal growth (%) 2.0 Enterprise value - add investments 1,036,293 Net debt (FY18) (54,816) Minority interest 366 Equity value 1,090,742 # of shares (m) 14,286 Equity value/share (Bt) 77 Sources: Company data, Thanachart estimates THANACHART RESEARCH 7

8 COMPANY NOTE AOT SAKSID PHADTHANANARAK Valuation Comparison Ex 10: Valuation Comparison With Regional Peers EPS growth PE P/BV EV/EBITDA Div yield Name BBG code Country 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F (%) (%) (x) (x) (%) (%) (x) (x) (%) (%) Sydney Airport SYD AU Australia na na Beijing Capital Int l 694 HK China (26.1) (23.3) Shenzhen Airport Co CH China Xiamen Int l Airport CH China 6.3 (0.9) Shanghai Int l Airport CH China Fraport Frankfurt Airport FRA GR Germany (2.2) Japan Airport Terminal 9706 JP Japan (66.9) Grupo Aeroportuario ASURB MM Mexico na SATS Ltd SATS SP Singapore Airports of Thailand* AOT TB Thailand Average 24.0 (3.5) Source: Bloomberg Note: * Thanachart estimates using normalized EPS THANACHART RESEARCH 8

9 APPENDIX AOT SAKSID PHADTHANANARAK COMPANY DESCRIPTION The Airports of Thailand (AOT) was corporatized from a state enterprise and is Thailand's leading airport business operator. AOT is responsible for six international airports: Don Mueang, Phuket, Chiang Mai, Hat Yai, Chiang Rai and Suvarnabhumi, all of which accommodate both domestic and international flights. With commercial operations beginning on 28 September 2006, Suvarnabhumi serves as the main airport and can accommodate up to 45m passengers and 3m tonnes of cargo a year. Within a single hour, the airport can operate up to 76 flights. Source: Thanachart COMPANY RATING Analyst REC. CG rating* Financials Industry Outlook Source: Thanachart; *CG Rating Operating Business Outlook Manage ment Rating Scale Very Strong 5 Strong 4 Good 3 Fair 2 Weak 1 None 0 THANACHART S SWOT ANALYSIS S Strength W Weakness AOT is an airport monopoly. As a state enterprise, the company s operations and finances receive support from the government. O Opportunity Thailand is a very popular destination for tourists. Strong economic growth in the Asia-Pacific is boosting the tourism industry in the region. AOT has little revenue diversity so its quarterly earnings are volatile and follow the different tourism seasons. Unclear direction due to changes in government policies have caused AOT to miss out on the chance of benefiting fully from Thailand s strong tourism industry. T Threat Airport competition is fierce. Many airports in Asia are reducing fees to attract airlines. Disease outbreaks present a threat to the industry. The Thai healthcare industry is also spurring medical tourism to Thailand. CONSENSUS COMPARISON Consensus Thanachart Diff Target price (Bt) % Net profit 19F (Bt m) 27,614 25,802-7% Net profit 20F (Bt m) 30,103 29,098-3% Consensus REC BUY: 17 HOLD: 9 SELL: 5 HOW ARE WE DIFFERENT FROM THE STREET? Our FY19-20F earnings are 3-7% lower than the Bloomberg consensus estimates which we attribute to us having more conservative passenger growth assumptions. RISKS TO OUR INVESTMENT CASE Thailand s tourism industry is a component of the world economy and there is no doubt that tourism would be negatively affected by any global economic volatility. Political unrest in Thailand is another concern as it has a significant impact on the tourism industry. Political interference and corruption are also concerns. As a state enterprise, AOT s major investments still have to be approved by the cabinet. Hence, any delays in getting cabinet approval would have a negative impact on AOT s earnings streams. However, our DCF-based TP is 8% above the Street s number, likely as we are more bullish on AOT s long-term growth from its commercial business. Sources: Bloomberg consensus, Thanachart forecasts Source: Thanachart THANACHART RESEARCH 9

10 FINANCIAL SUMMARY AOT SAKSID PHADTHANANARAK EBITDA margin should stay high, with D&A at 30-33% of COGS in FY19-21F AOT had total cash on hand of Bt74bn at end-1qfy19 INCOME STATEMENT FY ending Sep (Bt m) 2017A 2018A 2019F 2020F 2021F Sales 54,901 60,537 64,697 69,523 82,780 Cost of sales 17,686 19,006 20,028 21,364 25,578 Gross profit 37,215 41,532 44,669 48,159 57,202 % gross margin 67.8% 68.6% 69.0% 69.3% 69.1% Selling & administration expenses 10,236 10,746 11,645 12,166 14,073 Operating profit 26,979 30,785 33,023 35,993 43,129 % operating margin 49.1% 50.9% 51.0% 51.8% 52.1% Depreciation & amortization 5,645 5,642 6,116 6,332 8,343 EBITDA 32,624 36,427 39,139 42,325 51,472 % EBITDA margin 59.4% 60.2% 60.5% 60.9% 62.2% Non-operating income 1,400 1,381 1,411 1,199 1,179 Non-operating expenses Interest expense (1,195) (1,016) (860) (741) (741) Pre-tax profit 27,185 31,151 33,575 36,450 43,568 Income tax 5,445 5,903 6,715 7,290 8,714 After-tax profit 21,739 25,248 26,860 29,160 34,854 % net margin 39.6% 41.7% 41.5% 41.9% 42.1% Shares in affiliates' Earnings Minority interests (56) (54) (58) (62) (74) Extraordinary items (1,000) (23) (1,000) 0 0 NET PROFIT 20,684 25,171 25,802 29,098 34,781 Normalized profit 21,683 25,194 26,802 29,098 34,781 EPS (Bt) Normalized EPS (Bt) BALANCE SHEET FY ending Sep (Bt m) 2017A 2018A 2019F 2020F 2021F ASSETS: Current assets: 71,655 77,068 59,555 44,894 45,828 Cash & cash equivalent 67,672 72,806 55,000 40,000 40,000 Account receivables 3,069 3,282 3,508 3,769 4,488 Inventories Others ,047 1,125 1,340 Investments & loans 1,576 1,182 1,182 1,182 1,182 Net fixed assets 93,625 96, , , ,999 Other assets 11,553 13,124 14,025 15,071 17,945 Total assets 178, , , , ,954 LIABILITIES: Current liabilities: 20,728 23,203 20,663 20,044 21,157 Account payables 1,955 1,720 1,813 1,933 2,315 Bank overdraft & ST loans Current LT debt 4,252 4,223 3,850 3,111 3,842 Others current liabilities 14,491 17,260 15,000 15,000 15,000 Total LT debt 19,609 13,768 12,555 10,143 12,528 Others LT liabilities 6,384 6,469 7,000 7,000 7,000 Total liabilities 46,721 43,439 40,218 37,187 40,685 Minority interest Preferreds shares Paid-up capital 14,286 14,286 14,286 14,286 14,286 Share premium 12,568 12,568 12,568 12,568 12,568 Warrants Surplus 1, Retained earnings 103, , , , ,016 Shareholders' equity 131, , , , ,709 Liabilities & equity 178, , , , ,954 Sources: Company data, Thanachart estimates THANACHART RESEARCH 10

11 FINANCIAL SUMMARY AOT SAKSID PHADTHANANARAK CASH FLOW STATEMENT FY ending Sep (Bt m) 2017A 2018A 2019F 2020F 2021F Earnings before tax 27,185 31,151 33,575 36,450 43,568 Tax paid (5,445) (5,903) (6,715) (7,290) (8,714) Depreciation & amortization 5,645 5,642 6,116 6,332 8,343 Chg In w orking capital 387 (448) (133) (141) (337) Chg In other CA & CL / minorities 783 2,693 (2,327) (78) (215) Cash flow from operations 28,553 33,134 30,515 35,274 42,646 Capex (7,578) (8,351) (28,125) (29,606) (23,725) ST loans & investments LT loans & investments (354) Adj for asset revaluation Chg In other assets & liabilities 3,649 (1,711) (1,371) (1,046) (2,874) Cash flow from investments (4,283) (9,668) (29,496) (30,652) (26,599) Debt financing (7,724) (5,688) (1,585) (3,151) 3,117 Capital increase Dividends paid (9,757) (12,285) (15,241) (16,470) (19,164) Warrants & other surplus 392 (359) (2,000) 0 0 Cash flow from financing (17,088) (18,333) (18,826) (19,622) (16,047) Free cash flow 20,976 24,784 2,390 5,668 18,921 We believe AOT deserves a premium valuation vs. peers for its monopoly power, resilient cash flow stream, solid balance sheet and upside potential VALUATION FY ending Sep 2017A 2018A 2019F 2020F 2021F Normalized PE (x) Normalized PE - at target price (x) PE (x) PE - at target price (x) EV/EBITDA (x) EV/EBITDA - at target price (x) P/BV (x) P/BV - at target price (x) P/CFO (x) Price/sales (x) Dividend yield (%) FCF Yield (%) (Bt) Normalized EPS EPS DPS BV/share CFO/share FCF/share Sources: Company data, Thanachart estimates THANACHART RESEARCH 11

12 FINANCIAL SUMMARY AOT SAKSID PHADTHANANARAK FINANCIAL RATIOS FY ending Sep 2017A 2018A 2019F 2020F 2021F Growth Rate Sales (%) Net profit (%) EPS (%) Normalized profit (%) Normalized EPS (%) Dividend payout ratio (%) Despite high capex, AOT should remain in a net cash position given its robust CFFO Operating performance Gross margin (%) Operating margin (%) EBITDA margin (%) Net margin (%) D/E (incl. minor) (x) Net D/E (incl. minor) (x) (0.3) (0.4) (0.3) (0.2) (0.1) Interest coverage - EBIT (x) Interest coverage - EBITDA (x) ROA - using norm profit (%) ROE - using norm profit (%) DuPont ROE - using after tax profit (%) asset turnover (x) operating margin (%) leverage (x) interest burden (%) tax burden (%) WACC (%) ROIC (%) NOPAT (Bt m) 21,575 24,952 26,419 28,794 34,503 Sources: Company data, Thanachart estimates THANACHART RESEARCH 12

13 DISCLAIMER AOT SAKSID PHADTHANANARAK Important Disclosures and General Disclaimers And Disclosures: This report is prepared and issued by Thanachart Securities Public Company Limited (TNS) as a resource only for clients of TNS, Thanachart Capital Public Company Limited (TCAP) and its group companies. Copyright Thanachart Securities Public Company Limited. All rights reserved. The report may not be reproduced in whole or in part or delivered to other persons without our written consent. This report is prepared by analysts who are employed by the research department of TNS. While the information is from sources believed to be reliable, neither the information nor the forecasts shall be taken as a representation or warranty for which TNS or TCAP or its group companies or any of their employees incur any responsibility. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither TNS, TCAP nor its group companies accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The information and opinions contained herein have been compiled or arrived at from sources believed reliable. However, TNS, TCAP and its group companies make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user. TNS, TCAP and its group companies perform and seek to perform business with companies covered in this report. TNS, TCAP, its group companies, their employees and directors may have positions and financial interest in securities mentioned in this report. TNS, TCAP or its group companies may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this report. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this report. Note: Thanachart Securities Public Company Limited act as a Market Maker and Derivative Warrants Issuer. At present, TNS has issued 9 Derivative Warrants which are ADVA16C1912A, AOT16C1912A, BANP16C1912A, BDMS16C1912A, CBG16C1912A, CK16C1912A, CPAL16C1912A, PTT16C1912A, TRUE16C1912A (underlying securities are ADVANC, AOT, BANPU, BDMS, CBG, CK, CPALL, PTT, TRUE). Since TNS covers those underlying securities in research report, consequently TNS incurs conflicts of interest. Moreover, Investors are advised to carefully review the details and information in the prospectus before making investment decisions. Note: Our major shareholder TCAP (Thanachart Capital Pcl) which holding 100% of Thanachart Securities, TCAP has stake in THANI for more than 65% and being the major shareholder of THANI. Thanachart Capital Public Company Limited (TCAP), Ratchthani Leasing Public Company Limited (THANI), MBK PUBLIC COMPANY LIMITED (MBK) and PATUM RICE MILL AND GRANARY PUBLIC COMPANY LIMTED (PRG ) are related companies to Thanachart Securities Public Company Limited (TNS). Since TNS covers those securities in research report, consequently TNS incurs conflicts of interest. Recommendation Structure: Recommendations are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the recommendation is BUY. If the downside is 10% or more, the recommendation is SELL. For stocks where the upside or downside is less than 10%, the recommendation is HOLD. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal recommendation. For sectors, an Overweight sector weighting is used when we have BUYs on majority of the stocks under our coverage by market cap. Underweight is used when we have SELLs on majority of the stocks we cover by market cap. Neutral is used when there are relatively equal weightings of BUYs and SELLs. THANACHART RESEARCH 13

14 DISCLAIMER AOT SAKSID PHADTHANANARAK Thanachart Securities Pcl. Research Team 19 Floor, MBK Tower 444 Phayathai Road, Pathumwan Road, Bangkok Tel: Pimpaka Nichgaroon, CFA Head of Research Kalvalee Thongsomaung Food, Hotel, Media Phannarai Tiyapittayarut Property, Retail Siriporn Arunothai Small Cap Research, Healthcare Pattadol Bunnak Auto, Food & Beverage Thaloengsak Kucharoenpaisan, AFPT TM Analyst, Retail Market Adisak Phupiphathirungul, CFA Retail Market Strategy Pattarawan Wangmingmat Senior Technical Analyst Saksid Phadthananarak Construction, Transportation Supanna Suwankird Energy, Utilities Wichaya Wongpanuwich, CFA, FRM Analyst, Retail Market Sittichet Rungrassameephat Assistant Analyst, Quantitative Chak Reungsinpinya Energy, Petrochemical Nuttapop Prasitsuksant Electronics, Telecom Sarachada Sornsong Bank, Financial Rata Limsuthiwanpoom Industrial Estate, Property Fund, REITs Witchanan Tambamroong Technical Analyst THANACHART RESEARCH 14