Thailand Company Focus Jasmine Broadband Internet Infrastructure Fund

Transcription

1 Thailand Company Focus Jasmine Broadband Internet Infrastructure Fund Bloomberg: JASIF TB Reuters: JASIFu.BK DBS Group Research. Equity 20 Apr 2016 Refer to important disclosures at the end of this report BUY (Initiating Coverage) Last Traded Price: Bt9.05 (SET : 1,416.00) Price Target : Bt10.90 (20% upside) Potential Catalyst: Strong quarterly results and dividends Mispricing due to perceived risk Fibre optic cable lessor that offers 11% yield New fibre injection to support FY16-17F growth Concerns on JASMBB s 4G default has broadened the valuation discount to 37% against DIF Analyst Wasu MATTANAPOTCHANART wasum@th.dbsvickers.com Price Relative Bt Relative Index Initiate with BUY and DCF-based TP of Bt10.90 FOC lessor that offers lofty yields. Jasmine Broadband Infrastructure Fund (JASIF) was founded on 10 Feb 2015 with 800k core km of fibre optic cable (FOC) at IPO. Triple T Broadband (TTB), the second largest fixed-broadband player in Thailand, has agreed to lease 100% of the network until 22 Feb 2026, thus JASIF s income is highly secured Feb-15 Jul-15 Dec-15 (LHS) Relative SET INDEX (RHS) Forecasts and Valuation FY Dec (Bt Btm) 2015A 2016F 2017F 2018F Revenue 4,377 5,457 5,829 5,940 EBITDA 4,126 5,004 5,346 5,447 Pre-tax Profit 4,729 5,016 5,370 5,471 Net Profit 4,729 5,016 5,370 5,471 Net Pft (Pre Ex.) 4,088 5,016 5,370 5,471 EPS (Bt) EPS Pre Ex. (Bt) EPS Gth (%) nm EPS Gth Pre Ex (%) nm Diluted EPS (Bt) Net DPS (Bt) BV Per Share (Bt) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) 0.0 CASH CASH CASH ROAE (%) N/A Consensus EPS (Bt): Other Broker Recs: B: 4 S: 1 H: 1 ICB Industry : Technology ICB Sector: Software & Computer Services Principal Business: JASIF has investments in network of fibre optic components (FOC). Source of all data: Company, DBS Vickers, Bloomberg Finance L.P New fibre injection to support FY16-17F 17F capacity. As part of the IPO deal, TTB will continue transferring 7,500 core km of FOC per month to JASIF, which should end FY16F with 973k core km of cable, up from 883k at end The new fibre capacity will be coming in until Feb 2017, leading us to project 23% and 7% earnings growth in FY16F and FY17F, respectively. Too much concern on impact of JASMBB s 4G default. The market has been overly concerned over two issues and their implications: i) additional penalty on Jas Mobile Broadband (JASMBB), after its failure to pay for the 900MHz licence, and ii) the potential revocation of licences at related businesses (e.g. TTB s fixed-broadband licence). We believe that the penalty to be finalised by NBTC by the end of Apr will only affect JASMBB and JAS, the mother company. Also, TTB is a separate legal entity that has done nothing wrong, so the outright revocation of the fixed-broadband licence is highly unlikely, especially when the revocation has not been stated in the pre-auction document. We initiate coverage on JASIF with BUY call and TP of Bt10.90, based on 9.7% WACC and no more rent from 2043 onwards; FOC networks usually have 30 years of useful life, so there are 26 years left for JASIF s network. Although JASIF should be trading at 20-25% discount to DIF due to the shorter useful life of FOC compared with towers (c.40 years), JASIF seems to be oversold as evidenced by its FY16F EV/EBITDA of 9.9x, or 37% lower than DIF s 15.6x At A Glance Issued Capital (m shrs) 5,500 Mkt. Cap (Btm/US$m) 49,775 / 1,429 Major Shareholders (%) JAS (%) 33.3 BBL (%) 9.1 State Street Bank And Trust Company (%) 7.9 Free Float (%) m Avg. Daily Val (US$m) 4.3 ed: CK / sa: CS

2 INVESTMENT THESIS Profile (JASIF) was established on 10 Feb 2015 as a closed-end infrastructure fund. JASIF raised Bt55bn from its IPO on 16 Feb 2015 to invest in 980k core km of fibre optic cable (FOC) network; 800k core km FOC obtained at IPO and the rest 180k during the next two years until Feb Rationale FOC lessor that offers lofty yields. The fund bought 800k core km of fibre optic cable (FOC) network at IPO. As part of the IPO deal, it has been procuring around 7.5k core km more each month. Due to the gradual FOC transfer into the fund, it is expected to have 23% earnings growth in FY16F (10.7% yield) and 7% earnings growth in FY17F (11.2% yield). Highly secured streams of income. JAS s subsidiary, Triple Three Broadband (TTB), has contractually agreed to lease 100% of the network until 22 Feb Valuation We have a DCF-based TP of Bt10.90 (WACC: 9.7%, no more rent from 2043 onwards). With 21% upside to our TP and an 10.6% yield, we recommend a BUY on JASIF. Although we believe that JASIF should trade at 20-25% discount to DIF due to the shorter useful life of FOC compared to towers and JASIF s rental rate uncertainty after Feb 2026, JASIF seems to be oversold as evidenced by its FY16F EV/EBITDA of 9.9x, or 37% lower than DIF s 15.6x. Risks Lingering issues around JASMBB s debacle could weigh on JASIF s share price performance. Nevertheless, NBTC plans to decide the fate of the related businesses, including Digital TV licence at MONO and fixed-broadband licence at TTB, by the end of Apr When the implication of TTB becomes clear, the overhang on JASIF s share price should be removed. Lower rental rate is a long-term risk When JASIF renews its lease contract with TTB, we expect the rental rate to drop by 12% in 2027 as part of the asset portfolio (20% of the FOC network) has a lofty monthly rental rate of Bt750 per core km in 2016 (inflation-adjusted annually). We believe the high rate could not be maintained when the contract expires in If the rate drops more than the expected 12%, our valuation could be negatively impacted. Source: DBS Vickers Page 2

3 SWOT Analysis Strengths Secured streams of income from Triple T Broadband (TTB), the sole lessee, for the next 10 years (until 22 Feb 2026). Freehold asset with an estimated remaining useful life of 26 years. TTB is a strong fixed-broadband player, the number two player in terms of subscriber share, in a growing market. Weakness Sole reliance on TTB s business and its ability to pay rent Possible reduction of rental rate and/or occupancy rates when the existing agreements expire on 22 Feb 2026 Opportunities Future asset injections from TTB and other operators Threats Competition in the fixed-broadband market that might hinder TTB s business FOC network open for leasing at Digital Telecommunications Infrastructure Fund (DIF) Technological advancements in the field of fixedbroadband network Source: DBS Vickers Page 3

4 Company Background Corporate History. Jasmine Broadband Internet Infrastructure Fund (JASIF), the second-largest infrastructure fund in Thailand after DIF, raised Bt55bn at IPO and invested in fibre optic cable (FOC) that had been developed and managed by Triple T Broadband (TTB), a wholly-owned subsidiary of SET-listed Jasmine International (JAS). The fund then agreed to lease the network back to TTB, the fixedbroadband operator, until 22 Feb JASIF s FOC network of 883,000 core km (as of 31 Dec 2015) has a nationwide coverage of 10.23m home passes. Revenue enue structure. TTB has committed to using 100% of JASIF s capacity since the latter s IPO. Eighty percent of the network capacity will be leased at the wholesale rate of Bt425 per core km per month while the rest 20% will be leased at the retail rate of Bt750 per month. Both agreements will last until TTB s fixed-broadband licence expires on 22 Feb The rental rates for both contracts are inflationadjusted (Thailand CPI), but the adjustment has to be in the range of 0 and 3%. Shareholding structure. JAS is the sponsor of JASIF and a major shareholder of TTB, which transferred the FOC to JASIF. JAS is required to hold a minimum of 33.3% of JASIF shares for three years, and this moratorium ends in Feb The shareholding threshold will then be reduced to 19% in the following three years. Mr. Pete Bhodaramik, who holds 25.85% of JAS, now holds 0.7% of JASIF. Infrastructure fund structure. Infrastructure fund is a type of mutual fund established to mobilise funds from general and institutional investors to invest in Thailand s infrastructure projects, which include, but not limited to, rail transit systems, water, airports and telecommunications. Investments are recognised as costs and will be presented at fair value without depreciation and amortisation. The SEC stipulates that the dividend payout ratio shall not be less than 90% of the distributable income, with the withholding tax on dividends being exempted for 10 years. Also, infrastructure funds have no corporate tax liability, as they are exempted from corporate income tax in Thailand. Bt m 6,000 Sales Trend 30.0% Bt m 5,325 Profitability Trend 5, % 5,125 4, % 4,925 3, % 4,725 2,000 1, A 2016F 2017F 2018F 10.0% 5.0% 0.0% 4,525 4,325 4, A 2016F 2017F 2018F Total Revenue Revenue Growth (%) (YoY) Operating EBIT Pre tax Profit Net Profit Source: JASIF, DBS Vickers Page 4

5 Main Lease Agreement and Rental Assurance Agreement Length of Leased OFCs Lease Period Rental Rate Main Lease 80% of the FOC, totalling Approximately 11 years, Bt425 per core kilometre per month Agreement approximately 784,000 core ending February 22, 2026 until December 31, 2015 and will be kilometres, includes es: increased each year in line with the ,000 core kilometres which are equivalent to 80% of the Existing change in Thailand CPI announced by the Ministry of Commerce with a cap of 3% OFCs; and ,000 core kilometres which are equivalent to 80% of the Future FOC Rental 20% of the FOC, totalling Three years, renewable at Bt750 per core kilometre per month Assurance approximately 196,000 core JASIF's option for additional until December 31, 2015 and will be Agreement kilometres,, includes es: three-year periods until the increased each year in line with the ,000 core kilometres which are equivalent to 20% of the Existing expiration of the Main Lease Agreement change in Thailand CPI announced by the Ministry y of Commerce with a cap of 3% OFCs; and 2. 36,000 core kilometres which are equivalent to 20% of the Future FOC Source: JASIF, DBC Vickers Page 5

6 JASIF s Management Structure Source: JASIF, DBC Vickers Page 6

7 Competitive Strengths Secured streams of income. TTB has contractually agreed to lease 100% of JASIF s capacity until 22 Feb 2026, which coincides with the expiration of TTB s fixed-broadband licence (type 3), thus the income streams are highly secured for the next 10 years. Freehold asset with long useful life. We expect TTB to renew its business licence and continue using JASIF s FOC network until 2042 as we assume 30 years of useful life for fibre optic cable, thus implying 26 years of remaining useful life. We have discovered a number of prominent estimates for FOC s useful life, as follows: i) The Federal Communications Commission, an independent agency of the US government, has assigned a projected life range of 25 to 30 years on all non-metallic cables, including aerial, underground, buried or intra-building. ii) Corning, a leading manufacturer of optical fibre, states that the intended service life is in excess of 25 years. iii) Technology Futures, Inc., which provides depreciation and valuation services for major telecommunication carriers, recommended in 2008 that the depreciation life for newly-installed fibre optic cable is 20 to 25 years. Expected useful life of cable assets Source Federal Communication Commission Categories as stated in reports Projected Life (Years) Aerial Cable - Metallic Aerial Cable - Non Metallic Underground Cable - Metallic Underground Cable - Non Metallic Buried Cable - Metallic Buried Cable - Non Metallic Corning Fibre Optic Cables in General > 25 Technology Futures, Inc Newly Installed Fibre Optic Cable Source: Expected Life Study: Telecommunication and Cable Assets by Nevada Department of Taxation, DBC Vickers Page 7

8 TTB, the lessee, is a strong player in fixed-broadband market. TTB is a strong player in a growing industry. The fixed-broadband market has seen 15% CAGR in the number of subscribers over the last five years ( ) while TTB has seen 21% CAGR in its clients and revenue over the same period. The company has been taking market share from TOT, a state-owned telecom, and smaller players; TTB overtook TOT in 2014 as the number-two player in terms of number of subscribers while the number one, TRUE, remains strong. TRUE, TTB and TOT are the leading players with 37%, 31% and 21% market shares, respectively. AIS Wifi, a subsidiary of ADVANC, had 0.7% market share (44k subscribers) at the end of 2015 while the rest 9.6% is from other small players. Thailand is slightly behind the world in terms of fixed- broadband subscription. Thailand had 6.4m fixed-broadband subscribers (9.5% of population) at the end of 2015, and the Office of The National Broadcasting and Telecommunications Commission (NBTC) forecasts that the number will rise to 6.70m (9.9% of population) in 2016 and 7.23m (10.7% of population) in The global fixed-broadband penetration is now 10.84% of population, with Europe (29.60%) and the Americas (17.97%) leading the pack. Fixed-Broadband Market: Number of Subscribers Triple T Broadband: Number of Subscribers Fixed-Broadband Market Shares By Number Of Subscribers Estimated Fixed-Broadband Penetration (% Of Population) Source: NBTC, JASIF, DBC Vickers Page 8

9 Growth Strategies Gradual FOC transfers to boost FY16-17F 17F growth. TTB is obligated to continue transferring 7,500 core km of FOC per month to JASIF; as a result, the fund should end FY16F with 973k core km of cable, up from 883k at end-2015 and 800k at IPO. The new fibre capacity will be coming in until Feb 2017, leading us to project 23% and 7% earnings growth in FY16F and FY17F, respectively. Willing to buy all kinds of telecom infrastructure. The fund is open to new investments in any kind of telecommunications infrastructure, so new asset injections with strong yields and IRR could offer positive surprises down the road. Preliminarily, JASIF requires a project IRR of no less than 8%. Growth after FY17F depends on increase in rental rate. With no new asset injections, we expect net investment income to grow only 1.9% in FY18F and 1.5% p.a. from FY19F onwards. Although we assume the rental increase of only 1.5% per year, the increase is, in fact, tied to the change in Thailand s CPI with a floor/ceiling of 0/3%. FOC at Yearend Main Assumptions 2016F 2017F 2018F FOC (core km) 973, , ,500 Increase in rental rate 0.0% 1.5% 1.5% Occupancy rate 100% 100% 100% Net Investment Income Yield (Dividend + Capital Reduction) Source: JASIF, DBC Vickers Page 9

10 Key Risks TTB s licence e renewal in JAS Mobile Broadband (JASMBB) won a 900MHz licence in Dec 2015, but it failed to show up with the first instalment payment and the required bank guarantee before the 31 Mar 2016 deadline. Consequently, the market has been concerned over two issues and their impact on JASIF: i) Additional monetary penalties for JASMBB, and ii) The potential revocation of JAS s existing licences (i.e. TTB s fixed-broadband licence) Firstly, the regulator, NBTC, has stated in its pre-auction document that it will withhold the Bt644m down payment for the 900MHz licence in the event of default, and there is no other penalty. Hence, NBTC will have to sue JASMBB to obtain additional penalty if any. Secondly, TTB is a separate legal entity that has done nothing wrong as a licence holder, so the outright revocation of the fixed-broadband licence (expiring on 22 Feb 2026) is highly unlikely, especially when the revocation has not been stated in the pre-auction documents. Lower rental rate after As mentioned earlier, TTB has committed to leasing JASIF s asset until 22 Feb 2026, so there is a risk of lower income when the rental contracts have to be renewed. We currently assume 21% y-o-y decline in rental income in 2026 on the back of the 12% fall in rental rate and lower occupancy rate. The occupancy rate is projected to fall from 100% in 2025 to 90% in 2026, before reaching 80% in FOC relocation cost and duct rent. JASIF could be responsible for the relocation cost from aerial cable to underground cable in compliance with the government policy. Currently, the underground project Nonsee Phase I to be up for bidding in Apr this year includes only electricity cable (no fibre optic). According to the telco companies we have talked to, it might take 2-3 years before the relocation process of fibre starts because the Bangkok Metropolitan Administration (BMA) has not figured out which parties will be responsible for the installation of underground duct that the fibre will go through; the installer will be also be the lessor of the ducts. The investment in ducts could be made by the state enterprises (CAT or TOT) or a joint investment initiative between public and private companies. NBTC will decide whether to slap more penalties on JASMBB and/or JAS group within this month. Rental Income F Rental Rate F Occupancy Rate F Source: JASIF, DBC Vickers Page 10

11 Valuation and Recommendation Capital management. At IPO, JASIF received from TTB an advance payment for the last three months of rent ending 22 Feb Management intends to eliminate such excess liquidity via capital reduction, resulting in 111% (Bt0.82), 104% (Bt0.95) and 102% (Bt1.00) distribution payout ratios in FY15, FY16F and FY17F, respectively. Initiate with BUY. We initiate coverage on JASIF with a BUY call and DCF-based target price of Bt10.9 (9.7% WACC and no more rent from 2043 onwards). We like JASIF for i) its strong earnings growth in FY16-17F, ii) steady streams of dividends, iii) FY16F net-cash position, and iv) TTB s dominant position in the fixed-broadband market. Deeper fixedbroadband penetration and TTB s earnings growth will also ensure its ability to pay rent to JASIF. Valuation. Our base-case DCF valuation of Bt10.90 is based on 9.7% WACC and no more rent from 2043 onwards as we assume 26 years remaining useful life for its FOC network. Since the rental contracts will have to be renewed in 2026, we assume a 21% decrease in rental income for the year before rising 1.5% p.a. until 2042, in line with the projected inflation. Our best-case scenario points to Bt12.20 TP, assuming uninterrupted increases in rental income until The worst-case TP is Bt7.70 if we assume that TTB cannot renew the lease contracts in 2026, which is highly likely for the dominant fixed-broadband player. Capital Reduction from Advance Rent of Bt816m To be paid in Btm Resulting dividend payout ratio 111% 104% 102% 100% Resulting yield 9.6% 11.1% 11.7% 11.6% WACC Calculation WACC Calculation Beta Rf 3.0% Rm 12.0% Cost of Equity 9.7% Equity weight 100% WACC 9.7% Scenario Analysis Time Period Base Case Best Case Worst Case % 100% 100% Occupancy Rate declining to 80% by % 0% 2043 onward [NO MORE RENT BY TTB] Increase in Rental Rate per Year % 1.50% 1.50% % 1.50% NO RENT 2043 onward [NO MORE RENT BY TTB] Salvage value at end Target price Upside/(Downside) 27.5% 42.7% -9.9% Bt8.50 market price 11.6% 13.1% 4.4% Source: JASIF, DBC Vickers Page 11

12 Peer comparison Return-and and-risk profile is similar to DIF s. JASIF s only comparable company in Thailand is Digital Telecommunications Infrastructure Fund (DIF), but JASIF s asset structure is simpler; JASIF has freehold ownership of FOC network while DIF has the rights to net revenue, freehold and leasehold ownerships of telecom towers, towerto-tower fibre and fixed-broadband FOC. It is worth noting that DIF s portfolio mix is superior to JASIF s, as towers have longer useful life (c.50 years) than FOC. Nevertheless, both face similar risks as they will have to renew their lease contracts in JASIF is trading at steep discount to DIF. We believe that the market has become overly concerned about the impact of JASMBB s default on JASIF, resulting in a current valuation of FY16F EV/EBITDA of 9.9x representing a 37% discount to DIF s EV/EBITDA of 15.6x. We believe that the fair discount should be around 20% to take into account the longer tower life for DIF; the 20% discount implies a hypothetical target price of Bt11.30 per share. Page 12

13 Key Assumptions FY Dec 10 Feb A 2016F 2017F 2018F FOC at year end (core km) 800, , , , ,500 Increase in rental rate 0% 1.5% 1.5% Occupancy rate 100% 100% 100% TTB has been building and transferring FOC to JASIF (c.a. 7.5k core km per month). The transfer will end in Feb 2017 Page 13

14 Income Statement (Btm) FY Dec 2015A 2016F 2017F 2018F Revenue 4,377 5,457 5,829 5,940 Cost of Goods Sold (184) (355) (379) (386) Gross Profit 4,193 5,102 5,451 5,554 Other Opng (Exp)/Inc (67.4) (98.2) (105) (107) Operating Profit 4,126 5,004 5,346 5,447 Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc (37.8) Exceptional Gain/(Loss) Pre-tax Profit 4,729 5,016 5,370 5,471 Tax Minority Interest Preference Dividend Net Profit 4,729 5,016 5,370 5,471 Net Profit before Except. 4,088 5,016 5,370 5,471 EBITDA 4,126 5,004 5,346 5,447 Growth Revenue Gth (%) N/A EBITDA Gth (%) nm Opg Profit Gth (%) nm Net Profit Gth (Pre-ex) nm (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) N/A ROA (%) N/A ROCE (%) N/A Div Payout Ratio (%) Net Interest Cover (x) NM NM NM Margins Trend 112.0% 107.0% 102.0% 97.0% 92.0% 87.0% 2015A 2016F 2017F 2018F Operating Margin % Net Income Margin % The gradual transfer of FOC will lead to increases in annual income. Revenue growth from FY19F will be purely based on rental hike if there is no new acquisition. JASIF started booking revenue from 10 Feb 2015 with 800,000 core km at the IPO. Source: Company, DBS Vickers Page 14

15 Quarterly / Interim Income Statement (Btm) FY Dec 1Q2015 2Q Q2015 4Q2015 Revenue 648 1,210 1,243 1,276 Cost of Goods Sold (28.4) (50.3) (53.1) (52.3) Gross Profit 620 1,160 1,190 1,224 Other Oper. (Exp)/Inc (9.8) (18.6) (19.3) (19.7) Operating Profit 610 1,141 1,171 1,204 Other Non Opg (Exp)/Inc (0.1) Associates & JV Inc Net Interest (Exp)/Inc (4.6) (10.6) (10.7) (11.8) Exceptional Gain/(Loss) 0.38 (0.2) (0.2) 641 Pre-tax Profit 606 1,130 1,160 1,833 Tax Minority Interest Net Profit 606 1,130 1,160 1,833 Net profit bef Except ,130 1,160 1,192 EBITDA 610 1,141 1,171 1,204 Revenue Trend 1,400 1,200 1, Q2013 4Q2013 1Q2014 2Q2014 Revenue 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 Revenue Growth % (QoQ) 4Q % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% Growth Revenue Gth (%) N/A EBITDA Gth (%) nm Opg Profit Gth (%) nm Net Profit Gth (Pre-ex) nm nm nm nm (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Source: Company, DBS Vickers Page 15

16 Balance Sheet (Btm) FY Dec 2015A 2016F 2017F 2018F Asset Breakdown Net Fixed Assets 55,641 55,641 55,641 55,641 Invts in Associates & JVs Other LT Assets Cash & ST Invts 2,120 1,599 1,543 1,539 Inventory Debtors Other Current Assets 3, Total Assets 61,616 57,245 57,190 57,186 ST Debt 3, Creditor Other Current Liab LT Debt Other LT Liabilities Shareholder s Equity 56,869 56,283 56,218 56,211 Minority Interests Total Cap. & Liab. 61,616 57,245 57,190 57,185 The debt was paid off 1Q16F. Non-Cash Wkg. Capital 2,958 (956) (966) (969) Net Cash/(Debt) (1,730) 1,599 1,543 1,539 Debtors Turn (avg days) N/A Creditors Turn (avg days) N/A Inventory Turn (avg days) N/A N/A N/A N/A Asset Turnover (x) NM Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) 0.0 CASH CASH CASH Net Debt/Equity ex MI (X) 0.0 CASH CASH CASH Capex to Debt (%) 1,428.6 N/A N/A N/A Source: Company, DBS Vickers Page 16

17 Cash Flow Statement (Btm) FY Dec 2015A 2016F 2017F 2018F Pre-Tax Profit 4,729 5,016 5,370 5,471 Dep. & Amort Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. (2,976) 3, Capital Expenditure Btm 60, , , , , ,000.0 Other Operating CF (573) Net Operating CF 1,180 8,948 5,380 5,474 Capital Exp.(net) (55,000) Other Invts.(net) (1,960) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF (56,960) Div Paid (2,860) (5,602) (5,435) (5,478) Chg in Gross Debt 3,850 (3,850) Capital Issues 55, Other Financing CF (66.0) (17.1) Net Financing CF 55,924 (9,469) (5,435) (5,478) Currency Adjustments Chg in Cash (55.8) (4.4) Opg CFPS (Bt) Free CFPS (Bt) (9.8) A 2016F 2017F 2018F Capital Expenditure (-) Source: Company, DBS Vickers Page 17

18 DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co, Ltd. 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As of 20 Apr 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report ( interest includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Vickers Securities (Thailand) Co, Ltd and its subsidiaries do not have a proprietary position in the securities recommended in this report as of 19 Apr Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. Page 18

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This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission. This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia. This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek, Executive Director, ADBSR Singapore Thailand United Kingdom Dubai United States Other jurisdictions This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No E) or DBSVS (Company Regn No G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at for matters arising from, or in connection with the report. This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients. This research report is being distributed in The Dubai International Financial Centre ( DIFC ) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 3 rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. This report was prepared by DBS Vickers Securities (Thailand) Co, Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Vickers Securities (Thailand) Co, Ltd 989 Siam Tower, 9th, 14th-15th Floor, Rama 1 Road, Pathumwan, Bangkok Thailand Tel , Fax: Page 19